Update – July 18, 2019 – Parties in Minnesota Transmission Case Spar Over Recent Supreme Court Decision

Last month, the Supreme Court held that a Tennessee law that conditions the grant of a retail liquor store license on the applicant having lived in the state for at least two years violates the dormant Commerce Clause. The 7-2 opinion, authored by Justice Alito, concludes that the state’s two-year durational residency requirement “discriminates on its face against nonresidents” and that its “predominant effect” is to protect in-state sellers from out-of-state competitors. Over the last few days, parties litigating about a Minnesota transmission law in the Eighth Circuit filed letters interpreting the Supreme Court’s decision.

The Minnesota law at issue grants utilities with in-state transmission lines a right-of-first-refusal to develop new transmission projects that connect to their facilities. Last June, a federal district court dismissed LS Power’s complaint alleging that the law discriminates against out-of-state transmission companies and therefore violates the dormant Commerce Clause doctrine. The district court concluded that the 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.” LS Power appealed, and both sides have filed their briefs.

Last week, LS Power filed a letter at the Eighth Circuit to advise it of the Supreme Court’s recent dormant Commerce Clause decision. LS Power argued that “much like Tennessee’s residency requirement, Minnesota’s statute blatantly favors transmission owners who already have a presence in the state for purely protectionist reasons. Indeed, if Tennessee had limited new liquor licenses to people who already possessed liquor licenses for establishments in Tennessee, the law presumably would have been even more obviously protectionist, and hence even more obviously unconstitutional.”

Minnesota utilities defending the state’s law responded yesterday, drawing three distinctions between the Tennessee liquor law and the Minnesota transmission law. First, while Tennessee facially discriminated against out-of-state residents, Minnesota applies neutral criteria and out-of-state companies are among the utilities that own in-state lines and benefit from the law. Second, Minnesota generally precludes all new entrants into the transmission market, regardless of their location, while Tennessee permits new entrants and discriminates against out-of-state applicants. Third, utilities claim that the Minnesota law “serves important interests in health and safety in fairly obvious ways. . . . To ensure that the existing regulated owners are financially sound enough to carry their burdens to provide safe, reliable electricity, Minnesota may give them desirable projects as well as undesirable ones.”

The letters are available on the Minnesota page.