Comment by John “Jack” Blake Strasburger, Jr.
In February 2021, Winter Storm Uri caused the death of over 200 people in Texas—many due to hypothermia—and stressed the Texas grid to near collapse. Winter Storm Uri alone is estimated to have cost Texas between “$80 billion [and] $130 billion” in “storm-related financial losses.” Winter Storm Uri began to exert pressure on Texas's power grid and other infrastructure on February 11. Oil and gas wells froze at the wellhead. Roads became dangerous. By Sunday, February 14, demand for electricity was record breaking at “69,871 MW at 8:00 p.m.” The next day, the Electric Reliability Council of Texas (ERCOT) ordered “load shedding,” a process where electricity is shut off for select customers to stabilize a grid that is nearing failure. At that point in time, millions in Texas were without power. It took four to five days to stabilize the grid and return to a semblance of normal operations.
Winter Storm Uri was unprecedented, but it was not unforeseeable. There were warning signs for Texas. Ten years before Winter Storm Uri wrought havoc on Texas and its grid, the Federal Energy Regulatory Commission advised Texas stakeholders to winterize their energy assets in response to a 2011 winter storm. While some power companies implemented cold preparation measures to a moderate extent, Uri “was even more extreme than regulators anticipated.” These voluntary cold weather improvements were not implemented at the scale needed to prevent the interruption caused by Winter Storm Uri. In 2011, the Texas Legislature remained quiet on winterization regulation.
In addition to its human, environmental, and economic impacts, the events of Uri stressed the finances and operations of individuals and companies. Entrust Energy, Inc. (Entrust) was a retail electricity provider. After its formation in 2010, Entrust grew to service all types of customers in various states, including in Texas. Trouble arose for Entrust during Winter Storm Uri when one of its critical contracts was terminated. Concerned about preserving and “maximiz[ing] value to creditors,” Entrust sought to sell its customers to another retail energy provider. By early March, Entrust sold all but “approximately 13,000 customers.” Entrust was in the process of selling “a significant portion” of the remaining balance of customers when ERCOT initiated a unilateral transition of those customers to another provider. By the end of March 2021, Entrust filed for chapter 11 bankruptcy.
Winter Storm Uri impacted the people in Texas at every level. The extreme weather event stressed individuals, companies, the legislature, and the entire regulatory scheme. Events such as Uri can have tragic and severe consequences for society. Reflecting on these extreme weather events is necessary when examining the legal framework of any energy infrastructure. This Comment examines a specific instance of tension between the interest of Entrust, a private energy retailer, Texas's grid policy, and the balance of state and federal adjudication in Phillips v. Electric Reliability Council of Texas, Inc. (In re Entrust).
Entrust's litigation is ongoing, as the United States Court of Appeals for the Fifth Circuit has dismissed or stayed the claims alleged in its complaint against ERCOT pending the outcome of other litigation in state court that Entrust is not a party to. The matter has returned to the United States Bankruptcy Court for the Southern District of Texas, where that court has dismissed Entrust's takings claim, and converted Entrust's gross negligence claim into a motion for summary judgement. In In re Entrust, the Fifth Circuit relied on the doctrine of abstention in holding that Entrust must await resolution of related state litigation before it could proceed with its allegations in federal court. In the related state litigation, the Texas Supreme Court held the Public Utility Commission (PUC) order to ERCOT was valid, effectively upholding both the PUC's and ERCOT's role in altering wholesale electricity prices.
This Comment opines that the Fifth Circuit delicately but appropriately used abstention in staying Entrust's takings claim, which was based upon ERCOT's unilateral mass transition of Entrust's customer base to a provider of last resort, pursuant to the Public Utility Regulatory Act (PURA). Further, Entrust does not present a compensable takings claim because (1) Entrust was in contract with ERCOT, (2) PURA authorized ERCOT to implement the provider of last resort program, (3) Entrust was becoming insolvent when the transition of customers occurred, and (4) precedent does not require a taking.It would be dangerous to find a taking in Entrust's favor because it would undermine the provider of last resort program, be contrary to takings precedent, and potentially leave a gap in an infrequently utilized, but nevertheless important, statutory fallback provision. That gap could present a danger to consumers who are reliant on stable, affordable electricity.
Part II provides a background on abstention, Texas's grid policy, and Fifth Amendment takings claims in the energy industry context. Part III closely examines the Fifth Circuit's use of abstention to refrain from addressing whether the mass transition of an energy retailer's customers is a Fifth Amendment taking. Part IV discusses the appropriateness of the Fifth Circuit's use of abstention, how the Southern District of Texas adjudicated the takings claim, and the impact of finding a taking in the present case. It also proposes an alternative rule for when a case is “tangentially related” for the purposes of abstention. Part V briefly concludes.
About the Author
John “Jack” Blake Strasburger, Jr., J.D. Candidate 2026, Tulane University Law School; MANA 2021, B.S.M. 2019, Tulane University.
Citation
100 Tul. L. Rev. 1083