The Utility Reform Project and three of its members (collectively Bell) petitioned for Ninth Circuit review of amendments to power sale contracts between Bonneville Power Administration (BPA) and several direct service industries (DSIs). The Ninth Circuit denied Bell's petitions for review.

BPA is a federal agency authorized to market virtually all of the power generated by federal power facilities in the Pacific Northwest.[1] BPA entered into contracts with DSIs, industrial companies that require a great deal of electricity to operate, to sell power at a designated rate. An energy crisis began after these contracts were made, creating a low power supply as well as high energy prices for BPA, which buys power in the spot market. The original contracts did not give BPA the power to restrict the amount of power it sold to the DSIs and, as a result of the energy crisis, BPA was contractually obligated to buy power at high prices and sell it at lower prices to the DSIs. As one way of dealing with this crisis, BPA paid the DSIs to amend the original contracts to excuse BPA from the original contract obligations to supply the DSIs with power at the lower contract rate. Bell challenged these contract amendments on five grounds.

The court had jurisdiction over Bell's petition pursuant to the Pacific Northwest Electric Power Planning and Conservation Act (Northwest Power Act),[2] and, although one of the contract amendments had been performed, Bell's challenge was not moot because it was capable of repetition but evading review. The court found that it lacked jurisdiction to review one of the amendments because Bell did not petition the court to review that amendment within the ninety-day window that the Northwest Power Act allows after execution of the amendments.[3] The Ninth Circuit analyzed BPA's decision according to the "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law" standard,[4] as directed by the Bonneville Project Act.[5]

Bell first argued that BPA exceeded its statutory authority by amending the contracts. The court found that the amendments were within BPA's authority, because the administrator of BPA has broad statutory authority to amend contracts "upon such terms and conditions and in such manner as he may deem necessary."[6]

The court next addressed Bell's argument that BPA's decision to amend the contracts was arbitrary and capricious because the DSIs would have reduced their power use even without the contract amendments. The court, deferring to BPA's discretion, stated that it would not second-guess the agency's "winning business decisions," especially in light of the unusual market conditions that would have caused financial ruin if BPA fulfilled the terms of the original contract.[7] Thus, the Ninth Circuit held that BPA's decision was not arbitrary or capricious.

Third, the court discussed Bell's argument that the contract amendments unlawfully created a power discount, in contravention of the Northwest Power Act.[8] The administrator of BPA is required to follow specific procedures, including publishing the proposed rates in the Federal Register and holding at least one hearing, before establishing a power rate.[9] Bell claimed that the amendments constituted a rate change because they resulted in discounts to the DSIs since the money paid to the DSIs for the amendments was "inextricably linked" to the original rate.[10] The Ninth Circuit did not discuss the validity of Bell's "inextricably linked" theory because it held that the original contracts' ratemaking provisions were not linked to the amendments for three reasons: 1) the amendments were separate in time from the original contracts, 2) the amendments occurred in dramatically different power market environments from the original contracts, and 3) the amendments had separate consideration from the original contracts. For the amendment to truly be considered a discount of the original contract, BPA would have to get little or no additional consideration for the money it paid to the DSIs. But in this case, BPA received valuable consideration in the form of curtailed power. The court relied on its rationale in Association of Public Agency Customers v. Bonneville Power Administration (APAC),[11] where DSIs paid BPA to reduce their power purchases from BPA. In that case, the Ninth Circuit held that the fee was not for the sale of power, and therefore was not a rate.[12] Based on that reasoning, the court found that the current contract amendments also were not rates subject to ratemaking procedures.

Bell also argued that one of BPA's amended contracts violated the resource acquisition provisions of the Northwest Power Act because the amended contract included a provision whereby BPA made plans to facilitate new wind resources.[13] The Ninth Circuit did not address the substance of Bell's argument because it held that the claim was not ripe for review. The contract in question merely provided for future negotiations over a resource. Because BPA had not acquired a resource, the resource acquisition provisions did not apply and the Ninth Circuit dismissed the argument.

Finally, the court discussed Bell's argument that BPA violated the National Environmental Policy Act (NEPA)[14] by not conducting an environmental analysis or an environmental impact statement prior to amending the contracts. The Ninth Circuit did not address this argument because it found that Bell did not have standing to bring this claim. A claimant under NEPA must establish an injury in fact, causation, and redressability in order to have standing to sue.[15] Bell failed to demonstrate the element of causation because he did not show that his enjoyment of the land would be lessened if BPA did not complete an environmental analysis. Bell's claims that the DSIs would have gone out of business, therefore avoiding environmental injury, and that the amendments drained funds that BPA should have used for environmental efforts were not supported by facts and did not prove causation. Bell also attempted to rely on APAC, where the Ninth Circuit found that the plaintiffs had standing. The Ninth Circuit rejected the argument because the standing decision in APAC was not precedential and the type of amendments at issue in this case were not at issue in APAC. The Ninth Circuit denied all of Bell's petitions for review.