Transource Pennsylvania LLC v. Steven DeFrank
24-1045
3rd Cir.Sep 5, 2025Background
- PJM (the RTO) identified persistent congestion on the AP South Reactive Interface and selected Transource’s Project 9A under a FERC‑approved benefit–cost methodology to relieve it; PJM and FERC concluded the project met the 1.25:1 benefit–cost threshold.
- Project 9A would lower wholesale costs in downstream jurisdictions but raise wholesale costs for Pennsylvania consumers who currently benefit from the congestion.
- Transource applied to the Pennsylvania Public Utility Commission (PUC) for siting, certificate, and eminent‑domain authority; an ALJ and then the PUC denied the applications, rejecting PJM/FERC’s methodology and finding no “need” under Pennsylvania law.
- Transource sued in federal court (preserving constitutional claims via an England reservation); after the Commonwealth Court affirmed the PUC, the District Court granted summary judgment for Transource, holding the PUC order preempted under the Supremacy Clause and also finding a dormant Commerce Clause violation.
- The Third Circuit affirmed the District Court on Supremacy Clause grounds (conflict preemption/obstacle), explaining states retain siting authority but may not veto RTO/FERC‑selected regional projects by reweighing FERC‑mandated considerations; the court did not decide the dormant Commerce Clause issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preclusion / England reservation | Transource preserved federal claims for federal court; state review should not preclude federal adjudication | PUC/defendants: Transource could have litigated preemption in state court; issue preclusion should apply | England reservation valid; issue preclusion rejected — federal claims not barred |
| Supremacy Clause / conflict preemption | PUC’s denial is preempted because it obstructs FERC/RTO federal objectives by second‑guessing FERC‑approved benefit–cost methodology | PUC: classic state siting authority; Congress left siting to states (except limited NIETC backstop) | PUC order preempted: it poses a clear obstacle to federal objectives (affirming District Court) |
| State siting authority vs federal regional planning | Transource: states cannot veto PJM/FERC regional selections by re‑balancing benefits/costs | PUC: traditional state power to decide local need and to protect local consumers/environment | States retain siting power for local concerns, but may not reject RTO/FERC projects by redoing federally mandated need/benefit analysis |
| Dormant Commerce Clause | Transource: PUC acted protectionist and unduly burdened interstate commerce | PUC: action within state consumer‑protection and siting authority | District Court found a dormant Commerce Clause violation, but Third Circuit did not reach that issue (preemption dispositive) |
| Due process / eminent domain concerns | Amici/defendants: requiring deference to PJM would impair landowners’ procedural rights and let PJM effectively preauthorize condemnation | Transource/PJM: PJM does not exercise eminent domain; state processes (PUC hearings, common pleas condemnation suits) remain | Court held PJM does not wield eminent domain; state procedural protections and condemnation process remain intact |
Key Cases Cited
- Pub. Util. Comm’n v. Attleboro Steam & Elec. Co., 273 U.S. 83 (1927) (Identified the interstate regulatory gap that prompted federal regulation)
- England v. Louisiana State Bd. of Med. Exam’rs, 375 U.S. 411 (1964) (Permits reservation of federal constitutional claims while litigating related matters in state court)
- Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986) (State action that directly conflicts with FERC allocation is preempted)
- Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988) (State prudence reviews that undermine FERC allocations are preempted)
- Hughes v. Talen Energy Mktg., LLC, 578 U.S. 150 (2016) (States may not achieve legitimate ends by interfering with FERC‑determined interstate rates/mechanisms)
- Entergy Louisiana, Inc. v. Louisiana Pub. Serv. Comm’n, 539 U.S. 39 (2003) (Filed‑rate and preemption principles limit state re‑examination of federally approved ratemaking)
- Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015) (Framework for analyzing implied preemption and conflict preemption)
- Farina v. Nokia Inc., 625 F.3d 97 (3d Cir. 2010) (Third Circuit guidance on assessing agency‑balancing and preemption questions)