America's electrical grid is at a critical juncture.
As artificial intelligence and other technologies drive unprecedented demand growth, we need massive investment in our transmission infrastructure. Yet arcane legal provisions known as "right of first refusal" laws are systematically blocking competition and innovation precisely when we need them most.
Known as ROFR, the right of first refusal gives incumbent utilities exclusive rights to build new transmission projects connecting to their existing infrastructure, effectively shutting out competitive developers. These provisions guarantee monopoly control over essential infrastructure, eliminating bidding processes that would otherwise drive innovation and reduce costs for consumers.
The Federal Energy Regulatory Commission recently reintroduced federal ROFRs through Order No. 1920 under the guise of "right-sizing" replacement facilities. But the more concerning trend is happening state by state, as incumbent utilities lobby legislatures to enact state-level ROFRs.
Twelve states have enacted these anti-competitive laws, according to the Manhattan Institute, creating a problematic geographical barrier across the central United States. This concentration segments eastern and western electrical grids and complicates the development of crucial cross-country transmission lines needed for grid resilience and renewable energy integration.
The National Conference of State Legislatures reports that these ROFR laws are concentrated mainly in the Great Plains states, along with Great Lakes and Gulf states, with Mississippi being the most recent addition. Many proponents claim these laws protect consumers from "out-of-state competition" and safeguard incumbent producers.
The economic evidence against ROFRs is overwhelming. Competitive bidding reduces transmission project costs by 20%-30%, according to a study by The Brattle Group. In the MISO region alone, competitive projects yielded cost savings of 37% for ratepayers, as documented by the MacIver Institute. By eliminating competition, ROFRs directly translate to higher utility bills for American families and businesses.
While courts in Texas and Iowa have correctly recognized these laws as unconstitutional violations of the dormant Commerce Clause – with Iowa's Supreme Court explicitly labeling their ROFR "crony capitalism" in a 2023 ruling – the legislative push continues unabated.
Minnesota stands as a case study in this ongoing battle. The state currently faces an uphill fight to repeal incumbent transmission rights enacted in 2012, as documented by the State Power Project. Since passing its ROFR law, Minnesota has experienced precisely what economic research predicted: harm to consumers, reduced reliability, and discouraged regional grid planning, according to a 2023 study in The Electricity Journal.
More concerning is how these monopolistic provisions are evolving to evade scrutiny. Oklahoma's latest attempt (House Bill 2747) uses circuitous language: electric suppliers are "permitted to construct, own, and maintain facilities" only when extending "existing electric transmission facility or to facilities within or through any territory already served." This effectively grants preferential power to incumbent utilities while avoiding the explicit "ROFR" terminology.
Wisconsin's approach is more direct, with their proposed legislation (Assembly Bill 25/Senate Bill 28) simply granting "an incumbent transmission facility owner the right to construct, own, and maintain a transmission facility." Either way, the outcome is the same: competition remains locked out.
As America faces unprecedented energy challenges, we cannot afford policies that artificially restrict development of electrical transmission infrastructure. Without competitive markets driving efficiency and innovation, our grid will struggle to meet 21st century demands.
This isn't merely a battle between industry competitors – it's about whether America will have an electrical grid capable of supporting our economic future. The ongoing efforts to repeal existing ROFR laws and block new ones represent an essential step toward ensuring a resilient, affordable power system that serves the public interest rather than entrenched monopolies.
The choice before state legislatures is clear: protect outdated monopolies or embrace competition that delivers lower costs and better service. For America's energy future, the stakes could not be higher.
