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Industrial Customers of Northwest Utils. v. Bonneville Power Admin.

United States Court of Appeals, Ninth Circuit

September 18, 2014

INDUSTRIAL CUSTOMERS OF NORTHWEST UTILITIES, Petitioner,
v.
BONNEVILLE POWER ADMINISTRATION, Respondent, PORT TOWNSEND PAPER CORPORATION; AVISTA CORPORATION; ALCOA INC.; IDAHO POWER COMPANY; PUGET SOUND ENERGY, INC; PACIFICORP; PORTLAND GENERAL ELECTRIC COMPANY, Respondents-Intervenors. PUBLIC POWER COUNCIL, Petitioner,
v.
U.S. DEPARTMENT OF ENERGY; BONNEVILLE POWER ADMINISTRATION, Respondents, AVISTA CORPORATION; ALCOA INC.; IDAHO POWER COMPANY; PORTLAND GENERAL ELECTRIC COMPANY, Respondents-Intervenors. PACIFIC NORTHWEST GENERATING COOPERATIVE; BLACHLY-LANE COUNTY COOPERATIVE ELECTRIC ASSOCIATION; CENTRAL ELECTRIC COOPERATIVE INC.; CLEARWATER POWER COMPANY; CONSUMERS POWER, INC.; COOS-CURRY ELECTRIC COOPERATIVE, INC.; DOUGLAS ELECTRIC COOPERATIVE; FALL RIVER RURAL ELECTRIC COOPERATIVE, INC.; LANE ELECTRIC COOPERATIVE; LINCOLN ELECTRIC COOPERATIVE, INC.; NORTHERN LIGHTS, INC.; OKANOGAN COUNTY ELECTRIC COOPERATIVE, INC.; RAFT RIVER RURAL ELECTRIC COOPERATIVE, INC.; UMATILLA ELECTRIC COOPERATIVE ASSOCIATION; WEST OREGON ELECTRIC COOPERATIVE, INC., Petitioners,
v.
U.S. DEPARTMENT OF ENERGY; BONNEVILLE POWER ADMINISTRATION, Respondents, ALCOA INC.; AVISTA CORPORATION; IDAHO POWER COMPANY; PUGET SOUND ENERGY, INC; PACIFICORP; PORTLAND GENERAL ELECTRIC COMPANY, Respondents-Intervenors. CANBY UTILITY BOARD, Petitioner,
v.
U.S. DEPARTMENT OF ENERGY; BONNEVILLE POWER ADMINISTRATION, Respondents, ALCOA INC.; IDAHO POWER COMPANY; AVISTA CORPORATION; PUGET SOUND ENERGY, INC; PACIFICORP; PORTLAND GENERAL ELECTRIC COMPANY, Respondents-Intervenors

Argued and Submitted, Portland, Oregon May 9, 2013.

Page 913

[Copyrighted Material Omitted]

Page 914

On Petition for Review of the Bonneville Power Administration.

SUMMARY[*]

Bonneville Power Administration

The panel denied in part, and granted in part, petitions for review brought by public utilities and cooperatives who buy power from the Bonneville Power Administration and industrial customers who are end-users of BPA power, challenging the BPA's decision not to seek refunds of unlawful subsidies that the BPA previously gave to certain longtime industrial customers and which were invalidated by prior Ninth Circuit decisions.

The petitioners alleged that their power costs had been impermissibly raised by BPA's decision because, if BPA sought refunds of the subsidies, it could pass along the recovered funds to its customers as lower rates. At issue are three contractual arrangements: the 2007 Block Contracts (three way contracts between BPA, Alcoa Inc. and two other aluminum direct-service customers, and local public utilities in which BPA agreed to make payments to the aluminum companies in lieu of supplying them with actual electrical power); the Alcoa Amendments (an amended contract in which BPA again agreed to subsidize Alcoa rather than sell it power directly); and the Port Townsend Contract (an arrangement in which BPA supplied Port Townsend Paper Company, a non-aluminum direct-service customer, with its full requirements for power at a reduced rate).

The panel held that the BPA had no general constitutional or statutory duty to seek a refund any time it made an unlawful payment, but an individual decision not to pursue such a refund could be arbitrary, capricious or an abuse of discretion under the Administrative Procedure Act. The panel also held that the BPA's decisions in most respects sufficiently and reasonably balanced its competing obligations to merit the panel's deference, but in one respect did not. Finally, the panel held that the BPA reasonably explained why the challenged refund decisions were not inconsistent with BPA's earlier decision to seek recovery of the different payments that had been declared unlawful by the court in Portland Gen. Elec. Co. v. Bonneville Power Admin., 501 F.3d 1009 (9th Cir. 2007).

The panel denied the petition for review with regard to the decision not to seek refunds with respect to the 2007 Block Contracts and the Port Townsend Contract. The panel granted the petition and remanded to the BPA for further proceedings with regard to recovery of subsidies paid under the Alcoa Amendment.

Judge Reinhardt concurred in part, but dissented from section B.1.a which related to the 2007 Block Contracts. Judge Reinhardt would hold that the contractual damages waiver provision in the 2007 Block Contracts, as applied, operated in excess of the BPA's statutory authority.

Melinda J. Davison (argued) and Irion Sanger, Davison Van Cleve, P.C., Portland, Oregon, for Petitioner Industrial Customers of Northwest Utilities.

Zabyn Towner, Pacific Northern Generating Cooperative, Portland, Oregon, for Petitioners Pacific Northwest Generating Cooperative and Members.

David F. Doughman, Beery Elsner & Hammond LLP, Portland, Oregon, for Petitioner Canby Utility Board.

Irene A. Scruggs (argued), Public Power Council, Portland, Oregon, for Petitioner Power Council.

Randy A. Roach, General Counsel, Timothy A. Johnson, Assistant General Counsel, Jon D. Wright (argued) and Hilary Browning-Craig, Attorneys, Bonneville Power Administration, Portland, Oregon; and S. Amanda Marshall, United States Attorney, District of Oregon, Stephen J. Odell, Assistant United States Attorney, David J. Adler and J. Courtney Olive, Special Assistant United States Attorneys, Portland, Oregon, for Respondent Bonneville Power Administration.

Michael C. Dotten (argued) and Dustin T. Till, Marten Law, Portland, Oregon, for Intervenor Alcoa Inc.

Jay T. Waldron and Sara Kobak, Schwabe Williamson & Wyatt P.C., Portland, Oregon; and Ryan L. Flynn, PacifiCorp, Portland, Oregon, for Intervenor PacifiCorp.

Donald G. Kari and Jason Kuzma, Perkins Coie LLP, Bellevue, Washington; and Dan L. Bagatell, Perkins Coie LLP, Phoenix, Arizona, for Intervenor Puget Sound Energy, Inc.

Michael G. Andrea, Avista Corporation, Spokane, Washington, for Intervenor Avista Corporation.

R. Blair Strong, Paine Hamblen LLP, Spokane, Washington, for Intervenor Idaho Power Company.

Scott G. Seidman, Tonkon Torp LLP, Portland, Oregon, for Intervenor Portland General Electric Company.

Leonard J. Feldman, Marcus Wood, and Maren R. Norton, Stoel Rives LLP, Seattle, Washington, for Intervenor Port Townsend Paper Corporation.

Before: Alex Kozinski, Chief Judge, and Stephen Reinhardt and Marsha S. Berzon, Circuit Judges. Opinion by Judge Berzon; Partial Concurrence and Partial Dissent by Judge Reinhardt.

OPINION


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