As artificial intelligence, data centers, and electric vehicles drive unprecedented electricity demand, our aging transmission infrastructure struggles to keep pace. At the center of this crisis lies an obscure but powerful legal provision: the Right of First Refusal, or ROFR. These laws grant incumbent utilities exclusive rights to build new transmission projects, effectively creating regional monopolies that stifle innovation.
The current level of electricity demand is unprecedented. The Texas grid repeatedly broke consumption records in 2024. Yet Texas and other grids are less able to attach to new power supplies than in the past. The construction of high-voltage transmission lines has plummeted from 2,000 miles annually to just 700.
The reason we have fewer new transmission lines is bad federal and state policy. Since 1996, the Federal Energy Regulatory Commission has encouraged open access of new utilities to transmission lines. Yet federal rules for a long time allowed existing utilities priority in the construction of these new lines, known as ROFR, from which they could exercise a type of veto on competitors. In 2024, after a short attempt to end this policy, the commission put a version of it back in place, reinforcing incumbent utilities' dominance precisely when the grid demands innovation.
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Eric Olson is an associate professor of finance at the University of Tulsa. This piece is based off of a recent report.
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