ML19329E759

Motion to Limit Discovery & Issues for Trial & for Summary Finding Requiring Imposition of License Conditions.Aec Recital of Contested Issues of Fact & Law,Fpc 721010 Order Re Power Transmission to Canada & Certificate of Svc Encl

ML19329E759
Person / Time
Site:	Midland
Issue date:	08/27/1973
From:	Jablon R MICHIGAN MUNICIPAL COOPERATIVE POWER POOL, SPIEGEL & MCDIARMID
To:	US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML19329E760	List: ML19329E759 ML19329E762 ML19329E772
References
NUDOCS 8006170919
Download: ML19329E759 (38)

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TABLE OF CONTENTS Page I. FURTHER DELAY OF THESE PROCEEDINGS WILL DEPRIVE MUNICIPAL-COOPS OF SUBSTANTIVE RIGHTS................. 2 II. APPLICABLE LAW FULLY SUPPORTS A LIMITING OF THE ISSUES............................................ 5 A. As a Matter of Law, Issues of Profitability of the Municipal or Cooperative Systems Have No Bearing on This Case.............................. 6 B. A Hearing on the Consumer Power Defenses .

Concerning the Costs and Revenues of the Small Utility Systems Is Unnecessary.................... 11 III. THE COMMISSION SHOULD GRANT

SUMMARY

JUDGMENT ON ISSUES OF LIABILITY.......................................... 14 IV. INTERVENORS ARE PARTICIPATING BECAUSE THEY RECOGNIZE THE NEED FOR SYSTEMS TO HAVE ACCESS TO BULK POWER GENERATION AND COORDINATION........................... 21 CONCLUSION................................................ 21 APPENDIX A ......................................

Appendix to Supreme Court: Otter Tail Power Co. v. United States of America, No.71-991, Vol. 1.

APPENDIX B:

Letter from Keith S. Watson, Esq., to Joseph Rutberg, Esq.,

(June 29,1972) and attached " Recital of Contested Issues of Fact and Law".

APPENDIX C:

Intervenors' Proposed License Conditions, Midland Units 1 and 2.

APPENDIX D:

Consumers Power's Tax Advantages APPENDIX E:-

Consumers Power's Reasons for Development of Nuclear Generation.

-APPENDIX F:

Consumer's Power's Reasons for Refusing to Sell Transmission Services.

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g. .- . . . . - . . - - . . . . . . . . .

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APPENDIX G:

' Advantages to Coordination, But Refusal to Dea'l With Municipals-Coops on the Same Basis as Large Private Companies.

' APPENDIX H:  ;

Attempts by Consumers Power to Purchase Other Systems.

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UNITED STATES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION In the Matter of )

Consumers Power Company ) Docket No. 50-329A (Midland Units 1 and 2) ) 50-330A MOTION TO LIMIT DISCOVERY AND ISSUES AND ALTEPSATIVELY FOR

SUMMARY

FINDING '

REQUIRING IMPOSITION OF LICENSE CON-DITIONS

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Come now the Intervenor Michigan Cities and Cooperatives

(" Municipal-Coops") and move to limit discovery and the issues for trial on a realistic basis which will enable the case to be brought to trial as scheduled without such onerous delays and expenses as will effectively deprive the Municipal-Coops of their substantive rights in this proceeding, to wit: whether exclusion or restriction of the Municipal-Coops from participation in Company's large base-load generation, from the transmission of power over Company's transmission system, from utility interchange, peaking use, coordination services, together with specific activities to take-over or limit municipal-cooperative operations, would create or maintain a situation inconsistent with the antitrust laws, irrespective of whether the Municpal-Cooperatives can continue to exist-in business and to compete to a greater or lesser extent

• / _Coldwater,-Grand Haven, Holland, Traverse City, Zeeland, Michigan, Northern Michigan Electric Cooperative and Wolverine Electric Cooperative.

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for wholesale and retail business.

Alternatively, the Municipal-Coops move for a summary finding that the Company's activities under the license would create or maintain a situation inconsistent with the antitrust laws unless appropriately conditional upon requirements that Municipal-Coops be granted the opportunity to participate in the Midland Nuclear generator, and to obtain both transmission, interchange, pooling and coordination services at lakful rates, terms and conditions to be separately determined in subsequent proceedings in this case.

I.

FURTHER DELAY OF THESE PROCEEDINGS WILL DEPRIVE MUNICIPAL-COOPG OF SUBSTANTIVE RIGHTS.

It is well established that the first defense to an antitrust case by a giant corporation-*/ is to drag out the discovery and other pretrial proceedings to such an inordinate extent as to exhaust the plaintiffs financially, and, if this fails, to drar out the trial and appeal proceedings with the same

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objective. A related objective is to so complicate a proceeding as to paralyse the administrative agency from accomplishing its

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Consumers Power has a utility plant cost of $2,914,923,000.

Annual Report, inside cover. It is the seventh or eighth largest electric utility in the United States (Tr. 94).

• • / E.g., Goulden, Joseph C., The Superlawyers, Ch. 8, pp. 391-323 (Dell, 1973).

(

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

regulatory purposes.

These are the problems which now face the Municipal-Cooperatives and the Commission, respectively. The discovery that has taken place has been very broad. Much of it has been related to vaguely disclosed issues, but calling for great factual detail. Applicant threatens what it terms follow-up discovery, which threatensto delay the scheduled October hearing date months and perhaps years, and force the Municipal-Cooperatives either to expend excessively large sums of money or strictly

(

limit their participation. In the distant future, when the case finally comes to hearing, the Board will find itself similarly perplexed by hearings which can run a hundred or more days, while the Company contests the plethora of specific issues now in prospect. This is not the only licensing case before the

Commission, and it is apparent, that if the Board here opens the door to such interninable proceedings, the Comnission will be faced by the same tactics in many other cases. The Commission simply does not have the facilities and capability of handling a score of such cases concurrently. In any event, the Commission's regulatory efforts will be stymied for many years.

This is not-a District Court trial of violation of the antitrust laws and obviously the discovery and hearing here does not need to be as extensive as in a District Court trial, since 3-

the test here of inconsistency with the antitrust law is not as rigorous as finding a violation of antitrust laws. But even a District Court will not stand helplessly by in such circumstances.

Thus, in the leading case of United States v. Otter Tail Power

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Company, where the Court found that activities such as are here involved violated the antitrust laws, Judge Divitt held irrelevant Otter Tail's defenses that its selling transmission services er " wheeling" and coordinating services to municipalities would encourage the development or growth of municipal systems and would ultimately erode its retail markets . He was affirmed.

During trial Judge Divitt decisively limited the issues by:

" ruling out of the realm of admissible evidence in the case, evidence that one of the major

.. consids. rations by municipalities seeking to set up their own electric system and discontinue receiving electric service from Otter Tail, was the profit motive in . . . that. . . the munici-pality would realize profits which it could use for other municipal purposes and relieve the general tax burden of the community."

Like Consumers Power, Otter Tail contended:

"That such evidence is material in the considera-tion and evalua?. ion of the competitive situation, and the economic viability of the muni,ipal system as a competitor, and the balancing of nne interests of the' parties, and a determination of the overall public interest and the best use of the social resources involved." l l

• /,

331: .F. Supp. 54 (D. Minn., 6th Div. 1971) affirmed, 93 S.Ct. l 1022, 35 L.Ed. 2d 359 (1973).

_4_

1 Appellant's Alternative Motions, United States v. Otter Tail Power Co., supra, copied from Appendix, OT 71-991,Vol. 1.

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144-145 (February 4, 1972).

As the Judge stated from the bench when exciduing evidence concerning the profitability of municipal operations, and rates and services:

"That we didn' t wanu this to be a life-time mission." Supra, pp. 335-338 at p. 337.

Appendix A.

We request that the Hearing Board take similar decisive action here.

II.

APPLICABLE LAW TULLY SUPPORTS A LIMITING OF THE ISSUES The issues Applicant seeks to raise are stated by l Applicant in a letter dated, June 29, 1972. These are recited (See also Tr. 69-77, 187-188). Issues 8, 9, 11 in Appendix B.

and 12 relate to the profitability of municipal and cooperative systems. If there were any previous doubt, otter Tail confirms  ;

that questions concerning the profitability ok municipal or l cooperative systems have no bearing here. ** Moreover, since both

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have stated many the Department of Justice and interveners

• / Recopied The Atomic in Appendix A to this pleading.

Energy Commission regulatory staff is relying I

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mainly on the Department of Justice for the trial of issues con-cerning the desirability of conditioning the licensing of the Midland ,

Units (Tr. 42) , and to the best of our knowledge it takes a similar l 1

position to the Department.

times that they would be willing to stipulate as to costs and profitability, (since they deem the question irrelevant), there is no justifiable reason to have extensive litigation over

~

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such issues (E.g., Tr. 199, 324-325).

A. As a Matter of Law, Issues of Profitability of The Municipal or Cooperative Systems Have No Bearing on this Case.

The issue here is to whether, as a condition for a license, Consumers Power can be forced to grant municipal and cooperative systems an opportunity to buy either part of the Midland units or unit power from them and to sell transmission and coordinating services (including the entering into of inter-change agreements to coordinate and sell emergency, supplemental, and maintenance power on a basis of equalized reserves) . Recent cases including Otter Tail make clear the right of interveners to such access. Otter Tail Power Co., v. United States, U.S.

-*/ If the Board should fail to rule on the issues it places the Department of Justice and itnerveners in a most' difficult situation, since it compels a sort of Russian roulette, whereby we either ignore issues the Board may deem relevant er waste time and resources which would be better focused on issues of remedy. Because of the comple>d.ty of deternining rate issues, it is not possible to detemine profitability within any acceptable range of predictability. Obviously, municipal systems have advantages, such as tax exemptions. On the other hand, there are efficiencies associated with size. However, what is clear is that whatever the profitability of an isolated system, it is advantaged by having access to interconnection, pooling and reserves sharing as an equalized basis and disadvantaged, it if does not.

There is no way Consumers Power cas argue that interveners will not be advantaged by getting the rebef they seek or harmed if.they do not e

. 4 35 L.Ed. 2d 359, 935 Ct. 1022 (1973). But, in any event, it is no defense to violation of the antitrust law or policy that interveners can make do--or even prosper--without elimination

, of the violations.

The fact that there may be advantages to municipal, cooperative or corporate operation as a result of privileges granted by operation of odmur provisions of law does not erase the antitrust laws; nor does it entitle Consumers Power to deny cocperative or municipal entities access to facilities. If Consumers Power has a complaint, it should be addressed to the

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legislatures.

The Supreme Court's rejection in Otter Tail of the contention that the Company's anticipated profitability is relevant to its obligations under the antitrust laws, is con-sistent with Gainesville and Gulf States. Gainesville Utilities Department v. Florida Power Corp., 402 U.S. 515 (1971); Gulf States Utilities Co. v. F.P.C., 411 U.S. 747 (1973). In Gainesville, Florida Power Corp. attempted to argue that, because of the unequal benefits the would flow to Gainesville from an inter-connection, it should not have to interconnect without paying a special " standby" charge for the availability of the back-up service. The Court rejected that relative benefits to Florida

• / With regard to the supposed issue of tax advantages , it should be noted that Consumers Power enjoys sizeable advantages. See Appendix D.

t Power and Gainesville was a factor for consideration. As Judge Leventhal put it, Gainesville categorically rejects the proposition that small muncipals should be interconnected "on terms more onerous than those required of other independent investor-owned utilities." Iafayette, Louisiana v. S.E.C., 454 F. 2d 941, 952 (CADC, 1971), affirmed Gulf States Utilities v.

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F.P.C., 411 U.S. 747 (1973).

Not only do the leading cases in the utilit'y field affirm the rights of access of the smaller systems to coordi-nation, transmission and equalized reserves without onerous conditions, but general antitrust law belies the contention that a party can argue the profitability of the complainant as a defense to monopolization, denial of access or other anti-competitive conduct. E.g., Utah Pie Co., v. Continental Baking Co., 386 U.S. 695, (especially p. 702 ,1967). A rich man, as well as a poor man, is entitled not to have his competitors violate the antitrust laws to his detriment. If a taxi fleet owner were given a choice of only buying Chevrolets it would be no defense that his operations were profitable, or indeed, that he was outcompeting owners who use other makes of cars.

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• Despite the economic loss to Massachusetts Electric Co., in New England Power Co., v. F.P.C., 349 F.2d 258 (cal , 1965,

" Shrewsbury"), the FPC was affirmed in ordering a direct inter-connection between its supplier and Shrewsbury.

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l Both Otter Tail and Gainesville, supra, recognize interveners' rights of access to wholesale power services en non-burdensome ter:rs. Nor do these caser provide that in order'to be granted relief

, nunicipalities crcooperatives must negate the possibility of com-

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petitive harm to competing private power companies .

It is enough that the municipalities or cooperatives will be disadvantaged by the refusals to deal. Furthermore, just recently,GulfStatecUtiliti[esCo.,v.F.P.C., 411 U.S. 747 (1973), reconfirmed in exceedingly broad terms the applicability of antitrust laws to the wholesale power industry, there in the context of Federal Power Ccmmission regulation.

Consumers Power would defend against the granting of access to nuclear power based upon a showing of comparative retail costs. However, it cannot justify maintaining a moncpoly

• / See Municipal Electric Ass'n of Massachusetts v. S.E.C.,

413 F.2d 1052 (CADC, 1969); City of Statesville v. AEC, 441 F.2d 962, 979, 980 (CADC, 1969, en banc, concurring opinion).

Statesville affirmed.the AEC's determination that be licenses there involved were experimental. However, at least five members of the Court, and possibly the entire Court, appear to assume interveners would have a right to direct access to nuclear energy, once licenses have " practical value".

The response of Congress to Statesville was to amend the Statute to assure that AEC licenses would not be issued contrary to antitrust principles. Atomic Energy Act, Sec. 1056, 42 USC 2135 (68 Stat. 938, as amended by P.C.91-560 (Dec. 19, 1970, 84 Stat. 1473). See generally, " Reply of the Department of Justice on Issues Other than Disqualifications Raised by Applicant's Answer et

. May 9, 1972. (June 9, 1972).

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of nuclear generation and high voltage distribution to limit competition in the retail market. Indeed, the law has been careful to recognize that Consumers Power would not be entitled to argue for maintenance of monopoly control over nuclear genera-tion and high voltage transmission to protect its retail position.

Otter Tail, supra, United States v. Alcoa Aluminum Co., 148 F.2d 416 (CA 2, 1945). See United States v. Philadelphia National o Bank, 374 U.S. 321, 368-370 (1963); Richnond Power and Light

v. FPC, CADCN. 72-1963 ,(May 25, 1973). It is not accidental that Otter Tail cites cases such as United States v. Griffith, 334 U.S. 100, (1948) and Lorain Journal v. United States, 342 U.S. 143 (1951) , which are leading cases against the use by integrated companies of dominant positions in one market to obtain advantages. in another market or to deny use of " bottleneck"

• /

facilitier (35 L.Ed. 2d at F. 1368, p. 10 of slip opinion).

Accord, United States v. Terminal Railroad Ass'n, 224 U.S. 383 (1912) , cited by the District Court. 331 F.Supp. 54, 61 (D.

Minn., 6th Div. 1971). Consumers Power has stated no legally cognizable defense to conditioning the license based upen a showing of municipal-coops (or others) actual or potential earnings nor can it predicate denial of access to " bottleneck" facilities based upon an alleged showing that municipal-coops

$/ Otter Tail cites Gainesville noting "The difficulties and problems of . . . isolated electric power systems" id.

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4 .

U

. can outcompete applicant in retail (or other markets.

, B. A Hearing on the Consumer Power Defenses Concerning the Costs and Revenues of the Small Utility Systems Is Unnecessary.

Since both interveners and the Department have clearly stated that they do not believe the profitability of the small systems to be relevant to this case and that they are willing not to litigate these facts, further discovery or he'arings addressed to these facts can achieve no purpose. We suppose that Consumers Power can phrase an issue in such a way to make stipulation impossible--and it hr.s shown a marked reluctance to even talk about stipulation. However, the Board should not allow trial for its own sake.

• / Consumers Power would own all the nuclear power in Michigan.

It owns all transmission lines in its general area of service above 138 Kv. Compare Otter. Tail, supra, 331 F.Supp. at p. 59, 35 L.Ed. 2d at p. 364, where there was only a monopoly on subtransmission lines. Moreover, interveners are not suggesting they not pay a fair cost for an interest in the Midland Plants or the services they are seeking. Indeed, because of their financing and tax advantages, complained of by Consumers Power, total costs to Consumers Power may be subject to reduction by granting access. Moreover, as the Supreme Court noted in Otter Tail, the complete answer to any " defense" of Consumers Power that coordinating with public power systems would put it out of business .s i that, if such conjectures should occur, regulatory agencies, including those with.ratemaking power, retain jurisdiction over.the industry and can take corrective measures as necessary. New England Power Co., v. FPC, supra, 349 F.2d at 264. Alabama-Tennessee v. FPC,359 F2d'318,339(CAS, 1959),

certioral denied, 385 U.S. 847 (1966). See United States v.

Philadelphia National Bank, 374 U.S. 321, 371-372 (1963). We are constrained Eo . note that Consumers Power's fears of its own demise strain credulity. From its statements of its inability to compete one could think interveners should be the Applicant. The fact is,

Footnote, cont'd.

of course, that it is small publicly owned systems that have been going out of business, often selling to companies such as Consumers Power--and not the other way around. Thus, Federal Power Commission Chairman Joseph C. Swidler reported to Congress of the importance of providing access by publicly owned utilities to specialized wholosale services, stating:

"To the large privately-owned electric utility a retail customer, even a large industry, is simply a customer. However, a wholesale custo-mer ic frequently also a competitor, actual or potential. The customer at wholesale may not only be a competitor in the fringe area where the two systems are contiguous, but may also be a direct or potential competitor for the commer-cial and industrial businesses that are able to take costs and conditions of electric service

. into account in deciding where to locate and which power supplier to patronize.

"The electric power wholesaler may in fact be seeking to put the retailer out of business.

This is not merely theoretical. Every year many municipal systems succumb to purchase offers by investor-owned wholesale suppliers.

In this respect wholesale rate regulation in the electric power industry is unique and faces far greater resistance by the privately-owned utilities than retail rate-making. It presents a much greater challenge to the ratemaking authorities, . . . ."

S. Bill 218, 89th Congress, Hearings Before the Senate Committee on Commerce, lat Sess. [Serate 89-38] , pp. 69-70. The.

reality of the takeover threat is confirmed by Consumers Powers activities as demonstrated by discovery in this proceeding.

Appendix H.

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Apart from Judge Divitt's actions in Otter Tail, the closest analogy we can think of is the problem concerning

-the Federal Power Commission natural gas certificates. The Supreme Court declared the agency must obtain regulatory control over spiraling natural gas prices. Atlantic Refining Co., v.

Public Service Commission of New York., 360 U.S. 378 (1959).

The agency announced ceilings above which it would not grant temporary certificates, i.e., would not allow gas to'be sold on an interim basis. Statement of General Policy No. 61-1, 24 FPC 818 (1960), petition for review dismissed sub non Wisconsin v. FPC, 292 F.2d 253 (CADC, 1961). It then held expedited hearings to set initial prices based upon current market price comparisons whereby it excluded all ccst and economic evidence. Its actions were affirmed in United Gas Improvement Co., v. Callery Properties, Inc., 382 U.S. 223 (1965). Accord, FPC v. Texaco, Inc., 377 U.S. 33 (1964, affirming the FPC's rejection of filing of contracts with indefinite price escalations and thereby effectively disallowing such contracts).

Courts have repeatedly told--and even admonished--

regulatory agencies to find means to try cases expeditiously

• /

Certainly, an administrative agency should have--not less-flexibility than a court, -Administrative agencies were created for quick, common sense, resolutions to problems.

,9 - '

so that they could fulfill the substance of their legislative mandates. E.g., FPC v. Hunt, 376 U.S. 515, 526-527 (1964).

Hearings are not required where there are no triable issues.

E.g.,. Denver Union Stock Yard Co., v. Producers Livestock Marketing Association, 356 U.S. 282, 287 (1958); Citizens for Allegan County v. F.P.C., 414 F.2d 1125 (CADC, 1965), and cases cited above. ,

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-III THE COMMISSION SHOULD GRANT

SUMMARY

JUDGMENT ON ISSUES OF. LIABILITY

~While-a more cautious' approach would be to limit the issues,

.there are.no triable. issues on whether the license should be condi-I . .

The only real issues -- if there tionedLworthy of consideration.

are any -- relate to the conditions that should be imposed (i.e.,

remedy). Our suggested conditions are attached as Appendix c.

Despite the plethora of issues raised by Applicant, recent  ;

court cases have made clear intervenors' rights of access to nuclear power. The authors of the statute and the courts have long been clear on the obvious point that to deny small systems access to nuclear power, largely developed through Government research and development,.could only serve.to enhance the existing monopoly status of the large private power companies. .Section IIA, suora, " Reply of i the Department of Justice on Issues Other than Disqualification Raised )

)

by Applicant's Answer of May 9, 1972" (June 9, 1972). _Moreover,  !

i I

given' fuel. shortage and environmental' considerations, even assuming there were no cost benefits to nuclear power, reliability would I

dictate granting;the' smaller systems access. Consumers Power states f it is motivated in developing nuclear energy to assure reliability, that~ the price 1is likely to be "as. favorrble as any alternative" and

.that nuclear power ' offers an equal or better ~ sources of electric 14 -

L h

4 energy than fossil fuels. This is due, among other things, to the anticipated " limited availability of fossil fuel" . Appendix E.

Smaller systems are no less entitled to this source of future electric power. Consumers Power's answer that the smaller systems can achieve the benefits of nuclear power from buying from it, is as unlawful 1as it is arrogant. (Tr., p. 10). If they desire, municipalities and cooperatives have rights to participate in bulk power markets. See United States v. Aluminum Co. of America, 148 F.2d 416 (CA 2, 1945).

In Municipal Electric Association of Massachusetts v.

SEC, 413 F.2d 1052, 1055_(CADC, 1969), the basic issue was phrased in terms whether approval (if an acquisition under the Public Utility Holding Company Act, S 10, 15 USC S79j] should be given "in a manner which would give Municipals an opportunity on reasonable terms to obtain access to this new lower-cost power". The court presented the issue in terms of a blocking of access to nuclear base load power and "for low cost bulk power supplies and transmission services" .

413 F.2d at p. 1058.

4 There is no way that freezing out municipal-coops from access to nuclear supplies and bulk power transmission can be

- consistent with the antitrust laws. The Atomic Energy Act (and Statesville) require the granting of such access unless.it would not be : inconsistent hith the antitrust laws. See Cities of Statesville v.

t_ - ,

3_.3 , supra, 441 F.2d at p. 981 (concurring opinion) . Moreover, the position of Consumers Power cannot be enhanced when it is in fact completely coordinated in the Michigan Power Pool with another major utility, and has pooling arrangements with other major private power companies. Appendix G. The use of Midland base load power will be integrated with power from other base load, intermediate and peaking plants. Consumers Power cannot at the same time join with other utilities so that they can absorb pow'er from the large nuclear units and have available back-up emergency power and then claim the right to access'is inconsequential. See City of Lafayette, La. v.

-S.E.C., 454 F.2d 941, 945 (CADC, 1971) affirmed sub nom Gulf States Utilities Co., supra.

Until recently, Consumers Power might have argued that it is willing to give access to the plant itself, but not to provide

- ./

coordination arrangements based on equalized reserves and related

_/ Equalized reserves are where each participating system has or purchases equal reserves relative to its load to back-up generation. By combining the operation of plants, the amount of total reserves to guard against a plant shut-down or unexpected demand is reduced and the ability to mix large high capital, low operating cost (i.e., base load) and low capital cost high operating cost (i.e., peaking) generation is maximized. Taking into account operating factors, if each plant is treated as having the same required reserves, regardless of ownership, there is equalized reserves. ,

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' transmission services. However, under any fair reading of the combined Gulf States, Otter Tail, and Gainesville holdings, utilities' claims to exemption from providing access to these services has been rejected. Where there is control of a portion of the transmission network, Otter Tail prohibits a refusal to sell transmission services, subject to engineering availability. In Otter Tail itself the company allegedly only owned about 8% of the transmission lines in the area.

However, it was held to dominate 34.5 to 69 kv lines. 3'31 F. Supp.

at p. 59; 35 L.Ed. 2d at p. 364. Here, Consumers Power owns all major transmission lines above ll5kv, most of the 115kv lines and it is building a 765 kv system. Thus, practically, Consumers Power can economically block the building of the means for smaller systems to exchange power. Moreover, theory aside, the President of Consumers Power. corapany admitted the primary reason for the Company's refusal to sell transmission services was to prevent competition from municipals or REA's with low cost outside power for retail markets. Appendix F.

Use of economic dominance over one segment of the market to block competition in another is clearly unlawful. Otter Tail Power Co. v.

United States, suora; United States v. Terminal RR Ass'n, 224 U.S.

383 (1912); Lorain Journal v. United States, 342 U.S. 193 (1951).

-.* /

See Richmond Power and Light v. F.P.C., CADC No. 72-1963 (May 25, 1973).

Gainesville confirms that large utilities cannot refuse to interconnect with small publicly owned utilities and sell coordinating

_*/1The Richmond case illustrates judicial recognition of the need to protect municipal utilities who must both purchase from and compete with their dominant suppliers.

9

services on a basis similar to exchanges they make themselves.

Consuaers Power recognizes that it achieves great advantages from e

its coordination arrangements. Yet at the same time it is unwilling to provide similar ccordinating agreements to publicly owned entities.

Indeed, Consumers Power states a purpose to its pool arrangement was to keep out "undesirables". Appendix G.

Taken together, Gainesville and Otter Tail, which cites Gainesville, recognize the generation, transmission and sale of electricity depends upon a coordination of facilities and mutual backup to assure reliability and economic scheduling of plants.

Gulf States, which cites Otter Tail, confirms the regulatory responsibility to assure application of these principles, even at the point of delaying or blocking short term financing. The entire Court emphaiszed the obligation of (there the FPC] agencies to apply anti-trust principles where they could do so without direct conflict to their function.

. . . the Commission's broad authority to consider anticompetitive and other conduct touching the "public interest" under the other sections of the Act emphasizes the breadth of its authority under the public interest, standard generally and as embodied in 1204. This stat-

., ute was enacted as part of Tit. II of the Public Utility Act of 1935, 40 Stat. S03. S50. The Act had two pri-mary and related purposes: to curb abusive practices of public utility companies by bringing them under effective control, and to provide effective federal regulation of the expanding business of transmitting and selling electric

_ =_u _ _ _ _

power in interstate commerce. 40 Stat. 'S03-SO4. S47-84S; S. Rep. No. 021. 74th Cong.,1st Sess.. 1-4, 17-20; II. R. Rep. No.131S. 74th Cong.. Ist Sess. 3. 7-8' -

/crsey Cen tral Co. v. FPC,310 U. S. 61. 07-OS ( 1943) ; see North .4 merican Co. v. SEC,327 C. S. GS6 (l040). The Act was Imssed in the context of. and in response to. great concentrations of economie - and even political, power vested in power trusts, and the absence of antitrust en-forcement to restrain the growth and practices of public utility holding companics. See S. Rep. No. 621, supra, at 11-12; Utility Corporations-Summary Report, 70th Cong.. Ist Sess., S. Doc. No. 02. Part 73-A. 47-54: 70 Cong. Rec. S302119351 -

. In order to achieve federal regulation of these and other perceived problems on the operational level of the inter-state public utility business. Tit. II was enacted. S. Rep.'

'No. 021, supra, at 17; II. R. Rep. No.1318. supra, at 7.

Part II of Tit.11 was denominated the Federal Power Act, 40 Stat. S03. Title 11 certainly did not, preclude the operation of the antitrust laws, and it vested the.

Federal Power Commission with important and broad regulatory power in the areas described above. See Otter Tail Poteer Co. v. United States, - D. S. (1973);

Mecks. Concentration in the Electric Power Industry:

The Impact of Antitrust Policy, 72 Col. L. Rev. 64 (1972). This power clearly carries with it the responsi-bility to consider,in appropriate circumstances. the anti-competitive eficcts of regulated aspects of interstate utility operations pursuant to Xs 202 and 203, and under like directives contained in Is 205. 206. and 207. The

. Act did not render antitrust policy irrelevant to the

'. Commission's regulation of the electric power industry.

Indeed, within the confines of a basic natural monopoly structure, limited competition of the sort protected by the antitrust laws seems to have been anticipated. See Otter Tail Potter Co. v. United States,- U. S.. at  ;

California v. FPC,300 U. S. 4S2 (1002); S. Rep. No. 021, .

supra, at 12; Hearings before the IIouse Committee on Interstate and Foreign Connnerce on H. R. 5423. 74th Cong.. Ist Sess. 157-150 (1935): Sununary Report, _

supra, at 52; Meeks. supra. ..

9

Without a more definite indi-cation of contrary legislative purpose, we shall not read out of f 204 the requirement that the Commission con-sider matters relating to both the broad purposes of the.

Act and fundamental national economic policy expressed' in the antitrust laws. See F3IC v. Svenska Amerika Linien, 300 C. S. 23S. 244 (1965); California v. FPC, 360 U. S.. at 4S4-1S5: FCC v. RCA Communications, .

Inc., 34G U. S. SG. 04 (1953); JIcLean Trucking Co. v.

United Statcs, 321 U. S. 07. 80 (1944). Cf. Report of -

National Power Policy Committee on 'Public-Utility -

Holding Companics, in S. Rep. No. 021. supra, 55. 50 (App.). Consideration of antitrust and anticompetitive issues by the Commission, moreovcr, serves the important-

. function of establishing a first line of defense against those competitive practices that might later be the sub.- -

ject of antitrust proceedings. This is particularly sig-nificant in the context of a security ism under s 204, for appropriate consideration at a pre-issue stage may avoid' the need later to unravel complex transactions in granting-relief under the antitrust laws or other sections of the-Federal Power Act.

The principle Consumers Power is trying to uphold, even after Gainesville, Otter Tail and Gulf States, is that based upon its self-interest it can refuse to deal with public power systems on the same basis-it-does with other utilities. While there may be sophistication.to its arguments, those arguments are directly contrary to Supreme Court holdings.

_ _ _# _, =_ _; ._ _

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• s IV INTERVENORS ARE PARTICIPATING BECAUSE THEY RECOGNIZE THE NEED FOR SYSTEMS TO HAVE ACCESS TO BULK POWER

~ GENERATION AND COORDINATION Intervenors are participating in these proceedings to obtain the relief sought in Appendix C. They want access to Midland power, transmission services and coordination. Consumers Power's efforts to prove otherwise-is an example of the issues it can laborously try unless the hearings are controlled by standards of relevancy. We

- might add that the Department of Justice, representing the public, has a right and statutory obligation to oppose monopolization. The labored. hours of time ta' ken-during deposition to prove the Department of Justice instigated intervenors to protect their rights provides

. a glaring illustration of Consumers Power's " defenses" .

CONCLUSION At the beginning of these proceedings counsel for Applicant stated (Tr. 103):

" [W] e do have a fairly significant event hanging over this proceeding, which is the possibility of -a. decision by the Supreme Court in two cases, particularly the Otter Tail case now pending before them which could have a definite bearing'on the state of the law which would' control, in part at least, the issues being raised by the Intervenors and the Department of Justice."

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Those cases,= Otter Tail and Gulf States, were decisively decided

. contrary to the positions-Consumers Power espouses. Yet, we are threatened-with long drawn out proceedings to'relitigate, perhaps with slightly altered phraseology, the substance of those cases.

Intervenors municipal-coops look to this Board for an application o f' those rights granted by the statute and the Courts.

j- They also -look to this Board to provide a forum where they can

[. state their case without inordinate burden. Municipal-coops

- simply cannot afford -- nor should they have to -- a case of i

attrition of resources against Consumers Power. Indeed, as

. public entities, they have no shareholder interests to fall back i

on and any costs of. this proceeding must be borne by the public

~

t they serve.

WHEREFORE, municipal-coops request this Board to

-either1 decisively. limit the issues or to grant our motion for summaryLjudgment. Should the Board fail to do so, we must 4

4 limit our participation.- While we shall maintain our inter-ventionfand attempt to advise the Board of our positions in 1important matters, we do not have the resources to participate on a daily basis in an open-ended-proceeding-of the nature s

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envisioned by Consumers Power. ' Therefore, we shall be forced to' limit our activities in this case, accordingly.

Respectfully submitted,

+Y,d ,

Robert A. J6blon Attorney for Municipals of Coldwater, Holland, Grand Haven, Traverse City and Zeeland, and the Michigan Municipal Electric Association, and the Wolverine and Northern Michigan Electric Cooperatives.

August 27, 1973 Law Offices of:

Spiegel & McDiarmid 2600 Virginia Avenue, N. W.

Washington, D. C. 20037 l

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- _ - _ . _ _ . _ _ _ _ _ 1~

UNITED STATES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION In the Matter of' )

)

Consumers Power Company ) Dockets No.s 50-329A (Midland Units 1 and 2) ) 50-330A AFFIDAVIT DISTRICT.OF COLUMBIA, SS: .

Pobert A. Jablon, being first duly sworn, deposes and says that he is an attorney for the Municipals of Coldwater, Holland, Grand Haven, Traverse City and Zeeland, Michigan, the Michigan Municipal Electric Association, and the Wolverine and. Northern Michigan Electric Cooperatives; and that as such he has signed the foregoing Motion to Limit Discovery and Issues and Alternatively for Sumary Finding Requiring Imposition of License Conditions for and on behalf of said parties; that he is authorized so to do; that he has read said Motion and is familiar with the contents thereof; and that the maters and things threin set forth are true and correct to the best of his knowledge, information or belief.

f'  ?' ^d ,1 \ / / .

Robert-A. Jablon Subscribed and sworn to befcre me this 27th day of August, 1973.  !

Y? >Nf

~ Notary Public' l l

My Commission expires : APR 141376 9

APENDIX A: Appendix to Supreme Court:

Otter Tail Power Co. v. United States of

~

America, No.71-991, Vol. 1.

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Volume I-Pages 1-490 .

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T[ j hupreme Court of tije Unitch States b6 OCTOBER TER31,1971 I

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n ll'  : 6 No. 71991

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y; n OTTER TAIL POWER CO31PANY, ,

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Appellant, l

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l h! l UNITED STATES OF A31 ERICA,

! 1 f' l Appellee.

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APPEAL FR0ht TIIE UNITED STATES DISTRICT COURT R,-4 FOR TIIE DISTRICT OF 311NNESOTA  ;

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-N5 FILED FEBIlUARY 4,1972 j!

h'. PROBABLE JUIllSDICTION NOTED 31AY 22,1972 85 i

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137 Appellant % Alternative Motions Nf

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. [1] UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA Q-f SIXTH DIVISION

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CIVIL ACTION NO. 6-69-139.

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-Cm . -q ALTERNATIVE MOTIONS FOR A NEW TRIAL ~

i gQ OR FOR AMENDED AND/OR ADDITIONAL 4

FINDINGS OF FACT AND FOR AMENDED O.1if N bl AND/OR ADDITIONAL CONCLUSIONS OF LAW, j

Wm 'f AND TO AMEND THE JUDGMENT ACCORDINGLY.

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k. .k i MOTION FOR A NEW TRIAL.

Th>s

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a' Comes now the defendant, Otter Tail Power Company 4 '

(Otter Tail), and moves the Court for a new trial herein, for

t" $'

eu. the following reasons:

M .?

I.

[ ~)

f THE FEDERAL POWER COMMISSION DECISION

[G l AND ITS BEARING ON THE WHOLESALE MIF'1 '

'] )

SERVICE ISSUE.

The Memorandum and Order of this Court was dated and 1 filed on September 9,1971. Four days later, on September 13, *

s' 1971, the Federal Power Commission issued its Opinion No.

603 in the case of Elbow Lake, Minnesota v. Otter Tail Power ,

N. 1, s ^-

i Company, Docket No. E-7278, a copy of which is attached to li + 3 x  :

and made a part of this motion. The Federal Power Commis-j sion decision finds and asserts [2]* complete regulatory juris- ,

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• Numbers in brackets i2] refer to page numbers in Original '

W. 5 document.

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144 Appellant's Alternative 31otions Tr. Vol. I, pp. 71-73.

.if I Tr. Vol. I, p. 87. e Tr. Vol. I, pp. 91-93. i Tr. Vol. I, pp. 103-107.

• Ruling of the Court, Tr. Vol. I, pp. 102,103.

Tr. Vol. IV, pp. 73-75, (GX 420, GX 421).

Ruling of the Court, p. 82. '

C. The Court erred in overruling defendant's objectim., <

to the admission of evidence relating to occurrences whie l

were remote in peint of time, and generally were pre-19Z #

and as far back as the 1930's, upon the grounds that each v such items is remote in point of time and immaterial, and ir..

volved facts and situations and context vitally different fre 3

any issue in this case, and also such items are inadmissit',

under the pleadings, the complaint specifically alleging occur. .

h rences subsequent to 1955. We recognize that the Court ru!ed out some of this proffered evidence, but some of it was a6 mitted, and we submit was effectively used by the plaintic g

in the argument and submission of the case.

Offers, statements of counsel, objections and rulings. ir this area, appear in the record at the following places:

Tr. Vol. I, pp. 21-23.

Tr. Vol. I, pp. 36-40. Ruling of the Court, p. 47.

Tr. Vol. I, p. 67. &

Tr. Vol. I, pp. 77-79.

Tr. Vol. I, pp. 83, 84. .

4 Tr. Vol. I, pp. 105-107.

Ruling of the Court, Tr. Vol. I, pp. 102-103.

D. The Court erred in sustaining plaintiff's objections t-and ruling out of the realm of admissible evidence in the ca e- e evidence that one of the major considerations by municipali-ties seeking to set up their own electric system and discontinw

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k Appellant % Alternative Motions 145 h receiving electric service from Otter Tail, was the profit mo-tive, in the anticipation that, under municipal operation of I

cQ hh the retail electric service, and by charging the same rates as

.! .$w/d Otter Tail, the municipality would realize profits which it p I h-I2 could use for other municipal purposes and relieve the general l

• N[4.;-?

tax burden of the community. We submit that such evidence

) g4 is materialin the consideration and evaluation of the competi- ,

r 'l tive situation, and the economic viability of the municipal I

'[ ' system as a competitor, and the balancing of the interests of 1 the parties, and a determination of the overall public interest i

,O and the best use of the social resources involved. Illustrative 2N of the Court's rulings in shutting out such evidence, with ac- ,.

h companying colloquy between the Court and counsel, including *

hjM an offer of proof, appears in the record at Tr. Vol. II, pp.

i 36-40.

E. The Court erred in over' ruling defendant's objections

}j{'2i h, W to the receipt in evidence of engineering reports (otherwise j[] G called feasibility studies) prepared and submitted to munic-ipalities by consulting engineers concerning prospective mu-hf{ci

1. T J nicipal electric systems upon the grounds that the respective b' p;q c

engineers who prepared and submitted each study or report y.j was not produced as a witness and subject to cross-examina-4 l [.Q tion in connection with each document.

{ {~ , .; Offers, statements of counsel, objections and rulings, in j [ this area, appaar in the record at the following places:

[ Tr. Vol. I, pp. 64, 65.

l

0 [ Tr. Vol. II, pp. 30-31 (GX 309).

i y;.;' F. The Court erred in overruling defendant's objection

,y j, . to the admissibility of GX 302 and GX 303 upon the grounds

• that they relate to Alexandria and are outside of the issues

{?- {

{. of this case. Tr. Vol. II, p. 4.

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", Iewis, Cross by Field y

• A. Yes. .

N \, J Q. And it is delivered to your system via the lines of Sioux Valley Empire Electrical Association? j ,

i A. Yes. (

Y Q. Is East River Electric Cooperative a part of that func- ,

l tion tco or not as far as you know? i 1 -

A. Yes. -

f Q. It is. I see. j 8

f A. They are a substation, I believe it is. >

/ Q. I'm sorry. f*

• g A. East River to Sioux Valley is a substation, I believe i

g it is. r It [T. II, 36] Q. So the source of power for Colman, then-

• I t'W I had better back up and get it right-is initially the allotment J

&. of power from the Bureau of Reclamation?  ;

}

l A. Yes.

l l

[5 Q. Then it comes over the lines of the East River Cooper-r w , Je ative, and, in turn, over the lines of the Sioux Valley Electric -

Cooperative and then delivered to the system of Colman? I i

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$j A. Yes.

[ :t Mr. Field: While this witness is on the stand, Your K7 Honor, for clarity in the. record, I understand the matter of h Otter Tail's service and rates are still out? l The Court: Still out.

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I j C t Mr. Field: Otherwise, I could inquire of him about the Y* subject matter. l. ,

g.;, C gj Without transgressing that ruling, may I inquire-I will l  ;

g., j ask a question and see if it meets with the Court's approval,  !

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as far as the questian is concerned. (

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Q. I will ask you this. Is it not true that the potential of -

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1 making profits by the operation of the proposed new munic. 1 I

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Lewis, Crose by Field i 336 ipal system in Colman was one of the major motivating fac- ,

i tors involved in promoting the project?

Your Honor, if that [T. II, 37] question

• Mr. Anderson:

is to be permitted, then I would like the opportunity to have j one more exhibit marked.

It seems to me that that is beyond the pall, too,

• The Court:

of our mission. You have been a staunch advocate of that .

theory,I think, here.

Mr. Field: Well-How good the service, whether municipal The Court: '

ownership is better than private ownership, and all that.

Mr. Field: Well, the reason I'm asking the question is _

this, assuming rates and service are out of the case, which Your Honor says they are, and that makes them out, so there is no problem there, the profit motive is a separate subject matter, as I see it, for the establishment of these municipal j projects. It may overlap into the prospect of rate relief, and so

){ forth, but it is, and I believe we can prove from these exhibits as well as, I hope, from asking this witness questions, that that was one of the major points in promoting the project, to

. ?? ' make a profit so they could reduce the tax burden and so forth.

Well, if we are going to involve ourselves Mr. Anderson:

Dv' in a discussion of motives, then I would like to offer a letter-

• I The Court: Dc you think we should?

j. This is really what [T. II,38] I was talk-Mr. Anderson:

ing about this morning in a real sense, motive. If we are going h to get involved in a discussion of why they decided to go to l

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explore the possibility of a municipal power system, then inso- f C

far as Colman is concerned, I would like to introduce this '

f document which shows that just two weeks before the thrust toward municipal power really took off, they got a letter, the k *%.,

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I ]., That is the only thing I was trying to show. '

j The Court: So you have been talking or had in mind all .

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the time evidence of motive?

Mr. Anderson: Yes, really. Yes. i

.? ' f The Court: Is that material to our mission? You will h@d^'[ N i

I' remember the several nice visits we had about how we were }

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pp.,J,$ all agreed, or at least I thought we were, that we really didn't ,

"~';"- want this to be a life-time mission for all of us, and we all ,

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" looked at it practically and had the view that you can get t: l R: I kind of wrought up about this public versus private owner- '

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LP n 4 ship, and we all agreed that we were going to stipulate to [

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1. just about everything. I wonder if we are not departing from i

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3 [-g " what I thought was a meeting of our minds about the whole

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If you want to introduce things like this, he would want to l

introduce things the other way, and we get into a philosophi. ,

{T ',[ ' 'sa- cal debate, wouldn't we, basically? l fT Mr. Anderson: Yes. We had no [T. II, 39] intention and no interest in getting involved in a philosophical debate con-j X*Z ,

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49 cerning the merits or demerits of public power and if Your D

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lionor feels that our introducing this document would tend .

M in that direction, then we won't offer it. >

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m The Court: All rk;ht. '

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Mr. Anderson: But if Mr. Field is going to be permitted

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to ask the witness whether the potential for profit motivated '

.nn the town in exploring the possibility as to a municipal power g.- f g3  : system, then in order to round out the record, I would like to

(' j show that there was another ingredient involved, namely, that they weren't too happy about the rate increase.

A.; The Court: I will sustain the objection. ,

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g'. . UNITED STATES OF AMERICA DEFORE THE ATOMIC ENERGY COMMISSION In the mr'ter of )

)

Consumers Powcr Company ) Docket Nos. 50-329A (Midland Plant, Units 1 and 2) ) 50-330A

)

Certificate of Service I hereby certify that the foregoing document in the above-captio ed manter was served upon the following by deposit in the United States mail, first class or air mail, this 27th day of August, 1973.

Alan S. Rosenthal, Esquire Joseph Rutberg, Esquire Chairman, Atomic Safety and U. S. Atomic Energy Commission Licensing Board 7920 Norfolk Avenue U. S. Atomic Energy Commission Bethesda, Maryland Washington, D. C. 20545 Abraham Braitman, Chief Jerome'Garfinkel, Esquire Office of Antitrust and Indemnity Chairman, Atomic Safety and U. S. Atomic Energy Commission Licensing Board Washington, D. C. 20545 U.S. Atomic Energy Commission Washington, D. C. 20545 Mr. Frank W. Karas, Chief Public Proceedings Branch Joseph J. Saunders, Esquire Office of the Secretary Department of Justice U. S. Atomic Energy Commission Washington, D. C. 20545 Antitrust Division Washington,.D. C. 20530 Wallace E. Brand, Esquire Harold P. Graves, Esquire Antitrust Public Counsel James B. Falahee Department of Justice Consumers Power Company P. O. Box 7513 212. West Michigan Avenue Washington, D. C. 20044 Jackson, Michigan 49201 Dr. J. Venn Leeds, Jr.

Willitm Warfield Ross, Esquire P. O. Box 941 Keith Watson, Esquire. Houston, Texas 77001 Wald, Harkradcr and Ross 1320 19th Street, N. W.

. Washington, D. C. 20036

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Hugh K. Clark, Esquire William T. Clabault, Esquire.

P. O.' Box 1127A David A . ' Leckic , Esquire Kennedyvillo, Maryland 21645 - Antitrust Division-Departr. nt of Justico ,

Honorable Frank Kelly P. O.' Box 7513 Attorney General Washington, D. C. 20044 l State _ of Michigan

-. Lansing, Michigan 49813 Robert J. Verdisco, Esquire

-Counsel for AEC Regulatory Staff Atomic Safety, and Licensing U. S. Atomic Energy Comreission Board Panel Washington,.D. C. 20545 U. S.- Atomic Energy Commission

-Washington, D.12. 20545 4

k kc+ f 85 0.'

Robert A. Jablon Attorney for the Municipals of Cold.ater, Grand Haven, Holland, Traverse City, and Zeeland, the Michigan Municipal Electric Association, Northern Michigan Electric Cooperative and Wolverine Electric Cooperative Law Offices of:

Spiegel & McDiarmid ,

2600 Virginia Avenue, N. W.

Washington, D. C. 20037

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