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MINUTES OF THE
~S WASHINGTON PUBLIC POWER SUPPLY SYSTEM SPECIAL EXECUTIVE BOARD MEETING GLENN C. WALKLEY ROOM, MULTIPURPOSE FACILITY u~ RICHLAND, WASHINGTON APRIL _23, 1982 - 9:00 A.M.
The Special Meeting of the Executive Board of Washington Public Power Supply System was called to order by Chairman Stanton H. Cain at 9:00 a.m. l There was a quorum present. Chairman Cain stated this was an open public l meeting of the Supply System. Mr. G. E. C. Doupe', Acting Chief Counsel, l reported that an environmental analysis of the April 23, 1982 Executive Board agenda had been prepared which showed that all items on the agenda were cate- l gorically exempt from procedural requirements of the State Environmental Pro-tection Act.
ROLL CALL Stanton H. Cain, Chairman Ed Fischer Jack Welch Donald R. Clayholo C. Stanford Olsen ,
1 Howaro B. Richman
(( Paul-J. Nolan Joe Recchi l
Robert O. Keiser, Chelan County PUD; A. E. Fletcher, 9aard Memoers Present:
Clallam County PUD; Howard Prey,' Douglas County PUO; William G. Kuehne, Ferry County PUO; Kenneth R. Coc w ane, Franklin County PUD; Harold F. Nelson, Grant County PUD; Roger C. Sparb , Kittitas County PUO; Marion C. Babb, Klickitat County PUO; John Kostick, Lewis County PUD; Robert C. Olsen, Mason County PUD No. 3; John E. Dunsmoor, Pacific County PUD; Parker Knight, Skamania County PUO; David L. Myers, Wankiakum County PUD; Larry Nickel, City of Ellensburg; ano Thomas Legston, City of Richland. I Others Present: Peter T. Jc"nson, E. Willard, R. Ratcliffe, J. Curtis, Ed Sienkiewicz, J. R. Lewis, Bonneville Power Administration; Ray Foleen, Consul-tant to the WNP-4/5 Participants' Committee; J. A. Hare, Administrative Auditor; Frank Hensley, Legislative Budget Committee; Francis Coleman, Goldman Sachs; Jim Seagraves, R. W. Beck & Associates; J. P. Laspa, Bechtel Power Cor-poration; Gordon Culp, Bud Krogh and Robert Marritz, Culp, Owyer, Guterson &
Grader; T. S.'Hundal, United Engineers and Constructors, Inc.; Congressman Sid Morrisen; Senator Max E. Benitz; Washington State Representatives Shirley Hankins, Ray Isaacson and Doc Hastings; Senator Sue Gould; Glenn Walkley and John Goldsbury, past Presidents of the Board of Directors; D. S. Spellman, Puget Power & Light; David De Lorenzo, Hanford High School; Nancy De Lorenzo, i Columbia Basin Apartment Association; B. James, Energy Fair 1983; Susan Boothe, !
Pasco City Council; Dean Sunc2uist, Seattle City Light; William Barnes, Ckanogan County PUD; Al Pflugrath, Chelan County PUD; Harold Beckemeier, j
i 9 02 840824 10607529 COHEN 84-603 PDR i
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EXECUTIVE BOARD MINUTES April 23, 1982
' h'Y Mr. Welch continued that on Wednesday, April 21,-1982, the Executive Board - had sent a letter. to the four investor-owned utilities who have an ownership share in WNP-3. The purpose of the letter was to establish ths
-investor-owneo utilities' position with respect to a possible slowdown of con-struction at WNP-3. Mr. Welch read :he letter wnich had been sent to the investor-owned -utilities as well as the response to his letter. The letter received from the investor-owned utilities stated, in part, as follows:
"You ask whetner, as owners of WNP No. 3, we would resiss a proposal to defer continued construction on that project. The answer is yes. We will vigorously resist any such efforts... Answering the two specific questions posed in your letter,- our responses are as fol-lows: (1) Deferral of construction of WNP No. 3 would be very detrimental to our customers, and we would exercise our contractual and legal remedies to prevent such deferral; and (2) We continue to be, as we always have been, interested in pursuing any arrangement which is is tne interests of the region and our customers and would, of course, be willing to work with the Supply System, BPA and others to determine alternative solutions."
Mr. Welch also stated that a letter had been received from Peter Johnson, dated April 23, 1982. Mr. Welcr. read the letter which stated, in part, as follows:
"On April 19, 1982 at the meeting of the Washington Public Power Supply System Executive Bo_ard, Howard Richman o'f your Committee posed the question to me regarding the implication of the recommen-dation I made to that group. I responded that I would take your question under advisement and provide an answer to you at an early date. I will now express my intention as fully and completely as time will permit...
The selection of the WNP-1 Project as the project to be delayed pending identification of both the financial markets- and the means of assessing those markets was dictated by many f actors, iccluding, among others, the fact that the delay of either WNP-1 or WNP-3 would result in some reduction in the size of the BPA 1983 rate increase with some margin favoring delay of WNP-l; the proximity of WNP-3 to the region's major load centers providing increased transmission reliability and significant reduction of transmission losses; the l
delay of WNP-1 results in a greater reduction of surplus in both amount and timing, the circumstance of joint ownership of the WNP-3 Project...so that the output will be shared between Bonneville and i the other joint owners; the enhanced opportunity for a more expedi-tious restart of WNP-1 because the geography and the pool of techni-cal skills within the Hanford Reservation area; and, perhaps most b 1'.16C7531
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- April 23, 1982 EXECUTIVE BOARD MINUTES i
.A May 1, 1982 at which time the Project's comitments would exceed the cash available. Mr. Doupe' replied that this question had not been put before the court; however, such an issue should be placed before the court on or before May 1, 1982.
Following this discussion, Mr. Welch pointed out that a copy of R. W.
Beck & Associates' report was included in the Board members' folders.
Mr. Welch asked Mr. Johnson to coment on the letter which he had delivered to the Executive Board prior to this meeting. Mr. Johnson stat'ed that his recom-mandation was a result of responding to a request from the Executive Board with respect to future financing for the projects. Mr. Johnson continued that BPA, together with other decision makers and leaders throughout the Northwest, set the following objectives: (1) to further the best interests of current and future ratepayers of the region; (2) to minimize the financial risks and maxi-mize the fiscal integrity of the Bonneville Power Administration and the region as a whole; (3) to preserve the region's economic ability to deliver the benefits of the Pacific Northwest Electric Power Planning & Conservation Act; (4) to bring greater certainty, stability and predictability to rates and resource decisions; (5) to provide a maximum opportunity for the region's economy to recover and to remain prosperous; (6) to identify the most effec-tive strategy for marketing the bancs needed to finance the completion or preservation of the -Supply System's projects; (7) to maximize the region's flexibility to acccmmodate changing loads; ano (8) to identify a choice which
' ensures a healthy and positive construction environment within the Supply System in order that maximum efficiencies can be achieved.
Mr. Johnson stated that the recommendation which he had oresenteQ to the
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Supply System Board was difficult because of its impact on the' Tri-Cities area and the State of Washington. However, the recommendation had to be made in consideration of the interests of eight million citizens and ratepayers of the Pacific Northwest. Mr. Johnson stated, as he had on numerous other occasions, that Bonneville strongly believed that all three of the projects under con-struction by the Supply System were needed by the region. He continued that a multitude of circumstances prevented the Supply System from continuing with construction on this basis. He stated that the recomendation made by the Bonneville Power Administration was reached after weeks of exhaustive analysis and extensive consultation with a wide range of federal, State and local government officials, utility directors and managers and Supply System man-agement. He continued that Bonneville's recomendation was driven by two pressing circumstances: financial uncertainties and ratepayer reaction to escalating rates caused significantly by the Supply System's construction pro-gram. Mr. Johnson continued that fortunately, projected near-term surplusts of electricity would allow the region to deal effectively and responsively with these two circumstances. He continued that the determining f actor and decision faced on construction of these plants was that sufficient funds were not available to continue all three projects on the current construction schedules. He stated that there was not enough money prudently available to the -Supply System to protect Project 2 and continue the construction of both t
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' EXECUTIVE BOARD MINUTES .
April 23, 1982 conducted under Option B for an extendeo construction delay indicated that there ~would be a net benefit to the region of $212 million. On that basis, Mr. SienKiewicz said it.could be argued that that optiou has a benefit for the ratepayers in the region both in the short term and the long term. It is expected that there would be a 1 mil per kilowatt hour decrease in the rates for-the first.five to seven years. Following that, there would be .5 mil per kilowatt hour increase. Following further discussion on the effect of the construction slowdown on future rates, Mr. Sparks asked what provisions had j
been made for financing an extended construction delay of WNP-1. Mr. Johnson replied that adecuate funds were available to demobilize and cover maintenance costs through September 1983. Mr. Sparks asked what funding would be avail-able after September 1983. Mr. Johnson replied that- if funds were not avail-able after September 1983, it would be his desire to provide the funding from BPA revenue. It is estimated that the cash required would be approximately
$2.5 million per month.
Mr. Myers cbserved that it was the perception of Wahkiakum County PUD and others that the nuclear power plant construction program had been undertaken for the benefit of the entire region, including the private utilities, indus-trial customers and puolic power agencies. He stated that it appeared that with the termination of Projects 4 and 5 and the recommended extended con-struction delay for WNP l, the public utilities were primarily bearing the burden of risk and uncertainty in the construction of these nuclear power plants. For this reason, among otners, Wahkiakum County PUD strongly opposed i C the recommended construction delay of WNP-1 instead of WNP-3. He continueo that he was disappointed in the timing of BPA's recommendation, because it removed fecm the Board the consideration of options which might be available.
Mr. Myers presented two resolutions from Wahkiakum County PUD which identifiec Wahkiakum's position in this matter.
Mr. Fletcher stated that he believed the region needed the power whicn would be produced from all five of the Supply System's plants. He urged that construction be continued on the three remaining plants until such time as further financing was no longer available, if this were the case.
Mr. Clayhold stated that he felt if a directive were not received frcm
- Peter Johnson as to the extended construction delay for WNP-1, he would recom-
. mend an alternative to Mr. Johnson's recomendation. Mr. Clayhold referred to Peter Johnson's April 23, 1982 letter which stated: "I could not, in good conscience, approve a budget presentation or a financing plan inconsistent
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with thM program." Mr. Clayhold stated that although this did sound like a
! directive from the Administrator, he had heard Mr. Johnson indicate earlier in the meeting that he would consider other alternatives. He stated that short of a directive, he would encourage the Executive Board to implement Mr. John-son's recommendation with respect to Projects 2 and 3. However, with respect to WNP-1, Mr. Clayhold suomitted an alternative to Mr. Johnson',s recommenda-tion which would provide that the bond issue for WNP-1 be of a sufficient amount - to carry construction forward at the current pace either througn tne
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106C7535
o April 23, 1982
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EX ECUTIVE BOARD MINUTES'
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Mr. Johnson stated that he would stand with his recomendations as they
- were . set fortn in his April 23, 1982 ' letter to Mr. Welch, Chairman of the Finance Comittee. He continued that if there was a recomendation supported (by the Executive Board, he would take such a recomendation under advisement.
Mr. Johnson continued that the two concerns which had driven BPA's decision and recommendation were the financial uncertainties and the ratepayers' re-action throughout the region. He stated that the 8PA forecast was nothing more than an enabling circumstance to deal with the two concerns. Following further comments, Mr. Johnson stated that it was believed it would require a
-financing of 5875 million to proceed with construction of WNP-1 through Novem-
-ber 1982. He continued that consideration must be given to the difficulty this increase would present for financing, as well as the fact that a finan-cing of this size would rest.lt .in a modest rate increase, rather than the pro-posed rate decrease.
Following a considerable amount of discussion regarding t.te financing of the projects, Mr. Clayhold reviewed the reasons for shifting the operation of the Supply System from operating on a cash basis to operating on a comitment basis. He continued that prior to the time that Initiative 394 had been approved by the voters of the State, the Supply System had operated on a cash basis. Under this plan, it was possible for the Supply System to go forward with _ a bond sale when cash was needed for construction of the projects. How-ever, with the passage of Initiative 394, it was necessary to begin operating f on a comitment basis. He continued that if the voters were to vote against
( further financing of the project, the Supply System would have sufficient funds to bring the project to an orderly halt wnen operating in a comitment mode. However, if the voters were to approve the future financing of the project, the Supply System could imediately go b4Ck to operating on a Cash basis which would require less funding.
Mr. Nolan referred to Mr. Johnson's recommendation and analysis concern-ing tne construction schedule for WNP-1. Mr. Nolar. continued that it appeareo to him that Mr. Johnson's analysis had been presented with no alternative but to accept the recomendation. He continued that following the review of Mr. Johnson's April 23, 1982 letter, it appeared to him that the letter was a directive. He asked if this was a wrong interpretation of the comments con-tained in the letter. Mr. Johnson urged that the Executive Board review this matter with counsel. As indicated earlier, Mr. Johnson stated that if for very compelling reasons, the Executive Board were to reouest Bonneville to change their recommendation, he would have to take such a request under ad-visement. In conclusion, he stated that his letter had been quite clear, and he urged the Board to seek the advice of their counsel as to the interpretation l of the letter. Mr. Nolan asked how much time was being allowed in the deci-il sion making process for the Board to make such recommendation. Mr. Johnson deferred to Mr. Welch or a staff mem0er as to the current status on the remaining funds availaole. Mr. J. D. Perko, Acting Chief Financial Officer, replied that on a comitment basis, the latest analysis indicated that avail-aole funds would be depleted on or about June 1, 1982 for Projects 1, 2 ano 3.
Mr. Johnson aoded tnat the recommendation of the financial advisors was that
(- actions necessary to hold a bond sale in the near future needed to comence on April 26, 1982.
, 106C7537 1
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EXECUTIVE BOARD MINUTES
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April 23, 1982 23 to assure that funding for the projects is availaole. He continued that the financial advisors had indicated that due to the uncertainties of Initiative 394, there would be a risk on a cash basis. Therefore, the Bonneville Power Administration would feel it would be imprudent to proceed on other than a commitment basis. Following further discussion, Mr. Johnson stated that BPA could not proceed forward, given the uncertainties surrounding the financing of the projects, on other than a consnitment basis. He continued that Mr. Clay-hold had requested that consideration be given to proceeding on all three units on a commitment basis through Noventer; this approach would require a larger amount of financing. Mr. Johnson continued that if the Board came forward with this type of a recommendation, he would take the recommendation under advisement.
Rooert Olsen stated that he felt the financing problem which was being discussed at this meeting should have been foreseen at an earlier date. He stated that he was representing Mason County PUD No. 3, and it was his duty to make wise and prudent decisions on their behalf. However, he did not feel that there was sufficient information or time to make such a prudent decision. He stated tnat he did not feel the Executive Board was controlling the Supply System's destiny, but rather, that Peter Johnson was controlling its destiny. He stated that he felt the Board should consider Bonneville's recommendation. However, af ter studying such a recommendation, he felt that tne Board should come to their own conclusions and decisions. If BPA chose to
( override the Board's decision, it would then become BPA's decision and
( responsibility.
Following furtner discussion, Mr. Welch called on James Seagraves, R. W.
- Beck & Associates, for comments concerning their review of BPA's forecast of energy consumption. Mr. Seagraves reported that R. W. Beck & Associates had examined the assumptions, methodology and conclusions of BPA's report. In reviewing tne document, it was determined that significant judgment hao been used by the staff on the range of assumptions, input variables and the types of models used. None were felt to be unreasonable. He continued that it was felt the economic analysis was believed to be theoretically correct. C. Stan-ford Olsen asked, if in Mr. Seagraves' pecfessional judgment, he felt that the assumptions and conclusions reached by Bonneville Power Administration were correct. Mr. Seagraves replied that due to the way the economic analyses were presented, there would be no way to show either an economic benefit or cost to the region. In conclusion, Mr. Seagraves stated that the draft BPA report contained no major errors which R. W. Beck & Associates had discovered.
Following a considerable amount of discussion concerning the appropriate body to act on Peter Johnson's recommendation, Mr. Doupe' stated that the Board
' - of Directors under the existing law had the power to make final decisions on budgets and band sales; however, determining the construction schedules of the orojects was the responsibility of the Executive Board. He concluded that the subject wnich was being discussed was a divided function and responsibility.
Following further discussion, Mr. Nelson suggested that plans for a bond sale
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106C7509
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EXECUTIVE BOARD MINUTES' April 23, 1982 Mr. Mazur then reviewed the program goals for the extended construction 4 oelay plan for WNP-1. These program goals included preserving the plant !
assets, not precluding plant licensability, providing for an orderly cessation I of activities and a minimum cash flow and closing out contracts and paying off bills as rapidly as possible. He pointed out that many of the contractors were being tolerant with respect to receiving payment for their contract work under Project 4 due .to active contracts on Project 1. However, with the con-struction delay plan being discussed, it was felt that the centractors' toler-ance level would dissipate. Mr. Clayhold asked for assurance that management would be sensitive to the WNP-4 Termination Program when contracting matters were closed down on WNP-1. Mr. Mazur replied that although the Supply System woulo be sensitive to this area, he was unsure as to the latitude and flexi-bility,which would be available. Mr. Clayhold suggested that this subject be addressed in the goals for the extended construction delay program. Mr. Clay-hold stated tnat it appeared from the response that if the construction on WNP-1 was closed down, the risk of WNP-4 not being able to meet their comit-mcnts was increased. Mr. Mazur replied that there would be such an increased risk.
Following a review of the assumptions which had been developed, Mr. Mazur reviewed the proposed decrease in staffing which would occur if the extended delay plan were implemented. Mr. Mazur stated that the 6,375 personnel would be decreased within 30 days to 2,100 people. This staffing level would be f reduced to 1,000 within three months and 300 within one year. This staffing level would be sustained for the two to three-year period, depending upon tne
( ultimate determination for restart of construction. Following further discus-sion concerning the staffing levels and the resulting impact on funds which totaled 1970 million without interest, including the los; of schedule improve-ment of seven months, Mr. Mazur stated that the 1983 budget would be completed based on the present construction plan. He stated that initially, 90 percent of the construction contracts would be terminated; the remaining ten percer.t would be suspended. He also stated that selectively, the prepurchased con-tracts would be completed. Following a review of the objectives of the extended construction delay program, as well as the ramp-up of the program, Mr. Mazur reviewed his Concerns with respect to the extended construction delay.
One of the major concerns would be the loss of project momentum. He stated that regaining this momentum, especially in cost and schedule control, would be difficult. He also indicated that the loss of key personnel would oe extremely difficult to overcome. In addition, it would be extremely difficult to renire quality people for the restart program. Other concerns incluced (1) ability to sustain adequate maintenance over a prolonged time period; (2) impact of safety and licensability environment; (3) erosion of the nuclear industry capability to support restart; and (4) significant estimate at com-pletion impact which would result in higher utility rates.
Several cuestions concerning Mr. Mazur's presentation were raised by the Board memoers. Following this cuestion and answer period, Chairman Cain re-( cuested comments from memoers of the puolic.
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. EXECUTIVE BOARD MINUTES April 23, 1982 NUCLEAR PROJECT 1 Executive Board Resolution 63 entitled "A RESOLUTION APPROVING THE EXECU-TION OF MODIFICATION 'FDG' TO CONTRACT NO. 9779-218, MAIN ELECTRICAL CONTRACT, WITH FOLEY/WISMER & BECKER, A JOINT VENTURE, AND AUTHORIZING DELETION OF A PORTION OF THE WORK AND FINAL ACCEPTANCE OF CONTRACT NO. 9779-218 AND THE EXECUTION OF CONTRACT NO. 9779-218A WITH FOLEY/WISMER & BECKER, A JOINT VEN-TURE, FOR THE WORK WHICH WAS DELETED FROM CONTRACT NO. 9779-218 - WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT 1" was presented for considera-tion. Mr. Welch reviewed the resolution and reported that the realignment of Contract 9779-218 would provide maximum flexibility for the Supply System to directly control the orderly phase down of work under the contract which would ensure controlled completion of documentation for all work to be completed.
It would also ensure that all work and documentation was preserved in a manner which would best support a subsequent restart. Following further review of the resolution, Mr. Welch stated that based upon the Finance Committee's review and evaluation, the Committee recommended approval of Executive Board Resolu-tion 63. Mr. Welch moved that the resolution be adopted. Mr. Olsen seconded the motion.
Mr. Recchi asked for a'ssurance that the adoption of this resolution would not be in contempt of the previously discussed restraining order relating to WNP-1. Mr. Doupe' pointed out that this realignment of the contract had been proposed prior to the recomendation and consiceration of the extended con-struction celay of the project. Mr. Doupe' referred to Finding No. 1 of tne resolution which stated, in part, as follows: "The purpose of this modifica-tion is to allow maximum flexibility for the early completion, slowdown or extended construction delay of the project, if necessary, and ultimate restart of the project, as may be later determined by the Executive Board to De in the puolic interests". Mr. Doupe' continued that his legal analysis of the re-aligned contracts leads to the conclusion tnat it gives the Supply System total flexibility to gnage the contract in the best interests of the project. He stated that in his opiniu, passage of this resolution would not only allow a construction slowdown, but it would also expedite the improved management of the contract if the project were not slowed down. For this reason, Mr. Doupe' stated he did not feel that the adoption of the resolution would be inconsis-tent with the order.
Mr. Recchi asked if the realignment of this contract was within the 1982 budget. Mr. Welch replied that the funds were available within the 1982 bud-get. Mr. Scuire added that Mr. Clayhold had previously expressed, concern regarding tne possible impact which the slowdown of WNP-1 might have on the termination of WNP-4. He stated that the realignment of this contract reduced the likelihood of an impact on WNP-4. Following this discussion, the question was callad for. EXECUTIVE BOARD RESOLUTION 63 ADOPTED BY UNANIMOUS VOTE.
NUCLEAR PROJECT 3 Executive Board Resolution 64 entitled "A RESOLUTION ACCEPTING THE BID CF
( AND AUTHORIZING THE EXECUTION OF AN AGREEMENT WITH GEA POWER COOLING SYSTEMS, INC. FOR HEAT TRANSFER COMPONENTS FOR TWO ORY COOLING TOWERS, CONTRACT NO.
106(.7543 mu mmmumm i m
. EXECUTIVE BOARD MINUTES April 23, 1982
(, Executive Board Resolution 70 entitled "A RESOLUTION APPROVING THE EXECU-TION OF PROJECT CHANGE PROPOSAL NO. 35500637, CONSOLIDATION OF MISCELLANEOUS STEEL ERECTION TO ONE CONTRACT, WITH MORRISON-KNUDSEN COMPANY, INC. - WASHING-TON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PROJECT 3" was presented for considera-tion. Mr. Welch reported that this project change proposal would consolidate remaining miscellaneous steel erection in the WNP-3 Reactor Building from Contract 3240-265 to Contract 3240-263. He pointed out that the value of Contract 3240-263 would be increased by $710,000 for the transferred work and would be funded by decreasing the value of Cc.itract 3240-265. Following fur-ther review of the resolution, Mr. Welch stated that based upon the Finance Comittee's review and evaluation, the Comittee recomended approval of Executive Board Resolution 70. Mr. Welch moved that the resolution be adopted.
Mr. Recchi seconded the motion. EXECUTIVE BOARD RESOLUTION 70 ADOPTED BY UNANIMOUS VOTE.
Chairman Cain recessed the Special Executive Board meeting at 3:15 p.m. The meeting was reconvened at 4:05 p.m.
REPORT BY THE AUDli COMMITTEE Mr. Nolan, Chairman of the Executive Board Audit Comittee, reported that the Audit Comittee had reviewed the report of the Internal Auditor and the proposed report of the Acministrative Auditor. The Comittee was satisfied with the progress of the audits. Mr. Nolan urged that the Managing Director
( employ eight accitional internal auditors to provide the necessary staffing for the office of the Internal Financial Auditor.
APPROVAL OF CLAIM VOUCHERS
= Mr. Recchi moved that the following claim vouchers be ratified: GENERAL FUND - #119034 through 120428; NUCLEAR PROJECT NO. 1 CONSTRUCTION REVOLVING FUND - #3004 through 3008; NUCLEAR PROJECT NO.1 CONSTRUCTION FUND - #5380 through 5585; NUCLEAR PROJECT NO.1 CONSTRUCTION FULL FUND - #127 through 130; NUCLEAR PROJECT NO. 2 CONSTRUCTION FUND - #14986 through 15389; NUCLEAR PROJ-ECT - NO. 2 CONSTRUCTION FUEL FUND - #96 through 98; NUCLEAR PROJECT NO. 2 REVENUE FUND - #155 through 157; NUCLEAR PROJECT NO. 3 CONSTRUCTION TRUST ACCOUNT - #8770 through 8948; NUCLEAR PROJECT NO. 3 CONSTF.UCTION FUND - #484 through 515; NUCLEAR PROJECT NO. 3 CONSTRUCTION FUND - Wire Transfers 11-82 through 14-82. Mr. Welch seconded the motion. Mr. Olsen asked for assurance that no claim vouchers were included in this listing which were for the pay-ment of Bond Fund Trustees' litigation costs with respect to Initiative 394 Mr. Doupe' replied that the claim voucher list had been reviewed, and no vouchers were included for the payment of these foes. Following this discus-sion, the ouestion was called for. MOTION CARRIED.
Chairman Cain recessed the Special Executive Board meeting at 4:10 p.m.,
stating the the meeting would be reconvened at 2:00 p.m. on April 28, 1982 in the Lopez Room, Seattle Center, Seattle, Wasnington. The Notice of Adjourn-ment wnich was posted at the meeting place is attached hereto and made a part
(. of these Minutes.
106C7545
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EXECUTIVE BOARD MINUTES April 23, 1982 h April 19, the Executive Board Finance Comittee asked the Bonneville Power Administration to make a recomendation concerning future financing of the net billed projects. On April 19, the Bonneville Power Administrator recomended an extended construction delay of Nuclear Project 1. On April 23, the Finance Committee received a letter from the Administrator wnich answered questions previously posed by Board members regarding the BPA recomendation. These questions were discussed by the Board on April 23, 1982. Chairman Cain pointed out that this meeting was a continuation of the discussions held on April 23.
Chairman Cain stated that he had been advised by counsel that the injunc-tion had been lifted and that a reconsideration motion had been heard in Benton County Superior Court on the morning of this meeting; however, that motion was denied. Chairman Cain continued that a decision must be made quickly by the Bonneville Power Administration and the members of the Board. He pointed out that this decision would have an effect on an eight-state region in the Pacific Northwest. He stated that the Board was meeting at this time to allow addi-tional public comment prior to making that decision.
Cnairman Cain then called on Jack Welch, Chairman of the Executive Board Finance Comittee, for comments relating to this issue. Mr. Welch stated that at the April 23, 1982 Board meeting, a motion had been passed wnich directed the staff to develop possible options to tne construction and financing pro-
- posals which were recomended by the Bonneville Power Administration and to
( present tnese options to the Finance Comittee. The staff started imediately
( to prepare such options and worked throughout the weekend. The staff produced working papers which showed several variations regarding the management of tne net billed projects. The alternatives had been reviewed by the Finance Com-mittee and the Bonneville Power Administrator. Mr. Welch stated that many people had appeared at this meeting to present public comment. He recuested that these comments be heard prior to the Boaro taking action in this matter.
The Executive Board then heard puclic comments during the next two and one-half hour period from a number of interested individuals. The following citizens presented their views and support of the Supply System's projects:
John Poynor, Richland Mayor Pro Tem; Charlie Silvernail, Business Manager, IBEW Local 77; Mark Naulty, Pipefitter at WNP-1; Chuck Keenan, Director, Wes-tern Environmental Trade Association; Michael Hartfield, Northwest Council for
. Adecuate Electricity; John Boland, Concerned Citizen of the Northwest; Jay Maidment, Operations Research Consultant; State Representatives Shirley Hankins and Ray Isaacson; Senator Max Benitz; Sue Watkins, Port of Kennewick; Bill Sebero, Benton County Comissioner; Neal Shulman, Richland City Manager; Sheila Reneerger, Kennewick City Council; Dr. Tom Ables; Dan Ashburn, North-west Energy Coalition; Kelly Grubb and Charles Witt, Laborers Local 374; Steve Lattin, Port of Grays Harbor, Grays Harbor Opportunities 80's and Grays Harbor Chamber of Commerce; Russell Peters, Secretary, Pierce County Building Trades ,
Council; Clancy Pirtel, Teamsters Union; James Myton, Tacoma Plumbers and '
Steamfitters Local; William Grostick, President, Pierce County Building Trades Council; Clauce Oliver, Benton County Treasurer; Harold Matthews, Franklin County Comissioner; Jay Holman, Port of Benton; Bill Sarver, Teamsters Unicn; it 6(.7547
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EXECUTIVE BOARD MINUTES April 23, 1982 h.- Chairman Cain called on Mr. Welch, Chairman of the Executive Board Finance ,
Committee, for a report. Mr. Welch reviewed the history of the issue which I
was being discusseo. He stated that at the direction of the Executive Board, the staff had prepared a number of options and alternatives to the Bonneville Power Administration proposal. The Finance Comittee considered these propos-als and reviewed them with the staff of the Bonneville Power Administration.
A response to these alternatives had been received in the form of a letter addressed to Stanton H. Cain. Mr. Welch called on Mr. A. Squire, Deputy Man-aging Director, to provide a general sumary of the options which were pre-sented to the Finance Comittee and the Bonneville Power Administration.
Mr. Squire reported that the basic approach which had been taken was directed at how the Supply System could reduce the reautred cash flow for Projects 1 and 3 between this time period and the early part of Novemoer and to maximize funding. He said that during the review, it was determined that the cash flow requirements for the five months between May I and Novemoer 1 could be reduced by ten percent without prejudice to the target schedules. It was determir.ed that a 20 percent cash flow reduction at WNP-1 would not only prejudice the target schedules, but also the official schedule for WNP-l. It was determined that a 15 percent cash flow reduction at WNP-3 could be accom-plisned without prejudice to the target schedule. A reduction of cash flow at WNP-2 was not considered due to the overriding importance of cwpleting Proj-ect 2. Mr. Sauire continued that the investment bankers had oeen contacted
[^ and had indicated that a bond offering in the area of $700 million could be
( accomplished. Other possible sources of funding were examined, including selling approximately $100 million of uranium oxide. Following a review of 15 possible alternatives, these alternatives were reduced to tne two most pre-ferred alternatives.
Mr. Souire then reviewed the two preferred alternatives which had been discussed with the Finance Committee and the Bunneville Power Aaministration.
One alternative provided for construction at the present rate for Projects 1 and 3 until Novemoer 1,1982. This alternative would recuire a bond sale of
$720 million and would include BPA funding of $200 million, as well as $100 million from fuel sales. The other alternative provided for 90 percent of the present cash flow on Projects I and 3 until November 1982. This alternative provided for a bond offering of $750 million and contemplated funding in tne amount of $200 million to be received from BPA.
Following further discussion, Chairman Cain read the letter which had been received from Peter Johnson, Bonneville Power Acministrator, cated April 29, 1982. The letter stated, in part, as follows:
"I have reviewed with the staff of the Bonneville Power Administra-tion each of the alternatives to my recommendation of April 19, 1982 l
which have been presented to me. In addition, I have taken into account the many public statements included in your Board meeting of April 28, 1982.
k 106c'>s.m
. EXECUTIVE BOARD MINUTES April 23, 1982
' (.y He continued that it would be necessary to make a detailed review of the engi-neering which needed to be continued and that which could be discontinued. He indicated that a question existed as to how much of the engineering would need to be reexamined or redone following a construction delay of up to five years.
In sumary, Mr. Scuire stated that the funds available would allow for an orderly slowdown of WNP-1 and to maintain the project in a maintenance level until November 1983. Mr. Johnson added that this type of construction slowdown activity was being experienced across the country due to the change in load forecasts. He urged that the Supply System seek the advice and counsel from others who have had a similar experience 50 that the best procedure could be developed to save the resource and so the resource could be restarted at the least cost in the shortest possible time. He continued that he felt this resource was one which was needed in the region.
Mr. Nelson stated that the Executive Board had received a briefing from D. W. Mazur, Director of Projects, on April 23, 1982 ccncerning the problems and related costs on a rampdown and subsequent ramp-up of the project.
Mr. Nelson asked if it would be economically viable to complete the project if it were to be slowed down for two or more years. If if was not economically viable, the Supoly System would have a 60 percent completed project which could not be finished, due to the f act it was no longer econcmically viable.
Mr. Johnson responded that BPA had made an economic analysis on this subject.
( On a present value basis, it was believed that the actual additional cost of
( ramping dcwn and ramping back up would be approximately $250 million to 5300 million. inis would be the only additional cost aoove the cost of the project which could not be recovered. This additional cost would not render the
,a resource to be cost ineffective.
x
[- Mr. Cocnrane asked what Mr. Johnson felt the possibility would oe of completing No. 3 if WNP-1 was placed in an extended construction slowdown.
Mr. Johnson replied that the Bonneville Power Administration had purchased the output of Projects 1, 2 and 3 and he felt them to be economical, viable resources which would be needed in the future to serve the needs of the region.
Mr. Johnson stated it was his hope that at some future time, Projects 4 and 5 could also be determined to be viable resources for the region and could be acquired oy the Bonneville Power Administration.
Mr. Recchi asked what the investment comunity's reaction would be to the fact that the Supply System had made a determination to proceed with construc-tion on two plants, rather than three. He asked if this announcement would cause concern in the investment comunity and result in a higher interest rate on future bond sales. Mr. Johnson replied that construction slowdowns of this type were becoming more comon throughout the country. When discussing this matter with the investment comunity, Mr. Johnson stated that he had been told by the investment bankers to do what was prudent and responsible. Following further oiscussion, Mr. Nelson pointed out that within two months, the re-structured Executive Board would be assuming the responsibilities of the present Board of Directors and Executive Board. Mr. Nelson stated that it k appeared to him that by taking action on this matter at this time, the Board 106C7551 g
EXECUTIVE BOARD MINUTES April 23, 1982 O that a delay which would result in major cost increases would do nothing more than increase electrical rates for the future and play into the hands of the antinuclear advocates who are constantly criticizing the Supply System for what they perceive to be cost overruns. Mr. Logston stated that the people of the Pacific Northwest needed the power which would be gerarated by WNP-1, the ratepayers of the Pacific Northwest needed the savings which would result if WNP-1 was finished on schedule, and the citizens of the State of Washington needed the economic stability which would be lost if the project was delayed.
Following further remarks, Mr. Logston urged the Board not to vcte as a result of political pressure.
Mr. Recchi asked for input from legal counsel as to the ownership of Project 3 and the arrangements which would be necessary for the transfer wnich had been suggested by Robert Olsen. Mr. Rob Marritz, Culp, Owyer, Guterson &
Grader, replied that such an arrangement would be very difficult to accom-plish, ir.asmuch as the Net Billing Agreements require that in order to assign an interest in any of the plants, the consent of the participants would have to be secured. Therefore, all of the parties to the project would have.to agree to the assignment. Even if such an agreement were secured, the arrange-ments for such a transfer of ownership would be very complex.
Mr. Welch delivered a number of letters which he had received from indi-viouals in the Grays Harbor area. He continued that two of the letters were (A. from the City Councils of the Cities of Elma and Montesano. The letters representeo the Citizens of those areas and expressed a strong oesire for the continuation of construction of Project 3.
Executive Board Resolution 71 entitled "A RESOLUTION DIRECTING A FINANCING AND CONSTRUCTION PROGRAM FOR PROJECTS 1, 2 AND 3 AND AN EXTENDED CONSTRUCTION DELAY FOR PROJECT 1" was presented for consideration and read in its entirety by Mr. Douce'. Mr. Welch moved that the resolutien be adopted. C. Stanford Olsen seconded the moticn.
Chairman Cain called on Jack Tamagni of Lazard Freres, the Supply System's financial advisor, for further comments. Mr. Tamagni stated that the Supply System staff, his firm and the bankers had put together a tentative timetaole for the next financing. This timetable called for the Executive Board to aoprove the distribution of the Official Statement on Thursday, May 6,1982.
The draf t Official Statement would then be distributed no later than May 8 or 9, 1982. The timetable also called for a meeting with the rating agencies on May 10 and information meetings with the investors on May 10 and 11, 1982.
Preliminary pricing of the issue would be made on May 17, with a scheduled bond sale to be held on May 20, 1982. He continued that in order to prepare an Official Statement, a credible financing plan was needed. To develop such a credible financing plan, it would be necessary to know what the Board would approve in terms of projects and financing. Therefore, no action or no deci-sion would in fact be a decision, inasmuch as only 60 days remained before Initiative 394 went into effect and inasmuch as all three of the projects reouired major financing in order to continue construction. He, continued that 10607553
EXECUTIVE BOARD MINUTES April 23, 1982 C.
At 3:25 p.m., Mr. Lambert indicated that he would be serving as an alter-nate to Mr. Runyan from Clark County PUD. Chairman Cain asked if this was permissible. Mr. Doupe' advised that if the principal member of the Board of Directors was available and present at the meeting, his alternate could not serve in his behalf. Chairman Cain advised that Mr. Lambert could, however, make a statement. Mr. Lambert asked if the Executive Board was legally reouired to accept BPA's recommendation. Mr. Doupe' replied that the Execu-tive Board was not totally required to accept such a recomendation. However, a recommendation had been made and alternatives to the recommendation had been suggested. The Administrator did not approve the alternatives. The Adminis-trator had indicated that there was only one course of action which he would consider. Therefore, the Board, in accordance with their duties to carry out completion of the net billed projects, had only one course of action availaole to them and that was to concur with the Administrator's recommendation. He continued that the Administrator had the power to not approve further financ-ing. One alternative available to the Board would be to not concur with the Administrator's recommendation and therefore not go forward with the financing.
Such action would result in stopping construction on all three net billed projects. This would be in breach of the agreements between the Supply System, the Bonneville Power Administration, the owners and the bondholders. Mr. Lam-bert asked if the Board memoers would be relieved from legal liability in view of the Administrator's recommendation. Mr. Daupe' replied tnat the Board mem-bers did have legal responsibility to use prudent business judgment within the confines of the alternatives available to them.
Mr. Lameert stated that Clark County PUD objected to the f act that the alternatives which had been developed by the Finance Committee had not been submitted to the utilities for their review.
Following a considerable amount of discussion, C. Stanford Olsen stated that he had many concerns about the need for energy and the reliability and accuracy of the forecasts concerning the energy needs. He stated that he was also concerned accut the responsibility of the regional council balancing the resources against the load demands. He stated that the BPA Administrator had
. reviewed these areas and had offered BPA's forecast. Mr. Olsen continued that the Board did not have a forecasting responsibility. He stated that the Board had a definite responsibility to ensure that the facilities under construction had adequate cash to move forward in a prudent fashion.
Mr. Nickel stated that he realized a cost effectiveness study was neces-sary in order to have the issue of continued financing on the Novemoer ballot and that the necessary actions were occurring to prepare the study. He asked if the cost effectiveness study would include WNP-1. Mr. Souire replied that he saw no reason to include WNP-1 in the cost effectiveness study if there was not a need for a bond sale for WNP-1 in the near future. He stated that the consultant conducting the study had included WNP-1 up to tnis point, assuming completion on the present scheoule. Mr. Nickel stated that he would hope that j if the Board took action at this meeting to proceed with the extended con-struction delay for WNP-1, actions would continue to include WNP-1 in the cost
( \ effectiveness study so tnat the issue of WNP-1 financing could be addressed on 1
l 1C6C7555
EXECUTIVE BOARD MINUTES April 23, 1982 h..
Power Administration. He stated that the Board members were being forced, pursuant to legal agreements, to concur in a decision to mothball Project 1, which he believed to be the most cost effective resource. Mr. Olsen continued that in his opinion, the Board was being forced to concur in a recomendation which would place before the voters, under Initiative 394, the project which he believed to be the most costly, the furthest from completion and in tne
" backyard" of those who most adamantly opposed it. Mr. Olsen stated that his vote at this meeting was a vote of a " virtual hostage". He continued that the Board was being held hostage by the Net Billing Agreements which had been entered into with the Bonneville Power Administration several years ago. He stated that he was voting as he felt he was compelled to vote.
Mr. Richman stated that after hearing all the discussions, reports, public input and instructions from the Bonneville Power Administration in the form of the letters presented to the Board on April 23 and 29,1982, it was patently clear to him that the plan presented by the Bonneville Power Adminis-tration by their letter of April 19,198? was an instruction to the Board to implement that plan. He continued that it had also been made very clear that the Bonneville Power Administration had the contractual authority to instruct the Board to implement this plan. To not implement the plan as instructed by BPA would put the Supply System at risk of litigation and would also, in his opinion, jeopardize the integrity of the Net Billing Agreements. He stated that whatever course of action ne personally preferred was of no consequence (A in this decision, because such enoices were not available to him. Because of these f acts, Mr. Richman stated that he firmly believed it was in the best interests of the ratepayers of the region, as well as the Supply System, to vote in f avor of the BPA recomendation.
Mr. Recchi stated that his personal feeling was that the Supply System should keep all of their options open. He stated a draf t power load forecast from the Bonneville Power Administration was available. The Board did not have the benefit of the cost effectiveness study which was being developed.
Mr. Recchi also stated that the Board did not nave the benefit of the deter-mination regarding the impact which the fisheries enhancement would have on the feceral hydro system. Mr. Receni continued that he had been under the impression that the Supply System could continue with all three projects until the November election and that this could be done within the financial guide-lines which had been established by Mr. Johnson. He stated that it was his understanding that at least one of the alternatives would have provided for such continuation of the projects, with a financing i t. the $700 million range. He continued that he did not believe this was the time for either public power or the Board to consider abrogation of the contracts. He stated that he believed the contracts which had been entered into in good f aith must be upheld, and the obligations of the parties must be fulfilled. In the absence of Mr. Johnson looking f avorably upon the options which nad been pre-sented, he, too, would have to vote in concurrence with the directive wnich had been given by BPA.
(
Mr. Babb stated that he, too, would have little choice but to reluctantly N- vote for the resolution as presented.
106U;t.S7
, Washington Public Power Supply System P.O. Box 968 3000 George Washington Way Ricniand. Washington 99352 (509)372 5000 NOTICE OF ADJOURNMENT W \
SPECIAL EXECUTIVE BOARD MEETI.'G
. OF WASHINGTON PUBLIC POWER SUPPLY SYSTEM Notice is hereby given that the Special Meeting of the Executive Board of Washington Public Power Supply System scheduled for 9:00 a.m.
on April 23, 1982 is adjourned to 2:00 p.m. on April 28, 1982 in the Lopez Room, Seattle Center, Seattle, Wasnington.
Dated this 23rd day of April, 1982.
(
(
f !cs 5ecretary
(
106C7559
i 9 t
I h..
I NOTICE OF ADJOURNMENT Notice is hereby given that the Special Meeting of the Executive Board of the Washington Public Power Supply System conmenced on April 23, 1982, at 3000 George Washington Way, Richland, Washington at 9:00 a.m., and adjourned to Seattle Center, Seattle, Washington, at 2:00 p.m. on April 28, 1982, is further adjourned to 17930 Pacific Highway, South, Suite 400, on April 29, 1982, at 2:00 p.m.
Dated this 28tn day of April, 1982.
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/ 5ecretary L
1c607560
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Attachrent P A
1 April 30,1902 -
^
G01-a2-0169 -
Docket No. 50-460 l
l Mr. Harold R. Denton, Director -
Office of Nuclear Reactor Regulation /NRC .
Phillips Bicg., Room P-404A 9720 Norfolk Avenue Be:hesda, Maryland 20014
Dear Mr. Den:
cn:
Subject:
STATUS OF WNp-l
- g The purpose .% 'th ~
t information regarding the of this letter status is to providp:
of activities rela Ad a ntinued construction of
, E;P-1.
On April 19,19E2, th
.nistrator of Sonneville Power Administratien (20A) recc= enced to eg$.t:viy System's Board of Directors tnat construction of WriP-1.be celayed fc pe*rio: of "from 2 to 5 years" (see a:tached le tte r) . On e ,esday NM1) an order was issuec by the Benton Coun:y 5 rio , urt res ' ing the Board from taking any acticn to sic.,cown o :ayna ,onstruction on Wi!P-1 for a two week period, until a ..? -ca e het Id be held. The Suoply System Board me: in
.. c ~ c . F. day pril 23) to review tne BPA recommendaticn with the Ab. ratch d to receive further input from the Seply System staff anix:
to p @ ce publi . Because time for the Boaroof the to existence of the restraining evaluate alternatives presented creer, at theand
' meetinf no action was taken by the Board at the April 23 meeting. As a result of a court hearing held on Monday (April 26) the restraining orcer against Board action on WNP-1 was lifted.
Several alternatives to the BPA recommendation were presented at. the April 23 meeting, and others were prepared subse:;uent to that. The Board met again on Wednesday (April 28) in Seattle to hear further puolic coment on the SPA recommendation. At the conclusion of the April 28 meeting, the Board deferred their decision until Thursday (April 29) to provide time to review the alternatives and consider public cocrnents. At the Thursday meeting, the BPA Administrator stated .
~
H. R. Denton -
- ~- Page 2 April 30, 1982
'. Status of WNP-1 that none of the alternatives would be acceptable to BPA and that a construction delay on WNP-1 was recuired. Because BPA support is essential to the financing of all three Supply System projects, the Board voted to accept the BPA recommendation.
A ramp down of construction activities at WNP-1 will begin immediately.
Activities essential to maintaining the Construction Permit will continue throughout the construction delay. This will include supporting NRC review of the FSAR as required, and processing of the OL Application. We would like to meet with the staff in the near future to discuss details of the WNP-1 licensing review schedule in light of the planned construction delay.
It should be noted that the most recent "need for power" study performed by EPA (attached), which was the basis for the recommendation to delay WNP-1, shows a clear need for all three of the Supply System projects. The only itam being questioned is the time of the .(eo. Therefore, the action taken on WNP-1 is only a deferral and c: > t w:nnation. Because WNP-1 is approximately 63% ccmolete at this time and rehr~esents a valuable resource to the region,'.
temination of the plant at this stage is not being considered. We firmly believe that construction will be resumed.in the 2 to 5 year period discussed by EPA. For this reason, we believe it will be to our mutual benefit for
,~ tne Cenmission to proceed with the docketing of the WNP-1 FSAR. The FSAR was sucaitted for acceptance review in McVember 1981, and it is our understancing Inat the s 2ff has fcund it acceptable for docketing. Copies of the FSAR are new being precared for docketing and it is our intent to sucmit those em ies to the staff by May 14, 1982. Docketing of the Operating License
..,..icatien at this time would avoid the need to repeat the acceptance -
review peccess wnen ccnstruction resumes.
We will centinue to keep you apprised of the situation as furtner information is developec.
Very truly yours,
/ &M&
G. D. Bouchey, Decuty Director Safety & Security GCS/sm Attachnunts cc: CR Bryant BPA RW Hernan NRC A0 Toth .NRC DG Eisenhut NRC RH Engelken RO. V
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!s ac:::ds :s with 27 c:-.1=ent to express my rsed ::nendatica 3 projects, I regardiss t e .
- s::u::1:n schedu.las to be sais:aised for the 'J'JP 1, 2, an hd I: is as hersey : :1f7 1 :3 you of the cenclusions unich have been : ac e . d neesssary that dose :eem=da: ions be fully undars: cod by you an*Jashing::n Public ?over the zeshers of your 3ca:d isand :heisdevel:p: set of theof a futura fisc=cing plan.
- he developuse:
Supply o assis:
Sys:e='s I??3 budgsin dis u dars:asding, :s review=encers de fae:::sof* my. sad- s:sif and I vill be avail d to any a: :he Ine u:ive 2 card esti:; of April 19,193 1:3 :o dis :ee:=e:dati:n a:d vill be availabla de:eafter :s :sspen fu; der i quiries vnid you :: =a=hers f ycur 3 card =ay develop.
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' as ree::. asdi:s :o the Board a:d staff of de Supply Systes t a full paes to ne construe:1on ofli:TP #2 and 'J:?? 13 p :cted at
- 1. .: sin or := prove the existing Octst: action scheculas for these mai projects.
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- 2. Se construe:ica :::ple:icn schedule of *i'.?? 11 he delayed f::
period of f::s 2 to 5 years; and the s:sff of de Supply Sys:e= :: ;;epare a 3 ne See:d i=s:::c: vi:h these ree: =enda:1:ns.
budle: and fi:ancing plan c.onsis:en:
31s tec:=enda:1ca is the result 1: villofhavecareful en thecensicerati:n region, was notof anmany easy f ae: ors and, in view of the signift an: i= pac: =e:ters of ycur 3 card choice. However, I believe that as ycu and the ocha beco a more fully acquainted vi:h all of the financing, es:nc 12, dd =arke:ing and lead /:esource balance s:udies and invas:1;a:icas which have prees athe p::posal this rec:=enda 1:n you vill share my baliaf that adhersnes to 1.s the pruden: ac:1ca :o be :aken.
Since:ely, j
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ANALYS!S C7 RISCURCI ALTERNAT!'/ES 3CNNE*/!LI.I ?CCr.R ADMINISTRATION April 19, 1982 SU.$0t.ARY This paper presents the details of a decision / which will have a significant impact on the future of the Pacific Northwest. Circusstances which are largely economic have placed in jeopardy major regional energy programs, the financial health of many of the region's electric utill:ies, and possibly the region's fiscal credibili:y. The inccces and <= ploy =en: of thousands of the region's citicens are being i=pacted by these circumstances.
f The decision anscunced in this paper was made following ex:ensive analysis of ec= plex power financing and supply issue's. There was wide consultation vi:h regional leaders, concerned individuals, and experts inside and outside the region. The final decision was based upon the judg=ent of the 3enneville Power Ad=inistration (3?A), which is charged with the responsibility of pr:viding elec:rical energy to the region on a "prucent and businesslike" basis.
The decision 3?A has been addressing is what its recoc:=enda: ion should be to
. the Wasnington Pu:lic Power Supply Systes (Supply Syste=) on future financing
=
alterna:ives for the Supply Syste='s projects #1, 92, and 03. Because of the need for addi:icnal financing in May 1932 to con:inue cens:ruction of chese plan:s, decisions =us: be ade i==ediately :o provide a s' such cer:ainty as .
possible abou: :he future of :hese projec:s. The managers of the financing group w .ich =arke:s the Supply System's cons: rue: ion boncs for ene projec:s have acvised 3?A hat exis-ing circu=s:ances could make the next :end sale, scheduled for May 1982, more difficul and perhaps = ore expensive than past sales. The costs of these plants, as a result of long-:ers contracts called 7 ne:-oilling agree =ents, became the ut:i= ate responsibi'i:y of 3?A and i:s I cus:e:ers several years ago. The s:atus anc scheduling of these plan:s, therefore, inescapadly af fect every person and every consu=er of electricity in the region. .
In reaching a decision on the scheduling of resources needed in the region, a number of realities other than economics rust be addressed. Not the least of
- hese is the State of Washington Initiative 394 which signals a serious voter concern. 3?A respects this concern and understands that the decision it makes regarding the Supply Systes projects, and other energy f acilities, must be in the best interests of 3?A's ultimate constituents-the ratepayers throughout the Pacific Northwest.
Actions taken now must provide sufficient flexibility for the region to respond to future load / resource imbalances and changes in power marketing conditions. 3ecause of the enor=cus regional invest =ent in the three Supply Sys:en projects, =eans must be found :o realice the =axi=um value of these
) important regional assets.
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~
. In all of the analyses 3PA performed, it was apparent that the on-schedule b~ completion of WP 9 is a critical event in the region from the standpoint of both power production and the economic benefits of the revenues it will produce. The advanced stage of co=pletion of :he project (it is about 90_ percent complete), the large capital investment (more than 52 billion already committed), and the naar erm availability of the power and revenues (about 20'sonths away) make the early completion and operation of WP F2 an economic imperative for the region.
Cn the basis of these analyses, BPA has concluded that from the viewpoint of need-for power, economics, and financing, it wi'11 be feasible to extend the construction schedule of WP #1 for a period of up to 5 years. Near-term funding options appear to be adequate to continue WP #2 and WP .#3 on their current schedules and ex:end construe: ion of kMP #1. A forecasted near-term power surplus supports ex:ension of the WP #1 construction schedule by up to 5 years. Construction can be restarted earlier if circumstances dictate.
Civen the uncertain:les involved, no one element of the 3PA analyses is, by itself, persuasive. What h persuasive is the reinforcing consistency with which all factors--load / resource uncertainties, resour:e economics, and financial planning- point to the same conclusion. It is a matter of business prudence that SPA reduce its financial risk and not lever 2;e itself further by incurring addi ional debt to support surplus-capability.
Considerine the interests of the ratecavers and the retion as a whole continutnt WP v2 and v3 on current senedules and extendtne the co.strue:ien o f WP .si test oreserves and erotects :he econo =t: and financial integit:y c:
3?A an :ne region. It has fewer ots43 van:4ees anc more advantaees than any of the o:Mer er: tens. anc seosides flexiciti t for the region in mee: ng tu:ure 10actresource salances and in resconcing to ra id ensnees anc COntinTen:les.
03JIC VES The principal obje::ives 3?A used in perf or=ing the analyses and testing the de:isions we:e:
- 1. To fur:her the best interests of current and future ra:epayers of :he region. ,
- 2. To minimize the financial risks :c, and maximize the fiscal integrity of, 3PA snd the region as a wnole.
- 3. To p;eserve the region's economic ability to deliver the benefits of the Pacific Northwest Electric Power Planning and Conservation Act (Regional Act), including conservation and renewable resour:e development.
- 4. To bring greater certainty, stability, and predictability to rates and resource decisions.
- 5. To provide a maxi =um opportunity for the region's economy to recover and ;
remain prosperous.
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[* 6. To identify the most effective strategy for carketing the bonds ,naeded to finance the completion or preservation of the Supply System projects.
- 7. To maximice the region's flexibility to accoussoda te changing load and econo =ic condi: ions.
S. *o identify a choice whien assures a healthy and positive construction environ =ent within the Supply Sfstem in order that maxi =um efficiencies can be achieved.
1.0AD/ RESOURCE ANAI.YSIS Recent demand forecasts , including 3PA's preliminary forecast, show that the region, while needing additional electricity supplies in the 1990's,.now faces possible surpluses of generating capacity in the i980's. BPA's forecast shows annual average percentage load increases of .8, 1.7, and 2.5 percent as its low, base, and high case forecasts. Under the Regional Act, the Regional Power Planning Council has responsibility for forecasting future loads and resource requirements. It will be several months before the Regional Council can publish for commen: its first load forecast which, in April 1983, will becese a part of the of ficial regional power plan. In this interim period 3PA has been working closely vich the Regional Council, and has reviewed the SPA preliminary forecas: with :he Council as wel'1 as other regional public and .
priva:e utili:ies.
3?A also a::anged to have its preli=inary forecast independently reviewed by Na:ional Economic Research Associates (:.3 RA) , consulting economists from outs de :he region vi:h an international reputatien for expe::ise in electric energy de=and forecasting. That firm suggested that the BPA range of load growth is too narrow and recoc= ended th'at a higher range "would provide a more defensible guide to policy." A number of utili:y executives and exper:s be *. ieve it is pruden: utility practice to plan resources to meet loads.in the hign portion of the f orecas:ing . range. Under these circumstances, and using the high range reco . ended, all three net-billed projects could prove to be needed on senedule. However, a driving element in :he situation is tha:
financial and othe constraints preclude this option.
WP v2 is cur:ently seneduled to become co==ercially operational in February 1954 , *. 'NP 91 in June 1986, and WP93 in Dece=ber 1986. A1:nough nu=erous alternatives for revising the completion schedules were examined, in the following analysis only the three cost like'y options are depicted:
Option A - Continue the current schedule for completing all three plants.
Option 3 - Complete ATP 92 at.d 93 on schedule and extend completion of WP fl up to $ years.
Option C - Complete WIP 92 on schedule and extend completion of WP el up to 5 years and 93 up to 3 years.
3 m"Th.g m n.. .wp c- a _ ._ - m m.m .%.m 7 .:. .m ~.-
r
.g he following chart shows the effect of these options on :he toed / resource e belance:
REGIONAL FIRM LOAD / RESOURCE BALANCE Assuming A 17 Percent Amua'GrowthRate Average Megawatts
+3000 -
Current Construction Senecule Option A ,
+2000 - _ WNP si Estended Five Years Option a TN _. . ._ WNP *1 Estended 5 Years.
1000 - - \. A s Option C anc #3 Estenced 3 Years SURPW SM
\ss g
i., 's N D E ~iC;Ti-) g ,_,_ f.NN.
-iCCO -
-200C -
-3COC ~
-4000 ,
1993 '925 1990 1995 20C0 This chart suggests the following:
- 1. Cleerly, all three plants are needed by the region since there will be significant fir = deficits in the ea:ty 1990's. The questions are '%en are they needed?" and "Should construe: ion of any of the plants be
, extended?"
- 2. Under the current construction schedule for the three net-billed plants, there will be.some significant surpluses in the mid- and late 1980's.
- 3. If construction is extended on two projects, there will be some signi! . cant firs load deficits in the late 19o0's and early 1990's.
4 If the loads turn out to be greater, as some of the forecasts indicate, then the point at which deficits occur is moved up in time. For example, the upper forecast of 2.5 percent combined with all three plants on schedule would show a deficit in 1987 instead of the 1990 shown on the chart.
, B * . .
, (
. . .'i. S e. . . A . . . g A.p ,. ., .i c - A.e ,-
..r.e...-. 3...e. s ne regi::'s fu*ure power needs, f= etasting uncer:ainties, and :he ssiragi;i y of having addi:icnal :esour:ss nea:-at-hand dit:a:e tha: 3?A's j exis-ing s=d a::.cunced conservation a:d s=all (unde: 5 average regava::s)
- enewable :escur:ss progra=s should cc :inue to opera:e during :he period of surplus. 1?A co=siders :hese prograss to be valuable, unfinished resour:ss and vill =ake an aggressive effort :o cc=plete the=.
I
! 3?A has es:i=ated : hat, a :ost, /*50 average =e'gava::s are achievable by 1990
! in co=serva:ica and renewables in addi:isn :o :he savings frc: progra=s already unse:say or ineluded in !?A's p;eli=i=ary f::ecas:, a: cos:s less : nan
- he in::e= ental cos: :o comple:e and opera:e :he Supply Sys:e= proje::s.
The :es:-effe::iveness tes: fe; conserva:i = and :=ali renewabies in :nis period vi'. i reflec: :he recuced value of :he resour:es during :ne p:cba:.e nea -:er: surpluses.
3?A vill ::::inue to t=phasi:e i:s residential ec=serva:ica p;:gra=s vd:h have been offe:ed :s all regional u:ili:ies and which are unee:vay in 96 u:ill:y servi:e areas. The prog; =s offer increased . energy efficiency :o
- ualifying householes wi:h ele:: i space :: va: : her: in :hese se:vi:e areas 4: Li::le :: no cos: to the h==covner.
- ==i:= e:: s : large renewable rescur:ss vill be =ade on :he basis of a:
,ex:enced pla=ni:g h::i::: shoving need for nev power i: :ne pos -1990 period.
!?A =us: :en:inue to deve'op i:s policy, pecgra=, and c gani:a:isnal
- 4panili:y is renevaa'es in ::cer :o te able :o aedress :nis need effec:ively.
The principles of :s s :-ef f e::ivene.< s and :he p ::ec:i:n of :he ra:epaye:s' I
i .:eres : in assuring an adequate and reliable power supply vill cen:inue :s se
! para ==unt i: I?A's decisions and a::icns en conserva:icn and :e neva :'.e resour:es :evelep=en:.
- e. . ...i vc.. ..A . A,
. v. e. .. .e C F AL . .e..; y.. A...p.S i.-v ,.. S w..... ., , , y e.v.. e . e.v. , ; r. e. r. . S va ,. ,
v., ., .%. .,
a-
!?A's esenc=ic analysis ena=i:ed a large nu=ber of resource 41:e: natives it.cluding :he at:er.acive of :e=stecing .all :nree plan:s on senedule bu: ne: !
~
coe :: int WP #1 and #3 un:il : hey are eeded. The analysis : hen focused en
- .e econe=ic i=pa:: of the at:erna:ives on revenues fr:= power sa;es, including :he exz=ir.a: ice of the =es: likely ou:look for =arke:ing any ex:ess pcuer. 3?A es:!=a:ed :he cons::ue:ica cos::, ope:::ing ecs:s, fuel c:s s, :ne cos:: whi:n would be in:ur:ed if :he plan:s stood idle vai:ing :o se:ve, and financing cos:s. '
l l
I The .e: e::::=ic i=;a::: cf :he :hree at:erna:ives, vnen c:=pa:ed vi:h :ne curren: s:nedules f: ::--le:ing and opera:i:3 :he :nree pt:n:s were f:ue: :o be:
.o l
1
- 1. C:=p;e:! g all :nree plan:s en senedule bu: deferring :ne opers: ion of ;
WP 01 and 93 (te::ing :ne: si: icte) in :he event of serpius veuld :rea:e l
f.. .
Ti a net ' economic disadvantage of abou: $125 million (compared with completing the plants on their current . schedule, operating them and selling the surplus).
- 2. Cons::ue:ing WP #2 and 93 on schedule, but extending cons::uction of WP #1 up. to 5 years would have an economic advantage of about
$212 million compared with bringing all the plants in on schedule (abouc
$3!.0 million advantage over alternative 1).
- 3. Constructing WP #2 ' on schedule, but extending construe:Lon of WP #1 up to 5 years and #3 up to 3 years would also present a slight economic advantage of abou: $20 million compared wi:n completing all the plants on schedule (roughly $200 mil. lion less advantage than option 2).
FINANCIAL ANALYS!S In 3?A's financial analysis, performed cencurrently with the :wo analyses described previously, an equally large number of alternatives were examined.
In order to fu'ly assess the alternatives, 3PA considered the following:
- a. The financing requiremen:s for each plant. .
- b. The :tvenue/ rate impacts of the construction and operational alternatives. ,
- c. The limits of 3?A's flexibility in financing the plants.
- d. The : ens::ain:s of the financial =arkets (amounts that can be raised 4: tasonasle interest ra:es).
e.
The inpacts on :he credi: wor:hiness of 3?A, :he region's utilities, and states.
- f.
The legal and poli:ical i=plications of the alternatives, including the possible impac:s of Initiative 294 Based on advice provided- by underwri:ers (the people who marke: the bonds to individual investors) and financial advisors, it was determines that $$50 to
$650 million would be a reasonable amount for the bond offering this May.
'Therefore, 3?A realistically has only two financing options available: (1) to fund WP '72 to a le've l which- will per=it completion while continuing construction of one of :he otner two plants, or (2) to delay both other plants 1
while applying all the proceeds of *he bond sale toward completion of W7 92.
3ecause the lead / resource, resource econemic, and financial analyses indicate the feasibility and prudence of continuing WP 92 plus one other plant on their '
current schedules, a chol'ce must be made between proceeding with WP #1 or 93.
9 i
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1
.. . ... .. . ...... .... ... ....=w . .. . . e. , .., w n . .; .=e . ., .y . ., , ,y . .r== ev . .
. . . . = . * .
\'
] , , _ ,, , . . - -
t Ch0!cs CF W7 0101 WP #3_ O_i for selec:ing WP F1 over WPabout #3 for6 3%
WJ~ . r.
valid arguments WP v1 would beDe.about in coc=e rcialper operation +6d'i ?
are several would 9 miile kWh cheaper
..ne ule completion.
than WP v3; the power Hanford, Washington, y on .u earlier man:ns 10 percent); and WP #1 is located on the (or acoutreserva: ion, near WP 92.
nuclear reservation it is near When a
- .:$. ' ~ .
on the Hanford [.3. .
since W7 #1 Hewever, DOE nuclear programs and a h located skilled nuclear labor force. 7" "] _
of th work force should occur mere T location of ".D nume:cos required, recobill:ationat Hanford than at Satsop, Washington, economic advantage in .
[~ '
star:up is significant rapidly at the W7 di plantan edge signe :o beprove aocc.urred in regional load / resource WP v3. Such which have cost savings to regional . . .
view of the rapid changes significant .. .
balances. This could result in .L W ratepayers. jor Pacific %"3.
. of the Cascade Range and in closer shorterto the matrans=ission resul:ing transmission WP 93's location is wes: chan W P F1,losses and increases .
Nor:nwes: load centers This reduces line vings to regional ra:epayers.
dis:ances. the reliaolli:y--an additional potential cost sa all of WP #1 and distinguish of WP v3, there is li::le Supply to In ter=s of the total financing required to additional complete
~
snare 73-per:en:Rougnty 51.5 ' Jillion in System ~
Supply System's ~4 between the projec:s.
financing is required :o coc:plete each plant. fl has been wholly assigned the capability of WP and f our investor-ownedA of significance : hat to 3?A.
- is W? v3 is jointly ownec by One Supply Systemility assigned
.o 3?A. wi:n only 70 per:ent. of i:s capab s) :ne cons::ve: ion senedule theyof WP v3 would require the w that power u:ili:ies ( *CTextend may need cecision toof :Me o:her owners and it now J:Mer appearsowners will assist 3?A in agreement Additionally, the earlier : nan SPA. :o :he Supply System.
furnisning oversight a slightly icwer 3PA ill result is ded
~
Finally, ex:ending construe: ion on W? v1 w:nsa if Wp v3 cons::uction schedules were Oc::be ra*e increase nex:
instead.
RATE Ih? ACTS _
it is difficult to find cause are rising rapidly,for stabili:stion of electrici:y new During a periodHowever, vnen rates the future outlook is for optimism. esti=4:ed reduction in thesurplus resource needwill forallow expensive the rates in view of the an an:icipated temporary inflation and Also, borrowing rates which resources.
region to take advantage when it may =eet its of needs time at reduced in anticipation importantly, the region will continue of lower ..
interest rates resources. Most significantly lower than will produce lower cost electricity prices which, aschar a whole, on :heare following page. . .
to enjoy the national average, as shown on the
..g l -
~
_ w.eafcEtW .
g.+:-yay i *i& pw:l:
X. a.~.3..:. % .h: $'p:-@m.Q3 .:
~:
__ . . ..n.- .es .:~9.%,,.2We. en-zc- . .w- -
~
i AVERAGE RETAll ELECT *tlCITY RATES f.
IN CON'?AR SON TC 1960 PNW RATES PNW vs. U.S.
1980 Oct.LARS Mf:.'.S/kW h 0 **
- " s'a.
+30 n s.
l u.S 20 r .,,%e /
/
- ~.'* . . ./
+10 - .
i M: AxeLevet .. . ,
g 4
- ~~.....
l PNW
_20 - ,
q r s i
1990 1995 1950 1970 1930 TCday YEAR
- 2. addi:Len. One r e s u'. : s of our economic analysis and our review of the deb:
service 3?A wou'.d have :o pay on bonds ye: to be issued for tne construe: Jn of :ne Supply Sys:e= projects 91, 72, and V3, indicate :nac:
- 1. Tailing to go fo:sard with WP 02 would result in increased power 4 f
purenases anc higher rates botn in :ne near- and long-car =.
1 4 *
. Coing fervard vich all three projec:s would resui: in the need for a
'a higner ra:e increase plann[d for nex: October.
- 3. If we proceed with WP 12 and 03 on current schedules and ex:end cons :ue: ion of W F P1 for 5 years, 1983 rs:es will be reduced by 3 ..g ~
abou: 590 =illion.
schedules for all three 1
- 4. Finally, while extending construccion projec:s could result in a short-:erm decrease in races, it would result in much higher rates in the mid- and long-term.
Consequently, ;;oceeding with current construction on WP #2 and WP #3, and ex:ending :he cons::uction for WP P1 will benefi: racepayers in both the -
short- and long-ters while providing power suPF l y flexibility necessary to supper: the regional economy.
T.-2 3CNNy.VII.1.I ?CT:.R AO.4!NISTRATICS re.l.CO.e.:.5 QUESTIONS AND CO.MTS
- 3 NC"Is l i CN T*dI ISTOR.MATION PROVI0E0 IN THIS ? APER.
1 1
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1 e
~
s l Attachm:nt C 1 l
- 'i Docketfic'.50260 January 11, 1983 G01-83-0012 i
Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U.S. 'iuclear Regulatory Commission Washington, D.C. 20555 -
Subject:
NUCLEAR PROJECT NO. 1 C0tiSTRUCTI0f4 PERMIT EXTENSION - WNP-1 .
By letter dated July 21, 1981, the Washington vuu .s c uer Supply System filed a request with the ilRC for an amendment to the construction permit (CPPR-134) for the Supply System's fluclear Project No. I to extend the earliest and latest dates for ccmpletion cf construction. That amend ent request sought an extension to June i, 1986 for the latest construction ecmoletion date.
Subsequent to the filing of that amendment request, the Bonneville Power Administration (" EPA"i recommended to the Supply System that construction on Z.P-1 be delayed for a period of from two to five years.
In view of that recomendation, the Supply System's Board of Directors votec to suspend construction on WNP-1 temporarily. Tne Board has determined that construction on WriP-1 will be delayed for at least two years, as five andIne years. thatactual it is possible len that tne delay could be for as long energy demand considerations. gth of the delay will depend on regieral In view of these developments, the Supply System requests that its and latestamendment pending completionrequest dates: be modified to include the following earliest Earliest date for construction completion - June 1, 1988 Latest date for construction completion - June 1, 1991 hf
-c , a , , o -
.u 3 yp " pyrv s
d' Harold R. Denton Page 2 January 11, 1983 Construction Permit Extension G01-83-0012 We understand that this modification to th'e pending amendment request will not be treated by the Staff as a new snendment request. This point is of significance to us, and we ask that we be notified prior to further Staff action if this understanding is incorrect.
Very truly yours, f
G. D. Bouche/, Manager Nuclear Safety and Regulatory Programs cc: NS Reyncids, D&L M. Thadani, NRC CR Bryant, BPA O
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