The U.S. Department of Justice is asking state lawmakers to reconsider part of energy legislation that would grant Iowa utilities the “right of first refusal” when it comes to building regional transmission projects, signaling that the provision may be giving some legislators pause on the Gov. Kim Reynolds’ massive energy bill.
The letter from U.S. Assistant Attorney General Abigail Slater raises concerns the right of first refusal language would diminish competition in efforts to build out energy infrastructure nationwide on the heels of President Donald Trump’s executive order declaring a “national energy emergency.”
White House officials say the executive order signals the administration is making it a priority to increase the domestic production of oil and other forms of fossil-fuel energy.
The letter takes aim at Senate Study Bill 1113, introduced by Senate Commerce Committee Chair Mike Bousselot, R-Ankeny, which never received a subcommittee hearing. It was sent last week to Sen. Jesse Green, R-Boone, and Rep. Henry Stone, R-Forest City after they reached out asking the DOJ to weigh in on the legislation.
But similar language is included in the governor’s energy bill, Senate File 585, which outlines support for renewed nuclear power generation to building farm-based anaerobic digesters to produce biogas.
It proposes giving incumbent electric transmission owners an exclusive “right of first refusal” for upgrades to the power grid approved for construction in a federally registered planning authority transmission plan when the new transmission facilities connect to the incumbent’s existing lines.
The bill still needs to move through certain House and Senate committees before advancing to the full chamber.
Reynolds pitched a “forward-focused, all-of-the-above energy strategy” in her January Condition of the State address to build on Iowa’s existing strengths of low rates and a strong transmission grid.
More: What to know about Kim Reynolds’ massive energy bill, advancing in the Iowa Legislature
In her letter, Slater wrote that the DOJ’s Antitrust Division “urges Iowa to consider whether it can achieve those considerations through mechanisms that do not unduly restrict competition to develop transmission facilities in Iowa.”
“By protecting incumbents from competition, the Bill creates risks for increased costs, reduced quality, and less reliable transmission infrastructure at a moment when the President has declared a national energy emergency,” Slater wrote.
She wrote that the legislation’s stated “preference for further investment in Iowa transmission infrastructure by electric transmission owners” turns into “a legal grant that shields incumbents from competition.” Both bills include this provision.
Alliant Energy, MidAmerican Energy, an electrical workers union and some industry associations have lobbied in favor of the “right of first refusal” language, while other groups have pushed back on it as thwarting competition.
Tyler Raygor, Iowa state director of the conservative political advocacy group Americans for Prosperity, said in a statement that Iowa lawmakers should reject “anti-competitive policies” after the DOJ last week launched an Anticompetitive Regulations Task Force to push for eliminating anticompetitive state and federal laws and regulations.
“The DOJ is right; ROFR provides a lack of competition in the energy market and has the potential to cause substantial harm,” Raygor said. “Lawmakers should follow the lead of the Trump administration to prioritize legislation that gets the government out of the way of the free market.”
A spokesperson for the governor has not responded to a request for comment.
‘Right of first refusal’ giving some lawmakers pause
As of Monday afternoon, Green said he didn’t know how he would vote on the governor’s bill as it stands but wanted to come up with a solution to provide cheaper energy rates for Iowa customers.
He said there are many lawmakers in the Senate Republican caucus who “have deep concerns that need to be addressed” over the “right of first refusal” before they can support the measure.
“Utility bills are one of the biggest concerns on company’s minds and individual’s minds, and how can we deliver get more competition within the utility sector and provide cheaper energy for Iowans?” Green said. “And from my perspective, there’s a problem when you’re trying to eliminate competition from coming into Iowa and providing some of these services.”
Legal challenges stall similar ‘right of first refusal’ law
An Iowa Supreme Court ruling in 2023 halted a 2020 law that similarly determines which companies get preference to build new electric transmission lines. It gave the “right of first refusal” for new projects to companies with existing infrastructure, like MidAmerican and ITC Midwest.
Noting this ruling, the DOJ letter said this year’s legislation differs in that it seeks to broaden the definition of “incumbent electric transmission owner” to include out-of-state companies that own transmission facilities in Iowa. It also adds a requirement that the incumbent utility prove its use of a competitive bidding process in construction. Both provisions also are in the governor’s bill.
Still, the legislation allows incumbent utilities to bypass competitive bidding for new transmission lines in the state, “thereby eliminating competition from firms that could offer lower prices, greater innovation, and superior terms to Iowa’s utility customers,” Slater wrote.
The DOJ has previously weighed in on state rights of first refusal and filed briefs on actions challenging the constitutionality of such state laws.
In 2019, when Trump was in his first term, Slater wrote the Antitrust Division analyzed a similar proposal in Texas and found that where incumbents may be best positioned to build out additional grid infrastructure, state rights of first refusal and similar legislation would likely “reduce the competitive pressure on such incumbents to develop higher quality, lower cost transmission facilities” to the detriment of consumers.
And in 2022, the DOJ and the Federal Trade Commission jointly urged the Federal Energy Regulatory Commission not to reinstate a federal right of first refusal policy that the agency eliminated in 2011.
“In some cases, incumbent operators will be best positioned to deliver high quality, cost-effective infrastructure projects quickly,” Slater wrote. “But even in such circumstances the threat of competitive pressure from potential rivals will incentivize better outcomes like lower prices for consumers and more robust and innovative project designs. In other cases, non-incumbent firms may offer lower costs, and better project designs, and they should be allowed to compete on the basis of the better value they offer.”
Marissa Payne covers the Iowa Statehouse and politics for the Register. Reach her by email at mjpayne@registermedia.com. Follow her on X, formerly known as Twitter, at @marissajpayne.
This article originally appeared on Des Moines Register: DOJ: Lawmakers should rethink ‘right of first refusal’ in energy bills
