Oregon Advisory Opinions November 27, 1959: OAG 59-153 (November 27, 1959)
Collection: Oregon Attorney General Opinions
Docket: OAG 59-153
Date: Nov. 27, 1959
Advisory Opinion Text
OAG 59-153.
Public Utility Commissioner
This is in response to your recent request concerning several legal questions which your department is considering in connection with a proposed powertie between the Bonneville Power Administrator and the State of California.
The exchange of excess power between the Northwest area and California to satisfy the peak demands of each area is considered to be of possible mutual advantage. In this connection California has indicated its willingness not to claim a preferential status as a customer of the Bonneville Power Administrator in competition with Northwest power users. This situation has given rise to the questions submitted and hereinafter answered.
"1. Is there any limitation on the marketing area of the BPA inherent in the statute?"
16 U.S.C.A., § 832a (a), provides in part:
"The electric energy generated in the operation of the said Bonneville project shall be disposed of by the said administrator as provided in this chapter. * * *"
16 U.S.C.A., § 832a (b), declares:
"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 constructed on or after August 20, 1937." (Emphasis supplied)
16 U.S.C.A., § 832b, contains the following definition:
"As employed in this chapter, the term 'public body', or 'public bodies', means States, public power districts, counties, and municipalities, including agencies or subdivisions of any thereof."
In connection with preferences, 16 U.S.C.A., § 832c (d), contains the following statement that relates to the marketing area:
"It is declared to be the policy of the Congress, as expressed in this chapter, to preserve the said preferential status of the public bodies and cooperatives herein referred to, and to give to the people of the States within economic transmission distance of the Bonneville project reasonable opportunity and time to hold any election or elections or take any action necessary to create such public bodies and cooperatives as the laws of such States authorize and permit, and to afford such public bodies or cooperatives reasonable time and opportunity to take any action necessary to authorize the issuance of bonds or to arrange other financing necessary to construct or acquire necessary and desirable electric distribution facilities, and in all other respects legally to become qualified purchasers and distributors of electric energy available under this chapter." (Emphasis supplied)
It will be seen from the above that while it may be argued that "economic transmission distance" is intended to limit the marketing area, this is a physical, technological, budgetary or economic limitation rather than a statutory geographical limitation. It is my opinion that there is no limitation on the Bonneville marketing area inherent in the statute and in fact the purposes expressed by the language therein are directly to the contrary.
"2. What is the legal relationship between the Bonneville Power Administration marketing area and the area of operation of the preference clause?"
The preference clause is set forth in 16 U.S.C.A., § 832c (a), as follows:
"In order to insure that the facilities for the generation of electric energy at the Bonneville project shall be operated for the benefit of the general public, and particularly of domestic and rural consumers, the administrator shall at all times, in disposing of electric energy generated at said project,
give preference and priority to public bodies and cooperatives."
Section 832c (b) states:
"To preserve and protect the preferential rights and priorities of public bodies and cooperatives as provided in subsection (a) of this section and to effectuate the intent and purpose of this chapter that at all times up to January 1, 1942, there shall be available for sale to public bodies and cooperatives not less than 50 per centum of the electric energy produced at the Bonneville project, it shall be the duty of the administrator in making contracts for the sale of such energy to so arrange such contracts as to make such 50 per centum of such energy available to said public bodies and cooperatives until January 1, 1942: * * *"
In view of these sections and those set forth in answer to question 1, it is clear that the preference clause operates wherever the marketing area is extended.
"3. Does the marketing area of BPA follow the sale of power and if so does the boundary contract when an area is no longer served?"
There is nothing in the Bonneville Power Act that requires, expressly permits or necessitates the adoption by the administrator of a formally described boundary of the marketing area. Under the statute the marketing area is determined by the area of operation or sales and as that area expands or contracts the so-called boundary is clearly affected.
"4. Can the operation of the preference clause be waived by contract between Bonneville and a public buyer?"
16 U.S.C.A., § 832c (b), declares that up until 1942 in order to preserve the preference to public bodies not less than 50 percent of the electric energy produced at Bonneville shall be available to public bodies. This section also declares:
"* * * Provided further, That nothing herein contained shall be construed to limit or impair the preferential and priority rights of such public bodies or cooperatives after January 1, 1942; and in the event that after such date there shall be conflicting or competing applications for an allocation of electric energy between any public body or cooperative on the one hand and a private agency of any character on the other, the application of such public body or cooperative shall be granted." (Emphasis supplied)
It is submitted that whether a public body is able to waive its preference is a question of the power of that body, for the exercise of which it is responsible to its constituents. Furthermore in view of the broad statement of general policy contained in the above cited sections of the Bonneville Power Act, it is submitted that an attempt by a public body to waive its preferential right might well be held to be contrary to public policy. However, even if a public body sought or were willing to waive its preference it is doubtful, in view of the mandatory nature of the above language of § 832c (b), that Bonneville would be permitted to recognize the waiver. In any conflicting or competing allocation of energy the Bonneville Power Administrator "shall" grant the application of the public body.
"5. Where Bonneville sells power to a non-preference buyer and this buyer in turn sells it or wheels it for a preference type buyer, does the preference clause attach?"
A utility over whose lines electric energy is wheeled is neither seller nor purchaser. It simply permits the use of its facilities for the transmission of power for sale and purchase by other parties. If the Bonneville Power Administrator were the seller and a public body were the purchaser, that purchaser would enjoy a preferential right under the Act since the sale and disposition of the power would be directly to the public body and not to the wheeling agency. When the Bonneville Power Administrator sells power to a private agency he does so subject to the following provisions of 16 U.S.C.A., § 832d (a):
"Subject to the provisions of this chapter and to such rate schedules as the Federal Power Commission may approve, as provided in this chapter, the administrator shall negotiate and enter into contracts for the sale at wholesale of electric energy, either for resale or direct consumption, to public bodies and cooperatives and to private agencies and persons and for the disposition of electric energy to Federal agencies. * * * Contracts entered into under this subsection shall contain (1) such provisions as the administrator and purchaser agree upon for the equitable adjustment of rates at appropriate intervals, not less frequently than once in every five years, and (2) in the case of a contract with any purchaser engaged in the business of selling electric energy to the general public, the contract shall provide that the administrator may cancel such contract upon five years' notice in writing if in the judgment of the administrator any part of the electric energy purchased under such contract is likely to be needed to satisfy the requirements of the said public bodies or cooperatives referred to in this chapter, and that such cancelation may be with respect to all or any part of the electric energy so purchased under said contract to the end that the preferential rights and priorities accorded public bodies and cooperatives under this chapter shall at all times be preserved. Contracts entered into with any utility engaged in the sale of electric energy to the general public shall contain such terms and conditions, including among other things stipulations concerning resale and resale rates by any such utility, as the administrator may deem necessary, desirable or appropriate to effectuate the purposes of this chapter and to insure that resale by such utility to the ultimate consumer shall be at rates which are reasonable and nondiscriminatory. Such contracts shall
also require such utility to keep on file in the office of the administrator a schedule of all its rates and charges to the public for electric energy and such alterations and changes therein as may be put into effect by such utility." (Emphasis supplied)
This control of contracts and rates is not equivalent to a sale by Bonneville to a preferential customer, but as a sale to a private agency no preferential right attaches.
"6. What would be the effect on the marketing area and the operation of the preference clause of a Bureau of Reclamation line in California tying into a BPA line at the Oregon-California border?"
If the Bureau of Reclamation were the purchaser the Bonneville marketing area would extend to the Oregon-California border or wherever the bureau took delivery. The Bureau of Reclamation could not, however, assert a preferential right to the purchase of Bonneville power since § 832b, above set forth, does not include federal agencies within the definition of "public body."
If the bureau lines were utilized only for the purpose of wheeling Bonneville power to purchasers in California, the marketing area of Bonneville would extend to the points of delivery in California. The operation of the preference clause would then depend upon the identity of the California purchasers, namely, whether they are public bodies who enjoy a preferential right under the Act.
Under 16 U.S.C.A., § 832a (b), supra, the administrator may do those things necessary, desirable or appropriate "for the purpose of interchange of electric energy, to interconnect the Bonneville project with other Federal projects * * * constructed on or after August 20, 1937."
16 U.S.C.A., § 832d (a), was amended in 1945 to add the following italicized language to the first sentence thereof:
"Subject to the provisions of this chapter and to such rate schedules as the Federal Power Commission may approve, as provided in this chapter, the administrator shall negotiate and enter into contracts for the sale at wholesale of electric energy, either for resale or direct consumption, to public bodies and cooperatives and to private agencies and persons and for the disposition of electric energy to Federal agencies. * * *" (Emphasis supplied)
Subparagraph (b) provides:
"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 or providing emergency or break-down relief."
Thus while the bureau may not be entitled to a preference in the purchase of power it is a natural and appropriate agency through which excess power may be exchanged.
"7. What would be the effect on the marketing area and the operation of the preference clause of a Bureau of Reclamation line in California tying into an Oregon state built line providing a connection with BPA?
"8. What would be the effect on the marketing area in the operation of the preference clause on the Bureau of Reclamation line in California tying into a privately built line in Oregon connected with BPA?
"9. What would be the effect of the marketing area and the operation of the preference clause with a Bureau of Reclamation line in California tying into a line at the Oregon border which was partly built by private power companies and partly built by public bodies connected with BPA?"
The answer to these three questions is basically the same as to question 6, namely, that the question of whether or not the preference right to purchase exists does not depend upon the ownership of the lines over which the power is transmitted, but rather whether the power is purchased from the owner of the lines or wheeled for the California public body purchaser.
"10. What is the best course of action to be pursued by the states to formalize and carry into execution the agreement reached by the Governors of California, Oregon and Washington, to-wit: that California would not assert a preference right, in competition with Northwest power users, and to make this agreement legal and binding not only on California but public power agencies in California and the Bonneville Power Administration as well?"
In view of my answer to question 11 that follows, it is clear that an appropriate Act of Congress is the only effective way to accomplish the result desired and to bind the Bonneville Power Administrator and all public bodies in all of the states.
"11. Would an interstate compact have value---either legal, political or moral in preventing the attaching of the preference clause to California power purchasers?"
Turning to the compact, Article I, § 10, clause 3, of the United States Constitution, declares:
"No state shall, without the Consent of Congress, * * * enter into any Agreement or Compact with another State, or with a foreign Power * * *."
The kinds of interstate agreements prohibited by this provision have been discussed in numerous cases. The prohibition is directed to any agreement tending to increase, decrease or alter the political power in the states affected which may encroach upon or interfere with the just supremacy of the United States. State of Virginia v. State of
Tennessee, (1893) 148 U.S. 503, 518, 37 L.Ed. 537; Duncan v. Smith, (Ky. 1953) 262 S.W. (2d) 373, 42 A.L.R. (2d) 754; Ivey v. Ayers, (Mo. 1957) 301 S.W. (2d) 790; State of Missouri v. Lauridsen, (Mo. 1958) 312 S.W. (2d) 140.
It has been held that reciprocal agreements or statutes and uniform acts do not come within the federal constitutional prohibitions against interstate agreements: [motor vehicle tax exemptions---Bode v. Barrett, (Ill. 1953) 344 U.S. 583, 97 L. Ed. 567] and [out-of-state parolee supervision---Gulley v. Apple, (1948) 213 Ark. 350, 210 S.W. (2d) 514].
The same is true of agreements locating state boundaries where no new boundary is established but the old one merely relocated: Blaine v. Murphy, (Mass. 1920) 265 F. 324; but see Virginia v. Tennessee, supra, and State of North Carolina v. Tennessee, (1914) 235 U.S. 1, 59 L. Ed. 97, where the court held that if the boundary so run cuts off important and valuable portions of a state then the political power of the state would be affected and consent of Congress would be required.
It has been suggested that California, Oregon and Washington, and possibly Idaho and Montana, enter into a compact, the principal provision of which would be to undertake a power-tie connection which should offer mutual benefits at respective peak seasons and California would waive or at least not assert a preferential right to obtain power from the Bonneville Power Administrator.
If the State of California were the only purchaser involved, the waiver by California would be subject to the "public policy" criticism discussed in answer to question 4 and it is doubtful if the Bonneville Power Administrator could recognize the waiver for the reasons stated therein.
Of more importance, California's assurance would not bind public bodies in California other than the State of California.
It would seem that such a compact would be an attempt at least to encroach upon or interfere with the supremacy of the federal statute. The Congress could not be expected to ratify such a compact when its purpose is in essence to amend the federal statute.
For these reasons I would not consider that such a compact would be legal in any sense of the word.
Any comment upon the political or moral value of such a compact must be made with reference to the answers given to the previous questions. California's assurance that it would not assert a preference right in competition with Northwest power users is of no present legal significance and there is no way in which it can be implemented by legal action to bind the State of California and its residents, including federal agencies and public power users. At best it is a statement of his policy of what is the equitable and proper use of Northwest power.
As such it may properly be interpreted as indicating a willingness not to oppose any proper action including congressional legislation that would accomplish that end. Certainly a formal compact could add nothing to the binding quality of such assurances on the part of the State of California.