The City of Idaho Falls lost an appeal to claim eminent domain outside of city limits for the North Loop Transmission Project on Tuesday.
Homeowners didn't want their property condemned to build the transmission lines.
The Alliance for Property Rights took the city to U.S. District Court.
When the court ruled in favor of the group of homeowners, the city appealed to the 9th Circuit Court of Appeals.
The higher court is upholding the earlier decision.
Bryon Reed, co-chair of the Alliance for Property Rights, heralded Tuesday's decision.
"It further shows that the city went beyond the law when they threatened condemnation on dozens of properties and they trespassed while working on the route," he said in an email to the station. "The city also must now pay all legal fees for the Alliance of Property Rights. These legal fees will bepaid out of the general fund. ... This has been a great loss to the taxpayers of Idaho Falls."
Still, the city said the need for more electricity is not going away.
"In some cases, it is truly a matter of life and safety as we continue to provide heat and electricity with the current capacity constraints," said Idaho Falls Power General Manager Jackie Flowers.
Flowers said the city had "never decided to pursue eminent domain action against any property owner."
Idaho Falls Mayor Jared Fuhriman said this was an important case for the city.
"Although the city did not initiate the legal action, we felt it was important to get clarification for all parties involved from the courts related to the city's eminent domain
powers," he said.