HOW TO SERVE LEGAL PAPERS ON THE ELECTRIC RELIABILITY COUNCIL OF TEXAS (ERCOT)

ERCOT

Undisputed Legal | Process Service

Electric Reliability Council of Texas (ERCOT) is an American company that runs the Texas Interconnection, a massive electric grid that serves more than twenty-five million consumers in Texas and makes up an overwhelming majority of the state’s electric load. ERCOT is the first independent energy-regulating organization (ISO) in the United States and one of nine ISOs in North America. 

ERCOT (the system operator for the area) is responsible for transmitting electricity from where it is generated to where it is needed on the grid, which comprises nearly fifty thousand miles of transmission lines and over six hundred generating units.

[1.0] WHAT DOES ERCOT DO 

ERCOT administers the Texas Interconnection, which serves almost all of Texas.  Unlike other systems, the Texas Interconnection is not linked to any other grids, which exempts ERCOT from the Federal Energy Regulatory Commission (FERC) rules including those that deal with rate control and transmission. Instead, ERCOT is governed by the Public Utility Commission of Texas, not by elected officials. 

Electricity is a vital commodity, important in the residential, commercial, and industrial sectors. Power is generally controlled in two distinct categories, [A.] wholesale electricity sales and transmission in interstate commerce is regulated by the Federal Energy Regulatory Commission (FERC) and [B.] local distribution and retail sales of power. Local distribution is mostly controlled by the state itself, although certain towns and electric cooperatives control such operations on their own. Texas’ electrical system is not electrically linked to any other transmission grid. In Texas, the Electric Reliability Council of Texas (ERCOT) manages retail and wholesale energy sales, transmission, and distribution, and is controlled by the Public Utility Commission of Texas.

[2.0] HOW IS ERCOT ORGANISED

ERCOT is a membership-based 501(c)(4) non-profit corporation. A 501(c) organization is one kind of non-profit organization exempt from some federal income taxes under United States federal law.

ERCOT is administered by a board of directors consisting of representatives from each of the market sectors within the ERCOT organization. The board of directors of ERCOT is controlled by the Public Utility Commission of Texas (PUC) and the Texas Legislature. The Public Utility Commission of Texas has exclusive authority over all ERCOT-conducted activities. Three commissioners are appointed by the governor of Texas, including the chair. 

[2.1] ERCOT AS A NON-PROFIT

A non-profit corporation is a corporation whose whole earnings are reinvested into the organization rather than distributed to members, the directors, or officers. To establish a non-profit corporation and its Texas Process Service guidelines, an initial Certificate of Formation is filed with the Secretary of State. An organization established as a not-for-profit may be set up for any legal purpose. It is imperative for the purpose of the organization to be specified in the organization’s certificate of the establishment.

While a non-profit corporation or a similarly unincorporated association in Texas is free from federal and state taxes, this rule does not always apply to other non-profit corporations (or unincorporated associations.) An organization becomes exempt from paying taxes as long as it meets certain criteria and submits a joint application with the IRS and the Texas Comptroller of Public Accounts. 

It must be noted herein that there has been recent mistrust about whether ERCOT should be classified as a non-profit or whether it functions as a government agency. This question primarily stems from the fact that ERCOT enjoys some privileges hitherto reserved majorly for governmental organizations. This is most clearly seen in the well-established legal concept of sovereign immunity, wherein ERCOT– appearing as a state agency– is protected from legal action. ERCOT, a private non-profit organization that operates under the authority of the Texas Legislature and the Public Utility Commission, is the only grid manager in the nation to have these safeguards.

The interpretation has been provided by ERCOT itself. ERCOT has on multiple occasions provided Texas Process Service details as to its establishment as a membership 501(c)(4) nonprofit organization.  The issue still remains that the regulatory authority which governs ERCOT is also made up of several levels of government, being federal, state, and local. Additionally, the financing for any ERCOT initiative is derived from a surcharge placed on energy customers’ monthly bills. ERCOT’s finances, budget, and operations are entirely within the jurisdiction of the PUC, with supervision by the Texas Legislature.

[3.0.] HOW TO SERVE PROCESS ON A NON-PROFIT CORPORATION

Texas Process Service may be done upon officers or higher personnel apart from upon the registered agent for any non-profit corporation.  A non-profit corporation must have at least three directors, one president, and one secretary. A person may be either the president or the secretary since two offices cannot be held by the same individual. It should be remembered at this junction that any corporation may pay fair remuneration for services provided to the company, none-profit corporations are still allowed to pay reasonable compensation for rendered services. The Secretary of State does not make judgments about what constitutes fair pay or reasonable compensation.

Statutory authority allows the Texas Attorney General to [A.] examine charities that operate as non-profit organizations, and [B.] conduct an inspection of any and all corporations, including non-profits, and their Texas Process Service records. Conversely, the Secretary of State does not share this power. The IRS has the power to remove a non-profit organization’s tax-exempt status for breaking the law.

Members of non-profit corporations in Texas are given the right to view and copy the corporation’s books and documents if they provide a written request. If lawful and legitimate purposes may be furnished, then the documents can be seen and copied by the member. In addition, non-profit corporations are mandated to retain accounting records. The provision also directs some non-profit corporations to make all of their financial documents, books, and annual reports publicly accessible for examination and copying.

Charitable non-profits must make their records accessible to the public under the Texas Public Information Act if it is in the best interest of the people they are serving. 

[3.1] NON-PROFIT REQUIREMENTS WITH THE IRS

Unless there is an exemption, every tax-exempt organization must submit an annual information return or notice with the IRS. Form 990, Form 990-EZ, and Form 990-PF have required returns every year. Additionally, a yearly notification, known as Form 990-N is sent. The IRS’ main information-gathering tool is Form 990, which assists in the identification of tax-exempt organizations, the understanding of tax obligations, and the promotion of Texas Process Service compliance. 

With Form 990, an organization shares program information with the public. In addition, many states base their supervision of non-profit organizations on Form 990, which they use to fulfill regulatory and oversight duties, as well as to meet state income tax filing obligations for organizations that have claimed exemption from state income tax.

In Texas, a non-profit organization that regularly fundraises for a cause in the state must register with the state as a for-profit company and get an Application for Registration. If the company has solely non-interstate commerce connections or independent contractors in Texas, it presumably is not “transacting business” in Texas.

The Secretary of State will compel any out-of-state non-profit company that participates in a state employee philanthropic campaign to register with the Secretary of State regardless of the method of solicitation. To acquire a copy of the certificate of formation or other filing papers held by the Secretary of State, an individual conducting Texas Process Service should contact the records team and provide the entity’s Texas non-profit corporation creation date.

In contrast to the Secretary of State, a non-profit organization’s governing documents, as well as any tax-exempt filings, are not maintained by the organization itself. IRS-approved organizations are legally obligated to make certain records publicly accessible. If a bylaw is made part of the organization’s exemption application, it may be accessible.

[4.0] HOW TO SERVE ERCOT

Electric Reliability Council of Texas, Inc is a domestic not-for-profit corporation active in  Texas.  The entity is a membership-based 501(c)(4) non-profit corporation, established on 10th October 1990. The Secretary of State may be appointed or deemed to have been appointed as the statutory agent for Texas Process Service for a person under certain circumstances. These circumstances are specifically established by various provisions of Texas law. 

A Texas-based filing entity may be served through the Secretary of State if [A.] the entity fails to appoint or maintain a registered agent, or [B.]  the entity’s registered agent cannot with reasonable diligence be found at the registered office. Texas Process Service on a registered agent may be performed in the manner allowed by law for service of a summons. This Texas Process Service works as if the agent were a defendant and therefore serves the agent. 

ERCOT retains CT Corporation as a registered agent. Although Texas Process Service can be performed on a domestic or authorized foreign corporation, limited liability company, limited partnership, or limited liability partnership, this  Texas Process Service typically requires that two copies of the Texas Process Service be personally served on the Secretary of State or any person authorized by them at the Department of State. If the entity accepts Texas Process Service on behalf of the entity, the Department of State will send the process to the entity’s offices.

If Texas Process Service is levied on the Secretary of State as an agent of a domestic corporation should be done by [A.] delivering to the secretary duplicate copies of the Process Service, and [B.] accompanying the copies with any fee required maintenance by the secretary of a record of the Texas Process Service and forwarding by the secretary of the Process Service, notice, or demand. It must be noted that the Texas Process Service notice on the Secretary of State is returnable in not less than thirty days.

After Texas Process Service has been levied upon the Secretary, the secretary of state should immediately send one of the copies of the Texas Process Service to the named entity. It is necessary for the Process Service to notice to be [A.] addressed to the most recent address of the entity and [B.] sent by certified mail, with return receipt requested.

ERCOT supervises and guarantees the interconnection’s transmission dependability by controlling electricity’s inbound and outbound supply through the Texas Interconnection. Further, the entity also coordinates and systematically distributes power inside the interconnection. ERCOT manages the competitive wholesale bulk-power market’s financial settlements and provides for open access to the transmission system.

For more information on serving legal papers, contact Undisputed Legal our Texas Process Service department at (800) 774-6922. Representatives are available Monday-Friday 8 am – 8 pm EST.  If you found this article helpful, please consider donating.  Thank you for following our blog, A space dedicated to bringing you news on breaking legal developments, interesting articles for law professionals, and educational material for all. We hope that you enjoy your time on our blog and revisit us!  We also invite you to check out our Frequently Asked Questions About Process Servers.

Sources

1. ERCOT collaborates with the Texas Reliability Entity (TRE), one of eight regional organizations that form NERC’s Reliability Organization (RO).

2. Blunt, Katherine, and Russell Gold. ‘The Texas Freeze: Why the Power Grid Failed.’ The Wall Street Journal, Dow Jones & Company, 19 Feb. 2021, www.wsj.com/articles/texas-freeze-power-grid-failure-electricity-market-incentives-11613777856. 

3. ‘ERCOT.’ Federal Energy Regulatory Commission, 13 July 2020, www.ferc.gov/industries-data/electric/electric-power-markets/ercot. 

4. As defined by Internal Revenue Code Section 501(c) (26 U.S.C. 501(c)).

5. Sullivan, Sean. ‘What Is a 501(c)(4), Anyway?’ The Washington Post, WP Company, 28 Apr. 2019, www.washingtonpost.com/news/the-fix/wp/2013/05/13/what-is-a-501c4-anyway/. 

6. ‘ERCOT Report Confirms Gas- and Coal-Fired Plant Outages Played Big Role in June Grid Woes.’ Dallas News, 9 July 2021, www.dallasnews.com/news/politics/2021/07/08/ercots-june-outage-report-confirms-texas-natural-gas-and-coal-plant-failures/. 

7. Casey, Rick, et al. ‘ERCOT’S Convenient Identity Crisis.’ San Antonio Report, 29 June 2021, sanantonioreport.org/ercot-convenient-identity-crisis/. 

8. Takahashi, Paul. ‘Texas Supreme Court to Decide If ERCOT Is Immune from Storm Lawsuits.’ Houston Chronicle, Houston Chronicle, 22 Feb. 2021, www.houstonchronicle.com/business/energy/article/Texas-Supreme-Court-to-decide-whether-ERCOT-is-15968323.php. 

9. Elec. Reliability Council of Texas, Inc. v. Panda Power Generation Infrastructure Fund, LLC, 552 S.W.3d 297, 319 (Tex. App. –2018, pet. granted)

10. Pursuant to section 1.002(53) of the Texas Business Organizations Code, a ‘member’ of a nonprofit corporation is a person who has membership rights in the nonprofit corporation under its governing documents.’  Members of a nonprofit corporation are similar to shareholders of a for-profit corporation in that both members and shareholders may have significant rights with respect to internal corporate governance.  Unlike shareholders, however, members of a nonprofit corporation are typically not owners and are not issued stock.

11. As specified under the Texas Business Organizations Code

12. An officer or director must be a natural person, although it is also acceptable to refer to them using other titles

13. However, section 22.353 does not apply to (1) corporations that solicit funds only from their members; (2) corporations that do not intend to solicit and do not actually receive contributions in excess of $10,000 during a fiscal year from sources other than their members; (3) proprietary schools; (4) religious institutions; (5) trade associations or professional associations whose principal income is from dues and member sales and services; (6) insurers; or (7) alumni associations of public or private institutions of higher education.

14. The statute that deals with the provision of public information under Section 552.003(1)(A) of the Public Information Act specifically includes, ‘apart, section or portion of an organization, corporation, commission, committee, institution, or agency that spends or that is supported in whole or in part by public funds

15. ‘Form 990 Resources and Tools.’ Internal Revenue Service, www.irs.gov/charities-non-profits/form-990-resources-and-tools. 

16. Available at corpcert@sos.texas.gov or 512-463-5555

17. 7620 METRO CENTER DR AUSTIN, TX 78744-1613

18. Section 5.251 of the BOC sets forth the instances where the Secretary of State is an agent of an entity for purposes of service of process, notice, or demand. 

19. 1999 BRYAN STREET SUITE 900 DALLAS, TX 75201

20. Sec. 5.201.  DESIGNATION AND MAINTENANCE OF REGISTERED AGENT AND REGISTERED OFFICE.  (a)  Each filing entity and each foreign filing entity shall designate and continuously maintain in this state:

(1)  a registered agent;  and

(2)  a registered office.

(b)  The registered agent:

(1)  is an agent of the entity on whom may be served any process, notice, or demand required or permitted by law to be served on the entity;

(2)  may be:

(A)  an individual who:

(i)  is a resident of this state; and

(ii)  has consented in a written or electronic form to be developed by the office of the secretary of state to serve as the registered agent of the entity; or

(B)  an organization, other than the filing entity or foreign filing entity to be represented, that:

(i)  is registered or authorized to do business in this state; and

(ii)  has consented in a written or electronic form to be developed by the office of the secretary of state to serve as the registered agent of the entity; and

(3)  must maintain a business office at the same address as the entity’s registered office.

(c)  The registered office:

(1)  must be located at a street address where the process may be personally served on the entity’s registered agent;

(2)  is not required to be a place of business of the filing entity or foreign filing entity;  and

(3)  may not be solely a mailbox service or a telephone answering service.

(d)  A registered agent that is an organization must have an employee available at the registered office during normal business hours to receive service of process, notice, or demand.  Any employee of the organization may receive service at the registered office

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