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Long before the battle for full retail distribution
of energy had ended, the Modesto Irrigation District
began to harvest the fruits of victory.
Less than four years after MID power first was
delivered to Modesto homes, farms and businesses,
net profits from the district's electrical sales
were being used to retire the bonds which had
financed the development of the irrigation and
In 1954 as Stanislaus County's centennial year
marked the transformation of a desert into one
of the nation's most prosperous farming areas,
the final payment was made on more than $5 million
in MID bonds accumulated over nearly three-quarters
of a century.
Virtually all of the principal had been paid
from power revenues. Electrical profits were first
applied to the retirement of irrigation and electrical
bonds in 1927 with a $10,000 transfer. By July
1, 1954, when the final bond redemption payment
was made, $4,817,808 in energy sale profits had
been committed to retiring the bonded debt.
Financing the operations of the district has
ranged from the initial out-of-pocket contributions
by Robert McHenry, its first board president,
and others to get things started to the $18.5-million
bond issue floated in 1961 for the construction
of New Don Pedro Dam.
In the first 67 years after the MID's formation,
voters had approved 14 bond issues to finance
the development of irrigation and electrical systems.
The first was on December 14, 1887, and $800,000
issue whose value was almost destroyed by the
subsequent battle royal over the very life of
the district. After the turn of the century when
pro-irrigationists recaptured control of the district,
a second issue had to be voted to refinance those
Following that, an even-dozen bond issues were
approved between 1909 and 1934. The final payments
made in 1954 were on a 1914 issue totaling $610,000,
which had financed the first major upgrading of
the irrigation system undertaken by the MID after
the basic works were completed in 1904.
The district's excellent record of retiring debt
by power revenue profits was so successful and
well known that when the $18.5 million bond issue
for New Don Pedro went to a vote on November 7,
1961, the voters' approval, 11,231 yes to 328
no, set a record that stands today, a 97 percent
majority. Overwhelming approval also was given
the most recent bond issue proposed - $14.2 million
for the second unit of the McClure Generation
Station in a June 5, 1979, election, 5,361 yes
to 573 no.
At the same time that retail power revenues were
retiring electrical and irrigation system bonds,
even larger amounts of the electrical profits
were subsidizing irrigation operations and maintenance.
Starting in 1938, power revenues were transferred
annually to the irrigation department. Sixteen
years later when the district celebrated its freedom
from bonded indebtedness, $5,367,229 from this
source had been invested in irrigation development
and operation. The policy continues to this day.
The transfer of power revenues permitted a steady
reduction of irrigation taxes.
In 1935 the taxes were slashed from $6.40 per
$100 assessed valuation of property to $2.76.
Three years later, taxes were down to $2.40 and
soon thereafter to $1.50. This rate prevailed
for 16 years throughout World War II and the post
war years when other districts were increasing
water charges repeatedly. At the same time, assessed
valuations of only $80 per acre had been unchanged
since 1915, even though the land was selling for
as much as $1,000 per acre. Thus, irrigators were
receiving their annual supplies of water for a
bare $1.20 per acre.
In 1959 irrigation taxes were canceled.
"It was more an irritation tax than an
irrigation tax," explained Thomas K. Beard, who
early in his 16 years as a director representing
the Modesto division led the effort to eliminate
the tax. He reasoned:
The amount of money generated by
the tax was less than the cost of collecting it.
So, it just made good business sense to eliminate
an irritation, although the $1.50 to $2.50 a year
they were taxed probably was the only reminder
that the people of the City of Modesto had that
they were a part of the MID .
Today the district remains tax free, although
in 1976 an irrigation water-user charge was adopted.
In most years since 1961 the investment of electrical
profits in irrigation operations has exceeded
$1 million, some years nearly $2 million.
The retirement of irrigation and electrical bonds
and the support of the irrigation operations through
power revenues were accomplished while the MID
maintained one of the lowest electrical rate schedules
in the nation.
A 1957 Federal Power Commission survey revealed
that Modestans were using more energy and paying
less for it than most other Californians. Electrical
rates in the MID were well below state and national
levels, even though rates had not changed since
the mid-1930s. During that time, the cost of living
rose 18 percent in the postwar decade.
Even when San Francisco increased its wholesale
charges for Hetch Hetchy power by 33 percent in
1960, the MID was able to hold the line on rates.
The first retail electrical rate increase in the
50-year history of the department came in January
1974, based on recommendations of a financial
consultant who urged that the revenue from electrical
sales be increased. Ironically, after a half century
of no increases, the weather forced rate increases
in each of the next four years. The prolonged
drought forced the MID to turn to expensive PG&E
power purchases to meet the local consumer demands.
Rates were reduced once the drought was over
and today remain well below state and national
The revenue gains were due entirely to the rapid
rise in the number of MID power users and their
ever-increasing energy consumption. This growth
increased steadily in spite of the great depression.
In 1938, for instance, a record-breaking gain
was attributed primarily to the installation that
year of 408 new electric ranges and 135 new electric
water heaters in homes served by the MID .
Throughout the postwar years, energy consumption
overall increased 10 percent per year. By 1950,
the electrical department was showing a $1 million-a-year
As the district reached its debt-free milestone,
nearly five times more meters were in place than
in the first full year of operation. Each consumer,
furthermore, was using seven times more energy.
Whereas the average annual consumption on 5,045
meters in 1924 was 1,100 kilowatt hours, 23,047
consumers used 7,700 kilowatt hours each during
This boom in the use of electrical energy was
a measure of pride for the district, something
for which it worked diligently. In recent years,
however, the emphasis has been reversed as conservation
The technological revolution that produced electric
clothes washers and dryers, food freezers, dishwashers,
television sets, air conditioners, food processors,
hair dryers, razors, computers and even toothbrushes
contributed greatly to the lifestyle changes of
The fact that MID consumers paid lower energy
rates than those served by private utilities and
even by most other public agencies meant these
useful and convenient electrical "aids" of the
20th Century became affordable here
much sooner than elsewhere.
This pattern of expanding electrification likewise
put increasing demands on the MID to produce and
distribute the accelerated levels of power being
used. Meeting this power need has become a priority
objective of the district.
Energy purchased from private utilities was expensive,
and in the quest for lower-cost sources the MID
appealed to its old adversary, the City and County
of San Francisco.
An MID offer to buy surplus Hetch Hetchy power
was rejected by San Francisco in the mid-1930s.
San Francisco had been wholesaling to PG&E
the Hetch Hetchy energy not used for its streetcar
lines and other municipal purposes since July
1925. Apparently San Francisco considered the
giant private utility a more stable customer than
the Valley irrigation district, which had fought
San Francisco so vigorously over the Hetch Hetchy
The legality of selling Hetch Hetchy power to
PG&E was questionable, however.
In 1925 when the city entered into an agreement
with the private utility, the San Francisco
Examiner called it more than questionable.
It editorialized that:
It was a wrongful and shameful
policy "Hetch Hetchy is the peoples". They paid
for it. Its profits and benefits ought to remain
with the people. This transfer of Hetch Hetchy
power to PG&E is a subversion of the public
Over the years, San Francisco voters eight times
had rejected bond issues to purchase the PG&E
distribution system in the city, which was the
home of PG&E's headquarters. Under President
Franklin D. Roosevelt, Secretary of Interior Harold
Ickes began to breathe down San Francisco's neck.
Ickes forced two more unsuccessful elections in
attempts to win approval of local distribution
of Hetch Hetchy power. The "Old Curmudgeon" took
an active role in these campaigns.
Construction of the Riverbank Ammunitions plant
on the Hetch Hetchy transmission line by the World
War II Defense Plant Corporation temporarily prevented
the U. S. Department of Interior from forcing
compliance with the Raker Act by attempting to
shut down San Francisco's Moccasin Creek power
Secretary Ickes, however, still demanded a plan
to dispose of Hetch Hetchy power without selling
Negotiations between the city and the Modesto
and Turlock districts were reopened. A scheme
was devised by which the irrigation districts
would take all surplus Hetch Hetchy power, then
sell to PG&E any that they did not need. This
caused a furor. Secretary Ickes charged that San
Francisco still was trying to circumvent the Raker
Ickes? contention was supported by The Modesto
Bee and Frank Andrews, a Modesto electrician
and hard-working campaigner for the retail distribution
of power by the MID . Andrews turned against the
district, however, and formed the Modesto Water
and Power Users Association when the MID became
aligned with San Francisco.
Modesto Irrigation District Chief Engineer Clifford
Plummer undertook a personal effort to resolve
The MID was buying substantial amounts of energy
from PG&E and Plummer knew that considerable
savings could be achieved through the purchase
of Hetch Hetchy power instead. A direct appeal
to Undersecretary of Interior Abe Fortas, later
to become a U. S. Supreme Court justice, won from
Fortas an admission that the MID made a "very
compelling case" for its need for energy at costs
lower than what it was paying PG&E. Interior
Secretary Ickes, however, was unmoved, still insisting
that the proposal was illegal and violated the
After Ickes formally rejected the scheme in January
1945, San Francisco asked the federal courts to
ratify the proposed contract with the districts
as being in "reasonable compliance" with the Raker
Act. The courts, instead, issued an injunction
against the further sale of Hetch Hetchy power
to PG&E. San Francisco had no alternative
but to work out a deal with the irrigation districts.
The city needed a market and the MID needed a
PG&E purchases of power from the Turlock
district, which at first saw no reason for it
to become involved in the negotiations, proved
to be a stumbling block to any agreement. The
Department of the Interior refused to allow the
TID to become a conduit of Hetch Hetchy power
to the private utility.
The compromise finally approved by Secretary
Ickes and the courts called upon the TID to agree
that whenever it received electricity from the
Hetch Hetchy system, it would not sell to PG&E
more power than it sold in 1944 when the TID was
wholesaling only its surplus Don Pedro energy.
The TID agreed reluctantly, but it was not many
years before that district found itself using
all of its Don Pedro power and TID sales to PG&E
Federal Judge Michael Roche found this arrangement
to be in compliance with the Raker Act on July
A few days later the MID signed a nine-year contract
with San Francisco. Because of the need for new
substations and interconnecting transmission lines,
Hetch Hetchy energy was not received in Modesto
The contract was expected to save the MID $112,000
per year since the cost of Hetch Hetchy power
was just half what the district had been paying
PG&E. Five years after the agreement was implemented,
Plummer reported the district already had saved
The agreement was to be the target of a new investigation
a decade later when Tuolumne County Water District
No. 2, with the assistance of Congressman Clair
Engle, sought to take over a Tuolumne River powerhouse
site authorized for San Francisco as a part of
the original Raker Act development program.
For some years the Tuolumne County water agency
had been eyeing power sites on the Tuolumne River.
In 1954 Representative Engle introduced legislation
to amend the Raker Act to permit the mountain
county water district to build a $20-million power
project using San Francisco’s still-undeveloped
Early Intake site. The reasoning was that San
Francisco had "sat" on the site for 40 years without
using it and it should be put to work. "Playing
dog in the manger with a vengeance" was how Engle
described San Francisco's inaction.
The Raker Act had forced cooperative development
on the Tuolumne River, which by then included
five operating reservoirs. A sixth was under construction
and the seventh was in the planning stage.
Noting this, the Valley irrigation districts
were quick to object to the takeover. Projections
showed that energy generated at all district and
San Francisco power plants would be needed to
meet future demands.
The irrigation districts also were concerned
that the move might push San Francisco into building
the Early Intake project ahead of the next scheduled
powerhouse, which would use water stored behind
the then under-construction Cherry Valley Dam.
The reason for this concern was an agreement that
the districts would receive 35 percent of the
Cherry Valley-generated power at cost and the
balance at minimal profits for the city. No such
arrangement applied to the Early Intake powerhouse,
so if the mountain water district actions forced
a change in schedules, power costs for the Valley
districts would be affected adversely.
The fiscal concerns, however, were not stated
in the formal declaration issued by the irrigation districts in May 1954:
The introduction of a third agency
on the river for the generation of power could
hamper the coordinated releases for water supply,
power and flood control. With all power plants
under one control, certain plants could be idle
while the remaining plants operated to meet the
load demand. In this manner, Hetch Hetchy Reservoir
releases could be discontinued at times to increase
Hetch Hetchy storage and other similar adjustments
made over the watershed.
Tuolumne County had no firm market for the power
to be generated and Engle urged that it be sold
to the U. S. Bureau of Reclamation Central Valleys
Project. Up to that point, the CVP had not purchased
any power. In fact, 47 percent of the energy then
being generated at Bureau of Reclamation powerhouses
was being sold to PG&E.
At hearings held by the House of Representatives
Subcommittee on Irrigation and Reclamation which
Democrat Engle chaired, Congressman John Saylor
of Pennsylvania, the senior Republican member
of the committee, charged that the only reason
a powerhouse would be feasible at the location
was San Francisco?s earlier construction of Hetch
Hetchy Reservoir. Saylor called San Francisco?s
long-range development plan sound and likened
Congressman Engle's "dog in the manger" charge
similar to a "case where a wise and provident
father who when he builds a house puts on an extra
bedroom in anticipation of future growth of the
family. Then a complete outsider comes along and
say, "You're not using that bedroom and I'm going
to move in."
At these hearings the Tuolumne agency admitted
that its $75-million power and irrigation development
plan would force San Francisco to maintain a constant
discharge from Hetch Hetchy and would serve only
12,000 people irrigating 40,000 acres. The mountain
district confirmed it had no idea where it would
sell the 400 million kilowatts of power generated
there and at powerhouses proposed in a number
of other filings. That volume would rival the
output of the great Shasta Dam on the Sacramento
Engle refused to give up, however, and called
in the U. S. General Accounting Office, Congress?
independent watchdog agency.
The General Accounting Office investigation was
opened in August 1955 and 10 months later Comptroller
General Joseph Campbell found San Francisco to
be "in reasonable compliance" with the Raker Act.
He also declared that all future power development
would be required to meet the needs of various
public agencies, including the MID and TID.
By the time the report was filed, the voters
of San Francisco had approved a $54 million bond
issue to proceed immediately with both power plants.
The Cherry Dam Powerhouse, built first, was completed
in 1960, with the Canyon facility constructed
the following year. The Modesto district once
again was assured of an adequate supply of Hetch
The alliance of the MID and its partners on the
Tuolumne River, Turlock and San Francisco, also
proved effective in the mid-20th Century
struggles to keep federal and state agencies from
moving in on the electrical energy resources of
The U. S. Bureau of Reclamation conceived a plan
to develop 8.1 billion kilowatt hours of energy
a year, enough to serve 5,182,000 homes. The 38
reservoirs involved included one at Jacksonville
on the Tuolumne River, first inventoried by the
bureau in 1944 as part of an ambitious $3 billion
program to develop the water resources of 17 Western
states. The scheme would make supplemental water
available to some 2 million acres then under irrigation
and provide water to 3 million other acres not
The three partners on the Tuolumne wanted no
interference with their own energy and water development
and irrigators especially feared that federal
involvement would impose the 160-acre limitation
on lands receiving Bureau of Reclamation water.
The districts and San Francisco, therefore, opposed
the inclusion of the Tuolumne River in any such
program, including the Central Valleys Project.
The CVP?s Delta-Mendota Canal, which ultimately
went down the west side of Stanislaus County,
bypassed the Modesto and Turlock Districts. The
proposed East Side Canal may never be built.
The districts also bluntly told State Water Resources
Director Harvey Banks to keep his hands off the
Tuolumne River in developing his State Water Plan.
While it prevented the intrusion of federal,
state and local governments on the Tuolumne watershed,
the Modesto district carried on a major expansion
of its electrical transmission and distribution
system to meet ever-growing demands for more and
Continual modernization of the electrical distribution
system is essential.
"If you don't believe it," comments retiring
Chief Executive Officer H. L. Brooks, "experience
a power loss during the World Series. You're in
big trouble!" Brooks also recalls the time years
ago when a homemaker sued the irrigation district
for $1 for the loss of a cake which was in the
oven when there was a power loss.
As it observes its 100th anniversary,
the Modesto Irrigation District's electrical distribution
system has 25 substations, more than 18 miles
of 115,000-volt transmission lines, 207 miles
of 69,000-volt transmission lines and 1,102 miles
of distribution lines, of which 266 miles are
underground. Electrical lines in all new residential
subdivisions now are being placed underground.
Today the electrical distribution system represents
a capital investment in plant and equipment of
$117,131,000. More than 74,000 electrical customers
being served use nearly 1.5 billion kilowatt hours
of energy annually. The gross revenue for the
electrical department exceeds $70 million annually.
The generation and distribution of electrical
energy which had been started as a by-product
of the district's irrigation operations has become
the dominant function. Not only was the district's
"cash crop" highly profitable, it made the MID
less political entity than a commercial enterprise.
This was verified by the California State Supreme
Court as early as 1953 in a case brought by Andrews'
Modesto Water and Power Users Association over
the purchase of transformers and other electrical
equipment. Andrews had protested that these were
not purchased through competitive bidding.
The Supreme Court ruled against Andrews' contention
and found that an irrigation district engaged
in the generation, transmission and the sale of
electrical energy is the operator of a proprietary
enterprise and as such did not have to seek competitive
bids in purchasing routine equipment. MID Attorney
Vernon Gan explained this made the electrical
operation "more of a business than a government
entity, free from some of the restrictions ordinarily
applicable to an irrigation district" but at the
same time "losing some of the immunities with
which an irrigation district ordinarily is clothed
There was no question but that the Modesto Irrigation
District had become big business, dealing in retail
electrical energy and agricultural water.