NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SACRAMENTO MUNICIPAL UTILITY 

DISTRICT; et al., 

Petitioners, 

PUGET SOUND ENERGY INC; et al., 

Intervenors-Pending, 

 v. 

BONNEVILLE POWER 

ADMINISTRATION, 

Respondent.

No. 18-71753 

MEMORANDUM*

On Petition for Review of an Order of the

Bonneville Power Administration

Argued and submitted June 7, 2019**

Portland, Oregon

Before: MURGUIA and HURWITZ, Circuit Judges, and GAITAN,** District 

Judge.

The Sacramento Municipal Utility District, Transmission Agency of Northern 

 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

** The Honorable Fernando J. Gaitan, Jr., United States District Judge 

for the Western District of Missouri, sitting by designation.

FILED

JUN 17 2019

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
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California, and Turlock Irrigation District petition for review of a ratemaking order 

of the Bonneville Power Administration (“BPA”) for fiscal years 2018 and 2019 

(“BP-18”). In BP-18, the BPA raised the hourly rate for transmission service on the 

Southern Intertie, a system of power lines operated by the agency. We have 

jurisdiction under 16 U.S.C. § 839f(e)(5) and (e)(1)(G), and we deny the petition.

1. Substantial evidence supports the BPA’s decision to raise the hourly rate

to incentivize the purchase of long-term firm (“LTF”) transmission service, which 

provides a more reliable and predictable source of income than hourly service. See 

16 U.S.C. § 839f(e)(2); see also Cent. Lincoln Peoples’ Util. Dist. v. Johnson, 735 

F.2d 1101, 1122 (9th Cir. 1984) (noting that the BPA can design rates “to give BPA 

customers price signals”). Citing the number of LTF contracts up for renewal and 

the decrease in the queue of new requests for service, the BPA reasonably concluded 

that it faced a risk of LTF non-renewals. The agency reasonably determined that in 

the absence of an increase in the hourly rate, its customers were less likely to renew 

LTF service, in part because of increases in solar generating capacity in California 

and seams issues between the Southern Intertie and neighboring markets. In so 

concluding, the BPA cited independent research showing that the number of peak 

hours for transmission had declined, and comments from LTF customers considering 

nonrenewal of their contracts. 

2. The BPA did not arbitrarily and capriciously depart from a 2016 
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ratemaking decision (“BP-16”). See 16 U.S.C. § 839f(e)(2); FCC v. Fox Television 

Stations, Inc., 556 U.S. 502, 515–16 (2009). In BP-16, the BPA declined to adopt a 

proposal to increase the hourly rate, concluding that additional research was 

required. After gathering that evidence and considering non-rate alternatives, the 

BPA adopted a different rate solution than proposed in the prior ratemaking.

3. The BPA did not arbitrarily and capriciously depart from any relevant nondiscrimination or cost-based rate setting principles. By incentivizing LTF service, 

the revised rate for hourly service in BP-18 complies with the BPA’s statutory 

mandate to recover its costs. 16 U.S.C. § 839e(a)(1). No undue discrimination 

standard applies here, because the Federal Energy Regulatory Commission 

(“FERC”) did not order the BPA “to provide transmission service” on the Southern 

Intertie under 16 U.S.C. §§ 824i, 824j, or 824l. Id. § 824k(i). Nor does FERC Order 

No. 888 apply; the BPA agreed to follow that order only in relation to the terms and 

conditions of transmission service, not transmission rates.

4. The petitioners failed to exhaust their contention that BP-18 violates 16 

U.S.C. § 838g by failing to provide “the lowest possible rates to consumers 

consistent with sound business principles.” Therefore, even assuming the argument 

is subject in general to judicial review, we decline to address it here. See Marathon 

Oil Co. v. United States, 807 F.2d 759, 767–68 (9th Cir. 1986). 

PETITION DENIED.