Peter Lake, Chairman, Public Utility Commission of Texas, et al. v. NextEra Energy Capital Holdings, Incorporated, et al.

QU E S TIO N P RE SE N TE D This Court has long recognized that the regulation of utilities is “one of the most important of the functions traditionally associated with the police power of the States.” Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983). Like most (if not all) States, Texas exercises this power by regulating electric transmission throughout the State, including by setting rates for transmission and distribution services. For decades, the accepted view across the nation was that system reliability, efficiency, and cost for ratepayers are all best served when new transmission lines are built by the owners of the endpoint facilities to which the new lines would connect. Even when the Federal Energy Regulatory Commission changed course, it expressly preserved States’ ability to maintain that policy. Transmission Plan. & Cost Allocation by Transmission Owning & Operating Pub. Utils., 136 FERC ¶ 61,051, para. 313 (July 21, 2011) (final rule) (“Order 1000”). Like other States with large, sparsely populated rural areas, Texas took the federal government up on its offer and gave incumbent utilities a right of first refusal to construct new transmission lines. Tex. S.B. 1938, Act of May 7, 2019, 86th Leg., R.S., ch. 44, §§ 1, 2, 4, 5, 7, 2019 Tex. Gen. Laws 90, 90-91 (eff. May 16, 2019) (codified at Tex. Util. Code §§ 37.051(a), .053(a), .056, .057, .154(a)) (“S.B. 1938”). The question presented is whether, consistent with the Commerce Clause, States may exercise their core police power to regulate public utilities by recognizing a preference for allowing incumbent utility companies to build new transmission lines, as the Eighth Circuit has held, or if such a preference necessarily violates the Commerce Clause, as the Fifth Circuit held below. (I)