There was some question as to whether the pooling of contractor deficits would allow the bureau to use a consistent set of calculations for its water rates and for the determination of "full cost" charges under the Reclamation Reform Act.12 As noted above, the definition of "full cost" appears to imply that district-by-district accounting should be used in the calculations. In addition, the definition of "full cost" in the act requires the bureau to include any operation and maintenance deficits funded, which normally occur on a district-by- district basis. Therefore, the bureau rejected the modified postage stamp approach and recommended instead a "component" rate-setting option with the pooling of net payment positions. This would still have been advantageous to contractors with low current rates (relative to the "cost of service") and later expiration dates. The bureau was preparing to publish this proposal for a final round of public comments prior to adoption when Congress intervened. Public Law 99-546 (100 Stat. 3050; 43 U.S.C. 422a), enacted in October 1986, requires that each new or amended contract in the Central Valley Project include provisions to recover "any annual deficit (outstanding or hereafter arising)" incurred by a CVP water contractor from that contractor. Furthermore, interest is to be charged on any such deficit that arises after October 1, 1985. The interest rate is set to reflect government borrowing rates rather than the project authorized interest rates. These interest charges are not payable until after a district's current contract expires or is amended. The Bureau of Reclamation determined that, provided the provisions of the law are not altered or successfully challenged before being implemented, P.L. 99-546 rules out the pooling of individual contractor deficits. Accordingly, in May 1987, the bureau issued for public review a rate-setting proposal with individual contractor deficits, patterned after its 1984 proposal. This rate-setting policy was ultimately adopted in May 1988.
The federal government's role in the Central Valley Project is something of a historical accident: the project was converted from a state project to a federal one as the result of the depression. The Bureau of Reclamation established low water rates with no cost adjustments partly to ensure that the water supplies it had developed could be____________________