An electric utility is calling for the Supreme Court to weigh in on a “protectionist” Minnesota state law that the power company argues could hinder regional shifts toward clean energy.
The 2012 law grants utilities with an in-state presence the “right of first refusal” for certain projects, which LSP Transmission Holdings LLC (LS Power) says violates the Constitution’s “dormant” commerce clause because it discriminates against interstate commerce. Such claims have also driven legal battles over pipeline building and coal exports.
Minnesota’s law is “blatantly unconstitutional,” LS Power wrote in a Supreme Court petition docketed earlier this month.
“That law not only expressly discriminates in favor of companies with an in-state presence, but does so with respect to a distinctly interstate market,” the company wrote.
If allowed to stand, Minnesota’s law could affect clean energy development in Minnesota and other wind-rich states like Iowa, North Dakota and South Dakota, said Sharon Segner, LS Power’s vice president of project development.
Facilitating a clean energy transition will require billions of dollars of investment in transmission lines, and states have questioned whether “right of first refusal,” or ROFR, laws are appropriate in light of that expected development. Some states have passed such laws, and others have opted against them.
“At its heart, it is a discussion of the clean energy transition and whether or not the incumbent transmission owners have a monopoly,” Segner said.
“When you are talking about projects and expenditures in the billions of dollars, when you start talking about putting competitive pressures on that, you can see real impacts to the consumers, and the costs of these projects is significant,” she said.
LS Power brought its case to the justices after the company’s arguments failed to gain traction in the lower courts (Energywire, June 9).
LS Power sharply criticized the 8th Circuit for upholding the Minnesota law and deeming it nondiscriminatory because some of the incumbent companies that benefit from the law had headquarters out of state.
The appeals court also found that state authority over siting and permitting transmission facilities allowed the state “carte blanche” to give preference to in-state incumbents.
“The Court should intervene now to stop this race to the bottom and to bring the Eighth Circuit into line with the decisions of this Court and others,” the petition says.
Minnesota passed its law in response to the Federal Energy Regulatory Commission’s Order No. 1000, which in 2011 opened up competition in regional planning areas including those overseen by the Midcontinent Independent System Operator Inc. (MISO) and Southwest Power Pool (SPP).
The law defines incumbent companies as those that already own transmission facilities in the state. The standards apply to transmission projects that expand the interstate transmission grid and have federal approval.
North Dakota, South Dakota and Nebraska followed suit with their own ROFR laws in an effort to maintain the incumbent protections that the FERC order eliminated.
LS Power initially sued because the Minnesota law prevented outside competition for the approximately $150 million Huntley-Wilmarth transmission line project.
“LS Power was qualified in MISO and SPP to participate in a bidding process in the state of Minnesota as well as in MISO, so had there not been this state law that had been passed, we would have been eligible to have bid in it and potentially have won it,” said Segner.
At this point, the utility has moved on from challenging the Huntley-Wilmarth project and is focused instead on invalidating the ROFR law.
“We don’t ask for the project that was initially awarded to be held up or anything like that,” she said. “We’re asking for relief associated with future projects.”
LS Power said a decision from the Supreme Court is needed, since the Midwestern Governors Association has already requested that MISO, SPP and PJM Interconnection LLC work to plan and order the “grid of the future.” Such plans could also influence a national energy transition under the next administration, Segner suggested.
“We see it as very likely in the next year we will see those projects in the upper Great Plains coming to fruition,” she said.
LS Power’s Supreme Court petition comes as the company is in the midst of a separate ROFR law challenge that is still awaiting a decision in the 5th U.S. Circuit Court of Appeals.
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