Transource Pennsylvania, LLC v. DeFrank

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

TRANSOURCE PENNSYLVANIA, : Civil No. 1:21-CV-01101

LLC, :

:

Plaintiff, :

:

v. :

:

STEVEN M. DEFRANK, et al., :

:

Defendants. : Judge Jennifer P. Wilson

MEMORANDUM

This is a declaratory judgment action filed by Plaintiff Transource

Pennsylvania, LLC (“Transource”) against the Pennsylvania Public Utility

Commission (“PUC”) and its Commissioners (collectively, “Defendants”).

This case concerns federalism and the allocation of powers between federal

and state entities. The federal government has reserved for itself the power to

regulate the transmission of electric energy in interstate commerce, including in

wholesale ratemaking and interstate and regional planning. The federal

government exercises these powers through the Federal Energy Regulatory

Commission (“FERC”). FERC has, in turn, delegated some of these powers to

Regional Transmission Organizations (“RTOs”). The RTOs assess regional needs

by methods approved by FERC, which include economic analyses. By contrast,

the states retain the powers of siting, construction, and permitting for regional

energy infrastructure.

In this case, the RTO at issue determined a need for regional transmission

lines. But, when Transource, the entity with which the RTO was collaborating,

submitted its application to the PUC, the application was denied. Specifically, the

PUC made a determination that the project was not needed. In substance, the PUC

did not base its determination on considerations of siting or construction, but

instead on whether it was worthwhile to ensure that consumers across a region or

across state lines have similar access to low-priced electricity.

The court must decide whether the PUC has violated the Constitution in

making this determination. Specifically, the court must determine whether the

PUC violated the Supremacy Clause, by issuing a decision directly conflicting with

federal law or serving as an obstacle to federal objectives. The court must likewise

determine whether the PUC’s decision violated the dormant Commerce Clause

either by denying the application out of economic protectionism or burdening

interstate commerce. To some extent, these issues overlap, though the court will

address them individually below. For the reasons explained in the following

sections, the court finds that the PUC’s decision violated the Supremacy Clause

and the dormant Commerce Clause. Based on these findings, the court will deny

Defendants’ motion for summary judgment and grant Transource’s motion for

summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND1

A. Federal and state regulatory regimes

In the Federal Power Act (“FPA”), Congress provided FERC with broad

powers. 16 U.S.C. § 791a, et seq. Included among these powers are the authority

to regulate wholesale sales of electricity and transmission of electric energy in

interstate commerce. Id. at § 824. It also provided FERC with authority to

regulate practices that affect the rates for these activities. See id. at §§ 824b, 824d,

824e. FERC must ensure the rates and practices which affect transmission of

electricity are “just and reasonable.” Id. at §§ 824d(a), 824e(a).

The FPA empowers FERC with the ability to regulate “the transmission of

electric energy in interstate commerce,” but with the caveat that “such Federal

regulation, however, to extend only to those matters which are not subject to

regulation by the States.” Id. at § 824(a). Despite this language, the Supreme

Court has observed that the FPA expanded federal powers into areas historically

regulated by states. The Court noted that the FPA did “a good deal more” than

augment FERC’s powers to include areas hitherto exercised neither by federal nor

1 This section of this memorandum includes only the background relevant to the resolution of the

motions for summary judgment. Any additional factual recitation that is necessary for the

discussion of each specific issue is included in the Discussion section of this memorandum. In

considering the instant motion for summary judgment, the court relied on the uncontested facts.

Where facts were disputed, the court viewed the facts in the light most favorable to the

nonmoving party and has drawn all inferences in favor of the nonmovant, pursuant to the

relevant standard for deciding a motion for summary judgment. See Doe v. C.A.R.S. Protection

Plus, Inc., 527 F.3d 358, 362 (3d Cir. 2008).

state regulators. New York v. FERC, 535 U.S. 1, 21 (2002). Instead, the FPA

“authorized federal regulation not only of wholesale sales that had been beyond the

reach of state power, but also the regulation of wholesale sales that had been

previously subject to state regulation.” Id. Two powers which the FPA reserved

for the federal government were regulating interstate transmissions as well as

interstate wholesale sales. Id.

In addition, the Supreme Court described the limiting language of federal

powers in § 824(a) as “a mere policy declaration.” Id. at 22. The Court further

noted that such a policy declaration “cannot nullify a clear and specific grant of

jurisdiction [to FERC], even if the particular grant seems inconsistent with the

broadly expressed purpose.” Id. (internal quotation marks omitted).

Under the FPA, FERC delegates some of its powers and responsibilities to

RTOs. (Doc. 164, ¶ 1.) One such RTO is PJM Interconnection, L.L.C. (“PJM”).

(Doc. 164, ¶ 1.) FERC charged PJM with maintaining the bulk electric

transmission system of a 13-state region, which includes most of Pennsylvania.

(Id.)

In 2011, FERC issued Order No. 1000, which had two primary objectives:

(1) Ensure that transmission planning processes at the regional level

consider and evaluate, on a non-discriminatory basis, possible

transmission alternatives and produce a transmission plan that can meet

transmission needs more efficiently and cost-effectively; and (2) ensure

that the costs of transmission solutions chosen to meet regional

transmission needs are allocated fairly to those who receive benefits

from them.

Transmission Planning and Cost Allocation by Transmission Owning and

Operating Public Utilities, FERC Order No. 1000, 76 Fed. Reg. 49,842, 49,845

(2011) (“Order 1000”). Order 1000 made clear that the federal determination of

regional transmission planning and cost allocation includes “the processes used to

identify and evaluate transmission system needs and potential solutions to those

needs.” Id. at 49,861. But it does not include state matters, such as “siting,

permitting, and construction.” Id. As a result, even where regional planning

identifies and selects a regional transmission plan or project, “such solutions may

not ultimately be constructed should the developer not secure the necessary

approvals from the relevant state regulators.” Transmission Planning and Cost

Allocation by Transmission Owning and Operating Public Utilities, FERC Order

No. 1000-A, 77 Fed. Reg. 32,184, 32,215 (2012) (“Order 1000-A”).

Under the federal regime, the responsibilities of RTOs include “planning,

and [] directing or arranging, necessary transmission expansions, additions, and

upgrades that will enable it to provide efficient, reliable and non-discriminatory

transmission service and coordinate such efforts with the appropriate state

authorities.” 18 C.F.R. § 35.34(k)(7). As part of their planning process, an RTO

“must encourage market-driven operating and investment actions for preventing

and relieving congestion.” Id. at § 35.34(k)(7)(i).

While the federal government and RTOs are responsible for planning and

directing non-discriminatory transmission, the state has a separate purview. The

states’ authority encompasses issues of siting, permitting, and construction for

regional transmission projects. As applicable in this case, Pennsylvania law

provides that before constructing an electric transmission line, public utilities like

Transource must submit a siting application to the PUC. (Doc. 148, p. 20.)2 The

PUC is the Pennsylvania agency responsible for “oversight of the siting and

construction of electric transmission lines.” (Doc. 164, ¶ 83.)

To obtain approval for their application, public utilities must satisfy the

following requirements by a preponderance of the evidence:

1) That there is a need for it.

2) That it will not create an unreasonable risk of danger to the health

and safety of the public.

3) That it is in compliance with applicable statutes and regulations

providing for the protection of the natural resources of this

Commonwealth.

4) That it will have minimum adverse environmental impact,

considering the electric power needs of the public, the state of

available technology and the available alternatives.

52 Pa. Code § 57.76(a).

2 For ease of reference, the court utilizes the page numbers from the CM/ECF header.

There is no dispute as to the existence or characterization of the federal and state regulatory

regimes that apply to the Project. Therefore, some references for this subsection are drawn from

the parties’ briefing.

B. PJM’s regional assessment

In addressing congestion, FERC directed PJM in June 2007 to “file a

formulaic approach to choose economic projects proposed to reduce congestion

that describes exactly how any metrics will be calculated, weighed, considered,

and combined.” PJM Interconnection, L.L.C., 119 FERC ¶ 61,265, 62,492–62,493

(2007); see also Doc. 164, ¶ 16. In October 2007, PJM proposed such a formulaic

approach to FERC. (Doc. 164, ¶ 17.)

In the context of an electricity transmission grid, “[c]ongestion occurs when

the least costly resources that are available to serve load in a given region cannot

be dispatched because transmission facility limits constrain power flow on the

system.” (Doc. 157, ¶ 10; Doc. 164, ¶ 10; Doc. 157-1, p. 18.) According to a 2008

FERC order, “without a process for identifying economic transmission, PJM's

customers located in load pockets and separated from the rest of the system by

congested transmission bottlenecks, will have few opportunities to access

alternative resources that have lower prices for electricity.” PJM Interconnection,

L.L.C., 123 FERC ¶ 61,051, 61,411–61,412 (2008) (“2008 FERC Order”).

In partial fulfillment of its RTO responsibilities, PJM creates an annual

Regional Transmission Expansion Plan (“RTEP”). (Doc. 159, ¶ 7.) A component

of the RTEP is a market efficiency analysis, in which PJM identifies areas where

congestion exists and identifies solutions to reduce the identified congestion. (Id.

¶ 8.)

Under the approach that PJM proposed to FERC in October 2007, it would

conduct market efficiency analysis for proposed projects. (Doc. 164, ¶ 17.) This

analysis would provide a benefit-cost ratio for a given project over a 15-year span.

(Id. ¶¶ 17–18.) For PJM to include a given project in its RTEP, the benefit-cost

ratio must be at least 1.25 to 1.0. (Id. ¶ 18.) On April 17, 2008, FERC approved

PJM’s proposed approach. (Doc. 164, ¶ 21; Doc. 157-8; see also 2008 FERC

Order, 123 FERC at 61,416.)

FERC acknowledged objections to PJM’s proposed method but explained

that PJM’s approach was reasonable. (Doc. 164, ¶ 22.) In PJM’s approach, benefit

and cost of a project would be analyzed by “summing the energy benefit . . . for

only those zones that experience reduced energy payments – which are the zones

that would be assigned the costs of these facilities.” (Id.) The calculation would

not include “the expected energy payment increases, if any, in other zones.” (Id.)

FERC found “this approach reasonable because it would match the project

selection process to the existing cost allocation method. That is, it would evaluate

the load payment benefits of those loads that will be assigned the costs of the new

facilities.” (Id.)

C. The Project

Before soliciting projects for PJM’s 2014/2015 window, PJM identified

congestion within its region, and specifically “on the AP South Reactive Interface”

subregion (“APSRI”). (Doc. 164, ¶¶ 61–62.)3 PJM found that congestion across

the APSRI along the Pennsylvania-Maryland border had imposed “economic

transmission constraint costs totaling approximately $800 million from 2012

through 2016.” (Id. ¶ 62.)4

In October of 2014, PJM opened a “long-term RTEP proposal window . . . to

solicit market efficiency proposals in order to alleviate congestion” in the APSRI.

(Doc. 159, ¶ 21.) In response to PJM’s solicitation, the parent company of

Transource proposed a project (“Project”).5 (Id. ¶ 22.) The Project is a set of

proposed transmission lines beginning in West Virginia and ending in Maryland.

(Id. ¶ 23.) The portion of the Project at issue in this action would place high

voltage transmission lines in Pennsylvania’s Franklin and York Counties, where

3 Defendants state that they dispute this fact, but fail to cite to any evidence that negates the

existence of congestion. Instead, they assert that the amount of congestion dropped precipitously

beginning in 2015. (Doc. 164, ¶ 62.) But this does not negate Transource’s assertion that PJM

found congestion on the AP South Reactive Interface from 2012 to 2016. (Id.)

4 Defendants again state that they dispute this fact, but fail to cite to any evidence that negates

the existence of congestion. Instead, they assert that the amount of congestion dropped

precipitously beginning in 2015. (Doc. 164, ¶ 62.)

5 The Project is alternatively referred to as Project 9A or the Independence Energy Connection

Project (“IEC Project”). (Doc. 159, ¶ 22.) But the IEC Project is also referred to as a subset of

Project 9A. (Id. ¶ 24; Doc. 164, ¶¶ 64–66.) For ease of use and clarity, this memorandum uses

the term “Project.”

they would run from new substations to the Pennsylvania/Maryland border. (Id.

¶ 24.)

The PJM Board approved the Project in 2016, determining that it was “the

more efficient, cost-effective project” to address the congestion in the APSRI.

(Doc. 164, ¶ 68.)6 The Project, if built, would benefit parts of Virginia, Maryland,

Washington, D.C., and Western Pennsylvania. (Id. ¶ 71.) Meanwhile, other

regions which benefit from the current congestion would “no longer have the

benefit of [the] lower-cost power.” (Id. ¶¶ 71–72.)

As of March 2020, PJM projected that the Project would lead to lower costs

in benefited areas by $844,806,909.44. (Id. ¶¶ 73, 77.) At the time, the Project’s

construction cost, which would be paid by the customers of benefiting areas, was

estimated to be between $509 million and $528 million. (Id. ¶ 78.) The Project

thus “exceeded the 1.25:1 benefit-cost threshold required under PJM’s Operating

Agreement for market efficiency projects.” (Doc. 157-7, p. 57.)7

6 Although Defendants dispute this fact, their citation to the record does not actually contradict

this fact. (Doc. 164, ¶¶ 68, 137.)

7 Although Defendants dispute this fact, their citation to the record does not contradict this fact.

Transource relies on a 2020 ALJ recommendation which, in turn, states that “PJM’s basis for

selecting the IEC Project is that it exceeded the 1.25:1 benefit-cost threshold required under

PJM’s Operating Agreement for market efficiency project.” (Doc. 164, ¶ 79; Doc. 157-7, p. 57.)

Defendants seek to contradict this assertion by relying on a 2022 PJM document which provides

a “2021 Re-Evaluation of Project 9A,” including various benefit-to-cost ratios and one of 1.00.

(Doc. 164, ¶ 79; Doc. 164-2, p. 95.) But Defendants’ citation, showing a later and different ratio,

does not refute the accuracy of the earlier figure.

In November 2016, PJM and Transource’s parent company executed a

Designated Entity Agreement (“DEA”), which allocated responsibilities between

PJM and Transource for the Project. (Doc. 164, ¶ 80.) In January 2017, FERC

approved the DEA. (Id. ¶ 81.) In the same order, FERC determined that the

Project would “reduce the cost of delivered power by reducing transmission

congestion.” (Id. ¶ 82.)

On February 8, 2017, Transource filed an application for the Project to the

PUC. (Doc. 164, ¶ 84.) Throughout 2017 and 2018, the PUC granted various

approvals to Transource applications, none of which are relevant to the analysis in

this memorandum. (Id. ¶¶ 84–88.)

On December 22, 2020, the PUC Administrative Law Judge (“ALJ”) issued

a Recommended Decision, which recommended that the PUC deny Transource’s

siting applications because Transource had failed to show a need for the project.

(Id. ¶ 89.) The ALJ stated that, in determining a need under Pennsylvania law, the

PUC may consider economic and environmental impacts. (Id. ¶ 91.)

The ALJ determined that the benefit-cost methodology, approved by FERC

and used by PJM to assess whether the Project was worthwhile, was “deficient

when measured against the constitutional, statutory, and regulatory standards of

Pennsylvania law.” (Doc. 157-7, p. 104.) The ALJ considered Transource’s

argument that “congestion represents a form of rate discrimination.” (Id. at 105.)

The ALJ disagreed and concluded that “[e]conomic congestion is not a form of rate

discrimination, rather, it is a market-based response to a variety of factors.” (Id. at

106.)

The ALJ concluded that “Pennsylvania has benefitted from its participation

in PJM and through regional transmission planning; however, under these

particular circumstances, the IEC Project as a market efficiency project does not

provide sufficient benefits to Pennsylvania or the PJM region as a whole.” (Doc.

164, ¶ 94.) The ALJ was persuaded by witness testimony that, if the Project were

built, it could save “utilities in Maryland, Virginia, and the District of Columbia

almost a billion dollars over 15 years,” but if the Project were not built, the same

power would be used “in Pennsylvania, Ohio, Illinois, and New Jersey at a cost of

about $970 million.” (Id.) The ALJ concluded the following:

PJM’s failure to consider increased wholesale power prices in

Pennsylvania when calculating the benefit-cost ratio, frequent changes

to how the benefit-cost ratio is calculated even during this proceeding,

changes to how the benefits are simulated, and the uncertain nature and

extent to which transmission zones benefit all cast doubt on the

benefits, if any to Pennsylvania.

(Id.) The ALJ concluded that “[i]ncreased wholesale power prices are real costs to

customers that show there is no need for the project.” (Id.) For that reason, the

ALJ recommended that the siting applications and eminent domain applications be

denied because “no need ha[d] been proven.” (Id. ¶ 95.)

Transource appealed the ALJ’s Recommended Decision to the PUC. (Doc.

159, ¶ 39; Doc. 164, ¶ 96.) On May 24, 2021, the PUC issued its order, which

forms the basis of this litigation. (Doc. 159, ¶ 40; Doc. 164, ¶ 97; see Doc. 157-1.)

The order denied Transource’s siting applications and “adopted and incorporated”

the ALJ’s findings. (Doc. 159, ¶ 40; Doc. 164. ¶ 98.)

In considering Transource’s application, the PUC agreed with the ALJ that it

was free to set aside PJM’s economic analysis in determining the need or benefit-

cost ratio of the Project. (See Doc. 164, ¶ 106.) It stated that “[t]he potential

negative and practical impact on the citizens and consumers of Pennsylvania is our

concern, and it is properly within the scope of our consideration of the weight of

all the evidence on the issue of ‘need.’” (Id.)

The PUC concluded that “the federal authority under which PJM operates

does not extend beyond PJM’s approval process, where approval is sought from a

state commission.” (Id. ¶ 104.) Instead, agreeing with and quoting the ALJ, the

PUC found that “while the Federal Power Act (FPA) does grant FERC exclusive

jurisdiction over the interstate transmission of electric energy and electric

wholesale rates, the FPA limits FERC authority, including its designee, PJM, to

‘those matters which are not subject to regulation by the States.’” (Doc. 157-1,

p. 61.)

In assessing whether a “need” existed for the Project under Pennsylvania

law, the PUC rejected the PJM-approved criteria and methodology. (See Doc. 164,

¶ 106.) The PUC stated that “[t]he potential negative and practical impact on the

citizens and consumers of Pennsylvania is our concern, and it is properly within

the scope of our consideration of the weight of all the evidence on the issue of

‘need.’” (Id.)

On that basis, the PUC noted that relief of economic congestion on a

regional level would result in higher utility rates in Pennsylvania. (Id.) The PUC

concluded that “the ALJ properly considered the negative impacts to Pennsylvania

in evaluating the ‘need’” under state law. (Id.) The PUC also questioned the data

upon which PJM’s analysis rested, finding that it needed to better reflect “current

and existing priority needs on the regional level” to have greater persuasive impact.

(Id. ¶ 107.)

Because the PUC concluded that there was insufficient evidence to establish

“need” under Pennsylvania law for the Project, it rescinded Transource’s

provisional certificate of public convenience. (Id. ¶¶ 109–11.)

Once a market efficiency project, like the Project, is selected, PJM conducts

annual re-evaluations to ensure said project still meets the required 1.25:1 benefit-

cost ratio. (Id. ¶ 113.) In a 2018 PJM white paper, PJM stated that, since 2016, it

had evaluated the Project four times. (Id. ¶ 114.) PJM asserted that, in all four

evaluations, including the most recent in September 2018, the Project had passed

the required 1.25:1 ratio. (Id.) Further, in the most recent re-evaluation, in 2022,

the Project had a ratio of 2.48, which included “sunk costs.” (Id. ¶ 115.)8 In re-

assessing the Project’s benefits to consumers, PJM’s analyses account “for all of

the underlying system fundamentals” that drive changes in congestion, including

modeling parameters, new generation, and new load forecasts. (Id. ¶ 116.)

D. The present action

Transource filed its complaint in this action on June 22, 2021, seeking

declaratory and injunctive relief. (Doc. 1.) Transource sought declaratory relief on

the grounds that the PUC’s decision is preempted under federal law and violates

the dormant Commerce Clause. (Id. at 40.) It also sought injunctive relief

preventing enforcement of the PUC’s decision, including its revocation of

Transource’s Certificate of Public Convenience. (Id. at 41.)

On June 23, 2021, Transource filed a direct appeal of the PUC’s decision

revoking its provisional certificate to the Pennsylvania Commonwealth Court. (Pa.

Commw. Ct. Docket No. 689 CD 2021.) In the appeal, Transource argued that the

PUC “erred in rejecting PJM’s determination of the need for the [] Project, which

was presented as evidence to establish need under” Pennsylvania law. (Doc. 148,

8 Although Defendants dispute this fact, their citation to the record does not contradict this fact.

p. 21.) It also argued that the PUC’s “finding that the [] Project is not necessary to

resolve congestion . . . is not supported by substantial evidence.” (Id. at 21–22.)

In the instant action, Transource filed a motion for summary judgment and a

motion to expedite summary judgment on July 2, 2021. (Docs. 20, 21.) The

parties submitted briefs on the motions. (Docs. 23, 24, 61, 70, 74.) Subsequently,

on July 23, 2021, Defendants filed a motion to dismiss the action for lack of

jurisdiction and failure to state a claim. (Doc. 57.) On August 17, 2021, the court

held oral argument on the motions for summary judgment, to expedite, and to

dismiss. (Doc. 74.)

On August 26, 2021, the court issued an opinion and order denying the

motion to dismiss in part, deferring ruling on the remainder of the motion, and

staying the case, on abstention grounds, pending the outcome of the parallel case

pending before the Pennsylvania Commonwealth Court. (Docs. 82, 83.) On May

17, 2022, Transource notified the court that the case pending before the

Pennsylvania Commonwealth Court had resolved and that the parties wished to

proceed with the litigation in this court. (Doc. 90.) The court lifted the stay on the

same date. (Doc. 91.) Thereafter, the court set a schedule for supplemental

briefing on the pending motions and allowed limited fact discovery in connection

with the motion to expedite. (Doc. 96.)

On August 5, 2022, the court denied Transource’s motion to expedite. (Doc.

116.) On August 8, 2022, the court found the motion for summary judgment was

prematurely filed and denied it without prejudice to refiling by the appropriate

deadline set by the court. (Doc. 119.) Also on August 8, 2022, the court denied

without prejudice Defendants’ motion to dismiss. (Doc. 118.) In so doing, the

court addressed claim and issue preclusion arguments which Defendants had

raised. The court concluded that, under Third Circuit precedent, claim preclusion

should be analyzed under Pennsylvania law, “regardless of whether the plaintiff

has classified its reservation as an England9 reservation.” (Id. at 10.)

The court concluded the following:

[W]hile the PUC’s decision could be entitled to preclusive effect under

Pennsylvania law if Transource should have raised its federal claims

before the Commonwealth Court, but chose not to, the court cannot

answer this question without impermissibly making a fact

determination: whether Defendants objected to Transource’s notice of

its intent to split its claims.

(Id. at 10–11.) The court further concluded that “[i]f Defendants did not object to

Transource’s announced intention to split its claims, ‘[t]hey cannot now benefit

from their silence.’” (Id. at 11 (quoting R & J Holding Co. v. Redevelopment

Auth., 670 F.3d 420, 428 (3d Cir. 2011)).)

9 England v. La. St. Bd. of Med. Exam’rs, 375 U.S. 411 (1964).

On August 11, 2022, the court held an on-the-record conference call. (Doc.

122.) During that call, in response to Plaintiff’s counsel, the court stated the

following: “[I]n light of the rulings I’ve made over the past week, what I’m clearly

trying to convey to you, and now I will say expressly, is that I would like all of the

issues in this case addressed in the summary judgment motions.” (Doc. 168-1,

pp. 13–14.)

In accordance with the on-the-record call, the court issued a case

management order on August 12, 2022. (Doc. 123.) The final deadline that the

order provided was for dispositive motions and supporting briefs to be submitted

by February 15, 2023. (Id.) On February 1, 2023, the court granted a jointly

proposed order to modify the briefing schedule provided in its case management

order. (Doc. 145.) The court-approved order provided in part that Defendants

should file their motion on or before March 8, 2023, and Transource should file its

motion on or before March 29, 2023. (Id.) The parties filed their motions and

supporting briefs in accordance with the court’s order. (Docs. 146–48, 156–59,

164–65, 168–69.) Franklin County, Pennsylvania and PJM filed amici curiae

briefs. (Docs. 155, 172.)10 The court has reviewed the filings and the motions for

summary judgment are ripe for disposition.

10 The court has reviewed these briefs, along with those of the parties, and thanks Franklin

County and PJM for their helpful contributions. Although the court found the amici briefs

helpful, this memorandum cites to the filings submitted by the parties.

On August 28, 2023, without moving to amend this court’s established

deadlines, Defendants filed a motion for judgment on the pleadings. (Doc. 173.)

After the issue was briefed, Transource filed a motion, which the court granted, for

leave to docket a sur reply because Defendants’ reply brief expounded on legal

arguments which their initial brief merely mentioned. (Docs. 181, 183.) The court

addresses the motion for judgment on the pleadings in a separate memorandum and

order.

STANDARDS OF REVIEW

A court may grant a motion for summary judgment when “there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(a). A dispute of fact is material if resolution of

the dispute “might affect the outcome of the suit under the governing law.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is

not precluded by “[f]actual disputes that are irrelevant or unnecessary.” Id. “A

dispute is genuine if a reasonable trier-of-fact could find in favor of the

nonmovant’ and ‘material if it could affect the outcome of the case.” Thomas v.

Tice, 943 F.3d 145, 149 (3d Cir. 2019) (quoting Lichtenstein v. Univ. of Pittsburgh

Med. Ctr., 691 F.3d 294, 300 (3d Cir. 2012)).

In reviewing a motion for summary judgment, the court must view the facts

in the light most favorable to the non-moving party and draw all reasonable

inferences in that party’s favor. Jutrowski v. Twp. of Riverdale, 904 F.3d 280, 288

(3d Cir. 2018) (citing Scheidemantle v. Slippery Rock Univ. State Sys. of Higher

Educ., 470 F.3d 535, 538 (3d Cir. 2006)). The court may not “weigh the evidence”

or “determine the truth of the matter.” Anderson, 477 U.S. at 249. Instead, the

court’s role in reviewing the facts of the case is “to determine whether there is a

genuine issue for trial.” Id.

The party moving for summary judgment “bears the initial responsibility of

informing the district court of the basis for its motion, and identifying those

portions of ‘the pleadings, depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any,’ which it believes demonstrate the

absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). The non-moving party must then

oppose the motion, and in doing so “‘may not rest upon the mere allegations or

denials of [its] pleadings’ but, instead, ‘must set forth specific facts showing that

there is a genuine issue for trial. Bare assertions, conclusory allegations, or

suspicions will not suffice.’” Jutrowski, 904 F.3d at 288–89 (quoting D.E. v. Cent.

Dauphin Sch. Dist., 765 F.3d 260, 268–69 (3d Cir. 2014)).

Summary judgment is appropriate where the non-moving party “fails to

make a showing sufficient to establish the existence of an element essential to that

party’s case, and on which that party will bear the burden of proof at trial.”

Celotex, 477 U.S. at 322. “The mere existence of a scintilla of evidence in support

of the plaintiff’s position will be insufficient; there must be evidence on which the

jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. “Where

the record taken as a whole could not lead a rational trier of fact to find for the

non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co.,

Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

DISCUSSION

A. Arguments About Preclusion

1. Transource’s claims are not barred by claim preclusion.

Defendants argue that Transource’s claims are barred by claim preclusion.

They point out that in this court’s prior order, Doc. 118, it held that “the PUC

proceeding was quasi-judicial in nature, and that the Full Faith and Credit Statute

is applicable to this case.” (Doc. 148, p. 45.) They also assert that, in the same

order, this court held that “the PUC’s decision could be entitled to preclusive effect

under Pennsylvania law if . . . Defendants objected to Transource’s notice of its

intent to split its claims.” (Id.)

In making this argument, Defendants alter the quotation in a way that

fundamentally changes the meaning of this court’s finding. The court explained as

follows in the prior order:

[W]hile the PUC’s decision could be entitled to preclusive effect under

Pennsylvania law if Transource should have raised its federal claims

before the Commonwealth Court, but chose not to, the court cannot

answer this question without impermissibly making a fact

determination: whether Defendants objected to Transource’s notice of

its intent to split its claims. If Defendants did not object to Transource’s

announced intention to split its claims, “[t]hey cannot now benefit from

their silence.” Therefore, the court denies Defendants’ motion to

dismiss on claim preclusion grounds without prejudice to renewal at the

summary judgment stage.

(Doc. 118, pp. 10–11 (quoting R & J Holding, 670 F.3d at 428.)

In making their argument, Defendants cite only their brief to the

Commonwealth Court. (Doc. 148, p. 45–46; Doc. 147, ¶ 52; Doc. 147-9, pp. 55–

68.) That is to say, they focus only on whether the PUC “objected to Transource’s

notice of its intent to split its claims” without providing facts or law to suggest that

“Transource should have raised its federal claims before the Commonwealth

Court.”

Transource counters that Defendants’ argument on claim preclusion fails for

two reasons. First, it misunderstands the England doctrine—an exception to

ordinary claim preclusion. (Doc. 158, p. 50.) Second, even applying Pennsylvania

claim preclusion law, Transource’s claims are not precluded because the

Commonwealth Court expressly preserved Transource’s ability to pursue its

federal claims in this court and because the PUC acquiesced. (Id.)

Transource asserts that England reservation is an exception to the Full Faith

and Credit Statute, 28 U.S.C. § 1738. (Id. (citing Instructional Sys., Inc. v.

Comput. Curriculum Corp., 35 F.3d 813, 821–22 (3d Cir. 1994)).) When England

reservation applies, the state preclusion rules no longer apply to the at-issue state

court decision. (See id.) England explicitly held that a party has waived its right

to litigate federal claims in federal court if it “freely and without reservation

submits his federal claims for decision by the state courts, litigates them there, and

has them decided there.” England, 375 U.S. at 419.

In order to preserve its federal claims for resolution in federal court, a party

need only “inform [the state] courts what his federal claims are, so that the state

statute may be construed ‘in light of’ those claims.” Id. at 420. Transource asserts

that, under this standard, it properly reserved its federal arguments under England.

Per Pennhurst State School & Hospital v. Halderman, it could not bring its state-

law claims against Defendants, as state officials, in front of this court due to the

Eleventh Amendment. (Doc. 158, p. 51 (citing 465 U.S. 89 (1984)).) But

Transource brought its federal claims to this court and then its state claims in the

Commonwealth Court. (Id.)

Transource argues that, because it never “voluntarily” and “fully litigated

[its] federal claims in the state courts,” it should not be “denied [its] right to return

to the District Court.” England, 375 U.S. at 421; Doc. 158, p. 51. For that reason,

the Commonwealth Court’s judgement does not bar Transource’s claim in this

court.

Transource also addresses an argument that Defendants raised in their

motion to dismiss, though not in the current cross-motions. There, Defendants had

argued that the validity of an England reservation was contingent on a defendant

acquiescing to claim-splitting. (Doc. 158, p. 53 (citing Doc. 118, pp. 9–10).)

Transource agrees that “defendant’s acquiescence is one scenario in which claim-

splitting is permitted under Pennsylvania law.” (Id.) But, because England

reservation is an exception to the Full Faith and Credit Statute, when this exception

applies, Pennsylvania law is irrelevant. (Id.)

According to Transource, the Third Circuit explicitly rejected the

proposition that a third party’s actions are determinative in whether England

reservation is effective. (Id.) Instead, “[i]t is the actions of the displaced litigant

which are controlling.” (Id. (quoting Instructional Sys., 35 F.3d at 820–21) (citing

Kovats v. Rutgers, 749 F.2d 1041, 1047 (3d Cir. 1984)).) If consent of the

opposing party were required, it would render as meaningless the England court’s

proclamation that reservation of federal claims for federal court is ineffective only

when the litigant has “freely and without reservation litigated his federal claims in

the state courts.” (Id. (quoting England, 375 U.S. at 420).)

Transource also addresses two cases that Defendants raised at the motion to

dismiss phase. Specifically, it argues that, contrary to Defendants’ assertions,

R & J Holding Co. and Bradley v. Pittsburgh Board of Education do not stand for

the proposition that a defendant’s acquiescence is required for an England

reservation to be effective. (Id. at 54–55 (citing 670 F.3d 420; 913 F.2d 1064 (3d

Cir. 1990)).) Instead, both cases hold only that an objection to an England

reservation can be waived. (Id. at 55.)

Lastly, to the extent that this court held otherwise in its order denying

Defendants’ motion to dismiss, Transource points out that the court may

reconsider. (Id. at 55–56.) As the Third Circuit has stated, “[i]nterlocutory orders

. . . remain open to trial court reconsideration, and do not constitute the law of the

case.” (Id. at 55 (quoting United States ex rel. Petratos v. Genentech Inc., 855

F.3d 481, 493 (3d Cir. 2017)).)

In response, Defendants argue that Transource’s request for reconsideration

is untimely under Local Rule 7.10. (Doc. 165, p. 24.) They next argue that

Transource failed to properly invoke England reservation. They posit that Bradley

stands for the proposition that England reservation must be invoked during the

pendency of the state administrative proceeding. (Id.) They submit that

Transource had to raise its England reservation with the PUC. (Id. at 24–25.)

Lastly, Defendants argue that the PUC did not acquiesce to Transource’s

England reservation. (Id. at 25–26.) Instead, pursuant to the Pennsylvania Rules

of Appellate Procedure, which they assert apply here, Defendants objected to

Transource’s untimely England reservation at the earliest opportunity. (Id. at 25.)

Transource counters that its arguments are timely pursuant to the court’s

instructions to raise all issues in this case in the motions for summary judgment.

(Doc. 168, p. 27.) Next, Transource asserts that Defendants’ argument that

Transource had to invoke England in the PUC proceedings makes little sense. (Id.)

Specifically, “it would have been nonsensical to make an England reservation” to

the PUC because there was no federal claim until “after the PUC acted.” (Id.)

Transource argues that Defendants use Bradley to establish a principle that

does not exist. They point to the following passage from Bradley: “Under England

a party who has been forced to litigate in state court may reserve its federal claims

for federal adjudication by informing the state court of its reservation of those

claims.” 913 F.2d at 1071. Transource argues that this quote shows that England

pertains to parallel court proceedings which challenge state action. (Doc. 168,

p. 28.) While the litigant in Bradley cited England in his administrative appeal, the

Third Circuit in Bradley did not hold that he was “required to do so (rather than

waiting until state court).” (Id.)

In the alternative, to the extent that the litigant in Bradley was required to

raise England during his administrative appeal, that is due to a factual distinction

in Bradley. (Id.) There, administrative appeal provided the first stage of appellate

review of the challenged state action. (Id.) Here, the PUC decision is the

challenged state action. (Id.)

Lastly, Transource argues that Defendants are wrong regarding their

acquiescence in two ways. (Id.) First, it reasserts that Defendants acquiesced to

England reservation. Next, it argues that acquiescence is immaterial because, as

stated in England, “[o]nce issue has been joined in the federal court, no party is

entitled to insist, over another’s objection, upon a binding state court determination

of the federal question.” 375 U.S. at 422 n.13.

Transource has the prevailing arguments on this issue. England reservation

is an exception to the Full Faith and Credit Statute. Instructional Sys., 35 F.3d at

821. Defendants do not address this principle or the Third Circuit precedent of

Instructional Systems. Here, there is no dispute that Transource informed the

Commonwealth Court about its federal claims. There is similarly no dispute that

Transource invoked England reservation at the Commonwealth Court. And

Defendants have not provided binding precedent which required Defendants to

acquiesce in order for Transource to successfully invoke England reservation.

Further, this court will not deny Transource’s arguments as untimely simply

because Transource followed the court’s explicit instructions regarding when to

raise them.

Transource’s analyses of Third Circuit and Supreme Court precedent are

correct. Defendants wish to stretch Bradley and England beyond their boundaries.

Bradley is an example of a case in which a party properly raised England

reservation throughout state administrative proceedings, but nowhere requires

raising reservation at the administrative proceeding stage. And, in the present

instance, Transource’s federal claims arise from the PUC decision.

Defendants argue that, by bringing its dispute to the PUC, Transource

without reservation submitted its federal claims for decision by state courts,

thereby waiving its right to invoke England. (Doc. 165, pp. 24–25.) But

Defendants do not sufficiently support their argument that Transource “without

reservation submit[ed its] federal claims for decision” to the PUC. (Id.) Indeed,

there is no evidence to which Defendants point to support their assertion that

Transource submitted its federal claims to the PUC. Furthermore, this argument

suggests that Transource was required to raise its federal claims with the PUC prior

to the decision which gave rise to them. This simply makes no sense and

Defendants have not cited any binding authority that supports this conclusion.

Moreover, Defendants fail to address Instructional Systems or Kovats, which

show that Defendants were not required to acquiesce for Transource to invoke

England reservation. Accordingly, Transource’s federal claims are not precluded.

2. Issue preclusion does not apply.

Defendants, in a footnote in the brief in support of their motion for summary

judgment, request the court reconsider its prior ruling on issue preclusion. (Doc.

148, pp. 5–6 n.1.) If the court will reconsider, Defendants request an opportunity

to provide supplemental briefing. (Id.) But, as noted above, in an on-the-record

conference with counsel, and in response to a request for reconsideration, the court

unambiguously instructed that “all of the issues in this case” should be “addressed

in the summary judgment motions.” (Doc. 168-1, pp. 13–14.)

Defendants’ request for reconsideration fails to follow the court’s clear

instruction. Therefore, the court will not entertain this informal request. Further,

as Transource states, “arguments raised in passing (such as, in a footnote), but not

squarely argued, are considered waived.” (Doc. 158, p. 58 (quoting John Wyeth &

Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070, 1076 n.6 (3d Cir. 1997).) For this

reason, Transource argues that Defendants have waived their issue preclusion

argument. Defendants do not address this argument in their subsequent briefs.

Therefore, the court deems that Defendants have indeed waived any argument

regarding issue preclusion.

B. Merits Analysis

Transource argues that the PUC’s denial of Transource’s application

conflicts with and is preempted by federal law. (Doc. 158, pp. 23–42.) In the

alternative, Transource argues that the PUC’s denial violates the dormant

Commerce Clause in purpose and effect. (Id. at 42–49.)

Defendants respond that the PUC’s decision is neither preempted by federal

law nor in violation of the dormant Commerce Clause. Regarding preemption,

they argue that the PUC decision neither directly conflicts with federal law nor is it

an obstacle to federal objectives. (Doc. 165, pp. 8–18.) Instead, it is a valid

exercise of siting authority, which is a power that Congress reserved for the states.

(Id. at 18–20.) As for the dormant Commerce Clause, Defendants argue that the

PUC decision neither discriminates against non-Pennsylvanians on its face, nor

does it disproportionately burden interstate commerce. (Id. at 20–23.)

Defendants’ arguments fail for the reasons explained below.

1. The PUC’s decision violates conflict preemption.

The Supremacy Clause of the Constitution provides that the Constitution and

all laws “of the United States which shall be made in Pursuance thereof” are “the

supreme Law of the Land.” U.S. Const. art. VI, cl. 2. Consequently, courts “must

not give effect to state laws that conflict with federal laws.” Armstrong v.

Exceptional Child Ctr, Inc., 575 U.S. 320, 324 (2015). The Supremacy Clause

“invalidates state law that interferes with or is contrary to federal law.” Farina v.

Nokia, Inc., 625 F.3d 97,115 (3d Cir. 2010). As such, federal law may preempt

state law in three ways. Id. (citing Free v. Bland, 369 U.S. 663, 666 (1962)). One

of these is conflict preemption. Id. (citing Hillsborough Cty. v. Automated Med.

Labs., Inc., 471 U.S. 707, 713 (1985)).

Under Supreme Court precedent, conflict preemption arises where (1) “state

and federal laws ‘directly conflict,’” PLIVA, Inc. v. Mensing, 564 U.S. 604, 617

(2011), or where (2) “the state law stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress.” Oneok, Inc. v. Learjet,

Inc., 575 U.S. 373, 377 (2015) (internal quotations omitted). States cannot

“regulate areas where FERC has properly exercised its jurisdiction” or create an

“unavoidable conflict.” Oneok, 575 U.S. at 386, 389. Transource asserts that both

types of conflict preemption are implicated in this dispute. (Doc. 158, p. 27.)

Transource argues that the PUC’s order conflicts head on with FERC’s

method of determining whether a project is needed. Transource also submits that

the PUC’s decision is an obstacle to FERC’s objective of creating transmission

lines which reduce congestion, in turn reducing pricing disparities. (Id.) In effect,

Transource argues, the PUC is vetoing the project because it “wants to preserve

that very wholesale pricing disparity” the Project seeks to resolve. (Id.) If states

could exercise that power, no lines would ever get built to reduce congestion, and

FERC’s regional planning efforts would be frustrated. (Id.)

Transource points out that the Third Circuit has interpreted the Supreme

Court’s preemption case law as indicating that “regulatory situations in which an

agency is required to strike a balance between competing statutory objectives lend

themselves to a finding of conflict preemption.” Farina, 625 F.3d at 123.

Transource argues that is exactly the situation here.

Transource observes that, under the “applicable federal standards imposed

by FERC and implemented by PJM,” there was a finding of a need for the Project.

(Doc. 157-1, p. 58; Doc. 158, pp. 23–24; Doc. 164, ¶ 102.) In spite of that

determination, the PUC rejected the FERC-approved method for evaluating need

and instead adopted an approach that FERC itself had rejected: one that counted as

a project cost increased energy prices resulting from the reduced congestion that

would follow. (Doc. 157-1, p. 63.)11

Transource points out that the PUC’s decision directly conflicts with the

“FERC-approved method for determining whether a new transmission line is

needed to reduce congestion on the interstate grid.” (Doc. 158, p. 24.) It submits

that such an approach is an obstacle to FERC’s efficient regional planning. (Id.)

According to Transource, this situation is untenable: “If states could override

FERC by applying a conflicting method for determining need, solely to preserve

the benefits of congestion for their own citizens, that would eviscerate FERC’s

ability to plan the interstate transmission grid in an efficient and fair manner.”

(Id.)

11 Defendants contest Transource’s characterization insofar as it asserts that the PUC rejected

FERC’s analysis. (Doc. 164, ¶ 105.) They instead rely on the PUC’s statement that, according to

Order 1000, the PUC is the decision maker. (Id.) On that basis, the PUC stated that its decision

was “not influenced by FERC authority, directly or via PJM.” (Id.)

FERC has the power to regulate regional transmission planning. (Id. at 24

(citing S.C. Pub. Serv. Auth. v. FERC, 762 F.3d. 41, 55–64 (D.C. Cir. 2014)).) The

FPA provides FERC the power to regulate “transmission of electric energy in

interstate commerce and the sale of such energy at wholesale in interstate

commerce,” and also “jurisdiction over all facilities for such transmission . . . of

electric energy.” §§ 824(a), (b). And courts, such as the D.C. Circuit, have held

that the FPA provides FERC with “comprehensive and exclusive jurisdiction over

the rates, terms, and conditions of service of the transmission and sale of wholesale

electric energy in interstate commerce.” Ameren Ill. Co. v. FERC, 58 F.4th 501,

502–03 (D.C. Cir. 2023) (citing New York, 535 U.S. at 7–8).

Transource asserts that FERC’s powers over regional transmission planning

stem from two sources: its authority over transmission of energy in interstate

commerce and its requirement to ensure just and reasonable wholesale energy

prices. (Doc. 158, p. 25.) Regarding the first, by ensuring adequate transmission

capacity, FERC’s regional transmission planning promotes reliability and

efficiency. (Id.) And, as the D.C. Circuit has stated, “[e]nsuring the proper

functioning of the interconnected grid spanning state lines . . . fits comfortably”

within the FPA’s “grant of jurisdiction over ‘the transmission of electric energy in

interstate commerce.’” South Carolina, 762 F.3d at 63.

As for the second, Transource observes that regional planning, which is used

to address congestion in the interstate grid, is inextricably related to FERC’s

regulation of wholesale energy prices.12 (Doc. 158, p. 25.) By reducing

congestion, FERC ensures that all consumers throughout the grid have access to

low-cost power plants in a way that is just and reasonable without being unduly

discriminatory or preferential. (See id.)

Transource points out that, in the 2008 FERC Order, FERC specified the

approved method by which PJM would assess whether a project was needed to

reduce persistent congestion. 123 FERC at 61,416. PJM adopted the FERC-

approved approach. (Doc. 158 p. 26; Doc. 164, ¶¶ 36–42.)

Defendants counter that the PUC’s decision neither directly conflicted with

federal law nor was it an obstacle to Congress’ objectives. (Doc. 165, p. 8.) The

court will address these arguments in turn.

i. The court declines to rule on whether the PUC’s decision

conflicts with federal law.

Transource argues that, in adopting a methodology that directly conflicts

with FERC’s methodology, the PUC’s order directly conflicted with federal law.

The argument is that FERC determined the best approach for weighing the relative

12 For example, Section 206(a) of the FPA, 16 U.S.C. § 824e(a), provides that whenever FERC

“shall find that any rate, . . . for any transmission or sale subject to the jurisdiction of” FERC “is

unjust, unreasonable, unduly discriminatory or preferential,” FERC shall fix it. And Order 1000

makes clear that congestion is a factor that causes such discriminatory or preferential rates,

which FERC is required to fix.

costs and benefits of those transmission projects designed to reduce congestion.

(Doc. 158, p. 28.) It chose an approach that did not consider an increase in prices

resulting from that reduced congestion as a cost which should be weighed. (Id.;

see also 2008 FERC Order, 123 FERC at 61,416.) In doing so, it determined that,

in Transource’s words, customers currently benefiting from persistent congestion

had no entitlement to that benefit, which efficient transmission planning aims at

mitigating. (Id.)

Quoting the Third Circuit decision in Farina, Transource argues that, in the

present instance, FERC assessed the situation region-wide and applied its

“reasoned judgment to weigh the relevant considerations and determine how best

to prioritize between these objectives.” 625 F.3d at 123. Accordingly, “[a]llowing

state law to impose a different standard” would conflict with federal law through

“re-balancing of those considerations.” Id. For example, a “state-law standard that

is more protective of one objective may result in a standard that is less protective

of others.” Id.

According to Transource, such is the case here, where the PUC expressly

rejected the FERC-approved method for determining whether need exists for a

congestion-solving transmission project. (Doc. 158, pp. 28–29.) The PUC stated

that “potential negative and practical impact on the citizens and consumers of

Pennsylvania [was its] concern.” (Doc. 157-1, p. 63.) The PUC then adopted its

own methodology for determining “need” that conflicted with PJM’s FERC-

approved approach.

Transource points out that even Independent Market Monitor (“Market

Monitor”), an organization which Defendants invoke and rely upon in critiquing

the FERC-approved approach, acknowledges that the PUC’s method directly

conflicts with the FERC-approved approach. (Doc. 164, ¶ 53; see Doc. 148,

pp. 16, 18.) Not only had FERC not agreed with or adopted the approach, after

Market Monitor repeatedly proposed it, the approach is “irreconcilable” with the

methodology that FERC did approve. (Doc. 164, ¶¶ 47–51, 53–54.)

Transource urges that the court should apply here the same analysis from the

Supreme Court’s decision in Nantahala Power & Light Co. v. Thornburg, 475 U.S.

953 (1986). (Doc. 158, p. 30.) The Court in Nantahala determined that a state

utility commission could not apply a cost-allocation method that conflicted with

FERC’s decision. 475 U.S. 966–67. It held that “Once FERC sets . . . a rate, a

State may not conclude in setting retail rates that the FERC-approved wholesale

rates are unreasonable. A State must rather give effect to Congress’ desire to give

FERC plenary authority over interstate wholesale rates, and to ensure that the

States do not interfere with this authority.” (Doc. 158, p. 30 (quoting 475 U.S. at

966).) Transource argues that Mississippi Power & Light Co. v. Mississippi ex rel.

Moore, 487 U.S. 354, 371 (1988), similarly applies and requires the court to

conclude, once FERC has approved a method in an area in which it exercises

authority, a state may not adopt a conflicting method. (Id.)

Transource argues that these preemption principles are not limited to

scenarios in which utility commissions disregard FERC-filed rates. They are

equally applicable where a utility commission undertakes “identical, independent

inquiries regarding [a project’s] merits” but take a “perspective of different public

interests,” and as a result “reach conflicting conclusions.” (Id. at 31 (quoting

Appalachian Power Co. v. Pub. Serv. Comm’n of W. Va. 812 F.2d 898, 905 (4th

Cir. 1987)).) Such is the case here, according to Transource.

Transource points out that it is unaware of any instance in which a state has

directly disregarded FERC-approved regional planning methodology in the same

way as the PUC. (Id.) In Maryland, the Maryland Public Service Commission

rejected an argument similar to that which the PUC accepted. It determined that it

was “of no consequence” that the Project failed to meet the benefit-cost ratio when

examined at the Maryland level. In re Application of Transource Maryland LLC,

No. 9471, 2020 WL 3977589, at *41 (¶142) (Md. Pub. Serv. Comm’n June 30,

2020). Instead, it determined that, “pursuant to FERC Order No. 1000 and PJM’s

Tariff—[the Project] must be evaluated on a regional, not on a state-specific

basis.” Id.

Defendants provide a single argument to refute Transource’s assertion that

the PUC’s decision conflicts with federal law. They point out that the cases on

which Transource relies, Nantahala, Mississippi Power & Light, and Appalachian

Power, all relate to FERC’s ratemaking authority. (Doc. 165, p. 15.) They assert

that these cases are inapposite because the instant action relates instead to FERC’s

authority over interstate electric transmission planning and not to ratemaking. (Id.

at 15 & n.4.) Defendants cite no precedent in support of this distinction.

Although Transource has provided a well-reasoned argument, no binding

precedent is directly on point. Defendants are correct that the cases Transource

cites all relate to FERC’s ratemaking authority. It is true that cases such as

Nantahala, make clear that a state’s actions need not precisely be ratemaking in

order to interfere with FERC’s rate-making authority. 476 U.S. at 966. Indeed, the

Supreme Court held that “[a] State must rather give effect to Congress’ desire to

give FERC plenary authority over interstate wholesale rates, and to ensure that the

States do not interfere with this authority.” Id. In doing so, it explained that “the

filed rate doctrine is not limited to ‘rates’ per se.” See id. at 967 (“[O]ur inquiry is

not at an end because the orders do not deal in terms of prices or volumes of

purchases.”) (citation omitted).

Yet, in each of these cases, there was an exceedingly close nexus between

the action of the state utility commission and the exercise of FERC’s ratemaking

powers. Although Transource urges that the same analysis should be applied to its

regional transmission planning authority, it provides no federal appellate authority

to support that assertion. (Doc. 158, pp. 30–31.)

Transource may be correct that the PUC’s decision does directly conflict

with federal law. But because the court concludes that the PUC’s decision was

conflict preempted for other reasons and also violated the dormant Commerce

Clause, the court declines to rule on whether the decision directly conflicted with

federal law since a ruling on this argument is not necessary to the resolution of the

instant motion.

ii. The PUC’s order is an obstacle to federal objectives.

Transource also maintains that the PUC’s decision is an obstacle to federal

objectives. (Id. at 32–33.) It points out that, by the very nature of building new

transmission lines to reduce congestion, wholesale energy rates will go down in

some areas and up in others—that is the entire purpose of such projects. (Id. at

32.) If a state could decide that disagreement with the FERC-approved

methodology underlying such projects was a permissible reason to deny siting

approval, then FERC’s regulatory scheme would be obstructed. (Id.) Congestion-

reducing projects would become nearly impossible to build because those states

currently benefitting from congestion could simply deem the proposed projects as

unnecessary. (Id.)

Transource views this outcome as untenable. It would contrast with the

PUC’s own admission that “States . . . carry[ing] out their individual State

jurisdictional responsibilities . . . cannot interfere with the national goals of

creating a strong and fair wholesale energy market.” (Id.; Doc. 164, ¶ 56; Doc.

157-22, p. 16.) Transource argues that Pennsylvania may not reap the benefits

from federal planning when it suits Pennsylvanians, but obstruct federal planning

needed to reduce persistent interstate congestion. (Doc. 158, pp. 32–33.)

Defendants counter that the PUC’s decision was not an obstacle to

Congress’ objectives. (Doc. 165, p. 8.) In furtherance of this argument, they

contest the existence of the underlying congestion and alleged pricing disparity

between Pennsylvania and other states. (Id. at 16.) Then they point to the

Commonwealth Court opinion which, they assert, specifically held that the

congestion–the existence of which they dispute–has decreased since 2014. (Id.)

They also argue that Transource has failed to provide any evidence of pricing

disparities resulting from said congestion. (Id.)

Defendants assert that Transource is incorrect in its assertion that congestion

remediation is the applicable federal objective. (See id.) Instead, the real goal was

the creation of a transmission plan, which was created when the Project was

submitted to the RTEP. (Id.) Because the PUC did not interfere with that step of

the process, it is in essence incapable of now creating obstacles to federal

objectives, which have been entirely achieved. (See id.)

In short, Defendants’ argument is that the only federal objective at play in

this dispute is for PJM to create an essentially academic plan to solve a problem

that–in Defendants’ view–does not actually exist. Once the plan has been created,

the federal objective has been met and federal interests have been satisfied. The

only legal authority Defendants include to support their argument is the

Commonwealth Court's finding that congestion has decreased since 2014, Third

Circuit precedent related to the summary judgment standard, and a passing

unexplained citation to purportedly assert res judicata. (See Doc. 165, pp. 15–18.)

The court finds Defendants’ arguments to be unsupported and unconvincing.

It is undisputed that RTOs like PJM are responsible for “planning, and [] directing

or arranging, necessary transmission expansions, additions, and upgrades that will

enable it to provide efficient, reliable and non-discriminatory transmission service

and coordinate such efforts with the appropriate state authorities.” 18 C.F.R.

§ 35.34(k)(7). As such, PJM “must encourage market-driven operating and

investment actions for preventing and relieving congestion.” Id. at

§ 35.34(k)(7)(i). The apparent preliminary goal of regulations such as these and

the 2008 FERC Order was for PJM to analyze and select congestion-reducing

projects with benefits that exceed their costs by the required ratio. The ultimate

goal is that such projects be built if they obtain the necessary state siting,

construction, and permitting approvals, in order to remove the obstacle of

congestion and thus achieve FERC’s duty of ensuring that wholesale rates are just

and reasonable.

Here, by disagreeing with PJM’s FERC-approved benefit-cost methodology,

the PUC seeks to undercut the foundational goal of congestion-alleviating projects.

The PUC insists that any benefit-cost ratio must include projected rate increases

for areas that currently benefit from congestion—areas which will not contribute to

payment for the Project. This directly contradicts PJM’s FERC-approved tariff.13

Furthermore, the PUC implicitly assumes that congestion-reduction is not a valid

goal in its own right.

It is clear that FERC has determined that regional congestion is a problem

and one that directly affects its core obligation of ensuring just and reasonable

electric rates. As such, it is not within the PUC’s purview to pose obstacles to

FERC’s pursuit of reducing congestion through its approval process. Nor is it

13 As the Third Circuit has explained, a “tariff” is “the term of art used to refer to the

‘classifications, practices, and regulations’ a public utility uses to establish electricity rates.”

N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 83 (3d Cir. 2014) (citing 16 U.S.C. § 824d(c)).

Once a tariff has been filed with FERC and approved, either explicitly by FERC or by operation

of law, it has the force of federal law. See Mississippi Power & Light, 487 U.S. at 373; PJM

Power Providers Grp. v. FERC, Nos. 21-3068, 21-3205 & 21-3243, at *35 (3d Cir. Dec. 1,

2023) (“Congress established in § 205(d), and underscored in § 205(g), that a tariff may change

by operation of law [.]”).

within the PUC’s authority to pose obstacles to this federal objective when PJM

pursues it under the auspices of a FERC-approved tariff.

Defendants’ arguments about the merits of PJM’s congestion analysis and

how the Project should be assessed do them no favors in this legal context. These

arguments only underscore the extent to which the PUC’s decision constitutes an

obstacle to FERC achieving its goals of reducing congestion and achieving just and

reasonable rates. The PUC is attempting to supplant the role of the RTO and

expand its state authority into the regulatory territory occupied by the federal

government. If permitted, the PUC’s second-guessing of the methods sanctioned

by federal law and employed by the RTO would severely handicap the ability of

FERC to ensure just and reasonable rates. Because the PUC’s decision presents an

obstacle to achieving federal objectives, it is conflict preempted and violates the

Supremacy Clause.

iii. Congress’ explicit preemption in FPA § 216 does not

diminish the existence of conflict preemption here.14

Defendants argue that Congress has shown in the FPA that it is aware of the

language required to preempt traditional authority and has not done so in this

instance. (Doc. 148, pp. 34–35.) Section 216 applies to congestion projects in

areas which the Secretary of Energy has designated as national interest electric

transmission corridors. (Id. at 34 (citing 16 U.S.C. § 824P(a)).) Through

§ 216, the FPA provides a mechanism by which FERC may grant a permit to

develop a congestion project despite a state commission denying the application.

(Id. (citing §§ 824p(a), (b)(1)(C)(iii)).)

By contrast, FERC made clear that “nothing in” Order 1000 was “intended

to leverage the regional transmission planning or interregional transmission

coordination reforms to exceed [FERC]’s section 216 backstop authority.” Order

1000-A, 77 Fed. Reg. at 32,215 n.248. But, according to Defendants, that is

exactly what Transource is arguing for. (Doc. 148, p. 35.)

14 In Defendants’ initial brief, they also argue that FERC lacks the statutory authority to preempt

the PUC decision. (Doc. 148, pp. 30–32.) They argue that where, as here, a state authority

conflicts with, and thus has been displaced by, the existence of Federal Government authority,” a

“presumption against pre-emption” applies. (Id. at 31–31 (quoting New York, 535 U.S. at 17–

18).) But Transource points out that the anti-pre-emption presumption applies to areas

traditionally regulated by the states. (Doc. 158, p. 37.) States have not traditionally regulated

interstate transmission planning. (Id.) Transource points out that Defendants identify no case

holding to the contrary. And Defendants do not respond to Transource’s arguments in their

reply. Transource has the better argument on this point, too.

Transource disagrees. It is not asserting that FERC has the authority to

permit the Project in the face of a valid PUC denial. (Doc. 158, p. 39.) It

acknowledges that the Project is not in a national interest electric transmission

corridor, and FERC therefore has no authority to issue a construction permit. (Id.)

Instead, the issue at hand is whether the PUC may rely on its siting authority to

“override a FERC-approved method for determining whether a line is needed to

reduce interstate congestion.” (Id.)

The court agrees with Transource that Defendants’ argument

mischaracterizes the issue in this case. The preemption question before the court

does not pertain to whether FERC may override an otherwise valid PUC decision

related to Transource’s application or the Project at large. Instead, the issue relates

to whether the PUC decision was an obstacle to achieving federal objectives.

Thus, Congress’ express preemption in § 216 does not undermine Transource’s

conflict preemption argument.

iv. The PUC’s decision was not an exercise in siting.

Defendants also argue that the PUC’s decision was not preempted because it

was a valid exercise of a power which Transource concedes was reserved for the

states: siting authority. (Doc. 165, p. 18–20.) While Defendants concede that

FERC had jurisdiction over transmission planning, they argue that the PUC’s

decision constituted an exercise of its siting authority, a power which Congress has

left exclusively to the states. (Id. at 9.) Invoking a FERC order, they assert that

“[i]t is well-settled that [FERC] does not have authority over the siting and

construction of electric transmission facilities. (Id. (quoting PacifiCorp, 72 FERC

¶ 61,087, 61,488 (1995)).) Instead, “[a]ll such matters should be resolved at the

state and local level.” PacifiCorp, 72 FERC at 61,488. Courts have found that

“states have traditionally assumed all jurisdiction to approve or deny permits for

the siting and construction of electric transmission facilities.” Piedmont Envtl.

Council v. FERC, 558 F.3d 304, 310 (4th Cir. 2009).

According to Defendants, the distinction between transmission planning and

siting is based on the sequence of decisions. (Doc. 165, p. 9.) They invoke Order

1000, in which FERC stated that, “[t]ransmission planning is a process that occurs

prior to the interconnection and coordination of transmission facilities. 76 Fed.

Reg. at 49,860. Defendants submit that transmission planning, therefore, “ends

entirely before any coordination of utility transmission facilities occurs, i.e.,

building and connecting new transmission lines to the existing grid.” (Doc. 165,

p. 9.)

Defendants concede that, pursuant to Order 1000, FERC has determined that

the order’s “transmission planning and cost allocation requirements . . . are

associated with the processes used to identify and evaluate transmission system

needs and potential solutions to those needs.” (Id. (citation omitted).) But, by the

language of Order 1000, nothing in it “requires that a facility in a regional

transmission plan or selected in a regional transmission plan for purposes of cost

allocation be built, nor does it give any entity permission to build a facility.” 76

Fed. Reg. at 49,854.

Defendants assert that, although transmission planning has narrow

objectives, siting and permitting a project involve “a broader inquiry into the

public interest ‘need’ for the project.” (Doc. 165, p. 10.) In making this assertion,

Defendants do not quote any federal law or interpretation thereof. They instead

invoke the PUC’s assessment of the Pennsylvania law which it applied in assessing

Transource’s permit. (Id. at 10–11.) Defendants assert that the PUC’s

determination was based on “the weight of all the evidence” to determine whether

the Project is “reasonable and necessary and in the public interest” in order “to

determine whether Transource has established need” for “approval of the siting” of

the Project. (Doc. 165, pp. 10–11 (quoting Doc. 1-2, p. 60.)

Applying that standard, the PUC determined that there was insufficient need

for the Project. (Id. at 11.) The factors they considered included the fact that

congestion had decreased over the APSRI since the initial study showing need and

“there was insufficient proof of the potential NERC reliability violations.”15 (Id.)

15 Defendants’ point is that the FERC-approved regional transmission planning is deficient.

They do not define the term “NERC,” which stands for North American Electric Reliability

Council. (Doc. 90-1, p. 4.)

Defendants assert that the PUC’s application of Pennsylvania law was in

compliance with “the standard FERC applies when it exercises its ‘backstop’ siting

and permitting authority under FPA Section 216.” (Id. (footnote omitted).)

In determining the appropriate process regarding § 216 projects, “a

commenter proposed that FERC ‘rebuttably presume a need for a project subject to

the independent oversight’” because “participants must already make showings of

local or regional needs to gain approval from an [] RTO.” (Id. (quoting

Regulations for Filing Applications for Permits to Site Interstate Electric

Transmission Facilities, 117 FERC ¶ 61,202, at *10 (2006)).) FERC did not take

this approach, and instead found that “determinations of an [RTO] should be given

due weight in [FERC’s] assessment of whether a particular facility is needed to

protect or benefit customers.” 117 FERC ¶ 61,202 at *10–11. Accordingly, FERC

would “consider any such independent determinations as a factor, along with all

other relevant factors, in determining whether the statutory criteria have been met.”

Id. Defendants argue that is exactly what the PUC did here. (Doc. 165, p. 12.)

The court finds this argument unconvincing. Defendants suggest that the

PUC, by adopting FERC’s approach to determining the need for a particular

project, is not interfering with FERC’s authority. But Defendants have provided

no authority to suggest that public utility commissions are meant to exercise

parallel functions as FERC. Therefore, Defendants have not persuaded the court

that, by mirroring FERC’S approach to the determination of whether a project is

needed, the PUC’s decision is somehow not an obstacle to federal objectives.

Defendants also argue that the PUC’s decision related to siting, and not

regional planning, because it was procedurally different from PJM’s transmission

planning process. (Id. at 12–14.) In support of this argument, they point to various

ways in which PJM’s process was purportedly faulty, whether by not conducting

evidentiary hearings, taking sworn testimony, permitting cross-examination, or

purportedly basing the benefit-to-cost analysis on stale information. (Id.)

Meanwhile, the PUC’s determination was based on timely information which

provides, in Defendants’ words, “an important procedural check on the un-

litigated, un-reviewed conclusions reached by PJM.” (Id. at 13.)

If they were not allowed this important procedural check, Defendants argue,

state laws would merely be a “rubber-stamp [of] every RTO-approved

transmission line application.” (Id. at 14 (internal quotation marks omitted).)

Defendants argue that the court need not parse the meaning of FERC’s instructions

in Order 1000 “because FERC has clearly instructed that its jurisdiction did not

reach siting and permitting.” (Id.) Here, the PUC’s decision was made “after the

transmission planning process was completed. The PUC decision, therefore, was a

valid exercise of its siting authority.” (Id.)

Transource responds that, although federal law reserves siting and

permitting authority for the states, that authority does not support the PUC’s

decision. It asserts that the PUC’s decision “was not a siting decision, even though

it was made in the context of reviewing a siting proceeding. Rather, it was a

planning decision.” (Doc. 158, p. 33.) In support of this position, Transource

invokes Supreme Court precedent, which held that “[i]n a pre-emption case, . . . a

proper analysis requires consideration of what the state law in fact does, not how

the litigant might choose to describe it.” Wos v. E.M.A. ex rel. Johnson, 568 U.S.

627, 637 (2013).

Transource argues that this is indisputably a planning decision in substance,

as observed by the fact that FERC had the power to approve PJM’s tariff on the

issue. (Doc. 158, p. 33.) By contrast, if it were actually a siting issue, FERC

would have lacked the authority to evaluate the issue, as it has no authority

regarding siting. (Id. at 33–34.) But, as FERC state in Order 1000, “transmission

planning . . . requirements . . . are associated with the processes used to identify

and evaluate transmission system needs and potential solutions to those needs.”

Order 1000, 76 Fed. Reg. at 49,861. But the identification of these needs and

solutions “in no way involves an exercise of authority over those specific

substantive matters traditionally reserved to the states,” like siting. Id. Transource

further points out that none of the authorities cited by Defendants held that a

decision like the PUC’s was a siting decision. (Doc. 158, p. 34.)

Transource concedes that nothing requires the PUC to site a project or a

approve one merely because FERC approves it. (Id. at 34–35.) But then

Transource maintains that its concession is immaterial—Transource is not

asserting that the PUC must allow the project to be built in a specific place. (Id. at

35.) Instead, it is asserting that, although the PUC may deny projects for siting

reasons, such as to “mitigate the impacts of construction on public health and

safety, the environment, and natural resources,” it may not deny them on the basis

of regional planning, which is reserved for FERC. (Id.)

Transource also concedes that the PUC could have legitimately denied its

application based on a siting decision. (Id.) The PUC could have done so based

on any number of factors. For example, it may “evaluate the route over which the

transmission line will traverse, and impose requirements to mitigate the impacts of

construction on public health and safety, the environment, and natural resources.”

(Id.) But Transource contends that the PUC may not use these factors as a pretext

for denying permission because it disagrees as to whether congestion needs to be

relieved. (Id. at 35 n.3.)

Defendants maintain that the PUC’s decision was, indeed, an exercise of its

siting authority. (Doc. 165, p. 9–14.) In support, they look to when in the

Project’s timeline the PUC’s decision occurred. As FERC has stated,

“[t]ransmission planning is a process that occurs prior to the interconnection and

coordination of transmission facilities.” (Id. at 9 (quoting Order 1000, 76 Fed.

Reg. at 49,861).) Further, it “does not create any obligations to interconnect or

operate in any certain way.” (Id. (quoting Order 1000, 76 Fed. Reg. at 49,861).) It

asserts that transmission planning occurs entirely before any “coordination of

utility transmission facilities occurs, i.e., building and connecting new transmission

lines to the existing grid.” (Id. at 9–10 (footnote omitted).)

Defendants assert, without support, that although transmission planning has

the narrow objectives of “identifying potential solutions to transmission issues and

allocating projected costs of those solutions—siting and permitting a project

involves a broader inquiry into the public interest ‘need’ for the project.” (Doc.

165, p. 10.) In accordance with Defendants’ asserted broader inquiry, the PUC

followed the process mandated by Pennsylvania statute. (Id. 10–11.)

Defendants further urge that, “[g]iven the FPA’s dual regulatory scheme,

conflict-pre-emption analysis must be applied sensitively in this area, so as to

prevent the diminution of the role Congress reserved to the States while at the

same time preserving the federal role.” (Doc. 165, p. 8 (quoting Coal. for

Competitive Elec., Dynergy Inc. v. Zibelman, 906 F.3d 41, 55 (2d Cir. 2018)).)

After carefully considering Defendants’ arguments, the court is not

persuaded that the PUC’s decision was, in substance, about siting. Much of

Defendants’ argument attempts to deconstruct PJM’s analysis, following FERC-

approved methodology, for assessing the Project. (See id. at 11–14.) Defendants’

argument picks apart the FERC-approved methodology and whether it was

sufficiently open, allowed for evidentiary hearings, permitted cross-examination,

or allowed argument by interested parties. (Id. at 12–13.) But in making these

arguments about the various flaws in PJM’s analysis of the need for the Project,

Defendants have not provided a substantive basis for this court to conclude that the

PUC’s decision actually related to siting as opposed to determining whether there

was a need for the Project.

Instead, the court is convinced that the PUC’s decision was, in fact, a

substantive determination of need in the form of an exercise of siting authority.

The court finds two facts important in this determination. The first is that the

PUC’s analysis in denying Transource’s application clearly overlaps with PJM’s

regional transmission planning analysis. That analysis was undisputedly regional

transmission planning when FERC approved it and PJM carried it out. Why

should it be something else when the PUC does the same kind of analysis?

Second, no party has presented any evidence or compelling law to suggest

that the PUC’s decision related to “siting” as the term is commonly understood.

The Oxford English Dictionary defines “siting” as “[t]he action of locating

something in a particular place.” Siting, Oxford Dictionaries,

https://premium.oxforddictionaries.com/us/definition/american_english/siting (last

visited Nov. 6, 2023). But the PUC’s denial was not related to the particular place

of the Project.

The court is not convinced by Defendants’ sequence-based argument that

siting follows regional transmission planning and therefore anything that occurs

sequentially after the regional transmission plan is, therefore, siting. Rather, as the

Supreme Court has noted, in assessing preemption, “a proper analysis requires

consideration of what the state law in fact does, not how the litigant might choose

to describe it.” Wos., 568 U.S. at 637. Although the PUC now terms its denial as

an exercise of siting authority, it was regional transmission planning in reality.

That is the case even if though it occurred after PJM approved the Project.

Because Defendants have failed to show that the PUC decision was a valid

exercise of its siting authority, Defendants fail to overcome the preemption

analysis.

2. The PUC’s decision violates the dormant Commerce Clause.

The Constitution’s Commerce Clause provides Congress the power to

“regulate commerce . . . among the several States.” U.S. Const. art I, § 8, cl. 3.

The Supreme Court has interpreted the Commerce Clause as containing a

“dormant” component that “denies the States the power unjustifiably to

discriminate against or burden the interstate flow of articles of commerce.” Or.

Waste Sys., Inc. v. Dep’t of Envt’l Quality, 511 U.S. 93, 98 (1994). The dormant

Commerce Clause “prohibits the states from imposing restrictions that benefit in-

state economic interests at out-of-state interests’ expense.” Cloverland-Green

Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 298 F.3d 201, 210 (3d Cir. 2002)

(“Cloverland I”).

There are two ways in which the dormant Commerce Clause invalidates

state regulation. First, where a state regulation is “motivated by simple economic

protectionalism,” it will be “subject to a virtually per se rule of invalidity, which

can only be overcome by a showing that the State has no other means to advance a

legitimate local purpose.” United Haulers Ass’n v. Oneida-Herkimer Solid Waste

Mgmt. Auth., 550 U.S. 330, 338–39 (2007). This heightened scrutiny will apply

where a state acts with “discriminatory purpose,” Bacchus Imports, Ltd. v. Dias,

468 U.S. 263, 270 (1984), or the regulation “discriminates against interstate

commerce ‘either on its face or in practical effect.’” Cloverland I, 298 F.3d at 210–

11. Under this rule, “[t]he party challenging the [law] has the burden of proving

the existence of such discrimination.” Cloverland-Green Spring Dairies, Inc. v.

Pa. Milk Mktg. Bd., 462 F.3d 249, 261 (3d Cir. 2006) (“Cloverland II”). If there is

discrimination, the state is required to show that the law is narrowly tailored to

“advance a legitimate purpose.” Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328,

338 (2008).

If heightened scrutiny does not apply, the Pike balancing test applies. Pike

v. Bruce Church, Inc., 397 U.S. 137 (1970). Under this test, an “even-handed”

regulation that “incidentally” burdens interstate commerce will be found valid

unless the burdens are “clearly excessive in relation to the putative local benefits.”

Cloverland I, 298 F.3d at 211.

Transource argues that the PUC’s decision fails whether analyzed under the

per se test or Pike. (Doc. 158, p. 43.) It fails the per se test because it

discriminates on its face against interstate commerce. (Id.) Quite simply, the PUC

denied the Project because the PUC wished to maintain low prices for

Pennsylvania customers that benefit from congestion. (Id.)

Transource also argues that, even if the Pike test applies, the Defendants fail

because the PUC’s decision burdens interstate commerce by preventing the

alleviation of congestion across state lines. (Doc. 158, p. 46.) Transource

observes that, when assessing burdens on interstate commerce, a court must

evaluate not only the instant burden, “but also by considering how the challenged

[regime] may interact with the legitimate regulatory regimes . . . if not one, but

many or every, State adopted [a] similar [regime].” Healy v. Beer Inst., Inc., 491

U.S. 324, 337 (1989).

On the other hand, Defendants argue there are three reasons why the PUC’s

decision does not amount to a per se violation of the dormant Commerce Clause.

First, Defendants reason that although some Pennsylvanians would pay more if the

Project were completed, others would benefit. The PUC’s decision was not an

attempt to benefit Pennsylvanians to the detriment of others, instead it was a

holistic regional analysis. (Doc. 148, p. 42.)

Next, Defendants argue that the PUC’s decision was “not local

protectionism but the very essence of state sovereignty.” (Id. at 42–43 (citing

Piedmont, 558 F.3d at 314–15).) Defendants argue this is distinct from other cases

which Transource cites, like New England Power Co. v. New Hampshire, because

that case did not relate to the constitutionality of a state regulation preventing the

construction of a utility facility on public land. (Id. at 43 n.5 (citing 455 U.S. 331

(1982)).) Defendants do not explain the significance of this factual distinction. On

this point, Defendants also dispute whether congestion or price disparities actually

exist. (Id. at 43–44.)

Finally, Defendants argue that the PUC decision does not burden interstate

commerce because it takes into account “all the costs and benefits” of the Project,

including “considerable increases in prices to ratepayers both in Pennsylvania and

elsewhere” in the region. (Doc. 148, p. 44.) By contrast, they argue that PJM

applied “local, parochial interests” when assessing the benefits and costs of the

Project. (Id. at 45.)

In response, Transource argues that Defendants’ arguments are meritless.

Where Defendants argue that the PUC enacted a region-wide assessment that was

not self-serving, the record disproves this assertion. (Doc. 158, pp. 47–48.) And,

Transource maintains that it is irrelevant under the dormant Commerce Clause

whether residents of other states incidentally benefit from the PUC’s protectionist

approach. (Id. at 48 (citing Hunt v. Wash. St. Apple Advert. Comm’n, 432 U.S.

333, 349, 350–54 (1977)).) In further support, Transource cites numerous

Supreme Court cases. (See id. at 48–49.)16

Lastly, Transource argues that the PUC’s allegation that no pricing disparity

exists due to congestion, does not save them from the dormant Commerce Clause.

16 Defendants argue that none of these cases apply because “each deals with the sale of goods

that are already in existence within the stream of interstate commerce.” (Doc. 165, p. 22.) By

contrast, Defendants assert that this case is about “the construction of a new utility line not

currently in existence.” (Id.) Defendants provide no legal support for this analytical distinction.

In any event, the court finds it unconvincing. While this case is about the denial of a permit for

new transmission lines, the underlying issue is the flow of electricity across state lines.

Electricity already existed and was already in the stream of commerce.

(Id. at 49.) It points out that the PUC’s own findings recognized higher prices in

Maryland, Virginia, and D.C. due to congestion. (Id.) The PUC also recognized

that the Project would benefit customers region-wide by reducing congestion, but

Pennsylvanians would overall pay higher prices due to the reduced congestion.

(Id.)

Transource likens the PUC’s decision to New England Power, in which the

Supreme Court held that the “order of the New Hampshire Commission,

prohibiting New England Power from selling its hydroelectric energy outside the

State of New Hampshire, is precisely the sort of protectionist regulation that the

Commerce Clause declares off-limits to the states.” 455 U.S. at 339. In that case,

the utility commission issued its order to benefit citizens of New Hampshire to the

detriment of those in neighboring states who could not have access to the low-cost

power. Id.17

Reviewing the PUC’s decision, it is clear that the PUC determined that “the

consequences of [the Project] would be to alleviate the economic congestion on a

regional level, which in turn would result in higher rates in Pennsylvania.” (Doc.

157-1, p. 63.) Regardless of the regional benefits of the Project, the PUC

17 Transource recognizes that in New England Power, the problematic conduct was attributed to

a state statute, whereas here the PUC’s decision is based on a denial stemming from the

application of a state regulation. (Doc. 158, p. 45 n.8.) But Transource asserts that the

distinction makes no difference. (Id. (citing Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992).)

Defendants do not respond to this argument.

determined that the “potential negative and practical impact on the citizens and

consumers of Pennsylvania is our concern.” (Id.)

Here, the court finds that the PUC’s decision was a per se violation of the

dormant Commerce Clause driven by economic protectionism. Although various

statements by the PUC place greater emphasis on Pennsylvania interests and others

place more emphasis on regional interests, the PUC’s own words make clear that it

was focused on protecting the interests of Pennsylvanians. Importantly, the very

nature of the Project is to improve the flow of wholesale electricity across state

lines to places that currently have less access and therefore higher prices. The

Project’s sole purpose is to better facilitate commerce across regional and state

boundaries. And the PUC’s opposition to the Project is rooted in economic

protectionism in the form of maintaining the status quo imbalance of access to low-

priced electricity.

The court recognizes that the PUC also asserts that congestion may not even

exist and the Project may not alleviate it. Even assuming that this argument has

relevance to the dormant Commerce Clause analysis, neither assertion holds up

based on the PUC’s own analysis. The PUC contends that Pennsylvanians (and

others), who will not be paying the costs of building the Project, will pay higher

rates if the Project is completed. That contention is premised on two assumptions.

The first is that congestion exists. The second is that the Project, by reducing

congestion, will increase prices for those currently benefitting from congestion.

Accordingly, the PUC’s own analysis defeats the argument it raises in this case

that congestion did not exist and the Project would not solve it.

Although this finding of a per se violation is supported by the PUC’s own

language in its decision, the court also makes the same finding based on the

practical effect of the PUC decision. By insisting on counting as a Project cost the

projected increase in pricing to those who currently benefit from congestion, the

PUC’s decision recognizes congestion as a benefit. That is, it determines that

similar access to low-cost electricity is only desirable to the extent that it does not

raise prices to those who currently benefit from congestion. Thus, the court

concludes that Transource has met its burden in proving the existence of

discrimination.

Having made that finding, the state is now required to show that the law is

narrowly tailored to “advance a legitimate purpose.” United Haulers, 550 U.S. at

338–39. Defendants’ arguments focus on whether there was a per se violation or

whether the PUC’s decision burdens interstate commerce. But they do not assert a

legitimate local purpose. Because they fail to do so, they cannot show that the

PUC decision is narrowly tailored to advance such a purpose.

The court also notes that the PUC’s decision would violate the dormant

Commerce Clause under Pike. In accordance with Healy, the court concludes that,

if other states adopted a regime similar to the PUC, it would eviscerate FERC’s

attempts to reduce congestion. Instead, each state could put forth its own analysis

and effectively deploy a veto as to whether regional transmission projects were

desirable as congestion-reducing projects.

For these reasons, the PUC’s decision violated the dormant Commerce

Clause.

CONCLUSION

For the reasons explained above, the court finds that the PUC’s decision

violated the Supremacy Clause and the dormant Commerce Clause. Based on

these findings, the court will deny Defendants’ motion for summary judgment and

grant Transource’s motion for summary judgment. (Docs. 146, 156.) An

appropriate order will follow.

s/Jennifer P. Wilson

JENNIFER P. WILSON

United States District Judge

Middle District of Pennsylvania

Dated: December 6, 2023