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June 25, 2019

NextEra files federal lawsuit to overturn SB 1938

Mark Bruce,
Source – Grid Monitor,
Posted 06/25/2019

Calling a law adopted last month by the Texas Legislature, “discriminatory on its face,” NextEra Energy Capital Holdings, Inc. and four other NextEra transmission owner/developer entities filed suit in U.S. District Court seeking to invalidate Senate Bill 1938, which limits the Public Utility Commission of Texas (PUCT) from granting certificates to construct, own, and operate transmission facilities to entities not already in possession of such a certificate.

The bill, authored by Senate Business and Commerce Committee Chair Kelly Hancock (R-North Richland Hills) and sponsored by House State Affairs Committee Chair Dade Phelan (R – Orange) was approved by the Texas Legislature and sent to Texas Governor Greg Abbott on May 8.  He signed the bill on May 16 and it became effective immediately upon his signature.  NextEra argues SB 1938 violates the Commerce Clause and the Contracts Clause of the U.S. Constitution and seeks both declaratory relief to invalidate the law and injunctive relief to prevent the PUCT from enforcing the law.

The bill amended Section 37.056 of Texas Utilities Code to provide that a Certificate of Convenience and Necessity (CCN) for a new transmission facility that interconnects to an existing transmission facility can only be awarded to the owner of that existing facility.  The new law also amended Utilities Code Section 37.154 to require that existing transmission facilities in Texas can only be sold or transferred to another existing Texas utility with a CCN from the PUCT.

SB 1938 reversed a decade-long trend in Texas toward opening the construction of transmission facilities and provision of transmission service to new entrants, dating back to 2007 when the PUCT decided to develop a process for determining which transmission service providers (TSPs) should be selected to build the Competitive Renewable Energy Zone (CREZ) transmission lines which extended far into the Texas Panhandle, hundreds of miles beyond the ERCOT network footprint at the time.  In Project 34560, the PUCT adopted a competitive bidding process to select CREZ TSPs which allowed entities not then possessing a CCN to participate.  It was through the CREZ TSP selection process that NextEra affiliate Lone Star Transmission was able gain a Texas CCN.

NextEra asserts that in addition to unduly restricting future infrastructure investment opportunities for Lone Star Transmission, the new law also places two active projects at risk – the Hartburg-Sabine Junction Transmission Project in southeast Texas under development by NextEra Energy Transmission Midwest (NEET Midwest) and the Jacksonville-Overton transmission line acquisition from Rayburn Country Electric Cooperative in northeast Texas by NextEra Energy Transmission Southwest (NEET Southwest).  Both projects are located in non-ERCOT areas of the state.

In its suit, NextEra stated, “The State of Texas has a long and successful history of holding itself out as open for business, including for investment by qualified new entrant transmission owners that did not already own transmission facilities or hold certificates from the PUCT to provide transmission service.  Despite this history, after facing competition, several of Texas’ traditional transmission and distribution utilities successfully lobbied the Texas Legislature to effectively close the border to further new entrants.”

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