California Energy Resources Conservation and Development Com'n v. Johnson

• Citation: 807 F.2d 1456
• Decision Date: 13 January 1987
• Docket Number: No. 81-7809,81-7809
• Parties: CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, v. Peter T. JOHNSON, Administrator of the Bonneville Power Administration, Respondent, and Pacific Power and Light Company, et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1456

807 F.2d 1456

CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, v. Peter T. JOHNSON, Administrator of the Bonneville Power Administration, Respondent and Pacific Power and Light Company, et al., Intervenors.

No. 81-7809.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 4, 1985.

Decided Feb. 24, 1986.

Modified Jan. 13, 1987.

William M. Chamberlain, Gen. Counsel, Daniel W. Meek, John D. Chandley, Deputy Gen. Counsel, Arlene L. Khien, California Energy Com'n., Sacramento, Cal., for petitioner.

Charles H. Turner, U.S. Atty., Jack G. Collins, Chief, Civ. Div., Thomas C. Lee, Asst. U.S. Atty., Kurt R. Casad, Sp. Asst. U.S. Atty., Harvard P. Spigal, Gen. Counsel, John A. Cameron, Jr., Asst. Gen. Counsel, Portland, Or., for respondent.

M. Laurence Popofsky, Dian M. Grueneich, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., Eric Redman, Heller, Ehrman, White & McAuliffe, Seattle, Wash., for Direct Service Indus. Customers.

Donald N. Furman, Portland Gen. Elec., Portland, Or.

Daniel O. Flanagan, Mont. Power, Butte, Mont.

John Wiley Gould, CP Nat. Portland, Or.

John Daniel Ballbach, Puget Sound Power & Light, Seattle, Wash.

George Galloway, Pacific Power & Light, Portland, Or.

Gary A. Dahlke, Wash. Water Power, Spokane, Wash.

Douglas S. Little, Idaho Power Co. & Utah Power & Light Co., Seattle, Wash., for Inv. Owned Utilities.

Petition for Review of Action of the Bonneville Power Administration

Before TANG and FARRIS, Circuit Judges, and KELLEHER, ^* District Judge.

MODIFIED OPINION

FARRIS, Circuit Judge:

Respondent Bonneville Power Administration is a self-financing power marketing agency within the United States Department of Energy. Since the enactment of the Bonneville Project Act of 1937, 16 U.S.C. Secs. 832-832l, it has marketed the inexpensive hydroelectric power generated by facilities along the Columbia River. BPA sells electric power to numerous utilities, both publicly owned and private-investor owned, as well as to direct service industrial and government customers, primarily in the Pacific Northwest.

In 1980, Congress adopted the Pacific Northwest Electric Power Planning and Conservation Act, 16 U.S.C. Secs. 839-839h, to avert protracted and unproductive litigation over the finite supply of inexpensive federal hydroelectric power. See Aluminum Company of America v. Central Lincoln Peoples' Utility District, 467 U.S. 380, 104 S.Ct. 2472, 2478, 81 L.Ed.2d 301 (1984). This "Regional Act" required that within 9 months of the effective date of the act BPA "commence necessary negotiations for, and offer, initial long-term contracts" with its various classes of customers. 16 U.S.C. Sec. 839c(g). BPA completed negotiations and offered these contracts on August 28, 1981.

Under the Regional Act, the contracts, once offered, were reviewable upon petition filed within 90 days. 16 U.S.C. Sec. 839f(e)(5). The contracts generated considerable litigation. See e.g., Aluminum Company, 104 S.Ct. 2472; Forelaws on Board v. Johnson, 743 F.2d 677 (9th Cir.1984); ¹ Public Power Council v. Johnson, 674 F.2d 791 (9th Cir.1982). This is the last of the Regional Act contract challenges to be submitted for decision.

While the contracts offered BPA's various customers differ in particulars, they share standard "general contract provisions" challenged en masse in this action. Thus, petitioner CEC contends (1) that section 4 of the standard residential exchange contract violates sections 6(b)(1) and 6(b)(3) Section 9(e)(5) of the Regional Act provides that "[s]uits to challenge ... final actions ... taken pursuant to [the Act] ... shall be filed in the United States court of appeals for the region." 16 U.S.C. Sec. 839f(e)(5). The contract offers challenged here constitute "final actions" within the meaning of section 9(e)(5). Central Lincoln Peoples' Utility District v. Johnson, 686 F.2d 708, 710 (9th Cir.1982), rev'd on other grounds, sub nom. Aluminum Company of America v. Central Lincoln People's Utility District, 467 U.S. 380, 104 S.Ct. 2472, 81 L.Ed.2d 301 (1984).

of the Regional Act, 16 U.S.C. Secs. 839d(b)(1) and (3), "by committing BPA to acquire noneconomical resources;" (2) that power sales contract general provision 8(h) violates section 7(i) of the Regional Act, 16 U.S.C. Sec. 839e(i), by establishing a rate without conforming to the prescribed ratemaking procedures; (3) that power sales contract general provision 8(f) violates section 7(i) by establishing a method of cost allocation without conforming to the prescribed procedures; and (4) that power sales contract general provision 42(c) is void and unenforceable as it binds BPA to ignore future congressional modification of federal law governing priorities in access to BPA power.

BPA's interpretation of the Regional Act "is to be given great weight." Aluminum Company, 104 S.Ct. at 2479-80. The regulated subject is technical and complex. BPA has longstanding expertise in the area and participated in drafting the Regional Act. See Zuber v. Allen, 396 U.S. 168, 192, 90 S.Ct. 314, 327, 24 L.Ed.2d 345 (1969). The BPA construction of the Regional Act thus constitutes "a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are untried and new." Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965).

To uphold the challenged contract provisions, we need not find that BPA's construction of the relevant provisions of the Regional Act is the only reasonable construction of said provisions or even that said construction is the one we would have adopted had construction been committed to the judiciary in the first instance. Aluminum Company, 104 S.Ct. at 2480; American Paper Institute, Inc. v. American Electric Power Corp., 461 U.S. 402, 422-23, 103 S.Ct. 1921, 1932-33, 76 L.Ed.2d 22 (1983). We need only conclude that BPA's interpretation of the Regional Act, as reflected in the challenged contract provisions, is reasonable. Aluminum Company, 104 S.Ct. at 2480. "Only if BPA's interpretation is unreasonable [should the court] conclude that BPA's contract offers violate the [Regional] Act." Central Lincoln, 686 F.2d at 711.

On the limited record before us, we cannot conclude that section 4 of the standard residential exchange contract reflects an unreasonable interpretation of the pertinent provisions of the Regional Act. ² The remaining contentions raised by petitioner are not ripe for judicial review. Accordingly, we dismiss the petition without reaching the merits insofar as petitioner challenges general contract provisions 8(h), 8(f), and 42(c).

RESIDENTIAL EXCHANGE CONTRACT SECTION 4

Section 5(c) of the Regional Act, 16 U.S.C. Sec. 839c(c), establishes a "residential exchange" program designed to temper the inequity of the preference system mandated by the Bonneville Project Act of 1937, 16 U.S.C. Secs. 832-832l. See Aluminum Company, 104 S.Ct. at 2484. The allocation of cheap federal power under the preference Section 5(c)(5) of the Regional Act authorizes BPA to purchase low cost power in lieu of power offered by a utility under the exchange program:

                system heavily favored public utilities (preference customers) over private, investor-owned utilities (nonpreference customers).  Consequently, consumers living in areas served by private utilities faced higher power prices than consumers living in areas served by public utilities.  Under the residential exchange program, any Northwest utility with high system costs may sell power to BPA at their average system cost, then purchase from BPA an equal quantity of low cost federal power.  The benefits to the participating utilities under this program are to be passed on directly to residential customers.   See Aluminum Company, 104 S.Ct. at 2484.  The cost of this "money-losing program," id., is largely borne by BPA's direct-service industrial customers.  See 16 U.S.C. Sec. 839e(c)(1)
                

Subject to the provisions of sections 839b and 839d of this title, in lieu of purchasing any amount of electric power offered by a utility under [the residential exchange program], the Administrator may acquire an equivalent amount of electric power from other sources to replace power sold to such utility as part of an exchange sale if the cost of such acquisition is less than the cost of purchasing the electric power offered by such utility.

16 U.S.C. Sec. 839c(c)(5).

Under section 4(a) of the standard exchange contract, BPA agrees to give a utility participating in the exchange program "not less than seven years prior written notice" of its intent to acquire power from a less expensive source in lieu of purchasing some amount of power offered by the exchanging utility. Section 4(a) also requires that the substituted acquisition "be at least five years in duration." ³

CEC contends that section 4 violates sections 6(b)(1) and 6(b)(3) of the Regional Act, 16 U.S.C. Secs. 839d(b)(1) and (3). Section 6(b)(1) provides:

[A]cquisition of resources under this chapter shall be consistent with the plan, as determined by the Administrator.

Section 6(b)(3) provides:

If no plan is in effect, the Administrator may acquire resources under this chapter which are determined by the Administrator to be consistent with the criteria of section 839b(e)(1) of this title and the considerations of section 839b(e)(2) of this title.

The plan referred to is the "regional conservation and electrical power plan" required to be prepared and adopted by the Pacific Northwest Electric Power and Conservation Planning Council within two years of establishment of the Council. While the parties have neglected to furnish details as to the contents of the plan, if any, adopted by the Council, it is clear that either under the plan or in the absence of a plan, resource acquisition must be consistent with the mandate that priority be given to...