ML19329E937
| ML19329E937 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 03/02/1976 |
| From: | Bannan C, Leckie D, Levin M JUSTICE, DEPT. OF |
| To: | NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP) |
| References | |
| NUDOCS 8006180805 | |
| Download: ML19329E937 (153) | |
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CONSUMERS POWER COMPANY )
) Docket Nos. 50-329A /
Midland Nuclear Units 1 and 2 ) 50-330A I
REPLY BRIEF OF THE UNITED STATES DEPARTMENT OF JUSTICE.
THIS DOCUMENT CONTAINS P00R QUALITY PAGES THOMAS E. KAUPER JOSEPH J. SAUNDERS Assistant Attorney General DAVID A. LECKIE C. FORREST BANNAN MARK M. LEVIN JONATHAN C. ROSE JUDY L. GOLDS".EIN Deputy Assistant Attorney General Attorneys, Antitrust Division U. S. Department of Justice March 2, 1976 8006180 Of .g
(} TABLE OF CONTENTS Page T a b l e o f C a s e s --- - - -- - - - - -- - --- - - - - - -- - -- - - - - - -- - - - - - -- V Introduction an.d Summary of Argument------------------- 1 A. Introduction------------------------------ 1 B. Summary of Argument------------------------ 2 I. Applicant's Attempt to Support the Hearing Board's Finding as to the Scope of the Relevant Matters in Controversy is Totally Without Merit--------- 5 A. The Statement of Relevant Matters in Controversy Set Out in the Hearing Board's August 7. 1972 Order Cannot Reasonably be Read as Narrowly as Applicant Proposes-------- 7
- 1. Wholesale Territorial Allocation Agreements--------------------------- 11
- 2. Monopolistic Intent-------------------- 12
([ 3. Whalesale Wheeling--------------------- 12 B. Neither the Legislative History of Section 105c nor any Purported Understanding thereof by the Department of Justice Supports the Limitation on the Relevant Matters in Controversy Suggested by Applicant---- 14 C. Applicant's Claim of Prejudcie Arising From Consideration of Evidence Found by the Hearing BOacd to be
- Outside the Relevant Matters in Con tr over sy is Unf o und ed----------------- 20 II. The Inconsistency Standard Promulgated By The Hearing Board Is Supported By The Legislative History of Section 105c And Applicant's Contention To The Con tr a ry Is Wi tho ut Me r i t---------------- 28 III. Applicant's Refusals to Deal Establish the Requisite " Willfulness" Element of the Of f ense of Monopolization------------- 37 (s) i I
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, Page im IV. The United States Supreme Cour t Has Rejected Many of the Defenses Applicant Sc 2ks to Raise to the Charge of Monopolization--------------------- 43 V. Applicant's Bulk Power Requirements Must be Included In the Relevant Wholesale Power Market to Accurately-Assess Applicant's Market Power--------------------------------- 51 VI. Applicant's Dealings With the Small Electric Utilities in Michigan Evidence Willful Monopolization of the Relevant Wholesale and Retail Electric Power Markets---------------- 55 A. The Hearing Board's Finding that Applicant has the Specific Intent to Monopolize the Relevant Retail and Wholesale Power Markets is Based on Substantial Evidence and Appropriate Legal Theory and has not been Refuted by Applicant-------- 58 B. The Hearing Board's Finding That i
Applicant has the Specific Intent to Monopolize the Relevant Retail and Wholesale Power Markets is Fully Consistent with and Supported by Other Evidence of Record----------------- 74
- 1. Applicant Has Refused to Coordinate With Smaller Systems Except on Unreasonable and Discriminatory Terms; Its Claims to the Contrary are Without Merit------------------------ 74
- a. Applicant's Alleged Justifica-tions for its Anticompetitive Coordinating Policies are Fallacious----------------------- 74
- b. Applicant's Outright Refusals to Coordinate Reserves Were Unreasonable---------------- 78
- c. Applicant's Refusals to Share Reserves on Equal Percentage
{ - Principles We re Unreasonable----- 81 11 2,.__ . _ . _ . _
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- 2. Applicant has Failed to Refute f
(, the Hearing Board's Finding
, that its Conduct Amounted '
to a General Refusal to Wheel-------------------------------- 84
- 3. Applicant's Assertion of the Appropriateness (af its Denial of Direct Access to the Midland Nuclecc Unit is Unfounded------------------------- 93
- 4. Applicant Fails in its Effort to Overcome the substantial Evidence of Other Conduct Which Reflects the Purposeful Maintenance and Expansion of its Monopoly---------------------- 102
- a. Third Party Interconnections------- 103
- b. Preemptive Coordination------------ 103
- c. Territorial Agreements------------- 105
- d. Hydroelectric Facilities----------- 107 C. Conclusion--------------------------------- 108 VII. Applicant has Failed to Overcome the Nexus. Which the Department of Justice has Demonstrated in This Proceeding, Between the Situation Inconsistent With the Antitrust Laws Presently Existing in Michigan's Lower Peninsula and the Activities Under the Midla nd Nuclear License s----------- 109 A. Applicant's Nexus Argument----------------- 114 B. The Fact of Nexus-------------------------- 121 VIII. Applicant's Contentions As To The Scope and Formulation of Appropriate License Conditions A r e M i s c o n c e i v e d ------------------------------ 132 A. The Question Of Remand--------------------- 132 B. Alleged Narrow Scope Of Relief-------------
134
- 1. So-called Nexus Under Section
(' 105c(6)-------------------------------- 135 111 .
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- 2. Administrative Comity and Primary Jurisdiction Principles -------------------------- 141
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C. The Irrelevance of Alleged '
Harm to Applicant in Determin-ing Appropriate Relief------------------- *144
- 1. Appropriate Access to Midland---------- 145
- 2. Back-up Power-------------------------- 149
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D. Relief Allegedly Unrelated to t he M id l a nd U n i t s------------------------ 150 E. Conclusion--------------------------------- 150 4
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( LEGAL CITATIONS Alabama Power Company (Joseph M. Parley Nuclear Plant, Units 1 and 2) AEC Docket Nos.
50-348A and 50-364A, Memorandum and Order, (February 9, 1973) . . . . ........... 71,,114 British Oxygen Co., 3 CCH Trade Reg. Rep . V 21. 06 3 ( FTC Dec . 8, 1975) . . . . . . 54 California v. FPC, 369 U.S. 482 (1962) . . . . . . 142 City _of Lafayette v. SEC 454 F.2d 941 (D.C. Cir. 1971), aff'd sub, nom. . . . . . . . 116a City _of Statesville v. AEC, 441 F.2d 962 (D.C. Cir. 1969) . . . . . . . . . . . . . . 98, 100 Continental Ore Co. v. Union Carbide Corp., . . . 58 370 U.S. 690 (1962)
Conway Ccrporation v. FPC, 510 F.2d . . . . . . . 117 1264 (D.C. Cir. 1975)
Dahl, Inc. v. Roy Cooper Co., 448 F.2d
(' 17 (9th Cir. 1971) . . . . . . . . . . . . . .
61 Eastern R. R. Presidents Conf. v. Noerr Motor Freight, Inc., 36 U.S. 127 (1961) . . . . 70, 72, 73, 105 !
Eastman Kodak v. Southern Photo Materials, ,
273 U.S. 359 (1977) . . . . . . . . . . . . . . 40, 41 I Elco Corp. v. Microdot, Inc. 360 F. Supp. 741 (D. Del 1973) . . . . . . . . . . . . . . . . 52 l FPC v. Idaho Power 189 F. 2d 685 l l
(D.C. CIr. 1350) . . . . . . . . . . . . . . . ., 118 FPC v. Idaho Power Company 344 U.S. 17 (1952) . . . . . . . . . . . . . . . . . . . . 118 Gainesville Utilities Dep't v. Florida Power Corp., 40 FPC 1227 (1568), 41 FPC 4 (1969).
rev'd, Florida Power Corp. v. FPC, 425 F.2d 1196 (Stack. 1970) Reinstated 402 U.S. 515 (1971) . . . . . . !......... 75, 76, 81, 82 v
m,
( Page Gulf States Utilities Co. v. FPC.
411 U.S. 747 (1973) . . . . . . . . . . . . . Il6a Kansas City Power and Light Co.
(Wolf Creek Generating' Station, Unit 1), NTC Dkt. No. 50-482A, Decision, (November 21, 1975) . . . . . . . . 11 9 Kansas Gas and Electric Company and Kansas City Power and Light Company (Wolf Creek Generating Station, Unit No. 1) NRC Dkt. No. 50-4Q2A, Decision of Atomic Safety and Licensing Appeal Board, (June 30, 1975). . . . . . . . . . . . . 115, 116, 119 Lamb Enterprises Inc. v. Toledo Blade Co.,
461 F.2d 506-(6th Cir. 1977) . . . . . . . 8, 71. 72 Lorain Journal v. United States, 342 U.S.
143 IT951) . . . . . . . . . . . .- . . . . . . 40 Louisiana Power and Light Co. (Waterford Steam Electric Generating Station, Unit 3),
NRC Dkt. No. 50-382A. Memorandum and l.
Opinion of Board with Respect to Petition to Intervene in an Antitrust Hearing Relating to Application for Construction Permit, (April 24, 1973) . . . . . 111, 112, l 113 i Louisiana Power and Light Company l (Waterford Steam Electric Generating Station, Unit 3) NRC Dkt. No. 50-328A i Memorandum and Order September 28, 1973 . . . . 119 Louisiana Power and Light Company (Waterford Steam Generating Station Unit No. 3) NRC Dkt. No. 50-382A, Memorandum of Board with Respect to Appropriate License Conditions which ,
l Should be Attached to a Construction Permit Assuming Arguendo a Situation Inconsistent with the Antitrust Laws, (October 24, 1974) . . 101, 137, l 146, 147, ,
' 148 Louisiana Power - and Light Company l
(Waterford Steam Electric Generating Station, Unit 3) NRC Dkt. No. 50-38 2A l O . . . . 110, 116, 133 l
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{. Page Milwaukee Towne Corp. v. Loew's, Inc.,
190 F.2d 561 (7tE Cir. 1531), cert, ~
den. 342 U.S.-909 (1952) . . . . . . . . . . . 93 Mobil Oil Company v. FPC, 483 F.2d 1235 (D.C. Cir. 1973) . . . . . . . . . . . . . 140 Municipal Electric Ass'n of Mass. v. SEC, 413 F.2d 1D32 (D.C. Cir. 1969) . . . . . . . . . 98, 116a, 142, 143, 144 Northern California Power Agency v. FTC, 514 F.2d 164 (D.C. CIr.), cert. denied U.S. , 4T U . S . L . '.l .
3764 (Oct. 7, 1975). . . . . . . . . . . . . . 116a, 144 Packaged Programs, Inc. v. Westinghouse Broadcasting, 755 F.2d 708 (3d Cir.
I555) . . . . . . . . . . . . . . . . . . . . . 40 Ricci v. Chicago Mercantile Exchange, 409 U.S. 289 (1973T Saunders v. National Basketball Ass'n.,
-- 335 PT Supp. 649 (N.D. III. 1972) 93 b . . . . . . .
Scott Publishing Co. v. Columbia Basis Publishers. Inc., 293 F.2d 15 (9th Cir. 1960) . . . . . . . . . . . . . . 61 , 62 Six Twenty Nine Productions v. Rollins -
Telecasting. Inc. 365 F.2d 478
( 5th Cir .1966) . . . . . . . . . . . . . . 40 South End Oil Co. v. Texaco, Inc. 237 F. Supp.
650 (N.D. IIIT 1965) . . . . . . . . . . . . . . 62 United Mine Workers of America v.
Pennington, 38I U.S. 637 (3965). . . . . . . . 70, 71, 72, 73, 105 United States v. Aluminum Company of America, 148 F.2d 416 (2d Cir.
1945) . . ..................
51, 54 4
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l Page United States v. Associated Press, 52 F. Supp. 362 (S.D.N.Y.
1943) . . . . . . . . . . . . . . . . . . 46, 54 United States v. Blue Bell, Inc., 395 P. Supp. 538, 543 (M.D. Tenn. 1975) . . . . . . . . . . . .
52 United States v. Greater Buftalo Press, 402 U.S.
549 (1971) . . . . . . . . . . . . . . . . 53, 54 United States v. Griffith, 334 U.S. 100 (1948) . . . . . . . . . . . . 45, 46 United States v. International -
Business Machines, CCH 1975 Trade Ca.160, 495 (S.D. N.Y.
1975) . . . . . . . . . . . . . . . . . . . 55 United States v. International Telephone & Telegraph 324 F.
' C' Supp. 19 (D. Conn 1970) . . . . . . . . . . 54 United States v. Jerroed Electronics Corp. 187 F. Supp.
545 (E.D. Pa. 1960), aff'd. per curiam 365 U.S. 567 (1961) . . . . . . . . . 59 United States v. Otter Tail Power Company, 410 U.S. 365 (1973). . . . . . . . . 39, 40, 43, 44 45, 46, 47, 48, 49, 50, 91 Judgment:
United States v. Otter Tail Power Company, 1972 Trade Cas. 173, 791 (D. Minn. 1971) . . . . . . . . 47 United States v. Philadelphia National Bank, ?/4 U.S. 321 . . . . . . . . . 142 (1963) viii
. C.
,*@-- # % h =m-g * -eo e ewweem g _ .m w m p i
+.
C Page United States v. Phillipsburg National Bank, 399 U.S. 350
- T1970). . . . . . . . . . . . . . . . . . . . s2 United States v. Un..ted Shoe Machinery Corp., ITO F. Supp.
295 (D. Mass. 1973,. aff'd per curiam, 347 U. b. 521 (1954 . . . . . . . 55, 60, 61 ,
United States v. United States Gypsum Co., 340 U.S. 76 (1950). . . . . . . . 145 Western Massachusetts Electric Co.
39 F.P.C. 723 (1968), modified, 40 F.P.C. 296, aff'd sub nom.
Municipal Electric Ass'n or Massachusetts v F.P.C. , 414 F. 2d 1206 (D.C. Cir. 1969) . . . . . . . . . . . . 117
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LEGISLATIVE MATERIAL Page Hearings:
Hearings on the Prelicensing Antitrust Review of Nuclear Power Plants Before the Joint Committee on Atomic Energy.
91st Cong., 1st Sess., pt. 1 (1969) . . . . . . . . . . . . . . . . . . 15, 16, 17, 18, 19, 33 Hearings on the Prelicensing Antitrust Review of huclear Powerplants, Before the Joint Committee on Atomic Energ, 91st Cong., 2d. Sess., pt. 2 (1970). . . . . . . 15, 30, 31, 36, 100 Reports:
H.R. Rep. No. 670, 81st Cong.,
1st Sess. (1949) . . . . . . . . . . . . . . 33 r(, S. Reo. No. 1699, 83rd Cong.,
2d. Sess. (1954) . . . . . . . . . . . . . . 16, 29, 31, 136 S. Rep. No. 91-1247; H . R. Rep..
No. 91-1470, 91st Cong., 2d Sess. (1970) . . . . . . . . . . . . . . . . 32 Debates:
Cong. Rec. S. 19254 (December 2, 1970) . . . . . . . . . . . . . . . . . . 31 Cong. Rec. S 19256 (December 2, 1970) . . . . . . . .. . . . . . . . . . 30 Statutes:
Atomic Energy Act 42 U.S.C.
S2135. . . . . . . . . . . . . . . . . . . . passim Federal Power Act 16 U.S.C. S792 et. seg. . . . . . . . . . . . 117 0
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ W
INTRODUCTION AND
SUMMARY
OF ARGUMENT __
A. Introduction On November 13, 1975, the United States Department of Justice (" Department") filed its Brief In Support Of Excep-tions To The Initial Decision Of The Hearing Board; at the same time the Nuclear Regulatory Staff ("NRC Staff") and the Michigan-Cities and Cooperatives ("Intervenors") filed briefs in support of their exceptions to the Initial Decision. On January 26, 1976, Consumers Power Company (" Applicant") filed a Brief responding to the Exceptions of the Department, as well as those of the NRC Staff and the Intervenors. Pursuant to the Order of this Appeal Board, dated July 15, 1975, as subsequently modified, the Department hereby files a Reply Bridf,. which addresses many of the factual and legal contentions raised by Applicant's January 26, 1976, Brief (" Appeal Brief for Applicant").
It should be noted that we have not attempted herein to address issue by issue the matters raised by Applicant, nor have we undertaken a point by point reply to the factual assertions propounded by Applicant. Rather, our Brief in Support of Exceptions To The Initial Decision (" Appeal Brief for the Department") sets forth the full basis of our appeal from the Initial Decision, and we have now attempted only to highlight the major inaccuracies in Applicant's defense of the Initial Decision.
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B. Summary of Argument The Department has alleged and proved in this proceeding that: (1) Applicant has consciously and willfully monopolized the wholesale and retail electric power markets in a substantial portion of the lower peninsula of Michigan and that this is a situation manifestly inconsistent with the antitrust laws; and (2) the activities under the Midland licenses, namely the construction and operation of the Midland Nuclear Units and the marketing of power f rom those units, will maintain and indeed exacerbate this situation. In other words, we have met the requirement for an af firmative finding under Section 105c(5), and therefore, the NRC is obligated under Section 105c(6) to condition the Midland Nuclear licenses in such a manner as to eliminate the situation inconsistent with the antitrust laws.
Applicant, of course, disagrees with virtually every contention of the Department and would have this Board affirm the Initial Decision of the Hearing Board ("ID"). */ The principal thrust of Applicant's argument is that the Hearing Board's limiting of the scope of this proceeding to the reason-ableness of Applicant's " coordination" transactions was correct; that its coordination transactions do not provide a basis for finding a violation of the antitrust laws, which it asserts
- / Except in two rather important respects. It seeks to overturn the Hearing Board's finding that its conduct amounted to a general refusal to wheel (ID at 142) and tha t it has the specific intent to monopolize the relevant re tail and wholesale electric power markets (ID at 155).
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o is the appropriate standard under Section 105c; that even assuming the existence of a situation inconsistent with the antitrust laws the activities under the Midland licenses will not maintain it; and finally, assuming that an affirmative finding is made under Section 105c(5) the scope of appropriate relief under Section 105c(6) is extremely narrow.
This brief addresses these principal contentions of Applicant. First. we will demonstrate that the Hearing Board's finding concerning the scope of the relevant matters in controversy is erroneous and that Applicant's attempts to buttress this finding fail. (Section I). Second , we will show that Applicant's contention that a violation of the antitrust laws must be shown under Section 105c is totally erroneous (Section II) and that the legal standards which Applicant propounds as necessary to establish a violation of the Sherman Act are likewise erroneous. (Sections III, IV and V).
Third , we will then turn to the substantiel evidence of record which reflects a conscious and willful monopolization of the wholesale and retail power markets in Michigan's lower
-peninsula and to Applicant's f utile attempt to negate this evidence. (Section VI). In 'this section we will address the correctness of the Hearing Board findings as to Applicant's specific intent so monopolize'and other conduct by Applicant reflecting this intent (which includes virtually all of-Applicant's dealings with the smaller electric utilities in its area). We will also demonstrate the inability r* Applicant 3
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to overcome ' the Hearing Board's finding and the clear import of - its other ' conduct.
Fifth, we will_ highlight the factual and legal deficiencies in- Applicant's; argument as to the lack of nexus between the situation' inconsistent with the antitrust laws and the Midland Units. Finally, we will show that Applicant's effort to unduly limit 1 the- scope of relief in this proceeding is totally at odds with the unambiguous language of Sect' ion 105c, and its legislative . history and is factually unfounded.
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I.
Applicant's Attempt to Support the Hearing Board's
. Finding as to the Scope of the Relevant Matters in Controversy is Totally Without Merit The Hearing Board, relying principally on its Order of August 7, 1972, */ construed the relevant matters in controversy in its Initial Decision to exclude consideration of any conduct by Applicant which did not directly involve a " coordination" transaction. Under this limitation of the issues, the Hearing Board held that evidence relating principally to three issues, (1) wheeling of wholesale power, (2) specific intent to monopo-lize by Applicant, and (3) territorial allocation agreements, was irrelevant to its determination of the existence or nonexistence of a situation inconsistent with the antitrust laws (ID at 150-167). **/ Applicant now attempts to . support this artificial
- / In relevant part:
"The basic thrust of Justice's case is that (a) ap-plicant has the power to grant or deny access to co-ordination; (b) applicant has used this power in an anticompetitive fashion against the smaller utility systems; (c) applicant's said use of its power has brought into' existence a situation inconsistent with the antitrust laws, which situation would be main-tained by activities under the licenses that appli-cant seeks. Neither the intervening parties nor the Atomic Energy Commission's regulatory staff enlarge this scope. Hence, the scope of the relevant matters in controversy is as herein outlined."
- / Additionally, the Hearing Board, by finding that the only relevant market was " coordinating services" (ID at 30) appears to have ignored evidence regarding Applicant 's monopoly power in the retail and wholesale power markets. In a section of the Initial Decision,. entitled " Background Facts" (ID at 105-23), it sets forth 'many facts regarding the relative sizes and competitive (Footnote continued, over) 5 I g
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limiting of the relevant matters in controversy with essentially three a:guments.
Fi r s,t , it urges that since all parties agreed to "coordina-tion" as the issue "in controversy," all parties should now be bound by this stipulation. While we do not contest the principle that parties should be bound by a stipulation into which they have entered, we submit that the artificial and technical limita-tion Applicant now seeks to impose on the term " coordination" is unfounded. Moreover, the relevant matters in controversy, as set out in the. Hearing Board's August 7, 1972 Order, are not as
' limited as the Hearing Board found af ter the hearing and as Ap- !
plicant would now have this Board believe. (infra. I-A.)
Second, Applicant appears to rely on the legislative history of Section 105c as somehow supporting the Hearing Board's narrow construction of the relevant matters in controversy (Brief for Applicant at 25-28). Although the thrust of this argument is not entirely cle~ar, Applicant seems to be saying, not that considera-tion of issues beyond " coordination" is, in fact, prohibited by Section 105c and its legislative history, but rather that the Department, the NRC Staff and the Intervenors agreed to narrow the scope of this proceeding because they purportedly recognized (Footnote continued from previous page) tive abilities of the utility systems in Michigan's lower penin-sula.- However, it is unclear whetherthe Board considered this evidence to be beyhond the relevant matters in controversy and if not, what relevance, if any, the Board attached thereto.
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l' that such narrowing was compelled by the legislative history.
This is, of course, a fine distinction, and it perhaps reflects Applicant's recognition that the entire legislative history of 105c, including specifically the full text of statements by De-partment of Justice spokesmen, fails to support, much less man-date, the Hearing Board's posthearing artificial narrowing of the relevant matters in controversy (infra, I-3).
Finally, and seemingly the principal contention on which Ap-plicant relies in its support of the Hearing Board's posthearing limitation of scope, Applicant claims that to consider evidence which the Hearing Board found not to be within the relevant mat-ters in controversy would be grossly unfair and prejudicial to it.
The basis for this assertion is the supposed reliance by Appli-cant on the Board's Order of August 7, 1972, in the preparation and presentation of its case. While we do not necessarily ques-tion that Applicant relied on this Order, the exhaustive discov-ery conducted by Applicant in this proceeding af ter August 7, 1972, the content of its direct case, and its cross-examination of witnesses sponsored by the Department of Justice all belie any-contention that it relied on the Board's Order of August 7, 1972, as it was subsequently interpreted by the Hearing Board in the-Initial' Decision, (infra, I-C).
A. The Statement of Relevant Matters in Controversy Set Out in the Hearing Board's August 7, 1972, Order-Cannot Reasonably be Read as Narrowly as Applicant Proposes The relevant matters in controversy, established by the Hearing Board's August 7, 1972 Order, require answers to essen-7
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tially three questions (before reaching the question of nexus):
first, does Applicant have the power to grant or deny access to coordination; second, Applicant exercised this power ;
thir6, has such exercise has brought into existence a situation inconsistent with the antitrust laws, and if so, what is that situation? The limitation on scope adopted by the Hearing Board posthearing, which Applicant now attempts to defend, wot:26 ce appropriate only if the relevant matters in controversy wece limited to the second point, whether Applicant has exercised the power to grant or deny access to coordination in an unreasonable or anticompetitive manner. No examination as to the genesis or existence of the power would have been necessary, nor would the Board have been required to determine the ef fect of Applicant's exercise of this power on the competitive relationships in elec-tric pouer markets in Michigan's lower peninsula. Each coordina-tion transaction or refusal to coordinate could be scrutinized in isolation and its reasonableness evaluated.
This, of course, is precisely the approach adopted by the Hearing Board. Its illogic becomes apparent when one remembers that the purpose of a proceeding under Section 105c is to deter-mine whether the activities' under a nuclear license will create or maintain a situation inconsistent with the antitrust laws.
Under the scope adopted by the Hearing Board in the Initial Deci-sion, par ticularly when coupled with its piece-meal analysis of Applicant's conduct to determine whether each incident, standing alone, was a situation inconsistent with the antitrust laws, the 8
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Department apparently would have been required to establish that the Midland licence activities would somehow maintain Applicant's unreasonable exercise of the power to grant or deny access to co-ordination,rather than simply maintenance of its power to grant or deny access to coordination, or maintenance of its monopoly of the relevant wholesale electric power market.
The basic thrust of the Department's case is and always has been that Applicant has the power to grant or deny meaningful access to coordination and has exercised this power with the purpose and anticipated effect of monopolizing the wholesale-for-resale firm power market. */ This is the situation to which Ap-plicant's exercise of its power to grant or deny access to coor-dination has been directed, and which the Midland license activi-ties will maintain. Thus, the Department introduced evidence demonstrating Applicant's monopoly position in the r21evant mar-kets, as well as its purposeful acquisition and continuation of that monopoly; and Applicant introduced evidence attempting to rebut a finding of monopolization. Neither side limited itself to evidence relating to the reasonableness of what the Hearing Board ultimately found to be " coordination" transactions.
Applicant suggests-that the Department indicated that the situation inconsistent with the antitrust laws which it would prove in this proceeding was " maintenance of the power to grant or deny access to coordination" (Brief for Applicant at'23).
- / See, e.g., Prehearing Brief for Department at 38-53.
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This presumably is tantamount to an allegation of monopolization 9
- of coordinating services. The full discource at the prehearing conference of July 12, 1972, and the subcequent Board Order of August 7,1972, demonstrate the illogic of contending that " main-tenance of the power to grant or deny access to coordination" is the solo situation the Department sought to prove. To establish monopolization of coordinating cervices, the Department would have need shown merely that Applicant had such power and that it had been willfully acquired by Applicant. It would not have been necessary to allege, as counsel for the Department did, that Ap-plicant "has used it in an anticompetitive f ashion against the small systems."
The clear import of charging anticompetitive use of the pow-er to grant or deny access to coordination is that such exercise impacted on the competitive relationship between Applicant and the l
small systems in some way other than monopolization of "coordina-ting services" and it was this impact which was the situation in-consistent with the antitrust laws. The Hearing Board's August 7, 1972, Order recognizes this by requiring , in point (c), an in-guity into whether Applicant's anticompetitive exercise of the power to grant of deny access to coordination "has brought into being a situation inconsistent with the antitrust laws . . .
(emphasis added).
A contrary reading of the August 7,1972, Order would . re-quire a circular (and meaningless) inquiry, i.e., first, does Applicant have a monopoly of coordinating services, second, has
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it used it in an anticompetitive fashion, and third, has this brought into existence a monopoly of coordinating services.
. Turning now to the specific items which the Hearing Board and now the Applicant would exclude from consideration as not being within the relevant matters in controversy, it is apparent that all three are relevant if a realistic reading of the August 7, 1972, Order is undertaken.
To emphasize once again, the thrust of the Department's case is that Applicant has monopolized the wholesale-for-recale firm bulk power market and it has accomplished this monopolization through exercise of its power to grant or deny access to coordi-nation.
- 1. Wholesale Territorial Allocation Agreements As noted in our Brief in Support of Exceptions (at 152 n*),
the existence of territorial allocation agreements has a direct bearing on Applicant's refusal to deal on reasonable terms in
. coordinating services and its monopolization of the wholesale-for-resale electric power market. Such agreements augment Applicant's already considerable power in the relevant geographic market. The potentia 1' availability of a competitive bulk power supply alter-native,- had it not been denied by these " gentleman's agreements,"
.may well have reduced Applicant's control over the small utilities' opportunities to obtain coordinating power. Moreover, these agreements, far excluding a potential competing wholesale supplier, clearly aid Applicant's monopolization of the wholesale bulk 11 e
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power market, which is the situation which we have alleged to be inco'nsistent with the antitrust laws.
- 2. Monopolistic Intent A second " situation" found by' the Board posthearing to be beyond the relevant matters in controversy is Applicant's specif-ic intent to acquire all of the small Michigan electric systems.
Applicant, of course, supports the Board in this conclusion, but would, in attempting to refute the Board's finding of specific
~ intent, segregate the basis for the finding into three activities
-- acquisitions, political activity and a speech by R. L. Paul
-- a nd argue that each is beyond the scope of matters in contro-versy.
We submit that evidence bearing on Applicant's specific in-tent to monopolize the wholesale-for-resale firm power market is extremely relevant where, as here, the situation alleged to be inconsistent with the antitrust laws is monopolization of that very market.
Moreover, this specific intent to monopolize goes a long way to explain the purpose and intent of Applicant's coor-dination policies vis-a-vis the small systems.
- 3. Wholesale Wheeling Finally, the Hearing Bo~ard and Applicant purport to define a distinction between the wheeling of wholesale bulk power and the wheeling of coordinating power. Wheeling for the first purpose is supposedly not " coordination" and is, therefore, beyond the scope of the relevant matters in controversy, whereas the second 12 n
- r
~
type of wheeling is " coordination" and can, therefore, he con-sidered in determining the existence or non-existence of a sit-uation in. consistent with the antitrust laws.
Initially, it should be noted that such a distinction re-garding purposes of wheeling finds no basis in the record of this proceeding, nor did Applicant, at any time prior to the filing of its Appeal Brief, suggest to the contrary. Applicant has consistently treated " wheeling" as " wheeling." For example, the prepared testimony of Applicant's expert witness, Wilbur E.
Slemmer, states in part:
Q. How do you define " wheeling"?
A. I define wheeling as the supplying of a transmis-sion service to another system where there is no further participation in the transaction by the transmitting system. (Slemmer and Pace , PT at 20-21)
It is significant tha t , faced with the testimony of its own expert witness, Applicant never specifically attempts to explain how wheeling, which it has treated as being a single type of transaction, can be both " coordination" and "not coordination."
However, Applicant does suggest, although never clearly articu-lating this point,that wheeling is not in fact a " coordination" transaction (Brief for Applicant at 295 n. 235; 31) and tha t the
-focus should be on the reason for which wheeling was requested.
This . approach, seemingly the one adopted by the Hearing Board, ig-notes the fact that wheeling, whatever its purpose, is ' essentially a coordination of the transmission systems of the utilities in- i volved.
13 9 _ .-
Finally, even if this Board should adopt a restrictive defi-nition of the term " coordination" such that wheeling of wholesale power is not included, Applicant's policy in this respect is
'nevertheless relevant to its intent to mo.nopolize the wholesale-for-retail firm power market.
-B. Neither the Legislative IIistory of Section 105c nor any Purported Understanding thereof by the Department of Justice Supports the Limitation on the Relevant Matters in Controversy Suggested by Applicant To support its argument that the legislative history of Sec-tion 105c somehou buttresses the Hearing Board's finding as to the narrow scope of the relevant matters in controversy, Appli-cant cites principally the testimony of the then Acting Assistant Attorney General, Antitrust Division, Walker B. Comegys (Brief for Applicant at 26-27). Applicant suggests that Mr. Comegys
" offered assurances" that a narrow scope of antitrust review, presumably not extending to issues beyond " coordination," was contemplated. The full text of that paragraph of Mr. Comegys' testimony */ makes clear that the Department informed Congress
- / The. entire paragraph reads:
The advice will, or course, be grounded on judi-cial interpretation and application to particular fac-tual situations of the standards of Section 1 and 2 of the Sherman Act and Section 7 of the Clayton Act.
On this basis, antitrust review would consider the contractual arrangements and other1 factors governing how the proposed plant would be owned and its output used. We would also consider the arrangements under which it'would be built and supplied. No broader scope of review is contemplated, cognizant as we are of the need to avoid delays in getting atomic electric (Footnote continued, over) 14
.____m__
~~~~ ~
p
that it would evaluate the " par ticular factual situations" in-volved in grar. ting nuclear licenses according to well-established antitrust standards, including those developed under Section 2 of the Sh'erman Act. Mr. Comegys specifically indicated that Sec-tion 2 standards, which necessarily involve an inquiry into mar-ket position, competitive relationships and monopolistic intent, would be applied in examining appropriate " factual situations."
,Moreover, the legislative history of Section 105c shows that the only type of a situation inconsistent with the antitrust laws the Department "gave assurances" would be " unconnected with the plant under review" was a supplier-utility arrangement. */ It is significant, we believe, that the Joint Committee Report adopt-ed this example in indicating, by negative illustration, what is meant - by the term " activities under the license":
The standard pertains to the activities of the license applicant. The activities of others, such as design-ers, fabricators, manufacturers, or suppliers of mate-rials or services, who, under some kind of direct or indirect contractual relationship may be furnishing (Footnote continued from previous page) plants into operation. He do not consider such a li-censing proceeding as an appropriate forum for wide-ranging scrutiny of general industry affairs essen-tially unconnected with the plant under review (Hear-ings on the Prelicensing Antitrust Review of Nuclear Powerplants, Before the Joint Committee on Atomic Energy, 91st Cong., 2d Sess., pt. 2 at 366 (1970)
(he,reinafter, Hearings, pt. 2).
- / Hearings on the Prelicensing A3titrust Review of Nuclear Power Plants, Before the Joint Committee on Atomic Energy, 91st ,
Cong., 1st Sess., pt. 1 at 140, 144 (1969) (hereinafter Hearings, pt. 1).
15 l
l
equipment, materials or services for the li-censed facility would not constitute " activities under the license" unless the license applicant is culpably involved in activities of others that fall within the ambit of the standard. (H.R. Rep . No .
91-1470, 91st Cong., 2d Sess. at 31 (1970) (herein-after Report.)
Applicant's second citation to the legislative history of Section 105c, the comments of Acting Assistant Attorney General Comegys regarding the impact of power pooling, lends no support to Applicant's argument, and in fact shows that the Department informed Congress that a broad scope of inquity under Section 105c might be necessary. Although Applicant characterizes this
' testimony as being "[a] similar disclaimer" (Brief for Applicant' at 28 n. 9), presumably of a broad inquiry under 105c, */ when read in its entirety, a significantly different picture of what he intended to convey emerges. **/
Finally, Applicant claims that "[t]he restricted scope of antitrust review under Section.105c is further illuminated by Mr. Comegys' testimony in which he indicated joint venture issues were of "particular concern to the electric utility industry" (Id. at 27 n. 9). Besides failing to note that Mr. Comegys also
- / Applicant merely calls Mr. Comegys' testimon- a " disclaimer,"
but does not -indicate of what (Id. at 28 n. 29), We presume, however, that Applicant is attempting to utilize this testimony for the. same purpose as it was cited in Applicant's Post Trial Brief,.namely, as evidence of "a disclaimer that the provisions
[of 105c] would be made the vehicle for inquiry into the gen-eral characteristics of a utility's operations" (Post Trial Brief-for Applicant at 18 n. 35).
- /- Hearings, pt. 1 at 133. The full text of this testimony Is set out at pages 10-11 of the Reply Brief of the Department of Justice, dated November 25, 1974.
16 1
.. .__ _ _ _ ._ _ __ 4
stated that plants owned by a single utility would be subject
.to scrutiny under Section 105c, */ Applicant cites legislative history which provides no " illumination" on the question of scope and is in fact irrelevant to that issue.
In sum, the legislative history Applicant cites as indi-cating- the Department "of fered assurances" that its inquiry under - Section 105c would be extremely narrow supports no such conclusions. Moreover, such a contention conflicts with other
" assurances" as to the scope of inquiry under Section 105c, which the Department provided Congress and which Applicant chooses to ignore. In his testimony, Mr. Comegys addressed the question of overlap between the jurisdiction of the NRC and that of the SEC and FPC, indicating that NRC jurisdiction pursuant to Section 105c and the scope of inquiry thereunder should not be curtailed by such overlap:
Assuming that in some cases antitrust advice will require companies to alter their initial plans, and that the AEC may have to condition its licenses in some cases to make the licensed projects consis-tent with antitrust principles, how will this be re-conciled with the activities of the Federal Power Commission, the Securities and Exchange Commission, and State and local utilities commissions?
We expect little overlap between the State ac-tivity.of setting retail rates and the AEC's con-sideration of antitrust issues in licensing la re g
. generating plants. There could be greater overlap with FPC - activity to assure the reasonabiness of wholesale rates, and to fostet interconnect 1ons.
But, as noted before, in many cases the FPC may l be unable to act, or may not have taken action. Also AEC actions could affect some of the same activities
- / Hearings pt. 1 at 133.
17 wa.ei m **m9.. .' + - - -
as SEC orders concerning the financial and ownership aspects of holding company trans-actions.
We would not procose that the AEC be recuired to be bound by past PFC or State commission deci-sions. The electric utility industry is changing and developing rather quickly. The lav concerning the application of antitrust policies in regulated industries has also developed rapidly in recent years, and we expect it to continue to evolve. All agencies involved in this inductry must be free to conform their judgments as closely as is possible to new cir-cumstances and the new understandings of appropriate economic policy. (Hearings, pt. 1 at 135; emphasis added.)
Subsequently, by a letter dated February 11, 1970, Assistant Attorney General McLaren responded to questions of the Joint Committee regarding certain portions of Mr. Comegys' testimony. */ In this letter, Mr. McLaren stated that the Department of Justice anticipated tha t the NRC vould act as the " primary forum" with recpect to antitrust issues which might be common to the NRC, FPC and the SEC:
Question 6(b). Since Mr. Comegys mentioned (p. 10) that AEC action might overlap FPC and SEC activities, is it desirable that there be provi-sions for coordinated decision making or that each agency make the decision in the area of its primary expertise? Isn't the need for coordination parti-cularly important, since the antitrust policies are the same and _ multiple, varying agency decisions could cause chaos?
We do not anticipate that there will be a pro-F: o with multiple and conflicting litigation of the antitrust issues. Upon enactment of the pro-posed legislation,-the Atomic Energy Act would 1
- / February 11, 1970 letter from Richard W. McLaren, Assistant Attorney General, Antitrust Division, to Edward J. Bauser, Execu-tive Director, Joint Committee on Atomic Energy; Hearings, pt. 1 at 143-149.
18 7_ _ , _, , _ - ~ , .
.--e~~-- . e-w - * ~ ~ ***
Weeme
' ^
b contain a carefully conceived and adequate procedure for eliciting the Attorney General's consideration of the antitrust problems surrounding the construction and ' operation of:a nuclear . generating station. In view of this, we would generally expect the Atomic Energy CommissTon to be the primary forum for the Attorney General's presentation of issues common to all the agencies which must grant regulatory approval.
Similarly, we think it likely that in most cases the other regulatory agencies would think it appropriate for the Atomic Energy Commission to procccd first Lwith its. hearing of the antitrust issues and would give the Commission's adjudication of these issues heavy weight. (Hearings, Part I at 145, emphasis added.)
It is, therefore, clear that the " assurances" actually given by the Department do not support any inference that the Department would confine itself to scrutinizing " coordination" transactions in.a vacuum.
From the above discussion it is apparent that the legisla-tive history of 105c does not compel a limitation of the relevant matters in controversy to a determination of the reasonableness of Applicant's coordination transactions, excluding wheeling.
Applicant's argument, then, becomes that the Department of Justice so misapprehended the legislative history of Section 20cc that it agreed to such a limitation. A review of the many pleadings filed in this proceeding by the Department of Justice, both before and af ter the July 12, 1972 prehearing conference, refutes any such suggestion. For example, the " Reply of the Department of Justice on Issues Other.Than Disqualification Raised by Applicant's
-Answer of May 9, 1972," filed by the Department on June, 9, 1972,
' extensively analyzes the legislative history of Section 105c and concludes;that examination of a broad range of conduct by Appli-cant.was appropriate and required under Section 105c.
19
- ' ~~~~
- T ::
C.- Ipplicant's Claim of Prejudice Arising From Consider'ation of Evidence Found-by the Hearing Board to be Outside the Relevant Matters in Controversy is Unfounded The primary thrust of Applicant's attempt to support the Hearing Board's artificially narrow definition of the relevant matters in controversy appears to be its assertion that consid-eration of issues beyond those which the Hearing Board defined posthearing as within coordination "would constitute serious and unfair prejudice against the- company" (Brief for Applicant at 21).
Much later in its Brief, Applicant explains this " prejudice":
The Company prepared its defensive case and conduct-ed its cross-examination on the basis of, and in re-liance on, the Board's ruling.
Such evidence as was presented in this case on matters unrelated to coordination was brought out piecemeal, principally in cross-examination of Com-pany witnesses testifying on other matters or in documents arguably relevant to other issues. (Appeal Brief for Applicant at 290-91.)
A review of the direct case presented by Applicant in this proceeding belies the reliance w .icn Applicant now claims to have placed on the August 7,1972 Order as ultimately interpreted by the Hearing Board. For example, the wheeling policies announced by Applicant's Chief Executive Officer, Aymond, during his di-rect testimony, clearly encompass wheeling of wholesale power (TR 8106-07). In light of what seems to be a clear attempt to "de-fend" its past wheeling nonpolicy (or as the Hearing Board found its " general refusal to wheel," ID at 142) by announcin'g a sup-1 posedly reasonable policy, */ it is difficult to understand how '
- / But in fact unreasonable and anticompetitive. (See infra) 20 '
-. _ _. _____.___.-.~._~_ ____ _
4 Applicant can claim it " prepared its defensive case" in reliance r_
on a stipulation as to scope which excluded wholesale wheeling.
Mr. Aymond's direct testimony also addressed the issue of territorial agreements with respect to wholesale power */, as well as Applicant's policy with respect to acquisitions . **/
Thus, Applicant's direct examination of its Chief Executive Offi-cer raised the issues of wheeling (uith no real distinction drawn between wheeling of wholesale pouer and wheeling of coordinating power), territorial agreements and Applicant's acquisitions.
It should be noted that there is little room for Applicant to suggest . that the content ***/ of Mr. Aymond's direct testimony was decided upon af ter the commencement of the evidentiary hear-ing as a response to matters raised in the Depar tmen t 's case ,
which until that point Applicant had deemed as beyond the rele-vant matters in controversy. On November 23, 1973, before the
- /
Mr . Aymond , during your tenure as Chief Executive Of ficer, has the company had any written or oral un-derstandings with any other electric utilities which would preclude it from offering wholesale service to another system?
We have not. (Aymond, TR at 6071)
- /
-~ Has the company sought to acquire all of the smaller utilities in its area?
It has not, that has never been our policy. (Aymond.
.TR at 6064)
- / Although the topics to be discussed by Mr. Aymond' in his
. directf testimony were- established prior to commencement of the i hearing, there is strong reason to suspect that the policies them-selves, particularly with respect to wheeling, were drafted as a response to .the evidentiary presentations of its adversaries.
'(See inf ra )
21
hearing began, counsel for Applicant provided the Department with " summaries of testimony to be presented by . . . witnesses on behalf of Consumers Power Company . . . ." */ The summary of Mr. Aymond's testimony reads:
Mr . Aymond 'will be the applicant 's policy wit-ness, and his testimony will be entirely confined to the applicant's past and current poliies with respect to the various issues uhich have been raised by the Department of Justice and intervenors. Specifically, he will discuss the applicant's past and current pol-icies, where they exist, with respect to wheeling power for other utility systems, interconnectioiis with other utifIty systems, sales of cover at whole-sale, mergers or acquisitions, and sales of unit pow-er and equity participation in nuclear plants. He also will discuss the company's policies with respect to competition for wholesale and retail load. Mr.
Aymond will have no~3Ehibits. (Emphasis added)
Similarly, the prepared testimony of Applicant's expert wit-nesses, Irwin Stelzer (PT at 21), Joe D. Pace (PT at 759-59),
' Abraham Gerber (stricken) and Wilbur E. Slemmer (PT at 21-23), who replaced Gerber, all address wheeling and draw no distinction be-tween wheeling of wholesale power and wheeling of coordinating power.
Further, Mr. Ross, counsel for Applicant in this proceeding, summarized for the Hearing Board the scope of R. L. Paul's direct testimony as follows:
He will discuss competition within the municipal limits of mucicipal electric systems, service and competition of municipals outside their permissible limits; competition for -new industrial customers; competition with rural electric cooperatives -- REA's
--; competition with other investor-owned utilities
-- IOU's; bulk power supply competition; retail fran- l
- / November 23, 1973 letter - from Toni K. Golden of Wald ,
Harkrader & Ross to David A. Leckie of the Department.
22
- _._ .. -. . . . . _ . ~ . _ _ _ . . . . _ - _ . . _ _ _ . . . . . . . . . '
k chises; acquisitions; interconnections with other
. systems;. wholesale contracts. (TR 7803; emphasis added)
Of. the topics listed - by counsel for Applicant as comprising
"[t]he broad items in Mr. Paul's direct testimony" (TR 7803) only
- one, " interconnections with others," is arguably within the scope JofLthelrelevant matters in controversy as defined by the Hearing Board in the Initial Decision and which Applicant claims to have relied i on in " preparing its defensive case" (Appeal Brief for Ap-plicant at'290). Nor did Mr. Paul fail. to live up to this ad-vanced_ billing by his counsel. In fact, his direct testimony ad-dresses every issue which Applicant now claims to be beyond the proper scope of this proceeding and which, if considered, would "be so _ grossly unf air to the Company as to_ deny it due process" (Id. at 291). Mr. Paul testified extensively on Applicant's ac-quisitions and leases of small utilities, offers by Applicant to
, acquire or lease such systems which failed and Applicant's acqui-
- sition policies (TR 7907-7919). He testified regarding Appli- '
' cant's opposition to Rural Electrification Administration approv-al of a . loan to ' finance construction of generation by Northern Michigan _ and Wolverine Cooperatives (allegedly political activity),
(TR 7901-03). */ 'He testified as to the nonexistence of
- / ;Q. Did their [ Northern Michigan and Wolverine Elec-tric Cooperatives] decision to . proceed to install
-self generation, .to your knowledge, require Rural Electric Cooperative Administration ap-proval -in ' Washington? '
A. Yes. The REA loan policy requires that before
- a G&T cooperative can secure a loan for addi-
- (Footnote ' continued, over) 23 S "?
1.+i __
. ,# ~,E ,,,_
ww w, % . % .-,,m,,
" gentleman's' agreements" (TR 7950). */ Finally, he testified regarding requests by the small utility systems for wheeling (TR 7934-36). **/
(Footnote continued from previous page) tional generating facilities it must seek pro-posals from other power suppliers. in the area, and _if they find such proposals to be unsatis-factory to state phen they find such proposals
.to be unsatisfactory and attempt to achieve a satisfactory arrangement.
Northern Michigan and Wolverine believed they could not obtain such a satisfactory arrange-mont. However, we were given the opportunity to come to Washington and visit with REA AdfInistra-tion about our proposals and why ve felt they were satisfactory.
However, the REA went ahead and approve the loan and additional generation was installed.
Q. Since 1965, when, as I understand it, the G&T's finally obtained REA approval for additional gen-eration, have they installed any subsequent addi-tional generation to your knowledge, Mr. L'aul?
A. Yes.
Q. Has Consumer's Power publically opposed the in-stallation of this additional generation, Mr. Paul? .
I A. No, we have not. (TR 7901-03; Emphasis added)
~
- / Q. To your knowledge, does Consumers Power have ar-rangements with any other bulk power suppliers l which would preclude Consumers Power from sell- !
, ing at wholesale _ to a customer of that supplier, or which would preclude that supplier from serv-ing any of Consumers Power's wholesale customers?
-A. No.. There are none. l l
- /' We recognize that questions directed to Mr. Paul by Board I members cannot fairly be attributed ' to Applicant. However, the 24 (Footnote continued) g_ ._. . _ _ _. .- - - - -
g==-
. l
In short, the direct examination of_ Mr. Paul conducted by Applicant's counsel, by itself, makes nonsense of the assertion that Applicant presented its " defensive" case "on the basis of, and in reliance on, the Board's ruling" (Appeal Brief for Appli-cant at 290-91).
Even a perfunctory review of the cross-$xamint tion of De-partment witnesses by counsel for Applicant makes one wonder how Applicant can claim it " conducted its cross-examination on the basis of, and in reliance on" the Hearing Board's artificial lim-itation, at the end of hearing, of the scope of the relevant mat-ters in controversy. Department witness Steinbrecher was cross-examined by Mr. Ross regarding what is in effect retail wheeling (TR 1904-12) and requests for wholesale wheeling (TR 1488-89);
Department witness Wolfe was also cross-examined regarding whole-sale wheeling (TR 1829-32) and extensively cross-examined by Mr. Ross on the " political activity" by Applicant in opposing Traverse City's generation expansion program (TR 1791-97). */
(Footnote continued from previous page) thrust of Mr. Ross's question to Mr. Paul ( T." 7934) was clearly designed to elicit the statement from Mr. Paul that no small ,
l utility had requested Applicant to, inter alia, wheel electric l power prior to the initiation of this proceeding. Since Mr. i
- Paul was using a'somewhat contorted definition of request (" writ-ten requests or . . . firm requests requesting a response on be-half of the - company. " TR 7935) , the follow-up questions by the Board members which-brought out testimony regarding Southeastern
- Michigan Coop's request for wheeling were essential to clarify the record. Moreover, the question by~Mr. Ross clearly " opened the door" for cross-examination on Applicant's wheeling policies and past conduct.
- / The facts of this so-called political activity are set out !
at page 168 of the Department's Brief in Support of Exceptions.
25 l
,my3--_--- _9_ -me w *
- * * *h**N***** N * * * * " * ** * * "
Finally, Applicant's extensive discovery of the Department, the Ir cervenors and nonparty municipal electric systems, presum-ably in preparation for ? resenting its " defensive" case in this proceeding, totally deflates its clair. cnat it limited its prep-aration for this case in reliance on the Board's ultimate inter-pretation of its August 7, 1972, Order. For example, " Applicant's Interrogatories and Docunent Request to' the Depar tmen t of J ustice ,"
dated December 6, 1972, called for, among other things, all docu-monts relating to " territorial allocations of retail or wholesale customers by any utility providing electric service in the State of Michigan" (paragraph 2(c)(iii)), documents relating "to the
. purchase of, or negotiations involving the possible purchase of any electric system by Applicant" (paragraph 3), a detailed des-cription (and production of related documents) of Applicant's l
effort to prevent governmental approval of Wolverine and Northern Michigan's generation expansion (paragraph 14 (a)(v)), documents relating to "the following aspects of coordination by Applicant:
(a) ****
(b) Reserve requirements, reserve sharing, pooling, interconnection, wheeling, . . . activi-ties of Applicant with any other system. (para-graph 16; emphasis added) and documents relating to "the efforts, desirability or fe as i-bility of electric systems in the lower peninsula of Michigan (jointly or separately) to compete with Applicant for retail loads, to obtain alternative coordination arrangements or to obtain ' alternative. sources of bulk power supply" (paragraph 17 (c)).
26 p:
_w-a.pga.d4. e-. inwg. me4w a e
It is manifest from the above discussion that Applicant's claimed reliance in preparing and presenting its . case on the Hearing Board's subsequent artificially limited interpretation of relevant matters in controversy is totally unsupported by, and in' fact contrary to , the record. Since Applicant's Brief, dated January 26, 1976, represents the first time. Applicant has ad-vanced an argument as to the correctness of a narrou interpre-tation of the relevant matters in controversy */ , despite filing below a 190-page Pretrial Brief, a 230-page Brief in Support of
. Proposed Findings of Fact and Conclusions of Law (which them-selves constituted another 107 pages) and a 211-page Reply Brief, a f air inference can be drawn that Applicant was as surprised as the Department at the Hearing Board's finding on this point.
1 i
l l
- / The letter quoted from by Applicant at 25 n. 5 of its Appeal Brief,-has no bearing'whatever on paragraph C of the August 7, 1972, Order, " Relevant Matters In Controversy," but rather is di-rected -toward paragraph B, " Issues to be Considered" and whether or not creation of a situation inconsistent, as opposed to only maintenance, was at issue in this ~ proceeding. To cite 'Mr. Ross '
letter of March' 12, 1974, as being even relevant to, much less
= supportive of, Applicant's claimed reliance on a narrow defini-tion of coordination is disingenuous.
27 o
- _ . . - . - ~ . , ,
. - . . . - . . . ~ . - - - . - - . . . - - . - . - . . . . - .
L-u
_, _ _m . . _ _ _ _ . . .
II The Inconsistency Standard Promulgated By The Hearing Board Is Supported By The Legislative History Of Section 105c And Applicant's Contention To The Contrary Is Without fierit The Hearing Board correctly found tha t a " situation incon-sistent with the antitrust laus" is not the equivalent of an antitrust violation and properly promulgated a standard which takes into account the lower quantum of proof required under Sec-tion 105c (ID at 40-41).
Applicant contends, houover, that the Hearing Board 's stan-dard is incorrect and it relies on two erroncous propositions to support this contention. First, it argues that the legislative history of Section 105c demonstrates that Congress intended a
- full-fledged violation be shown in order to establish the exis-tence of'a situation inconsistent with the antitrust laws.
Second, Applicant argues that since the Nuclear Regulatory Com-mission does not have expertise in antitrust matters, Congress could not have intended for this relatively unsophisticated agency to fashion a so-called new antitrust standard. Even a superficial analysis of these ~ arguments reveals them both to be totally.without merit.
Contrary to Applicant's position, the Hearing Board's find-ing as to the appropriate antitrust standard under Section 105c is amply supported, rather than contradicted, by the legislative
- history of the Act. The Committee Report explicitly states that the " inconsistency. standard" should not be interpreted to mean a violation: -
28 gg,.p+m,
...-4-msee..- +4%, e we e. .-% e ,, 4% . . . . ..-pes ,e
u_. -- - - - --
The legislation proposed by the committee provides for a finding by the Commission "as to whether the activities-under the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105a." The concept of cer-tainty of contravention of the antitrust laus or the policies clearly underlying these laws 'is not intend-ed to be implicit in this standard; nor is mero pos-sibility'of inconsistency. It is intended that the finding. be based on reasonable probability of contra-vention of the antitrust laws or the policies clearly unde rlying these laws. It is intended that, in ef-fect, the Commission will conclude whether, in its judgment, it.is reasonably. probable that the activi-ties under the ' license would, when the license is issued or thereafter, be -inconsistent with any of the antitrust laws or the policies clearly underlying these laws. */
Two points stand out from this portion of the Committee Report:
(1) certainty of contravention of the antitrust laws is not re-quired; and (2) a finding of inconsistency may be based on con-travention of the policies underlying the antitrust laws. The necessary conclusion from this is tha t the level of proof re-quired to show inconsistency with the antitruct laws is less than that which would be required to establish violations of those laws in the coucts, and therefore a situation inconsistent with the antitrust laws can be established without showing a violation.
This view, namely, that " violation of" and " inconsistent with" are in no way synonomous, was widely held and frequently expressed during the Hearings on the 1970 Amendments to the Atomic Energy.Act. For example, Senator Phillip Hart, Chairman of the Antitrust and Monopoly Subcommittee, remarked during floor debate on the 1970 amendments that "
. . . the AEC will
- / S. Rep . No . 91-12 47 ; H . R. Rep. No. 91-1470, 14, 91st Cong. I 2d'Sess. (1970).
29 i
i
. . . ~ . . . . - - , - . . ~ . - . . - . - -
__+____
look at factual situations having the probability of contraven-ing the antitrust laws and will also be looking at antitrust vio-l a t io n ~. " */ Similarly, Joseph Hennessey, AEC Gencral Counscl, testified that "the antitrust revieu provided for in our act goes beyond actual violations of law and requires that Justice Depart-ment and we consider activities that are proposed that would tend toward a violation of the act or to restrict free competition independent of the antitrust laws. . ." *2/ (emphasis added).
Acting Assistant Attorney General Walker Comegys told the Joint Committee:
What will be the nature of the antitrust advice?
First, it will follow established antitrust policies, of course. The provisions of the Sherman Act con-cerning contracts in restraint of trade and monopoli-zation, and the Clayton Act concerning mergers, will provide the basic substance of the advice given. It will not be restricted to notice of clear antitrust violations, however. The language employed in the present statute, and in the proposed bills, clearly implies, we believe, that the advice should deal with arrangements which tend to inhibit competition or to preserve monopoly power, whether or not there is an act or' practice which can be said to be a violation of law. ***/
l The Committee on Atomic Energy of the City of New York Bar Asso- l ciation advised the Committee that ". . . the standard of review, and presumably the standard of eligibility for a license, is not whether the antitrust laws have been or will be violated." ****/
- / Cong . Rec . S 19256 (daily ed., Dec. 2, 1970), emphasis added.
1
- / ' Hearings, pt. 1 at 39.
- / Hearings, pt. 1 at 121.
- /- Hearinqs', pt. 2 at 610.
30
_- , . - _ _ _ _. .. . . . - . ~_ .
---.. _ --.- - - . ~ . - - - - - - - . - - - .
L g ma 44& 1 - e5 ear.\ e,-m- 'sH .- & a
- In -fact, James II. Campell, -then~ Chairman of the Board of the Applicant, Consumers Power Company, testified that the standard of 105c was _ substantially more -inclusive than the Sherman Act:
The basic issue to which any such advisory opinion should address itself should ue feel, be whether there is, in the Attorney General's opinion an actual or prospective violation of the antitrust Icus, not merely a . tendency to create or maintain a situation inconsistent -uith the antitrust laus. Using the ten-dency standard may as a practical matter result in forcing the nuclear pouer industry to meet more strin-gent antitrust standards than others are required to observe. I/
.It should be noted that although Mr. Campbell was testifying regarding a proposed draf t of Section 105c, which read in rele- i vant part " tend to create or maintain a situation inconsistent with the antitrust laws", * */ the subsequent deletion of the
" tend to" language from the amendment that Congress enacted nei-ther lessens the import of Mr. Campbell's testimony nor requires
" inconsistency" and " violation" to be viewed as synonomous. Af-ter the " tend to" language was deleted by the JCAE in 1970, sev-eral Congressmen feared that the elimination of this language would- change the -meaning of Section 105c and cause the antitrust I standard to be the equivalent of an actual violation. Expressly to avoid any future doubts as to Congress' intent, Senator George Aiken, ranking Republican member of the JCAE, read into the Con-gressional Record the opinion of Richard' W. McLaren, then Assis-i
- /- Hearings, pt. 2 at 516.
- / The 1954 Act and-several of the earlier proposed amendments to Section 105c contained similar language.
31
._s 7..
tant Attorney General, Antitrust Division, as to the meaning of the statute absent the wcrds " tend to":
. . . . While there would be a slight change of lan-guage . . .
[the words " tend to" would be dele ted from the present language of section 105c], we under-stand that this is intended to clarify rather than effect any substantial change in the antitrust safe-guards of the Act. . . .
The AEC would determine not only whether the activity would "v iol a te " the Sherman ~
Clayton, or rederal Trade Commission Acts, but also whether it is reasonably probable that situations or activities vould be incompatible with the policios of maintaining and fostering free competition which underlie those statutes (Cong. Rec. 19254) (daily ed.,
Dec. 2, 1970).
Ignoring this relevant legislative history, Applicant pur-ports to find support for its contention by quoting out of con-text a statement that the inconsistency concept "was intended to be an actual violation of the antitrust laws." (Appeal Brief for Applicant at 36). This statement is as Applicant correctly notes, from the Committee Report on Section 105c of the 1970 act; but,
-as Applicant fails to note. it does not pertain to any of the bills proposed or passed in 1970. Rather, it is an explanation of an amendment proposed by Senator Humphrey in 1954, which would have required the AEC to deny a license if the Attorney General,
.not the AEC, found a violation of the antitrust laws. That amend-ment was rejected in 1954, and there was no motion to insert it in the 1970 act. j/ If this quotation has any relevance at all, it can only be taken to support the Hearing Board's finding.
Applicant also-quotes a statement from the 1954 he'arings.
- / S. Rep. No. 91-1247; H.R. Rep. No. 91-1470, 11 (1970).
31a u _
~ ~ - - - - - - - - -
which it claims was made when the inconsistency ctandard was first introduced. This statement reads: "[the section] provides for heari.ngs.and judicial review in case there is any claim . . .
that a proposed license . . . would violate the antitrust lauc" (Appeal Srief for Applicant at 36). An examination of the legis-lative history of the 1954 Act reveals that this ouotation in fact refers to a proposed amendment to the 1954 Act which Con-gress refused to pass. This amendment would have given an appli-cant, whose antitrust behavior was questioned, the oppor tunity to seek declaratory relief in the Federal Trade Commission; the FTC decision on antitrust issues would have been binding on the AEC, but all parties would have retained the right to seek judi-cial review. */ The statement quoted by Applicant was an attempt to explain the standard which the FTC would have applied under the proposed review procedure. It is difficult to determine what relevance, if any, this statement has to an NRC proceeding.
Shif ting from Committee Reports, floor debates, and testi-mony before the JCAE, which provide no support for its conten-tion, Applicant suggests that somehow the Federal Property and Administrative Services Act-(40 U.S.C. S488) compels that incon-sistency and violation be viewed as identical standards ( Appeal Brief for Applicant at 36 n. 21). Although, as Applicant points
.out,.the phrase " situation inconsistent with the antitrust laws" did not originate in the Atomic Energy Act, but was first used
- / S. Rep. No. 1699, 83rd Cong., 2d Sess. at 60 (1954).
32
. . _ _ _ . . _ . . ._:...- - - _ . . - - . . - - --- -.- - -. .- -~
., ~ . - . -- -- ~
in the Federal Property and Administrative Services Act (FPASA),
~
this does nothing to support Applicant's claim. In fact, the background of this law further buttresses the Hearing Board's inconsistency standard.
The original version of the FPASA required the Attorney General's advice when a property disposition would violate the antitrust laws. The 1949 v.ersion of the FPASA. which.was in ef-fect when the Atomic Energy Act of 1954 was passed, changed the FPASA test from "will violate" to " situation inconsistent" with the antitrust laws. Examination of the Committee report indicates that the change in wording did not stem from oversight or care-lessness, but rather from a Congressional desire to broaden the antitrust standard:
In one respect the section is broader than a
~ similar provision in the Surplus Property Act of 1944. It requires a determination by the Attorney General as to whether the proposed disposal would tend to create or maintain a situation inconsistent with the antitrust laws, while under existing law the determination is whether the proposed disposition will violate the antitrust laws.
(H. Rep. No. 670, 81st Cong., 1st Sess. 19 (1949.)
Congress was aware of the similarity between the FPASA and Section 105(c)-of the Atomic Energy Act. */ Indeed, the author of the FPASA, Congressman Chet Holifield, was also chairman of the JCAE _during the Ninety-first Congress. **/ The logical im- j plication of. these f acts is that Congress consciously patterned 1 l
l
- /' Congress' awareness of this similarity to the FPASA is clear- I ly evidenced by theLhearings_before~the JCAE held November 18, 19 and 20,1969. See Hearings, pt. 1 at 8, 89,.123.
- / Hear ings, pt. l ' at - 123.
33 I l
,y_.. ..N. . - ~ ~ , - ~ . _ . , . . - - - - + . . - . - ~ ~ - . ~ ~ - .
r r
both the 1954 and the 1970 Atomic Energy Acts after the FPASA.
Thus, if'C? gress did not intend Section 105(c) to include the broad antitrust standard of the FPASA, it obviously would have worded -the statute to require an actual "violatien" rather than a'" situation inconsistent" with the antitrust laus.
Uhile' Applicant. argues that no court or agency, in. interpret-ing the FPASA, has held that inconsistency is less than violation, it is equally true that no court or agency has held that inconsis-tency is the same as a violation under that statute. It is ap-parent, however, that the Department of Justice, in performing its statutory role of advising whether a disposal of Federal property would tend to create or maintain a situation inconsistent with the antitrust laws, has not interpreted the standard to require a showing of violation. For example, a June 15, 1971 letter fro.n Richard W. McLar'a, Assistant Attorney General, Antitrust Division, to William E. Casselman, II, General Counsel, General Services Administration, providing the Attorney General's advice, states:
The two contract provisions mentioned above ap-pear to enhance the ability of Foote and Lithium Corp. to stabilize the market price of lithium over a very substantial future period.
In our view the oligopolistic positions of Foote and Lithium Corp. would be augmented by the proposed sale under the above-described conditions.
For the foregoing reasons, we conclude that the proposed sale would tend to create or maintain a sit-uation inconsistent with the antitrust laws. */
- / .This letter was furnished to Applicant upon its request !
during the discovery phase of this proceeding. i 34 1
L
The Department in the above letter did not allege that either Foote or Lithium Corp. had violated the antitrust laws or that the sale of lithium would enable the buyers to violate the
. antitrust laws in the future. The letter stated only that the mar ket position of these two firms should not be enhanced by the property disposition. The language 'of the letter clearly indi-cates that the Depar tmen t, .in making this determination , pro-ceeded on an assumption that inconsistency has a different, dis-tinct and significantly more expansive meaning than violation.
Finally, Applicant argues that it is "far-fetched" to sug-gest Congress could have " intended sub silentio to create a new less rigorous test," and have it applied by "this Commission which has not heretofore had any antitrust experience" (Appeal Brief for Applicant at 38). This argument, besides being totally
, makeweight */, is erroneous in two respects: First, the incon-sistency standard is not new. As discussed previously, it was adapted from the FPASA, a statute which was passed in 1949.
- / It could also be argued tha t it is "far-fetched" to suggest that Congress would have created "a new, less rigorous test and
. .. thrust responsibility for its interpretation . . . on fed-eral district courts '[which are experienced in evaluating viola-tions of the antitrust laws] . . . the Federal Power Commission
[which regulates certain aspects of utility operations under a public interest standard] . . .
[or] the Federal Trade Commission (which is experienced in evaluating violations of the Federal Trade Act]." (Appeal Brief for. Applicant at 38.) These bodies have ~ well-established " antitrust" standards and, we submit, if the idea had ' crossed Congress' mind, it is equally plausible it would have preferred to entrust t "new" standard to a "new" Jagency. Such an argument, however, reduces citation of legis-
.lative history to an exercise in mindreading, and is manifestly inappropriate.
35
,_ --.-.mwe- re g-e- e aw w eewr-eae ' - more
- WM* ense '6
- M N = # * * * *###*""**
- t E
Second, Congress was well aware of the AEC's limited experience with the antitruct laws. Various Congressmen ar.a witnesces */
discussed'this point, but Congress nevertheless entrusted on-forcement of Scction 105(c) - to the AEC. Applicant may question the antitrust expertise available in this par ticular forum, but
-the Appeals Board should be aware that Congress has authorita-tively decided this -matter and was anything but sub silentio in so doing.
i l
l 1
-l l
l l
l l
l
- / A few comments, which are by no means exhaustive, may be found in the following selections from the hearings. Hearings !
pt. 1 at 90, 91; Hearings pt.' 2 at-397, 412, 498. Also, as dis- '
- cussed 1 1nfra, Congress had considered, and rejected, giving the - responsibility for antitrust determinations 'to the FTC during: consideration of the 1954 act.
36 L
y,
III.
Applicant's Ref usals to Deal Establish the Requisite " Willfulness" Element of the Of fense Of Monopolization The Departnent has alleged that Applicant has engaged in exclusionary conduct -- selec tive ref usals to sell transmission services, selective refusals to coordinate and share reserves.
and refusal to grant accccs to the Midland Units -- the effect
- of which has been the maintenance of its nonopoly position in the wholesale and retail electric power markets. This conduct is exclusionary and artificially raises barriers to entering the markets; therefore, we submit, evidence of these refusals to deal is sufficient to establish the " willfulness" element of the of-fence of monopolization.
Applicant quarrels with this anal sis, contending tha t the Department must show " predatory conduct" to establish the requi-site " willfulness" (Appeal Brief for Applicant at 187). It is not clear what Applicant means when it states predatory conduct must be shown to establish the offense of monopolization. If A'p-plicant is suggesting that conduct not " honestly industrial" committed with specific intent to monopolize must be shown, then Applicant apparently does not differentiate the offense of monop-olization .from the- of fense of attempted monopolization. The law of monopolization is clear that it is unnecessary to de'monstrate predatory' conduct to prove a violation of Section 2 of the Sher-man Act where the defendant company possesses monopoly power in 37
,e egg % s ee , m oes - *- -
'*********"'**F-- 9**" -- *
[. ,
in the relevant market. */ It is necessary to shou predatory conduct.only uhere the offense of attempted monopolization is alleged. **/
Applicant suggests that the Department is contending that the " ordinary conduct" of an electric utility constitutes the requisite " wilfulness" and that - such conduct "por se" violates Section 2 (Appeal Brief for Applicant at 188-192). As noted above, this is not' the Depar tment's position. We have contended that Applicant engaged in exclusionary conduct when it selective-ly refused to sell transmission services, selectively refused to sell transmission services, selectively refused to coordinate and share reserves, and refused to grant access to the Midland Units. These refusals to deal were unreasonable since Applicant would have recovered all costs it would have incurred in making these transactions and there was in f act a possibility it would have derived some additional cost savings from these transac-
.tions. ***/ These unreasonable refusals to deal are not, as Ap-
.plicant suggests, " ordinary marketing methods"; the history of
- / See Appeal Brief for Department at 22-27 for extensive quota-tions and citations.
- / Of course, this discussion is largely academic since the De-partment has introduced substantial evidence showing Applicant's specific intent to destroy its competitors (Appeal Brief for Department at 167) and the Hearing ' Board found as a matter of
. fact -that 'such intent existed (ID at 155). ,
- / _ While Applicant might have indirectly lost customers in
. the long term as a result of engaging in these transactions be-cause its competitors' competitive capabilities may have been (Footnote continued) 38
.;. _. ;. y . . _ - _ _ . _ _ _ . - - .a . - ~ y.-
~
-u
. Applicant's coordination transactions with Detroit Edison, for example, is very _dif ferent f rom the policies. and practices it has pursued in dealing with smaller electric cystems in Michigan. These unreasonable refusals to deal are not examples of a dominant firm making itself "more attractive to consumers";
rather, they are excmples of a domincnt firm driving up the costs of its competitors. The Departmelt is not contending tha t Appli-cant is under a duty to subsidize its competitors, nor that it be required to engage in a deficit operation. It is uncontested that Applicant would not be monopolizing if it could be demon-strated that it refused to deal because the smaller systems in Michigan were unwilling to pay a price sufficient to cover all the properly allocated costs of the proposed transactions.
Applicant disagrees even with this legal analysis. It ar-gues that it has no duty to deal and that evidence of a refusal to deal is insufficient to meet the " willfulness" requirement of the offense of monopolization, even though it can be shown, that Applicant would-have recovered the costs of the requested trans-actions (Appeal Brief for Applicant at 203-207). Applicant (Footnote continued from previous page) strengthened, the U.S. Supreme Court's decision in otter Tail Power Company v. United States, 410 U.S. 365,380, (1973) makes clear that a company possessing monopoly power cannot refuse to deal with-its competitors in' order to prevent the erosion of its monopoly position. Therefore, if a vertically-integrated
-firmLloses a retail customer because it has made a sale
.at wholesale to a firm which' competes with it at retail, the retail revenue lost by the vertically-integrated company cannot properly be allocated . as a cost of the wholesale transactions.
39
.-.a.-_-_--.
_ ,_ _ . . . ..._.2..
, -.--- . y -
attenpts to distinguish, on two grounds, the line of cases cited by-the Department in support of the proposition that an unreason-able refusal to deal can establish the " willfulness" element of a Section 2 offense. First, Applicant claims that specific proof of monopolistic intent was shoun in all of these cases. Second, it suggests that the f act situations in these cases all involved refusals to deal in a previously-provided service and, thus, these cases are inapplicable here since Applicant has always re-fused to deal (Appeal Brief for Applicant at 205 n. 34). */
Applicant's analysis is uncound. First, while it is true that all of the cases cited by the Department, except Otter Tail, are attempted monopolization cases where specific intent was found, they are nonetheless important precedents in determining whether conduct is exclusionary. As explained in the Department's Appeal Brief:
The principal differences between the offence of mo-nopolization and the of fense of attempt to monogo!--
lize, are these: when an attempt is alleged, a _
firm's market power need not amount to monopoly; in addition to a showing of exclusionary conduct, "spe-cific intent" to monopolize and a " dangerous proba-bility of success" must be demonstrated. Note, how-ever, that it is unnecessary to show a " dangerous probability of success" in monopolization cases be-cause in these cases actual success must be shvwn, i.e., has Ng monopoly power in the relevant mar-ket. Similatly, " specific intent" need not be proved 4
since intent is inferred from the achievement of the
- / The cases cited by_ the Department were: Eastman Kcdak v.
Southern Photo Materials, 273 U.S. )
359 (1927); Packaged Programs, Inc. v.-Westinghouse Broadcastina, 255 F.2d 708 (3d Cir. 1958);
Six Twenty Nine-Productions v. Rollins Telecasting, Inc., 365 F.2d 478 (5th Cir. 1966); Lorain Journal v. United States, 342 U.S. 143 (1951),-and otter Tail v. United States, supra.
40
^l 1
. . . . -- .-nen~+,-..-*-~--~~ ~ - ~ ~
l
I-monopoly. While there are these differences between
" monopolizing" and " attempting to monopolize," exclu-sionary practicca must be found whichever offense is alleged. Connecuently, both monocolization and at-tempt to monocolize cases are impor tent sources of __
relevanE IIE5FoGeccents in deteisiinino unether a companv_possessina moncooly__powet_has acted to ex-cTude comnetitorc rrom the sat 1:et Ey creatino arti -
ticial battiets t5 entry. ( Appeal aTief T5E^cepaf t-ment at 26)_
Second, while it is true that all the refusal to deal cases cited by the Department involved the discontinuation of previous-ly provided services, this common element does not support Appli-cant's position. The significance that the courts have attached l
to this common element is that the prior provision of the service demonstrated that the monopolizing companies were capable of con-tinuing to provide the service. Since they were capable of pro-viding the service and recovering their costs on the transaction, the only reason they could possibly have for discontinuance was to put their competitors at a disadvantage. Therefore, these decisions find that the monopolizing company's intent is clear without specific proof of cuch intent -- such intent can be in-ferred from unreasonable conduct. For example, in Eastman Kodak l Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927), Kodak originally sold at wholesale to a number of independent companies, but then decided to act as its own wholesaler and succeeded in buying out all the wholesalers in the area except the plaintif f.
i t Southern.- Kodak refused to sell to Southern at the traditional ,
wholesaler's discount, forcing it to pay the retail price. This made. it impossible for Southern to compete with the Kodak-owned
' distribution network. Kodak had a monopoly (75% to 80%) of the 41 ee. ee a m- == =
- esgree me w e es m. pp ww e * * *-'M N' N.
.-- _. .w . - - - . . . - . . -
/
national photographic supply market and it was expanding its I monopoly into a second mar ket, namely, retail distribution. Al- ,
though no direct evidence as to Kodak's specific intent was pre-sented. at trial, Kodak's refusal to sell to its retail competi-tors at a price which would allow competition in the retail market was held to constitute illegal monopolisation.
This fs precisely uhat the Department has alleged in the in-stant proceeding. Applicant vould have recovered the costs asco-ciated with various coordination transactions in uhich it has re-fused - to engage. It nevertheless refused to engage in these
~
transactions and thereby artificially raised barriers to its com-petitors entering or . continuing in a market in which it has had a monopoly position. Applicant's intent, like Kodak's is clear i.e., to destroy competition. Therefore, even if Applicant's monopolization analysis is accepted namely, that predatory con-
! duct must be shoun, Applicant's refusals to deal are sufficient l'
l to establish a monopolization violation, i
I 42 U
r IV.
The United States Supreme Cour t Ilac Rejected
!!any of the Dafences Applicant Seeks to Raise to the Charce of f:onopolization The United Statec Supreme Court's decision in Otter Tail Power Company v. United States, 410 U.S. 355 (1973), rejects many of the defenses raised by Applicant to the Depar tment's charge thct it has monopolized the relevant wholocale and retail electric power marketc. Otter Tail stande for the proposition that traditional monopoli=ation principles apply fully to the electric utility industry, even though certain aspects of that industry are regulated. In particular, the Court found that an electric utility possessing monopoly power by virtue of its statistically high share of the relevant market.and its strategic dominance in transmission is prohibited from engaging in exclu-sionary behavior -- i.e., refusals to wheel and to sell bulk power -- the effect of which is the maintenance of its monopoly position.
Applicant reads Otter Tail differently and, we submit, er-roneously. Essentially, Applicant argues that otter Tail is solely an attempt-to-monopolize case of extreme facts, involving numerous predatory practices designed to completely deny bulk power to competing electric systems in states where state regula-tion of retail rates and service was not present. Therefore, goes the argument, Otter Tail stands for the proposition that the antitrust laws apply to the operations of an e'lectric utility system only in certain extreme cases where an electric system forecloses all bulk power alternatives to its competitors; 43 r
a
in all other cases, the fact of regulation, both state and fed-etal, precludes a finding that an electric system has committed the offense of monopolization.
Otter Tail suppor ts no such argument. The organization and logic of the opinion are clear. It begins with a brief summary of the District Court's lcgal and factual findings and decree.
Justice Douglas, writing for the majority, then presents the Court's mar ket analysis: "the aggregate of towns in Otter Tail's service area is the geographic market in which Otter Tail com-potes for the right to serve towns at retail" and otter Tail has franchises in 91 percent of these towns. Otter Tail, supra, at 369-370. */ Otter Tail's dominant position in subtransmission and the competitive significance of its transmission network is then discussed. Otter Tail, supra, at 370.
Otter Tail's exclusionary conduct; the effect of which was the maintenance of its monopoly position, is then recited, namely, ref usals to wheel, refusals to sell bulk power and litigation.
The Court specifically notes that the Federal Power Commission
~
ordered Otter Tail to interconnect and sell bulk power to the Town of Elbow Lake and tha t the North Dakota Public Service Com-mission refused to grant such relief for the Town of Hankinson.
Otter Tail, supra, at 371
- / While the Court found that each town in Otter Tail's service area 'was a natural monopoly in which only one supplier 'could
- realistically serve, monopoly power was still imputed to otter Tail by virtue 'of its control over 91 percent of the towns--
i.e. , the " aggregate of towns" was not a naturally monopolistic market.
44
, m% , _.
,so*. . *va=- -wa> = = t w %-- --*-eg.w+w-Se t--** **N*+-* * * - * * * * " " *
- ._ _ ck --
The Court then begins its legal discuccion. Part I of the Opinion disposes of Otter Tail's principc1 defence that the FPC's authority. to compel involuntary interconnections pursuant to Sec-
' tion 202(b) of the Federal Power Act immunicos its conduct from the operation of the antitruct laus. The Court flatly rejects this atgument. It finds that since " Congress rejected a perva-sive tegulatory scheme for the interstate distribution of power in favor of voluntary commercial relationships," Otter Tail's conduct is not immune from the antitrust laws. Otter Tail, sunra, at 374-375. Similatly, Part II of the Opinion finds that there is no conflict between FPC jurisdiction and the District Court's decree ordering wheeling and interconnection.
Having decided the dif ficult legal guestion posed by the case, namely, whether the Federal Power Act immunized Otter Tail's exclusionary conduct from the antitrust laws, the Court makes short shrift of what is now an easy case; it.has already deter-mined .the relevant market and it now applies the familiar Sherman Act formula -- i.e., that a company possessing monopoly power vio-lates the antitrust laws when it acts to preserve that power --
to the facts recited earlier in its Opinion.
The record makes abundantly clear that Otter Tail used its monopoly power in the towns in its service area to foreclose competition or gain a competitive advantage, or to destroy a competitor all in viola- ,
tion of the antitrust laws. See United States v. !
Griffith, 334 U.S. 100, 107.. Otter Tail, supra at l 377. */
- / .The Court's citation of Griffith is significant, for that case is one of the classic monopolization cases. Griffith in-(Footnote continued, over) 45
_ . _ . . . - - . . ~ . . . . _ - . - -
ce r.-
The. Court then goes on to cpceifically affirm the District 4
Coutt determination that Otter Tail poscessed monopoly power by vittue of its " strategic dominance" in the transmission of pouer
_i.e., control over a bottleneci; f acility -- and that the "use of this monopoly power" to destroy threatened competition -is a violation of the ' attempt to monopolize clause of Section 2 of the Sherman Act.'" Otter _ fail, supra, at 377. The Court then discusses Associated Press v. United States. restating the propo-Sition which AP clearly established: accesc to a bottleneck fa-cility need be only significant not indispensible to a competi-tor's survival. Otter Tail, supra, at 377.
Two more Otter Tail defenses are then disposed of. First, the-Court indicates that enginecring factors which vould prevent Otter Tail from selling or wheeling could be a defense to a charge of monopolization but finds no such factors present. Second, Otter Tall's restrictive ^ wheeling contract with the United States Bureau of Reclamation is declared invalid since the Court finds governmental contracting officers do not have the power to grant immunity from the Sherman Act. Otter Tail, supra, 378, 379.
(Footnote continued from previous page) volved no evidence of predatory practices and no evidence of spe-cific intent. Defendants in the case poscessed monopoly power by virtue of their monopoly position in towns which could support only one theatre -- i.e., natural monopoly situations. To estab-lish'the offense of monopolization, the Griffith Court ,found that it'was " sufficient" to show only that a restraint of trade or monopoly "results as the consequence of a defendant's conduct or
. business arrangement . . . .
To require a greater showing would cripple the act. " 334 U.S. at1054dciq) 46
_w ---
This completes the Court's legal discussion in support of its ultimate conclusion to affitm the District Court's judgment that Otter Tail had monopolized and attempted to nuaopolize.
410 U.S. at 381; see Judgment, United States v. Otter Tail Power
- Compony, 1972 Trade Cas. S73,791 (D. Minn., 1971).
Section IV of the Opinion re;aands that section of the Dis-trict Court's order addtessed to Otter Tail's use of litigation to prevent the establishment of new municipal systems. The re-maining sections of the judgment are affirmed. .thereby indicating that the District Court's finding as to litigation is not neces-sary to suppor t the finding of monopolization. Otter Tail, supra. 379, 380.
Finally,Section V rejects Otter Tail's argument that since requiring it to wheel and to sell bulk power will erode itc bus-iness, it need not do so. The Court states:
"The Act assumes that an enterprise will protect itself against loss by operating with superior ser-vice, lover costs, and improved efficiency. Otte.
Tail's tneory collided with the Sherman Act as it sought to substitute for competition anticompetitive uses of its dominant economic power.
"The fact that three municipalities which Otter Tail opposed finally got their municipal systems does not excuse Otter Tail's conduct."
Despite this clear and straightforward treatment by the Supreme Court, Applicant's discussion of Otter Tail at various points throughout its Appeal Brief is tortured and frequently at odds with the language of the decision.
First,- Applicant argues that Otter Tail does not preclude it from contending that the authority of the FPC and Michigan
-47 4
wOMMM*
OO" **"Y" i*"* MON **
- J
l Public Service Commission to regulate the electric power indus-try is significant in ascensing the Compcny's market power --
i.e.,
that market power chould not be imputed to Applicant by virtue of its statistically high share of the relevant mar ket since it is regulated (Appeal'Brief for Applicant at 64). The 11ajor ity Opinion applied the antitrust laus with undiminished force to en electric system.once it determined that Congress had rejected a pervasive scheme of regulation for wholesale pcuer transactions. Applicant's argument, which is nearly identical to that made by Justice Stewart in his dissent in Otter Tail, was rejected by the majority of the Court.
Second, Applicant argues, tnat Otter Tail is a case of ex-treme facts (Appeal 3rief for Applicant at 65). To support this assertion, Applicant consistently misstates the facts: (1) the Court did not find that Otter Tail demonstrated a " proclivity for predatory practices"; Applicant lifts this quotation out of con-text; (2) Otter Tail's dismantling of its distribution system is not even mentioned in the Court's Opinion; (3) Otter Tail did not coerce United States Bureau of Reclamation (USBR) into a terri-torial allocation, it. merely refused to wheel to certain custom-ers USBR wished to serve; USBR was not prohibited by the terms of the contract from building its own subtransmission to serve Otter Tail's customers; (4) Otter Tail's refusal to coordinate is not even mentioned in ' the Court's Opinion; (5) since the litigation issue is. remanded, it is not essential' to the Court's resolution of'the case.
48
,- __ _ __. _. _ _.. _ ~ -
-- -. -- - r
With this clarification, it is apparent tha t the facts in Otter Tail relied on by the Court, when correctly stated. are not significantly different from thoce in the instant proceeding.
Otter Tail sinply refused to wheel and refuced to sell bulh cou-er. These actions handicapped competing nunicipal electric sys-tems by denying them certcin bulk pouct alternatives; these sys-tems, decpite Otter Tail's best ef for ts , did in fact establish themselves au utilities. In shott, Applicant's statement that "Do modern civil antitrust case considered by the Supreme Court has involved more extrec.e predatoty conduct" is a self-serving exaggeration.
Third, Applicant argues Otter Tail is not a monopolization case (Appeal Brief for Applicant at 66). This inter pretation, also offered by the Heating Board, is puzzling. Section III of the Otter Tail Opinion finds a violation of both offenses, monop-olization and attempted monopolization, and the Judgment of the District Court which found both violations was affirmed.
Fourth, Applicant argues Otter Tail is different from the instant proceeding because two of the states in which Otter Tail served -- Minnesota and South Dakota -- did not regulate the re-tail operations of electric systems ( Appeal Brief for Applicant at 67). This may be true, but nowhere in its Opinion does the Court mention this fact, let alone attach significance to it. On the contrary, the Court takes notice of the existence of state regulation _when it discusses the north Dakota Public Utilities Commission's refusal to order Otter Tail to wheel for the Town of Hankinson.
49
- - - . ._._z_. -.. .___- . _ _ _ . . . . _ . . . . _ _ _ _ _ _ .
- Pinally, Applicant contends the Coutt did_not cdopt the bot-tieneck theory of monopolization-(Appeal Drief for Applicant at 112-113).;- 'The Court c1carly did . The opinion states:
. . . The Dictrict. Court determined that Otter Tail has "a st'rategic dominance in the trancaiccion of power in most of its service area" and that it used this dominance to forecloce ootential entrants into the retail area f rom obtaining electric power fron outside sources of supply. 331 F. Supp., et 60. Use of monopoly pover '"to "destroy threatened coapetition" is.a violation of the attempt to monopolize" clause of 52 of the Sherman Act . . . . 410 U.S. at 377.
Applicant's various attempts to distinguish Otter Tail from the instant fact situation fail. While some dictinctions have '
4
- been'noted, they are of little or no significance; the inctant fact situation is very;similar to Otter Tail. 5pplicant posses-ses monopoly power by virtue of its statistically high share. of the wholesale and retail powet markets and its sttategic domi-1 nance in transmission, and it has sought to maintain its monopoly
, - position by refusing to sell transmission services and refusing to coordinate and share reserves.
I w
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- z: __ __L __-__ =_a 2 _
V.
Applict.nt's Bulk Pouer Requirements Hust b3 Included In the I:elevant Uholocale Power Ucr ket to Accurotely Aszcoa Applicent's harhet Pouer It is uell-established that the "in-house" requirements of a ver tically-in tegr ated firm ato included in the relevant market when determining whether that firm pocsesres monopoly pouer. Ta United States v. Aluminum Comoany of America, 148 F.2d 41C, 424, (2d Cir. 1945), Judge Hand extensively discussed this issue, con-cluding that it was error for the District Court to have excluded that part of Alcoa's total ingot production which it fabricated and therefore did not sell as ingot to independent fabricators with whom it competed:
, There are various ways of computing "Alcoa's" control of the aluminum market -- as distinct from its production -- depending upon uhat one regards as competing in that market. The judge figured its share -- during the years. 1929-1938, inclusive -- as only about thirty-three percent; to do so he included
" secondary," and excluded that part of "Alcoa's own production which it f abricated and did not therefore sell as ingot. If, on the other hand , "Alcoa's" to-tal production, f abricated and sold , be included, and balanced against the sum of impor ted " virgin" and
" secondary," its share of the market was in the neighborhood of sixty-four per cent for tha t period.
The percentage we have already mentioned -- over ninety -- results only if we both include all "Alcoa's" production and exclude " secondary." That percentage is enough to constitute a monopoly; it is doubtful whether sixty or sixty-four percent would be enough; and cer tainly thir ty-three . per cent is not. Hence it is necessary to settle what ne shall treat as com-peting in the ingot market. _ That part of its produc-tion which "Alcoa" itself fabricates, does not of course ever reach the market as ingot; and we recog-s.
nize that it is only when a restriction of production either inevitably affects prices, or is intended to do so, that it violates Sl of the Act. Apex Hosiery 51
. _ _ _ . u _ ;.. -. -
e Co. v. Leader, 310 U.S. 469, 501, 60 S.Ct. 982, 84 E5d . lTC1, 128 A. L . R . 1044. Ecuever, even though we were to assume that a monopoly is unlauful ur. der 32 only in case it controlc prices, the ingot fabricat-ed by " Alcoa ," necessar ily had a direct effect upon the ingot acrket. All ingot -- with tr ifling excep-tions -- is used to fabr icate intermediata, or end, productn; and-therefore all in te t med ia te , or end, produc'tc which "Alcoa" fabricatec and cells, pro tanto reduce the demand for ingot itself. The sit-uatf6n is the came, though reversed, as in Standntd ,
Oil Co. v. United States, 221 U.S. 1, 77, 31 S.Ct.
SU2',~323, 55 E!fa. 613, 34, L.E.A., N.S.. 834, Ann.
Cas. 1912D, 734, where the court ansucred the defen-dantc' arguaant that they had no control over the crude oil by saying that "as subetcntial power over the crude product was the inevitable result of the absolute control which existed ovet the refined pro-duct, the monopolization of the one carried with it the power to control the other." -We cannot there-fore agree that the comnutation of the percentage of "Alcoa's" control over the IE30t narE3E chould
~ ~
not include the_uhole cf its7ngot proddc[ ion.
.(Emphasis adaed)
Nevertheless, Applicant argues that its internal bulk power requirements should be excludc= from the relevant market (Appeal Brief for Applicant at 168-179), citing a number of Clayton Act, Section 7 cases to support its proposition. */ These cases are not on point. In these cases, the courts considered and analyzed submarkets af ter it was determined that the proposed merger would not. result in excessive concentration in the more broadly-defined relevant market. In none of these cases did the Courts disregard, as Applicant suggests, a statistically-high concentration in the more broadly-defined relevant market. As the Supreme Court stated in United States v. ,Phillipsburg National Bank, 399 U.S.
i
- /~ United States v. Blue Bell, Inc., 395 F. Supp. 538, 543
{ TM.D. Tenn. 1975); Elco Corp. v. Microdot, Inc., 360 F. Supp.
741 .(D. Del. 1973).
52 ig3g m _;_, .eesie * - = e *ep s. - se se , hee gnam me Aw=n e - = geep.--* e
350, 360, (1970) while there may be submarkets within the broader market, "submarkets are not a bacic for the dicregard of a broad-er line of com.aerce that has economic significar.ce."
Applicant also cites ceveral other cases uhere the in-house requirements of a vertically integrated firm were excluded from the relevant market. These cases alco are not on point. In United States v. Greater Buffalo Precs, 402 U.S. 549, 555 (1971),
the Court, in pacsing of the legality of an acquisition made by a ver tically integrated firm, ruled that the wholesale " comics" re-guirements of the Creater Buffalo Preca must be included in the relevant market even though it met those " comics" requirements through its printing operations. In a subsidiary holding, the Court also excluded from the market the requirements of newspa-pers wno incidentally printed their own " comics" but which did not sell comics to other buyers in the market. The Court stated:
The threat that newspaper customers will do their own printing is of course a factor in the competitive situation. But, according to the - record, color comic supplement printing requires exacting mechanical tech-niques performed by specially trained personnel, and independent printers specializing in supplement print-ing and handling a high volume of business can pro-duce a high quality product more economically than most newspapers.
Essentially, the Court concluded that these newspapers did not sell comics at wholesale and could not competitively do so even they chose to enter the market; therefore, it was appropri-
. ate. to exclude these firms f rom the market. If applied to the instant proceeding, the Court's reasoning would lead to the con-q clusion-that if General Motors installed generation to power one 53
. . , . . _ ~ . . - - - . . . .
p
% m.m of its' assembly plants located in Applicant's service area. GM's
. generation would 'not be included in the relevant market since it is' not :really .in the buciness of marketing pcuer. The Cour t 's !
subsidiary-holding thus has no bearing on whether Applicant's
. bulk power requirements should be c::cluded from the mar ket since Applicant aggrecsively seeks to merket power at both wholesale and retail in competition t.'ith other electric suppliers.
To the same effect is British Oxyaen Co., 3 CCH Trade Reg. )
' Rep. 121,063 (FTC Dec. 8, 1975), where the Federal Trade Commis-rion excluded the production capabilities of industrial users of oxygen who did not manufacture the product except for their own internal use.
Applicant also cites the lower cout t opinion in United States v. Associated Precs, 52 F. Supp. 362 (S.D. N.Y. 1943) in support of its argument. This opinion, although written by
-Judge Hand was ' decided before ALCOA and is inconsistent with the later' case. In light of ALCOA and Greater Buffalo Press, this decision has little validity today. Applicant also cited dicta 1
in United States v. International ~ Telephone & Telegraph, 324 F.JSupp. 19 (D. Conn. 1970), which does support its position.
This dec'ision was not appealed to the Supreme Court, however. 3 i
S4
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VI.
Applicant's Dealings With the Small Electric Utilities in nichigan Lvidence Millful
-Monopolizntion of the Relevant Wholesale and Retail ElectLic Power _ Markets.
We have highlighted above -that the legal principles which Applicant ptopounds as appropriate benchmarks against which to measure its conduct vis-a-vis the small Michigan electric utili-i ties are in fact boced on either misinterpretations of appropri-ate case law or citation to legal theories which are irrelevant to the issues in this proceeding. In this section we will cddress Applicant's claim of the reasonableness of its dealings with the small systems.
Initially, it should be noted that, unlike Applicant and the Ilearing Board, we are unable to isolute Applicant's dealings with the small utilities into discrete, airtight, unconnected courses
- of conduct, nor do we believe it appropriate to do so. It is a well-established principic or antitrust law that activities legal in themselves may nonetheless form the basis for an antitrust violation, and this necessarily requires scrutiny of the totality l
of the conduct forming the basis for an alleged violation. */ It i
. is the cumulative effect of a course of conduct that must be the l
focus'in a determination as to the existence or nonexistence of a situation inconsistent with the antitrust laws, particularly where, as here, the inconsistency alleged is based on principles i
l
- / United States v. United Shoe flachinerv Corp. , 110 F. Supp.
795, 345 (D. Mass. 19'3),5 afI'd per cuiT5m, 347 U.S. 521 (1954);
n
' United States v. International UuEIniss N5 chines, CCII 1975 .'rade Cas. 160,~455 (S.D7 N.Y. 1F/5).
55
, - . + . .
~--.4 ---- ._
e
- w.
6 6 - , t -
k developed in_ cases brought under Section 2 of the Sherman Act The dictortion and irrationality resulting from using a piccomaal analysis is highlighted by Applicant'c attempt to over-come the IIearing Board's finding that Applicant has the cpecific inten t to:
l
[Il] onopol ize the retail and uholesale pouer markets by docttoying competiton from a group of healthy, growing. ef fective and aggiocsive competitorc. ***
Cach accuisition or attempted acquisition uhether or not innocent, in and of itself, is a material ele-ment and a substantial tactor in cuch a scheme. Ap-plicant's goal to accuire all of the small utilities in the relevant geographic market is an anticompeti-tive scheme to monopolize. Such schemos ate forbid-den by Section 2 of the Sherman Act. Mr. Aymond's dicavoval of the*** scheme is an ocsertion that it never ex10tcd. We find that as a matter of fact that the scheme still exists and tha t the matter is not moot. (ID at 155)
Typically, and consistent with its entire approach through-out this proceeding to thuart a finding of monopolization, Appli-cant, rather than face the issue squarely and attempt to refute the llearing Board's finding in light of the totality of evidence on which it is based , segregates the Hearing Board's evidentiary underpinnings into three di-: crete areas, namely, acquisitions, a '
statement by R. L. Paul, and political activity. It then charac-terizes the acquisitions as insignificant, not amounting to a violation of Section 7 of the Clayton Act, and thus not properly a basis for a finding of specific intent to monopolize; fir. Paul's speech becomes .the uninformed statement of a " salesman" which does not reflect company-policy and likewise cannot sthnd as a l basis for a finding of' a spGcific intent to monopolize; finally, it: claims that its so-called political activity to forestall l
56 l
1 x
, a2 ._
installation of generating caphcity by several small systems is constitutional 1y protected and thus must, bo ignored. Applicant never tddicoces the full mosaic of thn evidence which the Hear-ing Board' cites as the basis for its finding of specific intent to monopolize and does not even purport to expisin how the oggre-gate of this evidence is insufficient to support the Hearing Board finding.
Although, an we vill r$ake clear below. there is no legal basis nupporting Applicant's assertions that each of these acts, standing alone, must be ignored, the point to be noted here is the. analytical approach Applicant has taken. First, it isolates each fact and treats it as if it vere the sole support for an al-legation'of a situation inconsistent with the antitrust laws; second, it seeks to demonstrate tha t each fact , standing alone, is insufficient to support a finding of inconsistency; and final-ly, it would have the Board conclude that the aggregate of all the facts, each of which is claimed to be inadequate to support a finding of-inconsistency, must, therefore, also be insuf ficien t to support a finding of the existence of a situation inconsistent with the antitrust laws. Such an approach makes nonsense of antitrust analysis.
The' Department of Justice has alleged and proved that Appli- !
. cant, through its consistent unreasonable dealings with the small electric utility _ systems, has monopolized the relevant retail and wholesalc electric power markets, and that this monopolization by l
-Applicant'.was both conscious and willful. It is the position of !
1
. 1 57 l i
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T~'
y+ 4 --
9 % ew. w - ,:. g_ ++3--a- y
m . _ _ . __
of .the Depar taent , one which fully compor ts uith appropt inte legal precedent; that the sum total of Applicant'c conduct must be scrutinized. With this note, we nou turn to Applicant's attempt to justify, on an icolated basis, cach cource of conduct.
A'. The !!enring Board's Pinding that Applicant han t.be Specific Intent to rionopolize the Relevant Retail and Uholesale Pouer Iiarhets is Dased on Substantial Evidenca and Appropriate Legal Theory and has not been Refuted by Annlicant i
As noted above, Applicant's attack on the Hearing Board's finding +, hat Applicant has the specific intent to monopolize the retati and wholesale power markets in Michigan is in actuality nothing more than an effort to negregate the factual basis for the finding into discrete, airtight chambers, each of which it then challenges. */
u First, it contends that its acquisitions since January 1, 1970, do not amount to a violation of Section 7 of the Clayton
'Act (15 U.S.C. S18) (Appeal Brief for- Applicant at 321-23); nor
~
do they provide support for a charge of monopolization (Id. at
- / The error of such an approach is underscored by the Supreme 4
Dourt's observation in' Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690.(1962), teat:
. . . theLCourt of Appeals approached Continental's
' claims ._ as if. they were five completely separate and unrelated lawsuits. JUe think this was improper. In cases such as this , plaintif fs should be g'iven the full benefit of their- proof without tightly compart-mentalizing the various factual components and wiping
~
theislate clean after scrutiny of each . . . . The charactor and effect of a conspiracy are not to be
~ judged by dismembering it and viewing -its separate parts, but only by looking at it as a whole . 370 U.S.
at:698-99.
58
. 'e r
a
. 4, -.- #. . . . - -
, e. . ~ * + + + - + * - - - * *
~
323-24); not ate they inconsictent with PPC merget policy (Id.
-at 324-25). All three points were advanced by Applicant in its
-Post-IIoaring Dtief (at 206-10) and ware obviously found unpetcua-cive by the Heating nocrd (ID at 154). Moreover, only the cecond contention is arguably relevant to the icsue of monopolictic in- .
tent,.'and United Stetos v. Jerrold Electr onics: Corp. ,187 F.
Supp. 545.(C.D. Pa. 1960), aff'd. ner curitm 365 U.S. 567 (1961),
the only cace cited by Applicant, is not tr uly on point. In
.Jerrold, the Court found that the acquicition by Jet rold (a manu-facturer of cable television equipment) of 10 out of 500 cable
- television systems in the U. S. foreclosed from 1 percent to 10 percent of the market, but refuced to infer monopolictic intent becauce it found that the primary purpose of these acquisitionc was. investment. Jerrold Electronics, supra, at 563. */ In the present case, Applicant's market share is in excess of 80 percent and there has been no contention that its acquisitions were un-
- dertaken primarily for investment purposes.
Second, Applicant spends considerable effort to demonstrate l that DJ .#188, which states in part:
I The first goal of our marketing activity or program l
concerning utility systems in our service area is, of cource to acquire these systems, is the uninformed opinion of a ' company " salesman" and, therefore l improperly relied on for- any purpose whatever .( Appeal Brief for
-Applicant at 326-33). To support this contention, Applicant
- / In c fact, it was a close question whether Jerrold's acqui-L litions would qualify for the investment exception to Section-7~of the Clayton Act.
59
-ege*=. -we. u .e eM p . ...,m u . , , , , , _ ,, ,,,,m _
=- .. _ . _.
5 initially cites United Staten v. Unitod Shoo Machinerii Corn.,
'89'F. Supp. 349 (D. Mass. 1950) for the proposition that Mr.
. . Paul's statement of company policy in .DJ 3180 "would have boon e::cluded ftcn evidence in a conventional law suit" (Appeal Drief
.for Applicant at 327-20). Although as far as it goes, Applicant accurately cuotes Judge Uyzcnsl:1, it fails to note that imacdi-ately preceding the language it quotes, Judge Wyzanski specific-ally states that. rules of admissibility for antitrust actions vill be discunced later in the opinion */ and it further fails to no te that Judge Wyzanski held that the documents which the govern-ment sought to introduce were , in fact, admissible in a conven-tional antitrust lawsuit. **/ In short, Applicant cites language 4
from United _ Shoe, not the relevant proposition for which it stands.
- / Immediately. preceding the language quoted by Applicant (Eppeal Brief for Applicant at 328) the opinion states:
Taken as a group these three cases and others relied n
on by the Government can hardly be said to establish
. . . (a rule] to the ef fect that all statements by an agent acting within the scope of his authority to his . principal or to another agent are admissible
, against the principal as his extrajudicial admissions.
There is no such broad rule of. evidence in the federal courts - except perhaps__in antitrust cases of which more in_said in point 4 below. (89 F. Supp. at 353-54; emphasis caded.)
- / In point 4 of' the opinion, Judge Wyzanski draws a sharp con-trast between antitrust actions and other types.of law ~ suits:
But in a civil anti-trust suit . . . the trial judge is not required to exclude every tyre of hearsay _ '
evidence which _ uould be excluded in other types of cases.
. (Footnote continued) 60 6
. . s ..s..-....- ..w. _ - ,o- . - - -,..~.~. .
y s _--.__
Applicant, in fact , concedec .that there ic, no issue as to the admiscibility of DJ $188 (Appeal Drief for Applicant at 328), but then coekc to establinh that Mr. Paul'n state-ment of the "first goal" of Applicant's Marketing Depar tment should be given ,no evidentiary veight. Houever, a revicu of the casec ' cited by Applicant ac demonctrating that "antitruct tr ibun-als are justifiably cheptical" (Id. at 329) of the import of such statements reveals that they are not on point. In Dahl, Inc. v.
Roy Cooner Co., 448 F.2d 17 (9th Cir. 1971); (Appeal Brief for Applicant at 329) the sole banir for plaintiff's attempt-to-monopolize charge van an allegation that an employee of defendant told an employee of plaintiff that they would drive plaintiff out of business. In Scott Publiching_Co. v. Columbia Bacis Publishers, Inc., 293 F.2d 15 (9th Cir. 1960); (Appeal Brief for Applicant at 329, n. 338), there was clear evidence of record to negate any finding of r..onopolictic intent notwithstanding the " fighting" lan-
, guage Izt defendant. Moreover , the full opinion shows that the Court felt the statements regarding " driving [ plaintiffs] to the wal1" -(Scott Publishing Co. , supra, at 21), coul.d cer tainly sup-(Footnote continued from previous page So far as this Court'is aware, the Supreme Court has
- never either reversed or criticized a trial court for admitting hearcay evidence in a civil antitrust case tried without a jury. And all federal courts in antitrust cases do receive . . . the intramural com-munications passing between agents of the same co~rpor-ation. (89'F.:Supp. at 355) 61 g...-..,_ .
. . . 2. . _ . . . . _ . . . ..... ... .
por t a finding of monopolization in an appropriate case. */ In South End 011-Co. v. Texaco. Inc.. 237.F. Supp. 650 (N.D. Ill.
1965) (Id. .at 330 n. 338), the Court found tha t the alleged
.anticompetitive incidents took place fout years prior to the date the canno ot netion was filed and they had no impact on plaintiff's sales policies. Particularly relevant to the instant caso is-the Court's finding:
The record shouc that contempotaneous with these
" incidents" Tenoco was doing its utmost to assist the-plaintiff in his business . . . . 237 F. Supp.
l at G55 l-In sun, the cases cited by Applicant support at most the proposition that statements reflecting monopolistic intent, which are the sole basis for an allegation of such intent or which are contradicted by other evidence, should be viewed skeptically.
The facts of the instant proceeding allou Applicant to take no comfort _from such a proposition.
Applictnt's final effort to discredit R. L. Paul's speech is its assertion that "[n]ot only do the factual findings [of the
!! caring Board] make clear tha t this conclusion (that Applicant
(
t -
L */ The language quoted by Applicant from the Appeals Court i
. opinion is a quotation by-that Court from the District Court i opinion. The full District Court quote is:
LWhile aaain such communications would be consistent witE~3uch~afpurpose Tcteation ot a monopoly), if tee purpose were otherwise shown to exist , they appear to the Court to be'merely communications on the parti of
[ defendants]in the nature of a sales pitch to their financial _. angel in an effort to keep- the money coming, and.were'no doubt received in that spirit by-(the backercT. 180 P. Supp. 754,-766 (W.D. Wash.,'1959);
, emphasis added.
62
- * ' f ' * *
- eew , .%E , ,. , , ,
L
. --- ~ - ..
i i
Applicant is bound by Mr . Paul's statement) is purely formalis-tic, the conclusion itself is contraty to the law of agency" (Isp-peal Brief for Applicant at 331). An ' to the contention that the
!!aaring Daard's finding is " purely fornalistic" uc can do no acre than direct this Appeal Board's attention to the Initial Decision at 150-157, and particularly 150-151. The Docrd clearly evaluct-j ed Mr. Paul's duties and responsibilities ns an employee of Appli-cant (cpecifically including the responsibility to advise other l employces as to coupany policy (ID at 150)), found it inconceiv-l l abic that Mr. Paul's superiors were not aware of this announced "first goal." found that Applicant failed to disabuse Mr. Paul of false notions of company policy, and concluded Applicant should be bound by Mr. Paul's pronouncement of company policy (ID at 150-51).
This, we submit, represents no " purely formalistic" finding by the !! caring Board, nor is 1.t inconsistent with any of its other findings of fact. */ The language quoted by Applicant from l the Initial Decision to the effect that the goal expressed by Mr.. Paul was unrealistic (Appeal Drief for Applicant at 330, 331)
I l-r
- /L The llearing;Doard, apparently not wishing to impugn the' in-
.tegrity.of Mr. Aymond, at one point accepts his statement on policy as true (ID at- 151) . Yet, the B5aE3's ultimate ' finding
- of specific intent to monopolize is inconsistent with the Board l ' actually.. finding Mr . .Aymond's policy statement truthful.
Mr. Aymond's disavowal of the scheme is an assertion that it never existed. The testimony shows no intent to abandon an existing scheme. We find as a matter
- of' fact that the scheme still exists . . . . (ID at 155;.' emphasis-added).
- 63 r.
^'
j ~ - .
is taken from the I! car ing Board 's diccuncion of the cv idence nec-essary to custain a cauce of acti'on for attempt to monopoline.
The Board had already found, as a matter of fact, specific intent to monopoli m. and uns merely evaluating the Icgal significance of that finding under the erroneous precuoption that to be . guilty of attempting to nonopoline, Applicant uust, in fact, be able to acquire all of the cmall cysteus.
As to the contention that the float ing Doard ' c finding is con-contrary to the lau of agency, it is unnecescary, we believe, to embark on an analysis of the law of agency. The legal authorities cited by Applicant as support for this contention all relate to the admissibility of such a statement. Thus, Applicant is merely resurrecting its clain that such documents "uould have been ex-cluded from a conventional law suit." (Id. at 327-28) 11o r eove t , under the Federal Rules of Evidence (P.L.93-595; 88 Stat, January 2, 1975), DJ #188 and the statements contained therein are not even considered hearsay. Rule 801 of the FRE states in relevant part:
(d) Statements which are not hearsay. A sta teinent is not hearsay it --~
~
l (1) * * *
(2) Admission by party-opponent. The statement is offered against a party and is . . .
(C) a statement by a person authorized by. him to make a statement concerning the subject, or (D) a statement by his agent or servant concerning a matter within the scope of his agency or employment made during the existence of the relationship. . . .
Since Mr. Paul, at the time he made the statement reflected 64 mog .- e g* .
p
in DJ_J188, was an employee of Applicant author ized ' to announce cc:npany policy to other employees (Paul, TR at 7959), his state-ment'of such policy in DJ 4130 clearly falls under PRC, Rulo 801(d) (2)(C) and (D).
We recognize, of course, that FRE nule 801 addresses colely the J acou of admissibility and not the weight to be given the ad-mission. Therefore, we will highlight come of the evidence avail-cble to the !! earing Board in evaluating the weight to be given 4
Mr. Paul's statement.
Mr. Robert L. Paul is and has been an employee of Consumers Pouer Company since 1949 (TR at 7804-05). In 1964 he was assigned to lspplicant's main offices as a general power sales engineer; in 1967 he was promoted to General Supervisor of Governmental Sales; and in 1970 he becane the General Supervisor of Commercial, Clec-tric and Governmental Services (TR at 7805). His department, the Energy Consulting Services Department, participates in negotia-tions with the municipal and cooperative utility systems, some-times alone and sometimes in cooperation with other depa_ tments,
~
particularly Mr. Mosley's (the Vice President for Electric Opera-tions) (TR at 7921-23).
A review of the document introduced into evidence by the Department in this proceeding shows that a good percentage of them were~ prepared by, addressed to or reflect conduct by R. L.
Paul. */ This represents no design by the Department ,to
- */ See, e.g., DJ #12, 22, 23, 27, 28, 49, 51, 57, 58, 59, 30,- 82, EI, 85, 123, 124, 129, 140, 150, 151, 153, 156, 158, 162, 163, 170, 186, 188, 194, 206, 207, 208.
6f B
p
"cingic out"~Mr. Paul; he cimp'ly happenc to be the person most visib12 in the tr ancactions and negotiations involving the cmall utility nyctems. It vac, for exaaplo; Mr. Paul who urote that
.the propocod th ir d-pa r ty-admis n iott utandardc in the Michigan Pool contract "uould not meet our expreccod goal to clininate the pocsibic participation of undecirchle third partioc" (DJ #170).
It uns I:r. Paul who cdviced Edicon Sault Electric Company that Applicant:uould not enter into a ecocaination agreement (DJ 035).
It wan Dr. Paul who.kept track of Applicant's offeto to purchase or leace municipal electric cyntoms (DJ #12). It was to Mr. Paul that Northern Michigan Coopotative directed its requect for par-ticipation in Midlcnd and Mr . Paul who acknowledged receipt of that-requent (DJ #22, 23). It was Mr. Paul who was the principal spokesman (at least in the initial stages) for Applicant in the
. negotiations culminating in the September 1, 1973, contract be-tween Applicant and the MC-Pool (the contract is DJ #105; docu-monts reflecting Mr. Paul's par ticipation include DJ #54, 55, 56, 57, 58, 59, 60).
This activity by Mr. Paul, which is by no means all inclusive, belies Applicant's characterizations of him as a
" subordinate employee in the Company's marketing department"
.(Appeal.Brief for Applicant at 202), a " middle level Company
. employee" (Id. at 321 n. 322), a " middle-level salesman" (Id.
at 32G; see also at 329, 330 where he is merely,a "salasman")
and . a ~ " subordinate employeo" who engages in " overeager, and self-aggrandizing claim [s]" (Id. at 332).
It is interesting to note that when in its direct case Ap-66 i __ -__L___ ~'
-~~
- v. _ . . . ..
plicant cought to defune iccecc relating to its acquisitions, at-tempts to forestall gener ation additionc by the cooperatives and certain aspectc of its refucals to deal, it relied heavily on R. L. P a '11. Presumably. this reliance wac baced on Mr. Paul being the employee of Applicant most familiar with the matters about which he was testifying.
The weight to be given DJ }188 is further caphacirci by the fact that n. L. Paul'c speech is neither an isolated s ta temen t contr adicted by . contemporaneous conduct , nor is it the cole doc-ument reflecting Applicant's intent to "monopolice the retail and wholesale power markets by destroying competition from a group of healthy, growing, effective and agressive competitors" (ID at 155). In addition to other documente pr epared by Mr. Paul in
.uhich acquisitions are evaluated and/or recommended (e.g., DJ
- 15, 197), several documents not prepared by R. L. Paul reflect adherence to a policy consictent with the "first goal" announced in DJ #188. For example, in DJ #141, an October 10, 1966, letter from Applicant's.A. 11. -Lee to the President and Council of the Village of Paw Paw, Michigan, Applicant submitted a proposal to supply the Village with wholesale power and went on to state:
"In addition to this proposal for the supply of whole-sale power, we would like to suggest that you also give consideration at this time to the sale of your electric system." */ .
- / The lengths-to which Applicant will go tr segate any infer-ence that it regularly evaluated and sought :o purchase-the small systems is highlighted' by Mr . Paul's char'etor aing this pro-sposal, not as a suggestion that Paw Paw s t- ,
.s ys tem to Appli-(Footnote continued) 67
A June 10, 1969 latter to Richard Stutesman of Southeastern Michigan Cooperative from Applicant's Mathcu Dtuce (DJ #125) was cited by . the Hearing Board as suppott for its ' finding tha t
"{iln_1959 Applicant sought in vain to acquire the Southcastern Michigan _ Cooperative" (ID at;154).
Any doubt tha t the "first goal" announced by R. L. Paul was, if not specifically approved by top management, certainly consis-tent with their ova philosophy is laid to rest by DJ Q113, a May 13, 19G6 */ memorandum from B. G. Campbell, then Vice Presi-dent'in Charge'of Marketing (TR at 6185), to A. 11 . Aymond, Appli-cant's Chief Executive . Officer. Mr. Campbell recounts that Ap-plicant submitted a cost comparison to the City of Wyo:aing, Michigan, of a city-ouned and company-owned lighting system and that this _ precipitated a request by the City for a purchase offer.
Mr. Campbell reconmends that Applicant acquire the system because
"[t]his purchase will climinate another. potential municipal
. electric system" (DJ #111; emphasis added). **/
(Footnote-continued from previous page) cant, but'as "[a] suggestion that they night coreider soliciting
.an offer f rom the company for their system" (TR at 8112),
Also, it should ' be noted tha t as was the case with its offer
_to lease the Traverse City system (see ID at 153, Appeal Brief for Department at 168), Applicant sought to insure maximum exposure to this " suggestion: that tney might' consider soliciting an offer."
Copies of DJ . #141 -vere provided "to Bill Hamilton for News Paladi-um, Paw Paw Courier Northern."
- / .DJ~#188, the' Paul Speech, is dated May 17, 1966, less than one week la ter than DJ . fill.
- / ~ Although' Wyoming was operating only a municipal street 68 (Footnote continued)
N ~ =-
4+ e.s
.- .. .w e .w ee ... , . e ve e s'e '
~- 2e-- % - ..s% _ . nw ..m-; ,&m-%w, 4
Thus , doeur.cn ts con tempor t:ncous with DJ #103 cvidence noth-
~ ing . to . undercut or con t r ad ic t R. L. Paul's pronouncement of the "first goal" of Applicant's marketing activity. In fact, the only difference,betucen theca documents and DJ !!108 is that while
,. they reflect adherence to , or at least consistency uith,' the policy, they osit to spell out in so many vords the goal of ac-quiring all of the small systers.
Nor can it be claimed that Applicant's conduct has in any way been contradictory to this announced policy. Applicant admits to acquiring three small utility systems and attempting to acquire two others sinc- January 1, 1960 (Appeal Brief for Applicant
. at 321).
~
It f ails to note , however , its attempt to lease the (Pootnote' continued from previous page) lighting system, Applicant reasonably foresaw the possibility
- that this system would grou into a competitive entity and, there-fore, sought to head this off by purchasing the lighting system.
- Applicant's concern in this regard uas apparently based on its experience with the City of Zeeland, Michigan. Zeeland evolved from a municipal street lighting system _ purchasing power from Ap-
- plicant into.a generating municipal utility which competed suc-cesufully with Applicant for retail loads (Westenbroek, TR at 938-39). Applicant's Mr. Paul testified as to the outcome of this competition:
In the case of Zeeland, at one time the company was the only system franchised and operating in the City of Leeland. Zeeland established a municipal system _and subsequently did not renew the company's franchise to operate in Zeeland.
However, they have continued to allow the com-pany to remain ' there and _ serve the customers that they were serving. H o .i e v e r , our experionce~has~been that we are gradually los!ng these custoners over a period of ' time Has buildings are vacated, changes of business, and this' sort of thing, since the City will not allow us to serve any now customers. (Paul, TR at-7814),
69 7-
c._.. .
1 Trcverce City raunicipal syctea -(e:: cept to tr ea t it as political conduct),- the of fer Lo Southeactern Michigan Co-op */, its "cug-lgestican" tha t cystems solicit ~ cn offer from it in, for example, tho'cace of Pau Paw; -ita purchase proposal to the City of Uyoming
.in order to " eliminate another potential municipal electric
, cyctem" ( DJ fill its propos:-il to purchace the City of Grand
' Rapids.Strect. Lighting System (DJ #188 at 3. Int. #2040); and its evaluation of purchasing the City of Laton Rapids Cloctric systen-(Int. G2155). **/
In chort, there is ample reason for the Hearing Board to have concluded that Applicant chould be bound by fir. Paul's statement of Company policy:
. The first goal of our marketing activity or pro-gram concerning utility systems in our service area is, of cource, to acquire these systems. (DJ #188).
Third, Applicant goes through an-extensive analysis of the
. Noerr-Penning ton doctrine ** */ ( Appeal Brief for Applicant at 333-340) and concludes .that what it characterizes as political activ-
- / Applicant refers to DJ #125 as being .only a " passing refer-4
. cnce" to acquiring the co-op by. "a Company spokecman" (Brief for Applicant at 321,.n. 322); the IIearing Board found " Applicant
' sought in vain to acquire the . Southeastern Michigan Cooperative" (ID at 154).
- / Int. #2155 ' is 'a ' January 6,1970 memorandum by R. L. Paul whichfstates in part: " We ho pe to 'soon submit a proposal ~ to the City of Eaton Rapids for' the purchase of its electric system."
(See also Int. #2172.)- .The' proposal was not submitted to Eaton Rapids apparently because of capital difficulties by Applicant and legal ~ . problems by - the City. (Paul, TR at.7913).
- /IEhstern RR Presidents Conf. v. Noorr Motor Freight, Inc.,
365 :U.S. 127 (1961);-United Mine Workers of America v.
Pennington, 381 U.S.;I57-(1965).
70
- * > +w l e ;~ e- s_ n n
, we w-.e -
- r. m ,e .-e s mi *
~
'ities, namely, itn effortn to prevent Tr averse City and . Nor thern Michigan and I:olverine Cooperativec from~ installing generating capacity, "cannot . . . be utilined in support of a finding of an antitrust inconsistency in this prceeeding" (Appeal Brief for Applicant at 340). The ~ chor t ansuet to this-clain of immunity by Applicant is thet footnote 3 to the Penni,n,gton opinion, 381 U.S.
at 670, n. 3, allous evidence of valid political activity to be used to shou the "purpoce and char ac ter , " -- i.e., general anti-competitive intent -- of other nonexempt transactions. */ The only' limitation or the admissibility of such evidence is the trial judge's discretion to exclude unduly prejudicial or nonpro-bative evidence.
In Lamb Enterotises. Inc. v. Toledo Blade Co., 461 F.2d 506 (6th Cir. 1972), cited by Applicant as standing for the l
- / Applicant, although acknowledging the existence of this foot-note (Appeal Drief for Applicant, at 340 n. 359), erroneously characterizes it as "dictua" and proceeds to suggest this Board l
ignore it because "the Company's political activities were honest, L
above-board expressions of . opinion in the public arena . . . .
(Id.) In the first place, f ootnote 3 to the Penning ton opinion is not= dictum. The Hearing Board in the Alabama Pouer Company Parley Plant antitrust proceeding recently considered and rej ect-ed an identical contention:
The Court's statement in note 3 was not dicta as asser ted by Applicant , because it was giving guidance to the district court on future evidentiary rulings, since there were to be-further proceedings below' upon
- retrial [ footnote'omitted]. (Alabama Power Company (Joseph L M.f Parley Nuclear Plant, Units 1 and7 ), NNC Docket Nos. 50-348A,- 50-364A; Memot andum and Order ,
(November 25, 1975) at 18). .
Second, and more important, while the honesty or openness of the political activity may be relevant to the question of " sham",
such considerations ar e irrelevant to the pur pose or intent evidenced'by the political _ conduct.
71-7
= ..- - -
pro' position tha t "the Court of'Appealc held tha t (evidence.of political activity] . . . properly was inadmiccible undar Noctr-Penni~naton principles" (Appeal Brief for Applicant'at 337), the i
Cour t' of Appeals nerely upheld the trial j udge's exercine - of discretion in~ denying admission of evidence regar. ding political activity. 461 F. 2d at ' 515-517. The trial judge had ruled as follous:
Well, my ruling is at this point in time that I am going to _ sustain the obj ection, because I think at this point in time it would be highly prejudicial.
4 61 P. 2d a t 516.
The ruling did not go to the probative value of the evidence, but rather, to the -prejudicial ef fect on the_ jury before uhom the case was being. tried. See 461 F.2d at 509. The Hearing Board in this proceeding obviously believed Applicant's efforts to fore-stall installation'of additional generation by Traverse City and Northern Michigan and .Uolverine Cooperatives to be probative evidence bearing on Applicant's intent to monopolize. It cites
-in detail the facts relating to both incidents in that portion of .the Initial Decision addressing -intent to monopolize the re-tail and wholesale markets (ID at 153-154). A fair inference from this _ is that the Hearing Board found this evidence probative
~
and supportive 'of Applicant'sL monopolistic intent.
y Unless Applicant is contending tha t the Hearing Board abused
~
, its discretion -in admitting this evidence since it would be un-
~
duly prejudicial on the - Hearing Board, its reliance on the Noerr-Pennington: doctrine is misplaced. This evidence was properly *
- part of _ the ' record :and appropriately' cited by the Hearing Doard 72
n a .c - .
. to chou "putpone and char acter"' of other conduct, i e., Appli- .
cant's' intent.
W Thus, it is apparent tha* he legal -citations which Appli-cant'urgcc require this App al tard to disregard */ cach factual basis for the !! car ing Board 's find ing of monopolistic intent
-~
suppott no such approach. Applicant's so-called Noerr-Pennincton conduct,'its attempted.cnd cuccescful ceguisitions and lease offers, and the announcement by 11r.. R. L. Paul of the "first goal" of :tho ' Company's uar heting activity are all, individually and in-the aggregate, relevant and probative and provido a sub-1 stantial basis . for a-finding of monopolictic intent .
f It:-in interesting to note that Applicant does not
~ the.-f actsi on which the Ilear ing Board based ' its conclus, ion challenge but rather: attacks the ultimate finding of monopolistic intent by.
1 systematically urging ~ that cach fact on which it is based be disregarded.. ,
73
--Me**-W5M, M*" * ,*um meme ieof g g g m y e..e 9 mwem,, 4; ,,,,. _, . ...$, q
' - _ _D.
B.- The licar ing Board 's Pind ing That Applicant has the Specific Intent to Monopolice the Relevant Retail and Whclesale Power flarkets '
is Fully Consictent with and Supported by Other Evincnce ol_ Record. ,_______
In addition to the evidcnce cited by the Hearing Evard as a basis-for tts finding that Applicant has the cpecific intent to monopolize the relevant reta il and wholocale pouer markets, the record of this proceeding reflects that the totality of Ap-plicant's dealings with the small utility systems is consistent with, and therefore supportive of, this find ing. This evidence is set out in detail in the Department's Brief in Support of Exceptions (Appeal Brief for Department at 80-171) and we will limit ourselves herein to highlighting Applicant's f ailure to overcome the import of this evidence and the conclusion to which it - inexorably leads, namely, that Applicant's conduct, includ-ing- both its affirmative action and its refusals to act, demon-strates a willful monopolization of the wholesale and retail
. power markets in Michigan's lower peninsula.
- 1. Applicant Has Refused to Coordinate With Smaller Systems Except on Unreasonable and 91scriminatory Terms; Its Claims to the Contrary are Without Merit
- a. Applicant's Alleged Justifications for its Anticompetitive Coordinating ;
Policies are Fallacious i Applicant's efforts to justify its refusals to coordinate with smaller systems in Lower Michigan, except dpon unreason-able and discriminatory terms, appear to be grounded princi-pally upon three propositions. First, Applicant asserts that for it to derive the necessary net benefits from a coordination 74 o
.. . .~ . -. - ,-..-. ~.. ...~.. - .
y-
agreement with another electr ic system, the other systen must have the chility to engage in compareble coordinating transac-tions'en a reciprocal basis (Appeal Brief for Applicant at 218). Second, it crgues that to have entered into coordinating arrangements requested by the smaller systems would have resulted in granting them preferential treatment vis-a-vis the Applicant's other customers (Id. at 220). Finally, Applicant claims to have coordinated with all utilities " capable of coordinating" under contracts uhich have "a high degree of similarity" (Id. at 233), and this similarity precludes charg-ing it with discriminatory treatment of the smaller systems.
We believe each of these contentions is misconceived.
The Department of Justice has always agreed that Appli-cant, despite its monopoly power, is not obligated to coordi-nate with smaller systems where it would obtain no net benefit.
WeEdisagree, however, with Applicant's notion that it cannot obtain a net benefit unless the other coordinating party is able to engage -in comparable coordinating transactions on a reciprocal basis. Such an argument, suggests, despite Appli-cant's disclaimer, that Applicant really believes the benefits on both sides should be more or less equal, at least over. time.
Th is flies in the face of the principles of Gainesville Utilities Department v.-Florida Power Corp., 40 FPC 12327 (1968), cited and quoted f rom by Applicant as embodying the FPC's views on appropriate. coordination criteria (Appeal Brief for Aphlicant at 214 et' seq.). The passage from the PPC's Gainesville opinion 75 ,
< - - - - - --+-4 m ... ,_.. ..-.,_.,;..._ . . , . _ . . . . . , _ . _ . .
.n
m ;,
1 that Applicant quotec .ct- page 215 of its Appeal Srief is d irec tly in point. The FPC called for:
An . equitable char ing of the renponsibilitics of interconnected operation. Each par ticipant should bear its propertioncte share of that recponsibility. In doina so, each interconnected system will meet L ts ut ility rdsbons fUlit tes and thers util be no economic cenaltiu tor EEIr.g tne last-on{ oa the interconnecua network.
4u F.P.C. 122/, ct 1253 (capima is ccGec ) .
The FFC looked for and found benefits to both parties, but recognized that Gainesville woulo be penalized economically if the benefits, rather than the burdens, of interconnection were shared equally:
We agree with Gainesville and with staff that the record _ in this proceeding does not establish any satisfactory justification for the imposition of a per kw deraand [ standby]
charge as requested by Flor ida Power. We are also of the opinion that the 50-50 split proposal of the Examiner is not appropriate.
The reasoning of both Florida Power and the Examiner is inconsistent with what we have determined to be the appropriate analysis of the_ basic issues here presented: sharing the responsibilities of interconnected operations.
As we have' explained, that sharing must be based upon, and follow the proportionate burdens each system places upon the . interconnected system networks, not the benefits each expects to receive. 40 FPC at 1237.
As Applicant's own expert witness, Mr. Slemmer, testified, engineers analyze a proposed coordination arrangement by deter-mining whether or not meshing - two formerly independent systems will degrade the reliability of the combined system, and thus whether an -~overall net benefit or detriment will result, but there are no engineering principles governing how any net benefit should be apportioned (Slemmer, TR. at 8929-31, 8969-70).
76
. . . - _ _ ~ . _ _ _ _ . .. _ ___ _
W
,_ .._ _ ..~. _ _.. ._
The Department submits that where. Applicant possesses ronopoly
_ power and control over the coordiriating opportunitics of other systems, and chsent any evidence of any study ind ica t i ng that
- Applicant would have suffered degraded reliability f rom any proposed coordination arrangement, Applicant's insistence on comparability and reciprocity of coordinating transactions is patently unreasonable.
Applicant's claim that ' coordination with smaller systems -
who purchase wholesale power would af ford them " preferential"
-treatment -- that they would simply be buying power at less than Applicant's average cost -- likewise f a ils when it is recognized that wholesale firm pouer and coordinating power and energy are not the same thing. They should have differ-ent costs, principally because wholesale firm pcwer is planned to be available virtually at all times, while most forms of coordinating power and energy are generally supplied on an if-end-when-available basis. There is no discrimination in charging different prices for different products. Appli-cant's suggestions that reciprocity considerations are somehow a factor in t uch pricing are simply misconceived.
Applicant's third argument, that it does not discriminate ;
1 against smaller systems because its coordin :ing agreements with them provide f or what it characterizes as the same types of power exchange transactions as are contained in its contracts with its large neighbors, begs the issue. The existence or nonexistence of discriminatory treatment turns 77 V 6-W'm%%Q-ws* mm -
TA _ _
_-. _ _ . . ~;T 1
not Upon that: Applicant chooses to call the dif ferent typas of transactions.provided for in its var ious ' contracts, but upon tlua similarity or dissimilarity of the terms and ccaditions under which particular transactions take place.
Thus, although-Applicant's contracts with Holltnd and with the- M-C Pool provide f or what Applicant denom ina tes " reserve shar ing ," the imposition of the " Holland formula" on those
- systems renders the arrangements qualitatively and discrininc-torily different frca Applicant's reserve sharing with Detroit Edison.
- b. Applicant's Outr ight Refusals to Coordinate Reserves Uere Unreasonable Applicant continues to argue that it was justified in refusing to coordinate with Northern Michigan and Wolverine Cooperatives in 1964, Northern Michigan in 1967., and Edison
' Sault in 1972, because those systems would have needed to pur-chase power in order to meet their ' load plus an appropriate level of reserves.
The short answer to this argument is that Article II of
- Applicant's 1962 Michigan Pool Agreement with Detroit Edison
. (DJ #71) permitted Applicant to purchase generating capacity from Detroit Edison to make up a de. iciency in reserves (and vice versa) -- the very thing the smaller systems needed, but
- which Applicant would not consider. This provision of the Michigan Pool Agreement belles Applicant's contention that reserve sharing with a generation-short, or non-self-sufficient system is not normally-beneficial (see Appeal Brief of 78
- WMhW *ar+-se Me --
)_
n .
Applicant, a t.- 23 6-23 7 )' . 7he "ncrmcl enprctatlon" h that
-combining-the generation of, tt.o or more systems will reduce the total-level of reserves required by the combined systom as against the systems operating. coperately. (Maybcn, TR. at 2564-2570; e.o., DJ #65). Nor thern cnd Wolver ine wanted the opportunity to take advantage of th ic pr inciple with regard not only to their. existing -generation but also for future
_ generation which'they were contemplat ing instelling as an alternative to purchasing power when they approached Appli-cant in 1964 (see e.g., DJ #42). The ir requests for coordi-nation clearly were intended to develop a relationship for the future, not cerely to coordinate their ~ then-existing-
- generation-(see, e.g., DJ #39, 40, 41). There is no basis for suggesting ' that they were unwilling to plan future genera-tion. to achieve self-suf ficiency, had they been able to obtain coordination of generation with Applicant (see e.g., DJ #32).
In this regard, it ir, dif f icult to reconcile Applicant's subse-quent opposition to the cooperatives' financing of self-generation with its insistence on generating resources suf ficient to meet load plus reserves as a prerequisite to coordination. It would appear that Applicant af firmatively sought to prevent the cooperatives from meeting its coordination criteria.
Applicant's denial of Northern Michigan's renewed request
- for -coordination in 1967, is, if _ anything, an even stronger case in po in t '. Additional generating units were planned and under construction._ With such generation, the total capability 79 O
,m_--, %. p e s- ah n. +e
- w omens e **sk- h- += e m ,4 , ww., e g .. e e, w ==ume
- e e w =* peam
~
.~
f ot 'the interconnected system cf northern, Wolverine, Grand Haven and1? rave rse - C i ty 'vould each 150 nw to serve a lor.d
..of 100 mw,-and no-purchase of wholeselo poNar was required
'to meet- a generatica deficiency (DJ #40). Applicant's coordination cr iter ia were met on their face. Yet, rather
.than of fering1cr; attempting to work out a coordination acrec-ment,: if, insisted upon . treating Northern Michigan as isolated from its interconnected systen, found Horthern lacking, and continued to 'of fer only its standard wholesale type of agree-
. ment" ; ( DJ #49). Nouhere in h is letter to Mr. Daverman communi-cating this refusal to coordinate does Mr. Paul raire the Applicant's lack of information or alleged inability to assess
-the value of Northern's existing coordinating relationships (Id.).
Applicant's refusal to coordinate with Edison Sault in 19721further emphasizes the' discriminatory nature of its coordinating policies. Applicant had ' initially led Edison Sault to believe .that it could purchase generating capacity from Applicant to meet its coordinating requirement of genera-tion-sufficient to meet load plus reserves (DJ #83-85); Edison
' Sault Lwas : aware of the provision f or this in the Michigan Pool TAgreement (DJ #71).- Only'after Edison Sault had evaluated coordination on that' basis with the alternative of continuing wholesale firm - purchase and . concluded that coordination would be~ preferable! did Applicant's Messrs. - Paul and Hedgecock advise Edison Sault that' wholesale purchase was its only alternative .
. ~80-ma+
' p.m
..ee-.w +.,e e. + tw. ,ee w ,,, ...-..cw s ... -,..
i
- l. c. 7,pplicant's Ecfusals to Sharc Reserves on Equal Forcentage Principles Uere Uarecsonabic Applicant cppears to take issue with the Department's reliance on the results of the Gainesville litigation */
l as'a benchacrk for evaluating the recconableness of Appli-cant's interconnection agreements with small syctems in Lower Michigan (Appeal Brief for Applicant at 247 et seq. ) . Its argument in this regard is rather surprising in vieu of its earlier contention that "[ajs the FPC itself had subsequently stated, the Gainesville case embodies that Commission's views on the appropriate criteria to be observed in~ evaluating coordination interconnection proposals" (Appeal Brief for Applicant, at 214-15).
Regardless, we believe Applicant errs when it misreads the Gainesville opinions in attempting to mitigate its denial of equal-percentage reserve char ing to th'e M-C Pool, Lansing and Holland. 'Gainesville doec reflect the FPC's views of appropriate reserve coordination principles as between systems of greatly disparate size. Absent any showing that the,small system would I burden the larger, the FPC refused to require Gainesville to i l
pay Florida Power a standby charge in addition to "contr ibuting I its proportionate share of instantaneous emergency service and installed generating capacity, including reserve capacity" (40 FPC, at 1238; emphasis added). There has, of course, i
- / Gainesville Util. Dep't v. Flor ida Power Corp. , 40 FPC 1227 {)
(1968), 41 FPC 4 (1969), rev'd, Florida Power Corp. v. FPC, 425 F. 2d 1196 (Stack. 1970) Reinstated, 402-U.S. 515 (1971)
~81 N9 "Wam-n
- we 4E4..
~~
El
~
~
, . __ _ _ _ _ ~.
'baon no showing [in this proceeding that ::,cching ' the genera t ion
~
-~f o the.H-C Pcol, Lans ing or -holland with that of the ApplIcent
~
1 wouldLdograde Applicant's reliability so as to make reasonable
~
or appropriate Applicant's incosition of the addit ioncl charge encompassed in the: " Holland Formula" on smaller system.s 3:c.;-
ing reserva coordination (CJ #100, 105, Slemmer, TR. 897?-83).
e Further, the- Department believes the FPC's Ga inesville t'
opinien clearly-refutes the . con tention f requently raised by a
Applicant (e.'q., _
Appeal Brief of Applicant at 258) that it is t ~ appropriate _ to consider and reflect the size of a small coordi-nating partner's largest unit in levying a reserve requirement upon it. As 'cf tne time of its proceeding before the FPC, Gainesville's dependable generation capability was 108.4 mw, its peak l load 54.5'mu, and its largest generating unit 44 nw (40' FPC 1227, at 1248). Nowhere in the FPC's opinion is it i
even suggested that Gainesville should be required to maintair.
144 mw of reserve,-nor is it suggested that the size of its largest; unit. was relevant to the determination of Gainesville's reserve responsibility. Viewed in this light, Applicant's argument for the' reasonableness of its " Holland Formula"
,(Appeal Brief for Applicant, at 258-259) appears specious.
82-83
_m _____._-m_m_._..
- 2. Applicant has Fallad to Refute the Hearing Dontd's Finding thac its Conduct a.noented to a Ceaeral RefuEr1 to Uneel --..----
Applicont attempta to r 7 0 ute the Uccring Boara's finding "that Applicant's conduct smorated to a general refucal to whccl" l(ID at l'42)' pr incipally by ignoring or misstating the finding.
For'cxoople, ccapare Applicant'c statenent: "the Hearing Doard concluded
~
. . . that Consumers Pou2r had not always bacn willing to'uheel wholesale pocer . . ." (Appeal Brief for Applicant at 105 n. 95), with the Heating Board's actual finding quoted above.
When Applicant does face up to the Hearing Board's finding that its conduct amounted to a " general refusal to wheel ." it attempts to demonstrate the unreliability of the finding by citing (1) tuo items which are not in evidence in this procaed-ing and (2) the so-called reasonable wheeling policies announced L
during the direct testimony of Applicant's Mr. Aymond (Brief for Applicant at 302-306). First, Applicant cites a portion
! of the deposition of Mr. John Keen (Keen deposition, p. 304; L Appeal Brief for Applicant at 303, n. 262) to argue that the testimony of Mr. Keen, quoted by the Hearing Board (ID at 142),
referred simply to an offer by Wolverine to wheel for Appli-cant (which was rejected), and not to a refusal by Applicant to wheel for Wolverine. Applicant never sought to introduce
.into evidence that part of Mr. Keen's depositio'n on which it now relies and whether or not it would support Applicants' l~
-proposition, such a selective expansion of a long-closed 84
, , , . . . _ _ _; -- . : . -. , - ~ . . - - - . . - . - . . . . . . . . - --. - . - -
y-
evidonciary record for . the convenience of Applicant ,;c u ld be _ unf air. Moreovet, tha testicony g60ted by the 6 caring Ucard is in actualit- another scrtion of Mr. Keen's deposition (p. 340) rend into the record by Applicant'c count:1 during crosc-examination of Mt . Keen. Thus, Juplicoat itccif intro-duced'the statac. ant it now coehc to overtura and it had every opportunity to clarify any ambiguities in that statenent.
Further, had Applicant then sought to introduce the portion of the der sition on which it nov relies (p. 304), the De-partment would have had the opportunity, on redirect examino-tion of Mr. Keen, to clarify the record.
In cum, the Department has no desire to have this Appeal Board affirm a finding of fact by the Hearing B'oard if indeed it is based on a misapprehension as to the meaning of Mr.
Keen's testimony. On the other hand, the only thing which Y
Applicant citos to suggest such a misapprehension is evidence not of record and not, therefore, properly before this Board.
Moreover, even assuming that the incident to which Mr .
Keen referred - in his testimony quoted by the Board (Keen's deposition on page 340) was an of fer by Wolverine to wheel for Applicant, the clear import of the testimony is that Mr.
Keen strongly believed it would be totally futile to request Applicant to wheel for Wolverine. In fact, Applicant's counsel cited that portion of Mr. Keen's deposition quoted by ,the Hearing Board (and which ~ it now claims to be ambiguous) to estab-lish that subsequent to 1964-1965, Mr. Keen, due to his belief 85
- __ _ . . . - . -- .- - -. ...:...--..----.- e
in the futility of such action, had not tecuected uheeling ft;on
~ Applicant (Ta st-4530-33). Thi; is precicaly the purpose for which the Hanring Board quoted the teatimc 1 It did 'not, as Applicant clains, " cite to uhat it deemed to be a pr ior refusal
'to wheel" (Appeal 3rief for Applicaat at 302). Rather, the Hearing Board found that uhile "[t}achnically, it can be crgued that there can be no refuccl to deal without a specific request"
~
(ID at 141), "there is evidence that a number of the small utilities ' sounded out' Applicant and received discouraging replies" (ID at 141). It is these "d iscou rag ing replies," not any " deemed . . . prior refusal to wheel" (Appeal Brief for Applicant at 302) which form the basis for the Hearing Board's conclusion "that Applicant's conduct amounted to a general refusal to wheel" (ID at 142).
Second, Applicant places great reliance on its " Exhibit 12,023," which Lpurports to be a contract between Applicant and the MC-Pool pursuant to which Applicant will wheel 20 mw of firm bulk power from Detroit Edison to the MC-Pool (Appeal Brief for Applicant at 105, 297, 297-n. 245, 299, 303, 409). Not only has_this document never been introduced into evidence in this proceeding, it was not even in existence at the time the record was closed. The Department has had no opportunity to present f evidence or cross-examine witnesses regarding -this agreement. lFor example, the energy charge associated with th e prov ii s on of transmission services is, we believe, exces-
. sive on its f ace; yet, we ' have had no chance to establish 86 3-
.,-- ..-ar+ e. ~. - , = = - = ~ - - --- - * - - - ~ * * - * * * * * * * * * " " ' * " * " * " * ' '
this fact. Also, Applicant, uhich in currently chort of .'ca-erating capacity on its ova nycter (Gae C .i .121; Steinbrecher,
'iR at 1950-51), may here bson unable ^o cupply the power itself to the MC-Pcol, and, ther ef orc , my hava agreed to uheal . colely because of, and only for the dur a tion of . its generating defi-
-ciencf; similarly, ce heue had rio oppc.c tunity te develop thin theory. Tnerofore, the Dspartment submits that thic extra-record e::hibit should not be considered by this Appeal Board.
L'c ' recogni ze , houever, tha t ev'en if this Eoctd agrecc with the. Department's position, Applicant's conctant invocation of this centract will make it difficult to ignore the fact tha t Ap-plicant nay have finally agreed to wheel power for the cua11 syc-tems. To put matters in their proper per spective , the Board should note Applicant's explanation of its failure to respond to the requests it received for wheeling services from Traverse City, the MC-Pool, and the City of Coldwater in 1971:
Since issues relating to the Company's wheeling poli-cies were raised in this proceeding by the Department and the Intervenors , it is hardly surprising tha t the Company declined to discuss the matter once it was in litigation. In effect, p;oposals to talk about wheel-ing at that juncture must be considered settlement overtures. (Appeal Brief for Applicant at 304, 305 n. 271)
In other words, Applicant characterizes these requests for wheeling as " litigation letters," not' properly responded to ex-cept-in the context of settlement (see also Id.'at 304 n. 270).
Yet at -the same time it apparently believes that an extra-record exhibit reflecting an agreement to wheel, which it entered into after termination of the evidentiary hearing in this proceeding (and four years af ter the " litigation letter" requests) is highly 87
~._ _ . . . - - .
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7
N relevan t and pccbative c zidence of Applicant' c reasonablenase .
ila subr.it that if " Exhibit 12,023" is ptobative of anything it is Applicant'c recognition, as the evidentiary hearing progresced.
that' it.n uhealing pclicies (or coro cccurately, nonpclicies),
were likely to ha found anticompetitive, and tha t action vould have to be taken to mitigate against b:ing held liable for these policies.
Finally, Applicant acc:rts tha t in responce to iacuiries regarding trancmiscion services, it " formulated a wheeling policy under which it offered bulk power wheeling services to other electric systems . .
." (Appeal Brief for Applicant at 304).
Initially, it should be noted that this wheeling policy was not announced by Applicant until February ~12, 1974, after the direct caces of the Department, the Intervenors and NRC Staff had been completed.
On cross-examination. Mr. Aymond admitted that while he had long planned to testify as to company policy, formulation of the policy statement which he read into the record, including this so-called reasonable wheeling policy, began lecs than two weeks prior to his testifying (TR at 6156); that it had not been final-ized until the day before his testimany (TR at 6159, 6161); and that it had not even been shown to Applicant's Board of Directors (TR at 6157). Also on cross-examination, it became apparent that Mr. Aymond had not completely considered the ramifications
- of the policy statement and was thus unable to respond - fully to 88
- . .. - - ... - . , ~. - . - - . . - . - ~ ~ . - ~ - - ~ - --
1-- -. -_ - -
cue:tions r.s to its 8: caning. i/ Finally, it ic interesting to no te that in addition to con?any employots and ucchington coun-sal, consu}tants re tniacd by '.!auhing ton councol for this pro-coed ing :ndo in-put on theco policios, a fact which Mr. Ay.aond was unaware of. _**/ _
In sua, the entire policy sta tement , especially the 30-called reasonable wheeling policy, appeat s to be a hastily con-cocted effort to ace t , by after-the-fact policy statement, the evidence which had becn presented by the Department, the URC Staff and the Intervenocs -- and an effort which uas obviously designed solely to influence the outcome of the proceeding.
The-Hearing Boaro specifically recognized this fact:
To the extent that the fincl s ta tement is a change in policy or the enunciation of neu policy, the new policy is deemed to be timed to influence the Doard
- /- See, e.g., TR 6095-96; also 6098, where the following ex-change too Ipface:
Did you have anything particularly in mind with the word " indirectly"?
No.
- CHAIRMAN GARFINKEL: Why was the word used then?
THE WITNESS: I can't. answer that. Mr. ' Chairman.
- / MR. ROSS: Well, there have been some discussions
-- ' about these' policies with the consultants whom we have retained in this proceeding.
MR. BRAND: I see.
THE' WITNESS: That was something that I was not aware of. (TR at 6162) 89
.__._m....
r---
~ 2 .
in 'this i:rocaeding and ochrs lit tle m urenca of a pa :.c anen t ch ang :: in policy . . . . (ID ct 123-24)
- oreover, cren ascuning this uhteling poliev is probative of anyt.hin3 nore than Applicant's recogaition that itc nonpolicy (which the Iiccring Dosrd found acacun ted to "a geaural refusal to wheel") would f ail to curvive ntitrust scrutiny, it ic on its face antico
- rpctitive. Applicent has preuired accecs to its tranc.niscion net *tork on the following coniitions:
(1) that we . have the physical capability on our ex-isting or projectcd trancmission grid to provide the desired cervice, without impairing service to our existing and projected lords or ccamitments or en-dangering our system reliability; 4
-(2) that we be properly compensated for the service.
Proper componsation means that we recover our costs, measured by proper allocation of average system trans-mission costs, so that out other customers do not sub-cidize the uheeling customer; (3) that provision of bulk power wheeling service will not result in a significant loss to Consumers Pouer Company, directly or indirectly, of existing load or service areas, with resulting idle facilities and social waste; '
+
(4) that provision of bulk power wheeling services will not result in significant loss to consumers Power of access to interchange power transactions with third parties. (TR at 8106-07) (Appeal Brief for Applicant at 305) */
Notwithstanding Applicant's claim that these conditions are
" clearly reasonable" (Id. at 305-07), the Otter Tail Power Com-pany could have adopted and operated under an identical policy
- / Applicant had aot attempted to explain how or why condition (4) is reasonable. This is not surprising since Mr. Aymond, in explaining this provision, indicated Applicant would refuse to wheel if one of the small utilities were outbidding it for co-ordinating power . (TR at 6095)
I i
1 90 !
I
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_ _ _ _ _ R
,~ - - . - -- --
st.at m nt in itc declings with the Villace of El' ;o> Lehe. Cca-dition (3) .of Applicant's polic-j p:ovince thct 7 ?liccat *zill refacc to 'heol if doing no vill " result in a significant l o c.,
to Coasunor: Pouer Cenpany, directly or iniirectly, of onicting loa 6 or setvice arca . . . .
The alleged reaconablanets of this condition is that Applicant is ""clectly j uctified in t ef us-ing to engage in wasteful transactions" (Id. at 306) such cs
" cream skimming' (where "a syctra having no gonaral obligation to. carve . . . [can] ' pirate' away the wheeling cyctem's noct profitable industrial or wholenale custcmerc" Ibid). Besides being remarkably similar to the defense asserted by Otter Tail and rejected by the Supreme Court, */ this totally confuces the issue of wheeling retail power to an industrial customer
- /'The Court said:
Otter Tail -argues that, without the weapons which it used, more and more municipalities will turn to pub-lic power and Otter Tail will go dounhill. The argu-ment is a familiar one. It was made in United States
- v. Arnold, Schwinn & Co., 388 U.S. 365, a civil suit under Sl of the Sherman Act dealing with a restric-tive distribution program and practices of a bicycle manufacturer. We said : "The promotion of self-
-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct." Id. at 375 The same may properly be said of S2 cases under the Sherman Act. That Act assumes that an. enterprise will protect itself against loss by' operating with superior service, lower costs, and improved ef ficien-cy. Otter Tail's theory collides with the Sherman Act as it sought to substitute for competition anti- ;
competitive uses 'of its dominant economic power. j Otter Tail, supra at 380.
91 i
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, .~
and wht: ling wholo.tcile pou2: to a retail distribution system. */
The testimony of Mr. Steinbrecher, cited by ?.rolicant (Ang?cl 3riof far ?.pplictnt at 307) a:' be in<j f.o the effect that Sorthern Michignn Oc-op would not uncel for ;ppliccat if it would t er':l t in-Northern losing a custoqer, makes no reference whatever to uhceling of wholesale pouer. He ' addrecced only the quection of wheeling power - to a retail cuctonar of his system, and he did not even absolutely preclude ongsging in such a transaction (TR at 190/.-12. *[/ Likewise, the exper t witnesses Applic ant sponsored who testified on this alleged " cream skimming" directed their testicony almost entirely to retail wheeling and never cleatly indicated hou uholesale wheeling was a " socially wasteful" transaction.
Finclly, any-guestion as to anticompetitive consequences of Applicant's supposedly reasonable policy of refusing to wheel if doing so will result, "directly ot ind ir e c tly ," in a loss to Ap-plicant -is put to rest by the deposition testimony of Applicant's chief executive officer, Aymond (Int. #104), quoted at in the Department's Brief in Support of Exceptions. ***/
l
- / See, e 3. , Aymond, TR at 6099.
- / Thus, Applicant's statement:
Indeed, the manager of one of the Lower Michigan gen-eration and transmission cooperatives testified that ;
he .would not of fer his transmission services to the j
~ Company. for the purpose of taking one of his custom- '
I ers. (Appeal Brief for Applicant at 307) )
-is , at minimum, a misleading characterization of the evidence. !
- / Appeal Brief for Department at 130-31; see also Aymond, TR at 6099-6101.
92 l
_ , , , , , _ _ . . , . .- - -. n . . . - - , - - - - . - - - - - - - - - -
-w
_. . . . . _ .~
3 .- ?q:plican t ' c 1:c cer i: ion of the Ap.nopriate-nec3 of its INaisi of Direct Ar:
- 0 s to the i;idlar.d II:J n l 4,n U.. i t is Unfev.V?6 Applicaat clainc that itc continuinn (cfor 1 to grcnt diccet accc 0 to tha !idland ' aclect Units 10 justified since requerta for such access were not forthcoming " {u] n til af ter the initia-
. tion of this proceedincJ in 1971 -- thc size of the .'lidinnd Units having been c tchliched in 19G7" (Appeal Brief for Applicant at 270). It cuggests that the alleged failut e of the cmall systeac to "denand" cccess, " standing alone . . . should be suf ficient to-defeat the allegation tha t the Company had refused to deal"'
(Id..at 273). The cases cited by Applicant for this proposition (Appeci 3rief for Applicant at 273 n. 187, 188; at 274 n. 189) all involve actions for treble-damages arising from alleged refunals to deal. Illustrative of the fcct situations in these cases is Saunders v. National Basketball Ass'n., 348 F. Supp. 649 (N.C.
Ill. 1972), in which the only contact between the defendant and plaintiff, a mediocre college basketball player, was a question-naire sent to the plaintif f. There was virtually no way that the defendant NBA could have even guessed that plaintiff wanted (or
. had any expectation of) employment by the NBA. However, even these cases hold that a demand made prior to initiation of suit is-sufficient. For example, in I!ilwaukee Towne Corp. v. Loew's.
Inc., 190 F.2d 561 (7th Cir. 1951), cert. den. 342 U.S. 909 (1952), cited by Applicant ( Appeal Brief for Applicant at 274 n.
' 1 i
-189), .the Court, although disallowing damages prior to the date !
1 i
93 i
i
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s-
n a m'S '
of plaia titf 's demnd for fi r s t-r ut .ovies, upheld the dae. age a .i n t i for the p ricJ bebroen t!.; d x:cr.d and filing of the
~ cauce-of setion.
In'the inctan t proceeding . Applicant received recuests for participation in ilidland f rom 'frecerce City on May 24, 1971, ;/ frca Lior thern Ilichigan Coop;rctive ca July 20, 1971, and from, the City of Grand Haven on July 29, 1971; petitions to intervene vore not filed until September 30, 1971 (ace Appeal Brief for Applicant at 6-9). Thus, participation in this proceeding by several of the cuall utilitiec did not begin until af ter it became apparent that no adequate responce to their request for Ilidland participation would be forth-coming froa Applicant. In any event, as Applicant correctly notes, "this requirement (for a demand) is neither rigid nor mechanical" (Appeal Brief for Applicant at 274 n. 189), and the . record clearly shows that the small utilities which did not make a'" demand" for Midland participation before petitions to intervene were filed had every reason to believe that such action would be totally futile.
This, of course, is not the real thrust of Applicant's ar-gument. Rather, Applicant . contends that the 1971 requests for Midland participation were " untimely" and thus, it is both l
- /. This request' preceded the Attorney General's Advice letter 1 of June 124, 1971 (36 Fed. Reg. 17881). '
94 ms e . , - . *- ,,e emmee . *-. * * - - .
L
- a?ptopria h for A?plicant to refum tc d isc ucc ' p sr tic ip:; tion with cha 0:;311 c70tuc cnS*iaappropricta foc tha NitC to cc;npol cirect cccesc, 20 a liceni? co n.Ii t i o n , to eliminate a situation inconsistent with the anti tr uct la.ra (see infrn). Stripcad of its rhetoric, this argu:aant is ciinyly that the cmall uti'lities, by f ailing to act in 19G7, ualved all rights they have under a statute uhich vac not enacted by Congrecs until Dececbar, 1970, Ir light of Congress' providing in Section 105c(C) (the co-called
" grandfather cicuco") for antitrust ceview and the retroactive imposition of liccuse conditions even af toc an operating license i has been issued, this clain (which is in effect a clain of imnu-nity from Section 105c(6) for the liidland licenses) is surprising.
Had Congrecs in te nd e'i to exempt from antitrust scrutiny nuclear f acilitics whose output had allegedly been "conmitted" prior to December 19, 1970, */ it surely would .have done so and not have
- established a " grand f ather ing" procedure under which applica-tions for licenses for such facilities were subject to the same antitrust scrutiny as applications filed after the amendment.
Even accepting arguendo this rather unusual contention that I
the small systems should have exercised a right under Section 105c prior to its creation by Congress, Applicant's claim as to the' " untimeliness" of the small systems' requests for participa-tion in Midland ignores the fact that at the time construction
\
- / Obviously, every prospective licensee who had filed with the !
NRC prior to amendment of- the Act had plans for the output of their nuclear plan, i.e., had committed the output.
!" 95 l I
'L.-,____
.y-
[
1g _
a
o f :lidland *ma ant;o :nced , Am.nicant !an r e f u .;ir g to entn into ccordinc tion cri angirJnts ( ca ? .; ocul T>riet for tha cancrtaent at 60-104). It also igacrea che fact that itc "non-policy" with respect to uhcoling, which ::he Hearir.g Toard fo und a..'o cn ted
'to a "genetel r3fuuni to uheel" (ID at 112), van clearly evident co the small utiliticc' syctra managers. Furtheraore, Applicant cicatly regcrded its relationchip with these cmall utilities ac
-one between a utility and customer, not as one betueen utilities, and whatever arrangcaent Applicants was willing to enter into were offered on a take-it-or-leave-it basis. In sum, we submit, these small utilitiec had no reason to expect that Applicant would respond reasonably to requests for access on a voluntary basis.
To overcome the clear implication that Applicant's own conduct was substantially responsible for the small utilities not even'considering requesting direct access to the Midland Units in 1967, Applicant advancec essentially three arguments.
First, it claims to be " coordinating" with every system capable of coordi. stron and, thus, any allegation that its coordination policies " chilled" requests for Hidland participation is "on its face, inapplicable to Lansing, Holland, Traverse City, Northern Michigau, Wolverine and Grand Haven municipal and cooperative systems -- the only smaller systems found by the Board to be capable of coordination"' (Appeal Brief for Applicant at 275).
Besides being misleading as to 'the times at which these so-called 96 .
. s_ -
.,v
. p a
cooLGiaGul'>n 7, i r i' i @ ' ' ' 1 1 's
. 903 C.100tOd 13t0 J/ -- e.j".. Ap?li-Cie n t ri id - n Jt 20rce to-On?re r e 0 0 :. '/ 0 2 cn CD'j b.' 2 iC '?!th the UC-Pool until E . jw.b s t 19~3 -- it ignorer th. contant of ths.70 ag t ec.aen t;, which proviu note of tte f or.r. thm th cubstanca of tr uc coordinc. tion. and the entica tenor of its declidgs wito thcce a:ac11 cyc tar .
Second, Applicant asserta that its allered offer to the DC-Pool of unit postar f rom the Ludington Plant is a "cleater refu-tation of the 'chilliag' notion" (Appeal Brief for Applicant at 276). The memorandum which purports to show this offer, Ex.
12,007, is not quite as definitive ca Applicant would have this Board believe **/ and the representative of the UC-Poci attending the meeting did not recall that Applicant actually offered unit power f rom Ludding ton to the cooperatives. ***/ !! ore important, even assuming that Applicant discussed the possibility oF Lud-ington unit power sales to the cooperative, an offer of nuch power would have, in fact, been illusory. Ludington is a pumped storage facility and, thus, valuable principally as penking power.
- / Applicant apparently recognizes this fact since af ter making '
the sweeping assertion quoted above, it only specifically claims that its coordination contracts with two systems (Lansing and Holland) and its 1968 of fer to Traverse City (which.the City re-jected as totally ~ inadequate) negate the fact tha t it " chilled" requests for Midland participation before 1971.
- / In relevant part, Ex. 12,007 reads:
Mr. Campbell also stated that at an _ appropriate time the company would be willing to consider a safe of peaking power to the cooperatives from the Ludington j pumped storage plant. (Emphasis added) l 1
- / Steinbrecher TR at 1901-04, 1930. l 1
97 l i
l 1
pl 7 e l
Tao . ::11 sp enc var r' nac sor1 oL pe a k i n*; :>c 12: ; che2 nen6:4 ba .%-lo c... par et with it: 1 ~.; a a t y co s t ( ~3 t n:3. T 2 r. t 2502; S to iah t ach ?. :. . ';i' a t 1433-37).
F r o r.' thec? t to ct r unen ts , 7.cplicent eyears to conclude tha t it was receptive to the concept of a unit potcr r.rrangca'ent with the si.:all ut il .; t ie s , thc: this was apparent to the s.aall utili-ties and, ther ef ore, th: cuall utili ties should have felt froo to ask for Itidiand pouet on a similcr basis. Tne cleOr evidenc e of Applicant's consistcnt enticolapotitive pattern of conduct,
, which the recotd in this proceeding reflects, bellec such. a con-Clusion.
Applicant's finci argunent is essentially that the small systems vere inattentive in their pursuit of nuclear power. They neither initiated litigation seeking direct participation in nu-clear generation ac did small systeras in three other states */
(Appeal Brief for Applicant at 277), nor did they testify before the Joint Committee (Id. at 277-78). He frankly fail to see the relevr.nce of this.
Arflicant's final effort to justify its continuing refusal
__ ~
- / The litigation to which Applicant refers, City of States-ville v. AEC, 441 F.2d 962 (D.C. Cir. 1969), and Municipal Elec-tric Ass'n. of Mass. v. SEC, 413 F,2d 1052 (D.C. Cir. 1959), ac-tually points out the futility of the small systems in Michigan attempting to obtain access to Midland prior to. the 1970 amend-ment tc the Atomic Energy Act. Statesville held that the AEC could not be required to conduct antitrust review until it made a finding of " practical value" at the operating license stage.
- Municipal Electric Ass'n.lof Mass. is 7elevant solely to a joint acquisition of a nuclear generating company.
98 l .
(
, ,_m. m _ _..,s w- <*~e woe .+-w -o - - om sem + - **-~*~m- - + ~ - - + ~ ~ -
A --
. ...v.. - .., . .- . . _ . - '.~t to u'.ccc' C'ct(ciptt cn m . .id l i u. vita the U 111 cy;t ma ud to . de?,on ; tr < :o th*t t ne U.<- rha ald nc ,. gi ant each garticipition iG its allojacien that "d it y:t particirttian in tha- lidir00 Units could cost tha Compray cs tuch oc $141 millior" ( Appz a.'. Dr ief for Applic at it 272). Initially. it should be notad that contrcry to Applicant'n ascet tion that "[t] he other par ties do not . . .
challenge the Ccc:,cny's ascacercent of c':tra cost and diceriniaa-tion" (Id. at 273) if participation in the Midland Units cere granted, the Department certain] does challenge tha " Company's L assessment."
l The $141 million figure cones frou a study presented by Ap-plicant's uitnessen, Messrs. Stafford and Lapinski (Stafford and Lapincki, TR ct 9151-65, Ex. 12,018). Among other defects, the study shows that while claiming incroaced coste due to the neces-sity that'it purchase power to replace, the Midland capacity sold to the small systems, Applicant voluntarily delayed construction of the Quanicassee Muclear facility and Campbell fossil-fired facility because of decreased load projections (Stafford and Lapinski TR at 9189-90). Thus, Applicant continues to plan its l
l future generation needs as if it never received the 1971 requests l for participation; 'it refuses to recognize that -it may be re-l quired to divest a share of Midland power, and it refuses to i
i act-affirmatively to mitigate any alleged harm .it anticipates from so doing.
It should be noted ' that the longer Applicant refuses to ac-
- j. : knowledge the requests for participation, the stronger its claim j 1
99 l
i l _ ...
t i s'
F I
t *14 t it ne M 1 th.. o r. t i t o 0;: c. pu t ftce .Gdisad ,,J1J r : u. ta bo-co" e . If it can c r it. IDp.Jr,i t i.On o f licci. :3 cxditions s:n til
- 11dle.nd coien on ' t
- ) 31 at th e 10 7. 4 timo coatique to ;1 r a its cysta on the accu:.ctica thet it vill not be cecuirca to grant participation, Applicant will present th e N hC ui t h a _f_a_i".:
e ccyndli, nre.cly, it is in' f ace using the entite outpat from the liidland Units. To allou .Tpplicant to exacerbato its own
" harm" an:i then claim this "hata" not only justifies its refusal to discuss participation with the cacil systems but requires the NRC to de f acto approve its conduct (by not imposing license con-ditions), would, in effect, create en exemption from Section 105c antitrust actutiny for license applications on file prior to December 19, 1970. This flies in the face of Congress' intent.
Not only did Congrecs provide for "grandf athering" and retroac-tive application of license conditions, it was well aware that even under the 1954 Act the NRC would be requir ed to engage in an antitrust review and attach appropriate license conditions at the operating permit stage, after a nuclear unit had been constructed.
[ This was the holding of Cities of Statesville v. AEC, 441 F.2d 962 (D.C. Cir. 1969), which was reprinted in the legislative his-tory (Hearings, 2, at 193-253). In sum, Congress, by re-quiring antitrust review and imposition of appropriate license l
l conditions in " grandfathered" cases, even af ter. a nuclear facil-f ity had been constructed, left no room to engraft a " timeliness" exception onto Section 105c.
i 100 i
L ., a ,._ . - .
.. a . . , . . . - . - . , . . . . . . - _ _ . . - - - . .
p.-
p . -
.=
A furthec da".et in 'So S t .: f f n M .Oi .*: .i c i. dd y is t h a ;' in all yea:. c . w:copt cr;. A p_ ?.a m h M retflas g ueratin;' c:pacity in exc?cs of 220 -ca (the a.onnt r.hc ciudy acauncd 'ecel to allo-cated to the snall syocent). In aggc:gcting t? - so-callad harm to Applicut froc granting *:idland pr.: ticipa tion , it 60 0 not consider possible covonue frca the s:1c of thic capacity (Staf-ford ' and -Lapinchi, TR' a t ' 9244 ) . I'.ot ecver , wha tever the validity of this assecc.nent of "harn," acceptanco of Applicant's c.'.r.ia would conflict directly uith the holding of the !.'aterford Doard on this peint.. In the shou-cause hearing on relief, Louisiana Pouer and Light contended that denial of access to Water ford Unit No. 3 wac justified since requests for cecess were " untimely" and that all of the unit's capacity vac needed. Thece arguments ,
virtually identical to those asserted by Applicant in this pro-ceeding, were rejected out of hand by ,the Board. */
1
- /- Louisiana Power and Light Company (Waterford Steam Generating 3tation Unit No. 3) NRC Docket No. 50-382A, Memorandum' of Board with Respect to Appropriate License Conditions which Should be t-Attached - to a Construction Permit Assuming Arguendo a Situation
. Inconsistent 'with ' the Antitrust Laws , (Octo5er 24,~1974), at 25-26 (" Board Memoranda, October 24, 1974).
, 101 1,
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.. . , J
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C. ;c '. i c .a :: Pc i3 - .a it .' d J : c t t: Pc2tec.." -h>
3cL:, catial Cel. .9 .x D ... C.. u .v. : aich E;ilac' c t -
Nr c- - 1 1 . ! : t v. e . < ' ... 1.1 l n :m u .~ i , ce:.- .am :. "
In Udition to the ecoduct dicco imi ch e tt a , none of -
hich
.nylicant n r.s b e e n d i e to juctify are: u ch of which is concis-te n t with and suppoctin of a finding of monopolinction, the re-cord in thic proceeding revealc raricus other ceticac by Appli-cent designed to procer.ve cad c:gand itc cancpoly position.
i The se actions . include Applicant'c restricting n. mall cyste.mc with which_it une interconnec ted from intercoanocting with third pct-tice */, engcging in " preemptive coordinction" and other efforts to forestall coordination betwoon or among the c:.wll utility sys-tems **/, cgrecing with other large investor-owned utilitics to allocate' territories for the cale of wholesale pouer ***/, and restricting the future use of hydroelectric gener ating facilities of which it. disposed. ****/ The evidence relating to this con-duct is set for th in . detail in Appeal Brief for Department and we vill therefore limit ourselves herein to a few comments on
' Applicant's attempt to def use this evidence.
Initially, it should be noted that this conduct is not, as Applicant suggests, a "true miscellany of unconnected charges
- / Appeal Brief for Department at 148-49. .
- /-
Id. at 161-67.
- / _Id_. at 152-161. -)
i
- /- I_d .. at-149-52. .
102 {
l i
l
. 7. . ;
f
, 4. 7. i _. '. i c . n =. n.11 s la itc C;2ct' to G c . ~ v. the
!:c Ne t an ; d i;v ia - ~ ~ c f 'H.<a Cc.h::t 'ich
.i
'.D?c-,
.: tha Pi: c r n .~C nia':n-"cc - .
J. . y n r.1, : c; i *:.n .:%m ci" In cddition to tha conduct disecaced cicove, non: of which App i ic c.a t hr.c baan able to j uctify c.] c.wh cf v5ich is consis-tent with and cupp?rtive of a findinc of :aonopoli mt ion , the to-cord in thic proceeding reveals vat ions other c.c ticr :.; by Appli-cant designed to precerve and c::pand its monopoly pocition .
Theca actionc include Applicant's testr i.cting caall cyctems with which it was interconnected from interecnnecting with third par-
~
ties */, engaging in " preemptive coordination" and other efforts to fotestall coordination between or e.7ong the small utility sys-tems * */ , agreeing with other large investor-ouned utilities to allocate territories for the sale of wholesale power *x*/, and restricting the future use of hydroelectric generating facilities of which it disposed. ****/ The evidence relating to this con-duct is set forth . in detail in Appeal Brief for Department and we will therefore limit ourselves herein to a few comments on Applicant's attempt to defuse this evidence.
Initially, it should be noted that this conduct is not, as Applicant suggests, a,"true miscellany of unconnected charges
- / Appeal Brief'_for Department at 148-49. .
-**/- Id.:at 161-67. ,
- / .Id. at'152-161.
- / -I_d.'at 149-52.
102 l
S4 NND@ e 't -.%*'*she, wea = =naw ma mB-- ****h-h-
co c. : n a i .O unt eletsd asp ctc of Nrw . rc inu.t C o ., a ny ' c 21 c-tcic 09Watio. "
( Appc ?1 L i:C fc' t.plic7nt ct 2 9.2 ) . Mthat.
those ec ciona - by '.vlic :t are furthet m .2 % C:ticnc of a gr.t-tern cf conduct e71doncing a cpecific i n tuit to anopolina the wholwer.e-for-recale pouer acchet in nichiger.' c lover peninsult.
- a. Third Party Inf.crconnection:
Applictnt's afZort to.defead its restricting car 11 utilities with which it was interconnected fcoa interconnecting with a third pet ty ( Appeal Br ief for Applicant ct 291-208) ic in great part an argument that there never, in fact, was any need for these con-tract provisions:
[T]hore can have been no reasonable opprehension that in the late.1960's Lancing's interconnection vith the MMCPP, or Holland's with Wolver ino , would have in-volved any smaller systen, or Consumers Pouer, in in-terstate commerce. (Id. at 204-85)
Thic being the case, why then did Applicant insist on pro-hibiting third party interconnections without its prior w'ritten consent? Applicant clearly had the power to insist on inclusion of these contract provisions and, in the case of Lansing, the i
restriction caused Lansing to refrain from pursuing a possible i
l interconnection with the MC-Pool ( Appeal Brief for Department ,
i at 147-48). -
- b. Preemptive Coordination At pages 161-167 of our Appeal Brief, we s'et out substantial
' evidence reflecting ef forts by Applicant to prevent the small
- utility systems in its area from achieving a power source which 1
would be ' independent of Applicant. This conduct includes what
-103 fw >
www N-* '4="**** * * * * * > **f a-* ***** "- "
W i
our 1:p;rt ,.in-r;, Mt . T:cyt n , tef:ttcq :_o u "pi :
.;ti n ec-
- o rdio u.lon , ' .:. o t': n uc M e nc h ait .nci to f n es tn11 ennt e t ica e cpu.< i an pr ogr - , of thu rcn11 _ mtc r by ;ctright ory>tition
' tion to finca:i.y of t: 2 eay a. ion and by ef2 ort ca convince thc small atilitiec ta bagia (or inctenm ) .
holesala purchases from Appli;cn .
Applicent, of cource, never addrescac the totaliti of thic evidence, but rather icolatcs it into dicerete bits uhere it con be attac::cd on a piccomeal basis. It firct discusses " preemptive coordination" and ignoring _ the clear language of DJ 3150, claims that the document " evidences nothing core than the Company ac-knowledgement that, if it did act proceed promptly to negotiate the neu contract with Holland, the Company stood to lose a bene-ficial coordination relationship" (Appeal Brief for Applicant at 200-81). The document obviously speaks for itself and , we submit ,
lends itself to no such interpretation. For example, the meeting which the memorandum records took place August 29, 1966 and the Holland contract in existence at that time would not ' expire until December 3, 1967, 15 months later. */ This would seem to belie Applicant's characterization of the memorandum as calling for
" prompt" negotiations.
Not until substantially later in its Brief does Applicant discuss its attempts to forestall the installation cf generation f
- /
Paragraph number "1" of DJ 1150 states that the Holland con-tract then in force had an effective date of December 3,1957- and a 10-year term.
104 a
i m e .1 e% %,
==se eee+ +m m e, m. -- e. = mw Ne- ee e * . e e - a, wom me** N- ~ * ' * * * " " " ' * * '
l c, Ttain se City . a 12 Coor m rtas, ena ta. only to cr: tone-ct :l'1 cle.l. such cc2.-.:t in 1; mni z . . f M .' coni na tien by this apy.11 Eoatd du; to th . Me ,t i -N :n inc t.on dc c tr. ia . (2.ppeal .3t io f foc Applicant at 3JJ-J40).
l
- c. Tei:ritorirl Agrennenta The prinaty approach underta?.ta b
, Applicant to r efute the evidence cited by the Depar tmanc as suppot ting a finding that Ap-plicant hac agreed with its naighboring investor-owacd utilities as to wholasale service 12rr itoriec */ is seemingly to declar e not credible any evidence reflecting such "gentic. men'c agrocments" and at the same time praise the reliability of fir . Aymond's and Mr. Paul's testimony denying such agreementc. For example, Ap- i plicant claims that the testinony of ::r. Sundstrand (attorney for the Village of Pau Paw) that he uns informed by R. L. Paul that a
" gentlemen's agreement" between Applicant and Michigan Gas &
Electric Company was the reason Applicant vould not offer to serve Paw Paw, "of course, conflicts with the sworn testimony of the man with' whom he allegedly spoke (Tr. 7950) and t'he chief executive officer of the Company. Tr. 6071 (Aymond)" (Appeal Brief for Applicant at 314). **/ From this, Applicant then con-cludes "that the [ Hearing] Board properly discounted the isolated recollection of-one witness . . . ." (Ibid)
- / Appeal Brief for Department at 152-160.
1 Note that Applicant declined to cross-examine Mr. Sundstrand.
i
- /
105
_ _ . . a.w.. . .
[ ~..
-- - - ~ -
- .- ~- -
'i '. .d !:G ':i t. .f'.0 7 'r.
3t!.J' I C ) 5% dpG . 2 , D. L. Pria l , d i d n 0 0 in fece ccn die: *:' . 2 n.'. ; t r + r.0 ' c t - ; t l. :q n r. t d.d .ir. 3ynond.
Tno toctiacal ci Wi ': ',Tlicaat i "arely a general &.nial of 2
the :istence of "gentir m's ag r eenan ta" i ;r tcoce tuo (;cntlaren.
On the othet hand , wc:en .
'.r . U c.o l ra: ;recsed during crc ux -e::aa in-ation a3 to t;hather or not ha inic r .ed I!r. Sundstrand that Appli-canc could not sarve Pau P n becnuce of an agracc.ent uith Michigan Gas & Electric, he testifief that he could not recall uhether he Go informed tir. Sundstrand (TR at 8095). Further, Mr. Sundstrand 's' tectimeny is certainly not " isolated." DJ #235, a December 3, 1963 internal communication from R. L. Paul to A. H. Lee statoc in par t :
"they [Pau Pau officialc] are expected to point out that the gentleton's acronment not to inf ringe on othet power co.n-panies' tettitory even when no franchise or contract exists is an act of undue restraint of trade" (emphasis added),
l Another example of the approach undertaken by Applicant to undermine the evidence relating to " gentlemen's agreements" is its claim that DJ #157: ,
. makes clear that its author was merely con-sidering whether the Company could serve a wholesale load then served by another. Here, as elsewhere, our adversaries seek to convert evidence of the Company's willingness to compete for wholesale loads into evi-dence of an agreement not to compete. (Appeal Brief ;
for Applicant at 313.) I I
This is,-to say the least, a somewhat surprising contention con- I e
i sidering that the document states: '
We realize, of course, that we do not want to offend the Michigan Gas & Electric Company by serving customers in their area. However, since the village
- of Const.antine has always been unhappy with Michigan 106 3/_ f _ '; - _ _ _ - :"-~ ' _~ ~~~ * ~ ~ ~ = = = ~ ~ ' =Rl '
-. _ -.w . . . . -
- P - r. ; 1;l c : t r lu , - 4.< . : e r - e .: u L a c. 'c t - d ~1. ; - -
cr e d ' o u
- r .n t ,We e CC.dll M ' ','. ' 1 ; s .2 d;i W .
. ( J.1 ..,); . .f i ' ': { ' ad::b i)
In cua, the: r e i:1 ' o b.: t e . t t r.1 e v i .k '. m th c '. W licant would have t ;2cae3 to of 2a :ool m le v oice " o . t. cuetomer of h large' naighbo:ir g utili"../ cua these Systems tould in turn honc: Applicant's te r r i to r ir.1 inteetity.
- d. Tivm orlectric Facilities Applicant has folloved a conc.12 tent policy of ptohibitir.g.
by'dced convenant, the generation of electricity at hydroelectric facilitics of which it disposed (Appeal Brief for Department at 149-52). It does not deny this policy but, rather, attempts to raise doubts regarding the value of these f acilities to the small utilities (Appeal Brief for Applicent at 294 n. 234). This effort, however, is wide of the mark for the simple teason that even if these facilitics were of little or no value for the production of electrical energy */. Applic, ant took no chances.
Mr. Aymond explained that Applicant restricted the use of these f acilities because "it would be unfair for those to wind up in
- / Note, however, that in at least one case where it was deter-mined that use of a f acility for generation of ' electricity was unlikely, Applicant did not insist on such a reverter. DJ #146, the Minutes of' Applicant's April 12,1966: Board of Directors Meeting read in part:
Further study of .this proposed sale lof Union Street Dam to Traverse City) indicates that the company's best interests would be served b'f selling the proper-
. ty without reverter [as was regrired by the Board's
-March 2, 1966 authorization]. fhe dam has never been used for such generation and does not have a head suf-ficient to provide. economic generation, and therefore its possibility for such use is negligible.
107 i 1, . a -._ . . . . . . . . . - . , - - - - - - - . . - - .
- 2. _ __ _ . - _ - . . - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -'
in the . .
. of -
cm .-tit . for 7. .t mi.:d a cus ia e tio f'
( .'.v.g n e) , M ?: 5'3'; a n 93 : : :..: cd:ic
').
Iit - h e, r t , ; 1i:..; n t n - ent' o n. mogh of the pot:7 tic 1 v al --
- u r- of th :ce hyd r= ='-ut ic Co riliti ., ta itr *:ue:1.1 coor h i. : or s that ir sought to in. cure fo:. t.:ll thao F at the r a fscilitics could not be ured to gener a ta electr ic potic s .
C. Conclur_ie._n l
l 7he. evidence in this prococding reveals a pa'ctern of conduct by Applienr.t t;hich is not only consistent with and suppor tive of a finding of specific intent to conopolize, but uhich is unex-plainable if this intent were not precent. It is this intent, not any individual piece of conduct not any particular docuaent expressing this intent _*/ which provides the roison d_'tre of each individucl course of conduct.
i i
l.
l
- / Applicant would apparently have this Board believe that the Department relies solely on the speech by Mr. Paul (DJ #188) as providing the " mortar" which explains Applicant's conduct (Appeal :
- Brief for Applicant at 326). Nothing could be further f rom the l l truth. DJ #188 ' is certainly probative of monopolistic . intent.
but it is that intent, fou nd to exist by the Hearing Board and reflected in other documents and conduct, which answers the !
"why" of Applicant's conduct. '
108 ' !
l eeg ge- _ .. -
.e.g v. -m e - < micam . .. -- -%+- ens ey w - := - ~
e .-- . . . - .. .-.
VII Appli:cnt be.c raileo to Ovc t <; . :e ti:o Mesas. . h i c t.
the Depc.t . cnt oi Juccica ha D, . :c ' ~ t t i t cd in Thir Ptcceeding m: t '.re : n tir S i t.un . io:. Inconc !r ten t Gith th- ?> n t : 1.r uc t Lanc in e n; n tly . . in t ing in "i c h i g an ' c L.m.. o r Peninaule- nd the Tsc tivi t ic .,
Unde.r th.e 'tidic.nd .:eci sa . Licenre:
= ---
Essentially, Applicant at tei..pta to demenctrate the lack of nenus in this proceeding by advt.ncing a tua-pronged assault on the noni established by its adversaries. It first character-izes the nexus standards advanecd by the Department, the NRC Staff and Intervencra as "truismc and assetts tha t such stan-dards cannot satisfy the requirements of Section 105c. The net e f f e c t- of this effort, however, is to leave Applicant propound-ing a counter-truism, namely, there can be no nexus in the case
. of.a single-venture nuclear facility. Perhaps suspecting its
" counter-truism" is unpersuasive, Appl.icant purports to adopt (for purpose of argument) "the mors lenient nexus criterion of
[its] adversaries" (Appeal Brief for Applicant at 352, n. 23),
and seeks to demonstrate that they have failed factually to meet'
. their own standard. This is the second " prong" of Applicant's attack.and the one on which it seems . to concentrate.
Before specifically addressing Applicant's contentions re-garding nexus, the Department feels it is necessary to clarify one point. The-language quoted by Applicant as'being "the De-par tment principle. nexus theory" (Appeal Brief for Applicant at 352-353) is merely the premise or foundation for the Department's
- nexus standard. Immediately following that language, we. set 109 O
- = ee w y+ ,.e s - * - +
ggio e- we , .o *--h==>me.- - = agee . , ip a
+r. e _w.
oct ,th e ". la in ::. - P t h .' 's r e. : 1. m. ' t ' - ptincIr'> n?O , ti. :: o r y , "
n a,ucl y , e 't t. h c elecaic Do<rer 9:na 'ted c .. .he :~id md f:cil-ity, hita vill t e, if you .can t , " c ,;e f a g 2 .-a , " w i 3 1 .nable Ap-Plictn. t o >c a i_n t__c_.i..a.
its irononalv ::o.ir:r in the uholeralo-for-reccle elec tr ic pue/c c n'a: het . This ir cll t'.v ;. is Ecycired by Sectica IU5c, whether the ctatute ic tead standing alonc, in light of its legislative birtory, cr as interpre ted by prio::
rulingc of the I;uclear Regul? tory Com:nicnion, Appeal Goards, and Safety and Licensing Board in other pt c c eed ing s .
In.the Unterford proceeding, */ the Department and the Ap-plicant, Louisiana Pouer & Light Company (LP&L), had agreed to certain license conditions and, thus, the Attorney General's advice letter to the MRC reccomended tha t if the agreed-upon conditions were imposed on LP&L, no antitrust hearing need be held. Subsequent to the publication of this letter in the Fed-eral Register (37 F.R. 17775), several cities, a'REA co-op, and an association of municipal utilities filed petitions to inter-vene. It was alleged, basically,'that the agreed-upon license conditions were inadequate and, therefore, an antitrust hearing
' should be held.
The Commiscion, after considering the pleadings before it, found that one petition satisfied the requirements for interven-tion but felt that add itio,nal information was necessary prior to ruling on the ' other pleadings. Accordingly, it referred the
- / Louisiana Power and Light Company (Waterford Steam Clectric Generating Station, Unit 3), Docket No. 50-382A.
110 ww gem =pm =-*as..w.em - .
. .= me.p.e - es . , * - . , e= w .e -
ev m to c d"s i 'an . :, Larin, Loc. d Eu ci v it i ce tic; oE certnia
- r. ; te r s w ' , .r:c, uc cJ :ti m e tn . . u CCici::any ef tha peti-t.in n a tc m'.er.en. (.e,;n ant , nn.i Otdar, Febr ua r y 23, 197?:
"D tcr f ord I" j . Th s caferrcl to the Rectinej Lo nt d uno acco::,-
_ panied by clear dir ection f r c: t the Co;::.iinsion c. to the standard which the ::ocring 3c rd uas to apply in determining whether the interventienc veru appropria w.
The stand:rd requirec that: (1) the cliegctions
! raised by petitioners describe a situation incon-
' sistent with the antitr ust laus or the policies clearly underlying these laus, and (2) the cpecified situation be "cccated" or " maintained" by the activ-l ities under the license. Thus, it would be incuf-ficient for a petitioner simply to describe a situa-tion inconsistent with the antitruct laus, regardlecs of hou grievous the situation might appear to be. A meaningful nexun must be established between the sit-uation cnd the activities under the license."
(Waterford I at 2-3)
Subsequently, the Hearing Board held a prehearing confer-l ence, during which the parties addressed the issues posed by the i
Commission's memorandum, and on April 24, 1973 the Hearing Board l
issued a Memorandum and Opinion concluding that each petition to intervene should be granted. */
l .
The situations alleged to be inconsistent with the antitrust l
laws were essentially that Applicant, LP&L, had a monopoly of transmission facilities and large electric generation units; and
- / ~ Louisiana Power and Light Co. (Waterford Steam Electric Gen-
.erating. Station, Unit 3), N EC D k t . No. 50-382A. Memorandum and Opinion of Board with Respect to Petitions to Interv'.ne in an Antitrust Hearing Relating to Application for Construction Per-mit, (April ~24, 1973) "Waterford Board Memorandum, April 24, 11973."
111 a
th. t . P ~2 5. ;. m c ) .. D i it ; c'ilit/ *c '#C t t.. pa < Cos ..nc- cf tl.2 t:1. ent mt: a t c r.i N PMitim c/ t; .! c n'i c '. f ir:a _a th.c ncthel v',: (1) triucc13 to
' l. phe r , (2) tefur. dis to Ont7r into i; nniny ul ccard]:,c tior. a t r n *19 c,0 ". :c , ani (3) r e f ucal to grant pM ticipation la the !.'r i r r icr d Uai t . The ?' oar ing Daard fouc5 there ..::a a neuen betucen the acti"itiaa undet the ::atet-foto licence nad the alleged c5tuations inconsictent with the antitruct laws:
Pouer from itater ford vill be comingled {cic] with the pover f rom other LPt.L genet ting facilities. It is argued that this comingling [sicJ means that the ac-tivities under the propoced licence will strengthen
- the ability of the applicant- to maintain the existing cituationc or vill exacerbate them. Put dif ferently, it is alleged that .there is a direct nexus between each such situation and the activitiec under the pro-posed licence. */
t The matter was then certified to the Commiscion for appro-priate action, includ ing its determination as to the correctness of the Hearing Board's recommendation that the petitions to intervene should be granted. The Commission utilized the oppor-tunity presented by certification of the case to " outline some
, appropriate benchmarks" regarding nexus, some of which Applicant quotes in its brief and some of which it ignores. What is sig-nificant, however, is that .the Commission, despite specifically noting .that "comminglino' cannot satisfy the nexus requirement of Section 105c, uphe7d the Hearing Board's recommendation that the petitions clleged a suf ficient ne.<u's.. Re tur ning to the
- / Waterford Board Memorandum, April 24, 1973, at 6.
112
H%r ; Uc;r, .. . . c i :, _n :- r. a i n ; ( wh i <. ; is ' R ,.."1 in f u '.1 abovci, it in t .ar t r. ; c - c o :ia;i.1:.f r d i v.er a r& i, t'.-
nm: frcn-i c.y 'hc nring Doord ca .d c. e r '. e d :/ the C c:.u i : T i/ r.
van that the "ec: mingling' of pouc; f :. o.n t:.o Ent n fo;d facility
" vill ctrengthca the ability of 3pp)Jennt Lo faaintcia the exict-ing , : .tua tionc or will exccu rhate t h e ia" D aterford Board Honor.n-d ula , Spril 24, 1973, at G). This is fully consistent vith the
. Depart:acnt's por' tion in this proceeding and is in no uay con trary to prior hcidingc of the Commicsion or any Appeal Board.
Moreo'rer, unless one accepts the propccition that Congreca intended entitr ust review under Section 105c to apply solely to the licensing of joint venture f acilities, a proposition which is clearly at oddc with Congress' intent reflected in the legic-lative history of the Act, such a nexus is the only one that conceivably.can be established.
-As was noted in our Appeal Brief, whether a nuclear facility is solely ouned or jointly owned is an economic-engineering question which basically turns on the ability of a utility 1 l
to absorb the output of a nuclear unit. It is inconceivable !
that Congress enacted 105c to require small or medium-sized i
utilities (which must enter into joint ventures to take advantage i l
I of nuclear technology) to undergo antitrust scrutiny while I l
immunizing larger firms (which can absorb the output of nuclear facilities alone) from similar scrutiny.. Any suggestion that Congress intended this result is undercut by Section 105c which specifies that one of the antitrust laws against which inconsis-113
_. . _ _ _ _ _ _ . - - - - - - - - - - - - - - - -- - - - - - - - - 7. _ 7_ __
t n .;f 1;. to bc . . .: 'n e d ir ': : tin ' of -% .w r n tet, singi:
ch Jaut:a.n Act, # mj c li . . <c:c ;;;i.e- ' !.c n .
Further, the e: tire 1;91:1:tive f.ic". if cf . .o 1970 amenC-cents rei.locts Con :c concern tNit nucle.r r po.cr von 1J bacono a mencr :1y of a few latge utilition. She Atomic Safety cad Licensing Doctd in the Alabc.no Pouer Compa.ny Parley I;uclear Plant proceeding aptly summarize 6 Congrenr.' intent in enacting Section 105_:
Our reading of the leginlativo 2.istory of the antitruct provisions of the Act convinces us that the primary impetus for the inj ec tion of satitruct con-siderations into the nuclear licensing process was
'the dcoply held concern of Congress th't . . . nu-clear reactor technology should not b utilized by a few leadina private firms to entren h themselvec in an anticompetitive market position. (Alabama Power Co. (Joseph i:. Tarley I;uclocr Plant, Units 1 & 2) AEC
,. Dkt. Ucs. 50-343A and 50-354A, heaorandua and Order n (February 9, 1973) at 14; emphasis added.)
A. Apolicant's Nexus Argument Turning now to Applicant's nexus argument, it is signifi-cant to note initially what is not contained in it. Although Applicant asserts that "it is not necessary to argue about the precise' verbal formulation of the nexus standard" since its views as to such formulation are set forth in its Post Hearing Brief (Appeal Brief for Applicant at 351, n 23; Posthearing Brief for Applicant at 5-38), a study of the cited portion of its Post Hearing Brief reveals that Applicant in f act proposes no such precise verbal formulation, nor can it suggest. any sit-uation where the activities under a single-owner nuclear plant license would have a nexus to a situation inconsistent with 114
_ _ . . . _ . . _ . __..a_.2._.. __
W, ch m t, uni i c. T:in i-: t ;. y 3 :.c . t m .c , 'new c u .; 'J -
tn3 nit 2 Fion ;o n a t. t 4 3: . m ' . t c .i t m 6 ir is win chc nucler- incility. In o': .r ..+0 ;, d r , P. 't P,mliccut pur pm tc to toli e" uhat c : n n,': h? re. .. u r , it ner a c u L .- en ;d. 3 :. wou M be t.n ppccpriaLa nr:us in th;J prwe2 ding.
An even %co Lasic defec' in Applicent's argumen t (and ono which flows from its attee.pt to de .:cnctr ate that cannot be nonna) in that under the guica of ne::uc it vould prrclude Pf.C scrutiny of any of its conduct which is not an " activity under the li-conse." It suggests, for example, that its pooling and in te r-connection arrangement have no nexus to the activitics under the Midland J icence and should not be considered; likewise with re-spect to its wheeling policiec. The net effect of this argu-ment, then, is to transmute " situation inconcistent with the antitrust laus" and " activities under the license" into a single concept. */
- / The error 'of this approach is underscored by this Appeal Board's decision in Wolf Creek I:
[W]e conclude that the legislative history of Section 105c does not support the applicant's argument that the Commission must consider the operations of each nuclear plant in isolation when making its prelicens-ing - antitrust review. 'On the contrary, the Commis-sion's statutory obligation is to weigh the anticom-petitive' situation -- which to us means that opera-tions in an' " air tight chamber" were not intended ~
[ footnote omitted). A review conducted under the artificial restraints suggested by the applicant would allow long understood and well recognized ~ pot-terns of anticompetitive conduct to evade Commission
-notico. It is far too late in the day to dispute that (Footnote continued) 115
- - - - . u. ... _ ..._._ , . . _ _ . . .
h
To n" ,nt ti M :.;- 2- ';c: - cito- inineir 'v cicta fr.o- opt d ae sn en
- h'; c ] .nd { {j,p y _;/ pra.t.sec'i. ,
and thice H 'i ca of i m .' , only cno of ::ich i:: oven nac a in .11y r e l w n n i- to th- i s t; w cf nexm undet Sc:ction 105c.
First, Applicant "oppha 17% ti.r t it is nu bj ec t to FPC cnd Michigna Public Servic: Co.wi rsicn j u r irdiction an:1 escette that "the requietory purpoco of this con aircion [ the 7:nC] will be served fully if its ant. truct inquiry focua2s on the Midland Unitn . . . . (Appeal Brief for Applicant at 350-351).
If Appliccnt intends to ind ic a t.e that so:nehow " primary jurisdiction" hcs an impact on determination of nexus, this is misconceived. There is simply no issue of primary jurisdiction raised in this proceeding (see infra). Moreover, the legislative history of the Act demonstrates that Congress was auare that there would be overlap between the jurisdiction of the NRC and those .of the FPC and State utility commissions, and was further apprised by the Department tha t the NRC would be the " principal (Footno'te' continued from previous page) it' runs counter to basic antitrust precepts to exer- '
cise monopoly pouer - .however lawfully acquired initially -- to foreclose' competition or to gain com-
. petitive advantage , or to use dominance over a facil-ity ' controlling market access to exclude competition and preserve a monopoly position [ footnote omitted). ,
(Wolf Creek I. at 26-27) '
. 116- .
..,; .~_ _ . _~ . . . . . ., .. - .-
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hMnd . 7s:pl ican t ei"7s 2. o C .4 ; .7......f..
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c, u, b,, ., .,m_ .",; . . C;, " _I ' _ .*., n _n .--3_U_t,i _
! _i -
M ec Q . v. E 411 U.S. 7/7 (1973); (Dtiaf for implicent c
. 344); i.nd !otthorn Collic nla Po.19r Acence v. PPC, 514 F.2d 104 (D.C. Cir.), cett g n,.i tj. _ _ ,,_____ U.S. _
44 U.S.L.U. 320a (Oct. 7, 1975) ( Appecl Bt iaf for %plicant at 344 n. 7) opparently for the proponition that "n::xus" is a well-established concept in administrative law " par ticularly as it relates to concideration of antittunt allegations raised in administrative proceedings" (Id_. at 3<i4). Although the courts in both cases used the word " nexus," the concept embodied in their use of that term is substcntially different from the one involved here. A review of those cases shous that they stand merely for the proposition that since the agencies involved (respectively, the SEC and the FPC) had no ' statutory authority to. ~ remedy 'the anticompe titive conduct complained of, there was no reason 'to require the agency to investigate the matter. As the court stated in Northern California: "We question the wisdom of. requiring the Commission to investigate that which it has
- no authority to . remedy" 514 F.2d at 189. Conversely, where an agency has the star.utory authority to remedy the alleged anti-
. competitive ls'ituationfit must consider the allegations, Gulf _ ,
States, supra; Municipal Elec. Ass'n. of Mass. v. SEC 413 F.2d
~ 10 5 2 - (' D . C. - C i r . ' 19 6 9 ) ', even if .this required scrutiny of matters
-116a
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f,
, m. . w cle uI" eltai. .
jnti::Ji. Ix a? - o . J. c i t. ; .wi N, : ' .
GT L . '.'. L . '. ' .:S : '* Ell A*?M 120' '7Il (U - C'E- 1 ? ?' ) -
'T: i;.: Je ci m ly J i f l e t e r '.. t ? c t i : r, Oca eth-t et n:a ce t i v i--
ties :d r - a nuclN c licem uill croc s c: i n '. r. :. a i n a site.tio:-
in c o n c i : h_. a '. ,.- i th e n t i v: u c t. 1:ca, tV n: ,: u a incue invol ve *. un% t Scctirn 105c.
Finally. Applicsnt ci :cc c? vert.1 cases telating to the PPC's licensing authority undc>r Pcrt I of the Fadoral Power Act
( 16 11. S . C . S792 ct. seq.). */ Although their relevance to this proceeding, _if any, relatec core to the question of what is a "licenscu activity" and possibly the question of relief, they do have a tangental relevance to the issue of racintenance of a situation inconsistent with the antitrust laus, although not the one for uhich they are cit 3d by Applicant. The issue involved ira those cases was whether or not a specific transmission line, which integrated a licensed hydroelectric f acility with the re-mainder of a licensee's system, had to be licensed by the FPC.
The standard under which the FPC resolved this question was, as Applica'nt correctly notes, the primary purpose for construction of the transmission f acility. However, the cases do not support any inference that the FPC, having determined the purpose of 1
the _ f acility .and thus the scope cf its licensing authority, con-sidered no matters beyond the use of _ the licensed facilities.
To the contrary, in Western Mass. Elec. Co. , 39 F.P.Ca 723 (1968), modified 40 P.P.C. 296'(1968), aff'd sub. nom., Munici-1
_- f Appeal Brief for Applicant at 348 n. 14.
117
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100 ), v :, i. . ^: , c. i . 2 u b;
. plic t r. c (.'. p m . 1 M o ! L ': i im.?1Lc:r' at.34d n. 14) the F9C conn ;de r eti eh:
- gen . -
- u1"tralc r. c tn .
a:. i_ i co:c yn t i t ive .a c :: i v i t. i , - by the li,:e n ;er_ . a r.5 an to aircrim a-Otion in the licenzees' c'isysci of po a genttated at the.li :nrod hydroelectric facility. '2he first c] o ic '/as
.foun? te - be unsubstentisted, but to remt 'y the second cleim.
the FPC cor.ditione:) the licent-e to cor.s tr uc t and operate the fccilicies subject to its jurisdict. ion on licermees agreeing to make pouer from the hydroplant availabic to the municipcis on a nondiscriminatory basic and agreeing to transmit (whcci) that pouer to them. 414 F. 2d at 1209.
Despite a narrow interpretation as to wha t facilities must be licenned by the FPC under Part I, it is clear that the ,
FPC has the power to consider issues and to condition a license with respect to actions by a licensee which go well beyond the operation of the licensed f ac~ili tie s .
In FPC v. Idaho Power Company, 344 U.S. 17 (1952), the Su-preme Court specifically approved the FPC's conditioning a li-
~
. cense to construct and operate transmission line (which had been built in conjunction with a hydroelectric plant and which crossed government land)-upon the licensee's wheeling government power to
" preference customers" across, not only the licensed transmission
-line, but also the unlicensed Idaho Power transmission network.*/
- / - The license conditions - regarding wheeling are set out at 189 F.2d 665, _666, n. 2 (D.C. Cir. 1950).
118 i
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} O,' Of i- ' " 7 3 U: .a t : ?. L . ^ _T.:1 29; 'L / L' t Ui . .
c e p p ,'s t a i t :> net,',n of .:c :: *: cr 1, L. 2.:t, ue :. N u t - in -lair that n ? ;c u r '. 2 t U t. i v n O .'.c tcc.ui:.e: u ;;r C to ' c o.: na fur-ther than i.h" "Letivities en5ci .he ';cene."
Thun Applic a r.t ' .: cupcott for ar :et ting that. tne n r::uc stan-dard under Saction 105c is "rigorouc" rects enticaly on priet :!RC Opinions tnd Ordas. Tha ptopriety cf thic relicnce is, of cour ce , reanifc et , but by concentrating on isoltted dicta in .these Opinionc, f/ Applicant totally dictorts the guidanca which they provide. Motwithstanding the language quoted by Applicant from the Commission's 1:aterford II Opinion and the Appocl Board's
!!olf Creek I Opinion as supposedly reflecting " rigorous ne>:us standardc".(Appeal Grief for A1;plicant at 346), neither proceed-ing in fact suggests a nexus different than that estcblished by the Department in this proceeding. (See e.g., discussion of the Water fog proceeding , suy a.)
llaving failed to set out a nexus standard of its own and
- / At one point Applicant finds it necessary to reverse field and ignore the language - and clear import of opinions and con-
. centrate on the facts. In citing Wolf Creek I and II as being illustrative of "the type of link necessary to SHM such matters
[ wheeling} properly before this Commission" (Appeal Brief for l
Applicant.at 348), Applicant ignores the total opinion and reads Wolf Creek as standing for the proposition that refusals to wheel power can properly be considered by this Commission only
~
if it is "looking behind" an offer of access to a nuclear IFEIl-ity to determine whether the offer is bona fide (Id. at 348-49).
Thc- unstated conclusion of this argunent is, of course, that
- since. there -is no of fer of access to the Midland facility in this. proceeding. there is no cause to consider Applicant's wheel-
- ing policies. f Wolf Creek supports no such proposition.
119 4
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ca. wiser tbi- -o rd t: d -
a; n np i n t - w - n t e n s m :.3 c..;:.
Saution 105. in :i? '.o r C [!;mct Applic nr l': co. ' ' '. c d io c c m n.:..-a...--
. :. : . .. . n o tH ne t u .: c< '. : ; t p : c e 0 0 ~1 L c.: Ca p u ::n e n t ,
thc !!nc Stcii .w: :o In;ervenors, putpc.cc to do c:, (Ice:
Drief for Applicant at 351-352). I:cuever, even in t h .i c App '.1;; . -
cannot tenist twinting the stand &1d.
Applicant asnerto thct the evidence of rccord f a il c to s r. t -
isfy the nexuc standard : "the licensed activities [.wst) be found to contribute in a significant uanner to the maintenance of a situation inconsistent with the antitrust laws or their
( underlying policies" (Id. at 352). In specifying the alleged evidentiary deficiency Applicant states:
i Specifically, there is no evidence that conctroc-l tion and operation of the !!idland Units vill affect the competitive retail customer relationchips between the Company .nd any other system, that Midland uill j bestou u;.,n the Company any exclusive benefits with regard to bulk power supply which it does not now l posse _n,'or that Midland will af tecF~In~any way the compa m' coordination ar rangements with other sys-tems. (Appeal Drief for Applicant at 357; emphasis added)
Even assuming the accuracy of these assertions as to the
. lack of evidence (which we do not, see infra), they reflect ap-l plication of a standard vastly dif ferent than that proposed by 1
. the Department (and which Applicant purports to apply) and one 1 I
that might be relevant if the sole issue were creati_on of a situation inconsistent with the antitrust laws. The phrase "which it does not now possess" underscores Applicant's total
. disrega d .for the statutory language of Section 105c:
, . 120 l
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D. T h..e.__f'_e .c._t ..o f __M.a.
_ _ __. _ u e.
A plicant c1cius ta have factunlly defeatsd cny finding of ne :Us ia this pr oceeding on three fronts. First, it occcctu that "the recetd 6 c.::nstrates . . . thnt those who operate nu-clesr generation capacity in lower Michigan vill enjoy no unicue or significant bulk power cupply cost advantage over their non-nuclear rivals" (Appeal Brief for Applicant at 358). Second, it suggests that even if Midland provides Applicant with a cost advantc9e, this advantnge is " passed on" by wholesale pouer sales (Ibid.). Pinally, Applicant contends that nexus is
" persuasively" defeated by evidence of the competitive well-being of the cmc 11. utilities (Ibid.). Frankly, we fail to see the relevance of any.of these points to the question of whether the activities under the Midland license will maintain a ' situation inconsistent with the antitrust laws.
The first point, besides being not entirely accurate
[ (infra), has no relationship whatever to the economic impact of I the Midland Units. The second poi'nt totally ignores the fact tha t wholesale firm power and direct access . to the Mid1and facility are not substitutable for a utility which has or wants to begin electrical generation. Moreover, any suggestion that whclosale 121 L _. ,- _ . . . . . ... - - - - - - - -
r
- r. u ._ n 1. - , <;a a 1" "<*: -'
- cur "'
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fNec c Cer n -'
c accra, t c fi c.. .c 2 hy -ih s. c c t;.:e n '. nE E?ctirn 109: t h a '. nuci-:: c.", : r u vid Lc-c cme a aonapaly of a b ]er;e utili' M . ; : : l e c a l ., r n 19., maid prm re: and e:q. *d Applicanti- ...Or G c.i y con c t ol Ovcr the ;uncre-tion of nuc3 ear pcuct. The fini point - h e ._ , that :idland vill no t .r. in ta. h nituation inconc4 stant ith the cati tr us t Icus becauce the caall utili d es are ellergedly competitively vicble end will contint e to be so due to their tax advcntages
'is, on its face, illogical. */ It is, thetefore, difficult to understand hou Applicant can cite the competitive viability of the smal.1 systems as being the "most persuasive evidence of the absence.of ' nexus' in the proceeding. . . ." (Appeal Brief for Applicant at 358).
Turning nou to the relevant facts of-record, the liidland Units will generate approximately 1300 mu of nuclear power which is expected to be the cheapest available power to serve new and
. growing loads at the time they go on line (Stafford, TR at 9160, 9166, 9240; Aymond, TR at 6353). **/ During the Department's
- / Put into sylogistic form the illogic of this third point becomes apparent:
- 1. there is a factual situation which includes the
-existence of healthy competitors;
- 2. this _ situation is inconsistent. with the anti- l trust laws; *
- 3. but Midland will not maintain this situa tion be-
..cause of the existence of healthy competitors.
'**/' See Appeal'Brief for Department at 142-144 for a full discussion' of .the. economic impact of the Midland facility.
122 l
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.a cor,c of Coct? I thi.i; a h. e a couAe d : i r,-
Its thec ir.]ica ce 'O
- P ca st .x M he , in th
- u king m.'p m n. g /
- A ir unet it the figure for tiidlar.d nucleat per kilo.att hour?
For what year?
For 1980.
For Hidland-1 in 1980 it would be 4.73 mills per kilo-watt hour.
And what is the cost per kilowatt hour of the best f ossil fuel [ unit] during that year?
In 1980 for the Campbell 1 and 2 units at a heat rate of'about 9000 Btu per kilowatt hour we arrive at an 8 mill cost.
- / Compare the fact of this cross-examination with Applicant's assertion in its Brief: "Instead of presenting expert witnesses or cross-examining the Company's witnesses in this regard [ data regarding the cost of Midland Units and nuclear generation
- generally], the Department of Justice has chosen to rely- [on out-of-date studies]" (Appeal Brief'for Applicant at 116-117).
- /-~ Mr. Stafford is referring to working papers. Which were the
- underlying basis for Exhibit 12,018, and which showed, inter
' alia, Midland generating cost and- generating cost of foliEIFfired units.- Applicant did not introduce these working papers into evidence.
123 1 4
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ion si.. ; d . : .dl ;n. - In ..c 6 :t n2 .7 for the y 2.; r l's Eft Tot Un! t ia, 1 W. a t ' s cor.2ct.
And .11.U20; Unit 1M. 2 is 4.6 for t.h a .t a t:.e y n in . or 3.4.for the ca.a.y2cr?
Itc 3 . '. G .
Then, having the opportunity to tah co ent fron ?iid-land is a substeatial advantage to Consener: Pcuer Company, is it no t?
'le s . (Stafford. Tn at 9239-40)
The advcntage accruing to Apr,licant from its cbility to inte-gretc low-cost nuclear gencrtion into its sys tem is manifest.
Its average cost is reduced and to the c:: tent Applicant is able to do this uhile denying its competitors the same advantage, its competitive position vis-a-vis these cystems improves.
To overcorce this f act and to demonstrace that the Midland Nuclear facility is in no way unique, Applicant places great em-phasis on the fact that "[s]ix of the small systems are consider-ing construction of a large fossil generation plant, consisting of units up to 350 mw and, as the Board noted, there is no cred-ible evidence that these units could not be nuclect" (Appeal Brief for Applicant at ll4;.see also Id. at 392). When the factual underpinnings of this assertion are examined , howevbr , it falls of 'its own weight. First, Applicant fails to note that, the feasibility of this jointly-owned fossil-fired unit is dependent ,
I
'124 1
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c <.: . i. t c [ s ] in. bul: .y ac cupply, enj that ,4m c shoc2d boar t:ie full c;ctc cC cb4.r.ininii that auncly" ( 7. ' w :1 attet for Applicrch a:- 40:). Thus Alpena'u request for wheeling vo'zid erecuachly to gclerno5 by parrgraph (3) o f- '.pplice n t's co-callei I caconc'a le wheeling policy ( cuptr. . ) .
By participcting in the proposed generating unit. Alrana vould no longer purchase wholesale pcuer from Applicant, a not lors to Applicant, and, therefore, under terms of the " reasonable" wheeling policy. could be denied an opportunity to participate in the unit. A final point Applicant fails to note is that this jointly-owned fossil unit is presently no more than pre-liminary thinking of these small utilitiec.
A second principal problem wi.th Applicant's assertion is that the record is replete with credible evidence that a 500 mw nuclear unit .is the smallest size which is economically feasible (Appeal Brief for Department at 139-141), and Applicant introduced no evidence to the contrary nor did it attempt to refute this l testimony during its cross-examination. Rather Applicant now '
l attempts to' support the Hearing Board's finding that the small l utilities can build their own nuclear unit by reference to the 330 mw Ft. St. Vrain Nuclear Generating Station (Appeal i
- Brief for Applicant at 114 n. 117) not its own-Big Rock Point Plant, which was the basis for the Hearing Board's finding (ID l 125 e
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Vtaiu ucs can; u.cte. for in 1.5 ; 5 mJ iinca t h r. i. _in ; only one unir. the t'linch ticer St co ter Reacccc Plant, h <: S: 0 :- si .e:i at les- then 450 m . .orsovat. of t'n -199 n 2 01 e ; . unit 7 m opers-tion, under con.truction at on ct. der er of Dec Waer 31, 1973.
only nina units, all of which vore ordered prict to 19 65, have an 7:a output lecs than 400 et. (United States Atomic Enetgy Cort.m.ission. The -Nuclear Industry 1973, 4-5, table 1-2.)
In sun, there is no evidence , credible or otherwise , suo-pot ting the contention that the small Michigan utilities car.
construct their own nuclear generating unit.
Ilav ing , in effect, ignored the economic (or coct) benefit which the Midland Units provide it and being unable to sustain its assertion that the small utility systems could construct their own nuclear generating facility. Applicant seeks to demon-strate that the " nuclear generation capacity which Consumers Power constructs [is not] . . . significantly cheaper than fossil generation which the small systems can construct" (Appeal Brief for Applicant at 115). The point of this argument and its relevance to the issue of whether or not the' Midland Units will maintain a situation' inconsistent with the antitrust laws is,somewhat dif ficult to ascertain. The argument seems to be that the only. way in which nuclear power can be " unique" is if it has a
,significant cost advantage vis-a-vis the conventional fossil 126 1
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The ; cbl a ._ -; > < ' mrgua.unt s :hst, e.u i g no : ir.7 the .
near,ct f al nt.J be n ~. :. c s c :: ni.cln c mm, it ic in reality an arg- cat dit ec ted :" nr5 the 132.: cf creatier o Z c. situ 3ticn, not'mainten:nce. If the sarll nichigan utilities coulJ cchieve power costs identiccl to these 7tpplicant enjoys iroa the Midlan1 Units, 111dland .woul5 navertholes: contribute in c cignificant acnner to the maintenance of the situation existing in Michigan.
Notuithstanding Applicant's chcrccterization of this nexus as
" meeting of load greuth" or " prospective commingling" (g peal Bricf for Applicant at 352). this is cll that Section 105c requires.
Ilowever, we do not have to bolabor this point since the study-conducted for the City of Lansing by i's engineering consultants, which Applicant cites as being " tnt.only concrete evidence of record comparing actual cost of bulk power alternatives for smaller neighboring systems" (Id. at 115) shows nuclear power to be , in f act, the cheapest bulk power alterntive for Lansing (Exhibit 12,008). To overcome this fact. Applicant asserts that. Lansing's system manager conceded that the difference between
' the average kwh' of the nuclear plan (Plan 4) and the non-nuclear plan (Plan 38) is within the range of engineering error,- and thus, the nuclear and non-nuclear alternatives in the study "are comparable from a cost standpoint" (Appeal Brief for Applicant 127
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r i 'n m: . . . c .. i t _3 g c e,< , r; c s > t r d e . .g ? . r :.1 ~ . tot" I' cL '. 32;. in in na to, conc ^ d.;t th? a u ci m. cnj ncn-ntulant b u >. , oo 7 O l te r a a r.1" a s ve ' ' " r'enp s . al ; froa a cart at:n0rcint." The f u l !. import of hic ta t t iacy is to t h.:. cont.aty:
DY 'G . f. CSS:
O. Assuair. this pr ecan t atuCy and rcaring a leas then th.ee percent differential and tcc incsttaintiec to which you have pointed, is it not sound engineer-in; in utility fot eccating prectice to ausume that thoce differences, these purported savings are no small, that they cra nell within the range of fore-casting error, and that the t o f o r e the d: cision h:s to go one uay or the othet , in this cac2 fossil or nuclear , would probebly be governed by cther circum-ntances, rather than this kind of cost difference?
A. I can't agree with that, lir. Ross. I cannot agtce with you at all. The engineers have the latest numbers in here for a fossil fuel plant for SO2 gas scrubbing, $40 a kilouatt. They're using very mini-mal information on what gas scrubbing is going to cost in that new fossil -fuel plant.
Now, that's in Plan 3-B, using gas scrubbing, because we cannot get a permit in Michigan to burn high sulfur . fuel for a new plant without gas scrub-
-bing equipment. I don't think you've got enough bucks in for that.
And likewise we have been experiencing excala-tion costs in high sulfur fuel that is unbelievable; so I say to you in all sincerity, the sooner we can get'the nuclear, the better off we're going to be over the long range.
Q. Well, I'm puzzled at what you're saying; what you' re really saying is:
The study really is wrong in all rsspects, and that you can't rely on it; and you are plugging in certain of your own assumptions about how it numbers are wrong and you are drawing some conclusions. !
'128 i
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f e a sil xml, ic ; m ;: tin;. : t'. h;u - i sac .c:t.
I' ' not ;oiny cc 1t h:te an:. '
.u / "H t nuc10ct i t. n ' t going to L::i n tha so u .zu .
f But uncre's e"o' uh infot ration , sit , in this study to ec: vi.'c? :. 2 t ?.a t if Co nc ucn rn would c iz t ce to -
our obning 160 r.wgwac ts of Gucaicaisco and ttnn2 port power <to us. tha . e *, ill puruuo an 6c tive ac ;' tin-tion.
BY MR. ROSS:
-0 But you say there's enough information in the study but --
A. The study shous ye, sir. that based on those small little percen tages you' re talking about. that on an accrual period, 15 years. on an accrual bacis 15 years, there's appror.imately $15 million favoring the nuclear on a net wor th tha t is about $0 million.
Now I von't disagree that tuo cr two and a half
'or three percent is a good, acceptable enqineering etror. I won't argue . that point with yot. at all.
. What I'm saying --
.Q. You're relying on that 2-1/2 or 3 perec.iu, are 1 I
you not?
MR BRAND: He did not complete his answer.
11R ROSS: I'm sorry.
Now he'.s lost -his train of thought.
BY MR. ROSS:-
Please recover it, you paused and you seemed to come to a natural stop. '
A. .I sa'y to you -- I've said it to you before; I've said ' it to this . Board and I'll say it- to my Board:
129
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O. Beced on this ettdy rnd nr.ced on tuc Otlet 2n-cideratiOnE co ithich you h:7.2 Mdc re.crenc?, dc you ..
believe that acce.c c to a large-scalc nuclear goaaca-ting facility on the bcsis that you p;cNc3 is escen-tial for you to oparate an efficient and comcatitive bulk pover supply sycr.em, let's say, in the next ten yeats?
A. Yes, cir, I do.
O.. And do you plcce primary reliance on this study in establishing that conclusicn?
A. I do , yec , sir.
Q.. Thank you. (TR 2485)
In sum, neither " prong" of Applicant's assault on the nenus, which has been established in this proceeding, is actually on l point, nor has either " prong" refuted the basic fact that the ac-tivities under the Midland nuclear License, namely, the construc- ;
tion, operation and. marketing of power from the Midland facility, will contribute in a significant manner to Applicant's mainte-nance of its monopoly of the wholesale-for-resale bulk power mar- !
i ket. The Department is not, as Applicant suggests , " seeking to ,,
utilize the fortuity of a license application to litigate anti-trust . issues unrelated to these Units" (Appeal Brief for Applicant, l l
l 1
at 359). Rather,.the Department'is attempting to insure , as l l
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...:a y s t a r t dac :rg' . tion t h z. t the ecca bn reacndsfi to . th e Hent;.ag Decid (ther dy delaying tne ul ti n ta icio:.ition of license conilitican), ptogrese thtough holding out its wholocale rate- as cppropriate accass to the 311dland f acility, to urging that dir ect access be conditioned on r6ciprocity (presuaably that the small system build a larger generating f acility with sn op-eroting cost equal to Hidland and offer Applicant pa r ticipa tion ) ,
and ultimately end up suggesting that tha policy statement read into the record by Mr. Aymond would nake appropriate licence con-ditions. .Throughout this tortured journey from dropback position to dropback position Applicant evidences it clear desire to main-tain as much of its monopoly power as it can convince the NRC to allow. Moreover, the entire process suffers from two glaring defects. .First, Applicant assumes that the " nexus" required un-der Section 105c(5) is identical to the term " appropriate" as used in Section 105c(6), an error which Applicant compounds by contending the nexus' required under Section 105c(5) is the word
" rigorous." Second, Applicant argues that relief which does not leave it in an economic position equal to or better than it - would ' be absent relief is contrary to the public interest.
.A. .The Question Of Remand Before addressing these defects in Applicant's relief 132
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. ~cior . ' S is 7._ w d a c :_ r 3 : :u ti.e rurb>rity m ige: :.
11conr cat.iiti:a; cal thete is a r!:sciatici evi6cnc.2ry reccru ca **hr. it can L ::n auch + de temin s t ion. */ I:on icycrtant, there is no reason to believe tha t a temand to the Hear ing 3ccrd could 1a acccT.plished in a "relati;ely brief period" (3.ppeal 4
Drief for Applicant ct 363). Over ninetten .?onths elcysed fr om the time the evidentiary hearing balou commenced to the dat ; the Initial Decision was issued. Although a remand to the IIearing Board on the issue of relief would ccrtainly ba lecs time concum-ing than that, given a realistic briefing schedule and time for deliberation and writing an opinion, a retaand would in all prob-ability mean the.t a decision at the I! caring Board level would not be possible until late this year. **/
Nevertheless, Applicant suggests that the delay resulting from a remand of this proceeding to the Hearing Board would not be " undue. . .since the Midland operating licenses (and hence the proposed antitrust license conditions) will not be effective until the Units are ready to go on line -- some four years in the future" (Appeal Brief for Applicant at 363). Even assuming
- */ As discussed infra the Louisiana Power & Light Waterford pro-iieeding provides an appropriate benchmark as to adequate relief and can -be followed by this Appeal Board.
- /. Assuming further appeals, both- within the NRC and in the courts, it is conceivable that a final determination of this matter - would not be forthcoming until 1978 or 1979, 133 1
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': t : . :a i- c a s.: a.a :.n un-c e s. t c i n , they .mnt 9'.:nt fcr t hem aJ-> on & acsu: . an Bct Applic.it till cortinue to deny thuu a certs to tbs al' 1. cd Unit s ,
that Arplic.'nt vill coc:tinm to t e f t:c t to thoc.1 clectric r;or or
. a nJi that Ap.,licant will continue to insist on unreasoncble and discriminctory reserve sharing ar r ange.en ts . They will have to continue to install small scale genera tion, not only to meet pro-jected loads, but to satisfy Applicant 's incistence on theit maintaining 5.>:cessive lovels of reserve:3. In sum, the longer it takes for an ultimate determination as to appropriate relief, the more likely it is that such relief will be illusory for the small systemc.
If, honover, this Board should reject the Department's sug-gestion and ' temand this proceeding to the Hearing Board, we urge that'it do so with explicit instructions as to the scope of appro-priate ' relief and the criteria to be considered in formulating such relief. This would clearly expedite the procedure and may
- i ultimately result in no appeal being taken f rom the Hearing l Board's finding.
B. Alleged Narrow Scope Of Relief i
Applicant suggests that the " inherent boundaries" 'of NRC '
- / We read Section 105c(8) to indicate that whatever license conditions this Appeal Board determines are appropriate would be retroactively . imposed on the Midland construction permits.
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th i t the ccopc of? pernisc i a2 - relius ti.J ' t S </' t i c a %5c(5) ic governed by aa a---ic:1 n:a:rc s t n nS a rd as ic contaiNd in Sec~
tion 105c(3). Tiu.c - arg ren t , c1though not s c, ctated, is thct t t' UFC cannot elimiasto the cituation inconsistcat .ith the anti-trust 1r:s, but rather T.ust catisfy itself uith eliminating the l
ne:cus between the situation and the licensed activities. Second, Applicant suggests that the scope of relief which the NEC can order is limited by the regulatory jurisdiction of the FPC. Doth contentions cre misconceived.
- 1. So-called nonuc Under section 105c(6)
Section 105c(G) of the-Atomic Energy Act comes into play af ter a L finding under Section 105c(5) that license activities would create or maintain a situation inconsistent with the anti-trust laws. It provides:
In the event the Commission's finding under paragraph (5) is in the affirmative the Commission shall also consider, in determining whether the license should be issued or continued, such other factors, including the need for power in the af fected area, as the Com-mission in its judgment deems necessary to protect the public interest. On the basis of its findings, the Commission shall have the authority to issue or continue .a license as applied for , to recind a li-cense . or amend it, and'to issue a license with such conditions as it deems appropriate. (Emphasis added)
The Report by the Joint Committee on Atomic Energy on the 1970 amendments to the Atomic Energy Act sets out authorita-135 a
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other taccorc, imitc; c :::2 r e c .. ret a . u. r the c Moet:d a t 3 r , _r ::he Oca'; vion . its m' s .' , '. t d3k > DC:3cs:L] tO ,C r o T ' C C :: D:CliC i :12 ; L :2." Gn the .r ': ~ 3 of ,11 itc ficd incs -- thn findt.q uBr parr.claph (5).nnd its fimSinp nW: 7, cap r n '5)
-- the Co.nission a ul. . ._va the cethority ' to i.=. c u c or continu a license a; cypled fct, to refuc2 to it-sum o license, to rescira a licenna or cmend it, and l
to issue a liccnce with such conditions ac it deens a pp r op r .i a te . " Chile the Ccr mie.Gion has the flexibil-ity to consider and weigh the various interests end vbjectives uhich nay be involved, the comaittee does not expect that an affirmative finding undet para-graph (5) - would normally need to be overriden by Com .
mission findings and actionc under paragrapn (5).
The Committee beleives that, except in an extreordi-ndry situation, Co5iss3cn- E 5 5ed~c3nU H5ii3~3IicUld
'oe ablc__ to elir.inc te tne concerns onnalled in any af-
--f ir m a t i..ve rindinq._u_n_.d.,e.r_ na r ca t a ub (5) wnile, at the Same time, accom:r.od a t ing the other public interest concerns found pursuant to paragraph (6). Hornally the committee expects the Commission's actions under paragraph (5) and (5) will harmonize both antitrust and such other public interest considerations as may be involved. In connection with the range of Conmis-sion discretion, the committee notes that pursuant to subsection 105a. The Commission may also take such licensing action as it deems necessary in the event a licensee is found actually to have violated any of the antitrust laws. Of course, in the event the Com-mission's-finding under paragrpah (5) is in~the nega-tive, the Commission need not take any further action regarding antitrust under subsection 105c. S. Rep.
No. 91-1247, H.R. Rep. No. 91-1470, 91st Cong., 2d Sess. (1970), at 31. (Emphasis added)
Congress wanted the Commission to impose conditions to'elimi-nate the concerns entailed in findings of antitrust inconsistency
-- i.e. , conditions to eliminate the situation inconsistent with the antitrust laws. It is, therefore, apparent that the question 136
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- =. .c., n, .ly . ch., . .i !. i : : n r. e acci. : . ; u '. C c: ;c t,. c D r S te :. :t ; a i tu . : !.cn i n : o c. _ . . .. : t i t., t ?.a 2 :. ' . ue la- . tb Neus chiit: t0 t.:: relda; gnrop ist. ta cli :im .te that situaclea. " .:e "nenu9 or rel.t acachip timt cuct bu con-sidereG at the reli2f -tsge is one at Eproprict?nens -- i.e.,
uhother the cro.cese5 license conditicas are cperonricte to elimi-nate the situation inconsistent with the antitt us t lavs. Appli-cant's contention to the contrary is at odds with the clear, un-anbiguous 1Snguage of the statute and its legislative history.
Applicant's contention ca to the narrou scope of relief is also in direct conflict with the memorandum of the Hearing Board in the Louisiana Pouer and Light Co. , Unter ford Unit No. 3, pro-ceeding. */ That memorandum nakes clant that once a situation inconsistent with the antitrust laws has been found to exist, the NRC has broad authority to impose conditions in order to elininate that situation.
In that proceeding the Department, the NRC Staff and the Ap-plicant, Louisiana Power and Light Co., agreed on a formulation of license conditions and the Applicant agreed to accept those conditions regardless of whatever further action the Board might
- / In the Matter of Louisiana Power and Light Compang (Water-ford' Steam Generating Station Unit No. 3) AEC Docket No. 50-382A, Memorandum of Board with_ Respect to Appropriate License Condi-tions Which Should be Attached to a Construction Permit Assuming Arquendo a Situation Inconsistent with-the Antitrust Laws, October 24, 1974 (" Board's Memorandum, October 24, 1974").
137 1 1
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. Ci tDC i i.G d i n C G '.3 1 3 t e n t '?] th the - CQti;t 30t l 'i ' l '.', .
At P. C ': c a n c ' U :: ICO of thJ shou-cauw hecting, the Uaterforu E, ca d icaued a morandum in which li founS the agreed-upon relief inadecuate a r.d cet fo:th its vious with respect to cn adequate cet of licenuo conditions, which, if accepted by the Applicant, vould lead the Board to ad-vise the Commission that antitrust matters no longer precluded issuance of of the applied-f or construction permit.
The Scard, after noting tha t it "has the responsibility and inherent power to determine what licence cenditions are appropri-dte" (Board'S Memorandum, October 24, 1974 at 9), found the agreed-upon licence conditions " basically. adequate except in three re-spects: (1) access to nuclear facilities; (2) transmission
'between' and 'among'; and (3) reserve sharing (Id. at 12).
The Board then . formulated license conditions which expanded and clarified the relief which would be available from the Applicant
- / Essentially the_ agreed-upon conditions obligated the Appli-cant to: (1) interconnect and share reserves with small systems on an equal-percentage basis; (2) engage in unit power transac-tions; (3)Jgrant access to future nuclear f acil ties'; (4) wheel power and plan and construct transmission facilities for such wheeling; and '(5) sell power and energy at wholesale. ,
- / - The cities -alleged nine deficiencies of- the proposed condi-
'tIons Qd. at 12).
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.a ' r- , i . . ' : in c s i t u c. t i .m a inecris .c t :.n t wi L;i th- antitruct I T ':3 ) . It h. .u to gre nt t' . c Appl uc e t 's w tien f ur su:. n y di a; :::ition af td croc :ing with relief limild to the egreed-noen conditica.~. M / ny ex-1 panding tha recctra sharing and uM: 21ing calief in ing conditions beyon6 th a t originally concented to by the Applicant, the Ueter-ford Coard hac effectively denolished any arguacnt that the grant-ing of sorac - form of access to the nuclear unit applied for repre-sents the extent of the NRC's jurisdicition to icpose licence conditions under Section 105c. ,
The Board's Memorandum represents the first precedent under Section 105c on the appropriatenesc of licence conditions extend-ing beyond nere access to the nuclear unit applied for. The fac t that the par ties had stipulated to the existence of a situation inconsistent with the antitrust laws and maintenance of that sit-uation_by the license activities--and that the Applicant had con-sented' to accept cer tain relief--in no wa r vitiates the Memoran-dum's precedential impact.
- / Except in one regard, which led subsequently to the Depart-ment's filing of an exception to the Board's Initial Decision (Docket No. 50-382A), November 14, 1974. i
- / Order Denying Applicant's Motion for Summary Deposition of All-Issues and Alternative Motion for Summary Disposition of Certain Issues (Docket 50-382A), October. 24, 1974.
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- o c..r ueciGlag t 'e r * ' aty jut : riiction 0; i.i.a .PC under tb : a cu t G .
Gr.a. A c t (15 d.S.C. .3717). 2/ Chace ecc. : ;rc .-t on D.:iat. In 1:obil Oil Cc: Pen r v. F20, /:33 F. 2d 1236 (D.C. Cit. 1973), fet example, thi FPC i.c5 aascrted jurisdcition to deter?ine the rat-for. transportatica of liquid hy0Locerbons in 17 tar cta te pipelines .
It urged thct cuch action uns necoscaty to insure that purchacers of natural ges (over which it had juricdiction) uould not be charged for the tr:neportation of liquified hyJrocarbone. The Court noted that the statute wac silent regarding liquid hydro-carbonc, thereby implying that regulation of such was denied the FPC, and found clear support for this conclusion in the legisla-tive history of the Act. 483 F.2d at 1242 n. 2. More important, the Court found that the regulatory purpose of the Act, namely, to insure that consumers of natural gas paid a "just and reason-able rate," would be effectuated without FPC jurisdiction over liquid hydrocarbons:
Of.particular. relevance here, we noted [in MidAmerica Pipeline Co. v. FPC 330 F.
that the interests of the gas 2d 226 (D.C.
consumer Cir. be could 1964)]ade-quately protected by allocating costs between opera-tions over which the Commission had jurisdicition and
- those which it did not. 483 F. 2d at 1247. **/
t
- / Appeal'Brief for Applicant at 368.
- / Prior f to asserting jurisdiction over liquid , hydrocarbons, the (Footnote continued) !
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- 2. Adnlaittrcei>c Cr ucy cn Pri ".ry Jutirdict cr.
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A ! " licant c ar s . to cuggest Fhat priqcip100 of EdGiaile.ra-tivo ca e ity and ptinary jurisdiction tocuire the NEC to defer to the FPC "with regard to c;uestions such as trancaission se rvice and cootdination crrangements" (Appeal Grief for Applicant at 379). It is unclear, however, whether Applicant is urging that this "delerance" requires the UEC to refrain from setting the rate at which Applicant aill engage in a transaction (a proposi-tion with which the Department does not necessarily disagree) or whethet Applicant is asserting that the NEC must refrain from or-dering wheeling and coordination arrangements and establishing general principles governing these transactions. If Applicant is-suggesting the latter, its contention is misconceived.
In the_first place, there is no issue of primary jurisdic-
_ tion. in this proceeding, for no agency except the Nuclear Regula-tory Commission has the specific statutory authority to determine (Footnote continued from previous 'page)
FPC would simply regulate what percentage of costs associated i
.with transportation of ' liquid and gaseous hydrocarbons could not be - chat ged to gas operations. The net effect of this was to establish but the rate for transportation of liquid hydrocarbons, there was no regulatory compulsion on the pipeline companies to charge that rate.
' 141-
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' lc ice > to i'u n ic i,r ! . ice. 3 3 a ' n of .:: s . v.
SEC. 413 ?.23 103? (C.C. Cir .
IMi) . Tast.cce in'r ol ic6 M - :.:a by w>cral 11u icipel utilities t h a.t the SEC, in appreving tM acquisitwn by cos' -in neu England utilities of tuo nucleat-pover electric cacpanies, should condi-tion approval en the oppor tunity being provided to the cunicipals
- / Applicant's reliance on Ricci v. Chicroo Mercantile Ench"rge, 109 U.S. 289 (1973), (Appenl Eilif for Appliccnt at 376 n!~P .~--
379 n. 24) is factur.lly and legally inapplicable. Ricci involved, inter alia, a claim that plaintiff's membership in ti:e Mercantile Exchange had been trancferred' to a third party in violation of both the rules of the Exchange and the Enchange Act itself. It was this factual issue which the court referred to the Ceanicsion, not the issue of whether the transfer was in violation of the Sherman Act nor whether the Exchcnge Act immunized the conduct complained of f rom antitrust sanction.
Thus Ricci stands merely for the proposition that courts will stay tnoir hand pending agency adjudication if: (1) the court determines that maintenance of an antitrust action may be incompatible with the regulatory scheme; (2) some facet of the dispute is within the agency's jurisdiction, and (3) agency ad-judication promises to materially. assist judicial resolution of the antitrust immunity question (409 U.S. at 302). Convercely, if these three criteria are not present, a regulatory agency may be. required to await judicial action. California v. FPC, 369 U.S. 482 (1962). Moreover, the doctrine of primary jurisdiction does not come into play if the transaction -has already been con-
.sidered by the regulatory. agency prior to the commencement of the-antitrust action. United States v. Philadelphia National Bank, 374 U.S. 321, 353-354 (1963).
In the present case,-there is no allegation that Applicant has acted -in violation of the Federal Power Act, and thus , there
-is no issue on which the NRC could ' defer to the FPC.
142 y 1
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. c' tcM. po:.chn.t:; '(2) c.doy irta s tc ;c c on.1. : n : o r:0 hea cy coved ~be t.c qu i-i c io n ; -i (3) tN. cc.v. i t io v; a gm ;ci by t!.a ' iciplc tilate1 ta arcan ;:. c t c u o t h to oti u:
regal; tory cgenci.a (specifically the FPC). f/
The Court rejected thoce contentions and renanded the caco for a hearing and reconsidcration by tb SEC. OC particular no te is the Cour t's treat.nont of the assertion that reallocation of the output of the nuclear facilities to include municipal participation would invade the jurisdiction of the FPC:
Any. reallocation which would result fron the suggested conditions tould not invade the jurisdic-
. tion of the Federal Power Comm.ission. It would be an ,
exercise by the Commission of its oun authority under 413 F;2d at IUu6 (emphasis cdued)
'the Act . . . .
- / The' Court said:
The Commission contends that it is without authority to condition approval of the stock pur-chases by sponsors so as to enable Municipals to have the opportunity.they seek; and the Commission points out.that, insofar as consumers are concerned, appro-priate state commissions have approved the proposed acquisitions and, also; that the Federal Power Com-mission had regulatory jurisdiction over Yankees.
Thus, . the Commission states:
. Issues with respect to wholesale supply of power, applicable rates, and charges of dis-crimination thereunder, are subject to reg- ,
ulation 'and review by the FPC, so that In-tervenors may present any complaints they might have in these respects to that agency.
(Footnote continued) 143 1~ - - _ . _. .
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cert, d6n. U.S. ,
14 U . C . L . :. 3204 (U. .
October 7, 1.^i 7 5 ) da9c not, u /spplicant euggectc. Ctand f:r the propositier. that the FPC deferred" to its "siets' agency," the
- ImC , for a resolution of antitt act iscuca cricing fron a jointly-ovned nuclear facility. Tha FFC simply had no jurisdiction over the matter, and thus, can hardly be said to have deferrec to the tinC. It had no choice. The FPC coule not have heard the catter even if the. NRC had never been created.
C. 'The Irrelevance of Alleged Harm to Applicant in Determining Apprenriate Rolief While the purpose of a proceeding under Section 105c is clearly not punishment of past misconduct , the relief provided must be sufficient to remedy the situation inconsistent with the antitrust laws (Section'105c(6); Committee Report at 31). As the (Footnote continued _ from previous page)
And further:
.The conditions requested by Intervenors 4
call in effect for the allocation of bulk power and the - fixing of costs for the pur-chase and transmission of such power mat-ters which are not within the scope of our .
= jurisdiction but rather relate to areas en--
trusted to other regulatory agencies. )
I Municipal Elec. Ass'n. of Mass., supra, at 1059 l
l 144 )
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That this .:Oy pizce the def andant in a rocce po;;i tion that he
, would be abcent the decree is ncither su r pr i cir,g not relccant.
- 1. Aimropriate Access .to. titalend Nevertheloca Applicant contends initially that appropriate
- relief.should be limited to insuring accesc to the nidland fa-cility through wholcoale purchaces from Applicant. In addition to its claim that unit accesc will " burden" the company, Appli-cant contends that direct access is " unnecessary and redunJant" since "the appropriate share of any benefits flowing to the Com-pany fron-the Midland Units will be ' passed on' directly to other systems through the Company's wholesale service" (Appeal Brief'for Applicant at 386). To the contrary, wholesale power
. purchases would be unnecessary and redundant.
Systems such as the Municipal-Cooperative Pool would, in addition to nuclear power from the Midland facility, be -forced to pay for transmis-sion, back-up power ~and ' other components going into ' Applicant's
" firming" Midland power. This is clearly unnecessary and redun-dant' and take no account of the effect of " ratchet" demand 145 A .
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Mota m t, whil_ c lic..-- cet icion req.:1 c ing th n:! N !?
G5lus , '. S furtne; 3.;pliccct's du .m : to bn 13i._ . hole yf eiF C-n aeccd relief, c n .. J.nd eed Angli.c .a t ;r l.5 benefit thnofren, /
it is clearly incd:cuate to eccrer; the situation. The Eccrd in the Uctet ford proc:-eding concidered this form of nuclear acceas and dicmisced its adequacy except potaibly in so:ac hypothe tical situation "in which all or rubstantially all of cellar'c power is generated by nuclear units" (Board's Memorandum, October 24, 1974 at 32). 1***/ The Waterford Board's detecuination of this
- / The "ratche t" demand clause provides that if a system calls on Appliccnt for emergency assistance, for as little as a 15-minute period, this establishes a peak demand for which a capac-ity charge covering the peak must be paid for a month and 60 per-cent of that charge must be paid for the succeeding eleven months (e.g.
disinc,entive to install or continueThis causes a serious economic DJ #64 at 3 paragraph 6).
generation. (Mayben, TR at 3839-41; Munn, TR at 4071-72).
.**/ Midland will account for approximately 22 percent of Appli-cant's peak load. Reply Brief for Applicant at 181; Stafford and Lapinski, TR at 9169; 9244; Mosley, TR at 8528-29.)
- / In fact, limiting Midland access to wholesale purchases would represent NRC sanction of Applicant's monopolization of the wholesale-for-resale electric power market. For a~ utility to enjoy the benefits of ' nuclear power , which Congress wanted to be as widespread as possible, it would have to cease generation and purchase. its requirements from Applicant. The long-run effect of this would be to allow Applicant tofperfect its monopoly.
- ****/1 'The Department would disagree with the proposition that access limited solely to wholesale firm purchases is appro-priate even in such a case.
146
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buiot .;e s u m%3 ar r r ag e ..un c.c to A c r. i n 201-un po . r :
c:enarci.ed by other fscili;in . San tha nuclec:. fc-eility i chut down. :To r s o << u , the cor c of t t. O n s li t-ting the po.cor f toa the nuc1c er facilig to the buyer is for the- account of the buyer in both typec of ac cecc.
In the sale of firm bulk pouet , the celler aust sup-ply the power regardlacs of shut-downs, ccheduled or unscheduled. In other word <:, the costa of bcckup pouer and the obligation to supply it is fcctored into the price. Trancaission cost over celler's sys-tea is also factored into the price of firm bulk pou-er (Id. at 31-32). */
Perhaps recognizing that wholesale firm power sales repre-sent totally inadequate access to the Midland Units, Applicant places great reliance on the fact that the requests for Midland participation were supposedly " untimely" and that access will cost Applicant as much as $141 million ( Appeal Brief for Appli-cant at 388-89). We have already discussed the inappropriateness of this argument and the unreliability of the calculation of extra cost. In addition, we note here that acceptance of Appli-i
- / This clearly belies Applicant's characterization of the language _from Waterford as an explanation "why wholesale ser-vice can . provide . adequate access to nuclear generation facili-tites" (Appeal Brief for Applicant at 385).
147
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~'c u7te "_tibi cly," tm fe"iliti .: :: c = :, o a::e t a c e c, e .: e 'ito of ea : . .. 30uth 7s t :. ( ?.ml i ce. - t ' s c c :. :m t c a. ;n. nr5 all oZ th- unit'c capacity .30.3 " +. 1 by 131/012 fic u L . . Theca e r g .:-
men *c, su M tentially iSentical to thoce put focuaru by I;nlicent .
in 'this proceeding , were curar.erily rejec ted by the Board.
The positicn of Applicant is inconsictent with the purpose of Section 105c of the Act which authoc-izes thece proceedings. In all casec uherc condi-tions are 1:rpo s.ed by courts or adra in i s tr a tive bodies-to correct antitrust si ustions, such con:litiona re-caire behavior contrary to the plans, desir.ec and ce-termination of the party upca whcT. they are icposed.
If cccccc to Gatst ford is a proper condition to im-pose in the present proceedings, the f acts that Waterford uas decigned solely for the needs of Middle South and that Applicant and :4iddle South are unwill-ing in negotiations with others to relinquish any part thereof should not prevent or deter the iaposing of a condition requiring a right of access to Mater ford (Board's Memorandum, October 24, 1974 at 25-26).
Applicant's final ef fort to remain "whole" despite a finding of inconsistency with the antitrust laws is to have the NRC con-dition access to the Midland Units on an agreement by the utili-ties participating in that- facility to construct, within a rea-sonable time, generating units in which Applicant can participate.
(Appeal Brief for Applicant at 394). Although the D'epartment believes it likely that the small systems, attempting to obtain generating economies of scale, would be delighted to coordinate development with Applicant, to so condition their right to Midland 148 7
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Applient cm.tends thr.t the r e is no evidence c. hat the caell
- utilitica need power to "back-up that receivcd ftcu Midland via participction, and that even if such power is nececsary, 70plicant should provide it caly "through ETC-re ulated bulk pouer sales to such syctems" (Appeal Bricf for Applicant at 39G). Ce have cddrocsed the first part of this contention in our Appeal Brief (sce particularly at 187-89), and vill not do so hetein.
The second part, nem21y that FPC-regula'ed bulk power sales
-- i.e. , wholesale-for-resale firm bulk pouer--would bo. adecuate back-up, in a rather novel contention advanced by Applicant ap-parently for the first time in its Appeal Brief. This argument seems to be that the small systems can " firm" their Midland
- entitlement with purchases of wholesale firm power, rather than through a two-way coordination arrangement, including reserve- 1 sharing, and.it may go a long way to explain why Applicant. claims i
direct participation in Midland would be " unnecessary and redun-dant." Further, Applicant asserts tha t its willingness to sell wholesale power eliminatcs the necessity of these systems obtain-ing the wheeling of such back-up power from third parties. In I sum, Applicant urges license conditions which would do'little l 149 1
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' a n ye i j :c : c r. A ni: o 2 tna otic; in '-j;>1 i r a 1; ' a v nycica th t the " na ::w:" r r.-ct :. r c d im .. e : Sect.on 103c'3) i.: ide,; t ic e ' to i
th: te m "opprop.im.2 -
as c:/ in Ec.eeica 105c(;J cni the t v :1
'it t elev ince of " the tola of th o 0:'C" to r fornu'.rtion c: egpro-
.or ic te licence conditiona r;- the GRC. 'Th us , ther: is no rcacon -
for the 'IRC to refrein froa ing:cition of licence conditions which.Appliennt allegcc are unrelated t.. the Midland Unitc, and compelling' reason to do~ co. Relief appropricte to correct the situation inconsictent uith tho' antitruct laws demands it. (See Appeal 3rief for the Departnent at 134-190).
E. Conclucion i.
1 Viewed in it: entirety, Applicant's argument as to the scope i
of.rclief and the formulation of specific license conditions nust be rejected.. Its contentions are totally at odds with the lan-guage of Section 105c(6), the legislative history of the Act and prior decisionA by the NRC. Moreover, acceptance of these con-tentions would result in an abdication by this Appeal Board of
-its ' duty 'to fashion license . conditions appropriate to correct
.the. situation'existingiin Michigan's lower Peninsula, a situation I.
clearly ' inconsistent with the antitrust. laws. -
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elacch 2. 1975 Ra ci.x e t f ull y cut. 'i t tec. ,
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DAVID A. LF C RI T, t '
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MARK 11. LEVIN 4
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JUDY L., GOLDS'IEIN
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A t'to r ne ys ,
Department of Justice i
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CU:Jn l'ICAT~ OF SERV!CE I HL'ECRY CERT.TPY that I have thin day sorved .i copy of the foregoing document upon the follouing persons by depociting
.a copy thereof in the United States mail, with first class or air mail postage affixed, .this 2nd day of Mr.rch, 1976:
--Alan S. Rosenthal, Esquire i.
Chairman Atomic Safety & Licensing Appeals Board U. S. Nuclear Regulatory Commission Washington,-D.C. 20555 I
Michael C. Farrar, Esquire
' Atomic Safety & Licensing Appeals Board
. U. S. Nuclear, Regulatory Commission Washington, D.C. 20555 I
i John F.'Farmakides, Esquire c Atomic Safety & Licensing Appeals Board l U. S. Nuclear' Regulatory Commission Washington, D.C.. 20555-Hugh K. Clark, Esquire Chairman .
Atomic. Safety and Licensing-Board
' U. S. Nuclear Regulatory. Commission -
Washington, D.C. 20545 Dr. J. V. Leeds, Jr. '
P. O.~ Box 941
< Houston, Texas- 77001 l-
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t;arhin,w:1, D.C. 20037 Rcbert Vordisco, E. r; c. iru 7.ntitrust Counsel for
- uclear Regule.to
- .y S taf f U. S. 1;uclear Regula* ory Con:niasion 1.'a s h in g ton , D.C. 205/.5 Atc:-ic Snfety and Licensing DObrd U. 5. Nuclear Regulatoq Comnicsion V;ashin g tc a , D.C. 2 C 5 <2 3 Frank W. Karac, Chief Public Proceedings Branch Nuclear Regulatory Connaission U. S. Office of the Secretary Washington, D.C. 20555
. ?.-t,mA. /Ti -f Ua~ w MARK M. LEVIN l Attorney, Department of Justice March 2, 1976 I
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