ML19329A869

Prehearing Fact Brief of Util.Certificate of Svc Encl

ML19329A869
Person / Time
Site:	Davis Besse, Perry
Issue date:	12/01/1975
From:	Benbow T, Berger S OHIO EDISON CO., WINTHROP, STIMSON, PUTNAM & ROBERTS
To:	Atomic Safety and Licensing Board Panel
References
NUDOCS 8001150762
Download: ML19329A869 (92)

Text

- . -. . _ _ _ - _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _

.. .. - - ,. ,. ,~

s ., :. .m-- p.mpenqvr 3 c

'I' ?.p\.),k.e i,1.

e .u. m M. c ., ,

sr < ., . .M.l; e

[ '. ' s )_ ' y'.} 9. C,'s

, . : ; -:. w'.f w 4

w.Zk.~ .. Y,y %. -

r .L UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION . f 4-:N5 . 6 . RS

. .. . %..:. F. ':y;. . , .

, h, ...*, . . x) r :t;> hm'g;4 -

Before the Atomic Safety and Licensing Board ,; e ' , /g

7. .p

- t .s

.Q .Q -

~.j;g Q' M '

,  ?. ,

y. ,dk$lMh. '

W;Mi '

'Q; &yvL _c '[.& j',.

• ., ,, ,C 4

';CL/ ,g.y.L ,*.Q[

~ ~ <

-M

• D.  : '

4+4 krW.A. !b.

a, . . . , s '

I'n. the. Ma.tter of' ' J..*'t Y W *].' T ~ . -- -

.)

. .a

,- 't .

c., 1.

")l .. '. ^ ,.Ch.w,.). t<y THE 'IOLEDO EDISON ~ COMPANY ') -

W- tig$, ~

THE CLEVELAND ELECTRIC ILLUMINATING )< - Docket.No..,50@13@ 3 COMPANY -

~

) . [hhj 3 (Davis-Besse Nuclear Power Stat!.on, <<].3@%Q3,

• f Unit 1)

)

)

)

s "N . : .W.W.p*

g3 [

THE CLEVELAND ELECTRIC ILLUMINATING ) Docket Nos . 5 0-440A< .. .bb. e.s <. -

COMPANY, ET AL. )

(Perry Nuclear Power Plant, 5'0-4'41AycsJol.

) 3 'd Units 1 and 2) ) ,

,. ,o W 4%?< ,. ..

. a. d,,. . . yw

) .,

r. -

THE TOLEDO EDISON COMPANY, ET AL. ) Docket- Nos .0 5'.0$F00E[+ -,#

(Davis-Besse Nuclear-Power Station, )

Units 2 and 3) 9

)

• 3^ ^(.' L.-9m.QQ

' y T ." M 1 #

q 5'O g5K n

\ ~ , u dy.. ?sp%g\

, ,r.

~

j

$0. M N6"I 5 is J.:s '. >.es ,Jn W i 'f PREHEARING FACT BRIEF OF OHIO EDISON ,l,. %b,c#( p ,%

COMPANY AND PENNSYLVANIA POWER .y-j COMPANY -

~ - -W - m;h'A p g'%

t,.,[

W @ k 1

3 . - WN' M $d.d. M D[k

,y u, w ,' !.

e ..

,,w.

_ %c gr,. .

..c ~w . y. eq g ...n .m-

- u  ; r jsM ,-

.g..pg 4 ppy O

1 D  % I #N 4 .,%-

f i

%d R N.g'% .

'O -

'4 s'.:* +. ^/t. s..

c,t; .,12f&y .s t y.

OO>

I P, ' di@y%Q A ,

Terence H. Benbow

'fj

'" lt U] J LI e.'

Steven A.~ Berger Winthrop, Stimson, PutnamM-Mil%

QE. DM

. Roberts 40 Wall Street a ~ G:fjf&p%) N_

"!J3- d,, y# w New York, New York 10005' Attorneys for Ohio Edison, ! ,;3 %

.Mhk

. Company and Pennsylvania.. MTYfi Power Company WWO1TQ .. tcy eu m

1 W-%w&'g; December 1,,1975

• Q clg . - .,

800415076Q{j $d(.

.-s a=, n 5,ynn.;.n*w

, . . . .v ~. a. . %- .- ..'g, ~i.

q 4 t . . ,

s .

. . to. t

.q, . ~ , Yf~. a g\ ,.~. . g.. -&. . n .by..,: g;pg i;:.Q ? 6, .p;r-R.*hi~. 02 c Dl*MK I:

.'l ':. P> :. U. ?. ' & ,.l ?-^ $' M . '&W'Nf; g#

&m t W .A '

hNdb4AN'il ; b bhbi&NNh,3[y e'irdNdNN b  ;

a d5$3hh b. M.c dNf>K'tI i rfbI)N 9

TABLE OF CONTENTS Page INTRODUCTION...................................................... 1 PART 1 THE REVEALING HISTORY OF THE COMMISSION'S ANTITRUST REVIEW OF OHIO EDISON AND PENN POWER.............................. 6 A. Beaver Valley Unit # 2.................................. 6 B. Per y Units 1 & 2....................................... 11 C. Davis-Besse 2 & 3....................................... 14 PART II OHIO EDISON AND PENN POWER AS THEY EXIST TODAY.................... 20 A. General Description..................................... 20 B. History of Ohio Edison and Penn Power. . . . . . . . . . . . . . . . . . . 22 Akron Division.................................... 23

, Springfield Divi 3 ion.............................. 24 Youngstown Division............................... 25 Ohio Public Service Company....................... 27

. Pennsylvania Power Company........................ 28 The Ohio Edison System............................ 29 C. Public Utility Responsibilities of Ohio Edison and Penn Power and the Regulatory Jurisdiction to which they are Subject.................. 32 D. Coordination............................................ 39 E. Relationships with the Other Electric Entities Serving in the Areas Served by Ohio Edison and Penn Power.............................................. 44 PART III RESPONSES TO SPECIFIC CHARGES OF ANTICOMPETITIVE CONDUCT ALLEGED AGAINST OHIO EDISON AND PENN POWER........................ 50 Specific Responses to Numbered Charges...................... 54 CONCLUSION..............................................'.......... 85 e

k l

I

- __. - _ _,m .. -m ..

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safety and Licensing Board In the Matter of )

)

THE TOLEDO EDISON COMPANY )

THE CLEVELAND ELECTRIC ILLUMINATING ) Docket No. 50-346A COMPANY )

(Davis-Besse Nuclear Power Station, )

Unit 1) )

THE CLEVELAND ELECTRIC ILLUMINATING ) Docket Nos. 50-440A COMPANY, ET AL. ) 50-441A (Perry Nuclear Power Plant, )

Units 1 and 2) )

THE TOLEDO EDISON COMPANY, ET AL. ) Docket Nos. 50-500A (Davis-Besse Nuclear Power Station, ) 50-501A Units 2 and 3) )

PREHEARING FACT BRIEF OF OHIO EDISON COMPANY AND PENNSYLVANIA POWER COMPANY Ohio Edison Company (Ohio Edison or Company) and its wholly owned subsidiary, Pennsylvania Power Company (Penn Power or Company) * , insofar as the state.'ents and arguments are ap-plicable to Ohio Edison and Penn Power, fully support and hereby adopt'those statements and arguments made in the prehe -ing brief i

prepared by S' haw, Pittman, Potts & Trowbridge submitted on uchalf of all of the applicants in these consolidated proceedings.

• Ohio Edison and Penn Power are sometimes collectively re-ferred to as the Companies.

g -- , -,

2.-

4 i

• ' As a result, however, of the belated charges of anticompetitive conduct alleged against Ohio Edison and Penn Power with regard to their relations with other electric en-tities in the areas in which they serve, leveled against the Companies for the first time in the separate filings submitted herein by the Department of Justice and the NRC Staff on Septem-ber 5, 1975, Ohio Edison and Penn Power are submitting this l

separate prehearing brief. It will place the timing and lack of substance of those charges in proper perspective for the Board's consideration prior to the evidentiary hearing.

Part I tracks the revealing history of the antitrust review of the policies and practices of Ohio Edison and Penn i

I Power as related to their proposed activities under the licenses

~

sought. Three years passed from the submission by Ohio Edison and Penn Power of the first of their three applications subject to antitrust review until the September 5, 1975 filings. In all that time they had little reason to believe that their re-lationships with the other electric entities in the areas within which they serve would be called into question in any proceeding before this Commission. This is so particularly in light of the fact that none of those entities has ever seen fit to petition l to intervene herein or ever specifically requested access to Ohio Edison's or Penn Power's portions of the Perry Units 1 & 2 or Davis-Besse Units 2 & 3. Accordingly, Ohio Edison and Penn

- Power believed that the focus on their proposed activities under r e ,-i.-sey, ,s-r-. ----,--

,.m - ,yv-

3.-

the licenses sought would relate to their participation in the CAPCO pooling arrangement, and CAPCO's alleged anticompetitive effect upon certain electric entities located in areas outside of the areas being served by Ohio Edison and Penn Power and with whom they have had no relationships, competitive or otherwise.

In order to place the recent charges leveled against the Companies in proper perspective, Part II describes (A) the Companies as they exist today including their business purposes, the areas within which they serve, and their generation, transmission and distribution properties; (B) the history of the Companies; (C) their public utility responsi-bilities, and the nature and extent of the regulation to which they are subject both at the state and federal level; (D) a description of the coordinating arrangements which the Com-panies have with other electric entities, including the CAPCO arrangement, and the Companies reasons for entering into such arrangements; and (E) their relationships with other electric entities serving in the areas served by Ohio Edison and Penn Power, and the ongoing negotiations between the Companies and these entities planning for future relationships.

Finally, Part III answers those belated allegations leveled against the Companies in the September 5,1975 filings of the Department of Justice, the NRC Staff and the City of s Cleveland. Notwithstanding the inability of Ohio Edison to l

\

4.-

obtain timely discovery to inquire into the underlying basis of these charges and thus adequately prepare their defense for the evidentiary hearing (see, October 30, 1975 Motion of Ohio Edison and Penn Power for Additional Discovery from Department of Justice and NRC Staff), the Companies will demonstrate that the charges are baseless. All which appear to have any basis in fact involve conduct engaged in by the Companies grounded on good business justifications and in furtherance of their public utility responsibilities. It will become manifest that these charges have been irresponsibly introduced into these proceedings solely for the purpose of " color." Were it not for the joint nature of the applications for the licenses in question, thvie charges would never have been the basis for a separate hearing as to Ohio Edison and Penn Power.

In light of the absence of any petition to intervene by any other electric entity serving in the areas served by Ohio Edison or Penn Power or specific request for access by any such entity to the Companies' share of the power to be 1

generated f im the Perry Units 1 & 2 or the Davis-Besse Units 2& 3, cou. I with the good faith negotiations presently going on between lo Edison and its municipal customers in working l towards an agreement based upon a plan of action specifically recommended by the municipals' own consulting engineers, it is 1

l l

l

i

, , 5.-

1 l

1 J .

submitted that no possible casual connection can be estab-

lished between the companies' activities under the license i

I and any existing situation allegedly inconsistent with the t i t antitrust laws in the areas in which they serve.

4 a

t i

1

.1 L

i l

t 4

a

! i.

I i l

i 1

i i

I

.i i

t I

B

4 6.-

PART I THE REVEALING HISTORY OF THE COMMISSION'S ANTITRUST REVIEW OF OHIO EDISON AND PENN POWER i

i In rendering antitrust advice to the Commission pur-suant to Section 105(c) of the Atomic Energy Act, as amended (42 U.S.C. S 2135(c)), the Justice Department's letters of ad-vice have consistently, and appropriately, focus on the competitive scene in the area in which a particular appli-cant serves and on its relationships with the other electric entities with which it competes in that area. All this is done for the purpose of advising the Commission, consistent with the statutory standard of Section 105, whether the partic-ular applicant's activities under the license would create or J,

maintain a situation inconsistent with the antitrust laws in 4

the area within which that applicant serves.

A. Beaver Valley Unit #2 On October 20, 1972, Ohio Edison's and the other CAPCO companies' joint application for a construction permit on the Beaver Valley Unit #2 was docketed by the Commis-sion. Pursuant to Section 105 the Commission transmitted the s

application to the Department of Justice for its antitrust ad-vice as to whether or not an antitrust hearing should be held on the application.

7.-

Notwithstanding the joint nature of the Beaver Valley Unit #2 application, the Department formulated its advice to the Commission consistent with its past practice by evaluating the competitive situation in each of the respective areas served by the applicants and also the relationships of each of the applicants to the entities with which each competes in

< those areas. Thus, the Department's advice in the Beaver Valley l letter with regard to Ohio Edison centered upon Ohio Edison's relationships with the rural electric cooperatives and munici-pal electric systems operating in Ohio Edison's area. With regard to the cooperatives operating in the area within which Ohio Fdison serves, the Department advised as follows:

"All the rural electrical distribution co-operatives operating in the State of Ohio receive their bulk power from Buckeye Power, Inc. under long term contracts. Buckeye is a wholesale supply company wholly owned and controlled by the 28 rural electric distribution cooperatives in Ohio. Buckeye owns one of two 600 mw generating units installed at the Cardinal plant of the Ohio Power Company. . . .

Ohio Edison, while not party to an agreement with Buckeye, has entered a separate agreement with Ohio Power Company, pursuant to which it wheels bulk power to 7 distribution cooperatives located in its service area. The remaining Applicants do not have distribution cooperatives located within their ser-vice areas, and thus, do not wheel Buckeye power.

"During the course of our investigation, Buckeye Power informed the Department that it was concerned over the fact that it did not have an express con-tractual right to new delivery points for coopera-tives located within the service area of Ohio Edir n.

Such additional delivery points must be established by agreement between Ohio Edison and Ohio Power ac-

. cording to the contract between them.

8.-

" Ohio Edison has supplied the Department with information indicating that the Applicant does not have a policy of constant or arbitrary refusal to consider additional delivery points requested by Ohio Power on behalf of Buckeye or its members.

From 1967 to the present, Buckeye has requested three additional delivery points for member coopera-tives to which Ohio Edison wheels Buckeye power. Of these requests one has been withdrawn, one has been agreed to, and one is still under consideration.

" Buckeye has also requested a delivery point for an additional cooperative to which Ohio Edison does not presently wheel power. Ohio Edison has indicated that the provision of wheeling services to this co-operative would require a modification of the terms of its agreement with Ohio Power; Ohio Edison has in-dicated to Buckeye and the Department its willingness to modify the agreement in this respect.

" Ohio Edison has further indicated to the Depart-ment that it intends to continue its past practice with respect to the establishment of new delivery points for the provision of service to Buckeye member cooperatives; that is, to consider each request on an ad hoc basis and, when the capital expenditure re-quired by the Company to render service to the co-operatives would impose an unreasonable burden on Ohio Edison, to suggest that Ohio Power, Buckeye, or the affected member cooperative participate in the cost of establishing the requested delivery point.

"At present, there does not appear to be any evidence that Ohio Edison has refused to establish a delivery pcint for reasons based upon or related to competition between it and any rural electric distribution cooperative. Further, there does not appear to be any evidence that a refusal by Ohio Edison to establish a delivery point has had an anticompetitive effect. In view of Ohio Edison's past conduct and assurances that it is willing to l

modify its agreement with Ohio Power to provide for new wheeling service to additional cooperatives, i there do not appear to be any presently existing anticompetitive effects generated by Ohio Edison's conduct relative to the cooperative distribution j

I systems located in its service area." (Letter of l

Advice, dated April 20, 1973, pp. 3-4) l

9.-

With regard to the municipally owned electric utilities operat-ing in the area in which Ohio Edison serves, the Department advised as follows:

" Ohio Edison's 20 wholesale customers, which purchase all or part of their bulk power require-ments from the Applicant, made inquiry of Ohio Edison in August 1972, prior to the institution of our review, as to whether the company would allow the municipals to participate in generation projects and would provide the attendant wheeling and partial requirement service required. No -

specific reference was made in this request to the instant generating unit. While no answer was received to this request, Ohio Edison and its wholesale customers have entered into the follow-ing agreement:

'The parties will conduct studies and investigations of the engineering, financial and legal feasibility of an arrangement or arrangements under which the municipalities would by (sic] ownership in whole or in part, or by special contractual agreement, be in a position to participate directly in the out-I put of specific generating capacity. In the

event that the studies and investigations show that an arrangement appears to be feasi-

! ble and to the mutual advantage of the munici-palities and the Company, and if a sufficient number of municipalities agree to participate in the arrangement, Ohio Edison and those in-terested municipalities will thereupon enter into appropriate agreements therefor and will use their best efforts to put the arrangement into effect.' .

"In view of Ohio Edison's willingness to partici-pate in a determination of the feasibility of munici-pal utility participation in specific generating projects in the future and absent any allegations of specific anticompetitive conduct relevant to this application, Ohio Edison's relations with its munici-pal electric customers would not seem to create or

, maintain a situation inconsistent with the antitrust

10.-

4 laws."* (Letter of Advice, dated April 20, 1973, pp. 5-6) (Emphasis Added)

The Department concluded its letter of advice on the Beaver Valley Unit #2 as follows:  ;

3 "As indicated above, there have been no re-quests for participation in Unit No. 2 of the l

Beaver Valley Power Station. Our investigation has failed to disclose conduct by the Applicants which has resulted in presently demonstrable serious anticompetitive effects. In the absence of any anti-competitive denials of access to the 1

Beaver Valley unit or other practices of the Appli-cants related in some way to that unit which appear

, to create or maintain a situation inconsistent with the antitrust laws, the Department recommends that the Commission proceed in its consideration of the instant application without an antitrust hearing."

(Letter of Advice, dated April 20, 1973, p. 8)

(Emphasis Added) i .

i I

• With regard to the underlined portion of this quotation from j the Beaver Valley letter, we assume that the Department mis-

]

spoke in evaluating the connection between Ohio Edison's re-lations with its municipal customerg and the creation or l maintenance of a situation inconsistent with the antitrust

laws. Of course, it is the activities of Ohio Edison under the license and not its relations with its municipal cus-tomers to which the Commission must look in making its determination under Section 105 (c) (5) .

I e

e 0

2 4

k

'w m e -=- -

vy - - - -

e -. . -- - , , = *-----tw

11.-

(B) Perry Units 1 & 2 On June 25, 1973 Ohio Edison's and Penn Power's and the other CAPCO companies' joint application for a construction permit on the Perry Units 1 & 2 was docketed by the Commission and transmitted to the Department of Justice for antitrust advice.

On December 17, 1973, the Department rendered its advice and here again, notwithstanding the joint nature of the applica-tion, the focus of the Department's letter was on the compet-itive situations in each of the areas served by the respective applicants and more specifically their relationships with the entities in those areas with wh'ch each applicant competes.

With regard to Ohio Edison and Penn Power, the Depart-ment adhered to its earlier conclusions contained in the Beaver Valley advice letter set forth abcVe. Nevertheless it concluded that an antitrust hearing should be held on the application as a result of its evaluation of the competitive situation in the areas served by CEI and the relationships that CEI has with electric entities with which CEI competes. Thus, the Perry advice letter stated in relevant part:

"III. Competitive Considerations. The Applicants herein have made two previous applica-tions to the Commission on which the Department was requested to render antitrust advice: Davis-Besse Nuclear Power Station (Docket No. 50-356A) and Beaver Valley Power Station, Unit No. 2 (Docket No. 50-412A). Since there had been no formal request for participation in either facility, l

1

12.-

and since the Applicants appeared to be responding voluntarily and adequately to certain allegations of anticompetitive conduct, the Department did not recommend that an antitrust hearing be held upon either application. The competitive cituation outlined in the Department's advice letter dated April 20, 1973, on the Beaver Valley facility appears to be unchanged with respect to all but one of the Applicants, CEI. Therefore, we will not at this time reiterate the conclusions con-cerning the activities of the other Applicants which we set forth in our prior correspondence.

"IV. Conclusion. Based upon our review, the Department of Justice can only conclude that a failure by CEI to grant the requests by Painesville and Cleveland would create a situation inconsistent with the antitrust laws. CEI's refusal to wheel power for AMP--O appears to be another indication of this inconsistency. Construction and operation of the Perry units appear likely to enable CEI to maintain this anticompetitive situation. Accordingly, the Department of Justice concludes that the Commission should hold an antitrust hearing on this application."

To Ohio Edison and Penn Power it was clear that while the De-partment advised and the Commission ordered an antitrust hearing to be held on the application for the Perry Units 1 & 2, that hearing was intended for the purpose of determining whether CEI's activities under the license would create or maintain a situation inconsistent with the antitrust laws in the area within which CEI serves. At no time has Ohio Edison or Penn Power ever been given reason to believe that the Perry hearing was to inquire into the competitive situation in the areas in which Ohio Edison or Penn Power serves and its relationships with the other electric entities O e

. ~ . , - , - - -

13.-

serving in those areas for the purpose of determining whether their activities under the Perry license would create or maintain a situation inconsistent with the antitrust laws in the areas in which they serve.

Moreover, the intended scope of the Perry hearing as set forth above was clearly confirmed at the prehearing conference held on June 25, 1974 to consider the matters in controversy in the proceeding. It was stated by Staff counsel that " analysis of the other CAPCO entities not including CEI would not be related to any allegations of conduct or practice in their service area because we have made no such allegation." (Tr. 385) This interpretation was likewise expressly shared by the Department of Justice. (Tr. 385)

Finally, as was the case with respect to the Beaver Valley application, no petition to intervene was ever filed by any entity operating in the areas served by Ohio Edison or Penn Power. Nor has any specific request for access to their ownership share of the Perry Units 1 & 2 ever been received by Ohio Edison or Penn Power. Accordingly, it is incon-ceivable how Ohio Edison's or Penn Power's activities under the Perry Units 1 & 2 licenses could possibly create or main-tain a situation inconsistent with the antitrust laws in the areas within which they serve.

~

i i

• ~

14.-

(C) Davis-Besse Units 2 & 3 On August 9, 1974, Ohio Edison's and Penn Power's and the other CAPCO companies' joint application for construction permits on the Davis-Besse Units 2 & 3 was docketed by the Com-mission and transmitted to the Department of Justice for anti-trust advice.

4 By letter dated .abruary 14, 1975, the Department of Justice advised the Commission that based on its review which ,

included certain unspecified evidence which had come to its at-tention after the rendition of its advice letters on earlier applications by the applicants it was recommending that a hearing be held as to each of the applicants. This, of course, included Ohio Edison and Penn Power and constituted the first adverse advice letter issued by the Department of Justice against the Companies. The only specific practice, how-ever, called into question involving Ohio Edison's or Penn Power's relationships with the other electric entities in the areas within which they serve involved alleged unrea-sonable demands concerning the establishment of four new delivery points for the cooperatives in the area served by Ohio Edison. But these seem to be the same delivery points which were extensively discussed by the Department of Justice in its Beaver Valley advice letter as set forth above and on

. which the Department concluded that there had not appeared "to be any presently existing anticompetitive effects generated

_ --r - - - ,- _

15.-

by Ohio Edison's conduct relative to the cooperative distribution systems located in its service area." More-over no specific practice involving Penn Power's relations with the other entities operating in the area in which it serves was ever mentioned at all.

t Otherwise, the Department's letter of advice on J

the Davis-Besse Units 2 & 3 talked in general terms of CAPCO as a vehicle affording the CAPCO companies the advan-a tages of operational and developmental coordination which the companies have denied to other systems in the CAPCO area and naming specifically some of the electric systens which allegedly the CAPCO companies have refused to admit as members or refused to afford the benefits of coordination derived by the CAPCO companies through their arrangements.

Here again, however, no entity located in the areas served by Ohio Edison and Penn Power was specifically mentioned as having been denied the benefits of the CAPCO arrangement.

Furthermore, as was earlier stated with respect to the Beaver Valley and the Perry applications, no entity in the areas served by Ohio Edison or Penn Power ever saw fit to petition to intervene on the Davis-Besse 2 & 3 application or ever made a specific proposal for access to Ohio Edison's or Penn Power's ownership share of Davis-Besse Units 2 & 3.

Of course, the September 5 filings seek to inject into these consolidated proceedings for the first time many

16.-

f L

l .

allegations of anticompetitve conduct against Ohio Edison and 1

Penn Power in their dealings with the other electric entities 4

f; serving in the areas where the Companies serve. The background necessary to understand the underlying facts of those allega-tions and the Companies' specific responses to those charges will be discussed, infra, in Parts II and III.

i l Before addressing those specific allegations against Ohio Edison and Penn Power, however, it is of the utmost impor-tance for this Board to now determine whether evidence as to those allegations has any place in these proceedings at all, and if so, what place, so that the Companies can properly defend themselves against those charges.

The hearing to be held is, of course, for the pur-pose of this Board answering the statutory question posed by Section 105 (c) (5) , to wit, whether the activities under the license will " create or maintain a situation inconsistent with the antitrust laws." It is Ohio Edison's and Penn Power's position that even assuming arguendo the truth of all of the allegations made by the Department of Justice and NRC Staff with respect to their relationshirs with the other electric entities serving in the areas where they serve, that could not possibly result in an adverse finding by this Board that Ohio Edison's or Penn Power's activities under the license would create or main-tain a situation inconsistent with the antitrust laws in the

areas within which they serve. In the Waterford 2 decision, the Commission stated

4 4

.>-e -~

17.-

"As stated in our original Memorandum and Order, the requirement in section 105 for pre-licensing antitrust review reflects a basic Congressional concern over access to power pro-duced by nuclear facilities. The Commission's antitrust responsibilities represent inter alia a Congressional recognition that the nuclear industry originated as a Government monopoly and is in great measure the product of public funds.

It was the intent of Congress that the original public control should not be permitted to develop into a private monopoly via the AEC licensing process, and that access to nuclear facilities be as widespread as possible. The Commission is determined strictly to enforce this Congressional intent, and to work with other responsible agencies, such as the Department of Justice and the Federal Power Commission, to assure the AEC-licensed activities accord with the antitrust laws and the policies underlying those laws.

"At the same time, however, we must emphasize that the specific standard which Congress required for antitrust reviews -- 'whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105a' -- has inherent boundaries. It does not authorize an unlimited inquiry into all alleged anticompetitve practices in the utility industry. The statute involves licensed activities, and not the electric utilit.y industry as a wnole. If Congress had intended to enact a broad remedy against all anticompetitive practices throughout the electric utility industry, i it would have been anomalous to assign review responsibility to the Atomic Energy Commission, )

whose regulatory jurisdiction is limited to nuclear facilities. It is the status and role of these facilities which lie at the heart of anti-trust proceedings under the Atomic Energy Act."

(pP. 4-5)

It is thus apparent that the focus of this Agency's anti-I trust review should be upon the anticompetitive impact that l a given applicant's activities under the license will have upon the competitive situation in the areas served by that applicant. It is submitted that the failure of any entity in the areas served by Ohio Edison or Penn Power to either

18.-

, petition to intervene or request participation in any por-1 tion of Ohio Edison's or Penn Power's shares of the Beaver Valley, Perry or the Davis-Besse Units should render it unnecessary for this Board to inquire into whatever anti-competitive situation may be alleged to exist in Ohio Edison's or Penn Power's service areas since their activities under the license can in no way bear a reasonable relationship to such an assumed situation. Recently, the Atomic Safety -

and Licensing Appeal Board in its Wolf Creek decision, dated June 30, 1975, stated:

" Undoubtedly there are outer limits to the Com-mission's antitrust jurisdiction. But there is nothing lurking in the background of section 105c of the Atomic Energy Act to place it beyond this agency's power to look behind an offer of ' access' to a nuclear facility to see if it is bona fide or, becausa.of the offeror's concurrent refusal to wheel power, but a mask for a situation incon-sistent with the antitrust laws. " (p. 28)

On the basis of the above-quoted statement from the Wolf Creek decision, we pose the question: is there anything lurking in the background of Section 105 (c) that places it within this Agency's jurisdiction to look into the competitive situation existing in a particular applicant's area when no utility within that area has ever seen fit to make a specific request for " access" to the nuclear facility which is the subject of an application? We submit that the answer is no. For that reason should the oppcsition indicate that it is their inten-I tion for this Board to conduct a hearing pursuant to Section 105 (c) (5) in order to make an adverse finding specifically as l

19.-

to Ohio Edison or Penn Power, we will, as suggested by the Com-

] mission in Waterford 2, move to dispose summarily of this pro-J ceeding in that respect under the provisions of Section 2.749 of the Commission's Rules of Practice or by any other appropriate means.

1 l

i I

(

i i

I

)

1 e

f I

l l

. ~ . . . - _ , . - - . - - . . - . . . . . - , . -. .. ,

20.-

PART II OHIO EDISON AND PENN POWER AS THEY EXIST TODAY A. General Description Ohio Edison war organized as an electric public utility under Ohio state law to generate, transmit and distribute electric power. It presently owns facilities which provide electrical service to 708 communities, as well as to rural areas of the northeastern and central portions of Ohio. Through the operations of its wholly-owned subsid-iary, Penn Power, with which it operates as a single system, the western portion of Pennsylvania is also served. It is estimated that the area served by the Companies has a popula-tion of approximately 2,704,000 and that they serve a total of about 885,418 residential, commercial and industrial cus-tomers. The Companies also supply electric power for resale to 20 municipalities in Ohio and 5 in Pennsylvania.

The transmission lines of Ohio Edison and Penn Power are interconnected with the transmission lines of various other electric utilities including CEI, The Columbus and Southern Ohio Electric Co., The Dayton Power and Light Co., Duquesne Light Co., Monongahela Power Co., Ohio Power Co., The Toledo Edison Co. and West Penn Power Co.

21.-

The Companies presently own nine operating coal-fired generating plants which have a total net demonstrated capability of 3,492,000 kw and numerous oil-fired generating units with a net demonstrated capability of 327,000 kw. In-cluding the ownership interests of the Companies in the coal-fired Sammis Unit No. 7 (aggregating 447,200 kw), the total capacity owned by the Companies is 4,266,200 kw.

The generating plants and load centers of Ohio Edison J

and Penn Power are connected by a transmission system con- '

sisting of elements with voltage ratings ranging from 23 to 345 kv. Their transmission lines aggregate 5,000 miles and their electric distribution systems include 23,528 miles of pole line carrying 32,395 circuit miles of primary, secondary

. and street lighting circuits. They also own 407 substations with a total installed transformer capacity of 14,089,525 kva.

49 of these are transmission substations , including nine at generating plants. Additional interconnections are under consideration or planned for construction as part of the con-tinuing CAPCO program described below. The existing and new interconnections will make possible utilization by the Com-panies of generating capacity constructed as part of this program.

4

-~ - , - ~ .

22.-

The maximum hourly demand to date on the Companies by its customers was 3,836,000 kw. Their seasonal capability at the time of this demand was 4,281,000 kw (providing a re-serve margin of about 11.5% of peak load) including net firm purchases available at that time of 284,000 kw. Based on the present schedule of capacity additions to the system for 1975 through 1986, reserves at the time of presently anticipated peak load will range from 12% to 15%.

B. History of Ohio Edison and Penn Power Ohio Edison of today is the product of over a century of evolutionary growth and development. Ohio Edisc n has its origins in predecessor companies that were engaged in providing natural gas supply, street illumination and transportation.

Natural gas utilities, certain of which were organized as early as 1854, originally supplied natural gas principally for street illumination; however, they were soon supplying residential and industrial users as well.

In the decades that followed, these same companies began generating and selling electrical power. Several electric companies in the area were organized in the later part of the 19th century to generate electrical power for street illumination. These companies were also soon providing re-sidential and industrial service.

e

-, . ,,c

23.-

i The advent of the electric motor and the resul-tant development of electric streetcars spawned the organi-zation of transportation companies engaged in generating electrical power. Although these companies generated elec-trical power primarily for their rail systems , they were subsequently induced to supply service to residents adjacent to their streetcar and interurban lines. Transportation companies considered residential service to be of peripheral importance until the interurban lost favor to the automobile, and proceeds from residential service began to comprise a substantial portion of their revenues.

The early origins of Ohio Edison's predecessors are important since the purposes for which these early 3

suppliers of electrical power were organized have been responsible in large measure for the way in which they grew and developed throughout the area presently served by Ohio Edison.

Akron Division Akron, Ohio, the present headquarters of Ohio Edison, had electriedl street lighting in 1881 as a result of a municipal effort, but subsequent development of the street lighting system and the eventual sale of electrical power to the public was entrusted on a contractual basis to a series of different proprietary interests. The Akron T

y ,,, - ,, - r

24.-

General Electric Company, incorporated in 1891, supplanted earlier ventures that faltered and it emerged as Akron's sole electric utility in 1893. Contemporaneously, newly franchised transportation companies developed an expansive system of electric streetcar and interurban lines. The incorporation of the Northern Ohio Traction and Light Company in 1902 brought several successor transportation systems ,

as well as the Akron General Electric Company, into one unified system which provided both electrical power and transportation to the metropolitan Akron area. In 1928, an expanded version of this operation became part of Northern Ohio Power and Light Company, which two years later was one

. of the five utilities that consolidated to form Ohio Edison.

Springfield Division Springfield Light, Heat and Power Company, incor-porated in 1908, encompassed several earlier concerns that had developed electrical power in the area during the latter decades of the previous century.

The Ohio Ediscn Company name was utilized first by a company in the Springfield area that incorporated and purchased electric properties in Urbana, Mayesville and their environs in 1923. It was the surviving company when it consolidated with the Springfield Light, Heat and Power

25.-

Company in 1924. The resultant Ohio Edison Company was one of the five companies that joined together in 1930 to form the successor Ohio Edison Company.

The London Light and Power Company, incorporated in London, Ohio, purchased power from the electrical utilities operating in nearby Springfield. Prior to its consolidation

, into Ohio Edison Company in 1930, its stock was owned by the Commonwealth Power Company, a holding company.

Youngstown Division Electrical power in the Youngstown area was pio-neered in 1883 by a natural gas utility. This concern merged with a small electric utility company and became the Youngstown Consolidated Gas and Electric Company in 1900. Electric railways were also being developed in Youngstown during the 1890's and the transportation companies involved came under the control of a holding company ultimately known as the Pennsylvania-Ohio Power and Light Company. In 1914 the Youngstown Consolidated Gas and Electric Company was deeded to an electric railway concern which became part of the aforementioned holding company. Pennsylvania-Ohio Power i and Light Company extensively developed its properties during the 1920's prior to its consolidation into Ohio Edison in 1930.

Ohio Edison was organized as a result of a Consoli-dation Agreement signed July 2, 1930 by five Ohio public utility

p. -- .-- _ , - . . - - _ _ _ . . ~ - . - . . .-w+ - *

• 26.-

companies: The Northern Ohio Power and Light Company, The Ohio Edison Company, The London Power and Light Company, The Pennsylvania-Ohio Power and Light Company, and The Akron Steam Heating Company.* The Toronto Generating Station, located on the Ohio River and owned by the Ohio River Edison Company, and transmission lines with substation equipment extending from ~the power station to Youngstown ,

owned by the Ohio River Transmission Company, also became a part of Ohio Edison in that year. The formation of Ohio Edison was necessitated in large measure by Akron's need for surplus power from the Toronto Generating Station. A 60-mile 138 kv transmission line was built from the power station to Akron less than one year af ter the Consolidation Agreement of 1930 was signed.

Transportation properties owned by certain of the consolidating companies were transferred to Akron Trans-portation Company, Northern Ohio Interurban Company and Canton Traction Company. Ohio Edison initially retained but later sold the stock of these companies.

Ohio Edison assumed the indebtedness of the con-solidating companies and issued its preferred stock, share for share of like dividend rate, to holders of preferred 1

i l

• The Akron Steam Heating Company supplied steam heat to the central business district of Akron.

27.-

stock of the respective constituent companies. Commonwealth

& Southern Corporation, a holding company located in New York, owned the common stock and, as part of the agreement, pur-chased an additional 600,000 shares for $15,000,000 at the time of the consolidation.

The next major expansion of Ohio Edison's facilities occurred on September 30, 1944 when the company purchased all of Pennsylvania Power Company's common stock from Commonwealth

& Southern Corporation, the holding company for both entities.

Pennsylvania Power Company became a wholly-owned subsidiary of Ohio Edison as a result of this transaction.

The Commonwealth & Southern Corporation, the holding company for Ohio Edison Company, was dissolved on September

~

30, 1949 pursuant to a plan approved by the Securities and Exchange Commission and by the United States District Court of Delaware. Under the divestiture program, 2,052,396 shares of Ohio Edison common stock were distributed to Commonwealth

& Southern's common stockholders. Ohio Edison with its wholly owned subsidiary Penn Power became an independent holding company as a result of these transactions.

Ohio Public Service Company Ohio Public Service Company was incorporated on October 11, 1921 to bring together scattered predecessor electric properties in Massillon, Warren, Alliance, Elyria, l

I 28.-

i 4

- Lorain, Mansfield, Ashland, Sandusky, and Marion, certain of which had been owned by Henry L. Dougherty and Company. The j

Cities Service Company was the holding company that controlled Ohio Public Service Company until divestiture of this entity was ordered by the SEC in the late 1940 's. On November 10, 1949 Ohio Edison Company purchased Cities Service Company's two million shares of common stock in Ohio Public Service Company. The actual conveyance took place December 23, 1949 after the requisite approval of various regulatory bodies, including the Public Utilities Commission of Ohio and the Securities and Exchange Commission, had been secured.

The merger of Ohio Public Service Company and Ohio Edison was of utmost importance in the development and growth of the Company. The resultant entity had a combined capacity of approximately 989,810 kw provided by 54 units at 12 coal-fired and 2 diesel-fueled generating stations.

i Pennsylvania Power Company ,

The early history of Pennsylvania Power Company can be traced back to 1886 when the first of several early companies was organized to provide electrical power to New Castle, Pennsylvania, the present headquarters of Penn Power.

Other early entities were organized shortly thereafter to serve the communities of Ellwood City, Zelienople, Sharon, Greenville, and their environs. Successors of these early f

electric companies were the Shenango Valley Electric Light

, - y - . - . ~ p. ._ - . . * . - -. . _-y - - , . , . , . _ . -----,--.-c-r-

29.-

Company, Ellwood City Hydro Electric Company, Mercer County Light, Heat and Power Company and New Castle Electric Com-pany. These systems (with the exception of Ellwood City Hydro Electric) and numerous small township companies were consolidated to form Pe'nnsylvania Power Company on July 1, 1926.

Commonwealth & Southern Corporation acquired the common stock of the Company in the latter part of 1928 and on September 1, 1931, established Penn Power as a separate operating unit with headquarters in New Castle. On December 31, 1931, Ellwood City Hydro Electric Company became a part of Penn Power.

As previously mentioned, pursuant to an order of the Securities and Exchange Commission under provision of the Public Utility Holding Company Act of 1935, Commonwealth

& Southern Corporation, Ohio Edison's then parent company, was forced to divest itself of various operating utility companies, including Pennsylvania Power Company. On September 30, 1944, Ohio Edison purchased all of the common stock of Penn Power from Commonwealth & Southern and thus on that date became a wholly-owned subsidiary of Ohio Edison.

The Ohio Edison System By 1950 Ohio Edison and Penn Power had 12 substations, with 1,183,000 kva capacity, at its generating stations and 17

30.-

transmission substations fed at 138,000 volts plus one fed by 69,000 volts. In addition, Ohio Edison in 1950 owned 252 distribution substations with an aggregate capacity of 810,697 kva. Thirty-seven of these were industrial substations each serving only one customer.

However, after 1959, the majority of these industrial installations were sold to the customers they supplied.

Since the early 1950's the evolutionary growth and development of Ohio Edison and Penn Power could best be described as a continuing process of capacity and transmission additions needed to meet increased customer demands, including that needed to ment the system demand imposed by the large number of new residential, commercial and industrial customers which elected to locate in the areas served by the Companies. Except for the five small electric systems acquired by the Companies, which represented a total demand of less than 40,000 kva, the growth pattern during this period was exclusively limited to customer demands and the construction of substantial ' composite facilities needed to meet the Companies ' public utility re-sponsibilities imposed by statute. In this regard, between 1950 and 1971, 16 units with an aggregate capacity of 3,385,000 kw were put in service at five existing generation stations and at two new generating stations, Niles and W.H. Sammis. During the same period, 487,810 kw of generation were retired.

31.-

In 1971 two 600,000 kw units were completed and placed in commercial operation pursuant to an agreement between the Company and CEI which had been entered into prior to the formation of CAPCO. The first of these units was constructed as Unit No. 6 at W.H. Sammis Station; the second was installed at the Avon Lake Generating Station site of CEI. The contract provided that until 1983 whenever one of the two units was shrt down, each company had the right to use half of the output of the operating generator. In this manner the operations of each company could be planned as if they had two 300,000 kw units instead of one 600,000 kw unit. When Sammis Unit No. 6 and Avon Lake were completed and in commercial service, both units were rerated to 650,000 kw instead of 600,000 kw, because of favorable performance.

There was a substantial expansion of Ohio Edison's transmission system in the decades that followed 1950 due to increased generating capacity. This was marked by the introduction of a company-wide 69 kv subtransmission system and the decision in the late 1950's to increase top trans-mission voltage from 138 kv to 345 kv.

The history of Ohio Edison and Penn Power would not be complete without reference to the Companies' participation in CAPCO. This will be discussed in detail in the portion infra dealing with the coordinating transactions of the Companies.

32.-

C. Public Utility Responsibilities Of Ohio Edison and Penn Power and the Regulatory Jurisdiction To Which They are Subject Ohio Edison pursuant to Ohio statute, has the duty under Section 4905.22 of the Revised Code to " furnish necessary and adequate service and facilities, and every public utility shall furnish and provide with respect to its business such instrumentalities and facilities, as are adequate and in all respects just and reasonable." More-over, the same statute expressly limits the charges to be received by an electric utility for services by placing a responsibility on a utility to limit charges so as to "be just, reasonable and not more than the charges allowed by law or by order of the Publig Utilities Commission, and no unjust or unreasonable charge shall be made or demanded for, or in connection with, any service, or in excess of that allowed by law or by order of the Commission. "

Penn Power has similar responsibilities under Pennsylvania law. The Pennsylvania statutes (66 P.S.

S 1171) impose upon a public utility the obligation to furnish and maintain " adequate, efficient, safe, and reasonable service and facilities" and to '8make all such

. repairs, changes, alterations, substitutions, extensions, and improvements in or to such service and facilities as shall be necessary or proper for the accommodation, con-venience, and safety of its patrons, employees, and the public." It further provides that, " subject to the provi-

- 33.-

sions of the act and the regulations or orders of the Com-mission, every public utility may have reasonable rules and regulations".

Penn Power's operations are also subject to 66 P.S. S 1183, entitled " Proper Service ad Facilities Estab-lished on Complaint," which provides that the Commission, "upon its own motion or upon complaint, and upon a finding that the service or facilities of any public utility are unreasonable, unsafe, inadequate, insufficient, or unrea-senably discriminatory, or otherwise in violation of the act, may determine and prescribe reasonable, safe, adequate, sufficient service or facilities to be observed, furnished, enforced, or employed by the public utility. " 66 P.S. S 1190 specifically provides that "the public utility has the burden of proof to show that its service and facilities are adequate, efficient, safe, and reasonable in any proceeding upon the motion of the Commission involving the service or facilities of that public utility."

In addition to having a public utility's statutory duty to serve, Ohio Edison's operations in Ohio and Penn, Power's operations in Pennsylvania are also subject to broad and per-vasive regulation by The Public Utilities Commission of the Ohio and the Pennsylvania Public Utilities Commission and in cer-tain respects by the various municipalities in which they serve.

l

34.-

Both Companies' business operations are also subject to regulation by the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 and, with respect to interstate electric operations, to regulation, including re gulation of their accounting policies and practices, by the Federal Power Commission. Additional regulatory supervision is provided by the Nuclear Regulatory Commission, the Department of Interior, and the Department of Agriculture.

The prehearing brief filed this date by Shaw, Pittman, Potts, and Trowbridge on behalf of all applicants explains in detail on pages 67-89, the federal and state

, regulation to which the Companies are subject. As stated at page 89 of that brief:

"Given the comprehensive federal and state regulatory regimes outlined above, it would plainly be imprudent for the Licensing Board to disregard this predominant industry character-istic in evaluating the antitrust claims made here."

Failure to recognize the extent of the regulation which applies to Ohio Edison and Penn Power is to ignore completely the l development and basic structure of the industry.

In addition, in Ohio, under a "home-rule" concept, munici-l l

l

35.-

~

palities have original jurisdiction to set certain rates for electric service, subject to appeal to the Public Utilities Commission of Ohio if the rates set are not acceptable to the utility. When a retail rate is not set by municipal ordinance, or involves service to an unincorporated area, the Public Utilities Commission has original jurisdiction. Ohio Edison has in many instances been able to obtain from municipalities satisfactory rate adjustments covering residential and commercial service.

Historically, however, only about 89 of the municipalities served have exercised their jurisdiction to fix such rates.

Moreover, under Ohio law, the existing rate schedule, in each municipality, continues in effect until new rate sched-ules become effective either (i) as contained in an ordinance the terms and conditions of which have been accepted by the Company, or (ii) as fixed by order of the Public Utilities Commission of Ohio.

In addition to the broad regulatory scheme described above there are a number of indirect statutory restrictions and limitations which have the effect of precluding substitutions or establishment of power supply service by an electric utility.

These restrictions are particularly relevant in these pro-ceedings. Ohio Revised Code, section 4905.261 is construed as

36.-

9 precluding service to a present municipal wholesale cus-tomer of one utility company by another unless there is a specific order of the Public Utilities Commission or an interval of 90 days with no service by the present supplier.

This section provides:

"(Filing of complaints against duplication of electric facilities). Whenever a public utility proposes to furnish or furnishes electric energy to a consumer and which consumer is being fur-nished electric energy by another public utility, the latter public utility may file a complaint with the public utilities commission protesting the furnishing of service by the other public utility. Such complaint shall be filed within ninety days from the date the public utility which is furnishing electric energy discovers that another utility proposes to furnish the consumer with electric energy. In the event a consumer has been disconnected from the lines of a public utility, and electric energy has not been furnished said consumer for a period of more than ninety days, no right to file a complaint shall accrue under this section.

The commission upon finding that the complaining public utility has been furnishing or will furnish an adequate service to such consumer and that the public utility complained against will duplicate facilities of the complainant, shall order the public utility complained against not to furnish electric energy to such consumer."

This provision clearly manifests a legislative intent to avoid duplication of electric facilities. Moreover, it is clear that between two public utilities there can be no pirating of customers within the specific waiting period or, in the alternative, without commission approval.

l While Ohio statutes do not provide for certificated service territories as do the Pennsylvania statutes, this provi-

! sion approaches recognition of the right of one public I i l

- 37.-

utility not to have its customers taken away by another utility.

Both states have constitutional provisions which could restrict or preclude coordination by or between an l

investor-owned electric utility and a municipal electric system. (See Section 6, Article VIII and Section 6, Article XVIII of the Constitution of Ohio and Sections 6 and 7, Article IX of the Constitution of Pennsylvania.) The Ohio provision expressly imposes a restrictive limitation against the furnishing of bulk power supply requirements by a muni-cipal electric system to others outside its municipal boun-daries.

The Companiec are also subject to the accounting juris-diction of the Federal Power Commission and therefore must keep their books and records in accordance with that Commission's Uniform System of Accounts prescribed for Class A public utilities. The state regulatory Commissions also prescribe that accounts be kept in accordance with the Federal Power Commission's Uniform System of Accounts.

Ohio Edison is a registered holding company under the Public Utility Holding Company Act of 1935 and thus requires approval by the Securities and Exchange Commission for certain transactions. Two key sections of the Act which govern certain Company activities warrant particular discussion. Those sections , Section 9 (A) (1) and 10, govern

38.-

proposed acquisitions of public utility assets. Under Section 9 (A) (1) of the Act, it is unlawful for a registered holding company which has not obtained Commission approval to

. . . by use of the mails or any means or instru-mentality of interstate commerce, or otherwise, to acquire, directly or indirectly, any securities or utility assets or any other interest in any business;"

(15 USC 79 i. (a) (1))

Section 10 of the Act, as pertinent here, provides that in order to secure Commission approval

"(a) A person may apply for approval of the acquisi-tion of securities or utility assets, or of any other interests in any business, by filing an application in such form as the Commission may by rules and regula-tions prescribe as necessary or appropriate in the public interest or for the protection of investors and consumers." (15 USC 79 j.)

Furthermore, 10 (c) (2) of the Act provides that the Commission shall not approve

"(2) the acquisition of securities or utility assets of a public utility or holding company unless the Commission finds that such acquisitions will serve tnc public interest by tending towards the economical and efficient development of an integrated public-utility system . . . " (15 USC 79 j . (c) (2))

Ohio Edison has on four occasions acquired municipal electric systems and with respect to each obtained an order from the SEC approving the transaction. In each situation, Lowell-ville, Hiram, East Palestine and Norwalk, the Company i

39.-

was requested by the municipality to make an evaluation and submit a bid. Each acquisition was the product of arms-length negotiations, approved by the municipalities' governing authority as well as the SEC. It has not been the Companies ' practice actively to seek to acquire small municipal electric systems.

It is without dispute that the power to regulate i

Ohio Edison's and Penn Power's business, engineering and finan-cial operations has been exercised by numerous federal and state governmental authorities through the enactment of legis-lation and the adoption of various particular and specific rules and regulations.

D. Coordination Ohio Edison and Penn Power are presently directly interconnected with eight other major electric utilities. The terms and conditions of any transactions taking place between Ohio Edison or Penn Power and these utilities are governed by separate interconnection nyreements with such utilities and are filed with and regulated by the FPC. Typically, such agreements provide for coordinating transactions between the interconnected systems. These include mutual emergency support, firm and short term power sales, coordinated main-tenance services, on-peak, off-peak and, economy transactions.

i Some of these interconnections were in existence as early as t

the 1920's and interconnections as they presently exist were

- - - - --. y - - ,._.-y ,~_ . ~ _ , ,-- - - . _ , . - , , . ------g -.e- , .-,-

40.-

~

essentially in place in the 1950 's with only minor changes since that time. The host recent modification was a three party transaction between Ohio Edison, West Penn Power Co.,

and Monongahela Power Co. dated October 17, 1968.

Due to the characteristics and nature of their opera-tions it became increasingly apparent to Ohio Edison and Penn Power in the mid-1960's that increased economies of scale

- and improved reliability of its power supply could only be achieved through the formation of a power pool with neighbor-ing electric utilities. On September 14, 1967 the first step towarda the realization of these goals was taken with the forma .. of the CAPCO power pool by Ohio Edison, Penn Power and the other applicants in these proceedings.

With the creation of CAPCO, its members entered

-into somewhat more sophisticated coordinating arrangements.

In addition to the capacity and transmission additions dis-cussed herein, the Companies have entered the Basic Operating Agreement, effective as of January 14, 1975. Filed with the FPC, this supersedes during its term the bilateral agreements existing between the CAPCO parties. Mr. Lynn Firestone of Ohio Edison, an expert witness for Applicants, in his proposed testi-many of October 28, 1975, explained the specific services and coordinating transactions which are taking place among the CAPCO parties.

When the CAPCO power pooling group was organized

41.-

l

~

in 1967, the Companies' purpose in joining the group was to anticipate electric energy needs in the rapidly developing areas in which they serve and make plans to mee.t those needs as expeditiously as possible. Toward this end, the Companies have varying ownership interests in nearly 11 million kilowatts of generating capacity now under various stages of planning and construction. Of this total, over 8 million kilowatts will be nuclear fueled. All units are scheduled for operation between now and 1985.

The first phase of the CAPCO program called for the construction of four generating units and certain trans-mission facilities. The first and third of tP.ese units are Unit No. 7 at the W. H. Sammis Plant, a fossil.-fueled unit of 625 MW which went into comcarcial operation in 1971, and Unit No.1 at the Beaver Valley Station, a nuclear unit of 856 MN expected to go into commercial use in 1976. Neither Ohio Edison nor Penn Power has an interest in the other two units. One of these was completed in 1972 and the other i is scheduled for completion in 1976, both at. Lake Erie sites. Future plans include the constructica of other generating units, among them the three fosstl-fueled units at the Bruce Mansfield Plant (each with an expected capability of 825 MW) , an additional nuclear unit at the Beaver Valley Station with an expected capability of 856 MW, two nuclear-fueled units (each with an expected O

42.-

capability of 1,205 MW) at CEI's North Perry site, the two i

additional nuclear-fueled units with an expected capability of 906 MW each at the Davis-Besse Station and the two nuclear units with an expected capability of 1,200 MW at the Erie Nuclear Plant. Under the CAPCO arrangement, Ohio Edison and Penn Power are responsible for five of these plants.

Penn Power is building the three coal-fired Bruce Mansfield units and Ohio Edison is building the two Erie nuclear units.

Major delays have been required in the construction schedules for nine of the electric generating units described above.

As a further step in the CAPCO capacity addition pro-gram, the installation of 200,000 kw of peaking capacity (125,000 kw by Ohio Edison and 75,000 kw by Duquesne Light Company) was completed in 1972 and the installation of 510,000 kw of peaking capacity (195,000 kw by Ohio Edison, 120,000 kw by CEI and 195,000 kw by Duquesne Light Co.) was completed in 1973. Of the last mentioned peaking capacity units installed by Ohio Edison and by Duquesne Light Co., 334,000 kw are of a type suitable for operation as elements of combined cycle power plants. Such plants are designed to use heat resulting from the combustion turbine associated with the installation to produce steam with which to drive a steam turbine generator unit.

43.-

The CAPCO program contemplates that certain members who do not have ownership interests in particular generating units covered by the early phases of the program, will be, in certain instances, entitled to and obligated for electric power from such units. The Companies are not obligated to make such additional electric pover available to other participants if this would hinder their ability to serve their own customers. The CAPCO program also includes arrangements, subject to all necessary action by regulatory authorities, for the provision of facilities for the trans-mission of electric power among the participants.

In 1967, the East Central Area Reliability Coordina-tion Group (ECAR) was formed as a means for furthering reliabil-ity of bulk power supply among 26 electric utilities in an eight-state area. Both Ohio Edison and Penn Power have been members of ECAR since its inception. In representing its member companies, ECAR participated in the formation of the National Electric Reliability Council (NERC) and, as a mem-ber, is active in its activities. NERC, which is made up of nine member groups encompassing nearly the whole of the continental United States, has as its purpose greater depend-ability of the nation's electric supply.

. During 1968, ECAR adopted practices and procedures with respect to daily operating reserves. These establish,

- for each system, the minimum generating capability to be l 1

1

i 1 44.-

1 available each day to carry load and to meet unforeseen l contingencies. A coordinated program which all systems

}

j have agreed to follow in the event of emergency conditions was also adopted in that year.

During ECAR's life the organization has made substantial progress towards realizing its objectives. A

! headquarters for its staff of engineers and technicians i has been established in Ohio and a Coordinating Review Com-mittee made up of engineering and operating personnel from j the member companies has been and is continuing to func-tion with the purpose of augmenting the reliability of the bulk power supply of ECAR members. ,

l E. Relationships with the other Electric Entities Serving in the Areas Served by

. Ohio Edison and Penn Power Ohio Edison and Penn Power presently serve a total of 25 municipal systems with electric power for resale.

Of those served only two systems, Oberlin and Niles, Ohio,

! have generating capacity of their own to meet part of their own electrical needs. Additionally, in the area served by Ohio Edison are two systems not served by Ohio Edison, Orrville and Shelby. Orrville is served by Ohio Power Company and Shelby is an isolated municipal electric system.

Located within the area served by Ohio Edison are seven Rural Electric Cooperatives (REC's). There are no REC's j in the area served by Penn Power. Prior to August 1970,

(

each of the seven REC's was a total requirements wholesale pur-

45.-

chaser of power from Ohio Edison Company. In June 1968, however, Buckeye Power, Inc. (Buckeye) was formed by 27 Ohio REC's and acquired from Ohio Power ownership of a 600,000 kw generating plant located at the Cardinal Sta-tion near Drilliant, Ohio. Electric power from this plant is delivered to most Buckeye members through the power delivery facilities of six electric utility companies operating in Ohio.*

A somewhat different arrangement was established for the seven REC's previously served by Ohio Edison. Pur-suant to an Ohio Power / Ohio Edison Agreement (dated June 28, 1968) Ohio Edison purchases power from Ohio Power at the point of interconnection with that system and sells power to Ohio Power at various delivery points provided for in the Agreement. Since mid-1979 the REC's previously served by Ohio Edison have been served by Ohio Power according to the pro-visions of this Agreement.

As already noted, Ohio Edison's and Penn Power's relations with and service to their wholesale customers (including the contracts and rate schedules applicable to such service) are pervasively regulated by the FPC and thus l that agency appropriately serves as the principal forum for the resolution of whatever controversies may arise between the Companies and their wholesale customers.

• Ohio Power Coi.pany, Columbus & Southern Ohio Electric Company, i The Cincinnati Gas & Electric Company, The Dayton Power &

Light Company, Monongahela Power Company and The Toledo Edison Company.

l l

l

6 i.

- 46.-

l On January 27, 1972 Ohio Edison filed with the FPC an increase in the rates to its municipal customers j which went into effect subject to possible refund. Pur-I suant to the rules of practice of the FPC, twenty municipal wholesale customers of Ohio Edison (WCOE) intervened in l these proceedings (Docket E-7705). After extended negotia-tions, Ohio Edison and WCOE filed a joint motion with the

FPC seeking its approval of a Settlement Agreement dated February 9, 1973. This Agreement, which was approved by the FPC on August 29, 1973 and accepted for filing on November 28, 1973, reflected an agreement as to all matters in contro-versy. In addition, part of the Agreement involved an understanding and commitment by the parties jointly to con-duct certain engineering', economic and legal studies examining j a possible new power supply relationship between Ohio Edison l and WCOE. The following excerpt from'the Agreement between

! Ohio Edison and WCOE defines the general objective of the joint power supply study to be undertaken. t

• l "The parties will conduct studies and investiga-tions of the engineering, financial, and legal feasibility of an arrangement or arrangements under which the municipalities wo61d by (sic) owner-ship in whole or in part, or by special contractual agreement, be in a position to participate directly in the output of specific generating capacity.

In the event an arrangement appears to be feasible and to the mutual advantage of the municipalities and the Company, and if a sufficient number of e

t

, , . - - - - , - , - - - - - r ,- , ,..,.-----._.r- em - .._. w- --,._.-.-.._-,--e,w - , . . ~ - -

/

47.-

municipalities agree to participate in the arrange-ment, Ohio Edison and those interested municipalities will thereupon enter into appropriate agreements therefor and will use their best efforts to put the arrangement into effect."

The body designated by WCOE to carry out the study responsibilities under the Agreement is a five man steering committee which administers the engineering and legal work involved in the joint studies. After the exchange of con-siderable existing and historical data about the systems involved, a number of joint power supply study meetings were held at Ohio Edison's general offices. Present at each meeting were representatives of R.W. Beck and Associates (R.W. Beck) con-sulting engineers retained on behalf of WCOE. On February 11, 1975 Ohio Edison proposed a program for oNnership parti-cipation by WCOE in each CAPCO base load unit. While it was recognized that this program contained numerous problens to be resolved, it was designed to permit WCOE to fully partici-pate on reasonable terms in the utilization of large-scale generating capacity.

At a meeting held on March 12, 1975 it was agreed that certain reliability calculations were to be made by an engineering task force. Following this evaluation, Ohio Edison suggested that it would be appropriate for Ohio Edison to make another proposal. Basically it was felt that in order to simplify matters and to provide WCOE with optimum Ohio Edison reliability and economy (as well as real'zation e

- 48.-

of cost reduction through lower fixed charges incurred by WCOE), WCOE should participate in all future CAPCO base load units in the amount of 50 MN including the obligation for payment by WCOE of all construction and operating costs associated in that block of capacity. In addition, to the extent capacity entitlements were insufficient to supply customer loads, a wholesale rate would go into effect which shared'the difference in fixed charges actually incurred by Ohio Edison and the fixed charges actually incurred by WCOE through its ownership of the CAPCO units. At that point, R.W. Beck undertook to provide for WCOE a comparison of the economics of various methods of power supply. From that study came a recommendation that the most advantageous form of parti-

. cipa?. ion by WCOE would be to make a purchase power prepayment equivalent to the net plant allocated to WCOE. This prepay-ment, or contribution in aid, would eliminate Ohio Edison's return on investment and associated income tax on that portion of allocated plant. Since WCOE would contribute an amount equal to its allocated net plant, there would not be any capi-talization costs of net plant allocated to WCOE by Ohio Edison. Based on its analysis R.W. Beck concluded, "This arrangement is expected to insure WCOE members a reliable sourc) of power at cost which permits full utilization of the munici-pal's tax exempt status and not for profit principals to the mutual benefit of WCOE and the Company and provide WCOE an opportunity to exercise greater control over future power

~

supply decisions and costs."

t$

49.-

After a rather extensive review of the preferred alternative recommendations by R.W. Beck, Ohio Edison's President, John R. White, who will be called as a witness by Ohio Edilon, assured WCOE at a meeting on August 1,1975 that the Company has no conceptual problems with the proposal and would be agreeable to going forward to finalize the financial, legal, and engineering details needed to implement the concept. Following this offer of access, WCOE offered the services of their legal counsel to draft a " Letter of Intent" to memoralize the agreement reached that date. In a letter under date of October 31, 1975, Mr. P. Emerson Duncan, II, counsel for WCOE, prom-ised a draft Letter of Intent for circulation in the next few days. As of the date of the filing of this brief that draft has not been received.

,- .-r , r- ~ - --

50.-

PART III RESPONSES TO SPECIFIC CHARGES OF ANTICOMPETITIVE CONDUCT ALLEGED AGAINST OHIO EDISON AND PENN POWER Part I recounted the falsely reassuring his-tory of the antitrust review conducted of the practices and policies of Ohio Edison and Penn Power in connection with the several applications they have submitted subject to this Commission's jurisdiction pursuant to Section 105 (c) .

Belated filings of specific allegations on September 5, 1975 contained numerous charges of anticompetitive conduct against Ohio Edison and Penn Power which came as a complete surprise to the Companies, on which the Companies have had no dis-covery as to their underlying basis and against which the Companies must defend at the evidentiary hearing now upon us. As Ohio Edison and Penn Power have already stated for the record, the circumstances under which these charges have been made and the lack of opportunity which they have been given for discovery constitute no less than deprivation of their due process right to notice and adequate opportunity to defend on these charges.

In October compounding this injustice, the Depart-ment of Justice moved to add yet another charge of anti-competitive conduct against Ohio Edison and asked that it be included in the charges it filed on September 5. In an effort to explain away the failure of the Department to bring L _

51.-

this charge to Ohio Edison's attention at a time when it could properly defend itself against such charge, Mr. Charno, on behalf of the Department, stated:

"Now, as Mr. Benbow probably knows, the prepa-ration of a civil or criminal antitrust case where the government calls the timing and files the indict-ment, allows a more complete preparation before the fact than an antitrust review procedure where the Department is given a ilmited amount of time to comment on every nuclear application that is made and attempts to do so in the most comprehensive manner possible, relying primarily on third party statements as to the impact upon them of the activ-ities of various applicants.

" Clearly after discovery, after being able to go into it more deeply we will be able to srpplement our initial review of what was going on and that is exactly what has occurred in this case. We found out about this material very late. If it should be found to be prejudicial to the applicants, we have no wish to add an additional allegation." (Emphasis added) (TR 1304)

In analyzing Mr. Charno's statements and in applying them to the charges filed on September 5, troubling questions are raised. Mr. Charno stated that in the " limited amount of time" (180 days from the time the Commission transmits a given application to the Department) the Department is required to render antitrust advice, it relies primarily on third party statements as to the impact upon those third parties of the particular application in question. One must question if in the 180 days in which the Department was given an opportunity to comment upon the Companies' Beaver Valley application, in the 180 days within which the Department was given an oppor-tunity to comment upon their Perry 1 & 2 units applications

z.---

52.-

and in the 180 days the Department had to investigate Ohio Edison's and Penn Power's practices and policies in connection with the application for the Davis-Besse 2

& 3 units whether any or all of the charges set forth in the September 5 filings were brought to the attention of the Depart-ment. It wculd seem incredible that from the time in 1972 of the transmission of the application on the Beaver Valley facil-ity until September 5, 1975 some, if not all, of those charges had not been brought to the Department's attention. If so, why were Ohio Edison and Penn Power not apprised of these charges, particularly in the letter of advice dated February 14, 1975 in connection with the Davis-Besse 2 & 3 units? Furthermore, if the Department was aware of some, if not all, of those charges prior to February 14, 1975 what charge or combination of charges was it that gave rise to an unfavorable advice letter as to Ohio Edison and Penn Power on the Davis-Besse 2& 3 units and a favorable advice letter (and recommendation as to no antitrust hearing) as to Ohio Edison and Penn Power on the Beaver Valley and Perry applications? Of course, Ohio Edison's and Penn Power's motion for additional disenvery attempts to obtain answers to these questions by seeking to in-quire into the underlying basis for those charges and when and i how they were brought to the Department's and Staff's attention.

l 1 .

O e

w ,

- - - - - - - -c - p -- y-,. . --,

53.-

Moreover, the charges leveled against Ohio Edison and Penn Power in the September 5 filings are the kinds of charges that one normally expects to find prior to the com-mencement of any discovery in a letter of advice recommending hearing and/or a petition to intervene. In this proceeding, however, such specific charges were set forth in the Perry advice letter and in the City of Cleveland's petition to inter-vene only as to CEI. Thus CEI had an opportunity to inquire into the underlying basis for those charges and to adequately prepare itself for the evidentiary hearing. We submit that Ohio Edison and Penn Power have been given no similar oppor-tunity. Nevertheless, we will demonstrate below that the spe-cific charges of anticompetitive conduct alleged against Ohio Edison and Penn Power are without foundation and could not and

. indeed should not be the basis for any hearing as to them.

In most instances, it will he demonstrated that the Department and the Staff would have found the absence of any basis for many of the charges if they simply had read all of the relevant documents supplied to them. In other cases old charges have been revived despite having been previously found to be without merit by more appropriate governmental bodies such as the FPC, the SEC and the PUCO. In only a few instances has the Department made a charge in which the docu-ments alone do not exonerate Ohio Edison and Penn Power. In these instances, Ohio Edison and Penn Power are prepared to demonstrate that their actions were dictated by sound business L.

54.-

and engineering considerations, not by an anticompetitive spirit.

The charges against Ohio Edison and Penn Power leveled by the NRC staff and the City of Cleveland evidence even less independent thought and research than those advanced by the De-partment. Indeed each charge these parties have made is repeti-tive of others advanced by the Department, although they are phrased in a somewhat broader fas. tion.

This section of the brief reviews each of the specific allegations separately made against Ohio Edison and Penn Power in this proceeding and presents a response to each. Of course it must be emphasized that the inability of Ohio Edison and Penn Power to obtain discovery as to the underlying basis of these charges has relegated the Companies to surmise their origins.

CHARGE 1: In 1968, Duquesne, by agreement with the other CAPCO mem-bers, refused CAPCO membership to Pitcairn in order to further Duquesne Light Company's goal of acquiring that system.*

RESPONSE: Ohio Edison and Penn Power were not parties to any agreement with other CAPCO members concerning the possi-bility of CAPCO membership for Pitcairn, and as is indi-cated in the response to charge 2 (below), neither refused CAPCO membership to Pitcairn.

1 .

• Unless otherwise noted the charges are worded as they were by the Department of Justice.

55.-

CIIARGE 2: Pitcairn requested participation in the CAPCO Pool by a December 5, 1967 letter to Ohio Edison. In a reply letter dated January 2, 1968, Ohio Edison refused this request thereby denying Pitcairn the benefits of coordinated operation and development.

[The same charge has been made by the Department against Penn Power.]

RESPONSE: The December 5, 1967 letter from the Borough of Pitcairn did not request participation in the CAPCO Pool. In that letter Robert S. McCabe, Jr.

the solicitor for the Borough of Pitcairn stated only that he would like Mr. Mansfield (then Presi-dent of Ohio Edison and Chairman of the Board of Penn Power) to " consider this letter a formal re-quest on behalf of the Borough of Pitcairn for discussion with yourself and other members of CAPCO aimed at including the Borough of Pitcairn in the CAPCO Pool." (Emphasis added.)

In his reply of January 2, 1968 Mr. Mansfield noted the small size of the Pitcairn plant and said, .

"It is inconceivable to me how there could be any advantage to the members of CAPCO in having the Borough of Pitcairn as a member of the CAPCO pool. Accordingly, we think any discussion of the matter would be fruitless."  ;

l 1

l

l 56.-

Nonetheless when Mr. McCabe's next letter (dated January 11, 1968) stated that he was still " interested in discussing . . . the Borough's possible participation in the pool," Mr. Mansfield's response of January 30, 1968 indicated a willingness on the part of Ohio Edison to discuss Pitcairn's possible inclusion in CAPCO. Mr.

Mansfield requested that if Mr. McCabe had any " data or information" to indicate that Pitcairn's participation would be advantageous to Ohio Edison and the other parties to the CAPCO agreement, then Mr. McCabe should arrange to meet with Mr. John R. White (then general counsel of Ohio Edison Company) to discuss such " data and information."

Mr. McCabe did contact Mr. White for the purpose of discussing "the feasibility of the participation of the Borough' of Pitcairn in the CAPCO Pool." In a letter dated February 12, 1968 Mr. White stated that if Mr.

McCabe had the sort of " data and information" referred to by Mr. Mansfield he should " Advise me when it will be convenient for you to come to Akron to discuss them, I will be glad to meet with you for that purpose."

(Emphasis added.)

This exchange of correspondence does not show

. either a specific request to join CAPCO by the Borough of Pitcairn nor a ref'_'al to grant such a request by the Companies. It does demonstrate that they were

57.-

willing to enter high level discussions regarding the possibility of admitting Pitcairn to CAPCO. That such discussions did not in fact take place seems to be due solely to the lack of further initiative on the part of Mr. McCabe and the Borough of Pitcairn.

CHARGE 3: Prior to 1973, Ohio Edison enforced provision in its wholesale power contracts with municipal systems which allocated customers and territories thereby restricting competition between itself and the munici-pal systems. [The NRC staff has made a similar allega-tion, charging that Ohio Edison had a policy of re-quiring some of its wholesale customers to participate in customer allocation agreements which are inconsistent with the antitrust laws.]

- RESPONSE: Three distinct issues are raised by these allega-tions: (A) what such provisions stated, (B) whether they were " enforced", and (C) whether there was sub-stantial anticompetitive effect as a result of such pro-visions.

'(A) The provisions apparently referred to by both the NRC staff and the Department of Justice are those included in Ohio Edison Municipal Whole-sale Contracts from 1965 to'1972. In these contracts there was a limitation on extension of Ohio Edison service into the municipalities, and a limitation on extension of Ohio Edison service to premises

, , - - e.- -. ,. -e-- ,

58.-

served by the contracting municipality in 1965.

Similarly there was a limitation on the extension of service by the municipalities outside their boundaries and a limitation of extension of service by the municipalities to premises served by Ohio Edison.

(B) On only a few occasions did a municipal-ity or Ohio Edison find it necessary to request per-mission to serve a customer. A review of the documents concerning the responses to such requests indicate that engineering and customer service were the primary considerations, not " enforcement" of an anticompetitive agreement.

(C) All territorial and customer allocation provisions were removed from Ohio Edison contracts with wholesale municipal customers effective September 1, 1972. Since their removal, there has not been a noticeable increase in competition for new customers which might be served either by Ohio Edison or a muni-cipal system. The fact is that most customers know which power system can most easily and efficiently serve their neads and tend to approach the company in whose " area" they naturally are as a result of existing distribution facilities. Accordingly, the experience since the removal of the provisions desmonstrates that the i

1 l

m 59.-

competitive effect thereof was insignificant during the period in which they were in effect.

In addition it must be remembered that such pro-visions were in accordance with the State of Ohio's statutory policy of precluding the piracy of one utility's customers by another to avoid the duplication of utility facilities (Ohio Revised Code S 4905.26.1). Fur-thermore there was a planning rationale for the inclusion of these provisions which accrued to the benefit of the municipalities as well as Ohio Edison.

CHARGE 4 (a) : Prior to 1972, Ohio Edison refused to enter into whole-sale contracts with municipal systems for any shorter period than ten years.

,' RESPONSE: There are ample financial and planning justifica-tions for including a 10-year provision in contracts to supply wholesale power. Since the electric utility industry requires considerable financing from external sources, and thus needs long-range commitments for planning purposes, it has been Ohio Edisun's policy to seek contracts of sufficient duration to achieve some degree of continuity and permanence in its operations.

Historically, a major source of funds for the l i

)

electric utility industry has been the issuance of l l

i , revenue bonds payable over a term in excess of 10 l

)

years. Thirty-year terms are not uncommon. If i

l l

1 I

60.-

generation, transmission and distribution facilities are being built with capital financed over such long terms there must be assurances that a market vill exist for a reasonable period of time, otherwise electric utilities cannot offer the degree of security required by investors. For these reasons in virtually all other Ohio Edison contracts with municipalities, including street lighting and other services, a 10-year term is sought by the Company.

This is not to say, however, that Ohio Edison has been unwilling to provide for a contract period that is effectively shorter for those municipals which have evi-denced a desire for such a provision based upon their future plans and, in fact, contracts with some munici-palities have been entered into permitting cancellation on two year notice. Ohio Edison conducts arms-length negotiation with each of the municipalities it serves at whclesale. It is thus apparent that there is nothing whatever to support the characterization of Ohio Edison's successful negotiation for a 10-year provision as a

" refusal" to provide service on another basis.

CHARGE 4 (b) : In 1974, Ohio Edison repeatedly refused to wheel power for its wholesale municipal customers. These acts effectively foreclosed bulk supply alternatives.

RESPONSE: Ohio Edison does not have a policy of refusing to I

wheel power for its wholesale municipal customers and is

61.-

willing to discuss specific requests for such services.

However, no such specific request has ever been forth-coming from a municipal system of Ohio Edison. Here again because of the absence of discovery Ohio Edison is unaware of the underlying basis for this charge but it may stem from a misunderstanding by the Justice De-partment of the relationship between Ohio Edison and the Wholesale Customers of Ohio Edison (WCOE) .

As was indicated earlier the Settlement Agreement which resulted from Ohio Edison's 1972 FPC filing of municipal wholesale rate increases produced agreement by the parties thereto to discuss and explore the par-ticipation of its municipal customers in bulk power supply. The Company evidenced its willingna?s to carry out this agreement by hosting a series of pa t nt power supply study meetings.

At the first of these meetings, on October 7, 1971, Mr. Mayben (a consultant employed' by R. W.

Beck) asked what the situation would be if WCOE were to acquire ownership in a pcrticular portion of a unit.

He wanted to know how in the absence of a wheeling com-mitment power would be delivered to the individual WCOE members and what would be done about reserve sharing.

Mr. White responded that Ohio Edison had always assumed that if and when WCOE became an owner, it would be necessary e

M

62.-

~

to work out arrangements for transmitting power and sharing reserves with WCOE so as to insure an adequate and reliable power supply. Mr. Mayben responded that this should be sufficient to provide WCOE with what it needed.

CIIARGE 5: Ohio Edison has eliminated the ability of its wholesale municipal customers to compete with it for industrial customers by (1) the aforementioned allocation agreements, (2) setting its industrial

, power rates equal to, or lower than, its whole-sale municipal power rates, and (3) refusing, since at least 1970, the requests of Niles and Cuyahoga Falls municipal electric systems that Ohio Edison file rates for 138 kv service.

i

[A similar charge has been made by the NRC staff that Ohio Edison has a past and present policy of effectively frustrating competition between Ohio Edison and with its wholesale customers for industrial loads.]

RESPONSE: (1) The nature of the so-called allocation agreement and the circumst'.nces surrounding their inclusion in and subsequent exclusion from wholesale contracts has been discussed above. (Charge 2)

(2) Of course Ohio Edison has not as yet been informed as to which industrial and municipal rates i

have allegedly eliminated the ability of its municipal i

I

63.-

1 customers to compete for industrial loads and thus we will have to await such information before addressing the charge more specifically. In any event, Ohio Edison does not have the power to set rates. Like any regulated utility, Ohio Edison proposes rates but it is the regulatory commissions which fix them.

The absurdity of this charge is made clear when one realizes it is not even the same agency which fixes these rates. Wholesale rates are established by the Federal Power Commission and industrial rates are established by the Public Utilities Commission of Ohio (PUCO).

~

In proceedings before both federal and state regulatory bodies, utilities are required to justify their rate requests. Ohio Edison care-fully allocates its costs of service to arrive at a fair rate of return from the classes of customers included in each case. At Ohio Edison, f

large commercial and industrial customers are usually included in the same case since the level of the rates applicable to each class is generally the same. Historically, each commission similarly develops the cost of Jervice with respect to the i

. types of customers included in each case and ultimately establishes the level of the rates under which service is to be rendered.

l 1

64.-

That rates for service to municipal customers are set at one level and rates for service to industrial customers are set at another, evidences nothing more than the judgment of the respective commissions on the fair cost of service to those customers.

A utility should recover its full cost of service for each class of customers it serves. If it does not, other classes of customers are required to subsidize the customer class which is not paying its allocated costs.

If it is the Department of Justice's position that Ohio Edison's other customers should subsidize small municipal electric systems to artificially induce competition, then it is advocating a principle not embraced by any existing antitrust legislation, and the Department is doing so in a forum which is hardly suited for such a radical restruc-turing of the basis upon which rates are established in the electric utility industry at both the state and federal level.

Ohio Edison is quite willing to present again justi-fication for its rates, including, if necessary, a full scale rate case of the type presented regularly to the FPC and PUCO. Should Ohio Edison be forced to present such a rate case to defend itself against this unwarranted charge, it would be duplicative of information already reviewed by a more appropriate governmental agency and a waste of the i valuable time and attention of the Board.

1 I

WP

65,-

(3) Specific requests by municipal customers for cost information for 138 kv service have always

~

been responded to by Ohio Edison. Niles and Cuyahoga Falls are not exceptions. However, Section 35.3 of the FPC's Rules of Practice provides in relevant part that rate schedules shall not be filed "more than 90 days prior to the date on which the electric service is to commence and become effective . . .

Cuyahoga Falls never made the decision to take service at 138 kv and recent public statements by the mayor of that city indicate that it is unlikely to choose to accept such service. Accordingly, since Cuyahoga Falls has never made the decision to take service at 138 kv, no less ever demonstrated that it was capable of receiving such service within 90 days, Ohio Edison had no reason and indeed, could not, file a rate for 138 kv service.

As to Niles a letter of intent has recently been signed and it will be receiving 138 kv service shortly.

CHARGE 6: In 1962, Ohic Edison offered a substantial subsidy to the Hiram municipal electric system's largest customer to switch over to Ohio Edison in order to further its goal of acquiring that system.

RESPONSE: Notwithstanding the date cited by the Department of Justice, this allegation appears to stem from charges made to the Securities and Exchange Commission

'- in 1972. At that time the SEC was considering Ohio Edison's acquisition of the Hiram system, pur-

~

cm

66.-

suant to section 10 of the Public Utility Holding Company Act of 1935. In approving the acquisition, the Commission stated,

. . . various of the participants also assert that applicant empicyed unfair acquisition tactics by inducing the Col-lege, by a promise to reduce the rates charged it, to exert undue pressure upon Hiram's council to make the sale. This is denied by the College and is not supported by the record. Studies by the College and by Hiram's consulting engineer in 1969 showed that those rates were too high, and the College asked Hiram to reduce them and to permit the College to negotiate with an outside power source who was supply-ing all or part of the College's power directly. In March 1971 Hiram requested applicant to consider supplying it energy at wholesale rates or purchasing its system. Applicant replied in May that it was willing to supply a portion or all of Hiram's requirements or pur-chase the system for $675,000 stating that the latter was the most desirable from the standpoiht of all parties concerned." (Holding Company Act Release No. 17842 p. 4)

The fact that this charge has been previously examined by another federal agency and found to be groundless, further manifests the irresponsibility of the Department of Justice in asking this Board to inquire further into this matter.

CHARGE 7: In 1965, Ohio Edison refused to sell Newton Falls power for resale thereby denying it the benefits of coordination.

RESPONSE: Having had no discovery, Ohio Edison has no knowl-edge as to the underlying basis for this charge but qMq

68.-

There is nothing sinister or mysterious in Ohio

. Edison's offer to buy these same steam generating units in the event the city sold its entire system, including its distribution system, since purchase of the system would create a use for these generators in the Ohio Edison system -- supplying Norwalk with power. In fact, refurbished and operated on a proper maintenance schedule these units continue to provide a portion of Norwalk's power needs.

Several facts conveniently overlooked by the De-partment of Justice should here be noted. Ohio Edison has never bid on a municipal system unless specifically requested to do so by an ordinance of the city council or a letter from a responsible official. In the Norwalk case the city was by no means forced into a sale. The

. Norwalk electric system was suffering serious difficulties and the city examined various alternatives to remedy its problems. Ohio Edison was repeatedly consulted and over a period of time offered a number of alternative solu-tions. These included sale of wholesale power and iso-lation of a portion of the system to facilitate direct service by Ohio Edison, in addition to the purchase of-fer. Close examination of the facts reveals not an ef-fort by Ohio Edison to coerce Norwalk to sell its sys-tem, but the kind of concern for service and propriety that represents a model for dealings between an investor-owned utility and a failing municipal electric system.

CHARGE 9: In 1971, Ohio Edison refused to wheel power from Buckeye Power, Inc. to Norwalk in order to further its goal of acquiring that system.

CR

69.-

~

RESPONSE: Norwalk made only the most preliminary sort of inquiry into buying power from Buckeye Power Incorporated.

It never had a firm commitment for the sale of such power and never specifically requested Ohio Edison to wheel power.

Although again without discovery one is relegated to mere surmise, this entire charge seems to be based upon a notation in an internal Ohio Edison memorandum dated December 15, 1971 in which Messrs. A. N. Gorant, J. F.

Doering, and R. L. Kensinger reported a meeting they had on November 30, 1971 with Norwalk officials and consultants hired by Norwalk-The memorandum indicates that along with the

, m':ny other matters discussed, the following exchange took place. Comments by Wallace Duncan, an Attorney from Washington, D. C. who was representing the City of Nprwalk were reported as follows: "He asked about our policy for wheeling power as possibly Buckeye Power would be interested. Also questioned Orville, O." (sic)

The response, from one of the Ohio Edison representatives, was recorded as: "Not able to provide wheeling or Orville (sic) information."

This memorandum was written in a style in which the author frequently omitted unnecessary worcs in

~

the interest of conciseness. In addition a reading CE

70.-

of the full memorandum shows several instances in which the Ohio Edison men did not have information

, concerning questions beyond their own areas of re-sponsibility. Read in the context of the memorandum in which the exchange appears it is clear that the response was intended to indicate that no wheeling information or information about the Orrville situation

. was available from these Ohio Edison representatives.

Nor was the December 15 memorandum the only rec-ord of this meeting. Mr. Doering had recorded his notes of the meeting in a separate memo, dated December 3, 1971. This memorandum was also made available to the Department of Justice. He recorded the relevant portion

. of Mr. Duncan's comments as follows:

"He asked what Ohio Edison Company policy was regarding Wheeling and was told we could provide no information. He also asked if we had other partial power contracts and he was told to our knowledge that Norwalk was the only one."

Once both memoranda are reviewed, it becomes clear that there was no specific request to wheel Buckeye Power nor any refusal by Ohio Edison to wheel.

l CHARGE 10: At least prior to 1971, Ohio Edison had a territorial l allocation agreement with Firelands Rural Electric Cooperative with respect to new customers.

l e

@E1

l l

l 71.- l RESPONSE: Ohio Edison has never had a territorial alloca-tion agreement with Firelands R.E.C. The contract signed with Firelands prior to 1971, while it was still a wholesale customer of Ohio Edison, is substantially the same as those which then existed with other REC's which were Ohio Edison wholesale customers. None of those contracts con-tained territorial allocation provisions of any kind.

CHARGE 11: In 1965, Ohio Edison entered into an agreement with Ohio Power Company that should Buckeye Power, Inc.

be dissolved, the rural electric distribution coopera-tives purchasing Buckeye generated power from Ohio Power through Ohio Edison would become Ohio Edison customers again.

RESPONSE: No such agreement ever existed. Apparently this charge stems from a notation in a November 18, 1965 memorandum from C. W. Frederickson, then general co-ordinator of intersystem power arrangements, which reported on a meeting he had attended the day before with Messrs. Martinka and Lacopo representing the Ohio Power Com-pany and Mr. Dissmeyer of Ohio Edison. Many different m

72.-

matters relating to the proposed Buckeye arrangement were discussed at that time, among these wat " Future Status" reported in paragraph 8 on p. 2 of Mr. Fred-erickson's memorandum.

"Mr. Dissmeyer asked what would happen if we proceeded with the buy-sell arrangement with Ohio Power and .at some future date the REC's were disbanded because they were not economic.

Mr. Lacopo and Mr. Martinka agreed that in such case the load areas in question would revert back to Ohio Edison."

No policy-level agreement between the Ohio Edison and the Ohio Power Company can be presumed on the basis of this passage (which literally does not even refer to the dissolution of Buckeye, but to the dis-

,' banding of the REC's themselves.)

The most obvious reading of this report is that Mr. Lacopo and Mr. Martinka agreed with one another that these load areas would revert back to Ohio Edison. Since both of these gentlemen represented the same company, such an " agreement" could be nothing more than an opinion, and thus the passage represents merely a consensus of opinion.

Mr. Frederickson's testimony on deposition hears this out.

73.-  ;

"Q. Mr. Frederickson, are you aware of any agreement between Ohio Power and Ohio Edison to allocate exclusively to Ohio Edison certain co-ops presently members of Buckeye, should Butxeye be disbanded?

[After some discussion between opposing attorneys]

"A. The answer is no."

[Somewhat later.]

"Q. Referring to paragraph 8 on page 2 of your memorandum would those co-ops be wholesale customers of Ohio Edison in the event Buckeye disbanded?

"A. I believe that is what is inferred by Mr.

Lacopo and Mr. Martinka."

It is difficult to believe that what was inferred by two middle management employees of a corporation outside of CAPCO in a conversation ten years ago has any bearing whatever on the matters to be decided by this Board, yet that apparently is the position the Department of Justice urges with this allegation.

CHARGE 12: In 1966, Ohio Edison attempted to foreclose competition with Buckeye Inc, in supplying bulk power by offering Firelands Rural Electric Cooperative a new delivery

. point if it would withdraw from membership in Buckeye Power, Inc.

RESPONSE: The provision of a new delivery point for Firelands Rural Electric Cooperative was never conditioned upon e

74.-

its withdrawal from membership in Buckeye Power, Inc.

Additional delivery points have been provided to Firelands R.E.C. by Ohio Edison since 1966 and it remains a Buckeye member.

CHARGE 13: Since 1968, Ohio Edison has repeatedly refused and/or delayed providing new delivery points to rural electric cooperatives thereby inhibiting their ability to compete for new customers.

RESPONSE: Ohio Edison is prepared to demonstrate that its response to each request for a new delivery point was reasonable and based upon sound business and engineering considerations.

CHARGE 14: In 1968, Ohio Edison entered into an agreement with the Ohio Power Company that restricts the sale of power by rur,al electric cooperatives to municipal wholesale power customers of Ohio Edison thereby foreclosing competition in supplying bulk power.

RESPONSE: The agreement apparently referred to is the Ohio Edison-Ohio Power buy / sell agreement entered into by Ohio Edison to facilitate the ownership of a major s

I l

75.-

power generation facility by Buckeye Power Inc., a joint venture that included 27 rural electric coopera-tives.

In light of the history underlying this charge it is incredible that it is being made at all and even more incredible that it is being made by the Department of Justice since the provision of the contract which underlies the charge was specifically amended to secure Department of Justice approval for the Buckeye arrange-ment. The change in the provision at that time produced a " clean" business review letter by the same Department of Justice which now apparently believes it is anti-competitive.

In a letter to Richard Dicke, attorney for Ohio Power, dated December 19, 1967, Donald F. Turner, Assistant Attorney General, Antitrust Division, stated:

"As originally submitted, the Station and Power Delivery Agreements contained definitions of Buckeye Power Requirement which, in effect, would exclude many municipalities as customers of Buckeye members. The definition of Delivery Points Energy in the Ohio Edison Agreement would have the same effect. However, at the December 14, 1967 meeting, you proposed an amended defini-tion, attached hereto as Appendix I, which upon agreement of the other parties to the Buckeye Pro-  ;

ject would be substituted in the Station and Power

)

, Delivery Agreements and to which the definition 1 l

1

-4

76.-

of Delivery Points Energy in the Ohio Edison Agree-ment would be conformed. You have represented that the effect of the amendment would be to re-strict sales by Buckeye members to municipalities only insofar as the present Section 4905.26.1 of the Revised Code of Ohio would restrict such sales.

"On the basis of the information submitted -

and the representations which you have made in connection with this matter, you are hereby in-formed that the Department does not presently intend to institute proceedings with respect to the Buckeye Project contracts as amended in the manner indicated -bove."

Appendix I provides:

" Buckeye Power Requirement means the aggre-gate requirements of Buckeye for electric power and energy . . . ; provided however that consistent with the desire and objective of all parties to minimize any unnecessary or uneconomic duplica-tion of facilities, there shall not be included in the Buckeye Power Requirement any quantity of electric power and/or energy furnished to any consumer when the furnishing of power and/or energy to such consumer by a Buckeye Member is prescribed by the law of the State of Ohio reflected in Section 4905.26.1, Revised Code of Ohio, as said Section is in effect at the date of this Agreement. It is understood and agreed that the term ' consumer' as used in said Section 4905.26.1 applies to any customer of a power and/or energy supplier whether served at wholesale or at retail."

The " Ohio Edison Agreement" did incorporate very similar language.

" Delivery Points Energy means all the elec-tric energy required by the Cooperatives for G

W

e 77.-

• I delivery and resale to consumers...; provided, however, that, for purposes of determining the amount of the Delivery Points Energy required at any time, there shall not be included any quantity of electric power and/or energy fur-nished to any consumer when the furnishing of power and/or energy to such consumer by a Buckeye Member is proscribed by the law of the State of Ohio reflected in Section 4905.26.1, Revised Code of Ohio, as said Section is in effect at the date of this Agreement. It is understood and agreed that the term ' consumer' as used in said Section 4905.26.1 applies to any customer of a power and/or energy supplier whether served at wholesale or at retail."

Although the Department reserved "the right to take such action as may be appropriate in the future, in the event other evidence or subsequent developments so war-rant," Mr. Turner's letter particularly noted that:

. . . since there appears to be no definitive judicial interpretation whether Section 4905.26.1 of the Revised Code of Ohio applies to wholesale sales, we would be required to reconsider our views if judicial decisions were to differ from the inter-pretation of the term ' consumer' which you propose to incorporate in the agreements."

There still is no definitive judicial interpretation of this point nor evidence or subsequent developments warranting the resurrection of this charge. Moreover, 4 the PUCO in its letter of approval for this agreement 67une 13, 1967), found that:

9

78.-

j "The arrangements, variable rates, and charges 1 and minir.am charges specified in the Ohio Edison Agreement are reasonable, practicable and advanta-geous to the parties interested and to the public, and that the approval of the Ohio Edison Agreement, although not itself commencing until on or about, but not prior to July 1, 1969, is essential to effecting the present initiation of the Ohio Power-Buckeye Agreement;"

In light of the above it is manifest that evidence of this charge has no place in this proceeding.

CHARGE 15: Since the mid-1960 's, Ohio Edison has had an agreement with CEI that restricts compStition between the two with respect to new customers.

RESPONSE: No such agreement exists, nor has such an agreement ever existed.

CHARGE 16: Ohio Edison has eliminated, through acquisition, competing

, . municipal electric systems, including the following systems which had their own generation capability; Norwalk, Hiram and 1

Eas.t Palestine.

RESPONSE: Although Ohio Edison has acquired four municipal sys-tems in the last decade, its actions were r.ot unreasonable nor in any way violative of the spirit of the antitrust laws.

The Company is prepared to demonstrate that its actions in each J

instance were motivated by sound business and engineering con-siderations, and that in each case it acted only at the behest of responsiole local governmental officials. Furthermoro, each acquisition had to F approved by the Securities and 1

l,

..._ ~ -__ .__ . _...- . _ . _ _ . __

• l 79.-

i Exchange Commission pursuant to the Public Utility Holding Company Act of 1935, and each acquisition was so approved.

Each of these systems was having such serious diffi-culties that its elected officials felt it best for the municipality to sell its entire system. Even if the dubious proposition is accepted that antitrust principles applicable to unregulated industries apply to such situa-tions, these municipalities were little more than "failing compinacs" whose customers would have suffered greatly had Ohio Edison not bid on and bought these systems.

CHARGE 17: The NRC Staff hac chr.rged that Ohio Edison has had a policy of imposing long-term ct.pacity restrictions and financing restrictions in contracts or prop.; sed contracts with whole-

~

sale customers which have an adverse effect on the operation and growth of the systems of said customer in a manner incon-sistent with the antitrust laws.

RESPONSE: There are some capacity restrictions in certain municipal wholesale contracts at present, primarily in those situations where the customer has generation facilities. In all such instances, there were either engineering considerations which dictated the inclusion of these restrictions or specific re3uests by the munici-pal customer for a limited caoacity.

G 9

- n.~- ~ ---

80.-

The Company has always attempted to realize a fair return on its investment in the facilities utilized by its customers. In certain instances where the cost of the new facilities needed to serve a wholesale customer exceeds its projected revenues, the company has requested that the munici-pality make a capital contributica to aid in construction of such facilities, and the Staff may have mistakenly viewed these financial arrangements as restrictive.

Ohio Edison is prepared to show that each request for a capital contribution was reasonable and based upon the engineering and financial realities of the situation.

. CHARGE 18: In 1959, Penn Power refused to sell partial requirements power to Grove City municipal electric system, with the intent and effect of preventing competition with the municipal system for industrial customers.

RESPONSE: At the outset, it must be emphasized that the charge involves alleged conduct taking place more than 16 years ago and it is submitted it is so remote in time from the existing situation to be scrutinized by the Board so as to preclude the drawing of any meaningful inferences and thus does not have sufficient probative value so as to justify admitting evidence of this charge at the time of the hear-

. ing.

~

31.-

In any event, and notwithstanding the inability to obtain discovery of the underlying basis of the charge, it apparently centers upon some discussions that took place in 1959 between representatives of Grove City and Penn Power during which Grove City explored the possibility of obtaining services from Penn Power different than Penn Power was at that time providing to its other municipal customers. Penn Power was particularly sensitive to possible charges of discrimination in providing differing services to customers in the same class, and thus evidenced a reluctance to pro-vide services to Grove City which Penn Power was not at that time providing to its other municipal customers without first obtaining approval from the Pennsylvania Public Utility Commission which at that time was the only regu-latory body exercising control over the relationships between Penn Power and its municipal customers.

CHARGE 19: During the period 1965 to 1966, Penn Power refused to supply maintenance power to the Grove City municipal elec-tric system, thereby weakening the competitive viability of the municipal system.

RESPONSE: The term " maintenance power" is not a term of art in the industry and it is not clear exactly what this Department allegation means. If " standby" or " auxiliary" )

, power is actually what is referred to, both were available to Grove City throughout this period at the normal rates available to other Penn Power municipal customers.

82 -

CHARGE 20: Since mid-1966, Penn Power has enforced territorial cus-tomer allocation provisions in its contracts with its municipal whclesale customers thereby eliminating these sys.xms' ability to compete with it for industrial, com-mercial, and residential customers at retail.

RESPONSE: The provisions in question represent a mutual agree-ment by Penn Power and each of its municipalities that each j

would retain the customers they had at the t'.me of the sign-ing of the contract. No provision is made concerning new cut'omers. There is the added factor in Pennsylvania of rigid territorial regulation. Each investor-owned utility i

must obtain a certificate of public convenience and neces-sity from the P.U.C. in order to render a service in a new area. A municipal corporation that renders service out-side its boundaries is subject to the same requirement.

However, it must be emphasized that within a municipality the borough has an absolute franchise to supply electricty ,

(and it may do so at rates set by its council which are not subject to P.U.C. scrutiny). Thus to the extant Penn Power customers were inside a borough's boundaries, it needed borough approval and to the extent the borough's customers were outside of its boundaries it needed the approval of the P.U.C. Obviously, the policies advanced by such

?

, laws shows a strong legislative intent by Pennsylvania

~

to avoid duplication of utility facilities and e

- - ,, - _ s_ , _ _ _.. _ _ , ,,_

83.-

s to establish definite territorial service areas.

l (In addition see response to Charge 3 which involves considerations equally applicable here.)

CHARGE 21: Penn Power had, and has, a corporate policy of restricting competition between municipal electric systems and itself 1

l for industrial customers. '

RESPONSE: Penn Power does not have a policy of restricing com-petition between municipal electric systems and itself for industrial customers, and without greater specificity as to the basis for this charge, it is simply impossible to respond in any greater detail to what might undelie this allegation.

CHARGE 22: Penn Power had, and has, a corporate policy of refusing to file a rate for 69 kv service to its wholesale municipal customers, thereby restricting the municipalities' ability to compete with it for industrial customers.

RESPONSE: , Penn Power has continually held itself out as willing to provide service at 69 kv for any municipal customer who is desirous of such service. It has taken the position, however, that it will not file a rate for such service with the FPC until the particular gunicipality in question demonstrates that it is physically capable of receiving such service. The reason #or this position is to conform l ,

to the rules of practice of the FPC as noted in the response l above to Charge 5 (3) . In addition, however, this charge 1

l represents another attempt by the Department to have this I c=;

i i

84.- I Board consider a matter which another more appropriate

, governmental agency, the FPC, has alread'; passed upon.

Lengthy hearings were conducted before the FPC in Docket No. 8159 involving the precise question of whether or not Penn Power was required to file a rate for 69 kv servics- notwithstanding the failure of any municipality in Pez. L ./sr's area to demonstrate the physical capabil-ity of e -T such service. The final conclusion of the presiding administrative law judge, which was af-firmed on appeal by the Commission, was as follows:

"Upon not less than 45 days' notification in writing to Penn Power by any of its wholesale muni-cipal customers that such customer is or will be ready and able on or about a certain date to accept service at transmission voltages of 15,000 volts or more, Penn Power shall file revised rate schedules containing discount rates for such service, in ac-cordance with the views, findings and conclusions set forth in this decision, which filing shall be proposed to become effective on the service date contained in

, the municipal customer's notification and shall con-form to the notice requirements set forth in the Com-

, mission's Regulations."

To date, no wholesale municipal customer of Penn Power has given the requisite 45 days' notice to Penn Power, and thus Penn Power has as yet not been called upon to file a rate for 69 kv service for any of its municipal customers with the FPC.

e

85.-

. CONCLUSION As is shown by Part I the basic problem Ohio Edison and Penn Power have is in understanding the pro-priety of their being subjected to an evidentiary hearing on the practices and policies involving and relating to the other electric entities serving in the area in which they serve, when none of those entities has seen fit to petition to intervene or request access to the plants in question. In addicion, substantially all of the practices and policies of the Companies which have been called into question and on which evidence will be shortly introduced at the hearing, were only brought to the attention of Ohio Edison and Penn Power on September 5, 1975, notwithstanding the fact that the antitrust review of Ohio Edison and Penn Power began three years prior thereto and resulted on two separate occasions in favorable advice letters rendered by the Department of Justice.

The principal problem the Companies face in meeting those charges is their inability to obtain any discovery as to their underlying basis, which could not pos-sibly have been done during the discovery period established by the Board since it was only after the conclusion of such I

! period that the Companies received notice of these charges.

. Accordingly, even if Ohio Edison's and Penn Power's motion dated October 30, 1975 for additional discovery is granted, 1

I l

1 n .1

86.-

, the ultimate utility of such matters produced as a result of

. such uiscovery will in all likalihood e limited since the evidentiary hearing is now upo4 us. This is not to say that Ohio Edison and Penn Power do not intend to defend fully on those charges. They will be doing so, however, without in any way waiving the substantial deprivation of their due process right which clearly exists.

As shown in Part II, the practices, policies, arrange-ments and growth of the Companies over the years up until the present time have been the result of their continued recog-nition and performance of their public utility responsibil-ities to meet the needs of the customers in the areas in which they serve. More specifically as reflected in Part III the Companies, even without the discovery to which they are clearly entitled, have shown that the anticompetitive charges asserted against Ohio Edison and Penn Power are groundless.

This will become apparent as all of the facts underlying there charges are brought before the Board during the evidentiary hearing.

Respectfully submitted, WINTHROP, STIMcON, PUTNAM & ROBERTS s ,. m By [ U ~'

Terence H. Benbow A Member of the Firm

• 40 Wall Street New York, New York 10005 Tel. No. (212) 943-0700 Attorneys for Ohio Edison Company Dated: December 1, 1975 and Pennsylvania Power Company OF COUNSEL:

Steven A. Berger

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safety and Licensing Board In the Matter of )

)

THE TOLEDO EDISON COMPANY and )

THE CLEVELAND ELECTRIC ILLUMINATING ) Docket No. 50-346A COMPANY )

(Davis-Besse Nuclear Power Station, )

Unit 1) )

)

THE CLEVELAND ELECTRIC ILLUMINATING ) Docket Nos. 50-440A COMPANY, ET AL. ) 50-441A (Perry Nuclear Power Plant, )

Units 1 and 2) )

)

THE TOLEDO EDISON COMPANY, ET AL. ) Docket Nos. 50-500A (Davis-Besse Nuclear Power Station, ) 50-501A Units 2 and 3) )

CERTIFICATE OF SERVICE I hereby certify .that copies of the foregoing "Prehearing Fact Brief of Ohio Edison Company and Pennsyl-i vania Power Company" were served upon each of the persons listed on the attached Service List by mailing a copy, postage prepaid, on thic lst day of December,1975.

-./ h. bl A tA, Steven A. Berger

> Counsel for Ohio Edison Company and Pennsylvania Power Company

F SERVICE LIST Douglas Rigler, Esq. Gerald Charnoff, Esq.

Chairman William Bradford Reynolds, Esq.

Atomic Safety and Licensing Board Shaw, Pittman, Potts & Trowbridge'

. Foley, Lardner, Hollabaugh & Jacobs 910 Seventeenth Street, N.W.

815 Connecticut Avenue, N.W. Washington, D.C. 20006 Washington, D.C. 20006 Donald H. Hauser, Esq.

Ivan W. Smith, Esq. Victor A. Greenslade, Jr., Esq.

Atomic Safety and Licensing Board The Cleveland Electric Nuclear Regulatory Commission Illuminating Company Washington, D.C. 20555 55 Public Squ're Cleveland, Ohio 44101 John M. Frysiak, Esq.

Atomic Safety and Licensing Board John Lansdale, Jr., Esq.

Nuclear Regulatory Commission Cox, Langford & Brown Washington, D.C. 20555 21 Dupont Circle, N.W.

Washington, D.C. 20036 Atomic Safety and Licensing Board Panel Russell J. Spetrino, Esq.

Nuclear Regulatory Commission Thcmas A. Kayuha, Esq.

Washington, D.C. 20555 Ohio Edison Company 47 North Main Street Mr. Chase R. Stephens Akron, Ohio 44308 Docketing and Service Section U.S. Nuclear Regulatory Commission David M. Olds, Esq.

1717 H Street, N.W. William S. Lerach, Esq.

.' Washington, D.C. 20006 Reed, Smith, Shaw & McClay

~

Union Trust Building Reuben Goldberg, Esq. Box 2009 David C. Hjelmfelt, Esq. Pittsburgh, Pennsylvania 15219 Michael D. Oldak, Esq.

Goldberg, Fieldman & Hjelmfelt Mr. Raymond Kudukis 1700 Pennsylvania Avenue, N.W. Director of Utilities Suite 550 City of Cleveland Washington, D,C. 20006 1201 Lakeside Avenue Cleveland, Ohio 44114 Joseph J. Saunders, Esq.

Steven M. Charno, Esq. Edward A. Matto, Esq.

Melvin G. Berger, Esq. Richard M. Firestone, Esq.

Anthony G. Aiuvalasit, Esq. Karen H. Adkins, Esq.

Ruth Greenspan Bell, Esq. Antitrust Section Janet R. Urban, Esq. 30 East Broad Street Antitrust Division 15th Floor Department of Justice Columbus, Ohio 43215 Washington, D.C. 20530 Wallace E. Brand, Esq.

Jack R. Goldberg, Esq. Pearce & Brand Benjamin H. Vogler, Esq. Suite 1200 Roy P. Lessy. Jr., Esq. 1000 Connecticut Ave., N.W.

Office of the General Counsel Washington, D.C. 20036 Nuclear Regulatory Commission

.p Washington, D.C. 20555 go

g Frank R. Clokey, Esq. Thomas J. Munsch, Esq.

Special Assistant Attorney General Attorney General Duquesne Light Company Room 219 435 Sixth Ave.

Towne House Apartments Pittsburgh, PA 15219 Harrisburg, PA 17105 Christopher R. Schraff, Esq.

7ames B. Davis, Esq. Assistant Attorney General Robert D. Hart, Esq. Environmental Law Section Department of Law 361 E. Broad Street, 8th Fl.

1201 Lakeside Avenue Columbus, Ohio 43215 Cleveland, Ohio 44114 James R. Edgerly, Esq.

Lee A. Rau, Esq. Secretary and General Counsel Joseph A. Rieser, Jr., Esq. Pennsylvania Power Company Reed, Smith, Shaw & McClay One East Washington Street Suite 404 New Castle, PA 16103 Madison Building Washington, D.C. 20005 4

Leslie Henry, Esq.

Michael M. Briley, Esq.

Roger P. Klee, Esq.

Fuller, Henry, Hodge & Snyder

. P. O. Box 2088

• Toledo, Ohio 43604 e

1 l

l l

I l 9 "

d I

l l ~,

. . _ . . - _ .. . _ . , _ _ ._ .