Opinion ID: 343208
Heading Depth: 2
Heading Rank: 2

Heading: Formulation of the Marketing Criteria

Text: 21 Shortly after the enactment of CRSP, the Federal Power Commission began survey of markets and transmission facilities for CRSP hydroelectric power. The region selected for study included Colorado, New Mexico, Utah, Wyoming, Arizona, the southern part of Nevada, and small portions of Idaho and Texas. Representatives of preference customers in Colorado, New Mexico, Utah, Wyoming and Arizona assisted in supplying data. The survey, entitled Power Market Survey Colorado River Storage Project (Market Survey), was completed in June 1958. 22 The Bureau of Reclamation submitted recommendations based upon Market Survey data to the Secretary in a May 1960 memorandum. Bureau of Reclamation, Memorandum to Secretary of the Interior re Colorado River Storage Project (May 3, 1960) (1960 Memorandum). This memorandum proposed that the primary marketing area for CRSP power be the northern division states of Wyoming, Colorado, Utah and New Mexico. Because preference customers in these states did not need all of the CRSP power, however, the memorandum recommended that the excess be sold to preference customers in the southern division states of Arizona, California and Nevada. 23 Power sold in this secondary marketing area was to be withdrawn as needed by preference customers in the northern division. The memorandum proposed, however, that the southern division receive a minimum allocation of 7 per cent of CRSP output in the winter months and 20 per cent in the summer. 23 In recommending this geographic preference, the memorandum took into account those portions of the legislative history of CRSP which declared that all Colorado River Basin states should be on the same basis with respect to acquiring power. See Section II, D infra. It noted, however, that no definite instructions as to the market area were specified by the Congress in the legislation itself. It also gave considerable weight to the fact that power from the large Hoover Dam and Parker-Davis Projects was already committed to the lower basin states. The memorandum concluded that the over-all, closer balance among the states of the Colorado River Basin, that would result (from the recommended geographic preference), would achieve a more desirable result (than pro rata division among all the states). 1960 Memorandum, supra, at 13. 24 The Marketing Criteria announced on March 9, 1962, by Secretary Stewart Udall follow generally the policy set forth in the 1960 Memorandum. Preference customers in the southern division states are guaranteed a minimum of 20 per cent of summer CRSP power and 7 per cent of the winter supply. Until the northern division preference customers need their full allotments, the excess power is to be marketed in the southern division, subject to withdrawal on three years' notice. 24 As a condition for acquiring CRSP power, southern division customers must acknowledge the principle of withdrawal. 25 25 The Secretary sent application forms for the purchase of CRSP power to all prospective preference customers in both divisions. The forms contained a clause acknowledging the Secretary's discretionary authority to withdraw power allotments. Arizona Power Authority returned its forms with this clause stricken and was refused power allotments. Subsequent negotiations to allot power to the Authority as a pooling agent for the ultimate customers terminated after the Bureau negotiated contracts directly with the Authority's customers. Eight of the nine plaintiffs subsequently entered into contracts acknowledging the principle of withdrawal. A total of 27 southern division customers and 58 northern division customers entered into contracts with the Bureau of Reclamation. 26 26 After execution of the contracts, the Bureau offered to sell to the eight plaintiffs all the power needed to satisfy their customers' requirements. In December 1970, however, the Bureau notified all of its southern division customers that it would give notice not later than March 1973 that power in excess of the summer 20 per cent minimum would likely be withdrawn beginning with the 1976 summer season. The withdrawal would decrease the power allocated to the southern division from approximately 335,058 to 252,000 kilowatts.