Kaiser Aluminum & Chemical Corp. v. Bonneville Power Admin, RESPONDENT-INTERVENOR

• Decision Date: 16 August 2001
• Docket Number: N,RESPONDENT-INTERVENOR,No. 00-70559,No. 00-70375,00-70375,00-70559
• Citation: 261 F.3d 843
• Parties: (9th Cir. 2001) KAISER ALUMINUM & CHEMICAL CORPORATION, PETITIONER, PUBLIC POWER COUNCIL, INTERVENOR v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT VANALCO INC., PETITIONER, PUBLIC POWER COUNCIL, INTERVENOR v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT, AVISTA CORPORATION,ALCOA INCORPORATED, PETITIONER, AVISTA CORPORATION; PUBLIC POWER COUNCIL, INTERVENORS v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT o. 00-70379,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 843

261 F.3d 843 (9th Cir. 2001)

KAISER ALUMINUM & CHEMICAL CORPORATION, PETITIONER, PUBLIC POWER COUNCIL, INTERVENOR v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT VANALCO INC., PETITIONER, PUBLIC POWER COUNCIL, INTERVENOR v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT, AVISTA CORPORATION, RESPONDENT-INTERVENOR ALCOA INCORPORATED, PETITIONER, AVISTA CORPORATION; PUBLIC POWER COUNCIL, INTERVENORS v. BONNEVILLE POWER ADMINISTRATION, RESPONDENT

No. 00-70375, No. 00-70379, No. 00-70559

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted May 7, 2001

Filed August 16, 2001

Counsel: Paul M. Murphy, Murphy & Buchal, Portland, Oregon; William H. Walters, Miller Nash, Portland, Oregon; Michael J. Uda of Doney, Crowley, Bloomquist & Uda, Helena, Montana, for the petitioners.

Thomas C. Lee, Assistant U.S. Attorney and David J. Adler, Special Assistant U.S. Attorney, District of Oregon, Portland, Oregon, for the respondent.

Paul M. Murphy, Murphy & Buchal, Portland, Oregon, for the petitioners-intervenors.

Kyle D. Sciuchetti, Portland, Oregon; Peter J. Richardson, Eagle, Idaho, for the respondent-intervenor.

Petition to Review a Decision of the Bonneville Power Administration BPA No. 95 MS-94861

Before: Alfred T. Goodwin, Morton I. Greenberg,^* and Johnnie B. Rawlinson, Circuit Judges.

Rawlinson, Circuit Judge

Petitioners Kaiser Aluminum & Chemical Corp. ("Kaiser"), ALCOA Inc. ("ALCOA") and Vanalco, Inc. ("Vanalco") seek review of final Bonneville Power Administration ("BPA") decisions denying Petitioners' requests to purchase Surplus Firm Power at the IP-96 rate. Kaiser also requests a determination that its claims be decided by arbitration pursuant to an arbitration clause in a contract between Kaiser and BPA.¹

We have exclusive jurisdiction over the petitions pursuant to 16 U.S.C. §§ 839f(e)(5). The petitions are timely because they were filed within ninety days of BPA's final decision. Id. Because of our exclusive jurisdiction, Kaiser's claims are not arbitrable. BPA's decisions were reasonable and not contrary to statutes. Accordingly, we dismiss the petitions.

BACKGROUND

Respondent Bonneville Power Administration ("BPA") is a federal agency charged by Congress with marketing the hydroelectric power generated by a series of dams along the Columbia River. See 16 U.S.C. §§§§ 832-832m. Petitioners Kaiser, ALCOA and Vanalco are aluminum smelters permitted by the Northwest Power Act to buy electric power directly from BPA as Direct Service Industrial customers ("DSIs"). See 16 U.S.C. §§§§ 839a(8), 839c(d)(4)(A), and 839c(g).

BPA is governed largely by four statutes: the Bonneville Project Act of 1937, 16 U.S.C. §§§§ 832-832m ("Project Act"); the Pacific Northwest Consumer Power Preference Act of 1964, 16 U.S.C. §§§§ 837837h ("Preference Act"); the Pacific Northwest Federal Transmission System Act of 1974, 16 U.S.C. §§§§ 838-838l ("Transmission Act"); and the Pacific Northwest Electric Power Planning and Conservation Act of 1980, 16 U.S.C. §§§§ 839839h ("Northwest Power Act"). In Association of Public Agency Customers ("APAC") v. Bonneville Power Administration, 126 F.3d 1158, 1164 (9th Cir. 1997), we recognized that "[t]hese statutes subject BPA to a variety of detailed and potentially conflicting statutory directives." For example, the "Northwest Power Act requires BPA to set its rates for electric power at a level sufficient to meet its costs and to repay the federal debt incurred in building the projects included in the Federal Columbia River Power System." Id. (citing 16 U.S.C. §§§§ 838g, 839(4), 839e(a)(1)). In APAC, we noted that while such a requirement would tend to encourage higher rates, "the Transmission System Act requires that BPA market federal power `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.' " Id. (quoting 16 U.S.C. §§ 838g). Additionally, "BPA must also be environmentally conscious, support energy conservation, and act to protect the fish and wildlife of the Columbia River basin." Id. (citing 16 U.S.C. §§§§ 839, 839b).

BPA's customers include federal agencies, public bodies (including public utilities), private utilities, and DSIs such as Petitioners. See Aluminum Co. of America ("ALCOA I") v. Central Lincoln Peoples Utility Dist., 467 U.S. 380, 384 & n.2 (1984). Public bodies are "preference" customers to whom BPA is required to give priority over non-preference customers. Id. at 384 (citing 16 U.S.C. §§ 832c(b)). BPA's primary marketing area, however, is the Pacific Northwest, which includes Washington, Oregon, Idaho, the part of Montana west of the Continental Divide, and the parts of Utah, Wyoming and Nevada that are within the Columbia River drainage. See Aluminum Co. of America ("ALCOA II") v. Bonneville Power Admin., 903 F.2d 585, 588 (9th Cir. 1990) (citing 16 U.S.C. §§ 839a(14)). Under the Preference Act, BPA may sell power outside the

Pacific Northwest, but only if it has surplus energy to do so. ² Id. (citing 16 U.S.C. §§ 837a). "Surplus energy" is defined as "electric energy generated at Federal hydroelectric plants in the Pacific Northwest which would otherwise be wasted because of the lack of a market therefore in the Pacific Northwest at any established rate." 16 U.S.C. §§ 837(c).

In the 1970s, projections showed that due to increases in power demands, preferences to Northwest public bodies would soon require all of BPA's power. ALCOA I , 467 U.S. at 385. Accordingly, in 1973, BPA announced that new contracts to private utilities would not be offered. Id. While BPA signed contracts with DSIs in 1975, BPA advised the DSIs that their new contracts would not likely be renewed when they expired, sometime between 1981 1991. Id. In order to avoid disputes over BPA's proposed power allocations, in 1980, Congress enacted the Northwest Power Act. Id. at 385-86. The Northwest Power Act allowed BPA to acquire resources to increase the supply of federal power, and required BPA to enter into long term contracts providing DSIs the same amount of power to which they were entitled under the 1975 contracts. Id. at 386-87 (citing Section 5(d)(1)(B) of the Northwest Power Act, 16 U.S.C. §§ 839c(d)(1)(B)). Pursuant to this directive, in 1981, BPA entered into 20-year contracts with the DSIs (the "1981 Contracts"). See APAC, 126 F.3d at 1165. The 1981 contracts allowed the DSIs to vary their power load depending upon market conditions and to terminate their contracts with one year's notice to BPA. See id.; see also Power Sales Contract between ALCOA and BPA executed on August 31, 1981, ¶¶¶¶ 2(a), 4-5. The 1981 contracts also required any DSI desiring to continue purchasing BPA power after the 20-year term to request a replacement contract by June 30, 1993. See APAC, 126 F.3d at 1166.

In the 1990s, the price of wholesale power in the Pacific Northwest began to drop and, for the first time in history, BPA faced considerable price competition. Id. "By the Fall of 1995, competition for the DSIs' business was fierce. " Id. at 1176. Many DSIs were considering offers from alternative power suppliers at prices below BPA's rates. See id. BPA, therefore, began rate-making proceedings to create more competitive rates. See id. BPA responded to these competing offers by offering the DSIs Block Sales Contracts, including target rates which were later established as actual rates. See id. at 1168, 1176. Of the Petitioners, Kaiser was the only one to enter into a Block Sales Contract. Because Kaiser did not terminate its 1996 Block Sales Contract, Kaiser's prior [1981] contract terminated.

In a letter dated September 29, 1995, Vanalco terminated its "entire [c]ontract [d]emand effective . . . March 31, 1996," and decided to "buy power and services from other providers." On March 13, 1996, however, Vanalco amended its termination letter to terminate only 225.2 megawatts of its 235.2 megawatts of contract demand.

In June 1996, BPA issued its Rate Record of Decision ("1996 Rate ROD") making findings and conclusions regarding its proposed rates. BPA completed its rate-making proceedings and, effective October 1, 1996, established the IP-96 rate and the FPS-96 rate. The rates were confirmed and approved by the Federal Energy Regulatory Commission ("FERC") on July 30, 1997. See 80 FERC¶¶ 61, 118, 1997 WL 465613 (July 30, 1997). The IP-96 rate was more or less a fixed rate which applied to DSI customers purchasing under the 1981 contract; full requirement DSI customers purchasing under the 1996 [Block Sales] contracts; and Partial requirement DSI customers purchasing under the 1996 [Block Sales] contracts. The FPS-96 rate was a more flexible rate which could react to market pressures, and was available for the purchase of Firm Power for use inside and outside the Pacific Northwest.

Prior to FERC approval, on January 7, 1997, BPA and its customers (including Petitioners) executed a Settlement Agreement (the "FPS-96 Settlement Agreement") to resolve, without litigation, disputes concerning the market-based aspects of the FPS-96 rate schedule. In the FPS-96 Settlement Agreement, BPA agreed to: 1) limit the amount of firm energy sold under the FPS-96 rate; and (2) adopt a rate cap, which provides that "BPA shall not charge more than 63 mills per kilowatt-hour for firm power . . . on an annual average basis . . . [which is] based on the costs of BPA's highest-cost resource." The FPS-96 Settlement Agreement also provided that "[t]he parties shall not challenge the establishment or the confirmation and approval of the FPS-96 rate schedule in the United States Court of Appeals for the Ninth Circuit."

Effective March 31, 1997, ALCOA agreed with BPA, in a Firm Energy Sales Agreement, to forego its 1981 contract at the IP-96 rate for one year in order to purchase all of its power requirements with surplus firm energy at the FPS-96 rate. ALCOA and BPA renewed that...