ML19329A974

Suppl to Brief Filed 751201 in Support of Motion to Disqualify & Declare Counsel Ineligible to Participate Further in These Proceedings.Squire,Sanders & Dempsey Acted as Counsel for City & Util Simultaneously

ML19329A974
Person / Time
Site:	Davis Besse, Perry
Issue date:	12/10/1975
From:	Jennifer Davis, Hart R CLEVELAND, OH
To:
References
NUDOCS 8001280713
Download: ML19329A974 (66)

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1 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION s

Before the Atomic Safety and Licensing Board in The Matter Of  :

! The Toledo Edison Company . Docket Nos. 50-346C "t he Cleveland Electric  : 50-500A liluminating Company  : 50-501A (Davis-Besse Nuclear Power  :

Station Units I, 2, and 3)  :

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The Cleveland Electric  : Docket Nos. 50-440A Illuminating Company, et al  : 50-441A

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(Perry Nuclear Power Plant,  :

Units I and 2) .  :

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.L SUPPLEMENT TO BRIEF FILED DECEMBER 1,1975 IN SUPPORT OF MOTION TO DISQUALIFY AND DECLARE I

COUNSEL INELIGIBLE TO PARTICIPATE FURTHER L- IN THESE PROCEEDINGS.

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I^ JAMES B. DAVIS l

l Director of Law l

ROBERT D. HART First Assistant, Director of Law I

213 City Hall Department of Law

, Cleveland Ohio 44114 l

j 216-694-2737 Attorneys for City of Cleveland )

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t S December 10, 1975 [o o12so7/ 3 /'7 J

l Sinc 3 filing its initial brinf, th: City h;s becoms cw ra of othar docu-l

_ ments prepared by SS & D adversely affecting the interests of City. By this supplement to its Brief of December I,1975, the City wishes to incorporate these I documents . .

_ Before discussing these documents, it is necessary to review the prior history of the City's motion.

As early as September 16,1974 { prior to discovery) the City's outside

,. counsel, Mr. Hjelmfelt, had indicated before this Board that the firm of SS S D Was acting as counsel to CEl and the City concurrently, and that SS & D had acted adversely to the interests of the City and to the benefit of CEl.  ;

By a statement of October 4,1974, signed by Mr. Lansdale of SS & D, and filed with this Board, SS & D took exception to the comments of Mr. Hjelmfelt

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at the September 16,1974 hearing and stated:

"We do not and have never while representing one client acted adversely to such client in the interests of the other." (Exhibit T) .

Despite serious doubts, the City chose not to press the issue at

, that time, since it did not then have documentary proof that SS & D had acted

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adversely to its interests.

Not until after discovery was far advanced, and certain opinions of SS S D adverse to the City's interests began to come to light, was the City I

compelled to act both in t'he District Court in Cleveland and before the NRC to i

disqualify SS & D.

. in 1973, a request of AMP-O was addressed to CEI to wheel PASNY power from Niagara Falls. CEI responded that it would not wheel for "competi-tive reasons". At that time there was pending in Cleveland City Council a

$9.8 Million bond issue ordinance drafted by SS & D, which ordinance was u

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eventually passed, as amended, July ll,1973. The request to wheel was closely related to the' bond ordinance since the sale of any such bonds by MELP could l

be advantageously or disadvantageously affected, by whether or not the City could obtain low cost hydroelectric power from PASNY.

The City has just recently become aware from notes of meetings from the files of CEl's Mr. Hauser, that:

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"At a meeting in the Company on August 8, 1973, at which Messrs. Rudolph, Ginn, Wil-

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Ilams, Hauser, Lansdale, Charnoff, Davidson and Lester attended, it was decided that the Company should refuse the request of AMP-O to wheel PASNY power or wheel power from any other third party." (Exhibit U)

(Emphasis ours)

Here is the very Mr. Lansdale of SS & D who on October 4,1974 was telling this I

l very Board that SS S D while representing one client had never acted adversely to another client. These notes disclose that $nithin months after other SS & D attorneys had prepared the above bond issue for MELP, SS & D partner -

Fc. Lansdale was participating in a decision at the highest level of CEl, the inevit-able impact of which was to damage the sale of those bonds and deny MELP a critically needed new source of cheap power. And, on August 16, 1973, just two weeks later at the request of the same Mr. Lansdale a legal opinion I of SS & d was delivered to CEl. The purpose of the legal opinion was "to L .

determine whether CEI has viable grounds for refusing to wheel power" L (Exhibit V) . Thus it is seen that the company decision was made not to wheel and then, and only then, was legal justification sought.

~ Needless to say justification not to wheel was found: The August 16,

, 1973 legal opinion of SS & D states: However, a regulated public utility witn a total monopoly of transmission lines does have the power to exclude competing G

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I generating facilities from introducing their power into the market by means of wheeling . " (Exhibit V) . The City's counsel, SS & D, was advising its other client, CEl, it did not have to wheel power to the City.

From these documents we see the extent of the double role and the cF'lousness to the ethics of the professlon of SS & D. The much needed low cost c-electric power, which would have been available directly to the people of the City of Cleveland and which would have aided in the sale of bonds for capital improvements was denied by the City's bond counsel, SS S D, advising its l

client CEI that it "CEI has viable grounds for refusing to wheel power . . . ."

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and by SS & D's partner participating in the decision to deny it. Until it recently acquired the Hauser notes, the City had no inkling that these events had occurred.

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SS & D has attempted to excuse its misconduct by claiming:

"Bott parties are and have been fully

[' awant of such representations."

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l This is no excuse at all. All SS & D has said here was that 2 City knew SS S D {

had represented CEl. This is not remotely as though the City knew the full nature of the role played by SS & D to assist CEI in damaging MELP. Only after full disclosure by SS & D to the City could the City waive anything. Such ful!  :

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disclosure has never occurred to this day. I u The City stands in open-eyed wonder at the double role of SS & D l and its conclusion that the City knew all about the " representation".

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The attorneys of a client have a burden to come forward and make a I full and complete disclosure of all of their roles and activities and opinions that i

affect their client. To date SS & D has never done so. There has been no D

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disclosure by them . Everything the City has learned has come not from them, but

>w from discovery. CEI has claimed many documents are either privileged or work

,_ product in this drea. The City can only wonder how many more documents not now known and which directly affect MELP's operation has SS & D buried in

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its files. No doubt there are other opinions that have adversely affected MELP, l l

r and its operations. l Here we have a very sut:stantial document that can be considered the

' bottom line'. Knowing full well how important the wheeling of power from

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l PASNY was to MELP, this law firm through its partner John Lansdale delivered i l

a blow'that has helped cripple MELP. How can this particular attorney above j all now seek to appear in this case as trial counsel for CEl? How could anyone r imagine permitting it?

i in conclusion, these documents further support and advance the agreement that SS & D must be disqualified and declared ineligible to participate

.p further in these proceedings and prohibited from aiding and assisting associate L

counsel .

Respectfully submitted, JAMES B. DAVIS Director of Law ll j'

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ROBERT D. HART First Assistant, Director of Law

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213 City Hall i Cleveland, Ohio 44114 i

L 216-694-2737 Attorneys for City of Cleveland.

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CERTIFICATE OF SERVICE F

I l hereby certify that copies of the Supplement to Brief filed December I,1975 in Support Of Motion To Disqualify And Declare Counsel I'

1 ineligible To Participate Further in These Proceedings, dated December 10,

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1975 have been hand delivered to each of the persons listed on the attached Service List this H, day of December,1975.

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/ hl s-ROBERT D. HART

[' First Assistant, Director of Law I

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- The f;llowing w:ra h nd-d: liv red:

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r John Lansdale, Jr., Esquire Cox, Langford & Brown I

21 Dupont Circle, N.W.

Washington, D. C. 20036 Donald H. Hauser, Esquire

- Corporate Solicitor The Cleveland Electric illuminating Company Post Office 9ax 5000 Clevelanc Jhio 44101 l

Gerald Charnoff, Esquire

- Wm. Bradford Reynolds, Esquire Shaw, Pittman, Potts & Trowbridge 910 Seventeenth Street, N.W.

.- Washington, D.C. 20006 Mr. Chase R. Stephens r Docketing and Service Section i

U.S. Nuclear Regulatory Commission 1717 H Street, N.W.

c Washington, D. C. 20555 L

Douglas V. Rigler, Esquire Chairman Atomic Safety c Licensing Board Panel Foley, Lardner, Hollabaugh c Jacobs r- 815 Connecticut Avenue, N.W.

(, Washington, D.C.

r Michael R. Gallaghe-

[ Attorney at Law 630 Bulkley Building r Cleveland, Ohio 44115

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Ivan W. Smith, Esquire j John M. Frysiak, Esquire L Atomic Safety c Licensing Board Panel U.S. Nuclear Regulatory Commission Washington, D. C. 20555 ,

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CERTIFICATE OF SERVICE

,- I hereby certify that copies of the Supplement to Brief filed i'

December 1,1975 in Support Of Motion To Disqualify Ano Declare Counsel V

Ineligible To Participate Further in These Proceedings, dated December 10, 1975 have been served on each of the persor.s listed on the attached Service List by Regular U.S. Mail, postage prepaid, this l day of December,1975.

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I ROBERT D. HART

, First Assistant, Director of Law I

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The f;ll: wing wara d; lived by regular U.S. M:ll:

Alan S. Rosenthal, Chairman Andrew F. Popper, Esquire Atomic Safety and Licensing Appeals Board Office of the Executive Legal Director

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U. S. Nucelar Regulatory Commission Washington, D. C. 20555 U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Dr. John H. Buck Benjamin H. Vogler, Esquire Dr. Lawrence K. Quarles Joseph Rutberg, Esquire Atomic Safety & micensing Appeals Board Robert J. Verdisco, Esquire l U.S. Nuclear Regulatory Commission Roy P. Lessy, Jr., Esquire Washington, D. C. 20555 Office of the General Counsel Regulation

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Howard K. Shapar, Esqtilre Executive Legal Director U.S. Nuclear Regulatory Commission Washington, D.C. 20555

_. U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Melvin C. Berger, Esquire Joseph J. Saunders, Esquire

,_ Mr. Frank W. Karas, Chief Steven M. Charno, Esquire j Public Proceedings Branch David A. Leckie, Esquire Office of the Secretary Janet R. Urban, Esquire U.S. Nuclear Regulatory Commission Ruth Greenspan Bell, Esquire

f. Washington, D.C. 20555 Antitrust Division Department of Justice

, Abraham Braitman, Esquire Post Offree Box 7513 j Office of Antitrust & ldemnity Washington, D.C. 20044 U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Karen H. Adkins, Esquire Richard M. Firestone, Esquire Frank R. Clokey, Esquire Assistant Attorney Generals

, Special Assistant Attorney General Antitrust Section Towne House Apartments, Room 219 30 East Broad Street,15th Floor Harrisburg, Pennsylvania 17105 Columbus, Ohio 43215 Edward A. Matto, Esquire Christophar R Schraff, Esquire Assistant Attorney General Assistant Attorneys General Chief, Antitrust Section

, Environmental Law Section l 30 East Broad Street,15th Floor 361 East Broad Street, 8th Floor Columbus, Ohio 43215 Columbus, Ohio 43215 Richard S. Salzman, Chairman

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Atomic Safety & Licensing Appeals Board U. S. Nuclear Regulatory Commission

[ Washington, D. C. 20555 Michael C. Farrar Dr. W. Reed Johnson Atomic Safety & Licensing Appeals Board U.S. Nuclear Regulatory Commission

} Washington, D. C. 20555 t_

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j Thomas J. Munsch, Jr., Esq. David McNeill Olds, Esq.

General Attorney John McN. Cramer, Esq.

Duquesne Light Company William S. Lerach, Esq.

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435 Sixth Avenue Reed, Smith, Shaw & McClay i Pittsburgh, Pennsylvania 15219 Post Office Box 2009 Pittsburgh, Pennsylvania 15230 l

Joseph Rieser, Esq. John C. Engle, President Reed, Smith, Shaw & McClay AMP-0 Inc.

i Suite 440 Municipal Building i 1155 Fifteenth Street, N.W. 20 High Street Washington, D.C. 20005 Hamilton, Ohio 45012

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' Terrance H. Benbow, Esq. Jon T. Brown, Esq.

, Winthrop, Stimson, Putnam $ Roberts Duncan, Brown, Weinberg & Palmer 1'

40 Wall Street Suite 777 New Yor, New York 10005 1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006 l Wallace L. Duncan, Esq. Victor F. Greenslade, Jr., Esq.

Jon T. Brown, Esq. Principal Staff Counsel Duncan, Brown, Weinberg & Palmer The Cleveland Electric Illuminating, 1700 Pennsylvania Avenue, N.W. Co.

[ Washington, D.C. 20006 Post Office Box 5000 7 Cleveland, Ohio 44101 .

r Robert P. Mone, Esq. Lee A. Rau, Esq.

George, Greek, King, McMahon & Joseph A. Rieser, Jr., Esq.

McConnaughey Reed, Smith, Shaw & McClay

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l Columbus Center Suite 404 L

100 East Broad Street Madison Building l Columbus, Ohio 43215 Washington, D.C. 20005 I

Reuben Goldberg, Esq. Leslie Henry, Esq.

David C. Hjelmfelt, Esq. Ndchael M. Briley, Esq.

, l 1700 Pennsylvania Avenue N.W. Roger P. Klee, Esq.

Suite 550 Fuller, Henry, Hodge & Synder L-l' i

Washington, D.C. 20006 300 Madison Avenue Toledo, Ohio 43604 l

g Pennsylvania Power Company 1 East Washington Street New Castle, Pennsylvania 15103 I

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EXHIBIT "T" t'

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T STATEMENT OF SQUIRE, SANDERS & DEMPSEY RELATIVE l l TO ALLEGATIONS OF MISCONDUCT MADE BY ONE OF COUNSEL l

. FOR THE CITY OF CLEVELAND FILED OCTOBER 4,1974 BEFORE l l THE ATOMIC SAFETY AND LICENSING BOARD.

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J UNITED STATES OF AMERICA ATOMIC ENERGY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter )

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The Toledo Edison Company )

The Cleveland Electric Illuminating ) Docket No. 50-346A Company .)

(Davis-Besse Nuclear Power Station) )

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The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) and 50-441A (Perry Plant, Units 1 and 2) )

STATEMENT OF SQUIRE, SANDERS & DEMPSEY RELATIVE TO ALLEGATIONS OF MISCONDUCT MADE BY ONE OF COUNSEL FOR THE CITY OF CLEVELAND We have read the portions of the transcript of the proceedings held before this Board on September 16, 1974, in which Mr. Hjelmfelt, one of counsel for the City of Cleveland, an intervenor, suggested that the firm of Squire, Sanders & Dempsey,* ,

while acting as bond counsel for the City of Cleveland, acted' adversely to the City of Cleveland and in the interest of its client, The Cleveland Electric Illuminating Company (R. 749).

We regret that a prior engagement in the U.S. District Court for

• The firm practices in Washington, D.C. under the name Cox, Langford & . Brown' in which style it is referred to in the appear-ance herein of John Lansdale for the Cleveland Electric Illuminating Company. ,

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f New Jersey prevented attendance at the hearing. .

Squire, Sanders & Dempsey has represented the Cleveland Electric Illuminating Company in a wide variety of s

matters since shortly after its formation. For more than 65 years, such firm has acted, and continues to act, as bond counsel in connection with bonds and notes issued by the City of Cleveland.

Both parties are and have been fully aware of i

- such representations. Sofar as we know, the integrity of this firm has not heretofore been impugned in the manner in which Mr. Hjelmfelt has seen fit to do. We did not and have never while representing one client acted adversely to such client in the interests of the other.

f Respectfully submitted,

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Squire, Sanders & Dempsey  !

1800 Union Commerce Building Cleveland, Ohio 44115 216-696 '700

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i Cox, Langford & Brown 21 Dupont Circle; N. W.  !

Washington, D. C. 20036 k

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.. JohnLansddle, Jr.' (_)

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UNITED STATES OF AMERICA ATOMIC ENERGY COMMISSION BEFOREL THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of )

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The Toledo Edison Company )

The Cleveland Electric Illuminating ) Docket No. 50-346A

. Company )

(Davis-Besse Nuclear Power Station) )

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The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) and 50-441A (Perry Plant, Units 1 and 2) )

CERTIFICATE OF SERVICE

- I hereby certify that copies of . STATEMENT OF SQUIRE, SANDERS & DEMPSEY RELATIVE TO ALLEGATIONS OF MISCONDUCT MADE .

BY ONE OF CO'uNSEL FOR THE CITY OF CLEVEIAND have been served t

upon all of the parties listed on the attachment hereto by deposit in the United States mail, this 4th day of October, 1974.

a thfd .V Lans' dale, Jr. U 1

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i # D ATTACHMENT f Benjamin H. Voglen, Esq.

J hn B. Farmakides, Esq.

Robert J. Verdisco, Esq.

Chairman Atomic Safety and Licensing Office of the General Counsel U.S. Atomic Energy Commission  !

Board 20545 U.S. Atomic Energy Commission Washington, D. C.

Wachington, D. C. 20545 Gerald Charnoff, Esq.

John H. Brebbia, Esq.

William Bradford Reynolds, Esq.

Atomic Safety and Licensing Shaw, Pittman, Potts &

Trowbridge

< Board 910 - 17th St., N. W.

Aloton, Miller & Gaines Washington,-D. C. 20006 1776 - K Street, N.W.

.W2shington, D. C. 20006 Lee C. Howley, Esq.

Douglas Rigler, Esq. Vice President & General Counsel

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Hollabaugh & Jacobs The Cleveland Electric Illuminating Company Suite 817 Barr Building Post Office Box 5000 Cleveland, Ohio 44101 910 - 17th Street, N. W.

Washington, D. C. 20006 Donald H. Hauser, Esq.

E Atomic Safety and Licensing Corporate Solicitor Board Panel The Cleveland Electric Illun.inating Company q U.S., Atomic Energy Commission Washington, D. C. 20545 Post Office Box 5000 L

Cleveland, Ohio 44101 Frank W. Karas Chris Schraff, Esq.

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Chief, Public Proceedings Office of Attorney General Staff Office of the Secretary State of Ohio q State House i U.S. Atomic Energy Commission Washington, D. C. 20545 Columbus , Ohio 43215 ,

i Abraham Braitman Dwight C. Pettay, Jr.

Assistant Attorney General

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Office of Antitrust and Chief, Antitrust Section  !

. Indemnity U.S. Atomic Energy Commission 30 East Broad Street, 15th Floor L Columbus , Ohio 43215 Washington, D. C. 20545 .

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' H;rbert R. Whitting,

• Esq. Leslie Henry, Esq. i Robert D. Hart, Esq. Fuller, Henry, Hodge & Snyder I Law Department 300 Madison Avenue Toledo, Ohio 43604 L City Hall Cleveland, Ohio 44114 Iw

V p . i i . J ATTACHMENT PAGE TWO Joseph J. Saunders, Esq.

Steven Charno,Esq.

Department of Justice r- P.O. Box 7513 Washington, D. C. 20044 l

- John R. White, Esq.

Executive Vice' President Ohio Edison Company 47 North Main' Street Akron, Ohio 44308

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David M. Olds, Esq.

Reed, Smith, Shaw & McClay 747 Union Trust Building .

.[ Pittsburgh, Pennsylvania 15219 i

Mr. Raymond Kudukis Director of Utilities City of Cleveland 1201 Lakeside Avenue Cleveland,' Ohio 44114 Wallace L. Duncan, Esq.

Jon T. Brown, Esq.

, Duncan, Brown, Weinberg &

Palmer i 1700 Pennsylvania Avenue, N. W.

Washington, D. C. 20006 .

!f' Reuben Goldberg, Esq.

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David C. Hjelmfelt, Esq.

1700 Pennsylvania Avenue, N.W. ,

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Suite 550 -

Washington, D. C. '20006  ;

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[ Deborah Powell'Highsmith Assistant Attorney General Antitrust Section {

30 East Broad Stree,t, 15th Floor [

Columbus, Ohio 43215 [

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EXHlBIT "U" h

HAUSER NOTES FROM VARIOUS MEETINGS-t f

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'E 2 Y T E lf s A YT T T T R U C T PERDT 8 tera Charno 6 -

Cs this dato, D. Hauser cna G. Chernoff r.at with in3 7 1 *f , 1 7f3 cf the Jertice Do-- M cad Verdesco and Hescier t of

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Q:15 una tho initial conference rescrdi=g Perry t a It van held in the officca of the Justice Dc; rt- /

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la W ah S3ten, D.C.

The I::aeting v: s chaired by Chcreo of the Justica. o He noted the Ea revie:rei what had transpiredilleforNc.rticip:. to that da*A. tics ,

cquacts of both Clevn179A and Pai cat f He also refermd to the request of in the Perry Units. Reference Clavir'n3 to join end becccus a cabbe:- to ofthe CAPCO.

v.an cico re.da to the vritten request of AMP-Oh

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W o theel t PfS5Y Po.rer.

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- ts It was s:sta certain that replies to c11hof these req Justice in the fc:s of ecrrespeMemre vere provided to bot.

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c' car =o said that to avoid an antitrust reirier a r r

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licennhc proceediuss, the 'vv r:nst mka in the P=rr7 a binding cec =ai::ent to negotiate in c~J.fnith in tho u

' City of Cleveland cnd 2:isesville fer p=rtici;ctics 4asion services not caly frc:

Parry Units to provide tra the Unita but 'frem third p-ties, end nimbarchip Inter in the x:eeting tho tb%~*-t vs.i voiced CAPC0 pool.

ship would not be reqcirci ct this tht possibly CAPCO l me:b rchip

• paint but reserve shcring end other benefits of p L/

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Y , snst be a:ada available to the City of Cleve1nna and Painesvilla if it should request. , ,

Ua stated that such bina43 mito=nts had been enda i c=niitions of the licenses in n z:n=ber of y2cciings

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c 2nvolving unclear Ma ami serce.1 e:c=ples vee I=o-vidai cubsequent to the r.eeti=s.

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- Es anda it clear that Justica A-d4 a binding dt= cst d ci this ti=o that, as a =stter of 3:rinciple, the Ome'n j tculd agree to M pcrticip= tics, trW maion services, cci CAPCO cc=herchip. He stated fictly that they vould not )

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't;ur the 3=cposition that the details trecid have to be vorhed cut before such a ecc=it=c=t ecc.1d be unde. He, lihe -ize, c=.id that Justice would n=t necept thst the past proble=s t

tith the City m'=t be resolved befcre such n WW.,

W be r:sda. He said they rev4-M the proble.s that

, to had with the City, but the ce c7 tras perfectly c=pchio

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of protecting itself in a::7 agreMs that vould be entered L

into. He c:rpected that the particip:ti=n in the ple=t in CiR:0 and tv-4 =sion servicea could provide far re,w-Me

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canditions nud provia4mm to protect the cmq cud othert to this ani. Ha reposted over and over th=t the ic:t required cni Justice required a ecc=i"ent to negatinto in good faith.,

I Euring the meeting he stated thct being fully enmre of past history and the W-v's position.s in Davi.s-Boose, Beaver .

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• Talley and now Perry, they really qu2stioned r not it *cther o the Cocpany was acting in good faith M% and Wether o

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wasn't resny pinying gn=en with the City of Cle r

t h t tra Lw and represcutatives .of the AEC vere t voa1d edvised t a

' vars not in a position to este such c o===it=ent bu Charco said that I hern to review this with our m-M.

1 he.vou1d lih8 to get our c35VSr Within the next ScVerG to give his re e = ^ w trooks Wmo he had until Septe=ber 1 .

ties to his aupariors. .

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< 8,1973, at vhich f

- At a ameting in the cen on A=sust f - ..t 8, 1973 n==rs. wo1ph, c1==, w~,, a==er, te=sdese, Cuer=off.

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IL.vidsen, c=d Lecter attc=ded, it t:ss ^~-M-d tbst the Wmr chould reface the request of AMP-OPio to the  ;

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p:frer or Weel power from a::7 other third party.

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d dccided that the Cecps:7 should refuse to agree to C1c

f. - It was niso decided th=t the bMng a ne=her of CAPCO. ,

f ccmr's po::itien chocid be to refuse cceess to Davis-B i; 1 ,

On the other h:=d it was cgreed

' cad Besver-Valley Eo. 2,

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that the in:tyers shou 1d edvise the Justice DepahCity g.

it was ciecred with tbs other CluPOO O- pies, th' t the

! J L- of Cleveland tuuld be allowed to p:rticipsto in the Om nl .

cllocated partien of the Petry Units.

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. Bdbseqcent to the meeting, E. H. Endolph did receive

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ww.al of the chief ezocutives of the other CAPCO Cenics c  : .

l far the C7_ny to proceed vith sw;vning participatica in l .

,_ tho 074's ellocated pcrtion of Perry.

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Auguit 17,1973 - On this date, P.essrs. Hauser, T-A*1 e, cnd Charnoff est I '

trith Chrno of Justice on the Perry a=titrast der in

[ tha Justice De;nrt=ent offices in Wa^4nsten, D.C.

Ea .tas cdvised by Ennser that the ce gy vould, in return fbr a rec

rnendatics of no neci far an antitrust review tJith the as:ee:c t of the City of Clewha to that c=1, to nes:rtinte in good faith vith the City of Clew 1mna far V b.to participction in the %4='s c.uocated pa:-tien of the Perry Units and the Cc:;c=y vould provide trrmescien c.=rvices for that power to the City of Cleve. land u

Em uns chised that we t=uld not egree f.o -kerchip in C/KO

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CI thi3 tiDS Snd had P7"AM 'M vs tvld not 1: heel pcr. ..-  ;

. frcs third perties 4m 1"A413 PlSir pcwer or AMP-Ohio to the City of C1cvnla- t L -

... It t=s czr'n4M th=t the CAPCO peal vna ju=t in the 1Mi;a ctege end to interject a new prty said 'not be in the Merests of % It was also explained that tha City 1:s.s too he for participstien in Davis-Besse cai Be:ver-Valley No. 2; th:t k . that p:n.er was Ir.resdy cc:==ittod and cculd not be released P' .

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17 ths C m cr others. .

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I go % Aaia described at atzne lengthhich the tmig2a ecc 1

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cituation of the Ocepany and the City of Cisvaha w l

• I: sat be ma4dM in any actitrust rtniev and.as sppp ti-

! for the position +mh by the Cm. This uniquei eccpe 1 tive situntion was one in which the Cm and the m=ic l

f systca eccpeted on a hcnzse-by-house, Systs street-b sni various cccpetitive practices of the m=11cipal W a'4 6 in:re rcnrieved to dentrate th=t th'ey trcre -

f

@1a of ecc:petinG.

i i

2.t. t:cs pointed och to Charns that -<1th the intereenl f - . d Pwer Cwiasion ,

2t na conte = plated by the Fede e43reerr.:::

Order of January 10, the City of CleWM could He receive i

M.up c:=srgen~y shcrti-tem c=d li=ited-tem pr.rer. .  !

dered, as he did at a later reeting, that this m all weg pwer.

9 Es cleo reiternted at this =:ecting a statecent =da e c:::rlier r.eeting. That the entitrust review ver.ild be ec=

, u21d have with regned to tha

• to ths i=pset the Perry Units 1.

This ses cc=e.rbs.t in c=::p:f.itiva cad entitrust situation.

p to Lansdale's arp.It that there was caly n n-m

hm the Perry Units end the licensa cypliention c=d L

a In othar tards, Cbsw.

reqcc.,t of the City of Cleva'm -

sa 2 -,4med to esree. ,

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. He stated eGnin tho gnidalinco ha had given "un ct tha prior Wing and said that thesa vera es+ah14nhed as a matter of k,xLant policy and that he couLi not v=ry frczn ther wntion to his st$periors

. Em t:ss asked that if his re tan to be negative insofar es the W y van concerned, I~ .

th=t tre be given as vyy i.dty to present our case to thoso ei.'.===t tis did z:ahe the policy. He ~de no od-and-o:rt r

t to this b=t cpy red to be receptive end cs vill be sho:in cubsequently, such a meeting with his c=periors was held

,t .

, and Tenda' a ==t .

- captc=ber 14,17T3 - On this e. ate, Mectcrs. Char =ctf, m -

• Uith W4es, Chnrno, cnd Grosc=ss of tho Justice Dept rd in IMrk4n,, ton, D.C. The Cc A 's position and cr W s in way t thereof, togethe:r with set =s of the backe,.-d, vere

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D t %. re-c=plared fcr Mr. Sm 8-s by the C&y repro-L istives and Charno.

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< e Ua t:cre cahod if va had disc ~.:ssed ocr pocitics with the City j ,,

' Cf Clc7*1 ana : They v=re cdvised that vn hSd not.

'- -L% the end cf the meeting I s Wad Chs. =o if I was c cct in esst=:i=g thzrt his re--~Mtics would be nes:tive r

f=cofer es tho C-nv vas edecrr.cd by tho fact that this i

L WJ.ng of Septe=ber 14 was held. Es re4d that r:7 cs W ien tsa LM c=d that ho uns prewd to giro a nesstivo r . -aatics insist 4r.g that we fouw the gnia-,4nas that ,

ds tsa oe,4% at the prscr tw meeti=gs.

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At this point Eanndea questioned Charno as to what the City of Clavalemd really required. He stated be could uMest=ni

• ifbat affect a new party in a potrer priol in the for=stive .

stage night have and asked what real benefits the City of Cleveland conid get by beerr-ing a r.e::bar that it couldn't

{i Chrno sited thst the City obtcin in sc=m othe fashion. i 1:ss cfare of othe unita pisaned and could seek participat cs He could cico f5 those just sa it was fn the case of Perry.

Davis-tiniersta=d that the City vas a bit late with regard to .

He said, hwv.I, that he Basse end Beaver-Valley No. 2.

belicyca the reserve shcring, toguther with'the 138 EV inti.rs aection escats with CII cisht provide a practice.1 colutics es an alter = ate to C/JC0 Mership crra=ge=e=ts.

() -

Es cited &'4*c nis Pcr er Pool eses-ts with Sc= enc =

end Ica Angeles as er" 'an.

Mws poi =ted to the need fcr PASLT pc:rer es being ent I

cf mHng trp the gny batveen er:r s.si then the Ferry Units This gay ras d iened c. - O of tculd be on the line.

~

tinss and the clear inference was th=t Justico expected the to negotiste fcr the sais of po:rer d=ri=g this snp

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p::riod at rates lower thsn those ec::& daad in the Fodd L '

As at the previous :secting, the

• Ptr:rc::= CW maian's Orde.

cuggestion by us that the inteco=naction cgree.ent provide d d vr.s not accepted.

um,,thi=g the City of ClewlaM nee e l

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,. 'h ~ f f 2t was suggnated that thera things conid be bhed out in

/y#' ,/ negotiatit:ms with the City of ClevdaM-It tras e--mh* air,ed

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p ': ./ that we M3d get toguthcr with the City of Clevaled ,

.f ' ..? . 8 t2,y. At this I:eeting Chn..T.o asked if we vocid object p%

to ' tin st+~nMng such a n=eting. He vns assured that he 1:;onld be rest velecx:m.

Ch:rno did follo:r up several thes en-dng if s~k a cesting In these telephone cwic cstions he was advised had been set.

e, th:f. to such coating had been sat ned that he vould be kept caricci. .

Octoix:r 25, ISrl3 -

/J, a result of lettams of L. C. Eculey dated septe= der 26, r 1973, c=i October 4,1973, and a letter of Direetcr Piti=g sb the City of Cleve3 sad, a ceding vith :!eprecentativ=s of the '

offices of City En11 cn City t :s held in the Law Depart:sM_

a.=.

Thurcday, Octobe 25, 1973, at 10:00 l

t r 1

• • dt this Eetting the City VES repreSC:f.,ed by CatSide CC"Mel, Ecuben Go1Cx:rg, of Wanhington, D.C.; Vi'1* m R.1%-ten of R. W. Bech cnd Associates, CmMti=g A-dnaers; E. E. Whitins, i L::::r.Directcr; Bob Hart, Assists =t Directcr of Lc:r; Gg i Cicolis, c'er r-4 caiener of Lig & peuer; PW p w n, .

Directar of Utilitics; c=d Ralph E. P. ister, Productics Ibn ger, HELP. .

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The Wmr vna represented by L. C. Ec21ey, E. L. W5" W 2,

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It tras generally esteed that it would be uppvr AY J

• rtrriew the history cr backgrcn:::ui 1cnMing up to the meeting

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/ ' This was undertnM p:-incip0.ly by Hart of the Im Depart =

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cod q%=ized was the letter of August 3 and its acW -v ns '

In this review a wmis was pinced t: pan partici.

propossl. 't the r

~ tim e.s a r.c=ber of C/JCO.

This folicr. red th6.

mesting in which reproce:?tatives of the City of Clawla"4 keirod particpatics in CDCO.

tics cnd time again

&#mHs, in respec.ae to a qcentica of dat the City really ber e_ tmnted, reiterated essin that it va=ted to becc=n a re=

He caid that the City's philosophy irns of the CAPC0 pool.

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to prerride ccre reliable pcreer for its cud.a:.ers c=d to havo the resources of t h e other mc=bers of the Cf200 po

(. to (.c w upcn for this prpose.

He noted that the cnly pool i

He said that the CiJCO to thich they had access was CAPCO.

ivs club cnd v=.s certain

~.

pcci tras never r.esd, to be e.n a-"1 ,

i that 2==2icips1 pcrticipatica such c.s by ICL? vns feasible.

Goldberg said that ha had ecpies of cc=a of the CAPCO cs co-He cited .

' c=::tsuhich indicated the benefits to the ders. I b thich stated th=t c;ccific:0.17 the AA--4nte.rctics 4  !

4 ths objective vss to securo the bencrits of ecordin= tics easica and generatics phning. Ecs nico tL %. tr '

of Undcrc+ mA4m as ou'14n4 g its nic.a to tho &=xxra~5 3rincipsi purposes as reliability, adequato reserves, a tr He said th=t the City [

Cinsion network ani econc=:7 of senlo. &s j

- +1od to participato financially the a ms as other t t,0014331

. r cAPCO.

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legben said that HELP was facing a power ekpansion program p

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1 and tshich it could not fulfill vithin the system and would

. have to go outsida. He stated that MELP vould issue revenus bonds as other r:micipals to deliver Anlies; fir $nced and

' shM by revenues frca the sale of pore. He stated th=t they realized that there vere so=a restraints in the

{

precent 1M .ue but that there vas a definite prospect of ref4*-*4r g to a14-hte scus of the enerous provisicas

- . .- Cf L%4Me % , r Golciberg possibly anticipated arg_ -=ts that had been pm I

~

617 presented but thich had not been presented beforo "Jcatice uith respect to Perry cr at this coeti=g. He ccid t

th=t esm::ing that the Constitutics prchibits cr.mership l  ;

c=1 there is no vsy to vert cW $cist e merchip i.x a

< p1=f., the City veuld vant t=it participaticn. He caid that ha v::mid vant the dedicatics of a bioch of unit parer i

w4-4"5 that there vcmid have to be negotiations for

. prico vith a take er pay concept. He noted that through 8 cwhip the City could raise capital et a lover cost i th=n the privste a~ pm4es.- He caid thst x=yba through ,

i MM_.ent they could provids CA.PCO benefits ct a 1cr.: coct i!

cnd that there venid be pre--# for purchased po:ter rather th::n cnmership. He said there was no question that if they i~ h=To a tarkst for parer, the capital conid be raised. In 1

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this connectics he said that in the =egotiatics of prica, O

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" the ability of the city to raisa capital at a lower cost not raised Mid be reco6nized even if the capital tw.

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• by the city.  !

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• - Be asked vbether CHI and other Ws of CAPCO vo ngree as a r.atter of principle to e&:it }GLP as a r.echer Hewley responded that it was not the position of CAPCO.

of.the C&-v that tmder no circu= stances would it be cgree.

, On the other hand,.he couldn't i

cble to ad=it IELP to CAPCO.

CAPCO mr.bers would agree to ctate at that r.eeting that tht:

I i the n?-4 naica of the City as a .___ber.

GolCorg said he recognized that CEI cnd the other CAPCO

, es cnd protectices.

7 94es vould vn=t certain as. m, s y Lie.a, he didn't thi=h that it was in the interests of

" to

%w to si= ply cpin wheels if there van no ecumi'd-He said otherwise they had been *4 5 deship in CAPCO.

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• Cs effort before the /SC and vo=1d havo to ecstin The City, he said, vns cifwts with the ecuti= gest delays.

l l prepared to negotiate in good faith, berever, they vant l

casurcacos that the Cc=pany cnd othern trero liheviso td11 r to acsotista in good faith, t'

L .

2h cn:ver to a request sa to ho:t the request for alloc:?ics to varicus units was datermined, Mayben said that MEL h

to preserra its Md cres n=d it t:ns necesecry to sec=ro

- Ha caid

' a b+1-~1 cupply rather than frt::: cna base co=rco.

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thd he ree - = Mad to tha City +aHn? a= aller pieces frcza He also said that

.w .m 1 sources rather than one source.

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ha believed that the city's request was a proper ba3ance of so c ces of supply. He said thst ti=ing was also'an f

He said thst icportant factor in fm.m7nting the request.

it tras recognized that CEI's scheduling and dispatch would be required which constitutes special services for which .

ll 4 they expected to pay special ca pensation. .

In this connection he said and repeated several timss durins I I h course of the caeting, that a 345 interconnection was

~ required rather than the 138 kV i=tercennectics crdered by

& Federal Pove.r Ccz=icsion.

) Goldbe g r T h said that he recognized that scre ti=e cnd

. ctudy was reqaired to develop s=d negotiate the details ents but again asked vcmld MELP be rr*-itted cf the nw. -

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IS;yb=n said that he raa77y hadn't censidered the Feder1 IL =r Cczmission Order but had relied pri=srily cn the IG:LP represe=tatives. .He said he u=derstood that ths FPC Order '

I t::.s caly an c=ergency intr _cMion cad ecemhted that -

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Herc, trhat they

• • - 13LP would be a self-sufficient system.

cro proposing, was that a substa=tial part of espscity vas to be supplied ove.the intcMian and this tenld not

'

• c:Cy require a $5 kV intucsection but soveral connectic:.s .

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- LUD14334

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-l tfhich a6ain vould strtcct.tho intreets of the City in

• the avent for scx:xs renem one i=temMion was out of

. cervice. .

? .

In response to a question there was see discussion of

. I.

the proble=s with trans:.ission lines in this territory.

f l

- This again was brushed aside and stated that they recognized 2

thee were probic=s but they thought that the Ccepany's philosophy of generating at re=cte cources and transmitti=g

. k r- to the load centers van a good one and that r& w or l

cnother the e=vi&+.s1 proble=s venid have to be solved.

t I

• It was stated that the City eW.cd to pay its share of the c=vir - -tal costs.

In resp::=so to a question of whether the full request for

'h the = - s of the esey, oe of - - e it vss stated that if it was 'i=possible to get into erlier t:=its, the City veuld have to seek c=d co=?M,e supply .

cf power for the interis period.

~ Coldbeg assin referred to the proceedi=gs befcre ths /C presented the si=ple q=estics as to whether or not the City c:ald be ed=itted to CAPCO. There v=s ec:=s discus:ica cf

~

uh=t, in cadition to the us hv icts. spics c=a the trps:

L chis

• or power providea therehr, was required by the City.

l camn't reenv answered.

s .

t.001433 5

__.eme- m

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- - GoMbarg m da another speech that ,

l CEI was not ready today to se;y that as a mttar of principio

.12:LP would be ad=itte.1 to CAPCO but that an anmrer to this He said question was needed beto o proceeding further.

I that such a edtnent was needed because of ti=e and  ;

dai'es inic1ved in proceeding ft:rther. He said that he wy eciated an answer to his gaestics was subject to verkins cut crrangesents which venid be negotiated. He said that

{ -

l he w.r eciates CEI and 15:LP cre ec=petitors c=1 lf CEI wMes the City as beir.g here to stay, th4P could PN proceed ench scre expeditiously. He aT n caid that one 4  ;

t:27 or another the City ven21d get participation in the U=it P

cnd ce=bership in CAPCO. It was a questics of Wether. thia

) t:cald be nesctiated er 6.2d be secured thrcr.:gh EmuJe1 Inscadir.gs including those 1:r::1 ring the AEC.

a t::s esreed that the n==t meeting at eich r-w = re.so lE c:a the t'~-~'ny sad other CAPCO ne=bers vould be forthe-%s Hove =ber 27, at the C. _ =7'c t:=sid be set for 10:00 a.=

I ctficss.

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.. i 10-31-73 .  ;

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There was a meeting attended by K. H. Rudolph, R. M. Ginn, L. C. Howlay, H. L. Wm 4.-., W. Eactera, C. Ioshing, c.nd

/ *

. D. E. Rauser. The prpose of the meeting was to review the disenssicas with representatives of the City on October 25, 1973, and to deter =ine what our positics chould be at the meeting with the City prese=tly schedsled i for Iknre.ber 27, at 10:00 a.m.

The meeting of October 25, 1973, was s m -ized as ths City +264 g the position that before dicenscions pro-coeded further the Ccr=pc=y (c=d the other CAPCO CL ,enies) cust decide whether as n ratter of principle the City tonld be granted cr.hership in CAPCO. This vn.s the principal questica to be reviesed. Various state.c=ts cedo by represe=tatives of the City 4 MnM g those thd the City r=uld as =e fully all oM Ttiens cf a C1PC0 neber and ear- stood that CEI c=d the other i '

7 "fes venid va=t assurances and protection. ~5c

' City stateMs about being able to fi=ance fins = ir.1 responsibility based upon rever:es frc:a the ~*het thich it had and the possibility of refine.scing v=re cico r%;,ci.

The legni guidelinen vere reviewed. Specifics 12y disen:ced '

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tss the decisics of the AEC and the Louisinu Pc:rer cnd Light Ca=pany case involving the licensing of Waterfcrd Co. 3. In that case the Cdssica ruled that the ro-l O '

t.0014337 e

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e quihi,3 cf tha Atenic L2erEy Act for h= e-lican"4"5 cntitrust review does not authorize an im14-4ted inquiry into alleged anti-eccpetitive practices of The M-4"41ng Ce;ccy, the CAPCO Group, or the industry for that 2:c.tter.

A & of laternate positions vee discussed. Included t?. the proposal dich Justice had indicated might be i

. ccecptchie to get and Wich was z:ct presented to the City.

D.ic vna a eitment to negotista in good faith vith the City for its pad. icipation in the Wm's allocation of Perry 1 and 2.

As a part of this, Justice had indiested

, cena fern of reserve sharing ani arrcngeme=ts to take enre cf the needs of the City in the co-en11ed tima g=p between n::r: csd den those units vould etne en the line. This r:uld be coupled, of course,1.-ith no dership in CAPCO.

A=cther citernative Wich was discussed una si= ply a be.ch-up cad percr stW cgres. Wish it v=s noted i required the City to take only the p:uer it neoded c:xi s

c uld poccibly avoid the high cost nuclear pc:rcr.

Eh2 citernste of caying cm a ustter of principle tha  ;

Cm and other CAPCO C=._panies veuld agreed es a chtter of piinciple to tho City beca i=g a me=ber of CAPCO cnd W iste in good faith toward that c=d. Severn1 variaticas cf this later citernate were discussed as to Wether ..

derr. hip abould be retroactive to 4"-1"4 Davis-Bonne,

)

LN-Yalley; Wether it should beccme effective ndu or ec=e time in the futur..

t0014338 -

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ro decisica van mAa on ng cf the::o positions to rec =- --a

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/ to the CAPCO Cc=panies. No one proposed a fint no to the City cal av tranrtar-tion or de.nlin7s. It was agreed .

that .

I c* meeting shmild be held with the chief executives of the  :

r other CAPCO r%es to discuss this prior to the next neating with the City. K. H. Rudolph is to a w. rach l 1

1 a meeting. Em,one vas cware that the latest deru"4"e . 1 d

ti d

Ci ven to us by the Justice Depardt is Dec-hcr 1.

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As a result of w,ucation between L. C. Rowley and H. R .

/ .

whiting o=

ov=3.13, the =eet1=g of rme=ber zt,1973 una rescheduled for December 13, 1973, in Conferedes Roc:s 355 in m mm4"ating Cc=:pany's offices.

At the meeting

' the City was represented by outside mal, Reuben Gcidberg cod De.vid Hjel= felt; H. R. Whiting, Icv Directer; Bob dart, Assistant Director of Ler; Harold Ae%, an engineer for IELP; and Ralph E. 2:eister, Prod =ctics l'anager, IZLP.

The Co:pa:7 vas represc=ted by L. C. Eculey, H. L. WY7' 4ms ,

D. R. Davidscs, C. T. Icabi=g, D. H. Ec=.::er, a=d aJ. L. Tane h r.eeting vns delayed fcr vj, v 1=stely a half bcur 'vaiting for R ;y=c=d W A<-h to crrive.

He never did cppesr.

L. C. Ecyley cpened the cecting by referr.d=g to the DecAcr 10 ,

1973,1W.er of Duquesne Light Carpc=y addressed to Ralph P

~

L. C. Ecrie/- caid that this letter reflected the f ct thct the CAPCO F 7--ics, for the r~m stated in thst

[

letter, that it didn't =0.he sc= e for ZZLP to be a ce=ber of CAPCO, n::rting paroi:u1=rly the rectrictic=s on I .:=icipalities 4 ctatuta, ct arter, and ordian~-a.

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L. C. Howley then distriin:ted copies of his let'a of .

. Dece=ber 13 , 15713, which presented the Ccepary's cou=ter-prt:rposal.

After evm ,me had been given an cfgi.cnity to read the letter, there follcued a series of qncations prescuted E

mostly by Reuben Coldberg to fizrther define various pa.rts ofIP

• l the ymposal. -

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- Thr first qnsation Goldberg anhed as to dat the cccpany *

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w, by perticipation. The responsa van that this parti-Ci;x: ion was of the type the City had specified in its

[ .

-h.M on Pace 4 and that it was either cunership or tmit

(, eases with the City paying the costs of ovnarship and Wicn in F efwiian to its chsre in tha project.

N. Ioldberg then asked as to dether or nct the C<cpsny's Wi:icn was fir = on its refusal to Weel PM3r ponr. He N L* vised that the Occpa=y's positics va.s fir = cn Weeling M p:scr cr pern:r frcn a third party. It was noted that

'9 ths interconnection acre _ent specified by the Jederal Ccccission, provision vould bo :sa.de ferp.eehnne of

- N generated off of the Ccepeny's syst=1 dich p oridad

)  % cost plus 15%, or 17.5 --'77 n dichever is 5: enter.

's M Waian quastiened by Mr. Golr~ berg t:Ts that dich

% provide that the City 1.u21d agree not to s*17 electric

~

4 trg r to its retail cus'es bels coct. He vs.s advised k te believed there vere ins'e.nces in Wich the City did

[.

fa. t do this to secure air.eable business. He vas fteth:

%Ls:tzi that this, under Chio ler, h T11ed" ting B , y

~

N c-ther utilities were prer1M-1 frc= doing this and this

{ .

h i a=2 c.ffut by c&d to zz&c the asz::a n:les appli"-hM -

~

, C, a ecc:petitor. ~

IL.,b -the sa:as exp1mnation was given fcr the provision ageinct

$-1=2 arra=se=ents. It was exp1*hM that it had been

~

h A. ed that the City had u. sed sever and vnter services chd

'$tr wmpi.21 ftmetic=s to secure electric load.

LUO14341.

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The ac:r.t de7 was no to Wat type of bach-up arrangeMa fcr the City's participatian in these unita vna intended.

pc

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After t-wh discunnion Wich e=cu=ted to the stateent severni

. times by the Coc:pe.uy that Watenrer arrange::mnts were requi.reJ.

f ,

to frple= cut the cc=pany's proposal vould be nest 7 tinted cnd details vould be evolved in those negotintions.

Un then discusacd the sixth type of servico schedules specified cs Pese 6 of the Citys proposal. It was again pointed ont to Er. Go16 erg and the others that the istso r .pionc e c

t ccatc= plated by the Federal P:r er Cer -4naica Order vcrald

. ossentially provido rest all of these services. Thic vas

- cet cdd.ed by the City rep es==tatives.

~

Mr. C-hg then raised a g.ac'.ics es to W=t aW cther t=zits, coting that if the City was a ===ber of CAP 00 it t:ould nutccatiently be c= titled to pc.rticipation in thsae i

b cther units. It was poi =ted cut that 'no re.rtest had been

~

- csda by the City vith respect to other units dich had been c m ed recently. It was suggested tha participatica in other t=its could betilhed cbout Wen the tics ccces.

E. L. U4"4 *-a noted that if the City .as c r,=ber of C/.?co, it tould h:rre to participate in c11 futura units. Mr. Goldberg

. ainM this N:.ica of the meeting with the statcsest that hs bolicved p=rticipatics in future units vss iz::pertant to z::ats u ,

the Ccepsny's a vwcal a viable ons. -

1

. The next cubject for di'scussion was the ccadition that the h ,

City withdraw any infar:n1 cr fc==n1 petitions or regnests for IP

~

antitrust reriev. Mr. Goldberg was advised that it vns the i

l'~

. .. r . m . 3 7

g i  ;/ .

. 3 intention that the City irauld presently do no before ncEctiatican irare undertaken. He was advised that such withdreval va.ad take pince only after a satisfectory egree=ent had been f"i -

~ negotinted. Mr. Goldberg stated that he couldn' c see how

, He stated we could expect the city to at this time withdraar. '

coveral tines that the City certainly vns not interested in Ha was perfectly well cunre that Davis-Eesse dolcying the units. of Perry i

, tus a grc.ndfather situatica and that antitrust rev ew could very well dolay the licensing process.. He neve really rocpo::ded to a co=ter-preposal esd agreenent by the City i

that it twid urge thst the licensing procedI= es should go Chen th% eren though as entitrust reviev ves pending.

k'e cd71 sed his that ve hoped to cena inq iry c.s to ti=ing.

after receiving as cr=pti=n

~ cterb eenstruction ne=t . m. He hoped

- #.a1 hear 1=g cnd reviev.

cuba. W to an envis,-_

And that

' thct we vecid begin negotistiens 1_ cdiately.

-.er.

f possibly as cW could be negotiated befcre next u Doubt tms expresced that z=h an W could be, is fact, L ,

negotiated in that period of tiss based upon our past

- ' cz;;x:rie=ce in CAPCO. ,

Dr. Goldb=g Nmin raised a questics as to was & chip in He stated that he thought Mr. Ec'J1cy's ClJC0 ccepletely out.

statements at the beP49 of the 2necting vaa not catego Es tus advised th=t neer: hip in CAP 00 van definitely out.

Es said he was t= s*114 c to accept that and inquired as to He V s 1shether CAPCO had ever considered associnte me=b cdrised thst the questian had never ccen up.

' LD014343

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' L. C. Ikuley, before leaving a few miziutes b6 fore the meeting f

(

/. broke up, da a statecerrt that we m't see hcre the City

/ r.

could be really carious about scce of its proposals and tk@

~

it night be helpful if perhaps at the next meeting U:cy co"M chos us exactly how they could do what they gussed. Mr.

Goldberg caid he thcnaght that night be in order.

r N ::eeting W abcnzt 20 cimItes of 12. The City acid they

- e ec= sider the preposal and get dach to us.

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EXHIBIT "V" t

LETTER AND MEMORANDUM FROM JAMES P. MURPHY TO

< DONALD HAUSER DATED AUGUST 16,1973.

RE: MEMORANDUM TO MR. LANSDALE I

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2/Supw//,as;..l7/:

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hiekiu/ h/l?>#1///J Y/54,y4w..'f. f,. .u26 August 16, 1973 - '

Mr. Donald H. Hauser Corporate Soliciter The Cic. eland Electric T11-4 ating Co.

P. O. Eox 5000 .

55 Public Scuare Cleveland, Chio 1;h101

Dear Den:

Enclosed, please find a ecpy cf a re=crandu: I have prepred at the request of Jack Lr.sdale fer tc Orro.r's neeting .:ith the I' epa-: ent

] of Justice. This -a--'~'- cencerns an an . lysis of the CEI-!': icip:.1 Ticht situatic vis-a-vis the Supre=e Court's deci: ion El C::er Tail.

Also encle:cd are ecpies of the District Ccurt and Suprene Ccur; cpiniens in Otter Tail.

Sincerely yours,

[ [sunta c/ N f &^ [' W ", i i Jc=es P.14trph*  !

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j Enclosures i i -- i

. By Messenger

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,/ August 15, 1973 -

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.i EMORAITDUM TO 13. IAI:SrAIE:

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GI - A;e Chio - Wheeling Power j Re: 9 L IITfRODUCTICIT. I t

On July 27, 1973, a =ceting was held between representatives or the  :

s.

Cl;veland Electric Illt=inating Cc:pany (GI) and A=erican D.:nicipal Power-- l 2

Ohio, Inc., (AMP, Ohio) during which A?e Ohio proposed that GI uheel 30,000 kw cf electric p r.:er to it. Ale Ohio would thereupon sell such power to the City of Cleveland. Tnese 30,000 br would constitute approxi=ately 30f, of the r:unicipal light plant's 100,000 1w peak lead. Tne purpose of this =e=crandu is to exc=ine the present state of the antitrust law to deter =ine uhether GI has viable grounds for refusing to wheel power to AIG Ohio for resale to th2 City of Cleveland.

AIG Ohio > Inc.> in a ce bership corporation ec= posed of 2"c roxi- -

t r.ately forty Ohio n.:nicipal corporations, cne of which is the City of Cleveland.  :

At the present ti=e it has no generating, transmission, or distribution syste=. !l ii' i

. In fact, for all practical purposes it is not in business at the present ti-e. j t

GI and the Municipal Li Eht plant "octh have been providing electrical enc: cy nt retail to ren'.dertial; r.c-:.-.f c.'-d .

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N Using post World War II statistics cerally house-to-Muse conpetition. ,.l I  ;

as o campling, numerous cuacr.ers each year switch from CEI to Municipa <

yl In the late fqrties cnd the early and =iddle fifties, .,

s i

i Light or vice versa. ii l more Municipal customers switched to CEI than did'CEI custc=ers to Mun c Light.

In the late fifties and early sixties the balance shifted. and more 61 reaching 120 r f

customers suitched frem CEI to !!unicipal Light, the net in 19 Tnereafter, CEI has enjoyed a =aterial advantage with respect customers.

ta cuch transfers. The total nu=ber of annual transfers han been as low as

. t 150 and as high as 1,000.

The City of Cleveland for nany years has owned and operated its In addition, kaursuant to the Order of the Federal own generating facility. l ti Powsr Cc==ission in the case of City of Clevelane.. Chio v. Cleveland 11,1973), CEI is obligated to mt-4natinn Cc onnv (Opinica No. tWh, January .

t and the provide a permanent interconnectica between CEI's Lake Shore plan t

' City's generating facility, By and large, both the operations cf the City and cf CEI within L. However, in' the past two or three years, the City I City have been profitable.

Also, it must be cautioned that there c-e .

has suffered net operating losses. h City.

no figuEes which isolate the profitability of CEI cperations within t e been lower than these

.Pcr many years, the rates charged by the City have l

! However, CEI has enjoyed an advantage in reliability, and chcrged by CEI.  !

{ thb reason t1T t C:.7 . .'; the :.m/ ? (ecenb has fr 6 7.restand that itJ - - '

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"t~' ,:fe1- -

.. . s. st.'*nu a nez v

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.ectie.,n C r.

'cteau,e of thr: abover.entioned intere r:

'.i. t u v.ict s : ..:.

Cc.m. icsior , f.u is enticipated .that .;2nici- ' !.  ;

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• n 2 CCI' . 4 be- .:h . r:. e zin 7 G .' "  ;

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During; 1971, 37.14 cf CEI's revenues frem the sala of elec rie '

During 1971 ,

/ cnergy were am hhMe to sales within tha City of Claveland. i

-  !, 2 CEI had sales of electric energy within the City of Cleveland of approxi- it I{

mately $92,500,000. Daring the sa e per'iod, l'unicipal Light plant had cross r

al= cat all of which  !

cales of electric energy of approxi=stely $1,700,000, ~

l i*

w::re attributable to sales within the City. s The relevant geog aphic :srket for purposes of antitrust analysis ,

is somewhat difficult to ascertain in this case., As a =atter of potential i However, if ,

cenpetition, the City of Cleveland is a reasonable designation.

cna were to conclude that the relevant geographic narket is only those areas of the City of Cleveland in which CEI and Municipal Light presently ec pete a'ctively, a cuch smaller crea is involved, and is = cst difficult to designate.

On balance, it would seem that the entire City would be the most reasonable f geographic market, and this temsrandus proceeds on that assu=ption.

• j

- As nenticned above, the preposal by A?G Chio, Inc. cente= plates that power would be wheeled by CZI to.AIG Ohio, which in turn vill wholesa ,

it to the City, The power vculd be gen'erated at the .Iiiagara Plant of the I .

The l N:v York State Power CcMssion, and wculd be hyc celectric power. .

2 cost of this wheeled power to the City would be substantially below the  !

cost to the City both of generating its cwn pouer and of purchasing power i At the outset, from CEI by ccans of the interconnection referred to above.

' ^-

.M 2 Chio, Inc. proposes to wheel 3:p cc =atel- t.

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Ohio to conrtn.c its c,:n 'cransr.issi:: lines f- c ' r . .

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N '!ity of ClevM and so 3 ong nc :P r 30.00~i ~ t f enov;, .-

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. 15 r

I N. .

tIdIpD STAES v. OTTER _ TAIL PGIER COMPAI II.

i On h:w,2a. y 22,1973, the United states supreme court decided the I

I casa of Otter Tail pe: er Ccmany v. pnited States, hl Law Week h292, affi:-. int-331 F.Supp. 54 (D. Minn. 1971). A detailed statement of the case is set  !

I.

farth below.

[!

Otter Tail Power Cenpany is an investor-owned electric utility ' i l

So=pany uhich sells electric powe,r at retail in M5 tevns in Minnesota. I'crth l

The size of the tevns it services varies in pcpu-Dakota and South Dakota. -II ig Within its service area are located 615 tcwns,105 i lation frca 20 to 29,000.  !,

cf which are serviced by ru-al electric cooperatives, 45 by =unicipal syste=s, Fcr reasons not Ge =aine here, the i and the renaining M5 by Otter Tail., 2 court excluded frc= the relevant 6ecgraphic market the 105 towns serviced I by rural electric cooperatives, and as a result dete=ined that Otter Tail ,

towns. These tcuns were serviced pursuant served 91% of the 510 remainia5 j

to franchises granted by the =unicipality to Ctter Tail for periods of frc= ,

l f

10 to 20 years.

]

l -

Vnen Otter Tail's fran.:hise ter=inated in two of these tcuns, Elbow >

j Lake, Minnesota and Mankinsen, Iicrth Dakota, the citizens voted to establ i Thereupon, Otter Tail refused to sell the .i 2=2nicipal distribution systc=s.

d n';w systems energy at wholesale and c -ilarly refused to agree to wheel Elbow Lake ecnstructed power from other suppliers to the =unicipalities.  !

Cc---i =: '.:n t

"  ;;> own gc1 sert.W.rn plant P.nc. cmc'.ned frc= the Feder 1 ?t . c w '. -

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s 5-r N ll An has AMP Ohio, Inc., here, Elbow Laks had nado arrangements with ,

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' the Bureau of Reclaration ana various electrical co-ops to have wholesale t

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- I power furnished to it, but such power could be delivtred only if Otter Tail r wild wheel it. Also, si=ilarly to our problem, the power which would be provided by the Bureau of Recimtion would be cheaper than the power wh 2I Moreover, aEain similarly to our l could have been provided by Otter Tail.  !

lbow Lake to

.proble=, the court found that it would be uneconomical for E construct its own trant.cission lines fro: the Bureau's generating plant to 1

l the Village. )

)

As mentiened above, the District Court held and the Supre=c Court r affirned that the relevant geographic carket consisted of 510 towns within l

the Otter Tail service area, and that since Otter Tail serviced h65 of those towns, it possessed glf, of the geoz raphic narket, and consecuently pcssessed =enopoly power.

While the courts could have held that each

} did

-individual town was a.u indi/idual =arket, and a natural =enopoly, they not do so, although they did recognize that whoever sold electrical ener;;y (Uhile at retail in each town would have a natural =onopoly .in that tcun.

l the dissent spche of the electric utility industry as a " natural conopoly industry" and assured that Otter Tail possessed a natural conopoly, neither Otter the District Ccurt nor the majority opinion accepted this analysis.

~ Tail vigorously denied that it had a monopoly.) .

u U:.th respect to C"-

" ~ . ipr.1 Light, if +.hr eco--rr.h'.c .r.2rket is

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d rac: - ?h.- ; 'I mrPc', is the tropcrtion of CEI:s e;- ss snic-

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then C"f. has apprcr.ir:atcl:/ 6% cor. trol cf tv _

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.f monopoly,nonethelesstherearematerialdifferenc'esbetweenthe91Ishare 1 i

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cf the market possessed by Otter Tail and the 89f, possessed by CEI. I 1

~ difference, of course, is that whatever ce= petition Otter Tail had was n n

1 difrusen. es. 47 tcwns in the Otter Tail service t.rea were serviced by  :

.. i z:anicipal systems, and neither court's opinion makes reference ._: to any attc=ct  ;,

In addition, the new ',

by such systems to expand into other municipalities.

.CEI-Ittnicipal Light permanent interconnection and It.:nicipal Light's tradi-tionnily lower rates make Ibnicipal Light a substantial cc=petitive facter, j

and, it may be argued, effectively prevent CEI frcm exercising conopoly . 1

~

pon r. l Neither the District Ccurt nor the Supre=e Court in Otter Tail undertake an analysis of the relevant product market. However, if the product tarket were broken down into generation, transnission, and distri-bution to consu=ers, it is clear that Otter Tail had no concpoly ci the

.gtnerating market, but had a total nonopoly of the trans=ission ra-ket, With respect and had a 917, share of the retail sales in its se::vice area.

.to these product markets, CEI is in a virtually identical position to Otter ll .!

Tai 1, . i i >

Once the District Court found that Otter Tail possessed =6ncpoly I i.

t 3 ,

, power (It was not contended that Otter Tail had acted illegally or i=preperly 4 1

- ~ -in~ achieving this concpoly), it^ turned its attention to whether Otter Tail  : .l ls

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had sought to preserve this ncnopoly positien '.u r.

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C:;urt in U..iied States v. Grinne.11.i ._. n. , 33L li r' -

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.7-il consisted of The el105:d abus:s of =onopoly power by Otter Ta f-r_ ' .

1) refusing to sell pcwcr at wholesale to proposed ran c i ipal systems in the at retail, 2) refusing to .:heci CC Attes uhcre Otter Ttil had sold power d to prevent or

_ power to such syste=s, and 3) instituting litigation designe I In addition, Otter Tail had [

d21ay establish =ent of =unicipal syste=s. pplicrc f invoked provisions in its transmission contracts with other power su I

i i l syste=s access to other suttlicrs t,

.for the purpose of denying the ran c pa Ecuever, this last tactic l

by mean.3 of Otter Tail's transnission syste=s. .

e n= cunts basically to a refusal to wheel power. .

d .

The District Ccurt and Supre=e Court fcund that Otter Tail ha The reasoning behind the deci:: ion violated Section 2 of the Sher =an Act.

At the ti=e the ec= plaint was filed, .the franchises d's rather si=ple. Renetheless, i d which Otter Tail had with sc. e =unicipalities had e::p re . .

_anicitalities as cautive custeners

' Otter Tail attenpted to retai- t Ir:n C ter .,

o

, 3' by denying the const=ers therein access to electric enercytica e::cep Tail.

It refused to wheel power, and it refused to install an intercen.el 1 The =unicipality was left only with the alternative L .with a ranicipal syster. tcwns withis ,j

, I cf constructing its own generating facility, and forInnost of the

. i other l!

t the Otter Tail service crea this was econc=ic9Hy prohibitive.

?

.,- i a natural conopoly unto itself, i l

.words,, Otter Tail put each ranicipal ty, ll To make life even =cre difficult for a' s I

~ between the rock and the whirlpool. lIl i ting plant despite the ,

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'  ;;.. * ' .rlity which decided,to corst uct its o.m genera

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ti rt 0.tter T:.U eas abusini; its =rt.ci,al-r pw .. .'

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- 8_ l to natural concpoly =arket, since two electric utilities have been -

. 1Thile CEI has approximately operating here succc:sfully for =eny years.

it in not clear that thic percents.?!

' **4 " the ;; c:s :< ales within the City, l

has resulted 'in CEI obtaining =enopoly power. 1 oreover, because of the .

percanent interconnection and ntnicipal Licht's icwcr rates, c.ny possibility 3 t-I' ore- ,

of exercising nenopoly power vill be further dir_inished in the future. I 6ver, at the, present tire CI's course of actica with respect to the City is quite different frc= Otter Tail's. First, GI dces po: cess a franchine to It is not doing so without authori:n-operate within the City of Cleveland, tion, as was Otter Tail. Second, the City of Cleveland will obtain a per=n-n:nt interconnecticn in the near future, thus giving it a reliable cource of (although at rates not so low as it could receive power at cc=petitive rate (Ecuever, CEI may be vulner-t if CEI were to wheci pc.:cr to it frc= Hiagara).

l abic to the extent that it agreed to such an interconnection only reluctantly I

cr only after, a substantial history of refusing it.) Third, CEI is not cngaged in obstructive litigation with respect to the nunicipal Light -lent.

" Fourth, the recuest for wheeled power d'oes not cere from the City of C;creland, but fres A!G Chio, Inc., a re=bership corporatier of which the City of Cleve-land is but one nenber. More vill be said about A!9 Chio later.

However, the principal difference between the CEI and Otter Tail +

1 cituations is probably the strength of the businens justification defence I

nd .inced by Otter "ai7. 09 't " presc.-

.cD$.trictCourt:n ti.'6 ' , which apparently fe . .d Lnn , :::my nuI'...i[S 'eie r

.c. '- d

' av:i ,n cat: I ac ev,.. :qacs --

cultching tc ranicipa.1Lv-ouned distribution ny:.i:: e

'.n , its en;. .c'.t:- t e, c:: c: U-or caterie.Uy harming Cttc.r Icil n::3 thr.:n 4:e GCtr t; C',r;. r. .; *.': n '.M. ntu: y U- ; WJ ,,

gublic. aded::.tely '-

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9- e However, the a cariot.s thraat to Ott:r Tail for the fores: cable future.

i f District Cw+. did retain jurisdiction and in addition =ade any future conn:ctions (but presu= ably not wheeling arrangements) subject to Federal Power Co=issien approval.

The Suprece Ccurt =ade the following cc=ents with respect to

> Ott:r Tail's principal defense:

" Otter Tail arg.:es that, without the weapons which it used, =cre and =cre ==icipalities will tien to pub-lic power and Otter Tail vill go dounhill. The arg=:ent is a fc=iliar cre. It was made in United States v.

Arnoid. Sch rinn & Co., 3SS U. S. 365, a civil suit under 51 of the Sher =an Act dealing with a restrictive distri-

" bution pregra: and practices of a bicycle =anufacturer.

We said: 'The precocica of self-intere::t alone dces not invoke the rule of reasen to i=unice othere ise illegal conduct.' Id., at 375 "The sa=e =2y properly be said of 5 2 cases under the Sher:an Act. T::st Act ass =e:: that an enterprise v417 protect itself c ain::: less by cperating with  ;

- superier service,1cwer cost::, and i- proved efficiency.

Otter Tail's theery collides with the She=en Act as i i

it.sou;;ht to ::ubstituts fer cc- petitien anticc=petitive l uses of its dc=in n: econcaic pcuer." I i

I . . .

f

'Ve do not suggest, newever, that the District Ccurt, concludin;; thc.t C :er Tail vio1Eted the antitr.:st I laws

• should be i=cer.d cu: to C;ter. Tail's assertion m

that cc=pulsor/ interec=ection or wheeling v4 erode its integrated syste= and threaten its capacity to serie adequately the public. As the dissent prcperly notes,

- the Cc=i::sien iay not order, interecnnection if to do

- - 'so 'would i= air (the utility's] ability to render ndequate ::ervice to its custc=crs. ' 16 U. S. C.

l' b 824a (b ) . . . . "

.i. 1::, ine Supre .? C#a s said 2., 1, O~ . .

.L. - t'r., .

i

. . ;. c . !-

b;; .i M ., maf not be a defense, tus t. hat it si.wh t. . . .

'r m.te

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F District Court, in det.. mining the appropriate re=edy, should follow the b,/

/ . ,

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criteria set forth in 16 U.S.C. 5 62ha (b), which are whether the inter-c:nnection (or presu=2bly wheeling) "would i= pair [the utility's] ability to render adecuate service to its custe=ers," and whether such an i=po::ition l

[ would be an " undue . burden" upon the electric utility.

Thu::, there were two reascns why Ctter Tail's "dc=ino theery" ,

Ercunent was rejected by the District Ccurt. First, the District Court found that there were upper 14-4t:: en the cen rating capacity of Bureau of Recic=ation power, that no new generating capacity was scheduled to be activated, and that consequently all the :- -icipalities being served by '

i Otter Tail eculd not switch over to wheeled power. Secondly, there were t

i h65 separate tcwns in the Otter Tail service crea, and the switching f c= ,

i Otter Tail to Eureau power would not rubstanti*y her: Otter Tail until a  !

> cignificant mr_ber of =unicipalities had dcne so, presu= ably, the court f felt that it "or the Cc=nission cculd handle this prcble: if it ever beca=e i I

nanifest. - ,

i -

- l L

For CEI, the situation is =ateria11:* different. I do not kncv the naxi=u c= cunt of hydrcelectric power which w6uld be availabic to A!T Chio from the Nia6 ara plant or frc= other sources but if the c=ount is substantial,

- f then thi:: wculd be significant. However, of ut=cet significance ic the fact

~TA7 of CEI's g: oss sales'in 1971 were attributable to saler riC-

u

'T the- R ' -f7 c1 M..+ ^ -l e"t t f .* d . ., . , . . a C ._ r . . . .

M%ci av.C. the:; ceurce of pwcr, C. . sci it

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"Lty co.'.16.bc * ::.-.ed :& 'z.ntial' rLet ,t ?> .

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n-IEE. CASES CITED E OTIEa TAIL IN SUPPORT OF ITS HOLDn;G, 1 1

'Ge District Court nr.d the Suprc=e Court cited neveg .

in support of the proposition that a unilateral refanal to deal by cne having =0ncpoly power =ay constitute an megal preservation of that pc en .

r An analysis of those cases follows:

' East =an Kodak Cc- nany of New Ycrk v. Scuthern Photo Materici::

>i .

'Cc=cany, 273 U.S. 359 (1927), was a private antitrust action brcucht by . i Eastman an operater of a photopaphic stock house in Atlanta, Georgia. .

r Kodak manufactred photepaphic :sterials and sold then to dealers thrcuch-The allegations in the cc= plaint were s==arized by out the United States. _

the court: ,

"The case rade by the allegatiens of the cv jlaint van, in substance, this: ,The defendant, in violation .

of the Antitrust .Act, had enge_;ed in a ec=binatien to nonopoliac the interstate trade. in the United States in photographic =aterial:: and supplies, and had = ncp- This olized the c-eater pa-t of such interstate trade.

had been bren;ht about by p= chasing and accuiring the control of ec- petin.; cc= panics et; aged in ranufactring such naterials, and the businesses and stock hcuses of dealers; by restraining the venders "rc= re-entering these businessen; by i: cosing on the dealers to whc= . l j

it sold goods restrictive ter=s of sale fixing the

• prices at which its goods could be resold cnd pre- and by  :

vcating them frc= handling cc=petitive goods; 687)  ;

other neans of suppressir-o- ce=netition." (n. . -

m The issuc before the ce=t was whether the refusa.1 of East =an Ecdak to cei  !

- tinue te sell the plaintiff goodn at dealers' di.;ccu:e - -- 4 f=therance t I

, - . .: o. te . . . g.. . .. . , w.

nf E ast:- .

h.:Iposer of the case, the court assuT:d the existe. " i i ..

L nuo; + in the c:unifacture cf photn. raphic sq.o 1 i. ' , .:n n-cu .

- c: ? lier heldin.- t .- th t er- ^ .

4

- ;ucct. : 5: :: '

tyn 19 3 '.ri/i ' ' ' ' - *is- - -

a c44,y h .y .h. ,,

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m. m -~;*-

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Gntire discussion of the =onopoly question 'follows:

"2. On the cuestion

~

to the whether theatdefendant's plaintiff dealers' re-

--  % al to sall i*= coo &:

discounts was in furtherc3.ce of a purpose to conoso- ~

lize and constituted an actionable vreng, the defendant contends not only that there was r.o direct evidence as '

to the purpose of such refusa.1 overecting the presu=p-tion that it was a lawful one, but that such recasal was justified by the fact that the plaintiff h2d pre- --u-viously undertaken to handle the goods of ano"~

facturer under a preferen ,ial contract. Aside frcm the plaintiff's cententien that this centract relatednerely to go those which it had been purchasing frr the defendant, it was not shczn that the defendant knew of this contract when it refused to sell it:: Goods to the claintiff.

And for this reason, if for no other, we think that the trial court rightly declined to charge the jury to the effect that such taking cver of other goods by the plaintiff in'itself justified the defendant in its re-fusal to sell to the plaintiff. And, although there was no direct evidence--as there could not well be--

that the defehdant's refusal to :: ell to the plaintiff was in pursuance of a parpose to =cnopolice, we thin ciently tended to indicate such purpcse, as a natter of .

just and reasonable. infercnce, to va::asrant

' Clearly,' wasthe saidsub=ission of this questien to the ju /.

by the court of appeals, 'it could not be held as aratter o cent notives rather then by an intentien and de:: ire to This questien was subnitted perpetuate a ncncoly. ' Ar.d the weight of the evi-under proper instructions. ,

dence being in such case exclusively a quentien for the -

jury, its deter =ination is conclusive upon this questien of fact. . . ." (pp. 689-690)

=

- Apparently, East =an Kodak was attc=pting to "dn up" the avai ,

dealers in photographic supplies so that it veuld have ,a =oncpoly -- ,n:

in the 1 Pi.stributann of photographi'c supiier, i.e., . -

. v: ...c. ;< .

d Statts . ,! ' C .S . 11G . - .

In _I, rain Jou-nal Co. v. Un'

. s e % - c

. n aa.:. m ~ = :. ~ - . n . ..

t

- vraiugunume.*wpamm.m,rerprf

• 4

~

V in Iorain, When faced with cc=pstition for advertising rev nue from a newly the adver'.iser r crcated radio station, the Jcurnal refused to carry ads unles::

~

With respect to the Jcurnal's agreed not to advertice thrcu6 h the radio station.

lly  ?

clain that it had a right to celeut'its custoners and to refuse unilatera o 4..a.

can whenever it pleased, the court stated:

"The publicher clai== a richt c a private bbsiness and to refuse to accept concern to select its cu :tc=cr:

advertisements fren whc=cver it pleases. He do not dispute that general right.

'But the verd "right" is one of tise =cc: deceptive cf pitfall ; it 10 ::o ency to slip frc= a cualified =cening in theMost premise to an un-rights are qualified qualified.'one in the conclusion.American Banh & Tr.ist Co. v. Fe.deral Ban 256 U. S. 350, 358. The right clained by the publisher is neither cbsolute nor exe pt fres regulatien. Its exercise as a purpose ^ 1 - s of concpolicing inter-state ec= erce is prohibited by the She=an Act. The

- operator of the radio station, equally with the publisher of the newsps.per, is entitled to the protection of tha.t Act. 'In the absence of en r tu ucse to create er nain-tain a ncne:cl., the act aces not restrie tne long recognized right of trade.r er ranufacturer engaged in an entirely private buriness, freely to exercice hi

- own independent di:cre:;ien as to parties with whom he vill deal.' (E= phasic supplied.) United States v.

Colcate & Co._, 250 U. S. 300, 307. See Associated Press v. United States, 326'U. S.1,15; United State:

v. Bausch & Lc=b Co., 321 U.'S. 707, 721-723."

(p.12)

United States v. Elcerficx Linen Loces. Inc., 63 F.Supp. 32 (D.

Minn.19k5), involved a situation where a manufacturer of Wen rugs

• atte=pted to freeze out one of its distributor.; frc= bidding on a particula-Klearfla: had a monopoly in the Eind of government contract for such rugs, .

r

• .ufr.cture of linen rugs, and it var. not contended th..t thi:: =enopoly had i

• ;*.:.rv. t-6 41.:: c . z,;: b,, :- N the : ? t'

* ..;;a\;

< .. ~i nutinl cd independent . '.;tributon. ./..:. pcrc'.m::e6 "- . Nr~ r. -

sa: . -- l dircount and tither coln thcs at : tC6 A cr ;to lseme . Er n ).^:

1 -

v.

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_ 114

. which3reviously had been bid upon only by 12earflax directly. 12carflax thereupon atte=pted in a variety of ways to freeze out Floor Products, Inc.

fro = this p u , .u,. uma oc cwcr=ent business. While }acarflax conten: led that it van not a ec=petitor of the distributor, it van rather obvious that with respect to this gover=ent business it van. One of the method: }3er-flax u:ed van to refu:e to deal with it: distributcr vith respect to the cced:

required .to fulfill the gcVer=ent centract.

One of the 12carflax's defences van that it cculd discharge all its distributors and jobbers an:i distribute it linen rug: solely by itself without any violaticn of the law.

To this ' contention, the court respen: led:

"Iicr vill it avail the defen:isst to u-ge that it could dischcrGe all distributer: and jfebers. and draw to itself the entire sales of its product. Tnat situation is not nov.present. We are confrented uith a situatica vhere the prc:inc : of 12earflax are fleving through the

~

channels of interstate ec=erce by the effe-t cad cales of distributcra, jobbers, an:1 others. A: 1cag as that

. system of interstate distribution exists, no one can

. wrongfully ncncpc'lize that trade, and the noncpoly which Klearflax righ: N11y enjcy as a nanufactu er cannot be utilized fer any m gal e purpose. 12ea-flax has requested and used the aid of others in the distri-butica of its product, an:1 as one of such distributcr Floor Products had a right to carry en its burir.es as a seller of linen flecr coverings in interstate ec= cree, free frca any =enopolistic id d ations. ifnile Klear-flax can celect its custc=ers and can reNse to sell to those with them it does not de: ire to do busines:T it cannot refuse to nell if its design anci purpose in to c tablish a wrongful =encpoly. Tne preventien of cc=pe-tition herein van to enable K1ca-flax to fix a trice for 1

~ '

f.t* *li:m T:s to the Govern =ent--a price that va: higher )

'o c:;- -

• tributcr. 3:bber, er even to j

g,u - ,- - - . . i. s.

.. ..sr.;;:." (;3- eil en'.

j An$ %e Crr.n-t fe. ';her .stuted: .

"F is arged that 13 . 41tr ten :. rk.ni- ..u...

t.3 i'. ,, ..T r mi se inc .t vn5 ..-E ' -' . , <

1 mun.:. . ..n. nn net: ve t . . ' di:

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.. rnthe- van c. 6 .-:"ad M *

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v. ., .

i

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p

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to sttain a lawful end. A rerucal to sell, WhilC it may be lav-2nl per se, cannot be used in order to achieve an

. illegal result." (pp. 39)

All three of these cases can be distinguished. F:t 3t, cil involve the refusal to deal with existing custeners, not tt~ refusal to i . deal with potential custoners. In other words, while it G/ be a viola-tion of Section 2 of the Shernan Act to refuse to deal with existing custo=ers in an atte=pt to =onopolice or to preserve a conopoly, the j question re= sins whether it is a violation to refuse to deal with '. hose-I who are not only present cust: ers, but' who,. like Ay? Ohio, Inc., are not sven presently in business but who =erely have - desim to engage in same.

] Secondly, in East .an K0dak and :learflax, the abune of conopoly po er seers to l

have resulted in the attengt to use a canufacturirs conopo3y to cm ate c tiistributing conopoly. Third, Lomin Joural involved the use of third

[

parties to destroy an existir.; conpetitor, i.e., by ccercing the third-parties to boycott the radio station, not a cere unilateral refusal to deal. Incidentally, the dissent in _ Otter Tail contests the cajority's use of Lorain Jou mal on the grounds that Lomin Jou = al dealt neither i with a natural concpoly at retail nor with "a congressionally approved . ,

l rystem predicated on the existence of such monopolies." Tne difficulty ,

L .

dr the.t tbc Tri.tb distiacuishing Lorain Joumal on thd + .

nf. ft rr-s, arJ not cv uade tn:.t Ottee R...f natur : v:.:.m, .

~

r 'O . 54.mr.troved the netion t'ar.t 2 eon.m r-l YT

~ * Gt.T.t:. oT t}'" 1 :-$s'se:C. e LC C.'A' c., . w . ...n-.%.- . . . . :. .

s. -

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5 16 1,

with rc:pect to generating or' distribution facilities. Consequently, to '

use cuch conopoly .never to .urevent conyctitica in these other "<roducts" constitute: a viol: tion of Section 2 of the Sher =an Act. An exa=ple of a t

C2:e of this genre i:: t'nited States v. Terrinal Failroad Association .of St. Iouis, 22h U.S. 383 (1912). Tne facts of the case, and the Supre==

Cr.urt's holding are accurately set out in Heale, "Tne isntitrust lec,: of the U.S.A." (1966)s u.m. 131-2: .

"The city of St. Louis happens to be so cited on a .

. series of hill that it can be a.r.rreached fr = the vest  !

only by a narrev valley. All railrcad: ce=ing frc= the r vest I::st u::e this r:ute, and when the railways were l con:tructed it tas seen to be intracticable for each -  !

cor.nanJ to have its evn separate ter=inal facilities. i In 1830, e.ve. -a 1 . 4'

.. _- *., ,i c 4. . .a. d 4.n c .^. .

'. '... 3 'a. . -

I mi 21 facilitie and set up a jointly evned cenpany, .

the Ter=inal E2ilrcad Association of St Louis, to run j the=. The gover ent brcught a ci.-il action against '

this en=pany under the Sher an Act, on the ground that its operation cuppressed c:npetiricn.

The Suprese Cour ,1 at. .:1J-in b the Eule of Eenson, took the view that the unification of the ter..inal facil- .

t ities van not in itself an illegal c::bination in restraint *

.{

of trade. In a no.~31 case a nu=ber of railroads cctting '

together in a joint enterprice for this purpose vould be 1

unlikely to :,:n up against the law; for if they made the l ter:s on which other railroads could use the facilities too onerous, those concerned could si= ply construct their own ter .inus elsewher in the city.

The physical situation in St Loui::, houeverg was -

s txch that this option could not in practice be exercised.

% .::,,n ~ --

Court held that althou;;h the group's : nopoly l ."cn , .- - .ler- ti=2te3y r.ccui ud, it %as incu .be'nt upcn

[.

. of - not to ure this .t.;uu r o.a.cres-r

. . . u. . . . . . . ,: a . 1 : -

v. .n.. .

. '- c t' ntipuu.ted thut, rai..z oe&c r.: . ae -he . arc.~a. :arv ..r:r

night "lv be cdritted "tr. jr . tnt u:.r. .ef ra: o ar . r a J;y::t u c. u= .rir.:cus conce' .. but ::ot oi - 1.1 LF th'

.Diiv.ctola of the fir-t r ". nc.ci er ; ; t.. t .. -

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equal use of the facilities on ters: that vere reasonable and non-discri=inator/." (pp. 131 & 132)

The:e are other cases dealini; with ::irilar questions. Tneir u::c-

-. fulnes , in the instant situation is doubtful, for two reasons. First, by and large they support the theory articulated in Lorain Journal, and thus c

are not pa-ticularly helpful. Secondly, it 4c unlikely that an argn=ent should be nade to the Depart =ent of Justice that Otter Tail was vrengly decided by the Sup:ste Court because an electric utility can unilaterally refuse to deal with a cenpetitor. F.ather, the focus of the argu=ents to .

l I

the'Departnent of Justice :nist be v; 2n the differences between the facts i i

in Otter Tail and in the CI~ " 'icipal Light situation. g f

I (r

~

IV. FEDE?..L' PO'<.'IR CC:O'ISSION . IU':2?.CO::::ZCTION OP. LEES.

As stated above, the Supre=e Court has indicated that in the cvent an electric utility which refuses to wheel power to a potential conpetitor is found to have violated the antitrust laws, the question .

of whether a court should order that an intercernection be established or I

that the electric utility be required to wheel power to the potential cen-y

,I .

.petitor =ay depend upon whether the statuto:y guidelines given the Federal L I 3:wei Co=nission 12 16 U.S.C. S 82La(b) are satisfied, i.c. . c. cerrt r .:-t It

- . . . . 4 f.s >.J' vuot. au int.erconneetic... ce eg.a s: .m.~t.. .-

C t-rc: w. m: . : :...aro=. riate in the prh.*.c tr.to r.'s . . u

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• 1.:- p1 aced upon sus:n y,.:' ':1.. ntili!y ,:e..:e ,." 1 N

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. 18

,N Florida :s..- Corp. to interconnect with the City of Gainesville's ceneratir.g plant. l Tne City of G2inesville p'lant serviced approximately 17,000 cus-In 1965, Gainesville's " isolated" l teners in and around Gainesville, Florida. I syste: had a total generating capacity of 103.4 negawatts and a peak Isad of 51,1 =egavatt. Its gene. m ting facilities censisted of five steam elect-ic

.. Tnus, it had an l generating units, the largest of which was 50 =egcvatts. 'I j

cd;quate reserve syste= in 1c65, btit its peak load was projected to double

' by 1970.  ?,ather than construct new generating facilities, the City of i t

I Gainesville asked that Florida Power provide an intercennection, which re-quest was refused, and an actics consequently was brought before the t

s I.

i Co==ission. '

f i

Florida Pcver Corporation c;erated a najor electric gene-stics, I I

i 370,000 retail cus r - 3 transnission, and distribution syste= cervicing I in central and northwest Florida, including the county in which ti.e City Ehile it appeared that Florida Power did not i cf Gainesville is located. +

l retail electricity within the City of Gainesville, there was conpetition .  :

!l u The extent of this i between the two utilities in rural areas of the esunty. >

co= petition was not described in the opinion.

• With respect to whether an interconnectica shoul'd be drdered, ,

ll 1

~

the Suprene' Court inte.rpreted the lanruage cf lo U.C.C. Plha(b) cs fol10us: 5,

i. ,

- C o.:- .

"he M.c,n.?Or .  :::.

tl

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. n .ithity ' , : r tu co; .e.

.rDr.~/ s '

,e nr

.d conditio:.- 1' ano te Trescribe the ter=* ' finds sr" : . . '

re: -

• -.nt.. 3*' if the Ca=issir

'. T F .

{l or : ppropriate in tne puE: ~ intercr.' o l!

.: - burde- vi ' ' ~ - '

• z.i .- # on fitids that no ' -

• *

• nd !.::=iliz..- ~.;  :&.  ?- -

. qJ, cit thei O r"; : ' .. .:. :.. .' r

l I  :. . : '::) r.o.

' an intcrecnn::t . .:n "to e

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s .

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.o o =

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- 19 .-

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F generating facr.Mties . . . (or) to ec=pel such public utility to sell cr er.*: e energy when to do so wculd impair its ability to render adecuate service to its

~

I custeners." 16 U.S.C. Sc21.a(b). .

Follouing ex.ensive hearings, an c.v 2-a- ~ de find- ['

ings that the proposed i=terec:nectics veuld be in the public interest and that it wculd not place an undue i burden en Florida Power. The Cc==issics affir ed the i

findings and fc:her fcund that the interecanection would neither cc=pel Ticrida ?:ver to enlarge its gen-erating facilities ner 1:: pair its ability to serve its .

custc=ers." (tt. 521-522) 7 Pursuant to the last sentence of the above quotation, it is clea-that GI veuld not have to enlarge its generating facilities to wheel power i I.

to 1.hinicipal light. However, there does seen to be a substantial possibili-1 - l i

ty that such wheeling would "i= pair its ability to serve its custc=ers", at  !

r I l 1; cst those cus:c=ers which are not located within the City of Cleveland, ff a

l Tha likelihcod of losing 37.kf. cf its annual sales is a real one. Ecwever,  !

I ,i in response to this centention, 'onc night argue that at the tresent i=e  !

o i t

th0 only request of AIG Ohio, Inc. is that GI wheel 30,000 kilowatts to it i

for resale to the City, and that wheeling this quantity of power vill not

. l Impair GI,is abi'4ty to serve its custc=ers. Ecwever, if the Depart =ent is I cshing for an open-ended cc-4t=ent that GI wi wheel power, then thir -

I response is invalid.  !.

I l 4

i.- . I V. Al@ vaAO, IUC. - A MIDDI21'AII. ,

i I '

L As rentioned above, AIe Ohio is not presently engaged bi the  ;

, t 7

^rans=ission or sales of electric ow."

but : -- ^ v- :' ., to begin to do co.

t CL A's w2igat.,.

. _. t. . . : .a m. wt. vueci pa... .- - - .

' :., is the sun - ' cr- e,nc who is preseM.~ v .in 1'.9.: L s . ; . .. .

.  ; , v ... w . ..

L ca.:sy elect:ic cut.:g;, . vin-a-v:.: s:e .v.:o c.::. . .

• ." t '.

A t .:r ::- .r. ,..s . - . t . i c .- if ; r. ec :. :: . 44.... _- .

i m.

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r -

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/, However, it should be noted that Elbev Lake had constructed its cwn generating ,

e f

, plant, and consequently was & co=petitor at the ti=e the anti-trust actica j

t was brought. 'Zne tevn of Han r..dnson, however, probably was not engaged in .'

i the transmisalon - onles of eW. 'ic energy at any time. With respect ,

to Ett*4"on, the Supre=e Court epinion states:

"As' respects Elbev lake and Herhinsen, Otter Tail sfraly refused to deal, althe*:gh acccrding to the findings it had the ability to do so. Elbow Lake, cut off fres all scurces of whclesale pcuer, constructed its own generating pla .:. 3cch 21bc.i I.ake and Hankinsen recuented the Bureau of ?.eclamatics a.d va-ions cocps to furnish then with inolesale pouer; they were willing to supply it if Otter Tail wculd ' wheel' it.

. . . Hankinson tried

"., unsuccessfully to get relief frc= the Ucrth Dakota Co-ission and then filed a ec= plaint with the federal l cc-i ssion seeking an crier so cc:pel C:ter Tail to wheel. Enile the applicaticn was pendi.g the town council voted to withirt.v it and subsequentl" Jrenewed ,'

. Otter Tail's franchise."

/ 3 Relevant to this inquiry is 16 U.S.C. 5 E21;a(b), inich provides:

i

', "(b) Whenever the Co *e::ica, upon applicatien e'  !

any State cc:=ission or of any person engaged in the

' transmission or sale of electric energy, and after notice to cach State ce=nission and public utility affected and after cppertunity for hearing, finds such I

. action necessary cr appropriate in the public interes: .

it r.ay by order direct a public utility (if the Cc =is-  ;

cioa finds that no undue burden will be ulaced uten such public utd1#ty thereby) to esttblid physicit.1 '

m connection of. its trans:Issien faci 14:les with the -

facilities of cne or more other parsens engaged in the ,

transnission or sale of electric enerc;, to sell energ

l. *

.to or es: change energy with such persens: Provided, That. -- - - =

the Co::tission shall have no authority to cc. pel the

, enlarge .cnt of generating faci'dties for such pornoser ner te ec=pel such public utility to sen ~

i w

• m .d e ';o vculd irvai~ 3:

't.- .. . x .v:- i

ac.;urtu scrnt..: t' *z:n u. 'h t Ctc  : i:.: r. ~

prescrf.x- the tern:: u.i. \

..li' '. on '. r W ' n r --'-  !

by n .L- <:c'. ecn the pcrat . 2:fccu . .

-  ?-

in ein. .u- tae r.pnert. son..' w rf ec - 9 - -

r. .

Tbc cc:- w.scncn cr ::~r' ry. =u * . c .

of thcrt.

%.. we+.M r.t rh- u t ~ ~ - ', . ; r - -

.. . ..J .. .. . . . . '** * '

u -

J

/ -

, f, - - . :; . ._- -

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I p :. s s i c s E.+ *e =y persen engaged in the transmission or sale or electric I

& r g . . ." This previsich vculd indicate that AMP Ohio does not have s?.tr.!hJ to re:;ues; an interec=ection' order frc: the Cc-4ssion, One h:ue raised by Otter Tail was whether the District Cc.irt c: .11 crder it to whcci power when the Federal Power Cc-4::ica had no cuthority to' do so. The Supre=e Ccurt held: ,

" Insofar as the District Ccurt crdered ' wheeling'

! to cerrect anti-cc peticive and =encpolistic practices cf C:ter Tcil there is no conflict with' the authority cf the Tederai ?cuer Cc

• s Lcn."

!!ith re:pect to the Order to provide an interec=ectics, there vs.: no con-i flict on the reccrd since the Cc- d icn had crdered such an interec=ectica.  ;

Eevever, in that rescrd, the Cetrt stated: i t

. The decree cf the District Ccurt has an cpen end by which that ec=: retain jurisdiction i i

'necessar.v or ac.trc.ria e' to car.~a out the decree er  ;

{

' 'for the =cdificatien of any of the previ= ices. ' It ,

also cente= plates that futre dispute: cver inter-connections and the ter=s and ceniitiens governing those  !

l interco=ections u 71 d

'ce sufoject to Federal Pcwcr  !

Cc-issien perusal. It win be time enough to consider whether the antitr.:st renec =as override the tower of i, the Co :.issicn under 5 2C2 (b) as, if =d when the j j Cc=ission denies the interec=cetion and the District  ;

Court neverthele== undertakes to direct it. At present . i t

there is only a potential conflict, not a present s concrete cc.se or centroversy concerning it." .

i

.1 With respect to CEI, the 1 ue would be whether..the cort: Ocy

}

erder whccling when the Cc==iscica could neither crder wheeldng (because the l

c'v.5 '.2 dce

not pci.:.it it to de an) ner n- /c t'. ti C ;I fu' erconnec- - ' . l e

t RT Cr. a (:. .e.." . M ic ~ / s1s no nts g cere: tb- .u '

T '. 2 , tr.vn e '.'.i; '.. y stronger ari :

• t th c 'M V N r '. . i '-

. t - n.2 r :. ucura . pen.:.

.:. .~ n ' e .~ p  :.:-. . .

i

.. = :n , z. w , u u u . > . c a n c :

2- a -- :' i a *>s e . . . *

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. - 22

, l.MP Ohio will serve no function other than to act as a conduit.

Th re is at least sc=e indicatien in ene case that such conduits are ne favored. .in :iew e 1,a mw ccmany v. Federal pow r Cc=issien, 3ho 7,2d 258 (1sf. Cir.1965), the rederal pcuer ce==ission, upon ec= plaint er the Town of Sh-cwsbu:i / ,.criered that an interec=ection between the Town's be established despite distributing system and the new England Pcuer Cc ;.cs/

th2 fact that the Tcwn had an interconnectica with Mass. Electric, a ec 7 ny l

r T I which owned no generating capacity, but bought electric energy fres IZ. O 1"ne energy and sold it both at wholesale and retail in Massachusetts.

Mass. Electric had been supplying to the Town nad been purchased by Mass.

Eloctric frc= 13PCO. . ,

On the above facts, the Ccurt ordered that an interconnection be

}

rade between 13? 0 and the Town, and in dcing so stated:

"The Cc=issien eculd see no reasen why the =iddle-

.can, Mass. Electric, cheuld not.be e'd d' ated, noting L-that prevailing industry practice is fer genera. ting j utilities to avoid -="'a It fcuni i cdleren where cus:ccers .

j .

can be served di ectly. that Mass,. Electric 's loss of ince=e, which it regarded as cf cuestionable  ;

relevance, venld te reistively :all, and Mass.  !

l i Elcetric uculd be ec=pensated by IZFCC fer any conti=ed  ;

use of its facilities. On the cther hand IGPCO's 4 revenues would increase as a result of selling directly i to Shrewsbu /. In weighing these censiderations the -

Cc ission concluded that a direct :: ale ,by IGPCO was dictated by the public interest." (p. 260) ,

1

- The EPCO case =ay be sc=ewhat unusual in that both IEPCO and I Irenetheless, Macs. Ticetric c . -

- -f cr of Fa - England Electri: Systen. 9

• :-' Mr

r. Ibat :.1ddle=ei- : wh ut., ..c u. I..t 6 : -

{

. , . me.i- it. 2 ;.. c.c 5

Yr.c regt :.rerent tr- . i~EI wh . . .- .* . . .

'.v:. o . p  :. .

,i

.1\; mrcc ... , :. . n.diczn . which :.s .. . *. c wt. - - : *.

• i

-& 1. .

. . .. .c y:. . -

l

• 1. ..ie f ee,*. ...,.,

.=.g. . . . , . . .

e

1

. . a o .

t I

g, yoyo?OLY W R. .

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I Because it Providen exclusive service to 911, of the =unicipa:: . ._ l within its service area, the District Court and the Supre=e Ccurt held t..,.

t-Otter Tail possessed bencpoly pc er. While neither court undertook an exhaustive analysis of. product =arkets, each i=plicitly held that Otter Tail had a total noncpoly with respect to trans=ission lines. As above.

2nentioned, CEI had apprexi=ately 8% of the retail sales of electric en..._. -,

vithin the City of Cleveland in 1971. Moreover, at the present ti=e, c'.  ;

. probably has a total conopoly of the trans=issic: lines cc=ing into the p.....

For so long as the City intends to have only 30,000 kw wheeled to it, thb '

2sonopoly will be rai .tained because the construction of a trans=ission line for'the trans=issics of this a cunt of electricity is uneconenical, e

) Ecwever, it can be argued that CEI and Otter Tail's positions r-re rateric'3..e different with respect to the sale of electric energy at retail since CE',

is faced with a single ec=petitor rather than many cc=petitors, i.e., the opposing econc=ic power is not diffused.

Despite this factor, a rev4ew of the significant monopoly ceses

.'  : indicates that a market ' share of 897, creates a streng, albeit rebuttable, prei.u.stien that the possesser thereof has =ene.nolv. .acwer. For exa=ple, _.

i. the Suprcee ccurt's latest prencuncerent en the questien, . United Stateg s  !

~ I i Grinnell, 384 U.S. 563 (1956), three cwanies centro 11ed by a parent  :

f

~

.crporation possessed P75 of the acc cdited r ent -:.1 str.: r, c;;.'.r;:- . . . .

u.u:i:n ' w ..: . . The Ctr.:rt u atcd:

'Tuc offense of concpc13 urder 5 . ei Mc : J:0 - - n Ac. ar.s two elements:

(1) t!.g y : . . . . . :m- .

• pn cr .. v tb c V:.t ev"' ~ '~t. .'

• c.n t '.? ' ?- - i' '. ^' '. t c :' -

D s

c Lou or na:ntcncncc of tval. '-c'- -: ..-W- '

c." '

y -

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(

.. )*

>%__- eh- -

-I .

25. .

The Sucr " Court did =ention the strength of the cc=petitien in

{ The American Tc9.e'co Co. v. United State = , 328 U.S. 781, 797 (19h6).

tlicory of the govern =ent's case was the.t three ec=panies had conspired to conopolice the natienal cigerette =arket. Together, they centrolled over i

1 tws-thirds cf the entire de._estic field of cigarettes and over 80 percent '

of-the field of ec parable cigarettes. The Supreme Court added that "the cppositics [vas] confined to several small ev_.jetiters . . ."

I United States v. United Shee Machinerr Cero. ,110 F.Supp. 295 (D. Mass.1953), aff'd per curin=, 3h7 U.S. 521 (195h), the ccurt fcund th:

United Shee va:: supplying "over 756, and probably 855, of the errent dena-'.d i ,

t in the c=crican shoe nachinery =arket, as heretofore defined." (p. 330).

J The cc=t, unfertunately, did not go into substantici detail as to the staic l

) f

! cf United's cc= petition. Ecwever, it did note that at least 10 other pe-American =2nufacturers and sc=e fcreign :nnufacturers were engcged in c ,

t t

tition with United t.t least as to sc=e aspects of the shee nachinery carket.

The Court also noted that United ' bad "one i=portant cv etiter . . ." .

Co. cf A=eries, Judge Lea-nad Hand, in United States v. Alv-in=:

148 F.2d 416, h29 (2d Cir.19h5), stated as follows with respect to Aleca's control of the aluminu: 4 ot =arket: . .

" . We =ay start therefere with the pre =isc

) ,

that to have ec:bined ninety per cent of the producers n.? ingot would he.ve been to '=onopoline ' the in..;ot

.. .....e, ,.oncerns the juhlic :'c te-I .

r. . ....;t... . m .hr .. . _. ,,

L is avit .:n c:n '.1,0 cr uhe*.ht: . ...y ct L:::

.:: .. m ::*

'J.c Ch. : ton A et .".:.< 1: sp.

r > ,~ n4..'d .

'a'L :; ..r .. _ .

, . ' t es inj= e , c. : a cy ,-:ra'

(

.1,' . .i . . . u. .s.. ,, . . .

tn. i c D

2r c :: . -: . :.

.~ . s,.,v . . . .. . .

Je . ..

> a n,awv;un. m_a . =_ _ =:._ m . .w . . u -. .

. . .: :a. :... .;., . w c ym

1 -

m v -

bears to i=corted ' virgin' ingot. If the fraction

~ which it did not supply were the produce of ac=estic canufacture there cculd be nc dcubt that this per-centage gave it a ::encpoly--lawful er unlawful, as the case =ight be. The producer of so large a proportien of the surely h:s cc 21ste centrol within certain limits.

If, is tr-[e' that, if b5 nici ;; .hc 7. .4 ce he reduces the t .o nt which =an ec =ackeced--cs always, cr al= cst always, happens--he =ny invite the expansicn of the s=all producers who will c:j to fill the place left cpen; neverthele::, not cely is there an inevitable lag in this, but the large producer is in a streng positic: to

[

- - check such cc.-jeci:hn; and, indeed, if he has retained "

his old plant and persennel, he can inevitably do so. .. .

~

(P. D5) .

Obvicusly, the relevance of these cases to a regulated public f utility. can be argued. Such a utility dees not have the power to fix g

- prices since its rates are regulated. S' 81arly, it cennot exclude ec pe-i tition because the Federal pcwer Cv -issicn has the pcwer to crder inter-connectices as the Cc--

• esion has done in Ctter Tail and with resract to CE.

However, a re;0. lated public utility with a total =cacpoly of t : ::=issien

~~

lines does have the power to exclude cc=peting generating facilities frc=

j . introducing their pc,e- into the rn-ket by =eans of wheeling. Thus, while

~

1 a regulated public utility does not have power to exclude ec= petition tot *71y, it does have pcwer to exclude sc=e cu jetition. -

J. P. M.

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_ _ _ _ _ ,