Indus. Customers of Nw. Utilities v. Bonneville Power Admin.
| Decision Date | 18 September 2014 |
| Docket Number | 11–71396,11–71401,11–71419.,Nos. 11–71368,s. 11–71368 |
| Parties | INDUSTRIAL CUSTOMERS OF NORTHWEST UTILITIES, Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Port Townsend Paper Corporation; Avista Corporation; Alcoa Inc.; Idaho Power Company; Puget Sound Energy, Inc; Pacificorp; Portland General Electric Company, Respondents–Intervenors. Public Power Council, Petitioner, v. U.S. Department of Energy; Bonneville Power Administration, Respondents, Avista Corporation; Alcoa Inc.; Idaho Power Company; Portland General Electric Company, Respondents–Intervenors. Pacific Northwest Generating Cooperative; Blachly–Lane County Cooperative Electric Association; Central Electric Cooperative Inc.; Clearwater Power Company; Consumers Power, Inc.; Coos–Curry Electric Cooperative, Inc.; Douglas Electric Cooperative; Fall River Rural Electric Cooperative, Inc.; Lane Electric Cooperative; Lincoln Electric Cooperative, Inc.; Northern Lights, Inc.; Okanogan County Electric Cooperative, Inc.; Raft River Rural Electric Cooperative, Inc.; Umatilla Electric Cooperative Association; West Oregon Electric Cooperative, Inc., Petitioners, v. U.S. Department of Energy; Bonneville Power Administration, Respondents, Alcoa Inc.; Avista Corporation; Idaho Power Company; Puget Sound Energy, Inc; Pacificorp; Portland General Electric Company, Respondents–Intervenors. Canby Utility Board, Petitioner, v. U.S. Department of Energy; Bonneville Power Administration, Respondents, Alcoa Inc.; Idaho Power Company; Avista Corporation; Puget Sound Energy, Inc; Pacificorp; Portland General Electric Company, Respondents–Intervenors. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
Melinda J. Davison (argued) and Irion Sanger, Davison Van Cleve, P.C., Portland, OR, for Petitioner Industrial Customers of Northwest Utilities.
Zabyn Towner, Pacific Northern Generating Cooperative, Portland, OR, for Petitioners Pacific Northwest Generating Cooperative and Members.
David F. Doughman, Beery Elsner & Hammond LLP, Portland, OR, for Petitioner Canby Utility Board.
Irene A. Scruggs (argued), Public Power Council, Portland, OR, for Petitioner Power Council.
Randy A. Roach, General Counsel, Timothy A. Johnson, Assistant General Counsel, Jon D. Wright (argued) and Hilary Browning–Craig, Attorneys, Bonneville Power Administration, Portland, OR; and S. Amanda Marshall, United States Attorney, District of Oregon, Stephen J. Odell, Assistant United States Attorney, David J. Adler and J. Courtney Olive, Special Assistant United States Attorneys, Portland, OR, for Respondent Bonneville Power Administration.
Michael C. Dotten (argued) and Dustin T. Till, Marten Law, Portland, OR, for Intervenor Alcoa Inc.
Jay T. Waldron and Sara Kobak, Schwabe Williamson & Wyatt P.C., Portland, OR; and Ryan L. Flynn, PacifiCorp, Portland, OR, for Intervenor PacifiCorp.
Donald G. Kari and Jason Kuzma, Perkins Coie LLP, Bellevue, WA; and Dan L. Bagatell, Perkins Coie LLP, Phoenix, AR, for Intervenor Puget Sound Energy, Inc.
Michael G. Andrea, Avista Corporation, Spokane, WA, for Intervenor Avista Corporation.
R. Blair Strong, Paine Hamblen LLP, Spokane, WA, for Intervenor Idaho Power Company.
Scott G. Seidman, Tonkon Torp LLP, Portland, OR, for Intervenor Portland General Electric Company.
Leonard J. Feldman, Marcus Wood, and Maren R. Norton, Stoel Rives LLP, Seattle, WA, for Intervenor Port Townsend Paper Corporation.
On Petition for Review of the Bonneville Power Administration.
Before: ALEX KOZINSKI, Chief Judge, and STEPHEN REINHARDT and MARSHA S. BERZON, Circuit Judges.
Opinion by Judge BERZON; Partial Concurrence and Partial Dissent by Judge REINHARDT.
The Bonneville Power Administration (“BPA”) is an agency within the Department of Energy that markets the energy output of federal power projects in the Pacific Northwest. In two previous decisions, we invalidated three sets of contractual arrangements in which BPA agreed to subsidize certain longtime industrial customers rather than sell them power directly. See Pac. Nw. Gen. Coop. v. Bonneville Power Admin. (“ PNGC II ”), 596 F.3d 1065 (9th Cir.2010); Pac. Nw. Gen. Coop. v. Dep't of Energy (“ PNGC I ”), 580 F.3d 792 (9th Cir.2009). We held these subsidy arrangements unreasonable and contrary to BPA's statutory authority, as they did not comport with Congress's mandate that BPA operate in a businesslike manner. See16 U.S.C. §§ 839f(b), 838g.
In both cases, we remanded to BPA the question whether it could or should seek refunds of the improper subsidies. On remand, BPA concluded that it was contractually barred from seeking refunds as to some of the invalidated contracts, and that it had no legal or equitable basis for seeking refunds as to the others. Moreover, BPA concluded, if it did pursue recovery of the subsidies, it might face counterclaims from the subsidized entities and become mired in counterproductive, protracted litigation over the amount, if any, of refunds owed. As a result, BPA decided not to pursue recovery of the unlawful subsidies invalidated by PNGC I and PNGC II.
At issue in this consolidated appeal are challenges by two groups to BPA's decision to forgo refunds: public utilities and cooperatives that buy power from BPA, and that Congress has designated as BPA's first-priority or “preference” customers; and industrial customers who buy power from public utilities in the Pacific Northwest and so are end-users of BPA power. The challengers' core argument is that their power costs have been impermissibly raised by BPA's decision because, if BPA did seek refunds of the subsidies, it could pass along the recovered funds to its customers as lower rates.
“BPA is an agency within the Department of Energy created by Congress in 1937” to “market[ ] the power generated by federally owned dams on the Columbia River.” Portland Gen. Elec. Co. v. Bonneville Power Admin. (“ PGE ”), 501 F.3d 1009, 1013 (9th Cir.2007); see16 U.S.C. §§ 832–832m. “Congress has since expanded BPA's mandate to include marketing authority over nearly all the electric power generated by federal facilities in the Pacific Northwest.” Ass'n of Pub. Agency Customers, Inc. v. Bonneville Power Admin. (“ APAC ”), 126 F.3d 1158, 1163 (9th Cir.1997); see16 U.S.C. § 838f. In numerous prior opinions, we have provided extensive background on BPA's history and operations. See, e.g., PGE, 501 F.3d at 1013–16; PNGC I, 580 F.3d at 797–800; APAC, 126 F.3d at 1163–66. Here, we summarize only those statutory provisions and recent developments directly relevant to this appeal.
Four statutes govern BPA's operations: the Pacific Northwest Electric Power Planning and Conservation Act of 1980, 16 U.S.C. §§ 839–839h (“Northwest Power Act”); the Pacific Northwest Federal Transmission System Act of 1974, 16 U.S.C. §§ 838–838k (“Transmission Act”); the Pacific Northwest Consumer Power Preference Act of 1964, 16 U.S.C. §§ 837–837h (“Preference Act”); and the Bonneville Project Act of 1937, 16 U.S.C. §§ 832–832m (“Bonneville Project Act”). As we have noted before, “[t]hese statutes subject BPA to a variety of detailed and potentially conflicting statutory directives,” ranging from fiscal to environmental concerns. APAC, 126 F.3d at 1164. Of most direct relevance to this appeal are two sets of statutory directives: the rate-setting guidelines and the “sound businesslike principles” obligation.
A complex of statutory provisions dictates how BPA must proceed when selling federal power. First, BPA must give priority, as well as its most favorable cost-based rate (“the PF rate”), to publicly owned utilities, cooperatives, and federal agencies, known as “preference customers.” PNGC I, 580 F.3d at 798–99, 802; PGE, 501 F.3d at 1013–15; see16 U.S.C. §§ 839c(b), 839e(b). Preference customers are also the only group whose energy needs BPA is required, as opposed to authorized, to meet. See PNGC I, 580 F.3d at 811. After meeting the preference customers' needs, BPA may, if it so chooses, sell surplus power directly to certain longstanding industrial customers (“direct-service industrial customers” or “DSIs”) at a higher but still-cost based rate (“the IP rate”), or to anyone else at market rates. Id. at 799, 802–03; PGE, 501 F.3d at 1014; see16 U.S.C. § 839e(c). 1 “Regardless of the type of customer, BPA must charge a rate that, at a minimum, recoups BPA's own costs of generating or acquiring the electricity.” Alcoa, Inc. v. BPA, 698 F.3d 774, 780 (9th Cir.2012); see16 U.S.C. § 839e(a)(1).
In addition to the above rate-setting guidelines, BPA also must set rates “with a view to encouraging the widest possible diversified use of electric power at the lowest possible rates to consumers consistent with sound business principles.” 16 U.S.C. § 838g (emphasis added). A different provision similarly requires that BPA set rates that “recover, in accordance with sound business principles, the costs associated with the acquisition, conservation, and transmission of electric power.” Id. § 839e(a)(1) (emphasis added). More generally, Congress has directed BPA to implement the Northwest Power Act “in a sound and businesslike manner.” Id.§ 839f(b) (emphasis added). We have previously explained that BPA's business decisions are judicially reviewable for compliance with this overarching “sound business principles” standard, albeit with great deference to BPA's conclusions. See Alcoa, 698 F.3d at 788–89; PNGC II, 596 F.3d at 1075–80.
Historically, the aluminum manufacturers of the Pacific Northwest were among BPA's largest direct-service industrial customers. See PNGC I, 580 F.3d at 797–98. Until recently, BPA did not have trouble meeting the needs of its preference customers while also providing abundant power to the aluminum DSIs, including Alcoa. See id. But, as the Pacific Northwest has grown, BPA has found itself...
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