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" \ , , 002302 . . Summary of Legal Authority and Debt-Servicing Concept for Rate-Setting for Industrial Water Service from Storage Reservoirs Colorado River Storage Project The industrial water service rate policy under which the Bureau of Reclamation has been marketing water was set by an October 15, 1965, memorandum by the Commissioner of Reclamation. This rate policy was predicated on the existing law; the then - current Administration policy; a desire to raise the rate; a belief in the desirability of having a uniform rate for M&I service from all mainstem reservoirs; and a concern about the water diversion quantity lagging behind estimates. The new policy is based on these same premises and objectives. In addition, the present Administration is actively pursuing the elimination of all subsidy to industrial water users. The debt servicing concept is responsive to that goal. The new policy calculates the present worth of the Federal investment for consumptive uses from the storage units based on lO-year Treasury rates. The rate derived will be reviewed and adjusted at 5-year intervals through the life of a contract. The 1965 policy was based on water available for depletion by diversion; the new policy represents a fine-tuning. The old policy cited a gradual buildup and the need to offset low revenues during the buildup and meet interest costs; the new policy merely expands and updates interest costs for the pur- pose of rate setting. The former policy was calculated on the basis of con- struction costs allocated to consumptive uses; present policy uses the present worth of those same costs. Both policies propose to continue charging for M&I water service after repayment of appropriate costs has been accomplished and those revenues are apportioned according to the law under both; the only departure is a required 5-year adjustment which is a policy change which has occurred in the 17 years since the original rate policy. There is nothing in the Colorado River Storage Project (CRSP) Act that either authorizes or prohibits the use of the cost of servicing the debt related to the unpaid costs allocated to consumptive uses of water as the basis for establishing rates charged for industrial water service. The intent of the language in Sections 5(d) and 5(f) of the CRSP Act relating to interest rates was to specify the way interest to be paid to the Treasury by the Basin Fund would be calculated and was not intended to specify or limit the basis of interest rate on or process by which charges for industrial water service would be set or adjusted. Moreover, Section 6 of the CRSP Act leaves the allocation of the total costs of each unit, project, or feature among various authorized uses completely within the Secretary's discretion. , G .-;2 }-g .<~ /'-" A :....,........