B-170878, OCT. 21, 1970

B-170878: Oct 21, 1970

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PROVIDES FOR NET BILLING AS A MEANS OF EFFECTING PAYMENT AND IS APPLICABLE TO PROPOSED CONTRACTS WITH PREFERENCE CUSTOMERS IN CONNECTION WITH THE TROJAN NUCLEAR PROJECT. SECRETARY: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 23. COPIES OF TWO OF THE PROPOSED CONTRACTS WERE ENCLOSED WITH THE ASSISTANT SECRETARY'S LETTER. IF THEY HAVE BEEN SUBMITTED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES FOR THE REQUISITE PERIOD PRIOR TO THEIR EXECUTION. AS DISCLOSED BY THE ASSISTANT SECRETARY'S LETTER ARE SET FORTH BELOW. IS THE FIRST NUCLEAR PLANT BEING CONSTRUCTED UNDER THE TEN YEAR HYDRO- THERMAL PROGRAM. THE PLANT IS NEEDED TO MEET A PART OF THE FUTURE POWER REQUIREMENTS FOR THE PACIFIC NORTHWEST AND IS REFERRED TO IN THE PUBLIC WORKS FOR WATER.

B-170878, OCT. 21, 1970

PUBLIC WORKS APPROPRIATIONS ACT-BILLING PROVISIONS APPROVAL OF THE NET BILLING PROCEDURES INCLUDED IN THE CONTRACT BETWEEN BONNEVILLE POWER ADMINISTRATION AND PORTLAND GENERAL ELECTRIC COMPANY. THE PUBLIC WORKS APPROPRIATIONS ACT, 1970, PROVIDES FOR NET BILLING AS A MEANS OF EFFECTING PAYMENT AND IS APPLICABLE TO PROPOSED CONTRACTS WITH PREFERENCE CUSTOMERS IN CONNECTION WITH THE TROJAN NUCLEAR PROJECT.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 23, 1970, AND ENCLOSURES, FROM THE ASSISTANT SECRETARY FOR ADMINISTRATION CONCERNING THE INTENT OF THE BONNEVILLE POWER ADMINISTRATION (BONNEVILLE) TO IMPLEMENT ITS PARTICIPATION IN THE TEN YEAR HYDRO-THERMAL POWER PROGRAM FOR THE PACIFIC NORTHWEST BY EXECUTING CONTRACTS WITH PREFERENCE CUSTOMERS IN CONNECTION WITH THE TROJAN NUCLEAR PROJECT, LOCATED NEAR RANIER, OREGON. COPIES OF TWO OF THE PROPOSED CONTRACTS WERE ENCLOSED WITH THE ASSISTANT SECRETARY'S LETTER. HE REQUESTS TO BE ADVISED WHETHER WE WOULD BE REQUIRED TO OBJECT TO THE NET BILLING PROVISIONS OF THESE PROPOSED CONTRACTS, AND SIMILAR NET BILLING PROVISIONS IN FUTURE CONTRACTS, RELATING TO OTHER PROJECTS IN THE TEN-YEAR PROGRAM, IF THEY HAVE BEEN SUBMITTED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES FOR THE REQUISITE PERIOD PRIOR TO THEIR EXECUTION.

THE PERTINENT FACTS AND CIRCUMSTANCES CONCERNING THE MATTER, AS DISCLOSED BY THE ASSISTANT SECRETARY'S LETTER ARE SET FORTH BELOW.

THE TROJAN PROJECT, SPONSORED BY THE PORTLAND GENERAL ELECTRIC COMPANY, IS THE FIRST NUCLEAR PLANT BEING CONSTRUCTED UNDER THE TEN YEAR HYDRO- THERMAL PROGRAM. THE PLANT IS NEEDED TO MEET A PART OF THE FUTURE POWER REQUIREMENTS FOR THE PACIFIC NORTHWEST AND IS REFERRED TO IN THE PUBLIC WORKS FOR WATER, POLLUTION CONTROL, AND POWER DEVELOPMENT AND ATOMIC ENERGY COMMISSION APPROPRIATIONS ACT, 1970, 83 STAT. 323, 333, AND IN SENATE REPORT NO. 91-528, PAGE 49 (1969), AND THE CONFERENCE REPORT, HOUSE REPORT NO. 91-697, PAGE 17 (1969). THE APPROPRIATION ACT LANGUAGE PROVIDES FUNDS FOR PRELIMINARY ENGINEERING REQUIRED BY BONNEVILLE IN CONNECTION WITH THE PROPOSED AGREEMENTS TO ACQUIRE FROM PREFERENCE CUSTOMERS AND PAY BY NET BILLING FOR THEIR OWNERSHIP SHARE OF GENERATING CAPABILITY FROM NONFEDERALLY FINANCED THERMAL GENERATING PLANTS IN THE MANNER DESCRIBED IN THE COMMITTEE REPORT. THE PROPOSED CONTRACTS IMPLEMENT THE PROCEDURE OUTLINED IN THE COMMITTEE REPORT WHICH STATES THAT BONNEVILLE WILL ACQUIRE FROM A DATE CERTAIN, ON A COST BASIS, THE PREFERENCE CUSTOMER'S RIGHTS TO THE GENERATING CAPABILITY OF NONFEDERALLY FINANCED PLANTS, WHETHER OR NOT THEY ARE OPERABLE. ANY COSTS OR LOSSES TO BONNEVILLE UNDER THESE AGREEMENTS WILL BE BORNE BY BONNEVILLE RATEPAYERS THROUGH RATE ADJUSTMENTS, IF NECESSARY. UNDER SUCH ARRANGEMENTS, BONNEVILLE PAYMENT OBLIGATIONS FOR THE ACQUISITION OF THERMAL POWER WOULD BE LIQUIDATED BY NET BILLING AGAINST AMOUNTS DUE BONNEVILLE FROM THERMAL PLANT PARTICIPANTS UNDER THEIR OTHER OBLIGATIONS TO BONNEVILLE.

THE PROPOSED CONTRACTS WERE FORWARDED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES ON MARCH 27, 1970, AND NEITHER COMMITTEE HAS VOICED ANY OBJECTION TO THE CONTRACTS.

THE CONFERENCE REPORT ON THE PUBLIC WORKS APPROPRIATION ACT, 1970, LIMITED APPROVAL OF THE IMPLEMENTATION OF THE TEN YEAR HYDRO-THERMAL POWER PROGRAM FOR THE PACIFIC NORTHWEST TO THE TROJAN AND EUGENE PROJECTS "PENDING AN OPPORTUNITY FOR DETAILED REVIEW BY THE COMMITTEES ON APPROPRIATIONS OF THE LONG-RANGE HYDROTHERMAL PLAN." HOUSE REPORT NO. 91- 697, PAGE 17. THAT DETAILED REVIEW OCCURRED AT THE HEARINGS THIS YEAR ON THE PUBLIC WORKS APPROPRIATION BILL, 1971, AS A RESULT OF WHICH THE COMMITTEES APPROVED THE IMPLEMENTATION OF THE REMAINDER OF THE PROGRAM. HOUSE REPORT NO. 91-1219, PAGE 90 (1970), AND SENATE REPORT NO. 91-1118, PAGE 56 (1970).

THE PUBLIC WORKS FOR WATER, POLLUTION CONTROL, AND POWER DEVELOPMENT AND ATOMIC ENERGY COMMISSION APPROPRIATION ACT, 1971, APPROVED OCTOBER 7, 1970, PUBLIC LAW 91-439, APPROPRIATES CONSTRUCTION FUNDS FOR BONNEVILLE, SUBJECT TO THE FOLLOWING PROVISO:

" *** PROVIDED, THAT NOT MORE THAN $150,000 OF THE FUNDS APPROPRIATED HEREIN SHALL BE AVAILABLE FOR PRELIMINARY ENGINEERING REQUIRED BY THE BONNEVILLE POWER ADMINISTRATION IN CONNECTION WITH THE PROPOSED AGREEMENTS RELATING TO THREE NON-FEDERALLY FINANCED GENERATING PLANTS PROPOSED UNDER THE HYDRO-THERMAL PROGRAM TO BE SPONSORED JOINTLY OR SEVERALLY BY THE WASHINGTON PUBLIC POWER SUPPLY SYSTEM, SEATTLE CITY LIGHT, TACOMA CITY LIGHT, SNOHOMISH COUNTY PUD AND THE PUGET SOUND POWER AND LIGHT COMPANY, PURSUANT TO WHICH BONNEVILLE POWER ADMINISTRATION WILL ACQUIRE FROM PREFERENCE CUSTOMERS AND PAY BY NET BILLING FOR GENERATING CAPABILITY FROM NON-FEDERALLY FINANCED THERMAL GENERATING PLANTS IN THE MANNER DESCRIBED IN THE COMMITTEE REPORT."

AS EXPLAINED TO AN APPROPRIATION SUBCOMMITTEE OF THE HOUSE APPROPRIATIONS COMMITTEE - AT PAGE 871 OF THE HEARINGS ON PUBLIC LAW 91 439 - THE NET BILLING OR BALANCE PROVISIONS CONTAINED IN THE TWO PROPOSED CONTRACTS INVOLVE, AMONG OTHER THINGS--

" *** A SEVERAL-STEP PROCEDURE ON THE METHOD OF PAYMENT. FIRST, THIS NET BILLING TRANSACTION BETWEEN BONNEVILLE AND THE PUBLIC AGENCY WHICH ASSIGNS THE SHARE OF THE POWER TO BONNEVILLE WILL NORMALLY TAKE CARE OF THE PAYMENT. TO MAKE SURE THAT THAT WILL BE THE CASE, WE ESTIMATE THE NET BILLING CAPABILITY OF THE CUSTOMER AT 15 PERCENT BELOW WHAT WE ANTICIPATE HIS ACTUAL INDEBTEDNESS TO BONNEVILLE WOULD BE.

"SECOND, IF FOR SOME REASON THE NET BILLING CAPABILITY OF THAT CUSTOMER IS NOT SUFFICIENT TO PERMIT PAYMENT, THE CONTRACT PROVIDES FOR A VOLUNTARY ASSIGNMENT, THE ADMINISTRATOR WILL ATTEMPT TO ASSIGN THAT EXCESS SHARE TO SOME OTHER CUSTOMER WHO DOES HAVE THE ABILITY TO NET BILL IT. IF SUCH VOLUNTARY ASSIGNMENT DOES NOT WORK, WE MOVE TO THE THIRD STEP.

"THE THIRD STEP IN THE CHAIN IS THAT THE PARTICIPANTS IN THE CONTRACT FOR THAT PARTICULAR PLANT ARE THEN REQUIRED TO ACCEPT SUCH AN ASSIGNMENT UP TO 25 PERCENT OF THEIR ORIGINAL PURCHASES. IT IS ONLY AFTER ALL THREE OF THOSE CONDITIONS FAIL THAT BONNEVILLE IS OBLIGATED TO COME TO CONGRESS AND REQUEST APPROPRIATIONS FOR PAYMENT IN CASH. THAT CONTRACTUAL PROVISION PROVIDES FOR PAYMENT SUBJECT TO AVAILABILITY OF APPROPRIATIONS. IF THE APPROPRIATIONS ARE NOT FORTHCOMING, THAT BEING THE FOURTH STEP, WE COME TO THE FIFTH AND FINAL STEP.

"THE PARTICIPANT HAS NO RIGHT TO PAYMENT IN CASH BUT HE DOES HAVE THE RIGHT TO WITHDRAW THE POWER, TAKE IT BACK FROM BONNEVILLE AND USE IT IN HIS OWN SYSTEM OR RESELL IT TO SOMEONE ELSE." (SEE ALSO PAGE 876 OF THE SAME HEARINGS.)

THE HOUSE APPROPRIATIONS COMMITTEE IN REPORTING OUT PUBLIC LAW 91-439 STATED IN HOUSE REPORT NO. 91-1219, AT PAGE 90, WITH RESPECT TO NET BILLING PROCEDURES IN CONNECTION WITH THE TEN-YEAR PROGRAM THAT--

"LAST YEAR THE ADMINISTRATION APPROVED A 10-YEAR HYDROTHERMAL POWER PROGRAM FOR THE PACIFIC NORTHWEST, AND THE CONGRESS APPROVED INITIATING ITS IMPLEMENTATION THROUGH PROPOSED AGREEMENTS BETWEEN BONNEVILLE POWER ADMINISTRATION, PORTLAND GENERAL ELECTRIC CO., AND THE EUGENE WATER & ELECTRIC BOARD.

"THE PROGRAM INCLUDES THE CONSTRUCTION OF SEVEN THERMAL GENERATING PLANTS BETWEEN 1971 AND 1981. NONE WILL BE FEDERALLY CONSTRUCTED, FINANCED OR OWNED. THE COMMITTEE APPROVES IMPLEMENTATION OF THE REMAINDER OF THE PROGRAM BY THE USE OF NET BILLING AS THE MEANS OF AFFECTING PAYMENT BY THE BONNEVILLE POWER ADMINISTRATION FOR PART OR ALL OF THE GENERATING CAPACITY OF NONFEDERALLY FINANCED THERMAL PLANTS, UNDER SUITABLE AGREEMENTS BETWEEN BONNEVILLE POWER ADMINISTRATION AND PREFERENCE CUSTOMERS TO ACCOMPLISH THIS PURPOSE. SUCH AGREEMENTS WOULD PROVIDE THAT THE BONNEVILLE POWER ADMINISTRATION WILL ACQUIRE FROM A DATE CERTAIN, ON A COST BASIS, THE PREFERENCE CUSTOMERS' RIGHTS TO THE GENERATING CAPABILITY OF NONFEDERALLY FINANCED PLANTS WHETHER OR NOT THEY ARE OPERABLE. ANY COSTS OR LOSSES TO THE BONNEVILLE POWER ADMINISTRATION UNDER THESE AGREEMENTS WILL BE BORNE BY BONNEVILLE POWER ADMINISTRATION RATE PAYERS THROUGH RATE ADJUSTMENTS IF NECESSARY. THE COMMITTEE REQUESTS THAT THE PROPOSED AGREEMENTS BE SUBMITTED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES AT LEAST 60 DAYS PRIOR TO THEIR EXECUTION BY THE ADMINISTRATOR."

THE SENATE APPROPRIATIONS COMMITTEE IN SENATE REPORT NO. 91-1118, PAGE 56, CONCURRED IN THE ACTION TAKEN BY THE HOUSE, STATING THAT--

"IN THE PUBLIC WORKS APPROPRIATION ACT FOR FISCAL YEAR 1970 THE CONGRESS APPROVED INITIATING ITS IMPLEMENTATION THROUGH PROPOSED AGREEMENTS BETWEEN BONNEVILLE POWER ADMINISTRATION, PORTLAND GENERAL ELECTRIC CO., AND THE EUGENE WATER & ELECTRIC BOARD.

"THE BILL AS PASSED BY THE HOUSE APPROVES IMPLEMENTATION OF THE REMAINDER OF THE PROGRAM BY THE USE OF NET BILLING AS THE MEANS OF EFFECTING PAYMENT BY THE BONNEVILLE POWER ADMINISTRATION FOR PART OR ALL OF THE GENERATING CAPACITY OF NONFEDERALLY FINANCED THERMAL PLANTS, UNDER SUITABLE AGREEMENTS BETWEEN BONNEVILLE POWER ADMINISTRATION AND PREFERENCE CUSTOMERS TO ACCOMPLISH THIS PURPOSE. THE COMMITTEE CONCURS IN THE ACTION TAKEN BY THE HOUSE.

" *** ANY COSTS OR LOSS TO THE BONNEVILLE POWER ADMINISTRATION UNDER THESE AGREEMENTS WILL BE BORNE BY BONNEVILLE POWER ADMINISTRATION RATE PAYERS THROUGH RATE ADJUSTMENTS IF NECESSARY.

"THE HOUSE COMMITTEE IN ITS REPORT REQUESTED THAT THE PROPOSED AGREEMENTS BE SUBMITTED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES AT LEAST 60 DAYS PRIOR TO THEIR EXECUTION BY THE ADMINISTRATOR. THIS PROCEDURE WILL PROVIDE THE COMMITTEES AMPLE TIME FOR REVIEW OF THE PROPOSED CONTRACTS."

IT IS CLEAR FROM THE STATUTORY PROVISO QUOTED ABOVE AND THE EXCERPTS FROM THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES REPORTS THAT THE CONGRESS INTENDED THAT THE TEN-YEAR PROGRAM IN QUESTION WAS TO BE IMPLEMENTED BY THE USE OF NET BILLING AS A MEANS OF EFFECTING PAYMENT. ACCORDINGLY, AND SINCE THE PARTICIPANTS HAVE NO RIGHT TO CASH PAYMENTS, WE WOULD NOT BE REQUIRED TO OBJECT TO THE NET BILLING PROVISIONS OF THESE PROPOSED CONTRACTS, AND SIMILAR NET BILLING PROVISIONS IN FUTURE CONTRACTS, IF THEY HAVE BEEN SUBMITTED TO THE HOUSE AND SENATE APPROPRIATIONS COMMITTEES FOR THE REQUISITE PERIOD PRIOR TO THEIR EXECUTION AND PROVIDED THE CONGRESS IS INFORMED WITH RESPECT TO ALL ..END :