As America’s demand for affordable and reliable electricity grows, expanding our electric grid has become more urgent—and more challenging. One major obstacle is the rise of right-of-first-refusal (ROFR) laws, which allow incumbent utilities to block competitors from building new transmission lines, even when others can do the job more cost-effectively. Despite bipartisan opposition at the federal level, an increasing number of states are adopting these anti-competitive laws, favoring utility monopolies over consumer interests. These laws exclusively benefit monopoly utilities at the expense of consumers. Recently, these blatantly anti-competitive practices have captured the attention of state legislators. The Federal Energy Regulatory Commission (FERC) has the authority under the Federal Power Act to preempt state ROFR laws. If FERC won’t act, Congress should step in.
ROFR laws are bad for consumers
For years, ROFRs were standard practice. That changed in 2011, when FERC Order 1000 eliminated the federal ROFR to promote competition and lower costs in transmission development. However, this order opened the door to allow individual states to create their own ROFR policies.1
Today, roughly a dozen states have either enacted or are considering ROFR laws, often at the urging of entrenched utilities looking to lock in profits. These laws shut out competitive bidding and drive up costs. Take Minnesota, one of the first states to pass such a law: studies estimate it may cost residents an extra $15 million each month in electricity bills.
The impact of these laws is widespread, especially in regions covered by the Midcontinent Independent System Operator (MISO) and the Southern Power Pool (SPP)—two areas with ambitious grid expansion plans. MISO’s Multi-Value Project Portfolio (MVP) and SPP’s Integrated Transmission Plan (ITP) are designed to modernize infrastructure and improve reliability. But as more regions adopt similar initiatives, incumbent utilities are pushing to expand ROFR laws and capture the profits from these much-needed upgrades.
Figure 1: Status of State ROFR Laws2
Utilities often argue that ROFR laws enable faster, more predictable development of transmission projects. But the tradeoff between speed and competitive pricing is not unique to transmission. In fact, many industries have embraced competition precisely because it lowers costs. Studies suggest that competitive bidding for transmission projects can reduce costs by 20% to 30%.
In states with ROFR laws, this cost-saving competition is absent. Because utilities in these states can recover project costs—plus a guaranteed profit—directly from consumers, they have little incentive to keep expenses down. Still, ROFR laws remain common, largely due to the political influence utilities hold over state legislatures.
Even states without ROFR laws can feel the impact of those that have them. That’s because utilities recover transmission costs based on who benefits from a project—not just where it’s built. As a result, ratepayers in non-ROFR states can end up helping pay for overpriced projects in ROFR states. The R Street Institute has compared this phenomenon to agreeing to split a dinner bill, only to have someone order extravagantly at everyone else’s expense.
ROFR laws also discourage innovation. Non-incumbent developers, who often have the expertise to build more ambitious, high-voltage transmission lines, are unlikely to propose projects if they know an incumbent utility can block them. This leads to a cycle where only smaller, less efficient projects—ones that stay within a utility’s existing territory—get built. The end result is a more expensive and less effective transmission system.
Texas and Minnesota: Twin case studies highlight consistent federal opposition and inconsistent court treatment of state ROFR laws
After FERC issued Order 1000, Minnesota was one of the first states to pass legislation implementing a ROFR in 2012. Texas followed in 2019. These laws soon sparked legal challenges, revealing a deeper conflict between state and federal authority—and even a split among federal circuit courts—over whether such laws are constitutional.
At the heart of the dispute is the Commerce Clause of the U.S. Constitution, which gives Congress the exclusive power to regulate commerce between states. Courts have also recognized a related principle known as the Dormant Commerce Clause, which prevents states from passing laws that discriminate against or place an undue burden on interstate commerce.
Minnesota’s ROFR law, for example, precluded a non-incumbent transmission developer from submitting bids on new projects in the Midcontinent Independent System Operator (MISO) service territory that crossed through the state. After failing to gain relief from FERC, the developer took the case to federal court, arguing that Minnesota’s law violated the Dormant Commerce Clause by discriminating against out-of-state developers. In 2018, the U.S. Department of Justice (DOJ)—under the Trump administration—filed a Statement of Interest supporting this position. The DOJ argued that Minnesota’s law was unconstitutional because it allowed local utility monopolies to block competition from out-of-state developers in interstate markets.
Despite this support, the Eighth Circuit Court of Appeals upheld Minnesota’s law. The court reasoned that it did not discriminate against interstate commerce because some of the utilities benefiting from the law were incorporated outside of Minnesota.
The Texas ROFR law, however, met a different legal fate. In 2019, while a ROFR bill was pending in the Texas State Legislature, the DOJ’s Antitrust Division penned a letter opposing the potential state ROFR law. After the bill became law, an independant transmission developer that was deprived of a transmission project it had won in a competitive bid sued Texas. As was the case in Minnesota, the federal government was active in litigation challenging Texas’ ROFR law. Despite not being a party to the lawsuit, the DOJ argued in multiple courts that the ROFR law discriminated against interstate commerce, including in a submission to the U.S. Supreme Court.
Notably, this advocacy remained consistent across the first Trump presidency and under President Biden.
Although the district court initially dismissed the challenge to Texas’ ROFR consistent with the precedent set in Minnesota, the Fifth Circuit reversed that dismissal. The Fifth Circuit unequivocally rejected the Eighth Circuit’s flawed reasoning.3
The court ruled that transmission development is not a “natural monopoly” exempt from Commerce Clause scrutiny, and criticized the Eighth Circuit for relying on the “empty formality” of a utility’s state of incorporation. Instead, the Fifth Circuit emphasized that a utility’s “local presence” is what matters when evaluating whether a law discriminates against interstate commerce. The case was sent back to the district court for further proceedings.
After remand, the district court ruled that the Texas ROFR was unconstitutional under the Dormant Commerce Clause, at least as applied to those portions of Texas that are connected to the interstate electricity grid,4 concluding that “balkanizing a state from interstate commerce is the very problem the Commerce Clause is meant to guard against.”5
Currently, state ROFR laws have been struck down as unconstitutional in the Fifth Circuit, but remain upheld in the Eighth Circuit. This circuit split, coupled with the fragmented, state-by-state patchwork of ROFR policies, creates ongoing legal uncertainty. That uncertainty stifles competition, deters innovation, and discourages the long-term investments needed to modernize and expand the nation’s transmission infrastructure.
The current state of affairs on efforts to implement ROFRs
The federal government has clearly and consistently viewed state ROFR laws as anticompetitive and discriminatory. Nonetheless, several states continue to press ahead with efforts to enact them at the behest of incumbent utility interests. Two Wisconsin lawmakers recently introduced a bill to put ROFR in place — an effort championed by a utility-led coalition called WI4 ROFR. Iowa also recently passed ROFR legislation as a part of a large bill package in 2020. It was later overturned on procedural grounds, but reintroduced yet again this year.
In both states, legislators have continued to question whether ROFRs are in the best interest of their constituents. Representative Henry Stone of Iowa recently asked the DOJ to weigh-in on the proposed ROFR in his state, and the DOJ responded, noting “that these restrictions would foreclose competition to develop and build electric transmission and thereby potentially raise prices and lower the quality of service for electricity consumers.”
Similarly, Republican legislators in Wisconsin wrote a letter to the Trump administration in February asking for guidance on how to proceed with the ROFR proposal before them. The letter stipulates that ROFRs harm competition, and raises concerns about the implementation of President Trump’s “America First” agenda, arguing that “ROFR legislation stands in stark opposition to numerous executive orders issued by [the Trump Administration], which emphasized the critical importance of protecting and enhancing competition to foster innovation and reduce costs.”
The DOJ has recently formed an Anticompetitive Regulations Task Force to investigate and “advocate for the elimination” of regulations that stifle competition at all levels of government. The White House has also issued an Executive Order outlining its strategy to combat anti-competitive regulations in the marketplace.
Looking forward
The Trump Administration’s spotlight on ROFR laws and other anti-competitive regulations is a promising trend towards a fairer energy market that prioritizes consumer protections. As Assistant Attorney General Gail Slater noted in her first public speech of the administration, “corporate lobbyists using their power to undermine free markets is ubiquitous in our system, and small but powerful groups can dominate regulatory processes at the expense of the diffuse interests of individual citizens.” As a countermeasure to regulatory capture, Slater called antitrust enforcement “America First conservatives’ preferred approach to cure market ills.” The guiding principles of open competition and uniformity should inform this work and protect consumers from unfair and discriminatory electricity price increases.
ROFR laws not only inflate costs for ratepayers within the adopting state but also burden neighboring states through shared transmission expenses. If FERC fails to act, it falls to Congress and the courts to check the spread of ROFR laws and prevent further fragmentation of the nation’s power grid.
- See Order 1000: Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, FERC Docket No. RM10-23-000, 136 Fed. Reg. 61051, P 287 (July 21, 2011) (”Eliminating a federal right of first refusal in Commission-jurisdictional tariffs and agreements does not…result in the regulation of matters reserved to the states…Nothing in this Final Rule is intended to limit, preempt, or otherwise affect state or local laws or regulations with respect to the construction of transmission facilities, including but not limited to authority over the siting or permitting of transmission facilities.”) ↩︎
- Figure sourced from the Electricity Transmission Competition Coalition, pg.3, last updated March 10, 2025. Mississippi has also adopted a ROFR for transmission development (See Mississippi Code § 77-3-10.1). ↩︎
- NextEra Energy Capital Holdings, Inc. v. Lake, 48 F.4th 306, 318-324 (5th Cir., 2022). ↩︎
- Texas is unique because transmission infrastructure in much of the state is operated by the Electric Reliability Council of Texas (ERCOT), and not connected to neighboring states. But portions of Texas fall outside of ERCOT’s territory, with transmission in Northwest Texas operated by the Southwest Power Pool (SPP) and in parts of East Texas by the Midcontinent Independent System Operator (MISO). ↩︎
- NextEra Energy Capital Holdings, Inc. v. Jackson, 2024 WL 4660920, at 14 (W.D.Tex., 2024). ↩︎