United States: Recent Development In Retail Power And Contracting With Texas Governmental Entities

A Texas Court of Appeals recently rejected a retail electric provider's attempt to sue a Texas public school district for breach of contract—holding that the then-effective supply contract at issue was void and that the school district was therefore immune from suit under state sovereign immunity grounds after finding that the contract's purported extension violated Texas statutory competitive bidding requirements.

On October 31, 2016, the Texas 12th Court of Appeals upheld a trial court order dismissing TXU Energy Retail Company, LLC's ("TXU") breach of contract suit against the Fort Bend Independent School District (the "District").1 The underlying suit stemmed from a retail electric supply arrangement between TXU and the District that was competitively bid in 2010. The 2010 bid process involved bids for one- and two-year supply contracts covering the period from June 2011 through May 2013. TXU won the bid, and the parties entered into a one-year contract that contained (i) a "blend and extend" provision and (ii) a rollover provision that increased the District's energy price to a default level if the contract terminated and the District did not switch its locations to a new provider. The contract also provided TXU a one-year unilateral extension option, if written notice were provided to the District at least 90 days prior to contract expiration.

Partway through the first term, the parties triggered the blend and extend provision and negotiated a second contract that included (i) a reduced rate, (ii) a term that ended one year beyond that contemplated by the 2010 competitive bid process, and (iii) a provision expressing that the second contract superseded the first contract. The District subsequently determined that such extension violated Texas statutory competitive bidding requirements, and determined that the second contract was void as a result of such violation (and therefore a nullity). Upon that determination, the District notified TXU that it considered the second contract void. The District initiated a new competitive bid process during which TXU continued to supply it with electricity. TXU was not selected as a part of that process.

In its suit, TXU asserted that the second contract terminated the first contract, after which the District did not switch its service to another provider. According to TXU, those events triggered the rollover provision in the first contract that increased the District's energy price to a default level. Accordingly, TXU recalculated the District's invoices for the relevant period to account for the difference between that default rate and the rate it previously invoiced, and it claimed that the District owed it more than $3 million.

The Court of Appeals agreed with the District, and held that the second contract was void as violative of Texas competitive bidding procedures. Since a Texas governmental entity does not waive sovereign immunity in the absence of a valid written contract, the court held that claims stemming from the second contract were barred. Likewise, the court found that the first contract could not have been superseded by the second, void contract. Moreover, the court held that the blend and extend provision does not obviate the need for a competitive bidding process, where the resulting contractual arrangement would exceed the scope of the original bid constraints. It further reasoned that the rollover provision could also not trump the competitive bidding requirements; if taken to an extreme, such reasoning would permit the contract to extend indefinitely—a result the court characterized as surely violative of the intent underpinning statutory competitive bid requirements. Accordingly, the first contract expired in accordance with its terms after its express one-year term expired. While factually oriented to the blend and extend and rollover provisions, the court's reasoning seems equally applicable to instances where parties may attempt to end-run the competitive bidding requirements through the use of evergreen contracts.

Parties engaged with Texas governmental entities should review the case and the Court of Appeals' opinion. Contracting with governmental entities can, at times, be complicated and fraught with additional considerations that require thoughtful planning. In particular, parties need to pay attention to extension provisions that could extend such agreement beyond the term considered in the bidding process. The authors recently presented on the topic of "Contracting with Government Entities" at the 2016 University of Texas CLE Gas & Power Institute in Houston. A copy of the paper accompanying that presentation is available here.


1. TXU Energy Retail Co., LLC v. Fort Bend Indep. School Dist., 2016 WL 6426844, No. 12-16-00041-CV (Oct. 31, 2016, Tex. App.—Tyler). Note that for brevity purposes, customary citation is omitted from this alert. As this alert summarizes the facts as presented by the court in its opinion, all citation would otherwise reference the opinion cited above.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.