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.

After extensive briefing, 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.”

The court’s opinion and briefs filed in this case are available at https://statepowerproject.org/pennsylvania/.