Chemical Bank v. Washington Public Power Supply System

A group of cities and public-utility districts (the participants) (defendants) were members of a municipal corporation, the Washington Public Power Supply System (WPPSS) (defendant). WPPSS was authorized to operate and own power plants and systems for the generation and transmission of electricity. WPPSS was also authorized to issue revenue bonds to finance plant constructions. Each participant entered an agreement with WPPSS to finance the construction of two nuclear power plants. Under the agreement, a participant purchased and was required to pay for “project capability,” which was defined to require payments even if the power plant generated no electricity. Participants did not own or have significant control over the management of the power plants. The funds collected by WPPSS were to be used to pay down revenue bonds, which WPPSS would issue to construct the power plant. WPPSS issued bonds with a face value of $2.25 billion and an expected repayment cost of about $7.2 billion with interest. Chemical Bank (plaintiff) was the trustee for the bondholders. Construction began on the plants, but before the plants were even one-quarter completed, the project was terminated due to lack of adequate financing. Chemical Bank sued WPPSS and the participants, seeking a determination that the participants owed WPPSS sufficient funds to pay the bonds with interest. The participants disputed their obligation. The trial court found generally that the agreement was authorized and that participants were required to make payments regardless of whether the project was completed. The Washington Supreme Court granted review.