In addition, these letters advised of the desire of WPPSS to cooperate in this matter and, if economically and otherwise feasible, to serve as the non-Federal entity for this purpose.

It is the purpose of this letter to submit a proposal and request to enter into negotiations jointly with the Atomic Energy Commission (AEC) and the Bonneville Power Administration (BPA) leading to the execution of necessary contracts and agreements which could result in the financing, construction, and operation by WPPSS of power production and associated facilities utilizing heat from the Hanford NPR.

The interest and incentive of WPPSS to undertake the financing, construction, and operation of NPR power facilities by WPPSS is based on the following circumstances:

(1) Analyses and studies of available information by WPPSS consultants (R. W. Beck & Associates) indicate that the production of electric power from waste heat during the period of expected dualpurpose operation of the NPR (8 years) and thereafter under assumed conditions and integrated with existing Federal hydro resources and marketed by BPA would be economically feasible and provide a source of low-cost power which could become available at a time of expected regional power deficiency.

(2) The action of Congress during the last session in refusing to appropriate funds for the Atomic Energy Commission to complete the construction of the NPR power facilities suggests that a plan for non-Federal financing and construction of such power facilities is desirable. During the last session of Congress, WPPSS endorsed the President's program for Federal financing and construction of the Hanford power facilities, and is prepared to support this program if it is resubmitted to the Congress.

(3) The principal objective of the WPPSS is to do those things necessary within its powers, including the construction of hydro and thermal generating plants best adapted to an integrated and comprehensive regional power supply, which will insure members and the region with a supply of electric power at the lowest possible costs. is in the interest of the achievement of this objective that this proposal is being made.

(4) WPPSS is an operating agency and a municipal corporation organized under the statutes of the States of Washington, revised code of Washington (1957 Supp.) chapter 43.52 (ch. 29 laws of Washington 1957) and a municipality within the meaning of "municipality" of section 3(7) of the Federal Power Act. WPPSS has the authority by law, among other things, "to generate, produce, transmit, deliver, exchange, purchase, or sell electric energy and to enter into contracts for any or all such purposes"; also

to negotiate and enter into contracts with the United States or any of its agencies, with any State or its agencies, with Canada or its agencies, or with any district or city of this State, for the lease, purchase, construction, extension, betterment, acquisition, operation, and maintenance of all or any part of any electric generating and transmission plants and reservoirs, works and facilities, or rights necessary thereto, either within or without the State of Washington and for the marketing of the energy produced therefrom.

It is the declared policy of the law under which WPPSS exists that— the authority granted in this chapter shall apply equally to the generating of electricity by waterpower, by steampower, by atomic power, or by any other means whatsoever.

(5) WPPSS is presently composed of 16 public utility districts of the State of Washington serving 223,389 rural, domestic, commercial, and industrial customers in the State of Washington with a combined present peak power requirement of 997,757 kilowatts and annual consumption of 4,792,654,000 kilowatt-hours during 1960. The total plant value of power generating and distribution facilities owned and operated by WPPSS member districts is approximately $600 million. Twelve of the WPPSS members presently purchase their entire power requirements from BPA. Four members own generating facilities, but obtain the major part of their power requirements from BPA.

(6) The WPPSS has obtained an FPC license for the construction of the Packwood hydroelectric project (26,000 kilowatts) in Lewis County, Wash. (FPC project No. 2244). Bids have been received for project construction and equipment, and construction is expected to begin in 1962 and be completed in 1964.

The WPPSS presently has an application pending before FPC for the Nez Perce project (2 million kilowatts, FPC project No. 2273) on the Snake River for which a competing application for the mutually exclusive High Mountain Sheep project by the Pacific Northwest Power Co. is also pending.

Other hydro projects currently being investigated are the Hoh Bow project (60,000 kilowatts, FPC project No. 2257) located in Jefferson County, Wash., for which a preliminary permit has been received from the Federal Power Commission and the Ben Franklin project on the Columbia River near Richland, Wash. (252,000 kilowatts).

It is the desire of the WPPSS that the installation of the electrical power production facilities at the NPR by a non-Federal agency shall accomplish the objectives envisaged by AEC and BPA in support of the legislation for Federal construction of these facilities.

The WPPSS has recognized that operating conditions and requirements of the NPR are such that substantial reserves of capacity and energy are required which are available only from the U.S. Columbia River power system to make possible the use of energy from the NPR as a firm power source. It has also recognized that the marketing of additional firm power made available by the integration of the NPR energy source with the Columbia River system can best be accomplished by such integration and marketing.

This letter, with the attached statement of basic contract terms and conditions, embodies our present concept of arrangements that would make possible the financing, construction, and operation by WPPSS of power facilities required for optimum commercial power production from heat produced by the NPR.

We are hopeful that the response by AEC and BPA to this proposal and request will (1) advise of existing statutory authority of both agencies to enter into such contracts and agreements with WPPSS as considered necessary to accomplish the intended purpose of this proposal; (2) advise of additional congressional authorizations, if any, needed by each agency to accomplish this purpose; (3) advise as to the acceptability, concurrence, and appropriateness of the basic terms and conditions proposed; (4) advise of the interest, willingness, and merit of proceeding with negotiations and discussions along the lines of this proposal; and (5) advise of any alternate proposals which may be considered to be desirable and appropriate to accomplish the intent of this proposal.

Very truly yours,

OWEN W. HURD, Managing Director.

PRELIMINARY STATEMENT OF BASIC CRITERIA AND Proposed TeRMS AND CONDITIONS OF AGREEMENT FOR WPPSS CONSTRUCTION OF NPR POWER FACILITIES

As a result of recent conferences with staff representatives of AEC and BPA and based upon our present knowledge and understandings of factors pertinent to the installation by WPPSS of the electrical generating and associated facilities at the NPR, we have set forth hereinafter an outline of proposed terms and conditions which could provide the basis for negotiation of agreements between the WPPSS and AEC and BPA for the proposed installation.

The proposed terms and conditions have been divided into two parts, (I) those which would be pertinent to the arrangements relating more specifically to AEC, and (II) those pertinent to the arrangements relating more specifically to BPA.

I. PROPOSED TERMS AND CONDITIONS RELATING TO AGREEMENT BETWEEN AEC AND WPPSS

A. Construction

(1) AEC will lease, or otherwise make available at nominal rental, to WPPSS on a long-term basis, adequate land adjacent to the NPR for the construction and operation of the electrical generating and associated facilities, including ingress and egress thereto, and including rights-of-way for the construction and operation of transmission lines from said facilities to a satisfactory point of interconnection with the BPA transmission system.

(2) AEC will make available to WPPSS, without cost, all studies, designs, plans, specifications, and related material and information which are available to it and are pertinent and necessary for the design, construction, and operation of the proposed power facilities.

(3) AEC or WPPSS will prepare, or cause to be prepared, all necessary designs, plans, specifications, and related documents and, upon approval thereof by the other party, will construct, or cause to be constructed, the electrical generating and associated facilities to, but not including the switchyard adjacent to the generating plant. If AEC designs and constructs said facilities, WPPSS will advance or reimburse AEC periodically at mutually agreeable times for all costs and expenses incurred on its behalf subsequent to the effective date of the proposed agreement for the design and construction of the said facilities less an amount which shall represent the value to AEC of the "sixth cooling loop" and the additional instrumentation of the reactor previously contemplated by AEC in its plans for conversion of the reactor to dual-purpose operation.

(4) AEC shall have full and exclusive right and control in all respects to the "sixth cooling loop" and the additional instrumentation.

(5) WPPSS will construct, or cause to be constructed, the switchyard and transmission facilities required to deliver the project output to the BPA transmission system.

(6) WPPSS will undertake to sell WPPSS revenue bonds in an amount sufficient to advance or repay all costs incurred by AEC as may be required by (3) above and such additional amounts as are determined by AEC, BPA, and WPPSS as necessary for other capital costs, including transmission facilities, reserves, working capital and other financial requirements for the successful construction and oer-p ation of the proposed project.

B. Operation

(1) Upon satisfactory completion of construction and testing of the proposed facilities by WPPSS or AEC, WPPSS shall assume full responsibility for the operation and maintenance of all of the proposed facilities except the "sixth cooling loop" and the additional instrumentation which shall be operated and maintained by AEC as an integral part of the NPR.

(2) AEC will make available to WPPSS byproduct steam for power production during the period(s) that the NPR is operated for the production of plutonium.

(3) AEC will lease, or otherwise make the NPR available, to WPPSS without cost other than direct costs incurred by AEC in connection therewith during the period when the NPR is not actually used and operated by AEC for plutonium production.

(4) During periods when the NPR is operated by WPPSS for power production, AEC shall have and retain all rights to reactivate and utilize the NPR at any time upon appropriate notice for the primary purpose of plutonium production.

(5) WPPSS will at all times operate the electrical generating facilities in accordance with procedures, practices, and schedules as prescribed and agreed upon by AEC and BPA, and in a manner consistent with the operation of the NPR for its primary purpose of plutonium production as determined by AEC to be in the national interest.

(6) WPPSS will take all steps to qualify and AEC will grant all necessary licenses and permits that may now, or hereafter, be required for the operation of the electrical generating facilities and the NPR.

(7) During any and all periods when the NPR is operated by WPPSS, AEC will guarantee an uninterrupted supply of nuclear fuel for the NPR at costs not to exceed the cost to the Government for such fuel.

(8) AEC will indemnify WPPSS from all claim or damage resulting from the operation of the NPR or associated facilities or will provide insurance therefor to WPPSS at reasonable cost.

(9) The term of the agreement between AEC and WPPSS shall be for a period not less than that necessary to amortize any and all revenue bonds or other obligations sold or incurred by WPPSS for the purpose of financing the construction of the proposed facilities.

(10) Upon expiration of the agreement or when all bonds or other obligations incurred by the WPPSS have been retired, whichever is earlier, the Government, at its option and at no cost, may acquire the ownership of the electrical generating and associated facilities.

(11) The Government, at its option and after proper notice, may acquire the ownership of the facilities at any time during the life of the contract upon payment to WPPSS of an amount sufficient to amortize all outstanding bonds and other obligations incurred by WPPSS properly related to the project.

II. PROPOSED TERMS AND CONDITIONS RELATING 10 AGREEMENT

BETWEEN BPA AND WPPSS

A. Upon completion of construction, WPPSS will operate the electrical generating facilities, including associated transmission facilities, constructed by it in accordance with schedules and in a manner satisfactory to BPA and AEC, and will deliver the project electrical output to BPA at a mutually agreeable delivery point.

B. BPA will assume full responsibility for the delivery and sale of all project output at established and uniform rates reflecting the integration of the NPR power with other BPA resources.

C. BPA will reimburse WPPSS, or otherwise make provisions therefor, for all costs and expenses incurred by WPPSS during each year of the term of the agreement for the operation of the proposed facilities, including, without limitation, interest and amortization of any and all debt obligations incurred by WPPSS in connection with said project; the establishment of necessary reserves; renewals and replacements, operation and maintenance; and administrative and general expenses; taxes or payments in lieu thereof, insurance and other costs or expenses incurred by WPPSS for the successful operation of the project facilities.

D. The term of the agreement shall be coextensive with the agreement between WPPSS and AEC.

E. In the event WPPSS shall continue to operate the electrical generating facilities, including the NPR, after all revenue bonds or other obligations issued by WPPSS have been retired, WPPSS shall sell, or otherwise make available, to BPA at its actual cost the power output from the project as long as WPPSS shall continue to operate the facilities.

WASHINGTON PUBLIC POWER SUPPLY SYSTEM,
Kennewick, Wash., November 9, 1961.

Mr. CHARLES F. LUCE,

Administrator, Bonneville Power Administration,

Portland, Oreg.

DEAR MR. LUCE: This is to confirm information previously given to you during recent conversations regarding the action taken by the executive committee of the Washington Public Power Supply System endorsing consideration and studies leading to the non-Federal financing of the power features of the Hanford NPR and our desire to aid and assist in bringing about an early decision as to the desirability of non-Federal participation in the financing of the NPR power features and, if determined economically feasible, to serve as a non-Federal entity for this purpose. Enclosed is a copy of the resolution adopted by the WPPSS Executive Committee related to this matter.

Considerations to date have indicated the desirability of the full integration and coordination of the NPR electrical output with the BPA system and its marketing by BPA. We would therefore like to initiate and carry forward, as promptly as possible, discussions and other actions necessary to bring about and implement early decisions as to the arrangements which would be necessary between BPA, AEC, and WPPSS in order to develop a plan of non-Federal financing, construction, and operation of the NPR power features in the event that such arrangements are economically feasible.

We have greatly appreciated the cooperation and interest already expressed by yourself and members of your staff in this matter and stand ready to proceed as expeditiously as circumstances permit.

Very truly yours,

OWEN W. HURD, Managing Director.