Financial History 141 Spring 2022 - Page 24

Plume from the nuclear power plant on Hanford Reservation , 2006 .
After the Default
Immediately following the default , Chemical Bank and various other parties filed lawsuits in four states against the participating utilities , WPPSS , the BPA , engineering firms , energy forecasters and bond underwriters and their counsel . Their accusations included misrepresentation , mismanagement , incompetence , fraud , coercion and deceit ; they sought financial damages of more than $ 7 billion . Within a month , a federal Judicial Panel on Multidistrict Litigation combined 29 applicable actions into one labeled MDL 551 .
While that class action moved through the court system , the WPPSS itself continued to operate . The mid-1981 press release disclosing the $ 12 billion estimate to complete WNP-4 and 5 also noted the need to spend another $ 12 billion to finish WNP-1 through 3 . Each of those plants had also been running over budget and behind schedule . Since 1979 , BPA had been raising its rates to cover the cost overruns and delays . Thanks to that financing backstop , the WPPSS was able to continue selling bonds to support those projects . In September 1981 and February 1982 , it floated issues of $ 750 million and $ 850 million , respectively , paying interest rates in excess of 15.4 %.
In April 1982 , the continuing need to raise as much as another $ 3 billion finally convinced WPPSS and the BPA to stop
construction of WNP-1 when it was 63 % complete . Independent utilities that owned 30 % of WNP-3 waited until July 1983 to stop work on that project , when it was 76 % complete . BPA itself decided to continue working on WNP-2 , which it opened successfully in 1984 . By that time , the WPPSS had formally terminated the other four plants that had been important parts of the 1969 Ten-Year Program . It had certainly become clear that the region was not going to need those plants for at least the next 15 years .
MDL 551 made its way through the court system in a slow and deliberate manner . The process of exchanging discovery materials , taking depositions , listing witnesses , negotiating pre-trial settlements worth $ 107 million and arranging for a change of venue from Washington to Arizona took more than five years . In December 1988 , following a trial of only two months , the last remaining defendants agreed to settlements that brought the total to be paid to the bondholders to $ 750 million . Judge William Browning ’ s September 1989 Opinion and Order listed the payments to be made by the BPA , dozens of PUDs and electric cooperatives , and a number of municipalities , consultants , advisors and individuals . That order did not require WPPSS to make any payments . Indeed , despite the travails that organization had endured , and as noted at the outset , the company that renamed itself Energy Northwest did indeed survive this episode of disastrous decision making . In time , WNP-2 became a key component of the company ’ s 21st century energy production .
Michael A . Martorelli is a Director Emeritus at Fairmount Partners and a frequent contributor to Financial History . He earned his MA in History from American Military University .
Sources Lambert , Jeremiah D . The Power Brokers . Cambridge , MA : The MIT Press . 2015 .
Pope , Daniel . Nuclear Implosions : The Rise and Fall of the Washington Public Power Supply System . Cambridge : Cambridge University Press . 2008 .
US Department of Energy . Office of Technology Impacts . Regional Issue Identification and Assessment . Volume III : Institutional Barriers to Developing Power Generation Facilities in the Pacific Northwest . October 1979 .
US Department of the Interior . Bonneville Power Administration . A Ten-Year Hydro- Thermal Power Program for the Pacific Northwest . January 1969 .
US General Accounting Office . Region at the Crossroads : The Pacific Northwest Searches for New Sources of Electric Energy . August 1978 .
US Securities and Exchange Commission . Staff Report on the Investigation in the Matter of Transactions in Washington Public Power Supply System Securities . Government Printing Office . 1988 .
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