Opinion by Judge BERZON; Partial Concurrence and Partial Dissent by Judge REINHARDT.

The Bonneville Power Administration (“BPA”) is an agency within the Department of Energy that markets the energy output of federal power projects in the Pacific Northwest. In two previous decisions, we invalidated three sets of contractual arrangements in which BPA agreed to subsidize certain longtime industrial customers rather than sell them power directly. See Pac. Nw. Gen. Coop. v. Bonneville Power Admin. (“PNGC II”), 596 F.3d 1065 (9th Cir.2010); Pac. Nw. Gen. Coop. v. Dep’t of Energy (“PNGC I”), 580 F.3d 792 (9th Cir.2009). We held these subsidy arrangements unreasonable and contrary to BPA’s statutory authority, as they did not comport with Congress’s mandate that BPA operate in a businesslike manner. See 16 U.S.C. §§ 839f(b), 838g.

In both cases, we remanded to BPA the question whether it could or should seek refunds of the improper subsidies. On remand, BPA concluded that it was contractually barred from seeking refunds as *916 to some of the invalidated contracts, and that it had no legal or equitable basis for seeking refunds as to the others. Moreover, BPA concluded, if it did pursue recovery of the subsidies, it might face counterclaims from the subsidized entities and become mired in counterproductive, protracted litigation over the amount, if any, of refunds owed. As a result, BPA decided not to pursue recovery of the unlawful subsidies invalidated by PNGC I and PNGC II.

At issue in this consolidated appeal are challenges by two groups to BPA’s decision to forgo refunds: public utilities and cooperatives that buy power from BPA, and that Congress has designated as BPA’s first-priority or “preference” customers; and industrial customers who buy power from public utilities in the Pacific Northwest and so are end-users of BPA power. The challengers’ core argument is that their power costs have been imper-missibly raised by BPA’s decision because, if BPA did seek refunds of the subsidies, it could pass along the recovered funds to its customers as lower rates.

BACKGROUND

“BPA is an agency within the Department of Energy created by Congress in 1937” to “market[] the power generated by federally owned dams on the Columbia River.” Portland Gen. Elec. Co. v. Bonneville Power Admin. (“PGE”), 501 F.3d 1009, 1013 (9th Cir.2007); see 16 U.S.C. §§ 832 -832m. “Congress has since expanded BPA’s mandate to include marketing authority over nearly all the electric power generated by federal facilities in the Pacific Northwest.” Ass’n of Pub. Agency Customers, Inc. v. Bonneville Power Admin. (“APAC”), 126 F.3d 1158 , 1163 (9th Cir.1997); see 16 U.S.C. § 838f. In numerous prior opinions, we have provided extensive background on BPA’s history and operations. See, e.g., PGE, 501 F.3d at 1013-16 ; PNGC I, 580 F.3d at 797-800 ; APAC, 126 F.3d at 1163-66. Here, we summarize only those statutory provisions and recent developments directly relevant to this appeal.

A. Statutory Framework

Four statutes govern BPA’s operations: the Pacific Northwest Electric Power Planning and Conservation Act of 1980, 16 U.S.C. §§ 839 -839h (“Northwest Power Act”); the Pacific Northwest Federal Transmission System Act of 1974, 16 U.S.C. §§ 838 -838k (“Transmission Act”); the Pacific Northwest Consumer Power Preference Act of 1964, 16 U.S.C. §§ 837 -837h (“Preference Act”); and the Bonneville Project Act of 1937, 16 U.S.C. §§ 832 -832m (“Bonneville Project Act”). As we have noted before, “[t]hese statutes subject BPA to a variety of detailed and potentially conflicting statutory directives,” ranging from fiscal to environmental concerns. APAC, 126 F.3d at 1164. Of most direct relevance to this appeal are two sets of statutory directives: the rate-setting guidelines and the “sound businesslike principles” obligation.

1. Rate-Setting Guidelines

A complex of statutory provisions dictates how BPA must proceed when selling federal power. First, BPA must give priority, as well as its most favorable cost-based rate (“the PF rate”), to publicly owned utilities, cooperatives, and federal agencies, known as “preference customers.” PNGC I, 580 F.3d at 798-99, 802 ; PGE, 501 F.3d at 1013-15 ; see 16 U.S.C. §§ 839c(b), 839e(b). Preference customers are also the only group whose energy needs BPA is required, as opposed to authorized, to meet. See PNGC I, 580 F.3d at 811 . After meeting the preference customers’ needs, BPA may, if it so chooses, *917 sell surplus power directly to certain longstanding industrial customers (“direct-service industrial customers” or “DSIs”) at a higher but still-cost based rate (“the IP rate”), or to anyone else at market rates. Id. at 799, 802-03 ; PGE, 501 F.3d at 1014 ; see 16 U.S.C. § 8396 (c). 1 “Regardless of the type of customer, BPA must charge a rate that, at a minimum, recoups BPA’s own costs of generating or acquiring the electricity.” Alcoa, Inc. v. BPA, 698 F.3d 774, 780 (9th Cir.2012); see 16 U.S.C. § 839e(a)(l).

£ Sound Business Principles

In addition to the above rate-setting guidelines, BPA also must set rates “with a view to encouraging the widest possible diversified use of electric power at the lowest possible rates to consumers consistent with sound business principles.” 16 U.S.C. § 838g (emphasis added). A different provision similarly requires that BPA set rates that “recover, in accordance with sound business principles, the costs associated with the acquisition, conservation, and transmission of electric power.” Id. § 839e(a)(l) (emphasis added). More generally, Congress has directed BPA to implement the Northwest Power Act “in a sound and businesslike manner.” Id. § 839f(b) (emphasis added). We have previously explained that BPA’s business decisions are judicially reviewable for compliance with this overarching “sound business principles” standard, albeit with great deference to BPA’s conclusions. See Alcoa, 698 F.3d at 788-89 ; PNGC II, 596 F.3d at 1075-80 .

B. The Aluminum DSI Contracts

Historically, the aluminum manufacturers of the Pacific Northwest were among BPA’s largest direct-service industrial customers. See PNGC I, 580 F.3d at 797-98 . Until recently, BPA did not have trouble meeting the needs of its preference customers while also providing abundant power to the aluminum DSIs, including Alcoa. See id. But, as the Pacific Northwest has grown, BPA has found itself constrained by competing demands. Its preference customers now serve a larger population with greater energy needs, and rising energy prices have made BPA’s relatively cheap power increasingly attractive to non-preferential would-be buyers. See id. at 798 .

Beginning in 2007, BPA embarked upon a series of attempts to aid the aluminum manufacturers without selling them power directly. See id.

1. The 2007 Block Contracts (PNGC I)

In 2006, BPA entered into three-way contracts, effective starting in the 2007 fiscal year, between BPA; Alcoa, and two other aluminum DSIs; and local public utilities (“the 2007 Block Contracts” or “Block Contracts”). The DSIs wanted to continue buying physical power from BPA at a cost-based rate. Instead, BPA agreed “to make payments to the [aluminum DSIs] totaling a maximum of $59 million per year for five years in lieu of supplying them with actual electrical power, while retaining the option to sell them physical power instead in the final two years.” PNGC I, 580 F.3d at 798 . 2

*918 Alcoa challenged these contracts, arguing that BPA was required to sell it physical power, sufficient to meet its needs, at a cost-based rate. Id. at 806-07, 809 . Concurrently, several of BPA’s preference and other industrial customers challenged the same contracts from the opposite direction, objecting to subsidies or sales to the DSIs except for discretionary market-rate sales of surplus power. Id. at 807-09 .

We held that, under the relevant statutory provisions, BPA is not required to sell physical power to the DSIs. Id. at 811-12 . Rather, it is required to meet the power needs only of its preference customers, and has the option to sell to DSIs thereafter, if it so chooses. Id. However, if BPA does sell to DSIs, it must offer them the IP rate, not a market rate. See id. at 812-18 . We also held that, “under appropriate circumstances, BPA may lawfully monetize its energy contracts,” “so long as the decision to monetize is otherwise consistent with BPA’s statutory obligations.” Id. at 819, 820 . But we did not find the Block Contracts justified under that standard. As the Block Contracts were effectively a sale of power “at a rate below what [BPA] is statutorily required to offer (i.e., the IP rate), and below what it could receive on the open market” from non-DSI customers, the contracts were inconsistent with BPA’s statutory obligation to fulfill its role consistent with “sound business principles.” Id. Consequently, “BPA’s decision to monetize the aluminum DSI contracts amounted] to an impermissible subsidy of those companies’ operations.” Id. at 819 .

The question remained whether the aluminum DSIs owed BPA a refund for any past subsidy payments. Each of the Block Contracts contained a damages waiver providing,

Id. at 826 . We did not decide in PNGC I whether this waiver was applicable, noting that there was no indication in the administrative record of “how BPA believe[d] the damages waiver provision should be construed and, in particular, what effect it [was] to have if a contract [were] only partially invalidated.” Id. Instead, we remanded to BPA “to determine in the first instance the applicability and construction” of several elements of the Block Contracts, including the damages waiver. Id. at 827 . In doing so, we made clear that we were not declaring the Block Contracts void ab initio. Id. at 826-27. Rather, given that the contracts contained a severability clause and, in addition to the invalidated monetary benefits provision, a possibly valid physical power sale option, they were potentially partially enforceable. See id. at 826 .

2. The Alcoa Amendment (PNGC II)

As it turned out, the physical power sale option in the Block Contracts was never exercised. Instead, after PNGC I, BPA entered into an amended contract with Alcoa (“the Alcoa Amendment”) in which it again agreed to subsidize Alcoa rather than sell it power directly. Specifically, “BPA agreed voluntarily to make a nearly $32 million cash ‘benefit’ payment” to Alcoa during fiscal year 2009, which Alcoa could use to “purchase power from one of BPA’s competitors.” PNGC II, 596 F.3d at 1068-69 . 3 BPA argued that this subsi *919 dy was necessary to avoid interruption of Alcoa’s smelter operations; would assure the continued existence of the DSI load (which had historically benefitted BPA in various ways); and was only an interim fix before BPA could carry out the full administrative process needed to respond to the remand issues in PNGC I. Id. at 1081-84 .

Once again, BPA’s priority customers filed a legal challenge, and once again we invalidated the subsidy, holding that “BPA’s justifications for this unusual transaction ... [did] not demonstrate that the transaction was ‘consistent with sound business principles,’ as required by BPA’s governing statutes.” Id. at 1068-69 . We rejected BPA’s proffered rationales as irrelevant to BPA’s statutory mandate, unsupported by record evidence, or illogical. As clarified by PNGC I, we stated, BPA has no obligation to contract with Alcoa at all, much less “to provide [a] voluntary gift [to Alcoa] that will lead to higher rates for its other customers” and effectively subsidize its competitors. Id. at 1080-84 . We went on to explain that protecting jobs within the region, however laudable a goal, is not among the purposes that Congress has authorized BPA to pursue. Id. at 1082 . We suggested, however, that a “decision to sell physical power to Alcoa,” as opposed to merely providing monetary benefits, “might produce a different result.” Id. at 1085 .

Finally, like the earlier PNGC I opinion, PNGC II declined to compel BPA to recover any payments it had already made to Alcoa. See id. at 1086 . Instead, in part because the PNGC I remand remained pending, we remanded “to BPA to determine whether and how it [would] seek a refund from Alcoa.” Id.

3. Alcoa v. BPA

After PNGC II issued, BPA entered into yet another contract with Alcoa, one that we upheld. See Alcoa, 698 F.3d at 782-85, 796 . Although not directly implicated in this appeal, this final Alcoa-BPA contract merits some brief discussion, to complete the story of BPA’s efforts to assist the aluminum DSIs.

Under this latest contract, BPA agreed to sell physical power to Alcoa at the cost-based IP rate for a modest profit (projected at $10,000 for the contract’s initial, roughly 18-month period). Id. at 783 . BPA’s preference customers again mounted a challenge, arguing that instead of selling to Alcoa at the cost-based IP rate, BPA should focus on selling to other customers, whom it can charge higher market rates. Id. at 785 . In the preference customers’ view, BPA’s failure to maximize its profits demonstrated that it “[was] not acting according to a profit-making purpose,” but rather was still attempting to “subsidize Alcoa ... so as to preserve jobs at its smelting plant and the surrounding community.” Id. at 788-89 .

In Alcoa, we rejected these challenges, explaining that the “sound business principles” mandate does not mean “that BPA is required to maximize its profits.” Alcoa, 698 F.3d at 789 . To the contrary, BPA has wide discretion as to how best to pursue its businesslike role while also complying with other statutory mandates, such as environmental protection. Id. Applying the high level of deference owed to BPA’s business decisions, we allowed the most recent Alcoa-BPA contract to stand, noting that: (1) unlike the monetized energy contracts at issue in PNGC I and PNGC II, it provided only for physical power sales; (2) it was expected to yield some profit to BPA, albeit modest; and (3) there was no record evidence to support the preference customers’ speculation that BPA’s decision was motivated by concerns about job losses. Id. Therefore, we concluded, we had to “defer to BPA’s determi *920 nation” that its power sale to Alcoa comported “with sound business principles.” Id.

C. The Port Townsend Contracts {PNGC I)

Aside from the 2007 Block Contracts with the aluminum DSIs, also at issue in PNGC I was an arrangement between BPA and its sole remaining non-aluminum DSI, the Port Townsend Paper Company (“Port Townsend”). Under this arrangement, BPA agreed to “provide Port Townsend with its full requirements for power ... to be supplied through” the Clallam County public utility (“Clallam”). PNGC I, 580 F.3d at 802 . BPA would sell Clal-lam the power at the PF rate “plus the margin typically charged by [public utilities] to their industrial customers,” and Clallam would then sell the power to Port Townsend. Id. In effect, therefore, BPA would be selling power to Port Townsend, via Clallam, “at a rate below both the market rate and the IP rate,” id. at 823 , but not as low as the PF rate.

We invalidated the Port Townsend arrangement as inconsistent with BPA’s statutory obligations. Id. at 824 . BPA, we explained, is not obligated to sell Port Townsend power at all, much less at a subsidized rate, and had provided no convincing explanation as to why doing so comported “with ‘sound business principles.’ ” Id. (quoting 16 U.S.C. § 838g).

D. BPA’s Decision on Remand from PNGC I and PNGC II

The present litigation arises from BPA’s decision-making process on remand from our decisions in PNGC I and PNGC II. This decision-making process became known within the Northwest power community as the “Lookback.”

1. Lookback Proceedings

In June 2009, BPA issued a letter indicating that it would begin addressing the issues remanded to it by PNGC I.

The Lookback was structured as a two-step process: First, BPA would answer the contractual questions identified in PNGC I: “the applicability and construction of the severability clause, the damage waiver, and the physical power sale option in light of our holdings [in PNGC I ].” 580 F.3d at 827 . If it was determined that the contracts barred refunds, then the proceedings would end there. If BPA determined instead that it could seek recovery notwithstanding the damages waiver, it would move on to the second step: determining how much money was owed. BPA also considered in the Lookback whether it was “permitted to seek additional payments directly from Port Townsend Power Company (or indirectly through the Public Utility District No. 1 of Clallam County) for any undercharges for power delivered to Clallam by BPA for the benefit of Port Townsend, both during the Lookback period and subsequently.” Once PNGC II was decided, BPA expanded the scope of the Lookback to include any refunds that might be owed for payments made to Alcoa during the nine-month period before payments were ceased in compliance with PNGC II.

BPA issued a draft record of decision (“Draft ROD”) in June 2010 and invited public comment. The Draft ROD proposed three sets of conclusions: First, as to the Block Contracts, the Draft ROD proposed that the invalid rate provisions were severable from the remainder of the contracts; that the damages waiver was therefore enforceable; and that, as a result, BPA was contractually barred from seeking recovery. BPA also proposed that this conclusion was not inconsistent with its earlier decision to seek repayment un *921 der a series of settlement agreements invalidated in PGE.

Second, as to the Alcoa Amendment, the Draft ROD proposed that BPA was not obligated to seek a refund, and that it did not have any contractual basis for doing so. According to the Draft ROD, “Alcoa did not breach any obligation to BPA under the Amendment, so it is not clear a legal claim for money, in the form of damages or otherwise, could be pursued by BPA under the contract based solely on PNGC II.” The Draft ROD noted, however, that “BPA possibly could pursue an extra-contractual or equitable claim for restitution based on an unjust enrichment theory,” and “specifically invite[d] the parties to comment on whether such a claim could or should be pursued against Alcoa.” The Draft ROD also floated the possibility that BPA could “seek to administratively recover payments made to Alcoa under the Amendment” by adding a surcharge to future power sales to Alcoa. The Draft ROD noted, however, that: (1) such a surcharge might run into its own legal problems, as BPA is required to set rates pursuant to the strictures of the Northwest Power Act, and (2) BPA may have “already recouped some or all of any illegal overpayments under the Amendment ... by withholding payments to Alcoa for the final two months of the term of the Amendment,” i.e. after PNGC II was handed down.

Finally, as to the Port Townsend transaction, the Draft ROD proposed that BPA had no legal or equitable basis for recovering from Port Townsend directly. “'While it appears BPA could assert an equitable claim for restitution against Port Townsend, it is not clear that Port Townsend was unjustly enriched.” Moreover, Port Townsend might have an equitable estop-pel defense, although BPA concluded that it lacked sufficient information to evaluate this question.

Not surprisingly, Alcoa, Port Townsend, and Clallam all agreed with the Draft ROD’S proposed findings. Alcoa, moreover, threatened that, if “BPA were to change its position and conclude that the damages waiver is not enforceable,” then Alcoa could bring claims of its own against BPA “greatly exceeding any amount that BPA could recover from Alcoa.” Specifically, Alcoa estimated that it had a potential damages claim against BPA totaling $218 million, based on the difference between Alcoa’s power costs during the time period covered by the monetized contracts and what its power costs would have been had BPA sold it power directly at the IP rate during that time.

The preference customers viewed the Draft ROD very differently—as yet another instance of BPA capitulating to the DSIs. Both PPC and PNGC argued that BPA had not just the legal authority but also the duty to seek repayment of the unlawful subsidies. ICNU submitted similar comments.

None of BPA’s major conclusions changed in its final record of decision (“the ROD”), issued February 18, 2011. In the ROD, BPA decided not to pursue refunds of any of the subsidies invalidated in PNGC I and PNGC II, explaining its reasoning as follows:

STANDARD OF REVIEW

As petitions for review of BPA decisions are governed by the Administrative Procedure Act, 5 U.S.C. § 706 (2)(A), “[w]e affirm BPA’s actions unless they are arbitrary, capricious, an abuse of discretion, or in excess of statutory authority.” PNGC II, 596 F.3d at 1072 (internal quotation marks omitted). When, as here, we are measuring BPA’s actions against the “sound business principles” standard embodied in BPA’s governing statutes, “we are particularly deferential to the agency’s assessment of whether its actions further BPA’s business interests consistent with its public mission.” Id. at 1080 (internal quotation marks omitted). This deferential standard of review is not, however, toothless. While “we do not second-guess [BPA’s] policy judgments,” we do ask “whether the agency considered the relevant factors and articulated a rational connection between the facts found and the choices made.” Alcoa, 698 F.3d at 788 (internal quotation marks omitted); see Lands Council v. McNair, 537 F.3d 981, 987 (9th Cir.2008) (en bane). 5

*923 DISCUSSION

A. Constitutional and Statutory Arguments

Petitioners argue, first, that BPA has a duty, under either the Constitution’s Appropriations Clause or BPA’s governing statutes, to seek all refunds to which it may be entitled. We disagree. BPA decisions not to seek refunds must be evaluated, like all other BPA decisions, case-by-case, applying BPA’s governing statutes, the APA, and general principles of administrative law.

1. Appropriations Clause

The crux of Petitioners’ Appropriations Clause argument is that, “[h]aving disbursed funds to the DSIs from the Treasury without lawful authority, [BPA] acted in direct violation of the Constitution. Therefore, it now has a duty to seek recovery of these illegally-paid funds.” (citations omitted).

Viewed as a general challenge to BPA contractual damages waiver provisions, this argument is foreclosed by Alcoa, 698 F.3d at 791 . Alcoa rejected the argument “that BPA is constitutionally obligated to sue for any damages to which it is entitled.” Id. at 791 . In so ruling, Alcoa noted that the BPA administrators have statutory authority to compromise or settle claims, and held that a bilateral waiver provision is consistent with that authority, as it balances in advance the risk of being sued for damages against the opportunity to obtain damages from the contracting party. Id. at 792 .

Viewed as a narrow, case-specific challenge, the Appropriations Clause argument fares no better. Any disbursements BPA made under the invalidated monetary benefits provisions likely did not violate the Appropriations Clause. BPA is funded by a permanent appropriation, or revolving fund, which the BPA Administrator has wide latitude in spending. See 16 U.S.C. § 838i (establishing revolving fund within the U.S. Treasury for BPA); see also 3 General Accounting Office, Principles of Federal Appropriations Law 15-159 (discussing BPA revolving fund) and 2-17 (defining revolving funds as permanent appropriations). So there may well have been an adequate appropriation for the subsidies, even though they were later held invalid.

We need not wade further into the “largely uncharted area” of Appropriations Clause law, however. Md. Dep’t of Human Res. v. U.S. Dep’t of Agric., 976 F.2d 1462 , 1486 (4th Cir.1992) (Hall, J., concurring in part and concurring in the judgment). Even if the subsidy payments did rise to an Appropriations Clause violation, petitioners have pointed to no convincing authority establishing that BPA would therefore have a constitutional duty to recover the subsidies.

Certainly, the text of the Appropriations Clause provides no basis for inferring such a duty, nor do the cases relied upon by petitioners. Office of Personnel Management v. Richmond, 496 U.S. 414, 416 , 110 S.Ct. 2465 , 110 L.Ed.2d 387 (1990), held only that a court cannot order an agency to expend funds contrary to statute—not that, if an agency has already done so, the Appropriations Clause requires the agency to get the funds back. Certainly agencies are generally permitted to seek recovery of erroneously or illegally disbursed funds. Even in the absence of a specific statutory cause of action, “[t]he Government by appropriate action can recover funds which its agents have wrongfully, erroneously, or illegally paid,” so long as there is no clear *924 statutory barrier to doing so. United States v. Wurts, 303 U.S. 414, 415-16 , 58 5.Ct. 637, 82 L.Ed. 932 (1938). 6

But that recovery authority does not suggest that the government has a constitutional duty to seek a refund every time an erroneous or illegal payment has been made. To the contrary, Wurts suggested that Congress may statutorily preclude agencies from recovering erroneously paid funds so long as it “clearly manifest[s] its intention” to do so. 303 U.S. at 416 , 58 S.Ct. 637 (internal quotation marks omitted). If the Appropriations Clause imposed an affirmative constitutional duty upon agencies to recover erroneously paid funds, Congress could not eliminate the duty by statute. 7

2. BPA’s governing statutes

Petitioners next argue, more modestly, that BPA has a statutory duty to seek recovery of unlawfully disbursed funds, relying on the requirement in 16 U.S.C. § 838g that BPA provide “the lowest possible rates to consumers consistent with sound business principles.” We reject the suggestion that BPA has a statutory duty to pursue any potentially available source of income so as to lower its rates.

As this court recently clarified, the “sound business principles” mandate does not require BPA to “maximize its profits” or to “always charge the lowest possible rates” regardless of any other considerations. Alcoa, 698 F.3d at 789 . Rather, Congress has given BPA wide latitude to decide “how best to further BPA’s business interests consistent with its public mission.” Id. (internal quotation marks omitted). Along these lines, Congress has delegated to the BPA Administrator broad authority to compromise or settle claims. See 16 U.S.C. § 832a(f). Thus, Congress contemplated that BPA may sometimes make a business decision that it is not worth pursuing a particular potential source of income. Petitioners’ argument to the contrary fails.

B. BPA’s decision

Although BPA has no general constitutional or statutory duty to seek a refund any time it makes an unlawful payment, an individual decision not to pursue such a refund could be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706 (2)(A).

1. The aluminum DSI contracts

With respect to the aluminum DSI contracts, Petitioners maintain that BPA’s ROD had several of these faults, because: the damages waiver is not enforceable; *925 BPA does have available quasi-contractual or common law avenues of recovery against the aluminum DSIs, such as an unjust enrichment suit; and it is not a sound business decision to forgo those avenues entirely because of speculation that its counter-parties might assert defenses.

After reviewing these challenges, we conclude that we must defer to BPA’s reasonable interpretation of the 2007 Block Contracts as including a severable, enforceable damages waiver, and so do not disturb BPA’s decision as to refunds of the 2007 Block Contracts subsidy payments. We grant the petition for review, however, as to the Alcoa Amendment, as we conclude that the ROD’s reasons for not pursuing refunds for the subsidies proved by that Amendment are, as they stand, so insufficiently grounded in the record as to be “arbitrary, capricious, [or] an abuse of discretion.”

a. 2007 Block Contracts

Each of the 2007 Block Contracts included a damages waiver providing that, “[i]n the event the Ninth Circuit Court of Appeals ... issues a final order that declares or renders this Agreement void or otherwise unenforceable, no Party shall be entitled to any damages or restitution of any nature, in law or equity, from any other Party, and each Party hereby waives any right to seek such damages.” Each Contract also included a severability clause providing that “[i]f any term of this Agreement is found to be invalid by a court of competent jurisdiction,” “[a]ll other terms shall remain in force unless that term is determined not to be severable from all other provisions of this Agreement by such court.”

BPA’s conclusion that the damages waivers are enforceable was consistent with the statute and otherwise within BPA’s authority. To begin, the Alcoa court enforced a very similar mutual damage waiver in another Alcoa-BPA contract. Its reasons for doing so apply equally here.

Contrary to petitioners’ contention that no entity operating according to “sound business principles” would agree to a sweeping waiver, Alcoa interpreted such a mutual waiver as a valid exercise of BPA’s general claim-settling authority. 698 F.3d at 791-92 . Noting that such a waiver equally protects BPA against claims brought by the customer, Alcoa concluded that “[i]t is not our place to second-guess the agency’s considered judgment regarding the balance of risks embodied in a damage waiver or similar release or settlement provision.” Id. Moreover, the waiver provision is severable from the contracts’ void subsidy provisions. BPA received consideration in exchange for waiving its rights to seek damages from the aluminum DSIs—namely, a corresponding waiver providing that the contracting parties could not recover damages from BPA. “Legal portions of contracts are severable from illegal portions where there is separate legal consideration attributable to the severed portion of the agreement.” Consul Ltd. v. Solide Enters., Inc., 802 F.2d 1143, 1148 (9th Cir.1986). Finally, as such a waiver is a valid exercise of BPA’s power to compromise or settle claims and could likewise protect BPA’s interests, it cannot be contrary to public policy as allowing an unlawful subsidy.

The dissent’s assertion that this determination is controlled by PGE, and not Alcoa, is incorrect. PGE did not concern provisions in BPA power purchase contracts mutually waiving damages in the event the agreement is invalidated. Alcoa did.

PGE invalidated a series of settlement agreements BPA had entered into with *926 IOUs that participated in its Residential Exchange Program (“REP” or “Exchange Program”). See PGE, 501 F.3d at 1025-37 ; Golden Nw. Aluminum, Inc. v. Bonneville Power Admin., 501 F.3d 1037, 1047-48 (9th Cir.2007). The Exchange Program “essentially acts as a cash rebate to the IOUs where the IOUs’ power costs exceed those of BPA,” but requires that the Exchange Program’s costs be covered only by supplemental rate charges assessed on non-preference customers, not by passing costs on to preference customers. See PGE, 501 F.3d at 1015-16. BPA and certain IOUs entered into “settlement” agreements inconsistent with this pass-through limitation, maintaining that the limitation did not apply because the costs were “settlement costs,” pursuant to BPA’s general authority to make and settle contracts, rather than Exchange Program costs. We disapproved this approach, holding that BPA could not circumvent the statutory restrictions on power exchanges “by calling its actions ... [a] ‘settlement’ ” when those actions were “inextricably intertwined” with BPA’s Exchange Program authority. Id. at 1032.

In short, the exercise of settlement authority at issue in PGE concerned the whole of a comprehensive agreement, in which BPA sought directly to avoid the statutory restrictions placed on it. PGE did not concern a severable agreement provision allocating among the contracting parties the purely retroactive liability risks • that could arise in the event the agreement is otherwise declared invalid—a second-level pact, so to speak, covering the past, not the future, and governing relief in the event the agreement is invalidated, rather than the agreement itself.

In contrast, Alcoa considered precisely that sort of purely retroactive, partial, and mutual waiver: As here, the waiver at issue in Alcoa was a bilateral waiver of retroactive damages; it gave up both parties’ rights to seek compensation in the event that a portion of the contract in which it was contained was invalidated in the future. 698 F.3d at 791 . In both Alcoa and here, the larger agreement of which the waiver was a part was risky for both parties that agreed to the provision, not just for BPA. Here, for example, the aluminum DSIs gave up their ability to sue BPA to recover any costs associated with purchasing power through other means if the contracts were invalidated, costs that could have been, and that the DSIs contend were, extensive.

The fact that the damages waivers significantly benefitted BPA is important. Upholding the validity of the waivers here does not preclude a finding in a future case that a damages waiver is invalid, if the waiver at issue in that case does not benefit the agency and is instead designed principally to prevent an unlawful subsidy from being recouped.

Despite the large differences between the waiver issue here and the settlement authority question in PGE, and despite the close similarity between the waiver approved in Alcoa and the one at issue here, the dissent dismisses Alcoa as the controlling precedent and relies on PGE instead. Principally, the dissent relies for this odd choice on the understanding that Alcoa upheld the other portions of the agreement in which the waiver appeared, and so was not approving a damages waiver linked to statutorily unlawful contract provisions.

The dissent’s account mischaracterizes Alcoa. As one would expect, the damages waiver in Alcoa applied not to valid contractual provisions, but only when “a court renders any part of the agreement void or unenforceable”—in other words, unlawful. 698 F.3d at 791 . And, after holding the damages waiver lawful, Alcoa went on to *927 decline to decide whether the “Second Period” portion of the Alcoa contract there at issue was valid, as the question was not yet ripe. Id. at 793-94 . This sequence necessarily left open the possibility that the Second Period agreement would later be voided—and yet, the damages waiver provision that would be contained in that agreement had already been declared valid.

The panel deciding Alcoa was entirely cognizant of this possibility. Had the Second Period agreement been similar to, and valid for the same reason as, the agreement covering the initial period, there would be no reason to put off deciding the legality of the Second Period agreement. And the dissenting opinion in Alcoa specifically recognized that the waiver provision was valid and would apply if and when the Second Period agreement is challenged. Alcoa, 698 F.3d at 799 , 806-807 & n. 7 (Bea, J., dissenting). The dissent’s concern was with the majority’s decision to forego addressing the Second Period dispute before BPA suffered a monetary loss was that, because of the damages waiver, those losses could not be recovered. Id.

Alcoa therefore decided essentially the same issue that arises here regarding the enforceability of a bilateral damages waiver in a BPA power agreement. PGE covers the predecessor issue—was the power agreement there in fact void? Under such circumstances, we must follow Alcoa and uphold the damages waiver.

As BPA properly determined the Block Contracts waiver provisions were enforceable, its decision not to pursue refunds under those Contracts was likewise proper.

b. Alcoa Amendment

As the Alcoa Amendment does not contain a damage waiver, BPA is not contractually barred from seeking recovery of the subsidies invalidated in PNGC II. BPA nonetheless declined to seek recoupment of subsidies it provided pursuant to the Amendment, viewing the chances of succeeding in doing so as slight, and outweighed by the potential recovery costs.

BPA’s rationales for this conclusion boiled down to two: (1) Alcoa may have defenses to any equitable or quasi-contract claim, including perhaps an estoppel defense; and (2) Alcoa may be able to defeat a claim for unjust enrichment, and succeed on a counterclaim against BPA, by showing that, far from being enriched, it obtained less in monetary value than it was entitled to under the governing statutes. We hold both rationales “so implausible that [they] could not be ascribed to a difference in view or the product of agency expertise.” Lands Council, 537 F.3d at 987 . As a result, we cannot approve the current ROD’S conclusion as to recovery of the Alcoa Amendment subsidies.

As to the ROD’s first rationale, the evaluation of the merits of any possible defenses Alcoa might assert was far too generous. In particular, BPA’s prediction that “Alcoa would have a reasonably good chance of ... mounting a viable estoppel defense against any claim by BPA,” is particularly dubious.

It is unlikely that the DSIs could successfully estop the government from recovering a refund if, in fact, a court determined that they had received unlawful overpayments. As Richmond emphasized, although the Supreme Court has never categorically foreclosed estoppel against the government with regard to monetary payments, it has “reversed every finding of estoppel that [it has] reviewed.” 496 U.S. at 422 , 110 S.Ct. 2465 . Ignoring this history, BPA looked only at this court’s estop-pel cases, concluding “the Ninth Circuit is more receptive to claims of estoppel *928 against the Government than some other circuits.” Whether that vague comparison is correct or not is beside the point. It is of no help in assessing the actual risk of a successful estoppel claim in this case.

What is relevant is our actual standard: the party claiming estoppel must show both (1) “affirmative misconduct” on the part of the government and (2) that “the government’s wrongful act will cause a serious injustice, and the public’s interest will not suffer undue damage.” United States v. Hatcher, 922 F.2d 1402, 1409 , 1411 n. 12 (9th Cir.1991) (internal quotation marks omitted). Under this standard, we have very occasionally applied estoppel against the government in immigration cases. See, e.g., Salgado-Diaz v. Gonzales, 395 F.3d 1158, 1165-66 (9th Cir. 2005). But we know of no Ninth Circuit case estopping the government from recovering an erroneous monetary payment, nor have the parties identified one. Cf. Heckler v. Cnty. Health Servs. of Crawford Cnty., Inc., 467 U.S. 51 , 104 S.Ct. 2218 , 81 L.Ed.2d 42 (1984).

The ROD also reasoned that BPA may not be able successfully to pursue an unjust enrichment claim against Alcoa for several reasons. One concern expressed in the ROD was that a claim for unjust enrichment cannot lie where the relationship between the parties is governed by a valid express contract concerning the particular issue. See Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 408-09 (9th Cir.1992). But by the time the ROD here challenged issued, this court had already invalidated the relevant portion of the Alcoa Amendment. See PNGC II, 596 F.3d at 1085-86 . That being so, no valid contractual provision stood in the way of an unjust enrichment claim.

The ROD’S second rationale—that Alcoa may be able to show that it was not enriched, but rather illegally disadvantaged, by the subsidies in the Alcoa Amendment—has more support in the record. The record does establish, at least, that the amount of any damages BPA could actually recover from the aluminum DSIs is uncertain and disputed. Moreover, if BPA sues, Alcoa could well counterclaim, arguing that it actually lost money through the partially invalidated contracts.

Had BPA not insisted on a monetized contract, Alcoa maintains, BPA could have (and, according to BPA, likely would have) sold Alcoa physical power instead at the IP rate. The ROD noted Alcoa’s contention that, as matters turned out, Alcoa had to pay a significantly higher rate during the Alcoa Amendment period than the IP rate because of rising market rates. 8 The ROD also acknowledged that Alcoa had argued previously that it “is potentially entitled to recoup those additional payments.” Alcoa’s brief to this court elaborates on its *929 overpayment argument, maintaining that, far from receiving overpayments under the 2007 Block Contracts and the Alcoa Amendment, the company ended up paying “$218 million more for power than it would have” had BPA sold it power directly, including $26.1 million during the Amendment period.

One major flaw in Alcoa’s argument, and BPA’s acceptance of it as sufficiently meritorious to constitute a substantial risk in any litigation to recover, is that BPA could—under our PNGC decisions—have refused to sell Alcoa power at all, leaving Alcoa to buy power at full market rates. But Alcoa’s position is still not entirely implausible. Given BPA’s practices regarding Alcoa, it might be hard for BPA to establish as a factual matter that it would have refused to sell Alcoa power at the IP rate. And Alcoa’s persistence as to its contention suggests that it would take an equally aggressive litigation position in any collection action BPA might initiate. In that light, as BPA argued, choosing to pursue recovery from Alcoa “would expose BPA to some risk of a judgment to Alcoa under its theory of underpayment.”

But the ROD did not objectively evaluate the degree of this risk so much as capitulate to Alcoa’s threats. As noted, the above explanation of the possible counterclaim comes largely from Alcoa’s briefs and comments, not the ROD. The ROD vaguely implies that the costs and risks of litigation would outweigh its possible benefits, citing statutory and regulatory provisions requiring agencies to weigh costs of collection actions against benefits. At the same time, the ROD acknowledged, in a eonclusory fashion, that “Alcoa’s purported claim that it has been underpaid by almost $200 million is dubious,” yet nowhere ventured any alternative estimate of a likely litigation outcome, or of the litigation costs likely to be incurred in obtaining that outcome.

In fact, as petitioners point out, BPA never attempted “to calculate the actual amounts paid” to the aluminum DSIs, and so was in no position to determine whether there were or were not net overpayments to Alcoa. Those gaps are reason enough for skepticism about the ROD’s conclusion that, whatever those amounts are, they are not worth trying to recover. In addition, the final ROD evaluated only possible avenues for litigation, not other ways BPA might seek to recover the subsidies, such as offsets from future sales contracts with Alcoa.

We may not uphold an agency decision that “entirely failed to consider an important aspect of the problem.” Lands Council, 537 F.3d at 987 . BPA’s assumption that Alcoa might succeed in showing that it was not enriched, and could even recover on an affirmative counterclaim, suffers from such a lapse. We therefore remand to BPA to provide a defensible estimate of the amount of the subsidy it provided to Alcoa under the Alcoa Amendment prior to its invalidation; to provide some analysis of whether Alcoa’s claim of net underpayment has any fair chance of success; to analyze alternative plans for recovery of any overpayment to Alcoa; and either to adopt one of those plans or to explain why, with respect to each of them, the costs and downside risks justify abandonment of the opportunity to recover any overpayment.

2. Port Townsendr-Clallam

In contrast to its treatment of the Alcoa Amendment, BPA’s decision not to seek repayment from Port Townsend was in no respect unreasonable. Whether and how much BPA could recover from Port Townsend is entirely uncertain, both legally and practically. And, given the small amount of power sold under the Port *930 Townsend Contract, the amount of any recovery would necessarily be quite small, making it unlikely that the costs of litigation would be justified.

First, unlike the aluminum DSI contracts, the Port Townsend Contract involved a sale of power, not a subsidy, though at an unlawfully low rate. So it is unclear exactly what amount, if any, Port Townsend would owe BPA. Perhaps BPA could argue that Port Townsend owes it the difference between what it paid and what the same amount of power would have cost at the higher IP rate. But Port Townsend could plausibly counter that, had the rate been higher, it would have purchased less power, or even no power at all, given its struggles to stay open in the face of large financial losses and its reliance on the power prices provided by BPA to do so.

A second, supervening problem with recovering under the Port Townsend Contract, BPA concluded, is that, unlike the aluminum DSI contracts, this arrangement was structured as two separate bilateral contracts: one between BPA and Clallam, and one between Clallam and Port Townsend. The ROD observed that BPA had no direct contract with Port Townsend, and that, although it could try to back-bill Clallam, “it is far from clear ... that Port Townsend would voluntarily remit [the back-billed] amount to Clallam” in return.

Third, the ROD noted that Port Townsend could argue that any claims against it were discharged in Port Townsend’s bankruptcy. BPA expressed skepticism about this assessment, noting that Port Townsend’s bankruptcy plan was approved in January 2007, while PNGC I was not issued until December 2008. Thus, BPA could argue that its claims against Port Townsend were not yet within “fair contemplation” at the time of the bankruptcy proceedings, and therefore were not discharged. But even if not a legal bar to recovery, Port Townsend’s bankruptcy supports the overall reasonableness of BPA’s decision, as it casts doubt on Port Townsend’s practical ability to satisfy any judgment that BPA might secure.

BPA’s justifications for not pursuing recovery under the Port Townsend Contract are perhaps not as well substantiated as they could be. Nevertheless, BPA’s decision not to pursue recovery from Port Townsend does have a sufficient reasonable basis, to which this court must defer. See PNGC II, 596 F.3d at 1085 .

C. Inconsistency with the Residential Exchange Program Settlement Agreements

Finally, BPA reasonably explained why the refund decisions here challenged were not inconsistent with BPA’s earlier decision to seek recovery of the different payments that had been declared unlawful by this court in PGE.

After we invalidated the settlement agreements in PGE, the question then arose whether BPA would seek to recover the improperly passed-on payments from the IOUs. BPA concluded that, after our PGE decision, the IOUs could not legally retain the funds, reasoning that,

*931 2007 Supplemental Wholesale Power Rate Case Final Record of Decision, p. 178.

In the ROD here challenged, BPA provided two bases for reconciling its decision not to seek repayment in this instance with its contrary decision regarding the Exchange Program settlement agreement overpayments. First, BPA interpreted PGE as a ruling “that the REP Settlement Agreements were void ab initio,” whereas PNGC I and PNGC II only partially invalidated the contracts at issue. Second, BPA characterized the DSI contracts here at issue as exercises of BPA’s “commercial role” as a power marketer, and thus distinguishable from the Exchange Program settlement agreements, which it characterized as exercises of “BPA’s sovereign role as a regulatory administrator of the REP.” 9

“Unexplained [agency] inconsistency is ... a reason for holding an interpretation to be an arbitrary and capricious change from agency practice under the Administrative Procedure Act.” Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 981 , 125 S.Ct. 2688 , 162 L.Ed.2d 820 (2005); see also 5 U.S.C. § 706 (2)(A). Here, however, BPA has provided a reasoned explanation as to how the two situations vary sufficiently that they may be treated differently. BPA’s decision not to seek refunds here is therefore not arbitrary or capricious as inconsistent with its contrary conclusion post-PGE.

CONCLUSION

We have noted before that BPA’s governing statutes subject the agency “to a variety of ... potentially conflicting statutory directives.” APAC, 126 F.3d at 1164. “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 statutory authority.” PNGC II, 596 F.3d at 1086 .

In this instance, BPA’s decisions in most respects sufficiently and reasonably balance its competing obligations to merit our deference, but in one respect, on the current record, do not. We therefore DENY the petition for review with regard to the decision not to seek refunds with respect to the 2007 Block Contracts and the Port Townsend Contract. We GRANT the petition and REMAND to BPA for further proceedings, consistent with this opinion, with regard to recovery of subsidies paid under the Alcoa Amendment.

DENIED IN PART, AND GRANTED AND REMANDED IN PART. The parties shall bear their own costs on appeal.

. This summary is simplified, and so omits some of BPA’s less relevant rate-setting strictures, detailed more fully in PNGC I, 580 F.3d at 802-03 .

. The two other aluminum DSIs that received Block Contracts were Golden Northwest Aluminum and CFAC. However, Golden Northwest subsequently allocated its power allocation to Alcoa and CFAC, so BPA never made any payments to Golden Northwest.

. BPA entered into a substantially similar amended contract with CFAC, not challenged before this court.

. PNGC II mistakenly stated that the Alcoa Amendment incorporated the damages waiver by reference. PNGC II, 596 F.3d at 1086 .

. Although BPA and Port Townsend challenge ICNU’s standing, "[o]nly one of the petitioners needs to have standing to permit us to consider the petition for review,” Massachusetts v. EPA, 549 U.S. 497, 518 , 127 S.Ct. 1438 , 167 L.Ed.2d 248 (2007). No party contests PPC’s standing, and there is no basis for doing so.

In addition, ICNU has standing through at least two of its members, International Paper and Weyerhauser. The record indicates that both these companies have "pass-through” contracts to purchase electric power from BPA preference customers, pursuant to which they are required to “pay for all BPA rates and charges incurred by” the preference customers in providing them with electric service. Thus, they are "directly impacted by any rate increased adopted by BPA.” We recently held similar contracts and injuries sufficient to support standing in another suit brought against BPA by the customers of its direct customers. Ass'n of Pub. Agency Cus *923 tomers v. Bonneville Power Admin., 733 F.3d 939, 949-55 (9th Cir.2013).

. See Wisc. Cent. R.R. Co. v. United States, 164 U.S. 190, 212 , 17 S.Ct. 45 , 41 L.Ed. 399 (1896) ("parties receiving moneys illegally paid by a public officer are liable ex aequo et bono to refund them”); United States v. Fowler, 913 F.2d 1382, 1386-87 (9th Cir.1990) (holding that government agent's error in disbursing funds does not waive government's right to reimbursement); Old Repub. Ins. Co. v. Fed. Crop Ins. Corp., 746 F.Supp. 767, 769-70 (N.D.Ill.1990) (discussing statutory authority under which government may recover funds erroneously or illegally paid).

. Petitioners also point to Fansteel Metallurgical Corp. v. United States, 145 Ct.Cl. 496 , 172 F.Supp. 268, 270 (1959), which stated that "when a payment is erroneously or illegally made, it is in direct violation of article IV, section 3, clause 2 of the Constitution” and "it is not only lawful but the duty of the Government to sue for a refund thereof.” Fansteel is not, of course, binding on us, and we decline to follow it. Fansteel misreads Wurts as holding that government has a duty to recover illegally paid funds; in fact, Wurts held only that the government “can recover funds which its agents have wrongfully, erroneously, or illegally paid,” 303 U.S. at 415 , 58 S.Ct. 637 (emphasis added).

. More specifically, Alcoa’s explanation in its briefs to this court of its position begins by pointing out that, if BPA sells to DSIs, it must offer them the IP rate, rather than a market rate. See PNGC I, 580 F.3d 812 -13; PNGC II, 596 F.3d at 1073 . Alcoa then represents that, as demanded by BPA and required under the 2007 Block Contracts and Alcoa Amendment, it entered into forward power purchase contracts "at a time when power prices were relatively high.” The rates it obtained were well above what it could afford and, even after applying the credits that it received from BPA under the 2007 Block Contracts and Amendment, were significantly higher than the IP rate. The third link in Alcoa's net loss argument is that, assuming that BPA would have offered to sell to Alcoa at the IP rate in the absence of the Amendment (as it has said it would have), Alcoa paid more, rather than less, than had it not entered into the Amendment. Further, when the contracts were invalidated, Alcoa had to resell the power back into the market to "unwind” its purchases, and because the market had declined, it sold this power at a rate significantly lower than what it had paid.

. In addition, the waiver provisions in the two contracts differ; the 2007 Block Contracts at issue in PNGC I contained a mutual damage waiver, whereas the REP Settlement Agreements contained a one-way waiver that protected only the IOUs and therefore is less defensible as a sound business decision.