13. Keeping leased property in repair.

Article 13 requires that the lessees make no substantial change in any property without the consent of the director (of the power plant) and the Secretary. The "Director," appointed by the Secretary, is intended to have general supervisory powers for the protection of Federal property, and will not operate or manage the plant. Each lessee is required to make all repairs and replacements considered by the Secretary to be necessary for proper operation and maintenance, except such as may be occasioned by the act of God. In the event of failure of either lessee to make such repairs, the United States may effect them at its option and charge the cost thereof, plus 15 per cent for overhead and general expense, to the lessee having control of the property. That obligation bears interest at 4 per cent until paid. It must be paid on June 1 succeeding the date of completion of repairs.

14. Allocation of energy.

Article 14 effects in detail the allocation agreed upon by California allottees on March 20 and April 7, 1930, previously referred to.

The allocation is in the form of a reservation by the Secretary of power to contract with all allottees in accordance with the allocation contained in this article, and "the Secretary is authorized by each lessee to enforce against it the rights acquired by such other allottees under such contracts." Each lessee undertakes to generate energy as previously provided in article 10, and to furnish it at transmission voltage in quantities required to meet these allocations.

The allocations are in percentages of the total firm energy. The latter is defined in article 15, infra.

Six major allocations of firm energy are made: A, to the State of Nevada; B, to the State of Arizona; C, to the Metropolitan Water District of Southern California; D, to a group of municipalities; E, to the City of Los Angeles; F, to the Southern California Edison Co. and associated companies. These six allocations are followed by five stipulations and by three supplemental clauses. The supplemental clauses relate to the secondary energy, firm energy allocated to but not used by the district, and firm energy made available by increase in height of the dam.

Taking up the allocations in the order above outlined

A. Nevada is allocated 18 per cent of the firm energy, and

B. Arizona is allocated a like amount. If either of them does not take its full 18 per cent within 20 years from April 26, 1930, the other

may absorb 4 of the 18 per cent, provided that the total for the two of them shall not exceed at any one time 36 per cent of the total firm energy. These two allocations to the States are protected in more detail by stipulation (V). By that stipulation each State is permitted to contract for energy allocated to it at any time within the period of the lease and may terminate its contract without prejudice to the right to again contract. These State contracts will be made with the Secretary. If the State's demand is for 1,000 horsepower or less, it may become effective or be terminated on 6 months' notice to the director, but if the State has taken a total increment or relinquished a total decrement of 5,000 horsepower within the preceding 12 months, two and one-half years' notice is required. The director in turn is to pass on the notice to the lessees. Whenever the amount in use by a State is in excess of 5,000 horsepower of the maximum demand, the lessees must be compensated for property rendered idle by the use of such excess. The Secretary is to determine the amount.

The same stipulation provides that energy not contracted for by the States shall be available for use by the district, and if not in use by the States or the district, shall be taken and paid for equally by the city and company. In other words, the city and company are firmly obligated to take and pay for the 36 per cent allocated to the States, subject to the right of the States and the district to demand release of such energy. The contract further provides that both States shall have the right to execute firm contracts within the period allowed by section 5-c of the Boulder Canyon project act. This period expired at the latest within 6 months after execution of the lease, and this clause of the contract was not taken advantage of by the States.

C. To the Metropolitan Water District four types of allocations were made (all limited strictly to use "for pumping Colorado River water into and in its aqueduct"), thus:

1. Thirty-six per cent of the total firm energy, plus

2. All secondary energy (defined in art. 17), plus

3. So much of the firm energy allocated to the States, the city, and the company as may not be in use by them. Theoretically the district could, by virtue of this clause, become the user of 100 per cent of the firm energy generated at Hoover Dam, but in fact the obligations of the city and company are such that it is unlikely that the district will ever have an opportunity to utilize firm energy

in excess of its own 36 per cent, plus, temporarily, the States' 36 per cent. Energy allocated to the States but temporarily not used by them must be yielded to the district by the city and company equally, unless the two lessees agree on a different ratio. But this obligation to release State energy is subject to two qualifications. (a) If the district makes a firm contract with the Secretary for any unused State energy, it can be made only upon two years' notice to the Secretary, with compensation to the lessees for main transmission line property rendered idle thereby; (b) alternately if the district does not make a firm contract with the Secretary for unused State energy, energy allocated to the States but not in use by them will be released to the district by the lessees upon not less than 15 months' written notice to the Secretary and with compensation to the lessees, which will include cost and overhead of replacing energy which would otherwise have been received at the Pacific coast end of main transmission lines by the lessees. Such cost is defined to include various elements which were the subject of agreement between the district and the two lessees before incorporation in this contract. It is provided that, in the event of failure to agree upon the compensation, the energy shall nevertheless be released to the district, and the parties will proceed with arbitration under article 35-A of this contract. And the district's use of unused State energy, and of secondary energy as well, is subject to the further qualification that it can not call upon these supplementary sources during any year unless it has used, since the preceding June 1, one-twelfth of the firm energy it is obligated to pay for, for each of the months which have elapsed since June 1. In other words, the district may not call upon these supplemental sources of energy until it has, in each month, exhausted one-twelfth of its own allocation of 36 per cent of the annual firm output.

4. The fourth allocation to the district is in the form of an arrangement by the city and the company to furnish substitute energy to the district in the event of a temporary deficiency in secondary energy regularly used by the district. This is not a firm commitment, but is in the form of permission to the city and company to release such energy as they may agree upon to the district on the same terms of compensation as will apply to State energy released by the lessees to the district.

D. Six per cent of all firm energy was allocated to the municipalities of Anaheim, Beverly Hills, Burbank, Colton, Fullerton, Glendale,

Newport Beach, Pasadena, Riverside, San Bernardino, and Santa Ana to be allocated between them as they might agree, subject to allocation by the Secretary if they failed to agree before April 15, 1931. This time was subsequently extended by mutual agreement to November 16, 1931, and by that date the cities of Pasadena, Glendale, and Burbank had entered into contracts. This allocation is subject to stipulation II. That stipulation requires the city to take and pay for so much energy as the municipalities do not contract for, "or, if contracted for, not used by them directly or under contract for municipal purposes and/or distribution to their inhabitants." The three municipalities ultimately contracted for 4.0946 per cent, leaving a margin of 1.9054 per cent to be absorbed by the city.

E. Thirteen per cent was allocated to the City of Los Angeles. Unlike the allocation to the municipalities, this energy is not subject to limitation as to use; the limitation on the municipalities was mutually desired by them and by the City of Los Angeles, as the latter is residuary allottee of the municipalities' energy. The city's allocation is subject to the particular effect of stipulations I, II, and V. The first requires the city to take and pay for one-half of the State power not in use by the district. The second requires the city to take and pay for energy allocated to but not used by the municipalities. This residuum of 1.9054 per cent raised the city's total allocation of energy to 14.9054 per cent. Stipulation v contains not only the provisions relating to release of energy to the States referred to under A above, but also a proviso that the combined allocation of 19 per cent to the municipalities and the city be not reduced on account of any firm contract made by a State. However, as the time for execution of such a firm contract has now expired, this safeguard has no further application.

In addition to these two allocations (13 per cent direct and 1.9054 per cent as a residuum from the municipalities), the city has become the allottee of all energy made available by the 10-foot increase in water level authorized by the Sibert board during the negotiation of these contracts. This energy is referred to in the discussion of the last paragraph of article 14, infra.

F. Nine per cent, in all, was allocated to four public utility companies, the Southern California Edison Co. (Ltd.), the Southern Sierras Power Co., the San Diego Consolidated Gas & Electric Co., and the Los Angeles Gas & Electric Corporation. These companies,

like the municipalities, were to have until April 15, 1931, to agree among themselves on an allocation, failing which the Secretary should determine the share of each. By mutual agreement their time was also extended to November 16, 1931, and ultimately the Southern Sierras Power Co. and the Los Angeles Gas & Electric Corporation executed contracts for 0.9 per cent each. By virtue of Stipulation III the Edison Co. retained the residuum, 7.2 per cent. The San Diego Co. did not proceed. The terms of these two company contracts are discussed at a later page.

The foregoing six allocations disposed of all of the 4,240,000,000 kilowatt-hours originally available. As the contracts stood on the date of execution, the Metropolitan Water District was obligated to take 36 per cent, the city 37 per cent, and the company 27 per cent, subject to drawback provisions in favor of the States, municipalities, and three other utility companies. By virtue of exercise of these options by the municipalities and two utility companies, the obligations now stand as follows: Metropolitan Water District, 36 per cent; Los Angeles, 32.9054 per cent; Pasadena, 1.6183 per cent; Glendale, 1.8867 per cent; Burbank, 0.5896 per cent; Southern California Edison Co. Ltd., 21.6 per cent; Southern Sierras Power Co., 2.7 per cent; Los Angeles Gas & Electric Corporation, 2.7 per cent. These allocations, save as to the municipalities, are subject to flexible readjustment when and if the States take the energy allocated to them, or the district demands unused State energy. If State energy is withdrawn, Los Angeles will be reduced to 14.9054 per cent, the Edison Company to 7.2 per cent, and the other two utilities to 0.9 per cent each.

The remainder of the article, following this disposition of firm energy, consists of three paragraphs.

Secondary energy is allocated to the district. The city and the company are each given the right to purchase and use one-half of all secondary energy not used by the district, and any secondary energy not used by one lessee shall be available for the time being to the other. If secondary energy is not taken by the city, the district, or the company, the United States reserves the right to make other disposition of it, paying the lessees for the cost of generation as provided by article 12, and disposing of such power subject to the prior right of the district and the lessees, as also required by that article.