Acquisition of Energy Resources Under the Pacific Northwest Electric Power Planning and Conservation Act: a Look at the Future

• Publication year: 1981

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 5, No.1FALL 1981

Acquisition of Energy Resources Under the Pacific Northwest Electric Power Planning and Conservation Act: A Look at the Future(fn*)

James 0. Luce(fn**) Janet W. McLennan(fn***)

I. Introduction

The Bonneville Power Administration (BPA)(fn1) is a separate and distinct entity within the Department of Energy,(fn2) serving as the marketing agency(fn3) for hydroelectric power generated at thirty of the largest power dams in the Columbia River Basin.(fn4) The 1961 Columbia River Treaty with Canada(fn5) significantly enhanced the capacity(fn6) of these dams as well as the twenty-five nonfederal projects. The BPA also markets a limited amount of thermal power(fn7) and has net billing contracts to acquire more.(fn8) Overall, the BPA controls and wholesales approximately half of the Pacific Northwest's electric energy.(fn9) It also has built and maintains nearly eighty percent of the region's mainstream transmission system.(fn10)

The BPA's power marketing role is central to the economic future of the Northwest. The agency effectively controls the region's single largest block of power generation and transmission. Although the utility and environmental communities often fiercely debate the BPA's role, the rest of the region is only now coming to appreciate fully the BPA's significance.(fn11) This earlier lack of awareness was understandable in an era of energy surplus, but, in an era of shortage,(fn12) a broader public understanding of the BPA's role is essential.

This article addresses the impact of the Pacific Northwest Electric Power Planning and Conservation Act, focusing on two issues: (1) proposed administrative procedures, and (2) the BPA purchase authority. "Purchase authority" permits the BPA to purchase additional electric energy beyond the hydroelectric and thermal power it already markets. Purchase authority was at the heart of the debate over the regional power legislation. The administrative procedures the agency may adopt will establish the framework for many of the BPA's majority policy decision. Discussion of these issues necessarily involves an analysis of how the legislation will affect the BPA's actions.(fn13)

II. BPA Administrative Procedure: An Overview

Purchase authority under the Act necessarily involves administrative law issues. Procedure may establish the framework for purchase and, if so, a purchase decision must adhere to procedure or risk the uncertainty, possible delay, and costs inherent in protracted litigation. Experience shows that the gamble in shortcutting the administrative process is not worthwhile.

Before Congress passed the Administrative Procedure Act (APA),(fn14) administrative law principles had little applicability to the BPA. Congress had charted the BPA's course in the Bonneville Project Act of 1937.(fn15) Congress granted the Administrator great discretion in an effort to make the bold Federal Columbia River Power System succeed.(fn16) Power sales contracts and imaginative promotional efforts were necessary to dispose of excess electric power.(fn17) Sound technological decisions were the basis on which the BPA would build the vast transmission grid.(fn18) Congress' instruction to the BPA governing disposition of electric power from Corps of Engineers' reservoir projects was "to encourage the most widespread use thereof at the lowest possible rates to consumers consistent with sound business principles."(fn19) The region did not need additional power; it needed markets for its abundant supply. Administrative law played no part in the process.

Business was booming at the BPA when Congress passed the Administrative Procedure Act in 1946. Anyone suggesting that the whole effort slow down for a little informal rulemaking would have been branded a heretic, a lunatic, or both. The Administrative Procedure Act evolved from laws permitting review of traditionally independent regulatory agency actions. Such agencies, with legislative, adjudicative, and administrative functions, held the power to disturb the rights of those subject to regulation. The APA was less applicable to the executive departments, especially those according "privileges."(fn20) The BPA was not even included among the major subagencies listed in a contemporaneous study of the applicability of the APA to the Department of the Interior.(fn21)

Although the BPA was clearly a "public agency" within the APA definition,(fn22) its actions fell within the "public property . . . [and] . . . contracts" exceptions to informal rulemaking.(fn23) These exceptions relieved the BPA of the obligation to adopt rules pursuant to the notice and comment provisions.(fn24) The public property exemption is broadly interpreted and is viewed as applying to hydroelectric power disposal.(fn25) Moreover, the BPA sells the power by contract, thereby gaining an alternate exemption.(fn26) No one questioned whether these provisions applied to the BPA. In addition, aside from rate schedules,(fn27) most of the BPA's statements of "general or particular applicability and future effect"(fn28) fall within the interpretive rules exception.(fn29) Although the BPA makes countless discretionary decisions, they are not adjudicatory in nature, but informal decisions other than rulemaking.(fn30) Until recently the APA has had little impact on the BPA.

However, since the creation of the Department of Energy (DOE) in 1977,(fn31) some changes have come to the BPA. The Department of Energy Organization Act transferred the BPA from the Department of the Interior to the Department of Energy, a move that was made with some trepidation within the BPA. Forty years of working relationships and bureaucratic understandings regarding the regional nature and independent status of the BPA went by the boards. Although the DOE statute(fn32) and its legislative history(fn33) clearly called for continuing the status quo, the agency still must find its home in the DOE and convince its DOE parent that Congress really meant what it said, that the BPA "should be preserved as a separate and distinct entity."(fn34)

Almost overlooked because of the more practical concerns about the BPA's transfer to the DOE was the fact that Congress significantly changed certain administrative procedures under which the BPA must do business. The BPA's actions classifiable as substantive rules were made subject not only to the APA,(fn35) but also to broader notice(fn36) and comment requirements(fn37) required by the DOE Act. The "public property . . . or contracts" exceptions are not available.(fn38) In one fell swoop, Congress determined that in the area of substantive rulemaking, the BPA's free rein was over. The new requirements do not affect the Administrator's authority with respect to interpretative rules, which still require only publication in the Federal Register to become effective.(fn39)

Independently, the BPA staff, after reviewing the United States District Court decision in City of Santa Clara v. Kleepe(fn40) concluded that the BPA needed clearer procedures to govern many of its power marketing policy decisions. The BPA conformed these procedures to what it believed was the law of the case of Santa Clara, and published the procedures one day before Congress passed the Department of Energy Organization Act.(fn41) It has since amended these procedures three times. In the wake of the Regional Act's directive to offer greater opportunity for public involvement in the formulation of major regional power policies,(fn42) the BPA has revised its procedures to more accurately follow the Act's requirements in the public involvement area.(fn43) The scope of activities covered by the procedure is broadened from major power marketing formulation to development of major regional power policies. The procedure also recognizes that public meetings and other activities may be appropriate. The balance of this article suggests how the administrative law features of the new law might affect purchase authority.

III. Purchase Authority

A. Background

To understand the BPA purchase authority issue and to appreciate what all the Regional Act fighting was about, it is first necessary to understand that Congress created the BPA almost as an afterthought to assure that there would be an agency to dispose of surplus electric power generated at facilities it had authorized as navigation and flood control projects.(fn44) Congress hotly debated(fn45) the New Deal social philosophy, that the federal government should take the lead in bringing electricity to the Pacific Northwest's rural areas(fn46) and provide a public standard against which to measure private performance.(fn47) The BPA's initial mandate - to sell power, stimulate economic growth and promote public power - was apparent but downplayed as a matter of law.(fn48)

Consistent with the BPA's original property disposal role, Congress denied the BPA authority to own or control directly the projects from which it markets power.(fn49) The Bonneville Project fails to provide the BPA Administrator with express authority to make long-term purchases of new resources.(fn50) Congress did not charge the BPA with a public utility responsibility, that is, the legal obligation to assure that the lights go on when needed - or to explain why not. Rather, the BPA acted as a jobber, wholesaling electric energy at a price just high enough to recover the costs of production and...