The U.S. Supreme Court on Monday (Dec. 11) gave a green light to new, competitive high-voltage electric transmission in Texas, which could also increase the spread of renewables in the state that already has more wind and solar power than any other state.
The court denied a request from Texas to consider an appeal from an August 2022 Fifth Circuit Court of Appeals decision overturning the Long Star State’s “right of first refusal” law (the inevitable acronym is ROFR, pronounced “row-fer”) giving incumbent transmission owners the ability to keep competitors out of the small part of the Texas market that is interstate commerce (not the Electric Reliability Council of Texas, which is deliberately not connected to the rest of the U.S.)
Most of the Texas panhandle and smaller portions of eastern and western Texas are not part of ERCOT and are connected to interstate wholesale markets through the Southwest Power Pool, the Midcontinent Independent System Operator, and the Western Electric Coordinating Council. In 2018, MISO proposed a 500 kV line to connect with Entergy Texas, which participates in the MISO wholesale market. In 2019, the state legislature passed a law (S.B. 1938) saying that new lines “that directly [connect] with an existing utility facility . . . may be granted only to the owner of that existing facility.” The law is implemented by the Public Utility Commission of Texas (PUCT).
NextEra Energy, which would build and operate the new line, appealed to a federal district court, which upheld the PUCT. NextEra then took the case to the appeals court. The three-judge appeals court ruling was scathing. “Imagine if Texas—a state that prides itself on promoting free enterprise—passed a law saying that only those with existing oil wells in the state could drill new wells. It would be hard to believe. It would also raise significant questions under the dormant Commerce Clause….Texas recently enacted such a ban on new entrants in a market with a more direct connection to interstate commerce than the drilling of oil wells: the building of transmission lines that are part of multistate electricity grids.”
Texas asked the Supreme Court to review the appeals court ruling. The U.S. Justice Department argued that the court should not review the decision. Solicitor General Elizabeth Prelogar noted that the Federal Energy Regulatory Commission is considering “right of first refusal” provisions in its ongoing review of transmission planning. “If FERC were to adopt the proposed rule (or some alternative) while this case was pending before the court, that development might require supplemental briefing or otherwise complicate this court’s consideration,” she suggested.
“If utilities had pushed that model across the country, that really would have solidified utility dominance over our transmission systems” — Harvard Law’s Ari Peskoe
Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, told E&E News that the order could warn other states against adopting laws similar to the Texas measure. “If utilities had pushed that model across the country, that really would have solidified utility dominance over our transmission systems,” Peskoe said. “The Supreme Court’s decision … should at least prevent that sort of scenario from playing out.”
In Iowa, last week (Dec. 7) a state court ruled that a three-year-old state ROFR law that prevented competition in building transmission lines was unconstitutional. The state Supreme Court had already blocked enforcement of the law.
E&E News noted, “States began enacting ROFR laws about a decade ago, after the Federal Energy Regulatory Commission passed Order 1000, requiring competitive development for public transmission providers. The agency is now considering a proposed rulemaking that could walk back at least part of that order. “The question at stake has been ‘whether investor-owned utilities are going to be the only entities planning and building our transmission,’ said Peskoe.”
–Kennedy Maize