Ex-FERC chair: Minn. transmission law will hurt customers

Source: By Niina H. Farah, E&E News reporter • Posted: Monday, December 14, 2020

A former chairman of the Federal Energy Regulatory Commission is urging the Supreme Court to hear a case challenging Minnesota’s “right of first refusal” law for the utility sector.

Jon Wellinghoff, who led the commission under President Obama, said that the case raised issues of “vital importance” to the country’s electrical transmission grid and that the state law undermined FERC’s efforts during his chairmanship to ensure reasonable electricity rates for customers.

“Should the Minnesota right of first refusal rule be permitted to stand, the pool of competitors for building new transmission facilities will be artificially limited,” he wrote in a “friend of the court” brief. “As a result, consumers — not only those within Minnesota, but also those in surrounding states — will be harmed.”

LSP Transmission Holdings LLC (LS Power) petitioned the high court last month to hear its case challenging the 2012 law, which gives utilities with an in-state presence priority in certain projects.

LS Power argued that the Minnesota law violates the “dormant commerce” clause by hindering interstate commerce (Energywire, Nov. 16).

The state law was an effort to undermine FERC’s 2011 Order No. 1000, said Wellinghoff. The order withdrew existing right-of-first-refusal provisions that applied to transmission lines that were part of interstate grids and funded by customers in more than one state, he said.

“The Minnesota rule at issue here, and others like it, flagrantly discriminate against interstate commerce,” Wellinghoff said.

“That discrimination not only violates the Constitution, but it harms consumers both in Minnesota and in nearby states, where those consumers are without political recourse against such protectionism.”

For example, the law did not consider cost efficiency when awarding projects, and by hindering outside competition, it would lead to increased rates for Minnesotans and residents of the 14 other states in the Midcontinent Independent System Operator (MISO) grid.

The 8th U.S. Circuit Court of Appeals, which cited general police power of states in upholding the state law, did not understand the division of regulatory authority between states and the federal government, he said.

“A facile reliance on the police power does not override the bedrock principles of the Commerce Clause, the Federal Power Act, and Order No. 1000,” he wrote.

Resale Power Group of Iowa, the Coalition of MISO Transmission Consumers, Industrial Energy Consumers of America and the American Forest & Paper Association also joined in critiques of the Minnesota law.

In their joint friend-of-the-court brief representing the interests of interstate consumers, the groups warned that the Minnesota law would encourage “economic Balkanization” if left unchecked.

They noted that Iowa had adopted a similar right-of-first-refusal statute in June to protect its incumbents in response to the Minnesota law.

“At a time when the nation’s electric transmission infrastructure requires substantial capital investment, allowing states to ‘play favorites’ does not serve the national or public interest,” they wrote.