ML19329A827
| ML19329A827 | |
| Person / Time | |
|---|---|
| Site: | Davis Besse, Perry  |
| Issue date: | 08/23/1976 |
| From: | Campanella V, Goldberg A, Hjelmfelt D CLEVELAND, OH, GOLDBERG, FIELDMAN & HJELMFELT |
| To: | |
| References | |
| NUDOCS 8001150719 | |
| Download: ML19329A827 (178) | |
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UNITED STATES OF AMERICA
. NUCLEAR REGULATORY COMMISSION
, g. Before the Atomic Safety and Licensing Board The Toledo Edison Company and ) Docket Nos. 50-346A
, The Cleveland Electric Illuminating ) 50-500A Company ) 50-501A ,
(Davis-Besse Nuclear Power Station.) Units 1, 2 and 3) )
)
The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) 50-441A (Perry Nuclear Power Plant, ) Units 1 and 2) ) PROPOSED FINDINGS OF FACT AND
. CONCLUSIONS OF LAV7 AND BRIEF IN SUPPORT THEREOF OF C,J Y OF CLEVELAND Retben Goldberg
.. David C. Hjelmfelt Goldberg, Fieldman & Hjelmfelt
,' 1700 Pennsylvania Avenue, N. W.
.. Washington, D. C. 20006 Vincent C. Campanella
- Director of Law Robert D. Hart First Assistant Director of Law w City of Cleveland City Hall :
",. 44114 Cleveland, Ohio Attorneys for August . 23, 1976 City of Cleveland, Ohio L..
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E00 1150 l
Se4-TABLE OF CONTENTS (Continued) Page III. APPLICANTS HAVE MONOPOLIZED THE RELEVANT MARKETS . . . . . . 118' IV. CEI HAS DELIBERATELY SOUGHT _ MONOPOLY POWER AND HAS ACTED TO MAINTAIN THAT POWER . . . . . . 129 V. APPLICANTS HAVE CONSPIRED TO DENY MUNICIPAL ELECTRIC SYSTEMS ACCESS TO NUCLEAR POWER AND TO COORDINATED OPERATION AND DEVELOPMENT. . . . . 138 VI. THE DEFENSE RAISED BY APPLICANTS ARE NOT SUPPORTED BY THE RECORD
, AND ARE CONTRARY TO WELL ESTABLISHED LEGAL PRINCIPLES. . . . . . . . . 149 ! A. Contrary to Applicants' Assertions Municipal Electric Systems Cannot
,{ , Obtain All The Benefits Of Coordinated 3 Operation And Development And Parti-cipation In Nuclear Power Through Purchases Of Power From Applicants . 149 B. Applicants' Argument That Their Acts Are Immune From Antitrust Scrutiny Because They Were Done In Furtherance Of Federal Policy Is Unsrpported By The i Facts And Misconstrues Federal Policy . 151 b C. The Record Does Not Support The Con-I, tention That The City Was Not In Good Faith In Requesting Participation In CAPCO Nuclear Units . . . . . . 154 D. There Is No Basis For Applicants' Assertion That There Could Be No Mutuality In A Coordinating Arrange-ment Between CAPCO Members And The Municipal Systems In The CCCT . . 159 - 11 l
TABLE OF CITATIONS . y. Court Cases ,Page e
- American Federation of Tobacco Growers v.
Neal, 18 3 F 2d 8 69 ( 19 5 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127, 128 lr Arnerican Motor Inns. Inc. , v. Holiday Inns, g In c . , 4 21 F 2d 12 3 0 ( 19 75 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 American Tobacco v. United States, 328 f U. S . 7 81 ( 19 4 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119, 123, 139, 140 ., Asheville Tobacco Board of Trade, Inc. , v. FT C, 2 63 F 2d 50 2 ( 19 59 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 . [' As sociated Pres s v. United States, 326 L U . S . 1 ( 194 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126, 127, 140 Atlantic Refining Co. , v. FTC, 38! U. S. 357 f (1965)...........................,.................... 115
- Braverman v. United States, 317 C
U. S . 4 9 ( 19 4 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Cantor v. Detroit Edison, U. S. 6 ( July 6, 19 7 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169, 170 Eastman ~Mdak Co. , v. Southern Photo 1 Mate rials Co. , 2 7 3 U. S. 3 5 9 ( 19 2 7 ) . . . . . . . . . . . . . . . . . . . . . 124 L Elyria Telephone Co. , v. Public Utilities
' Commis sion, 158 Ohio St. 441, 110 NE 2d 59 (1953 ) . . . . . . 168 Fashion Originator's Guild of Amorica v.
FT C, 312 U. S. 4 5 7 ( 1941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Federal Power Commission v. Sierra [ Pacific Co. , 3 5 0 U. S. 34 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 S FTC v. Brown Shoe, 3 84 U. S. 316 ( 19 66) . . . . . . . . . . . . . . . . . ' 116 r., FTC v. Cement Institute, 333 U. S. 623 (194 8) . . . . . . . . . . . . . 115
' FTCv. Motion Picture Advertisinst Service Co. , Inc. , 344 U. S. 39 2 ( 19 5 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . 115 g Gamco, Inc. , v. Providence Fruit and Produce l Building, 194 F 2d 484 (1952) cert. denied 344 F U. S . 817 ( 19 5 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123, 126, 127
- e. Griffin v. Breckenridge, 403 U. S. 88 (1971) . . . . . . . . . . . . . . . 139
, Interstate Circuit v. United States, 306 ~
U. S. 2 0 8 ( 19 3 9 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 i 4 emini. iv l L i
t TABLE OF CITATIONS (continued) r Page Court Cases .r~ Lorain Journal Co. , v. United States, 342 ',g U . S . 14 3 ( 19 5 1 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 y ,Marne11 v. United Postal Service of America, t , In c. 2 0 6 F Supp. 3 91 ( 19 6 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Moore v. Jas. H. Matthews & Co. , 473 f F 2 d 3 2 E ( 19 7 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
- ( Nor'hern Gas Co. , v. Federal Power Commis sion 3t 9 9 F 2d 9 5 3 ( 19 6 8 . . . . . . . . . . . . . . . . . . . . . . . 169 Northern Pa cific Railroad v. United Shtes, 356
[ 3, U. S . 1 ( 19 5 8 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 116, 128 l Pacific Gas Transmissicn v. FPC, F 2d f} i ( De cided Ap ril 9, 19 7 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Psckaged Programs, Inc. , v. Westinghouse 151 i B road ca sting Inc. , 3 65 F 2d 4 78 (19 66) . . . . . . . . . . . . . . . . . . 124 T Panhandle Eastern Pipe Line Co. , v. 4 Federal Power Commission, 169 F 2d 881 (1948) . . . . . . . 168, 169 Pa rker v. B rown 317 U. S. 341 (194 3) . . . . . . . . . . . . . . . . . . . 166, 167 [ Schwermann Brothers v. Calvert Distulers L- Corp., 341 U. S. 3 84 ( 19 5 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Silver v. New York Stock Exchange. 373 U. S. 341, reh. den. 375 U. S. 870 (19 63) . . . . . . . . . . . . . . . . . { - Six Twenty-Nine Productions v. Rollins 126 Tele ca sting Inc. , F 2d 4 7 8 ( 19 6 6) . . . . . . . . . . . . . . . . . . . . . . . . 124 [ The Peelers Co. , 65 FTC 799 (1964), enforced M in p trt sub nom. , LaPeyre v. FTC, 366 r, F 2 d 1 17, ( 19 6 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Travelers Insurance Co. , v. Blue Cross of L Western Pennsylvania, 298 F Supp. 110. . . . . . . . . . . . . . . . . 168 g
.TV Signal Co. of Aberdeen v. American Telephone &
J Telegraph Co. , 4 62 F 2d 256 (1972) . . . . . . . . . . . . . . . . . . . . . . 139 United Banana Co. , v. United Fruit Co. , 245 F Supp. 7, 161, a ff' d , 3 62 F 2 d 84 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 United Gas Pipe Line Co. , v. Mobile Gas Co. , 350 L U.S.332.............................................. 171
, ' United States v. Aluminum Co. of America, 148 s
F 2 d 4 1 6 ( 19 4 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119, 120, 123, 128 u a m v 6,e 6
TABLE OF CITATIONS (continued) Court Cases
.Page e.
United States v. American Radiator & Standard Sanitary Corn. , 433 F 2d 174 (1970) cert. d enied 4 01 U. S. 9 4 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
. i _ United States v. Arnold, Schwinn and Co. , 388 U. S. 3 6 5 ( 19 67 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 r- hited States v. Besser Manufacturing Co. ,
J, 9 6 F Supp. 304, aff'd, 343 U. S. 444 (19 52) . . . . . . . . . . . . . . . 119 United States v. E. I. duPont de Nemours Co. , 351
-r ' U . S . 3 7 7 ( 19 5 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 s United States v. General Electric Co. , 272 U. S. 476 . . . . . . . 128 United States v. General Motors Corp. , 121 F 2d 376, f- cert. denied 314 U. S. 618 (1941) . . . . . . . . . . . . . . . . . . . . . . . 13 8, 139
(~ United States v. Griffith, 3 34 U. S. 100 (194 8) . . . . . . . . . . . . 120, 122, 123 United States v. Grinnell Corp. , 3 84 U. S. 5 63 (19 6 6) . . . . . . . 119 f United States v. International Business Machines, 1975 C CH Trade Cas e par. 60, 49 5 . . . . . . . . . . . . . . . . . . . . . . . . . . 123 United States v. Otter Tail Power Company, 331 [ F Supp. 54, aff'd in part 410 U. S. 3 66 (19 73) . . . . . . . . . . . 119, 125, 126, 169 L United States v. Paramount Pictures, Inc. , 334 U. S. 131 ( 19 4 8 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 I United States v. Philadelnhia National Bank. , 374 L U. S. 3 21 ( 19 6 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117, 118, 119 United States v. Socony Vacuum Oil Co. 310 U. S. 15 0 ( 19 4 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 United States v. Terminal Railroad Association, 224 I U. S. 3 8 2 ( 19 12 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 United States v. Tocco Associates, 405 L U. S. 5 9 6 ( 19 7 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
, . _ United States v. United Shoe Machinery Corn. 110 F Supp. 295, aff'd per curiam. 347 U. S. 361 (1954) . . . . . . . 120, 124 f-i Commission Cases b
- t. Alabama Power Company, 6 AE C 8 5, 8 6 . . . . . . . . . . . . . . . . . . 114 Consumers Power Co. , ALAB-123, RAI-73-5 . . . . . . . . . . . . . 173 Kansas Gas and Electric Co. , and Kansas City S ion, Unit No.1) k 29, CI 75 6 559, 572 (1975). 114 vi l
t
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- i e
TABLE OF CITATIONS (continued) t ., k Commission Cases ' Page
- s Louisiana Power & Light Co., (Waterford I),
C LI- 7 3 - 7, 6 AE C 4 8 ( 19 7 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Louisiana Power & Light Co. , (Waterford II), n' C LI-7 3 -2 5, 6 AEC 619 ( 19 7 3) . . . . . . . . . . . . . . . . . . . . . . . . . 172 Maine Yankee Atomic Power Co. , ALAB-161, F 6 AEC 10 0 3 ( 19 7 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 3 Nevada Power Company, (FPC Opinion No. 768, Do cket No. E- 8 7 21 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150, 151 Statutes o
! Atomic Energy Act e S e c tio n 10 5 c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110, 173 Se ction 10 5 c ( 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 k
S e ctio n 10 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 f ~ Federal Trade Commisnion Act Section 5 (15 U. S. C. 54 5 ( a )( 1 ) ) . . . . . . . . . . . . . . . . . . . . . . . . 115 b M C L A $ 4 6 0. 5 01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169, 170 U
.s Ohio C o de $4 9 0 5. 3 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Sherman Act Se ction 2( 15 U. S. C. $ 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 116, 124, 125 i
Se ction 1(15 U. S. C. $ 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
<. Mis cellaneous L
House Report No. 91-1470 (U. S. Code Congressional t' and Administrative News (91st Congress 2nd Session)
~
pp . 4 9 81, 5 0 1 1 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Senate Report No. 91-1247, 91st Congressional 2nd
-) Se s s io n ( 19 7 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 t-
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INCORPORATION BY REFERENCE AND DEFINITIONS t In addition to the proposed findings expressly set forth below, the City of Cleveland adopts and hereby incorporates by reference the proposed findings of fact and conclusions of law filed by the Department of Justice. i For the purpose of these proposed findings of fact, conclusions of f' ( , law and brief in support, the City of Cleveland adopts the definitions con-tained in Exhibit HMM-6 to Mr. Mozer's direct testimony (NRC 205). O L c 4 j. l j w. L t' - 1 L. - Y
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION P i Before the Atomic Safety and Licensing Board L The Toledo Edison Company and ) Docket Nos. 30-346A I The Cleveland Electric Illuminating ) 50-500A -{ Company ) , 50-501A (Davis-Bes se Nuclear Power Station,) [ Units 1, 2 and 3) )
- t. )
The Cleveland Electric Illuminating ) Docket Nos. 50-440A {v Company, et al. ) 50-441A (Perry Nuclear Power Plant, )
, Units 1 and 2) )
(. I PROPOSED FINDINGS OF FACT AND
' CONCLUSIONS OF LAW AND BRIEF IN *
, SUPPORT THEREOF OF CITY OF CLEVELAND
-- PROPOSED FINDINGS OF FACT L.
- The Parties L The City of Cleveland.
1.
, 1.01 The City of Cleveland (City) through its Division of Light and Power, operates facilities for the generation, distribution and trans-mission of electricity (Applicant's 102, C-161). The Division's installed
' i r'
[ generating facilities with a nominal capacity of 205 Mw have a net demon-strated capacity of 180 Mw. The generating capacity consists of three L steam electric generating units each rated at 2. 5 Mw, one 85 Mw steam , y electric generating unit, and three dual-fired (gas and oil) combustion tur-bine generating units each rated at 16. 5 Mw (Mayben dt. C-161, p. 8). eme
r
.(' 1.02 The City's electric system is temporarily interconnected
- f. with the electric system of The Cleveland Electric Hluminating Company a
(CEI) by means of a 1. 6-mile 138 kv single circuit transmission line
! (Mayben dt. C-161, p. 8). ~ 1.03 The City serves at retail in approxirs.ately 37% of the City of
(- Cleveland. In 32% of the City, service is offered by both CEI and the City. e ( in 5%'of the City of Cleveland, service is provided only by the City. In 63% of the City, retail service is provided only by CEI (DJ 353). s 1.04 The City sells at retail to approximately 46,000 customers (' ( , or 19% of the customers in the City of Cleveland, equal to about 6% of all the customers served by CEI (C-165, p.19). (
- 2. The Cleveland Electric Hiraninating Company (CEI)
(.. 2.01 The Cleveland Electric Hluminating Company (CEI) is a public utility incorporated under the laws of the State of Ohio and is engaged in the generation, transmission and distribution of electricity in a 1,700
'I squart, mile area in northeastern Ohio. CEI provides retail power to an estimated population of more than 2,085,000 in the City of Cleveland and
, 88 other incorporated municipalities and surrounding territory (NRC 151,
" p. 4).
[ 2.02 In July 1972, CEI experienced a peak load of 2,822 mw, excluding interruptible load. Its net system dependable capacity at the v, i time of peak was 3,395 mw which includes 335 mw of pumped storage c: . capacity (NRC 155, p. CEI 4). As of January 1, 1974, CEI had 3,940 mw e of generating capacity (Wein dt. DJ 587 p. 65). In 1973 CEI had 632 pole s.
/
'm
i~
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miles of transmission with a nominal rating of 66 kv and above (Hughes dt. { NRC 207 pp. 26-27 (table)).
- 3. Duquesne Light Company 3.01 Duquesne Light Company (Duquesne) is a public utility incor-porated under the laws of the Commonwealth of Pennsylvania and is engaged in the generation, transmission, and distribut'en of electricity in western
[ Pennsylvania in and about the City of Pittsburgh. Duquesne sells at retail (- in 146 municipalities and sells at wholesale to one municipality (NRC 157 L.
- p. 7). Duquesne has a net demonstrated generating capability of 2,518 mw i
( .. and serves in an area of 800 square miles having a population of 1,600,000 (NRC 157 p. 3).
- 4. The Toledo Edison Company .
~. 4.01 The Tolede Edison Company (Toledo Edison) is a public
['v utility incorporated under the laws of the State of Ohio and is engaged in the generation, transmission, and distribution of electricity in northwestern (' r w Ohio. Toledo Edison sells at retail to customers in 48 incorporated munic-I- ipalities and in rural areas. It sells power at wholesale to 16 municipalities. L -
, Toledo Edison has 1,046 mw of generating capacity and serves an area of 2,500 square miles having a population of 719,000 (NRC 157 p. 3). Toledo r~ ?* Edison has 493 pole miles of transmission line with a nominal rating of V
66 kv and above (Hughes dt. NRC 207 pp. 26-27 (table)).
- 5. Ohio Edison Company 5.01 Ohio Edison Company (Ohio Edison) is a public utility incor-L porated under the laws of the State of Ohio and is engaged in the generation,
?
L' 7.02 In the period 1910-1915, there were more than 4,000 pri-
, vately owned electric systems and 3,000 municipally owned electric sys-tems. During that same time period approximately half of the nation's generating capacity was owned by industries that generated their own power
,. needs. Today, self-generation by industry accounts for only about 1% of i
all electric generation (Kampmeier dt. DJ 450 p. 6). 7.03 During the period from World War I to the great depression, r the number of utilities greatly decreased and the size of the remaining l utilities greatly increased. Systems were consolidated and expanded through l. ( acquisition and merger (Kampmeier dt. DJ 450 p. 7). Technical advances [ in generation and transmission encouraged internal coordination of the i merged systems (Kampmeier dt. DJ 450 p. 8). LJ 7.04 Each of the Applicants is a product of long-standing policies f of acquisition and merger systema % 1)/ pursued for decades (Wein dt. DJ 587 p. 63). Acquisitions were a vay of lite in the utility industry (Besse deposition DJ 559 p. 64). Today only two municipal systems survive in the
~
area served by CEI (Wein dt. DJ 587 p. 63) and only one survives in the w. area served by Duquesne (Wein dt. DJ 587 p. 74). 7.05 Large economies of scale exist in the installation and opera-tion of electric generating units. . Investment cost per kw of capacity for a
, 100 mw plant is about 60% more than for a 1,000 mw plant. Fuel costs for ,
a 100 mw plant are about 60% higher than for a 1,000 mw plant. Operating j and maintenance costs for a 100 mw plant are three times as much as for s. a 1,000 mw plant (Kampmeier dt. DJ 540 pp. 22-23). 1 , ,
,, --. , -.~n,.4 gm --* e9 -93 ungi
(
. 7.06 Economies of scale are also present in the transmission of f electricity. The capacity of the transmission line increases approximately k
as the square of the rated voltage of the line (Bingham Tr. 8155-56). So
~
[ long as costs increase at a rate lower than the increase of the square of the i voltage, higher voltage transmission lines are more economical as voltage
\
increases (Wein dt. DJ 587 p. 50; Mozer dt. NRC 205 pp.14-15). Additional economies in transmission resui. from the fact that a given transfer capacity e at higher voltage requires less right of way than an equal amount of transfer
)
w _. capacity at lower voltage (Caruso Tr.10,911). p (. 7.07 It has long been recognized in the electric utility business { that reliability of service and economies of bulk power supply can best be ( achieved through coordination (Mayben dt. C-161 p.16). Forms of cuor-I
- d. dinated operations found in interchange or power pooling ah'eements among i utilities include (Mayben dt. C-161 p.17; Slemmer dt. Applicants' 21 pp. 8, L
15-16; Kampmeier dt. DJ 540 pp.10-13; DJ 588): a (a) Reserve sharing and mutual emergency support; (b) Emergency energy interchange; (c) Maintenance scheduling and maintenance C power exchange; gj r (d) Transmission service; (e) Short-term power and energy interchange; g (fi Spinning reserve interchange; 7, (g) Diversity interchange; (h) Economy interchange. i
,)
'\ '
Reserve sharing enhances reliability, provides economies and permits
\- ,. parties to take advantage of economies of scale (Keck deposition DJ 576 p. 8:
A Slemmer dt. Applicants' 121 pp.16-17; Dempler deposition DJ 570 p. 41; Lindseth deposition DJ 568 pp. 39-41). The possibility of economy inter-
,, change may, by itself, lead a municipality to perfect an interconnection (Levris Tr. 11,426).
f 7.08 Electric utilities engage in coordinated planning and develop-
!e ment to obtain the most economic method of expansion of power generation ?
~' and transmission facilities (Masters deposition DJ 567 p. 28; Keck deposi-tion DJ 576 p. 32). Forms of coordinated development found in the industry 7 include (Mayben dt. C-161 p.18; Kampmeier dt. DJ 450 pp.14-15): (a) Generating unit participation:
. (' Common ownership;
- [ (ii) Unit power purchases; i
(b) Transmission participation; , f L (c) Transmission system interconnection
'[ and expansion; .L j-(d) Staggered construction of generation units 1
C accomplished through planned exchanges
- f of surplus ,o <er; O
, . (e) Diversity power ir i 5 . age; l (f ) Firm power sales. Staggered construction is an economic advantage available to intercunnected utilities (Lindseth deposition DJ 568 pp. 40-41). Interconnections permit .u. u
F
-( -8,
, the interconnected utilities to carry a lower level of reserves (Lindseth rs deporition DJ 568 p. 39).
~( Reserve sharing pursuant to an interconnection agreement could
- ( enable a small utility with a 100 mw load and a single 100 mw generating 7, unit to insure its customers a steady supply of electricity without the
.l necessity of constructing a second 100 mw unit (Firestone deposition DJ r
- j 575 p. 77).
c A synchronous interconnection would provide the interconnected
)
utilities with frequency stabilization support which would improve the I quality of service which the interconnected utilities could offer. Frequency q support is not available over a non-synchronous interconnection (Firestone t-
, deposition DJ 575 pp. 53-54).
, In a speech to an Institutional Investors Seminar in the fall of 1969, j' Mr. Rudolph, President of CEI, stated that two or more electric systems t
interconnected and coordinated could achieve (1) greater reliability of .c. 1 service, (2) reduction of capital investment, and (3) increased economy of .i operation. Mr. Rudolph noted that nearly all major power systems in the U United States, including CEI, are members of one of six principal inter-L connected groups. Interconnecticn increasss the effectiveness of large, I efficient generating plants. Interconnections make possible sizeable reduc-L: tions in capital costs. In 1969, installation of a 250 mw unit cost about l
' $165 per kw. Through interconnections, CEI was able to install a 625 mw i un'.c at a cost of $140 per kw. A single system, Mr. Rudolph said, would w
be unable to absorb the cost of additional generation needed to "back-up" w.
I f( the larger unit. " Pooling," Mr. Rudolph said, "makes possible a move to
- r nuclear plants and EHV (extra high voltage) transmission grids. " Mr.
'I~ Rudolph predicted that "[t]he electric industry will put increasing reliance
- r on the formation of power pools and other technological developments to rneet the challenges of the next several decades" (C-131).
'i The coordinated operation of electric entities was described by the T j US Supreme Court in Gainesville Utilities v. Florida Power Corp. , 405 US
- r 515, 517-520, 29 L Ed 2d 74, 77-79, 91 S Ct 1592, as fonows:
O The demand upon an electric utility for electric power flue-tuates significantly from hour to hour, day to day, and season ['( to season. For this reason, generating facilities cannot be maintained on the basis of a constant demand. Rather, the utility's generating capability must be geared to the utility's 3 peak load of demand, and also take into account the fact that generating equipment must occasionally be out of service for 7 overhaul, or because of breakdowns. In consequence, the M utility builds certain " reserves" of generating capacity in ,r excess of peak load requirements into its system. 2/ The L 2/ The industry distinguishes between various types of " reserve" requirements. Since time is required to start up equipment [ that is not operating, a certain amount of equipment must be maintained in such a state that it can begin generating
, power immediately. The industry cans these instantaneous or " spinning" reser ces, and they must be available to meet i load variations and breakdowns of equipment as they occur. , A utility must always maintain " spinning" reserves equal to ; the size of the largest generator currently in service producing power, in order to protect against a breakdown of that unit. ',.. As " spinning" reserves are called upon a utility must start
- , up more equipment in order to maintain " spinning" reserves at an adequate level. These reserves are called " quick-start" or " ready" reserves and must be available on short notice --
{. usually 10 minutes or less. Both spinning and quick-start reserves are collectively referred to as " operating" reserves, in contrast to " installed" reserves. Installed reserves refers l to the~ remaining genersting capacity of a utility, those genera-tors that are not ready to be operated, or in operation. Accordingly, the expense associated with " reserve" require-ments includes both capital expense -- building the necessary (continued)
\
w
+ ,r -
, - - - -,,,,y .y- a m., -c-va-- --
m--,=-y..- y y .
I ( i l
- i practice of a utility that relies completely on its own generating l resources (an " isolated" system in industry jargon) is to main- !
c tain equipment capable of producing its peak load requirements I plus equipment that produces a " reserve" capacity equal to the j capacity of its largest generating unit. i The major importance of an interconnection is that it reduces the need for the " isolated" utility to build and maintain " reserve"
- generating capacity. 3./ An interconnection is simply a trans-l 2/ (continued) - " installed" reserve generating capacity -- and operating
( expense -- running the necessary " spinning" reserves and maintaining the readiness of " quick-start" reserves. In r general, this opinion will not differentiate between the dif-ferent reserve requirements. 3/ The reason that interconnections lower reserve requirements p is well illustrated by a hypothetical discussed in the Commis- ! I sion's brief, at 15-16.
" Assume that four elactric systems operate in isolation and that each has an annual peak load of 500 mw served by ,
( several generating units the largest of which is 200 mw. At a minimum, each system would have to provide 700 mw of installed generating capacity (500 mw to cover the annual peak load plus 200 mw of installed reserves equal to the largest unit). If we assume further that each system operates [ its 200 mw unit near capacity throughout the year, spinning L reserves equal to the output of that unit would constantly be required. If the four systems are to be interconnected f pursuant to the Florida Operating Committee formula, total L generating capacity need not exceed 2300 mw (total annual peak load -- if all peaks occur during the same period -- I plus operating reserves of 300 mw,1. e. ,1-1/2 times the b largest generating unit). This 2300 mw capacity requirement
, would be met by requiring each system to maintain generating l capacity equal to 115 percent of its annual peak load. Each l system would thus have to maintain only 575 mw of generating l , capacity -- 125 mw less than would be required if operating ' } in isolation. The interconnected system as a whole would R
require the constant maintenance of 200 mw of spinning reserves and 100 mw of quick-start reserves; each system's f pro rata share of operating reserves would amount to only { 75 mw. Thus, interconnection of the four systems would result in substantial capital savings by reducing installed generating capacity requirements and substantial operating p savings by reducing operating reserve requirements." (Footnote omitted. )
r M a mission line connecting two utilities. Electric power may move freely through the line up to the line's capacity, c Ordinarily, however, the energy generated by each system is sufficient to supply the requirements of the system's customers and no substantial amount of power flows through
- c the interconnection. It is only at the times when one of the 3' connected utilities is unable for some reason to produce suf-ficient power to meet its customers' needs that the deficiency may be supplied by power that automatically flows through the
( interconnection from the other utility. To the extent that the utility may rely upon the interconnection to supply this defi-r ciency, the utility is freed of the necessity of constructing ( and maintaimug its own equipment for the purpose. { An electrical intercom.ection among systems is required to make s coordinated operation possible. The interconnection must be kept closed 1 despite load variations and equipment failures. There must also be pooling [ of reserves and sharing in the providing of reserves and arrangements for I wheeling so that two participants who are connected only through the facilities l t-of a third can transmit power through its facilities. (Kampmeier dt. DJ 450 r p. 12) 'L Without wheeling, an intervening party who will transmit power only b under a buy-sell arrangement would in effect have a right of first refusal and be in a position to frustrate attempts to coordinate. For that reason, L in the pre-CAPCO era CEI found it advantageous to construct a transmission line across Ohio Edison territory to Ohio Power Company. Not ouly did that
~
I
, transmission line avoid Ohio Edison's right of first refusal but it also improved CEI's bargaining position in the regional power exchange market. ~
(Besse deposition DJ 559 pp.123-25) CEI's direct interconnections with Ohio Edison, Ohio Power and the PJM pool were an advantage to CEI in l that they permitted CEI to shop for power. (Ganther deposition DJ 561 p. 36) l
l Absent wheeling, it was more economical to have a direct intertie with a i y third party because under a buy-sell transmission arrangement the inter- l i vening party will resell the most expensive power on its system (Ganther r A deposition DJ 562 pp. 40-41).
- r. .
7.09 Without access to coordination services, it would not have been practical for the Applicants independently to construct and operate large nuclear units (Sunivan deposition DJ 578 p. 27; Kecic deposition DJ r- 576 p. 32; Masters deposition DJ 567 pp. 32, 57-68; Mozer dt. NRC 205 i (. pp.11-12;&irestone Tr. 9228). Joint planning has changed the ways of doing business in the utility [ industry. It not only effects the size of the unit being planned, but also the ( type of unit selected. This is because nuclear units become economicany b more attractive when large plants can be used without unduly increasing I instaHed reuerves. The cost per kw of instaHed capacity of a nuclear unf it t decreases at a more rapid rate as plant size increases than is the case for r i fossil-fuel plants. The greeter opportunity for use of nuclear plants is one I of the impacts of pooling on system plans. (C-131) L: Practical and economic facts of life made it nearly mandatory that P L Ohio Edison join a power pool to engage in coordinated operations and I development (White Tr. 9813-14). L: 7.10 Applicants have compared the costs of nuclear generation and fossil-fuel generation and have determined that base load celear units are e most economical (Rudolph deposition DJ 558 pp.168-65,175; Masters L deposition DJ 567 pp. 55-56; Kekela deposition DJ 574 p.123; Sullivan h.=
, --+ e-
(
! r-
- h. deposition DJ 578 p. 211 DJ 374). Applicants have not committed themselves
- y to install a coal-fired base load unit since 1970 (Williams Tr.10,556) and have agreed that no additional base load coal-fired units should be committed
{ (DJ 92). Coal availability problems increase the desirability of constructing nuclear generating units (DJ 511 pp. 90-91). In 1974, Mr. Masters of CEI noted that cost comparisons of a 1200 mw base load unit for operation in 1977 revealed that annual costs for a nuclear (" unit would be 10% less than for a coal unit for the years 1981-1986 and 17% m. less than for a coal unit for the fifteen-year period 1981-1995 (DJ 285). r Economies of scale are more significant for nuclear units than for fossil-i fuel units (Lindseth deposition DJ 568 pp. 42-43). The President of Toledo Edison admitted that in certain instances ( nuclear generation may be as much as 40% 1ess costly than coal-fired gener-ation (Williamson deposition DJ 581 p. 38). The economies of nuclear u generation were so pronounced that no detailed studies were required for L Applicants to conclude that the Davis-Besse 2 and 3 units should be nuclear rather than fossil-fueled units (Rudolph deposition DJ 558 p.174). As soon
, as the Davis-Besse 1 unit begins operating, Applicants will save $300,000 to $400,000 csch and every day in reduced fuel costs alone (Williams Tr.
p 10,527). L. 7 Applicants have recognized the economies of nuclear generation in b~ asserting to this Commission (Motion for Determination that Davis-Besse i ,v Unit #1 is " Grandfathered" for Purposes of Operation, p. 2): i I or
,we - -
.i
. . . Davis-Besse Unit 1 will be an important factor in assuring the reliability of the power supply in the State of
,, Ohio and, because of its relatively low fuel costs, it is expected to contribute to the stability of electric power costs for consumers of electricity in Ohio . . . .
Nuclear power is most advantageous environmentany and offers the best l hope for long-range economy and dependability (Winiamson Speech DJ 93). In economic terms nuclear power is a unique resource (Wein Tr. 7240). r l 7.11 Nuclear generation shows operating characteristics which
- r differ from fossil-fueled base load generation. Nuclear units are less L
flexible and are not cycled up and down to follow load. Careful attention to
\
i fuel burn control requires operation at a steady level of production. Thus, an owner of nuclear generation rnay find it more advantageous to sell base load power from nuclear generation as economy power than to cut back on L. generation to conserve fuel (Mayben Tr. 7815-22; Kampmeier dt. DJ 450
- p. 51; Dempler Tr. 8873).
u 7.12 As a practical matter, nuclear technology is usable solely L and exclusively by large electric systems or those which are part of a large interconnected and coordinated network (Kampmeier dt. DJ 450 p. 25; L. Mozer dt. NRC 205 p. 62). 7.13 Sman municipal systems without access to coordinated oper-C g ations and development cannot instan nuclear generating units .(Kampmeier
; dt. DJ 450 p. 25; Mozer dt NRC 205 p. 8). It would not be economicany
(~ feasible for the City of Cleveland to instan nuclear generation by itself i
-(Hinchee Tr. 2618; Mayben dt. C-161 p. 22). It would not be feasible for the municipal system in Bryan, Ohio, with an electric load of 23 mw, to s
A
r install nuclear generation (Keck deposition DJ 576 pp.123-124). Paine s - m ville could not economically construct its own nuclear generating plant (Pandy Tr. 3,120). It would be grossly impractical for Newton Falls to r -[ install nuclear generating units (Craig Tr. 2952).
- r. 7.14 Development of nuclear generation will make self-generation by small isolated municipal systems increasingly inefficient by comparison r
j (Toledo Edison memorandum DJ 557). Today the best choice of technology e is nuclear generation. The President of Ohio Edison has testified that the failure to utilize the best technology could result in the failure of Ohio T1 Edison as a company. (White Tr. 9815) { 7.15 Nuclear generation must be used in conjunction with a mix s of other power supply resources (Williamson deposition DJ 581 p. 38; c.
- i. Slemmer Tr. 9137-38; Smart Tr. 10,130). Other power supply options must be available to a system if it is to use nuclear power effectively.
e-Among the coordinating arrangements necessary are reserve sharing, L emergency power, and maintenance power (Mozer Tr. 3,350-52). To most [ L effectively use nuclear power requires coordinated development and opera-tion of all of the different kinds of generation throughout the region. Each type of generation compliments and supplements the others. Flexibility in pm..
- wheeling various kinds of power throughout the region is one of the essential e
elements in achieving their optimum use. (Kampmeier dt. DJ 540 p. 51). 4-7.16 Interconnections among the Applicants makes possible joint ownership of generating units (Firestone deposition DJ 575 p. 43). M
7.17 There is a strong and direct relationship between base load y generating units and 345 kv transmission networks (Mozer dt. NRC 205
- p. 18). Applicants have constructed iransmission lines associated with the installation of the Beaver Valley 2.and Perry 1 and 2 nuclear units (Mozer o dt. NRC 205 p.17). Applicants' jointly planned generation during CAPCO planning periods I - IV has a pronounced relationship to the jointly planned I
] 345 kv transmission system (Mozer dt. NRC 205 p.14). Generating plants r are tied together by transmission lines for purposes of economy and
- l.
reliability (Bingham Tr. 8,198). Extra high voltage transmission lines F are almost always planned as the result of the generation expansion plan J (Caruso Tr. 10,916-17). "The CAPCO transmission agreement recognizes ( the need for a CAPCO system of bulk transmission lines to enable the b parties to transfer power from jointly owned units to the systems of the I ownink Parties" (Firestone dt. Applicants' 122 p.11). Additional genera-tion from the Perry units will require installation of additional transmission
$ capacity (Carur. Tr.10,973). CAPCO will add 384 miles of 345 kv trans-mission line in connection with installation of the Mansfield, Perry and ., Beaver Valley units (DJ 153).
7.18 Applicants could not obtain access to the power supply options 7 w they now have without transmission connections among themselves and with other utilities (Mozer Tr. 3,269). I~ 7.19 Applicants' large transmission grid built in conjunction with 3 ,
} 1arge generating units might make it difficult for small systems to build l transmission in the same area (Mozer Tr. 3,271). The extensive transmission l l
~_. l l l _ . . __._,_. _ . . _ _ _ _ ~
l
- r. j network established by Applicants is strengthened by the addition of nuclear )
i c generation. Most other transmission construction would be duplication ' 4 (Mozer Tr. 3,356-56). The need to add nuclear power plants creates a r need to expand and increase the capacity of the transmission network. The 'r expansion and strengthening of the existing transmission network makes it increasingly difficult for a small system to construct competing transmission. ) .(
; (Mozer dt. NRC 205 p. 60) The alternative to constructing a duplicating l r transmission line could be a wheeling arrangement (Mozer Tr. 3,358). l l
The presence of transfer capacity on Applicants' existing transmission lines I r may preclude other utilities from obtaining the approval of the Ohio Power { 1 Siting Comrnission for construction of duplicate facilities (Moser dt. NRC 205 pp. 58-59). Presence of transfer capacity available on CFI's trans-I- mission lines would be an issue if the City of Cleveland sought to condemn f land for a right of way to build a duplicate facility (Caruso Tr.10,943). Impact on the environment may also be considered in a condemnation action 4 to obtain right of way for duplicating transmission lines (Caruso Tr. 10,956). [ 8. Central Area Power Coordinating Group t - 8.01 On September 14, 1967, Applicants, in these proceedings, executed a Memorandum of Understanding creating a power pool known as (, u
, the Central Area Power Coordinating Group (CAPCO). The purpose of CAPCO was to coordinate the installation of generation and transmission
.~ capacity to further reliability of bulk power supply through assurance of an I adequate reserve capacity level with reserve capacity coordination and an adequate transmission network and to take advantage of such economies of m b M
-1 e
r-scale as will be available. (NRC 184 p.1; Firestone dt. Applicants' 122 r pp. 9-10) The Memorandum of Understanding provides that (NRC 184 p.10): .( Each of the parties hereto recognizes a mutual interest and
- r advantage in maintaining a continuous and uninterrupted supply of electric power and energy available to custouers of all the parties hereto.
.r
- ( The Memorandum of, Understanding provides for wheeling of electricity between and among Applicants (NRC 184 p.12; DJ 588; Rudolph deposition DJ 558 pp. 213-14). The language found in the Memorandum of Understanding
- r (NRC 184 p.18) which provides for wheeling of power is very similar to
{ 1anguage found in Section 4 of the May 29, 1969 Power Agreement among Applicants implementing the Memorandum of Understanding. Mr. Masters l admitted that Section 4 of the 1969 Power Agreement provides for wheeling T (Masters deposition DJ 567 pp. 44-45). L. 8.02 CAPCO provides for the planning of bulk power supply facilities L on a one-system basis (Firestone dt. Applicants' 122 p.10). The CAPCO D Basic Operating Agreement provides that the installed reserve capacity of p the parties will be shared under a one-system concept (Firestone dt. L Applicants' 122 p.12). CAPCO transmission lines permit each Applicant g { to receive its capacity entitlements from CAPCO generating units and allow p Applicants to discharge their responsibilities to each other with respect to L reserve sharing. In addition, the unused transfer capacity in each of Appli-I L cants' non CAPCO transmission lines which are in parallel with CAPCO 9 transmission facilities is available for CAPCO purposes (Firestone dt. Applicants' 122 p.15). s. 6
r-P
, 8.03 CAPCO plans to maintain sufficient capacity so that on only one p day each year willit need to rely on power resources not owned by Applicants. -(
This is referred to as the one negative day concept (Schaffer Tr. 8,535).
'I
( The one negative day standard was adopted as a compromise (Schaffer Tr. r 8,699: Firestone Tr. 9,415). There is no means of determining that one
- l negative d2y is the right reliability criterion (Firestone Tr. 9,417). Prior r
{ to joining CAPCO, Ohio Edison had maintained reserves equivalent to a F 3/10 negative day standard while CEI's reserve level equated to a 10 nega-L tive day standard (Firestone Tr. 9,415). Ohio Edison thus reduced its f /. reliability standard in order to achieve economies of scale through CAPCO [ (Firestone Tr. 9,417). 1 8.04 When CAPCO adopts a particular bulk power supply expansion plan under the one system approach, it selects one plan from several alter-
- I native plans (Firestone Tr. 9,422).
L 8.05 Within CAPCO, capacity responsibility is apportioned among (~ the Applicants by the P/N method (Schaffer Tr. 8,535). "P" represents (.. the days when a party can contribute excess capacity to the pool. "N" represents the days in which a system must draw on others for capacity
'(
(Schaffer Tr. 8,536). The P/N method has never been used to determine p g ownership shares in CAPCO units (Schaffer Tr. 8,601).
., 8.06 Participation in CAPCO permits the Applicants to improve ~
reliability, take advantage of economies of scale and participate in reserve 1-sharing arrangements (Schaffer Tr. 8,537: White Tr. 9,712; Williams n $? i
r
.F
( Tr. 10,369-70). Without participating in CAPCO, Applicants would not be p able to construct and operate nuclear generating units (see Paragraph 7. 09). ~l 8.07 All 14 CAPCO units provide the advantages of economies of !I lL scale (Masters deposition DJ 567 p. 36).
- r Applicants' Relationships with Small Electric j{ Utilities in Their Service Territories l[ 9 Duquesne Light-il 9.01 In October of 1965, the Borough of Aspinwall, which then r ~
- b . operated a municipal electric generation and distribution system, requested
[ that Duquesne sell bulk power at wholesale (sale for resale) to the Borough
- (DJ 168). During the ensuing months Aspinwall repeatedly sought to buy T, .i power at wholesale from Duquesne and Duquesne continually refused to sell power to Aspinwall at wholcmale (DJ 169, 170, 171, 172, 173, 321). It was Duqu.ane's philosophy to purchase municipal electric systems whenever I possible (DJ 320). In accordance with that philosophy, Mr. Fleger, the j 1
Chief Executive Officer of Duquesne, instructed Mr. Gilfillan on April 29, f-1966, to inform Aspinwall that Duquesne would not sell power at wholesale. L-It was recognized that a refusal to sell at wholesale would mean that Aspin- [ wall would have to resort to litigation in an attempt to obtain wholesale ; r- Power from Duquesne and that probably Aspinwall could not survive the i time required to litigate (DJ 171). At about the same time, Mr. Munsch, 1 l_ Duquesne's General Counsel, " informed counsel for Aspinwall" that "we will fight them tooth and nail" if Aspinwall made any effort to forcs Duquesne to sell at wholesale (DJ 173). L. l l a l _ __ - .__ - = , . . , ._.
r-l 9.02' At the same time that Duquesne was refusing to sell power p at wholesale to Aspinwall and in furtherance of its philosophy of acquiring l municipal electric systems, Duquesne arranged for Aspinwall to request I L that a study of its electric system be made by the Pennsylvania Economy F League (DJ 321).
- [ ,
9.03 The Pennsylvania Esonomy League (PEL) is a private non-r profit organization which performs analysis of various phases of operation i of municipal governments (Sedlak & Flynn Tr. 12,297). Since 1960, PEL has performed 500 studies for municipalities only 4 to 6 of which have T" involved municipal electric systems (Sedlak & Flynn Tr. 13,303). In each F study of a municipal electric system, one recommendation made was that 1. the system be sold (Sedlak & Flynn Tr.12,355). PEL maintains no f 1 engineering staff (Sedlak & Flynn Tr. 12,361-62). PEL's study of the [ Aspinwall system recommended sale of the system ( Applicants' 120), L although PEL made no effort to determine a proper plan for the future of the Aspinwall electric system (Sedlak & Flynn Tr.12,395). The Aspinwall f~ system had in the past been a profitable operation (Applicants' 120). L 9.03 No representatives of municipalities or rural electric coop-l eratives serve on PEL's Western Division Executive Committee (Sedlak & (~ g Flynn Tr. 12,354-55). The Western Division Executive Committee does ) include the President of West Penn Power Company and the Chairman of the Board of Directors of Duquesne Light Company (DJ 631). In addition, 1 Mr. Hanley, another Director of Duquesne, was also on the Executive Committee (Compare DJ 631 and NRC 157). Duquesne is among the 'op u t-k L
i r
, seven industrial contributors to PEL. From 1971-1974 those seven indus-trial contributors provided 1/3 of PEL's operating budget (Sedlak & Flynn Tr. 13, 347-48). Aspinwall was never informed that Duquesne was a con-F, tributor to PEL (Sedlak & Flynn Tr.12,392).
9.04 PEL studied no power supply alternatives for Aspinwall other than continued isolated generation and sale of the electric system (Sedlack & Flynn Tr. 12, 353, 12, 39 3, 12, 394, Applicants' 120).
- r 9.05 After deciding that Duquesne should attempt to purchase the
( Aspinwall system, Mr. Fleger stated that he would contact Mr. Howard
~
- f
"[ Stewart, the Western Division President of PEL. Mr. Gilfilhn was ![ instructed in March,1966 to make no offer to purchase Aspinwall until l after Mr. Flege.r had talked to Mr. Stewart (DJ 169). On april 29, 1966, [
- 9. - Mr. Fleger informed Mr. GRfillan that he had indeed talked to Mr. Stewart
~
of PEL regarding the Aspinwall situation (DJ 170). Mr. Fleger's discussions
, with Mr. Stewart occurred prior to the study of the Aspinwall system by PEL (Applicants' 120). Duquesne subsequently acquired Aspinwall.
10.01 In March,1966, when it became known that the Solicitor of u ., the Borough of Pitcairn was concerned with the economies of Pitcairn's
~
- - municipal electric generation and distribution systems, Duquesne suggested 1
!r~ l that Pitcairn request PEL to study the Pitcairn electric system (DJ 238). ' g In July,1966, Pitcairn wrote to Duquesne requesting discussions regarding
~ l interconnection and pooling (DJ 239). A meeting was held in August of 1966 '
r at which Duquesne informed Pitcairn tha.t Duquesne would not sell power at wholesale. Instead, .Duquesne suggested that it would be to Pitcairn's 'W 4
, , , , - ,--- -w , .-,n -e = v*
I advantage to sell its system to Duquesne (DJ 242). It was Duquesne's intent to advocate that Pitcairn request PEL to make a ' study (DJ 242, 243). In October of 1966, after Duquesne had refused to sell wholesale power, , 1 1 Pitcairn consulted with the staff of the Federal Power Commission and was ' l r told that the FPC could order an emergency interconnection but could not ,i order Duquesne to make firm power sales (DJ 244). In December of 1966,
- F
! Mr. Fleger agreed with Mr. Gi1H11mn's suggestion that Duquesne attempt r
to acquire Pitcairn, the last remaining municipal system in its territory,
- L by using the same methods used to acquire Aspinwall (DJ 245, 246).
I__. '6 10.02 On November 20, 1967, Pitcairn wrote to Duquesne request- i i~ ing an interconnection to provide emergency backup for Pitcairn's then L isolated generation (McCabe Tr.1730, DJ 1). Duquesne responded with an l- offer to sell power to Pitcairn under Daquesne's rate M (DJ 203) although Pitcairn had requested a rate other than rate M. The average cost of
- power under rate M would have been 30 mills (Gilfillan Tr. 8,464) The wholesale rate to Pitcairn under a wholesale rate for the past two years has averaged 20 mills (Giln11= Tr. 8,459-60).
10.03 Pitcairn refused to purchase power under rate M because it was too expensive and not available for base load. Other municipalities which had purchased power under rate M had been unable to pay for the
; power and eventually sold their systems to Duquesne (McCabe Tr. 1,827). ~
10.04 In January of 1968, Mr. Merriman of Duquesne contacted a newly elected councilman in Pitcairn to promote sale of the Pitcairn system , i to Duquesne. On January 22, 1968, Mr. Merriman met with Pitcairn officials. ! l
F I r
- j In response to questions regarding Duquesne's winingness to make whole-I
_ sale sales, Mr. Merriman replied that Duquesne would not make such sales (NRC 13). 10.05 In March of 1968, Mr. Gilfillan met with Mr. McCabe, Solicitor for Pitcairn. Mr. McCabe asked whether Duquesne would provide emergency power under a rate other than rate M, partial requirements power or an interchange agreement (Gilfillan Tr. 8,416). Duquesne's oral r- response at the March 6,1968 meeting was confirmed by letter of March 19, [. 1968, in which Duquesne declined to seu base load power for resale and l refused to enter into an interchange agreement with Pitcairn (NRC 16).
~
The March 19, 1968 letter to McCabe (NRC 16) was approved by Mr. Fleger before mailing (DJ 249). p. L 10.06 In July of 1968, Pitcairn filed an antitrust suit against I Duquesne (Gilfinan Tr. 8,431). In 1970, Pitcairn filed a complaint with L the FPC and, finally, in 1971 Duquesne agreed to make wholesale sales of bulk power to Pitcairn (Gilfillan Tr. 8,432). 10.07 Rule 18 of the general terms and conditions of Duquesne's tariff on file with the Pennsylvania Public Utilities Commission prohibits the resale of power sold by Duquesne (Gilfillan Tr. 8,422, 8,435-36). I Rule 18 is not required by any order of the Public Utilities Commission L 3 (Gilfillan Tr. 8,476-77). During the period 1965-1971 other Pennsylvania ~ public utilities made sales for resale to municipalities (Gilfillan Tr. 8,445). Duquesne sold power to Penn Power which Penn Power later resold (Gilfil-lan Tr. 8,438-39). Although sales to Penn Power under an interchange l-l l
I contract differ somewhat in that the element of mutuality may be present,
- power sold under rate M could be resold, yet no mutuality exists with respect to such sales (Gilfillan Tr. 8,475).
'I
], 11. Pennsylvania Power Company p 11.01 From 1965 until 1976, Pennsylvania Power Company's .q . wholesale power supply contracts with municipalities in its service terri-F
; tory contained restrictions on the resale of the power sold (DJ 67-76).
r Penn Power's wholesale contract with Grove City provided that (DJ 76): it i
- 5. Except with the written consent of the Company, f service furnished hereunder shall not be resold for use at
! any premise now or hereafter being furnished electric service directly by Company.
i Elsewhere the agreement provided that the power be resold only at retail.
~
11.02 The terms of Grove City's contract with Penn Power pre-L. cluded Grove City from competing for industrial customers in the City L ( Allen Tr. 4,766). Grove City has sufficient capacity available in its dis-tribution system to serve industrial customers (Allen Tr. 4,799). i
,_ 11.03 Penn Power has offered to lease or purchase the Grove City electric system (Allen Tr. 4,777-78; DJ 501).
l 12.01 Ellwood City is a wholesale all-requirements customer of Penn Power (Urian Tr. 4,966-67). Penn Power serves all industrial cus-F . tomers within Ellwood City (Urian Tr. 4,967). Ellwood City wants to com-pete for existing industrial loads and new industrial loads but has been pre-cluded from doing so by its contract with Penn Power (Urian Tr. 4,971-73). Ellwood City has requested.Penn Power to permit it to serve the existing i l l-l 4 l
F , i i t l .p i industrial customers in the City and those requests have been denied (Urian l
- p. Tr. 4,986).
12.02 Ellwood City has been hindered in its desire to compete for - r-industrial customers by Penn Power's refusal to offer a high voltage dis-7 count rate (Urian Tr. 4,976-78). Penn Power does have a high voltage l rate for its retail industrial customers in Ellwood City (Urian Tr. 4,978).
)
- 1. 12.03 The Federal Power Commission (FPC) has recognized Ellwood r City's need for a high voltage discount rate stating (DJ 626 p. 9; DJ 627):
i. However, to determine the economic feasibility of the con-r' templated service and to guide its action, the municipality
. has an immediate need to know the rates which are to be charged by Applicant for the high voltage service. Ellwood City's needs and' expectations are not theoretical and a abstract, but real and reasonable.
[~ 13. Ohio Edison L. 13.01 Like its subsidiary Penn Power, Ohio Edison has for many
- 1. years placed restrictions on the resale of power sold to municipalities I
under wholesale power contracts (DJ 24-65). For example, Ohio Edisen's contract with the Village of Grafton provided that without written consent i L of the Company, Grafton could not resell the power purchased from Ohio Edison for use at any premises served directly by the Company or capable
. . . of being served by the Company without an extension of the Company's primary lines or to any new customers outside the municipality which could not be served without extension of the municipality's primary distribution 3 lines (DJ 50).
13.02 The prohibition on extending primary di:cribution lines out-i side the corporate limit contained in Ohio Edison's contract with the City 'W
,,n 9
# y. * " '
r--
!i;'
27-of Wadsworth has restricted the growth of the Wadsworth municipal elec-
- f. tric system (Lyren Tr. 1920-21, 1925-26). On occasions when Wadsworth was granted permission to extend its primaries, typically such permission r-L was conditioned upon paying Ohio Edison back by permitting Ohio Edison to y serve customers which would ordinarily be served by Wadsworth (Lyren l
- Tr.1926-27; NRC 36, 37, -38, 39, 40, 58, 59, 60, 62, 63, 64. 65, 66).
['. .t 13.03 Ohio Edison has. enforced the territorial restrictions in its r' wholesale power contract to prevent Niles, Ohio from serving custocers
- r. .
outside Niles' allocated service territory (DJ 408) and to prevent Niles ( l from selling electric power to Jones & Laughtin Steel Corporation (DJ 413). Ohio Edison has required Niles to give up customers in exchange for per-mission to extent its lines beyond its allocated service territory (DJ 412). F L Ohio Edison has considered construction of pre-emptive distribution lines f' to restrict the growth of the Niles municipal electric system (DJ 410). L
.,, 13.04 Ohio Edison required an exchange of customers and " banking" l; i L of customers as the price of permitting Hudson, Ohio to serve customers i reserved to Ohio Edison by Ohio Edison's wholesale power supply contract
$ with Hudson (DJ 467-74). ! 13.05 Mr. White, President of Ohio Edison, recognized that l r { restrictions on resale of power sold by Ohio Edison at wholesale to munic-l , ipal electric distribution systems could artificially restrict the growth of
~
those systems (White Tr. 9,719).
- 13. 06 - Ohio Edison's contracts with its wholesale customers con- -
q sisted of a written contract for 10 years not subject to unilateral change c:p., m** - 1 , wum
f^ l 3 > and a rate schedule subject to imilateral change. Territorial restrictions v
,. limiting Ohio Edison were placed in the non-cancellable contract while the l I ;
clauses restricting the municipality were placed in the rate schedule. .m ) r When these contracts were executed Ohio Edison did not expect to file rate changes for more than ten years. When Ohio Edison decided to file for a l rate increase before expiration of the ten-year contract, it recognized that : [ it faced the prospect of losing restrictions on the municipalities while .(; restrictions on the company remained in effect. Mrs. McGovern notified b I Mr. White, "we have outsmarted ourselves. " The "[h]appy solution on [ territory: the rate issue should lead to opening up the whole package for i {' discussion." (DJ 613) In 1972, OE eliminated the territorial restrictions L. . imposed upon its wholenle customers (White Tr. 9667). 14.01 Like its subsidiary Penn Power, Ohio Edison refused to file I a rate for 138 kv service although asked to do so by the City of Niles (DJ 419). L A similar request made by counsel for the Cities of Niles and Cuyahoga Falls i L- was also refused (DJ 421; White Tr. 9,576). Although both Ohio Edison and I Penn Power have contended that the rules of the FPC precluded filing of a L 138 kv rate more than 90 days in advance of commencement of service, I b Ohio Edison did in fact file such a rate in May,1975 when it had no cus-l' i tomers taking service at 138 kv and c'.a tot anticipate having such cus-L tomers within 90 days (Wilson Tr. 11,096). The FPC has recognized the necessity of such a rate to permit municipalities to plan expansion and improvement of their systems (DJ 626, 627). w . d b
T~
'l '
- 15. 01 Ohio Edison refused to wheel power for the Buckeye generation cooperative when asked to do so. The Buckeye request
't was specific as to points of transmission and as to amounts of power to be transmitted. (White Tr. 9725-26; DJ 481). Other than r, Ohio Edison, all investor-owned utilities in Ohio which sold power I (. to rural electric cooperatives signed the Buckeye Power Delivery I .( Agreement which provided for wheeling of Buckeye power by the f' investor-owned utility (White Tr. 9554). Mr. White testified that 1 Ohio Edison refused to sign the wheeling agreement because it r d- would not be properly compensated for the use of its transmission facilities (White Tr. 9555-56). Nevertheless, Ohio Edison informed { the cooperatives in its service area that a buy-sell arrangement would
- )
I be less expensive than the wheeling arrangement (White Tr. 9727). Ohio Edison also informed Buckeye that Ohio Edison might receive L j.. less revenue under the buy-sell arrangement than under a wheeling { arrangement (DJ 532). 7..
! 15. 02 Mr. Mansfield, former President of Ohio Edison, testi-L p-.
fled in proceedings before the SEC that Ohio Edison was vociferously L' opposed to the Buckeye arrangement and refused to wheel Buckeye
] powe r. Ohio Edison finally agreed to deliver the power pursuant to n a buy-sell arrangement to forestall the cooperatives from building transmission lines. (DJ 479) It was Ohio Edison's preference that i
.y .the REA distribution cooperatives not own transmission lines
.(Mansfield deposition DJ 572 p.118). From a business standpoint, O
N&
-- , e,.. ,- -, - - , - - - . - w
.I k , (. wheeling would have been as effective as a buy-sell arrangement. Ohio Edison does not want to wheel and the buy-sell arrangement ( was a means of avoiding wheeling. (Mansfield deposition DJ 572 pp. 119- 120).
- 15. 03 Lack of a wheeling agreement may have prevented
- (-
- Newton Falls from purchasing wholesale power from Buckeye in 1973. (Craig Tr. 2927-28).
- 16. 01 -In 1972 the twenty-one wholesale customers of Ohio i
Edison formed an organization called WCOE to oppose a wholesale p
- [_ -rate increase filed at the FPC by Ohio Edison. (Lyren Tr. 1883-85).
.I As a part of the settlement of the 1972 wholesale rate case Ohio ! .l Edison agreed to study a new form of power supply arrangement for the municipalities. (Lyren Tr. 1886). The inducement for Ohio Edison fL to settle was settlement of the rate case on favorable terms and the prospect of avoiding future rate cases before the FPC. The inducement zor WCOE to settle was the possibility of negotiating a new power supply
, arrangement (Mayben Tr. 12,558-59; Applicants' 227).
- J 16.02 Attorneys and consultants for WCOE drafted a set of b criteri for a study of the proposed new power supply arrangements
- (Mayben '2r. 12,524). On June 18, 1974, these criteria were forwarded to Ohio 'Cdis on (NRC 31). On October 7,1974, representatives of i
. WCOE met with representatives of Ohio Edison to establish the
{ parameters of the proposed study. (Lyren Tr. 1907-08). At the ' l October meeting, Ohio Edison placed limits on the study which pre-determined the outcome of the study (Mayben Tr. 12575-76). L
F. (, [ Among the limitations placed upon the parameters of the study was t
. .a refusal by Ohio Edison to consider third party wheeling (Cheesman A
Tr. 12,1512, 12162; Lyren Tr. 1905; Mayben Tr. 12,570). Mr. Mansfield f who was President of Ohio Edison until 1975, was of the opinion that
,s investor-owned utilities should not engage in coordination with public }'
power entities. (Mansfield depositio'n DJ 572 pp.10-11).
, Among other limitations placed upon WCOE's power
(- supply study by Ohio Edison were requirements that (1) WCOE cor i c not choose the generating plants in which it wished to participate, r (' . (2) that WC'OE could participate in each unit only up to an amount 7- equal to 10% of WCOE's annual load, (3) that any surplus power owned E . y. by WCOE could only be sold to Ohio Edison, and (4) that the P/N 1 ( formula would be the measure of reserves to be maintained by WCOE [- (Cheesman Tr. 12151-53). Application of the P/N formula would L. have caused WCOE to maintain approximately 280% reserves (Cheesman f) t Tr. 12158). Under the 10% limitation on participation, it would have taken 30 years for WCOE to have dcquired enough capacity to
..,. serve its own load (Cheesman Tr.12,218).
WCOE requests for wheeling services were renewed at a meeting with Ohio Edison on August 1,1975, and Ohio Edison
~ , refused to discuss the matter (Lyren Tr. 1915).
17.01 On the basis of market structure applicants have the I
- 6. power to impose a price squeeze on their wholesale customers (Wein Tr. 6973-74). Ohio Edison and Penn Power have imposed a price t..
jF ' I [ .t squeeze on their wholesale municipal customers. Both charge higher rates for service to municipalities than they do for service under ?! comparable rates to industrial customers. (Kampmeier dt. DJ 450
- r~
Q pp. 34-37, Tr. 6025-42) p Ohio ~ Edison offered the testimony and exhibits of Mr. Wilson to disprove the price squeeze charges. Applicants '167, T:
- ( - .which purports to rebut the price squeeze allegation, compares an existing rr.te to a proposed rate. (Wilson Tr. 11,127). It compares rates for a period of only one month although Mr. Wilson admitted D
(. on cross-examination that the results include the amount of a fuel T charge which is not the same for both wholesale and retail rates ( and that the differential between the fuel charges is not constant frous month to month. (Wilson Tr. 11,128-29). Changing the load : 1 I factor of the industrial customer used for comparison purposes would L.
., change the results shown on applicants 167 (Wilson Tr. 11,129). l 4
Applicant's 167 includes Ohio Edison's costs to distribute power at n { retail but does not reflect the same costs which would necessarily be incurred by a municipality attempting to serve an industrial customer at retail. (Wilson Tr. 11,130-31). Applicants 167 reflects 1 costs to 3 of the 4 largest out of 20 wholesale customers of Ohio
; Edison. - (Wilson Tr. 11,137-38). Applicant's 167 only purports to 'b show the effect of adding an industrial customer with a demand of , 3500kva or 5000kva while a typical Ohio Edison #ndustrial customer would have a peak demand of 1000kva. (Wilson Tr. 11,167-68) e t ;
I I-
. l Applicants' 168 like Applicants' 167 does not reflect distribution costs of the municipalities (Wilson Tr. 11,130-31).
~
7-
)(
Moreover the comparison of bills is made only for the months of October through April when the industrial customer would make e its smallest contribution to the municipalities peak demand. In
- h.
the summer months the industrial customer and the municipality would peak at about the se.me time. (Wilson Tr. 11,158-60). J' Throughout his testimony Mr. Wilson assumed that the additional power purchased to serve an industrial customer l would be paid for by the municipality at the lowest energy blocks. (Wilson Tr. 11,065-66, 11,068-69). Mr. Wilson states that this is the T( , primary reason that the municipality could sell power to the industrial customer at a profit. Under Ohio Edison's tariffs, there is no con- [; A. junctive billing. (Firestone Tr. 11319-20) Accordingly if the muni-cipality had to establish a new delivery point to serve an industrial ]" customer, the additional power would be purchased at the highest ( block rate not the lowest and the primary reason relied upon by . r, Mr. Wilson to disprove price squeeze would not exist. i Moreover Ohio Edison's evidence ignores the fact that f (j it is not necessary to show a negative revenue margin to demonstrate f price squeeze. Price squeeze consists of imposing an unacceptable 1 L.- level of profit or actual loss on a competitor by narrowing or eliminating 1' the difference between revenues derived from final product sales and costs. (Wein dt. DJ 587 p. 158). L
l
- (l 18.01 Ohio Edison has executed territorial agreements with r Dayton Power and Light, Toledo Edison, Columbus and Southern
~
.( Ohio Electric Company and Ohio Power Company, investor-owned [' '!- utilities which adjoin Ohio Edison (C-1, DJ 513-520 and 534-540).
~ '
These territorial boundary agreements were enforced reducing or eliminating competiticn between Ohio Edison and other investor-owned utilities. (DJ 521, 523-531). Mr. Mansfield as President of Ohio Edison participated in discussions of the territorial agreements 7 during which the parties recognized that the Ohio Public Utilities t (- Commission would not favor territorial agreements. (DJ 527 see r also DJ 519). In 1972 and 1973, Mr. White ordered the destruction of all materials relating to territorial agreements. (White Tr. 9747). i He orally directed Mr. Zimmerman to tell all Ohio division managers not to follow territorial agreements. Mr. White did not inform the other p parties to the territorial agreements that Ohio Edison would no longer (, be bound by them. (White Tr. 9752).
- v. .
- k. 19. 01 Ohio Edison does not compete with CEI for customers.
I Instead the .two follow the practice of permitting the company which can L extend service to a customer at least cost to the company to serve the p-I$ customer. (Rudolph deposition DJ 558 p. 53) [ 20.01 Since January 1,1965, Ohio Edison has acquired the L: municipal electric systems of Lowellville, Norwalk, Hiram and East i-h- Pallestine. (Wein dt. DJ 587 pp. 66-67). s.
- p
(- }( Toledo Edison r~ -21.01 Toledo Edison has an informal corporate policy p favoring the acquisiti6n of municipal electric systems in its territory. 0' (Keck deposition DJ 576 p. 233; Schwalbert deposition DJ 577 i' pp. 7,17-19; Kozak deposition DJ 579 p. 26; Cloer deposition ( DJ 582 pp.13-14; DJ 166). As recently as July 1974, Mr. Schwalbert, I (- a Toledo Edison vice-president, advised a new Toledo Edison district manager that " acquisition of municipals is an objective high on our list. " ~ (DJ 541). In keeping with that policy, Toledo Edison has acquired some municipal systems and taken steps toward the acquisition of others. (City of Elmore, DJ 552-56; City of Bryan, DJ 154, 155, 156, 158, 557; Pioneer, DJ 544; City of Watterville, DJ 505; Liberty Center, DJ 139; City of Napoleon, DJ 142-144). ( 21.02 Toledo Edison is an amalgamation of at least 190 F companies acquired by acquisition and merger. Toledo Edison "has L made other offers to make system surveys.which might lead to the L. purchase of . . . other municipal electric systems . . . " which include f Bradner, Custar, Elmore, Genva, Haskins, Montpelier, Oak Harbor, (, Pemberville and Woodville. (Wein dt. DJ 587 pp. 70-71). T b 21.03 By November 4,1966, Toledo Edison had become j aware that Waterville's need for firm power fromToledo Edison L, .
-to serve industrial customers had become critical. (DJ 615).
F On November 9,1966, Mr. Cloer met with the President of the s. Waterville Board of Public Affairs. During that conversation, Mr. Cloer s. stated that Toledo Edison did not wish to sell power at wholesale \.
- I
~(
- { to Wateville because Toledo Edison wished to purchase the Waterville 7- electric system. Mr. Cloer also informed the President of the
.(
Board of Public Affairs that the public reason why Toledo Edison
- f
; would not sell wholesale power was that Toledo Edison was not interested P in supplying " standby power. " (DJ 505). In June of 1967, a consulting
- (
engineer for Watezville asked whether Toledo Edison would sell .c i- either partial or all requirements wholesale power to Waterville. f (DJ 504). In keeping with the strategy outlined by Mr. Cloer, Toledo } Edison refused to sell to WatervEe pov er for resale. (DJ 506). f' b-Eventually Watervile decided to sell its electric system to obtain
.(
more reliable electric service. At the time the system was sold,
, Waterville,was an isolated electric system. (Cloer deposition
- DJ 582 p.12). An interconnection between Waterville and Toledo e
{ Edison would have improved Waterville's reliability (Cloer deposition p_, DJ 582 p.13), reducing chances of acquisition by Toledo Edison. L 22.01 During the negotiatiens leading to the signing of the I ( Buckeye Power Delivery Agreement, Toledo Edison was concerned, as were other investor-owned utilities, that it might lose municipal wholesale customers to the REA distribution cooperatives. (Schwalbert C D deposition DJ 577 p. 44). To eliminate the threat of wholesale competition by the REA cooperatives, Toledo Edison and the other
-e investor-owned utilities inserted in the Power Delivery Agreement a t
( condition' prohibiting an REA cooperative from undertaking to serve ~a municipal wholesale customer of an investor-owned utility until that L
- r if customer had been disconnected from the investor-owned utility for i I a period of 90 days (Schwalbert deposition DJ 577 p. 45; DJ 77; 81).
( Tolede Edison did not want to sign the Buckeye Power Delivg
- p
!- Agreement; however, the Buckeye agreement would eliminate the
'~
need for the REA distribution cooperatives to build a statewide trans-
- k mission system. Toledo Edison feared that a Buckeye transmission 37' N system could cause Toledo Edison to lose customers. The fear of r-losing customers was an important reason for Toledo Edison to sign the Power Delivery Agreement (Keck deposition DJ 576 pp.182-184).
.f' ~, Toledo Edison opposed construction of a 10-mile transmission
, line by the City of Napoleon to the Liberty substation of Tricounty 4 .. REC out of concern that Napoleon would use the line to con;pete with '~
Toledo Edison for customers along that line (Moran Tr. 10,666;
;} NRC 127 p. 3).
p, 22.02 Toledo Edison enforced the 90-day provision of the D Buckeye agreement in t successful effort to prevent its partial whole-T (y sale requirements customer, the City of Napoleon, from purchasing its supplemental power from Tricounty REC instead of Toledo Edison. In September 1971, Mr. Bill Lewis, a consultant for the n M City of Napoleon, met with Messrs. Moran and Cloer of Toledo
. Edison to request that Toledo Edison establish a delivery point for Tricounty REC to provide electric service to Napoleon at the existing i.
Le . delivery point from Toledo Edison to Napoleon. Mr. Lewis was told f e a u-
~
l
.i ~
Y l that Toledo Edison would dc, everything in its power to prevent r- Napoleon from receiving Buckeye power from Tricounty REC. He I was told that the proposal would in effect cause Toledo Edison to
! wheel power from Ohio Power to Napoleon and it was not Toledo Edison's policy to wheel power for municipalities. (NRC 127 pp. 3-4).
k. At the time of the discussions between Mr. Lewis f (- and Messrs. Moran and Cloer, Toledo Edison was considering purchasing the Napoleon electric system and submitted a bid for purchase of the system. (Moran Tr. 9923,10,074; DJ 142). In
~
February of 1972, Toledo Edison withdraw its bid. (DJ 144).
~
t In 1972 Napoleon sought bids for its bulk power supply. r Tricounty REC offered a proposal to sell Buckeye seasonal diversity i l power to Napoleon during Buckeye off-peak months. Napoleon would generate its own power during the months of Buckeye's peak demand. 7, (Dorsey Tr. 5256-57). In January of 1973, Toledo Edison told [~ Tricounty that the Buckeye agreement precluded Tricounty from serving [~ [ Napoleon. (DJ 146). By letter of May 2,1973, Buckeye formally r requested Toledo Edison to provide a delivery point for Tricounty to serve Napoleon. (NRC 128; DJ 148). By letter of May 23, 1973, Toledo Edison agreed to establish the requested delivery point l: assuming that Napoleon first operated in isolation for 90 days. U (NRC 129). On June 6,1973, Napoleon formally. notified Toledo I Edison that it would purchase power from Tricounty. (DJ 149). I e fr
- 3 9'-
C ( Mr. Cloer told Mr. Dorsey of Napoleon that Toledo Edison would r
- j. insist that Napoleon operate for 90 days in isolation. (DJ 150).
On July 18, 1973, Mr. Dorsey requested a waiver of the 90 day provision by Toledo Edison. (NRC 130). On July 19, 1973, Toledo I Edison refused to waive the 90 day provision. (NRC 131; Dorsey p Tr. 5629), ( Mr. Dorsey was uncertain as to whether Napoleon could generate enough power to operate successfully in isolation P for 90 days. Napoleon's reliability would have been reduced during
.c the isolation period (Dorsey Tr. 5265-66). Napoleon was unable to $ find a means of backing up its system. (Dorsey Tr. 5268). Accordingly, Mr. Dorsey requested that the disconnection with Toledo Edison be accomplished by using air breakers which would permit emergency kl reconnection in 15, minutes. Toledo Edison insisted upon method of disconnection which would require 4 to 5 hours to reconnect. (Dor sey Tr. 5272-73). Napoleon'> industrial customers protested the reduced L:
reliability of electric supply which would be occasioned by the 90 days , of isolated operation. (DJ 303-307). Shortly before the proposed date for commencement of
~
isolated service, Toledo Edison offered Napoleon a wholesale rate with a demand charge rachet reduction from 75% to 60% and Napoleon elected to accept the reduced rate for wholesale service and remain a customer of Toledo Edison (Dorsey Tr. 5294), rather than risk a h period ~of isolated generation. I~ l
- r- .r.v -
w -.w ,
I+ r ]~ 23.01 At meetings on September 2, 1971, and March 6,
- c. 1972, Mr. Lewis acting on behalf of Napoleon and Messrs. Moran I
and Cloer representing Toledo Edison discussed the possibility r j of joint ownership of large generating units through coordinated p development. On each occasion Toledo Edison refused to consider ( coordinated development. (NRC 127 pp. 6-7). Toledo Edison has C ( never informed Napoleon that Toledo Edison has a policy of permitting r- small utilities to participate in nuclear generating units owned in
)
t part by Toledo Edison. (Moran Tr. 10,666) p ! Since commencement of these proceedings Toledo I' Edison has agreed to ecnsider coordinated development with i Napoleon, Bryan and Bowling Green of a refuse burning generating unit. (Moran Tr. 9858-59). However, Toledo Edison's witness was unaware of any notification by Toledo Edison to its CAPCO partners of its proposal to engage in coordinated development with non-CAPCO ' 2 entities. (Moran Tr. 10,666-67) Toledo Edison is aware that such { an arrangement would be inconsistent with CAPCO. (Sullivan depo-sition DJ 578 p.117). Indeed approval by Toledo Edison's CAPCO partners would be required before Toledo Edison would be free to p engage in coordinated development with non-CAPCO entities (Schaffer 7, Tr. 8557). 24.01 For many years Toledo Edison's contracts with its
- _wholesals customers have included territorial restrictions. (NRC 112-125). The territorial restrictions in Bowling Green's wholesale EP
. r-1- r power supply contract restricted growth of the Bowling Green electric [_ c system (Hillwig Tr. 2375). Bowling Green did not request that the l territorial restrictions be included in its contract (McKnight Tr. F ( 11,995-96). In fact, Bowling Green attempted to obtain a contract r' without any territorial restrictions (Hillwig Tr. 2377-80; Moran Tr. I . 9882). Toledo Edison understood that one result of the territorial i l restraints on resale of power sold by Toledo Edison at retail would r be reduced retail competition (Moran Tr. 9978). k 25.01 Toledo Edison has entered into territorial market r b allocations with the two Ohio investor-owned utilities which have ~ territory contiguous to the territory served by Toledo Edison (C-1; i . DJ 513, 516, 517, 519, 546, 548, 549, 550). In late 1970 or early 1971, Mr. Schwalbert, a Toledo Edison Vice-Presid ent, orally r ordered the destruction of documents regarding territorial agree- { ments (DJ 617). 1. 26.01 Toledo Edison has refused to wheel power for Bowling f Green and American Municipal Power-Ohio (Hillwig Tr. 2386-88,
- p. 2402, 2445, 2453). Toledo Edison refused to file a transmission L
services rate schedule providing for the wheeling of power to muni-t: b cipalities although requested to do so by municipalities (Smart Tr. 10,131-32). In responding to Bowling Green's request for wheeling services, Toledo Edison considered the effect wheeling would have L. on competition for customers (Moran Tr.10,029). w. b= L1 ' A_ . .
y ' C' -(
'r: 1
( 27.01 Toledo Edison has imposed a price squee=s on its l r municipal wholesale customers by maint'ininga its wholesale rates I at least as high or higher than its comparable industrial rates. F l' (Kampmeier dt. DJ 450 p. 36; Mo: an deposition DJ 583 p. 52; -- [' NRC 127 p. 7). In recognition of the fact that municipal systems ( . 1 are competitors as well as customers, Toledo Edison has considered r i even higher rates for wholesale service. (DJ 166). [~ 28. The Cleveland Electric Illuminating Compan_v. L 28.01 The municipal electric systems of the cities of 5-Cleveland and Painesville are the only remaining municipal systems in the 1700 square mile territory served by CEI. (Wein dt. DJ 587 p. 64). In the past, CEI has acquired a number of municipal electric systems. L (Rudolph deposition DJ 558 p. 31). Acquisitions of such systems was a way of life for CEI. (Besse deposition DJ 559 p. 64). p;j 28.02 CEI has desir ed to acquire the Cleveland electric LS system since 1960. (Besse deposition DJ 559 pp. 55, 65). Acqui-F ( sition of the Cleveland system has been considered by each President i r of CEI at least since 1960. (Lindseth deposition DJ 568 pp. 16-17; L l Besse deposition DJ 559 pp. 55, 65; Rudolph deposition DJ 558 p. 31 C- 121). The reduction and eliminaticn of the municipal electric systems was listed among CEI's written corporate objectives from 1964 to 1970. (DJ 509, 510; NRC 143). l
- p' .
il f CEI has made repeated studies relating to the acquisition of the
- p Cleveland electric system. CEI has studied, discussed, and considered
-(
acquisition or lease of the Cleveland electric system in at least each of the
- P y following years:
p- 1963 - (C-92) l[ . 1965 - (C-102, C-101, C-93, C-99, (offer to buy); DJ-603) , 1966 - (C-104, C-107, DJ-360)
- r 1967 - (C-114, C-115, C-116)
- ( 1968 - (C-117, C-118, C-121, C-129, DJ-355, DJ-601) 19 69 - (C-128, - C-130, DJ-331, DJ-353, DJ-357)
.i[- 1970 - (DJ-354; C-74; NRC-143) il 1971 - (C-76) 1972 - (C-142, DJ-361) r l_ There is evidence of record which would indicate that CEI has not abandoned its desire to acquire the Cleveland municipal electric system. t - 29.01 CEIin the past faced stiff competition from the Cleveland L municipal electric system. (Rudolph deposition DJ'558 p. 58). CEI pro-vides promotional considerations such as free internal wiring or free up-grading of electric facilities in areas in which it competes with the municipal b systems in Cleveland and Painesville which it does not provide in noncompetitive r areas. (Rudolph deposition DJ 558 pp.16-17; Bingham Tr. 10, 323-25). p Such a practice is a form of cutthroat competition. (Wein Tr. 6622-23). 29.02 Until approximately five years ago, the Cleveland system had d { a competitive advantage over CEIin that it offered lower retail rates. During p that same period and continuing at least until 1975, CEI had a competitive L advantage in its greater reliability. (Rudolph deposition DJ 558 pp.121-24; i [ Besse deposition DJ 559 pp. 60; Loshing deposition DJ 565 pp. 21-23; Wyman deposition DJ 566 p. 62). L t ..
.p p CEI increased its reliability and achieved economies of scale fron. .(
parallelinterconnections with other utilities and through participation in CAPCO F
.( (Williams Tr. 10,369-70). CEI has stressed reliability and economies from f interconnections and CAPCO participation in nuclear units made possible through
( its membership in CAPCO in competing with the City for retail customers F ( (Wyman deposition DJ 566 pp.151-52; C-154,155,158,13,14,15). f CEI was aware that a parallel interconnection between CEI and the
.I Cleveland system would improve the reliability of the Cleveland system and 'F l reduce the flow of customers from Cleveland to CEI (Rudolph deposition DJ 558 r
p.177; Besse deposition DJ 568 p. 62; Gould deposition DJ 569 p. 24). CEI made frequent study of customer attitudes in Cleveland. Thus, CEI knew in 1970 that more customers wanted CEI service because of the City's ( growing reliability problems (DJ 346). By 1972 CEI's study of customer atti- [ tudes demonstrated that lack of reliability of the City system had caused L customer dissatisfaction with the City system to increase dramatically (DJ l p [ 349). When the City began to have reliability problems, CEI adopted a ; l c- marketing objective of converting to CEI service customers producing 10 times j L; i as much estimated annual revenue as the customers of CEI converted to City l L service (Farling deposition DJ 563 p. 37). When CEI was finally forced to per-i e feet a parallelinterconnection it reduced the conversion ratio targeted from b 10:1 to 1:1 (Gould deposition DJ 569 p. 95; DJ 378). CEI considered the effect c ! lv a 69 kvintertie would have on the City's ability to compete for the new electric
\
)
load of the Justice Center (Gould deposition DJ 569 p. 52). CEI wanted to pre- ) vent the City from serving the Justice Center load because serving the load would i improve the City's financial position (Gould deposition DJ 569 p.18). r .-
r 4 -4 5 - I' CEI set forth a program to realize its objective to acquire and eliminate L the City. In formulating its program, CEI recognized: (1) an interconnection r f was the best solution to the City's problems; (2) chances of acquiring the City
~
would be reduced if an interconnection were perfected; and (3) the FPC probably
.vould not have jurisdiction over an acquisition of the City system by CEI.
I ( Accordingly, it was recommended that CEI try to bring about an increase in f the City's rates. An increase in the rates charged by the City was considered ( essential to successful acquisition (DJ 599). F l In 1962 and 1963, CEI offered to interconnect in parallel with the Cleveland system contingent upon the Cleveland system's fixing its rates at
~.
the level of rates set by CEI and upon the Cleveland system reducir , its charges 1 to the City for street lighting service (Lindseth deposition DJ 568 p.14; DJ 293, 294, 295). Subsequent offers to interconnect with the Cleveland system were subject to the same price fixing terms (Lindseth deposition DJ 568 pp. 54-55; DJ 29 6, 298, 299). At least until 1968 it remained CEI's official policy to interconnect with the Cleveland electric system only if the City agreed to fix p prices (Hauser Tr.10,660; DJ 330). k At the time that CEI offered to interconnect only upon Cleveland's agree-ment to fix rates, CEI knew that fixing rates at the same level would elimimte r . the major reason for customers leaving CEI to take service from Cleveland b (Rudolph deposition, DJ 558 pp.128-30; Loshing deposition DJ 560 p.132; Wyman deposition DJ 565 p. 67; Gould deposition DJ 569 p. 97 C-110). In .' 1968 CEI believed that an 8 percent increase in Cleveland's rates would enable L CEI to take all of Cleveland's top industrial customers (DJ 330). . CEI believed that fixing rates at the same level would result in ma
- P-i'
,p
- [ a movement of customers from Cleveland towards CEI (Loshing deposition DJ 560 p. 22).
CEI was also aware that if the Cleveland system provided street
- r l lighting services to the City at no cost or at low cost, the Cleveland system r would'be forced to raise its rates to other customers to make up the revenue i
loss. The effect would be the same as the price fixing upon which the offered T ( interconnection was conditioned (Loshing deposition DJ 560 pp. 101-02 C-112), r or in a period of declining costs, to the extent that Cleveland reduced street k lighting rates it' could not reduce its other rates (Loshing deposition DJ 560
- p. 168). Since the rates charged by CEI and the City became comparable, I
[ CEI has not advocated that the City provide free street lighting (Loshing . deposition DJ 560 p.104). Imposition of price fixing as a condition in exchange for an inter-connection is a form c f cutthroat competition (Wein dt DJ 687 pp. 30-31).
- 30.01 In 1962, Cleve1 Lad proposed a twelve million dollar electric plant expansion including construction of a 75 mw boiler and an 85 mw steam F
g turbine generating unit. CEI attempted to forestall the construction of p- competing generation by Cleveland by offering to interconnect and sell firm t power to the City (JD 293). CEI appeared before the Cleveland City Council r i to argue that Cleveland should interconnect with CEI and should not install 7 additional generation (Hauser Tr. 10,863). CEI repeated itr offer in 1968, when the City proposed to install three dual-fired turbine generating units 1 m (Hauser Tr.10,659). Foresta11ing, attempted by CEI, with regard to the j i f- expansion of Cleveland's generating plant, is a form of destructive compe-L- 1 tition (Wein dt. DJ 587. pp. 32-34), a
F i i : l r
;- 30.02 In 1963, Cleveland proposed an interconnection between the Cleveland electric system and the municipal electric systems of Painsville and Orrville at a cost of $5 million. Chairman o'f the Board of r-
[ CEI wrote to the Mayor of Cleveland renewing his offer to interconnect ) -[ with the City making both the proposed three-city interconnections and L expansion of the municipal system unnecessary (DJ 295). This offer was made to forestall construction of competing transmission lines by Cleve-Y land (Hauser Tr. 10,864; Lindseth deposition DJ 568 pp. 58-60 C-94). L The 1963 interconnection offer is another example of destructive compe- 'l- - tition (Wein dt. DJ 587 pp. 32-34). I 31.01 In 1969, Cleveland requested a parallel interconnection with .L _ CEI (Titus Tr. 7505 C-127). CEI responded with an offer of load transfer service which would not provide the City with an interconnection (Titus Tr. p 7506; Lester deposition DJ 561 pp. 25-26). CEI recognized that what the City needed was a permanent parallel interconnection (Lester deposition
~
DJ 561 p. 27). E At the time the load transfer arrangement was proposed CEI was r-concerned that if some form of assistance were not offered to the City, the L FPC might force CEI to interconnect in parallel with the City (Loshing depo-I ' L sition DJ 560 p.137; Besse deposition DJ 559 p.167). CEI was also . con-9 cerned that a permanent parallel interconnection would increase Cleveland's ability to compete (Rudolph deposition DJ 558 p. 70). r L. CEI was well aware that Cleveland wanted a permanent parallel [ interconnection not a load transfer arrangement. In June of 1969, CEI noted L
q (. F l that it had thus far been successful in avoiding parallel interconnection with
~
Cleveland. CEI studied the effect of a parallelinterconnection on the City's
- operating costs and concluded that the City was in a price squeeze from increasing costs and little growth. An interconnection which would backup the City's large 80 mw unit could save the City $500-$600 thousand each year in fuel costs. If a standby charge could be imposed for the services F . provided over the interconnection, CEI could charge the City $1,200,000 a year adding to the City's financial problems. It was concluded that CEI - had three choicet: (1) avoid an interconnection and risk FPC action; (2) interconnect and attempt to impose a standby charge; or (3) try to purchase L , the municipal system while reliability and financial pressures continue (DJ 331). This study was circulated among CEI's top management (Rudolph deposition DJ 558 p. 77) . CEI was also aware th..t the loss of customers f~
L to CEI was contributing to the need for the City to increase its rates to make up for lost revenues (C-72). Since the City sought a parallel interconnection and CEI offered load F l transfer service very little progress was made until Christmas of 1969 (Hauser Tr. 10,538-39). Then the City experienced a major outrage and the load transfer scheme was activated as a means of providing emergency J service in the shortest possible time (Hauser Tr.10,537). A three-phase program was agreed to in which the first two phases related to load transfer aervice and the third phase was an undertaking by CEI to negotiate in good faith for a permanent parallel interconnection (Hauser Tr. 10,540-41, Applicant' 198). ) A L
I
- L'
-4 9 -
,r .l The principle advantage to CEI from offering load transfer service was that it avoided parallel operation with the City (DJ 335, 334 C-133). Although load transfers can be accomplished without dropping load with
- F ll a brief period of synchronous (parallel) operation and then a transfer
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(Firestone deposition DJ 575 p. 54; Hinchee Tr. 2762), CEI operations personnel were carefully instructed to avoid parallel operation of the load transfer points (C-82).
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At the time that CEI was offering the City only load transfer services, its own studies indicated that it could effect a 69 kv parallelinterconnection with Cleveland that could supply 60-80 mva of power by the summer of 1970. (C- 125). In December of 1969, Mr. Bingham pointed out that while from _ CEI's standpoint the most important factor was to avoid a parallel inter-connection "like the plague", if CEI offered too little, the FPC might order a parallel interconnection. Accordingly, Mr. Bingham suggested that CEI m offer a 69 kv non-synchronous interconnection limited to 40 mva which would preclude the City from fully loading its 80 mw generating unit (DJ 334). The City pervisted in its attempts to procure a permanent parallel interconnection with CEI. In July of 1970, the City requested a meeting with { lL CEI to discuss a permanent parallel interconnection. On Mr. Hauser's k advice CEI declined to set a date for the meeting. (DJ 337) Little progress was made towards negotiating a permanent parallel interconnection in 1969 and 1970 (Hauser Tr.10,856). L In 1971, Mr. Hinchee, Commissioner of Light & Power, pushed CEI for a meeting to discuss the permanent parallel interconnection. CEI recognized a s-
r-i that it might be saddled with an interconnection against its wishes. (DJ 338) Mr. Hinchee finally arranged a meeting with CEI's engineers only to learn that CEI had done no engineering planning for an interconnection with the
, City. At a meeting in July 1971, CEI finally agreed to begin a study of a permanent synchronous interconnection (DJ 6; Hinchee Tr. 2567). Little li progress was made toward negotiating a parallel interconnection in 1971 (Hauser Tr. 10,856). ' t-After failing to interest CEI in negotiating for an interconnection, L
Cleveland filed a complaint with the FPC seeking an order compelling a __ permanent synchronous 138 kv interconnection (Hinchee Tr. 2569; Appli-
- I~ cants' 18). CEI immediately responded by filing a notice of termination of L.
the load transfer service. While the FPC proceeding was pending, a CEI
" brainstorming" session concluded that if a two-step approach to a permanent synchronous interconnection were imposed, i. e. , first a 69 kv , 40 mva
,,_ temporary tie such as that suggested by Mr. Bingham, followed by a 138 kv permanent interconnection, the economic hurden on the City would be maxi- ,
l mized (C-138). CEI proposed just such a two-step burden-maximizing inter-connection at a conference conducted by FPC General Counsel Gooch in February, '1972 (Hauser Tr. 10,865). One consideration leading CEI to ! r
,. propose the 69 kv non-synchronous interconnection was to maximize the ,
i F hurden on the City (Rudolph deposition 558 pp. 92-93). Ultimately, the FPC I
- L did, in fact, order a 69 kv non-synchronous emergency interconnection to a be followed by a 138 kv synchronous interconnection (Applicants' 21, 22).
l e M
-ue
--m .
r 32.01 CEI has argued that over the years it was CEI that sought an interconnection with the City and the City that sought to avoid a permanent synchronous interconnection. The facts do not support CEI's contention. ,p From at least 1962 through 1968, it was CEI's corporate policy that an 3 f r interconnection was available to the City only if the City would agree to fix .L prices with CEI. Since 1969, the record is clear that CEI wished to avoid g o' a permanent synchronous interconnection "like the plague. " On the other
- r hand, CEI was well aware that Cleveland desired a permanent synchronous
- L.
inte rconnection. (~
- l-. ' In his letter of September 17, 1962, to the Mayor of Cleveland, CEI's I Board Chairman, Mr. Lindseth, noted the Mayor's statement of willingness
<L to discuss an interconnection (DJ 293). By letter of June 1963, Mr. Lindseth if, - noted that the City sought to interconnect with Painsville and Orrville -- unless r the City would agree to price fixing it could not interconnect with CEI (DJ 295). u On February 17, 1965, Cleveland's Mayor Locher wrote to Mr. Besse, Presi-F
- Lt-dent of CEI, stating that the City "has long desired an interconnection between y
MELP and CEI" but could not consider an interconnection predicated upon g price fixing (DJ 297). Mr. Besse replied by letter of February 25, 1965,
- Li referring to Mayor Locher's " expressed interest in an interconnection" (DJ r-1 298). In February of 1966, Mr. Loshing wrote to Florida Power Corp. indi-cating that CEI was concerned that the FPC might order CEI to force CEI to give the City an interconnection not conditioned upon price fixing (C-109).
g. _ On July 14,1966, .Mr. Besse wrote.to Mayor Locher referring to a news-paper account in which the Mayor " expressed keen interest in establishing ., I .w o , . .- ,.v.- , , - , ,,- --- -
4 an interconnection between the Municipal Electric Light Plant and the i _ ' Illuminating Company (DJ 299). Five days later, Mr. Besse met with Mr. DeMelto, the City's Director of Public Utilities. At that meeting Mr. 'F DeMelto requested an interconnection and was told that first the City must
,-- agree to price fixing DJ 621). On August 20, 1967, Mr. Besse informed the Chief Executive Officers of Duquesne Light, Toledo Edison, Ohio Edison
,T' and Penn Power that "his company was on notice that the City of Cleveland will ask us for an interconnection" (C-50 p. 4). In fact, CEI anticipated that a the City would file a complaint with the FPC to force an inte rconnection in r* L 1967 (C-108). CEI ignored all of these indications of the City's desire for a m permanent interconnection.
- t CEI also ignores the facts that it was the City that sought to obtain a y.
S. pe rmanent interconnection in 1969,1970 and 1971, and finally was forced to P obtain an FPC order compelling an interconnection.
- L 33.01 The load transfer service was actuated by connecting a CEI distributing cable to a City distribution cable at a city distribution substation.
I Each load transfer resulted in an outage to a customer (Hauser Tr. 2660-61). L. Operating problems with the load transfer service were very severe and im-
' posed customer outages from 5 minutes to 30 minutes which were not necessary
- r-for load switching (Hinchee Tr. 2626). The load transfers cou' been
{
- S operated more efficiently with only a 3-5 second outage caused by . acamg.
The longer delays were administrative delays caused by CEI's internal re-i quirements. Outages caused by the load transfers damaged the City's relations
, with its customers. (Hinchee Tr. 2665-67). The method of operating the load M
't transfer points was tied directly to CEI's use of its superior reliability to y obtain the City's customers (Hinchee Tr. 2697). The City, through Mr.
l Titus, suggested that portable radios be used for communications during
,r ;; the switching process to reduce the delays experienced in operating the r- trans fe rs. CEI refused t.. permit the use of portable radios. (Hinchee Tr.
2761-62). lr ^ l> In part the delay was occasioned by the requirement that CEI's load 'f- dispatch personnel obtain Mr. Hauser's approval prior to agreeing to transfer load (Titas deposition DJ 564 pp. 50-55). Mr. Hauser has no experience in T'
! operating an electric system and CEI does not look to him for advice on F operational problems (Hauser Tr. 10,865).
L Mr. Hauser testified that his approval was required because (1) of r, L existing litigation with the City; (2) he was in charge of day-to-day relations f with the City; and (3) the FPC had established standards and criteria for the L. load transfers (Hauser Tr.10,544). CEI wanted to insure that the City could f - not supply its own load before activating the transfers (Hauser Tr. 10,544). P Further, it was CEI's policy to provide load transfer service to the City only L
- s p when required by the terms of the FPC order (Rudolph deposition DJ 558 p.
L 118). CEI regularly makes transactions under other FPC filed tariffs without first consulting Mr. Hauser (Hauser Tr. 10,866). Mr. Hauser obtained the information on which he made his decision from the CEI dispatcher (Titas L. deposition DJ 564 pp. 60-65). Mr. Hauser also claimed to have considered . whether the City was paying its power bills in deciding whether to approve a ,
, ' oad transfer but later admitted that CEI had never refused a load transfer l
request for that reason (Hauser Tr.10,688). y , , - - - , -
l Mr. Hauser admitted that on occasions CEI declined to provide power ( r- to the City through the load transfer because CEI lacked sufficient generation {. (Hauser Tr. 10,698, Applicants' 134). CEI never approached any c'.her
!. bulk power supplies in an attempt to obtain power for the City nor did CEI r- ever offer to traneport power to the City located elsewhere when CEI had i
no power to sell (Haitser Tr. 10,703-04). t On at least one occasion, Mr. Hauser requested the Company's operating people to come up with justification for terminating service at a load transfer point (C-79). 4 The load transfer arrangement required that a block of load be . r transferred at one time. This imposed an economic penalty on the City. T . 7 If prudent operation required additional generation, the City would be forced i to transfer a block of load even when its own capacity might have supplied a r~ portion of the load transferred (Hinchee Tr. 2763). 34.01 Even after the FPC had ordered an interconnection the City l 3-1* experiened delays and difficulties in constructing the interconnection. The 7 g City was unable to obtain a set of plans for CEI's substation. The City needed, ) f but did not receive from, CEI a designated right-of-way and assistance c 1 in staking poles to avoid underground facilities of CEI. As a result the City had to design and submit by trial and error three sets of plans for entry into ) CEI's substation before obtaining CEI approval (Hinchee Tr. 2773-75). This I L. is additional evidence that it was the City and not CEI that truely desired an v inte rconnection. L h
,f~
T Although the 69 kv line was built for operation as a synchronous t
.. interconnection, CEI required that it be operated as an additional load I
transfer point. Much worse delays were occasioned in obtaining permission
,I to operate the 69 kv tie than to operate the 11 kv transfer points. On occasion s
7 it took~as much as 1/2 day to energize the 69 kv line. The City system would 4 experience brownouts, blackouts or voltage reductions while awaiting CEI (' approval of a request for power over the 69 kv tie (Hinchee Tr. 2669-71).
- CEI required that the City utilize all of the 11 kv load transfer points before the 69 kv tie would be energized (Hinchee Tr. 2670). This require-r j ment reduced the operational flexibility of the City electric system (Hinchee f Tr. 2803-04).
Mr. Hauser admitted that in December of 1972, CEI refused to sell
?-
- t. emergency power to the City over the 69 kv tie unless the City also agreed to a tie-in sale by executing a contract for the purchase of street lighting L.
service as well (Hauser Tr. 10,572-73). The City was experiencing a major 7 U outage which had lasted several hours and had no choice but to accede to the
,I tie-in sale (Kudukis Tr. 7496-98).
k, 7 35.01 The City system requires emergency assistance to a greater U degree than that normally found in the industry. The fundamental reason is F the poor condition of the generating facilities of the City caused by inadequate routine maintenance and repair of equipment. Prior to completion of the T i temporary 138 kv interconnection, the City would have been reluctant to v remove generating units from service for maintenance or repair during off-peak periods because the lack of a synenronous interconnection would b. l l
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have increased the risk of outages. Had an interconnection been perfected
,, when it was first discussed in 1962, this situation could have been avoided.
- I-(Mayben dt. C-161 pp.12-13; Hinchee Tr. 2797-98). Before operating load s-ll, transfers CEIinsisted that the City serve its own load to extent possible j ._ (Hauser Tr.10,544; C-145). The City was unable to purchase maintenance power from CEI over the 11 kv or 69 kv ties (Hinchee Tr. 2798, 27,801).
F
,[ , Although Mr. Hauser claimed that CEI sold maintenance power over the 69
.. - kv tie that testimony is contradicted by CEI's refusal to even activate the 69
- /
kv line unless the City was utilizing all of its generation (C-145) and Mr. r* . I Rudolph's testimony that CEI did only v hat was required by the FPC (DJ 558 p.118). The FPC order provided only for the sale of emergency power (Applicants' 21, 22). CEI has never filed with the FPC a rate schedule for
, the sale of maintenance power.
36.01 The City also had difficulty in financing rehabilitation of its L generating plant (Mayben Tr. 7706). In part, this resulted from the loss F LJ of customers due to poor system rePability which, in turn, resulted in a f loss of revenues preventing the expenditure of funds necessary for preser-L vation of the integrity of the system (Hinchee Tr. 2805). Further, the City
" was unable to pass on fully to consumers the high cost of purchase power ,y received from CEI under the emergency rate schedule because to do so L:
would have rendered the City's rates non-competitive and caused a further L loss of customers and reduction in revenues (Mayben Tr. 7715-16). P The City did attempt to sell b nds to finance rehabilitation of its electric plant (Hinchee Tr. 2623; 1: .iukis Tr. 7472; Hart Tr. 4665 et seq. ;
'N
=_ . - - . - .
', F ' .t , lL 'r Applicants' 102). In 1972 the City retained Mr. John Brueckle of the firm ,i ,., Squire, Sanders and Dempsey to draft an ordinance for the sale of $9. d l f-million of bonds for rehabilitation of the municipal light plant (Hart Tr. ,,~
- ! 4667). The ordinance was considered by the City Council in July 1973 i.' \
7, (Kudukis Tr. 7472; ' Hart.Tr, 4668). As originally drafted, the ordinance provided for sale of the bonds to the sinking fund of the City. At the hearing, ' the bonds were amended to preclude sale to the sinking fund and to require sale on the public market (Kudukis Tr. 7481; Hart Tr. 4649). The require- { ment that the bonds be sold to the public necessitated retention of engineering f- !( consultants and the preparation of a preliminary financing statement which I' - delayed an offering of the bonds for sale until 1974 (Hart Tr. 4674). As re-1 quired by the amended bond ordinance the bonds were registered bonds not coupon ! i bonds. It also provided that any lawsuit against the Division of Light and Power j' would constitute a default, and the bonds were mortgage revenue bonds rather than general obligation bonds (Hart Tr. 4673). These requirements T U . were considered problem areas by New York underwriters (Hart Tr. 4671-1 [ 73). The City was unable to sell the bonds on the public market /(Hart Tr. 4. p 1 / Although the Board recognized that among the charges made in these i proceedings was the charge that CEI had subverted the City's bond counsel r to acceed to detrimental amendments and that such action activity by CEI is not shielded by Noerr-Pennington (Tr. 4683), when the City offered {- evidence on those subjects it was rejected.' The City also charged CEI
/, itself with acting to prevent or hinder the City from selling bonds to finance rehabilitation of its electric system (Prehearing Brief of the City
{' of Cleveland p. 35). The Board is well aware that there is presently pending before the Special Board the motion of the city to disqualify the firm of Squire, Sanders and Dempsey (SS&D) from representing CEIin these proceedings. Indeed this Board has considered those proceedings ,, ' a part of the record of this hearing. The Board is also aware that over i n the City's obia.ction, SS&D did; in fact, actively participate in these pro-(footnote cor;.nued on next page) ..c
'-- - ._ . . , . . _ . . _ - . . , ..._y. - _ . _ ,.,, ._, r.
. r-
.,~
'i 4849). Eventually, the ordinance was again amended permitting sale of a portion of the bonds to the City sinking fund in 1975 (Ha -t Tr. 4849-50).
The City was delayed at least two years in obtaining capital needed to reha-
- (, bilitate its plant.
~/'
- 37. 01 In 1972, AMP-O wrote to CEI asking whether CEI would wheel i
power from third party sources to AMP-O members (DJ 508 Exhibit P; Hauser 1 (footnote continued for preceding page) ceedings on behalf of CEI. Evidence filed in the disqualification pro-
;! ceeding show that at the time Mr. Brueckel was acting as bond counsel i- for the City, his firm was General Counsel of CEI and that Mr. Lansdale ^,
was participating in decisions by CEI regarding the wheeling of PASNY power to the City and the City's request to join CAPCO which would 3 clearly impact on the marketability of the City's bonds if offered to the public. City offered as Exhibit C-2 an excerpt from the deposition of Don Hauser
- g. in which Mr. Hauser testified that he prepared a proposed amendment to the $9. 8 million bond ordinance which would require sale of the bonds to i
the public rather than on the open market. Mr. Hauser gave his proposed y amendment to several City council members. Mr. Hauser also attended {" meetings of the council's public utility committee which considered the ordinance. T The Board itself has recognized that CEI's position with respect to the bond ordinance was "open and notorious" and " openly espoused" (Tr. 7478). p Clearly then, Mr. Brueckel was well aware that his firm's " primary client" y wanted the amendments passed. g The City has also proffered the testimony of Mr. Kudukis, unrebutted by any evidence, that when the amendments desired by CEI were offered in committee, Mr. Brueckel, when asked by the committee, responded that the amendments would not substantially affect the ability of the City to sell { bonds (Kudukis Tr. 7485-86).
/ City is at a loss'to understand why it was precluded from presenting testi-b, mony on an issue the Board admitted was raised by the City and which the Board said the City would not be estopped from trying to support (Tr.' 4688). , Had the evidence been admitted it would have supported a finding of fact
[ that CEI in conjunction with SS&D, bond counsel for the City had acted to l prevent the City from obtaining capital funds necessary to rehabilitate its electric system. T.. .6 h - i
!I , .r-( T r. 10, 764). AMP-O wanted CEI to agree to a transmission schedule similar - to one AMP-O had negotiated with Ohio Power (Hauser Tr. 10,589-90). k' In 1973, AMP-O received indications from the Power Authority of the 7 i State of New York (PASNY) that if AMP-O could arrange wheeling, it would
- r- receive an allotment of 30 mw of hydro-generated power from PASNY for 3.
delivery to the Cleveland municipal system (Hinchee Tr. 2677-78). PASNY s .l. # would wheel power to the New York boarder and AMP-O would arrange j' wheeling over the lines of Pennsylvania Electric Company (Pennelec) and CEI. Pennelec . agreed to wheel the power for AMP-O (Hinchee Tr. 2679). I CEI was aware that Pennelec had agreed to wheel (DJ 393-97). PASNY power could have been purchased and delivered to Cleveland for less than the cost of the City's own generation (DJ 8). On beta .' of the City of Cleveland, Mr. Hinchee asked CEI to wheel r~ PASNY power without success (Hinchee Tr. 2679). AMP-O also requested U CEI to wheel PASNY to Cleveland (Hinchee Tr. 2681-83; DJ 10). CEI re-7 ( ', sponded to AMP-O's request (NRC-70) by stating that CEI would not wheel 7: 2
/ adding:
y for AMP-O, p As you may know, the Illuminating Company competes with g the Cleveland Municipal Electric Light Plant on a customer-to-customer and street-to-street basis in a sizeable portion of the City. This competitive situation is clearly unique. [ (-[ Economic studies indicate an arrangement to transmit the PASNY power would provide the Municipal system electric
^ energy at a cost which would be injurious to the Illuminating
- b. Company's competitive position.
e i s. _2_/ Some years earlier CEI had offered to wheel for the City under the Detroit
' plan which would admit no retail competition (Loshing deposition DJ 560 L :pp. 33-35). .
..I ' [ In fact, . at a meeting of top corporate officials, including Messrs. 1 Rudolph and Lansdale (a Director of the Company), on August 8,1973, CEI I l decided to pursue a policy of refusing any request for third party wheeling (DJ 291). AMP-O unsuccessfully renewed its request that CEI wheel PASNY
,, power to Cleveland in August of 1974 (DJ 399). CEI's position with respect to wheeling PASNY power for the City has never changed (Hauser Tr. 10,780-
-l 81).
.. Mr. Hauser admits that the City requested third party wheeling in l
August 1973 (Hr. user Tr. 10,720). CEI reiterated f s refusal to wheel third t-(' party power for the City at a meeting held on December 13,1973 (DJ 291). On repeated occasions the City, through Mayor Perk, Director Kudukis or
't Mr. Hart has renewed its request that CEI wheel PASNY power to the City.
r (, Each of those requests has been refused by one or more of President of CEI r~ Rudolph, General Counsel Howley, or the then Solicitor Hauser. CEI's i refusals were never based upon lack of transmission capacity and, in fact, I ! (! CEI does not dispute that sufficient transmission capacity is available for
'~
the proposed wheeling transaction (Hart Tr. 4700-02; Buchman Tr. 4702-03). (> .. During the spring of 1975, the City ascertained that seasonal power r L was available for sale by Buckeye (Hart Tr. 4703-04). The City also located e. I bulk power supplies from the Cities of Orrville, Ohio, and Richmond, Indiana (. (Hart Tr. 490-91). Richmond, Indiana had available 50 mw of capacity and l associated energy which it was willing to sell to Cleveland. Ohio Power ; 1 Company agreed to wheel the power through its territory and Indiana and ! Michigan Power Company agreed to wheel the power through its territory v 4
~
K f if CEI would agree to wheel the power (Hart Tr. 4709-11 DJ 193). The i City of Orrville had power which it was willing to sell to the City as soon 'f - as it perfected its interconnection with Ohio Power Company (Hart Tr. 4712). f Having located at least three power supply alternatives to the high 3._. cost emergency power it was purchasing from CEI, the City agaln requested CEI to provide transmission services to wheel the power (Hart Tr. 4704-05). + ] In response to a request that CEI wheel Buckeye power, Mr. Rudolph wrote to Mayor Perk on July 22, 1975, stating that CEI would wheel any power for
'f-the City "as to which there is no legal or conspiratorial impediment which would prevent this company making a like purchase ' a like price" (Appli-cants' 75). The City considered Mr. Rudolph's response to be a restate-ment of its earlier refusals to wheel and so informed CEI (Applicants' 76).
r~ b CEI responded by repeating the same conditions placed upon wheeling, i. e. , no legal or conspiratorial impediment and refusing to explain what was meant (Applicants' 78). At a meeting at City Hall in August of 1975 in which Messrs. Hart, I I Perk, Hauser and Rudolph participated, Mayor Perk requested that CEI agree U to wheel third party power generally and made specific reference also to b " i Richmond and Buckeye as power sources (Hart Tr. 4713-14). Messrs. ) Rudolph and Hauser reiterated CEI's "no legal or conspiratorial impediment , (Hart Tr. 4707-09). j On August 25, 1975, the City mailed to CEI a copy of the AMP-O - Ohio Power transmission agreement as a proposed form of agreement between r the Cit" and CEI (Applicants' 79). By letter of September 15, 1975, CEI again .. l l l
' /~
,- It would be impractical for the City to construct transmission lines r
1 across CEI territory because of (1) cost; (2) environmental problems, and
\
(3) obtaining siting approval for what would likely b' duplicating transmission ( facilities (Mozer dt. NRC 205 pp. 57-58). At least since the mid-60's, CEI
~
has, itself, been concerned with the increasing difficulty experienced in s obtaining transmission right-of-way (DJ 509, 510). CEI's " Company-Wide Basic Premises and Assumptions 1968-72 noted that '. . . right of way will become increasingly difficult to obtain'. " (C-69). CEI's Basic Premises and As sumptions 1973-77 noted at p.10 that " Land sites and rights of way will become increasingly difficult to obtain and more costly" (C-90). The same } 1anguage is repeated in CEI's Basic Premises and Assumptions 1974-78 (C-91). During a meeting between CEI and the City in October 25, 1973, CEI noted problems with constructing transmission lines in the Cleveland area (DJ 291
- p. 13). Frequently, CEI is forced to litigate to obtain right-of-way (Caruso
,. T r. 10, 941). The availability of transfer capacity on the CEI system would I definitely be an issue in litigation arising from the City's attempt to build transmission lines (Caruso Tr. 10,943). In the early 1960's CEI itself took . r the position that it would be economically unsound for the City to construct '~ a transmission line to Orrville and Painsville (Lindseth deposition DJ 568 pp. 58-60). The only alternative available to the City is interconnection with CEI (Applicants' 19). Applicants' extensive transmissio2. grid built in conjunction with large c 1 L generating units might make it difficuli for s.nall systems to build transmission I 1 lines in the same area (Mozer Tr. 3271). The sddition of the proposed nuclear G
.( . units will strenghten the transmission grid and make it more difficult for ., others to construct transmission lines in the area (Mozer Tr. 3357). An f alternative to constructing a duplicating transmission line might be a wheeling [ arrangement (Mozer Tr. 3358). 7 Applicants have offered the testimony of Mr. Caruso to buttress their argument that the City could construct its own transmission lines and e
\
I thus did not require access to CEI's transmission facilities (Applicants' 162). Mr. Caruso studied four alternative 138 kv transmission lines to be con-i structed by the City. Two of these alternatives involved construction of r } lines to interconnect with Ohio Edison Company (Caruso dt. Applicants' 162 [ p. 13). Mr. Caruso did not consus. vith Ohio Edison (Caruso Tr. 10,945), l and was unable to reach any conclusion regazCag the feasibility of the two s_ alternatives involving Ohio Edison (Caruso Tr. 10,983-84). A third alter- { native studied involved construction of a single 70 mile 138 kv transmission k r-line to Ohio Power predicated upon purchase of 50 mw of base load power I~ U from Richmond, Indiana (Otruso Tr. 10,986). Mr. Caruso assumed that
~
the cost of power from Richmond would be constant during the entire period b studied (Caruso Tr. 10,988). He admitted that if the Richmond power were '-- available for only five years it would alter the feasibility of the line (Caruso T r. 10, 933). Limited term of availability of the power would be magnified k! ,, by the minimum of two years for enginet ang and construction of the lines f - studied (Caruso Tr. 10,954). An additional year must be added for obtaining approval of the Ohio Power Siting Commission (Kekela deposition DJ 574 p. L.. w,
r .l -
-68 119). Still more time may be taken by litigation to acquire right-of-way.
Mr. Caruso's study thus is predicated on the highly speculative proposition f that the cost of the power would remain constant over the entire 25-30 year period of the study and that the City of Richmond somehow had constructed r 50 mw of excess capacity which it could make available to the City at a 100% load factor for the entire duration of the period studied.
. Purchase of 50 mw power from Richmond at 100% load factor would amount to appi oximately 60% of the City's load (Caruso Tr.10,948). If t
CEI had to purchase 60% of its load over a 70-mile single circuit line, Mr. Caruso admits he would have to seriously consider alternatives which would i provide more reliability (Caruso Tr. 10,949). Transmission over the ( CAPCO transmission system would be more reliable than transmission 6 over a 138 kv radial line constructed by the City (Mozer Tr. 3610-11). In f fact, without the existing temporary 138 kv interconnection with CEI, none of the alternatives studied by Mr. Caruso would have sufficient reliability to be considered feasible (Caruso Tr. 10,960-61). I The fourth alternative studied by Mr. Caruso was a 75 mile single-L> circuit 138 kv transmission line to Pennelee to obtain PASNY power. This line would parallel CEI's existing 345 kv line to Pennelec (Caruso dt. Appli-cants' 162 pp. 13-14). Once again, Mr. Caruso's study is predicated upon
, the cost of PASNY power remaining constant for the entire 25-30 year period studied (Caruso Tr.10,988). The study is also predicated upon the unsup-l ported assumption that the power purchased from PASNY would be available around the clock at 100% load factor. CEI has adequate existing transfer capacity to accommodate the City's purchase of power from PASNY (DJ 358).
~
[.;. Mr. Caruso stated that the factor of greatest uncertainty in his study r was the cost of right-of-way (Caruso Tr. 10,929-30). Nevertheless, Mr. J Caruso made no inquiry as to the availability of right-of-way from the rail-e! road companies along which he partially routed the lines (Caruso Tr.10,987). e No field study of the proposed right-of-way was made (Caruso Tr. 10,978-79). In fact, Mr. Caruso's study makes no provision for the expense of ( purchasing buildings or for crop damage claims or residue damages (Caruso T r. 10, 979 -80). t. Mr. Caruso's study was predicated upon construction using wood poles (Caruso dt. Applicants' 162 pp.12,13). Wood pole construction is
) less expensive than steel pole (Caruso Tr. 10,947). CEI itself has very L
, little wo6d pole construction. Approximately 15% of CEI's 138 kv line is on steel poles and 85% is on steel towers (Caruso Tr. 10,976). All of the 138 kv transmission lines described by Mr. Caruso which were constructed
,. in urban areas covering a time period from 1965 to the present were con-L :
t i structed on steel poles or steel towers (Caruso dt. Applicants' 162 pp. 5-7). n- ; y Mr. Caruso pointed out that his study was limited to the feasibility r of constructing a line compared to the purchase of emergency power from w CEI. He made no attempt to compare the feasibility of alternative plans i
.(Caruso Tr. 10,939). He did not consider wheeling as an alternative to the construction of transmission lines (Caruso Tr. 10,941). More importantly, ~.'
Mr. Caruso made no recommendation that the City construct any of the lines
- studied (Caruso Tr.10,945). Mr. Caruso made no mention of CEI's past i
opposition to construction of transmission lines by the City on the grounds )
- -e e t +. 4 - '
1 *e-et e w *- - - - --- "*-*I 'W" N Y "' "'W*
y -( that such lines would be uneconomical (C-94; Lindseth deposition DJ 568
,, pp. 58-61). .
l Mr. Caruso admitted that if the lines studied were built only part of the power purchased would flov over the line constructed by the City. 7 The remainder of the power would flow over the existing CAPCO-CEI transmission system (Caruso Tr. 10,987). One factor not considered by
. Mr. Caruso is that where parallel transmission exists, under prudent operation, the capacity of the smaller line becomes the upper limit on the usable capacity of the larger line. Otherwise an outage on the higher capacity line would immediately cause an overload on the smaller parallel j transmission line with possible destruction of that line (Bingham Tr. 8219-t 2 0). CEI presently utilizes a 345 kv line to receive 300 mw of power from
- i. its Seneca plant in Pennsylvania (Bingham Tr. 8232-33). Construction of
( a parallel 138 kv line by the City would immediately reduce the usable t capacity of CEI's 345 kv line below the 300 mw entitlement from Seneca. U 38. 01 Shortly after becoming Commissioner of Light and Power of n the City in March 1971, Mr. Hinchee orally requested an opportunity to h-participate in nuclear generation with CEIin the amount of 200 mw. CEI denied the City's request. (Hinchee Tr. 2702-06) On July 6,1971, the City filed its petition to intervene in these proceedings and renewed its request
. for participation in Davis-Besse Unit #1. The City reiterated its request for participation in Davis-Besse #1 in pleadings filed with this Commission ~
[; on July 27, 1971 and October 19, 1971, among others. c, &q
- r After CAPCO announced construction of the Perry units, the City I
ie reviewed its request for participation in the CAPCO nuclear units including
'l Davis-Besse #1, Beaver Valley #2 and the Perry units (Hinchee Tr. 2706, l
'l
>i DJ 182). A more formal request for participation in CAPCO nuclear units /' as well as for membership in CAPCO was sent by the City to the Chief Executive Officer of each CAPCO company on August 3,1973 (DJ 185).
~l ( At a meeting of top management of CEI on August 8,1973, it was decided that CEI would deny the City's request for participation in the Davis-Besse and Beaver Valley units and to offer the City participation in the Perry units. Subsequently CEI obtained the approval of the other CAPCO Chief Executives [ to offer the City participation in the Perry units (DJ 291). CEI did not inform the City of its decision and on September 10, 1973, the City wrote to CEI and the other CAPCO companies renewing its request to participate in the nuclear units and also requesting participation in future units, whether
, nuclear or fossil fired, being planned by CEI (Applicants' 61).
]' CEI finally agreed to meet with the City on October 25, 1973, to r g discuss the City's request for membership in CAPCO and for participation in p CAPCO generating units. Although CEI had already decided to offer partici-L pation in the Perry units and had recaived approval from its CAPCO partners, it did not extend the offer to the City. Neither did CEIinform c the City that it would not be permitted to participate in Davis-Besse #1 and l. Beaver Valley #2 (DJ 291). w. l w L
CEI and the City next met to discuss the City's request for partici-
, _ . pation on December 13, 1973, at which time CEI informed the City that it i
would not be permitted to join CAPCO but that CEI would extend an offer of participation. The City was informed that CEI believed the emergency
, service over the 138 kv intertie ordered by the FPC provided most of the backup the City would need for its participation. (DJ 291) CEI offered to Q negotiate with the City for participation in Davis-Besse 1, Beaver Valley 2
- r- and Perry 1 and 2 and to negotiate for "some type of back up. " Participa-t tion was to be from CEI's share of the plants. One provision of the agree-ment was that CEI would have the right of first refusal to purchase any
[* power from the City's participation not required for use by the City or its i retail customers. (It has been shown previously that such a right of first L refusal could be used to prevent the City from coordinating development [ with a third party. ) Another provision was that the City agree that it would L e not sell power below cost. Moreover, CEI insisted as a precondition to I L entering such negotiations that the City withdraw its petitions to intervene in these proceedings. (DJ 188) Thus, nine months after the City's written request to participate in the Perry units and two and one half years after the L City first requested participation in Davis-Besse 1, CEI came forward with w j an offer to negotiate subject to an obviously unacceptable precondition. On January 2,1974, the City rejected the conditions attached to ( CEI's proposal for entering into negotiations and the City renewed its
.'u request of August 3,1973 (DJ 189). On February 7,1974, CEI wrote to counsel for the City agreeing to negotiate participation "not to exceed the
~ De
T r-i the direct requirements of the City" and, in effect, withdrawing the pre-
- condition to negotiations but standing on its other conditions. At the same 1
time, CEI offered a draft of a proposed interconnection agreement intended to comply with the FPC Order for emergency service and which, CEI said, r "may or may not provide back up for the City's participation in nuclear units. " (DJ 19T) j On February 27, 1974, nearly a year after the City requested par-ticipation in the Perry units and three years after the City first requested s participation in Davis-Besse Unit 1, CEI offered the City a draft participa-tion agreement. Backup for the City's participation was to be found par-l. tially in the participation agreement and partically in the interconnection \ agreement. (DJ 192) Because CEI made the interconnection agreement an integral part of the participation agreement, it was necessary to work ( on both agreements simultaneously ( Applicants' 66). (. By letter of March 28, 1974, the City responded to CEI's proposed i~ c participation and interconnection agreements pointing out that they failed to provide for coordinated operations and development including such mat-N ters as reserve sharing and third party wheeling. The City also requested ' I, l-CEI's response to the City's proposed license conditions. ( Applicants' 63) I By letter of August 22, 1974, the City wrote to CEI noting the $yl 6, skeletal nature of the draft participation agreement and that the City had I- yet to receive any suggestions from CEI regarding the defects noted pre-viously by the City. The City also noted that final agreement on the inter-connection agreement was also delayed because under CEI's proposal the - t.. w
rr agreement had to be reformulated to provide backup for the City's partici-l ,.. pation in nuclear units. Among other defects, the proposed interconnection i agreement did not provide adequate transmission services. (Applicants' 66) e
- j On December 13, 1974, the City sent to CEI its counter-proposal 7= for participation in the form of draft participation agreement, draft facili-
' ties agreement and draft operating agreement (DJ 315) Between the date r
[ of CEI's first offer of a participation agreement and the counter-proposal put forth by the City, CEI and the City met to discuss an operating and s facilities agreement as a first step towards negotiating participation (Hart l Tr. 5,427-28). J' On January 3,1975, Mr. Hauser responded to the City's proposed i , participation agreement, operating agreement and facilities agreement, i stating, " Service Schedule F - Transmission Services has been changed to I provide only transmission services from City owned or Unit Purchased ( Power from the four CAPCO units. " (Applicants' 143) To date no parti-l cipation agreement has been executed (Hart Tr. 4,824). CEI has not withdrawn its insistence on a right of first refusal to L r buy any participation power excess to the needs of the City (Hart Tr. 4,825). l' The right of first refusal would be priced at the City's cost, thus preventing {, the City from marketing its excess power at the most advantageous price
. (Mayben Tr. 7,612, DJ 192). The right of first refusal insisted upon by f"
CEI could preclude the City from coordinating its power supply with third t parties (Mayben Tr. 7,618). 4 L,.
~ www - +-
.c i
s The participation agreement offered to the City provided only for c, . the wh'eeling of nuclear power from the power plants of the City (Hauser Tr.
-i 10,712). A small electric entity with access to nuclear participation needs
.c
; transudssion services to obtain access to other power supply alternatives f if it is to make practical and economical use of the nuclear power (Mozer
'1 dt. NRC 205 pp. 69-70). Even with access to nuclear power, a small sys-l/* j, tem must have wheeling to put together a proper blend of power supply resources (Kampmeier Tr. 6,142-48). L An agreement permitting the City to wheel excess nuclear power I
.! , from the City to a purchaser would be desirable for economic utilization
[ of the City's participation (Mayben Tr. 7,598). The City in its proposed t participation agreement did request " wheeling out" (Mayben Tr. 7,599). i i The transmission services offered by CEI providing only for the tranmis- [ sion of power from the participation units to the City's load centers would
, not enable the City to get meaningful access to the nuclear units in which it was participating (Mayben Tr. 7,611). During the spring and summer of r.
L 1975, CEI refused to negotiate with respect to requests for wheeling other than the limited transmission service offered in its February 1974 partici-E pation and interconnection proposals (Mayben Tr. 7,755-56). A party must have a full array of power supply alternatives in putting together a bulk power supply (Hughes Tr. 3,687). A party having access to I
~-
nuclear power must put together a blend of resources. The more alterna-r tives available to the party, the more economical the resource blend.
-(Hughes Tr. 3696) To achieve the maximum benefits of coordination
- s. .
.r- ?
- s
, through access to nuclear generation, wheeling services must be available ,- (Hughes Tr. 3,851). If a party is to make effective economical use of - !I. access to nuclear generation, it must have access to other power supply r-
, options in an unbundled fashion (Hughes Tr. 3,858). Coordination is needed
'r to make efficient use of nuclear generation (Hughes Tr, 4,092). In order to remain a viable entity, the City must have both access to nuclear power if' il and third party wheeling (Hinchee Tr. 2,708-11, Applicants' 207). The r' availability to the City of alternate power supply sources would permit the
\.
City to compete for additional customers (Hinchee Tr. 2,787). CEI has 7 1
- a. not offered the City a participation agreement with terms which would per-a f mit the City to make effective use of its power.
39.01 The Painesville municipal electric system has 38 mw of coal-i fired generation to serve a peak load of 25 mw. The system is electrically isolated. (Pandy Tr. 3,097-98) The system could not engage in trans- [L r acti ns with other electric entities without use of CEI's transmission net-I work (Pandy Tr. 3,099-3100). Alone, the Painesville system cannot take .. r-advantage of generation economies of, scale (Pandy Tr. 3,101). Painesville 7 must have an interconnection with CEI if it is to remain competitive ( Appli-l' cants' 272). { 39.02 Painesville cannot construct or finance a nuclear generating
, unit by itself. It must have the cooperation of CEI if it is to participate in nuclear generation. (Pandy Tr. 3,120) Painesville cannot build its own
_ transmission lines to other utilities because it is in a highly urbanized area and the cost would be prohibitive. -Moreover, it may be difficult to obtain
%9
, _ , , , . _w- =---r --'" ' -
- I i
; r-approval of the Ohio Power Siting Commission because such lines would duplicate CEI's existing transmission facilities. (Pandy Tr. 3,174)
- (
i By letter of April 11, 1973, Painesvine wrote to CEI expressing its ae !!. interest in participating in the recently announced Perry nuclear units (NRC
- C 13 6- A). CEI responded on April 24, 1973 with an offer to discuss Paines-
.L ,
vine's request (NRC 136-B). Subsequently CEI's representative advised r d;. Painesvine' that a simple interconnection agreement would provide Paines-ville with the same things it would get through participation (NRC-138, l 3 ' Pandy Tr. 3,116, Milburn deposition, Applicants' 195 pp. 22, 24). At the l 1 time of Mr. Pandy's testimony in these proceedings, CEI had not made
.i available to Painesvine any terms or conditions for access to the Perry A
units including Applicants' policy commitments (Pandy Tr. 3.162, Hauser Tr. 10, 869 ). In the spring of 1976, Painesvine renewed its request for T't L participation and in return received from CEI a copy of the obviously insuf-3r ficient participation agreement offered to the City of Cleveland over two ! (
- years earlier which admittedly did not even reflect CEI's current wheeling
( ' policy (whatever it might be)1/ (Hauser Tr.10,718). Painesvine is stiu .r- interested in participating in the Perry nuclear units (Pandy Tr. 3,158). i 39.03 Fcr many years Painesville has been attempting to negotiate , ( 3 an interconnection agreement with CEI. In 1966, Painesvine was informed l 1 q that negotiating an interconnection agreement was probably impossible l T. . l 1/ Counsel for CEI made an irresponsible charge that Staff counsel had 1 requested Painesville to renew its participation request. CEI's counsel admitted his charge was based on mere suspicion and requested leave to open discovery on that matter. Apparently he recognized the charge 1 was baseless as weH as base and failed to pursue discovery. ll ru' p g - - - , . , - . - . - _ _ . - . _ - _ . _ _ . . . - ,_.-,,y , - - . .- ,
(
-78
. r.
, because some CEI directors thought Painesville would fan like a plum into
- - CEI's lap. (MHburn deposition, Applicants' 195 p.11) These discussions 1
continued into 1976. During the negotiations between 1971 and 1975, Mr.
,r .; Howley of CEI informed Painesvine that CEI was not interested in an inter-r connection with Painesville that did not require Painesville to engage in price fixing with CEI. (Pandy Tr. 3,152-53; DJ 369) Painesvine also
,{ requested that the interconnection agreement provide for third party f wheeling. By letter of June 27, 1974, Mr. Howley informed Painesvine
.L that "we could not agree to the transmission service schedule which is i'
i third party wheeling. " (NRC 141; Pandy Tr. 3,137-29) [ 39.04 During discussions of a possible interconnection in 1962,
-\
Mr. Rudolph of CEI suggested that Painesvine cnd CEI exchange approxi- . 3 mately 600 customers and enter into a territorial division of markets pro-viding for exclusive service areas (Helsen Tr. 3,622-24A; NRC 144). f
-.. Mr. Howley renewed the proposal around 1964 or 1965 (Helsen Tr. 3,625-26).
r { 39.05 Reliability of service is a factor in competition between r Painesvine and CEI. After each outage, Painesvine loses customers to (~ , CEI (Pandy Tr. 3,179-80). Since 1971, Painesvine has experienced one ' y Q or two serious outages each year and has experienced voltage reductions
, one or two times each year (Pandy Tr. 3,099). Lack of an interconnection F.
! reduces Painesville's reliability (Pandy Tr. 3,181). Unde e an agreement ( with the Ohio Encironmental Protection Agency limiting operation of cer-tain of Painesville's generating units, Painesville will have no firm power L 4 *
~
i~ r-without an interconnection (Pandy Tr. 3,180). Painesville does not carry
. , _ generating reserves typical of industry practice because the cost would be too great. An interconnection would provide adequate reserves. (Pandy Tr. 3,181) The interconnection agreement negotiated with CEI does not .r. provide for third party wheeling nor does it provide for the sale of power by Painesville to third parties (Pandy Tr. 3, 176-77). Painesville agreed f to the offered interconnection because it was desperate for an interconnec- ]1 tion (Pandy Tr. 3,179, 3,124).
The Cities of Clevels.nd and Orrville had at times indicated a I i willingness to purchase excess capacity from Painesville (Pandy Tr. 3,103, [ 3,118). Such sales cannot be made without access to CEI transmission ( lines (Pandy Tr. 3,099-100). The present interconnection agreement does
; not provide for such sales (Pandy Tr. 3,177).
39.06 CEI has long desired to acquire or reduce and eliminate the Painesville electric system (DJ 509, 510; NRC 143). In 1964 or 1965, F L Mr. Howley suggested purchase of the Painesville system by CEI (Helse11 I Tr. 3, 625-27). At various times over the years, CEI has given consider-L- r, ation to the possible acquisition of Painesville's electric system (DJ 363, L 364, 366, 367, 368, 371). j i i lL. I i t s .
!I ~'
CONSPIRACY OF THE APPLICANTS TO DENY SMALL ELECTRIC UTILITIES ACCESS TO THE r BENEFITS OF COORDINATED OPERATIONS .{ AND DEVELOPMENT, ECONOMIES OF SCALE AND ACCESS TO NUCLEAR GENERATION W il 40.01 The foregoing findings of fact demonstrate that eac.h of the
- [
- ( Applicants desired to acquire municipal electric systems in their service r
territory; three ci them -- Ohio Edison, Penn Power and Toledo Edison -- imposed restrictions on resale of power sold to municipal systems at 3., a wholesale, and a fourth,- CEI, suggested a territorial agreement. Duquesna K refused to sell at wholesale or to interconnect with the only municipal sys-N tem remaining in its territory; at least three of Applicants -- Ohio Edison, 1 Toledo Edison and CEI -- have individually refused to wheel power; and T several have engaged in other anticompetitive acts. Clearly a motive exists "i . for each of them to enter into a conspiracy to deny small municipal systems the advantages of coordinated operations and deve*opment, economies of I scale and access to nuclear power. L ! 40.02 Mr. Lindseth, who, as CEI's chief executive officer, took l E part in all of the discussions considering the formation of the present CAPCO, I r-L testified (Lindseth deposition DJ 568 pp. 26-28): ! 1 _, Q. Was the possible inclusion of municipal systems discussed at any of the meetings? A.- If you mean by the phrase of municipal systems broadly [g! noncorporate type utiliQ % Qere was a discussion of, I
~
believe, a group of QWpr ratively owned systems at one
- j. or even possibly n erp e% 2 one of these meetings.
L-
.Q. Now what was the nature of dese discussions?
i lL I W
~
;. A. 'Whether the nature of the CAPCO arrangement was such that other than utility companies should be members.
;r t
O. And what was the conclusion?
- p A. The conclusion was that that did not conform to the con-
- (
cept of CAPCO, and they were not invited as I recall to participate. if ![ O. If you recau, on what basis was that decision reached? H A. Well, I do not remember the details of the discussion or consideration, but CAPCO was an organization of utility companies, and hence should be an organization of utility i(- companies.
- L Applicants attempt to explain away Mr. Lindseth's testimony by
- r-
;t
- ( saying that it only states that municipals were not " invited" to join CAPCO J and that the cooperatives were exc .uded because they were already involved a .
in the Buckeye agreement. The defect in Applicants' argument is that 3 Mr. Lindseth clearly said more than that. Mr. Lindseth testified that the f reason cooperatives and municipal systems were not invited to join was ( because CAPCO was to be an organization limited to investor-owned utilities. k Moreover, when specifically asked to state the reason for excluding the cooperatives, Mr. Lindseth made no mention of the cooperatives' partici-L q,4 pation in Buckeye but instead gave the reason that CAPCO was limited to investor-owned utilities. When the witness has specifically stated reasons
' for an action, there is no room for the fertile mind of counsel to offer other t
reasons. .,' - ~ Mr. Besse confirms that CEI had no desire to coorrHmte with
- r -
. municipal systems. Mr. Besse stated that CEI desired to avoid Federal intervention in coordinating activities which it was feared would permit i.
w.
,-p-- -
m
C
- I r
ii:1 small systems to coordinate, thus reducing the gap in costs between investor-
- r owned utilities and small systems. (Besse deposition DJ 559 pp.126,132-33)
!i Mr. Mansfield shared the belief that investor-owned utilities should not .c l{ coordinate with public power groups (Mansfield deposition DJ 572 pp.10-11). On August 20, 1967, the CAPCO Chief Executives engaged in lengthy discussion regarding possible municipal intervention before the FPC to seek P to join the pool (C-49 p. 7). On that occasion Mr. Besse of CEI noted that 4 "his company was on notice that the City of Cleveland will ask us for an
- (
inter conne ction. " At that same meeting, Mr. Mansfield of Ohio Edison
- )
and Penn Power stated that the municipalities of Hiram, Oberlin and Cleve-
- f land might file objections to the CAPCO arrangement before the FPC and a
try to get into the pool (C-50 p. 4). 1 Applicants attempt to dismiss C-49, first, as being evidence only 4 f against Duquesne, although the Board has ruled otherwise, / and, second, i
- , because the concern was not that municipals should join but that they might i
l delay FPC action approving the pool. Once again, Applicants' attempt to i { explain away the facts fails. Duquesne wanted the pool agreement signed
- j. or not signed prior to October 25, 1967, the last date upon which it could t-cancel the 800 mw nuclear unit it had ordered (see attachment to C-50).
.s Duquesne did not insist upon FPC approval prior to October 25. In fact,
^
the CAPCO companies did not even arrange to meet with the FPC until l I' November 1,1967 (C-52), after the critical date. Moreover, were it not l
~
1/ In any event, C-50, Mr. Firestone's notes of the same meeting, pro-vides, even under Applicants' theory, evidence against Ohio Edison and Penn Power. k L l _ _ _ _
- l ,
for a desire to exclude municipal systems, intervention of those systems before the FPC would create no problem. t Furthermore, if it were not the intent of Applicants to exclude munic-j ipal systems from membership in CAPCO, why was it necessary for the f Chief secutives of CAPCO to meet on October 22, 1975, to formulate a joint explanation as to why public power bodies were excluded (C-52)? It would have been simple enough for Applicants to have said that time did not
~
permit inviting others to join in the original pool negotiations (although such a statement would be contrary to Mr. Lindseth's statement of the reason for e their exclusion) and that public power bodies were welcome to join at a later f date. Instead Applicants agreed to advance rationale which looked towards future as well as present exclusion of municipal systems. L Applicants ignore the clear inferences to be drawn from C-55 in which Mr. Greenslade urges that the CAPCO member make efforts to avoid having become an " entity. " Mr. Greenslade suggested (C-55, p. 3): Increasing attempts are being made by municipalities to 7 become " pool" members and to participate in joint units. i The FPC is seemingly sympathetic with these efforts, but b its legal powers in the area are limited. Adoption of the
,. " entity" concept by the municipalities in a Section 202(b) proceeding could be the answer for the Commission.
If futher evidence of Applicants' intent to deny municipal systems the benefits of coordinated operations and development were needed, one { need only.look at Applicants' conduct as compared to their purported reason 1 , for excluding public power bodies. Applicants agreed to tell the FPC that l
~
the exclusion of public power bodies was premised on the idea that such l l l
,u -."t T
- 7
'( groups could participate more appropriately through purchases of capacity I and energy from Applicants (C-52). -
l In addition to the prior showing that that rationale is a sham, it F ( should be noted that at that very time, Duquesne was refusing to sell power at wholesale to Pitcairn and did not intend to make such sales in the future (NRC-13, dated January 23, 1968). Indeed, Duquesne has argued in this
- very proceeding that such sales would not only have been unlawful but would I have been criminal violations of Pennsylvania law (Duquesne Motion To i
Dismiss, filed April 20, 1976, at p. 17). Duquesne refused to make such sales until it recognized that it would probably be ordered to do so by the FPC. At the same time that CEI was telling the FPC that municipals should participate through purchases from Applicants, it was refusing even {F to interconnect with the Cities of Cleveland and Painsville without price fixing (C-99, C-111, C-128, C-132, Tr. 2569, 3152-53). Toledo Edison also refused to sell wholesale power to a municipal F [ system which it hoped to acquire (DJ 504, 506). r If, indeed, Applicants had valid business reasons for ex1cuding m municipal systems, why did they only put forth transparently false reasons ? I _ Applicants' conduct in refusing to admit Pitcair and Cleveland to CAPCO further evidences their intent to exclude municipal systems from the benefits of coordinated operations. Despite Applicants' claims to the
- contrary, Mr. Fleger refused to permit Pitcairn to join CAPCO. (Fleger Tr. 8624) Nor can there be any doubt that the City was denied membership
- f~' ' Mr. Hauser's notes of a meeting with the City on December 13,.1973, p . following the December 7,.1973 special meeting of the CAPCO Executives l to discuss the City's request for CAPCO membership, show that Mr. !I !! Goldberg,- one of the attorneys for the City, "was advised that membership jF in CAPCO was definitely out" (DJ 291). The response given to the City at lL , that December 13, 1973 meeting was, according to Mr. Rudolph, Chief Officer of CEI, a position formulated by CAPCO (DJ 558, p. 245).
~
Moreover, the refusals to admit Pitcairn and Cleveland to CAPCO were clearly the result of joint consultation resulting in a unified position, l' CEI consulted with its CAPCO partners before responding to the City's request of August 3rd for CAPCO membership (Williams Tr. 10,436), j_ although CEI was aware that under CAPCO rules requiring unanimous
- i
' consent CEI alone could have vetoed the City's request (Williams Tr.
T-10,437). The City was told by CEI "we have talked with the other members 7 of the CAPCO group, all of whom feel that these discussions can best be II initiated between the Illuminating Company and the City of Cleveland" (Appli-ir~ { cant,s ' 25). Earlier CEI had informed Painesville that eventually its request p for participation in the Perry units would have to be discussed with its L CAPCO partners (NRC 136B). The City's earlier request to join CAPCO 4 .
- n. was put on the. agenda of a CAPCO Executive meeting by Mr. Arthur at CEI's request and was discussed at the meeting (DJ 97, 98).
Interestingly, five days before responding to the City's August re-T
. quest, CEI had' unilaterally decided to deny the City's request to join CAPCO (DJ 291). Thus, CEI's offer of discussions (Applicants' 25), after conferring a
b L
, - . - .; - , - . _ . _ , - _ _ _ _ , - , _ _ _ . ..-.4 -_ _ , , _ , . . . , . _ , - , , , . , _ . , . , _ .-,_..m.
r i i lF l l[ with its partners was either a sham demonstrating a bad faith negotiating ! l
- p position or evidence that a joint CAPCO position was to be taken with respect to the City's request.
r 1 The ' City's request was discussed at a meeting of the CAPCO Chief
- P i Executive Officers in December 1973. There was consihrable discussion 1 ,
about the size and nature of the City system, and each company agreed to T
- l i
, communicate its views to CEI. Mr. Mansfield stated that the City's request i F offered no advantage to Ohio Edison and suggested that CEI work out a
- L . I separate agreement with the City. If such an agreement would result in an
.? impairment of CEI'd ability to meet its CAPCO obligation, Ohio Edison would l be prepared to make an adjustment in CEI's obligation (White Tr. 9519-26; a Williams Tr. 10,459-60). Exhibit C-61, written by Mr. Mansfield, states: i L Following the meeting of the CAPCO Executive Committee r n December 7,1973, Iinformed Mr. Rudolph that Ohio Edison and Penn Power were opposed to granting the request of the Cleveland Municipal Electric Light Plant (MELP) as stated in its letter dated August 3,1973, to Mr. Rudolph from Mr. Whiting. p Toledo Edison also communicated its response to CEI (Williamson deposi-L tion DJ 581 p. 18). Duquesne Light responded directly to the City in terms T. [ reflecting the response agreed upon at the December 3,1973, special p meeting of the CAPCO Executives (DJ 105). Contrary to Mr. Hauser's n ' otes for August 8,1973, Mr. WiIIiams - 1 states that when CEI attended the special CAPCO meeting in December of )
- 1973, it had not yet decided how it would respond to the City's request to join CAPCO (Williams Tr. 10,434). Mr. Arthur claimed that prior to the December 7,1973 CAPCO Executives meeting, Duquesne had not formulated
ip
;f[ a position'with respect to the City's request to join CAPCO (Arthur Tr. 8,392).
is
- This makes it all the more apparent that a joint CAPCO position was, in fact,
.t established at the meeting of the Chief Executives of CAPCO on December 7,
- r
!l . 1973. Similarly, the record discloses that CEI's subsequent offers of j p l access to the Cities of Cleveland and Painsville were made with knowledge
'r y of the other Applicants (C-62, C-64, C-65, C-66). Indeed, C-65 shows that g the negotiations were conducted not merely with full k swledge of the other
.L Applicants, but also in accordance with a courrs of action authorized by the
- p
,{. CAPCO Chief Executives on December 7,1973. Not only did the other y Applicants know of and authorize the negotiations, but they actually had an 3 input in the terms of the negotiations (C-66). J
- i. There is much evidence in the record to show that the CAPCO 1
!I companies formulated a joint position regarding their response to Pitcairn L just as they did in responding to Cleveland. Pitcairn's request to join CAPCO [ <L. was discussed at meetings of both the CAPCO drafting representatives on u ju Decemt.o r 11, 1967, and the CAPCO Engineering and Operating Task Force meeting on December 15, 1967 (C-34). Toledo Edison and CEI circulated i L, to Duquesne drafts of their responses to Pitcairn (DJ 237). Although Mr.
. White testified that he did not know the position taken by the other CAPCO j members prior to formulation of his response (which was formulated just fn, prior to sending it to Pitcairn), he obviously forgot that CEI had mailed to Mr. Mansfield many days previcu+1y a copy of its response to Pitcairn (DJ 218), as did Toledo Edison (DJ 232), and Duquesne (NRC-53,NRC-54,NRC-55).
p,
r i i if-i Moreover, when Mr. McCabe requested a meeting with each of the companies
- to discuss Pitcairn's request to join CAPCO, the CAPCO members formulated i l.
a joint position (NRC-12). The CAPCO company responses to Mr. McCabe's
- h
- u follow-up letter are so similar in format as to demonstrate that a joint position was taken (NRC-12, DJ 221, DJ 228, DJ 234). Mr. McCabe then wrote to each CAPCO company requesting a copy of the CAPCO agreement.
y q - Again, each company responded in the same fashion (DJ 217, DJ 223, DJ 230,
- r, DJ 235). Although Applicants have offered some testimonial evidence to show I
that each company acted independently, they have not undertaken to rebut r;
- [- or explain the massive documentary evidence to the contrary even when the
~
documents contradicted the offered testimoay.
, 40. 03 Applicants' attempt to excuse their refusal to permit Cleveland
,f
, to join CAPCO on grounds of reasonable business judgment. Mr. Slemmer, T Applicants' expert witness on pooling, testified that he could not imagine L
Applicants turning down a request for pool membership without first studying 1 L the matter (Tr. 9122). Nonetheless, Duquesne said "no" to Cleveland's { request for membership without making a study. Nor did Ohio Edison or ~ Penn Power make any engineering economic studybefore responding to the J- City's request (White Tr. 9808). CEI made no engineering economic studies c with respect to the City's request to participate in CAPCO (Williams Tr. 10,441). The record does not reflect that Toledo Edison made any such studies. l q-1 Mr. Williams testified that CEI was puzzled by the City's request j
,- 1 ll:- which he stated asked for inconsistent things. The City asked only for par- l ticipation in the CAPCO nuclear fired units. This it was asserted was incon-Ah y , , - , , , , , - - - - - - - - - , - - - - ,,m-
.F il- 5 l sistent with the CAPCO one-system plan. (Williams Tr. 10373-74) Later
- l
_ (Mr. Winiama Tr. 10430-31) Mr. Winiams was unable to state that the City
- )
was ever informed that its proposal was inconsistent with CAPCO member-
- r-
- i ?
ship or that the City would have to participate in CAPCO coal fired units f as wen as nuclear unitsl/ (Williams Tr. 10,439). Certainly Mr. Hauser's T notes of CEI's meeting with the City on October 25, 1973, to discuss the City's l ( request for membership do not reflect that the City was informed that its
,r- request was inconsistent with CAPCO membership or that the City would 1
have to participate in CAPCO coal fired units as well as nuclear units. ( (DJ 291) Those problems were not raised by CEI's August 13, 1973, letter responding to the City's August 3,1973, request. (App. 25) Interestingly, j 4 t the participation agreement offered the City in February 1974 was specifically i limited nuclear units precluding the city's participation in CAPCO coal fired units. (DJ 192) In addition Mr. Winiams admitted on cross-examination -u j that the City's August 3, 1973, proposal should be read in the alternative. (Willi =ms Tr.10485) Reading the City's request in the alternative would eliminate the aneged inconsistancies. L 40.04 The response to Pitcairn's request was based, at least in part, upon totany false rationale. Pitcairn was informed by Duquesne that i L it would have to interconnect at 345kv. Pitcairn's system was too small to justify interconnection on that basis. At the same time that Pitcairn was ~ being told that it could not join CAPCO because it lacked interconnections at 345kv, Duquesne itself had no 345kv. In fact, it was not until two years later that Duquesne had its first 345kv line (Dempler Tr. 8785-8786). l/In September 1973, the City requested participation in all of the recently announced CAPCO units which did in fact include one coal-fired unit. (Applicants' 61)
-- , - - , - - ,--4 , ,- , . _. - - , , ,
F t T' ( Another reason given for denying Pitcairn membership was that r- Pitcairn's generating units were too small. Pitcairn, it was said, could contribute no useful benefit to CAPCO because as a practical matter its r { contribution would not be measurable (Dempler Tr. 8805). To have any r affect on the plans or commitment of the CAPCO members with respect i to reserve capacity, a unit would have to be around 10mw in size ( (Dempler Tr. 8857). f There is no engineering reasons for requiring Pitcairn to inter-( connect at 345kv (Dempler Tr. 8787) and there is nothing in any CAPCO I s-agreements which would require interconnection at 345kv (Dempler I Tr. 8793, 8794, 879 6). A further indication of the unreality of the 345kv ( justification for refusing to permit Pitcairn to join CAPCO is found in Mr. Dempler's testimony. Mr. Dempler testified that even today, Duquesne a has no 345kv step-up transformers (Tr. 8850). From its own genrators located on Duquesne's system, Duquesne is not able to put any power into the CAPCO 345kv network (Tr. 8851). With regard to these units Duquesne r does not even plan to install 34 mr step-up transformers (Tr. 3853). Although Duquesne cannot put power from those units into the CAPCO transmission n grid, Duquesne does get credit for those units in CAPCO (Tr. 8856). p. y Toledo Edison had no 345kv lines until 1970 and no interconnection p, with its CAPCO partners at 345kv until 1972. (Moran Tr.10,061) Toledo Edison receives CAPCO credit of 7-8mW for a unit the power from which is , never stepped up to more than 23kv (Moran Tr.10063). m_
(. t iI The power generated at CEI's entire Lakeshore plant for which it
- (
receives CAPCO credit is never stepped up to 345kv. (Bingham Tr. 10267) CEI receives CAPCO credit for a 4 mw diesel generating unit. (Bingham Tr. 10299) _ l' _ Ohio Edison presently receives CAPCO credit for a 2. mw generating ' l- ~ (Firestone Tr.11,318) If Ohio Edison elects to continue operation of its ~ r
- { l mw unit at East Palestine, it will receive CAPCO credit for that unit.
(Firestone Tr.11317) Power from Ohio Edison generating units at Mad River, West Lorain, Edgewater, Gorge, Berger, Toronto, Niles, New r ] Castle, East Palestine, Norwalk and some Samis units is not stepped up to 345kv (Firestone Tr.11329) Power from Ohio Edison's generating
'l units at Mad River, Gorge, Norwalk and East Pclestine is not stepped up ,
i to 138ky. (Firectone Tr.11330) 4s 40.05 The adoption of the CAPCO reserve sharing formula provides
-(_
additional evidence of conspiracy and joint action. The formula which was c'
- b. devised for the CAFCO pool was not adopted until after the parties had studied its effect on a small system modeled after the City of Cleveland L
- (C-4 6). The results of that study demonstrated that for a municipal system L to join CAPCO, it would face an inordinately high reserve burden -- an economic disincentive ta join the pool.
L. Once having adopted the P/N formula, the CAPCO members did not ),- b - undertake to utilize that formula among themselves. Instead, the first
- CAPCO allocations were made arbitrarily (C-49, p.10). The purpose of the arbitrary approach was to reduce the impact of the formula on the
- i L
companies (C-49), pp.10-11). The first four units were not allocated en L, a Y '
= - - . + , , ,,-~e, ,*m--ew e s-e e w~w- - - ,- -co,,,
the basis of P/N because each company came into CAPCO with different amounts of capacity and different reserve levels. A period of time was needed for an equalization of the systems (Schaffer Tr. 8602-8603). I L Although it was recognized that for the original CAPCO members to come [~ l-into CAP CO a transition period was needed, it was also recognized that a formula should be ad. opted for the pool in dealings with municipal systems f- such as the City of Cleveland so that the companies could insist on applying 7 '; a formula, i. e. , not permit a transition period for municipalities (C-48, p. 7). i 7 The formula devised, P/N, was adopted for use by CAPCO after a transition period with full knowledge of the burden it would place en small systems. Even when adopted the formula utilized the pro rata method ? of representing units, which permitted a company with large units to carry d less reserves than it would without a pro rata approach (Schaffer Tr. 8590-85) l [ In 1972, Duquesne Light Company circulated its Proposal #2 recommending 7 a change in the method of representing units in the P/N calculations (C-5 7). j i ' Among the reasons assigned for changing the method of representing units L was that use of the pro rata method would be too favorable to new members l' joining CAPCO (C-57, p. 5). In July 1973, after the City had written to m CEI requesting membership ir CAPCO and after the other CAPCO members P L had been notified of that request, CAPCO adopted a modified form of 1 j Premise #2 which removed the benefits to new members of pro rata l L l calculations (DJ-372). Again a transition period was allowed before discarding e 1 L the pro rata method of representing units (Schaffer Tr. 8612). By the time l% s
' I~
( s'
',- pro rata was discarded, it was expected that the results for the existing F
members under Premiae #2 would nearly match pro rata (Schaffer !( Tr. 8612). 7.
\ Thus, pro rata was to be discarded since it was more favorable to new members i .nd the investment method applied under circumstances in which it was expected that for the existing CAPCO members the results b
would be about the same. Applicants attempt to justify the P/N formulation on the basis that it results in fundamental equity. Witness Firestone, who was presented -r as an expert on P/N, admitted that fundamental equity was whatever the parties agreed it was at the time (Firestone Tr. 9429-9430). Thus, the
,- results of the P/N formula may vary depending upon how the units are represented (Firestone Tr. 9428-9429). Nevertheless, the results will produce fundamental equity if the parties agree that they do (Firestone r
l Tr. 9429-9430). Accordingly, if the parties agree that equal percent of L peak load produces fundamental equity, that method, like the P/N method, n h produces fundamental equity. Obviously, the so-called fundamental equity
/* theory provides no justification for the P/N method.
L It should also be noted that Mr. Firestone admitted that, as the CAPCO members jointly install more units, the P/N method as applied
~l to them will begin tc, yield results similar to equal percent of peak load (Firestone Tr. 9282-9283).
O [f t' li !b 1
-I e'
7 schedules into residential, comrnercial and industrial based on the charac-f teristics and size of the load (Wein dt. DJ 587 p. 97).
\
The retail market is relevant because it is the dominant market for electricity. Ninety to ninety-five percent of the utilities revenues are j- derived from retail sales. It is necessary to judge the impact of all
- (
activities finally at the retail level. (Wein Tr. 6625). Retail markets govern
- ( the development of all other functions of the industry. Vrnether a monopoly
.r- exists in the retail market has consequences with respect to the alternative available elsewhere (Wein Tr. 6686). For example CEI refuses to wheel
. preference power to the city because that power could be used to compete '~
with CEIin the retail market (Rudolph deposition DJ 558 p. 215) although l in 1966 CEI did agree to wheel power for the city under the Detroit plan in N. which there would be no retail competition. (Loshing deposition DJ 560 pp. T 33-35). L
, The wholesale product market is composed of firm power sales of resale. Typically, wholesale sales are made in larger quantities and at higher voltages than are retail sales although large industrial retail cus-
.L. tomers may purchase at higher voltage and in larger quantities than do some wholesale customers. Wholesale purchases are made by electric utilities which distribute that power and resell it to retail customers. The wholesale market is composed of both " captive" customers and independent customers. d
" Captive" wholesale customers are the retail distribution systems owned by
], those who sell power in the wholesale market. Independent wholesale cus-
- tomers are the nonassociated independent customers who purchase at whole-I~
j sale for resale to ultimate users (Wein dt. DJ 587 p. 98). 1 1
-~ _
- r
;l- -
97
; The regional power exchange market is nude up of agreements ; f. between interconnected generation and transmission systems to op erate
.j
'\
their systems as an integrated generation and transmission entity. l[ Typically such agreements provide for a degree of coordinated operations 7: and development. This market exists for the purpose of reducing the !( costs of generation of firm power in order to compete effectively in the hal ] electric power markets. It provides a method of permitting each participant I to optimally combine factors of production without which the participant would experience higher costs of operation and higher costs of capacity
.i
- ( (Wein dt. DJ 587 p.100).
t The relevant geographic market for the retail market is each
- (
service area of each of the Applicants and each Applicants has a monopoly in its retail market (Wein dt. DJ 587 p.130-131).
; - Each service area of each of the Applicants also constitutes the L
relevant geographic market for the wholesale market (Wein dt. DJ 587
- p. 13 6).
The relevant geographic market for the regional power exchange market is the CCCT. The regional power exchange functions through the medium of high voltage transmission interconnections (Wein dt DJ 587 p.136). r' .u
), The geographic extent of the CAPCO regional power exchange may be viewed as the locus of gateways to and from the interconnected transmission facilities (Wein dt. DJ 582 p.142-143).
G 1
i
- a) '. Dr. Hughes' testimony was directed towards the existence of market f power by the applicants and not the use of that power. (Hughes Tr. 3686).
l[ Market power is determined by exan,ining the structure of the market and factors in the structure which would provide market power. (Hughes f Tr 3636-37). It is not necessary to define a market to measure market A power. (Hughes Tr 3719) Nevertheless Dr. Hughes did define as a relevant ); ,- product market the bulk power supply market in which he included what
/ Dr. Wein identified as the wholesale and regional power exchange markets.
1 A (Hughes dt. NRC 207 pp.14-17). Dr. Hughes agreed that Dr. Wein's market identification is equally valid for antitrust analysis. (Hughes ( Tr. 4098-99) 1 Dr. Wein's three market analysis most closely approaches the criteria set forth by Applicant's economist (Pace dt. App.190 p. 27): 3 The delineation of relevant markets should b provide a reasonable analytical context for
, the antitrust-oriented inquiry by providing a realistic picture of the alternatives avail-
.able.
THE APPLICANTS POSSESS SUBSTANTIAL b' MARKET POWER / J 42.01 Market power is the ability of a firm to influence the market
~ , to achieve results other than those that would occur in a perfectly competitive market. Market power can be exercised in a variety of ways including 4
w
- l. excluding competitors, refusals to engage in economically efficient trans-w- actions, restricting output or engaging in discriminatory market practices.
(Hughes dt. NRC 207 p. 8). In the electric power industry the basic factors affecting the market power of an entity are (1) size of the entity relative to other entities'in the market, (2) the entity's coordination arrangements with b
I
- l' 99_
}, other neighboring entities, (3) the entity's control over transmission, and 7., (4) the entity's locat on in relation to other systems. (Hughes dt. NRC 207 p.12). 'l For the purposes of antitrust analysis in this case, market shares i~ ] for applicants may be measured in terms of (1) pole miles of transmission e- lines, (2) megawatts of generating capacity and (3) megawatt hours generated.
( (Hughes dt NRC 207 p. 25). The Irarket shares of applicants individually and as a group are as follows.5/ (Hur,hes dt. NRC 207 p. 26 27 (table)): r Net Generating ( CAPCO Transmis sion Generation Capa city
'~'
(In the CCCT) 99.3% 98.4% 97.1% CEI (In its service area) 96.8% 96.6% 94.4 % Duquesne
; (Duque sne's t
service area) 100.0 % 100.0 % 100.0 % Ohio Edison - L Penn Power (Total OE-PP service area) 99.8% 99.0% 98.2% i 2 Toledo Edison (In Toledo Edison's I service ares) 99.2% h; 98.2% 96.1%
,, CEI has a verticle monopoly of generating capacity and retail sales F
p in its service territory. (Wein dt. DJ 587 p. 65). Ohio Edison and Penn Power have a verticle monopoly of generation capacity and a monopoly of wholesale and retail sales of electricity in their service areas. (Wein dt. L- DJ 587 p. 68). Toledo Edison has a verticle monopoly of generation and of wholesale and retail sales of electricity in its service area. (Wein dt DJ 587
- p. 72).
.s.
,6_/ Dr. Wein shows comparable market shares. (Wein dt. 587 pp. 65, 69, 73,
, 76) ~ l
e ^i
-100-
- (
- {. Within its service territory Duquesne is the only electric utility which gen-
.c erates, transmits and distributes power to ultimate consumers and within i its service area has a monopoly. (Wein dt. 587 pp. 74-75) f t The factors giving rise to the monopolistic powers of the Applicants ( in the firm power retail market include the effects of long-standing policies '( of acquisition and merger, the ability to take advantage of economies of
)
t economies of scale as a result of acquisitions and mergers, the further ,T development of scale economies through membership in the CAPCO pool, l' the inability of existing self-generating municipal systems to attain com-1' parable economies of scale because of their size and inability to join the 1 CAPCO pool, and legal barriers to entry. (Wein dt. DJ 587 p. 131) t Individually each Applicant has substantial market power within its 4 1 service area, and the CAPCO group has substantial market power in the I combined CAPCO companies' territory (CCCT). (Hughes dt. NRC 207 p. 27). L g Control over transmission is important because transmission is an essential resource that can constitute a bottleneck limiting the ability of the affected entity to achieve potential economies of scale, integration, anc f coordination of bulk supplies. (Hughes dt. NRC 207 p.13) 4 Applicants' control over transmission is a bottleneck that can limit r' { access by other systems to bulk power services from the CAPCO systems and other sources in the larger transmission network. (Hughes dt. NRC .-) - W 207 pp. 28-29), i t, The ability of Applicants to add nuclear plants confers an added economic advantage over systems that are unable to add nuclear capery 4 v
(-
-101-r.
j ), . because of their small size. . Nuclear units have low operating costs making
- r- them highly suitable for base load generations. Nuclear units differ also
.) ,r as to their environmental effects, safety features and reliability of fuel supply. !I (Hughes dt NRC 207 p. 30) l{ -The cumulative effect on market power of a sequence of nuclear ( plants will be greater than the impact of any one plant alone, because each lk additional nuclear unit will confer an incremental advantage.1/ The absence i of licensing conditions requiring access on reasonable terms to the benefits i
- _. of each new nuclear unit will leave Applicants free to exercise progressively 1
R , greater market power. (Hughes dt. NRC 207 pp. 31-32) ' [
- L The economic feasibility and benefits of access to bulk power services provided by nuclear units is dependent upon access to other bulk power l
services from Applicants including wheeling and reserve sharing. (Hughes ~
- f. dt. NRC 270 p. 32) 4 The monopoly power possessed by Applicants gives them the ability l L ;
to engage in successful destructive competition. (Wein dt. DJ 587 p. 25). l [ Among the forms of destructive competition recognized by economists are: 7- (a) cutthroat competition; (b) price squeeze; (c) pre-empting of markets; L (d) imposition of anticompetitive conditions; and (e) forestalling. (Wein
\'
y dt. DJ 587 pp. 26-34) Applicants have in fact engaged in. destructive
. competition.
l:. f 1/ Applicants have recognized that there are economic advantages in pur-L chasing nuclear fuel which are available only through purcha~ sing for multiple units. (DJ 162) i-l. L l L
. I~
- t-
-102-r
- l. REMEDIES 7 42.01 In order to prevent anticompetitive effects and to increase
)
A competition, the small electric systems in the CCCT must have available all of the benefits of coordination which the CAPCO pool affords, including g - joint ownership of nuclear plants, and the rates and conditions of various ( transactions should be on a plane of equality with the terms and conditions available to Applicants. (W. sin dt. DJ 587 p.144) 1 If self-generating municipal systems are refused coordination on 1. o. equitable terms, they must either build their own generation or become i .. ( full requirements customers of large suppliers. The permanent acquisition ) f of final markets formerly accomplished by merger and acquisition, can l t i now be accomplished by refusals to coordinate including refusals to offer l i ownership participation in nuclear units to small utilities on terms compa- ! rable to those available to large utilities. (Wein dt. DJ 587 p.147) Antitrust policy seeks to encourage the competitive process and I L promote the market results ordinarily achieved in competitive markets. [ One way antitrust policy acts is to limit the exercise of market power to u 7 make a powerful firm behave more nearly like a firm in a truly competitive I~' market. One of the features of competitive markets is the rich array of options that they provide. If other power systems in the CCCT area could l , - transact with the Applicants for a full array of power supply options, each l' could choose the mix of options it considered best. (Hughes dt. NRC 207 pp. 41-42) L. I w.>
I I
-103-I- 42.02 Only the City has offered proposed license conditions (C-162).
( The City's proposed license conditione, provide for access to nuclear units
\'
either by ownership or unit power participation. Applicants apparently do not oppose this provision. (Applicants' 44, Mayben Tr. 7782 et seq. ) r The City's proposed conditiens would extend the right to participate t i in CAPCO units to include + future CAPCO units. Applicants' policy commit-ments do not extend to future units. For the foreseeable future, all of the r public power entities in the CCCT in the aggregate and with full coordina-4 tion among them could not install a 900 mw nuclear unit without participa-i k ting with the Applicants. (Wein dt. DJ 587 pp.154-55) Accordingly, if the f' situation inconsistent with the antitrust laws is to be remedied, the non-Applicant entities in the CCCT must have access to future CAPCO units and t this proposed license. condition is reasonable. The City also proposes that Applicants be required to enter into an arrangement for sharing reserves on an equalized basis. (C-162 p. 3) L Applicants have opposed equalized reserve sharing -- at least with non-
- Applicant entities. Applicants presently share operating and spinning re-
,. serves on an equalized reserve basis. (Shaffer Tr. 8543; Dempler Tr. 8863-64; Williams Tr. 10,368, 10,487). Over time the P/N formula adopted by Applicants will provide a result approximating equal percent reserves. (Firestone Tr. 9280-83) Mr. Mansfield admitted that no harm would l' come to the pool from admitting members on an equalized reserve basis. (Mansfield deposition DJ 572 p. 92) ECAR has considered the P/N method b
- I
-104-
[ for reserve sharing but failed to adopt it. ( Schaffer. Tr. 8568) The a record does not reflect that any other pools have adopted the P/N method. .I (Schaffer Tr. 8568, Kampmeier Tr. 5706). There are pools which use I equalized reserves (Slemmer Tr. 9106-07, Williams Tr. 10,0431). ( Application of the P/N reserve formula would require Cleveland to carry 40%-60% reserves. ( C-4 6). Under P/N, WCOE would carry 283% reserves. (Cheesman Tr.12,236). A high economic penalty would be imposed upon a small utility by the P/N formula. (Firestone Tr. 9325-26). Applicants themselves did not use the P/N method to allocate {._ reserves with respect to the first four units because each company started y differently and a transition period wa:: needed. (Schaffer Tr. 8602-03, 1 Firestone Tr. 9426-27; Mansfield deposition DJ 572 pp. 48-49) g Applicants have suggested a third reserve sharing formula (Applicants' 44). l .\ r-Witness Mozer pointed out that Applicants' polb , commitments could require l L a party participating in nuclear generation to carry 100% reserves (Mozer i ! 1 Tr. 3327-28) and suggests this provision is unreasonable. Dr. Hughes I pointed out that the imposition of 100% reserves under Applicants' 44 could L provide a prohibitive cost on participating in nuclear facilities and impose a disproportionate share of reserves on a small entity acquiring nuclear p capacity. .(Hughes Tr. 4095-97) Mr. Kampmeier joined in the criticism 1 (._ of Applicants' reserve formula voiced by witnesses Mozer and Hughes. 5 I- (Kampmeier Tr. 6142-48) Mr. Mayben noted that the reserve method proposed by Applicants was not common in the industry and was unreasonable. 0 u i
I (
-105-
>I (Mayben Tr. 7601.02). Application of the Applicants' proposal to the 2ity if
- (
it acquires the 55mw of capacity in Davis-Besse #1 which it has requested would require City to carry 45% reserves at a time when CAPCO reserves [ were only 25% (Mayben Tr. 7609-10).
\
y City's proposal for equalized reserve sharing is appropriate and necessary to put small electric entities in the CCCT on a plane of r-equality.
] ,. City proposes that Applicants provide transmission facilities for the exchange of buk power between or among two or more n7n-Applicant entities.
7 (C-162 pp. 5-6) q The City's proposal is no different electrically or opera-7- tionally than that which CEI claims to have already agreed to do. It avoids the " common carrier problems" which Ohio Edison found objectionable. . g (White Tr. 9809) The wheeling provisions contained in Applicants' policy r commitments fail to provide access to the full range of coordinating arrange-L ments necessary if non-Applicant entities are to make effective use of nuclear l' L. power and if the situation inconsistent with the antitrust laws is to be F remedied. t Applicants presently wheel power for each other. (DJ 137; Rudolph
- l . deposition DJ 558 pp. 213-14; Masters deposition DJ 567 pp. 44-45)
Toledo Edison wheels power under the OVEC agreement. (DJ 137) CEI's contract with Ohio Power Company provides for wheeling. (Masters deposi-
)
i tion DJ 567 pp. 38-42; C-81). Pennelee wheels power to and from CEI's Seneca pumped storage hydro generating plant. (Bingham Tr. 8233). i I
Y i -106-I Allegheny Power Systems wheels power for Dusquesne. (Dempler Tr. 8860'-
\
- 62) The Southern Companies wheel power for Southecst Power Administra-tion; New York Utilities Wheel Power for PASNY; Ohio Power agreed to wheel power for the City of Cleveland (Williams Tr. 10453-56). More r companies in the industry have entered into wheeling arrangements today -
than eight years ago. (Williams Tr. 10495) The wheeling requested by r-j the City is common both in the industry and in the CCCT. The proposed license condition is reasonable and appropriate. t Citys proposed license conditions should he applied to the license ( to operate Beaver Valley unit #2 as well as to the licenses to be issued r' in this proceeding in accordance with Appeal Board's Decision of 4 June 10,1974, in Duquesne Light Company, et. al. (Beaver Valley Power r i Station unit #2) Docket No. 50-412A. In that decision, the Appeal Board E ruled that this Licensing Board has authority in these proceedings to provide relief on a " system-wide basis. Accordingly the Appeal Board f' L concluded the denial of the City's petition to intervene in the Beaver Valley proceeding would not leave the City without a remedy with respect to that s unit. It is necessary for the City to purchase portions of units becoming L operational at different times to permit each increment of nuclear power to match load growth. Applicants plan to obtain their nuclear participation from - a variety of units scheduled as nearly as possible to meet load growth. Thus it is appropriate and necessary that conditions attach to the ' s ense for Beaver Valley Power Station unit #2. m. Y m -
.(i ~'
-107-UNITED STATES OF AMERICA i
NUCLEAR REGULATORY COMMISSION r-t c Before the Atomic Safety and Licensing Board
\
The Toledo Edison Company and
) Docket Nos. 50-346A The Cleveland Electric Illuminating ) 50-500A '
- r- Company ) 50-501A
!{ (Davis-Besse ' Nuclear Power Station,) Units 1, 2 and 3) )
)
L The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) 50-441A 3- (Perry Nuclear Power Plant, ) -( Units 1 and 2) ) 7._ t. CONCLUSIONS OF LAW r-L
- 1. Under Sections 105(a) and 105(c) of the Atomic Energy Act it is I
m necessary to determine whether there exists a situation inconsistent with I the Sherman Act, Clayton Act or Section 5 of the Federal Trade Commission L
,. Act or the policies underlying those acts. ' 2. Applicants' actions must be viewed as a whole to determine if a
( situation inconsistent with the antitrust laws exists or will be maintained by grant of the requested licenses.
- 3. The Atomic Energy Act does not require that the Commission find a violation of the antitrust laws.
- 4. The burden is on the Applicants to establish a right to unconditioned
~
licens e::. u_ hi
F t
-108- .r
- 5. The relevant product markets for antitrust analysis in this pro-r-
ceeding are: (1) regional power exchange market; (2) wholesale market;
\
and (3) retail market.
?-
t 6. The relevant geographic market for the regional po-ar exchange r-market is the combined CAPCO companies' service territory (CCCT). The r~ relevant geographic markets for the wholesale and retail product markecs
)
i are the individual service territories of each of the Applicants, f
- 7. Each of the Applicants individually has monopoly power in the t.
wholesale and retail market in its service area. i_ (' 8. Each of the Applicants alone and acting in combination with its t CAPCO partners has monopoly power in the regional power exchange market. 9 Each of the Applicants has acted to maintain and extend its
' monopoly powers. ?-
- 10. Each of the Applicants deliberately acted to acquire monopoly t
power. In no instance was monopoly power thrust upon the Applicants. -{:
- 11. Each of the Applicants joined with the other Applicants in a con-spiracy to maintain their monopoly power.
r 12. Each of the Applicants has participated in a group boycott to deny l L, access to nuclear generation to other entities in the CCCT. (_ 13. Each of the Applicants has acted to deny other entities in the CCCT [ access to unique economic facilities, i. e. , nuclear generation ind transmission line s. l I l^
- 14. There exists in the relevant markets a situation inconsistent with the antitrust laws, i
H
f~ i-
-109-7 i 15. Issuance of unconditioned licenses for the Davis-Besse and
(~ ' Perry units would maintain or exacerbate the situation inconsistent with
.(
the antitrust laws.
. r-
- l- 16. No public interest reason exists why the license conditions pro-I posed by the City should not be adopted.
- 17. The license conditions proposed by the City are necessary and appropriate to alleviate the situation inconsistent with the antitrust laws
'r and to insure that access to nuclear facilities be as widespread as possible, u
i I 1 F 1 L l ..L 1 I l. r L P-L l' i iS .
.r.
(
-110-t UNITED STATES OF AMERICA I NUCLEAR REGULATORY COMMISSION s.
Before the Atomic Safety and Licensing Board .r-t [ In the Matter of )
)
The Toledo Edison Company ) Dockets Nos. 50-346A f, The Cleveland Electric Illuminating ) 50-500A I Company 50-501A
)
(Davis-Besse Nuclear Power Station, ) f, Units 1, 2 and 3) ) l-
)
_. The Cleveland Electric Illuminating ) Dockets Nos. 50-440A l Company, et al. ) 50-441/, 4 (Perry Nuclear Power Plant, ) p Units 1 and 2) ) r BRIEF OF CITY OF CLEVELAND IN SUPPORT OF PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW f' { This is a proceeding brought pursuant to Section 105c of the Atomic p Energy Act to determine whether the activities under an operating license L-for Davis-Besse Nuclear Power Station Unit 1 and construction permits r [ and operating licenses for Davis-Besse Nuclear Power Station Units 2 and 3 and Perry Plant Units 1 and 2 would create or maintain a situation incon-i sistent with the antitrust laws of the United States. If the Boardfinds that ( the Applicant's activities under the licenses would create or maintain a j situation inconsistent with the antitrust laws, the Board must, pursuant to L. Section 106 of the Act, determine whether the licenses should issue without i L conditions, should be denied or should issue only with conditions, and to determine and prescribe the conditions. Cm -
i I' , l
- (
-111-The Board's Prehearing Order No. 2, docketed July 25,1974, set . r- _ forth the issues and matters in controversy to bei tried and provided for the
{~' filing of pretrial briefs.
.r
!( Hearing commenced on December 8,1975, and continued until { July 1976. More than 70 hearinge days have been consumed in which a record ii of 12,710 pages has been compiled. More than 1,300 exhibits have been j introduced and 48 witnesses testified. T The Nuclear Regulatory Commission staff (Staff), City of Cleveland Il . (City) and Department of Justice (Department) assumed the burden of going d 't forward to present evidence demenstrating the existense of a situation incon-I sistent with the antitrust laws which would be created or maintained by the d grant of licenses not subject to conditions. A The evidence presented by City, Department and Staff shows that the jf regional power exchange functions through the medium of high voltage trans-x
- mis sion. It would be impractical for a municipal system such as Cleveland or Painesville to construct transmission facilities through the CEI system or beyond CAPCO in order to interconnect with other electric entities. None 7 of the municipal or REA' cooperatives operating in the CCCT owns any 345kv !~
backbone transmission. [ Applicants have a monopoly of generating capacity and net generation
.. in the CCCT. Applicants - own 97.1 percent of the net dependable generating capacity in the CCCT and a account for 98.4 percent of the net generation in W
the CCCT. All of the large generating units providing economies of scale found in the CCCT are owned by the Applicants. rm o ,
F ~- l'
-112-r-
4 CAPCO is the only power pool for coordinated operations and develop-(- ment in the CCCT. It operates in the contractual framework of the CAPCO I Memorandum of Understanding and subsequent CAPCO agreements. The l' ] coordination which occurs in CAPCO is made possible by the existence of the r hi,vh vo'; age transmission lines owned by the CAPCO companies. e CAPCO provides Applicants with essentially all of the potential benefits that can be obtained from coordinated operations and development. f Nuclear poweris among the most important power supply alterna-1 tives available today for base load power. There is a particular1v 9trong need for cc, ordination when a utility has a nuclear power plant such that a I utility installing a large nuclear plant such as Perry and Davis-Besse finds ., l
, coordination essential. A strong relationship exists between a utility's l nuclear power plants and its coordination arrangements. Nuclear power r ; magnifies the need for access to coordination.
s.
-. A small electric utility cannot participate in nuclear power without access to coordination. From a practical standpoint, small electric utilities in the CCC1 can achieve access to coordination and nuclear power only 7- through arrangements with the Applicants. Applicants control the power supply i-options available to other electric utilities in the CCCT and can, if they
[ choose, effectively prevent such small electric utilities from developing ,
; and/or maintaining reliable ano economic power supply systems.
j-L- L
r (
-113-I
- p THE LAW APPLICABLE TO THESE PROCEEDINGS
~l The ultimate legal issue to be decided in these proceedings is whether .r [ the granting of an unconditioned license to Applicants f2r operation of Davis-Besse Unit 1 and for construction of Perry Units I and 2 and Davis-Besse ; t Unit 2 and 3 would create or maintain a situation inconsistent with the anti-8 trust laws of the United States. / Although the statutory reference to a r " situation inconsistent with the antitrust laws" is not defined in the statute, ' i. it clearly indicates that something less than a violation of the antitrust laws 1 4 is required. Had Congress intended to require a showing of a violation of i the antitrust laws, it could easily have used language referring to a violation ' l. in place of the chosen wording " inconsistent with. " In addition to the language of the statute, the legislative history of
- L
[ the Act also shows that something less than a violation is intended by the _ phrase " inconsistent with. " House Report No. 91-1470 (U.S. Code Con-gressional and Administrative News (91st Congress 2nd Session) pp. 4981, 5011) states:
- The legislation proposed by the committee provides for a finding by the Commission "as to whether the activities under the license would create or main-y tain a situation inconsistent with the antitrust laws j- as specified in Section 105a. " The concept of cer-tainty of contravention of the antitrust laws or the policies clearly underlying these laws is not intended to be implicit in the standard; nor is mere possi-bility of inconsistency. It is intended that the p finding be based on reasonable probability of 8 / Atomic Energy Act $105c(5).
i L
T I -114-T of contravention of the antitrust laws. It is intended I that, in effect the Commission will conclude whether,
, in its judgment, it is reasonably probable that the activities under the license would, when the license is I
issued or thereafter, be inconsistent with any of the
. _ antitrust laws or the policies clearly underlying these laws.
- ,_ The " situation" referred to in the statute refers to a state or condi-tion at a given point in time not to isolated examples of specific anticom-r q petitive acts. The Atomic Safety and LI::ensing Appeals Board in Kansas m Gas and Electric Co. and Kansas City Power and Light Co. (Wolf Creek Generating Station, Unit No. 1) discussed the meaning of " situation"
, as follows: 2 /
I . . . the legislative hist'ory of section 105(c) does not support the applicant's argument that the Commission must consider the operations of each nuclear plant in isolation when making its prelicensing antitrust t review. On the contrary, the Conunission's statutory obligation is to weigh the anticompetitive r situation --which to us means that operations in c an " air tight chamber" were not intended. A review conducted under the artificial restraints suggested by the applicant would allow long understood and well recognized patterns of anticompetitive conduct to evade Commission notice. (emphasis in original) F L Another Atomic Safety and Licensing Board has pointed out ( Alabama Power Company, 6 AEC 85, 86): L. It should be emphasized that the statute does not require us to determine whether the Applicant's H " activities under the license," or any other s ~ activities of Applicant are or are not "inconsis-tent" with those laws. It is the competitive " sit-j {- uation" as a whole (with an emphasis on the j_ structure of the market, as the word " situation" clearly suggest), not particular individual parts M thereof, which we must measure. H 9] ALAB-279, NRCI-7516, 559, 572 (1975) - L 1 m--._
I i
-1 15-The antitrust laws referred to in the Atomic F_nergy Act which are
, to be used by the Commission as measuring sticks in deternuning whether
- I there is a situation inconsistent include the Sherman Act, the Clayton Act,
^{ and Section 5 of the Federal Trade Commission Act. Section 5 of the
.r Federal Trade Commission Act makes unlawful unfair methods of competition in commerce (15 U. S. C. $45(a)(1)). The unfair methods of competition
- r ij made unlawful by Section 5 include both conduct which amounts to a violation of the Sherman or Clayton Acts and conduct which, not amounting to a
- l violation of those Acts, is, nonetheless, unfair or, if allowed to conti).ue,
- e
'[ will develop into conduct violative of those Acts. Fashion Originator's r Guild of America v. FTC 312 U. S. 457 (1941). Section 5 is intended to
. "stop in their incipiency acts and practices which, when full blown, would r
violate'those Acts "[Sherman and Clayton Acts]. FTC v. Motion Picture Advertising Service Co. , Inc. , 344 U. S. 392, 394-95 (1953) . As was pointed out in FTC v. Cement Institute, 333 U. S. 683, 694 (1948): T . . . all conduct violative of the Sherman Act may L likewise come within the unfair trade practice 9 prohibitions of the Federal Trade Commission Act, the converse is not necessarily true. It L has long been recognized that there are many unfair methods of competition that do not assume the proportions of Sherman Act violations. Neither is Section 5 limited by those unfair methods of competition
' condemned at common law. FTC v. Motion Picture Advertising Service w
Co. Inc. , supra. - Section 5 reaches out to make unlawful conduct that runs counter to the public policy declared in the Federal Trade Commission Act.
- Atlantic Refining Co. v. FTC, 381 U. S. 357 (19 65). It condems trade u i
r
~116-practices which conflict with the basic policies of the Sherman and Clayton r Acts even when the practices do not actually violate those Acts. FTC v.
t
)
Brown Shoe , 384 U. S. 316 (1966). Although they do not limit the scope of Section 5, the Sherman and r Clayton Acts and the decisions defining them provides guides as to conduct l
- proscribed by Section 5.
.r
- l In Northern Pacific Railroad v. United States,356 U. S.1 (1958) the Supreme Court ennunciated the underlying premise of the Sherman Act I
at pages 4 and 5: r- -l l The Sherman Act was designed to be a comprehensive charter of economic liberty aimv i at preserving free F and unfettered competition as the rule of trade. It L rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of T our resources, the lowest prices, the highest quality L and greatest material progress, while at the same time providing an environment conducive to the preservation f of our democratic, political and social institutions.
- ' But even were that premise open to question, the policy
, unequivocally laid down by the Act is competition. b License conditions in this case must then be imposed if the Board }r finds a situation which in its incipiency runs counter to the public policy in m
. favor of competition.
II
- r
, THE RELEVANT MARKETS Section 2 of the Sherman Act 10/ makes it unlawful to:
a
. . . monopolize, or attempt to monopolize, or combine
- r. or conspire to monopolize any part of trade or commerce among the several states.
- _ 10/ 15 USCA $2.
W
F. i -117- l Monopoly has been defined as the ability to fix or control prices in, t or exclude competition from a relevant market. United States v. E. I. duPont de Nemours Co., 351 U. S. 377,100 L ed 1264, 76 S. Ct. 944 (1956). r' ,; The forbidden monopoly power must be appraised in terms of the market ,
- for the product. In the duPont case, supra, the Supreme Court said, at page 395:
- r- 1 In considering what is the relevant market for determining the control of price and competi-p tion, no more definite rule can be declared than !
that commodities reasonable interchangeable by consumers for the same purposes make up that p "part of trade or commerce" monopolization of
! which may be illegal.
r The relevant product for market definition need not be a single
' l
[ . item or service but may be a group of products or services comprising
! a line of commerce. In United Stat 3 v. Philadelnhia National Bank. 374
[ U. S. 321 (1963) the Supreme Court found that the entire range of commer-L. cial banking services including checking accountr., personal loans, and U savings accounts constituted a single line of commerce which was the f' relevant product . L In this case the entire range of coordinating transactions in the ( regional power exchange make up the relevant line of commerce. It makes r-1 no more difference that emergency power is not readily substitutable for L short term sales for s'.aggaring construction in this case than it did in Philadelphia National Bank that checking accounts are not substitutable for personal loans. As the court in Philadelnhia National Bank pointed out, the product market must be sufficiently inclusive to be meaningful in terms of l ~-
" trade realities. " I
- p-
- (
-118-
- n
'i
.g. In this case the relevant product markets as defined by Dr. Wein 1
1 are the retail market, wholesale power market, and the regional power n [- exchange market. The first two are distinct end product markets while
- 7. the latter, the regional power exchange market, is a market for factors
-l of production. .. p 1 The test for the geographic boundaries of the relevant product r-i market was defined by the court in Philadelphia National Bank at page 357 L. r-as not where the parties do business or compete: '4 L . . . but where, within the area of competitive overlap, the effect of the merger on competition will be direct and immediate. . . . This depends upon "the geo-graphic structure of supplier-customer relations. 4 f And at page 359 the Court said: t
. . . the area of effective competition in the known line f'L- of commerce must be chartered by careful selection of the market area in which the seller operates, and to which the purchaser can practicably turn for sunplies . . . . [ Emphasis supplied by the Court]
m b-APPLICANTS HAVE-MONOPOLIZED THE RELEVANT MARKETS I L Having defined the relevant product and geographic markets the
- 7. . next step is to determine how to measure Applicants' monopolization or
}
attempt to monopolize those markets. c'
) In determining whether monopoly exists, it is not material whether 7- prices are raised or that competition actually is excluded but that the power L.
e
% ae+
-,,-----m-. -+-->
'r 1
-1 19-exists to raise prices and exclude competition. American Tobacco v.
r u United States, 328 U. S. 781 (1946) . -i The Court in United States v. Grinnell Corn. , 384 U. S. 563, 570-71 (1966) pointed out that:
,,r The offense of monopoly under $2 of the Sherman Act a has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distin-
't guished from the growth or development of a superior product, business acumen or historic F accident. Possession of monopoly power in the relevant market can be inferred i t from a predominant share of the market, Grinnell, supra, or frcm control over a bottleneck facility which affords the controlling company the power f(' to exclude competition or set prices. United States v. Otter Tail Power Company, 331 F. Supp. 54, aff'd in part, 410 U. S. 366 (1973). r-9 While there is no fixed rule as to what constitutes a predominant L share of the market the courts have provided some guidaneg. A 90% share of the aluminum marked constitutes monopoly power. United States v. f Aluminum Co. of America. 148 F. 2d 416 (1945). Control of 30% of L - commercial banking in the relevant market was unlawful dominance in 7 i
Philadelphia National Bank. suura. A 65% market share with the remainder i il p of the market divided among 50 other companies was held to be monopoly power in United States v. Besser Manufacturing Co. 96 F. Supp. 304, aff'd, E 343 U. S. 444 (1952). In United Banana Co. v. United Fruit Co. (245 F. Supp.
ys L 161, aff'd, 362 F. 2d 149. (1966), a 70% share of the market constituted mono-poly. The Supreme Court in Grinnell, supra, held that the same market L criteria used in merger cases should be used in Section 2 monopolization cases. ! l l
.[' 1
-120- .r
- { Applicants alone and together control over 90% of the relevant
- r- markets. Their market shares alone compel a finding of monopoly power.
- t-While Applicants have argued that because this is a regulated industry market shares are not as significant as they are in other industries, rm the re is no reason why this should be for as is demonstrated elsewhere a
in this brief and proposed findings of fact reg tlation neither caused nor 'l j hindered applicants acquisition of market shares in excess of 90%. Neither [ are Applicants fully regulated in the use of their market power. ( As dominant firms possessing monopoly power in the relevant markets, f~ l- the limits of lawful business activities of Applicants are more narrowly circumscribed than are the acts of firms not possessing monopoly powers. United States v. Aluminum Co. of America, suora: The Peelers Co. , ) -- 65 FTC 799 (1964), enforced in part sub nom. , La Peyre v. FTC 366 F. (* 2d 117 (5th Cir.1966). L. The second element of the offense of monopolization, i. e. , the willful acquisition or maintenance of that power, can be established by evidence of " transactions neutral on their face" that have an exclusionary p effect on the market without specific evidence of anticompetitive motivation. (' United States v. Aluminum Co. of America. surj United States v. United r* y Shoe Machinery Corp. , 110 F. Supp. 295, aff'd per curiam, 347 U. S. f, 1 361 (1954). L. It is not necessary to show that Applicants deliberately acted to .) y create a monopoly. The Supreme Court said in United States v. Griffith, 334 U. S. 100, 92 L. ~ Ed. 123 6, 68 S. Ct. 441 (1948), at pages 105-106, h=sO that: _ _ , _ , _ , , . - , - - -T Y' * ""'" - ' ' ' '
i (
-1 21-
- ( It is, however, not always necessary to find a speci-fic intent to restrain trade or build a monopoly in r- order to find that the antitrust laws have been violated; I
it is sufficient that a restraint of trade or monopoly results as a consequence of a defendant's conduct or e business arrangements. 'k Certainly, Applicants' monopoly is the consequence of a conscious, aggres-p ., ( sive policy of acquiring competing public and private electric entities in f' Ohio and Pennsylvania and acquiring the generating capacity of various '( industrial firms. Dr. Wein's testimony demonstrates that Applicant's V i, monopoly was not the inevitable result of natural monopoly forces or
,P superior business acumen.
l The economien, of large scale generation and transmission which are T* I inherent in the electric utility industry could have been obtained by a variety [ of organizational forms which would not have resulted in the applicants 1.- acquiring monopoly power. (Wein dt. DJ 582 pp. 53-56). It was not inevitable that applicants should achieve don,inance through acquisition and 1 merger of the many small entities which once existed in the CCCT.
, It was not inevzcable that applicants should anticipate increases in the
(- demand for power and install new generating capacity to meet that demand. ( It was not inevitable that CEI, Toledo Edison and Ohio Edison should allocate territories as among themselves and with Ohio Power and other investor i* owned utilities. It was not inevitable that Ohio Edison, Toledo Edison and f C Penn Power should impose territorial allocations on their wholesale municipal custome>< . It was not inevitable that Toledo Edison and Ohio Edison join with w l other investor-owned utilities to place the 90-day provision in the Buckeye 5 W
- -- -, ., m n,-,
r -) t -122-f agreement. It was not inevitable that Toledo Edison would refuse to .,.. waive the 90-day rule when requested to do so by Napoleon. It was not 1 inevitable that Duquesne and Toledo Edison would refuse to sell power at wholesale to municipal systems they wished to acquire. It was not inevitable that CEI would refuse to interconnect in parallel with the City 7-( of Cleveland without price fixing until ordered to do so by the FPC. It was 7 ] not inevitable that no municipal electric systems be invited ta join CAPCO. It was not inevitable that the requests of Pitcairn and Cleveland to join CAPCO were denied. It was not inevitable that CEI refused to wheel and p '(, continues to refuse to wheel power for the City. It was not inevitable that Ohio Edison refused to wheel for WCOE. It was not inevitable that Ohio {
\.
Edison refused to wheel for Buckeye and delayed delivery of Buckeye power f, to cooperatives in its territory by two years. It was not inevitable that
~
Duquesne would refuse to interconnect with Pitcairn. It was not inevitable t.. that CEI would refuse to sell maintenance power to the city. It was not inevitable that CEI would refuse to wheel for Painesville. It was not inevitable that Applicants would refuse to grant municipal systems in the L. CCCT access to nuclear generating unics on reasonable terms and condi-l' tions. Nor were any of these things compelled by State or Federal law or policy or by any regulatory conur.ission. l It is not necessary to show a use of monopoly power to demonstrate l a violation of Section 2 of the Sherman Act. The Court in United States v.
~
Griffith, supra, said, at pages 106-107: So it is that monopoly power, whether lawfully or unlawfully acquired, may itself constitute an evil ant 1
r-(. -123- . ,r - stand condemned under $2 even though it remains e- unexercis ed. For $2 of the Act is aimed, inter alia, i at the acquisition or retention of effective market control.... Hence the existence of power "to ex-e clude competition when it is desired to do so" is it- .( self a violation of $2, provided it is coupled with the purpose or intent to exercise that power. . . . .(' ( In Gamco. Inc. v. Providence Fruit and Produce Building, 194 F. ( 2d 484 (CA 1,1952), the Court said at pages 486-487 that: '
- (
The Sherman Act condemns the power which makes pricing abuses possible as well as the abuse itself. s-It is sufficient that monopoly results from a defendant's conduct 7_ ( to prove an intent to monopolize. United States v. Griffith, supra. I Moreover none of the transactions engaged in by Applicants need be illegal (
,, in and of themselves if they are part of a course of conduct to acquire or l
T- mainte.in a monopoly. American Tobacco v. United States 328 U. S. 781 1 a.
) (1946). Accordingly individual element's of an ant 1 competitive situation may
, not be singled outfor evaluation on an item by item basis; for as a group, they may comprise an unlawful monopolization although each might be lawful
~
, standing alone. United States v. International Business Machines,1975 CCH
, Trade Case Par. 60,495.
I (' Merely showing the exclusionary effect of the policies and practices I
- g. engaged in by a company possessing monopoly power may prove the offense of monopolization. United States v. Aluminum Company of America, suora.
I u k 1 W. v- -
.I ^! 't
-124-r~ } As the court pointed out in United States v. United Shoe Ma chinerv Corp., ,. 110 F. Supp. 295 at 346, " Defendant having willed the means, has willed
- s the end. "
I .( One of the principle methods used by applicants to maintain their 7 monopoly power in the relevant nurkets is selective refusals to deal. If 1 a firm possess monopoly power a selective refusal to deal by that firm can p '(. be exclusionary and violate section 2 of the Sherman Act. In Eastman Kodak Co. v. Southern Photo Materials Co. , 273 U. S. 359(1927), Kodak which at one time sold at wholesale to a number of r 1 independent firms decided to perform the wholesale function itself. Kodak f was successful in acquiring all of the wholesalers in an area except Southern Photo Materials. Kodak then refused to sell to Southern at a.whole-sale discount offering instead to sell to Southern at the retail price. Although no direct evidence of a Kodak's intent was presented at trial, it was held that Kodak's refusals to sell to Southern at a price which would permit Southern L to compete for sales to retailers was illegal monopolization. I Selective refuaals to deal utilized by a party having a monopoly in Li one market to extendits monopoly to another market have been held to consti-a tute illegal monopolization. Packaged Programs. Inc. v. Westinghouse Broadca sting. 225 F. 2d 708 (3d Cir.1958); Six "wenty-Nine Productions v. Rollins Telecasting Inc. , 365 F2d 478 (5th Cir. 1966); Lorain Journal Co. v. I ^~' United States , 342 U. S.143, (1951). ( y . f emw i
F
-125-In Otter Tail Power Co. v. United States, 331 F. Supp. 54, aff'd
,. in part, 410 U. S. 366 (1973), the court was concerned with monopalization S and attempt to monopolize by an integrated generation, transmission and distribution electric utility. Otter Tail owned the only subtransmission system 7 available for delivering electric power to distribution systems in the area. (- When a municipality served at retail by Otter Tail undertook to establish C [ its own retail distribution system, Otter Tail refused to either sell power to the municipality at wholesale or to wheel power to the municipality from other bulk power suppliers. The municipality was left with the alternative 4 -. 1 of (1) establishing a high cost isolated generating sfstem; or (2) abandoning ft its plan to become a municipal distributor of power. Otter Tail argued that its actions were necessary to maintain its business and that failure to so L act would have caused the ultimate loss of all of its retail bucines. The (' (J Court found Otter Tail's defense unpersuasive and held that Otter Tail possessed monopoly power in the relevant market and its refusale to deal in orler to 1 maintain its monopoly power were unlawful. l 1 CEI's refusal to wheel PASNY power for delivery to the City because L 7 doing so would be injurious to CEI's competitive position in the retail market 1 I is clearly an unlawful act of monopolization. If a company controls a facAlity which cannot practicably be duplicated and access to which is a significant factor in an entities ability compete, a unilateral refusal to deal may be violative of Section 2 of the Sherman Act without any showing of monopoly power in the relevant market. Control of m f b' k
-r -( - I26-the " bottleneck" facility by itself constitutes monopoly power. Denying . , . . access to the bottleneck facility to destroy actual or potential competition .i I is illegal. United States v. Terminal Railroad Association, 224 U. S. 383 (1912); Associated Press v. United States, 326 U. S.1 (1945); Silver v. 7 New York Stock Exchange, 373 U. S. 341, reh. den. 375 U.S. 870 (1963); Gamco, Inc. , v. Providence Fruit and Produce Building, Inc., 194 F2d ] 484, cert. denied 344 U.S. 817 (1952); Otter Tail, supra. It is interesting to note that in Otter Tail the " bottleneck" facility was the subtransmission lines owned solely by Otter Tail. Thus, a " bottleneck" facility may be owned -( . jointly or individually. In this case both transmission lines and nuclear generating facilities are unique facilities which cannot practicably be reproduced. Applicants lL have offered evidence to a how that City could have constructed its own transmission lines and therefore no bottleneck exists. Assuming the evidence n did show that the City could construct its cwn transmission lines, an assumption City believes is cont. wry to the evidence,there is no es : ence that the cost to the City of constructing its ,wn transmission system would somehow be less than utilizing the existing transmission system of CEI. b It is not necessary under the " bottleneck' cases u2at the facility o( cannot be duplicated. It is enough that w..hout access to the facility the excluded -
, entity is at a competitive disadvantage. In Associated Press v. United States, \,
supra at 17-18 the Supreme Court quoted with approval Judge Learned Hand's L. . statement: Most monopolies, like most potents, give control over only some means of production for which there is a substitute; the possessor enjoys an advantage t L. ,
1 l 4
-127-over his competitors, but he can seldom shut them out altogether; his monopoly is measured by the
,e handicap he can impose . . . . And yet that advantage
-( alone may make a monopoly unlawful.
" In Gamco, Inc. v. Providence Fruit and Produce Building, Inc. , supra, the Court said at page 486:
r
. . . a monopolized resource seldom lacks substitutes; alternatives will not excuse monopolization . . . to C impose upon plaintiff the additional expense of develop-( ing another site, attracting buyers and transhipping his fruit and produce by truck is clearly to extract a mono-polist's advantage.
Applicants have argued that giving municipalities access to Applicants' k transmission lines and nuclear generating facilities would permit the muni-cipalities to exploit unfairly their tax advantages. It is by no means certain
, that Applicants do not enjoy tax advantages of equal or greater magnitude.
1 b The total Federalincome taxes paid by the Applicants for the last couple of years has been in the range of 2% - 4% of revenues. (Kampmeier dt. DJ 450
.. p. 29) Applicants expect to realize a very substantialinvestment tax credit i
L when Davis-Besse Unit #1 becomes operational (Williams Tr. 10,526). Even I ( if it were true that access to the " bottleneck" facilities would permit muni-(- cipalities to exploit their tax advantage, that fact is no defense to a charge of b monopolizatiou. The defense rrised by Appliants was considered by the Court in American Federation of Tobacco Growers v. Neal,183 F2d 869 (1950), f wherein the Court said at page 872: I To say that a board of trade whose members have mono-polistic control of a market may exclude an outsider who t wishes to compete therein merely because he has an ad-vantage in taxes or construction costs is to advance a proposition that has no support in any decision with which L we are familiar, and none has been cited in support of it. . I L.
L-
-128- ' 'r -) A restraint of trade involving the elimination of a competitor is to be deemed reasonable or unreason-
.- able on the basis of matters affecting the trade itself,
;{ not on the relative cost of doing business of the persons engaged in competition. One of the great values of competition is that it encourages those who
] compete to reduce costs and lower prices and thus pass on the saving to the public; and the bane of
(' monopoly is that it perpetuates high costs and
- ( uneconomic practice at the expense of the public.
( As to the contention that the restraint of trade here !( involved was a reasonable one, it is a sufficient answer that the effect of the action of the defendants ( was to exclude a competitor from a substantial
- l market in interstate commerce and it is well settled that such exclusion is unreasonable per se.
/' .)
i( Applicants have engaged in other exclusionary practices which are unlawful. Applicants have engaged in territorial allocations which are per se violations of the Sherman Act. Northern Pacific Railway Company v. O t United States, 356 U.S.1 (1958). United States v. Topco Associates, 405 U. S. 596 (1972). Applicants have violated Sectica 1 of the Sherman Act i by contracting with their wholesale customers to limit the areas or persons L~ with which the wholesaler could sell the power purchased from applicants. r- { United States v. Arnold, Schwinn and Co., 388 U. S. 365 (1967). United States v. General Electric Co. 272 U. S. 476. CEI engaged in a tying sale when it required the City to sign a h' .. contract for street lighting in order to be anowed to purchase emergency power over the 69kv line. Such tying arrangements are per se violations
'~
of the Sherman Act. Northern Pacific Railway Company v. United States, supra. Ohio Edison and Toledo Edison have imposed a price squeeze on their municipal wholesale customers in violation of the Sherman Act. United States v. *
~
Aluminum Company of America, suora. s' s.
-129-f Applicants have, through CAPCO, engaged in a group boycott in
,. refusing to engage in pooling arrangements with the City a d Pitcairn.
I i Group boycotts or concerted refusals to deal have long been held to violate the Sherman Act. Klors Inc. v. Broadway Hale Stores, Inc. 359 U. S. 207(1959).
.p IV CEI HAS DELIBERATELY SOUGHT MONOPOLY
- r POWER AND HAS ACTED TO MAINTAIN THAT POWER a
- (- CEI has a long history of attempts to eliminate the cities of Cleveland
] and Painesville as competitors for retail sales of electricity in its service j area. In this portion of its brief, the City will describe first CEI's use of its monopoly power to exclude the cities of Cleveland and Paines-ville from the regional power exchange marke : and second CEI's use of its 'T
( n onopoly power in an attempt to reduce and eliminate the City of Cleveland's [ electric system. i. Within its service area, CEI owns 632 of the 653, or 96. 8 percent, t [ pole miles of transmission with a nominal rating of 66kv and above. It accounts i for 96. 6 percent of the net generation within its service area. It owns L: - 3,896mW of the 4,128mW, or 94.4 percent, of net dependable generating L capacity in its service area. Through acquisition or merger it has acquired i all electric utility systems in its service area except those of the cities of 4. Cleveland and Painesville. CEI's transmission system virtually sourrounds L the electric systems of the two cities. [ Cleveland can obtain access to the regional power exchange market s only by having transmission connections with other electric systems. Such L l 1 l
I
-130-interconnections can be accomplished by Cleveland by constructing its own transmission or by obtaining access to CEI's transmission. In the early I
1960's CEI successfully opposed construction by the City of a transmission line which would have interconnected the electric systems of the cities of
- j. Cleveland, Painesville and Orrville. It would now be impractical for Cleveland to construct its own transmission lines to obtain access to the
- r regional power exchange market. Thus, Cleveland cannot participate in the g' regional power exchange market unless it obtains access to CEI and CAPCO
.(
transmission facilities. ! {' i Obviously, before Cleveland could obtain access to the regional power exchange through the medium of CEI's transmission facilities, the City first had to establish a synchronous interconnection at transmission voltage with i (. C EI. At all times relevant to these proceedings CEI has attempted to avoid [~ "like the plague" a synchronous interconnection with the City except upon ( terms and conditions which were anticompetitive. 5-L In 1962, Mr. Lindseth, of CEI, wrote to Mayor Locher, of Cleveland, offering an interconnection predicated on two conditions: (i) that the City increase its rates to the level of rates being charged by CEI and (ii) that the City lower its rates for street lighting service sold to the City. CEI, I L intending to forestallinstallation of generating capacity by the City, offered to sell the City firm power, thus alleviating the need for the City to install its proposed 85 Mw generating unit. CEI also offered to provide mutual I { standby, and economy energy. Because of CEI's insistance on price fixing, the City declined to interconnect with CEI. lw
-131-On June 21, 1963, Mr. Lindseth again wrote to Mr. Locher opposing the City's plans to interconnect with Painesvine and Orrvine and to instau an 85mW generating unit. Mr. Lindseth took the occasion to offer once more an interconnection predicated upon price fixing.
r- On February 12 and 17,1965, Mr. Besse, who had succeeded (- Mr. Lindseth as President of CEI, wrote to Mayor Locher and offered to T ( interconnect with the City if only the City would agree to a price fixing scheme. Again the City declined CEI's offer to interconnect on an anticompetitive basis. lt. { Mr. Besse repeated his offer of an interconnection contingent upon a price p
- ( fixing agreement on July 14, 1966.
In March of 1968, Mr. Hauser informed a meeting of CEI's "MELP Task Force" that it was'bfficial policy"that CEI would not interconnect with 3-(. the City unless the City would agree to fix its rates at the level of rates [' maintained by CEL Thus, at a time when CAPCO was taking the position L. that sman electric utilities could participate through purchases of power from M Applicants, CEI was refusing even to interconnect with Cleveland except I on terms the City could not accept. U In early 1969, the City was faced with the problem of taking some of b its boilers out of service to instan precipitators. Again the City sought an interconnection with CEI. This time CEI decided that public opinion would demand that CEI provide some sort of assistance. CEI had previously detemined L that the simplest, cheapest method interconnecting with the City was a 60mW 69kv interconnection. Instead CEI offered the City an likv load transfer { L s cheme. Although the City's engineers wanted a permanent. synchronous D g [ - 1 L.
- y .-
132-
~
interconnection, CEI felt that it had been successful in finding a way to give (~ the City " limited, temporary help without parallel operation. " In June of 1969, Mr. Loshing, Treasurer of CEI, wrote to Mr. Howley, 'I ( Vice President and General Counsel of CEI, reporting on the financial status , lf of the City's electric system and its need for additional revenue. Mr. Loshing -( noted that a 80mW interconnection with the City providing backup for the I '( City's 85mW unit could result in annual savings to the City of $600,000 a year.
~
He also pointed out that under cleverly designed rates the City could be i, . charged $1,200,000 a year for the interconnection, thereby increasing the 1- City electric system's operating deficit. Mr. Loshing concluded that there I were three courses of action open to CEI: I
- 1. Avoid an interconnection and run the risk of en FPC dictated interconnection, hoping that I
the financial and service problems will elimi-nate MELP as a competitive threat. L
- 2. Take the initiative in establishing an inter-7 connection with proper standby charges, to give them reliability but increase the finan-
"{ ' cial pressure on them. y 3. Make an all out effort to purchase MELP now while reliability and financial pressures are p still present. 1', The City had little desire to interconnect on the basis of the load p ( transfer scheme proposed by CEI and no agreement was concluded. Then 4 on December 21, 1969, the City experienced a forced outage of its number C 11 boiler which was the source of steam to its 85mW turbine generator unit. J t The City had no emergency interconnection and the loss of the 85mW unit , caused system shut down. u v-+. --_.,u -- w. - % -
1
-1 33-
- )- Due to the emergency situation of its electric system, the City was forced to enter into an agreement with CEI providing for likv transfer U
service and a promise to negotiate in good faith for a permanent synchronous interconneetien. r At the same time CEI was studying methods of interconnecting which i' would solve the City's immediate problem but still avoid a permanent r
; parallel interconnection "like the plague. " CEI's dilemma was that if it r offered too little the City might resort to the FPC and obtain an interconnection Y
which would be "most distasteful" to CEI, and, on the other hand, CEI did F t not wish to offer an interconnection whic.!, could provide backup for the City's r 85mW unit. The proposed solution was a temporary 69kv intertie limited i to 40mVa. The 69kv intertie was suggested two years later during hearings f i before the FPC for a permanent intez connection. f' The likv load transfer service was perfected in February 1970, L. but no progress was made toward negotiating a permanent parallel inter-F L connection. On May 13,1971, in FPC Docket No. E-7631, Cleveland filed a complaint against CEI requesting the FPC to order a permanent parallel 6 interconnection between CEI and the City. Again CEI reacted swiftly and on b May 21, 1971, filed a notice of cancellation and termination of the load r transfer scheme. The FPC suspended CEI's notice of cancellation and 6 termination until May 17, 1972, consolidated it with Cleveland's complaint proceeding, and set them for hearing. P On February 15, 1972, a CEI brainstorming session developed an interconnection plan which it was believed would " maximize the burden" on the City. The plan was to cause any permanent interconnection to come i.
-1 34 -
i~ j about as a two-step process: (i) a temporary 69kv intertie followed by 3 (ii) a permanent synchronous 138kv intertie. This proposal was discussed i with President Karl Rudolph of CEI and may have been one of CEI's F ( motivations for ultimately proposing such a two-step process of inter-r conne ction. t On February 7,1972, the City e:cperienced another outage of its I ( 85mW unit and immediately requested the FPC to order an emergency interconnection between CEI and the City. By Order of March 8,1972, the FPC ordered an immediate temporary emergency nonsynchronous 69kv inter-F ( connection. On January 11, 1973, the FPC issued its final opinion ordering I a 138kv permanent synchronous interconnection. ( In September 1972, the 69kv nonsynchronous interconnection was i l perfected. CEI refused to permit the 69kv intertie to be used to backup I the City's generation but instead required that it be used as a load transfer L point. Limiting the 69kv to use as a load transfer point was seen by CEI I as a means of delaying installation of the 138kv synchronous interconnection. r In order to further maintain its monopoly power in the regional L , power exchange market and as a direct exercise of that power, CEI has L~ refused to wheel power to the City. On August 30, 1973, CEI refused P g to wheel power available to the City from the Power Authority of the State of New York. On August 18, 1975, CEI refused to wheel power available L from Buckeye, Inc. , on a seasonal basis to the City. CEI's adamant refusal i L to wheel power to the City.of Cleveland has also prevented the City from purchasing power from the electric system of the City of Richmond, Indiana. M-9
P
-135-Indiana & Michigan Electric Company, which would wheel the power from p the City of Richm'ond to Ohio Power who in turn would wheel the power to i
CEI, has refused to wheel the power unless CEI first agrees to wheel the power. .r CEI has thus far succeeded in maintaining and even strengthening
- (
its monopoly power in the regional power exchange market. It has been r e
- i equally successful in strengthening its monopoly power in the wholesale and reatail power markets.
.t Most of the wholesale power market in CEI's service area is composed .F - of CEI's captive customers. CEI's opposition to an interconnection between I Cleveland and Painesville and its refusal to wheel power preclude wholesale L sales between Cleveland and Painesville. CEI has long had a desire to eliminate the municipal electric systems E in Cleveland and Painesville. CEI has made offers to purchase the Cleveland L 7 electric system and has made numerous studies with regard to acquisition of the electric properties of the City of Cleveland. [ g CEI has acted on many fronts to accomplish its objective of acquiring
; the City's electric system. During the period of the mid-1960's when the City's generating reserves w 2re low, the City was reluctant to take units n
[. out of service for normal ma*ntenance. As a result, from 1965 on the ) l { City began to experience reliability problems. These problems worsened L due to lack of back up for the City's 85mW unit when it became operational ( [ in 1967. This situation could have been avoided if the City had been able to
, obtain a synchronous interconnection with CEI. To take advantage of the t.
f
h.
-136-City's increasing reliability problems CEI embarked upon an agressive policy to encourage the City's customers to convert to CEI service.
{t CEI offered services to customere in parts of its service territory in which it competed with the City which it did not offer in other parts of its service
- F area. This is a clear example of CEI using its monopoly power in the retail
!i market and in the regional power exchange market for anticompetitive !! purposes. CEI's aggressive action to take the City's customers was successful. F By 1969, CEI could identify one effect of its policy as being a need for the L City to increase its rates to make ut, for revenues lost from the conversion L' of its customers by CEI. CEI had a long standing objective of attempting to have the City's rates raised to the level of CEI's rates. This " rate equalization" goal was I intended to eliminate the ability of the City to compete for customers by ( offering lower rates. The two efforts of CEI, i. e. , to avoid an interconnection L which would enable the City to provide more reliable service and to force L-the City to raise its rates, were made side by side from the early 1960's r (, up until the present as part of a plan to eliminate the City as a supplier to p electricity in the retail market. I One line of attack by CEI was to attempt to convince the City Council L. that the Division of Light and Power should supply power free to the City j for street lighting. This proposal was made by Mr. Lindseth in 1962 and advanced repeatedly thereafter. CEI obtained a legal opinion from the l. L City's bond counsel regarding the requirements of the City's bond indenture with respect to the rates the Division must charge for street lighting. The
I s
-137-effect of providing free street lighting would be to increase pressure on the
~~
City to make up lost revenue by increasing rates to its other customers. CEI also interfered with the Division's efforts to sell $9. 8 million of bonds to raise capital to make improvements to its electric system. F Mr. Hauser prepared an amendment to the proposed ordinance authorizing. .t , f. sale of the $9. 8 million bond issue. The ordinance was orginally drafted L to provide for the sale of registered bonds to the City's sinking funds.
- I Mr. Hauser's amendment required sale of the bonds on the open market
.k
- without removing the requirement that the bonds be registered. Coupon bonds are more marketable on the open market than are registered bonds.
p -[ Mr. Hauser gave copies of his amendment to members of the City Public Utilities Committee before which the ordinance was pending. An amendment similar to that prepared by Mr. Hauser was adopted and the City thereafte) y 1 was unable to market its bonds. CEI also utilized its control over the limited interconnections avail-able to the City t. extend CEI's monopoly. For example, it caused the F L likv service to be operated in such a way as to increase the frequency N of outages experienced by the City's customers. CEI caused the 69kv inter-connection to be operated in such a manner as to cause the City to experience F k increased costs and unnecessary outages.. Further, CEI at one point refused ( to energize the 69kv interconnection until the City first agreed to execute li a proposed contract for the sale of street lighting service by CEI to the City. f L. , 1 6 ~,
F t
-138-r l V
~
APPLICANTS HAVE CONSPIRED TO DENY MUNICIPAL ELECTRIC SYSTEMS ACCESS TO NUCLEAR POWER AND TO COORDINATED OPERATION AND DEVELOPMENT
- C
- [ The record developed in this case is more than ample to demonstrate
; [- a conspiracy to restrain trade and to monopolize. In order to prove a
( conspiracy undsr the Sherman Act, it is not necessary to prove an iF
- L overt act. United States v. General Motors Corp . , 121 F2d 376 (1941),
.I cert. denied 314 U. S. 618 (1941). In this case evidence of overt acts .L abounds. It is not even necessary to find an express agreement tol prove a conspiracy. "It is enough that a concert of action is 'I contemplated and that the defendants conformed to the arrangement. " =L
, United States v. Pa ; mount Pictures, Inc. , 334 U. S. 131, 142 (1948).
"[A]cquiescence in an illegal scheme is as much a violation of the Sherman
.l Act as the creation and pro stion of one. " lbid. 334 U. S. at 161.
- In Moore v. Jas. H. Matthews & Co. , 473 F. 2d 328 (1973) the l
court said at 330: l 7 ( Concerted action involves an agreement between the parties, but the agreement can be tacit as well as express . . . . [A]n agreement may be implied from conformity to a contemplated pat-i~ tern of conduct.
~
y; It has been held that: 1 ! Where the circumstances are such as to warrant I- ' a jury in finding that the conspirators had a unity l of purpose or a common design and understanding, y or a meeting of the minds in an unlawful arrange-L ment, the conclusion that a conspiracy is esta-blished is justified. u i -. e,- ,- - -, . , - -
1 L -139- j American Tobacco Co. v. United States, 328 U. S. 781, 810 (1946) quoted
- in United Statg v. American Radiator & Standard Sanitary Coro. , 433 F. 2d
{ 174,182 (19 TO) cert denied 401 U. S. 948. , Under Section 1 of the Sherman Act the key element of a violation is unity of purpose or a common design and understanding. TV Signal Co. of Aberdeen v. American telephone & Telegraph Co. , 462 F 2d 1256,1259
- (~
( (1972). The Acts of one of several co-cospirators are imputed to the others. United States v. Socony vacuum oil Co. , 310 U. S.150 (1940).
- r 1 The court in TV Signal of Aberdeen, supra, said, at page 1259:
- F Although knowledge is implicit in the requirement
[ of unity of purpose, no case of which we are aware requires that each party to a conspiracy knows of each transaction encompassed by the conspiracy 1 in order to be held accountable the~refor.
~
The declarations of one conspirator are evidence against his comrades in crime. United States v. General Motors Corp. 121 F. 2d 376, 408 (1941) cert denied 314 U. S. 618 (1941). All parties to a conspiracy are accountable for the results wrought [k:. thereby, including such results as are caused by the overt acts of other members of the conspiracy. Griffin v. Breckenridge 403 U.S. 88 (1971); r Braverman v. United States, 317 U. S. 49 (1942). L-In Interstate Circuit v. United States. 306 U. S. 208 (1939), the Supreme Court said at 227: f ' It is elementary that an unlawful conspiracy may be and often is formed without simultaneous action or agreement on the part of the conspirators. Schenck
- v. United States, 253 F. 212, 213 aff'd 249 U. S. 47;
~, Levy v. United States. 92 F. 2d 688, 691. Accep-
- tance by competitors without previous agreement,
i
- P
.s
-140-
[ ' of an invitation to participate in a plan, the necessary consequences of which, if carried out, is restraint of r interstate commerce, is sufficient to establish an i .l unlawful conspiracy under the Sherman Act. Acts entirely lawfulin themselves violate the Sherman Act if they are "part of the sum of the acts which are relied upon to effectuate the
- r l
,[ conspiracy . . . . " American Tobacco Company v. United States, 328 U. S. p 781, 809 (1946). l. In Associated Press v. United States. 326 U. S.1 (1944) the court said at page 15:
- r The Sherman Act was specifically intmded to prohibit e independent businesses from becoming " associates" in a ecmmon plan which is bound to reduce their r competitor's opportunity to buy or sell the things in 4 which the groups compete.
~
Nor is it proper to compartmentalize each item of proof and wipe the slate clean after scrutiny of each. "The character and effect of a conspiracy are not to be judged by dismembering it and viewing the separate parts, but only by looking at it as a whole. " American Motor Inns, Inc. v. Holidav Inns, Inc. 421 F. 2d 1230 (1975). The evidence clearly establishes that Applicants through the for-e. mation of CAPCO and their individual efforts to acquire all generation and
- g. transmission capacity in the CCCT have monopoly power in the regional
' power exchange market. They have conspired to use their monopoly power t_
to deny other entities in the CCCT access to coordinated operations and p development which make possible access to nuclear generation and economies of scale.
f- - -141-w Each of the Applicants has a history of attempting to acquire all of the
- municipa) electric systems within the areas in which they serve. Several
.i I have refused to sell power for resale to municipal systems which they wished to acquire. Several of Applicants have refused to engage in wheeling s 7 transactions with municipal systems which are necessary if the municipal l systems are to engage in coordinated operations and development. Several F j of the Applicants have imposed restrictions upon the resale of power sold by them to municipal systems with which they compete at retail. Several of the Applicants have imposed a price squeeze on their municipal whole-sale customers. Several have engaged in territorial divisions with r neighboring investor-owned utilities. All have refused to pern.it municipal t electric systems to join in the construction of large nuclear units on reason-I L able terms and conditions.
~
Applicants are well aware that if the municipal electric systems were granted access to coordinated operations and development, they would m be stronger competitors more resistant to take over attempts. Applicants are aware from the experience of their own systems, that without access to coordinated operations and development, it is not possible to take advantage L of nuclear generation through ownership or unit power participation. They are also well aware that for the forseeable future, nuclear generation h promises to be the most economical means of producing base load bulk power. f v
-l'
-142- I r i ; The motivation of each of the Applicants to join in a conspiracy to deny municipal electric systems access to coordinated operation and develop-
[ ment and to participation in nuclear generation is well established in the
! record.
Almost from the first four-company meeting to explore the possibility of formation of the CAPCO pool, Applicants have displayed a desire to exclude
- public power and other small electric utilities from participation in the l CAPCO pool .
![ ! 1 I At a meeting of the principals of Applicants on February 27, 1967, ) to work towards formation of CAPCO, Mr. Fleger, Chief Executive Officer of Duquesne Light, expressed concern that municipalities might challenge Applicants' request for a license to ecmstruct nuclear power plants.11/ i
- ' During March, April, and May of 1967, when the Applicants were '
jfI making various studies of the effects of different methods of allocating capa-t _ city on the resultant reserve levels, studies were made which would show the + effect of those methods on the City of Cleveland should it become a member. ,r a e The studies indicated that use of the allocation method similar to that finally 7 adopted could cause the City to carry more than twice the average level of 1 reserves for Applicants. Applicants were well aware of the economic disin-1. centive the method chosen would have to a system like the City which might seek to join CAPCO. ' t. At a meeting of the Applicants in June of 1967, Mr. Dissmeyer of r _ Ohio Edison suggested the use of a rigid formula for the allocation of capacity in CAPCO. He suggested that if Applicants determined allocations by 11/ City Exhibit C-26, which was not admitted into evidence. N - rm* p --'w " P-* " *
.e 'l'
-143-e*
negotiation, a new member of CAPCO could also seek to negotiate its _. allocations. A rigid formula would make membership for a new member s . more onerous. Again, at the August 20, 1967, principals meeting, Applicants expressed .a concern that if the proposed Memorandum of Understanding were filed with the FPC, Cleveland, Oberlin or Hiram might intervene in an attempt to join CAPCO. At the same time that Applicants were expressing a desire to exclude municipal electric utilities, Mr. Fleger was expressing the hope that Allegheny Power System - an investor-owned system - would ultimately { join CAPCO.
~
Also at the Aguust 20, 1967, meeting concern was expressed that if Applicants did not form CAPCO, the FPC might force them to do some-r thing not to their liking - presumably to coordinate with small systems in the r CCCT. L r, - During the four-company meeting of Applicants on September 11, 1967, L the problem of what to do about coordination with municipal systems was i " i again discussed. 1 I u ! , On October 26, 1967, Mr. Dempler of Duquesne Light wrote an internal L memorandum to Mr. Munsch discussing the Memorandum of Understanding, L signed by Applicants on September 14, 1967. Mr. Dempler said that the concensus among the Applicants was that public power systems should not be admitted to CAPCO but might participate by purchasing capacity and energy from Applicants. w
+
- r-y
-144-
- , Although no municipal systems were permitted to join CAPCO in
;e September of 1967, Applicants continued to worry that their monopoly might t .i be disturbed. An internal Ohio Edison memorandum from Mr. Travers tc r
i Mr. Dissmeyer, dated November 1,1967, discussed the advisability of
- r adopting capacity rating criteria which would have the effect of derating 1
much of the existing capacity of any municipality seeking to join CAPCO. The result would be the assignment of greater capacity allocatior.s to such a F i municipality providing another economic disincentive to CAPCO me'.nbership. Applicants still faced the problem of explaining the exchsion of f 1 municipal systems to the FPC. On October 22, 1967, a meeting of the CAPCO Chief executives was held to discuss explanations which could be L given to the FPC for the exclusion of municipal electric systems from CAPCO. One explanation seized upon was that municipal systems could participate through purchases from Applicants. i It was not long before Applicant's fears were realized. On December 5, i 1967, the town of Pitcairn, Pennsylvania, in Duquesne Light's service area, r wrote to each of the CAPCO companies requesting membership in CAPCO. r.- In a well orchestrated response, each of the CAPCO companies informed o
^
Pitcairn that membership in CAPCO would not be practical. Drsits of CEI's and Toledo Edison's responses to Pitcairn were reviewed by Duquesne .Jght 1 prior to their being mailed to Pitcairn. When Pitcairn persisted, each of u. the companies offered to discuss the matter further if Pitcairn really believed membership in CAPCO was desirable. Each of the Applicants refused to provide Pitcairn a copy of the Memorandum of Understanding, rendering further y b l l
c
!' 1
-145- l r i i
talks futile. Finally, Duquesne Light, in March of 1968, provided a list '
'of reasons why Pitcairn could not join CAPCO. -(
Having avoided Pitcairn's bid for membership in CAPCO, Applicants
' r' ,
.did not let down their guard. On January 16, 1968, Mr. Greenslade of
- { l l
r- CEI wrote to the other Applicants warning that CAPCO itself might be deemed I
;i a separate entity. If CAPCO was an entity, he warned, the FPC might force I ir 1 l} CAPCO to permit municipal' systems to join CAPCO. He advised that p
Applicants should take care to prevent CAPCO from becoming an " entity. " The specter of municipalities breaching Applicants' monopoly l J ' '[ remained. Duquesne Light advanced its " Proposal #2" to change the method i
.[ then used by Applicants for allocating CAPCO capacity. Among the reasons t
- (
advanced in support of " Proposal #2" was the effect of the present method of 1
- L allocation on new members such as an electric system having no generation
[ but' distributing and supplying 100Mw of load. Duquesne pointed out that "the
- L.
_ present Allocation Procedures applied 'across the board' would not only encourage such entry but would result in minimizing capacity allocations to f LL. such new members. " " Proposal #2" with modifications was subsequently approved by the CAPCO executive committee. 1 . During the July 7,1970, CAPCO executive committee meeting, the >r L chief executives were called upon to determine the method of setting operating q reserve requirements for the CAPCO members. One method under consi-
- I deration was the so-called " pro rata" method of allocating operating reserves.
Mr. Arthur, for Duquesne Light, pointed out that if the City joined CA'CO, the " pro rata" method would be very beneficial to the City, that, Mr. Arthur E 1 g l
1 r \ 4
'! -14 6-
[ noted, was "no good. " A method was adopted which removed the problem c 1 foreseen by Mr. Arthur. 'i On April 4,1973, the City of Cleveland wrote to Mr. Rudolph, of
) CEI, requesting admission to CAPCO. Nine days later the City requested
.. participation in the Perry units. Mr. Rudolph responded by suggesting that the City meet with Mr. Howley. i
~( l
- j On August 3,1973, the City again wrote to Mr. Rudolph requesting
-r- admission to CAPCO and presenting a proposal for participation by the City in Davis-Besse Unit 1, Beaver Valley Unit 2 and Perry Units 1 and 2. I On September 10, 1973, the City once again wrote to Mr. Rudolph renewing its request for membership in CAPCO and participation in the recently announced four nuclear and one coal fired CAPCO units.
.c i
- !. Finally, at Mr. Rudolph's request, eight months after the City had l
; requested membership in CAPCO, a CAPCO executive committee meeting )
t was held on December 7,1973, to consider the City's request for member-i ship in CAPCO. A joint CAPCO response to the City's request to join f~ CAPCO was formulated with the reply to be communicated to the City by
.L j C EI. In addition, Mr. Arthur of Duquesne Light wrote a letter to the City 1
L advising chat membership of the City would not be practical. Mr. Arthur's j [ t. 1etter was hand delivered to the City, by Mr. Lee Howley, on December 13, I I
, 1973, at a meeting in which Mr. Howley also delivered CEI's response to
!! l the City's bid for membership. CEI's response which Mr. Rudolph states
^
reflects the CAPCO joint position was that membership by the City would not l be practical. Thus, CAPCO responded to the City in the same fashion that it had earlier responded to Pitcairn.
~
I i
- r
-l
-147-i At the December 13,1973, meeting CEI did offer to negotiate with r the City for some of the forms of participation and coordination sought by the 7
City. A pre-requisite to the offer was the completely unacceptable condition (~ j u that before the negotiations could commence, the City would first have to withdraw from the Perry and Davis-Besse antitrust proceedings. A second condition attached to CEI's offer to negotiate was a requirement that the City not sell power belc, e cost--a condition which would give CEI a veto P over rates charged by the City. CEI refused to provide any wheeling services. 1. CEI's limited offer to enter negotiations if the City acceded to the ( b above described conditions had previously been discussed with CEI's { CAPCO partners and was designed to preserve the CAPCO monopoly. It was argued by CEI to its CAPCO partners that restrictions could be placed I i in the offer that could not be included in offers made later in the proceedings and that these conditions would isolate the wheeling issue. Applicants obviously believed that if the wheeling issue were isolated the chance of avoiding wheeling and the coordination it makes possible was improved. i CAPCO monopoly power in the regional power exchange market L_ might not have been so strong had not the Buckeye agreement been negotiated. The Buckeye arrangement arose from a desire of the Rural Electric Coop-r
, eratives in Ohio to obtain their own generation and transmission facilities.
u In order to forestall the construction of a competing transmission grid which i L-might have provided power supply options to all of the small electric systems
/
in Ohio and to industries genen. ting their own power, most of the Ohio investor-owned utilities, including Ohio Edison and Toledo Edison, under the
' leadership of Phil Sporn devised the Buckeye arrangement. The Buckeye i-l
![ t
-148-
.r arrangement provided for sale of a large fossil fired generating unit to the
~. Cooperatives and an agreement by the large investor-owned utilities to trans-i mit the power from that plant to the Cooperatives. This proposal elinunated
- i
; the need for the Cooperatives to build a competing transmission system.
r- The dominant factor behind the Buckeye arrangement was to preclude i the Cooperatives from building a transmission system. Ohio Edison preferred n q that the Cooperatives did not have transmission lines. The participating T investor-owned utilities other than Ohio Edison, but including Toledo i
- d. '
Edison, agreed to wheel the Buckeye power to the Cooperatives. Ohio r 1 ( Edison entered into a different contractual arrangement which operationally [ was the same as wheeling but avoided actual wheeling. An agreement by Ap;licants to wheel power for small electric entities j l in the CCCT would, of course, curtail their monopoly power. Applicants have consistently refused to wheel power for municipal systems. At a
,_ meeting between Applicants and their counsel in this proceeding, Applicants reaffirmed their refusal to agree to any license condition which would require r
i L them to wheel power from or to a municipal system. Applicants have acquired monopoly power of generation capacity and
\"
transmission facilities in the CCCT. This power was neither thrust upon t. them nor was it the inevitable result of economic forces. Rather, it was the result of a conscious process of mergers, acquisition, opposition to the L l 4
- p. e 1
t y
i I.
-149-construction of competing facilities and the exclusion of others from the various
( items of coordination and development necessary for the achievement of their own monopoly power. .(. { The terms of the CAPCO agreements place limits on the ability of e- any one of the Applicants to engage in coordination with a non-member. 'l ' Ey such terms Applicants restrict the ability of small utilities to obtain r ] access to coordination. f VI -[ . THE DEFENSE RAISED BY APPLICANTS ARE r NOT SUPPORTED BY THE RECORD AND ARE l CONTRARY TO WELL ESTABLISHED LEGAL PRINCIPLES j Interestingly Applicants' witnesses and exhibits have made little or s no attempt to meet directly the cases presented by City, Staff, and Depart- [ ment. Applicants' witnesses largely ignored the numerous exhibits offered to I show the existence of a conspiracy. Indeed much of the testimony of L Applicants' witnesses corroborates the conspiracy cases presented by City and the Department. (t Rather than controverting the case against them, Applicants have largely responded with a variety of defenses in the nature of confession and i L avoidance. The defenses raised by Applicants fall short of the mark. A. Contrary To Applicants' Assertions Municipal b Electric Systems Cannot Obtain All The Bene-fits Of Coordinated Operation And Development j.- And Participation In Nuclear Power Through Purchases Of Power From Applicanta, r Applicants have asserted that even if municipal systems are not 5 permitted to engage in coordinated operation and development and to F-e
p u-
-150-
. r-l participate in nuclear generation, they are not harmed because they may . obtain the same benefits through wholesale purchases of power from
- )
Applicants. At the very least, Applicants' argument presupposes a complete willingness to make such sales on the part of Applicants. This assumption 7 is of doubtful validity in light of Applicants' prior refusals to make such '( sales,
, Further, such a proposal would require a perfect cost pass through q- from Applicants to the municipalities. (Hughes Tr. 4128 Kampmeier Tr. 5877).
That a perfect cost pass through would in fact occur would be a mere
- r
- _ happenstance. Rate mWing is not a precise process. (Hughes Tr. 4128).
r- For example, there may be as many as 50 different cost allocation methods i , employed in rate making each of which would produce a different result. [ .( (Wilson Tr.11,102). Calculating the cost of common equity in rate making f is not a precise matter. Experts may arrive at different conclusions with L respect to an appropriate cost of equity. (Wilson Tr. 11122). Delays ( - are the rule in rate changes made to reflect changes in costs. (Hughes Tr. T 4129). Rates resulting from a settlement of a wholesale rate proceeding L would not necessarily reflect the full benefits of coordination achieved by the 1 L selling party. (Hughes Tr. 4130). Calculation of incremental costs is so subject to e'rror that a 10% surcharge is added to protect against error. L. r (Bingham Tr.10275). I h The Federal Power Commission recognizes that rates established do not precisely reflect costs. It said in Opinion No. 768 (Nevada Power g.
' Company, Docket No. E-8721 p.11):
l
r-1 ( 151-F It has often been repeated that a fair rate of return l for a public utility is not a matter which ie to be r determined by the mechanical application of a j mathematical formula, but rather such a determina-tion requires the exercise of informed judgment ir based upon an evaluation of the particular facts
- l presented in each proceeding. There is no one precise answer to the question of what constitutes r' a proper rate of return. Rather, there is a zone
( of reasonableness within which the Conunission is free to fix a rate of return. .W .( As the Court of Appeals for the District of Columbia Circuit has { observed (Pacific Gas Transmission Co. v. FPC, Aprn ',, 1976, Slip Op.
- L
- p. 9) "The Federal Power Commission is not known for its niggardliness".
[ ]. Moreover, a certain blend of power resources considered optimum I for a blend of resources for a particular wholesale customer of Applicants' (. would not necessarily be the same as the blend chosen by Applicants (Hughes i Tr. 4136-67). Further, a small system might obtain power more cheaply [ ~L by participating in a generating unit than purchasing at wholesale (Kampmeier
, Tr. 5842), or might develop a more economical blend of power supply resources ~
(Kampmeier Tr. 5843). p Relegating municipal systems to wholenale purchases protected only by the vagaries of rate regulation would leave untouched the monopoly power 'l' acquired by Applicants. L B. Applicants' Argument That Their Acts Are Immune From Antitrust Scrutiny Because They Were Done (, In Furtherance Of Federal Policy Is Unsupported By The Facts And Misconstrues Federal Policy.
\
L Applicants have argued in their prehearing briefs and in opening statements that the formation of the CAPCO pool was in keeping with Federal L w
-4m, _ . - , --.-s -, -w ,uy .e
P tu
-152- .r j policy promoting pooling and ther efore formation of the CAPCO pool is
- p not subject to antitrust review. The record does not provide a factual
( basis for Applicants' argument.
- (. When asked to state the reasons why Duquesne Light joined CAPCO,
- P Mr. Fleger replied (Tr. 8617) to:
'l .
Improve our efficiency, and to improve our
- [- reliability.
L On direct examination Mr. White testified that FPC pressure to
'\
F L increase reliability and the National Power Survey influenced Ohio Edison 7 and Penn Power to join CAPCO. (White Tr. 9500). He later admitted under 1. questioning by Judge Smith that it was nearly an economic necessity that i ( Ohio Edison join a pool. (White Tr. 9813-15). Mr. Mansfield also noted f that some of the CAPCO companies were concerned that if they did not pool L to take advantage of economies of scale the- might themselves be acquired by f the American Electric Power system. (Mansfield deposition DJ 572 p.135). The record does not' reflect what motivation Toledo Edison had for joining CAPCO. _ f.. L - When asked how CEI came to be in CAPCO, Mr. William, said (Tr. 10, 351):
,., We felt there would be considerable economies to
{ be gained by grouping with other people in order to justify the construction of these larger more economical units. L We also felt there would be economies in opera-tion and increased reliability of the power system L by coordinated activity. l l
\
w l I
r- ~l 153-r- 1 Mr. Williams makes no mention of any public policy favoring power pooling. In a speech before regional share holders meetings in Philadelphia, .p
- l. New York and Boston on January 24, 25 and 26,1968, CEI's President
,r Karl H. Rudolph said (C-121 pp. 7-8): I have gone to some lengths in describing the ECAR { organization and our 5 company power pooling arrange-q ment and I have done so far this reason. The Federal Power Commission, in its three-volume report on T power reliability issued last summer, called for inter-d connections and coordinated planning and operations. This, the FPC asserted, constitutes the major defense f against power interruptions. L Well--the electric utility industry, on its own initiative f has for some time been building its interconnection
+
network, and develocing coordinated plannirfg struc-
. ture s. The ECAR organization and our 5-company T power pooling arrangement r.re but two of the newest examples of this. Through these, and through regional groups functioning on a joint-planning, joint construc-T tion, joint operation basis, the industry will be able to L reduce to an absolute mmimum the service reliability j problem.
- r. l I
So you can see that the industry has long ago taken the steps necessary to provide the reliability of service ) I. which is so necessary, and I might add without any
' prodding on the part of the Government. We all under-stand that the Government has a rightful place in ) .'" regulating industry when the industry demonstrates I that it is unable to meet its responsibilities without g Government assi tance. There is absolutely no need for Government interference in this area, however.
{ For this reason, the Illuminating Company as one p compmy is unalterably opposed to the FPC's proposed l electric power reliability act and we feel that its enact-ment would impede the already significant progress
< that has been made in this area by the private sector of our industry. (Emphasis added)
L.
~
- r il ~
-154-
!r Moreover, to the extent that the FPC has urged coordination, ir- its' urging was directed at all segments of the industry. Dr. Hughes 'i
- (
who drafted the FPC's First National Power Survey discussion of coordination L and industry structure (Hughes Tr. 3644) testified that a strong theme in the r National Power Survey was that the investor-owned and public power segments
- (~
of the industry should stop fighting and start coordin=+4ng. CAPCO would , [L- be more in accord with the policy urged by the FPC if it provided for f coordination with municipal systems in the CCCT. (Hughes Tr. 4089-90). L C. The Record Does Not Support The Contention That fL ~ The City Was Not In Good Faith In Requesting Par-ticipation In CAPCO Nuclear Units. I Late in the proceedings, Applicants surfaced for the first time the 1 argument that the City's request for participation in CAPCO nuclear units was not a bona fide good faith request.EI In support of its allegation CEI I apparently relies upon (1) the testimony of Utilities Director Kudukis before L the Public Utilities Committee of the City of Cleveland, (2) the fact that L City Counsel has never authorized the City to enter into a contract for participation in nuclear units, and (3) the fact that the City had not yet r signed a participation agreement.
}
Applicants have offered a recording of Mr.Kudukis testimony G (Applicants 283) an incomplete and inaccurate transcript of that recording L [ (Applicants 282) and erroneous and misleading affidavit of Mr. Gaul L (Applicants 213) and the testimony of.Mr. Gaul in support of its charges. L M/ See generally the City's Objections 'to Applicant's Exhibits, Motion To u Strike And Alternative Request For A Hearing Date To Offer Rebuttal
' Testimony filed July 15, 1976, and incorporated herein by reference.
u e - - , - - - , - - - ,- - , _ ,,, - - - - en
C tl -155-t It is interesting to examine the background of the recorded state- '
- -, mems. Prior to the City Council Committee meetings, Mr. Gaul had had
. numerous discussions with CEI's-General Counsel Mr. Howley regarding the City's requect for nuclear participation. (Gaul Tr. 12432-33, 12436, jp, 12456). As a result of those discussions Mr. Gaul determined to question
.I Director Kudukis about the City's request. (Gaul Tr.12433). At the time, ir Q Mr. ' Gaul was a member of the Public Utilities Committee of City Council jp and had been taking gifts from CEI (Gaul Tr. 12452 53) and had been iL assisted by CEI employees in writing speeches. (Gaul Tr. 12449-51).
- f. Mr. Gaul first questioned Director Kudukis at an unrecorded meeting of f
- L the Public Utilities Committee on March 4,1974. The following the same matter was discussed at a recorded meetin., of the City Council Finance Committee.
5-.- (Gaul Tr.12434). _Mr. Gaul was uncertain whether he discussed the matter with Mr. Howley between the March 4 unrecorded meeting and the March 5 l recorded meeting (Gaul Tr.12456) but did admit that committee meetings !k of City Council are rarely recorded. (Gaul Tr.12439). The tape was made available to CEI a day or two after the committee meeting. (Gaul Tr.12440). [k - ,, At this point it is interesting to note also that the last words heard on the tape y _ submitted by Applicant's--obviously_those of the person who made the recording-- words that do not appear in the transcript submitted by Applicants, are "that's it, that's where he lost him. " (Applicants 283). I Applicants apparently contended that the statements made by. r-Director Kudukis indicate thst the City did not infact want to participate
. in~ nuclear power _ generating units and that the . City's request was merely.a l L.
[ L i.
r 1-I-
-156-
-F .i
, bargaining ploy. Mr. Kudukis has testified with respect to the position p stated on the tape as follows (Tr.1274):
- l Well, as in the preceding question, Mr. Gaul
- p was trying to determine of the two proposals,
.{ which way we were going. Are we going for an ownership participation or are we going for unit p power? At that time I felt that unit power was the way to
- p go and the other alternative would be ownership 1 participation, and I felt that this was the quickest and the best way to achieve our goal, which was
.-F to obtain power, and I was advocating that position. L Director Kudukis' testimony in this regard is complete 1f corroborated by Applicants 279 Applicants 279 is a copy of the affidavit drafted by F Mr. Hauser which Mr. Hauser requested Mr. Gaul to execute. (Hauser L Tr. 124 6M. As drafted by Mr. Hauser the affidavit stated that Director F~ L Kudukis stated that the City did not want ownership or unit nower participation. [ Mr. Gaul made changes in the draft prepared by Mr. Hauser to "make sure L it was absolutely correct. " (Gaul Tr.1244). Among the changes made by Mr. Gaul was deletion of any assertion that Director Kudukis had said that r i L; the City did not want unit power participation. One more thing that must be noted about the recorded testimony of Director Kudukis. Not included in the portion offered by CEI was the final L, ext hange between Mr. Gaul and Director Kudukis in which the two agreed . that there had not been a full statement of the City's position and that the subject would be discussed a greater length in subsequent committee r { meeting. (C-168). - One is left to speculate why CEI did not b eing that j portion of the tape to the Board's attention. t
- j.
- t L
E
-157-U
( With respect to the argument that City Council has not specifically
- authorized the City to negotiate for participation, Mr. Kudukis has testified that City Counsel approval of such negotiations is not necessary. (Kudukis
- F Tr. 127 69). City's failure to obtain City Counsel approval prior to negotiating lt
, r- for participation in nuclear units is no different from CEI's failure to obtain the
- k approval of its Board of Directors prior to offering to negotiate a joint
- {
ownership arrangement with the City. Mr. Lindseth testified on deposition i 1 f that a joint ownership arrangement with the City was a matter which would
- L ~
come before the Board of Directors. Although Mr. Lindseth was on the Board
- r
- t of Directors until sometime in 1974, no such joint ownership prposal came C
before CEI's Board of Directors. (Lindseth deposition DJ 568 pp. 30-31). a Nor is the fact that no participation agreement has been executed by r,
? the City evidence of bad faith on the part of the City. Rather it is a reflection I of the fact that CEI has thus far refused to agree to terms which would L
permit the City to make effective use of its participation in nuclear units. l-(Findings of Fact 38. 01). Mr. Mayben pointed out that parties normally F L make no commitment for nuclear power until all points have been negotiated. l l (Mayben Tr. 7805). If, as CEI would have the Board believe, the City's request for l r ! i participation is a hoax, it has been a singularly involved and unsuccessful hoax. For example, the City told Mr. Mozer that it desired additional interconnection points with CEI to accomplish delivery of the City's nuclear i {. power. -(Applicants 45). During negotiations for a firm power contract j with CEI, Mr. Hart requested inclusion of language permitting the City to reduce t the contract demand if the City was able to acquire nuclear participation. l
.s l t- l t
i
i i
-L
-158-r
- (Applicants 82). The prelimin= ry statement issued for sale of the $9. 8
-4
[ l r milli n rehabilitation bonds stated that the City had intervened in these I proceedings to obtain access to nuclear power and that the City wished to obtain nuclear power. (Applicants 102 p. 22, p. A-13). The City's Capital Improvements study proposes an expenditure of $100,000,000 to finance participation in nuclear units and assigns the expenditure a priority rating of tecessary. " (Applicants 206). The City met with several
.- r underwriting firms to discuss financing participation in nuclear generation.
- I
>L (Hart Tr. pp. 4898-99).
r
- k According to Applicants, the City truely desired only a firm power T contract from CEL In June 1976, the City signed a firm power contract
- t.
.with CEI but the City has not withdrawn from these proceedings nor has r
b it withdrawn its request for participation. (Applicants 271). Indeed if~ Applicants' these thesis requires the Board to believe that the City's
.L . participation.in these long and expensive proceedings was merely in furtherance of its negotiating strategy to obtain a fir m power contract. i ; To state the proposition is too reveal its absurdity. .u If further evidence of the City's desire to participate in nuclear units i
L were necessary, which it clearly is not, Mr. Mayben, the City's consulting e
} enginecr, testified that he has been given reasons to believe that the City is ; interested in participating in nuclear units. (Tr. 7825). Moreover I
Mr. Kudukis testified that the City is still interested in participating in p L t._ e e -- , , . , , ,
r.
-159-r nuclear generation and that the reasons which led him to prefer unit
~
l[ participation when he testified in 1974 no longer exist. (Kudukis Tr.12744). l 1' ) Finally there is no evidence that CEI ever informed its CAPCO r , . L_ partners that it believed the City's request were not made in good faith. ! l E CEIitself admits that all of its responses to the City's requests were l predicated on the belief that the City was in good faith. ,;I
! D. There Is No Basis For Applicants' Assertion That There Could Be No Mutuality In A Coordinating I Arrangement Between CAPCO Members And The l Municipal Systems In The CCCT.
F"*' Applicants will probably argue that coordination between utilities require mutuality , i. e. , benefits other than the payment of money must accrue to both parties. The municipal electric systems in the CCCT are so small, it will be argued, that they can make no contribution to the CAPCO
- t f pool.
1 L Applicants can point to no studies which would demonstrate thst I municipal systems cannot contribute benefits to the CAPCO pool. 4 f- Mr. Slemmer, Applicants' expert witness on pooling made it quite clear ~L that a study would have to be made before such a conclusion is reached. (Slemmer Tr. 9122). In fact, Mr. Slemmer testified that an arrangement f -could be made for coordination between Applicants and municipal systems L. operating in the CCCT which would provide each party with significant net _ benefits. (Slemmer Tr. 9121). Mr. Master's testified on deposition that l' - even if a small system could not provide emergency support to a large L system there could be an incentive for the large system to enter into an m - I
-~
s ,_ _ _
r
.s 1'
-1 60-m
, interconnection arrangement with the sman system. (Masters deposition DJ 567 pp.168-69). Mr. Masters also recognized that if a party, such as the City, seeking to join CAPCO has no other alternatives for coordination that will be reflected in its bargaining position. (Masters deposition DJ I 567 pp.138-39).
The record is replete with examples of benefits to Applicants from s -i
- L having power available from small systems. For example, CEI's inter-I connection with Painesvine might reduce CEI's CAPCO commitments.
..1 , __ (Masters deposition DJ 567 p.195). Napoleon's generation is being operated to provide peaking power for Toledo Edison and Toledo Edison is censidering tr a similar arrangement with respect to Bryan's generating capacity. (Keck [ p deposition 576 pp. 231-33). Leasing Bryan's generating capacity to provide peaking capacity for Toledo Edison would produce the same results as a
.r-purchase of power from Bryan. (Bosch deposition DJ 580 pp.13-14).
7 In 1974 the city of Orrvine wrote to Ohio Edison asking to discuss a power pooling arrangement. Orrvine at the time had 25mw of load and 'r 65mw of generating capacity permitting Orrville to make 40mw of capacity F available to the pool. (Applicants 174). Thus Orrvine offered the pool L. 15mw more than Duquesne obtains from its interconnection agreement with 7-t_ St. Joe Lead and for which Duquesne receives CAPCO credit. (Dempler Tr. 8710-11), ]u A system which could only contribute peaking units to the pool would
- be a benefit to the CAPCO pool. (Schaffer Tr. 8566). An entity which brought
~
.t
-161-as much as 10mw capacity to thn pool would change the CAPCO members commitments for reserve capacity. (Dempler Tr. 8857).
The acquisition of the City's generation by CEI would reduce CEI's CAPCO requirements. (DJ 354). F Small utilities could have aided Applicants by contributing capital at a time when Applicants were defering units because they were unable to raise capital for construction costs. (Mozer Tr. 3609). Small utilities could contribute benefits through peak diversity. (Mozer Tr. 3609). If the City of Cleveland had nuclear power it could sell economy power 1-- to Applicants. (Mozer Tr. 3609). Small utilities could have contributed to economies of scale when
, the 900mW Davis--Besse #1 was planned by permitting an increase in size to 1100mW. (Mozer Tr. 3608). The municipalities in the CCCT own r
l- approximately 350mw of generation (NRC 157, Hughes dt NRC 207 pp. 24-27 (table)). At a seven percent growth rate the municipal systems with generation would contribute 24mw of growth per year to the pool. That i~ g compares favorible with the 22mw per year annual growth experienced by
,r Penn Power for the eleven years 1963-1973. Including the non-generating L.
municipalities would approximately double the aggregate municipalload p L growth. i* Mr. Firestone has argued that since CAPCO presently exhausts the l economies of scale permitted by modern technology the additional load _ growth from the municipal systems will not add to economies of scale. (Firestone Tr. 9405). Based upon Mr. Firestone reasoning, absent some u increase in the size of units technically feasible by the year 1989-1990, H o lG
c-
-1 62-r
~l Toledo Edison win rnake no contribution to load growth. In that year
- f Toledo Edison will contribute only 153mw of load growth to a total CAPCO load growth of 1400mw. Subtracting Toledo Ldison's load growth stiu
'F
- ! permits CAPCO to install the largest available unit. (NRC 152). Indeed r even assuming that Penn Power's load growth doubles to 44mw per year in i .
1989-1990, Ohio Edison, Duquesne and CEI could install the largest
- I~
( available units without the combined load growth of Penn Power and Toledo .[ Edison. .i-Mr. Firestone also admitted that load growth over that needed to
- I
.<- make feasible installation of the largest available units increases the fre.quency of installation of units thereby increasing the total savings result- _ ing from taking advantage of economies of scale. (Firestone Tr. 9406). Apparently mutuality was no problem in 1962 when Mr. Linds eth offered to interconnect with the City with schedules for emergency support, s. firm power, economy energy and wheeling to the City's public load. 1 (DJ 293). Since then the City has added 125mw of new generating capacity [ which presumably increases mutuality. Perhaps the price-fixing requirement attached to the 1962 offer provided the mutuality. In 19 67 CEI negotiated an interchange agreement over a 100mw ,_ intertie with Union Carbide. (DJ 606). Either CEI believed a 100mw intertie was large enough to provide mutuality of it was willing to forgo u mutuality in an effort to forestall installation of additional generation by I L Union Carbide. h e w
f -163-
- r I
During the summer of 1973 when CEI was admittedly having difficulty [~ meeting its peak load and wa:. curtailing sales to its interruptible customers, i the City offered to sell peak load power to CEI. (Hinchee Tr. 2725). ; I
- i l In addition the City could provide beneficial support to the metropolitan '
~
transmission grid through a program of stagard construction of peaking ; Y units with CEI. (Mayben tr. 7765-66). E. There Is No Factual Support For The Argument That All Of Cleveland's Problems Are The j~ Result Of Its Own Mismanagement. L Although Applicants have attempted to prove that the problems experienced by the City system were all of the City's own cause, they have r been unable to do so. As the proposed findings demonstrate, the disrepair r of the Citys generation is the result of CEI's long standing policy of refusing to interconnect with the City. Moreover the Citys outage record was aggravated v [ by the manner in which CEI operated the load transfer points, p Applicants 200, offered in part to show that the City's generation L problems stemed from problems with the coal obtained by the City, shows f L that CEI was experiencing the same coal problems. F The Cresap report (Applicants 207) is a study of the City's electric L system prepared by a management consultant outfit with no apparent r b engineering or utility background. The exhibit was admitted on an unsponsored basis precluding the City from examining the basis for its conclusions or the ability of the authors to make the study. Moreover even the Cresap L- report recognized that the survival of the City's electric system depends upon L,- .
-164-I
- [ . its ability to obtain " wheeling rights, purchased power (at appropriate
)[ prices), .right to buy into nuclear plants" among other things. L While it is true that the Cityhas suffered extended outages of its
' I.
- L 85mw generating unit, Toledo Edison with full CAPCO membership and the ability to buy maintenance power suffered an outage of a 130mw unit at its Bay Shore plant lasting from December 1,1974 until July 1975.
(Kozak deposition DJ 579 pp. 21-22). It is true that the Cityinstalled a large unit in proportion to the
- size of its load to attain economies of scale at the expense of reliability, but so too did Ohio Edison reduce its reliability to build large units.
u (Firestone Tr. 9417). CEI's own field study of the City's electric distribution facilities revealed that the City's system was at least as good and in part better than 7 i[ CEI's distribution facilities. (DJ 400). CEI's own comparison of costs incured by the City and CEI points out that the difference in production costs L experienced demonstrates the " enormous benefits which can be obtained C' L through economies of scale. " (C-78). Unavailability of economies of ( scale have absolutely nothing to do with the City's management. L Mr. Davidson, one of CEI's engineers, wrote a memorandum in 2 _, April 1973 to Mr. Williams, Executive Vice-President of CEIin which ! i he identified the economic penalties associated with operating a small i public system even with the best of management. ( DJ 356). Among the b penalities identified were the following (1) small generating units at high capital per kw, (2) larger installed reserve capacity per unit of capacity
)
.J
-165-
- r J (3) higher fuel costs (4) less efficient units (5) higher maintenance costs
-T- (6) need to defer maintenace (7) higher personnel costs and (8) higher I administrative costs. Clearly Applicants have failed to prove that the City's problems are (- all the result of the City's poor planning and mismanagement. Further,
) +. .
even assuming that the City's system was poorly designed and mismanaged, ] which the city believes is not shown by the record, that would be no defense to Applicant's anticompetitive activities. F. The Power Of Erninent Domain Does Not Protect The City From Applicants' Anti-F. competiti- e Activities. { Applicants apparently plan to argue that the City's authority to
. condemn CEI's property by right of eminent domain gives the City fun l
protection against Applicants' anticompetitive acts. Assuming the Citysuccessfully acquired all of CEI's facilities, including generation, inside the City of Cleveland, the City would be deficit i l-of power and would have to expand its generation or purchase at wholesale. { It could still not produce ppwer s s economically as CEI which enjoys the benefits of the CAPCO pool. If in addition, the City, through competition were able to secure additional customers outside of the City equal to 50% of its load, the~ City system would still be only half as big as CEI in 7 terms of 1973 retail sales. (Wein dt DJ 587 p.126). City then would be 1 L only slightly larger than Toledo Edison which alone cannot install nuclear i , l \ m t_ O
-166-
.r
- l generation. In fact none of the present CAPCO companies alone could r- install nuclear generation. (Masters deposition DJ 567 pp. 31-32).
l Therefore the power of condemnation provides the City with no remedy for Applicants' denial to the City of access to nuclear generation and ~ coordinated operations and development.
- l Moreover CEI has informed prospective inves' tors that the proposal to condemn certain CEI facilities "does not appear to be economically or practically feasible. " (C-165). The proposed condemnation referred
-e[' to consists of an ordinance introduced in the Cleveland City Council upon F which no action has been taken since it was introduce. I ( VI
. THE DOCTRINE OF PARKER V. BROWN j DOES NOT INSULATE APPLICANTS FROM ANTITRUST REVIEW Through this proceeding Applicants have argued that their activities are not subject to review by this Board under the doctrine of Parker v.
Brown (317 US 341 (1943)). Applicants have argued to this Board that once [ a State has considered and approved an action of Applicants, those actions become State action and are beyond the intended application of the Federal Antitrust laws. The City does not agree that Parker v. Brown is as all 'V y encompassing as the expansive reading urged by Applicants would suggest. Moreover, the facts in this case demonstrate that many important activities of Applicants are simply not regulated. g In Parker v. Brown, the Supreme Court held that an agriculture g marketing program which derived its authority and efficiency from the (. legislative cornmand of the State and which could not operate or become 1 L- , l
-167-
.g .
- ! effective without that command did not violate the Sherman Act. The '
{ Court noted that the Sherman Act gave no indication that it was intended to restrain State action directed by a State. The Court also said, at 350-51:
- r-
!!. [a] state does not give immunity to those who violate the Sherman Act by authorizing
- ~ them to violate it, or by declaring that their action is lawful.
That a State cannot immunize private conduct violative of the Sherman Act was emphasized by the Supreme Court's decision in fw Schwermann Brothers v. Calvert Distillers Coro. , 341 US 384 (1950), in which price fixing compelled by a State fair trade act was held not exempt from the antitrust laws. The Court said, at page 389: .k _ d Therefore, when a state compe.ls retailers to follow a parallel price policy, it demands - private conduct which the Sherman Act forbids. {.. In Asheville Tobacco Board of Trade, Inc. v. FTC, 263 F 2d 502
- - (1959), the Court held that action of the Board was not immunized by Parker R
- v. Brown although the Board was authorized by the State to make reasonable
~
' " ~ ~ ' ' " ' ' ' ' " ' ' * * " ' ' " ' " * * " " " ' " ' ' ' " ' ' ' " ' ' ' " ' ' ' ' ' """" **
E. auction. Operation of the business was left in private hands guided only y
- (_ by general standards. set by the State. The Court said, at page 509
r- . . . action must be state action, not individual f action masquerading as state action. A state can neither authorize individuals to perform acts which violate the antitrust laws nor j(l; declare that such action is lawful. L , 4 o L l
)
p 'l
-168-r-
ll In Travelers Insurance Co. v. Blue Cross of Western Pennsylvania, 298 F Supp 1109, the Court pointed out that to achieve Parker v. Brown i protection the legislature must not only create the acting entity but must also authorize that entity to utilize anticcmpetitive means to achieve a r' specific governmental purpose. .k A regulatory scheme providing for general supervision rather than i specific direction of activity was found insufficient to constitute State action under Parker v. Brown in Marne11 v. United Postal Service of America, Inc. , 206 F Supp 391(1966). In Ohio the Public Utilities Commission is a creature of statute I and has only those powers given it by statute. The Commission's powers do 1 not include the rf ght to manage utilities or dictate their policies. A public f, ^ utility remains an independent corporation and posesses the right to regulate its own affairs and manage its own business. Elyria Tel, Co. v. .Wblic Utilities Commission 158 Ohio St. 441,110 NE 2d 59 (1953). The statutes b, of Ohio recognize and seek to protect competition among public utilities.E/ f Federallaw has also recognized the value of competition despite g r- FPC regulation. In Panhandle Eastern Pipe Line Co. v. Federal Power Commis sion,.l.4 /169 F 2d 881 (CADC 1948), cert. denied, 335 U.S. 854 (. L (1948) it was said: i- M/See Ohio Code 54905. 33 "No public utility shall furnish free service L or service for less than actual cost for the purpose of destroying g Competition. " L 14/ The Natural Gas Act and Federal Power Act are companion statutes a similarly construed. Federal Power Commission v. Sierra Pacific L Company, 350 U. S. 348.
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-169 .
[N]othing in the Natural Gas Act suggests that Congress thought monopoly better than compe- _ tition or one source of supply better than two, t or intended for any reason to give an existing ,? supplier of natural gas for distribution in a q. particular community the privilege of furnish-ing the increased supply.
. - In Northern Natural Gas Co. , v. Federal Power Commission, 399 F 2d 953 (1968) the Court said at 969:
g Congress, the Supreme Court, and this court have concurred in the belief that competition has a role to play in the natural gas industry.
'~
The Courts have not hesitated to censider antitrust claims arising in the context of regulation by the Federal Power Commission. The Supreme r ( Court said in Otter Tail, supra at page 373, that there is no " pervasive ( regulatory scheme" which precludes application of the antitrust laws to
, electric utilities.
The Supreme Court has recently had occasion to consider the application of Parker v. Brown in the context of the electric utility industry p l in Cantor v. Detroit Edison U. S. (July 6,1976). At F issue in Cantor was the legality of Detroit Edison's practice of providing b free light bulbs for residential use. The free light bulb service was provided for in Detroit Edison's tariffs filed with and approved by the Michigan regulatory commission approval. Nonetheless, the Court held the practice not protected from antitrust scrutiny by Parker v. Brown. The Michigan Commission, it was held, pervasively regulates distribution of { electricity with complete power and jurisdiction to regulate all utilities in the State and to regulate all rates, conditions of service and, "all other L.. L.
>4
-170-matters pertaining to the formation, operation or directio of such public
_ utilities. " MCLA $ 460. 501. The Court noted that Michigan policy is neutral -t on the question of whether utilities should provide free light bulbs. The
.c Court said (Slip Op. pp.14-15):
The case before us also discloses a program which is
.f the product of a decision in which both the respendent and the Commission participated. . .. There is
- nothing unjust in a conclusion that respondent's participation in the decision is sufficiently significant to require that its conduct implemen-ting the decision, like comparable conduct by
]. unregulated businesses, conform to applicable Federal law. Applicants can point to no affirmative State or Federal policy to l which any State regulatory body has required Applicants to conform as l excuse for their anticompetitive conduct. No such State or Federal policies ,
' exist. !
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In fact even in the area of rates where one would expect to find the greatest degree of regulation, Applicants exercise significant independent l C control. Mr. Bingham admitted that competition from other electric suppliers is a consideration in designing rates for' CEI. (Bingham Tr.10330). It appears
' that CEI sometimes designs rates based upon what it believes the traffic E will bear. . (C-80).~ The so'-called cost basis for the rate to be charged ?
the Cityfor emergency service over the 138kv intertie included estimates as well as one item based upon an " industry rule of thumb" rather than
- experienced costs. (Hauser Tr.10,859). CEI has a contract with NASA
, . which has a favored nations clause which clearly permits sales to NASA l' at rates not designed for actual costs incurred in serving NASA. (Bingham { Tr. 10268). 1 _ _ , - , .c. - . - _ _ . _ -_ l
Ph
-171- l Some rates are established solely on judgment with no attempt made to l
- allocate costs. (Bingham Tr.10,271). Under Ohio law initial rate filings are not subject to review, CEI has filed rates as initial rate filings.
r (Bingham Tr. 10301-02). Utilities in Ohio are free to negotiate rates for street lighting service without Commission review. (Bingham Tr.10303). Nor does the Federal Power Act preclude Applicants from setting rates. The Supreme Court said in United Gas Pipe Line Co. , v. Mobile , Gas Co. , 350 U. S. 332,100 Led 373, 383, 76 S. Ct. 373: l In construing the Act,15/ we should bear in mind i (~ that it evinces no purpose to abrogate private I ] rate contracts as such. To the contrary, by l requiring contracts to be filed with the Commission, the Act expressly recognizes ( that rates to particular customers may be set by individuc.1 contracts. [ Footnote added. ]
- Within its rate setting power Toledo Edison has followed a practice of maintaing its rates to its wholesale customers at the same level as its l rates to industrial customers. (Moran deposition DJ 583 p. 52). l bL Applicants clearly are not mere functionaries carrying out in mini- l 1
I sterial fashion the policies of their respective States. They exercise a large l k , degree of mar.agerial autonomy in the competitive market place. They are, t and properly so, subject to the antitrust laws. l f - 1_5_/Although 5 Act here refers to the Natural Gas Act the lanpuge of the Court is equally applicable to the companion statute the Federal Power r Act. Federal Power Commission v. Sierra Pacific Power Company, ) 350 U.S. 348. . l p- > l L l 1 l l
peM
-172-
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VII
- THE BURDENIS ON THE APPLICANTS TO SHOW THAT THEY ARE ENTITLED TO UNCONDITIONED OPERATING LICENSES The Nuclear Regulatory Commissh .., in the Waterford proceedings,
- c l has had occasion to address the purpose of prelicensing antitrust review pursuant to Section 105(c) of the Atomic Energy Act of 1954, as amended.
i The Commission has said: 'f The requirement . . . for prelicensing antitrust review reflects a basic Congressional concern
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over access to power produced by nuclear facilities. Jd/ r *
- 4 1
The Commission's antitrust responsibilities represent inter alia a Congressional recog-
. nition that the nuclear industry originated as a Government monopoly and is in great measure T the product of public funds. It was the intent . of Congress that the original public control should not be permitted to develop into a T private monopoly via the AEC licensing process, I and that access to nuclear facilities be as widespread as possible. The Commission is determined to enforce this Congressional
[" intent . . . to assure that AEC-licensed acti-vities accord with the antitrust laws and the policies underlying those laws.J7_/ _ This case concerns the activities of Applicants which have created in the Applicants individually and jointly monopoly of access to nuclear L 16,/. Louisiana Power & Light Co. (Waterford Steam Electric Generation Station, h Unit 3), CLI-73-7, 6 AEC, 48-49 (1973) (Waterford I). E/' Louisiana Power & Light Co. (Waterford Unit 3), CLI-73-25, 6 AEC 619, [ 620 (1973) (Waterford II). i '. . L
-173-2enerationin the C,CCT. City, Staff andthe Departmentputforward evidence establishing (1) the existence of a situation inconsistent with the antitrust F
laws; (2) that the existing situation prevented City and other municipal electric systems from obtaining access to nuclear generation on a plane of p equality with Applicants and (3) that the inability of the City and other municipal l electric systems to obtain access nuclear generation would maintain the
'r ] existence of a situation inconsistent with the antitrust laws.
, 1 Although Section 105(c) requires only that a finding of a situation in-consistent with the antitrust laws "be based on reasonable probability of con-r 1 travention of the antitrust laws or the policies clearly underlying these i laws, " 18 / City believes the evidence sufficient to sustain a finding of an [ actual violation of the antitrust laws. City, Department and Staff assumed the burden of going forward to f introduce evidence of a situation inconsistent with the antitrust laws. Once these parties had established a prima faci; case the burden of proof shifted to the Applicants to prove entitlement to an unconditioned license. Maine Yankee Atomic Power Co. , ALAB-161, 6 AEC 1003, 1018 (1973), citing Consumers Power Co. , ALAB-123, RAI-73-5, 331, 335 (1973). e Applicants have failed to sustain their burden of proof that they are entitled to unconditional licenses. I F i 18,/5. -Rep. No. 91-1247, 91st Cong. , 2nd Sess. (1970) at p. 40. L. l L. .
-174-CONCLUSION In this brief the City has discussed the applicable antitrust law as it applies to the facts of this case and has answered many of the defenses raised by the Applicants during the course of these proceedings. No attempt has been made herein to respond to Applicants' collateral estoppel argument which has already been the subject of extensive briefs and decision m by this Board. To the extent that Applicants attempt to reargue the issue, City would rely on its previous filings, b F
( Wherefore for the reasons set for:h herein the City prays that this f Board adopt the City's proposed findings of fact and conclusions of law and [ order the licenses sought by Applicants to be subject to the conditions proposed by the City. Respectfully submitted, 1 DAc
/
_ Reuben Goldber Arnold Fieldman David C. Hjelmfelt Goldberg, Fialdman & Hjelmfelt 1700 Pennsylvania Avenue, N. W. Washington, D. C. 20006 Telephone (202) 659-2333 Vincent C. Campanella, Director of Law Robert D. Hart, First Assistant
- Director of Law l City of Cleveland l( , 213 City Hall Cleveland, Ohio 44114 Telephone (216) 694-2737 L
Attorneys for City of Cleveland, Ohio
- i g/ Answer of the City of Cleveland to Dismiss Motion of CEI with Respect ;
L-to Allegations Fully Litigated Before and Finally Decided by the FPC. l 1 (- l L I
- I CERTIFICATE OF SERVICE
.F
! I- I hereby certify that service of the foregoing Proposed Findings of r-l Fact and Conclusions of Law and Brief in Support Thereof of City of Cleveland p has been made on the.following parties listed on the attachment hereto this ( 8th day of September, 1976, by depositing copies thereof in the United States F
,( mail, firrt class postage prepaid, or by hand delivery.
r- [~ David C. Hjeldfelt /
'i.
Attachment
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[ L h 1" ( iL 4 ,1 L
[ ATTACHMENT I
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Douglas V. Rigler, Esq. Chairman Christopher R. Schraff, Esq. Atomic Safety and Licensing Board Assistant Attorney General Foley, Lardner, Hollabaugh and Jacobs Environmental Law Section 815 Connecticut Avenue, N. W. 361 East Broad Street, 8th floor F' Washington, D. C. 20006 Columbus, Ohio 43215
- I Alan S. Rosenthal, Chairman Ivan W. Smith, Esq.
II Atomic SafetyAnd Licensing Appeal Board John M. Frysiak, Esq. U. S. - Nuclear Regulatory Commission Atomic Safety and Licensing Board Washington, D. C. 20555 U.S. Nuclear Regulatory Commission
]f.
Wash _ngton, D. C. 20555 _ Richard S. Salzman
- Jerome E. Sharfman ,
Andrew C. Goodhope, Esq.
!' Atomic Safety and Licensing Appeal Board 3320 Estelle Terrace y U. S. Nuclear Regulatory Commission Wheaton, Maryland 20906 '
Washington, D. C. 20555 !{ Robert M. Lazo, Esq. , Chairman 1 Howard K. Shapar, Esq. Atomic Safety and Licensing Board Panel
- f- Executive Legal Director U. S. Nuclear Regulatory Commission U. S. Nuclear Regulatory Commission Washington, D. C. 20555 r Washington, D. C. 20555 Q' Daniel M. Head, Esq. , Member Mr. Frank W. Karas, Chief Atomic Safety and Licensing Board Panel Public Proceedings Branch U. S. Nuclear Regulatory Commission Office of the Secretary Washington, D. C. 20555 U.S. Nuclear Regulatory Commission l Washington, D. C. 20555 Atomic Safety and Licensing Appeal l Board Panel Abraham Braitman, Esq. U. S. Nuclear Regulatory Commission Office of Antitrust and Indemnity Washington, D. C. 20555
_ U. S. Nuclear Regulatory Commission Washington, D. C. 20555 Joseph Rutberg, Esq. Jack R. Goldberg, Esq. , _ Frank R. Clokey, Esq. Office of the Executive Legal Director Special Assistant Attorney General U. S. Nuclear Regulatory Commission Towne House Apartments, Room 219 Washington, D. C. 20555 _ Harrisburg, Pennsylvania 17105 Benjamin H. Vogler, Esq. Edward A. Matto, Esq. Robert J. Verdisco, Esq. . Assistant Attorney General Roy P. Les sy, Jr. , Esq. Chief, Antitrust Section Office of the General Counsel l 30 East Broad Street, 15th floor Regulation b Columbus, Ohio 43215 U. S. Nuclear Regulatory Commission Washington, D. C. 20555 L 9
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I i - ATTACHMENT (continued) Melvin G. Berger, Esq. David McNeill Olds, Esq. Joseph J. Saunders, Esq. William S. Lerach, Esq. _ Steven M. Charno, Esq. Reed, Smith, Shaw & McClay David A. Leckie, Esq. Post Office Box 2009 , Janet R. Urban, Esq. Pittsburgh, Pennsylvania 15230 l Antitrust Division > f.. Department of Justice Terrence H. Benbow, Esq. Post Office Box 7513 Steven B. Peri, Esq. Washington, D. C. 20044 Winthrop, Stimson, Putnam & Roberts 40 Wall Street Karen H. Adkins, Esq. New York, New York 10005
. Richard M. Firestone, Esq.
Assistant Attorneys General Alan P. Buchmann, Esq. Antitrust Section Squire, Sanders & Dempsey 30 East Broad Street, 15th floor 1800 Union Commerce Building [ Columbus, Ohio 43215 Cleveland, Ohio 44115 q Russell J. Spetrino, Esq. Leslie Henry, Esq. Thomas A. Kayuha, Esq. Michael M. Briley, Esq. Ohio Edison Company Roger P. Klee, Esq.
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47 North Main Street Fuller, Henry, Hodge & Snyder Akron, Ohio 44308 Post Office Box 2088 Toledo, Ohio 43604
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John Lansdale, Jr. , Esq. ._ Cox, Langford & Brown James R. Edgerly, Esq. 21 Dupont Circle, N W. Secretary and General Counsel Washington, D. C. 20036 Pennsylvania Power Company
. One East Washington Street Richard A, Miller, Esq. New Ci . e, Pennsylvania 16103 Vice President and General Counsel iL The Cleveland Electric Illuminating Co. Donald H. Hauser, Esq.
Post Office Box 5000 Victor A. Greenslade, Jr. , Esq. Cleveland, Ohio 44101 T13 e Cleveland Electric Illuminating Co. Post Office Box 5000 Garald Charnoff, Esq. . Cleveland, Ohio 44101 Wm. Bradford Reynolds, Esq. Robert E. Zahler, Esq. Thomas J. Munsch, Jr. , Esq. Jay H. Berstein, - Esq. General Attorney j Shaw, Pittman, Potts & Trowbridge Duquesne Light Company 1800 M Street, N. W. 435 Sixth Avenue Washington, D. C. 20036 Pittsb trgh, Pennsylvania .15219
- - Atomic Safety and Licensing Board Panel Dockniag and Service Section U.S. Nuclear Regulatory Commission Office of the Secretary Washington, D. C. 20555 -U. S. Nuclear Regulatory Commission Washington, D. C. 20555
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ATTACHMENT (continued) Joseph A. Rieser, Esq. , Reed, Smith, Shaw & McClay
- 1155 Fifteenth Street, N. W.
Washington, D. C. 20005 ' - John C. Engle, President - AMP-O, Inc.
- 20 High Street
- Hamilton, Ohio 45012 Michael R. Gallagher, Esq.
ir - 630 Bulkley Building ]~ 1501 Euclid Cleveland, Ohio 44115 r L (r' .
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