Idaho Conservation League v. Bonneville Power Admin.

83 F.4th 1182

IDAHO CONSERVATION LEAGUE; Great Old Broads for Wilderness; Idaho Rivers United, Petitioners, v. BONNEVILLE POWER ADMINISTRATION, Respondent,Northwest Requirements Utilities; Alliance of Western Energy Consumers;Public Power Council; Puget Sound Energy Inc, Intervenors.

No. 22-70122

United States Court of Appeals, Ninth Circuit

Argued and Submitted June 8, 2023 Seattle, Washington

Filed October 16, 2023

On Petition for Review of an Order of the Bonneville Power Administration

Andrew R. Missel (argued), Advocates for the West, Portland, Oregon; Laurence J. Lucas, Advocates for the West, Boise, Idaho; for Petitioners.

J. Courtney Olive (argued), Special Assistant United States Attorney, Bonneville Power Administration, Office of General Counsel, Portland, Oregon; Sean E. Martin, Assistant United States Attorney; Natalie K. Wight, United States Attorney; United States Attorney's Office, Portland, Oregon; Marcus H. Chong Tim, General Counsel; Timothy A. Johnson and Anne E. Senters, Assistant General Counsels; Richard A. Greene and B. Tucker Miles, Attorneys; Bonneville Power Administration, Portland, Oregon; for Respondent

Matthew Schroettnig, General Counsel, Northwest Requirements Utilities, Portland, Oregon, for Intervenor Northwest Requirements Utilities.

Sommer Moser, Davison Van Cleve PC, Portland, Oregon, for Intervenor Alliance of Western Energy Consumers.

Irene A. Scruggs, Attorney, Public Power Council, Portland, Oregon; Steve J. Odell, Marten Law LLP, Portland, Oregon; for Intervenor Public Power Council.

Jason T. Kuzma, Puget Sound Energy Inc., Bellevue, Washington, for Intervenor Puget Sound Energy Inc.

Richard K. Eichstaedt, Eichstaedt Law Offices PLLC, Spokane, Washington; Ted C. Knight, Special Legal Counsel, Ted C. Knight Law, Bainbridge Island, Washington; for Amicus Curiae Coeur d'Alene Tribe and Spokane Tribe of Indians.

Before: Michael Daly Hawkins, Carlos T. Bea, and Daniel A. Bress, Circuit Judges.

Opinion by Judge Bress;

Dissent by Judge Bea

OPINION

BRESS, Circuit Judge:

The Bonneville Power Administration (BPA) is a federal agency tasked with selling the power generated at various hydroelectric facilities in the Pacific Northwest. In the decision on review, BPA set its rates for the 2022-2023 fiscal period. Environmental groups now petition for review of that decision, arguing that BPA failed to comply with a pair of statutory duties in the Northwest Power Act relating to fish and wildlife. See 16 U.S.C. § 839b(h)(11)(A). Because we conclude that these duties do not apply to BPA's ratemakings, we deny the petition.

I

A

Created in 1937, BPA is a federal power-marketing agency within the Department of Energy. See Nw. Env't Def. Ctr. v. Bonneville Power Admin. (NEDC 2007), 477 F.3d 668, 672 (9th Cir. 2007). BPA is responsible for marketing electric power generated from the Federal Columbia River Power System, which is comprised of 31 federal hydroelectric dams in the Columbia River Basin that are operated by the U.S. Army Corps of Engineers and the Bureau of Reclamation. See id. at 672-73. BPA also markets power from a non-federal nuclear plant and several other non-federal power plants. NEDC 2007, 477 F.3d at 673. Taken together, BPA provides about a third of the power generated in the Pacific Northwest. BPA's customers include federal agencies, public and private utilities, and direct service industrial customers. Id.

BPA's funding system differs from most federal agencies in that BPA does not obtain annual appropriations from Congress. Id. Instead, BPA's operations are financed from the "BPA fund," which is sourced from the revenue BPA generates through its sales and transmission of electricity. Id. Because BPA is self-financed, it must set its rates high enough to cover costs. Id. (citing Indus. Customers of Nw. Utils. v. Bonneville Power Admin., 408 F.3d 638, 641 (9th Cir. 2005)). Yet by statute, BPA must also sell power "at the lowest possible rates." 16 U.S.C. § 838g.

BPA sets its rates through ratemakings, called "rate cases," a process that resembles agency rulemaking. See 16 U.S.C. § 839e(i); see also Ass'n of Pub. Agency Customers, Inc. v. Bonneville Power Admin. (APAC), 126 F.3d 1158, 1176 (9th Cir. 1997). Built into this process are numerous opportunities for the public and interested parties to participate, including by submitting written briefs to the agency. See 16 U.S.C. § 839e(i)(1)-(3); see also Final Rules of Procedure, 83 Fed. Reg. 39,993-01, 40,009 (Aug. 13, 2018).

To determine the rates that it needs to charge to maintain its operations, BPA relies on estimates of its anticipated spending. These projections are not made in the rate proceeding but are determined ahead of time through a process called Integrated Program Review (IPR). See Fiscal Year (FY) 2022-2023 Proposed Power and Transmission Rate Adjustments Public Hearing and Opportunities for Public Review and Comment, 85 Fed. Reg. 77,189-01, 77,190 (Dec. 1, 2020). In the IPR process, BPA prepares estimates of its expenses and capital spending and allows interested parties the opportunity to review and comment on them.

In neither IPR nor ratemaking does BPA set specific funding levels for different programs, nor does it decide which costs to incur. As BPA explained in its Record of Decision (ROD) on review here, ratemaking determines "how to recover BPA's forecasted costs . . . , not whether to incur a cost or which costs to incur." Put differently, at this stage "BPA's funding projections are general in nature" because "BPA is not finally deciding what programs to pursue or how it will meet its various obligations over the rate period." Cf. Golden Nw. Aluminum, Inc. v. Bonneville Power Admin. (Golden Northwest), 501 F.3d 1037, 1053 (9th Cir. 2007) (explaining that the rate case is "not the forum for making decisions regarding which fish and wildlife alternative[s] to implement"). BPA's focus during ratemaking is thus on recovering costs that it generally expects to incur in carrying out its duties, meeting its legal obligations, and pursuing its objectives. See 16 U.S.C. § 839e(a)(1).

One such objective is BPA's Strategic Plan for 2018-2023. The Strategic Plan was adopted in response to BPA customer concerns regarding increased prices, and it centers largely on cutting costs and improving BPA's financial health. In particular, BPA sought to impose "cost-management discipline" by "hold[ing] the sum of program costs, by business line, at or below the rate of inflation through 2028." BPA's stated purpose for these measures was to "deliver on [its] public responsibilities through a commercially successful business."

Another expense BPA must plan to recover through ratemaking is the cost of complying with its environmental obligations. BPA's "[r]ates must be high enough to ensure that BPA will recover its total costs, including costs associated with 'fish and wildlife measures.' " Golden Northwest, 501 F.3d at 1049 (quoting 16 U.S.C. § 839e(a), (g)). Thus, BPA must "develop a realistic projection of fish and wildlife costs that accurately reflect[s] the information available at the time the rates were set . . . ." Id. at 1053. BPA takes these projected environmental mitigation costs into account during the IPR process.

As relevant here, the key source of BPA's environmental obligations is the Pacific Northwest Electric Power Planning and Conservation Act of 1980, otherwise known as the Northwest Power Act (NWPA). Pub. L. No. 96-501, 94 Stat. 2697 (1980) (codified at 16 U.S.C. §§ 839-839h).¹ That statute created the Pacific Northwest Electric Power and Conservation Planning Council (known as "the Council"), a policymaking body consisting of state government members from Idaho, Montana, Oregon, and Washington. See Seattle Master Builders Ass'n v. Pac. Nw. Elec. Power & Conservation Plan. Council, 786 F.2d 1359, 1362 (9th Cir. 1986); see also 16 U.S.C. § 839b(a)(2). The Council and BPA "operate independently of each other," but "[t]heir functions directly overlap" in a few ways. Seattle Master Builders, 786 F.2d at 1362. Most relevant here, the Council is responsible for developing a policy document, called the "Program," which lays out measures to protect, mitigate, and enhance the fish and wildlife that are affected by dam and reservoir projects within the Columbia River Basin. See generally 16 U.S.C. § 839b(h).

The NWPA imposes certain environmental responsibilities on BPA, including ones tied to the Council's Program. Consistent with these obligations, BPA engages in environmental mitigation measures both at the hydroelectric facilities themselves and "offsite" in adjacent habitat areas. See, e.g., 16 U.S.C. § 839b(h)(6)(E)(ii), (h)(8), (h)(10). Most relevant here, NWPA § 4(h)(11)(A) requires that, when exercising certain responsibilities, BPA must "provide[ ] equitable treatment for . . . fish and wildlife," and must "tak[e] into account" the Council's Program "to the fullest extent practicable." See 16 U.S.C. § 839b(h)(11)(A)(i)-(ii). At issue in this case is whether these two duties apply to the agency decision on review: BPA's "BP-22" ratemaking, which established BPA's power and transmission rates for the 2022-2023 fiscal period. We will have more to say about § 4(h)(11)(A) and related provisions in our analysis below.

B

In preparation for the BP-22 ratemaking, BPA began the associated IPR process in June 2020. The cost projections BPA announced in that process were influenced by BPA's "commit[ment] to supporting BPA's strategic plan and financial health objectives," which called for flat budgets relative to the previous rate period, including for fish and wildlife spending.

After the IPR process concluded, BPA commenced the formal BP-22 ratemaking in December 2020. At the start of this process, BPA released its initial proposal for power and transmission rates. BPA's proposal projected an increase in surplus power revenues—the amounts BPA obtains by selling power in excess of its obligations—of over $100...