Authorities were searching for the wreckage, a pilot and two passengers after eyewitnesses said they saw the balloon in flames and heard screams for help shortly before 8 p.m.
"As it was making its approach is when it came into contact with the power line, and then due to the fire, that unfortunately caused the balloon to lift very quickly," said police spokeswoman Corinne Geller.
People who saw the balloon in trouble felt helpless because there was nothing they could do.
"You could hear the people screaming, 'Please, God. Somebody help us!' We saw two passengers jump. There was nothing anybody could do; they were too far off the ground," said witness Carrie Bradley.
Authorities have not confirmed any fatalities, but three people were still unaccounted for as of Friday night. Search teams on the ground planned to work through the night to locate the wreckage and the three people. Stormy weather has grounded a search from the air.
The crash happened near the Meadow Event Park during a kick-off event for the Mid-Atlantic Balloon Festival. Police say other balloons had already landed when the accident happened.
The balloon festival was supposed to run through Sunday, but organizers have canceled the event.
The Associated Press contributed to this report.