By Tom Kleckner
The U.S. Department of Justice on Friday filed a “statement of interest” with the federal district court hearing an appeal of a Texas law giving incumbent utilities the right of first refusal over transmission projects (1:19-cv-00626).
Assistant Attorney General Makan Delrahim and attorneys from the department’s Antitrust Division sided with NextEra Energy that Senate Bill 1938 violates the U.S. Constitution’s dormant Commerce Clause, which prohibits states from “unduly” restricting interstate commerce or adopting “protectionist measures.”
DOJ said SB 1938 places competition in Texas’ deregulated retail electric market “at risk.” It used as examples a competitive MISO project in southeast Texas recently awarded to NextEra Energy Transmission (NEET) Midwest and a pending application by NEET Southwest for a certificate of convenience and necessity in SPP’s Northeast Texas footprint.
The department said the legislation puts competitive transmission’s benefits “in jeopardy,” with the “likely result” of higher electricity costs, and that SB 1938 “discriminates in favor of companies with a local physical presence.”
The bill, passed into law in May, grants CCNs to build, own or operate new transmission facilities that interconnect with existing facilities “only to the owner of that existing facility.” (See Texas ROFR Bill Passes, Awaits Governor’s Signature.)
DOJ also said SB 1938 “diverges from national trends towards more competition that arose after FERC found in the 1990s that it is not in ‘the economic self-interest of public utility transmission providers to expand the grid to permit access to competing sources of supply.’”
NextEra Energy Capital Holdings (NEECH) and four other NextEra transmission owner/developer entities in June filed a lawsuit calling for repeal of SB 1938 in the U.S. District Court for the Western District of Austin. The suit names Public Utility Commissioners DeAnn Walker, Arthur D’Andrea and Shelly Botkin as defendants. (See NextEra Takes Texas to Court over ROFR Law.)
The lawsuit calls for both declaratory relief to invalidate the law and injunctive relief to prevent the PUC from enforcing the law.
NextEra said it has standing because the law jeopardizes its Hartburg-Sabine Junction competitive project in southeast Texas and its acquisition of 30 miles of 138-kV facilities from Rayburn Country Electric Cooperative.
Texas Attorney General Ken Paxton was also named as a defendant, but he has since been dismissed from the proceeding.
The Texas Attorney General’s Office last month argued for dismissal of NextEra’s complaint, saying SB 1938 “is simply the codification of the long-time Texas (and successful) practice that the owners of existing transmission lines build out their existing lines from their endpoints.”
SB 1938 is not protectionist, and NextEra does not state a claim under the dormant Commerce Clause, Paxton’s office said. “NextEra has no vested contract rights, only an expectation, with respect to the transmission lines in question. And its rights were always subject to the imposition of new standards in the heavily regulated electric-utility industry.”
An appeals court in August granted Entergy Texas, Southwestern Public Service and Texas Industrial Energy Consumers’ motion to dismiss their appeal of a 2017 PUC order negating an incumbent utility’s ROFR (03-18-00666-cv). The parties filed their request in July, arguing SB 1938 had rendered the case moot. (See SPS, Entergy File to Pull ROFR Appeal.)
A similar ROFR case is unfolding in Minnesota, with oral arguments scheduled for Oct. 16 in the 9th U.S. Circuit Court of Appeals. DOJ similarly joined the challenge against that state’s ROFR law. (See Justice Dept. Joins Challenge to Minn. ROFR Law and Courts Uphold Minn. ROFR, MISO Cost Allocation.)
