CPS Energy v. Elec. Reliability Council of Tex.

Full title: CPS Energy, Petitioner, v. Electric Reliability Council of Texas…

Court: Supreme Court of Texas

Date published: Jun 23, 2023

671 S.W.3d 605 (Tex. 2023)

Opinion

No. 22-0056 No. 22-0196

06-23-2023

CPS ENERGY, Petitioner, v. ELECTRIC RELIABILITY COUNCIL OF TEXAS, Respondent Electric Reliability Council of Texas, Inc., Petitioner, v. 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, Respondents

Elliot Clark, Wallace B. Jefferson, D. Blake Wilson, Austin, Rachel Anne Ekery, Houston, Nicholas B. Bacarisse, Ron H. Moss, Austin, for Respondents Electric Reliability Council of Texas, Inc., Magness, William L. "Bill" in 22-0056. Brent Webster, Houston, John R. Hulme, Austin, Judd E. Stone II, Kyle Highful, Atty. Gen. W. Kenneth Paxton Jr., Bill Davis, Austin, for Amicus Curiae Public Utility Commission of Texas in 22-0056. James Sullivan, for Amicus Curiae Abbott, Greg in 22-0056. Jennifer Nicole Pulliam, Christopher D. Anderson, Bryan, for Amicus Curiae Rayburn Country Electrical Cooperative, Inc. in 22-0056. Glenn Arlen Ballard Jr., Adam C. Kiehne, Houston, Harriet O'Neill, Austin, Lauren Valkenaar, Greta McFarling, Blake Stribling, Mukul S. Kelkar, Houston, Adrianna Jimenez, Barry A. Chasnoff, for Petitioner in 22-0056. Patrick Leahy, Juliana Sersen, Austin, Macey Reasoner Stokes, George Harold Fibbe, Houston, Andrea Moore Stover, Austin, J. Mark Little, Houston, for Amicus Curiae Calpine Corporation in 22-0056. John Hubbard, Katherine Coleman, Michael A. McMillin, Phillip Glynn Oldham, Austin, for Amicus Curiae Texas Industrial Energy Consumers in 22-0196. Leslie Conant Thorne, Andrew W. Guthrie, Werner A. Powers, Dallas, Roger D. Sanders, Sherman, Ben L. Mesches, Christopher Knight, for Respondent in 22-0196. Hobart Hind, George McMullin Jr., Dallas, for Amicus Curiae National Association of Subrogation Professionals in 22-0196. Kyle Highful, Bill Davis, Austin, Brent Webster, Houston, Judd E. Stone II, Warren Kenneth Paxton, Austin, for Amicus Curiae Public Utility Commission of Texas in 22-0196. James Sullivan, for Amicus Curiae Abbott, Greg in 22-0196. Nicholas B. Bacarisse, Wallace B. Jefferson, Austin, Chad Vann Seely, Erika M. Kane, J. Hampton Skelton, Austin, Rachel Anne Ekery, Houston, Brandon Duane Gleason, Austin, Nathan Myrick Bigbee, for Petitioner The Electric Reliability Council of Texas, Inc. (ERCOT) in 22-0196.

Elliot Clark, Wallace B. Jefferson, D. Blake Wilson, Austin, Rachel Anne Ekery, Houston, Nicholas B. Bacarisse, Ron H. Moss, Austin, for Respondents Electric Reliability Council of Texas, Inc., Magness, William L. "Bill" in 22-0056.

Brent Webster, Houston, John R. Hulme, Austin, Judd E. Stone II, Kyle Highful, Atty. Gen. W. Kenneth Paxton Jr., Bill Davis, Austin, for Amicus Curiae Public Utility Commission of Texas in 22-0056.

James Sullivan, for Amicus Curiae Abbott, Greg in 22-0056.

Jennifer Nicole Pulliam, Christopher D. Anderson, Bryan, for Amicus Curiae Rayburn Country Electrical Cooperative, Inc. in 22-0056.

Glenn Arlen Ballard Jr., Adam C. Kiehne, Houston, Harriet O'Neill, Austin, Lauren Valkenaar, Greta McFarling, Blake Stribling, Mukul S. Kelkar, Houston, Adrianna Jimenez, Barry A. Chasnoff, for Petitioner in 22-0056.

Patrick Leahy, Juliana Sersen, Austin, Macey Reasoner Stokes, George Harold Fibbe, Houston, Andrea Moore Stover, Austin, J. Mark Little, Houston, for Amicus Curiae Calpine Corporation in 22-0056.

John Hubbard, Katherine Coleman, Michael A. McMillin, Phillip Glynn Oldham, Austin, for Amicus Curiae Texas Industrial Energy Consumers in 22-0196.

Leslie Conant Thorne, Andrew W. Guthrie, Werner A. Powers, Dallas, Roger D. Sanders, Sherman, Ben L. Mesches, Christopher Knight, for Respondent in 22-0196.

Hobart Hind, George McMullin Jr., Dallas, for Amicus Curiae National Association of Subrogation Professionals in 22-0196.

Kyle Highful, Bill Davis, Austin, Brent Webster, Houston, Judd E. Stone II, Warren Kenneth Paxton, Austin, for Amicus Curiae Public Utility Commission of Texas in 22-0196.

James Sullivan, for Amicus Curiae Abbott, Greg in 22-0196.

Nicholas B. Bacarisse, Wallace B. Jefferson, Austin, Chad Vann Seely, Erika M. Kane, J. Hampton Skelton, Austin, Rachel Anne Ekery, Houston, Brandon Duane Gleason, Austin, Nathan Myrick Bigbee, for Petitioner The Electric Reliability Council of Texas, Inc. (ERCOT) in 22-0196.

Chief Justice Hecht delivered the opinion of the Court, in which Justice Blacklock, Justice Bland, Justice Huddle, and Justice Young joined, and in which Justice Lehrmann, Justice Boyd, Justice Devine, and Justice Busby joined except as to Part IV.

These two cases present three questions concerning the Electric Reliability Council of Texas, Inc.: (1) Is ERCOT a governmental unit as defined in the Texas Tort Claims Act and thereby entitled to pursue an interlocutory appeal from the denial of a plea to the jurisdiction? (2) Does the Public Utility Commission of Texas have exclusive jurisdiction over the parties’ claims against ERCOT? And (3) is ERCOT entitled to sovereign immunity? The answer to all three questions is yes. In No. 22-0056,¹ we affirm the court of appeals’ judgment² dismissing the claims against ERCOT. In No. 22-0196,³ we reverse the court of appeals’ judgment⁴ and render judgment dismissing the claims against ERCOT.

1 CPS Energy v. Electric Reliability Council of Tex.

2 648 S.W.3d 520 (Tex. App.—San Antonio 2021).

3 Electric Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC.

4 641 S.W.3d 893 (Tex. App.—Dallas 2022) (en banc).

I

"In its electrical grid, as in so many things, Texas stands alone."⁵ Most of the state comprises the U.S. mainland's only intra state electrical grid,⁶ which covers 75 percent of the state's acreage, carries about 90 percent of its electrical load, and includes more than 52,700 miles of transmission lines, 1,100 generation units, and 26 million electricity customers.⁷ The Public Utility Regulatory Act (PURA) requires the Public Utility Commission (PUC) to certify an independent system operator (ISO) for the Texas power region.⁸ The PUC certified ERCOT, a membership-based 501(c)(4) nonprofit corporation.⁹

5 Texas v. EPA , 829 F.3d 405, 431 (5th Cir. 2016).

6 See New York v. FERC , 535 U.S. 1, 7, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002) ("It is only in Hawaii and Alaska and on the ‘Texas Interconnect’—which covers most of that State—that electricity is distributed entirely within a single State.").

7 Oncor Elec. Delivery Co. v. Pub. Util. Comm'n , 507 S.W.3d 706, 708 n.1 (Tex. 2017) ; ERCOT Organization Backgrounder , ERCOT, https://www.ercot.com/news/mediakit/backgrounder (last visited June 15, 2023); Fact Sheet , ERCOT (June 8, 2023), https://www.ercot.com/files/docs/2022/02/08/ERCOT_Fact_Sheet.pdf.

8 Tex. Util. Code § 39.151(a), (c). The Texas power region is also known as ERCOT. See id. § 31.002(5) (defining ERCOT as "the area in Texas served by electric utilities, municipally owned utilities, and electric cooperatives that is not synchronously interconnected with electric utilities outside the state"). To avoid confusion, we refer to the nonprofit corporation that is party to these cases as ERCOT and the area served by the interconnected grid as the Texas power region.

9 16 Tex. Admin. Code § 25.361 ; ERCOT Organization Backgrounder, supra note 7.

ERCOT was formed in 1970 by various Texas electric utilities that had interconnected their grids for greater reliability and increased capacity.¹⁰ Membership was "available to any electric utility [that] own[ed], control[led] or operate[d] an electric power system in Texas".¹¹ In those days, each member utility operated its own control area, and ERCOT served an administrative role that "promote[d] reliable operations of power systems in Texas by providing a means to communicate and coordinate the planning and operation of its members."¹²

10 See W. Tex. Utils. Co. v. Tex. Elec. Serv. Co. , 470 F. Supp. 798, 808-809 (N.D. Tex. 1979) ; Jared M. Fleisher, ERCOT's Jurisdictional Status: A Legal History and Contemporary Appraisal , 3 Tex. J. Oil Gas & Energy L. 4, 10-11 (2008).

11 W. Tex. Utils. Co. , 470 F. Supp. at 808.

12 Id. ; see Fleisher, supra note 10, at 11.

In 1999, the Legislature restructured the electric utility industry in Texas.¹³ It amended PURA to require the "[u]nbundling" of vertically integrated electric utility monopolies and established a fully competitive electric power industry.¹⁴ The new structure required an ISO to operate the wholesale electric market and "ensure the reliability and adequacy" of the Texas power grid.¹⁵ Since 2001, ERCOT has served as that "[e]ssential [o]rganization[ ]".¹⁶

13 Act of May 27, 1999, 76th Leg., R.S., ch. 405 § 39, 1999 Tex. Gen. Laws 2543, 2558 (codified at Tex. Util. Code ch. 39).

14 Tex. Util. Code § 39.051; see id. § 39.001(a), (b); Oncor Elec. Delivery Co. , 507 S.W.3d at 708-709.

15 Tex. Util. Code § 39.151(a).

16 Id. § 39.151; 16 Tex. Admin. Code § 25.361. On May 28, 2023, the Legislature amended Section 39.151. The amendments are effective September 1, 2023, and they do not affect the proceeding analysis or our holding. See Act of May 28, 2023, 88th Leg., R.S., ch. 410, § 15, 2023 Tex. Sess. Law Serv. (H.B. 1500).

The two cases before us stem from different facts and different parties, but they raise overlapping jurisdictional questions.

A

CPS Energy, a municipally owned utility that serves the San Antonio area, is a market participant in the ERCOT wholesale market. CPS buys and sells power through ERCOT, so ERCOT both collects money from CPS and pays money to CPS. The parties settle the amounts owed by each side and pay each other accordingly in what they call "settlement" payments. At issue here are payments from ERCOT to CPS. CPS’ participation in the market is governed by the terms of a Standard Form Market Participant Agreement, PURA, and the ERCOT Protocols, which are rules promulgated by ERCOT to manage the market and the grid.

In February 2021, Texans endured the catastrophic Winter Storm Uri. On February 15, just as the storm hit, ERCOT declared its highest state of emergency, Emergency Energy Alert Level 3, and directed transmission operators to curtail firm load. The PUC then directed ERCOT to set the per-megawatt-hour price of electricity at the highest permissible rate of $9,000 to reflect scarcity of supply. ERCOT recalled its firm load shed instructions on February 17 but kept prices at the cap rate for an additional 32 hours through the morning of February 19. CPS alleges that ERCOT should have ended its pricing intervention when it recalled its firm load shed instructions and that its failure to do so resulted in $16 billion in overcharges to market participants.

Some market participants defaulted after the storm. Pursuant to its Protocols, ERCOT then implemented its "short-pay" procedure and its "Default Uplift process".¹⁷ These processes spread the impact of the default, allocating the loss among market participants—including CPS—by reducing the amounts they are owed by ERCOT.¹⁸ CPS alleges that it was short-paid at least $18 million through the short-pay process. It also alleges that ERCOT intended to apply two downward adjustments to the credit in CPS’ account by over $1 million each through the default-uplift process.¹⁹ CPS sued ERCOT and several of its officers for breach of contract, negligence, breach of fiduciary duty, and violations of the Texas Constitution.²⁰ ERCOT filed a plea to the jurisdiction, arguing that CPS’ claims are barred by sovereign immunity and, alternatively, that the PUC has exclusive jurisdiction over the claim. The trial court denied the plea.²¹

17 See ERCOT Nodal Protocols §§ 9.19(1)(d)-(e), 9.19.1.

18 See id. §§ 9.19(1)(d)-(e), 9.19.1.

19 CPS secured a temporary restraining order from the trial court that prevented ERCOT from applying these downward adjustments. The court of appeals dissolved its order extending the temporary restraining order when it dismissed CPS’ claims. 648 S.W.3d at 541.

20 CPS also alleged that ERCOT's executives and board acted ultra vires and it sought prospective injunctive relief against downward adjustments for the storm-related default through the default-uplift process. CPS later nonsuited all individual defendants except Bill Magness, ERCOT's former CEO. The court of appeals determined that Magness was not a party to the plea to the jurisdiction that is the subject of this appeal. Id. at 532-533.

21 The trial court also denied ERCOT's motion to transfer venue to Travis County.

ERCOT appealed, asserting that it is a governmental unit entitled to an interlocutory appeal from the denial of a plea to the jurisdiction.²² ERCOT also sought review by petition for writ of mandamus in the event it is not entitled to an interlocutory appeal. After one court of appeals panel summarily denied mandamus relief,²³ ERCOT filed its petition for writ of mandamus in this Court²⁴ to continue the alternative path to review. A different court of appeals panel then held that ERCOT is a governmental unit entitled to take an interlocutory appeal, that the PUC has exclusive jurisdiction over CPS’ claims, and that CPS’ claims should be dismissed.²⁵ We granted review and set the case for oral argument on the same day as the case brought by the Panda Power Companies.²⁶

22 See Tex. Civ. Prac. & Rem. Code § 51.014(a)(8).

23 661 S.W.3d 812 (Tex. App.—San Antonio 2021) (mem. op.).

24 In re Elec. Reliability Council of Tex., Inc.

25 648 S.W.3d at 531, 541.

26 ERCOT's petition for writ of mandamus is dismissed as moot.

B

As part of ERCOT's functions, the PUC requires ERCOT to annually publish resource adequacy reports that project, for at least the next five years, the capability of existing electric generation resources to meet projected demand in the Texas power region.²⁷ ERCOT does so by publishing "Capacity, Demand, and Reserves" reports (CDRs). ERCOT's 2011 and 2012 CDRs projected a likelihood of severe energy shortfalls. Panda, a group of private-equity investors, alleges that it relied on these reports when it decided to invest billions of dollars to build three new power plants. After construction on the new plants began, ERCOT revised its CDRs and forecast a future oversupply of generation capacity. Panda sued ERCOT for fraud, negligent misrepresentation, and breach of fiduciary duty. Panda alleges that ERCOT's misleading reports caused it substantial financial harm and seeks damages in excess of $2 billion.

27 Tex. Util. Code § 39.155(b); 16 Tex. Admin. Code § 25.505(b).

The procedural history of this case is long and complex, and we recite only what is relevant to the disposition of this appeal. ERCOT filed two pleas to the jurisdiction arguing that the PUC has exclusive jurisdiction over Panda's claims and that ERCOT has sovereign immunity. The trial court denied both. ERCOT appealed, arguing that it is a "governmental unit" under the Texas Tort Claims Act entitled to an interlocutory appeal from the denial of its plea to the jurisdiction.²⁸ ERCOT alternatively sought review by mandamus. The court of appeals consolidated the appeal and mandamus petition and held that ERCOT is not a governmental unit entitled to an interlocutory appeal but that ERCOT has sovereign immunity.²⁹ Accordingly, the court of appeals dismissed ERCOT's interlocutory appeal for lack of jurisdiction, conditionally granted its petition for writ of mandamus, and directed the trial court to dismiss the case for lack of jurisdiction.³⁰ The trial court immediately complied, and Panda appealed. The court of appeals, then sitting en banc, changed course. Relying on three immunity cases decided by this Court in the interim, and with one justice dissenting, the court held that ERCOT is not entitled to sovereign immunity and that the PUC does not have exclusive jurisdiction over Panda's claims.³¹ We granted ERCOT's petition for review.

28 Tex. Civ. Prac. & Rem. Code § 51.014(a)(8) ; id. § 101.001(3).

29 Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC , 552 S.W.3d 297, 301 (Tex. App.—Dallas 2018), pet. dism'd as moot , 619 S.W.3d 628, 631 (Tex. 2021).

30 Id. Additional procedural history thereafter is available in this Court's prior opinion. Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC , 619 S.W.3d 628, 632-634 (Tex. 2021).

31 641 S.W.3d at 899.

II

The first issue arises from CPS’ petition: whether ERCOT is a governmental unit under the Texas Tort Claims Act and thus entitled to take an interlocutory appeal from the denial of a plea to the jurisdiction.³² "Although private institutions are not commonly understood to be a part ‘of government,’ we have held that a private institution can be a governmental unit", as is the case here.³³

32 See Tex. Civ. Prac. & Rem. Code § 51.014(a)(8) ; id. § 101.001(3).

33 Univ. of the Incarnate Word v. Redus (Redus I ), 518 S.W.3d 905, 907 (Tex. 2017).

"[T]he general rule, with a few mostly statutory exceptions, is that an appeal may be taken only from a final judgment."³⁴ However, certain statutes authorize interlocutory appeals over particular kinds of trial court orders.³⁵ Section 51.014(a)(8) of the Civil Practice and Remedies Code authorizes an interlocutory appeal from a trial-court order that "grants or denies a plea to the jurisdiction by a governmental unit as that term is defined" in the Tort Claims Act.³⁶ In turn, the Tort Claims Act defines "[g]overnmental unit" to include not only the state and its agencies and political subdivisions, but also "any other institution, agency, or organ of government the status and authority of which are derived from the Constitution of Texas or from laws passed by the legislature under the constitution."³⁷ Thus, a private, non-governmental entity can qualify as a governmental unit under this definition, but only if (1) it is an institution, agency, or organ of government; and (2) it derives its status and authority as such from the Texas Constitution or statutes.³⁸ A

34 Bonsmara Nat. Beef Co. v. Hart of Tex. Cattle Feeders, LLC , 603 S.W.3d 385, 387 (Tex. 2020) (quoting Lehmann v. Har-Con Corp. , 39 S.W.3d 191, 195 (Tex. 2001) ).

35 See id. at 390 & n.3.

36 Tex. Civ. Prac. & Rem. Code § 51.014(a)(8) ; see id. § 101.001(3).

37 Id. § 101.001(3).

38 Id. ; Redus I , 518 S.W.3d at 907.

In LTTS Charter School, Inc. v. C2 Construction, Inc. , we held that an open-enrollment charter school qualified as a governmental unit because it was "indisputably part of the Texas public-education system" and derived that status and authority from state statutes.³⁹ Our holding centered on various statutory pronouncements. We concluded that open-enrollment charter schools derive their status from the Education Code, which provides that they are "part of" the state's public-school system.⁴⁰ Their authority is also derived from the Education Code, which assigns them responsibilities for implementing the public-education system, provides them with substantial public funding and resources, grants them the same powers and privileges of traditional public schools, and subjects them to the same rules that govern public schools.⁴¹ Finally, the Education Code designates open-enrollment charter schools as "governmental entit[ies]", "political subdivision[s]", and "local government[s]" for various purposes.⁴²

39 342 S.W.3d 73, 76 (Tex. 2011).

40 Id. at 77.

41 Id. at 77-78.

42 Id. at 78 (quoting Tex. Educ. Code § 12.1053 ).

In University of the Incarnate Word v. Redus ( Redus I ), we concluded that a private university that operates a state-authorized police department qualifies as a governmental unit when defending suits relating to the department's actions.⁴³ We acknowledged that, unlike the charter schools at issue in LTTS , private universities do not receive public funding and are not statutorily labeled as governmental entities for any particular purpose.⁴⁴ Nevertheless, we observed that state statutes grant private universities the "status and authority" to operate a police department using commissioned peace officers and subject them to state law-enforcement rules and requirements, just like a municipal police department.⁴⁵ And although no statute expressly designates a private university or its police department as "part of" the state's law-enforcement system, we concluded that the university was an "organ of government" for purposes of its police department because it "operates as part of a larger governmental system" and performs the "uniquely governmental" function of law enforcement.⁴⁶

43 518 S.W.3d at 906.

44 Id. at 910.

45 Id. at 909 ; see id. at 910-911.

46 Id. at 909, 910, 911.

B

CPS maintains that unlike in LTTS and Redus I , there are no strong legislative indicators of governmental-unit status in relation to ERCOT and that in concluding otherwise, the court of appeals applied an impermissibly broad view of "organ of government". It argues further that ERCOT does not perform a "uniquely governmental function" and that ERCOT's actions during the winter storm event were merely operational. For its part, ERCOT contends that it is an organ of government because it is an essential part of a larger governmental system, namely the PUC's regulation of electric utilities, as evidenced by its delegated rulemaking authority and various provisions of PURA.

1

As we recognized in Redus I , an "organ of government" is an entity that "operates as part of a larger governmental system" and performs a "uniquely governmental" function.⁴⁷ Here, ERCOT operates as part of the state's broader electricity-regulation system under PURA and performs the uniquely governmental function of utilities regulation.

47 Id. at 910, 911.

PURA was enacted "to establish a comprehensive and adequate regulatory system for public utilities", including electric utilities and telecommunications utilities.⁴⁸ Under PURA, the PUC—a governmental entity—was given the "general power" to regulate and supervise public utilities.⁴⁹ Within this larger governmental system of utilities regulation is the express requirement of an independent system operator for the Texas power region.⁵⁰ This ISO is tasked with ensuring that (1) all electricity buyers and sellers have nondiscriminatory access to the region's transmission and distribution system, (2) the region's electrical network is reliable and adequate, (3) information regarding a customer's choice of retail electric provider is timely available to those who need it, and (4) electricity production and delivery are accurately accounted for.⁵¹

48 Tex. Util. Code § 11.002(a).

49 Id. § 14.001; see also id. § 11.002(c).

50 Id. § 39.151(a).

51 Id.

ERCOT performs these functions under the direct oversight of the PUC and must do so in compliance with the requirements set forth in PURA.⁵² In LTTS , we observed that the open-enrollment charter school was required to meet "financial, governing, and operational standards" under the Education Code and that the Commissioner of Education was empowered to audit the school and revoke its charter for failure to comply with the Code.⁵³ ERCOT is subject to similar requirements and more under PURA and by the PUC.

52 See id. § 39.151(d).

53 342 S.W.3d at 80.

The PUC certifies the ISO, and, as the ISO, ERCOT is "directly responsible and accountable" to the PUC.⁵⁴ The PUC has extensive authority over ERCOT, including "complete authority" over ERCOT's "finances, budget, and operations"—including the ability to audit its financials—to ensure that ERCOT adequately performs its functions and duties.⁵⁵ The PUC has authority over ERCOT's bylaws and protocols, and the chairman of the PUC sits on ERCOT's board.⁵⁶ The PUC can penalize and even decertify ERCOT if it fails to adequately perform its functions and duties or if it fails to comply with PURA.⁵⁷

54 Tex. Util. Code § 39.151(d).

55 Id. § 39.151(d), (d-4)(3); see also id. § 39.151(e).

56 Id. § 39.151(g-1).

57 Id. § 39.151(d), (d-4)(5).

Additionally, the regulation of utilities is "uniquely governmental".⁵⁸ As the certified ISO, ERCOT exercises delegated authority from the PUC to "adopt and enforce rules relating to the reliability of the regional electrical network".⁵⁹ It is also tasked with "enforc[ing] operating standards" and establishing and overseeing payment procedures for transactions by market participants within the electrical network.⁶⁰ Market participants are statutorily required to abide by all rules and procedures established by the ISO, and their failure to do so could result in a penalty.⁶¹

58 Redus I , 518 S.W.3d at 911 ; see Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm'n , 461 U.S. 375, 377, 103 S.Ct. 1905, 76 L.Ed.2d 1 (1983) ("[T]he regulation of utilities is one of the most important of the functions traditionally associated with the police power of the States.").

59 Tex. Util. Code § 39.151(d).

60 Id. § 39.151(i).

61 Id. § 39.151(j).

Because ERCOT performs a "uniquely governmental" function as part of a "larger governmental system", it is an organ of government.⁶²

62 Redus I , 518 S.W.3d at 910, 911.

2

ERCOT also derives its "status and authority" from statute.⁶³ Its status derives from statute because PURA requires the PUC to "establish one or more independent organizations"—that is, an organization that is "sufficiently independent" of any electricity producer or seller—to serve as the region's ISO.⁶⁴ An independent organization can serve as the region's ISO only if the PUC certifies it for that purpose.⁶⁵ Its authority also comes from statute because PURA grants a certified ISO authority to supervise the Texas power region's transmission facilities and to coordinate its market transactions, transmissions planning, and network reliability.⁶⁶ Thus, although ERCOT is a private, nonprofit corporation, its "status" as the ISO for the Texas power region and its "authority" to act in that capacity derive directly from PURA.

63 Tex. Civ. Prac. & Rem. Code § 101.001(3) ; Redus I , 518 S.W.3d at 907.

64 Tex. Util. Code § 39.151(a), (b).

65 Id. § 39.151(c).

66 Id. § 31.002(9); see also id. § 39.151.

Because ERCOT is an "organ of government the status and authority of which are derived from" statute, it is a "governmental unit" entitled to take an interlocutory appeal from the denial of a plea to the jurisdiction.⁶⁷

67 Tex. Civ. Prac. & Rem. Code § 101.001(3) ; id. § 51.014(a)(8).

III

The next issue, presented in both cases, is whether the PUC has exclusive jurisdiction over issues underlying the parties’ claims against ERCOT. We conclude that it does.

Courts are presumed to have jurisdiction to resolve legal disputes.⁶⁸ "To overcome that presumption, the Constitution or another law must grant exclusive jurisdiction to another court or an administrative agency."⁶⁹ A statute may grant an agency exclusive jurisdiction either expressly or by establishing a "pervasive regulatory scheme" that impliedly "indicates that the Legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed."⁷⁰ Thus, to establish exclusive jurisdiction over a particular issue, there must be (1) an express or implied grant of exclusive jurisdiction and (2) the issue must "fall[ ] within that jurisdictional scope."⁷¹ If the agency's exclusive jurisdiction is established, the claimant must pursue and exhaust all available administrative remedies before turning to the courts.⁷² "Until then, the trial court lacks subject-matter jurisdiction" and must dismiss the claims with issues that come within the agency's exclusive jurisdiction.⁷³

68 Oncor Elec. Delivery Co. v. Chaparral Energy, LLC , 546 S.W.3d 133, 138 (Tex. 2018) (citing In re Entergy Corp. , 142 S.W.3d 316, 322 (Tex. 2004) ); see also Tex. Const. art. V, § 8.

69 Chaparral Energy , 546 S.W.3d at 138 (citing In re Sw. Bell Tel. Co. , 235 S.W.3d 619, 624-625 (Tex. 2007) ).

70 Id. (quoting In re Sw. Bell Tel. Co. , 235 S.W.3d at 624-625 ).

71 Id. at 139 ; see id. at 138.

72 Forest Oil Corp. v. El Rucio Land & Cattle Co. , 518 S.W.3d 422, 428 (Tex. 2017).

73 Id. (citing Subaru of Am., Inc. v. David McDavid Nissan, Inc. , 84 S.W.3d 212, 221 (Tex. 2002) ).

A

ERCOT does not claim that the PUC has been expressly granted exclusive jurisdiction over the issues underlying CPS’ and Panda's claims; rather, it argues that Section 39.151 of the Utilities Code constitutes a pervasive regulatory scheme that imparts exclusive jurisdiction. We agree.

Section 39.151 grants the PUC extensive and ultimate authority over an ISO. As mentioned, the statute provides that the ISO "is directly responsible and accountable to the [PUC]," and the PUC "has complete authority to oversee and investigate [ERCOT]’s finances, budget, and operations" to ensure adequate performance of the ISO's "functions and duties."⁷⁴ It grants the PUC authority over ERCOT's board makeup, its bylaws and protocols, and its ability to charge fees to its members.⁷⁵ ERCOT is empowered to enact rules over market participants, but they must be approved by the PUC.⁷⁶ Moreover, the PUC's authority over ERCOT is not solely regulatory; it has adjudicatory power as well. The PUC may "take appropriate action" against the ISO, including decertification, for the ISO's failure to adequately perform its functions or duties or for its failure to comply with Section 39.151.⁷⁷ Section 39.151 ’s grant of extensive authority to the PUC over ERCOT and its detailed regulation of the particulars of ERCOT's functions constitute a pervasive regulatory scheme.⁷⁸

74 Tex. Util. Code § 39.151(d) (emphasis added).

75 Id. § 39.151(d), (e), (g-1).

76 Id. § 39.151(d); see also id. § 39.151(j).

77 Id. § 39.151(d).

78 Cf. In re Entergy Corp. , 142 S.W.3d at 323 ("The Legislature's description of PURA as ‘comprehensive,’ coupled with the fact that PURA regulates even the particulars of a utility's operations and accounting, demonstrates the statute's pervasiveness.").

B

The next inquiry is whether issues underlying the parties’ claims fall within the regulatory scheme's jurisdictional scope.⁷⁹ The question is whether "the Legislature intended ... the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed."⁸⁰ As to both Panda and CPS, we conclude that the issues underlying their claims come within the scope of the PUC's exclusive jurisdiction.

79 See Chaparral Energy , 546 S.W.3d at 139.

80 Id. at 138 (quoting In re Sw. Bell Tel. Co. , 235 S.W.3d at 624-625 ).

1

We begin with Panda's issues. PURA requires that ERCOT publish CDRs that "identify[ ] existing and potential transmission and distribution constraints and system needs" within the Texas power region, including alternatives and recommendations for meeting those needs.⁸¹ Panda contends that ERCOT failed to properly perform this requirement by issuing fraudulent CDRs that inaccurately reported the capability of existing electric generation resources to meet projected demand in the Texas power region. Because the proper performance of ERCOT's operations, functions, and duties comes within the PUC's "complete" authority over ERCOT, and because the PUC is statutorily authorized to hold ERCOT accountable if, as Panda alleges, ERCOT fails to properly perform, we hold that Panda's issues come within the PUC's exclusive jurisdiction.⁸²

81 Tex. Util. Code § 39.155(b); see also 16 Tex. Admin. Code § 25.505(c).

82 Tex. Util. Code § 39.151(d).

Panda notes that the PUC "has no authority to determine whether ERCOT complied with the relevant common-law standards or to provide a remedy." While that is true, an agency's exclusive jurisdiction does not prevent an aggrieved party from pursuing damages or other relief in the trial court after the agency has exercised its exclusive jurisdiction over the relevant issues.⁸³

83 See Chaparral Energy , 546 S.W.3d at 141-142.

2

Likewise, CPS’ issues come within the jurisdictional scope of the PUC's exclusive jurisdiction. CPS alleges that, inter alia , ERCOT "failed to implement its protocols in a way to ensure the integrity of its system", "failed to take reasonable precautions to meet its load projections expected as a result of" Winter Storm Uri, "failed to take reasonable corrective action when it became clear that its own projections showed insufficient capacity to meet forecast demand", and failed to correct "an acknowledged $16 billion error". Additionally, CPS essentially seeks exemption from ERCOT's short-pay and default-uplift procedures for charges relating to the Winter Storm default because it claims that they are due to ERCOT's own error and its subsequent failure to retroactively reprice the alleged overcharge.

These issues involve "the very activit[ies] the [PUC] regulates."⁸⁴ CPS’ issues implicate ERCOT's operations and billing, which fall under the PUC's "complete authority".⁸⁵ And while ERCOT oversees transaction settlement payment procedures, it does so by delegated authority from the PUC.⁸⁶ Additionally, CPS specifically alleged that ERCOT's actions (and inactions) violated Section 39.151 of the Utilities Code because it failed to perform its functions of "ensur[ing] access to the transmission and distribution systems for all buyers and sellers of electricity" and "ensur[ing] the reliability and adequacy of the regional electrical network".⁸⁷ By statute, the PUC is responsible for ensuring that ERCOT "adequately performs [its] functions and duties", and the PUC may take action against ERCOT should it fail to do so.⁸⁸ Thus, CPS’ issues fall within the PUC's exclusive jurisdiction.

84 In re Oncor Elec. Delivery Co. , 630 S.W.3d 40, 49 (Tex. 2021).

85 Tex. Util. Code § 39.151(d).

86 Id. § 39.151(i).

87 Id. § 39.151(a)(1), (2).

88 Id. § 39.151(d).

CPS raises a host of arguments to support its claim that the PUC does not have exclusive jurisdiction or that it is not required to exhaust administrative remedies. All fall short. CPS contends that the PUC does not have exclusive jurisdiction because it cannot adjudicate a contract claim or award damages. However, CPS’ claim for breach of the Standard Form Market Participant Agreement involves whether ERCOT properly implemented its protocols, which comes within the PUC's exclusive jurisdiction.⁸⁹ As to damages, as mentioned, an agency's exclusive jurisdiction does not prevent a party from pursuing damages or other relief in the trial court after it has exhausted administrative remedies.⁹⁰ Moreover, CPS primarily argues that its damages stem from ERCOT's alleged overcharge during the storm and its failure to retroactively reprice that overcharge. The PUC has authority to oversee transaction settlement procedures and authority over ERCOT's finances; therefore, presumably, it could order ERCOT to resettle its payments to CPS.⁹¹

89 See id. § 39.151(d) ("Rules adopted by an independent organization ... under delegated authority from the [PUC] are subject to [PUC] oversight ...."); cf. Chaparral Energy , 546 S.W.3d at 139-140 (holding that PUC had exclusive jurisdiction because the issue involved a public utility's services, even though customer asserted a breach-of-contract claim for money damages).

90 Chaparral Energy , 546 S.W.3d at 141-142.

91 See Tex. Util. Code § 39.151(d), (i).

CPS argues that it was not required to exhaust administrative remedies because it needed immediate injunctive relief.⁹² But PUC rules permit the PUC to order ERCOT to suspend complained-of conduct while a complaint is pending.⁹³ CPS also argues that exhaustion of administrative remedies is inapplicable where the action concerns questions of law. But CPS’ issues raise various fact questions including how much supply was available for the 32 hours after ERCOT recalled its firm load shed instructions, which is necessary to determine what the appropriate per-megawatt-hour price was. Thus, this exception to the exhaustion requirement does not apply.⁹⁴

92 See Hous. Fed'n of Tchrs., Loc. 2415 v. Hous. Indep. Sch. Dist. , 730 S.W.2d 644, 646 (Tex. 1987).

93 See 16 Tex. Admin. Code § 22.251(i).

94 Clint Indep. Sch. Dist. v. Marquez , 487 S.W.3d 538, 557-558 & n.13 (Tex. 2016).

Finally, CPS contends that exhaustion is not required because it asserts constitutional claims. Specifically, CPS argues that the loss allocation under the short-pay and default-uplift procedures amounts to an unconstitutional taking in violation of Article I, Section 17 of the Texas Constitution and an unconstitutional extension of credit in violation of Article XI, Section 3. However, "a litigant must avail itself of statutory remedies that may moot its takings claim, rather than directly institute a separate proceeding asserting such a claim."⁹⁵ Here, a decision from the PUC on the underlying issues could moot CPS’ constitutional claims. Were the PUC to order adjustment of the alleged overcharge pricing or resettlement of ERCOT's payments to CPS, it would cure the alleged violations and obviate the need to assert the constitutional claims in court.⁹⁶ And even if it does not, a party is not precluded from pursuing its constitutional claims after exhaustion or from seeking judicial review of any PUC rulings on issues underlying those claims.⁹⁷

95 Garcia v. City of Willis , 593 S.W.3d 201, 211 (Tex. 2019) (citing City of Dallas v. Stewart , 361 S.W.3d 562, 579 (Tex. 2012) ).

96 See id. at 211-212.

97 Chaparral Energy , 546 S.W.3d at 141-142.

In sum, the PUC has exclusive jurisdiction over CPS’ claims. As a result of our holding, we need not address ERCOT's alternative argument regarding exclusive jurisdiction in Travis County district court or the Third Court of Appeals, nor its argument that the PUC is an indispensable party.

IV

ERCOT's primary argument is that it is entitled to sovereign immunity. We agree.

"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.’ "⁹⁸ It is " ‘inherent’ in Texas statehood and ‘developed without any legislative or constitutional enactment.’ "⁹⁹ In determining whether a legislatively authorized entity is entitled to share in the state's immunity, we look to whether "the governing statutory authority demonstrates legislative intent to grant an entity the ‘nature, purposes, and powers’ of an ‘arm of the State government’ ".¹⁰⁰ We also look to whether extending immunity would "satisfy the political, pecuniary, and pragmatic policies underlying our immunity doctrines."¹⁰¹ If these requirements are met, the " ‘entity is a government unit unto itself’ and is ‘entitled to assert immunity in its own right’ when it performs a ‘governmental function.’ "¹⁰²

98 Univ. of the Incarnate Word v. Redus (Redus II ), 602 S.W.3d 398, 403 (Tex. 2020) (quoting Hosner v. DeYoung , 1 Tex. 764, 769 (1847) ).

99 Id. at 403-404 (quoting Wasson Ints., Ltd. v. City of Jacksonville , 489 S.W.3d 427, 429, 431 (Tex. 2016) ).

100 El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 527 (Tex. 2020) (quoting Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Pol. Subdivs. Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d 320, 325 (Tex. 2006) ).

101 Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019).

102 Redus II , 602 S.W.3d at 405 (quoting Ben Bolt , 212 S.W.3d at 325-326 ).

A

Three of our recent cases explored the boundaries and contours of sovereign and governmental immunity and are pertinent to our analysis here. In Rosenberg Development Corp. v. Imperial Performing Arts, Inc. , we addressed for the first time whether a private entity could possess the "nature, purposes, and powers of an arm of the State government" and thus qualify as an entity protected by sovereign or governmental immunity.¹⁰³ Rosenberg involved an economic development corporation created by a municipality, as authorized by the Texas Development Corporation Act.¹⁰⁴ The economic development corporation was a private, nonprofit entity, but it was incorporated exclusively for a public purpose: to promote enterprises to spur economic growth in the city.¹⁰⁵ Under the statute, it was authorized to fund projects with tax dollars or the proceeds of revenue bonds.¹⁰⁶ It was also subject to compliance with the Texas Open Meetings Act and the Texas Public Information Act.¹⁰⁷ The municipality had some supervisory control over the corporation, but ultimately, "all the powers of the corporation [were] vested in the corporation's board of directors."¹⁰⁸ Importantly, the Development Corporation Act provided that an economic development corporation "is not a political subdivision or a political corporation for purposes of the laws of this state", and it barred municipalities from delegating to the corporation any "attributes of sovereignty."¹⁰⁹ Ultimately, we concluded that the Development Corporation Act "evinces clear legislative intent that an economic development corporation is not an arm of state government."¹¹⁰ We also held that granting immunity did not "satisfy the political, pecuniary, and pragmatic policies underlying our immunity doctrines" because "[g]overnmental immunity benefits the public by preventing disruptions of key governmental services," but economic development corporations do not perform essential services.¹¹¹

103 571 S.W.3d at 749 (internal quotation marks omitted).

104 Id. at 741.

105 Id. at 741, 745.

106 Id. at 744.

107 Id. at 745.

108 Id. (internal alterations and quotation marks omitted).

109 Id.

110 Id. at 750.

111 Id.

Next, in University of the Incarnate Word v. Redus ( Redus II ), we considered whether sovereign immunity applied to the private university involved in Redus I , which was sued for the actions of its statutorily authorized police department.¹¹² We concluded that it was not immune because the university did not possess the nature, purposes, and powers of an arm of the state government, nor did applying sovereign immunity support the doctrine's nature and purposes.¹¹³ Central to our holding was the lack of control the state exercised over the university and its police department. We noted that "[t]he State did not charter" the university, nor did it set the police "department's policies, procedures, or protocols."¹¹⁴ We further observed that the state did not "hire or fire the [u]niversity's officers" and that "[t]he [u]niversity's administration, and its private governing board, are alone responsible for its police department's day-to-day operations and decision making."¹¹⁵ Ultimately, because the university's police department was "not accountable to the government," we concluded that it was not an arm of the state.¹¹⁶ We also held that extending sovereign immunity to the university did not further the doctrine's purposes of protecting the public treasury and preserving the separation of government power.¹¹⁷ We observed that the university, not the state, funded the police department, and therefore no tax dollars were at stake.¹¹⁸ This foreclosed any risk of invading the separation of powers because there could be no judicial reallocation of public funds.¹¹⁹ Additionally, there were no concerns regarding the diversion of public funds from government functions in order to pay judgments.¹²⁰

112 See Redus II , 602 S.W.3d at 401-402.

113 See id.

114 Id. at 407 ; see id. at 407-408.

115 Id. at 407.

116 Id. at 408.

117 Id. at 409.

118 Id.

119 Id.

120 Id. at 409-410.

On the same day we decided Redus II , we also decided El Paso Education Initiative v. Amex Properties , issuing the first and only opinion in which we have extended sovereign or governmental immunity to a private entity under the arm-of-the-state analysis.¹²¹ We observed that the Education Code expressly stated the Legislature's intent that open-enrollment charter schools be "immune from liability and suit to the same extent as a [public] school district".¹²² We concluded that, although charter schools are typically private, non-profit organizations, they have the nature, purposes, and powers of an arm of the state because they are regulated by and accountable to the state's Commissioner of Education, are largely publicly funded, educate nearly six percent of the state's students, "exercise the same powers and perform government tasks in the same manner as traditional public schools[,] ... expressly operate as part of the State's public education system, and ... are generally open to the public."¹²³ We also concluded that extending governmental immunity to open-enrollment charter schools would serve the doctrine's nature and purposes by protecting public funds from lawsuits and judgments that would reallocate the funds from the Legislature's designated purpose.¹²⁴ It would also protect the separation of governmental powers by respecting the Legislature's policy choices on how to provide and fund a free, public education, as well as its express desire that charter schools have the same governmental immunity from suit and liability as public schools.¹²⁵

121 602 S.W.3d at 529-530.

122 Id. at 529.

123 Id. at 528-530.

124 Id. at 530.

125 Id.

B

ERCOT "do[es] not fall neatly into any camp".¹²⁶ It is a unique entity serving a role that is not clearly analogous to a public entity like a police department or a public school. Yet, it provides an essential governmental service. While the Legislature has not expressly stated a desire that ERCOT be immune from suit, as it did in Amex Properties , the "the governing statutory authority"—PURA—nevertheless "demonstrates legislative intent to grant [ERCOT] the ‘nature, purposes, and powers’ of an ‘arm of the State government’ ".¹²⁷ ERCOT operates under the direct control and oversight of the PUC, it performs the governmental function of utilities regulation, and it possesses the power to adopt and enforce rules pursuant to that role. In addition, recognizing immunity satisfies the "political, pecuniary, and pragmatic policies" underlying immunity because it prevents the disruption of key governmental services, protects public funds, and respects separation of powers principles.¹²⁸ Thus, ERCOT is immune from suit.

126 Redus II , 602 S.W.3d at 406.

127 Amex Props. , 602 S.W.3d at 527 (quoting Ben Bolt , 212 S.W.3d at 325 ).

128 Rosenberg , 571 S.W.3d at 750.

ERCOT's governmental nature is demonstrated most prominently by the level of control and authority the state exercises over it and its accountability to the state. In this regard, it is much like a state agency, and it stands in stark contrast to the private university in Redus II . The PUC certified ERCOT as the ISO, and, as set forth in Section 39.151 of the Utilities Code, it has "complete authority" over ERCOT's operations.¹²⁹ In other words, the state has complete authority over everything ERCOT does to perform its statutory functions. The statute also grants the PUC authority over ERCOT's governance. ERCOT's bylaws and protocols are subject to PUC approval, and they "must reflect the input of the [PUC]."¹³⁰ While ERCOT has a board of directors, the state controls that too. Specifically, under Section 39.151, ERCOT's "governing body must be composed of [eight] persons selected by the ERCOT board selection committee."¹³¹ In turn, the board selection committee comprises members appointed by the three highest ranking officials in state government: the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives.¹³² In addition to the members selected by the committee, the board also includes two state officials, the Chairman of the PUC and the Counsellor of the Public Utility Counsel.¹³³ The final member of the board is ERCOT's CEO, whose selection is subject to PUC review and approval.¹³⁴

129 Tex. Util. Code § 39.151(d).

130 Id. § 39.151(g-1).

131 Id. § 39.151(g), (g-1).

132 Id. § 39.1513.

133 Id. § 39.151(g-1). Under the recent amendments to Section 39.151, the PUC must have two commissioners on the ISO's board, the presiding officer of the PUC and one other commissioner who will serve a one-year term. See Act of May 28, 2023, supra note 16.

134 Tex. Util. Code § 39.151(g-1) ; 16 Tex. Admin. Code § 25.362(h).

Section 39.151 also grants the PUC "complete authority" over ERCOT's finances and budget.¹³⁵ ERCOT must submit its proposed annual budget to the PUC, which can "approve, disapprove, or modify any item" in it.¹³⁶ ERCOT is authorized to charge a system administration fee, but only after the PUC approves its budget and sets the fee range.¹³⁷ ERCOT must provide the PUC with reports that compare its actual expenditures with its budgeted expenditures, and the PUC is authorized to audit ERCOT's finances.¹³⁸

135 Tex. Util. Code § 39.151(d).

136 Id. § 39.151(d-1).

137 Id. § 39.151(e).

138 Id. § 39.151(d-4)(3), (e).

In addition to the control the PUC exercises over ERCOT, Section 39.151(d) holds that ERCOT is "directly responsible and accountable to the [PUC]".¹³⁹ In Amex Properties , the open-enrollment charter school was entitled to governmental immunity in part because it "must adhere to state law and the [Commissioner of Education]’s regulations ... or risk revocation of its charter."¹⁴⁰ Here, the PUC is empowered to "take appropriate action against" ERCOT if it fails to adequately perform or adhere to the requirements set forth in Section 39.151, "including decertifying the organization or assessing an administrative penalty against the organization."¹⁴¹ And should the PUC decide to decertify ERCOT, the statute requires that ERCOT "transfer[ ] [its] assets to the successor organization to ensure continuity of operations in the region", demonstrating the state's control and ownership of ERCOT's property.¹⁴²

139 Id. § 39.151(d).

140 602 S.W.3d at 529.

141 Tex. Util. Code § 39.151(d).

142 Id.

Finally, ERCOT is subject to requirements typically reserved for state entities. For example, among other things, ERCOT is subject to review (but not abolishment) under the Texas Sunset Act, and it is required to open its board meetings to the public.¹⁴³ While these requirements are not dispositive—the economic development corporation in Rosenberg was also subject to open meetings¹⁴⁴ —when coupled with the state's control, they further support ERCOT's governmental nature.

143 Id. §§ 39.151(n), 39.1511.

144 571 S.W.3d at 745.

The dissent argues that these statutory provisions are insufficient to show that ERCOT has been vested with the nature of an arm of the government.¹⁴⁵ Specifically, it argues that ERCOT would not be immune for discretionary and independent actions, and that a factual showing of actual control by the PUC of the complained-of conduct is necessary to determine whether ERCOT's actions were attributable to the government such that it shares in the state's immunity.¹⁴⁶ The dissent would wait to resolve the immunity question until after the PUC exercised its exclusive jurisdiction.¹⁴⁷ To come to this conclusion, the dissent relies heavily on cases involving derivative immunity for government contractors.¹⁴⁸ However, this reliance is misplaced. ERCOT is not a government contractor; it is an "[e]ssential [o]rganization[ ]" certified by the PUC pursuant to statute, and its argument for immunity is as an arm of the state, not derivative of the state.¹⁴⁹ In Redus II , we noted that a derivative immunity case, Brown & Gay Engineering, Inc. v. Olivares ,¹⁵⁰ was "instructive" in holding that no control by or accountability to the state precludes arm-of-the-state immunity, but we have never held that a complete lack of discretion is required for immunity in an arm-of-the-state analysis for a legislatively authorized entity.¹⁵¹ "Sovereign immunity is entity-based."¹⁵² Our immunity inquiry looks to legislative intent, and Section 39.151 ’s numerous provisions outlining the PUC's ultimate authority over ERCOT's operations, budget, governance, and property demonstrate the intent to vest ERCOT with the nature of an arm of the state independently of the PUC's actions on a given day.¹⁵³

145 See post at 631 (Boyd & Devine, JJ., dissenting).

146 Id. at 639-41, 644-49.

147 Id. at 640.

148 Id. at 642-49.

149 Tex. Util. Code § 39.151 ; id. § 39.151(c).

150 461 S.W.3d 117, 125 (Tex. 2015).

151 Redus II , 602 S.W.3d at 407 ; see Amex Props. , 602 S.W.3d at 529-530.

152 Redus II , 602 S.W.3d at 407.

153 See, e.g., Amex Props. , 602 S.W.3d at 527 (noting that we look to the "governing statutory authority"). The dissent also takes issue with the fact that PURA does not directly address ERCOT, but instead regulates the ISO. See post at 638-40 (Boyd & Devine, JJ., dissenting). But ERCOT is the ISO for the Texas power region and is, therefore, subject to PURA while it serves in that role.

Moreover, the PUC had significant control and authority over the very conduct at issue in these cases. In CPS’ case, the PUC issued the directive to ERCOT to increase pricing to $9,000 per megawatt-hour that resulted in CPS’ alleged overcharge. The short-pay procedure and default-uplift process of which CPS complains are set forth in the ERCOT Protocols, and the Protocols are subject to PUC approval.¹⁵⁴ Finally, ERCOT's ability to conduct transaction settlements is through delegated authority from the PUC.¹⁵⁵ As to Panda, ERCOT is required by the PUC to publish CDRs, and those CDRs allegedly caused Panda's injury.¹⁵⁶ Panda conceded at oral argument that the PUC could have controlled the CDR data output had it wanted to.

154 Tex. Util. Code § 39.151(d), (g-1).

155 Id. § 39.151(i).

156 Id. § 39.155; 16 Tex. Admin. Code § 25.505.

PURA also evinces a legislative intent to vest ERCOT with the "purposes" and "powers" of an "arm of the State government."¹⁵⁷ PURA requires the PUC to certify an "[e]ssential [o]rganization[ ]" to operate a competitive electric market and to ensure "the reliability and adequacy" of the grid.¹⁵⁸ In this role, ERCOT regulates the electric utility market. It is statutorily authorized to establish, adopt, and enforce a variety of policies, rules, guidelines, standards, procedures, protocols, and other requirements to govern the operations of market participants.¹⁵⁹ And market participants are statutorily obligated to abide by these rules.¹⁶⁰ This regulatory role over utilities is uniquely governmental.¹⁶¹

157 Amex Props. , 602 S.W.3d at 527 (quoting Ben Bolt , 212 S.W.3d at 325 ).

158 Tex. Util. Code § 39.151 ; id. § 39.151(a).

159 Id. § 39.151(d), (i), (j), (l ).

160 Id. § 39.151(j).

161 See Ark. Elec. Coop. Corp. , 461 U.S. at 377, 103 S.Ct. 1905.

The fact that ERCOT is organized as a membership-based nonprofit corporation does not make it any less an arm of the state.¹⁶² An entity's organizational form is not dispositive.¹⁶³ While corporations do not typically enjoy sovereign immunity, ERCOT is not a typical corporation. Apart from limited liability, one of the hallmarks of a corporation is management by a board of directors in accordance with corporate bylaws.¹⁶⁴ But here, the state has authority over both ERCOT's board and its bylaws.¹⁶⁵ Under Texas law, corporations have the power to, inter alia , own property, dispose of property, spend money, incur liabilities, and conduct their business.¹⁶⁶ However, ERCOT may not exercise any of those corporate powers independently of the state. ERCOT's assets are owned by the state.¹⁶⁷ ERCOT may not raise money, spend money, or obtain debt financing without PUC input and approval.¹⁶⁸ The "business" ERCOT conducts is governmental and for the public benefit, and it is set forth by statute and subject to PUC authority and oversight.¹⁶⁹ In short, the fact that the state is utilizing the corporate form to achieve its objectives for the Texas power region does not change governmental nature of ERCOT's actions.¹⁷⁰ In sum, "the governing statutory authority demonstrates legislative intent to grant [ERCOT] the ‘nature, purposes, and powers’ of an ‘arm of the State government’ ".¹⁷¹

162 ERCOT Organization Backgrounder, supra note 7.

163 See Amex Props. , 602 S.W.3d at 528-529.

164 Tex. Bus. Orgs. Code §§ 22.102, 22.152, 22.201.

165 See Tex. Util. Code § 39.151(g), (g-1) ; id. § 39.1513.

166 See Tex. Bus. Orgs. Code § 2.101(3), (4), (6), (7), (12), (22).

167 See Tex. Util. Code § 39.151(d).

168 See id. § 39.151(d), (d-1), (d-2).

169 See id. § 39.151(a), (c), (d); see also id. § 39.001(a).

170 Relying on a recent Fifth Circuit concurring opinion, see Springboards to Educ., Inc. v. McAllen Indep. Sch. Dist. , 62 F.4th 174, 187-199 (5th Cir. 2023) (Oldham, J., concurring), the dissent contends that "there is no history or tradition of extending common-law sovereign immunity to private corporations." Post at 641 (Boyd & Devine, JJ., dissenting). We need not express any opinion on the correctness of that proposition today. But even assuming that it is correct, it does not address circumstances (like here) in which the state has exercised direct control over the corporation and has harnessed it for state-related objectives. Indeed, the U.S. Supreme Court has long recognized that the government cannot, for example, circumvent the state-action requirement by simply enlisting private entities to do its work. See, e.g., Skinner v. Ry. Lab. Execs.’ Ass'n , 489 U.S. 602, 614, 109 S.Ct. 1402, 103 L.Ed.2d 639 (1989). While a corporation is presumably not "the state", we reiterate that an entity's corporate form cannot in and of itself be dispositive of the immunity question.

171 Amex Props. , 602 S.W.3d at 527 (quoting Ben Bolt , 212 S.W.3d at 325 ).

C

Recognizing ERCOT's immunity also satisfies the "political, pecuniary, and pragmatic policies underlying our immunity doctrines."¹⁷² "Governmental immunity benefits the public by preventing disruptions of key governmental services," and there are few things more fundamental to the state's ability to function than its electricity grid.¹⁷³

172 Rosenberg , 571 S.W.3d at 750.

173 Id.

The protection of public funds and assets justifies recognizing ERCOT's immunity. Even though ERCOT is not funded with tax dollars, any damages payments would nevertheless come from the state and the public. ERCOT is primarily funded by a system administration fee charged to wholesale buyers and sellers of electricity.¹⁷⁴ The fee is required to closely match the revenue necessary for its budget without exceeding it to avoid a surplus of funds.¹⁷⁵ In other words, ERCOT charges only what is necessary for it to function. Were a judgment rendered against it, ERCOT would be forced to raise the system administration fee to pay the judgment—assuming the PUC would authorize that¹⁷⁶ —resulting in higher costs for electricity for consumers.

174 Tex. Util. Code § 39.151(e).

175 Id.

176 See id. § 39.151(d), (d-1).

Moreover, the Legislature appears to consider ERCOT's money and assets to be state assets. The system administration fee is statutorily authorized, subject to PUC approval, and collected pursuant to state power.¹⁷⁷ As mentioned, the PUC has authority over ERCOT's finances, including its ability to raise money and how it spends its money.¹⁷⁸ And were ERCOT to be decertified as the ISO, Section 39.151(d) requires that ERCOT "transfer[ ] [its] assets to the successor organization".¹⁷⁹ The state's ability to divest ERCOT of those assets and direct their transfer demonstrates the state's ownership over them. Thus, were the assets subject to judicial seizure, the judgment creditor would be the state—not ERCOT.

177 Id. § 39.151(e), (j).

178 See id. § 39.151(d), (d-1), (e).

179 Id. § 39.151(d).

Finally, recognizing ERCOT's immunity respects separation of powers principles. The judicial imposition of a damages award against ERCOT would run afoul of the Legislature's determination that the PUC alone has "complete authority" over ERCOT's finances.¹⁸⁰ This directive necessarily prevents the courts from enforcing a monetary judgment against it.

180 Id.

Contrary to the dissent's claim, this does not leave ERCOT unaccountable.¹⁸¹ It simply holds that the courts are not the proper avenue for redress. ERCOT is accountable to the state. Its shortfalls are being addressed by the Legislature, which is accountable to the people through the political process.¹⁸² For example, in direct response to the default of certain ERCOT market participants following Uri, the Legislature passed a bill authorizing the use of $800 million of the Rainy Day Fund for ERCOT to finance part of the default.¹⁸³ This helps ensure that short-paid market participants like CPS are repaid faster.¹⁸⁴ After the storm, the Legislature overhauled ERCOT's board of directors, making it more independent from electric-market stakeholders and further increasing governmental oversight.¹⁸⁵ It also passed an omnibus bill that required, among other things, weatherization of generation companies’ and electric utilities’ assets and gave ERCOT authority to inspect for compliance.¹⁸⁶ And it moved up ERCOT's Sunset date by two years, which ensured a comprehensive review of the organization in the near-term.¹⁸⁷

181 See post at 646-47, 652-53 (Boyd & Devine, JJ., dissenting).

182 See In re Stetson Renewables Holdings, LLC , 658 S.W.3d 292, 297 (Tex. 2022) (observing various ways in which the Legislature could hold an agency accountable for the failure to carry out a statutory program and reasoning that a judicial remedy could "create[ ] a serious risk that the courts will intrude into the prerogatives of [the] other branches").

183 See Act of May 30, 2021, 87th Leg., R.S., ch. 908, §§ 1, 5, 2021 Tex. Gen. Laws 2218, 2218-2227 (H.B. 4492) (codified at Tex. Gov't Code § 404.0241, Tex. Util. Code §§ 39.601-39.609); see also Sunset Advisory Commission , Staff Report with Commission Decisions: Public Utility Commission of Texas , Electric Reliability Council of Texas , Office of Public Utility Counsel 106-107 (2023), https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with-Commission-Decisions_1-19-23.pdf.

184 See Tex. Util. Code § 39.601(b)(1).

185 Act of May 30, 2021, 87th Leg., R.S., ch. 425, §§ 3, 4, 2021 Tex. Gen. Laws 830, 830-833 (S.B. 2) (codified at Tex. Util. Code §§ 39.151, 39.1513 ); see also Sunset Advisory Commission , supra note 183 at 1 ("In response to the disaster, the Legislature took swift action, completely overhauling PUC's and ERCOT's governance structures and making numerous changes to the electric industry and market ...."); id. at 106.

186 Act of May 30, 2021, 87th Leg., R.S., ch. 426, §§ 13, 16, 2021 Tex. Gen. Laws 833, 839-840, 841-843 (S.B. 3) (codified at Tex. Util. Code §§ 35.0021, 38.075); see also 16 Tex. Admin. Code § 25.55(b)(5), (d), (g) ; Sunset Advisory Commission , supra note 183, at 106.

187 Sunset Advisory Commission , supra note 183, at A1.

We hold that ERCOT is entitled to sovereign immunity because PURA "evinces clear legislative intent"¹⁸⁸ to vest it with the " ‘nature, purposes, and powers’ of an ‘arm of the State government’ "¹⁸⁹ and because doing so satisfies the "political, pecuniary, and pragmatic policies underlying our immunity doctrines."¹⁹⁰ There is no evidence that ERCOT performs any functions outside its role as the ISO, but we note that ERCOT would not be immune outside that role. We also note that immunity would not bar CPS’ constitutional claims.¹⁹¹ Because we conclude that ERCOT enjoys sovereign immunity as an arm of the state, we need not and do not address ERCOT's argument that it is entitled to derivative immunity.

188 Rosenberg , 571 S.W.3d at 750.

189 Amex Props. , 602 S.W.3d at 527 (quoting Ben Bolt , 212 S.W.3d at 325 ).

190 Rosenberg , 571 S.W.3d at 750.

191 See City of El Paso v. Heinrich , 284 S.W.3d 366, 372 (Tex. 2009).

* * * * *

In No. 22-0056, CPS Energy v. Electric Reliability Council of Texas , we affirm the court of appeals’ judgment. CPS’ motion to stay the court of appeals’ dissolution of the trial court's temporary restraining order is dismissed as moot. In No. 22-0196, Electric Reliability Council of Texas, Inc. v. Panda Power Generation Infrastructure Fund, LLC , we reverse the court of appeals’ judgment and dismiss the case for lack of jurisdiction.

Justice Boyd and Justice Devine filed a dissenting opinion, in which Justice Lehrmann and Justice Busby joined.

Justice Boyd and Justice Devine, joined by Justice Lehrmann and Justice Busby, dissenting. At the heart of sovereign immunity—the doctrine that the Sovereign cannot be sued without its consent—lies a contest between core values of constitutionalism.¹ On the one hand, constitutionalism entails a commitment to the rule of law: "the fundamental principle that government is subordinate to the law"² and the "very essence of civil liberty" that every individual has the right "to claim the protection of the laws, whenever he receives an injury."³ "[I]f the laws furnish no remedy for the violation of a vested legal right," our government will "cease to deserve this high appellation" of "a government of laws, and not of men."⁴

1 See Vicki C. Jackson, Suing the Federal Government: Sovereignty, Immunity, and Judicial Independence , 35 Geo. Wash. Int'l L. Rev. 521, 521 (2003).

2 Phillips v. McNeill , 635 S.W.3d 620, 627 (Tex. 2021) (citing Tex. Const. art. I, §§ 13, 19 ).

3 Marbury v. Madison , 5 U.S. 137, 163, 1 Cranch 137, 2 L.Ed. 60 (1803) ; see also Tex. Const. art. I, §§ 13 ("All courts shall be open, and every person for an injury done him, in his lands, goods, person or reputation, shall have remedy by due course of law."), 19 ("No citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by due course of the law of the land.").

4 Marbury , 5 U.S. at 163 ("In Great Britain the king himself is sued in the respectful form of a petition, and he never fails to comply with the judgment of his court.").

On the other hand, sovereign immunity is essential as "a structural protection for democratic rule," preserving the separation of governmental powers and protecting legislative and executive policy-making—for example, the allocation of the public coffers—from judicial interference and control.⁵ Although "protecting the purse comes at the expense of ensuring accountability under the law for the government's breaches,"⁶ the political process often serves as a substitute for private lawsuits to deter arbitrary and imprudent governmental action. But immunizing the Sovereign creates considerable tension with the "very essence of civil liberty": it burdens injured individuals with the costs and consequences of the government's improvident actions and "foreclose[s]—absent a legislative waiver—the litigation and judicial remedies that would be available to the injured person had the complained-of acts been committed by private persons."⁷

5 See Harold J. Krent, Reconceptualizing Sovereign Immunity , 45 Vand. L. Rev. 1529, 1530 (1992) ; see also Tex. Const. art. II, § 1 ("The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided to a separate body of magistracy[.]"); Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 409 (Tex. 2020) ("Sovereign immunity restrains judicial interference in the executive and legislative branches so that ultimately the people, not the courts, strike the policy balance between immunizing the government's actions and providing a judicial remedy."). Bolstering the doctrine are also modern political, pragmatic, and pecuniary justifications. Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 740 (Tex. 2019).

6 Rosenberg , 571 S.W.3d at 741.

7 Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 122 (Tex. 2015).

In the face of this conflict of values, the touchstone for applying sovereign immunity must be the public's trust that the rules of the game are established for their benefit and by the proper institutions.⁸ While sovereign immunity was once theoretically justified by the feudal fiction that the "king can do no wrong,"⁹ "in our system of government, the people"—not a king—"are the sovereign,"¹⁰ and immunity must be for the benefit of that sovereign.¹¹ In applying the doctrine for the people's benefit, history and tradition serve as lodestars for ensuring trust.¹²

8 See, e.g. , Krent, supra note 5, at 1530 ("The dominant justification for sovereign immunity must be that we trust Congress, unlike any other entity, to set the rules of the game.").

9 Rosenberg , 571 S.W.3d at 740 ; see also Wasson Ints., Ltd. v. City of Jacksonville , 489 S.W.3d 427, 431 n.5 (Tex. 2016) (discussing the historical anomaly of relying on the legal fiction that the king could do no wrong).

10 Hall v. McRaven , 508 S.W.3d 232, 253 (Tex. 2017) (Brown, J., concurring).

11 See Tex. Const. art. I, § 2 ("All political power is inherent in the people, and all free governments are founded on their authority, and instituted for their benefit.").

12 The application of immunity to the Sovereign rests on a common-law tradition long predating this State's constitutional founding. See Hosner v. DeYoung , 1 Tex. 764, 769 (1847) ("[N]o state can be sued in her own courts without her consent[.]"); see also Tooke v. City of Mexia , 197 S.W.3d 325, 331 (Tex. 2006) (noting that at the time of Hosner , the common-law doctrine was "then more than six centuries old"). And "[l]ike sovereign immunity itself, its common-law limitations and exceptions have deep historical roots" and are "designed to ensure the rule of law." Phillips v. McNeill , 635 S.W.3d 620, 627-28 (Tex. 2021) (discussing the ultra vires exception to sovereign immunity and noting that the sovereign-immunity doctrine's limitations and exceptions "trac[e] their lineage to courts’ issuance of writs of habeas corpus, mandamus, and injunction against government officials to check acts in excess of lawful authority or compel the performance of a clear legal duty").

Although public trust may be challenging to earn, and even harder to sustain, the judiciary and the Legislature both play a vital role. "To facilitate equipoise in the doctrine's operation," the judiciary first determines its applicability, pruning and shaping its boundaries and contours.¹³ And the Legislature, composed of the people's duly elected representatives, maintains the prerogative to waive any existing immunity.¹⁴

13 Rosenberg , 571 S.W.3d at 741 ; see also Wasson Ints. , 489 S.W.3d at 432.

14 Rosenberg , 571 S.W.3d at 741.

But the public's trust is undermined when the judiciary extends sovereign immunity, contrary to history and tradition, to what is undeniably not sovereign: purely private entities. Recently, the battle over the doctrine's conflicting values has protruded into a debate on whether private entities should be garbed with the Sovereign's immunity when they act as government contractors or legislatively authorized entities. For private entities acting as government contractors, this Court has contemplated but declined to apply derivative sovereign immunity in a conduct-specific inquiry based on the government's degree of control and the contractor's lack of discretion.¹⁵ For entities the Legislature has specifically authorized to exist or act by statute, the Court has extended sovereign immunity if (1) the authorizing statute "evinces ‘clear legislative intent’ to vest the entity with the ‘nature, purposes, and powers’ of an ‘arm of the State government’ "¹⁶ and (2) extending immunity "fits within the doctrine's underlying nature and purposes."¹⁷ In both cases, the root justification for possibly protecting private entities with the Sovereign's immunity is that, by statute or contract, they act as arms of the state: the government acted through the entity and the actions are effectively attributed to the government as "action taken by the government."¹⁸

15 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 733 (Tex. 2020) ; Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 126 (Tex. 2015).

16 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 405 (Tex. 2020) (quoting Rosenberg , 571 S.W.3d at 750, and Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Pol. Subdivs. Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d 320, 325 (Tex. 2006) ).

17 Id. at 401 (quoting Rosenberg , 571 S.W.3d at 750 ).

18 Id. at 407 (quoting Brown & Gay , 461 S.W.3d at 125 ).

Until today, however, this Court had never "extend[ed] sovereign immunity to a purely private entity—one neither created nor chartered by the government—even when that entity performs some governmental functions."¹⁹ Broadly expanding the doctrine and primarily relying on the statutory oversight authority of the Public Utility Commission of Texas (the PUC), the Court declares that a purely private corporation, Electric Reliability Council of Texas, Inc. (ERCOT), may shield itself under the Sovereign's cloak of immunity as a legislatively authorized entity.²⁰ Yet unlike any other entity previously granted immunity by this Court, no statute designates ERCOT as a part of the government.²¹

19 Id. at 401.

20 Ante at 623-24, 625-26, 628.

21 This Court has considered extending immunity to legislatively authorized entities four times and granted immunity twice. See El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 527, 530 (Tex. 2020) (extending immunity to open-enrollment charter schools); Redus , 602 S.W.3d at 405, 413 (denying immunity to a private university for law-enforcement activities); Rosenberg , 571 S.W.3d at 750, 752 (denying immunity to an economic-development corporation created and operated by a municipality); Ben Bolt , 212 S.W.3d at 325-26 (extending immunity to a self-insurance fund composed of local political subdivisions). In Amex Properties , the Legislature expressly designated open-enrollment charter schools as part of the public school system and immune from suit and liability, 602 S.W.3d at 528-29 (quoting Tex. Educ. Code §§ 12.105, .1056(a)), and in Ben Bolt , "[b]ecause the term ‘local government’ includes a combination of political subdivisions," the self-insurance fund composed of local political subdivisions was itself a local governmental body, 212 S.W.3d at 324-25 (citing Tex. Gov't Code § 791.003(4)(A), (E) ). Ben Bolt derived the test for legislatively authorized entities from a 1940 decision that did not involve sovereign immunity and instead concerned whether a statutorily created flood-control district constituted a separate and distinct governmental entity from the county. See Harris Cnty. Flood Control Dist. v. Mann , 135 Tex. 239, 140 S.W.2d 1098, 1101 (1940). As noted in later decisions, these flood-control districts are entitled to governmental immunity as constitutionally recognized "governmental agencies." See Tex. Const. art. XVI, § 59 (b) (Flood-control "districts shall be governmental agencies and bodies politic and corporate with such powers of government[.]"); Harris Cnty. Flood Control Dist. v. Mihelich , 525 S.W.2d 506, 508 (Tex. 1975) ("Districts formed in accordance with Section 59 of Article XVI have been recognized to be governmental agencies and bodies politic and corporate, ‘governed by the law applicable to counties,’ with the same immunities from tort actions as were enjoyed by the State and its counties[.]").

For the reasons the Court explains, we join Parts I, II, and III of the Court's opinion and agree that ERCOT qualifies as a "governmental unit" under the Tort Claims Act (and thus can pursue an interlocutory appeal) and that the PUC has exclusive jurisdiction over the issues underlying the parties’ claims against ERCOT. But because Texas law has not vested the private corporation ERCOT with the nature of an arm of the state, we respectfully disagree that sovereign immunity should broadly prohibit courts from exercising jurisdiction over claims against it. Specifically, we first address ERCOT's "nature" as an entity, then consider the "control" the State exerts over ERCOT, and finally evaluate whether extending sovereign immunity to ERCOT would promote the doctrine's nature and purposes. We conclude that none of these factors supports the monumental alteration of the crucial concept of sovereign immunity the Court announces today.

Because the Court holds otherwise, the Legislature could, and in our opinion should, correct the Court's error. To circumscribe the Court's broad expansion of the doctrine, the Legislature could enact a rule of construction that it does not intend to grant private entities the "nature, purposes, and powers" of an arm of the state for the purposes of sovereign immunity unless it explicitly designates the entity as part of the government. The Legislature could also waive some or all of ERCOT's newfound immunity. In this way, the Legislature could begin restoring the public's trust following this Court's erroneous extension of sovereign immunity to a purely private corporation.

I. ERCOT, Inc.

As mentioned, we have recognized that sovereign immunity may apply to an entity when a Texas statute "evinces ‘clear legislative intent’ to vest the entity with the ‘nature, purposes, and powers’ of an ‘arm of the State government.’ "²² This standard requires us to begin by considering ERCOT's nature as an entity, not just the nature of its functions. That ERCOT performs governmental functions and serves a public purpose "says nothing about the nature of the entity itself."²³ We thus begin by considering ERCOT's history leading up to its current status as an entity, which indisputably establishes that ERCOT exists as a purely private entity created and operated by purely private industry participants and, although selected to perform important governmental functions, has never been designated, considered, or characterized as an arm of the state.

22 Redus , 602 S.W.3d at 401, 405 (quoting Rosenberg , 571 S.W.3d at 750, and Ben Bolt , 212 S.W.3d at 325 ).

23 Id. at 407 (quoting Rosenberg , 571 S.W.3d at 750 ).

A. ERCOT's History

The "electrification of America" occurred rapidly.²⁴ Within a year after Thomas Edison invented the incandescent electric light bulb in 1878, major cities were using electricity to light streets and selected buildings.²⁵ Pouncing on the obvious economic opportunities, private firms scrambled to construct generators to serve individual buildings and properties. Seeing the bigger picture, Edison and his General Electric Company opened the first central power plant in 1882.²⁶ Within two months, the Pearl Street station in New York City boasted 203 customers, and then 513 the following year.²⁷ By 1889, Edison had built 500 small power plants to serve individual buildings and fifty-eight larger plants to serve several of America's larger cities.²⁸

24 Robert L. Bradley, Jr., The Origins of Political Electricity: Market Failure or Political Opportunism? , 17 Energy L.J. 59, 61 (1996).

25 Id. at 59-60.

26 Gina S. Warren, Vanishing Power Lines and Emerging Distributed Generation , 4 Wake Forest J.L. & Pol'y 347, 351 (2014) ; Hon. Richard D. Cudahy & William D. Henderson, From Insull to Enron: Corporate (Re)regulation After the Rise and Fall of Two Energy Icons , 26 Energy L.J. 35, 39 (2005).

27 Warren, supra note 26, at 350.

28 Id. at 350-51.

Initially, the scattered power plants and their electricity-distribution systems were "isolated, competitive, and unregulated."²⁹ The private firms (along with a few cities and rural cooperatives) that constructed and operated the facilities enjoyed "vertically integrated monopolies," each generating, transmitting, and distributing electricity to its own eager consumers.³⁰ With very few interconnections between their grids, they each served (and charged) their own local customers and, in reality, rarely competed against one another.³¹

29 Mary Katherine Strahan, Connecting Currents: Toward the Integration of North American Electricity Markets , 21 Hous. J. Int'l L. 291, 292 n.8 (1999).

30 Fed. Energy Reg. Comm'n v. Elec. Power Supply Ass'n , 577 U.S. 260, 267, 136 S.Ct. 760, 193 L.Ed.2d 661 (2016) ; see also Emily Hammonde & David B. Spence, The Regulatory Contract in the Marketplace , 69 Vand. L. Rev. 141, 149-50 (2016).

31 New York v. Fed. Energy Reg. Comm'n , 535 U.S. 1, 5, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002).

That situation began to change in 1892, when Edison's long-time personal assistant, Samuel Insull, left General Electric for the Chicago Edison Company and embarked on a storied career producing huge electric monopolies and, ultimately, the nation's electric grid.³² By the early 1930s, eight companies controlled two-thirds of the nation's private power producers, and three of them controlled half.³³ Not surprisingly, complaints quickly arose that the nation's electricity system gave "tyrannical power and exclusive opportunity to a favored few."³⁴

32 See Stephanie Phillips, Federal Regulation for A "Resilient" Electricity Grid , 46 Ecology L.Q. 415, 418 (2019) ; Warren, supra note 26, at 353-54; Cudahy & Henderson, supra note 26, at 41; Strahan, supra note 29, at 292 n.8.

33 Jeffrey D. Watkiss & Douglas W. Smith, The Energy Policy Act of 1992—A Watershed for Competition in the Wholesale Power Market , 10 Yale J. on Reg. 447, 450 (1993).

34 Id. at 451.

To promote the on-demand availability of electricity and the reliability of its delivery system at the lowest possible cost, the private, investor-owned utilities began interconnecting their individual grids and exchanging power between themselves.³⁵ Instead of constructing multiple expensive transmission lines to cover the same areas, they began sharing their lines and charging each other for the transmission service.³⁶ As the electricity they each produced separately combined in the transmission grids, areas suffering shortages could purchase extra amounts and pass the costs along to their customers.³⁷ Eventually, three main electricity grids developed within the U.S. mainland: "the Eastern Interconnection, the Western Interconnection, and the Texas Interconnection."³⁸

35 W. Tex. Utils. Co. v. Tex. Elec. Serv. Co. , 470 F. Supp. 798, 807 (N.D. Tex. 1979).

36 New York , 535 U.S. at 8-9, 122 S.Ct. 1012 ; see also Phillips, supra note 32, at 422.

37 See Hammonde & Spence, supra note 30, at 150-51.

38 Id. at 149-50.

The federal government and most states bought in to Insull's idea that the privately owned electric utilities were "natural monopolies."³⁹ Instead of fighting against the monopolies, the governments legitimized them in exchange for the right to heavily regulate their rates and services.⁴⁰ After the United States Supreme Court held in 1927 that the Constitution's commerce clause prohibits the states from regulating most inter state electricity transactions,⁴¹ Congress passed the Federal Power Act of 1935, authorizing the Federal Power Commission to regulate interstate electricity transmissions and wholesale sales and prohibiting unreasonable rates and undue discrimination.⁴² Congress left it to the states, however, to regulate intra state transactions and retail sales made directly to consumers.⁴³

39 Warren, supra note 26, at 353-54.

40 See Phillips, supra note 32, at 422; Hammonde & Spence, supra note 30, at 150-51.

41 See Pub. Util. Comm'n of R.I. v. Attleboro Steam & Elec. Co. , 273 U.S. 83, 89-90, 47 S.Ct. 294, 71 L.Ed. 549 (1927) ; see also Fed. Energy Reg. Comm'n v. Elec. Power Supply Ass'n , 577 U.S. 260, 266, 136 S.Ct. 760, 193 L.Ed.2d 661 (2016) ; New York , 535 U.S. at 5-6, 122 S.Ct. 1012.

42 New York , 535 U.S. at 6-7, 122 S.Ct. 1012 ; see also Gulf States Util. Co. v. Fed. Power Comm'n , 411 U.S. 747, 758, 93 S.Ct. 1870, 36 L.Ed.2d 635 (1973) ; Strahan, supra note 29, at 292 n.8.

43 Elec. Power Supply Ass'n , 577 U.S. at 266-67, 136 S.Ct. 760 ; see also Phillips, supra note 32, at 423-24.

The uniquely intrastate Texas power grid began its development in 1924 when two privately owned Texas utilities interconnected and later joined with others to create the North Texas Interconnected System.⁴⁴ In the 1940s, other Texas utilities joined to create the South Texas Interconnected System to support the nation's World War II efforts.⁴⁵ In the 1960s, the North Texas System and the South Texas System joined with other Texas utilities to create the Texas Interconnected System (TIS).⁴⁶ The members of TIS adopted their own rules and guidelines to govern their interconnected system and their purchases of power from one another.⁴⁷

44 W. Tex. Utils. Co. v. Tex. Elec. Serv. Co. , 470 F. Supp. 798, 808 (N.D. Tex. 1979).

45 Id. ; see also Daniel M. Gonzales, Shockingly Certain: Why Is the Public Utility Commission of Texas Steadfast in Its Resolve to Keep Texas's Energy Market Deregulated Amidst Turmoil? , 10 Tex. Tech Admin. L.J. 497, 500 (2009) ; Jared M. Fleisher, ERCOT's Jurisdictional Status: A Legal History and Contemporary Appraisal , 3 Tex. J. Oil Gas & Energy L. 4, 10 (2008).

46 W. Tex. Utils. , 470 F. Supp. at 808.

47 Pub. Util. Comm. of Tex. v. City Pub. Serv. Bd. of San Antonio , 53 S.W.3d 310, 312 (Tex. 2001) ; see also Gonzales, supra note 45, at 500.

Seeking to increase the national grid's reliability, hundreds of the industry's participants joined together in 1968 to create the North American Electric Reliability Corporation (NERC)—a "not-for-profit international regulatory authority"—to operate as the national grid's "electric reliability organization."⁴⁸ Operating as a private, independent, membership-based association, NERC adopted voluntary rules and reliability standards to govern the "bulk power system"—the "entire connection of power plants and transmission lines for the United States, Canada, and Baja California in Mexico that make up the continental system of electricity generation and transmission."⁴⁹ NERC's primary purpose was to ensure "that the bulk power system has enough resources to provide electricity to customers at all times, and that electricity will be continuously delivered despite sudden or unexpected shocks to the system."⁵⁰

48 Del. Dep't of Nat. Res. & Env't Control v. E.P.A. , 785 F.3d 1, 11 (D.C. Cir. 2015) ; see also About NERC , North American Electric Reliability Corporation (2023), https://www.nerc.com/AboutNERC/Pages/default.aspx; Ryan Suit, Charging Forward with NERC: An International Approach to Solving North America's Grid Problem , 24 Rich. J.L. & Tech. 3, 15-16 (2018).

49 Suit, supra note 48, at 15. In 2007, NERC's reliability standards became legal mandates governing participants in the bulk power system. Id. at 16.

50 Id. at 15-16.

Two years later, in 1970, TIS—joined by municipal utilities and rural electric cooperatives operating only within Texas—formed ERCOT to comply with NERC's new voluntary reliability requirements.⁵¹ Established as a "voluntary membership organization" serving as a "regional electric reliability council" under NERC's oversight, ERCOT's primary role was to coordinate electricity transfers among its members and to ensure reliability by maintaining the best possible balance between supply and demand on the Texas grid.⁵²

51 See Fleisher, supra note 45, at 10-11.

52 Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex. , 253 S.W.3d 184, 186 (Tex. 2007) ; see also W. Tex. Utils. Co. v. Tex. Elec. Serv. Co. , 470 F. Supp. 798, 808 (N.D. Tex. 1979) ; Gonzales, supra note 45, at 500; Fleisher, supra note 45, at 10-11.

In 1975, the Texas Legislature made its first major effort to regulate the intrastate and retail electric industry by enacting the first version of the Public Utility Regulatory Act (PURA75).⁵³ Like the 1935 Federal Power Act, PURA75 adopted the regulated-monopoly approach, declaring that electric utilities are "by definition monopolies in the areas they serve" and establishing a "comprehensive and adequate regulatory system" to ensure "just and reasonable" rates, operations, and services as a substitute for "the normal forces of competition."⁵⁴ It also created the PUC and empowered it to regulate and supervise the intrastate electricity industry.⁵⁵ PURA75 did not alter the nature or functions of ERCOT, however, which continued serving as its members’ private coordinating organization for their Texas power grid.⁵⁶

53 Gonzales, supra note 45, at 501-02. Before 1975, some municipalities regulated rates through franchise agreements allowing electric utilities to run distribution lines along city streets. Id. at 501.

54 Tex. Util. Code § 11.002.

55 See Gonzales, supra note 45, at 501-02; Fleisher, supra note 45, at 11.

56 See Fleisher, supra note 45, at 11.

In the late 1970s, an international energy crisis, fears about nuclear power, and environmental concerns led Congress to pass the Public Utility Regulatory Policy Act.⁵⁷ This Act sought to promote increased electricity generation by directing the Federal Energy Regulatory Commission (FERC)—a federal agency created to replace the Federal Power Commission—to pass rules requiring private electric utilities to purchase power at a fair price from "qualifying facilities" that generated electricity using renewable, efficient sources.⁵⁸ The addition of these nonutility generators increased both competition in electricity generation and the demand for affordable access to the grids’ transmission lines.⁵⁹

57 Watkiss & Smith, supra note 33, at 452-54.

58 New York v. Fed. Energy Reg. Comm'n , 535 U.S. 1, 8-9, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002) ; see also Fed. Energy Reg. Comm'n v. Mississippi , 456 U.S. 742, 751, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982) ; Phillips, supra note 32, at 424; Watkiss & Smith, supra note 33, at 452-54.

59 Hammonde & Spence, supra note 30, at 151.

By the late 1980s, however, policy views had shifted away from the regulated-monopolies approach in favor of electricity competition.⁶⁰ In 1992, Congress passed the Energy Policy Act, which amended the 1935 Federal Power Act to authorize FERC to combat "undue" rate discrimination by ordering utilities that owned transmission lines to make their lines available to their competitors.⁶¹ In 1996, FERC exercised that authority by ordering all utilities that owned interstate transmission lines to "functional[ly] unbundl[e]" their operations by separating their electricity-sales business from their transmission services and grant all wholesale buyers and sellers equal access to the transmission lines.⁶² FERC's orders also encouraged the industry to establish "independent systems operators" (ISOs) to coordinate the companies’ shared use of the transmission lines and the sale of power using those systems.⁶³ These orders "laid the groundwork for competition in wholesale electricity sales."⁶⁴

60 See Phillips, supra note 32, at 424.

61 New York , 535 U.S. at 9, 122 S.Ct. 1012 ; see also Phillips, supra note 32, at 424; Watkiss & Smith, supra note 33, at 455-56, 487.

62 New York , 535 U.S. at 10-12, 122 S.Ct. 1012 ; see also Phillips, supra note 32, at 424-25.

63 See Phillips, supra note 32, at 424-25; Hammonde & Spence, supra note 30, at 152-53.

64 Hammonde & Spence, supra note 30, at 152.

Texas soon joined these national deregulation efforts. In 1995, the Legislature amended PURA to deregulate the wholesale electricity market.⁶⁵ These amendments required utilities that owned transmission lines to make their lines available to wholesale transmission customers.⁶⁶ ERCOT, as the industry-created, private, nonprofit corporation, continued to serve as the industry's coordinator of its privately owned transmission grid.

65 Pub. Util. Comm. of Tex. v. City Pub. Serv. Bd. of San Antonio , 53 S.W.3d 310, 312 (Tex. 2001).

66 Id.

In 1999, the Legislature "overhauled" PURA "to create a ‘fully competitive electric power industry’ in Texas."⁶⁷ The thoroughly amended PURA now required all Texas electric utilities operating within the Texas power region to unbundle their services "into three distinct units: (1) a power-generation company; (2) a retail electric provider; and (3) a transmission and distribution utility," no later than January 1, 2002.⁶⁸ Under this new structure, the PUC continues to regulate rates charged by transmission and distribution utilities, but instead of regulating retail electricity rates, PURA created "a competitive retail electric market that allows each retail consumer to choose the customer's provider of electricity."⁶⁹

67 State v. Pub. Util. Comm'n of Tex. , 344 S.W.3d 349, 352 (Tex. 2011).

68 Id. PURA allowed the utilities to unbundle "through the creation of separate nonaffiliated companies, the creation of separate affiliated companies owned by a common holding company, or the sale of assets to a third party." City of Corpus Christi v. Pub. Util. Comm'n of Tex. , 51 S.W.3d 231, 237 (Tex. 2001).

69 Oncor Elec. Delivery Co. v. Pub. Util. Comm'n of Tex. , 507 S.W.3d 706, 711-12 (Tex. 2017) ; see also Pub. Util. Comm'n of Tex. , 344 S.W.3d at 352 ; Tex. Indus. Energy Consumers v. CenterPoint Energy Hous. Elec., LLC , 324 S.W.3d 95, 97-98 (Tex. 2010) ; Gonzales, supra note 45, at 502-03.

To encourage the creation of generation and retail companies and vigorous competition between them, PURA now also required the PUC to ensure that all participants in the retail market would have equal access to the Texas power region's grid. The retail providers pay the transmission companies for the right to use the grid and then pass those costs along to their customers by incorporating them into their retail rates.⁷⁰

70 Oncor Elec. Delivery , 507 S.W.3d at 712.

The 1999 statutory amendments did not, however, create ERCOT, which had already existed as the industry-created, privately owned coordinating organization since 1970. Nor did the statute designate ERCOT as the ISO or give ERCOT any particular functions, duties, or powers. Instead, PURA requires industry participants in each "power region" to "establish one or more independent organizations" to serve as the region's coordinating organization and empowers the PUC to "certify" the selected organizations to perform that function.⁷¹ In 2001, the PUC certified ERCOT—which the industry had created in 1970 and formally established as a Texas nonprofit corporation in 1990—as the Texas power grid's ISO.⁷² As a certified ISO, ERCOT's duties include managing the wholesale power market and ensuring the industry maintains generation capacity to meet projected demands.⁷³

71 Tex. Util. Code § 39.151(a), (c). An "independent organization" is an ISO "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).

72 See Tex. Pub. Util. Comm'n, In re ERCOT , Docket No. 22061, 2000 WL 33959260, at *4 (Apr. 4, 2000) (order); Fleisher, supra note 45, at 11; About ERCOT , ERCOT (2023), http://www.ercot.com/about/profile.

73 Tex. Util. Code § 39.151(a) ; see also Fed. Energy Reg. Comm'n. v. Elec. Power Supply Ass'n , 577 U.S. 260, 268, 136 S.Ct. 760, 193 L.Ed.2d 661 (2016) (explaining that ISOs "administer[ ] a portion of the grid, providing generators with access to transmission lines and ensuring that the network conducts electricity reliably"); Hammonde & Spence, supra note 30, at 152-53.

B. ERCOT's Nature, Purposes, and Powers

With ERCOT's history and current status in mind, we now turn to whether PURA evinces clear legislative intent to vest ERCOT with the nature, purposes, and powers of an arm of the state government. ERCOT essentially concedes that the legislative scheme did not vest it with the nature of an arm of the state before the 1999 PURA amendments, but it insists that ERCOT's subsequent certification as the Texas power region's ISO fundamentally altered ERCOT's nature, purposes, and powers and transformed it into an arm of the state. We disagree.

As we have explained, ERCOT, an industry-created, private entity acting as the industry-designated, PUC-certified ISO for the Texas power region, is statutorily empowered to perform uniquely governmental functions as part of the state's electricity-regulation system: overseeing the region's transmission facilities, coordinating its participants’ market transactions, transmissions planning, and network reliability, and—most significantly—exercising rule-making authority to govern the participants’ operations.⁷⁴ Although ERCOT enjoyed many of these powers and performed many of these functions before 1999, its functions took on a different—and necessarily governmental—character when it began taking these actions as the certified ISO as part of the state's management of the competitive electricity market. Its nature as an entity, however, did not change.

74 Tex. Util. Code §§ 31.002(9), 39.151.

Because ERCOT exercises statutorily authorized powers to perform governmental functions as part of the state's larger electricity-regulation program, we agree with the Court that it qualifies as a "governmental unit" under the Texas Tort Claims Act.⁷⁵ But whether it also qualifies as an "arm of the state" that sovereign immunity protects presents a "separate question[ ]" and a "separate analytical framework[ ]."⁷⁶ To answer the sovereign-immunity question, we must focus on ERCOT's nature as an entity and not just the nature of its functions. That it performs governmental functions and serves a public purpose "says nothing about the nature of the entity itself."⁷⁷

75 Ante at 615-17.

76 Univ. of the Incarnate Word v. Redus , 518 S.W.3d 905, 911 (Tex. 2017).

77 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 407 (Tex. 2020) (quoting Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019) ).

As an entity, ERCOT began as a membership-based association of electric-industry participants, which later incorporated it as a private, nonprofit corporation. Its members consist mostly of private entities that participate in the deregulated electricity market, including electricity generators, marketers, utilities, retailers, and consumers.⁷⁸ The state did not create ERCOT or authorize its creation, and it has remained a private entity even after PURA's 1999 amendments. Its employees are not government employees and do not receive government retirement or other benefits.⁷⁹ It is funded not by tax dollars or legislative appropriations but by fees paid by its members and a system administration fee paid by wholesale electricity buyers.⁸⁰ It is governed by articles of incorporation and bylaws adopted by its members.⁸¹ It is directly managed not by the PUC or another state agency but by its own board of directors.⁸²

78 About ERCOT , ERCOT (2023), http://www.ercot.com/about/profile.

79 See Careers , ERCOT (2023), http://www.ercot.com/careers.

80 Tex. Util. Code § 39.151(e) ; see also About ERCOT , ERCOT (2023), http://www.ercot.com/about/profile.

81 See Amended and Restated Certificate of Formation of Electric Reliability Council of Texas, Inc. , ERCOT (Jan. 31, 2019), https://www.ercot.com/files/docs/2019/02/06/Amended_and_Restated_Certificate_of_Formation__eff_01.31.2019_.pdf; Amended and Restated Bylaws of Electric Reliability Council of Texas, Inc. , ERCOT (Oct. 12, 2021), https://www.ercot.com/files/docs/2022/09/09/01_Current% 20ERCOT% 20Bylaws.pdf.

82 About ERCOT , ERCOT (2023), http://www.ercot.com/about/profile.

But as the Court notes, due to ERCOT's selection and certification as an ISO, PURA indirectly restricts and regulates ERCOT in numerous ways and indirectly grants it various functions and powers that are inherently governmental.⁸³ As we discuss further below, PURA's indirect grant and regulation of ERCOT's functions and powers are insufficient to alter its nature as a private entity. But our consideration of those functions and powers must begin with the recognition that all PURA's effects on ERCOT are indirect. Through all its provisions that empower, impede, or otherwise impact ERCOT, PURA never directly addresses ERCOT. Instead, it empowers, impedes, and impacts whatever ISO or other independent organization the "ERCOT" power region⁸⁴ has selected and the PUC has certified. PURA does not address, and therefore certainly does not alter, the private, nongovernmental nature of whatever entity is selected and certified as an ISO.

83 Ante at 623-25, 625-26.

84 See Tex. Util. Code § 39.151. Somewhat confusingly, PURA designates the Texas power region for which ERCOT serves as the ISO as the "Electric Reliability Council of Texas" or "ERCOT." Id. § 31.002(5) (" ‘Electric Reliability Council of Texas’ or ‘ERCOT’ means the area in Texas served by electric utilities, municipally owned utilities, and electric cooperatives that is not synchronously interconnected with electric utilities outside the state."); Texas v. U.S. Env't Prot. Agency , 829 F.3d 405, 431 (5th Cir. 2016) (noting that the Texas grid "shares the name of its governing board, the Electric Reliability Council of Texas (ERCOT)").

As an independent, privately owned, nonprofit corporation, ERCOT is subject to PURA's restrictions and requirements only because it applied for and was granted the PUC's certification as the power region's ISO. The restrictions apply to ERCOT not because of its nature as an entity but because of its position as the PUC-certified ISO. The Legislature could have assigned an existing governmental entity or created a new one to serve as the ISO, or it could have amended PURA to directly address and regulate ERCOT itself in ways that could indicate an intent to transform it into a governmental entity that is, by nature, an arm of the state. But instead, the Legislature has authorized the PUC to select a private entity to fulfill the ISO's functions.⁸⁵ That choice was consistent with the 1999 PURA amendments, which deregulated the retail electricity market so that it would be subject to "normal forces of competition" and "customer choices," rather than state regulation.⁸⁶ Instead of governmentalizing the ISO, PURA authorizes the PUC to select a private entity to fill that role.

85 Tex. Util. Code § 39.151(a), (c).

86 See id. § 39.001(a).

The PUC, in turn, chose to certify ERCOT as the ISO, but it has not understood the ISO, or ERCOT in particular, to be a governmental entity or otherwise protected by sovereign immunity. The PUC has adopted rules that purport to grant ERCOT protection against liability for certain specified actions.⁸⁷ Because sovereign immunity protects the government against both suit and liability, these rules would be unnecessary if ERCOT enjoys sovereign immunity. To the contrary, the PUC has expressly recognized that ERCOT may be subject to "civil relief that may be available under federal or state law."⁸⁸

87 See 16 Tex. Admin. Code §§ 25.43(o)(2) (protecting ERCOT from liability for transitioning or attempting to transition a customer from a retail electric provider to a provider of last resort), .200(d) (protecting ERCOT from liability for negligently causing service interruptions while attempting to maintain system stability and safety), .361(c) (protecting ERCOT from liability for events beyond its control that could not reasonably be anticipated).

88 Id. § 25.362(j)(6).

PURA never identifies the ISO as a governmental entity or expresses any intent that it be protected by sovereign immunity. It subjects the ISO to substantial regulation, but "heavily regulating an entity does not equate to conferring governmental-entity status."⁸⁹ Nor does it change the entity's "nature." In light of ERCOT's original and persistent nature as an industry-created, privately owned, nonprofit corporation, and in the absence of anything in PURA that purports to alter that nature, we conclude that PURA did not vest ERCOT with the nature, purposes, and powers of an arm of the state.

89 Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019).

II. State Control

Even if we were to ignore the fact that PURA never attempts to directly empower, impede, or impact ERCOT and instead assumed that all PURA's provisions addressing a PUC-certified ISO directly address ERCOT itself, we would still conclude that those provisions do not transform ERCOT's nature into that of an arm of the state. By indirectly granting the PUC "complete authority to oversee and investigate" ERCOT's operations, finances, and budget "as necessary" to ensure accountability and adequate performance,⁹⁰ PURA provides the PUC with broad oversight authority over ERCOT (as the ISO). But for the PUC to act through ERCOT such that its actions are effectively attributed to the government,⁹¹ the PUC first must exercise its oversight authority to control ERCOT's actions, and, under PURA, the exercise of that authority must be "necessary."

90 See Tex. Util. Code § 39.151(d).

91 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 407 (Tex. 2020) (quoting Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 125 (Tex. 2015) ).

As described below, our cases instruct that if a private entity has not been designated as part of the government and the government does not control the entity's conduct, the complained-of actions are considered the entity's independent and discretionary actions and it did not act as an arm of the state. Fundamentally, authority to oversee is not actual control. If the Court's inquiry rests on control, the proper question should be whether the PUC exercised its oversight authority to "sufficient[ly] control" ERCOT's complained-of actions such that they were "effectively attributable" to the government and were not ERCOT's discretionary actions.⁹² As the PUC has exclusive jurisdiction over the issues underlying the parties’ causes of action, we would, to "ensure[ ] an orderly procedure," at least wait for the PUC to "apply its expertise," "develop a complete factual record,"⁹³ and make relevant factual findings about any exercise of its oversight authority before determining whether or what type of immunity should be extended to ERCOT based on any government control.⁹⁴

92 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 733 (Tex. 2020).

93 See Clint Indep. Sch. Dist. v. Marquez , 487 S.W.3d 538, 544 (Tex. 2016).

94 See Redus , 602 S.W.3d at 408 n.58 (surveying other state decisions and noting that (1) "[s]ome states hold that sovereign immunity does not extend to a private entity regardless of government control," (2) "[o]ther states hold that, if derivative immunity exists, it provides ‘immunity’ from liability if the defendant was not otherwise culpable," and (3) "to the extent it is recognized as ‘immunity,’ it is most often considered ‘immunity from liability,’ not immunity ‘from suit’ ").

The Court instead concludes that PURA evinces clear legislative intent to vest ERCOT with the nature of an arm of the state because "ERCOT operates under the direct control and oversight of the PUC."⁹⁵ The Court relies largely on PURA provisions indirectly (1) granting the PUC "complete authority" over ERCOT's operations, finances, and budget, (2) making ERCOT "directly responsible and accountable to" the PUC, and (3) allowing the State to exercise some control or influence over ERCOT through various means, including by appointing members to the ERCOT board selection committee.⁹⁶ The Court, however, overreads both our case law and PURA and glosses over whether the complained-of conduct was not ERCOT's " ‘independent action,’ but rather ‘action taken by the government.’ "⁹⁷

95 Ante at 623.

96 See id. at 623-24 (citing Tex. Util. Code §§ 39.151(d), (d-1), (d-4)(3), (e), (g), (g-1), .1513).

97 Redus , 602 S.W.3d at 407 (quoting Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 125 (Tex. 2015) ).

A. Relevant Case Law

The common-law doctrine of sovereign immunity rests on a historical tradition that precedes the constitutional founding of this State and even of the Union.⁹⁸ But there is no history or tradition of extending common-law sovereign immunity to private corporations. As noted recently by Judge Oldham on the United States Court of Appeals for the Fifth Circuit, "[i]t's evident that at common law, both in England and the early American Republic, incorporated entities were not entitled to sovereign immunity," "regardless of whether they exercised governmental functions."⁹⁹ After extensive historical analysis,¹⁰⁰ Judge Oldham distilled the following rule: "If an entity has a separate legal status from the State (e.g. , as a corporation, LLC, or § 501(c)(3) nonprofit organization) ... the entity is not ‘the State’ and hence is not entitled to sovereign immunity."¹⁰¹ But Judge Oldham noted that this rule would concern "what enjoys the State's sovereign immunity in federal court," and "States are obviously free to cloak non-State entities with all manner of governmental immunities in state court," citing as an example Section 12.1056(a) of the Texas Education Code.¹⁰²

98 See Alden v. Maine , 527 U.S. 706, 715-16, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999) ("[T]he doctrine that a sovereign could not be sued without its consent was universal in the States when the Constitution was drafted and ratified."); Tooke v. City of Mexia , 197 S.W.3d 325, 331 (Tex. 2006) (noting that in 1847, when this Court first recognized the doctrine in its second term, the rule was "then more than six centuries old").

99 Springboards to Educ., Inc. v. McAllen Indep. Sch. Dist. , 62 F.4th 174, 191 (5th Cir. 2023) (Oldham, J., concurring).

100 Id. at 191-98 (reviewing English common-law tradition, debates between Federalists and Anti-Federalists, and early American court cases).

101 Id. at 198.

102 Id. at 199 n.6.

Texas's common-law history has followed a similar trajectory of considering private entities with a separate legal status from the State as not being an arm of the government. Indeed, we have departed from this rule as to private entities only once before today—in 2020.¹⁰³ But there, we relied on the same statute Judge Oldham referenced in his opinion, which directed that certain private entities have immunity to the same extent as public entities, and on a statutory designation that those entities were part of the state government.¹⁰⁴

103 See El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 524 (Tex. 2020).

104 See id. at 528-31 (citing Tex. Educ. Code §§ 12.105, .1056(a)).

In that case, El Paso Education Initiative, Inc. v. Amex Properties, LLC , this Court extended governmental immunity¹⁰⁵ for the first time to a private entity—open-enrollment charter schools.¹⁰⁶ Although these schools are typically "private, nonprofit organization[s]," the Legislature expressly designated open-enrollment charter schools as "part of the public school system of this state" and directed 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."¹⁰⁷ Because these charter schools "expressly operate as part of the State's public education system," are "accountable to State government through oversight of their charters and the receipt of substantial public funding," and "exercise the same powers and perform government tasks in the same manner as traditional public schools," the Court concluded that they "act as an arm of the State government."¹⁰⁸

105 Cf. Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 746 (Tex. 2019) (although not sovereign entities, political subdivisions share the State's immunity under the governmental-immunity doctrine when performing governmental functions as the State's agent).

106 Amex Props. , 602 S.W.3d at 529-30.

107 Id. at 528-29 (quoting Tex. Educ. Code §§ 12.105, .1056(a)).

108 Id. at 529-30; see also Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 406 n.51 (Tex. 2020).

On the same day as Amex Properties , the Court issued University of the Incarnate Word v. Redus . ¹⁰⁹ There, the Court considered whether a private university, neither created nor chartered by the State, was entitled to sovereign immunity for actions taken by its legislatively authorized campus police department.¹¹⁰ Specifically contrasting the Legislature's "limited authorization to private universities to commission peace officers" with its express "incorporation of open-enrollment charter schools into the State's public-education system," the Court noted that "no similar declaration exists" designating a private university as part of the government or directing that private universities have immunity from suit.¹¹¹ The Legislature did not "categorically transform[ ]" the private university's status to "government-entity status."¹¹²

109 602 S.W.3d at 398.

110 Id. at 404.

111 Id. at 411-13 & n.79.

112 Id. at 412.

In conducting its analysis, the Redus Court found "instructive" the "control" requirement contemplated in the government-contractor case Brown & Gay Engineering, Inc. v. Olivares . ¹¹³ The Court explained that "the extent to which the government exercises control ... is relevant" and "sovereign immunity potentially extends to the University if the complained-of conduct was not the University's ‘independent action,’ but rather ‘action taken by the government.’ "¹¹⁴ Because the university's administration and governing board "are alone responsible for its police department's day-to-day operations and decision making" and not accountable to the taxpayers or public officials, the necessary control for the private university to be an arm of the state was absent.¹¹⁵ Although the Court contemplated the entity's accountability to the government as a component of control, it did not hold that accountability would have been sufficient on its own to conclude that a private entity had the nature of an arm of the state; it held only that the absence of accountability demanded the conclusion that the government did not sufficiently control the entity for it to be considered an arm of the state.¹¹⁶

113 Id. at 407 (citing Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 125 (Tex. 2015) ).

114 Id. (emphases added) (quoting Brown & Gay , 461 S.W.3d at 125 ). In Brown & Gay , the Court considered cases where "the complained-of conduct for which the contractor was immune was effectively attributed to the government. That is, the alleged cause of the injury was not the independent action of the contractor, but the action taken by the government through the contractor." 461 S.W.3d at 125.

115 Redus , 602 S.W.3d at 407-08.

116 Id.

A month after Redus , the Court expounded on the Brown & Gay "control" requirement in the government-contractor case Nettles v. GTECH Corp . ¹¹⁷ At issue in Nettles was whether a government contractor for the Texas Lottery Commission had derivative immunity.¹¹⁸ Because the Court concluded the control-based standard was not satisfied, it expressly declined to recognize derivative sovereign immunity for contractors, just as it had declined to recognize such immunity in Brown & Gay . ¹¹⁹ But the Court clarified the standard as, put simply, asking "(1) did the government tell the contractor what to do and how to do it (as opposed to the contractor having ‘some discretion in performing the contract’); and, if so, (2) did the contractor do as it was told?"¹²⁰

117 606 S.W.3d 726, 731-36 (Tex. 2020).

118 Id. at 728.

119 Id. at 733.

120 Id. at 732 (footnote omitted) (quoting Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 130 n.6 (Hecht, C.J., concurring)); see also Brown & Gay , 461 S.W.3d at 125-26 ("In this case, the [plaintiffs] do not complain of harm caused by [the government contractor]’s implementing the [government]’s specifications or following any specific government directions or orders.").

As the Court explained in Nettles , applying this control-based standard requires looking "first to the ‘complained-of conduct’ in the pleadings" and then to any evidence " ‘necessary to resolve the jurisdictional issues raised.’ "¹²¹ Ultimately, this control-based standard asks whether the government "had sufficient control over" the entity's actions such that they were "effectively attributable" to the government and were not the entity's "independent actions" or whether the entity "had some discretion."¹²² Under the governing statute and the contract with the Texas Lottery Commission's contractor, "[f]inal decisions regarding the direction or control of the Lottery are always the prerogative of the [Commission] in its sole discretion,"¹²³ and the Commission has "broad authority and shall exercise strict control and close supervision over all lottery games."¹²⁴ But the Court held that "close supervision and final approval of work over which a contractor has discretion" do not make actions effectively attributable to the government.¹²⁵

121 606 S.W.3d at 733-34 (quoting Brown & Gay , 461 S.W.3d at 125, and Bland Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 555 (Tex. 2000) ).

122 Id. at 733.

123 Id. at 735-36.

124 Tex. Gov't Code § 466.014(a) ; Nettles , 606 S.W.3d at 736.

125 Nettles , 606 S.W.3d at 736.

From these cases, we can derive a few controlling principles regarding the nature of an arm of the state. Private, incorporated entities have a distinct legal status separate from the State and, as a general proposition, are not an arm of the state. But when the Legislature expressly designates a private entity as part of the government and makes the entity accountable through government oversight—thereby "categorically transforming" the entity's status to "government-entity status"¹²⁶ —the government need not exercise actual control over the entity's actions for the entity to have the nature of an arm of the state.¹²⁷ If there is no express designation, however, sovereign immunity, at most, "potentially extends" to the private entity only if it is accountable to the government and the government "exercises control over the activities" such that the "complained-of conduct" is not " ‘independent action,’ but rather ‘action taken by the government.’ "¹²⁸ For a private entity's action to be "effectively attributable" to the government based on control, close supervision and final approval is insufficient when the entity has discretion to perform the work.¹²⁹

126 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 412 (Tex. 2020).

127 See El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 528-30 (Tex. 2020).

128 Redus , 602 S.W.3d at 407-08 (quoting Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 125 (Tex. 2015) ). The Court notes that "we have never held that a complete lack of discretion is required for immunity in an arm of the state analysis for a legislatively authorized entity." Ante at 625. But we also have never held that an entity not expressly designated as part of the government—like ERCOT—is entitled to sovereign immunity as a legislatively authorized entity.

129 Nettles , 606 S.W.3d at 731-37.

B. Oversight or Control

The Legislature has not designated ERCOT as part of the government but has indirectly directed that ERCOT (as a PUC-certified ISO) "is directly responsible and accountable to" the PUC.¹³⁰ Applying the above-mentioned case-law principles, our inquiry concerns the extent to which the government exercised control such that ERCOT's actions could be effectively attributed to the government.

130 Tex. Util. Code § 39.151(d).

The Court asserts that "ERCOT operates under the direct control and oversight of the PUC" and "the state has complete authority over everything ERCOT does to perform its statutory functions."¹³¹ But this reads PURA too broadly. PURA grants the PUC "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."¹³² Only if ERCOT, as the PUC-certified ISO, "does not adequately perform the organization's functions or duties or does not comply with this section" is the PUC authorized to "take appropriate action ... including decertifying the organization or assessing an administrative penalty against the organization."¹³³ Insofar as ERCOT, through its discretionary and independent actions, "adequately perform[s]" its ISO functions and duties, the PUC's statutory authority to control ERCOT's operations appears to be limited.

131 Ante at 623-24.

132 Tex. Util. Code § 39.151(d) (emphases added).

133 Id. ; see also 16 Tex. Admin. Code § 25.364(d) (requiring the PUC to find that the ISO "has committed significant violations of PURA or [PUC] rules or failed to efficiently and effectively carry out the duties of an independent organization" before decertification).

The Court notes that ERCOT's bylaws and protocols require input from and approval by the PUC and that the PUC can "approve, disapprove, or modify any item" in ERCOT's proposed annual budget.¹³⁴ But bylaws, protocols, and budgets set broad constraints within which ERCOT can exercise its discretion, and this authority is akin to the "close supervision and final approval" that this Court has found insufficient to establish the necessary control.¹³⁵

134 Ante at 623-24 (quoting Tex. Util. Code § 39.151(d-1), (g-1) ).

135 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 736 (Tex. 2020) ("But close supervision and final approval of work over which a contractor has discretion are not the same as the government specifying the manner in which a task is to be performed.").

The Court points out that state officials, by appointing members of a board selection committee, have the power to indirectly appoint members of the board of directors for the PUC-certified ISO for the ERCOT power region.¹³⁶ But the power to appoint is the power to influence, not control.¹³⁷ Ultimately, no state official has been put in charge of ERCOT, and a private board still runs the nonprofit corporation.¹³⁸ Two of the eleven-member board are state officials: the PUC Chairperson and the Public Counsel of the Office of the Public Utility Counsel.¹³⁹ Only the latter is a voting director—one of nine voting directors—and by statute, represents not the public at large but "residential and small commercial consumer interests."¹⁴⁰

136 Ante at 623-24 (citing Tex. Util. Code §§ 39.151(g), (g-1), .1513).

137 The provisions providing the appointment power do not give the government any formal control over the board members’ decisions once appointed. See Tex. Util. Code §§ 39.151(g) –(g-6), .1513; cf. In re Abbott , 645 S.W.3d 276, 280 n.1 (Tex. 2022) ("The Governor frequently appoints these officers, but the state agencies’ enabling statutes rarely give the Governor formal control over the officers’ decisions once appointed.").

138 See Governance , ERCOT (2023), https://www.ercot.com/about/governance.

139 See Tex. Util. Code § 39.151(g-1).

140 See id. § 39.151(g-1)(2).

ERCOT is subject to some requirements typically reserved for state entities: it is "subject to review (but not abolishment) under the Sunset Act" and "required to open its board meetings to the public."¹⁴¹ But ERCOT is also "not subject to state contracting standards, the Open Meetings Act, Administrative Procedure Act, or other requirements traditional state agencies must meet."¹⁴² And "heavily regulating an entity does not equate to conferring governmental-entity status."¹⁴³

141 Ante at 624-25 (citing Tex. Util. Code §§ 39.151(n), .1511).

142 Sunset Advisory Commission , Staff Report with Commission Decisions: Public Utility Commission of Texas , Electric Reliability Council of Texas , Office of Public Utility Counsel 3 (January 2023), https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with-Commission-Decisions_1-19-23.pdf.

143 Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019).

Although the "PUC's oversight of ERCOT's finances, budget, and operations is essential," this oversight authority is necessary because ERCOT, as a private corporation, "is not subject to other traditional oversight mechanisms, such as the legislative appropriations process."¹⁴⁴ And without a determination that ERCOT is not adequately performing its functions and duties, the PUC's oversight authority is more like "close supervision" of ERCOT's discretionary and independent actions.¹⁴⁵

144 Sunset Advisory Commission , supra note 142, at 80.

145 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 736 (Tex. 2020).

If the PUC found that ERCOT did not adequately perform its duties as the PUC-certified ISO, the PUC would be statutorily authorized to "take appropriate action" and exercise its "complete authority."¹⁴⁶ But whether the PUC exercised its oversight authority to "sufficient[ly] control" ERCOT's complained-of actions such that they "were effectively attributable to" the PUC and were not "independent actions"¹⁴⁷ would depend on a factual and complaint-specific inquiry. Currently, the PUC mainly uses rulemaking proceedings and contested cases to guide and direct ERCOT's actions.¹⁴⁸ Although PURA "does not clearly identify how [the] PUC can give ERCOT direction outside of a contested case or rulemaking proceeding," the PUC "has broadly interpreted its statutory authority" to allow "informal mechanisms to guide ERCOT's actions, including verbal directives, memos, and orders."¹⁴⁹ But even if the PUC desired to exercise its oversight authority over ERCOT, it may lack the necessary resources and capabilities to do so.¹⁵⁰ In short, without an additional factual showing of actual control, the PUC's oversight authority does not "evince[ ] ‘clear legislative intent’ " to vest the private corporation ERCOT with the nature of an arm of the state.¹⁵¹

146 See Tex. Util. Code § 39.151(d).

147 See Nettles , 606 S.W.3d at 733.

148 Sunset Advisory Commission , supra note 142, at 41.

149 Id. ("While these informal methods may help the commission move quickly, they do not always adhere to best practices for openness, inclusiveness, and transparency."). The Sunset Commission has also recently found that the "PUC needs more formalized structures and processes when giving ERCOT direction that affects the electric industry and millions of Texans," id. at A1, and recommended that the Legislature "[a]uthorize [the] PUC to issue directives to ERCOT through written memos and orders, in addition to rulemaking and contested cases, and authorize stakeholders to formally provide input on theses directives," id. at A2. For emergency situations, the Sunset Commission recommended to the Legislature:

Clarify that [the] PUC can only direct ERCOT outside of these methods in an emergency or other urgent situation that poses an imminent threat to public health, safety, or grid reliability. If [the] PUC's direction to ERCOT is still necessary 72 hours after the emergency or urgent situation, [the] PUC must use the more formal process established under the recommendation to provide documentation of its direction to ERCOT.

Id. Neither the PUC nor ERCOT argues that the PUC used formal or informal mechanisms to control ERCOT's complained-of actions.

150 For example, the Sunset Commission's Report explains:

[The] PUC currently lacks the expertise and staff resources to independently analyze an abundance of electric data and information to make fully informed regulatory decisions, including evaluating their impacts on market participants and the general public....

While [the] PUC has complete authority to access ERCOT's data, which includes vast amounts of operational and financial data about electricity generation, consumption, and pricing, it lacks the technological capability to do so independently of ERCOT.... Further, any analysis provided by ERCOT may still carry inherent bias due to its focus on grid operations, which prioritizes reliability over considering the cost of such operations. Even if ERCOT were able to provide regulatory impact analysis, [the] PUC staff's current lack of analytical capabilities forces the agency to rely on ERCOT's analysis without independent verification.

Id. at 37-38; see also id. at A1 ("The Sunset Commission found [the] PUC was ill-prepared for the task [of being a more active overseer of ERCOT] and is woefully under-resourced given its critical responsibilities and the work that still lies ahead.").

151 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 405, 407 (Tex. 2020) (quoting Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019) ).

The Court claims ERCOT "is much like a state agency" based on the "level of control and authority the state exercises over it, and its accountability to the state."¹⁵² But a state agency necessarily acts in the government's name as an express part of the government and does not perform proprietary functions.¹⁵³ There is two-way accountability: (1) state agencies are accountable to the State and (2) the government is directly accountable to the people for the state agency's actions.

152 Ante at 623.

153 See Wasson Ints., Ltd. v. City of Jacksonville , 489 S.W.3d 427, 433 (Tex. 2016). Of course, state officials could act ultra vires, which are not considered acts of the state. See Hall v. McRaven , 508 S.W.3d 232, 238 (Tex. 2017) ("The basic justification for this ultra vires exception to sovereign immunity is that ultra vires acts—or those acts without authority—should not be considered acts of the state at all.").

The same is not true for ERCOT. ERCOT is a private corporation that has not been expressly designated as part of the government. The PUC may be accountable to the people for failing to exercise its oversight authority, or state officials may be accountable for appointing the wrong people to the PUC or even to the ERCOT board selection committee. But this is not direct accountability for ERCOT's actions. The government can politically disclaim responsibility for the private corporation's actions when ERCOT acts at its discretion and not under the PUC's control. In other words, ERCOT's actions are not "effectively attributable" to the government unless the PUC exercised sufficient control over ERCOT's actions; otherwise, ERCOT, as a private entity, "had some discretion" to conduct "independent actions."¹⁵⁴

154 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 733 (Tex. 2020).

Indeed, legislatively authorizing private entities to perform public purposes without designating them as part of the government may provide the government with the political benefit of not having express accountability for those entities’ actions.¹⁵⁵ The government could avoid blame or responsibility for any negative repercussions by disavowing the private entity's improvident actions, which could encourage a hands-off approach with minimal oversight before any public outcry.¹⁵⁶ And if a private entity were granted broad sovereign immunity regardless of the government's actual control, the entity would have little incentive to seek direction or guidance from the overseeing governmental agency. But if immunity instead depended on the government's actual control, a private entity would be motivated to collaborate with and seek direction from the overseeing governmental agency to cloak its actions with the Sovereign's immunity.

155 See Rosenberg , 571 S.W.3d at 750 ("[M]erely engaging in an act that serves a public purpose says nothing about the nature of the entity itself[.]").

156 See, e.g. , Sunset Advisory Commission , supra note 142, at 1 (noting that after blackouts in 2011 "signaled potential underlying problems," the PUC's "business as usual continued," and with ERCOT "generally managing the grid, [the] PUC never had cause to take a step back and consider how things were working, how it might improve operations, or what funding and staff may be needed to do so").

Since the 2020 Amex Properties decision—the only previous decision from this Court to extend sovereign or governmental immunity to a private entity—the Legislature has known that this Court relies on statutory provisions expressly designating an entity as part of the government and directing that immunity applies to an entity.¹⁵⁷ Yet, the Legislature has not designated ERCOT as part of the government or directed that it should have immunity, notwithstanding the Lieutenant Governor's announcement of ERCOT reform as a top priority for the 2021 Legislative Session¹⁵⁸ and the Legislature's significant enactments reforming ERCOT (as the PUC-certified ISO).¹⁵⁹ If the Legislature had "categorically transform[ed]" ERCOT by designating the private corporation as part of the government—as it did for open-enrollment charter schools—this case might be different.¹⁶⁰ But it did not.

157 See El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 528-29 (Tex. 2020) ; see also Redus , 602 S.W.3d at 412 (noting that "[t]he statutory text demonstrates the legislature's awareness of the ramifications of government-entity status" and "[r]ather than categorically transforming a private university's status, the statute links immunity to the peace officers who perform law enforcement functions").

158 Lt. Gov. Dan Patrick Announces Top 31 Priorities for the 2021 Session , Off. of the Lieutenant Governor (Feb. 23, 2021), https://www.ltgov.texas.gov/2021/02/23/lt-gov-dan-patrick-announces-top-31-priorities-for-the-2021-session/.

159 See Act of May 30, 2021, 87th Leg., R.S., ch. 908, 2021 Tex. Gen. Laws 2218, 2218-27; Act of May 28, 2021, 87th Leg., R.S., ch. 950, 2021 Tex. Gen. Laws 2465, 2465-72.

160 See Redus , 602 S.W.3d at 412. Of course, the mere designation of a private entity as part of the government is not sufficient to establish the entity as an arm of the state entitled to sovereign immunity. See id. at 405.

The parties do not argue, and the record does not establish, that the PUC exercised sufficient control such that the complained-of ERCOT actions are "effectively attribute[able] to" the government.¹⁶¹ As this Court has done in the government-contractor context,¹⁶² we would not decide at this stage whether, under the standard for legislatively authorized entities, the government's exercise of some degree of actual control would extend the Sovereign's immunity to a private entity not expressly designated as part of the government.¹⁶³ Because the PUC has exclusive jurisdiction over the underlying issues in these cases, the PUC perhaps will develop the factual record and make fact findings about any control it exercised over ERCOT's complained-of conduct.¹⁶⁴ Should the parties pursue judicial relief after exhausting administrative remedies, this Court could consider any sovereign-immunity arguments based on control with the added benefit of a developed factual record. This approach would respect the Legislature's decisions to (1) not designate ERCOT as part of the government, (2) grant the PUC "complete authority" as specified in PURA over ERCOT's operations, and (3) establish a pervasive regulatory regime that provides the PUC with exclusive jurisdiction over issues that fall under the PUC's "complete authority."¹⁶⁵

161 See Nettles v. GTECH Corp. , 606 S.W.3d 726, 731 (Tex. 2020) (citing Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 125 (Tex. 2015) ). The Court asserts that "the PUC had significant control and authority over the very conduct at issue in these cases." Ante at 625. But "ha[ving] significant control and authority" is not the same as exercising control over the complained-of conduct. CPS Energy expressly distinguishes between ERCOT's and the PUC's actions, stating that it "is not contesting the entire five-day period [of high wholesale electricity prices], or the PUC Orders, but only ERCOT's failure to follow those orders during the storm's last 33 hours," and that "CPS Energy's complaints do not concern these PUC Orders. The problem lies in ERCOT's decision not to follow them." And although Panda may have agreed that "the PUC could have controlled the CDR data output had it wanted to," id. at 625 (emphasis added), the issue is whether the PUC actually controlled ERCOT.

162 See Brown & Gay , 461 S.W.3d at 126 ("We need not establish today whether some degree of control by the government would extend its immunity protection to a private party; we hold only that no control is determinative.").

163 Redus , 602 S.W.3d at 407 (noting that sovereign immunity "potentially extends" if the complained-of conduct was effectively "action taken by the government").

164 The Court implies that we should not consider specific conduct because "[s]overeign immunity is entity-based." Ante at 625 (quoting Redus , 602 S.W.3d at 407 ). But the Court then holds that "ERCOT would not be immune outside that role" as the ISO, distinguishing between ERCOT's conduct as an ISO and its conduct outside that role for immunity purposes. Id. at 628. To the extent sovereign immunity possibly applies when the private entity is not expressly designated as part of the government, it should depend on whether the government has oversight authority and actually exercised that authority and control over the conduct at issue.

165 See Tex. Util. Code § 39.151(d).

III. Sovereign Immunity's Nature and Purposes

As mentioned, we have concluded that sovereign immunity might reach a legislatively authorized private entity if (1) the entity's authorizing statute "evinces ‘clear legislative intent’ to vest the entity with the ‘nature, purposes, and powers’ of an ‘arm of the State government’ "¹⁶⁶ and (2) extending immunity "fits within the doctrine's underlying nature and purposes."¹⁶⁷ Even if we concluded that PURA has somehow altered ERCOT's nature as an entity, we would nevertheless conclude that extending sovereign immunity to ERCOT would not promote the doctrine's "political, pecuniary, and pragmatic" purposes.¹⁶⁸

166 Redus , 602 S.W.3d at 405 (quoting Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 750 (Tex. 2019), and Ben Bolt-Palito Consol. Indep. Sch. Dist. v. Tex. Pol. Subdivs. Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d 320, 325 (Tex. 2006) ).

167 Id. at 401 (citing Rosenberg , 571 S.W.3d at 750 ).

168 Rosenberg , 571 S.W.3d at 740.

Politically, we continue to recognize sovereign immunity because it "preserves separation-of-powers principles by preventing the judiciary from interfering with the Legislature's prerogative to allocate tax dollars."¹⁶⁹ By preserving the common-law doctrine of sovereign immunity, the courts maintain an "equilibrium among the branches of government" by allowing the Legislature to decide, as a policy matter, when to "allow tax resources to be shifted ‘away from their intended purposes toward defending lawsuits and paying judgments.’ "¹⁷⁰ In short, sovereign immunity prevents the courts from "intruding into" the policy-making branch's role of managing and appropriating the public's funds.¹⁷¹

169 Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 121 (Tex. 2015).

170 Rosenberg , 571 S.W.3d at 740-41 (quoting Brown & Gay , 461 S.W.3d at 121 ).

171 See Hughes v. Tom Green County , 573 S.W.3d 212, 218 (Tex. 2019).

By requiring a legislative decision to make tax dollars available to pay the costs of litigation and judgments, sovereign immunity serves the pecuniary purpose of ensuring "that the taxes the public pays are used ‘for their intended purposes.’ "¹⁷² It "protects the public treasury by shielding the public ‘from the costs and consequences of improvident actions of their governments,’ "¹⁷³ particularly the "unforeseen" costs of "defending lawsuits and paying judgments."¹⁷⁴

172 Hillman v. Nueces County , 579 S.W.3d 354, 361 (Tex. 2019) (quoting Reata Constr. Corp. v. City of Dallas , 197 S.W.3d 371, 375 (Tex. 2006) ); see also Chambers–Liberty Cntys. Navigation Dist. v. State , 575 S.W.3d 339, 347 (Tex. 2019).

173 Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 404 (Tex. 2020) (quoting Tooke v. City of Mexia , 197 S.W.3d 325, 332 (Tex. 2006) ).

174 Brown & Gay , 461 S.W.3d at 123.

And pragmatically, sovereign immunity "serves to prevent governmental paralysis"¹⁷⁵ by protecting "the State and its political subdivisions from endless litigation," which "hamper[s] government functions."¹⁷⁶ It safeguards "the public as a whole" by protecting its governmental agencies from both the "distraction" of lawsuits and the risks that litigants could control government action through the courts instead of through the political process.¹⁷⁷ Extending sovereign immunity to ERCOT would, at best, only minimally promote these purposes. ERCOT does not receive tax dollars or appropriated funds, so permitting judgments against it would not require the unforeseen diversion of tax dollars from their legislatively appropriated purpose or interfere with or usurp the Legislature's policy decisions on how to allocate tax revenues.¹⁷⁸ The Court concludes that although ERCOT's funds are not taxes, they are effectively public funds because PURA empowers the PUC to authorize and set the amounts of the regulatory fees ERCOT charges to buyers and sellers of wholesale electricity.¹⁷⁹ But even if regulatory fees charged by state agencies constitute public funds that are equivalent to tax dollars, ERCOT's funds are paid by private entities to a private entity and are never held by a governmental entity. Like any other private entity, ERCOT can procure insurance to protect its funds against liabilities.¹⁸⁰ Sovereign immunity exists to protect against "the payment of taxpayer dollars subject to legislative discretion," not the payment of private funds that may be authorized or regulated by statute.¹⁸¹

175 Hughes , 573 S.W.3d at 218.

176 Ben Bolt-Palito Consol. Indep. Sch. Dist. v. Tex. Pol. Subdivs. Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d 320, 326 (Tex. 2006).

177 Hays St. Bridge Restoration Grp. v. City of San Antonio , 570 S.W.3d 697, 704 (Tex. 2019) (quoting Fort Worth Transp. Auth. v. Rodriguez , 547 S.W.3d 830, 839 (Tex. 2018), and Reata Constr. , 197 S.W.3d at 382 ).

178 See Brown & Gay , 461 S.W.3d at 121.

179 Ante at 624, 627; see also Tex. Util. Code § 39.151(e) ; TracFone Wireless, Inc. v. Comm'n on State Emergency Commc'ns , 397 S.W.3d 173, 175 n.3 (Tex. 2013) (addressing regulatory fees, which "support a regulatory regime governing those who pay the fee").

180 See Brown & Gay , 461 S.W.3d at 124 n.7 ("[P]rivate parties ... have an established means of protecting themselves from the specter of costly litigation—insurance.").

181 Hughes v. Tom Green County , 573 S.W.3d 212, 220 (Tex. 2019).

ERCOT urges that judgments in the cases against them would be financially devastating to ERCOT and could undermine PURA's regulatory scheme.¹⁸² But despite this "too big to fail" argument, ERCOT is not as indispensable to the legislative scheme as ERCOT suggests. As explained, PURA does not designate ERCOT as the ISO; it merely requires the power region to designate an organization to serve as the ISO and authorizes the PUC to certify that organization.¹⁸³ In fact, PURA provides that the PUC might certify "one or more" ISOs for the Texas power region and recognizes that an ISO may be decertified and replaced by a "successor organization."¹⁸⁴ Under PURA, an ISO may be critical to the State's oversight of the electricity industry, but ERCOT is not. Like the private university at issue in Redus , any expense ERCOT "incurs will fall on" ERCOT, "not the government or its taxpayers."¹⁸⁵

182 ERCOT admits, however, that although a "number of court cases have been brought against ERCOT arising out of the February 2021 extreme winter weather event," it "does not believe that the outcome of this litigation will affect its key functions." Elec. Reliability Council of Tex. (ERCOT), Self-Evaluation Report: A Report to the Texas Sunset Advisory Commission 14 (Sept. 2021), https://www.sunset.texas.gov/public/uploads/files/reports/ERCOT% 20SER_9-01-21.pdf.

183 See Tex. Util. Code § 39.151(a), (c).

184 See id. § 39.151(a), (d).

185 See Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 410 (Tex. 2020).

The interplay between the exclusive-jurisdiction and sovereign-immunity doctrines provides further reason not to extend immunity to ERCOT. Sovereign immunity is not necessary to preserve "separation-of-powers principles"¹⁸⁶ and maintain an "equilibrium among the branches of government"¹⁸⁷ —the exclusive-jurisdiction doctrine serves that function here. The PUC's exclusive jurisdiction respects the Legislature's decision to provide the executive branch, through the PUC, with "complete authority" over ERCOT.¹⁸⁸ It "honors the Legislature's intent that ‘the appropriate body adjudicates the dispute’ first, and thereby ‘ensure[s] an orderly procedure to enforce those rights.’ "¹⁸⁹ If litigation continues after the PUC has exercised its exclusive jurisdiction, any PUC fact findings would be given significant deference under the substantial-evidence rule.¹⁹⁰ And because the PUC applies its expertise in adjudicating issues first, litigation generally would not disrupt any key services without the PUC's first evaluating any complaint and determining ERCOT's continued fitness to serve as the ISO.¹⁹¹ The PUC could determine whether decertification of ERCOT is appropriate and, if so, certify a successor ISO and transfer assets before any judicial litigation ensues.¹⁹²

186 Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 121 (Tex. 2015).

187 Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 740-41 (Tex. 2019).

188 Tex. Util. Code § 39.151(d).

189 Clint Indep. Sch. Dist. v. Marquez , 487 S.W.3d 538, 544 (Tex. 2016) (alteration in original) (quoting Essenburg v. Dallas County , 988 S.W.2d 188, 189 (Tex. 1998), and City of Houston v. Rhule , 417 S.W.3d 440, 442 (Tex. 2013) ).

190 Tex. Util. Code § 15.001.

191 The PUC also purports to protect ERCOT from liability by mitigating risks of unforeseen expenditures through promulgated rules. See 16 Tex. Admin. Code §§ 25.200(d) (protecting ERCOT from liability "for its ordinary negligence" when it "cause[s] the interruption of transmission service for the purpose of maintaining ERCOT system stability and safety"), .361(c) ("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."); cf. Rosenberg , 571 S.W.3d at 751 (noting that "the statutory scheme itself contains provisions limiting liability and financial exposure" that prevent any "genuine risk of unforeseen expenditures").

192 See Tex. Util. Code § 39.151(d) ("The commission by rule shall 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."); 16 Tex. Admin. Code § 25.364 ("Decertification of an Independent Organization").

Although we acknowledge that extending sovereign immunity to ERCOT could offer some benefits for the State's efforts to ensure a reliable and economical electricity grid, we must also "remain ever mindful" of sovereign immunity's costs.¹⁹³ Sovereign immunity from suit "allows the ‘improvident actions’ of the government to go unredressed"¹⁹⁴ and thus "places the burden of shouldering" the "costs and consequences" of those actions "on injured individuals," rather than the entity that caused those consequences.¹⁹⁵ In short, "just as immunity is inherent to sovereignty, unfairness is inherent to immunity."¹⁹⁶ Under these circumstances, the cost of authorizing such "unfairness" to protect a purely private, nonsovereign entity outweighs any benefits. We thus conclude that extending sovereign immunity to ERCOT would not promote the doctrine's purposes. IV. The Public's Trust

193 See Rosenberg , 571 S.W.3d at 751.

194 Hall v. McRaven , 508 S.W.3d 232, 243 (Tex. 2017).

195 Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 121-22 (Tex. 2015).

196 City of Galveston v. State , 217 S.W.3d 466, 480 n.38 (Tex. 2007) (Willett, J., dissenting).

Finally, we must return to the concern over how the Court's decision will alter the public's trust in our State's justice system. The private corporation ERCOT, once unknown to the general public, has become a near-household name after more than 4.5 million people in Texas lost electric power during Winter Storm Uri.¹⁹⁷ For every three Texans, two lost power "for an average of 42 hours, during which they were without power on average for one single consecutive bloc of 31 hours, rather than for short rotating periods."¹⁹⁸ Not only did the storm expose needed improvements to the electric grid's reliability, but it also imposed a significant, tragic human toll:

197 Fed. Energy Regul. Comm'n , N. Am. Elec. Reliability Corp. , & Reg'l Entities , FERC, NERC and Regional Entity Staff Report: The February 2021 Cold Weather Outages in Texas and the South Central United States 9 (Nov. 16, 2021), https://www.ferc.gov/media/february-2021-cold-weather-outages-texas-and-south-central-united-states-ferc-nerc-and.

198 Sunset Advisory Commission , supra note 142, at 105 (quoting Winter Storm 2021 and the Lifting of COVID-19 Restrictions in Texas , Univ. of Hous. Hobby Sch. of Pub. Affs. (Mar. 25, 2021), https://uh.edu/hobby/winter2021/).

The Texas Department of State Health Services confirmed 246 deaths related to Winter Storm Uri, which included victims ranging from less than 1 year old to 102 years old. Hypothermia was the primary cause of the death for 161 people. The storm and power outages also exacerbated pre-existing illnesses, leading to the deaths of 25 people like the 83-year old Katy resident who lost power to the respirator he needed to live.... A grandmother and her three grandchildren likely numbered among the 10 Texans who died due to fires when attempts to warm their home ended in tragedy.¹⁹⁹

199 Id.

Many lawsuits have already been filed against ERCOT based on damages resulting from the loss of electricity and the high wholesale prices ERCOT charged during Winter Storm Uri.²⁰⁰

200 See Elec. Reliability Council of Tex. (ERCOT), supra note 182, at 14.

The public expects and trusts that those injured can claim the protection of the laws and that those responsible—to the extent responsibility exists—will be held accountable: the government through the political process and at the ballot box²⁰¹ and private entities in court. But by granting sovereign immunity to a purely private entity that has not been designated as part of the government and without requiring a demonstration of the government's actual control over the complained-of conduct, the Court undermines this public trust.

201 See Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 411 (Tex. 2020) ("Political accountability is a vital counterweight to sovereign immunity's inequity.").

The Legislature could, and in our opinion should, correct the Court's mistake. To specifically address the Court's holding as to ERCOT, the Legislature could waive ERCOT's newfound immunity in part or in full to give parties the right "to claim the protection of the laws, whenever he receives an injury."²⁰² More importantly, however, the Legislature could circumscribe this Court's broad and erroneous expansion of the sovereign-immunity doctrine to private entities. Although the judiciary defines sovereign immunity's boundaries, "[b]ecause the legislature ‘can modify or abrogate common law rules,’ provided its intent is clear, we consider legislative intent in establishing the doctrine's common-law contours."²⁰³ To clarify its intent, the Legislature could enact a law—a rule of construction for Texas courts to apply—that it does not intend to grant private entities (including private corporations like ERCOT) the "nature, purposes, and powers" of an arm of the state for the purposes of sovereign immunity unless it expressly designates the entity as part of the government.

202 See Marbury v. Madison , 5 U.S. 137, 163, 1 Cranch 137, 2 L.Ed. 60 (1803) ; see also Wasson Ints., Ltd. v. City of Jacksonville , 489 S.W.3d 427, 435 (Tex. 2016) ("If immunity is applicable, then the judiciary defers to the legislature to waive such immunity.").

203 Redus , 602 S.W.3d at 411 (footnote omitted) (quoting Abutahoun v. Dow Chem. Co. , 463 S.W.3d 42, 51 (Tex. 2015) ).

Although such a rule of construction would generally establish the outer limits to the judicial extension of sovereign immunity, a governmental designation by the Legislature ultimately may or may not be sufficient to demonstrate the necessary indications for the judiciary to conclude that a private entity is entitled to sovereign immunity. But that is how it should be. The rule of construction would begin restoring the public's trust that private entities will not be extended sovereign immunity as legislatively authorized entities unless the people's duly elected representatives expressly designate the entity as part of the government and the judiciary determines that the entity is entitled to sovereign immunity.

This legislative rule of construction, however, should not be necessary to cabin the judicial expansion of sovereign immunity. Although "immunity is inherent to sovereignty, unfairness is inherent to immunity,"²⁰⁴ especially when it is extended to what is not inherently sovereign: purely private entities. We therefore respectfully dissent from the Court's decision to extend sovereign immunity to the private corporation ERCOT.

204 Id. at 410-11 (quoting Hillman v. Nueces County , 579 S.W.3d 354, 361 (Tex. 2019) ).