ML18191A343

Washington Public Power Supply System Annual Report 1977

ML18191A343
Person / Time
Site:	Columbia
Issue date:	01/25/1978
From:	Washington Public Power Supply System
To:	Office of Nuclear Reactor Regulation
References
Download: ML18191A343 (38)

Text

Participants Public Agencies I

ES Private Utilities iv1unicipalities BRITISH COLUlgBIA ALBERTA ~ ~

A Nuclear Power Plants DA 0 MONTANA KM Hydroelectric Projects I iWNP NO.3 & NO.

6 Helena PACKWOOD LAKE kii HYDROELECTRIC PROJEC Tri.Cities4-

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(pi HANFORD GEN.

OREGON PROJECT NEV BA UTAH HANFORD RESERVATION WNP-NO.2&

i+ WNP-O 4

',WNP-NO. 1 L.

RICHLAND 0 Salt Lake City

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Highlights of ='l977 WASHINGTON PUBLIC POWER SUPPLY SYSTEM

~ $ 615 million par value of bonds ~ The Hanford Generating Project ~ Construction was started on the

'were sold in four separate trips to the (HGP) completed 11 years of opera- Diesel Generator Building, the last market, bringing the total bonds tion and generated its 37 billionth major structure for WNP-2.

issued since inception of the five kilowatt hour. Only one other nuclear plant in the free world has generated ~ The Nuclear Regulatory Commission Supply System nuclear power projects to $ 2.125 billion. Bonds outstanding a greater amount of electricity from (NRC) issued Limited Work Authori-a single unit. zations for WNP-3 and WNP-5 on totaled S1.989 billion at the end of the fiscal year. April 8, 1977. Preliminary site work

~ The Supply System and the Energy began on April 11.

~ A later sale of $ 230 million in reve- Research and Development Admini-nue bonds, on July 1'2, 1977, is be- stration (ERDA) reached an agree- ~ Exploratory drilling in search of ment to extend HGP operation. uranium for the Supply System began lieved to be the largest ever accom-in the Red Desert area of Wyoming.

plished under competitive bidding pro-OThe 966.ton WNP-2 Reactor Pres- Some uranium mineralization was cedures.

sure Vessel was successfully lifted 150 located.

~ The permanent, long term financing feet and lowered into the Reactor program for WNP-4 and WNP-5 was Containment Building for positioning. ~ Continuation and expansion of a launched. Two revenue bond issues It was the heaviest lift of its kind made study of an extensive area in the totaling 8235 million were sold. to date. Pacific Northwest for sites for possible The bonds were rated "A-1" and "A+" future generating projects was by Moody's and Standard and Poor's

~ Agreements were reached with 14 of approved.

rating services.

~

15 craft unions working on WNP-2, WNP-1 and WNP-4.

The Board of Directors WASHINGTON PUBLIC POWER SUPPLY SYSTEM Gathered for a quarterly meeting of the Management and control of the Supply System is vested in a Board of Directors Supply System's Board of Directors were, consisting of one representative from each of 19 consumer-owned utilities and clockwise around the table from the bottom left: C. K. Jolly, Glenn C. Walkley, Assis- three municipal electrical systems in Washington State. The Directors are:

tant Secretary, Glen R. Benjamin, (alternate from Klickitat County), Howard Prey, Don JOHN GOLDSBURY, Commissioner, HAROLD W. JENKINS, Commis-Hughes, A. E. Fletcher, Robert O. Kei ~

ser, T. R. Teitzel, E.W. Taylor, Secretary, Benton County PUD. sioner, Kittitas County PUD.

N.O. Strand, Managing Director; John ROBERT KEISER, Commissioner, GERALD C. FENTON, Commissioner, Goldsbury, President; John J. Welch, Vice Chelan County PUD. Klickitat County PUD.

President; Ed Fischer, Chairman of the A.E. FLETCHER", Commissioner, T.R. TEITZEL, Commissioner, Executive Committee; Dr. C.E. Emerick, Clallam County PUD. Lewis County PUD.

J.D. Cockrell, Ed O'ullivan (alternate from ED FISCHER", Commissioner, EDWIN W. TAYLOR, Commissioner, Seattle), W.G. Hulbert, Rolf E. Jemtegaard, Lane Bray, Quentin Mizer and Stanton H. Clark County PUD. Mason County PUD No. 3.

Csin. D.E. HUGHES", Manager of Engi- STANTON H. CAIN, Commissioner, neering 5 Planning, Cowlitz County Okanogan County PUD.

PUD. JOHN DUNSMOOR, Manager, HOWARD PREY, Commissioner, Pacific County PUD.

Douglas County PUD. LANE BRAY, Mayor, City of RICHARD H. WINDSOR, Commis. Richland.

sioner, Ferry County PUD. GORDON VICKERY", Superinten-GLENN C. WALKLEY", Commis- dent, Seattle City Light.

sioner, Franklin County PUD. ROLF E. JEMTEGAARD, Commis-C.K. JOLLY, Commissioner, sioner, Skamania County PUD.

Grant County PUD. W.G. HULBERT, JR.", Manager, JOHN J. WELCH, Commissioner, Snohomish County PUD.

Grays Harbor County PUD. J.D. COCKRELL", Light Superinten-dent, Department of Public Utilities, City of Tacoma.

DR. CHARLES F. EMERICK, Com-missioner, Wahkiakum County PUD.

"Member of Executive Committee.

Board of Directors/Executive Committee Report WASHINGTON PUBLIC POWER SUPPLY SYSTEM Those dramatic photographs of earth The goal of the studies, which will While we seek harmony with nature, taken from the moon some eight years continue throughout the years of we must strive for a balance of re.

'ago pointed out to all of us that earth operation of the projects, is to identi- sources to meet the economic, indus.

is indeed a lonely ship floating in fy potential problems and find trial and social needs of generations space and we are all passengers. methods to alleviate or surmount yet to come.

them.

The world has become increasingly Environmental protection is a complex aware of and concerned about the Policies have been established to process which must be matched with earth's environment and the need to protect the environment. Substantial technological progress to maintain that preserve and protect those resources sums, amounting to millions of dollars, balance.

which sustain life. are being spent to assure that there The National Environmental Protec-will be no adverse effects from those plants now being built, or those in tion Act establishes a policy, some operation.

purposes of which are to: President Board of Directors

~ Fulfill the responsibilities of each Project facility designers have and generation as trustee of the environ- must continue to carefully consider ment for succeeding generations. environmental impacts and design the facilities and equipment so that there

~ Attain the widest range of beneficial will be little or no impact from such Chairman uses of the enviroriment without activities as water intake or discharge. Executive Committee degradation, risk to health or safety, Construction activities are planned or other undesirable and unintended with the environment in mind. An consequences.

extensive system of dikes and ponds

~ Preserve important historic, cultural is being constructed at the site of and natural aspects of our national two projects in Grays Harbor County heritage and maintain, where possible, to control erosion. All land areas disturbed during construction will f, .W an environment which supports diver-sity and variety of individual choice. be returned to their natural states, I or landscaped if they are not used

~ 'Achieve a balance between popula- for project facilities.

tion and resource use which will permit high standards of living and a Structures also are designed to be wide sharing of life's amenities. compatible aesthetically with their JOHN GOLDSBURY surroundings.

~ Enhance the quality of renewable resources and approach the maximum These are just a few examples of the attainable recycling of depletable attention given to protection of the resources. environment by the Supply System planners and builders at all projects.

The Supply System is dedicated to these same principles. The environ- The nation has gone through two ment is of major concern to us. energy transitions in the past 100 years. First, wood, waterwheels and Extensive environmental studies were windmills gave way to coal; later, in carried out to assess the potential the 1950s, coal gave way to oil and effects on fish, wildlife, agriculture, natural gas. Technological progress has forestry and archaeology which might solved many of our energy problems, ED FISCHER result from construction or operation but energy technology develops of the five nuclear power projects. slowly. Finding substitutes for oil and An exhaustive environmental state- natural gas is difficult and time con-ment was prepared for each. suming and the economic, social, health and environmental constraints must be considered.

IIPPSS; its Organization and Mission WASHINGTON PUBLIC POWER SUPPLY SYSTEM The Washington Public Power Supply With WPPSS, the Board of Directors WPPSS built and operates a 27,500-System (WPPSS) is a non.profit muni- sets policy and determines if projects kilowatt hydroelectric project in the cipal corporation whose membership are desirable, based on forecasts of Gifford Pinchot National Forest in the consists of 19 public utility districts power needs by the 115 members of Cascade Mountains of Washington and and three municipal electric systems the Pacific Northwest Utilities Con- the 860,000.kilowatt HGP on the which operate within the State of ference Committee which is made up Hanford Reservation in Southeastern Washington. The main offices are in of public and investor-owned utilities Washington. HGP utilizes by. product Richland, Washington. and the Bonneville Power Adminis- steam purchased from an adjacent tration (BPA). ERDA-owned reactor known as N WPPSS was organized as a Joint Oper- Reactor.

ating Agency in 1957, to be the ve- The WPPSS staff of more than 700 hicle for cooperative, joint action by then carries out the policies and Under construction are five large its members. Its mission is to develop directives of the Board of Directors. nuclear-electric generating projects-and operate electric power facilities / three on the Federal Hanford Reser-for its members and other utilities of By itself, WPPSS does not forecast vation in Southeastern Washington and the Pacific Northwest. loads, operate distribution systems, two on a 2,170-acre site in Grays or establish retail rates. Power is dis- Harbor County in Western Washing-WPPSS is owned and controlled by its tributed over the BPA transmission ton.

member utilities. All power generation system to the participating utilities.

projects must be approved by the Power which is surplus to the needs of The total commitment for construc-members, acting through the Board of members may be sold to others, with tion of these five projects is about Directors. Each member utility has preference being given to public $ 7 billion.

one representative on the Board. bodies.

Members are either elected PUD corn. While WPPSS sponsors the prolects, missioners who represent and are re- WPPSS is not a government agency in other non-member utilities are parti-sponsible to the other commissioners the sense of levying taxes or making cipating by contracting to buy shares of their districts and to their custom. law, but it is a political subdivision of of the power to be generated. The

ers, or managers who represent their the state and is subject to all state laws revenue from power sales will be used u tilities. governing public bodies. No Federal or to redeem the revenue bonds. All pro.

State money is utilized. All projects jects are fully subscribed and the sale The WPPSS organization might be are financed by the safe of tax.exempt of all power guaranteed.

compared to that of a city with a revenue bonds which are redeemed with council. manager form of government. In preparing a financing program for revenue received from members or The City Council sets policy and two of the five projects, participants project participants for power they authorized spending up to 850 million authorizes projects; the City Manager have contracted to purchase.

carries them out with the city staff. to establish an "energy program".

As with other "public" corporations, The objective of the program is to cori-WPPSS is largely exempted from direct duct long range studies which will taxation, although an excise tax is paid enable the participants to determine on the electricity produced. In almost the best method of serving the pros-all other respects, its relations with pective needs of their customers for State and Federal agencies are much power and energy in the future wheth-the same as those which would exist if er it be coal, nuclear, hydro, solar, geo.

WPPSS were privately owned. thermal, wind or any other method.

In short, WPPSS is an organization:

with a commitment to service - service to the utilities of the Pacific North-west and, through them, to all the people.

Report from the Managing Director WASHINGTON PUBLIC POWER SUPPLY SYSTEM Fiscal year 1977 will go down in Even though the drought is a tempor- These include solar, hydro, wind, history as the year of the worst ary condition, the problem is not geothermal, coal, various nuclear tech.

drought ever in the Pacific Northwest going to disappear with the fall rains. nologies, non.generating alternatives and throughout the West. Water for Demand is growing as our population such as conservation and rate schedule both irrigation and power production and industrial development increases. adjustments. They also include keep.

was scarce. The hydroelectric system will reach its ing up with such emerging technolo-ultimate capacity and BPA will be- gies as municipal waste incineration, Conservation became the byword of unable to provide for any additional in-place coal gasification and nuclear the entire region; conservation of both growth of its customers after 1983. fusion.

water and electricity.

The prospect of potential electric energy shortages faces the region for The participants authorized spending The Pacific Northwest is heavily years to come, even with a return to up to $ 50 million for these long range dependent upon hydro sources for its "normal" water years. studies so that they may be prepared electrical energy-nearly 90 percent to make use of the best available of all electricity in the region is from The question of where to get more methods of producing power at the hydroelectric projects. A shortage of energy can be answered partially by lowest cost for the nearly 6.5 million water and consequently electricity, conservation. BPA, WPPSS member people who live in the 300,000 square-can disrupt the entire economy-utilities, and our project participants mile region served by project agriculture, commerce, industry, and are pursuing an aggressive program of participants.

even the life styles of people. Curtail-encouraging conservation.

ment of electricai usage to industries during the year resulted in the loss At the request of project participants, of jobs for many workers in the the Supply System also is pursuing Managing Director primary metals field. studies of alternate energy sources. Washington Public Power Supply System i, NEIL STRAND

)

Directing the activities of the Supply System Projects; Richard Q. Quigley, Chief Counsel; staff of more than 700 are these executives: P. C. Otness, Manager, Public Affairs and seated, left, Managing Director N. O. Strand, Duane L. Renbergar, Assistant Director, right, James D. Perko, Assistant Director, Generation snd Technofogy.

Finance and Administration. Standing, left to right, F. D. McElwee, Assistant Director,

The Year in Reuiew WASHINGTON PUBLIC POWER SUPPLY SYSTEM

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r Engineering drawings were studied by two Fiscal Year 1977 was a year of The impact of this construction work engineers in a maze of reinforcing steel "coming of age" for the Washington is apparent nationwide. Hundreds of pieced for the foundation of WNP-l.

Public Power Supply System as it industrial firms from coast to coast passed its 20th anniversary and moved and border to border, as well as over-into its 21st year of operation. seas, are working to manufacture ma.

terial and equipment used in building With its activities in construction of the five power projects. Dozens of five nuclear power projects, at a cost construction firms, large and small, of some $ 7 billion, the Supply Sys- have contracts to build various por-tem has become one of the largest tions of the projects.

construction utilities in the nation.

For construction, the typical problems were encountered at the start of the fiscal year, but there was encouraging progress in several areas as the year ended.

The fiscal year began in the midst of a strike by pipefitters and a concurrent lockout by major contractors at the

Stainless steel fuel pool liners arrived at the Hanford site by barge on the Columbia River.

Supply System's No. 2 project. The strike, which had begun in June, ul- P timately resulted in the suspension of certain construction contracts on the gSjlM project. @j After an agreement was reached in November, the pace of construction I ~

gradually accelerated. However, the six.month. long strike, and other fac-tors, caused a postponement of the I

project completion date for several months.

Negotiations with 15 other craft unions whose contracts were to expire during the year progressed without work stoppages and agreements were reached with 14 crafts, promising un-interrupted work for the next several years on the three nuclear projects under construction on the Hanford Reservation.

sector. Since inception of the nuclear Secretary, Edwin Taylor, Mason Progress was shown on the Supply System's two other projects, WNP-3 projects, the Supply System has issued County PUD No. 3 Commissioner and S2.125 billion of revenue bonds. a member of the Board for 15 years, and WNP-5, in western Washington During Fiscal 1977 alone, 8615 mil. and Assistant Secretary, Glenn with the signing of a State Site Certi-lion par value bonds were issued in Walkley, Franklin County PUD Com.

fication Agreement in October 1976 four sales. Investor acceptance contin- missioner and a member of the Board and the receipt of Limited Work ued to be very good, with interest since 1957. Collectively, the Board Authorizations from the Nuclear Reg-rates comparing favorably with appro. officers represent 43 years of experi-ulatory Commission (NRC) in April priate bond index values. ence in Supply System policy making 1977, permitting work to begin. By and project construction and oper.

the end of the fiscal year, site prepara. Fiscal 1977 was a year of change in ation.

tion work was well underway. Con- the organizational structure. Officers struction permits are expected to be of the Board of Directors, which Okanogan County PUD rejoined the received from the NRC in the fall to develops the policies that guide Supply permit work to proceed to comple. Supply System to become the 22nd System activities, are elected for two- member utility. Okanogan County tion. year terms by the 22 members of the PUD was one of the original 17 which WNP.5 is a duplicate of WNP-3, but is Board.

formed the Supply System in 1957, financed with WNP-4 as a single sys. but it withdrew from membership in tern. While arrangements were being At the biennial election in January, 1958. Its application for readmission 1977, officers elected were: President, made for the financing of WNP-4 and was approved in July 1976.

WNP-5 during the summer of 1976, John Goldsbury, Benton County PUD Commissioner and a member of the equipment was being ordered on op-Board for five years; Vice President, tion for both. When the financing John J. Welch, Grays Harbor County arrangements were completed through PUD Commissioner and a member of a series of agreements with the 88 the board for three years; re elected participating utilities and the large industrial users, the purchase options for about S100 million worth of material were exercised and firm orders placed.

The Supply System is a major parti-cipant in the money market, particu.

larly in the public power revenue bond

A surveyor marked the route for massive water pipes to serve WNP-1 at Hanford.

The administrative staff structure was refined to improve the Supply Sys-tem's capability to manage construc-tion of five large nuclear power pro-jects, with emphasis on the addition of contract administration specialists and experienced construction engine.

ers and managers.

Managing Director J.J. Stein retired on January 31, 1977, after 5'/s years as the chief executive officer and more than 30 years of public utility ex-perience. Neil O. Strand w'as appoint-ed by the Board of Directors to be-come the Supply System's third Managing Director in its 20-year Fiscal 1977 also was a year of growth Planning continued for design and history. for the Supply System staff because construction of the "Mid.Columbia Mr. Strand, who previously was Assist- of increased activities and responsi ~

Energy Exhibit Center," expected to ant Director, Projects, is a registered bilities. Applications or inquiries about cost about S1.5 million, in Richland.

professional engineer, with 25 years of employment were received at a rate of Construction is expected to start in experience in the nuclear power field, almost 1,000 a month. late 1977.

including design, construction and As of June 30, 1977, the Supply The center will have exhibits to show management duties. System had 714 permanent, full.time the evolution of man's use of energy, Mr. F.D. McElwee, a 25-year Army employees, an increase of 189 during as well as the technological, economic Corps of Engineers construction vet- the fiscal year. Many of those added and environmental aspects of various eran and later a nuclear project con- to the staff were on a professional, energy sources for the present and struction manager, was appointed to management or scientist level. future. Exhibit space will be leased to succeed Mr. Strand as Assistant other organizations associated with the The staff overflowed from the main Director, Projects. Mr. James D. Government's Hanford Project to pre.

headquarters office building in Rich-Perko, Supply System Treasurer, was sent a comprehensive display of all land and into leased portions of four appointed Assistant Director, Finance forms of energy use, research and other nearby office buildings. Staff and Administration. With Mr. Duane development.

increases are expected to continue for L. Renberger as Assistant Director, some years as new responsibilities such Land also was purchased for a future Generation and Technology, the ex- as security and project operation are visitors'enter near the Supply Sys-ecutive level ranks were completed. added. tem's office in Elma, which is head.

quarters for engineering of WNP-3 The Supply System maintains con-and WNP-5 in Grays Harbor County.

tinuous and active Equal Employment Opportunity and Affirmative Action Through exhibits, audio. visual displays programs. There also are manage. and other material, the centers will ment training and development pro- enhance public knowledge of nuclear grams and a tuition refund program generated energy and the role of the for employees who wish to improve Supply System and its participants in their job skills with additional ed- seeking the most practical and eco.

ucation or training. nomical methods of providing energy for homes, farms, industries and busi-nesses of the region.

The many other significant milestones passed in Fiscal 1977 are described in other sections of this report on Pro.

jects, Finance, Energy and the Uran-ium Bearing Lands Acquisition Pro-gram.

WPPSS and the Regional Power Programs WASHINGTON PUBLIC POWER SUPPLY SYSTEM new thermal resources. In this pro-ject, the nuclear reactor to supply steam was built by the Federal Government.

Based on agreements with public and private utilities, the generating facility was financed and built by the Supply System, making use of a resource that otherwise would have been wasted.

The electrical energy is transmitted through the region by BPA and inte-grated into the total regional power re.

source system by multi.party Ex-change Agreements.

The Hanford Exchange Agreements W

provided the framework for similar arrangements between BPA and the public utilities for the Supply System's Nuclear Projects 1, 2 and 3. The de-cisions to build these thermal plants r were the result of the Hydro-Thermal s

L Program developed by joint action of public and private utilities, BPA and major power users in the Pacific

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Northwest in the late 1960s.

Qa The first phase of this program was designed to meet projected power requirements into the early 1980s.

The proposals of various plant spon-sors were coordinated and scheduled so that the expected needs of all Workmen from the Flathead Electric Co. dams to provide a generation system power users could be served best operative, Kalispell, Montana, worked unequaled in size, reliability, flexi- while, at the same time, the number against a backdrop of the Rocky Mountains. bility and low cost. However, there is of projects which would be needed Flathead REA is ona of 110 public agencies a limit to the total energy which can was minimized.

which will share in power to be produced by WPPSS projects. be extracted from the rain and snow In addition to WNP-1, 2 and 3, other which fall over the Pacific Northwest thermal projects and their chief to run into the river system and make The average Pacific Northwest resident sponsors in this phase of the program power generation possible.

uses about the same amount of total were the Jim Bridger coal-fired plants The realization that the full utilization in Wyoming and the Centralia coal-energy as the national average, but he uses nearly twice as much electric of this basic solar system (evaporation fired plants in Washington by Pacific of moisture at lower elevations and Power and Light Co., and the Trojan energy as the national average and reprecipitation at higher elevations) and Pebble Springs nuclear projects pays about half as much per kilowatt was near, led power planners to begin in Oregon by Portland General Elec-hour for it.

to consider thermal resources in the tric Co. With the exception of the early 1960s. Pebble Springs unit, all the projects Historically, power development in the of the first phase of the program are region has concentrated on putting the HGP is one of the earliest examples of completed or under construction.

vast Columbia River system to work. the cooperative program which began Multipurpose Federal dams for flood to supplement the hydro base with control, irrigation, recreation and power generation have been coordi-nated with public and private utility

Regional Loads and Resources Figure 1 The first phase will produce an addi ~

Average MW 000 tional B,400,000 kilowatts of gener-ating capacity.

40 In the early 1970s, a second phase of the program began to develop to meet Loads 30 projected needs until the late 1980s, with an additional 8,600,000 kilowatts of generating capacity.

Th ermal Resources 20 This second phase includes the Supply System's Nuclear Projects 4 and 5.

Other projects and their chief sponsors 10 Hydro Resources (cnucal water Year) are the Colstrip coal. fired plants in Montana by Montana Power Co.; a fourth unit of the Jim Bridger coal-77.8 878 92-3 97.8 fired plant in Wyoming by Pacific 82 3 Operating Year Power and Light Co.; the Boardman Chart shows the relative growing importance of the thermal resource to meet the total coal. fired plant in Oregon by Portland regional needs. Hydro resources shown are for a critical water year which causes deficits to General Electric Co.; the two Skagit be shown.

nuclear projects in Washington by Regional Thermal Resources Figure 2 Puget Sound Power and Light Co.; and Average MW 000 a second unit of the Pebble Springs 15 nuclear project in Oregon by Portland General Electric Co.

In addition to cooperation in schedul-Total Thermal Resources ing the time of construction of these 10 projects, most have cooperative, joint utility ownership. Since no single utility in the region has an annual growth at the generating capacity level WPPSS Projects of the projects 500,000 to 1.million kilowatts - joint ownership better meets their individual growth require.

77.8 82.3 87-8 92.3 97.8 ments and diversifies their resource Operating Year base.

Chart shows the relative proportion of the total thermal resource which is supplied by WPPSS projects.

Large industrial users Direct Service Public Utilities Resources Figure 3 Customers who receive their power Average MW 000 directly from BPA also make up an 15 integral part of the cooperative plan-Total Resources ning process. They have signed unique short-term Power Sales Agreements with the Supply System in which they 10 Federal Hydro Allocation agree to purchase power, from WNP.4 and -5 which might be surplus to the public utility participants during the 5 WPPSS Projects early project operating years, but agree e

to relinquish this power upon proper notice if the Participants find their Utility Owned Resources needs growing or other expected 77-8 82.3 87.8 92.3 97-8 resources do not materialize.

Operating Year This cooperative arrangement allowed Chart shows the makeup of resources available to the public utilities and the growing the Supply System to begin building importance of the WPPSS projects to supply the needs of these utilities. slightly in advance of projected public 10

Airliners were lined up at the fabrication plant which obtains its power from the Snohomish County Public Utility District.

agency needs in order to meet regional power needs and yet helped support or firm up parts of contracts between the Direct Service Customers and BPA for interruptible power.

While all of the projects of the second phase of the hydro-thermal programs are either under construction or under application for construction permits, a more formal Regional Power Plan has been developed for consideration.

The plan will permit renewal of con-tracts with BPA in conjunction with an allocation of the Federally control ~

led hydro. thermal base of about 9,500,000 average kilowatts. A signi ~

ficant principle of the proposed pro.

gram is the right of BPA to purchase power from plant sponsors on life-of-project contracts and resell the power to public, private and industrial

~j/ KJ users. These purchase contracts should give added assurance of support for the extensive financing which will be pf required to continue to meet the growing demands of the Pacific Northwest Region.

This program will require Congres.

sional approval and will be subject to extensive discussion and possible modification before it would be accepted. Whatever the form of the final program, it is clear that the unique cooperation which exists among key parties in the Pacific An electrically powered band saw carved a Northwest Region will continue and giant forest log in a lumber mill served by the Supply System can be expected a WPPSS member public utility district.

to play an increasingly important role.

Role of WPPSS in the Regional Power Program WASHINGTON PUBLIC POWER SUPPLY SYSTEM In the Pacific Northwest, where the Supply System serves, there are 115 publicly owned electric utilities, some large, but many that are small. All are looking for a source of the energy they know will be needed in the future. The Supply System provides that source.

1 A high percentage of these public utili ~

ties participate in the Supply System's projects. This broad base of utilities helps make possible the financing of large power generating stations.

I There are three major classification of these public utilities: Public Utility Districts (PUDs), Municipalities and Cooperatives.

Each utility is self-governed and independent. They are geographically dispersed throughout Washington, Oregon, Idaho, western Montana and one each in the fringe areas of Wyoming, Nevada and California.

These utilities have long histories of efficient and reliable service to the people they serve and who elect their governing bodies.

In addition to the public utilities, there are four investor-owned utilities which are partial owners in two Supply System projects. They are: Pacific Power and Light Co., Portland General Electric Co., Puget Sound Power and Light Co. and The Washington Water Steam from geothermal heat rose in the air The Supply System might be described Power Co., operating in Washington, above the Idaho plain as drilling proceeded as a synergist in the regional energy Oregon, Montana, Idaho and Wyoming.

on the Raft River Project.

supply program, bringing together individual utilities to produce an effect There also is indirect participation by greater than the sum of the effects of the large industries of the region and, the individual agencies - generating in particular, the aluminum producers, more power by operating jointly than which have contracted to buy any could be produced by the utilities surplus power from several projects.

acting individually. Thus, the financial backing for Supply System projects is broad and diverse.

The utilities involved operate in several states and participation is spread among public and private utilities, as well as private industry.

The role of BPA is especially signifi ~

cant. First, the extensive BPA transmission system ties the projects to the utilities'ervice areas. Second, 12

Center pivot irrigation systems, in wide use in the semi. arid regions of the west, require large supplies of power.

the contractual arrangements for three of the Supply System's projects puts BPA, and thus the Federal Government, in a supporting finan-cial role. Third, the Federal hydro system, which BPA coordinates and whose power it markets, provides an ideal power base for maximum utili-zation of the Supply System's thermal power projects.

The low cost of this large hydro base, which is a substantial portion of the public utility resources, dilutes the higher cost of new thermal resources and provides for their melding into the utilities'ost base in an economically acceptable manner.

In the total system, power from Supply System projects will be used throughout a 300,000-square-mile region and, in different ways, will reach almost all of the nearly 6.5-million people in the region.

Of the 110 public utilities presently and this economy is strong and grow. Almost all of these activities are grow-served, there are 26 PUDs, 32 Munici- ing faster than the U.S. average. ing at a rapid rate, but there is palities, and 52 Cooperatives. The fi- considerable room in the Pacific The economy is highly diversified. Northwest for additional growth.

nancial obligation of each of these public utilities has a common thread- Key areas are: There are millions of acres available an absolute agreement to pay its share ~ Agriculture, with primary products for new irrigation projects and there of the project costs, independent of of wheat, fruit, potatoes and beef are sizable timber reserves.

whether the project ever operates. and important secondary activities in Even though current and projected food processing. population growth rates in the Pacific Further, each utility agrees to an auto.

matic increase in its mandatory ~ Timber products, principally lumber Northwest exceed that of the U.S.

obligation by as much as 25 percent and paper. average, the population density of the if one or more participants are unable region is still very low.

to meet their obligation. ~ Aircraft manufacturing.

The expectation of a continuing rapid Each utility also agrees to set rates at ~ Primary metals, principally expansion of the region's economy is a level necessary to meet its obligation. aluminum. very reasonable and a vital key to this Because each utility sets its own rates expansion is a continuing, reliable independent of any outside rate review

~ Mining. source of energy. The Supply System, agency and, since the utilities current- ~ Fishing. vith its strong base of project partici-ly have some of the lowest rates in the pants, is moving ahead to match the nation, there is a strong confidence ~ Foreign trade with Pacific rim expected energy demands.

that they can and will meet their countries.

financial obligations to the Supply ~ Military activities, with major Navy, System. This is a key factor in the Army, and Air Force bases in the ability of the Supply System to attract Puget Sound area.

the capital needed to construct its projects.

The real base of the ability to meet these obligations is the economy of the region which the utilities serve 13

Projects in Operation WASHINGTON PUBLIC POWER SUPPLY SYSTEM iJ i

~ ~

r I .m%

Deer are almost daily visitors to the Hanford watt hour. This compares with the Generating Project lawn, adjacent to the Hanford Generating Project Federal Government's N Reactor. 1976 electrical production of The Supply System's 860,000.kilowatt 2,608,440,000 kilowatts at a cost of HGP completed 11 years of operation 11.9 mils per kilowatt hour. The as the 1977 operating year ended.

improvement in electrical production in 1977 resulted from the restoration During the year, the project passed a milestone with the generation of its 37- of the turbine generators to full billionth kilowatt hour. Only one production capability following other nuclear plant in the free world problems with cracks in some turbine has generated a greater amount of blades.

electricity from a single unit. The daily production of HGP, about 20.million kilowatt hours, meets the HGP's gross generation for the Fiscal needs of a city with a population of Year was 3,985,710,000 kilowatt 531,000, or the size of Seattle, and is hours at a cost of 7.3 mils per kilo-equivalent to the daily electrical pro-duction of the hydroelectric plant at The Dalles Dam on the lower reach of the Columbia River.

Because of a region-wide drought which drastically reduced water flow in the rivers which provide about 80 percent of the region's power through hydroelectric projects, the HGP operation was extended from the nor-mal shutdown in mid-May until mid-July to supply power to the region and to permit maximum conservation of water resources.

14

The Supply System reached agreement with ERDA to extend HGP operation five years beyond the scheduled ex- Qe piration date of October, 1977. The v new agreement calls for annual in.

creases in the amount paid for the steam from the E R DA's "N- Reactor" which is utilized to generate power in the HGP turbines.

The Supply System paid almost $ 20 million for steam during the 1977 operating year. Under the new con.

tract, for a year in which about 4.5.

billion kilowatt hours are generated, the payment will rise from $ 34 million '@+A)starlit in 1979 to about $45 million in 1983.

Until the next nuclear power plant becomes operational in 1980, power produced by HGP fills about 30 per-cent of the projected deficit in the BPA service area.

Packwood Lake Project The Packwood Lake Project was began to melt. It was increased to Maiestic,snow~overed Mt. Rainierprovides affected by a lack of precipitation 19,100 kilowatts as the operating year a scenic view from the 27,500.kilowatt during the 1977 Fiscal Year. In most Packwood hydroaiectric power generating station.

years, snow lies as much as 6 feet deep on the shore of Packwood Lake The 27,500.kilowatt project has gener-and ice may still cover the lake surface ated a total net 1,327,195,800 kilo-well into the spring months. Snow has watt hours in its 13 years of operation.

been measured 16 feet deep in some In the fall of 1976, repairs were com-years on some of the rugged mountain pleted to the tailrace lining and peaks that surround the lake in the mechanical screens which were dam.

Gifford Pinchot National Forest of the aged in severe flooding in 1974.

Cascade Mountains.

Repairs were also completed to a Fiscal Year 1977 was an extraordinary damaged 100-foot section of tunnel year of very little snow or rain, re. lining which is part of the pipeline-suiting in little runoff water to gener- tunnel. penstock system which delivers ate power in the Supply System's water from the 450.acre lake, 2,850 Packwood Hydroelectric Project. The feet high in the mountains, to the generation of 82,922,700 kilowatt powerhouse near Packwood, 1,800 hours0.00926 days <br />0.222 hours <br />0.00132 weeks <br />3.044e-4 months <br /> during the year was 27.4 percent feet below.

less than in Fiscal 1976 and 18 percent less than the historical average annual generation. Generation fell to as low as 5,000 kilowatts during the late winter months before the scant snow-pack, measured at 16 inches in March, 15

Projects in Construction WASHINGTON PUBLIC POWER SUPPLY SYSTEM In the chilly, gray, early dawn of March 31, 1977, the "Hanford Giant" began the work day.

The "Hanford Giant" was the nick-name for the twin 325-foot-long boomed luffing rig hoist which was to lift the 966-ton Reactor Pressure Vessel (RPV) more than 150 feet into the air and then down into the reactor containment building, to be positioned precisely on preset mounting bolts on the reactor pedestal.

Months of preparation preceded the lift. Tons of concrete were poured as a foundation for the twin booms. The hoist was assembled on site, erected and tested to 1,344 tons, providing a capacity 39 percent above that required.

The lift was made several days ahead of schedule with the early morning start scheduled to take advantage of most favorable weather conditions.

The whole task was completed in 11 hours1.273148e-4 days <br />0.00306 hours <br />1.818783e-5 weeks <br />4.1855e-6 months <br />.

It was described as only a short distance of travel, but a major mile.

stone of construction.

The 966 ton Reactor Pressure Vessel for It was the first time a reactor had been WNP.2 was suspended over the contain-Nuclear Project No. 2 set in place with the internal com-ment shell before being lowered into position. The yyashington Public Power Supply ponents already installed. This made it System's Nuclear Project No. 2 the heaviest lift of its kind to date. It (yyNP-2/ will use a General Electric is expected this will save months of Co. nuclear steam supply system with critical path time and savings amount-a boiling water reactor and a N'esting- ing to millions of dollars.

house turbine generator with a net As the fiscal year drew to a close, electrical output of 1,100,000 kilo-construction was accelerating after a watts. The plant willhave a system of costly strike by plumbers and steam.

six circular, mechanical draft cooling fitters, coupled with a lockout by towers for off-stream cooling of the national contractors, which continued turbine condenser. The project siteis about 10 miles north of the City of from June until November 23, 1976.

Richland and 3 miles west of the Most workers of other crafts did not Columbia River on the Federally- cross the picket line and the number owned Hanford Reservation. yyNP-2 of craft workers dropped to about 150 is expected to be in commercial from the peak of about 1,000 before operation in 1980. the strike began. The buildup of craft workers after the strike ended was slowed by the holiday season and the 1,000 mark was not reached again until late April. It was approaching 1,100 as the fiscal year ended.

16

The "Hanford Giant" was the nickname given the luffing rig used to lift the 966.ton Reactor Pressure Vessel into WNP 2.

Because of the lengthy strike, and other factors, the commercial operating date was rescheduled for the fall of 1980 instead of June 1980.

During the year, construction progress advanced 11 percent to 43 percent completion and design engineering advanced to 87 percent completion.

Three major construction contracts and one contract for prepurchased a

~ 4 equipment were awarded for a total

!  %- lE of more than $ 313 million. Only six equipment and eight construction p ~ Lt+t contracts remained to be awarded to complete the project.

C A In terms of work completed during the year, about 15,000 cubic yards of con-crete were placed, 40,000 linear feet (8 miles) of large diameter pipe and 132,000 linear feet (25 miles) of cable tray were put in place. In addi ~

tion, 310,000 pounds of heating and ventilating duct work were installed.

Construction of the six cooling towers, the condenser circulating water piping, installation of the cooling tower makeup-water, circulating. water blow-down piping, river makeup water inlet and the civil and structural portions of the Recycle Building were completed.

Transformers were set in the main transformer yard and the turbine makeup. water pumphouse was essen-tially completed. Warehouses were built and filled with equipment for nt subsequent installation.

'f,']

The Diesel Generator Building - last major structure in the project - was started.

The Final Environmental Report was submitted and accepted by the NRC for review in December 1976. Work l) I

],j}lj j continued on preparation of the Final Safety Analysis Report.

Fiscal Year 1977 was the year in which WNP-1 and WNP-4 began to take shape and form.

With the excavation of more than 1.5-million cubic yards of earth completed the previous year, placement of con-crete began to accelerate. The con.

tainment building foundations each required 27,000 cubic yards of concrete.

The projects also will have structures that are the first of their kind in the nation steel plate lined reinforced concrete containment shells, designed t to meet all the requirements of the

~mph American Society of Mechanical Engineers Code for nuclear purposes.

A $ 67r363,970 contract for the containment structures was awarded during the year. It is one of the largest field construction contracts on r F the projects.

I~

Meanwhile, engineering advanced by 21 percent to 73.6 percent complete, The shape of WNP-1 began to become and emphasis continued to shift from apparent with the construction of the steel Nuclear Projects No.l and N0.4 engineering, planning and licensing liner for the reactor containment shell. activities toward physical construc-The Vyashington Public Power Supply System's Nuclear Projects No. 1 tion. More than 400 craftsmen were working at the site by the end of the (VVNP-1j and No. 4 (VVNP-4J are fiscal year.

duplicate 1,250,000-kilowatt nuclear power plants. Each plant will use a Construction of WNP-1 increased to Babcock and Wilcox nuclear steam 4.6 percent complete and WNP 4 to supply system with a pressurized water 1.6 percent complete at the end of the reactor and a VVestinghouse turbine fiscal year. The two projects have generator. Each willalso have a system been scheduled for completion 18 of three mechanical draft cooling months apart to permit more efficient towers for offstream cooling of the ~ use of the labor force.

turbine condenser water. VVNP-1 and Work on WNP 1 is proceeding under VVNP 4 will share a pumphouse on a full Construction Permit from the the Columbia River to provide water to make up for evaporative and other NRC which allows construction to losses from each plant's cooling completion. WNP-4 work is progress-system. The two power plants willbe ing under an extended Limited Work about 3,000 feet apart on sites about Authorization.

10 miles north of the City of Richland Issuance of a Construction Permit for and about 2.5 miles west of the WNP-4 was delayed pending further Columbia River. VVNP1 is expected investigation of an earthquake which to be in commercial operation in took place in the northern Cascade December 1982 and VVNP-4 in Mountains in 1872.

June 1984.

No detection instruments were avail-able at the time of the earthquake so the only sources of information for 18

Reinforcing steel was put in place in prepa.

ration for a concrete pour at WNPX.

investigators were reports in news-papers of the time and other limited written records.

A panel of expert geologists commis-sioned to evaluate all the available historical information concluded that the earthquake was centered some-where between Lake Chelan and the Canadian border and that the maximum intensity that could be assigned was Vill on the Modified Mercalli scale.

Later the NRC and the U.S. Geological Survey concluded that additional data would be required before any deter-mination could be made as to the earthquake source and its impact on the seismic design of WNP-1 and WNP-4.

The Supply System renewed and expanded the study effort using detailed geologic mapping, geophysical studies, remote sensing evaluations and airborne ma g netome te r s ur veys.

The data will be submitted to the NRC in the first year and that only a small of Fisheries claimed some impact to in the fall of 1977 with the expecta- proportion of the workers were new emerging Chinook salmon fry as a tion that the Construction Permit residents. result of the study and asked EFSEC will be issued in early 1978. to conduct a hearing and set a value However, a group of 11 taxing districts requested impact payments totaling for damages. Hearings took place During the year, 99 contracts with a intermittently from March 8 through value of $ 99 million were awarded $ 11.8 million. The Supply System proposed an agreement for $ 1,228,000 April 28 and then recessed while the for prepurchased equipment, bringing for impacts that could be demon. Supply System and the Department of the total awarded for equipment to strated. Fisheries attempted negotiations for a

$ 364,668,589. In addition, 13 con-settlement. This matter also was struction contracts with a value of The matter was taken to the State pending resolution at the end of the

$ 110 million were awarded, bringing Energy Facility Site Evaluation fiscal year.

the total for construction to

$ 219,213,763. Council (EFSEC) after an impasse was reached. The matter had not been In activities not associated directly resolved at the end of the fiscai year.

with construction, the first annual progress report of a continuing three. Hearings also began before EFSEC on year socioeconomic impact study was a petition by the State Department of issued. The study is to assess the Fisheries related to a study of the effects that large numbers of project Columbia River under low.flow condi-workers many from other areas- tions in April 1976. The Department have on the social and economic services and agencies provided by the various taxing districts.

The first progress report noted that impacts were limited because of a lower than expected employment level l9

On April 11, 1977, men and machin-ery moved onto the land that will be the site of duplicate nuclear power plants, moving the WNP-3 and WNP-5 projects beyond the planning stage and into the construction stage.

It was the beginning of an 8-year con-struction project and the end of a 3.

year effort to obtain a Limited Work Authorization (LWA) from the NRC to begin work. Issuance of the LWA had been expected in early August 1976, but on July 21, the District of Columbia Circuit Court of Appeals issued a directive that environmental considerations of various elements of the nuclear fuel cycle, such as fuel reprocessing and waste management, be more fully incorporated into NRC deliberations before a license could be issued.

Resumption of licensing was author-ized on November 5, 1976, and the LWA for WNP 3 and WNP-5 was issued April 8, 1977 after further reviews of possible environmental impact and geological and seismo.

Bulldozers were at work clearing the site Nuclear Projects No.3andNo.5 logical adequacy of the site as related where WNP-3 and WNP-5 will be built. to an earthquake which occurred in The VVashington Public Power Supply the Pacific Northwest in 1872.

System's Nuclear Projects No. 3 On May 24 and 25, the Atomic Safety (VVNP-3f and No. 5 (VVNP-5j are and Licensing Board conducted formal duplicate 1,240,000-kilowatt nuclear hearings to take up health and safety power plants. Each plant will use a issues and other information required Combustion Engineering nuclear steam in advarice of the issuance of a Con.

supply system with a pressurized water struction Permit.

reactor and a VVestinghouse turbine generator. The plants willuse hyper- While awaiting the proper permits to bolic, natural. draft cooling towers for begin work, materials such as large offstream cooling of the turbine concrete pipe began to arrive. Space condenser. The plants willbe built end had to be leased for storage. Special to end on a site about 16 miles east of permission was received from the NRC Aberdeen, 27 miles west of Olympia for an on. site laydown area for and 3 miles south of the town of equipment.

Satsop in Grays Harbor County. Between the time the LWA was VVNP-3 is expected to be in com- received and June 30, 1977, five mercial operation in September 1983 contractors had started work at the and VVNP-5in March 1985. site on clearing and grubbing, erosion control facilities, major excavation, soil testing and monitoring and development of the open-storage laydown areas.

20

Workmen prepared a drain system to pre.

vent erosion at the WNP.3 and WNP-5 site.

Between July 1, 1976 and July 1, 1977, 42 contracts were awarded for WNP-3 and 5 totaling S141,422,824.

Effective contracts at the close of the fiscal year totaled $ 474,978,773.

Work has been divided into 64 different tasks, each of which will form the basis of a separate construc-tion contract, ranging in value from 8250,000 to 824 million.

At the end of the fiscal year, engi-neering design had progressed to 63.5 percent complete on WNP-3 and 60.9 percent complete on WNP-5.

As with its projects WNP-1 and WNP-4 near Richland, the Supply System is obligated to make assistance payments to offset social and economic impacts in the region surrounding the WNP-3 and WNP-5 projects.

Negotiations with school districts and other taxing districts were begun and it was expected that agreement would be reached before the end of calendar year 1977.

they will least affect the migrating Power and Light Co., (5 percent), and In environmental studies, migrating fish in the Chehalis River. The Washington Water Power Co.,

salmon assisted engineers.

(5 percent).

The Site Certification Agreement for Each fall, Coho and Chum salmon the projects allows withdrawai of 80 The Supply System portion of the swim from the ocean into the Chehalis cubic feet of water per second from electrical output of WNP-3 will be River and then into the Satsop River the Chehalis River when the river flow purchased by 103 consumer-owned to spawn. Many of the salmon are headed for a State Department of is more than 550 cubic feet per utilities and delivered to them over second, a condition that is normal BPA's high voltage transmission Fisheries hatchery, about 20 miles upstream from the confluence of the except for an average of 14 days a system.

year. This constraint was considered Satsop and Chehalis Rivers. WNP-5 will be jointly owned with a limiting factor on plant operation A team of scientists retained by the and the scheduling of plant refueling. Pacific Power and Light Co., which Supply System captured some of the A petition was filed in Thurston will have a 10-percent share. The 8-to-10.pound fish and fitted them County Superior Court for modifi- Supply System's share of power from with small, battery. operated sonic cation of this section of the site WNP-5 will be purchased by 88 transmitters. The fish were then taken agreement. consumer. owned utilities.

back to the Chehalis River, to a point The Supply System will own 70 about 2)s miles downstream from the percent of WNP-3 with the remainder mouth of the Satsop River. There, owned by Portland General Electric they were released to repeat the final Co., (10 percent), Pacific Power and stage of their migration, with the Light Co., (10 percent), Puget Sound scientists tracking their route by using sound detection equipment to pick up the signals.

The fish-tracking study will be used to locate the water discharge pipes where 21

Special Programs and Studies WASHINGTON PUBLIC POWER SUPPLY SYSTEM Others work on a study comparing the economics of coal-fired and nuclear power plants.

On the Red Desert land of Wyoming, in the Great Divide Basin, exploratory drilling goes on in search of uranium ore to be converted into fuel for Supply System nuclear power projects.

ln Florida, a phosphate fertilizer manufacturer considers installation of facilities to extract uranium from the residue under an agreement with the Supply System.

In California, a consulting firm makes preparations for an extensive study of the Pacific Northwest for suitable sites for possible future thermal power projects of the Supply System.

These are examples of activities taking place under several different programs aimed at making it Supply'ystem possible for participants in Supply System projects to determine the best methods of meeting the projected needs of their customers for power and energy... of making sure sites 3

are available for future projects...

and assuring a continued future fuel supply for projects now under construction.

One such activity is the Energy 4

Program, with about $ 1 million budgeted for calendar year 1977. The short-term objective of this program is to plan for the possible addition of power projects, or other means, such as conservation, to equal about 2.5.

million kilowatts in the Pacific Northwest.

A crew operated a drilling rig in the search On the Snake River Plain in south for uranium ore in the Red Dasart of central Idaho, well drillers probe The long-term portion of the program Wyoming. involves studies in many different 6,000 feet deep into a geothermal reservoir. areas of energy resources. They include: hydroelectric, geothermal, In Richland, Washington, some Supply central station solar, central station System employees do their work in wind, fusion, liquid metal fast breeder a building partially heated and cooled reactor, high temperature gas cooled with solar energy. reactor, gas cooled fast breeder re-actor, light water breeder reactor, in-place coal gasification, fuel cells, municipal waste utilization, decentral-ized solar system, conservation, pumped hydro storage and others.

22

The studies will have a Pacific However, increasing difficulty in Late in 1975, the first phase of a siting Northwest orientation and an obtaining firm contracts for the program for future thermal generating emphasis on demonstrated techno. remaining needs brought about the plants was completed. More than a logies. Research and technological Supply System plans to conduct its year had been spent surveying an area development are felt to be the pro- own exploration. of 170,000 square miles. Twelve vince of the large national associations candidate sites, ranging in size from while the utilities concentrate their Rights were acquired to explore on a 400 to 1,000 acfes, were identified efforts on demonstrating new tech- total of 363,000 acres in Wyoming's as example sites within favorable siting nologies on the utility grid. Red Desert and exploratory drilling areas for future consideration.

began in June 1977. Some uranium The Energy Program is financed with mineralization has been located, but Late in Fiscal 1977, a continuation WNP-4 and WNP-5 bond proceeds. deposits found to date are of a grade and expansion of the study was ap-Participants authorized up to 850 or thickness which do not warrant proved. The continuing study will million for the program. commercial exploitation. However, first rank the possible nuclear project This comprehensive program allows a discovery of any mineralization so sites for discussion with local, state thorough evaluation of the economies early in the program is considered and regional agencies, organizations and impacts of various alternatives, favorable. and individuals. The sites then, will be permits the orderly selection of the submitted for prequalification and After the exploration program was "banking" for possible future use.

optimum next project and then pro- announced in December 1976, the vides the financing necessary to begin Supply System quickly began receiving A second phase will continue the coal-that project and carry it until per- proposals from mining claim owners. siting portion of the previous study manent financing can be arranged. Some came to the Supply System over a larger geographic area. It also In Idaho, the Supply System is acting offices bringing samples of ore. will include identification of pos-for the Public Power Council during sible sites, ranking and selection for By the end of the fiscal year, nearly future evaluation and "banking."

the design and planning stages, pro- 100 proposals for development had viding design and procurement review been received. Most were rejected for The study is expected to take a year and consultation with project sponsors various reasons such as possible legal to complete.

of the Raft River Geothermal Project. restrictions, negative evaluation, limit-The project is a joint program of the ed potential or time restrictions, but Federal Government and the Raft several proposals showed promise and River Rural Electric Cooperative. The were being evaluated for possible project, near Malta, will provide a further action.

test facility for evaluating the per-formance of a binary system as a Earlier in the year, the Supply System means of extracting electrical energy entered into a contract with a phos.

from a medium temperature geo- phate fertilizer manufacturing firm in thermal resource. Florida to supply uranium as a by-product of their phosphate opera-The search for uranium is taking place tions. The contract, believed to be under the "Uranium Bearing Lands one of the first of its kind in the Acquisition Program" (UBLA), also nation, provides for the sale of authorized for up to $ 45 million by uranium concentrates to the Supply WNP-4 and WNP-5 proceeds. The System for 15 years, beginning in objective is to secure at least 10- 1980. Production and sale of the million pounds of proven reserves by concentrates is contingent upon con-the mid-1980s. tinued operation of those facilities.

Although the firm has until near the The Supply System has contracts end of 1977 to make a decision, which entirely fulfilluranium require- expectations are that it will proceed.

ments for three nuclear power projects through 1986 and half of their require-ments for another 8 years, through 1994. In addition, for the other two nuclear projects, the Supply System has contracts for uranium to meet their needs into the early 1990s.

23

Financing Activities WASHINGTON PUBLIC POWER SUPPLY SYSTEM The Supply System sold $ 615 million Accumulated Financing Resources par value of bonds during fiscal year WNP Nos. 1-5, Inception through June 30, 1977 ended June 30, 1977. These sales ( S In Millions ) Table I increased total bonds outstanding to Accumulated Proceeds Bond Investment Percentage

$ 1.989 billion. The projected future Income Earned Financing Change St Note Sales Resources financing program requires approxi-mately $ 5.0 billion to be raised From Inception through 1983. through 6-30-74 S340 S14 S354 Base Nuclear Projects Nos. 1, 2 and 3 7-1.74 through 6-30.75 331 26 712 +101%

Financing Effort 7-1-75 through During the fiscal year that ended 6.30.76 640 46 1,597 +125%

June 30, 1977, the Supply System 7.1.76 through 6 30.77 614 63 2,274 42%

sold $ 380 million par value of bonds for Nuclear Projects Nos. 1 and 2 in Total Accumulated two separate trips to the municipal Financing Resources S2,125 6149 revenue bond market. These revenue bonds were rated "Triple A" by WPPSS Municipal Bond Sales Compared to Moody's and Standard and Poor's Other Public Power Municipal Bond Sales Table II rating services. The average weighted borrowing cost for these two issues Billions of Dollars was 6.1 percent. These sales increased 3.5 total bonds outstanding for Nuclear Projects Nos. 1 through 3 to $ 1.585 billion. The borrowing cost for these issues over a four year period ranged from 5.7 percent to 7.86 percent.

3.0 2.5

~

~Total Public Power Municipal Revenue WPPSS Muncipal Revenue Bond Sales Bond Sales On July 12, 1977, after the close of 2.0 the fiscal year, the Supply System sold

$ 230 million par value of revenue 1.5 bonds for Nuclear Project No. 3. The borrowing cost for this issue was 5.71 1.0 percent. WPPSS has been advised that this sale was the largest ever accom- 32%

plished under competitive bidding 21%

34%

procedures in the history of the municipal revenue bond market. This Fiscal Year 1975 1976 1977 sale brought the total debt outstanding Ending June 30, for Nuclear Project No. 3 to $ 480 million at an average borrowing cost the financing programs for Nuclear financing program for WNP-4 and of 6.55 percent. Table III shows that Projects No. 1, 2 and 3 are 42 percent, WNP-5 which are being financed as 78 percent, and 51 percent completed a separate single system. During the respectively. fiscal year ending June 30, 1977 the System sold $ 235 million par value of Nuclear Projects Nos. 4 and 5 revenue bonds in two separate trips Financing Effort to the market at an average weighted The major achievement of the financ- borrowing cost of 6.08 percent.

These revenue bonds were rated ing program was the successful launch- "A-1" and "A+" respectively by ing of the permanent, long-term Moody's and Standard and Poor's rating services. Table III shows that the financing program for Projects Nos. 4 and 5 is in its initial stages.

24

WPPSS Estimated Financing Requirements current financing program is one of (6 In Millions) Table I II the largest financing programs for Dollara 2,000

~ Financing 6.30 77

~Additional Financing Remaining construction of generating facilities of any corporation, municipal or private, in the U.S.

Application of Funds 1,500 The Supply System is responsible for the stewardship of all funds pending their ultimate disbursement. To this 1,000 end, a major investment program is conducted.

Interest income from the investment 500 program is credited to projects as 42% 78% 24%

required by Bond Resolutions or 7% Municipal Codes of the State of Project WNP.1 WNP-2 WNP-3 WNP4 WNP-5 Washington.

The impact of the investment program Accumulated Uses of Resources For Nuclear Projects Nos. 1 through 5 Table IV has been to offset 84 percent of the Billions of Dollars capitalized interest and financing costs incurred from the sale of bonds.

3.0

~Cash and Investments The Supply System has earned $ 149

~Construction Costs I Including Fuel ) million in interest income for WNP-1 2.5 Retirement of Notes through WNP-5 from inception, while incurring $ 178 million interest and

~Capitalized Interest and Financing Costs financing costs.

2.0 Efficient operation of the investment program requires a sophisticated cash 1.5 management plan and the implementa.

tion of an extensive interdepartmental communication network. The use of 1.0 accumulated resources of WNP-1 through WNP-5 through June 30, 1977 are illustrated in Table IV.

For Fiscal Year 1977, the Supply System invested an average of $ 951 Fiscal Year 1974 1975 1976 1977 million per day which produced a rate Ending June 30 of return of 6.62 percent. Comparing Resources ly $ 1.9 billion, equivalent to a 90 this to the borrowing costs of 6.59 The only major source of funds for percent compounded average growth percent per day, the investment pro-rate in 3 years. gram provided .03 percent greater the Supply System, prior to the collection of operating revenue, is This growth has brought the Supply income than cost incurred.

proceeds from revenue bond sales and System to the forefront as a major the investment income earned from participant in the municipal revenue these proceeds pending disbursement. bond market, specifically in the Public Power Revenue Bond sector.

As shown in Table I, approximately

$ 354 million of financing resources Table II demonstrates the impact of were accumulated from inception of the financing program of the Supply the projects through June 30, 1974. System on the Municipal Public Power However, since this period, financing Revenue market. The Supply System's resources have increased approximate.

25

Balance Sheets WASHINGTON PUBLIC POWER SUPPLY SYSTEM JUNE 30, (977 (AMOUNTS IN THOUSANDS)

Packwood Nuclear Lake Nuclear Projects Nos. General Hanford Hydroelectric Nuclear Nuclear Project No. 3 4&5 Fund ASSETS project Project Project No. 1 Project No. 2 Note A Note A (Unaudited)

Utility Plants and Equipment at cost:

~

ln service S67,013 S12,205 S2,608 S1,659 Modifications and additions to facilities owned by the U.S. Government 14,411 Less allowances for depreciation and amortization ( 36,485) (3,337) (178) (1,414) 44.939 8,868 2,430 245 Construction work in progress 6142,649 489,455 6 98,674 6147,167 Nuclear fuel ~ at cost 24,892 12,878 11,346 Prepayments for nuclear fuel enrichment services 4,986 4.615 4,887 10,220 Less amount charged to other joint owners (33,364) (4,613) 44,939 8,868 172,527 509,378 81,543 152,774 245 Special Funds ~ Note C:

Cash 3 2 1,762 11,983 2,591 1,040 Investment securities Note 8

~ 55 230 210.462 291,821 55,230 190,433 Prepaid insurance and other assets 21 8 3 21 Due from other Projects and General Fund ~

Note D 34,242 619 19.568 Net amounts due from other funds 7,111 1,605 6.067 538 Receivable from other joint owners 3,254 480 58 232 253,598 306,036 86,713 192,512 Sinking Funds ~ Note C:

Cash 13 7 1 2 6 21 Investment securities ~ Note B 6,784 695 142,165 10,168 107,340 67,462 6,797 702 142,166 10,170 107,346 67.483 Current Assets:

Cash 8 38 133 19 3.227 175 26,767 1,310

. Investment securities 52 Accounts receivable 114 98 Supplies and spare parts inventories 207 Prepaid insurance 166 3 Due from other funds 492 46 Due from power purchasers 695 Special cash deposit ~ interest 7 219 27,067 307 2,592 4,9'(6 363 219 53,967 307 2,592 1,581 Other Asset ~ unbilled reimbursable cost 4,949 2,837 Deferred Charges:

Costs associated with abandoned plant site ~

Note B 6,847 Preliminary survey and investigation costs 1,508 89 Unamortized debt expense 197 36 723 1,085 458 834 197 36 7,570 1,085 458 2,342 89 561,856 813,038 8576,080 8880,636 $ 276,367 $ 417,703 S1,915 26

Packwood Nuclear Lake Nuclear Projects Nos. General Hanford Hydroelectric Nuclear Nuclear Project No. 3 4 fk 5 Fund LIABILITIES project project Project No. 1 Project No. 2 Note A Note A (Unaudited)

Revenue Notes and Bonds - Note C:

Principal amount S56,710 612,591 6535,000 6800,000 6250,000 6335,000 Unamortized debt discount (1,082) (134) (3,942) (1,743) (3,076) (1,974) 55,628 12,457 531,058 798,257 246,924 333,026 Accrued interest on debt 595 155 18,299 8,936 6,460 Special Funds ~ Note C:

Accounts payable and accrued expenses 14,724 13,144 11,158 20,995 Amounts withheld from contractors 4,669 13,663 2,975 2,712 Amounts due to other Projects and General Fund 53,972 Net amounts due to other funds 36 36 19,393 26,807 14,133 77,679 Sinking Funds ~ Net amounts due to other funds ~ Note C 302 46 7,111 1,605 6,067 538 Current Liabilities:

Accounts payable and accrued expenses 2,370 21 S1,160 Net amounts due to other funds 154 Due to other Projects 3 4 450 Due power purchasers 220 Matured interest on debt 7 3 69 27,067 307 Matured long term debt 150 2,534 248 219 27,067 307 1,610 Deferred Credits and Advances:

Deferred gain on revenue bonds 2,479 132 Advances from participants 282 26,900 Advances from members and participants and accrued interest 305 2,761 132 26,900 305 Commitments and Contingencies ~ Note D S61,856 813,038 8576,080 6880,636 6276,367 8417,703 61,915 See notes to tselenee sheets 27

Notes to Balance Sheets WASHINGTON PUBLIC POWER SUPPLY SYSTEM Because of Bonneville Power Adminis- Nuclear Project No. 5 is being con-Note A - Organization tration's (BPA - an agency of the structed and will be operated by the The Washington Public Power Supply United States Government) obligations Supply System pursuant to terms of System is a municipal corporation and under the Net Billing and Exchange an Ownership Agreement between the joint operating agency of the State of Agreements as described in Note C, Supply System and one investor-Washington and was organized in the Supply System and BPA have owned utility (Pacific Power 5 Light 1957. Its membership consists of 19 entered into Project Agreements with Company). The Project will be 90/o public utility districts and 3 munici- respect to Nuclear Projects Nos. 1, owned by the Supply System and 10/0 palities which own and operate electric 2 and 3. The Project Agreements and owned by Pacific Power fk Light systems within the State of Washington. Exchange Agreements, with respect to Company. Each of the joint owners It is empowered to acquire', construct the Hanford Project, among other is responsible for providing its share and operate facilities for the genera- things, provide standards for the of the costs of construction and tion and transmission of electric power design, licensing, financing, construc- operation and will be entitled to its and energy. tion, fueling, operation and main- ownership share of the Project's tenance of each of the aforementioned capability. Each owner shall defray its The Supply System has constructed projects. They also provide for the own financing costs. Pacific Power and is now operating the Packwood approval of certain replacements, fk Light Company has designated the Lake Hydroelectric Project repairs or capital additions thereto. Supply System to act as its agent to (Packwood) and the Hanford Project construct, operate and maintain and has five nuclear electric genera- Nuclear Project No. 3 is being con- the Project.

ting plants under construction structed and will be operated by the (Nuclear Projects Nos. 1, 2, 3, 4 and Proceeds from the Generating Supply System pursuant to terms of Facilities Revenue Bonds (Nuclear=

5). In addition, the Supply System an Ownership Agreement between the has a General Fund. The Hanford Projects Nos. 4 and 5) may also be Supply System and four investor- used for paying the cost of certain Project, Nuclear Projects Nos. 1; 2 owned utilities. The Project will and 4 are situated on land which is work in connection with the acquisi-be 70/o owned by the Supply System leased from the Energy Research and tion and development of uranium-and 30/0 by four investor. owned Development Administration (ERDA). bearing lands and with the develop.

utilities (Pacific Power 5 Light ment of additional energy resources.

Rental for each project's property is Company - 10/0, Portland General a nominal amount for each year plus Electric Company - 10/0, Puget Sound All projects heretofore undertaken by any taxes or assessments which may be Power and Light Company - 5/0, and the Supply System except Nuclear imposed upon the leasehold. Nuclear The Washington Water Power Projects Nos. 4 and 5 have been Projects Nos. 3 and 5 are being con- Company - 50/0). Each of the joint separately financed. The obligations structed on land owned by the pro- owners is responsible for providing its issued with respect to each such pro-jects. The projects are further des- share of the costs of construction and ject are payable solely from the cribed elsewhere in this report. operation and will be entitled to its revenues of that project.

ownership share of the Project's capability. The ownership shares may be adjusted upon the occurrence of Note B - Accounting Policies certain events. Each owner shall defray its own financing costs. The parties to The Supply System has adopted ac-the Ownership Agreement have desig- counting policies and practices which nated the Supply System to act as are in accordance with generally their agent to construct, operate and accepted accounting principles appli-maintain the Project. cable to the utility industry. Except for Nuclear Projects Nos. 4 and 5 which are accounted for as one entity, separate books of account are main-tained for each project. Descriptions of significant accounting policies are presented below.

Capitalization of Costs During Construction During the construction phase of a project, the Supply System will 28

capitalize all costs of the project are stated at the lower of amortized Provisions for amortization of modi-including general, administrative, in. cost or market as provided by their fications and additions to facilities terest and other overhead expenses. respective bond resolutions. Income owned by the U.S. Government are Overhead expenses of the Supply earned on securities held in special being amortized over the period System are allocated to the various and sinking funds is recorded as a covered by the contract for dual pur-projects primarily on the basis of reduction of construction costs during pose operation of the New Production direct labor cost. the period of construction. Reactor. As discussed further in Note Debt Discount, Premium and D, this contract period was extended The market value, including accrued during 1977 from October 31, 1977 to Expenses interest, of investments held in the June 30, 1983. Amortization for 1977 Debt discount or premium and sinking and special funds and as has been reduced to reflect this current assets as of June 30, 1977, extension of the amortization period.

expenses relating to the issuance of revenue bonds are amortized on the approximates or exceeds amortized costs. Costs associated with the abandoned straight. line method over the terms of the respective issues. Such provi- plant site will be amortized by charges Depreciation and Amortization to income over the life of Nuclear sions for amortization (net of accre-tion of premiums) are capitalized as Provisions for depreciation of the Project No. 1 beginning with the costs during the construction period. Hanford and Packwood commencement of commercial opera-Projects'tility plants have been computed tions if they have not been recovered Gains on Redemption of Revenue on the straight-line basis using an from certain private utilities and Bonds Packwood and Hanford estimated life ending in 1996 and industrial companies benefiting from projects 2012, respectively, (the final redemp. the continued operation of the tion years of the respective project's Hanford Project.

Gains from the early extinguishment of debt occurring prior to 1973 have Revenue Bonds) which approximates The administrative office building and been recorded in the balance sheet the estimated lives of the projects.

warehouse facilities which are as a deferred credit less the annual If the Hanford Project ceases opera. accounted for on the records of accretion to income computed using tions after June, 1983, as discussed in Nuclear Project No. 2 are being the straight-line method over the terms Note D, the then carrying value of depreciated on the straight-line basis of the respective bonds. Gains occur- the plant will continue to be depre- over their estimated useful lives.

ring after January 1, 1973 are record- ciated over the remaining term of the ed as income in the fiscal year in Contributions Used for Purchase of outstanding revenue bonds. Regardless which the redemption is made. Equipment - Packwood and Hanford of continued operations, the pur-projects chasers of power from the Project will Current Assets and Current Liabilities continue to be obligated to pay the Monies provided by participants to Assets and liabilities shown as current principal amount of bonded debt, acquire equipment since completion in. the accompanying balance sheets among other costs, until 1980 when of the projects are accounted for as exclude current maturities on revenue participants of Nuclear Project No. 1 contributions in aid of construction bonds and notes and accrued interest assume this obligation. Consequently, and are applied as a reduction of the thereon as sinking funds have been or if the plant ceases operations, revenues carrying value of such equipment will be provided for their payment. arising from the aforementioned pay- included in utility plant.

ments will nevertheless be recorded by Investment Securities the Hanford Project each year there.

Investment securities include time after in amounts which will result in certificates of deposit, repurchase full realization of the carrying value of agreements (secured by U.S. Govern-the plant.

ment securities) and United States Government and Government agencies'ecurities. Investment securi-ties are stated at cost or amortized cost as appropriate and include accrued interest. Investment securities owned by the Hanford and Packwood Projects'ond Fund Reserve accounts and Reserve and Contingency funds 29

Revenue Bonds Outstanding Revenue Bonds of the various projects as of June 30, l977 consist of the following:

Effective Serial Amount Date Interest O Bering Coupon or Term Outstanding Project Series of Sale Rate Prices Rate Maturities (in 8000's)

Hanford Project Revenue Bonds (S2.510,000 due within one year) 1963 05-08.63 3.26% (A) 2.80-3.10X 9.1.77/1986 S 29,125 r 98 3.25 9 1 1996

~

~27 585 8 56,710 Packwood Lake Hydroelectric Project (S120,000 due within one year)

Revenue Bonds 1962 03.20 62 3.66 99.425 3.625 31 2012 8 9,641 Revenue Bonds 1965 11 0445 3.76 100.5 3.75 31 2012 2,950 8 12,591 WPPSS Nudear Project No. 1 Revenue Bonds 1975 09.18.75 7.73 (A) 5.75.7.40 7 1.81/2000 S 42,000 100 7.70 7.1.2010 58.300 100 7.75 7-1.2017 74,700 175.000 Revenue Bonds 1976A 02.04 76 6.84 (A) 6.006.25 7 1 81/1998 37,020 100 6.90 7.1 2010 66.485 100 7.00 7 1 2017 76 495 180,000 Rcvenuc Bonds 19768 0841.76 6.37 (A) 5.00-5.90 7.1.81/1998 41,825 100 6.50 7.1 2010 66,940 99.50 6.50 7.1.2017 71,235 180 000'535,000 WPPSS Nuclear Project No. 2 Revenue Bonds 1973 06 26 73 5.66 (A) 5.00.5,) 0 7 1 78/2010 8 25,600 100 5,70 7 1 2012 124,400 150.000 Revenue Bonds 1974 07 23 74 7.21 (A) 6.506.90 7.1 78/1994 '

28,000 100 7.00 1 ~ 1999 15,000 100 7.375 7 1 2012 37.000

~0,000 Revenue Bonds 1974A 11 26 74 7.67 (A) 7.20 7-1.78/1994 32,000 100 7.40 7 1 1999

~ 15,000 100 7.75 7-1 2012 78,000 125,000 Revenue Bonds 1975A 03.06 75 6.71 (A) 6.60 7 1 82/1994 32,000 100 6.60 7 1~ 1999 15,000 100 6.875 7 1 2012 78,000 125,000 Revenue Bonrh 1976 06.03 76 6.63 IA) 5.406.25 7 1 82/1998 27,840 99.25 6.625 7 1 2006 42,300 100 6.75 7 1.2012 49 860 120.000 Revenue Bonds 1976A 11 ~ 18 76 5.87 (A) 5.50 5.875 7 1 82/2002 94,195 100 6.00 7 1 2007 44,815 99.50 6.00 7 1 2012 60.990

~200 000 S800,000

)VPPSS Nuclear Project No. 3 Revenue Bonds 1975 12-03 75 7.87 (A) 5.40 7.25 7.1 83/1998 8 26,145 100 7.875 7-1 2010 52,695 100 7.875 7.1 2018 71,160 150,000 Revenue Bonds 1976 04.13.76 6.48 (A) 5.50 6.00 7.1 83/1998 19,605 99.625 6.50 7.1.2010 35,100 100 6.60 7.1.2018 45.295 100,000

$ 250.000 Nuclear Projects Nos. 4 and 5 Revenue Bonds (S22,600,000 due within one year) 1975 07 24.75 7.04 IA) 6.75.6.90 6 1.78/1981 S100,000 Revenue Bonds 1977A 02.23 77 5.93 IA) 5.50 5.75 7.1 89/2001 42,105 100 5,90 7 1 2008 40,605 100 6.00 7 1 2015 62,290 145,000 Revenue Bonds 19778 05.24 77 632 (A) 6.006.20 7 1 89/2001 33,485 100 6.40 7.1 2012 56,515 RnRRr S335,000 (A) Various prices 30

Note B - Accounting Policies through the Bonneville Power Admin- As security for the Generating Facili-(Continued) istration ("Bonneville" ) has purchased ties Revenue Bonds for Nuclear the entire capability of the Hanford Projects Nos. 4 and 5, the Supply Operating Revenues Project and Nuclear Projects Nos. 1, System has entered into Participants 2 and 3 from its statutory preference Agreements with 88 utilities oper-Because member purchasers of power customeis (and, in addition, with ating principally in the western United are contractually obligated to pay respect to Project No. 1, five of its States. Pursuant to the Participants

'project annual costs including debt private utility customers). Each of Agreements, the participants are obli-service, the Supply System records these customers has, in turn, pur- gated to pay their respective share of these reimbursable annual costs as chased such capability from the project annual costs, including debt operating revenues for the Hanford Supply System, all under the net service. The agreements stipulate the and Packwood Projects. In order to billing agreements and the exchange percentages of project annual costs spread such revenues equally over the. agreements. Bonneville is obligated to and of project output allocated to full term of the respective bonds, the pay the participants, and the par- such utilities. Billing to the partici-Supply System has recorded as ticipants are obligated to pay the pants for Nuclear Projects Nos. 4 and revenue each year an amount (in Supply System its'pro rata share of 5 will begin on July 1, 1988, or the addition to recovery of annual costs) the total annual costs of the projects date of commercial operation for the which is equal to the provisions for including debt service on the bonds, respective projects, whichever is depreciation and amortization less the whether or not the projects are com- earlier.

recorded gain on bond redemption. pleted, operable or operating and notwithstanding the suspension, The Participants Agreements provide Cumulative reimbursable annual costs for the redemption of " the reduction or curtailment of the less payments by member purchasers $ 100,000,000 of "Development" for future bond redemption are project s output.

Generating Facilities Revenue Bonds reflected as Unbilled Reimbursable The Supply System's Packwood outstanding at June 30, 1977.

Costs in the accompanying balance Project Revenue Bonds are secured sheets. by power sales contracts between the If the System is unable to issue and sell bonds to obtain funds to pay the Supply System and each of its 12 Retirement Plan members. Pursuant to these agree. principal of the revenue bonds when ments, each of the 12 members pur- due, or is unable to proceed with the The Supply System participates in the financing of Nuclear Projects Nos. 4 chases and pays the percentage allo-Washington State Public cation of power specified therein at and 5 because of such matters as the System which provides Employees'etirement rates which will be sufficient to oper- inability to obtain necessary permits retirement benefits to eligible em. ate and maintain the Project, including and licenses, each of the participants ployees. Cost of the plan to the debt service on the bonds. Such pay- will pay its proportionate share of Supply System is determined by the ments will continue until the bonds the principal due on the revenue bonds Retirement System's Board. The ac- are paid or provision is made for their together with any other costs associ-tuarially computed value of pension payment or retirement. The contracts cated with the termination of the benefits exceeds the fund assets for also provide that if any of the 12 projects.

the Retirement System. However, members, because of insolvency or because the Retirement System is a bankruptcy, fail to pay its respective multi-employer system, the amount of share or project annual costs, 8 of the such excess, if any, that relates to the 12 members, which account for 94.75 Supply System is not available. percent of the Project's power output, are liable for an automatic pro rata increase of the shares not so paid. The Note C - Revenue Bonds remaining four member purchasers are Outstanding Revenue Bonds of the limited in their liability for a pro rata various projects as of June 30, 1977 increase to an aggregate amount equal are presented on Page 30. to double their. original percentages.

Security for the Supply System's revenue bonds is summarized as follows:

Agreements and Contracts The United States of America, Depart-ment of the Interior, acting by and 31

Security Creation of Funds As of June 30, 1977, Project No. 2 Subsequent to the execution of had billed and received $ 26,900,213 contracts relating to the financing, Under provisions of the various bond from its participants pursuant to terms construction, and operation of Nuclear resolutions, the Supply System has of the net billing agreements referred Projects Nos. 1 and 3, the Supply been required to establish trustee- to above. Such amount was paid into System decided to construct a second administered sinking funds for the sole, the Prepayment Account in the nuclear plant (Nuclear Projects Nos. 4 purpose of paying principal and Revenue Fund. Additional amounts and 5) at the same respective sites.

interest on the bonds. will be billed to participants for the Since Projects Nos. 4 and 5 will be With respect to the projects under period from July 1, 1977 to substantially identical to Projects Nos.

construction, proceeds of revenue September 1, 1977, and payments 1 and 3 respectively, the parties bonds not specifically required to of such amounts will also be paid into associated with each project agreed meet principal and interest payments the Prepayment Account. Monies in during the current fiscal year to have been placed in special funds.

the Prepayment Account will be used equitably share costs of construction Except for the Reserve and Contin- to establish a Reserve Account in the and operation which mutually benefit Bond Fund of,$ 25,695,200, a Reserve each of the projects. Consequently, gency Fund discussed below, the and Contingency Fund of $ 3,000,000, Nuclear Projects Nos. 4 and 5 have special funds are to be used for con-and to provide working capital of not been charged their share of such costs struction purposes. The special funds less than $ 3,000,000. These advances incurred through June 30, 1977, in may also be used, if necessary, to make required interest and principal will reduce future amounts otherwise the amount of $ 34,160,177 and payable by participants for operating $ 19,554,840 respectively.

payments.

costs and debt service on the Project Hanford, Packwood and Nuclear No. 2 Revenue Bonds. Hanford Project Projects Nos. 4 and 5 have each In addition, amounts in special cash The Energy Research and Develop.

established a Reserve and Contingency deposits are held in trust for the ment Administration owns and Fund (included as special funds in the bondholders or noteholders for the operates the nuclear reactor which accompanying balance sheets). As pro-payment of principal and interest on provides steam to the Hanford Project.

vided in the bond resolutions, the notes and bonds, as such payments The reactor is operated for the funds are to be used, among other are due. production of plutonium for national things, to make up any deficiencies defense, and steam is a by-product of in the Bond Funds and to pay for Note 0 - Commitments such production. In 1971, ERDA extraordinary operation and main-suspended its operation of the reactor.

tenance costs, replacements and and Contingencies However, in 1971, the Supply System contingencies.

entered into an agreement with ERDA Contracts to continue dual. purpose operation of The Supply System has entered into the reactor through June 1983.

contracts covering a portion of total (During the current year the shutdown estimated costs for certain major date of the reactor was extended from equipment and material, and for ser- October 1977 through June 1983.)

vices relating to financing, design, In addition to annual payments for and the supply of nuclear fuel for the steam energy, the agreement provides projects under construction. The total for the Supply System to reimburse estimated financing requirements of ERDA for the cost of deactivating each project are indicated elsewhere the reactor (estimated to approximate in this report. At June 30, 1977, the $ 6,286,000). The participants of total contract commitments, less pay- Nuclear Project No. 1 have agreed to ments, by project were approximately: pay all such costs. Also, these partici-WNP No. 1 $ 260,000,000 pants have agreed to pay, commencing WNP No. 2 183,000,000 July 1, 1980, all debt service costs of WNP No. 3 299,000,000 the Hanford Project regardless of WNP No. 4 296,000,000 continued operation of the reactor.

WNP No. 5 270,000,000 Outstanding revenue bonds will then aggregate approximately $ 48,000,000.

32

The agreement to pay such costs will its complaint, the contractor is asking and the litigation is in the discovery permit participants of Nuclear Project for damages of not less than stages. Because of the early stage of No. 1 to receive power from BPA to $ 24,500,000 together with interest the proceedings, the Supply System's the extent of such additional costs thereon, attorney fees, and other un. legal counsel are unable to form an incurred. determined amounts for damages opinion as to the probable outcome or alleged to have been sustained from an estimate of the ultimate liability, if The U.S. Government has an option termination of the contract. Sub- any, of the Supply System.

to acquire ownership of the Hanford sequently, the Supply System filed Project upon obtaining Congressional its answer and a counterclaim against In addition there are other litigation approvai. If the Government exercises the contractor and its surety denying matters related to Nuclear Project its option, it must assume all rights No. 2 pending against the Supply liability and seeking damages of and obligations of the Project, System which management and

$ 13,970,000 plus substantial conse-including the obligation to pay all counsel believe are either without quential damages. Legal counsel for revenue bonds. merit or if decided adversely would the Supply System have confidence as to the merits of the Supply System's not have a material effect on the fi-Licensing position, but because the case is in the nancial statements of the Project.

Nuclear Projects Nos. 3, 4 and 5 are early stage of discovery, they are unable to give an opinion as to the The estimated cost of Nuclear Project being constructed under limited work No. 2 may either be increased or authorizations issued by the Nuclear Supply System's ultimate liability, if any, or an amount to be realized, if decreased as a result of the outcome of Regulatory Commission (NRC). fach the above litigation.

of these projects have applied to the any, of the Supply System in this case.

NRC for construction permits In a related matter, a subcontractor (Nuclear Projects Nos. 1 and 2 have. of the aforementioned contractor has construction permits). filed suit against the contractor for alleged breach of contract and against The issuance of construction permits the Supply System for alleged inter-by the NRC to Nuclear Projects Nos. 3, ference. In its complaint, the sub-4 and 5 depends upon NRC review of contractor seeks recovery of alleged data related to an earthquake which damages of approximately occurred in the North Cascades region $ 11,900,000 and punitive damages of of the Pacific Northwest in 1872. $ 20,000,000. The Supply System's legal counsel is of the opinion that the At the present time the Supply System punitive damages are without merit.

is unable to predict what effect, if any, However, because of the early stage of the results of the NRC review will have the proceedings, they are unable to on the designs, schedules or costs of its form an opinion as to the outcome of projects. The Supply System does not the litigation regarding the remainder expect to be able to evaluate such of alleged damages.

impact on its projects until completion of the NRC review. Such review is not A local Plumbers and Steamfitters expected to be completed until late union has filed an action in Federal 1977 or early 1978. If information is District Court against the Supply developed that would adversely affect System and several other companies the adequacy of the designs of the pro- and individuals. The action is based jects, delays and increases in project upon alleged violations of the Federal costs may result. anti-trust laws in connection with a strike at Nuclear Project No. 2, by Litigation Nuclear Project No. 2 plumbers and steamfitters. The relief In January 1976, the Supply System requested includes, among other terminated its contract with the things, treble damages in an un.

contractor responsible for the civil specified amount. The Supply System construction work on Nuclear Project has filed an answer denying liability No. 2 for breach of contract. In February, 1976, the contractor filed a lawsuit against the Supply System. In 33

Report of Independent Accountants Board of Directors Washington Public Power Supply System Richland, Washington We have examined the individual balance sheets of Washington Public Power Supply System's Hanford Project, Packwood Lake Hydroelectric Project, Nuclear Project No. 1, Nuclear Project No. 2, Nuclear Project No. 3, and Nuclear Projects Nos. 4 and 5 as of June 30, 1977. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing proce-dures as we considered necessary in the circ'umstances.

In our opinion, the balance sheets referred to above present fairly the respective financial positions of Washington Public Power Supply System's Hanford Project, Packwood Lake Hydroelectric Project, Nuclear Project No. 1, Nuclear Project No. 2, Nuclear Project No. 3, and Nuclear Projects Nos. 4 and 5 at June 30, 1977, in conformity with generally accepted accounting principles applied on a consistent basis.

The individual balance sheet of the General Fund as of June 30, 1977 was not audited by us and, accordingly, we do not express an opinion on it.

Seattle, Washington September 15, 1977 Statement of the State Auditor TO WHOM IT MAY CONCERN:

The Washington State Auditor's Division of Municipal Corporations conducts a continuous examination of all of the operations of the Washington Public Power Supply System, including each and every project. Reports are issued covering each calendar year.

On every such examination, state law requires that inquiry shall be made as to the financial condition and resources of the Supply System, whether the Con-stitution and laws of the state, the resolutions and orders of the Supply System, and the requirements of the Division of Municipal Corporations have been properly complied with; and into the methods and accuracy of the accounts and reports.

Very truly yours, ROBERT V. GRAHAM, State Auditor

~CLklMC~~N DARREL K. RUSSELL, CPA Chief Examiner Division of Municipal Corporations DKR:aes 34

Project Expenditures WASHINGTON PUBLIC POWER SUPPLY SYSTEM Operating Projects ( S in Thousands ) Construction Projects ( S in Thousands )

ercent o Hanford Generating Project Cumulative Current Estimated roiect osts Operating Expenses Costs Thrv Estimate For Ten Months Ended June 30, 1977 June30,1977 Expended Current'"'rior "

Depreciation & Interest S 3,670 Nuclear Project No. 1 Power Production 18,431 Construction and Fuel 8125,100 12.0% S1,041,406 S 884,876 Administrative & General 616 Engineering & Construction Management 31,785 41.3 76,936 60,451 Transmission 44 Owner's Costs 7,836 8.5 92,209 67,000 Net Financing Cons 7.806 5.0 157,449 193,673 S22,761

$ 172,527 12.6% S1,368,000 S1,206,000 Nuclear Project No. 2 Administrative & General 2.7% Transmission Construction and Fuel S360,178 44.1% S 817,530 S 722,430 0.2% Engineering & Construction Management 74 076 63 6 116,439 93,356 Owner's Costs 26,276 25.8 101,710 93,000 Net Financing Costs 48,848 118.2 41,321 56.214 S509,378 47.3% S1,077,000 S 965.000 Oepreciation

& Interest Nuclear Project No. 3 WPPSS 70% Ownership

~

Construction and Fuel 57,971 8.4% S 686,868 S 645,103 16 2o/ Engineering & Construction Management 17,048 31.1 54,744 49,313 Owner's Costs 3,981 6.0 65,917 58,450 Net Financing Costs 2,543 1.3 188,471 206,134 Power Production S81,543 8.2% S 996,000 S 959,000 80.9%

Total WPPSS and Private Utilities Ownership" S1,423,000 S1,370,000 Nuclear Project No. 4 Construction and Fuel S 61,439 5.7% 81,071,780 S 984,931 Engineering & Construction Management 31,045 48.0 64,669 64,669 Owner's Costs 7,830 8.4 93,575 67,000 Net Financing Costs'ther 7,185 1.5 473,725 388,784 Packwood Project 5.458 6.2 88,251 79,616 Operating Expenses $ 112,957 6.3% S1,792,000 S1,585,000 Year Ended June 30, 1977 Nuclear Project No. 5 ~ WPPSS 90% Ownership Construction and Fuel S 15,023 1.4% S1,054,910 S 978,135 Depreciation & Interest S 726 Engineering & Construction Management 20,908 31.2 66,987 65,367 Power Production 186 Owner's Costs 6,049 6.2 97,717 75,150 Administrative & General 92 Net Financing Costs'ther 3,296 .7 468,825 464,590 Transmission 50 5,468 6.4 85,561 79,758 S 1,054 S 50,744 2.9% S1,774,000 S1.663.000 Total WPPSS and Private Utilities Ownership" S1,971,000 S1,847,000 Administrative & General Transmission Net financing costs include interest expense less reinvestment income. Interest expense on Nuclear Projects Nos. 1, 2 and 3 is capltalised to September 1, 1980, September Power 1, 1977 and September 1, 1982, respectively, as required by the project bond resolutions.

8.7% Production Interest expense after the aforementioned dates will be paid from revenues received from the project participants. Itelnvestment Income on bond proceeds is credited to project costs ~

17 7% until the commercial operation date.

4.8%

Assumes that net financing costs applicable to the private utilities'wnership shares are proportionately the same as the Supply System's.

0 The current estimated project costs of Nuclear Projects Nos. 1, 2 and 3 are from the Depreciation & Interest Supply System's October 1, 1977 Project Construction Budgets which are currently in the approval process. The current estimates for Nuclear Projects Nos. 4 and 5 are as of Sep.

68.8% tember, 1977. All prior estimates are from the January 1, 1977 Project Construction Budgets.

35

Project Participants WASHINGTON PUBLIC POWER SUPPLY SYSTEM Public Ilt Peoples Utility Districts Municipalities Cooperatives Oregon Idaho California Central Lincoln Peoples Utility District Albion Heyburn Surprise Valley Electrification Corp, Clatskanie Peoples Utility District Bonners Ferry Idaho Falls Northern Wasco County Peoples Burley Minidoka Idaho Utility District Declo Rupert Clearwater Power Co.

Tillamook Peoples Utility District East End Mutual Electric Co., Ltd.

Oregon Fall River Rural Electric Cooperative, Inc.

Washington Farmers Electric Co. Ltd.

Bandon Forest Grove Idaho County Light & Power Cooperative Benton County PUD No. 1 Canby Mc Minnville Assn., Inc.

Chelan County PUD No. 1 Cascade Locks Milton Freewater Kootenai Electric Cooperative, Inc.

Clallam County PUD No. 1 Drain Monmouth Lost River Electric Cooperative, Inc.

Clerk County PUD No. 1 Eugene Springfield Utility Board Northern Lights, Inc.

Cowlitz County PUD No. 1 Prairie Power Cooperative, Inc.

Douglas County PUD No. 1 Washington Raft River Rural Electric Cooperative, Inc.

Ferry County PUD No. 1 Riverside Electric Co., Ltd.

Franklin County PUD No. 1 Blaine Port Angeles Centralia Richland Rural Electric Co. ~

Grant County PUD No. 2 Salmon River Electric Cooperative, Inc.

Grays Harbor County PUD No. 1 Cheney Seattle Coulee Dam Steilacoom South Side Electric Lines, Inc.

Kinitas County PUD No. 1 Unity Light & Power Company Klickitat County PUD No. 1 Ellensburg Sumas Lewis County PUD No. 1 McCleary Tacoma Montana Mason County PUD No. 1 Flathead Electric Cooperative, Inc.

Mason County PUD No. 3 Irrigation Districts Glacier Electric Cooperative, Inc.

Okanogan County PUD No. 1 Lincoln Electric Cooperative, Inc.

Pacific County PUD No. 2 Missoula Electric Cooperative, Inc.

Pend Oreille County PUD No. 1 Consolidated Irrigation District 19 Vera Irrigation District 15 Ravalli County Electric Cooperative, Inc.

Skamania County PUD No. 1 Vigilante Electric Cooperative, Inc.

Snohomish County PUD No. 1 Wahkiakum County PUD No. 1 Investor Owned Utilities Nevada Whatcom County PUD No. 1 Montana Power Company Wells Rural Electric Cooperative, Inc.

Pacific Power & Light Company Portland General Electric Company Oregon Puget Sound Power & Light Company Blachly-Lane County Cooperative The Washington Water Power Company Electric Assn.

Central Electric Cooperative, Inc.

Columbia Basin Electric Cooperative, Inc.

Columbia Power Cooperative Assn., Inc.

Consumers Power, Inc.

Total Participants by classification: Coos. Curry Electric Cooperative, Inc.

Douglas Electric Cooperative, Inc.

Cooperatives: 52 Harney Electric Cooperative, Inc.

Irrigation Districts: 2 Hood River Electric Cooperative, Inc.

Municipalities: 30 Lane County Electric Cooperative, Inc.

Public Utility Districts: 26 Midstate Electric Cooperative, Inc.

Investor Owned Utilities: 5 Salem Electric Umatilla Electric Cooperative Assn.

Total 115 Wasco Electric Cooperative, Inc.

West Oregon Electric Cooperative, Inc.

Washington Alder Mutual Light Company Benton Rural Electric Assn., Inc.

Big Bend Electric Cooperative, Inc.

Columbia Rural Electric Assn., Inc.

Elmhurst Mutual Power & Light Inland Power & Light Co.

Lincoln Electric Cooperative, Inc.

Nespelern Valley Elec. Cooperative, Inc.

Ohop Mutual Light Okanogan County Electric Cooperative, Inc.

Orcas Power & Light Company Parkland Light & Water Company Tanner Electric Wyoming Lower Valley Power & Light, Inc.

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