Texas State Capitol
Texas State Capitol Building.

In mid-June, Minnesota-based energy giant NextEra filed a federal lawsuit intended to fight a new Texas law that freezes transmission competition throughout the state.

The bill, SB 1938, was passed by the Texas legislature on April 17 and signed into law by Gov. Greg Abbott (R) on May 16. It allows Texas utilities first choice in building new transmission lines. This law applies even to interstate projects, as long as the project has an ending point in Texas.

NextEra argues law jeopardizes a transmission project for which one of its affiliates had been selected. The fate of that project, a 500-kilovolt line to be constructed in East Texas, now hangs in the balance.

NextEra’s suit lists a number of defendants, including Ken Paxton, the state’s Attorney General; and several members of the state’s Public Utility Commission (PUC): DeAnn T. Walker, Arthur C. D’Andrea and Shelly Botkin.

The suit argues that SB 1938 violates constitutional protections on interstate commerce. In particular, it argues that the law violates the Dormant Commerce Clause that forbids states from passing any legislation that restricts interstate commerce. States may not interfere with interstate commerce because it is the purview of the federal government, not the state governments, according to the clause.

NextEra says that SB 1938 is an example of “economic protectionism” hindering interstate commerce in violation of precedents set by other court cases.

In a June 27 tweet, Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative, said that this argument has been upheld in courts, including a recent decision regarding a case in Tennessee. In that case, the matter was not electricity but white lightning, but the argument behind the ruling is the same.

By a 7-2 vote, the Supreme Court of the United States (SCOTUS) held that Tennessee law granting licenses to sell liquor at retail only to people who have lived in the state for two years “plainly favors Tennesseans over nonresidents and therefore violates the Commerce Clause.”

NextEra is Seeking to Overturn SB 1938. 

NextEra’s lawsuit is part of a broader backlash against the bill due to concerns about stifled competition, potential price increases and whether it is unconstitutional. Opponents include a variety of businesses and organizations, including the Department of Justice. The results of this backlash, including NextEra’s current legal action, remain to be seen.

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