Rationale for Power Rates Charged by the Central Valley Project to Pacific Gas and Electric Company

The Central Valley Project (CVP) is a large multiple-purpose water resources development project in California consisting of 19 dams with related water conveyance systems, power generation, and transmission facilities. The project's primary purpose is to provide irrigation water to the Sacramento and San Joaquin Valleys. Its secondary purposes are to provide municipal and industrial water, flood control, fish and wildlife enhancement, and hydroelectric power generation. In December 1976, the Department of the Interior announced an adjustment in the rate for Northwest power sold to the Pacific Gas and Electric Gompany (PG&E) by the Central Valley Project retroactive to April 1, 1976.

The Bureau of Reclamation did not jointly review the rate with PG&E to negotiate a change in the rate for Northwest power sold to PG&E as of April 1, 1971, as required by the contract. A compromise rate adjustment was negotiated in December 1976 which established a split rate based on charging the full cost for Northwest energy to PG&E but dividing the capacity into two components: the first component, with energy associated at 60 percent load factor, is charged at the pass-through rate; the second component, consisting of the remaining Northwest capacity available to PG&E, is sold at the CVP system power rate. The decision to approve the split-rate appears to be a compromise that would be acceptable to PG&E. Because there was a disagreement of the affected parties and, under the contract, the matter could have been referred to the Federal Power Commission for a decision, such a referral was in order. However, the records do not show the rationale for not taking this course of action.