{"id":15674,"date":"2025-03-07T13:11:21","date_gmt":"2025-03-07T14:11:21","guid":{"rendered":"https:\/\/wifamily.news\/?p=15674"},"modified":"2025-03-07T15:01:59","modified_gmt":"2025-03-07T15:01:59","slug":"memo-oppose-right-of-first-refusal-legislation-rofr","status":"publish","type":"post","link":"https:\/\/wifamily.news\/?p=15674","title":{"rendered":"MEMO: OPPOSE RIGHT OF FIRST REFUSAL LEGISLATION (ROFR)"},"content":{"rendered":"

This post originally appeared at https:\/\/will-law.org\/memo-oppose-right-of-first-refusal-legislation-rofr\/<\/a><\/p>\n

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Only twelve states have so-called \u201cright of first refusal\u201d (\u201cROFR\u201d) statutes.<\/span>1<\/span> These statutes give existing in-state utility companies an exclusive right to build or own certain new transmission lines. Only if no such company exercises this right may the government use a competitive bidding process, thereby permitting other companies a chance to win a contract for a project.\u00a0<\/span>\u00a0<\/span><\/p>\n

2025 Senate Bill 28 and Assembly Bill 25 attempt to create an ROFR statute in Wisconsin for the first time. The Wisconsin Institute for Law & Liberty (\u201cWILL\u201d) opposes this legislation. It is unconstitutional because it impermissibly discriminates against nonresident companies. Additionally, it is a bad policy that will drive up costs for ratepayers. While supporters of this legislation claim it is necessary to ensure \u201creliability,\u201d existing laws already accomplish that goal.\u00a0<\/span>\u00a0<\/span><\/p>\n

The proposed ROFR statute is unconstitutional.<\/span><\/b>\u00a0<\/span><\/p>\n

The proposed ROFR statute is unconstitutional. The Commerce Clause of the U.S. Constitution vests unto Congress the power \u201cto regulate commerce \u2026 among the several states\u202f\u2026.\u201d<\/span>2<\/span> Under U.S. Supreme Court precedent, this clause prohibits states from discriminating against \u201cout-of-state goods or nonresident economic actors.\u201d<\/span>3<\/span> A state law that does either passes muster only if the state can prove the law is \u201cnarrowly tailored\u201d to \u201cadvanc[e] a legitimate local purpose.\u201d<\/span>4<\/span> This doctrine is colloquially known as the \u201cDormant Commerce Clause.\u201d In the words of the Court, \u201c[a]ssuredly, under\u202f\u2026\u202f[the] [D]ormant Commerce Clause\u202f\u2026, no State may use its laws to discriminate purposefully against out-of-state economic interests.\u201d<\/span>5<\/span> Accordingly, an allegation that a law \u201cseeks to advantage in-state firms or disadvantage out-of-state rivals\u201d is grave.<\/span>6<\/span> For example, in 2019, the Court examined a Tennessee law that required liquor store operators and owners to first have an in-state presence. It held that law was unconstitutional because it restricted out-of-state competition.<\/span>7<\/span>\u00a0<\/span><\/p>\n

SB 28 and AB 25 violate the Dormant Commerce Clause by advantaging in-state interests and disadvantaging out-of-state rivals. The legislation defines an \u201cincumbent transmission facility owner\u201d as \u201ca transmission company or transmission utility\u202f\u2026.\u201d The terms \u201ctransmission company\u201d and \u201ctransmission utility\u201d are already defined in statute. A transmission company is defined as, among other things, a company organized under the laws of Wisconsin.<\/span>8<\/span> Similarly, a transmission utility is defined as a cooperative or public utility that owns a transmission facility in the state or provides transmission service in the state.<\/span>9<\/span> Accordingly, to get a ROFR under this legislation, a company needs an in-state presence, just like the Tennessee law that the U.S. Supreme Court held was unconstitutional.<\/span>10<\/span>\u00a0<\/span><\/p>\n

Litigants have brought at least three successful challenges against ROFR statutes. In 2022, the Fifth Circuit admonished Texas\u2019s ROFR statute and remanded for further proceedings:\u202f\u201cImagine if Texas\u2014a state that prides itself on promoting free enterprise\u2014passed a law saying that only those with existing oil wells in the state could drill new wells. It would be hard to believe. It would also raise significant questions under the [D]ormant Commerce Clause.\u201d<\/span>11<\/span> In October 2024, a federal district court held that \u201c[b]ecause\u202f\u2026\u202f[the statute] facially discriminates based on interstate commerce and does not survive strict scrutiny, the statute is unconstitutional under the [Dormant] Commerce Clause.\u201d<\/span>12<\/span>\u00a0<\/span><\/p>\n

In 2023, the Iowa Supreme Court reversed a dismissal and returned an ROFR challenge to the trial court. In its opinion, the court stated:<\/span>\u00a0<\/span><\/p>\n

We are not surprised that the ROFR lacked enough votes to pass without logrolling. The provision is quintessentially crony capitalism. This rent-seeking, protectionist legislation is anticompetitive. Common sense tells us that competitive bidding will lower the cost of upgrading Iowa\u2019s electric grid and that eliminating competition will enable the incumbent to command higher prices for both construction and maintenance. Ultimately, the ROFR will impose higher costs on Iowans.<\/span>13<\/span>\u00a0<\/span><\/p>\n

The court temporarily enjoined enforcement of the ROFR statute.<\/span>\u00a0<\/span><\/p>\n

In December 2024, a federal district court concluded that an Indiana ROFR statute was unconstitutional:\u202f\u201c[The statute] cannot withstand strict scrutiny. Although it serves legitimate governmental interests\u2014promoting transmission reliability, maintaining cost-effective infrastructure, and continuity of service\u2014Indiana already requires \u2018[e]very public utility\u202f\u2026\u202fto furnish reasonably adequate services and facilities.\u2019\u202fThus, Defendants\u2019 proffered reasons for upholding the statute are insufficient\u202f\u2026.\u201d<\/span>14<\/span>\u00a0<\/span><\/p>\n

These three recent decisions demonstrate that this legislation will fail in court. Notably, Wisconsin statutory law, like Indiana\u2019s, already requires a transmission company \u201cto provide an adequate and reliable transmission system that meets the needs of all users that are dependent on the transmission system\u202f\u2026.\u201d<\/span>15<\/span> As one commentator wrote, \u201c[t]he reliability justification does not hold water. Non-incumbents seeking to build transmission lines can provide just as reliable service as incumbent utility companies.\u202f\u2026\u202fThe state utility board would make sure the non-incumbent company was up for the job and had the capabilities to build and operate the transmission line.\u201d<\/span>16<\/span>\u00a0<\/span><\/p>\n

The proposed ROFR statute will limit competition.<\/span><\/b>\u00a0<\/span><\/p>\n

Putting aside the legislation\u2019s unconstitutionality, it is also bad policy. This legislation attempts to eliminate the little competition in Wisconsin\u2019s transmission market. For context, transmission companies do not operate in a \u201cnatural\u201d monopoly. Across the nation, transmission companies regularly connect to each other\u2019s facilities as part of the larger grid, and they do so while competitively bidding against one another. This competitive process ensures lines are built efficiently at the lowest cost for ratepayers. One study by the Brattle Group found that competition can save ratepayers 20\u201330% on the project\u2019s cost.<\/span>17<\/span> When coupled with the fact that contracts under the competitive bidding process often include containment measures, thereby limiting the potential for overruns, these savings have the potential to grow even more. The MISO region where Wisconsin operates has tens of billions of dollars in projects each year, so these savings are substantial. The bottom line is that the market can support more than one firm bidding and building these projects.<\/span>\u00a0<\/span><\/p>\n

The state should embrace this competition and have those firms bid against one another to lower costs, which, in turn, helps Wisconsin families. Alternatively, if this bill were to pass, ratepayers could expect an increase on their power bills.<\/span>\u00a0<\/span><\/p>\n

Conclusion<\/span><\/b>\u00a0<\/span><\/p>\n

Using the heavy hand of government to eliminate competition does not benefit Wisconsin families, who will have to foot the bill for the added expense. In addition, while legal challenges elsewhere continue to play out, Wisconsin should set this proposal aside.<\/span>\u00a0<\/span><\/p>\n

Please oppose SB 28.\u00a0<\/strong><\/p>\n<\/div><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\"Skylar<\/div>\n
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Skylar Croy<\/h4>\n

Associate Counsel<\/p>\n

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Skylar@will-law.org<\/p>\n<\/div><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\"Kyle<\/div>\n
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Kyle Koenen<\/h4>\n

Director of Policy<\/p>\n

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Kyle@will-law.org<\/p>\n<\/div><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

The post MEMO: OPPOSE RIGHT OF FIRST REFUSAL LEGISLATION (ROFR)<\/a> appeared first on Wisconsin Institute for Law & Liberty<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post originally appeared at https:\/\/will-law.org\/memo-oppose-right-of-first-refusal-legislation-rofr\/ Only twelve states have so-called \u201cright of first refusal\u201d…<\/p>\n","protected":false},"author":65,"featured_media":5347,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-15674","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-will"],"_links":{"self":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/15674","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/users\/65"}],"replies":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15674"}],"version-history":[{"count":3,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/15674\/revisions"}],"predecessor-version":[{"id":15677,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/15674\/revisions\/15677"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/media\/5347"}],"wp:attachment":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15674"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15674"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15674"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}