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Ninth Circuit Rules on Settlement by Staff BPA Journal, June 2007

In early May, the Ninth Circuit Court of Appeals ruled in two related cases. One, known as the PGE (Portland General Electric) suit, was filed against BPA by numerous parties and challenged BPA's settlement of Residential Exchange Program disputes with six investor-owned utilities in 2000 (for the FY 2002-2011 contract period). Public utilities were the primary petitioners, although investor-owned utilities and industrial customers also filed petitions.

The second lawsuit, known as the Golden Northwest suit, addressed BPA's FY 2002-2006 power rates. In it, public agency petitioners contended BPA (1) improperly allocated costs of serving BPA's industrial customers to preference customers, and (2) improperly allocated costs of the Residential Exchange Program settlements to preference customers. Tribal petitioners argued that BPA did not set rates high enough to cover fish and wildlife obligations.

The court held that BPA exceeded its settlement authority in executing the Residential Exchange Program settlements, that BPA properly allocated the costs of serving the DSIs in its rates, that BPA improperly allocated costs of the Residential Exchange Program settlements to the preference rate, and that BPA should have updated fish and wildlife cost estimates used in its rate hearing. BPA and the U.S. Department of Justice are reviewing the ruling and considering whether to file for rehearing.

As a result of the uncertainty created by the court ruling, BPA informed Northwest investor-owned utilities that it is suspending about $28 million a month in payments under settlement of the Residential Exchange Program. BPA officials must certify the legality of the payments or become personally liable for them. The payments reduce electricity rates for residential and small-farm consumers served by the IOUs, and suspension of settlement payments is expected to effectively raise power rates to these consumers.