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khammond on DSKJM1Z7X2PROD with RULES

Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations whether the more dispersed cost changes in the incremental 30%
resulted from pipeline-specific factors rather than from broadly shared circumstances representative of ordinary pipeline operations.
Furthermore, Shippers own evidence demonstrates the dispersion is primarily just a few pipelines at the top of the middle 80%. Although it may be possible that analyses of the middle 80% in this proceeding similar to those provided in prior index reviews would have raised similar concerns about considering the middle 80%, no commenter presented such a comprehensive analysis. In the absence of a more detailed showing, we prefer to use a larger sample, representing a broader array of cost experience, in determining the data sets central tendency.
30. We are likewise unpersuaded by Shippers reliance upon the Commissions findings in the 2015 and 2010 Index Reviews that the middle 80% includes pipelines further removed from the median and that using the middle 50% provides a more effective method of excluding outlying data. As discussed above, we have reconsidered our prior findings and now conclude that based upon the record in this proceeding, the benefits of considering the additional data in the middle 80%
outweigh concerns about introducing anomalous data that could bias the index calculation.
31. We also find unpersuasive Shippers argument that it is unnecessary to use the middle 80% to obtain a representative sample of industry cost data. We acknowledge that the middle 50% represents a greater percentage of barrel-miles subject to the index than in 2015 or 2010. However, we find that on this record, it is preferable to consider additional data that more fully reflects the diversity of industry cost experience than the middle 50%.
32. Similarly, we disagree with Shippers assertion that using the middle 80% here would result in an index that encompasses extraordinary cost changes.66 As discussed above, the Kahn Methodology determines the index level using the central tendency of the trimmed data sample, and does not set the index at the samples upper or lower bounds. Thus, using the middle 80% will not allow pipelines at 66 See
Order No. 561A, FERC Stats. & Regs.
31,000 at 31,097 rejecting request to adopt index sufficiently high and generous to encompass even the most extraordinary costs because such an index would provide windfalls to many oil pipelines by allowing rate changes substantially above cost changes.

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the top or bottom of the sample to recover their particular cost changes, which by definition would diverge from the experience of pipelines closer to the central tendency. Instead, this approach only ensures that those pipelines cost experiences are reflected in calculating the data sets central tendency. As discussed above, we find that considering a wide spectrum of industry experience will aid the Commission in calculating a central tendency that better represents normal industry-wide cost changes.
C. Liquids Shippers Proposal To Calculate the Composite Measure of Central Tendency Using the Weighted Median 1. Comments 33. As discussed above, the Kahn Methodology calculates the median, mean, and weighted mean of the data set and averages the results to calculate a composite measure of central tendency. Liquids Shippers argue that the weighted mean of the data set in this proceeding accords undue weight to two pipelines, Colonial and Enbridge Energy, L.P. Liquids Shippers allege that these pipelines are substantial outliers in terms of barrel-miles and cost changes 67 and that both reported inaccurate page 700 data for 2014 and 2019.68 Because the weighted mean accords significant weight to these pipelines, Liquids Shippers state that using it to calculate the composite measure of central tendency will skew the index level upwards and fail to track normal industry-wide cost changes.69
34. To remedy this issue, Liquids Shippers propose to replace the weighted mean in the index calculation with the median of the barrel-mile weighted cost changes in the middle 50% weighted median,70 as calculated by their witness Elizabeth H. Crowe.
67 Liquids Shippers Initial Comments at 1315.
For instance, Liquids Shippers state that Colonial and Enbridge comprise 40% of the total barrel-miles for all of the 160 pipelines in the data set. Id. In addition, Liquids Shippers claim that Colonial reported a higher unit cost change over the 2014
2019 period than 69 of the 80 pipelines included in the middle 50% and Enbridge reported a higher cost change than 47 of those pipelines. Id. at 15.
68 Specifically, Liquids Shippers claim that Colonial reported an inaccurate capital structure in both 2014 and 2019 and that Enbridges reported ROEs are inconsistent with Commission policy. Id.
at 1719.
69 Id. at 1619.
70 The standard median identifies the cost change for which the same number of pipelines have a smaller cost change and a larger cost change. By contrast, the weighted median identifies the cost change for which the same share of barrel-miles rather than the number of pipelines is accounted for by the pipelines below and above the selected median.

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Liquids Shippers contend that the Commission has recognized that the median is the preferred statistical measure of central tendency where the data distribution is highly skewed.71
Thus, Liquids Shippers argue that using the weighted median is a statistically appropriate method of ameliorating the undue influence that Colonial and Enbridge exert upon the index calculation.72 Alternatively, if the Commission decides not to replace the weighted mean with the weighted median, Liquids Shippers propose reducing the weighting afforded to the weighted mean in the Kahn Methodology from 33.3% to 20% or 10%.73
35. Pipelines oppose this proposal and argue that Liquids Shippers have not justified modifying the Kahn Methodology to exclude the weighted mean. Pipelines disagree with Liquids Shippers claim that the weighted mean affords excessive weight to Colonial or Enbridge. Rather, Pipelines assert that averaging the weighted mean with the median and unweighted mean ensures that larger pipelines receive appropriate weighting in the index calculation, consistent with indexings aim to measure cost changes on an industrywide basis. Pipelines also assert that neither Colonial nor Enbridge is an outlier because both pipelines are included in the middle 50% of the data set. In addition, Pipelines maintain that Liquids Shippers allegations regarding Colonials and Enbridges page 700
inputs are both irrelevant and outside the scope of the five-year review.
Finally, Pipelines contend that Liquids Shippers calculation of the weighted median is methodologically flawed and would distort the index by affording undue weight to smaller pipelines in the data set.74 Colonial filed separate reply comments echoing these arguments and urging the Commission to disregard Liquids Shippers claims regarding its page 700.75
2. Commission Determination 36. We decline to adopt Liquids Shippers proposal to replace the weighted mean with the weighted median. First, removing the weighted mean from the index calculation would contravene longstanding Commission practice and Dr. Kahns testimony in the rulemaking proceeding that established 71 Liquids Shippers Initial Comments at 1920
quoting Order No. 561A, FERC Stats. & Regs.
31,000 at 31,097.
72 Id. at 20.
73 Id. at 20 n.45; Crowe Initial Affidavit at 89.
74 AOPL Reply Comments at 2227; Designated Carriers Reply Comments at 613.
75 Colonial Reply Comments at 311.

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