                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PACIFIC NORTHWEST GENERATING           
COOPERATIVE; BLACHY-LANE
COUNTY COOPERATIVE ELECTRIC
ASS.; CENTRAL ELECTRIC
COOPERATIVE INC.; CLEARWATER
POWER COMPANY; CONSUMERS
POWER INC.; COOS-CURRY ELECTRIC
COOP., INC.; DOUGLAS ELECTRIC
COOPERATIVE; FALL RIVER RURAL
ELECTRIC COOPERATIVE, INC.; LANE
ELECTRIC COOPERATIVE INC.; LOST
RIVER ELECTRIC COOPERATIVE INC.;
NORTHERN LIGHTS INC.; OKANOGAN
COUNTY ELECTRIC COOPERATIVE
INC.; RAFT RIVER RURAL ELECTRIC            No. 09-70228
COOPERATIVE, INC.; SALMON RIVER             BPA No.
ELECTRIC COOPERATIVE INC.;                 06-PB-11744
UMATILLA ELECTRIC; WEST OREGON
ELECTRIC COOPERATIVE INC.,
                        Petitioners,
ALCOA, INC.; AVISTA CORPORATION;
PUGET SOUND ENERGY, INC.;
PACIFICORP; IDAHO POWER
COMPANY; COLUMBIA FALLS
ALUMINUM COMPANY, LLC,
                       Intervenors,
                v.
BONNEVILLE POWER
ADMINISTRATION; DEPT. OF ENERGY,
                      Respondents.
                                       

                            3269
3270        PACIFIC NORTHWEST GENERATING v. BPA


PUBLIC POWER COUNCIL,                 
                        Petitioner,
AVISTA CORPORATION; PUGET SOUND
ENERGY, INC.; IDAHO POWER
COMPANY; ALCOA, INC.; COLUMBIA
                                           No. 09-70236
                                      
FALLS ALUMINUM COMPANY, LLC,
                      Intervenors,              BPA
                                          No. 06-PB-11744
                v.
BONNEVILLE POWER
ADMINISTRATION; DEPARTMENT OF
ENERGY,
                     Respondents.
                                      

INDUSTRIAL CUSTOMERS   OF                 No. 09-70988
NORTHWEST UTILITIES,                            BPA
                        Petitioner,       No. 06-PB-11744
                v.
                                             ORDER
BONNEVILLE POWER                           AMENDING
ADMINISTRATION,                           OPINION AND
                       Respondent.          AMENDED
                                            OPINION

         On Petition for Review of an Order of the
             Bonneville Power Administration

                  Argued and Submitted
            July 7, 2009—Seattle, Washington

                  Filed August 28, 2009
                 Amended March 2, 2010
             PACIFIC NORTHWEST GENERATING v. BPA               3271
    Before: Raymond C. Fisher and Marsha S. Berzon,
Circuit Judges, and Barry Ted Moskowitz, * District Judge.

                   Opinion by Judge Berzon




  *The Honorable Barry Ted Moskowitz, District Judge for the Southern
District of California, sitting by designation.
3274        PACIFIC NORTHWEST GENERATING v. BPA




                        COUNSEL

Erick Johnson, Lake Oswego, Oregon, for petitioner Pacific
Northwest Generating Cooperative.

Mark R. Thompson, Portland, Oregon, for petitioner Public
Power Council.

Melinda J. Davison, Irion Sanger, Davison Van Cleve, P.C.,
Portland, Oregon, for petitioner Industrial Customers of
Northwest Utilities.

Karin J. Immergut, United States Attorney; Stephen J. Odell,
Assistant United States Attorney; David J. Adler, J. Courtney
Olive, Special Assistant United States Attorneys; Randy A.
Roach, General Counsel; Timothy A. Johnson, Assistant Gen-
eral Counsel, Portland, Oregon, for respondent Bonneville
Power Administration.

Michael J. Uda, Doney Crowley Bloomquist Payne Uda P.C.,
Helena, Montana, for intervenor Columbia Falls Aluminum
Company.
             PACIFIC NORTHWEST GENERATING v. BPA            3275
Michael C. Dotten, Lake Oswego, Oregon, for intervenor
Alcoa Inc.

Jay T. Waldron, William J. Ohle, Sara Kobak, Schwabe Wil-
liamson & Wyatt P.C., Portland, Oregon, for intervenors Paci-
fiCorp et al.


                           ORDER

  The opinion filed on August 28, 2009, and reported at 580
F.3d 828, is amended. The amended opinion filed concur-
rently with this order is substituted in its place.

   With the filing of the amended opinion, the panel has unan-
imously voted to deny the petitions for panel rehearing.
Judges Fisher and Berzon have voted to deny the petition for
rehearing en banc, and Judge Moskowitz so recommends. The
full court has been advised of the petition for rehearing en
banc, and no judge of the court has requested a vote on the
petition for rehearing en banc. Fed. R. App. P. 35(f).

  The petitions for rehearing and the petition for rehearing en
banc are DENIED. No further petitions for rehearing or
rehearing en banc may be filed.


                          OPINION

BERZON, Circuit Judge:

   In Pacific Northwest Generating Coop. v. Dep’t of Energy
(“PNGC”), 550 F.3d 846 (9th Cir. 2008), amended on denial
of reh’g, No. 05-75638, 2009 WL 2386294 (9th Cir. Aug. 5,
2009), this court held invalid a central provision of a five-year
contract between the Bonneville Power Administration
(“BPA”) and the aluminum company Alcoa, Inc. (“Alcoa”).
3276        PACIFIC NORTHWEST GENERATING v. BPA
Less than a month after we issued the PNGC opinion, BPA
announced that it and Alcoa had agreed to an amended ver-
sion of the invalidated provision that would govern the nine-
month period ending September 30, 2009 (the original five-
year contract would have expired in September 2011). Peti-
tioners Pacific Northwest Generating Cooperative (“PNGC”),
Public Power Council (“PPC”), and Industrial Customers of
Northwest Utilities (“ICNU”) challenge BPA’s decision to
execute the amended contract.

   We agree with the petitioners’ challenge and therefore
grant their petitions for review. Although under no obligation
to contract with Alcoa, BPA agreed voluntarily to make a
nearly $32 million cash “benefit” payment to the aluminum
company, so that the company could purchase power from
one of BPA’s competitors. BPA’s justifications for this
unusual transaction, under which the agency received nothing
directly in exchange for its $32 million, do not demonstrate
that the transaction was “consistent with sound business prin-
ciples,” as required by BPA’s governing statutes. We there-
fore hold that BPA exceeded its statutory authority when it
agreed to the Alcoa contract amendment.

                   I.   BACKGROUND

  A.    The PNGC Opinion

   In PNGC, we invalidated a central provision of a five-year
contract (the “2007 Contract”) between the Bonneville Power
Administration and Alcoa, one of BPA’s Direct Service
Industrial (“DSI”) customers. Under the invalidated provision,
BPA had agreed to “sell” power to Alcoa at a mutually
agreed-upon rate, below both the market rate and the statu-
torily authorized Industrial Firm Power (IP) rate. See PNGC,
550 F.3d at 854-58. The provision at issue did not, however,
require BPA to sell physical power to Alcoa. Rather, BPA had
agreed to “monetize” the power sale by making cash “benefit”
payments to Alcoa in an amount approximately equal to the
              PACIFIC NORTHWEST GENERATING v. BPA                   3277
difference between the higher wholesale market rate for
power and the lower contract rate multiplied by the amount of
power consumed by Alcoa each month.1 See id. at 854-55.
The idea was that Alcoa could use the monetary benefit pay-
ments to subsidize its purchase of power on the wholesale
market, such that the aluminum company’s net power costs
would be approximately equal to the agreed-upon contract
rate (assuming that various caps on the monetary benefit were
not triggered). See id.

   We held this monetization provision invalid on the ground
that “[t]he decision to monetize embodied in the agreements
violated [BPA’s] statutory obligation[ ] . . . to provide ‘the
lowest possible rates to consumers consistent with sound busi-
ness principles.’ § 838g.” Id. at 875. We explained:

      In essence, BPA has voluntarily agreed to forgo rev-
      enues by charging the DSIs a rate below what is
      authorized by statute (i.e., the IP rate) and below
      what is available on the open market. These fore-
      gone revenues result in higher rates for all other cus-
      tomers. This outcome is in apparent and direct
      conflict with BPA’s statutory mandate, see § 838g,
      and renders BPA’s decision to “monetize” the DSI
      contracts in an amount reflective of those underlying
      rate decisions — albeit a capped amount — highly
      suspect.

Id.

  We then considered and rejected as “flawed” BPA’s three
  1
   The monetary benefit payments in the 2007 Contract were subject to
several caps. For example, BPA agreed to pay no more than $24/MWh for
each MWh of power that Alcoa consumed. Thus, if the wholesale rate for
power exceeded the agreed-upon rate by more than $24/MWh, Alcoa was
required to pay the overage. For a more thorough discussion of the various
caps and relevant examples, see PNGC, 550 F.3d at 855 & n.11.
3278          PACIFIC NORTHWEST GENERATING v. BPA
proffered justifications for this decision. Id. at 875-78. In so
doing, we noted that “[b]y subsidizing the DSIs’ smelter oper-
ations beyond what it is obligated to do, BPA is simply giving
away money,” id. at 877, and that such an act was “not reflec-
tive of a ‘business-oriented philosophy,’ ” id. at 878 (quoting
Ass’n of Pub. Agency Customers, Inc. v. BPA (“APAC”), 126
F.3d 1158, 1171 (9th Cir. 1997)). We also explained that
“BPA’s authority to sell power to the DSIs does not mean that
BPA may simply give money to the DSIs by calling the agree-
ment a ‘power sale’ with ‘monetized service benefits.’ ”
PNGC, 550 F.3d at 878 (emphasis in original).

   We concluded our discussion of the validity of the mone-
tary benefit provision of the 2007 Contract with the following
summary:

      In sum, BPA has not advanced a “reasonable inter-
      pretation[ ] of its governing statutes” that supports its
      actions. Golden Nw. Aluminum [Inc. v. BPA, 501
      F.3d 1037, 1045 (9th Cir. 2007)]. Nor has the agency
      shown how offering the DSIs rates below the market
      rate and below what it is statutorily authorized to
      offer “further[s] BPA’s business interests consistent
      with its public mission.” Ass’n of Pub. Agency Cus-
      tomers, 126 F.3d at 1171. We conclude that BPA’s
      decision to offer the subsidized rates to the DSIs and
      then monetize those rates is inconsistent with BPA’s
      statutory authority under the NWPA, and therefore
      hold that the monetization provisions of the alumi-
      num contracts are invalid.

Id.

   The PNGC opinion was filed on December 17, 2008. Two
weeks later, on December 31, 2008, BPA sent a letter to its
regional customers and stakeholders, including Petitioners. In
the letter, BPA informed its customers that, in light of the
            PACIFIC NORTHWEST GENERATING v. BPA            3279
PNGC opinion, the agency would cease making monetary
benefit payments to Alcoa.

   The agency also announced a proposed amendment to the
2007 Contract “so that service thereunder will conform to the
[PNGC] Opinion.” The critical change that BPA proposed
was that the parties would begin using the IP rate as the basis
for the monetary benefit calculation, rather than the previous
contract rate (which, as noted, was below the IP rate). BPA
also informed its customers that the amendment would only
govern “sales” to Alcoa from January 1, 2009 through Sep-
tember 30, 2009.

   BPA concluded its letter by providing a web address where
interested parties could view the proposed amended contract.
The agency also stated that it would accept public comments
about the amendment until January 6, 2009, less than a week
later. Although it recognized that it was providing only “a
limited time to comment on the proposed amendment,” the
agency stated that it “believe[d] that it is important to imple-
ment this amendment in a timely manner to avoid, if possible,
any unnecessary interruption of smelter operations, especially
given the difficult economic times and potential loss of addi-
tional jobs in the region.”

  B.    The Amended Contract

  On January 9, 2009, BPA signed the amended contract.
Like the 2007 Contract, the amended contract did not require
BPA to deliver physical power to Alcoa. Instead, BPA once
again agreed to provide a “monetary benefit” to Alcoa, which
Alcoa could then use to offset the cost of purchasing physical
power on the open market.

   Unlike under the previous contract, however, the monetary
benefit in the amended contract is calculated using the IP rate
as the base rate, rather than an agreed-upon rate lower than
the IP rate. More specifically, BPA agreed in the amended
3280          PACIFIC NORTHWEST GENERATING v. BPA
contract to pay Alcoa the difference between a forecasted
market rate for power of $48.05/MWh and the IP rate of
$32.70/MWh — that is, $15.35/MWh — for every megawatt
hour of power purchased by Alcoa on the open market
between January 1, 2009 and September 30, 2009, up to a
total of $31.9 million.2

   BPA announced the execution of the amended contract in
a letter to its customers dated January 13, 2009. In the letter,
BPA explained the reasons for its decision to enter into the
amended agreement:

      BPA decided it was necessary to move quickly to
      implement the amendment and avoid, if possible,
      any unnecessary interruption of smelter operations,
      especially given the difficult economic times and
      potential loss of additional jobs. Alcoa’s announce-
      ment of substantial worldwide layoffs and [Colum-
      bia Falls Aluminum Company’s] announcement of a
      likely plant closure reinforced our view that it was
      important to act quickly. As a consequence, a limited
      amount of time was available for public comment.
      While we would have preferred to afford customers
      more time to comment on the proposed amendment,
      BPA believed it had to move quickly due to the cir-
      cumstances.

      ...

      This amendment is an interim action that applies to
      payments through FY 2009 only. We now have time
      to address the FY 2010-11 period under the 2007
      Block Contract, and will use that time to more thor-
      oughly engage with the public on the terms for any
  2
   The IP rate quoted in PNGC was $45.08/MWh. See PNGC, 550 F.3d
at 857. That rate was for FY2007. The adjusted FY2009 rate is
$32.70//MWh. Petitioners do not dispute the validity of the 2009 IP rate.
             PACIFIC NORTHWEST GENERATING v. BPA            3281
    amendment or replacement agreement for the FY
    2010-11 period.

    BPA understands that it must address the look-back
    issue associated with payments made under the 2007
    Block Contract during the FY 2007-2008 period, and
    intends to engage the region once we have an oppor-
    tunity to consider all these arrangements more thor-
    oughly.

   Two months later, on March 3, 2009, BPA announced that
it had executed a nearly identical amendment to its contract
with a second aluminum DSI, Columbia Falls Aluminum
Company (CFAC). The validity of the amended CFAC con-
tract is not part of this appeal. The announcement of the
CFAC deal is relevant, however, because in that announce-
ment, BPA provided more detailed explanations of its reasons
for entering into the Alcoa contract amendment. Those rea-
sons included the fact that “DSI loads have historically bene-
fitted BPA by taking power in relatively flat blocks that
require little or no shaping; they have taken power from BPA
at light load hours, when power has historically been difficult
to market; and they have provided the Administrator with
additional power reserves.” The agency also averred that
“changing technologies in the aluminum and power industries
may permit DSI smelters to provide value to BPA in ways
that have not yet been imagined.” Thus, the agency con-
cluded, it would be “unwise and imprudent . . . to refuse to
provide service to customers that may provide future value to
BPA as they have done in the past.” BPA also expressed con-
cern about the short-term impact of a refusal to execute the
amended agreement, stating that the “DSIs currently have no
viable alternative for its power needs and a decision not to sell
power to DSIs would almost surely have the immediate con-
sequence of the plants shutting down and perhaps never
resuming production.”

   Finally, the agency acknowledged that the monetary bene-
fits offered to Alcoa and CFAC would result in an increase in
3282         PACIFIC NORTHWEST GENERATING v. BPA
rates for its other customers. It nonetheless concluded that the
contracts were reasonable because the agency did “not believe
that the proposed amendment, which covers only a nine
month period at a relatively modest cost, causes unreasonable
upward pressure on rates.”

  C.   The Current Petitions

   Petitioners PNGC, PPC, and ICNU filed petitions challeng-
ing the validity of the amended contracts on January 22, 2009,
January 23, 2009, and April 6, 2009, respectively. The peti-
tions were consolidated on April 21, 2009, and are the basis
of the current appeal.

                  II.   Standard of Review

   We affirm BPA’s actions unless they are “arbitrary, capri-
cious, an abuse of discretion, or in excess of statutory authori-
ty.” PNGC, 550 F.3d at 860 (quoting Aluminum Co. of
America v. BPA, 903 F.2d 585, 590 (9th Cir. 1989)). “In
determining whether BPA has acted in accordance with law,
we defer to BPA’s reasonable interpretations of its governing
statutes. Golden Nw. Alum. v. BPA, 501 F.3d 1037, 1045 (9th
Cir. 2007); see also PNGC, 550 F.3d at 861.

                        III.   Analysis

   Petitioners maintain that by entering into the amended
Alcoa contract, BPA acted in contravention of its statutory
obligation to provide “the lowest possible rates to consumers
consistent with sound business principles.” In essence, the
Petitioners argue that BPA’s decision to enter into a money-
losing contract that required it to pay up to $31.8 million to
a customer the agency was not obligated to serve “is not a
transaction that a rational business would enter.” The Petition-
ers further assert that BPA’s proffered justifications for the
decision once again fail to establish that the decision was rea-
sonable.
             PACIFIC NORTHWEST GENERATING v. BPA            3283
   BPA defends the validity of the amended contract on three
grounds. First, the agency contends that it “has no indepen-
dent obligation under PNGC to demonstrate that a sale of
power (or monetization of a sale of power) to the DSIs at the
IP rate must also satisfy the sound business principles stan-
dard.” (Emphasis in original.) In BPA’s view, so long as it
offers Alcoa power (or its monetary equivalent) at the IP rate,
it has acted within its statutory authority and complied with
this court’s holding in PNGC. Second, BPA maintains that the
“sound business principles” standard is “so suffused with dis-
cretion that it cannot supply a basis for a justiciable federal
claim because it provides ‘no law to apply.’ ” In other words,
according to BPA, even if the agency has an independent stat-
utory obligation to act in accordance with sound business
principles, any decision it makes pursuant to that obligation
is not reviewable. Finally, BPA asserts that, assuming its deci-
sion to enter into the amended contract is reviewable under
the sound business principles standard, the decision comports
with such principles. We address each of these arguments in
turn.

  A.   BPA has an independent obligation to act in a
       manner consistent with sound business principles.

   BPA’s argument that it need not independently demonstrate
that its decision to sell power to Alcoa at the IP rate was “con-
sistent with sound business principles” hinges on this panel’s
repeated references in PNGC to the agency’s improper deci-
sion to monetize the sale of power to the DSIs at a “rate
below what is authorized by statute (i.e., the IP rate) and
below what is available on the open market.” See PNGC, 550
F.3d at 875. BPA cites the following sentence as particularly
clear evidence of this court’s “narrow and straightforward”
holding:

    Because, by its own admission, BPA is not obligated
    to sell power to the DSIs, its decision to sell power
    voluntarily at a rate below what it is statutorily
3284          PACIFIC NORTHWEST GENERATING v. BPA
      required to offer (i.e., the IP rate) and below what it
      could receive on the open market violates its statu-
      tory mandate to act in accordance with “sound busi-
      ness principles.” See § 838g.

Id. at 873-74. According to BPA, this statement indicates that,
had it used a rate that was equal to the IP rate or the market
rate in the 2007 Contract, it would, by definition, not have
violated its statutory mandate to act in accordance with
“sound business principles.” In short, BPA views its decision
to premise its “benefits” to Alcoa on the IP rate as a kind of
safe harbor that insulates it from a challenge that its decision
to enter into the amended contract was not consistent with
“sound business principles.”

   [1] BPA’s interpretation of PNGC ignores critical aspects
of that opinion and is therefore incorrect. First, the panel in
PNGC agreed with BPA that it has no statutory obligation to
sell power to Alcoa. See id. at 866. Second, the court in
PNGC concluded, and BPA in that case acknowledged, that
the agency is subject to a statutory obligation to act in accor-
dance “with sound business principles.” See id. at 875. Other
panels have similarly recognized that BPA is required by stat-
ute “to operate with a business-oriented philosophy” and have
reviewed BPA’s compliance with this standard. See, e.g.,
Public Power Council, Inc. v. BPA, 442 F.3d 1204 (9th Cir.
2006); APAC, 126 F.3d at 1171; Dep’t of Water & Power of
the City of Los Angeles v. BPA, 759 F.2d 684, 693 (9th Cir.
1985); see also Portland Gen. Elec. Co. v. BPA, 501 F.3d
1009, 1029 (9th Cir. 2007) (noting that BPA is “charg[ed] to
function as a business.”).3

  [2] Given that BPA is not obligated to sell to the DSIs and
  3
   We explain in Part III.B infra, why the “consistent with sound business
principles” standard provides adequate law for a reviewing court to apply,
and also conclude, contrary to BPA’s submission, that no prior case has
held otherwise.
             PACIFIC NORTHWEST GENERATING v. BPA            3285
that its actions are generally reviewable under the “sound
business principles” standard, it follows that a decision by
BPA to enter into a contract with a DSI, like other non-
obligatory contractual decisions made by the agency, see
APAC, 126 F.3d at 1171, must also conform to the “sound
business principles” standard. BPA would surely have to con-
sider the fact that it must offer DSIs the IP rate when deciding
whether to execute a contract with the DSIs. See PNGC, 550
F.3d at 861 (holding that “if the agency chooses to offer firm
power to the DSIs, . . . it must first offer them the IP rate.”).
But the fact that the agency entered into a contract at the IP
rate does not insulate from review its voluntary decision to
enter into the contract in the first place.

   [3] To put it slightly differently, BPA is certainly autho-
rized to sell power to the DSIs at the IP rate. See PNGC, 550
F.3d at 867-73. But that authority, like its authority to enter
into contracts generally, is cabined by its obligation to “oper-
ate with a business-oriented philosophy.” APAC, 126 F.3d at
1169-71 (reviewing BPA’s decision to enter into “Long-Term
Extension Agreements” with the DSIs for the sale of unbun-
dled transmission services); see also PNGC, 550 F.3d at 878
(“BPA’s authority to sell power to the DSIs does not mean
that BPA may simply give money to the DSIs by calling the
agreement a ‘power sale’ with ‘monetized service benefits.’ ”
(emphasis omitted)).

   Intervenor CFAC, another aluminum DSI, argues that this
interpretation of BPA’s governing statutes would render the
IP rate a nullity, because it would never make business sense
for BPA to sell to the DSIs at the IP rate when market rates
exceed the IP rate, and DSIs would never accept the IP rate
when market rates fall below the IP rate. We disagree.

   We can envision several situations in which BPA might
reasonably conclude that a below-market rate sale to the DSIs
is a sound business decision. First, as the court alluded to in
PNGC, BPA’s governing statutes likely require it to offer
3286           PACIFIC NORTHWEST GENERATING v. BPA
power within the Pacific Northwest at established rates before
the agency may sell power outside the region. See PNGC, 550
F.3d at 876 n.35.4 If so, BPA might reasonably enter into a
contract with the DSIs at the IP rate so as to “free up power
to sell outside the Pacific Northwest.” Id.

   Second, BPA has asserted that the physical sale of power
to the DSIs has indirect benefits that might offset a below-
market rate sale. For example, BPA noted in its letter explain-
ing its justifications for the amended contract with CFAC that
“DSI loads have historically benefitted BPA by taking power
in relatively flat blocks that require little or no shaping; they
have taken power from BPA at light load hours, when power
has historically been difficult to market; and they have pro-
vided the Administrator with additional power reserves.”
These and other non-financial benefits to BPA could very
well justify a less-than-market rate sale, but they have no
direct application when, as here, BPA is not in fact physically
selling power to the DSIs.

   Third, a soundly run business might reasonably offer a
large customer a short-term discount with the expectation that
the customer’s future business at higher prices will more than
make up for the short-term loss of revenue. Similarly, a rea-
sonable business might offer a short-term discount to a cus-
tomer in order to diversify its customer base or to offload
unused capacity.

   As these examples illustrate — and they are only examples,
not meant to be exhaustive — a decision by BPA to enter into
a power sale contract with the DSIs at the IP rate, even if the
IP rate is below market rates, could under various circum-
stances be consistent with sound business principles.5 As
   4
     Because the issue is again not before us, we adopt no holding concern-
ing whether BPA’s governing statutes do, in fact, require it to offer power
inside the region at established rates before it may sell power outside the
region.
   5
     If BPA can demonstrate that the decision to sell power to the DSIs at
the IP rate is a sound business one, even where such a sale would require
               PACIFIC NORTHWEST GENERATING v. BPA                   3287
explained below, however, although we review such a deci-
sion by BPA with great deference, see APAC, 126 F.3d at
1171, the decision must still be reasonable and have some
support in the record before the agency at the time the deci-
sion is made.

   [4] In sum, we hold that BPA’s voluntary decision to con-
tract with the DSIs, like its other non-obligatory contractual
choices, must conform to the congressionally imposed
requirement that the agency act in a manner “consistent with
sound business principles.” See 16 U.S.C. §§ 838g;
839e(a)(1); 825s. The mere fact that BPA has chosen to con-
tract with a DSI at the statutorily authorized IP rate does not
insulate the decision to contract from review under the “sound
business principles” standard.6

  B.    The “sound business principles” standard provides
        adequate law to apply.

   BPA next argues that even if its decision to contract with

BPA to incur a short-term loss (either in the form of higher costs or fore-
gone revenues), then the decision to monetize that contract may well be
a sound business decision for the reasons discussed in PNGC. See 550
F.3d at 874-75 (noting, among other things, that “monetization reduces
[BPA’s] financial costs because it circumvents the risk that a customer
will default on payment after power is physically delivered”). There are,
of course, situations in which the decision to monetize would undermine
the validity of BPA’s decision to contract with the DSIs. For example, if,
as here, BPA justifies the underlying sale by citing to benefits that would
accrue to the agency only from the physical sale of power, then the deci-
sion to monetize rather than sell power would likely undercut that justifi-
cation.
   6
     In neither PNGC nor this case did BPA attempt to sell power to the
DSIs at a market rate above the IP rate. We do not decide, nor have we
decided, whether BPA could offer power to the DSIs at a rate above the
IP rate if the agency could demonstrate that offering power to the DSIs at
the IP rate was not consistent with sound business principles. See PNGC,
550 F.3d at 861.
3288          PACIFIC NORTHWEST GENERATING v. BPA
Alcoa is subject to the “sound business principles” standard,
that standard is “so suffused with discretion” that it provides
“no law to apply” and cannot form the basis of our review.7
In forwarding this position, BPA relies on City of Santa Clara
v. Andrus, 572 F.2d 660 (9th Cir. 1978), and Aluminum Co.
of America v. BPA (“Alcoa”), 903 F.2d 585 (9th Cir. 1989),
cases that BPA claims definitively ruled that judicial review
cannot be premised on the “sound business principles” stan-
dard.

   Although we fully acknowledge that actions taken by BPA
in furtherance of its business interests are entitled to particular
deference, see PNGC, 550 F.3d at 860-61, we reject BPA’s
argument that such decisions are unreviewable, for several
reasons.

   [5] First, BPA’s contention that its business decisions are
entirely unreviewable is directly at odds with this court’s pre-
cedent, as well as with a Supreme Court case, United States
v. City of Fulton, 475 U.S. 657 (1986). As already noted, we
have, on multiple occasions, held that actions taken by BPA
in furtherance of its business interests, while owed significant
deference, are nonetheless reviewable. See PNGC, 550 F.3d
at 861, 877-78; APAC, 126 F.3d at 1171; Public Power Coun-
cil, 442 F.3d at 1204; Bell v. BPA, 340 F.3d 945, 948-49 (9th
Cir. 2003); Dep’t of Water & Power, 759 F.2d at 693.

   In APAC, for example, BPA asserted that its decision to
begin “wheeling” non-federal power was a valid exercise of
its “broad [statutory] authority to contract in [its] best busi-
  7
    The Administrative Procedure Act, which governs our review of
BPA’s actions, see 16 U.S.C. § 839f(e)(2), prohibits judicial review of
“agency action[s that are] committed to agency discretion by law.” 5
U.S.C. § 701(a)(2). An agency action is “committed to [its] discretion by
law” where a “statute is drawn so that a court would have no meaningful
standard against which to judge the agency’s exercise of discretion” —
i.e., where it is “drawn in such broad terms that in a given case there is
no law to apply.” Heckler v. Chaney, 470 U.S. 821, 830 (1985).
            PACIFIC NORTHWEST GENERATING v. BPA            3289
ness interests.” APAC, 126 F.3d at 1169. In evaluating this
argument, the court noted that “[t]he statutes governing
BPA’s operations are permeated with references to the ‘sound
business principles’ Congress desired the Administrator to use
in discharging his duties.” Id. at 1171. In the court’s view,
these references provided BPA with “an unusually expansive
mandate to operate with a business-oriented philosophy.” Id.
This “unusually expansive mandate” did not, however, pre-
clude the court from reviewing the agency’s decision for rea-
sonableness. See id. After performing this review, the court
concluded that the BPA’s decision to begin wheeling non-
federal power, a decision that was intended to increase BPA’s
competitiveness in a recently deregulated market, “appear[ed]
reasonable” and was therefore entitled to deference. See id. at
1171.

  In PNGC, BPA likewise argued that its decision to provide
cash payments to the DSIs furthered its statutory mandate to
operate in accordance with “sound business principles.” See
PNGC, 550 F.3d at 877-78. As in APAC, we noted that this
court is “particularly deferential” to BPA when the agency
acts in furtherance of its business interests. Id. at 861. We
nonetheless held that BPA’s conclusion that a specific action
was consistent with “sound business principles” was review-
able for reasonableness. See id.

   BPA’s assertion that the “sound business principles” stan-
dard is too vague to support review is also undermined by our
decision in Public Power Council. In that case, we expressly
relied on the “sound business principles” standard to review
a decision by BPA to revise upward its previously approved
wholesale power rates. Public Power Council, 442 F.3d at
1209-11. Ultimately, we concluded that “[i]n light of [the]
eximious reasons for BPA’s [acting] in the way it did, we are
not able to say that BPA failed to proceed in accordance with
‘sound business principles.’ ” Id. at 1210. Although we
affirmed BPA’s actions in Public Power Council, our holding
clearly indicates that we did not find the “sound business prin-
3290        PACIFIC NORTHWEST GENERATING v. BPA
ciples” standard too indeterminate to support any review,
however deferential.

   Finally, in Bell, we reviewed BPA’s decision to buy out its
contractual obligations to supply suddenly high-cost power to
DSIs at uneconomically low prices during a recent energy cri-
sis. See Bell, 340 F.3d at 948-49. The court concluded that
“BPA’s decision to amend its contract obligations was emi-
nently businesslike, given the probably devastating result of
performing the original contract . . . .” Id. at 949. The court
therefore refused to “second-guess the wisdom of BPA’s win-
ning business decision[ ], especially when it was responding
to unprecedented market changes.” Id. Implicit in this hold-
ing, however, is an assumption that the court would “second-
guess” an action by BPA that was not “eminently business-
like.” See also Dep’t of Water, 759 F.2d at 693 (citing 16
U.S.C. § 839e(a)(1)’s requirement that rates “be designed
consistent with sound business principles” and holding that,
as a result of this and other legislative requirements, a deci-
sion by BPA to implement a policy designed to mitigate reve-
nue shortfalls was “not only statutorily authorized but
statutorily mandated”).

   [6] As these cases demonstrate, the law of this circuit is
clear: when Congress imposed a duty on BPA to operate in
accordance with “sound business principles,” see APAC, 126
F.3d at 1171, it imposed a requirement that was capable of
supporting review.

   Our approach in all these cases, like our holding in this
case, is consistent with the Supreme Court’s approach in City
of Fulton to review under a different statute containing
“sound business principles” language. In City of Fulton, the
Supreme Court held that Section 5 of the Flood Control Act
imposed a statutory obligation on the Secretary of Energy to
“protect consumers by ensuring that power is sold ‘at the low-
est possible rates . . . consistent with sound business princi-
ples.’ ” 475 U.S. at 667-68 (quoting United States v. Tex-La
            PACIFIC NORTHWEST GENERATING v. BPA            3291
Elec. Cooperative, Inc., 693 F.2d 392, 399-400 (5th Cir.
1982)). The Court then reviewed an action by the Secretary
for consistency with that standard, ultimately affirming the
Secretary’s action on the ground that the action was “reason-
able” and “well suited” to meeting this obligation. See id. at
668. So, the Supreme Court, too, has recognized that “consis-
tent with sound business principles” language provides a
reviewable standard.

   [7] Second, precedent aside, there is no basis for conclud-
ing that this is one of the “rare instances” where a statute is
“drawn in such broad terms that in a given case there is no
law to apply.” Heckler v. Chaney, 470 U.S. 821, 830 (1985)
(quoting Citizens to Preserve Overton Park v. Volpe, Inc., 401
U.S. 402, 410 (1971)). The statutory requirement that BPA
operate in a manner “consistent with sound business princi-
ples” is at least as specific as other statutory mandates held
sufficient to permit judicial review.

   For example, Keating v. FAA, 610 F.2d 611 (9th Cir. 1979),
held that an FAA Administrator’s decision was reviewable
where the relevant statute required that the decision be made
“in the public[‘s] interest.” See id. at 612. Similarly, City of
Los Angeles v. U.S. Dep’t. of Commerce, 307 F.3d 859 (9th
Cir. 2002), determined that a statute requiring the Secretary of
Commerce to use statistical sampling “if he considers it feasi-
ble” provided a meaningful standard for the court to review
the Secretary’s decision not to use sampling. See id. at 869
n.6; see also Barber v. Widnall, 78 F.3d 1419, 1423 (9th Cir.
1996) (holding a decision of the Secretary of the Air Force
not to correct a military record reviewable where the govern-
ing statute allowed the Secretary to make a correction “when
the Secretary considers it necessary to correct an error or
remove an injustice”). And, of course, it is well-established
that courts may review FERC’s determination that a given
electricity rate is “just and reasonable.” See Morgan Stanley
Capital Group Inc. v. Pub. Util. Dist. No. 1 of Snohomish
County, 128 S. Ct. 2733, 2738 (2008); see also E.& J. Gallo
3292        PACIFIC NORTHWEST GENERATING v. BPA
Winery v. Encana Corp., 503 F.3d 1027, 1039 (9th Cir. 2007).
If we may review whether a decision was “in the public’s
interest” or whether a particular act was “feasible” or “just
and reasonable,” we can certainly review whether an action is
“consistent with sound business principles.”

   Moreover, courts routinely review the rationality of busi-
ness decisions in other contexts. For example, under the com-
mon law “business judgment rule,” courts are required to
defer to business decisions made by a corporation’s board of
directors, unless “the directors[, among other things,] act in a
manner that cannot be attributed to a rational business pur-
pose.” Brehm v. Eisner, 746 A.2d 244, 264 n.66 (Del. 2000);
see also Navellier v. Sletten, 262 F.3d 923, 946 (9th Cir.
2001) (affirming district court’s formulation of the business
judgment rule as requiring a director to “[r]ationally believe
that the [director’s] business judgment is in the best interest
of the corporation”).

   Even more relevantly, the Sixth Circuit, in interpreting a
statutory directive very similar to the statutory requirements
at issue here, concluded that there was sufficient law to apply.
See McCarthy v. Middle Tenn. Elec. Membership Corp., 466
F.3d 399 (6th Cir. 2006). In McCarthy, the Sixth Circuit held
that an electric cooperative’s decision to incur “non-necessary
expenses,” if proven true, would “clear[ly]” violate the coop-
erative’s statutory duty under Tennessee law to provide its
“members with electricity ‘at the lowest cost consistent with
sound business principles.’ ” Id. at 410 (citing Tenn. Code
Ann. § 65-25-203).

   The statute at issue in Rank v. Nimmo, 677 F.2d 692 (9th
Cir. 1982), which was found not to provide law to apply, pro-
vides a useful contrast to the statutes held to permit review in
the cases just surveyed. In Rank, the relevant statute provided
that “the Administrator [of the Veterans Administration] may,
at the Administrator’s option,” accept assignment of a veter-
an’s loan. See id. at 699-700. According to the court, Con-
            PACIFIC NORTHWEST GENERATING v. BPA            3293
gress’s use of “the precatory ‘may’ ” and of the phrase “at the
Administrator’s option” made “clear that Congress intended
to vest the widest discretion possible in the Administrator.”
Id. The Administrator’s decision to accept or reject assign-
ment of a loan was therefore unreviewable. See id.

   [8] No such precatory language existed in the statutes in the
cases we have reviewed, and none exists in the statutes gov-
erning BPA’s conduct in this case. Section 838g, for instance,
states that BPA “shall” fix and establish rates in a manner
consistent with “sound business principles.” 16 U.S.C.
§ 838g; see also 16 U.S.C. § 839e(a)(1) (stating that “rates
shall be established . . . in accordance with sound business
principles”) (emphasis added). Moreover, unlike in Rank,
BPA’s governing statutes do not evince an intention on Con-
gress’s part to vest BPA “with the widest discretion possible,”
by referring to BPA’s “option” or “choice” or similar lan-
guage. To the contrary, by requiring BPA to act in a pre-
scribed manner — i.e., in a manner that “accord[s] with sound
business principles” — Congress clearly intended to limit
BPA’s discretion to a degree.

   Finally, BPA is incorrect in maintaining that City of Santa
Clara and Alcoa held that the “sound business principles”
standard is so vague that it provides no law to apply. Those
cases held instead that a congressional directive to sell power
“in such a way as ‘to encourage the most widespread use
thereof’ ” was “too vague and general” to provide applicable
law. See City of Santa Clara, 572 F.2d at 668; Alcoa, 903
F.2d at 599. Neither case directly precluded reviewability
under the “sound business principles” standard at issue here,
and neither can be fairly taken to have done so by implication
— particularly in light of the already surveyed precedents to
the contrary.

   In City of Santa Clara, the petitioners argued that certain
decisions made by the Secretary of the Interior violated Sec-
tion 5 of the Flood Control Act of 1944. See City of Santa
3294          PACIFIC NORTHWEST GENERATING v. BPA
Clara, 572 F.2d at 667. Section 5 requires the Secretary to
“transmit and dispose of [surplus energy from reservoir proj-
ects] in such manner as to encourage the most widespread use
thereof at the lowest possible rates to consumers consistent
with sound business principles.” 16 U.S.C. § 825s. We
refused to review the decision, holding that the statute’s
“widespread use” requirement was too vague to support judi-
cial review. See City of Santa Clara, 572 F.2d at 668. As we
explained,

    The Flood Control Act’s directive to market power
    in such a way as to “encourage the most widespread
    use thereof” could be interpreted in many different
    ways, such as to require that power be sold to as
    many different preference entities as possible,
    thereby fostering the most widespread geographic
    use of the power, or to mandate sale of the power to
    those preference entities whose customers present
    the most diversified mix of agricultural, industrial or
    residential users, or to require sale of federal power
    to those preference entities which serve the largest
    number of ultimate consumers.

       Clearly, the “most widespread use” standard is
    susceptible of widely divergent interpretations. As
    we said of another law in Strickland v. Morton,
    supra, “(t)he provisions of this statute breathe discre-
    tion at every pore.” 519 F.2d at 469. The statute per-
    mits the exercise of the widest administrative
    discretion by the Secretary. It does not supply “law
    to apply.”

Id. at 668.

   As the above quoted passage reveals, the court in City of
Santa Clara considered only whether the “widespread use”
clause provided law to apply; it did not address the “sound
business principles” clause. In this case, we are concerned
               PACIFIC NORTHWEST GENERATING v. BPA                     3295
solely with the “sound business principles” standard, a stan-
dard that “permeate[s]” BPA’s governing statutes. See APAC,
126 F.3d at 1171 (citing 16 U.S.C. §§ 825s, 838g,
839e(a)(1)); see also 16 U.S.C. § 839f(b) (“[T]he Administra-
tor shall take such steps as are necessary to assure the timely
implementation of this chapter in a sound and businesslike
manner.”). City of Santa Clara’s holding is therefore not
applicable here.8

  For similar reasons, this court’s holding in Alcoa is inappli-
cable. In Alcoa, the petitioners asserted that BPA had violated
section 7(k) of the Regional Act when it established certain
  8
    Even if City of Santa Clara’s holding was on point, that holding may
no longer be good law. City of Santa Clara predates both Heckler v.
Chaney, 470 U.S. 821 (1985), and Webster v. Doe, 486 U.S. 592 (1988).
In those cases, the Supreme Court clarified “what it means for an action
to be ‘committed to agency discretion by law.’ ” Webster, 486 U.S. at 599.
In doing so, the Supreme Court emphasized that the “committed to agency
discretion” exception to judicial review is a “very narrow exception.” See
Heckler, 470 U.S. at 830.
   Consistent with the emphasis in Heckler and Webster on the extreme
narrowness of the “committed to agency discretion” exception, the
Supreme Court in City of Fulton substantively reviewed the actions of the
Secretary of Energy under the part of Section 5 of the Flood Control Act
at issue in City of Santa Clara. 475 U.S. at 667-68. Although the Court
did not specifically reference the “widespread use” phrase of Section 5, it
did cite the “lowest possible rates” phrase that immediately follows, and
is logically linked to, the “widespread use” language. See id. (holding that
Section 5 requires the Secretary “to protect consumers by ensuring that
power is sold ‘at the lowest possible rates . . . consistent with sound busi-
ness principles.’ ”); 16 U.S.C. § 825s (“[T]he Secretary of Energy [shall
dispose of surplus energy from reservoir projects] in such manner as to
encourage the most widespread use thereof at the lowest possible rates to
consumers consistent with sound business principles.”). Unlike the court
in Santa Clara, the Supreme Court did not conclude that Section 5’s “most
widespread use” and “lowest possible rates” directives rendered the entire
statutory section “so imprecise that its interpretation requires a profound
exercise of discretion.” See City of Santa Clara, 572 F.2d at 668 (quota-
tion marks and citations omitted). To the contrary, it reviewed the Secre-
tary’s decision for compliance with Section 5’s statutory mandates
generally.
3296         PACIFIC NORTHWEST GENERATING v. BPA
rates for non-firm power. See Alcoa, 903 F.2d at 599. Section
7(k) requires BPA to establish nonfirm energy rates in accor-
dance with a number of statutory provisions, including
§ 838g. See 16 U.S.C. § 839e(k). Reviewing the various statu-
tory provisions, the court in Alcoa concluded that section 7(k)
“require[s] that BPA rates for nonfirm energy be drawn:

    1. having regard to the recovery of the cost of gener-
    ation and transmission of such electric energy;

    2. so as to encourage the most widespread use of
    Bonneville power;

    3. to provide the lowest possible rates to consumers
    consistent with sound business principles; and

    4. in a manner that protects the interests of the
    United States in amortizing its investments in the
    projects within a reasonable period.”

Alcoa, 903 F.2d at 590-91.

   The court then addressed the question “whether there is law
to apply here to the four standards section 7(k) incorporates.”
Id. at 599. Citing City of Santa Clara, the court noted that
“the ‘widespread use’ requirement provides BPA with . . . so
much discretion that there is no law to apply.” Id. The court
nonetheless held that there was law to apply overall because
the first and fourth standards “limit[ed] BPA’s discretion” to
set nonfirm energy rates. Id. It was careful to note that “[t]his
conclusion does not conflict with City of Santa Clara, because
these two standards were not present in that case.” Id.
Although the court in Alcoa did not apply the “consistent with
sound business principles” standard, it did not state that the
standard provided no law to apply. Nor was there any need for
               PACIFIC NORTHWEST GENERATING v. BPA                     3297
the case to address that standard, as the court held that other
standards set forth in section 7(k) provided adequate law.9

   [9] In sum, neither City of Santa Clara nor Alcoa addressed
the reviewability of the standard at issue here. As a result, nei-
ther decision controls the outcome of this case.

   [10] For all the reasons noted above, we hold that the
“sound business principles” standard incorporated in BPA’s
governing statutes is sufficiently specific to support judicial
review and does not indicate that Congress “committed to
agency discretion” decisions concerning compliance with that
statutory requirement.

  C.    BPA’s decision to enter into the amended contract
        does not conform with “sound business principles.”

   Having determined that the “consistent with sound business
principles” standard provides adequate law to apply, we next
turn to the question whether, as the agency maintains, its deci-
sion to enter into the amended contract conforms with that
statutory mandate. In resolving this issue, we are “particularly
deferential” to “the agency’s assessment of whether its actions
‘further BPA’s business interests consistent with its public
mission.’ ” PNGC, 550 F.3d at 861 (quoting APAC, 126 F.3d
at 1171). We may only set aside such an assessment if it is
unreasonable, meaning that it is “contrary to clear congressio-
nal intent or that [it] frustrate[s] the policy Congress sought
  9
     Noting that Alcoa stated in passing that “this ‘widespread use’ standard
[ ] incorporates two of the four standards BPA must use,” Alcoa, 903 F.2d
at 599, BPA posits that we must have been including the “sound business
principles” standard as one of the two standards, and so must also have
meant to include that provision in the earlier statement that “the ‘wide-
spread use’ requirement provides BPA with . . . so much discretion that
there is no law to apply.” Id. This chain of inferences is simply too thin
to constitute a holding, particularly about an issue, the impact of the
“sound business principles” standard, that was not necessary to the court’s
conclusion that the relevant agency action was reviewable.
3298         PACIFIC NORTHWEST GENERATING v. BPA
to implement.” See Biodiversity Legal Found. v. Badgley, 309
F.3d 1166, 1175 (9th Cir. 2002); see also Kaiser Aluminum
& Chem. Corp. v. BPA, 261 F.3d 843, 848-49 (9th Cir. 2001)
(noting that this court does not defer to BPA’s construction of
its governing statutes where BPA’s interpretation is “inconsis-
tent with statutory mandates, or [contravenes] the statutory
policy Congress intended to implement.”).

   Although we do not reject BPA’s views of its statutory
authority lightly, we are compelled to do so here. Congress
intended BPA to conduct its affairs in a “sound and business-
like manner.” See 16 U.S.C. § 839f(b). That mandate requires
BPA to operate in “a manner consistent with sound business
principles.” See supra Section III.A; see also 16 U.S.C.
§ 838g; PNGC, 550 F.3d at 875. For the reasons discussed
below, the agency’s decision to pay Alcoa up to $32 million
cannot be squared with this clear congressional directive. As
a result, we hold that the agency’s conclusion that it had the
statutory authority to enter into the Alcoa amendment was not
reasonable. See Biodiversity Legal Found., 390 F.3d at 1175
(holding that an agency’s interpretation of its governing stat-
utes is unreasonable if it is “contrary to clear congressional
intent or . . . frustrate[s] the policy Congress sought to imple-
ment”).

   [11] Like its decision to enter into the initial contract,
BPA’s agreement to the Alcoa contract amendment is, on its
face, a “highly suspect” one. See PNGC, 550 F.3d at 875. The
amended contract requires BPA to pay Alcoa up to almost
$32 million over a nine month period. BPA is to receive noth-
ing in return. In essence, then, BPA has agreed to provide a
non-obligatory gift of up to $32 million. The agency con-
cedes, as it did in PNGC, that its decision to provide this vol-
untary gift will lead to higher rates for its other customers. See
id. Given that BPA was under no obligation to contract with
Alcoa, let alone to pay it over $30 million in cash, and that
the amended contract will inevitably lead to higher prices for
all other customers, BPA’s decision raises serious questions
               PACIFIC NORTHWEST GENERATING v. BPA                     3299
concerning compliance with its statutory obligation to main-
tain “the lowest possible rates to consumers consistent with
sound business principles.” 16 U.S.C. § 838g; see PNGC, 550
F.3d at 875; see also McCarthy, 466 F.3d at 410 (“If the
Cooperatives failed to maintain records and spent their money
on non-necessary expenses, it is clear that they were not act-
ing in accordance with their statutory purpose of providing
their members with electricity ‘at the lowest cost consistent
with sound business principles.’ ”).10

   [12] Moreover, the amended contract requires Alcoa to use
the $32 million to purchase power from BPA’s competitors
(because BPA itself is not selling physical power to Alcoa).
In other words, BPA has effectively agreed to subsidize the
operations of its competitors, competitors who, in the past,
have not hesitated to take business away from BPA. In Kaiser
Aluminum, for instance, the court noted that, as the wholesale
price for power in the Northwest began to drop in the mid-
1990s, competition for the DSIs’ business increased substan-
tially, and “[m]any DSIs were considering offers from alter-
native power suppliers at prices below BPA’s rates.” 261 F.3d
at 846. In response, BPA was forced to amend its long-term
contracts with the DSIs by adjusting rates downward. See id.
  10
     We agree with BPA that if the agency’s decision to incur the $32 mil-
lion expense at issue here was valid, it could lawfully include that cost in
the rates it charges its preference customers. See Golden Nw. Aluminum,
Inc. v. BPA, 501 F.3d 1037, 1045 (9th Cir. 2007) (holding that “nothing
in [the relevant section of the Northwest Power Act] precluded BPA from
considering the costs of [resources needed to service valid contracts with
the DSIs] when calculating its preference rate, even though BPA would
not have incurred such costs absent its DSI contracts”). In Golden North-
west, however, unlike in this case, petitioners had not filed a timely chal-
lenge to the validity of the DSI contracts that generated the costs at issue.
See id. at 1044-45. As a result, the court was required “to take[ ] the exis-
tence of BPA’s contractual obligations to its DSI customers as given.” Id.
at 1045.
  In this case, petitioners have filed a timely challenge to the underlying
contract. Thus, we are required to address the preliminary issue that the
court in Golden Northwest took as given.
3300           PACIFIC NORTHWEST GENERATING v. BPA
   [13] At the present time, wholesale market rates are sub-
stantially higher than both the PF rate and the IP rate. BPA’s
competitors are therefore at a price disadvantage and cannot
put direct pressure on BPA to lower its prices. BPA’s deci-
sion, during a time of relative competitive advantage, to trans-
fer $32 million to these competitors would not appear to make
sound business sense.11

   BPA nonetheless argues that the decision to execute the
amendment “advances [its] business interest in numerous
respects.” First, the agency maintains that the amendment was
necessary to avoid “any unnecessary interruption of smelter
operations, especially given the difficult economic times and
potential loss of additional jobs.” This justification is essen-
tially identical to one we rejected as invalid, while sympathiz-
ing with its humanitarian goals, in PNGC. 550 F.3d at 877-78.
In PNGC, BPA had attempted to justify the monetization pro-
vision of the 2007 Contract, in part, on the ground that the
“monetary benefits” were necessary to ensure the continued
operation of the aluminum smelters and to protect “DSI jobs.”
Id. We held that this goal, while “laudable,” was “simply not
reflective of a ‘business-oriented philosophy.’ ” Id. at 878.
We also noted that BPA’s counsel had conceded at oral argu-
ment that “[i]t’s not Bonneville’s responsibility to ensure that
[the DSIs] exist.” Id. at 877 n.36 (alterations in original); see
also Envtl. Def. Ctr., Inc. v. EPA, 344 F.3d 832, 858 n.36 (9th
Cir. 2003) (noting that an agency action should be set aside
where, among other things, the agency “has relied on factors
which Congress has not intended it to consider”) (citing
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.
  11
     Petitioners also maintain that BPA’s decision to enter into the
amended contract was not consistent with sound business principles
because the agency did not first seek a refund of funds it improperly paid
to Alcoa pursuant to the 2007 Contract. As BPA notes, however, there is
a significant possibility that the DSIs do not owe BPA a refund. See infra
Part IV. Given this possibility, the agency’s failure to seek a refund before
entering into the amended contract does not, standing alone, render the
decision unreasonable.
             PACIFIC NORTHWEST GENERATING v. BPA            3301
Auto. Ins. Co., 463 U.S. 29, 43 (1983)). For these same rea-
sons, BPA’s first justification does not demonstrate that the
agency’s decision to enter into the amended contract was a
reasonable business decision.

   Second, BPA asserts that the monetary benefit payments
were necessary to assure the continued existence of the DSI
load, and that that was important because “[t]he DSI load has
provided enormous value to BPA in the past and it is reason-
able to believe that it will do so again.” As evidence of the
past value that DSIs have provided, BPA cites the fact that the
DSIs purchased “relatively flat blocks” of power, accepted
power at “light load hours,” and provided BPA with addi-
tional power reserves.

   There are several problems with this rationale. First, it
comes fairly close to another justification that the panel
rejected in PNGC: BPA’s “historic relationship with the DSIs
[and] the important role the DSIs played in the development
of the [federal power systems].” PNGC, 550 F.3d at 877 (sec-
ond alteration in original).

   Second, the primary examples of the DSIs’ value to the
agency that BPA cites result from the sale of physical power
to the DSIs. Because BPA will not provide Alcoa with physi-
cal power under the amended contract, BPA will not receive
those benefits from Alcoa, at least in the short term. See Envtl.
Def. Ctr., Inc., 344 F.3d at 858 n.36 (stating that an agency’s
determination is not entitled to deference where the agency’s
explanation for its conclusion is “implausible”).

  BPA asserts that its decision to monetize the contract
amendment was a sound business one because “monetization
[has] certain obvious risk management benefits.” These risk
management benefits include eliminating both “the risks [to
BPA] associated with making the relatively large wholesale
market power purchases [at fluctuating prices] BPA would be
required to undertake . . . to serve Alcoa’s current operating
3302        PACIFIC NORTHWEST GENERATING v. BPA
load” and the risk that Alcoa would be unable to pay for phys-
ical power that BPA delivered.

   [14] Although we do not doubt that monetization provides
these benefits, BPA’s decision to monetize cannot, on its own,
justify the Alcoa contract amendment, for three reasons. First,
monetizing a contract only makes sound business sense if the
underlying contract is a sound one. For the reasons we discuss
above, BPA could not reasonably have concluded that its
decision to sell power to Alcoa, and thereby incur a $32 mil-
lion loss, was “consistent with sound business principles.” If
anything, the agency’s decision to monetize highlights the
fact that the contract amendment amounts to no more than a
$32 million gift to Alcoa.

  Second, BPA attempted to justify the contract amendment
by citing to benefits that had previously accrued to the agency
when it sold physical power to Alcoa and the other DSIs. By
monetizing the contract, BPA undermined this justification.

   Third, the very reasons BPA provided for its decision to
monetize the contract — reducing the significant risk of non-
payment by Alcoa and eliminating the market risks that BPA
would face if it sold physical power to Alcoa — underscore
the unreasonableness of BPA’s belief that Alcoa will provide
future benefits to the agency that will offset the current $32
million cash payment. The agency does not explain why,
given that the risks of selling power to Alcoa are currently so
significant that the agency would rather give the company
money to purchase power from a competitor than deliver
power to the aluminum company itself, it reasonably believes
that the risks will be less significant in the future or that
Alcoa’s financial situation will improve.

   [15] The fourth, and perhaps most important, problem with
BPA’s contention that Alcoa will provide future benefits to
the agency that will offset the $32 million that BPA voluntar-
ily agreed to pay the aluminum company is that the agency’s
             PACIFIC NORTHWEST GENERATING v. BPA               3303
assertion is without any analytic or evidentiary support. For
example, BPA has not quantified the monetary value of the
past benefits that the DSIs provided. Nor has the agency ana-
lyzed how likely it is that Alcoa (either directly or indirectly
through its employees) will be able to provide benefits in the
future, when the aluminum company will provide these pro-
posed benefits, and how much those benefits will be worth.
Perhaps voluntarily paying $32 million to help ensure Alcoa’s
viability at the expense of other customers will lead to higher
revenues or lower costs for BPA in the future. BPA, however,
has not demonstrated that it has any basis for believing that
it will. In short, neither the record in this case nor the record
in PNGC contains any financial or other business analysis or
evidence to support the agency’s assertion that future benefits
to the agency are (a) likely or (b) sufficiently large to make
the decision to give $32 million away a sound business deci-
sion. See Envtl. Def. Ctr., Inc., 344 F.3d at 858 n.36 (no defer-
ence is due an agency’s conclusion where the agency
“entirely failed to consider an important aspect of the prob-
lem”).

   Moreover, the information that the administrative record
does contain would lead a rational observer to conclude that
Alcoa is not particularly likely to provide significant future
benefits to the agency. All of the parties agree that the total
DSI load has been steadily declining for many years and now
accounts for a relatively small percentage of BPA’s power
sales. Admin. Record at 76 (“[T]he aggregate DSI load has
decreased substantially over the past decade due to adverse
global aluminum market forces . . . .”). According to figures
available on BPA’s website, DSI load accounted for 630
aMW, or less than 3%, of BPA’s firm power load in 2008,
down from 3150 aMW in the early 1990s. See also APAC,
126 F.3d at 1164.12 BPA also asserted, in its letter to constitu-
  12
   See Bonneville Power Administration, 2007 Pacific Northwest Loads
& Resource Study 37 (2007), available at: http://www.bpa.gov/
power/pgp/whitebook/2007/Summary_Document_2007_White_Book.pdf
3304         PACIFIC NORTHWEST GENERATING v. BPA
ents, that Alcoa’s aluminum smelter might close down for
good if the agency failed to make even a single monthly mon-
etary benefit payment. But the agency further noted, in the
preamble to the contract amendment itself, that there was “un-
certainty that Alcoa will continue operating at existing levels”
during the nine-month amendment period even with the bene-
fit of the agency’s monetary payment. Given that the only
information in the record shows that DSI load has been stead-
ily declining for years and that the current health of the alumi-
num smelting industry is precarious at best, BPA could not
reasonably have concluded that Alcoa will be healthy enough
in the future to provide sufficient benefits to BPA to compen-
sate for the tens of millions of dollars that the agency is now
giving away. See Envtl. Def. Ctr., Inc., 344 F.3d at 858 n.36
(noting that an agency’s decision is not entitled to deference
where the agency “offer[s] an explanation for its decision that
runs counter to the evidence before the agency”). It may be
that DSI demand has fluctuated significantly in the past and
that the recovery of the aluminum industry can be reasonably
anticipated. But nothing in the record of this case or the ear-
lier one, aside from BPA’s conclusory assertions, suggests as
much.

   In sum, had BPA at any point performed a reasonable busi-
ness analysis of its decision to offer one of its customers a $32
million cash payment which the customer was required to
spend on services provided by one of BPA’s competitors, we
may well have deferred to its business judgment. But the
agency has not done so, and so has failed to demonstrate that
it had any basis for concluding that its decision to incur a non-
obligatory expense of almost $32 million was a sound busi-
ness judgment.

   As a final justification for the amendment, BPA asserts that
“[t]he Alcoa Amendment is nothing more than a temporary
solution while BPA and the region engage in a further admin-
istrative process to more fully respond to PNGC.” According
to the agency, the short-term nature of the amendment, com-
            PACIFIC NORTHWEST GENERATING v. BPA          3305
bined with the agency’s need to act quickly, renders its deci-
sion to enter into the amendment a sound business judgment.

   This rationale is the most plausible of those BPA offers.
But even assuming that exigent circumstances could render
reasonable BPA’s decision to spend millions of dollars it was
not obligated to spend, BPA has not established in the record
— even barely — that such exigent circumstances exist. BPA
explained in its January 13th letter announcing the execution
of the amended contract that “it was necessary to move
quickly to implement the amendment and avoid, if possible,
any unnecessary interruption of smelter operations.” But noth-
ing in the administrative record demonstrates that smelter
operations would have been threatened absent immediate
action on BPA’s part. In fact, the available information again
suggests otherwise. In its January 13th letter, BPA noted that
CFAC had announced a likely plant closure and that this
announcement “reinforced [the agency’s] view that it was
important to act quickly.” Yet, the agency did not execute an
amended contract with CFAC until March, two months after
it agreed to the amended contract with Alcoa and almost three
months after we issued our opinion in PNGC. This two-to-
three month delay indicates that BPA had time to consider
more thoroughly than it did whether its decision to spend tens
of millions of dollars was in its business interests.

   Moreover, BPA failed to demonstrate why the payment of
almost $32 million over nine months, as opposed to the pay-
ment of a lesser amount, was necessary to avoid the interrup-
tion of Alcoa’s smelter operations. A prudent business would
presumably want to minimize its discretionary expenses, even
in an emergency. Yet, the administrative record contains no
evidence that BPA considered precisely how large (or small)
a payment was necessary to buy the company the time it
needed so that the agency could fully consider further action.

  Because the record contains no information from which
BPA could have concluded that it needed to act as quickly as
3306         PACIFIC NORTHWEST GENERATING v. BPA
it did or that it needed to pay Alcoa as much as $32 million
to avert an emergency, we hold that BPA cannot reasonably
justify its decision to enter into the amended contract on the
ground that exigent circumstances required immediate action.

   [16] For all of the above reasons, we hold that BPA has
failed to demonstrate that it reasonably believed its decision
to execute the Alcoa contract amendment was consistent with
“sound business principles.” To be clear, we do not hold that
BPA’s governing statutes prohibit the agency from selling
power to the DSIs at the IP rate or that the agency may not
“monetize” such a sale under any circumstances. If the agency
provides a rational business justification for a sale (monetized
or otherwise) that is supported by the record before the
agency, we would be obliged to defer to the agency’s exper-
tise. In this case, however, the agency has entered into a trans-
action that, on its face, is not “eminently businesslike.” See
Bell, 340 F.3d at 949. Moreover, the agency’s justifications
for its agreement to the transaction fall far short of establish-
ing that its decision to award substantial, non-necessary “ben-
efits” not involving the sale of power was a sound business
one. We therefore conclude that the agency has acted in a
manner that is not in accordance with its statutory obligations.

   Although we cannot defer to BPA’s voluntary decision to
provide Alcoa with up to $32 million in cash payments, we
note that the decision to sell physical power to Alcoa might
produce a different result, for several reasons. First, the sale
of physical power to the DSIs is expressly authorized by stat-
ute, see § 839c(d)(1)(A), while the payment of cash is not.
Given that Congress intended the agency to sell physical
power to the DSIs, BPA’s conclusion that such a sale is in its
business interests is more likely to be reasonable. Second, as
noted above, many of the justifications that BPA gave for its
decision to execute the costly amended contract, though inap-
plicable to a “monetized” sale, would apply to a physical
power sale. See supra p. 3301. Third, a physical power sale
implicates a number of issues that fall within BPA’s particular
               PACIFIC NORTHWEST GENERATING v. BPA                   3307
expertise. Such issues include BPA’s current and future gen-
erating capacity, its transmission capabilities, its relationship
with suppliers, its current and projected commitments of
physical power to other customers, its ability to acquire addi-
tional power if needed, and so forth. Simply giving away $32
million in cash to a customer does not, by contrast, involve
issues that the agency is uniquely positioned to address. In
short, although we do not defer to BPA’s determination that
paying Alcoa $32 million was “consistent with sound busi-
ness principles,” the agency’s conclusion that a physical sale
of power to Alcoa, even at loss, furthered its business interests
might very well warrant our deference.

                          IV.    Conclusion

   We hold that BPA has once again failed to advance “a ‘rea-
sonable interpretation[ ] of its governing statutes’ that sup-
ports its actions.” PNGC, 550 F.3d at 878 (alteration in
original). More specifically, the agency has failed to show
that its decision voluntarily to incur a $32 million expense
that will increase the rates of its preference customers, pro-
vides no direct benefit to the agency, and subsidizes the oper-
ations of its competitors was a reasonable interpretation of its
statutory obligation “to operate with a business-oriented phi-
losophy.” APAC, 126 F.3d at 1171. Consequently — and with
due regard to our obligation to defer to BPA’s conclusion
regarding whether its action comports with the “sound busi-
ness principles” standard if it is at all reasonable to do so —
we hold that the amended Alcoa contract provision is invalid.13

  In addition to seeking a declaration that the Alcoa contract
amendment is unlawful and invalid, Petitioners ask us to issue
  13
     Because we conclude that the monetary benefit provision is invalid for
the reasons raised by the petitioners, we do not decide whether Alcoa’s
alternative argument that the monetary benefit payments were impermiss-
ibly low was properly before us, or, if it was, whether that argument is
meritorious.
3308         PACIFIC NORTHWEST GENERATING v. BPA
an order “compel[ling] BPA to seek a recovery from Alcoa of
unlawful payments so that they can be refunded or credited to
the customers of BPA who bore those costs in their rates.” We
decline to do so. Instead, we remand this case to BPA to
determine whether and how it will seek a refund from Alcoa.
See Pub. Util. Dist. No. 1 of Snohomish County v. BPA, 506
F.3d 1145, 1147-48, 1154 (9th Cir. 2007) (remanding case to
BIA for the agency to determine in the first instance how to
respond to the court’s invalidation of multiple settlement
agreements that the agency had entered into improperly).

   Among other reasons why a remand is appropriate, BPA
has yet to consider the validity and applicability of a damages
waiver provision that appears in the 2007 Contract and was
incorporated by reference into the amended contract. See
PNGC, 550 F.3d at 881-82 (holding monetization provision of
the 2007 Contract invalid, but remanding case “to BPA to
determine in the first instance the applicability and construc-
tion of . . . the damage waiver” provision of the contract). The
agency will also need to consider Alcoa’s argument that no
refund is due because the aluminum company, at the agency’s
demand, purchased wholesale power at rates well above what
it could afford.

   Moreover, the agency has informed the court that it has
already begun a public process to consider the damage waiver
and refund issue with respect to the 2007 Contract. Once that
process is complete and BPA has both reached a final conclu-
sion on the refund issue and generated an appropriate admin-
istrative record, the issue will be ripe for this court’s review.
See id.

   One final note: We have approached this case with careful
regard for the limited judicial role in overseeing BPA’s exe-
cution of its obligations and authority. The agency’s role is an
essential one in providing power to the Northwest, and it is
subjected to competing demands from various constituencies
in the region. Reviewing the underlying agency proceedings
             PACIFIC NORTHWEST GENERATING v. BPA             3309
in this case and in PNGC, it becomes apparent that BPA’s
peculiarly dual role, as both a federal agency and a power
business, can create situations in which it can fulfill neither
role very well and so has reasons to test the limits of its statu-
tory authority. Whether the statutory scheme bears revisiting
so as to make BPA’s job easier — for example, by providing
it with the obligation or authority to provide power to the his-
toric DSIs even when it is not a sound business decision to do
so — is not, however, a question judges can answer. Instead,
we must determine whether BPA’s actions, however well
motivated, are so clearly outside its statutory authority that
even taking into account the very large measure of deference
due its decisions, we have no choice but to disapprove its
action. That is the case here.

  [17] In sum, we GRANT Pacific Northwest Generating
Cooperative’s, Public Power Council’s, and Industrial Cus-
tomers of Northwest Utilities’ petitions as to their challenge
to the validity of the Alcoa contract amendment and
REMAND to the agency for determination of the applicability
of the agreement’s damage waiver provision.

 PETITIONS GRANTED IN PART, DENIED IN PART,
AND DISMISSED IN PART.
