Panda Power Generation Infrastructure Fund, LLC, D/B/A/ Panda Power Funds v. Electric Reliability Council of Texas, Inc.

Reverse and Remand and Opinion Filed February 23, 2022
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-18-00611-CV
PANDA POWER GENERATION INFRASTRUCTURE FUND, LLC, D/B/A/
PANDA POWER FUNDS; PANDA SHERMAN POWER HOLDINGS, LLC;
PANDA SHERMAN POWER INTERMEDIATE HOLDINGS I, LLC;
PANDA SHERMAN POWER INTERMEDIATE HOLDINGS II, LLC;
PANDA SHERMAN POWER, LLC; PANDA TEMPLE POWER
HOLDINGS, LLC; PANDA TEMPLE POWER INTERMEDIATE
HOLDINGS I, LLC; PANDA TEMPLE POWER INTERMEDIATE
HOLDINGS II, LLC; PANDA TEMPLE POWER, LLC; PANDA TEMPLE
POWER II HOLDINGS, LLC; PANDA TEMPLE POWER II
INTERMEDIATE HOLDINGS I, LLC; PANDA TEMPLE POWER II
INTERMEDIATE HOLDINGS II, LLC; PANDA TEMPLE POWER II,
LLC, Appellants
V.
ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC., Appellee
On Appeal from the 15th Judicial District Court
Grayson County, Texas
Trial Court Cause No. CV-16-0401
OPINION
Before the Court sitting En Banc
Opinion by Justice Nowell
Before us is an appeal from the trial court’s April 24, 2018 order granting
ERCOT’s plea to the jurisdiction based on sovereign immunity and dismissing the
cause for lack of jurisdiction. The trial court entered the dismissal order pursuant to
this Court’s original opinion in this case. See Elec. Reliability Council of Tex., Inc.
v. Panda Power Generation Infrastructure Fund, LLC (Panda I), 552 S.W.3d 297(Tex. App.—Dallas 2018, pet. dism’d w.o.j.). Panda1 appeals the trial court’s order
and presents two arguments: (1) ERCOT is not entitled to sovereign immunity, and
(2) the Texas Legislature did not grant exclusive jurisdiction over Panda’s common
law claims to the Public Utility Commission of Texas (PUC). We decide both issues
in favor of Panda; we conclude ERCOT is not entitled to sovereign immunity and
the Legislature did not grant exclusive jurisdiction over Panda’s claims to the PUC.
To the extent we previously held otherwise, that holding is in error. We reverse the
trial court’s April 24, 2018 order granting ERCOT’s plea to the jurisdiction and
remand this case to the trial court for further proceedings.
BACKGROUND
A. Regulatory Scheme
The wholesale electric power industry consists of the generation of electrical
power, the transmission of electricity over power lines, and the distribution of power
to customers. Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d
1Specifically, the appellants in this case are Panda Power Generation Infrastructure Fund, LLC d/b/a
Panda Power Funds; Panda Sherman Power Holdings, LLC; Panda Sherman Power Intermediate Holdings
I, LLC; Panda Sherman Power Intermediate Holdings II, LLC; Panda Sherman Power, LLC; Panda Temple
Power Holdings, LLC; Panda Temple Power Intermediate Holdings I, LLC; Panda Temple Power
Intermediate Holdings II, LLC; Panda Temple Power, LLC; Panda Temple Power II Holdings, LLC; Panda
Temple Power II Intermediate Holdings I, LLC; Panda Temple Power II Intermediate Holdings II, LLC;
and Panda Temple Power II, LLC. We refer to them collectively as “Panda.” Appellants represent that
Panda Temple Power Intermediate Holdings II, LLC is now known as Temple Generation Intermediate
Holdings II, LLC and Panda Temple Power, LLC is now known as Temple Generation I, LLC.
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184, 186 (Tex. 2007) (citing Pub. Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d
310, 312 (Tex. 2001)). Historically, the entire industry was a natural monopoly. See
TXU Generation Co., L.P. v. Pub. Util. Comm’n of Tex., 165 S.W.3d 821, 827 (Tex.
App.—Austin 2005, pet. denied).
In the 1990s, the Texas Legislature found that “the public interest in
competitive electric markets requires that . . . electric services and their prices should
be determined by customer choices and the normal forces of competition.” TEX.
UTIL. CODE ANN. § 39.001(a); see also TXU Generation Co., L.P., 165 S.W.3d at827 (citing TEX. UTIL. CODE ANN. § 39.001(a)) (“[I]n recognition that the power
generation and power distribution components of the electricity industry are not
monopolies warranting strict regulation, the legislature has opened the wholesale
electricity markets and retail electricity market to competition and market forces.”).
To achieve that goal, the Legislature enacted Chapter 39 of the Texas Utilities Code,
also known as the Texas Public Utility Regulatory Act (PURA), which restructured
the electric utility industry in Texas. See TEX. UTIL. CODE ANN. §§ 39.001–.918.
Section 39.151 requires the PUC to certify one or more “independent
organizations” to perform the following functions:
(1) ensure access to the transmission and distribution systems for
all buyers and sellers of electricity on nondiscriminatory terms;
(2) ensure the reliability and adequacy of the regional electrical
network;
(3) ensure that information relating to a customer’s choice of
retail electric provider is conveyed in a timely manner to the persons
who need that information; and
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(4) ensure that electricity production and delivery are accurately
accounted for among the generators and wholesale buyers and sellers
in the region.
TEX. UTIL. CODE ANN. § 39.151(a). PURA defines an “independent organization” as
“an independent system operator or other person that is sufficiently independent of
any producer or seller of electricity that its decisions will not be unduly influenced
by any producer or seller.” Id. § 39.151(b). In 2001, the PUC certified ERCOT, an
organization that was founded in 1970 to coordinate utilities in Texas, as the
independent system operator (ISO) to perform the functions described in section
39.151(a). ERCOT has acted as the ISO since it was certified in 2001.
ERCOT describes itself as an independent, membership-based 501(c)(4)
nonprofit corporation. ERCOT’s bylaws define which types of entities can become
ERCOT members. Each member has voting rights and pays annual dues to ERCOT.
ERCOT is operated by a chief executive officer and a board of directors.
ERCOT’s bylaws and protocols must be approved by the PUC and reflect the
PUC’s input. See TEX. UTIL. CODE ANN. § 39.151(g-1). The current bylaws require
that every board member be a resident of Texas and prohibit any legislator from
serving as a member. Id. § 39.151(g-1). To maintain certification as the ISO,
ERCOT’s governing body must be composed of persons selected by the ERCOT
board selection committee. See id. § 39.151(g). The board is composed of eleven
members, including the PUC chairman who is an ex officio nonvoting board
member. See id. § 39.151(g-1). The utilities code sets forth other qualifications for
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the board’s composition. See id. § 39.151(g-1)–(g-6). ERCOT’s bylaws state the
board hires the CEO who, under the board’s supervision and direction, carries out
ERCOT’s general affairs. With limited exceptions, meetings of ERCOT’s governing
body or a subcommittee that includes a member of the governing body must be open
to the public. See id. § 39.1511.
PURA section 39.151(d) requires the PUC to “adopt and enforce rules relating
to the reliability of the regional electrical network and account[] for the production
and delivery of electricity among generators and all other market participants.” Id.
§ 39.151(d). However, the PUC may delegate these responsibilities to an ISO; the
ISO’s rules and enforcement actions remain subject to the PUC’s oversight. See id.
Section 39.151(d) continues:
An independent organization certified by the commission is directly
responsible and accountable to the commission. The commission has
complete authority to oversee and investigate the organization’s
finances, budget, and operations as necessary to ensure the
organization’s accountability and to ensure that the organization
adequately performs the organization’s functions and duties. The
organization shall fully cooperate with the commission in the
commission’s oversight and investigatory functions. The commission
may take appropriate action against an organization that does not
adequately perform the organization’s functions or duties or does not
comply with this section, including decertifying the organization or
assessing an administrative penalty against the organization.
Id.
As the ISO, ERCOT must submit its entire proposed annual budget for
approval, disapproval, or modification to the PUC. See id. § 39.151(d-1). “The
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commission shall establish a procedure to provide public notice of and public
participation in the budget review process.” Id. After approving the budget, the PUC
authorizes ERCOT to charge wholesale buyers and sellers a “system administration
fee, within a range determined by the commission, that is reasonable and
competitively neutral to fund the independent organization’s approved budget.” Id.
§ 39.151(e). ERCOT is required “to closely match actual revenues generated by the
fee and other sources of revenue with revenue necessary to fund the budget.” Id. The
PUC requires ERCOT to submit reports comparing actual expenditures with
budgeted expenditures. See id.
Additionally, ERCOT “is subject to review under Chapter 325, Government
Code (Texas Sunset Act), but is not abolished under that chapter.” Id. § 39.151(n).
The PUC is required to “adopt procedures governing decertification of an
independent organization, selecting and certifying a successor organization, and
transferring assets to the successor organization to ensure continuity of operations
in the region.” Id. § 39.151(d).
B. Pending Lawsuit
The PUC requires ERCOT to publish “resource adequacy reports” at least
annually that provide a five-year forecast of the Texas power region’s ability to
generate and transmit sufficient electricity to meet projected demands. 16 TEX.
ADMIN. CODE § 25.505(c); see also Elec. Reliability Council of Tex., Inc. v. Panda
Power Generation Infrastructure Fund, LLC (Panda I Appeal), 619 S.W.3d 628,
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631–32 (Tex. 2021). To fulfill this duty, ERCOT publishes a “Report on Capacity,
Demand, and Reserves” twice a year, in May and December. Panda I Appeal, 619
S.W.3d at 632. These “CDR Reports” provide predictions on future electricity
demands within the Texas power region and the region’s ability to supply sufficient
electricity to meet those demands. Id. Participants in the electric industry rely on
ERCOT’s CDR Reports when deciding, for example, whether to invest in new
generation plants or transmission facilities. Id.
Panda alleges that in 2011 and 2012, ERCOT used its CDR Reports, press
releases, presentations, and ERCOT-sponsored press interviews to broadcast false
market information throughout Texas. According to Panda, the information ERCOT
provided projected a “serious and long-term scarcity of power supply.” However,
Panda asserts ERCOT knew there was no long-term scarcity projected; rather,
ERCOT published false market data to “encourage investors and their financial
sponsors to build new power generation.” Panda claims it relied on the false
information when it decided to invest $2.2 billion to build three new power plants.
After Panda began construction, ERCOT revised its forecasts and—instead of
projecting a shortfall—it predicted an excess of generation capacity in the ERCOT
region. Panda’s suit alleges ERCOT’s CDR Reports, press releases, presentations,
and press interviews were “made negligently and fraudulently and possibly to further
expectations of special or personal interests.” Panda maintains that as a direct result
of the misrepresentations, it now sells power at a fraction of the price for which it
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would have sold power had ERCOT’s representations been true. Panda sued ERCOT
for fraud, negligent misrepresentation, and breach of fiduciary duty.
ERCOT filed a plea to the jurisdiction seeking dismissal of Panda’s claims on
the ground that the PUC has exclusive jurisdiction to resolve Panda’s complaints
and, therefore, the trial court lacked subject matter jurisdiction. The trial court denied
the plea. ERCOT then filed a plea to the jurisdiction based on sovereign immunity,
which the trial court denied. In Panda I, this Court determined ERCOT’s
complained-of actions were protected by immunity and directed the trial court to
vacate its order denying ERCOT’s plea to the jurisdiction based on sovereign
immunity and dismiss the case for lack of jurisdiction. See Panda I, 552 S.W.3d at
319, 320.2 The Court did not reach ERCOT’s argument that the PUC has exclusive
jurisdiction to resolve Panda’s complaints. See id. at 301. The trial court complied
with this Court’s instruction and dismissed the case for lack of jurisdiction. Before
this en banc Court is Panda’s appeal from the trial court’s order dismissing its claims
for want of jurisdiction.
2
The procedural history of this case is presented thoroughly in the Texas Supreme Court’s prior opinion in
this case. See Panda I Appeal, 619 S.W.3d at 632-34. We need not recite the history here as well. See TEX.
R. APP. P. 47.1.
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LAW & ANALYSIS
A. En Banc Review
The “law of the case” doctrine “mandates that the ruling of an appellate court
on a question of law raised on appeal will be regarded as the law of the case in all
subsequent proceedings unless clearly erroneous.” Caplinger v. Allstate Ins. Co.,
140 S.W.3d 927, 929 (Tex. App.—Dallas 2004, pet. denied) (citing Briscoe v.
Goodmark Corp., 102 S.W.3d 714, 716 (Tex. 2003)). Relatedly, “[o]nce a panel of
this Court has spoken, subsequent panels are powerless to contradict that decision,
barring reconsideration by the Court sitting en banc or an intervening decision by
the supreme court.” Chakrabarty v. Ganguly, 573 S.W.3d 413, 415 (Tex. App.—
Dallas 2019, no pet.) (en banc) (citing MobileVision Imaging Servs., L.L.C. v.
LifeCare Hosps. of N. Tex., L.P., 260 S.W.3d 561, 566 (Tex. App.—Dallas 2008, no
pet.)); see also TEX. R. APP. P. 41.2(c) (en banc consideration should not be ordered
“unless necessary to secure or maintain uniformity of the court’s decisions or unless
extraordinary circumstances require en banc consideration”).
In Panda I, this Court determined ERCOT “is entitled to sovereign immunity
from private damages suits in connection with the discharge of its regulatory
responsibilities,” and ERCOT’s actions implicated in this lawsuit are protected by
sovereign immunity. Panda I, 552 S.W.3d at 318, 319. Although the supreme court
considered this case in Panda I Appeal, the supreme court ultimately determined the
issues before it were moot and did not reach the merits. See Panda I Appeal, 619
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S.W.3d at 631. Accordingly, until today, Panda I remains the law of the case, and
that decision cannot be contradicted barring reconsideration by this Court sitting en
banc. See Caplinger, 140 S.W.3d at 929; Chakrabarty, 573 S.W.3d at 415.
Since Panda I, the Texas Supreme Court has issued three opinions analyzing
and applying either the doctrine of sovereign immunity or governmental immunity.
See Univ. of the Incarnate Word v. Redus (UIW II), 602 S.W.3d 398 (Tex. 2020); El
Paso Educ. Initiative, Inc. v. Amex Props., LLC, 602 S.W.3d 521 (Tex. 2020);
Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571 S.W.3d 738 (Tex.
2019). In each case, the court considered whether and on what grounds to extend
immunity. In the most recent of these three opinions, the supreme court stated:
“Though we have contemplated it, we have yet to extend sovereign immunity to a
purely private entity—one neither created nor chartered by the government—even
when that entity performs some governmental functions.” UIW II, 602 S.W.3d at
401 (discussing Rosenberg, 571 S.W.3d at 750).
This Court in Panda I extended immunity to a private, membership-based,
nonprofit corporation that was neither created nor chartered by the government. In
light of the three recent supreme court opinions, and as discussed below, this en banc
Court concludes the holdings in Panda I that “ERCOT is entitled to sovereign
immunity from private damages suits in connection with the discharge of its
regulatory responsibilities” and that ERCOT’s actions alleged in this lawsuit are
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protected by sovereign immunity are clearly erroneous.3 Therefore, while en banc
consideration generally is disfavored, see TEX. R. APP. P. 41.2(c), it is appropriate in
this case to correct our prior, erroneous decision.
B. Sovereign Immunity
Sovereign immunity provides that “no state can be sued in her own courts
without her consent, and then only in the manner indicated by that consent.” UIW II,
602 S.W.3d at 403. The supreme court examines sovereign immunity in three
contexts outside of the State government: political subdivisions, 4 legislatively
authorized entities, and government contracts.5 Id. at 404. When determining
whether a legislatively authorized entity that is not a political subdivision has
immunity, a court will “consider whether the authorizing statute evinces clear
legislative intent to vest the entity with the nature, purposes, and powers of an arm
of the State government.” Id. at 405 (internal quotation marks and footnotes
omitted). If the entity is so vested, then the entity is a government unit unto itself
and is entitled to assert immunity in its own right when it performs a governmental
function. Id. “If, however, an entity’s underlying nature, purposes[,] and powers are
3
In Panda I, we also concluded ERCOT is not a “governmental unit” for purposes of section
51.014(a)(8) of the Texas Civil Practices and Remedies Code. See Panda I, 552 S.W.3d at 309 (citing TEX.
CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8)). We do not reconsider that holding in this appeal.
4
Political subdivisions of the State include counties, municipalities, and school districts. UIW II, 602
S.W.3d at 404. ERCOT does not argue it is a political subdivision of the State.
5
Counsel for ERCOT confirmed during oral argument before the Texas Supreme Court that ERCOT
does not claim to be a government contractor.
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not congruent with an arm of State government, then the legislature cannot de facto
grant it sovereign immunity.” Id. (internal quotation marks and footnotes omitted).
Sovereign immunity respects “the relationship between the legislative and
judicial branches of government” and “preserves separation-of-powers principles by
preventing the judiciary from interfering with the Legislature’s prerogative to
allocate tax dollars.” Amex Props., 602 S.W.3d at 528; see also UIW II, 602 S.W.3d
at 404; Nettles v. GTECH Corp., 606 S.W.3d 726, 737–38 (Tex. 2020) (“In addition
to the pecuniary justification of protecting the public fisc . . ., considerations of
government structure underlie the immunity doctrine.”). The judiciary defines the
boundaries of the common law doctrine of sovereign immunity and “determine[s]
under what circumstances sovereign immunity exists in the first instance.” UIW II,
602 S.W.3d at 404, 411. The “legislature informs that decision when it authorizes
an entity to act as an arm of the State government.” Id. at 404.
The case before us presents a boundary question—we must decide whether
sovereign immunity extends to ERCOT, a private, independent, membership-based
501(c)(4) nonprofit corporation that the PUC has authorized to serve as the ISO, but
that is not created or chartered by the government.
1. Standard of Review
Immunity from suit implicates a court’s subject matter jurisdiction and is
properly asserted in a plea to the jurisdiction. Nettles, 606 S.W.3d at 731. Because
subject matter jurisdiction is a question of law, we review de novo a trial court’s
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ruling on a plea to the jurisdiction. Id. In this examination, we are “not required to
look solely to the pleadings but may consider evidence and must do so when
necessary to resolve the jurisdictional issues raised.” Id. at 734.
2. Recent Supreme Court Decisions
Three recent supreme court opinions analyze and apply the doctrines of
governmental and sovereign immunity and lay the foundation for our analysis.
a. Rosenberg Development Corp. v. Imperial Performing
Arts, Inc., 571 S.W.3d 738 (Tex. 2019)
The Texas Development Corporation Act authorizes political subdivisions to
create nonprofit corporations to undertake projects designed to spur economic
growth and reduce unemployment. Rosenberg, 571 S.W.3d at 741 (citing TEX. LOC.
GOV’T CODE §§ 501.001–507.202). The Act expressly denies those entities status as
political subdivisions and forbids authorizing municipalities from delegating any
attributes of sovereignty to those entities. Id. (citing TEX. LOC. GOV’T CODE
§§ 501.010, .055(b)). When adopting the Act, the Legislature determined that
establishing and funding economic development corporations is in the public interest
and serves a public purpose. Id. at 744 (discussing TEX. LOC. GOV’T CODE
§ 501.004(a)(1), (4), (6)).
The economic development corporations are authorized to finance projects
that may be funded in part by local taxes or the proceeds of revenue bonds. Id. (citing
TEX. LOC. GOV’T CODE §§ 501.151, .201, 504.251–.254, 505.251–.254, .302). The
entities may only incur financial obligations that can be paid from bond proceeds,
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revenue realized from the lease or sale of a project, revenue realized from a loan to
finance or refinance a project, or money granted under contract with a municipality.
Id. at 745 (citing TEX. LOC. GOV’T CODE § 501.008). Although the entities are
private, the Legislature requires them to comply with the Texas Open Meetings Act
and the Texas Public Information Act. Id. Additionally, “authorizing municipalities
have some supervisory control over economic development corporations.
Ultimately, however, all of the powers of the corporation are vested in the
corporation’s board of directors.” Id. (cleaned up).
Pursuant to its authority under the Act, the City of Rosenberg created the
Rosenberg Development Corporation (RDC) to promote, assist, and enhance
economic and industrial development activities and promote or develop new or
expanded business enterprises, including public facilities. Id. at 741. To that end, the
RDC executed a contract with a nonprofit organization, Imperial Performing Arts,
Inc. Id. at 741–42. Subsequently, the parties found themselves crossways, and
Imperial sued the RDC for breach of contract and sought a declaratory judgment. Id.
at 742. In the litigation, the question arose whether the RDC was immune from suit.
See id. at 742–43.
The supreme court described the issue in Rosenberg as: “whether a
municipally created economic development corporation is entitled to immunity from
suit as if it were a political subdivision of the state,” even though it is neither a
sovereign entity nor a political subdivision of the State. Id. at 741, 747. The court
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began by considering whether the Legislature intended the entity to have “discrete
governmental-entity status separate and apart from its authorizing municipality,” and
concluded the Legislature did not. Id. at 748. Ordinarily, an “entity claiming
governmental immunity must . . . be a political subdivision.” Id. But the RDC was
not; the Legislature expressly rejected an economic development corporation’s
political-subdivision status. Id. at 748–49. Nevertheless, the court proceeded to
consider whether the governing statutory authority demonstrated a legislative intent
to grant an economic development corporation the “nature, purposes, and powers”
of an arm of the State government. Id. at 749.
The Legislature described economic development corporations as private,
nonprofit corporations and empowered them as such. Id. “More significantly, the
Legislature has expressly denied economic development corporations significant
governmental characteristics—political-subdivision status and attributes of
sovereignty.” Id. For example, the Legislature prohibited an authorizing
municipality from delegating any of its attributes of sovereignty, “including the
power to tax, the power of eminent domain, and the police power,” to the entity. Id.
The fact that RDC was a heavily regulated entity and that it engaged in an act
serving a public purpose did not equate to governmental-entity status. Id. at 750.
“Serving public purposes, as many nonprofits and public contractors do, does not
ipso facto equate to status as a governmental entity for governmental immunity
purposes.” Id. The court concluded “economic development corporations are not
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governmental entities in their own right and therefore are not entitled to
governmental immunity.” Id. at 741.
b. El Paso Education Initiative, Inc. v. Amex Properties,
LLC, 602 S.W.3d 521 (Tex. 2020)
Public school districts are generally entitled to governmental immunity from
liability and suit. Amex Props., 602 S.W.3d at 526. In Amex Properties, the supreme
court considered whether open-enrollment charter schools have governmental
immunity to the same extent as public schools. Id. at 527.
A charter school district that operated open-enrollment charter schools in El
Paso under charters from the Texas Education Agency explored sites for a new
school. Id. at 524. The president and superintendent of the charter school district
entered into an agreement with Amex Properties. Id. at 524–25. Subsequent disputes
between the parties led Amex Properties to sue the charter school district for
anticipatory breach of a lease. Id. at 526. In response, the district filed pleas to the
jurisdiction asserting its immunity from suit. Id.
The State constitution requires the Legislature to provide a system of free
public schools. Id. at 528 (quoting TEX. CONST. art. VII, § 1). Since 1995, open-
enrollment charter schools have been “part of the public school system of this state.”
Id. (quoting TEX. EDUC. CODE ANN. § 12.105). Charter schools operate under a
contract, the charter, with the Commissioner of Education. Id.
Typically, a charter holder is a private, nonprofit organization, but it must
adhere to State law and the Commissioner’s regulations governing public schools;
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if it fails to do so, it risks revocation of its charter. Id. at 528–29. “Like public school
districts, open-enrollment charter schools are largely publicly-funded,” receiving
billions of dollars of public funds annually. Id. at 529. The Legislature directs that
“[i]n matters related to operation of an open-enrollment charter school, an open-
enrollment charter school or charter holder is immune from liability and suit to the
same extent as a school district.” Id. (quoting TEX. EDUC. CODE ANN. § 12.1056(a)).
The supreme court concluded that open-enrollment charter schools act as an
arm of the State government. Id. “These schools are accountable to State government
through oversight of their charters and through the receipt of substantial public
funding. They exercise the same powers and perform government tasks in the same
manner as traditional public schools. They expressly operate as part of the State’s
public education system, and they are generally open to the public.” Id. at 529–30
(internal footnotes omitted).
Additionally, extending immunity to these schools “satisfies governmental
immunity’s purposes.” Id. at 530.
Diverting charter school funds to defend lawsuits and pay judgments
affects the State’s provision of public education and reallocates
taxpayer dollars from the legislature’s designated purpose. Conferring
immunity respects the legislature’s decision to fulfill its constitutional
obligation to provide a free, public education through charter schools,
its allocation of tax dollars to meet that objective, and its directive that
charter schools and charter-holders have immunity from suit and
liability to the same extent as public schools.
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Id. (footnotes omitted). The court concluded open-enrollment charter schools and
their charter-holders have governmental immunity from suit and liability to the same
extent as public schools. Id. at 524.
c. University of the Incarnate Word v. Redus, 602 S.W.3d
398 (Tex. 2020)
The Texas Education Code authorizes private universities to commission and
employ peace officers, and pursuant to that authority, the University of the Incarnate
Word, a private university, established a police department. UIW II, 602 S.W.3d at
401 (citing TEX. EDUC. CODE ANN. § 51.212(a)). The code also vests university
officers “with all the powers, privileges, and immunities of peace officers.” TEX.
EDUC. CODE ANN. § 51.212(b). But the code does not extend sovereign immunity to
an officer’s private university employer. UIW II, 602 S.W.3d at 401. After a student
was fatally shot by a university peace officer, the student’s parents sued the
university, and the university asserted the State’s sovereign immunity should be
extended to the university for actions taken within the scope of the authority
conferred by the statute. See id. at 402, 407.
Sovereign immunity is entity-based. Id. at 407. In this case, the State did not
charter or create the University; the State does not fund the university’s police
department or set the department’s policies, procedures, or protocols; and the State
does not hire or fire the university’s officers. Id. Rather, the university’s
administration and private governing board were responsible for the police
department’s day-to-day operations and decision making. Id. Additionally, the State
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did not exercise control over the university’s activities that might be considered
“governmental.” See id. at 407–08. Rather, the university’s governing board was in
charge of the police department, and that board was not accountable to the taxpayers
or to public officials. Id. at 408. “Because the University’s police department is not
accountable to the government, we conclude that the University is not an arm of the
State government.” Id.
The court also concluded that extending sovereign immunity to the University
would not further the doctrine’s purposes of preserving separation of powers and
protecting the public treasury because no tax dollars were at stake in the lawsuit. Id.
at 409. Further, the Legislature neither mandated nor funded private university
police departments. Id. Finally, the court discerned no legislative directive that
private-university police departments have sovereign immunity. Id. at 411.
Therefore, the court concluded, sovereign immunity did not extend to the private
university. Id. at 413.
3. ERCOT Is Not An Arm of the State
ERCOT argues it is immune from suit because it is a legislatively authorized
entity that has the nature, purposes, and powers of an arm of the State. ERCOT
asserts it exclusively performs public functions; it is an essential part of the State’s
comprehensive regulatory system for electrical utilities; it exclusively performs
functions assigned by the Legislature and the PUC; and its functions are performed
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for a public purpose. ERCOT claims it performs these functions “using
quintessential sovereign power: the power to make binding law.”
Conversely, Panda argues PURA contains no evidence suggesting the
Legislature intended to vest ERCOT with the nature, purposes, and powers of an
arm of the State government. Rather than create a state agency to serve as the grid
operator, the Legislature permitted the PUC to license an already existing private
entity (ERCOT) to perform the function.6
In this case, we do not have the clear expressions of legislative intent the
supreme court considered in Rosenberg and Amex Properties. Accordingly, we
consider whether extending sovereign immunity to ERCOT would serve the nature
and purposes of immunity. See UIW II, 602 S.W.3d at 401; Amex Props., 602 S.W.3d
at 528; Rosenberg, 571 S.W.3d at 750. “The facts presented in this case do not fall
neatly into any camp.” UIW II, 602 S.W.3d at 406. On one hand, the Legislature
authorized the PUC to choose an ISO and, following that instruction, the PUC chose
ERCOT. The PUC maintains some authority over ERCOT, including the authority
to decertify ERCOT. But on the other, ERCOT is a purely private entity that is not
created or chartered by the government, maintains some autonomy, is operated and
overseen by its CEO and board of directors, and does not receive any tax revenue.
6
Panda also argues that because ERCOT is not a governmental unit, it cannot be an arm of the State.
Whether an entity qualifies as a governmental unit and whether an entity has sovereign immunity are
separate questions with separate analytical frameworks. Rosenberg, 571 S.W.3d at 748.
–20–
ERCOT was established decades before the Legislature deregulated the Texas
energy market and authorized the PUC to oversee the market participants. When the
Legislature restructured the energy markets in the 1990s, it did so to create
competition while also seeking to ensure that market conditions were met. The
Legislature chose not to place a State agency in charge of administering the new
market and instead assigned the responsibility of choosing an ISO to the PUC. The
PUC chose ERCOT, an existing private, independent, membership-based
organization that already performed some of the responsibilities that would be
assigned to ERCOT as the ISO.
ERCOT is operated by its CEO and board of directors; the utilities code
dictates qualifications for board members. See TEX. UTIL. CODE ANN. § 39.151(g-
1)–(g-5); see also UIW II, 602 S.W.3d at 406 (noting private university’s board of
trustees and not the State controlled the University’s police department). While
ERCOT’s board must include the PUC Chairman, that person is an ex officio
nonvoting member. See TEX. UTIL. CODE ANN. § 39.151(g-1)(1). The board hires
the CEO who, under the board’s supervision and direction, carries out ERCOT’s
general affairs. To maintain ERCOT’s certification as the ISO, ERCOT’s board must
establish and implement a formal process for adopting new protocols or revisions to
existing protocols. See id. § 39.151(g-6). These protocols may not take effect until
the PUC approves a market impact statement describing the new or revised
–21–
protocols. Id. The PUC is not given authority to approve or disapprove of the
protocols; the PUC’s role is limited to issuing market impact statements. See id.
PURA dictates ERCOT’s functions as the ISO, see id. § 39.151(a), but PURA
does not dictate how ERCOT performs those functions; the method of performance
is wholly within ERCOT’s discretion. Likewise, while the PUC has several
opportunities to investigate, approve, disapprove, and review ERCOT’s actions,
ERCOT charts its own course, decides which actions to take, and how to operate its
organization. While ERCOT may be confined by the PUC’s influence, neither the
PUC nor the Legislature controls ERCOT’s day-to-day operations. Even in matters
where the PUC has oversight authority, ERCOT, like other private organizations, is
primarily operated by its CEO and board.
Even though ERCOT is operated by its own CEO and board, the Legislature
demands transparency with regard to corporate endeavors by requiring its board
meetings and meetings of any subcommittee that includes a board member to be
open to the public and made accessible. See id. § 39.1511. Board members with
conflicts of interest must recuse themselves. See id. § 39.1512. These facts are
similar to those in Rosenberg. See Rosenberg, 571 S.W.3d at 745 (“Even though the
corporations are private entities, the Legislature demands transparency with regard
to corporate endeavors by requiring compliance with the Texas Open Meetings Act
and the Texas Public Information Act.”).
–22–
The PUC exercises influence over ERCOT’s budget. See TEX. UTIL. CODE
ANN. § 39.151(d-1). ERCOT charges wholesale buyers a system administration fee
that is within a range set by the PUC, but the PUC does not establish the fee. See id.
§ 39.151(e); see also Rosenberg, 571 S.W.3d at 747-48 (describing statutory
limitations on the economic development corporations’ finances). The PUC may
decertify ERCOT, but it is not authorized to dissolve ERCOT. But cf. Amex Props.,
602 S.W.3d at 528–29 (private, nonprofit organization risks revocation of its charter
if it fails to adhere to state law and the Commissioner’s regulations governing public
schools).
Although ERCOT argues it has the power to make binding law, which it calls
the “quintessential sovereign power,” the applicable statutes do not support this
argument. The PUC is required to adopt and enforce rules relating to the reliability
of the regional electrical network and accounting for the production and delivery of
electricity among generators and other market participants. See TEX. UTIL. CODE
ANN. § 39.151(d). The PUC may delegate this duty to the ISO. See id. However, any
rules adopted by and any enforcement actions taken by the ISO under its delegated
authority are subject to the PUC’s oversight and may not take effect before receiving
PUC approval. See id. (“Rules adopted by an independent organization and
enforcement actions taken by the organization under delegated authority from the
commission are subject to commission oversight and review and may not take effect
before receiving commission approval.”). In practice, then, ERCOT suggests or
–23–
recommends rules and enforcement actions to the PUC, and the PUC chooses
whether to give its approval to those proposals so that they become binding law. The
Texas Utilities Code does not bestow the “quintessential sovereign power” to make
binding law upon ERCOT.7
ERCOT is a private organization subject to regulations and PUC oversight. In
this respect, ERCOT is akin to the economic development corporation in Rosenberg.
Like ERCOT, the RDC argued it was not an ordinary nonprofit corporation because
it was subject to statutory restrictions and requirements, such as open-government
requirements, that generally do not apply to non-governmental organizations.
Rosenberg, 571 S.W.3d at 750. The supreme court responded by stating: “But
heavily regulating an entity does not equate to conferring governmental-entity
status.” Id. The same is true here. While ERCOT is subject to statutory restrictions
and requirements that do not generally apply to non-governmental organizations,
those restrictions and requirements do not change ERCOT’s fundamental nature as
a private organization. It is heavily regulated; but those regulations do not confer
governmental-entity status. See id. Likewise, although ERCOT argues it serves a
public purpose, doing so “does not ipso facto equate to status as a governmental
entity” for immunity purposes. See id.
7
We decline to comment about whether making binding law is the “quintessential sovereign power.”
–24–
4. ERCOT Does Not Receive Tax Revenue
Sovereign immunity prevents the “judiciary from interfering with the
Legislature’s prerogative to allocate tax dollars.” UIW II, 602 S.W.3d at 404, 409;
see also Amex Props., 602 S.W.3d at 528 (same). ERCOT argues that extending
immunity protects the public treasury because ERCOT is funded with statutorily
authorized fees, which are public money. Panda maintains ERCOT receives no tax
revenue.
ERCOT is funded in part by the system administration fee, which it argues
“has every hallmark of a regulatory fee.” It then asserts that regulatory fees such as
the system administration fee are collected under the general police powers of the
State. ERCOT argues “the system administration fee is collected using the State’s—
not ERCOT’s—authority.” ERCOT believes its fee revenue “is thus state money.
And the fact that ERCOT is permitted to not only collect, but use, this public money
is indicative of its governmental status.”
ERCOT’s argument requires logical leaps unsupported by case law. ERCOT
cites H. Rouw Co. v. Texas Citrus Commission, 247 S.W.2d 231, 234 (Tex. 1952),
for the proposition that regulatory fees are collected using the State’s police powers.
In Rouw, the Court examined whether assessments levied against citrus growers
were taxes or regulatory fees. While the assessments in question were used, in part,
to advertise and enlarge the markets for Texas citrus fruits and to conduct research
beneficial to the citrus industry, their primary purpose was to raise revenue in excess
–25–
of the amount needed for regulation of the industry. See id. at 234. Because the
purpose of the fees was to raise revenue rather than regulation, the fees were
occupation taxes and not regulatory fees. See id.; see also Tex. Boll Weevil
Eradication Found., Inc. v. Lewellen, 952 S.W.2d 454, 462 (Tex. 1997), as
supplemented on denial of reh’g (Oct. 9, 1997) (discussing Rouw). The Rouw court
did not conclude regulatory fees are collected using the State’s police power; the
Rouw court concluded the relevant assessments were occupation taxes. See Rouw,
247 S.W.2d at 234. To the extent ERCOT relies on Rouw for the proposition that
regulatory fees are collected under the general police power of the State, we do not
believe the court reached that conclusion.
“ERCOT does not receive funding from the State; on the contrary, ERCOT
charges ‘wholesale buyers and sellers a system administration fee’ to cover its
expenses.” See HWY 3 MHP, LLC v. Elec. Reliability Council of Tex., 462 S.W.3d
204, 211 (Tex. App.—Austin 2015, no pet.) (quoting TEX. UTIL. CODE ANN.
§ 39.151(e)). Instead of being funded by the State, ERCOT has several sources of
funding. See 16 TEX. ADMIN. CODE §§ 25.363(a) (“This section applies to the budget
of and all fees and rates levied or charged by [ERCOT]”), (b) (ERCOT’s “accounts
shall show all revenues resulting from the various fees charged by ERCOT”), (e)
(ERCOT charges a system administration fee), (g) (“ERCOT may charge reasonable
user fees for services provided by ERCOT to any market participant or other
–26–
entity.”). ERCOT also charges membership fees to its members. ERCOT can obtain
debt financing with the PUC’s approval. TEX. UTIL. CODE ANN. § 39.151(d-2).
ERCOT assesses and collects each of these fees without the coercive power
of the State. While the system administration fee is authorized by statute and the
PUC sets a range for the fee, it is ERCOT that sets and charges the fee. See TEX.
UTIL. CODE ANN. § 39.151(e) (“[T]he commission shall authorize [ERCOT] to
charge to wholesale buyers and sellers a system administration fee, within a range
determined by the commission.”); 16 TEX. ADMIN. CODE § 25.363(e). The fee is not
set or charged by an arm of the State; it is set and charged by a private entity.
Accordingly, affording immunity to ERCOT will not protect the public fisc. ERCOT
does not argue the fees outside the system administration fee and any debt financing
it could raise are part of the public fisc or that these fees or debt could not be used
to pay a money judgment in this case.
If ERCOT is subject to a monetary judgment arising out of this litigation, then
ERCOT and the PUC could choose to raise ERCOT’s various fees or pursue debt
financing or some combination thereof if ERCOT needs additional funds to pay a
judgment. But any judgment will not be paid with tax revenue. While an increase in
the system administration fee may be a cost passed on to consumers, those additional
costs are not increases in public expenditures and are certainly not “unforeseen
expenditures associated with the government’s defending lawsuits and paying
judgments.” Rosenberg, 571 S.W.3d at 751. “Because no tax dollars are at stake in
–27–
this suit, it presents no separation-of-powers risk of judicial reallocation.” UIW II,
602 S.W.3d at 409. Sovereign immunity “guard[s] against the unforeseen
expenditures associated with the government’s defending lawsuits and paying
judgments that could hamper government functions by diverting funds from their
allocated purposes.” Id. at 403. In this instance, the government will not pay any
judgment Panda may obtain against ERCOT. See id. at 410. Any costs ERCOT
incurs will fall on ERCOT, which fully funds its own operations. See id.
Finally, ERCOT argues that PURA section 39.151(d), which permits the PUC
to decertify ERCOT and transfer ERCOT’s assets to a successor organization,
demonstrates ERCOT’s need for immunity in this lawsuit. Here, the supreme court’s
analysis of public fisc concerns in UIW II is instructive. When addressing the
protection of the public treasury, the university argued that private universities
would disband their police departments absent a finding that the universities have
sovereign immunity. See UIW II, 602 S.W.3d at 409. And, if private universities
declined to form or dissolved their existing police departments over liability
concerns, neighboring law enforcement agencies would have to fill the void,
requiring an increase in public funding. See id. The university asked the court to
consider the “indirect costs to the government should private universities discontinue
their police departments.” Id. In response, the supreme court noted that any judgment
against the university would be paid by the university and not by the government or
its taxpayers. Id. at 410. “Speculation that private universities might disband campus
–28–
police departments does not justify an unprecedented expansion of sovereign
immunity to the private arena.” Id. “The University warns against possibly higher
operating costs for government police departments, not unforeseen expenditures
from lawsuits and judgments.” Id.
Like those of the university in UIW II, ERCOT’s arguments that the PUC may
decertify ERCOT or that Panda may take ERCOT’s revenue and property, thus
leaving State priorities unfunded and depriving ERCOT’s successor of the assets it
requires to carry out its public functions, are speculative and do not “justify an
unprecedented expansion of sovereign immunity to the private arena.” Id. ERCOT
essentially warns that any successor would be forced to find a revenue source to
purchase assets needed to act as the ISO. While those costs could result in higher
operating costs for a new ISO, they are not unforeseen government expenditures
from lawsuits or judgments. See id. Even if the public must pay higher rates for its
electricity as a result of a finding against ERCOT in this lawsuit, immunity “has
never been defended as a mechanism to avoid any and all increases to public
expenditures.” Id.
5. PUC Rules
Our conclusion that ERCOT is not entitled to sovereign immunity is
consistent with the PUC’s administrative rules.8 The Texas Administrative Code
8
The PUC filed amicus briefs on behalf of ERCOT, arguing ERCOT has immunity. In those briefs, the
PUC did not discuss these provisions of the Texas Administrative Code.
–29–
states: “ERCOT shall not be liable in damages for any act or event that is beyond its
control and which could not be reasonably anticipated and prevented through the use
of reasonable measures . . ..” 16 TEX. ADMIN. CODE § 25.361(c). ERCOT likewise
is not liable for its ordinary negligence when it exercises its power to cause the
interruption of transmission service for the purpose of maintaining the ERCOT
system stability and safety, but it may be liable for “its gross negligence or
intentional misconduct when legally due.” 16 TEX. ADMIN. CODE § 25.200(d).
Finally, when considering the PUC’s response to ERCOT’s failures to comply with
PURA, a provision of the chapter, or a commission order, the PUC may take specific
actions; those actions, however, do not “preclude any form of civil relief that may
be available under federal or state law.” 16 TEX. ADMIN. CODE § 25.362(j).
We treat the PUC’s administrative rules like statutes for the purpose of
statutory interpretation. See TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d
432, 438 (Tex. 2011) (“We further interpret administrative rules, like statutes, under
traditional principles of statutory construction.”). We must give effect to all words
of a statute and not treat any as surplusage. See In re CenterPoint Energy Houston
Elec., LLC, 629 S.W.3d 149, 159 (Tex. 2021) (orig. proceeding). If we find ERCOT
is entitled to sovereign immunity, these provisions become mere surplusage. Thus,
to give effect to and avoid nullifying the PUC’s own rules relating to ERCOT, we
can only conclude ERCOT is liable for damages unless otherwise stated—a finding
inconsistent with endowing ERCOT with sovereign immunity.
–30–
6. Derivative Immunity
ERCOT argues in the alternative that it is entitled to derivative immunity for
the regulatory functions it performs at the behest of the PUC.9 Specifically, ERCOT
asks that we extend federal precedent relating to “self-regulatory organizations”
(SROs); federal courts have held SROs have absolute immunity. In Panda I, this
Court adopted ERCOT’s argument and concluded ERCOT functioned like an SRO
and was entitled to sovereign immunity from private damages suits in connection
with the discharge of its regulatory responsibilities. See Panda I, 552 S.W.3d at 318.
That conclusion was erroneous.
The rule granting SROs immunity has its roots in the Supreme Court’s
decision in Butz v. Economou, 438 U.S. 478 (1978), which began the process of
extending the type of immunity previously limited to judicial officers to other high
governmental officials. Rabin v. NASDAQ OMX PHLX LLC, 182 F. Supp. 3d 220,
237 (E.D. Pa. 2016), aff’d, 712 Fed. App’x 188 (3d Cir. 2017). Today, “[t]here is no
question that an SRO and its officers are entitled to absolute immunity from private
damages suits in connection with the discharge of their regulatory responsibilities.”
Standard Inv. Chartered, Inc. v. Nat’l Ass’n of Sec. Dealers, Inc., 637 F.3d 112, 115
(2d Cir. 2011) (citing DL Capital Grp., LLC v. Nasdaq Stock Mkt., Inc., 409 F.3d
9The supreme court has not made clear whether the doctrine of derivative immunity is recognized in
Texas. See generally Nettles, 606 S.W.3d at 733; Brown & Gay Eng’g, Inc. v. Olivares, 461 S.W.3d 117,
126 (Tex. 2015). Thus, as the supreme court did in Nettles and Brown & Gay, we will consider whether
ERCOT might be entitled to an extension of the PUC’s immunity from suit as if—but without holding
that—the doctrine of derivative immunity is recognized in Texas.
–31–
93, 96 (2d Cir. 2005)). The Texas Supreme Court has not extended this doctrine to
heavily regulated entities such as ERCOT.
SROs perform “a variety of regulatory functions that would, in other
circumstances, be performed by a government agency,” and for which the
government would enjoy immunity. See Barbara v. NYSE, 99 F.3d 49, 59 (2d Cir.
1996). Therefore, courts extended absolute immunity to SROs when they perform
regulatory tasks. See id. SROs and their officers are entitled to absolute immunity
from private suits “when they perform their statutorily delegated adjudicatory,
regulatory, and prosecutorial functions.” Weissman v. Nat’l Ass’n of Secs. Dealers,
Inc., 500 F.3d 1293, 1296 (11th Cir. 2007). But SROs also engage in non-
governmental activities that serve their private business interests. See id. Courts
determine whether immunity applies on a case-by-case basis. In re NYSE Specialists
Sec. Litig., 503 F.3d 89, 96 (2d Cir. 2007).
The doctrine “is of a rare and exceptional character,” and the party seeking
immunity bears the burden of demonstrating it is warranted. Id. When deciding
whether a SRO is entitled to immunity, courts consider “the nature of the function
performed, not the identity of the actor who performed it.” Id. (quoting Forrester v.
White, 484 U.S. 219, 229 (1988)).
As an initial matter, we decline to extend a doctrine that, up until this point,
has applied only to self-regulatory organizations. ERCOT is not an SRO. After
observing that “federal case law dealing with SRO immunity appears to be limited
–32–
to cases involving federal securities regulators,” the Court’s opinion in Panda I
failed to provide a helpful analysis on this point. Panda I, 552 S.W.3d at 318. We,
however, believe it must be given more weight. We have found no case law in Texas,
except Panda I, expanding absolute immunity bestowed on SROs to entities beyond
federal securities regulators. And we decline ERCOT’s invitation to be the first to
do so. We remain mindful of the supreme court’s recent statement that, to date, it
has “yet to extend sovereign immunity to a purely private entity—one neither created
nor chartered by the government—even when that entity performs some
governmental functions.” UIW II, 602 S.W.3d at 401. And yet ERCOT requests we
do so by applying federal case law doctrine in this case.
Second, the justification for derivative immunity applied to SROs is that
Congress has enabled the SROs to perform regulatory functions that would
otherwise be performed by the government, and the government would be immune
when performing such functions. See In re NYSE Specialists Sec. Litig., 503 F.3d at
100; In re Facebook, Inc., IPO Sec. & Derivative Litig., 986 F. Supp. 2d 428, 449
(S.D.N.Y. 2013). In contrast, the Texas Utilities Code provides that ERCOT’s
primary mission is to act as a private system operator with responsibility for ensuring
access to the transmission and distribution systems for all buyers and sellers of
electricity on nondiscriminatory terms; ensuring the reliability and adequacy of the
regional electrical network; ensuring that information relating to a customer’s choice
of retail electric provider is conveyed in a timely manner to the persons who need
–33–
that information; and ensuring that electricity production and delivery are accurately
accounted for among the generators and wholesale buyers and sellers in the region.
TEX. UTIL. CODE ANN. § 39.151(a), (c). The record does not establish that these are
regulatory functions that would, in other circumstances, be performed by the
government. Additionally, even if the record did establish that fact, Panda
specifically complains that ERCOT, exercising its own discretion, issued false and
misleading CDR Reports, press releases, presentations, and press interviews. The
record certainly does not show that ERCOT’s actions about which Panda complains
are actions that would, in other circumstances, be performed by the government.
We decline ERCOT’s invitation to extend a doctrine “of rare and exceptional
character” without precedent to do so.
7. Legislative Amendments
After this Court issued its opinion in Panda I and the trial court entered its
order granting ERCOT’s plea to the jurisdiction but before the supreme court issued
its opinion in Panda I Appeal, the 87th Legislature amended provisions of the
utilities code relevant to ERCOT. None of those amendments purports to bestow
sovereign immunity on ERCOT or waive the immunity this Court found in Panda I.
“[L]egislative silence . . . may reflect many things, including implied delegation to
the courts or administrative agencies, lack of consensus, oversight, or mistake.”
Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex. 2004). Although both parties make
arguments construing the Legislature’s silence in their favor, we decline to reach
–34–
conclusions about what, if anything, the Legislature hoped to convey to the courts
by its actions and inactions. See Sanchez v. Schindler, 651 S.W.2d 249, 252 (Tex.
1983) (We can infer nothing from this inaction because a “legislature legislates by
legislating, not by doing nothing, not by keeping silent.”).
8. Conclusion
We discern no legislative directive that ERCOT, a private, independent,
membership-based, nonprofit organization, has sovereign immunity. See UIW II,
602 S.W.3d at 411. PURA does not evince a clear legislative intent to vest ERCOT
with the nature, purposes, and powers of an arm of the State government. See id. at
405. Although ERCOT’s activities benefit the public, its arguments for extending
the doctrine of sovereign immunity “do not comport with the doctrine’s historic
justifications: preserving the separation of government power and protecting the
public treasury from lawsuits and judgments.” Id. at 401–02. To date, the supreme
court has not extended sovereign immunity to a purely private entity neither
chartered nor created by the State, and this Court will not create new precedent by
extending sovereign immunity to ERCOT.
C. Exclusive Jurisdiction
We now turn to ERCOT’s argument that Panda’s claims must be dismissed
because they fall within the PUC’s exclusive jurisdiction. Whether the PUC has
exclusive jurisdiction over an issue is a question of statutory interpretation that we
–35–
review de novo. See In re CenterPoint Energy, 629 S.W.3d at 154 (citing Oncor
Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018)).
1. Law on Exclusive Jurisdiction
District courts are presumed to possess subject matter jurisdiction over a
dispute in the absence of a contrary showing. Id.; see also TEX. CONST. art. V, § 8
(Texas state district courts possess “exclusive, appellate, and original jurisdiction of
all actions, proceedings, and remedies, except in cases where exclusive, appellate,
or original jurisdiction may be conferred by this Constitution or other law on some
other court, tribunal, or administrative body.”).
Conversely, agencies such as the PUC do not share the jurisdictional
presumption of district courts. See In re CenterPoint Energy, 629 S.W.3d at 154
(citing In re Entergy Corp., 142 S.W.3d 316, 322 (Tex. 2004) (orig. proceeding)).
Agencies are legislative creations with only those powers expressly conferred and
necessary to accomplish their duties. See Chaparral Energy, 546 S.W.3d at 138; see
also In re CenterPoint Energy, 629 S.W.3d at 154 (administrative bodies “may
exercise only powers conferred in clear and express statutory language”). The party
asserting an agency’s exclusive jurisdiction bears the burden to establish the
Legislature divested the district court of subject matter jurisdiction with respect to
the disputed issues. See In re CenterPoint Energy, 629 S.W.3d at 156.
An agency has exclusive jurisdiction when statutory language “clearly
expresses” the Legislature’s intent is to confer such jurisdiction or “when a pervasive
–36–
regulatory scheme indicates that the Legislature intended for the regulatory process
to be the exclusive means of remedying the problem to which the regulation is
addressed.” Id. (quoting Chaparral Energy, 546 S.W.3d at 138). While the supreme
court has noted that “PURA includes both express exclusivity language and a
pervasive scheme,” the court also “recognized that ‘[a]ll regulatory schemes have
limitations,’ so we must determine whether issues underlying plaintiffs’ claims
‘fall[] within [the PUC’s] jurisdictional scope.’” Id. (quoting Chaparral Energy, 546
S.W.3d at 139). Today we make a similar determination with respect to Panda’s
claims against ERCOT.
2. Express Grant of Authority
Although ERCOT does not argue that the Legislature expressly granted the
PUC exclusive jurisdiction to adjudicate Panda’s claims, we consider that issue out
of an abundance of caution. We also gain insight from the analysis surrounding the
Legislature’s expressed intent and corresponding silence.
PURA includes several express grants of exclusive jurisdiction to the PUC;
however, none of those grants apply to claims against ERCOT. For example, section
32.001 of the Texas Utilities Code is titled “Commission Jurisdiction,” and it grants
the PUC “exclusive” jurisdiction in two instances. See TEX. UTIL. CODE ANN.
§ 32.001. First, except as provided in section 32.002, which governs municipally
owned utilities, “the Commission has exclusive original jurisdiction over the rates,
operations, and services of an electric utility” in specific geographic areas. Id.
–37–
§ 32.001(a). Second, the PUC has “exclusive appellate jurisdiction to review an
order or ordinance of a municipality exercising exclusive original jurisdiction under
this subtitle.” Id. § 32.001(b). Similarly, section 52.002(a) states “the commission
has exclusive original jurisdiction over the business and property of a
telecommunications utility in this state subject to the limitations imposed by this
title.” Id. § 52.002(a). Through these provisions, the Legislature clearly expressed
its intent to confer exclusive jurisdiction over the described disputes on the
commission.
We cannot ignore the Legislature’s explicit jurisdictional grants where the
Legislature deemed it appropriate juxtaposed with the Legislature’s silence
elsewhere. See Hogan v. Zoanni, 627 S.W.3d 163, 169 (Tex. 2021) (explaining
courts presume the Legislature chose statutory language deliberately and
purposefully and likewise excluded language deliberately and purposefully). Upon
review of the applicable statutes, we conclude the Legislature did not expressly grant
exclusive jurisdiction over Panda’s claims to the PUC.
3. Pervasive Regulatory Scheme
Because the Legislature did not expressly grant exclusive jurisdiction to the
PUC to adjudicate claims against ERCOT, we must consider whether the Legislature
established “a pervasive regulatory scheme [that] indicates that the Legislature
intended for the regulatory process to be the exclusive means of remedying the
problem to which the regulation is addressed.” In re CenterPoint Energy, 629
–38–
S.W.3d at 156. In its arguments, ERCOT focuses on whether it is part of a “pervasive
regulatory scheme” without considering whether that scheme “indicates that the
Legislature intended for the regulatory process to be the exclusive means of
remedying the problem to which the regulation is addressed.” See id. We conclude
the scheme does not.
a. ERCOT is Heavily Regulated
ERCOT is heavily regulated and answerable to the PUC on a multitude of
issues. See, e.g., TEX. UTIL. CODE ANN. § 39.151; 16 TEX. ADMIN. CODE §§ 25.361,
25.362. ERCOT explains the many ways it is overseen and regulated by the PUC
and argues heavy regulation is equivalent to existing within a pervasive regulatory
scheme. Therefore, ERCOT concludes, the regulatory process must be the exclusive
means of remedying the issues about which Panda complains. We disagree; we will
not conflate heavy regulation with the type of pervasive regulatory scheme required
to establish exclusive jurisdiction. See Rosenberg, 571 S.W.3d at 750. Indeed, the
supreme court has made clear that the PUC’s jurisdiction to regulate activities is
separate from the PUC’s authority to adjudicate disputes. See In re CenterPoint
Energy, 629 S.W.3d at 156–58.
PURA specifically addresses which disputes involving ERCOT the
commission may resolve. PURA section 39.151 addresses the PUC’s and ERCOT’s
respective responsibilities, including the functions of the ISO, TEX. UTIL. CODE ANN.
§ 39.151(a); creation and adoption of rules relating to the reliability of the regional
–39–
electrical network, id. § 39.151(d); and the PUC’s oversight of ERCOT’s finances,
budget, operations, debt financing or debt refinancing, id. § 39.151(d)–(d-4). Only
one subsection, however, discusses dispute resolution. Section 39.151(d-4)(6) states
the commission may
(6) resolve disputes between an affected person and an
independent organization and adopt procedures for the efficient
resolution of such disputes.
Id. § 39.151(d-4)(6). An “affected person” is defined to be (a) a public utility or
electric cooperative affected by an action of a regulatory authority; (b) a person
whose utility service or rates are affected by a proceeding before a regulatory
authority; or (c) a person who is a competitor of a public utility with respect to a
service performed by the utility or wants to enter into competition with a public
utility. Id. § 11.003(1).
Section 39.151(d-4)(6) is clear: the PUC’s jurisdiction to resolve disputes
involving ERCOT is limited to resolving disputes between ERCOT and an affected
person. None of the Panda entities is an “affected person,” as defined by the statute,
and thus, the statute does not confer jurisdiction on the PUC to resolve a dispute
between ERCOT and Panda.
ERCOT cites Entergy and Chaparral Energy to support its exclusive
jurisdiction argument. In Entergy, the supreme court considered whether the PUC
had exclusive jurisdiction over a claim that a utility breached a PUC-approved
agreement. See In re Entergy Corp, 142 S.W.3d at 319–20. The court examined
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utility code sections 31.001 and 32.001. See id. at 323. Section 31.001(a) states the
“purpose of this subtitle is to establish a comprehensive and adequate regulatory
system for electric utilities to assure rates, operations, and services that are just and
reasonable to the consumers and to the electric utilities.” TEX. UTIL. CODE ANN.
§ 31.001 (emphasis added). Section 32.001 gives the PUC exclusive original
jurisdiction over the rates, operations, and services of an electric utility in specific
geographic areas. Id. § 32.001. The Entergy court wrote that “the statutory
description of PURA as ‘comprehensive’ demonstrates the Legislature’s belief that
PURA would comprehend all or virtually all pertinent considerations involving
electric utilities operating in Texas. That is, PURA is intended to serve as a
‘pervasive regulatory scheme.’” In re Entergy Corp., 142 S.W.3d at 323 (emphasis
added). Further, section 32.001’s jurisdictional grant shows the Legislature intended
disputes regarding utility rates, operations, and services to be resolved by the PUC.
See id. From these provisions, the court concluded the PUC had exclusive
jurisdiction over the dispute at issue. Id.
In Chaparral Energy, Oncor, a public transmission-and-distribution utility
regulated by the PUC, was sued by a commercial customer for breach of contract.
See Chaparral Energy, 546 S.W.3d at 136–37. The plaintiff, Chaparral Energy,
alleged Oncor failed to act in good faith and fulfill its duties and obligations under
the parties’ agreement; Oncor did not use reasonable diligence or act in a manner
consistent with good business practices, reliability, safety, and expedition; and
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Oncor “engaged in intentional misconduct” and was grossly negligent. See id. at 137.
The case proceeded to trial, and the jury found in favor of Chaparral Energy. See id.
After trial, Oncor moved to dismiss Chaparral Energy’s claims for want of
jurisdiction, arguing the PUC had exclusive jurisdiction over the claims at issue. See
id. Considering Oncor’s arguments in favor of exclusive jurisdiction, the supreme
court stated:
The Texas Public Utility Regulatory Act (PURA) grants the PUC broad
powers to “regulate and supervise the business of each public utility
within its jurisdiction and to do anything specifically designated or
implied by [PURA] that is necessary and convenient to the exercise of
that power and jurisdiction.” TEX. UTIL. CODE § 14.001. PURA’s
express purpose “is to establish a comprehensive and adequate
regulatory system for public utilities to assure rates, operations, and
services that are just and reasonable to the consumers and to the
utilities” and “to grant the [PUC] authority to make and enforce rules
necessary to protect customers of . . . electric services consistent with
the public interest.” Id. § 11.002(a), (c). It reiterates this purpose in
Subtitle B, which governs electric utilities like Oncor. Id. § 31.001(a).
It also provides that it “shall be construed liberally to promote the
effectiveness and efficiency of regulation of public utilities.” Id.
§ 11.008.
Id. at 138 (emphasis added). The supreme court concluded the PUC had exclusive
jurisdiction “to resolve issues underlying a customer’s claim that a PUC-regulated
utility breached a contract by failing to timely provide electricity services.” Id. at
136.
While ERCOT contends these two cases demonstrate that PURA established
a comprehensive regulatory system that also applies to Panda’s claims, we cannot
read these cases so broadly. The statutory provisions on which these opinions rely
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specifically address utilities and a comprehensive system for utilities to assure rates,
operations, and services. But ERCOT is not a utility, and this dispute is not about
utility rates, operations, or services. ERCOT is a system operator, and this case arises
from Panda’s allegations of fraud, negligent misrepresentation, and breach of
fiduciary duty. Thus, while the supreme court has concluded the PUC has exclusive
jurisdiction over some (but not all) disputes involving utilities, we do not consider
that conclusion relevant to the present dispute.
b. Allegations in Panda’s Suit
ERCOT encourages us to look beneath the words Panda used to plead its
common law complaints to determine whether “the problem” underlying those
claims is one over which the Legislature intended an agency to have exclusive
jurisdiction. Discussing and quoting Panda’s Second Amended Original Petition,
ERCOT asserts “the problem” at the heart of Panda’s claims “is Panda’s contention
that ERCOT failed to act with ‘competence or independence’ in publishing its 2011
and 2012 CDRs and the ‘science underlying’ those reports ‘was so unsound as to be
wholly unreliable.’” According to ERCOT, Panda’s allegations challenge ERCOT’s
independence, which goes “to the core of the PUC’s authority over ERCOT”
because the Legislature gave the PUC “explicit, exclusive control over issues related
to ERCOT’s competence.” Citing PURA section 39.151(d), ERCOT maintains it is
“directly responsible” to the PUC. And since the PUC has authority over ERCOT,
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the PUC can discipline ERCOT, and this lawsuit implicates ERCOT’s competence,
ERCOT concludes the PUC must have exclusive jurisdiction over Panda’s claims.
We agree with ERCOT’s premise that the PUC exercises extensive authority
over ERCOT; however, we cannot agree with ERCOT’s conclusion that Panda’s
claims as presented in its Second Amended Petition fall exclusively within the
PUC’s jurisdiction. While ERCOT quotes select portions of Panda’s Second
Amended Petition to support its argument, additional context is helpful to our
analysis. Panda alleged ERCOT, acting “either alone or in complicity with others,
sponsored false and misleading” CDR Reports. Panda alleges ERCOT developed a
“plan to spur investment,” and Panda’s pleading lists steps ERCOT allegedly took
to “condition the market” to encourage investment in new power plants; ERCOT
knew that by depicting “extreme capacity shortfalls,” investors would be “lure[d]”
into constructing new plants. Panda alleges “ERCOT had more than ample motive
to generate power development through false market information.” Panda maintains
it relied on ERCOT’s numerous misrepresentations when it decided to build three
power plants. Panda’s Second Amended Petition states that after it made investments
to build new plants,
55. Information slowly surfaced showing that ERCOT’s
methodology and data points used in the 2011 and 2012 CDRs were
either seriously flawed or rigged. Questions began to surface as to
whether ERCOT knew about the defective forecasting but suppressed
this fact to induce construction of plants without capacity payments.
Questions arose concerning ERCOT’s competency and independence,
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and whether the science underlying the CDRs was so unsound as to be
wholly unreliable.
56. In the 2011 and 2012 CDRs, ERCOT took great care on its
website to disclaim any responsibility for the accuracy of the data
supplied by market participants upon which the CDRs were based. But
nowhere did ERCOT disclose doubts about its own methodology.
Nowhere did ERCOT warn market participants that its science was
unsound, or that it lacked the competence or independence to produce
reliable assessments of capacity, demand, or reserves. At no time did
Plaintiffs assent to any attempt by ERCOT to limit its responsibility or
liability for misconduct in connection with the CDRs.
Although Panda’s allegations arise from the content of ERCOT’s CDR
Reports in 2011 and 2012 (as well as ERCOT’s press releases, presentations, and
press interviews), Panda alleges ERCOT used these tools to intentionally provide
false information to the market. The PUC requires ERCOT to prepare the CDR
Reports, see 16 TEX. ADMIN. CODE ANN. § 25.505(c), but the PUC does not dictate
the content of the reports. A January 2013 memorandum from the PUC states the
“inputs, assumptions, and formats of the CDR report are determined by ERCOT
staff.” The same memorandum states the then-existing methodology for producing
the CDR reports was approved by ERCOT’s board of directors in 2009.
Panda alleges ERCOT produced the CDR Reports as required, but, exercising
its own authority and discretion, ERCOT knowingly issued false and misleading
reports. Panda alleges ERCOT failed to act independently, not from the PUC, but
from others with whom it allegedly was complicit in its efforts to sponsor the false
or misleading reports. Likewise, Panda does not challenge ERCOT’s overall
competence as ERCOT suggests, but alleges ERCOT failed to act competently when
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it “sponsored false and misleading” CDR Reports. This case is not about PUC
oversight or the PUC’s authority over ERCOT. This case is about allegedly false
representations ERCOT made to the market for the purpose of luring investors to
build new power plants, and Panda’s alleged reliance on them.
ERCOT argues that, if it performed inadequately, then the Legislature gave
the PUC explicit power to discipline ERCOT for any inadequate performance, thus
precluding private causes of action. See TEX. UTIL. CODE ANN. § 39.151(d) (“The
commission may take appropriate action against an organization that does not
adequately perform the organization’s functions or duties or does not comply with
this section, including decertifying the organization or assessing an administrative
penalty against the organization.”). When taken to its logical end, this argument
would mean ERCOT could never be liable to anyone other than the PUC for its bad
acts, no matter how intentional or egregious those acts may be. We do not agree that
is the law. The various provisions on which ERCOT relies may delineate authority,
but they do not exclude judicial authority over Panda’s common law claims. See
Forest Oil Corp. v. El Rucio Land & Cattle Co., Inc., 518 S.W.3d 422, 428–49 (Tex.
2017). Statutory provisions authorizing the PUC to regulate ERCOT do not suggest,
let alone clearly indicate, that the PUC’s authority is intended to be exclusive of
common law actions. See id. at 429. Accordingly, the PUC’s disciplinary role does
not preclude Panda from pursuing its common law claims in district court.
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The PUC’s regulations also do not comport with ERCOT’s arguments. The
PUC’s own regulations state:
(j) Compliance with rules or orders. ERCOT shall inform the
commission with as much advance notice as is practical if ERCOT
realizes that it will not be able to comply with PURA, any provision of
this chapter, or a commission order. If ERCOT fails to comply with
PURA, any provision of this chapter, or a commission order, the
commission may, after notice and opportunity for hearing, adopt the
measures specified in this subsection or such other measures as it
determines are appropriate.
(1) The commission may require ERCOT to submit, for
commission approval, a proposal that details the actions ERCOT will
undertake to remedy the non-compliance.
(2) The commission may require ERCOT to begin submitting
reports, in a form and at a frequency determined by the commission,
that demonstrate ERCOT’s current performance in the areas of non-
compliance.
(3) The commission may require ERCOT to undergo an audit
performed by an appropriate independent third party.
(4) The commission may assess administrative penalties under
PURA Chapter 15, Subchapter B.
(5) The commission may suspend or revoke ERCOT’s
certification under PURA § 39.151(c) or deny a request for change in
the terms associated with such certification.
(6) Nothing in this section shall preclude any form of civil relief
that may be available under federal or state law.
16 TEX. ADMIN. CODE § 25.362(j). The PUC could not have been clearer when
stating that nothing in its rules for disciplining ERCOT “shall preclude any form of
civil relief that may be available under federal or state law.” Id. § 25.362(j)(6).
Consistent with PURA, the PUC’s rules demonstrate the PUC is not the path to
redress Panda’s alleged injuries.
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We conclude “the problem” at the heart of Panda’s suit is a series of
allegations that ERCOT acted either alone or in concert with others to purposefully
mislead the market and induce investors such as Panda to build new power plants.
This “problem” does not fall exclusively within the PUC’s jurisdiction.
c. Abrogation of Common Law Complaints
While maintaining the PUC is the proper forum for Panda’s complaints,
ERCOT alternatively argues that even if the PUC lacks jurisdiction to consider “the
problem” that Panda presents, then “that would just mean the Legislature abrogated
Panda’s claims—as it has the power to do.” For the limited purpose of this argument,
ERCOT accepts that section 39.151(d-4)(6) deprives the PUC of jurisdiction over
Panda’s claims. ERCOT then concludes, however, that section 39.151(d-4)(6)
“implements a legislative choice to allow claims related to ERCOT’s conduct by
entities that qualify as ‘affected persons,’ while abrogating the claims of those that
do not.”
We begin by noting the PUC’s own regulations do not comport with this
analysis. As discussed above, the administrative code states “[n]othing in this section
shall preclude any form of civil relief that may be available under federal or state
law.” Id. Panda asserts common law claims for negligent misrepresentation, fraud,
and breach of fiduciary duty. Panda’s common law claims are a form of civil relief
available under state law.
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Additionally, “[a]brogation of a common-law right . . . is disfavored and
requires a clear repugnance between the common-law cause of action and the
statutory remedy. A statute’s express terms or necessary implications must indicate
clearly the Legislature’s intent to abrogate common-law rights. Absent such a clear
indication, the [agency] did not have exclusive jurisdiction over the claims at issue.”
Forest Oil, 518 S.W.3d at 428 (footnotes and internal quotation marks omitted).
In this case, there is no “clear repugnance” between Panda’s claims and
PURA. While the PUC may choose to discipline ERCOT for the behavior alleged in
Panda’s complaints, the statutory provision empowering the PUC to do so is not
inconsistent with Panda pursuing its claims in district court. Further, nothing in
PURA’s express terms or necessary implications suggests the Legislature intended
to abrogate common law rights. Absent a clear indication, we cannot conclude the
Legislature intended to abrogate Panda’s common law rights.
4. Conclusion
In the absence of an express grant of authority, an agency has exclusive
jurisdiction where the Legislature created a pervasive regulatory scheme that
“indicates that the Legislature intended for the regulatory process to be the exclusive
means of remedying the problem to which the regulation is addressed.” In re
CenterPoint Energy, 629 S.W.3d at 156 (emphasis added) (quoting Chaparral
Energy, 546 S.W.3d at 138). ERCOT exists within a regulatory scheme; however,
that regulatory scheme does not indicate the Legislature intended for the regulatory
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process to be the exclusive means of remedying the problem to which the regulation
is addressed, much less the problems about which Panda complains.
We conclude ERCOT did not meet its burden to prove the Legislature clearly
stated its intent for the PUC alone to resolve the type of claims Panda asserts against
ERCOT. Absent a clear indication otherwise, we accept the presumption that the
district court has subject matter jurisdiction over the dispute. See id. at 154; see also
TEX. CONST. art. V, § 8. We conclude the PUC does not have exclusive jurisdiction
to adjudicate the common law fraud, negligent misrepresentation, and breach of
fiduciary duty claims that Panda asserts against ERCOT.
CONCLUSION
We reverse the trial court’s April 24, 2018 order granting defendant’s plea to
the jurisdiction based on sovereign immunity and dismissing this case for lack of
jurisdiction. We remand this case to the trial court for further proceedings.
/Erin A. Nowell//
ERIN A. NOWELL
180611f.p05 JUSTICE
Schenck, J., dissenting
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
PANDA POWER GENERATION On Appeal from the 15th Judicial
INFRASTRUCTURE FUND, LLC, District Court, Grayson County,
D/B/A/ PANDA POWER FUNDS; Texas
PANDA SHERMAN POWER Trial Court Cause No. CV-16-0401.
HOLDINGS, LLC; PANDA Opinion delivered by Justice Nowell.
SHERMAN POWER Court sitting en banc.
INTERMEDIATE HOLDINGS I,
LLC; PANDA SHERMAN POWER
INTERMEDIATE HOLDINGS II,
LLC; PANDA SHERMAN POWER,
LLC; PANDA TEMPLE POWER
HOLDINGS, LLC; PANDA
TEMPLE POWER
INTERMEDIATE HOLDINGS I,
LLC; PANDA TEMPLE POWER
INTERMEDIATE HOLDINGS II,
LLC; PANDA TEMPLE POWER,
LLC; PANDA TEMPLE POWER II
HOLDINGS, LLC; PANDA
TEMPLE POWER II
INTERMEDIATE HOLDINGS I,
LLC; PANDA TEMPLE POWER II
INTERMEDIATE HOLDINGS II,
LLC; PANDA TEMPLE POWER II,
LLC, Appellants
No. 05-18-00611-CV V.
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ELECTRIC RELIABILITY
COUNCIL OF TEXAS, INC.,
Appellee
In accordance with this Court’s opinion of this date, we REVERSE the trial
court’s April 24, 2018 order granting the plea to the jurisdiction filed by appellee
Electric Reliability Council of Texas, Inc. and REMAND this case to the trial
court for further proceedings
It is ORDERED that appellants Panda Power Generation Infrastructure
Fund, LLC d/b/a Panda Power Funds; Panda Sherman Power Holdings, LLC;
Panda Sherman Power Intermediate Holdings I, LLC; Panda Sherman Power
Intermediate Holdings II, LLC; Panda Sherman Power, LLC; Panda Temple Power
Holdings, LLC; Panda Temple Power Intermediate Holdings I, LLC; Panda
Temple Power Intermediate Holdings II, LLC; Panda Temple Power, LLC; Panda
Temple Power II Holdings, LLC; Panda Temple Power II Intermediate Holdings I,
LLC; Panda Temple Power II Intermediate Holdings II, LLC; and Panda Temple
Power II, LLC recover their costs of this appeal from appellee Electric Reliability
Council of Texas, Inc.
Judgment entered this 23rd day of February, 2022.
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