The End of Cost-Saving Competition?

If saving money is one of your 2025 New Year’s resolutions your state legislature may have a nasty surprise for you: legislation that would snatch away 20-30% of savings on your electricity bill.

The legislation is called “Right of First Refusal” (ROFR) and it eliminates cost-saving competition over who will be awarded multi-million dollar contracts to build new electric power lines. Instead, contracts would be automatically awarded to incumbent utilities regardless of their ability to deliver cost-savings to customers. Right of First Refusal means the right for incumbent utilities to charge what they want for these expensive construction projects.

In the past multiple states – including Illinois, Iowa, Kansas, Missouri and Oklahoma, have tried to enact ROFR laws but were stopped by a groundswell of opposition from voters. We expect ROFR to resurface in these states again in 2025. Consumers should be aware and watchful to protect against efforts to end cost-saving competition as legislators meet.

Cost-Saving Competition is the Only Way to Protect You from Rising Transmission Costs

Electric transmission lines are the backbone of our energy grid, delivering power from generation sites to homes and businesses across the country. As demand grows, new transmission lines are critical. However, the rising costs of constructing these lines are driving up electricity bills.  Transmission line construction is enormously expensive, costing $1-$3 million dollars per mile to build. Make no mistake – these costs are passed to you in your electric bill. For consumers already worried about rising prices, there’s a proven solution: competition.

The Role of Competition in Reducing Your Costs

When utilities compete for transmission projects through a fair bidding process, consumers win. Competition encourages companies to innovate, streamline processes, and lower costs to secure the contract. Competition saves consumers 20-30%, or $600,000 to $900,000 per mile. Here are some real-world examples of cost-saving competition in action:

• Missouri: The Fairport-to-Denny project was estimated to cost $161 million. Competitive bidding brought the cost down to $74 million, saving consumers $87 million, or 54%.

• New Jersey: The state saved $900 million on a single project by using competitive bidding, with more savings expected in future projects.

• Kansas and Oklahoma: Competitive bids on transmission projects saved consumers $84 million combined, without sacrificing quality or reliability.

The Threat of Right of First Refusal (ROFR) Laws

Unfortunately, some states are passing "Right of First Refusal" laws, which allow incumbent utilities to bypass competition for new transmission projects. These laws stifle innovation and lead to skyrocketing costs:

• In Minnesota, a major transmission project’s costs doubled to $1.14 billion after the state implemented a ROFR law. Consumers are now stuck footing the bill.

• The Electric Transmission Competition Coalition found that “If all new transmission projects were competitively bid…ratepayers could save an estimated $840 billion by 2050.”

The Stakes for Consumers

Without competition, utilities lack incentives to control costs and deliver on time. Imagine if the law kept you from getting multiple bids for a major car repair.  Instead, you had to take your car to an auto repair shop picked by politicians. That repair shop would have no incentive to provide good service or affordable rates. You’d end up paying whatever the repair shop wanted to charge you and accept their work whether it fixed your problem or not.  That’s a crazy way to provide auto repairs, but that’s exactly what ROFR does for power line construction.  And those projects cost millions of dollars and have a big impact on your electric bill. 

A Path Forward

As consumers, we need to advocate for cost-saving competition in electric transmission projects. By opposing ROFR laws, we can ensure fair bidding processes that lower costs and encourage innovation. In a time of rising prices, competition isn’t just an economic principle, it’s a necessity for protecting our wallets.

Let’s demand a fair race where the best ideas win, ensuring affordable and reliable electricity for everyone.