(3 of 5)
At the center of the maelstrom is Whoops, a once obscure but now infamous joint venture of 23 publicly owned utilities. With headquarters in the small city of Richland in southeastern Washington, the agency was set up in 1957 to build dams and power plants. By the early '70s Whoops officials, who put their faith in energy experts, thought that the Northwest was facing serious potential power shortages. Demand for electricity had been burgeoning 7% annually and was expected to continue growing at that pace. Hoping to provide an abundant source of cheap energy, the power system began building its first three nuclear plants between 1972 and 1975. In 1976, the Bonneville Power Administration, a U.S. Government agency that sells electricity from federal dams to Northwestern utilities, warned that power demand was still likely to outstrip supply in the '80s. With that encouragement Whoops went ahead with Nos. 4 and 5.
Whoops was ill prepared to build one nuclear plant, much less five. Many of the 23 members of the agency's board were farmers and small businessmen who were neophytes in the nuclear business. Whoops used three different designs for the five projects, which suffered from repeated delays and huge cost overruns. Like all nuclear plants, the Whoops projects faced costly Government regulation in the wake of rising public concern about the safety of reactors and the growing strength of the antinuke movement. By 1982 the total projected price of the five plants had exploded from $4.1 billion to $23.8 billion.
Meanwhile, the forecasts of power shortages proved to be wildly wrong. Conservation measures spurred by the 1973 and 1979 surges in oil prices reduced demand for electricity. So did a series of economic recessions that hit the Northwest particularly hard. The hypothetical need for the five plants vanished. First Whoops canceled Nos. 4 and 5 in January 1982, and later it mothballed Nos. 1 and 3. Only Project 2, scheduled to start generating electricity early next year, has a chance of being completed in the near future.
No hard evidence has yet surfaced that Whoops' board members and managers over the years are guilty of deliberate fraud or corruption. But they are collectively to blame for bad judgment and bureaucratic bungling on an unprecedented, almost unimaginable, scale. Concludes Washington Governor John Spellman: "Good-faith people made poor decisions." Those decisions were accepted by the merchants of Wall Street, who gladly peddled more and more Whoops paper.
Investors snapped up the bonds partly because they seemed to have the solid support of Government agencies. Securities financing the first three plants were backed by the Bonneville Power Administration, which has responsibility for making payments on the debt. To meet that obligation and other costs, BPA has boosted the rates it charges Northwestern utilities by 148% since 1979. The federal agency says it will raise rates further, if necessary, to pay off the bonds, even if only one of the plants is ever finished. Problems could still conceivably arise, however, for owners of Project 1,2 and 3 bonds. It is possible that lawyers for holders of the ill-fated Nos. 4 and 5 bonds will convince the courts that all the Whoops securities should be treated in the same way, so that losses can be spread among the investors.