ML20098C885

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Undated marked-up Transcript of Jj Stein Testimony Re Util Financial Qualifications to Design & Construct Nuclear Reactor
ML20098C885
Person / Time
Site: Columbia, 05000000
Issue date: 08/24/1984
From: Stein J
WASHINGTON PUBLIC POWER SUPPLY SYSTEM
To:
Shared Package
ML20093C821 List: ... further results
References
CON-WPPSS-069, CON-WPPSS-69, FOIA-84-603 NUDOCS 8409270260
Download: ML20098C885 (6)
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' SUl hRY OF APPLICNIT'S FIhNICIAL QuE.IFICATI0 tis

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2 OF JOSEPH J. STEIll, MANAGING DIRECTOR y (o'.

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s My name is Josep,% J. Stein. My business address is Washington Public Power Supply System, 301 Fifth Avenue, Richland, Washington. I am the Managing Director of Washington Public Power Supply System.

Washington Public Power Supply System is a municipal corporation of the State of Washington and was organized in January 1957 as a joint operating

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agency,~ pursuant to the laws of Washington. The Supply System is composed of 18 Public Utility Districts and 3 cities.* each of which operates an electri '

cal distribution system within the State of Washington, serving approximately 659.000 electrical customers. The Supply System is empowered to acquire, construct and operate facilities for the generation and transmission of cloc-tric power and energy, but does not engage in the distribution of electric energy at retail. .

The Supply System is authorized by R.C.W. 43.52.3411 to " issue revenue bonds or warrants payable from the revenues of the utility properties operated l by i t" . The Supply Sys' tem is required to adopt a resolution describing the proposed system or plan and setting forth the estimated cost. Such resolutions have been adopted, for Hanford flo. 2 in connecticn with a resolution for revenue notes of $15 million on Daccmber 4, 1970 and $40 million on ilovember 15,1972.

The estimated cost includes nuclear fuel, interest during construction, and provides for escalation and contingencies. The bonds or notes of the Supply System are negotiable instruments and legal securitics for deposits of public moneys, and are legal investr.ents for trustccs and other fiduciaries, and for savings and loan associations, banks and insurance conpanics doing business in n city of Tacoma becamo PrkSmS80".f0"ocESbSEPO Mn.

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.The note and.bonddresolutions adopted by the Supply System's Board

'of Directors are the indentures to the' purchasers of the securities in which certain covenants are made to such purchasers. . By agreements with power:

purchbars, termed " participants",the System receives a promise to p

-portion of the' costs of acqtiiring, constructing and operating the facility.

a The aggregate of. the.partic'ipants' obligation to pay costs of the facility; -

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, will equal the total of such costs. Each participant's portion of such costs includes the, amount required each year to pay ~the interest and a portion of the principal on the bonds outstanding,' ~plus the participant's share of the annual operating costs. The System covenants with the ~ bond holders to pay this principal and interest, as provided in the bond resolution, from the revenues received by -it which are pledged to payment of the bonds. The System agrees '

to set c' side in sinking funds amounts. sufficient to pay each year's accrued interest and principal and to eposit all revenues of the .troject into a Project Revenue Fund.. The System further promises not to agree to any modi-' )

fication of the contracts with participants or others, or amendment of the bond resolution, shich v,iould adversely affect the rights of the bond holders.. I

'llet Billing Agreements between each participant, the supply System and Bonneville Po.<cr Administration ("Bonneville") provide that the Project's entire, capability will be sold by the Supply System to certain statutory pre-forence customers of Bonneville, and assigned by the participants to

, Bonneville. -The Het Billing Agreements provide-that each participant will .

assign its share of Project capabili_ty to Bonneville which will credit the payments made to the Supply System by each participant for its proportionate share of:the Project's annual costs (which includes debt [ervice)against billings'cade by Bonneville'to the participant for onwor and enrtu n carviens  !

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n g delivered under other contracts. The Net B1lling Agreements provide that the J participants are obligated to pay the Supply System whether or not the Project y i

is completed operable or operating and notwithstanding the suspension, interrup-j 1,

_ tion, interference, reduction or curtailment of the Project output.

This method of financing large electric generating projects and electric systems has been successfully utilized in the Pacific Northwest for many years.

It has proven-to be a sound economic means of financing and is particularly well adapted to the needs of the System in undertaking the financing of large nuclear

,, generating projects. These Het Billing Agreements are included in the Ten Year Hydrothermal Power Program of the Pacific Northwest. This program was approved by Congress in the Public Works Bill, 1970 (83 Stat. 323,333) and in Public Works Appropriations Bill, 1971, (84 Stat. 890)).

In 1962 the Supply System began construction and is now operating the Packwood Lake Hydroelectric Project (27,000 kw). Construction costs of this project were financed by the sale of revenue bonds in the amount of $13,700,000.

All costs, including debt service,' have been paid on a current basis and, in addition, excess construction fu~nds have been applied to retire $519,000 par value of bonds ailead of schedule. The project output is sold to 12 public utility dis-tricts.

Operatingrevenugsforfiscalyear1972 totaled $851,300.

The System is now operating the Hanford Generating Project, which is supplied steam by the A.E.C.'s N-Reactor. Construction costs were financed by the sale of revenue bonds in 1963 in the total amount.of $122,000,000. All costs including

- debt service have been paid on a current basis and, in addition, excess constructica funds have been applied to retire $26.640,000 par value of bonds ahead of schedule.

The project output is sold to 76 power purchasers, including public utility

_ districts, nunicipalities,' rural electric cooperatives and investor-owned utilities inithe Morthwest region. Operating revenues for fiscal year 1972 totaled

$26,165,200.

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To' finance the project under consideration in this prucceding, Hanford No. 2,'Revence Notes in the. amount' of $15,000,000 were sold in February 1971 for'the preliminary planning and initial construction costs and an additional

$40,030,000 were sold in December 1972 for purchase of fuel and to meet progress

, payments. The Projecd has been designated as the " Washington Public Powe Supply System Nuclear Project No. 2", referred to herein as the " Project". The Project will be constructed near Richland, Washington, and have an installed capacity of approximately 1100 megawatts.

Funds sufficient to pay interest expense on the Notes until . maturity on July '1,1974, are held in trust. It is planned that the Notes will be redeemed from proceeds of the first long term

' Revenue Bonds to be sold for construction of the Project after the issuance o'f the Construction Permit. Construction' expenditures through November 1972

, amount.to $9,494,400.

Total cost of construction is estimated to be $457,000,000.}

Current, estimates for Hanford No. 2 construction expenditures through the year 1977 are as follows: -

Year '

Expenditure 1972

$13,311,000 - -

1973 62,804,000 1974 93,058,000

'. 1975 157,886,000

, 1976 101,990,000

1977 27,790,0.01 -

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  • Commercial operation is scheduled for September 1977. The project output c

has been sold to 95 consumer utilities in the States of Idaho, Montana, Oregon

'. and Washington.

The participants have agreed to pay the System approximately

-$50,000,000 per year for the term of the bonds, as prescribed .in the Net . Billing U

Agrcements.

In order to successfully market long term bonds in the' amount of

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> , l b approximately $457,000,000 to finance the Project, the Supply System will ,

issue its tax exempt revenue bonds in series from time to time during the

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It is planned to issue these bonds on the following period of construction.

' schedule:

bateofIssue_ Amount November 1973 $150;000,000 July 1975 '$150,000,000 -

September 1976 $157,000,000 *

. g The first bond issue, Series 1973, would include the refunding of outstanding short tenn notes. Each series of bonds issued will be on a parity with other

- bonds issued. The bonds are to be repaid on a level debt service basis over the 35 ye'ar anticipated life of the Project.

. All of the System's long term funding for these projects will be pro-vided from the sale of revenue bonds. The System's current rating is A-1 by Moody's Investors Service, Inc. , and AA by Standard and Poor's Corporation.

If, for any reason, the Supply System is unable to issue and sell bonds A

or refunding notes to obtain funds to pay the principal of the Notes, together with any interest thereon, when due, or is unable to proceed with the financing of the Project, the Supply System covenants in the resolutions auth-orizing the issuance of such notes that it will terminate the Project as pro-v'ided in the Project Agreement.

If, for any reason, the System is unable to complete construction of the Project, or after co:r.rancement of commercial operation the System is unable '

to continue operation of the Project, each ~of the Participants will pay to the System its respective share of debt service, together with any other costs.

associated i!ith the' termination of the Project.' These paymen'ts are to be treated as credits against billings made by Bonneville to the participants for

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power and certain services.

TheSystempkanstoconstructWashingtonPublicPowerSupplySystem Nuclear Project No.1 on the site of the existing Hanford Generating Project.

Nuclear Project'No.1 will include a comercial. nuclear steam ' supply system to replace the government owned N-Reactor, which is to be shut down in 1975, and a topping turbine" generator.to interface with the existing 86014! steam plant. Nuclear Project No.1 is scheduled to be completed in 1980 at a cost

' cf approximately $607.000,000. The System also plans to construct and acquire 70% undivided ownership interest in a nuclear electric generating plant, s

defined as the Washington Public Power Supply System Nuclear Project No. 3, Siting studies having an installed capacity of- approxi'mately 1130 megawatts.

are underway and WPPSS No. 3 Project is scheduled to be completed in 1981.

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