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Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations
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below the purported median that follow no discernible pattern.85 Accordingly, we conclude that Ms. Crowes calculation does not provide a useful measure of central tendency for purposes of calculating the index.86
40. Fourth, Liquids Shippers challenges to Colonials and Enbridges page 700 data are both misplaced and unavailing on the merits. Indexing proceedings are not an appropriate forum for challenging specific pipelines page 700 inputs 87 and the Commission has declined to scrutinize individual pipeline data in prior index reviews.88
In any event, the record does not support Liquids Shippers claim that Colonial and Enbridge reported outlying cost changes. Both pipelines are included in the middle 50% of all pipelines in the data set, which indicates that their cost experiences did not diverge significantly from industry norms. In fact, as Dr. Shehadeh demonstrates, Enbridges reported cost change represents the correctly calculated weighted median of the data sample,89 refuting Liquids Shippers 85 A small shift in the data samples median would produce significant and multidirectional changes in the calculations result. For instance, a median reflecting the pipeline with the next lowest weighted percentage change Wildcat Liquids Caddo LLC would reduce Ms. Crowes result from 0.57 to 1.74% a decrease of over 200%, whereas a median reflecting the next highest change reported by Wesco Pipeline, LLC would reduce the result by an even greater amount, from 0.57%
to 2.28% a decrease of 400%. These haphazard results do not reflect a convergence towards a central tendency of industry-wide cost changes.
86 In addition to failing to reflect the central tendency of industry-wide cost changes, Ms.
Crowes calculation also improperly reduces the weighting attributed to larger pipelines in the data set. Because Ms. Crowe orders the pipelines by barrel-mile cost change times barrel-miles, a pipeline with high barrel-miles would likely only lie near the median of the data sample if it reported extremely low cost changes. Thus, Ms. Crowes methodology would nullify the influence of larger pipelines upon the index calculation and thereby defeat the purpose of relying upon a weighted measure of central tendency. See AOPL II, 281 F.3d at 241 explaining that the weighted mean serves to ensure that minor firms do not skew the result.
87 See AOPL I, 83 F.3d at 1437 holding that the Commission did not err in Order No. 561 by declining to periodically review individual pipeline costs and instead requiring shippers to challenge individual pipeline rates via protests or complaints; see also Calnev Pipe Line L.L.C., 127
FERC 61,304, at P 5 2009 The Commission has made quite clear that it will not review allegations regarding the appropriateness of a pipelines cost of service or the accuracy of its accounting in an index proceeding. Such allegations must be included in a complaint once the index-based filing becomes effective. citing SFPP, L.P., 123 FERC 61,317 2008; BP W. Coast Prods. LLC v. SFPP, L.P., 121 FERC 61,243 2007.
88 2015 Index Review, 153 FERC 61,312 at PP
2230, 3339 declining to adopt manual data trimming proposals that would have required analyzing individual pipeline data; 2010 Index Review, 133 FERC 61,228 at PP 4855 same.
89 Shehadeh Reply Decl. at 14; see also supra n.81.

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contention that it is an outlier in terms of cost changes.
D. Liquids Shippers Proposal To Adopt Standardized ROEs for 2014 and 2019
1. Comments 41. Liquids Shippers state that the Commission should replace the ROEs that pipelines reported on page 700 for 2014 and 2019 with single, standardized figures for both years.90 Liquids Shippers contend that the data used to calculate the index level should conform to the Commissions cost-ofservice methodology 91 and that the reported ROEs for 2014 and 2019 are inconsistent with this methodology in two respects. First, Liquids Shippers claim that pipelines reported ROEs are self-selected and do not reflect what investors would demand in the market.92 Second, Liquids Shippers state that if all oil pipeline rates were litigated at the same time, absent unusual circumstances, the Commission would adopt the same ROE for every pipeline because regulated pipelines typically fall within a broad range of average risk.93 Liquids Shippers assert that the reported ROEs conflict with this principle because they vary substantially.94
42. Liquids Shippers also claim that uncertainty surrounding the Commissions oil pipeline ROE policy undermines the reliability of the reported ROEs for 2019. They state that the Commission initiated a review of its ROE policy in Docket No. PL194000
on March 21, 2019 but did not clarify its ROE methodology for oil pipelines until it issued the ROE Policy Statement on May 21, 2020.95 Because oil pipelines were required to submit page 700 cost-of-service data for 2019 in April 2020, Liquids Shippers allege that pipelines were not certain of the 90 Liquids
Shippers Initial Comments at 2122.
at 21, 25 citing 2015 Index Review, 153
FERC 61,312 at PP 13, 15.
92 Id. at 21 citing FPC v. Hope Nat. Gas Co., 320
U.S. 591, 603 1944; Bluefield Water Works &
Improvement Co. v. Pub. Serv. Commn of W. Va., 262 U.S. 679, 69293 1923; Farmers Union Cent.
Exch., Inc. v. FERC, 734 F.2d 1486, 1502 D.C. Cir.
1984.
93 Id. at 2223. Liquids Shippers assert that regulated pipelines typically face comparable risks and that the Commission typically sets oil pipeline ROEs at the median of the proxy group results. Id.
94 Id. at 23. For instance, Liquids Shippers state that among the 160 pipelines included in the untrimmed data set, reported page 700 ROEs for 2019 ranged from 0.9% to 22.3%. Id. at 24 citing Crowe Initial Aff. at 9.
95 Id. at 2526 citing Inquiry Regarding the Commissions Policy for Determining Return on Equity, 166 FERC 61,207 2019. As discussed above, the Commission issued a policy statement revising its ROE methodology for natural gas and oil pipelines on May 21, 2020. ROE Policy Statement, 171 FERC 61,155.

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Commissions prevailing policy when they reported their 2019 ROEs. In support of this claim, Liquids Shippers observe that two pipelines submitted updated Form No. 6 filings in July 2020
indicating that the page 700 ROEs they filed in April 2020 did not comply with the Commissions then-applicable policy relying solely upon the DCF
model.96
43. In light of these concerns, Liquids Shippers urge the Commission to replace each pipelines reported page 700 ROE for 2014 and 2019 with standardized ROEs for purposes of calculating the index level. For 2014, Liquids Shippers propose a standardized ROE of 10.29%, which 54
pipelines reported in their 2014 page 700 filings.97 For 2019, Liquids Shippers propose to use the 10.02%
ROE that Trial Staff has proposed in testimony in an ongoing oil pipeline rate proceeding based upon data for the six-month period ending in November 2019.98
44. Pipelines oppose Liquids Shippers proposal and disagree with their assertions. AOPL disputes Liquids Shippers claim that variation in the reported page 700 ROEs indicates that this data is unreliable or inconsistent with Commission policy.99 Pipelines contend, moreover, that the Commission found in the 2015 Index Review that statistical data trimming is sufficient to remove pipelines with outlying equity cost changes from the data set and that Liquids Shippers arguments do not undermine this conclusion.100 In addition, AOPL argues that Liquids Shippers failed to support their proposed standardized ROEs and that adopting their proposal would complicate the five-year review by introducing complex cost-of-service ratemaking issues.101

91 Id.

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96 Id. at 2728 citing Crowe Initial Aff., App. 4
at 12 referring to updated Form No. 6 filings of Plains Pipeline, LP and Rocky Mountain Pipeline System LLC.
97 Ms. Crowe states that 45 pipelines reported a 10.29% ROE on their page 700s for 2014. Crowe Initial Aff. at 1112. However, as shown in Attachment A, Exhibit 7 to this order, the Commissions review of Form No. 6 filings submitted in 2016 indicates that 54 pipelines reported this ROE for 2014 in the column on page 700 for prior-year data.
98 Liquids Shippers Initial Comments at 3031;
Crowe Initial Aff. at 12 citing Trial Staff, Direct and Answering Cost-Based Rate Testimony of Commission Trial Staff Witness Robert J. Keyton, Docket Nos. OR187002 et al. filed Jan. 14, 2020.
99 AOPL Reply Comments at 30.
100 Id. at 28 quoting 2015 Index Review, 153
FERC 61,312 at P 17; Designated Carriers Reply Comments at 1314 same.
101 AOPL Reply Comments at 32.

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