City of Santa Clara, Cal. v. Kleppe

Citation418 F. Supp. 1243
Decision Date23 July 1976
Docket NumberNo. C-75-1574.,C-75-1574.
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
PartiesCITY OF SANTA CLARA, CALIFORNIA, Plaintiff, v. Thomas KLEPPE, Individually and as Secretary of the Interior, and Gilbert Stamm, Individually and as Commissioner of the Bureau of Reclamation, United States Department of the Interior, Defendants, Pacific Gas & Electric Co., Intervenor-Defendant.


Edwin J. Moore, City Atty., Santa Clara, Cal., M. Van Smith, Asst. City Atty., Palo Alto, Cal., Michael R. Downey, Deputy City Atty., Santa Clara, Cal., and Frederick D. Palmer, of Duncan, Brown, Weinberg & Palmer, Washington, D. C., for plaintiff.

Rex E. Lee, Asst. Atty. Gen., Washington, D. C., James L. Browning, Jr., U. S. Atty., Richard F. Locke, Asst. U. S. Atty., N. D. Cal., San Francisco, Cal., Stanley D. Rose, C. Max Vassanelli, Attys., Dept. of Justice, Washington, D. C., for federal defendants.

Morris M. Doyle, Terry J. Houlihan, Phyllis Kay Dryden, Charles A. Ferguson-Lawrence, of McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., and John C. Morrissey, Malcolm H. Furbush, Theodore L. Lindberg, of Pacific Gas and Elec. Co., San Francisco, Cal., for intervenor-defendant PG&E.


CONTI, District Judge.

This case brings for judicial resolution a controversy over low cost federal hydroelectric power emanating from the Bureau of Reclamation's California Central Valley Project (CVP). The principal parties are the California City of Santa Clara on one side and the U. S. Department of the Interior and its Bureau of Reclamation on the other. Pacific Gas & Electric, a private utility company, has intervened as party defendant. Simply stated, Santa Clara wants more low cost federal power than the federal defendants have allocated to it, and suggests that the Bureau's allocation scheme is legally defective. The Bureau responds that how it allocates the CVP power under its control is unreviewably discretionary, but, for that matter, the allocation scheme was fairly formulated and is rationally based. PG&E, long an integral part of the Bureau's power allocation plan, and the source to which Santa Clara would most likely have to look for satisfaction of its power needs if the court upholds the Bureau's scheme, supports the Bureau's position. Santa Clara would prefer to purchase CVP power at $.005 per kilowatt-hour rather than PG&E power at $.019 per kilowatt-hour.1

I. Project Authority and Background.

CVP is a multipurpose project consisting of numerous dams, hydroelectric power generation and transmission facilities and irrigation canals, located in the Central Valley of California and the surrounding mountains.2 Although the production of hydro-generated power is not the primary purpose of the Project, the amount of electricity generated is substantial and serves a large number of customers in northern and central California.3

The Central Valley Project Authorization Act, 50 Stat. 850, provides in part:

Sec. 2. . . . The entire Central Valley project, California, heretofore authorized and established under the provisions of the Emergency Relief Appropriation Act of 1935 (49 Stat. 115) and the First Deficiency Appropriation Act, fiscal year 1936 (49 Stat. 1622), is hereby reauthorized and declared to be for the purposes of improving navigation, regulating the flow of the San Joaquin River and the Sacramento River, controlling floods, providing for storage and for the delivery of the stored waters thereof, for the reclamation of arid and semiarid lands and lands of Indian reservations, and other beneficial uses, and for the generation and sale of electric energy as a means of financially aiding and assisting such undertakings and in order to permit the full utilization of the works constructed to accomplish the aforesaid purposes: Provided further, That, except as herein otherwise specifically provided, the provisions of the reclamation law, as amended, shall govern the repayment of expenditures and the construction, operation, and maintenance of the dams, canals, power plants, pumping plans, transmission lines, and incidental works deemed necessary to said entire project, and the Secretary of the Interior may enter into repayment contracts, and other necessary contracts, with State agencies, authorities, associations, persons, and corporations, either public or private, including all agencies with which contracts are authorized under the reclamation law, . . .: And provided further, That the said dam and reservoirs shall be used first, for river regulation, improvement of navigation, and flood control; second, for irrigation and domestic uses; and third, for power. See also, Central Valley Project Reauthorization Act, 16 U.S.C. § 695d.

Thus incorporated into the Central Valley Project Authorization Act is the following provision of the Reclamation Project Act of 1939, found in Section 9(c), 43 U.S.C. § 485h(c):

Any sale of electric 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 construction investment at not less than 3 per centum per annum, and such other fixed charges as the Secretary deems proper: Provided further, That in said sales or leases preference shall be given to municipalities and other public corporations or agencies; and also to cooperatives and other nonprofit organizations financed in whole or in part by loans made pursuant to the Rural Electrification Act of 1936 and any amendments thereof. . . .
* * * * * *
No contract relating to municipal water supply or miscellaneous purposes or to electric power or power privileges shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes.

There is no question, and no argument to the contrary, that the "preference clause" of Section 9(c) applies to sales of federally-generated hydroelectric power from CVP, see Arizona Power Pooling Assn. v. Morton, 527 F.2d 721 (9th Cir. 1975), nor does the government dispute that Santa Clara is entitled to preference in the sale of the CVP power. Rather, the controversy centers around the Bureau's allocation decision which treats other preference customers more favorably than Santa Clara in the fierce competition for limited low cost federal CVP power.

Santa Clara has received varying amounts of CVP power since 1965. The City had lodged many requests for power with the Bureau, beginning in 1960, but its early requests acknowledged that it could not provide a market for federal power until late 1967, at which time its then existing power requirements contract with PG&E, which had been supplying all the City's power needs, would expire. Wishing to insure a supply of federal power at the earliest opportunity, however, the City sought a prospective allocation to satisfy its future, post-1967, needs.4 The Bureau responded that it could not then commit itself to such a future allocation, in view of anticipated Project requirements, but that the City's application would be kept on file for consideration nearer the time Santa Clara could actually purchase power, free from the PG&E contract.5

Meanwhile, early in 1963 additional hydroelectric power became available to the CVP with the coming on line of power from the Trinity River Division of the CVP.6 More energy became available as the generating units of that division proceeded to completion in May of 1964. While a notice of this additional power was sent to all entities entitled to preference status, including Santa Clara,7 requesting estimates of present load requirements and future load growth, this additional power was allocated to then existing preference customers only, excluding Santa Clara, because of the City's inability to take power immediately.8

Concerned that all CVP power was fast becoming spoken for, and dissatisfied with the Bureau's repeated assurances that the City's application would receive due consideration, the City, in July, 1964, telegraphed the Secretary of the Interior directly, requesting an immediate allocation of CVP power, on a withdrawable basis if absolutely necessary. The City asserted that its contract with PG&E was not binding on it and should not bar its eligibility to receive CVP power. The Secretary responded that 75 megawatts of power could be offered if the City could make arrangements with PG&E for its transmission. The letter warned, however, that the power would be withdrawn when required to meet previously promised, long-term firm allocations to other preference customers.9 The City thereupon submitted a formal application for that amount, but again requested that it be kept in mind for a firm, non-withdrawable allocation when and if additional power became available, and set forth its predicted power needs through 1980.10

PG&E objected to the Department's offering power to Santa Clara while the utility's requirements contract with the City was still outstanding. The Secretary of the Interior concluded, however, that the Department had to recognize its statutory responsibilities in the marketing of federal power to preference customers, including Santa Clara, and that the fact of a dispute between the City and PG&E over the validity of their power requirements contract would not relieve the Department of its statutory duty to provide available service to Santa Clara.11

On November 30, 1965, Santa Clara and the Bureau finally contracted for the purchase of CVP power on a withdrawable basis.12 Santa Clara's allotment under the original contract was 75,000 kilowatts, but was revised upward several times by amendments until it reached a peak of 120,000 kilowatts in November, 1970. All these increases had the City's assent. In 1971, however, the Bureau began to withdraw...

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