Whoops

Whoops is slang for the Washington Public Power Supply System (WPPSS), which in 1983 had the largest municipal bond default in history.

Whoops, or WPPSS, financed construction of five nuclear power plants by issuing billions of dollars in municipal bonds in the 1970s and 1980s. In 1983, because of extremely poor project management, construction on some plants was canceled, and completion of the remaining plants seemed unlikely. Consequently, the take-or-pay arrangements that had been backing the municipal bonds were ruled void by the Washington State Supreme Court. As a result, WPPSS had the largest municipal debt default in history.

WPPSS was formed in the 1950s to ensure consistent electrical power for the Pacific Northwest. The Packwood Lake Dam, its first project, ran seven months over the scheduled completion date. This was the beginning of WPPSS’ public works problems. Nuclear power became popular in the 1960s when it was perceived as clean and inexpensive. WPPSS saw this as an opportunity to meet the growing demand for power in its region. It scheduled the five nuclear power plants financed by a public bond issuance to be repaid with proceeds from the plants. The bonds were issued, but sales did not meet expectations. The construction problems at the plant included cost overruns and poor project management. Contractors leveraged government inefficiency and overcharged and under-delivered. This caused safety inspectors to demand more stringent rules, which were implemented mid-construction by the Nuclear Regulatory Commission (NRC). As a result, much of the project had to be scrapped then redesigned and rebuilt.

At the beginning of the 1980s, only one of the five WPPSS plants was close to complete. By then, nuclear power was found not to be as cheap and beneficial as claimed, and public opinion turned against it. Some cities in the region boycotted nuclear power before the facilities were up and running. Cost overruns continued to where more than $24 billion would have been required to complete the work. But the low power sales could not cover the deficits. Construction halted on all but the near-completed second plant. The first plant again had to be redesigned. WPPSS was forced to default on $2.25 billion in municipal bonds. The second plant finally became operational in 1984, but it too little too late for investors. On Christmas Eve 1988, a $753 million settlement was reached. The structure of the settlement meant that investors earned between $0.10 and $0.40 cents per dollar invested.