United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 2017 Decided January 26, 2018

No. 15-1453

PJM POWER PROVIDERS GROUP,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

PJM INTERCONNECTION, LLC, ET AL.,

INTERVENORS

Consolidated with 15-1455

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

RegulatoryCommission, argued the cause for respondent. With

him on the brief was Robert H. Solomon, Solicitor. Lisa B.

Luftig, Attorney, entered an appearance.
2

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 for the Court filed by Chief Judge GARLAND.

GARLAND, Chief Judge: 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 electricityover

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 1

Advanced Energy, 860 F.3d at 659-60. FERC, in turn, must

ensure that PJM Interconnection’s tariffis “just and reasonable.”

16 U.S.C. § 824d(a). 

“‘Capacity’ is the ability to produce electricity. Purchasers of 1

capacity acquire the right to buy electricity in the future.” Advanced

Energy, 860 F.3d at 659. 
3

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 whetherthey 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
4

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 ¶¶ 38, 39 (J.A. 73-74);

Sotkiewicz Answering Affidavit ¶¶ 5, 6 (J.A. 683). The

petitioners attack Sotkiewicz’s reliance on each of those studies. 
5

One of the studies, authored by the CH2M Hill engineering

firm, had previously been submitted in a 2011 FERC

proceeding. The petitioners maintain that this study lacks

“probative value” because the prior proceeding was resolved by

settlement before the Commission had an opportunity to make

a final just-and-reasonable determination. Petitioners’ ReplyBr.

15. But the fact that the matter was settled does nothing to

diminish the study’s reliability. Nor is there any requirement

that witnesses cite only to studies that FERC has previously

blessed. 

The petitioners assert that a second study, prepared by

Sargent & Lundy, could not have contained the data Sotkiewicz

said it did. But consultants from the firm that commissioned the

Sargent & Lundy study filed an affidavit corroborating

Sotkiewicz’s representations. See Pfeifenberger & Zhou

Affidavit 23 (J.A. 639). Although the petitioners insist that the

affidavit is hearsay, hearsay can constitute substantial evidence

in an administrative proceeding. See Lacson v. U.S. Dep’t of

Homeland Sec., 726 F.3d 170, 178 (D.C. Cir. 2013). And here

it does, because the consultants were “uniquely in a position to

know” the relevant information. Honeywell Int’l, Inc. v. EPA,

372 F.3d 441, 447 (D.C. Cir. 2004) (citation omitted); see

Second Taxing Dist. v. FERC, 683 F.2d 477, 488 & n.14 (D.C.

Cir. 1982). 

As to the third study, prepared by Stantec Consulting

Services, the petitioners object on the ground that no witness

with personal knowledge of that study appeared before FERC

and that the report itself was not entered into the record. The

petitioners cite no authority for the proposition that

personal-knowledge testimony is required for reliance on an

expert report in a FERC proceeding. Indeed, as we have just

mentioned, hearsay can be admissible in such proceedings. And
6

although failure to include an underlying report in the record of

an agencyproceeding could be troubling in some circumstances,

here FERC reasonably relied on Sotkiewicz’s assessment of

multiple information sources -- “including a review of

publicly-available data” -- of which the Stantec estimate was

just one part. Rehearing Order P 76; see Initial Order P 108

(noting that “PJM reviewed the market monitor’s estimate of

construction labor and found that it was consistent with public

information on utility construction labor costs”); id. (citing

Sotkiewicz’s statement that “the values closely track data from

the U.S. Bureau of Labor Statistics Quarterly Census of

Employment and Wages”); Sotkiewicz Initial Affidavit ¶¶ 37,

41 (J.A. 73-75) (discussing Bureau of Labor Statistics data);

Sotkiewicz Answering Affidavit ¶¶ 5, 8 (J.A. 683-84) (same).

2. Next, the petitioners contend that FERC should have

accepted the labor-cost calculations of the petitioners’ expert,

Robert Uniszkiewicz, who, in their view, possessed more

“expertise and experience regarding construction related

matters” than did Sotkiewicz. Petitioners’ Br. 52. But FERC

reasonably explained that it preferred Sotkiewicz’s analysis to

Uniszkiewicz’s because the latter had failed to account for

economies of scale. Rehearing Order P 77. This court “defers

to the Commission’s resolution of factual disputes between

expert witnesses,” Transmission Agency of N. Cal. v. FERC, 628

F.3d 538, 551 (D.C. Cir. 2010) (quoting Elec. Consumers Res.

Council v. FERC, 407 F.3d 1232, 1236 (D.C. Cir. 2005)), and

the Commission’s explanation for its preference was reasonable.

The petitioners further argue that FERC should have held an

evidentiary hearing to adjudge the comparative credibility of the

two experts. But the petitioners’ challenge -- based on their

claim of the superior expertise of their witness -- goes not to

Sotkiewicz’s credibility but to the weight of his evidence. 

FERC did not abuse its discretion in deciding to rely on the
7

written record to resolve that question. See Minisink Residents

for Envt’l Pres. & Safety v. FERC, 762 F.3d 97, 114-15 (D.C.

Cir. 2014); Blumenthal v. FERC, 613 F.3d 1142, 1144-45 (D.C.

Cir. 2010). 

3. Finally, the petitioners contend that FERC erred in

approving another input to the estimated cost of new entry: the

cost of capital. FERC approved the methodology that the

Brattle Group, PJM Interconnection’s consultant, used to

estimate this input. That methodology relied on a proxy group

of eight energy companies, including publicly traded

independent power producers, merchant generation companies

that were recently acquired by other companies, and recent

merchant generation divestitures. See Samuel A. Newell et al.,

Cost of New Entry Estimates for Combustion Turbine and

Combined Cycle Plants in PJM 34-37 & tbl.25 (May 15, 2014)

(J.A. 159-62). The petitioners object to PJM’s reliance on this

group, maintaining that the majority of new generator

construction is instead financed by private-equity firms, which,

they assert, require higher rates of return than publicly traded

companies. 

But “[m]erely because petitioners can conceive of a . . .

method that they believe would be superior to the one FERC

approved does not mean that FERC erred in concluding the

latter was just and reasonable.” Wisc. Pub. Power, Inc. v.

FERC, 493 F.3d 239, 266 (D.C. Cir. 2007). FERC considered

the petitioners’ contention, but approved PJM’s exclusion of

private-equity investors from the sample because their cost of

capital was not observable in the market and hence was not

“verifiable.” Rehearing Order P 57; see also Newell et al.,

supra, at 35 n.27 (J.A. 160) (“We do not include private equity

investors in our sample because the cost of equity cannot be

observed in market data.”). Moreover, the Commission

concluded that the private-equity data the petitioners proffered
8

was unreliable for calculating cost of capital in the electricity

context because it “consist[ed] of portfolios of investments in

many different projects in many different industries.” Initial

Order PP 82, 91; see Rehearing Order P 67. This response was

a “reasonable explanation for rejecting” the petitioners’

contention. See Elec. Consumers Res. Council, 407 F.3d at

1241. 

II

For the foregoing reasons, the petitioners’ objections fail to

undermine the substantial evidence supporting FERC’s approval

of PJM Interconnection’s figure for the cost of new entry. The

petitions for review are therefore

Denied.