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Author: WPPSS Still Has Lessons for Energy Industry by Annette Cary Tri-City Herald, October 21, 2010

The bond default of the Washington Public Power Supply System offers some still relevant cautionary lessons for the energy industry, said professor Daniel Pope in presentations this week in the Tri-Cities.

Treat large, complex systems with caution. And be equally cautious in forecasting demand for power, he said.

Pope, a history professor at the University of Oregon, wrote Nuclear Implosions: The Rise and Fall of the Washington Public Power Supply System, which will be released in paperback next month.

At the start of the 1970s, WPPSS had just a few score employees, but within 10 years it was overseeing the largest set of nuclear construction projects in the country as it worked to build five nuclear power plants, Pope said. It became the nation's largest single issuer of municipal bonds.

But only one plant, Energy Northwest's Columbia Generating Station near Richland, was completed and the $2.25 million municipal bond default that resulted was the largest in the nation's history then or now, Pope believes.

The first three plants were financed with net billing, a complicated arrangement to regionalize the cost and risk, and allowed WPPSS to sell bonds with the implicit guarantee that the Bonneville Power Administration would back them, Pope said.

But when BPA sold regional public utilities on the concept that two more nuclear reactors needed to be built or they would run out of electricity, it persuaded them to back the reactors without the net billing assurance, he said.

The five reactors were started not only with two sharply different financing arrangements, but also at two sites hundreds of miles apart, with three different engineering firms and two different planned reactor technologies, he said.

"No wonder there were problems," he said.

At the same time, recessions and slow economic growth slowed the demand for electricity and tight federal money policies boosted interest rates, he said.

In May 1981, work stopped on the fourth and fifth reactors. Later, reactors one and three would be mothballed.

"The complexity of building nuclear plants strikes me as an ongoing, as well as a historical, problem," Pope said.

There are benefits to being flexible and nimble in providing power, he said. One response may be to build small, such as the concept of NuScale Power, which plans to produce modular nuclear units with a 45-megawatt capacity that can be linked together.

WPPSS also has lessons to teach about being overly optimistic in forecasting power demand, he said. When the five nuclear plants were planned, forecasters believed that electric demand would not respond to price changes and that it would continue to grow faster than the growth rate of the nation's gross domestic product, he said.

Those assumptions have proved false.

"I hope a reminder of what went wrong can help us all approach big issues with open minds and a measure of humility," Pope said. "The problems we face in energy policy are too serious, especially in an era of global warming, to fall back on answers that failed us a generation ago."

Pope spoke Tuesday at a Richland meeting of the Eastern Washington Section of the American Nuclear Society and Wednesday at a Kennewick meeting of the Pasco-Kennewick Rotary Club.