(5 of 5)
As it is, the Northwesterners are not getting off unscathed. Their electric rates have already risen to pay for Projects 1,2 and 3. Moreover, their utilities will have to pay exceptionally high interest rates to raise capital in the bond market. At the moment, many investors are shunning bonds from the Northwest. "The whole thing is a nightmare," says Paul O'Connor, press secretary to Governor Spellman. "If traders on Wall Street have the choice between something that says Washington on it or something that says Indiana on it, they are going to go for Indiana. We've got a cloud hanging over us." Even the state government is suffering from guilt by association. Says Lyle Jacobsen, assistant state treasurer: "It's scary. We're launching a campaign to tell people that Whoops and the sovereign state of Washington are two separate things. The state will pay its bills."
Some Northwesterners and Whoops bondholders think that Uncle Sam should bail out the power system. One argument for such action is that BPA, a federal agency, encouraged Whoops to build the five nuclear plants. Energy Secretary Donald Hodel, who headed BPA from 1972 to 1977, accepts some of the blame. "We looked at the energy forecasts," he recalls, "and said, 'Jiminy crickets, the Northwest is going to run out of power.' " Nonetheless, he says, "the Administration strongly opposes any bailout, and I don't sense any sentiment for one in Congress." Opponents argue that using federal money to rescue Whoops would boost the already alarming budget deficit and set a precedent that could lead to similar expensive bailouts in the future.
Chances appear slim that investors stuck with Whoops 4 and 5 bonds will ever recoup their losses. Says Bettie Fullmer: "The only people who are going to make money are the lawyers." Many victims have already sold the securities at a tiny fraction of their face value to speculators, some of whom are betting that the Government will eventually bail out Whoops, giving them a big profit.
Investors will not be the only losers. As long as the fallout from the default hangs over the bond market, scores of electric utilities, and possibly other public agencies, across the U.S. will be facing higher interest rates to raise capital and will have to pass the added costs along to consumers and taxpayers. Either directly or indirectly, millions of Americans will be paying for the whopping blunders of Whoops.
—By Charles P. Alexander.
Reported by Deborah Peterson/Seattle and Adam Zagorin/New York