Judge blocks ‘right of first refusal’ law on electric transmission projects
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A Carmel-based nonprofit organization that manages the power grid in Indiana and 14 other states is meeting this week to approve electric substation and transmission projects across the central U.S. worth nearly $22 billion.
The board meetings of the Midcontinent Independent System Operator, stretching from Tuesday to Thursday, include about $2.7 billion in projects wholly or partially located in Indiana, according to filings in U.S. District Court in Indianapolis.
But approval of the projects comes less than a week after a federal judge issued an injunction against Indiana utility regulators, blocking them from giving “first dibs” to Indiana utilities.
U.S. District Judge Tanya Walton Pratt ruled on Friday that an act signed into law by Gov. Eric Holcomb in 2023 that gives local utilities the right of first refusal on such transmission projects discriminates against interstate commerce.
“The state’s interests are adequately served by existing, non-discriminatory utility regulations,” she wrote.
The controversial law, HEA 1420, which passed by close votes in each house of the Legislature, was heavily supported by Indiana utilities, organized labor, manufacturers and farmers, who said it would keep local control of expensive, specialized construction projects.
Opponents included consumer groups, out-of-state energy companies and large industrial companies. They said it could result in higher prices, stifle innovation and lead to more control by monopoly utility companies.
The more than $20 billion at stake is needed to bring on additional capacity for energy to meet huge consumer and business demand as the nation shifts to cleaner energy sources.
The bill’s author, Rep. Ed Soliday, R-Valparaiso, said in 2023 that transmission lines are being congested, as existing lines are struggling to move electricity from generating plants to customers.
“We need more transmission,” he said. “… It’s about being able to move electricity from one place to another.”
A Missouri company, LSP Transmission Holdings II, filed a complaint for injunctive relief in October of 2024, naming all five commissioners of the Indiana Utility Regulatory Commission as defendants, as they will have to approve Indiana projects and enforce the law.
The complaint claimed the law dictates that new electric transmission projects in Indiana will be built, owned, and operated only by the small handful of companies that already own the facilities to which the new transmission lines connect.
“Indeed, Indiana’s protectionism is not just blatant, but pernicious,” the complaint said.
Sharon K. Segner, senior vice president for transmission policy at LSP, said in a court filing the new Indiana projects include numerous high-voltage transmission lines and several substations.
“It is my understanding that unless this Court enjoins enforcement of HEA 1420 before Dec. 10, 2024, MISO will award all of these new projects to incumbents without giving LSP an opportunity to compete for them,” she wrote.
Several Indiana utilities were granted intervenor status, giving them permission to see exhibits and participate in hearings. They included AES Indiana (referred to in court papers by its previous name, Indianapolis Power & Light), Duke Energy Indiana and CenterPoint Energy.
AES Indiana said Tuesday morning it would have a statement soon on the court decision, but did not follow up. Duke Energy Indiana referred questions to a statewide utility association, the Indiana Energy Association, which said it was reviewing the court decision.
“As a matter of practice, we do not comment on pending litigation but stand by Indiana law,” the association’s president, Danielle McGrath, wrote in an email to IBJ.
She added that the legislation expanded Indiana’s right of first refusal law, which dated to 2013, and that the bill requires local utilities to use competitively bid engineering, procurement and construction contracts.
A spokesman for the IURC declined to comment, citing pending legislation.
But some consumer advocates applauded Judge Pratt’s decision.
“We are thrilled with the ruling,” said Kerwin Olson, executive director of Citizens Action Coalition of Indiana. “It’s legislation like HEA 1420, which was passed at the behest of Indiana’s monopoly electric utilities, that is contributing to escalating electric bills in Indiana. HEA 1420 was an anti-consumer bill at its core by eliminating any competition and further exposing captive ratepayers to monopoly pricing.”
He added: “The court absolutely made the right decision. This is a rare win for utility consumers in Indiana.”
Brandon Morris, a spokesman for MISO, said the recent court ruling does not affect the MISO board’s “ability to approve the portfolio.”
“MISO will review the federal court’s recent decision to determine any potential implications for who builds transmission projects in Indiana,” Morris said.