ERCOT Faces Dozens of Lawsuits for 2021 Winter Storm

Here’s another potential emergency planning “gotcha” for utilities to be aware of – lawsuits.  Case in point, during the first week of January 2022, 131 insurance companies filed a lawsuit against Texas grid operator ERCOT due to how the company performed during Winter Storm Uri in Feb. 2021.  And many other litigation efforts have been initiated as well.  My first thought when reading this was…yikes!

Why ERCOT is Getting Hammered with Lawsuits

Obviously, Winter Storm Uri was no joke.  It caused $200 billion in damage and resulted in 700 fatalities.  And yes, ERCOT did appear to be ill-prepared to handle the event.  But ERCOT clearly was not the only culprit.  In fact, the insurance copany lawsuit was also levied against over 30 electricity generation companies as well.

The suit from the insurance companies does not mention an actual dollar figure.  It cites that ERCOT and the other parties “failed to plan and prepare” and displayed “gross negligence” that caused “significant property damage to policyholders.”  The trial is set to begin in Feb. 2022.

Aside from the insurance company suit, ERCOT is also dealing with dozens of personal injury lawsuits as well.  There are literally billions of dollars on the line with all the lawsuits.

That said, ERCOT is a non-profit corporation that essentially serves as clearinghouse between electricity generators and buyers.  Therefore, ERCOT would likely not have money to cover damages awarded as a result of the lawsuits.

So, what does this mean?  Simply put, it means that Texas residents will have to foot the bill via higher rates, higher taxes, or both.  Thus, the customers are the real losers here from a financial perspective – not only did they have to deal with a power outage that was not their fault, they will likely have to pay the financial consequences as well.

Financials aside, this situation is a massive reputation hit for ERCOT and the other companies involved, which will probably lead to higher levels of state regulation and scrutiny going forward.  So, in essence, everyone loses thanks to these lawsuits, which highlights the tremendous importance of effective emergency preparedness.