Power Plants Owed Nothing To Uri Consumers, Panel Rules
In this article for Law360, partner Jeremy Fielding was quoted regarding a Texas Court of Appeals' recent decision to dismiss all claims against power generator companies over alleged failure to supply electricity to the state's power grid during Winter Storm Uri in February 2021.
A Texas appeals court Thursday wiped out claims that power plant companies' negligent handling of equipment and staff harmed electric consumers during a deadly winter storm three years ago, ruling the generator companies had no obligation to provide energy to homes and businesses.
A Court of Appeals for the First District panel, in granting a writ of mandamus to the companies, said under Texas' deregulated energy market, power generation companies were divorced from consumers that contract with distribution utilities for their electricity.
The state's legislature chose not to codify consumers' asserted right to constant energy when it split companies into distinct generation, transmission and retail provider components more than two decades ago, the panel said.
Under the current scheme, "wholesale power generators are no longer public utilities" and power plant companies are statutorily prohibited from having relationships with electric retail consumers, Justice Terry Adams said in the unanimous opinion.
We "conclude that Texas does not currently recognize a legal duty owed by wholesale power generators to retail consumers to provide continuous electricity to the electric grid, and ultimately, to the retail consumers, under the allegations pleaded here by the retail consumers," Justice Adams said.
The ruling may release hundreds of power companies from allegations tied up in sprawling multidistrict litigation to sort out the flood of lawsuits that emerged from the near-failure of Texas' power grid during Winter Storm Uri in 2021. Consumers alleged wholesale power generators could be liable for billions of dollars in personal injury and property damage.
The panel, however, declined to establish an electricity provision obligation on power plants. Wholesale power generators have no control over electricity once it leaves their facilities, and responsibility for grid reliability is up to state regulators under state law, the court said.
In that scenario, imposing any new duty on generators was more appropriate for the Texas Legislature, the panel said.
"We must respect the legislature's policy choice in enacting the current statutory framework for the electricity marketplace in Texas," Justice Adams said. "Indeed, the core responsibility of our judicial branch of government is to interpret and apply the law consistently and predictably based on precedent, not to create it by judicial fiat."
Thursday's ruling directed the MDL court to reverse course and grant the wholesale generators' motion to dismiss consumers' allegations of negligence, gross negligence and negligent undertaking.
Consumers claimed power generators including NRG Texas Power LLC, Calpine Corp. and Luminant Generation Co. LLC failed to winterize their systems, provide power to the Texas grid, supervise their employees and ensure they would be exempted from regulators' blackout orders during the devastating storm.
While the lower court last year dismissed consumers' other claims, including conspiracy and tortious interference, it let the negligence case move forward, according to the opinion. In their appeal, the generation companies said the lower court abused its authority.
Suits against power plant companies were among the sea of litigation that emerged from Winter Storm Uri. Power generators, gas providers and distributors struggled to provide electricity to homes and businesses during the storm, leaving many cold and dark through subfreezing temperatures.
A similar appeal over the MDL court's decision to allow negligence claims against transmission and distribution utilities is pending in the Fourteenth Court of Appeals, according to court records.
Meanwhile, the Texas Supreme Court has taken up a pair of cases over whether the state's public utilities commission overstepped its authority by setting mandatory electric prices during the storm and in potential future emergencies.
Jeremy Fielding of Kirkland & Ellis LLP, who represents generators including Bastrop Energy Partners LP, told Law360 on Thursday the opinion would be applied to five bellwether cases in the MDL and likely to dozens of other lawsuits.
"As the court of appeals noted, there is irreconcilable tension between the idea that power generators have a duty and obligation to provide consistent electricity to consumers and the specific policy choice the Texas Legislature made about how to structure its electricity markets," Fielding said.
Representatives for electric consumers did not immediately respond to requests for comment Thursday.
Texas Court of Appeals Justices Terry Adams, Sarah Beth Landau and Richard Hightower sat on the panel for the First District.
The generator defendants are represented by firms including Gibson Dunn & Crutcher LLP, The Brame Law Firm PLLC, Baker Botts LLP, Jackson Walker LLP and Kirkland & Ellis LLP.
The plaintiffs in the bellwether cases are represented by firms including Brent Coon & Associates, Robins Cloud LLP, Arnold & Itkin LLP, Watts Guerra LLP and Grotefeld Hoffmann LLP.
