Ninth Circuit Remands DSI Lookback to BPA

On September 18, 2014, the federal Ninth Circuit Court of Appeals held that Bonneville Power Administration’s (BPA) decision not to seek a refund of some of the amounts unlawfully paid to Alcoa could be arbitrary, capricious, or an abuse of discretion.  In a 2-1 decision, the appellate court remanded the matter back to BPA to more carefully consider whether BPA should seek a partial refund from Alcoa.  The Ninth Circuit also concluded that BPA has no general constitutional or statutory duty to seek a refund any time it makes an unlawful payment, and that BPA reasonably explained why it did not seek a refund from Port Townsend Paper.  A third judge concurred with most of the ruling, but would have directed BPA to consider seeking larger refunds from Alcoa. 

The case stems from previous appeals by public power utilities and their end use industrial customers in which the Ninth Circuit concluded that BPA paid illegal subsidies to the direct service industries (DSIs).  The DSIs are large industrial customers that directly purchase electricity from BPA, rather than purchase power from local utilities.  The Ninth Circuit ruled in two earlier cases that BPA improperly “subsidized” some DSIs.  BPA, however, declined to seek refunds from two DSIs (Alcoa and Port Townsend Paper).  This decision not to seek refunds prompted the most recent challenge by the public power utilities and their industrial customers. 

The case represents a partial victory for the public power utilities and their customers because BPA will now need to reconsider whether it should seek refunds from Alcoa.  Alcoa has argued that it was not subsidized and that BPA actually owes the aluminum company money because BPA refused to sell power pursuant to a traditional power sale.  BPA will consider these issues before issuing an order whether to seek refunds from Alcoa.  BPA’s final decision may not satisfy the litigants and could result in further appeals. 

The case was colloquially known as the DSI Lookback because the central issue was whether BPA should “look back” at the amounts it improperly paid to the DSIs to seek refunds.


DSI Lookback Opinion can be found HERE



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