The U.S. Court of Appeals for the Third Circuit issued a precedential decision in Transource Pennsylvania LLC v. Pennsylvania Public Utility Commission (Transource) on Sept. 5, 2025. The Third Circuit affirmed 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.
Implications for State Siting Authority
While reaffirming that states retain authority over siting, permitting and constructing transmission facilities, the Third Circuit clarified that such authority cannot be exercised in a manner that undermines federally approved regional planning processes. The court distinguished between legitimate siting concerns – such as environmental and safety impacts – and impermissible reevaluation of regional need already determined by PJM and FERC.
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). As regional transmission planning becomes increasingly critical to grid reliability and decarbonization goals, states may face limits on their ability to block projects that serve broader regional interests. 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.
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