A newly proposed bill would grant at least two Wisconsin-based companies—the American Transmission Company (ATC) and Xcel Energy—the Right of First Refusal (ROFR) for Wisconsin’s electrical transmission lines. It would grant incumbent utility companies the right to construct new transmission projects before opening them up to competitive bidding from other potential developers.
I am a hard NO on the Wisconsin ROFR bill.
Senate Bill 28 would give these companies a monopoly – the exclusive right to any regional transmission project authorized by the Midcontinent Independent System Operator (MISO), which is currently subject to a competitive bidding process.
ROFR is a highly complex topic. I toured the ATC facility and spoke with representatives from both sides of the issue several times. However, when boiled down, Republicans must rely on our underlying conservative principles.
Conservative principles are grounded in the free market. ROFR violates this. It’s been ruled unconstitutional in other states, may give power to unions, and at closer scrutiny, the fiscal arguments for it vaporize.
Proponents argue ROFR helps ensure reliability and continuity in utility services, as the incumbent utilities are familiar with regional needs and existing infrastructure. However, critics assert that such legislation curtails competitive forces that drive innovation and potentially lower costs.
By effectively sidelining alternative bidders, the legislation can lead to less favorable terms for consumers and impede the entry of new technology and practices that could emerge from a more open and competitive bidding process.
Why is a Wisconsin ROFR law being proposed again?
Wisconsin is part of MISO, which makes operational decisions for large transmission lines and is responsible for long-range planning. Tranche 2.1, a plan approved by MISO last December, calls for an investment of $21.8 billion for 24 projects and 323 facilities across the MISO Midwest subregion.
In 2001, several Wisconsin utility companies joined together and formed ATC. ATC builds, owns, and operates high-voltage transmission lines. If a Wisconsin ROFR law is passed, incumbent utilities including ATC and Xcel, would be instantly granted these projects with no restrictions on cost caps, limits on cost overruns, or a reduction in their guaranteed return on equity (ROE). This gives these companies an incentive to spend more on these projects as they are guaranteed an ROE of 10.52%. Those higher costs will be passed on to ratepayers.
Without competition, Wisconsin ratepayers can expect that maximum project costs will translate into higher rates. ATC and Xcel are particularly motivated to have ROFR legislation passed in Wisconsin ahead of bidding on Tranche 2.1 projects.
$1 Billion Saved?
A report commissioned by ATC claims that ratepayers ‘could’ save $1 billion over the project’s lifespan. A transmission line’s lifespan is set at 40 years. That comes to only an estimated 63 cents saved monthly per Wisconsin ratepayer over 40 years.
According to the MacIver Institute, ATC told the report’s author “what assumptions to make.”
However, the claim of “$1 billion in savings” over 40 years shrinks to effectively zero when the time value of money is considered. Even under ATC’s own analysis, a ROFR law costs Wisconsin customers over the first six years, and most of the ‘savings’ occur towards the end of the 40-year lifespan of the project.
That’s assuming the report is accurate. MacIver Institute does a great job explaining why the report’s validity should be challenged.
The billion-dollar savings conclusion is questionable because it assumes a new builder would have no ability to cost-share throughout the 40-year lifespan. In reality, a new builder could begin cost-sharing as soon as year #2 and continue to increase the cost-sharing as more customers are obtained.
ATC was in OPPOSITION to a Minnesota ROFR Law
The smoking gun: In 2012, Minnesota was considering its own ROFR law. ATC, based in Wisconsin and hoping to bid on Minnesota’s projects, provided written testimony in OPPOSITION to the bill, arguing,
“Senate File 1815, unfortunately, would stifle competition in the development and construction of electric transmission facilities leading to higher costs for electricity users in Minnesota. Unquestionably the competitive free market system in America has benefited businesses and consumers for decades. This same competitive spirit will only benefit Minnesota electricity users when applied to the development, construction, ownership and maintenance of electric transmission facilities.”
Now that ATC would benefit from a ROFR law, they are suddenly in favor of ROFR.
Courts Have Ruled ROFR is Unconstitutional
Courts in Iowa, Indiana, and Texas have ruled ROFR laws unconstitutional. In those rulings, the courts said ROFR laws limit competition, raise prices, lower the quality of service, ultimately harm consumers, and likely violate the Commerce Clause of the U.S. Constitution.
The conservative-controlled Iowa Supreme Court said when ruling on ROFR, “The provision is quintessentially crony capitalism. This rent-seeking, protectionist legislation is anticompetitive.”
Union Employees
Last year, Wisconsin utility companies that own ATC pledged “to the fullest extent possible” to use union labor on renewable energy projects in Wisconsin. ATC has not explicitly addressed its position on union labor for ROFR-related transmission projects, but it’s not a stretch to believe the same strategy would apply to these projects, locking out more than 70% of Wisconsin’s non-union workforce.
Free Market Competition
A long-standing platform of conservatives is free market competition. A Wisconsin ROFR law would do the exact opposite.
According to MacIver Institute, “The evidence in support of competition reducing overall costs to consumers is overwhelming…competitively-bid projects in the MISO region resulted in overall costs 37% less than the highest bids placed, and 52% less than MISO’s estimates. On the other hand…similar multi-value projects (MVP) not subject to the competitive process resulted in costs that were 18% higher than MISO’s original estimates.”
These cost reductions reflect real cost savings to ratepayers.
Make no mistake: I want Wisconsin-based companies to win the bids and build these projects. However, I want to ensure the projects are built at the lowest cost possible to protect Wisconsin ratepayers.
On February 18th, I joined 23 other legislators in asking President Trump to weigh in on whether utilities already doing business in Wisconsin should be given first rights on building new transmission lines. You can read that letter here.
In addition, I will be voting NO when the bill comes before the Assembly.
If ATC and its subsidiaries want to successfully bid on Wisconsin projects, they should focus on being the low bidder. They should hire non-union workers, reduce their massive lobbying efforts, and eliminate their DEI programs. But that’s just me.
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