Dan O’Donnell takes on the antiquated, anti-competitive concept of Right of First Refusal in transmission projects.
Jan. 24, 2024
Perspective by Dan O’Donnell
Think about the last time you had electrical work done. How did you pick the electrician? Did you get a couple of quotes and compare prices? Ask around for recommendations? Use a website like Angie’s List check out Google reviews?
Or did you close your bids to every company that wasn’t located within exactly five square miles of your house because a company outside of your neighborhood couldn’t possibly take care of your home?
Chances are you didn’t because, well, that would be ridiculous, but that is precisely how a troublingly large segment of Wisconsin legislators want to maintain the state’s transmission lines through an antiquated, anti-competitive system known as “Right of First Refusal.”
In 2011, the federal government opened up competition in the transmission system through Order 1000, which did away with the Right of First Refusal. Before Order 1000, regional transmission system operators would simply assign new power line projects to whatever utility happened to service the area where the new project was needed. There was no competitive bidding and thus no savings for taxpayers. The contract simply went to whichever utility held the monopoly over a particular region.
Order 1000 was a boon for competitive bidding, but it also allowed for states to enact their own Right of First Refusal laws that would set up their own monopolies with which regional transmission systems would not compete.
Competitive bidding always results in savings on public projects, and it is estimated that such competition in transmission projects results in 20-30 percent savings.
For 12 years, Wisconsin has operated without a Right of First Refusal law, but in October Republican State Sen. Julian Bradley and Rep. Kevin Petersen introduced legislation that would impose just that. The three transmission utilities that currently serve Wisconsin—American Transmission Company, Xcel Energy, and Dairyland Power Cooperative—would be allowed the right of first refusal for all new large regional projects and maintenance and repairs on existing power lines.
Practically speaking, those three companies would be empowered to create a monopoly on large transmission projects. The reasoning for this is suspect, with the best argument for it being “Only Wisconsin companies could possibly service Wisconsin power lines.” That’s laughable: Out-of-state companies are just as capable of servicing utility lines as ones who happen to be headquartered in Wisconsin. What, is a Minnesota-based company barred from having workers in Wisconsin? Will their service trucks be stopped at the state line?
Supporters of Right of First Refusal laws either think so or (more likely) want you to. If you don’t, you might start to ask questions about why taxpayers should relinquish the competitive bidding process to what amounts to a Wisconsin utility cartel. Competitive bidding always results in savings on public projects, and it is estimated that such competition in transmission projects results in 20-30 percent savings.
The push for Right of First Refusal in Wisconsin also comes at a time when its neighbors are moving in the exact opposite direction. Minnesota is trying to do away with its Right of First Refusal Law, while the Iowa Supreme Court just struck down that state’s law, calling it “quintessentially crony capitalism” and “rent-seeking, protectionist legislation.”
Trump’s Department of Justice and even the Biden Administration’s Department of Justice and Federal Trade Commission recognize that “American consumers and businesses should not be denied the benefits of competition” in transmission projects and have issued a joint statement opposing Right of First Refusal laws, which they say “could mean that the design and construction of certain transmission facilities is less competitive, resulting in higher prices or lower quality.”
Less competition inevitably means higher prices for lower quality products and services, and with projects as expensive as new power lines, it is imperative that Wisconsin’s lawmakers work to ensure that taxpayers are fully protected from costs that could very quickly skyrocket, especially from a monopoly with no incentive to lower them.
Taxpayers should refuse to support any Right of First Refusal law or any politician who introduces one. If they don’t believe in competition for utility companies, maybe it’s time they face some competition in primary races to remind them who in Wisconsin they actually serve.