B-137458, SEP 13, 1974

B-137458 Sep 13, 1974
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BONNEVILLE POWER ADMINISTRATION BPA IS AUTHORIZED BY EXISTING LAW TO PURCHASE POWER FOR THE ACCOUNTS OF ITS STATUTORY PREFERENCE AGENCY CUSTOMERS IN ORDER TO MEET THEIR NEEDS PURSUANT TO AGREEMENTS WHEREBY OWNERSHIP OF THE PURCHASED POWER WILL NOT BE IN BPA AND COSTS OF PURCHASING AND TRANSMITTING IT WILL FLOW THROUGH TO THE CUSTOMERS. AUTHORITY OF BONNEVILLE POWER ADMINISTRATION TO ENTER INTO TRUST AGENCY ARRANGEMENTS WITH PREFERENCE AGENCY CUSTOMERS FOR PURCHASE OF POWER: THIS DECISION TO THE SECRETARY OF THE INTERIOR IS IN RESPONSE TO A A REQUEST BY THE DEPUTY UNDERSECRETARY OF THE INTERIOR THAT THIS OFFICE REVIEW A PROPOSAL BY THE BONNEVILLE POWER ADMINISTRATION (BPA) TO PROVIDE CERTAIN SERVICES FROM THE FEDERAL COLUMBIA RIVER POWER SYSTEM AND TO ACT AS "TRUSTEE-AGENT" FOR ITS STATUTORY PREFERENCE AGENCY CUSTOMERS IN THE PURCHASE AND ACQUISITION OF POWER TO MEET EACH CUSTOMER'S LOADS AFTER JUNE 30.

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B-137458, SEP 13, 1974

BONNEVILLE POWER ADMINISTRATION BPA IS AUTHORIZED BY EXISTING LAW TO PURCHASE POWER FOR THE ACCOUNTS OF ITS STATUTORY PREFERENCE AGENCY CUSTOMERS IN ORDER TO MEET THEIR NEEDS PURSUANT TO AGREEMENTS WHEREBY OWNERSHIP OF THE PURCHASED POWER WILL NOT BE IN BPA AND COSTS OF PURCHASING AND TRANSMITTING IT WILL FLOW THROUGH TO THE CUSTOMERS.

AUTHORITY OF BONNEVILLE POWER ADMINISTRATION TO ENTER INTO TRUST AGENCY ARRANGEMENTS WITH PREFERENCE AGENCY CUSTOMERS FOR PURCHASE OF POWER:

THIS DECISION TO THE SECRETARY OF THE INTERIOR IS IN RESPONSE TO A A REQUEST BY THE DEPUTY UNDERSECRETARY OF THE INTERIOR THAT THIS OFFICE REVIEW A PROPOSAL BY THE BONNEVILLE POWER ADMINISTRATION (BPA) TO PROVIDE CERTAIN SERVICES FROM THE FEDERAL COLUMBIA RIVER POWER SYSTEM AND TO ACT AS "TRUSTEE-AGENT" FOR ITS STATUTORY PREFERENCE AGENCY CUSTOMERS IN THE PURCHASE AND ACQUISITION OF POWER TO MEET EACH CUSTOMER'S LOADS AFTER JUNE 30, 1983. THE QUESTION PRESENTED IS WHETHER EXISTING LAW AUTHORIZES BPA TO ENTER INTO THE SO-CALLED TRUST AGENCY ARRANGEMENTS.

THE HYDRO-THERMAL POWER PROGRAM IN THE PACIFIC NORTHWEST WAS DESIGNED GENERALLY TO INTEGRATE THE GOVERNMENT'S HYDROELECTRIC GENERATING FACILITIES AND ITS TRANSMISSION GRID IN THE PACIFIC NORTHWEST WITH PLANNED PRIVATE AND NON-FEDERAL PUBLIC UTILITY THERMAL GENERATING SYSTEMS IN THE REGION, SO AS TO ACHIEVE THE MOST ECONOMIC USE OF THE REGION'S ELECTRIC POWER. THE PROGRAM, IN ITS ORIGINAL FORM (REFERRED TO AS PHASE 1), WAS DISCLOSED TO THE CONGRESS, AND BPA'S PARTICIPATION IN IT HAS IN EFFECT BEEN CONFIRMED IN APPROPRIATIONS FOR BPA AND IN THEIR LEGISLATIVE HISTORIES. SEE, E.G., PUBLIC WORKS FOR WATER, POLLUTION CONTROL, AND POWER DEVELOPMENT AND ATOMIC ENERGY COMMISSION APPROPRIATION ACT, 1971, APPROVED OCTOBER 7, 1970, PUB. L. 91-439, 84 STAT. 890, 899; H. REPT. NO. 91-1219, 90 (1970); AND B-170878, OCTOBER 21, 1970.

ACCORDING TO A MEMORANDUM PREPARED BY THE REGIONAL SOLICITOR OF THE DEPARTMENT OF THE INTERIOR IN PORTLAND, OREGON:

"UNDER PHASE 1 OF THE HYDRO-THERMAL POWER PROGRAM, BONNEVILLE PURCHASED, THROUGH NET BILLING PROCEDURES, THERMAL RESOURCES FROM NON FEDERAL AGENCIES AND MELDED THEM WITH THE HYDRO RESOURCES OF THE FEDERAL SYSTEM. VARIOUS PORTIONS OF ELECTRICAL CAPABILITY OF SIX LARGE THERMAL PROJECTS HAVE BEEN OR WILL BE PURCHASED BY BONNEVILLE VIA THESE PROCEDURES. BONNEVILLE'S PURCHASES FROM THERMAL RESOURCES AS THEY ARE PLACED IN OPERATION. THESE PURCHASES WERE MADE TO ENABLE BONNEVILLE TO MEET ITS EXISTING CUSTOMER LOADS AND THE LOAD GROWTH REQUIREMENTS OF ITS PREFERENCE AGENCY CUSTOMERS. HOWEVER, THE NET BILLING PROCEDURE HAS PROVEN TO BE INADEQUATE TO SUSTAIN THE PURCHASE OF ENOUGH POWER FROM THERMAL RESOURCES FOR BONNEVILLE TO CONTINUE TO MEET ITS PREFERENCE AGENCY LOADS INDEFINITELY.

IT IS THIS SITUATION WHICH HAS GIVEN RISE TO PLANS FOR WHAT IS DESCRIBED AS PHASE 2 OF THE PROGRAM.

IN PHASE 2, THE REGIONAL SOLICITOR EXPLAINS--

"*** THE BASIC PROGRAM AND ITS OBJECTIVES WILL REMAIN UNCHANGED. NON- FEDERAL AGENCIES WILL CONTINUE TO DEVELOP THE THERMAL GENERATION NECESSARY TO MEET THE REGION'S ENERGY LOADS. THE FEDERAL SYSTEM WILL PROVIDE MOST OF THE ADDITIONAL PEAKING CAPACITY, RESERVES, LOAD FACTORING, AND THE TRANSMISSION FACILITIES NECESSARY TO INTEGRATE THE NEW THERMAL POWER INTO THE REGIONAL POWER SYSTEM."

UNDER PHASE 2, AS IT IS DESCRIBED IN DETAIL BY THE REGIONAL SOLICITOR -

"*** BONNEVILLE WILL PURCHASE IN ITS NAME CAPABILITY FROM THERMAL PROJECTS AS A TRUSTEE-AGENT FOR PREFERENCE AGENCY CUSTOMERS, WHO WILL BE DISCLOSED PRINCIPALS, AND PROVIDE THE NECESSARY SERVICES AVAILABLE FROM THE FEDERAL SYSTEM TO MAKE THESE RESOURCES USABLE BY THE PREFERENCE AGENCY. BONNEVILLE'S OBLIGATION TO MAKE PAYMENT FOR PURCHASE CAPABILITY WILL BE LIMITED TO WHATEVER MONEYS MAY BE DEPOSITED IN THE TRUST FUND.

"BONNEVILLE PROPOSES TO FURNISH SEVERAL IMPORTANT SERVICES UNDER THE TRUST-AGENCY ARRANGEMENT THROUGH USE OF THE FACILITIES OF THE FEDERAL SYSTEM. BONNEVILLE WILL (1) TRANSMIT THE OUTPUT OF THERMAL PROJECTS TO THE PURCHASERS' LOAD CENTERS, (2) LOAD FACTOR ENERGY FROM THESE PROJECTS BY STORING ENERGY FROM THE PROJECT THAT IS TEMPORARILY SURPLUS IN FEDERAL SYSTEM RESERVOIRS UNTIL THE ENERGY CAN BE USED TO SERVE THE PURCHASERS' LOADS, (3) SCHEDULE THE PURCHASERS' SHARE OF THE PROJECT ON AN HOUR-BY- HOUR BASIS, AND PARTICIPATE IN THE ANNUAL OPERATIONS PLANNING OF THE PROJECT SO THAT THE PURCHASERS' SHARE OF PROJECT CAPABILITY CAN BE MOST EFFICIENTLY INTEGRATED WITH OTHER THERMAL POWER PURCHASED AND THE POWER ACQUIRED FROM BONNEVILLE, (4) PROVIDE SYSTEM RESERVES DURING PERIODS OF FORCED OUTAGE AT THE PROJECT SO THAT THE PURCHASERS' LOADS ARE CONTINOUSLY SERVED, (5) MARKET AND/OR ASSIGN SURPLUSES FROM THERMAL PROJECTS FOR OR AMONG THE AGENCY AGREEMENT PARTIES, (6) PROVIDE A BILLING AND ACCOUNTING PROCEDURE WHICH MESHES INTO THE PURCHASERS' POWER BILLING AND ACCOUNTING PROCEDURES RELATED TO THEIR BONNEVILLE POWER SALES CONTRACTS, AND (7) PROVIDE PLANNING RELATING TO THE SCHEDULING FOR PURCHASES OF NEW THERMAL RESOURCES AND MONITORING OF CONSTRUCTION AND OPERATION COSTS OF THERMAL PROJECTS WHOSE OUTPUT IS PURCHASED.

"IN 1983, WHEN PREFERENCE UTILITIES BEGIN PURCHASING ELECTRIC CAPABILITY MUST BE INTEGRATED WITH THE RESOURCES PROVIDED FROM THE FEDERAL SYSTEM BY BONNEVILLE. IF EACH OF BONNEVILLE'S 104 PREFERENCE AGENCY CUSTOMERS TRIED TO INTEGRATE CAPABILITY IT PURCHASED FROM THERMAL PROJECTS WITH BONNEVILLE SUPPLIED POWER ON AN INDIVIDUAL BASIS, IT WOULD PLACE A DIFFICULT BURDEN UPON BONNEVILLE'S POWER OPERATIONS. FURTHER, THE PREFERENCE AGENCY PURCHASES OF THERMAL POWER WOULD BE FORCED TO DUPLICATE MANY FACILITIES AND ORGANIZATIONAL STAFF NOW PROVIDED ENTIRELY BY BONNEVILLE.

"THE PROPOSED TRUST-AGENCY ARRANGEMENTS WILL ENABLE BONNEVILLE TO MAKE MORE EFFICIENT USE OF THE RESOURCES OF THE FEDERAL SYSTEM. WHILE IT IS ANTICIPATED THAT ADDITIONAL STAFF AND FACILITIES WILL BE REQUIRED TO PROVIDE SOME OF THE SERVICES UNDER THE TRUST-AGENCY ARRANGEMENT, THE OVERALL COST APPLICABLE TO THE FEDERAL SYSTEM SHOULD BE LESS. BONNEVILLE WILL BE COMPENSATED FOR THE SERVICES TO BE PERFORMED AT RATES WHICH RECOVER ALL DIRECT COSTS PLUS A FAIR SHARE OF FIXED AND VARIABLE COSTS OF THE PORTION OF THE FEDERAL SYSTEM USED TO PROVIDE THE SERVICES. AS THE MAJOR WHOLESALE POWER SUPPLIER TO THE STATUTORY PREFERENCE AGENCY UTILITIES IN THE PACIFIC NORTHWEST, BONNEVILLE HAS AN EXTENSIVE TRANSMISSION SYSTEM AS WELL AS POWER OPERATIONS CAPABILITY. IT SCHEDULES, WITHIN OPERATING GUIDELINES PROVIDED BY THE CORPS OF ENGINEERS, THE BUREAU OF RECLAMATION, AND OTHER AGENCIES, THE OPERATION OF HYDROELECTRIC, THERMAL-ELECTRIC, AND HYDRO-STORAGE FACILITIES WHICH PROVIDE THE ELECTRIC POWER AND ENERGY TO MEET ITS CUSTOMER' LOADS. AS A RESULT BONNEVILLE HAS DEVELOPED A HIGHLY TECHNICAL AND SOPHISTICATED ORGAIZATION AND A VERY RELIABLE AND EFFICIENT POWER GENERATING AND TRANSMISSION SYSTEM IN THE PACIFIC NORTHWEST. THE PROPOSED TRUST AGENCY ARRANGEMENT WILL HELP INSURE THE CONTINUATION OF THE EFFICIENCY AND RELIABILITY OF THIS SYSTEM."

THE REGIONAL SOLICITOR STATES FURTHER THAT THE ADMINISTRATOR OF BPA HAS DETERMINED--

"THAT THE PROPOSED TRUST-AGENCY ARRANGEMENT IS ONE THAT WILL FURTHER THE EFFICIENT AND ECONOMIC USE OF THE FEDERAL SYSTEM AND THE PROPER ADMINISTRATION OF THE BONNEVILLE PROJECT ACT AND OTHER STATUTES RELATED TO THE FEDERAL SYSTEM AND THAT THESE ARRANGEMENTS WILL ALLOW BONNEVILLE TO DISPOSE OF FEDERAL POWER TO ITS CUSTOMERS AT THE LOWEST POSSIBLE COST CONSISTENT WITH SOUND BUSINESS PRINCIPLES, ENCOURAGE EQUITABLE DISTRIBUTION OF POWER FROM THE FEDERAL SYSTEM AND CONTINUE TO PROMOTE INTERCONNECTION OF THE FEDERAL SYSTEM AND PUBLIC SYSTEMS."

THE AUTHORITY OF THE ADMINISTRATOR OF BPA TO ENTER INTO CONTRACTS DERIVES FROM SECTION 2(F) OF THE ACT OF AUGUST 20, 1937, CH. 720, 50 STAT. 732 AS AMENDED, 16 U.S.C. 832(F), WHICH PROVIDES THAT:

"SUBJECT ONLY TO THE PROVISIONS OF THIS ACT, THE ADMINISTRATOR IS AUTHORIZED TO ENTER INTO SUCH CONTRACTS, AGREEMENTS, AND ARRANGEMENTS *** AND TO MAKE SUCH EXPENDITURES, UPON SUCH TERMS AND CONDITIONS AND IN SUCH MANNER AS HE MAY DEEM NECESSARY."

WITH RESPECT TO THE FOREGOING PROVISION OF LAW, THIS OFFICE HAS HELD THAT ITS PRUPOSE WAS--

"*** TO FREE BPA FROM THE REQUIREMENTS AND RESTRICTIONS ORDINARILY APPLICABLE TO THE CONDUCT OF GOVERNMENT BUSINESS AND TO ENABLE THE ADMINISTRATOR TO CONDUCT THE BUSINESS OF THE PROJECT WITH A FREEDOM SIMILAR TO THAT WHICH HAS BEEN CONFERRED ON PUBLIC CORPORATIONS CARRYING ON SIMILAR OR COMPARABLE ACTIVITIES."

B-105397, SEPTEMBER 21, 1951; SEE ALSO 46 COMP. GEN. 349, 355-56 (1966). THE BROAD AUTHORITY THUS CONFERRED ON BPA IS, WE BELIEVE, SUFFICIENT TO ALLOW THE ADMINISTRATOR TO ENTER INTO AN AGREEMENT IN THE FORM DESCRIBED- I.E., TO UNDERTAKE TO ACT AS TRUSTEE-AGENT FOR PREFERENCE CUSTOMERS IN THE PURCHASE OF POWER--PROVIDED THAT THE PURPOSE OF SUCH AN AGREEMENT IS CONSISTENT WITH THE PURPOSES OF THE BONNEVILLE PROJECT ACT.

WHILE 16 U.S.C. 832AF) IS INTENDED TO CONFER BROAD ADMINISTRATIVE DISCRETION ON THE ADMINISTRATOR, THAT DISCRETION MUST ALWAYS BE EXERCISED IN FURTHERANCE OF THE PURPOSES, AND SUBJECT TO THE PROVISIONS, OF THE ACT. WE MUST THEREFORE CONSIDER NOT ONLY WHETHER THE ADMINISTRATOR MAY ENTER INTO AN AGREEMENT IN THE FORM OF THE PROPOSED TRUST-AGENCY AGREEMENT BUT ALSO WHETHER THE TRUST-AGENCY AGREEMENT, AS DESCRIBED, WOULD BE CONSISTENT WITH THE PURPOSES FOR WHICH THE ADMINISTRATOR MAY ACT.

CONCERNING THIS QUESTION, THE PROPOSED ARRANGEMENT, AS ALREADY NOTED, IS A RESPONSE TO THE FACT THAT THE NET BILLING PROCEDURE, USED IN PHASE 1 OF THE HYDRO-THERMAL POWER PROGRAM, WILL NOT SUSTAIN THE PURCHASE OF ENOUGH THERMAL-GENERATED POWER FOR BPA TO CONTINUE TO MEET THE LOAD GROWTH OF ITS PREFERENCE CUSTOMERS. THE TRUST-AGENCY ARRANGEMENT IS THUS INTENDED, IN EFFECT, AS AN ALTERNATIVE TO NET BILLING WHICH WILL ALLOW THE CONTINUATION OF THE PROGRAM. THE OBJECTIVES OF THE PROGRAM- TO SUPPLY ADEQUATE POWER FOR THE PACIFIC NORTHWEST, TO PROVIDE EFFICIENCIES IN PLANT SIZE, OPERATIONS, AND ELECTRICAL DISTRIBUTION SYSTEMS WHICH SERVE CONSUMERS, AND TO MINIMIZE ENVIRONMENTAL IMPACT- WOULD REMAIN THE SAME.

SECTION 5 OF THE FLOOD CONTROL ACT OF 1944 REQUIRES THE TRANSMISSION AND DISPOSAL OF THE POWER AND ENERGY OF FEDERAL RESERVOIR PROJECTS, INCLUDING BONNEVILLE, "IN SUCH A MANNER AS TO ENCOURAGE THE MOST WIDESPREAD USE THEREOF AT THE LOWEST POSSIBLE RATE TO CONSUMERS CONSISTENT WITH SOUND BUSINESS PRINCIPLES." 16 U.S.C. 825S. THE BONNEVILLE PROJECT ACT FURTHER AUTHORIZES AND DIRECTS THE ADMINISTRATOR -

"TO PROVIDE, CONSTRUCT, OPERATE, MAINTAIN, AND IMPROVE SUCH ELECTRIC TRANSMISSION LINES AND SUBSTATIONS, AND FACILITIES AND STRUCTURES APPURTENANT THERETO, AS HE FINDS NECESSARY FOR THE PURPOSES OF TRANSMITTING ELECTRIC ENERGY, AVAILABLE FOR SALE, FROM THE BONNEVILLE TO EXISTING AND POTENTIAL MARKETS, AND, FOR THE PURPOSE OF INTERCHANGE OF ELECTRIC ENERGY, TO INTERCONNECT THE BONNEVILLE PROJECT WITH OTHER FEDERAL PROJECTS AND PUBLICLY OWNED POWER SYSTEMS NOW OR HEREAFTER CONSTRUCTED." 16 U.S.C. 832AB).

MOREOVER, THE ADMINISTRATOR IS ENJOINED, IN SETTING RATES FOR THE SALE OF POWER AT WHOLESALE, TO SET UNIFORM RATES--

"IN ORDER TO EXTEND THE BENEFITS OF AN INTEGRATED TRANSMISSION SYSTEM AND ENCOURAGE THE EQUITABLE DISTRIBUTION OF THE ELECTRIC ENERGY DEVELOPED AT THE BONNEVILLE PROJECT." 16 U.S.C. 832E.

IT APPEARS TO US, IN VIEW OF THE FOREGOING, THAT THE TRUST-AGENCY AGREEMENT IS CONSISTENT WITH THE PURPOSES OF THE APPLICABLE LEGISLATION.

WE NOTE IN ADDITION THAT, AT THE REQUEST OF THE CHAIRMAN, THE ESSENTIAL ASPECTS OF THE PROPOSED TRUST-AGENCY ARRANGEMENT HAVE BEEN REPORTED TO THE SUBCOMMITTEE ON PUBLIC WORKS OF THE HOUSE APPROPRIATIONS COMMITTEE IN MATERIAL SUBMITTED FOR THE RECORD BY THE ADMINISTRATOR. HEARINGS ON THE PUBLIC WORKS FOR WATER AND POWER DEVELOPMENT AND ATOMIC ENERGY APPROPRIATION BILL, 1975, PART 3, 108-109 (1974). AS STATED THEREIN--

"PHASE 2 OF THE PROGRAM INCORPORATES A NUMBER OF METHODS UNDER WHICH A PREFERENCE CUSTOMER MAY SECURE THE ADDITIONAL POWER IT NEEDS. THESE INCLUDE *** CONTRACTING WITH BPA TO ACT AS ITS AGENT IN THE PROCUREMENT OF OUTPUT FROM THERMAL PROJECTS OWNED BY OTHERS. ALL COSTS AND OBLIGATIONS RELATING TO BPA POWER ACQUISITIONS AS AGENT WOULD BE BORNE BY THE CUSTOMER." ID. AT 109.

ACCORDINGLY, WE CONCLUDE THAT BPA IS AUTHORIZED BY EXISTING LAW TO ENTER INTO AGREEMENTS SUCH AS THOSE DESCRIBED ABOVE.

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