concurring in part and dissenting in part:
I concur in the majority opinion in part, but dissent from section B. l.a which relates to the 2007 Block Contracts. The question in that section is whether BPA may use a contractual damages waiver provision to strip itself of its obligation to seek recovery of $100 to $200 million in funds that it expended not only illegally but contrary to the statutory limits on its authority. The answer to that question is necessarily no. The majority’s contrary answer allows BPA to violate its statutory limitations at will and to shield itself against taking any measure to remedy its unlawful actions. I would hold that this damages waiver provision, as applied, op*932erates in excess of BPA’s statutory authority.
In my view, this case is controlled by our holding in Portland General Electric Co. v. Bonneville Power Administration (PGE), 501 F.3d 1009 (9th Cir.2007). In PGE, we held that BPA’s contracting and settlement powers are “limited by the constraints of the [Northwest Power Act].” We explained:
Section 2(f) grants BPA the power to enter into contracts,1 but it says nothing about the kind of contracts which BPA may sign. We think it obvious, as a matter of general administrative law, that the contracts into which BPA may enter must be grounded in the authority, express or implied, that Congress has granted BPA.
Id. at 1030. We then went on to list a series of contracts that would clearly lie outside of the authority that Congress granted to BPA. For example, we stated that BPA could not enter into a contract to acquire an NBA franchise.2 Id. So too, as we held in PNGC I, it may not enter into a monetization contract that functions as an impermissible subsidy of the aluminum industry. Pac. Nw. Generating Coop. v. Dep’t of Energy (PNGC I), 580 F.3d 792, 823 (9th Cir.2009).
Admittedly, BPA’s authority to monetize and thus subsidize its DSI customers presented a closer question in PNGC I than the example given in PGE in which BPA would acquire the Portland Trail Blazers, and likely rename them the Bonneville Smelters. Nevertheless, in PNGC I, we held that BPA’s monetization of power at subsidized rates was (as would be the purchase of the Trail Blazers) “inconsistent with BPA’s authority under the [Northwest Power Act].” PNGC I, 580 F.3d at 823. In other words, BPA’s decision to “giv[e] a few of its customers $300 million,” id., was “so arbitrary and capricious as to violate its statutory obligation.” Alcoa Inc. v. Bonneville Power Admin., 698 F.3d 774, 789 (9th Cir.2012).
BPA argues that it is not permitted to seek recovery of the illegally transferred funds because the contracts contain damages waiver provisions. The majority holds that the contractual waivers are a valid exercise of BPA’s power to settle claims. Maj. Op. at 925. But just as BPA’s authority to enter into contracts is constrained by its statutory limitations, so too is its authority to settle claims. As we stated in PGE, “Congress could not have made it any clearer that it intended for BPA to exercise its general settlement authority within the confines of the [Northwest Power Act].” 501 F.3d at 1028. That BPA’s settlement authority is constrained by its statutory limitations in the same manner as is its contracting authority follows necessarily because otherwise BPA could accomplish by settlement precisely what it could not accomplish by contract in the first instance. A settlement provision allowing BPA to retain title to the Bonne*933ville Smelters and permitting the former owners of the Trad Blazers to retain the illegally transferred purchase price would, for example, certainly not lie within BPA’s settlement authority.
Here, the majority’s holding allows BPA to accomplish the very subsidy of the aluminum DSIs that we held in PNGC I to be unlawful and outside of its statutory authority. Because we held in PGE that “[a] settlement agreement must not be a means of bypassing congressionally mandated requirements,” a damages waiver provision must be interpreted in a manner that forbids such circumvention of the limitations on BPA’s statutory powers. See 501 F.3d at 1030. Construing the provision consistently with BPA’s statutory mandate requires that we hold that the damages waiver provision may not be applied here so as to shield the illegal subsidy and allow the aluminum industry to retain the unlawful payments provided for in the 2007 Block Contracts. Unfortunately, the majority fails to acknowledge that PGE is the controlling case.
In upholding BPA’s decision not to seek the return of the illegally transferred funds, the majority relies primarily on our holding in Alcoa v. Bonneville Power Administration that a damages waiver provision similar to the ones at issue here falls within BPA’s claim-settling authority. Maj. Op. at 926-27. Alcoa does not control this case. Alcoa upheld BPA’s sale of power to a DSI at a below-market rate, concluding that the terms of sale specified in the agreement—unlike the unlawful subsidies that are the subject of this case—were lawful and valid. 698 F.3d at 789. Finding no violation of the agency’s statutory mandate, we then turned to the petitioners’ challenge to the agreement’s damages waiver provision and upheld its inclusion in the contract. Id. at 791-92.3 In short, the damages waiver provision we upheld in general was included in a contract that did not itself provide for illegal subsidies or otherwise for violations of BPA’s governing statutes. Because we held that the transaction at issue in Alcoa was consistent with the statutory limits on BPA’s authority, we had no occasion to consider whether a damages waiver provision that would allow BPA’s customers to retain unlawful benefits afforded them contrary to BPA’s statutory limits lies within BPA’s settlement authority. The answer appears otherwise.
That Alcoa did not address the issue we encounter in this case is evident from BPA’s brief in Alcoa. There, BPA argued that any holding recognizing BPA’s general authority to waive damages in a contract would have no bearing on a situation like *934the one we are now presented with, in which the underlying transaction lies beyond BPA’s statutory authority. BPA explicitly distinguished the case before it from the application of a damages waiver provision under the circumstances present here. Its brief told us: “The Alcoa Contract involves a sale of power, not a monetized transaction such as those under review in PNGC I and II. Therefore, this case does not involve any issue of BPA ‘recouping illegal payments’ because no such payments will be made.” Answering Br. of Resp’t Bonneville Power Admin, at 75, Alcoa, 698 F.3d 774 (No. 10-70211). This statement makes clear that BPA expressly disclaimed the authority to apply a damages waiver provision to prevent the agency from recouping funds transferred without statutory authority. The fact that the majority has now, on the basis of Alcoa, granted BPA the authority it expressly disclaimed is striking.4 But even setting that concern aside, BPA’s brief to the Alcoa court proves that Alcoa could not have possibly decided the issue present in this case—whether a damages waiver provision which does prevent BPA from recouping funds transferred without statutory authorization is permissible—because BPA explicitly distinguished that issue from the one presented in Alcoa.
That we did not intend Alcoa to authorize the settlements at issue here is further evident from the Alcoa court’s failure to discuss or even mention PGE. PGE clearly requires BPA to exercise both its contracting and its settlement authority in a manner consistent with its statutory obligations. See 501 F.3d at 1030-31. Thus, Alcoa did not and could not have authorized BPA, by means of its settlement authority, to surrender its right to seek restitution from the beneficiary of funds transferred to them in excess of BPA’s statutory authority without creating a direct conflict with the principles that we established in PGE. The only reading of Alcoa that is consistent with PGE is that Alcoa approved the general authority of BPA to include damages waiver provisions in its agreements, a conclusion with which I firmly agree. Viewed in this light, it is obvious why the Alcoa court did not discuss PGE—we were simply not presented with the unlawful application of a damages waiver provision because we did not rule any part of the agreement at issue invalid. Had we done so, and had the damages waiver provision applied, we certainly could not have escaped the requirement expressed in PGE that BPA must exercise its contracting and settlement authority within the confines of its governing statutes.
The majority disagrees, reasoning that the damages waiver provisions at issue here and in Alcoa look alike, and that Alcoa therefore controls. That Alcoa did not consider the application of a damages waiver provision to a disbursement of funds in contravention of BPA’s statutory authority is of no consequence to the majority. To my colleagues, the fact that the provisions are similar ends the inquiry. Thus, the necessary consequence of the majority opinion is that Alcoa—without mentioning PGE—has blessed not only *935BPA’s general authority to include a damages waiver provision in its agreements, but also every application of such a provision.5
Recognizing that this position is unsustainable, the majority attempts to disclaim such a holding by noting that if a damages waiver “does not benefit the agency and is instead designed principally to prevent an unlawful subsidy from being recouped,” then such a waiver would be invalid. Maj. Op. at 926. However, this case demonstrates why the majority’s ostensible limit on its decision will have no practical effect. Before our Court, ICNU made the precise argument that the majority claims would be sufficient to invalidate a damages waiver; it argued that the waiver “was designed to ensure that ... BPA could circumvent Congress’ goal of prohibiting sales to the DSIs at rates lower than the market or legal rate” (emphasis added). BPA countered that “the damages waiver is intended to broadly protect both BPA and Alcoa from damages claims that either party could bring against the other.” In fact, an agency’s motive in agreeing to a waiver of damages may well be mixed. There will ordinarily be some potential benefit to it if it is protected against damages. In short, it may very well be true that the damages waiver provisions both protect BPA from potential liability and were “designed principally” to ensure that the aluminum companies could retain their subsidies—whether they were lawful or not.
Here, it was “apparent” that charging the DSIs a rate that was below both the rate authorized by statute and the rate available on the open market conflicted with BPA’s statutory mandate, and was therefore “highly suspect.” PNGC I, 580 F.3d at 821. Under these circumstances, it is reasonable to conclude that when BPA included a damages waiver provision in its contracts with the DSIs, it knew that there was at least a substantial likelihood that this Court would declare the $100 to $200 million in subsidies to have been unlawfully paid, it knew that the damages waiver provisions would allow the DSIs to keep their ill-gotten gains, and such was a principal reason for including the damages waiver provisions in the contracts. In my view, however, it is not even necessary to reach the question of why BPA included the damages waiver provisions in its contracts with the DSIs. The proper approach is simply to apply our binding precedent in PGE and ask whether BPA is invoking a damages waiver provision in a manner that is contrary to its statutory authority.6 The answer to that question is clearly, yes.
In this case, BPA operated contrary to its statutory authority in subsidizing the aluminum companies in the amount of $100 to $200 million, not only by making the *936initial payments but by failing to seek restitution of the amounts illegally transferred. Its reliance on general damages waiver provisions in the agreements as precluding it from securing the return of those payments is without support in the law. Therefore, I would hold, consistent with PGE, that applying a damages waiver provision to prevent BPA from obtaining recovery of illegally transferred funds is beyond BPA’s statutory authority. I respectfully concur in part and dissent in part.
. Section 2(f) of the Bonneville Project Act provides that, “Subject only to the provisions of this chapter, the Administrator is authorized to enter into such contracts, agreements, and arrangements, including the amendment, modification, adjustment, or cancelation [sic] thereof and the compromise or final settlement of any claim arising thereunder, and to make such expenditures, upon such terms and conditions and in such manner as he may deem necessary.” 16 U.S.C. § 832a(£). Section 9(a) of the Northwest Power Act later reaffirmed this grant of contracting and settlement authority. 16 U.S.C. § 839f(a); see also PGE, 501 F.3d at 1017.
. In Pacific Northwest Generating Cooperative v. Bonneville Power Administration (PNGC II), we similarly made clear that BPA's mere authority to enter into a contract could "not insulate from review” its decision to do so. 596 F.3d 1065, 1073 (9th Cir.2010).
. It is immaterial that Alcoa declined to address the validity of the "Second Period” portion of the Alcoa contract. In Alcoa, we held that petitioners’ challenge to the Second Period did not survive our standing or ripeness inquiry in part because an amendment to the Alcoa contract "eliminated all references to the Second Period,” meaning that “BPA and Alcoa would need to enter into a new contract that includes a similar Second Period before the petitioners could point to even the threat of suffering harm.” 698 F.3d at 793-94. It would have been quite peculiar to speculate how the damages waiver provision might have operated in the context of an agreement that no longer existed. In any event, our decision not to address petitioners’ challenge to the Second Period does not change the fact that, at the time we addressed the damages waiver provision in Alcoa, we did so in the context of an otherwise valid agreement, and therefore did not encounter the application of a damages waiver provision. What the majority would need to substantiate its point— and what it is clearly lacking—is a statement in Alcoa that the damages waiver provision could be validly applied to prevent BPA from recouping funds that it dispersed as a result of the Second Period of the Alcoa contract even if the terms of the Second Period violated BPA’s statutory mandate.
. I note but need not rely on the argument that BPA may be precluded by judicial estop-pel from relying on Alcoa. Judicial estoppel bars a party from making an argument in a judicial proceeding that directly contradicts an argument on which it prevailed in a prior proceeding. See Russell v. Rolfs, 893 F.2d 1033, 1037-39 (9th Cir.1990). BPA assured this Court that if we ruled for it in Alcoa, our decision would not concern "any issue of BPA 'recouping illegal payments.' " Having prevailed on its argument, it now tells us the opposite—that our decision in Alcoa decided precisely the issue that BPA said our decision would not affect.
. The majority also relies on the fact that in each of the 2007 Block Contracts, the damages waiver provision is severable from the invalid provisions that unlawfully subsidize the aluminum industry. It is difficult to understand why. No one has suggested that the damages waiver provision is itself invalid. Rather, it is only its applicability to the unlawful subsidization that is at issue. To suggest that severing the unlawful subsidization provisions from the damages waiver provision somehow precludes BPA from seeking to recover the amounts it paid under those unlawful provisions makes no sense whatsoever. In fact, the severance shows only that the payments were beyond BPA’s authority, not that BPA’s customers must be allowed to keep the $100 to $200 million in subsidies that BPA unlawfully gave them.
. Of course, PGE does not bar the application of all damages waiver provisions. Such a provision could still apply if an agreement is otherwise invalid for a reason that does not implicate BPA’s statutory authority, such as when an agreement is invalid for conflicting with general principles of contract law.