“Crony Capitalism”: IA Supreme Court Sticks Dagger into Anti-Competitive Transmission Law
On June 14, 2020, a provision was inserted into an appropriations bill at 1:35am on the last night of the Iowa legislative session. The provision granted sole right to the incumbent transmission provider to build any approved new transmission line, eliminating any competition for transmission in Iowa.
This past Friday, the IA Supreme Court issued its ruling on a challenge to the law by LS Power (“LSP”), a national transmission line developer. Justice Waterman, writing for the majority, in commenting on the passage of what is known as the Right of First Refusal (“ROFR”), stated:
“We are not surprised the ROFR lacked enough votes to pass without logrolling. The provision is quintessentially crony capitalism. This rent-seeking, protectionist legislation is anticompetitive.”
The Court only ruled on the question of whether LSP had standing and remanded the question of whether the law violated the Iowa Constitution back to the District Court to decide on the merits. LS Power had argued that the passage of the law violated the Iowa Constitution in three ways: 1) the provision must be referenced in the title of the legislation, 2) a bill must be a single-subject, and 3) it was a violation of equal protection.
While they remanded back to the District Court, the Supreme Court issued a temporary injunction since, Waterman noted, LSP “is likely to succeed on the merits on its “title” challenge to Iowa Code section 478.16” and “LSP has shown a likelihood of success on the merits of its claim that the ROFR’s enactment violates the single-subject requirement of article III, section 29 of the Iowa Constitution.” Since LSP is likely to prevail on the first two arguments, the Court did not consider the Equal Protection challenge.
While there were three justices that did not participate in the case, there was no dissenting opinion. Since there are no issues of fact, it is hard to imagine a district court not following the Supreme Court’s strong direction on this case.
This opinion may set the stage for further discussions on the role of competition for not just transmission, but generation, particularly as distributed energy resources continue to grow exponentially. The full opinion can be accessed here, but perhaps this is a fitting final quote from the opinion on the role of competition:
“Common sense tells us that competitive bidding will lower the cost of upgrading Iowa’s electric grid and that eliminating competition will enable the incumbent to command higher prices for both construction and maintenance. Ultimately, the ROFR will impose higher costs on Iowans.”