March 2020

Xcel Energy Defeats Constitutional Challenge Brought Against Right of First Refusal Law

United States - Minnesota

Xcel Energy, intervening in a case brought against the Minnesota Public Utilities Commission (MPUC), successfully defended a Minnesota law against a challenge brought under the dormant Commerce Clause of the U.S. Constitution, then secured affirmance of the win on appeal in the U.S. Court of Appeals for the Eighth Circuit.

The Minnesota law at issue gives existing owners of electric transmission facilities a right of first refusal (ROFR) to build certain new transmission lines that will connect to those facilities. The law was challenged by a company that did not own existing facilities but wanted to be considered to build new lines. The company argued that the law discriminated against or unduly burdened interstate commerce and hence violated the dormant Commerce Clause.

Representing Xcel Energy, Faegre Drinker intervened in the case to defend the Minnesota law. Although the U.S. Department of Justice, Antitrust Division, filed a brief supporting the plaintiff, the U.S. District Court for the District of Minnesota agreed with Faegre Drinker’s arguments on behalf of Xcel Energy and held that the ROFR law neither discriminates against out-of-state entities nor unduly burdens interstate commerce. It therefore dismissed the complaint.

The plaintiff appealed, but in March 2020, the United States Court of Appeals for the Eighth Circuit affirmed. Agreeing with the arguments on behalf of Xcel Energy, the court found 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 held that it does not discriminate against interstate commerce. The court further agreed that the law passes the test laid out by the Supreme Court in 1970's Pike v. Bruce Church Inc., because any incidental burdens on interstate commerce are not “clearly excessive in relation to Minnesota’s legitimate state interests in regulating its electric industry.”

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