D.C. Circuit Upholds PJM Capacity Market CONE

On January 26, 2018 the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") rejected a challenge to FERC's approval of tariff revisions from the PJM Interconnection, L.L.C. ("PJM") regarding the so-called cost-of-new-entry ("CONE"), or the anticipated revenues required to recover costs in PJM's wholesale capacity market. A coalition of generators challenged PJM's CONE as too low, which they argued undercut their own recovery in the capacity market. In a brief opinion, the D.C. Circuit held that petitioners' claims failed to overcome the deferential standard of review applied to factual challenges to agency orders.

PJM first submitted its tariff revisions in September 2014, proposing, among other things, a new CONE value, which serves as a key input into the cost curve establishing the clearing price for PJM's wholesale capacity auctions (see, e.g. December 5, 2014 edition of the WER). In support of its revised CONE, PJM