Aspire Power Ventures, LP v. Public Utility Commission of Texas, Electric Reliability Council of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman

ACCEPTED 15-24-00118-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 12/18/2024 2:57 PM No. 15-24-00118-CV CHRISTOPHER A. PRINE ____________________________________________________________________________________________________________________________________ CLERK COURT OF APPEALS FOR THE FILED IN 15th COURT OF APPEALS FIFTEENTH DISTRICT OF TEXAS AUSTIN, TEXAS AUSTIN, TEXAS 12/18/2024 2:57:37 PM ____________________________________________________________________________________________________________________________________ CHRISTOPHER A. PRINE Clerk Aspire Power Ventures, LP, Appellant, v. Public Utility Commission of Texas, Electric Reliability Council of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, Appellees. _________________________________________________________________ On Appeal from the 345th Judicial District Court Travis County, Texas Cause No. D-1-GN-24-003384 Hon. Catherine A. Mauzy, Presiding ____________________________________________________________________________________________________________________________________ APPELLANT’S APPENDIX IN LIEU OF CLERK’S RECORD ____________________________________________________________________________________________________________________________________ Chrysta L. Castañeda Monica Latin Texas Bar No. 15325625 Brent M. Rubin chrysta@castaneda-firm.com Ken Carroll Nicole Michael CARRINGTON, COLEMAN, THE CASTAÑEDA FIRM SLOMAN & BLUMENTHAL, L.L.P. 325 N. St. Paul, Suite 2030 901 Main Street, Suite 5500 Dallas, Texas 75201 Dallas, Texas 75202 Phone: (214) 282-8579 Phone: (214) 855-3000 Fax: (214) 602-9187 Fax: (214) 580-2641 Attorneys for Appellant Aspire Power Ventures, LP ORAL ARGUMENT REQUESTED TABLE OF CONTENTS Table of Contents ...................................................................................... 2 Certificate Regarding Contents of Appendix ......................................................4 Certificate of Service .............................................................................................5 1. Docket Sheet ..................................................................................... 6 2. Plaintiff’s Original Petition and Application for Stay/Suspension and Temporary and Permanent Injunction (May 31, 2024) ......... 12 3. Assignment by Presiding Judge (June 11, 2024) .......................... 34 4. Letter from Judge Mauzy (June 17, 2024) .................................... 35 5. PUC Defendants’ Original Answer (June 28, 2024) ...................... 37 6. Plaintiff’s First Amended Petition and Application for Stay/ Suspension and Temporary and Permanent Injunction (Aug. 13, 2024)................................................................................ 43 7. ERCOT’s Original Answer (Sept. 9, 2024)..................................... 69 8. ERCOT’s Plea to the Jurisdiction and Motion to Dismiss Under Rule 91a and Plea in Abatement (Sept. 9, 2024)........................... 74 9. PUC Defendants’ Amended Answer (Sept. 9, 2024).................... 173 10. PUC Defendants’ Plea to the Jurisdiction (Sept. 13, 2024) ........ 180 11. Letter to Judge Mauzy (Sept.24, 2024)........................................ 216 12. Letter to Judge Mauzy (Sept. 24, 2024)....................................... 228 13. Plaintiff’s Second Amended Petition and Application for Stay/Suspension and Temporary and Permanent Injunction (Sept. 24, 2024) ............................................................................. 269 2 14. ERCOT’s Amended Answer (Oct. 1, 2024) .................................. 299 15. ERCOT’s Amended Plea to the Jurisdiction and Motion to Dismiss Under Rule 91a and Plea in Abatement (Oct. 1, 2024) ............... 304 16. Letter to Judge Mauzy (Oct. 4, 2024) .......................................... 413 17. PUC Defendants’ Amended Plea to Jurisdiction (Oct. 4, 2024) ................................................................................ 416 18. Plaintiff’s Consolidated Response to Amended Pleas to the Jurisdiction and ERCOT’s 91a and Request for Abatement (Oct. 9, 2024) ................................................................................ 460 19. Unopposed Motion for Judicial Notice (Oct. 9, 2024) .................. 505 20. ERCOT’s Reply in Support of its Amended Plea to the Jurisdiction and Motion to Dismiss Under Rule 91a and Plea in Abatement (Oct. 15, 2024) ........................................................... 545 21. Order Granting Defendant ERCOT’s Amended Plea to the Jurisdiction (Oct. 21, 2024) .......................................................... 723 22. Order Granting Plaintiff’s Unopposed Motion for Judicial Notice (Oct. 21, 2024) ................................................................... 725 23. Order Granting PUCT Defendants’ Amended Plea to the Jurisdiction (Oct. 21, 2024) .......................................................... 726 24. Notice of Appeal (Oct. 28, 2024)................................................... 728 25. Request for Reporter’s Record (Oct. 30, 2024) ............................. 733 26. Notice of TRAP 34.5a Election (Nov. 8, 2024) ............................. 736 3 RESPECTFULLY SUBMITTED, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Monica Latin Texas Bar No. 15325625 Texas Bar No. 00787881 chrysta@castaneda-firm.com MLatin@ccsb.com Nicole Michael Brent M. Rubin Texas Bar No. 24067767 Texas Bar No. 24086834 nicole@castaneda-firm.com BRubin@ccsb.com THE CASTAÑEDA FIRM Ken Carroll 325 N. St. Paul, Suite 2030 Texas Bar No. 03888500 Dallas, Texas 75201 KCarroll@ccsb.com Phone: (214) 282-8579 CARRINGTON, COLEMAN, Fax: (214) 602-9187 SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: (214) 855-3000 Fax: (214) 580-2641 Attorneys for Appellant Aspire Power Ventures, LP CERTIFICATE REGARDING CONTENTS OF APPENDIX I hereby certify that the documents contained in this appendix to which this certification is attached are all the documents specified by Texas Rule of Appellate Procedure 34.5(a) and 34.5a(e). /s/ Brent M. Rubin 4 CERTIFICATE OF SERVICE I hereby certify that on December 18, 2024, a true and correct copy of the foregoing Appellee’s Brief has been served via the authorized electronic filing system on counsel of record for Appellees: John R. Hulme Elliot Clark John.Hulme@oag.texas.gov eclark@winstead.com Amanda Atkinson Cagle Elin Isenhower Amanda.Cagle@oag.texas.gov eisenhower@winstead.com Jordan Pratt Winstead PC Jordan.Pratt@oag.texas.gov 600 W. 5th Street, Suite 900 Environmental Protection Division Austin, TX 78701 Office of the Attorney General P.O. Box 12548, MC-066 Counsel for Appellee ERCOT Austin, TX 78711-2548 Counsel for Appellees the Public Utilities Commission of Texas and its Chairman and Commissioners /s/ Brent M. Rubin 5 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 345th District Court Case Summary Case No. D-1-GN-24-003384 ASPIRE POWER VENTURES, LP VS. § Location: 345th District THOMAS GLEESON,LORI Court COBOS,JIMMY GLOTFELTY,KATHLEEN § Judicial Officer: 345TH, DISTRICT JACKSON,COURTNEY HJALTMAN COURT § Filed on: 05/31/2024 Case Information Case Type: Other Civil Case Status: 10/21/2024 Closed Statistical Closures 10/21/2024 Final Judgment - CV Assignment Information Current Case Assignment Case Number D-1-GN-24-003384 Court 345th District Court Date Assigned 05/31/2024 Judicial Officer 345TH, DISTRICT COURT Party Information Plaintiff ASPIRE POWER VENTURES, LP Castaneda, Chrysta L Retained CARROLL, KENNETH E. Retained Defendant COBOS, LORI Hulme, John R Retained Cagle, Amanda Atkinson https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 1/6 Appx. Page 6 of 740 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 Retained PRATT, JORDAN TAYLOR Retained GLEESON, THOMAS Hulme, John R Retained Cagle, Amanda Atkinson Retained PRATT, JORDAN TAYLOR Retained GLOTFELTY, JIMMY Hulme, John R Retained Cagle, Amanda Atkinson Retained PRATT, JORDAN TAYLOR Retained HJALTMAN, COURTNEY JACKSON, KATHLEEN Hulme, John R Retained Cagle, Amanda Atkinson Retained PRATT, JORDAN TAYLOR Retained Case Events 05/31/2024 ORIGINAL PETITION/APPLICATION (OCA) PLAINTIFF S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Party: Plaintiff ASPIRE POWER VENTURES, LP 06/10/2024 EXECUTED SERVICE EXECUTED CITATION THOMAS GLEESON 06/10/2024 EXECUTED SERVICE EXECUTED CITATION PUBLIC UTILITY COMMISSION OF TEXAS 06/10/2024 EXECUTED SERVICE EXECUTED CITATION KATHLEEN JACKSON https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 2/6 Appx. Page 7 of 740 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 06/10/2024 EXECUTED SERVICE EXECUTED CITATION LORI COBOS 06/10/2024 EXECUTED SERVICE EXECUTED RETURN SERVICE OF CITATION - JIMMY GLOTFELTY Party: Plaintiff ASPIRE POWER VENTURES, LP 06/11/2024 ASSIGNMENT BY PRESIDING JUDGE JUDGE AMY CLARK MEACHUM'S ASSIGNMENT LETTER 06/17/2024 COURT CORRESPONDENCE LETTER TO COUNSEL FROM JUDGE MAUZY 06/17/2024 OTHER/NOTICE NOTICE OF APPEARANCE OF COUNSEL AND DESIGNATION OF ATTORNEY IN CHARGE Party: Defendant COBOS, LORI; Defendant GLEESON, THOMAS; Defendant GLOTFELTY, JIMMY ; Defendant JACKSON, KATHLEEN 06/28/2024 ORIGINAL ANSWER/WAIVER ORIGINAL ANSWER OF THE PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS Party: Defendant COBOS, LORI; Defendant GLEESON, THOMAS; Defendant GLOTFELTY, JIMMY ; Defendant JACKSON, KATHLEEN 08/13/2024 PLEADING PLAINTIFF S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Party: Plaintiff ASPIRE POWER VENTURES, LP 08/16/2024 EXECUTED SERVICE EXECUTED CITATION ELECTRIC REALIABILITY COUNCIL OF TEXAS 08/21/2024 EXECUTED SERVICE EXECUTED CITATION COURTNEY HJALTMAN 09/09/2024 ORIGINAL ANSWER/WAIVER ERCOT S ORIGINAL ANSWER https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 3/6 Appx. Page 8 of 740 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 09/09/2024 RESPONSE AMENDED ANSWER OF THE PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS Party: Defendant COBOS, LORI; Defendant GLEESON, THOMAS; Defendant GLOTFELTY, JIMMY ; Defendant HJALTMAN, COURTNEY; Defendant JACKSON, KATHLEEN 09/09/2024 ORIGINAL ANSWER/WAIVER ERCOT S PLEA TO THE JURISDICTION AND ATERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT 09/11/2024 OTHER/NOTICE LETTER COURT REGARDING HEARING REQUEST 09/13/2024 RESPONSE DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS PLEA TO THE JURISDICTION 09/17/2024 OTHER/NOTICE NOTICE OF APPEARANCE OF ADDITIONAL COUNSEL Party: Plaintiff ASPIRE POWER VENTURES, LP 09/24/2024 OTHER/NOTICE LETTER BRIEF TO COURT IN CONNECTION TO 10/1/24 STATUS CONFERENCE 09/24/2024 OTHER/NOTICE PUBLIC UTILITY COMMISSION LETTER BRIEF TO COURT 09/24/2024 PLEADING PLAINTIFF S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Party: Plaintiff ASPIRE POWER VENTURES, LP 10/01/2024 RESPONSE ERCOT S AMENDED ANSWER https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 4/6 Appx. Page 9 of 740 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 10/01/2024 RESPONSE ERCOT S AMENDED PLEA TO THE JURISDICTION AND ATERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT 10/04/2024 OTHER/NOTICE LETTER TO JUDGE MAUZY 10/04/2024 RESPONSE DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS AMENDED PLEA TO THE JURISDICTION 10/09/2024 RESPONSE PLAINTIFF S CONSOLIDATED RESPONSE TO DEFENDANTS AMENDED PLEAS TO THE JURISDICTION AND ERCOT s RULE 91a MOTION TO DISMISS AND REQUEST FOR ABATEMENT Party: Plaintiff ASPIRE POWER VENTURES, LP 10/09/2024 MOTION UNOPPOSED MOTION FOR JUDICIAL NOTICE Party: Plaintiff ASPIRE POWER VENTURES, LP 10/15/2024 RESPONSE ERCOT S REPLY IN SUPPORT OF ITS AMENDED PLEA TO THE JURISDICTION AND ALTERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT 10/21/2024 JUDGMENT NOTICE MAILED 10/21/2024 CVD: FINAL JUDGMENT (OCA) 10/21/2024 FINAL OR PARTIAL DISPOSITION ORDER (Judicial Officer: MAUZY, CATHERINE A) ORDER GRANTING PUCT DEFENDANTS AMENDED PLEA TO THE JURISDICTION 10/21/2024 ORDER (Judicial Officer: MAUZY, CATHERINE A) ORDER (MOTION FOR JUDICIAL NOTICE) 10/21/2024 FINAL OR PARTIAL DISPOSITION ORDER (Judicial Officer: MAUZY, CATHERINE A) ORDER GRANTING DEFENDANT ERCOT'S AMENDED PLEA TO THE JURISDICTION https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 5/6 Appx. Page 10 of 740 11/19/24, 9:41 AM Register of Actions - D-1-GN-24-003384 10/28/2024 NOTICE OF APPEAL NOTICE OF APPEAL BY PLAINTIFF ASPIRE POWER VENTURES, LP 10/30/2024 OTHER/NOTICE LETTER FROM 15TH COA 10/30/2024 OTHER/NOTICE REQUEST FOR REPORTER'S RECORD 11/08/2024 OTHER/NOTICE PLAINTIFF-APPELLANT ASPIRE POWER VENTURES, LP S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5a Party: Plaintiff ASPIRE POWER VENTURES, LP 11/12/2024 OTHER/NOTICE LETTER FROM 15TH COA 11/18/2024 OTHER/NOTICE RETURN NOTICE OF ORDER Service Events 06/03/2024 Citation GLEESON, THOMAS Served: 06/05/2024 COBOS, LORI Served: 06/05/2024 GLOTFELTY, JIMMY Served: 06/05/2024 JACKSON, KATHLEEN Served: 06/05/2024 08/15/2024 Citation HJALTMAN, COURTNEY Served: 08/16/2024 https://odysseyweb.traviscountytx.gov/app/RegisterOfActions/#/E9DC398A66B7D18E14B9A89715B44623D28DB28571025D03F2369712095532FD1… 6/6 Appx. Page 11 of 740 5/31/2024 3:53 PM Velva L. Price District Clerk D-1-GN-24-003384 Travis County CAUSE NO. _________________________ D-1-GN-24-003384 Rosa Oneal ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, THOMAS GLEESON, LORI § COBOS, JIMMY GLOTFELTY, AND § 345TH, DISTRICT COURT KATHLEEN JACKSON, § Defendants. ___th JUDICIAL DISTRICT PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Plaintiff Aspire Power Ventures, LP (“Aspire”) files this its Original Petition and Application for Stay/Suspension and Temporary and Permanent Injunction against Defendants Public Utility of Commission of Texas (“PUC” or “Commission”), Thomas Gleeson, Lori Cobos, Jimmy Glotfelty and Kathleen Jackson (collectively, “Commissioners”), and respectfully shows the Court as follows: INTRODUCTION 1. This lawsuit challenges the Commission’s illegal disregard of the Administrative Procedure Act (“APA”) relating to three orders that restrain the supply of electricity on the ERCOT grid (“Orders”). 1 In 2023, the Orders forced unnecessary conservation warnings, threatened rolling blackouts and drove up the prices Texans paid for electricity. If the Court does not act to void the illegal Orders, 2024 threatens to be worse. 1 The Orders are specifically identified in ¶ 25. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 1 Appx. Page 12 of 740 2. The three Orders implemented the ERCOT Contingency Reserve Service (“ECRS”). ECRS is a failed attempt to increase the reliability of ERCOT’s electric grid by paying electric generating companies to keep a portion of their existing generating capacity off the grid — in “reserve”— even when electricity demand is at a peak, including in hot summer months. 3. ECRS is not based on sound reliability criteria and has resulted in ERCOT procuring reserves that far exceed the reserves procured by ERCOT’s counterparts elsewhere in the country. Moreover, ECRS harms Texas electric consumers. According to ERCOT’s Independent Market Monitor (“IMM”), which oversees ERCOT, ECRS inflated the cost of wholesale electricity in the period June through November 2023 by approximately $12 billion. If the Orders are allowed to stand, ECRS will inflict further economic harm on consumers. 4. Aspire is an ERCOT Market Participant and has also suffered harm as a result of ECRS. Aspire buys electricity on ERCOT’s wholesale market and has fixed-price contracts with other parties to sell electricity. ECRS makes electric prices much more volatile, which in turn makes it impossible for Aspire to adequately plan to purchase electricity on the wholesale market that it must then deliver to purchasers on a fixed-price basis. ECRS substantially increases the likelihood that Aspire will suffer losses on the contracts that it does place. If the Orders are permitted to stand, it will continue to suffer harm. 5. The Commission illegally implemented ECRS by failing to even attempt to comply with the mandatory requirements of Texas’s APA when it adopted the Orders. Therefore, Aspire seeks a declaratory judgment declaring the Orders void. 6. The harm suffered by Aspire, other Market Participants and Texas consumers as a result of the Orders is incapable of being remedied by the payment of mere money damages. Illegal conservation notices cannot be undone, nor can any rolling blackouts issued as a result of the PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 2 Appx. Page 13 of 740 illegal Orders. Furthermore, the Commission takes the position that if one of its orders is declared void, it is void only on a prospective basis and cannot have any effect on transactions that have already cleared. While Aspire vehemently disagrees with the Commission’s position, the Commission essentially concedes that no money damages will remedy its illegal conduct. 7. Accordingly, Aspire seeks a stay and/or suspension of ECRS and temporary and permanent injunctive relief. Unless the Court grants interim relief, with the hot summer months fast approaching, ECRS will inflict substantial, irreparable harm on Aspire, other market participants, and Texas consumers. PARTIES AND PROCESS 8. Plaintiff Aspire Power Ventures, LP is a Texas limited partnership with its principal place of business in Houston, Texas 9. Defendant Public Utility Commission of Texas is a state agency that may be served through its Executive Director, Connie Corona, at 1701 N. Congress Ave., Suite 7-110, Austin, TX 78701. See Tex. Civ. Prac. & Rem. Code § 101.102(c). 10. Defendants Thomas Gleeson, Lori Cobos, Jimmy Glotfelty and Kathleen Jackson (collectively, “Commissioners”) are the Chair and Commissioners of the Commission, respectively, and are being sued in their official capacity. They can be served with process at their principal place of business, 1701 N. Congress Ave., Suite 7-110, Austin, TX 78701. 11. Additionally, because a state agency is a party, a copy of the petition is being mailed to the Attorney General in Austin, Texas, by United States Postal Service certified mail, return receipt requested. Tex. Civ. Prac. & Rem. Code § 30.004. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 3 Appx. Page 14 of 740 VENUE 12. Venue in this declaratory judgment action challenging the validity of Commission Orders is mandatory in Travis County district court. Tex. Gov’t Code § 2001.038(b). 2 JURISDICTION 13. Without prejudice to its rights to prosecute a direct appeal of the Orders under Texas Utilities Code 39.001(e) in the Third Court of Appeals, Aspire invokes the jurisdiction of this Court based, in part, on the Commission’s own conduct in related litigation. Specifically, the APA provides that the validity of a rule may be determined in a declaratory judgment action brought in Travis County district court if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff. Texas Gov’t Code § 2001.038(a)-(b). The Orders and their continued application interfere with and impair Aspire’s legal rights and privileges, which confers jurisdiction on this Court. 14. Aspire previously filed a Notice of Direct Appeal in the Third Court of Appeals challenging the ECRS Rules in Aspire Power Ventures, LP v. Public Utility Commission of Texas, No. 03-24-00102-CV. In the Notice, Aspire stated that the ECRS Rules are “competition rules,” and “[j]udicial review of the validity of competition rules shall be commenced” in the Third (or soon-to-be Fifteenth) Court of Appeals, citing the Third Court’s recent decision in RWE Renewables Americas LLC v. Public Utility Commission of Texas, 669 S.W.3d 566, 578-79 (Tex. App.—Austin 2023, pet. granted). Notice at 3-4. The Commission filed a petition for review in RWE that challenged, among other things, the Third Court’s jurisdictional holding, and the Supreme Court of Texas granted the petition and heard oral argument in March. 2 Aspire makes this contention subject to its position that the rules announced by the Orders are competition rules that are reviewable on direct appeal in the Third Court of Appeals. See infra ¶13-14. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 4 Appx. Page 15 of 740 15. On April 12, 2024, the Commission filed a motion to abate Aspire’s appeal of the Orders, based on its challenge to RWE’s jurisdictional holding. Aspire opposed the abatement, arguing, among other things, that abatement would impair Aspire’s right to seek interim and permanent relief from the Orders. In a brief order, the Third Court abated the appeal. Because the Commission-requested abatement has cut off Aspire’s right to seek relief in the Third Court of Appeals, and because the Commission takes the position that the review of these Orders belongs in district court, Aspire files this petition. FACTUAL BACKGROUND A. Texas’s Deregulated Electricity Market and ERCOT 16. The Public Utility Commission designated the Electric Reliability Council of Texas (“ERCOT”) as the Independent System Operator (“ISO”) for the electric grid that covers roughly 70% of Texas’ land mass and serves approximately 90% of Texas’ electricity consumers. ERCOT oversees the operation of the high voltage electric transmission system in Texas (which is also called ERCOT), the various markets administered by ERCOT in its capacity as an ISO, and the balancing of physical electricity supply and demand on the high voltage transmission system that ensures its reliability. 17. ERCOT operates within a deregulated electric sector, insofar as there are competitive generators and competitive retailers. The ERCOT rules require that each participant in the market (a “Market Participant”) belong to a specific category that best describes its activity. The Market Participant categories include power generators, competitive retailers, and transmission and distribution (wires) companies. Power generation companies produce electricity, ancillary services, or both. Transmission and distribution utilities are responsible for the power lines and other equipment that carry electricity from power plants and other generation facilities PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 5 Appx. Page 16 of 740 to end-use consumers. Retail electric providers sell electricity to end-use consumers in the portions of the state with retail competition. Qualified Scheduling Entities (“QSEs”) like Aspire are Market Participants as well. 3 18. As the ISO, ERCOT has a number of responsibilities, including reliable operation of the grid. For technical reasons, electric supply and demand must always be maintained in balance at an equilibrium point of 60 Hertz, or else the electricity grid risks collapse. Therefore, at times, reserve generation needs to be dispatched to balance supply and demand. ERCOT accomplishes this balancing through the operation of a real time wholesale electricity market. 19. The primary tool that ERCOT uses to ensure that demand and supply are in constant balance, i.e., the foundation of the wholesale electricity market, is called Security Constrained Economic Dispatch (“SCED”). In general, ERCOT runs SCED at least every five minutes around the clock. Wholesale electricity is bought and sold based on the prices created by SCED. ERCOT averages the prices generated in several SCED intervals to create the wholesale spot prices across the ERCOT region. These wholesale electricity prices then allow individual Market Participants to make voluntary decisions about how much electricity they would like to produce or procure over that interval. When prices are high, generators are incentivized to produce more electricity and consumers to use less. Conversely, when prices are systemically low, generators are not incentivized to add additional capacity to the grid and consumers are not incentivized to invest in energy efficiency or conservation. 20. Because electricity is an instantaneous commodity where supply and demand must be equal at every point in time, ERCOT maintains Ancillary Services to assist the balancing process. Ancillary Services exist primarily to bridge the time gap between the five-minute SCED 3 See infra ¶¶ 22-24. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 6 Appx. Page 17 of 740 dispatch interval output and fluctuations in demand and/or supply that may occur within this five minute interval. 21. Texas’s electricity market is governed by the Public Utility Regulatory Act (Chapter 39 of the Texas Utilities Code), orders and regulations adopted by the Commission, and rules and “protocols” adopted by ERCOT. By statute, ERCOT’s “protocols must be approved by the commission and must reflect the input of the commission.” Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15. B. About Aspire 22. Aspire is a Qualified Scheduling Entity (“QSE”) that participates in several of the markets administered by ERCOT. 23. In its capacity as a QSE, Aspire buys and sells wholesale electricity in the real time electricity market operated by ERCOT, serving as a conduit between companies that generate electricity and companies that sell electricity on a retail basis. 24. Accordingly, Aspire bears the risk of price fluctuations in spot electricity, because it must contractually commit in advance to buy and sell electricity at specific prices before SCED creates the actual wholesale market prices. Artificial fluctuations in prices, i.e., those that do not reflect the fundamentals of the market such as changes in weather, demand or generation, result in prices deviating from expectations. Because they are artificial and unexpected, these fluctuations not only represent an additional risk to Aspire but they also can result in financial losses for Aspire and other Market Participants. For example, when Aspire sells to a retail provider, it enters into an agreement to sell the retailer electricity at a fixed price and then bears the risk that the wholesale PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 7 Appx. Page 18 of 740 price that Aspire purchases at will be higher than the contract price with the retail provider, resulting in a loss. C. ECRS: A Costly, Market-Distorting Attempt to Bolster Reliability 25. In a purported attempt to bolster the grid’s reliability, ERCOT implemented a new Ancillary Service, ECRS, in June 2023. ECRS is the product of, among other things, three Commission Orders approving revisions to ERCOT’s Nodal Protocols that Aspire challenges here: • Order Approving ERCOT Revision Requests, NPRR 1096, Require Sustained Two-Hour Capability for ECRS and Four-Hour Capability for Non-Spin (PUC Project No. 52934) (May 12, 2022); • Order Approving ERCOT Revision Requests, NPRR 1148, Language Cleanup Related to ERCOT Contingency Reserve Service (ECRS) (PUC Project 54445) (Jan. 26, 2023); and • Order Approving ERCOT Revision Requests, NPRR 1178, Expectations for Resources Providing ERCOT Contingency Reserve Service (PUC Project 54445) (Jun. 29, 2023). (Together, the “Orders” or “ECRS Rules.”) 26. The ostensible purpose of ECRS is to support grid reliability by increasing the level of reserves, i.e., generation capacity that is not available to be dispatched through the operation of SCED to meet demand. ERCOT pays generators who participate in ECRS to keep a portion of their current electric generating capacity from being dispatched by ERCOT through SCED, unless one of several operational criteria are met. If ECRS did not exist, this capacity would potentially be available to SCED directly and would, accordingly, be available for dispatch. In other words, if ECRS had never been implemented, electricity supply would certainly be no less than and would most likely be higher than it was after the implementation of ECRS. In most cases, an increase in supply causes prices to fall, all other things being equal. 27. In actual practice, ECRS does nothing to increase current electricity reserve capacity. Instead, it simply causes additional capacity to be withheld from meeting actual current PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 8 Appx. Page 19 of 740 physical demand and often at intervals when that capacity is most needed, especially during hot summer days. 28. As explained in more detail below, ERCOT’s Independent Market Monitor (“IMM”), a watchdog created by the Texas Legislature, has identified a number of systemwide harms caused by ECRS. Specifically, the IMM concluded that ECRS has: • Caused ERCOT to procure excessive reserves, that far exceed reserves held by ERCOT’s counterparts elsewhere; • Generated artificial shortages that produce massive inefficient market costs, totaling over $12 billion in 2023; and • Diminished reliability by withholding capacity needed to manage transmission congestion. 29. In 2023, the first year ECRS was implemented, ECRS prevented the use of 2,194 megawatts of generating capacity on average, allowing the ECRS capacity to run on only 40 occasions of typically very short duration. The trigger for deploying ECRS capacity is based on maintaining the 60 Hertz frequency on the ERCOT grid as well as the amount of generating capacity available to the system at a given time—neither of which can be known or accurately forecasted by anyone other than ERCOT. 30. During the same period, ECRS, by withholding capacity from being dispatched in the real time market, distorted price signals by creating an administered or artificial scarcity condition. This artificial scarcity resulted in both higher prices and greater price volatility. In the limited periods in 2023 when the ECRS dispatch criteria were met and the capacity was dispatched to the grid, real time wholesale electricity prices became even less predictable for market participants. ECRS would suddenly permit more capacity to briefly appear, causing prices to abruptly drop, only to bounce back upwards when ECRS constrained participating capacity again. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 9 Appx. Page 20 of 740 31. These artificial and unpredictable distortions in price signals and the resulting increased price volatility make it impossible for independent QSEs like Aspire to efficiently manage the risks that are inherent in fixed price bilateral contracts with both buyers and sellers of electricity. The criteria used to determine when ECRS capacity is allowed to be dispatched is not predictable and cannot be accurately forecasted by independent QSEs. So, because QSEs like Aspire cannot predict the brief and abrupt addition and removal of generation under ECRS, they cannot accurately forecast prices. Therefore, ECRS makes it extremely difficult for independent QSEs to offer fixed-price hedges to retail providers, substantially increases the price for their hedges, and in turn drives up the costs consumers ultimately pay for that electricity. 32. Further, even if Aspire and other QSEs substantially increase what they charge retail providers for fixed-price hedges, the volatility introduced by ECRS still greatly increases the likelihood that QSEs will lose money on the hedges they offer to retailers. 33. Some QSEs, like Aspire, do not own physical generation and are “non-affiliated.” Many other QSEs do, and they use the affiliation between the QSE and the generation entity to effectively integrate their generation and load portfolios in much the same way that vertical integration linked supply and demand before restructuring occurred in 2003. Unexpected and artificial price distortions can be managed more efficiently under the “integrated QSE” business model because an integrated QSE can internalize (and net) the positive and negative effects of price fluctuations, something that Aspire and other non-affiliated QSEs cannot do. As a result, the fictitious prices and volatility caused by the implementation of ECRS not only leads to market inefficiency but also creates a specific and significant incentive for firms in the industry to “re- integrate” with the likely outcome that the industry concentration ratio will increase, thereby decreasing competition in both the generation and retail sectors. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 10 Appx. Page 21 of 740 34. No other electricity market in the United States has a service similar to ECRS, yet these other markets are able to reliably balance supply and demand efficiently and without creating imaginary prices and are able to ensure grid reliability to the required standards. D. Making Matters Worse, the Commission Illegally Adopted the ECRS Rules 35. To be valid, the ECRS Rules had to be adopted in substantial compliance with the APA, which contains a number of mandatory requirements aimed at facilitating a thorough rulemaking process that affords members of the public a meaningful opportunity to participate. But the Commission failed to do so, and the ECRS rules are therefore invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). 36. As a threshold matter, the ECRS Rules are “rules” to which the APA applies. Under the APA, a “rule” is defined as “a state agency statement of general applicability that: (i) implements, interprets, or prescribes law or policy, or (ii) describes the procedure or practice requirements of a state agency.” Tex. Gov’t Code § 2001.003(6)(A). The “amendment or repeal of a prior rule” is also deemed agency rulemaking. Id. § 2001.003(6)(B), (C). The Commission’s orders adopting the ECRS Rules imposed a policy of withholding available supply from the market as a reserve, thereby causing artificial shortages that raise the prices paid by Market Participants. The implementation of ECRS affects the private rights of Market Participants who purchase electricity at inflated prices. Moreover, electricity is an essential service, and Texans are impacted when those increased costs are passed on to consumers. Thus, ECRS Rules constitute a “rule” within the meaning of the APA because they represent the Commission’s authority to control the electricity market supply and prices, and they affect the rights of private parties. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 11 Appx. Page 22 of 740 37. Here, the Commission failed to substantially comply with three essential APA requirements: (1) notice, see Tex. Gov’t Code §§ 2001.023-.025; (2) public participation, see id. §§ 2001.029-.030; and (3) the contents of the agency order, id. § 2001.033. 1. The Commission Did Not Substantially Comply with the APA’s Notice Requirements 38. When a state agency proposes a rule, the APA requires that the agency (a) “give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule,” and (b) “file notice of the proposed rule with the secretary of state for publication in the Texas Register” at least 30 days before the agency adopts the rule. Tex. Gov’t Code § 2001.023(a)-(b). The Commission did not give notice of the ECRS Rules in the Texas Register, but rather buried them in the Commission’s website. And the Notices of Recommended Approval that ERCOT filed with the Commission were all filed less than thirty days before the Commission adopted each ECRS Rule: NPRR 1096 NPRR 1148 NPRR 1178 Notice of Recommended Approval 5/2/2022 1/6/2023 6/20/2023 filed w/ Commission Commission Approval Order 5/12/2022 1/26/2023 6/29/2023 Days Between Notice and Order 10 20 9 2. The Commission Did Not Substantially Comply with the APA’s Public Participation Requirements 39. Section 2001.029 of the APA establishes three public-participation requirements that a rulemaking agency must follow, none of which were followed here: • First, a state agency must give “all interested persons a reasonable opportunity to submit data, views, or arguments, orally or in writing” before the agency adopts a rule. Tex. Gov’t Code § 2001.029(a). The Commission never gave an opportunity for public comment. • Second, the agency must “grant an opportunity for a public hearing before it adopts a substantive rule if a public hearing is requested by: (1) at least 25 persons; (2) a governmental subdivision or agency; or (3) an association having at least 25 members.” PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 12 Appx. Page 23 of 740 Id. § 2001.029(b). The Commission never gave an opportunity to request a public hearing. • Finally, an agency must “consider fully all written and oral submissions about a proposed rule.” Id. § 2001.029(c). But without adequate notice to the public, this requirement cannot be met because it is impossible to determine who might have desired to submit comments. 3. The Commission Did Not Substantially Comply with the APA’s Public Participation Requirements 38. Under the APA, an agency order that finally adopts a rule “must include”: (1) a reasoned justification for the rule as adopted consisting solely of: (A) a summary of comments received from parties interested in the rule that shows the names of interested groups or associations offering comment on the rule and whether they were for or against its adoption; (B) a summary of the factual basis for the rule as adopted which demonstrates a rational connection between the factual basis for the rule and the rule as adopted; and (C) the reasons why the agency disagrees with party submissions and proposals; (2) a concise restatement of the particular statutory provisions under which the rule is adopted and of how the agency interprets the provisions as authorizing or requiring the rule; and (3) a certification that the rule, as adopted, has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Tex. Gov’t Code § 2001.033(a). This information must appear within the four corners of the agency order adopting the Rule. The Orders adopting the ECRS Rules contain none of these materials. Therefore, the Commission did not substantially comply with the APA when adopting the ECRS Rules. E. ERCOT’s Independent Market Monitor Confirms the Disastrous Effects of ECRS 39. The Texas Legislature requires ERCOT to appoint an Independent Market Monitor (“IMM”) “to detect and prevent market manipulation strategies, recommend measures to enhance PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 13 Appx. Page 24 of 740 the efficiency of the wholesale market, and provide independent analysis of any material changes proposed to the wholesale market.” Tex. Util. Code § 39.1515(a). Potomac Economics has served as ERCOT’s IMM for nearly twenty years and is led by David Patton, PhD, an energy economist with nearly thirty years of experience. 40. The IMM recently issued a report slamming ERCOT’s Ancillary Services methodology, and in particular, ECRS. The IMM explained that shortly after ECRS was implemented in June 2023, ERCOT decided to nearly double the amount of ten-minute reserves, resulting in the excessive purchase of electricity reserves compared to the reserves held for other U.S. power grids. Additionally, the IMM concluded ECRS is not based on sound reliability criteria, because it does not take into account the probability of contingencies and uncertainties that lead to reliability risks and fails to balance reliability objectives with the costs of satisfying reliability requirements. 41. Ultimately, the IMM concluded that ECRS generated artificial electricity shortages that produced massive, inflated costs for electricity sold on the wholesale market, totaling more than $12 Billion in the period June through November 2023. While not all of these costs were passed on to retail consumers, some of whom buy on fixed-price contracts, in the longer term, these artificially increased wholesale prices will negatively impact the retail prices Texans pay. 42. Finally, the IMM suggested fixes to ECRS, but ERCOT has not adopted the IMM’s proposed fixes and has pushed off any consideration of those fixes. So, with summer 2024 fast approaching, and ECRS threatening to keep much needed capacity off the grid during this high- demand period, market participants and Texas electric consumers are poised to pay unnecessary, increased costs for electricity unless ECRS is promptly reined in or suspended. PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 14 Appx. Page 25 of 740 DECLARATORY JUDGMENT 43. Aspire incorporates by reference all of the allegations set forth above. 44. Aspire asserts that the ECRS Rules were not adopted in substantial compliance with the APA, making them invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). The Commission, of course, disagrees. Because Aspire’s rights, status, and other legal relations are affected by the ECRS Rules, declaratory relief is necessary and appropriate to resolve questions regarding the validity of the ECRS Rules. 45. Therefore, under Chapter 37 of the Texas Civil Practice and Remedies Code and Texas Government Code § 2001.038, Aspire seeks a declaration including, but not limited to, the following: a. Each of the ECRS Rules is a “rule” within the meaning of the APA b. The Commission did not substantially comply with mandatory requirements of the APA when adopting each of the ECRS Rules, including requirements for (1) notice under APA §§ 2001.023-.025; (2) public participation under §§ 2001.029-.030; and (3) the contents of the agency order under § 2001.033 c. Each of the ECRS Rules is therefore invalid and void under Texas Government Code § 2001.035. APPLICATION FOR STAY, SUSPENSION, AND INJUNCTIVE RELIEF 46. Aspire incorporates by reference all of the allegations set forth above. 47. This Court has the power to enter a temporary injunction based on the Commission’s failure to substantially comply with the APA when adopting the ECRS Rules. Abbott v. Doe, ___ S.W.3d ___, No. 03-22-00126-CV, 2024 WL 1340692, at *23-24 (Tex. App.— PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 15 Appx. Page 26 of 740 Austin Mar. 29, 2024, no pet. h.) (collecting cases in which the court upheld temporary injunctions based on APA rulemaking challenges). Further, Texas Utilities Code § 15.004 provides that while an appeal of a regulatory authority’s order is pending, a district court “may stay or suspend all or part of the operation of the order, ruling, or decision.” Cf. Tex. Gov’t Code § 2001.038 (providing that a validity challenge under the APA cannot be used to “stay a hearing in which a suspension, revocation, or cancellation of a license by a state agency is at issue” but imposing no other limitations on a court’s ability to issue a stay). In deciding whether to grant a stay or suspension, the Court must follow the practices of a court exercising equity jurisdiction. Tex. Util. Code § 15.004. 48. As set forth in more detail above, the Commission adopted the ECRS Rules without substantially complying with mandatory requirements in the APA, rendering the ECRS Rules voidable. Aspire has therefore established, at the very least, a probable right to the relief it seeks upon final hearing. 49. If the operation of the ECRS Rules is not promptly stayed, suspended, or enjoined, Aspire and others will suffer immediate and irreparable injury as a result of the unlawfully adopted ECRS Rules, as set forth above. The injuries that Aspire and others will suffer are irreparable and cannot adequately be remedied at law. 50. Even with regard to monetary losses, the Commission takes the position—in a case pending before the Supreme Court of Texas—that would preclude Aspire and other Market Participants from ever obtaining monetary relief. See Town of Palm Valley v. Johnson, 87 S.W.3d 110, 111 (Tex. 2001) (per curiam) (irreparable injury must be shown because injunctive relief is “designed to provide remedy to cover those injuries for which there was not clear, full, and adequate relief at law”). The Commission has argued that because the APA provides that invalid PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 16 Appx. Page 27 of 740 rules are voidable, not void, under Texas Government Section 2001.035(a), Commission orders are “binding until disaffirmed” and “any controversy concerning their validity will have no effect on transactions that have already occurred.” Commission’s Brief on the Merits at 12, Public Utility Commission of Texas v. Luminant Energy Co., No. 23-0231 (Tex. Nov. 9, 2023); see also id. at 14 (under Commission’s interpretation of “voidability” in APA, voidable orders “would remain in effect as to those transactions that have already occurred but would not govern future transactions”). If the ECRS Rules are not stayed or suspended during the pendency of this action, Aspire and other Market Participants will be purchasing electricity at prices inflated by ECRS without any way to recover. 51. On a similar note, in Luminant, the Commission has taken the position that a Court could not have ordered ERCOT to resettle past invoices for an electricity transaction, because in a direct appeal of a competition rule to the court of appeals, the only relief available is remand to the Commission. Id. at 18 (citing Tex. Util. Code § 39.001(f)). Similarly here, the APA provides that a court that finds that an agency has not substantially complied with its provisions may remand the rule to the agency. Tex. Gov’t Code § 2001.040. Without a right to have invoices tainted by ECRS-inflated prices resettled, Aspire would have no path to a monetary remedy for the harm inflicted by ECRS. 52. Even if Aspire had the ability to potentially pass through some of the increased costs to its customers, that would not negate the irreparable nature of the injury ECRS causes. As explained above, Aspire has agreements with certain retail providers for fixed-price hedges, so Aspire bears the risk of price increases caused by ECRS in these contracts. Cf. Sw. Elec. Power Co. v. Burlington N., Inc., 475 F. Supp. 510, 522 (E.D. Tex. 1979) (irreparable injury suffered by electric utility that had to pay increased costs to railroad for fuel transport not negated; case law PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 17 Appx. Page 28 of 740 barred recovery of damages from railroad and pass-through agreement with customers “not assured” to be enforced because Public Utility Commission could disallow increase in fuel cost passed on to customer). 53. Even if Aspire could, in theory, recover damages or other monetary relief because of the harms it suffered because of ECRS, Aspire will suffer an irreparable injury because “damages are very difficult to measure by any certain pecuniary standard.” Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2011, no pet.). Among other things, ERCOT has chosen not to implement the systems that would allow it to meaningfully and correctly re-run SCED, even though it is technically possible to implement such systems and to re-calculate the dispatch and resulting prices as if ECRS had not run. The only adequate, effective, and complete relief is for the Court to stay or suspend the ECRS Rules. 54. No bond should be necessary for the issuance of the stay, suspension, or temporary injunction because the Commission will not suffer any harm resulting from a stay or suspension of the ECRS Rules and is simply being required to comply with the APA. However, Aspire is willing to post a bond if the Court determines it appropriate. See Tex. R. Civ. P. 684. 55. For all these reasons, pursuant to Texas Rule of Civil Procedure 680 et seq., Texas Civil Practice and Remedies Code § 65.001 et seq., and Texas Utilities Code § 15.004, Aspire respectfully requests a stay, suspension, and/or temporary and permanent injunction, staying or suspending the operation of the ECRS Rules and ordering and restraining the Commission, the Commissioners, their officers, agents, servants, employees, and attorneys, ERCOT, and all other persons in active concert or participation with them who receive actual notice of the order by PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 18 Appx. Page 29 of 740 personal service or otherwise (collectively, the “Injunction Restrained Parties”) on the following terms: The Commission and ERCOT are prohibited from enforcing, using or otherwise allowing the ECRS Rules to operate. PRAYER FOR RELIEF For these reasons, Aspire respectfully requests that Defendants be cited to appear and answer, and that without waiving its right to challenge the ECRS Rules as competition rules in the Court of Appeals, that this Court: 1. Issue the declaratory judgment requested by Aspire; 2. Stay or suspend the operation of the ECRS Rules under Texas Utilities Code § 15.004; 3. Issue the temporary and permanent injunctive relief requested by Aspire; 4. Award Aspire costs, expenses, and attorneys’ fees to the extent recoverable by law; and 5. Award Aspire any other and further relief to which it may be justly entitled. Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Telephone: (214) 282-8579 Facsimile: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 19 Appx. Page 30 of 740 Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Ph: 214-855-3000 Fax: 214-580-2641 ATTORNEYS FOR PLAINTIFF PLAINTIFF’S ORIGINAL PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 20 Appx. Page 31 of 740 Appx. Page 32 of 740 Appx. Page 33 of 740 OF r 06/11/2024 01:11:59 PM 4 Velva L. Price District Clerk Travis County D-1-GN-24-003384 1839 OF AMY CLARK MEACHUM Travis County Courthouse Local Administrative Judge (512) 854-9305 P. O. Box 1748 DISTRICT COURTS FAX (512) 854-9332 Austin, TX 78767 June 11, 2024 Chrysta L. Castaneda John Hulme Nicole Michael OFFICE OF THE ATTORNEY GENERAL OF TEXAS - THE CASTANEDA FIRM ENVIRONMENTAL PROTECTION DIVISION 325 N. St. Paul, Suite 2030 PO Box 12548, MC-066 Dallas, TX 75201 Austin, TX 77811-2548 Via email: chrysta@castaneda-firm.com Via email: john.hulme@oag.texas.gouv Via email: nicole@castaneda-firm.com Monica Latin Brent M. Rubin CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, LLP 901 Main St., Suite 5500 Dallas, TX 75202 Via email: mlatin@ccsb.com Via email: brubin@ccsb.com Re: Cause No. D-1-GN-24-003384; Aspire Power Ventures, LP v. Public Utility Commission of Texas, et al. in the 345' Judicial District, Travis County, Texas Dear Counsel: The above case will be assigned to JUDGE CATHERINE MAUZY according to Chapter 10.2 of our Local Rules. Please refer to Chapter 10.2 of our Local Rules for the proper method of proceeding from this point. Thank you. Sincerely, AMY CLARK MEACHUM Local Administrative Judge Travis County, Texas ACM/ ral xc: Ms. Velva Price, District Clerk Appx. Page 34 of 740 06/17/2024 10:40:08 AM Velva L. Price CATHERINE A. MAUZY KATHRYN BURNGSTRENClerk Judge ie] Staff Atto vis County (512) 854-4023 (51 24-003384 VICTORIA CHAMBERS LEAH HAYES Court Operations Officer 419TH DISTRICT COURT Official Court Reporter (512) 854-9329 (512) 854-4023 HEMAN SWEATT COURTHOUSE P. O. BOX 1748 SELINA HAMILTON AUSTIN, TEXAS. 78767 Court Clerk FAX: (512) 854-2224 (512) 854-5827 June 17, 2024 Chrysta L. Castaneda John Hulme Nicole Michael Office of the Attorney General of Texas The Castaneda Firm Environmental Protection Division 325 North St. Paul, Suite 2030 P.O. Box 12548, MC-066 Dallas, Texas 75201 Austin, Texas 77811-2548 Via email: chrysta@castaneda-firm.com Via email: john.hulme@oag.texas.org Via email: nicole@castaneda-firm.com Monica Latin Brent Rubin Carrington, Coleman, Sloman, & Blumenthal, LLP 901 Main Street, Suite 5500 Dallas, Texas 75202 Via email: mlatin@ccsb.com Via email: brubin@ccsb.com RE: Cause No. D-1-GN-24-003384; Aspire Power Ventures, LP v. Public Utility Commission of Texas, et al ., in the 345th Judicial District Court of Travis County, Texas Dear Counsel: This case has been assigned to the 419" District Court. Please familiarize yourselves with Chapter 10 of the Travis County Local Rules, which requires that all orders, including agreed orders, be presented to this Court for approval. Chapter 10 also incorporates the Texas Rules of Appellate Procedure requirements on the "Requisites of Briefs," with some exceptions. The Court may reject briefs that do not comply with Chapter 10. Please note the requirement that appendices be separately bound from briefs. As set out in Chapter 10 of the Travis County Local Rules, counsel should attempt to agree on a briefing schedule, including hearing or submission dates, and provide such agreement to the Court. If the parties cannot agree to such a schedule, please contact my Judicial Executive Assistant, Victoria Chambers at (512) 854-4023 or Victoria.Chambers@traviscountytx.gov. I prefer that the briefing schedule provide that the last brief be filed and delivered to the Court no later than thirty days before the schedule hearing date. Although all settings in this case must be made through my JEA, Victoria Chambers, the parties are responsible for announcing with Court Administration as with any other civil case, per Local Rule Chapter 3. Appx. Page 35 of 740 I look forward to working with you on this case. Sincerely, Judge Catherine A. Mauzy ce: Ms. Velva Price, District Clerk Page 2 of 2 Appx. Page 36 of 740 6/28/2024 4:04 PM Velva L. Price District Clerk Travis County D-1-GN-24-003384 CAUSE NO. D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § TRAVIS COUNTY, TEXAS PUBLIC UTILITY COMMISSION § OF TEXAS, THOMAS GLEESON, § LORI COBOS, JIMMY GLOTFELTY, § and KATHLEEN JACKSON, § Defendants. § 345th JUDICIAL DISTRICT ORIGINAL ANSWER OF THE PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS TO THE HONORABLE JUDGE OF SAID COURT: Defendants Public Utility Commission of Texas (“PUCT”), Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, and Kathleen Jackson, in their official capacities as Commissioners of the PUCT (collectively, “PUCT Defendants”), through the Office of the Attorney General of Texas, file this Original Answer to the Original Petition and Application for Stay/Suspension and Temporary and Permanent Injunction (“Original Petition”) of Aspire Power Ventures, LP (“Aspire”). General Denial The PUCT Defendants deny each and every allegation in Aspire’s Original Petition and demand strict proof thereof. The PUCT Defendants reserve the right to amend their Original Answer as permitted under the Texas Rules of Civil Procedure. Appx. Page 37 of 740 Defenses 1. The Court lacks jurisdiction over Aspire’s claims against the PUCT Defendants in their official capacities because there is no waiver of their sovereign immunity to hear Aspire’s challenges to the three orders at issue. 2. To the extent that Aspire failed to exhaust all administrative remedies in proceedings at the PUCT, the Court lacks jurisdiction over Aspire’s claims against the PUCT Defendants. 3. To the extent that Aspire’s Original Petition contains claims inconsistent with positions Aspire took in the administrative proceedings before the PUCT, the PUCT Defendants assert the defenses of waiver and estoppel. 4. To the extent that Aspire’s Original Petition contains claims not raised by Aspire in the administrative proceedings before the PUCT, the PUCT Defendants assert the defenses of waiver and estoppel. Prayer WHEREFORE, HAVING FULLY ANSWERED, the PUCT Defendants pray that: 1. Aspire take nothing by its suit and PUCT Defendants recover their costs; and 2. PUCT Defendants further pray for such other relief, both at law and equity, to which they may show themselves to be justly entitled. 2 Appx. Page 38 of 740 Respectfully submitted, KEN PAXTON Attorney General of Texas BRENT WEBSTER First Assistant Attorney General JAMES LLOYD Deputy Attorney General for Civil Litigation KELLIE E. BILLINGS-RAY Chief, Environmental Protection Division /s/ John R. Hulme JOHN R. HULME Assistant Attorney General State Bar No. 10258400 John.Hulme@oag.texas.gov AMANDA ATKINSON CAGLE Assistant Attorney General State Bar No. 00783569 Amanda.Cagle@oag.texas.gov JORDAN PRATT Assistant Attorney General State Bar No. 24140277 Jordan.Pratt@oag.texas.gov Office of the Attorney General of Texas Environmental Protection Division P.O. Box 12548, MC-066 Austin, Texas 78711-2548 Tel: (512) 463-2012 Fax: (512) 320-0911 ATTORNEYS FOR THE PUBLIC UTILITY COMMISSION OF TEXAS, 3 Appx. Page 39 of 740 and THOMAS GLEESON, LORI COBOS, JIMMY GLOTFELTY, and KATHLEEN JACKSON, in their official capacities as Commissioners of the Public Utility Commission Texas 4 Appx. Page 40 of 740 CERTIFICATE OF SERVICE This is to certify that on June 28, 2024, a true and correct copy of the foregoing document was served on the following counsel by an electronic service provider and/or email: Chrysta L. Castañeda chrysta@castaneda-firm.com Nicole Michael nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Tel: (214) 282-8579 Fax: (214) 602-9187 Monica Latin mlatin@ccsb.com Brent M. Rubin brubin@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Tel: (214) 855-3000 Fax: (214) 580-2641 Counsel for Aspire Power Ventures, LP /s/ John R. Hulme JOHN R. HULME 5 Appx. Page 41 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 89329798 Filing Code Description: Answer/Response Filing Description: ORIGINAL ANSWER OF THE PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS Status as of 6/30/2024 1:18 PM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 6/28/2024 4:04:37 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 6/28/2024 4:04:37 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 6/28/2024 4:04:37 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 6/28/2024 4:04:37 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 6/28/2024 4:04:37 PM SENT John RHulme John.Hulme@oag.texas.gov 6/28/2024 4:04:37 PM SENT Laura Courtney laura.courtney@oag.texas.gov 6/28/2024 4:04:37 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 6/28/2024 4:04:37 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 6/28/2024 4:04:37 PM SENT Appx. Page 42 of 740 8/13/2024 10:47 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Nancy Ramirez ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, AND COURTNEY § HJALTMAN, § § 345th JUDICIAL DISTRICT Defendants. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Plaintiff Aspire Power Ventures, LP (“Aspire”) files its First Amended Petition and Application for Stay/Suspension and Temporary and Permanent Injunction against Defendants Public Utility of Commission of Texas (“PUC”), Electric Reliability Council of Texas (“ERCOT”), Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman (collectively, “Commissioners”) and respectfully shows the Court as follows: INTRODUCTION 1. The ERCOT Contingency Reserve Service (“ECRS”) illegally restrains the supply of electricity on the ERCOT grid. ECRS is illegal for three reasons: First, ECRS violates the Public Utility Regulatory Act (“PURA”), which prohibits withholding supply from the market. Second, the PUC and ERCOT disregarded the PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 1 Appx. Page 43 of 740 requirements of the Administrative Procedure Act (“APA”) with three PUC orders implementing ECRS (the “ECRS Rules”). Third, ERCOT’s procedures for adopting rules, under rulemaking authority delegated by the PUC, do not comply with the APA. 2. ECRS is a failed attempt to increase the reliability of ERCOT’s electric grid. Under ECRS, generating companies get paid to withhold some of their existing generating capacity from the grid—in “reserve”—even when electricity demand is at a peak, including in hot summer months. But PURA and the regulations enacted under it expressly outlaw the withholding of electricity as a market power abuse. See Tex. Util. Code § 39.157(a) (PUC charged with preventing market power abuses and defining withholding of production as a market power abuse); 16 Tex. Admin. Code §§ 25.501(j), 25.503(a)(6), (d) (same). ECRS violates these fundamental tenets of PURA. 3. Texas electric consumers have paid inflated rates because of ECRS. According to ERCOT’s Independent Market Monitor (“IMM”), which oversees ERCOT, ECRS inflated the cost of wholesale electricity in the period June through November 2023 by approximately $12 billion. ECRS has also caused unnecessary conservation warnings and has increased the risk of ERCOT having to use drastic measures to ensure reliability. If the Court allows ECRS to stand, Texans will continue to suffer harm. 4. Aspire is an ERCOT Market Participant harmed by ECRS. Aspire buys electricity on ERCOT’s wholesale market and has fixed-price contracts to sell PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 2 Appx. Page 44 of 740 electricity. ECRS makes wholesale electric prices much more volatile. So, Aspire cannot adequately plan to buy electricity to fulfill its fixed-price contracts. ECRS also makes it much more likely that Aspire will suffer losses on its contracts by increasing wholesale prices. As long as ECRS continues to stand, Aspire will continue to suffer harm. 5. Making matters worse, the PUC and ERCOT implemented ECRS without even attempting to comply with the mandatory requirements of the APA. The APA ensures that the public gets an opportunity to participate in agency rulemaking and that agencies do not exceed their authority when making rules. But the process ERCOT and the PUC used to implement ECRS provided none of the APA’s safeguards. Therefore, Aspire seeks a declaratory judgment declaring the ECRS Rules void. 6. In fact, the process for adopting rules concerning ERCOT’s operations deliberately and illegally sidesteps the APA. The Legislature allowed the PUC to delegate its rulemaking responsibilities to ERCOT. But the Legislature did not dispense with the APA’s mandatory requirements when allowing the PUC to delegate rulemaking responsibilities to ERCOT. And ERCOT’s own rulemaking processes do not come close to meeting the APA’s rulemaking requirements, nor does the PUC’s condensed process for approving ERCOT-adopted rules. Aspire thus also seeks a declaration that ERCOT’s rulemaking processes, on their own and when combined with the PUC’s, do not substantially comply with the APA. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 3 Appx. Page 45 of 740 7. The harm suffered by Aspire, other Market Participants, and Texas due to ECRS cannot be remedied by the payment of mere money damages. False and unsettling conservation notices to the general public cannot be undone. Further, withholding generating capacity through ECRS necessarily means that ERCOT will have to rely more on the other tools to maintain reliability including operating reserves, Energy Emergency Alerts (EEAs), and even rolling blackouts, if necessary. The PUC also takes the position that if one of its orders is declared void, it is void only on a prospective basis and cannot have any effect on transactions that have already cleared. While Aspire disagrees with the PUC’s position that prior transactions cannot be unwound, the PUC essentially concedes that no money damages would be available to remedy its illegal conduct. 8. Aspire thus seeks a stay and/or suspension of the ECRS Rules and temporary and permanent injunctive relief. Unless the Court grants interim relief, ECRS will continue to inflict substantial, irreparable harm on Aspire, other Market Participants, and Texas electric consumers. PARTIES AND PROCESS 9. Plaintiff Aspire Power Ventures, LP is a Texas limited partnership with its principal place of business in Houston, Texas. 10. Defendant Public Utility Commission of Texas is a state agency that has answered and therefore appeared. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 4 Appx. Page 46 of 740 11. Defendant Electric Reliability Council of Texas is a quasi- governmental agency that can be served through its registered agent, CT Corporation System, 1999 Bryan Street, Suite 900, Dallas, TX 75201. 12. Defendants Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman (collectively, “Commissioners”) are the Chair and Commissioners of the PUC, respectively, and are being sued in their official capacity. Gleeson, Cobos, Glotfelty, and Jackson have answered and therefore appeared. Hjaltman can be served with process at her principal place of business, 1701 N. Congress Ave., Suite 7-110, Austin, TX 78701. 13. Because a state agency is a party, a copy of this amended petition is being mailed to the Attorney General in Austin, Texas, by United States Postal Service certified mail, return receipt requested. Tex. Civ. Prac. & Rem. Code § 30.004. VENUE 14. Venue in this declaratory judgment action challenging the validity of rules is mandatory in Travis County district court. Tex. Gov’t Code § 2001.038(b). JURISDICTION 15. The PUC has delegated its rulemaking powers to ERCOT to allow it to enact rules in the form of “protocols,” and ERCOT protocols must be approved by the PUC. Tex. Util. Code § 39.151(d), (g-6); Public Utility Commission of Texas v. RWE Renewables Americas, LLC v., No. 23-0555, 2024 WL 2983174, *4 (Tex. 2024). Rulemaking at both the PUC and ERCOT are subject to the Administrative PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 5 Appx. Page 47 of 740 Procedure Act (“APA”). See Tex. Gov’t Code § 2001.003(7); see also Tex. Util. Code § 39.1511(a-1). 16. The APA provides that the validity of a rule may be determined in a declaratory judgment action brought in Travis County district court if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff. Texas Gov’t Code § 2001.038(a)-(b). The ECRS Rules interfere with and impair Aspire’s legal rights and privileges. Therefore, this Court has jurisdiction. FACTUAL BACKGROUND A. The ERCOT System: Designed to Run Based on Principles of Competition 17. When Texas deregulated its electricity market in 1999, the Legislature designed the system to operate based on principles of competition. Tex. Util. Code §§ 11.002, 39.001; see also 16 Tex. Admin. Code § 25.501(a) (requiring ERCOT protocols to be developed with consideration of microeconomic principles and to “promote economic efficiency in the production and consumption of electricity”). Public Utility Regulatory Act (“PURA”), the statutory framework under which the grid was deregulated, sought to avoid monopolistic behaviors by participants in the electricity market. PURA charged the PUC with policing and mitigating market power abuses. Tex. Util. Code § 39.157(a). PURA specifically defines the withholding of electricity as a market power abuse. Id. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 6 Appx. Page 48 of 740 18. In addition to PURA, Texas’s electricity market is governed by orders and regulations adopted by the PUC and “protocols” adopted by ERCOT under rulemaking authority delegated by the PUC. ERCOT’s protocols must be approved by the PUC. Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15. 19. The ERCOT Nodal Protocols are the rules promulgated by ERCOT which detail how ERCOT and market participants are required to operate and to interact with one another and how the wholesale electricity market is designed. Section 21 of ERCOT’s Nodal Protocols details the process for adopting new protocols and revising existing protocols. A request to revise a Nodal Protocol is called a Nodal Protocol Revision Request (“NPRR”). After ERCOT adopts an NPRR, the PUC can approve the NPRR through an order. B. Texas’s Deregulated Electricity Market and ERCOT 20. The PUC designated ERCOT as the Independent System Operator for the electric grid that covers roughly 70% of Texas’ land mass and serves approximately 90% of Texas’s electricity consumers. ERCOT oversees the operation of the high voltage electric transmission system in Texas (which is also called ERCOT), the various markets administered by ERCOT in its capacity as an Independent System Operator, and balancing of physical electricity supply and demand on the high voltage transmission system to ensure its reliability. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 7 Appx. Page 49 of 740 21. ERCOT operates within a deregulated electric sector, with competitive generators and competitive retailers. ERCOT’s rules require that each participant in the market (a “Market Participant”) belong to a specific category that best describes its activity. The Market Participant categories include power generators, competitive retailers, and transmission and distribution (wires) companies. Power generation companies produce electricity, ancillary services, or both. Transmission and distribution utilities are responsible for the power lines and other equipment that carry electricity from power plants and other generation facilities to end-use consumers. Retail electric providers sell electricity to end-use consumers in the parts of the state with retail competition. Qualified Scheduling Entities (“QSEs”) like Aspire are also Market Participants and are addressed in more detail below. 22. ERCOT must ensure reliable operation of the grid. For technical reasons, electric supply and demand must always be maintained in balance at an equilibrium point of 60 Hertz, or else the grid risks collapse. Therefore, at times, reserve generation needs to be dispatched to the grid to balance supply and demand. ERCOT accomplishes this balancing by operating a real-time wholesale electricity market. 23. The primary tool ERCOT uses to ensure that demand and supply are in constant balance—the foundation of the wholesale electricity market—is called Security Constrained Economic Dispatch (“SCED”). ERCOT typically runs SCED at intervals of at least every five minutes around the clock. Wholesale electricity is bought and sold based on the prices generated by SCED. These wholesale electricity PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 8 Appx. Page 50 of 740 prices then allow individual Market Participants to make voluntary decisions about how much electricity they would like to produce or procure over an interval. When prices are high, generators are incentivized to produce more electricity and consumers to use less. Conversely, when prices are low, generators are not incentivized to add additional capacity to the grid. 24. Because electricity is an instantaneous commodity where supply and demand must be equal at every point in time, ERCOT maintains Ancillary Services to assist the balancing process. Ancillary Services exist primarily to bridge the time gap between the five-minute SCED interval and fluctuations in supply or demand that may occur within this five-minute interval. C. About Aspire 25. Aspire is a Qualified Scheduling Entity (“QSE”) that participates in several markets administered by ERCOT. 26. Aspire buys and sells wholesale electricity in ERCOT’s real-time electricity market, serving as a conduit between companies that generate electricity and companies that sell electricity on a retail basis. 27. QSEs like Aspire bear the risk of price fluctuations in the real-time electricity market, because they must contractually commit in advance to buy and sell electricity at specific prices before SCED creates the actual wholesale market prices. As a result, artificial fluctuations in prices—fluctuations that don’t reflect normal drivers of the market like changes in weather, demand, and generation— cause prices to deviate from expectations. Because they are unexpected, these PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 9 Appx. Page 51 of 740 artificial fluctuations not only represent an additional risk to QSEs like Aspire but also can result in financial losses. For example, when Aspire sells to a retail provider, it enters into an agreement to sell the retailer electricity at a fixed price and then bears the risk that the wholesale price that Aspire buys at will be higher than the contract price with the retail provider, resulting in a loss. D. ECRS: A Costly, Market-Distorting Attempt to Bolster Reliability 28. ERCOT implemented the ERCOT Contingency Reserve Service (“ECRS”), a new Ancillary Service, in June 2023. ERCOT has claimed ECRS bolsters the grid’s reliability. But ECRS does not increase reliability, and ECRS unnecessarily increases the price of electricity. 29. ECRS is the product of, among other things, three PUC orders approving revisions to ERCOT’s Nodal Protocols that Aspire challenges here: • Order Approving ERCOT Revision Requests, NPRR 1096, Require Sustained Two-Hour Capability for ECRS and Four-Hour Capability for Non-Spin (PUC Project No. 52934) (May 12, 2022); • Order Approving ERCOT Revision Requests, NPRR 1148, Language Cleanup Related to ERCOT Contingency Reserve Service (ECRS) (PUC Project 54445) (Jan. 26, 2023); and • Order Approving ERCOT Revision Requests, NPRR 1178, Expectations for Resources Providing ERCOT Contingency Reserve Service (PUC Project 54445) (Jun. 29, 2023). (Together, the “ECRS Rules.”) 30. ERCOT pays generators who participate in ECRS to withhold part of their generating capacity as reserves unless certain operational criteria are met. Reserves are electric generating capacity that is deliberately not made available to PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 10 Appx. Page 52 of 740 meet demand. Without ECRS, this capacity would be available for dispatch to the market through the normal SCED process. So, ECRS is designed to intentionally decrease the supply of electricity available to the grid. And even a slight increase in supply during key periods when the grid is stressed could have a substantial effect on price, to the benefit of consumers. 31. ERCOT and the PUC argue ECRS supports reliability by increasing the level of reserves. But ECRS in fact does nothing to increase current electricity reserve capacity. Instead, ECRS stresses the grid by reducing the grid’s ability to meet actual, current, physical demand, often at times when that capacity is most needed, especially during hot summer days. 32. As explained in more detail below, ERCOT’s Independent Market Monitor (“IMM”), a watchdog created by the Texas Legislature with the express purpose of detecting and preventing market manipulation and recommending measures to improve the efficiency of ERCOT’s wholesale market, has identified several harms caused by ECRS. The IMM concluded that ECRS has: • Caused ERCOT to procure excessive reserves, which far exceed reserves held by ERCOT’s counterparts elsewhere; • Generated artificial shortages that produce massive inefficient market costs, totaling over $12 billion in 2023; and • Diminished reliability by withholding capacity needed to manage transmission congestion. 33. In 2023, the first year ECRS was implemented, ECRS prevented the use of 2,194 megawatts of generating capacity on average. The capacity ECRS PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 11 Appx. Page 53 of 740 relegated to reserve was allowed to run on only 40 occasions, typically for a very short duration. 34. ECRS also distorted price signals by creating an artificial scarcity condition by withholding generating capacity. This artificial scarcity resulted in both higher prices and greater price volatility. In the limited periods in 2023 when the ECRS reserve capacity was dispatched to the grid, real-time wholesale electricity prices became even less predictable for market participants. ECRS would suddenly permit more capacity to briefly appear, causing prices to abruptly drop, only to bounce back when ECRS forced that capacity back into reserves. 35. These artificial and unpredictable distortions in price signals and the increased price volatility that resulted make it impossible for independent QSEs like Aspire to efficiently manage the risks that are inherent in fixed price bilateral contracts with both buyers and sellers of electricity. The criteria used to determine when ECRS capacity is allowed to be dispatched are unpredictable, and independent QSEs have no way to forecast them. So, because QSEs like Aspire cannot predict the abrupt addition and removal of generation under ECRS, they cannot accurately forecast prices. ECRS thus makes it much harder for independent QSEs to offer fixed-price hedges to retail providers, substantially increases the price for these hedges, and in turn drives up the costs consumers ultimately pay for that electricity. While the generators get paid to sit on the sidelines, consumers and the market lose. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 12 Appx. Page 54 of 740 36. Even if Aspire and other QSEs substantially increase what they charge retail providers for fixed-price hedges, the volatility introduced by ECRS still greatly increases the likelihood that QSEs will lose money on the hedges they offer to retailers. 37. ECRS has another unfortunate consequence: it incentivizes vertical integration and concentration, which could decrease competition in the electricity industry. Some QSEs, like Aspire, do not own physical generation and are “non- affiliated.” Many other QSEs do. These “affiliated” QSEs use the affiliation between the QSE and the generation entity to manage the unexpected and artificial price distortions caused by ECRS by internalizing (and netting) the positive and negative effects of price fluctuations. To deal with ECRS, these affiliated QSEs integrate their generation and buying/selling in the market, much like vertical integration linked supply and demand in Texas’s electricity markets before restructuring in 2003. Thus, ECRS not only leads to market inefficiencies but also creates a significant incentive for firms in the industry to “re-integrate” with the likely outcome that the industry concentration ratio will increase, decreasing competition in both the generation and retail sectors. 38. No other electricity market in the United States has a service like ECRS, yet these other markets can reliably balance supply and demand efficiently and without creating imaginary prices and can ensure grid reliability to the required standards. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 13 Appx. Page 55 of 740 E. Making Matters Worse, the PUC Illegally Adopted the ECRS Rules 39. ECRS is unlawful for a second reason. The rules implementing ECRS were not adopted in substantial compliance with the Administrative Procedure Act (“APA”). So, these rules are invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). 40. The APA contains several mandatory, commonsense requirements aimed at facilitating a thorough rulemaking process that affords members of the public a meaningful opportunity to participate. These requirements include (1) notice, see Tex. Gov’t Code §§ 2001.023-.025; (2) public participation, see id. §§ 2001.029-.030; and (3) the contents of the agency order, id. § 2001.033. 41. The APA’s requirements apply to “rules,” and the ECRS Rules, adopted under rulemaking authority originally given to the PUC and then delegated to ERCOT, are “rules” to which the APA applies. See Tex. Util. Code § 39.121(d), (g-6); RWE, 2024 WL 2983174 at *2. The APA defines a “rule” broadly to include “a state agency statement of general applicability that: (i) implements, interprets, or prescribes law or policy, or (ii) describes the procedure or practice requirements of a state agency.” Tex. Gov’t Code § 2001.003(6)(A). “Rules” also include “amendment or repeal of a prior rule.” Id. § 2001.003(6)(B), (C) 42. The ECRS Rules, adopted by ERCOT and approved by the PUC, are “rules” because they impose a policy of withholding available supply from the market as a reserve, which causes artificial shortages that raise electricity prices. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 14 Appx. Page 56 of 740 43. Neither ERCOT nor the PUC made any pretense of complying with the APA when adopting and approving the ECRS Rules, respectively. ERCOT followed its own processes for protocol revisions, which require far less than the APA in terms of notice, public participation, and the order. And the PUC largely relied on ERCOT’s efforts in adopting the ECRS Rules, rather than undertaking its own efforts to satisfy the APA. 1. ERCOT and the PUC Did Not Substantially Comply with the APA’s Notice Requirements 44. When a state agency proposes a rule, the APA requires the agency to (a) “give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule,” and (b) “file notice of the proposed rule with the secretary of state for publication in the Texas Register” at least 30 days before the agency adopts the rule. Tex. Gov’t Code § 2001.023(a)-(b). Neither ERCOT nor the PUC gave notice of the ECRS Rules in the Texas Register, but rather buried them on their respective websites. See Nodal Protocol § 21.4.1(4). And the Notices of Recommended Approval ERCOT filed with the PUC were each filed less than thirty days before the PUC adopted the referenced Rule: NPRR 1096 NPRR 1148 NPRR 1178 Notice of Recommended 5/2/2022 1/6/2023 6/20/2023 Approval filed w/ PUC PUC Approval Order 5/12/2022 1/26/2023 6/29/2023 Days Between Notice and 10 20 9 Order PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 15 Appx. Page 57 of 740 2. ERCOT and the PUC Did Not Substantially Comply with the APA’s Public Participation Requirements 45. Section 2001.029 of the APA establishes three public-participation requirements that a rulemaking agency must follow, none of which were followed here: • First, a state agency must give “all interested persons a reasonable opportunity to submit data, views, or arguments, orally or in writing” before the agency adopts a rule. Tex. Gov’t Code § 2001.029(a). The PUC never gave an opportunity for public comment. ERCOT did not allow public comment and restricted comment to a limited group of stakeholders. See Nodal Protocol § 21.4.4(1), 21.4.5(1). • Second, the agency must “grant an opportunity for a public hearing before it adopts a substantive rule if a public hearing is requested by: (1) at least 25 persons; (2) a governmental subdivision or agency; or (3) an association having at least 25 members.” Id. § 2001.029(b). Neither ERCOT nor the PUC never gave an opportunity to request a public hearing. • Finally, an agency must “consider fully all written and oral submissions about a proposed rule.” Id. § 2001.029(c). But without adequate notice to the public, this requirement cannot be met because it is impossible to determine who might have desired to submit comments. 3. ERCOT and the PUC Did Not Substantially Comply with the APA’s Order Requirements 46. Under the APA, an agency order that finally adopts a rule “must include”: (1) a reasoned justification for the rule as adopted consisting solely of: (A) a summary of comments received from parties interested in the rule that shows the names of interested groups or associations offering comment on the rule and whether they were for or against its adoption; (B) a summary of the factual basis for the rule as adopted which demonstrates a rational connection between the factual basis for the rule and the rule as adopted; and PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 16 Appx. Page 58 of 740 (C) the reasons why the agency disagrees with party submissions and proposals; (2) a concise restatement of the particular statutory provisions under which the rule is adopted and of how the agency interprets the provisions as authorizing or requiring the rule; and (3) a certification that the rule, as adopted, has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Tex. Gov’t Code § 2001.033(a). This information must appear within the four corners of the agency order adopting the Rule. The PUC orders approving the ECRS Rules contain none of these materials. At best, ERCOT’s materials relating to the ECRS rules, which appear in staff-prepared documents as opposed to an official PUC order, summarize comments about the rules and contain none of the other required materials. Therefore, ERCOT and the PUC did not substantially comply with the APA when adopting the ECRS Rules. F. ERCOT’s Independent Market Monitor Confirms the Disastrous Effects of ECRS 47. The Texas Legislature requires ERCOT to appoint an Independent Market Monitor (“IMM”) “to detect and prevent market manipulation strategies, recommend measures to enhance the efficiency of the wholesale market, and provide independent analysis of any material changes proposed to the wholesale market.” Tex. Util. Code § 39.1515(a). Potomac Economics has served as ERCOT’s IMM for nearly twenty years. David Patton, PhD, an energy economist with nearly thirty years of experience, leads Potomac Economics. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 17 Appx. Page 59 of 740 48. The IMM recently issued a report slamming ECRS. The IMM explained that shortly after ECRS was implemented in June 2023, ERCOT decided to nearly double the amount of ten-minute reserves, causing ERCOT to buy excessive reserves compared to other U.S. power grids’ reserves. 49. The IMM also concluded ECRS is not based on sound reliability criteria. ECRS does not account for the probability of contingencies and uncertainties that lead to reliability risks. ECRS also fails to balance reliability objectives with the costs of satisfying reliability requirements. 50. Ultimately, the IMM concluded that ECRS generated artificial electricity shortages that produced massive, inflated costs for electricity sold on the wholesale market, totaling more than $12 Billion between June through November 2023. While not all these costs were passed on to retail consumers, some of whom buy on fixed-price contracts, in the longer term, these artificially increased wholesale prices will necessarily negatively impact the retail prices Texans pay. 51. As the IMM explained in testimony to the PUC on July 25, 2024, ECRS’s deployment in 2023 caused forward prices for summer 2024 and 2025 to roughly double, which led consumers to have to pay “much, much higher” rates when signing new contracts with retail providers. The longer the problems with ECRS continue, the “larger the share of the costs hit Texas consumers.” 52. Finally, the IMM suggested fixes to ECRS, but ERCOT has not adopted the IMM’s proposed fixes and has pushed off consideration of those fixes. So, with ECRS continuing to keep much needed capacity off the grid during high- PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 18 Appx. Page 60 of 740 demand periods, market participants and Texas electric consumers are poised to pay unnecessary, increased costs for electricity unless and until ECRS is promptly reined in or suspended. DECLARATORY JUDGMENT 53. Aspire incorporates by reference all of the allegations set forth above. 54. Aspire asserts that the ECRS Rules were not adopted in substantial compliance with the APA, making them invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). ERCOT and the PUC disagree. Because Aspire’s rights, status, and other legal relations are affected by the ECRS Rules, declaratory relief is necessary and appropriate to resolve questions regarding the validity of the ECRS Rules. 55. Aspire therefore seeks a declaration under Chapter 37 of the Texas Civil Practice and Remedies Code and Texas Government Code § 2001.038 including, but not limited to, the following: a) Each of the ECRS Rules is a “rule” within the meaning of the APA. b) The PUC and ERCOT did not substantially comply with mandatory requirements of the APA when adopting and approving each of the ECRS Rules, including requirements for (1) notice under APA §§ 2001.023-.025; (2) public participation under §§ 2001.029-.030; and (3) the contents of the agency order under § 2001.033. c) Each of the ECRS Rules is therefore invalid and void under Texas Government Code § 2001.035. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 19 Appx. Page 61 of 740 d) Chapter 21 of ERCOT’s Nodal Protocols, both on its own and when combined with the PUC’s process for approving ERCOT protocols, does not provide a process for making and amending rules that substantially complies with APA §§ 2001.023-.025, .029-.030, .033. Aspire further asserts that the ECRS Rules violate the fundamental limits of PURA in that they require generators to withhold power from the grid. Aspire seeks a declaration that: a) The ECRS Rules violate PURA because they direct generators to withhold electricity from the grid in violation of Tex. Util. Code §39.157(a) b) In promulgating the ECRS Rules, the Commissioners committed ultra vires acts for which they are liable in their official capacities. See City of El Paso v. Heinrich, 284 S.W.3d 366, 372-73 (Tex. 2009). c) Each of the ECRS Rules is therefore invalid and void. APPLICATION FOR STAY, SUSPENSION, AND INJUNCTIVE RELIEF 56. Aspire incorporates by reference all of the allegations set forth above. 57. This Court has the power to enter a temporary injunction based on the failure to substantially comply with the APA when adopting the ECRS Rules. Abbott v. Doe, 691 S.W.3d 55, 91 (Tex. App.—Austin 2024, pet. filed) (collecting cases in which the court upheld temporary injunctions based on APA rulemaking challenges). Further, Texas Utilities Code § 15.004 provides that while an appeal of a regulatory authority’s order is pending, a district court “may stay or suspend all or part of the PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 20 Appx. Page 62 of 740 operation of the order, ruling, or decision.” Cf. Tex. Gov’t Code § 2001.038 (providing that a validity challenge under the APA cannot be used to “stay a hearing in which a suspension, revocation, or cancellation of a license by a state agency is at issue” but imposing no other limitations on a court’s ability to issue a stay). In deciding whether to grant a stay or suspension, the Court must follow the practices of a court exercising equity jurisdiction. Tex. Util. Code § 15.004. 58. The Court also has the power to enter a temporary injunction against the ECRS rules because they violate the fundamental limits of PURA. See City of El Paso v. Heinrich, 284 S.W.3d 366, 376 (Tex. 2009) (“[A] claimant who successfully proves an ultra vires claim is entitled to prospective injunctive relief, as measured from the date of injunction.”). 59. As set forth in more detail above, ECRS adopted and the PUC approved the ECRS Rules without substantially complying with mandatory requirements in the APA, rendering the ECRS Rules voidable. Also, the ECRS Rules forced withholding of electricity, exceeding the limits of PURA. Aspire has therefore established, at the very least, a probable right to the relief it seeks upon final hearing. 60. If the operation of the ECRS Rules is not promptly stayed, suspended, or enjoined, Aspire and others will suffer immediate and irreparable injury as a result of the unlawfully adopted ECRS Rules that violate PURA, as set forth above. The injuries that Aspire and others will suffer are irreparable and cannot adequately be remedied at law. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 21 Appx. Page 63 of 740 61. Even with regard to monetary losses, the PUC has taken the position that Aspire and other Market Participants from ever obtaining monetary relief. See Town of Palm Valley v. Johnson, 87 S.W.3d 110, 111 (Tex. 2001) (per curiam) (irreparable injury must be shown because injunctive relief is “designed to provide remedy to cover those injuries for which there was not clear, full, and adequate relief at law”). Although the Supreme Court rejected the PUC’s arguments in Public Utility Commission of Tex. v. Luminant Energy Co. LLC that injuries arising from PUC rules deemed invalid are not redressable, the PUC and ERCOT seem poised to erect barriers to monetary relief based on any challenges to rules that would require repricing. See No. 23-0231, 2024 WL 2982955, at *5 (Tex. June 14, 2024). If the ECRS Rules are not stayed or suspended during the pendency of this action, Aspire and other Market Participants will be purchasing electricity at prices illegally inflated by ECRS. By contending that money damages are unavailable, the PUC and ERCOT cannot avoid the conclusion that injunctive relief is particularly appropriate to prevent ECRS from causing further harm. 62. Even if Aspire had the ability to potentially pass through some of the increased costs to its customers, that would not negate the irreparable nature of the injury ECRS causes. Because Aspire has agreements with certain retail providers for fixed-price hedges, Aspire bears the risk of unpredictable and unforeseeable price increases caused by ECRS. Cf. Sw. Elec. Power Co. v. Burlington N., Inc., 475 F. Supp. 510, 522 (E.D. Tex. 1979) (irreparable injury suffered by electric utility that had to pay increased costs to railroad for fuel transport not negated; case law PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 22 Appx. Page 64 of 740 barred recovery of damages from railroad and pass-through agreement with customers “not assured” to be enforced because PUC could disallow increase in fuel cost passed on to customer). 63. Even if Aspire could, in theory, recover damages or other monetary relief because of the harms it suffered because of ECRS, Aspire will suffer an irreparable injury because “damages are very difficult to measure by any certain pecuniary standard.” Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2011, no pet.). Among other things, ERCOT has chosen not to implement the systems that would allow it to meaningfully and correctly re-run SCED, even though it is technically possible to implement such systems and to re-calculate the dispatch and resulting prices as if ECRS had not run. The only adequate, effective, and complete relief is for the Court to stay or suspend the ECRS Rules. 64. No bond should be necessary for the issuance of the stay, suspension, or temporary injunction because ERCOT and the PUC will not suffer any harm resulting from a stay or suspension of the ECRS Rules and is simply being required to comply with the APA. However, Aspire is willing to post a bond if the Court determines it appropriate. See Tex. R. Civ. P. 684. 65. For all these reasons, pursuant to Texas Rule of Civil Procedure 680 et seq., Texas Civil Practice and Remedies Code § 65.001 et seq., and Texas Utilities Code § 15.004, Aspire respectfully requests a stay, suspension, and/or temporary and permanent injunction, staying or suspending the operation of the ECRS Rules PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 23 Appx. Page 65 of 740 and ordering and restraining ERCOT, the PUC, the Commissioners, their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise (collectively, the “Injunction Restrained Parties”) on the following terms: The PUC and ERCOT are prohibited from enforcing, using, or otherwise allowing the ECRS Rules to operate. PRAYER FOR RELIEF For these reasons, Aspire respectfully requests that ERCOT and Hjaltman be cited to appear and answer, and that this Court: 1. Issue the declaratory judgment requested by Aspire; 2. Stay or suspend the operation of the ECRS Rules under Texas Utilities Code § 15.004; 3. Issue the temporary and permanent injunctive relief requested by Aspire; 4. Award Aspire costs, expenses, and attorneys’ fees to the extent recoverable by law; and 5. Award Aspire any other and further relief to which it may be justly entitled. PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 24 Appx. Page 66 of 740 Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Telephone: (214) 282-8579 Facsimile: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Ph: 214-855-3000 Fax: 214-580-2641 ATTORNEYS FOR PLAINTIFF CERTIFICATE OF SERVICE The undersigned hereby certifies that on August 13, 2024, a true and correct copy of the above and foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Brent M. Rubin PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 25 Appx. Page 67 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin on behalf of Chrysta Castaneda Bar No. 15325625 brubin@ccsb.com Envelope ID: 90829164 Filing Code Description: Amended Filing Filing Description: PLAINTIFF’S FIRST AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Status as of 8/13/2024 2:35 PM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 8/13/2024 10:47:08 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 8/13/2024 10:47:08 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 8/13/2024 10:47:08 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 8/13/2024 10:47:08 AM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 8/13/2024 10:47:08 AM SENT John RHulme John.Hulme@oag.texas.gov 8/13/2024 10:47:08 AM SENT Laura Courtney laura.courtney@oag.texas.gov 8/13/2024 10:47:08 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 8/13/2024 10:47:08 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 8/13/2024 10:47:08 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 8/13/2024 10:47:08 AM SENT Judy Garrison jgarrison@ccsb.com 8/13/2024 10:47:08 AM SENT Appx. Page 68 of 740 9/9/2024 9:34 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ERCOT’S ORIGINAL ANSWER Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) files its Original Answer and respectfully shows this Court the following: I. JURISDICTION 1. This Court lacks subject-matter jurisdiction to adjudicate Plaintiff Aspire Power Ventures, LP’s (“Aspire” or “Plaintiff”) claims because the Public Utility Commission of Texas (“PUCT”) approval orders and the ERCOT Nodal Protocols that are the subject of Plaintiffs’ claims are not “rules” under the Administrative Procedure Act; thus, APA § 2001.038’s limited immunity waiver does not apply here, and Aspire’s suit is barred by sovereign immunity. Further, this Court lacks subject-matter jurisdiction because Aspire’s claims against ERCOT fall within the exclusive jurisdiction of the PUCT, and Aspire failed to exhaust its administrative remedies before the PUCT prior to filing suit. II. GENERAL DENIAL 2. Pursuant to Texas Rule of Civil Procedure 92, ERCOT generally denies each and every claim and allegation contained in Plaintiff’s Original Petition, and all amendments and supplements thereto, and demands strict proof thereof as required by law. ERCOT’S Original Answer Page 1 Appx. Page 69 of 740 III. AFFIRMATIVE DEFENSES 3. Plaintiff’s claims are barred, in whole or in part, by the doctrine of sovereign immunity. 4. Plaintiff’s claims are barred, in whole or in part, by Plaintiff’s failure to exhaust its administrative remedies. 5. Plaintiff’s claims are barred, in whole or in part, because Plaintiff lacks standing to assert private claims for alleged violations of PURA. 6. Plaintiff fails to state a cause of action against ERCOT upon which relief can be granted. 7. Plaintiff’s claims are barred, in whole or in part, by waiver, estoppel, and/or laches. 8. Plaintiff’s claims are barred, in whole or in part, by the two-year statute of limitations set forth in APA § 2001.035(b). 9. Plaintiff is not entitled to recover attorneys’ fees in this matter. PRAYER ERCOT requests that the Court dismiss this case for lack of jurisdiction. Alternatively, ERCOT requests that upon proper motion or a final trial in this matter, a judgment be entered that Plaintiff takes nothing against ERCOT. ERCOT further requests all other relief, at law or in equity, to which it is or may be entitled. ERCOT’S Original Answer Page 2 Appx. Page 70 of 740 Respectfully submitted, WINSTEAD PC 600 W. 5th Street Suite 900 Austin, Texas 78701 (512) 370-2800 telephone (512) 370-2850 fax By: /s/ Elliot Clark Elliot Clark SBN 24012428 eclark@winstead.com Elin Isenhower SBN 24104206 eisenhower@winstead.com ATTORNEYS FOR DEFENDANT ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. CERTIFICATE OF SERVICE By my signature below, I hereby certify that a true and correct copy of this document has been served on all counsel of record in accordance with the Texas Rules of Civil Procedure on September 9, 2024. /s/ Elliot Clark Elliot Clark ERCOT’S Original Answer Page 3 Appx. Page 71 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 91774770 Filing Code Description: Answer/Response Filing Description: ERCOT’S ORIGINAL ANSWER Status as of 9/9/2024 3:36 PM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/9/2024 9:34:56 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/9/2024 9:34:56 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/9/2024 9:34:56 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/9/2024 9:34:56 AM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/9/2024 9:34:56 AM SENT John RHulme John.Hulme@oag.texas.gov 9/9/2024 9:34:56 AM SENT Laura Courtney laura.courtney@oag.texas.gov 9/9/2024 9:34:56 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/9/2024 9:34:56 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/9/2024 9:34:56 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/9/2024 9:34:56 AM SENT Judy Garrison jgarrison@ccsb.com 9/9/2024 9:34:56 AM SENT Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/9/2024 9:34:56 AM SENT Appx. Page 72 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 91774770 Filing Code Description: Answer/Response Filing Description: ERCOT’S ORIGINAL ANSWER Status as of 9/9/2024 3:36 PM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Elliot Clark eclark@winstead.com 9/9/2024 9:34:56 AM SENT Elin Isenhower eisenhower@winstead.com 9/9/2024 9:34:56 AM SENT Appx. Page 73 of 740 9/9/2024 12:08 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ERCOT’S PLEA TO THE JURISDICTION AND ATERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) files this Plea to the Jurisdiction and Alternatively, Motion to Dismiss Under Rule 91(a) and Alternatively, Plea in Abatement, and respectfully requests the Court dismiss (or, alternatively, abate) Plaintiff Aspire Power Ventures, LP’s (“Aspire”) claims against ERCOT. SUMMARY In this lawsuit, Aspire challenges “three PUC orders approving revisions to ERCOT’s Nodal Protocols,” under the purported jurisdiction of Section 2001.038 of the Administrative Procedure Act (“APA”). But the Texas Supreme Court recently held that a Public Utility Commission of Texas (“PUCT”) “order approving” an ERCOT Protocol revision is “not an agency-adopted ‘rule’ under the Administrative Procedure Act.” PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 492 (Tex. 2024) (emphasis added). Because the three PUCT orders approving ERCOT Protocol revisions— defined by Aspire as the “ECRS Rules”—are not agency rules, this Court lacks jurisdiction under APA § 2001.038, and Aspire’s claims must be dismissed. Id. Nor can Aspire use APA § 2001.038 to challenge ERCOT’s Protocol revision process. Just this term, the Texas Supreme Court sanctioned the existing revision process when it carefully analyzed -1- Appx. Page 74 of 740 the legislatively required and PUCT-directed “detailed procedures for adopting and revising [ERCOT’s] protocols,” and concluded that “this painstaking procedure [leverages industry expertise] while maintaining transparency and affording interested parties plentiful opportunities to weigh in.” Id. at 490. The Court rejected the argument that recent statutory changes show “the Legislature intended to overhaul that process entirely and effectively convert ERCOT Protocols into PUC rules subject to the same review procedures,” noting “we do not discern such a sweeping intent from the language the Legislature chose.” Id. at 491. In fact, the Court found the opposite, concluding the recent amendments “signal[] legislative recognition that ERCOT rulemaking and PUC rulemaking are independent endeavors.” Id. at 492. Thus, neither PUCT orders approving Protocol revisions, nor the Protocols themselves are agency-adopted “rules” under the APA. This Court therefore lacks jurisdiction under APA § 2001.038—the sole jurisdictional basis pleaded by Aspire to support its claims—without which ERCOT’s sovereign immunity bars Aspire’s claims. CPS Energy v. ERCOT, 671 S.W.3d 605, 611 (Tex. 2023). Aspire was not without a potential remedy for the harm it claims. “PUC regulations provide a process for review of ERCOT Protocols, . . . which culminates in a suit for judicial review in district court.” RWE, 691 S.W.3d at 492 n.11. But Aspire “did not engage in that process, choosing instead to utilize the inapplicable procedure for reviewing PUC [] rules.” Id. Aspire’s failure to exhaust its administrative remedies also deprives this Court of jurisdiction over Aspire’s claims. CPS Energy, 671 S.W.3d at 618. Even if the Court had jurisdiction, Aspire’s claims have no basis in law and should be dismissed under Rule 91a. Aspire’s procedural challenge fails as a matter of law because, as the RWE Court held weeks ago, the APA’s rulemaking requirements do not apply to the ERCOT Protocols or PUCT orders finally approving those Protocols. Aspire’s substantive challenge fares no better, as it is based solely on the claim that the ECRS program violates PURA § 39.157—a statute that directs the -2- Appx. Page 75 of 740 PUCT to protect against certain market power abuses. Nothing in PURA § 39.157 gives Aspire a private cause of action against the PUCT and ERCOT, and even if it did, that provision—which prohibits anticompetitive practices by market participants—is inapplicable to ERCOT. Moreover, in another recent Texas Supreme Court decision, the Court recognized that the PUCT is charged with balancing two equally critical, yet potentially conflicting, legislative goals: preserving a competitive market, and ensuring grid reliability. Sometimes, competition must yield to reliability, and “[d]eciding when those circumstances are present—and how to respond—is the Commission’s job, not the judiciary’s.” PUCT v. Luminant Energy Co. LLC, 691 S.W.3d 448, 463 (Tex. 2024) (emphasis added). It is, therefore, not for Aspire or this Court to second guess whether the ECRS program’s costs outweigh its reliability benefits, as Aspire claims here. In the unlikely event the Court determines it has jurisdiction and Aspire has pleaded viable claims, it should not proceed with this lawsuit because Aspire has failed to join all necessary and indispensable parties. When a party brings a declaratory judgment claim, as Aspire has done here, Texas law requires that “all persons who have or claim any interest that would be affected by the declaration must be made parties.” Tex. Civ. Prac. & Rem. Code § 37.006(a) (emphasis added). Here, Aspire asks the Court to not only declare the ECRS program invalid—but to declare the entire ERCOT Protocol revision process invalid—thereby eviscerating the Protocols entirely and plunging the State’s grid and market into chaos. This requested declaratory relief would affect the interests of hundreds of other market participants that participate in the ERCOT market and that have invested billions of dollars in reliance on the Protocols that govern the market, including by providing the ECRS Ancillary Service that Aspire seeks to prohibit. As set forth below, the Court should dismiss all of Aspire’s claims against ERCOT. -3- Appx. Page 76 of 740 BACKGROUND1 I. ERCOT and the ERCOT Nodal Protocols ERCOT is the Independent System Operator (“ISO”) and “essential organization” statutorily charged with operating the State’s electric grid and wholesale electricity market—all while subject to the PUCT’s “complete authority.” See Public Utility Regulatory Act (“PURA”) 2 §§ 39.151(a), (d). ERCOT does not generate, transmit, distribute, or sell electricity. Instead, ERCOT is the entity that Texas tasked with regulating Texas’s intrastate grid and wholesale electricity market, subject to plenary control by the PUCT. See PURA §§ 39.151(a), (g); 16 Tex. Admin. Code (“TAC”) § 25.361(b); see also CPS Energy, 671 S.W.3d at 611–12 (discussing ERCOT’s history). All aspects of ERCOT’s finances and operations are subject to the PUCT’s control, and the State of Texas selects ERCOT’s governing board. Id. at 623–26. As the Texas Supreme Court recently put it, “ERCOT and the PUC[T] are uniquely situated as legislatively endorsed joint participants in a complex regulatory scheme—each serving its own distinct and essential purposes.” RWE, 691 S.W.3d at 490. ERCOT manages Texas’s intrastate grid and wholesale electricity market using statutory authority delegated to it by the PUCT to “establish, adopt, and enforce a variety of policies, rules, guidelines, standards, procedures, protocols, and other requirements to govern the operations of market participants.” CPS Energy, 671 S.W.3d at 626 (citing PURA §§ 39.151(d), (i), (j), (l)). In 2021, the Legislature amended PURA to specifically require the PUCT to approve any Protocols adopted by ERCOT and for ERCOT to “establish and implement a formal process for adopting new protocols or revisions to existing protocols.” PURA § 39.151(g-6). As the Legislature knew when it added this requirement, ERCOT already had a longstanding collaborative, stakeholder-led process for adopting 1 “[A] a court deciding a plea to the jurisdiction is not required to look solely to the pleadings but may consider evidence and must do so when necessary to resolve the jurisdictional issues raised.” Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554–55 (Tex. 2000). 2 PURA is codified at Texas Utilities Code §§ 11.001–66.016. -4- Appx. Page 77 of 740 and revising its Protocols, referred to as the Nodal Protocol Revision Request (“NPRR”) process. See ERCOT Protocols § 21.2(1); RWE, 691 S.W.3d at 491. In compliance with the Legislature’s directive, ERCOT revised its formal process to take into account the new requirement for PUCT approval of ERCOT-adopted Protocols. RWE, 691 S.W.3d at 490. The NPRR process is detailed in ERCOT Protocols § 21. The NPRR process is extensive, providing multiple opportunities for comment and vote by representatives of each market segment, regulators, and consumers as the proposed Protocol revisions progress through ERCOT’s Protocol Revision Subcommittee, Technical Advisory Committee, and State-appointed Board. ERCOT Protocols §§ 21.3, 21.4.1, 21.4.4, 21.4.5; see also RWE, 691 S.W.3d at 489–90 (describing ERCOT’s detailed procedures for adopting and revising protocols). Throughout the NPRR process, ERCOT employs its subject-matter experts in a range of relevant areas (including, e.g., economics, market design, and various engineering specialties) to analyze the effect of any proposal on ERCOT’s functions and the grid and market. ERCOT Protocols §§ 21.4.6, 21.4.9. Because market participants like Aspire have a hands-on role in the Protocols’ drafting and revision, ERCOT is able to harness their substantial expertise as well. Indeed, in its recent analysis and endorsement of ERCOT’s Protocol revision process, the Texas Supreme Court recognized that this “painstaking procedure serves to leverage the expertise of ERCOT members and industry stakeholders while maintaining transparency and affording interested parties plentiful opportunities to weigh in.” RWE, 691 S.W.3d at 490 (emphasis added). The result of this “painstaking procedure” is thousands of pages of binding rules that govern every aspect of Texas’s electric grid and wholesale market—not only the Protocols, but also numerous other “guides, policies and procedures” containing legally binding market rules. See ERCOT, Market Rules; PURA § 39.151(j). These ERCOT market rules are highly detailed and rife with technical -5- Appx. Page 78 of 740 specifications. See, e.g., ERCOT Protocols §§ 3.22.2, 6.5.7.5, 8.1.1.4.1. For example, the Protocols governing certain ECRS charges include complex mathematical pricing formulas like this: The PUCT has neither the staff nor deep technical knowledge necessary to craft these immensely complex rules. See RWE, 691 S.W.3d at 490 (acknowledging that the PUCT “lacks the expertise and staff resources to make informed regulatory decisions independent of ERCOT.”) (cleaned up). For this reason, and because “ERCOT is uniquely positioned to manage the electricity market by virtue of its technical expertise,” id. at 487, the Legislature authorized the PUCT to delegate its rulemaking authority to ERCOT. PURA § 39.151(d). In so doing, the Legislature created a two-part, non-APA process by which (1) ERCOT first “adopt[s]” market rules using its own “formal process” (the NPRR process); and (2) the PUCT exercises its supervisory authority to finally “approve, reject, or remand” any ERCOT-adopted Protocol revisions. PURA § 39.151(g-6); see also CPS, 671 S.W.3d at 623; RWE, 691 S.W.3d at 487, 490–91. II. Ancillary Services and ECRS. As the PUCT-certified ISO, ERCOT must “ensure the reliability” of Texas’s electric grid. PURA § 39.151(a)(2). To ensure the reliability of the grid, ERCOT must, among other things, make sure that the supply and demand of electricity on the ERCOT System are at all times balanced. See 16 TAC § 25.361(b)(4). “For the ERCOT grid to remain functional, electricity supply and demand must -6- Appx. Page 79 of 740 remain balanced at a frequency of 60 hertz [Hz].” Luminant, 691 S.W.3d at 455. Failure to maintain system frequency at 60 Hz can damage grid infrastructure and lead to system-wide power outages lasting weeks or months. Id. at 455 (recognizing that the sudden frequency decay during Winter Storm Uri threatened to put Texas in a “total grid collapse that would have plunged the state into darkness for weeks, maybe months.”). Ancillary Services are an essential tool ERCOT uses to help resolve system imbalances and ensure grid reliability. See PURA § 39.159(b) (requiring that ERCOT “procure[] ancillary or reliability services . . . to ensure appropriate [grid] reliability”). Ancillary Services can be provided by electric generators or consumers, and are used to increase or decrease the supply of electricity in a matter of minutes or even seconds, which is particularly critical in times of high demand (e.g., peak summer temperatures) or short supply (e.g., Winter Storm Uri, when historically low temperatures froze generation equipment). See id.; see also ERCOT Protocols §§ 3.17, 6.5.9.4. Because Ancillary Services are an integral component of maintaining any electric system reliability, they have long been used in various forms by ISOs around the nation. 3 One type of Ancillary Service used by ERCOT is the herein complained-of ERCOT Contingency Reserve Service, or ECRS. ECRS was created through NPRR 863, which was proposed in January 2018 by a market participant. 4 After undergoing over a year of extensive vetting and revision by ERCOT and various market participants through the NPRR process, the creation of ECRS was approved and adopted by ERCOT’s Board in February 2019. 5 Aspire could have filed a complaint 3 See, e.g., Federal Energy Regulatory Commission (“FERC”) report on Energy and Ancillary Services Market Reforms to Address Changing System Needs (Sept. 2021), available here (outlining Ancillary Services products used by various ISOs and Regional Transmission Operators (RTOs) around the U.S.). 4 See NPRR 863, Creation of Primary Frequency Response Service Product and Revisions to Response Service (Jan. 1, 2018), available here. 5 See ERCOT Board Report on NPRR 863 (Feb. 13, 2019), available here. At that time, the PUCT was not required to approve ERCOT’s adoption of NPRR 863. PUCT approval became mandatory in 2021 with the addition of PURA § 39.151(g-6). -7- Appx. Page 80 of 740 against ERCOT at the PUCT when ECRS was adopted five years ago—but it chose not to. See RWE, 691 S.W.3d at 490. ECRS is the first new Ancillary Service in the ERCOT Region in more than 20 years. 6 It was developed to address certain reliability risks that ERCOT’s other Ancillary Services do not adequately address, including those risks created by rapid grid modernization (e.g., increasing amounts of intermittent wind and solar generation resources), which are only compounded by the ever-present heightened reliability risks presented by ERCOT’s intrastate nature. 7 “While all the other states in the Union have extensive interconnections with neighboring states, nearly 90% of Texas is covered by a single isolated grid with limited connections to external power supplies,” Texas v. Env’t Prot. Agency, 829 F.3d 405, 431 (5th Cir. 2016), meaning that, unlike the rest of the nation, the ERCOT grid cannot rely on its neighbors to prevent grid collapse. See also id. at 432 (recognizing that “ERCOT’s independence makes the Texas electrical grid uniquely vulnerable to sudden power shortages”). ECRS was intended in large part to fulfill a similar role to that of the import capability that other power regions have at hand, 8 making it a critical reliability tool—a fact that no one but Aspire disputes. 9 III. Aspire fails to exhaust its administrative remedies. To be sure, ECRS—as ERCOT’s first new Ancillary Service in decades—is still undergoing finetuning by ERCOT, at the directive of the PUCT and in close collaboration with market participants and the ERCOT Independent Market Monitor (“IMM”). The “ECRS Rules” Aspire complains of here are part of that finetuning, which is ongoing within the statutorily prescribed administrative process. 6 PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item No. 84 (July 22, 2024), available here. 7 See, e.g., ERCOT Protocols § 6.5.7.6.2.4(1) (listing purposes of ECRS). 8 PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item No. 84 (July 22, 2024), available here. 9 See generally PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item Nos. 81–90, available here. -8- Appx. Page 81 of 740 Most recently, in June 2024, ERCOT adopted NPRR 1224, which was intended to address concerns about when ECRS resources are deployed. 10 Aspire was among the market participants that provided comments to NPRR 1224, raising similar economic complaints it asserts here—but nowhere suggesting that ECRS is illegal or that the NPRR process in which it was engaging is illegal. 11 Though NPRR 1224 was approved by the various market stakeholders on ERCOT’s Protocol Revision Subcommittee and Technical Advisory Committee, and was ultimately adopted by ERCOT’s Board, the PUCT, in fact, recently rejected NPRR 1224 in its current form after receiving and conducting an open meaning on additional comments and concerns received from PUCT staff, the IMM, and market participants. 12 As NPRR 1224 demonstrates, the prescribed formal NPRR process works—and it does so in a way that invites input and collaboration from all segments of the ERCOT market to create solutions that balance the needs of the entire grid and market. 10 See NPRR 1224, ECRS Manual Deployment Triggers (Mar. 27, 2024), available here. 11 See Aspire’s Comments to NPRR 1224 (June 6, 2024), available here. 12 See PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item Nos. 81–90, available here. -9- Appx. Page 82 of 740 Flouting this process, Aspire runs to this Court complaining of “three PUC orders implementing ECRS,” and claiming—for the first time in five years since its creation—that ECRS is illegal. 13 See Am. Pet. ¶ 1. Specifically, Aspire challenges three “ECRS Rules”: (1) a May 2022 PUCT order approving ERCOT NPRR 1096, which modified certain requirements for Energy Storage Resources providing ECRS; 14 (2) a January 2023 PUCT order approving ERCOT NPRR 1148, which was merely a language cleanup of the already-existing ECRS Protocols; 15 and (3) a June 2023 PUCT order approving ERCOT NPRR 1178, which clarified and updated expectations for Resources providing ECRS. 16 Aspire chiefly complains that these three PUCT orders approving ERCOT Protocol revisions fail to comply with the APA. See id. ¶¶ 15–16, 54–55. Aspire also claims that these orders “violate PURA because they direct generators to withhold electricity from the grid in violation of Tex. Util. Code §39.157(a).” Id. ¶ 55. For both its procedural and substantive challenge, Aspire asks the Court to (1) declare the “ECRS Rules” invalid and void; and, (2) enjoin the PUCT and ERCOT “from enforcing, using, or otherwise allowing the ECRS Rules to operate.” Id. ¶ 65. Though Aspire seemingly tailors its requested declaratory and injunctive relief to invalidating the three above-enumerated PUCT orders, it spends the rest of its twenty-plus page petition lambasting the allegedly “illegal” ECRS program, suggesting it really seeks to have ECRS invalidated in its entirety. 17 See id. ¶ 1 (at the outset asserting that “[ECRS] illegally restrains the supply of electricity 13 Notably, in its comments to NPRR 1224, Aspire claimed it was “fully supportive of the recommendations made by the IMM” to improve the ECRS program, not to abolish it, and even offered its own additional improvement recommendations therein. 14 See Final ERCOT Board Report adopting NPRR 1096 (May 2, 2022), available here. 15 See Final ERCOT Board Report adopting NPRR 1148 (Dec. 21, 2022), available here. 16 See Final ERCOT Board Report adopting NPRR 1178 (June 20, 2023), available here. 17 Aspire’s definition of “ECRS Rules” creates ambiguity on this point. Aspire claims that “ECRS is the product of, among other things,” these three enumerated PUCT orders, which it then defines as the “ECRS Rules.” Pet. ¶ 29. Elsewhere, Aspire defines the “ECRS Rules” as the “three PUC orders implementing ECRS.” Id. ¶ 1. One definition suggests that Aspire challenges ECRS program in its entirety, the other does not. To be clear, ECRS was adopted in 2019 before any PUCT approval order was required for Protocol revisions. None of the three orders “implements” ECRS. The three PUCT orders only approved Protocol revisions modifying certain rules of the already-adopted program. Again, the ECRS program was created five years ago and went into effect in 2023, after years of time and expense developing the program. - 10 - Appx. Page 83 of 740 on the ERCOT grid.”). Not only that, but Aspire additionally challenges the entire ERCOT Protocol revision process, claiming this longstanding, painstaking process (that Aspire frequently participates in) fails to comply with the APA. Id. ¶ 55. 18 In other words, Aspire seeks not only to throw out the ECRS program—it also seeks to do away with the entire ERCOT market rulebook. The Court need not reach the merits of these far-reaching claims, however. This case is easily resolved on the threshold jurisdictional question, which has already been answered in the Texas Supreme Court’s recent decisions in PUCT v. RWE Renewables Americas, LLC 19 and CPS Energy v. ERCOT. 20 Those cases, discussed below, make clear that Aspire’s claims must be dismissed with prejudice for want of subject-matter jurisdiction; thus, the Court need not reach ERCOT’s alternative Rule 91a or Plea in Abatement unless it first finds it has jurisdiction. LEGAL STANDARDS I. Plea to the Jurisdiction. A “court must determine at its earliest opportunity whether it has the constitutional or statutory authority to decide the case before allowing the litigation to proceed.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). “Sovereign immunity from suit defeats a trial court’s subject matter jurisdiction and thus is properly asserted in a plea to the jurisdiction.” Id. at 225– 226. Subject matter jurisdiction is also lacking “when the Legislature has granted [an] agency the sole authority to make an initial determination in a dispute”; in that instance, the court “lack[s] jurisdiction until the party has exhausted all administrative remedies before the agency.” Oncor Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018). 18 Specifically, Aspire asks for a declaration that “Chapter 21 of ERCOT’s Nodal Protocols, both on its own and when combined with the PUC’s process for approving ERCOT protocols, does not provide a process for making and amending rules that substantially complies with APA §§ 2001.023-.025, .029-.030, .033.” Id. ¶ 55. 19 691 S.W.3d 484; see also Appendix A. 20 671 S.W.3d 605; see also Appendix B. - 11 - Appx. Page 84 of 740 Whether a court has subject matter jurisdiction is a question of law. Miranda, 133 S.W.3d at 226. Where, as here, a plea to the jurisdiction challenges the pleadings, the court’s task is to “determine if the pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause.” Id. If “the pleadings affirmatively negate the existence of jurisdiction, then a plea to the jurisdiction may be granted without allowing the plaintiffs an opportunity to amend.” Id. at 227. II. Rule 91a. Rule 91a authorizes dismissal of a cause of action that “has no basis in law or fact.” Tex. R. Civ. P. 91a(1). “A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” Id. Whether dismissal on the pleadings is proper is a question of law. City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex. 2016). Legal conclusions “need not be taken as true in evaluating the sufficiency of the pleadings.” City of Austin v. Liberty Mut. Ins. Co., 431 S.W.3d 817, 826 (Tex. App.—Austin 2014, no pet.). ERCOT’S PLEA TO THE JURISDICTION I. ERCOT’s Sovereign Immunity Bars Aspire’s Claims. The Texas Supreme Court recently held “that ERCOT is entitled to sovereign immunity” as an “arm of the State government”: We hold that ERCOT is entitled to sovereign immunity because PURA evinces clear legislative intent to vest it with the “‘nature, purposes, and powers’ of an ‘arm of the State government’” and because doing so satisfies the political, pecuniary, and pragmatic policies underlying our immunity doctrines. CPS Energy, 671 S.W.3d at 628. Absent legislative waiver, then, ERCOT is immune from suit. See id. It is Aspire’s burden to establish such a waiver, Rattray v. City of Brownsville, 662 S.W.3d 860, 865 (Tex. 2023), and it has failed to do so here. - 12 - Appx. Page 85 of 740 A. Neither the ERCOT Protocols nor PUCT orders approving ERCOT Protocols are “rules” under the APA. Aspire claims that this Court has jurisdiction under APA § 2001.038, which authorizes declaratory relief regarding the “validity or applicability of a rule” whose “threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.” Citing to the Texas Supreme Court’s RWE decision issued just weeks ago, Aspire claims that “[r]ulemaking at both the PUC and ERCOT are subject to the [APA].” Am. Pet. ¶¶ 15–16. But RWE held precisely the opposite—that neither ERCOT’s Protocols, nor the PUCT’s orders approving the adoption of or revisions to those Protocols, are “rules” under the APA. 21 691 S.W.3d at 492. The facts in RWE mirror this case. There, a market participant, RWE, similarly challenged a PUCT order approving certain ERCOT Protocol revisions related to the price of energy during times of extreme energy shortages. RWE, 691 S.W.3d at 487–88. Just as Aspire attempts to do here, RWE entirely skirted the proper statutory administrative process, instead going directly to the Third Court of Appeals with its PUCT order challenge, claiming the order was a “competition rule” subject to direct appeal under PURA § 39.001(f). 22 Id. at 488–89. The Texas Supreme Court soundly rejected this claim, holding that the PUCT’s Protocol revision approval order was not even a “rule” under the APA, much less a “competition rule” authorizing a direct appeal. See id. at 489–92. The APA’s rulemaking requirements, the RWE Court explained, are “exclusively and repeatedly directed at rules ‘adopted’ by a ‘state agency.’” Id. at 491. (emphasis added) (citing APA 21 Aspire’s mischaracterization of the holding in RWE raises serious concerns about its candor, and ERCOT reserves the right to seek appropriate sanctions under Rule 13 of the Texas Rules of Civil Procedure. 22 Aspire did the same. It filed a direct appeal in the Third Court of Appeals making the same complaints there that it makes here. See Aspire Power Ventures, LP v. PUCT, 03-24-00102-CV (filed Feb. 13, 2024), available here. Notably, the Third Court—over Aspire’s objection—abated that appeal pending the Supreme Court’s decision in RWE. See Memorandum Opinion (May 3, 2024), available here. The PUCT recently moved to dismiss the appeal based on RWE, and Aspire did not oppose the dismissal. See Unopposed Motion to Dismiss for Lack of Jurisdiction (Aug. 26, 2024), available here. - 13 - Appx. Page 86 of 740 §§ 2001.033(a), 2001.004(1)). Neither part of the two-part ERCOT Protocol revision process falls within this rubric. At step one, ERCOT is not a “state agency”—it is, as Aspire acknowledges, an “organ of government” that performs a “uniquely governmental” function with respect to managing the State’s electric grid. CPS Energy, 671 S.W.3d at 617; see also Am. Pet. ¶ 11 (defining ERCOT as a “quasi-governmental agency”). ERCOT’s adoption and revision of Protocols therefore does not constitute APA rulemaking. See RWE, 691 S.W.3d at 491. Nor do PUCT orders finally “approving” new or revised Protocols adopted by ERCOT constitute rules under the APA. Id. That the PUCT is now required to formally approve each and every Protocol revision adopted by ERCOT does not change this analysis. 23 Seizing on that new requirement, RWE argued that, by this amendment, “the Legislature intended to overhaul” ERCOT’s longstanding Protocol revision process and “effectively convert ERCOT protocols into PUC rules” subject to the APA. RWE, 691 S.W.3d at 491. The Court disagreed: We do not discern such a sweeping intent from the language the Legislature chose. For one thing, PURA makes clear that ERCOT, not the PUC, is the entity “adopting” new or revised ERCOT protocols. [PURA] § 39.1519(g-6). The PUC then “approves” the protocols. See id. This distinction is deceptively significant because the APA’s requirements . . . are exclusively an repeatedly directed at rules “adopted” by a “state agency.” . . . Indeed, the Legislature deliberately uses the term “adopt” throughout the APA—no reference is made to an agency’s “approval” of a rule. . . . ... We cannot ignore the Legislature’s deliberate decision not to designate the PUC as the entity that “adopts” ERCOT protocols given the comprehensive statutory use of that term. Id. (emphasis added) (internal citations omitted). The recent PURA amendments underscore that ERCOT’s Protocol revision process is wholly separate from APA rulemaking. In addition to making the PUCT’s Protocol approval mandatory, the 23 While the ERCOT NPRR process has, pursuant to the PUCT’s “complete authority” over ERCOT, “consistently been subject to PUC[T] oversight and review” even prior to this 2021 amendment, RWE, 691 S.W.3d at 491, PURA § 39.151(g- 6) now makes the PUCT’s review and approval mandatory for each and every new and revised Protocol adopted by ERCOT. - 14 - Appx. Page 87 of 740 Legislature made the NPRR Process mandatory, requiring that ERCOT “establish and implement a formal process for adopting new protocols or revisions to existing protocols.” PURA § 39.151(g-6). As the RWE Court recognized, “ERCOT already had such a process in place; nevertheless, [this] requirement signals legislative recognition that ERCOT rulemaking and PUC rulemaking are independent endeavors,” with only the latter falling under the APA. RWE, 691 S.W.3d at 492. Had the Legislature intended that ERCOT follow the APA’s rulemaking procedures, it would not have vested ERCOT with discretion (subject, as with all things, to the PUCT’s “complete authority”) to establish and implement a “formal process” for adopting and revising its Protocols. Cf., e.g., Tex. Boll Weevil Eradication Found., Inc. v. Lewellen , 952 S.W.2d 454, 499 (Tex. 1997) (recognizing that Tex. Agric. Code § 74.120(c) vests non-agency Boll Weevil Eradication Foundation with the authority to adopt rules that must comply with the APA’s rulemaking requirements). 24 Because neither the ERCOT Protocols nor PUCT orders approving ERCOT-adopted Protocols are “rules” under the APA, APA § 2001.038’s limited immunity waiver does not apply here. This Court, therefore, lacks subject-matter jurisdiction, and must dismiss Aspire’s suit with prejudice. 25 See RWE, 691 S.W.3d at 492; R.R. Comm’n v. WBD Oil & Gas Co., 104 S.W.3d 69, 79 (Tex. 2003) (holding no jurisdiction under APA § 2001.038 for claims regarding agency orders adopting field rules, which are not “rules” under the APA); LMV-AL Ventures, LLC v. Tex. Dep’t of Aging & Disability Servs., 520 S.W.3d 113, 124 (Tex. App.—Austin 2017, pet. denied) (“Section 2001.038 is a waiver of immunity and, therefore, is strictly construed in favor of retained immunity.”). 24 Tex. Agric. Code § 74.120(c) provides that any rules promulgated by the Foundation “must be adopted and published in accordance with state requirements,” putting the Foundation’s rulemaking within the APA’s ambit. Lewellen, 952 S.W.2d at 499. No such language is found in anywhere in PURA. See Hogan v. Zoanni, 627 S.W.3d 163, 169 (Tex. 2021) (“We presume the Legislature chose statutory language deliberately and purposefully . . . and that it likewise excluded language deliberately and purposefully”) (cleaned up). 25 See Harris County v. Sykes, 136 S.W.3d 635, 639 (Tex. 2004) (holding that if a plaintiff fails to plead facts that demonstrate a waiver of immunity, “then the trial court should dismiss the plaintiff’s action. Such a dismissal is with prejudice because a plaintiff should not be permitted to relitigate jurisdiction once that issue has been finally determined.”). - 15 - Appx. Page 88 of 740 B. The UDJA does not waive ERCOT’s immunity. Aspire also cannot show waiver of ERCOT’s immunity under the Uniform Declaratory Judgment Act (“UDJA”). The UDJA “is not a general waiver of sovereign immunity; ‘it does not enlarge a trial court’s jurisdiction, and a litigant’s request for declaratory relief does not alter a suit’s underlying nature.’” Creedmoor–Maha Water Supply Corp. v. Tex. Comm’n on Envtl. Quality, 307 S.W.3d 505, 515 (Tex. App.—Austin 2010, no pet.) (quoting City of El Paso v. Heinrich, 284 S.W.3d 366, 370 (Tex. 2009)). Thus, “sovereign immunity bars UDJA actions against the state and its political subdivisions absent a legislative waiver.” Tex. Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 620 (Tex. 2011). Outside of APA § 2001.038—which, for the reasons above, does not apply to Aspire’s claims—no such waiver has been identified here. 26 II. This Court lacks jurisdiction because Aspire failed to exhaust its administrative remedies. This Court also lacks subject-matter jurisdiction because the PUCT has exclusive jurisdiction over matters pertaining to ERCOT’s operations as the PUCT-certified ISO, and Aspire failed to exhaust its administrative remedies before the PUCT before bringing suit. “A state agency ‘has exclusive jurisdiction when the Legislature has granted that agency the sole authority to make an initial determination in a dispute.’” Chaparral, 546 S.W.3d at 138 (quoting In re Entergy Corp., 142 S.W.3d 316, 321 (Tex. 2004)). When an agency has exclusive jurisdiction over a matter, the agency has “authority to resolve disputes that arise within the agency’s regulatory arena,” and courts lack jurisdiction over the matter until the complaining party has exhausted all administrative 26 While the UDJA allows “[a] person ... whose rights ... are affected by a statute ... or municipal ordinance” to “have determined any question of construction or validity ... and obtain a declaration of rights ... thereunder,” that limited immunity waiver does not apply here because neither the challenged Protocols nor PUCT orders are a “statute” or “municipal ordinance.” Like all immunity waivers, this UDJA provision is strictly construed. See, e.g., Hensley v. State Comm’n on Judicial Conduct, 692 S.W.3d 184, 200 (Tex. 2024) (holding that UDJA § 37.004(a)’s waiver did not apply to a judicial canon that “is neither an ordinance nor a statute but a rule promulgated by this Court.”). - 16 - Appx. Page 89 of 740 remedies before the agency. Clint Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 544 (Tex. 2016); Chaparral, 546 S.W.3d at 137. The Legislature may vest an agency with exclusive jurisdiction in two ways. First, a statute may expressly grant an agency exclusive jurisdiction over matters the statute governs. Chaparral, 546 S.W.3d at 138. Second, an agency has exclusive jurisdiction “when a pervasive regulatory scheme indicates that the Legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed.” Id. PURA § 39.151 constitutes such a pervasive regulatory scheme. CPS Energy, 671 S.W.3d at 618. As the Texas Supreme Court explained: Section 39.151 grants the PUC extensive and ultimate authority over an ISO. . . . the statute provides that the ISO “is directly responsible and accountable to the [PUC],” and the PUC “has complete authority to oversee and investigate [ERCOT]’s finances, budget, and operations” to ensure adequate performance of the ISO’s “functions and duties.” It grants the PUC authority over ERCOT’s board makeup, its bylaws and protocols, and its ability to charge fees to its members. ERCOT is empowered to enact rules over market participants, but they must be approved by the PUC. Moreover, the PUC’s authority over ERCOT is not solely regulatory; it has adjudicatory power as well. The PUC may “take appropriate action” against the ISO, including decertification, for the ISO’s failure to adequately perform its functions or duties or for its failure to comply with Section 39.151. Section 39.151’s grant of extensive authority to the PUC over ERCOT and its detailed regulation of the particulars of ERCOT’s functions constitute a pervasive regulatory scheme. Id. (emphasis added). Aspire’s claims fall directly within this pervasive regulatory scheme. ERCOT adopted and implements the ECRS program pursuant to its legislative directive to “ensure the reliability” of the grid. PURA § 39.151(a). As a part of this core statutory responsibility, the Legislature has further directed ERCOT to (1) establish requirements to meet the reliability needs of the ERCOT region; (2) determine the quantity and type of Ancillary Services needed to ensure grid reliability; and (3) to procure those necessary Ancillary Services. See PURA § 39.159(b). The PUCT is charged with ensuring that ERCOT adequately fulfills each of these responsibilities, and may take action against ERCOT - 17 - Appx. Page 90 of 740 should it fail to do so. See id. (“The [PUCT] shall ensure that [ERCOT] . . . procures ancillary or reliability services on a competitive basis . . . .”); see also PURA § 39.151(d) (“The commission may take appropriate action against [ERCOT]” if it “does not adequately perform [its] functions or duties . . . .”). Aspire contends that ERCOT failed to meet these statutory requirements by, among other things, “fail[ing] to balance reliability objectives with the costs of satisfying reliability requirements.” See Am. Pet. ¶ 49. But “[b]ecause the proper performance of ERCOT’s operations, functions, and duties comes within the PUC’s ‘complete’ authority over ERCOT, and because the PUC is statutorily authorized to hold ERCOT accountable if, as [Aspire] alleges, ERCOT fails to properly perform,” these “issues come within the PUC’s exclusive jurisdiction.” CPS Energy, 671 S.W.3d at 619. Aspire was therefore required to first allow the PUCT “to make important determinations” regarding the alleged unlawfulness of ERCOT’s ECRS program “before [taking its] claim to the judicial system.” Chaparral Energy, 546 S.W.3d at 145; CPS Energy, 671 S.W.3d at 620. To be clear, Aspire always had a direct path to administrative and judicial review under PURA, PUC Rules, and ERCOT Protocols. After ERCOT adopted NPRR 863 creating the ECRS program (and, years later, NPRRs 1096, 1148, and 1178), 27 Aspire had a right to complain to the PUCT about ERCOT’s actions. See ERCOT Protocols § 21.4.12.3(1). Had the PUCT agreed with Aspire, the PUCT could have suspended the NPRR’s operation or ordered ERCOT to revise it. 16 TAC § 22.251(o). 28 If, on the other hand, the PUCT rejected Aspire’s appeal, Aspire could have sought judicial review of 27 Though not cited in Aspire’s Amended Petition, there have been several other NPRRs affecting the ECRS program. See, e.g., NPRRs 1015, 1079, 1196, 1213, 1224, 1232 (withdrawn), and 1244 (pending). 28 There is an alternative route to administrative review. The PUC has an open project in which it reviews ERCOT-adopted Protocol revisions. See PUCT Docket No. 54445 (“Review of Rules Adopted by the Independent Organization”), available here. Market participants and other interested persons may file comments in that project advocating for or against approval of an ERCOT-adopted revision. In addition to NPRR 1224, discussed above, this recently happened with NPRR 1186: numerous parties filed comments with the PUCT, in response to which the PUCT remanded the revision to ERCOT with instructions to further revise it. See Docket No. 54445, Item No. 64 (Jan. 18, 2024), available here. - 18 - Appx. Page 91 of 740 that decision under the APA through the contested case process. PURA §§ 15.001, 39.003; see also RWE, 691 S.W.3d at 492 n.11 (recognizing that the “PUC regulations provide a process for review of ERCOT protocols . . . which culminates in a suit for judicial review in the district court.”). But Aspire chose to forego administrative review. Just like RWE, Aspire “did not engage in that process, choosing instead to utilize [an] inapplicable procedure” to challenge the ECRS Protocol revisions. Id. As in RWE, then, Aspire’s claims must be dismissed for lack of jurisdiction for failure to exhaust administrative remedies. Id. at 492. If the Court concludes, as it should, that it lacks jurisdiction over Aspire’s claims, the case can be dismissed, and the Court need not consider ERCOT’s alternative motions below. ERCOT’S RULE 91A MOTION TO DISMISS Outlined above, recent Texas Supreme Court precedent makes clear that the Court lacks subject-matter jurisdiction over Aspire’s claims. If the Court determines it has jurisdiction, however, it should still dismiss this action under Rule 91a because Aspire’s claims have no basis in law. I. ERCOT’s Protocol revision process is not subject to APA rulemaking requirements. Aspire’s APA rulemaking challenge against ERCOT is twofold: first, Aspire complains that the ECRS Rules did not comply with the APA’s notice and comment requirements and, on that basis, asks the Court to declare those rules invalid and void. Am. Pet. ¶ 55. Second, Aspire broadly asserts that ERCOT’s Protocol revision process as a whole violates the APA. Id. Neither claim has merit. As set forth above, the Texas Supreme Court just weeks ago held that ERCOT’s Protocol revision process is not subject to the APA’s rulemaking requirements. See RWE, 691 S.W.3d at 491. This is because ERCOT is not a “state agency,” and it is well-settled that the APA applies only to “rules adopted by a state agency.” Id. (cleaned up). If the Legislature wished for ERCOT to nonetheless follow the APA’s rulemaking process, it could have required as much. See Lewellen, 952 S.W.2d at 499. Instead, it merely required ERCOT to use a “formal process” to “adopt[] - 19 - Appx. Page 92 of 740 new protocols or revis[e] . . . existing protocols,” PURA § 39.151(g-6), knowing that ERCOT has long had its own detailed Protocol revision process in place. See ERCOT Protocols § 21. Aspire’s APA challenge therefore fails as a matter of law. II. Aspire has no private cause of action for alleged PURA § 39.157 violations. In addition to its procedural APA challenge, Aspire asks this Court to declare that the “ECRS Rules violate PURA because they direct generators to withhold electricity from the grid in violation of [PURA] § 39.157(a),” and to enjoin the ECRS Rules’ implementation on that basis. Am. Pet. ¶¶ 55, 65. But PURA § 39.157 does not give market participants like Aspire a private cause of action—that statute is a directive from the Legislature to the PUCT to monitor and prosecute certain market abuses by market participants. “The fact that a person has suffered harm from the violation of a statute does not automatically give rise to a private cause of action in favor of that person.” Bickham v. Dallas Cnty., 612 S.W.3d 663, 670 (Tex. App.—Dallas 2020, pet. denied). “When a private cause of action is alleged to derive from a constitutional or statutory provision,” a court’s “duty is to ascertain the drafters’ intent.” Brown v. De La Cruz, 156 S.W.3d 560, 563 (Tex. 2004). “[T]he existence of a private cause of action must be clearly implied in the statutory text.” Tex. Med. Res. LLP v. Molina Healthcare of Tex., Inc., 659 S.W.3d 424, 431 (Tex. 2023); see also Brown, 156 S.W.3d at 563. Nothing in PURA § 39.157 expressly or impliedly grants Aspire the right to seek declaratory and injunctive relief against the PUCT and ERCOT. On the contrary, it is the PUCT that may penalize market participants like Aspire under that provision: (a) The commission shall monitor market power associated with the generation, transmission, distribution, and sale of electricity in this state. On a finding that market power abuses or other violations of this section are occurring, the commission shall require reasonable mitigation of the market power by ordering the construction of additional transmission or distribution facilities, by seeking an injunction or civil penalties as necessary to eliminate or to remedy the market power abuse or violation as authorized by Chapter 15, by imposing an administrative penalty as authorized by Chapter 15, by ordering the disgorgement of excess revenue as authorized by Chapter - 20 - Appx. Page 93 of 740 15, or by suspending, revoking, or amending a certificate or registration as authorized by Section 39.356. PURA § 39.157(a) (emphasis added). As Texas courts have recognized, this PURA provision authorizes the PUCT—and only the PUCT—to protect against anticompetitive practices. See Brazos Elec. Power Co-op, Inc. v. PUCT, 101 S.W.3d 499, 503 (Tex. App.—Austin 2002, pet. denied) (recognizing PURA § 39.157 “require[s] the Commission to establish by rule a code of conduct to protect against anticompetitive practices”); see also TXU Genration Co., LP v. PUCT, 165 S.W.3d 821, 832 (Tex. App.—Austin 2005, pet. denied) (recognizing PURA § 39.157 “gives the Commission broad authority to monitor and remedy market power abuses.”) (emphasis added). When, as here, “a statute explicitly provides certain rights of enforcement, but is silent as to the right sought to be enforced,” courts “may presume that the Legislature intended for that right to not be included.” Witkowski v. Brian, Fooshee and Yonge Props., 181 S.W.3d 824, 831 (Tex. App.—Austin 2005, no pet.). 29 “[T]he bar for implying a private cause of action is high,” Molina, 659 S.W.3d at 431, and Aspire has not met it here with respect to its alleged PURA § 39.157 violations. That provision is clearly a tool for the market’s regulator to prevent market abuses; it is not a tool for the regulated to sue for declaratory and injunctive relief. See Alexander v. Sandoval, 532 U.S. 275, 289 (2001) (“Statutes that focus on the person regulated rather than the individuals protected create no implication of an intent to confer rights on a particular class of persons.”). Aspire’s attempts to turn PURA § 39.157 on its head must be rejected. 29 To the extent Aspire suggests that it also has a private cause of against ERCOT under the Administrative Code, that claim similarly fails. Absent legislative creation of a private cause of action in PURA, the PUCT has no authority to create a cause of action by rule. Sandoval, 532 U.S. at 291. Even if it could, the PUCT rules Aspire points to vest only the PUCT, not private individuals, with the right to act if ERCOT violates the PUCT’s rules. See 16 TAC §§ 25.503(p) (“If the commission finds that a market entity is in violation of this section, the commission may seek or impose any legal remedy it determines appropriate for the violation involved . . . .”). - 21 - Appx. Page 94 of 740 III. The ECRS program does not violate PURA § 39.157. Even if Aspire could sue for alleged PURA § 39.157 violations, that statute has no application here. For one, the market power abuses PURA § 39.157 speaks to are anticompetitive practices by market participants , not by ERCOT. ERCOT has no “market power”—it does not generate, transmit, or sell electricity. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 464 (1992) (defining “market power” to mean “the ability of a single seller to raise price and restrict output.”). Rather, as the PUCT-certified ISO, ERCOT acts strictly as a market clearinghouse, generating settlement statements and collecting and remitting payments for energy transactions in the ERCOT market. RWE, 691 S.W.3d at 489. ERCOT is revenue-neutral, and makes no profit from these transactions; it operates instead from a regulatory fee approved by the PUCT. See PURA § 39.151(e); CPS Energy, 671 S.W.3d at 627. 30 What’s more, ECRS is exclusively a reliability tool—it is not the type of anticompetitive “withholding of production” contemplated by PURA § 39.157. 31 Both ERCOT’s energy dispatch system (the Security-Constrained Economic Dispatch) and all of ERCOT’s Ancillary Services products, including ECRS, rely on having certain amounts of generation readily available on the sidelines. These generation reserves—what Aspire calls “withholding power”—are necessary to ensure ERCOT can keep supply and demand on the system in balance. If, as Aspire claims, ERCOT unlawfully withholds power by not dispatching available generation, then ERCOT’s entire grid operation system could be called into question. Nothing in PURA § 39.157’s text supports such a dangerous proposition. 30 For this reason, the PUCT could not “disgorge[] excess revenue” from ERCOT, as PURA § 39.157 contemplates. 31 Anticompetitive withholding of production as contemplated by PURA § 39.157 includes “[f]or example, a market participant who has market power [and] withhold[s] production from more efficient units and offer[s] its least efficient unit at that unit’s marginal costs or higher, with confidence that the unit will be selected and set the price for all energy sold,” as “[s]uch withholding of production may bring in enormous profit to the market participant.” See PUCT Project No. 26201, Item No. 106, Order Adopting New § 25.503 as approved at the January 29, 2004 Open Meeting (Feb. 9, 2004), available here. - 22 - Appx. Page 95 of 740 In fact, Aspire’s argument would require that all Ancillary Services—by which ERCOT holds power in reserve to preserve grid reliability—are illegal under PURA. That absurd result would render meaningless the Legislature’s express recognition of the need for such Ancillary Services. See PURA §§ 39.159(b)(2), 39.159(b)(3)(requiring the PUCT to ensure that ERCOT, at least annually, determines the amount of Ancillary Services needed and that ERCOT procure Ancillary Services). Ancillary Services, including ECRS, do not contravene any provision in PURA—they are required by it. As in Luminant (and only if this Court has jurisdiction here, which it does not), “the judiciary’s role is purely textual.” Luminant, 691 S.W.3d at 464. Thus, even if PURA § 39.157 was implicated on these facts, its provisions cannot be divorced from their statutory context. While one of PURA’s goals is to ensure a competitive electric market, as is reflected in PURA § 39.157, that goal must be balanced with PURA’s other critical objective: to ensure the reliability of the State’s electric grid. See Luminant, 691 S.W.3d at 461–64. As the Texas Supreme Court recognized just this term in a similar PUCT order challenge, 32 PURA expressly “acknowledges that the goal of prices set by competition may, in some circumstances, have to yield.” Id. at 463. “Deciding when those circumstances are present—and how to respond—is the Commission’s job, not the judiciary’s,” as it is the “Commission [that] has the expertise to manage the electric utility industry; the courts do not.” Id. at 463–64 (holding that the “court of appeals thus strayed from its lane by inquiring whether the [challenged PUCT] Orders could have used competitive rather than regulatory methods to any greater extent than they did”). Here, Aspire seeks to invalidate three PUCT orders and the entire ECRS program based on the claim that ECRS’s alleged costs outweigh its reliability benefits. See Am. Pet. ¶¶ 2, 28, 31, 49. Even 32 In Luminant, a market participant challenged two PUCT emergency orders issued during Winter Storm Uri, which temporarily set the price of electricity at its statutory cap to help prevent grid collapse. Luminant, 691 S.W.3d at 452. Luminant in essence made the same argument Aspire does here—that the market impact of these orders far outweighed their reliability benefits and were, thus, unlawful. See id. at 462. The Court “decline[d] Luminant’s invitation to second- guess the Orders’ necessity and whether it was the price hike they enacted or the Commission's earlier load-shed directives that truly saved the grid from collapse.” Id.; see also Appendix C. - 23 - Appx. Page 96 of 740 accepting these allegations as true, whether ECRS correctly balances reliability benefits against its market impact is a question that the Texas Supreme Court has committed exclusively to the PUCT. Luminant, 691 S.W.3d at 463. The wisdom of the ECRS program is not for Aspire or this Court to second guess—particularly not where the PUCT, ERCOT, the IMM, and other market participants are all actively working to finetune that program to address concerns that have been properly raised in the administrative process. ERCOT’S PLEA IN ABATEMENT In the unlikely event the Court determines both that it has jurisdiction and that Aspire pleaded viable claims, this suit must nonetheless be dismissed or abated because Aspire failed to join all necessary and indispensable parties. The UDJA requires joinder of “all persons who have or claim any interest that would be affected by the declaration must be made parties.” Tex. Civ. Prac. & Rem. Code § 37.006(a). “When a party asserts Section 37.006(a) as a bar to any judgment favoring a party who has failed to join all necessary parties, Rule of Civil Procedure 39’s standards govern.” Amboree v. Bonton, 575 S.W.3d 38, 44 (Tex. App.—Houston [1st Dist.] 2019, no pet.). Under Rule 39, there are two types of parties: (1) those who are necessary for a just adjudication and that should be joined if feasible; and (2) those whose are so vital to the disposition of the suit that their absence deprives the court of jurisdiction. See, e.g., Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162–63 (Tex. 2004). This case presents the latter circumstance, where the absence of affected market participants deprives the Court of jurisdiction and warrants dismissal of Aspire’s claims. At a minimum, this suit must be abated to allow joinder of the necessary affected market participants. I. The other ERCOT market participants are jurisdictionally indispensable. “Rule 39 mandates joinder of persons whose interests would be affected by the judgment . . . [and] determines whether a trial court has authority to proceed without joining a person - 24 - Appx. Page 97 of 740 whose presence in the litigation is made mandatory by the [UDJA].” Brooks, 141 S.W.3d at 162. Relevant here, Rule 39 directs that an absent party must be joined to the litigation if it (1) claims an interest relating to the subject of the action, and (2) is so situated that the disposition of the action in its absence may impair or impede its ability to protect that interest. Tex. R. Civ. P. 39(a)(2). Generally, the failure to join all necessary parties triggers an analysis of “whether the court ought to proceed” or “whether the trial court should have refused to enter a judgment” until the necessary parties are joined. Brooks, 141 S.W.3d at 162. However, where a trial court’s ruling would “clearly prejudice” the absent parties’ rights, or where “a judgment would adversely affect the interests of absent parties who had no opportunity to assert their rights in the trial court,” the failure to join those parties may constitute a jurisdictional defect. See Vondy v. Comm’rs Court of Uvalde Cnty., 620 S.W.2d 104, 106-07 (Tex. 1981); Sage St. Assocs. v. Fed. Ins. Co., 43 S.W.3d 100, 103 (Tex. App.— Houston [1st Dist.] 2001, pet. denied). To determine whether a particular party is “jurisdictionally indispensable,” courts “must examine the surrounding facts and circumstances of the case to determine if the interests of an absent party will be prejudiced and if an adequate judgment can be rendered for the parties before the court.” Sage St., 43 S.W.3d at 104. Courts must make this determination by “liberally construing the [UDJA] in light of its purpose—‘to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations.’” Longoria v. Exxon Mobil Corp., 255 S.W.3d 174, 180 (Tex. App.—San Antonio 2008, no pet.). Non-parties have been deemed “jurisdictionally indispensable,” for example, where a declaratory judgment in their absence would “clearly prejudice” the non-parties’ contractual rights or benefits. See Sage St., 43 S.W.3d at 100. In Sage Street, the parties sought a declaratory judgment that a contractual assignment between two non-parties was void, thereby also voiding a settlement agreement between the two parties in the lawsuit. Id. at 101–03. The parties argued that the non-parties - 25 - Appx. Page 98 of 740 were not indispensable because a finding that the assignment was void was “incidental” to the declaratory judgment, and did not prejudice the non-parties because the judgment “is not binding on them.” Id. at 104. The appellate court disagreed, finding that although the UDJA “expressly provides that it does not prejudice the rights of a person not a party to the proceeding, it is undeniable that the trial court’s ruling would prejudice [the non-parties].” Id. Thus, the non-parties were “jurisdictionally indispensable” and required to be joined before a judgement could be rendered declaring the assignment void. Id. Here, Aspire asks this Court to declare not only that the ECRS program is invalid—it also asks the Court to declare that ERCOT’s entire Protocol revision process invalid, thereby calling into question the entire ERCOT market rulebook. The Protocols are thousands of pages, detailing the operation of the electric grid and the wholesale electric market. Those Protocols—developed over decades under the Protocol revision process that Aspire asks the Court to declare illegal—could all be deemed invalid if Aspire is granted the relief it seeks. See Am. Pet. at ¶ 54 (citing Tex. Gov’t Code § 2001.035). Texas would be left without a market and with no enforceable means to operate its intrastate grid. Such sweeping declaratory relief would substantially impact the interests of the hundreds of other market participants that participate in the ERCOT market and those that provide the ECRS Ancillary Service that Aspire seeks to prohibit. Market participants undoubtedly rely on established market rules when making important business and financial decisions—for example, when determining whether to build a new power plant, and when entering into bilateral agreements related the purchase and sale of energy and Ancillary Services. Like Aspire, market participants from every segment (e.g., generators, transmission and distribution providers, retail electric providers, and energy traders) commonly enter into such bilateral agreements with other market participants and consumers, - 26 - Appx. Page 99 of 740 and many (if not most or all) of these agreements are put at issue by Aspire’s claims. Billions of dollars are at stake for market participants that Aspire failed to join as parties. Because Aspire’s request declaratory relief would “clearly prejudice” the pecuniary and other interests of the hundreds of other market participants, those market participants must be joined before a judgement could be rendered in this suit—or a temporary injunction considered. II. Joinder of the affected market participants is feasible. Joinder of all affected market participants is certainly feasible. ERCOT’s Standard Form Market Participant Agreement, which each market participant must execute, contains a forum and venue selection clause making all market participants subject to Texas law and mandatory venue for all claims in Travis County, Texas. See Protocols § 22 (ERCOT standard form agreement) at § 11(A). Thus, each affected Market Participant is “subject to service of process,” as required by Rule 39. See Tex. R. Civ. P. 39(a). When a party requests that that the trial court join additional necessary parties whose interests would be determined in resolving the claims of the parties before the court, and the court determines that the non-parties fall with the purview of Rule 39 and are subject to service of process, the parties must be joined. See Tex. R. Civ. P. 39(a); Kodiak, 361 S.W.3d at 252; Longoria, 255 S.W.3d at 184. A trial court has no discretion to deny the request in a declaratory judgment action if the above are satisfied. Kodiak, 361 S.W.3d at 252. The number of necessary parties that must be joined has no bearing on this. See, e.g., Pierce v. Blalack, 535 S.W.3d 35, 39–44 (Tex. App.—Texarkana 2017, no pet.) (affirming dismissal with prejudice where at least 286 necessary parties were identified, trial court ordered plaintiff to join and serve all parties, and plaintiff served only 55 parties); Dahl v. Hartman, 14 S.W.3d 434, 435–37 (Tex. App.—Houston [14th Dist.] 2000, pet. denied) (affirming trial court’s dismissal with prejudice where plaintiff failed to serve and join 333 necessary parties). When necessary parties under Rule 39 are identified, the plaintiff faces two choices: either join and serve the necessary - 27 - Appx. Page 100 of 740 parties, or have its claims dismissed. The identity of all market participants is publicly available on ERCOT’s website. 33 Even if Aspire were to amend its petition again to remove its request to declare the Protocol revision process invalid, its request to declare the “ECRS Rules” invalid would still affect nearly all market participants, especially those participating in the ECRS program. ERCOT publishes Ancillary Service Obligation and Responsibility reports 180 days after each Operating Day that include the identity of the entities providing ECRS. 34 These market participants’ interests will be clearly prejudiced by the declaratory relief sought by Aspire. As explained above, the other ERCOT market participants are clearly necessary and indispensable under Rule 39, and each may be feasibly joined. Accordingly, ERCOT moves the Court to either dismiss Aspire’s claims out of hand if the Court finds these market participants are jurisdictionally indispensable; or, alternatively, to abate this lawsuit for 30 days and order Aspire to affect their joinder. If Aspire fails to join the necessary market participants within that timeframe, ERCOT requests that the Court dismiss Aspire’s claims. CONCLUSION For the reasons set forth herein, the Court should dismiss Aspire’s claims against ERCOT. In the first instance, the Court lacks subject matter jurisdiction over Aspire’s claims against ERCOT because Aspire’s claims do not fall within APA § 31.0038’s limited immunity waiver, and because Aspire failed to exhaust its administrative remedies. Alternatively, the Court should dismiss Aspire’s claims against ERCOT pursuant to Rule 91a, as those claims have no basis in law. Alternatively, the Court should dismiss this lawsuit for failure to join the other necessary ERCOT market participants, or abate this lawsuit for 30 days and order Aspire to join these affected market participants. If Aspire 33 List of Market Participants in the ERCOT Region (updated Sept. 9, 2024), available here. 34 AS Obligation and Responsibility (updated Sept. 9, 2024), available here. - 28 - Appx. Page 101 of 740 fails or refuses to do so, the Court should dismiss Aspire’s claims with prejudice. ERCOT requests such other and further relief, at law or in equity, to which it may be entitled. Respectfully submitted, WINSTEAD PC 600 W. 5th Street Suite 900 Austin, Texas 78701 (512) 370-2800 telephone (512) 370-2850 fax By: /s/ Elliot Clark Elliot Clark SBN 24012428 eclark@winstead.com Elin Isenhower SBN 24104206 eisenhower@winstead.com ATTORNEYS FOR DEFENDANT ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. CERTIFICATE OF SERVICE By my signature below, I hereby certify that a true and correct copy of this document has been served on all counsel of record in accordance with the Texas Rules of Civil Procedure on September 9, 2024. /s/ Elliot Clark Elliot Clark - 29 - Appx. Page 102 of 740 CAUSE NO. D-1-GN-24-003384 ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT APPENDIX TO ERCOT’S PLEA TO THE JURISDICTION TAB DESCRIPTION A PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484 (Tex. 2024) B CPS Energy v. ERCOT, 671 S.W.3d 605 (Tex. 2023) C PUCT v. Luminant Energy Co. LLC, 691 S.W.3d 448 (Tex. 2024) - 30 - Appx. Page 103 of 740 APPENDIX A Appx. 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' (  4         /  F  /J/3 / @ .           !""#"! $ %&'(  Appx. Page 108 of 740       !"#$%&%'()(%*           / 0 4   ( I         E/ =    . 00  .  B ' E B)*-+ C D           / @    B)*-+      .      (   . 4  G     ' (    .       (     . 4/F /%/                      ./ O   '       ('     ' /E *0   .    /   F / 3  ' ( / + ,/  /  F #&/ 3 (% B    '/ '/ %>'/ $1/ 0 /#1 #/+. +. 0(  . " (           .      (  '    (   .   .'    '        4 4          '     .  .' .'                    (  G  / /     '(    )*-+     4 .  ( .    .   )  ##  2/!/# L L3ML% + ,/ 0 /A9  )*-+    .'      6   C J .8  /D  /  . (. (. ( . " (   5 '  (.  ' 4/ *!) 4/+ ,/ / F#&/ 3 /*!)     B EB ' E        (  '  .   ((   .     ( *0   G  .   .        K+ ,/) /  ')*-+      .    F$/33J B+.     .    (  .    . " (       ' . .  ,    '  2 ##/L          '  '   )*-+         '   @  .  " (          6   .     ' 4   / !    2 ##/L#/E  .  /     .4 (    . ((  . " (    . / ** L  4       .  .        .  ! .    .     4      '      .    ,   .  *0   ( (  '       )*-+     4 .     (     .     >** L    . 4 4            /  G   .       .  (   ( (    5   4    (    B E   .  (  . //%& 2/!/# MMMM/ 0 0    '   0 /@    .     H6      2 #&/          ' 4  B        .   E .       6   '  *!)5 =   . 5 4 B      .    E   *0 2  #&/ 3     . (   . 5 ' /     ' 46   .    /! .   '   .    H6(     .   6  / """ 9' (    .  .      6    **$    '  *!)5    .  5  '   '  4     *!)5   ((  /!   !  .4 '  %& 2/!/#JLJ%$+ ,/2 / /1/ &% Footnotes 1 In our contemporaneously issued opinion in Public Utility Commission v. Luminant Energy Co., we hold that the PUC did not exceed its authority in issuing two emergency orders during Winter Storm Uri that operated to a similar end by temporarily setting the price of electricity at the regulatory ceiling. 691 S.W.3d 448, –––– (Tex. June 14, 2024) (No. 22-0231). 2 A more detailed explanation of the Texas electricity market appears in this Court's opinion in Luminant. See id. at ––––. We also recently engaged in a thorough discussion of ERCOT's history, and its role in the Texas electricity market, in CPS Energy v. ERCOT, 671 S.W.3d 605, 611–12 (Tex. 2023). 3 The others are “ensur[ing] access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms” and “ensur[ing] that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information.” Tex. Util. Code § 39.151(a)(1), (3). 4 As further amended in 2023, Section 39.151(g-6) currently provides: In this subsection, a reference to a protocol includes a rule. Protocols adopted by an independent organization and enforcement actions taken by the organization under delegated authority from the commission are subject to commission oversight and review and may not take effect before receiving commission approval. To maintain certification as an independent organization under this section, the organization's governing body must establish and implement a formal process for adopting new protocols or revisions to existing protocols. The process must require that new or revised protocols may not take effect until the commission approves a market impact statement describing the new or revised protocols. The commission may approve, reject, or remand with suggested modifications to the independent organization's governing body protocols adopted by the organization. Act of May 26, 2023, 88th Leg., R.S., ch. 464, § 4, 2023 Tex. Sess. Law Serv. (West) 1133 (codified at Tex. Util. Code § 39.151(g-6)). 5 In support of its first holding, the court relied on its own decision in Luminant, which we also review today. 669 S.W.3d at 576.    !""#"! $ %&'(  Appx. Page 110 of 740       !"#$%&%'()(%*      6 When RWE instituted this proceeding, Section 39.001(e) provided for review in the Third Court of Appeals. In 2023, the Legislature amended Section 39.001(e) to provide for review by the Fifteenth Court of Appeals going forward. Act of May 22, 2023, 88th Leg., R.S., ch. 459, § 1.13, 2023 Tex. Sess. Law Serv. (West) 1119. 7 We cite the current version of the protocols unless substantive differences require citing the version in effect when the relevant events occurred. ERCOT's current protocols and a library of past versions of the protocols, with summaries of revisions, are available on ERCOT's website. Protocols - Nodal, https://www.ercot.com/mktrules/nprotocols. 8 RWE, Comment Letter on Nodal Protocol Request 1081 (June 23, 2021), https://www.ercot.com/mktrules/issues/ NPRR1081#keydocs. 9 Available at https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with-Commission- Decisions_1-19-23.pdf). 10 See also Tex. Gov't Code § 2001.006 (describing when a rule “adopted” under Section 2001.006(b) may take effect); id. § 2001.021(a) (“An interested person by petition to a state agency may request the adoption of a rule.”); id. § 2001.023(a) (“A state agency shall give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule.”); id. § 2001.030 (“On adoption of a rule, a state agency, if requested to do so by an interested person either before adoption or not later than the 30th day after the date of adoption, shall issue a concise statement of the principal reasons for and against its adoption.”). 11 As noted, PUC As PUC regulations regulations provide a process for for review of of ERCOT ERCOT protocols, 1 6 Tex. Admin. Code 16 Code §§ 22.251, 22.251, 25.362(c) 25.362(c) (5), which culminates in a suit for (5), for judicial judicial review in district court, Tex. Util. Util. Code Code § 15.001. RWE did not engage engage in that that process, choosing process, choosing instead to utilize the inapplicable procedure for for reviewing reviewing PUC PUC competition rules. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.    !""#"! $ %&'(  Appx. Page 111 of 740 APPENDIX B Appx. Page 112 of 740         !"#$%&'$'"(        -  " - $"  -- " ** #    6      - 6** # 7(& 89 2%'#         :  *  -   #  "    4           ! "   " #$# "  * " # *  " *    "    !%&#%'%( +,/ -  -#     *  #  "    -- "  #    +,/1 "  " "*" #  #*    * " *   ;%%        *  *   +,/ -   !"##$" *    5  "     # !#   *  +,/ -  &'&'()'&'!   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(3 $3& *& - ') 0 & 0  & 1       #'(%    0 &    ( &          3  8:'A99&8: '  99)   4   9) & 8& >  ( &   *        4 * &9) 1  ;) @  ) = &   !          &      *  ; )0 & 59       6) !&     #%& 7=&8&81= &        )*   *   &     &   ,IS       K        )        '   !" 7 )     '  .H)II/  4PPPP   &&' ' '  .H)II/  3          &      &    )) % (g-7) The presiding officer of the commission shall designate commissioners to serve terms on the independent organization's governing body under Subsection (g-1)(1)(B) in the order in which the commissioners were first appointed to the commission. A commissioner may not serve an additional term until each commissioner has served a term. (g-7) To maintain certification as an independent organization under this section, the organization must: (1) identify all employee positions in the organization that are critical to the security of the electric grid; and (2) before hiring a person for a position described by Subdivision (1), obtain from the Department of Public Safety or a private vendor criminal history record information relating to the prospective employee and any other background information considered necessary by the independent organization or required by the commission. (h) The ERCOT independent system operator may meet the criteria relating to the other functions of an independent organization provided by Subsection (a) by adopting procedures and acquiring resources needed to carry out those functions, consistent with any rules or orders of the commission. (i) The commission may delegate authority to the existing independent system operator in ERCOT to enforce operating standards within the ERCOT regional electrical network and to establish and oversee transaction settlement procedures. The commission may establish the terms and conditions for the ERCOT independent system operator's authority to oversee utility dispatch functions after the introduction of customer choice. (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357. (j-1) Notwithstanding Subsection (j) of this section, Section 39.653(c), or any other law, the independent system operator in the ERCOT power region may not reduce payments to or uplift short-paid amounts to a municipally owned utility that becomes subject to the jurisdiction of that independent system operator on or after May 29, 2021, and before December 30, 2021, related to a default on a payment obligation by a market participant that occurred before May 29, 2021. (k) To the extent the commission has authority over an independent organization outside of ERCOT, the commission may delegate authority to the independent organization consistent with Subsection (i). (l) No operational criteria, protocols, or other requirement established by an independent organization, including the ERCOT independent system operator, may adversely affect or impede any manufacturing or other internal process operation associated with an industrial generation facility, except to the minimum extent necessary to assure reliability of the transmission network. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 212 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (m) A power region outside of ERCOT shall be deemed to have met the requirement to establish an independent organization to perform the transmission functions specified in Subsection (a) if the Federal Energy Regulatory Commission has approved a regional transmission organization for the region and found that the regional transmission organization meets the requirements of Subsection (a). (n) An independent organization certified by the commission under this section is subject to review under Chapter 325, Government Code (Texas Sunset Act), but is not abolished under that chapter.The independent organization shall be reviewed during the periods in which the Public Utility Commission of Texas is reviewed. (n-1) Expired. (o) An independent organization certified by the commission under this section shall: (1) conduct internal cybersecurity risk assessment, vulnerability testing, and employee training to the extent the independent organization is not otherwise required to do so under applicable state and federal cybersecurity and information security laws; and (2) submit a report annually to the commission on the independent organization's compliance with applicable cybersecurity and information security laws. (p) Information submitted in a report under Subsection (o) is confidential and not subject to disclosure under Chapter 552, Government Code. Credits Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999. Amended by Acts 2005, 79th Leg., ch. 797, § 9, eff. Sept. 1, 2005; Acts 2011, 82nd Leg., ch. 1232 (S.B. 652), § 1.09, eff. June 17, 2011; Acts 2013, 83rd Leg., ch. 170 (H.B. 1600), § 1.08, eff. Sept. 1, 2013; Acts 2019, 86th Leg., ch. 509 (S.B. 64), § 23, eff. Sept. 1, 2019; Acts 2021, 87th Leg., ch. 425 (S.B. 2), § 3, eff. June 8, 2021; Acts 2021, 87th Leg., ch. 908 (H.B. 4492), § 3, eff. June 16, 2021; Acts 2023, 88th Leg., ch. 410 (H.B. 1500), § 15, eff. Sept. 1, 2023; Acts 2023, 88th Leg., ch. 464 (S.B. 2013), § 4, eff. June 9, 2023. Notes of Decisions (25) V. T. C. A., Utilities Code § 39.151, TX UTIL § 39.151 Current through the end of the 2023 Regular, Second, Third and Fourth Called Sessions of the 88th Legislature, and the Nov. 7, 2023 general election. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 213 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92018492 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ PLEA TO THE JURISDICTION Status as of 9/16/2024 9:36 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/13/2024 3:47:51 PM SENT Elin Isenhower eisenhower@winstead.com 9/13/2024 3:47:51 PM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/13/2024 3:47:51 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/13/2024 3:47:51 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/13/2024 3:47:51 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/13/2024 3:47:51 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/13/2024 3:47:51 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/13/2024 3:47:51 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/13/2024 3:47:51 PM SENT John RHulme John.Hulme@oag.texas.gov 9/13/2024 3:47:51 PM SENT Laura Courtney laura.courtney@oag.texas.gov 9/13/2024 3:47:51 PM SENT Case Contacts Appx. Page 214 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92018492 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ PLEA TO THE JURISDICTION Status as of 9/16/2024 9:36 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/13/2024 3:47:51 PM SENT Judy Garrison jgarrison@ccsb.com 9/13/2024 3:47:51 PM SENT Appx. Page 215 of 740 9/24/2024 10:16 AM Velva L. Price District Clerk Travis County D-1-GN-24-003384 Norma Ybarra September 24, 2024 direct dial: 512.370.2802 eclark@winstead.com Via E-Filing Hon. Catherine Mauzy 418th Judicial District Court 1700 Guadalupe, 11th Floor Austin, Texas 78701 Re: Letter Brief re: Required Resolution of ERCOT’s and the PUCT’s Pleas to the Jurisdiction Prior to Any Temporary Injunction Hearing; Cause No. D-1-GN-24-003384; Aspire Power Ventures, LP (“Aspire”) v. Public Utility Commission of Texas (“PUCT”), Electric Reliability Council of Texas, Inc. (“ERCOT”), et al. Dear Judge Mauzy: Defendant ERCOT submits this letter brief to the Court for consideration in connection with the upcoming Review/Status Conference set by the Court on October 1, 2024 at 2:00 p.m. For the reasons set forth herein, ERCOT contends that the jurisdictional questions raised by ERCOT’s and the PUCT’s Pleas to the Jurisdiction must be resolved before the Court conducts a hearing on Aspire’s requested temporary injunction. Aspire first brought claims against ERCOT in this lawsuit on August 13, 2024. ERCOT timely filed its Answer, as well as its Plea to the Jurisdiction and Alternatively, Motion to Dismiss under Rule 91(a) and Alternatively, Plea in Abatement (“ERCOT’s Jurisdictional Plea”) on September 9, 2024. Defendants PUCT, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, in their official capacities as Commissioners of the PUCT (collectively, “PUCT Defendants”) filed a Plea to the Jurisdiction on September 13, 2024 (“PUCT Defendants’ Jurisdictional Plea” and together with ERCOT’s Jurisdictional Plea, the “Jurisdictional Pleas”). ERCOT agreed to discuss the case with Aspire before appearing in this lawsuit; advised Aspire that it would file a plea to the jurisdiction; and attempted to reach an agreement as to setting hearings on the to-be filed jurisdictional plea and Aspire’s request for a temporary injunction. Despite their best efforts, the parties were not able to reach agreement. The issue before the Court is whether it should first determine if it has jurisdiction before conducting a temporary injunction hearing. ERCOT submits that the answer is straightforward and indisputable. “Without jurisdiction the court cannot proceed at all in any cause.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998) (quoting Ex Parte McCardle, 74 U.S. 506 (1869)). A court may not “resolve contested questions of law when its jurisdiction is in doubt.” Id. at 101. Thus, it is black letter law that a “trial court must determine at its earliest opportunity Appx. Page 216 of 740 September 24, 2024 Page 2 whether it has the constitutional or statutory authority to decide the case before allowing the litigation to proceed.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). Because jurisdiction is so clearly lacking here, the Court can and should decide the Jurisdictional Pleas as soon as possible—and certainly before having a hearing on a costly and time-consuming temporary injunction hearing that will be unnecessary if the Court dismisses the lawsuit. A straightforward application of the law to Aspire’s claims shows there is no jurisdiction here: 1. For this Court to have jurisdiction under Texas Government Code § 2001.038, Aspire must be contesting an agency-adopted rule. R.R. Comm’n v. WBD Oil & Gas Co., 104 S.W.3d 69, 79 (Tex. 2003); see also Gant v. Abbott, 574 S.W.3d 625, 631 (Tex. App.—Austin 2019, no pet.) (“When no rule is being challenged, a claimant cannot obtain declaratory relief under the APA . . .”). 2. The Texas Supreme Court recently held that a PUC order approving a revision to ERCOT Protocols is “not an agency-adopted ‘rule’ under the Administrative Procedure Act.” PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 492 (Tex. 2024). 3. This case involves “three PUC orders approving revisions to ERCOT Nodal Protocols that Aspire challenges.” Am. Pet. at ¶ 29. 4. Because Aspire is not challenging an agency-adopted rule, this Court has no jurisdiction under the APA and the lawsuit should be dismissed. Aspire claims that “ERCOT reads [RWE] very differently than Plaintiff.” Aspire Letter Brief at 2 (filed Sept. 11, 2024). True, but what matters is how the Court reads RWE. ERCOT, accordingly, attaches the RWE opinion to this Letter Brief for the Court’s convenience. There is no way to credibly read RWE except as saying that PUCT orders approving ERCOT Protocol revisions are not agency-adopted rules subject to the APA. Accordingly, Aspire cannot bring an “action under the APA’s general method to challenge the validity of a rule,” Aspire Letter Brief at 2, when it is plainly not challenging a “rule” under the APA. Aspire’s suggestion that ERCOT’s request for the Court to hear the Jurisdictional Pleas first is some sort of tactic or gamesmanship is completely unfounded. Because jurisdiction is lacking, ERCOT had a duty to raise the issue. Bd. of License Comm’rs of Town of Tiverton v. Pastore, 469 U.S. 238, 240 (1985) (per curiam) (reminding “counsel that they have a ‘continuing duty to inform the Court of any development which may conceivably affect the outcome’ of the litigation” (quoting Fusari v. Steinberg, 419 U.S. 379, 391 (1975) (Burger, C.J., concurring))). Aspire’s insistence that the Court hold an injunction hearing before or simultaneously with the Jurisdictional Pleas is both improper and impractical. ERCOT will be prejudiced by being forced to pull employee witnesses from their responsibilities of operating the grid in order to prepare for and attend an all-day injunction hearing, and by incurring the significant attorneys’ fees required for an injunction hearing. Absent jurisdiction, ERCOT’s and the PUCT’s immunity is intended to guard against exactly this type of prejudice. CPS Energy v. ERCOT, 671 S.W.3d 605, 623 (Tex. 2023) (recognizing that immunity “prevents the disruption of key governmental services, protects public funds, and respects separation of powers principles.”). Appx. Page 217 of 740 September 24, 2024 Page 3 As a practical matter, the Court will not be able to hear the Jurisdictional Pleas and conduct a temporary injunction hearing in one day. ERCOT has requested a two-hour hearing to have the Jurisdictional Pleas heard. 1 And a temporary injunction hearing would likely last at least a full day. Aspire acknowledges that if the Court finds jurisdiction lacking, “the case will end” with no need for an injunction hearing. Aspire Letter Brief at 2. And ERCOT believes that will be the inevitable outcome, so there is no need for the parties to waste time and resources preparing for an injunction hearing that never takes place. As explained in ERCOT’s Jurisdictional Plea, Aspire improperly asks this Court to substitute its judgment as to the wisdom and benefit of a complicated Ancillary Service that was first adopted by ERCOT in 2019 to help ensure grid reliability. The PUCT, ERCOT, the IMM and Market Participants are still actively working on refinements to ECRS—utilizing the intended regulatory process. Before the Court entertains Aspire’s request that the Court swerve out if its lane and into ongoing policy making, it must be certain of its jurisdiction. “A court that carelessly exceeds the constitutional boundaries on its own power can hardly claim the authority to determine whether another co-equal branch of government has done the same.” In re Hotze, 627 S.W.3d 642, 646 (Tex. 2020) (Blacklock, J. concurring); PUCT v. Luminant Energy Co. LLC, 691 S.W.3d 448, 463-464 (finding the court of appeals “strayed from its lane” by second guessing policy making decisions). Thank you for your time and attention to this matter. Sincerely, Elliot Clark Cc: Counsel of record via E-filing 1 ERCOT’s Jurisdictional Plea includes an alternative Rule 91a Motion to Dismiss and a Plea in Abatement that will also need to be argued at that hearing. Aspire is entitled to 14 days-notice of a hearing under TRCP 91a.6, and the Court is supposed to rule within a specified time frame, TRCP 91a.3(c). And because Aspire seeks relief that will prejudice hundreds of market participants not before the Court, the Court should not rush to set an injunction hearing without first confirming it has all necessary parties before it—if it first concludes it has jurisdiction. Appx. Page 218 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 Elliot Clark, Wallace B. Jefferson, Austin, Rachel Anne 691 S.W.3d 484 Ekery, Houston, Nicholas Bacarisse, for Amicus Curiae Supreme Court of Texas. Electric Reliability Council of Texas. PUBLIC UTILITY COMMISSION Michael J. Jewell, for Respondent TX Hereford Wind, LLC. OF TEXAS, Petitioner, Ron Beal, Pro Se. v. John R. Hulme, Angela V. Colmenero, Priscilla M. Hubenak, RWE RENEWABLES AMERICAS, LLC Austin, Brent Webster, Houston, S. Grant Dorfman, Bellaire, and TX Hereford Wind, LLC, Respondents Lanora C. Pettit, Kyle D. Highful, Shawn Cowles, Atty. Gen. W. Kenneth Paxton Jr., for Petitioner. No. 23-0555 | Chrysta L. Castaneda, Dallas, Nicole Michael, for Amicus Argued March 19, 2024 Curiae Aspire Power Ventures, LP. | OPINION DELIVERED: June 14, 2024 Opinion Synopsis Justice Lehrmann delivered the opinion of the Court. Background: Market participants filed direct appeal of order In response to Winter Storm Uri, the Legislature amended of Public Utility Commission (PUC), 2021 WL 3711693, the Public Utility Regulatory Act (PURA) to provide that approving protocols adopted by Electric Reliability Council protocols adopted by the Electric Reliability Council of of Texas (ERCOT) revising its protocols effectively setting Texas, or ERCOT, do not take effect before they are approved price of electricity at regulatory maximum during emergency by the Public Utility Commission. ERCOT then adopted, load-shed event, even if standard price-setting formula and the PUC approved, a revision to its protocols effectively yielded different price. The Austin Court of Appeals, Jones, setting the price of electricity at the regulatory maximum J., sitting by assignment, 669 S.W.3d 566, reversed and under Energy Emergency Alert Level 3 conditions—the remanded. Review was granted. highest level of emergency that can be declared—even if the standard price-setting formula yields a different price. Pursuant to PURA's mechanism for seeking judicial review of The Supreme Court, Lehrmann, J., held that PUC's approval the validity of “competition rules adopted by the commission of ERCOT's revised protocols was not subject to direct review [PUC],” Tex. Util. Code § 39.001(e), two market participants by court of appeals. initiated a challenge to the PUC's approval order directly in the Third Court of Appeals. That court held the order was both substantively invalid—because the PUC exceeded its Vacated and dismissed. statutory authority by setting the price of electricity—and procedurally invalid—because the PUC failed to comply with the Administrative Procedure Act's rulemaking procedures in *485 On Petition for Review from the Court of Appeals for issuing the order. the Third District of Texas Attorneys and Law Firms We first consider whether, in light of the amendments to PURA requiring PUC approval of ERCOT protocols, the Lisa Hobbs, Kurt Kuhn, Austin, Stephanie C. Sparks, Dallas, approval order constitutes a “competition rule[ ] adopted by for Respondent RWE Renewables Americas, LLC. the commission.” Id. If it does not, the court of appeals lacked jurisdiction over the proceeding for judicial review of the Macey Reasoner Stokes, George Harold Fibbe, J. Mark Little, order. If it does, we must then evaluate whether the court Elisabeth Butler, Houston, Andrea Moore Stover, Patrick of appeals correctly *486 determined that the order is both Leahy, Austin, for Amicus Curiae Calpine Corporation. procedurally and substantively invalid. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 1 Appx. Page 219 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 We hold that the PUC's approval order is not a “competition App.—Austin 2011, pet. denied). Even before recent rule[ ] adopted by the commission” subject to the judicial- PURA amendments, ERCOT's protocols were “subject to review process for PUC rules. PURA envisions a separate commission oversight and review.” See Act of May 30, 2005, process for ERCOT-adopted protocols, and the statutory 79th Leg., R.S., ch. 797, § 9, 2005 Tex. Gen. Laws 2728, requirement that the PUC approve those adopted protocols 2729–30 (codified at Tex. Util. Code § 39.151(d)) (amended does not transform PUC approval orders into PUC rules 2021, 2023) *487 (current version at Tex. Util. Code § eligible for direct review by a court of appeals. The Third 39.151(g-6)). Court of Appeals therefore lacked jurisdiction over this proceeding. Accordingly, we vacate the court of appeals’ ERCOT is uniquely positioned to manage the electricity judgment and dismiss the case for lack of jurisdiction. 1 market by virtue of its technical expertise, and ERCOT utilizes a variety of resources and systems to manage grid conditions. For example, ERCOT typically relies on a computer system that employs a mathematical formula I to send price-based signals to energy generators regarding whether additional power is needed. Luminant, 691 S.W.3d at A ––––. The PUC has specifically delegated to ERCOT the task of developing protocols for how that mathematical formula PURA Section 39.151 requires the PUC to “certify an calculates energy pricing in times of energy shortage, or independent organization”—here, ERCOT—“to perform the “scarcity pricing.” Id.; 16 Tex. Admin. Code § 25.509(b). functions prescribed by [that] section.” Id. § 39.151(c).2 Four such functions are listed, including “ensur[ing] the reliability and adequacy of the regional electric network” B and “ensur[ing] that electricity production and delivery are accurately accounted for among the generators and wholesale In February 2021, Winter Storm Uri incapacitated the Texas 3 electric grid and resulted in an Energy Emergency Alert Level buyers and sellers in the region.” Id. § 39.151(a)(2), (4). PUC regulations likewise demand that the “protocols and other 3 “load-shed” event, meaning ERCOT directed operators of rules” adopted by ERCOT “promote economic efficiency the transmission system to reduce electricity consumption by in the production and consumption of electricity; support involuntarily disconnecting customers from the grid. During wholesale and retail competition; support the reliability of the load-shed event, ERCOT and the PUC took various electric service; and reflect the physical realities of the additional steps to balance supply and demand in the market ERCOT electric system.” 16 Tex. Admin. Code § 25.501(a). to avoid total grid collapse. One such step was to supersede the standard price-setting system by administratively setting ERCOT “is directly responsible and accountable to the the wholesale price of electricity at the regulatory ceiling. commission,” which “has complete authority to oversee In the storm's aftermath, ERCOT's Nodal Protocols were and investigate [ERCOT's] finances, budget, and operations amended to codify the practice in case future load-shed as necessary to ensure [ERCOT]’s accountability and to events necessitated a similar response. That amendment is the ensure that [ERCOT] adequately performs [its] functions subject of this suit. and duties.” Tex. Util. Code § 39.151(d). If ERCOT “does not adequately perform [its] functions or duties or does not comply with this section,” the PUC may take “appropriate C action,” including decertification. Id. As noted, even before Uri, ERCOT's protocols were subject ERCOT possesses rulemaking authority delegated to it by to commission oversight and review. After the storm, the PUC, as authorized by PURA. See id. § 39.151(d), the Legislature amended PURA to additionally provide (g-6); 16 Tex. Admin. Code § 25.362(c). The “Nodal that “[r]ules adopted by an independent organization [i.e., Protocols” developed and implemented by ERCOT “provide ERCOT] ... may not take effect before receiving commission the framework for the administration of the Texas electricity approval.” Act of May 30, 2021, 87th Leg., R.S., ch. 425, market.” Pub. Util. Comm'n v. Constellation Energy § 3, 2021 Tex. Gen. Laws 830, 830 (codified at Tex. Util. Commodities Grp., Inc., 351 S.W.3d 588, 594–95 (Tex. Code § 39.151(d)) (amended 2023) (current version at Tex. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 2 Appx. Page 220 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 Util. Code § 39.151(g-6)).4 In accordance with that provision, The court of appeals held that the PUC's order constituted a ERCOT's board of directors adopted Nodal Protocol Revision “competition rule adopted by the commission” under Section Request (NPRR) 1081, which would amend Nodal Protocol 39.001(e), giving the court jurisdiction over the proceedings. 6.5.7.3.1, and presented it to the PUC for approval. The 669 S.W.3d 566, 575 (Tex. App.—Austin 2023). The court of revision would set the price of electricity at the regulatory appeals then held that the PUC's order was invalid because (1) ceiling during an emergency load-shed event to reflect the PUC lacked the authority to approve NPRR 1081 under scarcity of supply, regardless of whether the standard price- PURA and (2) the PUC had failed to substantially comply setting formula yields a different price. ERCOT reported with the APA's rulemaking procedures. Id. at 576–77.5 We to the PUC that the revision would “ensure that Real-Time granted the PUC's petition for review. energy prices reflect the VOLL [Value of Lost Load] when Load is being shed, which is fundamental *488 to an energy- only market design in order to provide effective economic II signals.” The proposal was accompanied by a report from ERCOT's board and an impact-analysis report. The PUC We necessarily begin by considering jurisdiction. The PUC ultimately issued an order approving NPRR 1081. challenges the court of appeals’ subject matter jurisdiction over what is essentially a direct appeal of the PUC's order. It is undisputed that load shedding is not driven by market forces but is instead an important regulatory tool designed to protect the grid from long-term damage during an emergency. Load shedding accomplishes this by limiting the amount A of demand that may enter the market so as not to exceed PURA specifically provides for judicial review of available supply. Of course, when that happens, demand in “competition rules adopted by the commission.” Tex. Util. the market no longer accurately reflects demand to enter Code § 39.001(e) (“Judicial review of competition rules the market, and additional supply can only be “accurately” adopted by the commission shall be conducted under [the priced by considering the value of replacing that lost load. See APA], except as otherwise provided by this chapter.”). Unlike Hearing of Sen. Comm. Bus. & Com., 87th Leg., R.S. (Feb. most suits for judicial review of an agency rule, review of a 25, 2021), 79–80 (discussing incentives for production at the PUC competition rule begins in the court of appeals. Id.; see cap). As supply decreases, the value of lost load increases also id. § 39.001(f) (“A person who challenges the validity of until it is effectively at the regulatory cap. Luminant, 691 a competition rule must file a notice of appeal with the court S.W.3d at ––––. of appeals ....”).6 *489 The PUC argues that its order approving NPRR 1081 D is not a rule at all, much less a “competition rule,” and that PURA thus does not authorize direct review of the order On July 30, 2021, respondents RWE Renewables Americas, by the court of appeals. The APA defines “rule” as “a state LLC and TX Hereford Wind, LLC (collectively, RWE) sought agency statement of general applicability” that “implements, judicial review of the PUC's order by the Third Court interprets, or prescribes law or policy” or “describes the of Appeals. RWE asserted that the court of appeals had procedure or practice requirements of a state agency.” Tex. jurisdiction under PURA Section 39.001(e) and alleged that Gov't Code § 2001.003(6)(A)(i)–(ii). The definition “includes the PUC both exceeded its statutory authority under PURA the amendment or repeal of a prior rule” but “does not and failed to comply with the Administrative Procedure Act in include a statement regarding only the internal management issuing the order. The PUC responded that the order was not a or organization of a state agency and not affecting private PUC rule subject to direct review by the court of appeals or the rights or procedures.” Id. § 2001.003(6)(B)–(C). APA's rulemaking requirements, and that the PUC properly issued the order in furtherance of its statutory authority to oversee ERCOT and ensure the reliability of the Texas electric grid. B © 2024 Thomson Reuters. No claim to original U.S. Government Works. 3 Appx. Page 221 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 PURA empowers the PUC to “adopt and enforce rules approval, ERCOT prepares an impact analysis, id. § relating to the reliability of the regional electrical network 21.4.6(1), which is reviewed by the subcommittee, id. § and accounting for the production and delivery of electricity 21.4.7(1). The NPRR then moves to the Technical Advisory among generators and all other market participants.” Tex. Committee, which considers the subcommittee report and the Util. Code § 39.151(d). However, as noted, it also allows impact analysis. Id. § 21.4.8(1). If the advisory committee the PUC to “delegate these responsibilities to an independent recommends approval of an NPRR, the committee forwards organization,” which the PUC has done by delegating its report to the ERCOT board of directors, id. § 21.4.8(5), rulemaking authority to ERCOT. Id.; CPS Energy, 671 and the report is also posted online, id. § 21.4.8(4). ERCOT's S.W.3d at 616; see 16 Tex. Admin. Code § 25.362(c) board then has the opportunity to approve the NPRR or take (requiring ERCOT to “adopt and comply with procedures other action. [subject to certain parameters] concerning the adoption and revision of ERCOT rules”). ERCOT has utilized this Before PURA was amended to require PUC approval for delegated rulemaking authority to establish operational rules protocol revisions to become effective, ERCOT would known as the Nodal Protocols. Under those protocols, implement them on the first day of the month following generators make offers in advance on how much electricity approval by ERCOT's board. Id. § 21.6(1) (Jan. 1, 2021). they are willing to sell and at what price. ERCOT, Nodal Now that protocols “may not take effect before receiving Protocols § 4.4.9 (May 1, 2024).7 ERCOT uses those prices to commission approval,” Tex. Util. Code § 39.151(g-6), they match demand to the lowest-price provider. Id. § 4.5. ERCOT are implemented on the first day of the month following serves as “the central counterparty for all transactions” that receipt of that approval, ERCOT, Nodal Protocols §§ it settles and “is deemed to be the sole buyer to each 21.4.11(1), 21.6(1) (June 1, 2023). seller” (typically, an energy generator) “and the sole seller to each buyer” (typically, a retail user) “of all energy.” Id. § A market participant, among others, may appeal a decision 1.2(4). Operating as a sort of clearinghouse, it is ERCOT that of the ERCOT board regarding an NPRR to the PUC. Id. generates settlement statements providing the terms under § 21.4.12.3(1). The PUC's rules outline the procedure for which market participants must make payments for energy review of ERCOT protocols. 16 Tex. Admin. Code §§ 22.251, transactions. Id. §§ 9.2.4(1), 9.5.4(1), 9.5.5. 25.362(c)(5). Those rules generally require that a complainant exhaust the process outlined in Section 21 of the protocols In accordance with the PUC's direction, ERCOT has before challenging the protocol with the PUC. Id. § 22.251(c). implemented detailed procedures for adopting and revising Exceptions exist when, for example, “the complainant seeks its protocols. “A request to make additions, edits, deletions, emergency relief necessary to resolve health or safety issues.” revisions, or clarifications to these Protocols ... is called a Id. § 22.251(c)(1)(C). Generally, the complaint must be filed Nodal Protocol Revision Request (NPRR).” Id. § 21.1(1) within thirty-five days of “the ERCOT conduct complained (June 1, 2023). A variety of entities may use the of.” Id. § 22.251(d); ERCOT, Nodal Protocols § 21.4.12.3(1) NPRR process, including market participants, the PUC, the (June 1, 2023). In response to the complaint, the PUC may, independent market monitor, and ERCOT itself. Id. § 21.2(1) among other things, provide ERCOT with “guidance on the (a), (c), (f), (g). NPRRs are posted on ERCOT's website and development and implementation of protocol revisions” and reviewed by ERCOT's Protocol Revision Subcommittee. Id. order ERCOT “to promptly develop protocol[ ] revisions for §§ 21.4.1(4), 21.3(1). Market participants and other entities commission approval.” 16 Tex. Admin. Code § 22.251(o)(3), may comment on an NPRR. Id. § 21.4.4(1). In fact, RWE (4). If the complainant is dissatisfied with the result of the participated in this process with respect to NPRR 1081 by PUC proceedings, it can then seek judicial review. Tex. Util. Code § 15.001. submitting comments in opposition to it.8 This painstaking procedure serves to leverage the expertise *490 After considering the NPRR, the revision of ERCOT members and industry stakeholders while subcommittee may take one of several actions, including maintaining transparency and affording interested parties recommending approval of the revision or rejecting it. plentiful opportunities to weigh in. Moreover, we recognize Id. § 21.4.4(3). ERCOT then posts a report describing that ERCOT and the PUC are uniquely situated as the subcommittee's action. Id. § 21.4.4(5). Again, market legislatively endorsed joint participants in a complex participants and others may comment on the subcommittee regulatory scheme—each serving its own distinct and report. Id. § 21.4.5(1). If the subcommittee recommends © 2024 Thomson Reuters. No claim to original U.S. Government Works. 4 Appx. Page 222 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 essential purpose. As we recognized in CPS Energy, procedures”).10 By contrast, the APA uses the term “approve” “ERCOT do[es] not fall neatly into any camp. It is a to describe the governor's action on legislation that allows it unique entity serving a role that is not clearly analogous to become the law. Id. § 2001.006(a)(2). to a public entity like a police department or a public school. Yet, it provides an essential governmental service.” PURA reinforces this distinction. For example, in a suit for 671 S.W.3d at 623 (alteration in original) (citation and judicial review of a competition rule under Section 39.001, internal quotation marks omitted). While the PUC has broad the rulemaking record includes “the order adopting the rule.” administrative responsibilities, it simultaneously lacks “the Tex. Util. Code § 39.001(e)(4) (emphasis added). The PUC expertise and staff resources” to make informed regulatory issues no such order with respect to ERCOT protocols. decisions independent of ERCOT. Sunset Advisory Comm., We cannot ignore the Legislature's deliberate decision not Staff Report with Commission Decisions: Public Utility to designate the PUC as the entity that “adopts” ERCOT Commission of Texas, Electric Reliability Council of Texas, protocols given the comprehensive statutory use of that term. Office of Public Utility Counsel 37 (Jan. *491 2023).9 RWE and the court of appeals highlight that, under PURA as amended, an ERCOT protocol does not take effect until it receives PUC approval. 669 S.W.3d at 574; Tex. C Util. Code § 39.151(g-6). True, but even in requiring PUC A substantially similar version of the above-described process approval, the Legislature distinguished between ERCOT's for adopting and revising ERCOT protocols has long been role in adopting a protocol and the PUC's role in in effect. See ERCOT, Nodal Protocols § 21 (Mar. 1, 2005) approving it. Tex. Util. Code § 39.151(g-6) (“Protocols (rev. Feb. 2010, Apr. 2011, May 2011, Oct. 2011, May 2012, adopted by [ *492 ERCOT] ... may not take effect Aug. 2012, Apr. 2013, Dec. 2013, May 2014, July 2016, before receiving commission approval.” (emphasis added)). Nov. 2016, Nov. 2017, Jan. 2021, Apr. 2023, June 2023). The Again, the Legislature deliberately employed these terms to legislative and regulatory schemes have in turn envisioned communicate two distinct administrative actions that have separate, complementary purposes of and procedures for PUC distinct legal consequences. See Galveston Indep. Sch. Dist. rules and ERCOT protocols, notwithstanding the fact that v. Jaco, 331 S.W.3d 182, 185–86 (Tex. App.—Houston ERCOT and its protocols have consistently been subject to [14th Dist.] 2011, pet. denied) (highlighting the Legislature's PUC oversight and review. Tex. Util. Code § 39.151(d). RWE distinct use of “adopt” and “approve” in statutes describing nevertheless suggests that, by amending PURA to require the duties of the commissioner of education); Tex. Educ. Code formal PUC approval of ERCOT-adopted protocols at the tail § 7.055(b)(41) (“The commissioner shall adopt rules relating end of the process, the Legislature intended to overhaul that to extracurricular activities under Section 33.081 and approve process entirely and effectively convert ERCOT protocols or disapprove University Interscholastic League rules and into PUC rules subject to the same review procedures. We procedures under Section 33.083.” (emphases added)). do not discern such a sweeping intent from the language the Legislature chose. Finally, we cannot ignore that when the Legislature amended PURA in 2021 to require PUC approval of For one thing, PURA makes clear that ERCOT, not the PUC, the independent organization's (ERCOT's) protocols, it is the entity “adopting” new or revised ERCOT protocols. See simultaneously added the requirement that the organization id. § 39.151(g-6). The PUC then “approves” the protocols. “establish and implement a formal process for adopting new See id. This distinction is deceptively significant because the protocols or revisions to existing protocols.” Act of May APA's requirements, which RWE insists must be satisfied, are 30, 2021, 87th Leg., R.S., ch. 425, § 3, 2021 Tex. Gen. exclusively and repeatedly directed at rules “adopted” by a Laws 830, 832 (amended 2023) (codified at Tex. Util. Code “state agency.” See, e.g., Tex. Gov't Code § 2001.033(a) (“A § 39.151(g-6)). As discussed above, ERCOT already had state agency order finally adopting a rule must include: ....”). such a process in place; nevertheless, the requirement signals Indeed, the Legislature deliberately uses the term “adopt” legislative recognition that ERCOT rulemaking and PUC throughout the APA—no reference is made to an agency's rulemaking are independent endeavors. “approval” of a rule. See, e.g., id. § 2001.004(1) (requiring a state agency to “adopt rules of practice stating the In sum, consistent with the well-established regulatory nature and requirements of all available formal and informal scheme and the legislation governing it, we hold that © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 223 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 the PUC's order approving NPRR 1081 was a ratification that this Court contemporaneously holds in Luminant that decision that simply allowed protocol revisions, already the PUC did not exceed its authority under PURA in issuing developed and adopted by ERCOT in accordance with its temporary emergency orders that, like NPRR 1081, set the own detailed procedures, to take effect. Consequently, the price of electricity at the regulatory ceiling during a period of PUC's order was not an agency-adopted “rule” under the emergency load-shed. 691 S.W.3d at ––––. Administrative Procedure Act. In turn, because the court of appeals’ jurisdiction under Utilities Code Section 39.001(e) **** is limited to review of “competition rules adopted by the commission,” the court lacked jurisdiction over RWE's Because the PUC's order was not a “competition rule adopted by the commission” under PURA, Section 39.151 did not challenge to the PUC's approval order.11 confer direct-review jurisdiction on the court of appeals. We therefore vacate the court of appeals’ judgment and dismiss the suit for lack of jurisdiction. III Having concluded that the court of appeals lacked jurisdiction All Citations over RWE's appeal of the PUC's approval order, we need not address RWE's remaining arguments. We note, however, 691 S.W.3d 484, 67 Tex. Sup. Ct. J. 1096 Footnotes 1 In our contemporaneously issued opinion in Public Utility Commission v. Luminant Energy Co., we hold that the PUC did not exceed its authority in issuing two emergency orders during Winter Storm Uri that operated to a similar end by temporarily setting the price of electricity at the regulatory ceiling. 691 S.W.3d 448, –––– (Tex. June 14, 2024) (No. 22-0231). 2 A more detailed explanation of the Texas electricity market appears in this Court's opinion in Luminant. See id. at ––––. We also recently engaged in a thorough discussion of ERCOT's history, and its role in the Texas electricity market, in CPS Energy v. ERCOT, 671 S.W.3d 605, 611–12 (Tex. 2023). 3 The others are “ensur[ing] access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms” and “ensur[ing] that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information.” Tex. Util. Code § 39.151(a)(1), (3). 4 As further amended in 2023, Section 39.151(g-6) currently provides: In this subsection, a reference to a protocol includes a rule. Protocols adopted by an independent organization and enforcement actions taken by the organization under delegated authority from the commission are subject to commission oversight and review and may not take effect before receiving commission approval. To maintain certification as an independent organization under this section, the organization's governing body must establish and implement a formal process for adopting new protocols or revisions to existing protocols. The process must require that new or revised protocols may not take effect until the commission approves a market impact statement describing the new or revised protocols. The commission may approve, reject, or remand with suggested modifications to the independent organization's governing body protocols adopted by the organization. Act of May 26, 2023, 88th Leg., R.S., ch. 464, § 4, 2023 Tex. Sess. Law Serv. (West) 1133 (codified at Tex. Util. Code § 39.151(g-6)). 5 In support of its first holding, the court relied on its own decision in Luminant, which we also review today. 669 S.W.3d at 576. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 224 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 6 When RWE instituted this proceeding, Section 39.001(e) provided for review in the Third Court of Appeals. In 2023, the Legislature amended Section 39.001(e) to provide for review by the Fifteenth Court of Appeals going forward. Act of May 22, 2023, 88th Leg., R.S., ch. 459, § 1.13, 2023 Tex. Sess. Law Serv. (West) 1119. 7 We cite the current version of the protocols unless substantive differences require citing the version in effect when the relevant events occurred. ERCOT's current protocols and a library of past versions of the protocols, with summaries of revisions, are available on ERCOT's website. Protocols - Nodal, https://www.ercot.com/mktrules/nprotocols. 8 RWE, Comment Letter on Nodal Protocol Request 1081 (June 23, 2021), https://www.ercot.com/mktrules/issues/ NPRR1081#keydocs. 9 Available at https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with-Commission- Decisions_1-19-23.pdf). 10 See also Tex. Gov't Code § 2001.006 (describing when a rule “adopted” under Section 2001.006(b) may take effect); id. § 2001.021(a) (“An interested person by petition to a state agency may request the adoption of a rule.”); id. § 2001.023(a) (“A state agency shall give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule.”); id. § 2001.030 (“On adoption of a rule, a state agency, if requested to do so by an interested person either before adoption or not later than the 30th day after the date of adoption, shall issue a concise statement of the principal reasons for and against its adoption.”). 11 As noted, PUC regulations provide a process for review of ERCOT protocols, 16 Tex. Admin. Code §§ 22.251, 25.362(c) (5), which culminates in a suit for judicial review in district court, Tex. Util. Code § 15.001. RWE did not engage in that process, choosing instead to utilize the inapplicable procedure for reviewing PUC competition rules. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 7 Appx. Page 225 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 92372463 Filing Code Description: No Fee Documents Filing Description: LETTER BRIEF TO COURT IN CONNECTION TO 10/1/24 STATUS CONFERENCE Status as of 9/24/2024 10:22 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/24/2024 10:16:47 AM SENT Elin Isenhower eisenhower@winstead.com 9/24/2024 10:16:47 AM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/24/2024 10:16:47 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/24/2024 10:16:47 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/24/2024 10:16:47 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/24/2024 10:16:47 AM SENT Ken Carroll kcarroll@ccsb.com 9/24/2024 10:16:47 AM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/24/2024 10:16:47 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/24/2024 10:16:47 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/24/2024 10:16:47 AM SENT John RHulme John.Hulme@oag.texas.gov 9/24/2024 10:16:47 AM SENT Laura Courtney laura.courtney@oag.texas.gov 9/24/2024 10:16:47 AM SENT Case Contacts Appx. Page 226 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 92372463 Filing Code Description: No Fee Documents Filing Description: LETTER BRIEF TO COURT IN CONNECTION TO 10/1/24 STATUS CONFERENCE Status as of 9/24/2024 10:22 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/24/2024 10:16:47 AM SENT Judy Garrison jgarrison@ccsb.com 9/24/2024 10:16:47 AM SENT Becky Dunn bdunn@ccsb.com 9/24/2024 10:16:47 AM SENT Appx. Page 227 of 740 9/24/2024 5:49 PM Velva L. Price District Clerk Travis County D-1-GN-24-003384 Norma Ybarra September 24, 2024 VIA E-FILING Hon. Catherine A. Mauzy 419th Civil District Court 1700 Guadalupe, 11th floor Austin, Texas 78701 Re: Cause No. D-1-GN-24-003384; Aspire Power Ventures, LP v. Public Utility Commission of Texas, et al.; in the 345th District Court of Travis County Dear Judge Mauzy: The Public Utility Commission of Texas and its Commissioners (“PUCT Defendants”) submit this letter in conjunction with the Review/Status Conference set for October 1 at 2:00 p.m. The PUCT Defendants have filed a plea to the jurisdiction in this case, as has Defendant Electric Reliability Council of Texas (“ERCOT”). Because the Court must first decide whether it has jurisdiction before proceeding to consider the merits of the case, Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004), the PUCT Defendants and ERCOT are both urging that a two-hour hearing on their pleas be set before any consideration of plaintiff Aspire Power Ventures’ request for a temporary injunction. That injunction request would require a full day hearing, including numerous witnesses discussing highly complex matters involved with the management of the ERCOT grid. Thus, that injunction request cannot in any event be heard on the same day as Defendants’ pleas. And scheduling that injunction hearing would be a waste of the PUCT and ERCOT’s resources in preparing for and attending such a hearing if the Court lacks jurisdiction over this case. Indeed, the PUCT Defendants submit there can be little question that the Court does not have jurisdiction and that the injunction hearing will not be necessary. As the PUCT Defendants explain in their plea to jurisdiction, the Supreme Court’s recent decision in Public Utility Commission of Texas v. RWE Renewables, Americas, LLC, 691 S.W.3d 484 (Tex. 2024) makes clear that the PUCT approval Pos t Of fic e Box 12548 , Aust in , Texa s 7 8 7 1 1 - 2 5 4 8 • ( 5 1 2 ) 4 6 3 - 2 1 0 0 • www. texa satto r neyg eneral .go v Appx. Page 228 of 740 Hon. Catherine A. Mauzy September 24, 2024 Page 2 of 3 orders at issue are not agency adopted rules and thus are not subject to challenge under Tex. Gov’t Code § 2001.038 and not the proper subject of an ultra vires claim. Thus, there is no waiver of sovereign immunity in this case, and it should be dismissed. A copy of the PUCT Defendants’ plea to the jurisdiction, filed September 13, is attached. The Supreme Court’s recent decision in RWE Renewables is attached to that plea. Respectfully, /s/ John R. Hulme JOHN R. HULME Special Counsel State Bar No. 10258400 John.Hulme@oag.texas.gov OFFICE OF THE ATTORNEY GENERAL OF TEXAS Environmental Protection Division P.O. Box 12548, MC-066 Austin, Texas 78711-2548 (512) 463-2012 | Fax (512) 320-0911 Attorneys for the Public Utility Commission of Texas and Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, in their official capacities as Chairman and Commissioners of the Public Utility Commission of Texas Appx. Page 229 of 740 Hon. Catherine A. Mauzy September 24, 2024 Page 3 of 3 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing document has been forwarded to the following attorneys via the Court’s electronic filing case management system and/or electronic mail on September 24, 2024: Chrysta L. Castañeda Elliot Clark chrysta@castaneda-firm.com eclark@winstead.com Nicole Michael Elin Isenhower nicole@castaneda-firm.com eisenhower@winstead.com THE CASTAÑEDA FIRM WINSTEAD PC 325 N. St. Paul, Suite 2030 401 Congress Avenue, Suite 2100 Dallas, Texas 75201 Austin, Texas 78701 Tel: (214) 282-8579 Tel: (512) 370-2800 Fax: (214) 602-9187 Fax: (512) 370-2850 Monica Latin Attorneys for Defendant MLatin@ccsb.com Electric Reliability Council of Texas Brent M. Rubin BRubin@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Tel: (214) 855-3000 Fax: (214) 580-2641 Attorneys for Plaintiff Aspire Power Ventures, LP /s/ John R. Hulme JOHN R. HULME Appx. Page 230 of 740 9/13/2024 3:47 PM Velva L. Price District Clerk Travis County Cause No. D-1-GN-24-003384 D-1-GN-24-003384 Nancy Rodriguez ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § and COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ PLEA TO THE JURISDICTION Aspire’s suit challenges and seeks to enjoin three amendments to ERCOT’s operating standards or “protocols,” which the PUCT Defendants 1 approved on May 12, 2022; January 26, 2023; and June 29, 2023. The PUCT Defendants move to dismiss Aspire’s suit for lack of jurisdiction. I. Standard of Review A court “must determine at its earliest opportunity whether it has the constitutional or statutory authority to decide the case before allowing the litigation 1 Public Utility Commission of Texas (“PUCT” or “Commission”) and Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, in their official capacities as Chairman and Commissioners of the PUCT (collectively, the “PUCT Defendants.”) Appx. Page 231 of 740 to proceed.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). Whether the Court has subject-matter jurisdiction is a question of law. Id. Moreover, courts have an “obligation” to consider a plea to the jurisdiction asserting immunity when filed. See In re Lazy W District No. 1, 493 S.W.3d 538, 544 (Tex. 2016) (orig. proceeding). In short, jurisdiction must be resolved first; only after it has been determined can Aspire’s claims for injunctive relief be heard. The Court lacks jurisdiction over this case for several reasons. The first is sovereign immunity. Plaintiff’s suit against the Commission and its officials in their official capacity is a suit against the State. “[A] suit against government employees in their official capacities is, in all respects, a suit against the State.” De Mino v. Sheridan, 176 S.W.3d 359, 366 (Tex. App.–Houston [1st Dist.] 2004, no pet.). The trial court lacks subject-matter jurisdiction absent a showing that the Texas Legislature by statute or express permission has given the State’s consent to being sued in this matter. See Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002). There is no such consent here, as Aspire invokes a statutory provision that only authorizes judicial review of agency rules. But the matter at issue here is not an agency rule. Pub. Util. Comm’n of Tex. v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 492 (Tex. 2024) (PUCT order approving ERCOT protocol amendment “was not an agency-adopted ‘rule’ under the Administrative Procedure Act.”). See Attach. 1. Thus, the limited waiver of the State’s sovereign immunity 2 Appx. Page 232 of 740 under Texas Gov’t Code § 2001.038 is not applicable here. Nor does the ultra vires exception to sovereign immunity apply. Aspire alleges “the [PUCT] Commissioners committed ultra vires acts for which they are liable in their official capacities.” Am. Pet. ¶ 55. But “[a]n ultra vires action requires a plaintiff to ‘allege, and ultimately prove, that the officer acted without legal authority or failed to perform a purely ministerial act.’” Hall v. McRaven, 508 S.W.3d 232, 238 (Tex. 2017) (quoting City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009)). The PUCT Commissioners have not acted ultra vires by reviewing and ratifying amendments to the Electric Reliability Council of Texas (“ERCOT”) protocols—because their actions are specifically authorized by Tex. Util. Code § 39.151. See e.g. Tex. Util. Code § 39.151(g-6): “The commission may approve, reject, or remand with suggested modifications . . . protocols adopted by [ERCOT].” See Attach. 2. Thus, the ultra vires exception does not apply and Aspire’s lawsuit against the PUCT officials in their official capacity is barred by sovereign immunity. II. Factual Background Aspire’s suit challenges three different amendments to ERCOT’s operating standards or “protocols,” each approved in due course by the PUCT, as the Texas Public Utility Regulatory Act (“PURA”) has authorized since 2021. Tex. Util. Code § 39.151(g-6). Defendant ERCOT is the Commission’s designated electric grid operator. Tex. Util. Code § 39.151(d), (i), (j). ERCOT manages the Texas electric 3 Appx. Page 233 of 740 grid under authority delegated to it by PUCT to “establish, adopt, and enforce a variety of policies, rules, guidelines, standards, procedures, protocols, and other requirements to govern the operations of market participants.” CPS Energy v. Elec. Reliability Council of Tex., 671 S.W.3d 605, 626 (Tex. 2023). These protocols consist of thousands of pages of highly technical standards that govern every aspect of the electric grid and the wholesale electric market, including detailed specifications and complex pricing formulas. Id. at 616-17; Pub. Util. Comm’n of Tex. v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 486-87 (Tex. 2024). ERCOT develops these protocols through an elaborate stakeholder process involving electric market participants, providing extensive opportunities for market participant involvement and comment, that is described in the recent Supreme Court decision in RWE Renewables, 691 S.W.3d at 490 (protocol development process “serves to leverage the expertise of ERCOT members and industry stakeholders while maintaining transparency and affording interested parties plentiful opportunities to weigh in”). The specific protocol amendments challenged in this suit relate to ERCOT’s Contingency Reserve Service (“ECRS”), a type of “ancillary service” that the grid operator uses to balance supply and demand and keep the grid operating. See Tex. Util. Code § 39.159(b) (grid operator to “procure[] ancillary or reliability services . . . to ensure appropriate reliability”); § 35.004(e) (‘“[A]ncillary services’ means 4 Appx. Page 234 of 740 services necessary to facilitate the transmission of electric energy including load following, standby power, backup power, reactive power, and any other services as the commission may determine by rule.”); see also 16 Tex. Admin. Code § 25.5(9); ERCOT Nodal Protocols § 2.1. The particular ancillary service program at issue in this case, ECRS, was originally created in 2019. As ERCOT has explained in its own plea to the jurisdiction filed in this case, ECRS was developed to address reliability risks that the grid operator’s other ancillary services did not adequately address, “including those risks created by rapid grid modernization (e.g., increasing amounts of intermittent wind and solar generation resources), which are only compounded by the ever-present heightened reliability risks presented by ERCOT’s intrastate nature.” ERCOT Plea to the Jurisdiction 8 (citing ERCOT Protocols § 6.5.7.6.2.4(1) (listing purposes of ECRS)). The latter need refers to the fact that the ERCOT grid is generally not interconnected to the grids in other parts of the country and thus it is uniquely vulnerable to sudden power shortages. Id. (ECRS is a critical reliability tool fulfilling a similar role to import capability in other parts of the country). Aspire does not challenge the initial creation of ECRS, which occurred in 2019, but rather three later amendments to ECRS that were approved by the PUCT over a year ago. Am. Pet. ¶ 29; see also ¶ 1 (defining the three challenged orders implementing ECRS as the “ECRS Rules”). The Commission approved the first and only substantive amendment of the three ECRS protocol amendments Aspire 5 Appx. Page 235 of 740 challenges in May 2022. The two other ECRS approval orders at issue (approved in 2023) merely cleaned up the language in the underlying ECRS protocol (Nodal Protocol Revision Request, or “NPRR” 1148) and set forth clarifications and expectations regarding the ECRS protocol (NPRR 1178). Tex. Pub. Util. Comm’n, Review of Protocols Adopted by the Independent Organization, Project No. 54445. Aspire did not file its original petition in this case until May 31, 2024, over two years after the PUCT order approving ERCOT’s first protocol amendment and more than a year after the Commission approved the latter two protocol amendments. On August 13, 2024, Aspire filed an Amended Petition adding ERCOT as a defendant,2 asserting new causes of action relating to the same ECRS protocols that the PUCT ratified, complaining of ERCOT and the PUCT’s actions in connection with the ECRS protocols, and seeking associated relief. Am. Pet. ¶ 5 (“[T]he PUC and ERCOT implemented ECRS without even attempting to comply with the mandatory requirements of the APA”), ¶ 19. The ERCOT protocol that actually created the ECRS program, NPRR 863, was adopted in February 2019. Rather than the three protocol amendments at issue in this suit, most of Aspire’s complaints are about the ECRS program generally, indicating its actual objective in this lawsuit is to invalidate the ECRS program in its 2 The Amended Petition also added new PUCT Commissioner Hjaltman as a defendant. 6 Appx. Page 236 of 740 entirety. Am. Pet. ¶¶ 28-38. But the 2019 protocol that established ECRS was adopted before PURA was amended to add the requirement that the PUCT approve protocols before they take effect. As with the 2022 and 2023 protocol amendments challenged in this suit, Aspire did not complain to the Commission about ERCOT’s conduct in adopting the 2019 protocols through the procedure provided in the PUCT rules and, therefore, has failed to exhaust administrative remedies as to any of the ECRS protocols. See Section V below. III. The Court lacks jurisdiction over Aspire’s declaratory judgment claim because the PUCT’s approval orders at issue are not agency rules. Aspire’s suit seeks a declaratory judgment under the Texas Administrative Procedure Act, Tex. Gov’t Code § 2001.038.3 That provision only authorizes declaratory judgments regarding the validity or applicability of agency rules. Tex. Gov’t Code § 2001.038(a) (“The validity or applicability of a rule . . . may be determined in an action for declaratory judgment if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.”). But the recent RWE Renewables decision of the Supreme Court makes clear that these PUCT approval orders are not agency rules. In RWE Renewables, the Supreme Court held that the PUCT’s 3 Aspire also seeks an injunction and a stay under PURA Section 15.004 in connection with this Tex. Gov’t Code § 2001.038 declaratory claim. The Court lacks jurisdiction over these requests as well. 7 Appx. Page 237 of 740 protocol-approval determinations, such as those of which Aspire complains in this case, are not agency “rules.” Pub. Util. Comm’n of Tex. v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 492 (Tex. 2024) (PUCT order approving ERCOT protocol amendment was “a ratification decision that simply allowed protocol revisions, already developed and adopted by ERCOT in accordance with its own detailed procedures, to take effect,” and “[c]onsequently, the PUC's order was not an agency- adopted ‘rule’ under the Administrative Procedure Act.”). In RWE, the plaintiff (like Aspire, an ERCOT wholesale market participant) was likewise challenging a PUCT order approving an ERCOT protocol amendment. But the Supreme Court rejected RWE’s contention that the PUCT approval order at issue was a PUCT rule. The Court held that “PURA envisions a separate process for ERCOT-adopted protocols, and the statutory requirement that the PUC approve those adopted protocols does not transform PUC approval orders into PUC rules.” RWE Renewables, 691 S.W.3d at 486. Thus, the PUCT order approving ERCOT’s protocol amendment was only “a ratification decision” and “[c]onsequently, the PUC’s order was not an agency-adopted ‘rule’ under the Administrative Procedure Act.” Id. at 492. Here the Court noted that PURA designated ERCOT as the entity that “adopts” new or revised protocols, Tex. Util. Code § 39.151(g-6), which the PUCT (its overseer) then “approves.” Id. The APA’s requirements, on the other hand, refers and imposes requirements only with reference to an agency’s adoption 8 Appx. Page 238 of 740 of a rule. RWE, 691 S.W.3d at 491 (“We cannot ignore the Legislature’s deliberate decision not to designate the PUC as the entity that ‘adopts’ ERCOT protocols given the comprehensive statutory use of that term.”). The Supreme Court’s holding in RWE conclusively answers the jurisdictional question in this case—the PUCT’s approval orders are not agency-adopted rules that Aspire can challenge under the APA, Tex. Gov’t Code § 2001.038. There is no waiver of sovereign immunity. For this simple reason alone, the Court lacks jurisdiction over all of Aspire’s claims against the PUCT. Because PUCT’s approval order was not a rule under RWE, the Court has no jurisdiction over Aspire’s declaratory judgment claims against the PUCT under Tex. Gov’t Code § 2001.038. See also R.R. Comm’n of Tex. v. WBD Oil & Gas Co., 104 S.W.3d 69, 70 (Texas. 2003) (no Section 2001.038 jurisdiction regarding agency orders adopting field rules that were not APA rules). IV. The Court lacks jurisdiction over this case because Aspire’s complaints about ERCOT’s protocols must have been brought to the Commission. To the extent Aspire challenges the protocol amendments themselves, the case should be dismissed because the PUCT has exclusive jurisdiction over Aspire’s complaints about ERCOT’s adoption of the challenged protocol amendments. Aspire’s complaints must have been brought first to the Commission. Subject-matter jurisdiction is lacking “when the Legislature has granted [an] agency the sole authority to make an initial determination in a dispute,” and thus the Court lacks 9 Appx. Page 239 of 740 jurisdiction “until the party has exhausted all administrative remedies before the agency.” Oncor Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018). This includes any complaints about the protocols that ERCOT has adopted. Exclusive jurisdiction may be created by express statutory language or through the creation of a pervasive regulatory scheme indicating that “the Legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed.” Id. at 138 (quoting In re Sw. Bell Tel., 235 S.W.3d 619, 624-25 (Tex. 2007)). PURA Section 39.151, attached to this plea, sets forth a detailed framework outlining the PUCT’s oversight and “complete authority” over ERCOT’s functions. See Attach. 2. In CPS Energy v. Electric Reliability Council of Texas, 671 S.W.3d 605, 618 (Tex. 2023), the Supreme Court held that the PUCT’s comprehensive regulatory authority over its designated grid operator, ERCOT, was such a pervasive regulatory scheme establishing exclusive jurisdiction with the agency that it deprived the Court of the authority to hear the dispute. Id. (“[PURA] Section 39.151’s grant of extensive authority to the PUC over ERCOT and its detailed regulation of the particulars of ERCOT’s functions constitute a pervasive regulatory scheme.”). Aspire’s allegations about the protocol amendments themselves plainly fall within this scheme: they involve ERCOT’s development of standards designed to 10 Appx. Page 240 of 740 ensure the reliability of the ERCOT grid through ancillary services programs such as ECRS. Had Aspire filed complaints about ERCOT’s protocol amendments with the Commission, and the Commission sustained ERCOT’s action, then Aspire could have challenged that determination in this Court in accordance with the APA’s judicial review provisions. Tex. Gov’t Code § 2001.171. But Aspire did not file such a complaint with the PUCT, and the Court lacks jurisdiction to hear these complaints. For this additional reason, this Court lacks jurisdiction over Aspire’s amended petition. V. The Court lacks jurisdiction over any challenge to the Commission’s 2022 and 2023 protocol amendments because Aspire failed to exhaust its administrative remedies. Aspire’s attempt to frame the Commission’s validation decisions as “rules” is not totally surprising given that Aspire did not pursue the necessary administrative remedies to bring a suit challenging the 2022 and 2023 protocol amendments, and it is far too late for it to do so now. Again, to have pursued any such challenge, Aspire must have first exhausted its administrative remedies by (1) complaining to ERCOT about each of the three protocol amendments and then (2) filing a complaint with the Commission about each of the three protocol amendments. Aspire did neither of these, for any of the three challenged protocol amendments. Thus, Aspire failed to exhaust all available administrative remedies. To the extent Aspire’s Amended 11 Appx. Page 241 of 740 Petition could somehow be read as challenging the PUCT’s orders, the Court lacks jurisdiction over this case for this reason. Under the APA “[a] person who has exhausted all administrative remedies available within a state agency and who is aggrieved by a final decision in a contested case is entitled to judicial review under this chapter.” Tex. Gov’t Code § 2001.171. The Commission’s rules set out those procedures. Under PUCT rules, affected entities may issue formal complaints to the PUCT regarding ERCOT action. 16 Tex. Admin. Code § 22.251(b). Under these well-established procedures, Aspire must have sought relief through ERCOT’s alternative dispute resolution (“ADR”) procedures before then filing a formal complaint with the Commission. Id. § 22.251(c). When ADR is required, the complainant must file a formal complaint with the Commission within 35 days after completing ADR. Id. § 22.251(d). Aspire failed to file such a complaint after ERCOT approved the protocol amendments in 2022 and 2023, even though it had notice of and ample opportunity to comment and participate in the protocol-development process at ERCOT. See Section II above discussing ERCOT protocol amendment process; RWE Renewables, 691 S.W.3d at 490. Aspire then needed to complain of ERCOT’s action to the Commission under 16 Tex. Admin. Code § 22.251. Again, it did not. Had Aspire exhausted its administrative remedies as the law requires, the Commission decision on that complaint would then be subject to judicial review under Tex. Gov’t 12 Appx. Page 242 of 740 Code § 2001.171. Here again, the Supreme Court’s recent decision in RWE Renewables is instructive, as it confirms that such a complaint is the proper way to challenge an ERCOT protocol. RWE Renewables, 691 S.W.3d at 492 n.11 (“PUC regulations provide a process for review of ERCOT protocols, 16 Tex. Admin. Code §§ 22.251, 25.362(c)(5), which culminates in a suit for judicial review in district court, Tex. Util. Code § 15.001.”). Because Aspire did not avail itself of these remedies, the Court has no jurisdiction over this suit. See Section VI below. VI. The Court lacks jurisdiction over this 2024 case because Aspire waited over a year to file suit to challenge the PUCT protocol-approval orders. Had Aspire followed the proper procedure to complain about the 2022 and 2023 protocol amendments as the Supreme Court explained in RWE (it did not), its complaint about the Commission’s approval of ERCOT’s protocols would have been subject to judicial review under the APA—had it timely filed suit. Here again, it did not. Instead of following the proper procedure before the agency, Aspire instead skipped ahead to directly challenge the PUCT’s 2022 and 2023 approval orders in district court. But Aspire’s 2024 suit challenging the Commission’s 2022 and 2023 approval decisions was, in any event, filed far too late. A challenge to an agency order must be brought within 30 days of the denial of the motion for rehearing. Tex. Gov’t Code § 2001.176(a). Aspire did not file any sort of rehearing request after the approval orders were issued. Even if it had filed such a request, the motion would have been overruled by operation of law in 2023. Id. § 2001.146(c). Aspire would 13 Appx. Page 243 of 740 then have been required to bring its suit within 30 days. Id. § 2001.176(a). Aspire did not file this suit until late May 2024, far too late to invoke this Court’s jurisdiction. The obvious lateness of the suit aside, there is yet another problem fatal to the Court’s jurisdiction here: Aspire did not even try to participate in the proceeding in which the protocols were approved. It did not file anything at all (an intervention request, comments, or an objection) in response to ERCOT’s requests for approval of three protocol amendments Aspire challenges. VII. The Court lacks jurisdiction over Aspire’s ultra vires claims because the PUCT Commissioners’ review and approval of the ERCOT protocol amendments was within their statutory authority. The ultra vires doctrine allows suits against government officials who are alleged to have acted outside their legal authority. Hall, 508 S.W.3d at 238. To assert a valid ultra vires claim, the plaintiff “must not complain of a government officer’s exercise of discretion, but rather must allege, and ultimately prove, that the officer acted without legal authority or failed to perform a purely ministerial act.” Schroeder v. Escalera Ranch Owners' Ass'n, 646 S.W.3d 329, 332 (Tex. 2022) (quoting City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009)). A government officer with some discretion to interpret and apply the law acts without legal authority “if he exceeds the bounds of his granted authority or if his acts conflict with the law itself.” Id. (quoting Hall, 508 S.W.3d at 238). “If the challenged actions ‘were not truly 14 Appx. Page 244 of 740 outside the officer’s authority or in conflict with the law,’ then the plaintiff has not stated a valid ultra vires claim and governmental immunity will bar the suit.” Id. at 332-33 (quoting Matzen v. McLane, 659 S.W.3d 381, 388 (Tex. 2021)). Mere allegations that a state official’s acts were unconstitutional or “without legal authority” are not enough to satisfy the ultra vires exception to sovereign immunity. Creedmoor-Maha Water Supply Corp. v. Tex. Comm’n on Env’t Quality, 307 S.W.3d 505, 515 (Tex. App.—Austin 2010, no pet.). “[I]f the plaintiff alleges only facts demonstrating acts within the officer’s legal authority and discretion, the claim seeks to control state action, and is barred by sovereign immunity.” Id. at 515- 16. When determining whether a party has asserted a valid ultra vires claim, courts “construe the relevant statutory provisions and apply them to the facts as alleged in the pleadings.” Cockrell Inv. Partners, L.P. v. Middle Pecos Groundwater Conservation Dist., 677 S.W.3d 727, 744 (Tex. App.—El Paso 2023, pet. pending). Aspire has not alleged any facts that the PUCT Commissioners acted outside their legal authority. Indeed, the action they challenge is one they are statutorily mandated to do: under PURA, PUCT must review and approve all of ERCOT’s protocol amendments before they are allowed to take effect. Tex. Util. Code § 39.151(g-6). Instead, all of Aspire’s ultra vires conduct allegations take issue with the decisions reached by PUCT in its protocol-ratification order or the process by which the order was issued. To the extent Aspire complains about the procedures the 15 Appx. Page 245 of 740 PUCT employed in making a decision plainly within its authority, that is not a proper ultra vires claim. (And in any event, the Supreme Court has explained in RWE Renewables that the Commission’s protocol ratification decisions are not rules and that the Commission was not required to employ APA procedures in adopting them.) To the extent that Aspire complains about the decision that the PUCT made (that is, approving a protocol that is allegedly contrary to PURA’s prohibition on market participants withholding power from the ERCOT wholesale market), that is not the proper subject of an ultra vires claim, either. The Commission is statutorily charged with “approv[ing], reject[ing], or remand[ing] with suggested modifications to [ERCOT]'s governing body protocols adopted by the organization.” Tex. Util. Code § 39.151(g-6). Thus, the determination of whether a proposed protocol amendment complies with PURA is within the Commission’s discretion to make. Aspire’s challenge to the Commissioners’ exercise of discretion in carrying out their statutory duty to review ERCOT protocol amendments does not establish true ultra vires conduct. See Schroeder, 646 S.W.3d at 335 (“Even if incorrect in their conclusion, the Commissioners did not exceed the scope of their authority.”); see also Hall, 508 S.W.3d at 243 (“Based on the unrestricted nature of McRaven’s authority under Section 5.4.6, we find his discretion to interpret collateral federal privacy law to be ‘absolute’ . . . . As such, McRaven—whether right or wrong—was not without legal authority in making that determination.”). Because Aspire 16 Appx. Page 246 of 740 complains only of the Commissioners’ exercise of discretion under the applicable statute—and has failed to allege any conduct exceeding the Commissioners’ authority under that statute—Aspire has not properly pled a valid ultra vires claim within the exception to the State’s sovereign immunity. Matzen v. McLane, 659 S.W.3d 381, 388 (Tex. 2021) (plaintiff asserting an ultra vires claim must “allege facts affirmatively demonstrating actionable ultra vires conduct by state officials in order to avoid dismissal on jurisdictional grounds due to sovereign immunity”). Under Tex. Util. Code § 39.151(d), (g-6), the Commission undeniably had the authority and discretion to issue the 2022 and 2023 orders Aspire challenges. The ultra vires exception to sovereign immunity does not apply. PRAYER The PUCT Defendants pray that this Court dismiss all claims against the PUCT and the PUCT Commissioner defendants for lack of jurisdiction. The PUCT Defendants further pray for all other relief to which they may be entitled. Respectfully submitted, KEN PAXTON Attorney General of Texas BRENT WEBSTER First Assistant Attorney General RALPH MOLINA Deputy First Assistant Attorney General 17 Appx. Page 247 of 740 JAMES LLOYD Deputy Attorney General for Civil Litigation KELLIE E. BILLINGS-RAY Chief, Environmental Protection Division /s/ John R. Hulme JOHN R. HULME Special Counsel State Bar No. 10258400 John.Hulme@oag.texas.gov AMANDA ATKINSON CAGLE Assistant Attorney General State Bar No. 00783569 Amanda.Cagle@oag.texas.gov JORDAN PRATT Assistant Attorney General State Bar No. 24140277 Jordan.Pratt@oag.texas.gov OFFICE OF THE ATTORNEY GENERAL OF TEXAS Environmental Protection Division P.O. Box 12548, MC-066 Austin, Texas 78711-2548 (512) 463-2012 | Fax (512) 320-0911 Attorneys for the Public Utility Commission of Texas and Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, in their official capacities as Chairman and Commissioners of the Public Utility Commission of Texas 18 Appx. Page 248 of 740 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing document has been forwarded to the following attorneys via the Court’s electronic filing case management system and/or electronic mail on September 13, 2024: Chrysta L. Castañeda Elliot Clark chrysta@castaneda-firm.com eclark@winstead.com Nicole Michael Elin Isenhower nicole@castaneda-firm.com eisenhower@winstead.com THE CASTAÑEDA FIRM WINSTEAD PC 325 N. St. Paul, Suite 2030 401 Congress Avenue, Suite 2100 Dallas, Texas 75201 Austin, Texas 78701 Tel: (214) 282-8579 Tel: (512) 370-2800 Fax: (214) 602-9187 Fax: (512) 370-2850 Monica Latin Attorneys for Defendant MLatin@ccsb.com Electric Reliability Council of Texas Brent M. Rubin BRubin@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Tel: (214) 855-3000 Fax: (214) 580-2641 Attorneys for Plaintiff Aspire Power Ventures, LP /s/ John R. Hulme JOHN R. HULME 19 Appx. Page 249 of 740 Attachment 1 Pub. Util. Comm’n of Tex. v. RWE Renewables Ams., LLC, 691 S.W.3d 484 (Tex. 2024) Appx. Page 250 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 Elliot Clark, Wallace B. Jefferson, Austin, Rachel Anne 691 S.W.3d 484 Ekery, Houston, Nicholas Bacarisse, for Amicus Curiae Supreme Court of Texas. Electric Reliability Council of Texas. PUBLIC UTILITY COMMISSION Michael J. Jewell, for Respondent TX Hereford Wind, LLC. OF TEXAS, Petitioner, v. Ron Beal, Pro Se. RWE RENEWABLES AMERICAS, LLC John R. Hulme, Angela V. Colmenero, Priscilla M. Hubenak, and TX Hereford Wind, LLC, Respondents Austin, Brent Webster, Houston, S. Grant Dorfman, Bellaire, No. 23-0555 Lanora C. Pettit, Kyle D. Highful, Shawn Cowles, Atty. Gen. | W. Kenneth Paxton Jr., for Petitioner. Argued March 19, 2024 Chrysta L. Castaneda, Dallas, Nicole Michael, for Amicus | Curiae Aspire Power Ventures, LP. OPINION DELIVERED: June 14, 2024 Opinion Synopsis Background: Market participants filed direct appeal of Justice Lehrmann delivered the opinion of the Court. order of Public Utility Commission (PUC), 2021 WL In response to Winter Storm Uri, the Legislature amended 3711693, approving protocols adopted by Electric Reliability the Public Utility Regulatory Act (PURA) to provide that Council of Texas (ERCOT) revising its protocols effectively protocols adopted by the Electric Reliability Council of setting price of electricity at regulatory maximum during Texas, or ERCOT, do not take effect before they are emergency load-shed event, even if standard price-setting approved by the Public Utility Commission. ERCOT then formula yielded different price. The Austin Court of Appeals, adopted, and the PUC approved, a revision to its protocols Jones, J., sitting by assignment, 669 S.W.3d 566, reversed effectively setting the price of electricity at the regulatory and remanded. Review was granted. maximum under Energy Emergency Alert Level 3 conditions —the highest level of emergency that can be declared— even if the standard price-setting formula yields a different price. Pursuant to PURA's mechanism for seeking judicial The Supreme Court, Lehrmann, J., held that PUC's approval review of the validity of “competition rules adopted by of ERCOT's revised protocols was not subject to direct review the commission [PUC],” TEX. UTIL. CODE § 39.001(e), by court of appeals. two market participants initiated a challenge to the PUC's approval order directly in the Third Court of Appeals. That Vacated and dismissed. court held the order was both substantively invalid—because the PUC exceeded its statutory authority by setting the price Procedural Posture(s): On Appeal; Review of of electricity—and procedurally invalid—because the PUC Administrative Decision. failed to comply with the Administrative Procedure Act's rulemaking procedures in issuing the order. *485 On Petition for Review from the Court of Appeals for the Third District of Texas We first consider whether, in light of the amendments to PURA requiring PUC approval of ERCOT protocols, the Attorneys and Law Firms approval order constitutes a “competition rule[ ] adopted by the commission.” Id. If it does not, the court of appeals lacked Lisa Hobbs, Kurt Kuhn, Austin, Stephanie C. Sparks, Dallas, jurisdiction over the proceeding for judicial review of the for Respondent RWE Renewables Americas, LLC. order. If it does, we must then evaluate whether the court Macey Reasoner Stokes, George Harold Fibbe, J. Mark Little, of appeals correctly *486 determined that the order is both Elisabeth Butler, Houston, Andrea Moore Stover, Patrick procedurally and substantively invalid. Leahy, Austin, for Amicus Curiae Calpine Corporation. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 1 Appx. Page 251 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 We hold that the PUC's approval order is not a “competition Commodities Grp., Inc., 351 S.W.3d 588, 594–95 (Tex. rule[ ] adopted by the commission” subject to the judicial- App.—Austin 2011, pet. denied). Even before recent review process for PUC rules. PURA envisions a separate PURA amendments, ERCOT's protocols were “subject to process for ERCOT-adopted protocols, and the statutory commission oversight and review.” See Act of May 30, requirement that the PUC approve those adopted protocols 2005, 79th Leg., R.S., ch. 797, § 9, 2005 Tex. Gen. Laws does not transform PUC approval orders into PUC rules 2728, 2729–30 (codified at TEX. UTIL. CODE § 39.151(d)) eligible for direct review by a court of appeals. The Third (amended 2021, 2023) *487 (current version at TEX. UTIL. Court of Appeals therefore lacked jurisdiction over this CODE § 39.151(g-6)). proceeding. Accordingly, we vacate the court of appeals’ judgment and dismiss the case for lack of jurisdiction. 1 ERCOT is uniquely positioned to manage the electricity market by virtue of its technical expertise, and ERCOT utilizes a variety of resources and systems to manage grid conditions. For example, ERCOT typically relies on I a computer system that employs a mathematical formula to send price-based signals to energy generators regarding A whether additional power is needed. Luminant, 691 S.W.3d at ––––. The PUC has specifically delegated to ERCOT the task PURA Section 39.151 requires the PUC to “certify an of developing protocols for how that mathematical formula independent organization”—here, ERCOT—“to perform the calculates energy pricing in times of energy shortage, or functions prescribed by [that] section.” Id. § 39.151(c). 2 “scarcity pricing.” Id.; 16 TEX. ADMIN. CODE § 25.509(b). Four such functions are listed, including “ensur[ing] the reliability and adequacy of the regional electric network” and “ensur[ing] that electricity production and delivery B are accurately accounted for among the generators and wholesale buyers and sellers in the region.” Id. § 39.151(a) In February 2021, Winter Storm Uri incapacitated the Texas 3 electric grid and resulted in an Energy Emergency Alert Level (2), (4). PUC regulations likewise demand that the “protocols and other rules” adopted by ERCOT “promote 3 “load-shed” event, meaning ERCOT directed operators of economic efficiency in the production and consumption of the transmission system to reduce electricity consumption by electricity; support wholesale and retail competition; support involuntarily disconnecting customers from the grid. During the reliability of electric service; and reflect the physical the load-shed event, ERCOT and the PUC took various realities of the ERCOT electric system.” 16 TEX. ADMIN. additional steps to balance supply and demand in the market CODE § 25.501(a). to avoid total grid collapse. One such step was to supersede the standard price-setting system by administratively setting ERCOT “is directly responsible and accountable to the the wholesale price of electricity at the regulatory ceiling. commission,” which “has complete authority to oversee In the storm's aftermath, ERCOT's Nodal Protocols were and investigate [ERCOT's] finances, budget, and operations amended to codify the practice in case future load-shed as necessary to ensure [ERCOT]’s accountability and to events necessitated a similar response. That amendment is the ensure that [ERCOT] adequately performs [its] functions and subject of this suit. duties.” TEX. UTIL. CODE § 39.151(d). If ERCOT “does not adequately perform [its] functions or duties or does not comply with this section,” the PUC may take “appropriate C action,” including decertification. Id. As noted, even before Uri, ERCOT's protocols were subject ERCOT possesses rulemaking authority delegated to it by to commission oversight and review. After the storm, the PUC, as authorized by PURA. See id. § 39.151(d), the Legislature amended PURA to additionally provide (g-6); 16 TEX. ADMIN. CODE § 25.362(c). The “Nodal that “[r]ules adopted by an independent organization [i.e., Protocols” developed and implemented by ERCOT “provide ERCOT] ... may not take effect before receiving commission the framework for the administration of the Texas electricity approval.” Act of May 30, 2021, 87th Leg., R.S., ch. 425, market.” Pub. Util. Comm'n v. Constellation Energy § 3, 2021 Tex. Gen. Laws 830, 830 (codified at TEX. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 2 Appx. Page 252 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 UTIL. CODE § 39.151(d)) (amended 2023) (current version at TEX. UTIL. CODE § 39.151(g-6)). 4 In accordance The court of appeals held that the PUC's order constituted a with that provision, ERCOT's board of directors adopted “competition rule adopted by the commission” under Section Nodal Protocol Revision Request (NPRR) 1081, which would 39.001(e), giving the court jurisdiction over the proceedings. amend Nodal Protocol 6.5.7.3.1, and presented it to the PUC 669 S.W.3d 566, 575 (Tex. App.—Austin 2023). The court for approval. The revision would set the price of electricity of appeals then held that the PUC's order was invalid because at the regulatory ceiling during an emergency load-shed (1) the PUC lacked the authority to approve NPRR 1081 event to reflect scarcity of supply, regardless of whether under PURA and (2) the PUC had failed to substantially the standard price-setting formula yields a different price. comply with the APA's rulemaking procedures. Id. at 576– ERCOT reported to the PUC that the revision would “ensure 5 that Real-Time energy prices reflect the VOLL [Value of 77. We granted the PUC's petition for review. Lost Load] when Load is being shed, which is fundamental *488 to an energy-only market design in order to provide effective economic signals.” The proposal was accompanied II by a report from ERCOT's board and an impact-analysis report. The PUC ultimately issued an order approving NPRR We necessarily begin by considering jurisdiction. The PUC 1081. challenges the court of appeals’ subject matter jurisdiction over what is essentially a direct appeal of the PUC's order. It is undisputed that load shedding is not driven by market forces but is instead an important regulatory tool designed to protect the grid from long-term damage during an emergency. A Load shedding accomplishes this by limiting the amount of demand that may enter the market so as not to exceed PURA specifically provides for judicial review of available supply. Of course, when that happens, demand in “competition rules adopted by the commission.” TEX. UTIL. the market no longer accurately reflects demand to enter CODE § 39.001(e) (“Judicial review of competition rules the market, and additional supply can only be “accurately” adopted by the commission shall be conducted under [the priced by considering the value of replacing that lost load. See APA], except as otherwise provided by this chapter.”). Unlike Hearing of Sen. Comm. Bus. & Com., 87th Leg., R.S. (Feb. most suits for judicial review of an agency rule, review of a 25, 2021), 79–80 (discussing incentives for production at the PUC competition rule begins in the court of appeals. Id.; see cap). As supply decreases, the value of lost load increases also id. § 39.001(f) (“A person who challenges the validity of until it is effectively at the regulatory cap. Luminant, 691 a competition rule must file a notice of appeal with the court S.W.3d at ––––. of appeals ....”). 6 *489 The PUC argues that its order approving NPRR D 1081 is not a rule at all, much less a “competition rule,” and that PURA thus does not authorize direct review of On July 30, 2021, respondents RWE Renewables Americas, the order by the court of appeals. The APA defines “rule” LLC and TX Hereford Wind, LLC (collectively, RWE) sought as “a state agency statement of general applicability” that judicial review of the PUC's order by the Third Court “implements, interprets, or prescribes law or policy” or of Appeals. RWE asserted that the court of appeals had “describes the procedure or practice requirements of a state jurisdiction under PURA Section 39.001(e) and alleged that agency.” TEX. GOV'T CODE § 2001.003(6)(A)(i)–(ii). The the PUC both exceeded its statutory authority under PURA definition “includes the amendment or repeal of a prior and failed to comply with the Administrative Procedure Act in rule” but “does not include a statement regarding only the issuing the order. The PUC responded that the order was not a internal management or organization of a state agency and not PUC rule subject to direct review by the court of appeals or the affecting private rights or procedures.” Id. § 2001.003(6)(B)– APA's rulemaking requirements, and that the PUC properly (C). issued the order in furtherance of its statutory authority to oversee ERCOT and ensure the reliability of the Texas electric grid. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 3 Appx. Page 253 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 Id. § 21.4.4(3). ERCOT then posts a report describing the subcommittee's action. Id. § 21.4.4(5). Again, market B participants and others may comment on the subcommittee PURA empowers the PUC to “adopt and enforce rules report. Id. § 21.4.5(1). If the subcommittee recommends relating to the reliability of the regional electrical network approval, ERCOT prepares an impact analysis, id. § and accounting for the production and delivery of electricity 21.4.6(1), which is reviewed by the subcommittee, id. § among generators and all other market participants.” TEX. 21.4.7(1). The NPRR then moves to the Technical Advisory UTIL. CODE § 39.151(d). However, as noted, it also Committee, which considers the subcommittee report and the allows the PUC to “delegate these responsibilities to an impact analysis. Id. § 21.4.8(1). If the advisory committee independent organization,” which the PUC has done by recommends approval of an NPRR, the committee forwards its report to the ERCOT board of directors, id. § 21.4.8(5), delegating rulemaking authority to ERCOT. Id.; CPS and the report is also posted online, id. § 21.4.8(4). ERCOT's Energy, 671 S.W.3d at 616; see 16 TEX. ADMIN. CODE board then has the opportunity to approve the NPRR or take § 25.362(c) (requiring ERCOT to “adopt and comply with other action. procedures [subject to certain parameters] concerning the adoption and revision of ERCOT rules”). ERCOT has utilized Before PURA was amended to require PUC approval for this delegated rulemaking authority to establish operational protocol revisions to become effective, ERCOT would rules known as the Nodal Protocols. Under those protocols, implement them on the first day of the month following generators make offers in advance on how much electricity approval by ERCOT's board. Id. § 21.6(1) (Jan. 1, 2021). they are willing to sell and at what price. ERCOT, NODAL Now that protocols “may not take effect before receiving PROTOCOLS § 4.4.9 (May 1, 2024). 7 ERCOT uses those commission approval,” TEX. UTIL. CODE § 39.151(g-6), prices to match demand to the lowest-price provider. Id. they are implemented on the first day of the month following § 4.5. ERCOT serves as “the central counterparty for all receipt of that approval, ERCOT, NODAL PROTOCOLS §§ transactions” that it settles and “is deemed to be the sole 21.4.11(1), 21.6(1) (June 1, 2023). buyer to each seller” (typically, an energy generator) “and the sole seller to each buyer” (typically, a retail user) “of all A market participant, among others, may appeal a decision energy.” Id. § 1.2(4). Operating as a sort of clearinghouse, it of the ERCOT board regarding an NPRR to the PUC. Id. is ERCOT that generates settlement statements providing the § 21.4.12.3(1). The PUC's rules outline the procedure for terms under which market participants must make payments review of ERCOT protocols. 16 TEX. ADMIN. CODE §§ for energy transactions. Id. §§ 9.2.4(1), 9.5.4(1), 9.5.5. 22.251, 25.362(c)(5). Those rules generally require that a complainant exhaust the process outlined in Section 21 of In accordance with the PUC's direction, ERCOT has the protocols before challenging the protocol with the PUC. implemented detailed procedures for adopting and revising Id. § 22.251(c). Exceptions exist when, for example, “the its protocols. “A request to make additions, edits, deletions, complainant seeks emergency relief necessary to resolve revisions, or clarifications to these Protocols ... is called a health or safety issues.” Id. § 22.251(c)(1)(C). Generally, Nodal Protocol Revision Request (NPRR).” Id. § 21.1(1) the complaint must be filed within thirty-five days of “the (June 1, 2023). A variety of entities may use the ERCOT conduct complained of.” Id. § 22.251(d); ERCOT, NPRR process, including market participants, the PUC, the NODAL PROTOCOLS § 21.4.12.3(1) (June 1, 2023). In independent market monitor, and ERCOT itself. Id. § 21.2(1) response to the complaint, the PUC may, among other things, (a), (c), (f), (g). NPRRs are posted on ERCOT's website and provide ERCOT with “guidance on the development and reviewed by ERCOT's Protocol Revision Subcommittee. Id. implementation of protocol revisions” and order ERCOT §§ 21.4.1(4), 21.3(1). Market participants and other entities “to promptly develop protocol[ ] revisions for commission may comment on an NPRR. Id. § 21.4.4(1). In fact, RWE approval.” 16 TEX. ADMIN. CODE § 22.251(o)(3), (4). If participated in this process with respect to NPRR 1081 by the complainant is dissatisfied with the result of the PUC submitting comments in opposition to it. 8 proceedings, it can then seek judicial review. TEX. UTIL. CODE § 15.001. *490 After considering the NPRR, the revision subcommittee may take one of several actions, including This painstaking procedure serves to leverage the expertise recommending approval of the revision or rejecting it. of ERCOT members and industry stakeholders while © 2024 Thomson Reuters. No claim to original U.S. Government Works. 4 Appx. Page 254 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 maintaining transparency and affording interested parties by a “state agency.” See, e.g., TEX. GOV'T CODE § plentiful opportunities to weigh in. Moreover, we recognize 2001.033(a) (“A state agency order finally adopting a rule that ERCOT and the PUC are uniquely situated as must include: ....”). Indeed, the Legislature deliberately uses legislatively endorsed joint participants in a complex the term “adopt” throughout the APA—no reference is made regulatory scheme—each serving its own distinct and to an agency's “approval” of a rule. See, e.g., id. § 2001.004(1) (requiring a state agency to “adopt rules of practice stating essential purpose. As we recognized in CPS Energy, the nature and requirements of all available formal and “ERCOT do[es] not fall neatly into any camp. It is a unique entity serving a role that is not clearly analogous to a public informal procedures”). 10 By contrast, the APA uses the term entity like a police department or a public school. Yet, it “approve” to describe the governor's action on legislation that allows it to become the law. Id. § 2001.006(a)(2). provides an essential governmental service.” 671 S.W.3d at 623 (alteration in original) (citation and internal quotation PURA reinforces this distinction. For example, in a suit for marks omitted). While the PUC has broad administrative judicial review of a competition rule under Section 39.001, responsibilities, it simultaneously lacks “the expertise and the rulemaking record includes “the order adopting the rule.” staff resources” to make informed regulatory decisions TEX. UTIL. CODE § 39.001(e)(4) (emphasis added). The independent of ERCOT. SUNSET ADVISORY COMM., PUC issues no such order with respect to ERCOT protocols. STAFF REPORT WITH COMMISSION DECISIONS: We cannot ignore the Legislature's deliberate decision not PUBLIC UTILITY COMMISSION OF TEXAS, ELECTRIC to designate the PUC as the entity that “adopts” ERCOT RELIABILITY COUNCIL OF TEXAS, OFFICE OF protocols given the comprehensive statutory use of that term. PUBLIC UTILITY COUNSEL 37 (Jan. *491 2023). 9 RWE and the court of appeals highlight that, under PURA as amended, an ERCOT protocol does not take C effect until it receives PUC approval. 669 S.W.3d at 574; TEX. UTIL. CODE § 39.151(g-6). True, but even A substantially similar version of the above-described process in requiring PUC approval, the Legislature distinguished for adopting and revising ERCOT protocols has long been between ERCOT's role in adopting a protocol and the PUC's in effect. See ERCOT, NODAL PROTOCOLS § 21 (Mar. 1, role in approving it. TEX. UTIL. CODE § 39.151(g-6) 2005) (rev. Feb. 2010, Apr. 2011, May 2011, Oct. 2011, May 2012, Aug. 2012, Apr. 2013, Dec. 2013, May 2014, July 2016, (“Protocols adopted by [ *492 ERCOT] ... may not Nov. 2016, Nov. 2017, Jan. 2021, Apr. 2023, June 2023). The take effect before receiving commission approval.” (emphasis legislative and regulatory schemes have in turn envisioned added)). Again, the Legislature deliberately employed these separate, complementary purposes of and procedures for PUC terms to communicate two distinct administrative actions that rules and ERCOT protocols, notwithstanding the fact that have distinct legal consequences. See Galveston Indep. Sch. ERCOT and its protocols have consistently been subject to Dist. v. Jaco, 331 S.W.3d 182, 185–86 (Tex. App.—Houston PUC oversight and review. TEX. UTIL. CODE § 39.151(d). [14th Dist.] 2011, pet. denied) (highlighting the Legislature's RWE nevertheless suggests that, by amending PURA to distinct use of “adopt” and “approve” in statutes describing require formal PUC approval of ERCOT-adopted protocols the duties of the commissioner of education); TEX. EDUC. at the tail end of the process, the Legislature intended CODE § 7.055(b)(41) (“The commissioner shall adopt rules to overhaul that process entirely and effectively convert relating to extracurricular activities under Section 33.081 ERCOT protocols into PUC rules subject to the same review and approve or disapprove University Interscholastic League procedures. We do not discern such a sweeping intent from rules and procedures under Section 33.083.” (emphases the language the Legislature chose. added)). For one thing, PURA makes clear that ERCOT, not the PUC, Finally, we cannot ignore that when the Legislature is the entity “adopting” new or revised ERCOT protocols. See amended PURA in 2021 to require PUC approval of id. § 39.151(g-6). The PUC then “approves” the protocols. the independent organization's (ERCOT's) protocols, it See id. This distinction is deceptively significant because the simultaneously added the requirement that the organization APA's requirements, which RWE insists must be satisfied, “establish and implement a formal process for adopting new are exclusively and repeatedly directed at rules “adopted” protocols or revisions to existing protocols.” Act of May © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 255 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 Having concluded that the court of appeals lacked jurisdiction 30, 2021, 87th Leg., R.S., ch. 425, § 3, 2021 Tex. Gen. over RWE's appeal of the PUC's approval order, we need Laws 830, 832 (amended 2023) (codified at TEX. UTIL. not address RWE's remaining arguments. We note, however, CODE § 39.151(g-6)). As discussed above, ERCOT already that this Court contemporaneously holds in Luminant that had such a process in place; nevertheless, the requirement signals legislative recognition that ERCOT rulemaking and the PUC did not exceed its authority under PURA in issuing PUC rulemaking are independent endeavors. temporary emergency orders that, like NPRR 1081, set the price of electricity at the regulatory ceiling during a period of In sum, consistent with the well-established regulatory emergency load-shed. 691 S.W.3d at ––––. scheme and the legislation governing it, we hold that the PUC's order approving NPRR 1081 was a ratification **** decision that simply allowed protocol revisions, already developed and adopted by ERCOT in accordance with its Because the PUC's order was not a “competition rule adopted own detailed procedures, to take effect. Consequently, the by the commission” under PURA, Section 39.151 did not PUC's order was not an agency-adopted “rule” under the confer direct-review jurisdiction on the court of appeals. We Administrative Procedure Act. In turn, because the court of therefore vacate the court of appeals’ judgment and dismiss appeals’ jurisdiction under Utilities Code Section 39.001(e) the suit for lack of jurisdiction. is limited to review of “competition rules adopted by the commission,” the court lacked jurisdiction over RWE's All Citations challenge to the PUC's approval order. 11 691 S.W.3d 484, 67 Tex. Sup. Ct. J. 1096 III Footnotes 1 In our contemporaneously issued opinion in Public Utility Commission v. Luminant Energy Co., we hold that the PUC did not exceed its authority in issuing two emergency orders during Winter Storm Uri that operated to a similar end by temporarily setting the price of electricity at the regulatory ceiling. 691 S.W.3d 448, –––– (Tex. June 14, 2024) (No. 22-0231). 2 A more detailed explanation of the Texas electricity market appears in this Court's opinion in Luminant. See id. at ––––. We also recently engaged in a thorough discussion of ERCOT's history, and its role in the Texas electricity market, in CPS Energy v. ERCOT, 671 S.W.3d 605, 611–12 (Tex. 2023). 3 The others are “ensur[ing] access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms” and “ensur[ing] that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information.” TEX. UTIL. CODE § 39.151(a)(1), (3). 4 As further amended in 2023, Section 39.151(g-6) currently provides: In this subsection, a reference to a protocol includes a rule. Protocols adopted by an independent organization and enforcement actions taken by the organization under delegated authority from the commission are subject to commission oversight and review and may not take effect before receiving commission approval. To maintain certification as an independent organization under this section, the organization's governing body must establish and implement a formal process for adopting new protocols or © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 256 of 740 Public Utility Commission of Texas v. RWE Renewables..., 691 S.W.3d 484 (2024) 67 Tex. Sup. Ct. J. 1096 revisions to existing protocols. The process must require that new or revised protocols may not take effect until the commission approves a market impact statement describing the new or revised protocols. The commission may approve, reject, or remand with suggested modifications to the independent organization's governing body protocols adopted by the organization. Act of May 26, 2023, 88th Leg., R.S., ch. 464, § 4, 2023 Tex. Sess. Law Serv. (West) 1133 (codified at TEX. UTIL. CODE § 39.151(g-6)). 5 In support of its first holding, the court relied on its own decision in Luminant, which we also review today. 669 S.W.3d at 576. 6 When RWE instituted this proceeding, Section 39.001(e) provided for review in the Third Court of Appeals. In 2023, the Legislature amended Section 39.001(e) to provide for review by the Fifteenth Court of Appeals going forward. Act of May 22, 2023, 88th Leg., R.S., ch. 459, § 1.13, 2023 Tex. Sess. Law Serv. (West) 1119. 7 We cite the current version of the protocols unless substantive differences require citing the version in effect when the relevant events occurred. ERCOT's current protocols and a library of past versions of the protocols, with summaries of revisions, are available on ERCOT's website. Protocols - Nodal, https://www.ercot.com/ mktrules/nprotocols. 8 RWE, Comment Letter on Nodal Protocol Request 1081 (June 23, 2021), https://www.ercot.com/mktrules/ issues/NPRR1081#keydocs. 9 Available at https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with- Commission-Decisions_1-19-23.pdf). 10 See also TEX. GOV'T CODE § 2001.006 (describing when a rule “adopted” under Section 2001.006(b) may take effect); id. § 2001.021(a) (“An interested person by petition to a state agency may request the adoption of a rule.”); id. § 2001.023(a) (“A state agency shall give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule.”); id. § 2001.030 (“On adoption of a rule, a state agency, if requested to do so by an interested person either before adoption or not later than the 30th day after the date of adoption, shall issue a concise statement of the principal reasons for and against its adoption.”). 11 As noted, PUC regulations provide a process for review of ERCOT protocols, 16 TEX. ADMIN. CODE §§ 22.251, 25.362(c)(5), which culminates in a suit for judicial review in district court, TEX. UTIL. CODE § 15.001. RWE did not engage in that process, choosing instead to utilize the inapplicable procedure for reviewing PUC competition rules. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 7 Appx. Page 257 of 740 Attachment 2 Tex. Util. Code § 39.151 Appx. Page 258 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 Vernon's Texas Statutes and Codes Annotated Utilities Code (Refs & Annos) Title 2. Public Utility Regulatory Act (Refs & Annos) Subtitle B. Electric Utilities (Refs & Annos) Chapter 39. Restructuring of Electric Utility Industry Subchapter D. Market Structure V.T.C.A., Utilities Code § 39.151 § 39.151. Essential Organizations Effective: September 1, 2023 Currentness (a) A power region must establish one or more independent organizations to perform the following functions: (1) ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms; (2) ensure the reliability and adequacy of the regional electrical network; (3) ensure that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and (4) ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region. (b) “Independent organization” means an independent system operator 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. (c) The commission shall certify an independent organization or organizations to perform the functions prescribed by this section. The commission shall apply the provisions of this section and Sections 39.1511, 39.1512, and 39.1515 so as to avoid conflict with a ruling of a federal regulatory body. (d) The commission shall adopt and enforce rules relating to the reliability of the regional electrical network and accounting for the production and delivery of electricity among generators and all other market participants, or may delegate those responsibilities to an independent organization . An independent organization certified by the commission is directly responsible and accountable to the commission. The commission has complete authority to oversee and investigate the independent 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. The independent organization shall fully cooperate with the commission in the commission's oversight and investigatory functions. The commission may take appropriate action against an independent organization that does not adequately perform the organization's functions or duties or does not comply © 2024 Thomson Reuters. No claim to original U.S. Government Works. 1 Appx. Page 259 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 with this section, including decertifying the organization or assessing an administrative penalty against the organization. The commission by rule shall adopt procedures governing decertification of an independent organization, selecting and certifying a successor organization, and transferring assets to the successor organization to ensure continuity of operations in the region. The commission may not implement, by order or by rule, a requirement that is contrary to an applicable federal law or rule. (d-1) The commission shall require an independent organization certified by the commission under this section to submit to the commission the organization's entire proposed annual budget. The commission shall review the proposed budgets either annually or biennially and may approve, disapprove, or modify any item included in a proposed budget. The commission by rule shall establish the type of information or documents needed to effectively evaluate the proposed budget and reasonable dates for the submission of that information or those documents. The commission shall establish a procedure to provide public notice of and public participation in the budget review process. (d-2) Except as otherwise agreed to by the commission and an independent organization certified by the commission under this section, the organization must submit to the commission for review and approval proposals for obtaining debt financing or for refinancing existing debt. The commission may approve, disapprove, or modify a proposal. (d-3) An independent organization certified by the commission under this section shall develop proposed performance measures to track the organization's operations. The independent organization must submit the proposed performance measures to the commission for review and approval. The commission shall review the organization's performance as part of the budget review process under Subsection (d-1). The commission shall prepare a report at the time the commission approves the organization's budget detailing the organization's performance and submit the report to the lieutenant governor, the speaker of the house of representatives, and each house and senate standing committee that has jurisdiction over electric utility issues. (d-4) The commission may: (1) require an independent organization to provide reports and information relating to the independent organization's performance of the functions prescribed by this section and relating to the organization's revenues, expenses, and other financial matters; (2) prescribe a system of accounts for an independent organization; (3) conduct audits of an independent organization's performance of the functions prescribed by this section or relating to its revenues, expenses, and other financial matters and may require an independent organization to conduct such an audit; (4) inspect an independent organization's facilities, records, and accounts during reasonable hours and after reasonable notice to the independent organization; (5) assess administrative penalties against an independent organization that violates this title or a rule or order adopted by the commission and, at the request of the commission, the attorney general may apply for a court order to require an independent organization to comply with commission rules and orders in the manner provided by Chapter 15; and © 2024 Thomson Reuters. No claim to original U.S. Government Works. 2 Appx. Page 260 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (6) resolve disputes between an affected person and an independent organization and adopt procedures for the efficient resolution of such disputes. (e) After approving the budget of an independent organization under Subsection (d-1), the commission shall authorize the organization to charge to wholesale buyers and sellers a system administration fee, within a range determined by the commission, that is reasonable and competitively neutral to fund the independent organization's approved budget. The commission shall investigate the organization's cost efficiencies, salaries and benefits, and use of debt financing and may require the organization to provide any information needed to effectively evaluate the reasonableness and neutrality of the fee or to evaluate the effectiveness or efficiency of the organization. The commission shall work with the organization to establish the detail of information, both current and historical, and the time frames the commission needs to effectively evaluate the fee. The commission shall require the organization to closely match actual revenues generated by the fee and other sources of revenue with revenue necessary to fund the budget, taking into account the effect of a fee change on market participants and consumers, to ensure that the budget year does not end with surplus or insufficient funds. The commission shall require the organization to submit to the commission, on a schedule determined by the commission, reports that compare actual expenditures with budgeted expenditures. (e-1) The review and approval of a proposed budget under Subsection (d-1) or a proceeding to authorize and set the range for the amount of a fee under Subsection (e) is not a contested case for purposes of Chapter 2001, Government Code. (f) In implementing this section, the commission may cooperate with the utility regulatory commission of another state or the federal government and may hold a joint hearing or make a joint investigation with that commission. (g) To maintain certification as an independent organization for the ERCOT power region under this section, an organization's governing body must be composed of persons selected by the ERCOT board selection committee. (g-1) The bylaws of an independent organization certified for the ERCOT power region must be approved by and reflect the input of the commission. The bylaws must require that every member of the governing body be a resident of this state and must prohibit a legislator from serving as a member. The governing body must be composed of: (1) two members of the commission as ex officio nonvoting members: (A) one of whom must be the presiding officer of the commission; and (B) one of whom must be designated by the presiding officer of the commission to serve a one-year term on the governing body ; (2) the counsellor as an ex officio voting member representing residential and small commercial consumer interests; (3) the chief executive officer of the independent organization as an ex officio nonvoting member; and © 2024 Thomson Reuters. No claim to original U.S. Government Works. 3 Appx. Page 261 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (4) eight members selected by the selection committee under Section 39.1513 with executive-level experience in any of the following professions: (A) finance; (B) business; (C) engineering, including electrical engineering; (D) trading; (E) risk management; (F) law; or (G) electric market design. (g-2) Members of the governing body are entitled to receive a salary for their service. (g-3) A person does not qualify for selection as a member of the governing body of an independent organization for the ERCOT power region if the person has a fiduciary duty or assets in the electricity market for that region. (g-4) To maintain certification as an independent organization under this section, the organization's governing body may not include more than two members who are employed by an institution of higher education, as defined by Section 61.003, Education Code, in a professorial role. (g-5) A former member of the governing body of an independent organization certified under this section may not, before the second anniversary of the date the member ceases to be a member of the governing body, engage in an activity that requires registration under Chapter 305, Government Code. (g-6) In this subsection, a reference to a protocol includes a rule. Protocols adopted by an independent organization and enforcement actions taken by the organization under delegated authority from the commission are subject to commission oversight and review and may not take effect before receiving commission approval. To maintain certification as an independent organization under this section, the organization's governing body must establish and implement a formal process for adopting new protocols or revisions to existing protocols. The process must require that new or revised protocols may not take effect until the commission approves a market impact statement describing the new or revised protocols. The commission may approve, reject, or remand with suggested modifications to the independent organization's governing body protocols adopted by the organization. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 4 Appx. Page 262 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (g-7) The presiding officer of the commission shall designate commissioners to serve terms on the independent organization's governing body under Subsection (g-1)(1)(B) in the order in which the commissioners were first appointed to the commission. A commissioner may not serve an additional term until each commissioner has served a term. (g-7) To maintain certification as an independent organization under this section, the organization must: (1) identify all employee positions in the organization that are critical to the security of the electric grid; and (2) before hiring a person for a position described by Subdivision (1), obtain from the Department of Public Safety or a private vendor criminal history record information relating to the prospective employee and any other background information considered necessary by the independent organization or required by the commission. (h) The ERCOT independent system operator may meet the criteria relating to the other functions of an independent organization provided by Subsection (a) by adopting procedures and acquiring resources needed to carry out those functions, consistent with any rules or orders of the commission. (i) The commission may delegate authority to the existing independent system operator in ERCOT to enforce operating standards within the ERCOT regional electrical network and to establish and oversee transaction settlement procedures. The commission may establish the terms and conditions for the ERCOT independent system operator's authority to oversee utility dispatch functions after the introduction of customer choice. (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357. (j-1) Notwithstanding Subsection (j) of this section, Section 39.653(c), or any other law, the independent system operator in the ERCOT power region may not reduce payments to or uplift short-paid amounts to a municipally owned utility that becomes subject to the jurisdiction of that independent system operator on or after May 29, 2021, and before December 30, 2021, related to a default on a payment obligation by a market participant that occurred before May 29, 2021. (k) To the extent the commission has authority over an independent organization outside of ERCOT, the commission may delegate authority to the independent organization consistent with Subsection (i). (l) No operational criteria, protocols, or other requirement established by an independent organization, including the ERCOT independent system operator, may adversely affect or impede any manufacturing or other internal process operation associated with an industrial generation facility, except to the minimum extent necessary to assure reliability of the transmission network. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 263 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (m) A power region outside of ERCOT shall be deemed to have met the requirement to establish an independent organization to perform the transmission functions specified in Subsection (a) if the Federal Energy Regulatory Commission has approved a regional transmission organization for the region and found that the regional transmission organization meets the requirements of Subsection (a). (n) An independent organization certified by the commission under this section is subject to review under Chapter 325, Government Code (Texas Sunset Act), but is not abolished under that chapter.The independent organization shall be reviewed during the periods in which the Public Utility Commission of Texas is reviewed. (n-1) Expired. (o) An independent organization certified by the commission under this section shall: (1) conduct internal cybersecurity risk assessment, vulnerability testing, and employee training to the extent the independent organization is not otherwise required to do so under applicable state and federal cybersecurity and information security laws; and (2) submit a report annually to the commission on the independent organization's compliance with applicable cybersecurity and information security laws. (p) Information submitted in a report under Subsection (o) is confidential and not subject to disclosure under Chapter 552, Government Code. Credits Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999. Amended by Acts 2005, 79th Leg., ch. 797, § 9, eff. Sept. 1, 2005; Acts 2011, 82nd Leg., ch. 1232 (S.B. 652), § 1.09, eff. June 17, 2011; Acts 2013, 83rd Leg., ch. 170 (H.B. 1600), § 1.08, eff. Sept. 1, 2013; Acts 2019, 86th Leg., ch. 509 (S.B. 64), § 23, eff. Sept. 1, 2019; Acts 2021, 87th Leg., ch. 425 (S.B. 2), § 3, eff. June 8, 2021; Acts 2021, 87th Leg., ch. 908 (H.B. 4492), § 3, eff. June 16, 2021; Acts 2023, 88th Leg., ch. 410 (H.B. 1500), § 15, eff. Sept. 1, 2023; Acts 2023, 88th Leg., ch. 464 (S.B. 2013), § 4, eff. June 9, 2023. Notes of Decisions (25) V. T. C. A., Utilities Code § 39.151, TX UTIL § 39.151 Current through the end of the 2023 Regular, Second, Third and Fourth Called Sessions of the 88th Legislature, and the Nov. 7, 2023 general election. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 264 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92018492 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ PLEA TO THE JURISDICTION Status as of 9/16/2024 9:36 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/13/2024 3:47:51 PM SENT Elin Isenhower eisenhower@winstead.com 9/13/2024 3:47:51 PM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/13/2024 3:47:51 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/13/2024 3:47:51 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/13/2024 3:47:51 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/13/2024 3:47:51 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/13/2024 3:47:51 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/13/2024 3:47:51 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/13/2024 3:47:51 PM SENT John RHulme John.Hulme@oag.texas.gov 9/13/2024 3:47:51 PM SENT Laura Courtney laura.courtney@oag.texas.gov 9/13/2024 3:47:51 PM SENT Case Contacts Appx. Page 265 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92018492 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ PLEA TO THE JURISDICTION Status as of 9/16/2024 9:36 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/13/2024 3:47:51 PM SENT Judy Garrison jgarrison@ccsb.com 9/13/2024 3:47:51 PM SENT Appx. Page 266 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Monique Edwards on behalf of John Hulme Bar No. 10258400 monique.edwards@oag.texas.gov Envelope ID: 92410517 Filing Code Description: No Fee Documents Filing Description: PUBLIC UTILITY COMMISSION LETTER BRIEF TO COURT Status as of 9/25/2024 5:57 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/24/2024 5:49:42 PM SENT Elin Isenhower eisenhower@winstead.com 9/24/2024 5:49:42 PM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/24/2024 5:49:42 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/24/2024 5:49:42 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/24/2024 5:49:42 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/24/2024 5:49:42 PM SENT Ken Carroll kcarroll@ccsb.com 9/24/2024 5:49:42 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/24/2024 5:49:42 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/24/2024 5:49:42 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/24/2024 5:49:42 PM SENT John RHulme John.Hulme@oag.texas.gov 9/24/2024 5:49:42 PM SENT Laura Courtney laura.courtney@oag.texas.gov 9/24/2024 5:49:42 PM SENT Case Contacts Appx. Page 267 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Monique Edwards on behalf of John Hulme Bar No. 10258400 monique.edwards@oag.texas.gov Envelope ID: 92410517 Filing Code Description: No Fee Documents Filing Description: PUBLIC UTILITY COMMISSION LETTER BRIEF TO COURT Status as of 9/25/2024 5:57 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/24/2024 5:49:42 PM SENT Judy Garrison jgarrison@ccsb.com 9/24/2024 5:49:42 PM SENT Becky Dunn bdunn@ccsb.com 9/24/2024 5:49:42 PM SENT Appx. Page 268 of 740 9/24/2024 3:15 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Nancy Rodriguez ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, AND COURTNEY § HJALTMAN, § § 345th JUDICIAL DISTRICT Defendants. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Plaintiff Aspire Power Ventures, LP (“Aspire”) files its Second Amended Petition and Application for Stay/Suspension and Temporary and Permanent Injunction against Defendants Public Utility of Commission of Texas (“PUC”), Electric Reliability Council of Texas (“ERCOT”), Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman (collectively, “Commissioners”) and respectfully shows the Court as follows: INTRODUCTION 1. The ERCOT Contingency Reserve Service (“ECRS”) illegally restrains the supply of electricity on the ERCOT grid. ECRS is illegal for three reasons: First, ECRS violates the Public Utility Regulatory Act (“PURA”), which prohibits withholding supply from the market. Second, the PUC and ERCOT disregarded the PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 1 Appx. Page 269 of 740 requirements of the Administrative Procedure Act (“APA”) with PUC orders and ERCOT protocols implementing ECRS (the “ECRS Rules”). Third, ERCOT’s procedures for adopting rules, under rulemaking authority delegated by the PUC, do not comply with the APA. 2. ECRS is a failed attempt to increase the reliability of ERCOT’s electricity grid. Under ECRS, generating companies get paid to withhold some of their existing generating capacity from the grid—in “reserve”—even when electricity demand is at a peak, including in hot summer months. But PURA and the regulations enacted under it expressly outlaw the withholding of electricity as a market power abuse. See Tex. Util. Code § 39.157(a) (PUC charged with preventing market power abuses and defining withholding of production as a market power abuse); 16 Tex. Admin. Code §§ 25.501(j), 25.503(a)(6), (d) (same). ECRS violates these fundamental tenets of PURA. 3. Texas electricity consumers have paid inflated rates because of ECRS. According to ERCOT’s Independent Market Monitor (“IMM”), which oversees ERCOT, ECRS inflated the cost of wholesale electricity in the period June through November 2023 by approximately $12 billion. ECRS has also caused unnecessary conservation warnings and has increased the risk of ERCOT having to use drastic measures to ensure reliability. If the Court allows ECRS to stand, Texans will continue to suffer harm. 4. Aspire is an ERCOT Market Participant harmed by ECRS. Aspire buys electricity on ERCOT’s wholesale market and has fixed-price contracts to sell PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 2 Appx. Page 270 of 740 electricity. ECRS makes wholesale electricity prices much more volatile. So, Aspire cannot adequately plan to buy electricity to fulfill its fixed-price contracts. ECRS also makes it much more likely that Aspire will suffer losses on its contracts by increasing wholesale prices. As long as ECRS continues to stand, Aspire will continue to suffer harm. 5. Making matters worse, the PUC and ERCOT implemented ECRS without even attempting to comply with the mandatory requirements of the APA. The APA ensures that the public gets an opportunity to participate in agency rulemaking and that agencies do not exceed their authority when making rules. But the process ERCOT and the PUC used to implement ECRS provided none of the APA’s safeguards. Therefore, Aspire seeks a declaratory judgment declaring the ECRS Rules void. 6. In fact, the process for adopting rules concerning ERCOT’s operations deliberately and illegally sidesteps the APA. The Legislature allowed the PUC to delegate its rulemaking responsibilities to ERCOT. But the Legislature did not dispense with the APA’s mandatory requirements when allowing the PUC to delegate rulemaking responsibilities to ERCOT. And ERCOT’s own rulemaking processes do not come close to meeting the APA’s rulemaking requirements, nor does the PUC’s condensed process for approving ERCOT-adopted rules. Aspire thus also seeks a declaration that ERCOT’s rulemaking processes, on their own and when combined with the PUC’s, do not substantially comply with the APA. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 3 Appx. Page 271 of 740 7. The harm suffered by Aspire, other Market Participants, and Texas due to ECRS cannot be remedied by the payment of mere money damages. False and unsettling conservation notices to the general public cannot be undone. Further, withholding generating capacity through ECRS necessarily means that ERCOT will have to rely more on the other tools to maintain reliability including operating reserves, Energy Emergency Alerts (“EEAs”), and even rolling blackouts, if necessary. The PUC also takes the position that if one of its orders is declared void, it is void only on a prospective basis and cannot have any effect on transactions that have already cleared. While Aspire disagrees with the PUC’s position that prior transactions cannot be unwound, the PUC essentially concedes that no money damages would be available to remedy its illegal conduct. 8. Aspire thus seeks a stay or suspension of the ECRS Rules and temporary and permanent injunctive relief. Unless the Court grants interim relief, ECRS will continue to inflict substantial, irreparable harm on Aspire, other Market Participants, and Texas electricity consumers. PARTIES AND PROCESS 9. Plaintiff Aspire Power Ventures, LP is a Texas limited partnership with its principal place of business in Houston, Texas. 10. Defendant Public Utility Commission of Texas is a state agency that has answered and therefore appeared. 11. Defendant Electric Reliability Council of Texas is a quasi- governmental agency that has answered and therefore appeared. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 4 Appx. Page 272 of 740 12. Defendants Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman (collectively, “Commissioners”) are the Chair and Commissioners of the PUC, respectively, and are being sued in their official capacity. The Commissioners have answered and therefore appeared. 13. Because a state agency is a party, a copy of this second amended petition is being mailed to the Attorney General in Austin, Texas, by United States Postal Service certified mail, return receipt requested. Tex. Civ. Prac. & Rem. Code § 30.004. VENUE 14. Venue in this declaratory judgment action challenging the validity of rules is mandatory in Travis County district court. Tex. Gov’t Code § 2001.038(b). JURISDICTION 15. The PUC has delegated its rulemaking powers to ERCOT to allow it to enact rules in the form of “protocols,” and ERCOT protocols must be approved by the PUC. Tex. Util. Code § 39.151(d), (g-6); Pub. Util. Comm’n of Tex. v. RWE Renewables Americas, LLC, 691 S.W.3d 484, 487 (Tex. 2024).. Rulemaking at both the PUC and ERCOT are subject to the Administrative Procedure Act. See Tex. Gov’t Code § 2001.003(7); see also Tex. Util. Code § 39.1511(a-1). 16. The APA provides that the validity of a rule may be determined in a declaratory judgment action brought in Travis County district court if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff. Texas Gov’t Code § PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 5 Appx. Page 273 of 740 2001.038(a)-(b). The ECRS Rules interfere with and impair Aspire’s legal rights and privileges. Therefore, this Court has jurisdiction. FACTUAL BACKGROUND A. The ERCOT System: Designed to Run Based on Principles of Competition 17. When Texas deregulated its electricity market in 1999, the Legislature designed the system to operate based on principles of competition. Tex. Util. Code §§ 11.002, 39.001; see also 16 Tex. Admin. Code § 25.501(a) (requiring ERCOT protocols to be developed with consideration of microeconomic principles and to “promote economic efficiency in the production and consumption of electricity”). Public Utility Regulatory Act (“PURA”), the statutory framework under which the grid was deregulated, sought to avoid monopolistic behaviors by participants in the electricity market. PURA charged the PUC with policing and mitigating market power abuses. Tex. Util. Code § 39.157(a). PURA specifically defines the withholding of electricity as a market power abuse. Id. 18. In addition to PURA, Texas’s electricity market is governed by orders and regulations adopted by the PUC and “protocols” adopted by ERCOT under rulemaking authority delegated by the PUC. Since June 2021, ERCOT’s protocols must be approved by the PUC. Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15. Before PURA required PUC PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 6 Appx. Page 274 of 740 approval of ERCOT protocols, ERCOT protocols were subject to “commission oversight and review.” RWE, 691 S.W.3d at 486-87. 19. The ERCOT Nodal Protocols are the rules promulgated by ERCOT that detail how ERCOT and market participants are required to operate and to interact with one another and how the wholesale electricity market is designed. Section 21 of ERCOT’s Nodal Protocols details the process for adopting new protocols and revising existing protocols. A request to revise a Nodal Protocol is called a Nodal Protocol Revision Request (“NPRR”). After ERCOT adopts an NPRR, the PUC can approve the NPRR through an order. B. Texas’s Deregulated Electricity Market and ERCOT 20. The PUC designated ERCOT as the Independent System Operator for the electricity grid that covers roughly 70% of Texas’s land mass and serves approximately 90% of Texas’s electricity consumers. ERCOT oversees the operation of the high voltage electricity transmission system in Texas (which is also called ERCOT), the various markets administered by ERCOT in its capacity as an Independent System Operator, and balancing of physical electricity supply and demand on the high voltage transmission system to ensure its reliability. 21. ERCOT operates within a deregulated electricity sector, with competitive generators and competitive retailers. ERCOT’s rules require that each participant in the market (a “Market Participant”) belong to a specific category that best describes its activity. The Market Participant categories include power generators, competitive retailers, and transmission and distribution (wires) PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 7 Appx. Page 275 of 740 companies. Power generation companies produce electricity, provide ancillary services, or both. Transmission and distribution utilities are responsible for the power lines and other equipment that carry electricity from power plants and other generation facilities to end-use consumers. Retail electricity providers sell electricity to end-use consumers in the parts of the state with retail competition. Qualified Scheduling Entities like Aspire are also Market Participants and are addressed in more detail below. 22. ERCOT must ensure reliable operation of the grid. For technical reasons, electricity supply and demand must always be maintained in balance at an equilibrium point of 60 Hertz, or else the grid risks collapse. Therefore, at times, reserve generation needs to be dispatched to the grid to balance supply and demand. ERCOT accomplishes this balancing by operating a real-time wholesale electricity market. 23. The primary tool ERCOT uses to ensure that demand and supply are in constant balance—the foundation of the wholesale electricity market—is called Security Constrained Economic Dispatch (“SCED”). ERCOT typically runs SCED at intervals of at least every five minutes around the clock. Wholesale electricity is bought and sold based on the prices generated by SCED. These wholesale electricity prices then allow individual Market Participants to make voluntary decisions about how much electricity they would like to produce or procure over an interval. When prices are high, generators are incentivized to produce more electricity and PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 8 Appx. Page 276 of 740 consumers to use less. Conversely, when prices are low, generators are not incentivized to add additional capacity to the grid. 24. Because electricity is an instantaneous commodity where supply and demand must be equal at every point in time, ERCOT maintains Ancillary Services to assist the balancing process. Ancillary Services exist primarily to bridge the time gap between the five-minute SCED interval and fluctuations in supply or demand that may occur within this five-minute interval. C. About Aspire 25. Aspire is a Qualified Scheduling Entity (“QSE”) that participates in several markets administered by ERCOT. 26. Aspire buys and sells wholesale electricity in ERCOT’s real-time electricity market, serving as a conduit between companies that generate electricity and companies that sell electricity on a retail basis. 27. QSEs like Aspire bear the risk of price fluctuations in the real-time electricity market, because they must contractually commit in advance to buy and sell electricity at specific prices before SCED creates the actual wholesale market prices. As a result, artificial fluctuations in prices—fluctuations that don’t reflect normal drivers of the market like changes in weather, demand, and generation— cause prices to deviate from expectations. Because they are unexpected, these artificial fluctuations not only represent an additional risk to QSEs like Aspire but also can result in financial losses. For example, when Aspire sells to a retail provider, it enters into an agreement to sell the retailer electricity at a fixed price PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 9 Appx. Page 277 of 740 and then bears the risk that the wholesale price that Aspire buys at will be higher than the contract price with the retail provider, resulting in a loss. D. ECRS: A Costly, Market-Distorting Attempt to Bolster Reliability 28. ERCOT implemented the ERCOT Contingency Reserve Service or ECRS, a new Ancillary Service, in June 2023. ERCOT has claimed ECRS bolsters the grid’s reliability. But ECRS does not increase reliability, and ECRS unnecessarily increases the price of electricity. 29. ECRS is the product of, among other things, ERCOT protocol revisions and, when applicable, PUC orders approving revisions to ERCOT’s Nodal Protocols that Aspire challenges here: • NPRR 863, Creation of ERCOT Contingency Reserve Service and Revisions to Responsive Reserve (Feb. 12, 2019); • NPRR 992, Updated Day-Ahead Liability for NPRR863, Creation of ERCOT Contingency Reserve Service and Revisions to Responsive Reserve (Aug. 11, 2020); • NPRR 1015, Clarification of DAM implementation of NPRR863 Phase 2 (Aug. 11, 2020); • NPRR 1079, Day-Ahead Market RRS / ECRS 48-Hour Report Clarification (Aug. 10, 2021); • NPRR 1096, Require Sustained Two-Hour Capability for ECRS and Four-Hour Capability for Non-Spin (April 28, 2022); • NPRR 1148, Language Cleanup Related to ERCOT Contingency Reserve Service (ECRS) (Dec. 20, 2022); • NPRR 1178, Expectations for Resources Providing ERCOT Contingency Reserve Service (Jun. 20, 2023). PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 10 Appx. Page 278 of 740 • NPRR 1196, Correction of NCLR Ancillary Service Failed Quantity Calculations under NPRR1149 (Dec. 19, 2023); • NPRR 1213, Allow DGRs and DESRs on Circuits Subject to Load Shed to Provide ECRS and Clarify Language Regarding DGRs and DESRs Providing Non-Spin (Feb. 27, 2024); • NPRR 1224, ECRS Manual Deployment Triggers (June 18, 2024, 2024); • Order Approving ERCOT Revision Requests, NPRR 1079, Day-Ahead Market RRS / ECRS 48-Hour Report Clarification (PUC Project No. 52307) (Aug. 24, 2021); • Order Approving ERCOT Revision Requests, NPRR 1096, Require Sustained Two-Hour Capability for ECRS and Four-Hour Capability for Non-Spin (PUC Project No. 52934) (May 12, 2022); • Order Approving ERCOT Revision Requests, NPRR 1148, Language Cleanup Related to ERCOT Contingency Reserve Service (ECRS) (PUC Project 54445) (Jan. 26, 2023); and • Order Approving ERCOT Revision Requests, NPRR 1178, Expectations for Resources Providing ERCOT Contingency Reserve Service (PUC Project 54445) (Jun. 29, 2023); • Order Approving ERCOT Revision Requests, NPRR 1196, Correction of NCLR Ancillary Service Failed Quantity Calculations under NPRR1149 (PUC Project No. 54445) (Feb. 1, 2024); and • Order Approving ERCOT Revision Requests, NPRR 1213, Allow DGRs and DESRs on Circuits Subject to Load Shed to Provide ECRS and Clarify Language Regarding DGRs and DESRs Providing Non-Spin (Apr. 11, 2024). (Together, the “ECRS Rules.”) 30. ERCOT pays generators who participate in ECRS to withhold part of their generating capacity as reserves unless certain operational criteria are met. Reserves are electricity generating capacity that is deliberately not made available to meet demand. Without ECRS, this capacity would be available for dispatch to the PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 11 Appx. Page 279 of 740 market through the normal SCED process. So, ECRS is designed to intentionally decrease the supply of electricity available to the grid. And even a slight increase in supply during key periods when the grid is stressed could have a substantial effect on price, to the benefit of consumers. 31. ERCOT and the PUC argue ECRS supports reliability by increasing the level of reserves. But ECRS in fact does nothing to increase current electricity reserve capacity. Instead, ECRS stresses the grid by reducing the grid’s ability to meet actual, current, physical demand, often at times when that capacity is most needed, especially during hot summer days. 32. As explained in more detail below, ERCOT’s Independent Market Monitor or IMM, a watchdog created by the Texas Legislature with the express purpose of detecting and preventing market manipulation and recommending measures to improve the efficiency of ERCOT’s wholesale market, has identified several harms caused by ECRS. The IMM concluded that ECRS has: • Caused ERCOT to procure excessive reserves, which far exceed reserves held by ERCOT’s counterparts elsewhere; • Generated artificial shortages that produce massive inefficient market costs, totaling over $12 billion in 2023; and • Diminished reliability by withholding capacity needed to manage transmission congestion. 33. In 2023, the first year ECRS was implemented, ECRS prevented the use of 2,194 megawatts of generating capacity on average. The capacity ECRS PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 12 Appx. Page 280 of 740 relegated to reserve was allowed to run on only 40 occasions, typically for a very short duration. 34. ECRS also distorted price signals by creating an artificial scarcity condition by withholding generating capacity. This artificial scarcity resulted in both higher prices and greater price volatility. In the limited periods in 2023 when the ECRS reserve capacity was dispatched to the grid, real-time wholesale electricity prices became even less predictable for market participants. ECRS would suddenly permit more capacity to briefly appear, causing prices to abruptly drop, only to bounce back when ECRS forced that capacity back into reserves. 35. These artificial and unpredictable distortions in price signals and the increased price volatility that resulted make it impossible for independent QSEs like Aspire to efficiently manage the risks that are inherent in fixed-price bilateral contracts with both buyers and sellers of electricity. The criteria used to determine when ECRS capacity is allowed to be dispatched are unpredictable, and independent QSEs have no way to forecast them. So, because QSEs like Aspire cannot predict the abrupt addition and removal of generation under ECRS, they cannot accurately forecast prices. ECRS thus makes it much harder for independent QSEs to offer fixed-price hedges to retail providers, substantially increases the price for these hedges, and in turn drives up the costs consumers ultimately pay for that electricity. While the generators get paid to sit on the sidelines, consumers and the market lose. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 13 Appx. Page 281 of 740 36. Even if Aspire and other QSEs substantially increase what they charge retail providers for fixed-price hedges, the volatility introduced by ECRS still greatly increases the likelihood that QSEs will lose money on the hedges they offer to retailers. 37. ECRS has another unfortunate consequence: it incentivizes vertical integration and concentration, which could decrease competition in the electricity industry. Some QSEs, like Aspire, do not own physical generation and are “non- affiliated.” Many other QSEs do. These “affiliated” QSEs use the affiliation between the QSE and the generation entity to manage the unexpected and artificial price distortions caused by ECRS by internalizing (and netting) the positive and negative effects of price fluctuations. To deal with ECRS, these affiliated QSEs integrate their generation and buying/selling in the market, much like vertical integration linked supply and demand in Texas’s electricity markets before restructuring in 2003. Thus, ECRS not only leads to market inefficiencies but also creates a significant incentive for firms in the industry to “re-integrate” with the likely outcome that the industry concentration ratio will increase, decreasing competition in both the generation and retail sectors. 38. No other electricity market in the United States has a service like ECRS, yet these other markets can reliably balance supply and demand efficiently and without creating imaginary prices and can ensure grid reliability to the required standards. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 14 Appx. Page 282 of 740 E. ERCOT Did Not Have Authority to Create a New Ancillary Service like ECRS 39. ECRS is also illegal because it exceeds the rulemaking authority that PUC could delegate to ERCOT. 40. PURA recognizes that ancillary services, like ECRS, must be created by PUC, not ERCOT. Specifically, 2021 amendments to PURA recognize that ancillary services are “services necessary to facilitate the transmission of electric energy including load following, standby power, backup power, reactive power, and any other services as the commission may determine by rule,” whereas ERCOT has a more limited role limited to modifying ancillary services after PUC has created them. Tex. Util. Code § 35.004(e); see also id. § 35.004(g) (directing the commission to review the type of ancillary services needed for the ERCOT market and to evaluate whether additional ancillary services are needed); id. § 35.004(j) (PUC must require ERCOT to “modify the design, procurement, and cost allocation of ancillary services for the region in a manner consistent with cost-causation principles and on a nondiscriminatory basis” (emphasis added)). 41. Therefore, NPRR 863, which created ECRS, and which was never adopted by PUC, as a rule or otherwise, exceeded ERCOT’s authority. Further, all subsequent ERCOT protocols modifying ECRS, and PUC approvals of such protocols, are also invalid not only because of their own failures to comport with Texas Utilities Code § 35.004 but also because ERCOT’s initial creation of ECRS was invalid. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 15 Appx. Page 283 of 740 F. Making Matters Worse, the PUC Illegally Approved and ERCOT Illegally Adopted the ECRS Rules 42. ECRS is unlawful for a third reason. The rules implementing ECRS were not adopted in substantial compliance with the Administrative Procedure Act. So, these rules are invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). 43. The APA contains several mandatory, commonsense requirements aimed at facilitating a thorough rulemaking process that affords members of the public a meaningful opportunity to participate. These requirements include (1) notice, see Tex. Gov’t Code §§ 2001.023-.025; (2) public participation, see id. §§ 2001.029-.030; and (3) the contents of the agency order, id. § 2001.033. 44. The APA’s requirements apply to “rules,” and the ECRS Rules, adopted under rulemaking authority originally given to the PUC and then delegated to ERCOT, are “rules” to which the APA applies. See Tex. Util. Code § 39.121(d), (g-6); RWE, 691 S.W.3d at 486-87. The APA defines a “rule” broadly to include “a state agency statement of general applicability that: (i) implements, interprets, or prescribes law or policy, or (ii) describes the procedure or practice requirements of a state agency.” Tex. Gov’t Code § 2001.003(6)(A). “Rules” also include “amendment or repeal of a prior rule.” Id. § 2001.003(6)(B), (C) 45. The ECRS Rules, adopted by ERCOT and approved by the PUC, are “rules” because they impose a policy of withholding available supply from the market as a reserve, which causes artificial shortages that raise electricity prices. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 16 Appx. Page 284 of 740 46. Neither ERCOT nor the PUC made any pretense of complying with the APA when adopting and approving the ECRS Rules, respectively. ERCOT followed its own processes for protocol revisions, which require far less than the APA in terms of notice, public participation, and the order. And the PUC largely relied on ERCOT’s efforts in adopting the ECRS Rules, rather than undertaking its own efforts to satisfy the APA. 1. ERCOT and the PUC Did Not Substantially Comply with the APA’s Notice Requirements 47. When a state agency proposes a rule, the APA requires the agency to (a) “give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule,” and (b) “file notice of the proposed rule with the secretary of state for publication in the Texas Register” at least 30 days before the agency adopts the rule. Tex. Gov’t Code § 2001.023(a)-(b). Neither ERCOT nor the PUC gave notice of the ECRS Rules in the Texas Register, but rather buried them on their respective websites. See Nodal Protocol § 21.4.1(4). 2. ERCOT and the PUC Did Not Substantially Comply with the APA’s Public Participation Requirements 48. Section 2001.029 of the APA establishes three public-participation requirements that a rulemaking agency must follow, none of which were followed here: • First, a state agency must give “all interested persons a reasonable opportunity to submit data, views, or arguments, orally or in writing” before the agency adopts a rule. Tex. Gov’t Code § 2001.029(a). The PUC never gave an opportunity for public comment. ERCOT did not allow PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 17 Appx. Page 285 of 740 public comment and restricted comment to a limited group of stakeholders. See Nodal Protocol § 21.4.4(1), 21.4.5(1). • Second, the agency must “grant an opportunity for a public hearing before it adopts a substantive rule if a public hearing is requested by: (1) at least 25 persons; (2) a governmental subdivision or agency; or (3) an association having at least 25 members.” Id. § 2001.029(b). Neither ERCOT nor the PUC ever gave an opportunity to request a public hearing. • Finally, an agency must “consider fully all written and oral submissions about a proposed rule.” Id. § 2001.029(c). But without adequate notice to the public, this requirement cannot be met because it is impossible to determine who might have desired to submit comments. 3. ERCOT and the PUC Did Not Substantially Comply with the APA’s Order Requirements 49. Under the APA, an agency order that adopts a rule “must include”: (1) a reasoned justification for the rule as adopted consisting solely of: (A) a summary of comments received from parties interested in the rule that shows the names of interested groups or associations offering comment on the rule and whether they were for or against its adoption; (B) a summary of the factual basis for the rule as adopted which demonstrates a rational connection between the factual basis for the rule and the rule as adopted; and (C) the reasons why the agency disagrees with party submissions and proposals; (2) a concise restatement of the particular statutory provisions under which the rule is adopted and of how the agency interprets the provisions as authorizing or requiring the rule; and (3) a certification that the rule, as adopted, has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority. Tex. Gov’t Code § 2001.033(a). This information must appear within the four corners of the agency order adopting the rule. Neither the PUC orders approving PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 18 Appx. Page 286 of 740 the ECRS Rules nor the ERCOT pronouncements adopting them contain any of these items. At best, ERCOT’s materials relating to the ECRS rules, which appear in staff-prepared documents as opposed to an official PUC order, summarize comments about the rules and contain none of the other required materials. Therefore, ERCOT and the PUC did not substantially comply with the APA when adopting the ECRS Rules. G. ERCOT’s Independent Market Monitor Confirms the Disastrous Effects of ECRS 50. The Texas Legislature requires ERCOT to appoint an Independent Market Monitor “to detect and prevent market manipulation strategies, recommend measures to enhance the efficiency of the wholesale market, and provide independent analysis of any material changes proposed to the wholesale market.” Tex. Util. Code § 39.1515(a). Potomac Economics has served as ERCOT’s IMM for nearly twenty years. David Patton, PhD, an energy economist with nearly thirty years of experience, leads Potomac Economics. 51. The IMM recently issued a report slamming ECRS. The IMM explained that shortly after ECRS was implemented in June 2023, ERCOT decided to nearly double the amount of ten-minute reserves, causing ERCOT to buy excessive reserves compared to other U.S. power grids’ reserves. 52. The IMM also concluded ECRS is not based on sound reliability criteria. ECRS does not account for the probability of contingencies and PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 19 Appx. Page 287 of 740 uncertainties that lead to reliability risks. ECRS also fails to balance reliability objectives with the costs of satisfying reliability requirements. 53. Ultimately, the IMM concluded that ECRS caused artificial electricity shortages that produced massively inflated costs for electricity sold on the wholesale market, totaling more than $12 Billion between June through November 2023. While not all these costs were passed on to retail consumers, some of whom buy on fixed-price contracts, in the longer term, these artificially increased wholesale prices will necessarily negatively impact the retail prices Texans pay. 54. As the IMM explained in testimony to the PUC on July 25, 2024, ECRS’s deployment in 2023 caused forward prices for summer 2024 and 2025 to roughly double, which led consumers to have to pay “much, much higher” rates when signing new contracts with retail providers. The longer the problems with ECRS continue, the “larger the share of the costs hit Texas consumers.” 55. Finally, the IMM suggested fixes to ECRS, but ERCOT has not adopted the IMM’s proposed fixes and has pushed off consideration of those fixes. So, with ECRS continuing to keep much needed capacity off the grid during high- demand periods, market participants and Texas electricity consumers are poised to pay unnecessary, increased costs for electricity unless ECRS is promptly reined in or suspended. DECLARATORY JUDGMENT 56. Aspire incorporates by reference all of the allegations set forth above. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 20 Appx. Page 288 of 740 57. Aspire asserts that the ECRS Rules were not adopted in substantial compliance with the APA, making them invalid. See Tex. Gov’t Code § 2001.035 (a rule is voidable if a state agency does not substantially comply with the APA when adopting it). ERCOT and the PUC disagree. Because Aspire’s rights, status, and other legal relations are affected by the ECRS Rules, declaratory relief is necessary and appropriate to resolve questions regarding the validity of the ECRS Rules. 58. Aspire therefore seeks a declaration under Chapter 37 of the Texas Civil Practice and Remedies Code and Texas Government Code § 2001.038 including, but not limited to, the following: a) Each of the ECRS Rules is a “rule” within the meaning of the APA. b) The PUC and ERCOT did not substantially comply with mandatory requirements of the APA when adopting and approving each of the ECRS Rules, including requirements for (1) notice under APA §§ 2001.023-.025; (2) public participation under §§ 2001.029-.030; and (3) the contents of the agency order under § 2001.033. c) Each of the ECRS Rules is therefore invalid and void under Texas Government Code § 2001.035. d) NPRR 863, which created ECRS, is invalid because ERCOT did not have the authority to create new ancillary services. Accordingly, ECRS, and any subsequent modifications to ECRS, are also invalid. e) Chapter 21 of ERCOT’s Nodal Protocols, both on its own and when combined with the PUC’s process for approving ERCOT protocols, does PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 21 Appx. Page 289 of 740 not provide a process for making and amending rules that substantially complies with APA §§ 2001.023-.025, .029-.030, .033. 59. Aspire further asserts that the ECRS Rules violate the fundamental limits of PURA in that they require generators to withhold power from the grid. Aspire seeks a declaration that: a) The ECRS Rules violate PURA because they direct generators to withhold electricity from the grid in violation of Tex. Util. Code § 39.157(a) b) By approving the ECRS Rules, the Commissioners committed ultra vires acts for which they are liable in their official capacities because ECRS was unlawfully created by an ERCOT protocol, not a PUC rule. See City of El Paso v. Heinrich, 284 S.W.3d 366, 372-73 (Tex. 2009). c) Each of the ECRS Rules is therefore invalid and void. APPLICATION FOR STAY, SUSPENSION, AND INJUNCTIVE RELIEF 60. Aspire incorporates by reference all of the allegations set forth above. 61. This Court has the power to enter a temporary injunction based on the failure to substantially comply with the APA when adopting the ECRS Rules. Abbott v. Doe, 691 S.W.3d 55, 91 (Tex. App.—Austin 2024, pet. filed) (collecting cases in which the court upheld temporary injunctions based on APA rulemaking challenges). Further, Texas Utilities Code § 15.004 provides that while an appeal of a regulatory authority’s order is pending, a district court “may stay or suspend all or part of the operation of the order, ruling, or decision.” Cf. Tex. Gov’t Code § PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 22 Appx. Page 290 of 740 2001.038 (providing that a validity challenge under the APA cannot be used to “stay a hearing in which a suspension, revocation, or cancellation of a license by a state agency is at issue” but imposing no other limitations on a court’s ability to issue a stay). In deciding whether to grant a stay or suspension, the Court must follow the practices of a court exercising equity jurisdiction. Tex. Util. Code § 15.004. 62. The Court also has the power to enter a temporary injunction against the ECRS rules because they violate the fundamental limits of PURA. See City of El Paso v. Heinrich, 284 S.W.3d 366, 376 (Tex. 2009) (“[A] claimant who successfully proves an ultra vires claim is entitled to prospective injunctive relief, as measured from the date of injunction.”). 63. As set forth in more detail above, ERCOT adopted and the PUC approved the ECRS Rules without substantially complying with mandatory requirements in the APA, rendering the ECRS Rules voidable. Also, the ECRS Rules forced withholding of electricity, exceeding the limits of PURA. Aspire has therefore established, at the very least, a probable right to the relief it seeks upon final hearing. 64. If the operation of the ECRS Rules is not promptly stayed, suspended, or enjoined, Aspire and others will suffer immediate and irreparable injury as a result of the unlawfully adopted ECRS Rules that violate PURA, as set forth above. The injuries that Aspire and others will suffer are irreparable and cannot adequately be remedied at law. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 23 Appx. Page 291 of 740 65. Even with regard to monetary losses, the PUC has taken the position that Aspire and other Market Participants cannot ever obtain monetary relief. See Town of Palm Valley v. Johnson, 87 S.W.3d 110, 111 (Tex. 2001) (per curiam) (irreparable injury must be shown because injunctive relief is “designed to provide remedy to cover those injuries for which there was not clear, full, and adequate relief at law”). The Supreme Court rejected the PUC’s arguments in Public Utility Commission of Tex. v. Luminant Energy Co. LLC that injuries arising from PUC rules deemed invalid are not redressable, See 691 S.W.3d 448, 458 (Tex. 2024). But the PUC and ERCOT seem poised to erect barriers to monetary relief based on any challenges to rules that would require repricing. If the ECRS Rules are not stayed or suspended during the pendency of this action, Aspire and other Market Participants will be purchasing electricity at prices illegally inflated by ECRS. By contending that money damages are unavailable, the PUC and ERCOT cannot avoid the conclusion that injunctive relief is particularly appropriate to prevent ECRS from causing further harm. 66. Even if Aspire had the ability to potentially pass through some of the increased costs to its customers, that would not negate the irreparable nature of the injury ECRS causes. Because Aspire has agreements with certain retail providers for fixed-price hedges, Aspire bears the risk of unpredictable and unforeseeable price increases caused by ECRS. Cf. Sw. Elec. Power Co. v. Burlington N., Inc., 475 F. Supp. 510, 522 (E.D. Tex. 1979) (irreparable injury suffered by electric utility that had to pay increased costs to railroad for fuel transport not negated; case law PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 24 Appx. Page 292 of 740 barred recovery of damages from railroad and pass-through agreement with customers “not assured” to be enforced because PUC could disallow increase in fuel cost passed on to customer). 67. Even if Aspire could, in theory, recover damages or other monetary relief because of the harms it suffered because of ECRS, Aspire will suffer an irreparable injury because “damages are very difficult to measure by any certain pecuniary standard.” Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2011, no pet.). Among other things, ERCOT has chosen not to implement the systems that would allow it to meaningfully and correctly re-run SCED, even though it is technically possible to implement such systems and to re-calculate the dispatch and resulting prices as if ECRS had not run. The only adequate, effective, and complete relief is for the Court to stay or suspend the ECRS Rules. 68. No bond should be necessary for the issuance of the stay, suspension, or temporary injunction because ERCOT and the PUC will not suffer any harm resulting from a stay or suspension of the ECRS Rules and are simply being required to comply with the APA. However, Aspire is willing to post a bond if the Court determines it to be appropriate. See Tex. R. Civ. P. 684. 69. For all these reasons, pursuant to Texas Rule of Civil Procedure 680 et seq., Texas Civil Practice and Remedies Code § 65.001 et seq., and Texas Utilities Code § 15.004, Aspire respectfully requests a stay, suspension, and/or temporary and permanent injunction, staying or suspending the operation of the ECRS Rules PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 25 Appx. Page 293 of 740 and ordering and restraining ERCOT, the PUC, the Commissioners, their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise (collectively, the “Injunction Restrained Parties”) on the following terms: The PUC and ERCOT are prohibited from enforcing, using, or otherwise allowing the ECRS Rules to operate. PRAYER FOR RELIEF For these reasons, Aspire respectfully requests that this Court: 1. Issue the declaratory judgment requested by Aspire; 2. Stay or suspend the operation of the ECRS Rules under Texas Utilities Code § 15.004; 3. Issue the temporary and permanent injunctive relief requested by Aspire; 4. Award Aspire costs, expenses, and attorneys’ fees to the extent recoverable by law; and 5. Award Aspire any other and further relief to which it may be justly entitled. PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 26 Appx. Page 294 of 740 Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Telephone: (214) 282-8579 Facsimile: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com Ken Carroll Texas Bar No. 03888500 KCarroll@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Ph: 214-855-3000 Fax: 214-580-2641 ATTORNEYS FOR PLAINTIFF PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 27 Appx. Page 295 of 740 CERTIFICATE OF SERVICE The undersigned hereby certifies that on September 24, 2024, a true and correct copy of the above and foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Brent M. Rubin Brent M. Rubin PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION PAGE 28 Appx. Page 296 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 92398255 Filing Code Description: Amended Filing Filing Description: PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Status as of 9/26/2024 4:22 PM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 9/24/2024 3:15:41 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 9/24/2024 3:15:41 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 9/24/2024 3:15:41 PM SENT Ken Carroll kcarroll@ccsb.com 9/24/2024 3:15:41 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 9/24/2024 3:15:41 PM SENT Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 9/24/2024 3:15:41 PM SENT Elin Isenhower eisenhower@winstead.com 9/24/2024 3:15:41 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 9/24/2024 3:15:41 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 9/24/2024 3:15:41 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 9/24/2024 3:15:41 PM SENT John RHulme John.Hulme@oag.texas.gov 9/24/2024 3:15:41 PM SENT Laura Courtney laura.courtney@oag.texas.gov 9/24/2024 3:15:41 PM SENT Case Contacts Appx. Page 297 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 92398255 Filing Code Description: Amended Filing Filing Description: PLAINTIFF’S SECOND AMENDED PETITION AND APPLICATION FOR STAY/SUSPENSION AND TEMPORARY AND PERMANENT INJUNCTION Status as of 9/26/2024 4:22 PM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 9/24/2024 3:15:41 PM SENT Judy Garrison jgarrison@ccsb.com 9/24/2024 3:15:41 PM SENT Becky Dunn bdunn@ccsb.com 9/24/2024 3:15:41 PM SENT Appx. Page 298 of 740 10/1/2024 9:03 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ERCOT’S AMENDED ANSWER Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) hereby files its Amended Answer, and respectfully shows this Court the following: I. JURISDICTION 1. This Court lacks subject-matter jurisdiction to adjudicate Plaintiff Aspire Power Ventures, LP’s (“Aspire” or “Plaintiff”) claims because the Public Utility Commission of Texas (“PUCT”) approval orders and the ERCOT Nodal Protocols that are the subject of Aspire’s claims are not “rules” under the Administrative Procedure Act; thus, APA § 2001.038’s limited immunity waiver does not apply here, and Aspire’s suit is barred by sovereign immunity. Further, this Court lacks subject-matter jurisdiction because Aspire’s claims against ERCOT fall within the exclusive jurisdiction of the PUCT, and Aspire failed to exhaust its administrative remedies before the PUCT prior to filing suit. II. GENERAL DENIAL 2. Pursuant to Texas Rule of Civil Procedure 92, ERCOT generally denies each and every claim and allegation contained in Plaintiff’s Second Amended Petition, and all amendments and supplements thereto, and demands strict proof thereof as required by law. ERCOT’s Amended Answer Page 1 Appx. Page 299 of 740 III. AFFIRMATIVE DEFENSES 3. Plaintiff’s claims are barred, in whole or in part, by the doctrine of sovereign immunity. 4. Plaintiff’s claims are barred, in whole or in part, by Plaintiff’s failure to exhaust its administrative remedies. 5. Plaintiff’s claims are barred, in whole or in part, because Plaintiff lacks standing to assert private claims for alleged violations of PURA. 6. Plaintiff fails to state a cause of action against ERCOT upon which relief can be granted. 7. Plaintiff’s claims are barred, in whole or in part, by waiver, estoppel, and/or laches. 8. Plaintiff’s claims are barred, in whole or in part, by the two-year statute of limitations set forth in APA § 2001.035(b). 9. Plaintiff’s claims are barred, in whole or in part, by the filed rate doctrine. 10. Plaintiff is not entitled to recover attorneys’ fees in this matter. PRAYER ERCOT requests that the Court dismiss this case for lack of jurisdiction. Alternatively, ERCOT requests that upon proper motion or a final trial in this matter, a judgment be entered that Plaintiff takes nothing against ERCOT. ERCOT further requests all other relief, at law or in equity, to which it is or may be entitled. ERCOT’s Amended Answer Page 2 Appx. Page 300 of 740 Respectfully submitted, WINSTEAD PC 600 W. 5th Street Suite 900 Austin, Texas 78701 (512) 370-2800 telephone (512) 370-2850 fax By: /s/ Elliot Clark Elliot Clark SBN 24012428 eclark@winstead.com Elin Isenhower SBN 24104206 eisenhower@winstead.com ATTORNEYS FOR DEFENDANT ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. CERTIFICATE OF SERVICE By my signature below, I hereby certify that a true and correct copy of this document has been served on all counsel of record in accordance with the Texas Rules of Civil Procedure on October 1, 2024. /s/ Elliot Clark Elliot Clark ERCOT’s Amended Answer Page 3 Appx. Page 301 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 92633768 Filing Code Description: RESPONSE Filing Description: ERCOT’S AMENDED ANSWER Status as of 10/1/2024 11:24 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/1/2024 9:03:27 AM SENT Elin Isenhower eisenhower@winstead.com 10/1/2024 9:03:27 AM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/1/2024 9:03:27 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/1/2024 9:03:27 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/1/2024 9:03:27 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/1/2024 9:03:27 AM SENT Ken Carroll kcarroll@ccsb.com 10/1/2024 9:03:27 AM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 10/1/2024 9:03:27 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 10/1/2024 9:03:27 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/1/2024 9:03:27 AM SENT John RHulme John.Hulme@oag.texas.gov 10/1/2024 9:03:27 AM SENT Laura Courtney laura.courtney@oag.texas.gov 10/1/2024 9:03:27 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Appx. Page 302 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 92633768 Filing Code Description: RESPONSE Filing Description: ERCOT’S AMENDED ANSWER Status as of 10/1/2024 11:24 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 10/1/2024 9:03:27 AM SENT Judy Garrison jgarrison@ccsb.com 10/1/2024 9:03:27 AM SENT Becky Dunn bdunn@ccsb.com 10/1/2024 9:03:27 AM SENT Appx. Page 303 of 740 10/1/2024 9:05 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ERCOT’S AMENDED PLEA TO THE JURISDICTION AND ATERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) files this Amended Plea to the Jurisdiction and Alternatively, Motion to Dismiss Under Rule 91(a) and Alternatively, Plea in Abatement, and respectfully requests the Court dismiss (or, alternatively, abate) Plaintiff Aspire Power Ventures, LP’s (“Aspire”) claims. 1 1 ERCOT files this amended plea and amended Rule 91a motion to dismiss because after ERCOT filed its original plea and Rule 91a motion on September 9, 2024, Aspire filed its Second Amended Petition on September 24, 2024. The new petition does not change the fundamental jurisdictional issues before the Court, but it adds an additional substantive claim against ERCOT, arguing ERCOT lacks the ability to develop ancillary services programs. That claim against ERCOT, like the previously asserted claims against ERCOT, is subject to the PUCT’s exclusive jurisdiction and is barred by ERCOT’s sovereign immunity. On the merits, that claim is not plausible and should be dismissed under Rule 91a. -1- Appx. Page 304 of 740 TABLE OF CONTENTS Page I. SUMMARY ........................................................................................................................................... 3 II. BACKGROUND ................................................................................................................................ 6 A. ERCOT and the ERCOT Nodal Protocols ............................................................................ 6 B. Ancillary Services and ECRS. .................................................................................................... 9 C. Aspire fails to exhaust its administrative remedies. ..............................................................11 III. LEGAL STANDARDS ....................................................................................................................14 A. Plea to the Jurisdiction. .............................................................................................................14 B. Rule 91a. ......................................................................................................................................15 IV. ERCOT’S PLEA TO THE JURISDICTION ..............................................................................15 A. ERCOT’s Sovereign Immunity Bars Aspire’s Claims. .........................................................15 1. Neither the ERCOT Protocols nor PUCT orders approving ERCOT Protocols are “rules” under the APA. ....................................................................................................15 2. The UDJA does not waive ERCOT’s immunity. .........................................................18 B. This Court lacks jurisdiction because the PUCT has exclusive jurisdiction, and Aspire failed to exhaust its administrative remedies. ........................................................................19 V. ERCOT’S RULE 91A MOTION TO DISMISS..........................................................................22 A. Aspire’s claims are barred by the filed rate doctrine.............................................................22 1. Filed rates are per se reasonable and unassailable in judicial proceedings. ...............22 2. Electricity prices in ERCOT are filed rates that may not be judicially lowered by this Court through equitable relief. .................................................................................24 B. ERCOT’s Protocol revision process is not subject to APA rulemaking requirements...25 C. Aspire has no private cause of action for alleged PURA § 39.157 violations...................26 D. The ECRS program does not violate PURA § 39.157. ........................................................28 E. ERCOT had the authority to develop ECRS ........................................................................30 VI. ERCOT’S PLEA IN ABATEMENT .............................................................................................33 A. The other ERCOT market participants are jurisdictionally indispensable........................34 B. Joinder of the affected market participants is feasible. ........................................................36 CONCLUSION ...............................................................................................................................................38 CERTIFICATE OF SERVICE ....................................................................................................................39 APPENDIX TO ERCOT’S AMENDED PLEA TO THE JURISDICTION ....................................40 -2- Appx. Page 305 of 740 I. SUMMARY In this lawsuit, Aspire challenges “ERCOT protocol revisions and, when applicable, PUC orders approving revisions to ERCOT’s Nodal Protocols,” Sec. Am. Pet. at ¶ 29, under the purported jurisdiction of Section 2001.038 of the Administrative Procedure Act (“APA”). 2 But the Texas Supreme Court recently held in a similar challenge that a Public Utility Commission of Texas (“PUCT”) “order approving” an ERCOT Protocol revision is “not an agency-adopted ‘rule’ under the Administrative Procedure Act.” PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 492 (Tex. 2024) (emphasis added). Because the PUCT orders approving ERCOT Protocol revisions are not agency rules, this Court lacks jurisdiction under APA § 2001.038, and Aspire’s claims must be dismissed. Id. Nor can Aspire use APA § 2001.038 to challenge ERCOT’s Protocol revision process or specific Protocols. In RWE, decided just this term, the Texas Supreme Court sanctioned the existing Protocol revision process when it carefully analyzed the legislatively required and PUCT-directed “detailed procedures for adopting and revising [ERCOT’s] protocols,” and concluded that “this painstaking procedure [leverages industry expertise] while maintaining transparency and affording interested parties plentiful opportunities to weigh in.” Id. at 490. The Court rejected the argument that “ERCOT Protocols [are like] PUC rules subject to the same review procedures.” Id. at 491. In fact, the Court found the opposite, concluding that a recent statutory amendment “signals legislative recognition that ERCOT rulemaking and PUC rulemaking are independent endeavors.” Id. at 492. Thus, neither PUCT orders approving Protocol revisions, nor the Protocols themselves are agency- adopted “rules” under the APA. This Court therefore lacks jurisdiction under APA § 2001.038—the sole jurisdictional basis pleaded by Aspire to support its claims—without which sovereign immunity bars Aspire’s claims. CPS Energy v. ERCOT, 671 S.W.3d 605, 611 (Tex. 2023). And any complaint by 2 The APA is codified at Texas Government Code Chapter 2001. -3- Appx. Page 306 of 740 Aspire about ERCOT’s Protocols is subject to the exclusive jurisdiction of the PUCT. CPS Energy, 671 S.W.3d at 620 (“[W]hether ERCOT properly implemented its protocols . . . comes within the PUC’s exclusive jurisdiction.”). Aspire was not without a potential remedy for the harm it claims. “PUC regulations provide a process for review of ERCOT Protocols, . . . which culminates in a suit for judicial review in district court.” RWE, 691 S.W.3d at 492 n.11. But Aspire “did not engage in that process, choosing instead to utilize the inapplicable procedure for reviewing PUC [] rules.” Id. Aspire’s failure to exhaust its administrative remedies also deprives this Court of jurisdiction over Aspire’s claims. CPS Energy, 671 S.W.3d at 618. Even if the Court had jurisdiction, Aspire’s claims have no basis in law and should be dismissed under Rule 91a. Aspire’s procedural challenge fails as a matter of law because, as the RWE Court held weeks ago, the APA’s rulemaking requirements do not apply to the ERCOT Protocols or PUCT orders finally approving those Protocols. Aspire’s substantive challenges fare no better. To start, Aspire’s claims are barred by the filed rate doctrine, which “bars judicial recourse against a regulated entity based upon allegations that the entity’s ‘filed rate’ is too high, unfair or unlawful.” Tex. Com. Energy v. TXU Energy, Inc. (“TCE”), 413 F.3d 503, 508 (5th Cir. 2005). The whole premise of Aspire’s lawsuit is that “ECRS unnecessarily increases the price of electricity,” results in “both higher prices and greater price volatility,” “increases the likelihood that QSEs [like Aspire] will lose money on the hedges they offer to retailers,” and has “led consumers to pay ‘much, much higher’ rates.” Sec. Am. Pet. ¶¶ 28, 34, 36, and 54. But wholesale electricity prices set by ERCOT under the PUCT’s oversight and plenary authority are filed rates under the filed rate doctrine, and are thus “unassailable in judicial proceedings.” TCE, 413 F.3d at 508–10. -4- Appx. Page 307 of 740 Aspire also alleges that the ERCOT Contingency Reserve Service (“ECRS”) violates Public Utility Regulatory Act (“PURA”)3 § 39.157—a statute that directs the PUCT to protect against certain market power abuses. Nothing in PURA § 39.157 gives Aspire a private cause of action against the PUCT and ERCOT, and even if it did, that provision—which prohibits anticompetitive practices by market participants—is inapplicable here. In another recent Texas Supreme Court decision, the Court recognized that the PUCT is charged with balancing two equally critical, yet potentially conflicting, legislative goals: preserving a competitive market, and ensuring grid reliability. Sometimes, competition must yield to reliability, and “[d]eciding when those circumstances are present—and how to respond—is the Commission’s job, not the judiciary’s.” PUCT v. Luminant Energy Co. LLC, 691 S.W.3d 448, 463 (Tex. 2024) (emphasis added). It is, therefore, not for Aspire or this Court to second guess through litigation whether the ECRS program’s costs outweigh its reliability benefits, as Aspire claims here. Aspire also now claims that ERCOT lacked the authority to develop the ECRS Ancillary Service 4 program in the first instance, making it illegal. But the Legislature requires the PUCT to ensure that ERCOT “determines the . . . characteristics of ancillary . . . services necessary” to reliably operate the grid. PURA § 39.159(b). The Legislature did not just authorize ERCOT to develop Ancillary Service programs—it mandated that ERCOT develop those programs. In the unlikely event the Court determines it has jurisdiction and Aspire has pleaded viable claims, it should not proceed with this lawsuit because Aspire has failed to join all necessary and indispensable parties. When a party brings a declaratory judgment claim, as Aspire has done here, Texas law requires that “all persons who have or claim any interest that would be affected by the 3 PURA is codified at Texas Utilities Code §§ 11.001–66.016. 44 “Ancillary Service” is defined in the ERCOT Nodal Protocols as “A service necessary to support the transmission of energy to Loads while maintaining reliable operation of the Transmission Service Provider’s (TSP’s) transmission system using Good Utility Practice.” Protocols § 2.1. -5- Appx. Page 308 of 740 declaration must be made parties.” Tex. Civ. Prac. & Rem. Code § 37.006(a) (emphasis added). Here, Aspire asks the Court to not only declare the ECRS program invalid—but to declare the entire ERCOT Protocol revision process invalid—thereby eviscerating the Protocols entirely and plunging the State’s grid and market into chaos. This requested declaratory relief would affect the interests of hundreds of other market participants that participate in the ERCOT market and that have invested billions of dollars in reliance on the Protocols that govern the market, including by providing the ECRS Ancillary Service that Aspire seeks to prohibit. As set forth below, the Court should dismiss all of Aspire’s claims against ERCOT. II. BACKGROUND5 A. ERCOT and the ERCOT Nodal Protocols ERCOT is the Independent System Operator (“ISO”) and “essential organization” statutorily charged with operating the State’s electric grid and wholesale electricity market—all while subject to the PUCT’s “complete authority.” See Public Utility Regulatory Act (“PURA”) 6 §§ 39.151(a), (d). ERCOT does not generate, transmit, distribute, or sell electricity. Instead, ERCOT is the entity that Texas tasked with regulating Texas’s intrastate grid and wholesale electricity market, subject to plenary control by the PUCT. See PURA §§ 39.151(a), (g); 16 Tex. Admin. Code (“TAC”) § 25.361(b); see also CPS Energy, 671 S.W.3d at 611–12 (discussing ERCOT’s history). All aspects of ERCOT’s finances and operations are subject to the PUCT’s control, and the State of Texas selects ERCOT’s governing board. Id. at 623–26. As the Texas Supreme Court recently put it, “ERCOT and the PUC[T] are uniquely situated as legislatively endorsed joint participants in a complex regulatory scheme—each serving its own distinct and essential purposes.” RWE, 691 S.W.3d at 490. 5 “[A] a court deciding a plea to the jurisdiction is not required to look solely to the pleadings but may consider evidence and must do so when necessary to resolve the jurisdictional issues raised.” Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554–55 (Tex. 2000). 6 PURA is codified at Texas Utilities Code §§ 11.001–66.016. -6- Appx. Page 309 of 740 ERCOT manages Texas’s intrastate grid and wholesale electricity market using statutory authority delegated to it by the PUCT to “establish, adopt, and enforce a variety of policies, rules, guidelines, standards, procedures, protocols, and other requirements to govern the operations of market participants.” CPS Energy, 671 S.W.3d at 626 (citing PURA §§ 39.151(d), (i), (j), (l)). In 2021, the Legislature amended PURA to specifically require the PUCT to approve any Protocols adopted by ERCOT and for ERCOT to “establish and implement a formal process for adopting new protocols or revisions to existing protocols.” PURA § 39.151(g-6). As the Legislature knew when it added this requirement, ERCOT already had a longstanding collaborative, stakeholder-led process for adopting and revising its Protocols, referred to as the Nodal Protocol Revision Request (“NPRR”) process. 7 See ERCOT Protocols § 21.2(1); RWE, 691 S.W.3d at 491. In compliance with the Legislature’s directive, ERCOT revised its formal process to take into account the new requirement for PUCT approval of ERCOT-adopted Protocols. RWE, 691 S.W.3d at 490. The NPRR process is detailed in ERCOT Protocols § 21. 8 The NPRR process is extensive, providing multiple opportunities for comment and vote by representatives of each market segment, regulators, and consumers as the proposed Protocol revisions progress through ERCOT’s Protocol Revision Subcommittee, Technical Advisory Committee, and State-appointed Board. ERCOT Protocols §§ 21.3, 21.4.1, 21.4.4, 21.4.5; see also RWE, 691 S.W.3d at 489–90 (describing ERCOT’s detailed procedures for adopting and revising Protocols). Throughout the NPRR process, ERCOT employs its subject-matter experts in a range of relevant areas (including, e.g., economics, market design, and various engineering specialties) to 7 Although NPRRs are specific to revisions of the ERCOT Nodal Protocols, “NPRR process” is used herein as a shorthand for all of the various Revision Request processes that ERCOT employs. Other binding documents, such as the Nodal Operating Guides or the Planning Guides, when going through a revision are referred to as Nodal Operating Guide Revision Requests (“NOGRR”) or Planning Guide Revision Requests (“PGRR”), but these all are reviewed through the ERCOT stakeholder process and are ultimately approved, rejected, or remanded by the PUCT. 8 The ERCOT Protocols are available on ERCOT’s website here. -7- Appx. Page 310 of 740 analyze the effect of any proposal on ERCOT’s functions and the grid and market. ERCOT Protocols §§ 21.4.6, 21.4.9. Because market participants like Aspire have a hands-on role in the Protocols’ drafting and revision through the NPRR process, ERCOT is able to harness their substantial expertise as well. Indeed, in its recent analysis and endorsement of ERCOT’s Protocol revision process, the Texas Supreme Court recognized that this “painstaking procedure serves to leverage the expertise of ERCOT members and industry stakeholders while maintaining transparency and affording interested parties plentiful opportunities to weigh in.” RWE, 691 S.W.3d at 490 (emphasis added). The result of this “painstaking procedure” is thousands of pages of binding rules that govern every aspect of Texas’s electric grid and wholesale market—not only the Protocols, but also numerous other “guides, policies and procedures” containing legally binding market rules. See ERCOT, Market Rules; PURA § 39.151(j). These ERCOT market rules are highly detailed and rife with technical specifications. See, e.g., ERCOT Protocols §§ 3.22.2, 6.5.7.5, 8.1.1.4.1. For example, the Protocols governing certain ECRS charges include complex mathematical pricing formulas like this: The PUCT has neither the staff nor the deep technical knowledge necessary to craft these immensely complex rules. See RWE, 691 S.W.3d at 490 (acknowledging that the PUCT “lacks the expertise and staff resources to make informed regulatory decisions independent of ERCOT.”) (cleaned up). -8- Appx. Page 311 of 740 For this reason, and because “ERCOT is uniquely positioned to manage the electricity market by virtue of its technical expertise,” id. at 487, the Legislature authorized the PUCT to delegate its rulemaking authority to ERCOT. PURA § 39.151(d). In so doing, the Legislature created a two-part, non-APA process by which (1) ERCOT first “adopt[s]” market rules using its own “formal process” (the NPRR process); and (2) the PUCT exercises its supervisory authority to finally “approve, reject, or remand” any ERCOT-adopted Protocol revisions. PURA § 39.151(g-6); see also CPS, 671 S.W.3d at 623; RWE, 691 S.W.3d at 487, 490–91. B. Ancillary Services and ECRS. As the PUCT-certified ISO, ERCOT must “ensure the reliability” of Texas’s electric grid. PURA § 39.151(a)(2). To ensure the reliability of the grid, ERCOT must, among other things, make sure that the supply and demand of electricity on the ERCOT System are at all times balanced. See 16 TAC § 25.361(b)(4). “For the ERCOT grid to remain functional, electricity supply and demand must remain balanced at a frequency of 60 hertz [Hz].” Luminant, 691 S.W.3d at 455. Failure to maintain system frequency at 60 Hz can damage grid infrastructure and lead to system-wide power outages potentially lasting weeks or months. Id. at 455 (recognizing that the sudden frequency decay during Winter Storm Uri threatened to put Texas in a “total grid collapse that would have plunged the state into darkness for weeks, maybe months.”). Ancillary Services are an essential tool ERCOT uses to help resolve system imbalances and ensure grid reliability. See PURA § 39.159(b) (requiring that ERCOT “procure[] ancillary or reliability services . . . to ensure appropriate [grid] reliability”). Ancillary Services can be provided by electric generators and certain consumers, and are used to increase or decrease the supply of electricity in a matter of minutes or even seconds, which is particularly critical in times of high demand (e.g., peak summer temperatures) or short supply (e.g., Winter Storm Uri, when historically low temperatures froze generation equipment). See id.; see also ERCOT Protocols §§ 3.17, 6.5.9.4. Because Ancillary -9- Appx. Page 312 of 740 Services are an integral component of maintaining any electric system reliability, they have long been used in various forms by ISOs around the nation. 9 One type of Ancillary Service used by ERCOT is ECRS, about which Aspire complains here. ECRS was first developed through NPRR 863, which was proposed in January 2018 by a market participant. 10 After undergoing over a year of extensive vetting and revision by ERCOT and various market participants through the NPRR process, the creation of ECRS was approved and adopted by ERCOT’s Board in February 2019. 11 Aspire could have filed a complaint against ERCOT at the PUCT when ECRS was adopted five years ago—but it chose not to. See RWE, 691 S.W.3d at 490. And that complaint, had it been filed, could have culminated in a suit for judicial review under the substantial evidence rule. 16 TAC §§ 22.251, 25.362(c)(5), PURA § 15.001, APA §§ 2001.171, 2001.174; RWE, 691 S.W.3d at 490, 492 n.11. ECRS is the first new Ancillary Service in the ERCOT Region in more than 20 years. 12 It was developed to address certain reliability risks that ERCOT’s other Ancillary Services do not adequately address, including those risks created by rapid changes to the grid (e.g., increasing amounts of intermittent wind and solar generation resources), which are only compounded by the ever-present heightened reliability risks presented by ERCOT’s intrastate nature. 13 “While all the other states in the Union have extensive interconnections with neighboring states, nearly 90% of Texas is covered by a 9 See, e.g., Federal Energy Regulatory Commission (“FERC”) report on Energy and Ancillary Services Market Reforms to Address Changing System Needs (Sept. 2021), available here (outlining Ancillary Services products used by various ISOs and Regional Transmission Operators (RTOs) around the U.S.). 10 See NPRR 863, Creation of Primary Frequency Response Service Product and Revisions to Response Service (Jan. 1, 2018), available here. 11 See ERCOT Board Report on NPRR 863 (Feb. 13, 2019), available here. At that time, the PUCT was not required to approve ERCOT’s adoption of NPRR 863. PUCT approval became mandatory in 2021 with the addition of PURA § 39.151(g-6). But the PUCT had complete oversight of the ERCOT Protocols even before the mandatory approval process. RWE, 691 S.W.3d at 491. 12 PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item No. 84 (July 22, 2024), available here. 13 See, e.g., ERCOT Protocols § 6.5.7.6.2.4(1) (listing purposes of ECRS). - 10 - Appx. Page 313 of 740 single isolated grid with limited connections to external power supplies,” Texas v. Env’t Prot. Agency, 829 F.3d 405, 431 (5th Cir. 2016), meaning that, unlike the rest of the nation, the ERCOT grid largely cannot rely on its neighbors to prevent grid collapse. See also id. at 432 (recognizing that “ERCOT’s independence makes the Texas electrical grid uniquely vulnerable to sudden power shortages”). ECRS was intended in large part to fulfill a similar role to that of the import capability that other power regions have at hand, 14 making it a critical reliability tool—a fact that no one but Aspire disputes. 15 C. Aspire fails to exhaust its administrative remedies. To be sure, ECRS—as ERCOT’s first new Ancillary Service in decades—is still undergoing finetuning by ERCOT, at the directive of the PUCT and in close collaboration with market participants and the ERCOT Independent Market Monitor (“IMM”). The “ECRS Rules” Aspire complains of here reflect that finetuning, which is ongoing within the statutorily prescribed administrative process. Most recently, in June 2024, ERCOT adopted NPRR 1224, which was intended to address concerns about when ECRS resources are deployed. 16 Aspire was among the market participants that provided comments to NPRR 1224, raising similar economic complaints it asserts here—but nowhere suggesting that ECRS is illegal or that the NPRR process in which it was engaging is illegal. 17 Though NPRR 1224 was approved by the various market stakeholders on ERCOT’s Protocol Revision Subcommittee and Technical Advisory Committee, and was ultimately adopted by ERCOT’s Board of Directors, the PUCT, in fact, recently rejected NPRR 1224 at an open meeting in July 2024 after receiving additional comments and concerns from PUCT staff, the IMM, and market participants. 18 14 PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item No. 84 (July 22, 2024), available here. 15 See generally PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item Nos. 81–90, available here. 16 See NPRR 1224, ECRS Manual Deployment Triggers (Mar. 27, 2024), available here. 17 See Aspire’s Comments to NPRR 1224 (June 6, 2024), available here. 18 See PUCT Project No. 54445, Review of Protocols Adopted by the Independent Organization, Item Nos. 81–90, available here. - 11 - Appx. Page 314 of 740 As NPRR 1224 demonstrates, the prescribed formal NPRR process works—and it does so in a way that invites input and collaboration from all segments of the ERCOT market to create solutions that balance the needs of the entire grid and market. Flouting this process, Aspire runs to this Court complaining—for the first time in five years since its creation—that ECRS is illegal. 19 See Sec. Am. Pet. ¶ 1. Originally, Aspire challenged three “ECRS Rules” 20: (1) a May 2022 PUCT order approving ERCOT NPRR 1096, which modified certain requirements for Energy Storage Resources providing ECRS; 21 (2) a January 2023 PUCT order approving ERCOT NPRR 1148, which was merely a language cleanup of the already-existing ECRS Protocols; 22 and (3) a June 2023 PUCT order approving ERCOT NPRR 1178, which clarified and updated expectations for Resources providing ECRS. 23 19 Notably, in its comments to NPRR 1224, Aspire claimed it was “fully supportive of the recommendations made by the IMM” to improve the ECRS program, not to abolish it, and even offered its own additional improvement recommendations therein. 20 See First Am. Pet. ¶ 29. 21 See Final ERCOT Board Report adopting NPRR 1096 (May 2, 2022), available here. 22 See Final ERCOT Board Report adopting NPRR 1148 (Dec. 21, 2022), available here. 23 See Final ERCOT Board Report adopting NPRR 1178 (June 20, 2023), available here. - 12 - Appx. Page 315 of 740 Aspire has since amended its petition and now defines the “ECRS Rules” subject to its complaint to include those three orders, plus a host of other Protocol revisions and PUCT approval orders related to ECRS, including the originating NPRR 863. Sec. Am. Pet. ¶ 29. 24 Aspire’s broadened definition does not give this Court jurisdiction. If anything, by clarifying that its suit largely takes aim at ERCOT-adopted Protocols, 25 Aspire has pled itself directly into the exclusive jurisdiction of the PUCT. CPS Energy, 671 S.W.3d at 620 (“whether ERCOT properly implemented its protocols . . . comes within the PUC’s exclusive jurisdiction.”). Aspire chiefly complains that the PUCT orders approving ERCOT Protocol revisions and the Protocols themselves fail to comply with the APA. See id. ¶¶ 15–16, 57–58. Aspire also claims that these approval orders and Protocols “violate PURA because they direct generators to withhold electricity from the grid in violation of Tex. Util. Code §39.157(a),” Id. ¶ 59, and that “NPRR 863, which created ECRS, is invalid because ERCOT did not have the authority to create new ancillary services,” Id. ¶ 58. For both its procedural and substantive challenge, Aspire asks the Court to (1) declare the “ECRS Rules” invalid and void; and, (2) enjoin the PUCT and ERCOT “from enforcing, using, or otherwise allowing the ECRS Rules to operate.” Id. ¶¶ 58, 69. Not only that, but Aspire additionally challenges the entire ERCOT Protocol revision process, claiming this longstanding, painstaking process (that Aspire frequently participates in) fails to comply with the APA. Id. ¶ 58. 26 In other words, Aspire seeks not only to throw out the ECRS program—it also seeks to do away with the entire ERCOT market rulebook. 24 Aspire’s new definition of “ECRS Rules” now includes 10 NPRRs and 6 PUCT approval orders. 25 See ERCOT’s Original Plea at 10 n.17 (explaining ambiguity caused by previous definitions of “ECRS Rules”) (filed Sept. 9, 2024). 26 Specifically, Aspire asks for a declaration that “Chapter 21 of ERCOT’s Nodal Protocols, both on its own and when combined with the PUC’s process for approving ERCOT protocols, does not provide a process for making and amending rules that substantially complies with APA §§ 2001.023-.025, .029-.030, .033.” Id. ¶ 58. - 13 - Appx. Page 316 of 740 The Court need not reach the merits of these far-reaching claims, however. This case is easily resolved on the threshold jurisdictional question, which has already been answered in the Texas Supreme Court’s recent decisions in PUCT v. RWE Renewables Americas, LLC 27 and CPS Energy v. ERCOT. 28 Those cases, discussed below, make clear that Aspire’s claims must be dismissed with prejudice for want of subject-matter jurisdiction; thus, the Court need not reach ERCOT’s alternative Rule 91a or Plea in Abatement unless it first finds it has jurisdiction. III. LEGAL STANDARDS A. Plea to the Jurisdiction. A “court must determine at its earliest opportunity whether it has the constitutional or statutory authority to decide the case before allowing the litigation to proceed.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). “Sovereign immunity from suit defeats a trial court’s subject matter jurisdiction and thus is properly asserted in a plea to the jurisdiction.” Id. at 225– 226. Subject-matter jurisdiction is also lacking “when the Legislature has granted [an] agency the sole authority to make an initial determination in a dispute”; in that instance, the court “lack[s] jurisdiction until the party has exhausted all administrative remedies before the agency.” Oncor Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018). Whether a court has subject-matter jurisdiction is a question of law. Miranda, 133 S.W.3d at 226. Where, as here, a plea to the jurisdiction challenges the pleadings, the court’s task is to “determine if the pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause.” Id. If “the pleadings affirmatively negate the existence of jurisdiction, then a plea to the jurisdiction may be granted without allowing the plaintiffs an opportunity to amend.” Id. at 227. 27 691 S.W.3d 484; see also Appendix A. 28 671 S.W.3d 605; see also Appendix B. - 14 - Appx. Page 317 of 740 B. Rule 91a. Rule 91a authorizes dismissal of a cause of action that “has no basis in law or fact.” Tex. R. Civ. P. 91a(1). “A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” Id. Whether dismissal on the pleadings is proper is a question of law. City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex. 2016). Legal conclusions “need not be taken as true in evaluating the sufficiency of the pleadings.” City of Austin v. Liberty Mut. Ins. Co., 431 S.W.3d 817, 826 (Tex. App.—Austin 2014, no pet.). IV. ERCOT’S PLEA TO THE JURISDICTION A. ERCOT’s Sovereign Immunity Bars Aspire’s Claims. The Texas Supreme Court recently held “that ERCOT is entitled to sovereign immunity” as an “arm of the State government”: We hold that ERCOT is entitled to sovereign immunity because PURA evinces clear legislative intent to vest it with the “‘nature, purposes, and powers’ of an ‘arm of the State government’” and because doing so satisfies the political, pecuniary, and pragmatic policies underlying our immunity doctrines. CPS Energy, 671 S.W.3d at 628. Absent legislative waiver, then, ERCOT is immune from suit. See id. It is Aspire’s burden to establish such a waiver, Rattray v. City of Brownsville, 662 S.W.3d 860, 865 (Tex. 2023), and it has failed to do so here. 1. Neither the ERCOT Protocols nor PUCT orders approving ERCOT Protocols are “rules” under the APA. Aspire claims that this Court has jurisdiction under APA § 2001.038, which authorizes declaratory relief regarding the “validity or applicability of a rule” whose “threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.” Citing to the Texas Supreme Court’s RWE decision issued just weeks ago, Aspire asserts that “[r]ulemaking at both the PUC and ERCOT are subject to the [APA].” Sec. Am. Pet. ¶¶ 15–16; - 15 - Appx. Page 318 of 740 see also id. ¶ 44 (representing that RWE stands for the proposition that Protocols and PUCT orders approving protocol revisions are APA “rules”). But RWE held precisely the opposite—that neither ERCOT’s Protocols, nor the PUCT’s orders approving the adoption of or revisions to those Protocols, are “rules” under the APA. 29 691 S.W.3d at 492. The facts in RWE mirror this case. There, a market participant, RWE, similarly challenged a PUCT order approving certain ERCOT Protocol revisions related to the price of energy during times of extreme energy shortages. RWE, 691 S.W.3d at 487–88. Just as Aspire attempts to do here, RWE entirely skirted the proper statutory administrative process, instead going directly to the Third Court of Appeals with its PUCT order challenge, claiming the order was a “competition rule” subject to direct appeal under PURA § 39.001(f). 30 Id. at 488–89. The Texas Supreme Court soundly rejected this claim, holding that the PUCT’s Protocol revision approval order was not even a “rule” under the APA, much less a “competition rule” authorizing a direct appeal. See id. at 489–92. The APA’s rulemaking requirements, the RWE Court explained, are “exclusively and repeatedly directed at rules ‘adopted’ by a ‘state agency.’” Id. at 491. (emphasis added) (citing APA §§ 2001.033(a), 2001.004(1)). Neither part of the two-part ERCOT Protocol revision process falls within this rubric. At step one, ERCOT is not a “state agency”—it is, as Aspire acknowledges, an “organ of government” that performs a “uniquely governmental” function with respect to managing the State’s electric grid. CPS Energy, 671 S.W.3d at 617; see also Sec. Am. Pet. ¶ 11 (defining ERCOT as a “quasi-governmental agency”). ERCOT’s adoption and revision of Protocols therefore does not 29 Aspire’s mischaracterization of the holding in RWE raises serious concerns about its candor, and ERCOT reserves the right to seek appropriate sanctions under Rule 13 of the Texas Rules of Civil Procedure. 30 Aspire did the same. It filed a direct appeal in the Third Court of Appeals making the same complaints there that it makes here. See Aspire Power Ventures, LP v. PUCT, 03-24-00102-CV (filed Feb. 13, 2024), available here. Notably, the Third Court—over Aspire’s objection—abated that appeal pending the Supreme Court’s decision in RWE. See Memorandum Opinion (May 3, 2024), available here. The PUCT recently moved to dismiss the appeal based on RWE, and Aspire did not oppose the dismissal. See Unopposed Motion to Dismiss for Lack of Jurisdiction (Aug. 26, 2024), available here. The case was recently transferred to the Fifteenth Court of Appeals, and on September 26, 2024, the court dismissed the appeal for lack of jurisdiction. See Memorandum Opinion (Sept. 26, 2024), available here. - 16 - Appx. Page 319 of 740 constitute APA rulemaking. See RWE, 691 S.W.3d at 491. Nor do PUCT orders finally “approving” new or revised Protocols adopted by ERCOT, or rejecting or remanding them, constitute rules under the APA. Id. That the PUCT is now required to formally approve each and every Protocol revision adopted by ERCOT does not change this analysis. 31 Seizing on that new requirement, RWE argued that, by this amendment, “the Legislature intended to overhaul” ERCOT’s longstanding Protocol revision process and “effectively convert ERCOT protocols into PUC rules” subject to the APA. RWE, 691 S.W.3d at 491. The Court disagreed: We do not discern such a sweeping intent from the language the Legislature chose. For one thing, PURA makes clear that ERCOT, not the PUC, is the entity “adopting” new or revised ERCOT protocols. [PURA] § 39.1519(g-6). The PUC then “approves” the protocols. See id. This distinction is deceptively significant because the APA’s requirements . . . are exclusively and repeatedly directed at rules “adopted” by a “state agency.” . . . Indeed, the Legislature deliberately uses the term “adopt” throughout the APA—no reference is made to an agency’s “approval” of a rule. . . . ... We cannot ignore the Legislature’s deliberate decision not to designate the PUC as the entity that “adopts” ERCOT protocols given the comprehensive statutory use of that term. Id. (emphasis added) (internal citations omitted). The recent PURA amendments underscore that ERCOT’s Protocol revision process is wholly separate from APA rulemaking. In addition to making the PUCT’s Protocol approval mandatory, the Legislature made the NPRR process mandatory, requiring that ERCOT “establish and implement a formal process for adopting new protocols or revisions to existing protocols.” PURA § 39.151(g-6). As the RWE Court recognized, “ERCOT already had such a process in place; nevertheless, [this] requirement signals legislative recognition that ERCOT rulemaking and PUC rulemaking are 31 While the ERCOT NPRR process has, pursuant to the PUCT’s “complete authority” over ERCOT, “consistently been subject to PUC[T] oversight and review” even prior to this 2021 amendment, RWE, 691 S.W.3d at 491, PURA § 39.151(g- 6) now makes the PUCT’s review and approval mandatory for each and every new and revised Protocol adopted by ERCOT. - 17 - Appx. Page 320 of 740 independent endeavors.” RWE, 691 S.W.3d at 492. Had the Legislature intended that ERCOT follow the APA’s rulemaking procedures, it would not have vested ERCOT with discretion (subject, as with all things, to the PUCT’s “complete authority”) to establish and implement a “formal process” for adopting and revising its Protocols. Cf., e.g., Tex. Boll Weevil Eradication Found., Inc. v. Lewellen , 952 S.W.2d 454, 499 (Tex. 1997) (recognizing that Tex. Agric. Code § 74.120(c) vests non-agency Boll Weevil Eradication Foundation with the authority to adopt rules that must comply with the APA’s rulemaking requirements). 32 Because neither the ERCOT Protocols nor PUCT orders approving ERCOT-adopted Protocols are “rules” under the APA, APA § 2001.038’s limited immunity waiver does not apply here. This Court, therefore, lacks subject-matter jurisdiction, and must dismiss Aspire’s suit with prejudice. 33 See RWE, 691 S.W.3d at 492; R.R. Comm’n v. WBD Oil & Gas Co., 104 S.W.3d 69, 79 (Tex. 2003) (holding no jurisdiction under APA § 2001.038 for claims regarding agency orders adopting field rules, which are not “rules” under the APA); LMV-AL Ventures, LLC v. Tex. Dep’t of Aging & Disability Servs., 520 S.W.3d 113, 124 (Tex. App.—Austin 2017, pet. denied) (“Section 2001.038 is a waiver of immunity and, therefore, is strictly construed in favor of retained immunity.”). 2. The UDJA does not waive ERCOT’s immunity. Aspire also cannot show waiver of ERCOT’s immunity under the Uniform Declaratory Judgment Act (“UDJA”). The UDJA “is not a general waiver of sovereign immunity; ‘it does not enlarge a trial court’s jurisdiction, and a litigant’s request for declaratory relief does not alter a suit’s underlying nature.’” Creedmoor–Maha Water Supply Corp. v. Tex. Comm’n on Envtl. Quality, 307 S.W.3d 32 Tex. Agric. Code § 74.120(c) provides that any rules promulgated by the Foundation “must be adopted and published in accordance with state requirements,” putting the Foundation’s rulemaking within the APA’s ambit. Lewellen, 952 S.W.2d at 499. No such language is found anywhere in PURA. See Hogan v. Zoanni, 627 S.W.3d 163, 169 (Tex. 2021) (“We presume the Legislature chose statutory language deliberately and purposefully . . . and that it likewise excluded language deliberately and purposefully”) (cleaned up). 33 See Harris County v. Sykes, 136 S.W.3d 635, 639 (Tex. 2004) (holding that if a plaintiff fails to plead facts that demonstrate a waiver of immunity, “then the trial court should dismiss the plaintiff’s action. Such a dismissal is with prejudice because a plaintiff should not be permitted to relitigate jurisdiction once that issue has been finally determined.”). - 18 - Appx. Page 321 of 740 505, 515 (Tex. App.—Austin 2010, no pet.) (quoting City of El Paso v. Heinrich, 284 S.W.3d 366, 370 (Tex. 2009)). Thus, “sovereign immunity bars UDJA actions against the state and its political subdivisions absent a legislative waiver.” Tex. Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 620 (Tex. 2011). Outside of APA § 2001.038—which, for the reasons above, does not apply to Aspire’s claims—no such waiver has been identified here. 34 B. This Court lacks jurisdiction because the PUCT has exclusive jurisdiction, and Aspire failed to exhaust its administrative remedies. This Court also lacks subject-matter jurisdiction because the PUCT has exclusive jurisdiction over matters pertaining to ERCOT’s operations and Protocols as the PUCT-certified ISO, and Aspire failed to exhaust its administrative remedies before the PUCT before bringing suit. “A state agency ‘has exclusive jurisdiction when the Legislature has granted that agency the sole authority to make an initial determination in a dispute.’” Chaparral, 546 S.W.3d at 138 (quoting In re Entergy Corp., 142 S.W.3d 316, 321 (Tex. 2004)). When an agency has exclusive jurisdiction over a matter, the agency has “authority to resolve disputes that arise within the agency’s regulatory arena,” and courts lack jurisdiction over the matter until the complaining party has exhausted all administrative remedies before the agency. Clint Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 544 (Tex. 2016); Chaparral, 546 S.W.3d at 137. The Legislature may vest an agency with exclusive jurisdiction in two ways. First, a statute may expressly grant an agency exclusive jurisdiction over matters the statute governs. Chaparral, 546 S.W.3d at 138. Second, an agency has exclusive jurisdiction “when a pervasive regulatory scheme indicates 34 While the UDJA allows “[a] person ... whose rights ... are affected by a statute ... or municipal ordinance” to “have determined any question of construction or validity ... and obtain a declaration of rights ... thereunder,” that limited immunity waiver does not apply here because neither the challenged Protocols nor PUCT orders are a “statute” or “municipal ordinance.” Like all immunity waivers, this UDJA provision is strictly construed. See, e.g., Hensley v. State Comm’n on Judicial Conduct, 692 S.W.3d 184, 200 (Tex. 2024) (holding that UDJA § 37.004(a)’s waiver did not apply to a judicial canon that “is neither an ordinance nor a statute but a rule promulgated by this Court.”). - 19 - Appx. Page 322 of 740 that the Legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed.” Id. PURA § 39.151 constitutes such a pervasive regulatory scheme. CPS Energy, 671 S.W.3d at 618. As the Texas Supreme Court explained: Section 39.151 grants the PUC extensive and ultimate authority over an ISO. . . . the statute provides that the ISO “is directly responsible and accountable to the [PUC],” and the PUC “has complete authority to oversee and investigate [ERCOT]’s finances, budget, and operations” to ensure adequate performance of the ISO’s “functions and duties.” It grants the PUC authority over ERCOT’s board makeup, its bylaws and protocols, and its ability to charge fees to its members. ERCOT is empowered to enact rules over market participants, but they must be approved by the PUC. Moreover, the PUC’s authority over ERCOT is not solely regulatory; it has adjudicatory power as well. The PUC may “take appropriate action” against the ISO, including decertification, for the ISO’s failure to adequately perform its functions or duties or for its failure to comply with Section 39.151. Section 39.151’s grant of extensive authority to the PUC over ERCOT and its detailed regulation of the particulars of ERCOT’s functions constitute a pervasive regulatory scheme. Id. (emphasis added). Aspire’s claims against ERCOT fall directly within this pervasive regulatory scheme. ERCOT adopted and implements the ECRS program pursuant to its legislative directive to “ensure the reliability” of the grid. PURA § 39.151(a). As a part of this core statutory responsibility, the Legislature has further directed ERCOT to (1) establish requirements to meet the reliability needs of the ERCOT region; (2) determine the quantity and type of Ancillary Services needed to ensure grid reliability; and (3) to procure those necessary Ancillary Services. See PURA § 39.159(b). The PUCT is charged with ensuring that ERCOT adequately fulfills each of these responsibilities, and may take action against ERCOT should it fail to do so. See id. § 39.159(b) (“The [PUCT] shall ensure that [ERCOT] . . . determines the quantity and characteristics of ancillary or reliability services . . . [and] procures ancillary or reliability services on a competitive basis . . . .”); see also PURA § 39.151(d) (“The commission may take appropriate action against [ERCOT]” if it “does not adequately perform [its] functions or duties . . . .”). - 20 - Appx. Page 323 of 740 Aspire contends that ERCOT failed to meet these statutory requirements by, among other things, “fail[ing] to balance reliability objectives with the costs of satisfying reliability requirements,” See Sec. Am. Pet. ¶ 52, and because “NPRR 863, which created ECRS . . . exceeded ERCOT’s authority,” Sec. Am. Pet. ¶ 41. But “[b]ecause the proper performance of ERCOT’s operations, functions, and duties comes within the PUC’s ‘complete’ authority over ERCOT, and because the PUC is statutorily authorized to hold ERCOT accountable if, as [Aspire] alleges, ERCOT fails to properly perform,” these “issues come within the PUC’s exclusive jurisdiction.” CPS Energy, 671 S.W.3d at 619. Aspire was therefore required to first allow the PUCT “to make important determinations” regarding the alleged unlawfulness of ERCOT’s ECRS program “before [taking its] claim to the judicial system.” Chaparral Energy, 546 S.W.3d at 145; CPS Energy, 671 S.W.3d at 620. To be clear, Aspire always had a direct path to administrative and judicial review under PURA, PUC Rules, and ERCOT Protocols. After ERCOT adopted NPRR 863 creating the ECRS program (and, in the years following, the other NPRRs now added to Aspire’s Second Amended Petition), 35 Aspire had a right to complain to the PUCT about ERCOT’s actions. See ERCOT Protocols § 21.4.12.3(1); 16 TAC §§ 22.251, 25.362(c)(5); RWE, 691 S.W.3d at 490, 492 n.11. Had the PUCT agreed with Aspire, the PUCT could have suspended the NPRR’s operation or ordered ERCOT to revise it. 16 TAC § 22.251(o). 36 If, on the other hand, the PUCT rejected Aspire’s appeal, Aspire could have sought judicial review of that decision under the APA through the contested case process and under the substantial evidence rule. PURA §§ 15.001, 39.003; APA §§ 2001.003(1), 2001.171. 35 As previously discussed, Aspire’s First Amended Petition defined only three PUCT approval orders as the “ECRS Rules.” Its Second Amended Petition now cites several more as well as the actual NPRRs and includes them all as part of its new definition of “ECRS Rules.” Sec. Am. Pet ¶ 29. 36 There is an alternative route to administrative review. The PUC has an open project in which it reviews ERCOT-adopted Protocol revisions. See PUCT Docket No. 54445 (“Review of Rules Adopted by the Independent Organization”), available here. Market participants and other interested persons may file comments in that project advocating for or against approval of an ERCOT-adopted revision. In addition to NPRR 1224, discussed above, this recently happened with NPRR 1186: numerous parties filed comments with the PUCT, in response to which the PUCT remanded the revision to ERCOT with instructions to further revise it. See Docket No. 54445, Item No. 64 (Jan. 18, 2024), available here. - 21 - Appx. Page 324 of 740 2001.174, 2001.176; see also RWE, 691 S.W.3d at 492 n.11 (recognizing that the “PUC regulations provide a process for review of ERCOT protocols . . . which culminates in a suit for judicial review in the district court.”). But Aspire chose to forego administrative review. Just like RWE, Aspire “did not engage in that process, choosing instead to utilize [an] inapplicable procedure” to challenge the ECRS Protocol revisions. Id. As in RWE, then, Aspire’s claims must be dismissed for lack of jurisdiction for failure to exhaust administrative remedies. Id. at 492. If the Court concludes, as it should, that it lacks jurisdiction over Aspire’s claims, the case can be dismissed, and the Court need not consider ERCOT’s alternative motions below. V. ERCOT’S RULE 91A MOTION TO DISMISS Outlined above, recent Texas Supreme Court precedent makes clear that the Court lacks subject-matter jurisdiction over Aspire’s claims. If the Court determines it has jurisdiction, however, it should still dismiss this action under Rule 91a because Aspire’s claims have no basis in law. A. Aspire’s claims are barred by the filed rate doctrine Aspire asks this Court to enjoin ERCOT from utilizing ECRS to reliably operate the grid, alleging “consumers have paid inflated rates because of ECRS,” and without judicial intervention, “Aspire and other Market Participants will be purchasing electricity at prices illegally inflated by ECRS.” Sec. Am. Pet. ¶¶ 3, 65. Aspire’s claims must be dismissed, as they fall squarely within the filed rate doctrine. 1. Filed rates are per se reasonable and unassailable in judicial proceedings. The filed rate doctrine applies when state law creates a state regulatory agency and a statutory scheme under which the agency determines reasonable rates for the services provided. See CenterPoint Energy Res. Corp. v. Ramirez, 640 S.W.3d 205, 212 (Tex. 2022); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 216 (Tex. 2002); Hous. Lighting & Power Co. v. Auchan USA, Inc., 995 S.W.2d 668, 672–75 (Tex. - 22 - Appx. Page 325 of 740 1999). The doctrine “says, in essence, that ‘any rate filed with and approved by the appropriate regulatory agency has the imprimatur of government,’” Sw. Bell Tel. Co. v. Metro-Link Telecom, Inc., 919 S.W.2d 687, 692 (Tex. App.—Houston [14th Dist.] 1996, writ denied), making those rates “per se reasonable and unassailable in judicial proceedings.” TCE, 413 F.3d at 508 (cleaned up). The filed rate doctrine accordingly “bars judicial recourse . . . based upon allegations that the entity’s ‘filed rate’ is too high, unfair, or unlawful.” TCE, 413 F.3d at 507; see also Metro-Link, 919 S.W.2d at 692–93 (filed rate doctrine “prohibits a customer from claiming a lower rate than” the filed rate approved by the regulatory agency). The doctrine also categorically bars claims alleging that a plaintiff has been “forced to pay prices for electricity in excess of rates that would have been achieved in a competitive market,” and forecloses judicial relief based on a hypothetical comparison of “the filed rate and the rate that might have been approved absent the conduct in issue.” Jenkins v. Entergy Corp., 187 S.W.3d 785, 805 (Tex. App.—Corpus Christi 2006, no pet.). The doctrine’s purpose is twofold: First, the reasonableness of rates in a regulated industry is a question reserved solely for the governing regulatory body. Minicron SBC Corp., v. Worldcom, Inc., 994 S.W.2d 785, 789 (Tex. App.—Houston [14th Dist.] 1999, no pet.) (citing Keogh v. Chicago & Nw. Ry. Co., 260 U.S. 156 161-64 (1922)). If courts were to enforce rates other than those approved by the governing regulatory agency, they would invade this exclusive province of the regulatory agency—in this case, the PUCT, which “has the expertise to manage the electric utility industry; the courts do not.” Luminant, 691 S.W.3d at 463. Second, the doctrine prevents utilities from discriminating in the prices they charge for the same service among different ratepayers. Id. (citing Maislin Indus. v Primary Steel, Inc., 497 U.S. 116, 126 (1990)). If courts could recalculate agency-approved rates for certain litigants, discrimination would result among customers. - 23 - Appx. Page 326 of 740 2. Electricity prices in ERCOT are filed rates that may not be judicially lowered by this Court through equitable relief. Though the filed rate doctrine originated in the context of federal regulation, the doctrine “applies equally where state law creates a state agency and a statutory scheme pursuant to which the state agency determines reasonable rates.” Metro-Link, 919 S.W.2d at 692–93. And it applies whether a regulatory agency actively sets and approves rates, or merely monitors market-based rates and maintains oversight authority. See TCE, 413 F.3d at 509–10 (the “PUCT’s oversight over the market is sufficient to conclude that the [ERCOT] BES 37 energy rates are ‘filed’ within the meaning of the filed rate doctrine.”); Util. Choice v. TXU Corp., No. H-05-573, 2005 WL 3307524, at *2, 4 (S.D. Tex. Dec. 6, 2005) (extending TCE’s holding with respect to spot market rates to bilateral transactions; recognizing that the “filed rate doctrine bars claims for damages stemming from rates approved by the PUCT in the Texas energy market.”). In TCE, the Fifth Circuit applied the filed rate doctrine to affirm dismissal of claims against ERCOT, as well as a number of generators and market participants, for allegedly conspiring to manipulate ERCOT rates “during severe winter weather” when “the price for electricity on the [ERCOT] market soared.” TCE, 413 F.3d at 506. The TCE district court also applied the filed rate doctrine to dismiss a breach of contract claim against ERCOT based on “ERCOT’s failure to follow its own protocols.” Id. at 507. Upon analyzing the Texas electric market’s regulatory structure and PURA’s pervasive regulatory scheme, the TCE court concluded that the PUCT’s plenary oversight authority brings ERCOT wholesale rates within the ambit of the filed rate doctrine. See id. at 509–10. Likewise, in Utility Choice, the district court dismissed claims relating to “alleged manipulation of the Texas energy market to create substantial price increases” because the claims “challenge[d] the 37 “BES” refers to the Balancing Energy Service ("BES") market, which is another name for the EROCT wholesale market. “The BES market is a bid-based wholesale market for short-term electricity power” and ERCOT “administer[s] the BES market.” TCE, 413 F.3d at 506. - 24 - Appx. Page 327 of 740 [ERCOT] rates paid, and are thus barred by the filed rate doctrine.” 2005 WL 3307524, at *4. Recognizing that “the Fifth Circuit has held that the filed rate doctrine bars claims for damages stemming from rates approved by the PUCT in the Texas energy market,” the Utility Choice court dismissed claims for equitable and injunctive relief, finding that “such relief would require the Court to determine the appropriateness of the rates charged by Defendants and unduly infringe upon the rate setting authority held by the PUCT.” Id. at *18–21; see also Winn v. Alamo Title Ins. Co., Case No. A-09-CA-214-SS, 2009 WL 7099484, at *2 (W.D. Tex. May 14, 2009), aff’d, 372 Fed. Appx. 461 (5th Cir. March 30, 2010) (dismissing claims for declaratory and injunctive relief and monetary damages under the filed rate doctrine). The court in Utility Choice acknowledged that the PUCT “has been given the responsibility to ensure conditions are not unreasonably preferential, prejudicial, discriminatory, predatory, or anticompetitive” and, as such, granting the plaintiffs’ requested relief “would affect market rates and infringe upon the powers of the PUCT.” Id. Aspire asks this Court to intervene in the ERCOT wholesale market and judicially lower ERCOT’s filed rates by enjoining the ECRS program, thereby preventing that Ancillary Service from affecting energy prices that Aspire alleges are too high and it should not have to pay. The filed rate doctrine prohibits this Court from granting Aspire the relief it seeks. The doctrine is meant to keep courts “out of the rate-making process . . . recogniz[ing] that (1) legislatively appointed regulatory bodies have institutional competence to address rate-making issues; (2) courts lack the competence to set rates; and (3) the interference of courts in the rate-making process would subvert the authority of rate-setting bodies and undermine the regulatory regime.” Winn, 2009 WL 7099484, at *4. B. ERCOT’s Protocol revision process is not subject to APA rulemaking requirements. Aspire’s APA rulemaking challenge against ERCOT is threefold: first, Aspire complains that the ECRS Rules did not comply with the APA’s notice and comment requirements and, on that basis, asks the Court to declare those rules invalid and void. Sec. Am. Pet. ¶ 58. Second, Aspire alleges that - 25 - Appx. Page 328 of 740 NPRR 863 is invalid because ERCOT has no authority to create new Ancillary Services. Id. Finally, Aspire broadly asserts that ERCOT’s Protocol revision process as a whole violates the APA. Id. None of these claims have merit. As set forth above, the Texas Supreme Court just weeks ago held that ERCOT’s Protocol revision process is not subject to the APA’s rulemaking requirements. See RWE, 691 S.W.3d at 491. This is because ERCOT is not a “state agency,” and it is well-settled that the APA applies only to “rules adopted by a state agency.” Id. (cleaned up). If the Legislature wished for ERCOT to nonetheless follow the APA’s rulemaking process, it could have required as much. See Lewellen, 952 S.W.2d at 499. Instead, it merely required ERCOT to use a “formal process” to “adopt[] new protocols or revis[e] . . . existing protocols,” PURA § 39.151(g-6), knowing that ERCOT has long had its own detailed Protocol revision process in place. See ERCOT Protocols § 21. Aspire’s APA challenge therefore fails as a matter of law. C. Aspire has no private cause of action for alleged PURA § 39.157 violations. In addition to its procedural APA challenge, Aspire asks this Court to declare that the “ECRS Rules violate PURA because they direct generators to withhold electricity from the grid in violation of [PURA] § 39.157(a),” and to enjoin the ECRS Rules’ implementation on that basis. Sec. Am. Pet. ¶¶ 59, 69. But PURA § 39.157 does not give market participants like Aspire a private cause of action— that statute is a directive from the Legislature to the PUCT to monitor and prosecute certain market abuses by market participants. “The fact that a person has suffered harm from the violation of a statute does not automatically give rise to a private cause of action in favor of that person.” Bickham v. Dallas Cnty., 612 S.W.3d 663, 670 (Tex. App.—Dallas 2020, pet. denied). “When a private cause of action is alleged to derive from a constitutional or statutory provision,” a court’s “duty is to ascertain the drafters’ intent.” Brown v. De La Cruz, 156 S.W.3d 560, 563 (Tex. 2004). “[T]he existence of a private cause of action must be clearly - 26 - Appx. Page 329 of 740 implied in the statutory text.” Tex. Med. Res. LLP v. Molina Healthcare of Tex., Inc., 659 S.W.3d 424, 431 (Tex. 2023); see also Brown, 156 S.W.3d at 563. Nothing in PURA § 39.157 expressly or impliedly grants Aspire the right to seek declaratory and injunctive relief against the PUCT and ERCOT. On the contrary, it is the PUCT that may penalize market participants like Aspire under that provision: (a) The commission shall monitor market power associated with the generation, transmission, distribution, and sale of electricity in this state. On a finding that market power abuses or other violations of this section are occurring, the commission shall require reasonable mitigation of the market power by ordering the construction of additional transmission or distribution facilities, by seeking an injunction or civil penalties as necessary to eliminate or to remedy the market power abuse or violation as authorized by Chapter 15, by imposing an administrative penalty as authorized by Chapter 15, by ordering the disgorgement of excess revenue as authorized by Chapter 15, or by suspending, revoking, or amending a certificate or registration as authorized by Section 39.356. PURA § 39.157(a) (emphasis added). As Texas courts have recognized, this PURA provision authorizes the PUCT—and only the PUCT—to protect against anticompetitive practices. See Brazos Elec. Power Co-op, Inc. v. PUCT, 101 S.W.3d 499, 503 (Tex. App.—Austin 2002, pet. denied) (recognizing PURA § 39.157 “require[s] the Commission to establish by rule a code of conduct to protect against anticompetitive practices”); see also TXU Generation Co., LP v. PUCT, 165 S.W.3d 821, 832 (Tex. App.—Austin 2005, pet. denied) (recognizing PURA § 39.157 “gives the Commission broad authority to monitor and remedy market power abuses.”) (emphasis added). And the PUCT has, in turn, carried out that legislative mandate through its own rules. See 16 TAC §§ 25.503(a)(6), 25.503(g). When, as here, “a statute explicitly provides certain rights of enforcement, but is silent as to the right sought to be enforced,” courts “may presume that the Legislature intended for that right to not be included.” Witkowski v. Brian, Fooshee and Yonge Props., 181 S.W.3d 824, 831 (Tex. App.—Austin 2005, no pet.). 38 38 To the extent Aspire suggests that it also has a private cause of against ERCOT under the Administrative Code, that claim similarly fails. Absent legislative creation of a private cause of action in PURA, the PUCT has no authority to create a - 27 - Appx. Page 330 of 740 “[T]he bar for implying a private cause of action is high,” Molina, 659 S.W.3d at 431, and Aspire has not met it here with respect to its alleged PURA § 39.157 violations. That provision is clearly a tool for the market’s regulator to prevent market abuses; it is not a tool for the regulated to sue for declaratory and injunctive relief. See Alexander v. Sandoval, 532 U.S. 275, 289 (2001) (“Statutes that focus on the person regulated rather than the individuals protected create no implication of an intent to confer rights on a particular class of persons.”). Aspire’s attempts to turn PURA § 39.157 on its head must be rejected. D. The ECRS program does not violate PURA § 39.157. Even if Aspire could sue for alleged PURA § 39.157 violations, that statute has no application here. For one, the market power abuses PURA § 39.157 speaks to are anticompetitive practices by market participants , not by ERCOT. ERCOT has no “market power”—it does not generate, transmit, or sell electricity. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 464 (1992) (defining “market power” to mean “the ability of a single seller to raise price and restrict output.”); see also 16 TAC § 25.503(g) (defining “prohibited activities” and excluding “acts or practices expressly allowed by the Protocols.”). Rather, as the PUCT-certified ISO, ERCOT acts strictly as a market clearinghouse, generating settlement statements and collecting and remitting payments for energy transactions in the ERCOT market. RWE, 691 S.W.3d at 489. ERCOT is revenue-neutral, and makes no profit from these transactions; it operates instead from a regulatory fee approved by the PUCT. See PURA § 39.151(e); CPS Energy, 671 S.W.3d at 627. 39 cause of action by rule. Sandoval, 532 U.S. at 291. Even if it could, the PUCT rules Aspire points to vest only the PUCT, not private individuals, with the right to act if ERCOT violates the PUCT’s rules. See 16 TAC §§ 25.503(p) (“If the commission finds that a market entity is in violation of this section, the commission may seek or impose any legal remedy it determines appropriate for the violation involved . . . .”). 39 For this reason, the PUCT could not “disgorge[] excess revenue” from ERCOT, as PURA § 39.157 contemplates. - 28 - Appx. Page 331 of 740 What’s more, ECRS is exclusively a reliability tool—it is not the type of anticompetitive “withholding of production” contemplated by PURA § 39.157. 40 Both ERCOT’s energy dispatch system (the Security-Constrained Economic Dispatch) and all of ERCOT’s Ancillary Service products, including ECRS, rely on having certain amounts of generation readily available on the sidelines. These generation reserves—what Aspire calls “withholding power”—are necessary to ensure ERCOT can keep supply and demand on the system in balance. If, as Aspire claims, ERCOT unlawfully withholds power by not dispatching available generation, then ERCOT’s entire grid operation system could be called into question. Nothing in PURA § 39.157’s text supports such a dangerous proposition. In fact, Aspire’s argument would require that all Ancillary Services—by which ERCOT holds power capacity in reserve on standby to preserve grid reliability—are illegal under PURA. That absurd result would render meaningless the Legislature’s express recognition of the need for such Ancillary Services. See PURA §§ 39.159(b)(2), 39.159(b)(3)(requiring the PUCT to ensure that ERCOT, at least annually, determines the amount of Ancillary Services needed and that ERCOT procure Ancillary Services). Ancillary Services, including ECRS, do not contravene any provision in PURA—they are required by it. As in Luminant (and only if this Court has jurisdiction here, which it does not), “the judiciary’s role is purely textual.” Luminant, 691 S.W.3d at 464. Thus, even if PURA § 39.157 was implicated on these facts (and it is not), its provisions cannot be divorced from their statutory context. While one of PURA’s goals is to ensure a competitive electric market, as is reflected in PURA § 39.157, that goal must be balanced with PURA’s other critical objective: to ensure the reliability of the State’s electric 40 Anticompetitive withholding of production as contemplated by PURA § 39.157 includes “[f]or example, a market participant who has market power [and] withhold[s] production from more efficient units and offer[s] its least efficient unit at that unit’s marginal costs or higher, with confidence that the unit will be selected and set the price for all energy sold,” as “[s]uch withholding of production may bring in enormous profit to the market participant.” See PUCT Project No. 26201, Item No. 106, Order Adopting New § 25.503 as approved at the January 29, 2004 Open Meeting (Feb. 9, 2004), available here. - 29 - Appx. Page 332 of 740 grid. See Luminant, 691 S.W.3d at 461–64. As the Texas Supreme Court recognized just this term in a similar PUCT order challenge, 41 PURA expressly “acknowledges that the goal of prices set by competition may, in some circumstances, have to yield.” Id. at 463. “Deciding when those circumstances are present—and how to respond—is the Commission’s job, not the judiciary’s,” as it is the “Commission [that] has the expertise to manage the electric utility industry; the courts do not.” Id. at 463–64 (holding that the “court of appeals thus strayed from its lane by inquiring whether the [challenged PUCT] Orders could have used competitive rather than regulatory methods to any greater extent than they did”). Here, Aspire seeks to invalidate various PUCT orders and the entire ECRS program based on the claim that ECRS’s alleged costs outweigh its reliability benefits. See Sec. Am. Pet. ¶¶ 2, 28, 31, 52. Even accepting these allegations as true, whether ECRS correctly balances reliability benefits against its market impact is a question that the Legislature, as affirmed by the Texas Supreme Court, has committed exclusively to the PUCT. Luminant, 691 S.W.3d at 463. The wisdom of the ECRS program is not for Aspire or this Court to second guess—particularly not where the PUCT, ERCOT, the IMM, and other market participants are all actively working to finetune that program to address concerns that have been properly raised in the administrative process. E. ERCOT had the authority to develop ECRS New to its Second Amended Petition, Aspire asserts that ERCOT did not have the authority to develop the ECRS program, claiming that only the PUCT can create Ancillary Services. See Sec. Am. Pet. ¶¶ 39–41. From this premise, Aspire seeks a declaration that NPRR 863 and any subsequent 41 In Luminant, a market participant challenged two PUCT emergency orders issued during Winter Storm Uri, which temporarily set the price of electricity at its statutory cap to help prevent grid collapse. Luminant, 691 S.W.3d at 452. Luminant in essence made the same argument Aspire does here—that the market impact of these orders far outweighed their reliability benefits and were, thus, unlawful. See id. at 462. The Court “decline[d] Luminant’s invitation to second- guess the Orders’ necessity and whether it was the price hike they enacted or the Commission's earlier load-shed directives that truly saved the grid from collapse.” Id.; see also Appendix C. - 30 - Appx. Page 333 of 740 modifications to ECRS are invalid. Id. ¶ 58. Aspire’s latest theory is facially without merit and should be dismissed. Aspire misconstrues PURA § 35.004(e), which it relies on to claim that ERCOT lacks authority to develop new Ancillary Services. That provision, in its entirety, states: (e) In this section, “ancillary services” means services necessary to facilitate the transmission of electric energy including load following, standby power, backup power, reactive power, and any other services as the commission may determine by rule. PURA § 35.004(e)(emphasis added). On its face, this definition—applicable only to section 35.004—identifies certain types of Ancillary Services, with a final catchall for “any other services as the commission may determine by rule.” Ignoring the plain statutory text, Aspire reads the concluding phrase to mean that “ancillary services, like ECRS, must be created by [the] PUC[T], not ERCOT.” Sec. Am. Pet. ¶ 40. But that is not what the statute says. Read in its proper context, and based on the plain language used, the concluding phrase simply means that if the PUCT determines by rule that some other type of reliability service should be deemed an Ancillary Service for purposes of PURA § 35.004, then those services are included in this definition. Nothing in this statutory language prohibits ERCOT from developing new Ancillary Services, especially when the Legislature elsewhere requires ERCOT to develop Ancillary Services, as explained below. By its new argument, Aspire also overlooks the fact that ECRS is a form of “standby power”— a type of Ancillary Service prescribed in PURA § 35.004. This is significant because it completely dismantles Aspire’s other theory that ECRS violates PURA § 39.157(a) by “withholding power.” As explained above, see supra § V.D, Ancillary Services, by design and necessity, keep power on standby to enable ERCOT to balance the grid—its most fundamental reliability obligation. If keeping “standby power” for Ancillary Services was a violation of PURA constituting market power abuse—as Aspire argues—the Legislature would presumably not condone it as a type of Ancillary Service. - 31 - Appx. Page 334 of 740 Aspire’s attempt to minimize ERCOT’s role in developing Ancillary Services based on PURA § 35.004(h) 42 fares no better. That provision expressly authorizes ERCOT to modify the design of “ancillary services” as defined in PURA § 35.004(e). As noted, ECRS is a form of “standby power” already recognized by the statute as an Ancillary Service that ERCOT is free to modify. Aspire’s proffered interpretation is also rendered implausible by other, later-enacted PURA provisions. 43 For example, in 2023, the Legislature added PURA § 39.159(d), which provides, in relevant part: (d) The commission shall require the independent organization certified under Section 39.151 for the ERCOT power region to develop and implement an ancillary services program to procure dispatchable reliability reserve services on a day-ahead and real-time basis to account for market uncertainty. PURA § 39.159(d) (emphasis added). 44 If, as Aspire claims, the Legislature intended the 25-year-old concluding phrase in PURA § 35.004(e)’s definition to prohibit ERCOT from developing any new Ancillary Services, and to vest that authority only with the PUCT, it would not have mandated that ERCOT first develop an Ancillary Services program to procure dispatchable reliability reserve services. Aspire’s argument also ignores that the Legislature requires ERCOT to determine the characteristics of Ancillary Services needed to ensure reliability, PURA § 39.159(b)(2), and mandates that ERCOT procure those Ancillary Services, Id. at § 39.159(b)(3). If PURA § 35.004 meant what Aspire argues, the Legislature would have instead required the PUCT to determine and procure the Ancillary Services needed to stabilize the grid. It did not, and the Court cannot ignore this clear 42 Aspire mis-cites this section as 35.004(j), Sec. Am. Pet. ¶ 40, which does not exist. Based on the quoted language, Aspire meant to cite § 35.004(h). 43 Aspire incorrectly states that PURA § 35.004(e) was added in 2021. Sec. Am. Pet ¶ 40. That definition has existed in PURA § 35.004 since its initial passage in 1999, when Texas’s electricity market was deregulated. It was simply moved up in 2021. See S.B. 7, 76th Leg., R.S. (1999), available here. PURA §§ 35.004(g) and (h) were added in 2021, see S.B. 3, 87th Leg., R.S. (2021), but neither of those sections prohibit ERCOT from developing Ancillary Services, they just require the PUCT to monitor Ancillary Services in place, determine if any further services are warranted, and direct ERCOT to improve them when necessary. Regardless, the later statutory additions in 2023 would prevail in the unlikely event the Court agrees with Aspire’s interpretation and finds the statutes in conflict. 44 Added by H.B. 1500, 88th Leg., R.S. (2023), available here. - 32 - Appx. Page 335 of 740 expression of legislative intent. See San Jacinto River Auth. v. Medina, 627 S.W.3d 618, 628 (Tex. 2021) (“It is an elementary rule of construction that, when possible to do so, effect must be given to every sentence, clause, and word of a statute so that no part thereof be rendered superfluous.”) (cleaned up). Finally, Aspire’s argument that ERCOT is powerless to develop Ancillary Services ignores that the Legislature has expressly authorized the PUCT to delegate its rulemaking powers to ERCOT to develop and adopt market rules “relating to the reliability of the regional electrical network.” PURA § 39.151(d); CPS Energy, 671 S.W.3d at 616. That does not make the market rules ERCOT develops subject to the APA, as the Texas Supreme Court already held in RWE. 671 S.W.3d at 489–492. But it does mean that ERCOT can—and, in fact, by Legislative mandate must—develop the Ancillary Services needed to reliably operate the grid. PURA §§ 39.151(a)(2), (d); id. §§ 39.159(b), (d). VI. ERCOT’S PLEA IN ABATEMENT In the unlikely event the Court determines both that it has jurisdiction and that Aspire pleaded viable claims, this suit must nonetheless be dismissed or abated because Aspire failed to join all necessary and indispensable parties. The UDJA requires joinder of “all persons who have or claim any interest that would be affected by the declaration must be made parties.” Tex. Civ. Prac. & Rem. Code § 37.006(a). “When a party asserts Section 37.006(a) as a bar to any judgment favoring a party who has failed to join all necessary parties, Rule of Civil Procedure 39’s standards govern.” Amboree v. Bonton, 575 S.W.3d 38, 44 (Tex. App.—Houston [1st Dist.] 2019, no pet.). Under Rule 39, there are two types of parties: (1) those who are necessary for a just adjudication and that should be joined if feasible; and (2) those who are so vital to the disposition of the suit that their absence deprives the court of jurisdiction. See, e.g., Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162–63 (Tex. 2004). - 33 - Appx. Page 336 of 740 This case presents the latter circumstance, where the absence of affected market participants deprives the Court of jurisdiction and warrants dismissal of Aspire’s claims. At a minimum, this suit must be abated to allow joinder of the necessary affected market participants. A. The other ERCOT market participants are jurisdictionally indispensable. “Rule 39 mandates joinder of persons whose interests would be affected by the judgment . . . [and] determines whether a trial court has authority to proceed without joining a person whose presence in the litigation is made mandatory by the [UDJA].” Brooks, 141 S.W.3d at 162. Relevant here, Rule 39 directs that an absent party must be joined to the litigation if it (1) claims an interest relating to the subject of the action, and (2) is so situated that the disposition of the action in its absence may impair or impede its ability to protect that interest. Tex. R. Civ. P. 39(a)(2). Generally, the failure to join all necessary parties triggers an analysis of “whether the court ought to proceed” or “whether the trial court should have refused to enter a judgment” until the necessary parties are joined. Brooks, 141 S.W.3d at 162. However, where a trial court’s ruling would “clearly prejudice” the absent parties’ rights, or where “a judgment would adversely affect the interests of absent parties who had no opportunity to assert their rights in the trial court,” the failure to join those parties may constitute a jurisdictional defect. See Vondy v. Comm’rs Court of Uvalde Cnty., 620 S.W.2d 104, 106-07 (Tex. 1981); Sage St. Assocs. v. Fed. Ins. Co., 43 S.W.3d 100, 103 (Tex. App.— Houston [1st Dist.] 2001, pet. denied). To determine whether a particular party is “jurisdictionally indispensable,” courts “must examine the surrounding facts and circumstances of the case to determine if the interests of an absent party will be prejudiced and if an adequate judgment can be rendered for the parties before the court.” Sage St., 43 S.W.3d at 104. Courts must make this determination by “liberally construing the [UDJA] in light of its purpose—‘to settle and to afford relief from uncertainty and insecurity with respect to - 34 - Appx. Page 337 of 740 rights, status, and other legal relations.’” Longoria v. Exxon Mobil Corp., 255 S.W.3d 174, 180 (Tex. App.—San Antonio 2008, no pet.). Non-parties have been deemed “jurisdictionally indispensable,” for example, where a declaratory judgment in their absence would “clearly prejudice” the non-parties’ contractual rights or benefits. See Sage St., 43 S.W.3d at 100. In Sage Street, the parties sought a declaratory judgment that a contractual assignment between two non-parties was void, thereby also voiding a settlement agreement between the two parties in the lawsuit. Id. at 101–03. The parties argued that the non-parties were not indispensable because a finding that the assignment was void was “incidental” to the declaratory judgment, and did not prejudice the non-parties because the judgment “is not binding on them.” Id. at 104. The appellate court disagreed, finding that although the UDJA “expressly provides that it does not prejudice the rights of a person not a party to the proceeding, it is undeniable that the trial court’s ruling would prejudice [the non-parties].” Id. Thus, the non-parties were “jurisdictionally indispensable” and required to be joined before a judgement could be rendered declaring the assignment void. Id. Here, Aspire asks this Court to declare not only that the ECRS program is invalid—it also asks the Court to declare that ERCOT’s entire Protocol revision process is invalid, thereby calling into question the entire ERCOT market rulebook. The Protocols are thousands of pages, detailing the operation of the electric grid and the wholesale electric market. Those Protocols—developed over decades under the Protocol revision process that Aspire asks the Court to declare illegal—could all be deemed invalid if Aspire is granted the relief it seeks. See Sec. Am. Pet. at ¶ 57 (citing Tex. Gov’t Code § 2001.035). Texas would be left without a market and with no enforceable means to operate its intrastate grid. Such sweeping declaratory relief would substantially impact the interests of the hundreds of other market participants that participate in the ERCOT market and those that provide the ECRS - 35 - Appx. Page 338 of 740 Ancillary Service that Aspire seeks to prohibit. Market participants undoubtedly rely on established market rules when making important business and financial decisions—for example, when determining whether to build a new power plant, and when entering into bilateral agreements related the purchase and sale of energy and Ancillary Services. Like Aspire, market participants from every segment (e.g., generators, transmission and distribution providers, retail electric providers, and energy traders) commonly enter into such bilateral agreements with other market participants and consumers, and many (if not most or all) of these agreements are put at issue by Aspire’s claims. Billions of dollars are at stake for market participants that Aspire failed to join as parties. Because Aspire’s requested declaratory relief would “clearly prejudice” the pecuniary and other interests of the hundreds of other market participants, those market participants must be joined before a judgement could be rendered in this suit—or a temporary injunction considered. B. Joinder of the affected market participants is feasible. Joinder of all affected market participants is certainly feasible. ERCOT’s Standard Form Market Participant Agreement, which each market participant must execute, contains a forum and venue selection clause making all market participants subject to Texas law and mandatory venue for all claims in Travis County, Texas. See Protocols § 22 (ERCOT standard form agreement) at § 11(A). Thus, each affected Market Participant is “subject to service of process,” as required by Rule 39. See Tex. R. Civ. P. 39(a). When a party requests that the trial court join additional necessary parties whose interests would be determined in resolving the claims of the parties before the court, and the court determines that the non-parties fall within the purview of Rule 39 and are subject to service of process, the parties must be joined. See Tex. R. Civ. P. 39(a); Kodiak, 361 S.W.3d at 252; Longoria, 255 S.W.3d at 184. A trial court has no discretion to deny the request in a declaratory judgment action if the above are satisfied. Kodiak, 361 S.W.3d at 252. The number of necessary parties that must be joined has no - 36 - Appx. Page 339 of 740 bearing on this. See, e.g., Pierce v. Blalack, 535 S.W.3d 35, 39–44 (Tex. App.—Texarkana 2017, no pet.) (affirming dismissal with prejudice where at least 286 necessary parties were identified, trial court ordered plaintiff to join and serve all parties, and plaintiff served only 55 parties); Dahl v. Hartman, 14 S.W.3d 434, 435–37 (Tex. App.—Houston [14th Dist.] 2000, pet. denied) (affirming trial court’s dismissal with prejudice where plaintiff failed to serve and join 333 necessary parties). When necessary parties under Rule 39 are identified, the plaintiff faces two choices: either join and serve the necessary parties, or have its claims dismissed. The identity of all market participants is publicly available on ERCOT’s website. 45 Even if Aspire were to amend its petition again to remove its request to declare the Protocol revision process invalid, its request to declare the “ECRS Rules” invalid would still affect nearly all market participants, especially those participating in the ECRS program. ERCOT publishes Ancillary Service Obligation and Responsibility reports 180 days after each Operating Day that include the identity of the entities providing ECRS. 46 These market participants’ interests will be clearly prejudiced by the declaratory relief sought by Aspire. As explained above, the other ERCOT market participants are clearly necessary and indispensable under Rule 39, and each may be feasibly joined. Accordingly, ERCOT moves the Court to either dismiss Aspire’s claims out of hand if the Court finds these market participants are jurisdictionally indispensable; or, alternatively, to abate this lawsuit for 30 days and order Aspire to affect their joinder. If Aspire fails to join the necessary market participants within that timeframe, ERCOT requests that the Court dismiss Aspire’s claims. 45 List of Market Participants in the ERCOT Region (updated Sept. 26, 2024), available here. 46 AS Obligation and Responsibility (updated Sept. 26, 2024), available here. - 37 - Appx. Page 340 of 740 CONCLUSION For the reasons set forth herein, the Court should dismiss Aspire’s claims against ERCOT. In the first instance, the Court lacks subject matter jurisdiction over Aspire’s claims because Aspire’s claims do not fall within APA § 2001.0038’s limited immunity waiver, and because Aspire failed to exhaust its administrative remedies. Alternatively, the Court should dismiss Aspire’s claims against ERCOT pursuant to Rule 91a, as those claims have no basis in law. Alternatively, the Court should dismiss this lawsuit for failure to join the other necessary ERCOT market participants, or abate this lawsuit for 30 days and order Aspire to join these affected market participants. If Aspire fails or refuses to do so, the Court should dismiss Aspire’s claims with prejudice. ERCOT requests such other and further relief, at law or in equity, to which it may be entitled. Respectfully submitted, WINSTEAD PC 600 W. 5th Street Suite 900 Austin, Texas 78701 (512) 370-2800 telephone (512) 370-2850 fax By: /s/ Elliot Clark Elliot Clark SBN 24012428 eclark@winstead.com Elin Isenhower SBN 24104206 eisenhower@winstead.com ATTORNEYS FOR DEFENDANT ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. - 38 - Appx. Page 341 of 740 CERTIFICATE OF SERVICE By my signature below, I hereby certify that a true and correct copy of this document has been served on all counsel of record in accordance with the Texas Rules of Civil Procedure on October 1, 2024. /s/ Elliot Clark Elliot Clark - 39 - Appx. Page 342 of 740 CAUSE NO. D-1-GN-24-003384 ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT APPENDIX TO ERCOT’S AMENDED PLEA TO THE JURISDICTION TAB DESCRIPTION A PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484 (Tex. 2024) B CPS Energy v. ERCOT, 671 S.W.3d 605 (Tex. 2023) C PUCT v. Luminant Energy Co. LLC, 691 S.W.3d 448 (Tex. 2024) - 40 - Appx. Page 343 of 740 APPENDIX A Appx. Page 344 of 740       !"#$%&%'()(%*      )    !  =/ 1   0  * .  0    )  9  > . =     0     )  *     + ,/    !"##  "$  . 1/1 4 *    +?9  ! ""/ "%&'()**+) *= 2 / , 1.*/9 0( 7/    /9  - &-&$& (&(#&- () 0 =  !  9 2/; 8=    + '.  *+ ))-+ + "/ : 8/9 (.2.44 0 /; / !/:  ., 1/  / $ / 0111 2 .  "/    8 >    .   0  (3 #45)/0/   0  4 7   "/ 2 " $ "$6& 7&-&689+ )/0/    1 " .  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H6(     .   6  / """ 9' (    .  .      6    **$    '  *!)5    .  5  '   '  4     *!)5   ((  /!   !  .4 '  %& 2/!/#JLJ%$+ ,/2 / /1/ &% Footnotes 1 In our contemporaneously issued opinion in Public Utility Commission v. Luminant Energy Co., we hold that the PUC did not exceed its authority in issuing two emergency orders during Winter Storm Uri that operated to a similar end by temporarily setting the price of electricity at the regulatory ceiling. 691 S.W.3d 448, –––– (Tex. June 14, 2024) (No. 22-0231). 2 A more detailed explanation of the Texas electricity market appears in this Court's opinion in Luminant. See id. at ––––. We also recently engaged in a thorough discussion of ERCOT's history, and its role in the Texas electricity market, in CPS Energy v. ERCOT, 671 S.W.3d 605, 611–12 (Tex. 2023). 3 The others are “ensur[ing] access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms” and “ensur[ing] that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information.” Tex. Util. Code § 39.151(a)(1), (3). 4 As further amended in 2023, Section 39.151(g-6) currently provides: In this subsection, a reference to a protocol includes a rule. Protocols adopted by an independent organization and enforcement actions taken by the organization under delegated authority from the commission are subject to commission oversight and review and may not take effect before receiving commission approval. To maintain certification as an independent organization under this section, the organization's governing body must establish and implement a formal process for adopting new protocols or revisions to existing protocols. The process must require that new or revised protocols may not take effect until the commission approves a market impact statement describing the new or revised protocols. The commission may approve, reject, or remand with suggested modifications to the independent organization's governing body protocols adopted by the organization. Act of May 26, 2023, 88th Leg., R.S., ch. 464, § 4, 2023 Tex. Sess. Law Serv. (West) 1133 (codified at Tex. Util. Code § 39.151(g-6)). 5 In support of its first holding, the court relied on its own decision in Luminant, which we also review today. 669 S.W.3d at 576.    !""#"! $ %&'(  Appx. Page 350 of 740       !"#$%&%'()(%*      6 When RWE instituted this proceeding, Section 39.001(e) provided for review in the Third Court of Appeals. In 2023, the Legislature amended Section 39.001(e) to provide for review by the Fifteenth Court of Appeals going forward. Act of May 22, 2023, 88th Leg., R.S., ch. 459, § 1.13, 2023 Tex. Sess. Law Serv. (West) 1119. 7 We cite the current version of the protocols unless substantive differences require citing the version in effect when the relevant events occurred. ERCOT's current protocols and a library of past versions of the protocols, with summaries of revisions, are available on ERCOT's website. Protocols - Nodal, https://www.ercot.com/mktrules/nprotocols. 8 RWE, Comment Letter on Nodal Protocol Request 1081 (June 23, 2021), https://www.ercot.com/mktrules/issues/ NPRR1081#keydocs. 9 Available at https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-Report-with-Commission- Decisions_1-19-23.pdf). 10 See also Tex. Gov't Code § 2001.006 (describing when a rule “adopted” under Section 2001.006(b) may take effect); id. § 2001.021(a) (“An interested person by petition to a state agency may request the adoption of a rule.”); id. § 2001.023(a) (“A state agency shall give at least 30 days’ notice of its intention to adopt a rule before it adopts the rule.”); id. § 2001.030 (“On adoption of a rule, a state agency, if requested to do so by an interested person either before adoption or not later than the 30th day after the date of adoption, shall issue a concise statement of the principal reasons for and against its adoption.”). 11 As noted, PUC As PUC regulations regulations provide a process for for review of of ERCOT ERCOT protocols, 1 6 Tex. Admin. Code 16 Code §§ 22.251, 22.251, 25.362(c) 25.362(c) (5), which culminates in a suit for (5), for judicial judicial review in district court, Tex. Util. Util. Code Code § 15.001. RWE did not engage engage in that that process, choosing process, choosing instead to utilize the inapplicable procedure for for reviewing reviewing PUC PUC competition rules. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.    !""#"! $ %&'(  Appx. Page 351 of 740 APPENDIX B Appx. Page 352 of 740         !"#$%&'$'"(        -  " - $"  -- " ** #    6      - 6** # 7(& 89 2%'#         :  *  -   #  "    4           ! "   " #$# "  * " # *  " *    "    !%&#%'%( +,/ -  -#     *  #  "    -- "  #    +,/1 "  " "*" #  #*    * " *   ;%%        *  *   +,/ -   !"##$" *    5  "     # !#   *  +,/ -  &'&'()'&'!   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Page 369 of 740         !"#$%&'$'"(       "    " *  -     * " - #C  B$"    *   *-     F -/5 ,    &$         * " " #C "    "   -           " "     B"     -       "     *" "    -     C :" - 4 /0B  " *   ""    6     $*    /# **     "    C  >: :C  B           1B * " C " *        +,/  *-        B    " C :,6             "  "     $ G  >:,6    >: B" *             1 "  " # BL-M   "      #    I 1- "# # *   "  "    - G   *        I 1""          I  E   *-   -  L   M      " #C :" -  4 /# B    E   *-   "   " *     C :   I B F** *  "   F   "  "  "    " C     F "   " -    I      " --"             # >:1          "    +,/1 *  " *         "       *  **    -     #     * *  #     -     3    G    $*       +,/1 * " E      *      *  -      *  -   **     >:     >: F  ""          "B** # ** #   - C +,/1 N  B"   "  -  C   1    * *      :" -  4 / -   +,/ *    :  $"         +,/# "    :1            B "L M -- "  A >: *  > "   -  O"        K C     *   " *   /-- " - > ":     "6" #   "  E         "     C :""     * *  - -  $"   &(       #    6   B>:1    -+,/1- "# # -- "  ""   - **    * *   *     #C            >:   +,/  " "   " " +,/#   *   " *  # B  3        "  ""    -  +,/1 "    5"          " # "     " * "   "   *    -        ** *   * "C :1"   4  #  -"    #  >:1         +,/1 "     B--"       C     FB" *  C -+,/1 "      >:$" -- "  "     * "  :-   +,/  E  *-     >:" - 4 /# >:       4#         I  *      *-     I  B F ** *   " C  $"   * " **           *  - B" *      C : (      *                   B-- "  L M "   C +,/1 * "  -  -     $* ""    -  " *   - "  "    B --"      K "  :     B *    *    -     *"  " C :   F   " "   "    -- ** "      * " "   "   " +,/1   - * "  " :,6 B    "    -             -    L M >: "   +,/  "     -    1 "   "   #         "    "   F  * " #C  >: B "  F "   "-         *        C  B -     "3  -    *  "     +,/1 " # "   &    1 "   "   #  *             ! " #$%&  Appx. Page 372 of 740         !"#$%&'$'"(           "       F  "  -       " " F "    ###-5 #!! 2 3  4    1   6 #" "        " %'%'& (%!"  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(3 $3& *& - ') 0 & 0  & 1       #'(%    0 &    ( &          3  8:'A99&8: '  99)   4   9) & 8& >  ( &   *        4 * &9) 1  ;) @  ) = &   !          &      *  ; )0 & 59       6) !&     #%& 7=&8&81= &        )*   *   &     &   ,IS       K        )        '   !" 7 )     '  .H)II/  4PPPP   &&' ' '  .H)II/  3          &      &    )) % (g-7) The presiding officer of the commission shall designate commissioners to serve terms on the independent organization's governing body under Subsection (g-1)(1)(B) in the order in which the commissioners were first appointed to the commission. A commissioner may not serve an additional term until each commissioner has served a term. (g-7) To maintain certification as an independent organization under this section, the organization must: (1) identify all employee positions in the organization that are critical to the security of the electric grid; and (2) before hiring a person for a position described by Subdivision (1), obtain from the Department of Public Safety or a private vendor criminal history record information relating to the prospective employee and any other background information considered necessary by the independent organization or required by the commission. (h) The ERCOT independent system operator may meet the criteria relating to the other functions of an independent organization provided by Subsection (a) by adopting procedures and acquiring resources needed to carry out those functions, consistent with any rules or orders of the commission. (i) The commission may delegate authority to the existing independent system operator in ERCOT to enforce operating standards within the ERCOT regional electrical network and to establish and oversee transaction settlement procedures. The commission may establish the terms and conditions for the ERCOT independent system operator's authority to oversee utility dispatch functions after the introduction of customer choice. (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357. (j-1) Notwithstanding Subsection (j) of this section, Section 39.653(c), or any other law, the independent system operator in the ERCOT power region may not reduce payments to or uplift short-paid amounts to a municipally owned utility that becomes subject to the jurisdiction of that independent system operator on or after May 29, 2021, and before December 30, 2021, related to a default on a payment obligation by a market participant that occurred before May 29, 2021. (k) To the extent the commission has authority over an independent organization outside of ERCOT, the commission may delegate authority to the independent organization consistent with Subsection (i). (l) No operational criteria, protocols, or other requirement established by an independent organization, including the ERCOT independent system operator, may adversely affect or impede any manufacturing or other internal process operation associated with an industrial generation facility, except to the minimum extent necessary to assure reliability of the transmission network. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 449 of 740 § 39.151. Essential Organizations, TX UTIL § 39.151 (m) A power region outside of ERCOT shall be deemed to have met the requirement to establish an independent organization to perform the transmission functions specified in Subsection (a) if the Federal Energy Regulatory Commission has approved a regional transmission organization for the region and found that the regional transmission organization meets the requirements of Subsection (a). (n) An independent organization certified by the commission under this section is subject to review under Chapter 325, Government Code (Texas Sunset Act), but is not abolished under that chapter.The independent organization shall be reviewed during the periods in which the Public Utility Commission of Texas is reviewed. (n-1) Expired. (o) An independent organization certified by the commission under this section shall: (1) conduct internal cybersecurity risk assessment, vulnerability testing, and employee training to the extent the independent organization is not otherwise required to do so under applicable state and federal cybersecurity and information security laws; and (2) submit a report annually to the commission on the independent organization's compliance with applicable cybersecurity and information security laws. (p) Information submitted in a report under Subsection (o) is confidential and not subject to disclosure under Chapter 552, Government Code. Credits Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999. Amended by Acts 2005, 79th Leg., ch. 797, § 9, eff. Sept. 1, 2005; Acts 2011, 82nd Leg., ch. 1232 (S.B. 652), § 1.09, eff. June 17, 2011; Acts 2013, 83rd Leg., ch. 170 (H.B. 1600), § 1.08, eff. Sept. 1, 2013; Acts 2019, 86th Leg., ch. 509 (S.B. 64), § 23, eff. Sept. 1, 2019; Acts 2021, 87th Leg., ch. 425 (S.B. 2), § 3, eff. June 8, 2021; Acts 2021, 87th Leg., ch. 908 (H.B. 4492), § 3, eff. June 16, 2021; Acts 2023, 88th Leg., ch. 410 (H.B. 1500), § 15, eff. Sept. 1, 2023; Acts 2023, 88th Leg., ch. 464 (S.B. 2013), § 4, eff. June 9, 2023. Notes of Decisions (25) V. T. C. A., Utilities Code § 39.151, TX UTIL § 39.151 Current through the end of the 2023 Regular, Second, Third and Fourth Called Sessions of the 88th Legislature, and the Nov. 7, 2023 general election. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 450 of 740 Attachment 3 16 Tex. Admin. Code § 22.251 Appx. Page 451 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 Texas Administrative Code Title 16. Economic Regulation Part 2. Public Utility Commission of Texas Chapter 22. Procedural Rules Subchapter M. Procedures and Filing Requirements in Particular Commission Proceedings 16 TAC § 22.251 § 22.251. Review of Electric Reliability Council of Texas (ERCOT) Conduct Currentness (a) Purpose. This section prescribes the procedure by which an entity, including the commission staff and the Office of Public Utility Counsel, may appeal a decision made by ERCOT or any successor in interest to ERCOT. (b) Scope of complaints. Any affected entity may complain to the commission in writing, setting forth any conduct that is in violation or claimed violation of any law that the commission has jurisdiction to administer, of any order or rule of the commission, or of any protocol or procedure adopted by ERCOT pursuant to any law that the commission has jurisdiction to administer. For the purpose of this section, the term “conduct” includes a decision or an act done or omitted to be done. The scope of permitted complaints includes ERCOT's performance as an independent organization under the PURA including, but not limited to, ERCOT's promulgation and enforcement of procedures relating to reliability, transmission access, customer registration, and accounting for the production and delivery of electricity among generators and other market participants. (c) Requirement of compliance with ERCOT Protocols. An entity must use Section 20 of the ERCOT Protocols (Alternative Dispute Resolution Procedures, or ADR), or Section 21 of the Protocols (Process for Protocol Revision), or other Applicable ERCOT Procedures, before presenting a complaint to the commission. For the purpose of this section, the term “Applicable ERCOT Procedures” refers to Sections 20 and 21 of the ERCOT Protocols and other applicable sections of the ERCOT protocols that are available to challenge or modify ERCOT conduct, including participation in the protocol revision process. If a complainant fails to use the Applicable ERCOT Procedures, the presiding official may dismiss the complaint or abate it to give the complainant an opportunity to use the Applicable ERCOT Procedures. (1) A complainant may present a formal complaint to the commission, without first using the Applicable ERCOT Procedures, if: (A) the complainant is the commission staff or the Office of Public Utility Counsel; (B) the complainant is not required to comply with the Applicable ERCOT Procedures; or (C) the complainant seeks emergency relief necessary to resolve health or safety issues or where compliance with the Applicable ERCOT Procedures would inhibit the ability of the affected entity to provide continuous and adequate service. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 1 Appx. Page 452 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 (2) For any complaint that is not addressed by paragraph (1) of this subsection, the complainant may submit to the commission a written request for waiver of the requirement for using the Applicable ERCOT Procedures. The complainant shall clearly state the reasons why the Applicable ERCOT Procedures are not appropriate. The commission may grant the request for good cause. (3) For complaints for which ADR proceedings have not been conducted at ERCOT, the presiding officer may require informal dispute resolution. (d) Formal complaint. A formal complaint shall be filed within 35 days of the ERCOT conduct complained of, except as otherwise provided in this subsection. When an ERCOT ADR procedure has been timely commenced, a complaint concerning the conduct or decision that is the subject of the ADR procedure shall be filed no later than 35 days after the completion of the ERCOT ADR procedure. The presiding officer may extend the deadline, upon a showing of good cause, including the parties' agreement to extend the deadline to accommodate ongoing efforts to resolve the matter informally, and the complainant's failure to timely discover through reasonable efforts the injury giving rise to the complaint. (1) The complaint shall include the following information: (A) a complete list of all complainants and the entities against whom the complainant seeks relief and the addresses, and facsimile transmission numbers and e-mail addresses, if available, of the parties' counsel or other representatives; (B) a statement of the case that ordinarily should not exceed two pages and should not discuss the facts. The statement must contain the following: (i) a concise description of any underlying proceeding or any prior or pending related proceedings; (ii) the identity of all entities or classes of entities who would be directly affected by the commission's decision, to the extent such entities or classes of entities can reasonably be identified; (iii) a concise description of the conduct from which the complainant seeks relief; (iv) a statement of the ERCOT procedures, protocols, by-laws, articles of incorporation, or law applicable to resolution of the dispute and whether the complainant has used the Applicable ERCOT Procedures for challenging or modifying the complained of ERCOT conduct or decision (as described in subsection (c) of this section) and, if not, the provision of subsection (c) of this section upon which the complainant relies to excuse its failure to use the Applicable ERCOT Procedures; (v) a statement of whether the complainant seeks a suspension of the conduct or implementation of the decision complained of; and (vi) a statement without argument of the basis of the commission's jurisdiction. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 2 Appx. Page 453 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 (C) a detailed and specific statement of all issues or points presented for commission review; (D) a concise statement without argument of the pertinent facts. Each fact shall be supported by references to the record, if any; (E) a clear and concise argument for the contentions made, with appropriate citation to authorities and to the record, if any; (F) a statement of all questions of fact, if any, that the complainant contends require an evidentiary hearing; (G) a short conclusion that states the nature of the relief sought; and (H) a record consisting of a certified or sworn copy of any document constituting or evidencing the matter complained of. The record may also contain any other item pertinent to the issues or points presented for review, including affidavits or other evidence on which the complainant relies. (2) If the complainant seeks to suspend the conduct or the implementation of the decision complained of while the complaint is pending and all entities against whom the complainant seeks relief do not agree to the suspension, the complaint shall include a statement of the harm that is likely to result to the complainant if enforcement is not suspended. Harm may include deprivation of an entity's ability to obtain meaningful or timely relief if a suspension is not entered. A request for suspension of the conduct or enforcement of a decision shall be reviewed in accordance with subsection (i) of this section. (3) All factual statements in the complaint shall be verified by affidavit made on personal knowledge by an affiant who is competent to testify to the matters stated. (4) A complainant shall file the required number of copies of the formal complaint, pursuant to § 22.71 of this title (relating to Filing of Pleadings, Documents, and Other Materials). A complainant shall serve copies of the complaint and other documents, in accordance with § 22.74 of this title (relating to Service of Pleadings and Documents), and in particular shall serve a copy of the complaint on ERCOT's General Counsel, every other entity from whom relief is sought, the Office of Public Utility Counsel, and any other party. (e) Notice. Within 14 days of receipt of the complaint, ERCOT shall provide notice of the complaint by email to all qualified scheduling entities and, at ERCOT's discretion, all relevant ERCOT committees and subcommittees. Notice shall consist of an attached electronic copy of the complaint, including the docket number, but may exclude the record required by subsection (d)(1)(H) of this section. (f) Response to complaint. A response to a complaint shall be due within 28 days after receipt of the complaint and shall conform to the requirements for the complaint set forth in subsection (d) of this section except that: (1) the list of parties and counsel is not required unless necessary to supplement or correct the list contained in the complaint; © 2024 Thomson Reuters. No claim to original U.S. Government Works. 3 Appx. Page 454 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 (2) the response need not include a statement of the case, a statement of the issues or points presented for commission review, or a statement of the facts, unless the respondent contests that portion of the complaint; (3) a statement of jurisdiction should be omitted unless the complaint fails to assert valid grounds for jurisdiction, in which case the reasons why the commission lacks jurisdiction shall be concisely stated; (4) the argument shall be confined to the issues or points raised in the complaint; (5) the record need not include any item already contained in a record filed by another party; and (6) if the complainant seeks a suspension of the conduct or implementation of the decision complained of, the response shall state whether the respondent opposes the suspension and, if so, the basis for the opposition, specifically stating the harm likely to result if a suspension is ordered. (g) Comments by commission staff and motions to intervene. Commission staff representing the public interest shall file comments within 45 days after the date on which the complaint was filed. In addition, any party desiring to intervene pursuant to § 22.103 of this title (relating to Standing to Intervene) shall file a motion to intervene within 45 days after the date on which the complaint was filed. A motion to intervene shall be accompanied by a response to the complaint. (h) Reply. The complainant may file a reply addressing any matter in a party's response or commission staff's comments. A reply, if any, must be filed within 55 days after the date on which the complaint was filed. However, the commission may consider and decide the matter before a reply is filed. (i) Suspension of enforcement. The ERCOT conduct complained of shall remain in effect until and unless the presiding officer or the commission issues an order suspending the conduct or decision. If the complainant seeks to suspend the conduct or implementation of the decision complained of while the complaint is pending and all entities against whom the complainant seeks relief do not agree to the suspension, the complainant must demonstrate that there is good cause for suspension. The good cause determination required by this subsection shall be based on an assessment of the harm that is likely to result to the complainant if a suspension is not ordered, the harm that is likely to result to others if a suspension is ordered, the likelihood of the complainant's success on the merits of the complaint, and any other relevant factors as determined by the commission or the presiding officer. (1) The presiding officer may issue an order, for good cause, on such terms as may be reasonable to preserve the rights and protect the interests of the parties during the processing of the complaint, including requiring the complainant to provide reasonable security, assurances, or to take certain actions, as a condition for granting the requested suspension. (2) A party may appeal a decision of a presiding officer granting or denying a request for a suspension, pursuant to § 22.123 of this title (relating to Appeal of an Interim Order and Motions for Reconsideration of Interim Orders Issued by the Commission). © 2024 Thomson Reuters. No claim to original U.S. Government Works. 4 Appx. Page 455 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 (j) Oral argument. If the facts are such that the commission may decide the matter without an evidentiary hearing on the merits, a party desiring oral argument shall comply with the procedures set forth in § 22.262(d) of this title (relating to Commission Action After a Proposal for Decision). In its discretion, the commission may decide a case without oral argument if the argument would not significantly aid the commission in determining the legal and factual issues presented in the complaint. (k) Extension or shortening of time limits. The time limits established by this section are intended to facilitate the expeditious resolution of complaints brought pursuant to this section. (1) The presiding officer may grant a request to extend or shorten the time periods established by this rule for good cause shown. Any request or motion to extend or shorten the schedule must be filed prior to the date on which any affected filing would otherwise be due. A request to modify the schedule shall include a representation of whether all other parties agree with the request, and a proposed schedule. (2) For cases to be determined after the making of factual determinations or through commission ADR as provided for in subsection (n) of this section, the presiding officer shall issue a procedural schedule. (l) Standard for review. If the factual determinations supporting the conduct complained of have not been made in a manner that meets the procedural standards specified in this subsection, or if factual determinations necessary to the resolution of the matter have not been made, the commission will resolve any factual issues on a de novo basis. If the factual determinations supporting the conduct complained have been made in a manner that meets the procedural standards specified in this subsection, the commission will reverse a factual finding only if it is not supported by substantial evidence or is arbitrary and capricious. The procedural standards in this subsection require that facts be determined: (1) In a proceeding to which the parties have voluntarily agreed to participate; and (2) By an impartial third party under circumstances that are consistent with the guarantees of due process inherent in the procedures described in the Texas Government Code Chapter 2001 (Administrative Procedure Act). (m) Referral to the State Office of Administrative Hearings. If resolution of a complaint does not require determination of any factual issues, the commission may decide the issues raised by the complaint on the basis of the complaint and the comments and responses. If factual determinations must be made to resolve a complaint brought under this section, and the parties do not agree to the making of all such determinations pursuant to a procedure described in subsection (n) of this section, the matter may be referred to the State Office of Administrative Hearings for the making of all necessary factual determinations and the preparation of a proposal for decision, including findings of fact and conclusions of law, unless the commission or a commissioner serves as the finder of facts. (n) Availability of alternative dispute resolution. Pursuant to Texas Government Code Chapter 2009 (Governmental Dispute Resolution Act), the commission shall make available to the parties alternative dispute resolution procedures described by Civil Practices and Remedies Code Chapter 154, as well as combinations of those procedures. The use of these procedures before the commission for complaints brought under this section shall be by agreement of the parties only. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 5 Appx. Page 456 of 740 § 22.251. Review of Electric Reliability Council of Texas..., 16 TX ADC § 22.251 (o) Granting of relief. Where the commission finds merit in a complaint and that corrective action is required by ERCOT, the commission shall issue an order granting the relief the commission deems appropriate, including, but not limited to: (1) Entering an order suspending the conduct or implementation of the decision complained of; (2) Ordering that appropriate protocol revisions be developed; (3) Providing guidance to ERCOT for further action, including guidance on the development and implementation of protocol revisions; and (4) Ordering ERCOT to promptly develop protocols revisions for commission approval. (p) Notice of proceedings affecting ERCOT. Within seven days of ERCOT receiving a pleading instituting a lawsuit against it concerning ERCOT's conduct as described in subsection (b) of this section, ERCOT shall notify the commission of the lawsuit by filing with the commission, in the commission project number designated by the commission for such filings, a copy of the pleading instituting the lawsuit. In addition, within seven days of receiving notice of a proceeding at the Federal Energy Regulatory Commission in which relief is sought against ERCOT, ERCOT shall notify the commission by filing with the commission, in the commission project number designated by the commission for such filings, a copy of the notice received by ERCOT. Credits Source: The provisions of this § 22.251 adopted to be effective March 30, 2003, 28 TexReg 2489. Current through 49 Tex.Reg. No. 6852, dated August 30, 2024, as effective on or before September 6, 2024. Some sections may be more current. See credits for details. 16 TAC § 22.251, 16 TX ADC § 22.251 End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works. © 2024 Thomson Reuters. No claim to original U.S. Government Works. 6 Appx. Page 457 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92829938 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ AMENDED PLEA TO THE JURISDICTION Status as of 10/7/2024 8:28 AM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/4/2024 5:15:19 PM SENT Elin Isenhower eisenhower@winstead.com 10/4/2024 5:15:19 PM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/4/2024 5:15:19 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/4/2024 5:15:19 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/4/2024 5:15:19 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/4/2024 5:15:19 PM SENT Ken Carroll kcarroll@ccsb.com 10/4/2024 5:15:19 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 10/4/2024 5:15:19 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 10/4/2024 5:15:19 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/4/2024 5:15:19 PM SENT John RHulme John.Hulme@oag.texas.gov 10/4/2024 5:15:19 PM SENT Laura Courtney laura.courtney@oag.texas.gov 10/4/2024 5:15:19 PM SENT Case Contacts Appx. Page 458 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. David Laurent on behalf of John Hulme Bar No. 10258400 david.laurent@oag.texas.gov Envelope ID: 92829938 Filing Code Description: RESPONSE Filing Description: DEFENDANTS PUBLIC UTILITY COMMISSION OF TEXAS AND PUBLIC UTILITY COMMISSION OF TEXAS OFFICIALS’ AMENDED PLEA TO THE JURISDICTION Status as of 10/7/2024 8:28 AM CST Case Contacts Name BarNumber Email TimestampSubmitted Status Lizzette Velazquez lvelazquez@ccsb.com 10/4/2024 5:15:19 PM SENT Judy Garrison jgarrison@ccsb.com 10/4/2024 5:15:19 PM SENT Becky Dunn bdunn@ccsb.com 10/4/2024 5:15:19 PM SENT Carolyn Taylor ctaylor@ccsb.com 10/4/2024 5:15:19 PM SENT Appx. Page 459 of 740 10/9/2024 8:02 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Poodiack ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, and COURTNEY § HJALTMAN, § § 345th JUDICIAL DISTRICT Defendants. § PLAINTIFF’S CONSOLIDATED RESPONSE TO DEFENDANTS’ AMENDED PLEAS TO THE JURISDICTION AND ERCOT’s RULE 91a MOTION TO DISMISS AND REQUEST FOR ABATEMENT Chrysta L. Castañeda Monica Latin Texas Bar No. 15325625 Texas Bar No. 00787881 chrysta@castaneda-firm.com MLatin@ccsb.com Nicole Michael Brent M. Rubin Texas Bar No. 24067767 Texas Bar No. 24086834 nicole@castaneda-firm.com BRubin@ccsb.com THE CASTAÑEDA FIRM Ken Carroll 325 N. St. Paul, Suite 2030 Texas Bar No. 03888500 Dallas, Texas 75201 KCarroll@ccsb.com Phone: (214) 282-8579 CARRINGTON, COLEMAN, Fax: (214) 602-9187 SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: 214-855-3000 Fax: 214-580-2641 Attorneys for Plaintiff Appx. Page 460 of 740 CONTENTS INTRODUCTION .......................................................................................................................... 4 FACTUAL BACKGROUND ......................................................................................................... 7 A. About Aspire Power Ventures ..................................................................................... 7 B. PUC and ERCOT rulemaking ..................................................................................... 8 C. ERCOT Contingency Reserve Service (ECRS) .......................................................... 9 D. The PUC did not authorize ECRS as a new ancillary service prior to ERCOT’s ECRS rulemaking ...................................................................................................... 11 E. ECRS constitutes withholding of electricity, contrary to PURA .............................. 11 F. The ECRS rulemaking failed to meet the requirements of the APA. ........................ 12 ARGUMENT ................................................................................................................................ 14 I. Defendants’ Amended Pleas to the Jurisdiction Should Be Denied ............................. 14 A. The standard for deciding pleas to the jurisdiction ................................................... 14 B. Government Code § 2001.038 waives sovereign or governmental immunity for Aspire’s claims in this case ....................................................................................... 15 1. Challenges to PUC Rules fall within § 2001.038 ................................................. 16 2. The PUC delegated its authority to formulate and adopt rules like the ECRS protocols to ERCOT ............................................................................................. 17 3. When ERCOT adopted NPRRs under rulemaking authority delegated by the PUC, it stood in the shoes of the PUC and was subject to the same requirements and limitations as the PUC, including the APA generally and § 2001.038 specifically ............................................................................................................ 19 4. PURA signals that the APA applies to ERCOT ................................................... 21 5. RWE does not undermine Aspire’s reliance on § 2001.038 as a waiver of sovereign immunity with respect to its challenge to the ECRS Rules .................. 22 6. PURA’s directive that ERCOT be required to establish a “formal process” for its PUC-delegated rulemaking authority does not supplant the APA........................ 25 C. Aspire was not required to “exhaust administrative remedies” before pursuing its challenge in this Court .............................................................................................. 27 D. PURA § 15.001 does not exempt ERCOT protocols from the APA. ....................... 28 E. The Court is vested with jurisdiction over Plaintiff’s complaints, even those stemming from 2019 actions ..................................................................................... 29 F. There is no sovereign immunity for ultra vires acts. ................................................ 30 II. ERCOT’s Rule 91a Motion to Dismiss Should Be Denied .......................................... 33 A. A Rule 91a Motion to Dismiss is decided on the pleadings alone............................ 33 B. Aspire incorporates by reference its Response to Defendants’ Amended Pleas to the Jurisdiction ................................................................................................................ 34 PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 2 Appx. Page 461 of 740 C. Aspire’s claims are not barred by the filed-rate doctrine .......................................... 34 D. Aspire does not allege a “private cause of action” for PURA § 39.157 violations .. 36 III. ERCOT’s Plea in Abatement Should Be Denied, Because There Is No Requirement That All Market Participants Be Joined in Aspire’s Challenge in this Court ........... 38 A. ERCOT fails to prove other parties are indispensable under TRCP 39 .................... 38 B. An APA challenge requires only a complaining party and the state agency ............ 40 PRAYER FOR RELIEF ............................................................................................................... 41 PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 3 Appx. Page 462 of 740 Plaintiff Aspire Power Ventures, LP (“Aspire”) opposes the Amended Pleas to the Jurisdiction asserted by Defendants Public Utility of Commission of Texas (“PUC”), Electric Reliability Council of Texas (“ERCOT”), Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman (collectively, “Commissioners” and, with the PUC, the “PUC Parties”), as well as ERCOT’s alternative Rule 91a Motion to Dismiss and Plea in Abatement.1 ERCOT and the PUC Parties base their pleas to the jurisdiction on sovereign or governmental immunity. But § 2001.038 of the Texas Government Code expressly waives sovereign immunity for a declaratory judgment action, like that here, challenging the validity of rules and the process of their adoption. Further, the bar of sovereign immunity simply does not apply to challenges to ultra vires acts, such as those mounted here by Aspire. See, e.g., City of El Paso v. Heinrich, 284 S.W. 3d 366, 368-69 (Tex. 2009); Texas Natural Res. Conservation Comm’n v. IT- Davy, 74 S.W. 3d 849, 855 (Tex. 2002). Defendants’ Amended Pleas to the Jurisdiction therefore must be denied. And ERCOT’s alternative Rule 91a Motion to Dismiss and Plea in Abatement fare no better. They, too, must be denied. INTRODUCTION The ERCOT Contingency Reserve Service (“ECRS”) artificially restrains the supply of electricity available to Texans on the ERCOT grid. Under ECRS, 1 This Response addresses Defendants Public Utility Commission of Texas and Public Utility Commission of Texas Officials’ Amended Plea to the Jurisdiction filed 10/4/2024, and ERCOT’S Amended Plea to the Jurisdiction and Alternatively, Motion to Dismiss under Rule 91(a) and Alternatively, Plea in Abatement filed 10/1/2024. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 4 Appx. Page 463 of 740 companies that generate electricity are paid to withhold some of their existing generating capacity from the grid—to hold it in “reserve”—even when electricity demand is at a peak, such as in hot summer months. See 2d Am. Pet. ¶¶ 2, 30. Texas electricity consumers have paid inflated rates because of ECRS. According to ERCOT’s Independent Market Monitor (“IMM”), ECRS inflated the cost of wholesale electricity in Texas by about $12 billion for the period June through November 2023 alone. Id. ¶¶ 32, 50-55. ECRS is not only ineffectual, it is illegal and therefore invalid. First, ECRS violates the Public Utility Regulatory Act (“PURA”), which (i) prohibits withholding supply from the market, and (ii) grants only to PUC and not to ERCOT the authority to establish new “ancillary services” like ECRS. See Tex. Util. Code § 39.157(a) (PUC charged with preventing market power abuses and defining withholding of production as a market power abuse); 16 Tex. Admin. Code §§ 25.501(j), 25.503(a)(6), (d) (same); Tex. Util. Code § 35.004(e) & (h) (restricting to PUC itself the authority to create new ancillary services); 2d Am. Pet. ¶¶ 39-41, 59. Second—and centrally relevant to the threshold jurisdictional issues to be determined by the Court—the PUC and ERCOT promulgated and implemented ECRS without even attempting to comply with the mandatory requirements of the Administrative Procedure Act (“APA”), Tex. Gov’t Code § 2001.001 et seq., which were applicable to that process. See 2d Am. Pet. ¶¶ 42-49, 57. The APA ensures that the public has an opportunity to participate in agency rulemaking and that agencies do not exceed their authority when making rules. But PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 5 Appx. Page 464 of 740 the process the PUC and ERCOT used to create ECRS complied with none of the APA’s safeguards—e.g., no equal opportunity for general public participation, inadequate notice, no published response to comments or explanation of the impact of the rules, and no publication in the Texas Register. The Legislature allowed the PUC to delegate certain of its rulemaking responsibilities to ERCOT. Tex. Util. Code § 39.151(d). But when it did so, the Legislature did not dispense with the APA’s mandatory requirements—applicable to the PUC and therefore necessarily to its delegee, ERCOT, as well. Aspire alleges that ERCOT’s rulemaking processes do not come close to meeting the APA’s rulemaking requirements; nor does the PUC’s condensed process for approving ERCOT-adopted rules. See 2d Am. Pet. ¶¶ 42-49. In fact, the entire procedure— which must be judged as a single, integrated process—deliberately and illegally attempts to evade the APA. By fracturing the process of rulemaking—through delegation to ERCOT of the formulation of rules or “protocols” while reserving to itself the final say-so or “approval” over those rules—PUC attempts to sidestep the requirements of the APA. Relying extensively on the Supreme Court’s recent decision in Pub. Util. Comm’n of Tex. v. RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024), ERCOT and the PUC Parties argue that neither ERCOT’s formulation of the rules nor PUC’s “approval” of those rules, viewed in isolation, is subject to the APA or to the waiver of sovereign immunity in § 2001.038. But that is not what RWE says, and it is not and cannot be the law. The PUC and ERCOT cannot evade the APA PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 6 Appx. Page 465 of 740 and § 2001.038 by simply divvying up the tasks that, taken together, constitute the adoption of a “rule.” Viewed as a whole, as it must be, the PUC/ERCOT combined process for formulating and adopting the ECRS rules undeniably was governed by and failed to comply with the APA. And the resulting rules are subject to challenge, as here, under § 2001.038, because they are invalid.2 Finally, the Court should deny ERCOT’s Rule 91a Motion to Dismiss and Plea in Abatement. The 91a motion fails because it misconstrues Aspire’s pleadings and the statutes on which Aspire’s claims are based and because it goes beyond the pleadings to attack Aspire’s claims. Further, the 91a motion asks the Court to misapply the filed-rate doctrine because Aspire is not challenging agency-approved rates. The Plea in Abatement fails because ERCOT has not shown that any non- party actually claims an interest in the subject matter of the litigation, which Texas Rule of Civil Procedure 39(a)(2) requires. FACTUAL BACKGROUND A. About Aspire Power Ventures Aspire is a Market Participant on the ERCOT grid. Specifically, it is a Qualified Scheduling Entity (“QSE”) that participates in several markets administered by ERCOT. Aspire buys and sells wholesale electricity in ERCOT’s 2 A rule is invalid when an agency promulgates it without complying with the proper APA rulemaking procedures. El Paso Hosp. Dist. v. Texas Health & Human Servs. Comm’n, 247 S.W.3d 709, 715 (Tex. 2008) (citing Tex. Gov’t Code § 2001.035(a)). “Under these procedures the agency must provide notice, publication, and invite public comment, among other things.” Rodriguez v. Serv. Lloyds Ins. Co., 997 S.W.2d 248, 255 (Tex. 1999) (citing Tex. Gov't Code §§ 2001.023-.030). PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 7 Appx. Page 466 of 740 real-time electricity market, serving as a conduit between companies that generate electricity and companies that sell electricity on a retail basis. 2d Am. Pet. ¶¶ 25-27. QSEs like Aspire bear the risk of price fluctuations in the real-time electricity market, because they must contractually commit in advance to buy and sell electricity at specific prices before Security Constrained Economic Dispatch (“SCED”)3 creates the actual wholesale market prices. Id. ¶ 27. As a result, artificial fluctuations in prices—fluctuations that don’t reflect normal drivers of the market like changes in weather, demand, and generation—cause prices to deviate from expectations. Id. Because they are unexpected, these artificial fluctuations not only represent an additional risk to QSEs like Aspire but also can result in financial losses. For example, when Aspire sells to a retail provider, it enters into an agreement to sell the retailer electricity at a fixed price and then bears the risk that the wholesale price that Aspire buys at will be higher than the contract price with the retail provider, resulting in a loss. Id. B. PUC and ERCOT rulemaking Texas’s electricity market is governed in relevant part by Nodal Protocol Revision Requests (“NPRRs”) promulgated by ERCOT under rulemaking authority delegated to it by the PUC. See Tex. Util. Code § 39.151(d). Since June 2021, ERCOT’s protocols must be approved by the PUC. Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15. Before PURA 3 SCED is the primary tool ERCOT uses to ensure that demand and supply are in constant balance— the foundation of the wholesale electricity market. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 8 Appx. Page 467 of 740 required PUC approval of the NPRRs, they became effective when adopted by ERCOT, subject to “commission oversight and review.” RWE, 691 S.W.3d at 486-87. The NPRRs are rules promulgated by ERCOT that detail how ERCOT and market participants are required to operate and to interact with one another and how the wholesale electricity market is designed. 2d Am. Pet. ¶ 19. Section 21 of ERCOT’s Nodal Protocols details the process for adopting new protocols and revising existing protocols. Id. A request to revise a Nodal Protocol is called a NPRR. Id. After ERCOT adopts an NPRR, the PUC can approve the NPRR through an order. Id. C. ERCOT Contingency Reserve Service (ECRS) ECRS was created and adopted by ERCOT in February 2019 through NPRR 863. Id. ¶ 29. After almost five years of development, ECRS was finally implemented in June 2023. Id. ¶¶ 28-29. Since its creation, ERCOT and the PUC have modified ECRS through numerous ECRS-related NPRRs, as shown in Table 1 below (“ECRS Rules”). See id. ¶ 29. Many of the ECRS Rules established operative parameters and others were adopted to “cleanup” ERCOT protocol language. Id. Beginning in 2023, ERCOT and the PUC began implementing operative parameters such as deployment obligation requirements, setting prices for other resources,4 and a proposal to implement a trigger allowing ERCOT to manually release ECRS from SCED-dispatchable resources.5 Id. 4 See NPRR 1178 (setting the offer floor on capacity for resources providing ECRS concurrently with other resources). 5 See NPRR 1224; also see PUCT memo (the PUC rejected this Protocol, concluding that it did not “align with the intended risks ECRS is procured to mitigate”). PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 9 Appx. Page 468 of 740 TABLE 16 ERCOT NPRR PUC Approval Date Adopted Orders NPRR 863 – Creation of ECRS and N/A7 Feb. 12, 2019 Revisions to Responsive Reserve NPRR 992 – Updated Day-Ahead N/A Aug. 11, 2020 Liability for NPRR863 NPRR 1015 – Clarification of DAM N/A Aug. 11, 2020 implementation of NPRR863 Phase 2 NPRR 1079 – Day-Ahead Market Approval Order Aug. 24, 2021 RRS/ECRS 48 Hour Report (PUC Project No. Clarification (Aug. 10, 2021) 52307) NPRR 1096 – Require Sustained Approval Order May 12, 2022 Two-Hour Capability for ECRS and (PUC Project No. Four-Hour Capability for Non-Spin 52934) (April 28, 2022) NPRR 1148 – Language Cleanup Approval Order Jan. 26, 2023 Related to ECRS (Dec. 20, 2022) (PUC Project 54445) NPRR 1178 – Expectations for Approval Order June 28, 2023 Resources Providing ECRS (Jun. 20, (PUC Project 54445) 2023) NPRR 1196 – Require Sustained Approval Order Feb. 1, 2024 Two-Hour Capability for ECRS and (PUC Project No. Four-Hour Capability for Non-Spin 54445) (Dec. 19, 2023) NPRR 1213 – Allow DGRs and Approval Order Apr. 11, 2024 DESRs on Circuits Subject to Load (PUC Project No. Shed to Provide ECRS and Clarify 54445) Language Regarding DGRs and 6 At the October 1, 2024, status conference, the parties addressed the record relating to the adoption and approval of the NPRRs at issue in this lawsuit. While the parties have not been able to reach agreement on how the record should be presented to the Court, ERCOT’s and PUC’s counsel made representations regarding their respective materials relating to the NPRRs. Specifically, ERCOT’s counsel represented that “ERCOT’s protocol revisions are on its website. It’s very well organized. [Aspire has] full access to them” and “we’re not going to contest authenticity.” Status Conf. Tr. at 30:12, 30:24-31:1 (attached as Ex. A to Aspire’s Motion for Judicial Notice). PUC’s counsel added “All the PUC materials are readily available on the PUC’s website. They already have them. There’s no issue there.” Id. at 31:6-8. Accordingly, Aspire is concurrently filing a Motion for Judicial Notice regarding these materials. 7 NPRR 863, NPRR 992, and NPRR 1015 were adopted by ERCOT before PURA was amended in 2021 to require the PUC’s review and approval of NPRRs before they would become effective. See supra at 7-8. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 10 Appx. Page 469 of 740 DESRs Providing Non-Spin (Feb. 27, 2024) NPRR 1224 – ECRS Manual Rejection Order Aug. 5, 2024 Deployment Triggers (June 18, 2024) (PUC Project No. 54445) D. The PUC did not authorize ECRS as a new ancillary service prior to ERCOT’s ECRS rulemaking. By ERCOT’s own characterization, ECRS is a new type of ancillary service in the ERCOT wholesale market. See, e.g., ERCOT Board Report, NPRR 1196 (“The Protocols changes approved in NPRR 1149 included provisions that would go into effect upon implementation of the new Ancillary Service, ERCOT Contingency Reserve Service (ECRS).”); see 2d Am. Pet. ¶¶ 39-41. PURA provides that ancillary services, like ECRS, must be created by PUC, not ERCOT. Tex. Util. Code § 35.004(e). NPRR 863, which created ECRS, was never adopted by the PUC, as a rule or otherwise, and exceeded ERCOT’s authority. 2d Am. Pet. ¶¶ 39-41. Further, all subsequent ERCOT protocols modifying ECRS, and PUC approvals of such protocols, rested on ERCOT’s initial and unauthorized creation of ECRS. Id. E. ECRS constitutes withholding of electricity, contrary to PURA. ERCOT pays generators who participate in ECRS to withhold part of their generating capacity as reserves unless certain operational criteria are met, which is expressly prohibited under PURA. Tex. Util. Code § 39.157(a) (PUC charged with preventing market power abuses and defining withholding of production as a market power abuse); 16 Tex. Admin. Code §§ 25.501(j), 25.503(a)(6), (d) (same); see 2d Am. Pet. ¶ 30. The PUC and ERCOT claim that ECRS is a “critical reliability tool” which was developed to address certain reliability risks not adequately covered PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 11 Appx. Page 470 of 740 by ERCOT’s other ancillary services.8 2d Am. Pet. ¶ 31. But ERCOT’s Independent Market Monitor (“IMM”) determined that ECRS has actually “diminished reliability.”9 2d Am. Pet. ¶ 32. As explained in the IMM’s State of the Market Report published in May 2024, ECRS caused ERCOT to withhold procured resources from the real-time market dispatch even when such resources were needed to meet energy demand or manage congestion.10 2d Am. Pet. ¶ 32. The increased ECRS procurements that ERCOT sequestered “substantially exceeded levels that could be justified by reliability.”11 See 2d Am. Pet. ¶ 53. F. The ECRS rulemaking failed to meet the requirements of the APA. As previously stated, before 2021 ERCOT promulgated the ECRS Rules without prior authorization or subsequent approval by the PUC. From 2021 on, the PUC was required to issue approval orders before the ECRS Rules could take effect. But at no point has the process complied with the following requirements of the APA, among other omissions: • Posting of a notice of proposed rulemaking in the Texas Register with at least 30 days’ notice to the public • A notice of proposed rulemaking that meets all of the requirements of the APA, including: o A statement of the statutory or other authority under which the rule is proposed to be adopted o A fiscal note showing the name and title of the officer or employee responsible for preparing or approving the note and 8 PUC Am. PTJ at 5; ERCOT Am. PTJ at 8. 9https://www.ercot.com/files/docs/2023/12/11/13%20Independent%20Market%20Monitor%20(IMM)% 20Report.pdf (slide 6); see also 16 Tex. Admin. Code § 25.365 (Prescribing the IMM’s role and responsibilities, which include evaluation of rules and protocols that affect supply, demand, and the efficient functioning of the ERCOT market.) 10https://www.potomaceconomics.com/wp-content/uploads/2024/05/2023-State-of-the-Market- Report_Final_060624.pdf (pp. xix, 24) 11 Id. at p. 26. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 12 Appx. Page 471 of 740 stating for each year of the first five years that the rule will be in effect its impact on state and local government • A notice of agency adoption posted in the Texas Register that complies with all of the requirements of the APA, including a reasoned justification for the rule. Tex. Gov’t Code §§ 2001.023, .024, .033. Moreover, the ERCOT/PUC process proscribes actual public participation. The ERCOT stakeholder process is not designed to comply with the requirements of the APA, nor does it. See 2d Am. Pet. ¶¶ 46-49. While it has public meetings and opportunities to submit comments, the ERCOT process falls well short of the public participation requirements set by the APA. Id. Most notably, the ERCOT process does not permit the participation of all interested persons, as the APA requires. Id. Participation is limited to ERCOT Members and Market Participants at multiple stages, and the barriers to entry to become a ERCOT Member or Market Participant, and therefore a part of the preferred commenting class, are significant.12 Becoming a Market Participant A Market Participant is: 12 An Entity, other than ERCOT, that engages in any activity that is in whole or in part the subject of these Protocols, regardless of whether that Entity has signed an Agreement with ERCOT. Examples of such an Entity include but are not limited to the following: (a) Load Serving Entity (LSE); (b) Qualified Scheduling Entity (QSE); (c) Transmission and/or Distribution Service Provider (TDSP); (d) Congestion Revenue Right (CRR) Account Holder; (e) Resource Entity; (f) Independent Market Information System Registered Entity (IMRE); and (g) Renewable Energy Credit (REC) Account Holder. ERCOT Nodal Protocols § 2.1. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 13 Appx. Page 472 of 740 requires significant investment and is limited to those with particular experience and expertise as a practical matter. See 2d Am. Pet. ¶ 21.13 And some entities receive preferential treatment in the rulemaking process, and they are selected by the Commission (i.e., Commission Staff, the Reliability Monitor, and the Independent Market Monitor). ARGUMENT I. DEFENDANTS’ AMENDED PLEAS TO THE JURISDICTION SHOULD BE DENIED. A. The standard for deciding pleas to the jurisdiction On a Plea to the Jurisdiction, the “burden is on the plaintiff to affirmatively demonstrate the trial court’s jurisdiction.” PUC v. AMA Commc’ns, LLC, No. 03-21- 00597-CV, 2022 WL 3220405, at *3 (Tex. App.—Austin Aug. 10, 2022, no pet.) (citing Heckman v. Williamson County, 369 S.W.3d 137, 150 (Tex. 2012)). “When … a plea to the jurisdiction challenges the pleadings, [the court] determine[s] if the plaintiff has ‘alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause.’” Id. (quoting Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004)); accord ERCOT Am. PTJ at 14. In so doing, the court must “construe the pleadings liberally in the plaintiff’s favor, taking factual assertions as true and looking to the plaintiff’s intent.” Id. (citing Miranda, 133 S.W.3d at 226). Finally, the court “may also consider evidence that the parties have submitted that is relevant to the jurisdictional issues, and … must do so when 13 Even for residential consumers, ERCOT Membership costs $100 per year. See ERCOT Market Notice, M-C100923-03 General, ERCOT Membership Application for 2024 Membership Year - FINAL REMINDER (Nov. 13, 2023), available at https://www.ercot.com/services/comm/mkt_notices/M-C100923-03 . PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 14 Appx. Page 473 of 740 necessary to resolve those jurisdictional issues.” Id. (citing Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000)). While ERCOT states that its Amended Plea to the Jurisdiction “challenges the pleadings,” ERCOT Am. PTJ at 14, it acknowledges that a court can receive and consider evidence “and must do so when necessary to resolve the jurisdictional issues raised,” id. at 6 n.5 (quoting Bland, 34 S.W.3d at 554-55). It then proceeds to cite to and rely on a raft of evidence beyond the pleadings, which is why Aspire must be given the opportunity to do the same. See, e.g., ERCOT Am. PTJ at 7 & n.8, 8, 9, 10-12 & nn.9-23 (referencing and relying on various ERCOT Protocols, NPRRs, “market rules,” and “other binding documents” not in issue here, as well as ERCOT Board Reports and Projects). B. Government Code § 2001.038 waives sovereign or governmental immunity for Aspire’s claims in this case. Both ERCOT and the PUC Parties commence their Amended Pleas by arguing that the doctrine of sovereign immunity bars this Court’s jurisdiction over Aspire’s challenge to the original and amended ECRS Rules at issue in this case. ERCOT Am. PTJ at 3, 15 (citing CPS Energy v. ERCOT, 671 S.W.3d 605, 628 (Tex. 2023)); PUC Am. PTJ at 2-3 (citing Tex. Nat. Res. Conserv. Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002)). Both acknowledge, however, that sovereign immunity is no bar if the Legislature has waived it by statute. ERCOT Am. PTJ at 15; PUC Am. PTJ at 2-3. Section 2001.038 of the APA provides just such a waiver. It says, “The validity or applicability of a rule … may be determined in an action for declaratory PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 15 Appx. Page 474 of 740 judgment if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff,” and it requires that “[t]he state agency must be made a party to the action.” Tex. Gov’t Code § 2001.038(a) & (c) (emphasis added). Section 2001.038 expressly waives sovereign immunity for claims falling within its scope. Tex. Dep’t of State Health Services v. Balquinta, 429 S.W.3d 726, 744 (Tex. App.—Austin 2014, pet. dism’d); Texas Dep’t of Transp. v. Sunset Transp., Inc., 357 S.W.3d 691, 700 (Tex. App.—Austin 2011, no pet.). But, relying on the Texas Supreme Court’s recent decision in PUC v RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024), ERCOT and the PUC Parties argue that § 2001.038’s waiver of sovereign immunity doesn’t apply here because “neither ERCOT’s [ECRS] Protocols, nor the PUCT’s orders approving the adoption of or revisions to those Protocols, are ‘rules’ under the APA” generally, and § 2001.038 specifically. ERCOT Am. PTJ at 16; see PUC Am. PTJ at 7-9. Defendants’ argument, however, flows from a myopic and improperly fragmented characterization of the process by which ERCOT and the PUC promulgate rules like the ECRS protocols and from an unduly expansive reading of the Supreme Court’s opinion in RWE. See Am. Pet. ¶¶ 15-16. 1. Challenges to PUC Rules fall within § 2001.038. Rules adopted by the PUC are subject to the APA, including § 2001.038. See, e.g., Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 263-67 (Tex. App.—Austin 2022, no pet.) (rendering declaratory judgment that PUC rules were void for lack of APA compliance); see also PUC v. AMA Commc’ns, LLC, No. 03-21-00597-CV, 2022 WL PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 16 Appx. Page 475 of 740 3220405, at *3 (Tex. App.—Austin Aug. 10, 2022, no pet.); Sw. Bell Tel. Co. v. PUC, 888 S.W.2d 921, 929 (Tex. App.—Austin 1994, writ denied). Section 2001.003(6) of the APA defines a “rule” as “a state agency statement of general applicability” that “implements, interprets, or prescribes law or policy” or “describes the procedure or practice requirements of a state agency,” including “the amendment or repeal of a prior rule.” The PUC is a “state agency” and the ECRS Rules are “statements of general applicability” that implement law or policy and describe the procedure for doing so. In fact, the very statute that authorized ERCOT to adopt the ECRS Rules states that they are rules. See Tex. Util. Code § 39.151(d) (“[t]he commission [PUC] shall adopt and enforce rules relating to the reliability of the regional electrical network”… “or may delegate those responsibilities to [ERCOT]” (emphasis added)). If the PUC, acting alone, had formulated and adopted the ECRS Rules, the process of their adoption would be subject to the requirements of the APA and to challenges under § 2001.038. Defendants cannot avoid its application simply through delegation. 2. The PUC delegated its authority to formulate and adopt rules like the ECRS protocols to ERCOT. Although the Legislature in PURA directed the PUC to “adopt and enforce rules relating to the reliability of the regional electrical network,” it went on to provide that the PUC “may delegate those responsibilities to an independent organization … directly responsible and accountable to the commission.” Tex. Util. Code § 39.151(d) (emphasis added). And the PUC has in fact delegated rulemaking authority to ERCOT, including the authority by which ERCOT formulated and PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 17 Appx. Page 476 of 740 adopted the original and amended ECRS protocols at issue here. PUC v. RWE Renewables Americas, LLC, 691 S.W.3d 484, 486 (Tex. 2024); 16 Tex. Admin. Code § 25.362(c). Originally, this delegation of authority allowed ERCOT to promulgate and adopt rules with immediate effect (subject to PUC’s overarching authority over ERCOT’s activities as a whole, see Tex. Util. Code § 39.151(d)). In 2021, however, the Legislature amended PURA to provide that “Protocols adopted by an independent organization … under delegated authority from the commission … may not take effect before receiving commission approval.” Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15; see also Tex. Util. Code § 39.151(g-6) (“a reference to a protocol includes a rule”). Exercising the authority delegated to it by the PUC,14 ERCOT adopted the Protocol creating ECRS in 2019, before the Legislature required PUC approval for such rules to take effect. NPRR 863, Creation of ERCOT Contingency Reserve Service and Revisions to Responsive Reserve (Feb. 12, 2019). Most of the other ECRS Rules amending or revising that original protocol or rule were promulgated after PURA was amended in 2021 to require a joint process of ERCOT adoption and PUC approval for the protocol or rule to take effect. See 2d Am. Pet. ¶ 29 (listing ECRS Rules in issue). 14 The PUC did not have authority to delegate rulemaking authority to ERCOT for the original creation of an ancillary service to ERCOT. See infra at I.F. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 18 Appx. Page 477 of 740 ERCOT and the PUC Parties would have this Court believe that the PUC’s delegation to ERCOT of its rulemaking authority to adopt the ECRS protocols, rather than undertaking that task itself, somehow immunized that process from the requirements of the APA. But that just isn’t true. To allow the PUC Parties and ERCOT to evade the APA by simply divvying up the tasks that, taken together, constitute the adoption of a “rule” would be the regulatory equivalent of money laundering. 3. When ERCOT adopted NPRRs under rulemaking authority delegated by the PUC, it stood in the shoes of the PUC and was subject to the same requirements and limitations as the PUC, including the APA generally and § 2001.038 specifically. ERCOT argues that its “adoption and revision of [ECRS] Protocols …does not constitute APA rulemaking” subject to the APA and § 2001.038 because “ERCOT is not a ‘state agency.’” ERCOT Am. PTJ at 16-17; see Texas Gov’t Code § 2001.003(6) (defining “rule” for APA purposes as “a state agency statement of general applicability” that “implements, interprets, or prescribes law or policy” (emphasis added)).15 True enough, on the surface. While ERCOT has been recognized as an “organ of [state] government,” it is a “private, nonprofit corporation,” albeit one certified by the PUC to perform certain state functions. CPS Energy v. ERCOT, 671 S.W.3d 605, 617 (Tex. 2023). But ERCOT’s argument misses the point. When, as here, ERCOT (or any other entity) exercises authority delegated to it by a “state agency” like the PUC, its conduct in doing so is subject to the same 15 ERCOT does not contest the fact that its ECRS protocols are “statements of general applicability” that “implement … law or policy.” See id. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 19 Appx. Page 478 of 740 constraints and requirements as those applicable to the delegating agency. The delegee, ERCOT here, is treated as that delegating agency would be, not in its own right as a private corporation (with no authority to undertake the conduct at issue). It “stands in the shoes” of the delegating entity. See, e.g., City of Garland v. Byrd, 97 S.W.3d 601, 606 (Tex. App.—Dallas 2002, pet. denied) (when private hearing examiner conducts hearing in lieu of commission, “the examiner is granted the same duties and powers as the commission [and] stands in the shoes of the commission” and “the power being exercised is the same as that exercised by the commission”); Mainland Sav. Ass’n v. Hoffbrau Steakhouse, Inc., 659 S.W.2d 101, 102 (Tex. App.— Houston [14th Dist.] 1983, no writ) (“assignee/delegatee … stands in [delegor’s] place with respect to any benefits or obligations under the original agreement”); cf., DuPuy v. City of Waco, 396 S.W.2d 103, 108 (Tex. 1965) (“In the exercise of the power to take or appropriate private property for public use, [entities] to which the power of eminent domain has been delegated, are in the same position and are governed by the same rule” as the state.). As the delegee of the PUC’s rulemaking authority under PURA § 39.151(d), therefore, ERCOT “stands in the shoes” of the PUC and must be treated as a “state agency” in the exercise of that authority. Fundamentally, a delegor like the PUC here can only delegate such authority as it has, itself. See BLACK’S LAW DICTIONARY (12th ed. 2024) (defining “delegate,” in part, to mean “[t]o give part of one’s power or work to someone”). Because the PUC is and would be subject to the APA (including § 2001.038) in exercising rulemaking authority under PURA—e.g., if the PUC alone had adopted the ECRS Rules—it PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 20 Appx. Page 479 of 740 could not delegate to ERCOT the authority to exercise that power shorn of the limitations and requirements of the APA, an authority greater than the PUC itself possessed. 4. PURA signals that the APA applies to ERCOT. Regardless of whether a strict reading of the term “state agency” includes ERCOT, see Tex. Gov’t Code § 2001.003(7), the Texas Legislature has indicated that the APA applies to ERCOT, nevertheless. The APA recognizes two types of proceedings: rulemaking and contested cases. See Tex. Gov’t Code § 2001.003(1), (6); R.R. Comm’n of Tex. v. WBD Oil & Gas Co., 104 S.W.3d 69, 76 (Tex. 2003). As noted, “rules” are defined in the APA as certain “state agency statement[s] of general applicability”; whereas contested cases are “proceeding[s] … in which the legal rights, duties, or privileges of a party are to be determined by a state agency after an opportunity for adjudicative hearing.” Tex. Gov’t Code § 2001.003(1), (6) (emphases added). So, if the APA were the Legislature’s only word, APA rulemaking and contested cases might be limited to state agency actions. The Legislature, however, has said more. PURA provides that an independent organization like ERCOT “may adopt a policy allowing [its] governing body or subcommittee to enter into an executive session … to address a contested case, as defined by Section 2001.003, Government Code,” i.e., the APA. Tex. Util. Code § 39.1511(a-1)). If ERCOT can go into executive session to address a contested case under the APA, it follows that ERCOT can conduct contested cases generally under the APA—even though the APA’s definition PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 21 Appx. Page 480 of 740 of “contested case” does not authorize actors other than a “state agency” to conduct contested cases. Similarly, the Legislature has signaled through PURA that ERCOT can engage in APA rulemaking even though it is not a state agency. The Supreme Court has noted that ERCOT is “much like a state agency.” CPS Energy v. ERCOT, 671 S.W.3d 605, 623 (Tex. 2023). So, as explained in more detail above, when ERCOT exercises rulemaking authority delegated by the PUC—when the PUC would have to satisfy the APA if the PUC itself had made the same rule—the Legislature has directed that ERCOT follow the APA. See Tex. Util. Code § 39.151(g-6) (an ERCOT “protocol includes a rule”). 5. RWE does not undermine Aspire’s reliance on § 2001.038 as a waiver of sovereign immunity with respect to its challenge to the ECRS Rules. ERCOT and the PUC Parties nevertheless contend that Aspire’s arguments are foreclosed by the Texas Supreme Court’s recent decision in PUC v. RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024). They are wrong. At the outset, the only issue in RWE was whether the Third Court of Appeals had original jurisdiction over a direct appeal from a “competition rule” under PURA § 39.001(e), and the only respondent was the PUC. The Supreme Court held that the order issued by the PUC in that particular case was not a competition rule and dismissed the case for want of jurisdiction. Id. The jurisdictional issue before the Supreme Court in RWE is unrelated to the bases for jurisdiction in this case, APA § 2001.038 and ultra vires actions of the Defendants. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 22 Appx. Page 481 of 740 Moreover, what the Supreme Court did not say is telling. The petitioner in RWE challenged only a PUC approval order under the APA. The Supreme Court did not hold that the APA did not apply to the combined ERCOT/PUC rulemaking process, or even to the ERCOT adoption process alone. Rather, in dicta, the Supreme Court commented that there are stakeholder processes before ERCOT through which the petitioner might have mounted a challenge. E.g., id. at 486. It did not go so far, however, as to say that the post-2021 ERCOT/PUC processes met the requirements of the APA. ERCOT contends that “RWE held … that neither ERCOT’s Protocols, nor the PUCT’s orders approving the adoption of or revisions to those Protocols, are ‘rules’ under the APA” and § 2001.038 in particular. ERCOT Am. PTJ at 16 (citing RWE, 691 S.W.3d at 492). This is false. ERCOT was not even a party to RWE and the Court’s holding did not address ERCOT’s adoption of or revisions to its protocols. Instead, the Court was clear about the narrow jurisdictional issue it was deciding and the holding it reached: We hold that the PUC’s approval order is not a “competition rule[] adopted by the commission” subject to the judicial review process for PUC [competition] rules. … [T]he statutory requirement the PUC approve [ERCOT] adopted protocols does not transform PUC approval orders into PUC rules eligible for direct review by a court of appeals [under Tex. Util. Code § 39.001(e)]. RWE, 691 S.W.3d at 486 (italics original); see also id. at 492 (“we hold that the PUC’s order approving NPRR 1081…was not an agency-adopted ‘rule’ under the Administrative Procedure Act,” so that “the court [of appeals] lacked jurisdiction over RWE’s challenge to the PUC’s approval order” (emphasis PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 23 Appx. Page 482 of 740 added)). The Supreme Court’s holding resulted from a painstaking linguistic analysis of the difference between “adoption” (as used in the APA definition of an agency “rule”) and a PUC order “approving” an ERCOT-adopted rule (as Tex. Util. Code § 39.151(g-6) now requires for such a rule to take effect)—with the latter being the only issue before the Court. See RWE, 691 S.W.3d at 491-92. RWE, therefore, does not undermine Aspire’s contention that § 2001.038 waives sovereign immunity for its APA challenge to the validity of the ECRS Rules adopted by ERCOT as the PUC’s delegee—and particularly those protocols adopted prior to 2021 when the requirement for PUC approval was added by the Legislature. While ERCOT oversells the true scope of RWE, the PUC Parties invoke that decision in an effort to artificially circumscribe Aspire’s challenge here. Multiple times, the PUC Parties argue that Aspire’s claims must be dismissed because the Supreme Court concluded in RWE that “PUCT approval orders are not agency rules.” See, e.g., PUC Am. PTJ at 7, 8, 9. But that is a myopic and artificially constricted view of Aspire’s claims. Aspire does not challenge the “PUCT approval orders” in isolation, as did the petitioner in RWE. Instead, Aspire challenges the combined actions of ERCOT and the PUC in enacting the ECRS rules. After the Legislature amended PURA § 39.151(g-6) in 2021 to require PUC approval of ERCOT-adopted rules or protocols, the promulgation of rules “adopted” by ERCOT and “approved” by the PUC must be evaluated as a combined, integrated process—not fractured into its component parts, as ERCOT and the PUC seek to PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 24 Appx. Page 483 of 740 do.16 After the 2021 amendments, no ERCOT-adopted protocol can become effective without PUC approval; and, obviously, the PUC cannot “approve” an ERCOT protocol unless it is first created and “adopted” by ERCOT. Viewed properly as products of a single integrated process, therefore, the ECRS protocols undeniably are “agency rules” subject to challenge under § 2001.038, with its waiver of sovereign immunity.17 Cf., Tex. Tel. Ass’n v. PUC, 653 S.W.3d at 263-67 (ruling that PUC actions it characterized as “guidelines” were in fact and in substance agency “rules” subject to the requirements of the APA). 6. PURA’s directive that ERCOT be required to establish a “formal process” for its PUC-delegated rulemaking authority does not supplant the APA. Finally, ERCOT argues that the 2021 amendment to PURA requiring ERCOT to “establish and implement a formal process for adopting new protocols or revisions to existing protocols” to maintain its certification as a PUC ISO demonstrates the Legislature’s intention that those unspecified “formal procedures” alone should govern the process, supplanting the APA. See ERCOT Am. PTJ at 17- 18 (citing Tex. Util. Code § 39.151(g-6)). It contends that if the Legislature had intended the APA to apply to the adoption and effectuation of ERCOT protocols, it would have said so. Id. at 18 (citing, e.g., Tex. Agric. Code § 74.120(c)). 16 ERCOT notes that RWE observes “that ERCOT rulemaking and PUC rulemaking are independent endeavors.” ERCOT Am. PTJ at 17-18 (quoting RWE, 691 S.W.3d at 492). Given the Supreme Court’s determination in RWE that “PUC approval orders” are not “rules,” however, “PUC rulemaking” in that passage cannot refer to the PUC’s role in approving ERCOT-adopted protocols as part of the post-2021 integrated process. After 2021, taken together, they are one combined endeavor. 17 ECRS Rules adopted by ERCOT before the statute was amended to require PUC approval for them to take effect would, of course, be evaluated simply at the ERCOT level, in its implementation of authority delegated to it by the PUC. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 25 Appx. Page 484 of 740 But ERCOT infers too much from that amendment. At the outset, of course, nothing in the statutory language even suggests that the “formal process” to be adopted by ERCOT would not have to reflect and embody the requirements of the APA, tailored to ERCOT’s specific situation. While the amendment does not expressly state that the APA will apply to ERCOT/PUC rules, it also does not exempt those rules and processes from the APA or state that the APA will not apply. And the Legislature certainly knew how to make clear, expressly, when it did not want the APA to apply to any given administrative process. See, e.g., Tex. Gov’t Code § 411.180(a) (hearing on any denial, revocation, or suspension of handgun license “is not subject to Chapter 2001 (Administrative Procedure Act)”); Tex. Hum. Res. Code § 40.063 (“Section 2001.038 and Subchapters C through H, Chapter 2001, Government Code do not apply” to described categories of medical benefit decisions); Tex. Parks & Wild. Code § 32.006 (provision entitled “Nonapplicability of Chapter 2001, Government Code” states “provisions of the Administrative Procedure Act … do not apply to this chapter”). The APA itself contains an explicit list of administrative proceedings to which it does not apply. Tex. Gov’t Code §§ 2001.221- .227. That list of exemptions does not include ERCOT/PUC rulemaking. Id. The APA expressly states, “It is the public policy of the state through this chapter to: (1) provide minimum standards of uniform practice and procedure for state agencies ….” Tex. Gov’t Code § 2001.001. In the absence of an express statement by the Legislature that the “minimum standards” of the APA were to be supplanted by an unspecified, yet-to-be-developed “formal process” to be crafted by PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 26 Appx. Page 485 of 740 an entity like ERCOT, the rulemaking activities of ERCOT and its supervising agency, the PUC, cannot escape the application of the APA. C. Aspire was not required to “exhaust administrative remedies” before pursuing its challenge in this Court. Both ERCOT and the PUC Parties devote considerable attention to detailed descriptions of the internal processes within ERCOT and the PUC by which Aspire allegedly might have challenged the ECRS protocols—unrealistic timetables and other obstacles notwithstanding—and then argue that Aspire’s challenge in this Court is barred because it did not exhaust those administrative remedies. See ERCOT Am. PTJ 19-22; PUC Am. PTJ at 9-13. But they miss the boat with these arguments, which are entirely immaterial. Government Code § 2001.038(d) expressly provides that, “A court may render a declaratory judgment [regarding the validity or invalidity of a rule] without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question.” Courts have rightly interpreted that provision to mean that “there is no requirement to exhaust administrative remedies before bringing a Section 2001.038(a) challenge,” such as that mounted here by Aspire. Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 264 n.17 (Tex. App.—Austin 2022, no pet.) (emphasis added); accord, e.g., PUC. v. AMA Commc’ns, LLC, No. 03-21- 00597-CV, 2022 WL 3220405, at *4 (Tex. App.—Austin Aug. 10, 2022, no pet.). And that makes practical sense, because asking an agency to judge the validity of a rule the agency itself promulgated would be an exercise in futility. Moreover, given that jurisdiction over APA challenges is exclusively vested in this Court, see PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 27 Appx. Page 486 of 740 § 2001.038(b) (action may only be brought in Travis County district court), the PUC has no jurisdiction to decide APA challenges. D. PURA § 15.001 does not exempt ERCOT protocols from the APA. ERCOT also contends that the APA should not apply because Aspire had a path to challenge the ECRS protocols, by first appealing to the PUC and then seeking “judicial review of that decision under the APA through the contested case process and under the substantial evidence rule.” ERCOT Am. Plea at 21 (citing, inter alia, PURA § 15.001). But this “path” is a red herring—especially in light of § 2001.038(d)’s express statement that exhaustion of administrative remedies is not a prerequisite to challenging the validity of a rule in this Court. Contested cases determine “legal rights, duties, or privileges of a party … after an opportunity for adjudicative hearing” whereas rules, among other things, are “statement[s] of general applicability that implement[], interpret[], or prescribe[] law or policy.” Tex. Gov’t Code § 2001.003(1), (7) (emphases added). As ERCOT notes, its protocols “govern every aspect of Texas’s electric grid and wholesale market.” ERCOT Am. Plea at 8. And its protocols are not the product of an adjudicative hearing. Under the APA, there are “different methods of judicial review,” which “can be justified by the profound procedural differences between contested case proceedings and rulemaking proceedings.” R.R. Comm’n of Tex. v. WBD Oil & Gas Co., 104 S.W.3d 69, 76 (Tex. 2003). Judicial review of rules under the APA is “largely unlimited in PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 28 Appx. Page 487 of 740 time and scope” compared to the more limited judicial review of contested cases for “substantial evidence.” Id. at 75. According expedited and more limited review to contested cases makes sense, because a contested case resolves disputes between a discrete set of parties directly involved in a specific dispute. Id. at 78. In contrast, “it makes perfect sense to allow less restricted judicial review of rules. It may well be that the effect of a rule cannot be fully appreciated except as time passes.” Id. at 77-78. Accordingly, ERCOT is wrong that judicial review of a contested case under PURA § 15.001 somehow pulls the ECRS protocols outside the APA and § 2001.038’s procedure for challenging rules through a declaratory judgment, because the ECRS protocols bear the hallmarks of rules, not a contested case. See RWE, 691 S.W.3d at 486 (NPRRs are the product of delegated rulemaking). E. The Court is vested with jurisdiction over Plaintiff’s complaints, even those stemming from 2019 actions. The PUC Parties argue that this Court lacks jurisdiction because Aspire did not challenge the ECRS Orders before the PUC within the abbreviated time frame for “contested cases” prescribed in APA § 2001.176. PUC Am. PTJ at 13-14. As explained in the previous section, the PUC’s citations to contested-case statutes are a red herring. Moreover, to the extent the PUC complains about the timeliness of Aspire’s suit, limitations is not a jurisdictional issue. E.g., City of New Braunfels v. Allen, 132 S.W.3d 157, 167 (Tex. App.—Austin 2004, no pet.) (plea to jurisdiction improper mechanism for limitations defense). Finally, because neither ERCOT nor the PUC filed their materials in the Texas Register as the APA requires, the PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 29 Appx. Page 488 of 740 limitations period for Aspire’s APA complaints has not yet even begun to run. Tex. Gov’t Code §§ 2001.035(b), .036 (APA complaint must be filed within two years of filing in Texas Register). F. There is no sovereign immunity for ultra vires acts. Sovereign immunity does not bar a suit if the claimant affirmatively alleges facts demonstrating that the agency’s action is unconstitutional or beyond the agency’s statutory authority—i.e., ultra vires. See Texas Highway Comm’n v. Texas Ass’n of Steel Importers, 372 S.W.2d 525, 530 (Tex. 1963); Sw. Bell Tel. Co. v. PUC, 735 S.W.2d 663, 668 (Tex. App.—Austin 1987, no writ). Claims that an agency action is ultra vires are said to invoke the trial court’s “inherent jurisdiction” to protect against agency action that is unconstitutional or beyond the agency’s statutory authority. See id. at 667-68. “[A]n agency may not, in the guise of implied powers, exercise what is effectively a new power, or a power contrary to a statute, on the theory that such exercise is expedient for the agency’s purpose, nor may it contravene specific statutory language, run counter to the general objectives of the statute, or impose additional burdens, conditions, or restrictions in excess of or inconsistent with the relevant statutory provisions.” Cities of Corpus Christi v. Public Util. Comm’n, 188 S.W.3d 681, 690 (Tex. App.—Austin 2005, pet. denied) (emphasis added) (citing City of Austin v. Sw. Bell Tel. Co., 92 S.W. 3d 434, 441 (Tex. 2002); State v. PUC, 131 S.W.3d 314, 321 (Tex. App.—Austin 2004, pet. denied)). PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 30 Appx. Page 489 of 740 Pursuant to PURA § 35.004(e), “‘ancillary services’ means services necessary to facilitate the transmission of electric energy including load following, standby power, backup power, reactive power, and any other services as the commission may determine by rule.” Tex. Util. Code § 35.004(e) (emphasis added). The ECRS ancillary service was not determined by the Commission by rule as prescribed in § 35.004(e); it was established by ERCOT in the first instance. The ratification of ERCOT’s creation of ECRS contravenes specific statutory language requiring that new ancillary service products be determined by PUC rulemaking—not ERCOT rulemaking. The Commission’s ability to delegate rulemaking authority to ERCOT is limited by PURA to issues of reliability and accounting. Tex. Util. Code § 39.151(d) (“The commission shall adopt and enforce rules relating to the reliability of the regional electrical network and accounting for the production and delivery of electricity among generators and all other market participants, or may delegate to an independent organization responsibilities for establishing or enforcing such rules.” (emphasis added)). It does not include the creation of ancillary service products because, inter alia, PURA explains that ancillary services are intended for the purpose of “facilitat[ing] the transmission of electric energy.” See Tex. Util. Code § 35.004(e) (emphasis added). PURA does not allow the PUC to delegate rulemaking authority to ERCOT related to electricity transmission; there is no provision similar to § 39.151(d), which allows the PUC to delegate rulemaking authority to ERCOT only for reliability and accounting issues. To the extent ERCOT attempted to adopt PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 31 Appx. Page 490 of 740 rules to create ECRS based on a delegation from the PUC, the PUC lacks statutory authority to make such a delegation, making any such action ultra vires. While PURA § 35.004(h) provides that “[t]he commission shall require the independent organization certified under Section 39.151 for the ERCOT power region to modify the design, procurement, and cost allocation of ancillary services for the region in a manner consistent with cost-causation principles and on a nondiscriminatory basis” (emphasis added), this provision does not allow ERCOT to create new ancillary services products because that responsibility remains solely with the Commission per PURA § 35.004(e). Again, PURA does not provide the Commission authority to delegate its rulemaking responsibilities related to PURA § 35.004(e) away from itself and to ERCOT. Ultra vires acts, like ratifying ERCOT’s actions to create the new ECRS ancillary service product outside of a Commission rulemaking, are not entitled to sovereign immunity protections. Federal Sign v. Texas S. Univ., 951 S.W. 2d 401, 404 (Tex. 1997) (“[A]n action to determine or protect a private party’s rights against a state official who has acted without legal or statutory authority is not a suit against the State that sovereign immunity bars.”); see also Texas Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W. 3d 849, 855 (Tex. 2002) (“Private parties may seek declaratory relief against state officials who allegedly act without legal or statutory authority. But such suits are not ‘suits against the State.’ This is because suits to compel state officers to act within their official capacity do not attempt to subject the State to liability. Therefore, certain declaratory-judgment actions PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 32 Appx. Page 491 of 740 against state officials do not implicate the sovereign-immunity doctrine.”) (citations omitted). Further, governmental immunity does not preclude injunctive remedies to prevent the perpetuation or implementation of ultra vires acts. See City of El Paso v. Heinrich, 284 S.W. 3d 366, 368-69 (Tex. 2009) (“[W]hile governmental immunity generally bars suits for retrospective monetary relief, it does not preclude prospective injunctive remedies in official-capacity suits against governmental actors who violate statutory or constitutional provisions.”). II. ERCOT’S RULE 91A MOTION TO DISMISS SHOULD BE DENIED. A. A Rule 91a Motion to Dismiss is decided on the pleadings alone. The purpose of a Rule 91a motion to dismiss is to determine whether a pleading has no basis in law or fact. Tex. R. Civ. P. 91a.1, 91a.6. The Court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action. Tex. R. Civ. P. 91a.6. Under the fair notice standard, the pleadings are liberally construed in favor of the plaintiff, with consideration given to the plaintiff’s intent, and the factual allegations in the pleading are accepted as true to determine if the cause of action has a basis in law or fact. In re RNDC Tex., LLC, No. 05-18-00555-CV, 2018 WL 2773262, at *1 (Tex. App.—Dallas June 11, 2018, orig. proceeding). “A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” Tex. R. Civ. P. 91a.1. There is no basis in law “(1) where the plaintiff fails to plead a legally cognizable cause of action” or (2) where the plaintiff’s pleadings “establish a PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 33 Appx. Page 492 of 740 complete legal bar to its claims by affirmatively negating entitlement to the relief requested.” 17714 Bannister v. TAS Envtl. Services LP, No. 05-22-00820-CV, 2023 WL 7401502, at *4 (Tex. App.—Dallas Nov. 9, 2023, no pet.). B. Aspire incorporates by reference its Response to Defendants’ Amended Pleas to the Jurisdiction. ERCOT (but not the PUC Parties) moves for 91a dismissal on many of the same grounds asserted in the Defendants’ Pleas to the Jurisdiction: that ERCOT’s protocol revision process is not subject to the APA, that ECRS does not violate Tex. Util. Code § 39.157, and that ERCOT had the power to create ECRS. ERCOT Am. PTJ at 25-26, 28-33. Aspire therefore incorporates by reference the portions of its response, above, that address these issues. Below, Aspire addresses the alleged grounds for 91a dismissal not already discussed in its response to the Pleas to the Jurisdiction. C. Aspire’s claims are not barred by the filed-rate doctrine. ERCOT pleaded the filed-rate doctrine as an affirmative defense. Because Rule 91a does not permit consideration of evidence, affirmative defenses that are not conclusively established by the facts in a plaintiff's petition are not a proper basis for a motion to dismiss under that rule. Tex. R. Civ. P. 91a.1, 91a.6; Reynolds v. Quantlab Trading Partners US, LP, 608 S.W.3d 549, 556 (Tex. App.—Houston [14th Dist.] 2020, no pet.) (reversing Rule 91a dismissal because trial court improperly considered facts not asserted in plaintiff’s petition to support collateral estoppel and res judicata defenses). The filed-rate doctrine does not bar Aspire’s PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 34 Appx. Page 493 of 740 claims in this case, and nothing in Aspire’s pleadings assists ERCOT in proving otherwise. ERCOT argues that the filed-rate doctrine precludes judicial recourse for claims that the rates approved by a regulatory agency are unreasonable or excessive. ERCOT Am. PTJ at 22-23. The first flaw in ERCOT’s argument is apparent: it necessarily relies on extrinsic evidence to establish “approval” by a “regulatory agency” (all while arguing that ERCOT is no such agency). Semantics aside, the Court would need to find as a matter of fact based on evidence extrinsic to the Second Amended Petition that the “rates” were approved by the PUC, when in fact the original adoption of ECRS was not approved by the PUC. Second, Aspire claims that the ECRS Rules violate the APA and are ultra vires acts and are therefore invalid. Aspire does not challenge specific rates for electricity that were generated by or because of the ECRS Rules (even if those rates were untangled from the rest of the mechanisms driving electricity prices). The cases ERCOT cites address tariffs—documents that list “a public utility’s services and the rates for those services”18—not NPRRs or any rules similar to NPRRs.19 18 CenterPoint Energy Res. Corp. v. Ramirez, 640 S.W.3d 205, 210 (Tex. 2022). 19 ERCOT Am. PTJ at 22-25 (citing CenterPoint Energy Res. Corp. v. Ramirez, 640 S.W.3d 205, 221 (Tex. 2022) (tariff was reasonable under the filed-rate doctrine when it limited the liability of gas utility for personal injuries caused by utility’s negligence); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 217 (Tex. 2002) (tariff limiting an electric utility's liability for personal-injury damages was reasonable as a matter of law); Houston Lighting & Power Co. v. Auchan USA, Inc., 995 S.W.2d 668, 669 (Tex. 1999) (tariff was not unreasonable when it limited the liability of an electrical utility for economic damages caused by utility’s negligence); Sw. Bell Tel. Co. v. Metro-Link Telecom, Inc., 919 S.W.2d 687, 698 (Tex. App.—Houston [14th Dist.] 1996, writ denied) (filed-rate doctrine shielded phone company from liability for enforcing its own tariffs); Micron SBC Corp. v. Worldcom, Inc., 994 S.W.2d 785, 791 (Tex. App.—Houston [1st Dist.] 1999, no pet.) (filed-rate doctrine applied to telecom service carrier's tariff in action to collect charges that customer refused to pay); Jenkins v. Entergy PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 35 Appx. Page 494 of 740 Most of ERCOT’s cases involve claims for damages or monetary relief.20 It is no surprise that the filed-rate doctrine bars such cases, because any monetary award would require the court to examine the agency’s filed rates and retroactively determine what would have been appropriate. ERCOT identified a single case in which the filed-rate doctrine precluded claims for equitable relief.21 That case involved federal RICO claims, restraint of competition, and price fixing, and the equitable relief sought had nothing to do with agency rulemaking or the APA. Because Aspire’s claims are not based on filed rates, because the ECRS Rules were not approved by PUC in the first instance, and because ERCOT relies on matters extrinsic to Plaintiffs’ Petition, the 91a challenge must be denied. D. Aspire does not allege a “private cause of action” under PURA § 39.157. ERCOT also argues that Aspire’s claim alleging ultra vires acts should be dismissed because Aspire has no private cause of action for violations of PURA § 39.157. ERCOT Am. PTJ at 26-27. But Aspire does not assert a private cause of action under § 39.157. Rather, Aspire seeks a declaration that the ECRS Rules violate PURA § 39.157 and that by approving the ECRS Rules, the PUC Corp., 187 S.W.3d 785, 791 (Tex. App.—Corpus Christi–Edinburg 2006, pet. denied) (trial court erred in dismissing suit for want of jurisdiction in suit alleging that electric companies conspired with utility in a price-gouging scheme under a federal tariff); Tex. Commercial Energy v. TXU Energy, Inc., 413 F.3d 503, 506 (5th Cir. 2005) (filed-rate doctrine precluded energy retailer from recovering damages for violations of federal and state antitrust law in suit against electric power generators)). 20 See supra at n.19. 21 ERCOT Am. PTJ at 24-25 (citing Util. Choice, L.P. v. TXU Corp., No. CIV.A.H-05-573, 2005 WL 3307524 (S.D. Tex. Dec. 6, 2005)). PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 36 Appx. Page 495 of 740 Commissioners committed ultra vires acts.22 APA § 2001.038 and the Uniform Declaratory Judgments Act allow this type of relief. See Tex. Civ. Prac. & Rem. Code. § 37.004(a); see also Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 272 (Tex. App.— Austin 2022, no pet.) (rural telecom-services providers were entitled to a declaratory judgment that the PUC acted ultra vires in failing to fully fund Texas Universal Service Fund as required by PURA). Furthermore, the thrust of ERCOT’s 91a challenge is based on factual arguments that appear nowhere in the Petition. ERCOT argues that the ECRS program does not violate PURA, asserting that “ERCOT is revenue-neutral,” ERCOT “acts as a market clearinghouse,” “ECRS is exclusively a reliability tool,” and ECRS is “necessary to ensure ERCOT can keep supply and demand in balance.” ERCOT Am. PTJ at 28-30. ERCOT’s 91a challenge, moreover, misstates Aspire’s claim: “Aspire seeks to invalidate various PUCT orders and the entire ECRS program based on the claim that ECRS’s alleged costs outweigh its reliability benefits.” Id. at 30. Again, not so: Aspire seeks to invalidate the ECRS Rules on the grounds that they violate the APA and that Defendants lacked power to enact them. If the Court finds it has jurisdiction to reach the merits of Plaintiff’s application for temporary injunction, Aspire asserts that the Court should enjoin further use of the ECRS Rules because they will continue to inflict irreparable harm But that is an issue for another day. It is not a valid basis for ERCOT’s 91a challenge. 22 Petition at 22. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 37 Appx. Page 496 of 740 Because ERCOT has asserted no valid grounds for dismissal, its Rule 91a Motion must be denied. III. ERCOT’S PLEA IN ABATEMENT SHOULD BE DENIED, BECAUSE THERE IS NO REQUIREMENT THAT ALL MARKET PARTICIPANTS BE JOINED IN ASPIRE’S CHALLENGE IN THIS COURT. In addition to its Plea to the Jurisdiction and its motion to dismiss under Rule 91a, ERCOT has asserted a Plea in Abatement, arguing that even if the Court finds jurisdiction, Aspire’s challenge still “must nonetheless be dismissed or abated because Aspire failed to join all necessary and indispensable parties.” ERCOT Am. PTJ at 33-37. Again, ERCOT is wrong.23 A. ERCOT fails to prove other parties are indispensable under TRCP 39. When a party seeks to compel joinder of non-parties, including in a declaratory-judgment action, Texas Rule of Civil Procedure 39 governs. In re Kappmeyer, 668 S.W.3d 651, 655 (Tex. 2023) (orig. proceeding). ERCOT relies on Rule 39(a)(2), which provides in relevant part that A person … shall be joined as a party in the action if he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. (Emphasis added.) “[T]he difference between having an interest and claiming one is at the heart of the Rule 39(a)(2) analysis.” Kappmeyer, 668 S.W.3d at 658. “Claim,” 23 It is not clear that ERCOT’s Plea in Abatement is set for hearing. It is not jurisdictional. And in announcing the hearing for October 16, the Court said only that it would “set the plea [to jurisdiction] and the 91a,” making no mention of the Plea in Abatement. Status Conf. Tr. at 26, 29. But Aspire addresses it in an abundance of caution. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 38 Appx. Page 497 of 740 in the context of Rule 39, means to demand or assert. Crawford v. XTO Energy, Inc., 509 S.W.3d 906, 912 (Tex. 2017). The Supreme Court has explained that Rule 39(a)(2) “does not require joinder of persons who potentially could claim an interest in the subject of the action; it requires joinder, in certain circumstances, of persons who actually claim such an interest.” Id. at 913 (emphasis added). Accordingly, the fact that the ultimate judgment could affect nonparties does not in itself require their joinder under Rule 39. Kappmeyer, 668 S.W.3d at 658. ERCOT, as the party seeking to compel joinder, has the burden to show that the non-parties it contends are necessary are in fact necessary under Rule 39. In re Austin Hous. Fin. Corp., No. 03-22-00091-CV, 2022 WL 2960796, at *3 (Tex. App.— Austin July 27, 2022, orig. proceeding); see also Crawford, 509 S.W.3d at 912 (noting that despite the arguments of the party seeking to compel joinder, “no record evidence shows or even suggests that a single one of the [non-party] adjacent landowners has ever demanded or asserted ownership of or a royalty interest in those minerals”). Simply put, ERCOT has not provided any evidence, or even any argument, that any non-party has “actually claim[ed]” an interest in the subject matter of this litigation. Crawford, 509 S.W.3d at 913. At most, ERCOT has provided links to a list of all participants in the ERCOT market, as well as lists of all market participants participating in ECRS. ERCOT Am. PTJ at 37 & nn. 45-46. But ERCOT has not shown how any of these market participants has actually claimed an interest, which is fatal to its plea in abatement. See Kappmeyer, 668 S.W.3d at PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 39 Appx. Page 498 of 740 657 n.8 (spreadsheet of non-party property owners insufficient to require joinder when there was no evidence of any of them claiming an interest).24 B. An APA challenge requires only a complaining party and the state agency. The statute that confers jurisdiction in this Court over Aspire’s APA challenge also makes clear that the only necessary parties are Aspire and the government agency that violated the APA. Tex. Gov’t Code § 2001.038(c). If the APA required the addition of all parties who might be impacted—as ERCOT argues—the statute would have said so. Case law is replete with APA challenges in which the only defendants are the state actors. See, e.g., Tex. Dep’t of Ins. v. Tex. Ass’n of Health Plans, 598 S.W.3d 417, 420 (Tex. App.—Austin 2020, no pet.); Hegar v. Ryan, LLC, No. 03-13-00400-CV, 2015 WL 3393917, at *4 (Tex. App.—Austin May 20, 2015, no pet.). To hold that every person impacted by a state agency’s violation of the APA must be joined in a declaratory judgment action to void the rule would be to require most of the State of Texas to be joined in any such action. That is not the law. Finally, ERCOT argues that the non-party Market Participants are “jurisdictionally indispensable.” ERCOT Am. PTJ at 34-36. But critically, for a party to be jurisdictionally indispensable, Rule 39’s requirements must first be 24 On October 4, 2024, Calpine Corporation filed a letter with the Court noting that it might intervene if the case proceeds beyond the jurisdictional dispute. Yet, ERCOT’s plea in abatement is tellingly silent about Calpine. While ERCOT insists each and every Market Participant is a necessary party, it has offered no evidence of any “claim” made by a Market Participant relating to Aspire’s requested declaratory judgment. Moreover, Calpine’s letter demonstrates that if other Market Participants want to “claim” an interest in the dispute, they have a procedural mechanism to do so. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 40 Appx. Page 499 of 740 satisfied, and then other requirements must be met. Vondy v. Commissioners Court of Uvalde Cnty., 620 S.W.2d 104, 106 (Tex. 1981). Here, because ERCOT has not even cleared the hurdle of Rule 39, its plea in abatement fails. PRAYER FOR RELIEF For these reasons, Aspire respectfully asks that this Court deny Defendants’ Amended Pleas to the Jurisdiction and ERCOT’s alternative Rule 91a Motion to Dismiss and Plea in Abatement, and award Aspire any other relief to which it is justly entitled. PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 41 Appx. Page 500 of 740 Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Phone: (214) 282-8579 Fax: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com Ken Carroll Texas Bar No. 03888500 KCarroll@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: 214-855-3000 Fax: 214-580-2641 ATTORNEYS FOR PLAINTIFF PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 42 Appx. Page 501 of 740 CERTIFICATE OF SERVICE The undersigned hereby certifies that on October 9, 2024, a true and correct copy of the foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Brent Rubin PLAINTIFF’S CONSOLIDATED RESPONSE TO AMENDED PLEAS TO JURISDICTION, AND ALTERNATIVE RULE 91a MOTION AND PLEA IN ABATEMENT – PAGE 43 Appx. Page 502 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 92997792 Filing Code Description: Answer/Response Filing Description: PLAINTIFF’S CONSOLIDATED RESPONSE TO DEFENDANTS’ AMENDED PLEAS TO THE JURISDICTION AND ERCOT’s RULE 91a MOTION TO DISMISS AND REQUEST FOR ABATEMENT Status as of 10/10/2024 8:33 AM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/9/2024 8:02:32 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/9/2024 8:02:32 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/9/2024 8:02:32 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/9/2024 8:02:32 PM SENT Ken Carroll kcarroll@ccsb.com 10/9/2024 8:02:32 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 10/9/2024 8:02:32 PM SENT John RHulme John.Hulme@oag.texas.gov 10/9/2024 8:02:32 PM SENT Laura Courtney laura.courtney@oag.texas.gov 10/9/2024 8:02:32 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 10/9/2024 8:02:32 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/9/2024 8:02:32 PM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status George Fibbe 24036559 george.fibbe@bakerbotts.com 10/9/2024 8:02:32 PM SENT Laura Natelson laura.natelson@bakerbotts.com 10/9/2024 8:02:32 PM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 10/9/2024 8:02:32 PM SENT Appx. Page 503 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 92997792 Filing Code Description: Answer/Response Filing Description: PLAINTIFF’S CONSOLIDATED RESPONSE TO DEFENDANTS’ AMENDED PLEAS TO THE JURISDICTION AND ERCOT’s RULE 91a MOTION TO DISMISS AND REQUEST FOR ABATEMENT Status as of 10/10/2024 8:33 AM CST Case Contacts Matthew Erickson Matthew.erickson@bakerbotts.com 10/9/2024 8:02:32 PM SENT Lizzette Velazquez lvelazquez@ccsb.com 10/9/2024 8:02:32 PM SENT Judy Garrison jgarrison@ccsb.com 10/9/2024 8:02:32 PM SENT Becky Dunn bdunn@ccsb.com 10/9/2024 8:02:32 PM SENT Carolyn Taylor ctaylor@ccsb.com 10/9/2024 8:02:32 PM SENT Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/9/2024 8:02:32 PM SENT Elin Isenhower eisenhower@winstead.com 10/9/2024 8:02:32 PM SENT Appx. Page 504 of 740 10/9/2024 5:52 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Candy Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, AND COURTNEY § HJALTMAN, § § 345th JUDICIAL DISTRICT Defendants. UNOPPOSED MOTION FOR JUDICIAL NOTICE Pursuant to Texas Rule of Evidence 201, Plaintiff Aspire Power Venture, LP submits this Unopposed Motion for Judicial Notice and respectfully shows the Court as follows. 1. This lawsuit concerns ERCOT’s adoption of, and in some cases PUC’s approval of, Nodal Protocol Revision Requests (NPRRs) creating and modifying the ERCOT Contingency Reserve Service (ECRS). 2. At the October 1, 2024, status conference in this lawsuit, the parties addressed the record relating to the creation and revision of ECRS. The Court indicated that it desired to know the documents that were put in front of the public relating to ECRS. 3. ERCOT’s and PUC’s counsel made representations regarding their respective materials relating to the NPRRs. Specifically, ERCOT’s counsel UNOPPOSED MOTION FOR JUDICIAL NOTICE PAGE 1 Appx. Page 505 of 740 represented that “ERCOT’s protocol revisions are on its website. It’s very well organized. [Aspire has] full access to them” and “we’re not going to contest authenticity.” Status Conference Transcript, Ex. A at 30:12, 30:24-31:1. PUC’s counsel added, “All the PUC materials are readily available on the PUC’s website. They already have them. There’s no issue there.” Id. at 31:6-8. 4. Further, neither ERCOT nor PUC oppose this Motion. 5. Texas Rule of Evidence 201(b)(2) provides that the Court may judicially notice facts not subject to dispute because they “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” 6. Based on the representations of ERCOT’s and PUC’s counsel, the materials on ERCOT’s and PUC’s websites relating to the adoption and approval of the NPRRs can be accurately and readily determined and their accuracy cannot reasonably be disputed. Therefore, Aspire respectfully requests that the Court take judicial notice of the records relating to the following NPRRs, available at the urls from the ERCOT and PUC websites linked below, including the documents contained within these links: ERCOT NPRR PUC Approval Date Adopted Orders NPRR 863 – Creation of ECRS and N/A Feb. 12, 2019 Revisions to Responsive Reserve NPRR 992 – Updated Day-Ahead N/A Aug. 11, 2020 Liability for NPRR863 NPRR 1015 – Clarification of DAM N/A Aug. 11, 2020 implementation of NPRR863 Phase 2 NPRR 1079 – Day-Ahead Market Approval Order Aug. 24, 2021 RRS/ECRS 48 Hour Report Clarification (Aug. 10, 2021) UNOPPOSED MOTION FOR JUDICIAL NOTICE PAGE 2 Appx. Page 506 of 740 (PUC Project No. 52307) 1 NPRR 1096 – Require Sustained Approval Order May 12, 2022 Two-Hour Capability for ECRS and (PUC Project No. Four-Hour Capability for Non-Spin 52934) 2 (April 28, 2022) NPRR 1148 – Language Cleanup Approval Order Jan. 26, 2023 Related to ECRS (Dec. 20, 2022) (PUC Project 54445) 3 NPRR 1178 – Expectations for Approval Order June 28, 2023 Resources Providing ECRS (Jun. 20, (PUC Project 54445) 4 2023) NPRR 1196 – Require Sustained Approval Order Feb. 1, 2024 Two-Hour Capability for ECRS and (PUC Project No. Four-Hour Capability for Non-Spin 54445) 5 (Dec. 19, 2023) NPRR 1213 – Allow DGRs and Approval Order Apr. 11, 2024 DESRs on Circuits Subject to Load (PUC Project No. Shed to Provide ECRS and Clarify 54445) 6 Language Regarding DGRs and DESRs Providing Non-Spin (Feb. 27, 2024) NPRR 1224 – ECRS Manual Rejection Order Aug. 5, 2024 Deployment Triggers (June 18, 2024) (PUC Project No. 54445) 7 1 Additional materials regarding NPRR 1079 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=52307&itemNumber=4. 2 Additional materials regarding NPRR 1096 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=52934&itemNumber=8; https://interchange.puc.texas.gov/search/documents/?controlNumber=52934&itemNumber=9. 3 Additional materials regarding NPRR 1148 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=2; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=3. 4 Additional materials regarding NPRR 1178 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=17; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=18; 5 Additional materials regarding NPRR 1196 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=67. 6 Additional materials regarding NPRR 1213 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=71. 7 Additional materials regarding NPRR 1224 are available at https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=81; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=82; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=84; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=85; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=86; UNOPPOSED MOTION FOR JUDICIAL NOTICE PAGE 3 Appx. Page 507 of 740 CONCLUSION For these reasons, Aspire respectfully asks the Court to take judicial notice of the materials listed and linked above and grant Aspire any other relief to which it is entitled. Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Phone: (214) 282-8579 Fax: (214) 602-9187 Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com Ken Carroll Texas Bar No. 03888500 KCarroll@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: 214-855-3000 Fax: 214-580-2641 ATTORNEYS FOR PLAINTIFF https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=87; https://interchange.puc.texas.gov/search/documents/?controlNumber=54445&itemNumber=88. UNOPPOSED MOTION FOR JUDICIAL NOTICE PAGE 4 Appx. Page 508 of 740 CERTIFICATE OF CONFERENCE The undersigned hereby certifies that on various dates through and including October 9, 2024, she conferred with counsel for Defendants regarding the relief requested in this Motion, who stated that they are not opposed to the relief requested. /s/ Chrysta L. Castañeda Chrysta L. Castañeda CERTIFICATE OF SERVICE The undersigned hereby certifies that on October 9, 2024, a true and correct copy of the foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Chrysta L. Castañeda Chrysta L. Castañeda UNOPPOSED MOTION FOR JUDICIAL NOTICE PAGE 5 Appx. Page 509 of 740 1 1 REPORTER'S RECORD 2 VOLUME 1 OF 1 3 TRIAL COURT CAUSE NO. D-1-GN-24-003384 4 5 ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF 6 Plaintiff, § § 7 v. § § 8 PUBLIC UTILITY COMMISSION § OF TEXAS, ELECTRIC § TRAVIS COUNTY, TEXAS 9 RELIABILITY COUNCIL OF § TEXAS, THOMAS GLEESON, § 10 LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § 11 JACKSON, AND COURTNEY § HJALTMAN, § 12 Defendants. § 345TH JUDICIAL DISTRICT 13 14 ------------------------------ 15 16 STATUS HEARING 17 18 ------------------------------ 19 20 On the 1st day of October, 2024, the following 21 proceedings came on to be heard in the above-entitled 22 and numbered cause before the Honorable Catherine A. 23 Mauzy, Judge presiding in Austin, Travis County, Texas; 24 Proceedings reported by machine shorthand. 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 1 of 33 Appx. Page 510 of 740 2 1 A P P E A R A N C E S 2 3 FOR THE PLAINTIFF ASPIRE POWER VENTURES, LP: 4 MS. CHRYSTA CASTANEDA SBOT NO. 15325625 5 NICOLE LYNNE GRUNT MICHAEL SBOT NO. 24067767 6 THE CASTANEDA FIRM 325 N. ST. PAUL 7 SUITE 2030 DALLAS, TEXAS 75201 8 PHONE: (214)282-8579 chrysta@castaneda-firm.com 9 nicole@castaneda-firm.com 10 - and - 11 MS. MONICA WISEMAN LATIN SBOT NO. 00787881 12 MR. BRENT RUBIN SBOT NO. 24086834 13 CARRINGTON COLEMAN SLOMAN & BLUMENTHAL LLP 901 MAIN STREET, SUITE 5500 14 DALLAS, TEXAS 75202 PHONE: (214)855-3000 15 mlatin@ccsb.com brubin@ccsb.com 16 17 FOR THE DEFENDANT PUBLIC UTILITY COMMISSION: 18 MR. JOHN R. HULME SBOT NO. 10258400 19 MS. AMANDA CAGLE SBOT NO. 00783569 20 MR. JORDAN PRATT SBOT NO. 24140277 21 OFFICE OF THE ATTORNEY GENERAL P.O. BOX 12548 22 AUSTIN, TEXAS 78711 PHONE: (512)475-4229 23 john.hulme@oag.texas.gov amanda.cagle@oag.texas.gov 24 jordan.pratt@oag.texas.gov 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 2 of 33 Appx. Page 511 of 740 3 1 A P P E A R A N C E S 2 3 FOR THE DEFENDANT ERCOT: 4 MR. ELLIOT CLARK SBOT NO. 24012428 5 WINSTEAD, LP 600 W. 5TH STREET 6 SUITE 900 AUSTIN, TEXAS 78701 7 PHONE: (512)370-2800 eclark@winstead.com 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 3 of 33 Appx. Page 512 of 740 4 1 INDEX 2 VOLUME 1 3 STATUS HEARING 4 OCTOBER 1, 2024 5 PAGE VOL 6 Proceedings 5 1 7 Announcements 5 1 8 9 Argument by Ms. Castaneda 6, 22 1 Argument by Mr. Hulme 14 1 10 Argument by Mr. Clark 17 1 11 Recess 29 1 12 Hearing resumes 29 1 13 Adjournment 32 1 14 Reporter's Certificate 33 1 15 16 17 18 19 20 21 22 23 24 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 4 of 33 Appx. Page 513 of 740 5 1 P R O C E E D I N G S 2 * * * * * 3 (Open court) 4 THE COURT: Let me call Cause Number 02:01PM 5 D-1-GN-24-003384, Aspire Power Ventures LP versus Public 6 Utility Commission of Texas, et al. May I have your 7 appearances, please. 8 MS. CASTANEDA: Yes. Chrysta Castaneda and 9 Nicole Michael, Monica Latin, and Brent Rubin for the 02:01PM 10 Plaintiff Aspire Power Ventures. 11 MR. HULME: For the Defendant, Public 12 Utility Commissioners, John Hulme with my colleagues 13 Amanda Cagle and Jordan Pratt. 14 MR. CLARK: Elliot Clark for the Defendant, 02:01PM 15 ERCOT. 16 THE COURT: Thank you. All right. So I 17 understand we're having this little hearing today 18 because you-all couldn't reach an agreement about what 19 we're going to hear when, while I was gone. So I have 02:01PM 20 perused some pleadings, and correct me if I'm wrong, but 21 I think the issue is whether or not we're going to hear 22 the pleas to the jurisdiction first or we're going to 23 set them at the same time as the TI, correct? 24 MS. CASTANEDA: Yes, Your Honor, that is 02:02PM 25 the issue. 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 5 of 33 Appx. Page 514 of 740 6 1 THE COURT: All right. So I will hear from 2 both sides briefly, but I don't think -- I don't think 3 this is an hour-long hearing. 4 MS. CASTANEDA: I completely agree with 02:02PM 5 Your Honor. May I proceed? 6 THE COURT: Yes. 7 MS. CASTANEDA: Would you like me to 8 proceed from here or up there? 9 THE COURT: Whatever you're most 02:02PM 10 comfortable with is fine with me. 11 MS. CASTANEDA: Okay. I'll just stay here. 12 Your Honor, what is this lawsuit about? 13 Let me just start with that. Plaintiff, Aspire Power 14 Ventures, is a qualified services entity market 02:02PM 15 participant on the ERCOT grid. I know that's a lot of 16 acronyms. I'm going to go through some of these briefly 17 just to set the stage. 18 THE COURT: I'm glad you did, and I should 19 have brought -- I had been reading your pleadings, and I 02:02PM 20 was making myself a cheat sheet of all those acronyms, 21 but go ahead. 22 MS. CASTANEDA: Long and short of it is 23 Aspire participates in financial transactions on the 24 ERCOT grid. The Court may be aware that ERCOT has a 02:03PM 25 physical component, the delivery of electricity, and a 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 6 of 33 Appx. Page 515 of 740 7 1 financial component, the settlement of all the 2 transactions that drive the delivery of electricity. 3 The essence of this lawsuit is that certain 4 nodal protocol provision requests and the adopting 02:03PM 5 orders were not issued in accordance with the 6 Administrative Procedures Act and that the temporary 7 injunction we seek is to enjoin the use of specific 8 orders. 9 THE COURT: Isn't that, though, a legal 02:03PM 10 issue that I have to decide? Because the other side is 11 going to tell me that the statement you just made about 12 the law is not correct and that the adoption of those 13 orders does not fall under the Administrative Procedures 14 Act; and therefore, there's not jurisdiction. 02:03PM 15 MS. CASTANEDA: That's why the two issues 16 should be tried together, Your Honor, because that is a 17 central legal issue. If I might approach -- well, let 18 me back up for just a minute. The NPRRs at issue 19 concern the ERCOT Contingency Reserve Service, ECRS. 02:04PM 20 What the ECRS does is it withholds, under certain 21 circumstances, a certain portion of the generation 22 capacity of the grid by paying the generators an 23 enhanced price to keep it off the grid, in quote, 24 reserve. 02:04PM 25 However, the independent market monitor 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 7 of 33 Appx. Page 516 of 740 8 1 that evaluates all of this has opined that not only does 2 it not really result in increased reliability, it has 3 cost Texans in the first six months of its deployment 4 alone an additional $12 billion. It doesn't work. But 02:04PM 5 that's not really the critical issue right now. The 6 critical issue is that it does not comply with the 7 Administrative Procedures Act. And furthermore, Your 8 Honor, it is ultra vires. It is the beyond the capacity 9 of the agencies to have adopted it. 02:04PM 10 THE COURT: And you need to explain to me 11 why I need an evidentiary hearing to decide that 12 specific legal issue. 13 MS. CASTANEDA: Sure, Your Honor. Well, 14 first, I would point to the plea to the jurisdiction 02:05PM 15 filed by ERCOT in particular, which lays out a number of 16 evidentiary pieces in connection with its plea to the 17 jurisdiction. 18 At base, the plea to the jurisdiction and 19 the temporary injunction have at their heart the recent 02:05PM 20 June decision of the Texas Supreme Court in PUC versus 21 RWE Renewables. 22 Now, the essential holding for this case is 23 actually the Texas Supreme Court's discussion relating 24 to the APA. And what it does not say is that the PUC 02:05PM 25 and ERCOT are exempt from complying with the APA. In 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 8 of 33 Appx. Page 517 of 740 9 1 the face of a challenge to specific orders as to whether 2 they complied with the APA, the Court doesn't say, oh, 3 we're beyond all of that because of a new statute or 4 because of the way that they do their business. None of 02:05PM 5 that. 6 It went on to describe how there's an 7 interplay, a delegation of rule-making authority from 8 the PUC to ERCOT and that there's stakeholder processes 9 and there are things going on that involve the public, 02:06PM 10 and that's the answer as far as that question got 11 reached. But it didn't actually get reached on the 12 merits because it found that the Third Court of Appeals 13 did not have jurisdiction over the direct appeal in the 14 first place. 02:06PM 15 So the real issue in RWE, the essential 16 issue was, did a direct appeal lie over the orders of 17 the PUC, were they competition rules such that the 18 Public Utilities Regulation Act, under which all of this 19 was set up, authorize a direct appeal to the Court of 02:06PM 20 Appeals, or more properly, should that APA challenge 21 have been lodged in the District Court, which the APA 22 provides for. 23 The Supreme Court said no jurisdiction, 24 Third Court of Appeals, we dismiss the entire thing for 02:06PM 25 want of jurisdiction. But again, what wasn't directly 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 9 of 33 Appx. Page 518 of 740 10 1 answered and would be contrary to the express language 2 of the APA if answered in the way that Defendants would 3 like it answered was the question of, how does the APA 4 apply to the combined efforts of the PUC and ERCOT in 02:07PM 5 enacting the NPRRs, which are then approved by the PUC. 6 Plaintiff, Aspire Power Ventures, submits 7 there is no work-around, that the APA must be satisfied, 8 and it is not satisfied in a number of ways. They are 9 obvious and frankly are unlikely to be contested, but 02:07PM 10 must be established by the record. 11 So the evidence the Court needs to hear 12 from the Plaintiff's perspective that pertains to both 13 is the entire record of the rule-making, and there are a 14 number of rules that are at issue here, although it's 02:07PM 15 Plaintiff's assertion that none of it meets the several 16 requirements that are missing from the APA. That 17 evidence has to be admitted, and then Plaintiff intends 18 to call a single expert witness in support of the 19 temporary injunction to explain how this has been and 02:08PM 20 continues to inflict imminent harm to the state of Texas 21 and to the participants on the grid in the way it's been 22 administered, and the independent market monitor has 23 directly opined. 24 If I might, Your Honor, I would like to 02:08PM 25 approach with a handout. This is a listing of just a 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 10 of 33 Appx. Page 519 of 740 11 1 few cases that are reported in the Third Court of 2 Appeals. 3 THE COURT: Thank you. 4 MS. CASTANEDA: And here is a copy of some 02:08PM 5 of those cases -- where a temporary injunction and the 6 plea to the jurisdiction were tried together by the 7 District Court, including a case against the Public 8 Utility Commission of Texas. 9 And in none of these cases was it held that 02:08PM 10 it would be improper to try the plea to the jurisdiction 11 along with the temporary injunction. And in fact, in 12 the case I would specifically would like to point to, 13 In Re Pablos, in which the Austin Court of Appeals was 14 asked to issue mandamus to force the trial judge to rule 02:09PM 15 on the plea to the jurisdiction before taking up the 16 temporary injunction, mandamus did not issue. It is not 17 an abuse of this Court's discretion to try the two 18 issues together because, in particular, they are 19 interrelated. 02:09PM 20 THE COURT: No, I -- I agree with you. 21 That has happened since I've been on the bench. I don't 22 think it's -- I'm aware it's not an abuse of my 23 discretion to try them together. I'm with you on that. 24 MS. CASTANEDA: Thank you, Your Honor. 02:09PM 25 THE COURT: But nonetheless, I think it is 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 11 of 33 Appx. Page 520 of 740 12 1 my opinion I have to be persuaded that I can't try the 2 plea without hearing evidence that would pertain to the 3 TI, and that's what I'm focused on. Because if they can 4 be separated, it is my opinion that the plea ought to be 02:09PM 5 tried first. 6 MS. CASTANEDA: So, Your Honor, the plea to 7 the jurisdiction filed by ERCOT has a number of factual 8 references throughout it that are supported by specific 9 documents; for example, let me just cite Footnote 14: 02:10PM 10 See final ERCOT board adopting NPRR 1096. 11 It goes on on several other counts. 12 Notably, in the comments to NPRR 1224, Aspire made 13 certain statements. There is evidentiary references 14 baked into their plea to the jurisdiction that are 02:10PM 15 directly related to the evidence that plaintiffs will 16 present in connection with the temporary injunction. 17 And for those reasons, the issue of 18 judicial economy plus the issue of the direct appeal -- 19 I mean the interlocutory appeal that will result from 02:10PM 20 any decision this Court makes on either issue. There 21 will be an interlocutory appeal. If the Court denies 22 jurisdiction, as Plaintiff, Aspire, contends is 23 appropriate -- I'm sorry, denies the plea to the 24 jurisdiction, which we contend is appropriate, 02:11PM 25 Defendants will have an immediate right of interlocutory 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 12 of 33 Appx. Page 521 of 740 13 1 appeal when that issues. That will stay all proceedings 2 in this trial court. 3 Aspire and the people of Texas will not be 4 able to present the merits of why this order is void for 02:11PM 5 failure to comply with the law and why it should be 6 enjoined, because it is arbitrarily driving up the price 7 of electricity for no beneficial purpose, according to 8 the independent market monitor. 9 If those two issues are not tried together, 02:11PM 10 that hearing happens well down the road. And let me 11 also state -- 12 THE COURT: Well, but if they are tried 13 together and I grant the plea to the jurisdiction, then 14 if we're talking about judicial economy, that is not 02:12PM 15 judicial economy. Because how long -- first of all, how 16 long would a combined hearing take, the plea plus the TI 17 if I were to decide to hear them together? 18 MS. CASTANEDA: One day. One day. And the 19 benefit for judicial economy is if the Court is wrong on 02:12PM 20 the granting of the plea to the jurisdiction, it goes up 21 with the evidence on the temporary injunction, which the 22 Court of Appeals then can deal with the entirety of the 23 record to decide what is the appropriate result under 24 this circumstance. That would be best for not only the 02:12PM 25 litigants, for the Court's judicial economy, but also 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 13 of 33 Appx. Page 522 of 740 14 1 for the people of Texas. 2 Let me also say in closing on these 3 remarks, it's obvious that the Texas Legislature is 4 going to be meeting again soon. The functioning of the 02:12PM 5 ERCOT grid remains a huge challenge for people of Texas 6 and the Legislature. It would be beneficial for 7 everyone concerned to know what is the law pertaining to 8 this particular issue before further errors are 9 committed, as Plaintiff Aspire Ventures would suggest 02:13PM 10 are being committed on a daily basis when Defendants 11 fail to comply with the Administrative Procedures Act. 12 And with that, Your Honor, we would ask 13 that the Court set a temporary injunction hearing for a 14 full day if the Court is available on October 16th, 02:13PM 15 17th, or 18th; and I'll be prepared to address 16 pre-hearing scheduling if the Court sets a date. 17 And with that, I'll rest for the moment. 18 THE COURT: Thank you. 19 Yes, sir, Mr. Hulme. 02:13PM 20 MR. HULME: Good afternoon, Your Honor. 21 Let me start with one thing. It will take more than a 22 day to address all of these issues that counsel has been 23 talking about. The plea to the jurisdiction, ERCOT and 24 the Commission have asked for a two-hour hearing on 02:14PM 25 that. The injunction hearing itself would have to take 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 14 of 33 Appx. Page 523 of 740 15 1 a day. It involves some complicated issues and multiple 2 witnesses. 3 So I think Your Honor has already hit upon 4 the key question here: What's the best way to approach 02:14PM 5 this? The best way to approach this is to take up that 6 plea first and make a decision on what we submit is a 7 very straightforward issue as to whether the Court has 8 jurisdiction in this instance. 9 RWE's case could not be more clear. We 02:14PM 10 would submit that what we have in these approval letters 11 are not agency rules; therefore, there was no 12 jurisdiction of the Court appeals. For the same reason, 13 there is no jurisdiction on the 038 claim. 14 Now, the pleas to the jurisdiction are not 02:14PM 15 set for hearing today, nor is the preliminary 16 injunction, although we've heard a lot of argument about 17 that today. So I will try to be very brief to conserve 18 the Court's time, but we submit again the best way to 19 approach this to save the Court's time as well as the 02:14PM 20 parties' time, would be to set that plea first at the 21 first available date when that is possible and then 22 proceed, if necessary, with the injunction. 23 I don't want to get too far into arguing 24 the plea, Your Honor, because that's not -- 02:15PM 25 THE COURT: That's not what we're here for. 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 15 of 33 Appx. Page 524 of 740 16 1 MR. HULME: That's not what we're here for, 2 but I do want to respond to some of what counsel said. 3 There is a process under which an aggrieved 4 party can complain about something that ERCOT has done, 02:15PM 5 complain to ERCOT and complain to the Commission. And 6 if they're unhappy with what the Commission has done, 7 then you can come to Travis County District Court. 8 The Commission has exclusive jurisdiction 9 over those sorts of claims, those sorts of issues. You 02:15PM 10 can't jump directly to Travis County District Court. 11 That is what Aspire is trying to do in this case. They 12 are arguing as if the Court of Appeals had somehow 13 punted this case to Travis County District Courts. That 14 could not be further from the case, from the truth. 02:16PM 15 The truth is -- 16 THE REPORTER: I'm sorry, can you pull your 17 mic closer? 18 MR. HULME: Sure. 19 If you look at the RWE opinion, and I don't 02:16PM 20 want to be arguing the opinion here, but I think it's 21 very straightforward. These orders are not agency 22 rules, so there is no APA 038 claim, and that's what 23 Aspire has brought in this case. 24 So we are happy to get that plea heard as 02:16PM 25 soon as possible to save everyone time. If we set both 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 16 of 33 Appx. Page 525 of 740 17 1 of those matters for the same day, as Aspire proposes, 2 that means that the Commission and ERCOT are going to 3 have to prepare for an injunction hearing. That would 4 be, I would argue, a massive waste of state resources, 02:17PM 5 as well as the resources of ERCOT and its potential 6 witnesses. And personally, I would rather see those 7 individuals working to keep our grid in balance rather 8 than preparing for an injunction hearing that will never 9 be necessary because the Court simply lacks jurisdiction 02:17PM 10 because Aspire did not do what it needed to do here. 11 THE COURT: Thank you. 12 MR. HULME: Thank you. 13 THE COURT: Yes, sir, Mr. Clark. 14 MR. CLARK: Thank you, Your Honor. I mean, 02:17PM 15 I agree with Mr. Hulme. We don't need witnesses. We 16 don't need evidence to decide the plea. Included with 17 our plea is a 91a as well as a plea in abatement. Those 18 are all legal on the pleadings, so we won't need to put 19 on any evidence at the plea hearing for the 91a or the 02:17PM 20 abatement. There are -- I'm not going to argue those 21 today as we said, but there are many reasons why this 22 case shouldn't proceed, most prominently the lack of 23 jurisdiction. 24 So the way I would think of it is, in the 02:18PM 25 RWE case, there's a special rule that says if you have a 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 17 of 33 Appx. Page 526 of 740 18 1 competition rule that the PUC adopted, you can directly 2 appeal that to the Third Court of Appeals. But if you 3 have a rule that the PUC adopted, you can go to Travis 4 County Court. And so you say, think of a rule as a duck 02:18PM 5 and a competition rule as a white duck. And so what the 6 Texas Supreme Court said in RWE was, this order is not 7 even a duck, much less a white duck, so you don't have 8 jurisdiction here. 9 Well, that's exactly what our case is. 02:18PM 10 This is a duck. They're claiming that they have a rule 11 adopted by the PUC that gives this Court jurisdiction. 12 The Texas Supreme Court has clearly stated that is not 13 the case. Consequently, the PUC's order was not an 14 agency adopted rule under the APA. It couldn't be more 02:19PM 15 clear. 16 So if this is not an agency adopted rule 17 that we're here fighting about, this Court lacks 18 jurisdiction. And we'll save the rest of the argument 19 on the plea until then. But I agree that I shouldn't 02:19PM 20 have to pull witnesses from their jobs operating the 21 grid to prepare for this hearing and then have them come 22 down and testify for this hearing. 23 And if we have a combined hearing and you 24 determine at the beginning of that hearing, you know 02:19PM 25 what, I don't have jurisdiction, sorry, we're not going 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 18 of 33 Appx. Page 527 of 740 19 1 to go forward with the temporary injunction hearing, 2 that would be -- at that point, I think it might be an 3 abuse of discretion, but it would be unnecessary. 4 Right? Like, once you determine you don't have 02:19PM 5 jurisdiction, the case is done. It should just be 6 dismissed. We wouldn't then march through to a 7 temporary injunction hearing after you've already 8 determined you don't have jurisdiction. 9 And this argument that they're delegating 02:19PM 10 around the APA, RWE made all those arguments at the 11 Texas Supreme Court. The Legislature is not waiting on 12 anybody. The Texas Supreme Court has spoken on this. 13 So there's nothing that anyone is waiting for in this 14 Court on these issues. So I think it would be a 02:20PM 15 monumental waste of time. It would be a drain on 16 ERCOT's resources. We shouldn't have to pay to prepare 17 for a hearing that ultimately may not be necessary. 18 And there are many parties who, if this 19 Court decides it does have jurisdiction, get past that. 02:20PM 20 If you decide there are viable claims, you get past the 21 91a. The relief that they're seeking has market-wide 22 implications. And because they brought a claim under 23 the declaratory judgment, there are hundreds of other 24 parties that they would need to bring into this lawsuit. 02:20PM 25 They're asking you to declare the entire 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 19 of 33 Appx. Page 528 of 740 20 1 ERCOT rule book void. So there's billions and billions 2 of dollars at stake for people who work in the market 3 every day. But I think before we ever get to any of 4 that, all of those decisions need to be made. As we put 02:20PM 5 in our 91a, the filed rate doctrine doesn't allow a 6 court to give them the relief they're asking for. It is 7 not for a court to judicially lower energy rates in the 8 ERCOT market through equitable relief. 9 The Fifth Circuit has made clear that the 02:21PM 10 prices that get set in the ERCOT market are final rates. 11 Under the filed rate doctrine, those are judicially 12 unassailable. But there is a forum. As Mr. Hulme said, 13 there is a forum. They could have easily gone to the 14 PUC five years ago when ERCOT first passed the first 02:21PM 15 NPRR and said, you know what, we want to appeal that 16 ERCOT action. And then, that would have gone into a 17 contested case. And then possibly, if they didn't get 18 the result they wanted, they could have been in a Travis 19 County Court under a contested case review, but they 02:21PM 20 didn't do that. 21 So again, I apologize for previewing too 22 much of the argument, but I just think, as a matter of 23 judicial efficiency, we shouldn't be put to the time, 24 burden, and expense of preparing for and showing up for 02:22PM 25 a hearing that doesn't ultimately happen. There are 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 20 of 33 Appx. Page 529 of 740 21 1 legal issues that they can be decided without evidence, 2 and we would ask the Court to first set the pleas and 3 the 91a. 4 And as a matter of logistics, Your Honor, 02:22PM 5 because they amended their petition last week and added 6 a new substantive claim, we amended our plea and 91a 7 this morning. They're entitled to 21 days' notice 8 before we have a hearing on that, so that would put 9 October 22nd as the first day to have that heard. 02:22PM 10 That's a jury week. So then, that puts us into the next 11 week of October 28th. And if that 91a is granted, 12 obviously the case is done, and there's no need to have 13 an injunction hearing. 14 I would also point out they've said today 02:22PM 15 they're going to bring an expert witness to a hearing 16 that they're asking for in two and a half weeks. I 17 would like to get -- at least get a Rule 195.5 18 disclosure if we're going to have expert testimony. I 19 don't have that. And so, you know, I don't want to lay 02:22PM 20 behind the log on that and show up at any hearing and 21 object, but they don't get to just put an expert witness 22 on the stand without providing expert disclosures. 23 But I don't think we need to do any of 24 that. These are legal issues. The case law is very 02:23PM 25 clear, and I think we should get that done first; and 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 21 of 33 Appx. Page 530 of 740 22 1 then if there's anything left, there will be an 2 injunction hearing. 3 THE COURT: From your side, if I were to 4 agree with you and think that the plea and the 91a need 02:23PM 5 to be heard first, can you do that in three hours? 6 MR. CLARK: We can do it in two, I think. 7 THE COURT: For both sides? 8 MR. HULME: Yes. 9 THE COURT: All right. You may close the 02:23PM 10 argument briefly. 11 MS. CASTANEDA: Thank you, Your Honor. If 12 the Court reads RWE, which I'm sure the Court has or 13 will, what the Supreme Court does -- and recognize ERCOT 14 was not a party. It was the PUC alone. And the 02:23PM 15 challenge was simply to the orders. They're a single 16 page. It was two orders that were issued during Winter 17 Storm Uri. One was two pages, and one was three pages. 18 There was no other process around those orders. They 19 were issued in an emergency situation. There was no 02:24PM 20 ERCOT-related process beyond it. 21 ERCOT was not a party to it. The Court did 22 not address whether ERCOT complied. The Court simply 23 did not say the APA doesn't apply to the combined 24 entities; and furthermore, what the Court very carefully 02:24PM 25 did was describe the process, the stakeholder process 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 22 of 33 Appx. Page 531 of 740 23 1 that occurs at ERCOT. 2 Now, the Supreme Court thought it was 3 important to look at that issue in the context of 4 deciding whether or not the APA challenge might lie. So 02:24PM 5 I would submit that it's going to be important for this 6 Court to understand the NPRR process that went on with 7 these specific orders to understand whether or not their 8 plea to the jurisdiction is good. Again, we are back to 9 an evidentiary issue on the same record that underlies 02:25PM 10 our application for a temporary injunction. 11 Let me speak briefly to failure to exhaust 12 administrative remedies. I have handed up to the Court 13 Public Utilities Commission of Texas versus AMA, in 14 which the Court squarely rejected the argument. 02:25PM 15 We like -- it's on page 3 under star 4, We 16 likewise overrule the PUC party's contention that AMA 17 failed to exhaust administrative remedies before 18 bringing its APA Section 2001-038(a) challenge. 19 Specifically citing the statute, there is no exhaustion 02:25PM 20 of administrative remedies required on the issue of 21 whether they comply with the APA. Why? Because the PUC 22 does not have jurisdiction to decide its own compliance 23 with the statute. That's this Court's jurisdiction. 24 There is no failure to exhaust administrative remedies. 02:26PM 25 The filed rate doctrine, I would just 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 23 of 33 Appx. Page 532 of 740 24 1 observe that what Aspire is asking for is for disuse 2 going forward prospectively of these orders because they 3 do not comply with the APA. I do believe that addresses 4 a lot of the concerns that defense counsel have raised 02:26PM 5 relating to the issue of what relief is being sought. 6 Finally, Your Honor, on the issue of 7 disclosure, we have laid out a very fulsome petition 8 with basically all the factual assertions. We will 9 bring a witness to call, and we have actually previously 02:26PM 10 served to verify -- verification by said expert of that 11 testimony. We can provide that verification again so 12 that they know squarely. And I'm not opposed to giving 13 a Rule 195.5 disclosure, but we're happy to provide 14 whatever information is necessary once we know what the 02:26PM 15 Court's schedule is. 16 We will be happy to confer for maybe two or 17 three minutes and then tell the Court what we can 18 jointly do. 19 THE COURT: What about the argument that 02:27PM 20 since you've amended your pleading and ERCOT has amended 21 their response that I can't hear you as early as you 22 want to be heard because the notice you're entitled to? 23 MS. CASTANEDA: That all pertains to the 24 Rule 91a. That has really nothing to do with the 02:27PM 25 Court's jurisdiction, and it has nothing do with the 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 24 of 33 Appx. Page 533 of 740 25 1 temporary injunction. 2 THE COURT: Well, I'm not going to slice 3 and dice those. That would be a waste of judicial 4 economy. The plea and the 91a will be heard at the same 02:27PM 5 time. 6 MS. CASTANEDA: Okay. 7 THE COURT: I'm not -- I'm not going to do 8 that. 9 MS. CASTANEDA: We're willing to proceed 02:27PM 10 with less than 21 days' notice on the 91a. It's all the 11 same subject matter that the Court has already heard. 12 There really is a central theme to the defense here, and 13 it underlies all of those issues. 14 THE COURT: Do counsel for the Defendants 02:27PM 15 have any issue with the stipulation that they waive the 16 required notice for the 91a to be heard quicker? 17 MR. CLARK: I don't think I do. I would 18 like to confirm. I know there were some deadlines in 19 91a that courts have held are jurisdictional that can't 02:28PM 20 be waived and some that aren't. So if it is true that 21 they are allowed to waive it, then they can waive it. I 22 will say that -- well, I'll let Mr. Hulme speak. 23 MR. HULME: I was just going to say I have 24 no issue with that, Your Honor. The Commission doesn't. 02:28PM 25 THE COURT: I am well aware of the fight 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 25 of 33 Appx. Page 534 of 740 26 1 that's gone on and gone up to the appellate court about 2 whether or not a plea has to be heard and ruled on 3 before a TI. That's happened in this courthouse 4 repeatedly, so that's not an issue that I have. I'm 02:28PM 5 willing to take that up. But in this instance, I'm not 6 persuaded that I have to have an evidentiary hearing to 7 decide the legal issues. So I'm going to go ahead and 8 set the plea and the 91a. 9 It may be that I'll hold a ruling. It may 02:29PM 10 be that you'll convince me then that I need to hear the 11 evidence that would come out at a TI hearing, but I'm 12 not willing to set that now. So let's do this. 13 Ms. Chambers is here. I'll hear it as 14 quickly as possible. And it looks to me like the first 02:29PM 15 date -- well, are you-all, counsel for the Defendants, 16 available on Wednesday the 16th of October? 17 MR. HULME: Yes, I am, Your Honor. 18 MR. CLARK: Yes, Your Honor, I can be 19 available. 02:29PM 20 THE COURT: All right. I'm going to set it 21 at 9:30 on Wednesday the 16th. It's going to be set for 22 three hours, but that will leave me some time if I need 23 it. If you-all get here, I might let it go a little 24 longer. Yes, ma'am. 02:29PM 25 MS. CASTANEDA: Well, Your Honor, I would 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 26 of 33 Appx. Page 535 of 740 27 1 just observe that it very well may be that we would 2 still be calling a witness in support of our opposition 3 to the plea to the jurisdiction because we do believe 4 evidentiary support is appropriate. 02:30PM 5 THE COURT: We can take that up, and you're 6 going to have to give me some law because that is not my 7 understanding of ruling on a plea to the jurisdiction, 8 but I may very well be wrong. So if you convince me I'm 9 wrong, fine. But I would get any sort of disclosures 02:30PM 10 that the Rules of Procedure require to be done so that 11 somebody doesn't lodge an objection if I allowed you to 12 do that. 13 MS. CASTANEDA: And Your Honor, on that 14 front, we could use the Court's guidance. The automatic 02:30PM 15 disclosures that are provided for normally under the 16 Rules of Civil Procedure are not applicable in the case 17 of a suit against a governmental entity, and so that's 18 been a little bit of a sticking point. If the Court 19 would -- I'm happy to confer and see if we can't come to 02:30PM 20 an agreement on that issue. 21 THE COURT: You-all confer, and if you 22 can't, then you can -- I can set up a Zoom hearing or I 23 could take brief -- you know, do it on submission. But 24 you have to explain -- yeah. 02:31PM 25 MS. CASTANEDA: If we might just recess for 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 27 of 33 Appx. Page 536 of 740 28 1 a few moments here and come back into court? I know the 2 Court is in the middle of another proceeding. 3 THE COURT: I'm in the middle of another 4 proceeding, so I mean I can give you five minutes, but 02:31PM 5 I've got to let these other folks finish their trial. 6 I'll give you five minutes. 7 MS. CASTANEDA: Thank you. 8 MR. CLARK: Your Honor, just to be clear, 9 should we send out a notice of hearing for October 16th 02:31PM 10 at 9:30 a.m.? 11 THE COURT: I don't think you need to send 12 a notice of hearing. I'm giving you an open court 13 notice, and I will make docket note to that effect that 14 you-all were given open court notice. 02:31PM 15 MR. CLARK: Thank you, Your Honor. 16 THE COURT: You're welcome. And let me say 17 this. If I determine that I need to hear evidence or 18 I'm going to go into a TI, I will make sure and leave 19 myself some time on the week of the 28th. So you-all 02:31PM 20 ought to confer about what days that week because at 21 this point my calendar is -- that week of the 28th, 22 29th, or 1st, it looks like. 23 MS. CASTANEDA: 28th, 29th, or 1st? 24 THE COURT: Yes, that's Monday, Tuesday, or 02:32PM 25 Friday. Okay. You-all can go confer for just a minute 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 28 of 33 Appx. Page 537 of 740 29 1 while I make a docket note. Thank you. 2 (Recess taken) 3 MS. CASTANEDA: As I understand it, the 4 Court has set the plea to the jurisdiction and the 91a 02:36PM 5 motions for hearing on October 16th at 9:30 a.m. 6 Defendant ERCOT has filed its papers in 7 support of that hearing. Defendant PUC will file any 8 amendments to its papers in support of that hearing by 9 Friday the 4th. Plaintiff will file its brief in 02:36PM 10 response on October 9th, and we will provide a 11 disclosure of any witnesses that we intend to call for 12 that hearing at the same time and the substance of their 13 testimony. 14 We will need a stipulation, I believe, for 02:36PM 15 some kind of way to have in front of the Court the 16 actual agency record. And we have a dispute about the 17 nature of who is called an agency; but between them, 18 there's stuff at the PUC, there's stuff at ERCOT. It is 19 all on the website. We're supposed to receive a request 02:37PM 20 for admissions response from the Defendants on October 21 9th, I believe. 22 The only exception to this is, if for some 23 reason they refuse to admit what is a matter of agency 24 record, which I hope is not going to be the case, but 02:37PM 25 maybe they can let the Court know. 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 29 of 33 Appx. Page 538 of 740 30 1 MR. CLARK: I'm sorry we're taking up so 2 much time, Your Honor. I can address that if you like 3 or we can save it for another time. 4 THE COURT: Address it briefly. 02:37PM 5 MR. CLARK: As I told Ms. Castaneda on the 6 phone, we're not going to agree to go along with the 7 fiction that there is an administrative record here when 8 they didn't go through the administrative process to 9 create such a record. There's not a rule-making record 02:37PM 10 because there wasn't a rule that's at issue. I told 11 them, I said everything on these NPRRs on ERCOT's 12 website we're not going to contest authenticity, but I'm 13 not going to go along with this idea there's some agency 14 record when you didn't exhaust your administrative 02:38PM 15 remedies against ERCOT to create one. 16 So that's what they're going to get when 17 they get my response to their discovery. And this is 18 not an administrative appeal under the local rules, and 19 therefore there is no administrative record under the 02:38PM 20 local rules. An administrative appeal comes from a 21 contested case. If they had done that, they would have 22 a record, but they didn't do that, so there is no 23 record. 24 ERCOT's protocol revisions are on its 02:38PM 25 website. It's very well organized. They have full 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 30 of 33 Appx. Page 539 of 740 31 1 access to them. Their client has submitted comments to 2 some of those, so the they know how it works, but we 3 don't agree that there's an administrative record. 4 We've made that very clear. 02:38PM 5 MR. HULME: If I may add quickly, Your 6 Honor. All the PUC materials are readily available on 7 the PUC's website. They already have them. There's no 8 issue there. There is no rule-making record because 9 there was no rule-making. 02:39PM 10 THE COURT: I understand. They're not 11 going to admit there is an administrative record or 12 rule-making because they -- so what am I going to do 13 about that, except if I have to decide the legal issues? 14 MS. CASTANEDA: Right, Your Honor. And 02:39PM 15 what the Court calls it is part of the issue the Court 16 is going to decide; however, the existence of whatever 17 the contents of the notice were to the public is very 18 much an issue for the APA claim and the plea to the 19 jurisdiction. 02:39PM 20 THE COURT: Well, that is something you 21 ought to be able to get ahold of it. That is public 22 record. So I don't see -- 23 MS. CASTANEDA: I totally agree. 24 THE COURT: What's the issue with that? 02:39PM 25 MS. CASTANEDA: Only to the extent it needs 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 31 of 33 Appx. Page 540 of 740 32 1 to be admitted into evidence under judicial process, we 2 have a very short period of time. Assuming there is 3 actually no contest to what we're attempting to admit, 4 it should not be an issue. I only raise it to the Court 02:39PM 5 because the Court is going to want to have the record of 6 what was put before the public, I believe. 7 THE COURT: I suspect I will want to have 8 the record of what was put before the public, so I trust 9 that counsel are going to figure out how to get that in 02:40PM 10 front of me at the hearing set on the 16th. Right? 11 MS. CASTANEDA: Thank you, Your Honor. 12 THE COURT: Thank you. 13 MS. CASTANEDA: May we be dismissed? 14 THE COURT: You may. 02:40PM 15 MS. CASTANEDA: Thank you. 16 (Court adjourned) 17 18 19 20 21 22 23 24 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 32 of 33 Appx. Page 541 of 740 33 1 REPORTER'S CERTIFICATE 2 THE STATE OF TEXAS) 3 COUNTY OF TRAVIS ) 4 5 6 I, RACHELLE PRIMEAUX, Official Court Reporter 7 in and for the 419th District Court, Travis County, 8 State of Texas, do hereby certify that the above and 9 foregoing contains a true and correct transcription of 10 all portions of evidence and other proceedings requested 11 in writing by counsel for the parties to be included in 12 this volume of the Reporter's Record, in the 13 above-styled and numbered cause, all of which occurred 14 in open court, in chambers, and/or remotely via 15 videoconference and were reported by me. 16 17 WITNESS MY OFFICIAL HAND this 4th day of 18 October, 2024. 19 20 /s/Rachelle Primeaux 21 RACHELLE PRIMEAUX, CSR NO. 4073 Expiration Date: 4/30/25 22 Official Court Reporter 419th District Court 23 Travis County, Texas P.O. Box 1748 24 Austin, Texas 78767 Phone: (512)854-9329 25 419th District Court Rachelle Primeaux, CSR, RMR, FCRR Official Court Reporter EX A Page 33 of 33 Appx. Page 542 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Envelope ID: 92995831 Filing Code Description: Motion (No Fee) Filing Description: UNOPPOSED MOTION FOR JUDICIAL NOTICE Status as of 10/10/2024 9:23 AM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/9/2024 5:52:14 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/9/2024 5:52:14 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/9/2024 5:52:14 PM SENT Ken Carroll kcarroll@ccsb.com 10/9/2024 5:52:14 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/9/2024 5:52:14 PM SENT Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/9/2024 5:52:14 PM SENT Elin Isenhower eisenhower@winstead.com 10/9/2024 5:52:14 PM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status George Fibbe 24036559 george.fibbe@bakerbotts.com 10/9/2024 5:52:14 PM SENT Laura Natelson laura.natelson@bakerbotts.com 10/9/2024 5:52:14 PM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 10/9/2024 5:52:14 PM SENT Lizzette Velazquez lvelazquez@ccsb.com 10/9/2024 5:52:14 PM SENT Judy Garrison jgarrison@ccsb.com 10/9/2024 5:52:14 PM SENT Becky Dunn bdunn@ccsb.com 10/9/2024 5:52:14 PM SENT Carolyn Taylor ctaylor@ccsb.com 10/9/2024 5:52:14 PM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Appx. Page 543 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Envelope ID: 92995831 Filing Code Description: Motion (No Fee) Filing Description: UNOPPOSED MOTION FOR JUDICIAL NOTICE Status as of 10/10/2024 9:23 AM CST Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status Amanda Cagle amanda.cagle@oag.texas.gov 10/9/2024 5:52:14 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/9/2024 5:52:14 PM SENT John RHulme John.Hulme@oag.texas.gov 10/9/2024 5:52:14 PM SENT Laura Courtney laura.courtney@oag.texas.gov 10/9/2024 5:52:14 PM SENT David Laurent david.laurent@oag.texas.gov 10/9/2024 5:52:14 PM SENT Appx. Page 544 of 740 10/15/2024 11:38 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Schmidt ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ERCOT’S REPLY IN SUPPORT OF ITS AMENDED PLEA TO THE JURISDICTION AND ATERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) hereby files this Reply in support of its Amended Plea to the Jurisdiction and Alternatively, Motion to Dismiss Under Rule 91(a) and Alternatively, Plea in Abatement (the “Amended Plea”). For the reasons set forth herein and in ERCOT’s Amended Plea, the Court should dismiss (or, alternatively, abate) Plaintiff Aspire Power Ventures, LP’s (“Aspire”) claims. REPLY ARGUMENT & AUTHORITIES I. Neither the ERCOT Protocols nor the PUCT’s orders approving Protocol revisions are APA “rules”; Aspire’s claims are, therefore, barred by immunity. Aspire asserts the PUCT and ERCOT have “deliberately” and “illegally” “fractur[ed] the process of rulemaking” in an effort to “sidestep the requirements of the APA.” Resp. at 6. But, in fact, the creation of this two-part, non-APA process was a deliberate decision by the Legislature —as the Texas Supreme Court recognized in RWE, when it rejected the very same arguments Aspire improperly rehashes here. PUCT v. RWE Renewables Ams., LLC, 691 S.W.3d 484, 491–92 (Tex. 2024). -1- Appx. Page 545 of 740 Knowing that the PUCT “lacks the expertise and staff resources to make informed regulatory decisions independent of ERCOT” 1 regarding the “exceptional complexity of grid reliability concerns” 2 and the “complex inner workings of Texas’s utility markets,” 3 the Legislature authorized the PUCT to delegate rulemaking authority to ERCOT—a non-agency—to adopt, through its “painstaking” NPRR process, 4 Protocols for every minutia of the ERCOT market and grid. And in 2021—knowing that ERCOT has long used this “painstaking” NPRR process to adopt and revise Protocols—the Legislature sanctioned the long-existing NPRR process, and modified that process to now require that every ERCOT Protocol: (1) first be “adopted” by ERCOT through its already-existing “formal process,” PURA § 39.151(g-6)—the NPRR process, see Protocols § 21; 5 and then (2) “approved” by the PUCT, as an exercise of its “complete” supervisory authority over ERCOT, PURA §§ 39.151(d), (g-6). Neither ERCOT’s adoption of Protocols, nor the PUCT’s final approval of those Protocols, are subject to the APA. RWE, 691 S.W.3d at 491. Indeed, by this recent PURA amendment, the Legislature recognized that “ERCOT rulemaking and PUC rulemaking are independent endeavors”—and have been since ERCOT’s decades-ago certification as the “independent organization” for the ERCOT region. Id. at 492; see also id. at 491 (“The legislative and regulatory schemes have in turn envisioned separate, complementary purposes of and procedures for PUC rules and ERCOT protocols, notwithstanding the fact that ERCOT and its protocols have consistently been subject to PUC oversight and review.”) (emphasis added). 1 RWE, 691 S.W.3d at 490. 2 In re Entrust Energy, 101 F.4th 369, 380 n.4 (5th Cir. 2024). 3 Texas v. United States Env't Prot. Agency, 829 F.3d 405, 433 (5th Cir. 2016). 4 RWE, 691 S.W.3d at 490–91 (walking through the NPRR process and concluding that “[t]his painstaking procedure serves to leverage the expertise of ERCOT members and industry stakeholders while maintaining transparency and affording interested parties plentiful opportunities to weigh in.”). 5 See also Supplemental Appendix D (Protocols § 21). -2- Appx. Page 546 of 740 RWE squarely resolves the jurisdictional question here. Aspire’s arguments to the contrary are entirely divorced from RWE’s and PURA’s plain language and, as outlined below, must be rejected. A. Aspire mischaracterizes RWE . No doubt aware that RWE forecloses its claims—particularly given its direct participation in that case—Aspire goes through great and disingenuous lengths to distinguish this case from RWE. These attempted distinctions are baseless. First, Aspire claims that the “only issue” in RWE was whether the therein-challenged PUCT order approving an ERCOT Protocol revision was a “competition rule” under PURA § 39.001. See Resp. at 22. Thus, Aspire asserts, the “[t]he jurisdictional issue . . . in RWE is unrelated to the bases for jurisdiction in this case.” Id. That is patently untrue. To determine whether it had jurisdiction over RWE’s direct appeal of an alleged “competition rule,” the Texas Supreme Court first had to determine whether the PUCT’s Protocol approval order was even a “rule” under the APA. RWE, 691 S.W.3d at 492. Because, at step one, the Court determined the PUCT’s Protocol approval order was not an APA “rule,” it did not even reach the question of whether the order was a “competition rule”: In sum, consistent with the well-established regulatory scheme and the legislation governing it, we hold that the PUC’s order approving NPRR 1081 was a ratification decision that simply allowed protocol revisions, already developed and adopted by ERCOT in accordance with its own detailed procedures, to take effect. Consequently, the PUC’s order was not an agency-adopted “rule” under the Administrative Procedure Act. In turn , because the court of appeals’ jurisdiction under Utilities Code Section 39.001(e) is limited to review of “competition rules adopted by the commission,” the court lacked jurisdiction over RWE’s challenge to the PUC’s approval order. Id. (emphasis added); compare PUCT v. Luminant Energy Co., 691 S.W.3d 448, 459 (Tex. 2024) (analyzing whether a PUCT order that was first determined to be an APA “rule” was also a “competition rule” under PURA § 39.001). -3- Appx. Page 547 of 740 Aspire next contends that RWE is inapposite because Aspire “does not challenge the ‘PUCT[’s] [Protocol] approval orders’ in isolation, as did the petitioner in RWE”; it only “challenges the combined actions of ERCOT and the PUC[T] in enacting the ECRS rules.” Resp. at 24. But the alleged “combined actions” of ERCOT and the PUCT is exactly what RWE challenged under the APA—a challenge that was soundly rejected: A substantially similar version of the above-described process for adopting and revising ERCOT protocols has long been in effect. . . . The legislative and regulatory schemes have in turn envisioned separate, complementary purposes of and procedures for PUC rules and ERCOT protocols, notwithstanding the fact that ERCOT and its protocols have consistently been subject to PUC oversight and review. [PURA] § 39.151(d). RWE nevertheless suggests that, by amending PURA to require formal PUC approval of ERCOT-adopted protocols at the tail end of the process, the Legislature intended to overhaul that process entirely and effectively convert ERCOT protocols into PUC rules subject to the same review procedures. We do not discern such a sweeping intent from the language the Legislature chose. RWE, 691 S.W.3d at 491 (emphasis added). Finally, Aspire claims that RWE “did not address ERCOT’s adoption of or revisions to its [P]rotocols,” and “did not hold that the APA did not apply to . . . the ERCOT [Protocol] adoption process.” Resp. at 23–24. Not true. In addressing the argument that “the Legislature intended to . . . effectively convert ERCOT protocols into PUC rules subject to the same review procedures,” RWE, 691 S.W.3d at 491 (emphasis added), the Texas Supreme Court directly addressed whether ERCOT’s NPRR process was subject to the APA. See id. at 491–92. It is not: PURA makes clear that ERCOT, not the PUC, is the entity “adopting” new or revised ERCOT protocols. See [PURA] § 39.151(g-6). The PUC then “approves” the protocols. See id. This distinction is deceptively significant because the APA's requirements, which RWE insists must be satisfied, are exclusively and repeatedly directed at rules “adopted” by a “state agency.” *** [T]he Legislature deliberately employed these terms to communicate two distinct administrative actions that have distinct legal consequences. See id. at 491–92. -4- Appx. Page 548 of 740 In fact, Aspire re-urges virtually the same APA arguments concerning the NPRR process that were raised—and rejected—in RWE: 6 Aspire’s Pleadings RWE Renewables “Making matters worse, the PUC and ERCOT “The new load shed price-setting rule is invalid because the implemented ECRS without even attempting to PUC did not follow—or even attempt to satisfy—APA comply with the mandatory requirements of the rulemaking requirements.” RWE Respondent’s Brief on the APA.” Sec. Am. Pet. ¶ 5. Merits at 40. 7 “In fact, the process for adopting rules concerning ERCOT’s operations deliberately and illegally sidesteps the APA. The Legislature allowed the PUC “The PUC cannot circumvent APA rulemaking requirements to delegate its rulemaking responsibilities to ERCOT. by ‘delegating’ rulemaking to ERCOT, which the PUC must But the Legislature did not dispense with the APA’s still adopt.” Id. at 47. mandatory requirements when allowing the PUC to delegate rulemaking responsibilities to ERCOT. And “The Legislature requires market rules be adopted by the PUC ERCOT’s own rulemaking processes do not come to become effective, and the PUC cannot use ERCOT to close to meeting the APA’s rulemaking requirements, shield new rules from APA requirements.” Id. at 48. nor does the PUC’s condensed process for approving ERCOT-adopted rules.” Id. ¶ 6. ERCOT and the PUC Did Not Substantially Comply New or amended wholesale market pricing rules should be with the APA’s Notice Requirements Id. at 17. subject to public notice and comment. Id. at 52. “The APA’s requirements apply to ‘rules,’ and the ECRS Rules, adopted under rulemaking authority “The issue is whether the statement falls within the broad originally given to the PUC and then delegated to definition of a ‘rule.’ The APA defines a ‘rule’ as ‘a state agency ERCOT, are ‘rules’ to which the APA applies. . . The statement of general applicability’ that either ‘implements, APA defines a ‘rule’ broadly to include ‘a state agency interprets, or prescribes law or policy’ or ‘describes the statement of general applicability that: (i) implements, procedure or practice requirements of a state agency’ and interprets, or prescribes law or policy, or (ii) describes ‘includes the amendment or repeal of a prior rule,’ but not the procedure or practice requirements of a state those regarding only the internal management or organization agency.’ Tex. Gov’t Code § 2001.003(6)(A). ‘Rules’ of an agency and not affecting private rights or procedures. also include ‘amendment or repeal of a prior rule.’ Id. Tex. Gov’t Code § 2001.003(6).” Id. at 43. § 2001.003(6)(B), (C).” Id. ¶ 44 (citations omitted). “Neither ERCOT nor the PUC made any pretense of complying with the APA when adopting and “The PUC does not even argue it (or ERCOT) took the steps approving the ECRS Rules, respectively. ERCOT required by the APA to adopt or make changes to followed its own processes for protocol revisions, administrative rules. Instead, the PUC argues it was not which require far less than the APA in terms of required to comply with the APA, claiming the new price- notice, public participation, and the order. And the setting rule is not a rule because it was developed through PUC largely relied on ERCOT’s efforts in adopting ERCOT and the PUC merely made ‘a ratification decision.’” the ECRS Rules, rather than undertaking its own Id. at 42. efforts to satisfy the APA.” Id. ¶ 46. 6 See Supplemental Appendix E (RWE’s Brief on the Merits); Supplemental Appendix F (Aspire’s amicus brief); Supplemental Appendix G (ERCOT’s amicus brief). 7 See Supplemental Appendix E (RWE’s Brief on the Merits). -5- Appx. Page 549 of 740 “The APA ensures that the public gets an opportunity “‘In this way, the APA assures that the public and affected to participate in agency rulemaking and that agencies persons are heard on matters that affect them and receive do not exceed their authority when making rules. But notice of new rules.’ . . . However, in adopting the new price- the process ERCOT and the PUC used to implement setting rule, the PUC admittedly did not even attempt to satisfy ECRS provided none of the APA’s safeguards.” Id. APA requirements.” Id. at 41 (citation omitted). ¶ 5. “The PUC’s approach would create the absurd result that the “By fracturing the process of rulemaking—through same rule would be subject to APA requirements and judicial delegation to ERCOT of the formulation of rules or review if directly adopted by the PUC under § 39.151(d), but ‘protocols’ while reserving to itself the final say-so or could avoid APA requirements and be unreviewable simply by ‘approval’ over those rules—PUC attempts to the agency having ERCOT (under the same statutory sidestep the requirements of the APA.” Aspire Resp. provision) propose it first for the PUC’s subsequent to Am. Pleas at 6. rubberstamp.” Id. at 50. Aspire cannot feign ignorance of RWE’s resolution of this Court’s jurisdiction. Aspire was directly involved in RWE, and submitted an amicus brief asking the Court to determine that the combined actions of the PUCT and ERCOT “f[a]ll so far short of [the APA’s] requirements.” See Supplemental Appendix F (Aspire RWE amicus) at 2 (taking aim at the “ERCOT/PUC process for approval of NPRRs”). Aspire alleged additional ways in which it believed the Protocol revision process fails to comply with the APA, explaining its APA arguments had “been overlooked by the parties’ briefs.” See id. at 1. Again, the Texas Supreme Court considered—and rejected—these arguments. So too must this Court. B. PURA § 39.1511 does not support Aspire’s jurisdictional theories. Aspire also relies on PURA § 39.1511(a-1) to claim that ERCOT is subject to the APA’s rulemaking requirements. So the argument goes: “[i]f ERCOT can go into executive session to address a contested case under the APA, it follows that ERCOT can conduct contested cases generally under the APA.” See Resp. at 21–22. And if “ERCOT can conduct contested cases,” then it must be a “state agency” for purposes of promulgating APA “rules.” See id. -6- Appx. Page 550 of 740 Aspire is confused. ERCOT does not “conduct” contested cases. It is a party to them when, for example, an entity files a complaint against ERCOT at the PUCT. 8 The PUCT commissioners “conduct” those cases and are the arbiters of those disputes. See PURA § 39.151(d-4)(6); 16 Tex. Admin. Code (“TAC”) § 22.251(b). PURA § 39.1511(a-1) is an exception to the general requirement that ERCOT comply with the Open Meetings Act. It allows ERCOT to discuss contested cases in a closed session, out of the public eye and without its PUCT-Commissioner ex officio Board members present, who are the arbiters of such disputes. Id. That ERCOT is permitted to privately discuss PUCT-determined contested cases to which it is a party says nothing about whether ERCOT is subject to APA rulemaking. 9 See APA § 2001.003(1) (defining contested cases as “proceeding[s] . . . in which the legal rights, duties, or privileges of a party are to be determined by a state agency after an opportunity for adjudicative hearing.”) (emphasis added). C. The Legislature did, in fact, recognize the NPRR process is separate from the APA. Aspire also claims that, if the Legislature wanted to exempt the ERCOT Protocol amendment and revision process from the APA, it “certainly knew how” to do that. Resp. at 26. Because PURA does not specifically exempt the NPRR process from the APA, then, Aspire argues the APA applies by default. See id. Aspire’s argument ignores that the APA provides the default “minimum standards of uniform practice and procedure for state agencies .” Resp. at 26 (quoting APA § 2001.001; instead emphasizing the “minimum standards”). And, as Aspires concedes, Resp. at 19; Sec. Am. Pet. ¶ 11, 8 See, e.g., Complaint of Aspire Commodities, LLC against ERCOT, Docket No. 49673 (June 25, 2019), available at https://interchange.puc.texas.gov/Documents/49673_1_1023438.PDF. 9 See, e.g., PUCT Docket No. 53377, Complaint of Engie Market NA, Inc. and Viridity Energy Solutions, Inc. Against ERCOT (Mar. 18, 2022) (contested case at the PUCT to which ERCOT was party, which, under PURA 39.1511(a-1), ERCOT was authorized to discuss in closed sessions); see also, e.g., 16 TAC §§ 25.251, 22.207 (allowing any “entity” to appeal any “decision made by ERCOT” to the Commission, which may then be referred to SOAH for a contested case proceeding). -7- Appx. Page 551 of 740 ERCOT is not a state agency, meaning these default rules (that the “painstaking” NPRR process, in any event, goes above and beyond, RWE, 691 S.W.3d at 490–91) do not apply to ERCOT in the first place, so there was no need for the Legislature to expressly exempt the Protocols from the APA. See RWE, 691 S.W.3d at 491. The PUCT’s oversight and approval authority does not change that simple and determinative fact. Id. (holding the PUCT’s final approval does not “convert ERCOT protocols into PUC rules”). 10 And the Legislature has, in fact, expressly sanctioned the NPRR process as its own unique non-APA rulemaking process. As the RWE Court explained, in 2021, the Legislature amended PURA to direct that ERCOT implement a “formal process” for adopting and revising Protocols—knowing that such a “formal process,” the non-APA NPRR process, “has long been in effect.” 11 RWE, 691 S.W.3d at 492. This signals the Legislature’s “recognition that ERCOT rulemaking and PUC rulemaking are independent endeavors,” contrary to Aspire’s claims here: A substantially similar version of the above-described process for adopting and revising ERCOT protocols has long been in effect. See ERCOT, Nodal Protocols § 21 (Mar. 1, 2005) (rev. Feb. 2010, Apr. 2011, May 2011, Oct. 2011, May 2012, Aug. 2012, Apr. 2013, Dec. 2013, May 2014, July 2016, Nov. 2016, Nov. 2017, Jan. 2021, Apr. 2023, June 2023). The legislative and regulatory schemes have in turn envisioned separate, complementary purposes of and procedures for PUC rules and ERCOT protocols, notwithstanding the fact that ERCOT and its protocols have consistently been subject to PUC oversight and review. [PURA] § 39.151(d). *** Finally, we cannot ignore that when the Legislature amended PURA in 2021 to require PUC approval of the independent organization's (ERCOT's) protocols, it simultaneously added the requirement that the organization “establish and 10 Aspire cites several statutes that it claims show that the Legislature “kn[ows] how to make clear, expressly, when it d[oes] not want the APA to apply to any given administrative process.” Resp. at 26. All of those statutes exempt state agencies from complying with the APA for certain proceedings. See Tex. Gov’t Code § 411.180(a) (Department of Public Safety); Tex. Hum. Res. Code § 40.063 (Department of Family and Protective Services); Tex. Parks & Wild. Code § 32.006 (Parks and Wildlife Department). ERCOT is not a state agency, so the APA does not apply by default. 11 In re Pirelli Tire, LLC, 247 S.W.3d 670, 677 (Tex. 2007) (noting that “all statutes are presumed to be enacted by the Legislature with full knowledge of the existing condition of the law and with reference to it”) (cleaned up). -8- Appx. Page 552 of 740 implement a formal process for adopting new protocols or revisions to existing protocols.” . . . As discussed above, ERCOT already had such a process in place; nevertheless, the requirement signals legislative recognition that ERCOT rulemaking and PUC rulemaking are independent endeavors. RWE, 691 S.W.3d at 491–92 (internal citations omitted) (emphasis added). Aspire also cites three cases that it claims stand for the proposition that, when an agency delegates rulemaking authority to a non-agency, that non-agency stands in the delegating agency’s shoes for purposes of APA compliance. See Resp. at 20. But, in fact, none of those cases have anything to do with rulemaking or the APA. Aspire’s cited authorities instead concern: (1) whether a private hearing examiner could properly review a police officer’s appeal of his indefinite suspension; 12 (2) the rights of an assignee under an earnest money contract; 13 and (3) the scope of a plaintiff’s recoverable damages for its constitutional takings claim. 14 The only case that directly answers the jurisdictional question here is RWE. And RWE mandates dismissal of all of Aspire’s claims. II. Aspire’s claims fall within the PUCT’s exclusive jurisdiction. As set forth in ERCOT’s Amended Plea, this Court also lacks subject-matter jurisdiction because the PUCT has exclusive jurisdiction over matters pertaining to ERCOT’s operations and Protocols, and Aspire failed to exhaust its administrative remedies before the PUCT before bringing suit. See Amended Plea at 19–22. Aspire does not substantively address this issue in its response. See Resp. at 27–29. It instead doubles down on its assertion that the ERCOT Protocols, and PUCT orders 12 City of Garland v. Byrd, 97 S.W.3d 601, 605 (Tex. App.—Dallas 2002, pet. denied). 13 Mainland Sav. Ass’n v. Hoffbrau Steakhouse, Inc., 659 S.W.2d 101, 102 (Tex. App.—Houston [14th Dist.] 1983, no writ). 14 DuPuy v. City of Waco, 396 S.W.2d 103, 104 (Tex. 1965). -9- Appx. Page 553 of 740 finally approving Protocol revisions, are “rules” under the APA; therefore, it asserts, the exhaustion of remedies doctrine does not apply. See id. (citing APA § 2001.038(d)). 15 Because, as explained above, neither the ERCOT Protocols nor the PUCT’s orders finally approving those Protocols are APA “rules,” Aspire was required to first bring its complaints about the ECRS program to the PUCT before filing those complaints in this Court. See CPS Energy v. ERCOT, 671 S.W.3d 605, 619–20 (Tex. 2023); RWE, 691 S.W.3d at 492 n.11 (recognizing that the “PUC regulations provide a process for review of ERCOT protocols . . . which culminates in a suit for judicial review in the district court.”). 16 Outside of relying on its false premise, Aspire does nothing to show otherwise. III. Alternatively, Aspire’s claims must be dismissed under Rule 91a. A. The filed rate doctrine bars Aspire’s claims. Though Aspire attempts to package its claims as an APA rule challenge, this lawsuit really concerns Aspire’s dissatisfaction with the “artificially increased” wholesale electricity rates allegedly produced by the ECRS program. See Sec. Am. Pet. ¶¶ 3–4, 7, 26–28, 30, 32, 34 –38, 50–55. Aspire 15 APA § 2001.038(d) directs that “[a] court may render a declaratory judgment without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question,” meaning a plaintiff bringing a proper APA rule challenge is not required to exhaust its administrative remedies. Because this case does not concern an APA “rule,” however, APA § 2001.038(d) is inapplicable, and does not excuse Aspire from failing to exhaust its administrative remedies before the PUCT if it wishes to contest ERCOT’s Protocols. 16 After concluding that neither the ERCOT Protocols nor the PUCT’s order approving Protocol revisions are APA “rules,” the Texas Supreme Court directed that the proper path for a Protocol challenge is through the administrative process set forth in 16 Tex. Admin. Code §§ 22.251, 25.362(c)(5), which culminates in a suit for judicial review. RWE, 691 S.W.3d at 492 n.11. Aspire dismisses this directive as mere “dicta,” suggesting the Court need not consider it here. Resp. at 23. Even if the Court’s admonishment regarding the proper “process for review of ERCOT protocols” could be characterized as dicta (it is not), that does not cast that admonishment aside—it must still be followed. See Elledge v. Friberg–Cooper Water Supply Corp., 240 S.W.3d 869, 870 (Tex. 2007) (disagreeing with the lower court’s characterization of certain of the Court’s statements as dicta, but in any event holding that “[o]ur statements . . . though not essential to the outcomes in [the cited precedent], should have been followed.”) (emphasis added). - 10 - Appx. Page 554 of 740 does not dispute the fact that it challenges the rates it paid because of ECRS; instead, it argues the filed rate doctrine does not apply here because: (1) ERCOT has not, and on a Rule 91a cannot, prove the existence of any PUCT-approved filed rate; (2) Aspire “does not challenge specific rates”; and (3) the filed rate doctrine does not apply to claims for equitable relief. See Resp. at 34–36. These arguments all miss the same point: the complained-of wholesale electricity prices are “filed rates”—i.e., rates approved by the governing regulatory agency, the PUCT—by virtue of the PUCT’s comprehensive oversight of the wholesale ERCOT market. See Tex. Com. Energy v. TXU Energy, Inc. (“TCE”), 413 F.3d 503, 509–10 (5th Cir. 2005) 17 (holding that the “PUCT’s oversight over the market is sufficient to conclude that the [complained-of wholesale] energy rates are ‘filed’ within the meaning of the filed rate doctrine.”). That comprehensive market oversight is established by PURA—it does not rely on “extrinsic evidence,” as Aspire contends, Resp. at 35; see TCE, 413 F.3d at 509–10 (analyzing various PURA provisions to conclude the PUCT’s market oversight makes wholesale market rates “filed rates”). The existence of this comprehensive, PUCT-administered regulatory market scheme is also what demands dismissal of Aspire’s rate-disguised-as-a-“rule” challenge. As one Texas court explained, the purpose of the filed rate doctrine is to: preserve[] the exclusive role of regulatory agencies in approving rates and keeping courts, which are far less competent to perform this function, out of the rate-making process (“nonjusticiability”). The nonjusticiability strand recognizes that (1) legislatively appointed regulatory bodies have institutional competence to address rate-making issues; (2) courts lack the competence to set rates; and (3) the interference of courts in the rate-making process would subvert the authority of rate- setting bodies and undermine the regulatory regime. Winn v. Alamo Title Ins. Co., No. A-09-CA-214-SS, 2009 WL 7099484 (W.D. Tex. May 13, 2009) (internal citations omitted). The plaintiff in Winn, like Aspire, also sought declaratory and injunctive 17 See Supplemental Appendix H. - 11 - Appx. Page 555 of 740 relief. Id. at *2. 18 The district court dismissed all of the plaintiff’s claims under Rule 91a’s federal equivalent, Federal Rule 12(b)(6). In so doing, the court noted that “the Fifth Circuit ha[s] found the electric energy market subject to regulation by the [PUCT] and thus challenges to the price of energy were effectively challenges to a filed rate.” Id. at *8 (emphasis added). That Aspire pleads its claims in equity is thus of no moment—the same driving nonjusticiability concerns are raised by Aspire’s complaint that ECRS produces wholesale prices that are “too high, unfair, or unlawful.” TCE, 413 F.3d at 507. That complaint must be adjudicated by the PUCT. See Util. Choice v. TXU Corp., No. H-05-573, 2005 WL 3307524, at *2, 4 (S.D. Tex. Dec. 6, 2005) 19 (rejecting the argument that the filed rate doctrine did not apply to the plaintiff’s claims for equitable and injunctive relief, as those claims “would [have] require[d] the Court to engage in continued oversight of the Texas energy market,” and asked the Court to “unduly infringe upon the rate setting authority held by the PUCT” just the same as its claims for monetary relief). 20 What’s more, as expressly alleged by Aspire, the PUCT approved the ECRS rules implementing the ECRS program’s current pricing mechanisms. See Sec. Am. Pet. ¶ 29. And the “filed rate doctrine is not limited to ‘rates’ per se,”—it also applies to rate-setting mechanisms, like those set forth in the complained-of ECRS rules. Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953, 966 (1986); see Entergy Louisiana, Inc. v. Louisiana Public Service Comm’n, 539 U.S. 39, 49–50 (2003). For this additional reason, the filed rate doctrine plainly bars Aspire’s claims. 18 Aspire argues incorrectly that ERCOT only identified one case in which the filed rate doctrine barred claims for equitable relief. Resp. at 36. But ERCOT cited both Winn and Utility Choice for this proposition, Am. Plea at 25, and Aspire has made no meaningful attempt to distinguish their holdings here. See Resp. at 36. 19 See Appendix I. 20 To distinguish Utility Choice, Aspire again relies exclusively on its false premise that this is only an APA challenge, making all of ERCOT’s non-APA arguments inapplicable. See Resp. at 36. (claiming that “the equitable relief sought [in Utility Choice] had nothing to do with agency rulemaking or the APA.”). Resp. at 36. As explained supra, this is not an APA challenge because there is no APA “rule” at issue here. - 12 - Appx. Page 556 of 740 B. Aspire is not authorized to enforce PURA § 39.157. Aspire only briefly, and non-substantively, addresses ERCOT’s argument that Aspire has no private right of action under PURA § 39.157, which Aspire claims makes ECRS “illegal.” Sec. Am. Pet. ¶ 7. To start, Aspire misunderstands this ground for dismissal—it claims that “ERCOT . . . argues that Aspire’s claim alleging ultra vires acts should be dismissed because Aspire has no private cause of action for violation of PURA § 39.157.” Resp. at 36. That is not ERCOT’s argument. See Amended Plea at 26–28. Aspire asks for two forms of declaratory and injunctive relief. First, Aspire asks for a “declaration under Chapter 37 of the Texas Civil Practice and Remedies Code and Texas Government Code § 2001.038” that the “ECRS Rules” failed to substantially comply with the APA and were created without authority and are, therefore, invalid and void. Sec. Am. Pet. ¶ 58. This procedural validity challenge fails because, as detailed above, the “ECRS Rules” are not APA “rules.” Separately, Aspire asks the Court to declare that, and enjoin further operations of, the ECRS program because ECRS allegedly violates the antitrust prohibitions set forth in PURA § 39.157. 21 Id. ¶ 59. As ERCOT has explained, however—and as the plain language of the statute and various Texas courts have made clear, see Amended Plea at 26–28—PURA § 39.157 is a tool for the market’s regulator, the PUCT, to prevent market abuses by market participants; it is not a tool for the regulated to sue for declaratory and injunctive relief. See, e.g., City of Garland v. PUCT, 165 S.W.3d 814, 816 (Tex. App.— Austin 2005, pet. denied) (explaining that under PURA § 39.157, “the [L]egislature granted the Commission certain oversight powers over market structure, . . . including the authority to monitor market power associated with the generation, transmission, distribution, and sale of electricity in Texas.”) (emphasis added). 21 This substantive validity challenge is likewise barred by the Court’s lack of jurisdiction. - 13 - Appx. Page 557 of 740 In cases like this, where the relevant statutes are silent on a private right of action, but provide detailed administrative enforcement mechanisms, see PURA §§ 39.157(c)–(f), 39.151(d), (d-4), the Court must presume that the Legislature intended that a separate private right of action not be included. See Witkowski v. Brian, Fooshee and Yonge Props., 181 S.W.3d 824, 831 (Tex. App.—Austin 2005, no pet.). C. PURA § 39.157 application does not turn on facts outside the petition. As another ground for dismissal, ERCOT has explained why PURA § 39.157, which directs the PUCT to monitor and enforce against “market power abuses,” does not apply to ERCOT (who is not a market participant and has no “market power” to abuse), or the ECRS program (which does not “withhold generation,” as proscribed by PURA § 39.157). See Amended Plea at 28–30. Because it has no substantive response, Aspire instead complains that this ground of ERCOT’s Amended Rule 91a motion cannot be considered, as it purportedly relies on facts outside the petition; namely, that ERCOT is a revenue-neutral market clearinghouse that possesses no “market power” under PURA § 39.157, and that ERCOT must hold generation in reserves to maintain grid reliability. Resp. at 37. But these are not evidentiary facts—they are matters of law set forth under PURA and the PUCT’s regulations, 22 and have been recognized as such by the Texas Supreme Court. See, e.g., CPS Energy, 671 S.W.3d at 627 (recognizing the “ERCOT is primarily funded by a system 22 See PURA §§ 39.151(a) (establishing the “independent organization” and outlining its functions); 39.151(b) (directing that this “independent organization” must be “independent of any producer or seller of electricity” to ensure its “decisions will not be unduly influenced”); 39.151(e) (establishing the system administration fee that funds ERCOT’s operations, and directing that “[C]ommission shall require [ERCOT] to closely match actual revenues generated by the fee and other sources of revenue with revenue necessary to fund the budget”; i.e., ERCOT must, by Legislative command, be revenue- neutral); see also 16 TAC 25.363)(e) (governing PUCT review of ERCOT’s budget and expenditures, and reaffirming that “ERCOT shall closely match actual revenues generated by the system administration fee and other sources of revenue with . . . to ensure that the budget year does not end with a surplus or insufficient funds.”); id. § 25.361(b) (outlining ERCOT’s functions as the “independent organization,” which include “administer[ing], on a daily basis, the operational and market functions of the ERCOT system, including procuring and deploying ancillary services”). - 14 - Appx. Page 558 of 740 administration fee,” which “is required to closely match the revenue necessary for [ERCOT’s budget without exceeding it to avoid a surplus of funds”); RWE, 691 S.W.3d 484 (observing that “ERCOT serves as the central counterparty for all [wholesale energy] transactions,” and thereby “[o]perat[es] as a sort of clearinghouse” for the market); Luminant, 691 S.W.3d at 459 (explaining that ERCOT’s wholesale pricing mechanisms take into account, inter alia, “the amount of reserves needed to keep the lights on.”). The Court may properly apply the plain language of PURA § 39.157 to these legal matters. IV. The other market participants who have claimed an interest in the ECRS program must be joined. Aspire does not dispute that hundreds of other ERCOT market participants have significant pecuniary interests that are threatened by Aspire’s attempts to do away with the ECRS program and entire market rulebook. Rather, Aspire challenges ERCOT’s alternative plea in abatement for failure to join necessary parties on the ground that the other market participants have not “actually claimed” those interests in connection with this proceeding. See Resp. at 38–39. In making this argument, however, Aspire ignores that it purports to assert claims under the UDJA. Sec. Am. Pet. ¶¶ 58, 59. 23 And under the UDJA, all persons that would be affected “must be made parties.” Tex. Civ. Prac. & Rem. Code § 37.006(a). Aspire is also incorrect that no one has “actually claimed an interest in the subject matter of this litigation.” Resp. at 39. As Aspire acknowledges, another market participant, Calpine Corporation, has already made its claim known to the Court. See Resp. at 40 n.24. Moreover, the “record” that Aspire asks the Court to take judicial notice of also demonstrates that others “claim an interest” in the ECRS program. See Unopposed Mot. 23 On this issue of joinder, too, Aspire once more relies on its tireless insistence that this is an APA challenge, and nothing more; thus, it asserts, the only necessary party to an APA dispute is the “government agency that violated the APA.” Resp. at 40. But, as noted, Aspire expressly pleads this as a declaratory judgment action under Chapter 37 of the Texas Civil Practice and Remedies Code. See Sec. Am. Pet. ¶¶ 58–59. This argument also fails on its face because, again, there are no APA “rules” at issue here. - 15 - Appx. Page 559 of 740 for Judicial Notice ¶ 6, NPRR1224, Joint Commenters’ Comments (dated May 20 and June 10, 2024). Given Aspire’s acknowledgement that its requested relief will affect other market participants and that those interested parties “have a procedural mechanism” to assert their interests in this lawsuit, Aspire concedes it has no grounds to object to any future intervention—in the unlikely event the Court first finds it has jurisdiction and that Aspire has pled viable claims. CONCLUSION For the reasons set forth herein and in ERCOT’s Amended Plea to the Jurisdiction and Alternatively, Motion to Dismiss Under Rule 91(a) and Alternatively, Plea in Abatement, the Court should dismiss Aspire’s claims. ERCOT requests such other and further relief, at law or in equity, to which it may be entitled. Respectfully submitted, WINSTEAD PC 600 W. 5th Street, Suite 900 Austin, Texas 78701 (512) 370-2800 telephone (512) 370-2850 fax By: /s/ Elliot Clark Elliot Clark SBN 24012428 eclark@winstead.com Elin Isenhower SBN 24104206 eisenhower@winstead.com ATTORNEYS FOR DEFENDANT ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. - 16 - Appx. Page 560 of 740 CERTIFICATE OF SERVICE By my signature below, I hereby certify that a true and correct copy of this document has been served on all counsel of record in accordance with the Texas Rules of Civil Procedure on October 15, 2024. /s/ Elliot Clark Elliot Clark - 17 - Appx. Page 561 of 740 CAUSE NO. D-1-GN-24-003384 ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT SUPPLEMENTAL APPENDIX TO ERCOT’S AMENDED PLEA TO THE JURISDICTION ERCOT submits with its Reply this Supplemental Appendix in support of ERCOT’s Amended Plea to the Jurisdiction and alternatively, Motion to Dismiss under Rule 91(a) (the “Amended Plea”). The original Appendix attached to the Amended Plea contained three recent Texas Supreme Court opinions that ERCOT contends indisputably demonstrate that the Court lacks jurisdiction over this suit. For the Court’s convenience, ERCOT submits this Supplemental Appendix, and asks the Court to take judicial notice of these legal authorities and materials. TAB DESCRIPTION D ERCOT Protocol Section 21 (NPRR Process) (last amended June 1, 2023) E RWE’s SCOTX Brief on the Merits, PUCT v. RWE, Case No. 23-0555 (Feb. 8, 2024) (without appendix) F Aspire’s SCOTX Amicus Brief, PUCT v. RWE, Case No. 23-0555 (Apr. 26, 2024) G ERCOT’s SCOTX Amicus Brief, PUCT v. RWE, Case No. 23-0555 (Mar. 7, 2024) (without appendix) H Tex. Com. Energy v. TXU Energy, Inc. (“TCE”), 413 F.3d 503 (5th Cir. 2005) I Util. Choice v. TXU Corp., No. H-05-573, 2005 WL 3307524 (S.D. Tex. Dec. 6, 2005) Appx. Page 562 of 740 APPENDIX D Appx. Page 563 of 740 ERCOT Nodal Protocols Section 21: Revision Request Process June 1, 2023 PUBLIC Appx. Page 564 of 740 TABLE OF CONTENTS: SECTION 21 21 Revision Request Process................................................................................................. 21-1 21.1 Introduction .....................................................................................................................................21-1 21.2 Submission of a Nodal Protocol Revision Request or System Change Request .............................21-2 21.3 Protocol Revision Subcommittee ....................................................................................................21-2 21.4 Nodal Protocol Revision and System Change Procedure ................................................................21-3 21.4.1 Review and Posting of Nodal Protocol Revision Requests ...............................................21-3 21.4.2 Review and Posting of System Change Requests..............................................................21-4 21.4.3 Withdrawal of a Nodal Protocol Revision Request or System Change Request ...............21-5 21.4.4 Protocol Revision Subcommittee Review and Action.......................................................21-5 21.4.5 Comments to the Protocol Revision Subcommittee Report ..............................................21-6 21.4.6 Revision Request Impact Analysis ....................................................................................21-7 21.4.7 Protocol Revision Subcommittee Review of Impact Analysis ..........................................21-7 21.4.8 Technical Advisory Committee Vote ................................................................................21-8 21.4.9 ERCOT Impact Analysis Based on Technical Advisory Committee Report ....................21-9 21.4.10 ERCOT Board Vote ..........................................................................................................21-9 21.4.11 PUCT Approval of Revision Requests ............................................................................21-10 21.4.12 Appeal of Action .............................................................................................................21-10 21.4.12.1 Appeal of Protocol Revision Subcommittee Action .........................................21-10 21.4.12.2 Appeal of Technical Advisory Committee Action ............................................21-10 21.4.12.3 Appeal of ERCOT Board Action ......................................................................21-11 21.5 Urgent and Board Priority Nodal Protocol Revision Requests and System Change Requests ......21-11 21.6 Nodal Protocol Revision Implementation ......................................................................................21-12 21.7 Review of Project Prioritization and Annual Budget Process .......................................................21-12 21.8 Review of Guide Changes .............................................................................................................21-13 ERCOT NODAL PROTOCOLS – JUNE 1, 2023 PUBLIC Appx. Page 565 of 740 SECTION 21: REVISION REQUEST PROCESS 21 REVISION REQUEST PROCESS 21.1 Introduction (1) A request to make additions, edits, deletions, revisions, or clarifications to these Protocols, including any attachments and exhibits to these Protocols, is called a Nodal Protocol Revision Request (NPRR). Except as specifically provided otherwise in the following sentence or in other sections of these Protocols, Sections 21.2, Submission of a Nodal Protocol Revision Request or System Change Request, through 21.8, Review of Guide Changes, apply to all NPRRs. ERCOT Members, Market Participants, Public Utility Commission of Texas (PUCT) Staff, the Reliability Monitor, the Independent Market Monitor (IMM), the North American Electric Reliability Corporation (NERC) Regional Entity, ERCOT, and any other Entities are required to utilize the process described herein prior to requesting, through the PUCT or other Governmental Authority, that ERCOT make a change to these Protocols, except for good cause shown to the PUCT or other Governmental Authority. (2) A request that ERCOT change its computer systems that does not require a revision to the Protocols is called a System Change Request (SCR). Except as specifically provided in other sections of these Protocols, Sections 21.2 through 21.7, Review of Project Prioritization and Annual Budget Process, apply to all SCRs. (3) The “next regularly scheduled meeting” of the Protocol Revision Subcommittee (PRS), the Technical Advisory Committee (TAC), an assigned TAC subcommittee (as defined below), the ERCOT Board, or the PUCT, shall mean the next regularly scheduled meeting for which required notice can be timely given regarding the item(s) to be addressed, as specified in the appropriate PUCT, ERCOT Board, or committee procedures. (4) ERCOT may make non-substantive corrections at any time during the processing of a particular NPRR. Under certain circumstances, however, the Nodal Protocols can also be revised by ERCOT rather than using the NPRR process outlined in Section 21.4, Nodal Protocol Revision and System Change Procedure. (a) This type of revision is referred to as an “Administrative NPRR” or “Administrative Changes” and shall consist of non-substantive corrections, such as typos (excluding grammatical changes), internal references (including table of contents), improper use of acronyms, and references to ERCOT Protocols, PUCT Substantive Rules, the Public Utility Regulatory Act (PURA), NERC regulations, Federal Energy Regulatory Commission (FERC) rules, etc. Additionally, updates to Section 23, Forms, may also be processed as Administrative NPRRs. (b) ERCOT shall post such Administrative NPRRs to the ERCOT website and distribute the NPRR to PRS. If no Entity submits comments to the Administrative NPRR within ten Business Days in accordance with paragraph (1) of Section 21.4.4, Protocol Revision Subcommittee Review and Action, the Administrative NPRR shall be subject to PUCT approval. Following PUCT approval, ERCOT ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-1 PUBLIC Appx. Page 566 of 740 SECTION 21: REVISION REQUEST PROCESS shall implement the Administrative NPRR according to paragraph (4) of Section 21.6, Nodal Protocol Revision Implementation. If any Entity submits comments to the Administrative NPRR, then it shall be processed in accordance with the NPRR process outlined in Section 21.4. 21.2 Submission of a Nodal Protocol Revision Request or System Change Request (1) The following Entities may submit a Nodal Protocol Revision Request (NPRR) or System Change Request (SCR) (“Revision Request”): (a) Any Market Participant; (b) Any ERCOT Member; (c) Public Utility Commission of Texas (PUCT) Staff; (d) The Reliability Monitor; (e) The North American Electric Reliability Corporation (NERC) Regional Entity; (f) The Independent Market Monitor (IMM); (g) ERCOT; and (h) Any other Entity that meets the following qualifications: (i) Resides (or represents residents) in Texas or operates in the Texas electricity market; and (ii) Demonstrates that Entity (or those it represents) is affected by the Customer Registration or Renewable Energy Credit (REC) Trading Program sections of these Protocols. 21.3 Protocol Revision Subcommittee (1) The Protocol Revision Subcommittee (PRS) shall review and recommend action on formally submitted Nodal Protocol Revision Requests (NPRRs) and System Change Requests (SCRs) (“Revision Requests”) provided that: (a) PRS meetings are open to ERCOT, ERCOT Members, Market Participants, the Reliability Monitor, the North American Electric Reliability Corporation (NERC) Regional Entity, the Independent Market Monitor (IMM), and the Public Utility Commission of Texas (PUCT) Staff; (b) Each Market Segment is allowed to participate; and (c) Each Market Segment has equal voting power. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-2 PUBLIC Appx. Page 567 of 740 SECTION 21: REVISION REQUEST PROCESS (2) Where additional expertise is needed, the PRS may refer a Revision Request to working groups or task forces that it creates or to existing Technical Advisory Committee (TAC) subcommittees, working groups or task forces for review and comment on the Revision Request. Suggested modifications—or alternative modifications if a consensus recommendation is not achieved by a non-voting working group or task force—to the Revision Request should be submitted by the chair or the chair’s designee on behalf of the subcommittee, working group or task force as comments on the Revision Request for consideration by PRS. However, the PRS shall retain ultimate responsibility for the processing of all Revision Requests. (3) ERCOT shall consult with the PRS chair to coordinate and establish the meeting schedule for the PRS. The PRS shall ensure that reasonable advance notice of each meeting, including the meeting agenda, is posted on the ERCOT website. 21.4 Nodal Protocol Revision and System Change Procedure 21.4.1 Review and Posting of Nodal Protocol Revision Requests (1) Nodal Protocol Revision Requests (NPRRs) shall be submitted electronically to ERCOT by completing the designated form provided on the ERCOT website. Excluding ERCOT-sponsored NPRRs, ERCOT shall provide an electronic return receipt response to the submitter upon receipt of the NPRR. (2) The NPRR shall include the following information: (a) Description of requested revision and reason for suggested change; (b) Impacts and benefits of the suggested change on ERCOT market structure, ERCOT operations, and Market Participants, to the extent that the submitter may know this information; (c) List of affected Nodal Protocol Sections and subsections; (d) General administrative information (organization, contact name, etc.); and (e) Suggested language for requested revision. (3) ERCOT shall evaluate the NPRR for completeness and shall notify the submitter, within five Business Days of receipt, if the NPRR is incomplete, including the reasons for such status. ERCOT may provide information to the submitter that will correct the NPRR and render it complete. An incomplete NPRR shall not receive further consideration until it is completed. In order to pursue the NPRR, a submitter must submit a completed version of the NPRR. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-3 PUBLIC Appx. Page 568 of 740 SECTION 21: REVISION REQUEST PROCESS (4) If a submitted NPRR is complete or upon completion of an NPRR, ERCOT shall post the NPRR on the ERCOT website and distribute to the Protocol Revision Subcommittee (PRS) within three Business Days. (5) For any ERCOT-sponsored NPRR, ERCOT shall also post an initial Impact Analysis on the ERCOT website, and distribute it to PRS. The initial Impact Analysis will provide PRS with guidance as to potential ERCOT computer systems, operations, or business functions that could be affected by the submitted NPRR. 21.4.2 Review and Posting of System Change Requests (1) System Change Requests (SCRs) shall be submitted electronically to ERCOT by completing the designated form provided on the ERCOT website. Excluding ERCOT- sponsored SCRs, ERCOT shall provide an electronic return receipt response to the submitter upon receipt of the SCR. (2) The SCR shall include the following information: (a) Description of desired additional system functionality or the additional information desired and reason for suggested change; (b) Impacts and benefits of the suggested change to ERCOT market structure, ERCOT operations and Market Participants, to the extent that submitter may know this information; (c) General administrative information (organization, contact name, etc.); and (d) Summary of requested changes to ERCOT systems. (3) ERCOT shall evaluate the SCR to determine whether the request should be submitted as an NPRR. If ERCOT determines that the SCR should be submitted as an NPRR, ERCOT will notify the submitter within five Business Days of receipt, and the submitter shall withdraw its SCR and may submit an NPRR in its place. If ERCOT deems it necessary for further review beyond the five Business Days, ERCOT shall notify the submitter. (4) ERCOT shall evaluate the SCR for completeness and shall notify the submitter, within five Business Days, if the SCR is incomplete, including the reasons for such status. ERCOT may provide information to the submitter that will correct the SCR and render it complete. An incomplete SCR shall not receive further consideration until it is completed. In order to pursue the SCR requested, the submitting Entity must submit a completed version of the SCR. (5) If a submitted SCR is complete or upon completion of an SCR, ERCOT shall post the SCR on the ERCOT website and distribute to the PRS within three Business Days. (6) For any ERCOT-sponsored SCR, ERCOT shall also post an initial Impact Analysis on the ERCOT website, and distribute it to PRS. The initial Impact Analysis will provide ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-4 PUBLIC Appx. Page 569 of 740 SECTION 21: REVISION REQUEST PROCESS PRS with guidance as to potential ERCOT computer systems, operations, or business functions that could be affected by the submitted SCR. 21.4.3 Withdrawal of a Nodal Protocol Revision Request or System Change Request (1) A submitter may withdraw or request to withdraw an NPRR or SCR (“Revision Request”) by submitting a completed Request for Withdrawal form provided on the ERCOT website. ERCOT shall post the submitter’s Request for Withdrawal on the ERCOT website within three Business Days of submittal. (2) The submitter of a Revision Request may withdraw the Revision Request at any time before PRS recommends approval of the Revision Request. If PRS has recommended approval of the Revision Request, the Request for Withdrawal must be approved by the Technical Advisory Committee (TAC) if the Revision Request has not yet been recommended for approval by TAC. If TAC has recommended approval of the Revision Request, the Request for Withdrawal must be approved by the ERCOT Board if the Revision Request has not yet been recommended for approval by the ERCOT Board. Once recommended for approval by the ERCOT Board, a Revision Request cannot be withdrawn. 21.4.4 Protocol Revision Subcommittee Review and Action (1) Any ERCOT Member, Market Participant, the Public Utility Commission of Texas (PUCT) Staff, the Reliability Monitor, the North American Electric Reliability Corporation (NERC) Regional Entity, the Independent Market Monitor (IMM), or ERCOT may comment on a Revision Request. (2) To receive consideration, comments must be delivered electronically to ERCOT in the designated format provided on the ERCOT website within 14 days from the posting date of the Revision Request. Comments submitted after the 14-day comment period may be considered at the discretion of PRS after these comments have been posted. Comments submitted in accordance with the instructions on the ERCOT website—regardless of date of submission—shall be posted to the ERCOT website and distributed to the PRS within three Business Days of submittal. (3) The PRS shall consider the Revision Request at its next regularly scheduled meeting after the end of the 14-day comment period. At such meeting, the PRS may take action on the Revision Request. The quorum and voting requirements for PRS action are set forth in the Technical Advisory Committee Procedures. In considering action on a Revision Request, PRS may: (a) Recommend approval of the Revision Request as submitted or as modified; (b) Reject the Revision Request; (c) Table the Revision Request; or ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-5 PUBLIC Appx. Page 570 of 740 SECTION 21: REVISION REQUEST PROCESS (d) Refer the Revision Request to another TAC subcommittee, working group, or task force as provided in Section 21.3, Protocol Revision Subcommittee. (4) If a motion is made to recommend approval of a Revision Request and that motion fails, the Revision Request shall be deemed rejected by PRS unless at the same meeting PRS later votes to recommend approval of, table, or refer the Revision Request. If a motion to recommend approval of a Revision Request fails via e-mail vote according to the Electric Reliability Council of Texas Technical Advisory Committee Procedures, the Revision Request shall be deemed rejected by PRS unless at the next regularly scheduled PRS meeting or in a subsequent e-mail vote prior to such meeting, PRS votes to recommend approval of, table, or refer the Revision Request. The rejected Revision Request shall be subject to appeal pursuant to Section 21.4.12.1, Appeal of Protocol Revision Subcommittee Action. (5) Within three Business Days after PRS takes action, ERCOT shall post a PRS Report reflecting the PRS action on the ERCOT website. The PRS Report shall contain the following items: (a) Identification of submitter of the Revision Request; (b) Protocol language or summary of requested changes to ERCOT systems, recommended by the PRS, if applicable; (c) Identification of authorship of comments; (d) Proposed effective date(s) of the Revision Request; (e) Priority and rank for any Revision Requests requiring an ERCOT project for implementation; and (f) PRS action. (6) The PRS chair shall notify TAC of Revision Requests rejected by PRS. 21.4.5 Comments to the Protocol Revision Subcommittee Report (1) Any ERCOT Member, Market Participant, PUCT Staff, the Reliability Monitor, the NERC Regional Entity, the IMM, or ERCOT may comment on the PRS Report. Comments submitted in accordance with the instructions on the ERCOT website— regardless of date of submission—shall be posted on the ERCOT website and distributed to the committee(s) (i.e., PRS and/or TAC) considering the Revision Request within three Business Days of submittal. (2) The comments on the PRS Report will be considered at the next regularly scheduled PRS or TAC meeting where the Revision Request is being considered. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-6 PUBLIC Appx. Page 571 of 740 SECTION 21: REVISION REQUEST PROCESS 21.4.6 Revision Request Impact Analysis (1) If PRS recommends approval of a Revision Request, ERCOT shall prepare an Impact Analysis based on the proposed language or proposed system changes in the PRS Report. If ERCOT has already prepared an Impact Analysis, ERCOT shall update the existing Impact Analysis, if necessary, to accommodate the language or system changes recommended for approval in the PRS Report. (2) The Impact Analysis shall assess the impact of the proposed Revision Request on ERCOT staffing, computer systems, operations, or business functions and shall contain the following information: (a) An estimate of any cost and budgetary impacts to ERCOT for both implementation and on-going operations; (b) The estimated amount of time required to implement the Revision Request; (c) The identification of alternatives to the Revision Request that may result in more efficient implementation; and (d) The identification of any manual workarounds that may be used as an interim solution and estimated costs of the workaround. (3) Unless a longer review period is warranted due to the complexity of the proposed PRS Report, ERCOT shall post an Impact Analysis on the ERCOT website, for a Revision Request for which PRS has recommended approval of, prior to the next regularly scheduled PRS meeting, and distribute to PRS. If a longer review period is required by ERCOT to complete an Impact Analysis, ERCOT shall submit comments with a schedule for completion of the Impact Analysis. 21.4.7 Protocol Revision Subcommittee Review of Impact Analysis (1) After ERCOT posts the results of the Impact Analysis, PRS shall review the Impact Analysis at its next regularly scheduled meeting. PRS may revise its PRS Report after considering the information included in the Impact Analysis or additional comments received on the PRS Report. (2) Within three Business Days of PRS consideration of the Impact Analysis and PRS Report, ERCOT shall post the PRS Report on the ERCOT website. If PRS revises the PRS Report, ERCOT shall update the Impact Analysis, if necessary, post the updated Impact Analysis on the ERCOT website, and distribute it to the committee(s) (i.e., PRS and/or TAC) considering the Impact Analysis. If a longer review period is required for ERCOT to update the Impact Analysis, ERCOT shall submit comments with a schedule for completion of the Impact Analysis. (3) If the Revision Request requires an ERCOT project for implementation, at the same meeting, PRS shall assign a recommended priority and rank for the associated project. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-7 PUBLIC Appx. Page 572 of 740 SECTION 21: REVISION REQUEST PROCESS 21.4.8 Technical Advisory Committee Vote (1) TAC shall consider any Revision Requests that PRS has submitted to TAC for consideration for which both a PRS Report and an Impact Analysis (as updated if modified by PRS under Section 21.4.7, Protocol Revision Subcommittee Review of Impact Analysis) have been posted on the ERCOT website. The following information must be included for each Revision Request considered by TAC: (a) The PRS Report and Impact Analysis; (b) The PRS-recommended priority and rank, if an ERCOT project is required; and (c) Any comments timely received in response to the PRS Report. (2) The quorum and voting requirements for TAC action are set forth in the Technical Advisory Committee Procedures. In considering action on a PRS Report, TAC shall: (a) Recommend approval of the Revision Request as recommended in the PRS Report or as modified by TAC; (b) Reject the Revision Request; (c) Table the Revision Request; (d) Remand the Revision Request to PRS with instructions; or (e) Refer the Revision Request to another TAC subcommittee or a TAC working group or task force with instructions. (3) If a motion is made to recommend approval of a Revision Request and that motion fails, the Revision Request shall be deemed rejected by TAC unless at the same meeting TAC later votes to recommend approval of, table, remand, or refer the Revision Request. If a motion to recommend approval of a Revision Request fails via email vote according to the Electric Reliability Council of Texas Technical Advisory Committee Procedures, the Revision Request shall be deemed rejected by TAC unless at the next regularly scheduled TAC meeting or in a subsequent email vote prior to such meeting, TAC votes to recommend approval of, table, remand, or refer the Revision Request. The rejected Revision Request shall be subject to appeal pursuant to Section 21.4.12.2, Appeal of Technical Advisory Committee Action. (4) Within three Business Days after TAC takes action on the Revision Request, ERCOT shall post a TAC Report reflecting the TAC action on the ERCOT website. The TAC Report shall contain the following items: (a) Identification of the submitter of the Revision Request; (b) Modified Revision Request language proposed by TAC, if applicable; ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-8 PUBLIC Appx. Page 573 of 740 SECTION 21: REVISION REQUEST PROCESS (c) Identification of the authorship of comments; (d) Proposed effective date(s) of the Revision Request; (e) Priority and rank for any Revision Requests requiring an ERCOT project for implementation; (f) PRS action; (g) TAC action; (h) Credit review; (i) IMM Opinion; (j) ERCOT Opinion; and (k) ERCOT Market Impact Statement. (5) If TAC recommends approval of a Revision Request, ERCOT shall forward the TAC Report to the ERCOT Board for consideration pursuant to Section 21.4.10, ERCOT Board Vote. 21.4.9 ERCOT Impact Analysis Based on Technical Advisory Committee Report (1) ERCOT shall review the TAC Report and, if necessary, update the Impact Analysis as soon as practicable. ERCOT shall distribute the updated Impact Analysis, if applicable, to TAC and post it on the ERCOT website. If a longer review period is required for ERCOT to update the Impact Analysis, ERCOT shall submit comments with a schedule for completion of the Impact Analysis. 21.4.10 ERCOT Board Vote (1) Upon issuance of a TAC Report and Impact Analysis to the ERCOT Board, the ERCOT Board shall review the TAC Report and the Impact Analysis at the next regularly scheduled meeting. For Urgent Revision Requests, the ERCOT Board shall review the TAC Report and Impact Analysis at the next regularly scheduled meeting, unless a special meeting is required due to the urgency of the Revision Request. (2) The quorum and voting requirements for ERCOT Board action are set forth in the ERCOT Bylaws. In considering action on a TAC Report, the ERCOT Board shall: (a) Recommend approval of the Revision Request as recommended in the TAC Report or as modified by the ERCOT Board; (b) Reject the Revision Request; ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-9 PUBLIC Appx. Page 574 of 740 SECTION 21: REVISION REQUEST PROCESS (c) Table the Revision Request; or (d) Remand the Revision Request to TAC with instructions. (3) If a motion is made to recommend approval of a Revision Request and that motion fails, the Revision Request shall be deemed rejected by the ERCOT Board unless at the same meeting the ERCOT Board later votes to recommend approval, table, or remand the Revision Request. The rejected Revision Request shall be subject to appeal pursuant to Section 21.4.12.3, Appeal of ERCOT Board Action. (4) Within three Business Days after the ERCOT Board takes action on a Revision Request, ERCOT shall post a Board Report reflecting the ERCOT Board action on the ERCOT website. 21.4.11 PUCT Approval of Revision Requests (1) All Revision Requests require approval by the PUCT prior to implementation. (2) Within three Business Days after the PUCT takes action on a Revision Request, ERCOT shall post a PUCT Report reflecting the PUCT action on the ERCOT website. 21.4.12 Appeal of Action (1) The following processes are to be used to appeal an action related to a Revision Request. 21.4.12.1 Appeal of Protocol Revision Subcommittee Action (1) Any ERCOT Member, Market Participant, PUCT Staff, the Reliability Monitor, the IMM, the NERC Regional Entity, or ERCOT may appeal a PRS action to reject, table, or refer a Revision Request, directly to the TAC. Such appeal to the TAC must be submitted electronically to ERCOT by completing the designated form provided on the ERCOT website within seven days after the date of the relevant PRS appealable event. ERCOT shall reject appeals made after that time. ERCOT shall post appeals on the ERCOT website within three Business Days of receiving the appeal. Appeals shall be heard at the next regularly scheduled TAC meeting that is at least seven days after the date of the requested appeal. An appeal of a Revision Request to TAC suspends consideration of the Revision Request until the appeal has been decided by TAC. 21.4.12.2 Appeal of Technical Advisory Committee Action (1) Any ERCOT Member, Market Participant, PUCT Staff, the Reliability Monitor, the IMM, the NERC Regional Entity, or ERCOT may appeal a TAC action to reject, table, remand or refer a Revision Request directly to the ERCOT Board. Appeals to the ERCOT Board shall be processed in accordance with the ERCOT Board Policies and Procedures. An appeal of a Revision Request to the ERCOT Board suspends ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-10 PUBLIC Appx. Page 575 of 740 SECTION 21: REVISION REQUEST PROCESS consideration of the Revision Request until the appeal has been decided by the ERCOT Board. 21.4.12.3 Appeal of ERCOT Board Action (1) Any ERCOT Member, Market Participant, PUCT Staff, the Reliability Monitor, the IMM, or the NERC Regional Entity may appeal any decision of the ERCOT Board regarding a Revision Request to the PUCT or other Governmental Authority. Such appeal to the PUCT or other Governmental Authority must be made within any deadline prescribed by the PUCT or other Governmental Authority, but in any event no later than 35 days of the date of the relevant ERCOT Board appealable event. Notice of any appeal to the PUCT or other Governmental Authority must be provided, at the time of the appeal, to ERCOT’s General Counsel. If the PUCT or other Governmental Authority rules on the Revision Request, ERCOT shall post the ruling on the ERCOT website. 21.5 Urgent and Board Priority Nodal Protocol Revision Requests and System Change Requests (1) The party submitting a Nodal Protocol Revision Request (NPRR) or System Change Request (SCR) (“Revision Request”) may request that the Revision Request be considered on an urgent timeline (“Urgent”) only when the submitter can reasonably show that an existing Protocol or condition is impairing or could imminently impair ERCOT System reliability or wholesale or retail market operations, or is causing or could imminently cause a discrepancy between a settlement formula and a provision of these Protocols. (2) The Protocol Revision Subcommittee (PRS) may designate the Revision Request for Urgent consideration upon a valid motion in a regularly scheduled meeting of the PRS or at a special meeting called by the PRS leadership. Criteria for designating a Revision Request as Urgent are that the Revision Request requires immediate attention due to: (a) Serious concerns about ERCOT System reliability or market operations under the unmodified language or existing conditions; or (b) The crucial nature of settlement activity conducted pursuant to any settlement formula. (3) The ERCOT Board may designate any existing Revision Request a Board Priority Revision Request. If the ERCOT Board directs ERCOT Staff to file a Revision Request, it may further direct that a Revision Request be designated a Board Priority Revision Request. All Board Priority Revision Requests will be considered on an Urgent timeline. (4) ERCOT shall prepare an Impact Analysis for Urgent and Board Priority Revision Requests as soon as practicable. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-11 PUBLIC Appx. Page 576 of 740 SECTION 21: REVISION REQUEST PROCESS (5) The PRS shall consider the Urgent or Board Priority Revision Request and Impact Analysis, if available, at its next regularly scheduled meeting, or at a special meeting called by the PRS leadership to consider the Urgent or Board Priority Revision Request. (6) If recommended for approval by PRS, ERCOT shall post a PRS Report on the ERCOT website within three Business Days after PRS takes action. The Technical Advisory Committee (TAC) chair may request action from TAC to accelerate or alter the procedures described herein, as needed, to address the urgency of the situation. (7) Any Urgent or Board Priority Revision Requests shall be subject to an Impact Analysis pursuant to Section 21.4.9, ERCOT Impact Analysis Based on Technical Advisory Committee Report, and ERCOT Board consideration pursuant to Section 21.4.10, ERCOT Board Vote. 21.6 Nodal Protocol Revision Implementation (1) Following Public Utility Commission of Texas (PUCT) approval, ERCOT shall implement Nodal Protocol Revision Requests (NPRRs) on the first day of the month following PUCT approval, unless otherwise provided in the PUCT Report for the approved NPRR. (2) For such other NPRRs, the Impact Analysis shall provide an estimated amount of time required to implement the NPRR and ERCOT shall issue a Market Notice as soon as practicable, but no later than ten days prior to actual implementation, unless a different notice period is required in the PUCT Report for the approved NPRR. (3) If the PUCT approves changes to the Protocols, such changes shall be: (a) Filed with the PUCT for informational purposes as soon as practicable, but no later than one day before the effective date of the changes; and (b) Incorporated into the Protocols and posted on the ERCOT website as soon as practicable, but no later than one day before the effective date of the changes. (4) ERCOT shall implement an Administrative NPRR on the first day of the month following PUCT approval. 21.7 Review of Project Prioritization and Annual Budget Process (1) The Protocol Revision Subcommittee (PRS) shall recommend to the Technical Advisory Committee (TAC) an assignment of a project priority for each approved Nodal Protocol Revision Request (NPRR) and System Change Request (SCR) (“Revision Request”) that requires an associated project. (2) Annually, the PRS shall review the priority of all market-requested projects and recommend new or revised project priorities for market-requested projects. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-12 PUBLIC Appx. Page 577 of 740 SECTION 21: REVISION REQUEST PROCESS (3) TAC shall consider the project priority of each Revision Request and make recommendations to the ERCOT Board. (4) The ERCOT Board shall take one of the following actions regarding the project prioritization recommended by TAC: (a) Approve the TAC recommendation as originally submitted or as modified by the ERCOT Board; (b) Reject the TAC recommendation; (c) Remand the TAC recommendation to TAC with instructions; or (d) Table the TAC recommendation. 21.8 Review of Guide Changes (1) The revision process for the ERCOT market guides shall be governed by the individual guides and assigned subcommittees. The Protocol Revision Subcommittee (PRS) shall review changes to market guides proposed by other subcommittees that may conflict with existing Protocols and report the results of its review to the submitting subcommittee. ERCOT NODAL PROTOCOLS – JUNE 1, 2023 21-13 PUBLIC Appx. Page 578 of 740 APPENDIX E Appx. Page 579 of 740 FILED 23-0555 2/8/2024 9:15 PM tex-84324539 SUPREME COURT OF TEXAS NO. 23-0555 BLAKE A. HAWTHORNE, CLERK In the Supreme Court of Texas ____________________________________ Public Utility Commission of Texas, Petitioner, v. RWE Renewables Americas, LLC and Tx Hereford Wind, LLC Respondents . ____________________________________ On Petition for Review Third Court of Appeals in Austin, Texas No. 03-21-00356-CV _____________________________________ BRIEF ON THE MERITS OF RWE RENEWABLES AMERICAS LLC AND TX HEREFORD WIND, LLC _____________________________________ Michael J. Jewell Kurt Kuhn State Bar No. 10665175 State Bar No. 24002433 michael@jewellandassociates.com Kurt@KuhnHobbs.com Jewell & Associates, PLLC Lisa Bowlin Hobbs 8404 Lakewood Ridge Cove State Bar No. 24026905 Austin, Texas 78738-7674 Lisa@KuhnHobbs.com (512) 423-4065 KUHN HOBBS PLLC (512) 236-5170 (fax) 7000 North MoPac Expy., Suite 315 Austin, Texas 78731 Stephanie C. Sparks (512) 476-6005 State Bar No. 24042900 (512) 476-6002 (fax) ssparks@vedderprice.com Vedder Price PC 100 Crescent Court, Ste. 350 Dallas, Texas 75201 (469) 895-4830 COUNSEL FOR RESPONDENTS February 8, 2024 Appx. Page 580 of 740 TABLE OF CONTENTS Index of Authorities ................................................................................................................v Statement of the Case .............................................................................................................x Statement Regarding the Record ..........................................................................................xi Issues Presented .....................................................................................................................xii Reasons to Affirm ...................................................................................................................1 Statement of Facts ...................................................................................................................2 A. The Legislature amended PURA to require the unbundling of vertically integrated utility monopolies and establish a competitive electric power industry with wholesale prices set by the market.................... 2 B. In response to its legislative mandate, the PUC created a competitive wholesale electric market through the adoption of a series of carefully crafted competition rules that require price be set by the market................. .4 C. In the middle of Winter Storm Uri, the PUC ordered the price of electricity being set by the market to be replaced by an artificially inflated fixed price set at the $9,000 cap............................................................ 8 D. The load shed price-setting orders replaced market prices with a fixed regulatory price, which had nothing to do with protecting the grid from collapse and did not generate more energy........................................... 10 E. After Storm Uri, without even attempting to follow the APA, the PUC quickly adopted the same approach from the February orders as a permanent new price-setting rule for future load shed events ..................... 13 Summary of Argument ........................................................................................................ 17 Argument ............................................................................................................................... 19 I. Through PURA, the Legislature requires the wholesale price of electricity be set by the competitive market, and the PUC has no authority to adopt a rule to replace the market price with a fixed government price. ...................... 19 ii Appx. Page 581 of 740 A. \X.'hile the PUC can regulate the market, the plain language and intent of PURA requires the wholesale price must still be set by the market, not government regulators ...................................... .......................................... 20 1. This case is not about whether the PUC can regulate the market; the question is whether it can replace competitive pricing. ..................... 21 2. PURA requires the PUC allow competition to set the price of electricity, and it cannot adopt a rule to set a fixed price. ........................ 23 3. The PUC can regulate the market; it just cannot replace it with a fixed, non-competitive price. ....................................................................... 26 4. The PUC cannot adopt rules to assert new powers not authorized by PURA. .................................................................................................. 29 B. An inflated, fixed price set by the government is not an "accurate" market price determined by the normal forces of competition................... 30 1. This is no single VOLL for an ERCOT load shed event, and VOLL cannot tell the PUC what the market price should be. ............................. 31 2. Market prices fluctuate, and the PUC cannot predict the price. ............. 33 C. The new price-setting rule seeks to adopt a policy decision that should be left to the Legislature and is a direct assault on the pro-competition policy adopted in PURA........................... ........................................................ 36 II. This case has nothing to do with protecting the grid, and upholding the PUC’s actions would undermine future investment in Texas. ............................ 38 III. The new load shed price-setting rule is invalid because the PUC did not follow—or even attempt to satisfy—APA rulemaking requirements. ............... 40 A. The new load shed price-setting rule is a "rule" requiring the PUC to comply with the APA for its adoption .................. .......................................... 42 B. The price-setting rule is a competition rule that alters or amends several existing competition rules that regulated pricing on the E RCOT market........... ....................................................................................... 45 C. The PUC cannot circumvent APA rulemaking requirements by "delegating" rulemaking to ERCOT, which the PUC must still adopt. .............................................................................................................................. 47 iii Appx. Page 582 of 740 1. ERCOT cannot “adopt” new competition rules, and the PUC cannot shield new rules from validity challenges....................................... 47 2. New or amended wholesale market pricing rules should be subject to public notice and comment. .................................................................... 52 D. Under PURA, validity challenges to the PUC's adoption of a new or amended competition rule must be brought by direct appeal. ..................... 53 1. There is no administrative process after the PUC has already issued a final order. .................................................................................................. 54 2. The protocols cannot cut off the statutory right to file a direct appeal to challenge the validity of a new or amended rule. ...................... 55 3. There is no requirement to file a motion for rehearing or exhaust administrative remedies in order to challenge a rule. ................................ 58 Prayer ..................................................................................................................................... 59 Certificate of Compliance .................................................................................................... 60 Certificate of Service ............................................................................................................ 61 Appendix ............................................................................................................................... 62 iv Appx. Page 583 of 740 INDEX OF AUTHORITIES CASES Ala. Ass’n of Realtors v. Dep’t of Health & Human Servs., 141 S.Ct. 2485 (2021)................................................................................................ 37 Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332 (1982) ................................................................................................... 37 Carreras v. Marroquin, 339 S.W.3d 68 (Tex. 2011) ....................................................................................... 50 City of Alvin v. Pub. Util. Comm’n of Tex., 143 S.W.3d 872 (Tex. App.—Austin 2004, no pet.) ....................................... 57, 58 City of Corpus Christi v. Pub. Util. Comm’n, 51 S.W.3d 231 (Tex. 2001) .........................................................................2, 3, 19, 34 City of Laredo v. Laredo Merchs. Ass’n, 550 S.W.3d 586 (Tex. 2018) ..................................................................................... 37 City of Richardson v. Oncor Elec. Delivery Co. LLC, 539 S.W.3d 252 (Tex. 2018) ..................................................................................... 37 Collins v. Cnty. of El Paso, 954 S.W.2d 137 (Tex. App.—El Paso 1997, pet. denied) .................................... 50 Combs v. Entm’t Publ’ns, Inc., 292 S.W.3d 712 (Tex. App.—Austin 2009, no pet.) ............................................. 45 CPS Energy v. Elec. Reliability Council of Tex., 671 S.W.3d 605 (Tex. 2023) .............................................................................. passim El Paso Hosp. Dist. v. Tex. Health & Human Servs. Comm’n, 247 S.W.3d 709 (Tex. 2008) .............................................................................. passim Garza v. Harrison, 574 S.W.3d 389 (Tex. 2019) ..................................................................................... 21 Goeke v. Houston Lighting & Power Co., 797 S.W.2d 12 (Tex. 1990) ....................................................................................... 34 v Appx. Page 584 of 740 In re Konzak, 78 B.R. 990 (Bankr. D. N.D. 1987) ........................................................................ 33 In re Oncor Elec. Delivery Co., 630 S.W.3d 40 (Tex. 2021) (orig. proceeding) ................................................. 22, 34 John Gannon, Inc. v. Tex. Dep’t of Transp., No. 03-18-00696-CV, 2020 WL 6018646 (Tex. App.—Austin Oct. 9, 2020, pet. denied) ...................................................................................................... 42 Mosley v. Tex. Health & Human Servs. Comm’n, 593 S.W.3d 250 (Tex. 2019) ..................................................................................... 51 Nat’l Soc. of Prof’l Eng’rs v. United States, 435 U.S. 679 (1978) ................................................................................................... 37 NCAA v. Alston, 141 S. Ct. 2141 (2021) .............................................................................................. 37 Office of Pub. Util. Counsel v. Pub. Util. Comm’n, 131 S.W.3d 314 (Tex. App.—Austin 2004, pet. denied) ................... 41, 43, 47, 56 Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265 (Tex. 2015) ..................................................................................... 33 Powell v. City of Houston, 628 S.W.3d 838 (Tex. 2021) ............................................................................... 22, 49 Pub. Util. Comm’n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310 (Tex. 2001) ................................................................................ passim Pub. Util. Comm’n v. Constellation Energy Commodities Grp., Inc., 351 S.W.3d 588 (Tex. App.—Austin, 2011, pet. denied) ..................................... 43 R.R. Comm’n of Tex. v. WBD Oil & Gas Co., 104 S.W.3d 69 (Tex. 2003) ................................................................................. 44, 58 Rodriguez v. Serv. Lloyds Ins. Co., 997 S.W.2d 248 (Tex. 1999) ......................................................................... 41, 50, 51 vi Appx. Page 585 of 740 State v. Jackson, 376 S.W.2d 341 (Tex. 1964) ..................................................................................... 29 Teladoc, Inc. v. Tex. Med. Bd., 453 S.W.3d 606 (Tex. App.—Austin 2014, pet. denied) .............................. 43, 46 Tex. Mun. Power Agency v. Pub. Util. Comm’n, 253 S.W.3d 184 (Tex. 2007) ..................................................................................... 25 Tex. State Bd. of Exam’rs of Marriage & Family Therapists v. Tex. Med. Ass’n, 511 S.W.3d 28 (Tex. 2017) ....................................................................................... 29 Tex. Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643 (Tex. 2004) ..................................................................................... 48 TracFone Wireless, Inc. v. Comm’n on State Emergency Commc’ns, 397 S.W.3d 173 (Tex. 2013) ..................................................................................... 37 TXU Generation Co., L.P. v. Pub. Util. Comm’n, 165 S.W.3d 821 (Tex. App.— Austin 2005, pet. denied) .................................................................................. passim U.S. v. Socony-Vacuum Oil Co., 310 U.S. 150, 220-21 (1940) ..................................................................................... 36 United States v. Trenton Potteries Co., 273 U.S. 392 (1927) ................................................................................................... 36 STATUTES, CODE, & RULES 16 TEX. ADMIN. CODE §22.1 ........................................................................................ 56, 58 16 TEX. ADMIN. CODE §22.251 .............................................................................. 55, 56, 57 16 TEX. ADMIN. CODE §25.501 ...................................................................................... 6, 45 16 TEX. ADMIN. CODE §25.505 (2021) .......................................................................... 6, 45 16 TEX. ADMIN. CODE §25.509 ...................................................................................... 6, 39 2021 Tex. Sess. Law Serv. Ch. 425 (S.B. 2) ....................................................................... 13 vii Appx. Page 586 of 740 Protocol §5.5.2 ...................................................................................................................... 27 Protocol §6.5.7.3.1 ............................................................................................. 14, 22, 23, 24 Protocol §21.4.10 .................................................................................................................. 40 Protocol §21.4.11 .................................................................................................................. 49 TEX. GOV’T CODE §2001.001 ............................................................................................. 41 TEX. GOV’T CODE §2001.003 ....................................................................................... 43, 44 TEX. GOV’T CODE §311.016 ............................................................................................... 21 TEX. R. APP. PROC. 4............................................................................................................ 57 TEX. REV. CIV. STAT. ANN. art. 1446c, Act of June 2, 1975, 64th Leg., R.S., ch. 721, §1, 1975 TEX. GEN. LAWS 2327 ........................................................................ 2 TEX. UTIL. CODE §11.007 ............................................................................................. 41, 50 Tex. Util. Code §39.001 ................................................................................................ passim Tex. Util. Code §39.151 ................................................................................................ passim OTHER AUTHORITIES 28 Tex. Reg. 8901 (Oct. 10, 2003) ..................................................................... 6, 34, 35, 46 31 Tex. Reg. 7317 (Sept. 8, 2006) .................................................................. 6, 7, 27, 38, 46 35 Tex. Reg. 6823 (Aug. 6, 2010) ....................................................................................... 46 35 Tex. Reg. 10213 (Nov. 19, 2010) ................................................................................... 46 37 Tex. Reg. 8959 (Nov. 9, 2012) ................................................................................... 7, 46 Commission Proceeding to Ensure Resource Adequacy in Texas, PUC Docket No. 40000, “Submission of the Brattle Group’s ‘ERCOT Investment Incentives and Resource Adequacy Report,’” (July 24, 2012) ............................. 39 ERCOT Nodal Operating Guides, Section 4: Emergency Operation .......................... 26 ERCOT Nodal Protocols, Section 5: Transmission Security and Reliability Unit Commitment.............................................................................................................. 26 viii Appx. Page 587 of 740 ERCOT, Load Participation in the ERCOT Nodal Market (Apr. 2015) .................. 5, 30 ERCOT, Methodology for Implementing Operating Reserve Demand Curve (ORDC) to Calculate Real-Time Reserve Price Adder (2013) ............................ 32 Feb. 15, 2021 Open Meeting Act Notice, Secretary of State ...................................... 8, 11 London Econ. Int’l LLC, Estimating the Value of Lost Load (June 17, 2013) ............ 31, 32 Merriam-Webster Dictionary .............................................................................................. 49 Potomac Econ. Ltd., 2019 STATE OF THE MARKET REPORT FOR THE ERCOT ELEC. MARKETS (May 2020) ........................................................................ 27, 28, 33 Potomac Economics Ltd, 2020 STATE OF THE MARKET REPORT FOR THE ERCOT ELECTRICITY MARKETS (May 2021) ........................................................ 28 POTOMAC ECON. LTD., 2021 STATE OF THE MARKET REPORT FOR THE ERCOT WHOLESALE ELEC. MARKETS (May 2022) ............................................. 13 Sunset Advisory Commission, Staff Report with Final Results, Public Utility Commission of Texas, Electric Reliability Council of Texas, Office of Public Utility Counsel (June 2023) ................................................................... passim ix Appx. Page 588 of 740 STATEMENT OF THE CASE Nature of Case: This is a direct appeal, pursuant to TEX. UTIL. CODE §39.001(e)-(f), for judicial review of the validity of a new load shed price-setting rule adopted by the Public Utility Commission that changed existing competition rules governing the pricing of electricity and the use of the scarcity pricing mechanism in the ERCOT competitive market.1 In February 2021, during Winter Storm Uri, the PUC adopted orders creating an “exception to commission rules” which required that, during load shed, the actual price of electricity being set by the competitive market be replaced by an inflated, fixed regulatory price equal to the $9,000 price cap.2 In July 2021, without following the Administrative Procedure Act, the PUC adopted a new price-setting rule to provide a “permanent pricing solution” consistent with the approach taken by the PUC during Storm Uri. Under the new rule, while load shed is being ordered during EEA3, the wholesale price of electricity is required to be administratively set and fixed at the price cap. The rule is admittedly designed to create “price outcomes.”3 Court of Appeals: Third Court of Appeals. Justices Baker, Theofanis, and Jones.4 Disposition by Court of Appeals: In a unanimous opinion authored by Justice Jones, the court held the new load shed price-setting rule is invalid based on two independent grounds: (1) it exceeds the PUC’s statutory authority by setting a fixed regulatory price for electricity instead of a competitive market price; and (2) the PUC adopted the new price-setting rule without complying with mandatory APA rulemaking procedures.5 1 July 16, 2021 Order Approving Nodal Protocols, 3AR84-86. 2 Feb. 15, 2021 Order Directing ERCOT to Take Action and Granting Exception to Comm’n Rules (PUC Project No. 51617), attached to Resp. to Pet. as Tab B; Feb. 16, 2021 Second Order Directing ERCOT to Take Action and Granting Exception to Comm’n Rules (PUC Project No. 51617), attached to Resp. to Pet. as Tab C. 3 3AR84-86; July 14, 2021 PUC Mem. for July 15, 2021 Open Meeting, relevant pages attached as Tab A, 2AR5-10, 26-41. 4 J. Woodfin Jones, Chief Justice (Retired), Third Court of Appeals, sitting by assignment. 5 RWE Renewables Americas, LLC v. Pub. Util. Comm’n, 669 S.W.3d 566 (Tex. App.—Austin 2023, pet. granted). x Appx. Page 589 of 740 STATEMENT REGARDING THE RECORD In response to the court of appeals’ notice to file the rulemaking record, the PUC filed a notice indicating that no such record exists.6 In its place, the PUC filed a compilation of two documents, which it indicated are the only two documents filed in Project No. 52307 from the records of the agency that relate to the protocols approved in the July 16 order. The documents are not consecutively paginated, and (although there are only two documents), they are labelled as items “2” and “3.” Respondents will refer to these documents as the Agency Record. For clarity, citations to tabs and pages in the Agency Record are provided by first citing to the “Item No.” and then to the actual page of the filed PDF, and are listed as “__AR__.” 6 Aug. 30, 2021 Notice Regarding Filing of Record, No. 03-21-00356-CV, in the Third Court of Appeals. xi Appx. Page 590 of 740 ISSUES PRESENTED 1. Through PURA, the Legislature requires the wholesale price of electricity be set by the competitive market, not government regulators. But the PUC adopted a new price-setting rule that, during load shed, replaces the wholesale market price for electricity on the ERCOT market with a price fixed at the maximum cap. Does PURA give the PUC authority to replace the market price of electricity with a fixed regulatory price? 2. An agency pronouncement that departs from and effectively changes an agency rule is itself a “rule” under the Administrative Procedure Act. The PUC adopted the new load shed price-setting rule and changed the method of pricing electricity and the use of the scarcity pricing mechanism during load shed. Is the new price- setting rule a “rule” under the APA that departed from or changed existing competition rules on the market? 3. The Administrative Procedure Act sets out the minimum standards an agency must follow when adopting a new or amended rule, and failure to comply with those requirements renders the rule invalid. With the July 16 Order, the PUC approved and adopted the new load shed price-setting rule, but did not even attempt to comply with any of the requirements of the APA. Is the new rule invalid because the PUC did not follow the APA’s requirements? xii Appx. Page 591 of 740 REASONS TO AFFIRM Despite the PUC’s feigned alarm, this case is not about protecting the grid or preventing the PUC from regulating the market or balancing competing interests. The issue is whether the agency can simply override or ignore clear policy choices made by the Legislature. The court of appeals correctly held that the agency could not. To the benefit of all Texans, the Legislature deregulated the electric utility industry and mandated the price of electricity be determined by the competitive market. Over two decades later, the PUC has adopted a new load shed price-setting rule, by which it can order market pricing to stop and to be replaced by a fixed price. Under PURA, the PUC cannot eliminate market pricing and replace it with a fixed government price. Every agreement to fix prices eliminates competition, and the price-setting rule is a direct assault on the Legislature’s policy choice. If the PUC wants the ability to turn off the market, it should ask the Legislature for such authority. In adopting this new rule that changes both the method of pricing and the use of the scarcity pricing mechanism, the PUC did not even attempt to satisfy APA rule- making requirements. The Legislature has made it clear the APA requirements apply to proceedings under PURA and sets the floor for rulemaking. The PUC followed the APA when it originally adopted its competition rules to create competitive pricing and the scarcity pricing mechanism. If the PUC wants to amend or abandon those rules for the fixed-price model it used during Storm Uri, it should follow the same process, with public notice and comment, instead of adopting the new rule in an echo chamber. 1 Appx. Page 592 of 740 STATEMENT OF FACTS A. The Legislature amended PURA to require the unbundling of vertically integrated utility monopolies and establish a competitive electric power industry with wholesale prices set by the market. In 1975, the Public Utility Regulatory Act (PURA) was enacted to create a comprehensive regulatory scheme for electric utilities.7 At the time, the Legislature concluded these utilities were “by definition monopolies in the areas they serve,” and that as a result the “normal forces of competition which regulate prices in a free enterprise society do not operate.”8 Under the original statutory scheme, “[r]egulation was intended to be a substitute for competition.”9 Over the years, however, there were significant changes to the electric industry, with partial deregulation at the national level and deregulation in other states.10 In 1999, the Texas Legislature restructured the electric utility industry, amending PURA to require the unbundling of vertically integrated electric utility monopolies and establishing a fully competitive electric market.11 Each electric utility was required to separate into distinct companies responsible for either power generation, retail electricity, or transmission and distribution.12 7 City of Corpus Christi v. Pub. Util. Comm’n, 51 S.W.3d 231, 236 (Tex. 2001). 8 Id. (quoting former TEX. REV. CIV. STAT. ANN. art. 1446c, Act of June 2, 1975, 64th Leg., R.S., ch. 721, §1, 1975 TEX. GEN. LAWS 2327). 9 Id. 10 Id. at 237. 11 CPS Energy v. Elec. Reliability Council of Tex., 671 S.W.3d 605, 612 (Tex. 2023). 12 City of Corpus Christi, 51 S.W.3d at 237. 2 Appx. Page 593 of 740 Underpinning the Legislature’s decision to restructure the electric power industry was its finding that “the production and sale of electricity is not a monopoly warranting regulation of rates, operations, and services.”13 It further found that, except for transmission and distribution services and the recovery of stranded costs, “the public interest in competitive electric markets requires . . . electric services and their prices should be determined by customer choices and the normal forces of competition.”14 As a result, the Legislature ordered competition in the wholesale electricity market.15 To protect the public interest in the competitive market, the Legislature enacted Chapter 39 of the Texas Utilities Code. The statute precludes regulators from making any rules or orders regulating competitive electric services, prices, and competitors, or restricting or conditioning competition, except as authorized by the statute.16 The law requires that regulatory authorities use competitive rather than regulatory methods and “adopt rules and issue orders that are both practical and limited so as to impose the least impact on competition.”17 The Legislature “decided that both retail and wholesale electricity markets should be governed by market forces,” and “both wholesale and retail rates are now set by the market.”18 13 Id.; TEX. UTIL. CODE §39.001(a), attached as Tab C. Many of the statutes, rules, and protocols at issue have been amended in various ways. When relevant, the prior version will be noted; otherwise, citations herein are to the current version. 14 TEX. UTIL. CODE §39.001(a). 15 Pub. Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d 310, 312 (Tex. 2001). 16 TEX. UTIL. CODE §39.001(c). 17 TEX. UTIL. CODE §39.001(d). 18 TXU Generation Co., L.P. v. Pub. Util. Comm’n, 165 S.W.3d 821, 831, 834 (Tex. App.—Austin 2005, pet. denied). 3 Appx. Page 594 of 740 B. In response to its legislative mandate, the PUC created a competitive wholesale electric market through the adoption of a series of carefully crafted competition rules that require price be set by the market. The electric market in Texas runs through a network of transmission lines that form a grid covering the majority of the state, overseen by the Electric Reliability Council of Texas.19 PURA requires the PUC certify an independent system operator (ISO) for the power region, and the PUC certified ERCOT.20 “ERCOT is essentially a large, sophisticated IT organization that manages the flow of electricity through the ‘ERCOT grid,’ delivering power to more than 26 million Texas customers, representing about 90 percent of the electricity consumed in the state.”21 ERCOT’s authority to act in the capacity as the certified ISO is derived from PURA.22 ERCOT performs its functions under the direct oversight of the PUC, and must do so in compliance with PURA.23 ERCOT is directly accountable to the PUC, and the PUC has authority over ERCOT, including its protocols, which are the rules by which ERCOT manages the market and grid.24 While ERCOT is the ISO for the grid, “[u]nder PURA, the PUC— a governmental entity—was given the ‘general power’ to regulate and supervise public utilities.”25 19 City Pub. Serv. Bd., 53 S.W.3d at 312. 20 CPS Energy, 671 S.W.3d at 612. 21 Sunset Advisory Commission, Staff Report with Final Results, Public Utility Commission of Texas, Electric Reliability Council of Texas, Office of Public Utility Counsel, at A9 (June 2023), attached as Tab B. 22 CPS Energy, 671 S.W.3d at 612. 23 Id. at 616. 24 Id. at 612, 616; Tab B at 20. 25 Id. at 616. 4 Appx. Page 595 of 740 In response to the Legislature’s mandate to deregulate the electric power industry and set prices by competition, the PUC created a competitive wholesale market. The wholesale electric market is the buying and selling of electricity between generators and those who ultimately sell it to consumers.26 Underlying both the legislative mandate and the marketplace is the fact that “[e]lectricity is a consumable resource that can be bought, sold, and traded in a marketplace.”27 As found by the Legislature, “the sale of electricity is not a monopoly warranting regulation of rates” and “prices should be determined by customer choices and the normal forces of competition.”28 As originally designed, the wholesale competitive marketplace did exactly that. The competitive wholesale electric market is “an economic system for the production and sale of wholesale electricity relying on competitive forces of supply and demand rather than PUC regulation to set wholesale electricity rates in the ERCOT region.”29 The actual prices paid for electricity are supposed to be “based on bids and offers in the various ERCOT-operated markets.”30 The design of the competitive market was a deliberative process. After the Legislature mandated price be set by competition, the PUC implemented that approach by adopting a series of carefully considered competition rules over several years. 26 Tab B at 9. 27 Id. at 8. 28 TEX. UTIL. CODE §39.001(a). 29 Tab B at 116. 30 ERCOT, Load Participation in the ERCOT Nodal Market, at 7 (Apr. 2015), attached as Tab D. 5 Appx. Page 596 of 740 The current market framework originated in 2003 with the PUC’s adoption of §25.501, laying out the wholesale market design for ERCOT. It requires the use of competitive nodal energy prices determined through auctions. It also requires ERCOT’s protocols and rules for the wholesale electric market support competition.31 The PUC recognized §25.501 constituted a major step in implementing an improved wholesale market design for ERCOT that is consistent with microeconomic principles.32 Section 25.501 was designed to increase price transparency and “provide participants in the wholesale and retail markets with more accurate wholesale prices.”33 In 2006, the PUC adopted §25.505, establishing a scarcity pricing mechanism.34 The rule seeks to induce investment in new generating facilities by allowing prices to rise in response to scarcity in the market.35 Prices are allowed to rise and fall according to the market, only limited by a pair of offer caps—the low system-wide offer cap (LCAP) and the high system-wide offer cap (HCAP).36 At the time of its adoption, some argued price should rise without limit, but the PUC determined a cap was necessary to avoid “excessive transfers of wealth from load to generation without any additional benefits to the market.”37 31 16 TEX. ADMIN. CODE §25.501(a), (f), attached as Tab E; 28 Tex. Reg. 8901, 8902 (Oct. 10, 2003), attached as Tab F (highlights added). 32 Tab F, at 8911. 33 Id. at 8901-02. 34 16 TEX. ADMIN. CODE §25.505(a), (g) (2021), attached as Tab G. The scarcity pricing mechanism has been relocated to 16 TEX. ADMIN. CODE §25.509. 35 31 Tex. Reg. 7317, 7319 (Sept. 8, 2006) (highlights added), attached as Tab H . 36 16 TEX. ADMIN. CODE at §25.505(g)(6). 37 Tab H at 7333-34, -46. 6 Appx. Page 597 of 740 Prior to the adoption of the current system, the PUC had set a system-wide offer cap at $1,000 per megawatt hour. The PUC recognized that level was not sustainable.38 The current system employed two caps.39 Recognizing the need to monitor the scarcity pricing mechanism, the PUC indicated the Independent Market Monitor would review it annually, subject to public comment.40 Following extensive study and comment, using a rule-making, the PUC incrementally raised the HCAP over the years, before, in 2015, it was set at $9,000 per megawatt hour—the level it stayed until recently.41 These competition rules are fundamental to the proper design and function of the competitive wholesale market. The PUC designed the market as an energy-only market, which means power generators receive payment only for the electricity they produce.42 This contrasts with a capacity market in which generators also receive compensation for reserving generation capacity in case it becomes necessary.43 Instead of creating a capacity market, the PUC adopted the scarcity pricing mechanism, in conjunction with nodal auctions, to “use competitive rather than regulatory methods to achieve the goals of PURA.”44 The PUC adopted the scarcity pricing approach as “an appropriate tool for maintaining adequate reserves in a competitive market.”45 38 Id. at 7328. 39 Id. at 7318, 7348. 40 Id. at 7346. 41 37 Tex. Reg. 8959, 8961-62, 8971 (Nov. 9, 2012). 42 Tab B at 117. 43 Id. at 115. 44 Tab H at 7319. 45 Id. at 7331. 7 Appx. Page 598 of 740 C. In the middle of Winter Storm Uri, the PUC ordered the price of electricity being set by the market to be replaced by an artificially inflated fixed price set at the $9,000 cap. In February 2021, a polar air mass resulted in historic low temperatures in Texas. Cold air combined with other weather systems to produce ice storms and record snow. The severe weather had effects throughout the state, including on the electricity market. The low temperatures resulted in high energy demand while severe weather curtailed generation. Demand exceeded supply, and on February 15, ERCOT issued its highest state of emergency, an Energy Emergency Alert Level 3, which results in customer load shed (commonly known as “blackouts”). Given weather predictions, ERCOT expected to remain at EEA3 and load shed to continue for a sustained period.46 As expected, the weather dramatically raised energy prices on the competitive market. On February 15, 2020, the price ranged from $10.22 to $28.74 per megawatt hour. On the same day in 2021, the price ranged from $1,403.49 to $9,004.59.47 That night, the PUC commissioners held an abrupt telephone meeting. The PUC decided to “consider whether the system demand component of energy prices should be set at the system-wide offer cap when firm load is being shed.”48 Simply understood, the PUC was deciding whether to order the price of electricity being set by the market to be replaced by a price administratively fixed at the cap. 46 Feb. 15, 2021 Open Meeting Act Notice, Secretary of State’s website here, last visited February 8, 2024; Resp. to Pet. Tab B. 47 These numbers reflect ERCOT’s average real-time settlement hub prices as publicly posted on its website: http://www.ercot.com/mktinfo/prices/. 48 Open Meeting Act Notice, supra n. 46. 8 Appx. Page 599 of 740 Chair DeAnn Walker said she believed there were “distortions” in the market. Walker admitted it “may be the wrong term, but that’s what I’m going to call it right now.” Commissioner Arthur D’Andrea said, “I think we all expected that when we were in load shed, we would be at $9,000.” Walker added, “I was a little surprised when I learned today that, you know, we’ve been in load shed since about 1:00 this morning and that the prices weren’t at the scarcity pricing, and – and I was somewhat surprised about that.”49 Commissioner Shelly Botkin noted “these changes are – they are a big deal.” Walker agreed. However, after just a few minutes, the PUC voted to order “ERCOT to take immediate action in granting exception to Commission rules.”50 In the resulting order, the PUC indicated it “believes” it was “inconsistent with the fundamental design of the ERCOT market” for the price to be lower than the cap. Explaining its false supposition, the order states, “Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest.” The PUC ordered ERCOT to replace the competitive market price of electricity by administratively fixing the wholesale price of electricity, during load shed, at the maximum allowed, which was then $9,000.51 49 Feb. 15, 2021 Open Meeting, at 2-4, attached to Resp. to Pet. as Tab D. 50 Id. at 3-5. 51 Resp. to Pet. Tab B. 9 Appx. Page 600 of 740 The following afternoon, the PUC held a second meeting. Walker said, after “discussions with some people who really understand this issue,” she wanted to modify the order. Walker felt she “made a mistake” and “moved . . . too quickly” when making the decision retroactive. Walker admitted she acted “in haste” and “probably incorrectly” because “many companies had relied on the market as it stood at the time and made decisions in the market based on what they were seeing and where the market was at that time.”52 The PUC rescinded the retroactive portion of the order.53 D. The load shed price-setting orders replaced market prices with a fixed regulatory price, which had nothing to do with protecting the grid from collapse and did not generate more energy. Trying to justify replacing the market price, the PUC now cites its own court of appeals’ brief to claim the pricing orders were merely correcting a problem with a computer algorithm and were necessary to save a grid within minutes of collapse.54 Neither of these claims is true. The Independent Market Monitor testified to the Legislature that there was no “glitch” in the real-time pricing and the software worked the way it was written.55 ERCOT’s VP for Commercial Operations, Kenan Ogelman testified, “[t]he system was generating prices consistent with the protocols that we had.”56 ERCOT’s interim CEO, 52 Feb. 16, 2021 Open Meeting, at 2, 4-7, attached Resp. to Pet. as Tab I; Resp. to Pet. Tab C. 53 Id. at 4-7; Resp. to Pet. Tab C. 54 PUC Br. 7-8, 38-39. 55 Mar. 11, 2021 Senate Comm. on Jurisprudence, at 57, attached as Tab I. 56 Mar. 4, 2021 Senate Comm. on Bus. & Commerce, at 10, attached as Tab J. 10 Appx. Page 601 of 740 Brad Jones, testified it would be inaccurate to claim administratively raising and holding the price at $9,000 was done within the market rules.57 As to the threat of grid collapse, ERCOT CEO Bill Magness testified the threat to the grid occurred between 1:23 a.m. and 2:03 a.m. on the morning of February 15.58 ERCOT’s response to fix the threat to the grid was to “shed additional load.” Magness testified “we stabilized the frequency at that point, and we kept the frequency stabilized for the rest of the event.”59 Replacing the market price had nothing to do with protecting the grid. The PUC did not even meet to discuss the pricing orders until 5:20 p.m., more than 15 hours after ERCOT was able to stabilize the grid using load shed.60 Moreover, not once during the PUC’s February 15, 2021 meeting—nor in the accompanying order—was there any mention of the grid or needing to stabilize it.61 Instead, the meeting was simply about the wholesale price being set by the market, and the only issue discussed was the commissioners’ agreement to replace the market price with a regulatory price pegged to the $9,000 cap—which is exactly what the PUC did with its orders. 57 May 4, 2021 Senate Comm. on Bus. & Commerce, at 9, attached as Tab K. 58 Feb. 25, 2021 Senate Comm. on Bus. & Commerce, at 19, attached as Tab L. 59 Id. at 20-21. 60 Open Meeting Act Notice, supra n. 46; Resp. to Pet Tab M at 1. 61 See Resp. to Pet Tab B; Resp. to Pet. Tab H. 11 Appx. Page 602 of 740 While the internal mechanics of ERCOT protocols can be complicated, the PUC’s actions during Storm Uri were not. The PUC entered orders for a “pricing intervention to occur during firm load shed.”62 Instead of letting market pricing continue to function as designed, the PUC ordered ERCOT to implement “pricing outcomes” set by the PUC.63 This was an “out-of-market action” that caused the price of electricity to be higher than the market price.64 This is the first time since deregulation “the market rules have been abandoned for a price set by the government.”65 The fixed-price ordered by the PUC did not lead to any additional generation of electricity during the Storm Uri event. Instead, after the PUC set the price, generation continued to fall.66 This occurred even though generators are not allowed to shut down during an emergency regardless of the price set by the market.67 Generation did not increase with the inflated price because the problem had nothing to do with the market price.68 Magness testified, “everything that was available was running, and there was no reason it wouldn’t run for price.”69 The reason ERCOT 62 Tab I at 13. 63 ERCOT, M-C021521-01: Emergency Order of the Pub. Util. Comm’n Affecting ERCOT Market Prices (Feb. 15, 2021), ERCOT’s website available here, last visited February 8, 2024. 64 Tab I at 199-200. 65 Tab J at 93-94; Tab I at 41. 66 Tab L at 161. 67 Tab I at 36. 68 Tab L at 161. 69 Id. at 192. 12 Appx. Page 603 of 740 could not add capacity was strictly because generators could not run due to the weather—everything “that could run was running.”70 Instead, the PUC’s inflated government price simply increased energy charges for both consumers and electric companies by billions of dollars. Soon after the event, there was legislative testimony that, while the total spent for electricity invoiced on the ERCOT market for 2020 was around $5 billion, the PUC’s artificial price charged users four times that amount—over $21 billion—in just five days.71 The independent market monitor has since placed the total spent for electricity during the event at $59 billion.72 E. After Storm Uri, without even attempting to follow the APA, the PUC quickly adopted the same approach from the February orders as a permanent new price-setting rule for future load shed events. While generating no additional energy during the storm, the PUC’s February orders spawned bankruptcies, lawsuits, legislative hearings and action. A major piece of legislation that came out of the aftermath was S.B.2, addressing the governance of the PUC and ERCOT.73 The new law required: (1) the establishment and implementation of a formal process for adopting any new protocols or revisions to existing protocols that includes PUC approval; and (2) ERCOT protocols and rules cannot take effect before receiving PUC approval.74 After the law passed, ERCOT did 70 Id. at 201. 71 Tab J at 24. 72 POTOMAC ECON. LTD., 2021 STATE OF THE MARKET REPORT FOR THE ERCOT WHOLESALE ELEC. MARKETS, at ii (May 2022) available Here; Tab B at 80. 73 2021 Tex. Sess. Law Serv. Ch. 425 (S.B. 2). 74 Id. These requirements were originally added to §39.151(d), but have subsequently been moved to §39.151(g-6) without any material change. 13 Appx. Page 604 of 740 not establish a new formal process for adopting new or revised protocols with PUC approval, but the PUC still quickly adopted a new price-setting rule. Following the passage of S.B.2, the PUC opened Project No. 52307 to review proposed rules adopted by ERCOT during 2021. Relevant to this appeal was Nodal Protocol Revision Request (NPRR) 1081, which proposed revisions to the Real-Time Reliability Deployment Price Adder to “consider” firm load shed. While the new language adds load shed as one factor considered by the price adder,75 it also separately adopts a price-setting rule that, while load shed is being ordered during EEA3, the price adder is set to automatically require wholesale electricity be priced at the cap.76 ERCOT indicated the proposed changes were designed to be a permanent solution consistent with the PUC’s February price-setting orders. The new rule is designed to create “pricing outcomes.”77 The PUC’s staff said that, “[w]hile a comprehensive analysis of the February 2021 events related to Winter Storm Uri and its impacts on the ERCOT wholesale electric market is ongoing . . . . Consistent with the direction provided during Uri, NPRR1081 will provide a permanent pricing solution . . . .”78 On July 14, 2021, the staff filed NPRR1081 at the PUC for the Commission to consider and take action on the proposed rule during its open meeting the following 75 Protocol §6.5.7.3.1(1)(i). 76 Protocol §6.5.7.3.1(2)(p); 2AR26-27, 40. 77 2AR27, 39. 78 2AR40. 14 Appx. Page 605 of 740 day.79 At the meeting, there was no substantive discussion before the new rule was adopted: Chairman Lake: All right. We do not have anything for Closed Session. .... Mr. Journeay: We do have Item 26, sir. Chairman Lake: Oh, sorry. Oh, I’m sorry. Sorry, Rebecca. It’s an important one. (Laughter) Ms. Zerwas: Rebecca Zerwas for Commission Staff. I filed a memo. I speak to require the Commission to formally adopt ERCOT rules. There have been two NPRRs, NPRR1080 and 1081, and two OBDRRs, OBDRR030 and 031, that have been approved since the SB 2 signing dates. So, we have proposed an interim process for the Commission to approve these rule changes and are working with ERCOT on confirming to a more formal process, and it will be opening ERCOT Governance Rules, as well. Chairman Lake: Yes, this is an important one. Apologize for my oversight. Thank you for the memo. That works for me. Thoughts? Comm. McAdams: Same. Chairman Lake: All right. Is there a – Comm. Cobos: Agree. Chairman Lake: Is there a motion to approve the rules? Mr. Journeay: The proposed order -- Chairman Lake: The proposed order. Comm. McAdams: So moved. 79 2AR6. 15 Appx. Page 606 of 740 Chairman Lake: Second? Comm. Cobos: Second. Chairman Lake: All in favor, say, “Aye.” (All those voting in favor so responded) Chairman Lake: The motion passes.80 There was no other discussion of the new rule by the Commission. This direct appeal of the Commission’s new price-setting rule timely followed. The court of appeals held the new load shed price-setting rule was a “rule” under the APA because it implements or proscribes a new pricing policy that is intended to and will affect the rights of private parties.81 The court also held it was a “competition rule” under Section 39.001(e), noting neither side argued there was any material distinction in this case between a “competition rule” under PURA and a “rule” as defined by the APA.82 The court held that, by effectively setting the price of wholesale power during load shed, the new rule exceeded the PUC’s statutory authority.83 Finally, as an independent basis for its ruling, the court held the rule was invalid because the PUC did not comply with the mandatory rulemaking procedures set forth in the APA.84 80 July 15, 2021 PUC Open Meeting, at 90-91, attached as Tab M. 81 RWE Renewables Americas, 669 S.W.3d at 574. 82 Id. at 573 n.3. 83 Id. at 575-76. 84 Id. at 576-83. 16 Appx. Page 607 of 740 SUMMARY OF ARGUMENT Two decades ago, the Legislature made an important policy decision to unbundle electric utility monopolies and establish a competitive electric market. Under the old scheme, regulation substituted for competition. But the Legislature decided that practice should end. It mandated the wholesale price of electricity be determined by the competitive market. The result of that policy choice has benefited all Texans, by creating efficient competition and keeping electricity prices low. Now, for the first time since deregulation, the PUC is trying to abandon market pricing. Copying the pricing orders it threw together during Storm Uri, the PUC has adopted a new, permanent price-setting rule. The rule creates pricing outcomes chosen by the Commission. Under the rule, when load shed is ordered, market pricing stops, and the price for electricity is fixed at the cap. PURA does not give the PUC authority to suspend the market and set a government price. The plain text of PURA requires the price of electricity be set by the market, not regulators. This case has nothing to do with protecting the grid. The PUC can regulate the market and must balance competing interests. But it cannot, under PURA, do so by eliminating market-based pricing. None of the PUC’s other tools for regulating the market involve eliminating market pricing. During load shed, while the number of participating consumers is reduced, price is still set by market auctions. If the PUC requires generators to produce, the rules still allow the generator to choose to be paid the market price. And the scarcity 17 Appx. Page 608 of 740 pricing mechanism has caps and price adders to prevent market abuse or distortion, but they do not stop competitive market forces from fluctuating and setting the price. The PUC cannot claim to be able to better predict market price than the market. The PUC’s theory that it can “pull on generation” during an emergency by setting price was proven wrong during Storm Uri. Prior to the fixed price, all generators running were willing and able to sell on the market for less than the cap most of the time, and the price-setting rule only created a windfall for generators and punished consumers. Regardless of justification, every agreement to fix prices eliminates competition, and the price-setting rule is a direct assault on the Legislature’s policy choice. If the PUC thinks it needs authority to suspend the market and order a fixed, regulatory price, the proper way to seek such authority is at the Legislature, not by administrative fiat. Compounding error, in adopting the new price-setting rule, the PUC did not follow or even attempt to satisfy APA rule-making requirements. The PUC’s order adopting the new price-setting rule is a “rule” under the APA because it interprets its authority and the competition rules, and it implements and prescribes a new requirement that, during load shed, the price of electricity be administratively fixed at the cap. In adopting the new rule, the PUC altered or amended several competition rules, including the use of nodal auctions and the scarcity pricing mechanism. Each of the prior rules was a competition rule, adopted by the PUC following APA requirements. The PUC cannot amend those rules without going through the same APA rule-making process. 18 Appx. Page 609 of 740 ARGUMENT I. Through PURA, the Legislature requires the wholesale price of electricity be set by the competitive market, and the PUC has no authority to adopt a rule to replace the market price with a fixed government price. More than two decades ago, the Texas Legislature made an important policy decision to unbundle vertically integrated utility monopolies and establish a competitive electric market. Under the old scheme, “regulation was intended to be a substitute for competition.” City of Corpus Christi, 51 S.W.3d at 236. But the Legislature decided that practice should end. The Legislature found “the production and sale of electricity was not a monopoly warranting the regulation of rates,” and it amended PURA to require “prices should be determined by customer choices and the normal forces of competition.” TEX. UTIL. CODE §39.001(a). The result of the Legislature’s policy choice to embrace a competitive electricity market has greatly benefited Texans. “Following deregulation of major portions of the electric market in 1999, Texas’ ‘energy-only’ electric market operated as designed, with lucrative competition keeping electricity prices low.”85 The PUC, however, would like to go back to the way things were. The PUC believes it can order market pricing to stop and substitute what the agency thinks should be the price. The new rule was designed to create “pricing outcomes” chosen by the PUC.86 Under the PUC’s view, once it orders load shed, “there is no truly competitive 85 Tab B at A1. 86 2AR27, 39. 19 Appx. Page 610 of 740 market in operation to regulate.”87 The PUC claims to “ensure accurate market prices,” it should be able to ignore the real price on the market.88 But there is no authority under PURA for the PUC to suspend the market and set a government price for wholesale electricity, and the new price-setting rule is contrary to the statute. PURA requires the Commission allow the “normal market forces to set the price of power.” TXU Generation, 165 S.W.3d at 835. The actual prices on the market must be based on offers and bids made by the participants. Real market prices do not jump and become fixed at the maximum price just because the PUC assumes some theoretical desperate user might pay more. As Lieutenant Governor Dan Patrick observed in the aftermath of Storm Uri, “the market’s supposed to go up there by demand, not by decree.”89 The agency’s new price-setting rule is a direct assault on the Legislature’s policy choice to use a competitive electric market. A. While the PUC can regulate the market, the plain language and intent of PURA requires the wholesale price must still be set by the market, not government regulators. The plain text of PURA requires the wholesale price of electricity be set by competitive market forces, instead of government regulators—this was the entire purpose and policy decision driving the Legislature’s 1999 overhaul of PURA. TEX. UTIL. CODE §39.001. The statute dictates that “prices should be determined by 87 PUC Br. 28. 88 Id., at xii. 89 Mar. 15, 2021 Press Conf. of the Lieutenant Governor, at 17, attached as Tab N. 20 Appx. Page 611 of 740 customer choices and the normal forces of competition.” TEX. UTIL. CODE §39.001(a). It proscribes that, “Regulatory authorities . . . may not make rules or issue orders regulating competitive electric services, prices, or competitors or restricting or conditioning competition except as authorized in this title.” TEX. UTIL. CODE §39.001(c). And it mandates that “Regulatory authorities . . . shall authorize or order competitive rather than regulatory methods to achieve the goals of this chapter to the greatest extent feasible.” TEX. UTIL. CODE §39.001(d). The Legislature’s use of the word “shall” imposes a duty. TEX. GOV’T CODE §311.016(2); Garza v. Harrison, 574 S.W.3d 389, 402 (Tex. 2019). Through PURA, the Legislature requires that the PUC allow the wholesale price of electricity be set by the market. TXU Generation, 165 S.W.3d at 831, 835. 1. This case is not about whether the PUC can regulate the market; the question is whether it can replace competitive pricing. Unable to point to any specific statutory authority to support its claim to be able to replace market pricing, the PUC spends much of its brief attempting to rewrite the court of appeals’ opinion to claim the dispute is about something it is not. The PUC claims it is merely attempting to “balance” competing interests under PURA and that the court’s opinion would prohibit it from regulating the competitive market at all.90 None of these “sky is falling” arguments are true. 90 PUC Br. 1-2, 37-38. 21 Appx. Page 612 of 740 Neither Respondents nor the court of appeals has ever said the PUC cannot balance competing interests and regulate the competitive electric market under PURA. By definition, any regulatory scheme involves regulation. “Regulation is the government’s prospective ordering of marketplace conduct.” In re Oncor Elec. Delivery Co., 630 S.W.3d 40, 43 (Tex. 2021) (orig. proceeding). But just like any grant of regulatory authority, the Legislature can impose limits or procedural requirements on the exercise of that regulatory power. Powell v. City of Houston, 628 S.W.3d 838, 856 (Tex. 2021). In amending PURA, the Legislature created just such a limit by requiring the PUC to allow wholesale prices to be set by the competitive market. TEX. UTIL. CODE §39.001(a), (c), (d). The problem is that the PUC’s new price-setting rule does not “regulate” competitive pricing or “balance” competing responsibilities—it simply stops the competitive market from working and replaces it with a government price based on the agency’s assumption that it can decide price better than the actual market. In fact, neither Respondents nor the court of appeals ever said the PUC cannot consider load shed as one factor in setting a price adder—it just cannot use load shed as a means to stop market pricing and order a fixed regulatory price. To be clear, in the new rule, the PUC injects consideration of load shed in two places, in two very different ways. First, the protocol was amended to include firm load shed as one factor, among nine different factors, that should be considered in determining the price adder.91 The 91 Protocol §6.5.7.3.1(1)(i); 2AR30. 22 Appx. Page 613 of 740 Respondents did not challenge, and the court did not consider, whether load shed could be one of the many factors considered. However, in order to carry out the PUC’s decision to replace the market price during load shed with a fixed price, the rule was also amended to require that, if load shed is ordered during an EEA Level 3, the adder will be adjusted to automatically fix and keep the price of electricity at the cap.92 Under the new rule, load shed is the only factor that is used to set a fixed price at the cap. Respondents’ direct appeal specifically challenged the new price-setting rule. The court did not strike down regulatory price adders per se or decide if load shed could be a factor considered—those issues were not even before it. The court only held that the PUC exceeded its authority by adopting a rule that, during load shed, fixes the price of wholesale electricity at the cap.93 2. PURA requires the PUC allow competition to set the price of electricity, and it cannot adopt a rule to set a fixed price. The court of appeals’ reasoning is based on the same statutory construction and limitation on the PUC’s regulatory authority recognized in the TXU Generation case. That case was a direct appeal involving whether the Wholesale Market Oversight Rule exceeded the PUC’s authority. TXU Generation, 165 S.W.3d at 827. “The WMO Rule addresses the Commission’s oversight of the wholesale market by enumerating the duties of market participants and defining prohibited activities.” Id. at 829. The court 92 Protocol §6.5.7.3.1(2)(p); 2AR32. 93 RWE Renewables Americas, 669 S.W.3d at 575-76. 23 Appx. Page 614 of 740 held that, as amended, PURA required the PUC to “allow the market to set the price of electricity” while balancing the sometimes-competing statutory obligations of creating the competitive market and ensuring safe, reliable, and reasonably priced power to consumers. Id. at 834-37. The WMO Rule satisfied this dual mandate because, while it regulated the competitive market, it still “allows the market to set the price of electricity in accordance with the normal forces of supply and demand.” Id. at 835. Under the WMO Rule, “[m]arket participants are merely prevented from manipulating the market or acting in such a way as to disrupt the reliability of electricity service or artificially inflating price.” Id. at 835. The court recognized that, under PURA, “wholesale and retail rates are now set by the market.” Id. at 831. The WMO Rule satisfied this requirement because it “allows normal market forces to set the price of power, it does not favor regulation over competition.” Id. at 834. Here, the PUC’s new price-setting rule does exactly what the TXU Generation opinion recognized is forbidden by the statute: it orders a regulatory price for electricity. The rule requires that, during load shed, a price adder be modified such that—no matter what the offers and bids are on the competitive market—the price is fixed at the cap.94 The entire point of the rule is to create “pricing outcomes”95 chosen by the PUC. Instead of allowing “the market to set the price of electricity in accordance with the 94 Protocol §6.5.7.3.1(2)(p); 2AR26-27, 40. 95 2AR27, 39. 24 Appx. Page 615 of 740 normal forces of supply and demand,” the price-setting rule automatically sets a fixed regulatory price. The Court has previously held invalid PUC pricing rules that exceed the PUC’s authority under PURA. City Pub. Serv. Bd., 53 S.W.3d at 317-21; Tex. Mun. Power Agency v. Pub. Util. Comm’n, 253 S.W.3d 184 (Tex. 2007). In City Public Service Board, the Court considered whether the PUC had authority to set rates for wholesale transmission service provided by investor-owned utilities and municipal-owned utilities. The Court held the provisions in chapter 36, which applies to investor-owned utilities, gave the PUC authority to set rates because it included express authority to establish and regulate rates and provisions implying the regulation of rates. Id. 317-18. The Court held the opposite, however, for municipal-owned utilities covered by chapter 35. The Court noted chapter 35 lacked the express authority to establish and regulate rates, and the powers awarded under chapter 35 did not imply the type of rate-setting authority found in chapter 36. Id. at 318-21. The answer in this case should be even clearer. Nowhere in chapter 39 is the PUC given either express or implied authority to set the price of wholesale electricity. Instead, the statute requires “prices should be determined by customer choices and the normal forces of competition.” TEX. UTIL. CODE §39.001(a). Through chapter 39, the Legislature requires the PUC allow the wholesale price of electricity be set by the market. TXU Generation, 165 S.W.3d at 831, 835. The PUC has no authority under chapter 39 to adopt a rule to set the price of wholesale electricity. 25 Appx. Page 616 of 740 3. The PUC can regulate the market; it just cannot replace it with a fixed, non-competitive price. As part of its “sky-is falling” defense, the PUC wrongly claims that, if its new price-setting rule is outside of its statutory authority, the same would be true of any other out-of-market actions it might take.96 But that argument misconstrues the court of appeals’ ruling and the statutory limits it recognized. For instance, the PUC claims the ruling would prohibit ordering load shed to protect the grid. But unlike the price- setting rule, ordering load shed does not replace market prices. The procedures for load shed are a designed way to provide orderly, predetermined steps for curtailing demand during emergency shortages and restoring services thereafter and have nothing to do with the ongoing pricing of electricity on the market.97 By necessity, load shed shrinks the number of customers who receive electricity at any given moment, but the electricity being sold is still being priced by the market. As Storm Uri showed, even during load shed, the prior pricing mechanisms continued to function as designed. The same is true of reliability unit commitments (RUCs), by which the PUC can require generators to produce during an emergency.98 While the procedure is designed to ensure resource capacity is available, it does not stop prices from being set by the 96 PUC Br. 1-2, 37-38. 97 See ERCOT Nodal Operating Guides, Section 4: Emergency Operation, at 4.5.1(1), available Here. 98 See ERCOT Nodal Protocols, Section 5: Transmission Security and Reliability Unit Commitment, available Here. 26 Appx. Page 617 of 740 competitive market. The rules specifically allow the supplier to opt out of the make- whole payment and instead accept the price set by the market.99 Likewise, as originally designed, the scarcity pricing mechanism, including the price caps and price adders, were not a tool for the PUC to replace market prices. The price caps were designed to prevent market abuse from causing “excessive transfers of wealth from load to generation without any additional benefits to the market.”100 Before the price-setting rule, even with caps, prices were allowed to be set by the market. The price adders were adopted to more properly value existing reserves and account for ERCOT’s out-of-market actions as to existing reserves, and they did not replace competitive pricing. The operating reserve price adder accounts for the value of reserves based on the probability of reserves falling below the minimum contingency level and the value of lost load. The reliability price adder ensures certain reliability deployments do not distort energy prices.101 Prior to the price-setting rule, the reliability price adder did not significantly affect the total cost of electricity, even during scarcity pricing. For instance, in 2019, with shortage pricing in the summer, the reliability adder added $3.55 per MWh, with the 99 POTOMAC ECONOMICS LTD, 2019 STATE OF THE MARKET REPORT FOR THE ERCOT ELECTRICITY MARKETS at 63 (May 2020), available Here; Protocol §5.5.2(18). 100 Tab H at 7333-34, -46. 101 Potomac Economics Ltd, 2019 State of the Market Report for the ERCOT Electricity Markets at 2. 27 Appx. Page 618 of 740 average real-time price of $47.06 per MWh.102 In 2020, the average real-time price was $25.73 per MWh, and the reliability adder was $0.01.103 While the scarcity pricing mechanism was designed to prevent abuse or distortions of market prices, it did not replace competitive pricing. Moreover, the scarcity pricing mechanism did not artificially fix and keep the price at the cap, nor was that result ever intended. The fact that, during Storm Uri—before the PUC replaced the price—the market price rocketed up to the cap, but then continued to oscillate, as designed, shows the price continued to be set by the market with the scarcity pricing mechanism.104 Until the creation of the new price-setting rule, the PUC followed the Legislature’s mandate by creating competition rules requiring the price of electricity be set by competition. By permanently adopting the approach created during Storm Uri, the PUC’s price-setting rule reflects the first time since deregulation that “the market rules have been abandoned for a price set by the government.”105 Before Storm Uri, the PUC never overrode the price being set by the market to install a fixed, regulatory price.106 The question is whether the PUC has authority to do so. 102 Id. at 3 103 Potomac Economics Ltd, 2020 State of the Market Report for the ERCOT Electricity Markets, at 3 (May 2021). 104 Tab J at 10. 105 Id. at 93-94. 106 Tab I at 41. 28 Appx. Page 619 of 740 4. The PUC cannot adopt rules to assert new powers not authorized by PURA. The PUC is a creature of the Legislature with no inherent authority. City Pub. Serv. Bd., 53 S.W.3d at 316. It has only those powers the Legislature expressly confers, and implied powers necessary to carry out express responsibilities given it. Id. at 315- 16. The PUC cannot exercise “what is effectively a new power, or a power contradictory to the statute, on the theory that such a power is expedient for administrative purposes.” Id. at 316. An agency can adopt only those rules that are authorized by or consistent with its statutory authority. Tex. State Bd. of Exam’rs of Marriage & Family Therapists v. Tex. Med. Ass’n, 511 S.W.3d 28, 33 (Tex. 2017). Nothing in PURA gives the PUC authority to override the Legislature’s mandate that the price of electricity be set by competition. The Legislature did not give the PUC authority to set a government price for electricity—it did the opposite, requiring the PUC let the price be set by the market. “When the Legislature acts with respect to a particular matter, the administrative agency may not so act with respect to the matter as to nullify the Legislature’s action even though the matter be within the agency’s general regulatory field.” State v. Jackson, 376 S.W.2d 341, 344-45 (Tex. 1964). Absent statutory authority, an agency rule is made without legal authority and is invalid. City Pub. Serv. Bd., 53 S.W.3d at 318-21. The PUC’s new price-setting rule is contrary to PURA and is invalid. 29 Appx. Page 620 of 740 B. An inflated, fixed price set by the government is not an “accurate” market price determined by the normal forces of competition. To justify its new price-setting rule, the PUC claims it is intended “to help ensure accurate market prices for electricity” during future load shed events.107 But the PUC’s argument misapplies the concept of VOLL to justify its actions. Actual market prices fluctuate based on market forces, as they did during Storm Uri. The PUC cannot credibly claim to create market prices by eliminating the market. The PUC argues that because it ordered load shed, the price of electricity should have gone to its maximum “to pull generation on.”108 One major problem with the PUC’s economic theory is that the events during Storm Uri prove it to be wrong. During load shed, “everything that was available was running, and there was no reason it wouldn’t run for price.”109 Under the rules in place at the time, the market price for electricity was “based on bids and offers in the various ERCOT-operated markets.”110 The auction rules set prices based on the highest generator offer actually accepted.111 While prices initially rose to the $9,000 cap, they began to fluctuate, until the market price was replaced by the PUC.112 Thus, during most of the event, all available generators were willing and able to sell for less than the $9,000 cap. 107 PUC Br. xii, 13. 108 PUC Br. 7. 109 Tab L at 192. 110 Tab D at 7. 111 See trial testimony of Magness, Brazos Electric Power Coop. Inc. v. ERCOT, No. 21-03863-11 (S.D. Tex. Bankr. Feb. 23, 2022) at 57:24-58:11, attached as Tab O. 112 Tab J at 10. 30 Appx. Page 621 of 740 1. This is no single VOLL for an ERCOT load shed event, and VOLL cannot tell the PUC what the market price should be. Despite the reality of what happened with the market price during Storm Uri, the PUC tries to brush off pricing during the event as an “anomaly,” citing a study to claim that under the concept of the Value of Lost Load (“VOLL”) it can assume market price should have been at the cap based on the idea a nonparticipating consumer would have been willing to pay the legal maximum. But that is not what the report says or how VOLL works. The PUC’s argument is based on a misapplication of the concept of VOLL. Contrary to the PUC’s claim, VOLL does not require the price of electricity to be at the cap during load shed. VOLL is a theoretical value that represents a customer’s willingness to pay for reliable electricity service.113 At the time ERCOT adopted the use of VOLL, it retained a report on the issue of determining the value of lost load as it relates to rotating outages caused by insufficient operating reserves in the region.114 The report indicated that accurately estimating VOLL for any given region or specific type of outage is challenging because “VOLL depends on multiple factors such as the type of customer affected, regional economic conditions and demographics, time and duration of the outage, and other specific traits of an outage.”115 The major finding of 113 London Econ. Int’l LLC, Estimating the Value of Lost Load, at 4 (June 17, 2013), available on the ERCOT website Here . 114 Id. at 1. 115 Id. at 6. 31 Appx. Page 622 of 740 the report was that a single VOLL cannot be estimated for the ERCOT region for rotating outages caused by insufficient operating reserves.116 The study did recognize that “VOLL can be used to inform resource adequacy rules and scarcity pricing algorithms”117—which is how ERCOT historically used it. VOLL was used in the ERCOT system as merely one input, in a series of complicated mathematical equations, to calculate real-time reserve price adders.118 There is no magic VOLL number that says what the market price of energy would be in ERCOT during an extended load shed event like Storm Uri. The PUC also misreads the Senate hearing testimony, claiming Magness said that demand to enter the market should be priced at VOLL.119 But that is not what Magness said. Instead, he testified that, as the system was set up, “when we go into scarcity conditions, the prices go, you know, dramatically higher. They can go up to a cap of $9,000.”120 Magness did not testify load shed meant the price of electricity should be fixed at the cap; he merely testified to what actually happened during Storm Uri— scarcity conditions caused the price to increase, including up to the cap. 116 Id. at 1. 117 Id. at 6. 118 ERCOT, Methodology for Implementing Operating Reserve Demand Curve (ORDC) to Calculate Real-Time Reserve Price Adder (2013). 119 PUC Br. 10. 120 Tab L at 79-80 (emphasis added). 32 Appx. Page 623 of 740 2. Market prices fluctuate, and the PUC cannot predict the price. Before the PUC intervened, the market price rocketed up to the cap, but continued to oscillate—as designed.121 This price volatility is what market participants expected. “Volatility in real-time wholesale electricity markets is expected because system load can change rapidly and the ability of supply to adjust can be restricted by physical limitations of the resources and the transmission network.”122 By their nature, real-time energy prices vary substantially throughout the day.123 While market participants expect prices to fluctuate, there is no expectation prices will be pegged at the cap. ERCOT’s Ogelman testified that, “from a financial standpoint that was a paradigm change or a change relative to the rules that the market expected.”124 The Commission cannot reasonably claim to be able to predict what the price will be on the wholesale market. “No one can predict what prices will be in the future . . . future yields and market prices are at best often unpredictable and at worst even imaginary.” In re Konzak, 78 B.R. 990, 994 (Bankr. D. N.D. 1987). Fair market value is not determined, as the PUC suggests, by the maximum legal limit a monopoly could squeeze out of a desperate buyer. Fair market value is what a willing buyer would pay a willing seller, neither acting under compulsion. Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265, 278 (Tex. 2015). Based on what actually happened during Storm Uri, 121 Tab J at 10. 122 2019 STATE OF THE MARKET REPORT FOR THE ERCOT ELEC. MARKETS, at 19. 123 Id. at 4. 124 Tab J at 11. 33 Appx. Page 624 of 740 there is no reason to believe market prices should be at the cap when, before the PUC changed the rules, all generators available were for most of the time willing and able to sell electricity for less. The irony of the PUC’s argument should not go unnoticed. When utilities function as a monopoly, the law recognizes that normal market forces do not regulate prices, and regulation is necessary to protect consumers and make sure rates are fair. Goeke v. Houston Lighting & Power Co., 797 S.W.2d 12, 16 n.2 (Tex. 1990) (Gonzalez, J., dissenting); In re Oncor Elec. Delivery Co., 630 S.W.3d at 43. Regulation serves as a substitution for competition. City of Corpus Christi, 51 S.W.3d at 236. Here, however, sellers on the competitive market are offering lower rates, and the agency is arguing it should be able to use regulation to instead set the price at the maximum, guaranteeing only a windfall profit. If the market does not set the price at the maximum, no justification supports doing so by regulation. The PUC previously recognized that it cannot control or predict pricing in the ERCOT market. When it adopted the wholesale market design, the PUC noted that “[d]ecentralized decision-making based on economic forces is one of the key features of a successful competitive market.”125 “A key reason for deregulating the electric industry in Texas was to devolve decision-making and to provide electric retailers and wholesalers with flexibility in the face of changing market conditions.” Because the 125 Tab F at 8917. 34 Appx. Page 625 of 740 ERCOT market “is open to market forces” and “so too should market outcomes be governed by the laws of economics,” the PUC agreed that “[t]he ERCOT wholesale and retail markets are open to future opportunities that are not fully understood by market participants or regulators, and never will be.”126 The PUC likened the philosophy underpinning the ERCOT market to the game of handball, where “within the bounds of the court, the ball can go anywhere a player hits it. Just as the ball’s motion is governed by the law of physics, so too should market outcomes be governed by the law of economics.” “Under PURA, the commission supervises, not micromanages, the electricity market.”127 In designing the competitive market based on economic principles, the PUC made it “clear that the commission’s intent in referring to economic principles is not to prescribe a specific outcome.”128 However, to defend its new price-setting rule, the PUC now claims the ability to foresee what market price “should be” and assumes the authority to reach out and “grab the ball” and place it at the PUC’s chosen spot. The entire point of the rule is to “prescribe a specific outcome” chosen by the agency.129 That approach is inconsistent with how markets function. The PUC’s new price-setting rule does not simply tweak the rules—it is manipulating the outcome of the game. 126 Id. 127 Id. 128 Id. at 8923. 129 2AR27, 39. 35 Appx. Page 626 of 740 C. The new price-setting rule seeks to adopt a policy decision that should be left to the Legislature and is a direct assault on the pro-competition policy adopted in PURA. To justify its new price-setting rule, the Commission makes a number of assertions about why allowing it to eliminate the market during load shed and issue a fixed price could have some purported benefits, including helping competition in the long run.130 None of this should be a surprise. Claims of “fairer competitive prices,” “ruinous competition,” and “financial disasters” are all standard defensive claims to justify price-fixing schemes. U.S. v. Socony-Vacuum Oil Co., 310 U.S. 150, 220-21 (1940). But none of it should matter here. If the PUC wants an exception to the pro- competition policy adopted in PURA, it should seek it from the Legislature. The PUC appears to agree131 on at least one point: in amending PURA, the Legislature adopted a pro-competition policy and meant to prevent anti-competitive conduct in the wholesale electric market. TEX. UTIL. CODE §39.001(a). The parties differ on what that means in practice. Any combination formed for the purpose of raising, fixing, pegging or stabilizing the price of a commodity is price-fixing. Socony- Vacuum Oil Co., 310 U.S. at 223. “The aim and result of every price fixing agreement, if effective, is the elimination of one form of competition.” United States v. Trenton Potteries Co., 273 U.S. 392, 398 (1927). The Supreme Court has repeatedly rejected any attempt to justify anti-competitive price-fixing based on some purported societal good 130 PUC Br. 36-39. 131 PUC Br. 24-25. 36 Appx. Page 627 of 740 as “nothing less than a frontal assault on the basic policy of the Sherman Act.” NCAA v. Alston, 141 S. Ct. 2141, 2159 (2021) (quoting Nat’l Soc. of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978)). That includes arguments, like the PUC makes here, that the price-fixing scheme could have pro-competitive benefits. Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332, 351-52 (1982). The proper way to seek an exemption from a statutory pro-competition policy is to seek it from the Legislature, not by court decision. NCAA, 141 S. Ct. at 2160. The PUC’s belief that it can set electricity prices more efficiently than the market—no matter how heartfelt or misguided—does not allow it to abandon the market contrary to the Legislature’s mandate. “[O]ur system does not permit agencies to act unlawfully even in pursuit of desirable ends.” Ala. Ass’n of Realtors v. Dep’t of Health & Human Servs., 141 S. Ct. 2485, 2490 (2021). It is up to the Legislature, not the PUC, “to decide whether the public interest merits further action here.” Id. The Court “must take statutes as they are written,” and policy arguments are for the Legislature to resolve. City of Laredo v. Laredo Merchs. Ass’n, 550 S.W.3d 586, 590 (Tex. 2018). In amending PURA, the Legislature dictated that wholesale electricity prices had to be set by competition, not regulators. TEX. UTIL. CODE §39.001. An agency’s policy-making determinations cannot override the Legislature’s policy as adopted in PURA. City of Richardson v. Oncor Elec. Delivery Co. LLC, 539 S.W.3d 252, 265 (Tex. 2018). Policy changes, including gap-filing, “is best left to legislators, not courts or agencies.” TracFone Wireless, Inc. v. Comm’n on State Emergency Commc’ns, 397 S.W.3d 37 Appx. Page 628 of 740 173, 176 (Tex. 2013). If the PUC thinks it needs authority to stop competitive pricing in the wholesale electric market during load shed, the Legislature can grant such authority if it agrees. Until then, the PUC cannot adopt a rule to create its own exception to PURA’s requirements. II. This case has nothing to do with protecting the grid, and upholding the PUC’s actions would undermine future investment in Texas. The PUC repeatedly paints any challenge to the load shed price-setting rule as an attack on the PUC’s ability to protect Texans and the grid during an emergency.132 But that has nothing to do with whether the PUC has authority to replace the market price. No one has challenged the PUC’s ability to order load shed to protect the grid from collapse, and the authority to shed load or order generation is not the same as purported authority to order electricity be bought and sold at an inflated, fixed government price. As noted, the PUC’s abandonment of market pricing did not generate more electricity during Storm Uri—everything that could run was running. It is the PUC’s price-setting actions that threaten future electricity investment in Texas and the stability of the grid. When the scarcity pricing mechanism was adopted, the PUC noted that, “for the energy-only resource adequacy mechanism to be successful, the commission needs to minimize what the market perceives as arbitrary and frequent intervention in ERCOT markets.”133 132 PUC Br. 1-2, 37-38. 133 Tab H at 7346. 38 Appx. Page 629 of 740 Years later, as generation investment stalled, ERCOT commissioned a study of the problem.134 The study warned that a danger with energy-only markets is they can be susceptible to regulatory intervention due to political pressure in response to price shocks associated with high prices or low reliability.135 “If public officials were to succumb to the pressure and intervene in the market (e.g., by changing the rules or sponsoring out-of-market supplies), they would not only depress in-market investment but also undermine investor confidence generally. Resisting political pressures to intervene is essential if an energy-only market is to attract investment.”136 The PUC has done exactly what it was warned not to do—intervene in market pricing. Not only did it intervene during Storm Uri with the price-setting orders, but in response to the fallout it has now lowered the cap from $9,000 to $5,000.137 “Generators may discount any expectations of high scarcity margins earned under high price caps if they fear that the future regulators will reinstate lower caps.”138 It is the PUC’s own price-intervention actions that most threaten the future of the ERCOT grid. Markets cannot function efficiently if regulators can constantly change the rules. 134 Commission Proceeding to Ensure Resource Adequacy in Texas, PUC Docket No. 40000, “Submission of the Brattle Group’s ‘ERCOT Investment Incentives and Resource Adequacy Report,’” (July 24, 2012) (“Brattle Report”), available here. 135 Id. at 19. 136 Id. 137 16 TEX. ADMIN. CODE §25.509(b)(6)(B). 138 Brattle Report at 74. 39 Appx. Page 630 of 740 III. The new load shed price-setting rule is invalid because the PUC did not follow—or even attempt to satisfy—APA rulemaking requirements. In response to the debacle of Storm Uri, the Legislature completely overhauled the PUC’s and ERCOT’s governance structures, including making it “clear PUC would be a more active overseer of ERCOT.”139 The Legislature amended PURA to require: (1) the establishment and implementation of a formal process by which ERCOT adopts new or revised protocols with PUC approval; and (2) new or revised protocols cannot take effect until approved by the PUC. TEX. UTIL. CODE 39.151 (g-6). The PUC always had authority over ERCOT and the protocols. CPS Energy, 671 S.W.3d at 616. Now new or amended rules are only effective after PUC approval. Despite the legislative mandate, the PUC did not implement any formal process for adopting new or revised protocols before it adopted the price-setting rule.140 The new rule alters or amends several prior competition rules on pricing and the scarcity pricing mechanism. The PUC admits its new rule was created under the rulemaking authority in §39.151 and was approved by the PUC by the order challenged here.141 The new rule marked the first time a competition rule was amended or adopted after the Legislature changed PURA to require prior approval from the PUC. The question is whether the PUC’s use of its rulemaking authority requires it to comply with the APA. 139 Tab B at A1. 140 Two years after it adopted the price-setting rule, in June 2023, the ERCOT protocol for revision requests was amended to simply add that “All Revision Requests require approval by the PUCT prior to implementation.” Protocols 21.4.11(1). The rule was not otherwise meaningfully updated, and still does not include procedures for challenging a decision reached by the PUC. 141 PUC Br. at 14. 40 Appx. Page 631 of 740 Through PURA, the Legislature requires the PUC adopt rules for the energy market. TEX. UTIL. CODE §39.151(d). Proceedings under PURA are subject to the APA. Id. §11.007(a). The APA “details the procedure that a state agency must follow when adopting rules.” Rodriguez v. Serv. Lloyds Ins. Co., 997 S.W.2d 248, 255 (Tex. 1999). The PUC “must provide: (1) public notice; (2) an opportunity for and full consideration of comments; and (3) a reasoned justification for the rule enacted.” Office of Pub. Util. Counsel v. Pub. Util. Comm’n, 131 S.W.3d 314, 327 (Tex. App.—Austin 2004, pet. denied). “In this way, the APA assures that the public and affected persons are heard on matters that affect them and receive notice of new rules.” Rodriguez, 997 S.W.2d at 255. However, in adopting the new price-setting rule, the PUC admittedly did not even attempt to satisfy APA requirements. The PUC’s failure to follow the APA’s mandatory rulemaking requirements should make the new price-setting rule invalid. The APA’s rulemaking procedures set a floor for agency decision making, providing “minimum standards of uniform practice and procedure for state agencies” that allow for “public participation in the rulemaking process.” TEX. GOV’T CODE §2001.001(1)-(2). “When an agency promulgates a rule without complying with the proper rulemaking procedures, the rule is invalid.” El Paso Hosp. Dist. v. Tex. Health & Human Servs. Comm’n, 247 S.W.3d 709, 715 (Tex. 2008). Because the PUC did not even attempt to comply with APA rulemaking requirements, the court of appeals correctly held the new price-setting rule is invalid. 41 Appx. Page 632 of 740 A. The new load shed price-setting rule is a “rule” requiring the PUC to comply with the APA for its adoption. The PUC does not even argue it (or ERCOT) took the steps required by the APA to adopt or make changes to administrative rules. Instead, the PUC argues it was not required to comply with the APA, claiming the new price-setting rule is not a rule because it was developed through ERCOT and the PUC merely made “a ratification decision.”142 The PUC’s claim is more than suspect, given that ERCOT specifically said it proposed the new price-setting rule to be “[c]onsistent with the action directed by the PUCT in February.”143 Regardless, under the APA, the new price-setting rule is a rule adopted by the PUC under §39.151(d), (g-6), and nothing exempts the PUC from mandatory APA rulemaking requirements or direct judicial review. The PUC’s claim that its order adopting the new price-setting rule is not a rule is hardly a novel defense from the agency. The Court has repeatedly confronted the question of whether an agency’s pronouncement of law or policy constitutes a “rule” as the APA defines the term. See, e.g., El Paso Hosp. Dist., 247 S.W.3d at 714. “But an agency’s insistence that its statement is not a rule is not determinative.” John Gannon, Inc. v. Tex. Dep’t of Transp., No. 03-18-00696-CV, 2020 WL 6018646, at *5 (Tex. App.— Austin Oct. 9, 2020, pet. denied). 142 PUC Br. 14-19. 143 2AR27. 42 Appx. Page 633 of 740 The issue is whether the statement falls within the broad definition of a “rule.” The APA defines a “rule” as “a state agency statement of general applicability” that either “implements, interprets, or prescribes law or policy” or “describes the procedure or practice requirements of a state agency” and “includes the amendment or repeal of a prior rule,” but not those regarding only the internal management or organization of an agency and not affecting private rights or procedures. TEX. GOV’T CODE §2001.003(6). The Court has jurisdiction to review the validity not just of the PUC’s new competition rules, but also of any amendments to them. Office of Pub. Util. Counsel, 131 S.W.3d at 321; TEX. UTIL. CODE §39.001(e), (f). Thus, the question for the Court is whether the PUC’s order adopting the new price-setting rule “went beyond a mere restatement of the existing formally promulgated rules or underlying statutes,” and if “the substance and nature of this pronouncement distinguishes it as a ‘rule’ under the APA.” Teladoc, Inc. v. Tex. Med. Bd., 453 S.W.3d 606, 608 (Tex. App.—Austin 2014, pet. denied). Under any rational reading, the price-setting rule is a “rule” under this analysis. The protocols are “rules” that are used by ERCOT to “manage the market and the grid.” CPS Energy, 671 S.W.3d at 612. “ERCOT protocols are rules that provide the framework for the administration of the Texas electricity market.” Pub. Util. Comm’n v. Constellation Energy Commodities Grp., Inc., 351 S.W.3d 588, 594-95 (Tex. App.—Austin, 2011, pet. denied). The PUC’s adoption of the new price-setting rule is a statement that “implements, interprets, or prescribes law or policy” or “describes the procedure or 43 Appx. Page 634 of 740 practice requirements of a state agency.” TEX. GOV’T CODE §2001.003(6)(A). The PUC’s order adopting the new rule interprets its authority and the competition rules, and implements and prescribes a new requirement that, during load shed, the price of electricity be administratively fixed at the cap. The PUC claims, without authority, that the price-setting rule is not a “statement of general applicability” because it adopted the new rule in conjunction with ERCOT.144 But the test for “general applicability” is the impact of the rule, not how it was crafted. The “general applicability” requirement means “statements that affect the interest of the public at large such that they cannot be given the effect of law without public input.” R.R. Comm’n v. WBD Oil & Gas Co., 104 S.W.3d 69, 79 (Tex. 2003). The price-setting rule is a statement of general applicability because it amends and implements a rule affecting all participants buying or selling electricity in the market. El Paso Hosp. Dist., 247 S.W.3d at 714 (holding interpretation of payment system and calculations met “general applicability” because it affected all hospitals receiving reimbursements). The order adopting the new price-setting rule communicates the PUC’s interpretation of its authority and its reading of the enabling statute and competition rules and also implements and proscribes the PUC’s intent that ERCOT modify and fix the price of electricity during load shed to equal the cap. A written statement communicating an agency’s interpretation and intent to apply the law in a certain 144 PUC Br. 19. 44 Appx. Page 635 of 740 manner is a statement implementing, interpreting, or prescribing law or policy for purposes of the APA. Combs v. Entm’t Publ’ns, Inc., 292 S.W.3d 712, 721(Tex. App.— Austin 2009, no pet.) (holding letters from Comptroller were a “rule” under the APA). The new price-setting rule is a “rule” subject to the APA. B. The price-setting rule is a competition rule that alters or amends several existing competition rules that regulated pricing on the ERCOT market. The pricing orders are not just “rules” under the APA; they are “competition rules” that changed existing competition rules that previously regulated the market. By adopting the new price-setting rule, the PUC altered or departed from several existing competition rules governing the pricing of electricity and the use of the scarcity pricing mechanism in the ERCOT marketplace. For instance, in approving the price-setting rule, the PUC altered the requirement under §25.501 that prices be determined by nodal energy prices determined at auction. 16 TEX. ADMIN. CODE §25.501(a), (f). The new price-setting rule also changed the use of the scarcity pricing mechanism. 16 TEX. ADMIN. CODE §25.505 (2021). Even the PUC admits that the new price-setting rule changes the scarcity-pricing mechanism.145 The PUC has repeatedly recognized that its rules governing the pricing of electricity and the scarcity pricing mechanism are competition rules. When it adopted §25.501, the PUC noted that “most of the functions impacted by the rule are 145 PUC Br. 10. 45 Appx. Page 636 of 740 competitive.”146 Likewise, when the PUC adopted §25.505 to create the scarcity pricing mechanism, it recognized that “[t]he amendment and new sections are competition rules subject to judicial review as specified in PURA §39.001(e).”147 And the PUC has admitted that any amendments to these rules are themselves “competition rules subject to judicial review as specified in Public Utility Regulatory Act §39.001(e).”148 Because the PUC’s new price-setting rule does not follow—or altered or departed from—the existing competition rules governing the pricing of electricity and the use of the scarcity pricing mechanism in the ERCOT marketplace, the order adopting the new price-setting rule is reviewable as a “competition rule.” El Paso Hosp. Dist., 247 S.W.3d at 715; Teladoc, 453 S.W.3d at 620. Because the PUC, without even attempting to follow the requirements of the APA, issued an order adopting a new price-setting rule, and departed from or did not follow the existing competition rules regarding the pricing of electricity and the use of the scarcity pricing mechanism, the order and new rule are invalid. The PUC’s new price-setting rule changed existing competition rules governing the pricing of electricity and the use of the scarcity pricing mechanism. The PUC cannot ignore the requirements of the APA, adopt a new rule that changes the method of pricing in the market, and avoid judicial review. 146 Tab F at 8919. 147 Tab H at 7319. 148 35 Tex. Reg. 6823, 6824 (Aug. 6, 2010); see also 35 Tex. Reg. 10213 (Nov. 19, 2010); 37 Tex. Reg. 8959 (Nov. 9, 2012). 46 Appx. Page 637 of 740 C. The PUC cannot circumvent APA rulemaking requirements by “delegating” rulemaking to ERCOT, which the PUC must still adopt. Rules adopted by ERCOT were always subject to PUC oversight and review. TEX. UTIL. CODE §39.151(d). After Storm Uri, the Legislature amended PURA to make it clear any new or revised rule created by ERCOT—including protocols—may not go into effect until approved by the PUC. TEX. UTIL. CODE §39.151(d), (g-6). The PUC admits its new price-setting rule was created under the rulemaking authority in §39.151(d), (g-6), and was approved by the PUC by the order challenged here. It argues, however, that—by having ERCOT initially develop any new competition rule under §39.151(d)—the PUC can avoid both APA rulemaking requirements and review.149 Neither the APA’s requirements nor judicial review are so easily circumvented. 1. ERCOT cannot “adopt” new competition rules, and the PUC cannot shield new rules from validity challenges. Section 39.001 allows for “[j]udicial review of competition rules adopted by the commission” without distinction as to whether the rule was originally proposed by ERCOT or the agency itself. TEX. UTIL. CODE §39.001(e)-(f). In permitting an appeal of market rules, “[t]he statute does not have separate provisions” for ERCOT proposed rules or “limit the scope of our jurisdiction to challenges” to rules first proposed by ERCOT. See Office of Pub. Util. Counsel, 131 S.W.3d at 321 (rejecting a similar argument when the PUC sought to avoid validity challenge of amended rule). 149 PUC Br. 14-22. 47 Appx. Page 638 of 740 Moreover, the Legislature does not allow ERCOT delegated authority to create rules independent of the PUC. A “delegation occurs only when an entity is given the power and the discretion to set public policy and promulgate rules to achieve that policy or ascertain conditions upon which existing laws may operate.” Tex. Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 653 (Tex. 2004). There is no “delegation” when the entity must follow the policy as mandated by the Legislature and executed by an agency. Id. at 655. That is exactly what happens now under PURA. The PUC maintains authority over ERCOT and its protocols. CPS Energy, 671 S.W.3d at 616. As of 2021, PURA specifically requires that rules adopted through ERCOT are “subject to commission oversight and review and may not take effect before receiving commission approval.” TEX. UTIL. CODE §39.151(g-6). ERCOT’s protocols have to be “approved by the commission and must reflect the input of the commission.” TEX. UTIL. CODE §39.151(g-1). Because the Legislature requires the PUC retain authority to review and approve any new rule, no actual delegation occurs. Patient Advocates, 136 S.W.3d at 655. The Legislature requires market rules be adopted by the PUC to become effective, and the PUC cannot use ERCOT to shield new rules from APA requirements. To support avoiding the APA and a direct appeal, the PUC argues it should be legally significant that, when ERCOT proposes a rule, the statute requires its “approval” instead of its “adoption.” The PUC argues ERCOT should be considered the entity 48 Appx. Page 639 of 740 that “adopts” the rule, and the PUC merely “approves” the rule.150 But even the PUC’s proffered definitions do not support its argument. To begin with, under PURA, ERCOT cannot satisfy the PUC’s definition of “adopt” because it cannot “take and follow” any course of action, nor can it “choose” any standard or required course of action with a new or amended protocols. ERCOT can only recommend changes to the PUC, and the rule is only effective with the PUC’s order. ERCOT’s own protocols do not even call for it to “adopt” or “approve” any revision—it can simply “recommend[s] approval” to the PUC.151 Because any new or amended protocol is only effective (and can only be followed) once approved by the PUC, it is that action that adopts the rule for purposes of the statute. The statute makes clear the protocol is only effective after the PUC’s action, and thus it is the PUC action that makes it subject to judicial review. Undefined terms in a statue should be given their common, ordinary meaning unless a contrary meaning is apparent from the statute’s language. Powell, 628 S.W.3d at 843. The Merriam-Webster Dictionary defines “adopt” to mean “to accept and establish (something, such as a law or policy) in a formal or official way.”152 Similarly, it defines “approve” as “to accept as satisfactory” or “to give formal or official sanction.”153 Likewise, while not included by 150 PUC Br. 20-21. 151 Protocol 21.4.10(2)(a). 152 Adopt, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/adopt (last visited Feb. 8, 2024). 153 Approve, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/approve (last visited Feb. 8, 2024). 49 Appx. Page 640 of 740 the PUC’s brief, the American Heritage Dictionary also defines “adopt” as “to vote to accept.” Black’s Law Dictionary has defined “adopt” as: To accept, appropriate, choose, or select. To make that one’s own (property or act) which was not so originally. To accept, consent to, and put into effective operation; as in the case of a constitution, constitutional amendment, ordinance, court rule, or by-law. Collins v. Cnty. of El Paso, 954 S.W.2d 137, 149 (Tex. App.—El Paso 1997, pet. denied). Under any of these definitions, it is clear that a new rule is only actually adopted once it is accepted and approved by the PUC and thereby put into action. The PUC’s approach would create the absurd result that the same rule would be subject to APA requirements and judicial review if directly adopted by the PUC under §39.151(d), but could avoid APA requirements and be unreviewable simply by the agency having ERCOT (under the same statutory provision) propose it first for the PUC’s subsequent rubberstamp. The Court must interpret the statute to avoid absurd results. Carreras v. Marroquin, 339 S.W.3d 68, 73 (Tex. 2011). Allowing an agency to make amendments to its rules while avoiding the rulemaking process undercuts the APA. Rodriguez, 997 S.W.2d at 255. No logical reading of PURA allows the PUC to flaunt APA requirements and the judicial review created by the statute. The PUC is not excused from following mandatory APA rulemaking requirements when adopting market rules, including the load shed price-setting rule. Proceedings under PURA are subject to the APA. Id. §11.007(a). The PUC admits the purported authority to adopt the new price-setting rules is provided, through §39.151, 50 Appx. Page 641 of 740 by the rulemaking authority PURA gives the Commission.154 That should be enough to trigger the PUC to comply with APA rulemaking requirements before moving forward with adoption of the price-setting rule. “Indeed, the Legislature delegates formal rulemaking power to an agency in the expectation that an agency will ordinarily adopt rules of general application through that power.” Rodriguez, 997 S.W.2d at 255. Even if PURA was silent on rulemaking, the answer would be the same. “The APA has already spoken.” Mosley v. Tex. Health & Human Servs. Comm’n, 593 S.W.3d 250, 258 (Tex. 2019). The APA “details the procedure that a state agency must follow when adopting rules.” Rodriguez, 997 S.W.2d at 255. Allowing an agency to make amendments to its rules while avoiding the rulemaking process undercuts the APA. Id. The APA’s provisions “would be wasted ink if they did not generally apply to all state agencies.” Mosley, 593 S.W.3d at 258. If the Legislature intended the PUC to not have to comply with APA rulemaking, “the legislature has certainly proved itself able to exempt an agency procedure from the APA’s minimum procedure when it wants to.” Id. at 259. Because PURA does not contain any language that limits the APA’s rulemaking mandates, the PUC is required to comply with the APA when adopting new rules. 154 PUC Br. 14, 35. 51 Appx. Page 642 of 740 2. New or amended wholesale market pricing rules should be subject to public notice and comment. The PUC’s failures during Storm Uri show why APA rulemaking requirements are so important, and why the PUC should not be allowed to install a permanent end- run around the normal rulemaking process. As the Sunset Commission recognized, “[b]efore Winter Storm Uri, most Texans had little to no idea what ERCOT was or what functions it performed.”155 The “PUC’s use of informal methods to instruct ERCOT means the agency does not always adhere to best practices for openness, inclusiveness, and transparency.”156 The PUC is responsible for ensuring that it and ERCOT provide clear, consistent, and understandable information the public needs.157 The PUC argues it would be burdensome or duplicative to make it follow APA procedures for adopting new or amended rules.158 But this argument makes little sense. There is no requirement for duplication. As the court of appeals recognized, “given the close association between the Commission and ERCOT, it would seem to be a readily achievable task to accomplish the mandated APA requirements of notice, public participation, and order contents in an efficient, coordinated process.”159 There is no reason the process would be any more difficult than when the PUC adopted any other competition rule. As the Sunset Commission report noted, the PUC has failed to 155 Tab B at 2. 156 Id. at 3. 157 Id. at 4. 158 PUC Br. 1-2, 22. 159 RWE Renewables Americas, 669 S.W.3d at 582. 52 Appx. Page 643 of 740 meaningfully review and revise its administrative rules on a timely basis, “resulting in outdated rules that do not reflect the current regulatory environment.”160 The PUC could easily include review of the price-setting rule into a formal review process combined with any other competition rules it needs to update. A presumption favors adopting rules of general applicability through the formal rule-making procedures under the APA. El Paso Hosp. Dist., 247 S.W.3d at 715. “The process assures notice to the public and affected persons and the opportunity to be heard on matters that affect them.” Id. There is no justification for the PUC to amend or adopt new competition rules for the market without going through the APA rule- making process. D. Under PURA, validity challenges to the PUC’s adoption of a new or amended competition rule must be brought by direct appeal. This is a validity challenge of the PUC’s adoption of the new price-setting rule. By statute, this challenge must be quickly brought by a direct appeal to the court of appeals. TEX. UTIL. CODE §39.001(e)-(f). While it never made the argument below, the PUC now argues Respondents were required to instead follow the administrative process for appealing ERCOT decisions to the PUC.161 The PUC claims Respondents are somehow trying to “bypass” the administrative process.162 It is unclear how exercising the statutory right to appeal the validity of the PUC’s new rule could “bypass” 160 Tab B at 80. 161 PUC Br. 14, 17, 32. 162 PUC Br. 1, 33. 53 Appx. Page 644 of 740 the PUC after the agency has already issued its order. The PUC’s failure to adopt a new procedure as required by PURA may cause confusion, but the administrative appeal process for ERCOT actions does not apply to the PUC’s decision. The judicial review sought here is specifically provided for by PURA, and the PUC cannot supplant it. 1. There is no administrative process after the PUC has already issued a final order. In 2021, the Legislature amended PURA to require the PUC to establish and implement a formal process by which ERCOT adopts new or revised protocols with PUC approval. TEX. UTIL. CODE §39.151 (g-6). At the time the PUC adopted the new price-setting rule, it was aware PURA now “requires both the Commission and the Electric Reliability Council of Texas (ERCOT) to establish processes for Commission approval of any rules or protocols adopted under authority delegated from the Commission to the independent organization.”163 However, despite acknowledging the new requirement, no such processes were established before the PUC adopted the new price-setting rule. Instead, PUC staff “anticipate[d] further conversation regarding the revision request approval process as part of a rulemaking to consider ERCOT governance.”164 To date, the PUC has still not updated its rules or the protocols to reflect any steps that should or can be taken after a rulemaking has occurred. 163 Tab A, 2AR5. 164 Id. at 2AR6. 54 Appx. Page 645 of 740 The Sunset Commission actually noted the PUC’s failure, and directed the PUC again to update its policy. The report noted, the “PUC has not updated its rules to account for the Legislature’s decision to require PUC to approve ERCOT protocols, leaving market participants unsure of their rights.”165 While the process at the PUC remains unclear, the requirements for a direct appeal of the PUC’s new rule are not. Under PURA, judicial review of the validity of a competition rule adopted by the PUC must be brought in a direct appeal. TEX. UTIL. CODE §39.001(e)-(f). By contrast, on its face, the administrative procedure the PUC cites does not apply to challenging a PUC order. Instead, its stated purpose is to “prescribe[] the procedure by which an entity . . . may appeal a decision made by ERCOT.” 16 TEX. ADMIN. CODE §22.251(a). Nothing in §22.251 applies to challenging a PUC order or decision. The Sunset Report reached the same conclusion, stating the “PUC should [] update its existing rules to eliminate the formal appeal process for ERCOT protocols, which is no longer appropriate or necessary since protocols must now be approved by the commission.”166 2. The protocols cannot cut off the statutory right to file a direct appeal to challenge the validity of a new or amended rule. Even when the PUC finally does create a process for adopting competition rules first proposed by ERCOT, it cannot conflict with or cut off the statutory right to judicial review. As a state agency, the PUC has only those powers expressly given it by statute 165 Tab B A4, 42. 166 Id. at 44. 55 Appx. Page 646 of 740 or those implied powers reasonably necessary to carry out the express responsibilities given it by statute. City Pub. Serv. Bd., 53 S.W.3d at 315-16. The PUC’s own procedural rules recognize they “shall not be construed so as to enlarge, diminish, modify, or otherwise alter the jurisdiction, powers, or authority of the commission, the commission staff, or the substantive rights of any person.” 16 TEX. ADMIN. CODE §22.1(b)(3). To the extent the PUC rules conflict with any statute, the statute controls. 16 TEX. ADMIN. CODE §22.1(b)(4). The Legislature created a statutory process to seek judicial review of new rules. “PURA permits timely challenge to a ‘rule’ adopted by the commission.” Office of Pub. Util. Counsel, 131 S.W.3d at 321. This includes, like here, a challenge that the new rule exceeds or is contrary to the statutory authority granted under PURA. Id. A party can seek judicial review of the validity of a competition rule through a direct appeal by filing a notice of appeal no later than 15 days after the new rule is published in the Texas Register. TEX. UTIL. CODE §39.001(e)-(f). Respondents timely filed their notice of appeal in this case fourteen days after the PUC’s order. The facts in this case show how misapplying the rules for challenging an ERCOT action would conflict with the statutory right to appeal the PUC’s adoption of a rule. Section 22.251 allows that a complaint of an ERCOT action can be brought within 35 days of the ERCOT action. 16 TEX. ADMIN. CODE §22.251(d). Once a complaint of an ERCOT action is filed with the PUC, ERCOT has 14 days to provide notice of the complaint to other entities, and a response to the complaint is not due until 28 days 56 Appx. Page 647 of 740 after receipt. 16 TEX. ADMIN. CODE §22.251(e)-(f). The PUC staff is also given 45 days from the filing of the complaint to file comments and a motion to intervene. Id. §22.251(g). Requiring a party to follow these alternative timelines to challenge the PUC’s order adopting a new rule would prevent timely filing a direct appeal. In this case, ERCOT voted on the new price-setting rule on June 28, 2021, and the PUC issued its order adopting the new rule on July 16, 2021—just 18 days later.167 If, as required by statute, the PUC had published its new rule at that time, any notice of appeal challenging the validity of the PUC’s new rule would have been due by Monday, August 2, 2021. TEX. UTIL. CODE §39.001(f); TEX. R. APP. P. 4.1. Any direct appeal to the validity of the new rule would have been barred if filed with the Court after that date. City of Alvin v. Pub. Util. Comm’n, 143 S.W.3d 872, 879-80 (Tex. App.—Austin 2004, no pet.). But, under the PUC’s new alternative approach, an administrative complaint based on ERCOT’s actions would not even have been due under §22.251 until August 2, 2021—35 days after the board of directors acted. And even if an administrative complaint was filed the same day the PUC issued its order adopting the new rule (July 16, 2021), the PUC staff’s response to such a complaint would not be due until 45 days later (August 30, 2021). The PUC’s approach would result in any appeal being time- barred and immunize the PUC’s new rule from judicial review. 167 2AR6, 3AR84-86. 57 Appx. Page 648 of 740 3. There is no requirement to file a motion for rehearing or exhaust administrative remedies in order to challenge a rule. Even if an appeal could have been timely filed after some extra administrative proceeding, the process was not required. Neither PURA nor the APA requires a party to file an administrative proceeding or seek reconsideration with the PUC before filing a rule challenge. Instead, the Legislature specifically requires that validity challenges to the competition rules be brought through a direct appeal. The APA provides for two modes of judicial review of agency decisions—one from contested cases and another for challenging rules—that are substantially different. WBD Oil & Gas, 104 S.W.3d at 74. To seek judicial review in a contested case, the party must normally file for rehearing and exhaust administrative remedies. Id. at 75. “A person seeking judicial review of a rule need not do any of these things.” Id. Instead, the Legislature requires a validity challenge of a PUC competition rule be brought in a direct appeal. “PURA requires that challenges to the validity of competition rules be brought directly and quickly in this Court.” City of Alvin, 143 S.W.3d at 880. A direct appeal to the validity of the new rule would have been time barred if not filed directly with the court of appeals. Id. at 879-80. To the extent the PUC rules conflict with the statutory right to appeal, the statute controls. 16 TEX. ADMIN. CODE §22.1(b)(4). The proper path for appeal was followed here. 58 Appx. Page 649 of 740 PRAYER For these reasons, Respondents ask the Court to affirm the court of appeals’ judgment and hold the load shed price-setting rule invalid and for any further relief to which they may be entitled. Dated: February 8, 2024 Respectfully submitted, By: /s/ Kurt Kuhn Michael J. Jewell Kurt Kuhn State Bar No. 10665175 State Bar No. 24002433 michael@jewellandassociates.com Kurt@KuhnHobbs.com JEWELL & ASSOCIATES, PLLC Lisa Bowlin Hobbs 8404 Lakewood Ridge Cove State Bar No. 24026905 Austin, Texas 78738-7674 Lisa@KuhnHobbs.com (512) 423-4065 KUHN HOBBS PLLC (512) 236-5170 (fax) 7000 N. MoPac Exwy., Ste. 315 Austin, Texas 78731 Counsel for TX Hereford Wind, LLC (512) 476-6005 (512) 476-6002 (fax) Stephanie C. Sparks State Bar No. 24042900 ssparks@vedderprice.com VEDDER PRICE PC 100 Crescent Court, Ste. 350 Dallas, Texas 75201 (469) 895-4830 Counsel for RWE Renewables Americas LLC 59 Appx. Page 650 of 740 CERTIFICATE OF COMPLIANCE Pursuant to TEX. R. APP. P. 9.4, I hereby certify that this response contains 14,835 words. This is a computer-generated document created in Microsoft Word, using 14-point typeface for all text, except for footnotes which are in 12-point typeface. In making this certificate of compliance, I am relying on the word count provided by the software used to prepare the document. /s/ Kurt Kuhn Kurt Kuhn 60 Appx. Page 651 of 740 CERTIFICATE OF SERVICE I certify that, on February 8, 2024, I electronically served a copy of this brief on counsel of record, as listed below: Lanora C. Pettit Office of the Attorney General Austin, Texas 78711 Lanora.Pettit@oag.texas.gov Counsel for Petitioner 61 Appx. Page 652 of 740 APPENDIX Tab A ........... Relevant Pages July 14, 2021 PUC Mem. for July 15, 2021 Open Meeting Tab B ...... Sunset Advisory Commission, Staff Report with Final Results, Public Utility Commission of Texas, Electric Reliability Council of Texas, Office of Public Utility Counsel (June 2023) Tab C .............................................................................................TEX. UTIL. CODE §39.001 Tab D ………..ERCOT, Load Participation in the ERCOT Nodal Market (Apr. 2015) Tab E ……………………………………………..…16 TEX. ADMIN. CODE §25.501 Tab F ……………..…………………………….…..28 Tex. Reg. 8901 (Oct. 10, 2003) Tab G ……………………………………….............. .16 TEX. ADMIN. CODE §25.505 Tab H ………………………………………….…...31 Tex. Reg. 7317 (Sept. 8, 2006) Tab I …………...….…Tr. Excerpts of Mar. 11, 2021 Senate Comm. on Jurisprudence, video available here Tab J …………….Tr. Excerpts of Mar. 4, 2021 Senate Comm. on Bus. & Commerce video available here Tab K …………….Tr. Excerpts of May 4, 2021 Senate Comm. on Bus. & Commerce video available here Tab L ………….Tr. Excerpts of Feb. 25, 2021 Senate Comm. on Bus. & Commerce, video available here Tab M................................................................... Tr. of July 15, 2021 PUC Open Meeting, video available here Tab N ............. Tr. Excerpts of Mar. 15, 2021 Press Conf. of the Lieutenant Governor, video available here Tab O ………Testimony of Magness, Brazos Electric Power Coop. Inc. v. ERCOT, No. 21- 03863-11 (S.D. Tex. Bankr. Feb. 23, 2022) 62 Appx. Page 653 of 740 APPENDIX F Appx. Page 654 of 740 FILED 23-0555 4/26/2024 5:02 PM tex-87128503 SUPREME COURT OF TEXAS BLAKE A. HAWTHORNE, CLERK NO. 23-0555 IN THE SUPREME COURT OF TEXAS PUBLIC UTILITY COMISSION OF TEXAS, Petitioner, v. RWE RENEWABLES AMERICAS, LLC AND TX HEREFORD WIND, LLC, Respondents. On Petition for Review from the Third Court of Appeals at Austin, Texas No. 03-21-00356-CV AMICUS BRIEF OF ASPIRE POWER VENTURES, LP Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Telephone: (214) 282-8579 Facsimile: (214) 602-9187 Counsel for Aspire Power Ventures, LP Appx. Page 655 of 740 To the Honorable Supreme Court of Texas: Aspire Power Ventures 1 is an ERCOT Market Participant and operated as a Qualified Services Entity on the ERCOT grid during the period impacted by the case under review. It traded electricity on the ERCOT grid and as a Market Participant, is subject to the NPRRs at issue. Aspire submits this brief to explain how the Public Utility Commission of Texas (“PUC” or “Commission") and ERCOT disregarded certain requirements of the Administrative Procedures Act (“APA”) necessary to safeguard Texans from unlawful takings and from regulatory overreach. These specific requirements discussed herein have been overlooked by the parties’ briefs but warrant the Court’s consideration. First, the APA requires that the PUC analyze and determine whether the Legislature has delegated it the authority to issue the proposed rule. Section 2001.024 of the APA requires that the PUC include in its public notice of the proposed rulemaking the following items: (3) A statement of the statutory or other authority under which the rule is proposed to be adopted, including: (A) a concise explanation of the particular statutory or other provisions under which the rule is proposed; (B) the section or article of the code affected; (C) if applicable, the bill number for the legislation that enacted the statutory authority under which the rule is proposed to be adopted if the legislation was enacted during the four-year period preceding the date notice of the proposed rule is given; and 1 As required by Rule 11(c) of the Texas Rules of Appellate Procedure, all fees for this amicus brief will be paid by Aspire. 1 Appx. Page 656 of 740 (D) a certification that the proposed rule has been reviewed by legal counsel and found to be within the state agency's authority to adopt. TEX. GOV’T CODE § 2001.024(a)(3) (emphasis added). Because the ERCOT/PUC process for approval of NPRRs fell so far short of these requirements, the RWE decision below disposed of the matter in a single sentence: “The administrative record does not reveal that the Commission gave any notice to the public of NPRR 1081 before approving the rule.” RWE Renewables v. PUC, 669 S.W.3d 566, 577 (Tex. App.—Austin 2023, pet. granted). But the problem extends far beyond a simple lack of public notice. The content of the notice—and in particular, addressing the agency’s authority to issue the rule—serves as an important safeguard against the risk of an agency asserting authority beyond that delegated to it. Yet, nowhere in the record does it reflect that legal counsel rendered the opinion that the Legislature delegated the necessary authority to the PUC as required by TEX. GOV’T CODE § 2001.024(a)(3)(D) or that anyone else analyzed agency authority. Whether the PUC lacked statutory authority related to the issues addressed in NPRR 1081 or not, it is critical that the Commission comply with APA processes designed to prevent potential regulatory overreach.2 2 Similarly, the APA requires that the PUC include a fiscal analysis: 2 Appx. Page 657 of 740 The APA also contains critical safeguards for alerting the public to possible taking of private property. Under TEX. GOV’T CODE § 2007.042(b), if the Commission proposes a governmental action that might cause a taking of private property, then the Commission must (1) provide notice in the manner prescribed by Section 2001.023; and (2) file with the secretary of state for publication in the Texas Register in the manner prescribed by Chapter 2002 a reasonably specific summary of the takings impact assessment that was prepared by the agency. Id. Where a potential takings issue is implicated, the PUC must additionally “provide at least 30 days' notice of its intent to engage in the proposed action.” TEX. GOV’T CODE § (4) a fiscal note showing the name and title of the officer or employee responsible for preparing or approving the note and stating for each year of the first five years that the rule will be in effect: (A) the additional estimated cost to the state and to local governments expected as a result of enforcing or administering the rule; (B) the estimated reductions in costs to the state and to local governments as a result of enforcing or administering the rule; (C) the estimated loss or increase in revenue to the state or to local governments as a result of enforcing or administering the rule; and (D) if applicable, that enforcing or administering the rule does not have foreseeable implications relating to cost or revenues of the state or local governments. TEX. GOV’T CODE § 2001.024(a)(4). This fiscal analysis is critical to avoiding unfunded mandates on the state and local governments, and the analysis may demonstrate to the public and a reviewing court that the rule is either justified or unjustified from a cost and revenue perspective. Like its failure to address whether it had necessary authority to approve the rulemaking, the PUC failed to address this APA-required element. 3 Appx. Page 658 of 740 2007.042(a). In application, it is possible for an ERCOT NPRR to risk an unlawful taking of private property. As an example, in NPRR 1186, ERCOT sought to create new limits on the rights of battery storage facility owners to discharge their batteries and to sell that power onto the grid. At least one ERCOT Market Participant submitted comments in the ERCOT committee processes raising the concern that NPRR 1186 implicated takings issues.3 While there might be debate on whether the proposal in NPRR 1186 would have resulted in a taking, the APA requires the due process protections of enhanced public notice if there were even a possibility that the rule change would constitute a taking. The essential safeguard for constitutional property rights does not exist in the Commission’s process under review in this proceeding. In summary, the PUC’s position that its practices satisfied the intent of the APA is wrong. Key APA requirements perform crucial functions, like keeping agencies in check in their rulemaking, protecting against the risk of impermissible takings of private property, and ensuring that the public is well informed so it can meaningfully participate in the rulemaking process. The PUC’s position would reduce the APA’s requirements to little more than a list of suggestions. The Court 3 See Comments of Octopus Energy, NPRR 1186 (Sept. 22, 2023) https://www.ercot.com/files/docs/2023/09/22/1186NPRR- 28%20Octopus%20Energy%20Comments%20092223.docx 4 Appx. Page 659 of 740 should uphold the decision of the court below that the PUC was required to comply with the APA. Respectfully submitted, /s/ Chrysta Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Telephone: (214) 282-8579 Facsimile: (214) 602-9187 Counsel for Aspire Power Ventures, LP CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of foregoing has been served via e-file upon all counsel of record on April 26, 2024. /s/ Chrysta Castañeda Chrysta Castañeda 5 Appx. Page 660 of 740 APPENDIX G Appx. Page 661 of 740 FILED 23-0555 3/7/2024 5:57 PM tex-85334007 SUPREME COURT OF TEXAS BLAKE A. HAWTHORNE, CLERK No. 23-0555 IN THE SUPREME COURT OF TEXAS PUBLIC UTILITY COMMISSION OF TEXAS, Petitioner, v. RWE RENEWABLES AMERICAS, LLC AND TX HEREFORD WIND, LLC, Respondents. On Petition for Review from the Third Court of Appeals at Austin, Texas No. 03-21-00356-CV AMICUS BRIEF OF ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. Elliot Clark Wallace B. Jefferson State Bar No. 24012428 State Bar No. 00000019 eclark@winstead.com wjefferson@adjtlaw.com Elin Isenhower Rachel A. Ekery WINSTEAD PC Nicholas Bacarisse 401 Congress Avenue ALEXANDER DUBOSE & Suite 2100 JEFFERSON LLP Austin, Texas 78701 100 Congress Avenue, Suite 1450 Telephone: (512) 370-2800 Austin, Texas 78701-3562 Facsimile: (512) 370-2850 Telephone: (512) 482-9300 Facsimile: (512) 482-9303 ATTORNEYS FOR AMICUS CURIAE ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. Appx. Page 662 of 740 TABLE OF CONTENTS Table of Contents ...................................................................................... i Index of Authorities.................................................................................. ii Interests of Amicus Curiae ...................................................................... 1 Statement of Facts ................................................................................... 2 Summary of the Argument ...................................................................... 9 Argument ................................................................................................ 12 I. The court of appeals lacked jurisdiction over RWE’s challenge to NPRR 1081. ............................................................................... 12 A. NPRR 1081 was adopted by ERCOT, not the PUC. ............ 12 B. RWE could have challenged NPRR 1081 before the PUC. . 17 C. RWE’s demand for duplicative ERCOT and PUC rulemaking will cripple ERCOT’s ability to regulate the grid and market.................................................................... 19 II. The court of appeals’ substantive holding threatens the stability of the ERCOT grid and market. ..................................... 25 A. ERCOT’s energy-only market design demands that prices be at VOLL during load shed. ................................... 26 B. RWE’s cramped conception of PURA would gravely harm ERCOT’s ability to protect the grid and ensure efficient economic outcomes. ................................................ 33 Prayer ..................................................................................................... 39 Certificate of Service .............................................................................. 41 Certificate of Compliance ....................................................................... 42 Index Appx. Page 663 of 740 INDEX OF AUTHORITIES Cases CPS Energy v. ERCOT, 671 S.W.3d 605 (Tex. 2023) ............................................................ 9, 14 Luminant Energy Co. v. PUC, 665 S.W.3d 166 (Tex. App.—Austin 2023, pet. granted) ................... 33 Panda Power Generation Infrastructure Fund, LLC v. ERCOT, 641 S.W.3d 893 (Tex. App.—Dallas 2022) (en banc), rev’d sub nom., CPS Energy v. ERCOT, 671 S.W.3d 605 (Tex. 2023) ........................................................................ 13, 14, 16 RWE Renewables Am., LLC v. PUC, 669 S.W.3d 566 (Tex. App.—Austin 2023, pet. granted) ....................................................................................... 9, 13, 25, 33, 38 Statutes Tex. Util. Code § 15.001 .......................................................................... 18 Tex. Util. Code § 39.001 ................................................................ 8, 12, 26 Tex. Util. Code § 39.003 .......................................................................... 18 Tex. Util. Code § 39.151 .................................................................. passim Tex. Util. Code § 39.1511 .......................................................................... 8 Tex. Util. Code § 39.160 .......................................................................... 37 Other Authorities 16 Tex. Admin. Code § 22.251 ................................................. 8, 17, 18, 19 37 Tex. Reg. 8959 (Nov. 9, 2012) ............................................................. 38 Brattle Group, ERCOT Investment Incentives & Resource Adequacy (June 1, 2012) ............................................................. passim ii Appx. Page 664 of 740 Brattle Group, Estimation of the Market Equilibrium & Economically Optimal Reserve Margins for the ERCOT Region 77 (Dec. 20, 2018)...................................................................... 3 ERCOT, Market Rules ............................................................................. 20 ERCOT, Markets and Reliability: Operating Reserve & Reliability Deployment Price Adders (2018)......................................... 3 ERCOT, Nodal Protocol Revision Requests (NPRRs) ............................. 21 ERCOT Presentation Regarding Potential Implementation of Scarcity Pricing Proposal Offered by Professor Hogan, PUC Docket No. 40000, Item No. 369 (Jan. 22, 2013) ....................... 30 ERCOT, Other Binding Documents, Methodology for Setting Maximum Shadow Prices for Network and Power Balance Constraints § 4.1 (eff. Apr. 1, 2022) ................................................... 36 ERCOT Protocols § 1.1 ............................................................................ 15 ERCOT Protocols § 3.22.2 ....................................................................... 22 ERCOT Protocols § 6.5.7.5 ...................................................................... 22 ERCOT Protocols § 6.6.13.2 .................................................................... 23 ERCOT Protocols § 8.1.1.4.1 ................................................................... 22 ERCOT Protocols § 21 ............................................................................. 16 ERCOT Protocols § 21.2 ...................................................................... 6, 20 ERCOT Protocols § 21.3 ...................................................................... 6, 20 ERCOT Protocols § 21.4.1 ................................................................... 6, 20 ERCOT Protocols § 21.4.4 ................................................................... 6, 20 ERCOT Protocols § 21.4.5 ................................................................... 6, 20 ERCOT Protocols § 21.4.6 ....................................................................... 20 iii Appx. Page 665 of 740 ERCOT Protocols § 21.4.8 ......................................................................... 7 ERCOT Protocols § 21.4.9 ....................................................................... 20 ERCOT Protocols § 21.4.10 ....................................................................... 7 ERCOT Protocols § 21.4.11 ....................................................................... 8 ERCOT Protocols § 21.4.12 ....................................................................... 8 ERCOT Protocols § 21.4.12.3 .............................................................. 8, 18 London Economics, Ltd., Estimating the Value of Lost Load (June 17, 2013).............................................................................. 27, 30 NPRR 1120 .............................................................................................. 22 NPRR 1157 .............................................................................................. 16 NPRR 1172 .............................................................................................. 22 Potomac Economics, 2012 State of the Market Report for the ERCOT Electricity Markets (2013) ................................... 29, 30, 31, 32 Potomac Economics, 2020 State of the Market Report for the ERCOT Electricity Markets (May 2021)............................................... 5 PUC, Docket No. 5445 ................................................................. 15, 19, 21 Tex. PUC, Docket No. 52307 ................................................................... 12 Tex. PUC, Docket No. 55837. .................................................................. 30 Tex. R. App. P. 11(c) .................................................................................. 1 William W. Hogan, On an “Energy Only” Electricity Market Design for Resource Adequacy (Sept. 23, 2005) ..................................................................................................... passim iv Appx. Page 666 of 740 INTERESTS OF AMICUS CURIAE Pursuant to the Public Utility Regulatory Act and Public Utility Commission certification, Electric Reliability Council of Texas, Inc., is responsible for ensuring the reliability and adequacy of Texas’s grid and managing Texas’s wholesale electricity market. In that capacity, ERCOT has statutory authority to adopt, administer, and implement the legally binding rules—known as Protocols—that govern the market and grid. This case concerns the validity of a Protocol revision that ERCOT adopted and the PUC approved. While ERCOT is not a formal party to this dispute, this case will directly impact both procedural and substantive aspects of ERCOT’s rulemaking authority. Additionally, ERCOT is well-positioned to advise this Court regarding the pro- competitive justifications for the rule at issue, as well as the widespread collateral damage that the court of appeals’ decision will do to ERCOT’s and the PUC’s efforts to regulate and secure the market and grid. ERCOT will pay the fees incurred in preparing this brief. Tex. R. App. P. 11(c). Appx. Page 667 of 740 STATEMENT OF FACTS In its Luminant amicus brief, ERCOT explained its complex pricing mechanism. ERCOT’s Security-Constrained Economic Dispatch system sets a Locational Marginal Price based on generators’ offers and consumer demand. ERCOT’s Luminant Br. 10. But under the PUC- required Scarcity Pricing Mechanism, two administrative adders may raise prices when special circumstances require: the Operating Reserves Demand Curve (ORDC) Adder and the Reliability Deployment Price Adder (RDPA). Id. at 11–13. The ORDC ensures that in times of scarcity—when demand approaches the maximum amount of available supply—the price of electricity automatically reaches the Value of Lost Load. VOLL is the theoretical price the average consumer would pay to avoid curtailment if that consumer were bidding into the market. Id. at 13. Thus, when available reserves dip below a critical level (today, 3,000 MW), ERCOT’s Protocols set the price of electricity at VOLL (today, $5,000/MWh). 1 The 0F 1 During Winter Storm Uri, the maximum price was higher ($9,000), but the threshold for triggering it was lower (2,000 MW). See ERCOT’s Luminant Br. 12–13. 2 Appx. Page 668 of 740 economic concept is that as the “probability of shedding load” increases, the price of electricity should increase until it reaches VOLL. 2 1F Consistent with these market-driven principles, ERCOT, the PUC, and market participants all expected that if demand threatened to exceed (or in fact exceeded) available supply, and ERCOT were forced to order load shed to protect the grid, prices would remain at VOLL. For instance, RWE cites (at 39) a 2012 Brattle Group report that calls VOLL “the efficient price level during severe scarcity conditions when ERCOT must enact involuntary load shedding.” Brattle Group, ERCOT Investment Incentives & Resource Adequacy 77 (June 1, 2012) (emphasis added). Based on this understanding of the market design, ERCOT’s Technical Advisory Committee rejected Luminant’s 2014 proposal to make load shed a trigger for the RDPA: there was broad agreement that the proposal was redundant because the ORDC would cause VOLL pricing during load shed. See ERCOT’s Luminant Br. 14–18. 3 2F 2 ERCOT, Markets and Reliability: Operating Reserve & Reliability Deployment Price Adders 16 (2018). 3 See also, e.g., Brattle Group, Estimation of the Market Equilibrium & Economically Optimal Reserve Margins for the ERCOT Region 77 (Dec. 20, 2018) (explaining that during load shed, the ORDC would cause prices to be at VOLL). 3 Appx. Page 669 of 740 Winter Storm Uri exposed a flaw in that assumption. During the Storm, supply was highly volatile—resources would come online, only to trip off again soon after. To ensure there were sufficient reserves to protect the grid from a catastrophic blackout during these recurring drops in available capacity, ERCOT was compelled to order an unprecedented amount of load shed. See id. at 18. As a result, the ORDC occasionally failed to produce VOLL pricing because it showed “available” reserves of more than 2,000 MW. Id. at 18–19. But those so-called “available” reserves were a product of ERCOT ordering transmission operators to shed thousands of megawatts of demand, representing millions of customers. Id. at 19. Because those customers’ service had been curtailed, their demand could not be accounted for by the bids and offers being cleared by ERCOT’s pricing algorithm. Id. In other words, ERCOT’s pricing system interpreted the millions of shed customers as a reduction in demand when, in reality, demand was unprecedentedly high. Following the Storm, the Independent Market Monitor explained that the failure of ERCOT’s pricing system to ensure that prices were at 4 Appx. Page 670 of 740 VOLL during load shed was inconsistent with the competitive economic theory driving ERCOT’s energy-only design: Real-time energy prices should reflect that shedding firm load is an out-of-market action with a cost equal to the Value of Lost Load (VOLL) . . . . This is clear because one additional MW of energy under these conditions would allow ERCOT to serve an additional MW of load, so the value of this energy must equal VOLL. Efficient pricing during these extreme shortages is essential in an energy-only market because it provides necessary economic signals to increase the electric generation needed to restore the load in the short term and service it reliably over the long term. Potomac Economics, 2020 State of the Market Report for the ERCOT Electricity Markets xi (May 2021); accord id. at 31 (explaining that a “flaw in [the RDPA] was revealed in 2021,” insofar as it “does not directly account for firm load shed”). The IMM thus “recommend[ed]” that ERCOT revise the Protocols “to designate that firm load shedding directed by ERCOT be included in the calculation of the” RDPA. Id. at xi, 31. This recommendation spurred NPRR 1081, which was proposed jointly by ERCOT and the IMM. App. A. 4 Under the ORDC, prices rise to 3F VOLL as the probability of load shed increases. The economic theory 4 ERCOT has appended to this brief all of the key documents related to the adoption of NPRR 1081. 5 Appx. Page 671 of 740 underlying ERCOT’s energy-only market assumes that prices will remain at that level during severe load shed, when reserves are effectively negative. NPRR 1081 ensures that the market acts according to its intended design and underlying economic principles, producing efficient pricing outcomes that reflect the forces of supply and demand in a moment when those forces are not operating normally. NPRR 1081 was a product of ERCOT’s collaborative, stakeholder- led rulemaking process. ERCOT and the IMM proposed the revision to “ensure that Real-Time energy prices reflect the VOLL when Load is being shed, which is fundamental to an energy-only market design in order to provide effective economic signals.” App. A; ERCOT Protocols § 21.2(1) (providing how to initiate an NPRR). After ERCOT publicly posted the NPRR and solicited comments, ERCOT Protocols § 21.4.1, the NPRR was reviewed by ERCOT’s Protocol Revision Subcommittee, ERCOT Protocols §§ 21.3, 21.4.5. At an open PRS meeting, the revision was recommended for approval by representatives of consumers and every market segment (with three abstentions). Apps. E, F; ERCOT Protocols § 21.4.4. 6 Appx. Page 672 of 740 The revision was next presented to ERCOT’s Technical Advisory Committee. 5 ERCOT Protocols § 21.4.8. RWE commented that ERCOT 4F should not consider the revision while Luminant was pending. App. L. But RWE did not affirmatively argue that the revision exceeded ERCOT’s authority under PURA. Id. The PUC’s Staff urged adoption, explaining that shedding load “is an out-of-market reliability action and therefore should be reflected in Real-Time energy prices,” and that the price in those circumstances “should reflect VOLL” because “efficient pricing is needed during extreme shortages to provide the economic signals necessary to increase the generation needed to restore Load in the short- term and service it reliably over the long-term.” App. K. At an open meeting, every market segment recommended the revision for approval (with four abstentions). Apps. M, N. Finally, ERCOT’s Board adopted the revision. App. O; ERCOT Protocols § 21.4.10. Neither RWE nor any other stakeholder sought to exercise its statutory right to address the Board about its concerns. See 5 The TAC is comprised of stakeholder representatives and reports directly to ERCOT’s Board. The TAC plays an important role in the development of ERCOT’s policies and procedures. The PRS is a subcommittee of the TAC that reviews and recommends action on formally submitted NPRRs. 7 Appx. Page 673 of 740 PURA § 39.1511(b). Nor did RWE (or any other interested person) file an administrative appeal with the PUC concerning the Board’s actions. ERCOT Protocols § 21.4.12.3; 16 Tex. Admin. Code § 22.251. The Board’s adoption of NPRR 1081 was then approved by the PUC at an open meeting. See ERCOT Protocols § 21.4.11. Following that approval, RWE appealed directly to the Third Court of Appeals, pursuant to a statute permitting direct appeals of “competition rules adopted by the commission”—but not rules adopted by ERCOT. PURA § 39.001(e). Contra ERCOT Protocols § 21.4.12 (providing how to appeal ERCOT action on an NPRR). 8 Appx. Page 674 of 740 SUMMARY OF THE ARGUMENT As the PUC explains, the simplest resolution of this case would be to dismiss RWE’s direct appeal for want of jurisdiction. The court of appeals only has direct-appeal jurisdiction over a “competition rule[] adopted by the commission.” PURA § 39.001(e) (emphasis added). The court of appeals held, and RWE argues, that RWE’s challenge to NPRR 1081 comes within this jurisdictional grant because ERCOT merely “propose[s]” rules for the PUC’s adoption. RWE Renewables Am., LLC v. PUC, 669 S.W.3d 566, 575 (Tex. App.—Austin 2023, pet. granted). This Court considered and rejected an identical argument in CPS Energy v. ERCOT, holding—consistent with the statutory text—that ERCOT itself “adopt[s]” rules, subject to the PUC’s approval. 671 S.W.3d 605, 616, 623, 626 (Tex. 2023); id. at 618 (“ERCOT is empowered to enact rules . . . .” (emphasis added)). Because ERCOT, rather than the PUC, “adopted” NPRR 1081, RWE’s challenge should be dismissed. However, if this Court reaches the merits it should hold that NPRR 1081 was well within ERCOT’s and the PUC’s rulemaking authority. NPRR 1081 provides that when ERCOT is shedding load in EEA3 (because available capacity is critically low or negative), then the price of 9 Appx. Page 675 of 740 electricity on the wholesale market should equal VOLL, i.e., the estimated price that a customer would pay to avoid curtailment. RWE insists that administratively setting VOLL and requiring prices to be at that level during load shed is inconsistent with the competitive principles underlying ERCOT’s energy-only market design. RWE’s own authorities prove it wrong. For instance, a report RWE cites several times describes the “rich theoretical literature demonstrating the economic efficiency” of administratively “[s]etting the price cap at VOLL” during load shed. Brattle Group, ERCOT Investment Incentives & Resource Adequacy 77 (June 1, 2012). The economic literature on which the ERCOT market is based broadly recognizes that VOLL pricing during scarcity, including load shed, is fundamental to ensuring sufficient investment in generation resources and demand response in an energy-only market like ERCOT’s. And it recognizes that this pricing can only be accomplished by regulatory intervention. Based on this literature, and the ORDC that ERCOT put in place to implement it, ERCOT, the PUC, and market participants long expected prices would be at VOLL during load shed. Winter Storm Uri 10 Appx. Page 676 of 740 showed that assumption was wrong, at least when ERCOT was forced to shed unprecedented load. NPRR 1081 does nothing more than return ERCOT’s pricing mechanism to its competitive design, in line with longstanding market expectations. Were this Court to hold that ERCOT and/or the PUC lacked the power to implement NPRR 1081, that ruling would broadly imperil much of ERCOT’s and the PUC’s current market design, including the ORDC itself. And it would discard the essential economic principles on which the market was built. ERCOT prays that this Court dismiss RWE’s appeal for lack of jurisdiction or render judgment for the PUC. 11 Appx. Page 677 of 740 ARGUMENT I. The court of appeals lacked jurisdiction over RWE’s challenge to NPRR 1081. A. NPRR 1081 was adopted by ERCOT, not the PUC. Direct appeals are permitted only from “competition rules adopted by the commission.” PURA § 39.001(e). Competition rules 6 adopted by 5F ERCOT are not subject to that provision. This distinction defeats RWE’s appeal. RWE seeks to invalidate NPRR 1081, a revision to the ERCOT Protocols. It is NPRR 1081 itself (rather than the PUC’s approval order) that market participants are obliged to obey, PURA § 39.151(j), and it is NPRR 1081 itself that makes firm load shed a trigger for VOLL pricing. The PUC’s approval order, by contrast, merely states that the PUC “approves NPRR 1081.” Tex. PUC, Docket No. 52307, Item No. 3 (July 16, 2021) (order). RWE thus surgically attacks specific portions of NPRR 1081 itself, not merely the approval order. 7 6F 6 ERCOT agrees with the PUC that NPRR 1081 is not a “competition rule.” But this Court need not reach that question because, whether or not it’s a competition rule, NPRR 1081 was adopted by ERCOT, rather than the PUC. 7 Specifically, RWE (at 21–22) makes much of the fact that it “did not challenge” the portion of NPRR 1081 that “include[s] firm load shed as one factor, among nine different factors, that should be considered in determining” the RDPA, but only challenged the provision requiring prices to reach VOLL during load shed. Note, 12 Appx. Page 678 of 740 ERCOT alone “adopted” NPRR 1081. See PUC’s Reply Br. 6. RWE’s contrary position, and the court of appeals’ holding, relies on the contra- textual position that ERCOT merely “proposes” rules for the PUC’s adoption. RWE’s Br. 47; 8 RWE, 669 S.W.3d at 575. But this Court has 7F already rejected RWE’s argument, which has no basis in PURA’s text. In Panda Power, the Dallas Court of Appeals held that ERCOT does not exercise sovereign rulemaking authority because it merely “suggests or recommends rules . . . to the PUC.” Panda Power Generation Infrastructure Fund, LLC v. ERCOT, 641 S.W.3d 893, 909 (Tex. App.— Dallas 2022) (en banc), rev’d sub nom., CPS Energy v. ERCOT, 671 S.W.3d 605 (Tex. 2023). When ERCOT sought this Court’s review, Panda made the same argument. Panda’s Br. 16, ERCOT v. Panda Power Generation Infrastructure Fund, LLC, No. 22-0196 (Tex. filed Oct. 31, 2022) (arguing that ERCOT merely “propose[s] rules” because they however, that the portion of NPRR 1081 that RWE “did not challenge” has no operative effect without the portion that the court of appeals invalidated. 8 Likewise, RWE’s resort (at 49–50) to dictionary definitions of “adopt” are irrelevant in light of the Legislature’s express statement that ERCOT itself adopts the rule before the PUC approves it. 13 Appx. Page 679 of 740 “cannot take effect until the PUC says so”); id. at 29 n.19 (referring dismissively to “ERCOT’s power to propose rules” (emphasis added)). 9 8F In CPS, this Court reversed Panda Power and rejected Panda’s argument that ERCOT merely “proposes” rules. CPS held instead that “ERCOT exercises delegated authority from the PUC to adopt and enforce rules.” CPS, 671 S.W.3d at 616 (emphasis added; internal quotation marks omitted); id. at 618 (explaining that “ERCOT is empowered to enact rules,” which “must be approved by the PUC” (emphasis added)); id. at 626 (“[ERCOT] is statutorily authorized to establish, adopt, and enforce a variety of policies, rules, guidelines, standards, procedures, protocols, and other requirements to govern the operations of market participants.” (emphasis added)). 10 9F CPS’s holding accords with the plain statutory text, which considers a rule to be “adopted” by ERCOT before it is approved by the PUC. PURA § 39.151(g-6) (“Protocols adopted by [ERCOT] . . . under 9 As it does here, ERCOT argued in CPS that “the Legislature explicitly deems [ERCOT-adopted Protocols] ‘rules’ before PUC approval.” ERCOT’s Reply Br. 13, No. 22-0196 (Tex. filed Nov. 15, 2022); ERCOT’s Br. 28 & n.11, No. 22-0196 (Tex. filed Oct. 3, 2022). 10 Both CPS and PURA’s plain language reject RWE’s strange argument that ERCOT lacks delegated rulemaking authority because it “must follow the policy as mandated by the Legislature and executed by an agency.” 14 Appx. Page 680 of 740 delegated authority from the commission . . . may not take effect before receiving commission approval.” (emphasis added)); id. (“The [PUC] may approve, reject, or remand with suggested modifications . . . protocols adopted by [ERCOT].” (emphasis added)). 11 10F The unambiguous statutory text and this Court’s precedent thus leave no question that ERCOT—not the PUC—“adopted” NPRR 1081. And the Legislature intended for ERCOT to do so outside the APA. The Legislature’s post-Storm amendments to PURA reflect its profound awareness of the ERCOT Protocols and revision process. The Legislature could easily have specified in those amendments that ERCOT’s rulemaking process be governed by the APA. Instead, the Legislature ratified ERCOT’s preexisting rulemaking mechanism by codifying the requirement that ERCOT “establish and implement a formal process for adopting new protocols or revisions to existing protocols.” PURA 11 RWE’s resort (at 49–50) to dictionary definitions of “adopt” are irrelevant in light of the Legislature’s (and this Court’s) express statements that ERCOT itself adopts a rule before the PUC approves it. Similarly, RWE claims (at 49) that the ERCOT Protocols “do not even call for it to ‘adopt’ or ‘approve’ any revision.” In fact, the term “ERCOT Protocols” is defined as “document[s] adopted by ERCOT.” ERCOT Protocols § 1.1(1) (emphasis added). The PUC also considers the protocols to be adopted before they are approved. E.g., PUC, Docket No. 54445 (“Review of Rules Adopted by [ERCOT]” (emphasis added)). 15 Appx. Page 681 of 740 § 39.151(g-6). 12 This “process”—i.e., ERCOT’s “formal process”—“must 11F require that new or revised protocols may not take effect until the commission approves a market impact statement.” Id. In other words, the PUC’s approval of an ERCOT-adopted Protocol revision is part of the non-APA “formal process” by which the Legislature requires ERCOT to adopt new or revise existing Protocols. In this context, the PUC does not itself engage in rulemaking. It supervises ERCOT’s rulemaking: the PUC “may approve, reject, or remand with suggested modifications . . . protocols adopted by [ERCOT].” Id. (emphasis added). 13 12F ERCOT alone “adopted” NPRR 1081. Id. In approving ERCOT’s adoption of that Protocol revision, the PUC did not itself make a rule; it exercised its supervisory powers of “oversight and review” over ERCOT’s delegated rulemaking authority. PURA § 39.151(g-6). Because the PUC 12 Of course, ERCOT revised this process in light of changes the Legislature made to ERCOT’s role. See ERCOT Protocols § 21; NPRR 1157. 13 The Legislature’s decision to place ERCOT’s rulemaking outside the APA is not “absurd,” as RWE asserts. RWE’s Br. 50. The Legislature made a conscious decision to ratify ERCOT’s Protocol revision process, knowing that the process provides notice- and-comment opportunities to interested parties, as well as administrative and judicial review, while also harnessing ERCOT’s substantial subject-matter expertise and the expertise of market participants themselves. 16 Appx. Page 682 of 740 did not “adopt” NPRR 1081, the court of appeals lacked jurisdiction over RWE’s direct appeal, which must therefore be dismissed. B. RWE could have challenged NPRR 1081 before the PUC. RWE asserts it is entitled to challenge NPRR 1081 via a direct appeal because it cannot challenge NPRR 1081 administratively. RWE’s Br. 55–57. RWE argues that administrative complaints about ERCOT must be filed with the PUC within 35 days, after which the PUC has time to respond, 16 Tex. Admin. Code §§ 22.251(e)–(g), while a direct appeal must be filed within 15 days, PURA § 39.151(f). RWE thus claims that if it waited for administrative review before filing its direct appeal, its direct appeal would be time-barred. RWE’s argument is question begging: it assumes that RWE may challenge ERCOT-adopted Protocol revisions by direct appeal. But because RWE cannot do so, the purported incompatibility between the administrative regime and the direct-appeal statute falls away. In any event, RWE has a clear path to administrative and judicial review under PURA, PUC Rules, and ERCOT Protocols. ERCOT’s Protocol revision process provides market participants and other interested person notice and numerous opportunities for comment. RWE 17 Appx. Page 683 of 740 received notice of NPRR 1081, and it filed a comment urging ERCOT not to adopt it. App. L. After ERCOT nevertheless adopted NPRR 1081, RWE had a right to complain to the PUC about ERCOT’s action. See ERCOT Protocols § 21.4.12.3(1) (providing that a market participant, among others, may “appeal any decision of the ERCOT Board regarding a Revision Request to the PUCT” (emphasis added)). RWE could have filed a complaint with the PUC and argued that ERCOT’s adoption of NPRR 1081 “violat[ed]” a “law that the commission has jurisdiction to administer,” namely PURA. 16 Tex. Admin. Code § 22.251(a). If the PUC rejected RWE’s appeal, RWE could have sought judicial review under the APA (albeit in district court, rather than directly in the court of appeals). PURA §§ 15.001, 39.003. But RWE chose to forego administrative review. It is true that, in this case, the PUC approved NPRR 1081 just before RWE’s time to administratively appeal ERCOT’s adoption expired. But that approval did not prevent RWE from filing its administrative appeal and arguing that NPRR 1081 was inconsistent with PURA (an argument no party had presented to the PUC). Had the PUC agreed with RWE—or if it agrees with some future party challenging a Protocol 18 Appx. Page 684 of 740 revision—the PUC could have suspended NPRR 1081’s operation or ordered ERCOT to revise it. 16 Tex. Admin. Code § 22.251(o). 14 13F RWE may be right that, in light of recent PURA amendments, PUC Rule 22.251 should be amended to provide clearer guidance on how to challenge ERCOT’s adoption of rules given the PUC’s new supervisory role. But whether the PUC should clarify its rules has no bearing on this Court’s jurisdiction over a direct appeal from a rule that the PUC did not adopt. And even without clarification, RWE had an explicit path to administrative and judicial review. C. RWE’s demand for duplicative ERCOT and PUC rulemaking will cripple ERCOT’s ability to regulate the grid and market. The Legislature requires ERCOT to “adopt[] new protocols or revisions to existing protocols” using a “formal process.” PURA § 39.151(g-6). As the Legislature knew when it enacted this requirement, ERCOT adopts Protocols using a collaborative, stakeholder-led process. 14 There is an alternative route to administrative review. The PUC has an open project in which it reviews ERCOT-adopted revisions. PUC, Docket No. 54445 (“Review of Rules Adopted by the Independent Organization”). Market participants and other interested persons may file comments in that project advocating for or against approval of an ERCOT-adopted revision. This recently happened with NPRR 1186: numerous parties filed comments with the PUC, in response to which the PUC remanded the revision to ERCOT with instructions to further revise it. PUC, Docket No. 54445, Item No. 64 (order). 19 Appx. Page 685 of 740 ERCOT Protocols § 21.2(1). This process provides multiple opportunities for comment, and representatives of consumers and each market segment are able to vote on the proposals as they progress through ERCOT’s Protocol Revision Subcommittee, Technical Advisory Committee, and State-appointed Board. Id. §§ 21.3, 21.4.1, 21.4.4, 21.4.5. ERCOT employs subject-matter experts in a range of relevant areas, including economics, market design, and a variety of engineering specialties. These experts are engaged at every stage of the Protocol- revision process, analyzing the effect of any proposal on ERCOT’s functions and the grid and market. See id. §§ 21.4.6, 21.4.9. Additionally, because market participants have a hands-on role in the Protocols’ drafting and revision, ERCOT is able to harness their substantial expertise as well. The result of this process is thousands of pages of binding rules that govern every aspect of Texas’s electric grid and wholesale market—not only the Protocols, but also a numerous other “guides, policies and procedures” containing legally binding rules. See ERCOT, Market Rules; PURA § 39.151(j). 20 Appx. Page 686 of 740 The PUC “by design lacks ERCOT’s expertise in this highly technical field,” PUC’s Reply Br. 10, and it thus has neither the staff nor deep technical knowledge necessary to craft these immensely complex rules. This is why the Legislature authorized the PUC to delegate that authority to ERCOT, authorized the use of public funds to pay for ERCOT’s operations, and ratified ERCOT’s specialized rulemaking process. Requiring the PUC to engage in a second rulemaking after ERCOT engages in the “formal process” the Legislature requires would cripple ERCOT’s ability to regulate the grid and market. In 2023 alone, there were 56 NPRRs initiated in ERCOT, of which 28 were approved that year (along with numerous others initiated in 2022). See ERCOT, Nodal Protocol Revision Requests (NPRRs). That same year, an additional 66 revisions to other binding ERCOT rules were initiated, of which 60 were approved. 15 ERCOT considers all of these 14F revisions to be rulemakings subject to the PUC’s approval. See PURA §§ 39.151(g-6), (j); see, e.g., Tex. PUC, Docket 5445, Item No. 51 (Dec. 27, 15These include revisions to ERCOT’s Planning Guide, Nodal Operating Guide, Settlement Metering Operating Guide, Retail Market Guide, Load Profile Guide, Verifiable Cost Manual, and Other Binding Documents. 21 Appx. Page 687 of 740 2023) (submitting ERCOT-adopted revisions to the Nodal Operating Guide, Planning Guide, and Retail Market Guide for PUC approval). Most of the NPRRs that ERCOT adopts affect numerous provisions of the Protocols, often in entirely different sections. See, e.g., NPRR 1172 (involving 60 pages of revisions to seven different sections of the Protocols). They are detailed and highly technical, often “look[ing] more like an electrical engineering textbook than anything the PUC usually adopts.” ERCOT’s Amicus Letter 4; e.g., ERCOT Protocols §§ 3.22.2, 6.5.7.5, 8.1.1.4.1. One recent example is NPRR 1120, which ERCOT adopted to implement a PUC directive to develop a firm-fuel product that provides additional grid reliability during extreme cold-weather events. Like many sections of the Protocols, NPRR 1120 includes complex mathematical pricing formulas like this: 22 Appx. Page 688 of 740 ERCOT Protocols § 6.6.13.2(4). By comparison, the PUC approved only ten rulemaking projects in 2023 across its multiple regulatory domains. Just six of these concerned electricity regulation, and none involved the level of technical complexity 23 Appx. Page 689 of 740 that is the norm in ERCOT’s Protocols. RWE’s interpretation of PURA would require the PUC to engage in many times more rulemakings than it currently does, and those rulemakings will be far more technically demanding. Even putting aside the delay and wastefulness of double- rulemaking, see ERCOT’s Amicus Letter 5, this would—to put it mildly— strain the PUC’s resources while making it more difficult for ERCOT and the PUC to protect the grid and market. The Legislature, in granting ERCOT the power to “adopt” rules and endorsing its non-APA rulemaking process, could not have foreseen or intended the chaos that the court of appeals’ rule will wreak. RWE has no real response. It insists that “[t]here is no requirement for duplication” in the court of appeals’ reading of PURA. RWE’s Br. 52. On the contrary, the Legislature explicitly envisioned a two-part process: first, ERCOT “adopt[s]” the rule using a “formal process” that it establishes; second, the PUC exercises its supervisory power and “approve[s], reject[s], or remand[s] with suggested modifications.” PURA § 39.151(g-6). In other words, the Legislature expects ERCOT to create and adopt the Protocols using its longstanding process and substantial 24 Appx. Page 690 of 740 technical expertise; and it expects the PUC to review the work done by ERCOT. Yet, according to RWE, that second-step review is, itself, a rulemaking governed by the APA. Were that right, the PUC would absolutely have to engage in a duplicative second rulemaking after ERCOT engages in its stakeholder-led “formal process” and “adopt[s]” the protocol revision. II. The court of appeals’ substantive holding threatens the stability of the ERCOT grid and market. NPRR 1081 sets the price of electricity at VOLL when ERCOT is ordering load shed in EEA3 (i.e., when market-wide demand exceeds, or nearly exceeds, supply). The court of appeals held that this revision exceeded ERCOT’s and the PUC’s power under PURA because it was insufficiently competitive. 669 S.W.3d at 576. RWE defends this rule, insisting that PURA prohibits ERCOT and the PUC from setting the price of electricity under specific circumstances. RWE’s arguments are internally inconsistent and fundamentally misstate the design and operation of the ERCOT wholesale electricity market. 25 Appx. Page 691 of 740 A. ERCOT’s energy-only market design demands that prices be at VOLL during load shed. RWE grounds its substantive arguments in a legislative “find[ing]” 16 that “electric services and their prices should be determined 15F by customer choices and the normal forces of competition.” PURA § 39.001(a) (emphasis added). RWE fails to reckon with that italicized word. RWE attacks the very concept of VOLL, asserting that it “cannot tell the PUC what the market price should be.” RWE’s Br. 31 (emphasis removed); id. (“VOLL does not require the price of electricity to be at the cap during load shed.”). RWE’s argument lacks any basis in economic theory or market design, and RWE ignores what its own authority calls the “rich theoretical literature demonstrating the economic efficiency” of “[s]etting the price cap at VOLL” during load shed. ERCOT Investment Incentives 77. 16 PURA § 39.001(a) contains no operative language: it does not require or prohibit any action. Instead, § 39.001(a) explains why the Legislature enacted Chapter 39. And § 39.001’s operative provisions do not “tie[]” ERCOT and the PUC “to the mast of competition in a way that prevents them from taking action” in response to emergency conditions or to correct prices in light of ERCOT’s out-of-market actions. Oral Argument, PUC v. Luminant, No. 23-0231, 2024 WL 386329 (Tex. held Jan. 30, 2024) (Blacklock, J.); see ERCOT’s Luminant Br. 28–33. 26 Appx. Page 692 of 740 The only authority RWE musters is the introduction to an ERCOT- commissioned report, which notes that VOLL is necessarily an inexact measure because the price that a customer would pay to avoid load shed necessarily differs based on a variety of factors (e.g., the type of customer, the reason load is being shed, etc.). RWE’s Br. 31 (citing London Economics, Ltd., Estimating the Value of Lost Load 1, 6 (June 17, 2013)). RWE misuses this true and important fact to suggest that the price of electricity during load shed should be determined by market forces, without regulatory intervention. RWE is mistaken at the most fundamental level. The ERCOT market is designed so that in “normal” times, the “forces of competition”—demand bids and generator offers—determine wholesale prices. But NPRR 1081 was not built for “normal” times. NPRR 1081 operates when, because of ERCOT’s out-of-market reliability actions, competitive forces cease to operate normally. ERCOT orders load shed when reserves fall below a certain threshold because those reserves are critical to ensuring reliability and the physical health of system components. 27 Appx. Page 693 of 740 When load is shed, however, it artificially suppresses systemwide demand: the customers who are not receiving power are, for that reason, absent from the market, which consequently cannot account for their demand. Absent regulatory intervention to correct prices, therefore, generators’ offers would clear based only on the demand of the customers still receiving power. See ERCOT Investment Incentives 75–76 (explaining that it is “difficult to determine the marginal system cost during scarcity events because typical dispatch and price-setting mechanisms are not sufficient to bring supply and demand into balance”). 17 Econ 101 principles describe the effect of ERCOT’s out-of- 16F market actions: prices fall due to artificially suppressed demand. See id. (explaining that that out-of-market reliability actions, including “shedding firm load,” can “inappropriately suppress market prices when high prices are most needed”). 17 RWE suggests (at 39) that this report cautioned ERCOT and the PUC against “interven[ing] in market pricing” by requiring VOLL pricing during load shed. In fact, as ERCOT explains below, the report specifically endorses VOLL pricing in those circumstances. ERCOT Investment Incentives 6–7, 75–77, 79. The report’s warnings concerned regulatory interventions that suppress prices, like price caps and “sponsoring out-of-market supplies” of energy. Id. at 12–13; see also PUC’s Reply Br. 13. 28 Appx. Page 694 of 740 It is widely understood in the economic and market-design literature that, in an energy-only market built on competitive principles, regulatory intervention is necessary in these circumstances to ensure efficient pricing. 18 And the nature of this critical intervention is well 17F known and widely agreed: the system operator or regulator must administratively determine VOLL and ensure that prices are at that level during scarcity and load shed. RWE’s own authorities make this very point: Because “market- based supply offers and demand bids cannot be used to determine the marginal cost of power during scarcity events, . . . the price must be administratively determined.” ERCOT Investment Incentives 75 (emphasis added). This is “the price that the average customer would have been willing to pay to avoid curtailment.” Id. at 76. 19 18F 18 “In the vast majority of hours, the marginal cost of the marginal action is associated with the dispatch of the last generator required to meet demand. It is appropriate and efficient in these hours for this generator to ‘set the price.’ However, this is not true under shortage conditions.” Potomac Economics, 2012 State of the Market Report for the ERCOT Electricity Market 82 (2013) (emphasis added). 19 RWE is correct that—precisely because VOLL cannot be determined by bids and offers—determining VOLL is a difficult endeavor. Generally, a regulator or system operator must perform customer surveys to set an average VOLL (or a variety of averages for different customer classes). See Estimating the Value of Lost Load 7 (“A key conclusion from this literature review is that surveys provide more accurate estimates of VOLL . . . .”); On an “Energy Only” Market 11; ERCOT Investment Incentives 77–78. ERCOT is in the midst of such a study. See Tex. PUC, Docket No. 29 Appx. Page 695 of 740 As this RWE-cited report thus explains, VOLL is critical to ensuring the competitive pricing of reserves in times of scarcity. Because offers from generators are generally expected to reflect their short-run marginal cost, the operator of an energy-only market must implement a demand curve (in ERCOT, the ORDC) that “raise[s] prices towards the average VOLL when operating reserve levels approach the minimum reserve level.” William W. Hogan, On an “Energy Only” Electricity Market Design for Resource Adequacy 13 (Sept. 23, 2005). 20 This ensures that 19F prices account for “the effects of scarcity or capturing the true opportunity cost at margin.” Id. 21 Without the ORDC, “the resulting price 20F determination would be flawed in the periods of scarcity when it would be needed the most.” Id.; see also ERCOT Investment Incentives 79 55837 (Review of Value of Lost Load in the ERCOT Market). However, RWE does not challenge the PUC’s chosen VOLL, and the need to administratively choose an imperfect average value does not diminish the importance of the concept to competitive-market design. 20 Notably, Professor Hogan’s work provided the theoretical framework for ERCOT’s ORDC. See, e.g., ERCOT Presentation Regarding Potential Implementation of Scarcity Pricing Proposal Offered by Professor Hogan, PUC Docket No. 40000, Item No. 369 (Jan. 22, 2013). 21 During a shortage of supply, the operator’s first action is “generally not to satisfy operating reserves requirements.” 2012 State of the Market Report 83. This “results in diminished reliability, which has a real cost to electricity consumers” that must be “reflected in energy prices to achieve efficient economic signals governing investment in generation, demand response and transmission.” Id. 30 Appx. Page 696 of 740 (explaining that “the efficient price” as reserves diminish “will also increase with the severity of the event and ultimately reach VOLL”). Identical economic logic applies when ERCOT is shedding load, rebutting RWE’s position that PURA permits the ORDC but forbids NPRR 1081. If prices should be at VOLL when reserves are minimal, prices should also be at VOLL when reserves are effectively negative and the system operator must order firm load shed in order to ensure reserves sufficient to protect the system. As Professor Hogan explains: As the market tightens relative to available supply, reserves would be reduced and prices for energy and reserves would rise. When operating reserves reach the minimum level, the price reaches the . . . average VOLL and involuntary load curtailments would be required. On an “Energy Only” Electricity Market 14 (emphasis added). When “scarcity reaches the point that reserves are reduced to the minimum operating level, the system operator” must implement “rotating involuntary load curtailments.” Id. at 16. “Under these conditions the price of energy would be at the average VOLL, with a corresponding price of reserves.” Id. (emphasis added). The report that RWE touts agrees. It explains that VOLL is the efficient price level during severe scarcity conditions when ERCOT must enact involuntary load shedding . . . . A 31 Appx. Page 697 of 740 VOLL-based price cap approximates what the demand curve would have been had customers been actively bidding to avoid curtailment. Setting the price cap at VOLL is supported by a rich theoretical literature demonstrating the economic efficiency of this approach. ERCOT Investment Incentives 77; see also 2012 State of the Market Report 83 (“At times when there is insufficient capacity to meet both energy and minimum operating reserve requirements, all available capacity will be dispatched and the clearing price will rise in a predetermined manner to a maximum of the system-wide offer cap.”). This literature explains the longstanding design of ERCOT’s market, including the ORDC, and the rationale for NPRR 1081. ERCOT’s pricing system relies on bids and offers to the greatest degree possible. But bids and offers are insufficient to put a price on scarcity, let alone tens of thousands of megawatts of load shed. For years, ERCOT, the PUC, and the market believed that the ORDC would be sufficient to produce efficient pricing outcomes during load shed. Winter Storm Uri proved that wrong. So ERCOT adopted NPRR 1081 to return the market to its intended design. The critical point is that NPRR 1081 is pro-competitive because it corrects price suppression caused by ERCOT’s out-of-market reliability 32 Appx. Page 698 of 740 actions, ensuring that the price of energy reflects the true conditions of the market. VOLL is necessarily set administratively because the market is incapable of pricing the opportunity cost of demand that—because of regulatory intervention—is not currently in the market. NPRR 1081 is consistent with (indeed, critical to) the competitive principles PURA implements and around which the ERCOT market was designed. The court of appeals erred in holding that it exceeded the PUC’s or ERCOT’s authority. B. RWE’s cramped conception of PURA would gravely harm ERCOT’s ability to protect the grid and ensure efficient economic outcomes. The court of appeals held that ERCOT and the PUC exceed their statutory authority if they set “a single price at the rule-based maximum price.” RWE, 669 S.W.3d at 576 (quoting Luminant Energy Co. v. PUC, 665 S.W.3d 166, 191–92 (Tex. App.—Austin 2023, pet. granted)). Tellingly, RWE makes no effort to defend the actual substance of the court of appeals’ holding. Indeed, it insists (at 27) that the ORDC is not threatened by the court of appeals’ decision, even though it likewise sets “a single price at the rule-based maximum price” when reserves are between zero and 3,000 megawatts. And RWE even concedes that 33 Appx. Page 699 of 740 ERCOT may use load shed as “one of the many factors considered” in increasing (but not increasing to VOLL) prices under the RDPA. RWE’s Br. 21–22. In its efforts to do minimal damage to the regulatory regime, RWE thus ties itself in knots. According to RWE, ERCOT can administratively set the price of energy at VOLL when reserves are low (the ORDC), but not when they are effectively negative and ERCOT is shedding load to maintain those reserves. And ERCOT can use load shed (i.e., effectively negative reserves) as a factor for increasing price, but ERCOT cannot increase that price to an economically efficient level, i.e., VOLL. The resulting position is incoherent. RWE contends that the ORDC is appropriate because it “accounts for the value of reserves based on the probability of reserves falling below the minimum contingency level.” RWE’s Br. 27. But there is no daylight between that rationale and NPRR 1081: both do an identical thing (set energy prices at VOLL) under nearly identical circumstances (low vs. effectively negative reserves). Indeed, the reason ERCOT sheds load is to maintain sufficient reserves—the very reserves RWE concedes can properly be “value[d]” by VOLL pricing. If 34 Appx. Page 700 of 740 PURA prohibits NPRR 1081, then the ORDC’s validity is also in grave doubt. RWE also cannot explain the premise underlying its implicit distinction between correcting price suppression by (1) administratively increasing a price, which RWE suggests may be allowed; and (2) administratively increasing a price to VOLL, which it argues is illegal (at least if it responds to load shed, rather than merely low reserves). E.g., RWE’s Br. 27 (defending ERCOT’s other price adders because they “properly value existing reserves,” “account for ERCOT’s out-of-market actions,” and “ensure[] reliability deployments do not distort energy prices”); see also id. at 23 (asserting that the court of appeals “did not strike down regulatory price adders per se”). If PURA prohibits ERCOT and the PUC from setting the price of energy at VOLL when compelled by economic logic and market-design principles, there is no conceivable reason why ERCOT and the PUC could nevertheless displace prices based on bids and offers to some lesser (and less economically sound) degree. 35 Appx. Page 701 of 740 Moreover, all of ERCOT’s regulatory adders (as well as other pricing mechanisms 22) can, ultimately, drive the price to VOLL in certain 21F circumstances. 23 RWE suggests that ERCOT could incorporate load shed 22F into the RDPA in some other way, mistakenly claiming that ERCOT “historically used” load shed as “one input” in its “calculat[ion of] real- time reserve price adders.” RWE’s Br. 32. 24 But even if this were 23F possible, 25 it would likely still produce VOLL pricing in some intervals— 24F and would (under RWE’s rule) presumably be illegal in those instances. RWE also cannot explain why price caps are appropriate when price floors are not. The theoretical literature undergirding ERCOT’s energy- 22 See, e.g., ERCOT, Other Binding Documents, Methodology for Setting Maximum Shadow Prices for Network and Power Balance Constraints § 4.1 (eff. Apr. 1, 2022). 23 For example, when ERCOT (not the PUC, as RWE incorrectly claims at 26) uses its Reliability Unit Commitment tool, the RDPA can cause prices to reach VOLL. See ERCOT’s Luminant Br. 31–32 & n.25. RWE is also wrong to suggest that RUC- committing resources “does not stop prices from being set by the competitive market” because generators can “opt out of the make-whole payment.” A generator that opts out has effectively not been RUC-committed; when a generator is RUC-committed that impacts the RDPA. 24 Before NPRR 1081, ERCOT did not use load shed as an RDPA input—because ERCOT and the market believed the ORDC would produce VOLL pricing in that circumstance. See ERCOT’s Luminant Br. 15–17. There is no truth to RWE’s contrary claim, which is based on a non-pincited reference to a 2013 ERCOT report that does not support RWE’s assertion. 25 As ERCOT explains above, there is not an alternative way to incorporate firm load shed into the RDPA because the only efficient pricing outcome when load is being shed is VOLL. 36 Appx. Page 702 of 740 only market depends upon administratively set VOLL pricing and criticizes price caps. On an “Energy Only” Electricity Market 4, 14–16; ERCOT Investment Incentives 1–2, 77–79. RWE inverts this, suggesting that while VOLL pricing is anathema, price caps are appropriate to “prevent market abuse from causing ‘excessive transfers of wealth.’” RWE’s Br. 27. But price caps are not perfectly aligned with competitive forces because they prevent willing parties from contracting for energy at higher prices. However justified on regulatory grounds, it is thus difficult to fathom how such caps could survive under the court of appeals’ rule. 26 25F NPRR 1081—like the ORDC and RDPA—is fundamentally pro- competitive. It operates only at times when market forces falter. During load shed, customers who, for reliability reasons, have been forced offline cannot bid into the market to have their power restored, and their demand cannot be accounted for by ERCOT’s normal pricing mechanism. In these circumstances, normal market forces—bids and offers—cannot 26 Notably, the Legislature does not view price caps as inconsistent with PURA’s competitive scheme. While the Legislature has never specifically empowered ERCOT or the PUC to impose price caps (except in one specific instance, see PURA § 39.160(d)), it recently imposed limits on how long such caps may remain in effect, if the PUC and ERCOT opt to use them. PURA §§ 39.160(b), (e). 37 Appx. Page 703 of 740 produce a competitive solution. So the PUC has administratively determined the price customers would be willing to pay to avoid load shed. The relevant literature is clear that this is the efficient price during scarcity conditions, including load shed. Without such an intervention, prices would be suppressed and the energy-only market would not provide the proper incentives for demand response or the building of needed additional generation capacity. See 37 Tex. Reg. 8959, 8964 (Nov. 9, 2012) (order adopting Scarcity Pricing Mechanism rule). *** Even the court of appeals recognized that ERCOT and the PUC should rely on “competitive methods” only “to the greatest extent feasible.” RWE, 669 S.W.3d at 576 (quoting Luminant, 665 S.W.3d at 191–92) (emphasis added). But in all the circumstances discussed above, such reliance is not feasible—a point that both the court of appeals and RWE have missed. Relying solely on competitive forces cannot protect the physical grid when demand exceeds supply, so ERCOT must take out-of-market regulatory action to protect it. These regulatory actions, including load 38 Appx. Page 704 of 740 shed, suppress prices. In those circumstances, the “normal” forces of competition cease to operate and reliance on purely “competitive methods” cannot produce efficient pricing outcomes. Consistent with the competitive economic principles that underly the ERCOT market design, ERCOT must in these circumstances take administrative action to ensure that prices reflect actual economic conditions. That is all NPRR 1081 does, consistent with substantial economic literature and longstanding market expectations. If NPRR 1081 was not a valid exercise of ERCOT’s delegated rulemaking authority, it is likely that many other similar Protocols are likewise invalid. The result would be a convulsive change in the nature of the ERCOT market, and it would severely cripple the Legislature’s, the PUC’s, and ERCOT’s efforts to ensure the grid’s reliability. PRAYER ERCOT prays that this Court reverse the court of appeals’ judgment and render judgment dismissing RWE’s direct appeal for want of jurisdiction or, alternatively, render judgment for the PUC. 39 Appx. Page 705 of 740 Respectfully submitted, /s/ Wallace B. Jefferson Wallace B. Jefferson State Bar No. 00000019 wjefferson@adjtlaw.com Rachel A. Ekery State Bar No. 00787424 rekery@adjtlaw.com Nicholas Bacarisse State Bar No. 24073872 nbacarisse@adjtlaw.com ALEXANDER DUBOSE & JEFFERSON LLP 100 Congress Avenue, Suite 1450 Austin, Texas 78701-3562 Telephone: (512) 482-9300 Facsimile: (512) 482-9303 Elliot Clark State Bar No. 24012428 eclark@winstead.com Elin Isenhower State Bar No. 24104206 eisenhower@winstead.com WINSTEAD PC 401 Congress Avenue, Suite 2100 Austin, Texas 78701 Telephone: (512) 370-2800 Facsimile: (512) 370-2850 ATTORNEYS FOR ELECTRIC RELIABILITY COUNCIL OF TEXAS 40 Appx. Page 706 of 740 CERTIFICATE OF SERVICE I hereby certify that on March 7, 2024, this brief was served via electronic service through eFile.TXCourts.gov on all parties through counsel of record, listed below: Kurt Kuhn Angela Colmenero Lisa Bowlin Hobbs Brent Webster KUHN HOBBS PLLC Lanora C. Pettit (lead counsel) 3307 Northland Dr., Suite 310 Bill Davis Austin, Texas 78731 Priscilla M. Hubenak (512) 476-6005 John R. Hulme Office of the Attorney General Stephanie C. Sparks P.O. Box 12548 (MC 059) VEDDER PRICE PC Austin, Texas 78711-2548 100 Crescent Court, Ste. 350 Telephone: (512) 936-1700 Dallas, Texas 75201 Telephone: (469) 895-4830 ATTORNEYS FOR PETITIONER PUBLIC UTILITY COMMISSION OF ATTORNEYS FOR RESPONDENT RWE TEXAS RENEWABLES AMERICAS, LLC Michael J. Jewell michael@jewellandassociates.com JEWELL & ASSOCIATES, PLLC 8404 Lakewood Ridge Cove Austin, Texas 78738-7674 Telephone: (512) 423-4065 ATTORNEYS FOR RESPONDENT TEXAS HEREFORD WIND, LLC /s/ Wallace B. Jefferson Wallace B. Jefferson 41 Appx. Page 707 of 740 APPENDIX H Appx. Page 708 of 740       !"#!! $      #4#2.$ 3-2K#' &40&*)-'&*4 *J ='-'# -47 J#7#2-)-4'&'2I=' )-+ *2'%* 2&) 3*'&*4 '* 7&=3&==? -47 #4#2 .$ 2#'-&)#2 ->>#-)#7 >#-)=?83&)&*C 2#0#4'- . #4#2-'*2*J #)#6'2&6 >*+#2 =I#7 :$ ,./0 #4#2.$ 2#'-&)#2J2*3 2-&=&4. 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Page 718 of 740        !!"#           )4$#93' Q%)$3*3#%5.45#%IC.+: 3+$+* $%6K*6*/$4)4$#93,3+$+* PB"EB& +:$+ "*K*%6$%+3S 7.+#.% +. " #39#33T".)G9*%+R.' )4$#93K$442#+:#%+:* 3GJJ4*9*%+$4 OG/#36#)+#.% .K +:* K*6*/$4 UVUW#3HB-R=E" QR ; - B=' -44 ;4$#%+#K K3S K*6*/$4)4$#93$/* ).G/+3' #.# *1 & ! ! .+'.+$ `[c D'&' VeU, "Q&7Q&&E"' =:* <.G/+ KG/+:*/ Ved, UUe &'<+' [acd, UcU1'E6'[6 Vbc TUfeeW ' - ).G/+ )$% 6*)4#%*+. *Z*/)#3*3GJJ4*9*%+$4 OG/#36#)+#.% $K+*/6#39#33$4 PB"EB& +:$+, $3 +:* <.G/+ 6*)4#%*3+. *Z*/)#3*3GJJ4*9*%+$4 .K $44 K*6*/$4 )4$#93' [e D'&'<' _ UVbdT)WTVW ' OG/#36#)+#.% .5*/ ;4$#%+#KK3S3+$+*)4$#93,;4$#%+#K K3S 3+$+*) 4$#93 $/* "Q&7Q&&E" 2#+:.G+ J/*OG6#)*' DJ.% ).%3#6*/$+#.%,+:* <.G/+ 6*)4#%*3 +. *Z*/)#3* 3GJJ4*9*%+$4 OG/#36#)+#.% .5*/ ;4$#%+#KK3S3+$+*4$2 )4$#93, #%)4G6#%I +:* 3+$+* $%+#+/G3+ )4$#93' =:* #33G*3 #%5.45*6#%+: #3   )$3* $/* .K 3#I%#K#)$%+#9J./+$%)* +. +:* 3+$+*.K =*Z$3'=:G3, +:* <.G/+ 6*)4#%*3 +. *Z$9#%*#33G*3 +:$+ ).G46 C*6*)#6*6#% R.+ B*J./+*6 #%A'&GJJ'[6, [aa` @1 VVad`[c, [aab!U =/$6* $%.+:*/K./G9' -))./6#%I40 , +:* < .G/+6#39#33*3$44;4$#%+#K K3S <$3*3 ; d`,Ua[, D+#4' 1' B*J' ; Uc,`eV 3+$+*4$2 )4$#93 2 #+:.G+J/*OG6#)*'H#5*%+:* K./*I.#%I +:* <.G/+ :*/*C0 Footnotes 1 The spot market is sometimes referred to as the balancing energy or “BES” market. 2 As the detailed workings of the regulation of the Texas energy market can be found in Texas Commercial Energy v. TXU Energy, Inc., 413 F.3d 503 (5th Cir.2005) and Texas Commercial Energy v. TXU Energy, No. CA NO. C-03-249, 2004 WL 1777597 (S.D.Tex. June 24, 2004), the Court need not recite the details of the market's operations or oversight here ad nauseam. 3 Plaintiffs remaining claims allege Texas state statutory and common law violations. 4 Defendants acknowledge that Plaintiffs' allegations that the Reliant Defendants (collectively “Reliant”) engaged in improper dealings with the Texas General Land Office (“GLO”) do not fall within the ambit of the filed rate doctrine. This allegation will be discussed independently. Accordingly, Plaintiffs' claims relating to the Reliant/GLO relationship are not implicated when the Court discusses the application of the filed rate doctrine to the remainder of Plaintiffs' federal claims. 5 The TCE plaintiff's § 1 Sherman Act claims alleged defendants “engag[ed] in economic withholding, physical withholding, and market manipulation.” Tex. Commercial Energy, 2004 WL 1777597, at *6. Here, Plaintiffs' claims include conspiracy to restrain competition and price fixing under § 1 of the Sherman Act. TCE's claims under § 2 of the Sherman Act alleged violations based on “exercising monopoly power, attempting to monopolize, and/or conspiring to monopolize.” Id. In the case at bar, Plaintiffs' claims under § 2 of the Sherman Act allege monopolization, attempted monopolization and conspiracy to monopolize. Hence, the federal antitrust claims in TCE and the case at bar are indistinguishable for the purposes of determining whether the filed rate doctrine bars claims for damages under the Sherman Act and Clayton Act. 6 Although the TCE case involved the spot or BES markets, PUCT has similar responsibility to monitor the bilateral segment of the market. PUCT has enacted reporting rules governing the bilateral market to “[i]mprove the commission's ability to investigate allegations of market power abuse and anticompetitive behavior that may arise with respect to the wholesale electricity market.” PUCT Subst. R. § 25.93(d)(2). It would be paradoxical to conclude that the spot market portion of the Texas market is subject to judicial oversight of rates while the bilateral segment is not and vice versa. Thus, the Court reasons that the only way it can reach the conclusion that the filed rate doctrine does not bar claims in the bilateral segment is to conclude that the filed rate doctrine is inapplicable to the spot market. 7 The Court notes that Plaintiffs spend much time in their response to the motion to dismiss arguing that the Fifth Circuit wrongly decided TCE. This Court, however, will not revisit Plaintiffs' arguments previously rejected by the Fifth Circuit. 8 Defendants do not dispute that the PUCT lacks the authority to grant Plaintiffs the monetary damages sought.   !"#"$%&"'#""($)*"+$#$",  Appx. Page 719 of 740        !!"#           9 Plaintiffs assert an independent state cause of action for this alleged intentional interference with business relations. They also assert this conduct violates the Sherman Act. End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.   !"#"$%&"'#""($)*"+$#$",  Appx. Page 720 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 93168642 Filing Code Description: RESPONSE Filing Description: ERCOT’S REPLY IN SUPPORT OF ITS AMENDED PLEA TO THE JURISDICTION AND ALTERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT Status as of 10/15/2024 1:57 PM CST Associated Case Party: ELECTRIC RELIABILITY COUNCIL OF TEXAS Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/15/2024 11:38:21 AM SENT Elin Isenhower eisenhower@winstead.com 10/15/2024 11:38:21 AM SENT Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/15/2024 11:38:21 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/15/2024 11:38:21 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/15/2024 11:38:21 AM SENT Ken Carroll kcarroll@ccsb.com 10/15/2024 11:38:21 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/15/2024 11:38:21 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status George Fibbe 24036559 george.fibbe@bakerbotts.com 10/15/2024 11:38:21 AM SENT Laura Natelson laura.natelson@bakerbotts.com 10/15/2024 11:38:21 AM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 10/15/2024 11:38:21 AM SENT Lizzette Velazquez lvelazquez@ccsb.com 10/15/2024 11:38:21 AM SENT Judy Garrison jgarrison@ccsb.com 10/15/2024 11:38:21 AM SENT Becky Dunn bdunn@ccsb.com 10/15/2024 11:38:21 AM SENT Appx. Page 721 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Elliot Clark Bar No. 24012428 eclark@winstead.com Envelope ID: 93168642 Filing Code Description: RESPONSE Filing Description: ERCOT’S REPLY IN SUPPORT OF ITS AMENDED PLEA TO THE JURISDICTION AND ALTERNATIVELY, MOTION TO DISMISS UNDER RULE 91(a) AND ALTERNATIVELY, PLEA IN ABATEMENT Status as of 10/15/2024 1:57 PM CST Case Contacts Becky Dunn bdunn@ccsb.com 10/15/2024 11:38:21 AM SENT Carolyn Taylor ctaylor@ccsb.com 10/15/2024 11:38:21 AM SENT Associated Case Party: PUBLIC UTILITY COMMISSION OF TEXAS Name BarNumber Email TimestampSubmitted Status Amanda Cagle amanda.cagle@oag.texas.gov 10/15/2024 11:38:21 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/15/2024 11:38:21 AM SENT John RHulme John.Hulme@oag.texas.gov 10/15/2024 11:38:21 AM SENT Laura Courtney laura.courtney@oag.texas.gov 10/15/2024 11:38:21 AM SENT David Laurent david.laurent@oag.texas.gov 10/15/2024 11:38:21 AM SENT Appx. Page 722 of 740 10/21/2024 02:16:04 PM Velva L. Price District Clerk Travis County D-1-GN-24-003384 CAUSE NO. D-1-GN-24-003384 ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT OF Plaintiff, § § v. § § PUBLIC UTILITY COMMISSION OF § TRAVIS COUNTY, TEXAS TEXAS, ELECTRIC RELIABILITY § COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY,KATHLEEN JACKSON, § AND COURTNEY HJALTMAN, § Defendants. § 345TH JUDICIAL DISTRICT ORDER GRANTING DEFENDANT ERCOT'S AMENDED PLEA TO THE JURISDICTION On this day, the Court considered Defendant Electric Reliability Council of Texas, Inc. 's ("ERCOT") Amended Plea to the Jurisdiction (the "Plea"). After considering the Plea, Aspire Power Ventures, LP's ("Aspire") Response thereto, the Reply, the arguments of counsel, and all other matters properly before it, the Court has determined that the Plea is meritorious and should be GRANTED. It is therefore ORDERED that the Plea is GRANTED, and that all claims asserted against ERCOT in the above-numbered cause are hereby DISMISSED for lack ofjurisdiction. Having determined that ERCOT's Plea should be granted and that jurisdiction is lacking, the Court does not reach ERCOT's Rule 91a Motion to Dismiss Aspire's Second Amended Petition. Signed this ci { day of {Ju , 2024. Ulh � HON. CATHERINE A. MAUZY Judge Presiding Appx. Page 723 of 740 Appx. Page 724 of 740 10/21/2024 02:18:55 PM Velva L. Price District Clerk Travis County D-1-GN-24-003384 Appx. Page 725 of 740 10/21/2024 02:17:35 PM Velva L. Price District Clerk Travis County D-1-GN-24-003384 Appx. Page 726 of 740 Appx. Page 727 of 740 10/28/2024 2:32 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Susan Poodiack ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, and COURTNEY § HJALTMAN, § § Defendants. § 345th JUDICIAL DISTRICT NOTICE OF APPEAL BY PLAINTIFF ASPIRE POWER VENTURES, LP Pursuant to Tex. R. App. P. 25.1, Plaintiff Aspire Power Ventures, LP, provides its Notice of Appeal, stating: 1. Plaintiff Aspire hereby gives notice that it desires to appeal the trial court’s Order Granting PUCT Defendants’ Amended Plea to the Jurisdiction and Order Granting ERCOT’s Amended Plea to the Jurisdiction, both dated October 21, 2024, in the above-styled case. 2. The party filing this appeal is Plaintiff Aspire Power Ventures, LP. 3. The cause appealed from is Aspire Power Ventures, LP v. Public Utility Commission of Texas, Electric Reliability Council of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman, Cause No. D-1- GN-24-003384, in the 345th Judicial District of Travis County, Texas. PLAINTIFF’S NOTICE OF APPEAL – PAGE 1 Appx. Page 728 of 740 4. This appeal involves a matter brought against a state board, commission, department, office, or other agency, and its officers. See Tex. R. App. P. 25.1(d)(9)(A) & (B). 5. This appeal is taken to the Fifteenth District Court of Appeals. Dated this 28th day of October, 2024. Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Phone: (214) 282-8579 Fax: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 MLatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 BRubin@ccsb.com Ken Carroll Texas Bar No. 03888500 KCarroll@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: (214) 855-3000 Fax: (214) 580-2641 Attorneys for Plaintiff-Appellant PLAINTIFF’S NOTICE OF APPEAL – PAGE 2 Appx. Page 729 of 740 CERTIFICATE OF SERVICE The undersigned hereby certifies that on October 28, 2024, a true and correct copy of the foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Brent Rubin PLAINTIFF’S NOTICE OF APPEAL – PAGE 3 Appx. Page 730 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 93645411 Filing Code Description: Notice of Appeal Filing Description: NOTICE OF APPEAL BY PLAINTIFF ASPIRE POWER VENTURES, LP Status as of 10/29/2024 9:05 AM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/28/2024 2:32:16 PM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/28/2024 2:32:16 PM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/28/2024 2:32:16 PM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/28/2024 2:32:16 PM SENT Ken Carroll kcarroll@ccsb.com 10/28/2024 2:32:16 PM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/28/2024 2:32:16 PM SENT George Fibbe 24036559 george.fibbe@bakerbotts.com 10/28/2024 2:32:16 PM SENT Laura Natelson laura.natelson@bakerbotts.com 10/28/2024 2:32:16 PM SENT Amanda Cagle amanda.cagle@oag.texas.gov 10/28/2024 2:32:16 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/28/2024 2:32:16 PM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 10/28/2024 2:32:16 PM SENT Lizzette Velazquez lvelazquez@ccsb.com 10/28/2024 2:32:16 PM SENT John RHulme John.Hulme@oag.texas.gov 10/28/2024 2:32:16 PM SENT Laura Courtney laura.courtney@oag.texas.gov 10/28/2024 2:32:16 PM SENT David Laurent david.laurent@oag.texas.gov 10/28/2024 2:32:16 PM SENT Elin Isenhower eisenhower@winstead.com 10/28/2024 2:32:16 PM SENT Judy Garrison jgarrison@ccsb.com 10/28/2024 2:32:16 PM SENT Becky Dunn bdunn@ccsb.com 10/28/2024 2:32:16 PM SENT Appx. Page 731 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 93645411 Filing Code Description: Notice of Appeal Filing Description: NOTICE OF APPEAL BY PLAINTIFF ASPIRE POWER VENTURES, LP Status as of 10/29/2024 9:05 AM CST Case Contacts Becky Dunn bdunn@ccsb.com 10/28/2024 2:32:16 PM SENT Carolyn Taylor ctaylor@ccsb.com 10/28/2024 2:32:16 PM SENT Appx. Page 732 of 740 10/30/2024 11:45 AM Velva L. Price District Clerk Travis County D-1-GN-24-003384 Susan Poodiack K en C ar r o l l P ar t n er 21 4 .8 5 5. 30 2 9 k c ar r ol l @c c s b.c o m October 30, 2024 Via E-File and Email Rachelle Primeaux, CSR No. 4093 rachelle.preimeaux@traviscountytx.gov Official Reporter, 419th District Court Travis County, Texas P.O. Box 1748 Austin, Texas 78767 Re: Cause No. D-1-GN-24-003384, Aspire Power Ventures, LP v. Public Utilities Commission of Texas, et al. (345th District Court, Travis County, Texas) Appeal No. 15-24-00118-CV, Aspire Power Ventures, LP v. Public Utilities Commission of Texas, et al. (Tex. App—15th District) Ms. Primeaux: On behalf of Plaintiff-Appellant Aspire Power Ventures, LP, we have filed a Notice of Appeal from The Hon. Catherine A. Mauzy’s Orders dated October 21, 2024 in the above-captioned case, Granting the Amended Pleas to the Jurisdiction filed by ERCOT and the PUCT Parties. Pursuant to Tex. R. App. P. 25.1(e), I have delivered a copy of that Notice of Appeal to you by email. I ask that you prepare and file the Reporter’s Record for that appeal— specifically, transcripts of the hearings held October 1 and 16, 2024, before Judge Mauzy in that case. You have already transcribed both hearings. Please let me know the additional charge for preparing and filing the Reporter’s Record, and we will promptly forward payment. See Tex. R. App. P. 34.6(b). Sincerely, Ken Carroll KC/bd Carrington, Coleman, Sloman & Blumenthal, L.L.P. www.ccsb.com 901 Main Street, Suite 5500 • Dallas, Texas 75202 • fax: 214.580-2641 Appx. Page 733 of 740 Certificate of Service I hereby certify that a true copy of this letter requesting the Reporter’s Record was served on counsel for all parties on this 30th day of October 2024, via efileTexas, through which this letter was filed with the Court. __________________________________ Ken Carroll i_11939000v.1 Appx. Page 734 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Ken Carroll on behalf of Ken Carroll Bar No. 03888500 kcarroll@ccsb.com Envelope ID: 93736387 Filing Code Description: No Fee Documents Filing Description: REQUEST FOR REPORTER'S RECORD Status as of 10/31/2024 9:09 AM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 10/30/2024 11:45:16 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 10/30/2024 11:45:16 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 10/30/2024 11:45:16 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 10/30/2024 11:45:16 AM SENT Ken Carroll kcarroll@ccsb.com 10/30/2024 11:45:16 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 10/30/2024 11:45:16 AM SENT George Fibbe 24036559 george.fibbe@bakerbotts.com 10/30/2024 11:45:16 AM SENT Laura Natelson laura.natelson@bakerbotts.com 10/30/2024 11:45:16 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 10/30/2024 11:45:16 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 10/30/2024 11:45:16 AM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 10/30/2024 11:45:16 AM SENT Lizzette Velazquez lvelazquez@ccsb.com 10/30/2024 11:45:16 AM SENT John RHulme John.Hulme@oag.texas.gov 10/30/2024 11:45:16 AM SENT Laura Courtney laura.courtney@oag.texas.gov 10/30/2024 11:45:16 AM SENT David Laurent david.laurent@oag.texas.gov 10/30/2024 11:45:16 AM SENT Elin Isenhower eisenhower@winstead.com 10/30/2024 11:45:16 AM SENT Judy Garrison jgarrison@ccsb.com 10/30/2024 11:45:16 AM SENT Becky Dunn bdunn@ccsb.com 10/30/2024 11:45:16 AM SENT Carolyn Taylor ctaylor@ccsb.com 10/30/2024 11:45:16 AM SENT Appx. Page 735 of 740 11/8/2024 9:55 AM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-24-003384 D-1-GN-24-003384 Irene Silva ASPIRE POWER VENTURES, LP, § IN THE DISTRICT COURT § Plaintiff, § § vs. § § PUBLIC UTILITY COMMISSION OF § TEXAS, ELECTRIC RELIABILITY § TRAVIS COUNTY, TEXAS COUNCIL OF TEXAS, THOMAS § GLEESON, LORI COBOS, JIMMY § GLOTFELTY, KATHLEEN § JACKSON, and COURTNEY § HJALTMAN, § § Defendants. § 345th JUDICIAL DISTRICT PLAINTIFF-APPELLANT ASPIRE POWER VENTURES, LP’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5a Pursuant to Tex. R. App. P. 34.5a(a), Plaintiff-Appellant Aspire Power Ventures, LP, hereby provides notice of its election to file an Appendix in lieu of a Clerk’s Record for the appeal it has noticed from this case. See Aspire Power Ventures, LP v. Public Utility Comm’n of Texas, No. 15-24-00118-CV (Tex. App.— 15th Dist.). Aspire is filing notice of this election with the Court of Appeals, as well, in accordance with Tex. R. App. P. 34.5a(a). Dated this 8th day of November, 2024. PLAINTIFF-APPELLANT’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5A – PAGE 1 Appx. Page 736 of 740 Respectfully Submitted, /s/ Chrysta L. Castañeda Chrysta L. Castañeda Texas Bar No. 15325625 chrysta@castaneda-firm.com Nicole Michael Texas Bar No. 24067767 nicole@castaneda-firm.com THE CASTAÑEDA FIRM 325 N. St. Paul, Suite 2030 Dallas, Texas 75201 Phone: (214) 282-8579 Fax: (214) 602-9187 & Monica Latin Texas Bar No. 00787881 mlatin@ccsb.com Brent M. Rubin Texas Bar No. 24086834 brubin@ccsb.com Ken Carroll Texas Bar No. 03888500 kcarroll@ccsb.com CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P. 901 Main Street, Suite 5500 Dallas, Texas 75202 Phone: (214) 855-3000 Fax: (214) 580-2641 Attorneys for Plaintiff-Appellant PLAINTIFF-APPELLANT’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5A – PAGE 2 Appx. Page 737 of 740 CERTIFICATE OF SERVICE The undersigned hereby certifies that on November 8, 2024, a true and correct copy of the foregoing document was electronically filed with the Court and served on all counsel of record through the eFiling Service Provider pursuant to the Texas Rules of Civil Procedure. /s/ Ken Carroll Ken Carroll PLAINTIFF-APPELLANT’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5A – PAGE 3 Appx. Page 738 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Ken Carroll on behalf of Ken Carroll Bar No. 03888500 kcarroll@ccsb.com Envelope ID: 94081530 Filing Code Description: Notice Filing Description: PLAINTIFF-APPELLANT ASPIRE POWER VENTURES, LP’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5a Status as of 11/11/2024 1:09 PM CST Associated Case Party: ASPIRE POWER VENTURES, LP Name BarNumber Email TimestampSubmitted Status Monica Latin 787881 mlatin@ccsb.com 11/8/2024 9:55:31 AM SENT Nicole Michael 24067767 nicole@castaneda-firm.com 11/8/2024 9:55:31 AM SENT Brent Rubin 24086834 Brubin@ccsb.com 11/8/2024 9:55:31 AM SENT Chrysta Castaneda chrysta@castaneda-firm.com 11/8/2024 9:55:31 AM SENT Ken Carroll kcarroll@ccsb.com 11/8/2024 9:55:31 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Elliot Clark eclark@winstead.com 11/8/2024 9:55:31 AM SENT George Fibbe 24036559 george.fibbe@bakerbotts.com 11/8/2024 9:55:31 AM SENT Laura Natelson laura.natelson@bakerbotts.com 11/8/2024 9:55:31 AM SENT Amanda Cagle amanda.cagle@oag.texas.gov 11/8/2024 9:55:31 AM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 11/8/2024 9:55:31 AM SENT Matthew Erickson Matthew.erickson@bakerbotts.com 11/8/2024 9:55:31 AM SENT Lizzette Velazquez lvelazquez@ccsb.com 11/8/2024 9:55:31 AM SENT John RHulme John.Hulme@oag.texas.gov 11/8/2024 9:55:31 AM SENT Laura Courtney laura.courtney@oag.texas.gov 11/8/2024 9:55:31 AM SENT David Laurent david.laurent@oag.texas.gov 11/8/2024 9:55:31 AM SENT Elin Isenhower eisenhower@winstead.com 11/8/2024 9:55:31 AM SENT Judy Garrison jgarrison@ccsb.com 11/8/2024 9:55:31 AM SENT Appx. Page 739 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Ken Carroll on behalf of Ken Carroll Bar No. 03888500 kcarroll@ccsb.com Envelope ID: 94081530 Filing Code Description: Notice Filing Description: PLAINTIFF-APPELLANT ASPIRE POWER VENTURES, LP’S NOTICE OF ELECTION UNDER TEX. R. APP. P. 34.5a Status as of 11/11/2024 1:09 PM CST Case Contacts Judy Garrison jgarrison@ccsb.com 11/8/2024 9:55:31 AM SENT Becky Dunn bdunn@ccsb.com 11/8/2024 9:55:31 AM SENT Carolyn Taylor ctaylor@ccsb.com 11/8/2024 9:55:31 AM SENT Appx. Page 740 of 740 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Brent Rubin Bar No. 24086834 brubin@ccsb.com Envelope ID: 95464675 Filing Code Description: Appendix Filing Description: 2024.12.18 Appellant's Appendix in Lieu of Clerk's Record Status as of 12/18/2024 3:11 PM CST Associated Case Party: Aspire Power Ventures, LP Name BarNumber Email TimestampSubmitted Status Chrysta L.Castaneda chrysta@castaneda-firm.com 12/18/2024 2:57:37 PM SENT Nicole Michael nicole@castaneda-firm.com 12/18/2024 2:57:37 PM SENT Monica Latin mlatin@ccsb.com 12/18/2024 2:57:37 PM SENT Brent M.Rubin brubin@ccsb.com 12/18/2024 2:57:37 PM SENT Ken Carroll kcarroll@ccsb.com 12/18/2024 2:57:37 PM SENT Associated Case Party: Public Utility Commission of Texas Name BarNumber Email TimestampSubmitted Status John Hulme John.Hulme@oag.texas.gov 12/18/2024 2:57:37 PM SENT Amanda AtkinsonCagle Amanda.Cagle@oag.texas.gov 12/18/2024 2:57:37 PM SENT Jordan Pratt Jordan.Pratt@oag.texas.gov 12/18/2024 2:57:37 PM SENT Associated Case Party: Electric Reliability Council of Texas Name BarNumber Email TimestampSubmitted Status Elin Isenhower eisenhower@winstead.com 12/18/2024 2:57:37 PM SENT Elliot Clark eclark@winstead.com 12/18/2024 2:57:37 PM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status David Laurent david.laurent@oag.texas.gov 12/18/2024 2:57:37 PM SENT