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Bonneville Power Administration (BPA)’s decision to set the rate at which it sold power to Alcoa Inc., to create an Equivalent Benefits standard that it applied to the Alcoa contract, and not to prepare an Environmental Impact Statement (EIS), was not arbitrary and capricious, because BPA "considered the relevant factors and articulated a rational connection between the facts found and the choices made."

This case involves three consolidated petitions of review. First, Bonneville Power Administration (BPA)’s “preference” customers (Petitioners) challenged BPA’s decision to sell power to Alcoa, claiming that BPA could have sold power to Alcoa at a higher market rate. Petitioners claimed that BPA’s contract with Alcoa violated BPA’s statutory duties and “sound business principles.” In reviewing this argument, the Court examined whether “the agency considered the relevant factors and articulated a rational connection between the facts found and the choices made.” The Court will not “second-guess” an agency’s policy judgments and will only set aside an agency’s decision if it is “contrary to clear congressional intent.” In light of this standard of deference, the Court determined that BPA’s contract with Alcoa was not so “arbitrary and capricious as to violate its statutory obligation.” Second, Alcoa argued that BPA erred in adopting and applying the Equivalent Benefits standard to the Alcoa contract. The Court held that “Alcoa’s position rest[ed] on flawed factual and legal premises.” BPA has no obligation to sell power to Alcoa, did not exceed its statutory authority, and did not act arbitrarily and capriciously. Third, the Public Power Council (PPC) claimed that BPA violated the National Environmental Policy Act (NEPA) by failing to prepare an Environmental Impact Statement (EIS) in its contract with Alcoa. An EIS is not required when the action does not “individually or cumulatively have a significant effect on the human environment.” The Court will inquire whether the agency considered the relevant factors and whether there was a clear error of judgment. Because BPA’s contract with Alcoa did not involve any new power-generation sources, the Court concluded that BPA’s decision not to prepare an EIS was not arbitrary and capricious. DISMISSED in part and DENIED in part.