LOS ANGELES - The Washington Public Power Supply System plans this week to sell $700 million of refunding bonds, which maintain a double-A rating amidst changes that have produced dampened revenues for the federal agency securing the debt.

First Boston Corp., senior manager on the refunding for nuclear power projects 1, 2, and 3 revenue bonds, expects to price the deal tomorrow.

The continued high rating reflects the obligation of the Bonneville Power Administration to pay debt service on the bonds. Bonneville, a federal marketing agency for electric power, primarily serves customers in the Pacific Northwest.

Bonneville's financial st and flexibility underpin the credit, rating agencies noted. But they added, that the federal entity also is adjusting to challenging circumstances.

"It's a whole new world" for the agency, said Philip Edwards, senior vice president of Standard & Poor's Corp.

After a long period of relative stability, Bonneville is facing challenges that include the possibility of significant rate increases, growing pressure to preserve fish and wildlife, the need for power resources to meet energy demands and replace loss of existing capacity. lace loss of existing capacity.

"All those are causing Bonneville to go through a good deal of gyrations," Mr. Edwards said, adding that the federal agency and local utilities in the region "are going to have to adjust."

However, rating agency officials view the credit outlook as stable.

They cite Bonneville's extensive transmission network, electric rates that rank near the lowest in the United States, and the precedence of debt service payments for project 1, 2, and 3 bonds over payments that Bonneville makes to the U.S. Treasury Department for its federal obligations.

Based on these strengths, Moody's Investors Service rates the WPPSS projects 1, 2, and 3 bonds AA, while Standard & Poor's and Fitch Investors Service rate them AA. Those ratings apply to this week's refunding issue and $6.7 billion of revenue bonds outstanding for projects 1, 2, and 3.

Now the main focus of rating agency officials and market participants is how Bonneville will respond to certain developments that are adversely affecting its finances.

A regional drought, for example, has reduced output on Bonneville's hydroelectric system and forced increased purchases of more expensive power. Bonneville's operating revenues from aluminum smelters, a large group of industrial power users, also have declined due to lower aluminum prices and sluggish worldwide demand for the commodity.

Finally, Bonneville is forecasting higher expenses for its fish and wildlife program because of listings for several salmon species under the Endangered Species Act.

These developments prompted Bonneville to adjust its forecasted financial position for fiscal years that end on Sept. 30 in 1992 and 1993. The agency now expects net losses of about $252 million in fiscal 1992 and about $291 million in fiscal 1993. Bonneville said it expects to meet all its expenses, including scheduled U.S. Treasury payments, by using revenues and existing cash reserves.

Bonneville and its customers recognize that "our revenue stream can be quite variable," and recent developments were sufficiently dramatic" to reinforce that notion, said James H. Curtis, Bonneville's assistant administrator of financial management.

The factors affecting revenues were understood and not surprising, he said, but they underscore that Bonneville "needs financial policies to deal with risks of this magnitude," he said.

A potential positive development in this area is Bonneville's recently proposed 10-year financial plan, according to the rating agencies. In particular, they like a proposal that would allow Bonneville to make an interim rate adjustment during its two-year rate cycle.

"We think that's really important" so Bonneville can adjust rapidly to revenue changes, said Alan Spen, managing director of revenue bond ratings at Fitch.

Bonneville also is studying the possibility of an overall rate increase of about 15% to 18% for fiscal 1994 and 1995.

A rise of that magnitude would be unusual, given long-term rate stability in the region. Certain customers likely will "express some dissatisfaction" when negotiations begin on specific details, Mr. Curtis said.

But Mr. Curtis also stressed that Bonneville and its customers have "a much better shared appreciation [and] a lot of agreement" on the overall financial tools that Bonneville needs to manage its finances.

Bonneville's customers recognize the general need for items such as adequate cash reserves and the ability to make interim rate adjustments, he said.

Standard & Poor's observed that "Bonneville's ability to maintain its existing financial flexibility - through a combination of timely rate increases, accumulation of reserves, and continued ability to defer Treasury payments - is critical to the rating."

This week's sale is essentially a current refunding that replaces many callable bonds, said Bradford R. Higgins, a managing director of First Boston.

The preliminary official statement calls for selling $256 million of serial bonds and $444 million of term bonds.

The supply system three years ago launched a massive refunding program for projects 1, 2, and 3, after years of being shut out of the market because of legal problems associated with its $2.25 billion default on projects 4 and 5 bonds. Bonds for projects 4 and 5 were not secured by Bonneville and went into default after the Washington State Supreme Court voided utility agreements backing the debt.

Projects 4 and 5 were terminated in 1982. Project 2 was the only plant completed.

WPPSS initially paid an interest rate premium over comparably rated issuers when it re-entered the market. But that premium has dissipated as investors have come to "understand the Bonneville credit." Mr. Higgins said, adding that investors are reacting positively to the agency's attempts to solve problems on a regional basis.

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