Since enactment of the Bonneville Project Act of 1937 (Project
Act), the Bonneville Power Administration (BPA) has marketed
low-cost hydroelectric power generated by a series of dams along
the Columbia River. BPA sells two types of power: "firm" power
(energy that BPA expects to produce under predictable streamflow
conditions) and "nonfirm" power (energy that is in excess of firm
power and is provided only when such excess exists). BPA's
customers include three groups: (1) "public bodies and
cooperatives," which include public utilities and which are
"preference" customers to whom BPA is required to give priority
over nonpreference customers; (2) private, investor-owned utilities
(I0Us); and (3) direct-service industrial customers (DSIs), which
purchase power directly from BPA instead of through a utility. IOUs
and DSIs are "nonpreference" customers. As demand for power
increased to exceed BPA's generating capability, Congress moved to
avert a customer struggle for BPA power by enacting in 1980 the
Pacific Northwest Electric Power Planning and Conservation Act
(Regional Act). Section 5(a) of that Act requires all power sales
under the Act to be subject to the preference and priority
provisions of the Project Act. Section 5(d)(1)(B) requires BPA to
offer each existing DSI customer a new contract that provides "an
amount of power" equivalent to that to which such customer was
entitled under its existing 1975 contract. Section 10(c) provides
that the Act does not "alter, diminish, abridge, or otherwise
affect" federal laws by which the public utilities are entitled to
preference. Pursuant to the Regional Act, the Administrator of BPA
offered new contracts to DSI customers for the same amount of power
specified by the existing 1975 contracts, but, based upon his
interpretation of the statute and its legislative history,
concluded that terms of the power sales need not be the same as
they had been under the 1975 contracts. Those contracts had
provided that a portion of the power supplied to DSIs could be
interrupted "at any time," thus making that portion subject to the
preference provisions of the Project Act and enabling preference
utilities to interrupt it whenever they wanted nonfirm power. The
Administrator concluded that such a provision in the new contracts
would conflict with the
Page 467 U. S. 381
directive of § 5(d)(1)(A) of the Regional Act that sales to DSIs
should provide a portion of the Administrator's reserves for firm
power loads. Accordingly, the new contracts allowed power
interruption only to protect BPA's firm power obligations, thus
reducing the amount of nonfirm power available to preference
utilities. Respondent preference utilities challenged the new
contracts by a petition for review in the Court of Appeals,
claiming that those contracts violated the preference accorded to
nonfirm power under the 1975 contracts, that §§ 5(a) and 10(e) of
the Regional Act required that DSI power be interruptible under the
new contracts on the same terms as it was under the 1975 contracts,
and that the conditions in the new contracts provided DSIs with a
greater "amount of power" than the 1975 contracts, in violation of
§ 5(d)(1)(B) of the Regional Act. The Court of Appeals agreed, and
found the Administrator's interpretation of the Regional Act
unreasonable.
Held:
1. Giving the Administrator's interpretation of the Regional Act
the deference it is due, his interpretation is a fully reasonable
one, particularly in the absence of any statutory provision
affirmatively indicating the contrary. It is reasonable to conclude
that the statutory directive that the new contracts be for the same
"amount of power" as the 1975 contracts requires simply that the
new contracts involve the same number of kilowatts, and, contrary
to respondents' argument, does not preclude curtailing the
situations in which power can be interrupted. Nor is there any
merit to respondents' argument that the terms of the new contracts
conflict with § 5(a) of the Regional Act. While that section
preserves the priority and preference provisions of the Project
Act, that preference system merely determines the priority of
different customers when the Administrator receives "conflicting or
competing" applications for power that he is authorized to
allocate. The new contracts offered to the DSIs are not part of
such an administrative allocation of power; the power sold pursuant
to those contracts is allocated directly by statute. The Project
Act's preference provisions, as incorporated in the Regional Act,
therefore simply do not apply to the contracts that the latter Act
requires BPA to offer. Pp.
467 U. S. 389-395.
2. The legislative history of the Regional Act confirms the
Administrator's interpretation. That history shows that Congress
paid specific attention to power sales to DSIs, and consulted BPA
on the relationship between those sales and the Act's broader
purposes. There is no indication that Congress intended the new DSI
contracts to have provisions governing interruptibility that were
the same as in the 1975 contracts. Pp.
467 U. S.
396-398.
3. Because the Regional Act does not comprehensively establish
the terms on which power is to be supplied to DSIs under the new
contracts,
Page 467 U. S. 382
the Administrator has broad discretion to negotiate them. Sales
to DSIs under that Act are intricately related to the "exchange"
program established by the Act to reduce the disparity existing
under the Project Act whereby consumers served by public utilities
enjoyed much cheaper power than consumers served by IOUs. Pp.
467 U. S.
398-400.
686 F.2d 708, reversed and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, MARSHALL, POWELL, REHNQUIST, and
O'CONNOR, JJ., joined. STEVENS, J., filed a dissenting opinion,
post p.
467 U. S.
400.
JUSTICE BLACKMUN delivered the opinion of the Court.
Since enactment of the Bonneville Project Act of 1937, 50 Stat.
731, 16 U.S.C. § 832
et seq. (Project Act), the Bonneville
Power Administration (BPA) has marketed low-cost hydroelectric
power generated by a series of dams along the Columbia River.
Although § 4(a) of the Project Act, 16
Page 467 U. S. 383
U.S.C. § 832c(a), directs the BPA Administrator to "give
preference and priority to public bodies and cooperatives" when
selling its power, BPA for many years enjoyed a surplus of power
that allowed it to satisfy the needs of all customers in the
region. As demand for power increased to exceed BPA's generating
capability, however, the allocation of low-cost federal power
became an issue of significant area concern. In 1980, Congress
moved to avert what appeared to be an emerging customer struggle
for BPA power by enacting the Pacific Northwest Electric Power
Planning and Conservation Act, 94 Stat. 2697, 16 U.S.C. § 839
et seq. (Regional Act). That Act required BPA to offer new
contracts to its several customers. Some of the respondents
[
Footnote 1] brought this suit
to challenge the new contracts that BPA signed with certain
customers. The United States Court of Appeals for the Ninth Circuit
held that the contracts violated the statute. We now reverse that
judgment, and remand the case to the Court of Appeals for further
proceedings.
I
Before discussing the Regional Act's provisions that give rise
to the dispute, certain aspects of hydroelectric power generation
and the Project Act's allocation scheme must be explained.
Because the amount of power generated by BPA depends on
streamflow in the Columbia River system, BPA cannot predict with
accuracy the amount of power that it can generate. Accordingly, BPA
historically has sold two types of power. "Firm power" is energy
that BPA expects to produce under predictable streamflow
conditions. "Nonfirm" power is energy in excess of firm power, and
is provided only when such excess exists.
Page 467 U. S. 384
BPA's customers include three groups that are relevant to this
case. [
Footnote 2] The primary
group is what the Project Act refers to as "public bodies and
cooperatives," which includes public utilities and other public
entities. [
Footnote 3] These
entities are "preference" customers, and BPA is required to give
priority to their applications for power when competing
applications from nonpreference customers are received.
See § 4(b) of the Project Act, 16 U.S.C. § 832c(b). BPA's
other two groups of customers are private, investor-owned utilities
(IOUs), and direct-service industrial customers (DSIs). The latter
are large industrial end-users that purchase power directly from
BPA instead of through a utility. IOUs and DSIs are "nonpreference"
customers, and BPA is allowed to contract to sell to them only
power for which preference customers do not apply. Once a contract
between BPA and a customer is signed, however, the Project Act
makes clear that the contract is "binding in accordance with the
terms thereof." § 5(a), 16 U.S.C. § 832d(a).
In the early years of the Project Act, BPA's contract with each
of its customers obligated BPA to supply the customer's full
contractual requirements on a "firm," noninterruptible basis. In
1948, the increasing demand for power in the Northwest caused BPA
to modify its industrial sales policy so as to require that, where
feasible, a new contract signed with a DSI provide that some power
be supplied on a nonfirm basis. This condition meant that a portion
of DSI power could be interrupted when necessary to supply BPA's
preference
Page 467 U. S. 385
customers. DSIs are unique among BPA's customers in their
ability to tolerate such interruptions in service; they are able to
do so because some of their industrial processes can withstand
periodic power interruptions without damage. Utilities, on the
other hand, require power on a noninterruptible basis, because
their residential consumers cannot withstand periodic interruptions
in service.
The increased demand for power in the 1970's required that BPA
alter its sales policies even more drastically. Projections at that
time showed that, because of increased power demand, preference
customers soon would require all of BPA's power.
See
H.R.Rep. No. 96-976, pt. 1, pp. 23-27 (1980). Accordingly, BPA
announced in 1973 that new contracts for firm power sales to IOUs
would not be offered. In addition, when BPA signed contracts with
DSIs in 1975, it specified that 25% of their power would be subject
to interruption "at any time," and it advised the DSIs that, as
their new contracts expired during the 1981-1991 period, they were
not likely to be renewed.
The increase in demand soon threatened even the ability of BPA's
preference customers to obtain federal power to meet their full
power needs. In 1976, BPA informed its preference customers that
BPA would not be able to satisfy preference customer load growth
after July 1, 1983, and BPA began to consider how to divide the
available federal power among its preference customers.
The high cost of alternative sources of power caused BPA's
nonpreference customers vigorously to pursue ways to regain access
to cheap federal power. Most important, many areas that were served
by IOUs moved to establish public entities designed to qualify as
preference customers and be eligible for administrative allocations
of power. [
Footnote 4] Because
the
Page 467 U. S. 386
Project Act provided no clear way of allocating among preference
customers, and because the stakes involved in buying cheap federal
power had become very high, this competition for administrative
allocations threatened to produce contentious litigation. The
uncertainty inherent in the situation greatly complicated the
efforts by all BPA customers to plan for their future power
needs.
To avoid the prospect of unproductive and endless litigation,
Congress enacted the Regional Act. The Act provided for future
cooperation in the region by establishing a mechanism for
comprehensive federal-state power planning. §§ 4 and 6, 16 U.S.C.
§§ 839b and 839d. For the first time, moreover, BPA was authorized
to acquire resources to increase the supply of federal power.
[
Footnote 5] In addition, § 5
of the Act, 16 U.S.C. § 839c, sought to avert disputes over the
allocation of power by requiring BPA to enter into an initial set
of contracts with its various types of customers.
Section 5(d)(1)(B) of the Act, 16 U.S.C. § 839c(d)(1)(B),
required that.
"[a]fter the effective date of this Act [Dec. 5, 1980], the
Administrator shall offer . . . to each existing direct service
industrial customer an initial long-term contract that provides
such customer an amount of power equivalent to that to which such
customer is entitled under its contract dated January or April
1975. . . ."
These contracts were to
Page 467 U. S. 387
replace the existing DSI contracts that were scheduled to expire
at various times during the period 1981-1991. Section 5(d)(1)(A)
indicated that the sales to the DSIs under the new contracts were
to "provide a portion of the Administrator's reserves for firm
power loads within the region." [
Footnote 6]
Pursuant to this statutory directive, the Administrator offered
new, 20-year contracts to its DSI customers. The contracts were for
the same amount of power specified by the existing 1975 contracts.
Based upon his interpretation of the statute and the legislative
history of the Act, however, the Administrator concluded that the
terms of the power sales were not to be the same as they had been
under the 1975 contracts. The 1975 contracts provided that a
portion (the "top quartile") of the power supplied to DSIs could be
interrupted "at any time." This provision made the top quartile of
DSI power subject to the preference provisions of the Project Act,
and enabled preference utilities to interrupt it whenever they
wanted nonfirm power. The Administrator concluded that such a
provision in the new contracts would conflict with § 5(d)(1)(A)'s
directive that sales to DSIs should "provide a portion of the
Administrator's reserves for
firm power loads" (emphasis
added). Accordingly, the Administrator offered DSI customers
contracts that allowed interruption only to protect BPA's firm
loads, and not to make sales of nonfirm energy. 46 Fed.Reg. 44340
(1981).
This aspect of the new DSI contracts is at the center of the
present dispute. Under the Project Act, nonfirm power was allocated
hourly on an "if available basis," and was subject to the
preference provisions of that Act. Although nonfirm power is too
unreliable for preference utilities to use to satisfy the demands
of their consumers on a general basis, it nevertheless is
attractive to many preference utilities because
Page 467 U. S. 388
it could be used as a substitute for power they generated
themselves. In this manner, nonfirm power purchases enabled
preference utilities to shut down their own facilities when they
required maintenance, or if they could not generate power as
cheaply as BPA. Alternatively, preference utilities appear to have
been able to "arbitrage" BPA's nonfirm power by using it to
displace their own power, which they then sold to users that could
not purchase power directly from BPA. [
Footnote 7] By making DSI power interruptible under the
new contracts only to protect BPA's firm power obligations, the new
contracts reduced the amount of nonfirm power available to
preference utilities.
Shortly after the Administrator's decision and the execution of
new DSI agreements, respondents challenged the contracts by
petition for review in the Court of Appeals. The core of their
challenge was that the proposed contracts violated the preference
to nonfirm power accorded under the 1975 contracts. That
preference, it was said, was reserved by § 5(a) of the Regional
Act, 16 U.S.C. § 839c, which states:
"All power sales under this Act shall be subject at all times to
the preference and priority provisions of the Bonneville Project
Act of 1937. . . ."
Respondents also relied on § 10(c) of the Regional Act, 16
U.S.C. § 839g(c), which provides that the Act does not
"alter, diminish, abridge, or otherwise affect the provisions of
other Federal laws by which
Page 467 U. S. 389
public bodies and cooperatives are entitled to preference and
priority in the sale of federally generated electric power."
Respondents argue that these provisions require that DSI power
be interruptible under the new contracts on the same terms as it
was under the 1975 contracts. In addition, respondents assert that
the conditions in the new contracts effectively provide the DSIs
with a greater "amount of power" than their 1975 contracts, in
violation of § 5(d)(1)(B) of the Regional Act, 16 U.S.C. §
839c(d)(1)(B).
The Court of Appeals agreed with respondents and found the
Administrator's interpretation of the Act to be unreasonable.
Central Lincoln Peoples' Utility District v. Johnson, 686
F.2d 708 (CA9 1982). The court relied heavily on §§ 5(a) and 10(c)
of the Regional Act to conclude that the Act preserved the
longstanding practice of allocating nonfirm power under the 1975
contracts. Because of the importance of the issue, we granted
certiorari. 460 U.S. 1050 (1983).
II
A
Under established administrative law principles, it is clear
that the Administrator's interpretation of the Regional Act is to
be given great weight.
"We have often noted that the interpretation of an agency
charged with the administration of a statute is entitled to
substantial deference."
Blum v. Bacon, 457 U. S. 132,
457 U. S. 141
(1982).
"To uphold [the agency's interpretation]"
"we need not find that [its] construction is the only reasonable
one, or even that it is the result we would have reached had the
question arisen in the first instance in judicial proceedings. . .
."
"We need only conclude that it is a reasonable interpretation of
the relevant provisions."
American Paper Institute, Inc. v. American Electric Power
Service Corp., 461 U. S. 402,
461 U. S.
422-423 (1983), quoting
Unemployment Compensation
Comm'n. v. Aragon, 329 U. S. 143,
329 U. S. 153
(1946).
Page 467 U. S. 390
These principles of deference have particular force in the
context of this case. The subject under regulation is technical and
complex. BPA has longstanding expertise in the area, and was
intimately involved in the drafting and consideration of the
statute by Congress. Following enactment of the statute, the agency
immediately interpreted the statute in the manner now under
challenge. Thus, BPA's interpretation represents
"'a contemporaneous construction of a statute by the men charged
with the responsibility of setting its machinery in motion, of
making the parts work efficiently and smoothly while they are yet
untried and new.'"
Udall v. Tallman, 380 U. S. 1,
380 U. S. 16
(1965), quoting
Power Reactor Co. v. Electricians,
367 U. S. 396,
367 U. S. 408
(1961).
Giving the Administrator's interpretation the deference that it
is due, we are convinced that his interpretation is a fully
reasonable one. Section 5(d)(1)(B) of the Regional Act, 16 U.S.C. §
839c(d)(1)(B), expressly directs the Administrator to offer each
existing DSI an initial long-term contract for the same amount of
power as provided in its existing contract. It is therefore beyond
dispute that the plain language of the statute mandates that
contracts be offered. Respondents challenge the contracts, however,
because they contain interruptibility provisions different from
those in the 1975 contracts. Respondents offer essentially two
arguments in support of their position. Neither is persuasive.
First, respondents claim that the new contracts violate the
statutory directive that the contracts be for the same "amount of
power" as the 1975 contracts. Because the proposed contracts
curtail the situations in which power can be interrupted,
respondents argue that they effectively provide DSIs with a greater
amount of power than they would have received under the 1975
contracts. Petitioners and the Administrator contend, on the other
hand, that the term "amount of power" refers only to the quantity
of power to be sold to the DSIs as measured in kilowatts. They
claim that the phrase does not determine the interruptibility or
"quality" of the power that is sold under the required
contracts.
Page 467 U. S. 391
The distinction between power amount and power "quality" is a
valid one that can be seen by reference to the 1975 contracts.
Under those contracts, the "amount" of power referred simply to the
number of kilowatts sold. The contractual terms governing the
interruptibility of the power were included in other provisions in
the contracts.
See contract between BPA and Kaiser
Aluminum & Chemical Corp. (1975), App. to Pet. for Cert. N-2,
N-5. It is reasonable to conclude that the statutory directive that
the new contracts be for the same "amount of power" as the 1975
contracts requires simply that the new contracts involve the same
number of kilowatts. Respondents do not contend that the new
contracts fail to meet this requirement.
Sections (d)(1)(A) and 3(17) of the Regional Act lend support to
this interpretation. The former expressly requires that power sales
to the DSIs "shall provide a portion of the Administrator's
reserves for firm power loads." The latter defines reserves as the
power needed to protect BPA's "firm power customers" from
shortages. It is clear from these provisions that at least some
portion of DSI power is interruptible to protect the firm needs of
other customers. In addition, however, these provisions support the
Administrator's inference that the Regional Act does not require
DSI power to be interruptible to meet the nonfirm power desires of
preference customers, and the legislative history confirms this
view. The Report of the Senate Committee on Energy and Natural
Resources clearly explains:
"[T]he term 'firm power customers of the Administrator' is
intended to mean the firm power loads of such customers.
It is
not intended that the Administrator's reserves will be used to
protect other than firm loads."
(Emphasis supplied.) S.Rep. No. 96-272, p. 23 (1979). Because it
is clear that the top quartile of DSI power is a part of BPA's
reserves, that power is not to be used to serve nonfirm power
loads.
Respondents' claim that the top quartile of power must be
interruptible "at any time" in order to provide the DSIs with the
same "amount of power" is incorrect even under respondents'
Page 467 U. S. 392
own interpretation of the phrase. The parties agree that the
DSIs'
second quartile of power can be interrupted in more
situations under the new contracts than under the 1975 contracts,
and that the power quality of the second quartile is therefore
lower than before.
See Respondents' Memorandum in
Opposition to Motion for Temporary Injunction or Stay Pending
Review, filed Sept. 8, 1981, App. 21 (table comparing
interruptibility of second quartile of DSI power in 1975 and new
contracts). The legislative history of the Regional Act makes clear
that Congress expressly endorsed, perhaps even required, that the
new contracts contain the conditions making the second quartile
power more interruptible than before. [
Footnote 8] If, as respondents would have it, the top
Page 467 U. S. 393
quartile of power remained interruptible in the same situations
as under the 1975 contracts, but the second quartile became more
interruptible than before, it is apparent that the new contracts
would provide the DSIs with a smaller total "amount of power," as
respondents seek to define that phrase. In short, Congress could
not have contemplated interruptibility terms for the second
quartile different from those in the 1975 contracts, and at the
same time have insisted that DSIs get the "same amount of power"
under respondents' definition of the phrase; it is clear therefore,
that that definition is not what Congress intended.
Respondents' second argument is that the terms of the new
contracts conflict with § 5(a) of the Regional Act. It is true, as
respondents assert, that that section preserves the priority and
preference provisions that existed under the Project Act. But the
preference system merely determines the priority of different
customers when the Administrator receives "conflicting or
competing" applications for power that the Administrator is
authorized to allocate administratively. § 4(b) of the Project Act,
16 U.S.C. § 832c(b). In the instant case, the initial contracts
offered by the Administrator to the DSIs are not part of an
administrative allocation of power. The power sold pursuant to
those contracts is allocated directly by the statute. Because there
is no administrative allocation of power, there can be no competing
applications. The preference provisions of the Project Act, as
incorporated into the Regional Act, therefore simply do not apply
to the initial contracts that the statute requires the BPA to
offer. [
Footnote 9]
Page 467 U. S. 394
Respondents' argument that power sold to DSIs under the new
contracts is subject to preference implicitly proves too much.
There is nothing in either the rules governing preference or the
Project Act that distinguishes the top quartile of DSI power from
the other three quartiles. Under the 1975 contracts, the difference
between the top quartile and the other quartiles was the provision
in those contracts that made the top quartile subject to
interruption "at any time." That contract term allowed the
Administrator to treat the top quartile of power as if it were
uncommitted, and subjected it to preference. The other three
quartiles were not subject to preference, simply because the terms
of the contracts did not so provide. Thus, the distinction among
the different quartiles under the 1975 contracts was a product of
the terms of the contracts, not a requirement of the Project Act's
preference provisions. There is likewise nothing in the Regional
Act that distinguishes between the top quartile and the other
quartiles for purposes of applying preference when offering the new
DSI contracts. If respondents are correct that the power sold to
the DSIs under the new contracts is subject to preference, then
respondents have preference not only for power in the top quartile,
but for the other three quartiles as well. For as long as that
power is uncommitted, the preference provisions apply. Once
committed by contract, the interruptibility of the power is
determined by the terms of the contract. § 5a, 16 U.S.C. §
832d(a).
It appears, therefore, that respondents' view of the Regional
Act would render meaningless the initial contracts contemplated by
§ 5(d)(1)(B). Respondents' argument is essentially that the
allocation of power under the mandated contracts should be the same
as it would be if the preference rules applied. But Congress
presumably included § 5(d)(1)(B) precisely because it wanted to
achieve an allocation of power that differs from what allocation by
preference
Page 467 U. S. 395
would produce; preference was the perceived problem, not the
chosen solution. [
Footnote
10]
The Administrator's interpretation of the Regional Act also is
supported by § 5(g)(7) of that Act, 16 U.S.C. § 839c(g)(7). That
section "deem[s]" the Administrator "to have sufficient resources
for the purpose of entering into the initial contracts" mandated by
the statute. Through this express legal fiction, Congress ensured
that the initial contracts could not be challenged by a claim that
BPA lacked the power to enter into contracts with nonpreference
customers. Congress clearly intended BPA to offer the DSI contracts
even if that necessitated the acquisition by BPA of additional
power through outside purchases and construction of new generating
facilities. If preference were to apply to the initial contracts,
however, they could be executed only after preference customers
have purchased all the power they desire. Such a condition would be
truly incongruous, for it could require BPA to obtain an almost
unlimited amount of power. When Congress "deemed" the Administrator
"to have sufficient resources for the purpose of entering into the
initial contracts specified" by the Act, it is only sensible to
assume that Congress intended such contracts to be made without
regard to the preference rules that govern sales that are not
statutorily mandated.
Page 467 U. S. 396
B
The legislative history of the Regional Act confirms the
interpretation put forward by BPA and petitioners. That history
shows that Congress paid specific attention to power sales to DSIs,
and consulted BPA on the relationship between those sales and the
broader purposes of the Act. The record gives no indication that
Congress intended the new DSI contracts to have provisions
governing interruptibility that were the same as in the 1975
contracts.
The Committee Reports of both Houses made particular reference
to the DSI contracts and the manner in which those sales would
provide the reserves for the Administrator's other obligations. The
Senate Report contains the following explanation of the section
dealing with DSI sales.
"
The power quality provided the direct-service industries is
determined by the reserve obligations set forth in their contracts
in order to protect service to firm loads of the
Administrator. It is intended that these contracts at least
provide peaking power reserves similar to those provided in the
present contracts, and that the energy reserves shall include a
reserve approximately equal to 25 percent of the direct service
industrial load
to protect firm loads for any reason,
including low or critical streamflow conditions . . ."
(Emphasis supplied). S.Rep. No. 96-272, p. 28 (1979). This
passage flatly contradicts respondents' argument. The first
sentence makes clear that the "quality" of the power provided to
the DSIs is determined by the need to provide reserves to protect
"the firm loads of the Administrator." The sentence is noticeably
devoid of any suggestion that the quality of power is to be the
same as it was under the 1975 contracts. The rest of the passage
reinforces the view that the purpose of the interruptibility
provisions is "to protect firm loads."
Page 467 U. S. 397
The House Report indicates a similar understanding:
"Approximately 25 percent of the DSI load is to be treated as a
firm load for purposes of resource operation, and will provide an
operating reserve that may be restricted by the BPA at any time in
order to protect the Administrator's firm loads within the region
and for any reason, including low or critical streamflow conditions
and unanticipated growth of regional firm loads."
H.R.Rep. No. 96-976, pt. 2, p. 48 (1980). This passage confirms
that DSI sales were to be interruptible "to protect the
Administrator's firm loads." Such a requirement would have little
meaning if, as respondents would have it, the statute also requires
DSI power to be interruptible at any time for any reason.
The source of this language in the House Report is significant.
While the bill was still under consideration, BPA conferred with
the Committee's staff and furnished the Committee with its
understanding of how sales to DSIs would operate. The passage from
the Report quoted above is an almost
verbatim
incorporation of BPA's understanding of the provision.
See
Appendix III to Letter dated Aug.19, 1980, from BPA Administrator
to Rep. Kazen, Chairman, House Subcommittee on Water and Power
Resources, App. to Pet. for Cert. I-23 (discussing the DSI service
under the Regional Act). The legislative history therefore
indicates that BPA consulted with Congress during the consideration
of the Regional Act, and that BPA and Congress shared an
understanding of the terms on which the Administrator would sell
power to DSIs under the Act.
Respondents rely on the legislative history to establish two
points, neither of which is controverted. First, respondents use
the legislative history to demonstrate what § 5(a) already makes
clear -- that the Regional Act does not alter the priority
provisions of the Project Act.
See Brief for
Respondents
Page 467 U. S. 398
Central Lincoln Peoples' Utility District
et al. 23-30.
Petitioners and the Administrator do not contest this point. But
the issue in this case is not whether the preference rules have
been changed; the issue is whether the preference rules apply to
power that the statute requires BPA to sell to DSIs. Because it is
clear that the power sold under the initial contracts is committed
to DSIs by statute, it is equally clear that it is not uncommitted
power to which preference applies.
Respondents' second use of the legislative history is to show
that, under the 1975 contracts, the top quartile of DSI was subject
to preference because it was interruptible "at any time."
Id. at 21-23. This point also is uncontroverted. The issue
in this case, however, is whether the new contracts mandated by the
Regional Act must provide that a portion of DSI power be subject to
interruption "at any time." If so, there is no dispute over whether
preference would apply to that power. But respondents have not
pointed to anything in the Regional Act that requires that the
interruptibility terms of the 1975 contracts be incorporated into
the new contracts.
C
Because the Regional Act does not comprehensively establish the
terms on which power is to be supplied to DSIs under the new
contracts, it is our view that the Administrator has broad
discretion to negotiate them. Such discretion is especially
appropriate in this situation, because DSI sales are merely one
part of a complicated statutory allocation plan designed to achieve
several goals. Most important, sales to DSIs under the Regional Act
are intricately related to the "exchange" program established by
the Regional Act on behalf of nonpreference utilities. § 5(c), 16
U.S.C. § 839c(c).
The exchange program is designed to provide rate relief for
consumers served by IOUs. As noted
supra, the operation of
preference under the Project Act produced an allocation of cheap
federal power that heavily favored public
Page 467 U. S. 399
utilities (preference customers) over private utilities
(nonpreference customers). As a consequence, consumers that lived
in areas served by public utilities enjoyed much cheaper power than
consumers served by IOUs. The exchange program operates to reduce
this disparity. Very briefly, the program consists of an "exchange"
arrangement under which IOUs are allowed to sell power to BPA at
their average system cost, and then purchase from BPA an equal
quantity of cheaper federal power. The benefits to the IOUs under
this program are to be passed on directly to residential
consumers.
Because this exchange program essentially requires BPA to trade
its cheap power for more expensive power, it is obviously a
money-losing program for BPA. The Act expressly contemplates that
much of the cost of this program is to be covered by power sales to
DSIs, which pay a considerably higher price for power than other
users. Section 7(c)(1), 16 U.S.C. § 839e(c)(1), expressly directs
the Administrator initially to charge the DSIs a rate "sufficient
to [cover] the net costs incurred by the Administrator" under the
exchange program. The House Report explained the interrelationship
between sales to DSIs and the exchange program in some detail:
"[The DSIs] will also pay significantly higher rates under the
new contracts. These higher rates permit the Administrator to enter
into contracts with the region's investor-owned utilities for an
exchange of power equal to the utilities' residential load. This
exchange will permit residential customers of investor-owned
utilities to share in the benefits of the lower-cost Federal
resources. The power sold to BPA will be sold at the utilities'
average system cost and purchased back at the rate paid by the
preference customers' utilization [
sic] their general
requirements. The loss in revenue to the Administrator is, in
effect, returned by the higher direct service industry rates. By
providing these residential customers wholesale
Page 467 U. S. 400
rate parity with residential customers of preference utilities,
the amendment serves in a substantial way to cure a major part of
the allocation problem."
H.R.Rep. No. 96-976, pt. 1, p. 29 (1980).
This passage makes clear that the DSI sales and the power
exchange program are integrally related. BPA's ability to finance
the exchange program is related to the amount of power that BPAs
sell to DSIs, which in turn is determined by the interruptibility
terms of the new DSI contracts. It is the responsibility of the
Administrator to manage the complex relationship among these
various aspects of the statute, and, absent an express statutory
statement requiring particular terms in the contracts, it is
appropriate that we give him broad discretion to determine them.
[
Footnote 11]
III
For the foregoing reasons, the judgment of the Court of Appeals
is reversed, and the case is remanded for further proceedings
consistent with this opinion. [
Footnote 12]
It is so ordered.
[
Footnote 1]
Throughout this opinion, the term "respondents" is used to refer
only to those parties who support the Court of Appeals' judgment.
The term does not include the Administrator of BPA and the
Secretary of the Department of Energy, who nominally are
respondents in this case even though they urge reversal of the
judgment below.
[
Footnote 2]
In addition to the three relevant customer categories, BPA is
also authorized to sell power to federal agencies in the region.
See § 5(b)(3) of the Regional Act, 16 U.S.C. § 839c(b)(3).
Sales to such agencies have no pertinency for this litigation.
[
Footnote 3]
Section 3 of the Project Act, 16 U.S.C. § 832b, defines "public
bodies" as "States, public power districts, counties, and
municipalities, including agencies or subdivisions of any thereof."
It defines "cooperatives" as
"nonprofit-making . . . organizations of citizens supplying . .
. members with any kind of goods, commodities, or services, as
nearly as possible at cost."
[
Footnote 4]
Because of the preference accorded public utilities over private
ones, those States that had a relatively large proportion of public
utilities benefited from the federal power more than the States in
which most consumers were served by I0Us. Although 80% of the
consumers in the State of Washington had access to BPA power
because they were served by preference customers, only 20% of the
consumers in Oregon had access to such power.
See Pacific
Northwest Electric Power Supply and Conservation: Hearings on H.R.
9020, H.R. 9664, and H.R. 5862 before the Subcommittee on Water and
Power Resources of the House Committee on Interior and Insular
Affairs, 95th Cong., 1st Sess., pt. 3, p. 9 (1977).
[
Footnote 5]
Under the Project Act, BPA did not have authority to own,
construct, or purchase the output or capability of electricity
generating plants except to meet short-term deficiencies; BPA was
entirely a marketing agency that disposed of power generated at
dams constructed by the Army Corps of Engineers and what was then
called the Bureau of Reclamation (now the Water and Power Resources
Service).
See H.R.Rep. No. 96-976, pt. 2, pp. 26-27
(1980).
[
Footnote 6]
The statute defines "reserves" as "the electric power needed to
avert particular planning or operating shortages for the benefit of
firm power customers. . . ." § 3(17), 16 U.S.C. § 839a(17)
(emphasis added).
[
Footnote 7]
Respondents' discussion of this use of nonfirm power seems to us
to be somewhat less than persuasive. The parties agree that the
direct resale of BPA power by preference customers is prohibited.
Petitioners contend, however, that respondents can and do use
nonfirm federal power to displace their own power, which they can
resell to other users.
See Brief for Petitioners 47; Reply
Brief for Petitioners 18, n. 58. Respondents do not specifically
deny this, and simply emphasize their "other uses" for nonfirm
power and the fact that they use the BPA power to serve their
customers.
See Brief for Respondent Public Power Council
20-21; Brief for Respondents Central Lincoln Peoples' Utility
District
et al. 9, n. 25. We therefore take respondents to
have conceded that they do arbitrage the nonfirm BPA power.
[
Footnote 8]
The House Interior and Insular Affairs Committee Report, for
example, expressly stated that the second quartile under the new
contracts
"will provide a planning reserve to protect the Administrator's
firm loads against the delayed completion or unexpectedly poor
performance of regional generating resources or conservation
measures implemented or acquired by BPA."
H.R.Rep. No. 96-976, pt. 2, p. 48 (1980). The language in this
Report is copied
verbatim from a letter written by the BPA
Administrator to the House Subcommittee explaining how BPA would
serve the DSI load under the Regional Act.
See Appendix
III to Letter dated Aug.19, 1980, from BPA Administrator to Rep.
Kazen, Chairman, House Subcommittee on Water and Power Resources,
App. to Pet. for Cert. I-23. A similar statement is in the Senate
Report. S.Rep. No. 96-272, p. 28 (1979). The second quartile
interruptibility provisions described similarly in all of these
passages differ from those in the 1975 contracts.
The dissent apparently concedes that the second quartile
interruptibility provisions of the new contracts differ from those
in the 1975 contracts,
post at
467 U. S.
403-405, and the dissent is presumably aware of the
legislative history specifically endorsing the new provisions.
Thus, the dissent acknowledges that its interpretation of the
phrase "same amount of power" leads to an inconsistency, but claims
that Congress was not "aware that it was
altering the
interruptibility provisions" (emphasis supplied), apparently
assuming that Congress simply forgot what was in the 1975
contracts. It seems improvident to assume such ignorance on the
part of Congress, not to mention the Administrator of BPA, when
Congress clearly had to focus on the terms of the 1975 contracts in
drafting several aspects of the statute.
[
Footnote 9]
The reliance by respondents and the Court of Appeals on § 10(c)
of the Regional Act, 16 U.S.C. § 839g(c), is similarly misplaced.
Section 10 is entitled "Savings Provisions." The purpose of § 10(c)
was to reassure preference customers in other regions of the
country who feared that the Regional Act -- by statutorily
allocating power directly to nonpreference customers -- would set a
precedent that would weaken the commitment to preference that
exists in other statutes governing the sale of federal power
generated in other regions.
See H.R.Rep. No. 96-976, pt.
1, pp. 34-35 (1980);
cf. 126 Cong.Rec. 29803 (1980)
(remarks of Rep. Udall). That section thus is irrelevant to the
issue in this case.
[
Footnote 10]
To say that the preference provisions do not apply to the
initial set of contracts does not make preference meaningless. As
was the case prior to the Regional Act, preference continues to
govern the allocation of all power that is not committed by
contract. Thus, the preference rules will apply to any subsequent
contracts made with DSIs. Even during the period of the initial
contracts, the preference provisions apply to any surplus power
that exists.
See 16 U.S.C. § 839c(f). Such surplus might
exist, for example, because of especially high annual or seasonal
streamflow fluctuations, or because BPA's power acquisition program
secures additional power faster than BPA's increasing contractual
commitments.
See Mellem, Darkness to Dawn? Generating and
Conserving Electricity in the Pacific Northwest: A Primer on the
Northwest Power Act, 58 Wash.L.Rev. 245, 269-273 (1983).
[
Footnote 11]
In holding that the Regional Act does not require that DSI power
be interruptible to serve the nonfirm power needs of preference
customers, we do not decide whether the Administrator could
negotiate for such a condition if he concluded that it would serve
the purposes of the Act.
[
Footnote 12]
One set of respondents argues that we should affirm the Court of
Appeals' judgment, but narrow its scope.
See Brief for
Portland General Electric Company
et al. Given our
disposition of the case, we necessarily reject that argument.
JUSTICE STEVENS, dissenting.
Section 5(d)(1)(B) of the Pacific Northwest Electric Power
Planning and Conservation Act of 1980, 94 Stat. 2697, provides:
"[T]he Administrator shall offer in accordance with subsection
(g) of this section to each existing direct service
Page 467 U. S. 401
industrial customer an initial long-term contract that provides
such customer an amount of power equivalent to that to which such
customer is entitled under its contract dated January or April 1975
providing for the sale of 'industrial firm power.'"
16 U.S.C. § 839c(d)(1)(B). The critical question in this case is
whether the contracts offered by the Administrator of the
Bonneville Power Administration (BPA) pursuant to the 1980 Act are
for "an amount of power equivalent to" the amount to which the
direct service industrial customers (DSIs) were entitled under
their 1975 contracts.
Under the 1975 contracts, 75 percent of the specified amount of
power was virtually guaranteed; the "top quartile," however, was
subject to interruption at any time to meet the demands of
preference customers. Thus, the actual amount of power delivered
under the 1975 contracts was an amount somewhere between 75 percent
and 100 percent of the amount stated in the contracts. [
Footnote 2/1]
Under the 1980 contracts, 100 percent of the specified amounts
is virtually guaranteed. No longer is the first quartile subject to
interruption at any time. The result of changing the "quality" of
first quartile power is to provide the DSIs with a larger amount of
power than they would have received under the 1975 contracts. That
is plainly inconsistent with § 5(d)(1)(B), which indicates that the
DSIs'
"contracts will provide power in amounts equal to,
but not
greater than, that which these companies are now entitled
under existing contracts with BPA, and the terms of these contracts
will require that these companies
Page 467 U. S. 402
continue to supply reserves for the region."
H.R.Rep. No. 96-976, pt. 2, p. 29 (1980) (emphasis supplied).
[
Footnote 2/2] Thus, the new
contracts do not comply with the plain language of the 1980 Act.
[
Footnote 2/3]
Page 467 U. S. 403
The Court attempts to square its holding with the language of
the statute by drawing a distinction between the "quantity" of
power offered and its "quality." The Court believes that, while §
5(d)(1)(B) requires the same quantity of power to be offered to
DSIs as was offered in 1975, § 5(d)(1)(A) requires that the
"quality" of the power be higher than under the 1975 contracts;
under the 1980 Act, the top quartile of power provided to DSIs is
of a higher "quality," since it can be interrupted only for firm
power loads.
Ante at
467 U. S.
390-391. The proffered distinction between the
"quantity" and "quality" of power is nonexistent, however.
Kilowatts are fungible. Interruptibility is significant not because
it affects the "quality" of power a customer receives, but because
it affects the amount of power a customer receives. Under the
challenged contracts, DSIs receive power that is less freely
interruptible than it was under their 1975 contracts; hence, they
are now entitled to a greater "amount of power" than they were
under their 1975 contracts. That result violates the plain language
of § 5(d)(1)(B).
In the 1981 contracts, the DSIs agreed that the
second
quartile of power would be subject to interruption on two
contingencies that were not applicable to the second quartile
Page 467 U. S. 404
under the 1975 contracts. They therefore argue, and the Court
concludes,
ante at
467 U. S.
390-391, that, since respondents do not object to the
fact that the second quartile under the 1980 contracts is of a
different quality than under the 1975 contracts, respondents must
accept the conclusion that "quality" has a meaning different from
quantity. But it was after the Act was passed that the
Administrator and the DSIs agreed upon a new contract that provided
the DSIs with substantially more first quartile power with a fairly
remote possibility of a lesser amount of second quartile power. The
net result of the trade-off is still to give the DSIs significantly
greater contractual entitlements than they had under the 1975
contracts. Whatever the actual comparison between the second
quartile provisions of the 1975 and 1981 contracts, this argument
tells us nothing about the intent of Congress, since the
legislative history contains no indication that Congress was aware
that it was altering the interruptibility provisions of either the
first or second quartiles. To the contrary, the legislative history
indicates that Congress thought it was not altering the DSIs'
entitlement to power.
See 467
U.S. 380fn2/2|>n. 2,
supra. Moreover, it is
questionable whether the second quartile interruptibility
provisions of the 1980 Act constitute a real difference from the
interruptibility provisions of the 1975 contracts with respect to
that quartile. As the majority explains,
ante at
467 U. S. 392,
n. 8, the 1980 Act anticipated interruption of the second quartile
only because of delayed completion or unexpectedly poor performance
of generating resources or conservation measures. Prior to the 1980
Act, BPA had no authority to acquire or expand its resources; its
function was merely to market power generated at dams constructed
by the Army Corps of Engineers.
See ante at
467 U. S. 386,
and n. 5. Hence, the 1980 Act permits second quartile interruption
only on a basis that
would not have arisen under the 1975
contracts. [
Footnote 2/4] Surely
this relatively insignificant and somewhat
Page 467 U. S. 405
esoteric modification of the second quartile provisions is less
persuasive evidence of congressional intent than the plain language
of the statute itself.
The language of § 5(d)(1)(A) should be of little comfort to the
majority. All it says is:
"The Administrator is authorized to sell in accordance with this
subsection electric power to existing direct service industrial
customers. Such sales shall provide a portion of the
Administrator's reserves for firm power loads within the
region."
16 U.S.C. § 839c(d)(1)(A). [
Footnote
2/5] This subsection makes no reference at all to the "quality"
of power to which DSIs are entitled. If this language was designed
to entitle DSIs to higher "quality" power than they received under
their 1975 contracts, then Congress picked a rather obtuse way of
expressing the idea.
I read the subsection to mean what it says. The sales that the
Administrator makes to the DSIs are part of the reserve for firm
power loads. [
Footnote 2/6] In the
event of a shortfall, the Administrator is obligated to use top
quartile DSI power to meet his firm power obligations, even when
there is a preference
Page 467 U. S. 406
customer seeking to purchase power; in this respect § 5(d)(1)(A)
was necessary to change the law with respect to the rights of
preference customers, which would otherwise have had priority even
over purchasers of firm power. [
Footnote 2/7] But a provision ordering the Administrator
to use top quartile power as a reserve for firm loads sheds no
light on the extent of his obligation to sell power to the DSIs.
That obligation is governed not by § 5(d)(1)(A), but by §
5(d)(1)(B). [
Footnote 2/8]
Because I find nothing in the statute or in its legislative
history to indicate that Congress intended to allocate a greater
amount of power to the DSIs than they were entitled to receive
under their 1975 contracts, I cannot square the Court's holding
with the plain language of the statute . I therefore respectfully
dissent.
[
Footnote 2/1]
Apparently only about two-thirds of the first quartile load was
being delivered to the DSIs during the years preceding the passage
of the 1980 Act.
See App. 36. Thus, it would seem that the
amount of power actually delivered to those customers was
approximately 91 percent of the stated contract amounts.
[
Footnote 2/2]
The passage from the Senate Report quoted by the majority
ante at
467 U. S. 396,
when read in context, is inconsistent with the majority's
conclusion that DSIs have greater protection against interruption
under the 1980 Act than under their 1975 contracts:
"The power quality provided the direct-service industries is
determined by the reserve obligations set forth in their contracts
in order to protect service to firm loads of the Administrator. It
is intended that these contracts at least provide peaking power
reserves similar to those provided in the present contracts, and
that the energy reserves shall include a reserve approximately
equal to 25 percent of the direct service industrial load to
protect firm loads for any reason, including low or critical
streamflow conditions, and an additional energy reserve of
approxiamtely [
sic] the same amount to protect firm loads
against the delayed completition [
sic] or unexpectedly
poor performance of reginal [
sic] generating resources or
conservation measures, and against the unanticipated growth of
regional firm loads. One intended result of these procedures is
that there will be no increase in firm power commitments to the
direct service industrial customs [
sic], except for
technological improvements purposes."
S.Rep. No. 96-272, P. 28 (1980).
When read in light of its last sentence, this paragraph makes it
clear that Congress intended that DSIs have no greater assurance
against interruption than they did under their 1975 contracts.
Moreover, in a rate analysis submitted to Congress by the BPA, it
estimated its projected revenues under the proposed legislation by
assuming that it would continue to interrupt the top quartile of
DSIs' power at the same rate that it had done so in the past,
467
U.S. 380fn2/1|>n. 1,
supra, supplying from 86 to 96
percent of the DSIs' loads, and also anticipated interruptions in
the top quartile in excess of those necessary to protect firm
loads.
See S.Rep. NO. 96-272, at 59.
[
Footnote 2/3]
To the extent that the Court relies on "deference" to the
Administrator's interpretation of the 1980 Act,
ante at
467 U. S. 390,
it must be borne in mind that what is at issue here is the agency's
construction of a statute:
"The interpretation put on the statute by the agency charged
with administering it is entitled to deference, but the courts are
the final authorities on issues of statutory construction. They
must reject administrative constructions of a statute, whether
reached by adjudication or by rulemaking, that are inconsistent
with the statutory mandate or that frustrate the policy that
Congress sought to implement. Accordingly, the crucial issue at the
outset is whether the Court of Appeals correctly construed the
Act."
FEC v. Democratic Senatorial Campaign Comm.,
454 U. S. 27,
454 U. S. 31-32
(1981) (citations omitted).
It is also worth noting that the Administrator's interpretation
of this Act has not been a model of consistency. In the BPA's final
Environmental Impact Statement, issued in December, 1980, it stated
that top quartile DSI power can be interrupted "[a]t any time for
any period for any reason." App. 31. Similarly, in its summary of
its original draft contracts under the 1980 Act, it stated:
"BPA may interrupt a portion of the DSI load, not to exceed 25
percent of the Operating Demand plus the Auxiliary Power, at any
time, for any reason, and for any duration."
Id. at 74.
See also
467
U.S. 380fn2/2|>n. 2,
supra. In light of the lack of
clarity that has characterized BPA's position both before and after
the passage of the 1980 Act, its position surely is not entitled to
so much deference as to override the plain import of the words
Congress enacted.
See General Electric Co. v. Gilbert,
429 U. S. 125,
429 U. S. 143
(1976).
[
Footnote 2/4]
Even if the issue would have arisen under the 1975 contracts, it
is doubtful that the DSIs would have been entitled to second
quartile power in the circumstances in which interruption is
permitted under the 1980 Act; those circumstances most likely would
have given rise to a commercial frustration defense permitting BPA
to interrupt second quartile power to the DSIs.
[
Footnote 2/5]
Section 3(17) of the Act defines "reserves:"
"'Reserves' means the electric power needed to avert particular
planning or operating shortages for the benefit of firm power
customers of the Administrator (A) from resources or (B) from
rights to interrupt, curtail; or otherwise withdraw, as provided by
specific contract provisions, portions of the electric power
supplied to customers."
16 U.S.C. § 839a(17).
[
Footnote 2/6]
The legislative history of § 5(d)(1)(A), of which the Court
makes so much,
ante at
467 U. S.
396-397, does not demonstrate that the statute means
something other than what it says. The passages from the Committee
Reports on the Act quoted by the majority state that the
Administrator must treat the top quartile as a reserve to protect
firm loads. That he has surely done. But it does not speak to
whether that quartile is interruptible to meet the needs of
preference customers.
See also 467
U.S. 380fn2/2|>n. 2,
supra.
[
Footnote 2/7]
Prior to the passage of the 1980 Act, the Ninth Circuit had
construed preference provisions to prohibit the sale of power to a
private customer whenever there is a preference customer willing to
buy it.
See City of Santa Clara v. Andrus, 572 F.2d 660,
670-671 (CA9),
cert. denied, 439 U.S. 859 (1978);
Arizona Power Pooling Assn. v. Morton, 527 F.2d 721,
727-728 (CA9 1975),
cert. denied, 425 U.S. 911 (1976).
[
Footnote 2/8]
In Part II-C of its opinion,
ante at
467 U. S.
398-400, the Court points out that the higher rates
charged to DSIs provide a subsidy for certain consumers served by
investor-owned utilities, implying, I suppose, that it makes good
sense to sell the DSIs more power than they received under the 1975
contracts. If Congress had wanted the Administrator to exploit the
DSI market by increasing the amount of such sales, it should not
have limited their share of the available supply to an "amount of
power equivalent to that to which" DSIs were entitled under the
1975 contracts. And, in fact, the rate analysis submitted by BPA
indicated that it would supply power to DSIs at the same levels as
it did under the 1975 contracts.
See 467
U.S. 380fn2/2|>n. 2,
supra. Rather, the fact that
the Administrator charged higher rates to DSIs after the 1980 Act
became effective is significant only because it explains why §
5(d)(1)(B) did not simply provide that the new contracts would
contain precisely the same terms and conditions as the 1975
contracts. Under the new contracts, the DSIs' entitlement to power
was to be the same as under the old contracts, but the DSIs had to
pay a higher price for it.