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Washington Public Power Supply System (WPPSS)
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The Washington Public Power Supply System (WPPSS) was started in the 1950s as a means to guarantee electric power to homes and industry in the Northwest. Well-meaning officials believed that building nuclear power plants was the best way to supply clean and cheap electricity to customers. Events and human inadequacies produced the largest municipal bond default in U.S. history. The system's acronym, pronounced "whoops," came to represent how not to run a public works project.
WPPSS was organized in 1957 as a municipal corporation that allowed publicly owned utilities to combine resources and build power generation facilities. The entity was authorized by the Washington State Legislature and had the same status as a city or a county. The system was run by directors who were commissioners from the member utilities. Seattle City Light, the largest public utility in the state, signed on with 16 other utilities to insure the availability of electric power in the future. The system's first project was a $10.5 million dam at Packwood Lake . It was completed in 1964, seven months behind schedule.
Build, Build, Build
Planners expected that the demand for electricity in the Northwest would double every 10 years, beyond the capacity of hydropower. WPPSS made plans for a nuclear plant at Hanford, called Plant 2, and in 1971 utilities signed up to share costs and benefits. Plant 1, also at Hanford and Plant 3 near Satsop, Grays Harbor County, Washington, were proposed the following year. The costs of all these plants would be repaid through the sale of the power that they produced. WPPSS planned Plant 4 at Hanford and 5 at Satsop which would be "twinned" with 1 and 3. In this way, system planners thought, the experience and resources from the first plants would benefit the twin plants.
Several factors combined to ruin construction schedules and to drive costs to three and four times the original estimates. Inflation and design changes constantly plagued all the projects. Builders often got ahead of designers who modified their drawings to conform to what had been built. Safety changes imposed by the Nuclear Regulatory Commission increased costs too, but the biggest cause of delays and overruns was mismanagement of the process by the WPPSS. The directors and the managers of the system had no experience in nuclear engineering or in projects of this scale. System managers were unable to develop a unified and comprehensive means of choosing, directing, and supervising contractors. One contractor, already shown to be incompetent, was retained for more work. In a well-publicized example, a pipe hanger was built and rebuilt 17 times. Quality control inspectors complained of inadequate work that went unaddressed.
The delays were not widely reported. At a WPPSS board meeting in 1973, Seattle City Light Superintendent Gordon Vickery (1920-1996) expressed surprise that the projects were a year behind schedule. According to the minutes, "Mr. Vickery expressed his opinion that the public should be told this, rather than keep saying we are on schedule and then come up short" (Chasan).
Seattle City Light signed on to take portions of the power generated by Plants 1, 2 and 3, which obligated Seattle customers to pay a portion of construction. In 1975, City Light was given the opportunity to participate in Plants 4 and 5. A low snow pack during the winter of 1972-73 forced cutbacks of electricity from conventional hydro sources. The Arab oil embargo in 1973 produced long lines at gas stations, further heightening the sense of looming shortages.
At the same time, the environmental movement began to question the wisdom of nuclear power. The Washington Environmental Council filed suit to require City Light to produce an environmental impact statement on the nuclear plants which would have delayed the process five years. The environmental group dropped its suit when City Light Superintendent Vickery opened up the decision-making process. He established a 27-member Citizens' Overview Committee, made up of citizens and including environmentalists, to look at the needs for power and the best ways to provide it. City Light produced a study, Energy 1990, which examined ways to meet future power needs.
City Light staff supported first a 10 percent piece of the two new nuclear plants, then a 5 percent piece. The citizens' committee opposed participation in nuclear power and instead proposed that conservation be used to meet growth. The Seattle City Council supported the committee's approach and voted 6 to 3 not to participate in WPPSS 4 and 5. Seattle achieved the expected savings through a variety of measures including the "Kill-a-Watt" program that began in 1974.
In January 1982, the WPPSS board stopped construction on Plants 4 and 5 when total cost for all the plants was projected to exceed $24 billion. Because these plants generated no power and brought in no money, the system was forced to default on $2.25 billion in bonds. This meant that the member utilities, and ultimately the rate payers, were obligated to pay back the borrowed money. In some small towns where unemployment due to the recession was already high, this amounted to more than $12,000 per customer. The bondholders sued and the matter wound it way through courts for the next 13 years. Plants 1 and 3 were never finished either, but their costs were backed by the Bonneville Power Administration and the power it generated from the Columbia River Dams.
On December 24, 1988, the parties in the various lawsuits reached a settlement of $753 million. Some of the system's approximately 75,000 bondholders would receive 40 cents on every dollar invested; others got as little as 10 cents. Because a court found that some of the bond monies for Plants 4 and 5 were spent on Plants 1 and 3, participants in those projects were held liable for the default. Seattle's share was $50 million, of which $43.2 million came from insurance companies. The last settlement was reached in 1995.
Plant 2 at Hanford was completed in 1984 and is today (2000) called the Columbia Generating Station. It produces 12 percent of the power supplied by the Bonneville Power Administration at a cost of 2.3 cents per kilowatt hour. Seattle customers pay an average of 3.89 cents per kilowatt hour. The unfinished plants were mothballed against the possibility that construction would be resumed. In 1995, WPPSS decided to demolish what remained of the structures.
In 1998, the corporation was renamed Energy Northwest. A consultant advised the board of directors that the old name was "hurting business opportunities" (The Seattle Times). This change did not go seamlessly. The organization paid $260,000 to settle a lawsuit filed by another organization that had been using that name already.
Daniel Jack Chasan, The Fall of the House of WPPSS, (Seattle: Sasquatch Publishing, 1985); Seattle City Light Annual Report - 1994, p. 23;
Seattle City Light Annual Report - 1991, p. 28; Seattle City Light
Annual Report - 1986, p. 25; Seattle City Light Annual Report - 1976,
p. 6; Peter Lewis, "Nuclear Plant Is Now Ready for Y2K, Operators Say," The Seattle Times, July 2, 1999, p. D-1; "Bondholders still awaiting payoff 10 years later," The Seattle Times, December 15, 1991, p. E-5; "Judge: WPPSS Money misspent, N-Plants ruling opens door for bondholders," The Seattle Times, October 7, 1990, p. B-2; "WPPSS
Money Ready: Bond Holders Will Split $170 Million," The Seattle Times, November 27, 1992, p. D-7; "Deal
Reached in WPPSS Default," The Seattle Times, January 27, 1995, p. B-2;
Seattle City Light, Energy 1990 - Final Report, 1976, Part A, p. 1-8; Daniel Pope, "Environmental Constraints and Organizational Failures: The Washington Public Power Supply System," Humanities and Social Sciences Online website access December 31, 2011 (http://www.h-net.org/~business/bhcweb/publications/BEHprint/v019/p0074-p0082.pdf).
Note: This essay was emended on December 31, 2011 to correct the number of WPPSS bondholders.
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