Opinion ID: 2735161
Heading Depth: 3
Heading Rank: 1

Heading: Lookback Proceedings

Text: In June 2009, BPA issued a letter indicating that it would begin addressing the issues remanded to it by PNGC I. The Lookback was structured as a two-step process: First, BPA would answer the contractual questions identified in PNGC I: “the applicability and construction of the severability clause, the damage waiver, and the physical power sale option in light of our holdings [in PNGC I].” 580 F.3d at 827. If it was determined that the contracts barred refunds, then the proceedings would end there. If BPA determined instead that it could seek recovery notwithstanding the damages waiver, it would move on to the second step: determining how much money was owed. BPA also considered in the Lookback whether it was “permitted to seek additional payments directly from Port Townsend Power Company (or indirectly through the Public Utility District No. 1 of Clallam County) for any undercharges for power delivered to Clallam by BPA for the benefit of Port Townsend, both during the Lookback period and subsequently.” Once PNGC II was decided, BPA expanded the scope of the Lookback to include any refunds that might be owed for payments made to Alcoa during the nine-month period before payments were ceased in compliance with PNGC II. BPA issued a draft record of decision (“Draft ROD”) in June 2010 and invited public comment. The Draft ROD proposed three sets of conclusions: First, as to the Block Contracts, the Draft ROD proposed that the invalid rate provisions were severable from the remainder of the contracts; that the damages waiver was therefore enforceable; and that, as a result, BPA was contractually barred from ICNU V. BPA 19 seeking recovery. BPA also proposed that this conclusion was not inconsistent with its earlier decision to seek repayment under a series of settlement agreements invalidated in PGE. Second, as to the Alcoa Amendment, the Draft ROD proposed that BPA was not obligated to seek a refund, and that it did not have any contractual basis for doing so. According to the Draft ROD, “Alcoa did not breach any obligation to BPA under the Amendment, so it is not clear a legal claim for money, in the form of damages or otherwise, could be pursued by BPA under the contract based solely on PNGC II.” The Draft ROD noted, however, that “BPA possibly could pursue an extra-contractual or equitable claim for restitution based on an unjust enrichment theory,” and “specifically invite[d] the parties to comment on whether such a claim could or should be pursued against Alcoa.” The Draft ROD also floated the possibility that BPA could “seek to administratively recover payments made to Alcoa under the Amendment” by adding a surcharge to future power sales to Alcoa. The Draft ROD noted, however, that: (1) such a surcharge might run into its own legal problems, as BPA is required to set rates pursuant to the strictures of the Northwest Power Act, and (2) BPA may have “already recouped some or all of any illegal overpayments under the Amendment . . . by withholding payments to Alcoa for the final two months of the term of the Amendment,” i.e. after PNGC II was handed down. Finally, as to the Port Townsend transaction, the Draft ROD proposed that BPA had no legal or equitable basis for recovering from Port Townsend directly. “While it appears BPA could assert an equitable claim for restitution against Port Townsend, it is not clear that Port Townsend was 20 ICNU V. BPA unjustly enriched.” Moreover, Port Townsend might have an equitable estoppel defense, although BPA concluded that it lacked sufficient information to evaluate this question. Not surprisingly, Alcoa, Port Townsend, and Clallam all agreed with the Draft ROD’s proposed findings. Alcoa, moreover, threatened that, if “BPA were to change its position and conclude that the damages waiver is not enforceable,” then Alcoa could bring claims of its own against BPA “greatly exceeding any amount that BPA could recover from Alcoa.” Specifically, Alcoa estimated that it had a potential damages claim against BPA totaling $218 million, based on the difference between Alcoa’s power costs during the time period covered by the monetized contracts and what its power costs would have been had BPA sold it power directly at the IP rate during that time. The preference customers viewed the Draft ROD very differently — as yet another instance of BPA capitulating to the DSIs. Both PPC and PNGC argued that BPA had not just the legal authority but also the duty to seek repayment of the unlawful subsidies. ICNU submitted similar comments. None of BPA’s major conclusions changed in its final record of decision (“the ROD”), issued February 18, 2011. In the ROD, BPA decided not to pursue refunds of any of the subsidies invalidated in PNGC I and PNGC II, explaining its reasoning as follows: 1. As to the 2007 Block Contracts, BPA is contractually prohibited from seeking repayment because the damages waiver in those contracts is applicable and enforceable. ICNU V. BPA 21 2. As to the Alcoa Amendment, which does not contain a damages waiver, while BPA is not contractually prohibited from seeking repayment, it has no “reasonable legal or equitable basis for doing so.”4 Alcoa fully performed its contractual obligations, leaving BPA without any basis for a contract action, and BPA would be unlikely to prevail in any quasi-contract action. Moreover, if BPA sues Alcoa, Alcoa has indicated that it will bring its own action against BPA, and the low likelihood of success of any BPA suit is not worth the risk (even if small) of owing a judgment to Alcoa. 3. As to the Port Townsend Contract, BPA has no legal or equitable basis for seeking repayment. Because the Port Townsend Contract formally consisted of two separate bilateral contracts (BPA-Clallam and Clallam-Port Townsend), BPA had no direct contractual relationship with Port Townsend, and has no equitable or quasi- contract basis for suing Port Townsend. While BPA did have a direct contract with Clallam, “Clallam was no more than an intermediary” between BPA and Port Townsend, and therefore was not “enriched, unjustly or otherwise,” by the contract. Even if BPA could recover from Clallam, doing so “would not be fair or just” because “it would be nearly impossible for Clallam to recover [in turn] from Port Townsend.” ICNU, PPC, PNGC and its members, and the Canby Utility Board filed petitions in this court for review of the ROD. Port Townsend, Alcoa, and several investor-owned utility companies (“IOUs”) intervened to defend the ROD. 4 PNGC II mistakenly stated that the Alcoa Amendment incorporated the damages waiver by reference. PNGC II, 596 F.3d at 1086. 22 ICNU V. BPA