In re Luminant Generation Company LLC et al is a bitter pill to consumers in the litigation hangover after Winter Storm Uri. Takeaway: Texas does not recognize a legal duty owed by wholesale power generators to retail customers to provide continuous electricity to the electric grid and ultimately to the customers.

The claims

Hundreds of retail electricity customers sued hundreds of entities involved in virtually every aspect of the Texas electricity market. This decision is about wholesale power generators.

The generators moved for early dismissal of negligence, gross negligence and negligent undertaking causes of action (there were others) on the ground that the causes of action had no basis in law or fact.

No basis in law: The allegations, taken as true together with any inferences reasonably drawn from them, do not entitle the claimant to the relief they seek.

No basis in fact: No reasonable person could believe the facts as pleaded.

No legal duty

The plaintiffs claimed that the generators violated duties owed to retail customers by failing to:

  • winterize and maintain equipment,
  • supply electricity to the grid by not securing adequate supplies of reserve energy,
  • properly supervise and train workers,
  • ensure that the facilities and equipment would be exempted from ERCOT ordered blackouts by filing appropriate forms, and
  • avoid blackouts by not enrolling in ERCOT’s emergency loan-shedding program.

As a result of statutes enacted in 2002 implementing a fully competitive retail market for electricity, wholesale power generators cannot own or operate transmission and distribution facilities that carry electricity to retail customers and cannot enter into agreements with retail customers. All they do is generate electricity and sell it at wholesale. Under Texas law, they have no legal duty to retail customers.

Should a new duty be created?

No, said the court. Imposing any new duty on the generators to retail customers is for the legislature.

In deciding whether to impose a new duty the court must weigh the risk, foreseeability, and likelihood of injury against the social utility of the actor’s conduct, the magnitude of the burden of guarding against injury, and the consequences of placing that burden on the defendant.

Texas courts must be specific in determining the existence, scope, and elements of new legal duties. Vague pronouncements won’t do. Even if the generators had perfect maintenance and complete control over production, it is ERCOT that manages the delivery of that electricity by scheduling and managing how electricity flows through the network. Once electricity leaves a generator’s facility, the generator has no control over how transmission utilities and ERCOT conduct their business.

Foreseeability is a dominant consideration in deciding if there is a duty. Foreseeability does not necessarily equate to predictability. It means that the actor should have reasonably anticipated the dangers that his negligent conduct created for others. That means considering the specific danger at hand.

The court weighed these factors against the social utility of the generators’ conduct and the magnitude of the burden of guarding against injury that creation of a new duty on the defendants would create. A new duty would upend the framework the legislature has implemented.

Negligent undertaking.

Plaintiffs pleaded their negligent undertaking allegations also as negligent omissions and thus admitted that the complained of undertakings were not affirmative causes of action. Artful pleading could not recast those alleged omissions to be otherwise. No Texas law exists that transforms contractual duties owed to retail electricity providers into duties owed to third-party retail customers.

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