Ass'n of Pub. Agency Customers v. Bonneville Power Admin.
| Decision Date | 28 October 2013 |
| Docket Number | No. 11–73178.,11–73178. |
| Parties | ASSOCIATION OF PUBLIC AGENCY CUSTOMERS, Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Citizens Utility Board of Oregon; Eugene Water & Electric Board; Idaho Power Company; Northwest Requirements Utilities; Puget Sound Energy, Inc.; Pacificorp; Pacific Northwest Generating Cooperative; Public Power Council; Public Utility Commission of Oregon; Public Utility District No. 1 of Cowlitz County, Washington; Public Utility District No. 1 of Snohomish County, Washington; Public Utility District No. 1 of Benton County, Washington; The City of Seattle, Respondents–Intervenors. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
Kathleen M. Sullivan (argued), Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY; Michael Alcantar and Donald Brookhyser, Alcantar & Kahl, LLP, Portland, OR; Michael N. Kunselman, Alston & Bird, LLP, Washington, D.C.; John M. Rochefort, Alston & Bird, LLP, Los Angeles, CA; Judith Endejan, Graham & Dunn, PC, Seattle, WA; Jason N. Poulos, Weinberg Wheeler Hudgins Gunn & Dial, Atlanta, GA, for Petitioner.
Kurt R. Casad (argued), Special Assistant United States Attorney, S. Amanda Marshall, United States Attorney, Stephen J. Odell, Assistant United States Attorney, Richard A. Greene, Special Assistant United States Attorney, Portland, OR; Randy A. Roach and Timothy A. Johnson, Bonneville Power Administration, Portland, OR, for Respondent.
Jay T. Waldron (argued) and Sara Kobak, Schwabe Williamson & Wyatt, PC, Portland, OR; Donald G. Kari and Jason Kuzma, Perkins Coie, LLP, Bellevue, WA; Michael G. Andrea, Avista Corporation, Spokane, WA; Scott G. Seidman, Tonkon Torp, LLP, Portland, OR; Dan L. Bagatell, Perkins Coie, LLP, Phoenix, AZ; Ryan L. Flynn, Pacificorp, Portland, OR; R. Blair Strong, Paine Hamblen, LLP, Spokane, WA, for Intervenors PacificCorp., et al.
Paul M. Murphy (argued), Murphy & Buchal, LLP, Portland, OR; Sarah Dennison–Leonard, Portland, OR, for Intervenors Northwest Requirements Utilities, et al.
Stephanie Andrus, Assistant Attorney General, Salem, OR; Donald L. Howell, II, Deputy Attorney General, Boise, Idaho; G. Catriona McCracken and Raymond W. Myers, Citizens' Utility Board of Oregon, Portland, OR, for Intervenors Idaho Public Utilities Commission, et al.
On Petition for Review of an Order of the Bonneville Power Administration.
Before: ARTHUR L. ALARCÓN, STEPHEN S. TROTT, and RICHARD A. PAEZ, Circuit Judges.
Opinion by Judge PAEZ; Dissent by Judge ALARCÓN.
In this opinion, we consider whether a settlement agreement between the Bonneville Power Administration (“BPA”) and a large number of its customers is lawful. We invalidated a previous settlement between BPA and a class of customers because it did not comply with the Pacific Northwest Electric Power Planning and Conservation Act (“NWPA”). See Portland Gen. Elec. Co. v. BPA, 501 F.3d 1009, 1036–37 (9th Cir.2007) (“PGE”); Golden Nw. Aluminum, Inc. v. BPA, 501 F.3d 1037, 1048 (9th Cir.2007) (“Golden Nw.”). On remand, BPA initiated a complex ratemaking process, under which it calculated both (1) overcharges resulting from the unlawful settlement, and (2) new rates, intended to comply with PGE and Golden Northwest. Its customers, in turn, filed numerous petitions for review in this court, challenging various aspects of BPA's rate-making.1
In the face of potentially unending litigation, BPA and a large number of its customers entered into the Residential Exchange Program Settlement Agreement (“REP–12 Settlement Agreement” or “Settlement”). Record of Decision (“ROD”) 14.2 The Settlement sets terms for refunding customers who were previously over-charged, as well as setting terms—including a new rate-making methodology—for the next seventeen years. After a thorough evaluation, the BPA Administrator issued the REP12 Record of Decision, a final agency action, in which he adopted the Settlement and committed BPA to abide by its terms.
In its petition for review, the Association of Public Agency Customers (“APAC”) challenges the Settlement, alleging that it violates several provisions of the NWPA, 16 U.S.C. §§ 839c(c), 839e(b), the Bonneville Project Act, 16 U.S.C. § 832d(a), regulations of the Federal Energy Regulatory Commission, 18 C.F.R. §§ 300.1(b)(6), 300.21(e)(1), and this court's decisions in PGE and Golden Northwest.3 In response,BPA and the intervening parties argue, in part, that APAC's members lack standing to bring this challenge, because they are merely the customers of BPA's customers, not direct customers themselves.4 We conclude that APAC has standing to challenge the Settlement, due to the “pass-through” contracts under which its members pay rates that directly reflect the rates BPA charges its direct customers. With respect to the merits, however, we conclude that the Settlement complies with the relevant statutory requirements and with our prior decisions, and we therefore deny APAC's petition for review.
We have previously chronicled the history of BPA, a federal agency that markets power generated by federal hydroelectric projects in the Columbia River Basin. See, e.g., Alcoa, Inc. v. Bonneville Power Admin., 698 F.3d 774, 779 (9th Cir.2012); Pac. Nw. Generating Co–op. v. Dep't of Energy, 580 F.3d 792, 797–800 (9th Cir.2009); Golden Nw., 501 F.3d at 1041;PGE, 501 F.3d at 1013–16;Pub. Power Council, Inc. v. Bonneville Power Admin., 442 F.3d 1204, 1206 (9th Cir.2006); M–S–R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 836–37 (9th Cir.2002) (as amended); Ass'n of Pub. Agency Customers, Inc. v. Bonneville Power Admin., 126 F.3d 1158, 1163–65 (9th Cir.1997) (“APAC”). Nevertheless, because of the complexity of the case, we begin with a brief review of the relevant history of the agency and provisions of the NWPA, one of “the tangle of statutes that govern [BPA's] operations.” Golden Nw., 501 F.3d at 1042.5 We then discuss the specific facts relevant to this appeal.
Congress created BPA, an agency within the Department of Energy, in 1937. PGE, 501 F.3d at 1013. The agency was initially “tasked with marketing the power generated by federally owned dams on the Columbia River.” Id. For the first thirty years of its existence—from the 1930s through the 1960s—BPA had sufficient resources to meet the power demands of two classes of customers. Id. at 1014. First, BPA provided power to “preference utilities,” also known as “consumer-owned utilities” or “COUs.” This class consists of publicly-owned utilities, cooperatives, and federal agencies, who are accorded priority to federal power under the Bonneville Project Act. Id.; see also16 U.S.C. § 832c(a), (d). Second, BPA provided power to “non-preference utilities.” PGE, 501 F.3d at 1014. This class of customers is made up of two sub-classes: (1) investor-owned utilities (“IOUs”), who purchase power for re-sale, and (2) direct service industrial customers (“DSIs”), who purchase power for direct consumption. Id.; see also APAC, 126 F.3d at 1164.
As demand for low-cost federal power rose in the 1970s, BPA forecast that it would be unable to meet all of its customers' power needs by the end of the decade. PGE, 501 F.3d at 1014. An “uncertain and unstable” period followed, during which BPA advised non-preference customers—and, later, preference customers—of its looming inability to provide them with power. APAC, 126 F.3d at 1165;see also PGE, 501 F.3d at 1014. As a result, many non-preference customers were forced to purchase power elsewhere, “at a severe cost disadvantage in the marketplace.” Id.
In response to the pending energy crisis, Congress enacted the NWPA in 1980. The NWPA “transformed BPA from an agency that merely sold whatever power was available from generating facilities in the Federal Columbia River Power System to one charged with the responsibility of meeting the region's future power needs.” APAC, 126 F.3d at 1165. Of particular importance here, the statute authorizes BPA to “exercise greater control over its power supply and to augment that supply by purchasing electric power in the market.” PGE, 501 F.3d at 1014. It also authorizes the BPA Administrator to “establish and revise the rates at which BPA's power is sold,” and—subject to certain limitations—to “enter into contracts, agreements, and settlements of claims and contractual obligations.” Id. Two of the provisions granting BPA such authority, section 5, 16 U.S.C. § 839c, and section 7, 16 U.S.C. § 839e, are at issue in this appeal.
Section 5(c) of the NWPA makes low-cost power available to IOUs, one of the classes of non-preference customers. Under this provision, IOUs are entitled to “exchange power they have purchased or generated for lower-cost power generated by BPA.” PGE, 501 F.3d at 1015;see also16 U.S.C. § 839c(c)(1); Golden Nw., 501 F.3d at 1047. This process, known as the Residential Exchange Program (“REP”), “essentially acts as a cash rebate to the IOUs,” allowing the IOUs to benefit from BPA's low rates even when BPA cannot itself provide them with power. PGE, 501 F.3d at 1015 ().6 The IOUs, in turn, are required to pass on this financial benefit to their customers. 16 U.S.C. § 839c(c)(3); see also Cal. Energy Res. Conservation & Dev. Comm'n v. Johnson, 807 F.2d 1456, 1460 (9th Cir.1986) ().
The traditional formula for deciding if an IOU is entitled to a “REP Benefit” is as follows: first, the IOU offers to sell power to BPA at its “average system cost” (“ASC”) for producing power.7 Second, BPA calculates the “PF Exchange rate,” which is the sum of a base rate for power, see16 U.S.C. § 839e(b)(1), plus any supplemental charges triggered by the “rate ceiling,” see id. at (b)(3), discussed infra. If the PF...
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