US judge blocks Texas transmission line building restrictions
By Nate Raymond
Oct 29 (Reuters) -A Texas law that restricts the building and operation of new transmission lines to companies already running such facilities in the state unconstitutionally discriminates against out-of-state energy providers, a federal judge has ruled.
U.S. District Judge Robert Pitman in Austin on Monday sided with units of Florida-based NextEra Energy NEE.N and New York-based LS Power in finding that a 2019 law enacted by the Republican-led state violated the U.S. Constitution's Commerce Clause by interfering with interstate commerce.
That law had restricted the ability of power companies that did not own transmission facilities in Texas from obtaining approval from the Public Utility Commission of Texas to build lines that would be part of multistate electricity grids.
Before the law's enactment the commission had declared that utilities without any presence in the state could construct transmission lines in territory covered by two regional electric grid operators that cover areas inside and outside of Texas.
The 2019 law, SB 1938, overruled that decision and barred new market entrants from competing to build transmission lines in Texas in territory covered by the two grid operators, Midcontinent Independent System Operator and the Southwest Power Pool.
Pitman said that while five other states similarly give incumbent power companies preferential treatment and a right of first refusal to build proposed transmission projects, no other state had adopted a regulatory regime as restrictive as Texas's complete bar on out-of-state new market entrants.
He cited a 2022 decision by the New Orleans-based 5th U.S. Circuit Court of Appeals earlier in the litigation that had reversed his earlier dismissal of the case and found that the "very terms of SB 1938 discriminate against interstate commerce."
The appeals court had left to Pitman to decide whether the state could nonetheless justify the law by showing it had no other means to advance a legitimate purpose.
Pitman said the state had failed to do so, saying some of its stated goals of codifying existing processes and cleaning up statutory language were "factually untrue" or "not a compelling state interest."
The judge issued a permanent injunction blocking the Public Utility Commission of Texas from enforcing the law in regions covered by the two regional grid operators.
Representatives for the companies and Texas Attorney General Ken Paxton's office did not respond to requests for comment.
NextEra, which owns thousands of miles of transmission lines in multiple states but no such assets in Texas, challenged the law in 2019 after it was barred from building a segment of an interstate transmission line near the Texas-Louisiana border.
LS Power's LSP Transmission Holdings II intervened to also challenge the law, while two power companies already operating in Texas, subsidiaries of Xcel Energy XEL.O and EntergyETR.N, had intervened to defend the Texas law.
The case is NextEra Energy Capital Holdings v. Paxton, U.S. District Court for the Western District of Texas, No. 19-cv-626.
For NextEra: Stuart Singer of Boies Schiller Flexner
For LSP: Paul Clement and Erin Murphy of Clement & Murphy
For Texas: John Hulme of the Texas Office of the Attorney General
Read more:
Justices ask government for input on Texas electric grid dispute
Reporting by Nate Raymond in Boston
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