In a win for non-utility transmission developers, a U.S. district court on Monday said that a Texas law giving incumbent utilities the sole right to build transmission lines connecting to their systems was “invalid” because it violates the U.S. Constitution.
The U.S. District Court for the Western District of Texas ruled in favor of NextEra Energy and LS Power subsidiaries as well as the East Texas Electric Cooperative. It denied motions to dismiss the suit by Xcel Energy’s Southwestern Public Service Co. and Entergy Texas.
Texas utility codes related to the transmission law “are unconstitutional because they violate the dormant Commerce Clause and are therefore invalid and unenforceable, to the extent they grant in-state transmission owners the exclusive right to build or acquire transmission lines in the non-[Electric Reliability Council of Texas] regions of Texas,” the district court said. The dormant Commerce Clause bars states from restricting interstate commerce.
In August 2022, the U.S. Court of Appeals for the Fifth Circuit found that the Texas transmission law likely violates the Commerce Clause. The appeals court ordered the district court to reconsider its previous ruling that upheld the Texas transmission law.
The U.S. Supreme Court in December declined to consider an appeal of the 5th Circuit ruling brought by Texas Attorney General Ken Paxton. U.S. Solicitor General Elizabeth Prelogar urged the court not to take up the appeal, arguing that the Texas law was unconstitutional.
In September, LS Power filed a preliminary injunction on the Texas transmission law, given that the Southwest Power Pool board was due to vote on the grid operator’s $7.7 billion 2024 Integrated Transmission Planning portfolio at an Oct. 29 meeting, Sharon Segner, LS Power senior vice president of transmission policy, said in an email.
LS Power is looking forward to seeing the SPP’s 2024 ITP projects in Texas, as well as future Midcontinent Independent System Operator projects in Texas, being competitive as a result of the court’s decision, Segner said. The SPP transmission portfolio includes the $450 million Potter County-Beckham County economic project, according to Segner.
About a dozen states have passed anti-competition laws that benefit in-state utilities for building transmission projects, according to Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.
The Texas law was particularly restrictive because it prevented both regional transmission organization-planned and merchant projects, Peskoe said in an email. Texas will likely appeal the district court ruling to the Fifth Circuit again, with the support of the utilities, which get to charge the litigation costs to their ratepayers, he said.
“I found it noteworthy that the court did not find credible the utilities' arguments that the anti-competition law bolsters reliability,” Peskoe said. “It's always the utility industry's opening and closing argument when it seeks to stifle competition.”
