Last week, the U.S. Court of Appeals for the Ninth Circuit ordered the Bonneville Power Administration to reconsider whether it should seek recovery of improper payments made to certain Direct-Service Industrial ("DSI") customers. The Court's decision (Industrial Customers of Northwest Utilities v. BPA, 9th Cir. Nos. 11-71368 et al (issued September 18, 2014)) is an important landmark on the long-running battle between Bonneville's competing customer groups over access to low-cost federal hydroelectric resources.
The DSIs are large, energy-intensive industries, primarily aluminum smelters, that receive power directly from Bonneville rather than from a local distribution utility. At one time, the DSIs consumed more than 3,000 average MW of power in the Pacific Northwest, but that load has declined precipitously in recent years, especially after the Enron Crisis of 2000-01 produced a surge in regional power prices. The Northwest Power & Conservation Council expects that the DSIs will consume only about 700 aMW for the foreseeable future. The dispute addressed by the Ninth Circuit arises from the growing economic pressures faced by the DSIs, Bonneville's attempts to ameliorate those pressures, and the resulting burdens on other Bonneville customers, especially Bonneville's preference customers (that is, public utility districts, municipally-owned utilities, rural electric cooperatives, and other publicly-owned utilities that have statutory preference rights to Bonneville power).