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Case number 15-1453 at L. PJM Power Providers Group Petitioner versus Federal Energy Revotory Commission.

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Mr. Coretta, the petitioner, Mr. Nathan for the respondent, and Ms.

[00:00:50] Speaker 05:
Right, Mr. Coretta.

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May it please the court.

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PJM accepted an unreasonably low value for the construction cost of a hypothetical combustion turbine generating plant, a value we call the cost of new entry, and which is an important determinant in the PJM capacity market design.

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As a result, approximately 170,000 megawatts of capacity in PJM have cleared at understated values for three auctions held thus far, and this will occur in a fourth auction next year unless this Court takes action to correct its deficiencies.

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Findings in the orders under review failed to meet the substantial evidence standard and failed to respond to the reasonable objections of petitioners with respect to the labor cost value and the cost of funds, both of which are important in setting the cost of new entry.

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And in addition, petitioners and other protesters were unfairly treated and disadvantaged in the proceedings before FERC because so much of the evidence relied upon by FERC lacked a discernible evidentiary foundation, and FERC did nothing to correct that deficiency.

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The most impactful deficiency associated with the labor costs relates to the labor or base labor hours value, which is essentially the amount of time it takes to construct the reference combustion turbine generating unit under an idealized set of conditions.

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FERC relied primarily on the STANTEC report, which was not in the record.

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and which could not be properly evaluated by petitioners or protesters because it just didn't supply any evidence regarding what its source data was.

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Can you clear up something for me?

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Did your clients or anyone else ever request access to that data below?

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Your Honor, we requested that a hearing be held regarding this matter and some other aspects of the proceeding.

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There was no opportunity for discovery, and that's one of our points.

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you know, an expert on how these things work.

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So is having a hearing the only way where you might be able to have access to the data?

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Because if you had a hearing that a witness would testify and you would be entitled to whatever discovery of whatever or to see whatever materials they were relying upon.

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Yeah, the applicant had no obligation to supply us with any information regarding the source of the Stantec data outside of the Commission's procedural rules, and that would have required a hearing.

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OK, thank you.

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Thank you.

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So as I said, the Stantec report was the most impactful.

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Although FERC has claimed that this is well supported in the record, a simple inspection of essentially one sentence in a different report, the Pastaris report, provides some very vague and general statements regarding where Stantec obtained its information regarding the base labor hours.

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And all that really says is that they looked at some construction proposals, and it had input from other contractors.

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But it doesn't tell us who they were, what they asked them to provide.

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The situation we've encountered here is actually very similar to the one that the court encountered

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Susquehanna International Group versus Security Exchange Commission, where the court remanded findings back to the agency because it was relying upon consultants' report that it had no foundation for.

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Can you go to the proposed cost of capital value?

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One of your arguments is that FERC failed to address your argument, your claim with respect to project level financing risk.

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Yes.

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Based by private equity.

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Yes.

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Play out your argument for us, please.

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Sure.

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What petitioners, consultants showed

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below, and FERC didn't contest this, was that 70 percent of the new gas-fired generation being constructed in PJM was being constructed by private equity funds.

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Thank you.

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I appreciate that.

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And our experts also contended that these funds would experience project finance risk because they don't have a portfolio of assets to fall back on.

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and they provided a demonstration that private equity funds typically require higher returns than traditional entities, publicly traded entities, independent power producers.

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Okay, now FERC's response is what?

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FERC's response is they said two things, really.

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They said they used the best available public

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data, which we disagree with because we did provide data which was publicly available regarding what private equity funds expected to receive.

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But their primary argument was that they made an adjustment for what they call merchant risk.

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But merchant risk is not the same as project finance risk, and that's demonstrated by the fact that the information FERC relied on to figure out what the merchant risk was only looked at companies that had portfolios.

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So they failed to take account of this

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This risk associated with a project financing entity.

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The merchant companies are not coterminous with the private equity entities.

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That's correct.

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They are not.

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And I want to make sure I understood that was your argument.

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We have to have to say about it.

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And so if you're basing the disposition on that merchant group, that's not capturing the group to which you're referring.

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What you say is providing the largest amount of work.

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That is absolutely correct.

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And we are relying upon pedal gas storage for the proposition that a proxy group needs to be risk appropriate, which this one was not, or else adjustments have been made.

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What was your evidence about the return on capital required by private equity funds?

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There were an outfit called Cambridge Associates does publish

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data regarding what these funds receive.

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And is it disaggregated between energy production sources and other kinds of returns on private equity funds?

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I believe the data they provided only in one instance was

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bladed to this industry.

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Other than that.

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So it could be everything from private equity fund that takes over a casino in Las Vegas to a private equity fund that takes over some other company and eliminates a lot of workers.

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That's correct.

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So that doesn't really help very much with respect to return on capital required for a

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power generation.

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Well, Your Honor, FERC did not dispute our contention that private equity required higher returns.

[00:10:00] Speaker 05:
No, but they dispute that you don't have evidence as to what that higher return is with respect to power generation.

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I think what Petal Gas Storage stands for is that the proxy group needs to be risk appropriate.

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It needs to be as good as FERC can come up with with the evidence available.

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And if you don't provide it with evidence specific to power generation, then it doesn't seem to me that it's necessarily inappropriate for them to look at other data that's available.

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Your Honor, I would say that if that's what they were going to do, that they had to demonstrate.

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And by the way, the witnesses attempted to do this, but FERC never made any findings on it.

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They would have to demonstrate that private equity funds and project finance risk was not incremental to what they call merchant risk.

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And they didn't make that demonstration.

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So I think they're in the position where they've essentially acknowledged that there is this higher risk out there.

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And they say they don't know what it is.

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And we requested that a hearing be held so that that could be further analyzed.

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Well, you could have put in more evidence on the subject.

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When you say that a hearing, nothing stopped you from putting in evidence specific to power generation.

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There was at least one of the pieces of evidence we put in was just in

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this industry, in the energy industry.

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I think that was about a 19% return.

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They agreed that there was greater risk, and for that they added a 1.3% addition, correct?

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They picked the midpoint of the range based upon merchant generation.

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So they did not take account of any incremental risk associated with project

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Didn't they also look at the possibility of hedging?

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They looked at the possibility of hedging with respect to merchant entities.

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Intervenors argue in their brief that they looked at hedging in connection with this project finance risk.

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And as I alluded to earlier, the witnesses did make some statements regarding that.

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But FERC never made any findings.

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Intervene is essentially, I think, acknowledged that there's a hole here.

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But FERC never filled the gap.

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With respect to private equity's cost of required return, your projection was 13.8%.

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Is that right?

[00:12:36] Speaker 03:
No.

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That was FERC's.

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I thought that was PGA.

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That was PGA, actually.

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Rattle backed into 13.8%.

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Yours was 14.1%.

[00:12:46] Speaker 03:
No, I don't think so, Your Honor.

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Our witnesses recommended one between 15 and 20%.

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When you sit down and come back for a bottle, if you could get me that page, that would be helpful.

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Sure.

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I can do that.

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I see I'm running out of time.

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Are there any further questions?

[00:13:07] Speaker 03:
No?

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OK.

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Thank you.

[00:13:22] Speaker 01:
Good morning, Your Honors.

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Anand Viswanathan on behalf of the Commission.

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So it looks like there's been a number of questions about the cost of capital determination, so maybe I'll start there.

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Just to step back, I mean, under Section 205 of the Federal Power Act, the Commission considers the proposal that's been presented to it and evaluates that proposal for whether it is just and reasonable.

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The commission here agreed with PJM's view that private equity data was a poor proxy for estimating the cost of capital attributable to owning and operating a merchant generating facility.

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The commission agreed with PJM's expert testimony on this point.

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Why?

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Because private equity portfolios, the record reflected that those portfolios were diversified into many different industries, not just energy.

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But the numbers indicate the private equity and power generation, they were substantially involved in what we're talking about, right?

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I mentioned the petitioners have argued that most of the new construction was funded by private equity firms.

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From the commission's perspective, the question is whether the cost of capital appropriately captures the risks associated with constructing merchant generating facilities.

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And so in the commission's view, it agreed with what PGM had proposed because of the fact that

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The cost of capital that PGM proposed was specific, and it was attributable to merchant generation, not to other industries.

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We also have testimony in the record.

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I think you're walking past what I'm trying to figure out.

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They put in evidence to indicate that most of the new construction was being done by the large percentage,

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private equity entities.

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That's right.

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So it's no answer for you to refer me to the merchant generation.

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The percentage of contribution to the new construction is much lower than the private equity.

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So we're still back to the question of how to get rid of their claim that there's a higher rate for return that should be paid to private equity.

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So part of the problem here is- In other words, there's no answer to me.

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At least I can't sort it out.

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say that some private equity entities are inappropriate for us to look to because of other things.

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Well, but so what?

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Because 70% of what's being done is by private equity groups.

[00:16:02] Speaker 01:
So I think the record reflects, and the commission cited to testimony on this point, that you determine a cost of capital by how the capital is being used.

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It's not the source of the financing.

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It's not the source of the funding.

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So in the commission's view, the fact

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let's say the majority of the new construction is being funded by particular entities, that doesn't tell us that the cost of capital should reflect what those entities expect in terms of return.

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Are you just teaching me, or are you repeating what the commission said?

[00:16:31] Speaker 01:
So that is in the record graph.

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I will refer you to, this is JA820, I believe.

[00:16:44] Speaker 07:
It's something that tells me that the Commission addressed the argument head on and said we're not buying the argument that 70% of the new construction is private equity, and so we're moving from there.

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I mean, is that what you're saying there, Simon?

[00:17:02] Speaker 01:
So I think that the issue here is that the Commission

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viewed the way that PJM calculated the risks as appropriately capturing the risks that are attributable to how the capital is being used.

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That didn't mean anything to me.

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In all due respect, I mean, I hear the words.

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And as a general matter, I know what you mean to say, but I don't understand in this context.

[00:17:25] Speaker 07:
They made a specific claim with respect to high rate of return because private equity entities are doing 70% of the new construction.

[00:17:34] Speaker 07:
So that's kind of a simple screen

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presentation, and there could be flaws in it, but what was being pointed to by Florida?

[00:17:45] Speaker 01:
So I can point you to 730, JA 730, this is paragraph 82, and there's also a footnote in that paragraph to the expert testimony about Grattle.

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That testimony points out, and I'll just, what the commission said was that

[00:18:04] Speaker 01:
Because of the fact that private equity is consisted of, the portfolio is consisted of many different industries, it was a poor proxy for determining the cost of capital for how the capital is being used.

[00:18:15] Speaker 01:
And that's what they said at paragraph 82.

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The expert testimony that they're saying, that's the Brattle Report, and that can be found at JA 630, 630.

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And so what this page reflects here is that this notion that the fact that a private equity firm may choose to diversify into many different industries might be an appropriate investment strategy, but in terms of the cost of capital, it's not something that you reward because it's a voluntary choice.

[00:18:53] Speaker 01:
And I think that's what Brattle's testimony reflects.

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I think it's also, there's a difference between

[00:19:01] Speaker 01:
cost calculating cost of capital and its components, which is necessarily forward-looking, versus an entity like a private equity firm saying, we have actually earned x percentage looking backwards.

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So the cost of capital is to look forward.

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It's intended to be an estimate.

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It doesn't mean that whatever the private equity firm or some other entity happened to earn in the marketplace would be what they get as a cost of capital.

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And I'll return back to the risk point that I think someone else in the panel raised.

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The commission agreed that the way in which Brattle quantified the risks was appropriate because Brattle looked at a number of different reference points.

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One of those reference points was large publicly treated energy firms.

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And Brattle explained that the commission agreed at this point that

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A merchant generating facility is going to face higher risks than a large publicly traded firm, in part because of the ability to hedge.

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And so a large publicly traded firm would have long-term contractual agreements in place to hedge some of that risk.

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And so a merchant generating facility would not have that opportunity, so its risks would be higher.

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But at the same time, it would have some ability to hedge risk in the medium term.

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And so in Brattle's view and its expert judgment, it found that 8 percent would appropriately capture the higher risks faced by a merchant generating facility.

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And that was right sort of in the midpoint of all the various reference points they looked at.

[00:20:34] Speaker 01:
Uh, not specifically, Your Honor.

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I think what Brattle explained was that they did not include private equity sources for a couple of different reasons.

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We've talked about the poor proxy point.

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They also noted that private equity data is not observable in the marketplace.

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And so part of the Commission's reasoning for accepting Brattle's methodology was that it viewed it as transparent and based on verifiable public data.

[00:20:58] Speaker 07:
How could it be a poor proxy if it's 70% under construction?

[00:21:03] Speaker 05:
I thought your argument is that the only evidence about how much private equity has has to do with their entire portfolio of everything.

[00:21:13] Speaker 05:
And so even if they're 70% in power, we don't know what return they expect on power, that it's part of their own diversification of portfolios.

[00:21:22] Speaker 05:
Maybe they get 1%, and that's good enough because they're betting on 1,000% on a casino.

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And so it's just not an acceptable proxy to pick a private equity funds portfolio.

[00:21:37] Speaker 05:
Isn't that what they say?

[00:21:38] Speaker 07:
Is that what Ferg said?

[00:21:40] Speaker 07:
I mean, I understand that concept, but I'm just trying to figure out where Ferg says this.

[00:21:44] Speaker 01:
Well, so I think Burke said, I think Chief Judge Garland's point is a good one.

[00:21:47] Speaker 01:
The idea that we're not going to write an opinion about his opinion.

[00:21:52] Speaker 05:
Well, isn't that exactly what's in paragraph 82 of Burke's opinion at 730 and then exactly what's in

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the experts affidavit at JA 630.

[00:22:03] Speaker 01:
That's exactly right.

[00:22:05] Speaker 01:
And this is the idea that we can't separate out the various pieces of the private equity data.

[00:22:11] Speaker 01:
And I think an earlier point you made, Chief Judge Garland, is a good one in that the petitioners could have offered a specific source of data that was sort of unique to energy, the energy industry from private equity firms.

[00:22:25] Speaker 01:
They didn't do that.

[00:22:27] Speaker 01:
what they offered.

[00:22:28] Speaker 01:
I think we pointed this out in our brief at page 40.

[00:22:31] Speaker 01:
They offered some expert testimony from

[00:22:34] Speaker 01:
This is their – we cited their brief at page 63, which cites expert testimony from JA 437 to 438.

[00:22:41] Speaker 01:
They sort of describe a few different sources of private equity information.

[00:22:47] Speaker 01:
One of them was, quote, certain states' pension plans that report individual returns associated with their investments in certain companies.

[00:22:55] Speaker 01:
But that level of generality,

[00:22:58] Speaker 07:
it's pretty hard to get anything specific to the energy industry

[00:23:11] Speaker 07:
I think implicit in their argument, there are cross-neuralizing effects in private equity and part of the response, and maybe it was on them to point this out, that we don't operate by disaggregating all.

[00:23:24] Speaker 07:
We have a number of different investments, and the only way we can be seriously in play here is by having these other investments, too.

[00:23:35] Speaker 07:
I don't know how you sort that out, but their argument, bottom line, is we have to have a higher rate of return in order to be here.

[00:23:42] Speaker 07:
Otherwise, we're not here.

[00:23:44] Speaker 07:
And so who's going to fill the 70% that we leave?

[00:23:47] Speaker 07:
That's essentially what they're arguing.

[00:23:49] Speaker 07:
So I don't buy the argument that a piece of their portfolio that is power generation

[00:23:55] Speaker 07:
isn't at the same level of risk as well.

[00:23:57] Speaker 07:
Because I think it's cross-fertilizing in these private equity firms.

[00:24:01] Speaker 07:
I don't think they sit and limit.

[00:24:03] Speaker 07:
They're looking at investment A, B, C, and D, and that's how they're operating.

[00:24:08] Speaker 07:
And they're essentially saying, we have to have the higher percentage of return.

[00:24:12] Speaker 07:
Otherwise, we're not in this market.

[00:24:13] Speaker 07:
That's essentially what they're arguing.

[00:24:16] Speaker 01:
I think that's right.

[00:24:17] Speaker 01:
I think part of the problem is we just can't observe.

[00:24:20] Speaker 01:
You're saying they haven't shown it.

[00:24:22] Speaker 01:
They haven't shown it.

[00:24:22] Speaker 01:
That's exactly right.

[00:24:23] Speaker 01:
And I think that from the commission's perspective, coming back to Section 205 and what it requires, the commission looks at the proposed cost of capital that's presented to it.

[00:24:32] Speaker 01:
And so even if there's a better, more accurate way of coming to that number, the question is whether the number that's presented to the commission is just and reasonable.

[00:24:40] Speaker 01:
I think the commission gave several explanations based on record evidence as to why it approved

[00:24:45] Speaker 01:
PJM's choice of 8 percent.

[00:24:47] Speaker 01:
It was the poor proxy point.

[00:24:49] Speaker 01:
And they cited expert testimony on this point that there's just not enough information out there as to how much of the private equity firms is attributable to.

[00:25:01] Speaker 01:
power generation, I think actually the expert testimony had said that the majority of those private equity portfolios are not in merchant generation.

[00:25:08] Speaker 01:
They also pointed out that they agreed with how PJM captured the higher risks of a merchant-generating facility relative to large publicly traded firms.

[00:25:18] Speaker 01:
And I think there was also sort of a distinction in this idea of project-level financing versus

[00:25:24] Speaker 01:
sort of corporate level transactions.

[00:25:27] Speaker 01:
And the commission also pointed out that that distinction was not relevant because of the fact that, as I mentioned, Brattle looked at a number of different reference points.

[00:25:35] Speaker 01:
Some of them were not just limited to corporate level data.

[00:25:38] Speaker 01:
For example, there was corporate transaction data that priced merchant generation divestiture.

[00:25:48] Speaker 01:
So that's all the sort of record evidence that the commission relied upon for this point.

[00:25:53] Speaker 01:
I know that there was also some questions on the ability for the petitioners to access the data, specifically the hours estimate.

[00:26:07] Speaker 04:
The labor hours estimate, yes.

[00:26:09] Speaker 01:
Yeah, and so I think what I would say to that, Judge Wilkins, is that, first of all, that

[00:26:15] Speaker 01:
That base labor hours estimate is not the only thing the commission was considering.

[00:26:19] Speaker 01:
What it was considering was whether PJM's adoption of the market monitor's overall estimate of labor costs was appropriate.

[00:26:26] Speaker 01:
And so it looked at a number of different pieces of evidence.

[00:26:31] Speaker 01:
It relied upon PJM's expert testimony that, specific to the hours,

[00:26:36] Speaker 01:
the STANTEC hours estimate was actually consistent with hours estimates by two other independent firms.

[00:26:44] Speaker 01:
It also noted that Dr. Sackowitz was able to reproduce, nearly reproduce the market monitor's overall estimate of labor costs, and based on all of that evidence, the commission found that it was an appropriate estimate of labor costs.

[00:26:57] Speaker 04:
But didn't the market monitor have a vastly different number for the total labor hours?

[00:27:09] Speaker 01:
for total labor hours?

[00:27:11] Speaker 04:
I guess this is very confusing, but I thought that the market monitor report, their input for labor hours was not the one that the commission ultimately accepted, right?

[00:27:31] Speaker 01:
I don't think that's right, Your Honor.

[00:27:33] Speaker 01:
I think, so the market monitor retained Pasteris Energy to assist with the labor cost estimate.

[00:27:38] Speaker 01:
Pasteris retained Stantec.

[00:27:41] Speaker 01:
The hours estimate that Stantec came up with was the 360,000 hours number.

[00:27:46] Speaker 01:
And so that was the hours figure that was incorporated into the estimate of labor cost that was offered by the market monitor and ultimately proposed by PJM and accepted by the commission.

[00:27:56] Speaker 01:
I think what you might be referring to is

[00:27:59] Speaker 01:
There's a fairly big difference in the total dollar labor cost estimate offered by the market monitor as compared to that offered by PJM's expert Brattle.

[00:28:11] Speaker 01:
And so that's an issue where the stakeholders at PJM were unable to sort of come to a consensus and

[00:28:17] Speaker 01:
They asked PJM and the market monitor to confer to see if they could reach a consensus.

[00:28:22] Speaker 01:
And that's when Dr. Sotkowitz at PJM did his analysis of the market monitor's estimate and found it to be reasonable because it was consistent with PJM's past experience in comparing cost of new entry estimates.

[00:28:36] Speaker 01:
And he was able to nearly reproduce it using publicly available data.

[00:28:39] Speaker 01:
And as I pointed out, the hours estimate offered by the market monitor and Stantec lined up with hours estimates by two other firms.

[00:28:53] Speaker 02:
questions thank you mr. Flynn you have three minutes very quickly on the cost of capital

[00:29:16] Speaker 02:
The petitioners have seized on this question of the 75% of projects being funded through private equity.

[00:29:25] Speaker 02:
I think that what they're trying to get away from is the fact that FERC based its analysis on what it found to be an adequate analysis by PJM.

[00:29:36] Speaker 02:
In contrast, they found that the petitioner's analysis was incomplete.

[00:29:41] Speaker 02:
It was contrary to their precedent.

[00:29:43] Speaker 02:
And petitioners have no answer to that.

[00:29:46] Speaker 02:
What they mean by incomplete was actually elaborated by PJM's witnesses, who explained that the particular analysis included numbers that they obtained about this 15 to 20 percent return on equity, but it wasn't clear what the other aspects of the financial numbers were that go with that.

[00:30:10] Speaker 02:
cost of capital, you've got debt, you've got equity, and you've got a capitalization ratio, a split between them.

[00:30:17] Speaker 02:
And that data wasn't in the record.

[00:30:18] Speaker 02:
So how can you evaluate the reasonableness of an equity number if you don't know what goes along with it in terms of capital structure and debt?

[00:30:28] Speaker 02:
And so Ferg appropriately found, adopted the position of P. Jim's echo, their position that that information was incomplete.

[00:30:38] Speaker 02:
They also found that,

[00:30:40] Speaker 02:
the presentation by petitioners was contrary to FERC precedent.

[00:30:43] Speaker 02:
They did this very strange thing where they, FERC has a policy where in some cases you can increase the return on equity above the midpoint so that it's 75% instead of 50%.

[00:30:57] Speaker 02:
Here, the petitioner's witnesses took the debt, the equity, and the cash structure and increased all of them.

[00:31:05] Speaker 02:
up to the 75% level, which was flat in the concrete for expressing.

[00:31:09] Speaker 02:
And so FERC noted these things in its orders.

[00:31:12] Speaker 02:
They did, I will tell you that the answer to the private equity is so.

[00:31:19] Speaker 02:
I'll admit that.

[00:31:20] Speaker 02:
But it's there.

[00:31:22] Speaker 02:
It's there in several respects.

[00:31:25] Speaker 02:
One is that they do acknowledge this hedging question.

[00:31:28] Speaker 02:
I don't think it can be sliced quite as fine as

[00:31:34] Speaker 02:
The concept there is specified in the testimony at 630, page 75, for page 14 of our witnesses, that a lack of diversification by the company making the investment does not necessarily increase the investment's cost of capital.

[00:31:55] Speaker 02:
The point is that ratepayers and customers shouldn't be responsible for awarding a risk premium

[00:32:03] Speaker 02:
to a firm that can hedge that risk through hedging tools.

[00:32:08] Speaker 02:
And Ferg specifically mentioned the hedging tools at paragraph 58 in their order, it's really a 15.

[00:32:16] Speaker 02:
So again, it could be more precise and direct, but I think it's in there.

[00:32:23] Speaker 05:
I'm afraid you're out of time.

[00:32:24] Speaker 05:
Do you have a zinger you want to end here with?

[00:32:26] Speaker 05:
On any topic you want, but you're overtime ready.

[00:32:32] Speaker 02:
The emphasis is being put on Stantec.

[00:32:34] Speaker 02:
It should be put on what our witness put in, Dr. Sikic.

[00:32:37] Speaker 02:
He put in an entire analysis.

[00:32:39] Speaker 02:
He looked at Bureau of Labor Statistics, public data, and he reproduced.

[00:32:44] Speaker 02:
He did his own analysis to reproduce as close as he could what the market monitor had come up with.

[00:32:49] Speaker 02:
And so his basis was the public BLS data and the confirmation that on the labor hours,

[00:32:55] Speaker 02:
The same labor hour value was found by three different independent experts, Stantec, CH2M Hill, who we hired for the last review of the cost of your entry, and the very witnesses who prepared the analysis in this case.

[00:33:16] Speaker 02:
Although they had a higher overall number, they had the same number of labor.

[00:33:19] Speaker 05:
I'm afraid we're out of time.

[00:33:20] Speaker 05:
Thank you.

[00:33:21] Speaker 05:
All right.

[00:33:21] Speaker 05:
Let the intervener go over a minute.

[00:33:23] Speaker 05:
We'll let you go over a minute, because you're over already.

[00:33:26] Speaker 05:
So go ahead with another minute.

[00:33:32] Speaker 03:
Thank you, Your Honor.

[00:33:34] Speaker 03:
I should have had 15 minutes in the start.

[00:33:36] Speaker 03:
Did I really use it all up?

[00:33:38] Speaker 05:
Did you use it up?

[00:33:39] Speaker 05:
I'm afraid so.

[00:33:39] Speaker 03:
OK, I'm sorry.

[00:33:40] Speaker 03:
It goes so fast.

[00:33:41] Speaker 03:
So much fun.

[00:33:43] Speaker 03:
You did ask me for the site to the 15% to 20% that's on 480.

[00:33:49] Speaker 03:
I want to say about Mr. Sikevich.

[00:33:52] Speaker 03:
He did his analysis.

[00:33:53] Speaker 03:
Mr. Sikevich is a Ph.D.

[00:33:56] Speaker 03:
economist.

[00:33:57] Speaker 03:
He has not experienced in the construction industry, so his analysis had to rely upon other values.

[00:34:08] Speaker 03:
We've talked about the SanTech report.

[00:34:11] Speaker 05:
I'm sorry, could you, you said at 480, what did you say?

[00:34:14] Speaker 03:
418, excuse me, I'm sorry.

[00:34:16] Speaker 03:
If I said 480, 418, it's at the top of the page, paragraph 21.

[00:34:27] Speaker 03:
The CH2M Hill report was found by this commission below, not to have been shown to be just and reasonable.

[00:34:34] Speaker 03:
We raised even the same witnesses.

[00:34:37] Speaker 03:
PSEG raised same concerns there.

[00:34:41] Speaker 03:
FERC never addressed them, and yet they relied upon that report here as well.

[00:34:46] Speaker 03:
The Sergeant and Lundy report also referred to the third firm.

[00:34:52] Speaker 03:
We showed through our witnesses that there was a great deal of confusion.

[00:34:58] Speaker 03:
You really can't, you just can't put together the values given Sergeant Lundy's much higher overall labor costs.

[00:35:10] Speaker 03:
I want to make a couple of points about the cost of funds, one of which is FERC,

[00:35:16] Speaker 03:
referred to other sources besides the public or IPPs regarding its values, but all of those values always went back to those very firms.

[00:35:30] Speaker 03:
None of those firms were private equity funds.

[00:35:34] Speaker 03:
And as far as Mr. Flynn says, that hedging related to private equity funds was discussed.

[00:35:43] Speaker 03:
I commend you to read our reply brief on that.

[00:35:46] Speaker 03:
That simply didn't happen.

[00:35:48] Speaker 03:
And I'll mention one more thing about the private equity funds is that FERC here is relying for its wage values on a conglomeration of industries.

[00:36:00] Speaker 03:
That's the Bureau of Labor Statistics data.

[00:36:03] Speaker 03:
And if that's not acceptable or acceptable, then I don't see how they could say that the data regarding private equity funds wouldn't be acceptable either.

[00:36:13] Speaker 05:
Any questions from the back?

[00:36:15] Speaker 05:
Thank you.

[00:36:15] Speaker 03:
We'll take a matter on our submission.

[00:36:18] Speaker ?:
Thank you.