An Energy Retailer, Appeals The District Court’s Dismissal Of Its Lawsuit Against TXU Energy, Inc

Texas Commercial Energy (“TCE”), an energy retailer, appeals the district court’s dismissal of its lawsuit against TXU Energy, Inc. (“TXU”), a generator of electric power, and twenty-three other defendants. TCE argues that the district court erred by applying the filed rate doctrine to preclude it from recovering damages it sustained when TXU allegedly manipulated its market position to create substantial price increases in the short-term energy market. I Texas deregulated its energy market in 1999 with the passage of Senate Bill 7. Act of May 27, 1999, 76th Leg., R.S., ch. 405, 1999 Tex. Gen. Laws 2543. Bill 7 amended the Public Utility Regulatory Act (“PURA”) and split the state’s integrated utilities into three groups: electric generation companies, transmission and distribution companies, and retail electric providers. TEX.  UTIL. CODE ANN. § 39.051(b). The statute also gives the Public Utility Commission of Texas (“PUCT”) authority to regulate the state’s electric grids and to monitor and remedy market power abuses.1 Specifically, PUCT has broad power to maintain “safe, reliable, and reasonably priced electricity” and to “ensure that ancillary services necessary to facilitate the transmission of electricenergy are available at reasonable prices with terms and conditions that are not unreasonably preferential, prejudicial, discriminatory, predatory, or anticompetitive.” TEX. UTIL. CODE ANN. §§ 39.101(a)(1), 35.004(e). PUCT is also empowered to remedy market abuses 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, or by suspending, revoking, or amending a certificate or registration as authorized by Section 39.356.” TEX. UTIL. CODE ANN. § 39.157(a).  TCE is a retail electric provider that sells electricity to customers in Texas by entering into bilateral agreements with generators and by purchasing electricity through the ancillary Balancing Energy Service (“BES”) market. The BES market is a bid-based wholesale market for short-term electricity power. PUCT contracted with a private organization, the Electric Reliability Council of Texas, Inc. (“ERCOT”), to administer the BES market. Under the terms of the contract, ERCOT was required to ensure system reliability, nondiscriminatory access to transmission and distribution systems, access to market information, and clearance of all market transactions. PUCT also created
the Market Oversight Division (“MOD”) to ensure general compliance with the requirements of PURA. In 2002, MOD required all participants in the Texas electricity market to file an affidavit with PUCT pledging that they would not engage in market manipulation. In February 2003, during severe winter weather, the price for electricity on the BES market
soared. As a result, TCE was forced to pay considerably higher sums for the energy it had to supply its customers. The resulting losses led TCE to meet with MOD and express their concern that the price spikes were the result of anti-competitive bids and market manipulation. TCE alleged that, at the time of the price fluctuations, TXU controlled anywhere from seventy-five to ninety-nine percentof the BES market and that it used its market strength to purposefully withhold energy from the market in order to increase the price. TCE argues that while ERCOT made some attempts to force
TXU to rectify the situation, it failed to follow its own protocols. Due to the mounting losses, TCE was forced to file for Chapter 11 bankruptcy.