California Energy Resources Conservation and Development Com'n v. Bonneville Power Admin., 83-7181

• Decision Date: 04 March 1985
• Docket Number: No. 83-7181,83-7181
• Citation: 754 F.2d 1470
• Parties: CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1470

754 F.2d 1470

CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent.

No. 83-7181.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 3, 1984.

Submission Withdrawn July 11, 1984.

Resubmitted Oct. 2, 1984.

Decided March 4, 1985.

William M. Chamberlain, Sacramento, Cal., for petitioner.

Kurt Casad, Portland, Or., for respondent.

Petition for Review of Actions by the Bonneville Power Administration.

Before KILKENNY, SNEED, and NORRIS, Circuit Judges.

Sneed, Circuit Judge:

Petitioner California Energy Resources Conservation and Development Commission (CEC) challenges transactions between the Bonneville Power Administration (BPA) and two northwest electric utilities that took place in 1983. Petitioner seeks a declaratory judgment that the transactions constituted a sale of electric power by BPA at a rate below that authorized by the established rate structure, and that BPA was therefore required to undertake statutorily-mandated ratemaking proceedings before entering into the transactions.

We find that, under the circumstances of this case, BPA was not required to follow ratemaking procedures. We therefore deny petitioner's request for a declaratory judgment.

I. STATEMENT OF THE CASE

A. Background

Respondent BPA is a federal government agency that markets power from hydroelectric projects and other federally-owned sources of electric power in the Pacific Northwest. BPA's operations are governed by the Pacific Northwest Electric Power Planning and Conservation Act, 16 U.S.C. Secs. 839--839h (1982) (the Regional Act). The Regional Act requires BPA to set rates that cover its costs and also return the federal investment in BPA's facilities "over a reasonable period of years," Id. Sec. 839e(a)(1). The Act prescribes procedures for setting and modifying rates. The procedures include notice in the Federal Register, hearings, and decision on the record. See id. Sec. 839e(i). Rates must be approved by the Federal Energy Regulatory Commission (FERC) before they become effective. Id. Sec. 839e(a)(2). Rate determinations and other final agency actions are subject to judicial review in this court. See id. Sec. 839f(e).

Petitioner CEC is an agency of the State of California responsible for formulation and implementation of energy policies. See Cal.Pub.Res.Code Secs. 25200, 25216. CEC is interested in BPA rates and the availability of BPA power because California electric utilities purchase a substantial amount of power from BPA.

This case, like the accompanying case of Portland General Electric Co. v. Johnson, 754 F.2d 1475 (9th Cir.1985), arises from the BPA's efforts to market surplus electric power during a period of unexpectedly high supply and unexpectedly low demand. Portland General Electric contains a more detailed explanation of the surrounding circumstances. Briefly, at the beginning of 1983, BPA found itself with a large surplus of marketable electric power and a severe shortfall in revenues. Abnormally high stream flows were filling BPA's reservoirs to capacity, but sales were off due to a downturn in the national and regional economies. If BPA could not find ways of increasing its sales, it faced the prospect of spilling water over its dams without utilizing the energy that that water could produce, while having to defer interest and amortization payments to the United States Treasury.

The Trojan nuclear power plant (Trojan) is jointly owned by BPA, the Portland General Electric Company (PGE), and the Pacific Power & Light Company (PP & L). BPA owns 30 percent of the plant, PGE

owns 67.5 percent, and PP & L owns 2.5 percent. Trojan produces electric power at an average variable cost of approximately 0.6 cents per kilowatt-hour.

B. The Challenged Transactions

With BPA's reservoirs projected to soon be in a "spill" condition, its marginal cost for producing hydroelectric power in 1983 was much lower than the 0.6 cents per kilowatt-hour that it cost to run Trojan. Additional hydroelectric power was virtually free; it represented the utilization of energy that would otherwise be lost. Therefore, simple economics mandated that Trojan be shut down and the power that it produced be replaced with hydroelectric power from BPA. Such a shutdown and replacement would generate savings for all of Trojan's owners, as well as additional revenues for BPA.

Significant cost savings could only be achieved if Trojan were shut down completely. Simply reducing its output would not produce savings proportional to the reduction. Therefore, for the savings to be achieved, PGE and PP & L, as well as BPA, would have to replace their power from Trojan with hydroelectric power from BPA's dams.

For BPA, replacing its 30 percent share of the Trojan output with hydroelectric power was a purely internal matter, but for PGE and PP & L the replacement required a purchase of power from BPA at BPA's rates. BPA's rate schedule then in effect, however, did not reflect its extremely low marginal cost of producing power under spill conditions. Although the schedule contained a rate that applied specifically to short-term sales under spill conditions, that rate was 0.9 cents per kilowatt-hour, greater than the cost of running Trojan. At that rate, PGE and PP & L would obviously be unwilling to replace Trojan's output with BPA power. The shutdown could therefore be arranged only if the cost of BPA power to PGE and PP & L could be reduced.

BPA met this problem by arranging to purchase from PGE and PP & L their "scheduling rights" to Trojan for the period January 21-April 30, 1983. The purchase of the scheduling rights enabled BPA to shut down Trojan, thereby requiring PGE and PP & L to purchase power from BPA. The purchase price for the scheduling rights was set at 13.1 million dollars. The cost to PGE and PP & L of replacement power from BPA at 0.9 cents per kilowatt-hour was 15.5 million dollars. Therefore, the net cost to PGE and PP & L was only 2.4 million dollars, or approximately fifteen percent of the nominal 15.5 million-dollar cost of replacement power. Thus, the average net price for the replacement power was approximately 0.14 cents per kilowatt-hour (fifteen percent of the nominal 0.9-cent rate), compared to the 0.6-cent cost of running Trojan. At that rate, PGE and PP & L saved money from the Trojan shutdown, but BPA still profitted from the transactions because its cost of generating the replacement power was near zero.

During the shutdown, BPA initiated procedures for the formulation of new rates. See 48 Fed.Reg. 4027 (1983); 48 Fed.Reg. 12,777 (1983). The proposed new rates included a special "nuclear displacement" rate of 0.3 cents per kilowatt-hour, applicable to situations such as that that led to the challenged transactions. See Bonneville Power Administration, U.S. Dept. of Energy, Administrator's Record of Decision, 1983 Final Rate Proposal, at D-45 (Sept. 1983). The nuclear displacement rate was designed to make ad hoc arrangements such as BPA's purchase of Trojan scheduling rights unnecessary, but, because of the lengthy ratemaking process, the new rates were not scheduled to go into effect until November 1, 1983, six months after the end of the Trojan shutdown.

C. CEC's Objections

CEC objects to the transactions relating to the Trojan shutdown on the grounds that they constituted a modification of BPA's rate structure without adherence to ratemaking procedures mandated by the Regional Act. As already mentioned, CEC BPA responds that the case is moot, that CEC lacks standing to bring this action, and that, on the merits, the transactions were lawful because the replacement power was sold to PGE and PP & L at the established 0.9-cent rate, and BPA's purchase of the Trojan scheduling rights was within BPA's contracting authority under the Regional Act. We shall address each of these contentions in turn.

seeks a declaratory judgment that the transactions are unlawful.

II. DISCUSSION

A. Mootness

BPA argues that this case is moot because the challenged contracts have all been performed and terminated. We disagree, and we hold that this case is not moot, because the challenged transaction is of a type that is "capable of repetition, yet evading review." Southern Pacific Terminal Co. v. Interstate Commerce Commission, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911). As demonstrated by Portland General Electric, short-term transactions such as these before us can evade review in the sense that they can be completed in a shorter time than that required by the parties and this court to file, brief, argue, and decide a case. That is all that the concept "ability to evade review" signifies. It does not signify an ability to evade review indefinitely. To find that an issue is "capable of repetition yet evading review" embodies the conclusion that review, albeit somewhat belated, is now possible. That precisely is our conclusion in this case.

BPA also argues that the transactions that gave rise to this action will not be repeated because the "nuclear displacement" rate will make them unnecessary. We agree with CEC, however, that BPA characterizes too narrowly the type of action concerned. As this court stated in Williams v. Alioto, 549 F.2d 136 (9th Cir.1977), "[t]he repetition/evasion exception does not require a repetition of the exact law or behavior. The focus is on whether the same issues, arising from a repetition of a similar law or...