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{'a Washington Public Power Supply System A JOINT OPERATING AGENCY e,..)
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P. O. BOX 968    301 FIFTH AVE. RICHLAND,WASHIN GTO N 99352  TELEPHON E (5091946-9681 July 10, 1974 G03-74-29                ._ C-
                                                                                              /[\. ' .. . ..
                                                                                            . < . '/
                                                                                          /                  .. ?
Mr. Edson G. Case                                                          :El.          -
Acting Directorate of Reactor Licensing                                    Ci 'Tic, USAEC                                    ,
Washington D.C.          20545~                                                4(1        -
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                                                                                              <..                            l
 
==Subject:==
HPPSS flVCLEAR PP,0JECTS N0. 3 Afl0 5                                                        ,
PRELIMII:ARY SAFETY Ai!ALYSIS REPORT                                  '4-' ~~          -
                                                                                                                      ~
!                        PROJECT STf-501                                                                                    I
 
==References:==
: 1) Letter, A. Giambusso to J. J. Stein, Project f! umber STN-501, April 15,1974.
: 2) Letter, GC3-74-357, J. J. Stein to J. F. O' Leary, Same Sub.iect. June 4. 1974.
 
==Dear Mr. Case:==
 
          ' Washington Public Power Supply System (WPPSS) submits herewith, the following documents in support of our application for construction permits for WPPSS th'-lear Projects !! umbers 3 and 5.                                                          l Ten (10) cc71es of Licensing Applications Fifteen (15) copies of Preliminary Safety Analysis Report The application as tendered is for a two unit project to be located near Satsop in Grays Harb6r County, Washington.
                                                ,                                                e The second unit      (WPPSS    J    lluclear Project flo. 5) has been added to the application as a res0lt of action taken by the florthwest Public Power Council and the WPPSS Board of Directors since the Wt:P-3 application was initially submitted for staff review on fiarch 4,1974. Each unit will utilize a Combustion Engineering " System 80" fluclear Steam Supply System.
The two units'are identical with no shared Class I facilities or systems.
Shared facilities will include the off-site power sources, intake and discharge lines, water and sanitary waste treatment facilities and certain parts of the plant fire protection system.
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z                                                                                                            .
Mr. Edson,G.-Case                                                                                                                                                                            ,, ,
    .              .Page 2 The Preliminary Safety Analysis Report has been revised to incorporate the addition of Wi;P-5 and to respond to questions raised during the Wi!P-3 completeness review. All items listed in Mr. Giambusso's letter of April 15,1974 (reference 1) as being _ required-for docketing, have been responded to and included in the PSAR except as noted in our letter of June 4,1974 to fir. 0' Leary (reference 2). Responses have also been provided to as many of the requests for additional information (not required for docketing) as possible at this point. To assist the reviewers, a list of the completeness review questions and the location of the responses 'is included following Chapter 17 of the PSAR.
As noted in our letter of June 4,1974 to Mr. O' Leary, the Environmental Report is scheduled to be submitted on August 15, 1974. It is our under-standing from discussions with members of the staff that additional copies of the anti-trust information are not required at this tic.e.
Additional copies of the PSAR and applicatien ' fill be provided upen notification by the staff of the satisfactory ccepletion of the comolete-ness review.
Very truly yours,
                                                                                                          ) $          .> L.                                                  ..-
s  :.
d <? d . b i b l:1 Managing Director JJS:GCS:ct Enclosure cc: fir. J. D. Knotts, Conner, Hadlock & Knotts Mr. G. C. Sorensen, Fashington Public Power Supply System Mr. P. J. Hannaway, Ebasco Services, Incorporated l
 
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                                              *^                                                                              '
p f J G / R A L.
                                                                                                                                                                                                                                                              $t;/1N/7 Irk)
                                                                                                                                                                                -s
  ~
the Board has made both findings of fact relating to the radiological health and safety issues s                                                                                                                                        'cified in the Notice of Hearing, a                                                                            appropriate co clusions of law, as set out below, along wl h our orde                                                                                                                        ruling on the matter of issuance of construct on per                                                                                                              ts for WNP-3 and WNP-5.
In making the followin                                                                                              ndings and conclusions, the
                                                                              .                                                                                          \
Board r.eviewed and consider d the entire record of the pro-ceeding and all of the proposed findings of fact and conclu-sions of law submittedeby the partles.                                                                                                                                      All such proposed findings of fact and /conclusions of law which are not '
                                                                                                                                /'
incorporated directly.or inferentially in this Initial
                                                              /
                                                                                                                    /
Decision are hereby rejected as being unsupported in law or in fact, or as being unnecessary th the rendering of x
this Initial Decision.
II.                  FINDINGS OF FACT - GENERAL HEALTH AND SAFETY MATTERS f
A.            FINANCIAL QUALIFICATIONS I
: 1.              Washington Public Power Supply System is a municipal corporation and joint operating agency of the State of Wash-ington, organized in January 1957 pursuant to the laws of the State of Washington.                                                                      WPPSS.is composed of 19 operating public utility districts and the cities of Richland, Seattle, and Tacoma, Washington, each of which operates an electrical distribution system within the State of Washington.                                                                                                                                                            WPPSS
 
e;                      -
        ,              i a                4
                                    /                                                  .
i is' empowered to acquire, construct and operate facilities
                          -for the generation and transmission of electric power and energy, but does not~ engage in the distribution of electric energy at retail.    .( Appl,icant's Exhibits 1 and 54; Staff Exhibit 16; Perko, Tr. .following p.      598.)
: 2. WPPSS does not have rates.and is not subject to the
                          -jurisdiction of any regulatory agency having control over rates. Rather, WPPSS is reimbursed for the cost of each project, including debt service, by the purchasers of the
          .              capability of that project.      'Ir. this r.egard, the entire electrical capability of WFPSS' 70% ownership share of WNP-3 r
has been purchased by 103 publicly and cooperatively owned utilities (" Participants"),-3/ all of whom are statutory preference customers of the Bonneville Pow $r Administration
("BPA"). The remaining 30% ownership share of WNP-3 has been purchased by four investor-owned utilities (" Companies") in the following undivided portions:        Pacific Power and Light Company (10%), Portland General Electric Company (10%),
t The Washington Water Power Company (5%), and Puget Sound 3/  The respective portions purchased by each Participant are set forth in the formal Application (Applicant's Exhibit 1). A portion of WPPSS' 70"> chare of the
              .                WNP-3 output will be sold to 15 industrial customers of the Bonneville Power Administration from the date of commercial operation through June 30, 1984, pur-suant to a " Power Sale Agreement".
5 I
l
 
                                                                                  .N                                                                      l l
  ^*          mm N
power and Light Company (5%).    (Applicant's Exhibits 1
                              's' and 54; Staff Exhibit 16; Perko, Tr. following p. 598.)
: 3. WPPSS estimates its total cost for WNP-3 to be
                          $970 million. This estimate includes total nuclear pro-duction plant costs ($910,536,000) , . transmission and general plant costs ($14,989,000), and nuclear fuel in-ventory cost for the first core ($44,475,000).            (Perko, Tr. following p. 598.)
l                              4. The Participants have executed " Net Billing Agree-
                                ~
4/
        .                ments"    with WPPSS and BPA which provide that the Participants' portion of WPPSS' 70% share of the capability of WNP-3 will be sold to the Participants, which in turn will assign the capa-l                        bility to.BPA. The Net Billing Agreements provide that BPA j,                        will then credit the payments made to WPPSS by each Participant l
l                          for its proportionate share of the WMP-3 annual costs (including debt service) against billings made by BPA to the Participant for power and services. All Participants are obligated by the Net Billing Agreements to pay their proportionate shares to WPPSS whether or not WNP-3 is complete, operable or operating, and notwithstanding the suspension, interruption, interference with, reduction, or curtailment of WNP-3.          Further, BPA will 1
i l
4/  A form of Net Dilling Agreenent is set forth in Exhibit i                              A to WPPSS' formal Application (Applicant's Exhibit 1).
 
_g.                      .
  >~
            ~ ~ ,      1
                            )                                                                    1 l
I credit all payments made to WPPSS by the Participants ir-            I N.
respective of energy actually received by BPA.      Thus,-there f
is assurance that the Participants will possess the necessary funds to bear their share of costs for WNP-3 irrespective of
          )                operation of that' project. In the event of a default by a Participant, the remaining Participants are obligated to l
automatic step-ups<in their billings (by.as much as 25%) to satisfy the total obligations of the Participants.        Thus, there are three levels of security .for rersyment of bonds '
          '                and notes issued by WPPSS to finance its 70% share of NNP-3.
The first level of security is the revenues to be derived b.
from operation of WNP-3. The second level of security is the Net Billing Agreements pursuant to which the source of funds for payment of project costs is not dependent on actual project revenues. The third level' of security is the obliga-tion of the United States Government (through BPA) to provide power and credits to the Participants irrespective of opera-tion of WNP-3.    (Applicant's Exhibits 1 and 54; Staff Exhibit
          >                16, Perko, Tr. following p. 598.)
: 5. Permanent financing of WPPSS' 70% ownership share Of WNP-3 is effected by issuance of long-term debt securities of the revenue bond variety.      State of Washington law (R.C.W.
            -                S43.52.3411) provides that WPPSS may issue revenue bonds payable from the revenues of the utility properties operated by it. WPPSS' Board of Directors has adopted a project plan t
 
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                                                          ,  -9 i
and system resolution for WNP-3, as well as plan and system resolutions for issuance of revenue bonds for WNP-3. These
        -                    resolutions serve.as the indentares to the buyers of the securities in which certain covenants'are made to such buyers. The bonds or notes of WPPSS are negotiable instru-i ments and legal securities for deposits of public monies, are legal investments for trustees and other fiduciaries, and for savings and loan associations, banks, and insurance companies.    (Perko, Tr. following p. 598.)                          J 6 .# WPPSS has a record of successful financing of gener,ation projects. WPPSS began construction in 1962 and is now operating the Packwood Lake Hydroelectric Project
                              *(27,000 kW). Construction costs of this project were financed by the sale of revenue bonds in the amount of $13,700,000.      All costs, including debt service, have been paid on a current basis and, excess construction funds have been applied to retire $519,000 par value of bonds ahead of schedule.      In addition, S415,000 bonds have been retired according to the
          ',                    original retirement schedule.      The project output is sold to
      .t                      12 public utility districts.      Operating revenues for fiscal year 1976 totaled $782,259. (Perko, Tr. following p. 598.)
: 7. WPPSS also successfully financed and constructed, and il now operating, the Hanford Generating Project (860,000 kw), which utilizes by-product steam produced in
 
r-                                                                                      :
s the dual purpose N-Reactor of the United States Energy Research.and Development Administration ("ERDA") on'the Hanford Reservation. Construction costs were financed by the sale of revenue bonds in 1963 in the total amount of $122,000,000. All~ costs, including debt service, have been paid on a current basis and, in addition, excess con-struction funds have been applied to retire $34,825,000 par
          ~
value of bonds ahead of schedule. In addition, S28,265,000
                          . bonds have been. retired according to the original debt
              .            retirement schedule. The project output is sold to 76 power
            ;              purchasers, including public utility districts, municipal-
      ,                    ities, rural electric cooperatives and investor-owned utilities in-the Northwest region. Operating revenues for fiscal. year 1976 totaled $29,690,579.  (Perko, Tr. following
: p. 598.)
t
: 8. WPPSS is currently constructing its Nuclear Project No. 1 ("WNP-1") (1250 mw) located on ERDA's Hanford Reser-vation near-Richland, Washington. WNP-1 is being financed 1
l              pursuant to Net Billing Agreements similar to those executed t              for WMP-3. In September of 1975., WPPSS issued the first long-term revenue bonds to finance this project, and a total 1
of $535,000,000 in long-term debts has been issued to date.
These securities were rated Ana by Moody's Investor Service, l
L i
 
                            - Inc. and AAA by. Standard and Pocr's Corporation. ~5/                                                                                                                  Commer-cial operation is scheduled for January 1982.                                                                                                                    (Perko, Tr.
following p.          598.)
: 9. WPPSS is also currently constructing WPPSS Nuclear Project No. 2 ("WNP-2") '(formerly Hanford No. 2) (1100 mw) which is also located on the Hanford Reservation.                                                                                                                    WNP-2 is
        ,                    being financed in the same manner as WNP-1 and WNP-3, with the entire capability being sold to public and cooperatively o
owned utilities under similar Net Billing Agreements.                                                                                                                    In July of 1973, WPPSS issued the first long-term revenue bonds to finance WNP-2, and a total of $800,000,000 in long-term debts has been issued to date.                                                                                                                    These securities were rated Aaa by Moody's Investor Service, Inc. and AAA by Standard and Poor's Corporation.                                                                                                                    Commercial operation is scheduled
                                          ~
for September 1980.                                                                            (Perko, Tr. following p. 598.)
: 10.      WPPSS has also begun work on WPPSS Nuclear Project No. 4 ("WNP-4"), a duplicate of WNP-1, located on the Hanford Reservation.                                                                                  WNP-4 is being financed with WNP-5 as one system, and the project financing approach
                              ~
5/        The Atomi~c Safety and Licensing Board in Wsshington Public Power Supply Sys, tem (WPPSS Nuclear Projects Nos. 1 and 4) 2 URC 922, 927 (December 22, 1975),
concluded that WPPSS possessed or h?d reasonable assurance of obtaining the funds necessary to cover
              ,                          estimated construction costs of WMP-1 and related, fuel cycle costs.
                      .      6/        The Atomic Safety and Licensing Board in Washington Public Power Supply System (WPPSS Nuclear Project No. 2) 6 AEC 197 (March 15, 1973), ccn:luded that the record was adequate to support fi.r. dings subse-quently made by the then Director of negulation that WWss wnn financially quali fled te construct WNP-2.
 
ac              .
  ; ..?                                                                                            ,
E
                              'will'not be altered,'although there are"some differences in the underlying contractual arrangements.        These arrange .
                              -ments, and the financing history of WNP-4 and WNP-5, are discussed herein, infra, at paragraphs 13-17.
: 11. WPPSS has.also issued $250 million of long-term l
          -{                  ' revenue bonds for WNP-3.    .These long-term securities were i
            ..                  rated Aaa.by-Moody's Investor Service, Inc. and AAA by Standard and Poor's Corporation.      These and all subsequent issues'are earmarked as being for WNP-3 and proceeds of the sale of securities may be expended for that project only.
Corr spondingly, revenues associated with contracts for the sale and purchase of the output of WNP-3 may be applied only to WMP-3 costs, including debt service.        To continue financing WNP-3, in addition to the $250 million revenue bonds already sold, WPPSS will issue approximately $720 million dollars of its tax exempt revenue bonds in series from time to time during the period of construction.            Each series of bonds issued will be on a parity with other bonds issued.    (Perko, Tr. following p. 598.)      Based upon the I              foregoing, the Board finds that WPPSS'is financially
                              ' qualified in terms of 10 C.F.R. 550. 33 ( f) and Appendix C to 10 C.F.R. Part 50 to design and construct WMP-3 in that WPPSS possesses or has reasonable assurance of obtaining the funds necessary to finance its share (70%) of those activities and related fuel cycle costs.
 
4:            ,
1-
  ,            s.
                        \'      -- 12. The Companies have executed " Ownership Agreements"~7/
with WPPSS which provide that each of the Companies will pay its respective portion of the costs of acquiring, constructing, and operating'WNP-3, as well'as of WNP-3' annual operating--
        .                      costs. The Companies also-are obligated by the ownership Agreements to make payments whether or not WNP-3 is complete, I                      operabic or operating, and notwithstanding interruption or        -
curtailment of output of WNP-3. The respective shares of the 30% aggregate- which the four investor-owned electric utility
        .                    Companics have agreed to purchase are set forth in paragraph 2, supra. The Companies are financing their respective shares individually in the same manner as the balance of their re-spective construction programs, viz., short-term borrowing, sale of equity securities, proceeds from first mortgage bonds, internally generated funds (including retained earnings, depreciation and deferred taxes), leases or other executory arrangements and other secured and unsecured transactions or 8/
construction financing.-      The Board finds 'that each of t'he four investor-owned Companies which have purchased an aggregate of 30% ownership interest in WNP-3 is financially qualified 7/    A Torm of ownership's Agreement is set forth in Exhibit
              .                      A to WPPSS' formal Application (Applicant's Exhibit 1).
8/
                              ~
Current annual reports for the Companies are set forth in PSAR Amendment 39 (Applicant's Exhibit 54).
i 1
 
[    ,
;                                          /
'                                                                    14_                    -
_.        '' in terms of 10 C.F.R.          550. 33 (f) and Appendix C to 10 C.F.R.
Part 50 in that each. possesses or has reasonable assurance of obtaining the funds necessary to finance its respective share of design and construction costs for WNP-3, including
        ;                        related fuel cycle costs.        (Applicant's Exhibits 1 and 54; Staff' Exhibit 16; Perko, Tr. following p. 598.)
i
: 13. With respect to WNP-5, WPPSS owns a 90% undivided interest as a tenant in common with Pacific Power and Light Company, which owns the remaining 10% undivided interest.
9/
WPPSS has executed " Participants' Agreements"~ with 88 public and cooperative utilities (" Participants"), which will purchase the entire capability of WPPSS' ownership share (90%) of NNP-5, and the entire capability (100%) of WNP-4, which is wholly owned by WPPSS.      The ownership shares of'WPPSS in WNP-4 (100%) and WNP-5 (90%) will be financed in the same manner as WNP-1, WNP-2 and WNP-3, viz., through the issuance of i
revenue bonds.      All projects heretofore undertaken by WPPSS,      I except WNP-4 and WNP-5, have been financed as separate systems.
As noted, WPPSS' cwnership interests in NNP-4 and WNP-5 will be financed together as one system, and the project financing approach used for WNP-1, WNP-2 and WNP-3 and discussed in 9/    A form of Participants' Agreements and the respecti've portions purchased by each Participant are set forth in PSAR Amendment 39 (Applicant's Exhibit 54).
t
                                )
e                                          I e
 
                .0 detail herein, suora, paragraphs 4 - 9, will not be altered.
(Applicant's Exhibit 54; Perko, Tr. following p. 598.)
: 14. WPPSS estimates its total cost of WNP-5 to be
                    $1,718,661,000. This estimate includes total nuclear pro-    -
duction plant costs ($1,539,207,000), transmission and general plant costs ($19,271,000), and. nuclear fuel inven-tory for the first core and reload fuel ($160,183,000).
(Perko, Tr. following p. 598.)    .
: 15. Under the Participants' Agreements, WPPSS receives a promise from the Participants that each will pay a portion of -the costs of acquiring, constructing and operating the project (WNP-4 and WNP-5). Each Participants' portion of such costs includes the amount required each year to pay the interest and a portion of the principal on the bonds outstanding, plus the Participants' share of the annual operating costs. The first level of security for repayment of bonds is the revenues to be derived from operation of the project. The second level of security is that the Participants are obligated to make payments whether or not the project is completed, cperable or operating, and notwithstanding inter-ruption or curtailment of output. Thus, the source of funds for the payment of project costs is not dependent on actual project revenues, but is insured on a broad base through the    .
OblivaLivu vf the public and cooperative entities. Assurance l
 
,..                                                                          that such obligations'can be met is provided in-that the Participants covenant to increase rates to the level necessary to meet their obligations to WPPSS set forth in the Participants' Agreements.      These rates are not subject to review or approval by any State agency.      In the case of.
i              default by a Participant, each other Participant in its
      .,              class (i.e., cooperative or public agencies) promises te step-up their respective obligations by as much as 25%.
(Applicant's Exhibit 54;.Perko, Tr. following p. 598.)
: 16. To finance NNP-4 and WNP-5, revenue notes in the amou$tof$15,000,000 were sold in August of 1974 for the preliminary planning and progress payments. These notes matured and were retired on June 15, 1976. In addition, short-term revenue bonds in the amount of S100 million were sold in July of 1975, and long-term revenue bonds in the aq.ount of S145 million were sold in February of 1977. Most recently, on May 24, 1977, long-term bonds in the amount of $90 million were sold by WPPSS.      These r
bonds were rated A-1 by Moody's and A+ by Standard and Poors.    (Tr. 606-07.) To continue financing WNP-4 and its ownership's share of WMP-5, in addition to the S335
              .        million revenue bonds already sold, WPPSS .till issue approximately $3.1 billion of its tax-exempt revenue          .
bonds in series from time to time during tne period of s
i_
 
+
i w-      ..
cv                                                                                  .
                                                          -17_
                        . construction (Perko, Tr.'following p.
598). Based upon
                        .the foregoing, the Board finds that WPPSS is. financially.
                        . qualified in terms _of 10 C.F.R. 550.33(f) and Appendix C to 10 C.F.R. Part 50-to design'and construct WNP-5 in 5
that WPPSS possesses.or has, reasonable assurance of E              obtaining the funds necessary to finance its share (90%)
of those activities and related fuel cycle costs'.--10/
: 17. Pacific Power and Light Company ("PP&L") has executed an " Ownership Agreement" Qith WPPSS to purchase 11/
                                          ~~
10% of WNP-5.        PP&h will finance its ownership share of WNP-5 in the same manner as the balance of its respective construction programs, viz., short-term borrowing, sale s              of equity securities, proceeds from first mortgage bonds, internally generated funds (including retained earnings,
            ,            depreciation, and deferred taxes), leases or other executory arrangements and other secured and unsecured transactions or construction financing. -~12/  The Board finds that PP&L is 10/ As noted, WNP-4 and WPPSS' share of WNP-5.will be
                          ~~
            ?                    financed as one system. We' note that the Atomic        !
            .                    Safety and Lic0nsing Board in Washington Public Power St}pply System (WPPSS Nuclear. Project No. 4) in its Memorandum and Order dated Sept:mber 7, 1976, stated that it could at that time "maka a favorable conclusion of law on the financial qu?.lifications issue for h'?iP-4." HCWeyer, the Board in WNP-4 de-
                .                ferred issuance of the decision on fir:ncial quali-fications to await resolution of certain unrelated outstanding matters.
* 11/ , A copy of the Ownership Agrecrent betwoon PP&L and
                                'WPPSS is set forth in Exhibit H to WJ?SS' formal Application, as amended by PSAR Amendment 39 (Applicant's Exhibit 54).
h
 
4                                                                .                                                                                                                                                                                            fina'ncially quali fied in terms of 10 C.F.R. S50. 3 3 (f) and Appendix C to 10 C.F.R. Part 50 in that it possesses or has
                            ,                                                                                  reasonable assurance of obtaining the funds necessary to finance its share (10%) of design and construction costs for WNP-5, including related fuel cycle costs.                                                      (Appli-cant's Exhibits 1 and 54; S'taff Exhibit 16; Perko, Tr.
                            .                                                                                  following p. 598.)
B. DESCRIPTIDN AND SAFETY EVALUATION OF THE FACILITIES
: 18. The fabilitles are to be loca cd on a 2450-acre sitefin southeastern Grays Harbor Co        ty, Washington, one mile southeast of the confluence o        the Satsop and Chehalis Rivers, and approximately 26 mil.s west-southwest of Olympia,
                                                                                                              -Washington. The exclus' ion are is approximately circular in shape with a minimum bou\ndar distance of 4,300 feet (1,310 motors) measured approxim    ely from the center of either reactor building. The , p1' cant currently owns all portions
                                  ',                                                                            of the exclusion area    equir      for plant construction activities. Further    the Appl cant"has obtained by ease-I                                                                                                              ment the authority    o determine Til activitics within the exclusion area, IIcluding exclusi n or r_:a val of peracnnel
                                                                                                                                /
and property, with the exception o        two parcels.                                                Negotiations 4
                                                                                                                              /                                        .
are ongoing between the Applicant a d the                      tners of those parcels for easements similar to thos- obtained by the
                                                                                                                          /
Applicant from other landowners in the cyclusion area.
In the event that those negotiations 3r., net aucecasful,
 
i
                                                                          . . .                . . . . .                    . - . . - - ~ ~                          - - ~---
8        N*    -
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h'                      s' I
g                                                                                                                                                NUREG.0023 Suppl. No.1
)    ,1,            ,                                  3 mYes on 1      .,
l      %                                                                                                    Regulatory o i                        relSted to Construction Of                                                                                                                                -
Office of Nuclear I.
Reector Regulation l ;. .: Washington Public.. Power .
                    ':                                            ''                                                                                                          Docket Nos. STN 50-508
! l'.jSupply Sys' tem' Nuclear                                                                                                                                                '
                                                                                                                                                                                                    .1,                  . .
PProjects No.'S and                                                                                No. 5 " -
                                                                                                                                                              '"'~                                      June 1978 W
N-9.'.? .
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a~        ,8.enn.,
e                                    . >- -                                      :.,          :
ff Washington ymg.%sblic Poinnw"'                                                          .;.
                                                            ~.:n . n q:g.w.jSupply System, et al. .                                                        ,.',.s                                                                    .
i J @y-#::..:;ist No.1 .
: 3.      ,. .
                                                                              *,                                                                  i *' g ,
                                                  .1 J '
                                                                                                                                                  +;>
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                                                                                                                                                                                                                              )
1 1 .%. (
_ , . _a
                      'f                                                                                                                                        ,
e;                                                                                                                                        s          .
s.s 9
                                                                                                                                                    .k:p                                j .
        't
_syT-    .
                                                                                                                                                          , p .p ,              ..
1
: J .n; h .1
                                                                                                                                                                  +
                                                                                                                                                    ,$n.                            s r .'
E'                                -
                  .        jylt-n.
4
                                                                                                                                                                . .M. . ... .y              . .yhrh
                                                                                                                                                                                                . dp ,
 
            ,f--%p,*'-                        '
g z
                      -o '7f y' %
                                                            .  .....-c..+,                                                                              .-                                      . , .9%                                        . ..
                                                                                                                              . a., : ~.4%p.;.,y;                            6. ;> ( Q43:;.,s.y,&qhf, asav f        ..                                                                                                      ,
y, f g@y'y-
              .n u..v, -
c
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                                              .r
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c..    ..
c 4?,9. .-;s;,,,
e
                                                                                                                                                              ,.. .m,,3. .
( g; -
                                                                                                                                                                                              ,        .e.
m
                                                                                                                                                                                                              <5%
s ., .n.
g g: ,                                        f          ,
ws.                                  -
                                                                                                                                        ,7
                                                                                                                                          . .# N m s                                  .
                  "w. .'-.                                                                              .
                                                                                                                                                . ...s
                                                                                                                                                    . , . , . . m. .
                                                                                                                                                        .          ..~
                                                                                                                                                                      ~ siof Nf s 4.* c    ,h
                                                                                                                                  ,.            ' I8'
                                                                                                                                                            -n..
                                                                                                        . 6 .f; -QQd.QSM4;N .
Ms%;fO                                                    -              .                                                                                                              fa r .
                                                                                                                                                                                                                            ~
N, CfWO                                                                                                  }h}.l                                      ff??
                                                                                                                                                                                                              ~
  ..              i z, D:.                                                                                          %CV.sQ                                            f'                    . . . .                    ., ,
h ll4lQf.K;Q'w:ggM@p;[.~..
                                            ._                                                              ,4..-
                    ,,_m
                    .,                        : . ,.,,,,,,<. &.              ~..
                                                                                                        .,.+ h,.,s.  ,2
                                                                                                                                                . .. ..v..~y.  .
                                                                                                                                                                  ... y ,, #&.
1
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* i 1 NUREG-0023 Supplement No.1 June 1976 is.
SUPPLEMENT NO. 1 TO THE SAFETY EVALUATION REPORT BY THE OFFICE OF NUCLEAR REACTOR REGULATION U.S. NUCLEAR REGULATORY COMMISSION IN THE MATTER OF WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECTS NO. 3 AND NO. 5 DOCKET NOS. STN 50-508 AND STN 50-509 t
l
                                                                                -e. ~er e
 
e  .I TABLE OF CONTENTS F.*St 1-1
 
==1.0 INTRODUCTION==
AND GENERAL                            DISCUSSION.........................................
1-1 1.1 Introduction ..........................................................                                                                            1-1 1.9 Outstanding                          issues.....................................................
2-1 2.0 $1TE      CHARACTERISTICS........................................................
2-1 2.1 Geography and                          Demography...............................................
2-1 2.1.2 Exclusion Area                      Contro1..........................................
3-1 3.0 DESI GN CRITERI A FOR STRUCTURES . SYSTEMS AND COMP 0NENTS. . . . . . . . . . . . . . . . . . . . . .
3.6 Protection Against Dynamic Effects Associated with the Postulated 3-1
  -                        Rupture of                      Piping......................................................
I 3.6.2 Protection Against Dynamic Effects Associated with the Postulated Rupture of High Energy Piping Outside Containment....                                                                3-1 3-1 3.9 Mechanical Systems and                            Components......................................
3-1 3.9.2 ASME Code Class 2 and 3 Components..............................
6-1      e 6.0 ENGINEERED SAFETY FEATURES .................................................
l 6-1 6.2 Containment                        Systems....................................................
i 6.2.8 Containment Air Purification and Cleanup Systems................                                                                          6-1 r                                                                                                                                                                          9-1          l 9.0 AUXILIARY SYSTEMS...........................................................
l                                                                                                                                                                                        I 9.5 Other Auxiliary                          Systems................................................                                                    9-1 9-1 9.5.1 Fire Protection                                System..........................................
11-1
: 11. 0 RA010ACTIV E WASTE MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11-1 11.6 Evaluation                      Findings...................................................
15-1
: 15. 0 ACC I DENT ANALY SES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15-1 15.5 Postulated                      Accidents..................................................
15.5.6 Radiogical Consequences of                                                          Accidents..........................            15-1 18.0 REVIEW BY THE ADVISORY C0pMITTEE ON REACTOR SAFEGUARDS......................                                                                            18-1 20-1 20.0 FINANCIAL QUALIFICAT10 tis....................................................
20-1 20.1 Introduction...........................................................                                                                          20-1 20.2 Construction Cost                      Estimates............................................
20.3 Parti ci pants and Financing ' lans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  20-2    e 20.3.1 Wa shi ngton Publ ic Power Supply Sys tem. . . . . . . . . . . . . . . . . . . . . . . . .                                            20-2 20.3.2 Pacific Power & Light                                                          Company..................................              20-3 20.3.3 Portland General El e ctric Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        20-4 20.3.4 Puget Sound Power & Light                                                          Company..............................              20-9
)                              20. 3. 5 The Wa shi ngton Water Power Comp 4ny. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      20-9 20-13 20.4 Conclusions............................................................
i                                                                                                                                                                              21-1
: 21. 0 C ONC LU S 10N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
 
              's      i l
APPENDICES PaSi APPENDIX A          CONTINUATION OF THE CHRONOLOGY OF THE RADIOLOGICAL SAFETY REVIEW OF WASHINGTON PUBLIC POWER SUPPLY A-1 SYSTEM PROJECTS NO. 3 AND NO. 5 ..............................
APPENDIX B          REPORT OF THE ADVISORY Co m ITTEE ON REACTOR SAFEGUARDS.                                      B-1 DATED APRIL 16, 1976 .........................................
APPENDIX C          ERRATA TO THE SAFETY EVALUATION REPORT FOR THE WASHINGTON PUBLIC POWER SUPPLY SYSTEM PROJECTS NO. 3 AND NO. 5, DATED
                                                                                                                .............              C-1 FEBRUARY, 1976 ...............................
2 LETTER FROM THE STAFF TO THE ADVISORY COMITTE                          REACTOR APPENDIX D
  '-                                          SAFEGUARDS STAFF REGARDING WPPSS 3 (WNP-3) AND e (WNP-5)
SEISMOLOGY AND GEOLOGY REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1 4
9 f
4            i b-i, 4
              -t
                  '                                                        11 4                                                                                                                              1
                  !                                                                                                                              l i
 
i  :
LIST OF TABLES Page TABLE 11.1    CALCULATED RELEASES OF RADIDACTIVE MATERIALS IN GASEOUS                                        11-3 EFFLUENTS FROM WMP-3 AND WNP-5 ...............................
TABLE 11.2    CALCULATED RELEASES OF RADIDACTIVE MATERIALS IN LIQUID                                        11-4 EFFLUENTS FROM WNP-3 AND WNP-5................................
TABLE 11.3    N M IPAL PARAMETERS AND CONDITIONS USED IN CALCULATING                                                    !
RELEASES OF RADIDACTIVE MATERIAL IN LIQUID AND GASEOUS 11-5                                                l EFFLUENTS FROM WNP-3 AND WNP- 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            1 l
TABLE 11.4    COMPARISON OF CALCULATED DOSES FROM WNP-3 AND WNP-5 OPERATION WITH SECTIONS II.A. II.B. AND !!.C OF APPENDIX 1 TO 10 CFR 11-7 PART 50 ......................................................
CALCULATED POPULATION DOSES FOR COST-BENEFIT ANALYSIS, SECTION TABLE 11.5                                                                                                  11-8
                            !! .D OF APPENDIX 1 TO 10 CFR PART 50. . . . . . . . . . . . . . . . . . . . . . . . . .
11-10 TABLE 11.6    PRINCIPAL PARAMETERS USED IN THE COST-BENEFIT ANALYSIS........
15-2 TABLE 15.1    RADIOLOGICAL CONSEQUENCES OF DESIGN BASIS ACCIDENTS...........
TABLE 20.1    APPLICANT PACIFIC POWER & LIGHT COMPANY NUCLEAR PLANT WNP-3 AND WNP-5. SOURCE OF FUNDS FOR SYSTEM-WIDE CONSTRUCTION EXPENDI-TURES DURING PERIOD OF CONSTRUCTION OF SUBJECT NUCLEAR 20-F POWER PLANTS..................................................
TABLE 20.2    PACIFIC POWER & LIGHT COMPANY INPUT ASSUMPTIONS FOR SOURCES                                    20-6  OF FUNDS STATEMENTS FOR WNP-3 AND WNP-5..........................
TABLE 20.3    APPLICANT PORTLAND GENERAL ELECTRIC COMPANY NUCLEAR PLANT WNP-3 SOURCE OF FUNDS FOR SYSTEM-WIDE CONSTRUCTION EXPENDI-TURES DURING PERIOD OF CONSTRUCTION OF SUBJECT NUCLEAR 2* 7 POWER PLANT.................... ..............................
TABLE 20.4    PORTLAND GENERAL ELECTRIC COMPANY INPUT ASSUMPTIONS FOR20 8 SOURCES OF FUNDS STATEMENTS FOR  WNP-3.........................
TABLE 20.5    APPLICANT PUGET SOUND POWER & LIGHT COMPANY NUCLEAR PLANT WNP-3. SOURCE OF FUNDS FOR SYSTEM-WIDE CONSTRUCTION EXPENDITURES DURING PERIOD OF CONSTRUCTION OF SUBJECT 26 10 NUCLEAR POWER PLANT...........................................
TABLE 20.6    PUGET SOUND POWER & LIGHT COMPANY INPUT ASSUMPTIONS FOR20 11 SOURCES OF FUNDS STATEMENTS FOR WNP-3.........................
TABLE 20.7    APPLICANT THE WASHINGTON WATER POWER COMPANY NUCLEAR PLANT WNP-3. SOURCE OF FUNDS FOR SYSTEM-WIDE CONSTRL*C'i10N i
EXPENDITURES DURING PERIOD OF CONSTRUCTION OF SUBJECT 20 14 NUCLEAR POWER PLANT...........................................
TABLE 20.8    THE WASHINGTON WATER POWER COMPANY INPUT ASSUMPTIONS FOR                                      20-15 SOURCES OF FUNDS STATEMENTS FOR  WNP-3.........................
111
 
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==1.0 INTRODUCTION==
AND GENERAL OfSCUSSION 1.1  Introduction The Nuclear Regulatory Comission's (Comission) Safety Evaluation Report in the matter of the application by the Washington Public Power Supply System., Pacific Power & Light Company, Portland General Electric Company, Puget Sound Power & Light rempany and The Washington Water Power Company (hereinafter referred to as the applicants) for Project No. 3 (WMP-3) and the Washington Public Power Supply System and Pacific Power & Light Company for Project No. 5 (WNP-5) to construct and operate the proposed fic111 ties was issued on February 13. 1976.
The purpose of this supplement is to update the Safety Evaluation Report by providing (1) our evaluation of additional information submitted by the applicants since the Safety Evaluation Report was issued, (2) our evaluation of the matters where we had not completed our review of information submitted by the applicants when the Safety Evalua-tion Report was issued and (3) our responses to the coments made by the Advisory Comittee on Reactor Safeguards in its report dated April 16,1976.
Except for the appendices, each cf the following sections of this supplement is numbered the same as the sections of the Safety Evaluation Report that is being updated, and the discussions are supplementary to and not in lieu of the discussion in the Safety Evalua-tion Report.
br Appendix A to this supplement is a continuation of the chronology of the staff's principal actions related to processing of the WNP-3 and WMP-5 application. Appendix B is the Report of the Advisory Comittee on Reactor Safeguards on WMP-3 and WNP-5. Appendix C is a listing of errata to the Safety Evaluation Report.
e.
1.9    Outstandino issues In Section 1.9 of the Safety Evaluation Report, we listed a number of outstanding issues. All of the outstanding issues have been resolved.
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2.1          Geography and Demography ggg 6.6.2        Exclusion Area Control i
I The exclusion area is approx 13                                                          'stulated Rupture of piping of 4,300 feet (1.310 meters) 4                                                              elated Ruptere of High building. The applicants have through easements of all prope pa rcel s. In a letter dated Ju l                                                                                                                                        applicants'
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{                                  negotiations fall to produce a                                                                                'qainst f                                  thority to control these porti intention to either purchase c to authority granted by Washir                                                                                        n With this comitment from the l                                  that the applicants will have exclusion area as required by l
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          .      ..  . - - - - . _ _ _ _ _                                                                                                              E
 
                                                                                                                  .                .s-.~
t        9 3.0 DESIGN CRITERIA FOR STRUCTURES SYSTEMS AND COMPONENTS 3.6 3.6.2                  Protection Against Dynamic Effects Associated with the Postulated Rupture of piping Protection Acainst Dynamic Effects Associated with the Postulated Rupture of High Energy Piping Outside Containment In the Safety Evaluation Report, we stated that we had reviewed the applicants' i                      comitments regarding the design of the high and moderate energy piping systems and associated components and structures.
We found them to be in accordance with the guidance set forth in the Commission's letter of July 12, 1974, "Frotection Against Postulated Events and Accidents Octside Containment."
We further stated that the applicants had submitted a Topical Report, ETR-1002                                                                          , "Desien t                                Considerations for the Protection from the Effects of Pipe Rupture,"reto define in mo detail criteria which will be used in providing protection from these postulated events.
The Topical Report also sununarizes the analytical methods to be employed to assess the consequences of the postulated failure.
We stated that we would require that the criteria described in this topical report be consistent with the staff techni positions,                                                                                                                                                          cal in Amendment 33 to the Preliminary Safety Analysis Report (PSAR), the app!'ctnts deleted reference to the Topical Report. As stated in the Safety Evaluation Report, we continue to find that the applicants' comitments, as stated in the PSAR regarding the design of the high and moderate energy piping systems and associated components and structures, are in accordance with our design criteria and are acceptable,                                                                                  We consider this item resolved.
3.9      Hechanical Systems and Components e
3.9.2    ASME Code Class 2 and 3 Components 3.9.2.1 Design and Installation Criteria, Pressure Relieving Devices I'
        'p              We reported in the Safety Evaluation Report that the applicants had referenced two
    .p. .                recently developed computer codes, LOADFACT and PIPESTRESS 2010 for use in ana ti                  the effects of dynamic loadings associated with the sudden operation of pressure relieving devices.
We stated that we would require the applicants to establish the i                    validity of these codes for this type of analysis in accordance with our technical positions.
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In Amendment 30 to the PSAR, the applicants submitted program validation infonnation for PIPESTRESS 2010.
Also in Amemdment 30, the applicants stated that applicable validation information for LOADFACT could be obtained from reviewing the elastic solution validation results for a code entitled Plast 2267, as contained in Yopical Report ETR-1002.
3-1
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6.0 ENGINEERED SAFETY FEATURES 6.2    Containment Systems 6.2.8  Containment Air Purification and Cleanup Systems t In the Safety Evaluation Report, we described the applicants' proposed spray additive system and stated that, because of the unproven design of this system, we would re-quire integral pre-operational testing of the spray and spray additive system to demonstrate adequate performance of the design. These pre-operational tests must be of sufficient detail to permit the evaluation of the capability of the system to inject sodium hydroxide into the containment spray flow at an adequate rate to produce an hydrogen ion concentration (pH) value of 8.5 in the containment sump at the end of injection, while reintaining the spray solution within the pH values of 9.0 and 11.0.
The performance of the system within these limits must be demonstrated with a single active failure in the spray or spray additive system, or any support system. In Amendment 30 to the PSAR, the applicants described a series of pre-operational tests which include integrated testing of the spray and spray additive system with a single active failure either in the spray or spray additive system. The spray additive tank will be filled with water in lieu of sodium hydroxide. The results of these integrated
  ,                  tests will be correlated with separate sodium hydroxide flow measurements. We find this pre-operational testing commitment acceptable at the construction permit stage of review, and we consider this issue to be resolved.
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* l 9.0 AUXILIARY SYSTEMS i
I 9.5    Other Auxiliary Systems 9.5.1    Fire Protection System                                                                        1
                                                                                                                      )
In Ame        nts 30 and 31 to the PSAR. the applicants documented the following informa-tion to resolve our concerns regarding the fire protection system:
(1) Portable Halon 1301 fire extinguishers will be used as the fire extinguishing agent in the control room cabinets and computer room cabinets.
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(2)
The fire extinguishing systen in the dry cooling tower electrical rooms will use ionization fire detectors, alams, and automatic Halon 1301 flooding.
(3) The Halon 1301 inventory of each Halon 1301 fire extinguisher will be checked quarterly by weighing the Halon container.
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(4) Pre-action sprinklers with heat and ionization detectors and alarm plus manual fire hoses will be provided in the electrical penetration areas.
(5) An automatic hydrogen analyzer and alarm will be provided in the battery rooms to monitor hydrogen gas buildup from operation of the batteries. Portable Halon 1301 extinguishers will be located directly outside the battery rooms.
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Hose stations and portable Halon 1301 extinguishers will be provided in the
''                                vicinity of the emergency switchgear rooms.
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  *                        (6) The diesel fuel oil storage tanks have been moved from the previous location directly under the electrical rooms between the dry cooling towers to the opposite ends of the dry cooling towers. The electrical rooms for the dry
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cooling towers remain in the original area between the two dry cooling towers.
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The electrical rooms and each diesel fuel oil storage tank will be enclosed in
* * ,/                            barriers with a minimum fire rating of three hours.' The diesel fuel oil storage ya                                  tank areas will be provided with automatic foam system with alarms.
1 (7) In Section 9.3 3 of the PSAR. the applicants stated thtt the safety related
  ''                                equipment rooms with automatic sprint.ler systems such as the cable vault areas will be provid?d with floor drains.
        /
Based on our review of the "above fire protection system modifications, we conclude that the design criteria and bases meet the requirements of Criterion 3 of the General
                                                                                                                    )
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Design Criteria regarding desigh of structures and systems and provision of fire detection anc. fighting systems of appropriate capacity and capability to minimize the probability and effect of fires and are accepta'le. We, therefore, consider this issue resolved. However, as a result of investigations presently being con-ducted by the staff on fire protection systems, additional requirements may be imposed before plant operation to further improve the capability of the fire protection system to prevent unacceptable damage that may result from a fire, e
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                                                              -11.0 RADI0 ACTIVE WASTE MANAGEMENT 11.6 Evaluation Findings On April 30. 1975, the Comunission adopted Appendix I to 10 CFR Part 50 " Numerical Guides for Design Objectives and Limiting Conditions for Operation to Meet the Criterion 'As Low As Reasonably Achievable for Radioactive Material in Light-Water-Cooled Nuclear Power Reactor Effluents'." To effectively implement the requirements of Appendix 1 we have reassessed the parameters and mathematical models used in calcu-lating releases of radioactive materials in liquid and gaseous effluents in order to comply with the Conscission's guidance. This guidance directed that current operating      J data, applicable to prcposed redweste treatment and e* fluent control systems for a facility, be considered in the assessment of the input parameters. The input para-meters, models and their bases are given in Regulatory Guide 1.88 " Calculation of Releases of Radiaactive Materials in Liquid and Gaseous Effluents from Pressurized Water Reactors (PWRs)." September 9,1975.
By letter from Daniel R. Nuller to J. J. Stein, dated September 12. 1975, we requested the applicants to submit additional infonnation concerning the means proposed to be employed to keep levels of radioactive materials in effluents from WNP-3 and WNP-5 to unrestricted areas "as low as reasonably achievable" in accordance with Appendix !
guidelines. In a letter dated October 17. 1975. the applicants chose to perform the cost-benefit analysis required by Section 11.0 of Appendix ! to 10 CFR Part 50.
We have perfonned an independent evaluation of the applicants' proposed methods to meet the requirements of Appendix I as documented in Supplement 6 to the Environmental Report. Our evaluation consisted of: (1) a review of the information provided by the applicants in response to the letter of September 12. 1975; (2) a review of the applicants' proposed radwaste treatment and effluent control systems as described in the PSAR as amended through Amenenent 27 and in the Environmental Report as amended through Amenenent 5; (3) the calculation of new source terms based on models and parameters as given in Regulatory Guide 1.88; and (4) the calculation of the cost-benefit of potential redweste treatment augments, using doses based on the source tenns calculated in (3) above and guidance as given in Regulatory Guide 1.110. " Cost-8enefit Analysis for Radweste Systems for Light-Water Cooled Nuclear Power Reactors" (March 1976).
The individual and population doses were calculated using the guidance in Regulatory Guide 1.109 " Calculation of Annual Average Doses to Man from Routine Releases of Reactor Effluents for the Purpose of Evaluating Compliance with 10 CFR Part 50.
Appendix I" (March 1976). Meteorologic and hydrologic factors in the dose calcu-lations were determined using the guidance in Regulatory Guide 1.111. " Methods for 11-1
                                                                                                                              /
 
i      i Estimating Atmospheric Transport and Dispersion of Gaseous Effluents Releases from Light-Water-Cooled Reactors" (March 1976),                        and in Regulato ry Guide 1.EE, " Analytical Models for Estimating Radiotsotope Concentration in D Water Bodies" (September 1975).
We have determined the quantities of radioactive materials that                  e n will be relea l
the  liquid and  gaseous operational occurrences.
effluent    streams    during  nomal    operation        including ant pated The principal radionuclides expected to be released in liquid and gaseous effluents are given in Tables 11.1 and 11.2 to                      . In this supp making these determinctions, we have considered waste flows radionuclide a                ,
and equipment decontamination factors, which are consistent with those expect
  @                                the 40 year operating life of the plant, considering normal operation includi
    ;.                            anticipated ooerational occurrences.
tions is given in Table 11.3.          A list of the parameters used in these determina-
  ,                                                                                                                                        l rp. ,
in our evaluation, we have determined that for each reactor on the WNP 3 an site that (1) the release of all radioactive materials above background in liqu effluents will not result in an annual dose or dose comitment to any individua unrestricted area from all pathways of exposure in excess of 3 milltroentgens eq alent man (millirems) to the total body and 10 millirems to any organ, (2) th of all radioactive materials above background in gaseous effluents will not re C
an estimated annual air dose at any location near ground level which could b 5
by individuals in unrestricted areas in excess of 10 milliradiationes absorbed dos (millirads) for gama radiation or 20 millirads for beta radiation  , and (3) the release of all radioactive iodine and radioactive material in particulate form above will not result in an annual dose or dose comitment to any individual                e-in an unr stricted area from all pathways of exposure in excess of 15 millirems to any
  ,                              For the cost-benefit analyses, we considered the potentialmenting                    effectiveness o the proposed liquid and gaseous radwaste treatment systems using demonstrated technology.                                                                y items of re We further considered whether additional augmentation would effectively reduce the cumulative population dose reasonably expected withi radius of the reactors.
s    #
We evaluated the potential radwaste system augments based on                          gnaofstudy of the d the applicants' systems, on the dose information provided in Tab!es      .          . of 11 4 and 11 this supplement. on the basis of an interim value of $1.000 per mar-roentgens                ent man (man-rem) to the total body and $1.000 per man-rem to the thyroid for redu
                        ., 4    in dose by the application of augments, and on the cost of potential radwas augments as presented in Regulatory Guide 1.110.                                                          .
The doses from gaseous releases to the population within a 50 mile radius of each reactor, when multiplied by $1,0C3 per man-rem to the total body or $1.000 per ma to the thyroid, resulted in a cost-assessment value of $7,000 for the        -
e to man rem dos the total body and $8,000 for the man-rem dose to the thyroid.
Similarly, the doses from liquid releases resulted in cost-assessment values of $610 ses            -        for the man rem to the total body and $1.100 for the man-rem doses to the thyroid    .
11-2
 
i TABLE 11.1 CALCULATED RELE.ts'.S OF RADICACTIVE MATERIALS IN GASEOUS EFFLUENTS FROM WNP-3 and WNP-5 (Curiesperyearperunit)
Condenser Waste Gas Processing              Reactor                                      Auxiliary                                          Turbine                                                                                      Air System                    Bldo                                                81do                                                    81do                                                                          Removal Vent Total Nuclide a                                                                      a            a Krypton-83m        a                      a                                                    a a                                                                      1          4 Krypton-85m        a                      1                                                    2 a                                                                a                                                                      a          260 Krypton-85        260                      1 a                                                                      8            1 a                                                    1 Krypton-87          4 4                                                                a                                                                    2            8 Krypton-88          a                      2 a                                                                    a            a Krypton-89          a                      a                                                    a a                                                                    a            3
  ''    Xenon-131m          a                      3                                                    a a                                                                    a          7 a                      7                                                    a Xenon-133m 33                                                                    a                                                                21          620 Xenon-133            a                    570 a                                                                  a                                                                  a            a Xenon-135m          a                      a 4                                                                    a                                                                  3          13 Xenon-135            a                      6 a                                                                    a                                                                  a          a Xenon-137            a                      a a                                                                a            1 a                      a                                                    1 Xenon-138 2.1(-3)                                                  4.3(-3)                            2.4(-4)                                                                                            2.7(-3)    9.3(-3)
Iodine-131          a 8.3(-4)                                                  6.2(-3)                              3.4(-4)                                                                                          3.9(-3)    1.1(-2) lodine-133          a Cobalt-60      7(-5)D              4.7(-5)                                                  2.7(-4)                                                                      a                                                              a      3.9(-4) 1(-4)                                                      6(-4)                                                                      a                                                              a    8.5(-4)
Cobalt-58      1.5(-4) 1(-5)                                                      6( L                                                                        a                                                              a    8.5(-5)
Iron-59        1.5(-5)
Manganese-544.5(-5)                    3(-5)                                                1.8(-4 )                                                                        a                                                            a      2.5(-4) 5.3(-5)                                                      3(-4)                                                                        a                                                            a    4.3(-4)
Cesium-137    7.5(-5) 3(-5)                                                  1.8(-4)                                                                          a                                                            a    2.5(-4)
Cesium-134    4.5(-5) 4.2(-7)                                                  2.4(-6)                                                                          a                                                            a    3.4(-6)
    ''      Strontium-90 6(-7) 2.4(-6)                                                  1.3(-5)                                                                            a                                                          a    1.9(-5)
Strontium-893.3(-6) a                                                                            a                                                          a            8 Carbon-14    7.2                    8(-1) 380                                                                              a                                                          a      760 Hydrogen-3            a              380 a                                                                              a                                                        a        25 Argon-41              a                25 a negligible compared to overall source tem, e.g.. less than 1.0 curies per year noble gases.
less than 1 (-4) curies per year todine.
b exponential  notation: 7(-5) = 7 x 10-5, 11-3
                                                                                                                                                                                                                                                                      .--P e .
                                                            ~                                                    - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
 
          -r .,.
f t
TABLE 11.2 CALCULATED RELEASES OF RADI0 ACTIVE MATERIALS IN LIQUID EFFLUEhTS FROM WNP-3 AND WNP-5 Curies per year                                  Curies per year Nuclide                per unit            'I Nuclide                  'per unit Chromium-51                  8(-5)*                Tellurium-131m          4(-5)                  {
Manganese-54'                1(-3)                Tellurium-131            2(-5)                  l Iron-55                      1(-4)                Iodine-131            5.9(-2)                  'l Iron-59                      5(-5)                Tellurium-132        4.4(-4)                    i
  .              Cobalt-58                4.9(-3)                  Iodine-132            2.5(-3)
Cobalt-60                8.8(-3)                  Iodine-133            3.7(-3)
Bromine-83                  8(-5)                Iodine-134              3(-5)
Rubidium-86                  2(-5)                Cesium-134            2.7(-2)
Strontium-89                  2(-5)                todine-135            1.1(-2)
                  .tolybdenum-99 1.6(-3)                  Cesium-136            2.8(-3)
Technetium-99m            1.6(-3)                  Cesium-137            3.4(-2)
Tellurium-127m                1(-5)                Barium-137            9.7(-3)
Te11urium-127                2(-5)                Neptuntum-239          2(-5)
Tellurium-129m              6(-5)                All Others Except Hydrogen-3        6(-5)
Te11urium-129                4(-4)                Total                2.1(-1)
Iodine-130              1.7(-4)
Hydrogen-3          7.6(+2) a exponential notation: 8(-5) = 8 x 10-5 11-4 k                                                                                                                  I'
 
4 i
TABLE 11.3 PRINCIPAL PARAMETERS AND CONDITIONS USED IN CALCULATING RELEASES OF RADIDACTIVE MATERIAL IN LIQUID AND GASEOUS EFFLUENTS FROM WNP-3 AND WNP-5 Reactor Power Level                                                3800 thermal megawatts Plant Capacity Factor                                              0.80 Failed Fuel.                                                        0.12 percent (a)
Primary System Mass of Coolant                                                5.4 x 10 5pounds Letdown Rate                                                  84 gallons per minute Shim Bleed Rate                                                1.1 gallons per minute Leakage to Secondary System                                    100 pounds por day Leakage to Containment Building                                (b)
Leakage to Auxiliary Buildings                                160 pounds per day Frequency of Degassing for Cold Shutdowns                      2 per year Secondary System Steam Flow Rate                                                1.7 x 10 7pounds per hour Mass of Steam / Steam Generator                                1.6 x 10 4pounds Mass of Liquid / Steam Generator                              1.6 x 10 5pounds Secondary Coolant Mass                                        2.8 x 10 6pounds Rate of Steam Leakage to Turbine Building                      1.7 x 10 3pounds per hour Fraction of Feedwater Processed Through Condensate Demineralizers                                      0.6 Steam Generator Blowdown Rate                                  1.7 x 10 5pounds per hour Containment Building Volume                                          3.4 x 106 cubic feet Annual Frequency of Containment Purges (shutdown)                    4 Annual Frequency of Containment Purges (at power)                    20 lodine Partition Factors (gas / liquid)
Leakage to Auxiliary Building                                  0.0075
  -            Steam Generator                                                0.01 Leakage to Turbine Building                                      1.0 Main Condenser / Air Ejtetor (volatile species)                  0.15 a This value is constant and corresponds to 0.12 percent of the operating power fission product source tenn as given in Regulatory Guide 1.B8. September 9,1975.
b0ne percent per day of the primary coolant noble gas inventory and 0.001 percent per day of the primary coolant iodine inventory, i
11-5
_ il
 
                                                                                          ~
a                  s l
l l
TABLE 11.3 (Continued)
Decontamination Factors (DF) for liquid wastes Floor Drain Wastes                laundry and Boron Reco ery          Inorganic Chemical Wastes.            Hot Shower System (BRS)              Regenerant Solutions                Drains 4
4                              4 Iodine                  1 x 10                        1 x 10                        1 Cesium. Rubidium 2 x 10 4                      1 x 10 5                        g Others                  1 x 10 5                      1 x 10 5                        i I                                                              All Nuclides Except Iodine                Iodine 4
c.
Radwaste Evaporator DF                        10                        10l 10 BRS Evaporator DF                              10
    - g.,j -
P                                                                                  Cesium and Ms.                                                                Anions          Rubidimn        Other Nuclides 10                2                10 Boron Recycle Feed Demineralizer. DF Primary Coolant Letdown Demineralizer, DF        10                2                10 o
              -            Evaporator Condensate Polishing I,' '                                                                10              10                10 Demineralizer. DF 10                2                10
        $t                  Mixed Bed Condensate Demineralizer.0F l                Turbine Air Removal System and Containment e                  Building Internal Recirculation System 10
          'l:' ;
          ,                  Charcoal Filter,DF (Iodine Removal) s's (g , ,
Fuel Handling Building and Auxiliary Building Ventilation System Charcoal Filter.0F
      ,g' ,                                                                                                        10 (Iodine Removal)
                    )'
I i
i
      ' Nf, ,
:t'sY l
l 11-6                                        I l
 
                                                                                            ~
  .. g ..g 4
TABLE 11.4 COMPARISON OF CALCULATED DOSES FROM WP-3 AND WP-5 OPERATION WITH $ECTIONS II.A. !!.B AND !!.C 0F APPENDIX ! TO 10 CFR PART 50 (Doses to Maximum Individual per Reactor Unit)
Appendix I Dose    Calculated Criterion                                              Design Objective        Doses Liquid Effluents 1
Dose to total body from all pathways            3 mrem /yr*        2.1 mree/yr Dose to any organ from all pathways            10 arem/yr          2.6 mrem /yr l        Noble Gas Effluents I
l              Genna dose in air                              10 mrad /yr b      2.6 mrad /yr Beta dose in air                                20 mrad /yr        4.7 mrad /yr Dose to total body of an individual              5 mrem /yr        0.9 mram/yr Dose to skin of an individual                  15 mrem /yr        2.1 mrem /yr Radioiodines and Particulates*
Dose to any organ from all pathways            15 arem/yr          3.0 mrem /yr
* millirems per year D
millirads per year C
Carbon-14 and tritium have been added to this category.
11-7 mi e  i  -
 
  ;i    s. s
  .{!
      .                                                  TABLE 11.5 CALCULATED POPULATION DOSES FOR COST-BENEFIT ANALYS15. SECTION II.D OF APPENDIX ! TO 10 CFR PART 50*
Total Body                              Thyroid Pathway man-roenteen equivalent man            man-roenteen equivalent man Liquid                            0.61                                          1.1 Gaseous                          6.8                                          8.0
* Based on the population reasonably expected to be within a 50 mile radius of the reactor.
a$
e I
a l
7 1
e e
j 11-8 m
 
i    e Potential radwaste system augments were selected from the list given in Regulatory Guide 1.110. We considered 10 augments to the gaseous radwaste system and 10 augments to the liquid radwaste system. The total annual cost (TAC) for the gaseous radwaste system augments ranged from $8,000 to $660,000 per year. The TAC for the liquid radwaste system augments ranged from $11,000 to $200,000 per year. The principal parameters used in determining the TAC are given in Table 11.6.
For the 20 augments evaluated, we found that the TAC for each augment exceeded the
          $1,000 per man-rem to the total body or $1,000 per man-rem to the thyroid cost-benefit ratio. We concluded, therefore, that there were no cost-effective augments to reduce the cumulative population dose at a favorable cost-benefit ratio.
Based on our evaluation, we conclude that the liquid and gaseous radwaste treatment systems as described in the PSAR without augments are capable of reducing releases of radioactive materials in liquid and gaseous effluents to *as low as reasonably achievable" levels in conformance with 10 CFR Part 50.34a and meet the requirements of Appendix ! to 10 CFR Part 50 and are acceptable. We, therefore, consider the issue to be resolved.
2 11-9
)                                                                                                1
 
i I
          ..        ,s .    ~.
I i-t, .
TABLE 11.6 I
is .                                  PRINCIPAL PARAMETERS USED IN THE COST-BENEFIT ANALYSIS bb p,'; .
Labor Cost Correction Factor, Federal Power Connission Region 7 8        1.3
                ![4              Indirect Cost Factor" IfI ]            Cost of Money b 1.62 7 percent fa      Capital Recovery Factora 0.0806 E'.'.
            .i        j, '    'From Regulatory Guide 1.110.
s*
* y
          ,          sy,        From Applicants' Environmental Report Supplement 6.
p '.
w
:p f,' .
          ~ '.[*7 y
e.
W 1:.s
          .h)k.
1s' 6 -
k.
pry    3 '.
              $i. ,
t
      .' M*
  ,            ' g.,
      ,            t l              k
  .k            N 3              ?-
  ?d
  , hO
  .c' 11-10 I
 
s e i 15.0 ACCIDENT ANALYSES 15.5    Postulated Accidents 15.5.6  Radiological Consequences of Accidents The whole body dose model used by us to calculate the radiological consequences of the design basis accident has been revised since we reported the whole body doses in the Safety Evaluation Report. The revised whole body dose model considers explicit dose conversion factors for each isotope of interest, and this model was used to calculate the doses reported in Table 15.1 to this supplement. In addition, the thyroid close from containment purging to control hydrogen a cumulation following a design basis loss-of-coolant accident -has been reduced to reflect the additional dose reduction credit obtained by use of the containment spray additive system. The revised doses in this supplement do not affect our conclusion stated in the Safety Evaluation Report that the doses calculsted for the design basis accidents are well within the applica-ble guideline exposures of Regulatory Guide 1.4 " Assumptions Used for Evaluating the Potential Radiologcial Consequences of a Loss-of-Coolant Accident for Pressurized Water Reactors." ano thus a small fraction of the 10 CFR Part 100 guideline values, l
1 l
i 15-1 I
1
 
l i
a:
f.
              ~*f.
4
                ;                                                      TABLE 15.1 RADIOLOGICAL CONSEQUENCES OF
            ,:                                                    DESIGN BASIS ACCIDENTS ExclusionArea*/              Low Pnpulation ZoneE ye,                                                    2-Hour Dose roenteen equivalent man-                30-Day Dose, N,
Accident                      Thyroid                        _roenteen eaufvalent man Whole Body    Thyroid Whole Body 5,.
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Fuel Handling                                                        2    <1
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i- e 18.0 REVIEW BY THE ADVISORY COPMITTEE ON REACTOR SAFEGUARDS The Advisory Comittee on Reactor Safeguards (the Comittee) completed its review of the application for construction permits for the Washington Public Power Supply System Units No. 3 and No. 5 at its 192nd meeting held April 8-10, 1976. The application was also considered during the 191st meeting of the Comittee held March 4-6, 1976. A copy of the Committee's report, dated April 16,'1976, which contains coments and recomendations, is attached as Appendix 8 to this supplement. The actions we have taken or plan to take in response to these coments and recomendations are de scribed in the following paragraphs.
(1) The Comittee stated that if studies, conducted with the best available tech-niques, establish that significant further emergency core cooling system improve-ments can be achieved, consideration should be given to incorporating such improvements into WNP-3 and WNP-5.
Studies are being conducted by several reactor vendors and the staff to better define the current safety margins associated with emergency core cooling systems.
More specifically, we are holding generic discussions with Combustion Engineering regarding the concept of combined hot and cold side emergency core cooling system injection. Current efforts by the staff are aimed at determining if hot leg (upper head) injection muld bring about significant improvenent in the reflood period after a loss-of-coolant accident. Experiments to determine the effective-ness of alternate emergency core cooling injection modes such as these are planned to be perfomed at the semiscale test facility in Idaho. In addition, we are rieveloping advanced computer models for emergency core cooling systems performance
  ,                        evaluation. We will consider the results of these studies in evaluating any future modifications to the WNP-3 and WMP-5 energency core cooling systen.
(2) The Comittee stated that a generic question has arisen concerning loads on the
;                          vessel support structure for certain postulated loss-of-coolant accidents in pressurized water reactors, and that this matter should be resolved for WNP-3 and WNP-5 in a manner satisfactory to the staff.
In a {{letter dated|date=November 26, 1975|text=letter dated November 26, 1975}}, we requested the applicants to verify that the final design procedures would account for transient asy metric pressure loads on the reactor vessel supports. In a letter from N. O, Strand to B. C. Rusche, dated December 31, 1975, the applicants stated that it is their intent that the final design of the reactor vessel support system will take into account these asymetric loads in combination with the appropriate loss-of-coolant accident and seismic loads. The applicants further stated that the results of these analyses and the final design parameters for the supports will be incorporated in 18-1
                                                                                                                  .~
 
o.- s e the Final Safety Analysis Report. We consider this to be an acceptable commitment, and, that accordingly, the design of the reactor vessel supports is acceptable for the construction permit stage of review.
(3) The Comittee expressed the view that the applicants and the staff should continue to review the WNP-3 and WNP-5 design for features that could reduce the possibility and consequences of sabotage.          -
As we stated in the Safety Evaluation Report, we have concluded that the applf-cants' arrangements for protection of the plant against acts of industrial sabotage are acceptable for the construction permit stage of review. We have undertaken a study, on a generic basis, of design features of nuclear power plants to reduce the possibility and consequences of sabotage. We will apply the results
    .:                      of this study, as appropriate, to the WNP-3 and WNp-5 design.
  ,,,p,,              (4) The Comittee wishes to be informed of the specific application of the Browns Ferry Nuclear Plant fire special review group's recomendations as they apply to ledP-3 and WNP-5. These recomendations describe the development of additional information for fire prevention, fire fighting, quality assurance, and improvement of Comission policies, procedures and criteria.
We are pmceeding with a program to conduct a comprehensive review and evaluation of nuclear power plants based on the staff's newly developed guidelines for fire protection system. The guidelines considered experience gained from the Browns
        ,                  Ferry Nuclear Plant f fre, recomendations from the special review group.
Nuclear Energy Liability-Property Insurance Association, and other qualified fire protection consulting agencies. The fire protection systems for WNP-3 and WNP-5 will be upgraded if the results of our evaluation so dictate. We
    ,                      will inform the Comittee of the results of our review.
{
b (5) The Comittee expressed its continuing concern regarding generic problems related to large water reactors, recomending that such problems be dealt with appropri-
  .;                        ately by the applicants and the Nuclear Regulatory Comission staff.
{;'                        These generic problems are discussed in a report by the Comittee dated April 16, 1976. These problems are being worked on by the various reactor vendors, other
                  ,          industrial organizations and the staff, and will be the subject of our continuing
  ,''                        attention.
(6) The following additional coment was appended to the letter:
                                    "The recurrence interval of an earthquake of the order of the safe shut-down earthquake (SSE) may be about 1,000 years for this site. For such a recurrence interval the probability of not achieving safe shutdown, given    I the SSE, must be very small if the staff goal of less than 10-7 per 18-2
 
e    e 1
year, of a serious accident from any single cause is to be achieved.
Since seismic design adequacy is not subject to direct experimental confir-mation, we believe that other measures, including independent design review, low-amplitude shaking measurements of the completed structure, as-built construction validation, and detection of possible inservice degrada-tion, should be evaluated and the necessary steps taken to provide the high degree of detailed specific assurance required with regard to seismic capability of all safety-related features "
We have in the past identified as a desirable safety objective for a large pop-ulation of reactors that the probability of an accident with consequences that would significantly exceed the 10 CFR Part 100 guidelines from one accident source should be 10~7 per reactor-year or less. This objective was primarily set for application in postulated accidents where we have been able to quantify W                  or bound the probabilities (e.g., in the anticipated transients without scram case and in considering aircraf t crashes), but was not intended for use in seismic design.
In the case of seismic design we believe that a quantitive definition of various probabilistic parameters is still beyond the reach of the current state-of-the-art. Therefore, the use of a detenninistic and conservative ap-proach to ensure seismic design adequacy of safety related structures and systems is more appropriate.
The seismic design criteria of WNP-3 and WNP-5 were reviewed and accepted on the basis of deteiministic :ensiderations. We concluded that the WNP-3 and WNP-5 seismic design will comply with applicable staff positions as set forth in Section 3.7 of the Standard Review Plan.
With regard to seismic capability of equipment, all essential mechanical and electrical equipment including supports, in the WNP-3 and WNP-5 facilites will be seismically qualified by experiment and/or analysis as indicated in the Safety Evaluation Report. This seismic qualification is in accordance with the requirements of Appendix C in the Safety Evaluation Report, and is consistent with our positions set forth in Sections 3.9.2. 3.9.3 and 3.10 of the Standard Review Plan and IEEE Standard 344-1975. "IEEE Recomended Practices for Seismic Qualification of Class IE Equipment for Nuclear Power Generating Stations." In addition, we are conducting a seismic audit program to assess the implementation of approved qualification methods and procedures for all essential mechanical and electrical equipment. This audit is being accomplished through visits to architect engineering companies, reactor vendors, and to typical plant sites to evaluate the test or analytical method employed for each item of equipment taking into account the actual configuration and mounting location of the item.
l l
18-3 i
 
l i- i                                                                                                W l
The measures noted are, nevertheless, considered significant and should be imple-mented if we are to further improve the reliability and conservatism of seismic
                                                  ~
>                        design for safety related structures and systems. We are currently studying the advisability of implementing the above recommended measures, specifically, the implementation cf an independent design review of plants.
We believe that the acceleration for seismic design which was accepted for the WNP-3 and WNP-5 site is near an upper bound value based on the geology and seismicity of the Puget Sound Region. Though the probability of this event
  -                    being exceeded has not been determined, we believe that it is extremely low.
    -                    With respect to the comment on the probability of not achieving safe shutdown given an SSE of about 1000 years recurrence period, the design criteria used in y,)                    the seismic design of the plant are such that the probability of not achieving safe shutdown is indeed very small but cannot be realistically quantified at this time.
We are of the opinion that there is not further need to implement other measures such as independent design review, low amplitude shaking of completed structures and detection of pcssible inservice degradation, insofar as licensing of WNP-3 and WNP-5 is concerned.
: 7. The following additional comment was appended to the letter:
                              'With increasing frequency, questions have arisen concerning the appropriate degree of conservatism to be included in the seismic design criteria for nuclear power plants. The needs of public safety would be best served if
    ,,                          the design practices currently in vogue were altered to permit inelastic response so as to enhance the energy absorption characteristics of nuclear 3:                            structures under severe seismic lo dings. For the more severe seismic con-ditions inelastic design principits should be applied to foundations, con-
                          - crete containments, floors, and support structures in order to assure a high degree of damping and thus minimize the forces transmitted to critical 5                          safety features and to the primary coolant circuitry. This would eliminate
(                          the need for many of the complex supplemental structural features of questionable reliability which are now used to meet extreme seismic design
    ,                          conditions. . This design approach would allow nuclear structures to satisfy
      .                        even the most pessimistic loading requirements of the most extreme seismic prophet. If it is not used there is doubtful value, and possibly some loss
* in public safety margin, from the use of ultraconservative seismic design      ,
requirements because the reliability of the structural restraints cannot be assessed from relevant structrual experience or post-construction vibra-
* tional testing."
18-4 q
 
8  P We considered the concerns expressed in the above statement on the appropriate degree of conservatism to be included in the seismic design criteria for nuclear power plants, and how best would the needs of public safety be served if in-elastic design principles instead of the elastic design approaches currently used were applied in the design and analysis of structures for the severe seismic conditions. We recognize some of the anomalies of elastic design. Howeve*, the current elastic design approach to seismic design has been established after extensive research and development. Research efforts in recent years have demonstrated that earthquake effects, including lack of damage as well as damage, usually cannot be totally reconciled with elastic unit stresses and current design procedures. Various inelastic design methods have been proposed by several investigators, and certain empirical relationships and approximations are employed in order to reduce the complex problem of inelasticity and energy to more general application. However, there is a lack of more rigorous approach and the absence of complete scientific justification for the inelastic methodology.
For instance, if the response spectrum approach which is rigorously applicable to structures only in the elastic range is used. inelastic response spectra have to be established. Since nonlinear systems have no true vibrational modes, such inelastic response spectra are generally obtained by modifying the elastic response spectra, which is, at best, an approximation and requires experience and judgment.
There are other questions such as the damping values and ductility ratios to be used. Basically, the state-of-the-art of the non-linear design approach has not yet reached the point for more general and immediate application.
Realizing the limitations of the elastic approach, we have allowed the use of ultimate strength design for concrete structures and plastic design for steel structures in the design of member sections. We are presently considering the use of the inelastic approach for reevaluation of already built nuclear plants.
In addition. the inelastic approach is being considered for non-C5tegory I structures, systems and components. Furthermore, we are considering the en-gagement of experienced consultants to investigate and establish nonlinear design approaches.
(8) The following additional comment was appended to the letter:
                  "The site for WPPSS Nuclear Projects No. 3 and No. 5 lies in a seismically active region that has been subject to large earthquakes in historic time and inc16 des active major faults. While we do not disagree with the proposed seismic design basis, we believe it would be desirable to have the geologic and seisnic aspects of such sites, and perhaps most sites, also reviewed by the U. S. Geological Survey to provide the benefit of an additional independent evaluation."
The coninent does not question the adequacy of the seismic design basis selected for the site. Rather it relates to the policy presently followed by the staff in detennining the need for obtaining the advice of the U. S. Geological Survey in the review of nuclear plant sites. As indicated in our Standard Review Plan, 18-5
 
              $  B Section 2.5.1, a decision is made during the acceptance review as to the extent consultants'such as the U. S. Geological Survey should be involved in the review.
This decision is based on considerations which include the complexity of the geology of the site and surrounding region, the proximity of the site to previou The bases for our reviewed sites, and familiarity of the staff with the region.
decision to not involve the U. S. Geological Survey in the review of the WNP-3 and WNP-5 site are addressed in a memorandum from Edson G. Case to Raymond R. Fr                  -
dated March 30, 1976, which is included in this report as Appendix D.
We are reviewing our policy regarding the involvement of the U. S. Geological                .
Survey in case reviews.
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:.                                                                                                                    l 18-6
 
20.0 FINANCIAL QUALIFICATIONS 20.1  Introduction In the Safety Evaluation Report, wr stated that we would report the results of our evaluation of the applicants' financial qualifications in a supplementto the Safety Evaluation Report. The applicants have provided additional financial information in Amendment 32 to the PSAR and a letter from D. L. Renberger to B. C. Rusche, dated April 20, 1976, indicating ownership of WNP-5. Our evaluation is presented below.
The Commission's regulations related to the financial data and information required to establish financial qualifications for applicants for facility construction peruits appear in Paragraph 50.33(f) and Appendix C to 10 CFR Part 50. In accordance with these regulations, the applicants. Washington Public Power Supply System. Pacific Power & Light Company. Portland General Electric Company. Fuget Sound Power & Light                                                                                j Company and The Washington Water Power Company, si.bmitted financial infonnation with                                                                              f their application, as well as providir.g additional financial information in response to a request by us. Washington Public Power Supply System and the four investcr-owned utilities are the applicants for WNP-3. Wsshington Public Power Supply System and Pacific Power & Light Company are the applicants for WNp-5. Their respective l
percentages of undivided ownership interest in each unit are listed below.
f I                                                                                                  Ownership Interest l
(in percent)                                                  l WNP 3                                                      WNP 5              f Washington Public Power Supply System                                                      70                                                    90 Pacific Power & Light Company                                                              10                                                  10 Portland General Electric Company                                                            10                                                  --
P;get Sound Power & Light Company                                                                    5 The Washington Water Power Company                                                                  5                                          --
100                                                      100 The following analysis summarites our review of the application and the additional information and addresses the qualifications of each applicant to finance its un-dividedinterestinthecostsofdesigningandconstructingtheunit(s)inwhichit is a participant.
20.2    construction Cost Estimates The applicants have submitted construction cost estimates for the facility as follows:
20-1
 
1 i .
WNP-3 and WNP-5 (dollars in millions)
                                                                                          $2.380.1 Nuclear production plant    costs........................
35.7 Transmission, distribution and general plant costs....
134.8 Nuclear fuel inventory cost for first core.. ..... . . . . .
                                                                                          $2.550.6 Total The applicants' estimated cost for the nuclear production plant has been compared with costs estimated by the CONCEPT computer costing model. The Oak Ridge National Laboratory (ORNL) which does the CONCEPT computer work for the staff states that
                      " estimates produced by the CONCEPT code are not intended as substitutesfor detailed engineering cost estimates, but were prepared as a rough check on the applicants' estimate." The CONCEPT costing model projected the cost of the nuclear production plant to be $1.942.0 million. Discussions with the Oak Ridge National Laboratory and the applicants indicate that extrsordinary structural requirements for the units (which are not assumed by the CONCEPT model) account for a significant portion of the difference between the two estimates. In addition. the units will have a smaller We have proportion of coninon use facilites than is assumed by the CONCEPT model.
concluded that it is reasonable to use the applicants' estimate for purposes of this analysis because it represents the more detailed engineering cost study for this specific project.
20.3      Participants and Financing Plans
  -          20.3.1    Washington Public Power Supply System Washington Public Power Supply System is a municipal corporation and a joint opera-ting agency of the State of Washington. It is composed of eighteen operating pub'ic utility districts of the State of Washington and the cities of Richland. Seattle and Tacoma, Washington,    Washington Public Power Supply System has statutory authority to acquire, construct and operate plants and facilities for the generation and transmis-sion of electric power. It has completed two electric generating projects: the 27.5
/                      megawatt Packwood Hydroelectric Project and the 860 megawatt Hanford Steam Electric
[W                      Project. In adriition to WNP-3 and WNP-S. Washington Public Power Supply System has under construction or in advance planning, three additional nuclear units, namely WNP-1, WNP-2, and WNP-4. Washington Public Power Supply System does not engage in fg the distribution of power to retail customers, but is reimbursed for the cost of each Also, it is not under V                        project, including debt service, by the particioants therein.
the jurisdiction of any regulatory agency having control over its rates and services
    '[
''                      of the existing and proposed projects.                                                        .
The respective financial obligations between Washington Public Power Supply System and the above-named investor-owned companies are covered in the Ownership Agreement.        ~
Such agreement provides that each party shall be responsible for providing its own-ership share of the costs of construction and operation, and will be entitled to its Under the Ownership Agreement, ownership share of the units' ele:trical capability.                                          l the investor-owned utilities have designated Washington Public Power Supply System to act as their agent to construct, operate and maintain the project.
20-2 1
 
    ,          p Washington Public Power Supply System will finance its 70 percent ownership in WNP-3 and its 90 percent ownership in WNP-5 through the issuance of its revenue notes and its long-term revenue bonds. These securities are issued from time to time as con-struction funds are required. Washington Public Power Supply Syster.1 engages in
                          " project financing" and thus each of its security issues is related to a specific construction project. Its recent revenue bond offerings have been rated Aaa, the highest rating by Moody's and by Standard and Poor's. Washington Public Power Supply System issued $150 million of revenue bonds in December 1975 to finance construction of WNP-3 and an additional $100 million in April 1976. It issued $100 million of revenue bonds in July 1975 in partial support of preliminary work on WNP-5. An additional revenue bond issuance is planned during 1976 in support of WNP-5.
As noted above, Washington Public Power Supply System is not a retaff distributor of electric power. Its 70 percent share in the capacity of WNP-3 and its 90 percent share in the capacity of WNP-5 will be sold to approximately 100 consumer-owned util-ities in the Pacific Northwest. The Net Billing Agreements provide the contractual arrangements whereby the participants are obligated to make payments to Washington Public Power Supply System for their pro-rata shares of project costs whether or not j
the project is completed, operable or operating, and notwithstanding interruption or curtailment of output. Thus, the satisfaction of project costs is not solely depen-dent on actual project revenues, but is insured on a broad base through other revenue-producinq assets of the participants. Each participant has covenanted that it will establish, maintain and collect rates or charges for power, energy and other services furnished through its electric utility properties which shall be adequate to provide revenues sufficient to make the required payments to Washington Public Power Supply System. The aforementioned contractual arrangements and the underlying revenue-pro-ducing capability provide the security for the servicing of Washington Public Power Supply System revenue bonds and notes.
20.3.2        Pacific Power & Light Company Pacific Power & Light Company is an investor-owned electric utility operating in six states in the West and the Pacific Northwest. It serves approximately 540,000 resi-dential, comercial, and industrial customers as well as selling power at wholesale to consumer-owned utilities. Pacific Power & Light Company's operating revenues in-creased from $254.2 million for the 12 months ended February 28, 1975, to $309.4 million for the 12 months ended February 29, 1976, and net income increased from
                              $56.1 million to $72.7 million over the same period. Invested capital on December 31, 1975 amounted to $1, ",2.6 million and consisted of 53.5 percent long-term debt.
10.2 percent preferred stock and 36.3 percent comon equity. The company's first mortgage bonds are rated "Baa" by Moody's and "A " by Standard and Poor's.
Pacific Power & Light company plans to finance its ten percent portion of the WNP-3 and WNP-5 design and construction costs as part of its overall construction program.
The funds will'be provided from a combination of internally-generated sources (in-ciuding retained earnings, depreciation and deferred taxes) and from the issuance of 20-3
 
e'  s securities including long-tenn debt. preferred stock and common stock.
Interim fund-ing requirements will be met with short-term borrowing. In response to our request.
6                    the company has submitted a source of funds statement (or financing plan) with under.
lying assumptions for its system-wide construction expenditures for the period 1976 through 1982, the estimated earliest year for completion of WNP-5.
j]'
The financing plan f;i                    and assumptions are shown in Tables 20.1 and 20.2. respectively.
[                        Pacific Power & Light Company is subject to regulatory jurisdiction by state commission in Oregon. Idaho. Washington. California. Montana and Wyoming. Since December 31 g{"                        1974. Pacific Power & Light Company has been granted seven rate increases in five of the jurisdictions totalling $56.9 million on an annualized basis.
The allowed rates of return on consnon equity ranged from 11.25 percent to 13.5 percent. The company has h..
(?[,
four rate increases pending which request an average 15.0 percent return on comon gleh                      equity and a total anrual revenue increase of $35.0 million,
      'k.
      *f y'a    V          20.3.3    Portland General Electric Company
[yk f,5                          Portlard General Electric Cc.npany is an investor-owned electric utility operating in
[                              narthwest Oregon. It serves approximately 390.000 residential and industrial h,                            customers as well as selling power at wholesale to other utilities. Portland General Electric company's operating revenues increased from $146.8 million for the 12 months ended January h)tb                                                      31, 1975, to $184.8 million for the 12 months ended January 31 1976, and net income increased from $30.3 million to $51.2 million over the same
  %                              period.
Invested capital on December 31. 1975 amounted to $837.4 million and con-3' ,
gj.                            sisted of 53.1 percent long-term debt.13.0 percent preferred stock and 33.9 percent comon equity.
l' 6                                              The company's first mortgage bonds are rated "Baa" by Moody's and "BBB" by Standard and Poor's.
: i. .> .,
Portland General Electric Company plans to finance its ten percent .ortion of the h'?
  .                            liNP-3 design and construction costs as part of its overall construction program.
: a. .
p                            The funds will be provided from a combination of internally-generated sources (in-fy,                          ciuding retained earnings, depreciation and deferred taxes) and from the issuance of securities including long-tenn debt, preferred stock and comenon stock. Interim
  '[
funding requirements will be met with short-tenn borrowing. In response to our D                            request. the company has submitted a sources of funds statement (or financing plan) h
* with underlying assumptions for its system-wide ccnstruction expenditu s for the period 1976 through 1981, the estimated earliest year for completion of WNP-3. The financing plan and assumptions are shown in Tables 20.3 and 20.4. respectively.
Portland General Electric Company is subject to the regulatory jurisdiction of the Public Utility Commission of Oregon. The company's most recent retail rate action.
effective September 26.1975, was a 24.7 percent increase amounting to $39.6 million on an annual basis. A 13.3 percent rate of return on comon equity was allowed in                .
[                            the case.
Portland General Electric Company has requested a further 20 percent in-crease amounting to $42.2 million on an annual basis. A 13.3 percent rate of return on comon equity has been requested.
20-4
                                        ..                                                                                    5
 
b.
i      e l'
TA8tE 20.1 APPLICANT PACIFIC POWER & LIrHT COMPANY NUCLEAR PLANT WNP-3 AND WNP-5 SOURCE OF FUND 5 FOR SY5TIA WIDE CONSTRUCTION EXPENDITURES DURING PERIOD OF CON 5TRUCT ON OF SUBJECT NUCLEAR POWER PLANTS
                                                                  , millions of dollars)
Construction Years of Subject Nuclear Power Plants Security issues and                                                                                                                                          1982 1978                          1979                            1980                          1981 other funds              1976      1977
                                                    $-        $ 120        $ 140                        $ 80                            $ 70                          $ 100    $ 140 Common Stock                                                                                                                                                      40 50              40                                20                          30 Preferred stock                  40        -
155      207 Long-term debt                  95        140                        200              180                                160 Notes payable                  (17)          17                          (7)          -
(18)                          -
Contributions from                                                                        -                                -                            -        -
parent-net                    -          -                          -
Other funds                    119            8                      -                -
Total            ~T3T      "TET-        N                                3W                            TJf                          7          IBT Internal funds    '
174      188 82          97                          123            145                              162 het income Less:                                                                                                                                                    29      32 Preferred dividends          13          16                          19                23                              26 95      110 Connon dividends              51          57                          68                80                              89 47                          50      52 f.
Retained earnings                18          24                          36                42 2                                2              2                                3                        3        3 Deferred taxes                    3 Invest. tax cred.                                                                                                              10                        12      15 2            9                                  1              3 (deferred)                                                                              52                                62                        70      85 Depreciation & amort.            40          46                          48 22                          43                55                                53                        65      EO Less: AFOC                      23 59                          44                44                              69                        70      75 Total                40 f
TOTAL FUhD5          $~T77      $ 344      ST                            $7ET                            $~T6T                          IT5T    $ 462 I
Construction Expenditures
* huclear power plants          5 54      $ 166        $ 171                        $ 178                            $ 185                          $ 175  5 190 223          156                          265              188                              126                        183    293 Other Total const. Exp's.        $ UT      $ Tff        $M                            $ TET                            $ 3TT                          $N      $ TET Subject nuclear plant        $ 11      $    18      $                        31  $ 26                              $ 18                          $ 12    $      3
* Exclusive of AFDC (allowance for funds used during construction) 20-5
 
                , .e TABLE 20.2 PACIFIC POWER & LIGHT COMPANY INPUT ASSUMPTIONS FOR SOURCES OF FUNOS STATEMENTS FOR WNP-3 AND WNP-5                              ,
t.
,'                      (1) Capitalization goals of 52 percent Debt.10 percent Preferred Stock and 38 percent Common Equity;                                                                                              -
2,.
(2) Rates of 9-1/2 percent on long-ters debt and preferred stock; J/4.
(3) Short-ters interest rates at 8-1/2 percent.
  .[
?                        (4) Over-all rate of return up to 9.83 percent;
/!
* ll l
5                      (5) Price / earnings ratio of 10; I              (6) Dividend payout ratio of approximately 65 percent, and W                          (7) Coverages sufficient to maintain current bond ratings.
l
  ,{.'
.M (8) Preferred Stock Coverage requirement and its method of calculation as contained
                                + i the " Restated Articles of Incorporation." Article 111 (17) (c) (Attached).
s.
/d -                          For the period 1976-1983, the coverage of total interest and preferred dividends s: Tf ',                        combined would be:
i.I                                                                                                                            1980 1.90X S.                              1976      1.85X 1.86X                                                                              1981 1.94X
  ,fo,                                1977 197P      1.93X                                                                              1982 1.93X
; {', -                                                                                                                                                    !
1983 1.87X E                                  1979      1.91X
, .M
. A.
9, ,...
. j f,'                                                                                                                                                  .
e 6
f
                      .us noven sent artme onics.nt. m.ntmu                                      .8                          20-6
                                                /
                                                        - - _ . _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _                                                        }
 
t TABLE 20.3 APPLICANT PORTLAND GENERAL E.ECTRIC COMPANY BRJCLEAR PLANT WNP-3 SOURCE OF FUNDS FOR SYSTEM-WIDE ;0NSTRUCTION EXPENDITURES DURING PERIOD-NOF SUBJECT IR) CLEAR POWER PLANT (atllions of dollars) f Construction Year of Sub. ject Nuclear Power Plant Security issues and other funds                                                                                  1976                    1977                        1978        1979          1?30    1981 i
Common stock                                                                                      $ 54                    $ 79                        $ 104        5 60          $ 60    $-
Preferred stock                                                                                        25                        38                          38        (2)          (2)    (2)
Long-term debt                                                                                      106                          86                        124      187          146      200 Notes payable                                                                                        (40)                          (4)                          1      48            27    (38)
Contributions from                                                                                                                                                                              -
parent. net                                                                                                -                          -                          -        -
Other funds                                                                                                9                          5                        14      16                    25 Total                                                                          7                          W                        7            7                      l'BT Internal funds het income                                                                                              53                        54                          89    101          115    127 Less:
Preferred dividends                                                                                11                          13                        17      20            20    20 Cominon dividends                                                                                    27                        33                          41      47            52    57 Retained earnings                                                                                      15                            8                        31      34            43    50 Deferred taxes                                                                                            6                          9                        13      18            19    17 invest. tax cred.
3                          8                      19          3          21      6 (deferred)
Depreciation & amort.                                                                                  26                          37                        40      42            46    59 Less:          AFDC                                                                                  (15)                        (22)                      (36)      (57)          (56)    (51)
Total                                                                                  35                          40 '                        67      40            73    81
          '~
TOTAL FUNDS                                                                        T T8T                    TT3T                        T"33I        T33T        N        INT Construction Expenditures
* huclear power plants                                                                              $ 44                      $ 60                        $ 112      $ 172        $ 155    $177 Other                                                                                                145                        184                        236      177          134      89 Total Const. Exp's.                                                                          TTBT                      T73T                        l 53F      N            TY8T    ITE Subject nuclear plant                                                                            $ 10                      $ 17                        $ 28      $ 21          $ 12      $ 3
                      *ExclusiveofAFDC(allowanceforfundsusedduringconstruction)                                                                                                                                          l l
20-7
 
r_
o i
TABL ). 20.4 PORTLAND GENERA; ELECTRIC COMPANY
  ~
INPUT ASSUMPTIONS FOR SOURCES OF FUNDS STATiMENT FOR WNP-3 Item                                  Numerical Value Rate of return on average consnon stock equity-                  13.5 percent Preferred stock dividend rateI *I                                10.0 percent Growthrates(b)
Y                        a.      kilowatt hour sales                                7.44 percent                            -
: b.      revenues                                          16.48 percent
    .                    c.      expenses                                          13.03 percent 19.38 percent I                        d.
e.
interest charges net income                                        14.54 percent Market / book ratio with respect to project                      1.00/1.00 on 2/29/76(d)
  ~ .
comon stock offerings                                            1.21/1.00 on 12/31/85 Comon stock dividend payout ratio                                6.27 percent (1976) to 44.1 percent (1985)(e)
"[#(.
55 percent debt 7'                Target capital structure h
10 percent preferred stock 35 perunt comon stock t                                                                                              1981-2.352 Resultant Security Exchange Comission and indenture              1976-2.330 coverages over the period of construction III                    1977-2.250    1982-2.356 1978-2.677    1983-2,247 K                                                                                                          ~
*'                                                                                    1979-2.467    1984-2.337 1980-2.399    1985-2.199 k.
w                Long-term debt interest rate                                    10 percent
, , .                Short-term debt interest rate                                    8 percent (general)
' (>              ,                                                                  8.5 percent (nuclear fuel) t1 ;
l f.'
  .?-
(a) Applies to new issues.
  ,f" f                  (b)Each element of revenue and expense is individually analyzed and forecasted so that no
  -                      single growth rate is used in their development. The values given sumarize the results of all of the detailed analyses for the period December 31, 1975 to December 31, 1985 on A                      an annually compounded rate of growth basis.                                                  ,
(C)lncludes forecasted rate of increase in average sales price of 9.60 percent. Remaining growth rate is caused by increased unit sales.
(d)The market / book ratio is not an independent input; it is the product of other forecasts and therefore varies over the range shown.
                    -(' Varies over the range shown due to assumed 6 cents per year annual dividend increment.
I#IDecember 31 covering earnings divided by Dece iber 31 annualized fixed charges.
20-8 g
 
t e
Y                )
20.3.4  Puget Sound Power & Light Company i
Puget Sound Power & Light Company is an investor-owned electric utility operating in northern and central Washington State. It serves approximately 410.000 residen-thal, consnercial and industrial customers. Puget Sound Power & Light Company's op-erating revenues increased from $149.7 million for the 12 months ended March 31. 1975, to $169.6 million for the 12 months ended March 31, 1976, and net income increased from $19.6 million to $24.7 million over the same period. Invested capital on December 31, 1975 amuunted to $622.9 million and consisted of 57.h percant long-term debt.10.7 percent preferred stock and 31.5 percent couren equity. The company's first mortgage bonds are rated "Bea" by Moody's and "BBB" by Standard and Poor's.
Puget Sound Power & Light Company plans to finance its five percent portion of the WNP-3 design and construction costs as part of its overall construction program. The
            , funds will be provided from a combination of internally-generated sources (including retained earnings, depreciation and deferred taxes) and from the issuance of securi-ties including long-term, preferred stock and consnon stock. Interim funding re-
              ~quirements will be met with short-tern borrowing. In response to our request, the company has submitted a sources of funds statement (er financing plan) with underlying assumptions for its system-wide construction expenditures for the period 1976 through 1981. the estimated earliest year for completion of WNP-3. The financing plan and assumptions are shown in Tables 20.5 and 20.6. respectively.
Puget Sound Pcwer & Light Company is subject to regulatory jurisdiction by the Wash-ington Utilities and Transportation Cor.nission. Its most recent rate increase amount-ed to $22.9 million or 19.9 percent on an annual basis and was effective November 1 1974. The company has flied an additional $36.5 million rate increase request which would allow a 13.0 percent rate of return on common equity.
20.3.5    The Washington Water Power Company The Washington Water Power Company is an investor-owned electric and gas utility operating in the states of Washington and Idaho. It serves approximately 190.000 residential, commercial, and industrial customers as well as selling power at whole-sate to consumer-owned utilities. The Washington Water Powar Company's operating revenues increased from $117.4 million for the 12 months ended March 31. 1975 to
                  $142.5 million for the 12 months ended March 31, 1976, and net income increased from
                  $14.6 million to $19.1 million over the same period. Invested capital on December 31, 1975 amounted to $409.7 million and consisted of 63.2 percent long-term debt and 36.8 percent common equity. The company's first mortgage bonds are rated "A" by Moody's and Standard and Poor's.
The Washington Water Power Company plans to finance its five percent portion of the WNP-3 design and construction costs as part of its overall construction program. The funds will be provided from a combination of internally-generated sources (including 20-9
 
y,                                                                                            -
4
            ;e    -e                                                                                                            j 4
TABLE 20.5-APPLICANT PUGET SOUNO POWER & LIGHT COMPANY NUCLEAR PLANT WNP                                        500RlT5F FUND 5 FOR SY5 TEM-WIDE CUR 5TRUCTION EXPENDITURES DURING PIRIOD OF CONSTRUCTION OF SUBJECT NUCLEAR POWER PLANT (Millions of dollars) 3
['                                                Construction Years of Sub.iect Nuclear Power Plant Security issues and other funds                1976      1977        1978    1979      1980      1981 Conmon stock                    $ 24.7    $ 28.7      $ 25.9  $ 47.9    $ 71.4    $ 87.2 Preferred stock                  22.0        25.0        35.0    45.0      40.0      0.0 i '-                    Long-term debt                    40.0        40.0      105.0    155.0    115.0    140.0 NotesPayable(shortterm)          (10.9)      12.0        18.5    15.4      12.7      12.1 Contribution from parent-net        -          -
er.v .
    ''                                                      2.3        -          -      -        -        -
OtherTotal funds (pollution control) T8TT      '105.7      Ti474  76T3      TIE 1      239.3 Internal funds hetincome(adjusted)'              30,0        46.8        52.4    76.2      99.1    112.2
  ~."*                  Less:
      ,                    Preferred dividends            (6.8)      (8.8)      (10.6)  (13.9)    (17.8)    (19.3)
Coninon dividends              (15.3)      (18.0)      (23.6)  (29.8)    (37.7)    (44.6)
Retained earnings                  7.9        20.0        18.2    32.5      43.6      48.3
  -@-                  Deferred taxes                    1.7        1.8        1.4    1.0      2.0      3.8 Investment tax credit (deferred) 7.3          6.0        6.4    10.3      8.5      8.3 Depreciation and amortization 19.0            21.1        22.6    24.6      28.7      35.2 Less: AFDC                        (6.5)      (12.3)      (24.5)  (44.4)    59.0)    (68.6)
Total                    29.4        36.6        24 1    24.0        .      27.0 TOTAL FUNDS              M f142.3                175ET    YTsTT    $262.9    $266 3
    .                  Construction expenditures
* Nuclear power plants            $ 34.3    $ 67.5      $ 87.6  $156.2    $150.5    $170.0 Other                            73.2        74.8      120.9  131.1    112.4      93.3 Total Const. Expenditures    $T57.T $ TirT          $7653    $78TT    $767.T    $7ECI
    'Q .
Subject nuclear plant              5.8        8.3        13.7    10.4        7.3      3.1
  'f.*r
: y. .
* Exclusive of AFDC (allowance for funds used during construction)
[.h.
  - j ,. r.              This source of funds statement is based upon and qualified by the assumptions described on
: 2. ' .                the attached pages and has been prepared and furnished at the request of the Nuclear Regula-g.i                    tory Consission. It is not to be used in connection with the sale or purchase of the Company's gt,
* securities.
      ' l,
  .y.
            .e 20-10
 
p-i    e                                                                                                                                                  i TA8LE 20.6 PUGET SOUNO POWER & LIGHT COMPANY INPUT A55LMPTION5 FOR 50VRCE5 0F FUNDS STATEMENTS FOR WNP-3 (1) Generally maintain a minimum of either a 13 percent return on average consnon equity                                                          l or first mortgage bcnd indenture coverage of 2.2 times interest.
(2) Preferred dividend rate on new issue of 10 percent.
(3) Growth rate in kilowatt hour sales to consumers 6 percent.
(4) Inflation factor of 7 percent cE?:_-. :d each year through 1982 for construction expen.
ditures and certain operating and maintenance expense. 5 percent inflation factor com-pounded each year to forecast operation and maintenance of major generation plant.
(5)Interestratesusedinforecast:
Notes payable (short term):
Bank loans                        10 percent Conenercial paper                  6 percent Long tenn debt                        10.25 percent (6) Target capital structure:
1976-1980              1981-1982 Notes payable (short term)            5 percent              5 percent Long term debt                      50 percent            50 percent 13 percent            10 percent Preferred stock                                            35 percent Conenon stock                      32 percent                                                                                        I (7) Comon stock price / earnings ratio of 7 times earnings.
(8) Comon dividend payout ratio averages 52 percent.
(9) Maximum dilution of common stock does not exceed 15 percent in any given year.
(10) In line with the 1975 Tax Reduction Act (Sec. 402 of P.L. 94-12) the following investment tax credit assumptions are incorporated in the projections.
: s. Invest tax credit rate - 1976 at 10 percent; 1977 to 1982 at 4 percent.
: b. Investment tax credit taken on progress payments on Colstrip 3 and 4. Skagit Units
  ','                          1 and 2. and Pebble Springs Units 1 and 2. Appitcable transitten percentages for phasing in qualified progress payment are 1976. 40 percent; 1977. 60 percent.
* 1978. 80 percent and 100 percent after 1978.
: c. Limitation on use of investment tax credit as a percent of tax liability is 100 per-cent for 1976 and is scaled down 10 percent each year until it reaches the 50 percent level in 1981.
AFOC accruing from (11) AFDC rate adjusted periodically to reflect composite cost of capital.
construction of major production plant is normalized in 1977 and subsequent years.
20-11 m
                                                                                  ~            --    - . _ . _ _ . _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _
 
f
                                                          . . . _ . . _ . . ___._______.__.                                                    l
            '- -  a                    _ . . . . . _                                                                                          I l
i l
TABLE 20.6 (Continued)
(12) Schedule of Major Plant Construction Project Puget Power            Completion Date                            ,
Ownershio Share _
Plant August 1976 50 percent                    July 1980 Colstrip #2 - coal                            25 percent Colstrip f3 - coal                                                          July 1981 25 percent Colstrip f4 - coal                              5 percent                  . March 1982 WMP #3 - nuclear                                                            July 1983
    '                                                                        40 percent                    July 1985 Skagit #1 - nuclear                            20 percent Pebble Springs #1 - nuclear                                                  July 1986 40 percent                    July 1988 Skagit #2 - nuclear                            20 percent
: y. .                        Pebble Springs #2 - nuclear (13) Power Supply:
(a)
System resources are based on an average of the 30 water years include west group forecast.
(b)
Purchased hydro power costs debt service requirements are as precribed in t owners official statement.
(c)
Secondary (non. firm) sales are made                          either Revenues derivedwithin    or are from sales outside the Northws 1                                  and are based on relative levels of surplus.
primarily based on established Bonneville (BPA)* rates or other agreements as applicable.
(d) Wheeling charges are based on:
(1) Required capacity to move purchased power to Puget's system.
(ii) BPA established rates rip, h                (14) Other Infortnation Security Exchange Connission Fixed charge coverage:
(a)
  $                                    1976 = 1.95, 1977 = 2.68. 1978 = 2.30, 1979 = 2.39, 1980 = 2.36, 1981
- (' l                                  Growth rate of revenue from sales of electricity 17 percent, expenses 15 percen
  !.V .                          (b)
,, ,,                                    interest cost 21 percent, and net income 26 percent.
, .,1' m  5 .
                            *Bonneville Power Administration
        .;.1 ;. aj ,I, l
    ' 's?:.
  / f,' ** ,
E5 e .
20-12
 
F~
k I  I    .
l l ding f
retained earnings and depreciation) and from the issuance of securities inc uInterim fund
}-        long term debt, preferred stock and consnon stock.in response to our request, the company has be met with short-term borrowing,                                                    its i
a sources of funds statement (or financing plan) with underlying                          d  assumptions for system-wide construction expenditures                            for the period 1976 through 1981, the estimate The financing plan and assumptions are shown earliest year for completion of WNp-3.
in Tables 20.7 and 20.8 respectively.
The Washington Water Power Company is subject to ilities                      regulatory jurisdiction by the Washington Utilities and Transportation Comunission and the Idaho Public Ut Consitssion.
In August 1975, the Washington Commission authorized electric and gas increases totalling $3.6 elllion on an annual basis and allowed a 12.75 percent return Also in August 1975, the Idaho Consnision authorized            nt  electric and on consnon equity.
gas increases totalling $1.2 million on an annual basis and allowed a 1 return on conenon equtty.
Amendment 32 to the PSAR.                                                                                    {
l i
20.4      Conclusions _
Based on the preceding analysis including our evaluation of the reasonableness                              l of the financing plans and underlying assumptions, we have concluded that Washington Pub                          j Power Supply System, Pacific Power & Light Company, Portland General Electricl Compa Puget Sound Power & Light Company, and The Washington Water Power Company a cially qualified to design and construct WNp-3 and WNP-5 in proportion to their re-spective undivided ownership interests as indicated in Section 20.1 of this suppleme Our conclusion is based on the determination that the applicants ha've reasonable assurance of obtaining the funds necessary                        to complete the design and construction It is also based on the basic assump-l l
activities including related fuel cycle costs.                                h lengthy tions of rational regalatory environment and viable capital markets due to t e future period involved and the expected heavy dependence on external financing.
20-13 z      :
 
m.
B      8 h
TABLE 20.7 APPLICANT THE WASHINGTON WATrR POWER COMPANY IRJCLEAR PLANT WNP-3 SOURCE OF FUND 5 FOR SYST1M-WIDE CONSTRUCTION EXPEIOITURES DURING PERIOD OF CONSTRUCT ION OF SUBJECT NUCLEAR POWER PLAhT (Millions of dollars)
Construction Year of Subject Nuclear Power Plant    III Security issues and other funds                    1976      1977      1978    1979  1980                          1981 Common stock                        $ 12.0    $      $ 23.0  $ 24.0 $ 15.0                        $ 15.0
          -v'                  Preferred stock                            15.0        15.0          20.0                                                                            Long-term debt                        30.0    30.0        62.1    40.0      60.0                                    30.0
          ,; -                  hotes payable                        (7.0)    9.0        (9.0)    29.0    (29.0)                                                    .)' .                  Contribution from parent-net                                                                                        f 4hl-
        . a, r .
Other funds Total 4.4)    4.6
                                                                              ~WT      71D) P J4.8      2.8 P
3.9 44.2
(.8)
WM
[                      Internal funds
        . ,4 : .                het income                            18.0    20.4        24.0    26.7      34.0                                    38.1
          < '                  Less:
Preferred dividends                              1.4      2.7      2.7                                            4.5 W                            Cosmon dividends                    11.4    13.2        15.6    17.6      22.3                                    24.7
            .                    Retained earnings                      6.6      7.2        7.0      6.4      9.0                                            8.9 Deferred taxes                                                                                                        .*
* Invest.taxred.(deferred)              1.9      1.4        2.4      3.4      1.9                                            1.6
        ',                      Depreciation & amort.                  9.6    10.5        11.3    12.2      14.3                                      17.2
      'A                        Less: AFDC                            1.8        .6          .3      4        .4                                                      .5
      'M/.                                  Total                  T        "TET      ~T5T    ~7T.T      24 8                    """PTT y                              TOTAL FUNDS                $ 46.9  $"TEI      ITR~T    TTTTT  $ 94 7                        $'71.4 Construction Expenditures  III
      '                          Nuclear power plants                $ 9.8    $20.5      $ 34.1  $ 37.2 $ 35.7                        $ 31.6                              i Other                                37.1    57.8        72.6    80.2      59.0                                      39.8                l
      % .,<                        Total const. Exp's.              $TG      $7El      $ T5E7  $1T7T  $ 507                          $ 7T T Subject nuclear plant              5 5.7    $ 8.2      $ 13.6  $ 10.3 $ 7.2                          $ 1.8
          ,,,                  Interest coverage                      2.1    ~El            2.2    2.2      2.4                                              2.4
    ~t-/,T .
p-j,,,,
* III First five years (1976-1980) based on five year financial model data. Last two years pro-jected manually on a consistent basis.
              . .                  Exclustve of AFDC (allowance for funds used during construction)
Mi N
    . g.f'i .    ..
    ,'.gf  V.'.,e                                                                                                                              .
20-14
* e TABLE 20.8                                                                      8 THE WASHINGTON WATER POWER COMPANY _
lhPUT ASSUMPTIONS FOR SOURCES O_F FUN 05 STATEMENT FOR_
                                      ~
ff-l 14.5-15.0 percent.
Rate of return on Average Comon Equity -
(1)
Preferred Stock Dividend Rate - 9 percent.
(2)
Sales of general business        As you kilowatt  hours know, kilowatt  are hour    estimated sales  to other      to increase about 5 (3)    Growth Rates:                                                                  h  fore are not percent per year during the forecast period. utilities are subject to resource availab trendable.                                                                                    i Electric and gas revenues included within the forecast areamed                                a result of the general b kilowatt hour / therm sale trends and include elements of rate                                ity relief as    which were prog through-out the forecast as needed.
and cornposite debt cost prevailing at that point in time and the return on common equ previously mentioned.                                                                        i    to Operating expenses subject to inflation were                          escalated  Itemsatsuch 10aspercent    in 1976 decr 7 percent in 1977 and finally to 6 percent for the balance joft to                    escalation.
the  forecast.
power and gas purchased are generally regulated by contract and are not sub ec (4)    Comon stock price / earnings ratio or market / book                                        ratio No price  /    with respect to th corvon stock offerings:
are approximately equal, but on an increasing annual rate of about 5 percent.                                          '
earnings ratio was used for projected corvon offerings.
a target of 65 percent was assumed.
(5) Comon stock dividend payout ratio:
a target goal of 60 percent debt. 30 percent corvon equity
                                                                                            ~
(6) Target capital structure:
and 10 percent preferred has been assumed.
Our most restrictive indenture requirement statest that (7)    Interest coverage requirements:
annual interest requirements must be at least twice                                  We have anynot 12 consecutive gross earnings.
allowed us to exceed the two times interest coverage test under the indenture.
made a Security Exchange Corvission coverage test.                                        For An interest rate of 9 percent was assumed on all projected mortgage bond issues.
(8)    short ter:n bank loans, a rate of '-1/2 percent was utilized.
1 I'
20-15 3
 
i e
 
==21.0 CONCLUSION==
5_
In Section 21.0 of the Safety Evaluation Report, we stated we muld be able to make certain conclusions upon favorable resolution of the outstanding matters set forth We have discussed these matters in in Section 1.9 of the Safety Evaluation Report,                    We are able this supplement and indicated a favorable resolution of each matter.
to make the conclusions listed in Section 21.0 of the Safety Evaluation Report.
Furthermore there are no other issues outstanding.
Accordingly, we affirm the conclusions listed in Section 21.0 of the Safety Evaluation Report.
l i
21 -1 t
                                            ~
i                                                                                            [
 
4 's APPEN0!r_A_
CONTINUATION OF THE C W _0GY OF THE RA010 LOGICAL SAFETY REVIEW 0F WASHINGTON PUBLIC POWER SUPPLY SYSTEM
_N0JECTS #0. 3 AND N0. 5 P                                                                        i j
Issuance of the Safety Evaluation Report.
February 13,1976 Advisory Comittee on Reactor Safeguards meeting.
February 24. 1976 Submittal cf Amendment No. 31.
February 27,1976 Notice of availability of the Safety Evaluation March 1, 1976 Report pubitsbed in Federal Register.
Submittal of Amendment ho. 32 March 2. 1976 Advisery Committee on Reactor Safeguards March 4, 1976 full comittee meeting.
Submittal of Amendment No. 33.
April 1, 1976 Letter from the Advisory Comittee on Reactor                      )
April 16, 1976 Safeguards Letter from applicants providing infomation April 20. 1976 regarding ownership of WNP-5.
Submittal of Washington Public Power Supply April 29, 1976 System Deeds and Agreements.
Letter from applicants providing information June 1,1976 on status of control of exclusion area.
e 1
A-1
                                                                                                      -w
 
i ..
i APPENDIX B 16, 1976 REPORT OF THE ADVISORY COPMITTEE ON REACTOR SAFEGUARDS DATED AP ADVISORY COMMITTEE ON REACTOR SAFEGUARDS seuCLEAA RESULA7onY -m wamamoton, s. c. assus April 16, 1976 1
4 lenorable Marcus A. Bouden Acting Omimen
: u. s. melear segulatory oismission l
mehington, oc 20555
 
==SUBJECT:==
 
IRPORr G gasminREI RELIC PGIER SOFFLY STW1WI NOCImft FBIOL7ECTS
,                            N0, 3 Aim WD. 5 Dear ler. Ebudens turing its 193 rid meeting, April 8-10, 1976, the Adrimory Qassittee en mm: tor safeguards completed a review of the appliastam of the mobington 7411c Reser Sigply system (WPPBS) for permission to construct the Mrges D        maclest e site Project le. 3 and WPp68 Riclear project 10s. 5 (IEEP-3 and tesP-5).
ms visited on August 4,1975, and thh{ttee meetings 24, 1976,were    held that in Ridland,    meh-
{                  see day in Elma, mehington, and on February ington. De project tes also considered during the 191st meeting of the Omnittee in mehington, D. C., Isarch 4 4, 1976. During its review, the Queitttee had the benefit of discussions with representatives of IEures and its consultants, tv-t==tian Engineering, Inc., hasco services, Inc., and the Itaclear Ingulatory Qamission (4 staff. Se Casemittee slao had the benefit of the docm ents listed.
De lesP-3 and ISIP-5 site is 1cceted in Grays Barbor        Oxmty, mahlagte,
                                                                      - ,=i= Cosmopolis,      meh-approminately thirteen ailes east of L ."-                              1he minisaan ington, the nearest population center (1970 population 28,549).
esclusion distance is 1310 metere and the low population sons (175) radits is three miles. Se total 1970 resident population within the Ist ins 260.
!                  De ISIP-3 and 1GEP-5 application is andmitted in accordance with the Com-j
'                  mission's standardisation policy as described in appendix 0 to part 50,
                    " Licensing of Prothsetion and Utilisation Facilities," and section 2.110 of Imrt 2, "Ilules of practice," of Title 10 of the Code of rFederal Esgula-l tiens. For this application the reference systes is the hutumeinst Regineer-1 ing standardised tasclear staan agply system imone as its standsed Reference system-te. Bis design has been reviewed by the ACM and diacameed in its report of septesher 17,1975, =omhustian migineering standard safety Analysin moport - cummM0."
e 0
B-1
                                                                                                                                --s        .n
                                                                                                    .ww,--eww-m.w--              ---- +-- --
 
                              -      . .                -          ~ . . ... . -                                . . _  .
e
* P 1
knorable Mercus A. heden April 16, 1976 6
            ,/-
he ultimate best siak Bor emedt reactor will consist of a system of dry i            #
ocoling taunts amul ausponents that reject ascens heet to the atmosphere.
tocause teter      of its design the ultimets host sink does not rurguire a askeg ag ply.
W '2                        De Applicant described his investigations of the geologic and seianic V              .        characteristice of the site and the surreeding region. totile the geology of the surromding area is cogles, and there le defit.ite tectonic activity,
        ,,                        there are no knoun geologic or seismic prehkess that cannot be solved by design.
eration at the fondations.She prW esfe shutdom earttup=he is 0.32g horisontal accel-She operating hemis earthquake is 0.169 i
                          .      Bad telP reactor will employ a contalment systne including a free standing steel sammet surroisidad by a reinforced annerete aMaid building. She
      .u !                        inner steel veneel is designed for an internal premeiste of 44 psig. The f                          annulus, between the two structures, is malatAimed at a@e*=n=le=ric pres-V*                          sure to permit the collection of lamhage frcm the steel vessel, in the unlikely event of a LTA, and permit its processing before r*1==== to the envianneant.
a G                            %e Osmiittee recommended in its report of Septaber 10, 1973, on accept-
    ''. ' , .Y ance criteria for 300i, that significantly leproved EQ:S capability should be provided after  Januaryfor  reactors for whis construction permit requests were filed 7, 1972.
the telp 3 and telp 5 design is in this category.
mese projects will uma the 16 I 16 fuel asumublies similar to those to be
  , .g, /, 'd Q:e"                              used in Arkansas teaclear Que (knit 2 and St. Iaacle PlantAlthough        thit 2.
calculated peak clad tageratures, in the event of a postulated IDC4, may be less for 16 I 16 then for the 14 X 14 array, the Committee believes
, 9,,i
* that theSeptember mittee's    Agplicant should continue stanties that are responsive to the One-f3
, .I t.
10, 1973, report. If stutime, conducted with the best available teeniques, establish that significant further EG3 improvements
; ,,, f .- .                    can beand telP-3    adieved, leip-5. consideration should be given to lacorporating than into
;y              a
,A
' iQl
:                                A generic questlan has arisen aminerning lando on the v====1        support
".0
      *6-    2                  structure unter        for certain postulated Icef coolant accidents in pressiriand reactore.
  . e-                                                21s matter abould be reseleed for les-3 and teep-5 in a t j .f' ,,* ,                    menner satisfactory to the IEC Staff.
Of,( . -
c'f                              Se QMttee bellene that the applicant and the IEC Staff should continue p/ ;.
5
; a .*                          bility  and --- r---
of sabotage.to          review the telP 3 and teIP 5 design for testaares that could red l
l B-2 I
i
                                                                                                                            ~
 
4 i  4    ,
l l
l April 16,19M leenralde sentcus A. mudan                                                                                            l Following the troens Ferry fire the K hecutive Director Sor quarations est incident.
g a special review grow to detesmine what could be 3aarmed
)
to reacters that are already operating, and to the K repalatory process.
  ,                            me revise geog points out est its ressmasadettes
                                                                          "
* are are based es    not specific tesesledge        at      to any single plant and that its - Se ACES wishes to be Impt indommed of the than of tids 1sweatigation.
the specific applicatian of the review greg's ressemandstines, as they aggnly to ter-3 and IBF 5, ser the developeast of additiemal ladossation on fire pr.29, fire fighting, apmlity amanrance, and the improve-ment of E policias, proceeares, and critaria.
Other generic protdene relating to large          m estar ean p reactors T - shouldare    be discummed in the 3eunittee's report dated April 26,19E dealt with appropriately by the K Staff and the Applimat.
me Advisory Omudttee on Reactor safeguarde believes that the ite atlan is given to the foregoinghaften and topedic itses poser mentioned happly  insystem its CM report of September 17, 1975, the 5 can be constructed with resennetde assur-Maclear Projects No. 3 and It).anoe that they can he operated without tsuhae risk to the of the pedic.
Acklittanal comments by tambers senz W. Carbon, David Girent, IILiten S. Plesmet, Staghan Iawreski, and leyer Bender are presented below.
Sincerely yours, Dade W. thailar Oiairmen Additional Comments by stumbers Max W. Carbon, Devid Okrent, Milton S. Pleseetr
'                                  and stachen Lawroski l
me site for Wyves maclear Projects le>. 3 and Itz. 5 lies in a seimically active regin that has been adrject to large eartlepakes in historic timemile te do n and includes active mejor faults.
seianic design basis, we believe it would be desiralde to howe the geologic and siende aspects of such sitas, and perhaps most sites, also reviewed by the U. S. Omological marvey to provide the benefit of an additianal indepsedent evalustian.
1 E3 I
N"Y&W"-m.-.py,_____                                    cc. .
                                                                                                    *      "W"+-w.
 
                                                        -                            .  -                  .          _        -. . . . _ ~ - .
r                                                                                                                                                      1 s e                  e I
l l
i l
knotable Mercus A. kuuden                                      April 16, 1976
        ./ '
' ;,l:
.          4
    . p.,                                        Additional anoments by tambers David okrent and stilton S. Fiesset
        ,,.t Se recurrence interval of an earthquehe of the order of the enfe shut-l(!:                                      dem earthgenho may be about 1,000 years for this site. per such a q,j p                                          recurrence interval the prehability of not adlaving safe shutdem, 32,
      ?,'T          -                            givqn the SN, met be very maall if the IK Staff goal of less than 10-' por year, of a serious accident fram any single onuse, is to be
        - -                                      adieved. Since seimic design adequacy is not addect to direct esperimental confinnation, in believe that other measures, including 5                                            independent design review, low-eiplitude eheking ====areenats of the completed structure, as-built onnstructhe validetian, and detection
                      -                          of possible inservice degradatlan, should be evaluated and the neces-sary steps taken to provide the high degree of detailed specific
; @,i<
1 assurance required with regard to asianic cagahtlity of all andety-gg,                                          related feetw es.
Additional coments by Moder Myer Bunder
* With increasing frequency, questions have arisen concerning the agipro-priate degree of conservatian to be included in the seimic design
      /. = ,                                      criteria for nuclear power plants. Se needs of pelic enesty would
    ,/          ,
be best served if the design practices curantly in vogue were altered to permit inelastic response ao as to aihmice the energy absorptian f
characteristics of nuclear structwas mader severe seimic loodtage.                                    '
MV%        J,%,                                  For the more severe sei m ic conditions inelastic design principles
    ',f*                                          should be applied to foundetlans, concrete containments, floors, and                                !
.U,.                                              siqqiort structures in order to answ e a high degree of desping and I*                                        thus minimies the forces transmitted to critical safety festm as and
. I,                                              to the primary coolant circuitry. 2 1s would elimiaste the need for
!" K -                                            many of the amples sigipleantal structural feetwas of apsesti==Me M4                                                reliability idiid are now used to uset estreme meismic design con-ditions. 21s design appress smuld allow nuclear structures to 3 5.[,f,                                          satisfy even the most pessimistic leading requireme its of the most
',fp{y;.i.,y,'                                    estreme seimic prophet. If it is not used there is dostftal value,                                    ,
3';                                                and possibly some less in pslic safety margin, fram the use of                                      i
[,.# 7                                        ultr=====rvative seimic design requiruennts became the relia-                                        ]
bility of the structural restraints esmot be =======d fras relevant h.,"f.y,g 7, . ,.
        -        '                                structural esperience or post-construction vibrational testing.
g &y, ha c.:.u                                          neferences:
'O.';,,.                                          1. an==Magten pelic River sgply Systems (urges) lasclear projects leo. 3
'                                                        and leo. 5 Preliminary Safety Analysis Itaport (PSAIO vbluees 1-18
{
: 2. hts 1-30 to the FEAR i
B4 e
 
e -e APPENDIX C ERRATA TO THE SAFETY EVALUATION REPORT FOR THE WASHINGTON PUBLIC POWER SUPPLY SYSTEM PROJECTS NO. 3 DATED FEBRUARY. 1976 Page      Line In the safety Evaluation Report we inadvertently 1-1      1 did not mention a11 owners of these projects. (See paragraph 1.1 of this suppiament.)
1-1      35        Add . . . . . " report."
1-7      31        Change "50.37tf1" to "50.33(f)"
2-8        35        Change " reverse" to " severe" 33        9        Change "trnasfor" to " transform" 32        Change " tornado" to " Tornado" 3-3 3-11      14        Change "provides" to " provide" 3 11      26        Change "((ACI)" to "(ACl)"
7-7        5      Change "384" to "383" 23 Change "American National Institute" to "American National 13-1 Standards Institute" 24        Change "N18.1971" to "N18.7 1971" 13 1 11 Change "for Nuclear Power Plants" to "for Water-Cooled 14-1 Power Reactors" CESSAR 15-11      Table 15-4      Add:
                                  "(9) 1.2 peaking factor"
                                  "(10) 0.45 percent of the fuel reaches at least incipient melting after rod ejection accident."
                                  "(11)100percentofnoblegasesand50percentofiodinein                        ,
fuel reaching incipient centerline melting temperature are        '
released to the primary coolant."                                    1 C-1
                        ~~-
 
l e .
l APPENDIX D LETTER FROM THE STAFF TO THE ADVISORY COMITTEE ON REACTOR SAF STAFF REGARDING WPPS$ 3 (WNP.3) AND 5 (WNP-5) SEISMOLOGY AND
                                            .mm p , -s\      q mucLEAm neouLAfony comenetsSION wasemeetese.o.c. amuse MAR 3 sn Docket Nos: $TN 50-503 STN 50-509 Mr. Raymond R. Fraley Executive Secretary Advisory Convnittee on Reactor Safeguards Washington, D. C. 20555
 
==Dear Mr. Fraley:==
 
In response to your recent request, there are transmitted herewith for the use of the Comittee 18 :cpies of a memorandum dated March 26, 1976. from the Director Division of Site Safety and Environmental Analysis to the Deputy Director Office of Nuclear Reactor Regulation concerning the WPPSS 3 and 5 seismology and geology review carried out by the NRR staff.
If you need any further information on this matter, ple6se let me know.
Sincerely, t
Oes% t Sped %
LLCut /
Edson G. Case. Deputy Director Office of Nuclear Reactor Regulation
 
==Enclosures:==
 
As stated D-1
_ _ - .. -.            I
 
_.                    -= .- _ _ . .            .--            -.      . . - - _ .    - --        - .-
J e - e . o-w i
Edson C. Case The seiseslegical review was conducted independently by Carl Stepp.
                                                          ~
Dr. stepp, prior to joining the NRC, spent Ne,          two therefore, years working      on seismic was already risk asyping is the Puget Sound region.
2                                                  familiar with the literature of the region and was svare of the known relatiosahips between earthquakes and geologic structure in the region
}.
1
      .#                                          of the site. '
a The UPPS$ 3 and $ ette is located on the southwest extent of the Fuget Sound lowlands.
Although the utility proposed a division of tectonic provinces which would have placed the site within the Wallapa Hills
  ,                                                tectonic esprovince, in our review we considered      The anximum  thehistoric site toearthquake be re-isted to the larger Puget Sound region.                                This earthquake, if in the Puget Somd region produced an intensity VIII.                            However, assumed at the site, would result in an 0.25g acceleration.
the == h historic earthquake was not controlling in determining the seceleration for seismic deoip for UFFSS 3 and 5 because of the presence of " capable" faults meer the proposed site. The applicant did an on-tensive and thorough analysis of the reistionship  Most of thebetween mejorearthquakes earthquake and geologic structures in the region.                                They do produce producing structures are not apparent at the surface.
very large gravity anomalies, however, permiting their estent to be easily aspped. The safe shutdown earthquake at the site was based on an aseesammet of the nazieum earthquake that can reasonably be expected to occur on the nearest capable fault to the site - 21 miles suay.
The assessment of the naminua earthquake on that structure was based 3                                                    se a conservative estimate of the percentage of the total structure
; i
* that could break in a single earthquake and a conservative interpreta-j                                                    tion of the empirical relationship between length of f ault rupture and l,,                                                  earthquake aspitude. Finally, the acceleration at the site was computed 4e                                                    on the basta of curves that envelop the world-wide data set, and this i
;    '1  '
value wee incorporated into the deoip as the high frequency anchor (33Ns) for segulatory Guide 1.60 response spectra to be applied at the
!    s.                                                                                            We accepted the applicant's proposed foundaties level of structures.
acceleration for seismic deety of .323 because we fond his analysis to be conservative.                                                                                              ,
During the ACRS aseting on March 4. Dr. Stepp was asked for an estimate 3                                              of the probability that the acceleration for seismic    Ne replieddesign that no(0.323) computationfor J.,
          *~                                          the UFPSS 3 and 5 plant would be escoeded.Newever, he added that computa-                                      ,
: j.                                              of that probability had been attempted.
I
      *f.                                              tiene indicate the probability of an istensity VIII being exceeded at l
Abepen,          about 12 miles free the WPPSS 3 and 5 site, is of the order of 10- per year. Dr. Stepp finally stated that it is his view that the i
                                                        .32s is near an upper beimd value of acceleration for seianic design for l
'                                                        the WpFSS 3 and 5 site, i
l 0-3 l
l
                                                                                                                            '                      +-
                                                                                                                                                            '7 ~ -
_ _ ~._ _ _ . _ _ _ . _ _ _ _ _ _ _ _ _ _ _ . _ _ . _
 
e I
                                                                                                                  \
I gebon G. Case While the probability of this acceleration at the WPPSS site being exceeded has not been computed, Dr. Stepp would expect it to be orders of magnitude lower than the probability of an intensity 8 at Aberdeen being exceeded. It is Dr. Stepp's judgment that the probability that the .32s acceleration will be exceeded at the WPPSS site is extremely low (i.e. less than 10-5 per year). This difference in probability is primarily attributable to the facts that the WPPSS 3 and 5 facilities are founded on bedrock with the 0.32s seismie input applied at the foundation level, whereas Aberdeen is sited on valley alluvium which La observed to result in higher intensities for a given magnitude earthquake.
Harold R. Denton, Director
      ,                                                                  Division of Site Safety and Environmental Analysis ki-?
:ve .
n
* r      $.
ll s '
i'g ,*x og <
      *  ;s-g,'            . .
    /;<'
t
            .g N
 
                                                  $29,000,000 i WASHINGTON PUBLIC POWER SUPPLY SYSTEM q              ,
A Municipal Corporati n sad a Joint Operating Agency of the 5                                                State of Washington 4%% Washington Public Power Supply System Nuclear Project No. 3 Revenue Notes, Series 1973A Dated: October 1,1973                                                                            Due: June 15,1976 Principal and semi-annual interest (December 15 and June 15, first coupon due December 15, 1973) payable at Chemical Bank, New York, New York, or Peoples National Bank of Washington, Seattle, Washington. ' Die Notes will be in coupon form in the denomination of $25,000.
Interest exempt, in the opinion of Bond Counsel, from federal income taxation under existing laws and regulations and a speci6c ruling issued by the internal Revenue Service tvith respect to the Notes.
The Notes are being issued *o finance a portion of the Supply System's Ownership Share of the cost of acquiring and constructing Washington Public Power Supply System Nuclear Project No. 3, to pay at maturity the principal of and interest on $2,000,000 of notes of the Supply System previously issued for such purpose and to pay interest on the Notes to maturity. The Project will be constructed and operated by the Supply System pursuant to an agreement between the Supply System and four investor owned utihties (the " Companies"). The Project will be 70% owned by the Supply System and 30?c by the Companies. The Supply System's Ownership Share of Project capability, less a portion of the Project's output which will be sold to certain industrial companies during the period July 1,1981 through June 30,1984, has been sold by the Supply System to certain statutory preference customers (the
    " Participants") of the Bonneville Power Administration under agreements called Net Billing Agreements.
The Participants will pay to the Supply System an amount equal to the Supply System's costs, including debt service, associated with its Ownersh'p    i  Share of the Project, less amounts payable by the industrial companies. Each Participant has assigned its share of the Supply System's Ownership Share of Project capability to Bonneville which will ci r'.i' the payments made to the Supply System by each such Par-ticipant against billings made by Bo esi!!e to each such Participant for power and certain services. The Net Billing Agreements provide t!.        .:h Participant is obligated to pay the Supply System whether or not the Project is completed, operaw, or operating and notwithstanding the suspension, interruption, interference, reduction or curtailment of Project output.
The Notes, together with the interest thereon, will be payable from any moneys of the Supply System that may be lawfully applied thercto, including revenues derived from the Supply System's Ownership Share of the Project and the procuds of revenue bonds or refunding notes of the Supply System. Interest on the Notes will be capitalized to maturity. The Notes are not subject to redemption prior to maturity.
PRICED TO YIELD 4.25% TO MATURITY (accmed laterest to be added)
The Notes are to be issued subject to the approval of legality by Wood Dawson love & Sabatine, New York, New York, Bond Counsel to the Surply System, and floughton Cluck Coughlin & Riley, Seattle, Washington, Special Counsel to the Supply System. It is expected that the Notes in definitive form will be ready for delivery in New York, New York, on or about October 24,1973.
9 Oct3ber 10,1973 m
 
k          WASHINGTON PUBLIC POWER SUFFLY SYSTEM
    ;op                          Pri cip.iOmce--Richi a, w hi.go BOARD OF DIRECTORS A. J. Benedetti*                            Harold W. Jenkins Kirby Billingsley                          Thomas F. Kroupa Gerald C. Fenton                            Francis longo Ed Fischer*                                Howard Prey Alvin E. Fletcher                          E. Victor Rhodes
* John Goldsbury                            Joseph Shipman D. E. Hughes*                              James E. Tannahill W. G. Hulbert, Jr.'                        Edwin W. Taylor Arnold J. James                            John L. Toevs Rolf E.Jemtegaard                          Gordon Vickery*
Glenn C. Walkle> *
* Executive Committee Member.
e OFFICERS Howard Prey                            President Alvin E. Fletcher                      Vice President E. Victor Rhodes                      Secretary i
ADMINISTRATIVE STAFF Managing Director                                    J. J. Stein
: h.        Deputy Managing Director                              L. L. Humphreys Directorof Construction                              J. R. Church Directorof Compliance                                Neil O. Strand Manager, Regulatory Programs                          Duane L. Renberger Supervisor of Engineering                            O. E. Trapp Treasurer and Controller                              James T. Bobo Counsel                                              Richard O. Quigley Auditor                                              C. W. Godfrey SPECIAL COUNSEL Houghton Cluck Coughlin & Riley BOND COUNSEL Wood Dawson Love & Sabatine s
CONSULTING ENGINEER R. W. Beck and Associates ARCHITECT ENGINEER Ebasco Services, Inc.
FINANCIAL CONSULTANT Blyth Eastman Dillon & Co. Incorporated 3
I i
                                                                            ,c    ,  . ., ~, , 7
                                                                                                    , ,.. n y m
 
3 y      His OfEclai Statement, which includes the cover page and exhibits, does not constitute an oRer to sell the Notes in any state to any person to whom it is unlawful to make such ofer la such state. No desler, salesman or other person has been authorized to give any Information or to make any repreu                                                    g n tions, other than those contained in this Official Statement in connection with the oRering of the Not and 11 given or made, such information or representation must not be relied upon.
TABLE OF CONTENTS PAGE PUR POSE OF Tile NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .
Til E S UPPLY SYSTEhi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      5 SECURITY FOR Tile NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      7 TI I E PROJ ECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. .
BONNEVILLE POWER ADh11NISTRATION .                                                  . . . . . . . . . . . . . .        11 Tile IlYDRO TilERh!AL POWER PROGRAh! AND POWER SUPPLY IN TIIE PACIFIC NORTilWEST . . . . . . . . . . . .                                                      12 Tile NET BILLING AGREEh1ENTS . . . . . . . . . . . . . . . . . . . . . . . .                                            14 Tile PROJECT AGREEh1ENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18                                      ....
Tile OWNERSillP AGREEh1ENT . . . . . . . . . . . . . . . . . . . . . . . . . . .20                                        ..
TIIE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25. .
REGISTRATION OF Tile NOTES BY STATE AUDITOR . . . . . . . .28.
T R UST E E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28. . . . . . . .
NEGOTIA BLE INSTR Uhf ENTS . . . . . . . . . . . . . . . . . . . . . . . . 28                                            ......
LITIG ATION . . . . . . . . . . . . . . . . . . . . . . . . .                ....................                      28 APPROVAL OF LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 29                                                  ...
TA X EX Ehi PTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29                              ......
bi l SCE L LANEO US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29                                .........
EXillBIT I - List of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 EXillBIT 11 - Summary Report of R. W. Beck and Associates . . . . . .                                                    36 EXillBIT lil - The Ownership Agreement . . . . . . . . . . . . . . . . . . . . . .                                      45 EXillBIT IV - Form of Net Billing Agreements . . . . . . . . . . . . . . . . . .                                        67 EXfilBIT V - The Project Agreement . . . . . . . . . . . . . . . .                                    . . . . . . . . 89 EXillBIT VI- Opinions of Wood Dawson Love & Sabatine . . . . . . . . .                                                102 EXillBIT Vil-Opinions of lioughton Cluck Coughlin & Riley . . . . . . .                                                105 htAP
                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cen t erfol d Y 49 c ~,
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OFFICIAL STATEMENT WASHINGTON PUBLIC POWER SUPPLY SYSTEM (A Municipal Corporation and a Joint Operating Agency of the State of Washington)
                          $29,000,000 4%% Washington Public Power Supply System Nuclear Project No. 3 Revenue Notes, Series 1973A October 10,1973 The purpose of this Official Statement is to set forth information concerninF Washington Public Power Supply System (the " Supply System"), its Washington Public Power Supply System Nuclear Project No. 3 (the " Project") and its $29,000,000 Washington Public Power Supply System Nuclear Project No. 3 Revenue Notes, Series 1973A (the " Notes"), in connection with the nie by the Supply System of the Notes a2d for the iaformation of all who may become holders of such Notes. The Notes are to be issued pursuant to the Revised Code of Washington, Chapter 43.52, as amended (the "Act")
and Resolution No. 673 (the "Resoiution") adopted October 10,1973 by the Supply System.
PURPOSE OF TIIE NOTES The purpose of the Notes is to oay a portion of the Supply System's Cwnership Share of certain preliminary costs of the Project, including paying at maturity the principal of and interest on $2,000,000 principal amount of notes previously issued by the Supply System for such purpose and paying interest on the Notes to maturity. The estimated application of the proceeds from the sale of the Notes to pay such costs is set forth herein under "The Project-Initial Financing Program".
The Supply System has entered into an agreement (the " Ownership Agreement") with Pacific fl t      Power & Light Company, Portland General Electric Company, Puget Sound Power & Light Company and The Washington Water Power Company (the " Companies") which provides for the acquisition, construction, operation and ownership, as tenants in common, of the Project. The Ownership Agreement provides that the Project will be owned by the Supply System (70%), Pacific Power & Light Company (10% ), Portland General Electric Company (10% ), Puget Sound Power & Light Company (5%), and The Washington Water Power Company (5%). The Supply Gystem's share of the Project is herein referred to as the " Supply System's Ownership Share".
Under the Ownership Agreement each party will be responsible for providing its ownership share of the costs of construction and operation and will be entitled to its ownership share of the Project's capability. The parties to the Agreement have designated the Supply System to act as their agent to construct, operate and maintain the Project.
THE SUPPLY SYSTEM 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 ope. 'e plants, works and facilities for the generation and transmission of electric power and energy. The Supply System has the power of eminent domain, but it is specifically precluded from the condemnation of any plants, works i
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 composed of representatives of each of the                                      l members. Regular meetings of the Board are held quarterly, t
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                                                                                                                      , . ,._@l
 
i i
U    1 The Executive Committee of the Board administers the business of the Supply System between reyular meetings of the Board. The Executive Committee holds regul.ir meetings twice each month and
;                special meetings as often as the business of the Supply System may require.
Members of the Supply System and their respective representatives on the Board of Directors are as follows:
* Public Utility District No.1 of Benton County . . . . . . . . . . . . . . John Goldsbury Public Utility District No.1 of Chelan County . . . . . . . . . . . . . . . Kirby Billingsley Public Utility District No.1 of Clallam County . . . . . . . . . . . . . . Alvin E. Fletcher Public Utility District No.1 of Clark County . . . . . . . . . . . . . . . . Ed Fischer*
Public Utility District No. I of Cowlitz County . . . . . . . . . . . . . . D. E. Hughes*
Public Utility District No.1 of Douglas County . . . . . . . . . . . . . Howard Prey Public Utility District No.1 of Ferry County . . . . . . . . . . . . . . . . Thomas F. Kroupa Public Utility District No. I of Frankhn County . . . . . . . . . . . . . Glenn C. Walkley*
Public Utility District No. 2 of Grant County . . . . . . . . . . . . . . . . John L. Toevs Public Utility District No.1 of Grays Harbor County . . . . . . . . . James E. Tannahill Public Utility District No. I of Kittitas Coun'y . . . . . . . . . . . . . . . Harold W. Jendns Public Utility District No.1 of Klickitat County . . . . . . . . . . . . . . Gerald C. Fenton
  ,.                        Public Utility District No.1 of Lewis County . . . . . . . . . . . . . . . . Arnold J. James Public Utility District No. 3 of Mason County . . . . . . . . . . . . . . . Edwin W. Taylor Public Utility District No. 2 of Pacific County . . . . . . . . . . . . . . . E. Victor Rhodes
* City of Richland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joseph Shipman City of Seat tle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gordon Vickery*
Public Utility District No.1 of Skamania County . . . . . . . . . . . . Rolf E. Jemtegaard Public Utility District No.1 of Snohomish County . . . . . . . . . . . . W. G. Hulbert, Jr.*
City of Tacoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      A. J. Benedetti*
Public Utility District No.1 of Wahkiakum County . . . . . . . . . . . Francis Longo
* Executive Committee Member The Supply System presently employs 180 persons, including a highly qualified technical staff whose combined experience in the nuclear field totals over 600 man years and whose training includes disciplines in electrical, mechanical, civil and nuclear engineering. Through the operation of the Hanford Project described below the Supply System staff has accumulated substantial experience in the operation of a lar steam electric generating facility.
f' The Supply System owns and operates the Packwood Lake Hydroelectric Project with a name plate rating e. approximately 27,500 kilowatts. In 1962 and 1965, the Supply System sold $10,500,000 and $3,200, G") Packwood Lake Hydroelectric Project Revenue Bonds, of which $13,181,000 were outstanding as of September 7,1973.
The Supply System also owns and operates an 860,000 kilowatt electric generating plant and associated facilities (the "Hanford Project") located on the Hanford Reservation of the United States Atomic Energy Commission (the "AEC"). The Hanford Project is currently the second largest pro-F              ducer of electricity generated from nuclear energy in the United States. Steam is provided for the Hanford Project from the New Production Reactor owned and operated by the AEC. In 1963, the Supply System issued $122,000,000 Hanford Project Electric Revenue Bonds, of which $61,330,000 were outstanding as of September 7,1973. The AEC presently plans to end operation of the New Production Reactor in 1977. The Supply System is planning to build a new nuclear steam supply system and additional generating facilities which will incorporate the existing generating facilities of the Hanford Project, such facilities to be known as the Washington Public Power Supply System Nuclear Project No.1. This project will have a 1,220,000 kilowatt net generating capacity. The Supply System has issued $25,000,000 principal amount of revenue notes to finance preliminary work on this
[              project, which is presently scheduled to begin commercial operation in September,1980.
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The Supply System has begun construction of a 1,100,000 kilowatt nuclear electric generating
  '(    plant, known as the Washington Public Power Supply System Nuclear Project No. 2. In July,1973, the Supply System issued $150,000,000 principal amount of revenue bonds in order to pay a portion of the costs of acquiring and constructing this project. This project is under construction on the Hanford Reservation of the AEC and is presently scheduled to begin commercial operation in September,1977.
By 1982, it is expected that the Supply System will operate electric generating facilities with a capa-bility of approximately 3,540,000 kilowatts. Recently the Public Power Council, consisting of more than 100 statutory preference customers of the Bonneville Power Administration ("Bonneville"), requested the Supply System to investigate the financing and construction of an additional 1,200,000 kilowatt nuclear project for operationin 1984.
All projects heretofore undertaken by the Supply System have been financed as separate systems.
The obligations issued with respect to each project are payable solely from the revenues of that project.
The Supply System's Ownership Share of the Project will be similarly financed as a separate system.
On the basis of the estimated cost and interest during construction for the Supply System's Nuclear Projects Nos.1,2 and 3, it is estimated that the Supply System will require total long-term financing prior to 1980 of approximately $1,600,000,000. The first long-term finan:ing for Project No. I is projected for early in 1975 while the second long-term financing for Project No. 2 is projected for the fall of 1974. Additional financing for the Supply System's fourth nuclear project, if undertaken, will be required before 1980.
The schedule of financing for the Project contemplates, in addition to the sale of the Notes, the sale of bonds in one or more issues totaling approximately $529,000,000 as described in more detail under the caption "The Project-Permanent Financing Program". The first such sale is presently contemplated for the summer of 1975.
SECURITY FOR THE NOTES The Notes, together with the interest thereon, shall be payable from any moneys of the Supply System that may be lawfully applied to the payment thereof, including (i) revenues derived from the Sapply System's Ownership Share of the Project, including all payments to be made to the Supply System pursuant to certain agreements (the " Net Billing Agreements") described below; and (ii) the proceeds of revenue bonds or refunding notes of the Supply System. Interest on the Notes will be capitalized to maturity.
The Supply System's Ownership Share of Project capability, less a portion of the Project output which will be sold to 15. industrial companies during the period July 1,1981 through June 30,1984 pur-suant to a power sales agreement (the " Power Sales Agreement"), has been sold by the Supply System to 103 statutory preference customers (the " Participants") of Bonneville, and assigned by the Partici-pants to Bonneville, pursuant to the Net Billing Agreements. Of the Participants, 27 are municipal-ities, 29 are districts and 47 are cooperatives. Exhibit I attached hereto lists each Participant and indicates its share of the Supply System's Ownership Share of Project capability.                          L
                -The Participants will pay to the Supply System an aggregate amount equal to the Supply Sys-tem's costs, including debt service associated with its Ownership Share of the Project, less any amounts payable pursuant to the Power Sales Agreement. Each Panicipant has assigned its share of the Supply System's Ownership Share of Project capability to Bonneville which will credit the payments made to the Supply System by such Participant against billings made by Bonneville to such Participant for power and certain services. The Net Billing Agreements provide thr,t the Participants are obligated to pay the Supply System whether or not the Project is completed, operable, or operating and notwithstanding the 7
                                                                                                                  -      ,- m
 
  , ,    suspension, interruption, interf:rence, reduction or curtailm:nt of the Proj ct output and that such payments shall not be subject to reduction and shall not be conditioned upon the performance or non-g 3 performance by the Supply System or Bonneville or any other Participant under the Net Billing Agree-                          r ments or any other agreement or instrument.                                                                                    l The Supply System covenants in th: Resolution that it will terminate the Net Billing Agreements if fer any reason it is unable to issue and sell revenue bonds or refunding notes to obtain funds to pay the principal of the Notes, together with any interest thereon. when due. The Supply System may terminate the Net Billing Agreements if it is determined that the Supply System 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 and for other reasons specified in the Net Billing Agreements. Upon giving the notice of termination of the Net Billing Agreements, the Supply System shall make monthly accounting statemerns to the Participarits which shall show as the amounts due from the Participants in such month the maximum amount which can be stated therein for payment by the Participants without causing the amount due from any Participant to exceed the ability of Bonneville to allow net billing credits in such month to said Participant, taking into account all assignments which can be made pursuant to the Net Billing Agreements. The amounts paid by the Participants in the event of termination, or so much as is required therefor, will be deposited in the Washington Public Power Supply System Nuclear Project No. 3-Note Retirement Fund to be used to pay the principal of and interest on the Notes.
R. W. Beck and Associates (the " Consulting Engineer") estimates that under current Bonneville rates there will be in excess of $60,000,000 of net billing capability available to the Participants during the fiscal year ending June 30,1976.
TIIE PROJECT The Project will be constructed and operated by the Supply System pursuant to the Ownership Agreement as part of the Ilydro Thermal Power Program designed to meet the anticipated needs for power in the Pacific Northwest. The Supply System and Bonneville have entered into an agreement (the " Project Agreement") with respect to Project construction, operation, maintenance and budgets.
Application will be made to the Thermal Power Plant Site Evaluation Council of the State of Washington for certi6 cation of a site in southeastern Grays Harbor County along the south bank of the Chehalis River near its confluence with the Satsop River. The site is approximately three miles south of the community of Satsop, Washington, and approximately 66 miles southwest of Seattle. Site investigation work is presently being carried out. Prior to the certification by such Cour il public hearings will be held at which it is expected that some opposition to the Project will be posed.
The Project will consist of a pressurized water nuclear electric generating plant having a nominal capacity of 1,200,000 kilowatts, together with associated facilities required to deliver the Project output to Bonneville's high voltage transmission system in the vicinity of the Project site. A more complete description of the Project is contained in the report of the Consulting Engineer attached as Exhibit II to this Oflicial Statement.
The Supply System has entered into contracts for the delivery of certain items of equipment and material for the Project that require extensive lead time, including the nuclear steam supply system from Combustion Engineering, Inc., the turbine-generator from Westinghouse Elect-ic Co. and reload nuclear fuel from Exxon Nuclear Company. Specifications are presently being prepared for the uranium supply for the inidal nuclear core.
The Supply System has employed Ebasco Services, Inc. as architect-engineer for the Project (the
      " Architect-Engineer"), R. W. Beck and Associates as Consulting Engineer, and The S. M. Stoller Corporation as nuclear fuel consultant.
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1 Under its current schedule, the Supply System anticipates (i) receipt of the AEC construction permit
(    in the summer of 1975; (ii) fuel loading in the spring of 1981 and (iii) commercial operation in September 1981. The Supply System has considered environmental factors relative to the Project together with the technical and economic matters referred to herein; it has taken the steps required to date to conform with the Washington State Environmental Policy Act of 1971 and will continue to meet the requirements of that Act.
Initial Financing Program The proceeds from the Notes are estimated to provide the necessary funds to pay for the Supply System's share of the cost of the work that will be accomplished prior to June,1976.
Estimated Disposition of Note Proceeds Engineering and Construction Management . . . . . . . . . . . . . . . . . $12,957,000 Escalation and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          7,140,000
* Nuclear Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,772,000 Supply System's Direct Costs (1) . . .            ........          ............              5,166,000 Financing Expenses . . . . . . . . . . . . . . . . . . . . . . . .        ...........              232,000 Capitalized Interest (2) .      ......... .......................                                3,489.000 Gross Costs . . . . . . . . . .      ........................                      $31,756,000 Less: Investment Earnings . . . . . . . . . . . . . . . . . . . . . . .              2.756,000 Principal Amount of Note Issue . . . . . . . . . . . . . . . . . . . $29,000,000 (1) Includes payment of the principal of and interest to maturity on $2,000,000 of revenue notes issued in May,1973.
(2) Assuming an interest rate of 4%%.
Permanent Financing Program The current Supply System program anticipates that permanent financing for its Ownership Share of the Project will be initiated after the construction permit is received from the AEC through the issr . rice of long-term bonds to be retired from revenues derived from the sale of the Supply System's Ownership Share of the Project capability. These bonds are proposed to be issued to provide funds to retire the Notes and to pay the balance of the Supply System's share of the costs associated with the construction of the Project and placing it into operation. The Supply System proposes to issue the bonds in several series.
The Architect-Engineer and the Supply System have estimated that the cost of construction of the Project will be $581,366,000, including engmeering and construction management, escalation and contingencies to a 1981 operating date, initial nuclear fuel core, sales tax and owner's costs, but ex-clusive of financing expenses and interest during construction. The Supply System's share of these costs is estimated to be $406,957,000.
The Supply System's current program anticipates that funds necessary to provide one-half year's' interest in a reserve account in the bond furd, working capital and an initial reserve and contingency fund associated with its Ownership Share of the Project will be obtained under the Net Billing Agree-ments in advance of the expected date of commercial operation.
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Based on the foregoing and assuming permanent financing through the sale of four issues of bonds of approximately equal size at a 6% interest rate, the estimated total amount of bonds to be issued to finance the Supply System's Ownership Share of the Project is shown in the following table:
g Estimated Permanent Financing Required for the Supply System's Ownership Share of the Project Supply System's Total        Ownership Share Project Costs    of Project Costs Structures and Improvements                .............................                            $ 95,000,000        $ 66,500,000      ,
Reactor Plant Equipment . . . . . . . . . . . . . . . ............ . .                    . .          140,000,000          98,000,000 Turbine Generator Unit . .......................... ......                                              110,000,000'        77,000,000 Accessory Electrical Equipment . . . . . . . . . . . . . . . ....... .....                              35,000,000          24,500,000 Miscellaneous Power Plant Equipment . . . . . . . . . . . . . . . . . . . . . . . .                      3,000,000            2,100,000 Station Equipmen t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          4,000.000            2,800,000 S u btotal ( 1 ) (2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $387,000,000      $270,900,000 Contingencies (2) ........................................                                              53,400,000          37,380,000 Nu clea r Fu el(3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,331,000          24,032,000 Sales Tax (4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      21,635,000          15,145,000 Engineering and Construction Management (2) . . . . . . . . . . . . . . . . .                          45,000,000          31,500,000 Owner's Direct Costs (3) . . . . .          . ..........................                              40,000,000          28,000.000 Subtotal    . .. .... .................. ..........                                      $581,366,000      $406,957,000 Bond Discount and Other Financing Expenses (5) . . . . . . . . . . . . . . .                                                  9,990,000 Capitalized Interest During Construction (6) . . . . . . . . . . . . . . . . . . . .                                        152.255,000 Gross Requirement . .............. ..........                                                                                            [
                                                                                                              . .                    $569,202,000 Less: Estimated Income From Temporary Investments (7) . . . . . . . . .                                                      40.202,000 Net Requirement . . . . . . . . . . . . . . . . . ..............
                                                                                                                                    $529.000.000 (1)-locludes escalation to projected date of commercial operation, September 1,1981.
(2)-Estimated by the Architect. Engineer.
(3)-Estimated by the Supply System.
(4)-Includes sales tax on nuclear fuel.
(5)-locludes estimated cost of issuing the Notes.
(6)-Includes interest on the Notes at 4%% to June 15,1976 and interest on bonds at 6% to September 1,1982.
(7)-Includes income from temporary investment of the proceeds from the Notes.
In addition to the foregoing amounts to be obtained through issuance of bonds, present planning anticipates that the Participants will, between January 1,1981 and September 1,1981, pay under the Net Billing Agreements the following amounts:
Reserve Account in the Bond Fund . . . . . . . . . . . . . . . . . . . . . . . $15,900,000 Working Capital (1) ..................................                                          10,100,000 Reserve and Contingency Funo . . . . . . . . . . . . . . . . . . . . . . . . . .                  2,100,000 Total..........................................                                          $28,100,000 (1) Includes $8,000,000 to be provided from advanced net billing to permit leveling annual fuel costs in the esent of a critical perkd of power supply.
10
                                                                                                                                                            $)
y ~      h
                                                                                                                                                      +  Pi"#
 
l l
l t t                                                                                                                                                l BONNEVILLE POWER ADMINISTRATION                                                                              l p"
Bonneville, a bureau of the U. S. Department of the Interior, was established by the Bonneville
!        Project Act of August 20, 1937, to build transmission facilities and to market power fro n federal hydroelectric projects in the Pacific Northwest. Such projects now number 27 with an installed capacity of 10,485,900 kilowatts. These projects and authorired new projects and additions at existing projects will have, when completed, an, installed capacity of approximately 21,335,900 kilowatts. Bonneville's transmission facilities include over 12,000 miles of 115 kV to 500 kV ac and 800 kV de transmission lines. These transmission facilities together with the hydroelectric projects mentioned above comprise the Federal Columbia River Power System.
Bonneville Revenue by Major Classification of Customers2 Fiscal Year                                  Other                                  Transmission Emded              Preference          Electrie                                    Servke June 30              Customers            Utilities          Industrial              and Other    Total 1968......      $49,134,719        $12,515,810        $39,498,338            $16,739,045  $117,887,912 1969......        55,752,314          16,967,117          46,204,161              18,353,608  137,277,200 1970......        58,419,581          20,319,033          50,063,203              13,878,209  147,680,026 1971......        64,078,043          25,120,610          45,418,7452            21,060,576  155,677,974 1972......        69,452,035          37,918,589          45,733,0672            22,990,720    176,094,411 (1) From Bonneville Summary Finaneira Data.
(2) The decline in industrial revenues was primarily due to shutdown of aluminum pottines in the area and to curtailment by Bonneville of interruptible power to certain of its industrial customers.
The major part of the 500 kV and 230 kV backbone transmission system in the Pacific Northwest is owned by Bonneville as a result of its role in constructing transmission facilities as part of the Federal
"        Columbia River Power System. Bonneville transmits ever the Federal Columbia River Power System the major portion of the power from 11 nonfederal projects to various private and public utilities in the Pacific Northwest. This system represents approximately 80% of the bulk power transmission capacity for the Pacific Northwest.
The Federal Columbia River Power System has interconnections with other regions in the United States and Canada. Three high voltage transmission line interconnections (two 500 kV ac, one 800 kV de) of the Pacific Northwest-Pacific Southwest Intertie have been completed and are now in operation.
L        One existing 500 kV ac and one future 500 kV ac line 'villinterconnect the Federal Columbia River Power System with British Columbia, Canada, and several 230 kV ac lines interconnect the eastern portion of the system with utilities in the Mountain States and adjacent Canadian provinces. These interconnections provide, in addition to mutual support in the event of a breakdown or emergency, the means to carry P        capacity and energy which is surplus to the Pacific Northwest needs to these areas, and conversely to carry surplus capacity and energy from these areas into the Pacific Northwest.
AdditionalPower Supply
.'              In addition to the federal hydroelectric projects, Bonneville has acquired additional power supply and hydro storage to enable it to continue to meet its customers' requirements. Under agreements executed in 1963 by Bonneville,76 utility customers of Bonneville and the Supply System, Bonneville exchanges firm power from its system for the output of the Hanford Project of the Supply System. In 1964 Bonneville, acting jointly with the U. S. Army Corps of Engineers as the United States Entity, pursuant to the Treaty Between the United States and Canada Relating to the Cooperative Development of Water Resources of the Columbia River Basin, and pursuant to certain agreements executed in connection with such Treaty, obtained certain rights to 15,500,000 acre-feet of hydro storage on the Columbia River in Canada.
11
                                                                                                                        < ~ r ~r m n g
 
  ' '          Under the Hydro Thermal Power Program, Bonneville will obtain through the Net Billing Agree-ments the Supply System's Ownership Share of the Project capability upon its completion and through similar agreements the capability of the Supply System's Nuclear Project No. I and Nuclear                )
Project No. 2 and the City of Eugene, Oregon's 30% share of the Trojan Nuclear Project.
Bonneville Contracts Bonneville and each of the Participants have entered into one or more contracts requiring payments to Bonneville for the purchase 'or exchange of power, the operation and maintenance of facilities or the transmission of power over the Federal Columbia River Power System.
Bonneville markets power to 149 customers, including 105 statutory preference customers in the Pacific Northwest (public bodies and cooperatives which have preference and priority upon power from the Federal Columbia River Power System pursuant to the Bonneville Project Act, as amended) under the terms of various power sales contracts. Each of the Participants is a preference customer and is a party to at leact one such power sales contract. These contracts generally provide for the sale and delivery of firm power to a Participant in the amount of its requirements for power over and above the generating resources, if any, that the Participant has available to serve its own loads. Bonneville's obligation to meet a preference customer's requirements is effective for the term of the contract unless Banneville gives the Participant at least eight years' prior notice of insufficiency of supply.
These power sales contracts with preference customers are usually for a term of twenty years and contain provisions for a rate review once each five years, the next rate review date being December 20, 1974. In the past Bonneville has naimally replaced these power sales contracts on or prior to their expiration with new power sales contacts.
THE HYDRO THERMAL POWER PROGRAM AND POWER SUPPLY IN THE PACIFIC NORTHWEST                                                      h*
The Hydro Thermal Power Program was conceived by the Joint Power Planning Council, con-sisting of 110 electiic cooperatives, public utilities and private utilities in the PaciSc Northwest and Bonneville, in order to plan the coordination of existing and future thermal and hydroelectric resources in the Pacific Northwest. The major part of the power supply in the region has been historically from hydroelectric resources, but the remaining hydro projects to be developed will be essentially for peak power rather than for base load. Thermal power will provide an increasing portion of the base load resources in the future. The combination of hydro peaking and large scale thermal generating plants was found by the Council to be the soundest plan to achieve the aims of the Hydro Thermal Power Program The principles of this Program and the federal government's participation through Bonneville, the Arm Corps of Engineers and the Bureau of Reclamation have been endorsed by current and previous admin-istrations and by the Congress.
The members of the Joint Power Planning Council have concluded that the Hydro Thermal Power Program will:
: 1. Best preserve the environment and natural beauties of the Pacific Northwest.
: 2. Make efficient and economic use of the Federal Columbia River Power System.
: 3. Obtain the economics of scale from large thermal generating plants.
: 4. Meld the large thermal generating plants with existing hydro generating units and the peaking generation units which will be installed at existing dams, to achieve the most economic and reliable power supply to meet the power requirements of the Pa:ific Northwest.
12 f) i
                                                                                                                    ,n
 
ls        s                                                                                                              j The prescat Hydro Thermal Power Program of thermal generating plants for installation through j          1981 is tabulated below:
Scheduled Rated        Date of Principal                                                              Capacity    Commercial Plant                                                                            Type                    Operation Number                  Sponsor                                Location                        (3fMl_
1        Pacific Power & Light Company and The Washington W ater Power Company (Centralia Project)    .................            . Centralia, Washington    Coal-fired    1,400            (1) 2        Portland General Electric Com-
                    - pany (Trojan Project) . . . . . . .      St. Helens, Oregon        Nuclear        1,130      Ju!y 1975 Pacific Power & Light Company                                                        500      Sept.1975 3
(Jim Bridger Project) . . . . . . .      Rock Springs, Wyoming    Coal-fired      500      Sept.1976 4        Washington Public Power Supply System (Nuclear Project No. 2)            Hanford, Washington      Nuclear        1,100      Sept.1977 5      Portland General Electric Com-pany (Boardman Project) . . . .          Boardman, Oregon        Nuclear        1,200      Sept.1980 6      Washington Public Power Supply System (Nuclear Project No.1)            Hanford, Washington      Nuclear      1,220      Sept.1980 7      Washington Public Power Supply System (Nuclear Project No. 3)            Satsop, Washington        Nuclear      1,200      Sept.1981 (1) Currently in operation at reduced capacity.
The Centralia Project is owned by Pacific Power & Light Company, The Washington Water Power Company, Portland General Electric Company, Puget Sound Power & Light Company, the Cities of Seattle and Tacoma and the Public Utility Districts of Grays Harbor and Snohomish Counties. The Trojan Project is owned by the Portland General Electric Company, the City of Eugene, Oregon, and i              Pacific Power & Light Company. In accordance with present plans the Boardman Project will be a jointly owned project.
In addition to the foregoing major projects in the Pacific Northwest, The Montana Power Company and Puget Sound Power & Light Company are constructing a coal-fired steam electric generating plant at Colstrip, Montana. A portion of the output of this project will be used outside of the Pacific Northwest coordinated system and the balance of the output will be used by Puget Sound Power & Light Company L                to assist in meeting its needs within the Pacific Northwest. Under present plans, 350,000 kilowatts are to L                be available to Puget Sound Power & Light Company by 1976. Planning is proceeding on two additional 700.000 kilowatt blocks of power from additional units to be installed at the Colstrip site, presently scheduled for initial operation in September 1978 and September 1979. The Puget Sound Power & Light L                Company has also announced plans to construct a 1,100,000 kilowatt nuclear plant on the Skagit River near Sedro Woolley, Washington, to come on line in the early 1980's.
The Joint Power Planning Council is now considering further installations to meet the power requirements of the Pacific Northwest during the 1980's. Recently the Public Power Council requested the Supply System to investigate the financing and construction of an additional 1,200,000 kilowatt nuclear project for operation in 1984.
13 w                        -                  --              -- --            -
_                      _      _          m
 
Power Requirements and Resources Long-range planning of resources in the Pacific Northwest is based on annual and resources for the area prepared by the Pacific Northwest Utilities Conference                                  . An Co analysis of the most recent forecast by that committee, dated Aprd 9,1973, table:
Firm Loads and Resources Northwest Poner Pool, West Group (1)
Year Ending              Estimated                              Additional June 30                                Estimated            Resources                              Balance of
_ Requirements Resources (2)                                'Ibe              Resources Requiredf3)
Prolect              Required (3)
Peak Capability-Kilowatts (000) 1974......      . 21,939              22,519 1975..                                                        (580)              -
(580)
                        ....      23,979            22,840              1,139 1976... . .. 24,783                    24,433 1,139 350 1977.. .. .. 25,859                    27,473          (1,614) 350 1978........ 27,343                                                            -
(1,614) 28,009 1979..... .. 28,479                                          (666)            -
30,210                                                          (666)
(1.731) 1980........        29,754            32,317            (2,563)
(1,731) 1981... ...          31,263            34,293            (3,030)
(2,563) 1982........        32,669            35,522          (2,853)
(3,030) 1983.... ... 34,564                                                        306(4)                  (3,159) 36,567          (2,003) 1984...            36,373                                                994(4)                  (2,997) 36,813 (440)        994(4)                  (1,434)
Energy Capability-Average Kilowatts (000) 1974........ 13,877                    14,309 1975.. .. .. 14,696                                          (432)            -
(432)(5) 14,453                243 1976.....    .      14,999            15,470 243 (5) 1977.... . . 15,669                                          (471)            -
16,184                                                        (471) 1978. .. ... 16,489                                          (515)            -
16,719                                                        (515) 1979. .... . 17,239                                          (230)            -
17,485                                                        (230) 1980........ 18,064                                          (246)          -
18.298                                                        (246) 1981. ...... 19,021                                          (234)          -
(234) 19,782 1982... ... 19,926                                          (761)          -
20,276                                                        (761) 1983... ... 20,871                                          (350)          615 20.511                360                                    (965) 1984. .... . 21,934                    20,609            1,325 878 (518) 1,012                        312 f)) area    served by the utility members of the Joint Power Planning Council other than Th Company.
(2) Not including the Project.                                                                  e .\fontana Power (3) Parenthesis denotes surplus.
(4) ference After Coramittee dedsdng        15%Guidelines).
Planning  for reserves and 3% for realization factor (under              e the Pacific Northw t ty Con-(5) Current estimates by Bonneville based upon reservoir levels on September 1 period now indicate a 900,000 kilowatt average energy deficit in the years en, ding June 1973 and a 2 1973.
30 1974 and June 30 THE NET BILLING AGREEMENTS The Supply System, Bonneville and each Participant have entered into a Net Bill These Agreements proside for the sale by the Supply System to the Participants a Bonneville by the Participants of the Supply System's Ownership Share of the                                          ,
all of the Sopply System's costs associated with its O
                                                                  -                ~
E
 
F nd .
n N.<        'f    from other sources, including amounts payable under the Power Sales Agreement. In consideration of
            ,- '            such assignment Bonneville will offset or credit the amounts paid by the Participants to the Supply            i
        ,I                System against amounts owed Bonnesille by the Participants for power purchased and certain ser ices            '
5                  under Bonneville Contracts. This system of offsets or credits is termed " net billing". An abbreviated
        ~
summary of certain provisions of the Net Billing Agreements follows; howeser, reference should be made to full text of the form of Agreements attached hereto as Exhibit IV.
g
      .;.                        The capitalization of any word or words whien is not conventionally capitalized (e.g. Project, Participants) indicates that such words are defined in the Net Billing Agreements (Exhibit IV). (The p.f' '              same practice is followed in the summaries of the Ownership Agreement, Project Agreement and j,                Resolution which follow.)
9h
    , g.
Term of the Agreement h'                Each Agreement became effective upon execution and delivery. Net billing will begin on January 1,
  %((ff;W    S            1981, or the Date of Commercial Operation, whichever is earlier, or at some earlier date if the Net Dilling Agreements are terminated prior to such dates, as hereinafter described under the caption sT f. kb ;              " Termination".
g b.                        Although the Net Billing Agreements may be terminated prior to the maturity of any notes or bonds, G MW Q' 2"                      the obhgation of each of the Participants thereunder to pay its proportionate share of debt service on an notes or bonds shall continue until the notes or bonds have been retired, and Bonneville will continue
%(f;F hk              to be obligated Bonneville          to offset or credit these payments against the bills rendered pursuant to the Participant's Contracts, m e m ,~
YY  uw                    Ownership and Operation
    ~
The Supply System will perform its duties, exercise its rights under the Ownership Agreement and Q%s .h';s                use its best efforts to construct, operate and maintain the Project and finance its interest therein, in
%f7
&W-accordance with Prudent Utility Practice.
!'      C Sale, Purchase and Assignment The Supply System sells and each Participant purchases its Participant's Share and in turn assigns
(      yl              its Participant's Share to Bonneville.
[%
j
!      cy.
In each Contract Year, the Participant's Share is the percentage of the Supply System's Ownersh Share of Project Capability specified for such year in Exhibit A to the Net Billing Agreements. During the Gg[q'                    period from July 1,1981 through June 30,1984, the amount of power made available to each Participa from the Supply System's Ownership Share of Project Capability is reduced by sales of output under the d 4.m                    Power Sales Agreement. The purchase price to be paid by each Participant in each Contract Year
    /?'
[        4 will be the amount specified in the Billing Statement rendered to the Participant by the Supply System.
lQ y                The amount of the Billing Statement is determined by multiplying the Annual Budget or any amended J        Annual Budget, less any other funds, including amounts payable under the Power Sales Agreement, Q,                      specified in the Annual Budget as being payable from sources other than payments under the Net Billing Agreements, by the Participant's Share. The Annual Budget shall provide for all of the Supply 957h                    System's costs with respect to the Project in the Contract Year, including debt service. The Participant 36 T                  is obligated to pay the Supply System whether or not the Project is completed, operable or operating TN@7
%hE g iC ,
and notwithstanding the suspension, interruptien, interference, reduction or curtailment of the Project output, and such payments shall not be subject to reduction and shall not be conditioned upon the performance or nonperformance by the SL/ ply System or any other Project Owner or Bonneville or ary sP g.; e          <    other Participant under the Net Billing Agreements or any other agreement or instrument.
  $7'                          The Participant assigns and Bonneville accepts the assignment of the Participant's Share. In con-Q f.!9'@
k"              *'      sideration of such assignment, Bonneville will offset or credit the amounts paid by the Participant to the Supply System under the Net Billing Agreement against amounts owed Bonneville for power purchased and certain services rendered under the Participant's Bonneville Contracts.
          +                                                                  1S 7.m ' , .    , , ,g .79 ,,,                _
                                                                                                              ,    1  2 Q h ($,
 
'?
Bonneville is obligated to make the offsets and credits specified in the Net Billin whether or not the Project is completed, operable, or operating and notwithstand i            interruption, interference, reduction or curtailment of the Project output.                    ,
Such oIIsets and credits shall not be subject to reduction and shall not be conditioned upon the performance o theother any  Supply  System agreement          or any or instrument. other Project Owner or any Participant under the Net Billing Payment Each Participant is obligated to pay the Supply System on a monthly basis its Partic!            i of theStatement.
Billing  Supply System's annual costs associated with its Ownership Share of the Proje Each month's payments will be based on the amount of net billing credit received from Bonneville by the Participant during the preceding month on its Bonneville billings. I received from Bonneville are less than the Participant's Share of costs for a Contrac is nevertheless obligated to pay its share of such costs.
Bonneville may enter into net billing agreements with any or all of the Participants in conne with the construction and operation of other thermal generating plants, and has entered into
&            agreements with all of the Participants in connection with one or more of the Supply System's Nu Projects No. I and No. 2 and the Trojan Project. Pursuant to the Net Billing Agreements, Bo will offset the amounts it owes under the Net Billing Agreement and all other net billing ag which it may have in effect with each Participant against the sum of the amounts tha owe Bonneville for power and certain services in the proportion that the amount specified in th Billing Statement bears to the sum of the amounts to be paid by Bonneville under all such that Contract Year. Each Net Billing Agreement provides that Bonneville and the Participan enter into any agreements providing for payments to the Participant which Bonneville estima the aggregate ciits billings to the Participant to be less than 115 percent of the Bon                  g obligations to the Participant under all agreements providing for net billing.
F Two or more Participants may agree to a reallocation of their Participant's Share among other requirements, the aggregate of the increases is equal to the aggregate of the the reallocation does not cause Bonneville's estimate of the payments to obe made b the Supply System to exceed 86.95% of Bonneville's estimate of its billings to the Part.
If Bonneville is unable to net bill the amounts to be r .d to the Supply System becaus obligations due Bonneville from a Participant are, or arc expected to be, insufficient to assignment of such amounts which cannot be net bil ment so arranged. The other Participants will have the first right to accept such assignme among those exercising such right, before such an assignment is made to a customer who the Participants. If Bonneville is unable to arrange for such an assignment, the Participa assignment to the other Participants, who are obligated to accept it, pro rata, provided that Share or its estimated net billing capability.such assignments to a Participa If all or a portion of the Participant's Share is assigned as described above, the will remain liable to pay the purchase price for its Share in accordance with its Agreeme such assignment had not been made. Such liability of the Participant will be discharged that the assignee of all or a portion of the Participant's Share pays to the Supply Sys price for the portion of the Participant's Share so assigned.
If assignments cannot be made in amounts sufficient to bring into balance the respective obligations of Bonneville and the Participant and an accumulated balance in favor of the a previous Contract Year is expected by Bonneville to be carried for an additional year, such b 16
                          ,,      ; ,                      ,e      .
                                                                      .n
                                                                                                                '4
 
[.,  *g r Bonneville, subject to tne availability ofo theappropriation .
as Participant by or cash payment and determines thataffected                          ,
e this      will contin ng, assignment Participant Supply System for the Participant's account                                          e vered atby thea speci y either for the expected by the Participant when it elects to haveeversuch                        ,
power a is specified delivery will be limited to the amount of the Participant's        o it. The amount ofShare ayment by Bonneville such    for wh p-                  obligation to make payments to the Participant                              .
v e and Eonnesille's will th Termination
(;
gg b                      ownership, construction, or operation                                              oof      theinProjec participate hg                      Agreement and has been requested by Bonneville to give ating conditions which are beyond its control, or if uthe Supply System is in d
                                                                                                  , construction or oper-undernotice        of termi the Ownership M.                    the Project invoke the procedure to end the Project setnation,      forthorinif the      O the owners      of p
if -                    notice. The Supply System shall then                              ec ve on the    terminate date of such          its a
(',
  -;                      of its ownership interest in the Project,          ,
all in ng and disposition            accordan or sale
  ~,
termination, the Supply System will make monthly accounting    s p Agreement. After such g,                      Participant of all costs associated with such termination. The monthly acsta g;                      against      such Ownership Share        costs of the Projectall amounts received by thes Supply System from the di assets.                          on of the Supply System's
@c                      until all Bonds have been paid or funds are set aside for their paymentSuc 4[, .                    the Supply System. The payments will be                                      made n of such              at times excess costs    to        and current basis the Participant's Share of the amount which the Supply System isam required to pay into the M
W.
various funds provided in the Bond Resolution for                          debt service and all oth rposes.
Event of Default M
M '.
y                    Bonneville under each Net Billing Agreement                              s em and assigned      willto be auto C                    the Agreement pro rata with that of other nondefaulting        sed for the    remaining tterm of Participa 3,
4'                  Net Billing Agreement; provided however,                                  obligations that underthe its      sum o
'f                    its consent, may not exceed an accumulated maximum of                25%Participant, without or each Q
h-ay to exceed the estimate of Bonneville's billings the period of such increase.
o the Supply System  to the Partic or power and certain services during
[
: n.                  Participant's Rate Covenant pf f
* b Agreement except from revenueso derived                                m under its Net    fromBilling the owne and from payments by Bonneville under such Agreement. The Participant cov
.                    maintain and collect rates or charges for power, and                ac      energy and other servic sold, furnished or supplied by it through any of its                      electric          utility properties w es and commodities c s all be adequate to 17 4.
 
provide revenues sufficient to enable the Participant to make the payments to the Supply System pursuant to its Net Billing Agreement and to pay all other charges and obligations payable from or constituting a            )
charge and lien upon such revenues.
        . Applicability of Other Instruments The Net Billing Agreements are made subject to the terms and provisions of the Ownership Agree-ment, the Bond Resolution and all licenses, permits and regulatory approvals necessary for the owner-ship, construction and operation of the Project.
Exhibits The Exhibits described below are a part of the Net Billing Agreements and are attached to the form of Net Billing Agreement appended to this Official Statement as Exhibit IV.
Exhibit A-A list of the Participants and their respective Participant's Shares.
Exhibit B-Project Characteristics.
Exhibit C-Contractual provision 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 cancellation, termination, and suspension provisions contained in Section 3(f) of Exhibit C to the Net Billing Agreements in the event of non-compliance with the Equal Opportunity clause contained in said Agreements by the Director, Office of Federal Contract Compliance, U.S. Department of Labor.
THE PROJECT AGREEMENT The Supply System and Bonneville have entered into the Project Agreement. That Agreement, among other things, contains provisions with respect to the financing, construction, operation and maintenance of the Project, and the making of any replacements, repairs or capital additions thereto,            g and budgeting under the Net Billing Agreements. An abbreviated summary of some of the provisions                FI of the Project Agreement follows; however, reference should be made to the full text of the Agreement attached hereto as Exhibit V.
Term The Agreement became effective upon its execution and delivery and will terminate when the Net Billing Agreements terminate.
Design, Construction, Operation and Maintenance of the Project The Supply System agrees among other things (i) to perform its duties and exercise its rights under the Ownership Agreement and the Project Agreement in accordance with Prudent Utility Practice; and (ii) to keep Bonneville informed of all significant matters with respect to construction or operation of the Project, where practicable in time for Bonneville to comment thereon before decisions are made, and (iii) to confer with Bonneville during the development of the Supply System's proposals for such matters when practical to do so.
Bonneville will use its best efforts to construct, operate and maintain necessary facilities to inter-connect the Project with the Federal Columbia River Power System so as to be ready to receive Project generation on or before the initial test and operation of the Project.
Financing The Supply System shall use its best efforts to issue and sell Bonds to finance its share of the Project costs and the completion thereof, as such costs are defined in the Bond Resolution, and to finance its share of the cost of any capital additions, renewals, repairs, replacements or modifications to the Project; provided, however, that such Bonds may then be legally issued and sold.
I              Prior to its adoption, the Bond Resolution shall be subject to the approval of Bonneville.
18
 
1 l
l l
      .      -                                                                                                      1 Representation by Bonneville on the Committee Established Punuant to the Ownership Agreement The Supply System will appoint a member designated by Bonneville to the Committee established pursuant to the Ownership Agreement, who shall have the right to vote the lesser of 50% of the Supply System's Ownership Share or the sum of the Participant's Shares assigned to Bonneville under the Net Billing Agreements at the beginning of the Contract Year.
The Surly System will not proceed with the following elective items under the Ownership Agree-ment without the concurrence of Bonneville's representative on the Committee: (i) notice to repair the Project if the cost of repair is in excess of 20% of the depreciated value of the Project, (ii) renewals and replacements not necessary to assure design capability and additions not required by governmental agencies, (iii) construction of the Project if any other party to the Ownership Agreement does not participate, for the seasons set forth in the Ownership Agreement.
Budgets Bonneville has reviewed the Supply System's Construction Budget. Promptly after the approval of any revised construction budget pursuant to the Ownership Agreement, the Supply System shall submit to Bonneville a revised Construction Budget. The budget shall include the Supply System's share of construction costs pursuant to the Ownership Agreement and all of the Supply System's other costs related to construction and financing of the Project. The updated Construction Budget for the succeeding celendar year and revised Construction Budgets for the current calendar year shall become effective unless disapproved by Bonneville within 30 days, and 7 days, respectively.
Prior to the Date of Commercial Operation and each succeeding Contract Year, the Supply System shall submit an Annual Budget showing the Supply System's Ownership Share of operating costs under the operating budget adopted pursuant to the Ownership Agreement, its cost of fuel and all its other costs related to its Ownership Share of the Project. The Annual Budget shall be revised during the Contract Year if necessary. The Annual Budget and any revised Annual Budget shall become effective unless disapproved by Bonneville within 30 days and 7 days, respectively.
Bonds for Replacements, Repairs and Capital Additions c
If in any Contract Year the amounts in the Annual Budget for renewals, repairs, replacements and betterments and for capital additions 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 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 Bonneville'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 t-insurance proceeds, if any, exceeds the Annual Budget for such Contract Year, exclusive of Amounts for Extraordinary Costs; the Supply System will, in good faith, use its best efforts to issue and sell Bonds to pay such excess.
Applicability of OtherInstruments The Project Agreement is made subject to the terms and previsions of the Bond Resolution and all licenses, permits and regulatory approvals necessary for the ownership, construction and operation of the Project.
19 4
                                                                        - . - - ._- ,              ,.      -,,~7,,
* l 8 '                                                                                                                1 Exhibits The Exhibits described below are an integral part of the Project Agreement. Exhibits A and B            !
are attached to the copy of the Project Agreement appended to this Official Statement as Exhibit V.
Exhibit C, the Ownership Agreement,is attached hereto as Exhibit III.
Exhibit A-Project Characteristics.
Exhibit B-Ccntractual 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 cancellation, termination, and suspensica provisions contained in Section 3(f) of Exhibit B to the Project Agreement in the event of non-compliance with the Equal Opportunity clause contained in said Agreement by the Director, Office of Federal Contract Compliance, U. S. Department of Labor.
Exhibit C-The Ownership Agreement.
IIIE OWNERSHIP AGREEMENT The following is a summary of certain provisions of the Ownership Agreement and does not. purport to be complete. Reference should be made to the full text of the Ownership Agreement attached hereto as Exhibit III.
Ownership of the Project. The Project shall be owned by the Parties as tenants in common. The Supply System has an undivided interest of 70% and Pacific Power & Light Company, Portland General Electric Company, Puget Sot.nd Power & Light Company and The Washington Water Power Company have undivided interests of 10%,10%,5% and 5% respectively. A Pany's Ownership Share may be adjusted upon the occurrence of certain events, as described below.
Each Party promptly and with due diligence shall take all necessary actions and seek all regulatory approvals, licenses and permits to carry out its obligations under the Ownership Agreement.
The Parties waive the right to partition of the Project.
The duties, obligations and liabilities of the Parties are several and not joint or collective, and none of the Parties shall be jointly or severally liable for the acts, omissions, or obligations of any of the other Parties.
The Supply System shall construct, operate and maintain the Project and shall have possession and control of the Project for all the Parties.
Committee. There shall be a Committee composed of seven members, three to be cppointed by Supply S'ystem (one of whom will be designated by Bonneville pursuant to the Project Agreement), and one member to be appointed by each other Party. Ecch Committee member shall have the right to vote that part of the Ownership Share of the Party appointing him as designated in the notice of appoint-ment, ard the member appointed by Bonneville shall have the right to vote the portion of the Supply System's Ownership Share provided in the Project Agreement. The total voting rights of the members of the Committee appointed by each Party shall be equal to such Party's Ownership Share.
The Supply System shall keep all members of the Committee informed of all significant matters with respect to planning, construction, operation or maintenance of the Project, and when practicable, in time for members to comment thereon before decisions are made, and shall confer with the Committee, or separately with members thereof, during the development of the Supply System's proposals regarding such matters when practicable to do so. Upon request of any Committee member, the Supply System shall
[                                                              20
 
1 g    F J                    furnish or make available to all members of the Committee, with reasonable promptness                      a and at reason' ble times, any and all other information relating to the planning, construction, operation or maintenance of
                  ' the Project.
                                                  ~
The Supply System shall submit each of the matters listed below to the              t  Commit'ee for approval, which      approval rights of more than 80%:  must  be  by  a  vote  of Committee  members    having  combined          Ownership Share voting Determination of the Minimum Capability of the Project i              -
Any p;oposal made by Committee members, appointed by Parties other than Supply System, having
                              ; Ownership Share voting rights of 20% or more, or by the' Committee member designated by Bonneville Construction budgets and budgets of Annual Costs and chnnges therein
      -                    Anyincrease in the working fund in the Construction Trust Account or the Operating Trust Account described below Award of any contract or approval of any change order, in either case in excess of $500,000
                          - Fuel Plan, changes therein and determinations relating thereto Scheduled outages
,                          Insurance coverage, including limits and choice ofinsurers -
Estimate of cost of repair or damage to the Project if in excess of $1,000,000, and estimate of the value of the Project without repair e-Sales of salvage materials in excess of such mimmum amount as is established by the Committee.
?
If any of the above matters cannot be resolved by the required vote of the Committee, procedures have been established to resolve the issue in accordance with Prudent Utility Practice.
                          " Prudent Utility Practice" means any of the practices, methods and acts, which, in the exercise of reasonable judgment in the light of the facts (including practices, methods and acts engaged in or ap-proved by a significant portion of the electrical utility industry prior thereto) known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable f                cost consistent with reliability, safety and expedition. Prudent Utility Practice is not limited to the optimum f                practice, method or act, but rather a spectrum of possible practices, methods or acts. In evaluating whether any matter conforms to Prudent Utility Practice there shall be taken into account (i) the fact that Supply System is a municipal corporation and operating agency under the laws of the State of Wash-ington; and (ii) the objective to integrate the Project Capability with the generati ng resources of the l'
Federal Columbia River Power System and the generating resources of other systems operated by the Parties to achieve optimum utilization of the resources of such systems.
E
        =
Supply System shall submit the following additional matters to the Committee and shall proceed on such matters only upon unanimous approval of the Committee:
(i) Selection of the site of the Project (ii) Selection of the type of nuclear steam supply system (iii) Selection of the method of heat disposition (iv) Award of contracts for nuclear steam supply system and turbine-generators (v) Selection of an architect engineer (vi) Extension of insurance to any additional unit or generating project l
(vii) Capital additions to the Project after the Date of Commercial Operation which.are not necessary to assure design capability, or are not required by governmental agencies.
21 L
__      _ . - _ - ~ .    --~  - - - - -
 
I If the Committee is unable to reach unanimous agreement within sixty days after s Supply System of any of the matters (i) through (v) listed above, then unless the Com agrees otherwise, Supply System shall notify the Parties in writing and they shall then terminate the Project, or one or more of the Parties may elect to proceed with the Project upon reimbur electing Parties for their Costs of Construction and Fuel. Upon such reimbursement, the interest non-electing Parties in the Project shall vest in the electing Parties. Each of the Parties has agreed Supply System's de:ermination of the matters listed in (i), (ii), (iv) and (v) above.
Construction, Licensing, Operation and Maintenance The Supply System shall (a) take whatever action is necessary or appropriate to seek and obtain alllicenses, permits and other rights and regulatory approvals necessary for the construction, ope and maintenance of the Project; (b) prosecute construction of the Project in accordance with Prudent Utility Practice, AEC licensing requirements, any applicable Federal or State laws and regulations th under, and plans and specifications for the Project prepared or recommended by the Project archite engineer, and so as to schedule the Date of Commercial Operation as near as may be to Septe 1981; (c) operate and maintain the Project in accordance with Prudent Utility Pract:ce, giving due consideration to the recommendations of the Committee and the manufacturer's warranty require and in such a manner as to meet the requirements of the AEC and other government agenc jurisdiction, to safeguard the health and safety of persons and safety of property, and, as ne the normal course of business, to assure the continued operation and maintenance of the Projec Construction and Operating Payments Construction Budgets and budgets of Annual Costs, except Fuel costs, and revisions thereof sh be submitted to the Committee for approval at the times specified in the Ownership Agreement Costs of Construction and Annual Costs, including Fuel costs, shall be paid from the Construc Trust Account and Operating Trust Account, respectively, which the Supply System is required to            .
and maintain as separate accounts in a bank located in Washington meeting all requiremen upon depositories for any of the Parties. All moneys received by the Supply System under the Owner-ship Agreement shall be deposited in the appropriate Trust Account. Payments by the Parties sha made at the times specified in the Ownership Agreement.
The Supply System shall keep up-to-date books and records of all financial transactions and arrangements in carrying out the terms of the Ownership Agreement. All accounts shall be so ke permit conversion to the system of accounts prescribed for electric utilities by the Federal Power C mission. The Supply System shall cause all books and records to be audited by independent c public accountants of national reputation acceptable to all the Parties at approximately annual int and when such accounts are closed. Copies of such audits shall be supplied to each P shall have the right to examine and copy all plans, specifications, bids and contracts rela Fueland Scheduling The Supply System shall arrange for Fuel in amounts so that each Party may utilize i Share of the Project in a manner which such Party estimates is best suited to its individual s Each year the Supply System will o-epare and submit to the Committee for approval a ten-management plan, which shall be revised as reasonably required to reflect changes in condition. E Party used    shall furnish in preparing      to the each Fuel Plan.Supply System forecasts of its generation requirements from the P At the time of each fueling, the Supply System shall submit to the Committee for approval determination of the next fueling date (the " Forecast Refueling Date"), the kilowatt-hou available to each Party to such Date (the " Energy Entitlement") and the cost per kilowatt-hour o 22 9
      *a-a, -
                                                                                                                      ? *
 
    ,4 ) ,
forecasted generation requirements. Energy Entitlement.                                Each Party's En e such Party's Project Capability, and each Party shall manner                                  schedulee of the that its ene the next Forecast Refueling Date. Energy Entitlement apability                    is adequate until      to ma Minimum Capability to the Forecast Refueling Date.Each                                      on atParty sha Any Party may (i) order less than its Ownership Share of the Fuel necessary t  operation at Minimum Capability to the Forecast Refueling Date, (ii) require                            e ayed, that such D (iii) use the Energy Entitlement of other Parties, or (iv) require                  that the Project no e operated, upon arranging for equivalent alternate capacity and energy for the othernot                          Parties, but adversely affect the availability of capacity and energy to which any                                  other Pa Project or any other Party's costs for such capacity and energy.                                  e The Supply System shall schedule Project outages, other than fueling, em outage to the Committee for approval as far in advance as practicable,              e ro ect to meet but    may  shut governmental requirements or to avoid hazard to the Project or any person or prope Insurance                                                                      .
the benefit of the Parties such insurance coveragecefor                                        for the con
                                                                              , operation, maintenance and repair of the Project as the Committee may determine, but not less                                e than sha ments of the AEC, and conform (a Prudent Utility Practice.                                    u re- contract Liabilities; Walter of Subrogation consequential loss or damage, arising out                    ,
                                                                                                      , of    the const ncluding construction, damage resuhing from breach of any contract                ,
or loss or relating nership Agree-damages to any Party resulting from lossereof,                                      ,
ofresuit-use an        and o ing from the Project and based upon injury to or death of persons or damag t of Construction or Annual Costs, whichever may be osappropriate                                  s Parties, its agents and employees, for losses, operation, maintenance, reconstruction or repair of the Project.                        s ruction, costs, da Uncontrollable Forces the Ownership Agreement other than thes s obligation                          and expenses, if er      to pay failure of performance shall be due to uncontroihble forces, defined                    ent as any in the Owne Party is unable to overcome. Any Party rendered                                              ,
on-unable trollable forces shall exercise due diligence to remove such inability        spatch.
with all reasonable di Damage to the Project i extent that Supply System's estimate of the                                          cost of repair is n depreciated blue of the Project, and if the Parties do not unanimously agree that                      see the the Project sha 23
                                                                          -      ~.          _
m, . .
                                                                                                                      ,y y
 
  ,  ,        crption " Enc of Project" below), Supply System shall promptly submit a revised Cons budget of Annual Costs, as appropriate, and shall proceed to repair the Project, a its Ownership Share of the cost of such repair, if the Project suffers damage to the extent that Supply System's estimate of the cost exceeds 20% of the then depreciated value of the Project, computed according to the Own ment, Supply System shall determine the estimated fair market value of the Project if it is then te without repair. Thereafter, each Party which gives notice in writing to each of the other Part desire that the Project be repaired, shall pay a part of the total cost of repair in the prop its Ownership Share bears to the total of the Ownership Shares of all Parties gising s Party has gisen such notice, the Ownership Share of each Party which has not given notice s reduced at the end of each month to an Ownership Share determined by multiplying such P ship Share prior to such loss by a fraction the numerator of which is the estimated fair mark the Project if it is terminated without repair, and the denominator of which is said fair market plus the actual expenditures for repair. The amount of such reduction shall be proportio to the Ownership Share of each Party giving such notice.
If the Project suffers damage to the extent that Supply System's estimated cost of repa 20% shall Project  of the  then depreciated value of the Project and no Party gives the notice referre be ended.
Default Upon failure of a Party to make any payment when due, or to perform any obli other Party may make written demand upon said Party, and if said failure is not cu the date of such demand, it shall constitute a default at the expiration of such per Party may take any action, in law or equity, including an action for specific performance, Ownership such default. Agreement and to recover for any loss, damage or payment advances incu Assignment This agreement shall be binding upon and shallinure to the benefit of successors a Parties; provided, however, that no transfer or assignment of other than all of a Party's i Project to a single entity shall operate to give the assignee or transferee the status o the Ownership Agreement, and no transfer or assignment hereunder shall operate to incre of members on the Committee. Transfer or assignment shall not relieve a Party of any obl Ownership Agreement except to the extent agreed to in writing by the other Parties.
End of Project When the Project can no longer be made capable of producing electricity consistent wi Utility Practice or the requirements of governmental agencies having jurisdiction or is no by the AEC, or when the Project is ended as a result of damage thereto as described shall sell for removal all saleable parts of the Project, exclusive of Fuel, to the highest bidders ducting all costs of ending the Project, Supply System shall close the appropriate Trust Acc there are net proceeds, distribute to each Party its Ownership Share of such proceeds. Supp liquidate the Fuel, ar.d after making all required payments and receiving all due receipts, shall d the proceeds to the owners as their interests appear. In the event the costs of ending the Pro available funds, each Party shall pay its Ownership Share of such :xcess as incurred.
If one or more of the Parties is rendered incapable of proceeding with its obligations under the Ownership Agreement by reason of (i) inability to finance or (ii) failure to obtain necessary authorizations, including regulatory approvals, which condition is beyond the ability of suc remedy by reasonable means within a reasonable time, one or more of the other Parties may el 24
                                                                                                    , e vcq
 
                )        proceed with the Project without the disabled Party. The Parties so electing shall prom each non-electing Party for its Costs of Construction and costs of Fuel, if any, incurr forthwith vest in the electing Parties in such proportion a THE RESOLUTION The following is a summary of certain provisions of the Resolution authorizing the i of the Notes and does not purport to be complete. Reference should be made to the
          ,            complete information about the Notes. Copies of the Resolution are available on requ Seattle, Washington, or New York, New York. office of the Supply System                                ,
        /-            Use of the Proceeds 4
The Resolution authorizes the issuance of the Notes for the purpose of paying a par the Supply System of constructing and acquiring its ownership interest                              o in the Proje operation, including the cost of acquiring land and rights in land, acquiring nuclea
: g.                  work and expenses incurred in connection with the Project, engineering and other pro
      ' ~
making site and other studies and surveys for the Project, obtaining necessary permi                  ,
principal of and interest on the outstanding $2,000,000 approvals, prepa note issue which was issued for the Project, the appointed pursuant to the Resolution and the paying agen and paying interest on the Notes from their date to the date of maturity thereof.
Descriptionof theNotes Qs  '
multiple thereof, (as may be requested by the purchase
        ,            dated sale      October thereof,          1,1973.
payable on DecemberThey      will 15, 1973 bear interest at such rate as is determined by the B thereafter, and shall mature without option of prior redemption        15 1976.
on Juneand semi-annu Sources from Which Notes Payable t
bc" that may be lawfully applied to the payment                                                      thereof, inc y ystem's ownership interest in the Project and the proceeds of the Supply System's rev notes.
Creation of Funds sad Accounts l+            the " Nuclear Project No. 3-Preliminary Construction                                      ,
s ruction Fund"),
Fund" O                  will be held in trust and administered by the Supply System, and the other, known the Note Interest Fund Trustee (the " Note Interest                                            ppoint Fund one of the Paying Agents for the Notes as Note Interest Fund Trustee.
Disposition of the Proceeds of the Notes
!i From the proceeds of the sale of the Notes there shall be deposited:
: 1. With the paying agent for the $2,000,000 the Supply System, a sum sufficient to pay the principal of and interest on sa    .
25 A
: 2. With the Note Interest Fund Trustee for credit to the Note Interest Fund an amount equal to the interest to accrue on the Notes from the date thereof to June 15, 1976, which shall bc              )
used to pay interest on the Notes during such period.
: 3. With the Supply System for credit to the Preliminary Construction Fund the balance of such Note proceeds, which will be applied for the purposes noted above under the caption "Use of the Proceeds".
Monies in the Note Interest Fund will be used solely for the purpose of paying interest on the Notes.
On or before the fourteenth (14th) day of each month in which an installment of interest falls due on the Notes, the Note Interest Fund Trustee will transfer from the Note Interest Fund to the Paying Agents an amount which, together with any monies theretofore received or held by the Paying Agents for the purpose, will be sufficient to pay the installment of interest then falling due on the Notes. If at any time monies in the Note Interest Fund and other available monics are inadequate for payment of interest, the Supply System will transfer from the Preliminary Construction Fund to the Note Interest Fund any addi-tional amounts of money required.
All monies held or set aside by the Supply System in the Preliminary Construction Fund will, until invested or applied as provided in the Resolution, be deposited by the Supply System for the account of the Preliminary Construction Fund in such depositary or depositaries (hereinafter referred to as the
    " Construction Fund Depositary" or " Construction Fund Depositaries") as the Supply System may appoint. Each Construction Fund Depositary will be a state bank or trust company or national banking association located in the State of Washington and qualified under the law of said State to receive deposits of public monies, having a capital stock and surplus in excess of $7,500,000. All monies so deposited shall be continuously secured for the benefit of the Supply System and the holders of the Notes to the extent permitted by applicable state or federallaws for the securing of deposits of public monies.
Investment of Montes Heldin Funds 6
Monles held for the credit of the Preliminary Construction Fund and Note Interest Fund are to be invested in the following:
: 1. Direct obligations of, or obligations the principal of and interest on which are uncondi-tionally guaranteed by, the United States of America;
: 2. General obligation bonds of any state of the United States of America rated by a nationally recognized bond rating agency in either of the two highest rating categories assigned by such rating agency;
: 3. Bonds, debentures, notes or participation certificates issued by the Bank fcr Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-Import Bank of the United States, Federal Land Banks, the Federal National Mortgage Association or any other agency of the United States of America or any corporation wholly owned by the United States;
: 4. Public Housing Bonds or Project Notes issued by Public Housing Authorities and fully secured as to the payment of both principal and interest by a pledge of annual contributions to be paid by the United States of America or any agency thereof; or
: 5. Bank time deposits evidenced by certificates of deposit issued by any bank, trust company, or national banking association located in the State of Washington which is a member of the Federal Reserve System, is a qualified public depositary under the laws of the State of Washington and has capital stock and surplus of at least $7,500,000. Such time deposits will mature not later than the time when the funds invested are required for the purpose in; ended and will be secured at all times in the manner provided by the laws of the State of Washington, provided, that the funds 26                                                        h l
I
,                                                    .    - ~ . -                                                ,.
 
a invested in bank time deposits issued by any one bank, trust company or national banking association will not exceed at any one time 50% of the total of the capital stock and surplus of such bank, trust company or national banking association.
Allinterest earned by reason of investment of monies in either fund shall accrue to the Preliminary Construction Fund. In the event monies that 7.re invested are needed in the Preliminary Construction Fund or Note Interest Fund to meet obligations for which funds are not otherwise available, then the Supply System shall sell or present for redemption any part of the investments to the extent required to provide the necessary funds.
Particular Covenants of the System The Supply System covenants and agrees with the purchasers and holders of the Notes as follows:
A. The Supply System will pay the principal of and interest on each and every Note issued by the Supply System pursuant to the Resolution on the dates and at the places provided for in the Notes from any monies of the Supply System that may be lawfully applied to the payment thereof, including revenues derived from the Supply System's ownership interest in the Project and the proceeds of revenue bonds or refunding notes of the Supply System.
B. So long as any of the Notes are outstanding and unpaid, the Supply System will not, (i) voluntarily consent to or permit any rescission of, nor will it consent to any amendment to, nor otherwise take any action under or in connection with any of the Net Billing Agreements which will reduce the payments provided for therein or which will release any party thereto from its obligations thereunder, or which will in any manner impair or adversely affect the rights of the Supply System or of the holders of the Notes, and the Supply System will perform all of its obligations under the Net Billing Agreements and take such action and proceedings as shall be necessary to protect and safeguard the security for the payment of the Notes afforded by the provisions of the Net Billing Agreements; or (ii) voluntarily consent to or permit any rescissica of, nor will it consent to any amendment to or modification of, nor otherwise take any action under or in connectica with the Ownership Agreement or the Project Agreement which will in any manner impair or adversely affect the rights of the Supply System or of the holders from time to time of the Notes. The Supply System will perform all of its obligations under the Ownership Agreement and the Project Agree-ment and will take such actions and proceedings as shall be necessary to protect and safeguard the security for the payment of the Notes afforded by the provisions of such Agreements.
C. The Supply System will proceed as promptly as is reasonably possible and practicable to obtain all necessary permits, licenses and approvals, to prepare detailed plans and specifications for the construction of the Project and to do other necessary preliminary work so that the construction of the Project can be commenced and financing of the Supply System's ownership interest therein provided for through the sale of revenue bonds of the Supply System.
D. As soon as it is reasonably practicable the Supply System will issue and sell its revenue bonds for the purpose of providing funds to pay the cost of construction and acquisition of the Supply System's ownership interen in the Project, which cost shall include, among other things, the payment of the principal and interest not paid from the principal of the Notes authorized pursuant to the Resolution. If for any reason the Supply System is unable to issue and sell bonds or refunding notes to obtain funds to pay the principal of the Notes when due, or is unable to proceed with the financ-ing of the Project for any reason, the Supply System will terminate the Net Billing Agreements as l      provided in sub-paragraph (a) of Section 10 of each of the Net Billing Agreernents and will invoke the provisions of such Section. Thereafter the Supply System shall in each month make monthly accounting statements under the Net Billing Agreements which shall show as the amounts due from the Participants in such month the maximum amount which can be stated therein for payment by the Participants in such month without causing the amount due from any Participant to exceed the 27 n.. _m , . . ,
 
l  1 g,      ,
W
(
manner provided in the Net Billing Agreemen                                                      e y                          made pursuant to the Net Billing Agreements, and shall deposit into                        can be in the Resolution so much of the amount so collected as is required                        t c s created o provide for the payment of the fj principal      of and interest on the Notes and any additionalupply System's share of the costs of acquiring and constructing the Project.
notes h
[
y h '-
System's share of the cost of acquiringy with                                              and upply con the Notes from the proceeds of revenue bonds or notes or any                                    other mon r            revenues to be received pursuant to the provisions of the, ncluding paragraph.                                                                              Resolution receding Severability 5
C f                  tion to be contrary to law, then the affected                                        petent provision jurisdic-e rom, and shallin no way affect the validity of, any of the other provisions of the Resolution                                    or t c
ereunder.
p
'~
REGISTRATION OF THE NOTES BY STATE AUDITOR The Notes will be registered by the State Auditor of the State of Washin, certificate of in accordance with the provisions of Sectionsuch registration                                c    ote signe 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 shall be held in every action, suit, or proceeding in                                      certificate, prima facie valid and binding obligations in accordance              with their terms.
ught into question
{
TRUSTEE The Supply System has appointed Peoples Nationale Bank Fund Trustee.
ote Interest of Washin NEGOTIABLE INSTRUMElWS TheofNotes provisions    Section and interest coupons attached thereto are negotiable instrument 54.24.120 of the Revised Code of Washington.              ccordance with the LITIGATION ing the corporate existence of the Supply                            ,
System, ened,  question-upply System to their or t the Notes, or the validity of the Net Billing ystem, Agreements to issue                t related to the Project, or the power and the sale      of Resolutic:
powcr, energy and capability from the Supply System's owner hi authority n any way and collect rates for of t provided  in the s p interest in the Project as 28 9-
                                                                                %<ww7              - +
 
APPROVAL OF LEGAL PROCEEDINGS All legal matters incident to the Net Billing Agreements, the Ownership Agreement, the Project Agreement and the authorization and issuance of the Notes are subject to the approval of Messrs. Wood Dawson Love & Sabatine, Bond Counsel to the Supply System, and Messrs. Houghton Cluck Coughlin
    & Riley, Special Counsel to the Supply System. Copies of the opinions they propose to render are appended hereto as Exhibits VI and VII.
TAX EXEMPTION In the opinion of the above named Counsel, the interest on the Notes will be exempt from Federal income taxation under existing laws and regulations and a specific ruling issued by the Internal Revenue Service with respect to the Notes.
MISCELLANEOUS The references, excerpts, and summaries contained herein of the Net Billing Agreements, the Project Agreement, the Ownership Agreement, and the Resolution do not purport to 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 Notes, the rights and obligations of the holders thereof and said agreements.
The authorizations, agreements and covenants of the Supply System are set forth in the Resolution,
;    and neither this Official Statement nor any advertisement of the Notes is to be construed as a contract
;    with the holders of the Notes. 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.
All of the information relative to the Pacific Northwest, Bonneville, Joint Power Planning Council and Pacific Northwest Utilities Conference Committee has been taken from sources deemed to be reliable but is not guaranteed as to completeness or accuracy.
The delivery of this Official Statement has been duly authorized by the Supply System.
WASIUNGTON PUBLic POWER SUPPLY SYSTEM By E. VICTOR RHODES Secretary Dated October 10,1973 29
                                                                                                                . ~ m,
 
e f l
(THIS PAGE INTENTIONALLY LEFT BLANK) h 30                  h
 
EXHIBIT 1 WASIIINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No.3 Columns (1) and (2) in the following table show the number of customers and the gross revenues of each Participant and Company for fiscal 1972.
Column (3) shows the decimal fraction of the Supply System's Ownership Share of Project Capa-bility that has been purchased by each Participant and assigned to Bonneville and the ownership shares of each Company.
Column (4) shows the amount of the billings for power and certain services, after deducting any amounts previously committed under other net billing or exchange agreements, that Bonneville estimates each Participant will be obligated to pay in the fiscal year ending June 30,1983.
Based upon an estime,ted average annual cost to the Supply System, Column (5) shows the estimated annual Project costs as they are allocated to cach Participant for fiscal year 1982-1983 to be offset or
  ).
credited against the anticipated billings to the Participant shown in Column (4).
i 31
                                                                                                                ,3 .
 
r l
                ,    e WASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No.3 PARTICIPANTS (1)            tt)          (3)            (4)              (s) pgigal                  Estimated neemi is72 statistic. O    r p
_ Customers        Revenues kff(5)                  i et 19A2 19M3( %) 1922-1983 ( D)    _198? 19A3R)
City of Albion, Idaho . . . . . . . . .....                146 $          23,974 0.00006 5              4,500 $          2,500 City of Bandon, Oregon . . ........                      1,558          374,134 0.00132            124,900            54,100 Public Utility District No. I of Benton County, Washington . . . . .            15,301          4,740,481 0.04160          2,466,200          1,704,300 Benton Rural Electric Association . . .                4,894        1,213,861 0.00783            400,500            320,800 Big Bend Electric Cooperative, Inc.            ..      4,297        1,789,678 0.00528 Blachly-Lane Cooperative Electric                                                                  351,500            216,300 Association . . . . . . . . . . . . . . . . . .      1,786          726,056 0.00415            296,200 City of Blaine, Washington . . . . . . . . .                                                                          170,000 1,127          245,318 0.00116 City of Bonners Ferry, Idaho . . . . . . .                                                          71,800            47,500 1,602          339,683 0.00108 City of Burley, Idaho . . . . . . . . . . . . . . .                                                  67,600            44,200
  '                                                                                      3,908            826,893 0.00198            148,800 City of Canby, Oregon . . . . . . . . . . . . .                                                                          81,100 1,887          405,929 0.00164              153,100            67,200 City of Cascade Locks, Oregon . . . . . .                  578          175,057 0.00049              50,700            20,100 Central Electric Cooperative, Inc. . . .                4,685        1,234,504 0.01183            608,600            484,700 City of Centralia, Washington . . . . . . .            6,258        1,156,453 0.00275            190,600            112,700 Central Lincoln Peoples' Utility District            17,268        6,184,656 0.03236 Public Utility District No.1                                                                    2,607,500          1,325,700 of Chelan County, Washington . ...                18,808        5,537,414 0.00606 City of Cheney, Washington . . . ....                                                              257,500          248,300 2,568            667,506 0.00479 Public Utility District No.1                                                                      278,700            196,200    g of Clallam County, Washington .                    9,579        2,739,106 0.01006                                            7 Public Utility District No.1                                                                      630,500            412,100 of Clark County, Washington . . .            . 53,865        14,216,846 0.15228 Clatskanie People's Utility District . .                                                          7,123,600          6,238,600 2,432        1,833,515 0.00763 Clearwater Power Company . . . . . . . .                                                            806,800            312,600 5,343        1,370,112 0.00703 Columbia Basin Electric Cooperative,                                                                371,500            288,000 Inc. ... ..... ................                    3,002          1,015,601 0.00382            236,600            156,500 Columbia Power Cooperative Association, Inc. . . . . . . . . . . . . .          1,286          459,649 0.00101              68,800            41,400 Columbia Rural Electric Association, Inc.    ...... . . . . .        .. ....          1,838            775,135 0.01323 Consolidated Irrigation District No.19,                                                            650,100            542,000 Washington . . . . . . . . . . . . . . .                  1            8,626 0.00007 Consumers Power, Inc.                                                                                  3,700            2,900
                                                                  . ... ..              8,914        2,780,145 0.01655 Coos-Curry Electric Cooperatiu, Inc.. .                                                          1,221,400            678,000 7,809          2,569,924 0.00880 Town of Coulee Dam, Washington                                                                      543,700            360,500
                                                                                ..        546          171,988 0.00052              36,300 Public Utility District No. I                                                                                          21,300 of Cowlitz County, Washington . . .                28,619          9,446,009 0.02370 City of Decto, Idaho . . . . . . ........                                                        1,968,900            970,900 100            19,540 0.00017 Public Utility Dinrict No. I                                                                          10,200              7,000 of Douglas County, Washington ...                  7,290          2,054,707 0.0008S Douglas Electric Cooperative, Inc. . . . .                                                          38,500            34,800 5,019          1,151,293 0.00617 City of Drain, Oregon . . . . . . . ....                                                          463,900            252,800 556          178,700 0.00085              73,600 East End Mutual Electric Co., Ltd.. . .                                                                                34,800 293            58,697 0.00032 City of Ellensburg, Washington . . . . .                                                            17,100            13,100 4,928          1,118,022 0.00712            430,600            291,700 32 m . e                                        v - %
6----...a...--......  - - . . .
 
w i
s 6-                                      WASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No. 3 -(contioned)
PARTICIPANTS (1)              (s)        (3)
(4)            (8) a Estimated y ten 's  Anticipated Fiscal 1972 Statistice  Onn shlp                        Sha of
_Custorners                      g ay      Isoge e
_ Revenues 1982-1983(A) 1982-1983(D)
AnnuaWost Fall River Rural Electric Cooperative,                                                                              1983-1983(E)      ;
Inc. .. .......................
4,102 $          922,296 0.00250 $
Farmers Electric Co., Ltd. . . . . . . . . . .                                                        142,100 $        102,400 183            18,079 0.00021 Public Utility District No.1                                                                            12,900            8,600
          .;                      of Ferry County, Washington . .. .
        . .b                                                                              1,502            476,510 0.00116 Flathead Electric Cooperative, Inc. . . .                                                              70,400          47,500 3,939            788,284 0.00355
[                    City of Forest Grove, Oregon .. ....                      4,045 186,200          145,400 Public Utility District No. I                                                938,707 0.00000(B) 375,600 k~
L                          of Franklin County, Washington . . . .                  9,990 0
Public Utility District No. 2                                            2,928,955 0.01251          796,000          512,500
        .7                      of Grant County, Washington . . . . . .
      ?d                                                                              19,500          6,935,552 0.00589 se. -                    Public Utility District No.1                                                                          250,200          241,300
    $ I"-
of Grays Harbor County, Washington Harney Electric Cooperative, Inc. . . . .
28,007 1,527 6,355,467 0.02040 875,562 0.00263 1,791,500          835,700 City cf Heyburn, Idaho ..........                                                                    169,700          107,700 686            391,556 0.00173 T'                        Hood River Electric Cooperative,                                                                      122,600            70,900 Oregon
: 4. s                                      ......................                    2,132            639,192 0.00436 Idaho County Light & Power Coopera-                                                                  293,000          178,600 tive Association, Inc. . . . . . . . . . . . .          1,543 City of Idaho Fall 3, Idaho . . . . . . . . . . .                          346,106 0.00111            63,200 N.                          Inland Power & Light Company . . . . .
12,967 11,575 3,208,038 0.00797          562.000 45,500 326,500
  .6w                        Public Utility District No.1                                              2,814,575 0.02029        1,000,900 i                                                                                                                                                  831,200 of Kittitas County, Washington . . . . .                1,162 13                        Public Utility District No. I                                                300,98? 0.00205          118,600
    ?                                                                                                                                                  84,000 of Klickitat County, Washington . . . .                5,881
'f                          Kootenai Electric Cooperative, Inc. . . .                                1,704,287 0.00565          355,500 4,360                                                        231,500 lyf.
Lane County Electric Cooperative, Inc.                                      944,530 0.00515          260,100 5        '                                                                        7,320                                                        211,000 Public Utility District No.1                                              1,902,374 0.01114          743,200 4                                                                                                                                            456,400 of Lewis County, Washington . . . . . .
  $@                      Lincoln Electric Cooperative, Inc.
15,166            3,501,978 0.01249          788,100 y
f                            (Montana) . . . . . . . . . . . . . . . . . .          1,655 511,700 Lincoln Electric Cooperative, Inc.                                          536,898 0.00225          120,100 N                                                                                                                                                  92,200 (Washington) ... .........
  %                                                                      ..          1,486            595,268 0.00119 Lost River Electric Cooperative, Inc..                    1,288                                        84,900            48,800
  ;! ,                    Lower Valley Power & Light, Inc. . . .                                      307,481 0.00120            69,100 6,122                                                          49,200
'm.                        Public Utility District No.1                                              1,634,136 0.00671          360,800 W
# '                          of Mason County, Washington . . . . .                  2,356 274,900
* Public Utility District No. 3                                              409,976 0.00171          102,500
    ..                                                                                                                                              70,100 of Mason County, Washington . . . . .
(%
7*                      Town of McCleary, Washington . . . . . .
City of McMinnville, Orego. . . . . . . . .
11.826 626 2,776,718 0.01419 215,454 0.00075 815,000 54,400 581,300
$ ;'s                                                                                5,185                                                          30,700 Midstate Electric Cooperative, Inc. . . .                                  1,559,912 0.00102          498,400 3,625                                                          41,800 4,g                        City of Milton-Freewater, Oregon . . . .                  2,916 988,747 0.00590            410,500          241,700
* City of Minidoka, Idaho . . . . . . . . . . . .                            625,527 0.00000(C) 339,700                          0 50              8,979 0.00001 Missoula Electric Cooperative, Inc. . . .                3,437                                          1,300              400 City of Monmouth, Oregon . . . . . . . . .                                  775,496 0.00412          206,700 1,812 $                                                      168,800 395,850 0.00352 $ 325,600 $                144,200 33
 
p
  ,  e                                        WASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No. 3 -(continued)
FARTICIPANTS                                                                                                                  {
                                        ~-
(1)          (2)          (3)            (4)                (5)
                                                                                                  ',Ci gt                  Estimated                  !
Byste s    Anticipat ed
_ Maca11972 Statistics    Onne ship                            i rIo Customers      Revenues p ar        B<
ge      lie          ro e Nespelem Valley Electric                                                          1982-1983(A) 1982-1983(D)        1982 1983(r)
Cooperative, Inc. . . . . . . . . . . . . . . .            989        274,951 0.00146              76,800 Northern Lights, Inc. . . . . . . . . . . . . . .          5,503                                                          59,800 1,219,293 0.00547            278,900 Northern Wasco County People's                                                                                          224,100 Utility District .................                      2,458 Public Utility District No. I                                            515,977 0.00142            197,300              58,200 of Okanogan County, Washington . .                    11,437        2,852,454 0.00299 Okanogan County Electric                                                                          200,400              122,500 Coopera tive, Inc. . . . . . . . . . . . . . . .          982        194,031 0.00092            55,300              37,700 Orcas Power & Light Company . . . . .                      3,208 Public Utility District No. 2                                            932,971 0.00728            379,700            298,200 of Pacific County, Washington . . . . .              10,832 Public Utility District No. I                                          1,928,811 0.00941          578,900              385,500 of Pend Oreille County, Washington                    2,771          865,990 0.00064 City of Port Angeles, Washington . . . . .                                                            27,800              26,200 6,836      1.970,504 0.00754 Prairie Power Cooperative, Inc. . . . . . .                                                        549,500              308,900 310          78,217 0.00026 Raft River Rural Electric Cooperative,                                                                13,500              10,700 Inc. ............ .............                        1,645      1,015,079 0.00533            300,700 Ravalli County Electric Cooperative,                                                                                    218,400 Inc. ..........................                        2,027        547,786 0.00455          226,700 City of Richland, Washington . . . . . . . .              9,061                                                        186,400 2,551,518 0.01479          938,100 Riverside Electric Company, Ltd. . . . .                    205                                                        605,900 City of Rupert, Idaho . . . . . . . . . . . . . .
37,847 0.00025            13,100                              g 1,972                                                          10,200 Rural Electric Company . . . . . . . . . . .
471,793 0.00121            85,700 1,764                                                          49,600 Salem Electric . . . .                                                    472,445 0.00443          218,300
                                        .............              6,745                                                        181,500 1,313,349 0.01025          752,000 Salmon River Electric Cooperative, Inc.                    1,223                                                        419,900 City of Seattle, Washington . . . . . . . . .
309,683 0.00104            59,300 255,651                                                          42,600 Public Utility District No. I                                        60,443,753 0.09930        5,011,100            4,068,100 of Skamania County, Washingtm .                        2,561 Public Utility District No.1                                            774,612 0.00291            185,100            119,200 of Snohomish County, Washington. .                  103,736      24,320,282 0.19767        10,726,500 South Side Electric Lines, Inc. . . . . . . .                374                                                    8,098,100 City of Springfield, Oregon . . . .....                                  125,736 0.00085            43,700 5,735                                                          34,800 Town of Sumas, Washington . . . . . . .                                1,377,068 0.00145          203,200 321                                                        59,400 Surprise Valley Electrification                                            75,851 0.00019            13,400                7,800 Corporation ...................
2,652          764,747 0.00163 City of Tacoma, Washington . . . . . . . .                                                          96,200              66,800 62,844      30,587,028 0.02309 Tanner Electric . .................                                                              1,873,100              946,000 658          152,145 0.00109 Tillamook People's Utility District                                                                  58,000              44,700
                                                        .      10,921        2,811,835 0.00746 Umatilla Electric Cooperative                                                                      708,600              305,600 Association . . . . . . . . . . . . . . . . . . .      4,472        1,466,520 0.01487 Unity Light & Power Company . . . . . . .                                                        1,226,800              609,200 1,083          241,686 0.00278 Vera Irrigation District No.15 . . . . . .                3,196                                    139,800              113,900 Vigilante Electric Cooperative, Inc. . . .                              603,229 0.00378          239,700 2,929                                                        154,900 Public Utility District No. I                                            726,325 0.00136            82,600              55,700 of Wahkiakum County, Washington                        1,941        383,874 0.00203 Wasco Electric Cooperative, Inc. . . . . .                                                        125,500              83,200 2,273        719,014 0.00271            191,400            111,000 34
                                                                                                                                          '9 ,Q-f*
 
w e , .
* i                                WASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No. 3 -(continued)
PARTICIPASTS (1)                  (2)            (8)                (4)                (s)
Igal                    Estimated By!ter  s    Anticipated
_ F1 scal 1972 Statistles                                                    8h r o Onge,r,s, hip  DogggTil,le Customers              Revenues 1982-1983(A) 1982-1983(D)
An uaWott Wells Rural Electric Company . . . . . . .        1,370 $                                                              _1982-1983( E)
West Oregon Electric Cooperative, Inc.
681,336 0.00270 $                122,300 $            110,600 2,544                628,305 0.00238 Public Utility District No. I                                                                            175,300                97,500 of Whatcom County, Washington . . .                  I            285,388 0.00459                  231.200                188,000 TOTAI. PARTICIPANTS (103) . . . . .
961,318 $359,154,118 1.00000 $72,248,300 $40,968,000 CO3fPANTES (1)                  (2)                  (3)
Fisca11972 Statistics Customers ogrshgapabit t t
Revenues            1982 - 1983 PaciSc Power & Light Company . . . . . . . . . . . . . . . . . . . .          507,746            $197,950,424            .10000 Port'and General Electric Company . . . . . . . . . . . . . . . . . . . . 365,415 112,442,578            .10000 Puget Sound Power & Light Company . . . . . . . . . . . . . . . . . . 379,726 .
108,146,204            .05000 The Wr.shington Water Power Company . . . . . . . . . . . . . . . .178,037      .
_ 55,618.432            _.05000 TOTAL COM PANIES (4) . . . . . . . . . . . . . . . . 1,430.924        .......      . . $474,157,688
                                                                                                        ..                      .30000 (A) P:.rticipants' Shares are not the same in all years. See Exhibit A to the Net Billing                                  .
(B) Has .00C00 Participant's Share until July 1,1986, and .00091 Participant's Share the                                  .
(C) Has .00000 Participant's Share until July 1,1986 and .00002 Participant's Share the                                    .
ticipants' net billing capability committed to the purchase of                                                              y of Eugene, Oregon's 30% share of the Trojan Nuclear Project,                                                                          the 20% sh now proposed for net billing by the City of Tacoma, Washington, and the Public Utility Distric Grays Harbor and Snohomish Counties, Washington, and the Supply System's Nuclea                                              .
commitments are based, vary from year to year and certai structured to accommodate the operation of the net billing program as a whole, including projects and services. In addition, an assignment agreement between Bonneville a in the Supply System's Nuclear Project No.1 permits Bon                                                  .
res
        $36,500,000 of costs applicable to the years 1981 to 1987 would be net billed in 1980, to 1987. thereby increasing the amounts available for Project No. 3 net billing during the a 35 year period beginning September 1,1982 and assuming (E) Es projected revenues of $11,250,000 unde:                                    1982-1983 cost levels after deducting the Power Sales Agreement for the year 1982-1983. The annual costs for the Project may be structured by deferring principal payments or by s to reduce costs in the early years of the Project's operation. Such reduction                                          costs in would increase later years. Revenues under the Power Sales Agreement are anticipated in the followin 1981-82. . . . . . . . . . . . $11,250,000 1982-83............                  11,250,000 19 83-84. . . . . . . . . . . .        5,625,000 i
l                                                              35
 
r, s                                                                EXHIBIT II
?                                                                                                                                                              i R. W. BECK AND ASSOCIATES ANALYTICAL AND CONsVLTINC ENCJNEERs PLANNINC DEsiCN RATES                                                                                                                        SEATTLE. WAsHINCToN ANALYSTS                                                                                                                    DENVER. ColoRAoo EVALUATIONS                                                200 Tow!R BUILDINC                                              PHOENIX. ARIZONA MANAGEMENT                                            SEATTLE, WAshlNCToN 96101                                            oRLANDO. FLORIDA TELEPHONE 206-622 s000                                            CoLUM8Us. NE8RA5KA Boston, MAssACHUsET FILE NO SS-Ill7-NFI-TA Board of Directors                                                                                  October 10,1973 Washington Public Power Supply System Post Office Box 968 Richland, Washington 99352 Gentlemen:
 
==Subject:==
 
Summary Engineering Report Washington Public Power Supply System Nuclear Project No. 3 Presented herewith is a summary of our analyses, investigations                                                                and s posal by the Washington Public Power Supply System (theo the                                                          pro-
                                                                                                                                    " Supply                Sys Washington Public Power15,1976
                    " Notes") which will mature on June Supply System Nuclear Project No. 3 Revenue Not                ,    ,            s a
r es 1973A (the                      T for the purpose of paying the Supply S          ystem's share of certain initial costs of acquiring, constructing and placing into ing plant of approximately                                                                                        enerat-operatio 1,200,000 kilowatts and related facilities to bee locat d i Washington, ect").                and known as Washington Public Power Supply System Nucl The Supply System's present financing program provides that the Notes wil Share of the Project. proceeds of long-term bonds issued toretired                                            provide from wnership perman
                  & Light Company, Portland General Electric                                                                        c ower ompany and Compa The Washing'on Water Power Company                                                                              on, con-(the " C r e-ment each party will be responsible for providing its Ownership Share of the c operation and will be entitled to its Ownership Share of the                                    . TheProject's parties to the  capability Ownership        Agreement and maintain the Project.          have      designated                the    Supply      System      to  act    as uct, operate their agent follows:                    Under the Ownership Agreement the parties will have Ownership S Pmentage Party                                              Ownership
_ Share Supply System . . . . . . . . . . . . . . . . . . . . . . . . .
70 %
Pacific Power & Light Company . . . . . . . . . . .... . .
10 %
Portland General Electric Company . . . . . . . . . . . .      . 10 %
Puget Sound Power & Light Company . . . . . . . . . . .5%
The Washington Water Power Company . . . . . . . .5%                  .
36 h
g.1g%ese d_%*f
 
9y g
        ~
Share of the cost of preliminary work and expenses incurre engineering and other professional services; (b) obtaining the necessary permits, licenses required for construction of the Project; and (c) preparing detailed plans, specifications for the Project; together with the cost of issuing the Notes and interest on the Notes to lectively referred to herein as " Initial Work"). A portion of the proceeds of the Notes will be u retire 52,000,000 of revenue notes previously issued for such purposes.
Washington State Thermal Power Plant Site Evaluation Cou the United States Atomic Energy Commission (the "AEC") and, in general, to accompli work  to be undertaken prior to the issuance of long-term bonds to provide permanent finan Supply System's Ownership Share of the Project.
The Supply System
(                    The Supply System is a municipal corporation and a joint operating agency organized und laws of the State of Washington and has 21 members consisting of 18 public utility districts municipalities alllocated within the State of Washington. The Supply System owns and operat W/.
ington, and the steam-electric generating plant with a capaci                ,
in Benton County, Washington, known as the Hanford Project. Steam is provided to from    a nuclear reactor that is awned and operated by the AEC on its Hanford Reservation ne Washington.                                                                                          ,
The Supply System presently plans to continue operation of the Hanford Project until the f
;^            1977, when the operation of the AEC's reactor that supplies steam to the Hanford Project is l          to be terminated. The Hanford Project generating facilities will then be incorporated in Washington Public Power Supply System Nuclear Project No.1, which will include in additio Hanford Project generating facilities, a nuclear steam supply system and topping turbin equipment. Total generating capacity of Project No. I is estimated to                  be approximately 1,220,000  kilo-watts. Project No.1 is presently scheduled for commercial operation in September,1980.
The Supply System has begun construction of a 1,100,006 t:
Nuclear Project No. 2, presently scheduled for commercia The Supply System issued $13,700,000 of Packwood Lake Hydroelectric Project Revenue Bonds Series of 1962        and 1965, to finance the construction of the Packwood Lake Hydroele
              $122,000,000 of Hanford Project Electric Revenue Bonds, Series of 1963, to finance construction the Hanford Project. The Supply System has also issued $1$0,000,000 of Nuclear Project .
Bonds, Series 1973, to finance part of the cost of the construction of Nuclear Project No. 2 the Supply System has issued 525,000,000                                                            ,
Project No.1.                              of revenue notes to finance certain initial costs uclear for N the respective systems.Each of the foregoing projects is a separate utility system and t Proposal The Project will consist of a nuclear steam supply system, turbine-generating unit, assoc auxiliary equipment and facilities, and transformation and transmission              equipment.
The Supply System has entered into contracts for certain items for the Project that required long deliv 37 1
                                                                                                                      } 9. 4*WM f y
 
SI
    ,o M:      g    ,
A' y:                      ington State Thermal Power Plant Site Evaluation                                      s e by the Wash-Counc The Project is scheduled for commercial operation in September,1981a constru h
j issuance of the Notes. The Notes will be retired                                            or tfrom rough pro l(K                    to finance the Supply System's Ownership Share of the costs of constructiof long-te other funds available to the Supply System. The Supply                                  -  m System bonds    in ex several series, beginning shortly after receiving a construction                          e      .
perm The Sopply System's Ownership Share  t u
;                    of the Project will be pledged to said system.wnership                                    system  Share from
(.
p yp                    Description of the Project g                    County, Washington, approximately 16 miles from the City of Seattle.                                          .
rays Harboreast miles southwest approximately 3,817 megawatts thermal                                                ,
and nc., is rated atinclud generators, and other auxiliary systems. The waste heat from the turbine                                        condenser w n a closed cycle condenser            cooling    system  that  will supplied by Westinghouse Electric Co. will be rated atutilize evaporative        -      cooling        towers. T erator unit to be The Project is expected to have a net electrical output ofpower                      .
approximately factor.
Project's          output Project. will be delivered into the Federal Columbia River Power 1200        000  kilowatts. The the  vicinity of the m transmission grid in              $
Permits and Licenses Washington State Thermal Power Plant                                                            Site e site from ermit from the AEC.
the Eval Construction Program to design and supervise the construction of the ect-Engineer                                Project.The S design of the major components and structures                                          e work on the          of th e AEC construction to begin in the fall of 1975 after the receipt ofs scheduled                                  the construc scheduled for the spring of 1981 and commercial operation for September 198 for the Project totaling approximately $125,862,567.The                                ent and material Supply Sy tracts until after July 1,1976. These contracts are for the delivery                  under theseofcon-thNo payme e turbine-generator unit, the nuclear steam supply system, including the fabrication                          ,
of the    initial nucle e reload 38 l
                                                                          .je  e
 
  . e
}    nuclear fuel. The following table shows those major equipment and material contracts that have been J    awarded for the Project as of August 20,1973.
Contractor                                    Item                          Contract Award Date              Contract Amount Combustion Engineering, Inc. . . . . Nuclear Steam                                              7/19/73                $54,271,000(1)
Supply System Westinghouse Electric Co.            .. ..        Turbine-Generator                            8/20/73'                $39,138,236 Exxon Nuclear Company . . . . . . . . Reload Nuclear Fuel                                      7/25/73                  $32,453,331
( t ) Includes $8,251,000 for fabrication of the fuel for the initial core.
Initial Financing Program The proceeds from the Notes are estimated to provide the necessary funds to pay fer the Supply System's Ownership Share of the initial Work, that will be accomplished prior to June,1976.
The estimated disposition of the proceeds of the Notes, based on an interest rate of 4% %, is given in the following table:
Engineering and Construction Management . . . . . . ..........                                    $ 12,957,000 Escalation and Contingencies . . . ............ ...........                                          7,140,000 Nucle a r Fu el . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,772,000 Supply System's Direct Cost (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .            5,166,000 Financing Expenses                  . . .      .. .              . ....            .. .....          232,000 Capitalized Interest . .. . . . .......... .. ... ...... .                                          3,489.000 Gross Costs . . . . . . . . . ............ ...........                                $31,756,000 Less: Investment Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2.756,000 Principal Amount of Note Issue . . . . ...... ......                                  $29,000,000 (1) Includes funds for the retirement of $2,000,000 of revenue notes used for preliminary work on the Project.
The Supply System covenants in the resolution adopted in connection with wie of the Notes that it will terminate the Net Billing Agreements as provided in such Agreements if the Supply System deter-mines 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. In the event that the Supply System terminates the Net Billing Agreements such Agreements will provide the mechanism by which the Supply System's obligations will be discharged. We estimate that under current Bonneville rates there will be in excess of $60,000,000 of nct billing capability available to the Participants during the fiscal year ending June 30,1976.
Permanent Financing Program The current Supply System program anticipa*-s that permanent financing for its Ownership Share of the costs of construction for the Project will be initiated after the construction permit is received from the AEC through the issuance of long-term bonds to be retired from revenues derived from the sale of the Supply System's Ownership Share of the Project capability. These bonds are proposed to be issued to provide funds to retire the Notes and to pay the balance of the Supply Syste n's Ownership Share of the costs associated with the construction of the Project and placing it into operation. The Supply System expects to issue the long-term bonds in several series.
The construction costs for the entire Project have been estimated by Ebasco and the Supply System to be $581,366,000, including engineering and construction management, escalation and contingencies to a 1981 operating date, initial nuclear fuel core, sales tax and owner's costs, but exclusive of financing expenses and interest during construction. The Supply System's Ownership Share of these costs is
)  estimated to be $406,957,000.
39
                                                                                                                                              - ,w g
 
interest in a reserve account in the bond fund, gency                                                                        .
working ca in advance of the expected date of commercial operation. fund asso of bonds of approximately equal si7e w .i 69c' Based on the foregoing and fu interest rate, the estimated total amount of bonds to be issued to finance the Supply System's Ownership Share of the Project                                                                              a e:  is show Estimated Permanent Financing Required for the Supply System's Ownership Share of the Project supply s3 stem's Total          Onnership Share Project Costs      of Project Costs Structures and Improsements . . .                    ..          .          .
                                                                                                          . ....        $ 95,000.000            $ 66,500,000 Reactor Plant Equipment .. ....                      .. .              ..            ..        ..      .        140,000,000              98,000,000 Turbine Generator Unit . ....                      .      ...          .
                                                                                                  .........                110,000.000              77,000,000 Accessory Electrical Equipment . .                  .      .        ..                    .... ...                35,000,000              24,500.000 Miscellaneous Power Plant Equipment . .                      .        . ..
Station Equipment
                                                                                                      .. .                      3,000,000              2,100,000
                                                                                .. .... . ......                              4.000.000 Subtotal (1)(2) . . . . . .                                                                                                      2,800,000
                                                                        .. . ... .. ......                              $387,000,000 contingencies (2)        ..... .            ...
                                                                                                                                                  $270,900,000
                                                                                . . .... .......                            53,400.000              37,380,000 Nuclear Fuel (3)          .. ..          ..                      .
                                                                                  . . ...... ...                            34,331,000 Sales Tax (4)      ...    ... . .. ..              .
24,032,000 21,035,000              15,145,000 Engineering and Construction Management (2) . .                          .          .      ...        ...        45,000,000              31,500,000 Owner's Ditect Costs (3) .            ..          .... .
Subtotal
                                                                                .. .                        ..            40,000.000                                I 28.000.000
                                                                                                  . ... ..            S581,366,000            5406,957,000 Bond Discount and Other Financing Expenses (5)                              .
Capitalized Interest During Construction (6)                                                                                                9,990,000 Gross Requirement            ....              .
_ 152.255.000 Less: Estimated Income From Temporary Ins estments(7) .                                                                                5569,202,000 Net Requirement      .. ....
__40,202.000
{ n 000.000 (2)-Estimated by Ebasco.(1)-Includes escalation to projected date of                        ,
commercial operation September 1 1981.
(3)-Estimated by the Supply System.
(4)-Includes sales tax on nuclear fuel.
(5)-Includes estimated cost of issuing the Notes.
(6)-Includes interest on Notes at 41s9 to June
: 15. 1976 and interest on bond (7)-Includes inconie from temporary investment                                    of the proceeds from the Notess at 6% to September 1,1982.
anticipates that the Participants will, between January 1 Net Billing Agreements the following amounts:
e Reserve Account in the Bond Fund . . . . . . ....                                      ..      .  ..      $15,900,000 Working Capital (1) . . .... ........
                                                                                        .....                . . . .              10,100,000 Reserve and Contingency Fund . . . . . . . . . . . . . . . . . . . .
_ 2,100.000 Total.....................................                                                  ..      $28,100,000 (1) Includes $8,000,000 fuel costs in the event of a critical period of power supp!y.to                                                    nnual be provided from advanc l
40 I'
f 81
 
Project Output The Project is estimated by Ebasco to have a nominal net peaking capability of approximately 1,200,000 kilowatts. Operating at an 85% annual plant factor, it would be capable of producing about 9,000,000,000 kilowatt. hours annually with the Supply System's share being 6,300,000,000 kilowatt-bours. During a critical period of power supply in the Paci6c Northwest, caused by water sbortage, it is expected the Project would be operated to produce nearly its full energy capability. During other periods, however, there will be times when surplus water will be availabic to generate power at existing hydroelectric projects thereby permitting a reduction in the total amount of energy produced by the thermal-electric projects to be constructed under the Hydro Thermal Power Program, including the Project. Studies prepared by Bonneville indicate that the average output required from the Project will be in the order of 750,000 to 850,000 average kilo'vatts. Annual generation would, therefore, average between 6,500,000,000 and 7,500,000,000 kilowatt-hours.
Annual Costs Preliminary estimates of the annual costs of the Project, exclusive of interest and amortization of the capital investment, have been prepared based on 1973 cost levels escalated to 1982-1983 cost levels.
,    The estimated costs to the Supply System for its Ownership Share of the Project's output on the basis of estimated 1982-1983 cost levels, assuming total annual generation of 6,500,000,000 kilowatt-hours are as follows:
Supply System Total          Ownership Project            Share -
Annual Costs:
Operation and Maintenance ( l) . . . . . . . . . . . . . . . . . . . . . . . . . .          $ 5,464,000      $ 3,825,000
  ;        Administrative and General (l) . . .              . .... .......... .. .                        1,461,000        1,023,000 Insurance    ..................... ....................                                      2,000,000          1,400,000 Fuel...........................................                                              _13.000.000          9,100,000 Subtotal      .............. ...................                                $21,925,000      $15,348,000 Taxes    ........................ ................ ...                                                            910,000 Interest and Amortization (2) . . . . . . . . . . . . . . . . . . . . . . . . . .                                36,485,000 Payments to Reserve and Contingency Fund (10,% of Annual Debt Service ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      3,649,000 Subtotal . . . . . . . . . ..... ....................                                              $56,392,000 Less:
Surplus of Prior Year's Payment to Reserve and Contin-gency Fund (3) .. ................... .........                                                          2,809,000 Interest Earnings on Reserve Funds (4) . . . . . . . . ..                            .                      1.365.000 Net Annual Cost . .. .... ...... .................. .                                                          $52,218,000 Net Annual Cost per kilowatt-hour . . . . . . . .............                                                    11.5 mills (5)
(1) Labor and materials escalated at 4% per year to 1982.
(2) Based on level debt service and a 35. year amortization.
(3) Computed as follows:
Payment to Reserve for Contingency Fund (10% of annual debt service).                          $3,649,000 Less: Amount Required for Renewalt, Replacements and Additions                                      840.000 Net Surplus ..          ... . ...... ...... ...... . . .... .. .                          ..    $2,809,000 (4) Computed at 5.25% interest earnings.
(5) Net annual cost per kilowatt-hour to the Supply System is estimated to average 8.93 mills assuming total annual generation of 9,000,000,000 kilowatt-hours during critical periods.
41
 
s
* Sale of Power Each of the owners of the Project will controlits Ownership Share of Project capability and will pay the costs associated with its Ownership Share. Except as noted below the Supply System's Owner-ship Share of Project capability has been sold to 103 statutory preference customers of Bonneville (the
      " Participants"), which have executed Net Billing Agreements with the Supply System and Bonneville that provide for such sale. (Summary statistical information on the Participants and the Companies is given in Table 1 at the end of this report.)
The Supply System, Bonneville, and 15 industrial companies that purchase electrical power from Bonneville have entered into a Power Sales Agrer nent under which such companies will purchase a portion of the energy from the Supply System's Ownership Share during the period from July 1, 1981 to June 30,1984. The payments made to the Supply System for such sale of power to the industrial companies will serve to reduce the Participants' and Bonneville's payments under the Net Billing Agreements. It is anticipated that the energy sold to and the payments made by the industrial customers will be as shown in the following table:
Contract Year                                  Energy Sa%          Amount Paid (Iliousands of kWh) 19 81 -8 2 . . . . . . . . . . . . . . . . . 1,500,000            $11,250,000 1982-83................. 1,500,000                                $11,250,000 19 83-8 4 . . . . . . . . . . . . . . . . . 750,000          $ 5,625,000 Agreements The Net Billing Agreements provide that the Participants pay the Supply System the annual costs the Supply System incurs for its Ownership Share of the Project less amounts payable under the Power Sales Agreement. The Participants, in turn, assign their interest in the Project capability to Bonneville.
Bonneville pays the Participants in the form of credits on their power bills from Bonneville, amounts equal to the Participants' 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 Ownership Agreerrant, the Net Billing Agreements and the Project Agreement are included in the Official Statement to which this Summary Report is attached. Reference is made to such summaries and to the full text of the Agreements which are appended to the Official Statement as Exhibits.
Conclasions Based on our studies 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 under the Hydro Thermal Power Program and can be absorbed at an early date by the Participants, the Companies and the industrial companies that are parties to the Power Sales Agreement.
: 2. The Supply System's program for financing its share of the Initial Worm is sound and provides a sound basis for proceeding with the Project prior to permanent financing.
: 3. The Ownership Agreement, the Net Billing Agreements, the Power Sales Agreement and the Project Agreement provide a sound foundation for proceeding with the Project.
4 The estimated ccsts of the Project are rcasonable and comparable to costs expected from similar projects to be developed within the same time frame.
Respectfully submitted, R. W. BECK AND ASSOCIATES 42
 
r Table 1 l
      *        ,                  WASHINGTON Nuclear            PUU'LIC            POWER Project No. 3          SUFFLY SYSTEM Summary of Participants and Companies Financial and Statistical Data 1971 19;2 Participants        Companies Statistics                                                                                      _ Participants        Companies CUSTOMERS:
Residential . . . . . .                            800,548 To tal . . . . . . . . . . . .......
                                                  .....                                1,214,675            835,398 917,145            1,378,697                                1,262,037 ENERGY SALES: kWh (000) . . . . .                                                                961,318              1,430,924 27,639,931          37,654,504 ENERGY PURCHASES: kWh (000)                                                                  30,823,055            44,021,777 Boaneville (Hanford Project Exchange)        ........                    2,341,231          1,569,971          5,953,230 Bonneville . . . . . . . . . . ....            17,537,556          8,697,626                                2,600,720 Other . ................                        1,280,268 16,682,943              8,689,833 Total Energy Purchases                                        18,047,104          1,241,055            20,690,824 kWh (000) . . . . . . .              21,159,055          28,314,701 ENERGY GENERATED: kWh (000) 8,809,551                                                        23,877,228            31,981,382 14,767,352          9,350,417 Total Energy Require-                                                                                  16,178,204 ments kWh (000) . .                  29,968,606          43,082,053 PEAK DEMANDS: kW . . . . . . . . .                                                          33,257,645            48,159,586 Operations                                                  6,469,166          6,053,100          7,165,289              9,018,283 INCOME:
Total Operating Revenues. .
Other Income                              $ 234,424,723 $ 423.276,392 $ 259,154,118 $ 474,157,688 (Non-Operating) ......                        5,950,794        15,034,818 _        6,276,342            17,465.171 Total Income . . . . . . .
OPERATING EXPENSES:                              $ 240,375,517 $ 438,311,210 $ 265,430,460 $ 491,622,859 Purchased Power Bonneville (Hanford Project Exchange)        .... .....          5      7,473,570 $        3,219,330 $      17,558,138 $            5,535.128 Bonneville . . . . . . . . . . . . .          51,829,198          18,371,713 Other .................                          5,239,645                            50,733,178            21,871,730 54,035,003          4,933,972 Total Purchased Power                                                                                  56,468,284 Expense . . . . . . . .          $    64,542,413 $
Generating Expense . . . . . . . . . .                                    75,626,046 $      73,225,288 $
6,011,286        13,342,527                                83,875,142 Total Power Supply                                                                5,946,656            19,731,012 Expense      ........          $    70.553,699 $        88,968,573 $
Other Expense (Including Depre-                                                              79,171,944 $ 103,606,154 ciation and Taxes) . . . . . . . .                117,441,078        220,491.074 Total Operating                                                                131,572,445          272,351,367 Expenses        ........        $
Condensed Balance Sheet                                  187,994,777 $ 309,459,647 $ 210,744,389 5 375,957,521 Assets:
Net Utility Plant . . . . . .        ..
Other Property and                        $1,087,589,545 $2,168,575,513 $1,154,595,218 $2,388,011,624 Investments . . . . . . . . . . .          59,367,890          36,466,005 Current Assets . . . . . . . . . . .                                                  99,035,720            33,604,402 115,229,862          91,836,966 Deferred Debits . . . . . . . . .                                                    134,437,921          108,362,176 19.399,279        24,235.818          25,767,546            29.535,728 Total Assets . . . . . . . .                                              _
LIABILITIES:                                    $1,281,586,576 $2,321,114,302 $1,413,836,405 $2,559,513,930 Long-Term Debt . . . . . . . . .
Current Liabilities . . . . . . .          $ 637,625,280 49,527,798 $1,275,115,250 $ 723,469,313 $1,339,431,023 150,330,026          53,573,953 Deferred Credits                                  4,921,100                                                  163,531,190 8,139,201        10,566,136 R eserves . . . . . ..........
                                      ........                8,018,740                                                  66,798,522 46,097,723          7,928,872 Contributions in Aid of                                                                                        5,164,942 l
Construction . . . . . ...                  21,638,721          21,173,459 Retained Earnings . . . . . . .                559,854.937                            26,582,283            23,901,393 520,258,643 Total Liabilities . . . . .                                                    591,715,848 __ 960,686.860
                                                        $1,281,586,576 $2,321,114,302 $1,413,836,405 $2,559,513,930 43 y
 
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            ' '
* EXIIIIIT III WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 AGREEMENT executed by PACIFIC POWER & LIGIIT COMPANY PORTLAND GENERAL ELECTRIC COMPANT
              )    PUGET SOUND POWER & LIGIIT COMPANY TIIE WASIIINGTON WATER POWER COMPANT and WASIIINGTON PUBLIC POWER SUPPLY SYSTEM (Ownership Agreement)                    ,
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5
* INDEX TO SECTIONS SECTioN PAGE Recitals
                          ....................... ........................                                                47
: 1. Definitions . . . . . . . . . . . . . . . . . .. .........................                                47
: 2. Ownership and Waiver of Partition . . . . . . . . . . . . . . . . .........
49
: 3. Com mi t t ec . . . . . . . . . . . . . . . . . . . . . . . ......................                          50 4.
Proceedings of Special Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  52 5.' Construction Budget . .
                                                  ............................ ......                                    53
: 6. Construction Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              53
: 7. Construction, Licensing, Operation and Maintenance . . . . . . . . . . . .                                  54
: 8. Annual Cos ts-B udgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              54
: 9. Operating Trust Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                55
: 10. Fuel .... ..............................................                                                    55 1 1. Sched uli n g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
: 12. A ccou n tin g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
: 13. Insurance .........................
                                                                            ....................                        58
: 14. Liabilities; Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . .                    58
: 15. Uncontrollable Forces . . . . . . . . . . . . . . . . . . . . . . . . . .58. . . . . . . . . .
: 16. Damage to the Project . . . . . . . . . . . . . . . . . . . . . .
                                                                                      ..............                    59
: 17. De f a u l t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59                      ..............
: 18. Elective Capital Additions . . .
                                                          ..... ........................                                60
: 19. Investment . . . . . . . . . . .
                                                  ..................................                                    60
: 20. Assignments ... . ....
                                                    ....... ........... ...........                                    60
: 21. Traini ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      .      61
: 22. End of Project .
                                    .............................                          ...........                61
: 23. Nodces      . ....................
                                                                    .... ........ ...... ....                          62
: 24. Provisions Relating to Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
: 25. Additional Generating Units and Facilities . . . . . . . . . . . . . . . . . . . . . 62
: 26. Personal Covenants; Rule Against Restrictions on Alienation . ...
63
: 27. Construction of Agreement . . .
                                                            . ...... ...... ............                              63
: 28. Additional Documents
                                              ...................................                                    63 a
46
 
B 8 g            THIS IS AN AGREEMENT among WASHINGTON PUBLIC POWER SUPPLY SYSTEht, a municipal y      corporation of Washington, herein called Supply System; PACIFIC POWER & licht COhfPANY, a Maine corporation, herein called Pacific; PORTLAND GENERAL ELECTRIC COh!PANY, an Oregon corporation, herein called Portland; PUGET SOUND POWER & LIG11T COh!PANY, a Washington corporation, herein called Puget; and TiiE WASHINGTON WATER POWER Coh1PANY, a Washington corporation, herein called Water Power; each individually called Party, and collectively called the Parties.
RECIT ALS In order to achieve the economies of scale, the Parties enter into this agreement, pursuant to RCW 54.44 as amended, for the undivided ownership of a nuclear plant for the generation of electricity of approximately 1,100 megawatts net electric capacity and related facilities and property, all comprising the Project, hereinafter defined, and for the planning, financing, acquisition, construction, operation and maintenance thereof.
Supply System intends to acquire a site in the State of Washington for such Project, to be known as the Washington Public Power Supply System Nuclear Project No. 3 and Supply System, in connection therewith, intends to enter into certain contracts relating to said Project, and to file applications for the required licenses and permits to construct, operate and maintain the Project.
Supply System is organized under the laws of the State of Washington (RCW 43.52) and author-ized by law to construct, acquire, operate and maintain works, plants and facilities for the generation and/or transmission of electric power and energy. Pacific, Portland, Puget, and Water Power are investor owned electric utility corporations subject to regulation by either the State of Washington or the State of Oregon, or by both.
  ^
All as hereinafter provided: Each Party shall own a percentage of the Project, hereinafter defined,
          )#      and shall fitrnish money or the value of property equal to such percentage for the acquisition and con-struction of the Project and shall own and control a like percentage of the electrical output thereof.
Each Party shall defray its own interest and other payments required to be made or deposited in con-nection with any financing undertaken by it to pay its percentage of the money furnished or value of property supplied by it for the planning, acquisition, construction and operation of the Project, or any additions or betterments thereto, a uniform method being provided for determining and allocating operation and maintenance expense of the Project.
NOW, THEREFORE, the Parties mutually agree as follows:
: 1. Definitions. The singular of any term in this Agreement shall encompass the plural, and the plural the singular, unless the context otherwise indicates.
(a) "AEC" means the United States Atomic Energy Commission and such successor agencies as shall have responsibility for licensing or regulating nuclear power generating plants.
(b) " Annual Costs" means all Project costs except Fuel costs included in any budget or revised
  'I              budget of Annual Costs which has been approved, or Projects costs incurred under Section 8(b),
L                allocable to (1) Operation and Maintenance Expense Accounts as such accounts are described in the Uniform System of Accounts, (2) elective capital additions made pursuant to Section 18, and (3) ll                  beginning on the Date of Commercial Operation, repairs, renewals and replacements necessary to assure design capability, and modifications, betterments and additions required by governmental agencies. Credits relating to such costs shall be applied to Annual Costs when received.
(c) "Bonneville" means the Bonneville Power Administration. a bureau of the Department of the Interior of the United States of America acting by and through the Bonneville Power Administrator, or such successor entity as shall be assigned the responsibilities of the Bonneville Power Administrator under Contract No. 14-03-39100.
47
                                                                                                      -    t  w ,_,y
 
l i
. e (d) " Committee" means the Committee established pursuant to Section 3 hereof.
          -(c) " Contract Year" means the period commencing on the Date of Commercial Operation, and ending at 12 p.m. on the following June 30, and thereafter means the 12-month period commencing each
_ year at 12 p.m. on June 30, except that the last Contract Year sha!! end on the date of termination of this agreement.
          . (f) " Costs of Construction" means all costs allocable to the planning, acquisition and construction of the Project and of making it ready for operation (excluding the cost of Fuel and interest during construction), after giving appropriate consideration to credits relating to costs of construction, sales of salvage materials and interest received on monics deposited in the Construction Trust Account referred to in Section 6 hereof. Without limiting the generality of the foregoing such costs shall include:
(1) Preliminary investigation and development costs, engineering, contractors' fees, labor, materials, equipment and supplies, operator and other personnel trainina, testing, legal costs and all other costs properly allocable to construction.
(2) All costs of insurance obtained pursuant to Section 13(a) hereof and applicable to the period of construction.
(3) All costs relating to injury and damage c: aims arising out of the construction of the Project less proceeds of insurance maintained in accordance with Section 13(a) hereof.
(4) All Federal, state and local taxes and payments in lieu of taxes legally required to be paid in connection with the construction of the Project, except any tax or payment in lieu of taxes assessed or charged directly against any individual Party unless such tax or payment was assessed or charged to the individual Party on behalf of the Project.
(5) The cost of all services performed by or at the request of Supply System which are directly applicable to Project construction.
(6) An appropriate allocation of administra.ive and general costs of Supply System applicable to Project construction to the extent such costs are not chargeable pursuant to the foregoing sub-section (5).
(g) "Date of Commercial Operation" means the date fixed by Supply System as the point in time when the Project is ready to be operated and its output scheduled on a commercial basis.
(h) " Fuel" means nuclear fuel and rights relating thereto.
(i) " Matter" means any subject, or any aspect thereof, arising out of or relating to the interpreta-tion or performance of this Agreement, including any proposal that may be made by any Committee member.
(j) " Minimum Capability" mecas the capability of the Project determined by Supply System but not less than the minimum generation permitted by the manufacturer's recommendations or by the terms of the AEC operating license, whichever is higher.
(k) " Ownership Share" of a Party means the percentage specified in Section 2 or as may be adjusted pursuant to Sections 16(b) and 22(b).
(1) " Plant Real Property" means the real property to be acquired by the Parties as the site for the Project. A description of the Plant Real Property will be attached as Exhibit A when determined pursuant to Section 3(j)(1).
(m) " Project" means the nuclear generating plant and related property as described in attached Exhibit B. Exhibit B may be revised from tim: to time by mutual agreement of the Parties.
(n) " Project Capability" at any time means the actual net electrical generating capability of the Project at such time.
48 n
 
1 i      i (o) " Prudent Utility Practice" at a particular time means any of the practices, methods and acts, which, in the exercise of reasonable judgment in the light of the facts (including but not limited to the
    )          practices, methods and acts engaged in or approved3b a significant portion of the electrical utility indus-try prior thereto) known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice shall apply not only to functional parts of the Project, but also to appropriate structures, landscaping, painting, signs, lighting, other facilities and public relations programs reasonably designed to promote public enjoyment, understanding, and acceptance of the Project. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts. In evaluating whether any Matter con-forms to Prudent Utility Practice, Supply System, the Committee and an special board established pursuant to Section 4 hereof shall take into account:
(i) The fact that Supply System is a municipal corporation and operating agency under the laws of the State of Washington, with prescribed statutory duties and responsibilities; and (ii) the objective to integrate the Project Capability with the generating resources of the Federal Columbia River Power System and the generating resources of other systems operated by the Parties to achieve optimum utilization of the resources of such systems.
(p) " Uniform System of Accounts" means the Federal Power Commiss;on Uniform System of Accounts prescribed for public utilities and licensees in effect on January 1,1970 as amended to date of this Agreement.
: 2. Ownership and Waiver of Partition (a) The Project shall be owned by the Parties as tenants in common, with each Party's respective undivided interest being in the following percentage (Owner-ship Share), except as modified pursuant to Sections 16(b) and 22:
Percentage
* Party                                        Ownership Share SUPPLY SYSTEM      ..      ............              70 %
PACIFIC  ........................                    10 %
PORTLAND    .... ...... ........ .                    10 %
PuoEr ..... ...................                        5%
WAT ER POWER . . . . . . . . . . . . . . . . . . .      5%
(b) Each Party promptly and with all due diligence shall take all necessary actions and seek all regulatory approvals, licenses and permits necessary to carry out its obligations under this agreement.
(c) So long as the Project or any part thereof as originally constructed, reconstructed or added to is used or useful for the generation of electric power and energy, or to the end of the period permitted by applicable law, whichever first occurs, the Parties waive the right to partition whether by partition in kind or sale and division of the proceeds thereof and agree that during said time they will not resort to any action at law or in equity to partition and further that for said time they waive the benefit of all laws that may now or hereafter authorize such partition of the properties comprising the Project.
(d) The duties, obligations and liabilities of the Parties are intended to be several and not joint or collective, and none of the Parties shall be jointly or severally liable for the acts, omissions, or obligations of any of the other Parties. No provision of this agreement shall be construed to create an association, joint venture, partnership, or impose a partnership duty, obligation or liability, on or with regard to any one or more of the Parties. No Party shall have a right or power to bind any other Party without its or their express written consent, except as expressly provided in this agreement.
3 I                                                              49
                                                                                                                                  -r.,,
g
 
I 5 (c) Each Party and its designees shall have the right to go upon and into the Project at any time subject to the rules and regulations of public authorities having jurisdiction thereof and to the necessity of efficient and safe construction and operation of the Project, but Supply System shall have posses-fon and control of the Project for all the Parties.
(f) In order to provide uni 5ed management of the Project, the other Parties authorize and designate Supply System, and Supply System agrees to act, as their agent, to construct, operate and maintain the Project under the terms of this agreement. The Parties agree that such agency relationship shall not be changed without unanimous written consent of ah Parties.
(g) In the construction and operation of the Project, each Party shall act without compensation other than reimbursement of costs and expenses as provided herein.
: 3. Committee (a) The Parties hereby establish a Committee to facilitate effective cooperation, interchange of information and efficient management of the Project, on a prompt and orderly basis. The Committee shall be composed of seven members, three to be appointed by Supply System (one of whom will be designated by Bonneville pursuant to Contract No. 14-03-39100), and one member to be appointed by each other Party.
(b) Upon execution of this agreement each of the Parties shall notify all other Parties of the Com-mittee member it appoints, and, thereafter, of any change in its appointment. Any Party by written notice to the other Parties may appoint an alternate or alternates to serve on the Committee in the absence of the regular Committee member which it has appointed, or to act on specified occasions or with respect to specified matters.
(c) The Committee shall meet reguhrly, but not less often than once in each calendar quarter, as may be agreed upon, and at such other times as requested by any Committee member upcn three days' written notice. Supply System shall prepare written minutes of all meetings and distribute them to each Committee member within a reasonable time after each meeting.
(d) Each Committee member shall have the right to vote that part of the Ownership Share of the Party appointing him as designated in the notice of appointment. The total voting rights of the members of the Committee appointed by each Party shall be equal to such Party's Ownership Share.
(e) Any action which may be taken at a meeting of the Committee may be taken without a meeting by individual action taken in writing by all members of the Committee.
(f) Supply System shall keep all members of the Committee informed af all significant hiatters with respect to planning, construction, operation or maintenance of the Project (including, without limita-tion, plans, specifications, engineering studies, environmental reports, budgets, Fuel Plans, estimates and schedules), and when practicable, in time for members to comment therton before decisions are made, and shall confer with the Committee, or separately with members thereof, during the development of              !
any of Supply System's proposals regarding such hiatters when practicable to do so. Upon request of any Committee member, Supply System shall furnish or make available to til niembers of the Committee, with reasonable promptness and at reasonable times, any and all other information relating to the planning,        .
construction, operation or maintenance of the Project.
(g) Supply System shall submit each of the hiatters listed below to the Committee for approval, which approval must be by a vote of Committee members having combined Ownership Share voting rights of more than eighty percent.
Determination of hiinimum Capability (Section 1(j))
Any proposal made by Committee members, appointed by Parties other than Supply System, having Ownership Share voting rights of 20 percent or more, or by the Committee member designated by Bonneville pursuant to Section 3(a) (Section 4(e))
f,
                                                            $0
                                                                                                                    .q
 
p
    .. i Construction budgets and changes therein (Section 5)                i 6(b))
Any increase in the working fund inih the Construction Trust Account
              ~ Award of any contract or approval of any change order, in e t er as (Section 7(e))                                                        8(b))
Budgets of Annual Costs (Section                    8(a)) Sand  i 9(b))  revisions          thereof (Section Any increase in the working fund in the Operating                          S i Trust  10        Account ( ect Fuel Plan, changes therein and deternunations relating thereto as Scheduled outages as provided in Section 11(c)
Insurance coverage, including limits and choicef $1,000,000,                      of insurers (Section 1 Estimate of cost of repair or damage6(b))                to the Project (Section 16(a)) if in and estimate of the value of the Project without repair                i          (Section t blished    by the1 Sales of salvage materials in excess of such minimum amount as s es Committee.                                                  di  the planning, construction, (h) All proposals of Supply System relating to any Matters regar ngitt e und pport a comprehensive review, operation or maintenance of the Project submitted                          to the Comm e ment shallinclude itemized cost estimates and other detail sufficient to sul ses, r including, but not limited to, a copy of all supporting reports, ana y b      i not approved by the documents pertaining thereto.
(i) If any Matter submitted to the Committee under subsection (g) a ove vote within 30 days after the original submittal toCommittee the        who declines to vote approval mittee may decide upon unanimously, then each                l andmember shall also stateof the    therein what 3      shall specify in a written statement his reasons for declining approva ,b i t d to the h      alternative is acceptable to him. Such statement      0d            shall dbe      su m t eriod, or (ii) such long such written statement within 10 days after expiration of the later of (i) such 3 - ay within the time provided in the preceding sentence shall be submitted by Supply System.                                                                h from Com-Immediately after receipt of the writteni htstatement pursuant                        t If Supply to the prece mittee members having 20 percent or more Ownership tShare                                        voting r g s, to section 8(b) disputed Matter to a special board for a decision                                            pursuant to secti f Annual Costs, members System elects not to do so and does not submit                                            an alternative pro Supply System continues to operate                    ih the Project without an approved of the Committee having 20 percent or more of said voting r g ts ma board for decision pursuant to section 4.                                Committee and shall pro-(j) Supply System shall submit the following          i                  additional Matters to the ceed on such Matters only upon unanimous approval of the Comm ttee:
(i) Selection of the site of the Project (ii) Selection of the type of nuclear steam supply system (iii) Selection of the method of heat disposition                          t (iv) Award of contracts for nuclear steam supply system and turbine (v) Selection of an architect engineer (vi) Extension of insurance to any additional unit or generating proje (vii) Elective capital additions to the Project
* 51 5
e                  ,
 
5 '
Supply System of any of the biatters (i) through                                        m ee (v) li terminate the Project in accordance with Section 22(                              .
the required vote of more than eighty percent                                          under Se embers for e
decision by serving notice on all members of the Committee. Such                      e etailnotice sh the Matter to be submitted to the board. Within 10 days after    ,        y System shall such n giving System's position on the Matter to be submitted                                        rrence yto the b Committee member designated by Bonneville shall ha                                              e the serving of said notice of submission the Committee members                    who shall have d o vote approval Committee member exercising his voting rights for t                            ,            c to agree upon the selection of the second board member by vote                  of the majority of th wnership Share voting rights held by all of them, then any such Committee member                      o      e after thre other Committee members may apply to the Chief Judge of the United                                        Sta judicial district of Washington in which the project is located, for                    appointment uch board members or by said judge, such Committee memb                                                r written notice which shall name the board member so appointed                          ons on and sta the matter submitted to the board. Within ten days after their      appointment
                                                                      , the two board members A copy of this instrument together with ae served                                notice    em.
upon of the all Parties to this agccement and upon Bonneville at least seven days p (b) If the two board members fail to agree upon the appointmem  r              of the thi d within the time the other Committee members, may apply to the f-S                                                                                    ach of Chief J tates District Court trx third board member. Such judge nshall                    v be requested              of        to ap having demonstrated expertise in the field of the Matter submitted to the boardual of n (c) of the board is rendered, his successor shalle other                                    be  on appoin board members, or by said Judge, as the case may be, who made the origina        ,
(d)                                                                      .
commence a hearing within ten days after the appoin Thedecision.
correct    board may receive any evidence that ina rtheir  ,
and opin accordance with Prudent Utility Practice.The board shall decide whether t shall proceed as proposed by it; if in the negative, Supply of the majority of the board shall be final and conclusive.                .
The decision System sh (e)
Ownership Share voting rights of 20 percent orer- more (P submit any proposal to the Committee which confo                                              -
ments imposed on Supply System under subparagraph 3(h) by serving a copy o 52
* I h
4
 
l en l3- .
Is
      .: p '        f&
                                  . Committee members. Within 15 days, after receipt of such proposal, Supply System may submit one
:                    . or more written alternative proposals.1 Such an alternative proposal may.be that the Project continue -
Lt o be constructed, operated and maintained,~ as the case may be, as previously planned; failure of
  ,4
                                ~ Supply System to submit a written proposal to the Committee or to the board shall be treated for
        ~.
  '"                                all purposes of this.section 4(c) as if Supply System had submitted a written alternative proposal to such effect. The Committee shall meet with reasonabic promptness .and vote on such proposals.:
If Committee members by a vote of more than 80 percent approve any of Supply System's proposals,
                                . the proposal of the other Committee members shall be dismissed and Supply System shall implement its approved proposal.- If the Committee does not approve any of Supply System's proposals, as they may be amended, the Committee shall vote on the proposal or proposals of the Committee members, A, -                          ' and if the Committee approves any proposal.by a vote of more than 80 percent, Supply System shall proceed with the approved proposals. If the Committee does not approve any of the proposals submitted, b(                                it may require submission of further proposals, or dismiss all proposals by a vote of more than 80 percent.
If the Committee does not require further proposals or dismisses all proposals by'a vote of more e                              than 80 percent, any Committee member appointed by Supply System or the Committee members submitting any such proposal having 20 percent or more of the Committee votes may submit its proposal to the board for review within 15 days after the Committee vote. Such board shall then consider D; '                              Supply System's proposal and determine if its proposal is in accordance with Prudent Utility Practice.
If the board so determines Supply System shall proceed accordingly'and the proposal of the other Committee memba shall be dismissed. -If the board determines Supply System's proposal is not in accordance with Prudent Utility Practice it shall then consider the proposal of such other Committee members and determine if such proposal is in accordance with Prudent Utility Practice. If the board determines such proposal is in accordance with Prudent Utility Practice, Supply System shall proceed
* with the proposal. If the board determines that none of the proposals conform with Prudent Utility Practice, it shall dismiss all proposals and dissolve.
r~
If, pursuant to section 3(i) or this section 4(e), Committee members initiate board review of a
                -8 Matter, they shall serve on all other Committee members written notice naming a member of the board and stating their position on the Matter to be submitted. Thereafter the procedure shall be followed insofar as applicable, as set forth in subsections (a) through (d) and subsection (f) of this section 4. The Committee may adopt rules designed to implement the intent of this section.
(f) The board members shall determine the costs of' the proceeding hereunder, including g'                            reasonable compensation for the board members and the reasonable costs incurred by each Party in d
connection with the proceeding, all of which costs shall be Costs of Construction or Annual Costs, as          '
(                              appropriate.
  ^,                                    5. Construction Budget. An initial budget setting forth the preliminary estimate of amounts expected to be expended for Costs of Construction in each quarter hercafter to the completion of construction.has been submitted by Supply System to each of the other Parties together with an e                              estimated cash flow schedule for each of said quarters; said initial budpt and schedule are hereby T                              "
approved. By October 1 of each year entil completion of construction, Supply System shall submit to the Committee for approval an updated budget and cash flow schedule, supported by detail adequate for the purpose of comprehensive review, describing the items of Costs of Construction and of the amounts expected to be expended therefor in each month during the next twenty-four months and in each quarter thereafter until completion of construction. Construction budget and cash flow schedules shall be changed by Supply System from time to time as necessary to reflect substantial changes in construction schedules, plans, specifications or costs, and when so changed shall be submitted to the Committee for approval.
: 6. Construction Payments. (a) Supply System shall establish a separate trust account (Con-
                                                    ~
struction 'Irust Account) in a bank located in the State of Washington and having qualifications 4
l                                                                  53 6
 
t  I meeting all requirements imposed upon depositories for any of the Parties. Moneys for Costs of Construction of the Project shall be deposited therein and, except as provided in section 19, Supply System shall withdraw and apply funds therefrom only as necessary to pay Costs of Construction.
(b) Upon execution of this agreement each Party shall pay into the Construction Trust Account its Ownership Share of a working fund of $100,000; if Supply System proposes any larger amount it shall submit its proposal to the Committee for approval. Thereafter each Party shall continue to maintain its Ownership Share of such Fund in the amount stated, or in such larger amount as may be approved by the Committee.
(c) Except as otherwise agreed to by the Parties, Supply System will at least seven days prior to the date set for a meeting of its Board of Directors or Executive Committee give each of the other Parties a schedule of the Costs of Construction and reimbursement of the working fund expected to be paid on the Monday following such meeting if held on Friday, or on the next business day if such meeting is held on any other day, and each Party shall deposit its Ownership Share of such amounts in the Construction Trust Account on the day of such payment, whether or not such amounts are specifiedin the budget.
(d) Upon completion of the Project, acceptance thereof by Supply System and settlement of all the obligations relating to construction, Supply System shall close the Construction Trust Account and distribute to each Party its Ownership Share of any balance remaining.
: 7. Construction, Licensing, Operation and Maintenance. (a) Supply System shall take whatever action is necessary or appropriate to seek and obtain all licenses, permits and other rights and regulatory approvals necessary for the constru: tion, operation and maintenance of the Project, on behalf of itself and the other Parties.
(b) Supply System shall prosecute construction of the Project in accordance with Prudent Utility Practice, AEC licensing requirements, any applicable Federal or State laws and regulations thereunder, and plans and specifications for the Project prepared or recommended by the Project architect-engineer and so as to schedule the Date of Commercial Operation as near as may be on September 1,1981.
(c) Supply System shall operate and maintain the Project in accordance with Prudent Utility Practice, giving due consideration to the recommendations of the Committee and the manufacturer's warranty requirements.
(d) Supply System shall operate and maintain the Project in such a manner as to meet the requirements of the AEC and other government agencies having jurisdiction in any given Matter, to safeguard the health and safety of persons and safety of property, and, as necessary in the normal course of business, to assure the continued operation and maintenance of the Project.
(e) Supply System shall award contracts for the construction, operation and maintenance of the Project in a manner designed to result in the least over all cost consistent with standards of high quality,                                      j Contracts may be lump sum or unit price, and may also contain incentive and liquidated damages clauses.
Supply System shall advertise for bids and award contracts or reject all bids after appropriate evaluation and review in accordance with applicable laws of the State of Washington; provfded, however, that prior to making co.nmitments thereon Supply System shall submit to the Committee for approval each proposed contract award or change order, in either case, for any amount in excess of $500,000.
: 8. Annual Costs-Budgetr. (a) At least four months prior to the expected Date of Commercial Operation, Supply System shall submit to the Committee for approval a budget of the Annual Costs, except Fuel costs, but including administrative and general expenses relating to operation and Fuel, for each month from the expected Date of Commercial Operation to the end of the next succeeding Contract Year. Thereafter, by March I of each year, Supply System shall submit to the Committee for approval a similar budget for the next two succeeding Contract Years, which budget shall take into account the 54 m
L. -
 
cumulative difference between payments into and expenditures from the Operating Trust Account fg t t    established pursuant to Section 9 hereof up to the preceding March I and provide for restoration, as necessary, of the working fund. Each budget of Annual Costs shall be supported by detail adequate for the purpose of comprehensive review and shall show, among other things, staffing allocations and Sup System services.
(b) The effective budge: of Annual Costs shall be changed as necessary to reflect changed cir-cumstances, and when such changed circumstances become known, and prior to expenditure of any funds not contemplated in the effective budget of Annual Costs (except as otherwise provided hereafter in this subsection), Supply System shall submit promptly a revised budget to the Committee for approval.
Unbudgeted expenditu-es made by Supply System in an emergency or to protect the safety of persons or property shall be Annual Costs as incurred. Other expenditures necessary in the normal course business for the continued safe operation and maintenance of the Project, which are made by Supply System prior to the Committee's approval of a budget of Annual Costs, or a revision thereof shall be Annual Costs as incurred.
: 9. Operating Trust Account. (a) Prior to the date of the first payment required on account of Fuel, Supply System shall establish an Operating Trust Account in a bank located in the State of Washington and having qualifications meeting all requirements imposed upon a depository for any of the Parties. Each Party shall deposit therein its payments on account of Fuel, determined pursuant to Section 10 hereof, not less than 24 hours prior to the time payments are to be made by Supply System for Fuel.
(b) Prior to the Date of Commercial Operation each Party shall deposit in such Account its Ownership Share of a working fund in the amount of $100,000.00. If Supply System proposes any larger amount it shall submit its proposal to the Committee for approval. All moneys received by Supply System under terms of this Agreement, except Costs of Construction and receipts related to Construction shall be deposited in such Account.
(
(c) No later than Thursday of each week, each Party shall deposit in the Operating Trust Account such Party's Ownership Share of the portion of Annual Costs to be paid by Supply System in the suc-cceding week; provided, however, that if such portion of the Annual Costs increases during a week, each Party at the request of Supply System shall immediately deposit in the Operating Trust Account such Party's Ownership Share of any such increase for that week.
: 10. Fuel. (a) Supply System shall arrange for Fuel in amounts so that each Party may utilize its Ownership Share of the Project in a manner which such Party estimates will be best suited to its individual system needs.
(b) Not later than 90 days in advance of the first commitment for Fuel and annually thereafter by each July I until the Date of Commercial Operation, Supply System shall prepare and submit to the Committee for approval a ten-year Fuel management plan (Fuel Plan). Each year thereafter, the Fuel Plan shall be submitted with each budget of Annual Costs beginning with the first such budget.
Supply System shall consult with the Committee, and shall prepare the Fuel Plan consistent with sect %n 10(a). The first Fuel Plan shall describe the proposed Fuel contract arrangements; each suc-ceeding Fuel Plan shall describe in detail cach contemplated action and payment and the dates thereof, as well as core usage and design burnup, and estimated fueling dates. It shall include a cash flow analysis of forecasted expenditures and credits for each Party for each major component of the Fuel cycle by years, for the entire period, and cash flow by months, for the first five years of the period.
Each Party shall furnish to Supply System, as requested, forecasts of its generation requirements from the Project. Supply System shall use such forecasts in preparing each Fuct Plan. Supply System shall amend the Fuel Plan as reasonably required to reflect changes in conditions unforeseen at the time the
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VICTOR 4              W.~                                -
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                                                      "                                                        *,                                                    t.,                          .
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                                                                    ..                              I                                            l                                                                    ,
                                  . n. _.. .:-..              ;;
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                                                                            .~.
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                                      ~ n.:.:. .:. n:                          .                                                                                                                                  ,
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                    -                                        I                                                                i m
 
1 I
l Fuel Plan was prepared, and shall submit such amended Fuel Plan to the Committee for approval.
Supply System shall secure Fuel and refuel the Project in a manner which implements the Fuel Plan to            )
the extent reasonably practicable.
(c) At the time of each fueling, Supply System shall submit to the Committee for approval its determination of (i) the next fueling date (Forecast Refueling Date), (ii) the kilowatt-hours of net energy available to each Party to the Forecast Refueling Date (Energy Entitlement), and (iii) the cost per kilowatt-hour of its Energy Entitlement. Each Party's Energy Entitlement shall equal as nearly as practicable such Party's forecasted generation requirements. Supply System shall periodically review such determinations with the Committee, revise such determinations as necessary and submit them to the Committee for approval.
(d) Each Party shall order at least its Ownership Share of the Fuel necessary to insure operation at Minimum Capability to the Forecast Refueling Date; provided, however, that a Party may order less than such Ownership Share, to the extent that such Party has arranged, pursuant to section 11(d),
for the delivery of alternative capacity and energy to the Parties requesting operation.
(c) Each Party shall pay or cause to be paid into the Operating Trust Account its share of the amounts for Fuel as and when determined by Supply System and appropriate to the Fuel Plan.
Each Party shall have the right to make whatever arrangemente it may desire, whether by lease, security transaction, or otherwise, for the discharge of its Fuel payment obligation so long as such arrange-ments do not impair the rights of any other Party. Supply System shall disburse each payment relating to Fuel, when due, from the Operating Trust Account.
(f) Each Party shall receive appropriate net Fuel recovery credits, as determined by Supply System.
(g) Any Party may require that the Forecast Refueling Date be advanced or delayed and/or may use the Energy Entitlement of the other Parties if such Party (1) makes arrangement for delivery of alternative capacity and energy at the Project point of delivery equivalent to the amount of capacity and      (
energy which would have been available to such other Parties from their Ownership Shares of Project Capability if the Forecast Refueling Date had not been advanced or delayed or such Energy Entitlement had not been used by the icquiring Party, or (2) makes other arrangements acceptable to the aficcted Parties, including, but not limited to, payments for Fuel used or making a portion of such Party's Ownership Share of Project Capability available for use by such other Parties; provided, however, that neither the advancing or delaying of the Forecast Refueling Date nor the use of another Party's Energy Entitlement shall (i) adversely affect the availability of capacity and energy to which any other Party otherwise would have been entitled from the Project, or (ii) adversely aficct any other Party's costs for such capacity and energy.
(h) After reprocessing of a Fuel batch removed from the core, Supply System shall make a detailed final accounting of all costs, payments and energy allocable to each Party. Such final accounting shall stipulate any credits or deficits due any Party, including any provisional settlements made. Supply System shall submit such data to the Committee for approval, after which the Parties will settle accounts within 30 days or as otherwise agreed.
I1. Scheduling. (a) Within the constraints of section 10 and this section 11 each Party shall be entitled to receive, as scheduled by it, all or any part of its Ownership Share of the Project Capability.
Supply System's dispatcher promptly shall notify each Party of any significant change in Project Capability.
(b) By 4:00 p.m. on each regular working day, each Party shall submit its hourly schedule for the following day to Supply System's dispatcher except that each Party shall submit its hourly schedule for a holiday, Saturday, Sunday, and for the first following regular working day by 4:00 p.m. on the regular working day immediately preceding. Each party submitting such hourly schedules may make changes therein at any time; provided, however, that if the total requested changes in the level of operation of the
                                                                                                                  )
56
                                                                                                                  ,,g
 
generating plant requires a rate of change in excess of that prescribed either by the manufacturer's war-ranty or in the AEC operating license, each Party whose scheduled rate of change is in excess of its Ownership Share of the prescribed limit shall be limited proportionately so that the total rate of change does not exceed the prescribed rate of change.
(c) Supply System shall schedule generating plant outages other than fueling outages and submit same to the Committee for approval as to the time and duration thereof as far in advance as practicable.
Notwithstanding the foregoing, Supply System may shut the generating plant down to meet requirements of AEC or other governmental agency having jurisdiction or to avoid hazard to the Project or to any person or property.
(d) Except as otherwise provided herein, each Party shall schedule energy from the Project in such a manner that its Energy Entitlement is adequate to maintain such Party's Ownership Share of Minimum Capability until the next Forecast Refueling Date; provided, however, that a party may require that the Project not be operated during any period by arranging for delivery of alternative capacity and energy at the Project point of delivery to the Parties requesting operation equivalent to the amount of capacity and energy which would have been available to such Parties from their Ownership Shares of Project Capability during such period, and such requesting Parties shall pay the supplying Party a percentage of the amount of incremental savings which the requesting Parties realize from the displacement of energy
'      from the Project, which percentage and amount of savings shall be as agreed by the Parties involved; provided further, that requiring non-operation of the Project will not (i) adversely affect the availability of capacity and energy to which any other Party otherwise would have been entitled from the Project, or (ii) adversely affect any other Party's costs for such capacity and energy.
If fulfilling the schedules submitted by the Parties would require operation of the Project at an operating level below the Minimum Capability, Supply System's dispatcher shall immediately notify all Parties. Unless otherwise agreed by the Parties as provided in the preceding paragraph, the Parties
  . whose schedules are greater than their Ownership Share of such Minimum Capability shall take such schedules, and the other Parties shall schedule and take (proportional to their Ownership Share) the remainder of such Minimum Capability.
(e) When testing of plant facilities requires generation, each Party shall make provision for accept-ance of its Ownership Share of such generation. Supply System will notify Parties of test schedules as far in advance as practicable.
(f) During any hour in which the Project does not generate its station use and losses, Supply System's dispatcher shall notify the Parties and each Party shall arrange for delivery of its Ownership Share of such energy to the Project.
: 12. Accounting. Supply System shall keep up-to-date books and records showing all financial transactions and other arrangements in carrying out the terms of this agreement. Such books and records shall contain information supporting the allocation of Supply System's indirect costs associated with the Project. Such books and records shall be retained by Supply System for ten years and shall be made available for inspection and audit by the Parties at any reasonable time.
Any contract with any consultant or contractor of Supply System providing for reimbursement of costs or expenses of any kind shall require the keeping and maintenance of books, records, documents, and other evidence pertaining to the costs and expenses incurred or claimed under such contract to the extent and in such detail as will properly reflect all costs related to this agreement and shall require such books, records, documents and evidence to be made available to the Parties at all reasonable times for review and audit for a period of three years after final settlement of the applicable contracts. Each of the Parties shall have the right to examine and copy all plans, specifications, bids and contracts relating to the Project.
57
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M
 
m
    #  :r
              . . (b) All accounts shall be kept so as to permit conversion to the system of accounts prescribed for
: electric utilities by the Federal Power Commission, and the allocation of costs by Supply System between          )
Costs of Construction and Annual Costs pursuant to this agreement shall be binding on the Parties for purposes of this agreement, but the manner in ~which accounts are kept pursuant to this agreement is not intended to be determinative of the manner in which they are treated in the books of account of the Parties.
l(c) Supply' System shall by the 15th of each rnonth supply to each Party a complete, itemized acco'unt'of all deposits in and withdrawals from the trust accounts during the previous month, together with'an itemization of the basis for reimbursement made to Supply System from such account during such month. Supply System shall cause all books and records to be audited by independent Certi6ed Public
          - Aceountants of national reputation acceptable to all the Parties at approximately annual intervals and at such time as such accounts are closed. Copies of such audits shall be supplied to each Party.
: 13. Inmrance. (a) Supply System shall procure at the earliest practicable time and thereafter maintain in force for the benefit of the Parties as named insured and with losses payable to the Parties as
          . their respective interests shall appear, such insurance coverage for the construction, operation, main-tenance and repair of the Project as the Committee may determine pursuant to Section 3(g), but not less than shall be required under the contract to be executed with the Project Architect Engineer, and not
  .          less than will satisfy the requirements of the Atomic Energy Act of 1954 (as amer.ded), (including all AEC regulations in effect from time to time thereunder), and conform to Prudent Utility Practice.
                  -(b) Any Party may request additional insurance to the extent available, and Supply System shall purchase such requested insurance at the expense of such Party. The Proceeds from such requested insurance shall be disbursed as directed by such Party.
: 14. Liabilities; IFalver of Subrogation. (a) Each of the Parties releases each of the other Parties, its agents and employees from any claim for loss or damage, including consequential loss or damage,              g.
arising out of 'he construction, operation, maintenance, reconstruction, and repair of the Project due to negligence, ir o ding Fross negligence, but not any claim for loss or damage resulting from breach of any contract relating to the Project, including this Agreement, or for willful or wanton misconduct.
(b) Any loss, cost, liability, damage and expense to the Parties or any Party, other than damages to any Party resulting from loss of use and occupancy of the Project or any part thereof, resulting from the construction, operation, maintenance, reconstruction or repair of the Project and based upon injury to or death of persons or damage to or loss of Project property and property of other parties, to the extent not covered by collectible insurance, shall be charged to Cost of Construction or Annual Costs, whichever may be appropriate.
(c) Each Party shall cause its insurers to waive any rights of subrogation against each of the other Parties, its agents and employees, for losses, costs, damages or expenses arising out of the construction, operation, maintenance, reconstruction or repair of the Project.
: 15. Uncontrollable Forces. No Party shall be considered to be in default in the performance of any of the obligations hereunder, other than obligations of any Party to pay it< Ownership Share of costs and expenses, if failure of performance shall be due to uncontrollable forces. The term " uncontrollable forces" shall mean any cause beyond the control of the Party affected and which, by the exercise of reasonable di!!gence, the Party is unable to overcome, and shall include but not be limited to an act of God, fire, flood, explosion, strike, sabotage, an act of the public enemy, civil or trilitary authority, includ-ing court orders, injunctions, and orders of government agencies with proper jurisdiction prohibiting acts necessary to performance hereunder or permitting any such act only subject to unreasonable conditions, insurrection or riot, an act of the elements, failure of equipment, or inability to obtain or ship materials or equipment because of the effect of similar causes on suppliers or carriers. Nothing contained herein i S,R                                                  Y?b
                                                                        's s
b            (                                              ,
e      +                                                            '
 
7 A
s        ]1 e
shall be construed so as to require a Party to settle any strike or labst dispute in which it may be inv Any Party rendered unable to fulfill any obligation by reason of uncontrollable forces shall exe
  @                      diligence to remove such inability with all reasonable dispatch.'
: 16. Damage is the Project. (a) If the Project suffers damage resulting from causes other than ordinary wear, tear or deterioration to the_ extent that Supply. System's estimate of the cost of re V                  '
less than 20% of the then depreciated value of the Project, and if the Parties do not unanimously agree that the Project shall be ended pursuant to Section 22, Supply System shall promptly submit a re 1                    . construction budget or budget o f Annual Costs, as appropriate, and shall proceed to repair the Project,
  '                        and each Party shall pay as budgeted, into the appropriate Trust Account, its Ownership Share of the of sdch repair.
(b) If the Project suffers damage to the extent that Supply System's estimate of the cost of re p  >
exceeds 20% of the then depreciated value of the Project, Supply System shall determine the estim fair market value of the Project if it is then terminated without repair. Thereafter, each Party which, I                        within a reasonabic time to be determined by the Committee, gives notice in writing to each of the other Parties of its desire that the Project be repaired, shall pay into the appropriate Trust Account, g*                      as budgeted in a revised budget, that part of the total cost of repair                          in Party If any the proportion has          that its p,                      . Share bears to the total of the Ownership Shares of all Parties giving such notice.
sf                        given such notice, the Ownership Share of each Party which has not given notice shall be e.
the end of each month thereafter to the extent determined by the following formula:
N                                            S, = S.
y _
  .~.                                                    V -F C_
k.x;                                                  _
P                                where V = Estimated fair market value of the Project if it is terminated without repair h                                            C = Actualexpenditures for Repair
  $'                                            S. = Ownership Share prior to loss
                                              ' S, = Reduced Ownership Share
{
b#                          At the same time, the amount of such reduction shall be added to the Ownership Share of each P giving such notice in the proportion that its Ownership Share bears to the total of the Owne g;4                        of allPartiesgivingsuchnotice.
g                                  (c) If the Project suffers damage to the extent that Supply System's estimated cost of r N                          exceeds 20% of the then depreciated value of the Project and no Party gives the notice provide Section 16(b), the Project shall be ended pursuant to Section 22.
K.                                (d) For the purposes of this section 16, the depreciated value of the Project at any time
  %,'                        ' be based on the original cost of the Project, plus additions and less retirements, depreciated o
  /W pg                          line basis using a composite life of 35, ears.
(e) Supply System shall submit each of the estimates referred to in this section hereinab M                            the Committee for its approval pursuant to Section 3(g).
ggyi 7g (7                                17. Default. (a) Upon failure of n Party to make any pcyment when due, or to perform any obligation herein, any other Party may make written demand upon said Party, and if 9'
D                          not cured within 10 days from the date of such denand it shall constitute a default at the exp of such period.
(b) If a Party in good faith disputes the legal validity of said written demand, it shall such payment or perform such obligation within said 10 day period under                            i h thewritten prot
                              . each of the other Parties. Such protest shall be in writing and shall specify the reasons upon w
            ~
59 f -
t i
                                                                                                                                          .i...-
 
1 t
f protest is based. Payments not made by the defaulting Party pursuant to said written advanced by the other Parties and, if so advanced, shall bear interest until paid, at the highest la h'idem rate. Upon resolution of such dispute, then any payments advanced or made between the Pa as in this section provided, shall be adjusted appropriately.
(c) In addition to the rights granted in this Section 17, any nondefaulting Party may take any action, in law or equity, including an action for specific performance, to enforce this Agreement an to recover for any loss, damage or payment advances, including attorneys' fees in all trial and app coups and collection costs incurred by reason of such default.
        ' 18. Elective Capital Additions. Renewals and replacements not necessary to assure design capability, and betterments and additions not required by governmental agencies, shall b the Date of Commercial Operation only upon unanimous approval of the Committee.
: 19. Investment. Supply System shall use its best efforts to invest funds in the Construction Trust Account or in the Operating Trust Account in legally issued obligations of the United States or the of Washington, or in other obligations in which Supply System is authorized to invest. The ne hom such investments shall be deposited in the Account from which it came and credited to th in their respective Ownership Shares.
: 20. Assignments. This agrecment shall be binding upon and shall inure to the benefit of successo and assigns of the Parties; provided, however, that no transfer or assignment of other than all Party's interest in the Project and under this agreement to a single entity shall operate to gi assignee or transferee the status or rights of a Party hereunder and no transfer or assignme shall operate to increase the number of members on the Committee. Except as provided in S of this agreement, the undivided interest (or a portion thereof) of any Party in the Project, the proper l
real or personal, related thereto, and under this agreement may be transferred and assigned as s below but not otherwise, provided that so long as Supply System retains its Ownership  pursuant Share in th Project, no interest, except as a security interest, in the Project shall be sold or assigne to subsections (b) through (f) to an entity not authorized by RCW 54.44, as amended, to participat and enter into agreements with an operating agency for the undivided ownership of common facilitie (a) To any mortgagee, trustee, or secured Party, as security for bonds or other indebtedness of such Party, present or future; such mortgagee, trustee or secured Pany may realize upon su security in foreclosure or other suitable proceedings, and succeed to all right, title and interes of such Party; (b) To any corporation or other entity acquiring all or substantially all the property of the Party making the transfer; (c) To any corporation or entity into which or with which the Party making the transfer may be merged or consolidated; (d) To any corporation or entity, the stock or ownership of which is wholly owned by Party making the transfer; (e) To any corporation or entity in a single transaction constituting s sale and lease ba to the transferor or assignor; (f) To any other person, provided that the Party shall first offer to transfer or assign suc interest to the other Parties in proportion to their respective Ownership Shares in the amount and on terms and conditions not less advantageous than those which it is willing to accept for transfer or assignment to such other person. Such offer shall remain open for a reasonable p but not less than three months and, if the offer of the selling Pany's interest is not accepted b d
60 y
 
the other Parties proportionately, the entire offer may be accepted by one of the other Parties or in diferent proportions among the other Parties as such Parties may mutually agree.
(g) Transfer or assignment shall not relieve a Party of any obligation hereunder except to the extent agreed to in writing by all the other Parties. Any interest or assignment permitted by subsections (b) through (f) of this section 20 is expressly conditioned upon the transferee or assignee assuming the obligations of the transferring or assigning Party under this agreement.
4
: 21. Training. Supply System shall carry out a familiarization and training program to maihtain adequate stafling in connection with the construction, operation and maintenance of the Project and the expenses thereof shall be part of the Costs of Construction or Annual Costs as appropriate. Each Party shall be entitled to have employees present at the Project for purposes of training, subject to reasonable rules to be established by Supply System. Any increase in the Costs of Construction or Annual Costs resulting from such training shall be borne by the Parties employing such trainees.
: 22. End of Project. (a) When the Project can no longer be made capable of producing electricity consistent with Prudent Utility Practice or the requirements of governmental agencies having juris-diction or is no longer licensed by the AEC, or when the Project is ended pursuant to Section 16, Supply System shall sell for removal all salable parts of the Project exclusive of Fuel to the highest bidders. After deducting all costs of ending the Project, including, without limiting the generality of the foregoing, the cost of decommissioning, razing all structures and disposing of the debris and meeting all applicable requirements of law, Supply System shall close the appropriate Trust Account and, if there are net proceeds, distribute to each Party its Ownership Share of such proceeds. Supply System shall liquidate the Fuel, and after making all required payments and receiving all due receipts, shall disburse the proceeds to the Owners as their interests appear. In the event such costs of ending the Project exceed available funds, each Party shall pay its Ownership Share of such excess as incurred.
(b) (i) If the Parties are unable to reach agreement to any of the items (i) through (v) described in Section 3(j), one or more of the Parties may, within ninety (90) days after the date of the notice to the Parties provided for in Section 3(j), elect to proceed with the Project.
(ii) If one or more of the Parties is rendere<1 incapable of proceeding with its obligations here-under by reason of one or more of the conditions listed below, which condition is beyond the ability of such party to remedy by reasonable means within a reasonable time, one or more of the other Parties may, within ninety (90) days after notice by a Party of the occurrence of the condition, elect to proceed with the project without the disabled Party; provided, however, that if such disabled Party is proceeding with all due diligence to remove such disability, the election shall not be made until 90 days after final order or other final disposition of the matter; provided further, that if delay would cause substantial additional costs to be incurred if the election were so postponed, the electing Parties may proceed as necessary to avoid or minimize delay, preserving the rights of the disabled Party until final order or other final disposition. The conditions are:
: 1. Inability to finance.
: 2. Failure to obtain necessary legal authorizations, including regulatory approvals.
(iii) Upon the election for any of the reasons set forth in (i) and (ii) abwe, the Parties so electing shall promptly reimburse each non-electing Party for its Costs of Construction and costs of Fuel, if any, incurred hereunder; provided, however, that such reimbursement shall not occur with regard to a disabled Party until Snal order or other final disposition in the Matter confirming the disability. Upon such reimbursement, the non-electing Parties' interest in the Project and in this Agreement, and any related rights or interest acquired by them hereunder, shall forthwith vest in the electing Parties in such propor-tion as the electing Parties may agree.
61
                                                                                                                  -  1.,_.
 
i
: 23. Notices. Any notice, demand or request provided for in this Agreement served, given or made in connection therewith shall be deemed properly served, given or made if given in person or sent by                J registered or cert:fied mail, postage prepaid, addressed to the person and at the address designated in writing by the respective Party or by Bonneville, as the case may be. Any Party and Bonneville may at any time, and from time to time, change its designation of the person to whom notice shall be given by giving notice to all other Parties as herein above provided.
: 24. Provisions Relating to Delivery. Deliveries of electric power and energy to the Parties and to Bonneville shall be made at the point of delivery and at the approximate voltage described below. Such electric power and energy shall be in the form of three-phase current, alternating at a frequency of approximately 60 hertz. Amounts so delivered at such point during each month shall be determined from measurements made by the meters, adjusted for losses as agreed upon by the Parties, installed to record such deliveries at the place and in the circuits hereinafter specified:
PROJECT POINT OF DEI.IVERY:
Location: the point where the 230 kv or higher voltage facilities of the Project and those of Bonneville or of a Party are connected; Voltage: 230 kv or higher; Metering:in the circuits over which such electric po ver and energy will flow; Adjustment: for losses between the point of metering and the point of delivery.
    -              25. Additional Generating Units and Facilities. (a) Each Party shall have the right to install and operate on the Plant Real Property such facilities as are reasonably required to enable it to deliver to its own system its Ownership Share of the Project Capability; provided, however, that the facilities of 4
1      such Party shall be so instMled and operated as not to burden or interfere with those of any other Party,          g or the Project, or the construction on the Plant Real Property of generating units in addition to the first unit. In the event of construction on the Plant Real Property of generating units in addition to the first unit, the Party who installs such facilities, if necessary to avoid interference with such new generating units, shall relocate such facilities at its own expense. If a Party proposes to install or operate facilities which would require the relocation of previously installed facilities of any other Party, or of the Project, l
i but would otherwise meet the requirements of this subsection, the Party desiring to install or operate
~f            such facilities shall have the right to call for such relocation if it bears all costs resulting therefrom.
(b) Supply System, either individually or jointly with other entities, shall have the right to construct and operate on Plant Real Property (subject to the provisions of subsection (c), below, giving each of the other Parties a right to participate therein) additional nuclear generating units and necessary appurte-nances thereto. If Supply System individually or jointly with any other entity decides to construct and operate an additional generating unit or units and appartenances which would require the relocation of previously installed facilities of the Project, it shall have the right to call for or accomplish such reloca-tion, as the case may be, if it bears all costs resulting therefrom. In connection with any such additioni units, Supply System individually or jointly with other entities shall have the right to use any facilbes installed as part of the Project and to modify such facilities for use in connection with the installation or operation of such additional generating units and appurtenances; provided, however, that such use of Project facilities shall not, burden or unreasonably interfere with the Project, that the cost of any modification shall be borne by Supply System, and that Supply System shall pay to the Parties a reason-able monthly facilities charge based on the portion of the Project facilities devoted to the use of the additional units as compared to the portion devoted to the generating unit of the Project, which charge shall take into account such costs as capital and other carrying charges, depreciation, operation and maintenance expense, taxes, insurance and return on investment.
62 7                                            Tg
 
                                                                                                    ~ . . mu _          _&        w  ,
ei j'          .. .o
                              -(c)' To the extent Supply' System individually or jointly with any other entity decides to construct and operate additional nuclear generating units on the Plant Real Property, each of the other Parties shall have the right to participate in the ownership of such units to the extent it elects but not to exceed its Ownership Share of the total ownership of each unit under terms and conditions substantially similar
                  - to this Agreement, takhg into account intervening changes in construction, ownership and operating costs and conditions. Such right shall be exercised with respect to each individual additional generating unit at.the time that Supply System makes a firm decision to construct said additional unit and may not be p                    cumulated for application against later generating units.
                                -(d) All of the rights of the Parties described in subsection (c) above shall be subject to the fobow-ing - limitations:
(1) If a Party elects to participate pursuant to subsection (c) above, it will so advise Supply
  '-                            System in writing within ninety (90) days of the reuipt by it of written notice from Supply System that it has made a firm decision. Prior to sending such notice, Supply System shall make available to each of the Parties any relevant information it has concerning the proposed additional generating .
g .,
4~                              unit; (2) Such rights are not assignable by a Party to any other entity without the consent of
                                -Supply System except to a corporation whose stock or other ownership is wholly owned by the Party or except to a successor corporation to a Party resulting from a corporate reorganization in which there is no substantial change in beneficial ownership;
: m.        .
(3) No assignment shall be made except to a corporation authorized by RCW 54.44 as
((                                amended to participate and enter into agreements with an operating agency for the undivided owner-ship of common facilities.
f;w (4) Supply System, unless otherwise mutually agreed, shall be the Operator of any generating f(
g ..
plants constructed under the terms of this section.
: 26. Personal Covenants: Rule Against Restrictions on Alienation. (a) Except for the Parties' f
'                      mutual waiver of the right to partition set forth in Section 2(c), all of the cosenants and conditions herein O                shall be personal to the respective Parties and not covenants running with the land and shall be binding W                upon any Party which acquires any right, title or interest of any Party in or to the Project or under this Agreemsm,isy assignment or in any other way.
(b) If the duration of any term or condition of this Agreement shall be subject to the rule against k#                        restrictions on alienation or to a similar cr related rule, then the effectiveness of such term or condition
                        'shall not extend beyond (i) the maximum period of time permitted under such rule or (ii) the specific 79                      applicable period of time expressed in this Agreement, whichever is shorter. For purposes of applying R-                        the rule against restrictions on alienation, or any similar or related rule, the measuring lives in being Q                        shall be those of the officers and members of the board of directors of Supply System listed by name on
[d.f                    pages 6-7, Exhibit B entitled " Directory of Officials" of the " Report of Examination" of Supply System made by the State of Washington, Office of the State Auditor, Division of Municipal Cor-
  'J
$.pl                  - porations, for the year ended December 21,1972 (Examination No. 39548), together with a!! such C                        listed persons' children who are living on the date of execution of this Agreement. As used in this paragraph, the word " children" shall have its generally accepted meaning of descendants of the first M'                      degree.
: 27. Construction of Agreement. This Agreement shall be construed in accou".mce with the law of the State of Washington.
: 28. Additional Documents. Each Party, upon request by the other Parties, shall make, execute
          ^
and deliver any and all documents reasonably required to implement the terms of this Agreement.
63
___L_-_-        __. .
: n.        .
IN WITNESS WHEREOF, the Parties hereto have caused this Agreem::nt to be executed this 17th          y')
(.
dayof September,1973.
(SEAL)          WASHINGTON PusuC POWETA SUPPLY SYSTEM ATTEST:
Eo FISCHER                                  By    J. J. STEIN Secretary                                        . Managing Director
(!,EAL)        PACIFIC POWER & LIGHT COMPANY L.BENNETT                                  By GEORGE L. BEARD Secretary                                        Senior Vice President (SEAL)        PORTLAND GENERAL ELECTRIC COMPANY H. H. PHILLIPS                              By ROBERT H. SHORT Secretary                                        Senior Vice President l- )-
(SEAL)        PUGET SOUND POWER & LIGHT COMPANY W. E. WATSON                                By    D. H. KNIGHT Secretary                                        Vice President THE WASHINGTON WATER power COMPANY (SEAL)
J. P. BUCKLEY                              By    H. W. HARDING Secretary                                        Vice Presideni 64                                                              .
gy_ -      a
 
i i
WASIIINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROECT NC. 3 The Washington Public Power Supply System's Nuclear Project No. 3 is expected to have a net c!cctrical plant capability of approximately 1,200 MW.
It will be located on a site in the State of Washington acceptable to the Project Owners and Bonne-ville, such site to be described more particularly in Exhibit A.
The plant and associated facilities will include the site referred to, a nuclear steam supply system, fuel and reactor coolant system with all related containment structures, safety features. instrumentation, control and auxiliary systems; turbine-generator, condensers and circulating water cooling systems, facilities and piping; electrical and mechanical systems and other related equipment and facilities; electrical facilities required to deliver the output of the Project to the point of delivery described in Section 24; and other structures, shops, warchouses, construction facilities, offices, equipment or facilities required in the construction, maintenance and operation of the Project.
EXHIBIT B 65
\
                                                                                                                      .4 7
 
i
(, }
(THIS PAGE INTENTIONALLY LEFT BLA14) 66
                                                                                    ' - > ^-
* w
 
o EXHIBIT IV l
FORM OF NET BILLING AGREEMENT i'
CONTRACT NO.14 03-11-27 72 WASHINGTON PUBLIC POWER SUPPLY SYSTD1
                      ' NUCLEAR PROJECT NO. 3 AGREEMENT executed by the UNITED STATES OF AMERICA DEPARTMENT OF THE INTERIOR acting by and through the BONNEVILLE POWF,R ADMINISTRATOR and WASHINGTON PUBLIC POWER SUPPLY SYSTEM and (THE PARTICIPANT)
(Net Billing Agreement) 67                                        i i
k uq ., g ,,  ig M  + _ .
 
i, INDEX TO SECTIONS                                                              } \)
SECTIoN                                                                                                        PAGE
: 1. Definition and Explanation of Terms . . . . . . . . . . . . . . . . . . . . . . . . .                      70
: 2. E.s h ibi ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
: 3. Term of Agreement . . . ............ ......................                                                72
: 4. Financing, Design, Construction, Operation and Maintenance of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              72
: 5. Sale, Purchase, and Assignment of Participant's Share . . . . . . . . . . .                                72
: 6. Payment by the Participant . . . . . . . . . . . . . . . . . . . . . .                  .........        73
: 7. Payment by the Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    73
: 8. Scheduling .............................................                                                  75
: 9. Participant's Right to Use Project Capability . . . . . . . . . . . . . . . . . . . .                      75
: 10. Termination Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                76
: 11. Provisions Relating to Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                77
: 12. Obligations in the Event of Default . . . .                      ....... .............                    77
: 13. Sources of Participant's Payments . . . . . . . . . . . . . . . . . . . . . . . . . .                      77
: 14. Modification and Uniformity of Agreement                            ...................                  78
: 15. Assignment of Agreement . . .                  ............ .................                              78
: 16. Approval by Rural Electrification Administrator. . . . . . . . . . . . . . . .                              78
: 17. Participants' Review Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                78  fy
: 18. Applicability of Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . .                      79 Exhibit A (Table of Participants and Participant's Share) . . . . . . . . . . . . . .                          81 Exhibit B (Project Characteristics) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              86 Exhibit C (Provisions Required by Statute or Executive Order) . . . . . . . . .                                87 68 s
                                                                                                                            .3
 
i i
This AGREEMENT, executed September 25,1973, by the UNITED STATES OF AMERICA (Govern-ment), Department of the Interior acting by and through the BONNEVILLE POWER ADMtNISTRATOR (Administrator), and WASHINGTON Pust.rc POWER SUPPLY SYSTEM (Supply System), a municipal corporation of the State of Washington, and                              ,a                corporation of the State of                    (Participant)
WIT N E S S E T H :
WHEREAs in order to achieve the economics of size for the benefit of Supply System's members, the Participants and the other Project Owners, the Project Owners have entered into an agreement                i simultaneously with this agreement providing that the Project Owners will finance and own the Project and that Supply System will design, construct, operate and maintain the Project on behalf of the Project Owners; and                                                                                              l WHEREAS Supply System and the Companies have entered into short-term Power Sales Agreements              i simultaneously with this agreement providing for purchase by the Companies of output from Supply System's Ownership Share of the Project; and WHEREAS the Participant proposes to purchase the Participant's Share from Supply System for assignment to the Administrator hereunder and the Administrator proposes to acquire such Participant's Share; and WHEREAS Supply System end the Participant have each determined that the sale by Supply System to the Participant of the Participant's Share and assignment thereof to the Administrator as herein provided will be beneficial to it by reducing the cost of and increasing the amounts of firm power and energy which will be available to serve its members or customers in the future; and WHEREAS the Administrator has determined that the acquisition of the Participant's Share as herein provided will assist in attaining the objectives of the Bonneville Project Act and other statutes which pertain to the disposition of electric power and energy from Government projects in the Pacific Northwest by enabling the Government to make optimum use of the Federal Columbia River Power System, and that the integration of capability of the Project acquired hereunder with the generating resources of the Federal Columbia River Power System as provided herein will enable the Administrator to make available additional firm power and energy to meet the needs of his customers; and WHEREAS the Construction of the Project is a part of the Hydro Thermal Power Program for the Pacific Northwest and this agreement is one of a series of agreements implementing such programs; and WhEREAS the Administrator will pool electric power and energy acquired hereunder with other electric power and energy available to the Administrator from the Federal Columbia River Power System so that any costs or losses associated with acquiring such electric power and energy will be borne by the Administrator's ratepayers through rate adjustments if necessary; and WHEREAS the Administrator and the Participant are parties to agreements which require payments by the Participant to the Administrator which may be used to offset payments by the Administrator to the Participant hereunder under a net billing procedure; and WHEREAS Supply System and the Administrator propose to enter into the Project Agreement simultaneously with this agreement which will provide among other things for relationships between Supply System and the Administrator with respect to Project construction, operation, maintenance and budgets; and WHEREAS Supply System and the Administrator propose to enter into agreements with the other Participants containing terms and conditions substantial!y identical to those specified herein; and 69
                                                                                                            - m --
 
n                                              --
s y
3:
WHEREAs Supply System is organized under the laws of the State of Washington (Rev. Code of        \,
J Washington, Ch. 43.52) and is authorized by law jointly to construct, own, acquire and operate works, 11
            ,            plants, and facilities for the generation and/or transmission of electric power and energy and to enter
:into contracts for such purposes and with the Administrator and public and private organizations for the
                        - disposition and distribution of electric power and energy produced thereby; and WHEREAs the Administrator is authorized pursuant to law to dispose of electric power and energy Jgenerated at various federal hydroelectric projects in the Pacific Northwest and to enter into related agreements; h
                                - Now, THEREFCRE, the parties hereto mutually agree as follows:
: 1. Definition and Explanation of Terms.
(a) " Annual Budget" means the budget adopted by Supply System not less than 45 days prior to the beginning of each Contract Year which itemizes the projected costs of Supply System's Ownership Share of _the Project applicable to such Contract Year, or, in the case of an arnended Annual Budget,
                        - applicable to the remainder of such Contract Year. The Annual Budget, as amended from time to time, shall make provision for all such Supply System's costs, including accruals and amortizations,-
,                        resulting from the xvnership, operation (including cost of fuel), and maintenance of the Project and
                        - repairs, renewals, replacements, and additions to the Project, induding, but not limited to, the amounts which Supply System is required under the Bond Resolution to pay in each Contract Year into the
;                        various funds provided for in the Bond Resolution for debt service and all other purposes and shall n                        indude the source of funds proposed to be used; provided, however, that the Annual Budget for any j                        portion of a Contract Year prior to the Date of Commercial Operation or September 1,1981, whichever
[                        occurs first, shall include only such amounts as may be agreed upon by Supply System and the 4                        Administrator.
:                            All taxes imposed and required by law to be paid with respect to Supply System's Ownership Share,
                        . and which are due and payable in a Contract Year, shall be included in the Annual budget for that Contract Year as a Project cost. To the extent Supply System is permitted by law to negotiate for payments in lieu of taxes or other negotiated payments to state or local taxing entities, the Annual Budget shall also inclade the amounts of such negutiated payments; provided, however, that Supply System
{'                        shall not agree to'such negotiated payment if in any Contract Year the sum of such negotiated payments and taxes imposed by law'would exceed the total amount of ad valorem taxes that Supply System 4
+
would have paid in that year to such taxing entities if Supply System's Ownership Share of the Project or portion thereof within the boundaries of each such taxing entity, were subject to ad valorem taxes and its valuation lor tax purpases were added to the valuation of the property subject to ad valorem taxes by such taxing entity, but with its millage rate reduced so that the amount of ad valorem taxes
;                        raised would be unchanged.
4 (b)~ " Billing Statement" means the written statement prepared by Supply System that shows the
;_                      amount to be paid to_ Supply System by the Participant for the Participant's Share for a Contract Year 4
_ or, in the case of an amended Billing Statement, for the remainder of such Contract Year. Such amount i~                      shall be de' ermined as to the Participant by multiplying the amount of the Annual Budget or the amended l                        Annual Budget, as the case may be, less any ether funds (including but not limited to amounts payable under the Power Sales Agreements) which shall be specified in the Annual Budget as being payable l                        from sources other than the payments to be made under the Net Billing Agreements, by the Participant's Share. At the end of each Contract Year any amount over or under billed during such year will be reflected in the Billing Statement for the following Contract Year.
(c) < " Bonds" means any bond, bonds or other evidences of indebtedness issued in connection with the Project pursuant to the Bond Resolution (1) to finance or re6aance Supply System's Owner-70 n
* I l
ship Share of the costs associated with planning, designing, financing, acquiring and constructing the                I Project pursuant to the Bond Resolution and (2) for any other purpose authorized thereby.
(d) " Bond Resolution" means the resolution or resolutions adopted or supplemented by Supply System, as the same may be amended or supplemented, to authorize the Bonds.
(c) " Companies" means the electric utilities or other entities, other than Supply System, that execute and are party to a Power Sales Agreement.
(f)" Contract Year" (1) means the period commencing on the Date of Commercial Operation, or on January 1,1981, whichever occurs first, and ending at 12 p.m. on the following Jur: 30, and (2) thereafter means the 12 month period commencing each year at 12 p.m. on June 30, except that the last Contract Year shall end on the date of termination of this agreement.
(g) "Date of Commercial Operation" means the date fixed pursuant to section 1(g) of the Project Agreement.
(h) " Net Billing Agreements" means this agreement and all other agreements for the Project similar to this agreement entered into by Supply System, the Administrator and each of the Participants (Co1 tracts No. 14-03-39101 through 14-03-39203, inclusive).
(i) " Ownership Agreement" means the Agreement for construction, ownership, and operation of the Project, as the same may be amended, and as executed by the Project Owners.
(j) " Participants" means those entities which are specified in Exhibit A or which become assignees of all or part of any Participant's Share pursuant to sections 7(b) or 15.
(k) " Participant's Share" means the decimal fraction share of Supply System's Ownership Shtre of Project Capability, reduced by short-term sales of output from Supply System's Ownership Share of the Project under the Power Sales Agreements, purchased by the Participant hereunder as specified in Exhibit A, plus, during any period in which a decimal fraction is assigned to the Participant pursuant to sections 7(f) or 12 hereof or pursuant to section 7(b) in the other Net Billing Agreements the decimal fraction share or shares so assigned, and minus any reductions under section 12 hereof or under the assignment by the Participant under section 7(b) hereof during any period in which such reductions or assignments are in efIect; provided, however, that such short-term sales frora the Supply System's Ownership Share shall not exceed a total of 1,000 megawatt-years and shall not extend beyond June 30,1984.
(1) " Power Sales Agreements" means the agreements for the short-term sale and purchase of output from Supply System's Ownership Share of the Project entered into simultaneously with this agreement by Supply System and each of the Companies.
(m) " Project" means the nuclear generating plant a id related property as described in Exhibit B.
Exhibit B may be revised from time to time by mutual agreement of Supply System and the Administrator, after consultation with the Participant, but in any event shall conform to the description of the Project in the Bond Resolution which authorizes the issuance of Bonds in an amount su"icient to pay the costs of acquiring and constructing Supply System's Ownership Share of the Project.
(n) " Project Agreement" means the agreement for the financing, construction and operation of Supply System's Ownership Share as the same may be amended, executed by Supply System and the Administrator (Contract No. 14-03-39100).
(o) " Project Capability" means the actual electrical generating capability, if any, of the Project at any particular time (including times when the Project is not operable or operating or the operation thereof :. suspended, interrupted, interfered with, reduced or curtailed, in each case in whole or in part),
less Iroject station use and losses.
71
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  . .w e                                                      .
(p) " Project Consultant" means an individual or firm, of
(
f national h    l tionreputation F havi
: expertise in the field of the matter or item referred to it, appoin may be appointed for each matter or item referred.
(q) _" Project Owners" means Supply System and the electric utilities that execute a the Ownership Agreement.
(r) " Prudent Utility Practice" at a particular time means any of the ipractices, method which in the exercise of reasonable judgment in light of the facts (incluring but not limited to the methods and acts engaged in or approved by a signifkant portion of the                id electrical utility thereto) known at the time the decision was made, would have been expected to accom result at the lowest reasonable cost consistent with reliab scaping, painting, signs, lighting, other facilities and public relations programs reas promote public enjoyment, understanding and acceptance to be a spectrum of possible practices, methods or acts. In j
Supply System is a municipal corporation and operating                                                  a Capability with the generating resources of the Federal C systems taken as a whole, and to achieve efficient and econominiUtility              operation of suc tice, method or act which pursuant to the Ownership Agreement is determined to be Pr Practice shall be deemed to be Prudent Utility Practice hereunder.
(s) " Supply System's Ownership Share" means 0.70 or such other decimal fractio          /
mined under the Ownership Agreement.
: 2. Exhibits. Exhibits A through C are by this reference incorporated herein    i      and mad this agreement. Supply System and the Participant shall each be the " Contractor" as Exhibit C.
: 3. Term of Agreement. This agreement shall be effective upon execution and deliver as provided in section 10(c) and except as to accrued obligations and liabilities date of written notice by Supply System pursuant to section 10(a).
: 4. Financing, Design, Construction, Operating and Maintenance of the Project. Su perform its duties and exercise its rights under the Ow efforts to construct, operate and maintain the Project and to finance its interest therein.
: 5. Sale, Purchase and Assignment of Participant'rShare.
(a) Sale of Participant's Share. Supply System herebyiisells,            and the Participa t to Supply l
I the Participant's Share. The purchase price to be paid for each Contract Year by the Par System for the Participant's Share shall be the amount specified                    h in the Billin l
shall make the payment to be made to Supply System under sections 5,6 and 10, wh Project is completed, operable or operating and notwithstanding                d ti the suspens reduction or curtailment of the Project output, and such payments shall      f    not be subject whether by offset or otherwise, and shall not be conditioned upon the performance c L
I by Supply System or any other Project Owner or the Administrator or an or any other agreement or instrument.
72 0
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  .        e (b) Assignment of Participants Share to the Administrator. The Participant hereby assigns, and the Administrator hereby accepts the assignment of, the Participant's Share. In consideration of such assignment, the Administrator shall provide to the Participant the payments, ot' sets and credits specified in sections 7 and 10 in the manner provided therein, whether or not the Project is completed, operable or operating and notwithstanding the suspension, interruption, interference, reduction or curtailment of the Project output. Such payments, offsets or credits to be made by the Administrator under this agreement shall not be reduced by offset or otherwise, except as specifically provided in section 7, and shall not be conditioned upon the performance or nonperformance by Supply System, or any other Project Owner, the Participant or any Participant under this or any other agreement or instrument.
: 6. Payment by the Participant.
(a) Not less than 45 days prior to cach Contract Year, or whenever the Annual Budget for such Contract Year is amended, Supply System shall prepare and deliver to the Participant and the Admin-istrator a Billing Statement showing the amount to be paid by the Participant for such Contract Year.
Whenever during a Contract Year the Participant's Share changes from that used in preparing the Billing Statement for that Contract Year, an amended Billing Statement shall be prepared for the re-mainder of that Contract Year reflecting such change and shall be submitted to the Participant and the Administrator.
(b) The Participant shall pay to Supply System each Contract Year the amount specified in the Billing Statement submitted under subsection (a) above. Such payments shall be made as specified below.
The Participant shall pay to Supply System each month in a Contract Year the amount by which the net billing credits and cash paymer;ts theretofore received from the Administrator by the Participant for that Contract Year under section 7 exceed the sum of the Participant's previous payment, to Supply System for that Contract Year until the amount of the Billing Statement has been paid; provided, how-crer, that in any event the Participant shall pay by the end of the last month in that Contract Year the amount by which the amount in the Billing Statement exceeds the total of the monthly amounts previously paid to Supply System by the Participant in such Contract Year.
Each such payment shall be made on or before the thirtieth day after (1) the date on each of the Administrator's bills to the Participant which reflects a credit to the Participant for such Contract Year pursuant to section 7(a) or (2) the date that payment is received from the Administrator pursuant to section 7(c). Amounts due and not paid by the Participant on or before the close of business of such thirtieth day shall bear an additional charge of two percent of the unpaid amount. Thereafter, a further charge of one-half percent of the initial amount remaining unpaid shall be added on the last day of each succeeding 30 day period until the amount due is paid in full. Remittances received by mail will be accepted without asseament of the delayed payment charges referred to above provided the postmark indicates the payment was mailed on or before the thirtieth day after the date of the bill. If the thirtieth day after the date of the bill is a Sunday or other nonbusiness day of the Participant, the next following business day shall be the last day on which payment may be mailed without addition of the delayed pay-ment charge.
(c) In the event that Supply System bears any cost under section 8(e) of the Project Agreement the Participant wdl pay to Supply System an amount equal to the amount of such cost multiplied by the Participant's Share, in addition to the payments specified in section 6(b) hereof. Payments under this section 6(c) hereof shall be made within 30 days from the date of mailing of the statement stating the amount of the payments.
: 7. Payment by the Administrator.
(a) For each Contract Year, the Adn inistrator shall pay to the Participant an amount equal to that set forth in the Billing Statement for that Contract Year. The Administrator's payments shall be effected 73
                                                                          '                                        . . ' ym
 
y  _
i  e by means of credits against the Administrator's monthly billings to the Participant under the Participant's    .
Bonneville Contracts, as follows:                                                                              h (1) For Contract Years in which this is the only agreement requiring the Administrator to make payments to the Participant: In the month preceding each such Contract Year the Adminis-trator shall allow a billing credit in the form of an offset to the Participant in the full amount of the    ;
Administrator's billings in that month under the Participant's Bonneville Contracts. A billing credit        l computed in the same manner shall be allowed in each of the succeeding months (except the last) in that Contract Year until the full amount owed by the Administrator for that Contract Year has been ofTset against the Administrator's billings to the Participant.
(2) For Comract Years in which there are two or more agreements requiring the Adminis-trator to male payments to the Participantt In the month preceding each such Contract Year and in each of the succeeding months (except the last) in that Contract Year the Participant's billing credits under this agreement shall be offset in the manner specified in (1) above against the pay-ments due from the Administrator under all agreements of the Participant requiring the Adminis-trator to make payments to the Participant, in the proportion that the amount specified in the Billing Statement bears to the sum of the amounts to be paid by the Administrator under all such agree-ments for that Contract Year.
The total offsets allowed to the Participant hereunder for a Contract Year shall not exceed the sum of (1) the amount specified in the Billing Statement for that year and (2) any amount paid by the Partici-pant for a prior Contract Year which remains unpaid by the Administrator to the Participant under this agreement.
              " Participant's Bor.ncville Contracts" as used in this section means all contracts or agreements be-tween the Participant and the Administrator which require payments by the Participant to the Adminis-trator for sale and exchange of electric power and energy, operation and maintenance of facilities, use of transmission facilities, and emergency and standby power.
(b) If for any Contract Year, the Administrator determines that the dollar obligations due the Administrator from the Participant, referred to in subsection (a) above, are or are expected to be in-sufficient to offset the Administrator's dollar obligations to such Participant under subsection (a) above, and, in the opinion of the Administratcr and the Participant, are expected to remain insufficient for a significant period, the Administrator shall use his best efforts to arrange for assignment of all or a portion of the Participant's Share and the associated benefits and obligations (subject to the prior assignment of the Participant's Share to the Administrator hereunder) to another customer or customers of the Ad-ministrator for all or a portion of the remaining term of this agreement to the extent required to eliminate the insufficiency, and the Participant shall make the assignment so arranged. The other Participants shall have first right to accept such assignment, pro rata among those exercising such right, before an assign-ment is made to a customer who is not one of the Participants. If the Administrator is unable to arrange for such assignment, the Participant shall make such assignment to the other Participants pro rata pur-suant to the counterparts of subsection (f) of this section in the other Net Billing Agreements.
(c) If (1) assignments under subsection (b) above cannot be made in amounts sufficient to bring into balance the respective dollar obligations of the Administrator and (2) an accumulated balance in favor of the Participant from a previous Contract Year is expected by the Administrator to be carried for an additional Contract Year, such balance and any subsequent monthly net balances that cannot be net billed shall be paid in cash to the Participant by the Administrator, subject to the availability of appropriations for such purposes.
(d) The Administrator and the Participant shall not enter into any agreements providing tar pay-ments to the Participant which the Administrator estimates will cause the aggregate of his billings to the Participant to be less than 115 percent of the Administrator's net billing obligations to tne Participant under all agreements providing for net billing.
74
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i s (e) If all or a portion of the Participant's Share is assigned under this section, the Participant shall k    nevertheless remain liable to Supply System to pay the purchase price for the Participant's Share in accordance with section 5(a) as if such assignment had not been made, and such liability of the Partici-pant shall be discharged only to the extent that the assignee of the portion of the Participant's Share so assigned shall pay to Supply System the purchase price for the portion of the Participant's Share so                  l assigned in accordance with the provisions of this agreement. Supply System may commence such suits,                  l actions or proceedings, at law or in equity, including suits for specific performance, as may be necessary or appropriate to enforce the obligations of the Participant with respect to such liability.
(f) If assignments pursuant to section 7(b) of the other Net Billing Agreements cannot be made in amounts sufficient to balance dollar obligations of the Administrator and any other Participant, the Participant shall accept on a pro rata basis with other Participants assignment of a portion of such other Participant's Share, to the extent required to eliminate such insufficiency; provided, however, that the sum of such assignments to the Participant under this subsection shall not without the consent of the Participant exceed an accumulated maximum of 25 percent of the Participant's Share specified in Exhibit A, nor shall any such assignment under this subsection cause the estimate of the payments to be made by the Participant to Supply System under this agreement to excer.d the estimate of the Administrator's billings to the Participant for each Contract Year during the period of such assignment, both such estimates to be made by the Administrator.
(g) The estimates by the Administrator under this agreement of billing credits and of payments to be made by the Participant and the Administrator giving rise to such billing credits shall be conclusive.
: 8. Scheduling. Prior to 4 p.m. on each work day beginning on the day preceding the Date of Commercial Operation (work day meaning a day which the Administrator and Supply System observe as a regular work day) the Administrator shall notify Supply System of the amounts of energy from the Participant's Share he will require for each hour of the following day or days; provided, however, that the Administrator may during any hour request delivery of other amounts of such energy. Supply System's dispatcher, within the capability of the Participant's Share and in accordance with Prudent Utility Practice, shall schedule for delivery to the Administrator at the point of delivery specified in section 11 for each hour in the term hereof the amounts of energy so requested by the Administrator.
: 9. Participant's Right to Use Project Capability.
(a) If the Administrator is unable to satisfy his obligation to the Participant by net billing, assign-ment or cash payment under section 7, and determines, in consultation with the Participant, that this inability will continue for a significant period, the Participant may direct that all or a portion of the energy associated with the Participant's Share be delivered by Supply System for the Participant's account at the point of delivery specified in section 11, for either the expected period of such inability or the remainder of the term hereof, whichever is specified by the Participant when it elects to have such energy delivered to it. The amount of such delivery shall be limited to the amount of the Participant's Share for which payment cannot be made, at the time the Participant elects to have such delivery made to it, by net billing with the Participant or assignees or by direct payment by the Administrator here-under. The Participant's obligations to assign its Participant's Share to the Administrator and the Administrator's obligations to acquire such share and make payments to the Participant under this agreement shall then be appropriately modified. The Administrator's prior obligations to the Pardcipant not previously liquidated pursuant to the terms of section 7 shall be preserved until satisSed.
(b) If the Participant elects to withdraw all or a portion of its Participant's Share as provided in this section, the Administrator will transmit such share to any point (s) of delivery on the Federal Columbia River Power System designated by the Participant where the Administrator determines such share can be made available, will supply station service and losses related to such share during shutdown 75
                                                                                                                      ,i 7
 
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        ,4  ,'
of the Project and will provide forced-outage reserves for such sha're, under the same terms and condi-        %
tions as provided in contracts for similar service then being offered to other utilities in the Pacific        p
                    - Northwest owning interests in large thermal projects.-
                                -(e). Upon withdrawal of any portion of the Participant's Share under this section, the Participant shall schedule such portion in the same manner as provided for the Administrator in section 8, and the Administrator's rights under section 8 shall be correspondingly reduced.
Whenever the Participant schedules any portion of its Participant's Share, the Participant r.nd the -
Administrater shall (1) schedule at least their respective proportionate shares of the minimum capability of the Project, as determined by Supply System, unless all Participants with similar obligations to
                      - schedule and the Project Owners and the Administrator agree to a shutdown of the Project; provided, however, that the Administrator may, at his election, and in accordance with section 11(d) of the Ownership' Agreement, require shutdown of the Project if he supplies through exchange arrangements the power and energy the Participant otherwise would schedule from the Project during such period of shutdown, and (2) supply to Supply System all necessary forecasts.of their generation requirements from the Project for ensuing periods as necessary to enable Supply System to prepare the fuel manage-ment plan pursuant to section 10 of the Ownership Agreement.
: 10. Termination Settlements.
(a)-If Supply System is unable to participate in ownership, construction, or operation of the Project due to licensing, financing, construction or operating conditions which are beyond its control, or if Supply System is in default as defined in the Ownership Agreement and has been requested by the Administrator to give notice of termination, or if the Project Owners invoke the End of the Project procedure in section 22 of the Ownership Agreement, Supply System shall give notice of termination of this agreement effective on the date of such notice. Supply System shall terminate its activities related
                                                                                                                                        ~
to construction and operation of the Project, and shall undertake the salvage, discontinuance, decom-missioning and disposition or sale of Supply System ownership interest in the Project, all in accordance with the Ownership Agreement. Thereafter Supply System shall provide monthly accounting statements to the Administrator and the Participant of all costs associated therewith. Such monthly accounting statements shall continue until all Bonds have been paid or funds set aside for the payment or retirement thereof in accordance with the Bond Resolution or the final disposition of the Project whichever is later, at which time a final accounting statement shall be prepared by Supply System at the earliest reasonable tinse. Such costs of salvage, discontinuance, decommissioning and disposition or sale shall include, but shall not be limited to, all of Supply System's accrued costs and liabilities resulting from Supply System's ownership, construction, operation (including cost of fuel) and maintenance of and renewals and replacements to the Project, all other Supply System costs resulting from its ownership of the Project and the salvage, discontinuance, decommissioning and disposition thereof, and all amounts which Supply System is required under the Bond Resolution to pay in each year into the various funds provided in the Bond Resolution for debt service and all other purposes until the date that all of the Bonds have been paid or funds set aside for the payment or retirement thereof in accordance with the Bond Resolution.
The monthly accounting statements shall credit against such costs all amounts received by Supply System from the disposition of Supply System's Ownership Share of Project assets. The final accounting statement shall credit the fair market value of any assets related to the Project than retained by Supply System. If the monthly or final accounting statements show that such costs exceed such credits, the Participant shall pay Supply System at times reasonably agreed upon the sum determined by multiplying the amounts shown to be due in such statements by the Participant's Share. In any case such payments shall be made at times and in amounts sufficient to cover on a current basis the Participant's Share of the
!                          amount which Supnly System is required under the Bond Resolution to pay in each year into the various funds provided in the Bond Resolution for debt service and all other purposes. If the final accounting statement shows that such credits exceed such costs, Supply System shall pay at times reasonably agreed I                                                                                76 i
  ~
                                                                                          $ 1 * .,  f                      g e.g ehag m -p qw , ppeq~                                        _0'                      _
              --%r *w--N        w  T9y                          7        ,
 
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Share, such amount to be di upon an amount determined by multipl ing such                                                            rage excess by th 3
h shall bear interest from the date of such final accounting                    i statement s United Statesto the date of pay          .
of the annualinterest rates for each month during such time for three-to-five year ssue ,                                        '
Government securitics (taxable), Money Market Rates rCte lawfully payable by Supply System, whichever is less.                                      ii (b) To the extent of the Participant's Share then                      assigned        nt to to  thisthe  Administrato shall pay the Participant the amounts, if any, paid by the                    h times Participant as the parties to Supply Syste section. Such amounts shall be paid in the manner specified in Section 7 and at suc agree upon.
(c) The provisions r>f this section and the provisions                            i      13ofshallsections 5(a) an cumstances under which payments are to be made in this section and the provisions o remain in effect notwithstanding termination of this agreement pursuant to section 3.
: 11. Provisions Relating to Delivery. Deliveries of electric                                power and energy to hibit specified shall be made at the point of delivery and at the approximate voltage described in the below. Such electric power and energy shall be in the form ofll be                                          three-phase curr by frequency of approximately 60ihertz.                                  h i cuit agreed  Amounts  upon by            so deli hibit to the parties hereto, installed to record                                    such i f delivery                deliveries at the are so agreed.
this agreement when the location, voltage, and metering details of the po nt o
: 12. Obligations in the Event of Default. The Participant's Share purchased Supply System and assigned by the Participant to thedAdministrator                                  f ulting f
unde matully increased for the remaining termt's Share                                  ii              of this    of    agreem any reason, to perform its obligations under its Net Billing Agreement, and the Pa the defaulting Participant shall be reduced correspondingly; provi e ,fh Participant, increases for the Participant pursuant to this subsection                    i d shall in Exhibit  not,A,withoutnor      consent o t exceed an accumulated maximum of 25 percent of the Participant's                be made by the Par-          Share specif e shall any such increase under this subsection cause hthe estimate of the payments toAdmin ticipant to Supply System under this agreement to exceed                  d by the  the        estimate of t e Administrator the Participant during the period of such increase, which estimates shall be ma e and shallbe conc!usive.
f If the Participant shall fail or refuse to pay anyhallamounts            not relieve thedue      Par- to Supply Sy that the other Participants have assumed the obligation i            to make such payments sh obligation, ticipant of its liability for such payments, and the Participantsii          Supply assum  System  ng orsuc  any i              o or as a member of a group, shall have a right of recovery                                er appropriste ceedings, at law or in equity, including suits for specific                      performance, as may be ne his subsection.
to enforce the obligations of this agreement against the Participant undert t
: 13. Sources of Participant's Payments. The            i        Participant shall not be require h Administrator under to Supply System under this agreement except from the rev this agreement.                                                                                  h          fr The Participant covenants and agrees that it will establish,                  lid by it through        maintain and c power and energy and other services, facilities and commodities sold, furnis 77 I
v
                                                                                                      ,,g  y        g.    ,  ,
r wg  ser <m. v---*      .w3  ,              ,,3
 
g id revenues sficient to enable the                  -
I his agreement and to pay any of its electric utility properties which shall be adequate          d lien upon such revenues.
all other charges and obligations payable from or constituting a charge an
: 14. Modis ca tion and Uniformity of Agreement.                  hereto if it is not binding upon (a) This agreement shall not be binding upon any of the parties i ation by any p all cf the parties hereto, but this agreement shall not be subject to term nd r this agre circumstances, whether based upon                                          h        the d          default by agreement      of the of any oth (b) This agreement shall not be an ended, modiSed, or otherwise c angeff d parties in any manner that will impair ior adversely affect the security a orif agreement for the payment of the principal,                t  interest, and prem um, ding and unpaid or tively become payable so long as any                                  i        ofi terms theandBonds  conditions are outs a if the Participant and upon different from those contained                                i l dein similarthis termsagreement, and conditions.        the timely request by the Participant shall amend this agreement                        f d shall  to nc    u be binding
: 15. Assignment of Agreement. This agreement                              ided, shall hewever,  inure    to the benefit o that except upon the respective successors and assigns of thei parties                                            to otbr iting of the  this agreemen as provided in sections 7,9 and 12 hereof, neither this agre two parties hereto, to any other entity except the United States or af his agreement will not be unreasonably withheld. No assignment or transfer o t of any obligation hereunder.                                                                  t n agreement
: 16. Approval by Rura! Electrification Administrator. If the Panicipant is a h ll not be binding upon or other instrument pursuant histodelegate.                      which approval of this ag any of the parties until it shall have been approved by him or
: 17. Participants' Review Board.                                        i      f this agreement, and (a) Composition; election. Not more than                f      30 days after the execut on oh C thereafter not less than 60 days prior toi the commencement o eacBoard may determine 30,1981, as the Participants' Rev ew      Supply System shall give each Partici-times prior to June                                                    hichmembers.
a meeting of representatives e!cct a Participants' Review Board consisting of nine l i        Each Participant shall desig-pant not less than 15 days' written notice                                                        stating the tim lf of each Participant nate the person and an alternate (to serve in the absen shall be proportional to its Participant's Share. Any vacancy on t e remaining Board members pending the next Board election.                        i Board shall be held at least quarterly during the construction                              ti      Each member of      ofthe the Board Proje notice of the time and p! ace of such meeting shall be given to the par es.A majo shall be entitled to one vote, to be cast in person and not by proxy.be necessary and su tute a quorum, and the majority of those present ishall                (c) below. All meetings of the Participants. Except as herein any motion or resolution except asbership                                        otherwise                provided of the Board which i
provided, the calling and holding of meetings of th                                                                  ,
78 E
 
1 r        e rules may provide that the Board shall hase the right to appoint persons of technical, legal, auditing or other special qualifications to committees to carry out reviews and investigations.
(c) Except in the event of an emergency requiring immediate action, ccpies of all proposed Con-struction and Annual Budgets and fuel management plans, including amendments thereto, and plans for refinancing the Project shall be submitted by Supply System to the Participants' Review Board within a reasonable time, prior to the time such proposed budgets and plans are to be adopted by Supply System.
Such copics shall be submitted to the Participant upon its request.
(d) Except in the event of an emergency requiring immediate action, all bids, bid evaluations and shall be submitted to the Participants' proposed contract awards for amounts in excess of $500,000 Review Board at least seven days prior to award.
(c) Supply System will consider the recommendations of the Participan's' Review Board, giving due regard to utilizing the Project consistent with Prudent Utility Practice and the Supply System's statutory duties. Written recommendations may be made to Supply System whenever such recommenda-Such written tion is approved by the majority of the members of the Participants' Review Board.
recommer.dations shall be forwarded to Supply System within a reasonable time along with supporting data, which time shall not exceed the comparable time, if any, prescribed in the Project Agreerrant.
Supply System shall take action on such recommendations within a reasonable time for adoption, modi-fication or rejection. Supply System, upon taking action, shall notify the Participants' Review Board promptly of such action, and if it modifies or rejects a recommendation, shall give the reason therefor.
(f) If Supply System modifies or rejects a written recommendation of the Participants' Review Board concerning a matter submitted for review under subsections (c) or (d) above, the Participants' Review Board may refer the matter to the Project Consultant in the manner described m section 8 of the Project Agreement for his written decision and his decision shall be binding upon the parties. Pending any decision by the Project Consultant under this subsection, Supply System shall proceed in accordance
'        with the Project Agreement. Nothing in this subsection shall afTect the procedure for the settlement of
,      any dispute between the Administrator and the Supply System under this agreement or the Project Agreement.
(g) Except as specifically provided in section 8(e) of the Project Agreement Supply System shall not proceed with any item as proposed by it and not concorred in by the Administrator without approval of the Participants' Review Board.
(h) Supply System shall not, without the consent of the Administrator and the Participants' Review Board, cause the insurance en the Project to be extended to any additional units or generating projects or to lapse to permit the extension of such coverage.
: 18. Applicability of Other Instruments. It is recognized by the parties hereto that Supply System in the ownership, construction and operation of the Project must comply with the requirements of the Bond Resolution and all licenses, permits, and regulatory approvals necessary for such ownership, construction and operation, and it is, therefore, agreed that this agreement is made, and referrals to the Project Consultant hereunder shall be, subject to the terras and provisions of the Ownership Agreement, the Bond Resolution and all such licenses, permits, and regulatory approvals, b                                                              79
(
                                                                                                                    ~ .-
 
      .a
    ',      9 IN WITNESS WHEREOF, the parties hereto have executed this agreement in several co UNITED STATES OF AMERICA Department of the interior By DONALD PAUL HODEL (SEAL)                                                                                  Bonneville Power Administrator WASHINGTON Pusuc POWER SUPPLY SYSTEM By    J. J. STEIN (SEAL)                                                                                  Managing Director
            ' ATTEST:
By ED FISCHER Chairman, Executive Board PARTICIPANT k
By ................................
(SEAL)
Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATTEST:
A By ................................
Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 i
l I
l 80 0
a
 
i    e EXHIBIT A OYPPSS No. 3)
TABLE OF PARTICIPANTS AND PARTICIPANT'S SIIARE Participant                                                                                      Reference City of Albion, Idaho . . . . . . . . . . . . . . . . . . . . ... .....................                          Albion City of Bandon, Oregon . . . . . . . . . . . . .... ... ....... ........... ...                                  Bandon Public Utility District No.1 of Benton County, Washington . ...............                                      Benton PUD
* Benton Rural Electric Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      Benton REA
* Big Bend Elect.-ic Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        Big Bend
* Blachly. Lane County Cooperative Electric Association . . . . . . . . . . . . . . . . . . . . .                  Blachly. Lane The City of Blaine, Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      Blaine The City of Bonners Ferry, Idaho . . . . . . . . .............................                                    Bonners Ferry City of Burley, Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............                Burley The City of Canby, Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canby City of Cascade locks, Oregon ...              .. ....................... ......                                Cascade Locks
  ~'
                    ' Central Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . .      .............              Central Elec.
The City of Centralia, Washington . . . . . . ....... ..... ................                                    Centralia The Central Lincoln Peoples' Utility District . . . . . . . . . . . . . . . . . . ..........                    Central Line.
Public Utility District No.1 of Chelan County, Washington . . . . . . . . . . ..                              . Chelan The City of Cheney, Washington . . . . . . . . . . . . . . . . . . . . .                  ....... ...          Cheney Public Utility District No.1 of Clallam County, Washington . . . . . .                      .    .......      Clallam Public Utility District No.1 of Clark County, Washington . . . . .......... .                                    Clark Clatskanie Peoples' Utility District . . . . . . . . . . . . ........................                            Clatskanie
* Clearwater Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          Clearwater
* Columbia Basin Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            Columbia Basin
                    ' Columbia Power Cooperative Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .                  Columbia Power
* Columbia Rural Electric Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          Columbia Rural Consolidated Irrigation District No.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              Cons. Irrig.
                    ' Consu me rs Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumers
\ '
                    ' Coos-Curry Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            Coos-Curry City of Coulee Dam, Washington . . . . . . . . . . . . . . . . ......... ...........                            Coulee Dam
'.                    Public Utility District No.1 of Cowlitz County, Washington . . . . . . . . . . . . . . . .                      Cowlitz The City of Declo, Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decio Public Utility District No.1 of Douglas County, Washington . . . . . . . . . . . . . . . . .                    Douglas PUD
      .              ' Douglas Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....            Douglas Elec.
The City of Drain, Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Drain
''                    East End Mutual Electric Co., Ltd. ................ ...........                                        ..... East End
        ,              The City of Ellensburg, Washington . . . . . . . . . . . . . . . . . ..... ...........                          Ellensburg
* Fall River Rural Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            Fall River Farmers Electric Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers
                    *Public Utility District No.1 of Ferry County, Washington . ... . .........                                        Ferry
* Flathead Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Flathead The City of Forest Grove, Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forest Grove Public Utility District No.1 of Franklin County, Washington . . . . . . . . . . . . . . . .                      Franklin
* Approvalof Agreement by dural Electrification Administration required.
81 r .
 
s TABLE OF PARTICIPANTS AND PARTICIPANT'S SHARE-(Continued)
Reference Participant
                                                                                                                                                                          ......                      Grant Public Utility District No. 2 of Grant County, Washington .........                                                                                                                            Grays Harbor Public Utility District No.1 of Grays liarbor County, Washington .                                                                                                                              Ilarney
      *llarney Electric Cooperative, Inc.                ..    . .
                                                                                                                    ..                                            . . . . .                            licyburn City of fleyburn. Idaho . ......... ...... .. .                                                                                          .. ... .                                              Hood River Hood River Electric Cooperative of Hood River County, Oregon
                                                                                                                                                .....                                        ..      Idaho Co.
      *!daho County Light & Power Cooperative Association. Inc. . . . . . . .
                                                                            ...        .. .. ..                                                          .. .                                          Idaho Falls City of Idaho Falls, Idaho . . . . ...... ... .                                                                                                                                      ..          Inland
* Inland Power & Light Company . . . . . .                      .    .... .... .. ....
                                                                                                                                                                      .. ...                            Kittitas
      *Public Utility District No. I of Kittitas County, Washington . . . . . . . .                                                                                                                    Klickilat
      *Public Utility District No. I of Klickitat County, Washington ..
Kootenai
      *Kootenai Electric Cooperative, Inc. . . . ............... .... ........ .                                                                                                                        Lane
* Lane County Electric Cooperative, Inc. . . ...... .. . ... . .. ... . ...                                                                                                                        Lewis Public Utility District No. I of Lewis County, Washington . ..
                                                                                                    ......                              . ........                                                      Lincoln (M)
* Lincoln Electric Cooperative, Inc. (Montana) . . . .                        .
                                                                                      ..          ...    .....                                                                    .. .                  Lincoln (W)
* Lincoln Electric Cooperative, Inc. (Washington)
                                                                                                    .. ..                                    ...                                          ....          Lost River
* Lost River Electric Cooperative, Inc. . . . . . ..                    ..
Lower Valley
* Lower Valley Power & Light, Inc.                  .      ... ..      ..    .      .....                        ..                        .. ......
                                                                                                                    . .                                                              ..          .        Mason 1
        *Public Utility District No.1 of Mason County, Washington . .                                                                                                                                    Mason 3 Public Utility District No. 3 of Mason Coumy, Washington                                                                                                                                        McCleary Town of McCicary, Washington . . . . . . . . . . . . . .
                                                                                                                                                                            .. . ..                      McMinnville City of McMinnville, Oregon . .. . ... . ....... .
                                                                                                                                ..                                  ...                      ..          Midstate
        *Midstate Electric Cooperative, Inc. . . ... ...                                  ...
                                                                    . .. .... .                              . ..                                                  .                    .        ..      Milton.F.
City of Milton.Freewater, Oregon            .
Minidoka City of Minidoka, Idaho      ............
Missoula
        *Missoula Electric Cooperative, Inc.
                                                          . ......            .. . ...                        ..                                  .... ...                                              Monmouth City of Monmouth, Oregon . . .                                                                                                                                                      ..        Nespelem
        *Nespelem Valley Electric Cooperative, Inc.                      .
Northern Lts.
* Northern Lights, Inc. ...
                                                                                      .      ..        ........                                                                  ... .                    Northern Wasco Northern Wasco County People's Utility District                  ..
                                                                                              ..... ... . . .....                                                                                          Okanogan Elec.
          *Okanogan County Electric Cooperative, Inc. . . . . .                    .
Okanogan PUD Public Utility District No.1 of Okanogan County, Washington . . . .. ...
                                                                                  . ........ . . ..... .                                                                                                  Orcas
* Orcas Power and Light Company . . .. .                    . .
Pacific Public Utility District No. 2 of Pacific County, Washington . .... ... .. ..
Pend Oreille Public Utility District No. I of Pend Oreille County, Washington . . ..... ....                                                                                                                Port Angeles City of Port Angeles, Washington . ...
Prairie
* Prairie Power Cooperative, Inc. . . . . . . . . . . . . . . . . . . . ....... .. ........
                                                                                                                                                                                                  ...      Raft River
* Raf t River Rural Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . .
Ravalli
* Ravalli County Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richland City of Richland, Washington . . . ......... ... ......... ..... ......                                                                                                                        Riverside Riverside Electric Company, Ltd.            ....... ....              . .......... ....... ..
                                                                                                      ................                                                                                    Rupert City of Rupert, Idaho . . . .........................                                                                                                                                          Rural Rural Electric Company ................... ........... .. .........
                                                                                                                                                              .. .......                                    Salem Salem Electric . . . . . . . . . . . . . . .......................                                                                                                                              Salmon
* Salmon River Electric Cooperative, Inc. .                  .......... ..... ...........
                                                              ........................                                                                          ..........                                  Seattle City of Seattle, Washington . . .        ..
* Approsal of Agreement by Rural Electrification Administration required.
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i
* TABLE OF PARTICIPANTS AND PARTICIPANTS SHARE--(Continued)'                                                                    !
Perdelpest
              '                                                                                                                                      R'I'''ac' Public Utility District No. I of Skamania County, Washington . . . . . . . . . . . . . . .                        Skamania Public Utility District No.1 of Snohomish Count South Side Electric Lines, Inc. . . . . . . . . ................. . . . .y, Washington . . . . . . .              Snohomish South Side The City of Springfield, Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........
                                                                                                                            .........            Springfield The Town of Sumas, Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          Sumas
              '
* Surprise Valley Electrification Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            Surprise V.
City of Tacoma, Washington . . . . . . . . . . . . . . . . . . . . . .
Tacoma
                            ' Tan ner Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................
                                                                                                            . . . . . . . . . . . . . . . . . . . Tanner j      ,
                            'Tillamook Peoples' Utility District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      Tillamook fQ              'Umatilla Electric Cooperative Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
          . !u,                                                                                                                                  Umatilla N~                  Unity Light and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  Unity Vera irrigation District No.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
6@h. ,      ,
                            ' Vigilante Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Vera Vigilante Public Utility District No.1 of Wahkiakum County, Washin
      . %l 7
* Wasco Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . gton . . . . . . . . . . . . . .          Wahkiakum W'e.                                                                                              ..................                    Wasco 4~'
* Wells Rural Electric Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wells
                          ' West Oregon Electric Cooperative, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .........
          "                                                                                                                                      West Oregon Public Utility District No.1 of Whatcom County, Washington . . . . . . . . . . . . . . .                          Whatcom VA ,
                          ' Approval of Agreement by Rural Electrification Administration required.
p[., '
W,                        Upon prior written notice to Supply System, the Administrator and all of the other Participants, t Exhibit A may be amended from time to time upon mutual agreement of two or more Participants s provide revised Participants' Shares for such Participants so long as the aggregate of the increases in Par-
[e
      ,                  ticipants' Shares is equal to the aggregate of the decreases in Participants' Shares; provided, however, tha the sum of any such decreases for any Participant pursuant to this paragraph shall not exceed an accumu-4*:
lated maximum of 25 percent of the Participant's Share specified in this Exhibit on the date of execution of this agreement nor shall any such increase under this paragraph cause the estimate of the paym i                  to be made by a Participant to Supply System under this agreement to exceed 86.95 percent of the y                    estimate of the Administrator's billings to such Participant during the period of such increase, which g,.
  ~1 estirnates shall be made by the Administrator and shall be conclesive; provided, further, that any s increase or decrease shall not affect or impair the tax exempt status of the Bonds. The Administrator shall 6p                then prepare agreement.            a revised Exhibit A which shall be substituted for this Exhibit A and become a part n ,
  ).l
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                                                                                                                                                                <e . *-*M ~f L_
 
  , ,                                                                                                                i EXHIBIT A (WPPSS No.3)      '
PARTICIPANT'S SHARE 1983 84 1984-85  1985 86 1986-87 Participant                                  1980 81    1981 82  1982 83_
0)
Albion . . . . . . . . . . . . . . . . . 0.00004 0.00004 0.00006 0.00006 0.00005 0.00004 0.0000 Bandon ................. 0.00094 0.00094 0.00132 0.00140 0.00143 0.00147 0.00144 Benton PUD . . . . . . . . . . . . . 0.03604 0.03604 0.04160 0.04308 0.04174 0.04158 0.042 Benton REA . . . . . . . . . . . . . 0.00673 0.00748 0.00783 0.00741 0.00699 0.00673 0.0064 Big Be nd . . . . . . . . . . . . . . . . 0.00074 0.00074 0.00528 0.00507 0.00484 0.00332 0.00374 Blachly-Lane ............                    0.00388 0.00388 0.00415 0.00436 0.00452 0.00470 0.00491 Blaine . . . . . . . . . . . . . . . . . . 0.00092 0.00092 0.00116 0.00107 0.00103 0.00102 0.00 Bonners Ferry . . . . . . . . . . . . 0.00084 0.00084 0.00108 0.00109 0.00105 0.00104 0.00099 B urley . . . . . . . . . . . . . . . . . . 0.00081 0.00081 0.00198 0.00198 0.00188 0.00121 0.00155 Canby .................. 0.00139 0.00139 0.00164 0.00193 0.00211 0.00231 0.00256 Cascade Locks . . . . . . . . . . . 0.00042 0.00042 0.00049 0.00054 0.00058 0.00061 0.000 Central Elec. . . . . . . . . . . . . 0.01009 0.01243 0.01183 0.01157 0.01079 0.01010 0.009 Centralia . . . . . . . . . . . . . . . . 0.00148 0.00148 0.00275 0.00284 0.00278 0.00246 0.00 Central Line. . . . . . . . . . . . . . 0.02763 0.02763 0.03236 0.03432 0.03476 0.03569 0.0 Chelan ...... . .......                    0.00747 0.00478 0.00606 0.00562 0.00496 0.00451 0.00433 Cheney . . . . . . . . . . . . . . . . . 0.00431 0.00431 0.00479 0.00481 0.00460 0.00451 0.00442 Clallam . . . . . . . . . . . . . . . . . 0.00738 0.00738 0.01006 0.01040 0.01020 0.01025 0.0100 Clark .................. 0.13903 0.13764 0.15228 0.14715 0.14467 0.14576 0.13633 Clatskanie . . . . . . . . . .0.00584        . . . . . 0.00492    0.00492 0.00763 0.00731 0.00670 0.00628 0.0 0.00604 0.00703 0.00667 0.00631 0.00609 0.00573 Clearwater ...... .......
Columbia Basin . . . . . . . . . . 0.00217 0.00217 0.00382 0.00377 0.00368 0.00366 0.003 Columbia Power . . . . . . . . . . 0.00078 0.00078 0.00101 0.00098 0.00096 0.00095 0.00 Columbia Rural . . . . . . . . . 0.01058 0.01330 0.01323 0.01301 0.01272 0.01271 0.01298 Cons. Irrig. . . . . . . . . . . . . . . 0.00008 0.00008 0.00007 0.00006 0.00005 0.00005 0.00005 Consumers .............. 0.01538 0.01751 0.01655 0.01794 0.01923 0.02049 0.t'.242 Coos-Curry . . . . . . . . . . . . . . 0.00481 0.00481 0.00880 0.00869 0.00852 0.00844 0.00781 Coulee Dam . . . . . . . . . . . . . 0.00032 0.00032 0.00052 0.00052 0.00049 0.00040 0.00 Cowlitz . . . . . . . . . . . . .0.00013      . . . . 0.03296    0.04227 0.02370 0.01984 0.03146 0.02896 0.034
* 0.00013 0.00017 0.00019 0.00020 0.00021 0.00023 Declo ..................
Douglas PUD . . . . . . . . . . . . 0.00123 0.00097 0.00085 0.00070 0.00057 0.00057 0.00049 Douglas Elec. . . . . . . . . . . . . 0.00574 0.00638 0.00617 0.00634 0.00654 0.00673 0.00692 Drain ............. ....                    0.00051 0.00051 0.00085 0.00089 0.00088 0.00082 0.00083 East End . . . . . . . . . . . .0.00584      . . . . 0.00028  0.00028 0.00032 0.00029 0.00027 0.00026 0.0002 0.00584 0.00712 0.00723 0.00699 0.00693 0.00675 Ellensburg . . . . . . . . . . . . .
Fall River . . . . . . . . . . . 0.00014    . . . . 0.00095    0.00099 0.00250 0.00288 0.00321 0.00359 0.0039 0.00014 0.00021 0.00019 0.00016 0.00011 0.00011 Farmers ...............
Ferry    ......    ...........            0.00100 0.00100 0.00116 0.00112 0.00104 0.00099 0.00091 Flathead . . . . . . . . . . . .0.00000      . . . . 0.00291  0.00327 0.00355 0.00327 0.00300 0.00282 0.00 0.00000 0.00000 0.00000 0.00000 0.00000 0.00091 Forest Grove . . . . . . . . . . .
Franklin ................                  0.00898 0.00898 0.01251 0.01270 0.01225 0.01212 0.01151 Grant ........            ........        0.00725 0.00464 0.00589 0.00545 0.00482 0.00438 0.00420 Grays Harbor ...........                    0.03090 0.03090 0.02040 0.02209 0.02251 0.02333 0.02386 H a rney . . . . . . . . . . . . . . . . . 0.00055 0.00055 0.00263 0.00261 0.00256 0.00210 0.00221 H eyburn . . . . . . . . . . . . . . . . 0.00090 0.00090 0.00173 0.00174 0.00166 0.00131 0.00145 Hood River          .. ........            0.00340 0.00340 0.00436 0.00448 0.00457 0.00469 0.00469 Idaho Co. . . . . . . . . . . . . . . . 0.00067 0.00067 0.00111 0.00109 0.00106 0.00105 0.00098 Idaho Falls ............                    0.00363 0.00363 0.00797 0.00836 0.00831 0.00722 0.00787 Inland . . . . . . . . .. ....              0.01735 0.02076 0.02029 0.01946 0.01857 0.01811 0.01798 Kittitas .................
0.00180 0.00180 0.00205 0.00210 0.00205 0.00205 0.00206 Klickitat ................
0.00442 0.00442 0.00565 0.00534 0.00503 0.00486 0.00448 1 Participant's Shares will remain the same as 1986-87 for remaining Contract Years in the term hereof.
84
 
  ,      i PARTICIPANTS SHARE-(Continued) 1982 83 1983 84 1984 85    1985 86    1986 87 Participant                                  1980 81 1981 82 (1)
Kootenai . . . . . . . . . . . . . . . . 0.00436 0.00502 0.00515 0.00492 0.00468 0.00454 0.00443 Lane ................... 0.00832 0.00832 0.01114 0.01125 0.01133 0.01150 0.01123 Lewis    ..................                0.00944 0.00944 0.01249 0.01253 0.01197 0.01173 0.01103 Lincoln (M ) . . . . . . . . . . . . . 0.00187 0.00192 0.00225 0.00214 0.00202 0.00194 0.00182 Lincoln (W) . . . . . . . . . . . . . 0.00143 0.00143 0.00119 0.00116 0.00113 0.00112 0.00117 Lost River . . . . . . . . . . . . . . 0.00069 0.00069 0.00120 0.00121 0.00121 0.00122 0.00118 Lower Valley . . . . . . . . . . . . 0.00540 0.00542 0.00671 0.00642 0.00611 0.00594 0.00557 M ason 1 . . . . . . . . . . . . . . . 0.00144 0.00144 0.00171 0.00173 0.00167 0.00165 0.00161 Mason 3 . . . . . . . . . . . . . . . . 0.01326 0.01326 0.01419 0.01411 0.01336 0.01299 0.01265 McCleary . . . . . . . . . . . . . . . 0.00036 0.00036 0.00075 0.00074 0.00070 0.00050 0.00059 McMinnville . . . . . . . . . . . . . 0.00000 0.00394 0.00102 0.00276 0.00469 0.00343 0.00547 Midstate . . . . . . . . . . . . . . . . 0.00475 0.00524 0.00590 0.00620 0.00648 0.00678 0.00704 Milton F. . . . . . . . . . . . . . . . 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00002 Minidoka      ...............              0.00001 0.00001 0.00001 0.00001 0.00001 0.00001 0.00001 Missoula . . . . . . . . . . . . . . . . 0.00346 0.00411 0.00412 0.00392 0.00372 0.00360 0.00352 Monmouth . . . . . . . . . . . . . . 0.00292 0.00292 0.00352 0.00423 0.00473 0.00525 0.00588 Nespelem      ...............              0.00120 0.00129 0.00146 0.00140 0.00133 0.00129 0.00123 Northern Lts. . . . . . . . . . . . . 0.00446 0.00512 0.00547 0.00530 0.00509 0.00499 0.00489 Northern Wasco . . . . . . . . . . 0.00147 0.00147 0.00142 0.00165 0.00182 0.00197 0.00213 Okanogan Elec. . . . . . . . . . . 0.00033 0.00033 0.00092 0.00086 0.00085 0.00081 0.00079 Okanogan PUD . . . . . . . . . . 0.00253 0.00253 0.00299 0.00272 0.00266 0.00066 0.00143 Orcas .................. 0.00537 0.00604 0.00728 0.00728 0.00722 0.00730 0.00733 Pacific . . . . . . . . . . . . . . . . . . 0.00746 0.00746 0.00941 0.00952 0.00916 0.00905 0.00870 Pend Oreille . . . . . . . . . . . . . . 0.00078 0.00051 0.00064 0.00060 0.00053 0.00049 0.00047 Port Angeles . . . . . . . . . . . . . 0.00366 0.00366 0.00754 0.00746 0.00702 0.00481 0.00576 Prairie . . . . . . . . .........          0.00024 0.00029 0.00026 0.00023 0.00020 0.00018 0.00016
!    Raf t River . . . . . . . . . . . . . . 0.00341 0.00341 0.00533 0.00522 0.00507 0.00501 0.00468 Ravalli . . . . . . . . . . . . . . . . . . 0.00377 0.00455 0.00455 0.00438 0.00420 0.00412 0.00409 Richland . . . . . . . . . . . . . . . . 0.01006 0.01006 0.01479 0.01559 0.01556 0.01589 0.01576 Riverside      ...............              0.00025 0.00027 0.00025 0.00022 0.00019 0.00017 0.00015 Rupert .................                    0.00062 0.00062 0.00121 0.00123 0.00119 0.00098 0.00106 Rural .................                    0.00355 0.00442 0.00443 0.00436 0.00427 0.00426 0.00435 Salem ..................                    0.00988 0.00988 0.01025 0.01119 0.01200 0.01280 0.01385 Salmo n . . . . . . . . . . . . . . . . . 0.00063 0.00063 0.00104 0.00104 0.00102 0.00102 0.00097 Se attle . . . . . . . . . . . . . . . . . . 0.12094 0.11740 0.09930 0.08236 0.08079 0.07475 0.07206 Skamania      ... ...........              0.00207 0.00207 0.00291 0.00298 0.00290 0.00289 0.00278 Snohomish . . . . . . . . . . . . . . 0.22212 0.24072 0.19767 0.20948 0.19085 0.19308 0.19334 South Side . . . . . . . . . . . . . . . 0.00074 0.00081 0.00085 0.00080 0.00074 0.00071 0.00067 Springfield . . . . . . . . . . . . . . 0.00040 0.00040 0.00145 0.00180 0.00202 0.00224 0.00238 S um as . . . . . . . . . . . . . . . . . . 0.00010 0.00010 0.00019 0.00019 0.00019 0.00019 0.00018 Surprise V. . . . . . . . . . . . . . . 0.00097 0.00097 0.00163 0.00148 0.00135 0.00108 0.00102 Tacom a . . . . . . . . . . . . . . . . 0.06858 0.03044 0.04309 0.02792 0.04456 0.05865 0.05803 Tanner .................                    0.00078 0.00084 0.00109 0.00108 0.00106 0.00106 0.00104 Tillamook . . . . . . . . . . . . . . . 0.00464 0.00464 0.00746 0.00804 0.00827 0.00857 0.00833 Umatilla .......... .....                  0.01473 0.01467 0.01487 0.01651 0.01794 0.01910 0.02107 Urity    ..................                0.00239 0.00275 0.00278 0.00264 0.00250 0.00242 0.00235 Ve ra . . . . . . . . . . . . . . . . . . 0.00259 0.00259 0.00378 0.00398 0.00397 0.00405 0.00401 Vigilante . . . . . . . . . . . . . . . . 0.00066 0.00066 0.00136 0.00126 0.00115 0.00090 0.00088 Wahkiakum .............                    0.00156 0.00156 0.00203 0.00208 0.00203 0.00203 0.00198 Wasco . . . . . . . . . . . . . . . . . . 0.00225 0.00225 0.00271 0.00265 0.00260 0.00258 0.00244 Wells ..................                    0.00262 0.00245 0.00270 0.00248 0.00228 0.00214 0.00214 West Oregon . . . . . . . . . . .          0.00229 0.00229 0.00238 0.00241 0.00246 0.00250 0.00252 Whatcom . . . . . . . . . . . . . . . 0.00563 0.00482 0.00459 '0.00427 0.00380 0.00347 0.00335 1 Participant's Shares will remain the same as 1986 87 for remaining Contract Years in the term hereof.
i, 85
 
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i        e                                                                    '
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EXHIBIT B PROJECT CHARACTERISTICS WASHINGTON PUBLI( P'OWER SUPPLY SYSTEM I              NUCLEAR PROJECT NO. 3
                                      )
The Washington Public Power Supply System's Nuclear Project No. 3 is expected to hav electrical plant capabiity of approximately 1,100 MW.    }
It will be located on a site in the State of Washington acceptable to the Project Owner
                                        \
4  ,
Administratbr.
          ,                                    7 The plant and associated facilities will include a nuclear steam supply                d    system, fu coohnt system with all related containmm structures, ' safety features, instrumentati auxiliary systems; tur bine-generator, condensers and circulating water cooling systems, facilitie piping; electrical and mechanical systems and other                      ointrelated          equipment and fa to be determined required to deliver the output of the Project to the BPA transpission system a a by the Supply System and the Administrator; and other structures, shops, ware facilitica, offices, equipment or facilities required in the construction, maintenanc e        the Project.
A complete description of the Project will be prepared after bids have been rec and awards have been made for ma)ar plant. components.
9
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I i    e EXHIBIT C il PROVISIONS REQUIRED BY STATUTE OR EXECUITVE ORDER I. Contract Work Hours and Safety Standards.
This contract, to the extent that it is of a character specified in the Contract Work Hours and Safety Standards Act (Public Law 87-581, 76 Stat. 357-360, as amended) and is not covered by the Walsh-Healey Public Contracts Act (41 U. S. C. 35-45), is subject to the following provisions and to all other provisions and exceptions of said Contract Work Hours and Safety Standards Act.
(a) No Contractor or subcontractor contracting for any part of the contract work which may require or involve the employment of laborers or mechanics shall require or permit any laborer or m.chanic in any workweck in which he is employed on such work, to work in excess of eight hours in any calendar day or in c:: cess of forty hours in any workweek unless such laborer or mechame receives compensation at a rate not less than one and one-half times his basic rate of pay for all hours worked in excess of eight hours in any calendar day or in excess of forty hours in
'-              sucri    ..cweek, whichever is the greater number of overtime hours.
(b) In the event of any violation of the provisions of subsection (a), the Contractor and any subcontractor responsible for such violation shall be liable to any affected employee for his unpaid wages. In addition, such Contractor or subcontractor shall be liable to the United States for liquidated damages. Such liquidated damages shall be computed, with respect to each individual laborer or mechanic employed in violation of the provisions of subsection (a), in the sum of $10 for each calendar day on which such employee was required or permitted to work in excess of eight hours or in excess of forty hours in a workweek without payment of the required overtime wages.
1                (c) The Administrator may withhold, or cause to be withheld, from any moneys payable on account of work performed by the Contractor or subcontractor, the full amount of wages required by this contract and such sums as may administratively be determined to be necessary to satisfy any liabilities of such Contractor or subcontractor for liquidated damages as provided in sub-section (b).
Y                        (d) No contractor or subcontractor contracting for any part of the contract work shall require any laborer or mechanic employed in the performance of the contract to work in surroundings or under working conditions which are unsanitary, hazardous, or dangerous to his health or safety, as determined under construction safety and health standards promulgated by the Secretary of Labor by regulation based on proceeding: pursuant to section 553 of title 5, United States Code, proviaed that such proceedings include a hearing of the nature authorized by said section.
(c) The Contractor shall require the foregoing subsections (a), (b), (c), (d) and this sub-s                section (c) ta be inserted in all subcontracts.
(f) The Contractor shall keep and maintain for a period of three (3) years from the com-pletion of this contract the informatioa required by 29 CFR $ 516.2(a). Such material shall be made availab!e for inspection by authorized representatives of the Government, upon their request, at reasonable times during the normal work day.
: 2. Convict Labr.
The Contractor shall not employ any person undergoing sentence of imprisonment at hard labor.
      'I                                                          87 x                                                                          -
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e i
: 3. Equal Opportunity.
p Unless exempted pursuant to the provisions of Executive Order 11246 of September 24,1965 and the rules, regulations and relevant orders of the Secretary of Labor thereunder, during the performance of this contract, the Contractor agrees as follows:
(a) The Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layofi or termination; rates of pay or other forms of compensation and selection for training, including apprenticeship. The Contractor agrees to post in conspicious places, available to employees and applicants for employment, notices to be provided by the Administrator setting forth the provisions of this equal opportunity clause.
(b) The Contractor will,it all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, or national origin.
(c) The Contractor will send to each labor union or representative of workers with which he has a collective bargaining agreement or other contract or understanding, a notice, to be pro-vided by the Administrator, advising the labor unio'r or worker's representative of the Contractor's commitments under this equal opportunity clause and shall post copies of the etice in conspicious places available to employees and supplicants for employment.
(d) The Contractor will comply with all provisions of Executive Order No.11246 of Sep-tember 24, 1965, and of the rules, regulations, and relevant orders of the Secretary of Labor.
(c) The Contractor will furnish all information and reports required by Executive Order No.
11246 of September 24,1965, and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to his books, records, and accounts by the Admin-istrator and the Secretary of Labor for purposes of investigations to ascertain compliance with such rules, regulations and orders.
(f) In the event of the Contractor's noncompliance with the equal opportunity clause of this contract or with any of such rules, regulations, or orders, this contract may be cancelled, terminated, or suspended in whole or in part and the Contractor may be declared ineligible for further Gosern-ment contracts in accordance with procedures authorized in Executive Order No.11246 of Septem-ber 24,1965, and such other sanctions may be imposed and remedies invoked as prosided in Executive Order No.11246 of September 24,1965, or by rule, regulation, or order of the Secretary of Labor, or as otherwise provided by law.
(g) The Contractor will include the provisions of paragraphs (a) through (g) in every sub-contract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order No.11246 of September 24,1965, so that such provisions will be binding upon each subcontractor or vendor. The Contractor will take such action with respect to any subcontract or purchase order as the Administrator may direct as a means of enforcing such provisions including sanctions for noncompliance; provided, however, that in the event the Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the Administrator, the Contractor may request the United States to enter into such litigation to protect the interests of the United States.
      ~4. Interestof Memberof Congress.
No Member of or Delegate to Congress, or Resident Commissioner shall be admitted to any share or part of this contract or to any benefit that may arise therefrom. Nothing, however, herein contained shall be construed to extend to such contract if made with a corporation for its general benefit.
88
 
a EXHIBIT V 1
CONTRACT NO. 14-03-39100                    J 1 26-73 WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 AGREEMENT mested by the UNITED STATES OF AMERICA DEPARTMENT OF THE INTERIOR actingby and through the BONNEVILLE POWER ADMINISTRATOR and WASHINGTON PUBLIC POWER SUPPLY SYSTEM C
(Project Agreement) h                              89
                                                        -          , _ _ _ , _ <' :r~m= Q
 
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1 INDEX TO SECTIONS PAGE SECTION 91
: 1. Definition and Explanation of Terms . . . . . . . . . . . . . . . . . . . . . . . .
93
: 2. Exhibi ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93
: 3. Term of Agreement . . . .......                        ... ............... ......
93
: 4. Representation of the Administrator . . . . . . . . . . . . . . . . . . . . . . . . .
93
: 5. Design, Construction, Operation, and Maintenance of the Project . . .
94
: 6. Financing of the Project . . . . . . . . ...... ...................
95
: 7. Budget and Accounting Procedures . . . . . . . . . . . . . . . . . . . . . . . . .
96
: 8. Administrator's Approval and Project Consultant . . . . . . . . . . . . . . . .
                                                                                            ............            98
: 9. Insurance .          ..............................
98
: 10. Permits ................................................                                                  98
: 11. Ownership of Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98
: 12. Inspection of Project Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98
: 13. Assignment of Agreement . . . . ............................
98
: 14. Applicability of Oth er Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . .
99 Exhibit A (Project Char.teteristics) ............................
100 Exhibit B (Provisions Required by Statute or Executive Order) . . . . . . .
45 Exhibit C (Ownership Agreement) .............................
90
 
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[                        This- AGREEMENT, executed September 25, 1973, by the UNITED STATES OF AMERICA (Gov-ernment), Department of the Interior, acting by and through the BONhEVILLE POWER ADMINISTRATOR ~
(Administrator), and WASHINGTON Puntic POwzR SYSTEM (Supply System), a municipal corporation of the State of Washington, WITNESSETH:
                          ' WHEREAS in order to achieve the CConomies of size for the benefit of Supply System's members, the Perticipants and the other Project Owners, the Project Owners have entered into an agreement simul-taneously with this agreement providing that the Project Owners will finance and own the Project and that
                    ~ Supply System will design, construct, operate and maintain the Project on behalf of the Project Owners; and
    ,                      L WHEREAs the Administrator has determined that acquisition of up to 70 percent of Project Capa-
                    .bility will assist in attaining the objectives of the Bonneville Project Act,2nd other statutes which pertain
    ,,                to the disposition of electric power and energy from Government projects in the Paci6c Northwest by enabling the Government to make optimum use of the Federal Columbia River Power System, and that I
the integration of capability of the Project with the generating resources of the Federal Columbia River Power System as provided herein will enable the Administrator to make avaluble additional firm power
  ?""
and energy to meet the needs of his customers; and WHEREAS the construction of the Project is a part of the Hydro-Thermal Power Program for the Pacific Northwest and this agreement is one of a series of agreements implementing such program; and C    "~
WHEREAS Supply System plans to acquire a site for the Project in the State of Washington, acceptable to the Project Owners and the Administrator, and plans, in connection therewith, to enter into certain K                    contrzets for the financing, planning, engineering, construction and operation of said plant; and WHEREAS Supply System and the Companies have entered into short-term Power Sales Agreements
,-                    simultaneously with this agreement providing for purchase by the Companies of output from the Supply System's Ownership Share of the Project; and
[                            WHEREAS Supply System, the Administrator and the Participants are parties to Net Billing Agree-i                    ments under which Supply System sells Project Ccpability to the Participants and under which the Ad-ministrator will acquire such Project Capability; and i                          WHEREAS Supply System is organized under the laws of the State of Washington (Rev. Code of s                    Washington, Ch. 43.52) and is authorized by law to jointly construct, own, acquire and operate works, i                    plants, and facilities for the generation and/or transmission of electric power and energy and to enter into contracts for such purposes and with the Admmistrator and public and private organizations for the disposit:on and distribution of electric power and energy produced thereby; and I                            'WHEREAS the Administrator is authorized pursuant to law to dispose of electric power and energy f                      generated at various federal hydroelectric projects in the Pacific Northwest and to enter into related agreements;
                          . Now, THEREFORE, the parties hereto mutually agree as follows:
1 Definhion and Explanation of Terms.
(a)' " Annual Budget" means the budget adopted by Supply System not less than 45 days prior to
                    - the beginning of each Contract Year which itemizes the projected costs of Supply System's Ownership applicable to the remainder of such Contract Year. The Annual Budget, as amended from time to time, Share of the Project applicable to :meh Contract Year, or, in the case of an amer.ded Annual Budget, i-l-                                                                            91
:.  :~                    .              . D ^^ .      :              "      ~
                                                                                                                              ' ""TY
 
g t shall make provision for all such Supply System's costs, including accruals and amortizations, resulting from the ownership, operation (including cost of fuel), and maintenance of the Project and repairs, renewals, replacements, and additions to the Project, including, but not limited to, the amounts which Supply System i* required under the Bond Resolution to pay in each Contract Year into the various funds provided for in the Bond Resolution for debt service and all other purposes and shall include the source of funds proposed to be used; provided, however, that the Annual Budget for any portion of a Contract Year prior to the Date of Commercial Operation or September 1,1981, whichever occurs first, shali in-clude only such amounts as may be agreed upon by Supply System and the Administrator.
(b) " Bonds" means any bond, bonds, or other evidences of indebtedness issued in connection with the Project pursuant to the Bond Resolution (1) to finance or refinance Supp!y System's Ownership Share of costs associated with planning, designing, Snancing, acquiring and constructing the Project pur-suant to the Bond Resolution and (2) for any other purpose authorized thereby.
(c) " Bond Resolution" means the resolution or resolutions adopted or supplemented by Supply System, as the same may be amended or supplemented, to authorize the Bonds.
(d) " Companies" means the electric utilities, other than Supply System, that execute and are party to a Power Sales Agreement.
(c) " Construction Budget" means the budget adopted by Supply System which sets forth an esti-mated schedule of construction expenditures and itemizes all costs related to ownership, design, planning, construction and financing of Supply System's Ownership Share of the Project, as well as any revision or updating thereof during the course of construction.
(f) " Contract Year" (1) means the period commencing on the D te of Commercial Operation, or on January 1,1981, whichever occurs first, and ending at 12 p.m. on the following June 30, and (2) thereafter means the 12 month period commencing each year at 12 p.m. on June 30, except that the last Contract Year shall end on the date of termination of this agreement.
(g) "Date of Commercial Operation" means the date determined pursuant to Section 1 of the Ownership Agreement.
(h) " Net Billing Agreements" means the agreements for the Project entered into by Supply System, the Administrator and each of the Participants (Contracts No. 14-03-39101 through 14-03-39203, inclusive).
(i) " Ownership Agreement" means the Agreement for construction, ownership, and operation of the Project, attached hereto as Exhibit C, as the same may be amended, as executed by the Project Owners. Any amendment thereto which may affect rights, duties, or costs of the Administrator under the Net Billing Agreements shall require approval by him prict to execution by Supply System.
(j) " Participants" means those entities which are specified in Exhibit A of the Net Billing Agree-ments, or which become assignees of all or part of any Participant's Share pursuant to such agreements.
(k) " Power Sales Agreements" means the agreements for the short-term sale and purchase of output from Supply System's Ownership Share of the Project, entered into simultaneously with this agreement by Supply System and each of the Companies.
(1) " Project" means the nuclear generating plant and related properties as described in Exhibit A.
Exhibit A may be revised from time to time by mutual agreement of the parties, but in any event shall conform to the description of the Project in the Bond Resolution which authorizes the issuance of Bonds in an amount sufficient to pay the costs of acquiring and constructing Supply System's Ownership Share of the Project.
(m) " Project Capability" means the actual electrical generating capability, if any, of the Project at any particular time (including times when the Project is not operable or operating or the operation 92
 
r
          ;    I 7      g      thereof is suspended, interrupted, interfered with, reduced or curtailed, in each case in whole or in part),        {
less Project station use and losses.                                                                                !
(n) " Project Consultant" means an individual or firm, of national reputation having demonstrated expertise in the field of the matter or item referred to it, appointed among other things, for the resolution of a difference regarding a matt:r or item referred by Supply System. A different Project Consultant may be appointed for each matter or item referred.
(o) " Project Owners" means Supply System and the electric utilities that execute and are party to the Ownership Agreement.
(p) " Prudent Utility Practice" at a particular time means any of the practices, methods and acts, which in the exercise of reasonable judgment in light of the facts (including but not limited to the prac-tices, methods and acts engaged in or approved by a significant portion of the electrical utility industry
^x~/            prior thereto) known at the time the decision was made, would have been expected to accomplish the p              desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice shall apply not only to functional parts of the Project but also to appropriate structures, landscaping, painting, signs, lighting, ether facilities and public relations programs reasonably designed W-    ' '
to promote public enjeyment, understanding and acceptance of the Project. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to be a spectrum of possib!c practices, methods or acts. In evaluating whether any matter con-forms to Prudent Utility Practice be parties and any Project Consultant shall take into account (1) the fact that Supply System is a municipal corporation cnd operating agency under the laws of the State of
  , '            Washington with the statutory duties and responsibilities thereof and (2) the objective to integrate the entire Project Capability with the generating resources of the Federal Columbia River Power System, the Project Owners (except Supply System) and the Companies, to achieve optimun utilization of the w                resources of such systems taken as a whole, and to achieve efficient and economical operation of such g    systems. Any practice, method or act which pursuant to the Ownership Agreement is determined to be f .'              P dent Utility Practice shall be deemed to be Prudent Utility Practice hereunder.
  "                      (q) " Supply System's Ownership Share" means 0.70 or such other decimal fraction as may be determined under the Ownership Agreement.
?
: 2. Exhibits. Exhibits A through C are by this reference incorporated herein and made a part of this agreement. Supply System shall be the Contractor as that term is used in Exhibit B.
h.'
[''
: 3. Term of Agreemort. This agreement shall be effective upon execution and delivery and shall terminate when the Net Billing Agreements terminate.
n                4. Representation of the Administrator. Supply System shall appoint a member designated by the yg                Administrator to the Committee established pursuant to the Ownership Agreement. During the period L                the Administrator is assigned any Participant's Share or portion thereof under the Net Billing Agree-
)V                ments, Supply System, in accordance with section 3 of the Ownership Agreement, shall specify that the
.h                Administrator's representative on the Committee shall have the right to vote the lesser of 50 percent of
  / .~          Supply System's Ownership Share, or the sum of the Participant *' Shares assigned to the Administrator r          under the Net Billing Agreements at the beginning of the Contract Year. All Supply System costs and expenditures related to the Project made at the written request of the Administrator, which are not Costs of Construction or Annual Costs pursuant to the Ownership Agreement, shall be billed separately for payment by the Administrator under section 7 of the Net Billing Agreements..
: 5. Design, Construction, Operation, and Maintenance of the Project.
(a) Supply System shall perform its duties and exercise its rights under the Ownership Agreement and under this agreement in accordance with Prudent Utility Practice.
              )
93 w .n y
 
(b) Supply System shall keep the Administrator informed of all significant matters with respect
                                                                                                                      'g F
to construction or operation of the Project (including without limitation, plans, specifications, engineering studies, environmental reports, budgets, fuel plans, estimates and schedules) where practicable in time for the Administrator to comment thereon before decisions are made, and shall confer with him l
during the development of Supply System's proposals for such matters when practical to do so. Upon l request by the Administrator, Supply System shall furnish or make available to him with reasonable promptness, and at reasonable times, any and all other information relating to the planning, con operation or maintenance of the Project.
(c) Subject to provisions of section 2(e) of the Ownership Agreement, the Administrator may, at his option and at Government expense, maintain a representative at the Project site during the con-struction of the Project. Such representative shall have no authority regarding administration or inspection of the Project construction.
(d) The Administrator shall use his best efforts to construct, operate and maintaN necessary facili-ties to interconnect the Project with the Federal Columbia River Power System so as to be ready to receive Project generation on or before the initial test and operation of the Project, presently scheduled for 1,1981.
(c) The Administrator shall have the right to purchase upon reasonable terms and conditions energy produced during any test operation of the generating unit of the Project, upon reasonable notic to Supply System of his intention to do so, given prior to the commencement of such test operation. If Administrator does not exercise such right, he shall accept delivery into the Federal Columbia River Power System and, upon reasonable terms and conditions, shall deliver any such energy not purchas by him to Supply System or its assignee at mutually agreed points.
(f) During any. hour in which the Pteject does not generate dectric power and energy for station use and for losses to the high-voltage terminals of the Project substition, the Administrator shall furnish his pro rata share of such electric power and energy, based on the sum of decimal fraction shares the assigned to him under the Net Billing Agreements, to the Supply Syem at the point of delivery specifie in the Net Billing Agreements; provided, however, that deliveries of such ' electric power and energy may be interrupted or reduced in the case of system emergencies, or in order to make repairs, replacements or necessary additions to or perform maintenance on that portion of the Federal Columbia River Power System necessary to provide such dectric power and energy.
: 6. Financing of the Prclect.
(a) Supply System shall, in good faith and with due diligence, use its best efforts to issue and sell Bonds to finance Supply Sysam's Ovmership Share of the costs of the Project and the completion thereof, as such costs are defined in the Bond Resolution and, subject to the provisions of section 7(b), to finance Supply System's Ownership Share of costs of any capital additions, renewals, repairs, replacements or modifications to the Project which Supply System is required to pay pursuant to the Ownership Agree-ment; provided, however, that in each such case such Bonds may then be legally issued and sold.
l 1
'                Supply System may, after submitting its financing proposal to the Administrator, or shall, whenever requested by the Administrator, adopt proceedings to authorize the issuance and sale of additional B
!        to refund outstanding Bonds prior to maturity in accordance with the Bond Resolution; provided, how-crer, %at if in the judgment of Supply System or the Administrator no substantial benefits or economics l
will be achieved by such refunding, the matter shall be referred to the Project Consultant as provided in section 8.
(b) Notwithstanding any other provisions of this agreement, the Bond Resolution shall be subject to appmval of the Administrator.
94
 
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                        '                                                                                                      j l
3
: 7. Budget and Accounting Procedures.
(3) Construction Budgn. The Administrator has heretofore reviewed Supply System's Construc-tion Budget in connection with the Project. Promptly after approval of an updated or revised construc-l
    . tion budget pursuant to the Ownership Agreement, Supply System shall submit to the Administrator its
    . revised Construction Budget. Such budget shall include Supply System's share of construction costs pur-suant 13 the Ownctship Agreement and shall separately itemize all Supply System's other costs related to construction and financing of Supply System's Ownership Share of the Project. Updated Construction j
Budgets for the succeeding calendar year and revised Construction Budgets for the current calendar year shall become effective unless disapproved by the Administrator within thirty days, and seven days, re-            l specth *y, after submittal. Any item disapproved shall be referred to the Project Consultant as provided -
in section 8.
A monthly Construction Budget report shall be prepared by Supply System and filed with the Administrator showir.g by major plant accounts or contracts, the cumulative amounts committed and l
the cumulative expenditures to date of each such report.                                                          i (b) Annual Budget. At least 90 day; prior to the expected Date of Commercial Operation, Supply System shall submit to the Administrator a proposed Annual Budget for the period from the e7jected                  ~
Date of Commercial Operation to the next succeeding July 1, and if the Date of Commercial Operation              !
occurs subsequent to April 1 in a calendar year, a simih.r Annual Budget for the next succeeding Con-              +
tract Year. Thereafter, on or before April 1 of each year Supply System shall submit to the Administrator a simil r Annual Budget for the next succeeding Contract Year, which budget shall take into account the cumulitive difference between total moneys received and expenditures for the prior Contract Year and provide for adjustment, as necessary, of the appropriate working cash fund.
The Annual Budget shall include Supply System's Ownership Share of operating costs according to the operating budget adopted pursuant to the Ownership Agreement, and Supply System's share of anticip:ted fuel and other costs pursuant to the Ownership Agreement and shall separately itemize all of Supply System's other costs related to the Supply System's Ownership Share of the Project. All taxes im-posed and required by law to be paid with respect to Supply System's Ownership Share, and which are due end payable in a Contract Year, shall be included in the Annual Budget for that Contract Year as a Project cast. To the extent Supply System is permitted by law to negotiate for payments il lieu o' taxes or other negotiated payments to state or local taxing entities, the Annual Budget shall also include the amounts of such negotiated payments; provided, however, that Supply System shall not agree to such r.*goti ted payment if in any Contract Year the sum of such negotiated payments and taxes imposed by im would exceed the total amount of ad valorem taxes that Supply System would have paid in that ye:r to such taxing entities if Sapply System's Ownership Share of the Project or portion thereof, within the boundaries of each such taxing entity, were subject to ad valorem taxes and its valuation for tax pur-poses were added to the valuation of the property subject to ad valorem taxes by such taxing entity, but with its millage rate reduced so that the amount of ad valorem taxes raised would be unchanged.
If in any Contract Year the amounts in the Annual Budget for renewals, repairs, replacements, and betterments, and for capital additions necessary to achieve design capability or required by governmental agencies (Amounts for Extraordinary Costs), whether or not such amounts are Costs of Operation or Costs of Construction.as defined in the Ownership Agreement, exceed the amount of reserves, if any, m intained for such purpose pursuant to the Bond Resolution plus the proceeds of insurance, if any, e.vailable by reason of loss or damage to the Project, by the lesser of:
(1) an amount of $3,000,000 or (2) an amount by which the amount of the Administrator's estimate of the total of the Ad-ministrator's net billing credits nvailable in such Contract Year to Participants pursuant to section 7(a) of the Net Billing Agreements and the amounts of such reserves and insurance, if any, exceeds j
the Annual Budget for such Contract Year exclusive of Amounts for Extraordinary Costs.
95 m                  %
 
Supply System shall, in good faith, use its best efforts to issue and sell Bonds to pay such excess in accordance with section 6(a).
Notwithstanding any other provision of this agreement, Supply System's Ownership Share of costs incurred by Supply System in an emergency or to protect the safety of the Project or the public, and un-budgeted expenditures necessary in the normal course of business for the continued safe operation and              i maintenance of the Project prior to approval of the Annual Budget or revised Annual Budget, shall be                l added to the Annual Budget as incurred. Promptly after any such occurrence, and prior to expenditures of any other funds not contemplated in the effective Annual Budget, Supply System shall submit a revised Annual Budget to the Admhistrator.
The Annual Budget and revised Annual Budget shall become effective unless disapproved by the Administrator within thirty days, and seven days, respectively, after submittal. Any item disapproved shall be referred to the Project Consultant as provided in section 8.
(c) Accounting. Supply System shall keep up-to-date books and records showing all financial trans-actions and other arrangements made in carrying out the terms of this agreement. Such books and records shall contain informatien supporting the allocation of Supply System's indirect costs associated with the Project. Such boaks and records shall be retained by Supply System for three years and shall be made availab!c for inspection and audit by the Administrator at any reasonable time.
All accounts shall be kept so as to permit conversion to the applicable system of accounts prescribed for electric utilities by the Federal Power Commission.
Any contract with any consultant or contractor of Supply System providing for reimbursement of costs or expenses of any kind shall require the keeping and maintenance of books, records, documents,            '
and other evidence pertaining to the costs and expenses incurred or claimed under such contract to the extent and in such detail as will properly reflect all costs related to this agreement and shall require such books, records, documents and evidence to be made available to the Administrator at all reasonable times for review and audit for a period of three years after final settlement of the applicable contracts.
(d) All moneys received on account .of Supply System's Ownership Share of the Project which are surplus to a current year's operating and capital expenses and Bond Resolution requirements shall be invested by Supply System in accordance with the Bond Resolution until such surplus moneys can be appropriately applied in a future Contract Year.
: 8. Administrator's Approval and Project Con.sultant.
(a) All proposals of Supply System, including but not limited to, budgets, plans, actions, activities
      .. matters submitted to the Administrator under any provisions of this agreement shall include itemized cost estimates and other detail sufficient to support a comprehensive review, including but not limited to, a copy of all supporting reports, analyses, recommendations, or other documents pertaining thereto.
If the Administrator does not disapprove the proposal within the time specified, or if no time is specified, within seven days after receipt, the proposal shall oc deemed approved. Any proposal disapproved shall be segregated so that the exact items of difference are identified and shall become effective im nediately
  , as to items not disapproved.
(b) Disapproval by the Administrator shall be given in writing and, except as provided in section 6(b), shall be based solely on whether the proposal or item is consistent with Prudent Utility Practice.
Such disapproval shall describe in what particular the proposal or item is not consistent with Prudent Utility Practice and shall at the same time recommend what would meet that standard.
When any proposal or item is so disapproved by the Administrator, Supply Systen shall adopt the suggestion of the Administrator or within seven days after receipt of such disapproval, shall appoint a Project Consultant acceptable to the Administrator to review the proposal or item in.the manner de-96 O
                                                                  .-                                                a
 
        ;xa - .s; scribed in this section.LIf thi parties shall not agro upon the selection of the Project Consultant, Supply System shall promptly request the Chief Judge of the United States District Court for the judicial district
: of Washington in which the Project is located to appoint the Project Consultant.
J(c)DThe Project Consultant shall consider all written arguments and factual materials which have
      ' been~ submitted to.it by either party within the ten days following its appoir.tment, and as promptly as possible after the expiration of such period, make a written determination as to whether the proposal or-
      . Item disapproved by the' Administrator referred to it by Supply Systrn would or would not have been consistent with Prudent Utility Practice. If the Project Consultant determines that the proposal _or item
      ; refirred to it was not consistent with Prudent Utility Practice it shall, at the same time, recommend what would, under the same circumstances, have met such test.
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 shall be modified to conform to the recommendation of the Project Con-sultant or as the panies otherwise agree and shall become effective as and when modined.
_ (d) = All costs incurred by Supply System for or by reason of employing a Project Consultant under
        .this agreement end the Net Billing Agreements and all reasonable costs of Supply System related to
: presentations to the special board which may be convened pursuant to the Ownership _ Agreement, shall be a cost of the Project.
(c) If any proposal or item referred to the Project Consultant has not been resolved 'and will affect the continuous operati% or the Project, Supply System shall continue to operate the Project. Supply System may proceed with the item (1) as proposed by it, or (2) as proposed by the Administrator, or (3) as modi 6ed by mutual agreement by Supply System and the Administrator prior to the time such item affects operation of the Project; provided, however, that if Supply System proceeds with a dis-cpproved item reviewable under this agreement and if the determination made by the Project Consultant is that the item is not consistent 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 Supply System's Ownership Share of the Project in the Annual Budget to the extent such item was inconsistent with what the Project Consultant determined would under such circumstances have met such test. Not-withstanding other provisions of this section 8(e), whenever a proposal has been referred to the Project Consultant, Supply System shall operate in. accordance with Supply System's proposals until such pro-posal has been resolved by the Project Consultant,' whenever Supply System determines that the Adminis-trator's proposals would create an immediate danger to the safe operation of the Project.
(f) The Administrator's approval or failure to disapprove any plan, proposal or item pursuant to the terms of this agreement shall not render the Government, its officers, agents, or employees, liable or responsible for any injury, loss, damage, or accident resulting from ownership, design, construction, opera-tion, or maintenance of the Project.
(g) Supply System shall not proceed with the following elective items under the Ownership Agree-ment without the concurrence of the Administrator's representative on the Co 2mittee; (1) notice to repair damage to the Project, pursuant to section 16(b), (2) a capital addition to the Project pursuant to section 18 and (3) construction of the Project pursuant to section 22(b). 'Ihe Administrator shall
: evidence his approval of any such items in writing and Supply System's share of costs associated with any item so approved shall_become Project costs related to Supply System's Ownership Share.
(h) Items subject to review by the Committee under the Ownership Agreement shall not be review--
able hereunder.
l-                '(i) The word " item" as used in this section means the item described including the cost specified therefore.
97
 
r r
1
: 9. Insurance. Supply System shall keep the Administrator                            informed of the in d by the Adminis-          '
suant to the Ownership Agreement and shall purchase additional insurance requesteble. Th trator, at the Administrator's expense, to the extent insurance may be availa requested insurance shall be disbursed as directed by the Administrator.
: 10. Permits.
Subject to any regulations of the Atomic Energy Commission                    d      pertaini Project,if by the terms of this Agreement any equipment                                or facility d repair during  the      of eithe on the property of the other, a permit to install, test, maintain, inspect, replace, anh equi term of this agreement and to rer.:ove at the expiration of said term bl times suc in such term, is with the right of ingress to and egress from the location thereof at all reasona e hereby granted to the other party.
: 11. Ownership of Facilities.
(a) Ownership of any and all equipment, and alllling                  salvable party.      facilities, insta or the Project Owners on the property of the other, shall be and remaini in the insta tly all other salvable facili'.ies which are installed                                  f the owner by suc affixing thereto suitable tags, stencils, stamps, or other markers plainly stating tne na of the equipment and facilities so identified.
: 12. Inspection of Project Facilities. The Administrator      h ll t endermay,      but shall not be the Govern-the Project at any reasonable time, but such inspection, or failure to insp:ct, s a no rdamage ment, its officers, agents, or employees, liable or responsible for any injury, los;,
resulting from defects in the Project.
: 13. Assignmer.t of Agreement. This agreement shall inure                        h toither the benefit o upon, the respective successors and assigns of (a)                  the  panies Supply Systemto  to this any agreeme this agrc: ment, nor any interest therein shall be transferred or assigned      d iit tor, by or i
entity other than the United States or an agency there consent of Supply System.
: 14. A,)plicability of Other Instruments. It i; recognized by the parties              fh      hereto t in the ownership, construction and operation of the Project must comply with the Ownership Agreement, the Bond Resolutionof theand alllic                            ii and referrals to the Project Consultant hereunder shall be, subject to the terms and p Bond Resolution and all such licenses, permits, and regulatory approvals.
IN WITNESS WHEREOF, the parties hereto have executed this agreement in sev UNtTED STATES OF AstERICA Department of the interior By DON ALD PAUI. HODE1.
[ seat.)                                              Bonneville Power Administrator WAsmNGTON PUBLic POWER SUPPLY SYSTEst
[ SEA 1.]
By  J. J. STEtN Managing Director ATTEST:
By ED FiscnER Chairman, Executive Board 98
 
EXHIBIT A PROJECT CHARACTERISTICS WASHINGTON PUBLIC POWER SUPPLY SYSTEM Nuclear Project No.3 The Washington Public Power Supply System's Nuclear Project No. 3 is expected to have a net electrica' plant capability of approximately 1,100 MW.
It will be located on a site in the State of Washington acceptable to the Project Owners and the Administrator.
The plant and associated facilities will include a nuclear steam supp!y sv,r m, fuel and reactor coolant system with all related containment structures, safety features, instrumentation, control and auxiliary systems; turbine-generator, condensers and circulating water cooling systems, facilities and piping; electrical and mechanical systems and other related equipment and facilities; electrical facilities required to deliver the output of the Project to the BPA transmission system at a point to be determbed by the Supply System and the Administrator; and other structures, shops, warehouses, construction facilities, offices, equipment or facilities required in the construction, maintenance and operation of the Project.
A complete description of the Project will be prepared after bids have been received and evaluated and cwards have been made for major plant components.
99 e-yrw
 
i e EXHIBIT B PROVISIONS REQUIRED BY STATUTE OR EXECUTIVE ORDER
: 1. Contract Work Hours and Safety Standards.
This contract, to the extent that it is of            a character specified in the Contract Work R as amended) and is not covered by the Walsh-Standards Act (Public Law 87-581, 76 Stat. 357-360, Healey Public Contracts Act (41 U. S. C. 35-45), is subject to the following pro other provisions and exceptions of said Contract Work Hours and Safety Standards Act (a) No Contractor or subcontractor contracting for any part of the contract work w require or involve the employment of laborers or mechanics shall require or perm mechanic in any workweek in which he is employed on such work, to work in exces calendar day or in excess of forty hours in any workweek unless such laborer or me compensation at a rate not less than one and one-half times his basic rate cf in excess of eight hours in any calendar day or in excess of forty hours in such work is the greater number of overtime hours.
(b) In the event of any violation of the provisions of subsection (a), the Contractor subcontractor responsible for such violation shall be liable to anyliquidated                  affected employ
)
wages. In addition such Contractor or subcontractor sha employed in violation of the provisions of subsection (a), in the sum of $10 for ea which such employee was required or permitted to work in excess of eight hours or in e hours in a workweek without payment of the required overtime wages.
(c) The Administrator may withhold, or cause to be withheld, from any moneys pay account of work performed by the Contractor or subcontractor, the full amount                    bilities of wages this contract and such sums as may administratively be determined to be necessary to satis of such Contractor or subcontractor for liquidated damages as provided in subsection (b).
(d) No Cetractor or subcontractor contracting for any part of the contract work shall r any laborer or mechanic employed in the performance of the contract to work in surr under working conditions which are unsanitary, hazardous, or dangerous to his health or sa determined under construction safety and health standards promulgated by the Secretar regulation based on proctedings pursuane to section 553 of title 5, United States Co such proceedings include a hearing of the nature authorized by said section.
(e) The Contractor shall require the foregoing subsections (a), (b), (c), (d) and this su (c) to be inserted in all subcontracts.
(f) The Contractor shall keep and maintain for a period of three (3) years from the com of this contract the information required by 29 CFR i 516.2(a). Such material shall be made a for inspection by authorized representatives of the Government, upon their request, at r daring the normal work day.
: 2. Convict Labor. The Contractor shall not employ any person undergoing sentence of imp ment at hard labor.
: 3. Equal Opportunity. Unless exempted pursuant to the provisions of Executive Order and the rules, regulations and relevant orders of the Secretary of Labor September 24,1965 thereunder, during the performance of this contract, the Contractor agrees as follows:
(a) The Contractor will not discriminate against any employee or applicant for employm because of race, color, religion, sex, or national origin. The Contractor will take affirmative a 100
 
to ensure that applicants are employed, and that employees are treated during employment, without
:                  regard to their race, color, religion, sex, or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation and selection for training, including apprenticeship. The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the Administrator setting forth the provisions of this equal opportunity clause.
(b) The Contractor will, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for er.2ployment without regard to race, color, religion, sex, or national origin.
(c) The Contractor will send to each labor union or representative of workers with which he has a collective bargaining agreement or other centract or understanding, a notice, to be provided by the Administrator, advising the labor union or worker's representative of the Contractor's com-mitments under this equal opportunity clause and shall post copies of the notice in conspicuous places available to employees and applicants for employment.
(d) The Contractor will comply with all provisions of Executive Order No. I1246 of September 24,1965, and of the rules, regulations, and relevant orders of the Secretary of Labor.
(c) The Contractor will furnish all information and reports requirad by Executive Order No.
11246 of September 24,1965, and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to his books, records, and accounts by the Administrator and the Secretary of Labor for purposes of investigations to ascertain compliance with such rules, regulations and orders.
(f) In the event of the Contractor's noncompliance with the equal opportunity clause of this contract or with any of such rules, regulations, or orders, this contract may be cancelled, terminated, ll or suspended in whole or in part and the Contractor may be declared ineligib?e tor further Gov-crnment contracts in accordance with procedures authorized in Executive Order No.11246 of September 24,1965, and such other sanctions may be imposed and remedies invoked as provided in Executive Order No.11246 of September 24, 1965, or by rule, regulation, or order of the Sec-                  ,
retary of Labor, or as otherwise provided by law.
(g) The Contractor will include the provisions of paragraphs (a) through (g) in every sub-contract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order No.11246 of September 24,1965, so that such provisions will be binding upon each subcontractor or vendor. The Contractor will take such action with respect to any subcontract or purchase order as the Administrator may direct as a means of enforcing such provisions including sanctions for noncompliance; provided, however, that In the event the Contractor becomes involved in, or is threatened with, litigation witl a subcontractor
                                                                                                                                  ~
or vendor as a result of such direction by the Administrator, the Contractor may request the United States to enter into such litigation to protect the interests of the United States.
: 4. Interest of Afember of Congress. No Member of or Delegate to Congress, or Resident Com-missioner shall be admitted to any share or part of this contract or to any benefit that may arise there-from. Nothing, however, herein contained shall be construed to extend to such contract if made with a corporation for its general beneSt.
('                                                              101
            -    uumu    muuu uuum' _-unm
 
i I
EXHIBIT VI f roce owc aia ana-oaso WOOD DAWSON LOVE & S AB ATINE ATTOR NETS AN D COU N S ELLORS AT LAW o . . , ,. . c o o . . . . . . ..
C:"
6e o c.*s a*n*"t  a e=c                                      48 WALL STR EET NEW Y O R K , N . Y. 10005 s ne u        .' t  6,. a w 6 ? t v C = .. T w a m e n Boardof Directors Washington Public Power Supply System 301 Fifth Avenue Richland, Washington
 
==Dear Sirs:==
 
WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 REVENUE NOTES, SERIES 1973A, $29,000,000 At your request we have examined into the validity of an issue of S29,000,00 Power Supply System Nuclear Project No. 3 Revenue Notes, Series                                                                                                      f      1973A, of W Supply System 15,1976,                      (theare" ofSystem"),                    a municioal the denomination of S25,000 eac , num h        bered I to corporation a l
option of prior redemption on June                                1160, inclusive, and bear interest at the rate o 15, 1973. Said notes recite that they are issued June 15 and December 15 commencing December                                                                                                              System on under          and pursuant to Resolution No. 673, adopted the 10th day of Octobet,                                                                                                                            l by the Board of Di 43 and 54 compliance with the Constitution and statutes of the State                                                                                              of Washington, f the System    duly          including of the Revised Code of Washington, and proceedings of the Boardd of                                                                                      Directors acquisition  of o adopted, for the purpose of paying a part ofResolution).                                                                                                  the cost to the Sy We have examined the Constitution and statutesf of                                                                                        the State id notes,        including of Washingtor., and of proceedings of the Board of Directorsl of the System authoriz xecuted note of saidissue.
In our opinion the Note Resolution has been duly adopted,h the provisions th binding upon the System and said notes                                                                                                                        have been du li d to the payment of the System, payable from any moneys of the System that may be lawfully app eh Project thereof, including revenues derived from the System's ownership interest in t e of revenue bonds or refunding notes of the System.
It is also our opinion that the interest on said notes                                    d by the Internal                              is exempt Revenue  from taxation by th of America under existing laws and regulations and a specific ruling issue Service with respect to said notes.                      Very truly yours, Woop DAWSON LOVE & SABATINE 102 L
 
      ,          e tc6c. o c e.:  maa-oaso LWZCD DAWSON LOVE & SABATINE                                                                    ***'"#  ""**
* AfrORNr.YS AND COUNSELLORS AT LAW
                .a...  ..... . . . . . . . . .
i.*:",*1 T *"
tr o c. na matew s 48 WALL STREET aI ,. c 6                                                    NEW YO R K, N. Y. 10005 sau e              mm stsvcwe.tunNcn Bo:rdof Directors Washington Public Power Supply System 301 Fifth Avenue Richland, Washington
 
==Dear Sirs:==
 
WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 REVENUE NOTES, SERIES 1973A, $29,000,000 Under date of                    ,1973, we rendered an opinion approving the validity of tu above notes (the " Notes") issued pursuant to a resolution adopted by the Bosrd of Directors of the Waslegton Public Power Supply System (the " System") on October 10,1973 (the " Note Resolution").
We have examined into the validity of                  of the Net Billing Agreements referred to on page 14 of the Official Statement of the System, dated October 10,1973, relating to the Notes, a mong the United States of America, Department of the Interior, acting by and through the Bonneville Power Administrator, the System, and certain of the Participants referred to in Exhibit I of said Official State-ment, which -              agreements provide for the purchase and assignment of an sggregate of not less 7
J      than        % of the System's Ownership Share of the, Project Capability (as defined in the Net Billing Agreements and reduced in the period July 1,1981 through June 30,1984 by certain short-term sales of output) of the Project (as defined in the Note Resolution) in any Contract Year (as defined in the Net Billing Agreements). With respect to the authorization, execution and delivery of said Net Billing Agreements, 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            Net Billing Agreements, and such other documents, proceedings and matters relating to the authorization, execu-tion and delivery of said                Net Billing Agreements by each of the parties thereto as we deemed relevant. In our opinion, each of said                    Net Billing Agreements has been duly authorized, executed and delivered by each of the parties thereto and constitutes a valid and binding agreement, en-forceable in accordance with its terms.
We have also examined into the validity of the Ownership Agreement referred to on page 20 of said Official Statement, among the System and Paci6c Power & Light Company, Portland General Electric
  . Company, Puget Sound Power & Light Company and The Washington Water Power Company. With respect to the authorization, execution and de'ivery of said Or.nership Agreement, we have examined certified copies of proceedings of the System and of the Companies which are parties thereto, authorizing the execution and delivery of said Ownership Agreement, and such other documents, proceedings and matters relating to the authorization, execution and delivery of said Ownership Agreement by each of the parties thereto as we deemed relevant. In our opinion, said Ownership 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 the Project Agreement (Contract No. 14-03-39100) between the United States of America, Department of the Interior, acting by and through the Bonneville
(                                                              103
 
m 3
8 9 Power Administrator, and the System, referred to on page 18 of said OGicial Statement. With respect to the authorization, execution and delivery of said agreement, we have examined certified copiesl proceedings of the Board of Directors of the System authorizing the execution and delive ment, and such other documents, proceedings and matters relating            In ourtoopinion, the authorization, said      exec delivery of said agreement by each of the parties thereto as we deemed relevant.
agreement has been duly authorized, executed and delivered by each of the parties thereto a valid and binding agreement enforceable in accordance with its erms.
In rendering this opinion, we have relied upon the opinion of counsel for each of the Participa and aforesaid Companies that the Net Billing Agreement or Ownership Agreement to which suc Participant or Company is a party has been duly executed and delivered by said Participant o and is not in conflict with, or in violation of, and will not be a breach of, or constitute a default un the terms and conditions of any other agreement or commitment by which such Participant or Com is bound.
Very truly yours, Woon DAWSON LOVE & SABATINE O
104
 
7
        ,-      's EXIllBir VII LAW O F FICES O F HOUGHTON CLUCK COUGHLIN & RILEY 900 HOOE BMDWO                                            TELEPHO NE M LLAvzHCU G HTO N (IS70)                                                                                    (2001623-6501 JACE Q. CLUCK                                    SEATTLE. WASHINGTON 98104 M w R LEY EMIL P. SCHUBAT C4Vt3 CRELLENOER SERT L. M ET20 E R. JR.
JECLHAGOARD                                                                                    IN REPLY REFER TO Wf LLIAM N. HATHIAS.22                                                                        CUR FILE No.
J 3 HN C. CATHEY Board of Directors Washington Public Power Supply System 301 Fifth Avenue Richland, Washington
 
==Dear Sirs:==
 
0                                WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 REVESUE NOTES, SERIES 1973A, $29,000,000 At your request we have examined into the validity of an issue of $29,000,000 Washington Public Power Supply System Nuclear Project No. 3 Revenue Notes, Series 1973A, of Washington Public Power Supply System (the " System"), a municipal corporation and joint operating agency of the State of Wash-ington. Said notes are issuable in coupon form, are dated October 1,1973, mature without option of prior f        redemption on June 15,1976, are of the denomination of $25,000 each, nurnbered 1 to 1160, inclusive, and bear interest at the rate of 4% per centum per annum, payable semi-annually June 15 and December 15 commencing December 15,1973. Said notes recite that they are issued t'nder and pursuant to Resolu-tien No. 673, adopted by the Board of Directors of the System on the 10th day of October,1973 (the
            " Note Resolution"), and under the authority of and in full complian:e with the Constitution and statutes of the State of Washingon, including Titles 43 and 54 of the Revised Code of Washington, and proceed-ings of the Board of Directors of the System duly adopted, for the purpose of paying a part of the cost to the System of construction, and acquisition of an undivided ownerr. hip interest in, the Project (as such Project is defined in the Note Resolution).
We have examined the Constitution and statutes of the State of Washington, and certified copies of proceedings of the Board of Directors of th: System authorizing the issuance of said notes, including the Note Resolution, and other proofs relating to the issuance of said notes, also an executed note of said issue.
In our opinion the Note Resolution has been duly adopted, the provisions thereof are valid and bind-lag upon the System and said notes have been duly authorized and issued in accordance with the Con-stitution and statutes of the State of Washington, and constitute valid and legally binding obligations of the System, payable from any moneys of the System that may be lawfully applied to the payment thereof, including revenues derived from the System's ownership interest in th: Project, and the proceeds of revenue bonds or refunding notes of the System.
It is also our opinion that the interest on said notes is exempt from taxation by the United States of America under existing laws and regulat:ons and a specific ruling issued by the Internal Revenue Service with respect to said notes.
Very truly yours, HoucitToN cluck COUGIILIN & RILEY 105 m .
 
m-                                                                                                  ,
t  9' r
LAW OFFICES OF i:
HOUGHTON CLUCK COUGHLIN & RILEY ROLLA V. HOUG HTON (1970)
(206t e 3-65of JACnR. CLUCK                                  SEATTLE.WASHINoTON 981o4 PAUL COUGHLIN JOHN W RILEY EMik P SCHUSAT cAvio sMELLENGER BERT L. H ETZOER.JR, JOEL HAGOARD                                                                                IN PEPLY REFER TO WILLIAM N. MATHIAS,23                                                                        QUR FJLE NQ.
JO HN 5. CATH EY Board of Directors Washington Public Power Supply System 301 Fifth Avenue Richland, Washington
 
==Dear Sirs:==
 
WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT NO. 3 REVENUE NOTES, SERIES 1973A, $29,000,000 Under date of                                1973, we rendered an opinion approving the validity of the above notes (the " Notes") issued pursuant to a resolution adopted by the Board of Directors of the Washington Public Power Supply System (the " System") on October 10,1973 (the " Note Reso-lution").
We have examined into the validity of                    of the Net Billing Agreements referred to on page 14 of the Official Statement of the System, dated October 10,1973, relating to the Notes, among the United States of America, Department of the Interior, acting by and unrough the Bonneville Power Administrator, the System, and certain of the Participants referred to in Exhibit I of said Official State-ment which agreements provide for the purchase and assignment of an aggregate of not less than
                  % of the System's Ownership Share of the Project Capability (as defined in the Net Billing Agree-ments and reduced in the period July 1,1981 through June 30, 1984 by certain short-term sales of output) of the Project (as defined in the Note Resolution) in any Contract Year (as defined in the Net Billing Agreements). With respect to the authorization, execution and delivery of said            Net Billing Agreements, 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          Net Billing Agreements, and such other documents, proceedings and matters relating to the authorization, execution and delivery of said        Net Billing Agreements by each of the Parties thereto as we deemed relevant. In our opinion, each of said        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.
We have also examined into the validity of the Ownership Agreement referred to on page 20 of said Official Statement, among the System and Pacific Power & Light Company, Portland General Electric Company, Puget Sound Power & Light Company and The Washington Water Power Company. With rc<pect to the authorization, execution and delivery of said Ownership Agreement, we have examined certified copies of procedings of the System and of the Companies which are parties thereto, authorizing the execution and delivery of said Ownership Agreement, and such other documents, proceedings and matters relating to the authorization, execution and delivery of said Ownership Agreement by each of the parties thereto as we deemed relevant. la our opinion, said Ownership Agreement has been duly au-thorized, executed and delivered by each of the parties thereto and constitutes a valid and binding agree-ment, enforceable in accordance with its terms.
106
                                                                                                                                ~
 
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We hase also examined into the validity of the Project Agreement (Contract No. 14-03-39100),
between the United States of America, Department of the Interior, acting by and through the Bonneville Power Administrator, and the System, referred to on page 18 of said Official Statement. With respect to the authorization, execution and delivery of said agreement, we have examined certified copies of pro-ccedings (4 the Board of Directors of the System authorizing the execution and delivery of said agree-ment, 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 con-stitutes a valid and binding agreement enforceabic in accordance with its terms.
In rendering this opinion, we have relied upon the opinion of counsel for each of the Participants and aforesaid Companies that the Net Billing Agreement or Ownership Agreement to which such Par-ticipant or Company is a party has been duly executed and delivered by said Participant or Company and is not in conflict 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 Participant or Company is bound.
Very truly yours, HOUGHTON CLUCK COUGHUN & Rit.EY s
q 107
_-                    -_-_                - - _ - - - - - - - - - -                        - +
 
-                                                                                                                                                                                                1 l
l Jan.same            a              .--      m ... .- . . - . . . . .                      _ . _ .. - ...                                .
Till* MONTANA POWl'I! CO.ilPANY ANil SUlblDIAlHES 4                                                            CONSOI.IDATED STA'I Dll'.NT HI' INCOMis
                              'the following conWid.ced statement of income, insofar as it relates to th.: five years tnded
:ber 30,                                                                                                                                                                                <
necember 31, Pn3, hm. been examined by Price .Waterhouse & Co., independent accountants, whose                                                                    t and as                                                                                                la the opinion of the Company, a!! adjuuments, jditional            .repwt thercon appeais ci.cwhere in this Prmpcctus.
consisting only of normal recurring accruals, necessary for a fair statement of the resuhs of operatio for the imauihted twelve months cndet! S.p;cmk r 30,1974, hwe been made. The statement should he
' ted                acad in conjunction with the other coa',olidated Imancial statements :md notes thereto included ch.c                                                              t in this l'iospectus.                                                                                                                                              i 12 Month, Statie .                                                                            End+d Septeraher 30,                                                                                    l 49.9 3                                                                                1974 ve. r E.nded Dce.mher 31 1973                              1971              1970        1969 5.0%                                                                            (Unuditell                          1 >72,                                                      ,
Tho:e. r:'t of Do!!ars                                          .
                                                                                                                                                                          $ $2.aF2    !
Operatmr Revenncu                                                                $ 69.8!!7        5 62,452        s 57.714        $ 56.539
                                                ................. ..                    $ 72.719                                              29,h42          29,517      27. # 1
_g ...g gg ._g _g _gy 1:lest oe  .
41,2 4          47,426          32.4 %
N tural go .          .... ............ ..                                                                                                                  ,
w.tc,        ... .      ...................
21,4 F 6  i Oper.itin;. I werecund Tues:                                        46,942          39.120          32,263            27,349          25.054 Op:1.ition .......... .... . ......                                                                4 I '0            3.306            3.403        3,522    .
5.025            4.796                                                                    '
Mainh t we (Note 1)                .      - .      . -
7,162            6,927            6,959        6,C45 45.1 %                                                                                8.039            7,612                                                                      '
Dc;.trention and deriction (Note 1) .
tr4eme taes (Note 1)                                                                                                13.171            13.828      14,518 8,944          12.155            7.552 100.0 %,                  u. s. .    . . ... ...... ......                                                                                      13              5            69
              *                                                              ...              (14)              (3)                1                                                  6 Car.adian ............ ....                                                                                                                              f Proviwra for deferred tees en income iN..:e 1):
Aceclerated depreciation and amorti.                                                            1.008                928            938          869 prion      .....          .            ... .              1.592            1.245                                                                    ,
                                                                  .. . ......                (516)            (516)          4.9-19 77 Kctr I seixt ctarres                                            693              600              331              196          (126)                l Imotment in creda--. net                ... ...                                                                  11,103          10,758        9.352    l
                                                                ......... ..              D.294            12.695          11.012 Other t ats . .    .. .
60.824      5n.55S    !
f 4.197          77.904          6b.%t f.          62.993 25,234          25,651      24,437      l 30,586          3n 144          27.001                                                      )
Operating Inconne . . . . , . . . . . . . .              ..
Oths: In.eme and Deduaions:                                            1.913            1.275            1,019            1.256              646          394    l, expected Noneraaung miam-nct . . ..                            .
Alhw.mcc for f unds u3ed donng con-                                                                    50b              212              93          308      !
3.099            1.191 stru: tion (Note 1 ) . . . . . . . . . ..                                ~-
Tot:d        .        . . . . . .                5.0i2'    --- -2.I6 .5-          1.,525            1.4 t>8
                                                                                                                                      - -- _ . . . -                739 _ 792    .
32,612          28,f.n6          26.702          26.590        25.221 35.59M                                                                                        I Income Ucfoie Interest Charnes . . . ... .                                                                                                                        '
Intciest Clorget:                                                                      9,094            6/D0              6.171          J.794        4.159
                                                                          . ..              11.144 Interent en tour term debt                                        1.66M              t.99            595                572          2.151        2.471      l Othcr interest                    .. ....... .
0.70            7.325              6,743          6.945        6St 0 Tot.tl Intas;,t Ch.uf.es .              .        12.812 22.819          21.281            19,459          19,64%      18.360 22.756                                                1,209          1,70)        3,20)      l Net incorne .............. .........                                  1.209            1.209          1.2tra I)isiden.t* ArpficaHe to Prefested Stock.                                                                                                                          ,
5 28.577        5 21.610        5 20.nE'          5 18.750      '''~"5 18.436 "$ 17.160' I
Net income Asad.d.le for Common WL
                                                                                                                                                                        ~
                                                                                                ~'
senbcd by AScr.ife Number of Conunon Sh.uce                                7.526            7.509          7.51.?            7.515          7.512        7.499      1 Oontan.hn (thou m,ls of Shares). . .                                                                                              $ 2.45        $ 2.29 ilc3 Cf the                                                                                5M              $N              $ 247            $ 2.49 Nd Ineme Pa Sh:n e of ( onunoo
  ' fred Stock              Dahlends Deel.oed on Common SINL.                                                $ 1.60          $ 1.691          $ l.6S          $ 1.68      $ 1.65 l'er Sh ue                    ...........            .        $ 130                                                                                          i Italia of ILunin.m to 1:ixed Ch.uges                                                      4.59            5.48              5.95          5.60          5.73      I 3.29 (Note 16) ..... ..................                                                                                                                              I j
(    ) Denotes red firme.                                                                                                                                          i The smtwrical note reference > reict to the Notes to Consolidated Financial Statements appearing clscwhere in this Psospectus.
7
(        . . ~            . . _ . _ .                    . . . . . _ . . _ . . . _                        . . . . . . .          _ . _ . . . . . _ _ . _ . . _ , _ . .
 
      - ---~              . . . . . . . ..    .        .  ..
NOII:S 'IO CONSOI!DATI.D STNIDIENT OF INCO%1E l
Norn A -The consolidated Statement of Income for tb: twelve months enried Septcmber 30,1974, 1
and the five years endul December 31, 1973, is presented on the bases of accounts presenbed by the Public Scrvice Commission of Montana :md the Federal Poxer Commiv. ion, between which there are no differences, as explained in Note 1 to the Consolidated Iinancial Statem:nts.
i Norn 'll-- For thr purpose of computing this ratio, carnings have been calculated by r.ddin;; to n:t income (i) prosisions for current and d;ferred taxes on income, and fii) find charges. Fixed charps include inttrest and iclared amortintion en long-term debt and interest on short term horrowingt. Fixed charges also include one-third of all rentals, excluding delay rentah subset;uent to 1970, and rentals on joint-use properiy for the 12 months ended September 30, la'4.
The unaudited pro forma ratio of carnings to fixed charges for the t.vdve months coded Septem-ber 30,1974,is 2A2 after riving cifect to the annual requirements on outstanding debt at September 30 1974,iwuance of the New Ilonds at an assumed intere t inte of 9% % and application of th estimated proceed, from the proposed sales of the New Bonds and Additional Shares to the payment of short term borrowings (excluding I I,.we of Western F.nergy Compan3) to be outstanding at the time of such salc Interest in the amount of $2,799,000 was excluded from the fixed charges for the pro forma ratio as it related to the 8'A % lirst mortgage bonds itfunded April 1,1974, and to short-term borrowings daring the twclse month, en&d September 30, 1974, to be paiti from proceed; of the Neve Ikmds. Without
  '                    givir.g effect to the proposed sale of the Ad<Jitional Shares, the pro forma ratio of earnin;'s to fixed was excluded charges would be 2.33. For this latter computation interest in the net amount of $445,000 f;om the fised charges for the pio forma ratio after giving effect to the additional interot va short-teru borrowings due to the unasailability of the pio.ced3 from the sale of Addition d Shares. A difference
                                                                                                                                            )
of % of 1% from the assumed internt tats will change th se natios approximately .01.
i .
The annualinterest requirement on the New Donds will amount to $2,625,000.
For the twelve months ended October 31, 1974, operating revenues were 5115,758.000 and nct income, before deducting preferred stod disidend ratuirements, was $ 22.900,000. Net income after deducting such disiJcnd requirems nts was $21.691,000, or $2.8S per shaie of common stock.
These amounts are unaudited but, in the opinion of the Company, indode all adjustments, consisting only of norm.d recurring accruah, netewary to a fair piesentation thereof. 'Ibe unaudi'ed pro foima
  '                      ratio of carnings to lised ch.uges for the twdve month, coded October 31, 1974, comp."ed on a basis equivalent to that used in Note 11,is 2.57, and without gising efTeet to the propo>ed sale of the Additio Shares,is 2.26.
l 1                                                                                              ,
I            !
8
                                                                                                                                            )
I
 
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He-                _m i
i bb                                            MANAGl'. MINI'S DisCUSsicN AND ANAL.YSis OF TIIE -
L' CONSOI.lDA'II.D KFATI'.MINF OF INCOMP.
j _ by the -
are no              Twclie Montin I:nded September 30, 1974: Operatin;t revenues for the twelve months ended September 30,1974, compared with the twelv months ended December 31,1973, increased 56,737,000, principally dne to incrtased cla trie sales to other utilities,52,232.000; inercased natural pas rates to offset                    ,
t t) net          the increased cost of purchased Canadian natural ras, approximately $3,933,000 (See Business-Rgula-                                ,
charges            tion); and synem prowth, liut were adversely affected by weather conditicas and the effect of energy                              j Fixed        conservation by customers.                                                                                                        l 9tals on                                                                                                                                              I Compared with the twelve months ended December 31, 1973, the increase in operating expenses                                  .
for the twelve months ended Scptember 30,1974, of 57,622,000 is attributable principally to increased Septem* '          costs of thermal generation and purchmed power, 51,274.000; gas exploration and deve!opment, I
iber 30,          $773,000; and purcheed natural gas and royahics, 54,378,000 (see Business-Regulation).
    .timated incmne tax expense decieased principally due to changes in operating revenues, expenses and
    >rt-term                                                                                                                                              .
interest charres resulting in a lower taxable income. Allowance for funds used during construction,                                '
ch sale.            which is a nontaxable component of other income, and interest charges increased as a result of the                                ,
Ib as it i d: ring          Company's construction program, and higher rates on borrowed money.                                                                l i
Without                  Year 1973: Tha increa:.e in operating revenues of $12,401,000 for the year 1973 is attributable                              I 13 fixed principaRy to increased electrie and natural p sates granted in October,1972, approximately $9,600,000;                            ,
xcluded        increased natural gas rate > pranted in July,1973, to o! bet the increased cost of purchased Canadian natural                      g ort term                                                                                                                                              g gas, pproxinutely 51,387,000, and system growth.
iff nec The increase in operating expense for the year 1973 of $7,052,000 is attributable principally to                            [
increased costs of thamal penesa*jen and nurchased powct,52.397,000; gas exploration and dese!apment,
                        $927,000, and punhased natcrJ ga<, 52.111,000 The increase in allowance for Innds used during constmetion, which is a nontaxable component of other income, and intaeet charges results piincipally fiom the Compann construction program, and 100 and income        higher rates on borrowed money.
n stock, Year 1972: 'I he inereces in operating sevenues of $7,420.000 and net income of $1,322.000 me nsisting aurdmtaWe piincipa@ to nucasd clanic md natmal ga rates granted October, W72, approdu;neh o forma        S1,800.000, colder than noimal weather dming the in4: calenJar spiarter of 1972, system primth and i a bmis            resumption of normal operations by a major iadustrial enstomer following a strike in the copper iadnstr> be-dditional tween July 1,1971 and Septcmber 22,1971, which adversely alketed resennes and net income la th.;t year.
The decrease in Federal income taxes of 55,619,000 and the inqcase in the provision for deferred taxes on income of 54,949.000 resuh from the payment of back rentals for the use of Indian lands at s                                            1 the Keir hydioelects e projut, as ime fully dmribed in Note I to the Con.olidated        Financial Statements.
9
(        - - -                              _. _ ..              ........      . . _              . _ . _ .. _ _ _ _._
 
m_.,_,..                          ,    _., ..                              .                          ..          .                    -. -. -.. - - - -
El.I.Cl!!!C Ol*l t: MING SININIICS 12 M w I't i                                                                                                  l'rning                                      Year Ended December 31,                                                              .l Septontir r M,                                                                                                                -
1974                  1973            1972                                      1971          1970            1969                  l
                                                                                                                                              ~
filectris l'rergy Genetatsd am! 1*nrsbr,ed (M Kwhl:
I                    St e a m . . . . . . . . . . . . ....            ..  . .. .                  966.75.6          1,13f;.072        ' $ 1R,618                                    654,133      l'69.492        G10,926
                        . Il>dro and intemal ( omf ar.inm. . .                ... ..            _3,s.54,7J t,          3.15 k.f,17    3,#,m/#70                                    3,7f,4.302  1.5(4.195        1,4 70.6h 5
                                  'lotal Genciatal. Nct %tio i Output.                            4,ed l .fil 2        4,29 8.fc. . >  4.5 8 2,u 8                                  4,41 A435    4.401.hn        4.111.613 Porthawd .sid Net irtert hange.. .-
946./s29 , _ je4 3.056                                      63F.574      E04.110          907,494
                                    'lotal Generamt and l'nicha.ed.                          .
                                                                                                  ,I,I  l 7/s r!7 5,738.92            ,_5.241,6185,416 t,84                                          5,057,009 ' 5,208,001        5,019,105 Cornpany Uw,1)i.,n.hrnm and Transminion                                    .                                              .
I.wes ami Unaaounted for                      ...... .                    577,505              531,53 R        575.95 R                                    4k6,724 . 526,84 X            461.903
                                    ' lot:d I:ncrry sales to Public. .. .                    .    ~5 Il6i,424' 4,710.0%fs                4.890/46                                      4,570,285    4,6h l.155      4,557,202 Elett:ic %aln pl Kwh;:
R ew ic nt ul . . . . . . . . . . . . . . . . . . . . . .                1.011,$.11            1,016.742          9Rt.M49                                    912.860      850.321          F 20/.M
      ;                  Conniarual and Sn.all 19dmirial. . . . .                                  1,489,l r,4          1.47x/J.4        1,370.096                                    I,247,263    1,117,I90        1,042,3 S M Inde.to.d- l-d re 4 ar ttunus . . .                  ...  .            1,565.H 14            1,553,4 h 2      I,748.381                                    I 727.698    I,932,239        I,919,103 Pubhc Strces as,J liefbway I ithling. .                        .              46.570              45.253          41.ku i                                    43.180        42,tM2          42.687 I                  Othe: S da to Pnt hv Antborines.                                                It 7,015          90,094            86,426                                    89,146        93.092          95,229
    ]                    Salcs to Other l .!cstris t !'ihrin. . . . . . . . .. ..                    906/.ox              474,345          583.537                                    470,196      573,279          580.371 Sdes in R.niraa.Is ,u .I P:ulways (a) .                                          31,70x              SI,5 N            to.593                                    79,942        72,347          56.734
                                    'lotal la etry S de., to Pubhc. . .                            5,I61,424- 4,710.0> 0                  4.f,90/,86                                    4,570,2E5    4,681.155      4,557,202 Inte r derai ttnent.d                .... .. ..                                12,959              12,t.15          12,739                                      9.517        8.129            7.tJ O
                                    'I mal I.nergy '-stn. ...... .... .                            5,174,3h3            4,722,691        4,903,425                                    4.579,802    4,6h9,4h4      4,564,832 Numi er of rmiumcis t/, soap. for Period):
q                  Re d.f nwl . . .... .....                              .          .        If,1,391              160,758          156.157                                    151.334      147,325          144 E16 Conm.oeial aral Sm 11 Industsid....                .......                    26,179              25,567            24,960                                    24,406        23,900          23/M4 Imhatual-12rre          Cu aomen        . . . . .... .                                17                  17                    18                                  IR          IS              17 Pubhe Street ami Ilihuy Iinhtir'g, ..                                                826                801              762                                        738          699            (,62 Other $11e, la Pubb. ?. , thor sten. . .                .      .
109                108                109                                      110        '110            112 Satn to Other I;lesid: Iltil, ties.                                                                                                                                    50          50              50
                                                                              . .. .                            54                53                    53                                                                          i S.da to Radroads and Radways. . ... .                                                    1                    I                          I                            1            1                1 Inice,J partmental            ... . ...........                                    257                254              254                                        251          249            247        t Total Numbo of Cu,somers . . . . . . .                              191,8i4              187,559          1132,31 4                                  176,908      172,352          169,556        -
Operating Resenues (lheands of Ib!!ars):                                                                                                                                                                          !
RcWdenbal ....... .......                    ....... . .                $ 25,437 $ 24.922 $ 22,173 $ 20,421 5 19,254 $                                                                        18,147        '
Conunercial and Sm:J1 Initustrial. .                                          28,205              27.h07            24,000                                    21 R18        20.232          IB 7t3 q              Industrial-1 arpe Cueomets ( Analysis llelow) . ........ ..... .                                  .              10,44',              10,707            10,115                                    10,123        11.097          10,706 Pullie Mrret aad flirha ar I t-titing. . ..                                        1,583 .            1,557            1,439                                      1,390        1.333            1,257        ,
Other %fes to Pubbe .Wl,..ritk                        .                              604                60M              596                                        647          677            681        i Sain to Other I:lecto; Urdinet                            . .                    4,519              2,257            1,ft49                                    1,503        2.177            1,948        i Sala to R.iih o. ids and I:.ntwap. , . . . .                  ..                    170                276              412                                        429          3M              314        ;
                                  'lotal      .....              .            . . ,                    70,961              68,168            m,501                                      56.131        55.158          51,816          f Other Opnatin,: Revennn.                  .                      .                1.F IN            1.723            1/49                                    . I.3bl        I,381            1.066 TNal Operatic Poenun (IMludo.g                                                                                                                                                                      '
Inicidepartmental)                      .                        72,779              69,E87            62.452                                    57,714      56,539          52,882 Inteidcp.irtmental                                        ,                          219                216              189                                        157          141            130 Total I Ic lor Orc ating Hoenues.                              $ .72.998 5 70.103 $                          td.t. 31 5 57.871 .$ _56.6s0                                      $. 53,012 Analpis of in.imtrial-.l .or, t 'intom:ss I: lee.
tris Rnenan i t hoa. ands of IMims):                                                                                                                                                                        '
hluung and Smeltine a bl. ....                          ..,            $          5,930 $            6,411 $          4,929 $                                  4,112 $      4.591 $        4.412 Flutrofstie /ine i eda tion te).                . ..              .                -                  -
1.435                                    2,221        2.H I          3.147 Ccment I'l mn                              . .... .                                  723                689              615                                        595          572            573 I.umtw a nd l'apcr. .              ... .... ...                    .                1,770              1.727            1.509                                      1.476        1,139            1,237
        )
OilIndutsy                            ... . .....                                  2.020              1.40              1 K27 4                                        1.719        f.414            1.317
                                  'lotal        . .          .. . . ...                        $_ In.4.8 % ) . 10,707 $                    _I0.41 5 $ 10.123 $ ! !.097 $                                              10,706 Averare Annual Restenh d ll c (th h). . . . . . ~ .2                                  6 91                6 124            6.107                                    6.032        5.772          $J.67 Avesaye Annual 1:esideno.d Regrnue per 14wh                                              2.4 t.(            2.45(            2.25(                                      2.24(        2.20t          2.2It
: 3) Salci to raihomk and raihup were discentinueil in July,1971. as a result of the centersion front electrie to diesel 'ocon ..non by the Chicago, Mihvaul.ce. St. Paul & Pacifie Itailroad Company.
(M During Ibe.4, a nonrecurring vle of M19.Mi was made lo *I he Anaconda Aluminum Company, a cuslomer et llanneville Power Administla' ion, due to adverse water conditions in the Pacific Noithwest.                                                                                                              1 (c) In August 1972,The Anaconda Company discontinued its eine operations at Great Falls, Montana.
10
                                                                                                                              - - ~ ~ . - - ~ - ~ -                                                            "'~
            ',,._.    ,              . . . .      . . -        . - . . ~ . - - - . . - ..                                                                                                                                  ='            ,
y
 
a w -..- J                    a .. ~                  . a . .                      _                    ..        s.    . , _. ,,                                                                _,                , , ,
                  .                                                                                                                                                                                                                                                      i NATUltAL GAN Ol'l: RATING STATKTICS
. ,69 .
      -                                                                                                            !2 Sloutin -
I:nded                                              Vr:>r I.vidcal
                                                                                                                                                                                  ' ~ ~ ~ ~ ^'
Dni enher 31,~ - ' ~
                                                                                                                                                ~ ~ ~ ~ ~ ~ ~ -
Spicraten 30, f 0,926                                                                                                                  1971                      1973              1972              1971                    . 1970                    19C1                  !
                                                                                                                                                                    ~                          ~
0.685                                                                                                            ~                      '~                                                                                                          .
iTil.                        N AltikAl, G A% OP!) tall %%;                                                                                                                                                                                                  -
  - 87,494                              Sys:ctn Int.nt f Alithon, of rubic Fect):                                                                                                    2fs 165                  22.529                '22/d8                  i
          ~
19.761                    19.983          170 94
    .9,iT5 -                              Gw Produced                      . . . . . ......
40.t x'i          37114                    31.357                  32.w,                  t G;.s Purcha.cd                                                                37.F62                    39.2 ??
W9                                                6. lM 5,6"3              6.W4                                      6,132                                        !      ,
4.903                                Gas from Storare .                .                . . ...                      6.408                                                                                          -
U 63,6;8                  61.3',5                l 47302                                                                                                                64,031                  . t,4.902          65.577            63.368
                                                  ' Total    .                .. . . .        ..
I
      '0.690 -                          Sales (htdhons of CnNc l-'cet):                                                                                                                13354                    13.3'2                  13.421 22                                                                        .. .. .. ...                            13,964                    14.326          14.638 Resideno.d      ...
8.235            7.753                    7,476                    7,5v2 t,9'388M3:
j                  2              Commercial        ... .            . .              ..          .            E,192                    S.203 27.211            26'?39                    27.393                  25.4e 4 26,167                    26.485
      'q',                                  Indust ial          ...... . ....... . .
i,663          i.ci s                  i.573                      i.650 G..,unrnent ai.a stenwina                            ..                        i .6 4                    i.667
      ,,,3 7 ,                                                                                                                                      6,911              7.5N1            7,2'>9                    7.305                    7,24S Sales to Other G.n Unhtw.                                .. .                  6.830 e6.734 -
57,592          59,330            56.563                  57,059                  55,293                  '
57.202                                      Total Gas Snkl to Public . .                                          56.763 32                      128                  35            231                      855                        29
* 7.:6E                              Interdep nment.it                ,          ....
s4,832                                                                                                                                                                          56,94                    57.9'4                  55.122                j 56,795                    57,720          59.365 Subtotal S:dcs            ..          .          . ..
i,700            S.661                    6.975                    b70?
8,799                    9,846 44.416                              Gas to Storarc                    .. ... . ..
23.683                                                                                                            65,594                    67,566          6P.065            65,455                  64,919                  64.031 17
* Total Sales and Storace . .
66'                        Nurnber of Custemen (Average for ggj 50 PC'I*l):                                                                                            83,411            81.273            78.440                    75,719                73.572                f Residential .              .      ... ..              ... .              85.673 3                                                                                                    10,328                    9,> 6S              9,440          S,155                    8,9F 5                    S.E W            t 247                          Commerci.d              . . ...                        .... .
616                        611            .
562 368                      561                                SS9 Industrial ..    ...                  ...            .      ..
4" g,3g                              Go.crnynt and .'.innicipal. . . . . . . .                                            15                        15                  15                  15                  15                        16          [
6                        6                  6                    6                    6                        6          i Other Gas '.:tdi:ie;          .                ..          . ..
IS 151                                                                                                                      19                        19                  18                  18                  19
        ;$.763                              Interdepartmental .                      . .. .. ...                                                                                                                                    ~~~~~~~~
96,609                    94.380            91.314            SN:53                    85,360                  E 3,072              -
g ;06                                      Total                  . ... . . ...
k I I57                          Opentini: Revenuu (Thousands of                                                                                                                                                                                      i 081                              Doll.vs):                                                                                                          512395            $11.551                  $ 11.428                !!0.744 I *48                            Residential .                      .            ..                .      514.373                  514.665                                                                                                        [
6,080                    6.261              5,37;          4.570                    4,7 : 1                    4,119            +
      - _I.#  3
                        .                    Comme cial                            . ...... .
9.250                      8.535 14,755                    11,643              " 67 0          F.9 30 Indets hi f; 316                                                                      .....      ... ..
F95                        s01                673              630                    6:2                        578            f
            ' '46                            Governrvot anr! alimieip:d                                . ..
3.940              3.666          3.372                    3,371                      3,135 Sales to Odur Utd; ties .                .          .          .            ~ 4.203 f2.$5'                                                                                                            41,106                    37,315            32.379          29, 13                  29,402                  27,40s              ;
                ;30 _
Total G.n Sersiec Rcsenues 159                      til                115              129                    115                        101          ;
Other Gas Operating Re.senues fl.._AII Total Oneratinc: Revenues                                                                                          32,.N4          29.542                  29,517                  27,5t9                !
(Eselthlme Interdepartmental).                                    41,265                    37.426 4 432                                                                                                                24                      -16                17                    71              246                          14            ;
3.14-                            Interdep.u tmental                . . . .. .
5 *.s                                                                                                                                              $32.511                                                            527.523                  l
            ;23.-
Total Gas Kesenues                                  . .          .S41,289..
                                                                                                                                                  $ 37.472-        ._                524.41_3
                                                                                                                                                                                        - . _ _                _529.763 .
            .g'.                                                                                                                                          171                ISO                177                  176                      153 Averare Annual Residential the (hlef!                                              163 t ::.;q
            ..::.                            AserJrc Annu.d I:csidential Resenue                                                                                          50.59          $0.86                    $0.S 6                    $0.S0            !
Per lilef .                        ..... .... .                              51.03                    $ 1.02
;                                                                                                                                                                                                                                                                  l f %.c
      ;c @s.
                                                * 'll.. volume of natural gas purehased and produced is stated at a fised basis while the wtame of natural gas sold is stated at varying pressure bases. Ihe ditierent standards of mea <urement iesuh in                                                                                                                    i q.:ay, t                        - figures makmg it appear that more gas was sold and stored than was purchased . tad produced. even                                                                                                                        i    '
though there is a small loss between points of input and sale.                                                                                                                                                            j a                                                                                                                                                                                                                                                          .-
        * .:I r.L i.
11
('          --        _ . ,                      . , . . . .                              .          . _ . _ ,        ...              , , . . . . , . . _ . . .                      _ _ _ , _ . , _ _ , . _ .
l l
4-.
i  -                                                                                  i g.i-4    g      g          ---g                    - + + - .
mm .        -go  e  .e%    -+-=      7q-m9 --y  . - -
 
e aos amm. . se e. 6.ws.es , . , e ,. .                  e e e man o.  ,. . . = -      -
j e us0 e
ausumemus so  m* e ** 8" see me                                          8 anenammum n em esummmun                                                                          8
                                                                                .amme,    ensummuum 4
een em mum e as am mune a.                                                                                                                              f l                                l                                                                            %                                                                                    ./
5
                                                                                                                          \                                                                              .
i                                                                                    \                                                                            l                                    >-
y-I.
i n                                                                                            -'        ::
I 8
t i
I l
4                                    .-
                                                                                                                                                  \
I                                  .
4 t,                                                                                                        }-                                                                                        o t                                  r y
3                                                                                                                              :                                  3
      ,                                                              -                                                                                  (              5                                  a
                                                                                ,4 gr,1~ *'$.?                                                            fs                                                  /                                  DC l
l                                          h, s%..
F leJ 1
i sgaf.
8                                                                                                          ~..
                                                                                  $*        *) ; .*
[                                                                                                  I,                    $$m
                                                                                                                                                        \n.,l, 5
I                              }
                                                                                                - {*
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                                                                                                                                                                              .                                  8
                                              *                **                                    ,i;. .                        ,y,'                                              .
                                                                                                                                                                                                      *!                :                        H ff.I!:
l                                                                                                      '
                                                                                                                                                                          %,2 :". .. --a,- . .,
ii                        a
                                                                                                                                                                                                            ; ~ ,. . .
o O'h                                                      -
l'
                                                                                                                                                      .&:.                gl. \                            ,
g.ma 4
e
                                                                                                                                                      .                                                  /
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1                                                          .                                                        ,                                                        \
                                                                                                                                                                                                            $ r; l                  .
f*                                      ,.
g (6 9 Y'
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I*                                        ~
                                                                                                                              ~)\                                                I,' l
                                                                                                                                  &La.:. }s                                                        z::
                                              #I,                f/r-4 i
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f.
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                                                                                                                                                                                        ,; .      N              i g
f.s Q .4,                                                                                                                    V.
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J
                                      \t**                        o                                                                                                              .
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            !                                  *L1, ~;c:b            A .--,.,*                    A; - g. :s-                      '. . h~,{e,*;
                                                                                                                                              , ,,\s          :3                ./.
                                                                                                                                                                                . . 0,                    ,
                                                                                                                                                                                                                                    'l e
                                                                                                *A          l0                      ;
b                  k'' /, I)] " e .
                                                                                                                                              ; %'':m,.A' W!..                                                        'h.\p:
                                                            ,                                  .&          ~
e
            ,                                                                                  p 1.h                                            }
I s      ~- e.                            *
                                                    // s 4            i 3                                          O                            /~. ,-
* p!,/            '{%        ,        ,
                                                                                                                                                      ' *.c.;l t. %. s                              .s                V
                                                                                %g                                                        ,,                                            %
f
                                                                                                                                                          ,,5, p~/
n..?
* f o                                                                                              ,,7.
(                                                                                                                                                                                                                                                    '
                                                                                                                                      ..). ,.z
                                                                                                                                          ~
[l. .$. f ;.
                                                      , '~Y( r '.'4 g.*'' - -u ,c,  i I.          ..
4 r--.
NW
                                                                                                                                                                            },&.'h-., c r ;;:t V
6,:            )*            '
                                                                                                                    /
                                                                                                                    )                    1 J                                                                                                                s:j i;:;. .
                                                                          **t                                  ,.          /                                                                                                                                    .'
                                                                                                                                                                                                                                                              .(
a li.l t..
I',/ f                                                                                                                                  y,n"f  I, I
I i
                                                                              <            f "i 'J          'd k --                      ~ ./ ,, s'"
* l l                                                                                                                                                                                                                                                                                          I I
i,                                                                                                                                                  12 t
a
                                                                                                                                                                                                                                                                          # "'* 9 s ay,
                                                                                                                                                                                                                            ''O'g.g I                    *=
                                                                                                                        'M,-      p.
4 e      q
                                                            *O'O  e f                      .. - . ..
W
  ,                            -                                                                ,                                        ,.              . . . -                          ,_          r            .,            , , _ . . _ . . , , , , ,                          .
 
W% -J-                      - ... -.
                                                                                                                                                                                                            !      4
                                                                                                                                                                                                              ,      1 5      .
I
                                                                                                ~ IlUSINESS              ,
I General:        The Company's service area comprises 96,000 square miles or approximately                                                                          65% iof          th land area of the State of Montana. The estimated 1974 population of tlic Company's service                                                                                          j        a 587,000 or 82.4% of the total population of the State.
The Company provides electric service in 184 communities and the rural areas surrounding and in YellowstoneNNat. nal Park; natural pas service in 90 communities at retail and 6 at wholesa d
water service in 2 conununitics. The Company also sells firm power at wholesale, supplying the pa requircrnents of 9 rural electric co-operatises and the total requirements of 3 rural electri j
distributing companies at Great Falls, Cut Bank and Shelby, The Company sells gas at wholesale to Montana; to a pipeline company in northern Montana, and to Canadian distribution systemsl se communitics of Coutts and Milk River, Alberta.                                                                                                                                      ;
The sources of (1) operating revenues, and (2) operating income before income taxes, attributa to cach line of business accounting for 10% or nmre of the comolidated operating revenu:s and operating income during the 12 months ended September 30,1974 and the years 1969' thr were as follows:                                                12 Monsh, l.
Ituded                            Year Ended December 31.
Septonher 30,                                                            1970            1969                          :
1974.            1973        1972        1971 I-I                        Electric Operationst                                                                                              65 %                65 %            65 %
63 %                65 %      65 %
Operating Revenues . . . . . . . . . . . . . .                                                    76 %        76 %                75 %            73 %
80 %                76 %
Operating Income Before Income Taxes f
Natural Gas Operations:                                                                                          34 %                34 %            34 %
* 36 %                35 %      34 %
j Operating Revenues . . . . . . . . . . . . .
19 %              24G        23 %        23 %                24 %            26 %                          i f
Operating Income Before Income Taxes                                                                                                                                            I The economy of Montana is diversified. Agriculture and livestock account for approximately o the annual value of production. Other major factors in the economy include nonferrous metal mining and refinin;;; coal mining; forest products; petroleum icfining, and tourism. For the 12 months smeltin3                                industrial customers amanted for 29% of the Company's total operating ended September 30. 1974, revenues, including 10A% accounted for by the operations of The Anaconda Company.
Regulation:      The Company's public utility busium in the State of Montana is subject to the juris-                                                                        i diction of the Public Service Commis;icn of Montana ("PSC") as to sates, . services issuance of! sec and accounting. The Federal power Commission rFPC") has jurisdiction pur3uant to the Federal Powe Act over the Comp.my as a licensee of hydrocicetric developments (Sce " Electric Properties") and                                                                                  j as public utility engaged in the transmission and sale of electric power in interstate conuner no juri< diction over the Company's natural gas or water _ sales or over the sale of electric pow The importation of natural pas from Canada sequires approval by tk Alberta Energy Resources                                                                                        l C servation Hoaid, the National Energy Board of Canada and the FPC. The PSC, on .lanuary 6,1975 will be recomfituted, the present threc. member conuuission, elected statewide, being replaced by a l                                                                                '
five. member commiwion, with each member elected from one of live districts in the State of Montana.
The Company's experience has been that the cost of purchned Montana gas has increased from 13.75v per Mef in 1972 to 40c per Mcf at the iwsent time and that the co>t of purchased Canadian ga which constitutes moie than 80G of the Company gas supp!y. has increased from unproximately 24v per Met m 1972, to approximately 649 per Ef at the present time.
13
(
                                                                                                                      ,      ,    ,q,      ,            .
            - =                -**f*P_.,p          ,.^ . .>. . *w * - up om se .. . . e -e    e,
            =-w.                    v-  W-+--                    -      - -
g    y+-      - ry -
y                  e p vir ey  ---  -ir- ar=we-- -
(wa-1  --TM -t Pe  v-yy=.-t.-f
 
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The Company's basic ein tric and ;tas sa:e chs dales wuc adiowd in O tober,1972. In July,1973, the pSC authmi/cd a procedure for adjm tin." ras rates to intinoptib!c industrial venti.ut customers on a monthly b.ms and to other non-residenti.d customer, on a quasterly lunis, to o!! sci the in:: cased cost of purch.c,cd Canadian gas.
q In April,1974, the Company applied to the PSC for further authori/ation to adjust io, rates to flow through to all em.tomus the increased onst of pmehawd pas and the increa ed royahy exps nw of produced ras, both in Canada and Mont;ma, which increased co,t was projected at that time by the Company to be at least $12,0n0,000 en an am.urd basis commencing July 1, '974. On Aucue 30,1974, the PSC, by majority votr, franted the Comp.my's application and authmized a continuing . ate alpnt.
1                ment procedme wherchy the rates of interruptib:e industrial contract encomers are increawd or decrewed on a monthly bris beginning with gas dchwies in July,1974, and the rules of all oth.a customer are increased or decreawd on a quarterly basis ef!.ctive with meter readings oa and after Octoh r 1,1974.
to fimv through as actual increases or decreases in purchawd gas costs and royaity exp.nses 'this i                adjustment procedore so;ierseded that authmized by the July,1973, order.1:or the three months ended September 30, 1974, the Company co!LetcJ approximately 51,800,000 from its interruptih!c indusuia!
contract custom (rs and for the month of Oc tober,1974, approximately 51.020.000 from ali customers by these rate raljustments.
f
  !                      Separate ir A actions by the Montana Com.umer Counsel, a state egency, and the dissenting member of the PM *, challenti np. the vt .Jity of the PSC order, have been fi!cd in a State District Court.
                  'Ihc Company .s inicrvened as a defend.mt in both cases in suppoit of the PSC decision. I cmporary restraining ordas presenting the Company I om placing the new rates in dIcet were dissohed at a j          hearing on October 11, 1974, by the pic iding judge, who alloeced the rares to become effective immediately, subject to refund by the Company if directed to do so by nnal court order. Further trial s                proceedings are being conducted by the proiding judge. 'Ihe Company c..nnot predict the outcome of this litigation, bm anticipates prompt disposition of these caw if the Connnaion's order should not b;            )
sustained, it wouid materially atiect the Comp.my's resennes and earnings.
The Canadian Govs mment has ordertd that the price of natural pas imported from Canada, currently costing the Company abaat 64c pu Mcf.            incr6awJ to 51 per million 13tu (approsimately $1 J
per Mcf), efIcetive January 1,1975. (See "i;us.              .Natm.d Gas". ) Unless the PSC order should be invalidated, the Company exp; cts to now through this incicawd g:n expense to its customas by PSC approval of incicasi d sate schednics pursn..nt to the rate adjustment procedure establiWJ by the August 30,1974 mdt r. I aihne to ucmer thn e n espense, estimated at $15,000.000 on an ananal basis, I                would have a snaterial atheise cILet en the Comp.my's earning.,
The Company's electric revenue, for the 12 months endeil September 30,19,4, aseiaged 2.46v per kwh for residential service,2.22p per Lah for commercial senice and 0.h per kwh f .; indusuial scrVICc.
For the 12 months ended September 30, 1974, the Cempany's average sesenue from the sale of natural gas was $1.03 pe Mef for residential service, S4v per def for commercial seniec and 56v per Mcf for indust ial service.
Electric Properties:        The Comp.my's fully integrated and interconnet.ed cleenic system extends through the western two. thirds of Mont.ma. Reliability of senice u enhanced by the location of h3 dro-clectrie generation on four separate watersheds with ditierent precipitation characteristies, augmented by i
thermal generation.                                                                                                  !
The maximum demand on the Company's electric system for the 12 months ended Seriember 30,                      l 1974, was S97,000 kw on January 10,1974. Total capability of the Company's electrie system on that 14
                                                                                                                                      \
s _ _ .._ .. _._          -      .    . . _
 
  ~.                                          _
                        ,-.,        Y
      -^'
                                                                                                                                                                                                            .i
    .,.                                                                                                                                                                                                    h
:j-
* date was 1,025,000 kw, including 769,000 Lw prmidcd by the Company's pencrating facilities and 256,000 -
d;                                                                                                                                                                                                        !
                                  - > w frorn hrm power purchases, exchance arrant 4 ment'. and whesling payments in power. 'I he Company's
                                  -lyncratiny,capabihty is provided principally by 13 hydroelectric luojects with total capability of520.000 j'
t l 1-                          . kw and two thermal generating plants with total capability of 2&0tM Lw. 'lhe hydroclectric projects "C                            nre licensed by the 1 PC. The license for the MyLtic 1. ate projeci (11,500 kw) expired in 190. Since                                                                    !'
ac                          then,it has been senewed annually pending action na the Company'.s application for renewal. "I he licensel l i
      'O                          - for the Thompson Fath project (40,000 kw) expires in 1975, and the _ Comp.upy has applied for sentwat d-                            mider the Fedtral Power Act. The license for the Kerr project (180,000 Lw) c pires in 1980. All other              .
cd      j{
licenses expire subsequent to 1988. (Sec Note 6 to the Consolidated Financia! Statements.)                                                                              {.
I Hrough constrnetion of additional generatint; facilities, rcp!acement and exchange agreements and .                                                              !
y_                          firm power purcha,cs, the Company expects to have sufhcient c" ability to meet the projected demands
      .,;          !              of its customers and maintain reserves of at least 15% of firm demand. (See " Future Generation?)
Western Energy has adequate supplies of low-sulfur coal to supply the Company's projected therm:d                                                                        l
      ]              ,
rcn: ration requirements (Sec " Coal Propcrties.")
                    !                    . During the'12 months ended September 30,1974, the sources of the Company's generation were:                                                                      3 s
      .:; .                      . hydio 79.1%, coal 18.7% gas 1.5% and oil 0.7%. The Company's coal costs have been as follows:                                                                          'l 12 Months
      ~'
Endul                                                                                                          I Tj                                                                                  kt)funkt so,
      ;1                                                                                        1974                    1973          1972          1971                    1970        1969 -          ,
        .ve                                                                                                                          18.3p          17.4p                                18.2#
Average cost per million htu's . . . . . . . .            23.3v                    19.6#                                                17.2 f .                        ;
                                                                                                                                                                                          $3.16            '
                                                                                              $4.07                    S3.38        S3.16          53.01                  $2.97
:i                        Average cost per ton (delivered) , . . . . .
i
      .c The Company participates with Pacine Power & i.ight Company, Portland G:neral Electric Company
(                          and The Washington Water Power Company in the owner > hip of Pacific Northwest Power Comp.iny,                                                                          3 g                        - which, with the Washington Public Power Supply System, b.:s applied for an FPC license to build and
;                                                                                                                                                                                                            1 ge            y          operate a hydroelectric project en the hiiddle Snake River betwcs n Idaho and Greyn. An FPC administra-y                              live law judge has issued a decision imd order granting the appheants a license to construct the                                                                          .
2,700,000.kw Pleasant Valley-blountain Sheep Proicct on or after September 11,1975, unless 1.gislation
                      .              has been enacted prior to that dme, classifying the h!iddle Snake River as a wild or scenic river or                                                                      ,
i declaring a moratorium on dam construction in th t stretch of the river. The maner is pending before the i        .,
l'PC on exceptions to the original decision and the outcome is not prewntly determinable. I.egi>1ation 3
to preclude any project on this portion of the Snake River is pending in Congre s.                                                                                      j I
Fufnre Generation: The Company and Puget Sound Power & I.ight Company ("Pugct") are jointly 3d                              constructing two 330,000-kw mine-meuth generating units at Cohtrip, in southeastern Alentana. Applica.
De-                          tions are pendiup, I efore the Montana lloard of Natural Resoutseg. for licenses required to construct                                                                    ,
transmission lines necewary.to the operation of these units. The Company and Puget will have cqual ownership of and eati upon the output of these unitt 'Ihe Company will operate the units, and Western                                                                    ;  '
O                            linergy will supply their total coal requirements. The Company and Puget, together with The Washincton                                                                  ,
O                            Water Power Company, Portland General lilectrie Company and Pacilie Power & l.ight Company, propose                                                                      :
* OD                            to consuuet two additional 700.000-Lw generating units at the Cohtrip site, with associated tr.msmission                                                                ;
facilities, it is anticipated that Western Energy will also supply t' e total coal requirem' ems of these                                                                i r .M.                            units. Westein linergy has dedicated to all font units reservis which it believes to be sumeient for                                                                    f
      . 4-                        theit operation during their useful lives. These companies have applications pending before alTropriate                                                                  j l
15                                                                                                  l l
      ,,c [ .-              ~ . -                                                                    ..m.              ..        , , . .  ..,.,m,                _,            . , . _ ,            ,, , ,
7.**----..-.        . , .. . .-
M                                            v-.          --*ww              wy          -%--,e      - - , - - +      .--+-r  - . - -            - , . . - - , . , . - -.    ,        ----..c          y
 
f i
I                                                                                                                                      !
  <          State and Federal agencics for permits to construct and operate the units and associated facilitics. Infor-mation with respect to the new generation is set forth in thu following tab!c:                                                  l I
Compan3 Sh. ire h
E :tinuted    Net Datt of    Capability                    F.stimatt d          Cost      i Fuct        Ope ration    51W        I*t rcent            Co .t            pt r liW July,1975      330          50r;i, q
Colstrip No. I*                        Coal                                                  $111.000,000          533n      '
Co! strip No. 2" .          .          Coal      July,1976      330          50 %
i Cohtrip No. 3"                          Coal          1978        700 j                                                                                        30'4 }        $156,162,000          $372 Colsuip No. 4"        .                Coa!          1979        700          30"i)
* Under construction.
              " Planned.
I                Rc.';ional Interconnections: The Company's c!cctric system forms an integral part of the Northwest Power Pool conshting of the major clectric suppliers in the Unite i States Pacifie Northwest and 13ritish Columbia, Canada. The Company also is a party to the Pacific Northwest Coordinati m Agree-ment integrating clectric and hydraulic operations of the 16 parties as:winted with nerating facilities                          '
in the Pacific Northwest; is a member of the Western systems Coordinating Council organized by 38 c!cctric systems in the 13 western states ami British Columbia to assure reliability of operations and service to their customers, and is a party to the Intercompany Pool Agreement for the coordination of load and resource planning, allocation of energy and tiansmission opcrations among seven utilitics i
in Washington, Oregon, Idaho, h!ontana, Wyoming and Utah. The Company participates in an inter-connection agreement with 'lhe Washington Water Power Company, Idaho Power Company, Utah Power k 1;ght Company and Pacific Power & Light Company, providing for the sharing of transmission                            {
capacity of certain lines on their respective interconnected splems and emergency standby power for i        cach company. The Company and the United States llureau of Reclamation have agreements which provide for the use of execss capacity of certain lines on cach party's system for the transmioion of j
power cast of the Continental Divide in Montsna and for the firm use of the Company's transmi sien j        lines to deliver Government pows r from the Canyon Ferry hydroelectrie project to the Gourmnent's northein Montana transmission system and fram Great l'alk to Cut liank, Montana. The Company also has agreements for the mutual u e of excess capacity of ctriain lines of the Company and !!onnesille                          j 7        Power Admk.in ation for the transmission of power west of the Continental Divide.                                                  l t
  '                                                                                                                                              I i-                  Natural Gas: More than 80% of the Companfs gas supply comes fre'n Canada and is subj et                                    t i            to export permits granted by the Provincial and Federal gmernments in Canada and import p.imes granted by the l'I'C. As of December 31, 1973. the Company's total gas reserves were 962.000.000
  ,            Mcf. Of this amount. 144.000.000 Mcf, located in Montana, were encd by the Company; 254.000.000 Mcf. located in Alberta, Canada, were owned by Canadian 41ontana Gas; 46.000,000 Mef, located in                                    ,
j Montana, were owned by other.s and dedicated to the Company, and SIS,000,000 Mcf. located in i        Alberta, were owncil by others and dedicated to Canadi.mafontana Pipe 1 ine. Gas regnirements fo the                              l
      !      12 months ended September 30.1974, totaled 56.S00.000 Mef, of which the Company and Canadian-                                      l Montana Gas produced 31G and purchased the balance.
Annual purchmes from Alberta & Southern Gas Comp.my, I.t I., are authoriud at 29.200.000 Mcf under National lintrgy lloard of Canada CNlill") heenses whici. have expiration dates from                                    j 1985 to 1993.                                                                                                                      a 16                                                                      ,
f
 
                  -...~ . .                            2. __    . . .. . c          . . .            . . , , , _ _ _ _
emamuna.-                            ,.    .  .
l
(                    Canadian-Montana Pipe Line'has :Optied to NEll for authority to export an additional 20,000 Mcf t
  .                                                                                                The Company cannot predict the                    !j daily, to be purcimed :hom Alberta & Southern Gas Compar.y.                                                                                    '
cutcome of this application. An Alberta permit for the expmt, and an IPC authorization for the
  ~
j          import, of tids gas have been obtained.                                                                                          i Canadian-Montana Pipe Line is exporting to the Company a maximum of 99,460 Mcf per
  '.                                              Mef annually of gav purcham! from Canadian-Montana Gas 'in south-                                    ['
day and - 19,892,000 castern Alberta at Aden, Alberta, punuant to authwisions from ti,e NEli and the Alberta Energy                                    '
Resources Conservation iloard ("ERCll') which v.i!! expire May 14, 1975. Import authoriuion for*
this gas, issued by the FPC, will expire on May 10,1975. The                          Company at 'Aden            in January,1974, for a period ending            applie i
the FPC for a new authorization to continue the importation of p                                                                  I December 31,1992, llearings have been completed and a decision by the FPC is expected within                                a i
reasonably brief period. In 1972, Canadian-Monana Pipe 1.ine applied to the ERCll for a perm {-                                      t to continue the exportation of ga6 at Ad.n for a peric d ending December 31,1992. In March,1973                                  I 1:
ERCll recommended a new permit be iwued as applied fer, but the 1.ieutenant Governor in Counc                                    [
date has not acted on this recommendation. On May 14.197 the ERCil, with the approval of the
:d                                                                                            ahorizing a cominuation of the Ad:n                    .
Licutenant Govcinor in Council, issued a temportry permit                                                                        '
14, 1975. Canadian-Montana Pipe 1.ine, in Nosember,1973, applied O                    cxport for one year ending May to the NEll for a new liceme authorizing the centinuation of the exporution of gas at Aden for a period                          ,
38                                                                                                                                                    !
  -d                  ending December 31,191.. Th;., appli_eation has not been set for hearing. The NEll, in May,1974 with the approval of the Governor in Council, issued a temporary license authorizing a continuation d
  .es of the Aden export until May 14, 1975.                                                                                              '
The Company anticipates its cost of gas purchased from Canadian sources will increr.se materiall
  ?0                    in the future. The Canadian Government has amend:d natural gas export licenses, raising the Compan3's border price for n::tural gas imported frora Canada to 51 per million litu (approximately $1 per Mef),                          f l                                                    _
cffective January 1,1975. The Company currently p >s approximately 649 per Mcf for the gas it imports '
[
Q
  *-                    from Canada. Unless the PSC rate adju>tment order of August 30,1974, shouhl be invalidated, the Com.
CI                  pany expects to flow through this increased pas c.spense to its cudomers by PSC approval of jinc rate schedoles pursuant to procedures established by such order. (See " flu 3iness-Regulation".)
  ?:s                                                                                                                                                      !
The NEll began hearings in Cal;ary, Alberu, November 13, 1974, to determine Canadian pas                                    I      '
  ,.y                                                                                                                        The NEll has requirements, supply and deliserability and amoants asailaNe for espeit, if any.
3        ,
indicated that it will take no action on export appl eations pending before it until these hearings hase bec~n completed and a report issued. The Compc.,y cannot predict the outcome of the proceedmps befure the NEll, the liRCil or the FPC. If any of these applications shou!J uhimattiy be denied, the                              .I
: v.      i
    -s                    Company's ability to meet the needs of some of its eustomers would be impaired.
cuuomers are served from the Company's                            l5 Approximately 96% of the Company's natural ps                                                                                i
{'{0                  main integrated transmission :,ystem. The semainder are served from a separate spiem. Gas storage
      *0-
* 1 :,                    facilities are located in depleted prodnetion areas in four regions oT Montana. Thew facilities enaNe
    !0        !
the Company dming the summer months to tale and store gas in excess of system load requirements M
* and to distribute such gas during winter periods of peak demand.
  .ic-Coal Properties: Western Energy has coal mining leases coscring approximately 610 million                                    l recoverable tons of low sulphur (averaging 0.7% by weight) coal resaves at Celstrip in southeastern                                '
(W        j Montana where Western linergy conduets surface mining operations. Approximately 490 million tons rce        i
                '          of these reserves are conunitted to present contrach, including those for the Company's existing coal. fined 17
      '(  -                                    _ . . . . . . _ _ _ . , _ . . _ . .  .      _ _ _ .    . . . _ . _ , . .        . _ . _ . .          _ ,
l
 
r i,
i plant and Cohtric units Nm.1 and 2, am! thn.c anticil .it d for Cohtiin units Nos. 3 and 4. In add. tion.
Western Entrgy !w. pcmime l' dsrai miaior lem.c applicata ns oneri            lar,Js at Col anp emmated by J
4 contain appmunuhly it.o milhon acmciable tons of he.v .ulp'anr t avriapng k7',i by v.echt) c.ul reserves. Westein linciry cannot state llr; cAtent to which or '.'. hen it will oh'Wa mining h m putsuat to i
the appliotions. Westein I nergy aim luc. co.d noning bcases uncring. knd, .a cast:rn mni.u a w hs ; it has estahlbhed contain approximately 250 mill;..n tw of low sn! phar : acre g le , t h .m l ' . I;. v. , u ) .
surf ace-mineable coal in place. 'lhe uhnt to wiih thh tonnapc wi'i he d.:erm i ed to be r a on c Y commercially-miocable uul depends opon aJda;onal expletation, study at ; an@is and up f u me demand for coal. 'Ihe Comp.my belieses th..t Westein Ek:ry has su.atis ' co. ' und.r mi ; ag Ic. v s l              to snore than satisfy the Coaipany's lo:y'.-sante gent rann_ rcquircm.nts in aJ.'itiva, & Sestcin Resources Co., a wholly o.vncd solnidiary of W stern Ia.errt helJs underch ned csal sichts in %3c;ning and Tuas v.hich aic in s.nioni stages of c.sploiaiion, study and an.d) is.
At Cohtrip, Watcrn lintrpy mine, coal and, after crn hinr, sciis it without furth:r preporraion, We st er n principally for uw by electric utditi.s,incimhnp the Comp.my, in steam-c!cetri: renerating phmts.
lintrgy presently estim.c. t!ut, dming 19 74, it wi:t minc and scil 3.100 00 tons. M est m I? . rey further estiinates that its production daiing 1975 will be mme than 5,000.WO tens as deineries under
      !                long-tcim contrasts are inidecd. "roduction in 1977 and theicafter n1w is :stimahd at approxinu;:ly 13,000,000 tons per 3c.u. Nev. mining inachinery, includmg two 60. cane.3 ard draglin: and unit-train loadout facilities, is bein". installed m Cobuip to acconnnodate thi, incr.ased production 'I he cmp!oy e ,
engaged in mining operatka, at Cohuip aie scprc'ented by the Operating Fnaneers Unien, pu uar.t to a I                contract exhnding to '1.nch of 1975. Wot.in lincrpy undeipales that thh comract will b. ienewed for a period of m.nc than onc year at inucased wage leuh.
Western F.ncrgn minin; operations are subject to, and in substanthd compliance with, cxhting                  8 State and Federal environmental and hahh and safety law.s and regalatioas. Westein En.g stain, annual peimits to condnet mining cperations as tegnired by \lontana law. Legislation to refn!a'e surf ace The Senate mining is being considered by a joint $>nate llon>e conference comminee ef the Congiew.
j
      ,                has passed a bill which, in addnion to regulating surface mining centain a provisioa whkh wonfJ withdraw from surface nuning all coal owned by the F(daa! Govctmnent unLn the Federaf Gavernment also owns the related land suiface. The llou'e of Peprosmathes has paswd a bin whi.h also regulates surf ace mining and this legislation pmuda iiut. b. fore minim can be n:'denaken. the w rinen i,oment of j
the surf ase owmi must be channed. I he .toiat Conicicoc Cononittec lus in 5cated that neitL c of tha provisions is ancptable to a majoiity e the comnuuee. t he Company c.nua't i redict what, d any, law wH1 resnh; bowcur,if the Senate proshion is mcorpoi.ccJ in the law and is appheabic to the ep.uion<.
of Western 1:n-igy at ('ohtop, it wouhl have an adwise etTeet upon oper. ..ons at that lot ation ince almost 30'; of the Cohtiip resenes piewntly nnder kase wouhl be subject to withdrawal and th. cost
      '                of mining the remainder would be materi.div increased. and if the lionw luesision allowing the smiace owne to esticise control mer the mining of coal undeinca;h his la+nd is accepted and such presision is l
applicable to Westein I:ncigy. it, too. woulJ have a sonilar asherse ellect u,'on long-team operations at that location sim e most et the ses.no subject to withdiawal wouhl be subget to such control. I utme desclopment of Wotein I ncipfs other ioenes in eastan Watana and tho'e of Northwestein Resources Co. in Wyoming and Texas wouhl not be a!fected by the wohdrawal paniHons of the Senate bdi since                    .
none of sush out ieselve . are covered by l'cden.d lemes. tSce also "liosiacss-1:nviromnent.")                      )
The Comiuny's investment in Westein Fncrry is los than 10'J of the con olidated net avcts of the Company and its subsidiaiio.1.ikcwise, the sales and income of Wotcrn Energy are lesi than 10'J.
i                                                                    18 s
                                                                                        . .          . .  . . _ . . . .    . ~ . .      .
          \ , ...        ..__      . _      ...      . _ . . .
 
__          ,_ m mamassp-~ J                  . . . .uu .. _ . . . . . .. s, . .          . .    . . ,        .
i i
i
:d                ''/ %- consolidated sales and inanne. of the Comp:my and it:: sub..idianics. While inacased future pio-          '
Mr            -
6.N,n will require additional inve'.tmua by Etere linergy (Sec "the id Pioceeds and Comtruction
::N.              Pr :: tam"), the Company does not anticipate that it. investment in We tern Energy v ill exceed 10%                    '
                      '/ te.c consolidakd net a:. sets of the Companylmd its r.ubsidiaries in the foreseeable future.                l
:                                                                                                                            t l
Emironment: The Company is subject to envhunnental regulations by Federal and State authorities.
                ~
i:~.
W                  .,8% ding regulatinat under the Federal Clean Air Act and the Federal Water Po!!ution Control Act
    .00                Ar .ndments of 1972. The Company does not believe'that material expenditures will be required under W.                ( ar*nt interpretations of applicable envininmental laws and regulatiom for addition.d pollution centro i    j t have been designed to 72 7:              . % apment for existing facilities. All of the Company's emrent comtruct on pro ec s 8:.li -              4.rapiy with current interpretations of the emironmemal laws and regulations applicable to them a un of pollution control facilities, which'is sub*mtid, is included in the construction budgets for 1% projects. (See "the of Proceeds and Construction Program.")
a
  #2:                        Air quality stan tards adopted by the State of Montana have been disapproved by the Environm W                    Pr*ction Agency tIPA) to the extent that they lack procedures or segulations for pieventing significan
  . :::                derioration of air quality in partium of the State where air quali y h now better than the national
    .t:0 Unalards promulgated by the EPA. Neither the Clean Air Act nor current regulations of the EPA contain        ,
n.:              kn/ definition of "3irnificant deterioration" or any standards by which it may be determined to have        >
                        %rred. The i PA has propowd new regulatium with respect to this matter. The Cornpany cannot                            l
: cess
: *.3 m              br dict the impact of these regubtions or other future polhpion control regulations on the Cohtrip            ,
                        % rating complex or on its existing facilities.                                                              l od                                                                                                                                1 Legal and administrative proceedings have been instituted involving the Colstrip Fenerating complex 09;                  arul the operations of Western Energy. In June,1973, tha Sierra Club and others instituted a suit in the linited States District Court for the District of Colambia against the Secretary of the Interior and other
:(
: 2. .2e c Ptdcral o!!icials asking that coal development in a four state area, including Montana, be suspended i: 2te                ptading a compichensive study and cavitomnental impact report. The Company has intervened in the i
S:dd                c:re. In Febinary,1974, the Court entered a summary judgment in favor of the defendants, and an
:::nt                appeal has been laten by plainti!Is to the Court of Appeak for the District of Columbh. The Court of            ,
re.2tes -            Appeah has remanded the case to the District Contt for a Imther evidentiary hearing which was hdd i
::: of              on November 6,1974. In July,1973, lhi!Ialo Rapids Irrigation District and other> instituted a pro-
    . 2ese              tee ding before the I l'C contending that FPC hetm:s are sequired for the Cohts.p generating miit>.
      . '.aw A ruotion to dismio his been filed by the Company and the other respondents and the matter is still rmm                  p'nding. A lawsuit is pending in the United States Supreme Contt invohing simi!4r issues, and the                ,
  . i >bec                Cennpany and some of its associates in the Colstrip units have petitioned the Court to file a brief as it east              ansicus curiae. None of these proceedings has reached the point where the Company can predict its                }
outcome or dTect upon the Company.                                                                              l g' ace                                                                                        m.
i
  .mi 5 S:s at                        Energy Comervation: Various measures are under consideration by governmental bodies to reducel            -
Fu:ure              energy demand. Ahhogh the extent cannot be deterrained, the Company bdieves that the energy i
see:ces              conwrvation movement has had a rctarding etTeet upon the use of energy by some of its customers.
11 since              (Sec "Fleetsie Operating Statistics" and "Natoral Gas Operating Statisties.") While the Company                  .
i
    )                    capects to have sutlicient tapabihty to meet the present and projected electrie demands of its customers und maintain an adequate reserve, it cannot prediet the impact epon its operations of future govern-
* uts of                8Hnital actions. (See 'ilusiness-Electiie Propeities" and " Coal Psoperties.")
n 10%
19 1    1
(-      -
 
r 3
                --        a----~        .            . .        . _                      .                          ,    _    ,, ,_,,.
I 1
DF.SCit!P fION OF NMV IlONDS Generah The New liond, will be issued under the Company's Mortt:'pc and Deed of Tne,t, dated as of Octoler 1,1945, to Guaranty Tsust Company of New York (now 51org:m Guaranty Trust Company of New York) and Arthur 12. Iturke (R. Amand.en, successor), as Trustees, as supplemented by sacn supplemental indentmes, hcrein referred to as the "Monpare". 'lhe Compaay maintains normal bankmg and borrowing sciationships with Morgan Giuranty Trust Company of New York which 'is the' trustcc for its piincipal retiiennnt plan. 'lhe statements herein concerning the New Bonds and the Mortgage are d                mercly an outline and do not purport to be complete. 'lhey make use of terms defined in the Mortgage The New and are qualihed in their entirsty by expren tcference to the cited Sections and Artiefes.
Bonds are not subject to a sinking or improvement fund or other piosidons for amortization prior to maturity.
Interest ami payment: The New llomh will be due December 1,1981 and will bear interest at the rate shown on the cmcr pape payable June I nnd December 1.
The New llonds will be issued as fully r tristered bonds in denominations of $1,009 and multiples l
thereof and will be transferable and exchangeable.without charge (except for stamp taxes, if any, and other govermnental charges) at the oliice of Morgan Guaranty Trust Company of New York in New York City.
Securisp *1 he New Don:h, together with all other Bonds now or hereafter issued under the Mortgage, will be seemot by the Mortrape, which conttitutes, in the opinion of the General Counsel of the Company, i                  a first mortrare lit n on all of the materially impmtant paysical properties of the Company (except as              ,
stated below), whjeet to execpted encumbrances.1 Mc are excepted from the lien a!! cash and securities; certain merchandise, equipment, apparatus, mates .            supplies; aircraft, automobiles, and other vehicles; receivabics, contracts, leases and operatidt agh            's;  timber, minerab, mineral rights and royalties, and all gas and oil production property. 'Ihe lie' * ' the Mortgage does not extend to the Company's subsidiaries or their stock or to the Corapany's electric or pas supply contracts.
l The Mortrage contains provisions for subjecting after-acquired property (subject to pre-existing
                '            liens) to the lien then oi, subject to limitations in the case of consolidation, merger or sale of soNtantially
          ;                    nll of the Companyis assets. (See Mongage, See. 87.)
The Mmtrare provides that the Trustees shall have a lien upon the mortraged propeny prior to the 1                    Bonds for the guyment of their reasonable compensation and expem.es and for indemnity against certain liabilities. (See Mortgage, Sec. 96.)
i Replacement ruml; No Sinking Fund: The New Ilond , as such, are not entitled to the benefit of a replacemem fund. Ilowever, so long as any 1975,1984 or 1959 Seiics Itonds are omstanding, in addi-tion to actual expenditures for maintsnance and repairs the Company is required to expend or deposit cach year, for replaecment and improvements in respect of the mortgaged electrie, gas. ste.nu and/or J                      water utility property and automative equipment, 51.300.000 plu. N of net additions to the depreciable utility property of such character, made ,f ter . inly 31,1945. ami prior to the beginning of the year. Such requirement may be met by depositing cash or by certif        3    ing pioss property additions or expenditures for i                      automotive equipment or by taking credit for llands and qualined tien bonds retired. Most of the net
>      1                      property additions certified to meet this requirement may become unfunded when 1975,1984 and 198 g                                                        .
:                                                                                                                                      -)
                                                                                                                                      - * ~ ~
* W' . . .      ... . ..            . . n . r- . n.  ~              -              -    ~*,--r--==re-~.*-
M
 
                            ,                    _                                                        ,              _        .        _.      m __
              , o      -ame ~ w.a                  ., ,, . . - .        ..              ..                . ..          .
i k ._                                                                                                                                                                    i
                              . Scries lionds are no longer ontstanding. Any excen in such credits may be applied against futurc                                                  F
                              . requirunents. Such cash may be withdrawn arain.t grow propaty additions or on waiver of the right. to
      ,g          .
inne lionds, or he applied to the retirement of Ilonds. 'lhc Moitgare may be amended v.iti.out any                                                s 93 .                    approval by holders of the Ntw Ilonds so as to exclude natural gas transmiwinn property from the b b                        under this inprirement nr so n to substitute for the forer.oing provisiim a requirement that then. shall bc llyg.e :                                                                                                                                                                    l cxpended 12W of adjusted pross operating icvenues from the mortgaged and pledged property (o                                                      ,
he : a.                  than natural pas hansmission revenues, as allocated or detennined by the Comp.my) for maintenanec!
rip -a                    and replacemenn in respect of the mortgaged property and automotive equipmunt (other than natu Sh . ..                  ps trarnMon pioperty L IWnues imm oil and natural pas production propertit.s are not inJuded                                                    ;
Th:                        such adjm.ted r, row operating resenues. (See hintigare, Sec. 39,1 irst Suppkmental, Sec. 4 and
,    ~3 g ..                                                                                                                                                                    f Supplemental, Sec. 4.)
There is no sinhing fund for the New Ilonds.
i rest c :e                        S;iesial Poni ions for Ihtirement of Popds. If, during any 12-month period, property is di' pos                                          j j
by the order of or to any rovernmental authority, resulting in the receipt of $5,000,000 or more                                                '
; j mn .;'n                      therefor, the Comp;my isubject to certain conditions and deductions) must apply such procetds to th K), 2;'.i            - retirement of Ito uts. 'Ihe New lionds are redeemable at the special rederuption priee equa! to 100G                                            [
      'k i: .b                    of their principal amount for this purpose. Such 55.000,000 figure may he increased to an amount
, '                                not in eteen of $15,000,000 by amendment to the hfortgap without any approval by the holders of the New !!nnA. 'lhe hjortpp may also be amended, without any approval by holders of the New
                                                                                                                                                                                'j
'                          > llonds, to climinate the foregoing special prosisions for retirement of Ilonds. (See Afortgap, Secs. 64                                              '
Afe: pp.
Co: .;2:r.,                and 87, First Supplemental, See,11 and Fourth Supplemental, Sec. 8.)'
{
((ggt u g3 Issuance of Additinnat lionds: The maximum principal amount of Ilond< which may be issued under the Mmtyage is not limited, llonds of any series may be issued hom time to time on the basis of (1) 60%
        .r d W.                    of property niditions after adjustrients to ofiset retirements; (2) retirement of Lionds or qualified lien
. Iro)Ctin, b nds;and (3) deposit of casic l Compey's
'                                        The Mmirare may be amended withi ut any appr . val by ho!ders of the New Ilonds, so that $25,000,-
000 of Ilonds may I e iwued without compliance with (1),12) or (3) above, but only upon the showing gg      -              of net earninp i.fened to in the next sentence. With certain exceptions in the case of (2) above, the
      - g ;g.
* issuance of Itona is subject to adjusted net earninp before income taxes for 12 out of the precedin; 15 rnonth> being at least twice the annual interest tequirements on all lionds at the time outstanding plus prict to thr                  the additional iv.ne and all indebtedness of pri.it rank Sneh adjusted net earninp are computed after dnst ccrtais                  expenses for maim. n.mse and pimision for h tiwment and deprn iation et property, provided that. m of the actual pimi. ion for actirement and depreciation of certain mortgaged utility property and automotive i
equipment, th.n shall he uwd an amount cqual to the currently existing replacement fund requi'rem for such period,but the Mortrap may be amended, without any                                ti api oval by holders of the New IlonJs, to benefit of a ny, in adds                  use only such actual provision.
l l 1 Of depo
* Property additioas generally include electric. gas, steam or water property acquired after July
! ram and 't                          1945, but may not include property used principally for the transmission of natural gas (execpt for the
      . deprec,ub.e                  purpose of credit under the 19S1 and 1989 Sinking or improvement Funds or except for the purpo year. Sud-                  credits against eentain retiiements or teleases) or ps and oil pieduction property. It is anticipated th 4
nditures fer                New llouds will be irmd arainst unfunded net propeity additions and that, fdlowing the issu.mee of the t of the nd                  New lionds, th, l'ompay v.i!! hae n saining unfunded net property additions as of Sep* ember 30,                                                !
4 ud 199                      1974 of approsimately 51,$70,000. (See aho l'eplaecment Fund above.)
21
        .(
w
                  ~ ~~~~** ~ ~--              ..          _      ,,.-. - .- .,.                  . . . .      . . . .        .  .. .. _. ._ .,,.. _ __ __            _ ,,,
i 1
            .                    ~                        -      - -              . _ - - , - - . .                          , ,  - - -                  - -. - - - - -.
 
j o.em.meme. e . e.am -eum .a.  .4 .    . . _            ,.g
                                                                                      ~
The Mmtrare resnicts the w.uance of Ilomh against property additions subject to prior liens 'l he amount of the ohbr.nions secund by prior liens on mortgapd poiperty may lx increased, provided that,if any property sub)ct to such hen shall hase beta made the b.ms of a credh under the Mon .ge b., the Company, all the additional ohhrations are depo.ited. (See Mortgage, Sees. 4 to 7,20 to 32, end 46 and Fourth Supplemental, Secs. 2,3 and 7.)                                          ,
Mclease and Sulo.fitution of Property: Propcrty may be released upon the basis of (!) dep oit of cah or, to a limited exb:nt, pmcha.c money mortpa., (2) property addnions. after aJjustmems in c.rtain
        ,                    cases to oliset retirements and aller making adjustments for qualificd licn bonds outstand.ng apinst property additinns, and (3) waiver of the right to issue lion Is, without app:;ing any carnings ast. Ihere is no requirement to oilset retiremenh of natural gas transmission property o. cept to the ext'e nt that such
        ,                      property has been used as a credit under the Mortgage. Cash may be withdrawn upon the ba4 stated in i
(2) and (3) above. When prope,ty released or cash withdrawnconsists or represents pro ceds of property which was not innded property, property additions made the basis of the rc! case or withdr:e. al may in certain cases remain or become available as a credit under the Mortgage, a.*.d the waiver of the richt to I                    inue Bonds made the basis of the re' case or withdrawal may in certain cases cease to be elitctise as such a waiver. The Mortgage contains special provisions with respect to qualified lien bonds p! edged and disposition of monep icceived on pledged prior lien bonds. No prior notice to liondholders is required in connection with releases, but subsequent reports are required in certain cases. (Si e Mortgage, Sees. 5,31, 32,37,46,57 to 63,100 and 118.)                                                                                                                          .
I i
Disidend Limitations: Cash dividends on common stock are restricted by the amount, if an:,, by which d
(a) replacment fund requirements, if any, from October 1,1945, exceed (b) provisions for depreciation from that date I dus the excess of current earned surpins over carned surplus at September 30,1945, less                                                g certain deductions. (See Mortgage, Sec. 39, and Note 3 to Financial Statements.)                                                                          i 1                                                                                                                    e Modification.The rirhts of the Bondholders may be modined with the conent of 70G of the Bonds, and, if Ic.6 than all series cf liands are affected, the consent also of 70G of the Bonds of each series j        ,                afTected. The Company has sesened the right to amend the Mortpge without any approval by holders of 1        ;                the New Donds so as to substitute for the forepoing provision a provision to the efIcet that the rights of the 13cndholders may be modified with the consent of 662.4% of the Hords. and, if less than .d; series of Bonds are atlet ted. the const nt aho of 6626 of the Bonds of each series afTeeted. In general, no modilication of the terms of i'a>nwns of principal or interest .md no modificati0n of the Company's obliga-i tions under Sation 6 5 or atitctine the lien or reducing the perecntare required for moddication is ellectise against any liondholder without his consent, tSee Mortpape, Article XIX and Fourth Sup;'!emeatal, I
Sec. 9.)
Delanlh no.I Notice'ihereof: Defaults me defined as l>cing: deiault in payment of principal; default for 60 days in payment of interest or of imtalhacnts of funds f or retirement of Hondu certain defaulk with respect to Onihbed I.icn lionJs seitain esems in bankinptcy. in olvency or teorganizatien; or default for 90 days afici notice in other cosenants. The Iiustees may vi:hbold notice of defauhs (except in payment of principal. interest or f um! for scinement of lionJs) if they think it in the interest.s of the liondholders.
(See Mortgage, hecs. 65 and 66.)
The ho!&ts of 25% of the Honds may dect.uc the principal and interest due on default, but a majority may annot such declaration if such defauh has bee i cured. No holder of Bonds may enforce the
  ;                                                                                    22
      .                                                                                                                                                                                )
e . e. e        ae  we em e t e.so a. ***EP.We tuee l'* ** ** *^- *
* e * *9
* 88****P * *
                              , , . . , . .                      .e.e+  e** seme* .-                  v.-
9,
 
lien of the Mmtpre without riving to the 'Im.*                                  e.sitten notice of a default and unless 25'' of the
          -                    Ilonds have terguNed the 'l su.tets to act and oth :- o them reasonable oppmtunity to at t and the Truuees la{t,a                    have failed to act. 'I he 'l rush es are not reipiired to ri>L their imnis or othuwise incur persona! liability if there is reasonable groumi for behrving that repayment is not rea.on.ddy aoured. A majority 'of y the
        ,and                  the Bond.s may diint the time, rnethod and plac- of conductiny any proceedinry. for any remedy availab!c to the 'l rustecs or esencisirir, any trust or pmur conferred upon ihs. Trustees. (See Mortpre, Secs. 67,71,
                                                                                                                                                                                                                        \
80 and 95.)                                                                                                                                                                              I cash trtrin                        Esidente of Compliance v.ith Mmt:p;'e l'rmisinnd An aimual certificate is recluired to be filed as
    - gainst                    to the ab.sence'of default umh r any of the covenants in ti e Mortyge.
there such                      Redemption and Purchase of Itonds: The New Bonds will be redeemable in whole or in part on 30 days' notice (a) at the specis! redemption piice equal to 100'.". of theii principal amount for th replace-                                                                            f tedin~                                                                                                                                                                                                          I operty ment fund or with certain d posih and protteds of propcrty, :md (b) at the rencral redemption prices set forth below im all other red.mptions, in exh case tore:1.er whh accrued interest to the date fixed                                                                                  ',,
say in                                                                                                                                                                                                          j ght tu -                for rederoption; provided that no New lionds shall be redeemable prior to Decemier I,19PJ for the such a replacement innd or at the pncral redemption prices with borrowed funds or in anticipation of fur.ds to be borrowed having an interest cost (criculated in accord mee with accepted financial practiec) of                                                                                  l d and
                                                                                                                                                                                                                      -i ired in.                less than 8.90% per anmun.
;        5, 31,                                            it redccrma amin::
'                                                            12. mouth period                                                          General cutbug                                                        Herlemptiors l
Non mhtr 30                                                            hice (%)
i
,          which                                                                                                                        108.75 1975 ........................                                                                                                                [
i        ciati:n                                                                                                                        107.00 15, less 1976 . ......................                                                                                                              l 105.25                                                                        1 1977 ........................
k                                                              1978 ........................                                103.50                                                                        f Bonds,                                                              1979 ........................                              101.75 i ser es                                                            1980 ........................                              100.00
,                                                                                                                                                                                                                        i tders of                                                              19S1 .............. .........                              100.00                                                                          f, d ik                                                                                                                                                                                                            .'
JfiC5 OI                      If at the time the notice is given the redemption moneys are not on deposit with the Corporate tal, no                  Trustee, the redemption may be made subject to their icecip befoic the date fiwd for iedemmion. and ON, "'                                                                                                                                                                                                        !
such notice sh:d! he of no effcet mden such inanc)s aic w sceeind. (See Montpre, Att; ele X, and l
!      'II#'h*C                Seventh Supplemental, Sec.1.)                                                                                                                                                          i
,        : mental,                                                                                                                                                                                                      t Cash deposited under any provisions of the Mortga,ac (with certain cseeptiens) may be applied to the purchase of lionds of any serie3 (See Mortgage, See. 55.)
        . default                                                                                                                    6 l
nits with LI: GAL OPINION 9                                                                                                        l butt for i
payment                        The leplity of the New llands will be pawed on for the Company by William !!. Coldiron, F c. Ytee President and Gencial Counsel of the Comp.my. 40 East Broadway. lintte. Montana, and by M >sts. Heid                                                                                    i' lho!Jcts.
                                  & Priest. 40 Wall Strcet. Mw Yoik. New York. as 5.pecial Counsel to the Cmapany Messrs. MuJge Ro>e Guthrie & Alexander. Ou ltroad Sticet. New Wrk, New Yo:L. will iender an epinion on the leplity of the it, but a                New 11onds for the Underwriters. *lhe in,mpe ation of the Company, its title , franchises, permits and s        force the 4
M I
                                                              . , . , . . .                    . . . . . ....y                      .      , , . . , , . , , _ _ _                                        _ _ ,,,,
                  -      = = = = ~ .          ~ . . . -                                  .                                    .,
1 d
 
                                                                                                    - ~ . . .- .
(. - w .. ... m . ... .. .          a.      .
i.
                  ' licenses, the lien and enforectibility of the Mortgarce and all other natters rmcrned by Montana law, w be pawed upon only by William JI. Coldiron, lhq.L As of September 30,1974, W;lliaru II. Coldh L owned 2,400, and hdd options on 4,400, sharcs of the Company's common stock.
i i
EN PI.Irf5
  -f The finincial statements included in this Prospcetus, except as they relate to the unaudited twelve month period ended September 30,1974, have been so included in rJiance on the repon of P house & Co., independent scountants, and on their authority as c7perts in auditing and accounting.
                        - The statements made as to matters of law and legal conclutions under."flusiness-Regulation",
                    "11u:.iness--Co.d Properties","llusiner. -Environmynt" and "Dscription of New P,onds-Securit,v" ha been reviewed by William II. Co!diron, Esq., Vice President and General Counsel of the Comp are sct forth herein upon the authority of such Cour.scl.
i
                                                                                                                                    'b 1
i l
1 4%e i
i I
f
                                                                                                                                  . 1 24
,                                                                                                                                  s' l
\                                                                                          . .        .      ...y    . -
I                                                                  - -    . .~ -
: d. . m,
 
y                          _              -__
m.a                              ~.- _ .                .._.. . . , . . . . _ . . . .
      .{                                          4
. Il                                                                                                                                                  -.
e-REPORT OF INDI.PFNDENT ACCOUNTANTS                                                [
To the Board of Directors of                                          '
    .g                              . nc Montana Power Company I
i
' t-We have examined the consolidated balance sheets of The Montana Power Company and its' I
subsidiaries as of Daember 31,1973, the consolidated statement of changes in financial position and
* consolidated statuocnts of carnings r tained for use in the businew for the five years ended December 31, j ,=
vs                                1973, together with the conso!idated statement of income for the hvc years ended December 31, 1973 2                                  appearin;;elsewhere in this Prespectus. As ex;daintd in No:e I to the financial statements, the Company a
maintains accounts to conform to the accountin.a rnpirements of both the Public Service Commiwion of -
Montana and the Federal Power Commissiont financi:d stat:ments based on the accounts preecribed by                {      ,
i both Commissions are prevnted in this Prospectus Our examinatiom, which were directed to beth sets of i
financial statements, were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered                  ;
I necessary in the circumstances.
l As described more fully in Note 1, the differences between these two sets of financial statements nrise fro $i a decision of the Federal Power Commission whleh has resulted in the exclusion of some 521,600.000 of Company's costs from the property accounts with a corresponding reduction in stocutolders' investment. The Public Service Commission of Montana recognizes such amounts as legitimate costs of utility property and permits the Comp.my to earn a rcturn thereon. Because the Public Service
{~                          Commission of Montana has the major jurirdiction over the affairs of the Company, including rates and              ;.
securitics inues, the financial statements based on its accotmting reiluirements, in our opinon, are the more useful to the Company's stockholder >.
In our opinion, the aforementioned statements based on the accounts prescribed by the Public Service Commission of Montana present f airly the consolidated financial position of The Montana Power                      :
Company and its subsidiaries at December 31,1973, the results of their operations nnd the changes in their financial position for the five years then ended, in conformity with renerally accepted accounting principles c6nsistently applied.                                                                                              j i
Also,in our opinion, the aforementioned statemerf s based on the accounts prescribed by the Federal Power Connnission present fairly the consolidated financial position of Ihe Montana Power Company and its subsidiaries at D cember 31,1973, the resuas of their operations and the changes in their financial position for the live years then ended,in conformity with the applicable accounting regulations and orders          j of the Federal Powei Commission consistently applied.
l.,
i Pr.icr. Wxt anoust & Co.
Portland, Oregon Frbruary 6,1974                                                                                                      i I
25                                                        l t
                                                                                                                                                                  \
            ,                                                                                                                                                  i k
                        - ,  ~ - - - - ~            _ . _ . , . . . . _ . . . . . .      . . .  . . _ . . -  , ..      ... _..    . ___ ,__, _    .
L . . _ _ _ _ _ _ . _ .
 
y -            -
                  "t
                                        . . . . .        .      . . . . _              _.m  -
f-..-..
1 I                                  . Tile MONTANA POW!.R COMPANY AND SUI!SIDIAll!ES
    '                                                      CONSOLf DA'li.'D !!Al,ANCC SUEl.IS ASSETS (Note 1) T'wtf am a(counts prew ribed by I
Pu!>!ic .% rsin e C.,iomiv. ion                  t's deral l'on c r i
* ct M:mf. na                          CornmlWon
                                                                                          .tiepteml4r Jn.                          .apfemhtr Jii.
    '1 Da ca ra'c. r 31,        1974          thccmla r 31, 1974                                                    1973 (Unm,1!!c.Il            l'ii)          (Unsudited)
                                                                                                                      'Ihoman.h of Doll.us PROT'PR f Y AND PLANT l*J SrPVICE AND U!WTR
        '              Cossinucim (loctudes 583.90.000 at Sep-tcmber 30,1974. aml $37,lr4,tdo at Deecm-                                                                                                                ,
ber 31.1973, under constra timo                                                                                                                          1 Utility prop.rtics:                                                                      $327,722            $341,262          5305,908            i
                                                                                                  $363,076 Electric . ........................                                                      128,329            133.143            128,329            j 133,143
          ;                  Natural rs . . . . . . . . . . . . . . . . . . . . . . .                17,634        ~ 17,272              17,034            17,272 Water and common utility . . . . . . . . . . . .                                                            42,474            30,197
          ,                                                                                          42,298            30,021                                                  l Nenutility property . . . . . . . . . . . . . . . . . . .
503,344            534.513            4S1,706            j!
i 556.151                                                122,973
          ,                                                                                          129,919          122,995            129,897                                ;
Less-Accumula:cd depreciat:on and depletion l
1 426,232          380,349            404,616            358,733 2,712              2,476            2,712              2,476 Miscts.tANtotts INvesuttN rs (at cost) . . . . . .
h CURRENT Asstn:                                                                    13,159              8,450          13,159                8,450          l j            Cash ( Note 4 ) . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts rtecivable,less allowance of $107,555                                                                    13,352              12,704 13,352            12,704 for doubtint accounts . . . ...........
Materials and .suppli 5 (prinripa!!y at avcia;c                                                                                          3,951          !
          .)              cost) ................ . ........ ..
7.4'79            3,931            7,479 2,469              i,627 2.469              1,627                                                l 1            Prepayments and other avets . . . . . . . . . . . . .                                              1,243          12,629                1,243 12.6 ")
Work in progress . . . . . . . . . . . . . . . . . . . . . . .
49,0SS            28.005          49,088              2S,005 DrFFRRf'D CtfAPC.13:                                                                                                      927                958 927                988 I          Preliminary un vry and investbation dwies                                                              370              749                370 Unamor tired A ist e.tpen e . . . . . . . . . . . . . . . .                        749 i                                                                                              417                471              417                471 ihtr mrdinary propalv be. (Nste !) . . . . .                                                +        3S)              238                3S1 licadwater bendit thar;;es (Not: 1)........                                        238 6,987              7,655            6,987              7,655 Kerr Projeci tharp.s (Not.1) ...........
Deferred taxe, attributable to Kerr l'ioject                                                                      (4,045)            (4,432)
(4,0 15)          (4.432) ch arges . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,273              5,433            5,273              5,433 l
                                                                                                    $483.305        5816.203            $461,689          5394.647
( ) Iknote: red figure.
26 i
                                                                                                                        . + -      ...s-              ..    . .. * *-s e.=-
                  , o ,. w ,
 
mv_            - -
                                        . . . - .  . . - ,            ;        o ..                  . ..                    ..      __              ._            ..    . . . . _ . , _
c                                        Tile MONTANA POWl:lt COilpANt AND SUllSilllAltlES t
CONSOLIDATED ltALANrl: S11EL'IS LI A llI LITIES
(%te 1) I'md on arrnunts prewribed fry
    ~                                                                                                          Fublic Strsice Commission -                          Federal 1*nw cr Commiwinn
                                                                                                                      .o.f N!.nn.iana
    ~                                                                                                      Septa mtn r .w,                            Septeintn r 30, 1974          Dcen,In r 31,              1974          December 31, (Unaudite,Il            1973            ( Juauditsd)                1973 r 31'-                                                                                                                                                                                                        '
h u n nih of D oHr.rs_
CA Pil Al 1/ VI n IN:
hharchohlers' investment:
Capital s.tod (Note 2):                                                                                                $ 21,983              $ 21,9S3
                                                                                                                $ 2!,983            $ 21,983 Prefencd .........................                                                                                    114,043              113,400 Connnon ...... ..................                                          114,043            113.400 Capital ?.tod expense . . . . . . . . . . . . . . . . .                            (479)                (479)                  (479)                (479)
  ' ,og                                                                                                              -                    -
(500)                (500)
Discount on capaal t tock . . . . . . . . . . . . . . .
42 9
    '72 Capital surrhu (no chang: during last five 16,205              16,205                    -                    -
years) . , . . . . .      .......            .. .... .
97 Earning retainc.1 for use in the businew                                                                                    32,224                26,550 37,135              31,461
    '06                                (Notes 1 and 3 ) . . . . . . . . . . . . . . . . . . . .
188,887              182,5/0                167,271              160,954 17 3 (271)                (271)                  (271)                (271) g                              Treasury . stock-Common (at cost) (Note 2) 1F8,616            182,299                167,000              160,683 184,017            152,939                184,017              152.939 17 6                        Long-term debt (Note 3) . . . . . . . . . . . . . . . .
N(                    CunnrNT I *
* Ito t' "P 58,500              30,500                  58,500                30,500 Notes payable to banks (Note 4) . . . . . . . . . .
M                            Dividends payable . . . . . . . . . . . . . . . . . . . . . .                        3,699                3,607                  3,699                3,6N 7 3,620                3,435                  3,620                3,435 U. S. and Canaikan income taxes . . . . . . . . . .                                                                                                    5,306 8,484                5,306                  8.484 j)3.                        Other tases . . . . . . .....................
5,273                4,283                  5.273                4,283 Accounts payable . . . . . . . . . . . . . . . . . . . . . .
g-
    -                          In t e rest acc r ue d . . . . . . . . . . . . . . . . . . . . . . . .              4,43S                3,171                  4,438                  3,171 Customer depmita. ................. ....                                                539                  570                    539                  576 30-                                                                                                              2,711                2,222                  2,714                  2,222 Other current habilities . . . . . . . . . . . . . . . . . .
67,267              53,iSi)                87.57 ~ 53,150 Mi                    Dri t anin Cnintes:
3~0                                                                                                              2,225                2,115                  2,225                  2,115 Customer adtauers for construction . . . . . . .
4,6"2                4,090                  4,692                  4,090 Investment tas credit i Note 1 ) . . . . . . . . . . . .
f.b                                                                                                        _
6,917 6,205 6,917                6,205 M5
* 10 si nvrs l'on INJunti s, Dut Ac,ts, Ennovt t s 1,055                  n39                  1,055                  939
      !.):)                      PxovinrNT AND O llit.R . . . . . . . . . . . . . . . . . .
      -                      CONTHinUlloNS DY CUWlOMI R$ FOR CON $tt UC.
TloN 01 PkOPI n ry (Note 1 ) . . . . . . . . . . . . . .                              -                  7,077                    -                    7,077 433 ArceMutall ti lu O'tr T.w RrnocrioNs Itr.
                                  $UI.IIF G j''R o st Arrl'llt:ATI D Dll'RI.CIAllON 15.433              13,624                15.133                13,624 ann AMon11/A r loN (Note 1 ) . . . . . . . . . . . . .                                ....          . - . - . . -            . . . .                        . . . .
      ~4 5416                    $ 161.659            $ 394,647
      .==                                                                                                      _$483.305- .. . . . 2 6 3__
( ) 1)enotes red figuie.
27
(    .-      - __                    ....          -. . . . . - - . . . . .                . . . . . - . . -          . .      _ . . . . . . . . . . . . .                _ . . . . . . . . . . . , ,
v----
 
                                                                                                                                                        *                      ~ '*      ~'
                ,....n.
Till? MONTANA l'OWI:It CO\it'AN)* AND SUt:51DIAltlES                                                                          .
1                            .
CON 501lDNII'D STATI3f f.N1S Or I:Af(NINGS ICETAINED FOlt USE IN Ti!E 110SINESS
(
12 Mont!ss lhded Septemhwr 30,                        3s ir 1:nkd D6cemb< r 31.
1974                                                                            197(,          19t.9 1973            1972          1971 (Unaudited Thoue..rnh of Do!!ars Based on Accounts l'rescritol 1 y (Note 1):
Ptsuc Simvree CoMuissius or MON r AN A                                                                                          $29,904                          $24,090        $19.310
                                                                                                          $43.168        $36,023 Italance at beginning t f paiod . . . .. .                $27.114 Add:
              }                      Net Income from Comnfidated                                                          21,2El          19,959                            19,645          18,364 Statement of incuene          .........            22.786        22.819 Deduct:
Dividends (cash):
l> cferred StAL                                                                                      957                              957            957 957          957            957
                                              $6.00 Series ..... ..........                                                    252            252                              252            152
                                                                        ..... ...                252          252
                                              $4.20 Series      ...
Cornmon Stock
                                              $1.65 per share in 1969; $1M
              '                                    per share m l''70 nnd 1971; I                                    $1.695 per share m 1972; and
                                                    $1.80 ter share in 1973 an.1 12 rnontha end(d Septtmtser                                                                                                12/.22          12,3 F 0 13.556        13.!17        12.7:.2          12.626 I                                    30, 1974 . .      .. .........
13,941          13.A 35                          13,ta l        13,559 14,765        14.726 s                                        Total Disi. lends . . . . . . .                                                        -                                -              -
l                                  Transfer to Common Sto<L (Note 2)..
                                                                                                  -        20h'D              -
I Balance at end of perimi (Notes I                                                                        $36.028                          $ 29.404      $24.090
                                                                                            $37.135        $31.v.1        $ 43.363 i                      and 3) ........................
I              TErst rat. POWI R COMMitt!ON                                                $3t. 457        $ 31,117        $24,99)                          $ 19.179      $14.399 llalance at tarintemr. of period .                .      !2J.201 l
Add:
Net income fiom Coit.ohdated                                          22.519          21.281          19,959                            19 /.18        IE.3e 9 Statement of Insor3e        . ........            22.7F0 Deduct:                                                                                                                                    13.10 1          13.581 14,765        1 f.726        U.941            13.5.15 Total dividenits (as afmel              .....
                                      't ransfer to Commun Stuel (Note 21
                                                                                                    -        20t                  -              -
Balance at enit of l< rial (Notes I                                                      51457          .541.117                        .$.24.993      _$.19.179.
                                                                                                            .$.2f
                                                                                                                ., .5f D
                                                                                              $12. 224.
and .15 .........................                      .      .
I i
i 1
l l
t S
6 i                                                                                                                                                                                    I 4                                                                                                  ~.                      .-..--<-**--t-
              ,                                                                                                                                                                                              1 9
  .o n        .
 
+ +_                                                          _
  --                  - . ~ .. .. ,,
I.                                              Till f.10NTANA l'OWI.It CO\lPANY AND SultSIDIAltll:S l
CONSol.IllATr.D VTATi?.f ftir Ol' CilANfir.S IN IIINANCI AI, l'OS!!!ON I
(Ibstd on nuovai.1vev ribret by the l'ul.litNrnice Commiwinn of Muutaa.a su.4 the l'eif                t ral l'ount Camimiwinn-Note 1) t 12 Mnnt.a l'..dul Year I:mle d Dece mf a r 31, Sepcmher30,                            .
197                                                                      1970            19f.9 1973              1972          1971 (Unaud.hdl '
                                                                                                                                    'Ihousands of D411ars e
Sower or I usos Current e.leratiorn:                                                                                        $21,2R1        $19,959      $19,645        $18.169
                                                                                          $ 22.7F6                    $22.819 Net ino mc ..... ... ... .......
Itctns ont reipiiiing cursant outlays:
10                                                                                                                                                                                    7,513 Depsteiatinn, depktion and                                                                            9,476          E,670        7,969 10,'i24                10,77')
atnostir.ibon .      ..............                                                                                                                                          !
i 1*nr.hiom im sf.feisc.I tants on                                                                      6,F 2h        1.234            812          946 O          +
i inu me ....... .. ...........
3,547                  1,65 f.
Allowance for f mds und duting                                                                                        (212)            (93)      09%)
            !                                                                                      0.091)                ( 1,19.1)            (506) 46 construction ..... ............                                                                          2fde          114              63 Other-net ........ ............
($M)                    564 957                                                                                                                                                                                  26,475                          i 33,572                31/ 5              37,3N          29,765      28.396 232          i Sale of cominon sitsk under stock option                                                        107                  50          23            90        933
                                                                            ......                    699 plan .. .... . ....... ...
24,90f,                          23,000      -30,000          -
f              Sale of long lee m d,'f 4 . . . . . . . . . .....                  60,198                                      -
Guararty of 1,oltuunn cui.in4 resenue letids lev lund. en sf.pi*it voih                                2.7 f,7              ) ,',27            -              -              -          -                              t trustee ( Note 31 . . . . ............                                                                  17,bn3            -              -          3,450 3d                          Short tt tri tut towing . . . . . . . . . . . . . . . .            $0.0M                  10.00:1 l                                                                                                                                                        $,01              H7
  .389            i            Clangs in oiln r as>ets      said li,d'.ihtice--                                              (47.7)        (1,967)            677
( 14.f.60 )
  -              I                net (Now A)      ... .. ..... ......                        _
                                                                                                                                                                                      $1).743
                                                                                                                        $ 70,99M          $32.4 2''      _$ $ $,467  $61.087
  -              I                                                                        5127,43f tojo                        Apriic,3,r3 cy g i;,,tw
  "'"'                        Ornu ad.titions to prontty and plant                                                    $$6,f 92          $28.117        $21.55)      $14.61$        $20.374                            g
                                                                                            $ S t,7FS (Note it)                .
i Allowsuce for funit ust.I efutint                                  O ,0 71)              (1,191)                ( 30fil      (212)            (931      (34 0 construction ......... .. .. .....                                                                                                                                                  1 8.199                                                                                                                                                    21,671        14,522        19,47fi Fl.f S9                3 %,b'? l        27.F l l
                                                                                                                              -                  271 l'orcluw of tremry st+ L ...              .......
611    2 3,9.1J            l$3
                                                                                                    ,10.f 0 t                  $7)              373 Rrtirement of loer tritu i,bt  t          . , ,
19 130        113to          -
Rethement of sh.in tom Iveromng .                    .
                                                                                                                                                                          !).F))        11,$89 DividenA on cononon :.u l p.vfd red ete.L                          14,7f.4              14.726            I),91!        l).833
      ~                        Settlemrut of herr hejc(t thatro lew                                                                              6                                                                          3
                                    $ 1.22 9.41.4 tetrived item dowhitream                                                                  10,021            -              -          -
9,g79 liencthi.ie ics ............... .. ...                            -
                                                                                                                                            $ 52,.l22      $44.467      $_6 8,057    .$.14,74    8                        6
  #                                                                                          $.127,03:t                .$.70.992
( ) l)t' 10tes leal Ii f,nic.                                                                                                                                                                  )
i Note A ~*lhe sh.mre in oiler aucts aint lialilitics -net for the 12 Inonths entietl Septemi er 30, 1974 l
is (!nc ptincipally to incie.ncs in cash 5').70's.100; luatetials anil mpphes $3,244,000; ans!
g.
work in propicss $9 kil.0(n,
                                                                                                                                                                                                                            }.
Note Il-('ontiilmtions in alit of conslinction for lie live 3 ears entles! December 31. 1973 has                                                                                                i recl.milicit as a intuetion of T'os$ khlitions to propelly an61 plant. See N0te I to lhe Conwlittatul l'inancial Stakments.
29
(
                    -    =-                                                                          ..              .                ..... ..          _ .            . . .      . _ . . _ _ ,
l
 
7 9
e- -
                        , ~ ~ . .                      - . . .      . , , .        . . , .                          ,,        .
4-Till: MONTANA POWI:It COMf*ANY AND SUttsIDIAltif3 NOIl.S TO CON 501.1DNIl:D IINANCIAI. VI ATI:MT:NTS For lhe Five Years I:nded Detemhtr 31,1973 and the Unaudited *1 m he Months 1:nded S~pternfar 30,1974 Norr.1--Sustst Aiw oi: Sicsis icAsr Accoussiso Poticitm The Company's m " unting. policies conform to generally accepted accounting principles as applied in the case of regu'ated pubhc utilities and are in accordance with the accounting requirements and ratemaling practices of the regulatory authori'ics having jurisdictien.
Principle., of ConwII.lation The consolidated financial statements include the accounts of all wholly owned subsidiariet 't he net assets of th" subsidiaries as shown by their books at December 31, 1973, and September 30.1974 cxceeded the Company's cost of investment by $5,520,777 and $6,103,797 i        respectively, reprewnting unthstributed net income of the subsidiaries since acquisition which is includsd in consolidated caininp retained for use in the business. 'lhe cunent assets and liah:lities of the subsidiaiics opes.itingin Canada are exprened in United States dstlars at th: period-end rate of exchanp; other awets and haNiitics are expressed at rates praailing at the Ihne of the transactions. Itevenue and expense amounts for cash moath are translated at the avciap rate of exchang in c!Icct during the month.
The exchange adjmtmemt from tram!ation of Canadian currency are not material during the five years ended December 31,1913, or in the ap3tgate and are included in other reserves.
Tinancial Statement l'inentation: The Company maintains r:ecoonts to conform to the accounting requirements of both the Publ.c Service Conuniuion of Montana (PSC) and the Federal Power Com.
ruission (I PC) for purposes of comp!)ing whh the Momana statutes s. hic h phe the PSC broad replatory
        ,          jurisliction over the aliairs of the Company :.nd foi purpoe of complying with federal laws which rive the FPC jmisdiction over hsented prbjects and the tramnnnion and sale of rower in interstate commer:c.
Financial statements are presented in this soport becd en tl.c .uoanting regnhem.nts of bath i
Conuniwions. Itceame of the nienske jmisdiction which the PM he mer the Company's allairs.
        !          including ratc*. scivim, sceuritics inues and creation of h,ns, it is the erinion of the Cempany that the fin 3ncial statenknts l',iWd on the riquilenients P( Momana law und of the PSC replegent the propgr presentation of the hoanml poshion ;.nd the results of operations of the Com;uny. (Approximately 959 of the Compan>i. tesenues are d thed from intretate seniess algates lised by the PSC.) lloweser, the FPC has the tir.ht to piesuibe books.cf accounts to be m.nniained for it purposes and in view of the 1964 deci> ion of the U. S Ceurt of Appeals for the Fourth Circuit in the case of Appalachian Pouer Company v. the Federal Power Commission which behl that, in that ase, the FPC accounts were basie accounts and mmt be pertented in reports to stoelholden, tinancial statements based on the requirements of that Comminion are aho presented.
It will be noted that the ddierenen between the two presentatiom relate primarily to Utilhy Properties, Capital Smptus, and 1:ainmp Itetained for the in the ilusincu. These differences esist incame of diverp nt timImp of the two Conunirien<, in their tapective property reclassification orders in 1945, as to corporate sost and "olipn.il cost" el ecstam propesties, and as la dhpo.sition of amounts I        '                                                                    30                                                        l
 
                                                          .m. .    . . . _  .
e -e ..          _
                                      . . .  ~
t
(                                    Tile MONTANA POV,TR COMPAW AND SU115t!!!ATUIS i
Null 3 TO CONSol.!DATI:D FINANCIAL, STATDIENIS-(Conthmcd)                                            i Nori: 1-SuMMany or SimincANT AccousTmc Poucir.s-(Continued)                                                        .
clawilled as idectric Plant Acquisition Adjustments. Since 1959, 'bere has been no differenc                        '
the income Matement.
Pursuant to an order from the PSC, accumulated income tax reductions resuhing from accel
_' g;g                  depreciation and amontie.ation on utility' property are recorded as Earnings Retained fo g                Ilusiness--Restricted, but in the accompanying balance shcets, these tax ieductions have be Provisions for depreciation and depletion are recorded at amounts Deprniailon <md Depletion:                                                                                    .
hwy                    substantia!!y equivalent to calculations made on sisaightline and unit of production ructhod 973,                of various rates based on useful lives of properties determined from studies and computations m b797                  competent tnginters During the five years ended December 31,1973, and the twelve months cnded tuded                  September 30,1974, the pmvisions for depicciation and depletion approximated 2% o                                    !-
i the                  and dep!ct;ib!c property at the beginning of the year.                                                                !
ang:;                        Maintenance and repairs of property and replacements and renewal: of items determined to j be
    , g,g                  than units of property are charged to operating expenses. The cost of units of property retiredi o ton:h.                disposed of, adjuued for removal costs and saleace,is charged to the accumu!ated                                prov Gain or          i g                  tion and depletion, and the cost of rstated scplacements and renewals is added to utility plant.
loss is recognized upon the sale or other disposition of land or utility plant constituting an opera
(                unit or system, unte:g Co-w                      Allmvance fcr Famds lhed During Cons:ruction: As provided by the applicabic regulatery systems                  ;
g y ,,.,                f accounts, the Comp.my capitalizes into plant in senice a fixed perecnt on the cost of utility comts                ,
h th'e              pr jects that exceed minimum requirements both as to dollar expenditures and duration o merc:.                of construction. An amount equal to the amount capitalized is shown on the Consolidated Statemen locome as " Allowance for 1 unds Used Daring Construction." an item of Other Income.                  The allowanc 1971, 1972, f b".h                                                                                                                                        l afts:.3,            was computed at the rat'e of 6hG for the years 1969 and 1970 and 7G for the years                                      '
1973, and the twelve months ended September 30,1974, and equaled 29, IG, IG. 2G, SG ..Ian rny 9.11 of Net Income for the live > cars ended D.eemb,r 31,1973, and the twelve months em'ed September: 3 prr.;.:r ly 9!1                    1974, respectively.
31,1973, Assuming that funds used to finance construction during the five years ended December
    'iC'tt,  28              and the tache months endsd September 30,1974, were prmided in the same proportion as the Comp
                                                                                    % averap actRat cost of debt, after provhion for
      '        I            average capitalitation ratim and using the Compan3 I' h"#                income tam, during the period, the conunon equity component of the allowance for funds und dmin remt:ts              construction exprcwed as percentages of c.uninn for common >tod was 1.5G , .39, .SG,1.79, 3 arid 9.3G for the 3can 1969 through 19'i3 and the twelve months ended September 30,1974, re The amount of the allowance saries from 3 ear to Scar with the Companyi con.struction program.
      , g.,,,,:y tes n ist                    Eff loration and herr /orment Ceuti 'Ihe Company and its subsidiaries account for exploratio a cthrs                desclopment costs incurnd on or related to hythocarbon lea >es on the individual propaty '.
amuts 31
{                                                                                          . . . ._._. _.._..... ..          ,    .
 
  !n r
y q                                                                                ,
n sm.. .
                              . ? .n==o..
3 Till: MONTANA POWI'!( COMPANY AND SU1WIDIAltif NOTI.S TO CONSOLIDAT!;D FINANCIAL, STATD!!NIS-(Cor,tinued)
Nore 1-SusistAny os Sicmi scAsr AccoumlNG PDUCHW-(Continutd)
This results in capitati/ation of emts                        related to the acquisition of Icases a Nonproductive i.xphnr. ion and drilhng wsts are.
i i
amorti/ation of these ue ts over the r_ productive hycs.
                                        .charged to expense currently.                                                                                        dated luns 1,
                                                  ' Co1>italization of rollution Cmarol racilitiese 7 h' Compa                        $3.000,000  ty, pursuunt    County ofto an utree
                                          -1973, has uncomicionally guaranteed tl:e pa>mur                                                                      i          i ed f prino capitali/ing the cm.t of purchasing acquining, com.aucting,                                  bre. Interest and                  instatlig th paym.nts I                      with the panceds of these bonds and will depreciatc the equi;. ment                                                    d,pnitover wch its n. ful
                  '                      on the debt are thged to expense current!y Unexpended proceeds of the bond issue the Trustee are tempoiarily invested and the carninp are included in Other income.
t                                Contributions in Aid of Cermrnction Effecthe Jarmany 1,197d, the FPC
                  ,                        butions by customers for con <truction of pro;wity will be accounted fo                                                                    '
cost of the utility property rather than accumu!aiing the>
I presenting              this autount on the liability side of the 30.1974.
At Detembci 31, 1973, balance sh      ,
e
,                                            amount has been tramferred to the utilhy properti s                                                                                                  ' ted            se service the original cost will be reduced; the remaining amounts will be                                                            t transfe J
provisions for depicciation and depletion. This chinge aficits the prese                                                                  ,
but will have no eticet on the Company's carnirip as this amount has gcon plant investment for depreciation and ratemaking pmposes.
g l                                                                                                During 1970 man.;gemert conduded that u<c ci the Costs Defcurd to futurc Otwating l'aioJs:                              abaadonei *1 bis extraan'inary Madi<on natur.d pas storage field be di>contii.ued and the f adhties                                                            i
'                                              property loss Wafter api eable ta.ses is beint chart.d to income owr e p i                                              July 1,1970 as authmited by the PSC.the FPC issued an order arrioting                                                              i
'                                                    On January 15, 1971, j
payments due the thiited States                    i    .for headwater Ienefits peosided project for the peiial 1953 throuch 19''O. The nit ernent exe i
through 1970 and the net addid
)
period of five yeais conuneneing Jaauary 1,1971 as authoi;ted by the In 1967, t!ie i PC ordered an i'icrease            20.1959,      in the plusannual interat. Onchges                        for the u e
                                                                                                                                                                  !...y 31,1972, l
Project from $23075 to $"f 0.000 annually eff.etiw Mayadditional amma' charp
'                                                the Comp.iny -pahl 511.249.414                                    19n7-1972, the Company recetded an December 31, 1971, including inteiest. Dmins the >cais                                                    i d by the FI'C; i
annual th.nre apin t income to recornire the inercawd annaal fisentals                                      ii        h as  deterra ne balance i                      i therefore, atter tases anni prosision for amounh secowiable from down>tream be                                                            .
33
                          -                                                                                                                                                              I{.
1
                              \            . .. -
o$'
 
(          '
Tile MONTANA Powl;tt COMPANY AND SUlt5fDIARIES NO~ll$ 'IO CO.%Ol.1DATl;D FINANCIAI, STN!ETIENTS-(Continmd)
Norn I-Susistany M Smsn irant Attouroneo Por tau. -(Continued)
:                                                                                                                                                                                                the PSC and the FPC i                                                                                                                                                  i                      f
                              - to be accounttd for was $3,755,000. 'Ibe Comp:.ny received mthori/at on rom l f .,a .          :
to araortire this amount to dct.tric op. rating nice ovtr a paiod of ten ytars commencing in Augast
    ., a          g 1972. *1hk rewh*. in a charge apaimt income in 1972 of $157,000 and $376,f,00 in suhequ;nt pars until fully amortind. The nestriction on the as ilabihty o' retained earning, for dividend purposes
,  ..n:.
      +                          imposed by tht Ibard of Dnectois m 1968 was iemoud by scolution in July 1972.
l q if                                                                                                    Intesest on borrowed funds expended princip:.lly for the In/croi Charfyd to Nonutihty Propertye
' p:md
:) J                        construction or acituisition of certain nonutility mining prop.rties not in senice j'. being capitah in nonutility propcity. 't he amount of interest capi:aliicd was $189,000 in 1973, the first year l m.::u
'                                interest was immied on fund, borrowed for the conuructim or acquisition of such properties, and
: enh
                                  $1,343,000 in the twelve month ptried ended Sclomber 30,1974.
I                                        Income 7<a /l venue -Income tax depsecielon of propeity acquiied after 1970 is based on IRS
:zw.                        Class Life Amt Depreciation Regulations utili/irg accelermed methods and depreciation of property it.nal          ;                                                                                                                                                                                          for eketrie
  . ;.. md                      acquhed pdor to 1971 is bastd on ll(S GuiJehne Clau 1.ive, utilizing accelera:cd methods utility preperty enly. _ in accordance with the secouming icquirements of re;ulatory authoritie j
Company prmides deferred income taxes on the di!!crtnce between actual income ta.s deprecia l        .,,.
      '                            and straight line depreciation using lits Guid.'ine Class 1.hes and n!<o provides defened income l    ' . .* 2I5      g
    ' " 4'            1 taxes on the ditierence between income tax depreciation and financial accounting ('epreciation for
                      ,          principal nonutihty properties.
As            ore intly described above, during 1972 the Comp my deducted for income tax purposes the I mts                              additional annn.I rentals and intciest paid for use of Indian lands at the Kerr flydroelectric Project for l :d 1:2m                          the pesiod May 20.1959 thieuph Deecmber 31,1971; and in 1973 began capitalizing intermt on borrowed funds opended principally for the comiruction or acquisition of nonutility mining property r                      not in service. 'lbe timing difierence resulting frem deferral of these costs to future operating periods for e o :he                        financial accounting purposes as well as other timing d;ilerences in principal nonutihty opesatiom have                                                                                              "
x&:.sry me ,e:ag                      been normalized.
The remaining thfrerene some of which are permanent in nature. between depreciation and d n,t inee. ne for financial aceoanting pmpues are i ct: . nng depletion used in d tennining tnaMe incew                                            .
rcitari:                      primarily due to diheitneo betwun IRS (iuiJ.hne Class 1 ives and fnaneial aceonnting hm. and
    ;oga.ay                        together with other dillerences between tauble income and tin.tncial accounting income, me acco for as net cmrent reductions in income tax provoiens.
c cur a The reduction in emrent federal inceme las resuhing (m$ the imestme ,t tas credit on utihty PH'pedies is being tuen into income based on the vaiious hses of the auett riving rise to the eredit.
l      the Kert                    In 197 8 the Company adopted the Ibw.throurh method of acconming for the investment ta credit on l    11, M 72.                                                                                                                                                                                                    30,1971, II' P'i"'i dI""""Ohty                pmpesties. 'lhere has been u nwieiial .ti.ct en net iacome at September j , th @                                              P howner investment in tredits ei appm.sinutely M00,000 may be reali/ed prior to December 31,1974
! ord:d as                                                                                                                                                                                              Thg integ{mgng gag dipending upon ihe in Sessiec dath and chf ihik.y of nlJjor prope6ty additient g gg                          credit on such pmpestics was indgnificant in prior yars.
g g ;,3;,
33
(
                                                                                        . _ . . . ~            _._ .                    _._..._....._.._..._.._..                                                        _ . , . .
l
 
y    = = = ~ . . . . . .          . .
TIII; MONTANA l'OWLI2 CO'.il'ANY ANil SUhSID!AI'll.S NOl13 'lO CON 501.1 DATED l'INANCIAL .VI ATISMNTS-(Contin NOTr.1--SUMt.11.nV OP SIGNirlCANT Acco'enim Pot.tcirs-(Con:inue                                              -
U. S. and Canadian income taxes charred to co a :n:d capens. s a.a e fo!!o.u:
12 Mor tra l'od.d                                Ye rt T.ndul Deet art 31, Sq.:en'.. r lui, 1974                                                1971        1970        1909
                                                                                                            .8 )
I';73            JM2
        ,                                                                                  (Ua.m:
Tia uwdinf Dolbis
                                                                                                                                      $ 7.ftBB      $13.934 $13.975 $14,6 86
                                                                          .........            $ f..H7              $12.M$
Currer.t    ....      . .......... ...
I Deferred:                                                                                                                      928        93'1        8f.9 1.349            1.701 2.230 Atctleratej derre:iati .n and awrtit.di;n. , . .                                                            4.300        -          -            -
                                                                          ...........              (449)                  (449)
Kerr 15 eject charges .      . .....                                                                                      -          -            -
(07                      91 Inter est charseit to ponutility rtoretty. . . . . . . .                                                                    248      026)            77 f23                    656              394 Insestrncnt tax cred.t--r.ct.                                                                  76              285          56      -
384 Miscellat.cous ite rm.- rc t
                                                                                                $l2,432              $14,0f 8          ' 14,n66 $15.168 $14.767 $15,5r#2 1                                                                                                                                                                          d by
            <                        /setualincome in expense is recorcikd to ''espec:al" incom. in expense, which is                                                                              <
i applying the U. S. inwnie in rate et $2.W in lHe,49.2G in IMO at:d 4'W and the twelve nyonths ended September 30, IM4 to income befon in, as follows:
12 Merubs l'oded                                  Ytcr l'uded Deu mfier 31.
Sq :< nber 30.              -
                                                                                                                                      -~
1914                                                1971        1970        1969 1973            1972 (Ucaudited)
Thounn.ts of Do112.s
                                                                                                                                          $14.n3        $13.14      $14.787 $15.592
                                                                                                  $12,452              $14.0f>5 Actual income in exrtnse.
A<tpntments for in effects of:
1.tcen of utshty insoue tat deptc6iation utilitir.r the strairht line susthod and gWJ(kne clm                                                                              1,965        1.881        2.049 l.434                  1,(38            2.024 lives oser (putwi.d nounting derrr6iation.                                                                              102            46        210 j                                                                                                                    573              241 l ..It 8 Allowance for funds n ed during sornunction,                                                                  (J1        (375)        226            $1 1.440                  1.427 I                    Misccllaneous itcnn-net . . . . . . . . . . . . . . . . . .                              $ 17,7n4        $1r>.'hs    !!b.fton    $1o.y4n $1J,W
                                                                                                    $ 19.'114                      .
Computed ''cagecitJ" mcome tax esrense. . . . . .
i The Company has made nn prov n (of                                () S of Canadi.tn inume lates on the CumulTti\C t
                                                                                                                      -    arninj., are espected to remain inwied for undistributcd carninp of Canadi,m yubm iarie5.
1    remitt:'ner of these ameunts would re> ult ia no an indehnite period of time and, in addniini.                            ,                                    urn.mly in effeet and by utilization
                                *i'2""?""'l,%'OdiZ'Ui-"~"'"of ' ' ' " " ' " " " " ' ' " * " " " ' " ' " " " ' "
l                  U. S. ineome tar, return.
34
                                                                                                                                                ~ . . , . .. .... . , ,,
s.,                                          -.-4        . -        .-
                        --  -5
    - R
 
l l
                                    ~ . . . _ . . .                . .. . . . .
g            -
(                                                                                        *
                                                            'Alll? MON TAN /. l'OWI.!: CG.di'ANY AND SUlt%IDIAful3 NOIT3 *tO COMOI.!DAIEls iINANCIAI. SIWI13 TEN'IS-(Continued)
Nota: 2-car: tat. 51ocr
!                                            Capitalstockcopht;of the following:
3 Preferred (tun 4ulative, no par value):
l I-                                                    Autharind -3,000,000 sbarcs .
    .                                                1.ssued and ontstanding
                                                        $6.00 w ri,.s-.159,5 F9 shares . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,958,900 4,96 6,024,000 i'                            $4.20 s.etia-- 60,000 sharcs . . . . . . . . . . . . . . . . . . . . . . . . . .
j                                                                                                                                                                                        I
        "                                                                                                                                      $ 21,983,500
    ~                    ,
77 Common (iio par value):
      -                                              AuNrited--22,000,000 shares
  ' Es=
    .Til                                              Issited and outitanding. Inclnding.9.900.sh;ucs held in treamry:
I                                                                                                                  $114,043,045
                            ~
September 30, 1974 7,547,356 shaies..................                                                                          l r.ed by                i December 31,1973        7,5 21,3 5 8 s h 2: e s . . . . . . . . . . . . . . . . . . $113,399,595                                ,
a { ')
i The preferred stoLL i<. rcJecmable at tlie option of the Cornpany on thirty. day notice at 5110 per share for the $6.00 seists and $103 per share for tii e 54.20 urin, phis accumulated dividends. 'Ibe
! ~~                          .
hquidation price of prcistred sharea is $100, p'u3 awumulated divid;nds.
l IE j                                                                                                                                                          ,
lif.!f3                  f
                                '            The lloard of Direc tors authorited an inercase in the stated value of common stock of $20.000,000                                          ,
in blareb.1973, by a transfer of that m.iount fiom I:asnings Iktainal for the in the 11adness. the only                                            l other chanres in conunoo stod foi the l'w yeais and nine month, en isd September 30,1974, were sharis                                              ;
issued under the tumoon stock epoon pl n as sihmn b low.
2.M 210                          The lloard of Direston,in aceoidance with the comp mp sommon stock option pt.m, ruay authorin.
8                  before June 18, 1970, the pant of options to e!heer:, and etlici al ey cturloyees to purchase !!0,527
_.1 additional shates of the no par connuon stwL of 'he Compan). Options rranted shall be nt not less ihm l        S..*
        ~~~ *f.                        the clo ing price on the h'cw York Stock thehang on the date the optietis are panted and become cur.
l                                      cisable after two ) cars, pmvided there sie no one.spiied prior option s ontracu. Options must be cureised l  . , , , , ,
        ***"                            irl thC Older panted und Opile live ys3M Irom thJ dlle OI pant.
[          ,
l ut b to Allontstandint ptions aie nenbable. On December 18,1974.128,648 shates at an averay opthm I uLasa                                  price of $24.75 per r,h.ne will opire if not cuteind.
i l Maced
:                                                                                                  35 l
l 1
w        --
I i
 
                                        - ~ . .                                                          . . .
l Tl!!; SiONI ANA l'OWI.!! COS!PANY Ar*H M:llSilplAltlIM
(
V NO'll3 *10 CONSOl'.lDNA LD i INANCIAL . INIl.Sil'.N'lS-(Con Noin 2-CAntar. Sincx-(Continued)                                                                    Optfo., f% e l'ait 314:t e t V.ibe Nun.ter r Aserar,e                        Aurn e.f                                            hr Wes                'l eh!
Per.stw r          Wt. 1 Elmtr.                                                                  (a)
Options outstanding:                                                                                      $3,1M,038          $2 %.75          $3lS4.0M 128,64M          $24,75                                                      -
                    '                                                        Granted in: 1969 ............                                  -                -
1970 ............                                                  .
1971 ............
s          $25.00              1,145.900 40,92.';        $28.00        1,14.,400 1972 ............                              -
197.1 ............
* 9 Months Emlal Septeinber 30,                            -
1974 .......... _.
14,329,938
                                                                                                                                                                        $4,3ri,935          $25.53 I                                                                                                                  169,573          $25.53 i
Total at September 30,1974........                                                                                                              (b)
Options widch became exercisabic during:                                                                  $32.30      $ 44E,13'i          $31.75 < $ 439.484                    '
1969    ............      13.M2                                                30.13              163.458            ,
5,426            27.b8          151,2.N 1970    ............                                                            31.74              105,048 3,319            29.57          97,$79 1971    ............                                          14.1,Su          30.94                10.563
                        ,                                                                                                                      600            24.75                                            2,300,b22
                        <                                                                                      1972    ............
24.75      1.!W.,947            30.47 1973  ............      75.513 9 Montla 1:nkd Septemhr 30,                                                                29.01          3.6f9.422 123,775              2512        3.196.4 %
1974 ..........
(s)
I                                              Options cur.ised during:                                                                        $ 8435,414          $3015          t 1.249.7(*
40,*09            $23.09 103.74f' 1960 ............                                              90.32:'          31.51 3.''0 3          27. O                                                  30,k66 1970 ............
25.7.'          .it.747          32 09 462 l
1971 ............                              28.70          N.650            3 4 (10              58,647 1972 ............            l.725                                                                  139.579
'                                                                                                                                                                25 12        10li,l.94          32 80
                            ,                                                                                                                  4,256                        *
                              '                                                                                    1973 ............
l 9 !.fontla i nited l                              l'                                                                                      September 30,                                                              30.54              743,'WO 25,993            24.75        643.451 i
1 1974 ..........
l l
(a) At dates options utre g ranted i
(b) At dates orthms bec..me ncteluble.
(c) At dates options were 6.wreised.
i                                                                                                        Options m
* not riikrt.d in bafance sheet xcounts initil nerd ul, at I
account is cardited with the proc.cif . No th..rps er stcdit* 10 inoime ,n 36 i
i
 
F F
I
    .,, m                                                                                                                                                                                        n.    .-.... ., - . . ~ --            -      -      ~'~"~~~            ' ~          ' '
                                                    . - .                                . . . . ~ .                                                                    ....
      ,b Tile MONTANA l' owl:l COMPANY AND ,UltNIDIAHlf.S NOTES TO CONSOI.Il>A*II'.D l'INANCIAI, STATl3tt'.NTb-(Continued)                                                                                                      >
r.
Norr. 3-1.owTsus Di ni:                                                                                                                                                                    Seg. ten,her 30,          Detember 31.
                                                                                                                                  '                                                                                                                  1974                    1974 long.tcrm dtlit uimit.ts of the inllowing:
[                                                              First mortgage Imndu
                                                                                                                                                                                                                                              $          -              3 29,996.438 8 % % serin, due 1974. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,191,732              39,19 t,359        [
        ,3                                                                        2% % wriu, duc 1975. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.014,275                6,047,740 3 % % se ries, d uc 19 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                          ,
l$,028,057                15,029,509          l 4 % % si. rin, d ue 1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                        '
24,806,771              24,801,34!
, yo                                                                              7 % '; n i ia, d ue 2091. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 % % sc iies, due 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                            60,157,085                      -
Sinkitig fund tisbentures:
10,750,864                11,130.127 3 % % , d ue 19 7 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,912.813              24,910,124 l ~ ,,,,                                                                            7 % % , d ue 199 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  , r.'ill                                                              Guaranty of County of Itoxlui, Montana 5% G Pollution Con.
19,866,222              19,862.929 3
j                                                                                    trol itewnve llomh, doi 2003. . . . . . . . . . . . . . . . . . . . . . . . .
(16,741,071)              (18,033.376)        !
,                                                                                                Funds on deiw.it with Tiustcc . . . . . . . . . . . . . . . . . . . . . . .
4
                                                                                                                                                                                                                                              $184,016,748              5152.939,191          .
3    h**                                                                                                                                                                                                                                            -
3s, r
e*.5
* The prindpal amount of long. term debt is shown adjeted for unamort1/ed debt disecunt and                                                                                                                ;
i                      ,
i ,{. *[*.3                    ,                          prennum, whi$h amounted to a nel dixous of $320,433 and $160,181 nt December 31,1973 and                                                                                                                                            [
;**                                                        heptemNr 30,1974. respectiwly. 'Ibew amo.n.ts are tving, amortired owr the period the tsfated lends                                                                                                                                  l l
ute outstanding.                                                                                                                                                                                                                    l The agreement suuring the 38.' G dilsmntes dus 1979 provides that the Comp.my inn t dehscr jl 4)(Fr aII                                                to the trustre, for a suiremrat >inkior tund. Wo.0do cash or piincipal .unount of dsNntur. each Seat f
gag                                                    Ibrongli l97h. Al ikkelnbJr 31,19/3 and % 6.'niNr                                                                                                            1    30, I"l1, the Cuttip m) had acquired $595.000                  <
ana 5970 a.O. i.mp<cim,i . p,incip.d amre o e, 3. ,<i d i-io,e* whi<h so.diry far f aiure sintin, fona
, a .u l yy                                                        requiremt'nts and whkh. avevi.hnd). h.a. Iwn upphed in the bal.mee sheet .c. a redoetion of this debt,
                                                            'lhe nyrecou nt wtunng the 7Yi Nokmg i und l Abenturo due in 1998 prosiden that the Company                                                                                                                                        }
j y,py                                                      must deliser to the imstcc for a retiremcm sintior land a mimmum of 5%00.000 cash or principal atuount                                                                                                                            ;
;i g g
}
bf debentillt's 40thh, ar lioni 1979 lhloH)h 1497. hhlkill/ IDud fWQuilimildt Hndir the litst inortgJfe                                                                                                                          I bonJ< are being nnt th outh I telut) adJmont. Other rquhed principal pa)memi on long lernt debt                                                                                                                                  I i  H).9$0                                                    for the years 1975 through 1979.ne $31.1X8.000,27 9 fo nt n.ortgare bond 4. on Oeiober I,1975, and 19,000,000. 3h 4 sinking fund d.bentures, on May 1,1979, whleh are espested to be tsfunded with 1                                                              other long term olibranons.
                                                                                          'll e Cotap.iny's Motif.Ife and Iked of Thist 10 Morfan Ull.llanty Ilott Cotapally of New York                                                                                                      l dated OctoNr I,1945, as Supplemenkd. unpows a thica last mostrare lien on all ph> leal properties i                                                              owned or thereallir aoloiteil, enhi ise of Subsidiary somp.my mwit anil seitakt propoly and aucts du' sg                                                                                                                                                                                                                                                                                      i spccificall) cacephd liom uid lien. At ihmWr 31,1973 and Sephmber 30,1973, the underiedated
, a g, u,                          ,
37                                                                f 1              (                                                                                                                                                                                                                                                                                l l
c
                                          -      *                                          ... ... ..                                                                                      ..        ...                    ~.          .    .      . . . . . . . .
                                                                                                                                                                                                                                                                            .............3 l
r
 
ur -
i
                                                              'Illi: MONTAfiA POWl;tt COMt ANY AND blit;Sil)lAHil3                                                            .        T e1 I                                        NOll3 'to CONsot.IDA'sl.la !~l!!/.NCIAL S't'ATl;Mid!IS-(Continual)
Note 3 1.osr,. Tint Drnt-(Continued)                                                  res pecthcl). At Ductn.                                        ;
book valas of nuck subject to the lien was $ 501,52ri,000 and $447.2l bcr 31,1973 and Sepinohrt 30, 1974                            roptstiwly,                                                                            '
princip.4 mrount i,f $115,183,000 and 5145,12,009, 1.ongterm dat nrrawnh irnpose no material retrictiom onPACthe raaib                                                                          l for dailend'.. harnings ntained for use in the businen shown by the                                              I
                '                  at SeptanNr 30,1974 finanti:3              statenu.nh extsud unh retained carning shown by th: 1 PC hn; which the 1 pC might c<mt<.ml are not svadalife for payment of dindends                                            J              (Note    i .1 J
Noit 4-Suoirt.'luus: totanwmo:
                                            'lhe Company h unantly rathmieul            At De,crnbcr  h) 31,19M the PSCnn1 su h Ttumkhwer une    30,1974, utidinfe:ual pomiwor                    ;
principal tunount not to onetd $73,000,000.
borrowinsttr.npem<nn with                          lending co umercitd b:mb pr wide f or Imu 49,504,000 und $15,500,0%i was snused. t!mecured pronh.
I aml $74,000,000, rntothul), of which                                                                                                                <
sory notes are inued to Lnding cormuercial banks for ab. month p                                                                              ,
pilme rate in effal from tune to time and may ordman!y                          31,197.1 be prepaid withou
                                                'Ibe aveiap hattest rate on outiladig notes payab'e at Den mNr 1974 was 10% amt i1.78%,                      y    n pestivsl . 'Ih; maxhmna amount ol nuto pa                                          ,
l 1973 wa $30,509,003 nnd during the twrhr momh, vnd,d Sept.mkr 30,1974 was $$8,M,00                                                    '
The approxim;.te wrirbted averap of nob s, gr ph!e ountnnding fo                                                                                  !
September 30,1974 w.is $7,336,000 and $20,526,009,                                                                                  ;j ran, of 9.3% and i1.0%, mpecthcly.                                                                                                                :
Cimpentatin.it bat. men war $4 miHioa ad !0 mil Septeinber 30,19/4 i                                                                                  !
anso, whish inviade amounts norm.dly ru nnednsd bn wmLing hae                                                  iapial    of          ingu
* withdrawal but th, Compariy cntr ntly antkipata ih balanen will apinoun.ite tin credit and ten perunt of the bestowing thenunder en a naning adia:e ba h.                                                                        3
}
i NOT!:          $ MIlikt Idl Ml IIM.'M                                                          l i
                                                    't he Company in.outaim trusten'd, tioncon!ributory thlirement pla rutirement ap, norwHy nr3 65, aml                              Law compt.ted one year of smke.
bild by the 196h1.0 1                            l l
Oif41nbd 31, IO7I, Ib/ roaf t.Gr babh' of inteth computed priorh 1973,                          settice          emh. Ac *orducly, anh e
spestively,                                                                                  '
l                                        $$74,301 for the ytan 1969 thront l'er the twrite mmths ended Septcnil a 30,107 l conh of the Plam, funded                                      i'                  a whish were for nunut knko, une !hil,M, nhhao/h a
;                                                                                                                                                                    h Pemion thfoim Act of 1971 tequha, the hmdate, o l
4 Comjuny dou not Nhne that the mi of romt b ma with the A6L wat matalaI
                                                                                                '"                                                                            I
                                                                                                                                                          -            t. .          .
                                                                                                                                          ....e. + .
e = , e a og ..
e se e  e i e    saep am,me.
 
                  '--.-..w....                                            .. ..          .                .
i r
Tile MONTANA l'OWI'!t COMPANY AND MntSIDIAltlisS NOTES '10 CONSOI.IDATLD FINANCIAL STATEMENTS---(Continued)
NOTE 6--CONTINGENCII S AND COMMITMENTSt The Companis hydroelectric projects are operated under licenses issued by the FPC which expire
      ***h" 8 ,                        at various times through 1998. When a license expires,it may be reissued to the Company, issued to a new 'iccusec or the facility may be taken over by the United S'ates. In either of the last two events the TS45                    - Company would be entitled to compensation equivalent to its sat investment in the project, not to exceed
: PSC                      fair value, plus severance damages. In determining net inveument in the project, th: licenses proside 10,603                      that there may be deducted the amount contained in an amorti7ation reserve which shall be accumulated from a portion of the amoimt earned in excess of a specified seasonable rate of return after twenty years of operation under the license. The amount of these amoitization reserves, if any, relating to the Company's hydroclectric psojects cannot b: ascertained with accuracy at this time because of various uncertainties seraidma methods of calculation. Iloweser, m..nagement at this time believes that any g3                          such anmrtization reserves are not material in relation to th: Comp.my's investment in property and 00,000 plant or to shareholdess' c iuity.
Minimum annual sentals under noncance!!able lease. for the year 1973 and the twelve months ended cader's September 30,1974 weic $1,400,000 and $1,290,000, respectively. The>e rentals consist of 5975,000 ber 30,                      hydroelectaie project rentats under terms of licenses issued by the FPC (Note 6), the largest of which is 5950,000 applicable to the Kerr h)droelectrie project which heense espires in 1980, and trammission du N                      line rentah amounting to 5425,000 for the year 1973 cnd $315,000 for the 12 months ended Septem-g ig, her 30,1974. Minimum transmission line reatah are b acd on negotiated percentages of physical plant
    , L ed c sts and variable operating costs, and do not centain renewal options. One transmission line rental interest agreement, constituting 5213.000 minimum annual rertah, cxphed March 31,1974. 'Ihe remaining transm on Une sental agreements c utinu: t 2015. The minimum rental commitments under non-173 and                      cancellable leases for each of the five succeeding years, each of the next three five year periods, and the g,                remainder based upon agicements in eticct on December 31,1973 are set forth below, o
Tmn mbslon e line cf                                                                                  ITydn.tisetdc        Line                  Total 1974  ...      .  ..      ................              S 975,000      0 265,000          $1,240,000 1975 ...        ...... ................                      975,000        212,000          1,187,000 ho :ttua                            1976  ... ..... ..................                          975,000        212,000          1,187,000 rs ended                                                                                        975,000        212,000            1,1S7,000 tumiMly-                            I977    ** ***        ** *********              **.
1978  .............................                        975,003    +    212,000            1,187,000 for each.
345 and                          1979 through 1983. . . . . . . . . . . . . . . . .        1,470,000      1,15S,000          2,528,000 125.000      1,158,000            1,183,000 1984 throurh 198S. . . ........... ...
  -
* cxpense,                          1989 thniugh 1993. . . . . . . . . . . . . . . . . . .        120,000      1,15S,000            1,178,000 ited prior                        Remainder 1994 through 2015. . . . . . . . . .                120,000      3,033,000            3,153,000 000. The vice costs                        in connection with their continuing censtrue: ion program. the Company and its subsidiaries have
    . time, the                    entered into' puschase conunitments which amounted to approximately S45,000,000 at December 31, ome.                          1973, and $40,000,000 :.t September 30,1974.
39 4
._._u        4              _.
 
l I
Tile MONTANA l' owl:It C051PANY /. Nil MmSIDI*.HFCS j
NOTI'.S 'I'O CONSOI.IDATED IINANCI AI. El A'! E31ENTS-(Cor.clmfed) f Nore 7-Surri.i r.ti NTany Iscor,in STATnui.N r Int.on?.tATION:
12 MonCsv I'nded 1*carI:nch  d Ik cm!=r 31.
                                                                                                                                          - ~ ~ ~ ~ - - ~ - ~ ' -      - - -
September 31 ~ ~ -                                                  1970            1969 l'i7.1              1972      1971
    !                                                                                            1971 I
a                                                                                                                            .'I..h.ouands et De f arn Charge <1 to costs and expenset                                                                                                        $ 3,552 5 3.632
                                                                                                $ 5,632            $ 5,420            $ 4,672      $ 3,630 mintenance and rcp irs          . . . .... ...                ..
7,928          7,513 9,769            9.624              S.M 1      E.392 Depreciation and depiction            ..          .        .
Amoltiration of or15 defericJ to future operat-                            1,155            1,155                635        277          41              -
i ing period. (Note 1)                        ..                .
i
      }
Taxes, other than ii. wine taxes                                                                                                        7,7 M          6.985 f,'19 5            8,457      8,013
                                                                              . .. ..                9.444 I                      Ad valorcm          .        . ..      .
370        33S            362 655                000                451 Federal aca state social sceurity                        ...
1,290      1,991      1,768          1.238
                                                                              ... .                  2.047              2,004 State liccue                    . ..
hovision for dcf tsicd state co rotation 1;cenu                                                                                          -              -            l' (65)              (68)              64S          -
i l                      -Kerr hei tt e          .
674        625            548 S85                F51                684                                                  i 1                                                                      .. .
e                    State c!cctric tems tiro:ecds              .
23F            248 260                266        253 256 State gas diitiitution .        . .. ... . ..                  .
372              200 1,4? 7              977        992
                                                      . .. . . .. ... ..                            1.P32                                                              - _.                        ,
Other        ..                                                                                . . . .              .          .
                                                                                                                    $ 14.009          $12.773      $ 12,293    $ 11.1 h 9 $ 9.581 a
                                                                                                .$15.051
                                                                                                                    $ 3,197          $ 2.990      $ 2,078    $ 1.876 5 1.396
                                                                                ...              $ 3.551 Rents (a)    . .        .
5 2.371          $ 1.576          $ 1.501      $ 1,266    $ F02 5 624 Royalties          .... ..            . ... . ....
1                                                                                            $ 1,870          $ 1,439            $ 1,270      $ 9SS $ 914 $ 635 (a) Includes del.iy s ents.ls of. . . . . . . . . . . . . . .
( ) Denotes red figure.
i h
I 4
l                                                                                                                                                                                                      \
l      1 i
I                                                                                                                                                                                                .
1
        '                                                                                                40
          >                                                                                                                                                                                      )
4                                                                                                  . _ _ . . - .              .. . . . .    . . . . . . .      .              , , . . . .
i                                              _ . . , . . .          ...      . .
 
T1
                                                                                                                                                          -_ j .
                                                          --m..                . . . . . . . . . . . _ . . . _ . . . .
O
    -                                                                UNDEN%711 TING Z
t'      +          The Underwriters named below have severally agreed, r.ubject to the terms and conditions of the i
Underwriting Ar.rcement, to purchase from the Company the respective principal amounts of New Bond.5 set forth opposite their names:
Primipal Amount Name Kidder, Peabody & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . .                  $ 2,700,000
  -                            Smith, Barney & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . .                  2,700,000 He                                                                                                                              2,700,000
  -                            IIalsey, Stuart & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
850,000 Blyth Eastman Dillon & Co. Incorporated . . . . . . . . . . . . . . . . .
850,000
                              ' Die First Doston Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Drexel Burnham & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . .                        850,000 142 850,000 USS                          Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....
IIornblower & Wecks.llemphill, Noyes Incorporated . . . . . . . . .                                  850.000
      -                                                                                                                            850,000 E. F. If utton & Company Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Brothers Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . .                  850,000 6pSS                        Merrill Ly nch, Pierec, Fenner & Smith Incorporated . . . . . . . . . . .                            850,000 362                      Paine, Webber, Jackson & Curtis Incorporated . . . . . . . . . . . . . .                            850,000 1M8                          Salomon B rothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        850,000 White, Wcld & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . .                    850,000 Dean Witter & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . .                    850,000 B e a r, St ea rns & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        850,000 L. F. Rothschild & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    850,000
( 48 .J
                !              Shicids Model Roland Securitics Incorporated . . . . . . . . . . . . . . .                          700,000
  , 9'581                                                                                                                            700,000 D. A. Davidson & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . .
i 1,396                      ABD Sceurities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . .                    525,000 1 624                        American Securities Corporation . . . . . . . . . . . . . . . . ........                            525,000 Dominick & Dominick, Incorporated ...................                                                525,000
  $ 635 Moseley,IIallgarten & Estabrook Inc. .....................                                          525,000 R. W. Pressprich & Co. Incorporated ...................                                            525,000 SoGen-Swiss International Corporation . . . . . . . ............                                    525,000 Stuai t Biethers . . . . . .......... . .....................                                      525,000 Thomson & McKinnen Auchincloss Kohlmeyer Inc. . . . . . . . . . . .                                  525,000 UllS-Dil Corporation . . . . . . . . . . . . . . . . . . . . . . . . . $. . . . . . .                525,000 Wood, Struthers & Winthrop Inc. . . . ...................                                            525,000 Bateman Eichler, Ilill Richards incorporated . . . . . . . . . . . . . . .                          325.000 William Illair & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                325,000 Boe tt eher a nd Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            325,000 lloswoith Sullivan and Company, Inc. . . . . . . . . . . . . . . . . . . . . . . .                  325,000 Dain, Katman & Quail, Incorporated . . . . . . . . . . . . . . . . . . . . . . . .                  325,000 41
[ ~ *          --- -            .. - .,, , _ _ _              _ ..... ,                ... ... . . - ,,,                _
                                                                                                                                                            , ..e 1
I
 
i r-1                                                                                                                                      Principal Amount Name
                                                                                                                                          $    325,000 First of Michigan Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
325,000 First Mid America Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      325,000 Piper, Jafiray & If opwood Incorporated . . . . . . . . . . . . . . . . .                        150,000 Cunningham, Schmertz & Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
150,000 Foste r & M arshall I nc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        150,000 The Illinois Company Incorporated . . . . . . . . . . . . . . . . . . . . . .
150,000 Kirkpatrick, Pcttis, Smith, Polian Inc. . . . . . . . . . . . . . . . . . . . . .                150,000 i
Rodman & Renshaw, Inc. ...............................
530,000,000 Total ................................
The several Underwriters, through their Representatives, have advised the Company t Underwriters propose to make a public offering of the New 13onds initially at the price to t
          !                  forth on the cover page of this prospectus. Any such ofter:ng and sale will be for deliver if issued and accepted by the Underwriters and subject to the right of the Underwriters to with cancel or modify the offering and to reject orders in whole or in part. On any such offering m 1
dealers, the Underwriters may allow a concession of not in excess of .450% of the principal am New Bonds, of which not in excess of .250% of such principal amount may be reallowed to ce                                                    .
other dealers. After the initial public offering, the price to the public, the concession and the real;o j                  ance may be changed.                                                                                                                    '
                                                                                                                                                                        )
5                        The Underwriters are committed to take and pay for all of the New 11onds if any are taken. Und certain conditions involving defaults by one or more Undenvriters, the remaining Underwriters have right, but are not obligated. to take up and pay for the New lionds which the defauhing Unde Underwriters failed to purcha.se or to substitute another underwriter or underwriters satisfactory t D,                  Company, if the remaining Underwriters do not take up and pay for all the New Ilonds agr purchased by the defauhing Undenvriter or Underwriters or substitute another undernrit the Company may substitute another underwriter or underwriters satisfactory to the Represe 1
The Company has agreed to indemnify the several Underwriters against cert:in civil liabili including liabilities under the Securitics Act of 1933.
4 L
I i                                                                                                                                                      i i
i 42
                                                                                                                .. - ,.. m _,                _
(
                                      , . . . _    . . .    ._      .                                                                                                      i L_..
 
{
I t !
PJtOSPIN.TIJS
(                                                    $25,000,000 The Washington Water Power Company First Mortgage Bonds, 9%y0 Series duc 2005 Due Fe!nuary 1, 2005 Interest payable February I and August 1                                                                          I
    .                                                                                                                      I
                'Ihc New Ilonils are not refundable out of certain munics prior to Fohrnary I.1985. escerit under Otherwise. they are redeemable at any time at the option of the Company at          f certain circumstamrs.                                                                                              j declinin;' redemption prices. 'I he New Ilonds will he iwoable only in fully re nistered form onel will be        l trainier.ihle without sersice charne. See "De*,cription of New lionds" herein.
TIIESE SECT'IIITIES IITVE NOl'IIEEN Al'Pir.OVED OR DISAPPROVE!! 1:Y Tile SECU AND ENCil ANGE COMTil% ION NOlt il AS 'illE CO'ialIF510N l'ASSED UPON TIIE l ACCURACY OR ADI:QI;ACY OF 'illiS PROSPf ril'S. ANY REI'RESI;N-                                      l TATION '10 Tile CONiltARY IS A CRIMINAL OFFENSE.
                      -....,                                                    IInderw riting I)iscounts and              Proceeds to Prin to                                    Cornpan3(1)(3)
Puhhc(1)        Cornniiwinns(?)
101.250'A              E/59'c,                100.3759'        ,
Per Bond                          ..
(                                                                                                                        i S25.312.500            5218,750                S25.093.750        i Total . . . . . .              .      ..
(1) Plus accrued interest from Februny 1.1975 to the date of payment and delivery.
(2) The Company has a; reed to indemnify the several Underwriters against certain civil liabilitics,                ,
including liabilities under the Securities Act of 1933.
(3) llefore deduction of expenses of the Company estimated at $115.000.
The New Itonds are offered by the sescral Underwriters when, m and if issued h3 the Company and accepted by the l'r.derwriters and subicct to their right in reiert ordcas in whole or in part. It is espected that the New lionds will be asailable for delisery at the ofHce of liiIdcr, l'eabody & Co. Incorporated, 10 llanmer Square, New York, New York 10005. on or about February 2d,1975.
Kidder, Peabody a Co.
IneOrjwrated White, Weld & Co.
Incer[ orated Dean Witter & Co.
Incorgerated I                                    The date of this l'rmpectus is l'thnrary II,1975 i
l
 
          'No deakr, sahsnum, or any naher penon has been :'othnei,nl to nine :niy intorniation or to make any representations, other th:o those ennt. sine ! in this hmpatas, in conneethm with the olier de herein; and, if nisen or made, snib inh rmation nr npresentations must not be relied upon as having been authorised by the Company or by any I'ndes,*.riter. 'Ihis Prmpeans does not comfitute an nih rin by any Underwriter in any imi dhlinn tu any person to ulenn it is unlawful for such Underwriter to                                              3 make such offer in such jurisdiction.
Neitlar the delisery of this Prospectus nor any sale made livrennder shall, ui. der any circunniances, create any implication that there has not been any thange in the :liain of the Cennpany since the d bercof.
This Prospectus, with appropriate thanacs, will be used by separate ;;riml.s of underwriters for oliering of $25.0ho.000 primipal :nnount of l'irst alortgage Ilonds, 9N% Sales due 2005 Ohe "New Ilonds"), and for the ollering of .tbo.WO shares of Common Simk, no par sa'uc (the "New Conunon Stock"). The sale of one issue is not contingent upon the safe of the other.
t I
r TAllLE Ol' CON'II:NTS Page    ;
Page 14 Sumrnary Inforrnation                                            3  Power and Ga, supply                                  .      .
17 General Problena of the Utility it:Justry ..                    3  Competition and Puldic Ownership Actisitics .                  ..
17 The Company                                .
4  Desription of New 13onds .                    .      .      ..
l 21 4  Description of Cv:nmon Flock                            .....                .
Use of Proceeds              ..
4                                                              ...        22 Construction Program    ..          .      ... .        .        Management            ..                    .          .
Capital sceuritie,,                            ..          . 5  Litigation                                          .      ..      23      l 6                                                                        23 Dividends and Price Range .            .          .. .            1.cgal Opinions                                  . .                          ,
7                                                                        23        :
Statement of Income                                . .            Expera                                                                        I 10  Opinion of Independent Certif,cd PuHie Electric Operating Statistics .                          .
Acconnunts                                  ...                    23 11 Gas Operatint, Statistics                . .            .
Finar.ci.d St.nements                                                24
                                                            . .      11 Ilusineu    .              ..
Underw e ite rs                                                      31 13 Property .      ...            ...  ..      ..
6 IN CONNI'CilON MITfl '1111N OITI'lilNG. Tile 11NDFRWillTINIS TI AY OVElt-A1. LOT Olt l'FFI Cr TitANSA(' LIONS WIIICII St Attil.1/.E Olt al AINI' \tN Tile TI AltKEI' l'IllCE OF Till: NEW llONDS. Tile N1: W CO.T ITION SI'OCK AND 01 ISTANDING COTitlON SiOCK OF Tile COT!PANY AT A 1.lTI't. AllOVI'.Til AT WillCll TilGitT OTilEi:Wisi: Pill: VAIL IN Tile OPEN AI Althltr. Sl'CII Ti! \NSArilONS SLAY 111'.1:FITCll'D W!ril 1;lNpl*CI' TO SUCII IlONDN IN 'l Ill: OVElt 'IIIE-col 1NI Ett .Tl \l:EE r 01: O'IliElluiSE, ANil Mi111 Ill:Sl'ECT TO SI:Cil N' loch ON lill: Nl W YOlth PACIFIC Olt SPO!; ATI: *,l'OCK l'NCil ANGl'S. IN Tile OVElt-Till.:. Col'NTFit TI Althl l' Olt Ollil'It% ISI:. St 011 STAllli.17. LNG, IF CONI.TIENCI:D, h!AY llE DISCONTINUl:D AT ANY T1.T il'.                                                                                                      I 2
l l
 
V SUMM AlW INFOM.',l ATION l
The foll "ing material is cinablied in its entirely by d detailed information am! linancial statements                                                            J
[          - (including n,'<n s thereto) appearing elsewhere in this pmtpectus.
                  " DIE OFFI'lglNG (see emer page, pages 2 and 4)
The Washinrh.n Water Power Company Company    '                                                                              . 525.000,000 Fiist Mortgage Ilnnds due 2ws Securit'v Irmg Offered . . .                                                                      .
February 11, 1975 fixpected onering Date .                                                                                400.mo shares of Common Stock Additional ',ecurities being Offered .                        .. .. .
                                                                              .. .... .                To prepay bank loans and to finance construction Use of pp,. ecds . . . . .......
TIIE COMPANY (see pages 3,4,11 aml 12)
Principally clxtric and gas utitty 13usincu .          .
Eastern Washington and northern Idaho Service An a ..-                  .
                                                                                                                    ..                    Approximately 550.t00 Service Ao a Population                      ..... .              .. ...
Operatin;: l'evenue Sources for 12 rnonths ended                  -
Electrie 68%, Gas 30"c, Other 2^*e October $1. 1974                                                                            ..            llydro, with minor exceptions Source of J lectric Generation for System lead ..                                      .
                                                                .        .. .            ....              Elcetric. Novemher 1974: Gas. December 1974 Recent Rat. Increases FINANCIAI, INFORMATION (see pages 5,7 :md 8)                                                                  IZ .\tutohs Ended December 31,        Octolar 31 1973                1974 Selected I". ome Statement Data:                                                                                      5108.955.000
                                                                          ... .              ..                        S 92.9')9.htn Operatin.. Revenues                                                                              S 13,646h00        S 14,424,000 Net Ins"'"e                ..                  . .
52.04              S2.12 Earnimn l'er Aserare Share of Common S:ock                                                          S t.44              $1.47 Disiden.ts per Share of Conunon Stock ..                                    .        .
('                  Ratio of I arnings to Fised Charges .                          .        .      .                  2.29                2.46          2.26*
2.14                2.29          2.13*
Supplenn.ntal Ratio of liarnings to Fised Charges                                                        Octotier 31,1974 Acte.d            As Adjusied**
Capital Stowture:                                                                                                                          64 9, 5257.492.000        5260.402.000 1.onc.ico n Debt .              .                        . .
137.418.000        144.818.000        36 Con $ mon Fquity                            ..                                  ..
Total .        ..                    .                  . . .        .      5394.910.000        5405.310.000      100%
                            . Pro fo.ma ratios for the twelve months ended October 31. 1074.
                          ..gjges ,ilect to the sale of the l'cw Bonds and New Conunon Stock.
GENI:RAL PRoll!I:\lS OF Tile UTil.IlY INIWSTRY The wadiington Water Power Company (the " Company") has been esperiencing some of the problems egounon to the electric and natuial gas indusnies including increased costs                                                            resn!!ing frem Ilowever,                  I inflation the te,ch cost of capital and the need to comply with emironmental requirements.
j since, with enaer emptions, its power supply is obtained from hydroelectiie resources the Company's                                                                i cost of powo tor system load has not been materially atieeted by incicased fuel costs. Also, the state                                                              '
utility conunr oons have pi'nnitted the Company promptly to pass on to eu.tomers the increased cost of its natural rv supply. While its cost problems have not been as serious as the problems of many other companies          ni the utility business, the Company may iequite adJitional rate relief from regu!atory comminiom .a the near funne to maintain its prowth in earnings which is essential to obtaining capital for expanuga M its facihties. The Cetapany is snbject to cintaihnent with respect to its source of Canadian
(              gas supply .n ate other ras distributing companies in the l'aeitie Northwest. (See "Businew-Rates and ea Powe, and Ga, Suppro.m suppr.)
Rcyd.nhm .
3
                                                                                                                                          -                .    .~
 
                                                        'Illi' COMP /,W
            'lhe Company _ was inoyporetal .in ihh9 mn!n ihr I.i.vs of. the State of Wa'.hington and has its -
principal ottices at 1.a .t 1411' Mi). inn Asenne. Spolanc, Washington 9202. Its telephone.numbei is
      - 509 4M9 0500. The Cnnipany is primarily eng, ed in the pencration purchase, transmi.sion. distribution :
and sale of c!ectric energy and the pmchase distribution and sale of natural gas. To'a minor catent, steam heating and water services are also provided.-
USE OF PHOCEEDS The net pioceeds from the sale of the New liond. and New Common Stock, aggregating approxi-mately $32,540.f 40. _will be useti to prepay $27.t;90.000 of unsecured p:omissory notes due December 1, 1975, expected to be outstanding at the time of closiny under the Company's esisting line of credit with certain Washington and blaho connnercial banks. with the remainder of such net proeecds to be used to carry forward the Company' construction poipram nothned below. 'lhe procect !- of the borrowin: S due December 1.1975 weie used to prcp. y SIS.000.000 of notes due November 1.1974, with the balance used for construction purposes. - (See Note 2 to Financial Statementi)
CONS'IRUCTION PROGRAM The Company estimates its construction program for 1975 will be approximately $29,265,000 con-sisting of:
Colstrip Coal fired Steau Flectric Generating Project (Company'.s 15%, ou nership share of Units 3 and 4) . . . . . . . . .              5 3.283.000 Skagit Nucleai Project                                                                            'g (Company's $r;;, ownership share of Units 1 and 2)                        .          1,710,000 Washington Public Powei Supply System Nudear Unit No. 3 (Company's 5%. ownership share)                  .        . . .              ...      867.000 Other Electric Generating Plant                        ,            .        .          2.364.000 Electric Transmission P! ant .          . . ...        ... .. .          ..          7.246.030 Electric Distribution Plant                      .                                      8.233.000 Natmal Gas Utility Plant        .                                                      2.699.03)
Other Utility Plant .        .    .              .
1.063,000 Miscellaneous and General Plant                                  ..    .              1.800.000 Total          .                    .                .        . S29.265.000 f-                                                                                                                _
l                                                                                                    +
In addition to internally generated funds from retained earnings and depreciation and amortization, the Company in 1975 espects to iwne unecured pronuwory notes un.!er its existing line of credit with -
!      the banks at various times and in vmicos amounts not presently determinable.to finance the construction program outlined above. (See "Propuiy" and " Power and Gas Supply".)
L 4
 
                                                          .                                    ~                    -                .                            .
(.'APii Ai, SIL'Utdi'lIN .
Omfanding
:    5 As e,i                                Adimsed Amoun -                  Otti.tu r 38,                                  for Ausluerised :                  1974                                l'inanting I.4Nt, lIint DI.nT:
First Mortgage lionds:                                    5500,000,000(1) 5 20,370,000                        5 20,370,000 3M0; Series duc 1982 ' .              . . .
30Jm,000                            30,000,000 4%% Series duo 1987                ,            , ,
20,000,000                          20,000,000
,                48//,;. Serles dne 19:,S                          .
15,000JFH) -                        15,000,000 4X'/,. Serics due 1988                            ,
* 15/mj#)0                            15,000,000 4M'/c Series due 19;;9                  . . .
30,000.000                          30,000,000 4X'.{ Sciies dne. I'N4                          ,
10,000,000 10J00,000 4%',;, Series due 1995 20fx)0,000                            20,000,000 6 ',;. S$ ries duc 1996                            ,
20/00,000                            20J)00,000 9M0", Series due 2000        .. . ..,
20,000,000                          20,000,000 7X0; Series due 2003                            , ,
                                                                                                                  -                        25,000,000 New Ilonds . .
Sinking l'und Debentures (2):
S 8.092,000                      8,092fK)0                            8,092,000 4M% duc 1978 ,,                        . . .
6,930,000                  6,930/4)0                            6,930,000 4M% duc 1983-                          .
5,100,000 5,100J)00                  5,100.000 4M% duc 1990                    , . . . .
15,000,000 -
15,000,000                  15,000,000 8%% duc 199I                    .            ,
{
I              Notes Payable-13anks:
Due December 1,1975(3)                                  S 35,000,000                  22Jn0/100                                    (4)
S257,492.000                        S260,492,000 Total leng Term Debt 10/100,000 shs.              ti,812J51 shs.                ~7.212,051 shs.(5)
Coststo.N Sun, No pan Vaun. _
(1) Issuance limited by property, carnin p. and other prosisions of the Mortgage.
(2) li.selusise of 54S8.0M currently to le retired through sinking fund operations; the debenture agree-ments contain Ptovisions which, under tertain conJitions, coul.1 restrict the issuance of unsceured
                -long.ierm indebtedness.
(3) These notes bear interest at a rate equivalent to the prime commercial loan rate prevailing from time to time, which was 95 ',',;, as of l'ebruary 10,1975.                                          s.
(4) A postion of the net proceeds of the New 11onds and New Conunon Stock will tv used to prepay outstanding notes due Deeender 1,1975 which are esiveted to be $27.000tKK).
(5) INinsise of any shares issuable under the ilmplopes' Stock Purchase Plan referred to under i
                  ** Management'.                                                                                                                                                          I l
l l
    ~f 5
i I
i
                                                          . , . ..-m.-    , _ _ , ,            , ,        .            . . . . _ .
n,-,--      -
                                                                                      ....---a.                n.-          ,                  r-- , - - , - - -          - - - - , - , ,,
 
y i
i DIVIDENDS Anis PitlCE ItANGl; l.
Thci Ounpany has paid dividends without internistion eri n Ist:nhline. uares of its Common Stock since IP.'D and has increa cd the total divitlend for c.n h of the past tw ive years. On D,cember 13. 1971 the dividend was raised to its pre ent raie of 38 cents ivr <hase (equiv: lent to an annualized rate of $132).              !
: Dividends paid and the birh and low prices of the Company's Cominon Stock on the New York Stak                              i Exchange for th: periods indicated were as follows:
Price Hanne -
Disiencruh          -
1 Per %are      Ilicia            im                  j 1970    ..    .      ..        ...            ...    .            51.32      522              517 %
1971 .    ...                      .. .. ..                          1.36        24                20 %
19721st Quarter            . ... . .. .            ..        ..      0.34        23M              21 2nd Quarter        .....................            ......      0.35        22 %              2i t,i 3rd Ouarter        ............. ..... .. .. ...                0.35        22M              21 ~
4th Quarter        ....        .. ........ ....        .... 0.35        23 %              21 %
19731st Quarter      . .. .... ........... .. ..                      0.36        22M              20M 2nd Oua r t er . . . . . . . . . . . . . . . . . . . . . . . . 0.36        21M              20M          t.
3rd Quarter .            . ... ... .... ... .. . .                0.36        21 %              18 %        l 4th Ouarter      ... ...... ... .... .... ...                    0.36        20M              .17%
1974 ist Ouarter    .... .... . ...... .... ......                    0.37        21              .19              .
2nd Ouarter . . .          .. .... . ....... ... ...              0.37        20 %              17M 3rd Ouarter        .. ....... ...... . ...                        0.37        18                ISM        i 4th Quarter                    ..        .                      0.38        17 %              ISM 1975 ist Quarter (through February 10. 1975)                .
19M              16M The last reported sale price on the New York Stak lixchange on February 10.1975, was S10 50 per share.
A quarterly dividend of 3R cents per share on the Common St.vk was declared on February 10 1975 payable March 13. 1075 to holders of record on l'ebruary 27. 1975. This disidend will be paid on the New Common Stock.
It is the intention of the lloard of Directors to continue to pay dividends quarterly on the Common                      .
Stock, but such dividends are dependent on future earning..                  s linancial position of the Company and -        !
i other factors.
i
                                                                                                                                    '4 6
--                    _.              ._ . . ~ .
 
i j
                                                                              ,ilWl'le.TIENT Ol' INCOMI:                                                                                                                  t
[
The followinp. statement of income fot the 3 cam 19tn lo Pan. intinswe, lus beco exam                                                                                                                      :
i
_ (i ndependent cerlilied public acwmt.ints, whose i
f the opinion results of              unh includes all adjustments, comp ising only notmal recntring acciu:d, neceway for a Imr statement o
  -      - operations. This statement should he considacd in conjuntuon with the other fin appearing elsewhere in this Prospectus.                                                                                                                                            12 iltmths                    g I ndo                      I Years l'.nded t h rember 31,                                      14 31 74 1971                1972          1973 (Unatufih d) 1969          1970
('l hom;mds of Ih.tlarsJ Operating Revennet                                                              .. .
                                                                                                            $ 4S,M9 5 50/ 65 5 52.s7r. 5 55/d3 5 65 I67 5 74,745                                    31399 23.033            25.808        26.424 Elettnc            .  .. ... ..                                                              18.93'1        20,161 859            1,154 953              957 G as . . . . . . . .  . ..
770            821 549              657 Steam IIcating        .. . .... .              ... . ... . .                                                                      423              471 434            446
                                                                          ..        .........                                                                      82.Es4        92.999            108.955
                . Water . . .              .    ....          .
72.093            76,957 t>8.992 Total op: rating revenues                                                                                                                                                                          r Operating Rescrue Dedouiont                                                                                                                                                                9,650 6,230            7,410          8.900 Opcrating ihren eu                                                                            6,526          6,7 41 20.691 Power pmehised and net in:errh:mpe                                                                                      12,180            14,944        15.280 9.878        10,550
                                                                                . .                                                                                                  9.012            10.833 Gas purchmd . .                                                                          4.174          4,448              4.871            5.0 54 3,512 Other produuion, trammiwion and distribution                                                                              3,36S              3.585          3.252 2.869          3,084 Custom:rs' acconming and sales promotion                                                                                                      5,755          5.805            6A13 4,533          4,937 -            5,075 3.650            4.557 Administratne and general                                    .
2.491          2.581            3.172              3.287 Mairtenance and repairs                    .        .. .
34,K96 ~ 40.475                  45.899            55.201 30,474        32,394 Total operating cspemes                                  .
6.445          7.779              8.287 5,199          5.566            6.320 7,917            8.385          9.350              9.v22 Depreciation (l)                      .
7,091          7,406 6,812 4.910          4.546 Tate -other ih m inceme ..              ..
t if          5,715              5.437 532 205            Ifs 5 Federal incorne 1242) .                                                                          196            197                201 8a.s14 54,771 ~ 6m o20 . 67.759 f              State income ias              ..            .
Total operat ing revenue deductions .                              .
49.30s        51.138 22.216            22.834        25.24n            23.141 19.634        29.9u5                  -
Net Operating Reser:ues Other Income iDedcetiom);                                                                                                                                                  576              ( 346) 381              312 Equity in carnirn (Iows) of subsidiary companies (!)                                            226            904                  291            290 2.049              466              652 Interest and dN&nd income                                                        ,
403            921              1.471 Allowance for funds uxd during consonesion(3)                                                                                                      (4971 Lon on disposition of property                                                                  (210)          (205)                (4N)            (146)
Amortir. mon et utility plant acquiQion adjmunents.                                                                                                a151)          (265)              r131)
(261)          063)                fu4                                                as7 1,1s1            1.545          1.158 Other-net      ..    .        . .
158          1.157 28.628 Total other income (d ductions)                                                                                      23.397            24.379          26.398 19.842        22.n62 income before Interest Charges                                      .
12.075        13.125            14.531 Interest Charget                                                                                      9,751        11,300            11,634 Interest on long4erm debt                    .
74              71                72 Amortiration of d.ht dncount, premium and expense-                                                  57              62                75 158              7                os              143 nel ...                .
25              32 li g67          11158          13,294            14.746 Other interest                                                                                9.83 t        11.304 Total in crest charges                              .
12.223          13.104            13)82 10,009        10,658              11.530 Income before the l'ollowing 1:c Transfer from Accumulated Amouru invested in the llusi-                                                                                    542            542              542              542 ness Equivalent to Reductiom in I(Arat income lases                                                  542            542                    ~
Resulting from Aceclerated Amoitiration(2)
Net income Acailable fot Dividends and other Corporate                                          5 10.551 5 11.210 S 12.072 5 12.765- -$- D.646                              --
s u.424-Purposes .            ...            .
51.06          S2 04            52.12 Earn.mgs Per Share tilated on Weighted Average Shares                            . ...              51.76          51.80              S t .ES                                                                l Outstanding)                  ... .        .
5.0$6,963 6,228.653 6.423,408 6.400,117 6.678.S10 6,791.054 Shares Dum.mdina (Weighted Average) 51.86            51 66          5102              5112 Earnings l'e' Share tilawd on Number of Shares OuNand-            ,.
                                                                                                                      $1.10          $1.K0 Ing at 1:.nd of Year)            . .                                                        6.224.195 6,232.503 6AR7.004 6.504.810 6.764.535 6.812.051 51.36          S1.39            51.44            51.47 Shares Outstandinr ( At l'n f of Ye:u) . . . .. .                                                    51.2S          51.32
                                                                                                                                                                                                              -2A6 2A5                2 44            2A2              2.29 Dividends Per Share          .
2.67 1 29 2 27            2.25            2.14
(          Ratio of Earninrs ta rised Charres(4)                                                    ..            2Al            2.26 Supplemental Ratio of I'.arnings to Iised Chaires(4) 7
: y.                                                                                                                                                                                                        _ , , . , _ _
 
                  . (1) Ft>r the Compauv\ prailite m cornputivi pire.i. ion frq d.pseciation asul in accounting, for carning ol subsidi.py unnpanies. ?re Note l to I ipancial htatron uts.
(2) Federal mcome taxes clurred to operaim. o pen -e s v.rr e compared in accordance with Icipdicmenh of Icnolaloty. auth.Hilir, hatin;: jmi . .'ictici. oser the r 'ompa n[? rates Sce Note I to Financial Statements. A nronciliation of FcJeral in .ene rases derised from statutory tax. rates applied to income for accounting pmposo and such tases charged to operatiny espense is 3.hown as fo!!ows:
Yran I' mica lirremiser 31,            3 2 )I""8I"
                                                                                                                    -.-. I .ne:cd i
* In.31 74 I W.9    197n        1071        1972    1973 f t:namiited)
('l tumumd. nf I)ollan!
Tax espense derived from; income for acconniing purposes .                        5 M.637 S 8,055 S S,068 5 8,222 S 8,390 S 9,984 (Reduttions) and additions in taxes from:
Additional tax depreciation                    (1,956) (1,825) (1,518) (1,803) (2.394) (2,315)
Other timing di!ferences (principally the allowance for funds used dur-ing tonstinction and lase. and expenses capitali/ed)                          (243)
(307)        (813) (2.033)      (6S9)            50 Invotment credit .        ..          ...          (90)  (208)        (300)      (546)    (SS2)        (756)
Investment tax credit adjustment .                                              1.070      121    _ (151)
Federal income tax charged to operating expenses . .    ..    .              .
S 6.348 S 5.715 5 5,437 S 4.9In S 4.546 S 6.812                                      -
1 (3) Credits to income for allowance for funds med during construction ("AFDC") are primarily the                                    >
resuh of construction related to the Companfs one third owner hip in an tmderground gas stora;c project at Chehalis which was placed in servica in 1970 and the Company's 15% ownership in the Centralia steam clectric generating plant which was pheed in service December 31,1072.                                                    I In accordance with the accountiy practice desenhed in Note I to the linancial Statements, a cem-posite rate of 6% was used to charpe Al DC to construction work in progress for jobs started prior to January 1,1973, and 7M% for jobs started subsequent to that date. Determinatmn of the components                                            i of the composite rate attrit usable to each source of Innds use.' for construction is imgracticable; however, I
on the assulnotion that the fund used for this purpose were prosided from sources in tie same ratio
'        as the Comi.an,is capitali/ation ratio of 65t;, debt and 359 common equity. with MDC attributable                                          l to debt bein,c based upon embedded intere t costs (befose income tax efTeet), the pottion of funds pro-vided by common equity would amount to 2S;. 356,59. 75. 2S; and 2':'. . respectisely, of net income available for dividends and other 03rporate purposes for the years ended Deegmher 31, 1969 through 1973 and the twelve months ended October 31.1974. respectis ely.
l              (4) " Earnings" consist of " Net income Asailab?e for Disidends and Other Cerporate Purposes" plus *%ed charpes" (interest. related amorti/ation and interest portion of total rentals) and income taxes.
The pro forma ratio of carnings to lised charpes for the 12 months ended October 31.197-8 adjusted to give c!Icet ta the annual interest requirements on long. term Jebt espectcJ to be outstanding upon sale of the New Ilonds (119f. rate as,umed) would be 2.26. A t bange of M of Ir/r, in the intere.st rate of fle New 11onds would result in a chan;e of approximately .0N in this ratio.
i The Company has calculated supplemental ratios ef cannings to lised charges. In this supplemental                                    '
'        calculation "carnings" are defined as above and "lised charres", in addition to items referred to above,                                ;
I.
                                                                      .h l
i i
t t
            .      . .          _              , . . . . . - - - - -            --~    ~-v-----"          -.%-    --- -          --- " ~ *" '
 
i.a tuJcd in tie t o as of Im.cr y,ui. iu ,cd t rorn includes the Conq>any*: allocable portion of intere .!            t w "l'ower anti Ga . Supply"). Such Was!nn: ton poldis n:ihty dntrich nnder i m l on vo , o h ordy to tho e Ix>wer luns ha , not wt icti to wita.fi iv.al i
allocable partion of inicie .t cslien e ictatelesina suppftniental ratio f or the twcive montin coded O under the cont acts. 'l he pro 1974 v.ould be 2.13. A change of 8 l of 19 in the intentst n.te of the Nc,v lionds would icsult in a of approximately .411 in this ratio.
The annual interest requiicinenh on the Ncv. Ibads vcill amonal to $2J13,ho.
purpow's for the Operatine revenues and net income asailable for disiden.ls and oiber cori o Iv slve monthI ended Iktember share (based on weighted averare shares outstandinri weic S2.11.
Manancment's Discov. inn mal Anaipis of the Statemtnt of Income 31.1972 is attributable The improveinent in resennes for the periods codin7 obtequent to December                              d to inetta.cd electrie sales for resalc, increased                  narniai ;ms rates to off .ct the increa cd cos 1:ates anti Repolation".) Inflationary factor, and (S. e "l!n inc .s natural increa.:
ras and nstem trowth.in purchased naturalIncreased                    pas cost operatingresulted expensesin operating e October 31,1974 increasing at a more sapid rate than cperat;ng ierrnues.                        h      i 1974 in 1973 resulted pii:narily from placing the Ocnualb Sicani liant ia service. Interest c arpes n increascJ due to increased interest rates on and hisher level, of bank boirowings.
(
    \
(                                                                9
        --  _ .    . . . . ~ . . . . _ .
 
I:i.I:CI!(IC Ol'I.ItA IING .5IXll',II(N En s e n !..: Dei . r.ilwr 31.                            12 \louttn Inded 1969            1970            1971            1972          197.1    lu 3174 Ncr Sr.is 5: Ri soi+re s Islahum of Kwh):
llydro I:enerahon (I ror C.unpm>*s Statiom)                                                              3.515          3,4 %          3.511            3.740            3.014        3.h02 Thctmal generation (I som Company's St.ibon4)                                        .
76h          559 Purchased power          .      . .. ..                ..... ..... .....                              2,476          2,601        2,'44              3.403            3,176        3.056 Nct inter 6hange (credit)                      .          . .. . . . ...                                    (37)            126          (m)            (118)            397          141 Power generated and received                                    .          . . .                      5.% 1          6,l e;6      6,ra              7.025          7.355        EMI Deliveries out,ide sptem              .        ... . ..                        .          ..            1,193          1.194          1.247            1,569            1,79S        2 Ah5 Kt Sptem Resources                    ..            .                          ..            4 /,x t        4.872          5.1 U              5,456          5,557        5 /356 Ntt hnTIM Hs r/t rat Ma N as ( Alithom <>f Kwh):
Encrgy Sales:
Residunti.!      .. .                  .. . . . . .                                              1,u9            1/A6          1,814              1,965          2.056        2.131 Commercial                              .          ..                    .                          939            999        1/>76              1,132          1,144        1,150 Indmiri.d                                              . ..                                      1,341          1,377          1,421              1,476          1,515        1.524 Public >treet and highway hghting                            .          .        ..                  33              34          31                32            32            32 Tot,,1 General liminess                      .                .                    .        3,952          4,076        4,3 14            4405            4,747        4,8 U Public utilitics and railroads                    .              . . ...                          1,4F6          1,512          1.45!            1,797            2,056        3,032
                  %.tal Energy SoM to Public                                                                    5,03            5.585i        5.795            6,402            6,803        7,K<h Sales outside sptern        .. .                    .              .              .        .      (1,251)          ( ?,284)      (1,203)        (1,530)          (1,798)      (2,788; Energy lowes                          . . . ..                                      .. .                    497            568            542                5 r,8          552          575 Net Sptem Rconiterncats                  .                                    .            4/,S t          4,872          5.134              5.4 %            5,557        5,r %
Nuhtein or l'.t a rs arc Crsiom us ( Ascrate for Periali:                                                                                                                                              g Residentini      .                                                                          142J06          146,616        151,610        157,N5            162.328        Ir3 891 Conrnuci al      . .        . .                          .. .                                1E,035          19h7S        19,111          19.250            19.555        lo w0 Industrial                              ..                              .      .                I.212          1,27S        1,2n7              1,306            1 A25        IJsl Public street and highway lighting                                                                    361            3Un          262                261            250          2.:9 To:al Genor.il ilusiness                                                                163.314          167,332        172.2m        178.925            183.558        167,424 Public utihties and railroaa                .. ..                      . .                            10              12          13                12              13          15 Total l'!cctrie Customers                                .                      ..    ,161/ 24          167.};4        172.?q l                        1S3.57)        187. 0 9 178 037_
1:11 C1100 Ort h sli% kl si vp s OOD )):
Residu.tial                              .                    .                        . 520 1;8            520.802        521 F' l      523..t '2          521.564        524 51S Conuncicial                                      .. . .                .              .      12,930            13.549        I I.1S i        15.0 %            15.482        15.s93 Industrial                                    .                                                  S,626            S.630          N.S7 7          9,191            9,702        10,13s Public street and highway lighting                                                                    $42            h77          807                F35              929          956 Total General liminew                                  .        .                .      42.846            43,915        46.uk2          4 S. U.s          50.677        52.405 Public utihues and railroads                                                                      4,97S            5.522          5.1 C            5.810          13.107        20 66 Total f rom l'nergy Sales                                                                  17,S24          49A70          $1 APs        S t.1SS          63.874          7.4 271 Mncellancom reu nnes                      .                  ..                      . .              1.025            1.105          1,130            1.23o            1.293        i A74 Total l'lectrie Revenues                                    .                          518,SN          $ i0.665        $52.578      S $ 5.o l S        $65.167        574. 15 Net Oper,itma Resennes liefore Income Tases (504)                                                  521.715          522,174        522.914      s21.5ss            $25.d9        511.2a v                          -        =-                          . .=
1 s.rluic 1;t sm: situ Mkme As s m.: s:
Annaal the is t Cmtomer (Kwh1                                              .                          II.IN            11. 4 1        11,9(.o        12 A o.,          12.667        12.814 Revenue ivr Ku h (in cents)                                            .                                1. 2'Y          1.24          1. 21.'          l . l ot        I.19v        1.20e
  . Annual Revenue Ivr Cmtomer                                                . .                      511119            S I42 4'8      5141 25      SIN IS            $151,32        5133 82 1
10
    , , _          pw pwe          .y    .        ee-      e      e,s.                    *              *              '
 
m                                    .          -            m -. _
                                                                                                                                , . , . -              m. _
q-_=                                                              _i    s~    _
4 GAS Ol'I'ItNilM; SI'ATIS'ilCS kn unful livu nitei r 31,                                                    12 E nths
: i.    ~
                                                                                                                                                                                                                            - - -        I mitd 19'.9                197u -            1971                  1972                  1973 19 31 74 4                Notaa n m' Gas Ctsuests as ( Awract for poimi):
4 ',,fn 6              47.550          ~ 51.67n                55.449                  58.96x          61.3 %
hudential            . ...... ....... ... ..... ..... ..... .
5,596              5,714                6.250                  6.h27          7,271
                                                                                                          .... ....                  5.245 i-                    Conunmi.d ..... ... . .. .. . ..                                        .
232            23d                    265                      279              2w
                                                                                                                                      ' 221 l                    Industrial-hrm . . ... ... ... . .. . . . . .......                                                                                            24            22                    20 -                    20                lM
+                  . Industrial--.intaruptibic            ..        ... .                . ... . .... .                                26 .
                                                                                                                                                                                                                        -66,tn_4..        6832_7
,                                Tot:al G34 Cuuome t s . . . . . . . . . . . . . . . . . . . . .
4 M.31 %..            . . .$3.A02        . 57. .'*18 . . r.2_673.
                                                                                                                              ~
1HIsis 5ua s (lhousands of 'Ih.rmW                                                                                                      68,f.52          77,875                S3,934                  81.612          82,i26
                                                                                          ..            ........ .              f,4,524
* Residential              . .. . . . . .
57,242              57.9 0                  $R366          60.4 4 41.620                  44.141 Commercial ' . . . . . .          ..        . . .... .                        .. .. ...
105,hh3 -          lux,170              110,476                108,087          tilAls
              *                                                            .. . ... ............                                102,564 4                      Industri.d-fmn . .                . .
81.',14          78.kl2                85.143                . El.533          74,774 Industrial- mict rupiible              . ... . ......                              . .......              "17.152 300 629            322nn                U7.112                  329.r 21        328.724 Tot.il Ga Siles ....                      . ..              .....                  ... 2.s W2                      _.              . _ _ _ . _ ._                                - . _            . . _ _
Gas Orsumw R man s OOon):                                                                                                                                5 9,758                                      511.016          512.411
                                                                                                    .. ....... .                S 7.h63                5 ftA47                                511.013 Residential                          ... . ........
SA59                    5.711          6302 Commercia!              .. ... . . . . ....                                .. ... ....                          3.'N4                  3/nl            4.915 7,913 4,%2                  4,536            4.938                  5,4rA                  5,745 i                      Industrial-brm ~... .                  .        .....
2.N79                  3,In6            3.176                3.646                    3.762          4,911 .
Industrial.. irteirupubic                . . ..        .. .                        .          ...
18,933                20.nho            22.787                25.V6                    26.234          32.165
                                    'It.tal from "Iherm Sales                            . . .                    .      .
222                      190              2 34
                                                                            .. . .                    .. .. ...                            l              . El                  246 htisccitaneous revenues                                                                                                                                                  5:synx                  s26.424        $32.3w sis 439                520.16 t          s23.o u
'                                  Total Gas Avenues                            .                        .        ..  .                                                                                                                      ~
s 1.i$i                                                                                  E.'4F.H,        5._' 4,6.Ed.
                      - Net Operatint: Rewnuss livfore Income T.nes Wm)                                                          - -                    E_4.r.a t 's 4.xs.i_
                                                                                                                                                                                                  .s. .Q12                      . ..                  ..
G ss nt um uru Sinics- Avrt.mt s:                                                                                                                                                                                          1,339 1.%0                    1,444          1.sn7                  1.511                  1.384-Annual l' e per Customer flhermd ..                                                      .
15.14 12.19e                12.3tbr          12.53t                13.12(                  13.5nt I:esenw per therm (in cents!                                        .                      . ...
5:02 61 5182.79                5177 M            518S 85              5198.28                  5186.82 Annual Revenue per Cwaomer                          . . ..                          .. ....
IICSINF.SS General. The Company derives about W/r of its operating revenues from supplying electric senice.
l 300*c from supplying natural gas senice, and the remaining 2% from supplying steam heat and water l                          service.
j                                  Electric service is supplied to more than 190.000 customers in 93 conununities in castern Washington and northern Idaho. The Company has a senice area of al.prWmatdy 26.W stuare miles with an
[                          estimated population of 550A)0. The principal community in the aiea seived is Spokane. Washin. ion.
i with a metropolitan area pipulation estimated at 290.000. The area sened indudes highly producti e farm and timber lands. as well as the Coeur d'Alene mining district in Shoshone County, IJabo. 'lhe j                            Company's historical peak load of 1.003.000 kw (supplied by Company generation and pmehased pmer) occurred on January 9.1971 between 6 and 7 P. St.
Natural gas senice is supplied in Spokane and 32 other sommunities in e.ntein Wa>hington and 24 communities in northern Idaho. Apinosimately 70.0tti ras custonyrs are sened in these areas.                                                                                                                                    '
Water senice is supplied in and around Claiksion. Wa3hington and in areas immediatdy adjacent to S;vlane, Washington induding Clayton and Dur I ake as well as to three .small sy>tems in Koetenai                                                                                                                                  '
;                          ' County. Idaho. Steam heat senice is supplied in th. eemral pntion of Spokane.
1(ates and llegulation. "Ihe Company, as a pubbe unlity, is subjut to regulation by the Washingtoii Utilities and liansportation Commission ("W U l t"'). the IJabo pubbe Utilitie3 Commi>> ion ("lPL'C")
alid the hiontana Public Senis*e Colniniwinn ("AlpM'") with n sput to rates, auounting, the isstiana of                                                                                                                              I suurities and with iesput to other matters pertaini*ig to its clunie. gas and water operations within l
i their resputive jurisdictions WiriC does not hase imisdiction over the steam heating, operations of IIIe Comp.tny. The ('ompany is both a **liNhsN^ .ind a "publ!* litilit)"* as th0se terms ale !!%'d in the
'.                            l'ederal Power Act. and acconhngly is subject to seruiation as to unain matters by the Federal Power Commission ("FPC"). The Company is not a natut..I ras company umler the Natural Gas Act.
j      .{
11 J
      ,                            -+~,.n,            -n.        -..,,,r            ,--,,..,.-,,v.--w-_--~-                                    --,,,v-          .-.,-.-n      . , , - - - - . - - - - , . . . _ - - , , _ , , .            n--        7  .,n,
 
        'l he Company res cised l~l t ' a;>priwal to inaca ib electric wholesale p.e..cr rates in l'171 'llre new rates will ren-rate appiosim.acly U%.im ail.liiional resenne on ,m am.aal basis.
In November P)74 the Conq>any int reawd cletIrie rates a'. appnne i by WiiIC and IrlC 'l b:se new rate schednics became diedive with o'n .umphon on and alic. Noccmber 13. l'ii4 in Idaini, and with consumpthen on and aber November 19. P>71 in Wa hington. 'l hese tales arc espested to renerate additional revemic of approsimately $4.om.fm on an ammal basis. In addilian. W11lC mdered a i'a surcharpe he added to commeicial and indu .nial cu .tolaers as a consenation measure. 'I hi, suh harge          .
will be in clieet from November 19, 1974 until N1 arch 1,1975 amt is subject to passible refund if the surcharge does not resuh in consenation.                                                                        ,
i The Company retei.ed rern! nory appnr.at to mlinst natural y rates in Wash:nrion and Idah i in january, April an ! I)etember 1974 'l he in.reased rates are imended to oilset increasa due to the increased cmt of ras purcha cd ho:n the Company's supp!i,:r. No,thwest Pipeline Corporation.
        'lhe Comj.any appbl to a:ni recived apprmal finm WI'l(' and IpUC fm water rate insrea.es                    k which became clic.the Novciabei 12. PD3. ami amounted to appimnoaldy Sl57,W1 additional levenue on an annual hav, on bnnary 27, p>75 the (i.mpany apited to WUIC for a water rate increase v.hich would amount to appmsunatdy '.197.000 additi-nal sevenne on an :.nnual basit in Maich and lhenAcr or in74 the Company increased the rates for steam heating senice. 'Ihe March I'374 inewase amounted to appiosimately 52' o.Nn on an annual basis :.nJ the most recs nt incicase, c!Iettise ikcember 6.1971, is intended to predace additional res enue el approsimately 5559.000 annually. 'lhese rate increases weie primarily for v are and salary adjmtments and increased costs of fact For the twche mombs ended 0,tober 31,1974 aserare electris revenues per kilowatt-hour do!d to residential, co.nmen ial and indu.ai.d t ustomers v.eie 1.20 cer.ts.1.38 cents and 6+5 milk. respecthdy.
  'lhe Company's aserare ie.idemial resenue per Lilov.an. hour is amon: the Luvot of aay investor.owncd
                                                                                                                    +
or govermnent owned utilny in the nation, while the wasumption o! 12.814 kilowatt hours per average          '
residential co tomer dming the *ame period ranks among the highest.
l'or the twthe momi,s ended October 31, pri4. asciage pas iesenue per :herm was 10.73 cents undes brm sales and 6.5S cents undst intenuphHe mies avadable io a lew laire industrial on institutional custoiners Average consumption per tesidential cu tomer for this peilod was I.Un thermt FIDIrOilWLntal M.ttfris. The ('ompany is subj 'et to Cosironmental rCyulati0n by federal. state alhi local m.ihorities.
All of the Company \ current con trueiian piojeds. inJuding it, hare of iaimly owned penerating                i i
pIantN ha\e been deslyned lo coinply wdh all em!roninJntal laws picsently applicaNe to litem, and the cosh of such compliane, me inJnJed in the ec.nsaechon budgeu for such projects. Ilow es er. air spndity              (
l.tandards adop;ed by the St.de of Montana h.nc been disapprmed by the limiionn' ental Protectien                    i Agency. ~lhe Company cannot predict the elTect on the Cohtrip emerating plant cf Intme reputoions
  .1dopted pursn.mt to the Clean Air Act. Iklap resuhing fmm opposnion to consuuction of renerat-                      !
ing plants and major trammission lines have iesuhat in delay and madre:, ult in adJdional delay cf                  j the Cohtrip Project in Montana. (Nee " Power and Gas . Supply".)
Studies are being conducted by the Company in cooperation with the Washing:on State Ibp.utment of Fwlogy to determine subieet la 1:pC apprmal, feasiNe methods of imprm k water qual;ty in the                      f Spokane Rher. The hlabo Ikr.utment of linviromnemal Protection and llealit and the Washington                        l State ikp.ntment o! l'w'opy base adopted ths oh e 1 ninoren stand.uds b r the narcis el these states.                  .
but alc In.iking Imther studie. el thi elIcil on fish el diwohed nitrofen and powqNJ rJmidies. It 5% n0t i
p0% ibis at this tinie to deterinint- the ellect, if any, of the foreroing en the opei.nions er the Company's hydtodeenie pmjeeb in these states on the measmes, if any, that may I e requned to impime water QuaIit) ol' the TiWis whJrC these plojuts are h%:ted.                                                                  .
Other than the items set fonh abme. there are no known material espenditmes which will be                        !
required of the Company for polhaion mntrol aguipinent under applicaNe emironmental laws.                              !
12
 
1 PitOPI:!rl Y General. 'J he Company \ clatric propestic are located in Washim; ton, Idaho                        and Montana.
820,200 kw. The
{                                                                  1 The properties include hphoelatiie renerating 1 mh eith a pie :nt capability of installed capacity (nanieplate natiny) totals (>2(i,Ua Lw, of whi. h 132,41/) kw i, in six plants located in Washinzton, 211.250 kw i, in two plants located in i f.dio, and U2,X80 Lw i, in th,: Noson Rapih plant located in western Moniana. 'l he Company also owns a 32.M Lw capability combustion tm pencratin;; unit lAated at Othello, Washington, and has a 15'.i interest in tha 1,400/X)0 Lw Cent (Wa ,hington) steam electric generatin plant. 'l N plant is jointly owned h3 the Company, three oth investor owned utilities and f our pnNie apeneies.                              .
: 31. 1973. the Company hal 24'i substations with a total installed capacity of As of December 3.069.696 Lva and 9.579 miles of clestrie transmi ion and dhiribution line, 'lha transmission system consists of 536 miles of 23n.ohvoh line,1,310 miles of I10,4 'ipvoit line, and 170 miles of 60/h0-volt line. 'Ihe Company has 7,563 miles of distributiva lin:-
The Company's nattual pas properties consi i cf approsimitely 1,883 niiles of gas distribution ma and a one third ownership in an underground ps ston:pe project near Chehalis, Washington. In 1974 the Company aupiiied Cohunbia Gas Company, a small natural gas distribution company, in a trans action recorded as a purchase I he acynisition sesnIted in an inercase of 5882/00 in net utility plant.
The effect on operations during 1971 was not significant.
Steam heating propaties owned by the Company include a central pencrating station and 48,400 feet of distributi in mains.
Wales propaties owned by the Company include resenohs, a tiltration plant, 32 wells, and 239 miles of inains.
31, 1973, Additioits and Retiremenh of Utility Property, Fer the 5 year perioJ cnded December 5115,283M00 and approsi-the Company nude pross propaty adJitions to utihty p: ant of approximately
{          mately MS.130/M was ictired from utdity plant. Sneh pross addition, amounted to approximately 26 of total utility plant at December 31, 1973.
Titics. In the opinion of its General Counsel. the Company owns in fee all its principal plant > and other important units of seal property. Overt 10w rights 1.              reservoirs as wed as transmi>> ion and di triN-tion lines are on property owned in fee, leased, or for which the Comp uiy ha3 salid casements, beenses, Mme of the title < anJ ri;Qh of :he C.'mpany are subject to minor delects enJ permih or franchises.
irregularities nsually found in properties of like na: ore nd magnitude which in the opinion of Genera Counsel, fer the Cor pany do not impair the use of the property in the operation of the Company's business. The Company's steam heating distributi.in sp'em ecenrics the streets and allep of Spokane under the terms cf a rental apiecment of indefinire duration. Substantially all of the physical pro;mtics of the Company ate subject to the lien of the Martpage and Deed of Trm.t securing outstanding Fmt Mortpape llond of the Company.
Propeities Subiert to rederal I.icenses. Sis of the Companyi getterating stations now in denice are under major FPC licen es. The licenses are as follows:
Iiicnse                                        Namcolate Nmnlier        INpires                incation            Itating Projert hiaho            200,000 Lw Cabinet Gorge                                2058        1-1(M 001 Montana          282,850 kw Lxon RapiA(1)                      ,        2075        5-10-2005 Washington        99,200 Lw Spokane River (2)              ,,          2545        S 12007 (1) 5hlication has been likd v.ith the FPC reque tin.' ,m order to permit the installation of fifth penaatim: imit at the Comp.my's Lson Rapid Ilydroelectrie l'ioicet located at Noson, Montan.t. This atiditi.m.d unit, schedoled for c.impletian in Nosember 1977, will increase the j
{                      projecti and the Comp.ms's net capabihn by I!2.ON LwI eng i Ac. Nine Mac, Monroe (2) Consists ef 4 operating facilities:
i 13 l'
< h___._                                      _ . _ . , . _ . .          . _ _ . _ . . ,
i
 
In addnion to the above.nn ntic ned proj. ets, the Cunpany oper*s hui T.cocrating plants on the SpILane Hiwr (l.itile l'.dl; and Post Italls, with numepic:: satin 3 of .U.000 Lw aml 11.250 I w. respee.
        ' lively)-umler permits honi the Irdenal rovennnent.rimeed piior to snathnent of the l'edenal Power Act. f,ineahms ha$e Iken rab.ed as to centain Im:ian ri his ami as to the necc.sity of estemling ilm Spokane I:aet license to inLhnhit hew tv.o plants. No O .onin.nion !.as been m.nle as to the necewity for licen,in; one or both of these plants. (See "I itirati. .. '.)
As .a keensee under the 1 cdcral pov.er Act the Caapany and its licen,ed projects are subject to the prosi iom of Part I of that Act, intlnding pimision, relating to payment fer headwater benehts, condemnation of licenwd Isoicets upon payment i.i just compensation and take-over of such projects after.the esp; ration of the license upon pa) ment of the tener of " net imestment" or
* fair value" of the projest, in either case plus severance damares POul'R AND GAS StTPLY                                                  ,
Power Supply. ~lhe Company's hydnvlectrie prnerali- 1. to: ether with its portion of the output from the Centiaha steam chcoir piojcet and four term firm cennacts foi the purch..se of po.ur are, in the i
opinion of the Company, sufiicient to supply the Compann es.timated sequirements. for both' peak and energy, throaeh the opera'in:t year 19771978 which ends J me 30,1973 To meet the espected increased requirements thereafter, the Company is developiny athliti mal sounes of supply as discussed below.
The majir portion of the Company's lon;.tsm contr;.ets for the purchase of power are with Publie (Jtility Distrists ("Pulh") owning hydroelectrie prokets eithe Cohimbia River and tributaries under which the Company purshavs portions of the project outrut as set forth in the following tabulation.
Approsimate Purtime .        ,
fituraflon Projntownst                              Projrti    ti nf oniput      Kilawatts      Date PUD No.1 of Chelan County ...                    Chelan              100.0(a)        56.000        1995 PUD No. I of Chelan County . .. .              Rocky Reach            3.2(b)      41,000        2011    i PUD No. 2 of Grant County              ..        Priest Rapids        10.7(c)      96,000        2005 PUD No. 2 of Grant C< unty                      Wanapum              12.8(e)      117,000        2000 PUD No. I of Dougla': County            .      Wells                  5.6(d)      47,000        2018 (a) The Company purchases the project output and sells back to the. PUD about 20% of the output to supply local service area res airements.
(b) Centract amount is seduced to 2.99 in Jul) W' for the remainder of the contract.
(e) May be redneed in pedetermined masimum annets upon exercise of withdrawal by the Pl'D.
The Company's minimum share of Fries Rapids is 6.lG and Wanapum is S7;. ~ Notice of withdrawal has Iven icecived reducing the Comp.ay's share in each project by OA% in 1976:
1.6% in In?X an I l.2% in PM9. so that a . of September I 1979, the Comp.my*5 share of Priest Rapids and Wanapum will lv 7.3% an I o.6%, resivetively.
(d) May be seduced by esereise of withdrawal by the ITD within certain limits, but not below 3..$.
Notice of witinhawal will reduce the Cempany's sh.ne by 0.1% in h77 and 0.1% in 1979.
Under the power conoacts with the PUD >. the Company rap a share of the espenses (including debt senice charged of the ictated projects, which shaie is based on the propeitum of the project output to which the Company is entitled under the w pectiw coctracts.
                *llh* CompJn) ba% seWlal other signilYans lony Ierm afreelnentS for the purcha>J. sale, or eschange of power with other utilites or apeneies consisting of:
j.'                    (1) Arreement viih Idaho Power Company for the eschange of sunnner capacity anI energy i              . on the Company *> >> stem and for winter capasity and energy on Idaho's >ptem. This agreement contmues indelinitely unless terminated by eithei party giving four scars advance notice.
[                                                                        18                                                )
i l
U                        .m-                . , . . . . . . . .. . . - . . .  . . ~ . . , , . _ ..~. .... ..... . m
 
l l
i f 2) Cononenciar in Sep;cmb. r PM. the Coneany obtainc.! fom pow. r inun the llomrail!e Pima Admmistrati.>n ("Bl%") melci a 30-year nira.t in t uhan"e for the Company's Pri portion of the ontlnn of the Waxhington Pohhc I r %pply Sv icm ("WPPA") eneration at f                                                                                  vain ,I ai IIP s sate is e.piiudcot to th -
the ll.mion! Atomic Woi l- l he annnmi on po Companis annual paymenh to WPPW On Jann ny ?x.1971, the llanton! intoi was sluit d mn
                                                                                        .natises .mical to all.rv the Atomic l' nary by Pse identid onlei. I!pon appeah rovernment lepe Comnosdon ("Al C") to operate the reador for p mmonly operation with the utditics' promi.e 'o pay Al-(: costs In ionjuntlion with this estensi.m of the operation, the ('ompany has agree I to pay 10',; of the steam joyment co.t , for lif,;. of tb. pl.mt output w hi.h i'. in addition to that receised im !!anford del t senice pasmentt 'lluce contracts h.ne n.we be,:n signed for estending IIanfm.I operation thiourh Ostoher l's77. An agreement for further cuensian of the nuclear pow r reauor operation is being nerotiated.
lict ioning in 1930 the Cmopany vill icceive N.04 Lw p wccr finm itPA in t abang for the Companfs share of WNP No I nmicar proja t. WNP Na 1. a 1.?9Um.Lw p! ant, is being built HI % is by WPpM to replace lle loss of pov.er when the llanford reactm is tmally dmt down.
required to deli \er p. mci to the Company unJar the cabange ameement, whether or not the project is completed and bewmes operational.
f.3 ) The Comp.my receives 5',; of Columbia ho ia"e Pimci ISchance ("CSPE") power and pays 5'; of CSPM t osts. 1 he contra,t was made po oble thion h ratitisatian of t treaty beo ceen the l'nited States and t':nnda by whish Canada consunJcd three dams for 15.5trVM uere feet of storaye on the upper Columbia IGer. lhe ('ompanis share when recalled for its own use, commencing April loM. win amount to 9000 Lu at 50 ; annual I tu! f..uor. In conjunction with CSPl. arranrements, the Company has purchaud opacity from Bonnnille which amennh to 54.M) kw commensing April 1977.
(4) Apreement with San Diero Gas A. !!!c nic Company for the cwhange of surplus lirm hydrcelectric capacity and encipy on the Company's spiem for surplus firm oll peak thenn.d energy
[              on San Diepo's system.
1he Comp.my togther with sarious Wher utihties and ayencia in the Pacifie Northwest, has entered into a lony tenn Coordination Aorcement euen bny until 2nm. This agreement pro \ido for thJ Voordinated operJtion of snhstantiall) ad the p0wel plinb and INrgoirs in the ared l j.e Company is also a party to an Intercompany Pool Arieement with six other imotor ow ned utilities in Washington, jdalni. ,\Ionlana. I lah and OIep0it and an Interioilneiti 511 A"reelnent with Idah0 Powel Company and Pacilie Power A 1 spht ('ompany. Coordmated opei.ni m under thne agreements has been raponsib!e for lirnik!!p up thollsaihh of kiloWatti ot otherwi% M ondary power in !!Y Northwest lJ{ ion Ste.un llestric Generation. The Company ow n- a 15r; interot in the Cennalia (Washington) 1.4m).000 kw coal lired ste.un cleettie aenerating statien. linee othei imestoi owned tuihties and lonr
                                                                                  'I he !irst 700.0001.W Unil V.as p$aJed in ser\iee in
/              publii ayni;es also b.Be an ownaship kn this plant.
the fall of In71 and the decond unit in the smumer of IC2. Ihe plant has not Iwn able to operate I.2n? AU Iw capacity . Studio ate in at full capacity and is presenlly ceititied f or operatien at and cosb necewary for operation at full rated capacity.
propress to determine the modificatians The Compan[% hhare of the culplit is presently 190J4H kw and will lv 210.(%) Lw when the plant is fully opaational. ~l he Company has : wi: neil a poitian of its share of the power to Central Valley Project (l'SilR) through P)Si (if its patien unawirned, the Company is using a small amount for its imn load requirem nb and ha< m.nle shoit term meanremenN lor disposition of the remainder cont 3inin$ IoW sn!pbur coaI thro 4jh IT7. fi%d letpnied to operate lhe plant is sop,'hed Llom coaIIIc!ds owned jointly by Pacitie Power A I icht ('omp.my and Washington luisation A Daclopment Company WIDro. a wholly im ned .sabsidiaiy ei ihe Comp.my. h the m.marcr of the inining, opera-("WIDCo") .
lion % ('urrent inonth!) coiltlact Ictjuilcinenb are .550.MI toni At IIstolVI 51. !M. approsimaIC!y 2.0d0.000 tons were sto          s tpiled at the power plant.
15
  ._                                                                  .gg  y.,
                                                        ,g
            -            .$    9W@ IDW e. gg g 3
 
l
                "!he Gunpany is paitkipatiny in the planned declopnicnt of two 700pH L a toaldned thcrmal units l<nated at ( ol .tsip. Al mt.m.o 't his proin I is join - pl:nmed by Por.: Somed Power & l icht Coinpany, t he Alont.ma Power Company. PonLu.d (u nral I b eric l'ornpany anJ the Congany.
The Comp.my's portion of thoe two imits will ne it, auf, if de. l-ped. will piovide a future puer source aber 1979 An apphcation im a pennit to tht M.noana 'aan lieparin ent of Natural lies,onices (the "l>epartment") whish smni approse Ib. priOct. is pcmbnp A sep nt vleased .lanuary 28. 1975 by the Deg athoent to the Itoant of Naicial l<ev.un cs and ('onvitation, w his.h thaid will make the admini.trathe deci, ion alter formal hearings. reus:maen. led denial of the pennit. D: lay. in the urtih;a.
tion prosew have delayed the whcduled PWh in.senke date of the Icv nuit. 'I he Con pany is inscstiut.
ira other possible posser sonnes to supi,1) its load ym th .dter .luly PGN l he eff ed en this pnijest et pro;hncd lerislation. I nie:a! and State, e lahnp to snip mining cannot n m he determined.
Nucicar l{lettric Generation. 'I he Company has sianed a letter nI in;cnt to own a M.; share in Puyt Sound Power & l.irbt Compan3's construttion and operation of the Skarit Nthlear Project. 'lhe projest will consist of two 1.2Uh000 Lw units with the Unt unit stheduld for ope:ation in 1W2 and the seumJ unit for 1%4.
The Company is also em ared with other Northwe-a utilitbs in the development of a 1.250.000 I w nuclear projat w heduk-d for sen ke in September Iwl. 't he projat, dedynated W NP No. 3. wili              ,
be sikmsored by WPPSS and the Company will own $g of the project and will be entitled to 5% o!
the power output.
Other Power Supply Arthitin. 't he Company is al.o a participant in Pacific Northwest Power Comp.my, whk h h secting a licen.e fn m the 1 PC to buiLi a hydroglectric proj.s t on the Snake Rher in IJaho. 'lhe futme status of this doclopment is subject to the U. S. Conpest and final roiew by the I PC. I or thh teason, the power whth the Company may have an opportunity to acquise is not presently determinable.
Gas Supply. 'l he Company is dependent upon Northwest Pipeline Corporation ("Noithwest"),
sueemor to I:1 Paso Natural Gas Co.npanyi northr.ot division. as its sole source ef supply. It has              ?
contrasts with Noahweq foi two 13po of tina r.n service and one type of inteiruptible senice. The liim gas h purchased on a comhmed syuem h.oh and includo both pipeline and stora';e pn senice. Pipeline firm pas suppliuf to the Company's distribution >>uem is pmehased maler a senice apeement which extends la 0,tober 31. Iw6. and fron year to year thereafter. 'I he proent rate h app:osimately 4 22e th at 1000 load factor and 40lv/th at 75G load factor Thi- sontract pimido for a maximum peak demand of up to 1.279.065 therms per day. Nouhwei\ pas supply i primarily from C.madian someo and second.uily from the ItocL3 Mono:ains and the Nan .lu.m liasin. Arpiosimattly 7o , of Northwet' pas supply h imported hom ('ana I.i un.lcr Ivth I h ' an I t 'ana.han Nanonal l'neis) lbard ierulatio .-
Gas imported inun lhiti h ('olumbia constitud a cu;oi ponian ef tis a.n impm te.t oom Canada. ~lls Premier of liriti b Co!mabia h.n recently announced hk i nention of sec!iar substamial ineicases in the price of ras hom lhilish Cohnnbia If such piiee inac.no nuterialiee. they would roult in inewased costs to the Company of pmch.ned pas. (See "Itusinos i'ato and Re; ulation".)
              'lhe Company. Nouhuest and Washincton Natmal Gas Compan) each Ean a one-third undivided interest in an underpound r.n storare held locaied near Chsh. dis. W ashinsten. 't his pioject. known as the Jaelson Piaisie Storar.e hojeel. bec.une oper..t;eaal en Nosemba 1. pGtt and now h.n a peal day delisciahihty of 240.000 mcl per day and a total siciare capa.ity cf ?).3 billion cubie feet. Pl.un aw under way to increase the delisciabihiy of this Stoiare 1%icct to 300 pad mcf per day. Additional muua!
increases in storare capacity are antLip.ded umd the eqimawd 31 bdhon cubie feet ol ultimate stoiage capacity is achieved.
A seduction in supply to Nouhncs fiom liiitish Cohnnbia has rauhed in a peak day short fall in supply thning the couent period. l he Company has k en ads hed sku .ippnnmuicl3 one-half of such short lall is due to malunical pmbicms espected to be el shoit. icon duration and shai the remaindei of the shori. tall h due to pmduction pmidems espr ud to be of lonra duration Noi thw ot has
;                                                              hi L_
 
[-.
                                                          ~
esperienced a 3tG peal d.iy deficica~. on the:r sy te.u dming the 1971-M winter dne to the short.lalb floweverl liccause of the availabihty of onethiid ol'th. Jatl. son Psaisif Niosay psoject capacity. the
                                                            ~
      -.. k            Company has met and espats to meet its hun load sopsinunents, and the Canathan supply ~delitiency is resuhme only in sonne additional curtailment of intenopuble customers over that normally csperiensed by sudi customerc
                            ' Nmthwest has irceived l'PC approval to constuit ami operate a centrally locate I liquehed natural gas plant.in the Pacifie Noithwest. 'lhe plant, whish is now under com.opctino, is npeered tu be in service by Nosember 1976, and will have an initial pcal day delisesahiiity of 150#i0 mcf and a swage capacily of the equivalem of 12 billion cubic feet of natural ras of which the Companfs share will be
                    - appnaimately 14'/,
                            'Ihe increases in the.Jaikson Prairie Stenaye Proiat deliserability and capacity and the construction by' Northwest of the liquehed natural pas plant tosciber with the Comp;myi pas supply contract , with Northwest will, in the opinion of the Company, proside the Company with an adequate pas supply to meet its antisipated firm requirements throurh the winter of 197S-74 if the shortage of supply in Ibitish Columbia is remedied, of which there can. IV no assurance. The Cmnpany is investigating additional resources to supplement lutme pas supply.
COilPl!!IIION AND Pt ilLIC Ont?RSt!!P M!il\TIII'S The Company is not in direct competition with ;my investor.nwnal public utility in its 'enice area in some minor iastances however, the Cnmp.my is in competition in frinye areas with certain rural electric cooperatives whose operations base not materially affected or threatened to affect the Company's businew Since the adoption in 1930 of the District Power Act of the State of Washington, Pl'lh hase had -
the power by stanne to acquire cicetrie utility propertis within their respective di?tricts by cemimction or by purchase or condemnation of esisting Iacilities. Ilowever, an amendment to the Act requires the PllDs to obtain a favorable sote of the voters in the dotrict before condemnation of properties in that
(              dhtrict. Plith pNsendy exist in three counues within the territory 1.ein,.: served by the Company.
namely Stesens, l.ineoln and l'erry Counties, and in a small rural area in Spokan: County thistence of these districts has not materially alieeted the Companyi busine
                              'lbere is no statute permittina the formation or olvration of PliDs in Idaho or Montana.
                                                                                                            ^
The Companyi pas rates are sompetitive with coal and oil, the other prineipal fuels in the area.
There is also some competition Ivtween ras and electricity. In areas wivre tvih services are furnished by the Company, it sells the sesivetive senices on the basis of customer pielerence.
Dl'StMIPIION Ol' NIN llONDS ,
General, 'I he New lionds are to be iwuett undes the t bmpanfs Almtrag and Dee.1 of frust, dated as of June 1, In30, as suppkmemed (the "AbingapA M which First National Cay llank is Trustee.
The statements herein concerning the New 11onds and the Nioupape are merely summaries and do not purport to tv complete. 'lhey make m,e of terms detined in the MartpAe and are qualilied.in their entirety by espww relesence to the cited sat;ons and Articles of the Alonpape. Sections 125 to 150 of the hicitpay ap; var in the liirst Supp!ementa! Indenture.
Interest aml Payment. lhe New llonds will mature l'ebruary 1, 2005 and will Ivar imerest' fiom l'ebtuary I.1975 at the sate shown in their title, payable semi annually on l'ebmary I and August I of each year, commensing .\u"ust I,1975. Principal and interest are payable at lirst National City llank in NewWrk, N. Y. I he New lionds will le iwuable only in fully registewd ferm in denominations                                I of $1,thki and multiples thereof.
Redtmption ami Pmthase of linnds 'I he New lionds will be redeemabk, in whale or in part. en 30 dayst notice (a) at the following. slwial redemption luices with cash deposited for the current
                    . improsement fund or imder the maintenance and repta.cment provisions or with the proceeds of centain s
17 I
i
> W,;                                        a ...      .    . . . .  --      .        .~
                                                                                                            - -- - ~ ~ ~ -        ~ = ' - ~ ~ ~ ~ ' ' * ~
 
v      - _                _      ..-                        ._                          __.                _ _ _ _ . - . _ . - - _ _                              ..--_- - __ . - - .
o                                                        .
3,<9pcrty sohl by the Company or relcahl finm the Mmlyape, and (b) at the following "eneral redemp-
          .,,,n prices for all other iedemptions:
If redeented during lhe twelve months period ending .f anuary 31.
I General        $;n ri.d                      . Ccurral            %perial                                              - G ner.d    Speriat Hedemp-      Hodemp-                          Hedernn.-        Holemp-                                                Hedemp-    Mtdemp.
tiran        lims                              fiosa            fines                                                    tiene        tion Price -      . Psite                            Price            Pria c .                                                Price      Psite 788F                            (%)'        .Ycur.                (%)              ( s/, )    Ytar                                        ('/, )      ('/, )
(%( _
e976 ..... 110.63              101.25        1986    .        .106.97          101.12        1996                                . 103 30          linfo I10.26 - 101.25            1987              106.r,0          101.10        19'J7                                      102.9.l. 104.75-1977 .      .                                        ..                                                                      .
j97H      .        109.90        101.24        1988'  . .        106.23          101.03      19:3S                              ..      10?.57      100 69 g979 . ... If f).53            101.23        1989    .        105.87          101.06        1999                      . . . .        102.20    . lin 63 j9%9 ... . 109.16                101.22-      1990    ..        105.59          101.03      2004 .                            .        101A1      100.57 pfal .. .. 308.80              101.20        1991 .      . 105.13                101.00      2tkil . ...                                101.47      100.49 -
j 9a2 . . . . 108.43              101.19        1992    . . _ 101.77              100.97      2002                              ..      101.10      100 41 108.07        101.!8        1993              104.40          100,93      2003                                        100.74      100.32 19%'t .      .                                            .                                                                  . . .
          'j9P,1 ..... 107.70                101.16        1991        . 104.04                100.X9 '    2001                              .        100.37      l(u23
                              -107.33        101.14        1995              103.67          100.85      2005                                . 10100            1(n00 J935 .                                              .
        . jn cach case toycther with accrued interest to the date fixed for redemption; provided ilst no New Ibnds
              ,Jaall be redeemable at the general redemption prices prior to February 1,.1985 with borrowed funds or
              ,o anticipation of funds to be borrowed hatmr an interest co3t (calculated in accordance with acceptable gnancial piactiee) of less than 9.375%, per annum.
If at the time the notice is given the redemption moneys are not on deposit with the Trustee, the scdemption may be made subject to the depait of the redemption moneys with the Frustee on or before sho date fised for redemption and such notice :. ball be of no elfcct unless such moneys are so received.
Cash deposited under any provi> ions of the Manpage (with certain exceptiom) may be applied to ghe purcha>e (including the purchase from the Company) of Ilonds of any series.
(Mortgage. Secs. 38,39 and 64 and Ait. X; Sixteenth Supplemental. Sec.1.)
Imprmement Fumi. 'I he annual Imptovement Fund payments for each out>tandin; series, which wdl include the New Ilonds, are 1%, of the greatest amount of Honds of such serie> at any ene time out-
              ,.tanding prior to the beginning of the year in which such payment is due lew eertain llonds theretofore
              ,,.nicit and certain Honds the right to issue which shalt have been waived. This requiiement may be
              ,,anitied (a) in cash or principal amount of llands of such series or (b) by credit for the amount of p.mds that nupht otherwise be iwued on the basis of cither property additions or of llends or prior hen ponds theretofore retired. 'I he requirement for any year may be anticipated, but if the date rised for any
              ,c ulung redemption shall be prior to the calendar year in which such impimement fund payment is due.
              ,edemption shall be at the peneral redemption price and dubject to the limit 4 tion on such redemption set g,qth under "l:edemption and purchase of Ilonds".
The Coaipany has resened the right to amend the Mortgage (without any consent or other action el noy series of Honds created subsequent to March 31. 1970, including the New.1;ond4 to eliminate pg improvement fund payments with respect to Bonds cicated subsequent to that date, including the New
!-            pan,Is.
I                  (Mortraye, See. 39, Tenth Supplemental. See. 3: Fourteenth Supplemental, Sec. 5.)
Maintenance anil Itttirement of l'roperty. Subject to thi order > and rerulations of any regulatory hodh.nity amienance or lohaving  appropriatejurisdiction, for propeity retirement        the or forCompany property amorti/ation                  is required  13% of the gross      for caeh cale L                                                                                  18 l
!-                                                                                                                                                                                              j L-                .e                  __ _    . - - v4...-..            . . . . _ . , .      - . . . , =                              . . .      . . . _ ,      _.                    _
 
F. ;
operating revenues of the Company, as detined. lixec.s amounts in any year may be credited agaimt h
the lhe succeeding years' icquiicments. -(Moilgare See. 3S.)
Special Prmisions for INiirement of Ilonds. ,If, during any 12 mmiths period, property dispo.ed of by order ol or to any pmeinmental authority resu!h in the Company neceiving Sl5Dn.WO or more in cash, the Company mmt apply such procreds- (subjest to certain conditions and deductions) to the
                                                                            ^
retirement of lionds. "Ihe New lionds are rede:mable at the Spceial Redemption Priecs for this puipose.
          ;(Mortgage, Sec. 64; Tenth Supplemental, Sec. 4.)
Security. The New I*onds, together with all ether limdshow or hereaher iwued. under the Mort.
page. will be ~  s ecured by the Mortrare. whish constitteet. in the. opinion of General Coumel, a first
          -mortgage 1:en on all of the piesent pioperties of the Company (escept m stated below), subject to ta) leases of nonor portions of the Company's property to others for uses which, in the opinion ef Ge 'crat Coumel, do not interfere with the Compan:,'s business, eb) leases of ecstain pieperty of the Company not used in its utility businew, (c) excepted encumbrances. as defined in the Mortgage, and (d) encum.
brances, defects and inegularities deemed immaterial Iy Gencial Counsel in the operation of the Company's hminew. There are excepted from the lien all c:.sh and securities: muchandise, equipment,-
rnaterialy or supplies held for sale or comumption in the Company's operations: receivables. contracts,
            ! cases and operating agreements; electric energy, and other material or prodnets (including ga4 generated, manufactured, produced or purchased by the Company, for sale, distribution or use in the ordinary course of its business.
The. Mortgage contains provisions for subjecting after acquired property (subject to pre-esisting liem) to th. lien thereof, subject to limitatiom in the case ef consolidation, merger or sale of substantially all of the Company's awets. (Mortgare. Art. XV.)
    <              The Mortpape provides that the Trustee shall have a lien upon the mortpr.;cd property, prior to I      thellonds. for the payment of its reasonable compensation and espenses and for indemnity. (Mortgage.
Secs. 92 and 97.)
I)isidend Cmenant. So long as any New IlonJs are outstanding, dividends or distributions on the Company's common stoel. other than disidends payabi soldy la shares of its common stock, aie limited io net income applicable to common stock since July 1,1057, phis S6.000JOL and plus en s
amount equal to the proceeds from the sale of conunon stock subsequent to Jul.1,1957.            (Sisteemh Supplemental. Sc. 2.)
Iwuance of Ahlitional lionds. 5500JO).0t0 principal amount of Ilonds is the present masimum amount which may he outstanding under the Mortgare. lloweser, the Company has resersed the riph to amend the Moitgage (without any consent or other action of any series of Ilonds created subsequert
          - to l'ebromy 28. 1065. including the New llend3) to remove this limitation.
lionds of any series may be issued from time to time on the basis *ef: (1) 607 of cost er fair value of property additions (whichever is len) after adju3nnents to otTset ictirements; (2) retirement of Bonds or piior lien bonds: and (3) deposit of cash. Wi:h certain exceptions in the case of (2) above.
the issuance of Ilonds is subject to net earnings fer 12 out of the preceding 15 months before income lases being at least twice the annual interest requirements on all lionds at the time outstanding, including the additional issue, and on all indebtedneu of prior rank. Such net earnings are computed after
            . provision for maintenance, retiiement and depreciation of property e.lual to 1316 of grm operating            ,
revenues of the Company for such period. It is espected that the New llands will be issued against            !
unfunded property additiom and that after the issuance thereof the unfunded propeity additions remaining      l will I e approsimately 53 3JX10JXV.                                                                          l l
l l
C 19
 
                                                                                                                                              .I Properly additions T.cne ally include elechic or en 6 opeity . spered alter ' May 31, PD9, but -
may not inchide pn pcity used pnneipally for the prodom.n os rah;iing et natural ;m
                                  'Ihe Company has reserved the n    r ht to amend the Mostrare hithout any convent or other actii n of any series of lionds crea:ed sulmpient to'Manch 31. l'no intfeJiig the New Isonds; :o include water property and steam heat propesty as property additions.
No Honds snay be issued on the I asis of property additionnubst to piim lier unless the prior lien bonds secured thereby have been ipuJilied by being deduwd f:om the 15 ind otherwise ir.ualle and do not esceed StG of such property additions, and unless the lhals then to be outst.a. ding whi h have been issued ar,ainst pmperty subject to continning prior liem ami ceitain othe iteras wouhl not exceed 15% of the Honds outstanding.
                                  'lhe amount of prior liens on mortgaged pmpeity acquired alter the date of dei.very of the Mort-gage may be increased subsequent to the acquisition'of such propesty provided that, if any propeity sub.
Jcci to such prict lien shall have been made the basis of any application under the Mortgage, all the .
additional obligations are deposited with the Trustee or the trustee or other holder of a ilrier lien.
(Mertgage, Secs    to 8, 20 to 30 and 46; I iss! Supplemental. Sec. 3: l'ihh Fup;lemental. See. 2; Eleventh Supplemental, Secs. 4 and 5; Twelfth Supplemental, Sec.1; Fomteenih Supp! memal, Sec. 4.)
Release and Substitution of Propcity. Propcity may be.ielea ed upon the ba is of (1) detwit of cash or, to a limited amount, purchase money mortyages. (2) p:o;>erty r.dditions and (3) waiver of l
the right to issue Honds. Cash may be withdrawn upan the bases stated in (2) and (3) abave. When property released is not fonded property, property additions used to clTeet the release nuy apin, in certain cases, become available as credits under the Martpape, and the waiver of the right to issue liands
,                        to c! feet the release may, in certain cases. cease to lve etreciive as su h a waiver. hinslar provisions are I
: i.                        in efTect as to cash proceeds or such pmperty. lhe Mortgage contains special prosidons with re>pm
* to prior lien bonds pledged, and disposition of moneys reecived on pledged bond; seemed by prior lien.
(Mortgage. Sees. 5. 31, 32,46 to 50. 59,60. 61,118 and 134.)
l
;                                  Modification. In peneral, the Mortgage, the rights and oblicatiom of the Company and the rights of    '
the Bondholders may be modified only with the conent of 75% cf the Bonds, and. if le s than all >eries of Bonds are altected. the con ent aho of 75% of the lionds of each >eries aliceted. The Company has reserved the right to amend the Mortppe (without any consent or eiher action of aay series of Honds              ,
created subsequent to Maich 31. PGO, including the New Ilond>) .so as to change U e in the fereying i                          sentence to 66Wh llowever, no modilieation of the terms of payment of principal or interest, and na modification affectin,c the lien or reducing the percentage required for ipodification, is elketive against l                          any Dondhohler without his consent. The Ocmpany has the right to make certain specific amendments and amendments necessary from time to time to qualify the Mortrage under the Trust Indenture Act of 1939 as in force on the date of suth amendments without the convm'of Bond uhlers (Mortgare Art. XVill, Sees.120 and 149; l'iist Supplemental See.10. l'ourtesulb Supplemental, See. 3.)
Defanlis and Notice 'lhereof. Ikfaults are: defauh in payment of principah def udt for 60 dap l
in payment of interest; defauh in payment of interest or principal of qualided prbr lien bonds continued beyond grace period; certain events in bankruptcy, insoheney or reorgani/ation: and defauh in complying with other covenants for no days aher notice The Timtee may withhohl notice of defatdt (eseept in i
I                          payment of principal, interest or funds for retiicment of Ilonds) if it thinks it is in the interests of the bondholders. (Mortpare, Sees. 44. 65 and 135.)
In case of defauh, hoklers of a majority of the lionds may dedare the piincipal and interest due and payable. No holder of Ilonds may enforce the lien of the Montpare unten such hokter shall base            ,
20
    -t - - - . - - - - -  a..-..y,,..y                    , _ _ _
 
given the Trustee written notk e of a defanh and unins the hohlers of 25% of the llonds base requated k    the Trustee in writing to act and base ollered tha 'Irustee adespute seentity and ind-mnity and a reasonable opportunity to att. llohlers of a niajarity of the ihnds may diiett the time, method .ind place of conducting any proceedings for any remedy asailable to the Trustee, os esercising any tion or power conferred upon the 'f rustee, or nuy direct the 'I rnstee to take certain a, tion. (Simtrare. Sees.
65,68, w,79,92 and 13Md) aml Ait. XXV.)
Esidence of Compliance with 31nrtme Prosisions. Compliance wiih S1ortrare provisions is evi.
denced by written statements of the Comp my's olhars or permns se!ceted m paid by the Gimp.my In certain major matteis the accountant or engineer must he independent. Yminus certificato and other papers are required to be filed annually and upon the happening of certain esent , in hoJiny an anno.d certificate with reference to compliance with the terms of the Niortraye and absence of Def aulis.
DESCRIPIION OF CO\iTION STOCK The following is a brief desciiption of certain of the rights anJ privileres attaching to the romnmn Stoek, without nominal or par value, of the Company. For a complete desuiption, referenu is made to the Company's Restated Articles of incorporation and to the laws of the State of Washington. 'l he fo!!owing summary, which does not purport to be complete, is quahhed in its entiiety by such ref erei ce.'
Ilo!ders of Common Stock of the Company are entitled to reccice such divilends as may ha lawfopy declared from time to time by the lloard of Directors of the rompany.
I~ach holder of Common Stock is entitled to one vote for each haie held by him, and to vote cumulatively for the election of directors.
In the event of any liquidation of the Com;,any, the hohlas of Common Stock wouhl be entitled to
(
share ratably in all assets of the Company asailable for disttihntion to .stockholdeis.
No holder of Common Stock h. s any pre-emptise ri;!A. escept that if the Company oliers shares of its Common Stock er any securities consertible into shares of its Common Stoet for money. other than by means of a public otteiing the new shares or comatible seemitia most brst be effered pro rata to the holders of the then ontstanding Common Stosk of the Company upon terms not los tasorable to them than the terms upon which the new hares or comertible securities are to be sohl to per ons other than such stockholders SAb hmited proemptise righis are not anplicable, howeser. to the :rantin of options to purchase, or ollering for sale of, sharo of the Conunon Sto,L of the Company to oth,ers and employees of the Company or majority.ownal subsidiaries of the Comp.my.
The prsently outstanding shaies of Comman Stock of the Company are fully pahl and nan.
asses >able and, upon iwnance ami sale as herein descobed, the sharn of New Conunon Stosk wi!! be fully paid and non.asserable.
The Common Stock of the Comp.uiy is listed on the New hl. Pacihe and Spokane Stock In-changes.
The Tramfer Apenis for the Common Steel are 1 irst National Cn> llant ,111 Wall sneet New York. N. Y.10015 and olhee of the Company. P. O llos 3727. Spokane Washington m2 'tt lhe Registrars are Registrar and Itansfer Company Al INhange Place. Jersey City. N J. 07302 and 'ihe Old National llank of W nh;nyton, West 428 Riserside Asenue. Spokane, Washincten W201.
            'The Artiela ef Inicipoiation piesently authoti/c the Company to inne in.mi. tut sh.no of Com.
mon Stock. It is, contemplated that ai the annnat mm tmg of stockhoLieo, scheduled for \las 4.1975 the stockhohlets v di Iv sequcsied to amend the .bikL3 to mchase this .nuhoiieanen to 20.00.tst sh no of      l
(
Common Stock and to authose 10.0dd.tbl 'h.no of a new da s of Pielcued Steck.
l 21 l
 
  \
M A N A Gl'..W:N r The names of the directors and exceutive otheer, of the Comp.my are as folhnvs:
N.inic ( Age at Octo!>rr 3f.1974)                                                                                                                                l'nsit nen
              ' K . M . R obi n son ( 79 ) . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the floard and Chief ISecutive Othect
              *W. J. Satre (56) .............. ......... ......                                                                                  President                      and Director o            J. P. lim.kley (50)        .... ..... . ... . . .. ...                                                                          Vice  President                                                      and Secretary
: 11. W. liar ding (52) . . . . . . . . . . . . . . .........                                                                      Viec President                                                                                            !
D. M. Ohason (44) .. .........................                                                                                  Yke President Wm. A. Low ry ( 59 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President                                                                                                                                                    l D. L Olson (49) ..... .. .....................                                                                                  Awistant Viec President                                                                                    l R. T. M e l .cndon ( 50) . . . . . . . . . . . . . . . . . . . . . . As istant Vice President J. M. Coombs (56) . . . . . . . .                                                          . . . . . . . . . . . . . . . . . . Ti easu i e r Rodney G. Aller (58) .. .......................                                                                                  Direc tor
              'A. L Ilarnes (69) . . .. . ........... ......                                                                                    Director Duane 13. llagadone (42)                                          ..                            ........ ......                Director
              *Roy J. Johnson (63)                                                        .. ......... .......                                  Diiector                                                                                                      ;
              ' James 11. McMonigle (69) . . . . . . . . . . . . . . . . . Director                                                                                                                                                                              '
J a m es A . Poo re. J r. ( 5 8 ) . . . . . . . . . . . . . . . . . . . . . . Director Eugen e 'I hampson (52) . . . . . . . . . . . . . . . . . . . . . . . Director l.
* Member of Executive Committee.
All executive olliecrs have been actively employed by the Company either as an otiieer or employee                                                                                                                                                    .
during the past Inc years.
b.
Remuneration of director.s and oflieers during 1973 was as follows:                                                                                                                                                                                  i
[%ltln.lrCit A tilln.II C:.puisics in                              Ag:.rt:: ate                                                                          llenefih Nine of Initisiitual                                                                      Whit ti licuutn iation                                    Dur:1                                                                        I pon or IttentHy of Group                                                                            h !!aivistil                            Ittninnerai!nn                                                                        tictirs inint K. M. Robinson . . . . . . . . Chairman of the llaard and Chief thecutise Ollicer                                    S 95,100                                                                            $ 47.216 W. J. Satre          ........                                  President and Director                                                                  68.433                                                                  35.008 All Directors and OfTicers                                                                                                                                                                                                                      I as a Group        ........                                  Directors and 00icers                                                            497,427                                                                        209.106          :
i As of October 31. 1974, directors and 00icers as a proep owned 26.w5 share > of Common Stock                                                                                                                                                          l of the Company.
The Company has in eIIect an limployeei Stock Purchase Plan which prosides for the grantmg to all secular full. lime employees of the Company. during such limited o!Tesing periods as may be specilied from time to time by the llaard et Dnectois, of the right to pur6hase a hmited number of share.s of the Company's Common Sto,k. With the pinilege of p.iying for such shares on an instaument basi 3 through payroll dedn,tiont 'I his plan qualities as an "I'mployee Stock Purchaw Plan" as that term is delined in the Inteinal Rewnue Code of 1054, as amende l. At October 'l.1974, there were 6,183 sharea reinaining to be iwued under an olleiing made to emrloyees on July 2.1973, at a p"ce of $19.9.5. %Itiill p.' ice %.1% 95# h of the nialket plIie t'l lhe sleik on the da) the ellillilg w.h inasle. An additional otTering of 30fW shares is contemplated in the near futme.
I For a recent m.iiket price of Conunon Sto,L of the Company. see "Dnidend and Price Range' 22
 
I.I'l !GNI ION
            't he Secretary of the Interior ai.d the '> poi anc and t 'oent d'Alene 'i niba of Indians have petitiom d
(
the I PC to require the li. s usur. of the t 'omp.my's I i' tie I all . and Pu i . dis poaci pl.mts, and to n.ipmc Pd) ment . to the loth.nc.10: the octuj.anty el lands claimul to be Imb.m itewnati. n or torma hnhan f(esersation landt 'l hc. matter is also refeurd to imder "Piopeny Propeitin Sohjcet to l'cJ.ial 1.ieenses" Incept foi the abuse m.cter, there rue no material pcatimp Ic al pn .;cdmps nor any su h pniccedmg Linme to Iv toniemplak : to thit h the (i .upany or any o! its .alnidi.aics is a party or ef which any a f thcir piopcuy is the sahjed. other than onlinaiy sontme laication intidental to the 1.ind of business condu.ted by the rempany and in sub,nh:aics.
I.l: gal. OplNit1NS
            'lhe salidity of the New thmds and of the Nc."('emmon Stoch will I e passed up n for the Company by hfeurt Paine, I. owc. Colhn. Ile: man A OTelly, Spokane, Wa Jungton. Genmi Conosel for the Company, and Mewrs. !< cit! A Priest. JO W.dl Street New Yo:L, N. Y. and for the Underwiiters by Ments. Sullivan & Cromucil, 4S Wall hueet, New Yo:L, N. Y. Ilowes er, all matters pertaining to
,    the errani/ation of the Company, titin to property, f anthiscs, beenses andI vrmit and all mattens of i
Washington. Idaho and Moniana law will be pasi.ed uron only by Messrs. Paine, l. owe, Co!!;n.
lierman & 0%elly.
I:NPI:l iS
            'Ihe balance *,heet as of December 31. PG3 and the related statement of income for the the ye:ns i    then ended and the statemenh el retaintd eainines and thances in linan;ial position for the three par then cmled intlnde I in this hospeans b r.e leen es.m.ined by llastins & Se!!s. independent certificd public acchantants. as stated in theii ophnan appearing haein and have been so ineloded in rehance upon such opinion pisen upon the amhority of that liim as esperts in anonnting and auditing.
The statements made as to matten of law and leret conJa,. ions und, r "Disidend, an.t Pciec 1:am e k "Husinen-llates and I:trnhuion", "ho; ;rty", "Pou.r and Gas Supply", " Con. petition and Pu;&
1  Owneninp Aetisitio". "De.suiption of N,.s llends", "Dauiption of Connoon Sm.L" "M.marema i
  !  tmd "I.itiration" h.ne been reviewed by Meurs. Paine.1 owe Cofhn. llennan & 0%cily. 'lhe statemei.S made as to matters of law and legal concin ions under "Doeription of New Ilonds" and " Description d Common Stoek" hase be,n resiswed by Meurs. lieid A hiest. All of the forepoing a:e set forth hen N in reliance upon the opinians of said toms, respectisch, and in reliance upon their authority as experts.
OPINION OF INDi'PrNDENT OFit t Iftl'D PUllt.lO ACCOUNTANTS The Washincton Water Power Company:
We have esamineti the balance shcet el 'I he Washmpien Wata Powei Company as of December 31,1%3 and the related stateuen:s el iname for the tise years then ended and et ietamed canungs and changes in financial position for the thice year then ended. Oor ewpination was made in acemJ.
ance with generally accepted auditing standards, and , econhnply included such tesh of the accounting recoids and such other an htiny piocedmes as we considaed twen.ny in the einemnstances.
In our epinion, the above mentioned financial statements present fanty the lin.m,ial position of the Company at December 31.1W3 and the iesults oI ib operations and chances in its tmancial position for the stated periods then ended, in confoimity with renu.dly accepied accounting principles applied, except for the change, with which we concur, in method ef accounting for investments in subsidiary companies as desenbed in Nole I to 1inancial Statements. on a con istent basis.
i lissuss E Sriis Seattle, Washington
{
Jannaty 23,1974                                                                                                                          .
23                                                                        l l
l c~,                  _.. .              . .-                  . - -          - . - .        -                -
                                                                                                                                  -~ ~
 
t Tile WASillNGTON WATI:1: l' owl;lt COMI'ANY IIAI.A M 'l:..lil EI'    '
A S S li 'l S Osfolgt 31, licirniorr 31,                197J 1973            (lin.inditt el)
(lluiuvends esf Duff.in)
Unlley P ANr (Notes I amd 2):
5367,27S              5374.590 Electrie 59.746                  62,011            :
Gas                ..                          .
3.501                  3.545 Steam Ilcaling 8,S15                  9,033 i  Water                                                    .
6.991                19,173 Construction work in pier.ress 41ti334                46S.432 Total 80.325                  86.'154 Accumulated depreciation and amortiration 366,039                381.478 Utility plant--net                ..              ,
I INvl.5I MI N i s:
14,802                15.943 Subsidian companies-at espiity (Note 1) .                        .
1.171                  1.'125          t Other-at cost                                            .
15,97.1                17,6M Total ins estments        . .        .
l Cciou NT Assiis:
522                    730 Cash in banks and woiling funds                              .                                                                              4 1,600 Temporaiy cash investments                                .
Receivables:
8.422                  6.8',5 Customers-net                                      .
1.7N                  I .S.'s Other'                                          .
2.682                  4.o ri Materials and supplies-aserag ce r 21'i                    527 Other        .
13.e,62              15.299 Total current assets
                                                                                                          +
Di t iina o lh clis:
Unamorti/ed debt discount and espense (being .unerti.<cd eser lises of                                                        1.3 4 ' '
1.2So related debt)                        ..
873                    922 Preliminary survey and investi;ation ch.ures 1.t u)                  9a5 Other              ..      . .. ....        .
3.159          _. 3.17ti Total delened debits 53 ), erin            5117321 Teral          .
i
* D 21
 
Av.              y t                                                                                                                                                    4 s    ,                                                                                                                                                                                        n,        >
                                                                                                                                                                                                                                    .j y                                                                                                                                                                                                                          -j u
Tite WASillNGTON WATE!t :POWElt COMPANY                                  '
1 it AI,ANCE .':;r.CI'
-)if LI Altli.lTiliS Ot t,.t.cr 31.
                                                                                                                                                - Deretnin r 31,                  . I'n4 i 'd.1                I t 'raudisi d)                                j'
                                                                                                                                                                                      ~
fl hau atuk <>r I)o!i.u()
clJ)Nfi Tl K51 DIHT (Note 2):
              ' First mortgage bonds                                    ..                . .                        .        .                  5200.370                    $200.370 Sinking fund debcotures (portion maturing after one year) .                                                                .            35.342                      35.122
                ' Notes pasabic-banks                                                                                                                    12.000 223Krl Total long-term debt                      .                  .                      . .                            247.712                    257,492
            , CAi'in As. SiOCK:                                                                                                                                                                                                    .
                                                                                                                                                                                                                          '40 Common, no par: authorimi 103)00J)00 ~ shares; outdanding. ?!973.
6,769.535: 1974,6.812J151 (Note 3)                        .            .                                    .                  110.795                    I11462'                          >
Ri: RAIN: t, FauNiNcs                .-                                            ,
16.c&,                    21.329 s,
art'USIUs.\ ri n As10 UNI INViNrrn iN Tili; BUSINrss ForivAli:Nr.10 Rr.                                                                                  ,'                                            _,
S                DUrs tow IN li tornAi. INrO%ti: taxis Rt.stu riNo Frost Accri rnu s.n j'                A% onti/AsiON (RrrORoi n As Ri rA!NTn 15ARNINus-R151RICil n FOR
                                                                                                                                                                                                        ,[                .,
!                l'ul HRi. les nra si IN( Osti. TAsi s IN A< c OuN rs h!AINi AINI n PUR%UAN r 10                                                                                                            '
                                                                                                                                                                                                                            ?
SAli. Ri< i n.uony Ri Qi'IRi Stl N1N) (Note 1)                                                                                            4,879                        4,427
(                                                                                                                                                                                                          ,
                                                                                                                                                                                                                              ,[n CURutsi 1.iann itirs:                                                                                                                                                                                            ,
586                        488 Currently maturing long. term debt                                                                                                                                                                              'y.
2,816                        3,952 Accounts payab!c                          .                                                                                                                                                    t, Taxes accrued                                                                                                                            6.207            s            3.305 Interest acerned              .                        .                                .                                              2.564                        3.4 N, Other (inchules 5105.000 due subsidiarie; in 1974)                                                                                          1.310                        1.767 13.483                        17,961 Total current liabilities .                                                          .
                                                                                                                                                    ,y D iixxi n Cui nirs:
4
                                                                                                                                                  . _s Investment tas credits (Note 1)
                                                                                                                                                                  ,192                        953 ; ;
                                                                                                                            . .                                    540    .                  625 : ' ,
Other~      .            .                .    ...        . . .
I,732                        1,5F.
Total deferreI credits                                .                        .          .            .
3,218                        3,172 CONiniitterlONs IN Ain OF CONsrRUCilON                                                .                          . .          .
ComtirsirNis (Note 5)                                . .. .                                  ..                          .
Total                  ...... ..... . .                                                      . .            5308.803                  $417.621
                                                                                                                                                      . - = - .                  = . ~ . = .
See accompanying Notes to l'inaneial Statements.
                                                                                                                      \
25                  ,
                                                                                                                              .\                                                                                                      l
                                                                                                                +
* t  !
                                                                                                                                                                            . ~ . . . . , ..                                          -
h -. . .
      + , .        -
                                                            ..._c
                                                                                      .a._
                                                                                                                                                                                                ,..                _ e., . . -], .
 
w W[,.lf j;)
            , m. -                a m
r Tile WASillNGTON WATEP. POWER COMPANY FI'ATI'. MENT OF 1(ITAINI:D EARNINGS 12 mail.s 3.?A                    C                                                                                                                                                                              I nettd Trars 1:ndul fin. n.bcr 31,-
          'T,                      '
I n.3 t .14 s + _*                                                                                                                                      1971                  1972          1973          ( t 'nmulist d >
(1 b.m ands of !)rdiars) a :1                                                                                                                                525,922                529.2 %      512.987                  516 m Vi i1Balance at beginning of period .... . . . .                                    ......              . .. ..... ....
                                                                                                                                                                                                              ,11.42; Add net income available for dividends and other corpor.ite purpows                                              .            ,12 N 2                  12.765      J3/rl6 37 Yil                42.023        24.613                  31.312 Total .... . . ...... .. .                        .... .......... . ... ...
Deduct:
Cash divirtends on Conunon SimL (per sharc 1971, 51.36; 1972. 51.M;                                                                                                                    9,N E,736                9.016          9,6 19 1973. 51.44; 12 montin ruded Octohcr 31, 1974. 51.47)                                .. ... . ..
                                                                                                      ... ... ...                  . ..          _--_                  _20.f;W Transfer to Common Stock account (Note 3)                                                                                                                  _ . .
                                                                                                                                                                                                                $21.3.'9.
p2'> 2M                S12.987      _516.98;l Balance at close of period .                        . . ..          ....    ..... .. .                  ... . ..
FI'ATEMENT OF CilANGES IN FINANCIAI, POstilON-12 Wntla Inant Years I:ndvd lien mbcr 31.                      In.31 74
    *                                                                                                                                              '1971                    1972          1973          (t naudistal (T housands of I)ollars)
Source of l'unds:
From operations:
512.072                512,765      513.616                514.424 Net income available fer dividends and other corporate purposes 7,054                6M6              8,046                8,572 -      '
Depreciation and amorlintion , .. .... ..... .....                                            . ...
121-            (151)-
1.070 Investrncnt ta credits defeired-nct                      ..      .. . .                      .... .                                                                                  '
                                                                                                                                                          -                      497        -                      -
Lon on disposition of property .                        ..                                          ..                                                                                    g Ath)wance for funds used during construction                              .                    . ..            (1.471)              (2.05)              (K6)                  (652)
(570)                    346 Undonibuted (carninrs) Imses of subsidiary companies                                            .
                                                                                                                                        ....              (542)                (542)            (542)                (542)
Less non cash incorne transfer ...                          .... . ....                  .
20,229-ii.I l 3              IK627                                21.997 Total frem operations            .          ..                    . .          ,              ..
From other sources:                                                                                                                                            20fm                      -
Sale of monpre bonds and debentures                                        .          .                          15.0a0                  -
5.672                    356        5.411                      253 Sale of Conunon Stock                .                .        ... .                              .
669 Stock iwued in Columbia Gas Merrer                              ..                        .        .
3tood Ilank bmrowings          . . .                  ..          ..          .                              .        Kihio              is.000          18.000 Proceed from sale of I cwiston Ilydro project . .                                                                    -
2.700            -
                                                                                                                                                          --                1.031              -
j                                  Refund of prior year lideral income tases- net                                                      . .
0 841
_ _ 261,                      205            f 574 Net change in other items              .. ...                    ..                                  .
54M. I6              S40.922      ,5..c. ).on?.            > 'o.02n..
Total funds as.iilable                .      .. .              .      .      . . . .. .                  -
.                    Application of I .mds:                                                                                                                                              $21,000                sis 00a
                                                                                                                                                    $14.000        4 511poo                                                      '
Repayment of bank borrowinn .                            . . . ...
Constinction openditures '(nct of allowance for funds used during non-
                                                                                                                                          ..          22J01                21.366          24.460                25.559 i                              struction)          ..... .      .            . .... .                .          ..
                                                                                                                                                            -                  -                -                      n2 Net utility plant nequired in Columbia Gas Merrer                                    .                            .
                                                                                                                                            .            F.736              9.036            4/,49                9.981        .
Cash disidends              . ... .          .      . . ... ....                ..      .          .
607                770      1 i
629                  950 Redemption of debentmes                . ..            .          ..      .. .. ..                .        .
1.101 I.257              1,217          4.611 investment in mbsi.hary companics                      .        . . . . . . . . . .          .              ...
(2,271)
Incscase (decrease) in other working capital componcnts                                                        .
(1,tvo)              (2637:            2.7u
                                          ' Total funds applied .                . ............ .                    .. . .                        sikoil.'              [5NMI          {.3.067}                556.026' See accompan3i n;. Notes to Irinancial Statements.
i                      .
26                                                                                                    i      '
I.
k..
 
.w Tile WASIIINGTON WAT1:It POWl:lt COMPANY k                                          NOIES TO FINANCIAI. STNIEAll:NTS Informatie.n ns e.f Oc tober 31.1974 amt for the Tucive mnths 't hen Ended is l'naudited
: 1. Summary of Significant Accounting Policies:
L              Systent of Accounn The accounting secords of the Company are maintained in accordance with the unifmm system of accounts prescribed by the Federal Power Commission ("i PC") and adopico by the appropriate state regulatory commissions.
Utility Plant
                  'Ihc cost of additions to utility plant constructed by the Company, including an allimar.cc for funds used during cimstinction and seplacements of units ef property and betterments. is c:.pi-talized. Maintenance and repairs of property and seplacements determinegl to be less than' units of
_ property are charged to operating espenses. Costs el depicciahic tmits of propeity retired pins costs 1 of removal 1:w salvage are charged to accumulated depreciation. Upon sale or disposition of prop-city other than through normal retirement. the difference. if material, between the proceeds reab7ed and the cost less the estimated portion of the reserve for depreciation applicable thereto is recorded in income accounts.
Allowance for Funds Used IDurin.e Construction L.
In accordance with the uniform system of accounts prescribed by reputatory authorities, an allowance for funds used during construction ("AFDC") is included in construction work in progress and crefted to income using a composite rate, applied to comtruction umk in propress which assumes that funds used for construction were prmided by debt and common equity. This accounting practice resuhs-in the inchision in construction work in progress of AFDC which will uhimately be included in rate base in estabbshing rates for utility charges.
Ikpreciation                        ,
Depreciation prosisions are computed by a method of depreciation accourting utilizing unit rates for eleettie hydro pioduction plants and composite iates for other propeities. Such iates are designed to proside for retiiemen!h of propellies at the espiration of their serv!J0 liseN. The rates inilude annuity and interest components in whi,h the interest component for electrie hydy production plam is sis per cent and for other property is /cro per cent. Depreciatien of transportation e.luipment is prm ided on the basis of miles or homs of operation.
The ratios of provisions for depreciation to aserage depreciable property were as follows: p>71.
l.82?;.; 1972, 1.785[: 1973.1.895l..
Subsidiaries in compliance with an ordes of the FPC erlective Januaiy 1.1973, the Company changed from the
              " Cost" to the "b uity" l    method of accounting for imestments in subsidiary companies. As a resuh of such treatinent the Company recoridred subsidiary income of 5576.000 (S.09 a shaie) in 1973. The effect on net income of prior years is not material and it has not been re. stated.                                    i 27 1
l
                                                                                                                          .~
 
TIIE WASIIINGTON WATEll I'OWElt COMI'ANY NOTES TO FINANCIAL STNIE%IEN'IS-(Continued)
Retirement Plan The Company has a Trusteed Itetirement Plan covering its regular full time employees. Pension costs are computed on the basis of accepted actuarial methods and include current service costs and amorti7ation of prior seniec costs over 15 years. The costs of the plan are borne by the Company:
total pension costs were: 1971. 51,033.000; 1972. 51.013.000; 1973. 5856.000; and twelve months ended October 11. 1974. 5936.000. The Company's policy is to fund pension cost accrued.
Income Tmes Prmisions for income taxes are based generally on income and expense as reported for financial statement purposes adjusted principally for tiw allowanec for funds used during corstruction. ta\es capitali/cd and the excew of tas depreciation (computed primarily on accelerated method-) over book depreciation. In accordance with requirements of regulatory authorities basing jurisdiction over rares, the Company's tax prmisions reflect the current tax reductions arising from such timing differences.
on new Investment tax credits are accounted for en the " flow-through" method whereby credits production Iaeilities are amortired mer a lise-year period and credits on other plant p! aced in senice are credited to l'eJeral ineone las expense currently. Such treatment is in accordance with directives 1471. 5300.000; of regulatory authorites and resulted in a reduction of l'ederal inconw tas expense of:
1972. 5546.(xW); 1973. SSF2.000, and twehe month period ended October 31. 1971 5756.000.
Subsidiaries are The Company and its subsidiaries lite censolidated Federal income tax returns.
charged or credited with the tax effects of their operations and insestnwnt credits.
During a 60 month period ended February 1958. prmisions for Federal income tases gase ellect to accelerated amortiranan, for tai purposes only, of 65% of the depreciable cost of the Cabinet Gorge Ilydroelectrie proiect. Ateounting for the resultant reduenon, in l'ederal income taxes was as The order pro-prescribed by an order of the Washington litihties and Transportation Commiwinn.
vided that during the 60. month period the reduction in taxes was to be segregated from net income and accumulated in an account entitled lletamed Earnings-ltestricteJ. and that the amount so aceumulated be transferred (5542.No annually) to retained earning.s of the following 25-year period, during which period and continuing throughout the hfe of the property. Federal income taxes are expected to be greater than they would hase been if accelerated amortization had not been claimed.
6 s
28
 
Tile WASillNGTON WATER POWEl< COMPANY
(    2. Ixmg. Term Debt:
NO'l 13 'l O I IN ANCI AI. S I'N! 1311NI S-t Continued)
Long-term debt consists of the following (in thousands of dollars):                                        Ikccmher 31,    oitot cr 3 ,
1973            1974 First mortgage bonds:
                                                                          .. ... .. .... .. . ..                                5 20.370        S 20.370 3)JSL Series due l')S2            ..
4Kr/c, Series due 1987 .          .. ..... . . .... . .. ... ...                                    30.000          30.000
                                                                                          ..    ........          . . .        20.000          20.000 4%SL Series due 19xS                      . .. .
                                                            .. . ... ... ... . ........ ..                                        15.000          15.000 4}$ Series due 19SS                                                                                                  15.000
                                                                                    . ... .. .... ......                          15.000 4MSL Series due 1989          .        . ..
30,000
                                                                                        ..... ..............                                      30.000 4%C/r. Series due 1994 . .. .. ...                                                                                    10.000
                                                                          ................... . .....                              10.000 4%SL Series due 1995              ..
                                                                                          .. . ........            . . .        20.000          20.000 6 % Series due 1996                ... . .
20.000
                                                                                  .. . .. . .... ... .                            20.000 9MSL Series due 20MI                        .
                                                                                    ... ...            ...... . .              20.000          20.000 7%S/n Series due 2003            .        .
Total          .. .. . .                ..            . . . ..                    200.370          200.370 Sinking fund debentures lportion maturing after one year):
                                                                                        . .. ...... . . .                          8.092            8.092 4M% due 1973                          .        ...
7,000          6,930 4M% duc 1983      .... ..              .
                                                        ......            .  ......          .. ...    ..  ......                  5.250          5.100 4M% due 1999 .
                                                            ...... .... .......... .. ......                                      15.000          15.000 8%Sb due 1991 Total            .... . ..                .. ... .... .......                          35.342          35.122 Notes payable-hanks:
{                          Due November 1.1974              ...            .  .. . ..                .. . . . .                12.000            -
22.000 Due December 1.1975 . . .                    ..            .      . . . .            . . . .
Total long term debt                      .        .                    . . . 5247.712              5257.492 The notes due December 1.1975 were is<ued under the terms and conditions c: a Credit Agreement dated June 25.1974 estendm: a ime of ereibt under which the Company can horrow trom several banks a maximum principal amount of $35.tKKU'to at any one time outstandmg; $18.000.000 of the borrowings thereunder were used to prepay notes which were due November 1.1974. Pursuant to the terms and conditiens of the Agreement. these notes bear interest at the prime commercial loan rate of the Seattle-First National it.mL prevailing from time to time during the life of the notes (11.2555 at October 31, 1974). These are no compensating balance requirements. The average short. term bank borrowings out.
standing during the , sear ended December 31.1973 was 57.700.000 and the average interest rate was 7.170;. The asera:e outstandine during the twelve months ended October 31.1974 was S13.300.000 and 6
the average interest rate was 10M.E.
The aggregate annual sinking fund requirements for the six years from December 31,1973 under the bonds and debentures outstanding October 31.1974 amount to: 1974. 52,491.700; 1975, 52.671.700; 1976 and 1977, 53.141,700 and 197S and 1979, 52.803.700. Of these annual amounts 52.003,700 may be met by certification of property additions at the rate of 1675h of requirements.
The maximum principal amount of h1ortgage Bonds which may be issued under the h1ortgage is limited to $500.000.000. Ilowever, the Company has reserved the right to amend the blortgage, without any consent of the holders of the 1995 series or any subsequent series of bonds, to reiaove this limitation.
Substantially all of the utility plant is subject to the lien of the mortgage and deed of trust underlying outstanding First hlortgage Bonds.
(                                                                                  29 i
q        .-      ,      _
 
2 Tile WASillNGTON WATEit r0 WEIT COMPANY NFI ES '8 0 l'INANCI AI. STNil;.'.liXI S -.(Com Imted)
None of the long-term debt is piedred. held by or for the account of the.Congmy, or hc!d in its sinkin;t or other special imids.
: 3. Comumn Steck:
The Company publicly sold shares of its no par value Common Stock during the 3-year period as follows: 1971, 250.000 shaies for SS,563/M aml 1973, 250.tm sh::res for %5.112.? AL -In addition.
32,988 sh;ues were issued to anguise Columbia Gas Compeny which was merged imo the Company in 1974.
              'Ihe Company transferred 520.txHum dming 1972 from actained earnings lo Common Stack accom pursuant in authorization by the lhiard of Directors.
The Company lias an !?mployees' Stock Purchase Plan v.hich psovides                                  s for the grar. ting to all reg full-time employces of the Company. dming such limited n!fering periods as may he .pecified from time to time by the floard ef Ihicetois. <.f the right to purchase a hmited number of shares of the Comp Common Stock, with the prieilere of pa)ing for such shares on an in.tallment hash thro sph payrou 3.621 in 1971.17.506 in 1972.
deductions. The Company iwued the folleumg shares imder the Plan:
3        14,725 in 1973, and 9.528 shares during the ten months ended October 31, 1974. at prices from S19
        $21.00. At October 31,1974 there were 6,183 shares yet to be issued at 519.95 under an edering made to employees on July 2.1973. On May 10.1974 the Company's shareholders apprmed an amendment to the plan providing that the maximum number of shares which may be issued as a result of all offerin after May 10. 1974 shall be 150.000 shares.
As shares are inued proceeds are credited to the Common Stock account; no amotmts are charged) to income.
: 4. Suppfemental Information:                                                                                        12\1onds-                ,
Years F.ndid l>cumhtr 31                l~nded 1972            1973      10 31 74 1971                            ... . _.-.
<                                                                                                  Inous. mas nr lunars)
Tases, other than inome taxes, are as follows:                                                                                        '
55.242        55.306        S5.568    S 5.764
'                  Ad valorem . .        . ... ........ ........
ml          F26          OlS l'ederal and state social security              . ..              513 15            23            2n            64 State of Idaho kwh generation                            .
1.533          1.771        1.025        2.019 State excise . . . .      .. . .. ..
1.413 1.018          1.202        1.20!                  ,
Municipal occupation taxes and license fees . .
32            49            44            50 Misecl!.meous ...........................                                                                                            '
Ss.383        59.0 5        59.Ma      S10.228 Total      .    .. . .... .......              . _ . . . .            .    ._ ._.      . _ . _ . _ .
Charged to:                                                                                              S 9.922
,                                                                                    57.917        58.385        59.350 Operating revenue deductions--Taxes                    .
Utility plant, clearin;; and other sundry                                      630          34o          306 466 a ccou nt s . . . . . . . . . . . . . . . . . . . . .
than set out separately in the statement Amounts of maintenance and repairs and depreciation, of i          of income, are not materie Amounts of rentals, ao. -tising costs and research and development costs are not material.
}
: 5. Commitments:
The Comp.my has substantial power supply conunitnients and contracts espiring at Various date                                          I l                                                                                                                                                    y=-
through 2018. Iteference is made to "Poner anil Gas Supply".
l
!                                                                                                                                                        l:
30                                                                        r r
* u
 
                                                                                                                                                                        .~ _
E            >
                                                                                                                                                                                .)
b                                                                        UNilicitWI:Ii1.!('i
    'k                LSnbject to the terms anil conditions cont.iii.ed in Iht 1.halerWritinp A"reement.' a copy of .v.hkh is (filed as an exhibit to tie I!cristration Starcmcot, ti e t halemiter:, named it low hase f.everally'arreal I                  to purchase, and the Company has arreeil to ell to them severally, the sespective principal anumnts -
                ' of New Ilonds set forth below.
p Principal Asumme Name                                                                                              -
                            ' Kidder. Peahody & Co. Inenrporated_ . .                              ..          . .....              . . . . L S 2.%0.4.x' l'
2.500.0W
                              -White. Weld & Co. Incoriurated                                          .., . . .                          .
1)ean Witter & Co Incorporated                        . ...              , . .. ... . .                                  2.500.f D s l)resel linruham & Co. Incorporated . .                                  .        , . .....                                725.000 The First lio. ton Corporation -                . .              ..      . ... .                  ... ..                  725.fXY)
                                                                                                            . ..        ...........                      '725.000                ,
Go!dman. Sichs & Co.                    .    .          .
t llornblower & Weeki..llemphi!I. Noyes intorporated                                        . ..                ..        ' 725.000 t
II. F. Ilution & Company Inc.                . .            . . .. ....                            . ..                    725.000 L
1.chman ' ilrothers Incorporated                        .. ..                      . ...........                            725.000 -
                                                                                                                            .        . ..                725.000 l_ neb !!ho.nfes & C o-      .      . . .                  .        . . .
Merrill I.ynth. Pierce, l'enner & Smith incor porated .                                                . ..                725.000 Paine, Webler. JaiLson & Curtis locorporated                                              ....            . .              725.000 1(esnnhh Securities Inc.                  .                .. .                .          .            ...                725.000 Salomon lirothers . ... .                                                                                                    725.000
(                                                                                          .. .. . ....
Smith, llarney & Co. Incorporated                              .          . . .. .                            .            725.00)
I.. F. P.oth.. child & Co.                              . ..                ....                                  .        625.000 Shear on ll.iyden Stone ine.                    .              ...                                .. . .                    625,000 Shichts Model Rolar;d Secu:ities incoqurated                                .                .. .                .        625/klo Wecden & Co. Incorporated                                      .                  .                        .              625.000 l)omiaick & I)ominick, locorpor.ited                                          .                                .            500.0.H l'oster & Marshall Inc.                                                                                            .        Sm.(ut liariis, lipham & _ Co. Incorpoiateil .                                            .                                        5(M.0W Moseley, llallrarten & listabrook Inc                                .                ...          .                      500.(k0 I
                                'Ihomson & Meliinnon Auchincloss fiolibneyer Inc.                                      ..            .+.        .          500.0(V 1                          Si vneer Trask & Co incorpmated .                          . .              ... . .. . . ..                                  500.000 l
Tucker. Anthony & It I.1)ay                    . . . ...... . . .. .. .                                                      500.000 American Seetuities Corgyration .                  .            ........ .... .....                                        3tkl.000 llaeon. Whipple & Co.            ..          .. . .. . .. .... ... .....                                                  300.000 tilunt lillis & Sinunons incotierated                    ...... .... .                  .. .... ..                        300.000 Melbnald & Company .                    .    .. .. .... ., ...... ... .                                                    300.000 The Ohio Comp.my                  .... . . ... . .... ... . .                                            ..                300.000 Paper. Jattray & Ilopwood ineoiivrated . .                              ...                  .. ..                .        300.tku 31 I
I k ib-                                                          , , , , . -        , . _ . .,,
 
p            ,
  < - c.                                                                                                                                                                                ;
          .                                                                                                                                                                      t
                                                                                                                                                                                        ?
4 ,.
I l'sim ipal -        =
Nmc
* Ammme              f~
                                                                                                                                                                                          ^
      -                      'lillins. St roud. Suplee & Co.                  . . . . . .      . .          .. .
                                                                                                                            . . . . . . . . . ' $ ' 2m,fs00 2fF)##) -    -t
                            ~ Freeman Sa urities Cornpanf. Inc.- .. .... ......... .. ....
2fW)fgx)      -[
                              't he lilinois Company incorgwated                              ....            ........ .                                                              t 200.txx)      -i Martin Nelson & Co.. Inc. . . . . . . . . . . .                              .... .. . ...... ..
Wagenseller & I)urst. . Inc. . . . . . . . . . . . . . . . .                                  ...... ....                                200/K)0 Total                                                                                                                              i.
_.525.f x10.t T6._
f 9
5 Kidder, Peabody & Co. Incorporated. White. Weld & Co.. Incorporated and Dean Witter & Co.
                ~ Incorporated, as Representatives of the several Underwriters. have advised the Company as follows:
I.,
                          .The several Underwriters are offering the New lionds to the public at the public ofTering priec set forth on the cover page of this Prospectus, and to Dealers at a price which represents a concession of .4'W/,, of the principal amount under -the public offering psice. 'ihe Underwriters and such Dealers may reallow a concession of .25"e to deal.:ss who are members of the National Amciation of Securitics Dealers, Inc. or certain foreign dealers who agree not to make sa' of the New Bonds in the United States or to nationals or residents thereof. After the initial public o!1ering. the -                                                                      ,
public offering price and the concessions may be changed.
6
                                                                                                                                                                                        ).
L I
                                                                                                                                                                                      'I s                                          -
e j'
L                                                                                                                                                                                          i i
4 i
i                                                                                                                                                                                          !-
L                                                                                                                                                                                          \
32 l'
t
            ,      ..      . . . . . . _ . - _ . _ . _        , _ _ _ . _ . - . _ . . _ . . . - . _ , . . . . . . . . . . - . - _ . . . - . . _ _ _ _ _ ~ _ , _ . - . . _        ._.~
 
d a
b E
1                  No person has been authrized to give any
$    .l information or to make any representations, other than those contained in the Prospectus j              in connection with the offer contained in this
        ,            Prospectus, and, if given or made, such infor-                                                600,000 Shares
        !            mation or representations must not be relied upon as having heen authorized by the Com-i          pany. This Prospectus does not constitute an                                  PUGET SOUND FJWER &
offer to sell the securities in any state to any                                            LIGilT CO.TIPANY l
one to whom it is unlawful to make such ofIer in such state.
            '                                                                                                    % Preferred Stock I
(Cumulative, $25 par value)
TABLE OF CONTENTS Page The Company                                                      2 P    OSPEGUS Summary          ..        .        ..                          3 Use of Proceeds and Construction Program                    .                          .      4 Merrill Lynch, Pierce, Fenner & Smith Capitalization                        ..                          5 Incorporated
(                      Statements o'i Income .                                            G Management's Discussion and Analysis              ~
of the Statements of Income .                          ..      7                      Dean Witter & Co.
Incorporated Business                                                          g i        Operating Statistics                                            17 i
j        Map of Service Area                                            18 Management .                                                    19 Description of the New Preferred Stock.. 20 Legal Opinions and Experts..                                    23 Financial Statements            . . . . . . . .                24                      +
Report of Independent Certified Public Accountants .      ..                              ..      37                          Dated May 29,1975 Underwriting                          ..                      38                                                            ;
j                                                                                                                                        l l
l l
0                                _
  .                                                                                                                                                  l
 
                          =-                  - .      - .          . -            ,_
M d
4 PRELIMIN ARY PROSPECTUS DATED APRIL 22, 1975 1
I1
                          !s 8
    ''  I                              2 e
PROSPECTUS l
I              -
3                                                          600,000 Shares                                                <
s l
jQ                              Puget Sound Power & Light Company s                      jE                                                        % Preferred Stock                                                  I (Cumulative, $25 Par Value) yJ_s                                                                        Per Share to Yield ?c' Price $
l!.3$j                                                                                  per share from date of originalissuance.
1a a                      Entitled to cumulative annual dividends of S j .B E;E
                            .I Tii.2      ., E-          The New Preferred Stock may not be redeemed through certain refunding operations as more fully set forth herein prior to June 1,1980.
                  '        .]DIY
:    U=G
                                  !2 l#t THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPR aI,EI
: g.                    SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMM R #EE                        PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECT 3b2E                          ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFEN T*tt Underwriting          Piemds to
                    '            *f1 V        e "
Price to Publicm          Commissiwns(2)          Company (3) 7Eg          5 I                        e                                                                                                    $
ji4 y8 $ $          Per Share..                                      S
(
sy$
s        a o 1
g    Total..
bE*1 i            j: = f            (1) Plus accrued dividends, if any, from date of original issuance.
s            jE88              (2) The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilit'es under the Securities Act of 1933.
l                        i.
                                  ,e
                                  }g j (( }(3) Before deducting expenses payable by the Company estimated at $88,000.
g833                    The New Preferred Stock is offered subject to prior sale, when, as and if delivered to and
                                    ,ll2            accepted by the Underwriters, and subject to approval of certain legal matters by th pggi              and by counsel for the Company. The Underwriters reserve the right to withdraw, cancel
                                    ==            l i55f li      8 modify such offer and to reject orders in whole or in part. It is expected that delivery o shares of New Preferred Stock will be made in New6 York, N. Y., on or about June 5,1975
:          g
                                      !m s.=
                                    ,,                                                                                              Dean Witter & CO.
jig"a. Merrill Lynch, Incorporated          Pierce, Fenner & Smith                                      Incorporated
                                    ."d(
* I                              The date of this Prospectus is May 29, 1975.
                                                                  \                                                                                      __
 
  '            *~<m                                                                                          ,
                                                                      ~- w          - -      _-          _
(
I IN CONNECTION WITH THIS OFFERING. THE UNDERWRI I              OR OTHERWISE EFFECT    PREVAIL IN  TRANSACTIONS                      WHICHIF S THE OPEN h!ARKET. SUCH STABILIZING,            C0 4
MAY BE DISCONTINUED AT ANY TIh!E.
The Company is subject to the informational requirements of the Securities E and, in accordance thereccith,11,files      1975 reports and other information teith Commission. Certain information as of Aprilcertain other information f Company to its directors and officers and scith respec the Company and filed by it seith the Securities and E Washington. D.C. 20519, and copies of such material can be obtained from th scribed rates. The Company's Common Stock, $10 par t alue,is listed on the schere reports, proxy material and other information concerning the Com THE COhfPANY Puget Sound Power & Light Company (the " Company"), a Washingto utility providing electric service exclusively within the State o 206 454.G3G3.
Bellevue, Washington 96000. The telephone number isThe electric impact of th'ese problems varies among companies and regions. Although              )
the Company as described below, the Company's experience in relation there favorable.
The Company, similar to many other electric utilities, is involved in a very su program (see "Une of Proceeds and Construction Program"). Its ability to Anance this construction will depend on general money market conditions a securities, its ability to meet various carnings coverage requirements. The Co
;                          affected by inflationary factors (see "Alanagement' t
rate relief and eiTective November 1,1974 the Company received a general      c      r mately 20fo in annual operating revenues based 31,1974 was in part,  on future rate increases.of the Company's energy requirement for the year e Over 967o supplied by hydro clectric generation. Accordingly the Company was not a or shortages of fossil fuel (see " Business-Power Resources-Existing" and "
The Company has not to date experienced significant delays in its construction pr assult of environmental regulaticn or licensing problem . The Company is u these factors will result in delays or additional costs For a description of hearings releing to the Company's application for a cons additional generating units at Colstrip, hiontana, see " Business-Legal Proceedin 2
                                                                  ~ -
s'
 
F l
* SUMMAltY                                                                il l                          The following inaterial is qualified in its entirety                                              by the detailul infor Pro.-pec tus.
l statements (including the notes thereto) appearing elsewhere in this TIIE OFFERING 21                                                                                        ..Puget Sound Power & Light Company
                                                                                              .600,000 shares of 9 Preferred Stock.
t Company.                .  .
cumulative. 625 par value Sedurity offered .                                                                                        ..May 29,1975 Expected Offering Date.                                    ..
February 15, May 15. August 15, November 15 Dividend Payment Dates .                                                          .. Repay bank loans incurred for 1
construction purposes Use of Proceeds .
TIIE COMPANY
                                                                                          .. Production, transmission, distribution and sale of electric energy Business..
                                                                                                              .. Hydro 96e;. fossil fuel 4r; 31, 1974).
                                                                                                                  ..Approximately 2.T00.000 Sources of Generation (Year ended December Available Peaking Capability kilowatts..                              ..Approximately 3,200 square miles in the western portion of Washington State Service Area..                                                                            ..Approximately 1.010.000 1                                                                        .
                                                                                                                      ..Approximately 409,000 i            Population                                                      ..
Customers .
FINANCIAL INFORMATION                                          Years I:nded December 31 4
1973            l''78
                                                                                                                      ..S116,902        S142.303
                                                                                                                        ..S 15,463        $ 21,3S5 k            4 Operating Revenues (thousands)
Net Income (thou-and4                                                                                                S4.03 4
Earnings per Common Share:                                                                          52.94 Assuming no conversion of preference stock                                                    S2.89            S3.68 i
              #                Assuming full conversion 1.06 j
Ratio of Earnings to Fixed Charges and Preferred Dividend                                            1.85Requirements:
                                                                                                                                -                1.92*
i Actual..
              }                  Pro Forma                                                                  As of I)ecemfier 31,1974 (Thouunds)
An Adsuwed*
Actual
              }                                                                              . 5318,749      59.4 %
                                                                                                                                  $318,749      57.8 cc 52,122        9.4 I
Ixmg Term Debt..                                                      37,122      6.9 14,814        2.7 Preferred Stock..                                                      14,814      2.8 16G,059      30.1 Convertible Preference Stock..                                        160,059 30.9 Common Equity.                                                    .S536.764 100.0G,
                                                                                                                                  $551,744 100.orc              l Total Capitalization..                                                                                                  I
                  '        'Giving effect to the issuance of the New Preferred Stock.                                      -
                  .                                                                    3 1
_,y _
a                                        -w. _,
 
d USE OF PROCEEDS AND CONS'IHUCTION PROGRAM d
The net proceeds (approximately $                ) inom the sale of the Goo.non shares of P.?S -
{
value preferred stock being ofTered hereby (the "New Prefctred Stock") will be applied towan:
repayment of ontstan< ling bank loans incurred for construction purposes. There bank loans an
  .g expected to aggregate approximately S48,000,000 at the time of delivery of the New Piefernd Stock.
i              Construction expenditures for 1974 amounted to approximately $94,400,000 and it is estimated
      '      that the Company's 1975 construction program will require the expenditure of approximatel:.
l
              $90,700,000 (excluding allowance for funds u ed during construction) as follows: production p!a..t additiens and improvements, 561,700,000, including approxin ately $13,T300,000 applicable to th<
1    Company's portion of the Colstrip generating plant in Ro.sebud County, Montana and approximately
              $16,000,000 applicab!c to the Company's portion of the Skagit Nuclear Project tsee " Business-Pows Resources-Under Construction or Planned"): transmission plant improvements and extension-
              $7,700,000: distribution plant improvements, $10,200,000; new services and extensions, e9,200,000; and general plant improvements. $1,000,000.
The Company expects to finance the balance of its 1975 construction program with funde obtained from internal sources and from short-term borrowings. Such borrowings will be n funded through the sale of debt and equity securities which are expected to approximate S4M00.000 durm; the remainder of 1975. The Company's construction program for the years 1976 and 1977, subject to continuing review and adjustment, is estimated at $300.000.000 (excluding a!!owance for funds used during construction) of which approximately 7.W is expected to be raised through the cale of securi-ties. The amount, character and timing of future financing will be determined in the licht of then
            ;  existing conditions. See " Business-Power Resources-Under Construction or Planned."
Gross electric utility plant at December 31,1974 amounted to SG72,269,000 During the five years ended December 31,1974 the Company made gross pioperty additions (excluding allowance for funds used during construction) in the amount of $261,335,000.
t i
1 4
        \
a 1
                                                                                +
l I                                                                  4
                                                                                            *      -v--
 
F
      )                                                        CAPITALIZATION 3
A
    \ 1 31, 1974 (see Balance Sheets), and as The capitalization of the Company as of December i
adjusted to reflect the issuance and sale of the New Preferred Stock,is as follows.
As Adjusted Decemfier31,1974__
Outstanding      Ntio(al I
Outstanding,        Itatio (Thousands of Dollars)
                                                                                                                          $303,147
                                                                                          . $303,147 First Mortgage Bonds.. . . ..          .    ..
8,486 8,486 Debentures..                                                                                              525 525 j            Notes payable..                    ..
5.90% pollution control revenue bonds, series                        20,000                          20,000 1973, duc 1998..                  ..      ..
(13,400)                        (13,409)
Less funds on deposit with trustee.. ..                                                        _ 318,749        57.8 %
f                                                                                  318,749            59.4 %
Total Long-Term Debt..                  ..
Preferred Stock, $100 par value,1,000,000 shares                        37,122 37,122 authorized,371,222 shares outstanding..
l          New Preferred Stock, S25 par value,3,000,000 shares                        -
15,000 authorized (b),600,000 shares to be issued..                                                          52,122        9.4 37,122            6.9 s
Total Preferred Stock..
Preference Stock, S50 par value,700,000 shares                                              2.8          14,814          2.7 14,814
              }          authorized,206,290 convertible shares outstanding..
Common Stock, S10 par value,10,000,000 shares                                                            49,979 49,979 authorized (b),4,997,852 shares outstanding..
34,689                          34,689
:      Additional paid in capital..                        .
81,391 81,391 Earnings reinvested in the business..                                                    30.9          166,059        30.1
                                                                                            . 166,059 Total Common Equity.                                                          100.0 cl,    S551.744        100.0 9
                                                                                        . S53G,744 Total Capitalization..
S 46,200                            (c)
Bank Loans and Commercial Paper..
(a) Assuming full conversion of the Convertible Preference                          Stock into Common Stock of the Long-Term Debt 57,8G; Preferred Stock Company, the adjusted capitalization ratios would be:
9.4%; and Common Equity 32.89 13,1975.
(b) Subject to shareholder approval, which is expected on May (c) See "Use of Proceeds and Construction Program" w
                              $18,000,000,  respectively, at the time of delivery of the New Preferred Stock.
              -5 Reference is made to the Balance Sheets and Notes 4,5,6,7 and 8 of the Notes to ments, appearing elsewhere in this Prospectus.
                -1                                                                      5 1
l g
I
 
1
(
  >                                            STATEMCNTS OF INCOME 31,1071 have bee.
The following statements of income for the five years ended                                              h          December i i n thereon examined by Coopers & Lybrand, independent certiSed                                                                public with d in conjunction          accountathe is included elsewhere in this Prospectus. The statements shoubt be rea other financial statements and related notes                        1970 appearing 1971              1972elsewhere  1973        herein.
1974 FI5ouands of Dollaro
                                                                                                                $108.146      $116902        5142."93
                                                                          $ 86f,82        $ 94,101 OPERATING REVENUES (Note 1) 32,D,1 OPERATING EXPENSES:                                                                  22.966            25.939        25.f>x2 20.AAl                                19,651        23.144        26,0.'l Operation: Purchased and interchanged power-net.                  17,025            17,723 5,622          6,140          6.401 3,794            4.585                                          13.Mn Other                                                                                                11,201        12.331 8,535          10.4G7 hlaintenance tNote 1)..                                                                                13,257        14.861        17.042 Depreciatmn (Note 11                                              10.889            10.8 >I 7,335 Tascs other than Federal income taxes (Note 9)..                      626            1,309              2,4G2        2.9T4 1,305 Federal income t.nn t Note. I nnd 10):                                                                  1,261            919 Payable currently.                                                -                  26!)                                            tr373 203            266 (176)              til Deferred inscwtment tax e redits-net .                                                                            b6.205        103,1w3 68.2M I            79.Stri Deferred-other                                                  61.627                                                            3%910 Total operatme eniense .                                                                        28.f.47        30t97 25.055          25.817 OPEllATING INCO51E                                                                                            457            15G                I 69              270 OTHER      INCOhll:-NET:
Income from property males-net .                                                                                                      4,423 1,419              1,$P9          1.b93 Allowance for funds used during                                        877                                              1.2'A          1,791 225                171 corntruction (Note 1)                                                14_t 3.313          6.218 1.914              2.217 hliscellaneous--net .                                                1.090                                                            4'.12 x 27,731              30,761        38010 Total other income-net .                                      261,I 4 5 INCOhlE DEI'OME INTEllEST LilARGES                                                                                      15.fM5          16 i
11,039          12.613            12.975 INTEHl:ST CllAHGES:                                                                                        1,680        2.677          5.0/0 Interest on lone.tcrm debt                                          2,009            1,lM Other intere t                                                                            67                65            85            121 Amortiration of debt emptnse, net of                                      52 14.7,'o      IR5 87          23.741 premium (Note 1) .                                              13.100          13.86M 213C, 16 o t        15461 Total interest chars:es .                                      13.0 'i          13 mu NET INCOhlE                                                                                                1,212        1.695          2.240 1,278            1,2 86 LESS DIVIDI",ND ACCRif ALS:                                                                                1,0x l        1.07 1          1,071 Preferred stoil,                                                    i fisa            I .os7 2.5rn            3.311 Consertihte preference stock                                                          2.3tl            2.2m 2.366 Total dmdend accruals                                      $ 10.679          $ 11.51o          5 13.7 4      Aluu $ la 671 NET INCOh!E l'Olt COhlhlON STOCK .                                                                                  4.379.u2      4,483.216 Common sharcs--weighted aserage:                                  3,953,799 4.112.676 4.367,055                      4.829,N.6      4.032.14o Outstandme                                                    4,408,184 4,566,752 4.N15,979 Assummg full conv roon nf preference stoi k                              4                                                          $4 03
                                                                                                                      $3.15        $2 94 Earnince per common Share iNote Ih                                  $2.70            $2 80                                            $3 M Assuming no conscromn of preference stmk-                                        $2.76              $3 03        $269
                                                                                $2.67                                                              Slh
                                                                                                                      $1.91        $193 Assuming full < onsersion                                        $1.76            $1.82 Dividends per sommon sharc                                                                                              I A5            1.9G 1.93            2.14 Ratio of earnmg* to inminned ined charces and                          1.86 preferred dmdend regmrements Note references are to the Notes to Financial Statements included 6
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  ;                  For the purpose of computing the ratio of earninn< to combined fixed charg dividend requirements, " earnings" are defined as I            (adjusted for undistributed income or low of uncon.olidat.91 sub-idiaries n " fixed of interest on debt, amortiration of debt discount and expen-es net of piemium                                                                  and such and " pre-j rentals as are estimated to be repre entative of the intere r factor in the particular ca-e:
ferred dividend requirements" con,ist of the requirement, for dividends on the Com                                                                      l stock multiplied by the ratio that pre-tax income hears to net income.
to combined fixed charges and
                      'The Company has calculated supp'emental ratio < of carnings preferred dividend requirements pmsuant to Accounting Serie< Helease No.12 1971 by the Securities and Exchance Commi* ion. In thi- supplemental                                                                        itun- calcul
                  " preferred dividend require ments" are defined as above purchased from Washington public utility districts under long-term contracts (s Resources Existint"). Such n!!otable portion of interest relate only to those power pur subject to future reduction under the contracts. The supplemental ratios of e
        '        fixed charges and preferred dividend requirements for the years 1970 through 197 1.73,1.59 and 1.71, respectively.
Assuming a dividend rate of lle; on the New Preferred Stock, the pro forma rati to combined fixed charges and preferred dividend reouirement- for the year 1971, a to the sale of the New Preferred Stock and repayment of notes payable to bank <.
I 1.02. The pro forma supph mental ratio defined of              above Il') andfor      thethe      3 ear 1971, repayment                                            after giv of notes sale of the New Prefer ed Stock at an noumed divideml rate payable to banks, woubt he 1.68. A difTerence of li of I!; in the actual dividend sumed rate on the New Prefe red Stock wouhl thance the pio. forma ratio of earnin i
fixed charges and preferred dividend requirements by less than 0.01 in both of the abov
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The annual dividend requirement on the New Preferred Stock will be S Operating Resenues. Net income, and Net income for Cemmon Stock for th March 31,1975 were 5119.660.00n. 422.95n.nnn, and $19.625.nA re. pectively.                                                      s i.21.Emnings A%um- per share (based on the average number of shmes outstanding during the periods were I
ing full conversion of the Preference Stock, earning, per ru recurring adjustments) necessary for a fair statem(nt of such amounts Management's Discuoion and Analysh of the Statements of Income An interim and general rate increase accounted for about 811.3 million of the inura e i Regulation and llatt ." The general rate increa e wa< in ating revenues for 1974. See "Ihr<ine.o effect only during the lagt two nmnth< of 1971 and the full el#ct of such increase wi 1975 revenues. Fales to other utilities accounted for i11.1 millior of increa<cd 1971 operating 1
Although the Company espect* to acll poner to other utilitir* in the futme. the amoun sales depends on the factors discueed under "Husiness-Sah 7
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power sales and for 1971 and 1973 is due to inflationary factors result
{          and material and supply costs. The increase in depreciation expense            i 1974. Taxes other tt                d increased depreciable electric plant and to an increas i
salaries and wages upon which the other taxes are based, together                                  w ble income.
i income taxes were significantly higher in 1974 primarily due to the increase diture-for funds used during constructionf thewhich                                                  5.90% pollution      are and (2) an increase in interest income from funds invested by the trustee o I                                                                                                              l bonds in control bonds.
The higher interest charges in 1971 and 1973 are                                    due to the f prior    avera;eissua 1972,1973 and 1974 and higher levels of short term debt at interest rate rates.                                          HUSINESS i
General The Company is an investor owned public utility                                  il furnishing principally in tbele l        i of Washington State.                            The territory the estimated      population ofserved the Company's        covers nsisting of 3M.0i!  senicea of the State. On December 31,1974 31.1974 the Company had 408, 56 customers, coDuring the year endtd over one million. On December                                                                                    b-ct rie residential, Dccember 38.938 commer iah 462 industrial and 1,439    '
generation. In the future an increasing percentage of the Compar.y s ene derived from projects using coal and nuclear fuel.                                                                  i The basie economic activities in the Company's service                                    i j      i dmtrh area  -
and thme connected with various branches of national defense.                                h T farming, shippin :                                                                      f ture of pulp,        pal . :
I include the manufacture of commercial aircraf t and                        h aero-pare                products d cement;        and    the pany), ships, freight cars, trucks and logging equipment:                    d                  oil refining;              t b      and other wmd products, chemicals, light metals, steel and iron pro ucts an fron processing of food products.                        the Company's revenues were derived 51.19 For the year ended December 31, 1974,                                              d 12.99 from other-residential service,25.4 % from commercial users,10.6G from                                t dindustrial for more thar.      use principally sales to other utilities. During this period, no single custom 2.2% of the Company's operating revenues.        the average kilowatt-hour use per resi&ntial custome:
For the year ended December 31, 1974                                        l              nd the avtran served by the Company was 13.856 kilowart. hours, almo3t                                    d withtwicethe nats  the na n rate for electricity sohl to all home users was 1.44                    centa 31, 1974  the avaperailkilowatt ble peakinghour    s wa c average for investor owned utilities2,500,000    of 3.09 cents. At Decemberl{W.            i The Compa bility of the Company was approximately di-2,115,200 liW occurred December 7,1972.The Compan                                      d          the    Cempany' tributing electricity, except from the Cities of Tacoma and Seattle                              utside of tht    whic.
service area and whose municipal electric system operations have                                    extend  had ilto city limits. Since 1930, public utility districts, which may be crea 8
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power by statute to condemn properties of privately owned publie utiliti
(                    and subject to certain limitation; pursuant to a resolution of the district commiuion                          l    i witho s
I                certain circumstances, a public vote on propm.als by a di trict to construct or acquire an
    !              facilities for the generation, transmission or distribution of electric power. The Comp knowledge of any proceedings of this nature pending or threatened.
The Company has approximately 1,820 regular employees, of which approximate members of the International Brotherhood of Electrical Workers.
Sales to Other Utilities I                  The Company has begun to sell increased amounts of power to other utilities a creased use by utilities in the Southwest portion of the United States of power to d generation from high cost oil. fired sources.
Firm power is generally avadable for sale to other utilities (1) if the deman Company's retail cu*tomers is less than the Company's projections of such timing of new resources creates a temporary firm power surplus.
Nonfirm power is available for sale to other utilities during periods whenh    stre generating plants supplying the Company are above the minimum expected l recorded conditions over a 30-year historical period. The Company has suffici able to meet its firm load under minimum expected water conditions. During periods w j
flows are abmc the minimum espected levels. 3urplus power is produced at hy
            '        and such power is u-ed to displace power from the Company's higher. cost therm This displaced thermal generation is then available for sale to other utilities. T l
Company has surplus power from hydro electric so
{                      utilities.
In 1974, revenue from such sales by the Company amounted to approximate hwh) of which $3.2 million WI million kwh) was sales of firm power and S7.0 millionin (1583 the  mil I
nonfirm power. The Company expects to continue to make sales of power
            '          future and, on the basi < of the avemge of 30 year 3                              l
                '      mately 1,500 million kwh of nonfirm p(mer available to displace its own ther to other utilities if averate water conditions prevail for a given year. Water condi average in 1974 and below average in 1973. The amount of such sales in th primarily on the availability of power in exceu ofihthe C amount of surplus power of other Northwest utilities and the Bonneville Power A is available for sale to other utilities.
Regulation and HatesThe Company is subject to the regulatory authority of (lf
    .1                  portation Comminion ("WUTC") as to rates, accounting, the issuance o other matter 3, (2) the Federal Power Comminion ("F electric projects and in certain other matters and (3) the Montana Public Service h-    C accounting and certain other matters in connection with the Colstrip generating p 9
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ington law the WUTC is required to act upon rate filings within eleven months of the date of fding.
q                      Effective November 1,1974 the WPTC granted a general rate increase which wouhl produce ar increase in annual revenues of approximately $22a77.000, or 209 in annual operating sevenu                  r 1
the basis of the Company's operations for the 12 n onths .mied June 30,1973. The amount grante ,
was about 98% of the original reque<t by the Company. The WPTC had granted the Company en
    ;              interim rate increate representing approximately 412.000.000 of increased annual revenut , w hich we :
into effect on l'ebruary 9,1974 and continued until the gneral rate increase became ellective.
The WUTC's order also required the Company to impose a 5cl surcharge in addition to tb general rate increase on all electric power delivered to commercial and industrial cu-tomer- durn the four month period November 1,1974 through February 29.1975. the winter peak de mand pt r: n 3
for electrical energy in the Pacific Northwest. The WUTC stated that the surchaico wa- de<ien.
to provide an economic incentive for bu<inesses to eliminate energy waste in their comirercial ar.
industrial operation.<. The WCTC reserved the right to order refunds of the surchange. in whole r :
in part, to such customers if experience with this surcharge indicates that the surchar:e ha "me n P resulted in substantial increased revenue to the Company with no measurable reduction in di n..v for energy attributable to the surcharge." Revenue from the surcharge amounted to approximahl:.
                    $1,000,000 and has been deferred by the Company.
The Company's previous general rate increase became efTective April 18,1972 and rt prest nt. .
an increase in electric rates of 1109 The WUTC has also granted a rate increase to be applied as a surchar e on rates to allow t h" Company to recover certain research an i development expen es. The increase became oficctive n:.
August 13, 1973 and as a result of an extension runs through December 31, 1975. Rev(nues from this surcharge amounted to approximately S750,000 in 1974 and are anticipated to approximati
                    $980,000 in 1975.
Power Resources-Existing Of the Company's present electric requirements approximately 80% is obtained through lom
* term contracts with several of the Wa+hington public utility districts owning hydro.dectric pn                -
on the Columbia River at a cost in 1974 of about 3 mills per kwh. The balance is supplied by the Company's own generation, purchase and interchange, which are primarily from hydro. electric source.-
l              The purchase of power from these projects is generally on a " cost of service" basis under which
        ;          the Company pays a proportionate part of the annual cost of each project in direct ratio to the amow of power allocated to it. These projects are financed throuch substantially level debt service paymem-and their annual costs should not vary substantially over the term of the contracts. Appropriate amounts of all rish insurance are in etTect.
i The Company is currently entitled to purchase portions of the power output of the district-projects as set forth in the following tabulation:                      co,,,,, anno,i Arnount l'urcha ahle
( Approdmatel> >            g Kilow at t  Empiratu.n Project Owner                        Project              4 of Output            Capacity        D.u c PUD No.1 of Chelan County          Rock Island
* 87.1%                  217,000          2012 PUD No.1 of Chelan County          Rocky Reach                59.7 %              768,000          2011 PUD No.1 of Douglas County          Wells                      50.3 %              424,000          201S PUD No.2 of Grant County            Priest Rapids              14.5 %                130,000        2005 PUD No. 2 of Grant County          Wanapum                    16.9 9                152,000        2009 10 i
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  .i                    Tbc Company's share of the output of the existing Rock Island Project will be 87.1?E through
-              June 30,1983, and will decrease gradually commencing July 1,1963, to a minimum of 50r; for the period from July 1,1999 until expiration of the contract. (For the expansion of the Rock Nand Project see " Power Resources-Under Construction or Planned".) The Company's share of the output of the Rocky Reach Project may be reduced over a period of years to ">S.9% upon exercise i          withdrawal rights by the District for use within its local service area and by Colochum Transmission Company (a subsidiary of Alcoa). The Company's share of the output of the Wells Project may be f
reduced over a period of years to 31.3S;. upon the exercise of withdrawal rights by the District for use d          within its local service area. The Company's shares of the output of the Priest Rapids and Wanapum i          Projecta may be reduced over a period of years to 8?c and 10.871, respectively, upon exercise of wi drawal rights by the District.
Certain United States utilities are obtaining the benefits of over 1.000,000 KW of additional
        '        capacity as the result of the ratification of a Treaty between the United States and Canada by whic Canada is providing approximately 15,500.000 acre. feet of storage on the upper Columbia River. The Comp *my is obtaining a portiot. (estimated at 160.000 I<W in 1975) of this power by virtue of its existing contracts to receive power from Columbia River plants. In addition the Company has con-(240.000 KW and 130.000 MW, re-tracted for 17.59 of both capacity and average energy spectively, in 1975) of Canada's share of the power resulting from such storage (Columbia Storage Power Exchange). These amounts decrease gradually until expiration of the contract in 2003. This power has been assigned to other utilities subject to future withdrawal by the Company. Notice ha been given that the Company is withdrawing a portion of such power (84,247 KW of capacity and 45,147 KW of average energy) effective April,1975.
The Company has abo contracted to purchase from other utilities Columbia Storage Power Exchange power in the approximate amount of 300,000 KW of capacity and 161,000 KW of average energy. This power became available in April,1975 and is subject to rights of withdrawal by          \
the I,j              other utilities in future years. Certain of these utilities have withdrawn their power effective . larch
        ;        31, 1976. Therefore the Company will base available commencing April 1,1976, approximately 186,000 KW of capacity and 93,000 KW of average energy.
The Company owns a 7G interest in the 1.400.000 KW coal. fired steam electric plant near Cen-j tralia, Washington, built joir.tly by a group of four investor. owned utilities and four pubhc anneies Unit No. I was declared to be commercially operable on July 11,1973, and Unit No. 2 on September 1.
1973. The present rated capability of 1,274.000 KW is expected to be increased to approximately 1            1,400,000 KW (the design capability) when additional tests and possible modifications are completed.
The Company has leased a 67,500 KW combu< tion turbine which has been installed on a site near Ferndale, Washington. This unit became operational on December 13, 1974 for standby and peaking capability.
Other Company owned plants have a generating capability of 426.950 KW.
The Company also has a contract to receise power from the Bonneville Power Administration
    '              through September,1977 equivalent to approximately 14% of the annual output of Hanford Atomic Power Plant No.1. Starting on July 1,1980 the Company will be entitled to receive 80,000 KW of capacity r nd 68.000 KW of average energy from Washington Public Power Supply System
("WPPSS") Nuclear Project No.1 until July 1,1996.
The Company, the Bonneville Power Administration and various other utilities and agencies in the
      ]
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l                                                                                                                                                    ,
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20, 200:1. ThN          !
1                    area have entered into a long term Coonlioation Agreement extending until June I                  agreement provides for the coordinated operation of substantially allof the powe                                                              ,
                    - in the Pacific Northwest. Among other things, it materially increases the ability of the carry load with its existing resources during periods of insufficient stream f equipment.
Power Resources-Under Construction or Planned                                                    ""          " " ' "                          ,
Estimated                                          '"          *"##'                          j Total _ t.oCompan.a Energy          Date of i                                                                    Net                        1%nned Unit  Capability        Source                                        (Minion i .sharetr,n Wueh        Operation        per KW N o.  (Megawatts) j 1*toject and location Colstrip                                                        Coal              9 751                        $ o'o          ',o""
                                                                                                                                                        ' ~
1          330                                          $336              ''~
Colstrip, Montana                                33o        Coal              7 76f 2                                          19791                            459        o$
3          700        Coal                              328
* 700        C9a1              198of 4
Ilock Island                                        410        Ilydro            1977 through],          400                164        th)
Ilock Island, Washington            1 through                                        1978]
8 50,c)
Skagit                                          1.288        Nudear              19821          542            1.335 Sedro Woolley. Washington          1 Nuclear            19856 2        1.288 678          5 WPPSS No. 3                                                                        1981          647 1.240        Nuclear Satsop, Washington (a) Excluding allowance for funds used during construction and transmission faci (b) The Company will receive, under a power contra after July 1,2000, as described below.
I                (c) Approximately.
Colstrip Project-The Company is jointly constructing with The Mon two coal fired, mine-mouth thermal generating units at Colstrip. Montana
(" Montana Power")
("Colstrip Project"),100 miles east of Hillings. The two units Cll each hav
        ;                330,000      KW and will burn coal contnilled by Western Energy Company, a subsidiary of M Power. A related transmission line and other associated facilities may require ap 4
of Land Management and other Federal agencies, and environmental impact s 4                required in conjunction with such approvals. See " Environment."
The Company has joined with four other utilities in determining the feasibility
        ;                                                KW units at the Colstrip site, in June,1973 the five utilities applied for a two additional 700.000 certificate for the two additional units under the Montana Utility Siting Act of 19 been set for hearing as a contested case before the Montana Board of Natural R vation following an unfavorable departmental report. Sie " Environment" and "
y In the event that the additional units are constructed. the entire project outp l                            Montana Power's share, would be transmitted over two 500 KV transmissio f            ,
from Colstrip to a point of interconnection with the main northwest                                                    transmiss 5188.000.000;      the Montana. Costs of these transmission facilities are estimated to be approximately l                            Company's portion of these costs has not been determined. Additional pe agencies, together with environmental impact statements, may be requi j
transmission lines and related facilities.
12
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i d
1                      Roch hland Project construction commenced in 1971                                  on eight 410.000            additional ge KW of capacity
(~  q the      Rock      Island          Project.      The      additional            units  will  Company will produce              app l                                                                                                                        20!2,
      '            and 150,000 purchase the entire output of the additional units 2000                            on a  " cost-of to 3006  upon theservice" exer-        ha which may be reduced not in excess of 109 per year beginnin, July 1, I
cise rights of withdrawal by Chelan County PUD for use in its iocal service area.
j t site near Sedro Woolley, Washington ("Shagit                                                            bility Proje of
          ,          is    expected to consist of two nuclear generating 1,288,000                                                                                    l            units, ea i Company struction manager for the project. Contracts have been entered into with Genera for the nuclear steam supply systems and initial nuclear fuel for the proj Corporation for the turbine-generating units. The proposed project w j
sary contracts for joint ownership with other utilities are being negotiated.
The Company has applied to the State of Washington Thermal Power Council ("TPPSEC") for site certification, which must he obtained before TPPSEC has scheduled hearings on the Skagit                                                    ii    i    bject      P made by the Governor after receipt of TPPSEC's recommendation:(form-                                        the Gove to judicial review. The Company has applied to the Nuclear Regulatory                                          i        C merly the Atomic Energy Commissioni for a limited work authorization                                  he project        p preparation and for construction                                          permits for thedSkag Hearings on the construction permits are expecte to 3
tion is scheduled to commence July 15, 1975.
be held in 1976. The Company will also eventually apply to the NRC for l
{                      project upon completion (.f construction.WPPSS No.                                                  3i expeeted Project-T 1
l undivided share of WPPSS Nuclear Project                          No. 3 near Satsop Washington. This 1,240.000 to have a net electrical capability of approximately in operation by September,1982.
Fuct Supply 31,1971. over 96c; of the Company's energy requirement 975)        was For the year ended December                              operating year (July 1,1974-June 30,1 1974 75 supplied by hydronlectric generation. For theless than le; fof the                                                h  C natural gas and less than 4cl from projects burning coal,if average water                                  d for co year. The Company does not own or lease coal lands or reserves,                                              f the bu coal fired plants under long-term contracts. In the future an increasing percentage each of its Company's energy requirements will be derived from projectsusing coal a Coal Projects. The Company and Montana Power, as joint owners of purchase the coal requirements for the unitsWestern                                                        from escalation provisions to cover actual mining cost inc 4                                                                13 1
 
t I          ments for Units 1 and 2 over the project's anticipated useful life. The coal supply agreement sp
    "          a maximum sulfur content in delivered subbituminous coat of 1,59 and an average content of 0.71 There are no current or known future regulatory limitations on the sulfur content of such coal. 5
      '        " Legal Proceedings" for discussion of air quality regulations limiting emissions. A long.
agreement for Colstrip Units 3 and 4 is under negotiation it is anticipated that coal supply ar ments for Units 3 and 4 will be similar to those obtained for Units 1 and 2.
The Company and the other seven joint owners of the Centralia Project have entered into term coal supply agreement with Washington Irrigation and Development Company MVIDCO" Pacific Power & Light Company t"Pacifie"), who jointly own and lease certain coallands in Le Thurston Counties, Washington. WIDCO and Pacific have agreed to supply up to 125 milli subbituminous coal which is estimated to be the coal requirement of the Centralia Project ove anticipated useful life. The sulfur content of the coal is approximately 0.79 and there are no cu or known future regulatory limitations on the sulfur content of such coal. The Centralia Proje has made major additions to its electrostatic precipitators to limit emissions to meet                      1.274.000local a l        standarde at full plant output, and air quality standards have been met at a plant output of KW. Additional plant modifications may be required to increa e the plant\capability above its currtn level. Coal costs are presently running at approximately 59.00 per ton (56c/. ll3TU).
Nuclear Projects. Generally, the supply of fuel for nuclear generating units involves the sition of uranium concentrate, its conver< ion to uranium hexafluoride, enrichment. fabricatio nuclear fuel assemblies and reprocessing of the spent fuel. The Company has contracted fo uranium concentrate for the initial core loading and one reload for each of the two units plann its Skagit Project. Although the Company has not entered into an agreement for conve rsi not anticipate any dit?iculty in obtaining such an agreement. In June,1974 the Company NRC entered into a contract to provide enrichment services by NRC for the Skagit Projict for :
years at prices subject to change by the NRC from time to time. The Company has als an agreement providing for the fabrication of the fuel for initial core loading and first reloa following table shows estimated uranium concentrate requirements and commitments.
                                                                      'Ihouunds of l'ounds of l'ranium Concentrafe ,
Unit t                        Unit 2 llequired Commuted          Hequired Commined Year Itequired_
                                                                    .1,457          1,457                -
1980-1981 699          699            1,457        1,457 1982 668            0                0            0 1983 553            0                0            0 19S4 600            0              609          699 1985 600            0              668            0 1986                            .
600            0              553            0 1987 600        4    0              600            0 Annually thereafter .          .
Additional contracts for uranium concentrate, conversion and fabrication will be required operation of the plant af ter initial core loading and first reload; however, availability, p cannot now be predicted.
The Company, as a SG owner of WPPSS Project No. 3, has with other owners contracte sufficient uranium concentrate, enrichment and fabrication for fif teen years of operation of th 14 i
 
__              - (
                                            . _ - - _-        __w              -
better than national standards. They utilize an area classification plan and initially desi clean. air areas in the country as Class II, in which moderate air quality deterioration to provide for some industrial growth. Any area may be reclas-ified by a state. Fed or independent Indian reservation after public hearings, but Federal lands may be to Class I, which permits virtually no increa<es in pollutant concentrations. The Comp its existing generating units and the two generating units prc<ently under construc Montana operate or will operate in compliance with current interpretations of these Company cannot now estimate the impact upon it of any future reclassification areas in which its generating units are then located, of future interpretations of these reg the effect of the regulations upon the propo-ed additional units at Colstrip. The Company a other participants in the Colstrip Project are seeking judicial review of these regul the United State Court of Appeak for the Sixth Circuit.
The Company has anticipated financing its share of certain pollution control equip Skagit Project and the WPPSS No. 3 Proj< et through the ianance of pollution The Boards of County Commissioners of Skagit County and of Grays Harbor                                  County 22.1071,an authori7e the iwnance of such bonds on terms and conditions to be negotiated. On Slay association and two individuals filed an action against Shagit County in the County Sup challenging the vahdity under the Washington Constitution of the Washington statute issuance of sm h hands and .si ching to prevent the Company from financing certain type 17.1971, the Washington Supreme Court. in Port at the Ska;:it Proicet with sm h bonds. On October of Longriem e. Taxpayer of the Port of Longeine, held the statute at issue toM be As a result it appear- likely that unless the Washington legi lature and voters adopt a dcon amendment, the Company will be unable to finance pollution control equipment for the Sk WPPSS No. 3 Projects, and other projects located in Washmaton State, through sales of control revenue bonds. This will result in inercased financing costs.
In June 1973. the Company ar.d four other utilities filed an application with the Monta partment of Natural Resources and Conservation FDepartment") for a certificate of compatibility and public need under the Montana Utility Siting Act of 1971 in order to ce two additional cencrating units at Col-trip. Montana. The Company wouhl              have a 2.W owner hir h Entana Ibiard of Natur.d interest in the two units.              In .lanuarv.1975 the Di partment advised t ethat the
(" Board")
Resources and Corservation additional units repic ent the " minimum adverse environmental impact" or that there i for the project in Montana, a these terms are used under the Siting Act. Final authority the certificate or to deny the application rests with the lloard. subject to21.1975.        judicial Severi review.
I has set the matter for hearine as a contested ca-e. with hearings to commence April                          '
groups and individuah have appeared in the proceedmgs in opposition to the projec
{              the Company is unable to obtain the neceuary certificate, it may have to charge ope cancellation rharges and construction expenditure <. Such cancellation charges were i
and are not expected to increa e materially in 1975. Construaim
                      $1,600.000 as of December 31.1971                  31.1971 were approximately A2.100.000 and an add expenditures tional $1.100.000 i4 hv the Company as of Decemberexpected to be expended p Should charges to operations become necewary, the Company will request the app ington Utilities and Transportation Conunission to amortite the charges over a perio            ,
l l
.                                                                          16                                                .
N
                                                                                                              ~
 
r d
        '    Fnvironment f                The Company is subject to environmental and other regulation by Federal authorities including the Environmental Protection Agency (" EPA'1 and state and local authorities. Tho Company do not believe that material expenditures will be required under applicable environmental laws for ad tional pollution control equipment for existing facilities of the Company. All of the Company's current construction projects have been designed to comply with envire.nmental laws and regulation 4 curn 3
applicable to them, and the cost of pollution control facilities is included in the construction bud for those projects.
To date the Company has expended or become contractually (ommitted for approximatdy $18 million for the equipment required to bring existing facilities and those under construction imo com-pliance with environmental controls and regulations. The future cost to the Company relattd to o a
vironmental controls for particulates anel sulfur oxides for the two mhlitional generating units at the Colstrip Project is estimated to be approximately $10 million. Mining of the coal for the.-e projects i
is subject to state or Federal regulations respecting land reclamation. Legislation to regulate strip mining is pending in Congress, but the Company cannot predict at this time the impact on the cost l
of coal for its projects if such legislation b. comes law.
On June 13, 1973 various plaintiffs filed suit in the U.S. District Court for the DEtrict of Columbia against certain Federal agencies alleging that they are making decisions concerning the de-velopment of coal resources of the Northern Greal plains Hegion without making requi ite environ-mental impact statements in violation of the National Environmental Policy Act. On F(bruary 14, 1974 the Court granted the Federal and intervening defendants' motions for summary judgment and the intervening defendants' motion for judgn ent on the pleadino. The plaintifh have appealed to the United States Court of Appeals for the District of Columbia.
On October 16,1973 various plaintifb filed a complaint in the United States District Court for the District of Montana at Billings again t various Federal agencies. The orininal complaint was dismissed and an amended complaint was filed seching injunctive and declaratory relief in recard to
(            the disposition of water right* to certain bodies of water in Montana. The Colstrip Project will prob.
ably utilize water to be withdrawn from one of these bodies of water.
The Company is unable to predict the ultimate efTects of there proceedings and of other aspects of the developing environmental laws and regulations upon the Colstrip or Skagit Projects or upon any other projects which the Company may undeitake in the future, llowever,it i< possible that they may delay or impede the Companyi construction and operation of such projects and require the
      !        Company to make substantial additional expenditures.
Legal Proceedings The Muckleshoot Indian Tribe filed a complaint against the Company on July 18.1972 in the United States District Court for the Western District of Washington requesting damages of
    .l          $45,000,000 for alleged wrongful diversion ano conversion of water from the White Stuck Hin t and an injunction against further diversion <. This complaint relates to the Company % R1.400 KW White River Generating Plant which was constructed in 1910. In the opinion of general coun'el, the Company has substantial defenses in this litigation and there is little likelihood of significant recovery against the Company.
q EPA regulations, adopted effective January 6,1975, require the air quality implementation plan of each state to prevent significant deterioration of ambient air in areas where air quality is 15 i
l
 
(
I                                                          OPEllATING STATISTICS Years Enclest or on Decemt>er 31 1971            1972            1973                197h 1_97_0 Electric revenues by riawen tthouunds):                                                          $61,423        $ 65,2sti          8 72,722 349,897          554,432 Itesidential .                                                                  26,222            29Al9          32,920              36.230 24.023 Commercial                                                                                                        12,502            15,146 8,M I            8.< M          l l,4'io Industrial                                                      3,878            4,461            5.424          6.231              7,189
(              Other innsurners .                                      _
108,146        116,902            111,287 M6,i,8']        98,101 Total riertric resenues f rom ron<umern                  -                -                ~              -                11,106 Other clottric utilitie mi                                                                                    S l 16 9n2          $l l1 N1
                                                                                  $*1682          011 101        8104.14G i
Total th s trw reu nues Number of instomers taves.wc):                                  319,279          332,371          383,173        351,431            363,717 f(ruidential                                                                    31.091          35,150          37,312              37,753 34,261 Commere sal                                                                                          379              442                483 327              331 Industrial                                                                          9 85          1,024          1.295              1,456 8R*
Other .                                                                                                                            401 409 3%1,75?          367.711          379.72G          303.553 Total s ustomern faseragel KWil rencratent. puri h.ned and interi hanged (thouund41:                                                        1,490,290          1,793.833 1,250.28R        1,103.953        I A31,925 Total Unm my generated                                                                                      9,225.on2        10.350,36A 7,1GI,9x9        7,606,312        9,140.628 I              l'urch.s.ed power                                                                                            (736 8736 (226.3AO) (177.6u0)              1897.309)                            .t7 8.19_6 Interihanscel pimer a not) 8,188.897        8 5:2.575        9.678.214        9,97F419 12.618.397 Total nutput                                                                            479'1,428)      Inf.%4n2)          i816.922)
(      ;              lenneg and ('omrms use                                    (781A*2s 18na,974 8 84t N20        9 319 957 11.771 175 Total energy 4.de n                                7,407,18% AufG.fi97 i        Electiic encrev males, KWil hhouundo:                                                                                              5.039,751 4,16l,100        1.557,250      4,856,093        4.913.398 a              itesidenhal                                                              1,721,741        1,8 M,685        2,089,051          2.011.277 Comme tri,d                                              1,515,241 I,492.37,5      1,506. ltri      1,865,277        2,010.5 %          2,050,080
        ,              indudrial                                                                                    294.805          316,9 y.          274.252 205,709          241.107 1              Other runsumer-                                                                                                                9,407,360 7,407,415        8,026,f,97      8,848,820        9,319,957 Total cr.ctgv sales to roniumers                                                                              -          22168,115 Other electnc utihtieni                                                                                                      11,771 475 7.407.4 8 > Eio.'ii U            88 mis 20        9.319.9'i?
Total energy ules I'cr residenti d ru tomer;                                                                            14,151          13,863              13,856 13,012          13,711 1              Annual u e (KWils                                                                            $178 99        $1M 09              3199.94
                                                                                    $150.28          $1b3 77 Annual reunur                                                                                      1,2Ge            1.33c            1,44 c llevenue per KWil                                                1.20c            1.19c
                                                                                                              +
Company.nwned generator rapabihty-lolowater                                                        309,900          309,900            309,900 i                                                                            309.900          309;900 11ydro                                                                                        183,800*        183,800*            IM.600*
85.800          85,800 Steam                                                                            2,750                          31.250              94,750 2.750                            31.250 Other .
3% t?,0          52 8 9 >0        52 8.9*>0          fn2 4%0 Total Compmenw ned generator rapainhty                3Hr.o 1
iPrior to 1974 ules to nther utiheie, were airnuntnl for bv trc<ht. to puri h ard and intere hangeil power. Itevenues                              l frorn such s. den were not sicmin ant bee ''thnine**--Salen to Other litihters *
                      ' Includes ('om s n y'. hire ni rwei ted rapainhty n! the t 'ent rah e Mf r im l'.lri ttic Generating I'lant upon rnmple-tion of mhhtion.il testing an<l lumible m<nhlwalions tace "lluunes -l'ower f(esources-Esisting"),
[
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                                                                                                                                                          .....                            ,_  ~
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4 t
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h1ANAGEMENT Directors i
l      4      WINSToN D. BROWN Chairman of the Board (Retired), Howard S. Wright Construction Co., Seattle RALPit bl. DAVIS
            -            President of Ihe Company, Bellevue Joian W. Ei. tis Executive Vice President of the Company, Bellevue F. J. HERB Chairman of the Board, The Bellingham National Bank, Bellingham J. H. KINc Vice President and Treasurer of the Company, Bellevue Iowti.t. P. hirex ttwAir Director Emerstus, The Boeing Company, Scottle Rontar D. O'BRIEN Chairman of the Board, PACCAR inc, Bellevue Iny:Ns B. RAntL Chairman of the Board, Star Machinery Company,Scattle RALPii SionstANs Chairman ol the Board, Associated Grocers,Inc. and Pressdent, Ralph's Thristu ay Stores,0lympia
(        Officers Rsiph M. Davis                              ..      . ...                  . President John W. Ellis .                        . .        .      . . . .            .Exceutive Vice President J. H. Abramson                      . . . . .. . , .                      ... Vice President-Administration W. J. Ferguson      .            .. .. . . . . . . . . . . . . . . .        ..Vice President-Major Projects L. E. IIall            .                      .          . . . . .      .    ..Vice President-Public Affairs J. H. King . .                . . . . . . . . . . . . . . .              . .Vice President-Finance nna Treasurer D. H. Knight        . . . . . . . . . . . . .                    ..      . ...Vice President-Power Supply R. F. Whaley .                        ..        . . . . . . . . .            .Vice President And Controller R. C. Wing .              . . . .      .. . . .. .. .. .. .. . .. . Vice Presiden t
      ,            W. E. Watson          .. ..          . . . .      . . . . .    . .. .. . Secretary l
10                                          :
l F
 
il I
i
  -                                DESCRIPTION OF THE NEW PREFERRED STOCK 1
i
    ;        General 1      ,
The fo!!owing statements incivle summaries of certain provisions relating to the New P      -
Stock contamcd in the Company's Articles of Incorporation (the " Articles"), Alortgage In
    '        Debenture Indenture, and Statement of the Relative Rights and Preferences of the New Stock, all of which are Exhibits to the Registration Statement of which this Pre 3 pectus Reference is inade to the pertinent Exhibits for a full and complete statement of such prov the following statements are qualified in their entirety by such reference.
The Artides at present authorize three classes of capital stock; $100 par value Prtferre
              $50 par value Convertible Preference Stock, and $10 par value Common Stock.
the shareholders of the Company will, on Afay 13, 1975, approve a proposal to authorize shares of $25 par value Preferred Stock: the 600.000 shares of New Preferred Stock bein:: ofi(rco hereby will constitute the first series of the $25 par value Preferred Stock.
The remaining 2,100.000 shares of $25 par value Preferred Stock may in the future be issuul as additional series of $25 par value Preferred Stock without further approval by the shar cluding such terms as the Board of Directors may fix according to law.
Dividend Rights The holders of the New Preferred Stock, together and on a parity with the holders of par value Preferred Stock, will be entitled to receive, when and as declared by th cumulative dividends at the annual rate fixed for each particular series, before the Compan pay dividends on, make any other distributions on. or hiake any ex;>enditures f shares of the Preference Stock or the Common Stock.                                          r 'ci-Divitiends on the 600,000 shares of New Preferred Stock will be payable at the annual      in.rat 4
fied on the cover page of this Prospectus on the fifteenth days of February, Alay, Augus ber. The first dividend on the New Preferred Stock will acciue from the date of original will be payable on August 15, 1975.
I Liquidation Rights In the event of any involuntary liquidation, dissolution or winding up of the Company of the New Preferred Stock, together and on a parity with holders of the $100 par valu Stock, will be entitled to receive, before any distribution is made on the Common S Preference Stock, the par value of such shares ($25 or S100, as the case may be) p
[        dends, or, if such liquidation dissolution or winding up is voluntary, such holders will I
to receive the applicable optional redemption prices.
                                                                          +
Redemption Provisions l
The Company may, at its cption, redeem, on not less than 30 nor more than 90 d l
New Preferred Stock in whole or in part at the applicable optional redemption prices, 1
          )                                                        20
 
    )                ,
I each case accrued dividends. The optional redemption prices for the New Preferred Stock are                    '
{                                                                      S        if redeemed thereafter and on or
( 4
              $      per shart if redeemed on or prior to June 1,1980:if redeemed thereaf ter and prior to June 1,1985; S                                          provided, however, that the Company if on or p
    "        redeemed thereafter, including in each case accrued dividends:
will,not, prior to June 1,19AO, redeem any shares of the New Preferred Stock in any refund operation favolving funds (other than the proceeds of an issue of junior stock) having an e i
cost to the Company below that of the New Preferred Stock.
      )
l Voting Hights I
The holders of the Common Stock have exclusive voting rights except as referred to below j        " Restrictions on Corporate Action," except when holders of S100 par value Preferred Stock. S2n value Preferred Stock or Preference Stock are entitled to vote under the Arti arrearage in dividends, and except as otherwise required by the laws of the State of Washingto J
Whenever dividends payable on any S100 par value Preferred Stock or S25 par value Pr Stock are in arrears in an amount equivalent to or exceeding four quarterly dividends, ho!&
                $100 par value Preferred Stock have the right to elect the smallest number of directors nece constitute a majority of the Board of Directors and holders of $25 par value Preferred Stock ha the right to elect tv.o directors. Such rights shall continue until no dividends are in arrear current dividend has been set apart.
Restrictions on Corporate Action The Company may not, without the consent of two-thirds of each outstanding class of Pre 1        Stock: (i) authorize any prior ranking stock; (ii) change the terms of the Preferred Stocks in any j
prejudicial manner; provided, however, if such change wouhl be prejudicial to the hold j
class, or any series thereof, alone, only the like consent of hohlers of such class or series of
(              required; (iii) dispose of substantially all of its property tbut no consent is required to mort;'ane assets of the Company): or (iv) dispose of any shares of either class of Preferred Stock unless ce earnings and other tests are complied with.
The Company may not, without the consent of a majority of each outstanding clas< of Pref Stock (or such greater proportion as may be required by the laws of the State of Washington),
j certain instances (i) merge with any corporation or (ii) incur un-ecured indebtedness.
Under the Articles, the voting rights of each class of Preferred Stock described above in this e
section are not efTective if, in connection with any of the matters specified, provision is made fo redemption or other retirement of all such class of Preferred Stock at the time outstanding.
1 Preemptive Rights No holder of shares of stock of any class has preemptive or other rights to subscribe for or pur-chase any stock of the Company of any class, or securities convertible into stock.
N i
21 gyg8*
1 l
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i I
  )                                                                                                                      i t
Liability for Further Calls or Assessments J
The New Preferred Stock, when issued, will be fully paid and nonassess 1                                                                                                                        >
I              Transfer Agents and Registrars l            York, New York will both be Transfer Agents a 1
i I                                                                                                                  6 i
I j        i l
i l
l l                                                                              r 22 i
s
                                        --e p-
 
R l
j 1                                                                                                                  t LEGAL OPINIONS AND ENPERTS 4
I The validity of the New Preferred Stock1900offered    herchy is being pas-ed upon for the Compa Washington Huilding. Seattle. Washington.          ;
{'                    Messrs. Perkins, Cole, Stone. Olsen & Williams,                                                              l general counsel, and for the Underwriters by Slessrs. Mudge Rose Guthrie & Alex                        ,
Street, New York, New York. All matters pertaining to the laws of the States of Washin                  ll Montana are being passed upon only sby Me. rs. Perkins, Coie, Stone. Ol-en & Williams.                  !'
Messrs. Perkins, Coie, Stone, Olsen & Williams have reviewed the statements made herein a matters' of law and legal conclusions under " Business" with resect to " Regulation and R
                      " Fuel Supply," " Environment" and " Legal Proceedings," and under " Description of the New ferred Stock" and those statements are set forth henein on the authority of such firm as expe April 15,1975, attorneys in that firm were the beneficial owners, directly or indirectly, of approxi. l I
mately 600 shares of the Company's comn.on stock and $40,000 in principal amount of it gage bonds.                                                                                          .
The financial statements of Puget Sound Power & Light Company as of December 31,19              '
for the five years then ended have been examined by Coopers & Lybrand, independent accountants, and are included in this Pro.-pectus in reliance upon the accompanying repo              '
firm, which report is given upon their authority as experts in accounting and auditing.
I l
J-(<.              ,
l' 1            -
23 i
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r                                                                                                                                                                              ,
a Puget Sound Power & Light Coinpany BALANCE SHEETS ASSETS Decemi,er 31    Decernher 31 1974              197.1 (Thousands of Dollaro
            , UTILITY PLANT:
Electric plant, at original cost (Notes 1,2,7 and 13).                                  .                                  .. $672,269          S570,912 y      Less accumulated depreciation (Note 1)..                  .                                .                          -.          92,766          81.074 Net utility plant..      .                .                  ..                        ..                              579,503          495,Ss. A OTHER PROPERTY AND INVESTMENTS:
Nonutility property, at cost..                                                                  ..                          .          879                79G Investment in and advances to subsidiaries (Note IL .                                                                    ..        2,843              2,700 Other investments, at cost (Note 3).                                                                                                    880            1,465 Total other property and investments... .                                                                        ..      4,602              4,961 CURRENT ASSETS:
Cash (Note 8)..                  . .                .            .      .                          . . . . .                    3,701              1,294 Accounts receivable:
Customers                  ..          .                            .                  . . .                  . .              13,769              9,661 Miscellaneous .        .                          .                          .                                            .      4,513              3,651 Less allowance for doubtful accounts..                        .                                                        ..        (408)              (340) 17,904          13 ' ~1 Materials and supplies, at average cost..                                                                                          9,433              5,wG Current portion of deferred income taxes (Note 1).                                                                    .                900                -
Prepayrnents              .                    .                              ..                      ..                        1,326              1,195 Total current assets..                      .                                                                          33,2G4          21,25_7 DEFERRED CHARGES:
Advance under power contract..                  .                                                .                          .        906                937 Unamortized debt expense (Note 1).                                                                                                  1,009                772 Accumulated income taxes (Note 1).                    .                              .                                              829                703 Thermal plant feasibility costs..    .            .                            ..                                .
707 Prepaid power costs.. .        .                                              ..                                      ..
                                                                                                                                                      -                2,573 Other .            .                                    .                . . . . . .                      . . . . .                1,104              1,524 Total deferred charges..                                .      ..            ..                . . . .                  3,90s              7,216
                                                                                                                                              $621,277        $529,272 l
i            The accompanying notes are a part of the financial statements.
[
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J Puget Sound l'ower & Light Company BALANCE SIIEETS
(
LIABILITIES AND CAPITAL December 31      Decemt,er 31 1974            1973 f
(Thousands of Dottars)
CAPITALIZATION:
Shareholders' investment:                                                                                                    . $ 49,979            $ 43,850 Common stock (Notes 4 and 12).
34,689            26,976 Additional paid.in capital (Notes 5 and 12).
81,391            -73,202 1
Earnings reinvested in the business (Note 6)..                                                                                  166,059          144,028 Total common equity.                                        ..
37,122            39,345 Preferred stock (Note 4).
14,814            14,814 Convertible preference stock (Note 4).
l                                                                                                                                                      217,995          19S,187 Total shareholders' investment..                                                                                    . 318,749              256,116 Long. term debt (Note 7).                                                                                                          536,744        _ 454,30__3 l                                                                                                  . . . .
Total capitalization 30,500            41,000 NOTES PAYABLE TO BANKS (Note 8).
CURRENT LIABILITIES:                                                                                                ..
15,700            6,000 Commercial paper (Note 8).
i
                                                                                                                                                .. . . .              4,704            4,679 Accounts payable                                . . .
Accrued expenses:                                                                                        .. .            ..
12,457            0,649 Taxes                              ..
                                                                                                                                                              .        1,667            1,547 Salaries and wages..                      .
4,226            2,175
{-            i                  Interest                              .
2,441              653 Other j                                                                                                                            .      .. .
41,195            24,703 Total current liabilities..
DEFERRED TAX CREDITS (Note 1):                                                                                                            3,754            2,449 1
Accumulated investment tax credits..                                                                                                    1,223              833 I            Accumulated income tax credits..                                                                                      . . .
4,977            3,282 Total deferred tax credits..
OTIIER DEFERRED CREDITS:                                                                                                          .      3,213            2,942 Customer advances for construction (Note 1).                                                                                            2,572            1,230 Other .                          . . .
5,785            4.172 Total other deferred credits .
2,076            1,812 ACCUMULATED PROVISION FOR SELF. INSURANCE..
COMMITMENTS AND CONTINGENCIES (Notes 2 and 14)                                                                                      $621,277          $529.272 i
k              The accompanying notes are a part of the financial statements.
25 i                                                                                      _ __ _                __
                                                        ---- - - ~ .                                                            _
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    ?
Puget Sonnti Power & I.iglit Cornpany 3
STATEMENTS OF EARNINGS REINVESTED IN TIIE IlUSINESS l                                                                                                      Years Ended December 31 1971      1972      1973    1974 1970 thousands of Dollarsi I
555.999      559,726  S63.370 $6s,778 $73Jft i        ~ BALANCE AT llEGINNING OF YEAIL                                              13.045      13.863    16.014    15 n3    21.:*
NET INCO.\lE .                                                                                                            9 8.5 <
73.589    79.414    84.241 69.04_4 I                    Total .                  . . . .
DEDUCTIONS:
Cash dividends paid:
Preferred stock:                                                                                      602      589      57 624          612 577
                        $4.64 per share on 4.84*; issue..                                          658          637        609      592
                        $4.70 per share on 4.70"; issue .                                          -            -          -        113    1.15'
                        $8.00 per share on 87 issue .                                            1,078        1,087      1.086    1,074    1.07-t 7.25% Convertible preference stock,53.625 per share..                                    7,388      8.339    8,67 1  8.6'.G 6.958 Common stock
* Expenses relatine to issuance of equity securities:                            -            -          -        -        21' 8% Preferred st<n k, 150.000 . shares Common stock,400.000 shares in                                                -            495        -      -        F74 1971 and 600.000 shares in 1974..                                                    10.219    10.63G    11.039  1.1.15 9.318 Total deductions .                        . . . . . . . .
563.370  56A.778  573.202  sst31 559.726 BALANCE AT END OF YEAR (Note 6)..
I          *See Statements of Income for dividends per common share.
The accompanying notes are a part of the fmancial statements.
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STATEMENTS OF CIIANGES IN FINANCIAL POSITION
                                ,                                                                                                  Years Ended l>ecember 31                        1974 1972                1973 1970              1971 a
      '                                                                                                                                thousands of Dollars)
J                                                                                                                                                              5 15,463      S 21,385
                                                                                                    ... 5 13,045                5 13,8G3        $ 16.044
        <                  FUNDS PROVIDED BY OPERATIONS:
Net income ..
Add (deduct) items not affecting working capital in the current periwl:                                                                                              11,896            13,131        14.751 Depreciation, including amounts charged                                        9,264          11,047 to 01her expen<e aciuunts                                                                                                            (730)      (1,701)
        $                                                                                                                              (546)            (611)
Equity portion of allowance for funds                    . . . .
(337) used during construction .                                                                                        1,464            1,185          1,5GS 383                                                803 Deferred investment tax credits and                                              (17 6) 179)              443              238 income taxes-net .                                                              (353)                                            29,2S7        3G,806 I
24,0G8            29,23G Other                                                                          21,443 Total from operations..                                                                                                                    60,000
                                                                                                                                        -            30,000
                                                                                                      .. 30,000                                                                        13,183 OTIIER FUNDS PROVIDED ( APPLIPD):                                                                        12,071              405            15,283 Issuance of first mortgage Imnda .                                                          47                                            25,000      (10,500) l 9,000          (10,500)
Issuance of equity scrurities .                                                      (6,000)                                -              2,738        3,852 Increase tdecrease) in notes payable to banks .                                          -
1,652              231            448 (115)
Proceeds of pollution control bonds-net .                                . . . .        (328)
(Increase) decrease in other investments . .                                                                                            (62,330)      (97,094)
(34,6G4)          (40,402) l            Additions to utility plant-net of equity portion                                    (36,541)                                  -            (2,57 3)        2,573 of n!!owance for funds used during construction .                                      -
(11,039)      (12,074)
(9,724)        (10,636)
(Increase) decrease in prepaid power costs..                                          (9,318)                                                (5G9)      (2,152)
(1,124)              (498) l            Payment of dividends                                                                    (531)                                733            1,11_2          472 451
(
Reacquired securitics .                                                                1,828 COO $            563    ~S        (10) S (2.8G0) $ (4.48G) l                Miscellaneous-net                                                                .$
Increase (decrease) in working capital..
Changes in components of working capital:                                                                              $ (1,600) $ (2.880) $ 2,407
                                                                                                                  .3        667    $ 1,543                                                  4,732 Increase (decrease) in current assets:                                                                                    2,552              724 981              423                                            3,637 Cash                                                                      _.
46          1,453 Accounts receivable                                                                      (89)            (58)                              -              900 Materials and supplies                                                                -
399            131 43                89 Current portion of deferred income taxes..                                              114 Prepayments                                                                                                                            (3f,49)        (0.725)
(1.205)                351 (Increase) decrease in current liabilitics:                                          (1,150)                                                            (6.76S)
(1.448)            1.093 Commercial paper and accounts payable..                                                  77            (183)
Accrued expenses and other..                                                            600 $            563 $            (10) S (2.F60) $ (4.4F6)
I',  .
The accompanying notes are a part of the financial statements.                                        4 9
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l                                                Puget Sound l'ower & Light Gunpany
  )
NOTES TO FINANCIAL STATEMENTS 2
: 1. Summary of Accounting Policies The Company's accounting policies conform to generally accepted a accounting requirements of regulatory authorities. Significant policies are de Utility Plant-Utility plant includes taxes incurred and allowancesi for fu struction. It is the general policy of the Company to charge the icost                                        h of        mai d to operating expenses and other appropriate accounts. The cost of renewal                                    d to  mainte-appropriate utility plant accounts, except the cost of minor replacements nance expense. The original cost of operating property retiredh or lotherw                                              fa removal, less salvage, is charged to accumulated depreciation. However, in significant operating unit or system, the original cost is removed                                  h              t from hl. t accumulated depreciation is charged with the accumulated depreciation relat and the net gain or loss on disposition is credited or charged to income.
Investment in Subsidiaries-The investment in subsidiaries is stated                                                il assets, revenues, carnings, and earnings reinvested in the business of t in r21ation to those of the Company.
Accounts Reccicable and Operating Revenues-The Company bills and bi-monthly cyclical basis. Accounts receivable and operating revenue billed. They do not include an estimated accrual for service between                                                      I end of the year.
J Customer Advances for Construction-Customer advances                                              t    for id byconscue i
whole or in part or may be transferred to utility plant.
I                  Depreciation and Amortization-The Company provides for depre for all depreciable property, except for 15.6% of such property (princ i              property) which is depreciated on a 6 percent compound-interest method.
The annual depreciation provisions recorded in the Company's acco l
following percentages of the original cost of depreciable utility plant:                1972    1973      1974 1970    1971 3.0      3.0      3.1 2.7        3.0 Straight.line method (%)        . .
                                                                                                                  .76    .81      .85
                                                                                              .68    .72 Compound-interest method (%)      .
Automobiles, trucks, power operated equipment and+ tools aret d method and such depreciation is charged to fixed asset and maintenan Debt expense is being amortized ratably over the periods of outsta j
Federal Income Taxes-In computing depreciation for Federal                                    d in its financiaincom uses depreciation methods and estimated asset lives which difier from those u i ll statements. In addition, the allowance for funds used 28 I
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                                        =A
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l Pu;:et Sound l'ower & I,ight Company
(                                            NOTES TO FINANCIAL STATEMENTS, Continued d    l income tax result of these factors, the Company's efIective tax rate varies from the statuto j          rate (See Note 10).
The Company normalizes, with the approval of the Washington Utilitie Commission, the tax effects of (1) liberalized and asset depreciation                                                                an dits; (3) the property additions af ter 1969 and 1970, respectively
        !.                                                                                                      i        t                    f I
tion ("AFDC") represents capitalization ofi lthe                                                    d d inestim i
i capital funds which are applicable to utility                                        f          plant tility  service, while ments of regulatory authorities. The Company. in the rates used to bill customers                    d a fair                        or u
          .I      is permitted, under established regulatory rate practices, to recover                            h    ltd these return thereon through their inclusion in rate base and the provision for depre utility plant has been placed in service.
The composite rate used by31,the                Company 1974. Such rate wastodeterm capitalize i ned on the  thebasiscost        of the        of fund ih t giving was 7.8Co for the five years ended Decemberestimated cost of capita effect to income taxes related to interest on debt.
A substantial portion of AFDC represents. :n effect, the capitalization              hich directly                        of a h l                      l
(          1 j
charges shown. as an expense in the statements                                        ided by common of in of construction work in progress. The portion of AFDC attributable to funds prov                                t k stock equity amounted 31,              to 1974, 2.31fo,3.47G,3.26G. 4.15G and 6.01%                                            G of n for the five years ended December the assumptions that (1) funds required for constru                                                                    dd cost        rates for funded debt and preferred and preference December 31, 1974,                                                                            l d utility stoc of net income for common stock. Cash inflow related to AFDC do plant is placed in senice.
Earnings per Common Share-Earnings per common share for each of December 31, 1974 have been computed as follows:                                  the net income for Earnings per common share assuming no conversion of preference stock:
J commen stock is divided by the weighted average number of eommon shares o the aggregate of the net income for com-Earnings per common share assuming full conversion:                                                                t 3        mon stock plus the dividends accrued on convertible preference stock islddivide of the weighted average number of common shares outstanding plus the num be outstanding if the convertible preference stock were fully converted.
29 1
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l 1
  .'h i 4 7                                                  Puget Sound Power & Light Cornpany 1
NOTES TO FINANCIAL STATEMENTS, Continued i
: 2. Utility Plant Expenditures
    ]
J                  Expenditures for utility plant during 1975 are expected to approximate S90,700,000. The Com.
pany's construction program for the years 1976 through 1977, subject to continuing review and i        adjustment, is estimated to be $301,000,000. Certain purchase commitments have been made in l
      '        connection with the construction prcgram.
: 3. Other Investments Other investments consist principally of (1) mortgages receivable resulting from sale of certain non operating properties which are collateralized by such property but have no ready marketabilit:.
and (2) long tenn notes receivabic deerned fully realizable.
: 4. Capital Stock                                                                                                          Preference                      .
3 S to< k (700,000                        k Preferred Stock                shares        Common
* j                                                                                          (1,000,000 sharen authorisedI        aut horira d)      S tocl.
e 7.25%,                        s 4.84 5,        4.70 5,      89,      Convertible                      i Par value.                                                                    . S100            $100      500                S50              Sigf (shares)                                    l 150.000          150,000    150.000      344600        6.000 0M Authorited 131,800          140,583        -          300,000        3,9 *>3.561    ,
Outstandin;: .1.uiuary 1,1970
                                                                                                                                                                        ) !
        '      Issued to trustre of employee investment plan:                                                                  -              -                1;w2 1970                                                                                              -          -            -                6,723 1971                                                                                                        -              -                7,750 1972                                                                                            -          -              -                9,70G ;
1973                                                                                            -          -              -              12,F02 ,
1974                          . . . . .
Sold to public:
400.0X' 1971
                                                                                                      -              -        150,000          -                -
1973                                                                                              -          -              -            600,004 1974                                                                                                                                                l Conversion of preferenic stuik into common stoc..                                                                                                  4GR
                                                                                                      -              -          -                (310) l                    1971                                                                                                        -            (3,400)          5,150 1972 .                                                                                                                                                1 l                Acquired for sinkin:: fund:
(4,427)s.      (3,255)        -              -              -
1970
                                                                                        - . . . . . (1,742)        (5.995)        -              -              -
i 1971                                                                                                                                                  j (3,2GI)        (4,376)      -              -              -
1972 (2,355)        (3.500)        -              -                -
[
1973 (4.407)            (820)  (17,000)          -                -
i                  1974                                    . . . .
115.60r,        122 617      133.000      29G.29        4.997K2 Outstanding December 31, 1974..
7.395          6.383      17.000                                      ;
Available for future sinking fund requirements..                                                                                                            ,
1 1                                                                                        30                                                                                  l r
I
 
l l'uget Sound l'ower & Light Coniliany
{ j
    '                                          1 TOTES TO FINANCIAL STATEMENTS, Continued j                  The preferred stock may be redeemed by the Comp.iny at the following redemption share plus accrued dividends:                                                                                                      ;
      '                      4.84% Series-S103 prior to May 15,1977 and $102 thereafter.
4.70% Series-S102 prior to May 15,1979 and $101 thereafter. 15,1978,1983 and 1988, respectively, 8% Series-SIOS, $105 and S103 prior to February and $101 thereafter.
t 1                The Company is required to deposit funds annually in a sinking fund                                c sufficient to r following number of shares of each series at $100 pe 1,000 shares through 1959, 2003, and 2001, respectively. These requirements may be satisfied delivery of reacquired shares.
The convertible preference stock may be redeemed at par plus accrued dividends. Th 448.924 shares of its authorized and must keep available for conversion of this preference stock unissued $10 par value common stock, based on conversion values for preference sto stock of $50 and $33, respectively.
1
: 5. Additional Paid-in Capital                                                    Years Ended December 31 1972        1973      1974 i                                                                                1970        1971 (Thousands of Dollarst f                Balance at lieginnin:: of year.
51G.929    $17.27G    $26.013      S26,reo
                                                                                                                                    $20.976 6.900
                                                                                        -          8.350        -
Excess of proceeds oser par salue of common stock sold to public .
Excess of par value oser cost of preferred stock reacquired                                    271        200      657 317      273 i              for annuni sinking fund requirements .
Excess of proceeds oser par value of common stock is.4ued to                                  158        ISG      ISG 30      133 trustre of employe e insestment plan.
Excess of conversion prire over par value of common stock              -            11        118      -
        '            issued in exchance for ronvertih!e preference stock .                        $2n.o 3 S2c rao 52a973 pg
                                                                                      $17.276 Baiance at end of year.
    \              6. Earnings Reinvested in the Business Earnings reinvested in the business unrestricted              as to pavment of cash dividends on com at December 3I.1974, under provisions of the most i                stock amounted to approximately $51,100,000 restrictive covenants applicable to the preferred and preference stock and long-term debt.
1 31 C_                              -      ,-            __                                                                          _
                      - - - - - - --                                                                          'w    ,.-
l I
 
i          F                                            ~
h
  ~;
J l                                              Puget Sound Power & Light Cornpany
  '                                        NOTES TO FINANCIAL STATEMENTS, Continued l
: 7. Long-Term Debt 4                                                                                                Amount Outstandinc Decemlier 31
    )                                                                                                  1974          1973 (Thousands of Doll.irst First Mortgage Bonds:
10% % series, due 1983..      .
                                                                                                ..S30,000          $-
25,000          25,000 3%% series, due 1984..
30,000          30,000 4%% series, duc 1988..
15,000          15,000 4?k% series, due 1991..
40,000          40,000 45k% series, duc 1993..
15,000          15,000 l                      4% % series, due 1994..
20,000          20,000 5% % series, due 1996..
20,000          20,000 69k% series, due 1997..
20,000          20,000 7% % series, due 1999..
29,700          29,700 9% % series, due 2000..
30,000          30,000 7% % series, due 2002..                            .
8% % series, due 2004..                        .      .
30,000    _-
304,700          244,700 8,486          9,292 Debentures,5% %, duc 1983..                .  .            .
5.90% pollution control revenue bonds, series 1973, due 1998 (S20,000,000, net of funds on depiisit with trustee of $13,409,000 and $17,261,000).                      6,591            2,739 525            544  1 Notes payable .                                .                .
_320,302            257,275
                                                                                                  . 1,553              1,159 Less unamortized discount-net of premium..
Total..                                              ..S318.749    _
S25 _6.116 The effective interest cost approximates the coupon rate during the life of the bonds and the discount or premium applicable to individual issues is not material.
l The Company is required to make annual sinking and improvement fund payments to the trustec equal to one percent of the aggregate principal amount of each series of fir 3t mort:: age bom outstanding as provided in the respective indentures, except for the 10%% series, duc 1983. which l
has no sinking fund provision. The aggregate amount of such requirements for 1975 is S2,447,000 and for each of the years 1976 through 1979 is 62,747,000. This requirement may be met by the substitu-tion of certain credits as provided in the indentures.                .
t      ,
      !                  The Company is also required to make an annual sinking fund payment sufficient to redeem (at special redemption prices not to exceed 100.75 percent of principal) S375.000 principal amou debentures on November 1 of each year through 1952. This requirement may be satisfied by delivery of reacquired debentures. At December 31,1974, $8S9,000 of reacquired debentures were availa to meet future sinking fund requiremerits.
32 1
l l
l l
l
 
i l e
f
  )
l Puget Sound 1%cr & Light Company l
NOTES TO FINANCIAL STATEMENTS, Continued k  J The 5.90% pollution control revenue bonds were issued by Rosebud Coun l        Company has guaranteed the payment of principal and interest en the bonds.
of hrst mortgage bonds,83',c; series, due On March 7,1974, the Company issued $30,000,000                          of first mortgage bonds, 14, 1974, the Company issued $30,000,000 j
March 1, 2004. On November 10%% series, due November 1,1933. The of notes payable to banks.
1 j
Substantially all properties of the Company are subject to the lien of the
: 8. Notes Payable 1
Notes payable to banks represent borrowings under a credit                                fh i eagreem provided for a maximum commitment of $50,000,000 with                                              interest d commitment. Theon borr rate. The agreement also provided for a fee of li of 1% per annum on the unuseand mat borrowings carried an average interest rate of 12G at December 31,1974                  balances on a yearly wes informally usderstood that the Company would maintain compensating                          balances. The average basis equal to 5% of the totalline of credit based on monthly                                bank stateme his compensating normal delay in check clearances through the depository banks substantially met t balance requirement.
On April 1,1975 notes payable to banks were refinanced                                      with notes du f S75,000,000.
a new credit agreement with 22 banks which provides for a maximum commitment o I
The new agreement provides for interest on borrowings at 114% of the prim 2
fee of % of 1%'. The Company has informally agreed to maintain compen
(  l The average interest rate on commercial paper31,1974,                outstanding          atsupple-a 85.000,000  December A S15,000,000 supidemental credit agreement which expired December                                        dit I
mental credit ngreement which expired 31 arch 31,1975, and the unused port line were used to support the issuance of commercial paper.
The maximum aggregate balance of notes                        payable at October  31. The to    banks and approximate        comme average t
at any month end during the year 1974 was S66,800,000 balanc average interest rate was 11.25%, calculated on a daily average basis.
l N
33
 
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1 1
i Puget Sound 1%er & I,ight Coinpany 1                                              NOTES TO FINANCIAL STATDIENTS, Continued i                                                                                                                                                                        ,
l i                                                                                                                                                                        J I                                                                                                                Years Ended December 31
    ;          ' 9. Supplementary Income Statement Information                                          1970          1971        1972          197.1        1974
                                                                                                                                                                              )
      ,                                                                                                                tThousands of Dollard 1
I          Taxes:                                                                              $ 6,092      3 5.609    S 7.396        s 7 Ms S 9.12-lleal estate and personal property..            ~
3.o91        3.361        3.853          4.229        4.r. . i State business                                                                                    1.379      1.347          1.479        2.09 1.219                                                I f,1 ;
        '            Municipal, occupational and other .                                                      989    1.o88      1,157          1,353 State sales and use .                                                                              818      1.12s          1,477        1.1 -
756 I ayroll                                                                                          3o2        353            3st          M1 281 Other.                                                                                                    515.238      $16,730        514 7 '
                                                                                                        $12,431      $12.583 Charged to:                                                                                                    $13.237
                                                                                                                                                        ^
S I 1.N .1    M7p L
                                                                                                        $1o.889      $1o.851 Tax expent.c..                                                                                                1.977          1.s a        2.7    .
1.542      1.732 Other account <.. inituding construction in progrew .
                                                                                                        $12.431      $12.5,03    $15.234        $ 16.7.10
                                                                                                                                                                $1]%
See the Statements of Income for maintenance and depreciation.
l              Rentals, advertising, research and development expenses and amortization of intangibles are considered to be significant. The Company pays no royalties.
: 10. FederalIncomeTaxes                                                                                                                  31,1971 The Company's efTective Federal income tax rates for the five years ended December were 3.3% 10.99,10.7%, 21.le'c and 27.29, respectively. The ditierence between these efTective rates and the 48% Federal income tax statutory rate comprises:                                                        1972        1973 I
1970    1971 I        Items on which the tax effect has not been deferred in accordance with regulatory requirements:
Depreciation expense deducted for income tax purposes in excess of depreciation expense included in the financial statements. net of                      25.4?; 18.77; 16.4"; 16.4"; 11.1 "
liberalized depreciation treated as a timin;: ditTerent e Allowance for funds used during construction included as income in                                  44          3.8          4.7      7.2 3.1 the financial statement, and excluded from taxable income Certain taxes included in the cost of utility plant in the financial                                  4.1        3.3          3.f        2.7 4.8 statements and deductal for income tax purposes Certain general and administrative expenses included in the cost of utility plant in the financial statements and deducted for income                        3.9      2.6        -            -          -
tax purposes                                                                                                  1.6          1.3        -
                                                                                                                        -        4.2 l                            Flow through r,f investment tax credits..
7.5      3.1        3.2          1.0        ( .21 Other                                        . . . .
                                                                                                                      ~44.7'; 37.1 ".~, 2S 3";        2G.9".~    E0 s
                                                                                                                              - n                                _.-
1 34 1    .      ..
 
4 i
i Puget Sound ther & I,ight Comimny                                                                  l NOTES TO FINANCIAL STATE. TIENTS, Continued k                                ,
j Deferred tax amounts in the Statements of Income for the years ended Dec                                                      I j
1974 result from timin;: differences in the recognition of expenses for tax and fina                                                ;
p poses (See Note 1). The source of these differences and1973the tax1974efIect of e (Thousands of Dcuaro l            Excess of deductible liberatired and asset depreciation rance depreciation  h                            on5 production 390 1
property additions after 1969 and 1970, respectively, over related depreciation
                                                                                                  . . . .                S 307                in t e l              financial staternents                                                                                        (900) a Property taxes accrued in the financial staternents in excess of amounts deductible              -
for tax purposes .
(127) j            Provision for self insurance in the financial staternents $in                                        excess (131) 2GG          $(637) of deduc tax purposes .
a i
i          11, Employee Pension Plan The Company has a noncontributory pension plan covering                                                        0 subs The total cost of this plan for each of the yearsrespectively, including S526.000. dd                            S503,000, S 1974 was $1.800,000 and $2,300.000, I          and $725,000, respectively, charged to construction. Effective January 1,1974 the plan was a to increase plan benefits which had no material effect on net income.                                  i        fundUnfund are being amortized over 31,              a period 1974, of approximately thirty years.                        i    The Com tl pension
                              $10,392,000.
cost accrued. At DecemberThe actuarially computed value of vested benefi
(          '            on market) of the pension fund by approximately SS,600,000.
t 12 Employee Investment Plan The Company has a qualified employee investment plan under which                                          h          presc tions as designated by the employees are deposited monthly with a trustee                                      fund and ar a diversified investment portfolio. The Company makes a monthly contribution                            ibution is            to t equal to 35% of the basic contribution of each participa pany contributions are used by the trustee to purchase common stock dir at a value established by sales at specified dates on the New York Stock Exchange.
For the years 1970 through 1974 the Company contributed 8G5.000,                                          i          S20 and $240,000,    respectively, in cash to the plan and the trustee purchased from such co 1,752, 6,723, 7,750, 9,70G and 12,S02 shares of Company                                        h bookscomnenof the stoc were credited to the common stock and additional paid-in capital accounts on t e Company.
35 s
l 1
I c                                                                                                                                                              )
 
i v
A                                                                                                                    i Puget Sound Power & Light Comimny l
NOTES TO FINANCIAL STATEMENTS, Continued 1        .
: 13. Restatements In accordance with regulatory requirements effective January 1,1974, contributions in aid cf construction have been reclassified as a reduction of utility plant. Utility plant as of December 31 1973 has been restated to reflect this change resulting in a reduction of S12,954,000. Previously such contributions were shown separately among the liabilities. In addition, certain other restatements have been made to conform previously reported amounts to 1974 classifications.
: 14. Contingencies I            See " Business-Legal Proceedings" for details of a complaint filed against the Company by the Muckleshoot Indian Tribe requesting damages of S45,000,000 and a contested case before the Montana Board of Natural Resources and Conservation regarding the application for a construction perinit for two additional generating units at Colstrip, Montana.
1 l
I 1
36 V
                                                -r I
 
j Puget Sound Power & Light Company i'
(                              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTA l
Puget Sound Power & Light Company Bellevue, Washington s
tie have examined the balance sheets of Puget Sound Power & Light Com 31,1974 and 1973 and the related statements of income, earnings                          d    rein changes in financial position for the five years ended December h31,1974.          tests of  Our e i  h  i i
in accordance with generally accepted auditing                                            standa cumstances.
In our opinion, the aforementioned financial statements present 31, 1974, in conf ormit y with Puget Sound Power & Light Company at December and changes in financial position for the five years ended December generally accepted accounting principles applied on a consistent basis.
Coonas & LYBRAND Seattle, Washington February 12,1975, except as to Note 8 with respect
{        to which the date of this report is April 1,1975.
i l
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37 l
1
 
                                                                      . . . . . ~ .            . . . . - . . .
J 1
No dealer, salesman or other person has been authorized to give any information or to make any representations, other than thoso con-                                                $S0,000,000 j
toined in this Prospcctus,in connection with the offer made by this Prospectus, and, if glvon or made, cuch information or r(pre-                                                POCliiC power & Light sentations must not bo telled voon es having been authorized by the Company or by any of                                              CO@pCQy the Underwriters. fielther the delivery of this Prospectus nor any solo m de hereunder shall, under any circumstances, create any implication that there has been no change in                                            First Mortgcge Bonds, the affairs of the Company clnce the dato hereof. This Prospectus does not constitute                                              10% % Series duo 1990 an offer or sollettalion by anyone in any jurisdiction in which euch offer or t oilcitation is not authorized or in which the person making such offer or colicitation is not quall-fled 16 do so or to anyone to whom it is unlawful to make such offer or soilcitation.                                            Snlornon Brotlicrs
            '                            ~
Blyth Factman D!Ilon & Co.
(                                                                                                                                Inc.orporated TABLE OF CONTENTS E80'                  The First Doston Corporation Avai!abte lnformation .                                        . 2 q
The Company .      .
3                  Kidder, Peabody & Co.
3                                incorporeted Problems of the Electric Ut6ty Industry.
Use of Proceeds. Construction Program and Financing Plans.                                              3 j
4 Capitalization. .          .
5 Statement of Conso!. dated income .
Manapement's Discusnan and Analysis of the Statement of Connchdated income...                            7 Map.          .          .        ..              ..              8 Electric Operatin0 Statistics . ..                .      .          9
              ;          Business.                      ..        ...              . . 10 Description of New Bonds..              .
                                                                                .        . 17 Legatity.. . . . .            .
                                                                                          . 21                    Prospectus                                                  ;
j                                                                                          21 Experts . . .                            .
Opinion of Independent Certified Public Ac-21 Dated May 1,1975 j          countants ..                            .                ..
Consolida!cd Financial Statements . .                      .      22 l
I        Underwriting . . . ..              . . .          .            . 36 4
I      .# \
l i
k ...                .    .. _ .        -
D
 
                                                                  . - .              _ . - _                            . ~ . . . _ .            .
J                                                                                                                                                                                                                                      !
4                                                                                                                                                                                                                                      :
ll
                                                                                                                                                                                                                                              +
Prospectus
                          $60,000,000                                                                                                                                                                                                        l Pacific Power & Light Company                                                                                                                                                                                      !
First Mortgage Bonds,10%% Series due 1930                                                                                                                                                                          [
Interest is payable May 1 and November 1                                                                                                                                                                          f Upon exercise by the holder of the New Bonds of an election describod herein, the maturity                                                                                                                        l of the New Bonds shall bo May 1,1985 Instead of fany 1,1990.                                                                                                                                                      '
The New Bonds are redeemable at the option of the Company as a whole or in part at any time upon not less than 30 days' notice, at the applicable redemption prices set forth herein, with accrued interest to the}
i date fixed for redemption, except that prior to May 1,1980 no redemption of the New Bonds may be                                                                                                                  I made at a General Redemption Price for the purpose, or in anticipation, of refunding such New Bonds through the use, directly or indirectly, of funds borrowed by the Comcany at an effective interest costl to
      ;                    the Company of less than 10.9456% per annum. The initial General and Special Acdemption Prices are 110.45% and 100.00%. respectively. See '' Description of New Bonds".
THESE SECURITIES HAVE NOT DEEN APPROVED OR DISAPPROVED BY THE SE I                  EXCHANGE COMMISSION NOR HAS TH'i COMMl3SION PASSED UPON THE ACC
(      '                  ADEOUACY oF THIS PROSPECTUS. ANY REPRESENTATION To THE CONTRARY 1                  CRIMINAL. OFFENSE.
i 1                                                                                                                              UnderwrillnD                                                                                          i Price to            Discounts and                                    Proceeds to Commissions (2)                                  Company (1)(3)                                      i Public(1) l                                                                                                          99.70 %            1.125 %                                          98.575 %                                            .
Pe r Bo n d . ... . .. . . . . .. . . . . . .. . . . . . . . . . . . .. . .... . .. .. . .
                                                                                                                      $59.820,000        $675.000                                          $59,145.000                                          3 Total..................................................
(1)
Plus accrued interest from May 1,1975 to date of payment and delivery.
(2) The Company has agreed to indemnify the several Underwriters against certain liabilitics. including liabilities under the Securities Act of 1933.
i (3) Before deduction of expenses payable by the Company estimated at $135.000.
The New Bonds are offered when, as and if issued and accepted by the Underwriters named within. and i                subject to approval of legal matters by counsel, prior sale or withagwal, cancellation or modificat the offer without notico. It is expected that delivery of the New Bonds will be made in New York City on May 8,1975.
Salomon Brothers
          .                                                          Blyth Eastman.Dillon          in ,,.,. .
                                                                                                                                  & Co.
The First Boston Corporation Kidder, Peabody & Co.
    \                                                                                                                                                                                    in... ,.t.4 3
The date of this Prospectus is May 1,1975.
{  f
  ,A-Q_mi    '
                                                                                                                      .    ..      _ ...          ...._, _ _                                m.,._,___                                  .
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I j                              IN CONNITIION Wl'Ill 'llll% Ol ITitlNti. 'l111: l' Nill'.itWitiII:ltS N1AY t)VI:H Al.l.O I ( sit I:1IT.CT 'l RANSAriIONS WillCll SI Altli.17.1. Oil %3 AIN'l AIN 'l til. A1 AltKI:I l'ItM l. Ol' 'lIll.
I!ONI)N OITI:ltl'.1) lil'.it El!Y A'l A 1.1:VI.I. Al!OVI'. 'lil AT Wi!M il h11 Gilt 01111:ltWi'.!
Pill'VAll, IN 'lllE Ol'l:N h1 Alt Kl.T. $11011 SI Allit.17.ING, IF CON 1NIENCEI), h1 AY lil'. I)lS-i CON'llNt!EI) AT ANY 'llN1E.                            .
i AVAll.Alli.1: IN FOltN1 ATION
          ;                            The Company is subject to the informational respiirements of the Securities Exchange Act of 193.I and in accordance therewith files reports and oil.cr information with the Securities and I.uhanne-g Commiwinn. Information. as of particular dates, coacernin:: directors and ollicers, their remuneution.
the principal holders of securities of the Company and any material interest of such persons in                        ,
transactions with the Company, is disclosed in piosy statements distributed to shareholders of the I                  Compan) and liled with the Commiwion. Such reports, prosy statements and other information may he
            <                    inspected at the office of the Connniwinn at i1001. Street. N.W., Washington,1).C. 200il5, and copies of sucli material ma) he obtained from the Conuniwinn at prestrihed sales. 'Ihe Compan>'s cannmon stock I                  is listed on the New York and the Pacific Stock Enhances where reports, proxy material and othcr information concerning the Company may also he inspec ted.
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4'                      *% . y w ~- . .--
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                    ''              - - - - .- a .                      - . . . . . , ~ . .
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'OR                                                        IIIE COMPANY                                                                :    '
l THE              Pacific Power & l.ight Company (Company) is an operating pubbe utility, incorporated under the                        +
,.lSE    laws f Maine on June 16,1910. The principal executive offices of the Company are located in the Public DIS,      Service Building, Portland. Oregon 9720 t the telephone number is (503) 243-1122. It is engaged prirnarily in generating. purchasing, transmitting and distributing electricity in more than 240 commun (the largest of which is Portland, Oregon) in the StMes of Oregon. Wyoming. Washington, Cahfornia, Montana and Idaho. The Company provides customer services through four division offices and thiny f
district ofTices located throughout its service area.
f PROllt. EMS OF TIIE El.ECTRIC UTILITY INDUSTRY                                                    >
The Company has been experiencing some of the problems generally common to the electric utility                        '
ry, M as kmed cmts resu% hm Won, de @ tw d caphal, & ned to com% wd                                                  -
1934      environmental requirements (see " Business-Regulation"), the efTect of encrgy conservation on electric
'""      operating revenues and, in some of the states in whi:h the Company operates, obtaining rate relief with
      ""'  reasonable time after the fding of appbcations therefor (see" business.. Rates").                                            ;
n in                                                                                                                                    ,
r the
,y be USE OF PROClil:DS. CONSTRUCTION PROGRAM AND FINANCING Pl.ANS es of              Company construction costs in 1975 are expected to aggregate approximately 5225,000.000, of which
<tock      approximately $37,000,000 has been incurred through Februarv 28,1975, and the construction piog im in lther        1976 is expected to equal or exceed the 1975 program. The 1975 and 1976 construction programs crelude costs relating to the Wyodal Project uee "Businos-Propeny and Power Supply"). The Company's
{    estimate of construction costs and timing of construction projects is subject to continuing review and adjustment.
The Company issued 3,500.000 shares of commoa stock for approximately 555.58u,000 in knuary, 1975 to retire short term debt issued in connection with the 1974 construction program.
In addition to the use of internally generated funds. the Company expects to finance the 1975 construction program through the use of shon. term borrowings and permanent financing. The Company intends to issue, in addition to the Fust Mortgare llonds olTered hereby (New Bonds). 570.000.000 of additional long term debt and equity secunnes prior to the end of 1975. Within the next year, the Company may also guarantee approximately $78.000.000 of pollution control revenue bonds,in addition to $15,000.000 of such hands sold in Apnl 1975. The construction and fmancing planned for periods subsequent to 1975 will depend upon the cost and avadabiht) of capital. the tuneliness and adequacy of rate relief, and other economic Qctors.                                                                                      l^
The Company's regulatory and corporate shon-term borrowing %uthority consists of a S65.000.003 line of credit with fourteen bants, a $35.000.000 loan facihty in the Eurodollar market and authority to sell commercial paper up to 500,000.000 outstanding at any one time. At the time of the sale of the New Bonds, the Company estimates that it will hae outstanding 530.000.000 of bank loans under its hne of cr-dit, $$5,000,000 of commercial paper and 5M.t'od.000 under its Eurodo!!ar loan facdity. The proceeds                      i' from the sale of the New lionds will be used to setire ponions ol' the e short. term borrowings outstandmg j
in types and amounts ihai will re> ult in the lowest cilectise intere i cost on amounts remaining outstanding after such retirements, consistent with the interest rates and matunues of such short. term debt.
3
(
 
i 1
CAplTAl.17.ATION
                                    'lhe capitahtation of the Company and its omsohdated subsidiaries as of February 28.1975, and as
          !                ' adjusted to reflett the Companyi ruaranty relaicd to the issuance of 515.000,000 prinapal amount of 8VL Series, due 2005, pollution control revenue bonds by Sweetwater County Wyoming and the nsuante of 560,000,000 prmeipal amount of New Ilonds is as follows:
i                                                                                                            Februar) 28.1975 I
* Outuandinr.                _ As Adju*d l
Shares        Amount            Amount        It atic.
i
                                                                                                              -Thouunds of Dollars----
Long-Term Debt ( Note 6):
First mortgage bonds ( A).......          ............
                                                                                                              $ 667,788 $ 727,788 25,000          40,000 Guaranty of pollution control revenue bonds..
Less funds on deposit w th trustee ( H) .                                                  (3,000) 4 58,085          58,085 Long. term debt of consolidated subsidiaries..
Miscellaneous long.ierm debt .                  ......
1,034          1,034 Unamortized premium and discount on long.
term debt..
(3,239)        (3.239)
Total Long-Term Debt . .                                          748,668        820.668        569'1
              '                                                                                  1,172,360          117.236        117.236          8.1 Preferred Stock (Note 4).                    .              .
Common Equity (Note 4):
Common stock (53.25 par value).                          26,686,268            86,730        86,730 Premium on capital stock .                . . . . .
279,449        279.449 196            196                ,
Installments received on common stock ..
Capital stock espense .. ......                                                (l1,228)        (l1,228)                1 Retained Earnings (Note 5).                                                    149,455        I49,455              ,
Total Common Equity..                .
504,602        504.602        35.0 Total Capitalization..                                    $ 1,370,506 $ 1,442.506            100.07c Notes 4,5 and 6 refer to Notes to Consolidated Financial Statements.
( A) Additional first mortgage bonds may be issued without limitation as to principal amount upon satisfaction of the requirements of the Company's Mortgage and Deed of Trust dated as of July 1, 1947, as supplemented (see " Description of New Bonds--Issuance of Additional llands"). For information as to short-term borrowings, see "Use of Proceeds, Construction Protram and Financing Plans" and Note 10 to Consolidated Finanaal Statements.
(B) Under terms of the indenture of trust relating to the SW Series, duc 2005. pollution control revenue bonds, the proceeds from the issue will be deposited with the uustee. Disbursements udl be made by the trustee as the pollution control facihties for the Jim 14:dger Project are construsted (see i                    "Dusiness--Property and Power Supply"). As such disbursements are made the amount of funds on deposit with the trustee will be reduced. In the Comp.iny's accounts. the tot.d amount of bonds i                  outstandin;' under the indenture less the funds on deposit with the trustee will be reflected as a liability. As of the date the 8% Series, due 2005. pollution control revenue bonds were issued, after disbursements for such pollution control facilities were made, approximately $3.000.000 remained on deposit with the trustee.
                    .                                                                            4                                                              ,
i w,,    -  . ... ~ .-          - . . . . -      . .      - _ _ _          w.....-        g n , e g : , ,..
                                            .I t
m o,. .
 
-u....-..                                            . . . . .  . . . _ , _ ,
STA'lI. MINT Ol' n MOI.lDA'l1:D INCOMi'.
The following statemeni of consohd.ited Inunn., r.n t:, five year', ended December 31,1974 has been by Hadins & Sells, independent Certified Pu%c Amimitats, 28,1975                                                            whose hae  opinion        withaudited not been        re',pect butthereto in the appe 4    in this Prospectus; the statement for the twelve months cr.ded Febru.uy od a      opinion of the Company includes all adjustment', (mnstnuting only normal recurring accruals) nece 9d        statement of the re',ults of operations for such period. Tr.;s statement '.hould be considered in conjunctio notes and the other con'ohdated financial statements and notes thereto appearing c!sewhere in this Pros with the information under "Ilusiness-Rates".                                                                                                                              Ta tlie Month l~nded Year F nded Da ecm'uer 31 - -                          Februars 26, 1972          1973              1974              1975 1970                1971                            ~~~~              -
(l'naudait d )
1housands of Dollars Operating Resenues:                                                                                                                  5720,377        5216,789          5:23.363 Sl52.F42            5171.679          $190.170 Elcetne .                                                                                                                  1.538        1,465            2,124            2.2
* f.
l.298              1.559 Steam hestmg .                                                                                                            6.552      I I,905          25,62S            26.167 4.912                5.619 Telephone (, Note 2 ) .                                                                                                    1.F 15        2.ll* 8          2,436            2.44i 1.545              1.563 Water                                                                                                                              235,935          246.979          254.247 169.687            18D,230          7 00.075 Total operating resenues.
Operating Fxpenses:
Operanon:
Electrie tulity:                                                                                                                26,1:1            25,213            25.9(0 g
Power p.,rchased and interchanged-Net..                                  23.053 2,742 24.0E')
3.393 25.438 5,124      16,194            16.9.91          16,053 Fuel expense-.                                                    ..
4.611              5,654            5,662 3.353              3,587            3.857 l                    Other production.-                                                                                                9.682      10.344            11.460          11,714
.                                                                                                  7,909              f .660 Transenuon and distnbution..                                                                                                  9.464              9.899          10,143 E.7 t 2            9.067            9.204 Custnn er serwee espense                                                                                                      3.693              5,833            6,103 2.337              2.404            2.447 Other u2ues.-                                                                                                    16.152        15.675            18.014            18.525 12.999              14.593                                                              19,724 Adnuni trauve and general..                                                    7,940            9.673              9.977      13,391            ?8.870 Maintenance :                                                                                                                        26.062            30,ont          31,69:
17,943              19.960            21.097 Depreetation ...                                                                                      17,440                        22,365            24.087          23,504 16.f 12                              19.723 Tames-Oeer than mcome .
10,250          7.472          (2.743)          (2,769)
                                                                                      ...-          5.919              9.451                                                  -~
Federal and state meome tairs (Notes I and 3)..                                                                                      156,092          16 t.l: 0        les.3:s 0(                            Total eperauns cipenses.
109,725 50,s92 12:.ws 5:.e:2 133.051 67.e:4        79,i43            8:,849            s5,9is Net Utility operating Income O'4 82        Other Income (Deductions):                                                              5,357            10.447            12.324        7.557            16,799          18.99:
Allow ance for funds used dunng construction ( B 1...                                  -                  -                3:5        3,707              7,132          8.466 Equity in ennings ofjoint sentuies ( Notes I and 2 p ..... .                                                246            740          1,142            4.445              7e 9 Interest, dni.' ends and other mcome (C).                                                787                                                                              (1,33 %
(1.082)              (946)      (1,100)            (1,242)
Other deduenons                                                                        (655)                                                                                (Fid)
O)                (3)            (20)          (167)            ( 605)
Upon        Mmonty mierest .                                                                                            483              (62)    (1,053)            (4.129)          (2,744) 169 Income tases (C)..
: g.                            Other ancome (dcJuenons i -Net (C)..                                  5.655            10.091            12,561        10.416            22,200          23,341 g      in me Before Interest Charges..                                                      .' t',547          67.783            79.585      90.259          105.049        ~ 109.200 mM          Interest Charges                                                                      23,550                              20.537        30,592            42,798          44,119 26.570 Interest on long. term debe. .                                      ...
Amortaatien of debt dmoum. premium and es.                                                                                                  161              232            253 Venue                                                                                                  M                  99              139 7,890 nse Net--                                                                                        1.i,60          2.027          5,e64                            8.610 Lgg gI        Ot{er interest ,.                                                . . . .              1.f40 25,496            2 H29            36703        36.787            50,920      ~~53.13:
' ( S"                          Totalinteresi charges-Net.
ids en      Net tamine .- .                                                                  -31.o$ i                nn4              dm            n542 s,407 n i:9 5.407 nn>
g.4g7
                                                                                                      ).69.1            5.115            6.815 Preferred Dnidend Requirements .
bonds                                                                                        5 2 ',N              5 .1.2769        5 41.067      5 45,135~        5 45.7:2          5 47.671 '~
I as a      Earnings Arrheable to Common SimL .
Average number of shares of Common Stock outstand.rg....16.234                                            17,074                          19,$s t          22,498          23,533
  . Sher                                                                                                                                  Is.292
( m t hou s nJs l ... . ........ . _. . .. ...                ...
led On      Farnmes per sommon share (b.ncJ en aserare number of                                                                        5:25            5: 27            52.03          52 03 share. or Ccmmon Stod cuistandmg ) ..                                                51 69              51 98 51 43          51.47          51.575          51.60          $1.60 Cash Omdend Declared Per Common Share... ... ...                                        5128                                                                                  1.99 2 46              2 63            2.78            2 65            2.03                      ,
8taho or brnirgs to l:ned Charges t D) ...                  . . . . . . . .
2.44            2.60            2.50            1.96            l.92      t Sopp!cmentai natio or Earmngs ta l ned Chargesti:) ..                                      2 23 i
1 5
l y_    -
 
l l
l
                                                                                                                                                                      +
                                                                                                                                            -        .~..              .--
                                                  .. .    . e.  . . . .        . .          .. ..-
NOl!.% 10 $1 All sil'NI :3 ( ONSOt.lDA'll D INCOs1E A. The statement of consolidated inwme indudes the operations of the Company and its subsidiane ,
majoritpowned, since dates of organiution or acquismon. All signihsant interwmpany transactions have be,-
l              chminated.
The statement of mnsolidated income for the four years ended December 31,1973, which previously includeJ subsidiary operations on the equity basis of accounting, has been testated to the consolidated basis of presentatw:
This restatement had no ellett on previously reported net income.
q B. In accordance with the accounting pracuce described in Note I to Consolidated Financial Statement-allowance for funds used during construction ( AFDC) was determined on the basis of a composite rate of 70 thrmT' j
June 30,1974, and at a compoute rate of 8% beginning July 1,1974. The " Allowance for funds used dar.r.,
I construction", an item of non operating"Other income",is defmed in the Uniform System of Accounts prewnhed k the Federal Power Commioion as including the net cost for the period of construction of borrowed funds used la i
2              construction purposes and a reasonable rate on other funds when so used.
Determination of the mmponents of the composite rate attributable to each source of funds used for construc is impracticable; however, on the awumption that the funds used for this purpose were provided from so same ratms as the Company's capitalization ratios during the applicable periods (569 61% debt,87-12'J preferre i
stock and 30%33% mmmon equity), with AFDC attributable to debt and preferred stock being based upon incremental costs (with interest on debt computed on a pre-tax basis), the portion of AFDC attributable to fund-0.8%, 6.47, 6.4%, 4.19, 6.9% and 5 5% of carnings applicable to provided by common equity would amount to common stott for the years ended December 31,1970 through 1974 and the twelve months ended February 28 respectively, C. As of February 1,1974 the Company has included as other income a non recurring payment in tl.e amount l
of 53,8Do.000 received f rom Idaho Power Company for the transfer of an undivided one third interest in coal rewn cs at the Jim Bridger plant, resuhing in an increase of $1,976,000 (5.09 per common share) in "Othcr insomc (dedm tions) - Net" after prosisions for income tases.                                                                                                        t D. "Earmngs" represent the ag;regate of ( a) consolidated net income, less equity in undistributed joint ventutes,(b) taxes based on income and (c) 'ixed charges. " Fixed charges" represent irrerest charges ans.
estimated amot.nt rentescotmg the inurest factor in rents The pro forma ratio of carnmps to fixed charges for the twelve months ended I ebruary 28 1973, adjusted to gise cfrect to annual mterest requirements on outstandmg dcbr j
and on $15,000,000 of the EW Series, due 2005, pollution comrol revenue bonds sold by Sweetwater County.
Wyoming. 560,000,000 principal amount of the New Bonds at an assumed interest rate of 107,                                                        and $78.060 29,1976,at additional pollution control icvenue bonds. w hich may be sold during the twelve months ended February an estimated interest rate of 8% and the ehnunation of mierest on short term and long term debt heretofore reared. or to be retired with the proceeds from the sale of such polhition comrol sevenue bonds and the New Honds, would be 1.65; a* change of 1/8 ol l'i in the interest rate on the New Honds would result in a change of approximately .002 j
this pro forma ratio.1ha pro forma ratio does not take mio consideration the annual etiest of electric rate merease discussed under "Husinew -itnes" or the cirect of antiapated additional permanent tinancmg, other than polluuan control resenue hondt (See "Use of Proceeds, Construstion P:ogram and Financing Plans".)
E. Pursuant to Accounting Series llelease No.122 of the Securities and Eschange Commission. in this I
supplemental calculation of the raun of carnmes to fixed charges,in ad&uon to items included in the calcula fixed charges in D above, lised charges include the Companyi allocable portion ofinterest expense of Washingto public unhty dntricts telaimg to bonds iuueJ to tinance cenain rencratmg facihues from which. under long-te arrangements the Company is purchasing power. Suth allocable ponion of interest expense relates only to thos power purehases not subject to withdrawal upon notice. (See Note 7 to Consohdated Financial Statemen supplemental pro form.i ratio of earnings to tised charres for the twelve months ended February 28,1973. ad in Note D abose, would be 1.61; a change of 1/8 of 1% in the intesest rate on the New Bonds would resuh in a change of approsimately .002 in ilus supplemental pro forma ratio.
F. Numbered note refeiences are to Notes to Consolidated Financial Statements appearing elseu here herein l          6 l
                                                                                                                                                                  ******.M  "**M WG*** *'88**  * * " 88 8" U*WT
* 8 88 *8D ' "Wh** L OS set 8ER ' N W I ' '9P*$
m es g et su r **  en* # 9 ep6 >S4D Ff t e GD w,
{
 
h-              ._ :                ..:._...._...                                          . , , . . . . .
i liaries, all            Unaudited total operating revenues, consohdaied                                      carninn applicable to c.,mmon so.tk an 31.1975 were $238,3'0,000. 99.4M oha and 9 r A have been carnings per common share for the twelve mumbs ended if arth5237,097,0Mr,5 U. 4G#
respectively, as unnpared with                                                              31,1975 was 2.02 and the pro foima ratei y included      The ratio of earninn to fised charres for the twelve                                m..mbs ended i:arth                              d cha:r,4 for esentation.
was 1.71 (see Note D to Statement of Consohdated Income h 'Ihe wpplemeraal ratio of carmnt s to l 31,1975 was 1.96 and the pro fmma ratio was 1.67 (see Note E to Staten cm ni the twelve months ended March                                                                                                                              ,
itatements, Consolidated income). In the opinion of the Company all adjustments (constituting only t
1% thr; ugh sed during necessary to a fair statement of such amounts for such periods                                                                                          hav
: scribed by      issuance of addnional mortrare honds. cxcept for cenam refundmr purposes, that minim ds tsed for Allowance for Funds Used Durine Construction, hefore insome taxes. he capial to at le interest charges on hona. On the basis of rhn formula. the pn> forma coverage (assum onstruction      $60,000,000    of New Ilonds at an assumed interest rate of 10%)d for                                                  i h the 12requiremem consecutive arces in the    immediately preceding the iwuance of the New Bonds would he at least 2.10 times as compare w t 6 preferred      of at least two times.
insed upon              The annual interest requirement on the New Bona will be 56.450.000.
  .le t3 funds                            MANAGEMI.NTS DISCUSslON AND ANAISSIS OF 1110 STATEMENT OF CONSOI.lDATED INCOME
  >piicable to                                                                                                      31,1974 as compared wah the ye.tr The decline in electric operating revenues for the 3 ear ended December ty 28,1975 ended December 31,1973 is principally the result of reduced kilowait. hour sales to"Pub the am:unt for resale) and inadequate levek of electric rares in relation to continuing increases in opera oal reserves costs. Such increses were substantially othet by related reductions in income taxes. addi her income        joint ventures, and increasedThe                      a!!owance          for fune used during construction with dccline m inJuurial kilowatt-hour sales (see "Flectric Oper ng    the slightly for 1974 as compared to 1973.
ex ,tigs of Statistics") between the year ended December 31,1974 and the twelve The                                                          monthsdeclineended in      F rges and an the result of energy conservation and general economic conditions in the I acine Northweit.
rges f r the      governmental and municipal energy sales from the 3 ear ended December 31.197 results principally from the transfer of a larre governmental customer to a commerc                      31.1973 ar.d anding debt February 28, 1975 Ahhough electric operating revenues declined between the years ended December ter C:unty, clauificanon.                                                                28.1975 electrie operating revenues inercued. prim.m!>
4,000,000 of      December 31,1974. for the twelve months ended February                                                                  D i            Rates" for 29,1976,at        tellecting the cITect of increased c!cctric ra'es which became The                      cirective decrease  in the    fall of 1974.earnings in consohdated          See " us    pernew-e retired, or mformation regarding electric rate increases recently pat into effect.31.1974 and the tweh 1s, would be common share inr the 3 car ended December 4tely .002 in with the year ended December 31.1973 reflects an mcreme m the number of common sh ite increases merease in electrie unbry opetarmg espense. insludmg28.                                    fuel  and other production expense fo 1975 over the respecme pnor reno 6.
an pollution December 31.1973 and 1974          i and the twebe months ended February meieasing      steam eletnic generation in relation to the portion of energy generat resuhs from the Compan3 ion, in this      purchased from        d h3 roelectric sources (see "l;ledric Operating Statistics" and " Business--
alculation of      Suppl 3 "). Operating capenses aho mereased due to increases in deprecidon, maintenan Washington        reneral espense which are selated to increased unhtyd plant                                    as a result  putof into    scivice, the acquintion            as well a of control materiah. Maintenance and adminiarante and general espenses a o nciease hi Jr 1:ng term                                                                                                                                                    72 anJ cly to those        of Telephone Unhties, Inc. in October 1973. The reduwon in administrative                                            The increased andamounts general ex ments.) The 1973 results piincipally from a reduction in employee l'enesit program msurance premiums.
    , adjusted as ofinterest charges retlect additional capital obt.oned to nnance the Companfs continuing constiu t in a change      "Husineu").        See Notes to Statement of Consohdated Income above and Note fer mformation rel.mng to accounting lbr income rases, allowance for funa used daring constr here herein.
carmngs of joint ventures, telephone operations and a non-recorong crethi to other income.
7 I
                                                                                                                                              . . - . . . - - -      .~. -
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                                                                                                                                                                                                                                                                            .-                                j l
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                                                                                          ..~
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                                                                                                                                                                                                                                        ,,g,ge,
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                                                                                                                                                                                                              \            blONT                                                  ,
WASHINGTON                                                                                                                  N  %
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                                                                                                                              ..o'.=*
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                                                                                                                                        . .s
                                                                                                                                              ,    .r P
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                            -              .t.          ; .,,.
                                                                    >                                e.''J      .
s,
                                                                                                                                                                          *a i
s.,c,t  '
      ,                    '5            t
                                            -o .< er .
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                                                                            .m e,                ,                                                                                -
s
                                                                                                                                                                                                                                                                                        'I
                            ,                                                  ,,, I          '''    ***''*l tes..
e sasa
                                                                            ',,,g          ,,,.. .+d J . . y,rrztaz,uun.uwntzzzrz uzzzzzzw=                                                          4 c,                          e n ,, .                                                                                                                          u..,
                                                                                              , ,,                            ,,,.,..,y,                                                                                                                                                i
                                                                  , ,            ,,,,,,.,..                                        .....,.,.(,
i cc e                                                                                                  -
                                                                                                                                                                                            ~ , e ~.                          1                                    i                      '
A Co''act sent e .
g
                                . . ...., ,, m                              .> q ; a a n                                        y _~__ _ ;
i                                                    .3 - ,                                                                                                      t,                    ,,
                          .  .cess
: s. %
                                                .,f. '.r                              .,
l                                                                                          ,
t"*- i. '
i....,....,
        ,                                                                                                                                                                                                                                                            7
                                                                                                                                ,                                s                                                              .
                                                                                      ; .,    s. ..                          ,                                                                                                '...,.,,                              i                    .
i
                                                                                        - - - ,                              l
                                                                                                                                                                                                -f'' ':.                                          ,
                                              .,/
                                                                                                        .                                      [, r "wW Y . 44 1N(                                                                                4 1
1 ks i, *.
:                                                          .,,e.                      .
t
                                          *"5                                                                    l            -                                                                                      t
                                                                                                                  .                                                                          t                                                                                                *
            )                                  /                                                              -+              s I'( ,                      e    .sct a s I          .
NI. 3                                                                    .              i                      i 8'      hf        &                                                                                                                ,
u..,<,,..                                            .
                                                                                                                              -                . . . ,r .                                                    :                                        ,        i      e
                                                                ;.                                            4.p a              .
                                                                                                                                                                                                                                                            .-          p                      ,
                                                                                                                                                                                                                  .,                                                                              t S . as'a 5
                                                                                                                                                                                                                ~Tc. %w 6 :
u a                                                    -
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n z nn 2. .~ . .r . -r . ;+rr_, . . . ,_rrz . , r. r -: ..
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          !                                                                                                                                                                    t PACIFIC PoetA 8 LtG**T COMP ANY Posits.e. cet6.w                                                                                                                                              !
LEGEND esse          ..s..                                                                                  e,        e,
                                                                                                                                      , ,,          ,e                                                                                        D inw'5'0* 08Fitts
                                                                          ~                                                            """*C.i,,,,,,'"                                                                                        O D't,s.ct 08 8,t t l seeee.                                                                                                                                                                                                                                              ,
                                                                          ****                                                                                                                                                                      $[BueC[ 8eg g$
COM8 48,
                                                                                                                                                                                                  ,MiW .8 s*                                                                                                                                            g&                  " tab                                                    417.1 j                                                              __ --
e T
l                                                                                                                                                                                                                                                                                            1 v -
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4,
                                                                                                                                                                              .      ....            _.                        ..s Elf.ClRIC Ol'1 ::TIING NINiIS!ICS-                                                                                                          I I mi lie M.,.a t.s
                . :p
                . I                                                                                                                                                                                            Imhd-b                                                                                                                    .          1welie Months I r.ded Decemtwr 11 -
1974 Fa teruar> 2R.
1975 1970                1978              1972                1973 k
Opes.tintRcvenues (thouunds sif dollars):                                                                                                          $ 87.4'.,5          19lJh1
                                                                                                      ..- 3 64339                  1 73.259          $ 77.125            $ El r.05 Rendential.. .                                                                                                                                      58.146              66 374 43.l01                4b.491            51.70E              54./60                                                      '
Gemm tual                                                                                                                        42.35R            47.526              49.r>41 3 5.5kk -            38.595            40,> 94 Industrial .                                                                                                                      2.01              2,kO3              2.7x5 Gnvernment and Munnepal._                                              2.668                2.530              2.6h5 I                                                                                                                                                                            15.353              13.743 4.267                5.623            13.4th              33 Ak71 a i Puhhc Uuhues and Other .                                                                              __                  _
I k 5.9i al          215.14l          218,293            287.546 Totall'netry iales.
s                                  149.965              16h.496 5.236            5.496              $,Rl 7 2.k77                3.161              4.279 l                      Mwilanenus t leons R6venun..                                                                                                                                                                  ,
                                                                                                                                                                            $220.377          $216,789          $223.3*i3 lotall.lectri( Operaung Revenues. $152.h42                              1871.679          $19%l70
                                                                                                                -- a a            m.m.        s-  esu-Energy Sales i thouundu.f K w h 1                                                                                                                5,653.332          5.721.758 4,552.47o            4.962.472          5,23360              5.529.110 Reudential .          - . .
3,3M.342        3.4 t F.12 R      3,4RI 994 2,752.M9              2.940.770          3,I k4.19h O.mmerual                      .._.
5.286.591          5.217.121 4.761.448            4.828.399          5.07tJ47            5.230.415                                                        '
Industnal .                                . . .
141.144            133 211 149,04s              139.354            152.174              157.407
                          '                    Government anJ Mumon.l .. ..                                                                                                3.403.f.4 4 a p I.977,384            1.hf f .134 I,099.414            1,553.944          2.91 A.407 Pubbs Uuhues and Other ..
* iti,567,5 An 17.704.218                16.476.579        it.4r.23h Totall acro Sales..                            13.320.942 14.424.939                                                          a = .x.x        ==..m                            .
t                Number of Cuunrners Iaseiage for pennd .
I f                      !                  (nunted on locatmn haus):                                                                                                                        461,466            dr 3,752 395,050              405,516            424344              446.238 j                Reudential., ... ...                                                                                                                                                  74.3ti5 6k.194            70.246              72.594          74.097 r mmcrcial u            .,                                                  66.69)
* L
                                                                              ...~..
2.470            2.m4                2,407 2.(97                2.652              2.590                                                                            I Iridustnal .                                                                                                                                          814                  Bil 694                737                843
                              '                Government and Munional.                                              1.U22 q                                                                                                                                                        26                  29              27                    26 24                    24 J                                        Pubbt Uuhues and Oilier .
i 498.143              522.154          539.205            541.912 Tot al Customeri ..                                  465.454              477.030
                                                                                                                                  --e              me                  a____=.          - _ . = n . . m_.,
l                                                                                                  ==r-i Astrage Per Rendentot rustomer                                                                                                                                            12337
          ,                    j                                                                                  II539                12.237            12.331              12391            12.251
                                .              Annual uw- Kw h                                                                                                                                  $189 $4            $197 41
                                                                                                                  $1f.2 F6              $150 66          $18167              $152 87 f,,                    l              Annual Revenue..            ..
I Agc            1.55c                I f.0c I .d i t              i 48e              1.47c j            Resenue per Kw h ..
                                  .        Sum of Non.smultaneous l'eak Demand ILilo.                                                                                                                            1.! ! t. m0 I
w atts as determined hw .ill systemo . ..                      2,519.000            2J 10Mi            3.210.n00            3.06o.000        3Il6.000 p                                                                                                                                                                                                                                    l I.nergy Gener.ued and l'urchawd (thouwn .h of                                                                                                                                                        I l                      .
                                    '          Ks h );
d                                                                                                                                                                                                                                  i GenerateJ- Net statun outpur                                                                                                                                                                    i l                    t 5.016.030          4.k 91.7 u          3.76#, $27        5 039 74a          5.013.2r.4 Hydroeleanc ..                                    . . . . . 4.140.125 5.71F.ina          5.4S e.t.g                    j 2.696.753            2.415
* 5          1329.H2              6.5 t ?.051 Steam . ..                          .....
113                  106 (2)                  131              E20              11.o69                                                          ,
Other <
h.? ? ),970        10.244.947      lo,757p47          10,971 f 8 Total Generated .                            -. 6.5 3k.67h              7.411 412 h.400.537                              8 E7 .n70        7.461pl0            7.193.475 Purchased and Net intrechange..                  ,..    ..      7.529.4.'6                              9.991 gx i s.2 t E 4t.7      18,170 453 14.t hh.3d?          l .4.537.9n9      IF.214.4th          19.172.017 lotal Generated and Purchased..                                                                                    35,51g          33p53              32,999                      .
15.466                17.592            18.357 esman Company Use .. .. ...                                ..
1,709.135            1.697.286                    1 IJil.h44              1.375.448        IJa N.515            1.42? ?81 apress                            I        I.ost and Un.actuuntest l'or _                        .
l).320.*h2          14.424.939        lb.567.5hh          17.704.2 in      16.476.s79        In.4n 235                        l ans.:
g[
Energy 5old .
                                                                                                              - m .-              w.w                          . . . .    .n.                              n.
b) Indudes temporary sales under certain contraels, the last of which opired in 1974.
9                                                                                                            l e
(      _ -
                                                  -            _ __ _ . . _ _ _ . . . . . . . . . .                                _ . . . . - . . . - . _ ~ . - _ _
t l
 
1                    i 4
J t
BUSIN1'.SS I
J General. During cach of the last fwe fiscal years, more than 87% of the Com operating revenue has been derived from the electric business                            i            and f th the rem telephone and water operations. 'The geographical distribution of its twelve months ended 1*cbruary 28.1975 was:
i California,5.2%; Montana, t.W; and Idaho,0.8%.
l Telephone operations contributed approximately 2%,3%,2%,6%,13%                                        hc      , a 1
utility operating income, before income taxes, for the five years ended Dec months ended February 28,1975, respectively, with electric operations con remainder (see Note 2 to Consolidated Financial Statements regarding ac Inc.).
Business activitiestin the Co.npany's                      electric service areas are highly d Among the important types of businesses using th 4
extractive, recreatior.al and industrial fields. Company's senice,a i
rpf neries and pipeline compressor stations; iron ore min        as ski lodges and resoris, zirconium ana gypsum extraction ;ind processing; recreation complexes, st2c:transponation e titaium processmg and machining:
j processing plants; beet sugar factories; flour milk; creameric>; meat p berry and nut processing plants; and irri;ation pumping installations.
Regulation. The Company is subject to the jurisdiction of public utility re i
of the states in which it operates as to its rates. services, accounting, the iss matters. The Company is both a "licensce" and a "public utility" as those te Power Act and is, therefore. subject to regulation by the Federal Power Com 2
issuance of securities, accounting, certain rates and other matters. Certain projects are licensed under the Oregon li>Jrocicetric Act and                                d i are    fhsubjec
                    .in a nuclear generating facility under construction, th construction and operation of nuclear reactors. particularly with regard to pub
                      " Property and Power Supply");
to In addition to zoning and other regulationt by local                      nuthorities, Cests incurred          the Compan by the Company      m environmental regulation by federal, state and local authenties.
connection with emnpliance                                      with existir; and antic fer the years 1972,1973 and 1974. respectively. and .ite
                        $15,000,000, 529,000.000 and $44.000.000 estimated to be approxim.itely S50,000.000, $71.000.000 and S64.000,000 1976 and 1977. The amounts for 1975 and 19 o arc included in the 1975 a (see"Use of Proceeds Construction Program .in 10 i
t
                                                        ,g...  **=*"****#
.;              ,  .      n 1
 
                                $ je y,
" " -                          er-            ---    >        _ . .    . _ _ . _                ,    ,
m,L projects have been designed to comply with applicable environmental laws and reg estimated cost of pollution control facihties such as ciccunstata pretipnatort scrubhers. coohn; tow and settling ponds n included in the construttmn budgets for those psojects f see " Property an
@ted                                Supply" and " Coal Sales and Reserves").
het:ing,                                                                                                  1974, the Oregon Public Utihty Rates.- On S-ptember 3. November 12 and November 20
:s P.r the .                                                                                  i    d the Washington Pubhc Utihties and 'Iranu
                                    - Commissioner. the Idaho Pubhc Unhties Ci,mmm on an 3,33                                portation Commmion, respectively. iwued orders permitting the Company to insrcase re in Oregon, Idaho and Washington in the aggregate amount of apprmunately 533.000.000
                                '"    upon estimated 1974 operatmns. Pursuant to an orderissued on March 25,1975 by th da          net                      Utilitics Commission, the Company has increased its retail rates in California by approximately he :velve                            annually. The Company also has on file a rate application in 31,1975                  the State andof  Montana April 18.      to inc g                        '        clectric rates by an arrrerate of approximately 51,300.000 annually. On January
  , g.
  ~
8'          '          1975, respettisely, appheations were ided in the State > of Oteron and Washing:on to increa rates in the aegrepte by approximately 521.000 000 annually. The Company cannot anticipate what extent these appheations. or other applications the Company experis to fde later in 1975 nct mal, granted. Major fattors in the Company's need for increased rates are the increase in pow usi?.g the                          costs resuhing from increased steam electric generation, higher costs of construction of new gen oil cells, fac Ten litiesofand  the current hirh cost of capnal. industrial customer > in Oregon have filed suit c the Company's largest cruz and nius and                          September 3,1974 order of the Ore;;on Public Utihty Commissioner on                              the The,  ground seek a      that to
    ; WIO0d                            overall revenue increase allowed, which they do not challence is imposed upon them.
a        h:p,                      reduction of approximately 52.300.000 annually in the increase charged them. One residentia the Company in Oregon has fded suit,in his indisidual capacity, seeking to ' revole or modify" the order, alleging that the Companis residential rates permated by that order are " discriminator) anmrg ies tf each                          customers of the same cla s" and that the Company " failed to establish a need for the various mon and other                          increases in residential servises." The court has denied the motions of the in te Federal residential customer that the Commissioner's order, to the extent challenged by them, be stay i at :o the                          Company he required to undettate to provide a refund to them of amounts they claim to be in e drMectric                            lawful increase. 'lhe City of Pordand has also tiled suit on behalf ofincif and al! other customers parteipant                          Company within the City alleging that such order i3 unjust and unreconable in placing Faitland ra ion of the                          the same lesel as elsewhere in Oregon. The dnference involved is approsimately $2.000 ON annu i oser the                          Company cannot predict the outcome'of these suits on the merits. 'I he Company is iadvised. ho safty (see                          if any of these plaintilTs prevail on the merits. they wdl seek a refund ik            3man) theamounn Cny on andp.ud by the the case of the suit brought by the City of Ponland. paid by the Company's custome after September 3,1974 in excess of the utes the court or the Commmioner. on remand to him. m fmally set. Counsel have advised the Company that plaintiiri nght tog tefund under such citeumstan subject to not settled under Oregon law.
0mpany in Property nnd Power Supply. The Company owns 33 hydroelectric generating plann wnh a Yrcls have.                                                              It also owm. three steam.electrie generating plants and has ownership
    'roximately '                        capacity of 863,393 k dowatts.
interests in one other, the aggregate rated steam electric capaaty owned by the Company being 1.43 y, and are
    > cars 1975,                          Lilowatts. In addition it has minor internal combustion geneuting capacit). During the year ended December 31.1974, approxnnately 59% of the Company's encrgy requirement was supphed by it> p in pr0 gram                          27% was obtained under long. term purchase contracts, pnnapall) fmm hydroelectric generating fxihnes the recently and the balance of IG through interch.mge and other pmchee arrangements (see "Electrie Operatmg onstnietion                          Statnties"). The Company has replaced sub>tamially all of the energy purchased under llonneville Po              ,
11                                                        4
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                  ~ ~ ~    - '
d Authority (IIPA) contracts which expired Aurust 31,1973 with output fmm its Centralia ( hhington Steam Electric Generating Plant and the fourth unit at the Dave Johnston liant and the haf.:nce from a number of other purchase contracts. 'Ihe Company also has contracts to purchac hrm peatmp capaaty d
from IIPA and expects to purchase non firm energy from flPA to the extent available (see Note 7 i                      Consolidated Fmancial Statemenn).
Most of the Company's hydroelectric plants are licensed as major projects under the Federal Po Act. The first of these licenses (for a 1,100 kw planti expired June 26,1974 and was renewed; and t second (for a 136,000 kw plant) expires in 1979. The remaining licenses expire on dates from j
through 2006. IJpon expiiation of a license the project may he re-licent.cd to the Company or, upon payment to the Company ofits net investment therein, not to execed fair value, plus seve the project may be taken over by the United States or licensed to a new licensee. Each also provides that after the firsi 20 years of operation, out of surplus carnings thercafter, if any, 4                        accumulated in excess of a specihed rate of return upon net investment in the licensed project.
shall establish and maintain amonization reserves which,in the discretion of the FPC, shall be the termination of the license or applied from time to time in reduction of net investment in the the opinion of the Company \ management, any such excew earnings realized from tho have been in operation for 20 years have not been material but may be material in the future.
        ;                            The Company's generating facilities are imereonnected through its own lines or the lines o and, along with substantially all other generating facilities and reservoirs located within the
        ';                      which the Company operates, are operated on a coordinated basis to obtain maximum load carrymg capabihty and cfHciency. On December 31,1974, the Company owned 5,910 circuit mi j
i lines, including 49 miles of 500 kv,1,733 miles of 230 kv,271 miles of 161 kv,1,222 miles of 2,635 miles of 69 kv capacity or less.                                                                                      I Near Rock Springs, Wyoming, the Company and Idaho Power Company are constructing th Ilridger coal toed generating plant. consisting of four 500,000 kw coal-fired units. 'Ihc first unit placed in commercial operation and the second. third and fourth units are scheduled fo 1977 and 1979, respectively. The Company's share of the total cost of the plantofand                      associated w hich approxi-transmission facilities and coal mine is estimated to be approximately S700.000,000 mately $103.000.000 will be for air and water pollution contiol facilitics. Idaho Power Co receive the entire output of the first unit until completion of the second unit. The Company's shar output of the plant will be 50% beginning with completion of the second unit and 66W upo
        !                      'of the third and fourth units.
Additional air quahty tontrol equipmem to conform to Wyoming and federal air quality standa
          '                      being installed for the first three units Of      at this thetotal.
Company's        Dave Johnston coal-tired generatin 53,400,000 has been expended through 1974 estimated cost of approximately 5b0,000.000.
and approximately $20,000.000 has been or will be expended i 1975 and is included in i
construction tosts ihr 1975 set forth under"Use of Proceed . Concruction                                  Ptogram and f ma Coohng towers whish meet These units are exempt from federal thermal ellluent diwharge standards.
i                    Wyoming water quality stanJards, to the extent currently determined, base been insta Studies now in progress will determine whether additional water cooling will approximately $7,000,000.
be required to meet Wyoming water quahty standards.                                                330,000 kilowait air-j The Comp.my and Illack llills Power and Light Company are constucting a cooled, coal-fired plant (the Wyodak Project) east of Gillette, Wyoming, near coal deposits co 12 l
i
                                                                                      - - - - " - -    - - - - - ~ - - -          ~ ~-~ "-- ** *-
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                                                          ... .__. ..-~            . . -      ..
                    - -~.-                  ~ .-                              .
hington)                IHad liiHs. *lhe Company \ share3 of the W ..dak Project is WL and i.exptt'ed to cost ap e from a-
                          $;39300,000, t he Company and Idad lidis P .act and 1.irbt rongiany intend to sell and l capacity.            . Project.
                                      "ihe estimated wst of construunm. appn,ximately $23.000.000 in 1975, is not included in lote 7 to -              Company's construction piogram discussed under"Use of Proceeds, Conuruction Pr Plans",
On January 31.1975.      the Wyoming 1.nvironmental Quahty Council adopted air quality standa al Power                much stricter than fedeial stand.irds, hmitinr pennissible emiwions of sulfur dioxide from
  ; and the a 1997                  burning equipment. 1.ntorcement of these rero!.nbas wdl reinure the installation                                        of s Studies by the Company mdicate that compliance wnh these or,upon                Bridger plant and at the Wyodak Project.
damages, regulations may also reqmre inuallation of strubbers on Unis 1,2 and 3 at the Dave however, the Depanment of 1:nvimnmental Quality has stated that ihe new                                      Thesulfur oxide
  - e licenses standards were designed to perm t operation of these uma of the plant without scrubbert
    , if any, c licensee Department has not yet estabbshed any wmphance schedule under which the standan neld until-            the Companyi generating Iaohnes.
roject. In The Company estimates that us share of the cost of scrubbers on the brst three un cis which plant and at the Wyodak Pmject sdl require                            capital expenditures of approximac per year. The sulfur dioxide emission result in additional expenses of approximately $30,000.000 standards applicah!e to the proposed Jim Dridrer Unit No. 4 are stricter than those ep of(then, plants. Studies are bemp made to determme whether available technolo;y wou!d                                    f      ena regi:n in              those standards. ~1he deenion to proceed with construction of Unit No. 4 will depend on the outcom
: f. carrying                                                                      The Company's share of capital expenditures and those studies or of the htigation referred to below.                                545.000.000 and 54.000,000, nsmissi:n IP" and                additional operating espenses fiir a scrubber for Unit No. 4 is esuinated atm respectively. If scrubbers                                          and $11.00tua10 of additional annual t
approximately $5b.000.000 of additional cap:ul expendnures g the Jim                                                't he foregome carnal cost estim.nes re based cn completion of scrubber
: has been                expenses wiu be required. installation at the Dave Johnston                                plant and at Jun Bridger These amounts are not carun'ly            ,
a in 1976,              Umt No. 4 and W3odak concurrently with the completion of those units.                                                    l meimd                    included in the Company's forecast of consuuttion expenditures.
1 approxi-                    The Company and Idaho Power Company have filed suit for judicial review of these s tpany will                grounds, among others. that the i mironmemal Quahty Courcil eseceded its aatho m cfthe                  "C'I " *"' "TN''"U ""d '"P'd""' ""d d"' "" "C'd **"' 'h"" n tiu such st rinrent stan ompletion                have been ided by othen. 'Ihe Company unnot preth,i the outmme of thh huganon.
The Company has arreed to asquire a 10, miereu in iwo 1.24n.000 kw nuclear                          ajoint genera constructed in western Washmgton by Wasinn; ton Pubhe Power Supply Sy3 tem (WPPSS).
    .indards is am at an                operating agency of pubht unhty dntrich. scheduled for operanon m 1982& and 198 1.288.000 kw nudear generatinf plant sponsored by Puget Sound Power rgh 1974                  to acquire a 20'.e interest in a estimated                L ght Company, scheduled fiir operation in loS2. The Company b% apiced to acquir ng Plans, .              two 700.000 kw coal. fired ueam eletuie generating units ta he conuructed by The Montana
    .hich meet                Company near Colstrip. Montana. sdieduled by the sporbor ti'r operation in 1979                                          *
* a cost of              Sales and 1(esenes").
M"8 *IN                        The Company owns 25N of the wting securities of Pacois Northwest Power Compan activity is seeking, as joint apphcant with WPPSS,            On February a license
: 23. 1971from    the 1:PC a hearing        to build a examiner project on the Snake Ibver between Oteron and Idaho lowatt str-otrolled by                recommended granting a heen c. with conuruction of the project to be postponed untilt S 1975, apparemly to provide Contrew time to determine whether construction of any pro                                    i I
13                                                                I t
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                  ~    ' " ' ~ - - - ~ ~ - - - ~                  - - . ~                                                                            4 Y
 
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a I          should he permitted. 'I he matter i. penthnr. helme the I:p( oa eu eptions to the imii.d deouon .tra' tL outwmc is not presently determinable. l.e:mlanon to preclude any project on this porunn < ; the Sr.al e River between 0 cron and Idaho is pendine in Congrest i
i                  Since 1973, the Company has had in eficit throughout its servi., arca a prograrn to enwura;c eners conservation and has fded encrpy cuitailment programs wnh the appropriate regulator,. oodies r. f,,e states Because of nationwide energy shortares and powible shortages in the Pacific Northwe t n,ip next y
several years, the Company expects to continue to encourare enes y conservation.
On August 1,1974 the Port!and City Council. after receiving a report from a cornu!!c ; firm l
i          recommending further study into the question of benefits that might he derived                                      from a merger of hoth of w hich erve Company and Portland General lilectiic Company, requested the two companies.
customers within the City, to study separately th: advantages and disadvantages of a merger and to submit to the Council either a plan of merger or a statement of the reasons why a merger would not he m the best interests of the respective company \ customera. or investor, The Company and Portland G Electric Company bled merger reasihdity studies with the Ccencilin early .\f arch.1975 and each mmp has been requested to evaluate the other; study. Bar,cd upon the study a submitted to the Counn q
Company has concluded that a meireris not reaoble at this time. One of the five men her of
          '        City Council has si.ned that, if he is not satisfied with the companies' good faith in the merpcr stu
          '        the resuhs ihtreof, he may propose a study of the featibility of publie ownership of the utilities
* prop within the Cn> or that the City's pov.er to (et clectric rates in the City be invoked. Approximately I
the Company's clectric operating revenues were derived from customers within the Cny of Portla year ci.ded December 31,1974.
The fullowing tables summariie the Comp.iny's existing and planned generating p!:.nts:
F.Nt%IING Ct31:H OING PI ANT 4                                                      I install.umn      Naint plate Dato            R a t us; l'ucre) N mro-( Mer.iw ain I M .192(          47
                                                              .. Copco. Cahrorraa        Klamath Rn er COPCO PLANB ..
                                                              ...Portla nd. Or e pn      0.1/ Gas Sic.an l'icara          192 L 1924          3M I INCO! N ..                                                                                          19N                32
                                                              .. Prosswi. Oit p .        Rorue Rner PRONPI C l .                                                          Lewn River                      19 4 l955        IM M E R WlN ..
                                                              .. A ncl. k .uiu nen
                                                                .lokeice I allt Orcron    N I trpqua Rwer. I nh Creck LlGil'1 NORlit tKiPQU A Pl.ANE..                                          & Clearw.cer Rnct            19 % 19 4        I?M 194)              108
                                                                . . Ambo) . Wa shqion      I cw n Rwer
                  - Y Al.l ..                                                                                              195fi              F0
                                                                . K e no. 0;cror,          Klamath Rner BO)!l                                        Coupar. Wad..ston        Lew n River                      19 9            2e4 Su ll:1                                                                Coal-l~ned Neam I le, ins        19$LI972        TfD 3 DAVL JOllNs10N..                          .. Glento.L. W).c unc                                        19,2                18 IRON G \1l;                                . lb rnbrool.Cattornu Klanuth Rn er                                            I $ (.
1965 TRON A ..
                                                              . Gacen Rnt r. WS orrint Oih Gas Sic.n+1 leitne                                  23 fi C.nr.bu tiogg.Iurbm-              l972
                                                              .. Libby. Monta:u                                                              631.7 LIDilY                                                                                                  1972 Cl' N I R Al l A ( Con. pan 3 Poinon)    . .Centratu Wa hnrton Coabt areJ%am.11eane Ji\1 IIRlDGl.R LINil' NO I (Compan).. Rock Senngx Wyommr Coat lired & cam 4lettne                      1974            M9 Pornonl*.                                            -
                                                                                                  -                          190).1957          52.4 17 mincitaneous nnnor hyJroclectne uruin.
2.t 59.3 T01 AL..
Note: ll>dioclectrie pioject locations are stated by locality and river w.stershed.
* See text above for schedule of Company \ participation in output.
14 i
                                                                  - - - - -      -      * * ' ~          ~ * ~ ~ ~ ~ ~ ~
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                                        .-.m....                . . . . . _ . . . _          _
e s ol t:RE (.I 'si' A i !% fi l'I.4% I %
    -)                                                                                                  N 1.e d-                    . . - -
Com. pan)'s.O.nnersidp
                                                                                                                                                        .      ~ .          . - . . - -
O* : *ht ,
Cost          l e.t al I stunated 33 Spon.
niruunh I oiuated - (ou
                                                                                                                                    'E      MW            2/2h/7$'        ( ost '    Pe r K% $
Energ) Neurs c                wt      Capatit3 F T=C'5Y                                                                                                          (Mew                                  mi            m il
: e. :: ive                                                                                                            m atrs)
  * **g 2 cal            jgy ggggyglP P'e L Springs.                Coal. Fired steam-1.teonc                            800 No. 2 1976                        66.7      1.000 5266.2W $647.Wa 14Ui W yommg                                                                    Shu No 3 1977 No 4 1979 1976
                                                                                                                          $40 i .i 39      23              28 3      wm tr N 3a d130.u);        6fM
    * * { irm            T m ANa_          P unier.oreron            Nudeu                                1978          33o    60.0            19B      15.100 b .,.*the              WYOD AK .... 8,.. cic. Wyommg          CoatJ ued Steam.I Icara COLST RIP . . t ..:anp, Montana            coat.f ired steam.Eleune                            700      10 0                          600      74.000        $ 3')
  *T.::
    .          ;cive                                                                            No 3 1979 700      to.O            70) 70 p*            ,3g                                                                            No 4 1940                          10 0            124 I      l.E003 212 h>03            A553 No 3 19h2-              1.240
  ! y.r *.4 h              W PPSS*..        .%fwp Washmgton          Nudcar                                            1,240      10 o            124 1 No 5 19k4              1,2b8    20.0            257.6      4,8003 210.0003              8153
  .,a. g erag                                                                                                1982                                                                                    i SKAGIT No. l* (nr. crete.Wastunpon Nudcar
    . ::'.r:any                                                                                        W A1.-                                1.8M                                                  !
: 0. ,. tgc                                                                                                                                                                                          !
                                              ~
Estimated 4 6:and                              S Crats and estimated costs inchide only the Company's portion ofjointly-owned plants.                                                                      ;
3.,,,.e e r costs are subject to comtant review .ind change.                                                          No.1, curremly in service:
g.j.,,,j eg 2 Indudes Company \ portion of costs relating to Jim Bridger Uni                                                                            l                -
      ,, 3 or                    therefore the estimated cost per KW is based upon 1,333 MW, the Company's portion of the                                                                            }
c.4 he the                    capacity.
3 Exdudes costs of nndear fuch
* Ahhough the Co npany has agreed to participate in the construction and ownersh                                                                              j generating facilitics being sponsored by others it currently has no material investm                                                                                ;_
f                              Coal Sales and Re ,enes. The Company owns in fee and has mining leases on strip coal reserves in                                                              .
      %,                                                                                  In southwestern Washington. the Centralia Plam (see " Property anns                    Washm;: ton, Wyoming and Montana.
and Power Supply") is fueled with coal mined and sold to the plant participants from adjacent
    , g,3                          held by the Company and Washington irrigation & Development Company, a subsidia t              ,-
  <              :55              Washington Water Power Company.                                                                                                                                      [
The Company has strip eval resenes in four major areas and several smaller areas
  ,            [;
                **                aggreg, ting approximately 950.000.000 tons, of which approsimately 250.000.000' to the Dave Johnston and Jim lindges ,icam.electrie generating plants.                                                                                  In 5            :U $
The Company has approsimately .300.000.000 tons of strip coal reserves near Dedes,t M
                ]
y,,
addition, Deder Coal Company, a jomt senture in which the Comp.my's subsidiary. Weste 750.000.000 tons of coal resenes near Deder, having                                      j inc., has a one. half mterest, controls approsimately                                                                                                                g 2            *M  3 an ascrage heat value of approximately 9200 to 9600 thu per pound. The joint vemure                                                                                  i tons of coal through 2003.
contracts to sell apprmumately 330.000.000 g                    Approximately 1.300.000.000 tons of stop coal re crves congrolled by the Company (induding                                                      l j
m.7                resenes controlled by Deder Coal Company) currently are uncommmed. Of the total reserves.                                                                            j a sulfur content ofless than 1.0'}. In the Company's opmion all ofits coal reserves have a suthe                                                                      ;
heatmg value to be u.ed etliciently as boiler fucl in the Company's coal. fred steam-clec                                                                            i
    - 2W                            pl.mit    The    Wyoming          1  mironmental                Quahty        Council      sulfur          o. side      emiwion        standards            j(s
* Power Supply *). however, nught presem use in Wyoming of the Company's coal resen
* wntent preater than 1.0'a as boiler fuel Mining of these coal tesenes is subject to stare regulations respecting land redamation and emironmental protection-15 I
(                    ...                                                          .. . . . . . . . . ,              ,_              _ _
                                                          ~ . . . . . , , , , . . , . . . .
e L
 
                                  ..>.._o.                                              .s..
I"
            ~=                                    ._            , , - -                          .
I I
Surface mining regulation bilh. substantially identical                                              f rac t<unaanee  to a bill    A veto the 93rd Conrre,s, pawed both houses of ConPreu and were                                              Neitherreferrtd the N n ite  to flor a uin ere l          i    !! n:
conference committee compromise hill has                                                            i                been l 53,000,oW        p;r 3 ear report its coal reserves but cath would result in net inucased mining cows of approx ma at present levels of operation.
The State of Wyoming passed legislation in early                                                    lidity of1975 thi. le . which
                                                                                                                                                    !ano        will owner or a waiver of consent prior to the iuuance of                                          i a State mining permit. 'Ihc to the extent it restricts access to coal held under federal                                      00 coal tors of leases the compan>  is, n- coat t
Company, auc*.tionable. This legislation may affeu a under construction.
o The following table describes the Company's recoverabic                                                      Percert6te            coal re Unawirni d or biher Awitned                                                Ca.nei et Undubinted or Du . uted                        (tons)            to Webt. IN Recoverable                                              (tons)
Coal Resence WasutsoTow                                                        2
                                                                          - Centraba Plant .8                                              0.7 Centraba Field neat Centraha ._                    70,000Jc0*
                    -  Wyowmo O6 Jarn Bridger Ccial Field near RosL Spnngs..                    ... Jim Bri4cr Plants. 33,000,000*
133,900,000*
s Dase Johnuon Plantr. a                                      0.5 Dave Johnston near Glenrock .                        117.000,000                                                  04 300.000,000 0.7 Antelope non5 cast of ~lenrock .                                                      145.000.000 250,000,000                11 North Antelope 5 nonheast of G!cnrxk..
Cherokee west of Rawhns.,          ............
Mowt AN A                                            Decker Coal Company                                        O4
                                                . . _ . . .                                                    2 In.000,000' Decker near Decker...                                165.no0.000*                                                0.5 400.09J.000
    -                      West Decker near Decker..                                                          I,33r4 0,n00 4RS.non.000 Totah: .
                  .                                                                                                  i t      whish. m the o;mmon of 5 Recoverable coal reserves represent the portion of total reserve est ma esderived                                      I' eser ve from the Company. is substannated by adequate information. includmg that                                              d f addman.:1 operations (in some            o adju tment cases). as aouterop            data, qu.ility result of continuing                  testmp enginecting              and evaluationT tmrknowled o
the estimates are subject exploratory and development mformation and as a resuh of changes marketabihty or utihtauon by the Company of such reurves.                        #
i                    2 See " Property and Power Supply".                                                                d plants are sufheicnt to 3The Company considers that the respective reserves assigned to the name provide fuel to these plants for their econonucall3 useful hve 5 Nine non-contiguous reserse areas.
* Controlled by DecLcr Coal Compan), but not subject to contract for sale.
16
                                                                              . , . -    o~~-    -~ -==  ** ~~~~~ -' m **'~~~""'
                                                                        .e M    .. , , . .      ..
                =
 
maise== - - - --                  -
          --              In June,1973 the Sierra Club and other plamulls fded a ennplanit for dedoratory jud;' men: a;>aht N-        A      the Secretary of the Imerior and other lederal utiiuals to enjom any feder.d atoon echted w enal
    " b*            development, indudmg the approval of numnr plan . in the Northern Great Plan.s regn.n. n .ludre
  .2 an d          northeastern Wyoming and castern Montana, pnar to the preparatton of a wn pteherr.ive enurormera.d
  ' W "'          impact statement terardmg coal development in that repam. On I:chroary l( 19N, the Ur ittd States District Court for the District of Columbia granted the defendaras' and intervenors' notions for summar)
Plamtills have appe.ded glas murface          judgment and judgment on the pleadinv. and domiwed the lui'.ation.
gsiation,        decision and the Court of Appeals has swued a temporary injunction pending a decision on the appeal a t3 the        The Company is unable to predia the nutwmc of the huyanan t he Company owns mal resem in the
  .=y's coal        region subject to the htigatan; however wah the puible cuepuon of wal stipphes for the WydL anJ racon or          Colstrip projeus Oee "I'roperty and Power Supply") and any addition if wntr .ts for the sale of wal by DecLcr Coal Company, the Company does not believe that this lingation will affect its arreraly
    ,p p            contemplated activines.
Telephone Operations. 1he Company owns indircul). through a sub idiary, over 80'' of the
* currently outstanding voting stock of 'lelephone Uidines. Inc. a Washington telephone holdmp wmpany.
Telephone Utilities operates telephone propenies through 23 subsiduries, pr ncipally in Wdingmn.
(-                Oregon. Momana, Idaho and Nevada. lelephone litihtics' sub idiaries base approximatel> ll6.t91 telephone stations in service.
DESCRIP flON OF NEW llONI)S General. The New llands are to be inned under a Mortgage and Deed of Trust. dated as of July 1, 1947, to Guaranty 'Imt Company of New Yorl. I now Morgan Guarant> Tru>t Company of New Yod 1
(" Corporate Trusice") and Oliver R. Ilrooks i R. L. Sparrow, successor), as Trusiecs, as supplemented.
heremafter referred to as the "Mortpare" 'lhe statements herein concerning the New Ibnd .md the Mortgage are merely an outhne and do not purpon to be compleie. 7 hey male use of terms detired in the Mortgage and are qualified in thcir entirety by espress reference to the sited Section and Artides of the
{            Mortgage.
The New lionds are not subject to a sinking or improvement fund or other provision for amornunen prior to matunty (see "Maiority Daies").
The New Bonds will be iwuable in the form of registered bonds without coupon < in denomirution of
                      $1,000 and any muluple thereof. 't he New lbods are ewhangeable at the ofbe or agency of the Company in New York City without payment of any sharge mher than a sum sufficient to reimimrse the Company for any ias or taxes or other posernmemal charge mudent thercio.
Maturity Dates. The New Ilonds w di maime on May I. lWu or at the election of the holder thersi.
      ,        g      on May 1,1985.11- lilE IlOLDI:R DI SIRI N 111 C Al L OR ANY POR llON 01 1111. NLu lloNIW j sing
  .t    Reserve      (IN A Mt lfilPl.1 01 51.000) RI GIS~ll Ri I) IN 111% N A\ll M.VI L Rt. ON M W l. 1985.111. OR uhional        lith AUlllORl/l D AlIORNI.Y Mt Sl D1IIVI R 10 till' CORPORAll 'IRt Sil'i. AND 1111 h=g the            CORPORATE TRl;SIIT MUS~l RI Cl l\T AN IRRIT OCAlli.l. WR1 Fll:N No t 101: 01: 1:1 t C 110%
NO I ARill R Til AN NO\TMill R l.1051 TND NO 1.ATT R I!! AN DI Cl.Mlll R 31.19N 'lli \ l SUCll NEW llONDS SI'LCll;ll D IN 'llit 1-11 ClION M A I Ulti SON M AY 1,1485. Till~ NOl RT s tu to            MUST EITilER lil' DI:1.lVI RI l) OR SI N I ITY RI GISil RI D MAIL 10 tile CORPORAIL 1RUSI'EE, 23 WAl l. SI RI l 1. NI W T ORK. NI W YORK 10015. ATil N'ilON: CORI'OR A ll TRUST DEPAR'lMI N I AND Mt SI til! ACCOMPANil D itY ~llit NEW llONDS 10 Willcli lill 1:1.I'C flON REl.A 11 S II AN l 1 l CllON 15 \1 \DI AN 10 ONL) A POR'llON Ole ANT NI W llOND. Tile COMi%NY WILL I NI Cull AND lill: CORPORAIL TRt S11i Wil L DI i IVI R.
WilllOUT CilARGl., A NI'.W llOND OR llONDS IN PRINCIPAL AMOUNI l.QL AL 10 till.
i
 
    ^ -                                                                                                                -.          . . . _ , . . .
        ----d-                    , - . . . . . . .          ,,                , , , , ,        _
I i        l>ORTION 01 '1111! NI!W PONDS DELIVlikliD 'lO TillirORPORATI El.ECTION ll AN IH EN MADL Interest and Payment. 'lhe New Donds will hearinterest at the rate shown in their titl annually on May I and November 1. beginning November 1,1975. Interest will be whose names the New Bonds are registered at the close of busmess on the l'Ah day                                                        .
next preceding cach semi-annual interest payment date (with tertain exceptions. a Mortgage). Prmdpal and interest are payable at Morgan Gaaranty Trust Company of N Redemption and Purchase of Honds. The New Bonds will be redeemahic in wh days' notice (a) at the special redemption pricci set forth below for the replace deposits and proseeds of property, and (b) at the general redempoon prices redemptions; provided, however, that no New Bonds shall be redeemed prior to redemption is for the purpose.or in anticipation. of refunding such New Bond thro indirectly, of funds honowed by the Company                                              at an errective interest cost to the 10.9456% per annum.
accordance with a(ceptabic fin.mcial pracuees) erless than If, at the time the notice is given. the redemption moneys are not held by the redemption may be made subject to their receipt by the Corporate Trustee befo redemption and such notice shall be of no efTect unless such moneys are so received.
Cash deposited under any provisions of the Mongage (with certain eneptions) m purchase of Honds of any series. (Sec Mortgage. Art. X, and Twenty-eighth
              ~
Spnid Supp Generaf Generat      Special                                Redemption Rotenm ion Modemption Redemption                                      Price (% )    Price t 4 )
Price (4 )                Year Year                    Price P. I                                                                                        t if redeemed during the twelve months period ending April 30.
102.05        100 00 I10.45      100.00              1984..
1976..                                                                                  101.00      100 00 109 40      100.00              1985.
1977..                  .
100.00      100u0 108.35      100.00              198ti..
1978.,                                                                                                100.00 1987..                100.00 107.30      100.00 1979..                                                                                  100 00        100 oo 106 25      100.00              1985..
1980..                                                                                  100.00        100 09
            -                                          105.20      100.00              1989..
1981.                                                                                  100.00        100.00 104 15      100.00              1990..
1982.
103.10      100.00 1983..
in cach case, together with accrued interest to the date fixed for redemption.
Replacement 17 und. There shall be espended each year 15bfnadju. ed grou operatingSuch                                  resenues maintenance and replacements in respect of the mortgaged property and automative eqmpmen requirement may be met be depositing cash or tertifying gros property additions or a e.spenditures or by taLing credit                            for Bond and gaalified lien bonds retired. Any exc Such cash may be withdrawn on the basis of gros. property be applied against future requirements.                                                                                          (See additions or waiver of the right to iuue llood . or may be appheil to the retirement of Bo Nincteenth Supplemental. Sec. I and Tuenty eighth Supplemental. See. 2.)
18
: 4.                                                                                                                          --    - ~ ~
                                                                              -- - - --              -  --~~ ~ -
e A
 
e -.-              - . - . . .
e.c t-x                        special Prmhions for m iirement of Ilonds.
li acong any 12 mon hs' period. rropeii> is di p+ cd or 510,000.000
                                                                                                                              #            or more as              l CH NO by the order of'T he                      orNewtoHonds    any          governmental authorny,                            for thu ruuhm l
i arc redeemable at the special redempt on pnce to    the retirement of Ilonds.If the Company purpmc.
is conwhdated with, merged into, or wnvey 510,000,000, or if a governmental or pubhe body corporation having a plant acmunt of not few than                                                                              he
  } "n g              acquires 7tfA of the Company's common stat towards its diuolution. .11 ountand
* redeemed at the special redemption prices any time within 12 months.now or hereafter ioued un
:, on 30                    Security. *Ihe New thmds, together with all other th>nds
: cernin Mortgage, will be secured by the Mortvare, which constitutes,in the opinion of d othef Company, a first moncage lien on all of the clntric generating plants and other m
  ,itsuch
  .tre Jy of Company's property to others for uses which, in the aiated in            Company's businew. ( h) leases of ecrtain property o in W e G ty    f Rawhns, Monung, the pnor hen of the Indenture made by Rawlins Electric Compa
  ,stec. the            Irving Trust Company, as Trustee, dated as of October I,1941, as supplemente                                                bi!cs gg                    the lien all cash and securities, certain equipment. apparatus, materiah and supplies: air and other vehicles; receivables, contracts, !ca,es and operating agreements:
  !ad to the              rights and royalties and all natural gas and oil production property.Th
:.l.)                  liem) to the lien thereof, subject to limitations in the case of consolidation, merg
  ,                      all of the Compan3's aweis. (See Mortgage, Sec. 87.)
ise 5'
                    '            The Mortgage prmides that the Trustees shall have a lien upon the mortgaged p Honds, for the payment of their ieasonahte compemation and expemes and for in
(            f j    liabilities. (See Mortgage Sec. 96.) Bonds of any series may be inued from time to time on the basic i          Iwuance of Additional llonds.
g                      (1) 60% of Propeity Additions after adjustments to offset retirements,(2) reti g                  , lien bonds otherwise than with Funded Cash and (3) deposit of cash. With certain exc g                        of (2) above, the ionance of Bonds is subject to adjusted netd earnings                                                h i    before
  ^3                      the preceding 15 months being at least twice the annual interest                                                requirements Such adnnted net    on al outstanding and on all indebtednco of prior rank, including the addnional iwue.
  ;0 0                    earnings are computed after expenses ihr maimenance and piovision for teti 20-propert); provided that, in lieu of the actual30,1}}

Latest revision as of 07:07, 13 December 2024

Forwards Licensing Applications & PSAR for Units 3 & 5.W/o Stated Encls
ML20098C936
Person / Time
Site: 05000000, Satsop
Issue date: 07/10/1974
From: Stein J
WASHINGTON PUBLIC POWER SUPPLY SYSTEM
To: Case E
US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML20093C821 List: ... further results
References
CON-WPPSS-035, CON-WPPSS-35, FOIA-84-603 GO3-74-29, NUDOCS 8409270290
Download: ML20098C936 (125)
v • d • e


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