Association of Public Agency Customers, Inc. v. Bonneville Power Admin.
| Decision Date | 24 September 1997 |
| Docket Number | 95-70927 and 95-70928,Nos. 95-70859,95-70864,95-70861,95-70862,s. 95-70859 |
| Parties | Util. L. Rep. P 14,176, Util. L. Rep. P 14,177, 28 Envtl. L. Rep. 20,141, 97 Cal. Daily Op. Serv. 7575, 97 Daily Journal D.A.R. 12,209 ASSOCIATION OF PUBLIC AGENCY CUSTOMERS, INC., Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Aluminum Company Of America; Elf Atochem North America; Columbia Aluminum Corporation; Columbia Falls Aluminum Company; Kaiser Aluminum & Chemical Corporation; Intalco Aluminum Corporation; Northwest Aluminum Company; Reynolds Metals Company; Vanalco Incorporated, Respondents-Intervenors. UTILITY REFORM PROJECT; Kevin Bell, Petitioners, v. BONNEVILLE POWER ADMINISTRATION, Respondent. ASSOCIATION OF PUBLIC AGENCY CUSTOMERS, INC., an unincorporated association, Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent. UTILITY REFORM PROJECT; Kevin Bell, Petitioners, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Aluminum Company Of America; Elf Atochem North America; Columbia Aluminum Corporation; Columbia Falls Aluminum Company; Kaiser Aluminum & Chemical Corporation; Intalco Aluminum Corporation; Northwest Aluminum Company; Reynolds Metals Company; Vanalco Incorporated, Respondents-Intervenors. ASSOCIATION OF PUBLIC AGENCY CUSTOMERS, INC., an unincorporated association, Petitioner, Northwest Conservation Act Coalition, Petitioner-Intervenor, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Aluminum Company Of America; Elf Atochem North America; Columbia Aluminum Corporation; Columbia Falls Aluminum Company; Kaiser Aluminum & Chemical Corporation; Intalco Aluminum Corporation; Northwest Aluminum Company; Reynolds Metals Company; Vanalco Incorporated, Respondents-Intervenors. PUBLIC POWER COUNCIL, Petitioner, Northwest Conservation Act Coalition, Petitioner-Intervenor, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Aluminum Company Of America; Elf Atochem North America; Columbia Aluminum Corporation; Columbia Falls Aluminum Company; Kaiser Aluminum & Chemical Corporation; Intalco Aluminum Corporation; Northwest Aluminum Company; |
| Court | U.S. Court of Appeals — Ninth Circuit |
Wallace L. Duncan, Melinda J. Horgan, S. Bradley Van Cleve, Duncan, Weinberg, Miller & Pembroke, Portland, Oregon, for petitioner Association of Public Agency Customers, Inc.
John A. Cameron, Jr., Shelly Richardson, Davis Wright Tremaine, Portland, Oregon, for petitioner Public Power Council.
Linda K. Williams, Portland, Oregon, for Petitioner-Intervenor Northwest Conservation Act Coalition.
Daniel W. Meek, Portland, Oregon, for Petitioners-Intervenors Utility Reform Project and Kevin Bell.
Terence L. Mundorf, Marsh Mundorf Pratt & Sullivan, Mill Creek, Washington, for Petitioner-Intervenor Public Utility District No. 1 of Clark County, Washington.
David Adler, Barry Bennett, Thomas Lee, Portland, Oregon, for respondent Bonneville Power Administration.
Paul M. Murphy, James L. Buchal, Ball Janik, Portland, Oregon, for Respondents-Intervenors Aluminum Company of America, et al.
Theodore R. Kulongoski, Virginia Linder, Rives Kistler, Salem, Oregon, for Amicus Curiae State of Oregon.
Petitions to Review Decisions of the Bonneville Power Administration.
Before: PREGERSON and THOMAS, Circuit Judges, and REED, Jr., * District Judge.
Confronted by unprecedented market pressures, the Bonneville Power Administration ("BPA") undertook a searching re-examination of its business strategy. As a result, BPA proposed profound alterations in its relationships with certain large industrial customers. At issue in this consolidated appeal are the administrative decisions effecting the transition, which are challenged by a number of widely divergent interest groups. After careful consideration, we deny all the petitions for review.
In order to assess whether BPA's actions were arbitrary and capricious, or outside its statutory authority, we must place BPA's decision in proper context. Thus, an understanding of the statutory framework guiding BPA and the origins of the market forces which informed the BPA's Administrator ("Administrator") in reaching his conclusions is necessary.
BPA is a federal agency within the Department of Energy created by Congress in 1937 originally to market low-cost hydroelectric power generated by the Federal Columbia River Power System, a series of dams along the Columbia River in Oregon and Washington. 16 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. 16 U.S.C. § 838f. As part of its marketing responsibilities, BPA is charged with oversight of the massive federal high-voltage transmission system, comprising approximately 80% of the bulk transmission capacity in the Pacific Northwest, used to deliver power generated at a federally owned and operated facility, termed "federal power," and non-federal power to its customers. 16 U.S.C. § 838b.
Hydroelectric power producers, such as BPA, store the generation capacity of hydroelectric energy as water held behind dams. Department of Water & Power of the City of Los Angeles v. Bonneville Power Admin., 759 F.2d 684, 686 (9th Cir.1985). The amount of power that BPA has available to sell at any given time depends upon the height of water held behind the dam. This in turn depends upon the streamflows in the Columbia River basin. Portland Gen. Elec. Co. v. Johnson, 754 F.2d 1475, 1477 (9th Cir.1985). Because streamflows are somewhat unpredictable, BPA can never be certain precisely how much power it will have for sale in the future. To cope with this uncertainty, BPA has evolved a marketing plan dependent upon sales of "firm" and "nonfirm" power. From BPA's perspective, "firm" power is that amount of power BPA will be able to produce when the streamflows are at their lowest possible level as determined by historical data. Southern Cal. Edison Co. v. Jura, 909 F.2d 339, 341 n. 1 (9th Cir.1990). Put another way, firm power is the minimum amount of power that BPA can expect to have available for sale during a given time period or the amount of power which "BPA expects to have available under even the most adverse streamflow conditions." Portland Gen. Elec. Co., 754 F.2d at 1477. In contractual terms, "firm power" "Nonfirm" or "interruptible" power is any amount of power in excess of firm power. Because BPA can count on having power to meet its firm power commitments, BPA sells firm power in long-term contracts. Id. BPA sells nonfirm power on a short-term basis whenever it is available. Id.
means power on demand at any time. A firm power customer expects unlimited power access, and pays a commensurate rate.
BPA power purchasers essentially fall into three groups. The first and primary group is composed of public utilities and other public entities who purchase power for resale to the ultimate consumer. These purchasers are known as "preference" customers because BPA is required to give priority to this group's applications for power over the competing applications of non-preference customers. 16 U.S.C. § 832c(a). The second group contains private, investor-owned utilities who also purchase BPA power for resale. The third group are the direct service industries ("DSIs")--industrial companies engaging in power intensive operations who purchase power directly from BPA for their own use. These customers are a closed group: BPA is forbidden from selling power directly to any entity other than those who are currently DSIs. See 16 U.S.C. § 839c(d)(2). The DSIs represent approximately one-third of BPA's total power sales and contributed 25% of BPA's total revenues annually from 1992 to 1995.
The DSIs are unique among BPA's direct customers in that they have the ability to withstand unexpected interruptions of their power without damage to their industrial processes. They are able to do this because they are typically large industrial customers who may be able to adjust their operations or provide their own backup power to accommodate occasional interruptions in service, particularly if they are given advance notice of the interruptions. The needs of DSIs are in contrast to BPA's utility customers that serve residential consumers who need an uninterrupted source of power. BPA takes advantage of this capability by specifying in its DSI power sale contracts that a portion of the DSIs' power or transmission capacity may be "interrupted" or held back for use elsewhere. This allows BPA to treat the interruptible portion as "reserves" from which it may draw in the event of an emergency threatening its ability to serve its other firm customers. See 16 U.S.C. §§ 839c(d)(1)(A), 839a(17)(B).
There are two types of reserves: "operating" reserves, which are called on to replace generation failures, and "stability" reserves, used to respond to transmission system failures. Both BPA and the DSIs gain from this arrangement. Having these reserves saves BPA the expense of building additional generating or transmission facilities to meet its firm power commitments, and the DSIs purchase the interruptible portion of their power at a discount. See 16 U.S.C. § 839e(c)(3).
BPA's operations are governed largely by four statutes: 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 ("Project Act"). These statutes subject BPA to a variety of detailed and potentially conflicting statutory directives. For instance, the...
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