Federal Court Limits State Authority to Deny Interstate Transmission Projects

The Fifth Nationwide Local weather Evaluation not too long ago concluded that, to satisfy nationwide and worldwide local weather targets, United States internet greenhouse fuel emissions might want to decline by over 6% per 12 months and attain internet zero by roughly 2050. So as to obtain this goal, america might want to vastly develop electrical energy technology whereas decarbonizing electrical energy sources. In different phrases, america might want to construct important quantities of renewable power infrastructure.

As a result of renewable power sources like high-quality wind and photo voltaic power should not equally distributed throughout the county, interregional transmission infrastructure is critical to move such power to main inhabitants facilities. The U.S. Division of Power has acknowledged that, so as to meet rising clear electrical energy calls for, america should develop its transmission techniques by 60% by 2030 and upwards of 300% by 2050.

One impediment to assembly these targets is the power of states to dam interstate transmission initiatives. Underneath the Federal Energy Act (FPA), the Federal Power Regulatory Fee (FERC) has authority to manage “the transmission of electrical power in interstate commerce.” This consists of authority over regional transmission planning. States, nevertheless, retain major authority over “siting, allowing, and building” of most transmission strains.

States’ authority over transmission siting can function a considerable roadblock to the buildout of transmission strains. However a Center District of Pennsylvania court docket not too long ago established one key restrict on states’ authority to dam new transmission strains by the siting course of. In an opinion that’s at the moment beneath enchantment within the Third Circuit, the Center District court docket held that, as a result of the federal authorities has authority to find out transmission system wants and potential options, a state can’t deny a siting allow based mostly by itself willpower {that a} mission shouldn’t be wanted. States can nonetheless deny a siting allow based mostly on considerations comparable to environmental and aesthetic impacts, however the court docket clarified that solely the federal authorities can decide whether or not an interstate transmission mission meets a public want. That is important as a result of it prevents states from vetoing a mission on the premise that it solely gives advantages to different states.

The Regulatory Construction for Electrical energy Transmission

Authority for interstate transmission planning and siting is split between federal and state authorities. FERC Order No. 1000 clarifies that the federal authorities has authority over regional transmission planning and value allocation, together with “the processes used to determine and consider transmission system wants and potential options to these wants,” whereas states have authority over “siting, allowing, and building” of most transmission strains.

In lots of elements of the nation, transmission planning is undertaken by FERC-regulated our bodies known as regional transmission organizations (RTOs) and impartial system operators (ISOs). PJM Interconnection is one such RTO, which oversees a area encompassing 13 states, together with Pennsylvania, together with the District of Columbia.

One of many tasks of RTOs comparable to PJM is to encourage market-driven actions for stopping and relieving grid congestion. Grid congestion happens when transmission limitations forestall the least-costly sources from assembly demand in a given area. FERC has licensed RTOs to deal with such congestion by “planning, and [] directing or arranging, obligatory transmission expansions, additions, and upgrades and coordinat[ing] such efforts with the suitable state authorities.”

Transource Pa. LLC v. Defrank

The U.S. District Courtroom for the Center District of Pennsylvania issued a choice on December 6, 2023 in Transource Pa. LLC v. Defrank that restricted state authority to disclaim transmission initiatives that RTOs had decided had been wanted based mostly on federally-approved requirements. PJM Interconnection had recognized grid congestion throughout the Pennsylvania-Maryland border and concluded that such congestion had led to roughly $800 million in prices from 2012 to 2016. PJM decided {that a} mission proposed by Transource consisting of recent transmission strains working from West Virginia to Maryland would cut back this congestion and supply internet constructive financial advantages. PJM subsequently concluded that there was a public want for the mission, based mostly on FERC-approved strategies for figuring out public want. PJM additionally concluded that the mission would economically profit areas damage by the congestion, whereas rising prices for sure areas that had been benefitting from the congestion. PJM accepted the mission in 2016 and entered into an settlement with Transource’s father or mother firm allocating tasks for the mission. FERC accepted this settlement in 2017, and Transource then filed siting functions with the Pennsylvania Public Utility Fee (PUC), as required by Pennsylvania regulation.

Pennsylvania requires that utilities meet 4 necessities so as to obtain PUC siting approval: (1) there’s a want for the mission; (2) the mission is not going to create an unreasonable threat of hazard to the well being and security of the general public; (3) the mission will adjust to Pennsylvania’s pure sources legal guidelines; and (4) the mission could have a minimal opposed environmental impression. In 2020, the PUC Administrative Regulation Choose (ALJ) denied Transource’s allow utility on the premise that the mission would enhance wholesale charges in Pennsylvania and subsequently did not serve a public want beneath Pennsylvania regulation, regardless of offering advantages elsewhere inside PJM’s territory. The PUC adopted and integrated the ALJ determination in Could 2021.

Transource then filed a grievance within the U.S. District Courtroom for the Center District of Pennsylvania. At subject within the case was whether or not the PUC’s willpower that the mission failed to satisfy a public want (1) violated the Supremacy Clause of america Structure, and (2) violated the dormant Commerce Clause of america Structure. The court docket held that the PUC’s determination violated each clauses.

The Supremacy Clause serves to “invalidate[] state regulation that interferes with or is opposite to federal regulation.” One of many methods by which federal regulation can preempt state regulation beneath the Supremacy Clause is thru battle preemption, which arises when: (1) state and federal legal guidelines instantly battle; or (2) “state regulation stands as an impediment to the accomplishment and execution of the total functions and aims of Congress.” The court docket held that the PUC’s order was topic to battle preemption within the second means described above as a result of it created an impediment to attaining federal aims. Within the phrases of the court docket:

It’s clear that FERC has decided that regional congestion is an issue and one which instantly impacts its core obligation of making certain simply and cheap electrical charges. As such, it’s not throughout the PUC’s purview to pose obstacles to FERC’s pursuit of lowering congestion by its approval course of. Neither is it throughout the PUC’s authority to pose obstacles to this federal goal when PJM pursues it beneath the auspices of a FERC-approved tariff.

The court docket didn’t make a willpower as as to if the PUC’s order was additionally battle preempted beneath the separate justification of instantly conflicting with federal regulation, citing a scarcity of controlling precedent.

Essential to the court docket’s holding was its willpower that the PUC’s order was not a sound train of its siting authority. All events agreed that the PUC might have denied the applying based mostly on conventional siting considerations, comparable to considerations about site-specific environmental, public well being, and aesthetic impacts. However the PUC was not allowed to “use these elements as a pretext for denying permission as a result of it disagrees as as to if congestion must be relieved.” The court docket held that, “[a]lthough the PUC now phrases its denial as an train of siting authority, it was regional transmission planning in actuality.”

The court docket individually held that the choice additionally violated the dormant Commerce Clause, which “prohibits the states from imposing restrictions that profit in-state financial pursuits at out-of-state pursuits’ expense.” The court docket held that “the PUC’s determination was a per se violation of the dormant Commerce Clause pushed by financial protectionism.” Transource’s mission was designed to “facilitate commerce throughout regional and state boundaries,” and the PUC’s order was “targeted on defending the pursuits of Pennsylvanians . . . within the type of sustaining the established order imbalance of entry to low-priced electrical energy.” The court docket subsequently struck down the PUC’s determination on each battle preemption and dormant Commerce Clause grounds.

On January 10, 2024, the Pennsylvania PUC and different Defendants filed a discover of enchantment to the Courtroom of Appeals for the Third Circuit, the place the case is at the moment pending.

Implications of the Determination

If upheld on enchantment, the Center District determination can be important for stopping states from vetoing transmission initiatives with solely out-of-state advantages. The court docket famous that, “if different states adopted a regime much like the PUC . . . [they] might successfully deploy a veto as as to if regional transmission initiatives had been fascinating as congestion-reducing initiatives.” The court docket’s conclusion aligns with the evaluation of assorted consultants within the subject. For example, in its 2013 report on Insurance policies for a Trendy and Dependable U.S. Electrical Grid, the Bipartisan Coverage Heart argued that:

[I]ndividual state authorities could also be certain by state statutes to just accept or reject the mission on the premise of their in-state transmission wants, or the in-state advantages that the mission gives. In these instances, states is probably not empowered to think about the regional advantages of a proposed mission. In some states, regulators would possibly even be required by regulation to reject a mission that doesn’t serve load throughout the state’s boundaries, even in instances the place the mission delivers broader advantages to the area at massive that the state would share in over time.

Alexandra Klass echoed the Bipartisan Coverage Heart’s considerations in her 2017 article on Increasing the U.S. Electrical Transmission and Distribution Grid to Meet Deep Decarbonization Targets, additional noting that “the truth that states are primarily answerable for siting and eminent area for interstate transmission strains usually severely limits the power of utilities, service provider transmission strains, and others to acquire approval to assemble strains wanted to combine new electrical energy technology into the grid to satisfy deep decarbonization targets.”

Regardless of this widespread recognition of the potential for states to veto transmission initiatives based mostly on lack of in-state advantages, the Pennsylvania PUC seems to be among the many first state companies to explicitly base a allow denial on disagreements as to the necessity for a transmission mission. In its briefing, Transource had “level[ed] out that it [was] unaware of any occasion by which a state has instantly disregarded FERC-approved regional planning methodology in the identical means because the PUC.” If upheld on enchantment, the Transource court docket’s holding would sign that the Pennsylvania PUC’s method couldn’t unfold to different states, doubtlessly deterring states from vetoing a mission that would supply solely out-of-state advantages. Given the rising want for transmission between totally different areas of america to realize electricity-sector decarbonization, this holding might take away one important barrier to nationwide decarbonization targets. Nevertheless, even when upheld and broadly adopted, the Transource holding wouldn’t forestall states from vetoing initiatives based mostly on conventional siting issues comparable to native environmental considerations.