60 F. Supp. 344 | Ct. Cl. | 1945
Lead Opinion
delivered the opinion of the court:
In these two cases we have written one set of findings of fact and one opinion. In case No. 45688 the plaintiff sues for $82,172.54, claiming that it was overcharged this amount by the Government for electric power taken by the plaintiff from a generating plant at Boulder Dam, in that it was denied a “load-building” or “load-absorption” period which, if granted, would have reduced its charges by the amount stated. In case No. 45916 the plaintiff sues for $184,081.31 which, it claims, it was overcharged for Boulder Dam electric power under an “interim” contract with the Government, in that it was required to pay 1.63 mills per kilowatt-hour for secondary power when the lawful price for such power was only .5 mill. References to the plaintiff apply, depending on the time of the action referred to, to the plaintiff’s former wholly owned subsidiary, the Southern Sierras Power Company, or to the plaintiff itself, either under its former name, the Nevada California Electric Corporation, or under its present name.
The Boulder Canyon Project Act of December 21, 1928, 45 Stat. 1057, required the Secretary of the Interior to obtain contracts, from future purchasers of power to be generated at the dam, adequate in his judgment to insure the payment of all costs of operation and maintenance and the repayment within 50 years from the date of completion of the project of the cost of building it, with interest. Unless and until such contracts were obtained, no money was to be spent in constructing the dam. The Secretary, on April 26, 1930, made a contract for the lease of the power privileges at the dam to the City of Los Angeles and the Southern Cali-
In the autumn of 1931, the Secretary made separate contracts with the cities of Pasadena, Glendale, and Burbank, California, the Los Angeles Gas and Electric Corporation and the plaintiff. The plaintiff’s contract was dated November 5, 1931. In each of these contracts the allottee agreed to take and/or pay for the percentage named in the contract of the whole amount of firm energy to be generated at the dam, at the price of 1.63 mills per k. w. h.
The lease and the several contracts allotted, by percentages, the entire 4,240,000,000 k. w. h. per year among the several allottees as firm power, i. e., as power which the Government bound itself to deliver and the allottees bound themselves to pay for. The rate to each allottee for firm power was 1.63 mills per k. w. h., except as that rate was
In the lease a concession was made to the City of Los Angeles and to Edison, that they would not, for the first three years that each was bound to pay for power, be obliged to take or pay for their full ultimate allotments at the firm power rate. It was provided that, for the first, second, and third years only 55, 70, and 85 percent, respectively, need be taken, and that if more than those percentages were in fact taken, the excess would be charged for only at the .5 mill secondary power rate. This was the “load-building period” privilege, which, as we shall see, the plaintiff claims it did not get, which claim is the basis for the suit in case No. 45688. This privilege was given to the Metropolitan Water District in its contract of April 26, 1930, which was also the date of the lease. It was not given to the 3 smaller cities, nor to the Gas Company, nor to the plaintiff, in their contracts made in the autumn of 1931. As we shall see, it was later given to all of the municipalities, and to the city of Los Angeles, as the successor to the Gas Company, but not, at least in the same form, to the plaintiff, though the Government urges that it was given to the plaintiff in substance.
Contracts adequate to reimburse the Government having been made, the Government proceeded with the building of the dam. As building progressed, the prospect was that the Secretary would announce the availability of 1,250,000,000 k. w. h. per year of power, which announcement would put into effect the obligation of the City of Los Angeles to begin to pay for its percentage of power, about June 1, 1937. The dam was expected to be completed in 1936. But all the water in the river could not be impounded while the depth necessary to generate 1,250,000,000 k. w. h. was built up, since
In May 1937 the Secretary announced that 1,250,000,000 k. w. h. per year would be available June 1, 1937, thereby obligating the City of Los Angeles and the three smaller cities to begin to take power at the firm rate, as modified by the load-building privilege, from the latter date. The City’s interim contract thus came to an end on May 31, 1937. On July 22, 1937, the plaintiff was given a supplemental or interim contract to be operative for the period of approximately 3 years which would elapse before the availability of the full 4,240,000,000 k. w. h. would be announced and the plaintiff’s permanent contract would go into effect. This interim contract provided that the plaintiff should receive 114,280,000 k. w. h. the first year, and specified amounts slightly less than that for the second and third years, of “firm” energy at the 1.63 mills rate, and additional energy at the .5 mill rate. The contract designated the named amounts of energy as “firm” energy, but the energy was not “firm” within the meaning of that term as used in the lease, the other contracts and the regulations. It was completely subordinate to the rights of the City, though the prospect was that it would in fact be available and it turned out to be available for the three-year period. It was also subject in various ways to the will of the Secretary. This interim contract gave the plaintiff, for the interim period, the load-building concession which meant that only 55,70, and 85 percent of the specified amounts of “firm” energy had to be taken and paid for at the 1.63 mills rate during the first, second, and third years, respectively, of the interim contract, amounts taken in excess of those percentages carrying only the .5 mill rate. The refusal to give the plaintiff a .5 mill rate for all power taken under its interim contract is, as we have said, the basis for its suit in No. 45916.
In No. 45688 the plaintiff’s claim is based on the fact that it was not given a load-building period which would have
That the Secretary of the Interior is hereby authorized, under such general regulations as he may prescribe, to contract for the * * * generation of electrical energy and delivery at the switchboard to States, municipal corporations, political subdivisions, and private corporations of electrical energy generated at said dam, upon charges that will provide revenue which, in addition to other revenue accruing under the reclamation law and under this act, will in his judgment cover all expenses of operation and maintenance incurred by the United States on account of works constructed under this act and the payment to the United States under subdivision (b) of Section 4. * * *
General and Uniform regulations shall be prescribed by the said Secretary for the awarding of contracts for the sale and delivery of electrical energy. * * *
The Secretary’s General Regulations, promulgated on April 25, 1930, after conferences with the municipalities and companies which were to take the power, provided for the making of the lease to the City and Edison; defined firm and secondary energy; fixed the rate per k. w. h. for each class of energy; allocated the energy among the lessees and allottees, and fixed the minimum annual obligations of each lessee and allottee. The lease, as we have seen, was dated April 26, 1930, and leased the generating machinery at the dam, some to the City of Los Angeles and some to Edison. It also, by its terms, made allotment contracts with the City and Edison, which incorporated the terms set out in the regulations. It provided in Article 14 (D) for the allocation of 6% of the power to a
Any modification, extension, or waiver by the Secretary of any of the terms, provisions, or requirements of this contract for the benefit of any one or more of the allottees (including the lessees) shall not be denied to any other.
As we have seen, the lease granted the load-building period to the City and Edison, whereby each was, for the first, second, and third years of its contract excused from taking more than 55, 70, and 85 per cent of the agreed amount of firm energy at the 1.63 mill rate, and, if it took more than those percentages, got the excess at the .5 mill rate. The municipalities of Burbank, Glendale, and Pasadena, as well as the plaintiff and the Gas Company, were not given this concession in their original contracts made in the autumn of 1931. But, as we have seen, in the autumn of 1934, following the signing of the “Memorandum of Understanding,” the Secretary made supplemental contracts with the three municipalities in which it granted load-building periods to them on the basis of the same percentages as those granted to the City and Edison. On October 22,1934, as shown in finding 11, the Secretary made a contract with the City, excusing the City from its guaranty that the municipalities would pay for their allotments of power, to the extent that their allotments were to be reduced by the load-building period which they were to be given.
The plaintiff claims that it was entitled to a load-building period because that concession was made to the municipalities. It points to Article 37 of the lease, quoted above. It says that the supplemental contracts with the municipalities were modifications of the lease (1) because the lease was incorporated in and made a part of each of the original contracts
We think the plaintiff became entitled to a load-building period, when that concession was made to the municipalities and to the City as guarantor, and as assignee of the Gas Company. We think the lease and the contracts made with the allottees other than the lessees were intended to provide for equal treatment of the allottees, including the lessees, except as the lease and the original contracts which were contemplated by the lease, and into which the lease was incorporated, provided. The lease was modified when the requirement of its Article 14 (D) that the municipalities take 6% of firm power was reduced by the percentages of the load-building period, and when the requirement of its Article 14 (F) relating to the Gas Company was similarly reduced, for the benefit of the City as assignee. Its Article 14 (F) (ii) was modified when the City’s guaranty to take or pay for the municipalities’ allotment if they did not do so was reduced by the same percentages.
The Government argues that the lease was not modified by these concessions to other allottees, but, as we have indicated, we do not agree. The Government also urges that, whether or not the plaintiff became entitled to a load-building period, it received that concession, in its interim contract given it by the supplemental lease of July 22, 1937, shown in finding 17. By this lease it agreed to take specified quantities of power, during the interval of about two years and ten months
No. 45916 is, as we have said, based upon the claim that -all of the power which the plaintiff took under its interim contract of July 22, 1937, and for which it paid 1.63 mills, except for the percentages covered by the load-building period, for which percentages it paid .5 mill, should have carried the .5 mill rate because it was secondary power. The
The Government’s defense to this claim is, in substance, that the power available before the date of the first announcement which put the City’s permanent contract into effect, and after each announcement but before the succeeding one,, until the ultimate announcement of 4,240,000,000 k. w. h. of available power was made, putting the last of the contracts into effect, was power not covered by the Kegulations or contracts, which the Secretary could refuse to sell at all, or sell on any terms he saw fit, and that the plaintiff is therefore bound by its contract to pay the agreed rates. As we have shown, the City and the plaintiff each applied for interim power. The conference of the interested parties with the agents of the Government produced the Memorandum of Understanding of October 3, 1934. That memorandum was intended as an agreement that various formal contracts would be made. All the contemplated contracts were made, except the one giving the plaintiff an interim contract, at the .5 mill rate. The City was given such a contract, and began to take power under it in October 1936, and ceased doing so on June 1, 1937, when its permanent contract began to operate.
The Secretary refused to approve an interim contract with the plaintiff on the terms provided in the Memorandum of Understanding. Further negotiations occurred in the succeeding years, and on July 22,1937, an interim contract was made with the plaintiff. It leased to the plaintiff the gen
The interim power which the plaintiff was entitled to under its contract was not “firm” power, as that term was used in the Regulations, lease, and contracts other than the interim contract. Firm power as defined was power which the Government agreed to deliver and the taker had the right to demand. The amount of firm power to be ultimately available had been conservatively estimated, so that the financing of the project would be sound, and it was always anticipated that there would be, in fact, a good deal more power than that which had been contracted for as “firm.” The mere prospect or likelihood that power would be available was not, therefore, the basis of distinction between firm and secondary power. Yet the interim contract attached the label “firm” to the plaintiff’s power, in contradiction of the use of the term in all other connections. The obvious purpose of the label was to justify the rate. The reason for the imposi
The regulations, the lease, and the original contracts fixed the rates for firm and secondary power. We think they bound the Secretary, if he desired to market the power here in question, to charge the price for it which was applicable to its true nature. It was secondary power, because it was not agreed to be delivered, and was expressly made subject to the priorities of the City, and to being shared, if necessary, with others. The rate, set by public regulation and by agreement, applicable to secondary power, should have been applied to it.
The plaintiff asserts that, by Article V of the Eegulations, Article (14) of the lease, and Article (7) of the plaintiff’s original contract, which provided for the allotment of energy, it was entitled to a portion of the secondary energy at any time that such energy was available and was not taken by Metropolitan. If so, it was entitled to get it at the .5 mill rate set in the Eegulations, lease, and contract for secondary energy. We think it was so entitled. A practical impediment to its getting it was, originally, that it would have no facilities for generating it until Edison took possession under its lease after 4,240,000,000 k. w. h. of energy were available. In fact the Secretary, by the plaintiff’s interim contract of July 22, 1937, leased generating equipment to the plaintiff, thus making secondary energy available to it. But in the same contract, he labeled the secondary energy as “firm” and ■charged 1.63 mills for most of it. We think that, having made it available, he could not depart from the rate set in the Eegulations, lease, and contract.
The so-called “third circuit” contract made by the Government with the City on July 6,1938 is relied on by the plaintiff as bringing into play from that date the provision of Article 33 of the plaintiff’s interim contract promising to it the benefit of any more favorable contract made thereafter. The City was proposing to build an additional transmission line, and desired to obtain additional power. By this contract the
We think that the third circuit contract, which gave the City a .5 mill rate for power, including interim power, which power, if secondary, yet had priority of right over the plaintiff’s interim power, entitled the plaintiff under Article 33 to the .5 mill rate from July 6,1938/
Edison’s contract for firm power did not go into effect until June 1, 1940. The Metropolitan Water District had, in the original contracts, obligated itself to pay for 36% of the firm power generated at the dam. Its obligation was to begin when the Secretary announced the availability of 2,000,000,-000 k. w. h., one year after the City’s obligation became effective. In 1931 it was apparent that the 2,000,000,000 k. w. h. announcement would be made June 1,1938. It had been expected from the beginning that Metropolitan would not, in fact, have use at least in the early years for its 36% of firm power, and the lease and contracts had provided that the Secretary might resell, for Metropolitan’s account, what it did not use; that the City and Edison should each have an option to buy one-half of such power; that the plaintiff should have an option to buy 10% of Edison’s one-half, and that if the Secretary proposed to sell such power he would notify the several parties having options. In 1937 the Secretary notified the parties, including the plaintiff, that he proposed to sell Metropolitan unused power, to begin June 30, 1938, at the 1.63 mills firm power rate. None of the parties exercised their options. On October 14, 1938, after the plaintiff had made its interim contract on July 22, 1937, the Secretary, without notice to the plaintiff, made a contract to sell Edison Metropolitan unused firm power at .5 mill. Failure to notify the plaintiff was a breach of the Government’s contract giving the plaintiff an option to buy such power, and a right to notice when it was for sale. The Government urges that the plaintiff was not hurt by this alleged breach, since it had, by its interim contract, obligated itself to pay 1.63 mills for a specified amount of power, subject to the load-building con
The Government urges, with regard to both suits, that whatever rights the plaintiff may have had to a load-building privilege or to a .5 mill rate for its secondary power, it lost those rights by voluntarily entering into its interim agreement. The plaintiff says that it did not make the agreement voluntarily, but made it as a result of economic duress. We agree with the plaintiff. We have found that it did all that it could to obtain an interim contract along the lines of the 1934 Memorandum of Understanding. It was apparent in 1937 that this could not be accomplished. It would not
The plaintiff is entitled to recover in both cases. Judgment will therefore be entered for plaintiff in case No. 45688 in the sum of $82,172.54, and in case No. 45916 in the sum of .'$184,081.31. It is so ordered.
Dissenting Opinion
dissenting:
I do not think plaintiff is entitled to recover in either case. Under the original leases and contracts the plaintiff was not -entitled to any power until 1940, when it was to take a part
They entered into a contract for power on precisely the-same terms as the city’s contract. The only difference was-the city was entitled to get its power first; but this was immaterial because there was plenty for both parties.
No more has been charged plaintiff than it agreed to pay. There has been no discrimination, and, so, I do not think plaintiff is entitled to recover.
