Public Power Council v. Bonneville Power, No. 04-73240.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtFernandez
Citation442 F.3d 1204
PartiesPUBLIC POWER COUNCIL, INC., Petitioner, v. BONNEVILLE POWER ADMINISTRATION, Respondent, Portland General Electric Company, Intervenor. Canby Utility Board, Petitioner, Portland General Electric Company, Intervenor, v. Bonneville Power Administration, Respondent. Alcoa Incorporated, Petitioner, Portland General Electric Company, Intervenor, v. Bonneville Power Administration, Respondent. Industrial Customers of Northwest Utilities; Benton Rural Electric Association; Columbia-Snake River Irrigators Association, Petitioners, v. Bonneville Power Administration, Respondent.
Decision Date04 April 2006
Docket NumberNo. 04-73240.,No. 04-73939.,No. 04-73934.,No. 04-73952.

Page 1204

442 F.3d 1204
PUBLIC POWER COUNCIL, INC., Petitioner,
v.
BONNEVILLE POWER ADMINISTRATION, Respondent,
Portland General Electric Company, Intervenor.
Canby Utility Board, Petitioner,
Portland General Electric Company, Intervenor,
v.
Bonneville Power Administration, Respondent.
Alcoa Incorporated, Petitioner,
Portland General Electric Company, Intervenor,
v.
Bonneville Power Administration, Respondent.
Industrial Customers of Northwest Utilities; Benton Rural Electric Association; Columbia-Snake River Irrigators Association, Petitioners,
v.
Bonneville Power Administration, Respondent.
No. 04-73240.
No. 04-73939.
No. 04-73952.
No. 04-73934.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted March 8, 2006.
Filed April 4, 2006.

Page 1205

Nancy Baker and Mark R. Thompson, Portland, OR, for Public Power Council.

Paul M. Murphy, Murphy & Buchal LLP, Portland, OR, for Canby Utility Board.

William H. Walters, Miller Nash LLP, Portland, OR, for Alcoa Incorporated.

Melinda J. Davison, Davison Van Cleeve, PC, Portland, OR, for Industrial Customers of Northwest Utilities, Benton Rural Electric Association, and Columbia-Snake River Irrigators Association, Michael J. Gianunzio, Everett, WA, for Public Utility District No. 1 of Snohomish County, Washington.

Kurt R. Casad, Special Assistant U.S. Attorney, Portland, OR, for Bonneville Power Administration.

Page 1206

Loretta Mabinton, Assistant General Counsel, Portland, OR, for Portland General Electric Company; Gary Dahlke, Paine, Hamblen, Coffin, Brooke & Miller LLP, Spokane, WA, for Avista Corporation; James R. Thompson, Boise, ID, for Idaho Power Company; W. Wayne Harper, Butte, Montana, NorthWestern Energy; Stephen C. Hall, Stoel Rives LLP, Portland, OR, for PacifiCorp; Kirstin S. Dodge, Perkins Coie LLP, Bellevue, WA, for Puget Sound Energy, Inc., intervenors.

On Petitions for Review of an Order of the Bonneville Power Administration.

Before FERNANDEZ, TASHIMA, and PAEZ, Circuit Judges.

FERNANDEZ, Circuit Judge.


Public Power Council, Inc., and others (collectively PPC) petition for a review of the decision of the Bonneville Power Administration (BPA) to trigger the Safety-Net Cost Recovery Adjustment Clause (SN CRAC) portion of its General Rate Schedule Provisions (GRSPs), as a result of which a rate setting proceeding took place. Canby Utility Board also petitions for a review on the basis that because it had a special contract with BPA, its rates could not be changed in any event. We deny the petitions.

BACKGROUND

BPA is a "self-financing power marketing agency," which markets wholesale electricity from federal hydroelectric plants and several other power plants in the Pacific Northwest. Aluminum Co. of Am. v. Bonneville Power Admin., 903 F.2d 585, 588 (9th Cir.1990). "It owns and operates approximately eighty percent of the Pacific Northwest's high-voltage transmission system and markets approximately forty percent of the electric power consumed in the Pacific Northwest." Indus. Customers of N.W. Utils. v. Bonneville Power Admin., 408 F.3d 638, 641 (9th Cir.2005). "BPA's customers include federal agencies, public bodies (including public utilities), private utilities," and Direct Service Industrial customers. Kaiser Aluminum & Chem. Corp. v. Bonneville Power Admin., 261 F.3d 843, 845 (9th Cir.2001).

Essentially, BPA is governed by four organic 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. §§ 837-837h (`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. §§ 839-839h (`Northwest Power Act')." Kaiser Aluminum & Chem. Corp., 261 F.3d at 845. It is authorized to issue and sell bonds to the United States Treasury "to assist in financing the construction, acquisition, and replacement of the transmission system." 16 U.S.C. § 838k(a). However, it must repay a projected amount of those bonds each fiscal year; if it fails to do so, the Treasury, with some exceptions, may increase the applicable interest rate for that year's outstanding bonds. Id.

Since 1974, BPA's electricity sales have been its source of revenue. See Indus. Customers, 408 F.3d at 641. Thus, the Northwest Power Act requires BPA "to establish rates that will produce sufficient revenues to ensure BPA's fiscal independence and repay the U.S. Treasury for the federal funds that were borrowed to build the projects in the Federal Columbia River Power System." Cal. Energy Comm'n v. Bonneville Power Admin., 909 F.2d 1298, 1303(9th Cir.1990). At the same time, "[t]he statute also requires that rates be as low as possible consistent with sound business principles." Cent. Lincoln

Page 1207

Peoples' Util. Dist. v. Johnson, 735 F.2d 1101, 1116 (9th Cir.1984).

In order to fulfill its mission, BPA must periodically revise its rates. See Indus. Customers, 408 F.3d at 642. It does so pursuant to § 7 of the Northwest Power Act (16 U.S.C. § 839e). Its power rates, other charges, cost adjustments and rate methodology are then defined in its wholesale power rate schedules. The rate schedules contain GRSPs, which set out the provisions that govern the various rates in question. See Indus. Customers, 408 F.3d at 642.

In August of 1999, BPA proposed to revise its wholesale power rates for the five year period between October 1, 2001, and September 30, 2006 (the "WP-02 Rates").1 BPA conducted hearings in accordance with § 7(i) of the Northwest Power Act (16 U.S.C. § 839e(i)). Those are hereafter referred to as the "WP-02 Rate Proceeding." On May 10, 2000, BPA completed the final record of decision for the proposed WP-02 Rates (May 2000 ROD). On July 6, 2000, BPA filed its proposed WP-02 Rates with the Federal Energy Regulatory Commission (FERC) for approval.

During the summer of 2000, however, wholesale power rates rose precipitously. As a result, BPA's proposed WP-02 Rates became far more attractive to prospective customers. Its preference customers thus sought to purchase much more power for the 2002-2006 period than BPA had anticipated. Supplying that would require BPA to make up any shortfall in its production capacity by purchasing power on the open market. It, therefore, became concerned that the WP-02 Rates established in the May 2000 ROD would not be sufficient to cover its costs. Consequently, on August 4, 2000, BPA filed a motion with FERC to stay review of BPA's WP-02 Rates. See BPA's Proposed Safety-Net Cost Recovery Adjustment Clause Adjustment to 2002 Wholesale Power Rates, 68 Fed.Reg. 12,048, 12,049 (Mar. 13, 2003).

On September 4, 2000, BPA notified FERC that it would pursue modifications to the WP-02 Rates. In October 2000, after a public comment period, it notified FERC and parties to the WP-02 Rate Proceeding that it was initiating a limited § 7(i) (16 U.S.C. § 839e(i)) hearing, in which it would revise the WP-02 Rates in order to address its increased load obligations and high market prices. It matched its actions to its words, and on December 1, 2000, it proposed amendments to the proposed WP-02 Rates. BPA's Proposed Amendments to 2002 Wholesale Power Rate Adjustment Proposal, 65 Fed.Reg. 75,272 (Dec. 1, 2000); see also Indus. Customers, 408 F.3d at 642. Once again, however, BPA's announcement of proposed rates was followed by a downturn in its financial outlook. Its forecast for cash reserves dropped substantially, while market prices rose significantly more than expected. Those developments induced BPA to make various additional changes to its proposed amendments to the WP-02 Rates. See Indus. Customers, 408 F.3d at 642. That process led to the filing of the WP-02 Supplemental Proposal (June 2001 ROD) and to the ultimate adoption of three Cost Recovery Adjustment Clauses (CRACs) as a part of the GRSPs. Those were:

(1) The Load Based CRAC (LB CRAC), which triggers if BPA's augmentation cost (cost of purchasing power on the open market) exceeds the forecasted amount. Essentially, the LB CRAC is a formula for increasing base rates by a certain percentage, depending on what BPA pays to acquire excess power.

Page 1208

(2) The Financial Based CRAC (FB CRAC), which triggers if BPA's accumulated net revenues fall below a certain threshold. Like the LB CRAC, the triggering of the FB CRAC results in a percentage increase to BPA's base power rates.

(3) Finally, the SN CRAC, which triggers if, after implementation of the FB CRAC, BPA has missed, or reasonably expects to miss, a payment to the United States Treasury or another creditor. The disputes here revolve around the SN CRAC. As we have indicated previously:

Under the GRSP, the Safety-Net CRAC would be available if the Administrator determined that, after implementation of the Financial-Based CRAC and any adjustments, either of the following conditions existed:

• The BPA forecasts a fifty percent or greater probability that it will nonetheless miss its next payment to Treasury or other creditor, or

• The BPA has missed a payment to the Department of the Treasury or has satisfied its obligation to the Department of the Treasury but has missed a payment to any other creditor.

Id. As is apparent, unlike the LB CRAC and the FB CRAC, the SN CRAC is not a precise formula; it does not, by itself, revise BPA rates. Rather, if triggered, the SN CRAC allows BPA to revise the FB CRAC parameters in order to "achieve a high probability that the remainder of Treasury payments during the [WP-02] rate period will be made in full." Id. at 642-43 (internal quotation marks omitted).

After the adoption and FERC interim approval of the new CRACs, BPA's financial condition began to deteriorate further. By January of 2003, an updated financial forecast showed that its net revenue gap for the 2002-2006 period had increased to $950,000,000. BPA analyzed its...

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7 practice notes
  • Golden Northwest Alum. v. Bonneville Power Admin., No. 03-73426.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 3, 2007
    ...that govern its operations. See, e.g., Portland Gen. Elec. v. BPA, 501 F.3d 1009 (9th Cir.2007); Pub. Power Council, Inc. v. BPA, 442 F.3d 1204 (9th Cir.2006); M-S-R Pub. Power Agency v. BPA, 297 F.3d 833 (9th Cir.2002) (as amended); Ass'n of Pub. Agency Customers, Inc. v. BPA, 126 F.3d 115......
  • Ass'n of Pub. Agency Customers v. Bonneville Power Admin., No. 11-73178
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • October 28, 2013
    ...797-800 (9th Cir. 2009); Golden Nw., 501 F.3d at 1041; PGE, 501 F.3d at 1013-16; Pub. Power Council, Inc. v. Bonneville Power Admin., 442 F.3d 1204, 1206 (9th Cir. 2006); M-S-R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 836-37 (9th Cir. 2002) (as amended); Ass'n of Pub. Age......
  • Portland General Elec. Co. v. Bonneville Power, No. 01-70003.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 3, 2007
    ...capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(a). See Pub. Power Council, Inc. v. BPA, 442 F.3d 1204, 1209 (9th IV. ANALYSIS The question in this case is whether BPA's authority to settle out of future power exchange contracts is bound by th......
  • Ass'n of Pub. Agency Customers v. Bonneville Power Admin., No. 11–73178.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • October 28, 2013
    ...792, 797–800 (9th Cir.2009); Golden Nw., 501 F.3d at 1041;PGE, 501 F.3d at 1013–16;Pub. Power Council, Inc. v. Bonneville Power Admin., 442 F.3d 1204, 1206 (9th Cir.2006); M–S–R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 836–37 (9th Cir.2002) (as amended); Ass'n of Pub. Age......
  • Request a trial to view additional results
7 cases
  • Golden Northwest Alum. v. Bonneville Power Admin., No. 03-73426.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 3, 2007
    ...that govern its operations. See, e.g., Portland Gen. Elec. v. BPA, 501 F.3d 1009 (9th Cir.2007); Pub. Power Council, Inc. v. BPA, 442 F.3d 1204 (9th Cir.2006); M-S-R Pub. Power Agency v. BPA, 297 F.3d 833 (9th Cir.2002) (as amended); Ass'n of Pub. Agency Customers, Inc. v. BPA, 126 F.3d 115......
  • Ass'n of Pub. Agency Customers v. Bonneville Power Admin., No. 11-73178
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • October 28, 2013
    ...797-800 (9th Cir. 2009); Golden Nw., 501 F.3d at 1041; PGE, 501 F.3d at 1013-16; Pub. Power Council, Inc. v. Bonneville Power Admin., 442 F.3d 1204, 1206 (9th Cir. 2006); M-S-R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 836-37 (9th Cir. 2002) (as amended); Ass'n of Pub. Age......
  • Portland General Elec. Co. v. Bonneville Power, No. 01-70003.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 3, 2007
    ...capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(a). See Pub. Power Council, Inc. v. BPA, 442 F.3d 1204, 1209 (9th IV. ANALYSIS The question in this case is whether BPA's authority to settle out of future power exchange contracts is bound by th......
  • Ass'n of Pub. Agency Customers v. Bonneville Power Admin., No. 11–73178.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • October 28, 2013
    ...792, 797–800 (9th Cir.2009); Golden Nw., 501 F.3d at 1041;PGE, 501 F.3d at 1013–16;Pub. Power Council, Inc. v. Bonneville Power Admin., 442 F.3d 1204, 1206 (9th Cir.2006); M–S–R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 836–37 (9th Cir.2002) (as amended); Ass'n of Pub. Age......
  • Request a trial to view additional results

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