ML19282B561
| ML19282B561 | |
| Person / Time | |
|---|---|
| Site: | Saint Lucie  |
| Issue date: | 03/02/1979 |
| From: | Guttman D SPIEGEL & MCDIARMID |
| To: | |
| References | |
| NUDOCS 7903150377 | |
| Download: ML19282B561 (15) | |
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- UNITED STATES OF AMERICA e 4 BEFORE THE k "' I NUCLEAR REGULATORY COMMISSION 2 /44R T3
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In the Matter of
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Florida Power & Light Compant ) Docke t No . 50-389A g m,M,, 5. %AJ.u, f
(St. Lucie Plant, Unit No. 2 )
N PUBLIC DOCUMENT ROOM RESPONSE OF FLORIDA CITIES TO BOARD MEMORANDUM AND ORDER ON DISCOVERY Pursuant to the Rulings at pages 52-54 of the February 9, 1979 " Memorandum and Order on Discovery", Florida Cities, 1/
intervenors in the above-captioned proceeding, hereby (a) provide explanation or modified requests with respect to Joint Request Nos. 56 and 72 and Cities Request Nos. 14, 39, 40, 57-59, 64 and 72-73 (b) request clarification of the Board's ruling on Cities Request No. 18 and (c) request that, in view of the Board 's ruling on the " government bounty" requests, Applicant's Reques t Nos. 173-175 be deleted.
Requests Related to FP&L's Gas Supply Joint Request Nos. 79-82 and Cities Request Nos. 57-59 2/ and 72-73 relate to FP&L's gas supply. The Board found that the sub-ject matter of these requests is " clearly relevant" to the pro-ceeding, but urged the parties to negotiate concerning the scope of the requests. Pursuant to this suggestion, Cities have con-ferred with the parties. It is Cities understanding that FP&L will not press its objections to the Joint Requests , but will con-1/ Florida Cities include the Florida Municipal Utilities Association, the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utilities Authority, the Utilities Commission of the City of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida.
2/ FP&L did not object to Cities request No. 60, which also rela-tes to gas supply.
790315CS77 @
. inue to object to Cities requests. Cities respectfully reaffirm their requests and take this opportunity to respond to concerns raised by the Board. As summarized below, the grant of their gas-related requests should not impose undue burden on FP&L or imply a "large" litigation on gas markets. Insofar as Cities requests seek documents, FP'4L's objections should be mooted by the fact that the documents should also be provided under the Joint Requests. Insofar as they seek further information, the infor-mation sought is relevant and production at this stage is likely to enhance the ef ficiency of the proceeding.
In noting that the requests "are broader than we prefer, par-ticularly Cities requests . . . the Board (a) states its concern that there not be a "large" litigation about the Florida natural gas market and (b) suggests that a national policy against the use of natural gas for boiler fuel might moot the relevance of FP&L's gas supply to this proceeding. Cities respectfully suggest that the answer to these concerns provides further support for the propriety of Cities requests.
Cities do not anticipate a "large" litigation on the Florida natural gas market. Cities seek to show that FP&L had knowledge of and/or actively participated in developments which enhanced its access to natural gas at the expense of those Cities that relied on natural gas. In short, Cities do not anticipate a broad inquiry into natural gas supply in Florida, but, rather, focus on the development of one particular supply arrangement ---
i.e., FP&L's supply from Amoco. The basic facts relating to FP&L's advantage (in the " natural gas market"), Cities suggest, are both readily available and not subject to substantial
dispute. 1/ (For example, there should be little dispute about the total natural gas transported into Florida in any year, the amounts delivered to FP&L and each gas-using city, the prices paid, and the percentage of total fuel supply that gas comprises for each utility.) From such information, expert witnesses can, as the Board suggests, present " simplified proof" on the economic importance of gas. As detailed in Cities' Response to FP&L's objections, 2/ Cities will show that FP&L possesses a substantial competitive advantage through access to a large long-term supply of low cost natural gas.
When applied to Florida, the Board's concern about the rela-tive importance of natural gas as boiler fuel highlights the importance of Cities claim. As the Board correctly notes, it has been, at least until most recently, Federal policy to give low priority to the use of natural gas as a boiler fuel for the generation of electricity. FP&L, however, has been effectively exempted from this policy. While the majority of the gas using members of the Cities group have experienced severe curtailments during recent gas shortages, FP&L's gas supply --- including the FP&L/Amoco warranty contract --- has been exempted from the opera-tion of Federally ordered curtailment plans. 3/
As to the future, the FP&L/Amoco contract should provide FP&L 1/ Although, of course, their interpretation may be.
2/ At pages 18-26.
3/ As explained in Cities' prior pleading, the basis for the exemption is the FERC's claim that it lacks the jurisdiction to order curtailment of gas purchased directly from producers. As noted, the FERC 's position is current under appeal in the Fifth Circuit.
with substantial amounts of gas through at least the mid-198 0 's .
By contrast, FP&L has itself most recently contended that the Powerplant and Industrial Fuel Use Act of 1978 "probably has made it impossible" for gas using Cities "ever to use substantial quan-tities of natural gas in their powerplants" . 1/ Thus, FP&L con-tends that the present disparity in access to gas is Likely to continue into the future.
Finally, Cities must comment on the distinction between those 1/ The assertion was made by FP&L in response to the Fifth Circuit's request for comment on the effect of 1978 energy legislation on the pending appeal of the FERC'c jurisdiction to curtail FP&L's gas supplies. Petitioners in that case include six of the Cities group here. As FP&L told the Court, Section 301 of Powerplant and Industrial Fuel Use Act "primarily is intended to prevent powerplants from burning natural gas in greater proportion than they burned during the test year which fell during the calendar years 1974 through 1976.
During this test period, Petitioners' powerplants were heavily curtailed.
Consequently, even if, as a result of this proceeding, Petitioners were allo-cated aditional quantities of gas, it probably would do them little, if any, good because they would be prohibited from using it." */
- / FP&L is not affected in a similar manner because its gas supply was not curtailed during the test period.
In sum, FP&L claims that the new energy legislation has locked recent disparities in gas deliveries into the future. It is Cities claim that to the extent that they exist, these disparities were created by unlawful activity on FP&L's part although Florida Cities hope to get at short-term exemption from application of the Act.
The quotation in the text appears at page 7, and the quota-tion above appears at pages 3-4, of " Memorandum of Florida Power &
Light Company in Reply to Petitioners' Statement on the Ef fect of the Natural Gas Policy Act of 1978 on the ' Transportation Gas Issue'", Sebring Utilities Commission, et al., Petitioners v.
Federal Energy Regulatory Commission, Respondent, 5th Cir. Nos.
79-2911, et al., January 9, 1979. =
requests to which FP&L will apparently respond (the Joint Requests) and those it apparently vill not respond to (Cities).
In essence, insofar as FP&L possesses documents related to Cities gas supply allegations, 1/ these documents should be encompassed by the Joint Requests. In view of the importance with which they view the issue, Cities requests supplement the Joint Request by providing further specificity. For example, Cities Request No. 58 specifically seeks documents relating tc the scheduling of gas deliveries by FP&L since 1965. This information is sought based on Cities' understanding that, even assuming the absence of direct knowledge of the March 22, 1967 letter, FP&L should have gained constructive knowledge of its terms through the daily mechanics of gas delivery. Similarly, Request No. 58 makes clear that Cities seek all documents related to the March 22, 1967 letter.
In at least two important respects, however, Cities seek relevant information which may not be forthcoming under the terms of the Joint Request. First, while the Joint Request is limited to documents, 2/ it is conceivable that important developments may have left no existing documentary evidence. Cities Request No. 57 a-b, therefore, seeks knowledge of development that may have lef t no documentary record.
Second, Request No. 57 c-d 3/ seek to narrow the controversy by requesting FP&L' to state the date at which it gained knowledge 1/ As described in Cities Response to FP&L's Objections.
2/ Except that Joint Request No. 79(b) asks for the identity of officials responsible for the arrangement at issue.
3/ Cities have proposed the modification of requests 57(d) to reduce burden to FP&L. See Cities' Response to FP&L's Objections, at 15.
6-of the March 22, 1967 arrangements and the manner in which the knowledge was gained. A response to this request would, at mini-mum, permit a more efficient use of subsequent depositions.
In sum, Cities' natural gas related requests seek relevant and important information that would expedite the proceeding and not expand it, and should not cause undue burden. Their requests are very specifically directed to what knowledge FP&L had involving a specific gas contract and related agreement which created a gas preference for FP&L and limited gas available to the Cities. Under this contract and related agreement, FP&L obtained an assured low price gas supply of great magnitude. There is substantial basis for believing that FP&L was involved in (or at least knew of) illegality concerning these arrangements. However, limitations of discovery as to the knowledge of FP&L officials of these agreements could create a substantial evidentiary gap.
Because of the importance of this matter, the FERC orders indi-cating FP&L's possible involvement (see Cities' Response to FP&L Objections, supra) in illegality and the need to determine the extent of FP&L's involvement, Florida Cities respectfully request granting their requests as written with regard to these matters.
Explanations of Basis for Pre-1965 Cut-Off Date The Board has requested clarification with regard to the dates proposed to be covered by Joint Request questions 41, 56 and 76, 1/ and Cities' Requests No s . 8, 39, 40 and 42. Order, page 15.
1/ Although its order can be read to cover post-1964 documents, Florida Cities assume the Board intends justification for pre-1965 documents. In any event, the above discussion is applicable to the entire period at issue. With regard to Cities Request No. 8, Cities do not press their requests for documents for the 1960-64 period.
Joint Request Numbers 56 and 76 concern wholesale power availability and pricing for sales to utilities, including requests for information relating to limitations on resale and points of delivery for the sale of wholesale, emergency and other bulk power.
Florida Cities believe that FP&L's refusals to deal in whole-sale power constitute one of its clearest violations of antitrust law and policy. The time periods requested are justified by the importance of this issue. FP&L's refusals to deal and policies of discriminatory dealing in wholesale power are not peripheral, but rather go to the core of this case. 1/ First, since nuclear generated energy comprises a significant portion of wholesale power sales, such refusals deprive smaller systems of access to nuclear generated energy. Second, they force smaller systems to construct potentially uneconomic generation. Third, FP&L's acquisition attempts are furthered when smaller systems are deprived of access to wholesale power (and economies of sale represented by wholesale power sales). Fourth, such refusals to deal in wholesale power have aided the maintenance of wholesale territorial divisions. See Florida Power & Light Company v.
Gainesville Utilities Department, 573 F.2d 292 (5th Circuit, 1978), cert. den., U.S. (1978). Fifth, FP&L's refusals to deal in wholesale power (i.e., the sale of generation plus transmission services separate from distribution services) when contrasted to its promotional policies for the sale of electricity 1/ The allegations and references are for purposes of justifying Florida Cities discovery request. They recognize that at this stage of the proceeding they are not to be considered for deter-mining the ultimate merits.
at retail (i.e., the sale of generation and transmission plus distribution services) represent a classic tie-in practice. 1/
Finally, Apart from their af firmative case , Florida Cities anticipate that FP&L will argue defensively either that Florida Cities should have developed alternatives to nuclear power or that the Company's present policy of restricting wholesale power sales is reasonable in light of current economic or power supply fac-tors. Pre-1964 discovery can demonstrate that FP&L's policies with regard to wholesale power are long standing and anticom-petitively motivated.
. In referring to limitations on wholesale customer loads in question 56 and those relating to establishment of points of deli-1/ The relationship between refusals to deal or discriminatory dealings in wholesale power and antitrust law is discussed in the recent City of Mishawaka v. American Electric Power Company, Inc.,
CA S74-72 et al., (January 30, 1979). At pages 18-19 of the District Court decision, the Court states:
"The antitrust laws require that a mono-polist avoid exclusionary conduct that is not inevitable. In this case , the general antitrust obligations comple-mented by a similar duty arising from Section 205(b) of the Federal Power Act, which prohibits undue discrimination bet-ween wholesale rates and state-regulated rates."
At page 23, 24 the Judge states (after quoting an Administrative Law Judge of the Federal Energy Regulatory Commission):
"The Administrative Law Judge concluded that these activities [ restricting who-lesale service] were in violation of defendants' traditional utility obliga-tion to serve all customers on a non-discriminatory basis. . . and ordered AEP to treat all classes of customers fairly and equitably, and to cease and desist from any actions that single out any class of customers for the purpose of indicating that its continuity of service may be in jeopardy. . . "
very for the sale of emergency power in question 76, Florida Cities believe that they can establish (1) tha t FP&L had a policy of restricting resale to municipalities by rural electric coopera-tives (who could buy wholesale power); 1/ and (2) tha t FP&L refused to interconnect with smaller systems in order to sell who-lesale as opposed to emergency power. 2/ Other limitations as to amounts of wholesale power available could impact on competition for loads and service area. The references in the previous foot-notes and in Gainesville Utilities Department v. Florida Power &
Light Company, supra, illustrate that for purposes of discovery, these allegations are well founded and there is reason to believe that discovery will lead to probative and relevant evidence.
Florida Cities respectfully submit that discovery for the entire period is further required to establish in general the limited terms on which FP&L would deal with municipalities and its motivations. For example, when FP&L would not even sell wholesale 1/ In depositions in the Gainesville case, supra, FP&L's Mr.
Richard C. Fullerton provided one reason for the Company's policy of prohibiting cooperatives from selling to municipal systems during the 1960 's :
"And we were not ourselves wholesaling to municipalities, so why should we sell to somebody else and let him wholesale it.
I mean that is as good a reason as I can think of if you want me to think one up."
Deposition, page 83.
Florida Cities do not know how far back FP&L's restrictive dealing policy covered. However, it can be presumed to have existed at least as far back as the early 1950's. See Florida Power & Light Company, 37 FPC 544, 560, 572-573 (1967), quoted at pages 65-66 of
" Joint Petition of Florida Cities for Leave to Intervene Out of Time; Petition to Intervene; and Request for Hearing (August 9, 1976).
2/ See generally Florida Cities' Joint Petition, pp. 62-67, 75-78.
power, there was no hope that the Company would enter into more sophisticated arrangements, such as joint generation planning.
Consumers Power Company (Midland Units 1 and 2), NRC (pages 391-394 of Slip Opinion).
The above explanation also supports Florida Cities' requests 39, 40 and 42. In view of allegations of price squeeze and restrictive rates, terms an- ens appli cable to wholesale service to municipal customers, question 39 requesting changes in rate schedules, etc., would demonstrate limitations on service.
To the extent that rate changes disadvantaged Florida Cities, or any of them, competitively, but had small effect on overall Company's revenues, information concerning the impacts on the Company of such rate changes could negate arguments that changes were justified to further legitimate economic purposes. 1/
Question 40 relates to sales of power at wholesale to five specific cities where Florida Cities believe their may be specific evidence of such refusals to deal or disciminatory dealings. The Fort Pierce Utilities Authority and Homestead have specifically complained to the Federal Energy Regulatory Commission concerning FP&L's refusals to deal in wholesale power in Florida Power &
Light Company, FERC Docket Nos . ER78-19 et al.
Question 42 requests information with regard to FP&L's poli-cies concerning the pricing of retail industrial power. Such documentation is relevant to price squeeze allegations. It is further relevant to establish that FP&L has refused to deal in wholesale power on the same terms and conditions that it sells 1/ Florida Cities do not, of course, concede that defenses con-cerning legitimate business purposes for anticompetitive practices directed against them would be valid, but merely wish to protect themselves against such claims being raised.
power at retail, among other things, negating any possible justi-fications for such refusals to deal. 1/
Cities Request No. 14 The Board found Cities' Request No. 14 overbroad, but per-mitted its modification. Pursuant to the Board's ruling, Cities propose to modify the request to (a) withdraw the request for expenditure records; (b) alter ' he time period from 1960 to 1965 and (c) narrow the request to seek information relating to (1) state elections and (2) municipal elections in municipalities (a) where there is a municipal electric system or (b) where issues have been raised concerning the grant or renewal of a franchise to FP&L.
Cities Request Clarification of the Board Ruling on Cities Request No. 18 The Board denied Cities Request No.18 on grounds that it is overbroad. Cities note that FP&L objected only to a portion of the request. 2/ Cities therefore respectfully request that the Board clarify its order to provide that FP&L comply with the por-tion of the request to which it did not object.
Cities Request No. 20A Cities respectfully request the Board to reconsider its rejection of Cities Request No. 20A, and, if the prior holding is affirmed, to grant Cities parity by deleting FP&L Request No. 176.
Request No. 20A seeks information related to PP&L's promotion 1/ Florida Cities note the contrast between FP&L's claim in FERC Docket No. ER78-19 et al. that restrictions on wholesal~e power sales are necessary7 and its simultaneous promotion of industrial load growth at retail.
2/ As FP&L states, at page 21 of its Objections, it " objects to Cities Request No. 18 to the extent it seeks information con-cerning "any . . . involvement . . . "
of purchases from FP&L, and in particular, information relating to FP&L'c promotion of purchases from FP&L as opposed to from other utilities. The Board states that the promotion of service is fun-damental to competition and denies the request on the grounds that it "cannot determine how discovery of applicants pro-competitive activities can reasonably be expected to lead to the discovery of evidence supporting Intervenor's antitrust thesis of this case ."
(Order, at 28) Cities do not fundamentally disagree with the Board's characterization of the information sought, but respect-fully suggest that the characterization underscores the need for discovery.
First, Cities anticipate that FP&L will claim that there is little or no competition in the electric utility business, 1/ and, therefore, that claims of anticompetitive practice are groundless.
Discovery of FP&L's competitive activities would, of course, rebut this defense.
Second, it is well established that practices that are other-wise acceptable may constitute unlawful behavior when conducted by a monopolist or one attempting to monopolize. See, e.g., United States v. Aluminum Co. of America, 148 F.2d 416, 432 (2d Cir.
1945); United States v. United Shoe Machinery Corp., 110 F.Supp 295 (D. Mass 1953) aff'd per curiam, 347 U.S. 521 (1954). Cities will contend, inter alia, that FP&L possesses a monopoly in retail service. In this context its continued attempts to expand this monopoly by the acquisition of municipal systems constitutes an 1/ For example, in its April 7, 1978 Brief in Florida Power &
Light Company, FERC Docket No. ER78-19, et al., (which concerned FP&L's proposal to limit wholesale service), FP&L sought to deny the existence of competition in bulk power supply, competition for franchises, and competition for new industrial loads.
unlawful promotion of service. In short, the " competitive" acti-vities inquired into through Request No. 20A may well include unlawful behavior. By the same token, FP&L may be expected to cast itself in the role of the lawful monopolist who has monopoly thrust upon it. Thus, it may claim that it did not initiate acquisition efforts or seek franchise renewals -- but merely responded to requests for service. Request No. 20A would seek documents responsive to this defense.
Finally, Cities note that Request No. 20A is virtually iden-tical to Applicant's Request No. 176 of Cities. Should the Board af firm its denial of Request No. 20A, therefore, Cities respect-fully request that, to achieve an equitable parity, FP&L Request No. 176 also be deleted.
Cities Request No. 64 The Board found that Cities Request No. 64 could produce relevant information, but urged its narrowing to reduce burden.
Cities propose to further refine the request by (a) explaining that the reported damages to the Turkey Point Units referred to are damages to the steam tubing generator bundles (b) limiting the request for information on outages and off-line time to best current projections.
Cities Request the Deletion of Applicant's Request Nos. 173-175 The Board Order, at 38-41, denies Cities' requests relating to " benefits received from the government." In so doing it rejects, as a potential defense, a contention that Cities receive certain benefits as government entities.
Applicant's Request Nos. 173-175 essentially seek to learn of any tie-ins between electric service and other utility services.
As Cities understand it, FP&L does not seek information to claim that Cities have engaged in tie-ins prohibited by antitrust laws, 1/ but, rather, to show that the provision of multiple uti-lity services may enhance the market power of an electric utility.
To the extent that such effect might be alleged, however, its existence would be related to the status of municipalities as entities vested with public authority to operate utility systems.
In light of the Board's general denial of Cities requests for information on FP&L's " government bounty", Cities respectfully request that FP&L Request Nos. 173-175 also be denied.
WHEREFORE, Cities respectfully request that the Board take action as further stated herein.
Respectfully submitted,
/
Daniel Guttman Attorney for the Florida Municipal Utili-ties Association, the Fort Pierce Utili-ties Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utilities Authority, the Utili-Commission of the City of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key We s t , Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida.
March 2, 1979 Law offices of:
Spiegel & McDiarmid 2600 Virginia Avenue , N.W.
Washington, D.C. 20037 1/ While such a claim might have theoretical basis as a coun-terclaim in a Court antitrust case, it is not relevant, where, as here, the issue is the conduct of a prospective licensee.
. CERTIFICATE OF SERVICE I hereby certify that the foregoing RESPONSE OF FLORIDA CITIES TO BOARD MEMORANDUM AND ORDER IN DISCOVERY has been served on the following persons by hand delivery
- or depositing copies in the United States mail, first class postage prepaid, on March 2, 1979:
- Herbert Dym, Esq. *Mel Berger, Esq.
Daniel Gribbon, Esq. Mildred Calhoun , Esq.
Joanne Grossman, Esq. Antitrust Department Covington & Burling Department of Justice 888 16th Street, N.W. 1101 Pennsylvania Avenue , N.W.
Washington, D.C. 20006 Washington, D.C. 20530
- Lee Dewey, Esq. John E. Mathews, Jr., Esq.
Fred Chanania, Esq. Mathews, Osborne, Ehrlich, Dave Evans, Esq. McNatt, Gobelman & Cobb Office of Executive 1500 American Heritage Life Legal Director Building Nuclear Regulatory Jacksonville, Florida 32202 Commission Washington, D.C. 20555 *J.A. Bouknight, Jr., Esq.
E. Gregory Barnes, Esq.
Jerome Saltzman Lowenstein , Newman, Reis &
Chief Axelrad Antitrust & Indemnity 1025 Connecticut Avenue , N.W.
Group Washing ton , D.C. 20036 Nuclear Regulatory Commission Chief, Docketing and Service Washing ton , D.C. 20555 Section Office of the Secretary Ivan W. Smith , Esq. Nuclear Regulatory Commission Office of the Secretary Washington, D.C. 20555 Nuclear Regulatory Commission Washing ton , D.C. 20555 Valentine B. Deale, Esq.
Atomic Safety and Licensing Robert M. La zo , Esq. Board Panel Atomic Safety and Licensing Nuclear Regulatory Commission Board Panel Washington, D.C. 20555 Nuclear Regulatory Comission Washington, D.C. 20555 Daniel Guttman