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under the appropriate power rate schedules of BPA. The Government's obligation is to make available to the respective participating utilities as exchange energy the amount thus computed, and this amount will be deemed to be the equivalent of that made available to the Government from the reactor. This will be the mechanics of balancing the exchange accounts.

Exchange agreements which are now in effect provide for settlement of balances in the exchange energy accounts at specified times by payment of money. The exchange plan proposed with the members of the supply system contemplates a completely balanced exchange account, and that the Government would not be required to settle any balances except by delivery of electric energy and the capacity associated therewith.


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The Bonneville Project Act (act approved August 20, 1937, c. 720, 50 Stat. 731) is the source of the Administrator's authority. Sections 2(b) and 5(b) of that act expressly relate to "interchange” and 'exchange" of electric energy, respectively. These are the provisions of the act which can be said to confer basic authority for the proposed exchange, and they will be discussed hereinafter in detail.

Under Executive Order No. 8526, 5 F.R. 3390, the Administrator was designated as the marketing agent for the electric energy generated at Grand Coulee Dam. The Reclamation Project Act of 1939 (act approved August 4, 1939, c. 418, 53 Stat. 1187) governs the operation of the works constructed as a part of the project. This act contains exchange provisions in the second paragraph of section 14. In light of standards expressly set forth in the delegation governing Grand Coulee, the provisions of section 14 of the Reclamation Act are of major importance to this discussion for several reasons, which will be discussed hereinafter in detail.


Section 2(b) of the Bonneville Project Act provides as follows:

(b) In order to encourage the widest possible use of all electric energy that can be generated and marketed and to provide reasonable outlets therefor, and to prevent the monopolization thereof by limited groups, the administrator is authorized and directed to provide, construct, operate, maintain, and improve such electric transmission lines and substations, and facilities and structures appurtenant thereto, as he finds necessary, desirable, or appropriate for the purpose of transmitting electric energy, available for sale, from the Bonneville project 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 (50 Stat. 732; 16 U.S.C. 832a(b)].

Only the last part of this provision relates to interchange, and it not only authorizes but also directs the interconnection of the Bonneville project with other Federal projects and publicly owned power systems, "for the purpose of interchange of electric energy." If the supply system constructs the Hanford electric facilities, this statute effectively requires the Administrator to interconnect with the Hanford plant, for the purpose of interchange of electric energy. The authority to interchange must be implied from section 2(b), because surely Congress would not require expenditure of Federal funds to interconnect for the specific purpose of interchanging energy, and then

deny the Administrator the authority to carry out the purpose of effecting such interchanges.


Section 5(b) of the Bonneville Project Act is as follows:

(b) The Administrator is authorized to enter into contracts with public or private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation or of providing emergency or break-down relief (50 Stat. 735; 16 U.S.C. 832d(b)].

The authority vested in the Administrator by this subsection is to contract for the "mutual” exchange of unused excess power. The word “exchange” as used in the law of personal property is defined in Black's Law Dictionary (3d ed.), page 713, as follows:

Exchange is a contract by which the parties give, or agree to give, one thing for another, neither thing, or both things, being money only [citations] * * *

The word "mutual” in the statute limits the authority of the Administrator regarding exchanges to those where the thing transferred by each party to the other is "power.” The subsection does not authorize exchange of power for other property or vice versa.

In construing the words "unused excess power” the General Counsel of BPA some years ago held that the words are merely descriptive of the kind of power which the Administrator normally markets in the regular course of his business. See opinion dated February 16, 1953, subject, “Sharing by the Government of Steam Costs of Private Utilities.” The Bonneville Project Act does not authorize the Administrator to dispose of all energy generated at the Bonneville project, but only the part which is not required for the operation of the dam and locks at such project and the navigation facilities employed in connection therewith” (sec. 1). Since it is excess to the needs of the project, it may be referred to as "excess power."

The subsection authorizes the Administrator to enter into contracts for the exchange of power upon "suitable exchange terms." This phrase obviously refers to the terms which in the contract are to govern the exchange. These words have been uniformly held to authorize an adjustment in value of the power exchanged in order to meet various equities which may exist in favor of one or the other of the parties. Power does not need to be exchanged upon equal terms.. Although the product exchanged must be identical in nature, that is, power, the amounts exchanged need not be identical because the cost of generating the power received by one party might substantially exceed the cost of generating the power delivered by him in exchange. Likewise the power delivered by one party might be at a time or place different from the time or place of delivery by the other party. Such differences may affect the comparative values of the products delivered and this would warrant an equitable adjustment in the terms of exchange. The phrase in question was intended to allow a. realistic disposition in the contracts of such details. Exchange terms are "suitable” if the Government receives in return for its contribution a consideration which is reasonably appropriate to the purposes contained in the statutory authorization.

The concluding words of the subsection related to the purposes for which the exchange authority may be exercised. These are "for the purpose of economical operation or of providing emergency or break

down relief." The words are a limitation on the action of the Administrator, authorizing him to take such action only when he does so for one or more of the purposes specified. Under this construction the Administrator must make an administrative determination when he enters into the contract that the exchange therein specified would accomplish one or more of the purposes set forth in the statute.

It is also my opinion that only such exchange contracts are authorized as are entered into for the purpose of obtaining economical operation of, or providing emergency or breakdown relief to, the Government's system. The administrative construction of the statute by the Administrator in the past has uniformly been to the effect that the economical operation referred to in the statute is the economical operation of the Government's system only.

In summary it may be said that the Administrator has express statutory authority to enter into a contract or contracts with the supply system and its members as the owners of public power systems, providing for the delivery, by the Government of excess power in exchange for power to be delivered to the Government from the production of the electric facilities of the Hanford reactor, if his purpose is either to obtain or accomplish economical operation of the Government's system, or to provide emergency or break-down relief to the Government's system.


Section 14 of the Reclamation Project Act of 1939 provides in part as follows:

The Secretary is further authorized, for the purpose of orderly and economical construction or operation and maintenance of any project, to enter into such contracts for exchange or replacement of water, water rights, or electric energy or for the adjustment of water rights, as in his judgment are necessary and in the interests of the United States and the project.

The specified exchange authority is here vested in the Secretary "for the purpose of orderly and economical construction or operation and maintenance” of any project. The phrase "orderly and economical” modifies “operation and maintenance” as well as “construction.” Congress undoubtedly intended that an exchange should serve the orderly and economical operation of the project.

This statute also authorizes the execution of such exchange agreements if found to be orderly and economical in purpose was in his judgment are necessary and in the interests of the United States and the project.”

In summary it is my opinion that the Administrator, as the delegate of the Secretary, has express statutory authority to enter into an exchange contract if (1) his purpose in doing so is to obtain or accomplish orderly and economical operation and maintenance of the Columbia basin project, and (2) such contract is, in his judgment, necessary and in the interests of the United States and such project.


The proposed exchange plan involves these essential elements:

(1) The power output of the Hanford reactor belonging to the respective members of the supply system would be delivered to the Administrator in such manner as best to serve the integrated powerloads of the Federal system, in coordination with the other generating plants of the system;

(2) The Administrator would noncoincidentally deliver back to these member systems excess power produced at the plants of the Federal system in such manner as to serve the power require

ments of these systems. There can be no doubt but that this is a genuine exchange within the specific terms of either of the statutes cited hereinabove. The only inquiry which I now make is whether such a transaction as this proposed exchange would result in economical operation of the Government's system, present and future, considering the advantages of such a transaction in their broadest aspects.

It is conceivable that the proposed exchange might result in such costly deliveries of power to the Government that as an exchange it would be economically infeasible. On the other hand, if it can be shown on a reasonable and judicious basis that the estimates of probable costs are such that the exchange power from the Hanford project can be absorbed into the Federal system at costs which are competitive with or less than those of the projects in the Pacific Northwest which have in recent years been authorized as feasible and economical additions to the Federal system, the Administrator would be justified in making an administrative finding that the exchange would result in economical operation of the Federal system.

The proposed exchange contract is to be an obligation binding upon the Government during the service life of the Hanford project for many years. In determining the probable future economy of the proposed exchange during the full term of the contract, the Administrator may consider the future growth of the Federal generating system and the cost of other sources of power to meet this growth. If the Administrator finds, on the basis of the most informed conservative judgment available to him (a) that there is a likelihood that the Federal power system will be enlarged and augmented in the future so as reasonably to keep pace with the power needs of the Pacific Northwest, and (6) that the cost of the Hanford output during the future years of the contractual term therefor will be less than that of alternative sources of power available during the same period of years, he will in my opinion be justified in making an administrative finding that the proposed exchange contract will result in economical operation of the Federal system during such future period.

As a further test of economical operation, the Administrator may consider whether the exchange contract would result in increased firm power sales of the Federal Government. In order for the proposed exchange to improve economy of operation of the Federal system, it would be necessary that the Government augment its firm power supplies which it can market as firm power in addition to those generated at the Federal projects, or gain some equally clear pecuniary advantage. The existence of large blocks of secondary energy on the Federal system which are now necessarily wasted makes it possible for the Administrator to utilize the Hanford project output received in exchange to sell a block of firm power not otherwise available for sale. If the immediate effect of such sales can reasonably be anticipated to increase the net revenues of the Federal system during future years, it is my opinion that this would result in economical operation of the Federal system,

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If it be assumed that in the various circumstances specified above, the feasibility and cost studies relative to the Hanford electric output will ultimately demonstrate economy of operation, the proposed exchange contracts would also be authorized under the provisions of section 14 of the Reclamation Project Act of 1939. They could then be entered into for the purpose of economical operation and maintenance of the Columbia Basin project. In my opinion the Administrator would also be justified, in such circumstances, to find that the contracts are necessary and in the interests of the United States and the project.

It is in the interests of the United States not to permit the property of the United States to go to waste. In the present instance two agencies of the Government hold in trust valuable properties of the United States which are being wasted. The Administrator has large amounts of nonsalable secondary electric energy which are being wasted for want of a market. The Atomic Energy Commission holds in trust large amounts of excess steam produced at the Hanford reactor, all of which is being wasted for want of electric generating facilities to utilize it. These two Federal agencies are powerless by their own efforts to cooperate with each other in order to prevent waste of these national properties. The Washington Public Power Supply System, however, has full legal authority and standing under the Atomic Energy Act, to perfect an arrangement with each of the Federal agencies which through an exchange contract will enable both of them to put an end to the waste of both a large part of the secondary energy of the Columbia River, and also a large part of the excess steam presently going to waste at the Hanford project. Accordingly, it is my opinion that the Administrator would clearly be justified in finding that the conversion of these two waste products into usable firm power through the medium of an exchange agreement would be necessary and in the interests of the United States.

There are undoubtedly other circumstances surrounding the proposed exchange contract which would be sufficient to support findings by the Administrator that it serves economy of operation and is in the national interest. The analysis recited above of situations which would justify such findings cannot in its nature be exhaustive. For instance, the economic fact that bringing into being new sources of usable low cost energy promotes the national welfare and generates national wealth to the extent of between $6 and $10 for each dollar of annual cost may be given weight when a determination of the national interest is being made.

The provisions of the statutes cited above, which contain limitations of purpose upon the express authority of the Administrator to enter exchange contracts must be interpreted in the light of informed reason. The limits fixed by the statutes may be determined only by interpreting them, and since the Administrator is the officer who is authorized to take action, it is he who must interpret the statutes before taking action under them. The Supreme Court said, in American Power Company v. S.E.C., 329 U.S. 90, 112:

It is a fundamental principle, however, that where Congress has entrusted an administrative agency with the responsibility of selecting the means of achieving the statutory policy "the relation of remedy to policy is peculiarly a matter for administrative competence.”

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