Hermes Law

News From the Office

Texas Supreme Court to Rule on Key ERCOT Decisions

On September 2, 2022, the Texas Supreme Court granted CPS Energy’s Petition for Review in the CPS Energy v. Electric Reliability Counsel of Texas (“ERCOT”) matter (Case No. 22-0056). The case was consolidated with In re ERCOT and William L. Magness (Case No. 21-0834) and set for oral argument on January 9, 2023. The Court is expected to rule on several critical issues that will impact all ERCOT litigation, including ongoing litigation resulting from February 2021’s Winter Storm Uri. This article discusses what the CPS Energy appeal might mean for insurance companies.

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Another Win for Insurers Affected by Winter Storm Uri

Last week, the Fifth Court of Appeals in Dallas, Texas, produced another big win for insurers wishing to recover against the Electric Reliability Council of Texas Inc. (“ERCOT”)  for payouts made to insureds because of Winter Storm Uri blackouts. After that, however, the Texas Supreme Court will have the final say as to whether suits against ERCOT can go forward. This article discusses what insurance companies need to know about the state of the law involving lawsuits against ERCOT and how Hermes Law is helping insurance companies seek damages.

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Important Notice Regarding ERCOT and Winter Storm Uri

From February 13th to the 17th, Texas experienced one of the most severe winter storms in the state’s history. Power grids were pushed to the breaking point as the electricity demand continued to rise..  In response, the Electric Reliability Council of Texas (“ERCOT”) implemented rolling blackouts across the state.  At the peak of the winter storm, more than 4.3 million residents lost access to reliable electricity.

The aftermath of the winter storm was almost as destructive as the storm itself. Thousands of residents found their pipes had either burst or run dry—or in some cases, both. Faced with potentially thousands of dollars worth of damage, many residents and businesses filed claims with their insurers.  Those claims’ submission gives rise to the insurers’ potential right to subrogate their indemnity payments from ERCOT.

The viability of an insurer’s subrogation claim against ERCOT is contingent upon ERCOT’s immunity status.  In general, a governmental unit is presumed to be immune from suit, unless that immunity is waived by statute.  The Texas Tort Claims Act (“TTCA”) waives immunity for units of government but only under certain defined circumstances.  In Panda Power Generation Infrastructure Fund, LLC, et al. vs. Electric Reliability Council of Texas, Inc., ERCOT maintained its immunity status as a “governmental unit.”  The case was on appeal to the Texas Supreme Court, which was set to decide the issue this spring.  However, in a tight 5-4 decision, the Court ruled that it did not have the authority under the Texas Constitution to decide the issue due to procedural mootness. Therefore, ERCOT’s immunity status remains undecided.

In light of the Supreme Court’s ruling it is unclear if the TTCA’s notice-of-claim requirement applies to subrogation claims against ERCOT.    The TTCA provides that a claimant asserting liability against a governmental unit must give notice of the claim not later than six (6) months after the incident giving rise to the claim occurred.  The notice must reasonably describe:

  1. The damage or injury claimed;
  2. The time and place of the incident; and
  3. The incident.

In light of the uncertainty regarding ERCOT’s immunity status, providing written notice of each claim in conformance with the TTCA is, by far, the safest approach. If you are interested in learning more about the current situation with ERCOT or want to know the best practices in moving forward, we encourage you to contact Hermes Law.