Will Those Responsible For The Failure Of The Texas Electrical Grid System Be Held Accountable In The Wake Of Winter Storm Uri?
This is the question millions of Texans are looking to answer.
The Electric Reliability Council of Texas (ERCOT), The Public Utility Commission of Texas (PUC) and AEP (American Electric Power) bear responsibility for the losses caused by the extreme winter weather power outages.
In February of 2011, nearly ten years prior, a winter storm much like winter storm Uri rolled through Texas causing temperatures to drop into the single digits. As a result of the extreme cold, a total of 193 generating units failed which necessitated rolling blackouts across the state.
The energy infrastructure failure of 2011 affected 3.2 million Texans leaving them without power for anywhere between 15 minutes and 8 hours.
Unfortunately, Texas did not take action to ensure that the power grid would withstand future cold weather storms.
Winter storm Uri hit Texas on February 13, 2021, exactly 10 years after the winter storm of 2011. Uri directly affected over 4.5 million Texans leaving them without power anywhere between 1-7 days.
All across the state of Texas, businesses were forced to close their doors and suspend regular operations in part due to the repeatedly ignored warnings about the weaknesses in the state’s power infrastructure.
There has been a massive financial hit to an untold number of business owners. Many believe this was an emergency solely because of ERCOT and AEP’s failure to take the necessary precautions which just exacerbated the situation.
The artic blast caused over $180 Billion in damages to Texas businesses, landowners, and families.
Even after the ice melts, the fight for many Texans is far from over. The looming issue on the horizon will be dealing with insurance claims and figuring out how to repair and pay for the damages caused.
The fight with insurance companies over homeowners and business interruption claims will continue into the indefinite future.
WHY DID THIS HAPPEN:
In short, the Texas power grid was not equipped to operate in such low temperatures. However, this does not mean that preparing Texas’ infrastructure was impossible.
The cold weather event also caused increased energy demands across the state as Texans tried to keep their homes and businesses warm, with total state energy demand peaking around 69,000 megawatts.
A peak winter demand of 69,000 megawatts is by no means unusual. As recently as the 2018 winter season, the Texas energy grid experienced demand in excess of 65,000 megawatts. The Texas energy grid regularly meets summer demands of 125,000 megawatts— almost twice the peak demand experienced in February 2021.
WHAT WAS NEEDED:
ERCOT and AEP could have increased the electric capacity and weatherized it’s facilities in the days, weeks, and years leading up to the February 2021 storm but they consciously chose not to do so.
The Texas power grid needed to be protected in preparation for operation in cold weather. This preventative measure would have had a relatively low cost when compared to the alternative, which was the loss of power to over 4 million Texans. The failure to winterize the grid resulted in loss of business, loss of use, numerous injuries, and even loss of life.
WHO IS RESPONSIBLE:
The Texas Public Utility Commission of Texas (PUC) is the governmental entity that is responsible for the oversight of Electric Reliability Council of Texas (ERCOT). ERCOT is responsible for managing the flow of electric power to Texans all over the state.
It’s important to note that ERCOT is not a state agency. It’s a private nonprofit corporation run by an unelected board. It was ERCOT’s decision to not winterize the power grid after the grid failure of 2011. The power grid went neglected and relatively unchanged for 10 years.
ERCOT manages the flow of electric power for roughly 90% of Texas consumers which equates to approximately 26 million Texans.
ERCOT’s state-wide blackouts left over 4 million Texans without electricity to warm their homes as sub-freezing temperatures flowed through their homes for days.
ERCOT is responsible.
HOW IS ERCOT TRYING TO AVOID RESPONSIBILITY:
Currently, ERCOT is fighting to keep the protections of sovereign immunity in a case pending before the Supreme Court of Texas. See Elec. Reliability Council of Texas, Inc. v. Panda Power Generation Infrastructure Fund, LLC.
If ERCOT retains sovereign immunity it will effectively eliminate any ability to sue them for their wrongful acts or omissions. This is a problem for Texans because without the ability to hold ERCOT accountable and keep them motivated, there is no guarantee that this type of widespread failure will not happen again.
WHAT THE TEXAS LEGISLATURE IS DOING:
Senator Joan Huffman announced an upcoming hearing to examine the law and jurisprudence governing ERCOT and the Public Utility Commission of Texas (PUC).
The hearing will review whether additional safeguards, such as administrative provisions and statutes could have prevented the ongoing public utility crises.
With so many Texans losing power, including senators and state officials, it is no surprise that this investigation has been launched this quickly. Hopefully, this hearing will shed light on why ERCOT should not keep the protections of sovereign immunity.
WHY THIS IS GOOD:
If Texans can prevent ERCOT from being protected by sovereign immunity, ERCOT can be held responsible for their wrongful acts and omissions by compensating Texans for their losses.
By hitting ERCOT where it hurts, this will incite a sense of importance behind the maintenance of the Texas power grid.
Texas is the 9th largest economy in the world and a winter storm should not have taken out the entire power grid. It is evident that the careless actions of those tasked with the critical responsibility of providing electricity to the state are to blame.
CAN YOU SUE ERCOT FOR FINANCIAL LOSSES, INJURY, OR WRONGFUL DEATH?
In certain circumstances, yes. ERCOT manages approximately 90% of Texas’s power grid. Generally, energy providers are granted certain legal protections that shield them from civil liability when severe weather causes power loss. However, many experts are alleging that ERCOT mismanaged the power grid, and thus calling for greater accountability as climate change is expected to bring more extreme weather to the state’s ill-prepared electrical power grid.
WILL THERE BE A CLASS ACTION LAWSUIT:
Business owners and residents who have suffered substantial financial losses, lost loved ones, missed work, sustained property damages, and endured tremendous suffering due to the ERCOT power outages are threatening to file and join a class action lawsuit to recover financial compensation.
As previously stated, power companies are typically granted some legal protections to prevent “power outage lawsuits.” These protections are often written into agreements that define how much a utility company is permitted to charge customers. In these “contract tariffs,” power companies are often free from liability for power service interruptions due to circumstances beyond their control, such as an “Act of God.”
However, these protections may not hold up due to the fact that this was not an unforeseeable disaster. This opens the door to civil liability when an electric company engages in gross negligence or willful misconduct.
In the past, courts have been hesitant to designate liability for weather-related outages if the cost of litigation and damages awards would be passed down to customers through their electricity rates.
In the ERCOT power loss emergency, ERCOT, as the state’s grid operator, ordered rotating power outage due to a host of power grid system failures. Texas residents believe ERCOT’s failure to properly maintain the power grid and prepare for climate change, amongst other allegations, demonstrates that ERCOT is liable due to gross negligence.
HAVE CUSTOMERS EVER WON A POWER OUTAGE LAWSUIT?
Business and residential customers have teamed up in the past and have successfully won monetary compensation from local power companies after major storms caused extended power loss. Ex: People in Nassau County, New York, filed a proposed class action lawsuit against their energy providers after Hurricane Sandy.
While it remains unclear whether government investigations will result in findings of civil or criminal liability, past instances of mass outages indicate a high likelihood of civil litigation—including class actions—for energy price spikes, personal energy, property damage, and other losses caused by the lapse in energy generation.
Indeed, Plaintiffs’ lawyers are publicly soliciting clients and alleging that some companies took undue advantage of the scarcity in production by charging exorbitant prices for energy. While the viability of those suits remains unclear, companies must be prepared to face them.
COULD CLIMATE CHANGE OPEN THE DOOR TO SHOWING ERCOT WAS GROSSLY NEGLIGENT?
Whether the extreme weather is classified as “weather change” or “climate change,” there is no doubt Texas has suffered increasingly extreme hurricanes, rainstorms, and freezing temperatures in recent years.
One untested type of legal claim is called a “climate resilience claim.” A climate resilience claim permits plaintiffs to file lawsuits to hold companies financially liable for failing to act competently with climate change. This movement proposes to hold utility companies responsible for “falling asleep at the wheel.”
Although it is not clear if the Texas power outages meet the legal standard from bringing a climate resilience claim, individual plaintiffs filing their own lawsuits as well as plaintiffs who join a class action lawsuit could argue that ERCOT’s energy system operators and bulk grid operators failed to plan for climate change.
FIRST PARTY HOMEOWNER AND BUSINESS CLAIMS:
Many homeowners and business owners suffered significant damages from the February 2021 Texas winter storms. After assessing and preventing further damages, many of these Texans will need to file insurance claims.
The insured must start by reviewing their various insurance policies. It is important to understand the terms of coverage to determine the best way to maximize a claim. Further, insured should keep in mind that many insurance companies seek to minimize their liability by denying and disputing valid claims.
Business owners and homeowners with significant damages should consider hiring an insurance coverage lawyer for these larger claims. The lawyer can review the policies and help prepare the claim for filing. More specifically, the first party claim lawyer can identify potential coverage issues and help effectively document the covered losses.
WHY HOMEOWNER AND BUSINESS OWNERS NEED TO BE CAREFUL TAKING ACTION WITHOUT THE ASSISTANCE OF AN ATTORNEY:
Many proprietors need to make numerous decisions during a crisis. More specifically, business owners need to protect their property, business, employees, and customers.
The decisions made by the insured dictates whether an insurance policy applies. Insurance adjusters use these decisions to determine if they can issue a denial of coverage letter. Insurers have in-house lawyers that advise them on how to deny coverage. By hiring a lawyer to aid in reviewing coverage issues, homeowners and businesses can help avoid potential pitfalls regarding insurance decisions.
INSURANCE COMPANY ADJUSTERS AND INSURANCE COMPANY LAWYERS COMMONLY WORK TO REDUCE CLAIM VALUES:
In addition to outright denying claims, insurance company adjusters also work to reduce claim values. Insurers have in-house lawyers that advise them on how to reduce a claim’s value. The goal of the insurer is not to compensate the insured for their loss, but to retain as much money as they can.
For this reason, many businesses and property owners will benefit by working with a business interruption lawyer when making a claim. These insured can discuss documenting damages as well as damage mitigation issues with their attorney. The attorney will assist in documenting, defending, and verifying damages. All of these issues can be helpful in maximizing an insurance claim payout.
INSURANCE COVERAGE VARIES GREATLY BETWEEN DIFFERENT POLICIES AND BUSINESSES:
Insurance companies offer a wide variety of insurance coverage to many different types of businesses. Further, insurance brokers and agents commonly offer an “all risks” benefits policy to many businesses. These policies provide coverage for many types of loses.
However, each type of policy will dictate the specifics of the coverage. Further, the policy clauses, exclusions, and language will need a thorough analysis in order to understand whether policy coverage applies. Moreover, an insurance coverage attorney can provide experienced legal advice regarding the business interruption insurance policy.
We Are Here To Help
At the Pusch and Nguyen Law Firm, our mission is to ensure the safety of individuals and businesses, and protect the rights of those harmed by negligent corporations. The business interruption lawyers at Pusch and Nguyen represent commercial property owners whose insurance claims have been wrongly denied or underpaid. If you find yourself in a dispute with your insurance company, contact us to find out how we can help. Our business interruption lawyers can be reached at 713-524-8139 or fill out a business interruption contact form.
Q1: What types of claims can a business owner and homeowner file against insurance companies and ERCOT?
A1: Claimants may file a variety of claims including injury, death, and damages.
More specifically, they may file a wrongful death claim, real property damages claim, business damage claim, and/or a personal injury claim.
Any Texas family, business owner, or property owner who suffered significant damages, serious injuries, or the death of a loved one caused by the power failure and black outs during the recent Feb. 2021 freeze may have a viable claim.
Q2: Who are the private companies ERCOT, AEP, and AEP Texas that maintain the Texas power grid and why are they the target of ERCOT power failure claims?
A2: ERCOT is the Electric Reliability Council of Texas, Inc. ERCOT along with two out of state private companies provide 90% of Texas’s electricity and serve 26 million clients.
These private companies including American Electric Power Company, Inc (AEP) and AEP Texas, Inc. maintain the Texas power grid. As such, Texas ERCOT power failure claims allege these private companies have a duty to protect Texas citizens from the known danger of cutting off power to Texans and Texas businesses during an artic blast. Further, because of this duty and the widespread power outages in February 2021, these private companies are the target of several ERCOT power failure claims.
Q3: Did ERCOT, AEP, and AEP Texas take reasonable care to protect and maintain the Texas power grid prior to and during the 2021 Texas Winter Storms?
A3: Many believe that ERCOT, AEP, and AEP Texas had a duty to take reasonable care to protect and maintain the Texas power grid. As such, Texans are beginning to file negligence claims, takings claims, and other claims against ERCOT and two other private companies on behalf of Texans and Texas businesses.
In these ERCOT lawsuits, they allege that these companies had ample warning regarding the Texas Winter Storms and known weather risks, but failed to take proper action to winterize the Texas energy grid to prepare for the February 2021 cold snap resulting in devastating damages, injuries, and deaths to many Texans and Texas businesses.