                           NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUN 17 2019
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

SACRAMENTO MUNICIPAL UTILITY                    No.    18-71753
DISTRICT; et al.,

                Petitioners,
                                                MEMORANDUM*
PUGET SOUND ENERGY INC; et al.,

                Intervenors-Pending,

 v.

BONNEVILLE POWER
ADMINISTRATION,

                Respondent.

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

                       Argued and submitted June 7, 2019**
                                Portland, Oregon

Before: MURGUIA and HURWITZ, Circuit Judges, and GAITAN,** District
Judge.

      The Sacramento Municipal Utility District, Transmission Agency of Northern


      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Fernando J. Gaitan, Jr., United States District Judge
for the Western District of Missouri, sitting by designation.
California, and Turlock Irrigation District petition for review of a ratemaking order

of the Bonneville Power Administration (“BPA”) for fiscal years 2018 and 2019

(“BP-18”). In BP-18, the BPA raised the hourly rate for transmission service on the

Southern Intertie, a system of power lines operated by the agency. We have

jurisdiction under 16 U.S.C. § 839f(e)(5) and (e)(1)(G), and we deny the petition.

      1. Substantial evidence supports the BPA’s decision to raise the hourly rate

to incentivize the purchase of long-term firm (“LTF”) transmission service, which

provides a more reliable and predictable source of income than hourly service. See

16 U.S.C. § 839f(e)(2); see also Cent. Lincoln Peoples’ Util. Dist. v. Johnson, 735

F.2d 1101, 1122 (9th Cir. 1984) (noting that the BPA can design rates “to give BPA

customers price signals”). Citing the number of LTF contracts up for renewal and

the decrease in the queue of new requests for service, the BPA reasonably concluded

that it faced a risk of LTF non-renewals. The agency reasonably determined that in

the absence of an increase in the hourly rate, its customers were less likely to renew

LTF service, in part because of increases in solar generating capacity in California

and seams issues between the Southern Intertie and neighboring markets. In so

concluding, the BPA cited independent research showing that the number of peak

hours for transmission had declined, and comments from LTF customers considering

nonrenewal of their contracts.

      2.   The BPA did not arbitrarily and capriciously depart from a 2016


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ratemaking decision (“BP-16”). See 16 U.S.C. § 839f(e)(2); FCC v. Fox Television

Stations, Inc., 556 U.S. 502, 515–16 (2009). In BP-16, the BPA declined to adopt a

proposal to increase the hourly rate, concluding that additional research was

required. After gathering that evidence and considering non-rate alternatives, the

BPA adopted a different rate solution than proposed in the prior ratemaking.

      3. The BPA did not arbitrarily and capriciously depart from any relevant non-

discrimination or cost-based rate setting principles. By incentivizing LTF service,

the revised rate for hourly service in BP-18 complies with the BPA’s statutory

mandate to recover its costs. 16 U.S.C. § 839e(a)(1). No undue discrimination

standard applies here, because the Federal Energy Regulatory Commission

(“FERC”) did not order the BPA “to provide transmission service” on the Southern

Intertie under 16 U.S.C. §§ 824i, 824j, or 824l. Id. § 824k(i). Nor does FERC Order

No. 888 apply; the BPA agreed to follow that order only in relation to the terms and

conditions of transmission service, not transmission rates.

      4. The petitioners failed to exhaust their contention that BP-18 violates 16

U.S.C. § 838g by failing to provide “the lowest possible rates to consumers

consistent with sound business principles.” Therefore, even assuming the argument

is subject in general to judicial review, we decline to address it here. See Marathon

Oil Co. v. United States, 807 F.2d 759, 767–68 (9th Cir. 1986).

      PETITION DENIED.


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