Commerce Clause and Supremacy Clause Challenge to Transmission Permitting Decision
Transource LLC v. Defrank

Commerce Clause Challenge to Alternative Energy Portfolio Standard
West Virginia v. Defrank

Transource LLC v. Defrank
Recent Developments: Federal appeals court affirmed district court decision that the PUC’s order is preempted by the Federal Power Act.
Case Documents

Case Summary

Transmission developer Transource challenged the Pennsylvania Public Utility Commission’s decision to deny Transource’s application to construct an interstate transmission line. Under Pennsylvania law, the PUC may grant an application only if it finds that “there is a need” for the project. Transource claims that the PUC’s conclusion about “need” in this case is: 1) preempted by PJM’s finding that Transource’s project is economically beneficial; and 2) violates the dormant Commerce Clause because the PUC’s goal was to restrict the flow of low-cost power to benefit of in-state consumers.

PJM is the transmission operator that plans transmission expansion projects in Pennsylvania and surrounding states pursuant to procedures in its tariff that is approved by the Federal Energy Regulatory Commission (FERC). PJM’s projects are financed through cost sharing formulae approved by FERC and ultimately paid for by the region’s consumers.

In 2014, PJM found that lack of transmission capacity was causing higher energy prices in parts of Maryland and surrounding areas. To relieve this “congestion,” PJM solicited proposals for transmission projects that would allow more low-cost power to flow on the regional network. After receiving approximately 40 proposals, PJM chose Transource’s project that would traverse parts of Maryland and Pennsylvania. In 2020, the Maryland Public Service Commission granted Transource siting permission.

In 2021, the Pennsylvania PUC concluded that Transource had failed to demonstrate that its proposed project was needed. The evidence showed that while PJM anticipated that the project would reduce regional power costs, prices in Pennsylvania would increase. The PUC concluded that it must consider this “potential negative and practical impact on the citizens and consumers of Pennsylvania,” and that this potential compels it to independently assess PJM’s conclusion that the project will be regionally beneficial. Ultimately, the PUC adopted the recommendation of its administrative law judge to reject the project because Transource failed to carry its evidentiary burden about whether the project was “needed” under Pennsylvania law.

In its complaint, Transource claims that the PUC based its denial on analysis that is “directly contrary to the federally approved methodology used by PJM in assessing whether there is a regional need for new transmission.” The order therefore “frustrates the federal process for determining what transmission projects are needed.” Because the PUC’s order “is in direct conflict with federal law” and “is an obstacle to the achievement of both PJM’s and FERC’s objectives,” it is preempted by FERC’s regulations under the Federal Power Act. Transource also claims that the PUC’s order amounts to local protectionism in violation of the dormant Commerce Clause doctrine. By “reserving to Pennsylvania customers the economic advantage supplied by current constraints,” the PUC attempts to obstruct the flow of interstate power for the benefits of its consumers.

The district court held that the PUC’s decision conflicts with and is preempted by the Federal Power Act. Under the Federal Power Act, FERC directed PJM to plan regional transmission projects and approved various methods for finding regionally beneficial projects. The court concluded that although the PUC styles its permit denial “as an exercise of siting authority, it was regional transmission planning in reality.” The PUC’s denial was “not related to the particular place of the project” and instead “clearly overlapped with PJM’s regional transmission planning analysis.” Because the PUC may not “undercut” PJM’s planning and may not “pose obstacles to FERC’s pursuit of reducing congestion,” the court held that the PUC’s order is preempted under the Federal Power Act.

The court also held that the PUC’s order violates the dormant Commerce Clause in purpose and effect. The court found that the “PUC’s opposition to the project is rooted in economic protectionism.” While the “very nature of the project is to improve the flow of wholesale electricity across state lines,” the PUC’s denial is “focused on protecting the interests of Pennsylvanians.”

On appeal, the Third Circuit affirmed the District Court’s preemption holding and did not decide the dormant Commerce Clause claim. The panel concluded that FERC-regulated transmission planning furthers FERC’s goals of ensuring just and reasonable and not unduly discriminatory transmission service. Because the PUC’s permit denial was “the result of second-guessing FERC’s methodology” for evaluating transmission projects, it “undercuts” FERC’s purpose of ensuring just and reasonable rates. The PUC’s order was therefore preempted because it “posed an obstacle to the full achievement of federal purposes.”

Third Circuit

Opinion (Sep. 5, 2025)

Filed Briefs
Pennsylvania’s Opening Brief (May 10, 2024)
Pennsylvania’s Reply Brief (Aug. 14, 2024)

Amicus Briefs in Support of Pennsylvania
• National Association of Regulatory Utility Commissioners (NARUC)
• State Consumer Advocates
• Stop Transource Franklin County
• Members of the Pennsylvania General Assembly

Transource’s Intitial Brief (Jul. 10, 2024)

PJM’s Amicus Brief in Support of Transource (Jul. 17, 2024)

Oral Argument Recording (Dec. 5, 2024)

District Court Decision
Opinion (Dec. 6, 2023)
Memorandum Denying Pennsylvania’s Motion to Dismiss as Procedurally Improper (Dec. 6, 2023)

Complaint
Transource’s Complaint (Jun. 22, 2021)

Filed Briefs
Transource Motion for Summary Judgment (Jul. 7, 2021)
Pennsylvania’s Brief in Support of Motion to Dismiss (Jul. 23, 2021)
Pennsylvania’s Brief in Opposition to Transource’s Motion for Summary Judgment (Jul. 27, 2021)
Transource’s Brief in Opposition to Motion to Dismiss (Aug. 6, 2021)
Transource’s Reply Brief in Support of Motion for Summary Judgment (Aug. 10, 2021)
Pennsylvania’s Reply Brief in Further Support of Motion to Dismiss (Aug. 13, 2021)

On August 26, 2021, the court issued an order holding the case in abeyance until the conclusion of state court proceedings.

Pennsylvania’s Supplemental Brief in Support of Motion to Dismiss (Jun. 17, 2022)
Transource’s Reply to Supplemental Brief (Jul. 1, 2022)
Pennsylvania’s Supplemental Reply Brief in Support of Motion to Dismiss (Jul. 14, 2022)

On August 8, 2022, the court issued an order denying Pennsylvania’s motion to dismiss, which it had filed on July 23, 2021.

Pennsylvania’s Brief in Support of Motion for Summary Judgment (Mar. 7, 2023)
Franklin County’s Amicus Brief in Support of Pennsylvania (Mar. 15, 2023)
Transource’s Brief in Support of Cross Motion for Summary Judgment (Mar. 29, 2023)
Transource’s Reply Brief in Support of Cross Motion for Summary Judgment (May 3, 2023)
Pennsylvania’s Reply Brief in Support of Motion for Summary Judgment and Brief in Opposition to Transource’s Motion for Summary Judgment (Apr. 19, 2023)
PJM’s Amicus Brief in Support of Transource (Jun. 12, 2023)
Pennsylvania’s Brief in Support of Motion for Judgment on the Pleadings (Aug. 28, 2023)
Transource’s Brief in Opposition (Sep. 11, 2023)
Pennsylvania’s Reply Brief in Support of Motion for Judgment on the Pleadings (Oct. 2, 2023)
Transource’s Sur-Reply in Opposition to Motion for Judgment on the Pleadings (Oct. 5, 2023)

State Commission Decisions
Pennsylvania Public Utility Commission Order Denying Application (May 24, 2021)
Maryland Public Service Commission Order Granting Settlement and Granting Certificate of Public Convenience and Necessity (Jun. 30, 2020)

West Virginia v. DeFrank
Recent Developments: West Virginia filed its complaint in September 2026
Case Documents

Case Summary

On September 3, 2026, West Virginia’s attorney general filed a lawsuit in federal district court claiming that aspects of Pennsylvania’s alternative energy portfolio standard (AEPS) violate the dormant Commerce Clause. The complaint targets laws enacted in 2017 and 2020 that allegedly “wall off” Pennsylvania’s alternative energy credit market from interstate competition by setting geographic eligibility criteria for certain types of credit-generating resources.

Created by the Pennsylvania General Assembly in 2004, the AEPS requires utilities and other companies selling electricity to consumers to supply at least 18 percent of their power from qualifying resources. The law divides the 18 percent requirement into three compliance obligations. Companies must meet about half of the requirement through Tier I generators, which include solar, wind, and other renewable resources that meet typical state renewable portfolio standards. A 2007 amendment requires companies to meet a small percentage of the Tier I requirement with solar.

More than half of the AEPS requirement must be met with Tier II resources. Tier II resources include generators smaller than five megawatts, large-scale hydro, municipal solid waste, and waste coal, which is leftover material from coal mining. Pennsylvania utilities and other companies with AEPS compliance obligations meet all three requirements by purchasing and retiring energy credits generated by Tier I, solar, and Tier II resources.

West Virginia’s lawsuit argues that amendments to the AEPS “effectively mandate” that solar and Tier II resources have “physical presence in Pennsylvania.” These amendments are facially discriminatory, according to West Virginia, and further violate the dormant Commerce Clause doctrine because they were enacted for a discriminatory purpose and have discriminatory effects.

Act 40 of 2017 added eligibility criteria for generators to meet the solar mandate. Resources must “directly deliver” generated electricity to a retail customer in Pennsylvania, be “directly connected” to local distribution system within Pennsylvania, or “connect directly” to the transmission system within Pennsylvania. Act 114 of 2020 imposed the same criteria on Tier II resources. It also allowed resources to qualify for Tier II if they are subject to permits issued by the Pennsylvania Department of Environmental Protection.

West Virginia’s complaint includes statements by Pennsylvania legislators and by utility commissioners that it claims demonstrate discriminatory purpose. For instance, in a statement accompanying the utility commission’s order implementing Act 40, the chair and vice chair of the commission noted that the Act 40 was intended to “close the borders” to “foster economic development in the state.”

The complaint also documents the allegedly discriminatory effects of the amendments. Prior to the amendments, companies sourced about 60 percent of solar credits and 40 percent of Tier II credits from out-of-state resources. Following implementation of each amendment, the share of in-state resources spiked. In 2025, all Tier II credits were sourced from in-state resources and only a few out-of-state solar credits qualified under legacy contracts entered into prior to Act 40 implementation.

West Virginia also alleges that the amendments burden interstate commerce under the Supreme Court’s Pike balancing test. The complaint claims the amendments impose a “severe burden on interstate commerce by excluding otherwise eligible out-of-state” generators. That results in lost tax revenues in other states and lost ratepayer savings that would accrue from West Virginia utilities selling credits to Pennsylvania companies.

West Virginia is asking the court to enjoin Pennsylvania utility regulators from enforcing the in-state requirements and order them to recognize otherwise eligible out-of-state resources. The complaint does not seek to invalidate other aspects of Pennsylvania’s AEPS.

Complaint (Sep. 3, 2026)