addition, they state that the flows requested are also being negotiated with the Bonneville Power Administration, Bureau of Reclamation, and the Corps of Engineers for the upstream Federal dams those agencies operate.

In separate answers, the Licensees for the four mid-Columiba projects opposed the requested modifications, but stated that they are willing to discuss these matters with the Petitioners. Generally, the Licensees argue that the available evidence does not support a modification in the current operations of the projects. They state that alternative, less costly means are available to facilitate downstream migration. The Licensees also assert that the Commission lacks the authority to require modifications in the current minimum flows, and that any such requirement without their consent would contravene Section 6 of the Federal Power Act, 16 U.S.C. § 799. In addition, the Licensees contend that they cannot implement minimum flows until upstream Federal projects-the Corps of Engineers' Chief Joseph and the Bureau of Reclamation's Grand Coulee Dams— modify their flow releases.

The Priest Rapids complaint. Before these recent petitions, the State of Washington Department of Fisheries (Department) had filed a complaint on September 22, 1976, respecting the operation of the Priest Rapids Project No. 2114 (Docket No. E-9569). The Department alleged that the area downstream from the Priest Rapids Dam serves as an important spawning and rearing area for fall chinook salmon. The Department claims that the 36,000 cfs minimum flow established in the project license causes many valuable spawning areas to dry up, resulting in the stranding and subsequent death of eggs and juvenile fish. The Department requested that the minimum flow requirement in the license be increased to 70,000 cfs during the period of October 15 to April 30 of each year. This period would allow for spawning, incubation of eggs, and rearing of juvenile fish. After notice of the complaint was issued, several petitions to intervene were filed and the Licensee, Public Utility District No. 2 of Grant County, filed its answer opposing the relief sought.

Between two conferences our staff held on March 3, 1977, and October 17, 1978,' the Department filed a motion on October 5, 1978, requesting that the minimum flows from the Priest Rapids Project be increased from 36,000 cfs to 50,000 cfs. This motion was supported by the Oregon Fish and Wildlife Commission, the Yakima Indian Nation, Idaho Fish and Game Commission, and the National Marine Fisheries Service. This motion was filed for the same reason the complaint was filed— to protect chinook salmon spawning and incubation areas but subsequent to a joint study conducted by the Department and Public Utility District No. 2 of Grant County.

PUD No. 2 of Grant County in its answer stated that the Department had failed to set forth

facts in support of its request for a hearing. Grant County further stated that it believed that the measures taken during the 1977 spawning season were successful and should be continued for another year, with certain modifications. Under that 1977 scheme of regulation, minimum flows of 36,000 cfs were periodically released from the Priest Rapids Dam.

Consolidation

Because the matters and issues raised by the complaint are closely related to or subsumed within those raised by the more recent petitions, we will consolidate the complaint and petitions for consideration in a single proceeding. All of the parties earlier permitted to intervene with respect to Docket No. E-9569 will also be deemed intervenors with respect to the petitions in the consolidated proceeding.'

Hearing Issues

We find that it is appropriate and in the public interest that a hearing be held to investigate whether the operation of the projects listed above should be modified in the interest of protecting the fishery resources of the Columbia River. The following issues shall be considered during the hearing:

(1) the extent, if any, to which the current minimum flow at the Priest Rapids Project No. 2114 should be increased for the purpose of protecting the chinook salmon spawning and incubation areas downstream from the dam;

(2) the ways, if any, in which the operations of Projects Nos. 943, 2114, 2145 and 2149 should be modified in the interest of protecting chinook, sockeye, and coho salmon, and steelhead trout which must pass these mid-Columbia projects (including determinations of any appropriate instantaneous and daily average minimum flows and spilling percentages); and

(3) all other associated issues raised by the Washington Department of Fisheries' complaint in Docket No. E-9567, the Department's motion filed October 5, 1978, and the Petitioners' motions filed on December 4 and 15, 1978.

As we noted earlier, the Licensees argue that the Commission lacks the authority to require changes in minimum flows without their consent. For example, P.U.D. No. 2 of Grant County argues that Article 39 of its Project No. 2114 license does not grant the Commission the authority to amend Article 45, which specifies a minimum flow of 36,000 cfs. The Licensees' arguments, however, are without merit.

10

Article 39 of the license for Project No. 2114 provides:

The licensee shall construct, operate and maintain or shall arrange for the construction, operation and maintenance of such fish ladders, fish

traps, fish hatcheries, or other fish facilities or fish protective devices for the purpose of conserving the fishery resources, and comply with such reasonable modifications in project structures and operations in the interest of fish life in connection with the project as may be prescribed hereafter by the Commission upon recommendations of the Secretary of the Interior, the Washington State Departments of Fisheries and Game and the licensee. [15 FPC 1005, 1006 (1956). Emphasis added.]

Flow releases are unquestionably an element of "project operations," which we may reasonably modify in the interest of fish life."

In any event, the Licensees also overlook the standard article contained in each of the four licenses which provides:

*** the operations of the licensee, so far as they affect the use, storage and discharge from storage of waters affected by the license, shall at all times be controlled by such reasonable rules and regulations *** as the Commission may prescribe for the protection of life, health, and property, and in the interest of the fullest practicable conservation and utilization of such waters for power purposes and for other beneficial public uses, including recreational purposes, and the licensee shall release water from the project reservoir at such rate in cubic feet per second, or such volume in acre-feet per specified period of time, * * * as the Commission may prescribe for the... purposes [other than navigation] hereinbefore mentioned. [Emphasis added.]12

The words "other beneficial public uses, including recreational purposes" are taken directly from Section 10(a) of the Federal Power Act. In Udall v. F.P.C., 387 U.S. 428 (1967), the Supreme Court ruled beyond cavil that this language includes the purpose of protecting anadromous fishery resources (specifically including salmon and steelhead trout).

In light of these open-ended license articles, we find that we have ample authority to require modifications to the projects' operations to provide the relief the complainant and Petitioners seek, or other relief that may prove necessary or desirable. The Licensees' contentions that such modifications would alter their licenses without their consent, in violation of Section 6 of the Federal Power Act, are not well taken.

The issuance of a license does not relieve the Commission from ensuring throughout the term of the license that fishery resources are protected and enhanced. During the term of a license, changes in circumstances or available information may well demand reappraisal of the ways in which the project as originally conceived may be kept best adapted to a comprehensive plan of development. This is precisely why we include open-ended conditions in the project licenses. A modification under such an open-ended license article is not an alter

ation within the meaning of Section 6 of the Act requiring a Licensee's agreement. Both the courts and Congress have recognized the Commission's authority to impose open-ended license conditions, which reserve our right to impose changes in project works or operations despite Section 6." By accepting a license with open-ended conditions, a Licensee agrees to make modifications the Commission might order under those conditions. If the Licensee could later avoid the imposition of modifications ordered under an open-ended license condition simply by refusing to agree to them, the Commission's recognized reservation of rights would be vitiated.

Need for Expedited Hearing Phase I

In providing for a hearing, we recognize that there have been extensive and continuing efforts to resolve the anadromous fish problems related to the construction and operation of the four mid-Columbia projects. The final solution to these problems may require a substantial amount of time for discovery, further studies, discussions among the parties, and hearings.

The immediate problem, however, concerns the impending Spring 1979 downstream migration of smolts during their journey seaward. According to the pleadings, the migration would begin around the middle of April and continue to the middle of June. With so little time available before migration begins, we find that due and timely execution of our responsibilities in this matter imperatively and unavoidably requires departures from our usual practice and procedure. Because the parties have been unable to resolve their differences over what measures should be required for this coming spring, we are directing the presiding Administrative Law Judge to convene a prehearing conference in Portland, Oregon, on March 20, 1979, for the exclusive purpose of considering the issue of what interim measures, if any, should be imposed to protect the Spring 1979 downstream fish migration. If it appears to the Presiding Judge that the parties have been unable to resolve their differences over the proper operating regime during the Spring 1979 downstream fish migration by the end of the prehearing conference, he shall convene the hearing immediately and continue it until he has complied a sufficient record to reach a decision on what measures should be required for this spring." All parties should come to the hearing prepared to present oral evidence and to cross-examine any oral testimony by sworn witnesses.

We are delegating authority to establish the Spring 1979 interim operating measures to the Presiding Judge, who must render a decision on this phase of the hearing by April 13, 1979. The Licensees must follow the Presiding Judge's decision on the interim measures. Those measures will go into effect immediately and will be stayed only by Commission action. Any party wishing to appeal or support the Presiding Judge's decision on interim

measures must do so by filing its briefs, comments, or statements of position within fifteen days of issuance of the decision.

Hearing - Phase II

Further scheduling of hearings in the remainder of this proceeding will be the responsibility of the Presiding Judge. Moreover, as noted above, additional studies may be required before a longterm solution can be reached, and may even be needed before effective hearings can commence to consider what fish measures should be required for the remainder of the license terms. Moreover, interim operating measures may be necessary beyond the Spring 1979 downstream fish migration, to facilitate studies or to govern during the period prior to final Commission action in this proceeding. These matters, as well as the development of a complete record, will be left to the judgment of the Presiding Administrative Law Judge as part of the exercise of his delegated authority under Section 1.27 of our Regulations.

The Commission orders:

(A) The complaint proceeding designated Docket No. E-9569, and the petitions discussed above and filed by Petitioners in Projects Nos. 943, 2114, 2145, and 2149, are consolidated.

(B) Pursuant to the Federal Power Act, particularly Sections 4(g), 10(a), 10(g), 306, 307, 308 and 309, the licenses for Projects Nos. 943, 2114, 2145 and 2149, and the Commission's Rules of Practice and Procedure, a hearing shall be held in this proceeding respecting the issues discussed above, in accordance with the provisions of this order.

(C) The Commission's Rules of Practice and Procedure shall apply in this proceeding except to the extent they are modified and supplemented below.

(D) A prehearing conference shall be held commencing at 9:30 a.m. local time on March 20, 1979, in Judge Soloman's court room of the U.S. Courthouse, 620 S.W. Main, Portland, Oregon, to initiate the first phase of the hearing in this proceeding. The first phase will consider the interim operating measures necessary or desirable for Projects Nos. 943, 2114, 2145 and 2149 during the Spring 1979 downstream fish migration on the Columbia River.

(E) Under Section 309 of the Federal Power Act, 16 U.S.C. 825h, the Commission delegates to the designated Presiding Administrative Law Judge authority to order the Licensees for Projects Nos. 943, 2114, 2145, and 2149, to modify the operations of those projects during the Spring 1979 downstream fish migration. The Presiding Judge's order on interim operating measures shall be issued no later than April 13, 1979. The effect of the Presiding Judge's order shall be stayed only by Commission action. Any party wishing to appeal or support the Presiding Judge's order shall file its brief,

comments, or statement of position no later than 15 days from the issuance of that order.

(F) Any order of the Presiding Administrative Law Judge on modifications to the operations of Projects Nos. 943, 2114, 2145 and 2149, beyond the Spring 1979 downstream fish migration shall be effective immediately and be stayed only by Commission action. Any appeal from such an order must conform to Section 1.7(d) of the Commision's Regulations.

(G) The Licensees for Projects Nos. 943, 2114, 2145 and 2149, the complainant and intervenors in Docket No. E-9569, and the Petitioners identified above shall all be permitted to participate in this consolidated proceeding.

(H) The Secretary shall cause prompt publication in the Federal Register of notice of the prehearing conference ordered in paragraph (D) above.

-Footnotes

'Public Utility District No. 2 of Grant County, Washington, Order Issuing License (Major), 14 FPC 1067, 1073 (1955), as amended, 15 FPC 1005, 1006 (1956). 2 Public Utility District No. 1 of Douglas County, Washington, Order Issuing License (Major), 28 FPC 128 (1962), as amended, 28 FPC 492 (1962).

› Public Utility District No. 1 of Chelan County, Washington, Order Amending License, 51 FPC 1141, 1152 (1974).

Public Utility District No. 1 of Chelan County, Washington, Opinion No. 304, 18 FPC 25, 36 (1957). 'The Priest Rapids project consists of two dams, Priest Rapids and Wanapum.

Article 45, 14 FPC at 1074.

'In addition to the two conferences our staff has held concerning the complaint, a number of other conferences and meetings have been held among the parties under the auspices of the Columbia Committee on Fishery Operations. These meetings led to agreements under which certain steps, including spilling, were taken to insure the safe passage of juvenile fish during past annual spring migration runs.

That study culminated in Technical Report No. 38 entitled "The Effect of Daily Flow Fluctuations on Spawning Fall Chinook in the Columbia River." According to the Department's October 5, 1978 motion, the Licensee has refused to modify the operation of the project in the manner recommended in the study.

In addition to the three Licensees, the Department, and the Petitioners, these intervenors in Docket No. E-9569 are parties to the consolidated proceeding:

The Washington Water Power Company; Puget Sound Power & Light Company; Portland General Electric Company; Pacific Power & Light Company; the Cities of Eugene, McMinnville, Milton-Freewater, and Forest Grove, Oregon; State of Oregon Fish and Wildlife Commission; City of Seattle, Washington; City of Tacoma, Washington; Cowlitz County Public Utility District; State of Idaho Fish and Game Commission; and the Confederated Tribes of the Umatilla Indian

Reservation.

10 Article 45 provides:

The licensee shall so regulate the flow from Project

[161,210

has this Commission's assurance that the proposed inducement tariff structure is lawful. In that regard, DPA asserts that the Secretary advised it to obtain a declaratory order and stressed the importance of such an order to the processing of the DPA application." DPA advises that the Secretary has indicated a strong desire to reach a license decision by August 23, 1979.

The Proposed Tariff Structure.

DPA proposes to divide its potential shippers into two classes signatories and non-signatories." Signatories are those shippers who sign a "use agreement" by which they agree to use the facility and to pay fees which, when added to those paid by non-signatories, will cover the financial requirements of the facility on a fiscal year audited basis. Non-signatory shippers would not sign an agreement, although the option to do so would remain available to them. Signatory shippers would be compensated in two ways. First, signatories would be charged a per barrel "user fee" which would be lower than the "service charge" paid by nonsignatories. As presently proposed, the service charge would be 115% of the user fee. The second portion of compensation is more complex. In addition to paying the lower user fee, signatories would be entitled to recover an annual adjustment of 60% of the "coverage" for the year just ended. Coverage is a term used for a percentage of principal and interest payments in a given year which is collected in addition to the actual requirements on the bonds. This is usually set at 25% of the actual requirement and is provided to give additional security to bondholders against the risk of overly-optimistic revenue projections. DPA proposes to return 60% of this amount to the signatories and to devote the remainder to early retirement of the bonds and other uses.

DPA states that if 85% of the facility use is by signatory shippers, those shippers will pay approximately 5¢ less per barrel of oil shipped. Appendix E of DPA's License Application shows estimated tariffs based on current investment and operating cost estimates as follows:

Richfield supports the use of the modified procedure and urges that the Commission establish a briefing schedule to "assure full consideration of the issues presented." The ERA "supports the concept of an incentive tariff" and "in general supports the cost 'formula' concepts" as presented in DPA's Petition.

Justice, after reviewing the applicable statutes and precedents, concludes that the tariff structure and differential are not unlawful, provided that, when tested by the appropriate legal standard of "reasonableness," they bear some reasonable relationship to the value of the guarantees, are available to all shippers, and are determined by arm's length bargaining. Justice believes that "the documents and other materials in the appendices of the * Petition*** do not constitute an adequate record upon which the Commission may render a Declaratory Order," and that further proceedings as necessary. Justice urges that DPA be required to "perfect its case" with further comments or protests permitted to be filed after DPA files additional information.

The Need for Further Proceedings.

We are not unmindful to the desirability for a prompt determination of DPA's petition. All parties agree, and the Secretary found in his approval of the Seadock application, that a deepwater port located offshore Texas is in the national interest. However, the present record in this proceeding does not permit this Commission to make the specific findings requested by DPA's petition. It is noted that DPA asks us to make "specific findings that the nature and magnitude of the differential proposed is lawful." Our review of the applicable statutes and case law, infra, leads us to conclude that a tariff structure whereby shippers who make commitments of the type proposed herein are charged lower rates, is not per se unlawful and we hereby approve in principle an incentive two-tier tariff structure. However, notwithstanding this legal determination, certain factual determinations must be made before this Commission can approve the specific (5¢) differential proposed by DPA's petition. We shall establish expedited procedures to provide a fuller record for these factual determinations."

Lawfulness of an Inducement Tariff Structure.

DPA's proposed inducement tariff structure would permit those shippers providing certain financial guarantees to pay lower rates than do shippers who make no such guarantees. At issue is whether a differential, in the form of an inducement tariff structure, is permissible under controlling provisions of the Interstate Commerce Act (ICA), 49 U.S.C. § 1(5), § 2, and § 3. Section 2 of the ICA prohibits carriers from charging different rates to shippers for "like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and [¶61,2111