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PJM Power Providers Group v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

January 26, 2018

PJM Power Providers Group, Petitioner
v.
Federal Energy Regulatory Commission, Respondent PJM Interconnection, LLC, et al., Intervenors

          Argued September 8, 2017

         On Petitions for Review of Orders of the Federal Energy Regulatory Commission

          Kenneth R. Carretta argued the cause for petitioners. With him on the briefs were Cara J. Lewis and John L. Shepherd Jr. John N. Estes III and Paul F. Wight entered appearances.

          Anand R. Viswanathan, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief was Robert H. Solomon, Solicitor. Lisa B. Luftig, Attorney, entered an appearance.

          Paul M. Flynn argued the cause for intervenors. With him on the brief were Jennifer H. Tribulski, Ryan J. Collins, Adrienne E. Clair, Robert A. Weishaar Jr., Gary J. Newell, Christopher S. Porrino, Attorney General, Office of the Attorney General for the State of New Jersey, and Carolyn McIntosh, Deputy Attorney General. Dennis Lane and Alex Moreau, Deputy Attorney General, Office of the Attorney General for the State of New Jersey, entered appearances.

          Before: Garland, Chief Judge, Wilkins, Circuit Judge, and Edwards, Senior Circuit Judge.

          OPINION

          Chief Judge Garland.

         Congress has given the Federal Energy Regulatory Commission (FERC) authority to regulate the transmission and sale at wholesale of electric energy in interstate commerce. 16 U.S.C. § 824(a), (b). FERC tasks certain non-profit entities, known as regional transmission organizations, with managing the transmission of electricity over the electric grid and ensuring that energy is reliably available for consumers. 18 C.F.R. § 35.34; see Advanced Energy Mgmt. Alliance v. FERC, 860 F.3d 656, 659 (D.C. Cir. 2017). One such regional transmission organization is PJM Interconnection, LLC, which has responsibility for administering a tariff that determines the rates paid to energy providers for providing electric capacity in the broad mid-Atlantic region.[1] See Advanced Energy, 860 F.3d at 659-60. FERC, in turn, must ensure that PJM Interconnection's tariff is "just and reasonable." 16 U.S.C. § 824d(a).

          This case concerns one element of PJM Interconnection's 2014 tariff revisions: the estimated cost of new entry, which approximates the revenue that a newly constructed power generator would need to recoup its costs. Through a complicated methodology, which we fortunately need not test the reader's patience by explaining again, the cost of new entry affects the prices paid to energy providers for electric capacity. See TC Ravenswood, LLC v. FERC, 741 F.3d 112, 114-15 (D.C. Cir. 2013); see also N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 84-87 (3d Cir. 2014). The petitioners in this case -- PJM Power Providers Group, a coalition of energy providers, and the PSEG Companies, a public utility holding company and its subsidiaries -- challenge FERC's orders approving PJM Interconnection's tariff. See 149 FERC ¶ 61, 183 (Nov. 28, 2014) (Initial Order); 153 FERC ¶ 61, 035 (Oct. 15, 2015) (Rehearing Order). In the petitioners' view, the cost of new entry submitted by PJM Interconnection and approved by FERC is too low. Consequently, they argue, the resulting price that they are paid for wholesale capacity is also too low. And this, they say, means that the PJM Interconnection tariff that FERC approved is not just and reasonable.

         I

         We review FERC's orders under the Administrative Procedure Act, asking whether they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Braintree Elec. Light Dep't v. FERC, 667 F.3d 1284, 1288 (D.C. Cir. 2012) (quoting 5 U.S.C. § 706(2)(A)). The Commission's factual findings, "if supported by substantial evidence, " are "conclusive." 16 U.S.C. § 825l(b).

         The petitioners acknowledge that "[t]he questions posed here are purely factual issues, " and they challenge FERC's orders solely on the ground that they are unsupported by substantial evidence. Petitioners' Reply Br. 4. Our review in these circumstances is "highly deferential, as issues of rate design are fairly technical and, insofar as they are not technical, involve policy judgments that lie at the core of the regulatory mission." Alcoa Inc. v. FERC, 564 F.3d 1342, 1347 (D.C. Cir. 2009) (internal quotation marks and citation omitted). As the Supreme Court has made clear, our role is "not to ask whether a regulatory decision is the best one possible or even whether it is better than the alternatives." FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 760, 782 (2016). Instead, we must "affirm the Commission's orders so long as FERC examined the relevant data and articulated a rational connection between the facts found and the choice made." Alcoa, 564 F.3d at 1347 (internal quotation marks and citation omitted); see Elec. Power Supply Ass'n, 136 S.Ct. at 782.

         Having examined them in detail, we conclude that none of the petitioners' objections to the cost-of-new-entry figure that FERC approved can overcome our deferential standard of review.

         1. The petitioners' first objection is that FERC lacked substantial evidence to approve the estimates of labor costs that formed part of the calculation of the cost of new entry. FERC's labor-cost analysis relied principally on affidavits by Paul Sotkiewicz, an economist employed by PJM Interconnection. See Initial Order P 108; Rehearing Order PP 76, 78. Sotkiewicz concluded that a generic power generator could be constructed in 360, 000 labor hours, a figure he supported by pointing to, inter alia, three studies conducted by different consulting firms. See Sotkiewicz Initial Affidavit ...


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