ML19305B771
| ML19305B771 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak, South Texas  |
| Issue date: | 04/06/1979 |
| From: | Lawbe W Office of Nuclear Reactor Regulation |
| To: | Lerner N TRANSCOMM, INC. |
| Shared Package | |
| ML19305B756 | List: |
| References | |
| NUDOCS 8003200303 | |
| Download: ML19305B771 (5) | |
Text
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UNITED *; TAT ES
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-April 6, 1979
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.MEMORAtiDUM FOR:
liorman Lerner, Transcomm William Lambe, flRR-AIG FROM:
THE OUR RECENT DISCUSSI0!is WITH ROY LESSY RE:
SUBJECT:
SOUTH TEXAS CASE (Prepared in Anticipation of a Hearing) flora, as we discussed with Roy lessy during our last meeting, I.think it is important for you to continue considering your role in the Texas case in light of the relaticnship that exists between the structure, conduct and performance of members of the electric power industry in the Southwes Traditional industrial organization analysis and Texas in particular.
depicts a causal link between industry structure, i.e., the number of buyers or sellers (dispersicn of production facilities) industry conduct, and efficient resource distribution or the performance of the industry In those industries where a few large firms participants as a whole. control a large percentage of the means of produc When the a competitive advantage over the smaller industry members.
larger firm abuses this " market power," it usually surfaces in the form of. poor conduct or " misconduct," i.e., refusals to deal, predatory Often, this pricing, price discrimination, tying arrangements, etc.
poor conduct results in poor market performance, i.e., the resources available to industry members are not employed to their utmost efficiency, resulting in economic and/or social waste to society.
In applying this theoretical approach to the South Texas case, it is apparent that we still need to collect additional data to firm up ourI th case -- one way or another.
In any conceivable the " structure" of the industry throughout the Southwest.
.stantial shares of the principal means of production This fact, along with Tu's cnd HL&P's member-transmission facilities.
ship (weightedl/) in 115, gives each a substantial competitive advantage over smaller producers (or cons'umers) in Texas.
The votes cast by TIS ce$bers are weighted as a factor of each 1/
TU and HL&P have the largest loads.
i member's load.
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-2 For purposes of conducting an antitrust hearing or trial, it is essential to be able to document instances of abuses of this market power or " mis-In the HL&P conduct"
- to date, we have few examples to rely on. territory, we Coop and the Gulf States Utilities Company.
the Southwestern Po er Administration, k'estern Farmers Electric Coop, Gate City Electric Coop and also individual members of the Tex-La Coop.
In order tc show how industry performance has suffered and how it will be improved (through increased allocative and/or technical efficiency) with increased options or opportunities for competition in the industry, I think we should have additional documentation re the abuse You as the expert economist, will then be able to show how the elimination of this poor conduct whould lead to better resource allocations power.
and. consequently, improved industry performance.
In order to strengthen the conduct portion of the case, I believe weAdditional co must document as many injured parties as possible.For Houston Lighting & Po that may prove fruitful include:
small distribution
- 1) Wharton County Electric Coop._-- Wharton is a coop (peak load of about 15 mw) located just south of the City of
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At one time Uharton was a wholesale customer of HL&P, but It would be Houston.
is now served by the South Texas Electric Coop.
interesting to find out why Wharton changed suppliers, what type of relationship it has with HL&P ar.d whether Wharton was interested in the South Texas nuclear plant.
Sam Houston Electric Coco. (Sam's Dam) -- Sam's Dam is also 2)distribution ccop (peak load of about 87 rav) located north of the Sam's City of Houston and not far frca HL&P's transmission system.
Dam is presently served by Gulf States Utilities and Texas Power It seems that HL&P is the most logical supplier and and Light Co.
it may prove interesting to find out why Sam's Dam is not getting power from HL&P.
Community Public Service Co. -- Community is a transmission and distribution company (combination gas and electric) located througho'u
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A portion of Community's load is located the state of Texas.
within the Houston City limits and is served by HL&P. Community is If Community is either presently HL&P's only wholesale customer.
Was Community happy or unhappy, I think we should find out, and why.
offered access to the South Texas plant? Has Community considered going interstate?
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Additional contacts for the Texas Utilities Company area:
- 1) The City of Lubbock. Texas -- We (AIG) made an initial contact 3
i with Mr. W. Wood, the general manager of the electric department for Lubbock last su=er.
During our conversatiop with Mr. Wood, he stated that at one time he wanted to interconnect with Texas Electric Service Co.
(TESCO -- a TU subsidiary) but was discouraged from doing so by TESCO executives.
Apparently, TESCO was a bit apprehensive or fearful that Lubbock might go interstate and reqirated the City to downplay this request because TU was in the CP stage of its Commanche Peak Plant.
TU did state that if Lubbock interconnected it would have to stay intrastate.
A follow up contact with Mr.
Wood seems in order to see if he would be interested in testifying for Staff.
- 2). Southwest Texas Electric Coco. -- During our field work this i
coop and its ex-general manager, Mr. Elton McGinnes (he has retired this year) have expressed a desire to go into interstate commerce.
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The coop (peak demand of about 13 ra) is presently served by West Texas Utilities (WTU) which in + urn is prohibited from going interstate by its interconnect, ion agreet with TESCO.
The City of Jacksonville, Texas -- The City is located in the 3)northwest portion of the state.
It is presently served by a small, privately operated electric company, Southwestern Electric Service Co. (SWESCO). The City's wholesale power was recently increased about one-third (due largely to a rate increase from SWESCO's supplier, Texas Power & Light Co.).
As a result of this increase, the City requested service from the Southwestern Electric Pcwer Co.
(SWEPCO).
The President of SWEPC0 responded to the City's request 1/
by stating that SWEPC0 couldn't serve Jacksonville because SWEPC0 didn't have a certificate of convenience to serve the area.
- However, Mr. Stall, SWEPCO's President, stated that he would be glad to sell 1
power to Jacksonville if Texas Power & Light (TPSL) would wheel it.
TPSL refused to wheel because it would have had to go into interstate commerce to do so.
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- 4) _C_ity_of Electra, Texas -- The City wanted service from West Texas Utilities Co... however, WTU couldn't serve the City b cse of its interstate interconnection with Western Farmers Elect. '.;
Coop.
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- 5) Greenbelt and Lea County Electric Cocos -- Lea County is a distribution coop located on the Texas /New Mexico border, serving 1/
C.f. letter from Lamar Stall, President of SWEPCO, to James Marshall, general manager of the electric utility departmett of the City of Jacksonville, Texas -- dated May 19, 1977, responding to Marshall's letter of March 10, 1977. -(Fron discovery file labeled "VIII.
Competi tion -- WTI'/ TESC0".)
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_4 Greenbelt is located on the Texas /0klahoma bo in both states.
with facilities in both states.
Each coop is served by the Southwestern Public Service Co. an
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It may interstate company (Greenbelt is also supplied by WTU).
l prove interesting to see if either of these coop
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These exampics for thie most part represent possible areas of c activity in:the wholesale-for-resale arena.
Product Markets-Based upon the field work 'and analysis of do in the-South Texas proceeding.
"Cooriination services" -- either that used in Consumers or something similar covering products or services at the bulk leve 1)
" Wholesale-for-resale" -- most of the abuses of market power 2) i.
have occurred in-this arena;
" Ultimate consumers" -- this would cover those areas of com activity that have occurred between HL&P and GSU, notably that
-3) l involving industrial loads; and
" Nuclear pcwcr" -- P,oy Lessy asked you to consider this as a 4) l product market.
The coordination services market has not really been a factor in Texa
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Texas power suppliers and the isolatinn of thei l
Ilowever, with the advent of joint power projects, the growth of the smaller producers (and the conccmitant need fo l
l among suppliers in the. future, this market will ta there is evidence of emergency power sales,. economy power sales ilities --- i.e.,
. joint construction of generation and transmission facMorecier, this particular both operational and developmental in nature. market affo
_ for example, itL&P has denied CPSL participation i
Texas Project bulk power supply, should CPZL decide to op interstate power entity.
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level and not the wholesale level.
To maintain that the abuses of.
carket power have been only at the wholesale or wholesale-for-resale level would make any nexus argument difficult.
4 The wholesale-for-resale market is probably the easiest to document given the examples of power entities (largely smaller munys and cocps)
Many of that have been precluded from dealing in interstate power.
these examples pertain to potential competition because the firms in question have been historically precluded from interconnecting with -
interstate entities and have been unable to engage in interstate commerce without 'the fear of suffering disconnection from and by i.he larger intrastate suppliers.
Competition for ultimate customers is largely in terms of competition We have evidence of this type of competition for new industrial loads.GSU and HL&P (Blume has researched this area); CP&L a i
involving:
(location of a.duPont plant and possibly [I'm not sure] a Union Carbide plant); and TU, SWEPC0 and Cherokee Electric Coop-(a new lignite gasif plant).. Cherokee, a customer of TP&L wanted service fro Although
.wouldn't provide the interconnection from SWEPCO to Cherokee.
the plant hasn't been built yet, TU has apparently won this battle.
Geographic Markets _.
Depending upon the emphasis or focus, many geographic are posited as relevant markets.
The most broadest, to each applicant's service area as the narrowest.
plausible at this point in time appears to be that area delineated as
ERCOT" -- the Electric Reliability Council of Texas.
Within ERCOT there are buyers and sellers representing all of the product markets located above; the area encoapasses all of the applicants; both actual and potential ccmpetition can be shown; and applicant's transmission Although facilities are more or less congruent with the ERCOT boundaries.
none of the applicants can be termed " monopolist" in this market, the shear size in numbers of generation and transmission facilities of HL&P and TU coupled with the cohesive nature of the TIS agreement, portray a significant degree of market power by each firm.
i fiorm, the additional testimony of the parties referred to in In sum:
-the text along with the remainder of the privileged documents you Fave -
l yet to review, may assist you in developing your testimony.
William Lambe Antitrust Economist i
Antitrust & Indemnity Group Office of Huclear Reactor Regulation i
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