A-87459, AUGUST 10, 1937, 17 COMP. GEN. 126

A-87459: Aug 10, 1937

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PROJECT FOR WHICH ELECTRICITY WAS PROCURED WAS ABANDONED WITHIN THE TEN- YEAR PERIOD. THE CONTRACTOR IS NOT REQUIRED TO MAKE FURTHER REFUNDS UNLESS AND UNTIL ELECTRIC SERVICE IS RESUMED WITHIN SAID PERIOD. AS FOLLOWS: THERE IS ENCLOSED A COPY OF A LETTER OF DECEMBER 23. CONTAINED THE FOLLOWING PROVISION: "IT IS FURTHER UNDERSTOOD AND AGREED THAT THE TITLE. LIABILITY OF THIS LINE IS TO REMAIN WITH THE PUBLIC UTILITIES CONSOLIDATED CORPORATION AND IN THE EVENT THAT THE DEPARTMENT OF COMMERCE SHOULD SECURE FROM THE TRANSCONTINENTAL AND WESTERN AIR. THEN THE POWER COMPANY WILL REFUND. SHALL HAVE BEEN REFUNDED TO THE DEPARTMENT OF COMMERCE. THE WAIVER WAS OBTAINED AND REFUNDS WERE MADE IN ACCORDANCE WITH THE ENCLOSED STATEMENT.

A-87459, AUGUST 10, 1937, 17 COMP. GEN. 126

ELECTRICITY - ERECTION OF TRANSMISSION LINE AT GOVERNMENT EXPENSE - REIMBURSEMENT THROUGH SERVICE CHARGES - EFFECT OF SERVICE ABANDONMENT WHERE CONTRACT FOR ELECTRIC SERVICE PROVIDED FOR PAYMENT BY THE GOVERNMENT OF THE COST OF CONSTRUCTION OF A TRANSMISSION LINE, AND THAT CONTRACTOR WOULD REIMBURSE THE GOVERNMENT BY REFUNDING A PORTION OF EACH BILL FOR ELECTRICITY UNTIL THE ENTIRE COST HAD BEEN REFUNDED BUT THAT NO REFUNDS WOULD BE MADE AFTER TEN YEARS FROM BEGINNING OF SERVICE, AND PROJECT FOR WHICH ELECTRICITY WAS PROCURED WAS ABANDONED WITHIN THE TEN- YEAR PERIOD, THE CONTRACTOR IS NOT REQUIRED TO MAKE FURTHER REFUNDS UNLESS AND UNTIL ELECTRIC SERVICE IS RESUMED WITHIN SAID PERIOD, BUT NO GOVERNMENT OFFICER MAY RELEASE THE RIGHT TO SUCH REFUNDS IN THE ABSENCE OF ADEQUATE CONSIDERATION, NOTWITHSTANDING THE PRESENT ABANDONMENT, OR THAT SAID ABANDONMENT MIGHT BECOME PERMANENT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF COMMERCE, AUGUST 10, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 2, 1937, AS FOLLOWS:

THERE IS ENCLOSED A COPY OF A LETTER OF DECEMBER 23, 1936, FROM THE CITIZENS' UTILITIES COMPANY AT KINGMAN, ARIZONA, TO THE AIRWAYS DISTRICT MANAGER AT OAKLAND, CALIFORNIA, CONCERNING CONTRACT C18A-837 (C6BA-138) OF JUNE 16, 1931, ENTERED INTO BY THE GOVERNMENT WITH THE PUBLIC UTILITIES CONSOLIDATED CORPORATION FOR ELECTRIC SERVICE AT AN AIRWAYS RADIO RANGE STATION AT THE KINGMAN AIRPORT.

THE CONTRACT REQUIRED THE CONSTRUCTION OF A TRANSMISSION LINE AT A COST TO THE GOVERNMENT OF $1,400.00 TO BE PAID ON COMPLETION OF THE LINE, AND CONTAINED THE FOLLOWING PROVISION:

"IT IS FURTHER UNDERSTOOD AND AGREED THAT THE TITLE, INCLUDING MAINTENANCE, DEPRECIATION, OPERATION, AND LIABILITY OF THIS LINE IS TO REMAIN WITH THE PUBLIC UTILITIES CONSOLIDATED CORPORATION AND IN THE EVENT THAT THE DEPARTMENT OF COMMERCE SHOULD SECURE FROM THE TRANSCONTINENTAL AND WESTERN AIR, INC., A WAIVER OF THE 15 PERCENT REFUND CLAUSE EXISTING IN THE TRANSMISSION LINE CONTRACT BETWEEN PUBLIC UTILITIES CONSOLIDATED CORPORATION AND TRANSCONTINENTAL AIR TRANSPORT, INC., THEN THE POWER COMPANY WILL REFUND, MONTHLY, 15 PERCENT OF THE BILLS PAID FOR ELECTRIC POWER AND LIGHT SERVICE OF THE AIRWAY RADIO RANGE STATION UNTIL THE WHOLE $1,400.00, WITHOUT INTEREST, SHALL HAVE BEEN REFUNDED TO THE DEPARTMENT OF COMMERCE, EXCEPT THAT NO REFUNDS SHALL CONTINUE TO BE MADE BEYOND TEN YEARS FROM THE DATE OF BEGINNING OF SERVICE.'

THE WAIVER WAS OBTAINED AND REFUNDS WERE MADE IN ACCORDANCE WITH THE ENCLOSED STATEMENT.

THE RADIO RANGE STATION AT KINGMAN, TO WHICH THE SERVICE WAS FURNISHED, HAS BEEN ABANDONED AND NO SERVICE HAS BEEN OBTAINED SINCE DECEMBER 24, 1934. THE TOTAL AMOUNT WHICH HAS BEEN REFUNDED BY THE CONTRACTOR IS $460.71. THE CITIZENS' UTILITIES COMPANY, IN ITS LETTER OF DECEMBER 23, STATES THAT NO FURTHER REFUND OF THE CONSTRUCTION CONTRIBUTION IS POSSIBLE UNLESS SERVICE IS FURNISHED AND PAID FOR, AND REQUESTS TO BE INFORMED WHETHER THE CONTRACT SHOULD BE CONSIDERED CANCELLED AND THE "UNREFUNDABLE PORTION OF THE CONSTRUCTION CONTRIBUTION FORFEITED.'

THIS SERVICE IS NO LONGER REQUIRED AND THE CONTRACT SHOULD, THEREFORE, BE CONSIDERED TERMINATED. YOUR DECISION IS RESPECTFULLY REQUESTED AS TO WHETHER THE RIGHT TO A FURTHER REFUND IS FORFEITED OR WHETHER THE CONTRACTOR IS REQUIRED TO REFUND THE BALANCE OF THE $1,400.00 OR ANY PORTION THEREOF.

IN THIS TYPE OF CONTRACT, WHEN THE CONSTRUCTION OF A POLE LINE IS NECESSARY, WE HAVE REGARDED THE POLE LINE CHARGE AS A SORT OF CONNECTION CHARGE AND NOT THE OUTRIGHT PURCHASE OF THE POLE LINE. IT IS A GUARANTEE THAT IF THE COMPANY FURNISHES THE SERVICE, THE GOVERNMENT WILL PURCHASE ENOUGH CURRENT TO REIMBURSE THE COMPANY IN THE FORM OF REVENUE FOR THE EXPENSE OF PROVIDING THE SERVICE. IF IT IS YOUR OPINION THAT A FURTHER REPAYMENT TO THE GOVERNMENT IS NECESSARY AND YOU CONSIDER THAT IT IS SOMETHING LESS THAN THE UNREFUNDED PORTION OF THE $1,400.00, IT WOULD APPEAR THAT THE AMOUNT TO BE REPAID SHOULD EQUAL THE PRESENT SALVAGE VALUE OF THE LINE.

THE RELATIONSHIP BETWEEN THE CITIZENS' UTILITIES CO. AND THE PUBLIC UTILITIES CONSOLIDATED CORPORATION, WITH WHICH COMPANY THE CONTRACT IN QUESTION WAS MADE, IS NOT ESTABLISHED BUT FOR THE PURPOSES OF THE SUBMISSION HERE MADE IT WILL BE ASSUMED THAT THE TWO COMPANIES ARE ONE AND THE SAME.

THE AMOUNT PAID BY THE GOVERNMENT TO THE COMPANY FOR THE CONSTRUCTION OF THE POLE LINE IN THE INSTANT CASE IS PROPERLY FOR VIEWING AS A CONNECTION OR SERVICE CHARGE, AND THE AGREEMENT THAT THIS PAYMENT WAS FOR REFUNDING AT THE RATE OF "15 PERCENT OF THE BILLS PAID FOR ELECTRIC POWER AND LIGHT SERVICE TO THE AIRWAY RADIO RANGE STATION UNTIL THE WHOLE $1,400, WITHOUT INTEREST, SHALL HAVE BEEN REFUNDED," WITH THE FURTHER PROVISION THAT "NO REFUNDS SHALL CONTINUE OR BE MADE BEYOND 10 YEARS FROM THE DATE OF BEGINNING OF SERVICE," SEEMS BASED UPON THE THEORY IF THE AGGREGATE PAYMENT BY THE GOVERNMENT FOR THE CURRENT FURNISHED DURING THE PERIOD NOT EXCEEDING 10 YEARS SHOULD EQUAL OR EXCEED $9,333.33 THE PROFIT TO THE COMPANY WOULD WARRANT THE ABSORPTION BY IT OF THE EXPENDITURE MADE BY THE GOVERNMENT IN REFERENCE OF THE COST OF THE INSTALLATION OF THE POLE LINE HERE INVOLVED. A 15724, SEPTEMBER 30, 1926; A-38113, AUGUST 29, 1931; A- 45236, NOVEMBER 15, 1932. SINCE THE RADIO RANGE STATION WAS ABANDONED PRIOR TO THE EXPIRATION OF A PERIOD DURING WHICH THE COMPANY COULD HAVE ABSORBED THE CHARGE IN QUESTION, IT NECESSARILY FOLLOWS THAT THE COMPANY IS NOT REQUIRED TO MAKE FURTHER REFUNDS UNLESS AND UNTIL ELECTRIC POWER AND LIGHTING SERVICE BE RESUMED AT THE STATION PRIOR TO THE EXPIRATION OF THE LIMITATION PERIOD FIXED IN THE CONTRACT, OR WITHIN SUCH EXTENDED PERIOD AS MIGHT BE AGREED UPON IN THE EVENT OF THE RESUMPTION OF THE SERVICE.

WHETHER SERVICE MAY BE REQUIRED TO BE RESUMED AT THE OPTION OF THE GOVERNMENT WITHIN THE 10-YEAR SERVICE PERIOD WHICH APPARENTLY WILL NOT TERMINATE UNTIL SOMETIME AFTER JUNE 16, 1941, IS AN UNKNOWN FACTOR. OFFICER OF THE GOVERNMENT, HOWEVER, IN THE ABSENCE OF ADEQUATE AND COMPENSATORY CONSIDERATION HAS THE POWER TO RELEASE THE RIGHT VESTED UNDER THE CONTRACT TO HAVE REFUND OF 15 PERCENTUM OF ANY POWER- AND LIGHT- SERVICE BILLS PAID DURING THE 10-YEAR SERVICE PERIOD, AND ASIDE FROM THE FACT OF THE REPORTED $939.29 ($1,400 LESS $460.71), WHICH HAS NOT BEEN AS YET REFUNDED, OF THE EXPENDITURE INCURRED FROM THE PUBLIC FUNDS THERE IS NO EVIDENCE PRESENTED FROM WHICH MIGHT BE DETERMINED WHAT WOULD CONSTITUTE ADEQUATE CONSIDERATION FOR SURRENDER OF THE GOVERNMENT'S RIGHTS. REFUNDS ARE EARNED THROUGH THE COMPANY FURNISHING THE SERVICE. THE MERE FACT THAT SERVICE IS NOT BEING OBTAINED, AND THAT THE ABANDONMENT OF THE LINE MAY BE PERMANENT, DOES NOT JUSTIFY AT THIS TIME A CONCLUSION OF ANY FORFEITURE BY THE UNITED STATES, IF SUCH A FORFEITURE IS POSSIBLE THROUGH ACTION OF GOVERNMENT REPRESENTATIVES, WHICH IS NOT TO BE UNDERSTOOD AS HERE CONCEDED. SPECIFICALLY YOU ARE INFORMED THAT PRESENT ABANDONMENT OF THE RADIO RANGE STATION AT KINGMAN MAY NOT BE ACCEPTED IPSO FACTO TO HAVE TERMINATED OR FORFEITED RIGHT TO FURTHER REFUND UNDER THE CONTRACT.