United States Court of Appeals, District of Columbia Circuit
September 8, 2017
Petitions for Review of Orders of the Federal Energy
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.
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.
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.
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. 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).
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.
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).
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.
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
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 ...