Electric Reliability Council of Texas, Inc. 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

Supreme Court of Texas
══════════
No. 22-0056
══════════

CPS Energy,
Petitioner,

v.

Electric Reliability Council of Texas,
Respondent

═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fourth District of Texas
═══════════════════════════════════════

~and~
 ══════════
No. 22-0196
══════════

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

═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fifth District of Texas
═══════════════════════════════════════

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

2
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
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

1See Vicki C. Jackson, Suing the Federal Government: Sovereignty,
Immunity, and Judicial Independence, 35 GEO. WASH. INT’L L. REV. 521, 521
(2003).
2Phillips 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 (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.”).
5See 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

3
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
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

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).
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.”).
9Rosenberg, 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).

4
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
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

10Hall 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”).
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.

5
 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

See Nettles v. GTECH Corp., 606 S.W.3d 726, 733 (Tex. 2020); Brown
15

& Gay Eng’g, Inc. v. Olivares, 461 S.W.3d 117, 126 (Tex. 2015).
16Univ. 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).

6
government acted through the entity and the actions are effectively
attributed to the government as “action taken by the government.”18
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

18 Id. at 407 (quoting Brown & Gay, 461 S.W.3d at 125).
19 Id. at 401.
20 Ante at 29-31, 34-35, 39-40.
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

7
 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

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, 140 S.W.2d 1098, 1101 (Tex. 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[.]”).

8
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.

22Redus, 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).

9
 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
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

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.
26Gina 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.
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).

10
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
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
To promote the on-demand availability of electricity and the
reliability of its delivery system at the lowest possible cost, the private,

30Fed. Energy Reg. Comm’n v. Elec. Power Supply Ass’n, 577 U.S. 260,
267 (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 (2002).
See Stephanie Phillips, Federal Regulation for A “Resilient” Electricity
32

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.
33Jeffrey 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.

11
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
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

35W. 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; see also Phillips, supra note 32, at 422.
37 See Hammonde & Spence, supra note 30, at 150-51.
38 Id. at 149-50.
39 Warren, supra note 26, at 353-54.
40See Phillips, supra note 32, at 422; Hammonde & Spence, supra note
30, at 150-51.

12
most interstate 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 intrastate transactions and
retail sales made directly to consumers.43
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

41See Pub. Util. Comm’n of R.I. v. Attleboro Steam & Elec. Co., 273 U.S.
83, 89-90 (1927); see also Fed. Energy Reg. Comm’n v. Elec. Power Supply Ass’n,
577 U.S. 260, 266 (2016); New York, 535 U.S. at 5-6.
New York, 535 U.S. at 6-7; see also Gulf States Util. Co. v. Fed. Power
42

Comm’n, 411 U.S. 747, 758 (1973); Strahan, supra note 29, at 292 n.8.
43 Elec. Power Supply Ass’n, 577 U.S. at 266-67; see also Phillips, supra
note 32, at 423-24.
44W. Tex. Utils. Co. v. Tex. Elec. Serv. Co., 470 F. Supp. 798, 808 (N.D.
Tex. 1979).
45Id.; 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.

13
rules and guidelines to govern their interconnected system and their
purchases of power from one another.47
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

Pub. Util. Comm. of Tex. v. City Pub. Serv. Bd. of San Antonio, 53
47

S.W.3d 310, 312 (Tex. 2001); see also Gonzales, supra note 45, at 500.
48Del. 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).
49Suit, 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.

14
 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
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

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.
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.

15
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
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
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

55 See Gonzales, supra note 45, at 501-02; Fleisher, supra note 45, at 11.
56 See Fleisher, supra note 45, at 11.
57 Watkiss & Smith, supra note 33, at 452-54.
New York v. Fed. Energy Reg. Comm’n, 535 U.S. 1, 8-9 (2002); see also
58

Fed. Energy Reg. Comm’n v. Mississippi, 456 U.S. 742, 751 (1982); Phillips,
supra note 32, at 424; Watkiss & Smith, supra note 33, at 452-54.
59 Hammonde & Spence, supra note 30, at 151.
60 See Phillips, supra note 32, at 424.

16
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
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,

61New York, 535 U.S. at 9; 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; 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.
65Pub. Util. Comm. of Tex. v. City Pub. Serv. Bd. of San Antonio, 53
S.W.3d 310, 312 (Tex. 2001).
66 Id.

17
nonprofit corporation, continued to serve as the industry’s coordinator
of its privately owned transmission grid.
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
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

67 State v. Pub. Util. Comm’n of Tex., 344 S.W.3d 349, 352 (Tex. 2011).
68Id. 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).
69Oncor 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.

18
costs along to their customers by incorporating them into their retail
rates.70
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

70 Oncor Elec. Delivery, 507 S.W.3d at 712.
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).
See Tex. Pub. Util. Comm’n, In re ERCOT, Docket No. 22061, 2000
72

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 (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.

19
 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.

20
 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
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

75 Ante at 13-16.
76 Univ. of the Incarnate Word v. Redus, 518 S.W.3d 905, 911 (Tex.
2015).
Univ. of the Incarnate Word v. Redus, 602 S.W.3d 398, 407 (Tex. 2020)
77

(quoting Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571 S.W.3d
738, 750 (Tex. 2019)).
78 About ERCOT, ERCOT (2023), http://www.ercot.com/about/profile.
79 See Careers, ERCOT (2023), http://www.ercot.com/careers.

21
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
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

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_Certific
ate_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%20Byla
ws.pdf.
82 About ERCOT, ERCOT (2023), http://www.ercot.com/about/profile.
83 Ante at 29-32, 34-35.

22
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.
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

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)”).
85 TEX. UTIL. CODE § 39.151(a), (c).

23
regulation.86 Instead of governmentalizing the ISO, PURA authorizes
the PUC to select a private entity to fill that role.
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
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

86 See id. § 39.001(a).
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).
89Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571 S.W.3d
738, 750 (Tex. 2019).

24
alter that nature, we conclude that PURA did not vest ERCOT with the
nature, purposes, and powers of an arm of the state.
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.”
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

90 See TEX. UTIL. CODE § 39.151(d).
91Univ. 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)).

25
“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
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

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).
See Redus, 602 S.W.3d at 408 n.58 (surveying other state decisions
94

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’”).
95 Ante at 29.

26
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
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

96 See id. at 29-31 (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)).
98See Alden v. Maine, 527 U.S. 706, 715-16 (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”).
99Springboards to Educ., Inc. v. McAllen Indep. Sch. Dist., 62 F.4th 174,
191 (5th Cir. 2023) (Oldham, J., concurring).
Id. at 191-98 (reviewing English common-law tradition, debates
100

between Federalists and Anti-Federalists, and early American court cases).

27
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
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
In that case, El Paso Education Initiative, Inc. v. Amex Properties,
LLC, this Court extended governmental immunity105 for the first time

101 Id. at 198.
102 Id. at 199 n.6.
103See 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)).
105Cf. 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).

28
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
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

106 Amex Props., 602 S.W.3d at 529-30.
107 Id. at 528-29 (quoting TEX. EDUC. CODE §§ 12.105, .1056(a)).
108Id. at 529-30; see also Univ. of the Incarnate Word v. Redus, 602
S.W.3d 398, 406 n.51 (Tex. 2020).
109 602 S.W.3d at 398.
110 Id. at 404.

29
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
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

111 Id. at 411-13 & n.79.
112 Id. at 412.
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.

30
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
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

116 Id.
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

31
 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
From these cases, we can derive a few controlling principles
regarding the nature of an arm of the state. Private, incorporated

[government]’s specifications or following any specific government directions
or orders.”).
606 S.W.3d at 733-34 (quoting Brown & Gay, 461 S.W.3d at 125, and
121

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.

32
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).
See El Paso Educ. Initiative, Inc. v. Amex Props., LLC, 602 S.W.3d
127

521, 528-30 (Tex. 2020).
Redus, 602 S.W.3d at 407-08 (quoting Brown & Gay Eng’g, Inc. v.
128

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 33. 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.

33
 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.
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,

130 TEX. UTIL. CODE § 39.151(d).
131 Ante at 29-30.
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).

34
“adequately perform[s]” its ISO functions and duties, the PUC’s
statutory authority to control ERCOT’s operations appears to be limited.
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
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

134 Ante at 30-31 (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.”).
136 Ante at 30 (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.”).

35
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
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
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

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).
141 Ante at 32 (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).

36
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
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

144 SUNSET ADVISORY COMMISSION, supra note 142, at 80.
145 See Nettles v. GTECH Corp., 606 S.W.3d 726, 736 (Tex. 2020).
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.
149Id. (“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

37
authority over ERCOT, it may lack the necessary resources and
capabilities to do so.150 In short, without an additional factual showing

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

38
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
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.
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

woefully under-resourced given its critical responsibilities and the work that
still lies ahead.”).
Univ. of the Incarnate Word v. Redus, 602 S.W.3d 398, 405, 407 (Tex.
151

2020) (quoting Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571
S.W.3d 738, 750 (Tex. 2019)).
152 Ante at 29.
153See 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.”).

39
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
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.

154 See Nettles v. GTECH Corp., 606 S.W.3d 726, 733 (Tex. 2020).
155See 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[.]”).
156See, 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”).

40
 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.

157See 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/.
See Act of May 30, 2021, 87th Leg., R.S., ch. 908, 2021 Tex. Gen.
159

Laws 2218, 2218-27; Act of May 28, 2021, 87th Leg., R.S., ch. 950, 2021 Tex.
Gen. Laws 2465, 2465-72.
160See 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.

41
 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

161See 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 33-34. 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 34 (emphasis added), the issue is whether the PUC actually
controlled ERCOT.
162See 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 33 (quoting Redus, 602

42
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
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

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 40. 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).
166Redus, 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).

43
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
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
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

168 Rosenberg, 571 S.W.3d at 740.
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).
Hillman v. Nueces County, 579 S.W.3d 354, 361 (Tex. 2019) (quoting
172

Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 375 (Tex. 2006)); see also

44
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
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

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.
175 Hughes, 573 S.W.3d at 218.
176Ben Bolt-Palito Consol. Indep. Sch. Dist. v. Tex. Pol. Subdivs.
Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 326 (Tex. 2006).
177Hays 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.

45
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
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,

179 Ante at 31, 37; 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”).
180See 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).
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.

46
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
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,

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).
186 Brown & Gay Eng’g, Inc. v. Olivares, 461 S.W.3d 117, 121 (Tex.
2015).
Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571 S.W.3d
187

738, 740-41 (Tex. 2019).

47
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

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.
191The 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

48
 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
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

successor organization to ensure continuity of operations in the region.”); 16
TEX. ADMIN. CODE § 25.364 (“Decertification of an Independent Organization”).
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).
City of Galveston v. State, 217 S.W.3d 466, 480 n.38 (Tex. 2007)
196

(Willett, J., dissenting).

49
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:
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

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-so
uth-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/).
199 Id.

50
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
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.
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,

200 See ELEC. RELIABILITY COUNCIL OF TEX. (ERCOT), supra note 182,
at 14.
See Univ. of the Incarnate Word v. Redus, 602 S.W.3d 398, 411 (Tex.
201

2020) (“Political accountability is a vital counterweight to sovereign
immunity’s inequity.”).
202See Marbury v. Madison, 5 U.S. 137, 163 (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.”).

51
“[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.
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

Redus, 602 S.W.3d at 411 (footnote omitted) (quoting Abutahoun v.
203

Dow Chem. Co., 463 S.W.3d 42, 51 (Tex. 2015)).

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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.

Jeffrey S. Boyd
Justice

John P. Devine
Justice

OPINION FILED: June 23, 2023

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

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