In the early 1970s, a small agency of about  81 people backed by some of Washington state's  

local utilities decided to build five  nuclear power plants. Simultaneously.

And it went about as well as you  might think. With the country's  

biggest municipal bond bankruptcy up until  then. And four abandoned power stations.

The story of Washington Public Power Supply  System’s attempt to pull off America's most  

complicated construction project is  a fascinating mix of civil service,  

bad estimates, nuclear immaturity,  and just plain mismanagement.

In this video, a good old-fashioned  American nuclear energy debacle.

## Beginnings

Washington is a state in the  northwestern United States.

They received statehood in 1889.  Afterwards, its population boomed  

as settlers poured in from the East during  the various Gold Rushes and World War I.

These larger populations needed water  and power services, and new utilities  

were founded to provide them. In major  cities like Seattle and Spokane, those  

utilities were owned by the city and that  helped keep their rates reasonably low.

But the rural areas did not have that benefit.  

This left them vulnerable to private utilities  that served them at extortionate prices. Their  

practices and monopoly status engendered  anger and annoyance amongst the people.

Urged on by a progressive organization  called the Washington State Grange,  

the state authorities adopted  public utility districts or PUDs.

PUDs are community-owned, nonprofit power  

utilities. Unlike regular private utilities  subject to the state utility commission,  

PUDs are governed by commissioners  elected by the local community.

## PUDs and Dams

Over the next few years, these PUDs bought and  resold power out of the federal hydropower system.

Washington state has a rugged,  

mountainous landscape. Winds blow moist  clouds from the Pacific to these mountains,  

causing them to drop their moisture in the  form of rain. Lots of rain, rugged terrain.

These conditions are ideal for hydroelectric  power. During the Great Depression,  

the US Federal Government funded the construction  

of dams and hydroelectric power plants as  part of its New Deal public works programs.

Building these new dams led to questions  about how the power would be distributed.  

So the government formed a bureau called the  Bonneville Power Administration, or the BPA.

The BPA distributes and markets the power  generated by the US government's hydropower dams,  

reselling it to utility customers like  the PUDs at cost. The PUDs in turn bring  

it to local residents while also handling  customer service and other day to day things.

## Forming a Combine

These local PUDs' heavy dependency  on the power provided to them by the  

Federal government led to concerns in the 1950s.

That decade, the US Federal Government began to  lose its taste for New Deal-style involvement  

in the economy. In 1956, President Dwight  Eisenhower pushed for changes in the funding  

model of the Tennessee Valley Authority,  another federal agency similar to the BPA.

Eisenhower, a fiscal conservative, saw the TVA and  its ilk as socialism - halting several federal dam  

projects and even mulled selling the whole  thing off. And if they can do it to the TVA,  

then they can do it to the BPA too, which  would leave the utilities high and dry.

To head off such a thing, seventeen public  utility districts formed a new agency.  

Announced in mid-1956, the new agency  was called the Washington Public Power  

Supply System. The name immediately received a  fortunate acronym: WPPSS, pronounced "whoops".

## How It Worked

I think it is important to make  clear that WPPSS - let me just  

call them Washington Supply  System - was not a utility.

Rather, their intent was to help  "shore up" its member PUDs' power  

generation sources by either  purchasing existing dams from  

the federal government if available or  funding the construction of new ones.

While the agency itself is authorized by state  law, its projects are not funded by state taxes.  

Instead, the agency is authorized to issue  nontaxable state bonds to raise money.

Washington Supply System started out as a  small organization with little to do and  

seemingly little reason to exist. Quickly,  three PUDs dropped their membership. The  

agency knew they had to find projects  fast. As one manager colorfully put it,  

"We better get pregnant or they'll dissolve us."

An outside engineering firm hired as a  consultant brought five potential jobs.  

One was a small hydroelectric project  at the somewhat remote Packwood Lake,  

about 25 miles outside of Mount Rainier,  the namesake of those amazing cherries.

In 1962, the agency issued  about $13.7 million in bonds  

to help fund the Packwood dam's construction.

The dam project was completed two years later.  Despite being delivered a few months late,  

the project was a big financial success.

## Hanford

Now for this second part of the story, we  are going to have to dial back a few years.

During the Manhattan Project, the US  Government set up a major plutonium  

production site along Washington state's  largest river the Columbia. The site was  

named Hanford and its plutonium was used to  manufacture two of the first atomic bombs.

For a long time, hot water from  Hanford’s plutonium production  

reactors was simply returned to the river,  

which seemed wasteful. Why not use this waste  heat to generate power for civilian purposes?

In 1956, Washington's influential senator  Henry "Scoop" Jackson proposed a law to have  

the US government spend $65 million to build a  dual-purpose "convertible" reactor at Hanford.

The bill faced substantial opposition from  the Eisenhower administration and members of  

Congress who did not think that the Atomic Energy  Commission - the US federal agency then in charge  

of nuclear energy development - should be involved  in generating power. So in 1956, it didn't pass.

But by 1958, things had changed,  in part thanks to the launch of  

Sputnik. The locals were also excited by the  possibility of receiving energy from Hanford.

So the proposal made it into a larger  bill and Eisenhower reluctantly signed  

it - thus allocating money for the construction of  

a new plutonium reactor called the  N-reactor or New Production Reactor.

Unlike Hanford's other reactors, this  produced both plutonium for nuclear  

weapons and high-pressure steam that  can be used to generate electricity.

Nobody in Congress opposed the plutonium part  lest they look weak on national security.  

But coal and private utility interests  killed Congressional funding for building  

the steam-generating part of the  facility. The Washington state  

government looked into picking  up the slack but passed as well.

## WPPSS and Hanford In early 1959, Washington Supply System is in the

midst of locking down the  project for Packwood Lake.

Flush off that success, Managing Director  Owen Hurd with authorization from the board  

starts investigating nuclear power.  They eventually put themselves forward  

as a partner with the AEC to fund and  build the 800-900 megawatt power plant.

To get Congressional opponents on  board, Washington Supply System  

lobbies and offers to sell half the  power generated to private utilities.

With popular support rising, this revised Hanford  

Generating Project passes in 1962 and  President Kennedy signs it into law.

If you really think about it,  the whole thing is a bit crazy.  

Washington Supply System was just a few  years old, was run by a thin staff of local  

utility operators, and did not even  have their own engineering staff.

Yet it works out. Despite some labor  issues - including some unofficial  

strikes and walkoffs - Washington Supply  System closely oversees the Hanford steam  

plant and shepherds it to completion.  It begins operation in April 1966.

At startup, the plant was the country's  largest civilian nuclear power plant by  

a large margin. It was a massive  installation, with eight pipes  

bringing hot steam to what were then the  two largest turbine generators in the world.

In 1967, Hanford singlehandedly accounted  for 43% of the country's nuclear power.

Washington sold $122 million of bonds at a  3.26% interest rate to fund the construction.  

The project was finished below budget,  and the remaining funds used to retire  

debt. Despite the labor disputes, the whole  thing can be called a pretty good success.

Being associated with such a massive plant  brought untold prestige. And soon enough,  

Washington Supply System starts  calling this generator Hanford One.

## Growing Demand

A key assumption that Washington  Supply System and the rest of the  

utility industry operated under in the late  1960s was that energy demand would grow.

Per analyses and forecasts made by the AEC,  electrical loads in the region had grown at  

an average of 5-7% each year and there seemed to  be no reason that the trend wouldn't continue.

The number of residential customers had  grown 2.5 times between 1937 and 1967.  

And kilowatt-hours those customers  used grew from 1,200 to 12,200.

Commercial and industrial customers' loads  were growing just as fast or even faster.  

Industrial customers used 90 times more  power in 1967 than they were in 1937.  

Nobody questioned the assumptions behind these  trends or the validity of the projections.

Utilities instead worried about where  to get the power to meet those needs.  

The Pacific Northwest region  lacked reserves of good fossil  

fuels. And the number of ideal sites for new  hydroelectric power plants was dwindling.

So the only scalable alternative seemed to be  

uranium. In the late 1960s, the BPA's  administrator brought together all the  

region's utilities and discussed the need  for nuclear energy to meet all that demand.

## The Big Plan

After several years of wrangling, the  group unveiled the Hydro-Thermal Power  

Program - a sprawling 20 year plan  covering the years from 1970 to 1990.

Phase I called for seven large  plants to be built from 1970 to  

1980 - a mix of coal and nuclear plants.  With the BPA by law unable to build them,  

Washington Supply System quickly found  itself responsible for building three  

nuclear plants. First WNP-2 committed to  in 1971, and then WNP-3 and WNP-1 in 1973.

Looking back, it feels like an overreach  but it is important to note that Washington  

Supply System felt a civic duty to go where  others cannot. The Hanford One job - which  

both the US federal and Washington state  governments turned down - is a prime example.

Moreover, it was the start of  the golden age of nuclear energy.  

After an initial hesitancy,  utilities were adopting it  

wholesale with 31 plants announced in 1967  alone. The TVA announced 17 by themselves.

And even if Washington overbuilt a little bit,  

what's the big deal? The thinking of the time  was that nuclear would make power "too cheap  

to meter". Any extra capacity can be used  to lure another aluminium smelter to town.

Finally, the BPA threw in another  safety net called "net billing".  

Explaining this in full would be a bit tiring.

The short version is that net billing  means the BPA commits to buying nuclear  

power - more expensive than  its hydropower - and spreads  

out the cost difference across  all of its utility customers.

Net billing is meant to help spread out the high  cost of building new power generating sources  

across a wide population. And from a development  standpoint, I get it. But it also commits every  

utility customer to the plant. And critically,  that holds even if the plant is never built.

## Changes in Plan

Basically as soon as things got  rolling, changes had to be made.

In October 1970, Washington Supply System had  to relocate the 1,100 megawatt WNP-2 - initially  

estimated to cost $500 million - from its  original planned location at Roosevelt Beach.

National park staffers wanted a  six-year study to see whether the  

plant's hot water would affect the local  clam population. So WNP-2 was relocated to  

Hanford, where the environmental  studies had already been done.

A few months later in January 1971,  Washington Supply System received  

an unpleasant call from the federal  government. The Nixon administration  

was cutting spend. And with plutonium  needs declining thanks to arms agreements,  

they wanted to shut down Hanford One's N-reactor  and the 860 megawatt power plant attached to it.

A furious lobbying effort followed.  Various players in Washington state  

said that the shutdown would  create a power crisis in the  

area. Ordinary people sent letters to the  government asking to reverse the shutdown.

A compromise was reached in mid-1972. The  old N-reactor can run for a few more years.  

But since its weapons capability  cannot be practically removed,  

the whole thing had to go. So to  prevent a permanent loss to the grid,  

Washington Supply System pledged to build a  replacement, WNP-1 to replace Hanford One.

That is how Washington Supply System ended up  committing to two nuclear projects in 1973.  

And why WNP-2 and WNP-1 both happen to be at  Hanford, while WNP-3 is at the town of Satsop,  

west of Olympia. And why WNP-2 was  scheduled to start before WNP-1.

## Adding 4 and 5 Washington Supply System now had to manage

a budget that had abruptly tripled  from $500 million to $1.6 billion.

For an organization of just 81 employees in 1971,  

this is a substantial ask. They rapidly  hired and moved to a new office to keep  

up with the monumental task of  three nuclear power plant builds.

At the same time, they had to  adjust to the requirements of a new  

era. The 1970s marked the rise  of the environmental movement,  

leading to new regulations issued by the  AEC leading to constant design changes.

The newly passed law NEPA also  necessitated extensive studies  

and Environmental impact reports that cannot be  

ignored or downplayed - especially in the wake  of the momentous Calvert Cliffs court decision.

Finally, the net billing safety net broke.  A 1972 tax ruling by the IRS regarding  

nontaxable bonds plus the rapidly rising costs  of the Hydro-Thermal Power Program hitting BPA  

customers meant that net billing can no longer be  used for nuclear projects after WNP-1, 2, and 3.

So tell me why, oh why, did Washington  Supply System then decide to add  

another two nuclear reactors? It  ties back to the energy crises.

In the late 1960s, people talked of an  impending energy crisis. Then in the  

1970s it seemed like those days had  come. A light snowpack in 1972 meant  

less water for the region's hydropower  dams, causing factories to shut down.

Then in 1973 was the Yom Kippur War and the  resulting oil embargoes. With the gas rationing,  

conservation programs, etc. People at  both the BPA and utilities believed  

that 1973 would be just the beginning.  The only thing to do was to push forward  

to Phase II of the Hydro-Thermal Power  Program and build more nuclear plants.

The hope was that "twinning" WNP-4  and WNP-5 with WNP-1 and WNP-3 at  

Hanford and Satsop can realize some $400  million of cost savings. And at the time,  

the feeling about progress at the  three plants was that they were  

slow but on the right track. A feeling  that later turned out to be incorrect.

With net billing no longer available, utilities  were asked to commit themselves to building the  

plants, then estimated to cost $2.25 billion.  With the BPA's aggressive help - including a  

potential threat of shutoff by 1983 - 88  utilities signed an agreement by 1976.

One major exception to the trend  was the big utility Seattle Light,  

which owned its own hydropower stations  and was not heavily dependent on the BPA.

They asked the Seattle city council for  authorization to buy into the WNP-4 and  

5 projects, and the council voted  no, saying that it cost too much.

## What Went Wrong

That is how Washington Supply System committed  to five nuclear power projects in five years.  

And as it turned out, many of the assumptions  motivating that urgency were incorrect.

First of all, the Washington state region  was not hurdling towards a power crisis.  

As they like to say, past performance  is not indicative of future returns.

The 5-7% annual growth forecasts had been prepared  by a body called the Pacific Northwest Utility  

Conference Committee, which compiled historical  data from utilities and made a crude projection.

But some of this historical growth  can be attributed to the fact that  

the Pacific Northwest had some of the  lowest power costs in the country,  

thanks to its plentiful hydropower dams.  No sophisticated economic analysis was  

done to see what might happen if the price of  power went up. And it came to be that rising  

energy prices and good conservation  programs blunted that demand curve.

During the Seattle Light drama, an  outside consulting firm was brought  

in to do their own estimates  of future electricity demand,  

and what they came up with was 1.5% - far  lower than even Seattle's low 4-5% forecast.

The second major miscalculation was believing  that nuclear power plants would get cheaper  

as they got bigger. Back in the 1960s,  GE told potential customers that net  

cost per kilowatt for a 1,000 megawatt plant  would be half that of a 200 megawatt plant.

There had been no data to back  this assertion and as they tried  

to build these new facilities they  found it was not true. In 1967,  

the AEC estimated that a 1,100 megawatt plant  would cost $134 million. Two years later,  

that was revised up 79% to $240 million. That  price trend would only go up in the coming years.

## Mismanagement

But those do not excuse the fact that the  single biggest factor behind the debacle was  

Washington Supply System's struggle to manage  the project within the restraints put upon it.

Washington grew its staff to 550 and  then 2,000 people. But even so they were  

ill-equipped to handle what was without question  the biggest megaproject in the US at the time.

These five plants were rushed to construction  with no attempt to achieve economies of scale.  

Consider the French nuclear industry. Many  of the French plants built in the 1970s had  

the same 900 megawatt design with the same  components and shared a single supply chain.

Washington Supply System's five plants,  

on the other hand, were of three different  designs done by three different designers.  

It was noted that a state law nominally prevented  consolidation of the jobs and that no standard  

design then existed. Nevertheless, the  savings would have been substantial.

EDF was a massive organization run by a  tight-knit group of educated elites. And  

they kept a tight grip on the project, embedding  their own people at the engineering sites and  

strictly refused to take on design changes  even when they seemed good on the surface.

Washington Supply System - perhaps overwhelmed -  exercised lax control over its contractors. They  

elected three separate architect/engineers  - apparently to spread out the risk - who  

then struck different contracts with  different supply and engineering firms.

Contracts were awarded while the designs were  still being finalized. And contractors were  

allowed to make changes on the fly - leading  to careless modifications, component delays,  

lots of waiting around, shoddy  work, and extensive rework.

One concrete and steel job  was initially estimated at  

$40 million but the moving goalposts caused  its price to balloon to well over $200 million.

In another major incident, in June 1980,  the Nuclear Regulatory Commission or NRC  

fined Washington Supply System $61,000  when they discovered that the sacrificial  

shield wall - a protective barrier  between the reactor vessel and the  

containment buildings - was done profoundly  terribly and would not survive an accident.

The issue was that bad work was being done  on top of bad work. Inspectors reported  

cracks in the wall's structural beams since  1977. Even so, two contractors built on top  

of its flawed structure. This is not  on the workers, but their supervisors.

Washington initially thought  the fix would take 3 weeks,  

it ended up taking 13 months of  24/7 work by over 100 workers.

## Mismanagement: Labor Strife And then there was extensive labor strife

between the contractors and the  labor unions doing the work.

In 1976, a strike by the Plumbers and Steamfitters  union shut down work entirely for four months,  

costing up to $500,000 each day.  Washington Supply System struggled  

to mediate between the contractors and its unions.

The unionized workers felt that they  were being blamed for what they thought  

was incompetent management.  And they are of course right.

But it is a two way street. I should note  this was the 1970s, a time of ... volatility,  

and the workers were not doing their best  work. They did whatever they can get away with.

Walkoffs and strikes continued  throughout the next few years.  

Between April 1978 and July 1979, there  were over 100 work stoppages or secondary  

boycotts. And at Satsop alone, there  were 18 labor disputes in just 1979.

## Mismanagement: Just Sad Things

And then there are the things  that just make you sad.

The hope had been that "twinning" the  number 4 and 5 stations would save money.  

But the time between construction  start of these two build phases  

were so close together that none of  those benefits were ever realized.

In August 1978, heavy rains in Satsop  washed away all the excavation work  

done for WNP-3 and 5 into a nearby creek,  adding $51 million to the cost. The area  

gets an average of 90 inches of rain each  year, this should have been accounted for.

And then in early 1979 came a double hit. First,  

the movie thriller called "China Syndrome",  depicting a possible nuclear reactor meltdown.

Twelve days after the movie was  released came the nuclear incident  

at Three Mile Island - an accident  that shattered the credibility of  

the American nuclear industry and led to  a massive revamp in the NRC's overview.

Washington Supply System employees later  blame the NRC and its safety regulations  

for 50% of the project's overruns in its  first four years. This estimate has been  

contested, with others instead blaming  Washington's general mismanagement.

## Ballooning Costs

The estimated price tag of $4  billion for all five plants  

had been too optimistic from the very beginning.

Even as utilities were committing to  plants 4 and 5, the strikes, delays,  

and new changes were blowing the  original estimates out of the water.

By 1978, the plants were delayed  by two years and costs went up to  

$8.5 billion. In 1979, that had gone up  to $11.7 billion. By the end of 1980,  

the time delay had stretched to 13  years and costs to $17.3 billion.

Those costs had to go somewhere. Rates rose very  quickly from 0.351 cents per kilowatt-hour in 1979  

to 2.2 cents in 1983. A significant portion of  those rises can be attributed to the power plants.

This was 1979. Per polls, the number  one issue that people cared about that  

year was inflation and energy. The absolute  worst thing to be doing was raising rates.

At the same time, Washington Supply  System's interest rates rose from  

5.93% in 1977 to 11.77% in 1981. Part of  this was the inflationary environment,  

but there were also concerns that  they were selling too many bonds.

From 1978 to 1980, 20% of all the gas and  electric bonds came from Washington alone.  

By 1980, they were selling $200 million every  

45 days. Half of the company's costs  were just the interest on its debts.

Worse yet, the people buying those bonds were  not given proper information about the state  

of the project. In late 1979, a mutual fund  manager reportedly toured the site himself,  

and then immediately sold every Washington  Supply System bond they had. Yet Washington  

kept selling $200 million of bonds  almost right up until the end.

## Cancellation

The early 1980s saw the US economy  hit by a sizable recession.

Unemployment rates in Washington state  doubled from 1979. Lumber mills closed  

and electricity demand plunged.  With the rough economic situation,  

there was no possible justification  to finish all five power plants.

In early 1981, the new Washington Supply  System director Robert Ferguson orders a  

ground-up cost estimate for the project. The  new estimate puts the cost of completion at  

$23 billion, or about $86 billion today.

As one estimate put it, enough to build  the Great Wall of China with union labor.

Ferguson realized that the organization simply  cannot do it and recommends that the board put  

a 1-year moratorium on construction for  plants 4 and 5. The board is shocked,  

feeling that they had not been  told about all this, but agrees.

The fallout is immediate. Wall Street  analysts predict that plants 4 and 5  

will not be completed. Thousands of workers  in Hanford are laid off, and they protest.  

The ratepayers rose up in fury, suing their local  utilities to keep them from paying for the plants.

In January 1982, WNP-4 and 5  are cancelled. But of course,  

the bondholders still want to get paid back for  the bonds they bought for those projects. The  

utilities - and their ratepayers - were on the  hook. In some cases up to $12,000 per customer.

However the Washington Supreme Court  makes a somewhat dodgy ruling that  

the utilities and energy cooperatives did not  legitimately enter the agreement for 4 and 5,  

releasing them from their  obligations to the project.

So in August 1983, Washington Supply System  defaults on the $2.2 billion of bonds issued for  

stations 4 and 5. It was the largest municipal  default in American history up until then.

## Conclusion

As with any lawsuit, the bondholders sued,  alleging malfeasance, incompetence, and fraud.

The lawsuit dragged on for six years and  was finally resolved in late December 1988  

with the 75,000 bondholders getting 10 to 40  cents back for every dollar they put in. The  

lawyers certainly made out well, earning  $33 million, though they asked for $100.

The estimate to finish WNP-1, 2, and 3 was  over $12 billion - a ridiculous number. They  

raised $1.6 billion in an attempt to  continue before deciding to cancel 1  

and 3 - with both at over 60% completion  rate - so they can just focus on WNP-2.

WNP-2 finally opened in 1984 at the cost  of nearly $3,000 per kilowatt. To compare,  

the French had an average weighted  cost of $1,200 per kilowatt.

It is now called Columbia Generating  Station and has worked fine without  

much drama. Which is exactly what you  want out of a nuclear power station.

In 1995, the remains of  WNP-1 and 3 were demolished.

The two plants at Satsop are still out there  

and are frequently the subject  of YouTube exploration videos.

Finishing the first nuclear plant somewhat  redeemed Washington Supply System but a lot  

of the baggage remained. In 1998,  they renamed themselves to Energy  

Northwest - after paying $260,000  to deal with a trademark issue.

Since then, they have kept their heads down,  successfully developing other renewable forms  

of energy like the Nine Canyons wind turbine  project and the Horn Rapids solar projects  

alongside Packwood and Columbia. A troubled  start, but a reliable cornerstone since.