Boulder Canyon Project Adjustment
Act
This Act of July 19, 1940, 54 Stat. 774, was prompted by a
request from the power allottees for a
review of the power rates. During the 7 years between
execution of the power contracts and the
delivery of energy several factors had developed. The
competitive value of Boulder Dam energy had
fallen because of improvements in the art of generating
power by steam, decreases in the cost of fuel
and in the capital costs of steamplants. Further, The
Bureau of Reclamation in the Reclamation
Project Act of 1939 adopted the policy of dropping the
competitive rate base for a rate fixed by the
amount needed to amortize the investment allocated to
power, plus costs of operation, maintenance
and replacement.
The Adjustment Act substituted for the old rate adjusted
periodically by competitive conditions a
rate stabilized for the 50-year period from June 1, 1937,
to May 31, 1987, sufficient to meet:
operation, maintenance, and replacement costs; repayment to
the Treasury of reimbursable advances,
including interest which was reduced from 4 percent to 3
percent; $300,000 paid annually to each of
the States of Arizona and Nevada in commutation of the
share of excess revenues provided for those
States by Section 4(b) of the Project Act; and payment of
$500,000 annually to the Colorado River
Development Fund.
Repayment of the $25,000,000 allocated to flood control by
Section 2(b) of the Project Act was
deferred until June 1, 1987, without interest, after the
50-year repayment period, after which time
repayment shall be as determined by Congress.
Among other features of the Act was a provision (Section
2(b)) for reduction of payments to
Arizona and Nevada if the project or features of it were
taxed by the States or its political
subdivisions. This provision was utilized in 1970 when
Clark County, Nevada, attempted
(unsuccessfully) to tax the interests of the City of Los
Angeles and The Metropolitan Water District
in the Project.
Another provision (Section 9) authorized the Secretary to
substitute an agency operating agreement
for the lease held by the City of Los Angeles and the
Southern California Edison Company. The
agency contract was executed May 29, 1941. Nine energy
contracts were entered into on the same
date (the Arizona contract was executed November 23, 1945).
These were with the States of Nevada
and Arizona; the public agencies of Pasadena, Burbank,
Glendale, Los Angeles and the Metropolitan
Water District; and these utilities: Southern California
Edison Company and California Electric
Power Company.
Water Delivery Contracts - General:
The basis of the Secretary's contracting authority is
Section 5 of the Boulder Canyon Project Act. It
authorizes the Secretary of the Interior to contract for
the storage of water in the reservoir created
by the Dam and for the delivery thereof for irrigation and
domestic use. The Act further provides that
such contracts shall be for "permanent service." The Act
provides that "No person shall have or be
entitled to have the use for any purpose of the water
stored as aforesaid except by contract made as
herein stated.”
Implementation of Water Delivery Contract Authority:
Since the Metropolitan Water District was assumed to be a
major purchaser of Hoover Dam energy
for the purpose of pumping water to southern California via
its proposed Colorado River Aqueduct,
a power contract for that purpose required a water delivery
contract between the Secretary and
MWD. Also, to permit Imperial Irrigation District (IID) to
contract for repayment of construction of
the All-American Canal, a water delivery contract with IID
was needed. Hence the need arose for
negotiation of water delivery contracts by the Secretary.
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