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Friday, February 23, 2024 | Back issues
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Bonneville Power Deal|’Is Lawful,’ Court Rules

(CN) - The 9th Circuit on Monday declined to review a complicated settlement between a federal power agency and customers who claimed they were overcharged for electricity generated in the Columbia River Basin.

"The settlement is lawful," Judge Richard Paez wrote for the 2-1 majority. "Furthermore, the BPA [Bonneville Power Administration] administrator engaged in an exhaustive evaluation of the settlement, providing thorough analyses and conclusions for countless challenges raised during the administrative proceedings."

Congress created the BPA in 1937 to sell power generated by federally owned dams on the Columbia River. As demand for low-cost federal power rose in the 1970s, the agency predicted a shortage.

Congress responded with a law that changed the BPA's role from one of selling whatever power was generated in the river basin to being responsible for meeting the region's future power needs.

The Northwest Electric Power Planning and Conservation Act authorized the agency to "exercise greater control over its power supply and to augment that supply by purchasing electric power in the market."

One section of the law allows investor-owned utilities to exchange power they have bought or generated for lower-cost power generated by the BPA. The utilities are then expected to pass on the savings to their customers.

This process, known as the Residential Exchange Program, or REP, "essentially acts as a cash rebate" for the investor-owned utilities, the 9th Circuit explained in a previous ruling.

"Put simply, the REP is complicated," Paez wrote. "It was the source of 'almost continuous litigation' in the 1980s," he noted, and was at the heart of a 2000 settlement agreement that the 9th Circuit struck down in 2007.

In that ruling, the federal appeals court determined that the agency had improperly tried to shift the costs of the settlement to its customers.

On remand, the BPA embarked on a "complex rate-making process," triggering an "onslaught of appeals," according to Paez.

Rather than fight the "seemingly endless litigation," the agency agreed last year to settle with a large number of its customers, including all six regional investor-owned utilities.

The settlement sets a lump sum of REP benefits to be paid to the utilities over a 17-year period. For fiscal year 2012, for example, the utilities will collectively receive $182.1 million, a figure that jumps up to $286.1 million for fiscal year 2028.

The agency's administrator estimated the present net value of the benefits at $2.05 billion.

Additionally, the settlement establishes a new method for testing to ensure rates are fair and provides a schedule of refunds for customer-owned utilities that were overcharged under the 2000 REP settlement agreement.

The Association of Public Agency Customers (APAC) challenged the deal in federal court, claiming it violated the NWPA, the Bonneville Project Act, federal regulations and 9th Circuit precedent.

APAC is made up of six member groups that own and operate industrial facilities in the Pacific Northwest. Its member groups do not purchase power from the BPA directly; they buy it from the agency's customers.

The 9th Circuit majority rejected the BPA's claim that APAC lacked standing because it wasn't a direct consumer. On the merits, however, the court sided with the federal agency.

"We therefore conclude that the BPA administrator's adoption of [the settlement] was not arbitrary or capricious," Paez wrote, denying APAC's petition for review.

Judge Arthur Alarcon, in dissent, said the court should not have even reached the merits of the case:

"I would deny the petition because it is my view that we lack the power to review its merits because APAC has failed to demonstrate that it has ... standing."

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