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COLORADO RIVER ENERGY DISTRIBS. ASSN. v. LEWIS

March 20, 1981

COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION, A Non-Profit Colorado Membership Corporation, and Provo City, Utah, A Political Subdivision of the State of Utah, Plaintiffs,
v.
William LEWIS, As Acting Secretary of the Department of Energy, and Ruth M. Davis, As Assistant Secretary of Energy For Resource Applications, Defendants



The opinion of the court was delivered by: PARKER

Plaintiffs, Colorado River Energy Distributors Association (CREDA) and Provo City, Utah (Provo) have brought this action against the Secretary of Energy and the Assistant Secretary for Resource Applications seeking a declaratory judgment that defendants do not have the authority to implement and collect, on an interim basis, proposed rate increases for electric power sold by defendants to plaintiff CREDA's members. This case is presently before the Court on plaintiffs' motion for a preliminary injunction enjoining the Department of Energy (DOE) from placing into effect an interim rate increase for electric power from the hydroelectric generating facilities of the Colorado River Storage Project (CRSP). Plaintiffs argue that no proposed rates may take effect unless and until they have first been approved by the Federal Energy Regulatory Commission (FERC). After considering the parties memoranda and oral argument, the Court concludes that the plaintiffs' motion for a preliminary injunction should be denied. The Court's findings of fact and conclusions of law are set out below.

BACKGROUND

 CREDA is a non-profit Colorado membership corporation comprised of seventeen publicly-owned electric utility systems, organizations of publicly-owned electric utility systems and state and federal agencies which provide wholesale electric service. CREDA's members are either electric utilities or associations of electric utilities located in the Colorado River Basin states of Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. Provo is a political subdivision of the State of Utah and a CREDA member. Under the federal reclamation laws those CREDA members and their customers which are electric utilities qualify for preference in the purchase of electric power produced by CRSP hydroelectric facilities. CREDA's members purchase approximately 90 percent of the power produced by CRSP. Defendant William Lewis was named in his official capacity as Acting Secretary of the Department of Energy. The Secretary is responsible for the operation of the DOE, which includes management of the Western Area Power Administration (WAPA), a distinct organizational entity within DOE. Defendant Ruth M. Davis, named in her official capacity as the Assistant Secretary of Energy for Resource Applications, was delegated the responsibility for the formulation, approval and implementation of rates charged for CRSP power marketed by WAPA. *fn1"

 The Western Area Power Administration was created as an agency within the Department of Energy by the Department of Energy Organization Act of 1977, 42 U.S.C. §§ 7101, 7152(a)(3) (DOE Act). WAPA is responsible for the marketing of electric power generated at 47 federal hydroelectric power plants and one coal-fired plant to over 450 power customers in 15 western states. By statute, revenues from the sale of energy generated at hydroelectric plants in the Colorado River Storage Project must be sufficient to pay the Project's annual operating and maintenance expenses, and, in addition, must provide for a return to the Treasury of the costs of each power unit within the project within fifty years. 43 U.S.C. § 620d(d)(1).

 The Twenty-First Annual Report of the Colorado River Storage Project, submitted to Congress as required by 43 U.S.C. § 620e, contained a repayment study which showed that the then-existing (1977) power rates would be sufficient to pay annual operating and maintenance expenses, but would not repay the power investment and irrigation assistance costs within the statutory time frames. WAPA tentatively found that a rate increase of forty-three percent was necessary to provide the required revenue, and publicly proposed such an increase at a customer meeting on March 5, 1978.

 Following a series of public meetings with customer representatives and the receipt of written comments, WAPA reduced the rate increase to twenty and one-half percent. This increase was approved on an interim basis by the Assistant Secretary for Resource Applications, in accordance with the Delegation Order, on December 23, 1980. The announcement of the interim rates also advised WAPA customers that the new rates would become effective on January 23, 1981, and restated DOE's intention to refund any overcharges with interest. 45 Fed.Reg. 86988 (December 28, 1980).

 LEGAL ANALYSIS

 Until 1977, the Department of the Interior's Bureau of Reclamation managed the CRSP. Power marketing by the Bureau of Reclamation in the Colorado River Basin was governed by the Reclamation Act of 1902, 43 U.S.C. § 372 et seq., the Reclamation Project Act of 1939, 43 U.S.C. § 485 et seq., and the Colorado River Storage Project Act of 1956, 43 U.S.C. § 620 et seq.

 Section 9(c) of the Reclamation Project Act of 1939 gave the following authority to set rates to the Secretary of the Interior:

 
Any sale of electrical power or lease of power privileges, made by the Secretary in connection with the operation of any project or division of a project, shall be for such periods, not to exceed forty years, and at such rates as in his judgment will produce power revenues at least sufficient to cover an appropriate share of the annual operation and maintenance cost, interest on an appropriate share of the construction investment at not less than 3 per centum per annum, and such other fixed charges as the Secretary deems proper ...." 43 U.S.C. § 485h(c).

 In 1977 the Bureau of Reclamation's power marketing functions were transferred to the Secretary of Energy, acting through a new power marketing administration under section 302(a)(1) & (3) of the DOE Act. 42 U.S.C. § 7152(a)(1) & (3). The Act established WAPA as the new power marketing administration. The DOE Act did not change the standards set by the Reclamation Project Act of 1939 relating to the marketing of CRSP power under section 9(c).

 The DOE Act also granted the Secretary the power to delegate "any of his functions to such officers and employees of the Department as he may designate." 42 U.S.C. § 7252. Exercising this authority, the Secretary issued Delegation Order No. 0204-33, *fn2" which gave to the Assistant Secretary for Resource Applications, acting through the five power marketing administrations of DOE, including WAPA, the authority to formulate rates for the sale of power sold by each power marketing administration. The Delegation Order also provided that the Assistant Secretary approve and implement rates formulated by the power marketing administrations on an interim basis. Authority to confirm and approve the interim rates was delegated to the Federal Energy Regulatory Commission. The Delegation Order also authorized the repayment of any difference between the interim rates collected and a lower rate confirmed by the FERC as a refund with interest to the affected power marketing administration customers. The provisions of the Delegation Order have since been embodied in Department of Energy regulations which became effective December 31, 1980. *fn3" WAPA subsequently amended its ratemaking procedures to comport with the Delegation Order. 44 Fed.Reg. 7796 (February 7, 1979). Under these procedures, WAPA now formulates and recommends proposed rate changes for CRSP power to the Assistant Secretary after the public has had an opportunity to submit comments on the proposed rate changes.

 Plaintiffs argue that the implementation and collection of interim rates is unlawful for four separate reasons:

 
1) Defendants have no express or inherent authority to implement WAPA's proposed rate increases before final ...

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