B-144964, FEB. 23, 1961

B-144964, FEB. 23, 1961

TO SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTER OF JANUARY 31, 1961, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING TO BE ADVISED WHETHER WE WOULD BE REQUIRED TO OBJECT TO THE AMENDING OF CONTRACT NO. 14-06-0100- 1901, COVERING ELECTRIC POWER FURNISHED TO THE CITY OF BURLEY, IDAHO. THE PROPOSED AMENDMENT, IN THE NATURE OF A REFORMATION OF THE CONTRACT, WOULD BE RETROACTIVE TO NOVEMBER 1, 1959, AND AFFORD CERTAIN RELIEF TO THE CONTRACTOR BY CHANGING THE MINIMUM CHARGE PROVISIONS OF THE AGREEMENT FROM 1200 TO 400 KILOWATTS FOR ENERGY DELIVERED THROUGH THE FERRY SUBSTATION FROM THE ABOVE DATE THROUGH OCTOBER 1960.

THE RECORD DISCLOSES THAT THE SUBJECT CONTRACT WAS EXECUTED BY THE PARTIES TO SUPERSEDE A FORMER CONTRACT IDENTIFIED AS NO. 14-06-100-953, DATED MAY 8, 1956. THE PRESENT CONTRACT WAS FINALIZED ON MAY 2, 1960, AND MADE RETROACTIVE TO NOVEMBER 1, 1959, FOR THE CONVENIENCE OF THE BUREAU OF RECLAMATION FOR INTERNAL MANAGEMENT PURPOSES. THE CURRENT CONTRACT PROVIDES FOR AN INCREASED ALLOCATION OF POWER TO THE CITY WITH A MINIMUM OF 1200 KILOWATTS TO BE DELIVERED THROUGH A SECOND TRANSFORMER THEN EXISTING AND DESIGNATED AS THE FERRY SUBSTATION. RATE SCHEDULE R 1-F3 MADE A PART OF THE AGREEMENT PROVIDES FOR A MINIMUM CHARGE OF $1 PER MONTH PER KILOWATT OF THE CONTRACT RATE OF DELIVERY, AND WHEN CONSIDERED IN CONJUNCTION WITH THE STIPULATED CONTRACT RATE OF DELIVERY UNDER PARAGRAPH 4 (B) OF THE CONTRACT THE CITY BECAME LIABLE FOR A MINIMUM CHARGE OF $1,200 PER MONTH FOR THE SERVICE SUPPLIED THROUGH THE FERRY SUBSTATION.

WHILE THE TOTAL CONSUMPTION OF ENERGY BY THE CITY AT BOTH SUBSTATIONS EXCEEDED IN EACH BILLING PERIOD FROM NOVEMBER 1, 1959, TO SEPTEMBER 30, 1960, THE TOTAL MINIMUM ALLOCATIONS, THE AMOUNT METERED THROUGH THE FERRY SUBSTATION DURING THAT PERIOD WAS MATERIALLY LESS THAN THE MINIMUM AMOUNT FIXED BY THE NEW CONTRACT. IT IS APPARENT THAT THE PARTIES TO THE CONTRACT FAILED TO TAKE INTO CONSIDERATION THE FORCE AND EFFECT OF THE MINIMUM CONSUMPTION AND BILLING PROVISIONS OF THE AGREEMENT AS EVIDENCED BY THE FACT THAT THE BUREAU OF RECLAMATION BILLED THE CITY ONLY FOR THE ACTUAL AMOUNT OF ENERGY USED DURING THE PERIOD IN QUESTION. FURTHERMORE, IF THE MATTER HAD BEEN BROUGHT TO ITS ATTENTION, THE CITY WOULD HAVE TRANSFERRED A PART OF THE TOTAL ENERGY DELIVERED TO IT FROM THE BURLEY TO THE FERRY SUBSTATION BY REARRANGING ITS FEEDER CIRCUITS AND THUS WOULD HAVE AVOIDED ANY EXTRA CHARGES THEREAFTER UNDER THE MINIMUM BILLING PROVISIONS.

UPON A REVIEW OF THE ACCOUNT WITH THE CITY BY BUREAU OF RECLAMATION PERSONNEL IT WAS DISCOVERED THAT THE MINIMUM BILLING RATES FOR THE INDIVIDUAL SUBSTATIONS HAD BEEN OVERLOOKED, AND THEREAFTER THE CITY WAS CHARGED WITH THE DIFFERENCE BETWEEN THE ACTUAL CONSUMPTION AND MINIMUM RATES AT THE FERRY SUBSTATION, EQUAL TO $7,893.30 FOR THE ELEVEN BILLING PERIODS. IN PROTESTING THE CHARGE RAISED AGAINST IT, THE CITY ALLEGES THAT SUCH MINIMUM CHARGES WERE FOR APPLICATION ONLY AGAINST THE TOTAL POWER DISTRIBUTED THROUGH BOTH SUBSTATIONS, WHICH AMOUNTS EXCEEDED THE TOTAL MINIMUM ALLOCATIONS. THIS APPEARS TO HAVE BEEN THE UNDERSTANDING OF THE BUREAU ALSO AS EVIDENCED BY THE BILLINGS AFTER MAY 1960. IN ANY EVENT, THE CITY POINTS OUT THAT IF SUCH MINIMUM BILLING HAD BEEN MADE AT THE TIME OF THE ALLOCATED INCREASE, ANY DEFICIENCY AT THE FERRY SUBSTATION COULD HAVE BEEN ELIMINATED THROUGH REDISTRIBUTION OF ENERGY BETWEEN THE TWO SUBSTATIONS, AS HAS NOW BEEN DONE. THUS, IT APPEARS THAT ASA RESULT OF THE BILLING OVERSIGHT BY THE BUREAU THE CITY WAS LED TO BELIEVE THAT THE MINIMUM BILLING RATES APPLIED ONLY TO THE TOTAL CONSUMPTION OF THE TWO SUBSTATIONS.

IN VIEW OF THE FOREGOING IT IS APPARENT THAT THE PARTIES TO THE CONTRACT OVERLOOKED THE CONSEQUENCES OF THE MINIMUM RATES AND BILLING PROVISIONS OF THE CONTRACT, AND THAT IT WAS NOT THEIR INTENTION TO RAISE A CHARGE AGAINST THE CITY FOR THE DEFICIENCY IN POWER SUPPLIED TO THE FERRY SUBSTATION FOR THE PERIOD INVOLVED. WHILE THERE IS NO AMBIGUITY IN THE TERMS OF THE SUBJECT CONTRACT, THERE IS NO DOUBT BUT THAT THE CITY OFFICIALS WOULD NOT HAVE EXECUTED THE DOCUMENT IF ITS EFFECT HAD BEEN UNDERSTOOD. THE RECORD ALSO INDICATES THAT AT THE TIME THE CONTRACT WAS NEGOTIATED THE CONTRACTING OFFICER'S UNDERSTANDING WAS SIMILAR TO THAT OF THE CITY. WE BELIEVE THE EVIDENCE ON THIS POINT IS SUFFICIENT TO JUSTIFY REFORMATION OF THE CONTRACT. 30 COMP. GEN. 220. HOWEVER, THE RECORD DISCLOSES THAT SINCE THE POWER DISTRIBUTED THROUGH THE FERRY SUBSTATION NOW EXCEEDS THE MINIMUM QUANTITY SPECIFIED IN THE CONTRACT, REFORMATION THEREOF, TO AVOID THE FORMER SITUATION, NO LONGER IS NECESSARY. IN VIEW THEREOF WE DO NOT FEEL THAT REFORMATION OF THE CONTRACT, WHILE APPARENTLY JUSTIFIABLE, IS NOW REQUIRED.

WITH RESPECT TO THE CHARGES OF $7,893.30 RAISED AGAINST THE CITY OF BURLEY FOR THE DEFICIENCIES IN THE MONTHLY BILLING PERIODS FROM NOVEMBER 1959 THROUGH SEPTEMBER 1960, IT IS APPARENT THAT IT WAS NOT THE INTENTION OF THE PARTIES TO RENDER THE CONTRACTOR LIABLE THEREFOR. FOR THAT REASON SUCH CHARGES MAY BE CANCELLED. A COPY OF THIS DECISION SHOULD BE ATTACHED TO THE CONTRACT.