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Included in this print is the proposed contract between the AEC and WPPSS, which can be referred to as phase I, and the contract between the Bonneville Power Administration and WPPSS which can be referred to as phase II. Summaries of these contracts are also included in this print.

These contracts were reviewed by the General Counsel of the Atomic Energy Commission and the Regional Solicitor of the Bonneville Power Administration, respectively. Each concluded independently that its agency had ample legal authority for these arrangements. However, on July 7, 1962, in response to a request for an opinion on the legality of these arrangements from the Chairman of the Atomic Energy Commission, the Comptroller General ruled that the AEC could not enter into these arrangements without further congressional authorization. These opinions are included in this print.

In order to decide as to an appropriate future course of action, including any necessary amendments to the AEC fiscal year 1963 authorization bill, the Joint Committee commenced hearings on July 10, 1962. Witnesses from the AEC, Bonneville Power Administration and WPPSS reviewed their respective portion of these arrangements in detail.

The record of the public hearings held by the Joint Committee on the subject proposal which were held during the period this print was prepared (July 10 and 11, 1962) will be printed as soon as possible. Since the printed record of these hearings may not be available before the Atomic Energy Commission authorization bill for fiscal year 1963 is considered by the Congress this print has been prepared to make available in one place the most pertinent documents and materials on this subject before the bill is considered.



JULY 10, 1962. The purpose of this hearing is to receive testimony on proposed arrangements for the construction and operation of electric generating facilities at the Hanford new production reactor (NPR) by a group of utilitv districts in the Pacific Northwest.

These utility districts in the State of Washington, which comprise the Washington Public Power Supply System (WPPSS), propose to build and operate the NPR electric generating facilities at their own expense. They would buy the otherwise wasted NPR steam from the AEC and generate electricity which will be transmitted, at their own expense, to the Bonneville Power Administration under appropriate power exchange agreements.

For purposes of convenience, we can refer in these hearings to the proposed arrangements between AEC and WPPSS as phase I We can refer to the arrangements between Bonneville and WPPSS as phase II.

We understand that the contract terms for these arrangements have been carefully negotiated over the past year and that all contract terms have been mutually agreed upon. The contracts are ready for signature although no signing has taken place as yet. Copies of these contracts are before each member of the committee and will be placed in the record.

On Friday, July 7, in response to a request from the Chairman of the Atomic Energy Commission for an opinion as to the legality of these arrangements, the Comptroller General ruled that the AEC could not proceed with this proposal without further congressional authorization. Copies of the AEC letter and the Comptroller General's decision have been furnished to all members and will be placed in the record. Although I do not intend to go into the merits of the Comptroller's decision at this point, I believe it desirable for there to be a full and complete explanation of the proposed arrangements between AEC and WPPSS (phase I) and between Bonneville and WPPSS (phase II), so that the Joint Committee and the Congress can decide as to an appropriate future course of action, in view of the Comptroller's decision, including any necessary amendments to the AEC authorization bill, this is the purpose of these hearings.

I think it is appropriate at the outset to distinguish the WPPSS proposal from last year's debate on the NPR.

In 1958, AEC was authorized to construct a convertible production reactor which would optimize plutonium production with steam as a secondary byproduct. In 1961, the administration proposed a $95 million authorization to the Atomic Energy Commission for the design and construction of the NPR electric plant. Under the authorization, AEC would have been responsible for operation of the plant. The Congress rejected this proposed authorization.

The WPPSS proposal calls for no expenditure of Federal funds and does not involve the Federal Government in generating electric energy. Any benefits which accrue to the AEC, including the possible receipt of up to $125 million from the sale of steam, will be without any outlay of Federal money. The WPPSS proposal therefore has no relation to last year's discussion.

With these basic facts in mind, I hope in these hearings to determine in greater detail the precise contractual arrangements between AEC and WPPSS and between Bonneville and WPPSS in connection with this proposal.

Our first witness this morning is Commissioner Robert E. Wilson of the AEC. Dr. Wilson, will you proceed please.



JULY 10, 1962. Mr. Chairman and members of the committee, Chairman Seaborg regrets that it is not possible for him to be present at the hearing this morning because of his involvement in meetings at the White House, and has asked me to represent him. The Commission and its staff are pleased to appear before you this morning in connection with proposed arrangements between the AEC and the Washington Public Power Supply System under which the supply system would design, construct, and operate electric power generating facilities to utilize steam produced in the Commission's new production reactor at Hanford, Wash. The contemplated arrangement, based upon a proposal submitted by the supply system to AEC and the Bonneville Power


Administration, differs from that considered by the Congress last year and is supported by the Commission. Under this proposal, the capital investment required for converting the NPR to dual purpose and, later, power only operation would be made by the supply system rather than by the Federal Government; operation of the power generating facilities would be by the supply system rather than by the Federal Government; and the power generated by the supply system will be transferred to BPA under exchange agreements between BPA and the supply system participants.

As you know, last year Dr. Seaborg appeared before your committee supporting a project which would have authorized appropriations for AEC to construct these generating facilities at the NPR. Since this authorization was not approved by the Congress, the State of Washington, through its department of conservation, began to explore the possibilities of having such a project undertaken by the State or some other non-Federal body. As a result of these explorations, the supply system, a non-Federal organization composed of 16 public utility districts in the State of Washington, on November 28, 1961, submitted its proposal to AEC and the Bonneville Power Administration. At this point, I would like to insert in the record a copy of the supply system's proposal and its supplementary letter dated February 2, 1962.

After a thorough analysis of the supply system's proposal, the Commission responded by indicating its interest in undertaking formal negotiations of definitive contractual arrangements. At this point, I would like to insert in the record, a copy of AEC's response of April 6, 1962, to the supply system's proposal.

Negotiations between AEC and the supply system have been conducted over the past few months. These negotiations have now been essentially completed and draft contracts have been prepared. We understand that negotiations which have been going on concurrently between BPA and the supply system in connection with this project have also been completed.

Under this contract, the Commission would lease to the supply system certain land adjacent to the NPR on which the electric generating facilities would be built. The supply system would install and operate the generating equipment to produce large quantities of power, approximately 800,000 kilowatts, utilizing excess steam energy produced during the period of the Commission's operation of the NPR. The resulting power would be delivered to BPA and integrated with BPA's existing power supplies under the aforementioned exchange agreements. During periods when the Commission would not be operating the NPR for its own programs, the reactor would be leased to the supply system, subject to appropriate licensing requirements, in order to permit continued electric power production.

The Commission is pleased with the successful completion of these negotiations because conversion of the NPR for electric power recovery under the terms of the proposed arrangements between the Commission and the supply system will provide substantial benefits to the AEC. The Commission by the sale of excess steam energy produced incident to the operation of a Commission production facility, would recover appreciable sums of money, thus reducing the cost of plutonium to be produced in the NPR. Furthermore, programmatic objectives of the Commission would be accomplished through contribution to the Nation's nuclear power development program. Chairman Seaborg discussed the technical benefits of NPR conversion with the committee in testimony last year. Of special significance, these benefits would be obtained with no additional cost to AEC.

Particular attention should be given to the payments for steam energy which the Commission would receive under the proposed contract. If the period of both plutonium and power production continues for 7 years, the Commission would receive payments totaling $3 million. Should the dual-purpose period continue for 10 years, the Commission would receive payments totaling $31 million, and, with a dual-purpose period of 24 years, the Commission would receive a total of $125 million. We have discussed the steam payment

schedule with the Federal Power Commission. On the basis of FPC's advice and careful analysis by the AEC staff, the Commission has concluded that the schedule of payments is reasonable.

In summary, we believe that the proposed arrangements with the supply system present an opportunity for the Federal Government to cooperate closely with a non-Federal group in the utilization of a valuable national resource. In so doing, the Commission will have an opportunity to further the development of nuclear power technology; and, with no additional cost to the AEC, the Commission, through its sale of excess steam energy, may be able to recoup a significant portion of the costs of construction of the NPR, particularly if the dual-purpose period of operations continues for more than 7 years.

This concludes my prepared statement. We would be pleased to answer any further questions the committee may have.



I am Owen W. Hurd, managing director of the Washington Public Power Supply System (Supply System), whose headquarters are located at 130 Vista Way, Kennewick, Wash.

The Supply System is a municipal corporation of the State of Washington composed of 16 public utility districts and was formed in 1957 for the purpose of providing an adequate and low-cost future power supply for its members and others to supplement power obtained from Federal and other sources.

Supply System member systems range in size from small systems serving rural areas and small communities to relatively large systems serving cities and large industrial loads. Total number of customers served by Supply System members amount to approximately 230,000 whose present total annual peakload exceeds 1,100,000 kilowatts and 5 billion kilowatt-hours with total annual revenues of $42 million. It is expected that the power requirements of the Supply System members will double in about 10 years.

Members of the Supply System include those which purchase their entire requirements from BPA and those which obtain a portion of their power requirements from their own_resources. The latter include the Grant County Public Utility District which recently celebrated the completion of the $166 million Priest Rapids Dam on the Columbia River with an installed capacity of 831,000 kilowatts, and have under construction the $195 million Wanapum Dam, companion project upstream from the Priest Rapids project which will

have an installed capacity of 866,000 kilowatts. Another member is Chelan County Public Utility District which owns and operates three hydroelectric projects with a total cost of nearly $400 million and capacity of 1,083,000 kilowatts which include the Rocky Reach and Rock Island projects on the main stem of the Columbia River. Another member, the Douglas County Public Utility District, has a FPC license pending for the 500,000 kilowatts Wells project on the Columbia River. The major portion of the output of Columbia River projects of these members have been contracted for by private utilities of the region. Other Supply System members also own and operate generating plants and are investigating the feasibility of undertaking new projects. The Kittitas and Grand County Public Utility Districts, both members of the Supply System, are currently investigating the engineering and economic feasibility of a steamplant using local Cle Elum coal deposits.

Projects to be undertaken or investigated by Supply System are those which, by reason of pertinent circumstances, are considered by the members and others involved to require or benefit from Supply System development.

The Supply System has presently under construction a small (26,000 kilowatts) hydroelectric project in Lewis County, Wash., and an application pending before the Federal Power Commission for a license to construct the 3-million-kilowatt multipurpose Nez Perce hydroelectric project or its alternate, the smaller Mountain Sheep project, on the middle Snake River between the States of Oregon and Idaho. Since its formation in 1957, the Supply System has undertaken the investigation of other potential projects to meet future power requirements of its members and others.

Members of the Supply System last year supported efforts to obtain congressional authorization and appropriations for the Federal construction of power facilities using steam from the convertible new plutonium production reactor under construction by AEC at the Hanford project near Richland, Wash.

After the defeat of this proposal by Congress and as a result of a proposal made by Mr. Earl Coe, director of the Washington State Department of Conservation, the Supply System undertook the investigation of the feasibility of non-Federal ownership including financing, construction, and operation of the NPR facilities. On November 28, 1961, the Supply System submitted to AEC and BPA a proposal to finance, build, and operate power facilities to utilize the waste heat from the NPR during its operation for the production of weapons-grade plutonium and the full heat capacity of the reactor when operated for steam production purposes only.

During the intervening months the Supply System has participated in negotiations and discussions with representatives of BPA and AEC that have resulted in drafts of agreements which are considered to be suitable for the implementation of the Supply System proposal.

I understand that current drafts of those agreements for the exchange of NPR power facility output with BPA for the delivery of firm power to utility participants and the contract for the use of NPR

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