West Virginia Attorney General JB McCuskey is challenging Pennsylvania’s “closed border” rule, which exclude otherwise eligible PJM generators from key alternative energy credit markets.. (AP Photo/John Raby)
Copyright 2025 The Associated Press. All rights reserved
Pennsylvania has devised an expensive formula for promoting its alternative energy goals. But what lawmakers describe as protection for local producers looks very different from the customers’ side of the meter.
The Keystone State mandates that utilities purchase alternative energy, while locking out most companies in the region capable of supplying it. The predictable result is higher utility bills for Pennsylvania ratepayers.
I previously argued in this column that PJM Interconnection states serious about affordability should reconsider their support for renewable portfolio standards, especially the so-called “closed border” rules that limit which credits count toward compliance. That argument is now headed to federal court.
On Sept. 3, West Virginia Attorney General JB McCuskey sued the Pennsylvania Public Utility Commission (PUC) in U.S. District Court, arguing that geographic restrictions favoring Pennsylvania producers over otherwise eligible PJM competitors violate the Constitution’s Commerce Clause.
“The Framers included the Commerce Clause in our Constitution precisely to prevent this kind of naked economic warfare between states,” the complaint argues.
The lawsuit doesn’t ask Pennsylvania to abandon its alternative energy targets, but only to stop using those targets to shield local producers from regional competition.
Pennsylvania’s ratepayers should be rooting for Attorney General McCuskey.
Pennsylvania’s Alternative Energy Portfolio Standards (AEPS) require electricity suppliers to source 18 percent of retail electricity sales from qualifying resources. Suppliers can comply by generating that themselves or by purchasing alternative energy credits.
When lawmakers created the program in 2004, qualifying generators anywhere in the 13-state PJM Interconnection, including West Virginia, could sell credits into Pennsylvania. Two later amendments narrowed the market by excluding out-of-state suppliers.
In 2017, the legislature restricted solar credits to facilities meeting Pennsylvania location or direct-connection criteria. Three years later, it imposed the same restrictions on “Tier II” resources, which include waste coal and large-scale hydropower. The PUC’s implementation effectively barred out-of-state facilities from both markets.
Neither bill left much doubt about its intent. As West Virginia’s complaint documents, sponsors titled the Tier II proposal “Closing Tier II Border.” Supporters of the solar restriction likewise promised to “close the borders” and protect Pennsylvania-based solar.
That protection comes with a price. By excluding out-of-state competitors, Pennsylvania created an artificial supply constraint.
Government-mandated demand doesn’t disappear when regulators disqualify suppliers. Buyers lose options while the remaining sellers in the market gain pricing power. Ratepayers have no choice but to finance the difference.
The average price for a Tier II alternative energy credit skyrocketed from $1.92 in 2020 to $26.92 by 2025, a 14-fold increase, according to a report by the Pennsylvania PUC and the Pennsylvania Department of Environmental Protection.
Total annual compliance spending under AEPS reached roughly $702 million in 2025. Tier II compliance costs alone ballooned from $3.6 million in 2020 to $367.6 million in 2025, according to the PUC, which pointed to the closed border restrictions as driving the higher compliance costs. The PUC now recommends repealing the restrictions outright.
The complaint argues that the restrictions, which shut out West Virginia producers that had supplied Pennsylvania for more than 15 years, serve no legitimate environmental purpose and do nothing to advance the welfare of Pennsylvania’s citizens.
“To the contrary, they inflict direct economic harm on Pennsylvanians, whose electricity compliance costs have exploded—rising from $122.5 million in 2020 to more than $700 million in 2025—since Pennsylvania’s Legislature and PUC artificially strangled the supply side of the energy credit market by locking out interstate competition,” the complaint states.
The complaint identifies hydroelectric facilities, utility scale solar and rooftop-solar among the suppliers harmed by Pennsylvania’s closed border rules. The lawsuit estimates that West Virginia generators lost more than $25 million in potential credit revenue in 2025 alone.
A record 55 percent of Americans now list affordability as their top concern, according to the most recent Gallup survey, and 13 percent point specifically to energy and utility costs—the highest share since 2008. Pennsylvania’s policymakers should consider what their regulations cost the constituents paying those bills.
The Energy Association of Pennsylvania has also called for reopening the Tier II border to out-of-state regional suppliers, arguing that restoring competitive market pressure would reduce compliance costs by tens of millions of dollars annually and provide instant rate relief to Pennsylvania consumers.
A National Center for Energy Analytics analysis estimates that renewable and alternative energy mandates added more than $114 billion to American electricity bills between 2020 and 2025, with the steepest increases in jurisdictions that impose geographic restrictions.
PJM’s independent market monitor, Monitoring Analytics, argues that the current patchwork of uncoordinated state renewable programs with “specific and prescriptive environmental dispatch rules” pose a threat PJM’s market design and are “inconsistent with the least cost approach to meeting state environmental goals.” That market distortion is exactly what West Virginia’s complaint targets: laws that “partition the integrated PJM market along state lines, rewarding political geography over economic efficiency.”
A recent federal court ruling appears to bolster West Virginia’s case. In January 2025, a federal judge held that Michigan’s local capacity purchasing requirements discriminated against interstate commerce and must survive strict constitutional scrutiny.
Pennsylvania’s restrictions burden customers on both sides of the border. Pennsylvania customers are forced to pay into a captive market, and West Virginia customers lose the revenue their generators would have earned in it.
Whatever one thinks of renewable and alternative energy mandates, they should at least be open to competition. It shouldn’t take a federal judge to remind Pennsylvania that affordable energy comes from more competition, not less.
Be the first to comment