North Dakota steps in to protect Minnesota’s electricity consumers

After years of threatening to sue Minnesota over the Next Generation Energy Act of 2007 (NGEA), the state of North Dakota finally filed suit in federal court.  North Dakota’s complaint argues that the NGEA violates both the commerce clause and the supremacy clause of the federal constitution, as well as the Minnesota constitution’s prohibition against special legislation that grants special or exclusive privileges to a private corporation, association, or individual. 

At issue is the NGEA prohibition against the importation of electricity generated from a new coal plant.  Legislation was passed in the 2011 legislative session to repeal the prohibition, but Governor Dayton vetoed it.

I wrote about the economic, environmental, and legal reasons to repeal the law earlier this year.  Here’s how I explained the legal issue.

There are two legal issues with these specific prohibitions. First, they may be preempted by the Federal Power Act.  Second, they may violate the dormant commerce clause of the Constitution.

The statutory language banning new coal-fired power actually envisions being preempted by federal law as the ban is prefaced by the statement “unless preempted by federal law.” This is because the state law, in part, regulates the wholesale electricity market and the regulation of these markets is generally preempted by the Federal Power Act.

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Without getting into a detailed constitutional analysis, there are number factors that suggest the state law violates the dormant commerce clause.  First, it prohibits a specific type of interstate commerce and, as result, poses a substantial burden on interstate commerce. Second, it discriminates between power from existing coal-fired power plants and new coal-fired power plants. Third, the intended purpose of the law promotes a global public interest, not a local public interest.  Fourth, the effect of the law will not effectuate the intended purpose. As already explained, the ban will likely increase carbon-dioxide emissions by shifting the use of western U.S. coal to less efficient power plants in Asia.

The complaint adds one more angle to the violation of the Supremacy Clause that I missed.  In 2007, the Supreme Court ruled that carbon dioxide emissions were subject to the Clean Air Act.  The complaint argues that the NGEA conflicts with the Clean Air Act because “Congress left no room for States to supplement it.” 

While I’m pleased that the state of North Dakota filed suit, the fact that a suit took over four years to be filed is distressing.  It reflects the fact that Minnesota ratepayers have very little protection against legislative, regulatory and special interest efforts to raise electricity rates at the expense of Minnesota consumers and Minnesota jobs. 

In contrast, lawsuits are filed on a regular basis by environmental activist groups with deep pockets funded by Minnesota foundations.  There is no adequate legal response to these groups.  The result is higher electricity rates for Minnesota consumers.  As I reported in Recommendations for Promoting Affordable and Competitive Energy Rates in Minnesota:

Though electricity prices in Minnesota remain competitive, this competitive advantage is slipping.  In 1990, the price of electricity in Minnesota was ninth lowest in the country. Two decades later, in 2009, Minnesota’s ranking slipped to twentieth.  All the while, with the exception of Wisconsin, electricity prices for Minnesota’s neighbors have become more competitive.

It’s unfortunate that Minnesota electricity consumers and Minnesotans whose jobs depend on low electricity rates must depend on the state of North Dakota to protect their interests.