Yosemite Park and Curry Co. v. United States, 309-79C.

• Citation: 686 F.2d 925
• Decision Date: 11 August 1982
• Docket Number: No. 309-79C.,309-79C.
• Parties: YOSEMITE PARK AND CURRY COMPANY v. The UNITED STATES.
• Court: U.S. Claims Court

686 F.2d 925

YOSEMITE PARK AND CURRY COMPANY v. The UNITED STATES.

No. 309-79C.

United States Court of Claims.

August 11, 1982.

Richard A. Solomon, Washington, D. C., attorney of record, for plaintiff; Stuart F. Feldstein, Dennis Lane and Wilner & Scheiner, Washington, D. C., of counsel.

John W. Showalter, Washington, D. C., with whom was Asst. Atty. Gen. J. Paul McGrath, Washington, D. C., for defendant.

Before DAVIS, KASHIWA and SMITH, Judges.

SMITH, Judge:

Plaintiff operates food and accommodation services at Yosemite National Park (Yosemite) as a concessioner of the National Park Service (NPS). Under a long-term contract between NPS and plaintiff, NPS supplies all of plaintiff's electricity. Plaintiff contends that the rate structure used by NPS overcharged plaintiff in contravention of the contract terms and of applicable statutes and regulations. The Government maintains that its method of setting rates was reasonable and should be upheld. We find for the Government.

I.

The facts have been stipulated by the parties. In 1963, plaintiff and NPS entered into a 30-year concession contract for the provision to the public of food and accommodation services in Yosemite. Because plaintiff's facilities are inside the park and the park is itself isolated, the Government has complete control over plaintiff's access to the basic utilities needed to operate its facilities. Consequently, the concession contract requires that NPS supply plaintiff with utilities, and throughout the life of the contract NPS has provided plaintiff with electrical, water and sewer, and solid waste disposal services. Section 6(a) of the contract states only that the rates charged be "reasonable."

At Yosemite, NPS obtained the electricity it provided to plaintiff from two sources. During the period in question, 1974 to 1980, about 60 percent (per year, on the average) of plaintiff's electricity was generated at a hydroelectric plant, owned and operated by NPS, in the park. The remaining 40 percent (approximately) was obtained by NPS from Pacific Gas & Electric Company (PG&E), the public utility company which supplies electricity to the Yosemite area. NPS distributed the PG&E electricity throughout the park on its own distribution grid.

The method NPS used to set electricity rates is, in its essential outline, straightforward. From 1974 to 1978, NPS based its charges on the rate schedule of PG&E. Beginning in 1978, NPS used instead the average of the rates of PG&E and two other area utility companies, Southern California Edison Company and Sierra Pacific Power Company. This rate-setting method may be called a comparative-rate system.

Included in the utility companies' rate schedules, of course, was their cost of energy, a combination of fossil fuels, nuclear energy, and hydroelectric power. Because of the rapid escalation of petroleum costs in the early 1970's, the California Public Utilities Commission (which regulates all of the aforementioned utility companies) began to separate out the energy costs in the published rates. This was called the energy cost adjustment clause (ECAC) and its amount varied from month to month with the cost of the fuel and the mix of fuels used during that period. For example, if hydroelectric power were used to a large extent in a particular month, the ECAC charge would generally be lower in that month relative to a month in which mostly fossil fuel was used. The ECAC was not a new charge — the cost of energy was always reflected in the rates — but it made more obvious the fluctuations in energy costs and the role played by energy costs in the final rate paid by the user.

Plaintiff points out that, while 60 percent of the electricity NPS supplied was purely hydroelectric (from the NPS generator at Yosemite), NPS charged plaintiff as if 100 percent of the electricity were generated by a combination of hydro, nuclear, and fossil fuels. As a result, plaintiff says, it was overcharged for 60 percent of the electricity it used, because no nuclear or fossil fuel was used in its production.

In essence, plaintiff is arguing that a cost-based system should be used instead of the comparative-rate system. While plaintiff says it would accept the use of the utilities' rates as a starting point for calculating NPS rates, it insists that ultimately the NPS rates must bear a close relation to the actual cost to NPS. The legal question presented in this case is whether the contract and the relevant statutes and regulations require a cost-based system — that is, one whose validity rests ultimately on its relationship to the actual costs to NPS of producing the electricity — or whether a rational comparative-rate system is permissible.

II.

A.

The NPS rates in this case are governed by what might be described as several levels of authority. The most directly applicable level is the contract itself, section 6(a) of which states:

The Secretary of the Interior shall furnish utilities to the Concessioner, when available, and at reasonable rates to be fixed by the Secretary, for use in connection with the operations authorized hereunder. Emphasis supplied.

The contract, however, offers no further definition of "reasonable rates."

The term "reasonable," by itself, could mean reasonable in relation to the Government's cost of providing the electricity; or, it could mean reasonable in relation to the rates plaintiff would otherwise have to pay to obtain the electricity from utility companies, in short, fair market value. The contract simply offers no basis for choosing between these meanings. Under the plain words of the contract, then, we cannot say that the NPS comparative-rate system is unreasonable.

Taken as a whole, section 6(a) points to a more definite meaning of "reasonable." The phrase "to be fixed by the Secretary" suggests that the parties contemplated an established procedure which would give meaning to the otherwise vague term "reasonable." As discussed at length below, there are such statutory and regulatory provisions for fixing these prices. Since, as we find, these provisions require a reasonable price to be set in either of the senses discussed above, it makes the most sense to read "reasonable rates" in section 6(a) of the contract to mean in accordance with the applicable statutes and regulations.¹ We therefore move on to those provisions.

B.

The comparative-rate method used by NPS was established in a memorandum, dated January 24, 1973, from the Acting Director, Western Region. It provides:

All charges for utility services require the application of sound business management practices. Accordingly, local rates will be established at comparable commercial prices charged in the community being used by the concessioner to support and justify the respective charges for meals or lodging or services provided the public. This policy is consistent with the intent of Congress (31 U.S.C. 483a) and the Office of Management and Budget (Circular A-25) in that the resulting rate(s) will recover costs to the fullest extent possible and as fair and equitable, taking into consideration value to the recipient, public interest served, and other pertinent facts. Emphasis supplied.

There can be no question that the NPS practice of averaging local utility rates is in accordance with this policy memorandum, and plaintiff does not contend otherwise.

The basic statutory authority for the provision by NPS of electricity to concessioners is found in the organic act of the National Park System.²

In order to facilitate the administration of the National Park System, the Secretary of the Interior is authorized to carry out the following activities, and he may use applicable appropriations for the aforesaid system for the following purposes:

* * * * * *

(4) Utility services for concessioners; reimbursement

Furnishing, on a reimbursement of appropriation basis, all types of utility services to concessioners, contractors, permittees, or other users of such services, within the National Park System: Provided, That reimbursements for cost of such utility services may be credited to the appropriation current at the time reimbursements are received. Emphasis supplied.

Plaintiff argues that the italicized words are, so to speak, words of limitation rather than words of purchase. That is, plaintiff asserts that NPS cannot charge more for electricity than would reimburse its cost of providing it. The Government argues, to the contrary, that reimbursement is the minimum that NPS should receive.

The legislative history of section 1b(4) makes it fairly clear that the Government's position is the correct one, or at least that plaintiff's position is not the correct one. Concern about overcharging concessioners had nothing to do with the enactment of section 1b(4); concern about undercharging by the Government was the central theme. The only substantive comments on paragraph (4) are in letters from the Secretary of the Interior to the respective committee chairmen, recommending approval of paragraph (4). In both letters the Secretary stresses the tremendous post-war increase in use of the parks, the unnecessary expense of NPS generating all of its own electricity, and the efficiency of NPS buying its electricity elsewhere and charging for the cost of obtaining and distributing it.³ The expressed concern is with recovering the costs at all, not with recovering too much.⁴ In fact, the real purpose of paragraph (4) is to authorize accounting procedures which permit straightforward reimbursement of the cost of providing electricity instead of the "involved" procedures that NPS previously had had to use.⁵ It may be concluded that the phrase "on a reimbursement of appropriation basis" refers to the minimum amount which Congress wanted NPS to charge. This reading of section 1b(4) also brings it into better harmony with the Independent Offices Appropriations Act, discussed below, which was also concerned with adequate reimbursement to the...