ERCOT Abstention

Phillips v. ERCOT addresses a dispute between ERCOT and the liquidating trust of Entrust Energy, a supplier of electriciity to end users, who went into bankruptcy after receiving a large bill in the wake of Winter Storm Uri. In resolving this dispute, the Fifth Circuit held:

• No immunity for ERCOT. The six relevant factors were “an even split,” but because ‘our court has indicated repeatedly that factor 2 [the source of the entity’s funding] is the most important, ERCOT is not an arm of Texas and not entitled to immunity in federal court.”
• Abstention. Burford abstention was required because, inter alia: “federal adjudication of the [programs at issue] risks dramatic intrusion into Texas’s specialized system of electric utility regulation and would disrupt Texas’s efforts to establish a coherent and uniform policy for electric utilities. Under the specific circumstances of this case, the fact that the takings claim arises under federal law and that Texas does not provide any sort of specialized system for review does not support hearing the claim.” (footnote omittted).

No. 22-20603 (April 29, 2024).