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Show H.. ... Western Resources WRAP-UP Exxon pullout; nuclear plant cancellation By HeleneC. Monberg Vernal Express Washington Correspondent EXXON PULLS OUT OF COLONY PROJECT ishington Exxon Corp., the n's largest petroleum company, unced on May 2 it is pulling out of blony oil shale project in Garfield vty, Colo. Exxon held a 60 percent est in the project and was project iger; Tosco held a 40 percent est and provided the technique for icting oil from shale. The project lesigned to produce close to 50,000 ls of shale oil per day by 1987. e Colony project was widely ded as the premier oil shale ct in the nation, and the Exxon uncement stunned the syn-fuels stry. It was not, however, pected. The rumor mill had been --e for weeks about the escalating j. of the project, and the U.S. letic Fuels Corp. held up its second lent on Tosco's loan guarantee the government in March, pending 'ranee from Tosco that the nment interest was protected. "Tcon blamed escalating costs. Rep. Z: Brown, R-Colo., blamed ating costs, falling oil prices and government permitting processes. Orrin G. Hatch, R-Utah, said a would have to be provided by the al government if syn-fuels cts are to succeed here. shington The Pacific Northwest eling from cancellation of two ar plants, a recent decision to one completion of a third nuclear or, and escalating power rates to or its massive high-cost nuclear iment. i fallout from the partially failed iment affects the rest of the ry from California and the west, as a secondary market for ahs Pacific Northwestern power, to ''Street. Rarely has a regional 00 !y project had such an impact on a as this nuclear plant project has ahn the Pacific Northwest and fed. ch ;th some $24 billion" involved in 'acific Northwest nuclear option, has incredibly far-reaching 1 Nations for the nuclear power '8 'ry, municipal bond financing, i fc electric cooperative financing, ongr! mention the utilities in this part mom country," J.H. (Joe) Tice of the c Northwest Generating Co. of sound, Ore., told Western Resources to,' up (WRW) on April 27. The lt)K:ir plants were to keep energy ;ni(iin the Pacific Northwest, but it j,, he said. "Cheap power in the (0j c Northwest is rapidly becoming ress g of the past, largely because of j,tuation," according to Tice. af Nuclear Power sta Plants cancelled hington The Pacific Northwest ling from cancellation of two r plants, a recent decision to ne completion of a third nuclear r, and escalating power rates to ir its massive high-cost nuclear ment. fallout from the partially failed ment affects the rest of the coun-im coun-im California and the Southwest, , ree;secondary market for surplus : Northwestern power, to Wall Rarely has a regional energy t had such a impact on a region suit nuclear plant project has had on :y Di'cific Northwest and beyond, raisf-h some $24 billion" involved in oulcific Northwest nuclear option, icrf incredibly far-reaching implica-pport'or implica-pport'or the nuclear power industry, pal bond financing, rural elec-' elec-' operative financing, not to men- i utilities in this part of the coun- F. H. (Joe) Tice of the Pacific rest Generating Co. of Portland, old Western Resources Wrap-up ) on April 27. The nuclear plants to keep energy cheap in the : Northwest, but it didn't, he said. ) power in the Pacific Northwest ily becoming a thing of the past, because of this situation," ac-7) ac-7) ! to Tice. TWO CANCELLATIONS, y A POSTPONEMENT, LAW SUITS Pacific Northwest's nuclear has been cut 60 percent in the y wr months, according to Tice, -pf E. Bell, Assistant J istrator of the Bonneville Power "y istration (BPA) and manager of A Washington office, and other f& Northwest contacts. JV" beginning of the year a group thwestern utilities had 6,080 atts of generating capacity in clear plants, all in the state of .ctiigton, on the drawing board. Iitiis happened: ot(f Jan. 22 the board of directors of ' , ishington Public Power Supply 'rK' l (WPPSS) terminated it iction of two nuclear power s totalling 2,490 megawatts at d in Eastern Washington and at n between Aberdeen and Olympia tern Washington, Plants 4 & 5. April 30 the WPPSS board of directors voted to delay completion of its plant No. 1 totalling 1,250 megawatts from three to five years; it had been scheduled for completion in 1986. It took this action on the recommendation of the BPA Administrator Peter T. Johnson in mid-April. He said the delay on the construction time on plant No. 1 would "result in some reduction in the size of Bonneville's 1983 rate increase." Bonneville, has, in effect, underwritten the cost of the first three plants which WPPSS had in its nuclear option. Johnson made his recommendation to the WPPSS board of directors after BPA announced on April 2 that its preliminary forecast of demand for electricity in the Pacific Northwest until year 2000 was an increase at an average annual rate of 1.7 percent. This forecast was the first ever produced by BPA, and it was nearly two years in the making. The National Economic Research Associates reported on April 10 that its analysis of the BPA data indicated it was low, and that a range of an increase of between 2 and 2.2 percent would be "more consistent with the available data." But Bell told WRW on May 3 Bonneville plans to continue to use its estimate of 1.7 percent "for planning purposes until the Northwest Power Planning Council comes out with its forecast at the end of next year. They we'll make another re-evaluation" re-evaluation" of nuclear plant construction schedule. Many critics believe the BPA load growth forecast is too low; it is much lower than earlier projections. Prior to 1973 demand had grown 7.5 percent a year. Earlier projections forecast load growth would be 3.2 percent annually between 1981-1992, according to the 1981 BPA annual report just released. Such drastic decisions serve as the breeding ground for law suits. Twelve rural electric cooperatives in the area filed suit against WPPSS on April 23 in a Washington state Superior Court in Lewis County, Wash., seeking a declaration from the court that they are not liable to pay for any of the costs to terminate WPPSS plants No. 4 and No. 5. Altho they were participants in the two plants, they claimed participants are not liable to pay "unless and until the projects are completed" or , the plants are decommissioned, and neither of these circumstances has occurred. Morgan Dubrow of the National Rural Electric Cooperative Association on May 3 presented WRW with several pages of excerpts of remarks made by Lee C. White, former chairman of the Federal Power Commission now a Washington, D.C., attorney. Both met with a group of rural cooperatives at Orcas Island, Wash., on April 24 concerning their liabilities, if any, under their contracts with WPPSS. White stated at that meeting, "To say that the WPPSS-participating utility contract is unusual is grossly to understate the situation. It is more than unusual; it is very nearly unbelievable. Many of us are familiar with take-or-pay contracts which obligate the purchaser to pay for a product even if he is unable or unwilling to use it. That, however, focuses on a totally different situation than the contracts in question. Where there is no product, take-or-pay in inappropriate. The concept of committing to pay regardless of whether there. is any product delivered is, so far as I know, novel in the electric energy industry," White advised to coops. co-ops. White also said he doubted the complex problem would be solved by litigation he surmised; it is more likely to be solved by a consensus agreements compromise or some type of legislative solution. ENTER DOJ IN CONTROVERSY WPPSS was organized in 1957 under a state law in Washington permitting public utility districts (PUD's) and municipal power systems to band together under one entity to acquire, build, operate and own both electric power generation units and transmission facilities. When it became evident that the federal power being supplied to these federal preference power customers was coming to an end, WPPSS decided in the late 60's and early 70's to build five nuclear plants, according to Bell. At that time it was widely thought such plants would be the best buy for the money to keep Pacific Northwest power cheap, he told WRW on May 3. BPA, in effect, guaranteed the repayment of the first three plants thru "net billing agreements" with WPPSS with the exception of a 30 percent ownership in WPPSS plant No. 3 by four investor-owned utilities, Bell said. Newspapers in the Pacific Northwest" recently have, run long articles about the. decline and fall, of . the . WPPSS -dream. In sum, just about everything that could go wrong did. In a series called "WPPSS: The Big Jolt" which the Seattle Post-Intelligencer ran in late March and early April, it stated WPPSS was directed in the mid 1960's to mid 1970's when the key decisions were made "by elected commissioners of the state's public utilities, plus officials of four city-owned utilities (who were) members in good standing of the good-old-boy network that has run power planning in Washington for a half century. ..with an almost religious belief in growth. Several had held office since the 1950's." They were usually small businessmen who knew their field but were babds in the woods about building nuclear power plants and financing them, according to the Post-Intelligencer Post-Intelligencer WPPSS articles. Management was faulty from the outset, there were vast cost overruns, major labor disputes and construction hiatuses, inaccurate forecasts of load growth, a saturation of investment : portfolios with WPPSS bonds, and finally, an outright refusal by Wall Street to buy more bonds for WPPSS plants No. 4 and No. 5, which were not underwritten by BPA, even tho the last two WPPSS bond sales in the past year have carried interest rates of more than 15 percent. That was a 300 percent increase in rates in three years. Naturally, with the costs of the WPPSS power plants going up, power rates are going up. BPA's rates went up from about 3 to 6 mills in December 1979; to 11 mills in June 1981;and BPA : announced on March 31 it plans to increase its firm power rate by 73 percent on Oct. 1, 1982, from 1.14 cents to 1.97 cents per kilowatt hour. Local utilities are likewise raising their rates, to the outrage of at least five ratepayer groups. In just one year the estimated cost of the five WPPSS plants escalated from $15.9 billion in 1981 to $23.8 billion in 1982, and some 88 power supply systems have contracted to buy some power from at least one of the five WPPSS nuclear plants. Irate ratepayers put an initiative on the Washington state ballot in 1981 which passed in the general election in November 1981 requiring an affirmative vote by voters within service areas of public power utilities before new revenue bonds can be issued to finance power plants 250 megawatts or larger. Three large banks serving as bond fund trustees to protect the interests of WPPSS bondholders have filed a suit in the U.S. District Court in Seattle challenging the validity of the initiative. Now the Department of Justice (DOJ) has done likewise. It filed a separate suit at the request of the Department of Energy (DOE) on April 9, 1982, challenging the Constitutionality of the successful initiative (No. 394). The DOJ suit will be heard by the U.S. District Court in Seattle on June 28. A BPA-DOE issue paper dated April 1982 stated, "The judge has indicated that he will hand down- a decision on June 30. If the validity of Initiative No. 394 is upheld, the measure (ie. initiative) will take effect on July 1, 1982, altho an appeal is anticipated no matter what the decicison may be." So the Pacific Northwest will be in financial turmoil for some time. |