ML19254E049

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Petition for Review of Aslab 790906 decision,ALAB-560.Urges re-examination Per NRC Regulations,Alleging Important Antitrust Divergence from Other Aslab Decisions.Describes Errors Found in Decision.Certificate of Svc Encl
ML19254E049
Person / Time
Site: Perry, Davis Besse  Cleveland Electric icon.png
Issue date: 10/22/1979
From: Reynolds W
CLEVELAND ELECTRIC ILLUMINATING CO., SHAW, PITTMAN, POTTS & TROWBRIDGE, TOLEDO EDISON CO.
To:
NRC COMMISSION (OCM)
References
NUDOCS 7910310016
Download: ML19254E049 (13)


Text

P@LIC DOCTIEVT ROOw 4[1 I W UNITED STATES CF AMERICA r

NUCLEAR REGULATORY COfDiISSICN

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THE CLEVELAND ELECTRIC ILLCMINATING

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Decket No. 50-346).

CCMPA'IY

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(Davis-Besse Nuclear Power Station,

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Unit 1)

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THE CLEVELAND ELECTRIC ILLUMINATING

)

Docket Nos. 50-440A COMPANY, ET AL.

)

50-441A (Perry Nuclear Power Plant,

)

Units 1 and 2)

)

)

THE TOLEDO EDISON COMPANY, ET AL.

)

Occket Nos. 50-500A (Davis-Besse Nuclear Power Station,

)

50-501A Units 2 and 3)

)

THE PETITION OF TFE CLEVELAND ELECTRIC ILLUMINATING COMPAN'l AND THE TOLEDO EDISCN COMPANY FOR REVIEW OF ALA3-560 Pursuant to Section 2.796 (b) (1) or the Commission's Rules of Practice, 10 C.F.R.

S 2.786 (b) (1) (19'9), The Cleveland Electric Illuminating Company ("CEI") and The Toledo Edison Comnany ("TECO"), two of the five Applicants involved in the 1/

above-captioned consolidated antitrust proceeding,-

hereby petition the Commission for review of ALA3-560, issued on Septemher 6, 1979.

Ccemission review is required because the Appeal Ecard's decision concerns important questions of fact, law and policy relating to the proper interpretation of Section 105(c) of the Atomic Energy Act, and to the manner in which 1/

The other three Applicants are:

Ohio Edison Company, Pennsylvania Power Ocmpany, and Duquesne Light Company.

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4. 9 l 7910310
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, the antitrust laws should be applied thereunder to the electric utility industry, which have not yet been addressed by the Commission and have been wrongly decided below.

In at:cordance with the requirements of Section 2.7 8 6 (b) (2), CEI and TECO state the following in support of this review petition:

A.

Concise Sammary of ALAS-560 Cn January 6, 1977, the Atomic Safety and Licensing Board

(" Licensing Board"), convened to undertake Section 105 (c) antitrust review (42 U.S.C.

S 2135(c) (1976)) of the activities under the Davis-Besse and Perry licenses, announced its initial decision.

See L3P-77-1, 5 N.R.C.

133 (1977).

The Licensing Board found one or more situations inconsistent with the anti-trust laws to exist within the gecgraphic area identified as the ccmbined CAPCO Ccmpany Territories ("CCCT"), -2/

and it there-fore ordered that ten condicions be attached to the requested licenses. -3/

The Apolicants separately filed extensive exceptions to the initial decision with the Atomic Safety and Licensing Appeal Scard '" Appeal Scard").

The ct.;r:al thrust of those

_2/

CAPCO is an acronym for the Central Area Power Coordina-tion Group, a pooling association to whicn the five Applicant utilities belong.

For convenience, the Licensing Board adopted the abbreviation CCCT to describe the outer boundary drawn around the five service areas of the Applicant utilities.

The service areas extended generally across northern Ohio and into western Pennsylvania.

3/

The five Applicants moved for a stay of the license con-ditions pending appeal.

The motion was denied by both the Li-censing Board (see L3P-77-7, 5 N.R.C.

452 (1977)) and the Appeal Scard (see ALA3-385, 5 N.R.C.

621 (1977)).

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. exceptions was that the legal approach of the Licensing Board te its antitrust review responsibilities was fundamentally in error.

It was pointed out that the manner in which the Licensing Board ;ramed its antitrust inquiry necessarily condemned pooling arrangements among electric utilities without regard to industry structure, the purpose and intent for such a formation, and the benefits achieved thereby.

Having so framed the inquiry, the Licensing Board had no difficulty determining that the ques-tiened conduct was inconsistent with the Sher:. tan Act.

It saw no need to consider, let alone grapp.le with and resolve, the truly central issues raised by the inherent structural and eco-nomic characteristics of the indust.ry, the extant regulatory policies at both the federal and state 1( rels, and the public interest consequences associated with the questioned conduct.

01 review, the Appeal Board adopted a s'milarly de-fective framework for its legal analysis.

In so doing, it again largely ignored the arguments advanced by CEI, TECO and the other I ;plicants with regard to the manner in which antitrust principles should be applied in an industry which has long been subjec* to extensive federal and state regulatien -- electing in certain instances to reformulate positions advanced so as to be better able to dismiss them.

On this basis the Appeal Board:

(1) rejected a claim (never advanced by the Applicants) "that the electric power industry is impliedly exempted frc= the full rigors of the anti: rust laws" (ALA3-560, slip op. at 30-32);

1243 293

. (2) dismissed out-of-hand -- due to a misreading the Commission's decision in Houston Lighting & Power Co. (Scuth Texas Project, Units 1 & 2), CLI-77-13, 5 N.R.C. 1303 (1977)

(" South Texas")

the notion that Section 105(c) antitrust review must be sensitive to and fully ccgnizant of legitimate ";xblic interes " consid-erations (ALAS-560, slip op. at 32-35); and (3) brnshed aside, as "an artful variation of the theme just rejected", the request of the A,_, _ -ants to " harmonize' antitrust Snforcement with the competing policies of other regulatory agencies and statutory proscriptions (ALA3-560, slip Op. at 35-40).

In addition to committing fundamental error in connec-tion with its antitrust analysis of the liability question, the Appeal Board, by a divided vote, also resolved the issues raised 4/

as to the scope of relief incorrectly.-

Contrary to the thrust of the'Cc==ission's decisions in Louisiana Pcwer & Light Co.

(Waterford Station, Unit 3), CLI-73 ', 6 A.E.C 48 (1973)

("*aterford

_"),

and CLI-73-25, 6 A.'..C.

619 (1973) ("Waterford II"),

j the Appeal Board majcrity ordered that Applicants make available a range of ccordination services without regard to whether a requesting entiev. is.carticica tinc. in a nuclear power c.lant or whether such cccrdination services are necessary to ensure mean-ingful access to nuclear-generated power ( ALA3-5 6 0, slip cp. at 43-53).

4/

In a divided opinion (ccmpare ALA3-560, slip op. at 48-57 with id. at 295-91), two members of the Appeal Board favored an expansive view gf this Conmission's authority to order antitrust relief, One which diver:es remedy from Applicants' activities under the nuclear licenses.

The third Appeal Scard mem'rer viewed the relief questien more narrowly, observing (and we F'

ieve quite correctly) that the unbounded reading given to ion IC5(c) b-the T.ajority in this area is without support in the sectutory

language or in the legislative history.

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3.

Concise Statement Supporting Exercise of Commission Review This case brings before the Commission for review the first fully adjudicated r.U trust proceeding.

As such, it provides the Commissica with its first opportunity to address many of the rabstantive antitrust matters that have received di-vergent treatment from various licensing boards. -5/

In light of the misguided approach taken below, Commission censideration of, and informed decision on, the important questions of law and policy in this area are sorely needed.

There are at the present time three ongoing major antitrust reviews pending before licens-ing boards.-6/

The manner in which Section 105 (c) should be inter-preted and applied in those proceedings is, in the final analysis, for the Ccmmission to say.

It has not yet spoken to these issues in any comprehensive fashion.-7/

The instant case furnishes an 5/

Licensing boards have issued initial decisions in three an:I: rust proceedings following a full adjudication of the issues:

Consumers Power Co. (Midland Plant, Units 1 & 2), LEP-75-39, 2 N.R.C.

29 (1975), rev'd, ALA3-452, 6 N.R.C.

892 (1977); Tolein Edison Co. (Davis-Sesse Nuclear Pcwer Station, Units 1-3) and Cleveland Electric Illuminating Co. (Perry Nuclear Pcwer Plant, Unt:s 1 & 2), L3P

'7-1, 5 N.R.C.

133 (1977), aff'd as mcdified, ALA3-560, 10 N.R.C.

(1979); Alabama Power Co. (Jcseph M. Farley Nuclear Plant, Units 1 & 2), L3P-77-24, 5 N.R.C. 807 (1977)

(11 ability), L3P-77-41, 5 N.R.C.

1432 (1977) (relief), arreal rendinc.

6/

See Florida Power & Light Co. (St. Lucie Plant, Unit 2),

Cocket No. 50-389A; Houston Lignting & Pcwer Co. (Scuch T1xas Project, Units 1 & 2) and Texas Ut:11:les Generating Co. 03ranche Peak C==- 7'ectric Station, Units ;& 2), Docket Nos. 50-493A, 50

.39A, 50-445A and 50-446A; Pacific Gas & Electric Co. (Studslaas Nuclear Pr0 ject, Unit 1), Docket No. P-564A.

7/

In four cases, the Cc= mission has provided substantive guilance to its licensing and appeal boards on issues preliminary to the actual antitrust hearine.

E.c.

Flcrida Power & Lign: Co.

-~,

(Continued next page) 1,35 c95 0

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. _... _ -. _. appropriate vehicle for the Cc= mission now to do so, both to correct the errors below and to provide useful and necessary guidance for the future.

The Cc= mission's regulations governing review petitions expressly provide for review of cases that "constitut[e] an important antitrust question" (10 C.F.R. S 2.736(b) (4) (i) ).

We cannot conceive of a more cc=pelling example of what was contemalated r

bv. this reference tha- -he first fully ad'udicated review pro-a ceeding under Section 105(c).

This is esc.ecially so when the analytical franesork of the Appeal Scard is examined in light of emerginc antitrust doctrine.

The determined, albeit misdirected, effort in ALA3-560 to condemn Applicants on che basis of an cwzly expansive reading of the Sherman Act is not only faulty on its cwn terms, but also is cut et step with recent antitrust adjudi-cations by both the courts and sister aeencies.

9 Thus, the Appeal Scard's all too frequent use of the per se doctrine to find antitrust inconsistencies rec.uires Com-

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Lucie Plant, Unit 2), CLI-73-12, 7 N.R.C.

939 (1973); Houston Lightinc & Power Co. (Scuth Texas Project, Units 1 & 2), Cl-77-13, 5 N.R.C.

1303 (1977 ;

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Light Co. (Waterford Stear

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r Louisiana Power & Light Co. (Waterford Steam Electric Generating Stat On, Unit 3), CLI-73-7, 7 A.E.C.

43 (1973).

Mone of these cases addressed the fundamental cuestions raised here as to the manner in which Sections 1 and 2 of the Sherman Act should be ap-y.14e..o

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Ct. 1551, 1557, 1564 (1979).

Similarly, Commission review is demanded by cases like Berkey Photo, Inc. v Eastman Kodak Co.

F.2d 1979-1 Trade Cases (CCH) 5 62,718 (2d Cir. 1979),

recently decided by the Second Circuit Court of Appeals.

The Court there flatly re ected the Sherman 2 monopolization analysis employed by the Appeal Scard below -- which erroneously assumed the existence of menopoly pcwer on the basis of size alone.

As the Second Circuit correctly pointed cut:

"Although [menopoly]

power may be derived from size, the two are not identical".

Is.

at p. 78,003; and see id. at pp. 78,004-05.

Of equal importance to the Cct=ission's consideration of the instant review cecition is the decision a.vear ac.o last summer of the Securities and Exchange Cctmission approving the acquisition of Columbus and Seuthern Ohio Electric Company by Ch'io Power Company.

See American Electric Power Co.,

M.c.in. Proc.

File No. 3'1476 (S. E. C. July 21, 1978).

There, the SEC spoke forcefully about the limited role that competition can be expected to play in the electric utility industry, with particular reference to essentially the same geographic area that was considered in ALA3-560.

The Appeal Scard below, while recognizing that the con-sidered opinion of this sister agency is at odds with a number of its conclusions, perfunctorily dismisses the contrary authority --

without offering a single reason -- by noting simply that the "SEC opinien is not binding upon us * * *" (ALA3-560, slip op. at 122).

This c,oints l.a.v e t another fundamental fl=w in the 3

Appeal 3 card's antitrust approach.

The electric utility industry 1243 297

-g_

has been subject to close regulatory supervision by a number of federal and state agencies, including the Nuclear Regulatory Com-mission.

Heretofore, industry structure and mode of operation have been shaped in large part by regulatory regimes that have as their predominant responsibility the protection of the public interest.

In carrying out nis mandate, the decision was made long age., and has not been cceprcmised since, that the public interest can best be served by an electric utility industry marketpla c e structured by ccmprehensive regulation and not by freewheeling competit'on.

The Appeal Board's antitrust approach is plainly in con-flict with this general regulatory attitude of sister agencies.

Notwithstanding a similar admonition to this Commission to perform its assigned responsibilities in a manner which is fully sensitive to overriding "public interest" considerations, the Appeal Scard explicitly elected to disregard the public interest in its ap-plication of the antitrust laws.

As a result, the Appeal 3 card has misused its authority under Section 105 (c) to blindly restruc-ture the electric utility industry in terms of a hypcchetical competitive marketplace, notwithstanding the historic resistance to any such approach by sister agencies as being contrary to the public interest.

It has never been Applicants' contention that regulation supplants antitrust enforcement in the electric utility industry.

However, the antitrust laws cannot properly be applied in the present centext in total disregard of "puhlic interest" ccnsideraticns i243 298

. which have heretofore largely dictated the structural framework of this industry.

If Section 105(c) is to be used as a vehicle to interject ccmpetition into a marketplace which heretofore has been shaped by regulation -- precisely because it has been determined that the public interest is ill-served in a ecmpetitive framework -- such pronouncement must ccme from the Commission itself, not from one of its intermediary review beards.

Accord-ingly, Ccmmission review of ALA3-560 is essential.

C.

Concise Statement of Errors in ALA3-560 and Where Such Matters were Previously Raised The position of CEI and TECO during Appeal Board review of the initial decision is set forth in their respective excep-tions filed on February 7, 1977, and in the brief s lodged with the Appeal Board in support of these exceptions.

Each of the five errcrs listed below was identified as an exception and fully briefed to the Appeal Board:

1.

The Appeal Scard erred in holding certain conduct of CEI, TECO and the other Ac.clicant utilities cer _se_ incensistent with Section 1 cf the Sherman Act.

2.

The Appeal Scard erred in holding certain conduct of CEI, TECO and the other Applicant utilities inconsisten with Sec-tion 1 of the Sherman Act as unreasonable restraints of trade without any meaningful assessment of such conduct in the centext of the inherent structural and economic char-acteristics of the indus;ry and the extant regulatory policies at both the federal and state levels.

3.

The Appeal Board erred in holding certain conduct of CEI, TECO and the other anG

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. Applicant utilities inconsistent with Section 2 of the Sherman Act in that it employed an improper standard for measuring monopoly power and further failed to con-sider whether any of the Applicants demon-strated a " deliberate or willful purpose to exercise monopoly power".

4.

The Appeal Board erred as to the scope of Commission antitrust review respon-sibility by failing to determine whether the posited antitrust inconsistencies would be created or maintained by activities under the license.

5.

The Appeal Board majority erred in failing to limit the prescribed relief to only that which is necessary to ensure mean-ingful access to nuclear-generated power.

WHEREFORI, CEI and TECO respectfully request that the instant petition for Commission review of ALAB-560 be granted.

Dated:

October 22, 1979.

Respectfully submitted, SHAW, PITTMAN, POTTS & TROW 3 RIDGE Sy: CS 20 4 ah 3-m_

Nm. Bradford Reynolds Robert E.

Zahler 4

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1800 M Street, N.W.

Washington, D.

C.

20036 Counsel for The Cleveland Electric Illuminating Company and Of Counsel:

The Toledo Edison Company John Lansdale Alan P.

Suchman Squire, Sanders & Dempsey Donald H.

Hauser The Cleveland Electric Illuminating Ccmpany Michael M.

Briley Paul M.

Smart 3d13 J}Q fi

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Fuller, Henry, Ecdge s Snyder i

The Toledo Edison Company

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Sefore the Commission In the Matter of

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THE TOLEDO EDISON COMPANY and

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THE CLEVELAND ELECTRIC ILLUMINATING

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Occket No. 50-346A COMPANY

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(Davis-Besse Nuclear Power Station,

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Unit 1)

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THE CLEVELAND ELECTRIC ILLUMINATING

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Occket Nos. 50-440A COMPANY, ET AL.

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50-441A (Perry Nuclear Power Plant,

)

Units 1 and 2)

)

)

THE TOLEDO EDISON CCMPANY, ET AL.

)

Docket Nos. 50-500A (Davis-Besse Nuclear Power Station,

)

50-501A Units 2 and 3)

)

CERTIFICATE OF SERVICE I hereby certify that copies of the foregoing "The Petition Of The Cleveland Electric Illuminating Company An'd The Toledo Edison Company For Review Of ALAS-560" were served upoh each of the persons listed on the attached Service List, by hand delivering copies to those persons in the Nashington, D.C.

area, and by mailing copies, postage prepaid, to all others, all on this 22nd day of Cctober, 1979.

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