Third Circuit Decision Limits State Siting Authority in Regional Transmission Project

Strategic Insights -

The U.S. Court of Appeals for the Third Circuit issued a precedential decision in Transource Pennsylvania LLC v. Pennsylvania Public Utility Commission (Transource), affirming a district court ruling that the Supremacy Clause of the U.S. Constitution preempts the Pennsylvania Public Utility Commission's (PAPUC) denial of siting applications for a regional transmission project previously approved by PJM Interconnection LLC (PJM), a regional transmission organization regulated by the Federal Energy Regulatory Commission (FERC).

The case arose from PJM's selection of Transource's Project 9A to alleviate congestion on the AP South Reactive Interface, a transmission bottleneck affecting electricity prices in Maryland, Virginia, and the District of Columbia. PJM approved the project using its FERC-approved benefit-cost methodology, which evaluates regional transmission needs and economic efficiency. Despite PJM's approval, the PAPUC denied Transource's siting applications, citing insufficient need for the project and adverse impacts on Pennsylvania ratepayers.

The Third Circuit held that the PAPUC's decision conflicted with federal objectives by second-guessing PJM's benefit-cost analysis and obstructing the implementation of federally mandated regional transmission planning. The court emphasized that FERC's authority over interstate transmission planning includes the power to approve methodologies for evaluating congestion-relief projects, and state regulators cannot override those determinations based on their own evaluation of the need for such projects.

The Transource decision signals a narrowing of state discretion in transmission siting when projects originate from a FERC-authorized regional transmission organization's transmission planning process. It also underscores the importance of federal oversight in ensuring just and reasonable rates and nondiscriminatory access to transmission infrastructure across state lines.

Key Takeaways:

  • The Third Circuit's Transource ruling highlights the evolving balance of federal and state jurisdiction under the Federal Power Act (FPA).
  • Regional transmission organizations, like PJM, have significant authority over the development and implementation of transmission projects, including the evaluation of regional need and economic efficiency.
  • States may face limits on their ability to block projects that serve broader regional interests, particularly when those projects originate from a FERC-authorized regional transmission organization's transmission planning process.
  • The court's decision may prompt further litigation and could ultimately reach the U.S. Supreme Court, given its implications for federalism and energy infrastructure development.

Statistics:

  • The Transource Project aims to alleviate congestion on the AP South Reactive Interface, a transmission bottleneck affecting electricity prices in Maryland, Virginia, and the District of Columbia.
  • PJM approved the project using its FERC-approved benefit-cost methodology, which evaluates regional transmission needs and economic efficiency.
  • The Third Circuit decision is precedential and may set a precedent for future cases involving state-federal jurisdiction over transmission siting and planning.

Sources:

  • Transource Pennsylvania LLC v. Pennsylvania Public Utility Commission (Transource), U.S. Court of Appeals for the Third Circuit, Sept. 5, 2025.
  • PJM Interconnection LLC (PJM), FERC-approved benefit-cost methodology for evaluating regional transmission needs and economic efficiency.
  • Federal Energy Regulatory Commission (FERC), authority over interstate transmission planning and regulation of regional transmission organizations.
  • Mondaq Ltd, "Third Circuit Decision Limits State Siting Authority in Regional Transmission Project" (2025).