# Petition for Writ of Certiorari — California Energy Resources Conservation & Development Commission v. Bonneville Power Administration > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1720%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1988 - **Citation:** 488 U.S. 818 ## Text 87-1835) Sey No sMAY 4 1988 | Ck | IN THE Supreme Court of the United States OCTOBER TERM, 1987 CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, vs. BONNEVILLE POWER ADMINISTRATION; JAMES J. JURA, as Administrator; JOHN S. HERRINGTON, as Secretary of the Department of Energy of the United States of America; and the UNITED STATES OF AMERICA, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT WILLIAM M. CHAMBERLAIN * General Counsel JONATHAN BLEES Deputy General Counsel CALIFORNIA ENERGY REX E. LEE COMMISSION SIDLEY & AUSTIN 1516 Ninth Street, MS-14 1722 “Eye” Street, N.W. Sacramento, California 95814 Washington, D.C. 20006 (916) 324-3237 (202) 429-4266 *Counsel of Record May 4, 1988 Publishing and Graphic Electronic Services, Inc. (PAGES) / (213) 474-7855 re QUESTIONS PRESENTED 1. Whether the Bonneville Power Administration violated its statutory mandate to provide interregional electricity transmission services “‘as a carrier” (16 U.S.C. §837e) to “all utilities on a fair and nondiscriminatory basis” (16 U.S.C. §838d) by adopting a transmission policy that discriminates in favor of Northwest utilities and against California and Canadian utilities and California ratepayers. 2. Whether a federal proprietary agency must formulate its sales and marketing policies in a manner consistent with the Nation’s antitrust laws to the maximum extent feasible. LIST OF PARTIES The parties to the proceeding below were petitioner California Energy Resources Conservation and Develop- ment Commission (CEC) and respondents Bonneville Power Administration (BPA), James J. Jura as Adminis- trator of BPA, John S. Herrington as Secretary of the Department of Energy of the United States of America, and the United States of America. In addition, the Public Utilities Commission of the State of California (CPUC) was a petitioner below. TABLE OF CONTENTS Page CORI EPT MEER ETE EEE? | cocksccsscceseresosssnscesensszesece i Be I UPI IE i diisecdncntnssnsccecccveccnssecscoesstcesecovees ii CP I BAe BEE B BIB eicscccccccccscncsccsccossosesess Vv I oils ccccccchnnhsannssinessensnensiane ] SII sat ccetmananeubdnecswensonneoonenenses 2 PRINCIPAL STATUTES INVOLVED ................ 2 STATEMENT GE THE CASE. ...ccccccccscsccccsscescccese 3 I adil esas cpeescnsedaannonnssietiosonccio 3 BD. FPRGURRD TRG BTOURG 0....ccsccccsesccssccscccscesseseses 3 ED PEDOUID FORIOY cccccccscccccccctcnccsescns 9 D. Ninth Circuit Review of the Access SPUN Wicidsncatiucdishensapelsinteinsinacainsnenabsesnerenceoense 13 REASONS FOR GRANTING THE WRIT ...... 17 I. BPA’S POLICY OF GRANTING PREFERENTIAL ACCESS TO NORTHWEST UTILITIES AND DISCRIMINATING AGAINST CALIFORNIA UTILITIES AND THEIR RATEPAYERS VIOLATES THE STATUTES REQUIRING BPA TO MAKE TRANSMISSION SERVICE AVAILAELE TO “ALL” UTILITIES ON A “FAIR AND NONDISCRIMINATORY” BASIS .............. 18 II. THE NINTH CIRCUIT’S OPINIONS AND BPA’S ACTIONS CONFLICT WITH THIS COURT’S HOLDINGS THAT FEDERAL AGENCIES HAVE —jy¥—— A DUTY TO CONSIDER AND WEIGH THE ANTICOMPETITIVE IMPACTS OF THEIR ACTIONS AND TO CONFORM THEIR POLICIES TO THE ANTITRUST LAWS TO THE MAXIMUM EXTENT FEASIBLE ............ 23 ii een el OEE NEI ORE 30 pele cg. ERLE Separately Bound TABLE OF AUTHORITIES \ Page Cases 324 Liquor Corp. v. Duffy, _—_ U.S. ——, 107 SR; TED Cy Siiaadcititivetentahsnscitttamnctiionasen 24 Aluminum Company of America v. Central Lincoln People’s Utility District, 467 CB. Be Se ivteatenestnnncinnnininietrintatainnccnnimeneee 13 California Energy Commission v. Johnson, 767 FAG 631 CO Cie. UGGS). ccicercciccenscsccsnicssceses 12 California Energy Resources Conservation and Development Commission v. Bonneville Power Administration, 831 F.2d 1467 (Seda Cae. GBT). - sacedeseccstsnceniceniiiinesiiiansnscans passim Chevron, U.S.A, Inc. v. NRDC, 467 U.S. 837 (RDG): snccitisinoniessinssnianincivicisdsiiitinininintealacmnospenintess 20 City of Springfield v. WPPSS, 752 F.2d 1423 (DUR Ge BD sctetisinahipisiinssatccinninscsnnnsnsenintennscnne 8 City of Huntingburg v. Federal Power Comm’n, 498 F.2d 778 CE. Ge TD scctisensntcitinigiiiiinenguerinvessonne 24, 29 Civil Aeronautics Board v. Delta Air Lines, Fad, BOT AFB. BIG CHOC) crseccccecceccicecesecccoreee 27 Consumer Product Safety Comm’n v. GTE Sylvania, Inc, 447 U.S. 102 (1980) .............. 20 Copperweld Corp. v. Independence Tube Corp, 4GT US. T32 C1GGS) cccoceosetecsiscrorccscratesceaseseses 17 Department of Water and Power of the City of Los Angeles v. Bonneville Power Administration, 759 F.2d 684 (9th Cir. BGS) snnsiccedsncsesscassiassinsianiemnenstuintaasudanctitans passim Federal Maritime Comm'n y. Svenska Amerika Linien, 390 U.S. 238 (1968) .......cccccccccscseesees 24 Gulf States Utilities Co. v. Federal Power Comm'n, 411 U.S. 747 (1973) c.cccccccccccccseeeeee 24 Kiefer-Stewart Co. v. Joseph E. Seagram & BOR, FOO WB, BEE CGE) ccccessecssecsecsreicesenses 27 Latin America/Pacific Coast Steamship Conf. v. Federal Maritime Comm'n, 465 F.2d 542 (D.C. Cir.), cert. denied, 409 U.S. SOE CTU thasiciniiitacinuliliaiileie hich eiietinicicdinienns 24 Marine Space Enclosures, Inc. v. Federal Maritime Comm’n, 420 F.2d 577 (D.C. Ce REID caltneritaptihtsciiasstisiahncshcaalscantininnes 29 Maryland People’s Counsel v. FERC, 761 FAG TED COC. Car. 19GB) ccccecsesccecsssoces 24, 29 McLean Trucking Co. v. United States, 321 le Ge Ge esi ice 24 New England Power Co. v. New Hampshire, SBS is Bae GROUND wiccnicctieactaitisinadaesncceies 27 Northern Natural Gas Co. v. Federal Power Comm'n, 399 F.2d 953 CE Gs FI rhinestone, 24, 29 Perma Life Mufflers, Inc. v. International Parts Corp, 392 U.S. 134 (1968) .............. 27 United States v. Terminal R.R. Ass’n, 224 U.S. SOW CROCE Weedicicteniiddharassnanectdacteriainaniansecsabbinnn 23 United States v. Third National Bank, 390 re SFE COU sicihinhaetecennivectanebleee lads n otis 29 a —_ ¥ii—— FEDERAL STATUTES Act of June 25, 1948, c.646, 62 Stat. 869: §1254(1), 28 U.S.C. § 1254 (1) ...cececessseereereers 2 Act of August 31, 1964 (sometimes referred to as the “Regional Preference Act”): §1, 16 U.S.C. §837 ...cecrereceeeeserereenensnssrensnsrnenees 3 §1(c), 16 U.S.C. §837(C) -rerererererererenenenensers ae §1(d), 16 U.S.C. §837(d) .--seecerereererereererereesees 3 §2, 16 U.S.C. § 8378 ...-rererererererersnenensesnensees | §6, 16 U.S.C. §837€ ....ececeeererererees 2, 6, 7, 18 Bonneville Project Act of 1937: §1, 16 U.S.C. §832 .....crerererereenessersnenensensnsnsenens 3 §2(b), 16 U.S.C. §832a(0) --.-.---0-rereeeees 3, 4, 25 §4, 16 U.S.C. $8326 ...cecrerereerererserereneserssnsnrenens 5 Department of Energy Organization Act of 1977: §501(d), 42 U.S.C. §7191(d) --n-rereeeveeeeeenenees 10 Federal Columbia River Transmission System Act of 1974: §2, 16 U.S.C. §838 ....-.ereceereeeseerenenrerersesnsenens 3 §6, 16 U.S.C. § 838d ......----00- 2, 7, 18-19, 25 §9, 16 U.S.C. § 838g ...-.-recerereeeeeees 3, 6, 25, 26 §10, 16 U.S.C. §838B .......recereererenenensrresenees 3, 6 Flood Control Act of 1944: §5, 16 U.S.C. $8258 ......c-crereesereerensersrennsnsesees 25 Pacific Northwest Electric Power Planning and Conservation Act of 1980: G2, 16 U.S.C. $839 eaennnnnscccccssereenreecccesssssensnses 3 §7(a), 16 U.S.C. §839¢(a) ecsesseceeeeeesernsssssneees 6 §7(a)(1), 16 U.S.C. §839e(a)(1) ..------++ 25, 26 §7(g), 16 U.S.C. §839¢(g) exesseseeeeeersssssseeeeees 26 §9(e)(5), 16 U.S.C. $8398 (€)(5) evreeereeeeeee 3, 14 — FEDERAL COURT RULES Witte Cirewlg Resle 1522.3 ...cccccccccocccocccsccsccecsecceeess 15 FEDERAL LEGISLATIVE MATERIALS H.R. Rep. No. 590, 88th Cong., 2d Sess., reprinted in 1964 U.S. Code Cong. & ay See FIUE ‘ehshicinibienttinitainiins 5, 6, 20, 21 H.R. Rep. 93-1375, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & I EN TUE aiideiisdinpucitiuasiidaniidsidainticscensesences 22 Sen. Rep. No. 93-1030, 93rd Cong., 2d Sess. [BOT Oa sncesennntntbinindhasibibantinaniessadianbaeeseamaneaneseses 22 FEDERAL ADMINISTRATIVE AGENCY DECISIONS AND ORDERS Pacific Gas and Electric Co, FERC Docket E-7777-000, Initial Decision, 26 FERC (CCH) 163,048 (1984) woe 4, 5, 7, 28 US. Dep’t of Energy, Bonneville Power Administration, 26 FERC (CCH) ee I caeieihtcrladlitendanticcencnacscecsees 6 US. Dep’t of Energy, Bonneville Power Administration, 39 FERC (CCH) BAR, | Te 9 MISCELLANEOUS” BPA, 1982 Annual Report (1982) .......cccscscsceseeeees 6 BPA, 1983 Program and Financial Summary GE Condition 3 exists when BPA and other Northwest utilities lack sufficient surplus to fill the Intertie regardless of price. Under Condition 3, BPA apportions Intertie capacity first to itself and then to Northwest utilities that have surplus energy for sale. Any remaining capacity is then, and only then, made available to utilities outside the Northwest. A. at G21. D. Ninth Circuit Review of the Access Policy Just thirteen days after its adoption in September 1984, the Interim Policy was challenged by the Los Angeles Department of Water and Power (LADWP), which filed 15 BPA asserted in its Near Term Policy Record of Decision that the Policy “does not provide use of BPA Intertie capacity for arbitrage of extraregional power.” A. at H32. BPA went on to admit, however, that the Policy does not prohibit purchase of Canadian power to displace Northwest resources. Jd. The Proposed Near Term Policy issued in early 1985 was more candid, and stated that during implementation of the interim version of the Policy, approximately two-thirds of the Canadian energy previously sold directly to California reached that market indirectly through this artificial arbitrage or “‘tollgate’” market. A. at F2. Cf. Aluminum Co. of America v. Central Lincoln People’s Util. Dist. 467 U.S. 380, 388 & n. 7 (1984) (finding that parties who purchased BPA nonfirm energy to “displace” their own generation which was then sold to others had conceded that they “arbitrage” the BPA energy). oe an emergency request to stay the Policy. In pursuit of a prompt decision, LADWP agreed to forego normal briefing on the merits. After expedited oral argument, the Ninth Circuit issued a sweeping decision upholding the Policy. The court, apparently relying on a few short conclusory affidavits BPA filed in court to oppose LADWP’s request for a stay, found that “BPA has presented reliable evidence that without a policy which carefully allocates Intertie access, it will experience significant revenue shortfalls in coming years.” A. at B20. There was absolutely no evidence to that effect in the record created during BPA’s notice and comment proceeding. The LADWP panel found that the Policy limited competition (A. at B13), but held that, if restriction of competition was necessary to prevent BPA revenue deficits, such restriction was not only authorized, it was mandated. A. at B20. The court also held that the statutes requiring BPA to share excess transmission capacity with all utilities on a fair and nondiscriminatory basis authorize BPA to discriminate against Canadian and California utilities. In the LADWP panel’s view, those statutes mandate a preference, not just for federal and Canadian Treaty power, but for Northwest utilities as well. A. at B25. The panel also dismissed as “frivolous” any duty by BPA to comply with antitrust policy “because the antitrust laws do not apply to the federal government.” A. at B20 n. 12 (citation omitted). LADWP did not seek review by this Court of the decision. Pursuant to the judicial review provisions of the Pacific Northwest Electric Power Planning and Conservation Act of 1980, 16 U.S.C. §839f(e)(5), the CEC and the CPUC filed their own challenges to the Interim Policy . within the statutory 90 day time period.!® The divided 16 Both agencies sought to consolidate these cases with LADWP in order to bring that decision directly to this Court for review, but BPA | nei panel which decided these challenges unanimously found that the Policy, in both its versions, is anticompetitive. Thus the majority opinion in CEC candidly stated that the Policy’s pro rata allocation scheme creates a regularly shifting, horizontal division of the market for surplus nonfirm energy [whereby] each eligible producer is temporarily granted sole access to a specified share of the capacity, which it may either use or allow to remain unused without fear of competition by other producers. A. at A16. Similarly, the dissent stated that: The BPA’s pro rata allocation scheme for available intertie capacity — a scheme which if implemented by a private party would plainly violate the antitrust laws — paternalistically restricts price competition among Northwest utilities and denies Southwest utilities and energy consumers the benefit of free market pricing for surplus energy offered for sale by privately-owned Northwest utilities. The interim access policy’s interference with free market pricing simply creates a cartel for the Northwest utility companies in the sale of power to the Southwest. A. at A26 (footnote omitted). Despite its recognition of the effects of the Policy, the CEC majority concluded that it was bound by the LADWP panel’s conclusion that BPA was required to discriminate against utilities outside the Northwest in providing access to excess transmission capacity. A. at Al14. The majority recognized that BPA has a duty as a federal agency to “consider” federal antitrust policies, but the court did not require BPA to show how it had harmonized those policies with the agency’s fiscal needs, objected and the LADWP panel rejected our attempts to intervene or consolidate the cases. This problem would not occur under a new Ninth Circuit rule that automatically consolidates such cases. 9th Cir. R. 15-2.3(b). a oe or to demonstrate that BPA had sought to protect competition as much as possible. See A. at A15-A20. The majority also did not identify any specific statutory justification for BPA’s elimination of competition among nonfederal sellers. However, noting several BPA argu- ments (including the claim that the Policy counters alleged “monopsony” power by California buyers), the court decided that given the state of the record on a temporary policy, consideration of more competitive alternatives should await review of the Long Term Policy.!7 A. at Al7,A18. Judge Norris sharply disagreed with the majority: I can see no statutory authority under which the BPA is authorized to discriminate so clearly in favor of Northwest utilities and against Southwest utilities and energy users. Indeed, the relevant statutory language appears to point the other way. The anti- competitive, pro-Northwest utility slant of the pro rata intertie access plan seems plainly incompatible with the statutory language requiring that the BPA be “fair and non-discriminatory” in its treatment of all utilities, 16 U.S.C. §838d, as well as the clear understanding recognized in Department of Water & Power that the purpose of the intertie was to benefit both the Northwest and Southwest, 759 F.2d at 694. A. at A26-A27 (emphasis in original). 17 The Long Term Intertie Access Policy, originally scheduled for adoption in 1986, still has not emerged from BPA, though its release is said to be imminent. Adoption of the Long Term Policy will not moot this case. As shown in the Appendix, both published drafts of the Long Term Policy have had the same anticompetitive features with respect to hourly sales of surplus nonfirm energy as did the Interim and Near Term Policies. That is, both drafts have granted to BPA and Northwest utilities, under Conditions 1 and 2, exclusive access to the federally owned portion of the Intertie and have also horizontally divided that access among those utilities. A. at I1 8-122, J14-J18. eo REASONS FOR GRANTING THE WRIT This case involves the transfer of billions of dollars of wealth from electric utilities and consumers in California to electric utilities and consumers in the Pacific Northwest.!® The transfer occurs because BPA’s Intertie Access Policy horizontally divides the California market for Northwest electricity, eliminates competition for that market among Northwest energy sellers, and eliminates competition from other utilities (principally Canadian) who would also supply the California market if they could gain access to it. The Policy thus enables the Northwest utilities to raise the price they receive from California utilities. Neither panel of the Ninth Circuit has disputed that the scheme is anticompetitive and that it would be per se illegal if it were imposed by a private party. See Copperweld Corp. v. Independence Tube Corp. 467 U.S. 752, 768 (1984). This Court’s review is required for two reasons. First, the plain language of the governing federal statutes prohibits discrimination-in allocating Intertie transmis- sion capacity. Yet the Ninth Circuit has held that '8 According to BPA’s annual report for 1985 (the first full year in which the Policy operated), BPA collected approximately $400 million that year from California purchasers. BPA, 1985 Program and Financial Summary 33 (1985). This amount does not include substantial additional energy sold to California by Northwest nonfederal utilities. Although uncertainties in future weather conditions and fuel prices make it impossible to predict the precise impact of the Policy’s restrictions on competition, the Near Term Policy ROD establishes that the Policy has been successful in achieving BPA’s goa! of substantially increasing its prices to California. The record shows that BPA’s prices to California nearly doubled the year after the Policy took effect. A. at H23, H91. Over a period of several years, the Policy’s restrictions on competition will certainly cost California ratepayers billions of dollars, particularly if California's alternative generation costs substantially increase due to oil or natural gas shortages. See also supra note 4. aac | — discrimination is what the statutes require. Second, the Ninth Circuit has ignored this Court’s well-settled rule that federal agencies must consider and balance antitrust policies in implementing their Congressional mandates. The absence of a conflict in the circuits is irrelevant. BPA operates in only one circuit; hence there can never be a conflict. Because of the lower court’s clear errors of law, and because of the enormous economic impact of those errors on California electric consumers, the issue merits consideration by more than one court. I. BPA’S POLICY OF GRANTING PREFEREN- TIAL ACCESS TO NORTHWEST UTILITIES AND DISCRIMINATING AGAINST CALI- FORNIA UTILITIES AND THEIR RATE- PAYERS VIOLATES THE STATUTES RE- QUIRING BPA TO MAKE TRANSMISSION SERVICE AVAILABLE TO “ALL” UTILI- TIES ON A “FAIR AND NONDISCRIMINA- TORY” BASIS Congress has required BPA to make Intertie capacity that it does not need for transmission of federal energy available “‘as a carrier” to “all utilities” on a “fair and nondiscriminatory” basis. 16 U.S.C. §?37e provides (emphasis added): Any capacity in Federal transmission lines connect- ing, either by themselves or with non-Federal lines, a generating plant in the Pacific Northwest or Canada with the other area or with any other area outside the Pacific Northwest, which is not required for the transmission of Federal energy or [Canadian Treaty energy], shall be made available as a carrier for transmission of other electric energy between such areas. 16 U.S.C. § 838d provides (emphasis added): yom a The Administrator shall make available to all utilities on a fair and nondiscriminatory basis, any Capacity in the Federal transmission system which he determines to be in excess of the capacity required to transmit electric power generated or acquired by the United States. Despite the unequivocal requirement of these statutes that BPA be fair and not discriminate in providing access to its transmission lines, the Access Policy does precisely the opposite by granting priority to Northwest utilities and by shielding them from competition. Sections 837e and 838d provide a two-tiered preference scheme based on the origin of the energy to be sold: first priority goes to federal energy and Canadian Treaty energy, and second priority goes to other nonfederal energy. The Ninth Circuit, however, found in the statutes a three-tiered preference scheme based on the identity of the utility desiring access: first, BPA and utilities desiring to transmit Canadian Treaty energy; second, Northwest nonfederal utilities; third, U.S. utilities located outside the Northwest, including those in California and Canada. A. at B25.!9 Neither the language of the statute, its legislative history, nor common sense supports this re- writing of the statute, which gives Northwest utilities a preference over other nonfederal electric utilities. The most fundamental canon of statutory construction is that “the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed 19 The majority in CEC simply deferred to the LADWP panel’s interpretation of these critical statutory provisions, based on the Ninth Circuit’s rule of interpanel deference. A. at A14-A15. 20 Thus the LADWP court has clearly erred in concluding that “BPA is required to allocate use of federally-owned transmission facilities in a manner which accords preference first to transmission of federal power and then to transmission of other Northwest- generated power.” A. at B25 (emphasis added). = = legislative intention to the contrary, that language must ordinarily be regarded as conclusive.” Consumer Product Safety Comm’n v. GTE Sylvania, Inc. 447 U.S. 102, 108 (1980). If the intent of Congress is clear from the statute, “that is the end of the matter.” Chevron, U.S.A, Inc. v. NRDC, 467 U.S. 837, 842 (1984). Rather than implementing the plain meaning of the statutes quoted above, the LADWP decision (by which the panel in the present case deemed itself bound) redefined BPA’s statutory authority and justified doing so based on three passages of legislative history. First, the court selectively quoted the legislative history of section 837e as follows: [BPA] may enter into agreements for the wheeling of energy generated in Canada, but such energy ... does not have the priority granted to Federal energy and Canada’s entitlement to [treaty] power benefits A. at B23 (emphasis and ellipses in the court’s opinion). Focusing on the word “may,” the panel concluded that BPA retains discretion to discriminate against direct Canada-to-California sales and may adopt a Northwest utility priority following the priority for federal energy. A. at B23. In reaching that conclusion, however, the LADWP court edited the legislative history’s language in a way that turns the intended meaning of the statute on its head. The unedited language shows that Congress’s intent was exactly the opposite: [BPA] may enter into agreements for the wheeling of energy generated in Canada, but such energy stands on the same basis as any other non-Federal energy. It does not have the priority granted to Federal energy and Canada’s entitlement to [treaty] power benefits H.R. Rep. No. 590, 88th Cong., 2d Sess., reprinted in 1964 U.S. Code Cong. & Admin. News 3342, 3350 (emphasis added to the portion omitted by the Ninth Circuit). Thus EEE Eero BPA has granted one group of private competitors and denied another access to a “‘tollgate” facility (see United States v. Terminal R.R. Ass’n, 224 U.S. 383 (1912)), and has insulated the former group from price competition among themselves. However, the Ninth Circuit has failed to require BPA to make any meaningful showing that these extreme anticompetitive effects of the Policy are necessary to achieve any legitimate statutory objective. 23 A. at Al6, A26, B13; see also A. at E78 (BPA indicates that under the Access Policy “buyers in California face Pacific Northwest sellers who are unable to compete with each other. . .”). | a,’ Federal agencies charged with regulating carriers and utilities, including the electric power industry, must accord careful consideration to “the fundamental national economic policy expressed in the antitrust laws.” Gulf States Utilities Co. v. Federal Power Comm'n, 411 U.S. 747, 759 (1973); see also Federal Maritime Comm'n v. Svenska Amerika Linien, 390 U.S. 238, 244 (1968); | McLean Trucking Co. v. United States, 321 U.S. 67, 80 | (1944); Maryland People’s Counsel v. FERC, 761 F.2d 780, 786-87 (D.C. Cir. 1985); City of Huntingburg yv. Federal Power Comm’n, 498 F.2d 778, 783 (D.C. Cir. 1974). Even where other economic, social, or political considerations are found to be of sufficient importance to justify deviation from antitrust principles, those agencies may not take such action without conforming their conduct, to the maximum feasible extent, to antitrust policies. See Latin America/ Pacific Coast Steamship Conf. v. Federal Maritime Comm’n, 465 F.2d 542, 547 (D.C. Cir.), cert. denied, 409 U.S. 967 (1972); Northern Natural Gas Co. v. Federal Power Comm'n, 399 F.2d 953, 961 (D.C. Cir. 1968). This requirement reflects the fact that the antitrust laws “‘are as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.” 324 Liquor Corp. v. Duffy, __ US. ——, 107 S.Ct. 720, 729 (1987), quoting United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972). The obligation to consider antitrust principles in formulating and implementing federal policy applies with special force to federal power marketing administrations such as BPA, which were established to sell federal electricity at inexpensive prices, thereby providing a “yardstick” to encourage competitive pricing by privately owned utilities.2* BPA’s enabling statutes in particular 24 BPA, Columbia River Power For The People: A History Of The Policies Of The Bonneville Power Administration 26 (1981). —————— a demonstrate a consistent Congressional intent to foster rather than restrain competition.*> The Ninth Circuit did not deny the severe anticompeti- tive consequences of the Access Policy. It simply tried to justify these violations of antitrust principles based on the alleged need for increased BPA revenues. A. at B20. Yet it is very clear, both from BPA’s own Record of Decision and from the LADWP and CEC opinions, that the Policy does not simply protect BPA’s sales of surplus energy from competition; it also protects all nonfederal sellers from competition from Canada, among themselves, and even from BPA. A. at E78; A. at Al6, A26, B13. While protecting federal energy sales from competition may increase federal revenues, neither of the Records of Decision nor the two Ninth Circuit opinions has even remotely suggested how protecting nonfederal energy sales from competition has anything to do with BPA’s mandate to be a self-financing agency.*® Moreover, BPA has alternative ways of enhancing its revenues which are either less anticompetitive or not anticompetitive at all. For example, BPA could raise its rates to its Northwest customers in order to recover a higher percentage of its total costs from the customers 25 See, e.g, 16 U.S.C. §832a(b) (“to prevent monopolization”); 16 U.S.C. §825s (made applicable through 16 U.S.C. §839e(a)(1)) (“to make [federal energy] available . . . on fair and reasonable terms and conditions” and “at the lowest possible rates to consumers consistent with sound business principles’); 16 U.S.C. §838d (excess transmis- sion capacity shall be made “available to all utilities on a fair and nondiscriminatory basis”); 16 U.S.C. §838g (“consistent with sound business principles”); 16 U.S.C. §839e(a)\(1) (BPA rates to be set “in accordance with sound business principles”). 26 Even with respect to its own sales, BPA has not shown that it needs to act anticompetitively in order to maintain adequate revenues, nor has BPA shown that the method it has chosen to achieve its revenue goals is the least anticompetitive action available consistent with its revenue needs. _ who receive high quality firm power from BPA.’ It could also exercise the express priority over transmission capacity that Congress provided in sections 837e and 838d in order to ensure that all federal energy could be sold to produce needed federal revenue.*® BPA could also consider a more limited protection of its sales from competition (e.g. restricting competition only during spill periods, or only when market conditions would not permit BPA to recover a FERC-approved cost-based surplus energy rate). It is only because BPA has decided (1) to keep its rates to Northwest utilities low, (2) to sell only a “pro rata” share of its own energy, and (3) to ignore alternatives that restrict competition to a lesser degree, that BPA deems it necessary to adopt a total 27 BPA’s mandate to be self-financing is simply the obligation to recover enough revenues from ail of its power sales to repay its treasury obligations within a reasonable time. 16 U.S.C. §839e(a)(1). BPA has not been established to make a profit; rather, it sells its power at cost “‘at the lowest rates to consumers consistent with sound business principles.” 16 U.S.C. §§838g, 839e(a)(1). However, within this statutory framework, BPA must decide how much of its total costs must be recovered from its firm power customers and how much must be recovered from sales of surplus energy. 16 U.S.C. §839e(g). Therefore, BPA’s obligation to be a self-financing agency involves a zero sum game: every increase in the rates charged to California permits a decrease in the rates charged to the Northwest, and vice versa. We do not suggest that this Court needs to become involved in the intricacies of BPA ratemaking in this case. We do submit, however, that BPA may not double its rates to California (to the benefit of the Northwest) by horizontally dividing up the market for sales of surplus energy to California, without demonstrating how every anticompetitive consequence of that action is both (1) necessary to protect BPA’s ability to recover adequate revenues and (2) the least anticompetitive alternative available for that purpose. 28 The question here is why BPA should be permitted to violate Congress’s antitrust policies when it has not even made full use of the express power Congress provided to reserve Intertie capacity so that BPA could sell all of its own energy. ~~. restriction on competition for sales of energy to California. Although BPA does not expressly articulate it as an independent rationale for the elimination of competition among the nonfederal utilities, the implication in the Interim Policy Record of Decision is that BPA took this action to counter an alleged lack of competition among California buyers of surplus Northwest energy. A. at E75-E79; see also A. at Al8-A19. If this was BPA’s justification, it is insufficient for several reasons. First, BPA is not a regulatory agency.2? FERC regulates the wholesale electricity market in the Northwest and California, not BPA. See New England Power Co. v. New Hampshire, 455 U.S. 331, 340 (1982). Congress has not delegated to BPA the authority to exerci governmental police powers for the purpose of regulating alleged anticompetitive conduct by others. As stated by Judge Norris, “BPA’s statutory mission ... does not extend to acting as the guardian angel for Northwest utilities in their market relationship with Southwest utilities.” A. at A26. Second, BPA ignored the well-settled rule that those who commit antitrust violations may not justify such conduct on the ground that it was undertaken to compensate for or retaliate against antitrust violations by their adversaries. Perma Life Mufflers, Inc. v. Internation- al Parts Corp., 392 U.S. 134, 138 (1968); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 214 (1951). As Judge Norris observed: If Northwest energy companies believe that the Southwest utilities are exercising some sort of unfair 23 BPA quite clearly has only those powers delegated to it by Congress: “[An agency] is entirely a creature of Congress and the determinative question is not what [the agency] thinks it should do but what Congress has said it can do.” Civil Aeronautics Board v. Delta Air Lines, Inc., 367 U.S. 316, 322 (1961). a, ae monopsony power, let them sue under the applicable antitrust laws. It is not the mission of the BPA to fight this battle for the Northwest utilities through the promulgation of a regionally biased access policy. A. at A26. Third, as discussed at pages 4-6, supra, the southern end of the Intertie, unlike the northern end, was paid for and is owned by nongovernmental entities, who have not been obliged to make their capacity available to non- owners.” Moreover, to the extent that BPA’s complaint relates to its inability to reach potential customers in California, BPA has no legitimate grievance. According to testimony given during the Quad-7 proceeding by Charles Luce (BPA Administrator from 1961 to 1966), the idea of limiting California utility Intertie participa- tion to large generating utilities actually came from BPA itself and related to its political concerns about regional versus public preference. A. at L13-L16. Finally, the Ninth Circuit’s failure to require BPA to consider less anticompetitive alternatives violated the % In the Quad-7 Initial Decision, the administrative law judge pointed out that requiring “owner” utilities to surrender their Intertie shares to “‘non-owners” would not necessarily produce a fair result: The costs to and rates charged by the various municipalities may be reduced if access to the Intertie is given them, but there will be a corresponding increase in the cost to PG&E and Edison and an increase in their rates to cover the cost increase assuming full retail rate recovery of costs. The stockholders of PG&E and Edison will not lose money, nor will the executives of PG&E and Edison have their salaries reduced. Essentially what we deal with here is the question of whether the consumers supplied by the municipalities will have their rates reduced while other customers of PG&E and Edison find their rates increased. A. at L10. In this case, it is also the ratepayers of PG&E and Edison (as well as of the various other California utilities which own portions of the Intertie) who are hurt by the Access Policy. 1: (anaemia a, well-established principle that agencies must consider on their own initiative whether such alternatives exist. As the D.C. Circuit said in Northern Natural Gas Co.: [T]he duty imposed upon the Commission by Section 7 of the Natural Gas Act is not merely to determine which of the submitted applications is most in the public interest, but also to give proper consideration to logical alternatives which might serve the public interest better than any of the projects outlined in the applications. 399 F.2d at 973 (footnote omitted, emphasis in original); see also Maryland People’s Counsel, 761 F.2d at 786; City of Huntingburg, 498 F.2d at 788; Marine Space Enclosures, Inc. v. Federal Maritime Comm’n, 420 F.2d 577, 585 (D.C. Cir. 1969); cf. United States v. Third National Bank, 390 U.S. 171, 189-92 (1968). Congress has recognized only two exceptions — for federal and Canadian Treaty energy — to the require- ment that BPA allocate Intertie transmission capacity on a nondiscriminatory basis. Even if that governing language were not so clear, the undisputable anticompeti- tive consequences of the respondent’s allocation must, under this Court’s precedents, have some bearing on how the statute is to be interpreted. Yet the Ninth Circuit has disregarded both the plain language of the statute and also the well-settled rule that federal legislation should be interpreted and implemented so as to harmonize antitrust and regulatory principles. The economic consequences of the Ninth Circuit’s error amount potentially to billions of dollars. Clearly, the issue is too important to leave exclusively to one court as the first and last judicial body to pass on the matter. _— CONCLUSION The Court should grant the Petition for a Writ of Certiorari. May 4, 1988 Respectfully submitted, CALIFORNIA ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION WILLIAM M. CHAMBERLAIN* General Counsel JONATHAN BLEES Deputy General Counsel 1516 Ninth Street, MS-14 Sacramento, California 95814 (916) 324-3237 REX E. LEE SIDLEY & AUSTIN 1722 “Eye” Street, N.W. Washington, D.C. 20006 (202) 429-4266 Attorneys for Petitioner *Counsel of Record --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1720%3A1. Public record. Not legal advice.