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was also understood that if the form is left so as to require election as a condition to receiving the commutation, the date of action by the legislature should be advanced sufficiently to permit a special session of the legislature to be called, this being in view of the fact that the regular session has adjourned without taking action. It was also understood that such changes as might be appropriate should be made in view of the fact that the Legislature of Nevada has elected to accept the commutation.)

(c) The payment, without further appropriation, subject to the provisions of section 10 hereof, into a separate fund in the Treasury, hereby established and designated “The Colorado River development fund,” of the sum of $500,000 for the year of operation ending May 31, 1940, and the like sum of $500,000 for each year of operation thereafter, until and including the year of operation ending May 31, 1987. Payment of the said sum of $500,000 for the year of operation ending May 31, 1940, shall be in installments of $20,000 each, payable on the first day of June, 1939, and monthly thereafter, until and including June 1, 1941, provided that any such installment for any such payment date which shall have passed at the time this section 7 (c) shall become effective shall be payable immediately, and shall be paid as expeditiously as administration of this Act will permit. Said sum of $500,000 for each year of operation subsequent to the year of operation ending May 31, 1940, shall be paid in a single payment on or before June 30 next following the close of the year of operation for which it is made, beginning on or before June 30, 1941. Receipts of the Colorado River development fund for the years of operation ending in 1940, 1941, and 1942 (or in the event of reduced receipts during any of said years, due to adjustments under section 10 hereof, then the first receipts of said fund up to $1,500,000), are authorized to be appropriated only for the continuation and extension, under the direction of the Secretary of the Interior, of studies and investigations being carried on by the Bureau of Reclamation for the formulation of a comprehensive plan for the utilization of waters of the Colorado River system for irrigation, electric power, and other purposes, throughout the upper and lower basins, including studies of quantity and quality of water and all other relevant factors. The next such receipts up to and including the receipts for the year of operation ending in 1955 are authorized to be appropriated only for the investigation and construction of projects for such utilization equitably distributed among the four States of the upper division. Such receipts for the years of operation ending in 1956 to 1987, inclusive, are authorized to be appropriated for the investigation and construction of projects for such utilization equitably distributed among the seven States of the upper and lower divisions. Such projects shall be only such as are found by the Secretary of the Interior to be physically feasible, economically justified, and consistent with the said comprehensive plan as formulated, or as the same may be modified from time to time. The terms "Colorado River system," "upper basin,” “lower basin," "upper division,” and "lower division" are used in this section 7 (c) as defined in the Colorado River compact mentioned in the Project Act.

(d) The repayment to the Treasury, with interest, without further appropriation, of the advances heretofore or hereafter made to the Colorado River Dam fund under section 2 (b) of the Project Act for the construction of Boulder Dam and incidental works (excluding advances used for leased machinery and equipment, and the sum of $25,000,000 allocated to flood control by said Act), which advances, including interest thereon during construction, are herein referred to as the “net advances.” Such repayment, with interest, shall be made in annual installments, beginning with an installment for the first year of operation in which revenues are in excess of other requirements, and continuing annually thereafter, until and including the year of operation ending May 31, 1987, or until such earlier or later date as said net advances may have been repaid, with interest, by reason of the operation of other provisions of this Act. Each such installment shall be paid on or before June 30 next following the close of the year of operation for which it is made and shall consist of the balance of revenues remaining in the Colorado River Dam fund as of the close of the year of operation for which it is made, after paying, or making provision for the payment of, all other sums payable under the provisions of this Act from said fund with respect to the year of operation for which such installment is paid. Advance payments may be made on any such installment if, in the judgment of the Secretary of the Interior, justified by the condition of the Colorado River Dam fund. All such installments shall be applied first to the payment of interest on the net advances accrued and unpaid to the close of the preceding year of operation, and next to the principal thereof. If in any year there shall not be a balance sufficient to pay such accrued interest, the deficit shall bear interest until paid. The said $25,000,000 allocated to flood control shall be deemed to have been the first advances made for construction purposes, and shall be repaid without interest, after full repayment of the net advances, in such manner as the Congress may hereafter provide.

SEC. 8. REPAYMENT OF MACHINERY ADVANCES.—The Secretary of the Interior shall also cause the revenues from the rental of leased machinery and equipment to be applied currently as received in payment of interest upon, and repayment of, the advances from the Treasury to the Colorado River Dam fund on account of such leased machinery and equipment.

SEC. 9. READVANCES AUTHORIZED.-If, by reason of sums having been covered into the Treasury out of the Colorado River Dam fund in payment of interest and/or principal of advances from the Treasury, or by reason of credits which may be due on account of collection at rates exceeding those to be fixed under this Act, or by reason of the costs of operation, maintenance, or replacements exceeding the funds currently available therefor, there shall be insufficient sums in the Colorado River Dam fund to meet the requirements of this Act, the Secretary of the Treasury is authorized to readvance to the said fund, on request of the Secretary of the Interior, sums not exceeding the amounts theretofore paid from said fund to the Treasury.

SEC. 10. ADJUSTMENTS DUE TO ACT OF GOD, AND SO FORTH.--If, by reason of any act of God, or of the public enemy, or any major catastrophe, or any other unforeseen and unavoidable cause, the revenues for any year of operation, after making provision for costs of operation, maintenance, and the replacement annuity for said year, should be insufficient to make the payments to the States of Arizona and Nevada and into the Colorado River development fund herein provided for, such payments shall be abated, or reduced, in equal proportions, as the Secretary of the Interior may find to be necessary by reason thereof.

SUPPLEMENTAL CONTRACTS

Sec. 11. AUTHORIZATION. On written demand of any allottee of electrical energy made within sixty days after notice of promulgation of rates given by the Secretary of the Interior as provided for in section 5 hereof, he shall enter into a supplemental contract with such allottee, which shall provide that:

(a) The allottee shall pay the rate or rates, determined in accordance with section 2 of this Act, for the use of falling water for the generation of such class or classes of energy as has or have been allotted to such allottee under regulations heretofore issued by the Secretary of the Interior under authority of the Project Act, and the adjustment, by credits and not by cash refunds, of such payments made under any existing contract with such allottee as amount to overpayments on the basis of such supplemental contract.

(b) (i) Rates shall be readjusted by the Secretary of the Interior as of June 1, 1945, and every five years thereafter, upward or downward, as may be necessary to reflect (1) correction of estimates of revenues from the storage and delivery of water (other than for generation of electrical energy); (2) variations, if any, in the amounts payable to the States of Arizona and Nevada, in the event that either or both of said States shall not elect to accept the commutation provided for in section 7 (b) hereof; (3) variations, if any, in the amounts payable by contractors in the event that any such contractor shall not enter into such supplemental contract; (4) the receipts of moneys from sources other than those mentioned in section 2 hereof, and of classes other than those specified in the findings made under section 5 hereof with reference to net costs of operation and maintenance; and (5) the advances hereafter made to the Colorado River Dam fund under section 2 (b) of the Project Act for the construction of Boulder Dam and incidental works (excluding advances used for the installation of machinery and equipment and readvances made pursuant to section 9 hereof).

(ii) To the extent hereinafter provided. rates for the use of falling water for the generation of energy shall also be rea justed by the Secretary of the Interior, as of June 1, 1955, and at ten-year intervals thereafter, upward or downward, on the following basis. If, at any such successive date for revision, it shall appear that the actual aggregate flow of water in the Colorado River, measured at Lee Ferry, between June 1, 1937, and the date for such revision, is greater or less than, by not to exceed 10 per centum, the expected aggregate water flow for such period, as found pursuant to section 5 hereof, then the actual excess or deficit, on the basis of the last preceding estimate, of revenues from the use

of falling water for the generation of energy at the secondary rate during the said period shall be carried into effect by a readjustment of rates, and the total actual use of secondard energy by all contractors during such period shall be the basis for estimates of the use of such energy, and of revenues therefrom, during the balance of the fifty-year period for the amortization of the net advances; but if, during the period between June 1, 1937, and each successive date for such revision, the variation between the actual aggregate water flow and the expected aggregate water flow for such period exceeds 10 per centum, then the actual excess or deficit, on the basis of the last preceding estimate, of revenues from the use of falling water for the generation of energy, at the secondary rate during such period, to the extent attributed by the Secretary of the Interior to the amount of such variation which exceeds 10 per centum, shall not be carried into affect by a reduction or increase in rates.

(iii) l'pon each readjustment of rates the Secretary of the Interior shall make written findings as to each element entering into such readjustment.

(c) The allottee shall pay compensation for the use of machinery and equipment in the manner provided for by its existing contract, except that such compensation shall be computed on a basis of amortization of the cost of such machinery and equipment within fifty years from the respective dates of completion of installation of the several units thereof with interest as provided in section 6 hereof, notwithstanding that such periods may not coincide with the period for repayment of other parts of the investment: Provided, That such. supplemental contract shall provide for adjustment of such compensation by the Secretary of the Interior as to any unit in the event that such unit may be out of service in consequence of the inability of the United States from any cause to deliver water for the operation of said unit, or any act of God or the public enemy or failure of works operated by the United States.

(d) Adjustments shall be made on the termination of any contract, through refunds or the collection of additional charges as the case may require, so as to reflect corrections since the last readjustment of rates under section 11 (b) hereof, such as will be reflected during the life of such contract through rate readjustments.

(e) Such supplemental contract shall take effect when, but not before, all provisions of this Act shall have become effective pursuant to section 16 hereof.

Such supplemental contract may include such further provisions as the Secretary of the Interior may deem proper, not inconsistent with this act or the Project Act, as modified hereby.

SEC. 12. MODIFICATION OF RESALE AND INCIDENTAL CONTRACTS. The Secretary of the Interior is also authorized, on request of the holder of any existing contract for the resale, for the credit of an allottee, of energy allotted to but not used by such allottee, and for which it is obligated to make payment, to enter into a supplemental contract with such holder, making such modifications of such existing contract as he may deem proper in the light of the provisions of supplemental contracts made pursuant to section 11 of this act.

MISCELLANEOUS SEC. 13. WAIVER OF ADJUSTMENT UNDER THE BOULDER CANYON PROJECT ACT. The acceptance of the supplemental contract herein authorized by an allottee of energy shall constitute a waiver of such allottee's right to the periodic rate adjustments provided for in the Project Act and in contracts heretofore executed under the authority of that Act.

SEC. 14. FAILURE TO EXECUTE CONTRACT. Any allottee of energy failing or refusing to execute a supplemental contract conforming to this act shall continue to pay the rates and charges provided for in its existing contract, subject to such periodic adjustments as are therein provided, in all respects as if this act bad not been passed.

SEC. 15. REPORTS. The Secretary of the Interior, immediately after the close of each fiscal year, shall submit to the Congress, and publish, a report on the operations, revenues and expenditures under this act and the Project Act.

SEC. 16. EFFECTIVE DATE OF ACT. The provisions of this Act relating to the determination and promulgation of rates and the making of supplemental contracts, and section 15 hereof, and this section, shall be effective immediately. If all of the allotteees obligated under existing contracts to take and/or pay for firm energy, as defined in the regulations heretofore issued under the Project Act, shall have signed supplemental contracts as provided in section 11 hereof, within 180 days from and after written notice of promulgation of rates, as

provided in section 5 hereof, the Secretary of the Interior shall so find, and thereupon all provisions of this act shall be effective. If allottees obligated to take and/or pay for at least 90 per centum of such firm energy shall have signed such contracts, within said period, the Secretary may, in his discretion, find that sufficient allottees have signed such contracts to justify the full operation hereof, and thereup on all provisions of this Act shall be effective, provided that if such finding is not made within 180 days from and after written notice of promulgation of rates, as provided in section 5 hereof, the provisions of this act (other than those specified in this section) and any supplemental contracts entered into pursuant to section 11 hereof, shall be of no force or effect.

SEC. 17. SHORT TITLE. This Act may be cited as the Boulder Canyon Project Adjustment Act.

FREEZING OF INTEREST RATE THROUGH ISSUANCE OF BONDS

The following alternative for section 6 of the foregoing draft is suggested on the theory that the Federal Government, should it see fit to do so, is in a position to protect itself against possible fluctuations of interest rate through the issuance of bonds, which would in effect refund such advances made from the Treasury for the Boulder project as under the terms of the proposed legislation are to be interest bearing, and thus by earmarking funds insure conformity between the interest cost for such earmarked money and the interest to be paid to the Treasury out of the Colorado River Dam fund. The alternative is intended merely to indicate in principle the working of a plan for freezing rates.

If the plan is adopted, various minor adjustments in the foregoing draft (e. g., making the subject matter of alternative sections 6 (a) and 6 (b) effective immediately, and correcting certain cross-references) will be necessary, but will be affected by the final form of the alternative provision, and such adjustments are therefore not attempted at this time:

INTEREST RATE AND AUTHORITY TO ISSUE REFUNDING BONDS

Sec. 6. INTEREST RATE AND AUTHORITY TO ISSUE BONDS.-(a) The Secretary of the Treasury is authorized and directed to issue bonds of the United States, in a principal amount approximately equal to the aggregate amount of the advances which under this Act are interest bearing, heretofore made by the Treasury to the Colorado River Dam fund for the construction of Boulder Dam and incidental works (including power-plant machinery and equipment), in such denominations as he may fix, bearing interest at the lowest rate obtainable but not exceeding 312 per centum per annum, and maturing at such times and in such amounts as the Secretary of the Interior may certify to the Secretary of the Treasury will conform as nearly as may be to the probable schedule of repayment of the principal of the net advances to be determined by the Secretary of the Interior in the promulgation of rates pursuant to section 2 (d) hereof, and to estimates similarly certified, as to the repayment of the advances for powerplant machinery and equipment.

(b) The proceeds of the issuance of such bonds shall be available for the refunding of such existing obligations of the United states as the Secretary of the Treasury may designate, and after any such bouds shall have been issued the advances from the Treasury to the said Colorado River Dam fund shall be deemed to have been made from the proceeds of said bonds.

(c) Upon the issuance of bonds authorized by section 6 (a) of this Act, the average annual interest cost to the United States of the proceeds thereof, as determined by the Secretary of the Treasury, plus one-tenth of 1 per centum, shall constitute the annual rate of interest which shall be charged by the Treasury upon advances to the Colorado River Dam fund which under the terms of this Act are interest bearing, as from the date or dates of issue of said bonds. Prior to the issuance of such bonds, the annual rate of interest upon such advances, from the respective dates thereof, shall be computed at the average cort, to be determined by the Secretary of the Treasury, of money borrowed by the United States during the period from the making of the first of such advances to the date of the issuance of such bonds, plus one-tenth of 1 per centum.

(d) Whenever by the terms of this Act, or of any lease or contract made inder the Project Actor under this Act, payment of interest is provided for, or whenever interest shall enter into any computation thereunder (except in the case of penalties for nonpayment of obligations), the rate of such interest shall be the rate determined pursuant to section 3 (c) of this Act.

Mr. STONE. Now, may I read this statement ?
The CHAIRMAN. Proceed.

Mr. STONE. The committee of which I am chairman was called into being by the necessity for settling a long-standing controversy relating to the Colorado River. This controversy arose in large part out of ambiguities in and uncertainties attributable to the language of the Boulder Project Act of 1928. Among ourselves and with official representatives of the United States, over the past 3 years, we have worked diligently and with increasing harmony toward a conclusion which is crystallized in the bill now before this committee. It is my purpose to outline, as briefly as may be, the nature of the controversies and the method suggested as a means of removing them as between the States, at the same time protecting the United States.

You will recall that in section 4 (b) of the Project Act it was provided that before proceeding with construction of Boulder Dam the Secretary of the Interior was required to have in hand contracts adequate, in his judgment, to insure payment of expenses of operation and maintenance of the works and repayment within 50 years from the date of completion, of all amounts advanced to the Colorado River Dam fund. Pursuant to this direction the then Secretary of the Interior entered into contracts with allottees of energy, selling the entire firm output at the dam for a 50-year period ending in 1987. The price, however, was not fixed for the entire period, but was and is subject to periodic adjustments. That is under the present act.

At the time these contracts were made, in 1930, one of the contractors, the Metropolitan Water District of Southern California, had been created, and consisted of the area of 13 southern California cities, but it had not been financed. In his report to the Appropriations Committee of the House, when that body was considering the first appropriation for construction, the then Secretary of the Interior stated that regardless of whether the district was able to make good on its contract, the repayment requirements of the Project Act had been satisfied. In other words, the Secretary stated that a sale of 64 percent of the firm energy would satisfy the repayment requirements of the Project Act.

When the project was placed in operation in 1937, the Metropolitan Water District had invested well over $100,000,000 in its aqueduct project, and at the present has completed its main aqueduct at an expense approximating $200,000,000. Its assessed valuation is nearly one-third of the assessed valuation of the State of California. It must, therefore, be looked upon as a responsible contractor for Boulder energy. This being true, it follows that the rate fixed by the Secretary of the Interior, based upon the sale of 64 percent of the firm energy, was slightly more than 50 percent higher than would have been necessary to satisfy the Project Act requirements.

Before the time the contracts were made, as is evidenced by a memorandum for the press, issued in 1929 by the Secretary of the Interior, it was the intent of the parties to revise the rates when the project was placed in operation, that is, about 1937. For technical reasons this appeared to be impossible and no adjustment has been made.

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