Central Lincoln Peoples' Utility Dist. v. Johnson

• Decision Date: 27 September 1982
• Docket Number: No. 81-7561,81-7561
• Citation: 686 F.2d 708
• Parties: CENTRAL LINCOLN PEOPLES' UTILITY DISTRICT, et al., Petitioners, Public Power Council, et al., Petitioner-Intervenors, v. Peter JOHNSON, as Administrator of the Bonneville Power Administration, Department of Energy, et al., Respondents, Aluminum Company of America, et al., Respondent-Intervenors.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 708

686 F.2d 708

CENTRAL LINCOLN PEOPLES' UTILITY DISTRICT, et al., Petitioners Public Power Council, et al., Petitioner-Intervenors, v. Peter JOHNSON, as Administrator of the Bonneville Power Administration, Department of Energy, et al., Respondents Aluminum Company of America, et al., Respondent-Intervenors.

No. 81-7561.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 6, 1982.

Decided April 6, 1982.

As Amended Sept. 7, 1982.

Rehearing and Rehearing En Banc Denied Sept. 27, 1982.

James T. Waldron, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for petitioners.

Jack G. Collins, Portland, Or., Eric Redman, Seattle, Wash., Alvin Alexanderson, Portland, Or., argued for respondents; Peter Johnson, Bonneville Power Adm'r, Portland, Or., James Edwards, Secretary of Energy, Dept. of Energy, Washington, D. C., on brief.

James C. L. Baxendale, Portland, Or., for intervenor Portland Gen. Elec. Co.

William David Sprayberry, Vancouver, Wash., for intervenor Public Power Council.

Barton L. Kline, Boise, Idaho, for intervenor Idaho Power Co.

Robert E. Sullivan, Butte, Mont., for intervenor Montana Power Co.

John Wiley Gould, Portland, Or., for intervenor CP Nat. Corp.

Allan Hart, Portland, Or., for intervenor Staffer Chemical Co. and Elkem Metals Co.

George M. Galloway, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., for intervenor Pacific Power & Light Co.

William S. Weaver, Donald G. Kari, John D. Ballbach, Perkins, Coie, Stone, Alsen & Williams, Seattle, Wash., intervenors for Puget Sound & Power Co.

Before BROWNING, Chief Judge, and WALLACE and BOOCHEVER, Circuit Judges.

OPINION

BOOCHEVER, Circuit Judge:

This case concerns the allocation of power under the newly enacted Pacific Northwest Electric Power Planning and Conservation Act, Pub.L.No.96-501, 94 Stat. 2697 (1980) (the Act). Public utility customers of the Bonneville Power Administration (BPA) contend that the power contracts offered to BPA's industrial customers violate those provisions of the Act that give preference to public utilities in the allocation of power. Because we find no explicit exception to the unambiguous provisions of the Act that preserve the longstanding preference given to public utilities, we find the contracts invalid.

FACTS

BPA is the federal agency that markets federal hydroelectric power in the Pacific Northwest. Congress passed the Act to resolve competing claims to low-cost federal power. See, e.g., H.R.Rep.No. 976 (Part II), 96th Cong. 2d Sess. 26 (1980) U.S.Code Cong. & Admin.News 1981, pp. 10052, 10113. The Act requires BPA to offer long-term contracts to all of its customers. BPA offered contracts to its direct service industrial customers (DSIs) on August 28, 1981. These contracts are the first to be offered under the Act and the first to be adjudicated.

BPA provides DSIs "Industrial Firm Power" which allows BPA to restrict its delivery of power to the DSIs for specified reasons. Each quartile, or fourth, of the DSI power is subject to different restrictions. The first quartile is served partially with nonfirm energy, the energy remaining after BPA has fulfilled its firm obligations. Nonfirm energy is the energy in excess of that which BPA can reliably plan on producing and is therefore provided only when such an excess exists. ¹ Firm energy is the energy that BPA can reliably plan on producing and must be sufficient to serve BPA's firm loads. Firm loads are the power requirements that BPA must plan for and may not restrict.

Prior to the Act, BPA offered nonfirm energy first to the preference customers and then to the DSIs. Under the new contracts, BPA plans to offer nonfirm energy to the DSIs first. The preference customers challenge the contract provisions that effectuate this new method of allocation. ²

ANALYSIS

I. Applicable Standards

Section 9(e)(5) of the Act provides that suits to challenge final actions such as contract offers shall be brought in the United States Court of Appeals for the region. The original jurisdiction given this court by § 9(e)(5) raises procedural problems that will have to be resolved on a case-by-case basis. Because no factfinding is necessary in this case, we will treat it like a petition for administrative review. A myriad of variations may arise in suits brought under the Act, and we do not intend to bind the court to the procedures used in this case.

Section 9(e)(2) of the Act provides that the scope of review by this court of a sale of electric power is governed by the Administrative Procedure Act, 5 U.S.C. § 706. The Administrative Procedure Act specifies that in reviewing agency actions, a court shall decide all relevant questions of law, interpret statutory provisions, and determine the applicability of the statutory terms to agency action. The reviewing court must set aside agency actions that are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Id. § 706(2)(A).

In interpreting the Act, we give substantial deference to BPA's construction of the statute because BPA is the agency charged with the Act's administration. United States v. Rutherford, 442 U.S. 544, 553, 99 S.Ct. 2470, 2475, 61 L.Ed.2d 68 (1979). This deference is especially appropriate because BPA's interpretation is a contemporaneous construction of a statute by those with the responsibility for setting it in motion. Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); Columbia Basin Land Protection Association v. Schlesinger, 643 F.2d 585, 600 (9th Cir. 1981). Additional weight is given the agency interpretation when the agency administrators participated in drafting the legislation as they did here. Zuber v. Allen, 396 U.S. 168, 192, 90 S.Ct. 314, 327, 24 L.Ed.2d 345 (1969). Our review is limited to whether BPA's interpretation of the Act is reasonable. Columbia Basin, 643 F.2d at 600. Only if BPA's interpretation is unreasonable may we conclude that BPA's contract offers violate the Act.

II. The Preference

Giving all due deference to BPA's construction of the Act, we nevertheless find its interpretation unreasonable. We find that the explicit and longstanding preference retained in the Act controls rather than the ambiguous provisions relied upon by BPA to justify a change. Before examining the Act's legislative history and underlying purposes, we turn first to the express terms of the Act.

A. Pertinent statutory provisions

1. Preference provisions: Section 5(a) of the Act provides that:

All power sales under this Act shall be subject at all times to the preference and priority provisions of the Bonneville Project Act of 1937. ...

At § 10(c), the Act further provides that:

Nothing in this Act shall alter, diminish, abridge, or otherwise affect the provisions of other Federal laws by which public bodies and cooperatives are entitled to preference and priority in the sale of federally generated electric power.

The Bonneville Project Act, 16 U.S.C. § 832 et seq., requires that BPA give preference and priority to public bodies and cooperatives in selling power. 16 U.S.C. § 832c(a). Thus, §§ 5(a) and 10(c) of the Act explicitly reaffirm the preference to public bodies established by the Bonneville Project Act.

Preference provisions have been included in federal power acts since 1906. Fereday, The Meaning of the Preference Clause in Hydroelectric Power Allocation under the Federal Reclamation Statutes, 9 Envt'l L. 601, 610 (1979). BPA's allocation of power has been subject to the preference since the Bonneville Project Act was passed in 1937. It is undisputed in this case that BPA previously interpreted the preference provision to apply to nonfirm power as well as firm power. Thus, prior to offering the contracts now at issue, BPA allocated nonfirm power according to the preference after it had first allocated firm power according to the preference. BPA's pre-Act interpretation of the preference was consistent with this court's interpretation of a preference clause under an analogous statute. See Arizona Power Pooling Association v. Morton, 527 F.2d 721, 725 (9th Cir. 1975), cert. denied, 425 U.S. 911, 96 S.Ct. 1506, 47 L.Ed.2d 761 (1976) (holding that a similar preference clause in the Reclamation Project Act of 1939, 43 U.S.C. § 485h(c), applied to sales of thermally generated electrical power).

Any modification of the preference, in view of its long history and clear reaffirmation in the Act, should be explicit. See generally New England Power Co. v. New Hampshire, --- U.S. ----, ----, 102 S.Ct. 1096, 1102, 71 L.Ed.2d 188 (1982) (courts "have no authority to rewrite ... legislation based on mere speculation as to what Congress 'probably had in mind' ").

2. Basis for BPA's interpretation: BPA's interpretation is based on the assumption that § 5(d)(1)(A) of the Act requires giving the DSIs priority to nonfirm energy for their first quartile. Subsection 5(d)(1)(A) provides that:

The Administrator is authorized to sell in accordance with this subsection electric power to existing direct service industrial customers. Such sales shall provide a portion of the Administrator's reserves for firm power loads within the region. (emphasis added).

Section 3(17) of the Act defines "reserves" as the power needed to avert shortages for the benefit of firm power customers. ³ To evaluate the BPA's conclusion, it is first necessary to consider the manner in which nonfirm energy is initially allocated.

The sale of nonfirm energy is contingent on availability. When sufficient nonfirm power is available, BPA provides it as needed to both the preference customers and DSIs. When, however, there is insufficient nonfirm energy to fill the needs of both types of users, the preference clause appears on its face to mandate, and, as previously interpreted by the BPA, did require, that the nonfirm energy needs of the preference customers be met before the nonfirm needs of the DSIs. Application of the preference...