Lawsuit alleges negligence against ERCOT regarding February winter storm

by Jeffrey Nadrich Managing Partner, Nadrich & Cohen, LLP

A lawsuit filed in the district court of Bexar County, Texas on March 12 alleges that Electric Reliability Council of Texas (ERCOT) was negligent with regards to the February 13-17, 2021 North American winter storm.

The storm killed at least 82 people, 70 in the United States, caused more than 9,924,000 power outages, over 4.5 million in Texas, and caused over $195 billion in property damage.

The complaint alleges that ERCOT is “presiding over one of the largest illegal wealth transfers in the history of Texas.”

The lawsuit was filed by CPS Energy, and the complaint states it “wants to protect its customers from excessive and illegitimate power and natural gas costs.”

The complaint notes that ERCOT has run up over $16 billion in erroneous charges in relation to the storm, and that the overcharge is “an acknowledged error caused by ERCOT’s own mistake” in not reducing a $9,000 per megawatt-hour system-wide offer cap “even when the scarcity that prompted this change no longer existed.”

CPS Energy, according to the complaint, needs its customers to be protected against errors in ERCOT’s pricing.

The complaint claims ERCOT wants CPS Energy to pay for defaults in the market caused by ERCOT’s pricing, and that CPS Energy “will never be able to recover these monies.”

The complaint claims ERCOT has failed to pay at least $18 million owed to CPS Energy for the storm, and that this represents a prior material breach, excusing CPS Energy from performing under its standard form market participant agreement.

“Nevertheless, CPS Energy will continue to pay all lawful, legitimate charges for electricity,” the complaint states.

The complaint argues that ERCOT can’t declare CPS Energy in default because the winter storm was a force majeure event, meaning an extraordinary event out of the control of both parties, preventing the contract from being fulfilled.

The complaint alleges that money ERCOT wants CPS Energy to pay unlawfully extends CPS Energy’s credit in violation of Texas’ constitution.

The complaint requests a temporary injunction to stop ERCOT from declaring a default, extending CPS Energy’s credit to pay for others’ defaults with no prospect of repayment, and charging CPS Energy for any default uplift invoice.

The complaint requests, in addition and in the alternative, pursuant to Tex. R. Civ. P. 47, monetary relief to correct ERCOT’s erroneous overcharges during the storm.

The complaint claims that millions were left without power “due to ERCOT’s lack of preparation.”

ERCOT, according to the complaint, “did not ensure consistent weatherization compliance across the grid.”

The complaint notes that ERCOT oversaw rolling outages after winter storms in 2011, and that a 2011 Federal Energy Regulatory Commission report concluded that a failure to winterize the power grid was a contributory factor in the power outages.

The winter storm was foreseen by at least a week. However, ERCOT, according to the complaint, failed to estimate and prepare for the amount of power that would be needed for the storm, and failed to follow its own load forecasting, weatherization, winter preparedness and emergency operations protocols.

The complaint notes that Texas regularly sees demand of over 70,000 megawatts or more in the summer, yet that the storm only required a demand of 69,222 megawatts.

The complaint alleges a breach of contract, claiming that ERCOT breached their market agreement by failing to implement protocols to ensure system integrity. ERCOT “breached” their handling of winter weather preparedness, weatherization plans, submission of emergency operations plans, and load forecasting, according to the complaint, since they were warned well in advance about the storm yet failed to reasonably prepare to meet its load projections.

The complaint claims that ERCOT’s failure to enforce winterization of the grid “intentionally frustrated the purposes of” their contract, “making it financially impossible for CPS Energy to perform as a willing buyer.”

The complaint alleges negligence, gross negligence, and negligence per se, alleging that ERCOT failed to act with reasonable care when they estimated and planned for the amount of power required for the storm. The complaint also claims ERCOT failed to act with reasonable care when it became clear their projections showed they wouldn’t have enough capacity to meet demand.

The complaint alleges that ERCOT’s failure to reduce prices in a reasonably prompt manner was negligent.

The complaint argues that the negligence of ERCOT amounts to gross negligence because ERCOT’s behavior was extremely risky, they knew it was extremely risky, yet “nevertheless proceeded with conscious indifference to the rights, safety, or welfare of others.”

ERCOT’s actions, according to the complaint, constitute negligence per se since they violate the Texas Utilities Code.

The complaint accuses ERCOT of violating Article 1, section 17 of the Texas Constitution by taking CPS Energy’s goods and services without just compensation.

The complaint seeks a declaratory judgment that ERCOT’s failure to pay the $18 million they owe CPS Energy “is a prior material breach of the Market Agreement.”

A declaratory judgment is sought by the complaint preventing ERCOT from declaring a default due to a force majeure event, and the complaint seeks declaratory judgments stating ERCOT shouldn’t have to pay for others’ defaults and shouldn’t have to pay any part of ERCOT’s erroneous overcharge.

The complaint seeks a temporary injunction preventing ERCOT from declaring CPS Energy in violation of contract due to a force majeure event, or requiring CPS Energy to pay any part of ERCOT’s erroneous overcharge.

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Created on Mar 12th 2021 22:08. Viewed 569 times.

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