## Facts

- PJM Interconnection operates a multi-state regional transmission grid divided into western and eastern subregions.
- PJM planned new high-voltage (500 kV and above) network transmission facilities, largely located in the eastern portion of the PJM system.
- FERC approved a region-wide “postage-stamp” cost allocation for these facilities, allocating costs to all PJM utilities based on load rather than location or distance of power flows.
- In an earlier challenge, the Seventh Circuit vacated and remanded FERC’s approval for insufficient justification.
- On remand, FERC reinstated the same postage-stamp method, asserting the 500 kV upgrades would provide region-wide benefits (reduced congestion, improved reliability, reduced reserve needs, reduced losses), without providing a formal quantitative cost-benefit study.
- The Illinois Commerce Commission and primarily western PJM utilities petitioned for review, arguing the benefits were concentrated in the east while the west would bear disproportionate costs, making the allocation unjust, unreasonable, and unduly discriminatory under the Federal Power Act.

## Issues

1. Whether FERC adequately justified a region-wide postage-stamp allocation for PJM’s new 500 kV transmission facilities by showing costs are reasonably aligned with benefits, including for western utilities.
2. Whether FERC’s explanation and evidentiary support satisfied the Federal Power Act’s “just and reasonable” and non-discrimination requirements after the prior remand.

## Decision

- The Seventh Circuit largely upheld FERC’s remand orders and denied most petitions for review.
- The court held FERC’s approval of a region-wide, load-based postage-stamp allocation for 500 kV projects was not arbitrary or capricious.
- The court accepted FERC’s judgment that the projects’ benefits were sufficiently system-wide, even if some subregions would receive greater direct benefits.
- The court rejected the claim that the method imposed undue discrimination against western utilities.

## Legal Principles

- Under the Federal Power Act, FERC must ensure transmission rates and cost allocations are just, reasonable, and not unduly discriminatory, which requires some rational relationship between who pays and who benefits.
- Cost responsibility need not match benefits with precision; FERC may approve allocations where benefits are “roughly commensurate” with costs.
- In regional grid planning, FERC may rely on the network character of transmission upgrades and predictive, technical judgments about diffuse reliability and efficiency benefits.
- Judicial review is deferential: the court asks whether FERC provided a reasoned explanation connecting the record and agency expertise to its conclusion, not whether the agency produced a definitive quantitative cost-benefit analysis.

## Conclusion

The Seventh Circuit upheld FERC’s decision to spread the costs of PJM’s 500 kV transmission upgrades across the region on a load-based postage-stamp basis, finding FERC reasonably concluded the projects confer system-wide benefits sufficient to satisfy the Federal Power Act’s just, reasonable, and non-discriminatory standards.


Illinois Commerce Comm’n v. FERC, 756 F.3d 556 (7th Cir. 2014)