Denton City Hall

A Denton County judge has transferred city officials' lawsuit against the Electric Reliability Council of Texas to Travis County.

The lawsuit Denton officials have filed against the Electric Reliability Council of Texas has been moved to Travis County.

“The parties agreed to transfer [it],” said Ryan Adams, the city’s director of customer service and public affairs. “We just got the order this morning.”

A hearing on ERCOT’s motion to transfer had been scheduled for Tuesday in the 16th Judicial District Court. The order hands jurisdiction over the case to Travis County. On Monday, it had not been uploaded to the court system’s website.

The city’s core argument is related to the way ERCOT, the entity that oversees energy distribution in Texas, paid for electricity during the outages.

According to documents, the average price of energy per megawatt-hour in February was $23.73. During the rotating outages that began around the state on Feb. 15, that increased to $2,400 per megawatt-hour.

Denton staff members on Feb. 19 issued $100 million in new debt “to meet immediate cash flow needs” for Denton Municipal Electric, the city’s utility provider. During the 2019-20 fiscal year, DME spent almost $64 million on power purchases. That compares with just over $97 million the previous year. The utility is carrying about $851 million in debt, in general obligation bonds, revenue bonds and certificates of obligation.

It has since been well documented that the bulk of the grid’s missing energy production was because of natural gas and oil energy providers that hadn’t properly winterized infrastructure. Other energy providers, such as wind-powered generators, also failed because of a lack of winterization.

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

Essentially, Denton attorneys argue, ERCOT has invoked a mechanism by which it “spreads the cost” of municipalities unable to pay exorbitant energy bills onto other municipalities, including Denton. For example, a city unable to pay part or all of its energy bill to ERCOT because of the sky-high costs imposed during the weather event would have its debt pushed onto other cities.

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

An ERCOT spokesperson has declined to answer questions about the lawsuit.

A little more than a week after rotating power outages began, Denton City Council members gave the OK to allow DME to borrow up to $300 million to cover costs incurred during the storm. During Feb. 16-19, DME spent $207 million to buy electricity from ERCOT. DME’s annual budget is $231.4 million.

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

When a winter storm moved across Texas in mid-February, ERCOT nearly collapsed because of frozen power plants and record demand for electricity, according to published reports. To prevent that from happening, the agency mandated rotating power outages among its member cities, including Denton, where residents went without electricity anywhere from 30 minutes to over an hour intermittently Feb. 15-17 under ERCOT’s Energy Emergency Alert Level 3.

ERCOT has faced criticism from residents, customers, elected officials and others for its handling of the crisis — specifically, that the nonprofit organization was not prepared for the weather event. That organization’s president, Bill Magness, has resigned, along with several board members.

According to published reports, the Texas Supreme Court ruled in a 5-4 decision that it cannot determine whether ERCOT is immune from lawsuits. Meanwhile, state senators have passed a bill that would recoup billions in possibly erroneous charges during the weather crisis in February.

PAUL BRYANT can be reached at 940-566-6881 and via Twitter at @paulbryant_DRC.

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