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Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations
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Commissions determinations in the 2015 and 2010 Index Reviews, the Commission retains a substantial measure of freedom to refine, reformulate, and even reverse its precedents in the light of new insights 55 if it describes good reasons for the new policy.56 In the NOI, the Commission requested comments that address whether the Commission should continue to trim the data set to the middle 50% or adopt an alternative approach to data trimming, including using the middle 80%.57 Based upon our review of the resulting record, we conclude that using the middle 80% is appropriate for this index review.
26. Three primary considerations support using the middle 80% instead of the middle 50% in this proceeding.
First, we find it is appropriate to consider more data in measuring industry-wide cost changes rather than less. The Kahn Methodology derives the index level by computing the central tendency of a statistically trimmed data sample. As a general matter, considering a broader sample of data should enhance the Commissions calculation of the central tendency of industry cost experience. In this proceeding, using the middle 50% would exclude 48
pipelines 58 from the Commissions review of industry-wide cost changes over the 20142019 period. We are reluctant to discard this additional data.
27. Second, we find in this proceeding that normal cost changes are best defined by using the inclusive data sample embodied in the middle 80%. Prematurely discarding data prior to determining the central tendency could skew the index such that it does not actually reflect industry-wide trends. By using this inclusive data sample, the Commission is able to reasons for the new policy. internal quotation mark and citations omitted; New England Power Generators Assn, Inc. v. FERC, 879 F.3d 1192, 1201
D.C. Cir. 2018 So long as any change is reasonably explained, it is not arbitrary and capricious for an agency to change its mind in light of experience . . . or further analysis or other factors indicating that the agencys earlier decision should be altered or abandoned. citing FCC v. Fox Television Studios, 556 U.S. 502, 51416 2009;
Defenders of Wildlife v. Zinke, 856 F.2d 1248, 1262
9th Cir. 2017.
55 Davila-Bardales v. INS, 27 F.3d 1, 5 1st Cir.
1994 citing Rust v. Sullivan, 500 U.S. 173, 186
87 1991; Motor Vehicles Mfrs. Assn v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 1983.
56 FCC v. Fox Television Studios, Inc., 556 U.S.
at 515; see also id. explaining that an agency need not demonstrate to a courts satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better emphasis in original.
57 NOI, 171 FERC 61,239 at P 9 citing 2005
Index Review, 114 FERC 61,293.
58 Shehadeh Initial Decl. at 26.

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accurately identify the central tendency of industry-wide cost changes that reflects the normal cost changes recoverable by the index.59 Moreover, even if the middle 80% or, for that matter, the middle 50% includes relatively high cost changes at its upper bound, the index average will be significantly below that upper bound and will not allow pipelines to recover such extraordinary costs.60 Rather, the index will reflect the central tendency of the industry-wide data, which, by definition, represents normal industrywide costs. Absent a compelling showing that including data from the middle 80% distorts our measurement of the industry-wide central tendency, we are inclined to consider this more comprehensive data set.
28. Third, along similar lines, we emphasize that mere generalized concerns about outlying or unrepresentative data do not justify excluding the experiences of pipelines in the incremental 30% i.e., those pipelines that are included in the middle 80% but not the middle 50%
from our review of industry cost changes. Unlike in prior index reviews, the record in this proceeding does not contain sufficient evidence that pipelines in the incremental 30%
experienced anomalous cost changes that would skew the index. In the 2015
and 2010 Index Reviews, commenters presented detailed analyses demonstrating that the incremental 30%
contained anomalous cost changes resulting from factors not broadly shared across the industry that would materially distort the index calculation.61 The record here does not 59 The definition of idiosyncratic data can vary from review to review. In any given five-year review period, an historically high level of cost change due to, e.g., new regulatory requirements may be widely experienced by pipelines across the industry and, accordingly, will be reflected in the central tendency of the industry-wide data and thus identified as a normal cost change. On the other hand, if during a different five-year review period, only a small number of pipelines experience that same level of cost change, then the cost change will be idiosyncratic and will differ significantly from the central tendency of the industry-wide data.
Generally, the best method of identifying normal and idiosyncratic costs is to consider an inclusive and broadly representative data set such as the middle 80% and to compare those costs to the central tendency of that data set.
60 Likewise, if the lower bound of the middle 80%
includes pipelines with cost changes that are below industry norms, the index average will significantly exceed this lower bound.
61 For instance, commenters proposing various manual data trimming methodologies demonstrated that the middle 80% included pipelines whose cost changes resulted from idiosyncratic circumstances such as major rate base expansions or increases in net plant. See 2015 Index Review, 153 FERC
61,312 at PP 2029; 2010 Index Review, 133 FERC
61,228 at PP 3455.

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contain a comparably detailed analysis of the incremental 30%. Although Joint Commenters identify 7 pipelines out of 48 with anomalous cost changes in the incremental 30%, removing those pipelines from the sample would only marginally affect the central tendency of the middle 80%.62 Furthermore, the record contains no evidence that the cost experiences of the remaining 41
pipelines similarly diverged from industry norms.63 Finally, the mere presence of pipelines with anomalous cost experiences in a data sample is not sufficient reason to use an alternative sample. The Commission recognized in the 2015 and 2010 Index Reviews that the middle 50% likely includes pipelines with idiosyncratic cost experiences, such as rate base expansions.64 Accordingly, this record does not justify discarding the additional data in the incremental 30%
via statistical data trimming to the middle 50%.65
29. Shippers arguments for a contrary result are unavailing. Notwithstanding that the middle 80% is more dispersed than in prior reviews, the record contains no evidence addressing 62 When these pipelines are removed from the data set, the mean of the middle 80% declines from 1.46% to 1.29%, while the median and weighted mean remain nearly unchanged. This reduces the composite central tendency of the middle 80% only marginally, from 0.78% to 0.72%. Compare Attachment A, Ex. 1, with id., Ex. 6. Furthermore, even this limited reduction may be exaggerated because it results in part from reducing the overall number of pipelines in the sample, which would tend to lower the mean of the sample. Additionally, because four of the seven removed pipelines are located below the median, it is unsurprising that excluding them from the middle 80% would reduce the mean.
63 In using the middle 80% in this proceeding, we observe that the index level established herein is nonetheless the lowest index since the 2000 Index Review. This mitigates concerns that using the middle 80% leads to an anomalous index level.
64 See 2015 Index Review, 153 FERC 61,312 at P 33 n.60 noting that 26 of the 41 pipelines that commenters proposed to exclude for reporting non-comparable data were included in the middle 50%; 2010 Index Review, 133 FERC
61,228 at P 48 n.25 noting that 7 of the 25
pipelines that a commenter proposed to exclude for experiencing rate base expansions were included in the middle 50%. Just as the presence of those pipelines did not preclude use of the middle 50%
in earlier reviews, we find that the pipelines Joint Commenters identified do not preclude use of the middle 80% in this proceeding.
65 AOPL also argues that the Commission should use the middle 80% because it conforms more closely to a lognormal distribution than the middle 50%. AOPL Initial Comments at 2021, 24 citing Shehadeh Initial Decl. at 24; AOPL Reply Comments at 89. Shippers contend that this argument is mathematically flawed and unsound.
Joint Commenters Reply Comments, Brattle Report at PP 5054; Liquids Shippers Reply Comments at 2425 quoting Crowe Reply Aff. at 5. Given these objections, we do not rely upon this argument in reaching our decision to use the middle 80% here.
See also 2015 Index Review, 153 FERC 61,312 at P 43 rejecting this same argument.

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