ML19344D676

Responds to T Conner 800314 Ltr.Nothing Presented by Applicant Indicates That State of Sc Is Actively Supervising Use by Carva Cartel of Economic Market Power Over Exchange Svcs

ML19344D676
Person / Time
Site:	Summer
Issue date:	03/21/1980
From:	Brand W BRAND & HALL
To:	Stephens C NRC OFFICE OF THE SECRETARY (SECY)
References
NUDOCS 8004280004
Download: ML19344D676 (3)

Text

t BRAND G HALL ATTORNEYS AT LAW WALLACE EDWARD BRAND sECOND FLOOR noWano EAnt watt is23 L sraser,Nx

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Mr. Chase R. Stephens  ; MAR A51980> C Chief -

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Docketing and Service Branch (M bdwSq & s Office of the Secretary 8, U.S. Nuclear Regulatory Commission fo Washington, D.C. 20555 c3 4 In the Matter of South Carolina Electric & Gas Company (Virgil C. Summer Nuclear Power Plant, Units 1 and 2)

Docket No. 50-395A

Dear Mr. Stephens:

This is in response to Mr. Troy Conner's recent letter dated March 14, 1980. He is to be commended for bringing the Supreme Court's recent decision in California Retail Liauor Dealers Association v. Midcal Aluminum, Inc., 48 U.S.L.W. 4238 (March 3, 1980) to the attention of the Commission. However, SCE&G's reliance on Midcal to support its position is wholly misplaced. The holding of the court was that the state statute on which the California' retail Liquor Dealers Association relied did not meet the standards of Parker as recently clarified by Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975); Cantor v. Detroit Edison, 428 U.S. 579 (1976) and City of Lafayette, Louisiana

v. Louisiana Power & Light Co., 435 U.S. 389 (1978) and therefore did not confer immunity from the Sherman Act.

We agree with SCE&G that these decisions established a two part standard for antitrust immunity under Parker v.

Brown, namely, the challenged restraint must be "one clearly articulated and affirmatively expressed as state policy";

second, the policy must be " actively supervised" by the state itself [48 U.S.L.W. 4240]. The conduct Central has complained of in the instant proceeding is the formation of a power exchange cartel known as "CARVA" and the use by the CARVA power exchange cartel of its market power over electric power exchange services to force Santee-Cooper to limit its trade freedom. The resulting territorial alloca-tion plan and its ratification by the state legislature is only incidental to this conduct and results from it. SCE&G has attempted to merge these two events which have independent  !

antitrust significance.

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. BRAND 8 HALL Mr. Chase R. Stephens March 21, 1980 Page Two Nothing presented by the applicants has established that South Carolina has forthrightly stated a legislative  :

policy, clear in its purpose, to permit or direct the formation of power exchange cartels and to permit or direct i that competing power suppliers be required to limit their freedom as traders as a condition of being supplied with power exchange by the cartel.  !

The allegations here, supported by some documents, are that the CARVA cartel required Santee-Cooper to limit its marketing area before it would sell it the power exchange service it wanted, and that after, and only after it agreed to do so, was it supplied with an opportunity to participate in the coordinated development of a nuclear generating unit, the subject Summer unit.

l Nothing presented by the applicants shows that the state of South Carolina is actively supervising use by the CARVA t cartel of its economic market power over power exchange  ;

services. The state of South Carolina has never attempted to  ;

i impose the requirement to provide power exchange services or to regulate the price at which transactions will occur. It is questionable whether ccnstitutionally it may de so even if it wishes to in the light of Public Utilities Commission  !

v. Attleboro Steam & Electric Company, 273 U.S. 83, 47 S.Ct.

294, 71 L.Ed. 549 (1927); Arkansas Power & Light Company  ;

v. Federal Power Commission, 368 F.2d 376 (1966).

In Midcal the United States Supreme Court cited i with approval and adopted the reasoning of the California Supreme Court in Rice v. California Beverage Control Appeals l Bd., 21 Cal. 3rd 431, 579 P.2d 476 (1978) which had stated:

"There is no control, or ' pointed re-examination' by the state to insure that the policies of the Sherman Act are not

' unnecessarily' subordinated' to state policy." 48 L.W. 4239 and 4240. L In the case pending before this Commission, as we pointed out above, there is no' control over the economic  !

power of the cartel over price and output and there is i no pointed reexamination by the state as to whether or not the CARVA cartel should have required Santee-Cooper to-  :

limit its trade freedom in return for obtaining access to t a portion of the Summer Unit.

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. . BRAND 8 HALL Mr. Chase R. Stephens March 21, 1980 Page Three SCE&G may also have overlooked the court's reaffirma-tion as its conclusion and principal holding that: "a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful.

Moreover, Midcal presented the court with the further question of whether the 21st amendment authorized the state to substitute its own policy for Federal policy. Here, applicants did not even suggest that the state of South Carolina has the constitutional power to nullify Section 105 of the Atomic Energy Act or Sections 1 and 2 of the Sherman Act by any means other than by meeting the strict requirements of Parker v. Brown. But even if it were to be found that both requirements of Parker are present, the question is raised whether facts which would confer immunity from the Sherman Act under Parker v. Brown would also confer immunity to the operation of Section 105c of the Atomic Energy Act. No court has ever held that they would. In other words, although the Court decided in Parker and its progeny that competition is not the summum bonum and that a state may substitute other schemes of economic regulation, no court  !

has ever held that the state may choose a scheme of regula-tion which would permit the benefits of public funding of nuclear research to be funneled to private groups no matter what scheme of regulation it devised. even if forthrightly stated and adequately supervised. Simply put, no " overriding public purpose" however important it is perceived to be in the mind of the state legislature, has been held to override the purpose of the federal legislature in enacting Section 105.

Respectfully submitted, Wallace E. Bran cc: All Parties of Record l

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