A federal judge has ruled that a Minnesota power-line law complies with the U.S. Constitution, rejecting claims by a New York-based electricity provider that the state improperly favors home-state transmission operators.
LSP Transmission Holdings sued two Minnesota public agencies last fall, saying the 2012 state law is anti-competitive and violates the Constitution's commerce clause. The law gives "incumbent" transmission providers a "right of first refusal" to build new power lines — i.e., first dibs over companies without transmission lines here, such as LSP.
However, the law doesn't discriminate against out-of-state entities, U.S. District Judge Donovan Frank said in an opinion filed Thursday. The Minneapolis-based judge also wrote "any burden on interstate commerce is outweighed by the benefits of Minnesota's right-of-first-refusal law."
An attorney for LSP Transmission said the company is reviewing Frank's decision but declined to say if it plans an appeal.
The Constitution's commerce clause prohibits states from enacting laws that discriminate or unduly burden interstate business.
LSP had sought to bid on a 40-mile power line between Mankato and Winnebago, Minn. Instead, Xcel Energy and ITC Midwest LLC notified regulators in early 2017 that they intended to build the line, which would connect an Xcel substation with a planned ITC substation.
LSP Transmission, which owns 500 miles of transmission lines outside of Minnesota, sued members of the Minnesota Public Utilities Commission and the head of the Minnesota Department of Commerce, the implementers and interpreters of state power-line laws.
The U.S. Department of Justice in April filed a "statement of interest" in the case, agreeing with LSP that Minnesota law favors in-state entities and is anti-competitive, thus violating the Constitution.
Frank wrote in his opinion that the DOJ's filing came in late in the proceeding — an "unjustified delay" — and therefore declined to consider it.
However, Frank wrote that had he considered the DOJ's position, he wouldn't have changed his decision.
In return for granting existing power-line companies first dibs on new construction, "Minnesota places extensive regulatory burdens on those owners," Frank wrote. "Any intervention by the court could upset the balance between those burdens and regulation."
He added that Congress and the Minnesota Legislature are "better situated than the courts … to determine the economic wisdom" of right-of-first-refusal laws. The Legislature passed the law "to avoid unnecessary duplication of facilities, which increase the cost of service to the consumer," Frank noted.
Frank also wrote that the Minnesota law doesn't give preference to in-state companies. Rather, it only gives right of refusal to companies that are directly connected to a transmission line — like Xcel and ITC. It does not consider whether those companies are based in Minnesota.
Several power-line operators in Minnesota are based out of state, but they have transmission lines here, Frank noted. ITC Midwest is headquartered in Cedar Rapids, Iowa.