ML19347B775

Response to CLI-80-28 Issued 800630,stating That Commission Should Modify Proposed Significant Changes Criteria to Eliminate Conflict W/Legislative Intent.Significant Changes Criterion Should Be Viewed Separately.W/Certificate of Svc

ML19347B775
Person / Time
Site:	Summer
Issue date:	10/10/1980
From:	Fabrikant R, Kaplan D, Urban J JUSTICE, DEPT. OF
To:	Atomic Safety and Licensing Board Panel
References
ISSUANCES-A, NUDOCS 8010150640
Download: ML19347B775 (16)

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RESPONSE OF THE U.S. DEPARTMENT OF JUSTICE TO THE NUCLEAR REGULATORY COMMISSION'S REQUEST FOR COMMENT ON ITS "SIGNIFICANT CHANGES" CRITERIA AND THE APPLICATION OF THOSE CRITERIA The Department of Justice (" Department") hereby submits its l

Response to Memorandum and Order CLI-80-28 (" Order") issued by the Nuclear Regulatory Commission (" Commission") on June 30, 1Q80.

The Commission's Order was predicated on a series of 4

pleadings initiated by the petition 1/ of Central Electric 1/ Central Electric Power Cooperative, Inc. initially filed Its Petition for a Finding of Significant Change and Reques' for Antitrust IIearing on Operating License on December 6, 1978. On January 31, 1979, Central filed Amended Petition of Central Electric Power Cooperative, Inc. for a Finding of Significant Change and Opposition of Central Electric Power Cooperative to Motions of South Carolina Electric 6 Gas and Santee-Cooper to Dismiss or for Summary Disposition. .

(hereinafter " Amended Petition")

-80101506 40 h

power Cooperative, Inc. (" Central") for a determination that "significant changes" had occurred in the activities or proposed activities of South Carolina Electric and Gas ("SCEG")

and South Carolina public Service Authori* - (" Santee Cooper"),

since the Department's 1972 antitrust review of the application I

for a construction permit for the Virgil C. Summer Nuclear

! Station. 2/

The Atomic Energy Act of 1954, as amended, ("Act") provides that the Attorney General review license applications 3/ and advise whether the Commission should find that the " activities under the license would create or maintain a situation inconsistent with the antitrust laws." 4/ The Act, however, i

provides that the Attorney General review applications for operating licenses only if the "Cpmmission determines such I review is advisable on the ground that significant changes in the licensee's activities or proposed activities have occurred 4

subsequent to the previous review by the Attorney General." 5/

The Commission's Order proposed criteria for the "significant changes" determination and discussed the 2/ An application for an operating license for the Summer Station was filed on December 10, 1976.

3/ 42 U.S.C. t 2135 (c )( 5 ) (1976).

4/ 42 U.S.C. 5 2135(c)(1), (5) (1976).

5/ 42 U.S.C. 5 2135(c)(2) (1976).

application of those criteria to the Summer Station. The Order requested the comments of the Department and other parties on the proposed criteria and the application of those criteria to the present factual situation and requested that the Department provide its " tentative views on whether a hearing would be required." 6/

I. Criteria for the "Significant Changes" Determination j In its Order, the Commission set out the following three criteria for determining whether a significant change in the

" licensee's activities or proposed activities" makes an antitrust review at the operating license stage " advisable": 7/

that the change or changes (1) have occurred since the previous antitrust review of the licensee (s); (2) are reasonably attributable to the licensee (s); and (3) have antitrust implications that would likely warrant some Commission remedy.

The Department believes that the first two proposed criteria are appropriate but that the third should be modified.

The *irst two criteria clearly are required by the language of section 105c(2) of the Act and its legislative history.

Section 105c(2) refers to changes that "have occurred subss .ent to the previous review by the Attorney General," and the report of the Joint Committee on Atomic Energy on the 1970 6/ Order at 29.

7/ Order at 7

legislation that created the present antitrust review provision l states: 8/

l The term "significant changes" refere to the licensee's activities or proposed. activities; the committee considers that it would be unfair to penalize a licenr.ee for significant changes not caused by the licensee or fer which )

the licensee could not reasonably be held respont.ihle or answerable, j Thus, the Department agrees that the Commission's first two proposed criteria are appropriate.

4 The Department, however, does not believe that the Commission's third criterion is consistent with congressional intent in establishing the present antitrust review provision.

The Order correctly indicates that the word "significant" in Section 105c(2) implicitly references the ultimate issue of "whether the activities under the license would create or maintain a L'tuation inconsistent with the antitrust laws."

Thus, to he "significant" within the meaning of the Act, a change must have competitive importance. The Order, however, goes on to state that whether significant changes should be deemed to have occurred depends on "(a) whether an antitrust review would be likely to conclude that the situatica as changed has negative antitrust implications, and (b) whether the Commission has available remedies." 9/

8/ H.R. Rep. No. 91-1470, S. Rep. No. 91-1247, 91st Cong., 2d Sess. 29 (1970) reprinted in [1970] U.S. Code Cong. and Admin.

News 4981,-5009-10.

9/ Order at 24.

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This formulation of a competitive importance criterion appears to require the Commission Staff or the Department to conduct an antitrust review prior to a request for the Attorney General's advice under Secfion 105c(1). Such a review is neither provided for by the Act nor suggested by its legislative history. It would constitute a substantial departure from the scheme that was established in the 1970 amendments to the Act. That scheme specifically requires that i

no antitrust review be conducted unless the Commission determines that there have been "significant changes". 10/

Moreover, there is no mechanism for obtaining necessary information from licensees in the context of such a ,

determination. 11/

An alternative criterion must be found that would accomplish the essential purpose of the Commission's proposed third criterion without requiring a preliminary antitrust review. The Department suggests that changes in the licensee's activities or proposed activities be considered significant if, and only if, they constitute substantial changes within the 10/ The legislative history indicates that the Commission sEould consult the Attorney General in making a "significant changes" determination. H.R. Rep. No. 91-1470, S. Rep. No.

91-1247, 91st Cong., 2d Sess. 29 (1970) reprinted in [1970]

U.S. Code Cong. and Admin. News 4981, 50U9. However, the Department does not believe such consultation was to have been an antitrust review.

11/ 10 C.F.R. 5 50.33a provides that certain information be submitted by licensee applicants as a part of any formal antitrust review.

competitive environment (i.e., changes in the structure of the market or in the conduct of the licensee with respect to the construction or operation of the licensed plant.) 12/

In applying the Department's suggested criterion, it obviously would be appropriate to consider unforseeable events to be "significant changes". The Department suggests that the Commission also deem "significant changes" to have occurred where a change in market structure or conduct was a distinct possibility at the time of the prior antitrust review 13/ or l

where conduct was not ripe for review at that time. 14/ l Under the Department's formulation of the "significant changes" criteria, it is not necessary to consider issues relating to the competitive effect of the significant changes, whether any license conditions are warranted because of the significant changes, or whether the Commission can grant appropriate relief. These issues should be considered in an antitrust review and possibly in an antitrust hearing, but not in a "nignificant changes" determination. The issue at this 12/ It might be argued that changes in the competitive environment must be, in some sense, adverse. However, it generally will he difficult to determine meaningfully whether this is the case without an antitrust review.

13/ In such a case, the "significant changes" could be the Tact that what had been possible was now certain.

14/ For example, ongoing negotiations concerning access to a nuclear power plant may preclude analysis of the whole access issue at the time of a construction permit review. In such a

, case, there should be an opportunity to consider this issue in j an antitrust review at the operating license stage.

1 stage simply is whether there have been significant changes in

the activities or proposed activities of the applicants. This j issue should involve only the Commission's first two criteria and the Department's proposed third criterion.

l II. Application of the "Significant Changes" Criter'ia 4

! Initially the Department notes that, in assessing whether 1

there have been significant changes in the activities of the

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licensees in tiis proceeding, it views the issues somewhat

. differently than do the other parties to this proceeding.

4 Major issues in the Commission's Order and in the pleadings have been whether the "significant changes" alleged by Central constitute situations inconsistent with the antitrust laws and whether the Commission could remedy them if they do. The I

Department believes that consideration of or conclusion with respect to these issues is premature. Because the Department .

l does not believe it is appropriate to " predict the outcome of I i

[its antitrust] review", 15/ the Department declines to p,. ovide its " tentative views on whether a hearing would be required". 16/

't Petitioner Central has made a number of allegations concerning "significant changes" and the effect of those changes on competition. The allegations focus on two South Carolina statutes and the events that led to their enactment.

1 15/ Order at 29.

16/ Id.

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It is undisputed that in 1973, with the support of SCEG and Santee Cooper, the South Carolina legislature enacted two statutes that affected competition. One statute authorized Santee Cooper's participation in the Summer facility, 17/ and the other prevented Santee Cooper from competing in the sale of power to municipal systems and cooperatives other than Central, outside a three county service area. 18/

Central has alleged that SCEG's and Santee Cooper's efforts to seek enactment for the legislation were the product of conspiracy or the exercise of monopoly power by SCEG, 19/ and claims that, as a result of a conspiracy with SCEG or otherwise, Santee Cooper's posture in the market substantially changed and Central's future was placed in jeopardy. 20/ SCEG and Santee Cooper vigorously deny these allegations. Central, however, also has made one uncontroverted allegation that may constitute "significant ctinges" within the meaning of Section 105c(2). There it no dispute that in 1973 SCEG and Santee Cooper lobbied foi, and the South Carolina legislature enacted, legislation restricting the area in which Santee Cooper can compete. It is likely that as a consequence of this 17/ S.C. Code S 58-31-100 (1976).

18/ S.C. Code SS 58-31-310, 320, 330 (1976).

19/ Amended Petition at 3-4, 8, 11, 38.

20/ Amended Petition at 3-4, 43-50.

legislation, Santee Cooper has altered its " activities or l proposed activities" under the license in that it ceased competing for the business of municipalities and cooperatives, other than Central, outside>its three-county service area.

l This change in Santee Cooper's " activities or proposed activities" would have taken place since the prior antitrust t

review of March 31, 1972. Thus, if the Commission were to conclude that Santee Cooper has changed its conduct as a result

! of the South Carolina statute the only remaining issue would be l

whether this change in conduct is reasonably attributable to the licensee (s).

The Department concurs with the Commission's suggestion that, as a matter of law, a licensee's lobbying activities can I

i he sufficient to attribute conduct under the resulting statute to the licensee. 21/ However, the Department defers to the Commission to determine whether Santee Cooper's lobbying activities are sufficient in this case.

Licensees and the Staff argue that because the change in Santee Cooper's conduct was required by statute, Parker v.

l Brown 22/ and progeny 23/ preclude Sherman Act liability.

21/ Order at 20.

f 22/ 317 U.S. 341 (1943).

23/ E.g., California Retail Liquor Dealers Ass'n. v. Midcal XIuminum, Inc., 48 U.S.L.W. 4238 (March 3, 1980); City of Lafayette, Louisiana v. Louisiana Power S Light Co., 435 U.S.

389 (1978); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976);

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).

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Futhermore, the licensees and the Conmission Staff argue that the licensees support for the legisistion creates no Sherman Act liability because of the Noerr-Pennington doctrine. 24/

These arguments appear to equate antitrust liability with the

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existence of a " situation inconsistent with the antitrust laws," and to assume that a determination of "significant" changes can be rade only where there is a likely " situation inconsistent with the antitrust laws" that could warrant a Commission remedy. This assumption is consistent with the l l

Com.nission's third proposed criterion for determining l "significant changes." The Department, however, does not agree with the Commission's third proposed criterion, and therefore, does not believe that consideration of legal doctrines i

pertinent to a determination of liability under the antitrust laws is relevant in making a "significant changes" (

determination.

The or.ly issue at this stage is whether licensees are

! responsible or answerable under the Atomic Energy Act, not whether they are liable under the Sherman Act. A "significant changes" determination imposes no liability; it merely triggers an antitrust review. Even if an antitrust hearing eventually resulted and the Commission found it necessary to impose 1

24/ Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine h'orkers v.

Pennington, :S1 U.S. 657 (1965).

license conditions to remedy a " situation inconsistent with the antitrust laws," those conditions need not constitute sancticas comparable to those that could flow from liability under the Sherman Act. -s j

The legislative history of Section 105c(2) does not support  ;

the proposition that Congress intended that an antitrust review i l

at the operating license stage be foreclosed where the only changes in the " activities or proposed activities" of the l 1

licensees were the product of state legislation. The report of the Joint Committee on Atomic Energy clearly indicated that licensees should be subjected to an antitrust review at the operating license stage if the "signficant changes [have been]

caused by the licensee or" if the licensee could " reasonably be held responsible or answerable" for them. 25/ In adding the second phrase, the Joint Committee clearly intended to go beyond direct causation, and must have contemplated that a ,

"significant changes" finding could be made even though there is an intervening cause such as an act of a state legislature.

Thus, a licensee may " reasonably be held responsible or answerable" for conduct prescribed by legislation where such legislation can be farily attributed to the licensee, at least insofar as the licensee should undergo an antitrust review by 24/ H.R. Rep. No. 91-1470, S. Rep. No. 91-1247, 91st Cong., 2d 5ess. 24 (1Q70) reprinted in [1970] U.S. Code Cong. and Admin.

News 4981, 5009-10.

the Department. To do so would not be " unfair," and therefore, would he consistent with congressional intent. 26/

If the Department's position on "significant changes" prevails, and if the Commission concludes that Santee Cooper's conduct has changed as a result of the South Carolina statute, there is no need to determine whether Central's other allegations concerning conspiracy, exercises of monopoly power and changes in Santee Cooper's posture in the market are "significant changes." If the Commission determines that there were "significant changes", the Department will investigate Santee Cooper's other allegations and other possible "significant changes" in its antitrust review. Any "significant chances" ultimately could become the focus of an antitrust hearing. However, if the Commission rejects the Department's analysis, it must judge the merit of these other allegations on the basis of an investigation by the Commission Staff. If valid, they clearly would constitute "significant changes" and warranc an antitrust review.

IV. Conclusion In conclusion, the Department believes the Commission should modify its proposed "significant changes" criteria in accord with the Department's formulation. Because the 26/ See text accompanying note 8 supra.

, Commission seems to have determined that Santee Cooper's lobbying activities were sufficient to attribute to Santee Cooper any changes in its conduct that flow from the South Carolina statutes, it should find that there have i been"significant changes" if it concludes that Santee Cooper, in fact, has altered its conduct. If the Commission concludes that Santee Cooper _has not altered its conduct in response to the South Carolina statutes, then the Commission should determine whether Central's other allegations have merit. If the Commission concludes that these allegations are valid, it should find that there have been "significant changes". It is inappropriate at this stage to consider issues relating to the competitve effect of significant changes or whether meainingful relief could be imposed.

Respectfully submitted,

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4Btrnald A. Kaplan t' Chief Enecgy Section Antitrust Division T hk l Robert Fabrikant Assistant Chief Energy Section Antitrust Division 13 -

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fanet R. Urban l / Attorney Energy Section

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Nancy Lucf ~- ] ,

Attorneyd7 F l Energy Section

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i UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION In the Matter of:  ;

SOUTH CAROLINA ELECTRIC 5 GAS ) Docket No. 50-395 A COMPANY and )

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SOUTH CAROLINA PUBLIC SERVICE )

AUTHORITY k ,

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(Virgil C. Summer Nuclear Station, )

Unit 1) )

CERTIFICATE OF SERVICE I hereby certify that copies of Response of the U.S.

Department of Justice to the Nuclear Regulatory Commission's Request for Comment on its "Significant Changes" criteria and the Application of Those Criteria in the above captiored matter, have been served upon the following by deposit in the United States mail this 10th day of October, 1980:

Chairman Ahearne Docketing and Service Section Office of the Commission Office of the Secretary U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 i

Commissioner Gilinsky Atomic Safety and Licensing I Office of the Commission Appeal Board Panel l U.S. Nuclear Regulatory U.S. Nuclear Regulatory '

Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 Commissioner Hendrii> Atomic Safety and Licensing Office of the Commiscion Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 Commissioner Bradford Jerome Saltzman, Chief Office of the Commission Utility Finance Branch U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555

Samuel J. Chflk Hugh P. Morrison, Jr. Esq.

Secretary of"the Commission Charles S. Leeper, Esq.

U.S. Nuclear Regulatory Michael Rand McQuinn Commission Cahill, Gordon G Reindel Washington, D.C. 20555 1990 K Street, N.W. Ste. 650 Washington, D.C. 20006 Ar. W.C. Mescher, President Joseph Rutberg, Esq.

Wallace S. Murphy, Esq. Frederic D. Chanania, Esq.

General Counsel Office of Executive Legal South Caroline Public Director Service Authority U.S. Nuclear Ragulatory 223 N. Live Oak Drive Commission Moncks Corner, S.C. 29461 Washington, D.C. 20555 Mr. P.T. Allen Joseph B. Knotts, Jr.

Execative Vice President Debevoise 4 Liberman and General Manager 1200 Seventeen Street, N.W.

Central Electric Power Washington, D.C. 20036 Cooperative, Inc.

P.O. Box 1455 Columbia, South Carolina 29202 C. Pinckney Roberts, Esq.

Dial, Jennings, Windham, Thomas 4 Roberts P.O. Box 14141 Washington, D.C. 20005 George H. Fischer, Esq.

Vice President and General Counsel South Carolina Electilc and Gas Company P.O. Box 764 Columbia, South Carolina 29202 Robert Medvecky, Esq.

Reid S Priest 1701 K Street, N.W.

Washington, D.C. 20006 -

/

Edward C. Roberts, Esq. 'M,J - M/

South Carolina Nancy Lu@e f/

Electric 6 Gas Company Attorney,/

P.O. Box 764 Energy Section Columbia South Carolina 29202 Antitrust Division U.S. Department of Justice

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