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March 2021

Xcel Energy Secures Cert Denial in Minnesota Energy Regulation Appeal

United States - Minnesota

Xcel Energy prevailed in a Minnesota energy regulation matter on March 1, 2021, when the Supreme Court refused to hear an appeal challenging a Minnesota statute that gives existing owners of electric transmission facilities a right of first refusal (ROFR) to build new transmission lines that will connect to their existing facilities. Faegre Drinker represented Xcel Energy in defending the Minnesota law.

Under the statute, Xcel Energy was selected, and agreed, to build a new transmission line in Minnesota. A disappointed bidder — who did not own a connecting transmission facility and thus did not hold a ROFR for the project — sued the State of Minnesota in federal district court, arguing that the law discriminated against or unduly burdened interstate commerce and hence violated the Dormant Commerce Clause.

Despite a brief filed in support of the plaintiff by the Antitrust Division of the Department of Justice, the U.S. District Court for the District of Minnesota agreed with Faegre Drinker’s arguments on behalf of Xcel Energy. The court held that the ROFR law neither discriminates against out-of-state entities nor unduly burdens interstate commerce, and dismissed the complaint.

The plaintiff appealed, but the U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s decision, finding that the ROFR law “draws a neutral distinction between existing electric transmission owners whose facilities will connect to a new line and all other entities, regardless of whether they are in-state or out-of-state,” and thus holding that it does not discriminate against interstate commerce. The court further agreed that the law does not unduly burden interstate commerce under the Supreme Court’s decision in Pike v. Bruce Church Inc.

The challenger then sought certiorari, arguing once again that the ROFR law violated the Dormant Commerce Clause by affording a preference to companies with a physical presence in Minnesota, to the disadvantage of companies lacking such a preference. In the alternative, the petition asked the Supreme Court to solicit the views of the federal government on whether the case should be heard. The petition was supported by two amicus briefs — one from a former Federal Energy Regulatory Commission (FERC) commissioner and one from various energy consumers’ groups.

Opposing certiorari, the Faegre Drinker-led team argued that further review was unwarranted because (1) there is no division on this issue in the lower courts, (2) the Eighth Circuit’s decision is fully consistent with the Supreme Court’s existing precedent on the intersection of the Dormant Commerce Clause and regulated-monopoly energy markets (which precedent the petitioner did not challenge or ask the Court to revisit), (3) the federal government is extremely active in its regulation of this subject matter and thus there is no need for a constitutionally based reshuffling of the federal-state regulatory balance, and (4) the decision below is correct on the merits because the ROFR law affords a preference based on incumbency rather than geography — as demonstrated by the fact that one of the other incumbents selected to build the facility in question is itself incorporated and headquartered outside of Minnesota.

The Court denied the petition without comment on March 1, 2021.

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