78 



built the TYojan nuclear power plant, with 30 percent co-ownership by Eugene Water 

 and Electric Board (EWEB) covered by a net-billing agreement. And the Washington 

 Public Power Supply System (WPPSS). under net-billing eigreements. completed one 

 nuclear plant and partially constructed two other nuclear plemts in Washington 

 state. The Hanford N-reactor tvu-bine generator, built by WPPSS. also came on line 

 just prior to the formal initiation of the Hydro-Thermal Power Plan, and before its 

 closure in 1987 was considered a part of the overall effort. Bonneville became the 

 agent for integrating these resources so the consumers of the region could benefit 

 from the greatest efficiency and lowest costs from operation of the regional electiic 

 system. 



In spite of the efforts of utilities and Bonneville to continue developing the 

 region's generating resources in a systematic way, the region continued to lose 

 ground to rapidly growing demands for electricity. The Hydro-Thermal program 

 failed to meet the region's expectations for two basic reasons. A revision of 

 regulations by the Internal Revenue Service denied tax exempt status to bonds sold 

 by publicly owned utilities to finance their plants if power from the facilities was sold 

 to Bonneville, a Federal body. And, Bonneville's financial ability to participate in 

 net- billing agreements reached its limits far sooner than expected because of the 

 climbing costs of new thermal plants. 



In 1973, Bonneville and the region's utilities initiated a Hydro-Thermal 

 program. Phase II. in which the utilities would finance their own plemts without net- 

 billing participation by Bonneville. Thus, WPPSS nuclear units 4 and 5, now 

 terminated, were not covered by net-billing contracts. Nonetheless. Bonneville 

 expected to provide electric load management and power integration services and to 

 supply peaking power £md reserves from Federal facilities in order to bring about the 

 most efficient mix of resources possible. Bonneville's participation in this program 

 was enjoined by a Federal Court, which required that Bonneville complete an 

 environmental impact statement on its role in the region. Delays in the construction 

 of new plants, costs higher than originally expected, and the realization that the 

 Hydio-Ihermal Program would not be adequate to meet needs made it evident that 

 Bonneville would not able to sell firm power to investor-owned utilities and still 

 provide first priority to serving "preference customers" as directed by Federal law. 



Preference 



The Bonneville Project Act of 1937 directed that the co-ops and publicly owned 

 utilities of the region be given first call on available Federal resources. They 

 consequently came to be called "preference customers." Until the 1970s, their legal 

 preference had never been exercised because there had been enough electricity for 

 everyone. In 1973, when Bonneville's firm-power contracts with investor- owned 

 utilities expired, Bonneville could not offer new ones if preference customers were to 

 continue to have first call on Federal resources. So the firm power contracts with the 

 investor-owned utilities were not renewed. 



