ML18191A167

Washington Public Power Supply System, $120,000,000 Nuclear Project No. 2 Revenue Bonds, Series 1976

ML18191A167
Person / Time
Site:	Columbia
Issue date:	06/01/1976
From:	Washington Public Power Supply System
To:	Office of Nuclear Reactor Regulation
References
Download: ML18191A167 (69)

Text

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%ASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No.2 Revenue Bonds, Series 1976 Dated: June 1, 1976 Due: My 1, as shown below Interest is payable January 1 and July I, commeacing January 1, 1977.Continental Illinois National Bank and Trust Company of Chicago is Bond Fund and Construction Fund Trustee.~~The 1976 Bonds maturing on July,1, 2006, and on July I, 2012, are subject to redemption by operation of the ond Retirement Account at 100%plus accrued interest to satisfy sinkin fund installments date on or after Janua 1 1999 d J ry,, an anuary 1, 2007, respectively.

The 1976 Bonds may be redeemed rio y d prior to maturity, at the option of the Supply System, on or after July I,'986, as a whole at any time, or in part in inverse order of maturities and by lot within a maturity on any interest payment date, at prices ranging.from 103%for the period July 1, 1986, to and includin Tune 30 after Juae 30, 2000, plus accrued interest to the date fixed for e, ate e for redemption ia each case, as further described herein.on s may so e redeemed under special circumstances as further described herein.Interest exempt, in the opinion'of Bond Counsel, from federal income taxation under existing laws, regulations and rulings issued by the Internal Revenue Service.The 1976 Bonds and thc interest thereon arc payablc solely from thc revenues derived b the Su I throgh h o hip op tlo byi ofth P.oj,l ln n pursuant to th N t Billin A e c'grccmcnts, and Bond procccds.e.ro cc, n u g all payments to bc made to the Supply System The United States of America, Department of thc Interior, actin b and trator ("Bonaevillc")

h ch d th or, ac ng y and through thc Bonncvllle Povver Adminls-(the'Partlcf anfs")who c, as pur ascd the total ca abili of'he d th p ty'roject from 94 of its statutory prcfercncc customers pan w o, in turn, have purchased such capability from the Su I S stem all A B ill is bli d th Partld System, in thc manner and from fhc sources described hcrcin thc ot a e o.pay e dpants, and thc Participants arc obli atcd to a ources esc c crcin, thc total annual costs of the Project, including debt e, on s, w cr or not the Project is completed o crable or sio rcd tf o rtail t of th P oj'o t t ro cct output.The Project would not bc affected by the passage of an initiative ctitlon p o winch has bccn filcd with thc Ivashlngton tfonal>would adverse y affc<<gu, enac e to Iaw and dcfcrmlned to be constitu of the Initiative petition see thc caption"Initiative Petition" ot cr nuclear power plants in the State of Xvashin as gton.For a further discussion AMOUNTS, MATURITIES, COUPONS, YIELDS AND PRICES Amount Due n Yield Coapon Amount Due Coapon$875,000 1982 5.40%'.70%88$,000 1983 5.40 4.85 1991 5.80%5.80%1,030,000 1984 5 A 0 5.00 1,755,000 1992 5.90 5.90 I 095,000 1985 SAO 5.10 6.00 1,190,000 1986 5.40 5.20 6.10 1320000 1987 540'0 6.10 1,440,000 1988 5.$0 5.50 2,330,000 1996 6.20 6.20 1,485,000 1989.5.60 5.50 2,475,000 1997 6.25 6.25 1,565,000 1990$.70 5.60 2>620,000 1998 6.25 6.2$$42,300,000 6s(f>%Term Bonds Duc July 1, 2006 Price 99V4%$49,860,000 6si4%Term Bonds Duc July 1, 2012 Price 100%P(er(ae um+.'j's q~p~~~~~p~oap Thc 1976 Bonds arc offered when, as and if issued and received by.us and arc sub'cct b W dDa o Lo kSbfi,N YokBo dCo I o h or, B d unsel to t Supply Syst m, nd Houghton Cluck Coughlin 6'c will be ready for delivery on or about Tune 23 1976 pecia unse to the Supply System.It is expected that the I June 3, 1976 WASHINGTON PUBLIC POWER SUPPLY SYSTEM Principal OiBce-Richland, Washington Members Public Utility District No.1 of Benton County;..Public Utility District No.1 of Chelan County.....Public Utility District No.1 of Clallam County..Public Utility District No.1 of Clark County.Public Utility District No.1 of Cowlitz County Public Utility District No.1 of Douglas County Public Utility District No.1 of Ferry County.Public Utility District No.1 of Franklin County Public Utility District No.2 of Grant.County..........

Public Utility District No.1 of Grays Harbor County Public Utility District No.1 of Kittitas County.Public Utility District No.1 of Klickitat County.Public Utility District No.1 of Lewis County.Public Utility District No.3 of Mason County...Public Utility District No.2 of Paci6c County.City of Richland City of Seattle.................

Public Utility District No.1 of Skamania County.Public Utility District No.1 of Snohomish County City of Tacoma.Public Utility District No.1 of Wahkiakurn County.....*Executive Committee Member.OPFICERS I Representatives to tbcoard of Directors John Goldsbury Kirby Billingsley Alvin E.Fletche'r Ed Fischer*, D.E.Hughes*Howard Prey Clair R.Hilderbrandt Glenn C.Walkley*John L.Toevs John J.Welch*Harold W.Jenkins Gerald C.Fenton~Arnold J.James Edwin W.Taylor Quentin Mizer Lane Bray Gordon Vickery*Rolf E.Jemtegaard W.G.Hulbert, Jr.~J.D.Cockrell*Francis Longo Alvin E.Fletcher Howard Prey Edwin W.Taylor~President~,.Vice President Secretary ADMINIsTRATIVB STAFP Managing Director Deputy Managing Director Asst.Director-Projects Asst.Director-Finance&Administration Asst.Director-Generation

&Technology Manager, Planning and Analysis Manager, Finance Division Treasurer Auditor Chief Counsel FINANCIAL CONSULTANT Blyth Eastman Dillon&Co.Incorporated BQND CQUNsBL Wood Dawson Love&Sabatine SPECIAL COUNSEL Houghton Cluck Coughlin&Riley J.J.Stein I L.Humphreys N.O.Strand P.C.Otness D.L.Renberger H.R.Kosmata J.T.Hobo J.D.Perko C.W.Godfrey R.Q.Quigley CONSULTING ENGINEER R.W.Beck and Associates CoNsTRUGTIQN ENGINEER Burns and Roe, Inc.NUCLEAR FUEL CONSULTANT S.M.Stoller Corporation The information confained in this OfIicial Statement has been obtained from the Supply System and other sources deemed reliable.No represenfation or warranty is made, however, as to the accuracy or complefencss of such information, and nothing contained herein is, or shall be, relied upon as a promise or representation of the Undenvriters.

This Official Statemenf, which'includes the cover page and exhibits, docs not consfitute an, oKer fo sell thc 1976 Bonds in any state to any person to whom it is unlawful to make such oKer in such state.No dealer, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement in.connection with thc oKering of the 1976 Bonds, and if.given or made, such information or representation must not be relied upon.

SUMMARY

STATEMENT MAP TABLE OF CONTENTS PAGE 5.Centerfold SECURITY FOR THE BONDS THB SUPPLY SYSTEM AND THB PROJECT Location of the Project Description of the Project Project Permits, Licenses and Schedule.Project Contracts Nuclear Fuel.Estimated Project Financing Requiiements

.Project Output Estimated Cost of Power The Supply System's Other Generating Projects...Financing Program.BONNEVILLE POWER ADMINISTRATION

.Acquisition of Project Capability and Power Supply.Bonneville's AuthorityBonneville Contracts..Bonneville Revenues and Expenses.......'onneville Rates;Bonneville Loads and Resources.....POWER SUPPLY IN THB PACIFIC NORTHWEST AND THE HYDRO POWER PROGRAM Regional'Power Requirements and Resources THE PARTICIPANTS THE NBT BILLING AGREEMENTS TeG11 Ownership and Operation Sale, Purchase and Assignment Termination Modification of Agreement.Provisions Required by Statute or Executive Order......7 10 11 11" 11 12 12.12 14 14 15 16'16 17'7 18 19 20'21'HERMAL 22'25 26'7'7 27 27'27 28 28 THB PRoJEGT AGREEMBNT Term Design, Licensing and Construction of the Project............

Financing Budgets Operation and Maintenance

.Bonds for Replacements, Repairs and Capital Additions.......Bonneville's Approval and Project Consultant

.Provisions Required by Statute or Executive Order............

DEscRIPTIGN oF 1976 BQNDs AND CERTAIN PRQYIsIoNs oF THB ,RESOLUTION AND SUPPLEMENTAL RESOLUTION The Bonds'nd the 1976 Bonds.Sub'sequent Series of Bonds.Additional Indebtedness Other than Bonds.Construction Fund;Application of Bond Proceeds...........

Other Funds Established by the Resolution; Flow of Revenues.Certain Covenants Events of Default;Remedies.Amendments; Supplemental Resolutions

.K LITIGATION Supply System.Equal Employment Opportunity

.Contractor Litigation

.Comptroller of the Currency Ruling INITIATIVE PETITION OTHER PROPOSED LEGISLATION REGISTRATION OF THE 1976 BONDS BY STATE AUDITOR LEGAL OPINIONS PAGB 28 28 29 29 29 29 30 30 30 30 31 32 33 33 34 37 39 40 40 40 40 41 41 41 41 42 42 TAx ExBMPTIQN CERTIFICATION AS TO OFFICIAL STATEMENT MISCELLANEOUS ExHIBIT I-The Participants

.ExHIBIT II-Letter of R.W.Beck and Associates ExHIBIT III-Letter of Burns and Roe, Inc.~~0~~42 42 43 44 47 55 ExHIBIT IV-Opinions of Counsel.ExHIBIT V-Supply System Net Billed Projects-Annual Costs.....

ExHIBIT VI-Bonneville Power, Administration Projected Revenues.61 65 66

SUMMARY

STATEMENT (Subject in All Respects to More Complete Information Contained in This Official Statement)

Purpose of Issue The purpose of the$120,000,000 Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976, is to finance a portion of the cost of constructing and acquiring the Project.The Supply System has issued$480,000,000 of permanent financing for the Project.It is estimated that the additional permanent financing required for the Project will be$194,000,000.

The Project will be financed and accounted for as a system separate from all other current or planned Supply System projects.The Project will be located about 140 miles southeast of Seattle, Washington, near Richland, Washington, and will consist of a boiling water nuclear electric generating plant with a nominal capacity of approximately 1,100,000 kilowatts, together with the necessary facilities to deliver the output to the 500 kV transmission facilities of the Federal Columbia River Power System located in the vicinity of the Project.The, Supply System The Supply System, organized in 1957, is a municipal corporation and a joint operating agency of the State of Washington.

Its members are 18 operating public utility districts and the Cities of Richland, Seattle and Tacoma, all located in the State of Washington.

The Supply System has the authority, among other things, to acquire, construct and operate plants, works and facilities for the generation and transmission of electric power and energy.The Supply System is operating generating facilities of approximately 888,000 kilowatts capacity and has under construction or in advanced planning nuclear projects of approximately 6,000,000 kilowatts capacity.Security for the Bonds The 1976 Bonds and the interest thereon are payable from the revenues derived by the Supply System through the ownership and operation of the project, including all payments to be made to the Supply System pursuant to the Net Billing Agreements, and Bond proceeds.Interest on the 1976 Bonds will be capitalized until September 1, 1977.The United States of America, Department of the Interior, acting by and through the Bonneville Power Administrator

(" Bonneville"), has purchased the Project capability from 94 of its statutory preference customers (the"Participants")who, in turn, have purchased such capability from the Supply System, all under the Net Billing Agreements.

Bonneville is obligated to pay the Participants, and the Participants are obligated to pay the Supply System, in the manner and from the sources described herein, the total annual costs of the project, including debt service on the Bonds, whether or not the project is completed, operable or operating and notwithstanding the suspension, reduction or curtailment of the project output.No participant will be required to make such payments to the Supply System except from revenues derived from the ownership and operation of such Participant's electric utility properties.

Each Participant has covenanted that it will establish, maintain and collect rates or charges for power and energy and other services furnished through its electric utility properties which shall be adequate to provide revenues sufficient to make required payments to the Supply System.Payments under the Net Billing Agreements are to commence on January 1, 1977.The Project would not be atfected by the passage of an initiative petition which has been filed with the Washington Secretary of State and which, if enacted into law and determined to be constitutional, would in the opinion of the Supply System preclude the design, construction and operation of certain other nuclear power plants in the State of Washington.

For a further discussion of the initiative petition see,the caption"Initiative Petition".

Contracts, Schedule, Permits and Licenses, 1 As of March 1;1976, the Supply System had entered into equipment and construction contracts amounting to$370,793,759, or approximately 83%%uo of the expected total value of the direct equipment and construction costs for the Project including escalation but excluding sales tax, engineering, construc-tion management and contingencies.

The Supply System has employed Burns and Roe, Inc.as Construction Engineer for the Project.The Supply System has obtained all of its uranium requirements for the initial nuclear fuel core.The Supply System has under contract 14 years of fuel reload requirements.

The Supply System received on March 19, 1973 a construction permit for the Project from the Atomic Energy Commission, the predecessor agency to the Nuclear Regulatory Commission.

The Supply System's construction schedule for the Project anticipates the initial fuel loading in June.1979 and commercial operation in December 1979.

OFF<ICIAI'TATEMENT OF%ASHINGTON PUBLIC POWER SUPPLY SYSTEM A Municipal Corporation and a Joint Operating Agency of the State of Washington relating to ifs$120,000,000 Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976 June 3, 1976 The purpose of this Official Statement, which includes the cover page hereof and the exhibits hereto, is to set forth information concerning Washington Public Power Supply System (the"Supply System"), its Washington Public Power Supply System Nuclear Project No.2 (the"Project")and its$120,000,000 Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976 (the"1976 Bonds"), in connection with the sale by the Supply System of such Bonds and for the information of aH who may become holders of such Bonds.The 1976 Bonds are to be issued pursuant to the Revised Code of Washington, Chapter 43.52, as amended (the"Act"), Resolution No.640 (the"Resolution")

adopted June 26, 1973, by the Supply System and a resolution supplemental to the Resolution, Resolution No..827 (the"Supplemental Resolution")adopted June 3, 1976, by the Supply System.The Supply System has heretofore issued pursuant to the Resolution

$480,000,000 principal amount of bonds for the Project, which bonds together with the 1976 Bonds and aH additional series of bonds which may be hereafter issued pursuant to the Resolution to pay the cost of acquiring and constructing the Project are herein called collectively the"Bonds".SECURITY FOR THE BONDS The principal of and interest on the Bonds are payable solely from the Bond Fund created by the Resolution.

The moneys pledged to such Fund are limited to the income, revenues, receipts and profits derived by the Supply System through the ownership and operation by it of the Project, including the revenues derived by the Supply System from the Net Billing Agreements described below, and Bond proceeds.Interest on the Bonds will be capitalized until September 1, 1977.The United States of America, Department of the Interior, acting by and through the Bonneville Power Administrator

("BonneviHe"), has purchased the entire capability of the Project from the Par-ticipants who, in turn, have purchased such capability from the Supply System, aH under the Net Billing Agreements.

Bonneville is obligated to pay the Participants, and the Participants are obligated to pay the Supply System, in the manner and from the sources described below, the total annual costs of the Project, including debt service on the Bonds, whether or not the Project is completed, operable or operating and notwithstanding the suspension, reduction or curtailment of the Project output.The Participants are 94 municipal corporations and electric cooperatives, aH of whom are statutory preference customers of BonneviHe and purchase aH or a portion of their power supply directly from BonneviHe under power sales contracts with Bonneville.

For a discussion of these contracts and their terms see"Bonneville Power Administration." These power sales contracts provide for monthly billings and payments.Under the Net Billing Agreements, in payment for the share of Project capa-bility purchased by each Participant, such Participant will pay the Supply System its pro rata share of the Supply System's costs for the Project, less amounts payable from any other sources.Bonneville wiH pay for the Project capability sold by the Participants to Bonneville under the Net Billing Agree-ments by giving the Participants credits against the amounts the Participants owe Bonneville under the aforesaid power sales contracts.

This crediting procedure is called"net billing." Prior to each Contract Year the Supply System will adopt an Annual Budget covering aH the, Supply System's costs for the Project, including debt service on the Bonds, less amounts payable from any other sources.Thereafter a Billing Statement will be prepared for each Participant which will show the Participant's pro rata share of the Annual Budget.The Annual Budget and Billing Statements may be amended during a Contract Year if necessary.

In the month preceding the beginning of each Contract Year, the Bonneville bill to each Participant for power supply and other services under the Participant's power sales contracts with Bonneville will show an offsetting credit equal to the Participant's obligation to the Supply System as shown on its Billing Statement, up to the fuH amount of such bill if necessary.

In each month thereafter such crediting will continue until credits equal to the amount shown on the Participant's Billing Statement have been made to the Participant.

In each month of the Contract Year, and within 30 days of receiving the credit, the-Participant must-pay the Supply System an amount equal to the credit it received from Bonneville in the preceding month.The elfect of this payment procedure will be that monies due BonneviHe from the Participants will be paid to the Supply System and will not become available to pay other Bonneville obligations.

If Bonneville estimates that a Participant's obligation to Bonneville under its power sales contracts will not equal or exceed the Participant's obligation to the Supply System under its Net Billing Agreement, thus resulting in a net billing deficiency, the Net Billing Agreements provide that Bonneville shall use its best elforts to'make assignments of such Participant's share of Project capability to other Participants and'other customers of Bonneville to the extent necessary to eliminate such Participant's net billing deficiency.

and, if such assignments are not sufficient to eliminate such deficiency, the Net Billing Agree-ments provide for mandatory assignments to the other Participants.

Such mandatory assignments to any participant may not exceed 25%of that participant's original share of project capability or be such as to cause its obligation to the Supply System to exceed the credits available to it from Bonneville.

If a Participant defaults under the Net Billing Agreement, each other Participant's share of the Project capability will be automatically increased for the remaining term of the Net Billing Agreements pro rata with that of other nondefaulting Participants up to an additional accumulated maximum of 25%of its original share of Project capability; provided, that such increase shall not cause the estimate of the payments to be made by such Participant to the Supply System to exceed the estimate of BonneviHe's billings to the Participant for power and certain services.Each Participant is a party to at, least one other agreement with Bonneville providing for net bHHng, such as the net billing agreements relating to the Supply System's Nuclear projects Nos.1 and 3.The credits received by the Participant from Bonneville in each month under aH net billing agreements will be allocated pro rata.The Net Billing Agreements provide that if assignments cannot be made in amounts sufficient to bring into balance the respective dollar obligation of Bonneville and the Participant and an accumulated balance in favor of the Participant from a previous Contract Year is expected by Bonneville to be carried for an additional Contract Year, such balance'and any subsequent monthly net balances that cannot be net billed will be paid in cash to the Participant by Bonneville,"subject to the availability of appro-priations for such purposes." At the time the Net Billing Agreements were, entered into, aH of BonneviHe's revenues were paid into thc United States Treasury, and BonneviHe was required to obtain appropriations from Congress for aH its cash needs;Since that time the Federal Columbia River Transmission System Act (the"Transmission Act")was enacted (see"Bonneville Power Administra-tion").The Transmission Act establishes the Bonneville Power Administration Fund (the"Fund")into which aH revenues received,by Bonneville are to be deposited.

Bonneville may make expenditures from the Fund without further appropriation by Congress for any purpose necessary or appropriate to carry out the duties imposed upon BonneviHe pursuant to law, including making any cash payments required under the Net Billing Agreements.

Although Bonneville is still required to submit an annual budget including such expenditures to Congress for review, BonneviHe's expenditures from its revenues in the Fund do not require formal approval by Congress except that Congress may take action to impose specific.directives or limitations on such expenditures.

Subject to the power of Congress to take such action, Bonneville is obligated to pay from its revenues in the Fund any cash payments required under the Net Billing Agreements prior to any payments by BonneviHe to the Treasury for repayment of (i)thc Federal investment in the Federal Columbia River Power System, (ii)Corps of Engineers and Bureau of Reclamation costs connected with such system and (iii)bonds issued pursuant to the Transmission Act.BonneviHe has stated to the Supply System and each Participant that, in accordance with the provisions of the Transmission Act, it will pay in cash from the Fund any costs billed to the Participant not,paid through net billing credits on a parity with other Bonneville operating expenses.Bonneville is obligated by law to charge rates for electric power and transmission of electric power which will recover the cost of producing and transmitting electric power, including all payments under the Net Billing Agreements.

For a discussion of Bonneville revenues available for net billing and cash payments, as described above, see"Bonneville Revenues and Expenses" under the caption"BonncviHe Power Administration" and Exhibit VI.Bonneville currently estimates that after aH net billed projects begin commercial opera-tion, the net billing obligations of Bonneville to the participants in such projects will exceed Bonneville revenue from such participants which is subject to net billing.For example, current projections indicate that in the year ending September 30, 1984 the net billing obligations of Bonneville to the participants in net billed projects will exceed estimated net billing credits by$99 million.If necessary, Bonneville is obligated to pay such deficits under the assignment and net billing procedure or by cash payments from the Fund in the manner described above.Each Participant is obligated to pay the Supply System the amount set forth in its Billing Statement.by-the end of the Contract Year, whether or not it has received equivalent net billing credits or cash payments from Bonneville.

No Participant will be required to make such payments to the Supply" System except from revenues derived from the ownership and operation of its electric utility properties and from cash payments made by Bonneville.

Each Participant has covenanted that it will establish, maintain and collect rates or charges for power and energy and other services furnished through its electric utility properties which shall be adequate to provide revenues sufficient to make required payments to the Supply System.Payments under the Net Billing Agreements will commence on the date when the Project is ready to be operated on a commercial basis, or January 1, 1977, whichever is earlier;provided, that such payments prior to the date the project is ready to be operated on a commercial basis or September 1, 1977, whichever is earlier, are limited to such amounts as BonncviHe and the Supply System agree may be included in the Annual Budgets.The Resolution provides for a Reserve Account in the Bond Fund equal to one-half of the maximum annual interest on each series of Bonds.Bonneville and the Supply System have agreed that the amount required for the Reserve Account, Reserve and Contingency Fund and for working capital will be pro-vided through payments under the Net Billing Agreements prior to September 1, 1977.If for any reason these amounts are not so provided, they will be provided from Bond proceeds.

The revenues of the Supply System derived or to be derived from the Supply System's Nuclear Projects Nos.1, 3, 4 and 5, Hanford Project, Packwood Lake Hydroelectric Project and any other project which may hereafter be undertaken by the Supply System are not pledged to the payment ot'the Bonds.The Project would not be affected by the passage of an initiative petition which has been filed with'he.Washington'Secretary of State and which, if enacted into law and determined to be constitutional, would in the opinion of the Supply System preclude the design, construction and operatio'n of certain other nuclear power plants in the State of Washington.

For a further discussion of the initiative petition" see the caption"Initiative Petition." THE SUPPLY SYSTEM AND THE'PROJECT The Supply System, a municipal corporation and a.joint operating agency, of the State of Washington, was organized in January, 1957, pursuant to the Act.Its membership is made up of 18 operating public utility districts and the Cities of Richland, Seattle and Tacoma, all located in the State of Washington.

The Supply System has the authority, among other things, to acquire, construct and operate plants, worksand facilities for the generation and transmission of electric power and energy, as well as make s'urveys, plans;investigations or studies relating thereto.The Supply System has the power of eminent domain, but" it" is specifically precluded from'he condemnation of any plants, works or facilities owned and operated by any city, public utility district or privately-owned electric utility.The Supply System has its principal office in Richland, Washington.

The management and control of the Supply System is vested in a Board of Directors (the"Board")composed of representatives of each of the members.Regular meetings of the Board are held quarterly.

The.Executive Committee of the Board administers the business of the Supply System between regular meetings of the Board.The Executive Committee.

holds regular meetings twice each month and~special meetings as often as the business of the Supply System may require.I The Supply System has completed two electric generating projects: the 27,500 kilowatt Packwood Hydroelectric Project which began commercial operation in 1964 and the 860,000 kilowatt Hanford Steam Electric Project which began commercial operation in 1966.In addition to the Project, the Supply System has"under construction or in advance planning, four additional, electric generating projects: the 1,250,000 kilowatt Nuclear Project No.1, the 1,240,000 kilowatt Nuclear.Project No.3, the 1,250,000 kilowatt Nuclear Project No.4 and the 1,240,000 kilowatt Nuclear Project No.5.For a more complete description of the Supply System's projects see"The Supply System's Other Generating projects".

Quality of construction of'the Supply System's nuclear projects is continuously monitored through the Supply System's quality assurance program, which program has been periodically inspected and evaluated favorably,.by the United States Nuclear-Regulatory Commission

("NRC",)as part of the NRC's comprehensive and continuous program-of review of the Supply System's compliance with NRC.regulations.

The Supply System presently employs approximately 500 persons, including 240 persons in executive,, finance and administrative functions, 110 persons in plant operations and 150 in the technical area.This technical staff, with disciplines in electrical, mechanical, civil and nuclear engineering, has over,2,400 man-years of technical experience and over,1,800 man-years of nuclear experience.

'he following is a general description of the Project;for additional information, reference is made to the reports of R.W.Beck and Associates (the"Consulting Engineer")and Burns and Roe, Inc.(the"Construction Engineer"), appended hereto as Exhibits II and III, respectively.

10 Location of the Project" The'Project is located on the Hanford Reservation of the United States Energy Research and Development Administration

("ERDA")approximately 12 miles north of the City of Richland, Wash-ington, and about 3 miles west of the Columbia River.The State of Washington has approved the site for the Project.The site has been leased from ERDA for a term, including Supply System'options, extending beyond July 1, 2012.The Supply System has obtained a lease from the Washington State Department of Natural Resources for the location of the cooling water intake and discharge structure in-the bed of the Columbia-River.

Description of the Project The Project will consist of a single-unit, boiling water reactor electric generating station having a nominal capacity of 1,100,000 kilowatts together with the necessary transformation, switching and related facilities to interconnect the generating station with the 500 kV facilities of the Federal Columbia River Power System.After subtracting the electrical requirements for station operating auxiliaries;,the net plant output will be approximately 1,093,000 kilowatts.

The basic structures comprising the overall power plant are the reactor, radioactive waste, turbine-generator, diesel generator and service buildings (together comprising the main plant), six mechanical'raft cooling towers, the circulating water pumphouse, and the river mal eup water plant.Makeup water to replace the evaporative losses of the circulating water cooling system will be obtained from the, Columbia River by means of three makeup water pumps.The Project'also includes an administrative service building located away from the site in Richland;Washington, which has been completed and provides administrative space for'the Project'and other Supply System activities.

Project Permits, Licenses and Schedule Construction of the Project started in August 1972 under a construction permit variance granted by the-Atomic Energy Commission

("AEC"), the predecessor agency to the NRC.The AEC granted'-a construction permit in March 1973, at which time major construction of structures started.The site for the Project has been approved by the Washington State Thermal Power Plant Site Evaluation Council whose duties have recently been transferred to the Washington State Energy Facility Site Evalua-tion Council.The Supply System has also obtained a National Pollutant Discharge Elimination System permit and a Corps of Engineers permit for construction of the intake and discharge facilities in the Columbia River.There are no other major permits required to be obtained for construction of the Project.Permits relating to Project operation must be obtained from the NRC and other governmental agencies in the course of placing the Project in operation.

The reactor building substructure has been completed.

The containment vessel'is,essentially com-plete based on the original design of this vessel.However, as a result of problems encountered in boiling water reactors presently in operation, the General Electric Company, the supplier of the nuclear-steam supply, system, has revised the design criteria for the containment vessel.The Construction Engineer is presently redesigning the vessel and its internals to meet these criteria;.

The design modi-fications.basically involve the addition of internal reinforcements.

The cost of'these changes (estimated.

at less than$5,000,000) has been included in the present estimate, and the changes are not expected to delay the construction schedule.Tests are being performed to substantiate the criteria used in the design modifications.

The results will not be known until after the vessel modifications are well under way or completed.

Concrete work on the spray ponds and service water pump houses is complete.'ork on the cooling towers is 72%complete and on the circulating water pump house is essentially complete., The.reactor vessel and the turbine-generator have been delivered to the Project site..11 Delay has been encountered in the performance of the, general construction work.On January 24, 1976, the Supply System terminated the major civil construction contract with Bovee 2 Crail Construction Company, who had prime responsibility for construction of the reactor, turbine-generator, radioactive waste, diesel generator and service buildings, on the grounds that the contractor had defaulted.

The question of default and other issues are presently being litigated.

See the caption entitled: "Litigation".

The structures of the turbine generator and radioactive waste buildings are now essentially complete.Concrete work on the reactor building is presently being continued under an interim contract, and the Supply System expects to award in August 1976 a contract for the completion of this work.Overall general civil construction is presently about 70%complete.The delays associated with this contractor problem have caused a delay in the Project schedule of approximately six months and a consequent increase in the estimate of the cost of the Project.The Project is currently scheduled to load fuel in June 1979 and to achieve commercial operation by December 1979.As of April 1, 1976, overall construction was estimated to be 30%complete compared to a scheduled 58%completion under the schedule which contemplated a commercial operation date of June 1978.Project Contracts The equipment and construction contracts awarded to March 1, 1976, are shown on Exhibit B attached to Exhibit III hereto and no substantial change has occurred subsequent thereto.As noted on the exhibit these contracts, totaling$370,793,759, include several with provision for escalation.

The amounts for these contracts total approximately 83%of the currently estimated total direct con-struction and equipment costs including escalation but exclusive of sales tax, engineering, construction management, and contingencies.

Nuclear Fuel The nuclear fuel cycle consists of four basic elements prior to insertion of the fuel assemblies in a nuclear reactor.These elements include acquisition of the uranium concentrates, conversion of the uranium concentrates to uranium hexafioride, enrichment of the uranium hexafioride and fabrication of the enriched uranium into fuel assemblies.

For the initial fuel core, the Supply System has contracts with Homestake Mining Company for acquisition of sufficient uranium concentrates, with Kerr McGee Corporation for conversion of uranium concentrates to uranium hexafioride, with ERDA for enrichment services and with General Electric Company for fabrication services.For reload fuel, the Supply System has contracts with Exxon Nuclear Company, Incorporated, for uranium concentrates estimated to be sufficient for 14 years of operation, based on annual refueling, with Kerr McGee Nuclear Corporation for conversion services through 1985, with ERDA for enrichment services for a period of 30 years commencing on October 1, 1977 and with Exxon Nuclear Company, Incorporated, for fuel fabrication services estimated to be sufficient for 14 years of operation, based on annual refueling.

At the present time,'o operating facilities for the reprocessing of spent fuel are available.

The Supply System is presently having spent fuel storage facilities designed for construction at the Project site which it estimates will be capable of satisfying spent fuel storage requirements until about 1990.It.is expected that reprocessing facilities will be available to meet the reprocessing services requirements of the Supply System prior to that time.f Estimated Project Financing Requirements The total financing requirements for the Project are presently estimated to be$794,000,000 and are shown in the following tabulation.

'Based on present estimates of actual needs by the Construction Engineer and the Supply System, the proceeds from thc 1976 Bonds will be sufficient to continue con-struction of the Project until May 1977.In addition to the 1976 Bonds and the$480,000,000 principal amount of Bonds previously issued, additional Bonds necessary to complete the financing of the Project in the estimated aggregate principal amount of$194,000,000 are planned to be issued as the need arises.to complete construction of the Project.The amount of financing has been estimated on the basis of actual interest rates for previous financings, an annual 6.70%interest rate for the 1976 Bonds and an annual 7.5%interest rate for the balance of the Bonds.ESTIMATED PROJECT FINANCING REQUIRED Based on the foregoing, the estimated total financing requirements-for the Project are shown in the following tabulation:

Construction Costs(1)Structures and Improvements

...Reactor Plant Equipment.Turbo Generator Units.Accessory Electrical Equipment.Miscellaneous Power Plant Equipment.Station Equipment.Distributable Direct Subtotal-Direct Construction Costs Other Direct Costs Sales Tax(2)Engineering and Construction Management(1)

Construction Contingencies(1)

Owner's Cost(3).Schedule Delay(4)Total Construction Cost Nuclear Fuel(5)Contingency(6)

.Bond Discount and Other Financing Expense(7)

.Capitalized Interest During Construction(8)

Gross Requirements,.Less: Estimated Income-Temporary Investment(9)

Net Requirements(10)

$115,635,500 123,064,900 117,709,300 43,325,800 30,189 400 3,465,400 5,492,700$438,883,000

$18,756,200 79,054,400 30,643,000 55,000,000 11,000,000

$633,336,600

$59,375,000 32,217,400 7,451,000 117,326,000

$849,706,000 (55,706,000)

$794,000,000 (1)-Estimated by the Construction Engineer.(2)-Estimated by.the Construction Engineer-and the Supply System.Does not include estimated sales tax on escalation, contingency, schedule delay and nuclear fuel.(3)-Estimated by the Supply System.(4)-Estimated by the Construction Engineer as the cost of delay in the date of commercial operation from July 1979 to Deceniber 1979 as discussed under the caption"Project Permits, Licenses and Schedule." (5)-Estimated by the Supply System, includes sales tax of$2,828,000.

(6)-Estimated by the Supply System, to cover contingencies not included in Construction Engineer's estimate.(7)-Includes actual expenses of previous financings and estimated expenses for the 1976 Bonds and additional Bonds.(8)-Based on actual interest rates for previous financings, an assumed 6.70%annual interest rate on the 1976 Bonds and an assumed 7.50%annual interest rate on'additional Bonds.(9)-Includes actual income to date and estimated future income at an annual'nterest rate of 5.5%.(10)-Construction cost estimates based on commercial operation date of December 1979.1, 13 Construction cost estimates are based on a scheduled date of commercial operation of December,".

1979.The Construction Engineer has estimated that the effect of schedule extension on the cost of escalation, contingency and engineering and construction management would be an increase in cost of about$2,000,000 per month for an extension not exceeding 6 months.In addition'o the foregoing amounts to be obtained through issuance of Bonds,.present planning anticipates the following will be paid from revenues of the project under the Net Billing Agreements.

If for any reason such amounts are not provided under the Net Billing Agreements, the Resolution provides that they will be obtained through the issuance of,additional'Bonds.

~,Reserve Account, in Bond.Fund Working Capital Reserve Sr, Contingency Fund.$27,265,000 3,000,000(1) 3,000,000 Total...............................,.$33,265,000 (1)-The amount of working capital may be increased by agreement between the Supply System and Bonneville.

Project Output The Project is expected to have a net generating capability of 1,093,000 kilowatts.

Although there is not yet sufficient historical operating information available on large nuclear plants to establish an expected plant factor for the, Project from operational experience, the regional planning guidelines assume a 75%plant factor for the Project.A 75%plant factor would result in the production of.about 7.2 billion kilowatt-hours annuamy.During certain periods there will be times when surplus water will be available to generate power at existing hydroelectric projects thereby permitting a reduction in the total amount of energy produced at all of the thermal electric projects to be constructed under the Hydro Thermal Power Program, including the Project.Estimated Cost of Power Estimates of the actual cost of the Project's operations are given in the following table.The cost per kilowatt-hour of 14.5 mills is based on 7.2 billion kilowatt-hours at a plant factor of 75%.If the Project were to operate at a plant factor of 65%, the cost per kilowatt-hour would be.approximately 16.0 mills..Estimated Project Annual Costs Ezp ense Interest and Amortization(1)

Payments to Reserve and Contingency Fund.Insurance Administrative and General(2)

Operation and Maintenance(2)

Fuel(3)Taxes(4)$61,323,000 6,132,000 1,595,000 3,866,000 11,085,000 25,400,000 1,445,000 Subtotal.............................................

~.....$110,846,000 Less: Surplus from Prior Year's=Payments to Reserve an'd Contingency Fund(5)...'4,1'48,000)

Less: Interest Earnings(6)........................................

(2,329,000)

Total Annual Cost............,.................

$104,369,000 Cost per kilowatt-hour (7.2 billion kWh).......

14.5 mills (1)-Based on level debt service,, 35 year amortization and 7.0%annual interest rate on Bonds.Maturities of the Bonds may not be scheduled to yield level debt service throughout the period.Variations in annual costs will result from such scheduling to the extent actual debt service varies from assumed level debt services.(Notes continued on folloxviug page)14

'(2)-Costs are based-on the following:

a.1976 costs of labor and materials, escalated to 1983 at 6.0%per.year, but not beyond.b.Operating costs characteristic of a mature plant.Operating costs during initial years are expected to be higher.;(3)-Based.on average escalated cost of the first five.years (1981-1985)

'of reload fuel.(4)-Calculated at 0.2 mills per kWh.(5)-Computed as foHows: Payments to Reserve and Contingency Fund$6,132,000 Less: Estimated amount required for renewals, replacements and additions 1,984,000 Net Surplus$4,148,000 Net surplus may be used for purposes other than reduction in power costs in accordance with the Resolution.

(6)-Computed on the basis of 7.0%interest earnings.The Supply System's Other Generating Projects The Supply System is operating a hydro-electric project and a steam electric generating project and, in addition to the Project, has under construction or has in advanced planning stages four nuclear.electric , generating projects.The Supply System owns and operates the Packwood Lake Hydroelectric Project with,a nameplate rating of 27,500 kVA.The Supply System sold$13,700,000 Packwood Lake Hydroelectric Project Revenue Bonds, of which$12,821,000 were outstanding as of May 1, 1976, The Supply System owns and operates an 860,000 kilowatt electric generating plant and associated facilities (the"Hanford Project")located on the Hanford Reservation of ERDA.The Hanford Project was constructed pursuant to agreements between the Supply System, Bonneville, 76 Pacific Northwest utility participants, and AEC.Under these agreements, BonneviHe acquired the capability of the Hanford Project in exchange for power from the Bonneville system.In 1963, the Supply, System issued$122,000,000 Hanford Project Electric Revenue Bonds (the"Hanford Project Bonds"), of which$58,910,000 were outstanding as of May 1, 1976.By-product steam is provided for the Hanford Project from the New Production Reactor ("NPR")owned and operated'by ERDA for national defense purposes.Under agreements executed by the Supply System and ERDA on April 12, 1974, the Supply System provided for the operation of the Hanford Project in corijunction with the NPR until the Fall of 1977.The Supply System.recently requested ERDA to extend such operation through Junc 30, 1978.The Supply System has under construction a 1,250,000 kilowatt nuclear generating plant, known as Washington public Power Supply System Nuclear Project No.1, and has issued an aggregate of$355,000,000 principal amount of revenue bonds in order to pay a portion of the costs of acquiring and constructing this project.This project is located on the Hanford Reservation of ERDA and is presently scheduled to begin commercial operation in March 1981.The erection of temporary construc-tion facilities and pouring of concrete for the major structures has begun and the work to.date'is proceeding on schedule.The Supply System has begun preliminary work on a 1,240,000 kilowatt nuclear plant at a site near Satsop, in Grays Harbor County, Washington, to be known as Washington Public Power Supply System Nuclear Project No.3, which will be 70%owned by the Supply System and 30%owned by four investor-owned utilities.

The Supply System has issued$250,000,000 principal amount of revenue bonds to pay a portion of its costs of acquiring and constructing this project.The Supply System is awaiting State site certification for this project.Hearings have been held by the Washington State Thermal Power Plant Site Evaluation Council and the information presented at'those hearings is presently being reviewed by the Washington State Energy Facility Site Evaluation Council, its successor.

Upon the completion of 15 such review, the Council must make recommendations to the Governor of the State of Washington who renders the final site determination.

The Supply System has also applied for a limited work authoriza-tion and construction permit from the NRC.The project is presently scheduled for commercial operation in October, 1982.The capability of the Supply System's Nuclear Project No.1 and its ownership share of Nuclear project No.3, in addition to the capability of the project, have been acquired by Bonneville under net billing agreements and exchange agreements with respect to each such project.In response to a request of the Public Power Council, consisting of more than 100 statutory preference customers of Bonneville, the Su'pply System has also begun preliminary work on the Supply System's Nuclear Project No.4 and Nuclear Project No.5.The NRC has issued a limited work authorization for Nuclear Project No.4 which will be a duplicate of Nuclear Project No.1 to be located on the Hanford Reservation and is scheduled for commercial operation in 1982.Nuclear Project No.5 is planned to be a duplicate of Nuclear Project No.3 located at the Satsop site near Aberdeen in Grays Harbor County, Washington, and is scheduled for commercial operation in 1984.The Supply System has issued$100,000,000 of revenue bonds to finance this work.These bonds are secured by interim agreements with 93 public agencies and electric cooperatives.

Pursuant to such intcrini agreements, the Supply System is developing the necessary agreements with such agencies and cooperatives for sale of the capability of the projects to support permanent financing.

As part of these arrangements, it is expected that Nuclear Project No'.5 will be jointly owned, with the Supply System owning a 90%share and the Pacific Power 4 Light Company owning a 10%'share.For a description of the effect on the design, construction and operation of Nuclear Projects Nos.3 and 5 of the passage of an initiative petition see the caption entitled"Initiative Petition".

All projects heretofore undertaken by the Supply System, except Nuclear Projects Nos.4 and 5,.have been financed as separate systems.The obligations" issued with respect to each such project are payable solely from the revenues of that pr'oject.Th'e Project is similarly being financed as a separate system.It is anticipated that the Supply System's ownership interests in Nuclear Projects Nos.4 and 5 will be financed as one system.,I Financing Program/On the basis of the estimated cost and interest during construction of the Project and the Supply System's Nuclear Projects Nos.1 and 3, it is estimated that the Supply System will require long-term financing for these projects after the sale of the 1976 Bonds and prior to 1983 in excess of$1,700,000,000.

The Supply System has previously obtained$355,000,000 of long-term financing for Nuclear ProjectNo.1,$480,000,000 of long-term financing for the Project and$250,000,000 for Nuclear Project No.3.The Supply System's ownership interest in Nuclear Projects Nos.4 and 5, the cost of which will not be net billed to Bonneville, will require long-term financing in excess of$2,550,000,000.

Addi-tional amounts up to$125,000,000 may be required in connection with such financing to fund other activities relating to the development of fuel resources and additional projects.After the sale of the 1976 Bonds, the long-term financing contemplated by the Supply System in , the calendar year 1976 is currently expected to be$300,000,000.

The next sale of bonds by the Supply System is expected in late summer of 1976.BONNEVILLE PO>VER ADMNISTRATION The Bonneville Power Administration, a bureau of the U.S.Department of the Interior, was estab-lished by the Bonneville Project Act of August 20, 1937.Under the Bonneville Project Act, and the Federal Columbia River Transmission System Act enacted in 1974 (the"Transmission Act"), Bonneville builds transmission facilities and markets power from Federal hydroelectric projects in the Pacific Northwest.

Such projects now number 29 with an installed capacity of 12,475,000 kilowatts and a firm 16 energy capability of 8,435,000 average kilowatts.

These projects, authorized new projects and potential additions to existing projects will have the potential of an instaHed capacity of-approximately 27,943,000 kilowatts.

BonneviHe's transmission facilities include over 12,100 miles of 115 kV to 500 kV ac and 800 kV dc transmission lines.These transmission facilities, together with hydroelectric projects mentioned above and the resources acquired from non-Federal sources, comprise the Federal Columbia River Power System (the"Federal System").More than 80 percent of the 500 kV and 230 kV transmission system in the Pacific Northwest is owned by Bonneville.

In addition to Federal power, Bonneville transmits over the Federal System the major portion of the power from 11 non-Federal projects to various private and public utilities in the Pacific Northwest.

Bonneville sells electric power at wholesale to 143 utility, industrial and government customers in the States of Washington, Oregon, Idaho and Montana west of the Continental Divide, plus small adjacent portions of California, Montana, Nevada, Utah and Wyoming.Of the 143 customers, Bonneville serves either aH or the major share of the electric load of 110 public and cooperative utility customers and 15 industrial customers.

In 1975 the Federal System produced approximately 50%of the region's energy requirements.

In addition Bonneville sells surplus power under contract to 14 customers in California and Canada.Acquisition of Project Capability and Power Supply While the Federal System has-a potential installed generating capacity of more than twice the existing installed capacity, the firm energy capability of the hydro system is not expected to substantially increase.As part of the Hydro Thermal Power Program, Bonneville has purchased through net billing agreements and exchange agreements capability of the Project, as well as the capability of the Supply System's Nuclear Project No.1 and its ownership share of Nuclear Project No.3 and the City of Eugene, Oregon's 30 percent ownership share of the Trojan Project (the"net billed projects")

and may purchase 10 percent of the capability of the first unit of Portland General Electric Company's Pebble Springs nuclear generating project.Bonneville plans to blend the energy from the Project and the other net billed projects with the resources of the Federal System for sale at wholesale to its customers.

The net billed projects are expected to represent 24.7%of the estimated energy capability of the Federal System in the year ending June 30, 1986, the first year the net billed projects reach their full forecasted generating capability.

If the initiative petition described under the caption"Initiative Petition" prevents completion of Nuclear Project No.3, Bonneville will not receive 651 average megawatts of capability it expects to acquire from such project, which would represent 6.4 percent of the estimated energy capability of the Federal System in the year ending June 30, 1986.Bonneville has acquired the capability of the Hanford Project in exchange for firm power from its.system.Bonneville has entered into certain arrangements to increase the capacity of the Federal hydro-electric projects.Acting jointly with the U.S.Army Corps of Engineers as the United States Entity, pursuant to a treaty between the United States and Canada, it has entered into certain agreements under which the Federal System obtained certain rights to 15,500,000 acre-feet of hydro storage on the Columbia River and its tributaries in Canada, which, together with the Libby Project authorized by treaty, has enabled the Federal Government and Northwest utilities to install 2.8 million kW of additional capacity at hydroelectric projects on the main stem of the.Columbia River downstream from such storage.BonneviHe's Authority Under the Bonneville Project Act and the Transmission Act Bonneville markets at wholesale the electric energy from Federal hydroelectric projects and the net billed projects, constructs, operates, and maintains transmission lines and substations, interconnects the Federal hydroelectric projects and non-Federally owned power systems and projects, and is directed to set rates to recover its costs of producing and transmitting'lectric energy.Under the provisions of the Transmission Act, BonneviHe's receipts from the sale and transmission of electric power are deposited in the Bonneville Power Administration Fund (" Fund"), established in 17

, the Federal'Treasury.

'Such receipts are to be used to pay Bonneville's expenses, including the cost of power purchased from the Project and other net billed projects, operation and maintenance of'the Federal System, and repayment to the Federal Treasury for the investment in multipurpose Federal projects.In addition, the Transmission Act provides that Bonneville may sell up to$1.25 billion in revenue bonds to the Treasury, at an interest rate comparable to the rates prevailing in the market for similar bonds, for the purpose of providing funds for construction of transmission facilities.

Although Bonneville is still required to submit an annual budget to Congress for review, Bonneville's expenditures from its revenues in the-Fund do not require formal approval by Congress, except that Congress may take action to impose specific.directives or limitations on such expenditures.

Bonneville's purchase of the Project's capability and capability from other net billed projects was authorized and approved by Congress in the Public Works Apropriations Acts of 1970 and 1971.Bonneville Contracts Each of the Participants is a preference customer of Bonneville and has, with other public bodies and cooperatives, a statutory preference and priority upon power from the Federal System.Each Participant is a:party to at least one power sales contract requiring payment to Bonneville for the purchase or ex;change of power.Such contracts, which expire between 1983 and 1994, are usually for a term of 20 years, the maximum permitted by law, and generally provide for the sale and delivery of firm power to the Participant in the amount of its requirements over and above the generating resources, if any, that the Participant has available to serve its own load.Bonneville's obligation to meet a preference cus-tomer's requirements is effective for the term of the contract, unless Bonneville gives the preference customer-at least 7 years'prior notice of insufficiency of.supply.Bonneville recently announced that it expects to give preference customers notice that the date of insufficiency will be July 1, 1983.In the past Bonneville has executed new preference customer power sales contracts prior to the termination of existing preference customer power sales contracts.

However, Bonneville does not expect to execute new preference customer power sales contracts until after it has completed an environmental impact statement entitled"The Role of BPA in the Pacific Northwest Power Supply System, Including Its Participation in the Hydro-Thermal Power Program" (Role EIS)and has given consideration to the material presented in the final Role EIS and its other legal obligations.

In addition, from time to time,'Bonneville receives applications for purchase of power from agencies which may also have a statutory preference and priority on power from the Federal System.These applications for power and resultant power sales contracts, and the terms of preference customers'uture power sales contracts, could acct future allocations of power from the Federal System.If Bonneville does not execute new power sales contracts with the Participants or if a Participant's new power sales contract provides for a limited or reduced level of power sales, a reduction in the net billing credits available to such Participant for use in offsetting its payments to the Supply System may occur.Any deficits in net billing credits would be satisfied in the manner described under the caption"Security for the Bonds".For further information with respect to the Role EIS and litigation relating thereto see the caption"Power Supply in the Pacific Northwest and the Hydro Thermal Power Program".Bonneville delivers power to 15 industrial customers, most of which use large amounts of electric power to produce metals or chemicals, pursuant to power sales contracts for 20-year terms.Such power sales contracts provide for the delivery of power subject to greater interruption than the firm power furnished preference customers.

These contracts terminate between 1984 and 1991.Bonneville had expected to sign new power sales contracts with its industrial customers to provide continued sales of power until December 31, 1994.However, as indicated above, Bonneville expects to notify its preference customers that its resources will be insufficient to meet such customers'equirements for firm energy after July'1, 1983.Bonneville anticipates that the preference rights of public agencies and cooperative utilities to'its power resources will preclude execution of such new power sales contracts as previously expected.In addition to sales to preference customers and industries, Bonneville delivers smaller amounts of power to"investor-owned utilities and federal and state agencies in the Pacific Northwest, and any sur-18 pluses to entities outside the Northwest.

A large portion of this surplus power is sold to entities in California.

SonnevHIe Revenues and Expenses Bonneville's revenues for the year ended June 30, 1975 totaled more than$234 million, about$52 million, or almost 29 percent, more than the preceding year's revenues.There were two principal factors in the increase: (1)the average 27 percent wholesale power rate increase which became effective Decem-ber 20, 1974, added about$30 million to revenues;and (2)revenues from the sale and delivery of surplus power to California entities totaled about$31 lnillion, as compared with about$21 million in the preceding year.The following table sets forth a summary of Bonneville revenues and expenses for the following years ending June 30: 1973 1973 1974 1975 REvENuns: (1)Preference Customers..........

Industrial Customers..........

~Other Power Revenues(4)

.......Transmission Service and Other Revenues Total(6)...............

$64,078,043

$69,391,748

$74,669,546

$83,934,0$9$99,126,685(2) 4$,418,745 45,733,067 44,014,159 46,161,233 62,708,155(3) 30,523,772 42,420,037 40,230,234 32,078,941 51,081,347(S) 12,707,709 15,405,121 15,579,527 20,779,097 21,501,446 152,728,269 172,949,973 174,493,466 182,053,330 234,417,633 EZPENSES: (1)Operation and Maintenance Ex-penses(7).....................

28,331,756 Cost of Purchase and Exchange Power 12,812,811 Total................

41,144,567 Balance of Bonneville Revenues(9)

...$111,583,702 38,513,323 46,669,527 31,328,206 33,927,636 32,794,242 48,254,905 19,347,378(8) 66,016,905

$168,400,728

..45,243,408 64,122,448 82,182,$41 83,756,731

$108,827,525

$92,310,925

$98,296,599 (1)Revenues and expenses summarized from financial data audited by the General Accounting Offic and certified by the Comptroller General.(2)Revenues refiect a wholesale power rate increase.of approximately 27%effective December 20, 1974.(3)Increase due to operation of aluminum potlines previously shut down, increased availability of interruptible power, and a wholesale power rate increase of approximately 27%effective December 20, 1974.(4)Includes revenues from privately owned utilities and Federal agencies.(5)Increase primarily due to high availability of power in excess of the needs of preference customers and a wholesale power rate increase of approximately 27%%uo effective December 20, 1974.(6)Does not include approximately

$3,000,000 annual revenues received from the Bureau of Reclama-tion and the U.S.Corps of Engineers used to repay costs of the generating projects.(7)Such expenses represent only those of the transmission system.(8)Refiects reduced costs to the Federal System for the Hanford Project and expiration of the agreement to purchase capacity of the coal-fired Centralia thermal project.(9)Balance of revenues were applied as payments to the Treasury for Corps of Engineers and Bureau of Reclamation operation and maintenance costs, annual interest expenses of the Federal System and amortization of the power facilities financed from appropriated funds.Bonneville's projected revenues through September 30, 1995 are shown in Exhibit VI.The table in Exhibit VI reflects two projected rate increases before 1984 which are'estimated to increase Bonneville's revenues by 68 percent above revenues forecast at current rates.Subsequent rate increases to recover additional cost escalation not indicated in Exhibit VI would be made in amounts sufficient to satisfy 19 Bonneville's revenue requirements.

Exhibit VI includes the estimates of the annual costs.of the Project and the Supply System's Nuclear Project No.1 and its ownership share of Nuclear Project No.3 prepared by the Supply System and shown on Exhibit V.Current projections, based upon the rate increases referred to above, indicate that in the year ending September 30, 1984 Bonneville's revenue from the participants in the net billed projects, which is subject to net billing will be$263 million.Current estimates indicate that the annual cost in such year of Bonneville's share of the output of such net billed projects will be$362 million.Any, difference between the portion of such participants'ayments to Bonneville subject to net billing and the annual costs for such participants'hares of such projects will be paid either (i)through assignments of portions of such participants'hares to other Bonneville customers, thereby utilizing their net billing capability or (ii)by Bonneville, in cash, from the Bonneville Power Administration Fund.The total amount Bonneville estimates will be available in the year ending September 30, 1984 for net billing or cash payment is$743,700,000.

In accordance with the Transmission Act, any payments from the Fund for annual costs of such projects are treated as operation and maintenance expenses of Bonneville and take priority over Bonneville's obligation to pay amortization and interest on the investment in the Federal System and related operation and maintenance expenses of the Corps of Engineers and the Bureau of Reclamation.

The total investment in Federal hydroelectric projects and the Bonneville transmission system previously financed with appropriated-funds was*$6.7 billion as of June 30, 1975, of which 74 percent, or$5 billion, was allocated to electric power.The entire cost of Bonneville's transmission system is included in this sum.The investment in multipurpose Corps of Engineers and Bureau of Reclamation projects is divided among the purposes served by the projects, which include food control,'navigation, irrigation, municipal and industrial water supply, water, quality, recreation, and the enhancement and propagation of fish and wildlife, in addition to the generation of power.a g Bonneville Rates Bonneville's rates are developed by Bonneville, submitted to the Department of the Interior for review and approval, and then submitted to the Federal Power Commission for confirmation and approval.The rates must be designed to be consistent with sound business principles and.recover the cost to Bonneville of producing and transmitting electrical energy to customers, which includes the repay-ment of capital investment in the Federal System with interest within a reasonable period of years.On December 20, 1974 Bonneville instituted wholesale power rate increases averaging approximately 27 percent to be effective for the 5-year period ending December 20, 1979.The existing power sales contracts contain provisions for a rate review once each 5 years.Bonneville has proposed that this rate review period be shortened to provide for a rate review on December 20, 1979, and annual rate review periods beginning July 1, 1981.Bonneville has stated that its current projection indicates that a wholesale power rate increase which would increase revenues by approximately 40 percent will be necessary on December 20, 1979.In addition, Bonneville estimates that a wholesale power rate increase which would increase revenues by approximately 20 percent will be necessary on July 1, 1981.Such rate increases are due in substantial part to the added costs of thermal power acquired from net billed projects based on annual costs estimated in 1975.Escalation of the cost of the net billed projects and other Bonneville expenses are expected to increase future Bonneville rate levels over current estimates.

In addition to the wholesale,.power rate increases, Bonneville expects to file revised transmission rates with the Federal Power Commission in the near future in an amount which would increase transmission and miscellaneous revenues by about 22%.In 1975 the average cost per kWh paid to Bonneville by its preference utiilty customers for firm power was.368 cents.Bonneville has calculated that the average cost per kWh in 1975 paid by all customers of these utilities was.975 cents, with residential customers paying 1.117 cents per kWh.The'average Bonneville rate per kWh for Bonneville preference customers,.after giving effect to the foregoing rate increases, is estimated to be between.6 and.7 cents per kWh.This rate is substantially less than comparable wholesale power costs in other areas of the nation and the average retail rates of these customers are expected to remain weH below average rates paid in other areas of the nation.20 Bonneville Loads and Resources Bonneville annually submits to the Pacific Northwest Utilities Conference Committee ("PNUCC")its estimated requirements and resources.

These loads and resources are then combined with the loads and resources of other utilities'to develop long-range planning studies.The most recent analysis by the PNUCC Loads and Resources Subcommittee of the West Group Area power loads and resources entitled"Long Range Projection of Power Loads and Resources for Thermal Planning" (" Blue Book"), dated April 16, 1976, was made for the years 1976-1977 through 1995-1996.

This analysis was pre-pared using the"Milestone" concept for determining the dates on which new thermal generating plants could reasonably be expected to be in continuous operation.

The"Milestone" concept establishes standard development schedules for each type of thermal plant and identifies, as milestones, certain major events in the development and construction of the plants.These standard"Milestone" plant development schedules are applied to each proposed thermal plant for the purpose of providing a con-sistent basis for planning the addition of thermal resources.

Each plant sponsor will continue to maintain its own construction schedule, which may not'be the same as the Mlestone schedule used for area resource planning.The area studies are used to determine area'esource needs, including reserve margins.The estimated resources of the Federal System are adjusted to refiect the reserve requirements, which is the basis for calculating a surplus or deficit.An analysis of the most recent forecast of the Federal System's loads and resources is shown in the following tables: Year Ending June 30 1977...1978...1979...1980...1981...1982...1983...1984...1985...1986...1987...Federal System Loads and Resources(1)

Peak CapabHlty-KHowatts (000)(2)EstImated Estimated~Rc u(remeum~Resources(3 4 SUfUlllS 5)14,779 14,060 (719)16,036 14,902 (1134)17,171 17,414 243 17,653 18,825 1172 18,466 18,717 251 18,576 18,542 (34)19,202 19,557 355~....17,983 20,332 2349 18,720 20,368 1648 18,571 20,246'675 19,221 20,303 1082 Percent~Sur lus 5 (4.87)(7.07)1.42 6.64 1.36 (0.18)1.85 13.06 8.80 9,02 5.63 Year Ending Junc 30 1977...1978...1979...1980...1981...1982...1983...1984(7).1985(7).1986(7).1987(7).(1)From the Blue Pcrccnt Srmlus 5)(6.66)(13.06)(17.49)(14.14)(17.25)(17.55)(14.77)(9.73)(10.68)(12.38)(13.56)(Footnotes continued on following page)Energy CapabHlty-Average KHowatts (000)(2)Estimated Estimated SUM(5es(5) 9,154 8,544 (610)9,633 8,375 (1258)10,128 8,357 (1771)10,369 8,903 (1466)11,035 9,132 (1903)11,019 9,085 (1934)11,099 ,-9,460, (1639)11,231 10,138 (1093)11,576.10,340 (1236)11,750 10,295 (1455)11,889 10,277 (1612)Book dated April 16, 1976.

(2)Computed under PNUCC planning guidelines..

(3)After deducting reserves under PNUCC planning guidelines.

(4)Includes the capability Bonneville expects to acquire from'the Supply System's ownership share of the capability of Nuclear Project No.3, whose construction may be precluded if the nuclear initiative in Washington, described under the caption"Initiative Petition" is enacted.(5)Parentheses denote negative values.(6)'Does not include a reduction in energy capability of 165 average megawatts in 1979 and 42 average megawatts in 1980 caused by the delay in the commercial operation of the project from September 1979, as specified in the Blue Book, to December 1979.(7)If Bonneville gives preference customers notice that after June 30, 1983 it will have insufficient firm resources'to meet such customers'equirements, and Bonneville's obligation to such customers' requirements is*limited to an allocation after that date, the Federal System's deficits of energy capability for the subsequent years ending June 30, will be reduced.-Net Federal System resources noted on the preceding table reflect the installation schedules for hydro projects as determined by the constructing agencies-the Bureau of Reclamation and the Corps of Engineers-and milestone schedules for the capability of net billed projects.Total estimated require-ments consist of direct service loads, exports, and contractual obligations to public agencies and private utilities.

The most recent PNUCC forecast, using estimates jointly developed by Bonneville and its preference customers in the Fall of 1975, projects an average compounded energy load growth rate for Bonneville's preference customers of 5.1%for the years ending June 30, 1977 through 1987.This compares to a historical rate for such customers of 4.94%for the ten-year period between 1965 and 1975.Bonneville's preference customers'nergy load growth rate was 10.5%in the year ended June 30, 1973, 1.3%in the year ended June 30, 1974, and 1.8%in the year ended June 30;1975.The actual energy con-sumption for these customers for the 8 months beginning July 1, 1975 was 5.7%greater than consump-tion in the comparable period of 1974-1975.

The decreased rate of energy load growth in the years ended June 30, 1974 and 1975 can be attributed to two factors.First, because of an extremely dry summer and fall in 1973, Federal reservoirs were far below normal operation levels, and Bonneville and the region's.utilities and states immediately implemented a voluntary conservation program, which has been credited with an overall reduction in the rate of regional energy load growth.Second, regional economic conditions, which refiect national economic conditions, caused a substantial reduction in the electric loads of the region's industries, primarily forest products, m'ctals and aerospace.

Bonneville studies indicate that the combined impact of conservation and adverse regional economic conditions resulted in estimated reduction of current regional energy loads by 7%.POWER SUPPLY IN'ME'PACIFIC NORTHWEST AND THE HYDRO THERMAL POWER PROGRAM The power supply facilities in the Pacific Northwest have been operated with a high degree of cooperation for many years.The Northwest Power Pool, a voluntary organization of public, private and Federal power suppliers, was established in 1942 to coordinate power operations in the Pacific Northwest and is still functioning on an effective basis.As the complexities of power supply increased, other groups were formed.The Pacific Northwest Utilities Conference Committee, consisting of essentiaHy all power generating interests in the Pacific North-west, was formed in the late 1940's to extend the cooperation established in the Northwest Power Pool into other areas, including the advanced planning of power resources.

The Public Power Council, representing over 100 publicly owned utilities and cooperatives, was formed in the late 1960's to further the coordina-tion of the" public power groups in their efforts to improve power supply in the region.The Joint Power Planning Council (an ad hoc group of 104 publicly owned utilities and cooperatives, four, major privately 22 owned utilities and Bonneville) was established in the late 1960's to provide for further cooperation throughout the entire electrical utility industry.The functions of the Joint Power-Planning Council are now being carried out by the PNUCC.'ntil the late 1960's nearly all power supply in the Pacific Northwest was obtained from hydro electric resources of the area.Most of the hydro electric resources remaining to be developed by the late 1960's were essentially peak resources with limited base load energy capability.

Base load thermal power projects are required to supply the region's increasing energy needs.In October 1968.the Joint Power Planning Council announced accord on a Ten Year Hydro Thermal Power Program (now referred to as Phase 1 of the Hydro Thermal Power Program)to con-struct hydro and thermal generation required to meet the Pacific Northwest Region's power requirements and to guide the region in its transition from an all-hydro electric power base to a mixed base of hydro and thermal generating resources.

The large thermal generating plants included in Phase 1 of the Hydro Thermal Power Program, including the Project and the Supply System's Nuclear Projects Nos.1 and 3, are tabulated below.Project Principal Sponsor Pacific Power tl: Light Co.and The Washington Water Power Company Centralia Location Centralia, Wa.Rated Milestone Capacity Operation Type (Mlv)Date(1)Coal-fired 1,400 In operation.

Portland General Electric Company..........

Trojan St.Helens, Ore.'uclear-1,130 In operation.

Pacific Power&: Light Co.Jim Bridger Rock Springs, Wy.Coal-fired 500 In operation.

No.2~~Jim Bridger'ock Spiings, Wy.Coal-fired 500 Oct.1976 No.3'Washington Public Power WPPSS Supply System......No.2 Washington Public Power WPPSS Supply System......No.1 Hanford, Wa.Hanford, Wa.Nuclear 1,100 Dec.1979 Nuclear 1,250 Oct.1982 Washington Public Power WPPSS Supply System......, No.3 Satsop, Wa.Nuclear 1,240 Sept.1983 Portland General Electric Pebble Springs Company..........

No.1 Arlington, Ore.Nuclear 1,260 July 1985 (1)See discussion under"Bonneville Loads and Resources" under the caption"Bonneville Power Administration".

Early in the 1970's it appeared that Phase 1 of the Hydro Thermal Power Program would have to be supplemented with additional power resources if the needs of the Pacific Northwest were to.be supplied.The cooperation that had been developed under Phase 1 of the Hydro Thermal Power Program was continued and additional generating projects were identified.

All members of the power industry in the Pacific Northwest-public, private and Federal-as well as Bonneville's direct service industrial cus-tomers, continued their efforts to coordinate plans to provide power resources best designed to achieve reliable power supply to meet power requirements of the Pacific Northwest.

Tliis cooperative planning and scheduling has been identified as Phase 2 of the Hydro Thermal Power Program.23 The present schedule of thermal generating plants identified under Phase 2 of the Hydro Thermal Power Program, including the Supply System's Nuclear Projects Nos.4 and 5, is shown below: , Principal Sponsor Montana Power Company.Montana Power Company.Pacific Power&Light Co.Montana Power Company.Portland General Electric Company 0~~~~~~~~~Montana Power Company.Project"'olstrip No.1(2)Colstrip No.2(2)Jim Bridger project No.4 Colstrip No.3(2)Carty Coal No.1 Colstrip No.4(2)Location Colstrip, Montana Colstrip, Montana Rock Springs, Wy.Colstrip, Montana Boardman, Ore.Colstrip, Montana~0 Coal-fired Coal-fired Coal-fired Rated Capacity~~\Vl 165(3)165(3)333(3)Milestone Operation Date(1)In operation.

Aug.1976 Dec.1979 Coal-fired Coal-fired 460 490(3)Sept.1980 Aug.1981 Coal-fired 490(3)Aug.1980 Puget Sound Power&Light Company.I~~~~~~~Washington Public Power Supply System Washington.Public Power Supply System Puget Sound Power&Light Company,,.

~.........

Portland General Electric Company Skagit No.1 WPPSS No.4 WPPSS No.5 Skagit No.2 Pebble Springs No.2 Hanford, Wa.Satsop, Wa.Nuclear 1,250 Oct.1983 Nuclear 1,240 Mar.1985 Sedro Woolley, Wa.Nuclear 1,288 Aug.1986 Arlington, Ore.Nuclear 1,260 July 1988 Sedro Woolley, Wa.Nuclear 1,288 Aug.1983 (1)See discussion under"Bonneville Loads and Resources" under the caption"Bonneville Power Adminis-tration".(2)Not specifically identified as a Phase 2 project.(3)CapabiTity of unit available for use in West Group area of the Pacific Northwest.

The specific contractual role of each of the major segments of the utility industry has changed in part from Phase 1 of the Hydro Thermal Power Program.Under Phase 1 Bonneville has undertaken to provide for additional power supply to its preference customers and industrial loads by acquiring the out-put of certain publicly owned generating facilities under the"net billing" concept.Under Phase 2, (i)Bonneville's preference customers are planning to supply directly their own increasing needs in excess of power supplied by Bonneville through the development of additional large-scale generating projects and (ii)Bonneville had expected to sign new power sales contracts with its industrial customers to provide continued sales of power until December 31, 1994.However, as indicated in"Bonneville Contracts" under the caption"Bonneville Power Administration", Bonneville anticipates that the prefer-ence rights of public agencies and cooperative utilities together with its expected notice of insujficiency to those preference customers will preclude execution of new industrial power sales contracts as previously expected.These developments have created uncertainties in the power supply arrangements for Bonne-ville's industrial customers at the expiration of their existing contracts.

The region's utilities, BonneviHe and the industrial customers are currently discussing possible arrangements necessary to assure the region's supply so that the needs of all can be adequately met.Bonneville's alternatives with respect to the sale of power and services to its customers after 1983 are being considered in its Role EIS, which will also review the services Bonneville may perform for preference customers in the planning, acquisition and disposition of power and energy from large scale generating plants.Bonneville expects that its Role EIS will be completed in the Fall of 1977.

Bonneville's participation in regional power planning and operations, its participation in Phase 2 of the Hydro Thermal Power Program and the adequacy of its environmental impact statements insofar as they relate to Phase 2 are the subject of two lawsuits, both in the United States District Court for the District of Oregon.On August 27, 1975, the District Court rendered a decision adverse to Bonneville in one of the lawsuits.The decision has been appealed to the U.S.Court of Appeals for the Ninth Circuit.Bonneville is preparing the Role EIS so that it will be suflicient to enable Bonneville to proceed with its program regardless of the result of the current appeal.In the opinion of Bond Counsel and Special Counsel to the Supply System and General Counsel to Bonneville, the relief prayed for in the one suit and the judgment entered in the other will not aEect the validity of, or Bonneville's obligations under, the Net Billing Agreements and the Project Agreement, Regional Power Requirements and Resources The load-resources analysis for the West Group area of the Pacific Northwest is developed by the PNUCC on an area-wide basis from composite data submitted for all regional utilities.

An analysis of the West Group area loads and resources is shown in the following tables: Year Ending June 30 LOADS AND RESOURCES(X)

West Group Area Estimated Estimated Resources~Re ntrcments~(2 3 Percent Surplus Surplus<<AD<<crtts(4 or Dellclls(4) 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Peak Capability

-Kilowatts (000)25,181 26,759 28,251 29,561 31)019 31,947 33,361 34,634 36,161 37,754 39,450 26,325 27,467 30,276 32,069 32,585 32,834 33,659 36,848 36,360 38,420 39,496 1,144 708 2,025 2,508 1,566 ,887 298 2,214 199 666 46 4.5 2.6 7.2 8.5 5.0 2.8 0.9 6.4 0.6 1.8 0.1 Estimated Estimated Resources~Rc<<ircments~2(3)3L Percent Surplus Surplus o~rDcnctts(4

~or DNclls(4 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Energy Capability

-Average Kilowatts 15,736 16,593 17,533~~~~~~~~~~~~~1 8333 1 19,250 , 19,876 20,540 21,331 22,251 23,148 24,132 25 (000)14,971 15,158 15,236 15,955 16,733 17,284 17,844 20,068 21;136 22,507 23,511 (765)(1,435)(2,297)(2,376)(2,517)(2,592)(2,696)(1,263)(1,115)(641')" (621)(Footttotes on (4.9)(8.6)(13.1)(13.0)(13.1)(13.0)(13.1)(5.9)(5.0)(2.8)(2.6)folloroing page.g (1)From the Blue Book dated April 16, 1976.(2)After deducting reserves under" PNUCC planning guidelines.

Reserves in each year include allowance for load growth reserves equal to one-half of the area load growth for utility type loads during that year.Assumes critical water conditions.

Substantial secondary energy is expected to be available under most stream How conditions.

Resources forecasted under these guidelines include the Supply System's Nuclear Projects Nos.3, 4 and 5, Portland General Electric Company's Pebble Springs No.1, Montana Power Company's Colstrip Nos.3 and 4, and Puget Sound Power A Light Company's Skagit Nuclear Units Nos.1 and 2, which are not yet licensed for construction.

(3)Includes peak and energy capability from Supply System's Nuclear Projects No.3 and No.5, Skagit Nuclear Units Nos.1 and 2, and Pebble Springs No.1, whose construction may be precluded if the initiative petition in Washington described under the caption"Initiative Petition" and the similar initiative petition in Oregon are enacted.If such construction is precluded, resources and surplus would be reduced or deficits increased by the following amounts: Year Ending Peak Energy Jnne 30~kVV 000~vkv.klV(000 1984..............

2,528 1,328 1985..............

2,528 2,097 1986..............

5,028 3,458 1987..............',316 4,479 (4)After supplying all area interruptible loads (including Bonneville's industrial interruptible loads)which range from 1,054 to 1,257 megawatts on peak and 1,019 to 1,224 average megawatts of energy.Parentheses denote negative values.(5)Does not include a reduction in energy capability of 165 average megawatts in 1979 and 42 average megawatts in 1980 caused by the delay in the commercial operation date of the Project from September 1979, as specified in the Blue Book, to December 1979.THE PARTICIPANTS Of the 110 preference customers of Bonneville, 94 are Participants in the Project, of which 27 are municipalities, 22 are districts and'45 are cooperatives.

The municipalities have contracted to purchase approximately 22.6%of the Project capability, the districts have contracted to purchase approximately 56.9%and the cooperatives the remaining 20.5%.I The net billing arrangements between the Supply System, the Participants and Bonneville for the Project and the other net billed projects will increase the amount of capacity and energy available to the Federal System by the amount of their output.This, in turn, will make more capacity and energy available.

from Bonneville to aH of its customers, including the Participants.

Each of the Participants is a s'tatutory preference customer-of Bonneville and, as such, has a priority over non-preference cus-tomers on power sold by Bonneville from the Federal System.In 1975, the Participants served approximately 910,379 power customers with total sales of energy of approximately 29,383 billion kilowatt-hours.

Operating revenues of the Participants totaled approx-imately$298,042,148.

Of that amount, districts'evenues were$134,342,195, municipals'evenues were$104,124,966 and the cooperatives'evenues were$59;574,987." The centerfoldvmap shows the areas served by the Participants.

, Exhibit I attached shows the number of customers and gross revenues in 1975 for each Participant and indicates its Participant's share of the Project capability.

Table I attached to Exhibit II hereto is a summary of financial and statistical data by class of utility.26.

THE NET BILLING AGREEMENTS Each of the Participants has executed a Net Billing Agreement with the Supply System and Bonne-ville.Many of the provisions of the Net Billing Agreement have been summarized under the caption"Security for the Bonds" above.A summary of certain additional provisions of the Net Billing Agree-ments follows.The full text of the form of Agreements may be obtained from the Supply System.The capitalization of any word or words which is not conventionally capitalized (e.g.Project, Participants) indicates that such words are defined in the Net Billing Agreements.(The same practice is followed in the summaries of the Project Agreement and the Resolution and Supplemental Resolution which follow.)Term Each Net Billing Agreement became effective upon execution and delivery and will terminate on the date that the Project Agreement terminates except as provided in Section 10(c)(see the sub-caption"Termination")and as to accrued obligations and liabilities.

Although the Net Billing Agreements may be terminated prior to the maturity of any Project Bonds, the obligation of each of the Participants thereunder to pay its proportionate share of debt service on any Project Bonds shall continue until the Project Bonds have been retired, and Bonneville will continue to be obligated to offset or credit these payments against payments pursuant to the Participant's Bonneville Contracts.

Ownership and Operation The Supply System will use its best efforts to arrange for the financing, design, construction, operation and maintenance of the Project.Sale, Purchase and Assignment The Supply System sells, and each Participant purchases, its Participant's Share of the Project Capability and each Participant in turn assigns its Participant's Share of such Capability to Bonneville.

The amount of'each Participant's Share of Project Capability is shown in Exhibit I attached hereto.The provisions of the Net Billing Agreements with respect to payments are summarized under the caption"Security for the Bonds" above.If Bonneville is unable to satisfy its obligation to a Participant by net billing, assignment or cash payment and determines that this will continue for a significant period, the affected Participant may direct that all or a portion of the energy associated with its Participant's Share be denvered by the Supply System for the Participant's account at a specified point of delivery, either for the expected period of such inability or the remainder of the term of the Net Billing Agreement, whichever is specified by the Participant when it elects to have energy delivered to it.The amount of energy delivered will be limited to the amount of the Participant's Share for which payment by Bonneville cannot be made.The Participant's obligation to assign its Participant's Share to Bonneville and Bonneville's obligation to make payments to the Participant will then be appropriately modified.Termination If the Project is ended pursuant to Section 15 of the Project Agreement, as described below, Supply System will give notice of termination of each Net Billing Agreement effective upon the date of termina-tion of the Project Agreement.

Supply System shall then terminate all activities relating to construction and operation of the Project and shall undertake the salvage and disposition or sale of the Project as provided in the Project Agreement.

After such termination, the Supply System will make monthly accounting statements to Bonneville and each Participant of all costs associated with such termination.

27 The monthly accounting statements will credit against such costs all amounts received by the Supply.System from the disposition of Project assets., Such monthly accounting statements will continue until.all project Bonds are paid or funds are set aside for such payment.If the monthly accounting statements shrew that such costs exceed sucli credits, the Participant will pay its portion of such excess costs to the Supply System.The payments will" be made at times and in amounts sufficient to discharge on a current basis the Participant's Share of the amount which the Supply System is required to pay into the various'funds provided'in the Project Bond Resolution for'ebt service and all other purposes.Modification of Agreement The Net Billing Agreements shall not be amended, modified or otherwise changed by agreement of the parties in any manner that will impair or adversely aKect the security aKorded by its provisions for the payment of the principal, interest and premium, if any, on the Project Bonds.Provisions Required by Statute or Executive Order..The Net Billing Agreements contain certain provisions required by Statute or Executive Order and ,relating.to contract work hours and'safety standards, convict labor, equal opportunity employment and the interest of a member of Congress.Under the provisions of Executive Order 11246 of September 24, 1965 and the Rules and Regulations and relevant Orders of the Secretary of Labor thereunder, the'Supply System has'been granted a limited exemption from the provisions permitting cancellation, ter-mination, and suspension of the Net Billing Agreements in the event of non-compliance with the Equal Opportunity Clause contained in the Net Billing Agreements, by the Director, OSce of Federal Contract Compliance, U.S.Department of Labor.~t, eTHE PROJECT AGREEMENT The Supply System and Bonneville have entered into the Project Agreement.

'hat Agreement,:airiong other things,'rovides'tandards for the design, licensing, financing, construction, fueling, operation arid maintenance of the Project, and for the'making of any replacements, repairs or capital additions.thereto.'

summary'of some of the provisions of the Project Agreement follows.A copy of the Project Agreement may be obtained from the Supply System., Tcrnl The Agreement became effective upon its execution and delivery'and will terminate when the Project'is terminated as provided'in Section 1$of the Agreement.'I i~'J , Section 15 provides that the Project shall terminate and the Supply System shall cause the Project ,to be salvaged, discontinued, decolnmissioned and disposed of or sold in whole or in part to the highest ,bidder, or bidders, or disposed of in such other manner as the parties may,agree, when: (a)Supply System determines it is unable to construct, operate, or proceed as owner of the Project due to licensing, financing, or operating'conditions or other causes which are beyond its control.(b)The parties determine the.Project is not capable of producing energy consistent with Prudent Utility Practice or, if the parties disagree, the Proje'ct Consultant so determines, or (c)Bonneville directs the end of Project pursuant to the provisions of Section 11(a), which provide that if the estimated cost of a replacement or repair or capital a'ddition required by a gov-':.ernmental coagency exceeds 20 percent of the then depreciated value of the Project, Bonneville may": direct that'the Supply'System end the Project..'

~*'28 Design, Licensing and Construction of the Project The Supply System will among other things (i)perform its duties and exercise its rights in accordance with Prudent Utility Practice;(ii)use its best efforts to obtain aH licenses, permits and other rights and regulatory approvals necessary for the ownership, construction, and operation of the Project;(iii)construct the Project in accordance with Prudent Utility Practice;and (iv)use its best efforts to schedule the Date of Commercial Operation as near as.possible to September 1, 1977..Bonneville will use its best efforts to construct, operate and maintain the necessary facilities to interconnect the Project with the Government's transmission grid so as to be ready to receive the Project's generation on or before the initial test and operation of the Project.In the Project Agreement"Prudent Utility Practice" at,a particular time means any of the practices, methods and acts engaged in or approved by a significant proportion of the electrical utility industry prior to such time, or any of the practices, methods, and acts which, in the exercise of reasonable judg-ment in light of the facts known at the time the decision was made, could have been expected to accom-plish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition.

In evaluating whether any act or proposal conforms to Prudent Utility Practice, Bonneville, the Supply System and any Project Consultant shall take into account the objective to integrate the entire Project Capability with the hydroelectric resources of the Federal Columbia River Power System and to achieve optimum utilization of the resources of that system taken as-a whole, and to achieve efficient and economical operation of that system.Financing The Supply System will use its best efforts to issue and sell Project Bonds to finance the cost of-the Project and the completion thereof, as such costs are defined in the Project Bond Resolution, and to finance the cost of any capital additions, renewals, repairs, replacements or modifications to the Project;provided, however, that such Project Bonds may then be legally issued and sold.All Project Bond Resolutions are subject to approval by Bonneville, and Bonneville has approved the Resolution and the Supplemental Resolution.

Budgets Construction Budgets and Annual Budgets will be prepared annually.The Construction Budgets and the Annual Budgets and any revision thereof are to be submitted to Bonneville and are subject to its approval.In the absence of any objection by Bonneville a budget will, become effective within 30 days, in the case of the Construction and Annual Budgets,,and within 7 days in the case of any revision thereof.A monthly Construction Budget rcport shall be-prepared by the Supply System and'file with Bonne-ville showing by major plant accounts or contracts, the cumulative am'ounts committed and expended to the date of each such report.I Costs incurred by the Supply System in an emergency or to protect the safety of the Project or the public shall be added to the Annual Budget as incurred.All accounts shall be kept so as to permit conversion to the system of accounts prescribed for electric utilities by the Federal Power Commission.

Operation and Maintenance The Supply System will operate and maintain the Project in.accordance with Prudent Utility'Prac-tice and the requirements of government agencies having jurisdiction.

2'9:

Bonds for Replacements, Repairs and Capital Additions If in any Contract Year the amounts in the Annual Budget for renewals, repairs and replacements and for capital additions and betterments necessary to achieve design capability or required by govern-mental agencies (" Amounts for Extraordinary Costs"), whether or not such amounts are costs of operation or costs of construction, exceed the amount of reserves, if any, maintained for such purpose pursuant to the Project Bond Resolution plus the proceeds of insurance, if any, available by reason of loss or damage to the Project, by the lesser of: (1)$3,000,000 or (2)an amount by which the amount of BonneviHe's estimate of the total of the net billing credits, available in such Contract Year to the Participants and the amounts of such reserves and insurance proceeds, if any, exceeds the Annual Budget for such Contract Year exclusive of Amounts for Extraordinary Costs, Supply System will, in good faith, use its best etforts to issue and sell Project Bonds to pay such excess.Bonneville's Approval and Project Consultant If any proposal or item subject to approval by Bonneville is disapproved by Bonneville and an alternative proposal or item is suggested by Bonneville, Supply System will either adopt such suggestion or, within seven days after receipt of such disapproval, appoint a Project Consultant acceptable to Bonneville to review the proposal or item.Proposals or items found by the Project Consultant to be consistent with Prudent Utility Practice shall become immediately effective.

Proposals or items found by the Project Consultant to be inconsistent with Prudent Utility Practice shaH be modified to conform to the recommendation of the Project Consultant or as the parties otherwise agree and shall become etfcctive as and when modified.If any proposal or item referred to the Project Consultant has not been resolved and will atfcct the continuous operation of the Project, Supply System shall continue to operate the Project and may proceed with the item as proposed by Supply System, or as proposed by Bonneville,.or.as, modified by.mutual agreement of Supply System and Bonneville.

If the Supply System proceeds with the item as proposed by it, and the item is determined by the Project Consultant to be inconsistent with Prudent Utility Practice, Supply System shall bear any net increase in the cost of construction or operation of the Project resulting from such item without charge to the Project to the extent such item is found by the Project Consultant to be inconsistent with Prudent Utility Practice.Provisions Required by Statute or Executive Order The Project Agreement contains certain provisions required by Statute or Executive Order.Under the provisions of Executive Order 11246 of September 24, 1965 and the Rules and Regulations and relevant Orders of the Secretary of Labor thereunder, the Supply System has been granted a limited exemption from the provisions permitting cancellation, termination, and suspension of..the Project Agreement in the event of non-compliance with the Equal Opportunity Clause contained in said Agree-ment by the Director, Office of Federal Contract Compliance, U.S.Department of Labor.DESCIUPTION OF 1976 BONDS AND CERTAIN PROVISIONS OF THE RESOLUTION AND SUPPLEMENTAL RESOLUTION'he following summary is a brief outline of certain provisions contained in the Resolution and the Supplemental Resolution and is not to be considered as a full statement thereof.This summary is qualified by reference to and is subject to the Resolution and the Supplemental Resolution, copies of which may be examined at the principal offices of the Supply System, the Bond Fund Trustee and the Paying Agents for the 1976 Bonds.30 The Bonds and the 1976 Bonds The Resolution creates and establishes an issue of Bonds of the Supply System which'ay be issued from time to time to pay the Cost of Construction of the Project and to establish reserves as therein provided.The 1976 Bonds are part of such issue.The 1976 Bonds will be dated June 1, 1976 and will be issued in coupon form in the denomination of$5,000, registrable as to principal only, and in fully registered form in denominations of$5,000 and any multiples thereof.Principal and semi-annual interest (January 1 and July 1)on coupon 1976 Bonds and principal on registered 1976 Bonds will be payable at the option of the holder at Peoples National Bank of Washington in Seattle, Washington, American National Bank and Trust Company of Chicago in Chicago, Hlinois, and Manufacturers Hanover Trust Company in New York, New York.Payment of interest on fully registered 1976 Bonds will be made by Continental Illinois National Bank and Trust Company of Chicago, Chicago, Illinois, which has been appointed the Bond Fund Trustee.Coupon 1976 Bonds and fully registered 1976 Bonds are interchangeable at the office of the Bond Fund Trustee.The 1976 Bonds will mature in the years and amounts and bear interest at the rates per annum shown on the cover page hereof.The 1976 Bonds maturing on July 1, 2006 and July 1, 2012 will have the benefit of a Bond Retirement Account to operate at the times and in the amounts set forth below, (Res.Secs.3.1, 4.5, 4.7, 6.2;Supp.Res.Sec.2).Bedemptiont The 1976 Bonds will be subject to redemption prior to maturity at the option of the Supply System on and after July 1, 1986, in whole at any time, or in part on any interest payment date in inverse order of their maturities and by lot within a maturity, at the respective redemption prices (expressed as percentages of the principal amount)set forth below, together with accrued interest to the date fixed for redemption:

Period During Xvhlch Rcdccmcd Rcd emption (Both Dates Inclusive)

Prices July 1, 1986 tu June 30, 1990...............

1039e July 1, 1990 to June 30, 1995..102 July 1, 1995 to June 30, 2000.....,..~.......101 July 1, 2000 and thereafter

........100 The Supply System further reserves the right to redeem prior to maturity (a)the 1976 Bonds maturing on July 1, 2006, and on July 1, 2012, in part on any interest payment date on and after January 1, 1999 and on and after January 1, 2007, respectively, upon payment of the principal amount thereof from sinking fund installments as described below and (b)the 1976 Bonds maturing on July 1, 2012, in part on any interest payment date on and after July 1, 1983 upon payment of 101%of the principal amount thereof from excess construction fund proceeds, in each case together with accrued interest to the date fixed for redemption.

e The Supply System also reserves the right to redeem the 1976 Bonds at any time prior to maturity, in whole at any time, or in part on any interest date in inverse order of their maturities and by lot within a maturity, from proceeds received from the sale or disposition of property or in the event the Project is ter'minated as provided in the Project Agreement, upon payment of the principal amount thereof together with accrued interest to the date fixe for redemption.

V Notice of redemption of 1976 Bonds is to be given by publication of a notice at least once on any business day of the week in daily financial papers, or in daily newspapers of general circulation printed in the English language, published in each of the cities of Seattle, Washington, Chicago, Illinois, and New York, New York, the date of publication in each case to be not less than 30 nor more than 60 days prior to the date fixed for redemption.

The Bond Fund Trustee may approve substitute publication if a required publication cannot be made.Notice of redemption of 1976 Bonds is also to be mailed not less than 25 days nor more than 60 days before the redemption date to the registered owners of 1976 Bonds 31 h which are to be redeemed, but such mailing shall not be a condition precedent to redemption and failure to mail or receive any such notice shall not affect the validity of the redemption proceedings.(Res.Secs.5.2, 5.3;Supp.Res.Sec.3).Sinking Fund Installments:

The 1976 Bonds due July 1, 2006, are to be retired by mandatory sinking fund installments accumulated in the Bond Retirement Account in the Bond Fund in amounts sufficient to redeem on July 1 of each year, at the principal amount thereof, the principal amount of such Bonds specified for each of the years shown below: Year Amount 1999$2,780,000 2000 4,680,000 2001 4,970,000 2002 5,280,000 2003 5,605,000 2004..............................

5,955,000 2005.......................

6,320,000 2006.........................

6,710,000 The 1976 Bonds due July 1, 2012, are to be retired by mandatory sinking fund installments accumu-lated in the Bond.Retirement Account in the Bond Fund in amounts sufficient to redeem on July 1 of each year, at the principal amount thereof, the principal amount of such Bonds specified for each of the years shown below: Year Amount 2007$7,120,000 2008.........................

7,560,000 2009 8,025,000 2010..............................

8,520,000 2011.........................

9,040,000 2012"'.9,595,000 The sinking fund installments for the 1976 Bonds due July 1, 2006,-and due July 1, 2012, may be applied to the redemption of such Bonds on July 1 of each of the above years or on the immediately preceding January 1.(Supp.Res.Sec.2).Subsequent Series of Bonds The Supply System covenants to issue additional series of Bonds to the extent required to pay the Cost of Construction of the Project and to establish the reserves required by the Resolution to the extent such reserves are not funded, from other sources.Such Bonds may be issued upon compliance with the following principal conditions:

(1)There shall have been delivered to the Supply System a certificate of the Bond Fund Trustee that no default exists in the payment of principal of and interest on any outstanding Bond, and there has been delivered to the Bond Fund Trustee a certificat of the Secretary of the Board of Directors of the Supply System that the Net Billing Agreements and Project Agreement are in full force and effect and have not been amended in any manner adversely affecting the Supply System and the holders of the Bonds.'I (2)Such Bonds shall be either serial or term bonds or a combination thereof, with the final maturity date to be July 1, 2012.(3)The Construction Engineer shall certify as to the amount expended for, and the amount remaining available to pay, Cost of Construction and the times funds will be required to pay such Cost, and, if the estimated Cost of Construction has increased, give a statement of the reasons for such increase.(Res.Sec.3.4).32 Additional Indebtedness Other than Bonds The Supply System may also issue additional bonds ranking on a parity with the Bonds and secured by an equal charge and lien on the revenues of the Project (" additional bonds")foi the following purposes: (1)to comply with an order of any governmental agency with authority to issue, make or enforce an order or decision requiring the installation of additional facilities or modifications at or in the Project;(2)to comply with requirements of the Project Agreement for the issuance of additional bonds to pay for renewals, replacements and betterments and foi capital additions and betterments necessary to achieve design capability or required by governmental agencies;(3)to refund at any time any Bonds or additional bonds.The Supply System may not issue any additional bonds unless prior to or simultaneously with the issuance of such bonds the Supply System has in effect valid written contracts for the sale of capability, power and energy of the Project which, in the opinion of the Supply System and of the Consulting Engineer to the Supply System, will produce revenues at least sufficient to enable the Supply System to meet all of its obligations under the Resolution.

Such contracts (1)must be for terms extending at least to the final maturity date of the Bonds, (2)unless such contracts are with the parties to thb Net Billing Agreements, must be with purchasers which, in the opinion of the Consulting Engineer, have the ability and financial responsibility to meet their obligations under such contracts, and (3)must contain terms with respect to'payments for Project capability, power and energy and the items of annual power costs to be included in the price for such project capability, power and energy which are not less favorable to the Supply, System than the terms of the Net Billing Agreements.

Additional bonds may be either serial or term bonds or a combination thereof, with the final maturity date to be, July 1, 2012, or if the.service life of the facilities being financcd extends beyond July 1, 2012, a later date which is not later than the expiration of such service life.A separate bond fund is to be created and payments into such bond fund for the retireinent'of such additional bonds are to commence within 5 years from the date thereof or, in the case of refunding bonds, at the time when payments with respect to the retirement of the refunded Bonds or additional bonds would be required if such Bonds or additional bonds were not refunded.From the proceeds of'sale'of additional bonds or revenues of the Supply System available at the time of issuance, an amount equal to the maxi-mum amount of interest to become due on'such bonds in any six-month period is to be deposited in the reserve account in such bond fund, and such account is to be maintained,-at such amount;provided that such amount, in the case of refunding bonds, may be so deposited at the time when the refunded Bonds or additional bonds are no longer deemed outstanding.(Res.Sec.9.6).I~Construction Fund;Application of Bond Procccds The Resolution establishes a Washington Public Power Supply System Nuclear Project No.,2 Construction Fund (the"Construction Fund")and a Construction Interest Account and Fuel Account therein, to be held by the Construction Fund" Trustee.'ontinental Illinois Bank and Trust Company of Chicago is Construction'Fund Trustee under the Resolution.

The proceeds of sale of the 1976 Bonds will be applied as follows;(a)An amount equal to the interest on the 1976 Bonds from their date to September 1, 1977, will be credited to the Construction Interest Account in the Construction Fund.(The interest to September 1, 1977 on the Bonds heretofore issued was capitalized from the proceeds of such Bonds.)(b)The sum of$27,191,000 will be credited to the Fuel Account in the Construction Fund.(c)The balance of 1976 Bond proceeds will be deposited in the Construction Fund.33 The proceeds of sale of subsequent series of Bonds will be applied as follows: (a)An amount equal to the interest on such Bonds to September 1, 1977, wiH be credited to the Construction Interest Account in the Construction Fund, (b)The Supply System will credit to the Fuel Account in the Construction Fund such amounts, if any, as the Supply System determines.(c)The balance of Bond proceeds will be deposited in the Construction Fund.The Resolution.

provides that if working capital and the Reserve Account and Reserve and Con-tingency Fund requirements are not provided for.by September, 1, 1977, or the Date of Commercial Operation, whichever is earlier, through revenues received pursuant to the Net Billing Agreements, such amounts will be provided from Bond proceeds.Moneys in the Construction Fund are to be used to pay Cost of Construction of the Project, which includes costs of constructing and acquiring the Project, obtaining permits and licenses and acquiring property and Fuel, trustees'nd paying agents'ees, taxes and insurance premiums, the cost of engineer-ing services and administrative and overhead expenses of the Supply System allocable to the acquisition and construction of the Project.The cost of acquiring Fuel will be paid from the Fuel Account.Moneys in the Construction Interest Account in the Construction Fund will be used to pay interest on the Bonds to September 1, 1977.Whenever moneys in the Construction Interest Account are inade-quate to meet interest payments, amounts necessary to meet the deficiency are to be transferred from the Construction Fund to the Construction Interest Account.The Resolution-prescribes certain procedures designed to safeguard payments or transfers from the Construction Fund, including, among others, certificates by the Construction Engineer and a detailed itemization by the Supply System of the amounts to be paid and the purposes thereof.Moneys remaining in the, Construction Fund after providing for the payment of all Cost of Construc-tion and after required payments, if any, to the Interest Account and Reserve Account in the Bond Fund and to the Reserve and Contingency Fund are to be transferred to the Bond Retirement Account.(Res.Secs.6.8-6.13, 7.1;Supp.Res.Sec.5).Other Funds Established by the Resolution; Flow of Revenues The Resolution also establishes a Washington Public Power Supply System Nuclear Project No.2 Revenue Fund, Bond Fund (including an Interest Account, a Principal Account, a Bond Retirement Account and a Reserve Account), Fuel Fund and Reserve and Contingency Fund.All such funds are to be held by the Supply System, except for the Bond Fund, which is to be held by the Bond Fund Trustee.'evenue Fund: The gross revenues derived by the Supply System from its ownership and operation of the Project are to be paid into the Revenue Fund.Moneys received prior to September 1, 1977, or the Date of Commercial Operation, whichever is earlier, under the Net Billing Agreements will be credited to a Prepayment Account in the Revenue Fund.Bonneville and the Supply System have agreed that if the Project does not commence commercial operation prior to September 1, 1977, an amount at least equal to one-half of the maximum annual interest on the Bonds issued prior to September 1, 1977, plus$6,000,000 will be included in the Annual Budget for the Project for the period January 1 to September 1, 1977.Such amount will be credited to the Prepayment Account and used, first, to deposit in the Bond Fund for credit to the Reserve Account, the amount required to establish such Account in the amount required by the Resolution; second, to deposit$3,000,000 in the Reserve and Contingency Fund;and, third, to provide$3,000,000 for working capital for the Project.Additional working capital may be provided by mutual agreement between the Supply System and Bonneville.

Moneys in the Revenue Fund are to be used for the purpose of making required payments into the Bond Fund and any 34 special funds for additional bonds, paying for the costs of operating and maintaining the Project, making required payments into the Fuel Fund and the Reserve and Contingency Fund, making repairs, renewals, replacements, additions, betterments and improvements to, and extensions of, the Project, and paying all other charges or obligations against such revenues.(Res.Sec.6.1).Bond Fund: From the gross revenues theretofore paid into the Revenue Fund, the Supply System is to pay monthly into the Bond Fund, for the credit of the Interest Account and the Principal Account, respectively, fixed amounts sufficient in the aggregate to pay the principal of and interest on the Bonds as the same become due and payable.Payments to the Interest Account will commence on September 25, 1977.Prior to that date the Construction Fund Trustee will transfer from the Construction Fund to the Bond Fund Trustee amounts sufiicient to pay each installment of interest on the Bonds.Monthly payments to the Principal Account are to commence not later than September 25, 1977, and be suEcient to pay outstanding serial Bonds as they mature.Beginning July 25, 1998, the Supply System is also obligated to pay monthly into the Bond Retirement Account amounts sufficient in the aggregate to redeem the 1976 Bonds maturing July 1, 2006 and July 1, 2012 in the principal amounts and at the times specified under the subcaption"Sinking Fund Installments" under"The Bonds and the 1976 Bonds".Such amounts are in addition to the amounts required or to be required to be paid into the Bond Retirement Account to redeem the terms bonds of other series of Bonds in the principal amounts and at the times specified in thc resolutions authorizing such Bonds.Moneys in the Bond Retirement Account are to be applied by the Bond Fund Trustee to the purchase or redemption of outstanding Bonds.There is required to be paid into and maintained in the Reserve Account for each series of Bonds outstanding, an amount equal to the largest amount of interest on such Bonds during any six month period from the date of such Bonds to the final maturity date thereof.By September 1, 1977, or the Date of Commercial Operation, whichever is earlier, the Supply System will deposit thc required amount in the Reserve Account either from Bond proceeds or amounts received under the Net Billing Agree-ments and deposited in the Prepayment Account.The Supply System is required to maintain the required amount in the Reserve Account at all times thereafter by additional payments from the Revenue Fund.If any Bonds are issued after September 1, 1977, or the Date of Commercial Operation, which-ever is earlier, the additional amount required to be deposited in the Reserve Account shall be deposited therein from Bond proceeds or revenues available therefor at the time of issuance of the Bonds.(Res.Sec.6.2).Fuel Fund: Beginning on the Date of Commercial Operation, all payments for Fuel will be made from the Fuel Fund.After the Date of Commercial Operation, after making the required payments into the Bond Fund and into any separate bond fund for additional bonds and after paying or making pro-vision for payment of the reasonable and necessary costs of operating and maintaining the Project, including taxes or payments in lieu thereof, the Supply System will transfer to the Fuel Fund the fol-lowing amounts: (1)the amount included in the Annual Budget for Fuel, (2)all amounts received as Fuel credits, including the proceeds of the sale of Fuel, and (3)any additional amounts necessary to avoid a deficiency in the Fuel Fund.(Res.Sec.6.4).Reserve and Contingency Fund: On or before September 1, 1977, or the Date of Commercial Operation, whichever occurs earlier, the Supply Systein will deposit in the Reserve and Contingency Fund the sum of$3,000,000 from the Prepayment Account or, to the extent such moneys are not available, from Bond proceeds.In September, 1977, and in each month thereafter, the Supply System is required to pay out of the Revenue Fund into the Reserve and Contingency Fund, after making the tca (Stora90 (." OLu~e A L Duncan (StoM90)R Va Arrow (Stora9e)t.tWey]I WPPSS N0.5 WPP N0.5 a/a, PorFpnd ENTRA IA G)te~-.~S!ok)!!O N EEEINSET Q!')I rtISE lOwtr r 7~-'nert=~l't-I 3+I Ji KU(IOhe.0 J C)0 (J V A 0 A ELECTRIC UTILITY PARTICIPANTS SERVICE AREAS Washington Public Power Supply System/NUCLEAR PROJECT NO.2 LEGEND Public Agencies Federal Hydro and Canadian Treaty Storage ProJects Nuclear Power Plants Fossil Fueled Power Plant(Coal)

B.P.A.Transmission Facilities WPPSS PROJECT RESERYATION I BENTQN COUNTY PROJECT N0.2&WPPSS NO.I A 1, d WPPSS NO.4 R ichla'L J r-" ps'C'OLC I I NA PORO~NANPORp F IIANKLIN COUNTY~+0 Itr ING Salt Lake City prepared by R.W BECK and ASSOCIATES and BONNEVILLE POWER ADMINISTRATION required payments into the Bond Fund, any separate bond fund established for additional bonds and the Fuel Fund, and after paying or making provision for payment of the reasonable and necessary costs of operating and maintaining the Project, an amount equal to 10%of the aggregate of the amounts required to be paid during such month into the Interest, Principal and Bond Retirement Accounts in the Bond Fund and into any special funds for interest, principal and bond retirements in respect of addi-tional bonds.Moneys in the Reserve and Contingency Fund are required to be used to make up deficiencies in the Bond Fund or in any bond funds established for additional bonds for which funds are not available in the Construction Fund or Reserve Account or in the construction fund or reserve account in respect of additional bonds, respectively.

To the extent not required for any such deficiency, moneys in the Reserve and Contingency Fund may bc used after the Date of Commercial Operation for any one or more of the following purposes: (i)to pay the cost of renewals, replacements and normal additions to and extensions of the Project;and (ii)to pay extraordinary operation and maintenance costs, including extraordinary costs of Fuel and the cost of preventing or correcting any unusual loss or damage (including major repairs)to the Project.(Res.Sec.6.5).Inveslrnenr of Funds: The term"Investment Securities" means (i)direct obligations of, or obliga-tions the principal of and interest on which are unconditionally guaranteed by, the United States of America;(ii)general obligation bonds of any state of the United States rated by a nationally recognized bond rating agency in either of the two highest rating categories assigned by such rating agency;(iii)bonds, debentures, notes or participation certficates issued by the Bank for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-Import Bank of the United States, Federal Land Banks or the Federal National Mortgage Association or of any agency of the United States or of any corporation wholly owned by the United States;(iv)Public Housing Bonds or Project Notes secured by contracts with the United States or an agency thereof;and (v)time deposits and certificates of deposit of any member of the Federal Reserve System authorized to do business in the State of Washington, not exceeding 25%of the capital stock and surplus of such member.Moneys in the Revenue Fund not required for immediate disbursement are to be invested in Investment Securities described in clauses (i)through (iv)above maturing or redeemable at or prior to the estimated time for the disbursement of such moneys.Moneys in the Interest Account, Principal Account and Bond Retirement Account are to be invested in Investment Securities described in clauses (i)through (iv)above maturing not later than 2 days prior to the respective dates when such moneys will be required for the purposes intended.Moneys in the Reserve Account not required for immediate disbursement are to be invested in Investment Securities described in clauses (i)through (iv)above maturing or redeem-able within 7 years from the date of investment.

Moneys in the Fuel Fund and Reserve and Contingency Fund not required for immediate disbursement are to be invested in Investment Securities maturing or redeemable within 2 years and 7 years, respectively, from the date of investment.

Moneys in the Con-struction Fund are to be invested by the Construction Fund Trustee in Investment Securities maturing or redeemable within 5 years of the date of investment.(Res.Secs.1.1, 6.1, 6.7, 6.9).Excess Moneys: Moneys and the value of Investment Securities in the Reserve Account in excess of the amounts required to be maintained in the Reserve Account constitute"excess moneys" in respect of such Account;moneys and thc value of Investment Securities in the Reserve and Contingency Fund in excess of$3,000,000 plus the commitments or obligations incurred by or the requirements of the Supply System for any of the purposes for which the Reserve and Contingency Fund may be used con-stitute"excess moneys" in respect of such Fund.Prior to September 1, 1977, or the Date of Commercial Operation, whichever is earlier, excess moneys in the Reserve Account and the Reserve and Contingency Fund shall be paid into the Con-struction Fund.36 If as of any June 30 following September 1, 1977, or the Date of Commercial Operation, whichever is earlier, excess moneys exist in the Reserve and Contingency Fund or the Reserve Account, such moneys shall be paid as follows: (a)excess moneys in the Reserve and Contingency Fund shall be paid proportionately into the Reserve Account and the reserve account for any series of additional bonds to the extent of any deficiency therein, and the balance of such excess moneys shaH be paid into the Revenue Fund;and (b)excess moneys existing in the Reserve Account shall be paid proportionately into the reserve account for any series of additional bonds to the extent of any deficiency therein, and the balance of such excess moneys shall be paid into the Revenue Fund.If as of any June 30 following September 1, 1977, or the Date of Commercial Operation, whichever is earlier, there shall exist in the Revenue Fund, after giving effect to any transfer of excess moneys from the Reserve Account and the Reserve and Contingency Fund to such Fund, an amount which exceeds the Supply System's required amount of working capital, the amount of such excess is to be applied to reduce annual power costs under the Net Billing Agreements.

The"required amount of working capital" shall be$3,000,000 or such lesser amount (not less than$2,000,000) or such greater amount as may be decided upon by the Supply System and Bonneville with the approval of the Con-sulting Engineer.In addition, if the Supply System and Bonneville agree, aH or any part of such excess over required working capital may be applied to the making of repairs, renewals, replacements, additions, betterments and improvements to, and extensions of, the Project, the purchase or redemption of Bonds, or for other purposes in connection with the Project.(Res.Secs.6.2, 6.5, 6.6).Certain Covenants Certain covenants of the Supply System with the holders of the Bonds and the holders of additional bonds are summarized as follows: The Project: The Supply System mill, subject to the Project Agreement, complete construction of the Project at the earliest practicable time, operate the Project efficiently and at reasonable cost, maintain the Project in good condition and comply at aH times with the terms of any licenses for the Project (Res.Sec.9.1).Rates: The Supply System will dispose of aH capability of and power and energy from the Project solely for the benefit and account of the Project and pursuant to the provisions of the Net Billing Agree-ments;and the Supply System will maintain and collect rates and charges for capability, power and energy and other services, facilities and commodities sold, furnished or supplied through the Project, which will be adequate, whether or not the generation or transmission of power by the Project is suspended, inter-rupted or reduced for any reason whatever, to provide revenues sufficient, among other things, (i)to pay the expenses of operating and maintaining the Project, (ii)to make the required payments into the Bond Fund and any special funds for additional bonds, and (iii)to make the required payments into the Fuel Fund and Reserve and Contingency Fund.(Res.Secs.9.2, 9.3).Net Billing Agreements and Project Agreement:

The Supply System will not consent voluntarily to any amendment or rescission of the Project Agreement or the Net Billing Agreements or take any action under or in connection with such agreements which will reduce the payments provided for therein or which will in any manner impair or adversely aEect the rights of the Supply System or of the bond-holders.(Res.Sec.9.4).Disposition of Properties:

The Supply System will not sell, mortgage, lease or otherwise dispose of any properties of the Project unless (a)simultaneous provision is made for the retirement in full of the Bonds and any additional bonds or (b)the properties to be disposed of are unserviceable, inadequate, obsolete or no longer required for use in connection with the Project, in which case$50,000 of the moneys received therefor are to be transferred to the Reserve and Contingency Fund and the balance is to be paid proportionately into the Bond Retirement Account and bond retirement accounts created for additional bonds, unless such disposition is in connection with the replacement of such properties or the disposition of Fuel, in'which case all moneys received from such disposition are to be transferred to the Reserve and Contingency Fund or the Fuel Fund, respectively, or (c)the transfer of such properties in whole or in part is by operation of law, in which case moneys received therefor are to be paid proportionately into the Bond Retirement Account and bond retirement accounts for additional bonds.Notwithstanding clauses (b)and (c)above, moneys received by the Supply System prior to September 1, 1977, or the Date of Commercial Operation, whichever, is later, as a result of any sale, lease, transfer or other disposition specified therein shall be transferred to the Construction Fund.(Res.Sec.9.7).Insurance:

The Supply System will keep the Project insured, to the extent such insurance is avail-able at reasonable cost: against risks of direct physical loss, damage to, or destruction of, the Project, at least to the extent that similar insurance is usually carried by private utility corporations operating like properties, and against accidents, casualties or negligence,'including liability insurance and employer's liability.

In the event that any loss or damage to the properties of the Project occurs during the Period of Construction the Supply System is to transfer the insurance proceeds, if any, in respect of such loss or damage to the Construction Fund;any insurance proceeds received by the Supply System in respect'of such loss or damage occurring thereafter are to be transferred into the Reserve and Contingency Fund or, in the case of insurance covering loss or damage to Fuel, to the Fuel Fund.(Res.Sec.9.8).Books of Account: The Supply System will keep proper books of account, showing the Project as'a separate utility system, in accordance with the rules and regulations of the Division of Municipal Cor-porations of the State Auditor's oQice of the State of Washington and in accordance with the Uniform System of Accounts prescribed by the Federal Power Commission.

Such books of account are to be audited annually'y a firm of independent certified public accountants of national reputation., Bond-holders may obtain copies of the annual financial statements showing the financial condition of the Project and the annual audit rcport by sending a written request therefor to the Supply System.(Res.Sec.9.9).Coiisulting Engineer: The Supply System will retain a nationally recognized independent consult-ing engineer or engineering firm to render continuous engineering counsel in the operation of the Project.In addition to his other duties, the Consulting Engineer shall prepare, not later than 18 months after the Date of Commercial Operation, and each 3 years thereafter, a report based upon a survey of the Project and the operation and maintenance thereof.Each report is to show, among other things, whether the Supply System has satisfactorily performed and complied with certain covenants in the Resolution.

The Consulting Engineer is also required to report to the Bond Fund Trustee and the Supply System upon the economic soundness and feasibility of all contemplated renewals, replacements, additions, betterments and improvements to, and extensions of, the Project involving the expenditure of$100,000 or more.The Consulting Engineer is also required to file annually a certificate with the Bond Fund Trustee describing the insurance then in effect and stating whether or not such insurance complies with the requirements of the Resolution.

In the event of any loss or damage in excess of$100,000, whether or not covered by insurance, the Consulting Engineer is to ascertain the amount of such loss or damages and deliver to the Supply System a certificate'setting forth the amount and nature of such loss or damage, together with recommendations's to whether or not such loss or damage should be replaced.Copies of any such triennial, report, annual certificate as to insurance, or certificate in respect of any such loss or damage wiH be sent to bondholders filing with the Supply System written requests therefor.(Res.Sec.9.10).38 Events of Default;Remedies Under the Resolution, the happening of one or more of the following events constitutes an Event of Default: (i)default in the performance of any obligation with rcs'pect to payments into the Revenue Fund;(ii)default in the payment of the principal of or default for 30 days in the payment of interest or any sinking fund instaHment on any Bonds;(iii)default for 90 days in the observance and performance of any other of the covenants, conditions and agreements of the Supply System in the Resolution;(iv)the sale or conveyance of any properties of the Project except as permitted by the Resolution or the forfeiture through fault of the Supply System of any license, franchise, permit or other privilege necessary or desirable in the operation of the Project;and (v)certain events in connection with the bankruptcy, insolvency or reorganization of the Supply System.(Res.Sec.11.1).In case an Event of Default has occurred which has not been cured, each trustee appointed by or pursuant to the provisions of the Resolution is required to exercise such of the rights and powers vested in it by the Resolution and use the same degree of care and skill in the exercise thcrcof as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.(Res.Sec.7.6).If an Event of Default shall have occurred and shall not have been remedied, the Bond Fund Trustee or the holders of 20%in principal amount of the Bonds and additional bonds then outstanding may declare the principal of aH the Bonds and additional bonds and the interest accrued thereon to be immediately due'nd payablc, but such declaration may be annulled under certain circumstances.(Res.Sec.11.1).After the occurrence of an Event of Default and prior to thc curing of such Event of Default, the Bond Fund Trustee may, to the extent permitted by law, take possession and control of the Project and operate and maintain the same, prescribe rates for Project capability or power sold or supplied through the facilities of the Project, collect the gross revenues resulting from such operation and perform aH of the agreements and covenants contained in any contract which the Supply System is then obligated to perform.Such gross revenues, after payment of operating expenses, shall be applied to the payment of principal of and interest on the Bonds and additional bonds.After aH sums then due in respect of the Bonds and additional bonds have been paid, and after aH Events of Default have been cured or secured to the satisfaction of the Bond Fund Trustee, the Bond Fund Trustee is required to relinquish possession and control of the Project to the Supply System.(Res.Secs.11.3, 11.4).The Resolution cmpowers the Bond Fund Trustee to file proofs of claims for the benefit of the holders of the Bonds in bankruptcy, insolvency, or reorganization proceedings and to institute suit for the collection of sums due and unpaid in connection with the Bonds, to enforce specific performance of covenants contained in the Resolution or to obtain injunctive or other appropriate relief for the protection'of the holders"of th'e Bonds.(Res.Sec.11.4).The holders of a majority in principal amount of the Bonds and additional bonds at the time outstanding have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Bond Fund Trustee, or exercising any trust or power conferred upon the Bond Fund Trustee, but the Bond Fund Trustee must be provided with reasonable security and indem-nity and also may decline to foHow any such direction if it shall be advised by counsel that the action or proceeding so directed may not lawfully be taken or if it in good faith determines that, the action or proceeding so directed would involve it in personal liability or that the action or proceeding so directed would be unjustly prejudicial to the holders of Bonds or additional bonds not parties to such direction.

No holder of Bonds or additional bonds has any right to institute suit'to enforce any provision of the Resolution or the execution of any trust thereunder (except to enforce the payment of principal or interest installments as they mature), unless the Bond Fund Trustee has been requested by the holders of not less than 20%in aggregate principal amount of the Bonds then outstanding to exercise the powers granted it by the Resolution or to institute such suit and unless the Bond Fund Trustee has refused or failed, within 60 days after the receipt of such request and after having been offered adequate security 39 and indemnity, to comply with such request.In the event the Bond Fund Trustee has failed or refused to comply with the aforesaid request, the Resolution provides for the creation of a"Bondholders'ommittee".(Res.Secs.11.4,,11.5).

The enforceability of rights under the Resolution may be subject to general principles of equity which permit the exercise of judicial discretion and to valid bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors.Amendments; Supplemental Resolutions Any amendment to the Resolution may be made by the Supply System with the consent of the holders of 6636%in principal amount of the Bonds and additional bonds then outstanding and with the consent of the holders of 66%%in principal amount of the outstanding Bonds and additional bonds which are adversely affected by any amendment which does not equally affect all other outstanding Bonds and additional bonds, provided that no such amendment shall permit a change in the date of payment of principal of or any installment of interest on any Bond or additional bond or a reduction in the principal or redemption price thereof or the rate of interest thereon without the consent of each holder of Bonds and additional bonds so atfected.(Res.Article XII).Without the consent of any holder of Bonds, the Supply System may adopt supplemental resolu-tions: to authorize the issuance of subsequent series of Bonds or additional bonds;to add to the cove-nants of the Supply System contained in, or to surrender any rights reserved to or conferred upon it by, the Resolution; to add to the restrictions contained in the Resolution upon the issuance of addi-tional indebtedness; to confirm as further assurance any pledge under the Resolution of the revenues of the Project or other moneys;otherwise to modify any of the provisions of the Resolution (but no such modification may be etfective while any of the Bonds are outstanding);

or to cure any ambiguity or correct any defect in the Resolution, provided that the Bond Fund Trustee shall consent thereto.(Res.Article X).LITIGATION Supply System There is no litigation pending or, to the knowledge of the Supply System, threatened, question-ing the corporate existence of the Supply System, or the title of the otficers of the Supply System to their respective oflices, or the validity of the 1976 Bonds, or the power and authority of the Supply System to issue the 1976 Bonds, or the validity of the Net Billing Agreements or the Project Agreement, or the power and authority of the Supply System to fix, charge and collect rates for the sale of power, energy and capability from the Project as provided in the Resolution.

Equal Employment Opportunity Five claims against the Supply System have been filed with the Federal Equal Employment Oppor-tunity Commission alleging sex or race discrimination in its hiring and promotion practices.

In-one of the claims, the Commission found reasonable cause to believe that the Supply System was in violation of Title VII of the Civil Rights Act of 1964 on the grounds of sex and race disciimination.

On the basis of this finding, the claimant commenced a lawsuit against the Supply System in the Federal Court for the Eastern District of Washington.

The same claimant has also filed a similar charge with the Otfice of Federal Contract Compliance of the United States Department of Labor ("OFCC")with respect to the Supply System's compliance with the provisions of Executive Order 11246 of September 24, 1965.The Supply System has been granted by the Director of OFCC a limited exemption from the cancellation, termination and'suspension provisions contained in the Net Billing Agreements and the 40 Project Agreement.

The Supply System does not have such a limited exemption from the corresponding provisions contained in its lease of the project site from ERDA.In the opinion of Bond Counsel and Special Counsel to the Supply System and General Counsel to Bonneville, the obligations of Bonneville, the Participants and the Supply System under the Net Billing Agreements and the Project Agreement would remain in full force and effect regardless of any action by OFCC.Contractor Litigation In February 1976, Bovee&Crail Construction Company ("Bovee")filed a lawsuit against the Supply System in the United States District Court for the Eastern District of Washington, Northern Division (Cause No.C-76-43), in connection with the termination by the Supply System of a civil construction contract.Subsequently the Supply System filed its answer and a counterclaim against Bovee and against Maryland Casualty Company (Bovee's surety)and General Energy Resources, Inc.(the company of which Bovee is a wholly owned subsidiary).

In its complaint, Bovee prays for damages of not less than$24,500,000 together with interest thereon and attorneys fees and other undetermined amounts.The answer and counterclaim of the Supply System denies liability and seeks direct damages of$13,970,000 and substantial consequential damages.Comptroller of the Currency Ruling On August 27, 1975, the Comptroller of the Currency issued a ruling that the$175,000,000 Wash-ington Public Power Supply System Nuclear Project No.1 Revenue Bonds, Series 1975, are eligible for purchase, dealing in, underwriting and unlimited holding by national banks.Based upon an interpre-tation of that ruling and verbal advices received from the oflice of the Comptroller of the Currency, certain national banks are planning to participate in bidding for the 1976 Bonds.The Supply System has been advised that certain firms of investment bankers, acting independently or jointly, are considering whether or not to institute litigation to contest such ruling.INITIATIVE PETITION An initiative petition relating to nuclear power plants filed with the Washington Secretary of State by its terms would not affect the Project or the Supply System's Nuclear Projects Nos.1 and 4.It is ex-pected that the required signatures will be obtained by the July 2, 1976, deadline to have the initiative peti-tion submitted to the voters in November, 1976.In the opinion of the Supply System, the enactment into law of the petition would, if determined to be constitutional by the courts, preclude design, construction and operation of other nuclear projects not yet approved by the State of Washington, including the Supply System's Nuclear Projects Nos.3 and 5.Although the effect of the enactment into law of the petition upon the economy of thc Pacific Northwest region is unknown at this time, in the opinion of Bonneville if Nuclear Project No.3, from which Bonneville has purchased the Supply System's share of capability, were to be terminated, Bonneville's revenues from the sale of power and other services to its customers would be adequate to meet hll of Bonneville's obligations under the Net Billing Agree-ments, including debt service on the Bonds and aH other annual costs of the Project.OTHER PROPOSED LEGISLATION On March 11, 1976, a bill (H.R.12461)was introduced in the House of Representatives of the United States Congress.This bill requires, among other things, that electric utilities with retail sales in excess of 200 million kilowatt-hours annually design retail rates charged to each electric consumer or class of consumers to reflcct the cost of providing electric service to such consumer or class.The bill also provides that retail rates per kilowatt-hour charged to a consumer shall not decrease as kilowatt-hour 41 consumption by such consumer increases, except to the extent that a utility can show that such decrease reflects the cost of providing service to such consumer.In addition, the bill would require that the rate charged to a residential consumer for a subsistence quantity of electric energy not exceed the lowest charge per kilowatt-hour to any other consumer to whom energy is sold.The bill would require eviden-tiary hearings before any rate increase is put into effect.The bill also provides judicial enforcement rights to the Federal Power Commission, consumers and members of electric cooperatives to determine whether rate schedules comply with the requirements of the bill.A subcommittee of the House Commerce Committee has completed hearings on the bill and the bill is expected to be reported to the full committee in June in an amended form.If the bill is enacted in its present form the rates of about one third of the Participants and Bonneville rates to its direct service industrial customers would be subject to the Act.REGISTRATION OF THE 1976 BONDS BY STATE AUDITOR The 1976 Bonds will be registered by the State Auditor of the State of Washington, and a certifiicate of such registration signed by the State Auditor or a Deputy State Auditor will be endorsed upon each Bond in accordance with the provisions of Section 54.24.070 of the Revised Code of Washington, made applicable to the Supply System by the Revised Code of Washington, Section 43.52.3411.

Such Section 54.24.070 provides, in part, that any revenue obligations after having been so registered and bearing such certificate, shall be held in every action, suit or proceeding in which their validity is or may be brought into question prima facie valid and binding obligations in accordance with their terms.LEGAL OPINIONS Wood Dawson Love&Sabatine, New York, New York, Bond Counsel to the Supply System, and Houghton Cluck Coughlin&Riley, Seattle, Washington, Special Counsel to the Supply System, will render opinions with respect to the validity of the 1976 Bonds, the Net Billing Agreements and the Project Agreement.

Copies of the opinions they propose to render are appended hereto as Exhibit IV.TAX EXEMPTION In the opinion of the above named Counsel, the interest on the 1976 Bonds will be exempt from federal income taxation under existing laws, regulations and rulings issued by the Internal Revenue Service.CERTIFICATION AS TO ORM~CIAL STATEMENT The System will confirm to the successful bidder for the 1976 Bonds, by a certificate signed on its behalf by the Managing Director of the System and dated and delivered on the date of delivery of and payment for the 1976 Bonds, that on the date of this Official Statement and on the date of such certificate (i)the descriptions and statements of or pertaining to the Supply System contained in this Official Statement were and are true-and correct in all material respects;(ii)insofar as the Supply System and its affairs, including its financial affairs, are concerned, this Official Statement did not and does not contain an untrue statement of a material fact or omit any statement or information which is necessary to make the statements therein, in the light, of the circumstances under which they were made, not misleading; and (iii)insofar as the descriptio'ns and statements, including financial data, of or pertaining to Bonneville and other'governmental bodies,'and non-governmental bodies, and their activities contained in this Official Statement are concerned, such descriptions, statements and data have been obtained from sources which the Supply System believes to be reliable and the Supply System has no reason to believe that they are untrue in any material respect.There will also be delivered to such bidder on the date of delivery of the 1976 Bonds a certificate'of the Bonneville Power Administrator, dated such date, that on the date of this Official Statement and on the date of such certificate the descriptions and statements, including financial statements, of or pertaining to Bonneville contained in this OAicial Statement were and are true and correct in all material respects and that insofar as Bonneville and its affairs, including its financial affairs, are concerned, this Olficial Statement did not and does not contain an untrue statement of a material fact or omit any statement or information which is necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

MISCE~LLANEOUS The references, excerpts, and summaries contained herein"of'the'Net Billing Agreements, the Project Agreement and the Resolution do not'urport'o be complete'statements'of the provisions of such documents and reference should be made to such documents for a full and complete statement of all matters relating to the 1976 Bonds, the'basic agreements securing the 1976 Bonds and the rights and obligations of the holders thereof.The authorizations, agreements and covenants of the Supply System are set forth in the Resolution, and neither this OKcial Statement nor any advertisement of the 1976 Bonds are to be construed as a contract with the holders of the 1976 Bonds.Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly so identified, are intended merely as such and not as representations of fact.Bonneville has furnished the information contained under the caption"Bonneville Power Adminis-tration" and the information pertaining to Bonneville under the caption"Power Supply in the Pacific Northwest and the Hydro Thermal Power Program" and in Exhibit VI.The Consulting Engineer has furnished the balance of the information contained under the latter caption.The delivery of this Ofiicial Statement has been duly authorized by the Supply System.WAsHINGToN PUBLIc PowER SUPPLY SYsTEM By/s/EDwIN W.TAYLoR Secretary'43 EXHIBIT I WASHINGTON PUBLIC POWE<R SUPPLY SYSTEM NUCLEAR PROJECT'NO.

-2 The Participants, their customers and gross revenues, and Participants Shares of the Project capability.

Participant 1975 Statistics Customers Rcvcnucs Participant's Sharc of Project Capability City of Albion, Idaho City of Bandon, Oregon...............

~.,Public Utility District No.1 of Benton County, Washington

....Benton Rural Electric Association, Inc..Big Bend Electric Cooperative, Inc..Blachly-Lane County Cooperative Electric Association

.......City of Blaine, Washington

.City of Bonners Ferry, Idaho City of Burley, Idaho City of Canby, Oregon City of Cascade Locks, Oregon.Central Electric Cooperative, Inc..City of Centralia, Washington Central Lincoln Peoples'tility District..City of Cheney, Washington

.Public Utility District No.1 of Clallam County, Washington...

Public Utility District No.1 of Clark County, Washington

.....Clatskanie Peoples'tility District.Clearwater Power Company......Columbia Basin Electric Cooperative, Inc...Columbia Power Cooperative Association, Inc.............

Columbia Rural Electric Association, Inc Consumers Power, Inc.Coos-Curry Electric Cooperative, Inc.Town of Coulee Dam, Washington

.......................

Public Utility District No.1 of Cowlitz County, Washington

....City of Declo, Idaho Douglas Electric Cooperative, Inc.....City of Drain, Oregon East End Mutual Electric Co., Ltd.City of Ellensburg, Washington

.Fall River Rural Electric Cooperative, Inc.Farmers Electric CoLtd..Public Utility District No.1 of Ferry County, Washington

.....Flathead Electric Cooperative, Inc..City of Forest Grove, Oregon.Public Utility District No.1 of Franklin County,.Washington

...Public Utility District No.1 of Grays Harbor County, Washington Harney Electric Cooperative, Inc.City of Heyburn, Idaho.Hood River Electric Cooperative, Inc..146 1,797 19,094 5,800 4,779 2,065 1,364 1,654 4,066 2,384 664 6,448 6,612 19,199 2,591 12,158 61,777 2,595 6,011 3 322 1,341 2,046 10,509 8,841 550 31,205 78 5,964 577 368 4,817 4,952 229 1,582 4,731 4,634 11,320 29,747 1,913 788 2,128.00016.00263.05350.00666 01610.00272.00185.00182.00694.00090.00054.00586.00739.04017.00539.01769.06151.01996.00775.00673.00143.00761.00453.01634.00137.05525.00019.00363.00218.00033.01028.00409(A).00041.00171.00370.00181.02370.03075.00719.00504.00502 on next page)$33,763 489,225 7,253,093 1,846,638 2,696,886 1,002,446 368,806 472,448 1,079,667 670,114 274,072 2,098,252 1,390,197 7,873,124 793,497 4,486,372 19,872,957 3,005,749 1,812,027 1,326,703 458,475 1,285,053 3,908,297 3,138,393 205,956 14,621,255 26,713 1,736,601 243,112 109,923 1,553,831 1,489,389 45,365 653,217 1,168,622 1,271,357 3,997,843 11,457,883 1,186,749 508,555 849,659 (Continued EXHIBIT I-(Continued)

WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PRO3ECT NO.2 The Participants, their customers and gross revenues, and Participant s Shares of the Project capability.

Partldpant 1975 Statistics Customers Revenues Partldpant's Share of Project Capability Idaho County Light&Power Cooperative Association, Inc.....City of Idaho Falls, Idaho Inland Power%Light Company Public Utility District No.1 of Kittitas County, Washington....

Public Utility District No.1 of Klickitat County, Washington

...Kootenai Electric Cooperative, Inc..Lane Electric Cooperative, Inc.Public Utility District No.1 of Lewis County, Washington

....Lincoln Electric Cooperative, Inc.(Montana)...........

~..Lost River Electric Cooperative, Inc.Lower VaHey Power&, Light, Inc.............

Public Utility District No.1 of Mason County, Washington

....Public Utility District No.3 of Mason County, Washington

.....Town of McCleary, Washington City of McMinnviHe, Oregon.Midstate Electric Cooperative, Inc..City of Milton-Freewater, Oregon~..City of Minidoka, Idaho.Missoula Electric Cooperative, Inc.City of Monmouth, Oregon.Nespelem Valley Electric Cooperative, Inc.Northern Lights, Inc Northern Wasco County Peoples'tility District........,....

Okanogan County Electric Cooperative, Inc....~.........

~.Public Utility District No.1 of Okanogan County, Washington

..Orcas Power and Light Company.Public Utility District No.2 of Pacific County, Washington

....City of Port Angeles, Washington

.~Prairie Power Cooperative, Inc.Raft River Rural Electric Cooperative, Inc..........

~,...., RavaHi County Electric Cooperative, Inc.City of Richland, Washington Riverside Electric Company, Ltd..City of Rupert, Idaho.Rural Electric Company.Salem Electric Salmon River Electric Cooperative, Inc..City of Seattle, Washington

.Public Utility District No.1 of Skamania County, Washington

..Public Utility District No.1 of Snohomish, County, Washington South Side Electric Lines, Inc..45 1,812 13,368 14,493 1,290.6,140 5,502 7,959 16,719 1,698 1,479 7,666 2,893 13,200 671 6,118 4,823 3,466 61 4,333 1,052 2,211 6,603 2,730 1,114 12,153 4,062 11,544 7,274 363 1,969 2,539 10,555 210 2,207 2,107 7,759 1,371 262,034 3 331 110,530 448$470,863" 4,407,918 4,901,965 474,672 2,199,305 1,455,793 2,562,280 4,933,721 632,819 526,234 2,447,405 624,735 3,726,763 234,930 2,183,831 1,390,825 842,025 9,260 1,181,130 356,864 452,097 1,975,084 704,821 247,554 3,314,675 1,354,666 2,778,663 2,816,037 133,713 1,350,257 828,145 3,700,397 55,591 584,905 651,333 1,858,219 464,412 75,749,862 1,103,505 36,179,390 223,882 (Continued

.00186.02376.01222.00220.01009.00391.01452.02274.00255.00202.00820.00231.01446.00234.01227.00488.00583.00005.00294.00236-.00149.00455.00051.00190.01042.00725.01503.02416.00019.00853.00301.02761.00020.00348.00262.00453.00170.07193.00547.15363.00073 on next page)

EXHIBIT I-(Continued)

WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO'The Participants, their customers and gross revenues, and Participant s Shares of the Project capability.

Particlpaut City of Springfield, Oregon.City of Sumas, Washington

.Surprise Valley Electrification Corporation Tanner Electric Tillamook Peoples'tility District......................

Umatilla Electric Cooperative Association

..................

Unity Light and Power Company.Vera Irrigation District No.15 Vigilante Electric Cooperative, Inc..Public Utility District No.1 of Wahkiakum County, Washington Wasco Electric Cooperative, Inc.................,,.......

West Oregon Electric Cooperative, Inc..OTAL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i~~T 11)382$332 2,927 774 12,993 5,550 1,293 3,559 3,492 1,988',528 2,858 3,679,723 82,668 956,610 245,435 3,652,771 3,956,348 440,802 905,206 995,180 522,475 939,921 812,179 910,379$298,042,148 1975 Statistics Customers Revenues Participant's Sllare of Project.~Cn ablllly.00363.00048.00323.00122.01729.00036.00204.00701.00294.00328.00342.00182 1.00000 (A)Fall River Rural Electric Cooperative, Inc.has temporarily assigned its Participant's Share to Public Utility District No.1 of Snohomish County, Washington.

46 E<XBIBIT II.R.W.BECK AND ASSOCIATES ENGINEERS AND CONSULTANTS PLANNING DESIGN RATES ANALYSES EVALUATIONS MANAGEMENT 1510 EAST COLONIAL DRIVE POST OFFICE BOX 6817 ORLANDO, FLORIDA 32803 TELEPHONE 30S 896.4911 SEATTLE, WASHINGTON DENVER, COLORADO PHOENIX, ARIZONA ORLANDO, FLORIDA COLUMBUS, NEBRASKA WELLESLEY, MASSACHUSETTS INDIANAPOLIS, INDIANA June 3, 1976 Board of Directors WASHINGTON PUBLIC POWER SUPPLY SYSTEM Post Office Box 968 Richland, Washington 99352 Gentlemen:

Summary Engineering Report Washington Public Power Supply System Nuclear Project No.2 Presented herewith is a summary of our analyses, investigations and studies with respect to the proposal by the Washington Public Power Supply System (the"Supply System")to issue$120,000,000 of its Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976 (the"1976 Bonds"), for the purpose of paying a portion of the cost of acquiring and constructing a nuclear-fueled electric generating plant with a nominal capacity of approximately 1,100,000 kilowatts and related facilities known as Washington Public Power Supply System Nuclear Project No.2 (the"Project").The Supply System has issued a total of$480,000,000 of its Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds in four series: Series 1973, Series 1974, Series 1974A and Series 1975A, The Supply System's present financing program provides that additional bonds (which, together with the 1976 Bonds and previously issued bonds are hereinafter referred to as the"Bonds")will be issued at later dates and in amounts necessary to pay the cost of completing the Project and placing it into operation.

The Supply System The Supply System is a municipal corporation and a joint operating agency organized under the laws of the State of Washington and has, as members, 18 public utility districts and 3 municipalities all located within the State of Washington.

The Supply System owns and operates one hydro-electric generating plant and one steam-electric generating plant, and has under construction three nuclear-47 electric generating plants.In addition, the Supply System has two nuclear generating plants in the advanced planning stages.These projects and their status are listed below:~Pro cct Hanford(2)

Packwood(2)

WPPSS No.1(5)WPPSS No.2(5)WPPSS No.3(7)WPPSS No.4(9)WPPSS No.5(7)Total Location Hanford Packwood Hanford Hanford Satsop Hanford Satsop~c Steam(3)Hydro Nuclear Nuclear Nuclear Nuclear Nuclear Initial Operating~Data 1)November 1966 June 1964 March 1981 December 1979 October 1982 March 1982 April 1984 Size 860.0 MW 27.5 MW(4)1,250.0 MW 1,100.0 MW-868.0 MW(8)1,250.0 MW 1,116.0 MW(10)6,471.5 MW Bonds Issued to Date (000)$122,000 13,700 355,000 600,000(6) 250,000 100,000 Estimated Additional Financing Required (000)798,000 194,000 718,000(8) 2,593,000(11)

$1,440,700$4,303,000 (1)Hanford and Packwood Projects actual, other projects estimated.

(2)In operation.

(3)Turbine-Generator facility using steam from nuclear reactor owned and operated by Energy Research and Development Administration

("ERDA").(4)At unity power factor.(5)Under construction

-Nuclear Regulatory Commission

("NRC")construction permit and Wash-ington State site approval received.(6)Including current issue.(7)In advanced planning stage.(8)Supply System's 70%ownership share.Four investor owned utilities will own 30%of WPPSS No.3.(9)Under construction

-NRC Limited Work Authorization and Washington State site approval received.(10)Supply System's 90%ownership share.An investor owned utility is expected to own 10%of WPPSS No.5.(11)For WPPSS No.4 and Supply System's 90%ownership share of WPPSS No.5 and includes funds for retirement of$100,000,000 of bonds outstanding.

Additional amounts up to$125,000,000 may be required to fund other activities in connection with development of fuel resources and additional projects.The Supply System's Packwood Lake Hydroelectric Project, its Hanford Generating Project, WPPSS Nuclear Project No.1, the Project and its ownership sharc of WPPSS Nuclear Project No.3 each is financed and operated or wiH be financed and operated as a separate utility system with the revenues of each system pledged solely to the obligations of such system.The Supply System intends to finance and operate WPPSS Nuclear Project No.4 and its 90%ownership share of WPPSS Nuclear Project No.5 as a single separate system.The Project The.Project is located approximately 12 miles north of the City of Richland and 3 miles west of the Columbia River, in Benton County, Washington, on the Hanford Reservation of ERDA.The Project will include a nuclear steam supply system manufactured by the General Electric Company employing a boiling water reactor.The nuclear steam supply system will include the neces-sary auxiliary systems required to control, contain and service the nuclear reactor core.Steam will be supplied to the turbine at approximately 985 psia.After driving the turbine, the steam wiH be exhausted 48 into the condenser which is cooled with circulating water from mechanical draft cooling towers.Water will be withdrawn from the Columbia River and suitably treated for use as makeup to thc circulating water cooling system.A Westinghouse generator will be the main generating unit and will be rated at 1,231,700 kVA.The Project will have a net electrical output of approximately 1,093,000 kilowatts.

The main power transformers will step up the generator voltage to 500 kV.The Project's output will be delivered into the Federal Columbia River Power System in the vicinity of the Project.An 18.3 mile 500 kV transmission line will be constructed by Bonneville Power Administration

(" Bonneville")between the Project and Bonneville's Hanford Substation to effect such delivery.Permits and Licenses The specific site for the Project has been certified for the State of Washington by the Washington State Thermal Power Plant Site Evaluation Council and a construction permit was issued for the project by the Atomic Energy Commission, a predecessor agency of NRC, in March 1973.Construction Program The present construction schedule prepared by the Supply System and Burns and Roe, Inc., the Construction Engineer selected by the Supply System to design and supervise construction of the Project, calls for commercial operation of the Project in December 1979.This represents a six-month delay from the previously scheduled commercial operation date of July 1979.The Construction Engineer is of the opinion that the present program for construction is realistic and a commercial operation date of December 1979 has a reasonable chance of achievement.

As of March 1, 1976, Project construction was approximately 30%complete.On January 24, 1976, the Supply System terminated the major civil construction contract for the.Project on the grounds that the contractor had defaulted.

The question of default and other issues are presently being litigated.

Civil construction of the reactor building and other work is presently being performed under an interim contract.It is expected that a new civil construction contract will be awarded in August 1976 to complete the work scheduled under the terminated contract.The Construction Engineer reports that the delays associated with this contractor problem have caused a delay in the Project schedule of approximately six months and a consequent increase in the estimate of the cost of the Project.As of March 1, 1976, equipment and construction contract commitments totaled$370,793,759.

Actual expenditures to March.1, 1976, are summarized in the following table: Total Construction Cost Nuclear Fuel Bond Discount and Financing Cost Interest During Construction Subtotal.Less: Investment Income Total$288,380,000 13,118,000 1,799,000 54,302,000

$357,599,000 (38,669,000)

$31'8,930,000 Financing Program The financing program has incorporated the issuance of Bonds in several series to finance the con-struction of the Project.The present estimates of construction costs by the Construction Engineer and the Supply System show the proceeds from the 1976 Bonds will be suEcient to continue construction of the Project until May 1977 prior to which time additional Bonds are planned to be issued.The amount of the next issue will be determined immediately prior to the time of issuance.49

$115,635,500 123,064,900 117,709,300 43,325,800 30,189,400 3,465,400 5,492,700$438,883,000

'Based on the foregoing, the estimated total financing requirements for'the Project are shown in the following tabulation:

Estimated Project Financing Required Construction Costs(1)Structures and Improvements Reactor Plant Equipment....

Turbo Generator Units Accessory Electrical Equipment Miscellaneous Power Plant Equipment Station Equipment Distributable Direct.Subtotal-Direct Construction Costs................

Other Direct Costs Sales Tax(2)Engineering and Construction Management(1)

Construction Contingencies(1)

Owner's Cost(3).Schedule Delay(4)Total Construction Cost.Nuclear Fuel(5).Contingency(6)

Bond Discount and Other Financing Expense(7)

Capitalized Interest During Construction(8)

Gross Requirements Less: Estimated Income-Temporary Investment(9)

Net Requirements(10)

$18,756,200 79,054,400 30,643,000 55,000,000 11,000,000

$633,336,600

$59,375,000 32,217,400 7,451,000 117,326,000

$849,706,000 (55,706,000)

$794,000,000 (1)Estimated by the Construction Engineer.(2)Estimated by the Construction Engineer and the Supply System, Does not include estimated sales tax on escalation, contingency, schedule delay and nuclear fuel.(3)Estimated by the Supply System.(4)Estimated by the Construction Engineer as the cost of delay in the date of commercial operation from July 1979 to December 1979 as discussed under the caption"Construction Program." (5)Estimated by the Supply System, includes sales tax of$2,828,000.

(6)Estimated by Supply System to cover contingencies not included in Construction Engineer's estimate.(7)Includes actual expenses of previous financings and estimated expenses for the 1976 Bonds and additional Bonds.(8)Based on actual interest rates for previous financings and an assumed 6.70%annual interest rate on the 1976 Bonds and an assumed 7.50%annual interest rate on additional Bonds.(9)Includes actual income to date and estimated future income at an annual interest rate of 5.5%.(10)Construction cost estimates based on commercial operation date of December 1979.50.

'A summary of the total financing actually accomplished and contemplated for the future by the Supply System for the Project cost is shown in the following table: Total Construction Costs(1).....Nuclear Fuel(2)Contingency(3)

Bond Discount and Financing Costs (4)Capitalized Interest During Con-struction(5)

Gross Requirements

........Less: Investment Income(6).....Net Requirements

..........

E<stimatcd Financing Required Prcvlons 1976 Financlngs Bonds$404,578,000

$85,779,000 15,344,000 27,191,000 0 0 1,799,000 2,160,000 102,213,000 10,050,000 Additional Bonds Total$142,979,600

$633,336,600 16,840,000 59,375,000 32,217,400 32,217,400 3,492,000-7,451,000 5,063,000 117,326,000 523,934,000 125,180,000 200,592,000 849,706,000 (43,934,000)

(5,180,000)

(6,592,000)

(55,706,000)

$480,000,000

$120,000,000

$194,000,000

$794,000,000 (1)Includes constructions costs, engineering and construction management costs, escalation and con-struction contingencies, as estimated by the Construction Engineer, and.owner's direct costs, as estimated by the Supply System.(2)Estimated by the Supply System, includes sales tax of$2,828,000.

(3)Estimated by the Supply System, to cover contingencies not included in Construction Engineer's estimate.(4)Includes costs of issuance of previous financings and estimated costs of issuance of the 1976 Bonds and additional Bonds.(5)Based on actual interest rates for previous financings, an assumed 6.70%%uo annual interest rate on the 1976 Bonds and an assumed 7.50%annual interest rate on additional Bonds.(6)Includes actual income to date and estimated future income at an annual interest rate of 5.5%.In addition to the foregoing amounts to be obtained through issuance of Bonds, present planning anticipates the following will be paid from revenues of the Project under the Net Billing Agreements.

If for any reason such amounts are not provided under the Net Billing Agreements, the bond resolution provides that they will be obtained through the issuance of additional Bonds.Reserve Account in Bond Fund............

$27,265,000 Working Capital.3,000,000(1)

Reserve and Contingency Fund...~~.......3,000,000 Total$33,265,000 (1)The amount of working capital may be increased by agreement between the Supply System and BonneviHe.

Construction cost estimates are based on a scheduled date of commercial operation of December, 1979.The Construction Engineer has estimated that the effect of schedule extension on the cost of escalation, contingency and engineering and construction management would be an increase in cost of about$2,000,000 per month for an extension not exceeding 6 months.project Output The Project is expected to have a net generating capability of 1,093,000 kilowatts.

Although there is not yet sufficient historical operating information available on large nuclear plants to establish an expected plant factor for the Project from operational experience, the regional planning guidelines 51 assume a 75%plant factor for the Project.A 75%plant factor would result in the production of about 7.2 billion kilowatt-hours annually.During certain periods there will be times when surplus water will be available to generate power at existing hydroelectric projects thereby permitting a reduction in the total amount of energy produced at all of the thermal electric projects to be constructed under the Hydro Thermal Power Program, including the Project.Cost of Power Estimates of the annual costs of the Project's operations are given in the following table.The cost per kilowatt-hour of 14.5 mills is based on 7.2 billion kilowatt-hours at a plant factor of 75%.If the Project were to operate at a plant factor of 65%, the cost per kilowatt-hour would be approximately 16.0 mills.Esthnated Project Annual Costs Interest and Amortization(l)

.Payments to Reserve and Contingency Fund Insurance.Administrative and General(2)

...........

~Operation and Maintenance(2)

.Fuel(3)Taxes(4)Expense$61,323,000 6,132,000 1,595,000 3,866,000 11,085,000 25,400,000 1,445,000 Subtotal...,...........,...,..$110,846,000 Less: Surplus from Prior Year's Payments to Reserve and Contingency Fund(5)..(4,148,000)

Less: Interest Earnings(6)

.........................................

(2,329,000)

Total Annual Cost...........................................

$104,369,000 Cost per kilowatt-hour (7.2 billion kWh)14.5 mills (1)Based on level debt service, 35 year amortization and 7.0%annual interest rate on Bonds.Maturities of the Bonds may not be scheduled to yield level debt service throughout the period.Variations in annual costs will result from such scheduling to the extent actual debt service varies from assumed level debt services.(2)Costs are based'on the following:

a.1976 costs of labor and materials, escalated to 1983 at 6.0%per year, but not beyond.b.Operating costs characteristic of a mature plant.Operating costs during initial years are expected to be higher.(3)Based on average escalated cost of the first five years (1981-1985) of'reload fuel.(4)Calculated at 0.2 mills per kWh.(5)Computed.as follows: Payments to Reserve and Contingency Fund.............

$6,132,000 Less: Estimated amount required for renewals, replacements and additions.1,984,000 Net Surplus$4,148,000 Net surplus may be used for purposes other than reduction in power costs in accordance with the bond resolution.

(6)Computed on the basis of.7.0%interest earnings.52 Sale of Power The entire capability of.the Project has.been sold to 94 statutory, preference customers of Bonne-ville (" Participants"), which have executed Net Billing Agreements with the Supply System and Bonneville that provide for such sale and the assignment of the Project capability to Bonneville.

Sum-mary statistical information on the Participants is given in Table 1 at the end of this report.The Net Billing Agreements provide that each Participant shall pay the Supply System its share of the annual costs of the Project., The Participants, in turn, assign their shares of the Project capability to.Bonneville..Bonneville pays each Participant, in the form.of credits on its power bills from Bonneville or through cash payments, in the manner described in the OEcial Statement, amounts equal to the Participant's payments to the Supply System..The Supply System and Bonneville have entered into a Project Agreement which, among other things, provides standards for the design, construction and operation of the Project.Summaries of the Net Billing Agreements and the Project Agreement are included in the OEcial Statement to which this Summary Report is attached.Conclusions Based on our study and analyses of the Supply System's proposal to construct the Project, we are of the opinion that: 1.The output of the Project is required to meet the load growth of the utility systems of the Pacific Northwest and can readily be absorbed by Bonneville when the Project is scheduled for initial operation.

2.The Net Billing Agreements between the Supply System, each'articipant and Bonneville provide a sound basis for proceeding with the financing of the construction of the Project.3.The estimated costs of the output of the Project arc reasonable and comparable to costs expected for similar projects to be developed within the same time frame.We have furnished to you information contained in-the Official Statement under the captions"Estimated Project Financing Requirements","Estimated Cost of Power","Power Supply in the Pacific Northwest and the Hydro Thermal Power Program", except the material, relating.to Bonneville lawsuits, and in Exhibit I.In our opinion, the information contained therein is correct.RespectfuHy submitted, R.W.BECK AND ASSOCIATES

'53, TABLE 1i WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLE<AR PROJECT NO.2 PARTICIPANTS

SUMMARY

OF FINANCIAL AND STATISTICAL DATA Diststctstl) 19TS Stattsttcs Coopcratlvcs htnntctpatitlcs Total 1914'tailstlcs Total SrhTISTICS:

Customers:

Residential Total.Energy Sales: kWh (000)................

Energy Purchases:

kWh (000)Bonneville (Hanford Project Exchange)Bonneville Other.Total Energy Purchases kWh (000)Energy Generated:

kWh (000)..........

Total Energy Requirements kWh (000)Peak Demands: kW 339,435 387,747 14,921,458 1,805,&78 13,005,312 127,720 14,938,910 768 804 15,707,714 3,114,769 314,436 352,401 10,157,194 452,227 4,078,720 (944,528)3,586,419 7,251,775 10,838,194 2,069,139 141,363 170,231 41304,480 348,401 4,406,153 2,328 4,756,882 7,094 4,763,976 1,140P 10 795,234 910,379 29,383,132 2,606,506 21,490,185 (814,480)23,282,211 8,027,673 31,309,884 6,324,818 769,880 882,248 27,120,427 2,126,840 20,323,825 (842,206)21,608,459 7,535,154 29,143,613 6,027,984 OPERhTIONS:

P Income: Total Operating Revenues............

Other Income (Non.Operating)

.......Total Income OPERhTINQ ExPENsns: Purchased Power: " Bonneville (Hanford Project Exchange)Bonneville Other--.Total Purchased Power Expense., Generating Expense Total Power Supply Expense.....Depreciation Other Expense (Including Taxes)........Total Operating Expenses........CoNDENsED BhL*NGE SHEET: Assets: Nct Utility Plant Other Property and Investments

.......Current Assets..Deferred Debits Total Assets Liabilities:

Long Term Debt'urrent Liabilities

..................

-Deferred Credits-Reserves Contributions in Aid of Construction

..Retained Earnings..................

Total Liabilities

................

Percent Participation 134,342,195 3,293,173 104,124,966 2,476,299 59,574,987 874,295 298,042,148 6,643,767 137,635,368 106,601,265 60,449,282 304,685,915 6,449,292 50,284,863 711,952 57,446,107 6,936,972 1,491,676 1,623,556 15,937,332 17,011,671 (3,369,543) 12,168 14,059,465 7,951,978 18,647,395 29,258 9,564,524 83,233,866 (2,645,423) 90,152,967 14,918,208 64,383,079 13,331,056 38,535,994 116,250,129 22,011,443 16,671,749 49,894,888 8&,578,080 18,676,653 8,305,992 21,927,642 48,910,287 105,071,175 38,308,797 110,358,524 253,738,496 337,384,134 85,437,587 64,174,335 11,789,754 432,405,065 191231,476 34,234,098 12,045,549 233,159,813 10,574,557 27,745,285 946,589 1,002,949,012 115,243,620 126,153,718 24,781,892 197,890,598 31,170,802 8,929,774 827,646 11,433,219 248,533,771 2181132,429 26,315,357 2,355,810 5,173,521 12,625,830 233,313,241 198,791,806 10,826,616 1,658,618 229,132 915,684 60,004,388 614,814,833 68,312,775 12,944,202 6,230,299 24,974,733 541,851,400 498,785,810 497,916,188 56.868 22.639 272,426,244 20.493 1,269,128,242 100.00 498,785,810 497,916,188 272,426,244 1,269,128,242 246,468,157 5,415,848 251,884,005 6,660,891 61,247,539 (481,657)67,426,773 10.079,755 77,506,528 36,260,894 94,216,715 207,984,137 933,003,555 97,647,254 110,595,499 26,460,182 1,167,706,490 559,405,794 54,824,424 12,449,460

~4,276,961 22,194,864 514,554,987 1,167,706,490 100.00 (1)Public Utility Districts, Peoples'tility Districts, and 1 Irrigation District.54 EXHIBIT IH Burns and Roe, Inc.320 Fullon Avenue rI Heinpstead, New York 11550>Telephone (516)560-7070 TWX 510-222-4935 a Cable BUROE HEMPSTEADNY Main Office 700 Kinderkamack Road Oradell, New Jersey 07649 Board of Directors Washington Public Power Supply System Richland, Washington June 3, 1976

Subject:

Washington Public Power Supply System Nuclear Project No.,2 Gentlemen:, Burns and Roe, Inc.has been selected and retained by Washington Public Power Supply System to provide engineering, design and construction management services for Washington Public Power Supply System Nuclear Project No.2 (the"Project")being constructed on the U.S.Energy Research and Development Administration's Hanford Reservation, near Richland, Washington.

Burns and Roe's responsibilities cover engineering, design and certain quality assurance and con-struction management services and include preparation of plans and specifications, capital cost esti-mating, participation in site selection, participation in the preparation of applications and reports for such items as the Nuclear Regulatory Commission (the"NRC")construction permit and operating license and Corps of Engineers'ermits, economic analyses, surveiHance of vendor and contractor quality assurance programs, project scheduling, review of bids, expediting of.vendors and contractors, assistance in plant startup and testing, administration of construction contracts, coordination of con-tractors, coordinating a site safety program, establishing and administering a site security program and providing other related services to result in a complete and successful operating plant.The Project The Project will consist of a single-unit, boiling water reactor electric generating station having a nominal capacity of 1,100,000 kilowatts together with the necessary transformation, switching and related 500 kV facilities to interconnect the generating station with the 500 kV facilities of the Federal Columbia River Power System.The plant layout and design, which provides for the initial development of a single 1,100,000 kilowatt unit, includes consideration of the possible future expansion to a station with another generating unit.Following is a summary description of the electric generating station.The Project is located on the Hanford Reservation, approximately 3 miles west of the Columbia River and 12 miles north of the City of Richland.The plant will consist of a nuclear steam supply system, turbine-generator, cooling tower and river makeup water pumping and blowdown discharge facilities, together with associated structures, auxiliary equipment, instrumentation, controls and other accessories.

55 There will be seven basic structures comprising the.overall power plant.These are the reactor, radioactive waste, turbine-generator, diesel generator and service buildings (together comprising the main plant), cooling towers and circulating pumphouse, and river makeup water plant.The nuclear plant will contain a General Electric Company boiling water reactor of proven design, that will have a manufacturer's guaranteed rating of 3,300 megawatts thermal and will supply approxi-mately 14,295,000 pounds per hour of steam at 985 psia with fcedwater returned at 420 degrees F.Westinghouse, the turbine-generator manufacturer, guarantees that this steam will produce an output of 1,154,000 kilowatts of generation under expected conditions of operation.

After subtracting the electrical requirements for station operating auxiliaries, the net plant output will be approximately 1,093,000 kilowatts.

The tuibine-generator will be a tandem-compound, 6-How unit consisting of a high-pressure turbine section on the same shaft with three low-pressure turbine sections and the electric generator.

The gen-erator will be a three-phase, 60 Hertz, 1800 rpm unit rated at 1,231,700 kVA at 0.975 power factor and will generate at 25 kV.The turbine-generator plant will be complete with auxiliary systems, pumps, controls, instrumentation, electric switch-gear and fire protection equipment.

The circulating water pumphouse which provides condenser cooling water, fire system water and service auxiliary cooling water will be located south of the plant adjacent to six mechanical draft cooling towers.The condenser cooling water'will discharge from the turbine-generator building and return to the cooling towers.Makeup water to replace the evaporative losses of the circulating water cooling system will be obtained from the Columbia River by means of three makeup water pumps.Blowdown from the circulating water system will be discharged to the Columbia River downstream of the makeup water intake.,Diesel generators will be'included for emergency use in the event of loss of auxiliary, power.The diesel generators will'be housed in a separate concrete building located adjacent to the reactor building.The service building adjacent to the turbine-generator and reactor buildings will house offices, laboratories,.locker rooms, lobby, first-aid facilities,machine shop and storerooms.,Construction Progress and Schedule Construction of the Project was started in August, 1972 under a construction permit varian'ce granted by the Atomic Energy Commission (the"AEC"), the predecessor agency to the NRC.The construction permit was granted by.the AEC in March, 1973 at which'"time construction of the reactor building'substructure was started.'Construction of the remainder of the main plant-.was started in May,'1973.

Erection of the containment vessel was started in September, 1973.Cooling'tower construction was started in April, 1974.The reactor buHding substructure has been completed.

The containment vessel is essentially com-plete based on the original design of this vessel.However, as a result of problems encountered in boiling water reactors'presently in operation, the'General Electric Company has revised the design criteria for the containment vessel.Burns and Roe is presently redesigning the vessel and its internals to meet these criteria.The design modifications"basically involve'the addition of internal reinforcements.

The cost of these changes (estimated at less than$5,000,000) has been included in the present cost estimate, and'the changes are not'expected'to delay'the construction schedule.Tests are'being performed to substantiate the criteria'used"in the design modifications.

The results will not be'known until after the vessel modifications are well under way or completed.

Concrete work on the spray ponds and service water pump houses is complete.Work on the cooling towers is 72%'omplete and on the circulating water pump house is essentially complete.The reactor vessel and the turbine-generator'have'been delivered to the Project site.56 Delay has been encountered in the performance of the general construction.

work..On, January"24, 1976, the Supply System.terminated the major civil construction contract with Bovee Ec Crail Con-struction Company ("Bovee"), the contractor with prime responsibility for construction of the reactor, turbine-generator, radioactive waste, diesel generator and service buildings, on the grounds that the contractor had defaulted.

The question of default and" other issues are presently being litigated..

The structures of the turbine-generator and radioactive waste buildings'r'e now essentially complete.Concrete'ork on the reactor building is presently being continued under an interim contract, and the Supply System expects to award in August, 1976, a contract for the completion of this w'ork.Overall general civil construction is presently about.70%complete.The delays associated with-this contractor problem.have caused a delay in the Project schedule of approximately six months and a.consequent increase in the.estimate of the cost of the Project.The Project is currently scheduled to load fuel in June 1979 and achieve commercial operation by December 1979.As of April 1, 1976, overall construction was estimated to be 30%complete.A previous estimate, prepared in December 1974 indicated a commercial operation date of June 1978 for the Project.The 18 month difference between this and the current estimate of the Project commercial operation date refiects actual experience with critical path work on the completion of the containment vessel and the foHowwn work in the reactor building prior to the termination of the Bovee contract, and the estimate of additional time required as a result of that contractor problem.Construction Costs and Construction Contracts The total estimated Project construction cost of the, items under Buins and Roe's scope of responsi-bility as Engineer, Construction and Qualify Assurance Manager is$578,336,600 as shown in detail in Exhibit A attached to this letter.This estimate covers all nuclear electric generating plant equipment and construction including the main step-up transformers, Burns and'Roe engineering, construction and quality-assurance management, site consultants, and sales tax, contingency and escalation applicable to-the.aforementioned.

The total estimated Project construction cost shown in Exhibit A includes an allowance of$11,000,000 under"Schedule Delay" for the delay in the Project schedule caused by the default of Bovee described above.Nuclear fuel, owner's costs, interest during construction and any judgment rendered in the Bovee litigation discussed in the OEcial Statement to'which this letter is attached as an exhibit are not included in Exhibit A.It is estimated that the effect of schedule extension on the cost of, escalation, contingency and engineering and construction management would be an increase in cost of about$2,000,000 per month for ari extension not exceeding 6 months.The March 1976 cost estimate shown in Exhibit A indicates an increase in the total Pioject'on-struction costs over the'previous estimate prepared in December 1974.Such increase includes, where applicable, the effects of (a)escalation, (b)changes resulting from NRC and other regulatory require-ments, (c)termination of the major civil construction contract with Bovee, (d)plant improvements, (e)changes in scope of engineering and management services, (f)actual costs of awarded contracts, an (g)delay in the scheduled commercial operation date from June 1978 to December 1979.The total costs of equipment and" construction contracts awarded to March 1 1976 h are s own on x i i a tached to this letter and no substantial change has occurred subsequent thereto.The amounts for these contracts,$370,793,759, total approximately 83%of the currently estimated total irect construction and equipment costs including escalation but exclusive of sales tax, engineering, construction management, and contingencies.

All contracts were awarded, after competitive bidding, on the basis of the bidder's experience, qualifications, available personnel and facilities as well as price considerations.

57 Escalation and Contingencies Exhibit B shows those contracts which contain escalation provisions.

Escalation has been pro-vided in these contracts based on indices of the Bureau of Labor Statistics or other generally accepted industrial indices.Contracts not noted as containing escalation provisions are fixed price contracts.

In addition, provision is included in Exhibit A for escalation for contracts not as yet awarded at the rate of 8%per annum.An additional allowance of$30,643,000 was included in the estimated capital cost to cover unforeseen contingency items which may be necessary as the details of design are further, developed and as construction progresses.

Conclusions The Project will include a boiling water reactor of proven design furnished by the General Electric Company-a reactor type already in use in, under construction or planned for many large commercial utility installations.

The remainder of the plant is generally similar in design to conventional thermal plants except for the special considerations that are related to using steam from a boiling water reactor, and the components duplicate or are very similar to those which are now in successful commercial operation.

We have examined the plant equipment as to its feasibility, reliability and maintenance characteristics.

We determined that the proposed or contemplated items of equipment are either of presently proven design or reasonable extensions of such designs.It is our considered opinion, with respect to the Project, that: 1.The present plans and design are suitable for the site, and the site is suitable for the Project.2.The program for construction is realistic and a commercial operation date of December 1979 has a reasonable chance of achievement.

3.The work within the scope of our responsibility will be completed within the present cost estimate provided the date of commercial operation is not delayed significantly beyond December 1979.4.There are no major engineering or construction problems associated with the Project that require any untried design methods.5.The Project is feasible from an engineering and construction standpoint, is of acceptable commercial design and can be expected to operate reliably with normal maintenance.

6.The description of the Project and the statements and summaries of our estimates which appear in the Olficial Statement to which this report is an exhibit are correct and in conformity with, and a fair and adequate presentation of, the.information in this report.Very truly yours, K.A.Rom President and Chairman of the Board 58' EXHIBIT A ESTIMATED PROJECT CONSTRUCTION COST CoNsTRUGTIQN CosTs December 1974(1)March 1, 1976(2)-Structures and Improvements

......Reactor Plant Equipment.........Turbo Generator Units Accessory Electrical Equipment........Mscellaneous Power Plant Equipment...Station Equipment.Distributable Direct Subtotal-Construction Costs(3)$64,624,500 128 697,900 108,003,000 30,999,900 2,779,900 6,643,100 4,080,800$345,829,100

$115,635,500 123,064,900 117,709,300'3,325,800 30,189,400 3,465,400 5,492,700$438,883,000

" OTHER DIREGT CosTs Sales Tax Q 5%Engineering and Design Construction Man-agement, Site Consultants and Quality As-surance.Contingency

.Schedule Delay Nuclear Fuel&Sales Tax Owner's Cost Interest During Construction

......;.......

$17,291,500 57,818,000 26,478,200 Not Included Not Included Not Included$18 756 200 79,054,400

~~>>~30,643,000 11,000,000 Not Included Not Included Not Included Total Estimated Project Construction Cost.$447,416,800

$578,336,600 (1)Based on a commercial operation date of June, 1978.(2)Based on a commercial operation date of December, 1979.(3)Escalation has been distributed in the construction costs in accordance with the Supply System accounting system.59 AWARDED PROJECT EQUIPMENT AND'CONSTRUCTION CONTRACTS (As of March 1, 1976)Item Turbine Generator and Accessories Nuclear Steam Supply System....Condenser and Auxiliaries

.......Feedwater Heaters.............

Main Step-Up Transformers

.....Temporary Facilities

.~.........

Cooling Towers................

Reactor Building Substructure....

Primary Containment Vessel.....Turbine Room and"Reactor Build-ing Cranes.General Construction

...........

Standard Cast or Forged Steel Valves Diesel Generators

...............

Nuclear Valves Structural Steel............

Contractor

'estinghouse General Electric Westinghouse Southwestern Eng.Asea, Inc.Bovee&Crail Const.Co.Marley Corp.Stewart-Erickson PDM Steel Co.Whiting Corp.Bovee&Crail Const.Co., Walworth Co.Stewart and Stevenson.

Velan Valve Corp.PDM Steel Co.Contract"Award Date 5/2/67 3/23/71 1/14/72 1/14/72 7/14/72 7/24/72 9/22/72 10/20/72 10/20/72 3/9/73 3/30/73 7/13/73 7/13/73 12/3/73 3/12/74" Present.Contract Amount$35,166,447 54,'753,886(1) 3,267,186 2,817,842 2,020,003 1,565,464 7,324,796 2,434,113 8,556,681 1,064,115 28,257,624(2) 1,839,686 1,296,331 1;622,636 4,129,338 Mechanical Equipment Installation HVAC and Plumbing Installation Instrumentation and Control Boards Electrical Cable...............

Make-Up Water Pump House....Electrical Installation

..........

Turbine Generator Installation....

Architectural Construction

......Interim Construction Contract....Other MisceHaneous Contracts...Total Awarded Equipment and Con-struction Contracts...........

Bovee&Crail Const..Co.-Gen: Energy Resources Inc.The Waldinger Corp.General Electric Raychem McMillan Bros.Fischbach/Lord Elec.Co.Westinghouse Peter Kiewit Sons Inc.Wright-Schuch art-Harbor 5/10/74 5/10/74 6/17/74 7/9/74 12/27/74 2/14/75 4/28/75 5/23/75 2/26/76 103,613,808(1) 8,752,695(1) 1,908,002 2,016,939 4,155,503(1) 54,742,003 (1)2,987,916 8,728,384(1) 5,255,000(1) 22,517,361(1)

$370,793,759 (1), These contracts include a total of$61,380,000 for estimated contractual escalation.

(2)Supply System terminated this contract on January 24, 1976.60 EXHIBIT IV OPINIONS OF COUNSEL P ETTERHEAD OP WOOD DAWSON LOVE&SABATINB]P BTTERHBAD OP HOUGHTON CLUCK COUGHLIN&RILBY]Board of Directors Washington Public Power Supply System Richland, Washington

Dear Sirs:

Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976,$120,000,000 Principal Amount Year 1992........1993........1994........1995........1996........1997........1998........2006........2012........At your request, we have examined into the validity of$120,000,000 Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1976, of Washington Public Power Supply System (the"System"), a municipal corporation of the State of Washington.

Said bonds are issuable in coupon form, registrable as to principal only, in the denomination of$5,000 each, and in fully regis-tered form, without coupons, in denominations of$5,000 and any multiples thereof.The coupon bonds are numbered from 1 upwards and are dated June.1, 1976.The fully registered bonds are numbered from R-1 upwards and, except fully registered bonds initially issued, which are dated June 1, 1976, shall be dated so that no gain or loss of interest shall result from exchanges or transfers thereof as pro-vided therein and in the Bond Resolution hereinafter mentioned.

Said bonds mature on July 1 in each of the years and in the amounts and bear interest, payable January 1, 1977, and semiannually thereafter on January 1 and July 1, as follows: Principal Intcrcst Interest Year Amount Rate Rate 1982..~.....$875,000$1,755,000 1983........885,000 1,900,000 1984.....~..1,030,000 1,980,000 1985........1,095,000 2,205,000 1986........1,190,000 2,330,000 1987........1,320,000 2,475,000 1988........1,440,000 2,620,000 1989........1,485,000 42,300,000 1990........1,565,000 49,860,000 1991........1,690,000 Said bonds are subject to redemption prior to maturity upon the terms and conditions set forth therein, and recite that they are issued under and pursuant to Resolution No.640, adopted by the Board of Directors of the System on the 26th day of June, 1973, and a resolution supplemental thereto, Resolution No......., adopted by said Board on June, 1976 (hereinafter referred to collectively as the"Bond 61' Resolution"), and under the authority of and in full compliance with the Constitution and statutes of the State of Washington, including Titles 43 and 54 of the Revised Code of Washington, for the purpose of acquiring, by purchase or condemnation, and constructing a nuclear electric generating plant and associated facilities as a separate utility system constituting and to be known as the Washington Public-Power Supply System Nuclear Project No.2.We have examined the Constitution and statutes of the State of Washington, certified copies of proceedings of the Board of Directors of the System authorizing the issuance of said bonds, including the Bond Resolution, other proofs relating to the issuance of said bonds and an executed coupon bond of said series.In our opinion, the System is a municipal corporation of thc State of Washington, duly created and validly existing;the Bond Resolution has been duly adopted and the provisions thereof are valid and binding upon the System;and said bonds have been duly authorized and issued in accordance with the Constitution and statutes of the State of Washington and constitute valid and legally binding obligations of the System payable solely from the funds and revenues as set forth and provided in the Bond Resolu-tion on a parity with the System's presently outstanding Washington Public Power Supply System Nuclear Project No.2 Revenue Bonds, Series 1973, Series 1974, Series 1974A and Series 1975A, and any bonds hereafter issued on a parity therewith pursuant to the Bond Resolution.

It is to be understood that the rights of the holders of said bonds under the same and under the Bond Resolution and the enforceability thereof under the same may be subject to general principles of equity which permit the exercise of judicial discretion and to valid bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors.It is also our opinion that the interest on said bonds is exempt from taxation by the United.States of'America under existing laws, regulations and rulings issued by the Internal Revenue Service.Very truly yours, 62.

[LETTERHEAD OF WOOD DAWSON LOVE EC SAEATINE][LETTERHEAD OF HOUGHTON CLUCK COUGHLIN k RILEY]Board of Directors Washington Public Power Supply System Richland, Washington

Dear Sirs:

WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO.2 REVENUE BONDS, SERIES 1976,$120,000,000 Under the date of............, 1976, we rendered an opinion approving the validity of the bonds referred to above (the"Bonds")issued pursuant to resolutions adopted by the Board of Directors of the Washington Public Power Supply System (the"System")on June 26, 1973, and............, 1976 (coHectively, the"Bond Resolution").We have examined into the validity of the Project Agreement (Contract No.14-03-19121) between the United States of America, Department of the Interior, acting by and through the Bonneville Power Administrator, and the System, referred to in the Official Statement of the System, dated June 3, 1976, relating to the Bonds.With respect to the authorization, execution and delivery of said agreement, we have examined certified copies of proceedings of the Board of Directors of the System authorizing the execution and delivery of said agreement, and such other documents, proceedings and matters relating to the authorization, execution and delivery of said agreement by each of the parties thereto as we deemed relevant.In our opinion said agreement has been duly authorized, executed and delivered by each of the parties thereto and constitutes a valid and binding agreement enforceable in accordance with its terms.We have also examined into the validity of eighty-four of the Net Billing Agreements, referred to in said Official Statement, among the United States of America, Department of the Interior, acting by and through the BonneviHc Power Administrator, the System, and certain of the Participants referred to in Exhibit I of said Of6cial Statement, which eighty-four agreements provide for the purchase and assign-ment of an aggregate of 97.638%of the capability of the Project, as such Project is defined in the Bond Resolution, and include aH such Net Billing Agreemcnts providing for the purchase and assignment by any Participant of more than 0.701%of the capability of the Project.With respect to the authoriza-tion, execution and delivery of said eighty-four Net Billing Agreemcnts, we have examined certified copies of proceedings of the System and of the Participants which are parties thereto authorizing the execution and delivery of said eighty-four Net Billing Agreements, and such other documents, proceedings and matters relating to the authorization, execution and delivery of said eighty-four Net Billing Agree-ments by each of the parties thereto as we deemed relevant.In our opinion, each of said eighty-four Net Billing Agreements has been duly authorized, executed and delivered by each of the parties thereto and constitutes a valid and binding agreement enforceable in accordance with its terms.It is to be understood that the obligations of each of the parties to the Project Agreement and the Net BiHing Agreements and the enforceability thereof under thc same may be subject to general principles of equity which permit the exercise of judicial discretion and to valid bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors.

In rendering this opinion, we have relied upon the opinion of counsel for each of the Participants that the Net Billing Agreement to which such Participant is a party has been duly executed and delivered by said Participant and is not in conQict with, or in violation of, and will not be a breach of, or constitute a default under, the terms and conditions of any other agreement or commitment by which such Partici-pant is bound.Very truly yours, 64 Year Ending June 30 1977.........1978.........1979.........1980.........l981.........1982.......~.1983.~.....~.1984........~1985~........1986.~..~....1987.........1988....~....1989.~..~....1990.........1991.........1992.~.......1993.........1994.........1995.........1996.........1997.........1998.........1999.........6,432 7,719 7,719 7,719 8,594 8,556 8,652 8,660.8,695 (8,760 8,807 8,773 8,771 8,810 8,782 8,829 8,801 8,911 8,892 8,886 8,870 8,860 33,146 38,057'7,673 60,598 63,211 79,831 82,784 82,816 82,809 82,780 82,752 82,811 82,918 82,S86 82,906 82,946 83,046 82,993 83,052 83,097 83,119 83,240 13,405 15,808 15,808 70,000'0,083 132,743 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 138,237 21,999 29,400 31,637 67,739 110,905 122,189 123,044 123,044 123,044 123,044 123,044 87,199 87,206 87,185 87,169 87,155 87,147 134,488 134,488 134,488 EXHIBIT V SUPPLY SYSTEM NET BKLED PROJECTS(1)

Annual Costs ($000)~Estimated Estimated Debt Scrvicc Debt Debt Service Financing Service Estimated 1VPPSS No.2 hsued for Future Operation and 1976 Bonds(2)to Date(3)Finaneings(4)

Maintenance(5)

Estimated Amouats Nct Billed to Fund Res crvcs(6)24,949 8,316 0 36,929'4,999 25,380.4,230 Total 24,949 61,299 61,584 120,128 192,716 208,905 293,099 340,578 351,902 352,785 352,821 352,840 352,865 352,970 317,132 317,131 317,197 317,253 317,296 317,328'64,708 364,714 364,825 (1)Includes WPPSS Nuclear Project No.1, the Project and the Supply System's ownership share of WPPSS Nuclear Project No.3.(2)Based on an estimated interest rate of 6.7%for the 1976 Bonds.(3)Actual debt service on WPPSS Nuclear Project No.1 Series 1975 and 1976A Bonds, WPPSS Nuclear Project No.2 Series 1973, 1974, 1974A.and 1975A Bonds and on WPPSS Nuclear Project No.3 Series 1975 and 1976 Bonds.(4)Estimated debt service for future financings based on aost recent project costs computed using level debt service at 7.5%.(5)Estimated operating costs for mature plants operating in a normal year.Assumptions used in the calculation are: a.1976 cost levels escalated to 1983 at 6.0%%uo per year.b.Date of commercial operation is based on"milestone" dates.c.Plants are assumed to operate at a plant factor of 60%%uo the first year and 75%%uo thereafter by PNUCC guidelines.

d.For the period through 1996,'payments made for Nuclear Project No.1 by five investor owned utilities will reduce the total annual costs for such project.(6)Includes funding of working capital, Reserve and Contingency Funds, and Reserve Accounts in Bond Funds.65 EXHIBIT VI BONNEVILLE POWER ADMINISTRATION PROJECTED REVENUES ($millions)Year 1976 TQ 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988, 1989 1990 1991 1992 1993.1994-;......

1995 BPA Revcnaes 296.0 71.4 316.6 328.9 350.6 485.3 559.9 658.8 703.5 743.7 758.7 759.3 739.8 749.2 750.6 758.3 755.9 754.5 753.0 751.2 750.1 (3)Cost of Power AcqaMtion WPPSS Other 0 39.3 0 10.0 34.0'3.4 61.4'8.3 76.2 38.4 138.3'7.9 196.7 33.9 230.0 34.8 305.0 34.8 343.5 34.8 352.1 34.8 352.8 34.8"'52.8 34.8 352.8 34.8 353.0'4.8 344.1 34.8 317.1'4.8 317.1 34.8 317.1 34.8 317.3 34.8 317.3 34.8 (4)SPA OEM ExXeuse 51.5 13.0 54.9 56.8 59.3 62.3 66.0 68.6 70.6 71.5 71.5 71.6 71.7 72.1 72 7 732 73.3 73.4 73.5.73.5 73.6 (S)Remaining JJPA Rcvenaes 205.2 48.4 184.3 172.4 176.7 246.8 263.3 325.4 293.1 293.9 300.3 300.1 280.5 289.5 290.1 306.2 330.7 329.2 327;6 325.6 324.4 NOTzs Column (1)-Fiscal Year.~.1.Fiscal Year1976 commences July 1, 1975, and terminates June 30, 1976.2.The transition quarter (TQ)commences July 1, 1976, and terminates September 30, 1976.3.Fiscal Year 1977 and subsequent Fiscal Years begin on October 1 of the year preceding, and terminate 12 months later.Column (2)-BPA Revenues 1.A rate increase which will increase revenue by approximately 40 percent is forecasted for December 20, 1979 (three-fourths of'Fiscal Year 1980), and is based upon (a)the presently forecasted additional costs to Bonneville

'for the ac'quisition of the capability of the Supply'System's Nuclear Project'No.'

starting in 1980,'lus (b)th'e overall cost escalation which has occurred since Bonneville effectuated its last rate increase as of December 20, 1974.Becaus'e the Bonneville rates, by'irtue.of existing power sales contract provisions, cannot be increased untH December 20, 1979, the increase estimated to be required as of that date will have to provide for a significant amount of catch-up to cover the cost escalation.

This 66 estimate of future revenue increase requirements is believed to be conservative in that it makes no provision for additional cost escalation which may occur between the present and December 1979;i.e., if costs continue to escalate during that time, a larger increase could possibly be necessary.

2.A rate increase which will increase revenues by approximately 20 percent is forecasted for July 1, 1981 (one-fourth of Fiscal Year 1981)to cover additional costs, principally for the acquisition of the capability of the Supply System's Nuclear Project No.3 commencing in 1981.3.A rate increase is not indicated after 1981.However, if costs increase, a rate increase could be effected on July 1 of each year, subject to new or revised power sales contract terms providing for annual rate review.Column (3)-Cost of Power Acquisition 1.The column"WPPSS" includes the Supply System's Nuclear Projects Nos.1, 2 and 3 and the Hanford Project.2.The column"Other" includes the City of Eugene's 30 percent sharc of the Trojan Project and the purchase of secondary energy.The estimate as to the purchase of secondary energy is obtained from load forecasts and is also used in computing revenue estimates.

3.The figures in the column"WPPSS" are from cost estimates developed by the Supply System and indicated in Exhibit V, adjusted, commencing July 1, 1976, to the Transition Quarter, and, thereafter to Fiscal Years commencing October 1.Column (4)-BPA Operation and Maintenance Expense The estimates for Bonneville's operation and maintenance expenses are based'on budgeted figures~for Fiscal Years 1976 and 1977.Commencing in Fiscal Year 1978, the estimates are computed using the Fiscal Year 1977 figure as a base and increasing that number by a percentage of annual plant-in-service additions.

This percentage is based on a study of historical data.Column (5)-Remaining BPA Revenues Remaining BPA Revenues are available for financing Bonneville construction and for payments to the Treasury for Corps of Engineers and Bureau of Reclamation operation and maintenance costs, annual interest expenses of the Federal System, and amortization of the power facilities financed from appropriated funds.Provided by Bonneville Power Admin-istration, Divisions of Power Manage-ment and Management Services, May 21, 1976.67