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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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