Denton files suit against ERCOT following winter storms

Denton files suit against ERCOT following winter storms

The city of Denton on Thursday filed suit against the Electric Reliability Council of Texas alleging “unconstitutional use of public funds.”

A judge granted a temporary restraining order in favor of the city late Thursday, according to a city news release sent out late Friday afternoon.

The suit is filed in Denton County’s 16th Judicial District.

The city’s core argument is related to the way ERCOT, the entity that oversees energy distribution in Texas, paid for electricity during the past week’s rolling blackouts and winter storm.

It has since been well documented that the bulk of the grid’s missing energy production was due to natural gas and oil energy providers that hadn’t properly winterized infrastructure.

Other energy providers, such as wind-powered generators, also failed due to a lack of winterization.

“In an ill-advised attempt to use ‘market forces’ to address a scarcity that was caused by nature and by poor planning … “ the Public Utility Commission and ERCOT raised energy prices to unprecedented levels, according to legal filings.

Essentially, Denton attorneys argue, ERCOT has invoked a mechanism by which it “spreads the cost” of municipalities unable to pay exorbitant energy bills onto other municipalities, including Denton, that possibly could.

For example, a city unable to pay part or all of its energy bill to ERCOT because of the sky-high costs imposed last week would have its debt pushed onto other cities.

The city of Denton contends “cities are barred from making such payments.”

In a legal filing, city attorneys cite an article in the Texas Constitution that claims “a city has no power ‘to lend its credit or to grant public money or a thing of value in aid of, or to any individual, association, or corporation whatsoever … .’”

Four attorneys from an Austin-based law firm are signed onto the suit representing Denton. They name ERCOT, ERCOT board members and several executives in the suit.

Ultimately, the city is seeking a permanent injunction that would, in part, keep ERCOT from demanding payments to cover others’ debts and keep ERCOT from taking action against the city for not making said payments.

Also, the city is seeking all reasonable attorneys’ fees and court costs incurred.


Melody Meadows

Based in Euless, Texas, Melody Meadows is a Chief Editor at Business Journal.  Previously  She worked for Crain Media and Yahoo News.  Ms. Meadows is a graduate of University of Texas at The University of Texas at Austin. Ms. Meadows started working for Business Journal in 2020.  She covers business, government, politics and stories about economics.