The Energy Markets Podcast EMP S2E18: Everything you always wanted to know about ROFR - but were afraid to ask. We talked with LS Power's Sharon Segner
LS Power Senior Vice President Sharon Segner discusses the multibillion-dollar stakes involved in the arcane dispute before the Federal Energy Regulatory Commission over ROFR, or right of first refusal.
FERC has proposed to allow incumbent monopoly utilities first crack at building the vast new network of transmission lines that must be constructed in order to transition to a clean-energy grid and economy. There would be no competing bids to determine if the utility build is the least-cost option, and under monopoly regulation the utility receives the full cost of the build, plus a generous rate of return. Then when the utility build goes grossly over budget, the monopoly utility goes back to the state regulatory commission for full cost recovery plus that generous rate of return. There's no opportunity for a competitive process to determine if the utility build is the least-cost option.
Or, as Segner notes, "What FERC has teed up here is, should the clean-energy transition be a clean-energy monopoly or should it be competitive?"
Segner's company is the plaintiff in one of two conflicting U.S. appeals court rulings directly addressing the concept of ROFR under FERC regulation. LS Power was rebuffed by the 8th Circuit U.S. Court of Appeals in its constitutional challenge to ROFR in Minnesota. But utility giant NextEra Energy prevailed in its challenge to ROFR in Texas, where the 5th Circuit U.S. Court of Appeals strongly supported NextEra's and LS Power's assertion that such laws are unconstitutional due to a legal principle known as the Dormant Interstate Commerce clause. The conflicting court opinions would appear to make the issue ripe for appeal to the Supreme Court with its newly dominant conservative supermajority in place.
We try to unpack it all for you.