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The Power BrokersThe Struggle to Shape and Control the Electric Power Industry$
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Jeremiah D. Lambert

Print publication date: 2015

Print ISBN-13: 9780262029506

Published to MIT Press Scholarship Online: May 2016

DOI: 10.7551/mitpress/9780262029506.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 20 May 2022

Bonneville Power

Bonneville Power

Overreach and Disaster

(p.93) 3 Bonneville Power
The Power Brokers

Jeremiah D. Lambert

The MIT Press

TVA was not the only public power vehicle sponsored by President Roosevelt. He sought to replicate the TVA concept elsewhere, including the Pacific Northwest, where he wanted to harness the vast hydroelectric power of the Columbia River. Political opponents, among them investor-owned utilities, saw TVA as a mortal threat and fought to limit the scope of other public vehicles. Bonneville Power Authority (BPA), organized as a federal marketing agency to sell hydroelectric power produced by dams on the Columbia River, was by law simply a merchant of power produced by others without rights to own the sources of that power. BPA nonetheless became a primary provider of low-cost electricity to power-dependent, municipal utilities, which in 1957 formed Washington Public Power Supply System (WPPSS) to consolidate public power initiatives in the Pacific Northwest. Spurred by forecast power shortages, WPPSS joined forces with BPA in the 1960’s to promote a hugely ambitious nuclear power program. Since it could not build or own the power plants required, BPA chose as a surrogate WPPSS, which agreed to finance, construct and operate five nuclear plants but lacked the managerial capacity to deal with complex nuclear technology. BPA guaranteed financing for three of the plants, and WPPSS raised money for the remaining two on the strength of contracts with participating local utilities, also BPA’s customers. The funding medium was municipal bonds, of which WPPSS became over a decade the nation’s largest issuer. Many buyers were individuals, much like the customers for the securities of Insull’s holding companies. The nuclear program encountered huge cost overruns, delays, and technical failures. Forecasts of the imminent power shortage, an article of faith at BPA and WPPSS, proved wildly wrong. In the event, WPPSS defaulted on the non-guaranteed bonds, and only one of five nuclear plants ever reached completion. Donald P. Hodel, BPA’s administrator during five critical years ending in 1977, dismissed environmental critics as “prophets of shortage,” suppressed reports questioning the foreseen power shortage, and coerced local utilities to support two of the nuclear plants by causing BPA to issue a notice of insufficiency, an official pronouncement that threatened energy curtailment unless plants four and five were built as planned. The failed nuclear program saddled BPA’s ratepayers with huge cost increases, and bondholders also suffered major losses. Hodel meanwhile made a fortuitous and timely departure, later serving as President Reagan’s Secretary of Energy and the Interior. The debacle raised searching doubts about the governance of politicized bureaucracies. WPPSS operated free of local control; but BPA, unlike TVA, was not self-governing and remained exposed to the variable winds of political pressure linked to federal subsidies. Faced with the prospect of power shortages, BPA relied on WPPSS to do indirectly what it could not do directly, lost control of its agent, and presided over the resulting regional disaster. In the wake of this monumental failure, the public power movement sustained a serious reversal. At the same time, alternative environmentally oriented approaches to the nation’s energy future took root in the ashes and gained a wider audience.

Keywords:   Bonneville Power, WPPSS, Hodel, nuclear, cost overruns, prophets of shortage, notice of insufficiency, bond default, politicized bureaucracies

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