ML20010A739
| ML20010A739 | |
| Person / Time | |
|---|---|
| Site: | Saint Lucie  |
| Issue date: | 08/07/1981 |
| From: | Jablon R FLORIDA CITIES (FLORIDA MUNICIPAL UTILITIES ASSOCIATE, SPIEGEL & MCDIARMID |
| To: | |
| Shared Package | |
| ML20010A740 | List: |
| References | |
| ISSUANCES-A, NUDOCS 8108120156 | |
| Download: ML20010A739 (69) | |
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Florida Citico:8/7/81 BEFORE THE UNITED STATES
- NUCLEAR REGULATORY COMMISSION e N ATOMIC SAFETY AND LICENSING BOARD t Before Administrative Judges: DOCKEFED A It USMC
't.
Peter B. Bloch, Chairman -
Agg 71981,> L -
Michael A. Duggan -5 0c o Se ts Robert M. Lazo 0 c, g $e e Ivan W. Smith, Alternate Branch e A
w FLORIDA POWER & LIGHT COMPANY ) Docket No. 50-389A
)
(St. Lucie Plant, Unit No. 2) ) August 7, 1981
)
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. FLORIDA CITIES' RESPONSE TO S N.PJh '
BOARD QUESTIONS __
AUG 111981 m ;j D .-
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Robert A. Jablon Y Sarky D Alan J. Roth Joseph Van Eaton Attorneys for The Lake Worth Utilitias Authority, the Utilities Cownis'sion of New Smyrna Beach, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Mount Dora, Newberry, St. Cloud and Tallahassee, Florida, and the Florida Municipal Utilities Agancy August 7, 1981
- Law officies of:
. Spiegel & McDiarmid pSMf i h0 g
> 2600 Virginia Avenue N.W.
Washington, D.C. 20037
]
TABLE OF CONTENTS a
Paqo Table of Authorities............................. ii - vi Question 1....................................... 1 Estoppel As To Facts......................... 2 Estoppel As To Situation Inconsistent........ 6 Decisions Giving Rise To Estoppel. .......... 11 A. Having Found An Actual Law Violation, Gainesville Mandates a Finding That A " Situation Inconsistent" With the Antitrust Laws Exists............................. 11 B. Opinion No. 57 Separately Establishes The Existence Of A " Situation Inconsistent" With The Antitrust Laws.................................... 18 C. Gainesville and Opinion No. 57 Can Be Relied Upon In Support Of Summary Disposition..................... 25 Question 2....................................... 27 Gainesville On Markets....................... 27 Florida Power & Light Company FERC Decision On Markets..................... 28 Summary Of Findings Concerning Market....................................... 30 Legal Implicati'ons Of Market Findings..................................... 31 Question 3....................................... 36 Question 8....................................... 39 Question 9....................................... 52 Question 10...................................... 52 A. Status of document discovery............. 53 B. Interrogatories.......................... 54
- C. Future discovery......................... 54 Question 11...................................... 57 Miscellaneous.................................... 60
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TABLE OF AUTHORITIES Paqe_
AGENCY CASES:
Alab,ama Power Co. (Joseph M. Farley Nuclear Plant, Units 1 and 2),
ALAB-646 (1981)............................... 6-9, 11, 13-14, 15, 16, 23, 24, 31, 37 City of Homestead, Florida v. Florida Power & Light Co., Docket No. EL78-28 (November 8, 1979)............................ 19 Consumers Power Company (Midland Units 1 and 2), ALAB-452, 6 NRC 892 (1977)........................................ 8, 9, 11, 13, 15, 24, 37-38, 47 Florida Cities v. Florida Power & Light Co., FERC Docket No. EL78-4 (June 12, 1978)......................................... 19 ,
Florida Power & Light Co., Opinion No.
517, 37 FPC 544 (1967), reversed, 430 F.2d 1377 (5th Cir. 1970),
reversed, Florida Power & Light Co. v. FPC, 404 U.S. 453 (1972) .............. 6, 10, 14 Florida Power & Light Company, Opinion Nos. 57 and 57-A, 3 2 PUR 4th 313, 340 (1979).................................... passim Florida Power & Light Company, Docket No.
ER78-19, et al., " Order Directing the Submission of a Transmission Tariff and Substitution for Individual Rate Schedules"-(December 21, 1979)................ 10, 21 Florida Power & Light Company, Docket No.
E R7 8-19, et al., " Order Denying Rehearing, Accepting for Filing and Suspending Rate Schedules and Denying Motion for Extension of Time (February 6, 1980)............................ 10, 21
- ii -
Pa.ge O
' AGENCY CASES (CONT'D) l Gulf States Utilities Co., Docket No.
ER76-816 " Order Approving Settlement Subject to Condition" (October 20, 1978)......................................... 47 Houston Lighting and Power Co. (South Texas Project, Units 1 and 2),
affirmed, ALAB-574, 11 NRC 7 (1980)........... 23 Mississip_p_i Power Co., 45-FPC 269 (1971)................................... .... 47 Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2),
ALAB-422, 6 NRC 33, (1977).................... 23 Toledo Edison Company (Davis Besse Plant, Units 1, 2, and 3),
ALAB-560, 10 NRC 265 (1979)................... 8, 14, 15, 24, 37
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a COURT CASES -
Associated Press v. United States, 326 U.S. 1 (1945)............................. 14 l Battle v. Liberty _ National Life Insurance Co., 483 F.2d 39, i
T5th Cir. f574)............................... 36-Chandler v. Roudebush, 425 U.S.
840 (1976).................................... 10
! ~~~y__of Cit Anaheim v. Southern California Edison Co., C.D. Cal. No. CV-78-810-MML
. (May 19, 1981)................................ 23 City __of Mishawaka v. American Electric
' Power Co., 465 F.Supp. 1320 (D.C.
Ind. 1979), modified and remanded, 616 F.2d 976 (7th Cir. 1980).................. 22 FPC v. Idaho Power Company, 344 U.S.
17-[1952)..................................... 11 l - 111 -
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I Page COURT CASES (CONT'D)
Gainesville Utilities Dept. v. Florida Power Corp., 402 U.S. 515 (1972).............. 28 Gainesville Utilities Department v.
Florida Power & Light Company, 573 F.2d 292 (5th Cir.), cert.
denied, 439 U.S. 966 (1978)................... passim Gamco v. Providence Fruit Produce Building, Inc., 194 F.2d 484 (1st Cir.), cert. denied, --
344 U.S. 817.................................. 14 Georgia Power Co. v. FPC, 373 F.2d 485 ( 5th Cir. 1967)........................... 47 Gulf States Utilities v. FPC, 411 U.S. 747 (1973).......... ................ 22 Jeffrey_v. Southwestern Bell, 518 F.2d 1129 (5th Cir.
1975)............................'............. 36 1 .
i Miller v. New York Produce Exchange, 550 F.2d 762 (2d Cir. 1977)................... 10 Montana-Dakota Utilities Co. v.
Williams Electric Cooperative, 263 F.2d 431 (8th Cir. 1959).................. 33 Niagara Mohawk Power Corp. v. FPC, 379 F.2d 153 ( D. C .Cir. 1967).................. 11 Northern Pacific R. Co. v. United States, ,
356 U.S. 1 (1958)............................. 32 Otter Tail Power Co. v. United States, 410 U.S. 366 (1973)........................... 24, 26, 37 Peelers Co. v. Wendt, 260 F.Supp 193 (W.D. Wash. 1966).............................. 36 Penn. Water & Power Co. v. Consolidated Ga r, Elec. & Power Co., 184 F.2d 431 (4th.Cir. 1950), cert. denied, 340 U.S. 906...................................... 33-34
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. Page COURT CASES (CONT'D)
Perington Wholesale, Inc. v. Burger Kin Corp., 631 F.2d 1369 (10th Cir.
1979 ......................................... 32 Radiant Burners v. Peoples Gas Co.,
364 U.S. 656 (1961)........................... 32 South Carolina Counsel of Milk !
Producers,__Inc. v. Newton, l 369 F.2d 414 (4th Cir.), cert.
denigd, 385 U.S. 934 (1966)................... 35-36 TV Signal of Aberdeen v. Am. Tel.
& Tel., 617 F.2d 1302 (8th Cir.
1980)......................................... 32-33 United States v. AT&T, 1980-2 Trade Cases 163,480 (D.D.C. 1980)......................... 10 United States v. Consolidated Laundry ,
Corp., 291 F.2d 563, (2d Cir.
. 1961)......................................... 32 United States v. Crescent Amusement Co.,
323 U.S. 173 (1944)........................... 35 United States v. Florida Power Corporation and Tampa Electric Company, CIV No. 68-297-T..................... 16 United States v. Griffith, 334 U.S. 100 (1948)........................... 34-35 Unite.d States v. Socony-Vaccuum Oi'i- Co . , 310 U.S. 150 (1940).................. 32 United States v. Topco Associates,
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Inc., 405 U.S. 596 [19 7 2 ) . . . . . T . . . . . . . . . . . . . . . 12-13, 32, 47 United States v. Utah Mining and Construction Co., 384 U.S. 394 (1966)........................................ 23 United States v. Yellow Cab Co.,
332 U.S. 218 (19 4 7 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 White. Motor Co. v. United States, 332 U.S. 253, 263 (1963)...................... 12-13
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_. _. _ _ _ _ _. _ m _ . _
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Paqe_
A STATUTES Atomic Energy Act, Section 105(a),
42 U.S.C. $2135(a)............................ 11-17 Rule 803(8)(c) of the Federal Rules of Evidence............................. 10 I
1 MISCELLANEOUS j
i j FPC National Power Survey (1970).................. 6-7 1 Moore's Federal Practice, 0.60 (Manual for Complex Litigation)............... 57
, 1 Moore's Federal Practice 12.80.................. 58 .
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Florida Cities: 8/7/81
, BEFORE THE UNITED STATES NUCLEAR REGULATORY COMMISSION ATOMIC SAFETY AND LICENSING BOARD Before Administrative Judges:
Peter B. Bloch, Chairman Michael A. Duggan Robert M. Lazo Ivan W. Smith, Alternate FLORIDA POWER & LIGHT COMPANY ) Docket No. 50-389A
) .
(St. Lucie Plant, Unit No. 2) ) August 7, 1981
)
FLORIDA CITIES' RESPONSE TO
. - . . . . . - - - BOARD.. QUESTIONS . . . . . - - - -
. Pursuant to the Board's July 8, 1981 order, Florida Cities respond to questions 1-3 and 8-11 in Table I.
Question:
(1) How are these proceedings affected by Gainesville, Utilities _ Department v.. Florida Power & Light Company, 573 F.2d 292 (5th Cir.), cert. denied, 439 U.S. 966 (1978) and Florida Power & Light Company, Opinion Nos. 57 and 57-A, 3 2 PUR 4th 313, c 340 (Federal Energy Regulatory Commission, 1979)?
Answer:
For reasons explained below, Gainesville and Opinion Nos. 57 and 57-A require a Board finding that Florida Power &
Light Company's ("FPL's") proposed ownership and operation of St.
Lucie Unit 2 will create or maintain a situation inconsistent
, with the antitrust laws.
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If the Board concludes that it cannot make such a finding of inconsistency with the antitrust laws based upon these 2 decisions alone, it should make such finding based upon these 1
decisions plus additional uncontroverted evidence, which is set forth in Florida Cities' " Motion to Establish Procedures, for a Declaration that a Situation Inconsistent with the Antitrust Laws Presently Exists and for Related Relief" (May 27, 1981, referred to as " Motion to Establish Procedures").
If the Board determines not to make that finding of I inconsistency, then the Board should rule that the decisions are determinitive as to the following facts and that FPL should be estopped from contending othewise.
Estoppel As To Facts:
- 1. FPL controls three out of the four operating nuclear units in Peninsular Florida and is constructing its fourth. Opinion No. 57 (32 PUR 4th at 324,335; St. Op. pp. 15, 32). 1/ These units provide FPL with an important source of low-cost power for base load requirements. Opinion No. 57, Id. .
Municipal generating units characteristically have high operating costs and are ill-suited to provide base load requirements. Jd.,
i 32 PUR 4th at 324-5, 330; Sl. Op. pp. 15-16, 24. Except as pro-vided under settlement license conditions in this case, FPL refu-ses to grant Florida Cities access to its nuclear facilities.
1/ For convenience, Opinion 57 is cited to both PUR and the FERC Slip Opinion. Opinion 57 Slip Opinion page references follow those of PUR.
l l-
- Id., 3 2 PUR ath at 324-325, 335; Sl. Op. pp. 15-16, 32. FPL has otherwise sougnt to deny municipals economically priced, base load power. Id., pp. 324-325, 334, 339; Sl. Op. pp. 15-16, 32, 38; and parsim. Such refusals are substantially detrimental to the municipals and advantage FPL in competition for acquiring and retaining retail service area, Id., pp. 330-331, 335. 339; Sl.
Op. pp. 25-26, 32, 38-39; and passim, and in increasing its who ___ ~~~
lesale monopoly power. Id., p. 330; Sl. Op. p. 24.
- 2. FPL has (a) dominance over the bulk power market in Peninsular Florida and (b) a monopoly within its ratail service area over economic base load generation (including nuclear _ ,
generation), transmission and coordination, as well as ;ctail and wholesale sales. See Opinion Nos. 57 and 57-A, generally, espe-cially at pp. 314, 324-331, 335; Sl. Op. pp. 2, 15-16, 32.
Regardless whether FPL has dominance in Peninsular Florida, it has acted to restrain competition in the bulk power market in Peninsular Florida. Gainesville, supra. It has monopolized the
" wholesale bulk geographic" submarket within its retail service area and constrained competition for wholesale transactions across its boundaries. Opinion No. 57, pp. 323, 326-327, 331, 335; Sl. Op. pp. 13, 19, 26-27, 32-33.
- 3. FPL is the largest electric utilty in Florida. It has a retail service monopoly in eastern and southern Florida.
Gainesville, 573 F.2d at 294. Opinion No. 57, pp. 323-325; Sl.
Op. pp. 13-15. FPL's refusals to deal in nuclear and base load e
power, wholesale power, transmission and coordination have advan-taged it in competition with other electric systems, helping FPL to preserve cnd extend its retail and wholesale monopely. See generally Gainesville and Opinion No. 57, especially Opinion No.
57 at pp. 330-331; Sl. Op. pp. 24, 25-26.
- 4. FPL has acted to restrict or den:t Cities access to base load generation (including nuclear), transmission,_ wholesale power and coordination. ,See Gainesville, Opinion No. 57 and positions taken by FPL in this case.
- 5. FPL owns 81% of the transmission lines in or near its retail service area at 69 Kv or above. Jacksonville Electric __-
Authority owns 5%. These are facilities over which bulk power is or may be transported between cities in FPL's retail service area, including cities and other utilities outside such retail
. service area. FPL's monopoly over transmission within its retail service area gives it strategic dominance over transmission within, to and from Peninsular Florida. Opinion No. 57, p. 325; -
Sl. Op. p. 16. See Gainesville, 573 F.2d at 294. FPL has ust its monopoly power to restrict Cities' access to transmission, Opinion No. 57, pp. 335-336; S1. Op. pp. 32-33. See p. 333; Sl.
Op. pp. 29.
- 6. FPL was part of a conspiracy with Florida Power Corporation (Florida Power) to divide the wholesale power market in Florida. Gainesville, 573 F.2d at 294.
- 7. FPL and the municipal utilities located within its retail service territory engage in vigorous franchise competition. Gainesville, 573 F.2d at 297-299; Opinion No. 57,
pp. 327-335; St. Op. pp. 20-32 and findings at 330-331; Sl. Op.
pp. 24-26. At various times FPL has promoted acquisition or willingly received municipal proposals to sell their systems to FPL. Most, if not all, of those incidents occurred when the municipal systems were arranging new bulk power supplies from the options of self-generation, wholesale purchase from FPL and retail purchases from FPL after~franch se disposition. Opinion No. 57, p. 330; Sl. Op. p. 24. The Cities were denied the option of sharing in FPL's nuclear or other base load units. Opinion No. 57, pp. 335, 330, n. 37; Sl. Op. pp. 32, 24, n. 37; and_
passim. -
- 8. FPL has advertised the economic benefits from its base load generation (including nuclear) and its access to econo-mies of scale in all facets of its operation. Such statements were of a nature to induce franchise renewals for FPL or sales of municipal systems to FPL. Opinion No. 57, pp. 331, 339; Sl. Op.
pp. 25-26, 38. FPL was aware of municipal needs for economic base load power and access to economies of scale. Opinion No.
57, pp. 329, 330, 333-334, 339; Sl. Op. pp. 22-23, 24, 29-31,.38.
- 9. FPL's proposed restricted tariff at issue in Docket l No. ER78-19 was not economically justifiec and was anticom-petitive. Opinion No. 57-A, p. 1; Opinion No. 57, pp. 314, l
336-340; Sl. Op. pp. 2, 34-40.
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Estoppel As To Situation Inconsistent:
The ultimate questions before the Board are whether a-aituation inconsistent with the antitrust laws exists and, if so, the appropriate relief to be ordered.
Florida Cities contend that the following situations inconsistent exist and, absent a remedial order, are likely to continue: -
- 1. Florida Power & Light Company is directly intercon-nected with the other two, large investor-owned utilities in Peninsular Florida, Florida Power Corporation ("Flcrida Power")
and Tampa Electric Company (" Tampa") .-It70nstructs and operates its generation in the context of coordination and business dealings with these companies. Thus, is benefits economically from the existence of a market in Peninsular Florida in which it
_ can buy and sell firm power and " coordination". 1/ However, 1/ These facts are established conclusively by Florida Power &
Light Co., opinion No. 517, 37 FPC 544 (1967), reversed, 430 F.2d 1377 (5th Cir. 1970), reversed, Florida Power & Light Co. v. FPC, 404 U.S. 453 (1972) and the materials set forth at Motion to Establish Procedures, pp. 24-43, and related appendices. These materials include sworn deposition testimony, legal filings, financial reports, and other public documents. Compare Alabama Power Co. (Joseph M. Farley Nuclear Plant, Units 1 and 2),
ALAB-646 (p. 38 of Slip Opinion, June 30, 1981), in which the #
Appeal Board recently reaffirmed the importance of coordination:
"The principles of electric power supply production and coordination are generally applicable throughout the electric utility industry (Mayben, Direct, pp. 3-9).
These principles do not vary significantly among electric utilities regardless of differences in loca-tions, although they may change to a certain extent depending on corporate policy and financial requirements (Mayben, Direct pp. 8-9; Tr. 5, 576-5, 586; FPC National
- Power Survey, Part I, Chapter 17 " Coordination for Relisbility and Economy," December 1971)."
Quoting the Farley Licensing Board Decision, LBP-77-24, 5 NRC 804, 834 (1977).
(footnote continued on next page)
by conspiring with Florida Power Corporation to divide the whole-sale power market in Peninsular Florida and by its o'ther anticom-petitive actions described above, FPL has limited the access of systems such as Cities to competitive power supply.
Further, FPL's current refusals to deal with systems within Florida Power's " territory" perpetuate the artificial barrier es tablished by the territorial division. Smaller systems are impeded in buying and selling power supply, since they are substantially restricted to dealing with systems to which they are directly interconnected. A smaller systcm directly connected
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with~6n1y Florida Power Corporation is restricted in its dealings with Florida Power & Light and smaller systems surrounded by it; conversely, a smaller system in FPL's retail service area is restricted in transactions with Florida Power and systems surrounded by it. The result is to enhance the. econcuic power of (footnote continued from previous page):
1/ The 1970 National Fower Survey by the Federal Power Commission relied upon in Farley, supra, found that such coor-dination in Peninsular Florida exists between Florida Power, FPL, Tampa Jacksonville and Orlando: <
"These suppliers, surrcanded on three sides by water, subjected to hurricanes and the highest incidence of lightning in the nation, undertake to stand on their own feet and provide their own reserves. They are strongly interconnected and comprise what has come to be known as the Florida Group. In emergencies each supplier aids the Florida system in trouble to the maxi'num extent of its resources. Notwithstanding the fact that each Florida supplier operates his own system in the most economical canner consistent with its indivi-
. dual requirements and policies, there is a strong recognition of the need to coordinate operating matters."
Id., pp. II-3-32 (Attachment 10).
the larger systems in wholesale and retail markets and to limit
, the smaller systems to dealing with one principal supplier for many power supply products or services.
- 2. As Florida's largest electric utility, FPL has a retail and wholesale service monopoly throughout its retail ser-vice area, covering a large portion of the state and dominant power over nuclear and base load generation and over transmission in Peninsular Florida. FPL has refused to deal with smaller systems in significant aspects of power supply and ser-vices botn inside and outside the boundaries of its retail ser-vice a with the purpose and result of advantaging itself in wholesale and retail competition. Further, although it benefits from flexible dealings with larger investor-owned utilities to meet the power supply needs of each system, where FPL has dealt with smaller systems, it has done so on a restrictive basis.
In Midland 1/, Davis Besse 2/, and most re :ently in Farley 3/, the Appeal Board has found that to demonstrate a
" situation inconsistent" a licensing baard need not find an actual violation of law, although such violation has been found here. Gainesville Utilities Dept. v. Florida Power & Light Co., -
573 F.2d 292. The standard for finding liability is set forth at pp. 26-29 of the Farley Opinion.
1/ Consumers Power Company (Midland Units 1 and 2), ALAB-452, 6 ERC 892 (1977).
2/ Toledo Edison Company (Davis Besse Plant, Units 1,2, and 3),
. ALAB-560, 10 NRC 265 (1979).
3/ Alabama Power Company, supra.
9-A situation inconsistent results from the existence or likely existence of conditions which are contrary to the poli-cies that underly the antitrust laws. Midland, supra, 6 NRC at 907-914, quoted in Farley, at 27-28. The Gainesville and Federal Energy Regulatory Commission decisions concerning Florida Power &
Light compel the conclusion that FPL's conduct has been contrary to the policies underlying those laws. The proposed license con-ditions that FPL has propounded in this proceeding exclude relief to systems in Florida Power's " territory". They deny such systems rights of access to St. Lucie Unit 2 and wholesale power, perpetuate transmission barriers and contain wholesale power resale restrictions, thereby mandating a conclusion that the market strictures complained of will continue. While FPL will undoubtedly seek to argue that its conduct does not conflict with the antitrust laws based upon narrow distinctions with regard to market definitions or justifications for exclusionary conduct, these are precisely the kinds of arguments that Congress intended to foreclose by requiring that the Commission find whether a situation inconsistent with the antitrust laws exists (as distinguished from an actual law violation). Fu rthermore , such I '
rationalizations were rejected by the Court in Gainesville and by the Federal Energy Regulatory Commission in Opinion No. 57 and also in Federal Power Commission Opinion No. 517, supra, 37 FPC 544.
- The text of both the Gainesville and Federal Energy Regulatory Commission decisions prove the existence.of the
s.tuation inconsistent claimed by the Cities. This agency has determined that agency decisions have the force of res judicata and collateral estoppel. See references in " Motion to Establish Procedures", pp. 11-15. 1/ Moreover, Gainesville and the FERC decisions -- and others 2/ -- provide conclusive evidence that FPL is likely to act inconsistently with the antitrust laws.
Moreover, here an actual violation has been found by a Court. This Board must defer to that judicial determination,
- especially considering that the agency has been held to have the authority and responsibility to treat less than actual violations as justifying license conditions. The agency is even empowered to reopen existing licenses where an actual violation is found.
1/ If ostoppel is not applied, the prior findings of administra-tive agencies are admissible into evidence. See Rule 803(8)(c) of the Federal Rules of Evidence. Miller v. New York Produce Exchange, 550 F.2d 762, 769 (2d Cir. 1977) (Commodity Exchange Authority findings to commodity squeeze admissible); United States v. AT&T, 1980-2 Trade Cases 563,480 (D.D.C. 1980) (FCC findings admissible in antitrust suit); see also Chandler v.
Roudebush, 425 U.S. 840, 863, n. 39 (1976) (administrative fin-dings as to employment discrimination admissible in statutory trial de novo in federal court).
2/ E.g., Florida Power & Light Company, Opinion No. 517, 37 FPC 544 T1967), reversed 430 F.2d 1377 (5th Cir. 1977), reversed, <
Florida Power & Light Company v. FPC, 404 U.S. 453 (1972); e Florida Power & Light Company, Docket No. ER78-19, et al., " Order Directing the Submission of a Transmission Tariff and Substitution for Individual Rate Schedules" (December 21, 1979);
" Order Denying Rehearing, Accepting for Filing and Suspending Rate Schedules and Denying Motion for Extension of Time (February 6, 1980). FPL has appealed these orders on jurisdic-tional grounds. Flcrida Power & Light Co. v. FERC, CA5 Docket No. 80-5259. However, even if FPL is correct that FERC cannot order it to file a transmission tariff, FPL has declined to file
- a tariff covering non-interchange firm service and resists the directive that it file any transmission tariff. The FERC orders are effective during FPL's appeal.
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See Atomic Energy Act, Section 105(a), 42 U.S.C. $2135(a). For
, the Commission to give less than conclusive determination to the Gainesville case would be an abnegation of agency responsibility.
In Farley, the Appeal Board reiterated that the basis for the Commission's antitrust responsibilities was
. . . 'a basic Congressional concern over access to power produced by nuclear facilities' and . . .
legialative recognition 'that the nuclear industry originated as a Government monopoly and is in great measure the product of -public funds [which] should not be permitted to develop into a private monopoly via the [NRC] licensing process ....'"
Pp. 6-7, quoting Midland, 6 NRC at 897. When FPL receives NRC licenses, it receives valuable graats of the "public domain".
FPC v. Idaho Power Company, 344 U.S. 17 (1952). Where an agency has been granted remedial power to protect against wrongdoing by recipients of certificates or licenses, the justification for use
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of such power is compelling. Niagara Mohawk Power Corp. v. FPC, 379 F.2d 153 (D.C.Cir. 1967). To paraphrase Judge Leventhal, the breadth of agency power is "at zenith" when a petitioner seeks a f
license or privilege, but fails to discharge the " duty he should l
by rights have assumed without nudging." 379 F.2d at 159.
Decisions Giving Rise To Estoppel: <
A. Having Found An Actual Law Violation, Gainesville Mandates a Finding That A " Situation Inconsistent" With the Antitrust Laws Exists.
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Gainesville held "that the evidence compels a finding
. that P&L was part of a conspiracy with Florida Power Corporativn (Florida Power) to divide the wholesale power market in F Trida."
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O 573 F.2d at 294. It also found that such agreement was illegal under the antitrust laws, e.g., 573 F.2d at 299-300, and that the Company's purported justifications, either that no agreement existed or that its refusals to deal were justified could not stand factual scrutiny. 573 F.2d 300-303. Finally, based upon evidence set forth at 573 F.2d 294-299, and elsewhere, the Court found:
. . . In view of the correspondence on other cities, we believe the treatment Gainesville received compels the inference that a continuing conspiracy existed to divide the market."
There can be no doubt that FPL's actions were incon-sistent with the antitrust laws. The Fifth Circuit held:
"A horizontal market division in most industries is clearly a per se violation of the Sherman Act."
573 F.2d at 299.
While the Court implies that a retail agreement could be justified, it applies a per se, standard to Florida Power Corp.
and FPL's wholesale territorial division. The reasons for sue,h per se application are well established. A seller of goods or services cannot justify price-fixing as pro-competitive. Such actions are naked c.arkat restraints. Territorial divisions are e also. Indeed, they constitute an extreme form of price-fixing, since there would be no price under which a system in one company's service area could obtain service from the other. 1/
1/ "One of the classic examples of a per se violation of ll is
, an agreement between competitors at'the same level of the market structure to allocate territories in order to minimize com-petition. Such concerted action is usually termed a ' horizontal' (footnote continued on next page)
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As the Fifth Circuit pointed out, 573 F.2d at 302, "the con-
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centration of the electric power industry in Florida" reduced Gainesville's alternatives. Because of the territorial division, the Court finds that these alternatives were limited to one. Id.
While Florida Cities believe that the above is deter-minative, the glabama Power decision lends additional support for the conclusion that Gainesville should be decisive here. At pp.
30-31 of the Slip Opinion the Appeal Board seus forth:
"In the electric utility business, there is common practice among the companies of interchanging power and energy and sharing responsibility for building new generation facilities to achieve economic bene-fits unattainable by an individual utility acting alone. Generally known as " coordination", the practice includas various arrangements among utili-ties for reserve sharing, emergency exchange of power and energy, economy exchange of power at:d energy, maintenance scheduling, seasonal capacity exchange, and staggered construction. The simple purpose of these arrangements is to allow producers of firm power to lower their costs of production."
(footnotes deleted).
Referring to the Midland decision "as precedent" (see Slip opinion at 43), where "it traced in p instaking detail the opera-l l tions of the electric utility industry", the Board reaf firms its l
j conclusions that:
l (footnote continued from previous page):
restraint, in contradistinction to combinations of persons at different levels of the market structure, e.g., manufacturers and distributors, which are termed ' vertical' restraints. This Court has reitarated time and time again that '[h]orizontal territorial limitations . . . are naked restraints of trade with no purpose
_ except stifling of competition.' White Motor Co. v. United States, 372 U.S. 253, 263 (1963). Such limitations are per se violations of the Sherman Act. " United States v. Topco Associates, 405 U.S. 596, 608 (1972).
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. . . because of the peculiar characteristics of electricity, utilities buy, sell and exhange surplus bulk power and associated services to improve the efficiency and reliability of their operations. For reasons there discussed, we concluded that there existed a separate coor-dination services market consisting of these types of transactions."
Slip Opinon, pp. 38-39 at 39.
"Territoriality" prevents or limits access by smaller systems to coordination. Cases such as Associrted Press v. ,
United States, 326 U.S. 1 (1945) and Gamco v. Providence Fruit Produce Building, Inc., 194 F.2d 484 (1st Cir.), cert. denied, c U.S. 344 817 (1952), as well as the Commission's decision in Toledo Edison Company (Davis Besse Units 1 and 2), ALAB-560, 10 NRC 265 (1979), establish that when companies in the same busi-
- ness act in concert to obtain benefits, while denying such bene-fits to smaller actual or potential competitors, they act i;. con-sistently with the antitrust laws. E.g., Toledo Edison Co.,
supra, 10 NRC at 277-278. 1/
, 1/ For a more detailed discussion of the principle and addi-
- Eional case support, see " Motion to Establish Procedures", pp.
l 93-99. FPL simply cannot deny that it has acted in a coordinated
, manner with Florida Power Corporation. The Gainesville case itself establishes cooperative activity, which goes far beyond f simple coordination.
l Moreover, in 1967, in a case that was ultimately affirmed by the United States Supreme Court, the Federal Power Commission specifically found that FPL, Florida Power Corporation, Tampa Electric Company and others formed the Florida Operating Committee, which it referred to as the " Florida Pool" and that:
"The record in this proceeding makes it plain that FPL received substantial benefits from its par-I ticipation in the . Florida Pool in the coordination of spinning reserves, the arrangement of plant maintenance schedules and the. assurance of reliabi-l lity of frequency control and from both the Florida j -
Pool and ISG in the form of automatic assistance in l
the case of emergencies."
Florida Power & Light Company, supra, 37 FPC 544, 551-552.
(footnote continued on next page)
15 -
In short, the Gainesville decision establishes the fact of a territorial division of "the wholesale power market in Florida". Florida Cities submit this alone is sufficient to constitute a situation inconsistent with the antitrust laws.
Moreover, the Farley, Davis-Besse and Midland decisions establish that denial of access to smaller systems to the benefits of coor-dination is inconsistent with antitrust policy. By its nature, the territorial division found in Gainesville blocked access by smaller systems to coordination.
FPL may perhaps argue that the passage of time, inter-vening causes or the like should vitiate the Gainesville Court's finding. Antitrust violators have often argued the possibility of their reform, coupled with their having taken calculated steps in that direction. Such arguments should be rejected. See Midland, supra, 6 NRC at 1044-1046. The law violation found in Gainesvi.lle during the pendency of this case compels a finding by the Nuclear Regulatory Commission that a situaP, ion inconsistent exists and FPL ought not to be able to avoid the impact of such (footnote continued from previous page):
The above finding is confirmed by FPL's present mem-bership in the Florida Electric Coordinating Group ("FCG"), bila-teral coordination contracts on file with the Federal Energy Regulatory Commission, deposition and affidavit testimony and repeated public statements of the Company. These are set forth in the " Motion to Establish Procedures" pp. 24-43.
e
= _ _ - _ _ _ _ _ _- __ _ _ . . _ _
l l
finding any more than it could argue that a Board finding that a 1
, situation inconsistent exists ought to be given no effect. 1/
See Farley, supra, pp. 135-140 of Slip Opinion, discussing the remedial purpose of Section 105.
Moreover, whatever possibilities may be open for com-panies to argue their reform in other contexts, we have shown the Board testimony by FPL's Chief Executive Officer that the i
Company has no program to assure compliance with the antitrust laws and, indeed, that it rejects the correctness of the Fifth Circuit's decision. 2/ Where a company brazenly takes the posi-tion that judicial findings against it were incorrect, it is hardly in the position to plead repentence.
1 While FFL may argue that the antitrust " conspiracy" l found in the Gainesville case has terminated because of the
~
j withdrawal of Florida Power Corporation or otherwise, as the Gainesville decision itself demonstrates, and as we discuss more fully above, the evil of the territorial division was that it restricted municipalities in FPL or Florida Power's service area to one potential source of supply. 3/ Through restraining peninsular-wide dealings in wholesale power supply, FPL continues ;
l 1/ To contend otherwise merely permits FPL to benefit from delays in the legal process. Compare Gainesville, supra, 573 i F.2d at 293.
2/ Attachment B to " Florida Cities' Answer to ' Motion of Florida Power & Light Company for Declaratory Order" (July 27, 1981).
2/ Significant.ly, in the Florida Power-Tampa Electric terri-
, torial case, the applicable consent decree restricted the parties from agreeing to or enforcing territorial or market limitations in the sale or resale of bulk power. See, United States v.
Florida Power Corporation and Tampa Eledtric Company, CIV No.
68-297-T cited at Motion to Establish Procedures, p. 19.
l:
. to advantage itself in competition for retail and wholesale sales and power supply. 1/
Arguments as to the cessation of the conspiracy at least under the Section 105 " situation inconsistent" standard must be foreclosed because FPL continues the evil. Indeed, the major focal point of this continued litigation is FPL's continued refu-sal to deal with smaller systems outside its retail service area.
By contrast, Florida Power Corporation offered Crystal River to utilities th roughout Peninsular Florida. 2/ However, FPL limited the offerings of St. Lucie Unit 2 to systems in or near its own retail service crea. Under the St. Lucie 2 license con-ditions FPL not only refuses to offer wholesale power to systems outside its retail service area, but imposes resale restrictions 1/ The Federal Energy Regulatory Commission found in Opinion No.
57, both that FPL had monopoly power over a retail service area and "over bulk power transactions as well" within its retail area. Opinion No. 57, 32 PUR 4th at 322, 324; sl. op. pp. 13,
- 15. The Commission further found, p. 327, Sl. Op. pp. 20 "Tne record is richly detailed with evidence of retail competition to serve entire communities between FPL and existing municipal systems". Finally, it found that through its " wholesale sales polic!.es", it could increase its retail and wholesale monopoly power (Id., p. 331, 330; Sl. op. pp. 26, 24, and generally) and, indeed, that FPL had specifically compared the rates of municipal utilities th roughout Flo ri.da in a recent franchise renewal cam-paign. Id., p. 331; Sl. Op. pp. 25-26. In concluding that FPL's <
proffered restrictions on the sale of wholesale power were anti-competitive, FERC found: "Of even greater importance to the Company [than encouraging acquisitions] would be the assurance that in future franchise renewal contests with potential retail market entrants, it could point to existing municipal utilities as characteristically expensive and unable to exploit scale economies". Id., p. 339; Sl. op. p. 38.
2/ If summary disposition is not ordered, Florida Cities will show that FPL's transnission and other policies made this of fer largely ineffective for Cities within FPL's service area.
18 -
that could limit the resale of such power to systems within Florida Power's area. In short, the Company absolutely refuses to deal with these systems in nuclear power, firm power, or base-load power services, thereby severely limiting competition for power supply. 1/
B. Opinion No. 57 Separately Establishes The Existence Of A " Situation Inconsistent" With The Antitrust Laws.
Opinion No. 57 both reinforces the applicability of Gainesville in compelling a finding that a situation inconsistent exists and provides independent grounds for such finding.
[/ Because of [Es direct interconnections with Florida Power Corporation and Tampa Electric Company, FPL can buy and sell power without paying additional transmission charges. It refuses-to agree to reciprocal transmission rights, should the Cities construct transmission and none are provided for in the license conditions. The effect of the dual transmission system or double rate is to give FPL a market advantage in buying and selling power of any sort with systems to which it is directly intercon-
! nected and to give Florida Power the same, thereby reinforcing I territoriality. For example, if Homestead, located in or near
! Florida Power & Light's retail service area, wants to purchase or sell economy exchange, where FPL and Florida Power have the j
same generation costs, it will always be cheaper for Homestead to
, deal with FPL. If Tallahassee, a municipal near Florida Power 1 Corporation's retail service area, has the same costs, Tallahassee will be doubly disadvantaged in dealing with <
Homestead, since a transmission charge must be paid to both FPL i and Florida Power Corport. tion. Thus, Tampa Electric, Florida Power and Florida Power & Light are always at an advantage dealing with each other; municipals are always at an advantage
! dealing with the major supplier to which they are directly inter-
- connected. A market for power sales and purchases from plants 1 throughout the entire peninsula of Florida has been created under which the municipals are at a permanent disadvantage.
T 19 -
Opinion No. 57 found that proposed tariff restrictions of FPL "would eliminate the only practical source of base-load power or-energy to competing utilities within the markets dominated by the Company" 1/ that such restrictions would "crcate the potential for additional anticompetitive effects by inhibiting the formation of new distribution utilities within these markets", that FPL's reasons for refusing to deal were unsupported, Id., pp. 336-338; that FPL " failed to satisfactorily demonstrate countervailing public interests to warrant the approval of any of these
[ restrictive wholesale and coordind. tion] proposals" (32 PUR 4th,
- p. 314; Sl. Op. p. 2), and in general, that "FPL's proposals were unjust and unreasonable under Sections 205 and 206 of the Federal Power Act, particularly because of their anticompetitive effects." Opinion No. 57-A, p. 1 (emphasis supplied).
I7 When it commenced proceedings in Docket No. ER78-19, et al.,
which led to Opinion No. 57, the Commission initiated an investi-gation to determine whether in refusing to sell wholesale power to Ft. Pierce, FPL had violated its tariff obligations and the Federal Power Act. " Order to Show Cause", Florida Cities v.
Florida Power & -Light Co., FERC Docket No. EL78-4 (June 12, 1978). A Staff 5Evestigation Report found that FPL had refused to serve Ft. Pierce and that such refusals violated its filed SR-1 tariff and Section 205 of the Federal Power Act and that FPL's defenses were "not viable" (Report, pp. 1-2, April 7, <
l 1978). The Commission also consolidated a case concerning FPL's proposed cancellation of firm partial requirements service to Homestead. Following the Commission's finding as to the illega-l lity of the proposed tariff availability restrictions, the other dockets were also terminated. E.g., see Opinion No. 57, pp. 40,
Docket No. EL78-28 (November 8, 1979); " Order Terminating -
Proceeding", Florida _ Cities _v. Florida Power & Light, supra (November 8, 1979).
l
The significance of Opinion No. 57 is not merely its holding that FPL's proposed refusals to deal were illegal, but its thorough review of FPL's conduct over a number of years in light of industry requirements and practices. The Commission made spe-cific findings that FPL possessed monopoly power, pp. 323-325; Sl. Op. pp. 13-16; that its territorial allocations provided an effective barrier to new retail competition, p. 324; Sl. Op. p.
14; and that the absence of wheeling would reinforce barriers to retail competition, even where potential customers overcome the ef fects of the territorial allocations or the substantial cost of acquiring utility property at the expiration of francises, Id, p.
324; Sl. Op. p. 14; that FPL controlled three of the four operating nuclear plants in the state and that its nuclear generating capacity and "substantially all of the gas-fired generation available within the relevant market, each of which give the Company a significant edge in the production of low-cost power for base load requirements," Id., p. 324; Sl. Op. p.15; and 7
that FPL has a " strategic dominacce" over transmission. Id., p.
t 325; Sl. Op. pp. 16. .
c The Commission also found that "[t]he record is richly detailed with evidence of retail competition to serve entire com-munities between FPL and existing municipal systems". Id., p.
327; Sl. Op. p. 20. It detailed FPL's acquisition efforts, pp.
327-330; Sl. Ops pp. 20-24. It found, in part based upon testi-mony by FPL, that self-generation by municipals is becoming less
economically ettractive, ti.2t FPL controls municipals' remaining bulk power options in or near its monopoly service area and that FPL had " constrained" and " inhibited" competition in the wholesale bulk pcwer market. Id., p. 323, 327; Sl. Op. pp. 13, 19-20.
The Commission also f'nds, "Unrebutted Company documents in evidence indicate that it is FPL's policy .o retain full ownership of :he nuclear generating plants which it constructs,";
that FPL has not filed a tariff providing for firm transmission services and that its filings limited the availability of transmission. Id., p. 335; Sl. Op. pp. 32-33. 1/
The Commission finds (p. 314; Sl. Op. p. 2):
~
"On the basis of ocr analysis of the record before us, we conclude that FP&L's proposed tariff
_ restrictions would eliminate the only practical source of base-load power or ettergy to competing utilities within the markets dominated by the Company."
The Commission also finds (p. 339, 40):
{/
Ta In its " Order Directing the Sutaission of a Transmissicn ri f f" , supta, and its " Order Denying Rehearing", supra, FPL was ordered by FERC to file its transmission policies in tariff form.
On rehearing, FPL sought to limit the filing to transmission for ,
interchange service. The Commission stated:
"Our order required FESL to consolidate its numerous rate schedules into a single tariff for interchange transmission services, and include therein its statement of company policy on wieeling availability. The order did not purport to interpret FP&L's pol' icy. That policy may encompass more than interchange services; however, FP&L itself must clarify any ambiguities by delimiting its scope."
FPL still has not filed a firm transmission tariff.
22 -
"The proposed restrictive provisions are anticom-
. petitive, we find no countervailing reasons for their implementation, and they are to be deleted. " 1/
It also concludes (p. 339;Sl. Op. p. 39) that:
"The restriction of wholesale service to named and existing customers is an even greater threat to potential franchise competition. . . The signal to potential retail distributors in areas presently served by FPL at retail and over which FPL has who-lesa19 monopoly power is quite clear. Cf. City of Mishawaka v. American Electric Power Co., supra.
There is a disclaimer at p. 315, Sl. Op. p. 3, of Opinion 57 that the Commission is not attempting to determine factual issues which may be the subject of litigation in other forums. Further, the Commission does not purport to find a i
violation of the antitrust laws themselves. Id. However, thesc disclaimers notwichstanding, the Commission specifically looks to
' ~
FPL's past conduct and applies classic antitrust analysis to determine whether FPL's proposed restrictions in the sale of power are justified; it examines whether FPL's specific conduct has "anticompetitive effects". Id. 2/ The Commission finds that the Company's " record of past conduct cast a shadow over FPL's i claimed need to rettrict service." Further, in response to the ;
Company's request in its application for rehearing for a declara-i tion that the decision was decided solely under the Federal Power t
1 t
17~ It finds the proposed cancellation of service to Homestead violative of the understanding of the partes. Id. See p. 1(, n.
1, supra.
2/ The Commission recognizes an obligation under the Federal l
Power Act to consider antitrust law and policies. E.g., Gulf
. States Utilities v. FPC, 411 U.S. 747 (1973) cited at Decision, i p. 315, Sl. Op. p. 2.
l 23 -
. Act, perhaps an attempt by FPL to avoid a collateral estoppel effect, the Commission states that illegality is found "under the standards of Section 205 and 206 of the Federal Power Act, par-ticularly because of their anticompetitive effects." Id.
( Emphasis supplied. )
-Courts give conclusive weight to a carefully determined I
agency decision. E.g., City of Anaheim v. Southern California Edison Co., C.D. Cal. No. CV-78-810-MML (May 19, 1981). As is set forth in Florida Cities' " Motion to Establish Procedures", p . 12, the Supreme Court has approved giving determinitiva weight to administrative agency decisions. United States v. Utah Mining __
and Constr_uction Co., 384 U.S. 394, 422 (1966). This Commission has acted similarly. Public Service Co. of New Hampshire
~
(Seabrook Station, Units 1 and 2), ALAB-422, 5 NRC 33,, 70 (1977).
- It is of course for this agency 1/ and not the Federal Energy Regulatory Commission to determine the collateral estoppel effect that will be given Opinian No. 57, and there is every reason tc give it binding effect here. 2/
Moreover, if as Farley reaffirms, the question-is not whether FPL has violated the law, but whether a situation incon-sistent with the antitrust laws is 'ikely to be " created or maintained" by the grant of the NRC license, Opinion No. 57 must 1/ Houstqn_ Lighting and Power Co. (South Texas Project, Units 1 and 2), LBP-79-27, 10 NRC 563, 573 (1979), affirmed, ALAB-574, 11
~~ ~~~
NRC 7 (1980).
j 2/ See supra, p. 10.
I
be conclusive. As an agency expert to make such determination, the Federal Energy Regulatory Commission has determined that FPL's control of base load generating units, including nuclear, and transmission gives it dominant economic power, that without appropriate access the smaller systems' competitive opportunities will be impeded and that FPL has acted to achieve such com-petitive restraints. Indeed, the Company's proposed tariff itself shows a clear desire to restrict municipal access to bulk power supply, provided it can achieve such result. Thus, the filing, as well as the FERC opinion holding the filing illegal, establishes the likelihood that, if permitted, FPL will act to restrict such power supply in the future.
. The FERC decision is especially compelling when read in the context of the standards established by Midland and Davis-Besse, and recently confirmed by Farley. Supra, pp.
109-111 of Slip Opinion. Where a company has monopoly power, it cannot justify conduct, such as refusals to deal:
". . . designed to preserve or enhance its dominant position in the competitive market. At the very least, if not a violation of the an'.itrust laws, such conduct runs counter to the policies underlying those laws." <
In light of Farley, there can be no doubt that the conduct found in Opinion Nos. 57 and 57-A meets the tests of Section 105 for remedial relief. Accord, Otter Tail Power Co. v. United States, 410 U.S. 366 (1973).
4
25 -
. C. Gainesville and Opinion No. 57 Can Be Relied Upon In Support Of Summary Disposition.
Even if the above decisions were not deemed sufficient on their own to compel summary disposition here, as is stated in Florida Cities' " Motion to Establish Procedures", these decisions must be given binding effect in light of abundant additional evi-dence, which is consistent with Gainesville and Opinion No. 57 and which confirms a situation inconsistent with the antitrust laws exists, -thereby justifying summary disposition in this case.
As we have stated, such material is of the type that the Fifth Circuit found conclusive in Gainesville, supra, where the Court ruled as a matter of lai without remand that there had been a violation of the antitrust laws. And, as has been discussed, the
~
sqttlement offer in this case itself constitutes a refusal to deal with outside cities.
Furthermore, as we have explained above, in spite of cruers by the Federal Energy Regulatory Commission in Docket No.
ER78-19 that FPL file a tariff stating its transmission poli-cies, FPL has filed no firm transmission service tariff. " Motion a
to Establish Procedures", pp. 63-64. In License Condition IX, FPL would reduce wholesale power availability if a system uses FPL's transmission facil31ities to acquire alternative power supply or if it purchases access in a nuclear unit. " Motion to Establish Procedures", pp. 55-56. And, indeed, in its most recent acquisition attempt relating to Vero Beach, the Company
itself filed with the Federal Energy Regulatory Commission a report prepared for Vero Beach, which sets forth the alternatives to Vero Beach's sale of the electric system and states that wheeling options (and therefore alternative power supply) were not available. " Motion to Establish Procedures", p. 57. Compare Otter Tail Power Co. v. United States. 1/ The Cities have pre-sented abundant other evidence of FPL's continuing anticom-petitive conduct. " Motion to Establish Procedures," passim.
In conclusion, Gainesville and Florida Power & Light
. hold that FPL has acted illegally and anticompetitively. The decisions themselves justify a finding that the activities under St. Lucie 2 sill create or maintain a " situation inconsistent" with the antitrust laws. They are further confirmed by contem-poraneous and subsequent refusals to deal by the Company, including the settlement license conditions.
1/ FPL's Vice President, Robert J. Gardner, has indicated a con-tinued interest on the part of the Company in acquiring the Vero Beach electric system. See Attachment C to " Florida Cities' Answer to Motion of Florida Power & Light Company for Declaratory Order, or in the Alternative, to Dismiss Florida Cities from the Proceeding" (July 27, 1981). Florida Cities rely upon the evi-dence set forth in their May 27, 1981 Motion to Establish Procedures, in.: ading the public statements of FPL in conjunction with its acquisition attempt. They respectfully move to incor-porate by reference Mr. Gardner's statement to the Vero Beach Commission, which is Attachment C to " Florida Cities' Answer",
supra. This statement confirms the correctness of the statement
, of Commissioner Gregg of Vero Beach at Appendix Dll3, _ " Motion to Establish Procedures":
"Should in the future the climate for regulatory approval change, it shall be the intent of both parties to re-initiate dicussions [of FPL's takeover of the Vero Beach system]" .
Question:
(2) Should the market definitions contained in Gainesville and Florida Power & Light bind us in this proceeding? (See FERC memorandum opinion at 11-13).
Answer:
The market definitions contained in Gainesville and Florida Power & Light are binding against FPL. However, they do not preclude consideration of additional markets in which situations inconsistent with the antitrust laws may exist.
Gainesville On Markets:
The Court finds a conspiracy "to divide a wholesale power market in Florida." 573 F.2d at 294. Gainesville finds a A Section 1 violation. To the extent that a product market was found it is " wholesale power". Id.
The geographic extent of the conspiracy is the combined service area of Florida Power & Light and Flordia Power. Thus, at 573 F.2d 302 the Court refers to "the concentration of the electric power industry in Florida". At p. 303, the Court states: "but when only two companies dominate a market, it is unlikely that any formal agreement is needed or would a risked."
The context makes plain that the Court considered the area of foreclosure the combined territories of Florida Power & Light and Florida Powar.
=
1 0 13ua illegal action was the refusal to deal in wholesale power 1/ by FPL throughout Florida Power Corporation's
" territory" and vice-versa. The Court uses the term "in Florida", but the context is FPL and Florida Power Corporation's service area.
Gainesville also refers to a separate, more limited area, stating FPL " operates generally in the eastern and southern l parts of Florida from Jacksonville in the north to the Miami area in the south. P&L serves two cities on the eastern edge of Alachua County." 573 F.2d at 294. 2/
Florida Power & Light Company FERC Decision On Markets:
Opinion 57 finds a retail market and a bulk power pro-duct market, whic t. is divided into " discrete firm requirements and coordination markets." Decision, p. 321; Sl. Op. p. 11.
- However, the decision recognizes and "does not dispute" the vali-dity of further subdivisions of the firm requirements and coor-dination submarkets, but uses a broader product market division as more practical "for purposes of this proceeding."
I7 By " wholesale power" the Court obviously means transactions among utilities, distinguish 1 ag them from retail sales. Thus, at l p. 294 the Court states: c l "This case grew out of Gainesville's long struggle to obtain an interconnection for its electric system with either of these two power companies."
Then it quotes Gainesville Utilities Dept. v. Florida Power Corp., 402 U.?. 515 (1972), describing the importance of an interconnection in reducing the need for reserve generating capa-city and the sale of deficiency energy.
2/ The case plainly treats Cities such as Orlando and Lake Helen as outside FPL's " territory". 573 F.2d at 298. This is not, of
. course, inherent, but a recognition that such cities were outside the " territory" assigned to FPL in the market division.
At pp. 321-325; St. Op. pp. 11-16, 321, approving the testimony of the Staff economic witness (which is provided with exhibits cited by Opinion 57, for the Board's reference), the.
Commission finds a retail market that follows the retail service l area of Florida Power & Light, but excludes the " service terri-l tories of larger bordering utilities." Decision, p. 322; Sl. Op.
pp. 12. 1/
In Opinion No. 57, 32 PUR 4th at p. 323; Sl. Op. p. 13, FPL's bulk power monopoly is defined as coextensive with the retail market. 2/ This bulk power market or submarket is charac-terized by the FERC as "similarly constrained because relatively a few wholesale transactions are made across its boundaries." This is attributed to " wholesale territorial agreements and the absence of firm power transmission services." A potential for competition in the wholesale market is recognized, but the Commission finds that " actual competition had been inhibited by FPL."
(( Municipalities near FPL's retail service area are included.
Thus, there is a slightly larger retail market found in Opinion <
No. 57 than in Gainesville, supra. The Gainesville definition of FPL's retail market is limited by FPL's territorial agreements.
As is explained in Opinion'57, the neighboring territories .of larger investor-owned utilities are excluded because of retail territorial agreements approved by the Florida Public Service Commission and the unavailability of wheeling, but certain nearby systems are included. ' Opinion No. 57, p. 322, n. 12; Sl. Op. p.
12, n. 12. Compare, Gainesville, supra, 573 F.2d at 299.
. 2/ This wholesale rate case included intervention only bv muni-cipal or rural' electric utilities in this geographic market.
Opinion No. 57, p. 316, n. 2-3; Sl. Op. p. 4, n. 2-3.
While broader product markets are used, at p. 335; Sl.
Op. p. 32, as we have stated before, the Commission also finds that FPL is the sole owner of three operating nuclear plants and principal owner of a fourth. A similar finding is made at p.
324; Sl. Op. p. 15.
"Three of the four operating nuclear plants in the State of Florida are solely owned by FPL (Tr. 588, 1625)."
The Commission finds at p. 325; Sl. Op. p. 16,, "that FPL owns 81% of the transmission lines within the relevant market with operating voltages of 69 KV or above" and that "FPL's ownership share gives it ' strategic dominance' over transmission."
The Commission concluded that.the Company's exercise of control of generation and transmission has sufficiently restricted sources of base load wholesale capacity so as to impede the Cities in competition.
Summary Of Findings Concerning Market:
Based upon the above, 51orida Cities submit that Gainesville and Florida Power & Light establish:
j (1) that FPL has monopoly power over a retail market for the sale of electricity; (2) that FPL has monopoly power over firm wholesale and coordination power in the same geographic market; (3) that FPL has a transmission monopoly in its retail area of service;
(4) that FPL controls sources of " base-load wholesale capacity" in the same geographic market (Opinion No. 57, p. 339; Sl. Op. p. 38);
(5) that FPL "has monopoly power over bulk power i
transactions" in the same geographic market (Opinion No. 57, p.
324; Sl. Op. p. 15; (6) that FPL possesses monopoly power over firm whole-sale sales in the same geographic market; (7) that FPL has a nuclear monopoly in the combined service areas of Florida Power & Light and Florida Power Corporation; (8) that FPL has " constrained" the wholesale bulk
~
geographic market (Opinion No. 57, p. 323; Sl. Op. p. 13), which includes the " firm requirements and coordination submarket",
i (Id., p. 321; Sl. Op. p. 11). 1/
Legal Implications Of Market Findings:
The market definitions contained in Gainesville and Opinion No. 57 establish FPL's monopoly power over a relevant e
market for municipals in or near FPL's retail service monopoly area.
1/ Further, Farley, pp. 30-51, supra, confirms the appropriate-ness of a " coordination services" and firm wholesale market as reflecting trade realities.
e 5
~
By the same token, the market definitions in Gainesville and FloridG Power & Light require judgment in favor of all Florida Cities (not only cities in or near FPL's retail servi ce area) ,
assuming acceptance of those decisions with regard to FPL's i
restrictive conduct.
FPL has been found to have entered into an illegal who-lesale market divisicn. "No proof of relevant market is required under Section 1 [of the Sherman Act] where a per se violation is established." TV Signal of Aberdeen v. Am. Tel. & Tel., 617 F.2d 1302, 1309, n. 8, (8th Cir. 1530), citing United States v.
Topco Associates, Inc., 405 U.S. 596 (1972) and Radiant Burners
, v. Peoples Gas Co., 364 U.S. 656 (1961). As the Topco Court explained, oer se violations are so invidious that further judi-cial inquiry into the relevant (geographic and product) markets is unnecessary and often fruitless. 405 U.S. at 607, quoting Northern Pacific R. Co. v. United States, 356 U.S. 1, 5 I
(1958)(preferential tying arrangements cer se unreasonable). See United States v. Socony-Vaccuum Oil Co., 310 U.S. 150, 210, 224-228 (1940) (price fixing unreasonable per se, without regard )
I to power of the conspirators to control the market). 1/
1/ Similarly, market definitions need not be proved in Section 2 consp tracies to monopolize. E.g., Perington Wholesale, Inc. v.
Burger King Corp., 631 F.2d 1369, 1376-77 (10th Cir. 1979);
United States v. Consolidated Laundry Corp., 291 F.2d 563, 573 e
. T2d Yir. 1T6f) .
I L
A Section 1 per se violation has as its very purpose trade restraints and is by definition inconsistent with the antitrust laws. It is for this reason that proof of market is not required. 1/ Of course, FPL does not and cannot deny that it has direct " coordination" dealings sith Florida reser Corporation, whose geographic scope would economically and electrically include municipal entities in the Florida Cities '
group that are not within FPL's retail service area. The geographic scope of the Florida Electric Coordinating Group l
("FCG"), which includes utilities throughout Peninsular Florida, precludes arguments that FPL's business transactions are confined to a more limited area, except of course to the extent that it constrains the market in its dealings with the Cities . 2/
F "~[A] per se violation is conclusively presumed to be unreaso-nable, and hence illegality does not depend on a showing of the unreasonableness of the practice - and it is unnecessary to have a trial to show the nature, extent, and degree of its market effect." TV Signal Co. of Aberdeen v. Am. Tel. & Tel., supra, 617 F.2d at 1312, n. 3 (concurring opinion), quoting 54 Am. Jur.
2d Monopolies $32 (1971).
2/ The Gainesville court (at 573 F.2d at 300) relics upon Montana-Dakota Utilities Co. v. Williams Electric Cooperative, e 263 F.2d 431 (6th Cir. 1959) and Pennsylvania Water & Power Co.
- v. Consolidated Ges Electric & Power Co., 184 F.2d 552 (4th Cir.
~1950), cert. denied,~~340 U.S. 906 for the proposition that
" contracts between utility companies [that] provide for terri-torial divisions are E3r se Sherman Act violations". These cases support the conclusion that the territorial division found in Gainesville either establishes a market definition that includes cities located in Florida Power Corporation's area or eliminates the need for such definition. Indeed, Montana-Dakota holds that where a territorial division has been found, competitive injury need not be established. Pennsylanvia Water & Power generally condemns a contract which prevents a utility from dealing at who-
. lesale with other electric utilities. The Fifth Circuit specifi-cally found that "the concentration of the electric power (footnote continued on next page)
Thus, a finding of a territorial division in wholesale power by the Fifth Circuit and of territorial constraints by the Federal Energy Regulatory Commission establish the right of _all Florida Cities to the benefitEof corrective license condf.tions. 1/
f The inconsistency with the antitrust laws -- FPL's refu-sals to deal with Florida Cities in the context of the markets found in Gainesville and Florida Power & Light -- is confirmed by United States v. Griffith, 334 U.S. 100 (1948). Griffith owned movie. houses. It had a monopoly in some towns, but faced com-petitors in other towns. Griffith conspired and contracted with various film distribution companies to give itself preferential runs, thereby etrengthening its power in its monopoly towns, threatening to extend its monopoly to other towns, , and otherwise
- disadvantaging competitors in the remaining towns . The Supreme Court held that Grif fith ' a use of its monopoly power to extend its control into related markets constituted violations of Section 1 and 2 of the Act.
(footnote continued from previous page) industry in Florida supports our holding that a conspiracy to divide the market existed", and the Court adverted to the power supply alternatives as being limited because of such market division. 573 F.2d at'302. Given the already highly. monopolized nature of the electric' power industry in Florida, refusals to deal with adjacent power companies outside FPL's " retail" service area severely limit the macket. . Failure to find that such actions are inconsistent with the antitrust laws would severely undercut, if not totally. vitiate Penn Water, supra. Such asser-tedly " unilateral" refusals to deal effectively create the kinds of territorial barriers which would be outlawed by agreement.
Further,. refusals to deal by utilities outside their retail ser-
. vice area where a territorial division had been found are not only themselves " inconsistent" with the antitrust laws, but would
. continue past' illegal conduct.
1/ See " Motion to Establish Procedures", pp. 20-43, esp. at 22-23, 40-43.
35 -
As Opinion No. 57 establishes, FPL has used its domi-nance over base load power sources and transmission facilities to restrict coordination and power supply access of the municipal systems located within its geographic monopoly area. (E.g.,314, 322-323, 325, 335-336, 339-340; S1. Op. pp. 2, 12-13, 16, 32-33, 38-40). Such actions restrain competitive opportunities, including access to power supply, by municipals both within and without its monopoly area. Under Griffith, FPL is legally responsible for this effect of its actions both inside and out-side its monopoly service area. Accord, United States v.
Crescent Amusement Co., 323 U.S. 173 (1944). And under United States v. Yellow Cab Co., 332 U.S. 218, 224-228 (1947), the area of trade restraint under Section'l and Section 2 conspiracies to monopolize are coextensive with the tainted operations of the conspirators, regardless of the amount of commerce affected.
The case law makes plain that antitrust liability arises for injuries within the natural target area of antitrust viola-tions. Thus, assuming that cities in Florida Power Corporation's service area are found outside FPL's retail or wholesale monopoly y market area (setting aside the constraints which FPL has created), the cities in Florida Power Corporation's service area are still within the target area of FPL's antitrust violations and are entitled to relief. For example, ... South Carolina Counsel of Milk Producers, Inc. v. pewt_on, 360 F.2d 414 (4th Cir.), cert. denied, 385 U.S. 934 (1966), the complaint alleged that grocery store owners had engaged in a horizontal conspiracy 1.
~
to monopolize the grocery business by entering the milk pro-cessing business and selling the milk in their stores at loss leader prices, forcing the plaintif f's raw milk suppliers to sell at very low prices. The Fourth Circuit refused to dismiss the complaint, holding that the defendants were potentially liable under Sections 1 and 2 of the Sherman Act for the consequent injury to raw milk suppliers, who are not in the grocery business or milk processing business. 1/
"If a plaintiff can show himself within the sector of the economy in which the violation threatened a breakdown of competitive condit as and that he was proximately injured thereby, th< 5e has standing to sue under Section 4 [of the C.ayton Act] . 360 F.2d. at 418. (Cited approvingly in Jeffreg_v.
_ Southwestern Bell, 518, F.2d 1129, 1131 (5th Cir.
1975);, Battle v. Liberty National Life Insurance Co., 483 F.2d 39, 49 (5th Cir. 1974).)
Question:
(3) Is it necessary in this proceeding to determine
'* h e th e r there is a separate market for auclear power?
Answer:
No. However, such proof would be sufficient to )
establish a " situation inconsistent". Should hearings be necessary, Florida Cities will seek to demonstrate such market.
Florida Cities again note that in Opinion 57, the Commission found:
(( ~SEdilarly, in Peelers Co.
~
- v. Wendt, 260 F.Supp 193 (W.D. Wash.
1966), the holder of a shrimp peeling process patent was held liable under Section 2 of the Sherman Act for the discriminatory pricing of the right to use the shrimp peelin .rocess, even though the injured shrimp canners were not directly in com-petition with the patent holder. . He re;, the r.e is clearly com-petition for coordination services.
". . . [I]t is clear that the Company has monopoly power over bulk power transactions as well . . .
Moreover, included in FPL's bulk power resources are virtually all of the nuclear generating capa-city and substantially all of the gas-fired genera-tion available within the relevant market, each of which give the Company a significant odge in the production of low-cost power for base load require-ments. Three of the four operating nuclear plants in the State of Florida are solely owned by FPL ... "
Id., p. 324; Sl. Op. p. 15. Accord, p. 335; Sl. Op. pp.
32.
and found that:
. . . joint ownership of such facilities would provide municipal and cooperative utilities (as well as other utilities in the region) with access to FPL's economies of scale. . ." Id.
These findings provide a basis for determining that such
- a separate market exists, which FPL monopolizes c'J, at minimum, dominates. Compare Otter Tail Power Co. v. United States, 410 U.S. 366 (1973).
In Midland, Davis-Besse and Farley, relief was ordered, including access to nuclear facilities, without finding a separate market for nuclear power. As is set forth in those cases, nuclear power affords a source of economic base load generation, which is used in conjunction with a utility's other <
generation and transmission. The licensing of nuclear units adds to a utility'. economic power, which can be used to disadvantage smaller systems. If such economic power is or will likely be used anticompetitively, that constitutes grounds for relief
. grunting nuclear access. As the Appeal Board states in Midland:
38 -
Consumers' denial of access to nuclear power from Midland completes the circle foreclosing the small systems from economical generation. Their inabi-lity to obtain that access increases their power production costs, and this in turn enhances Consumers' competitive position at both the whole-sale and retail levels. In the circumstances of this case, there fore , Consumers' refusal to allow participation by the small utilities in Midland will have an anticompetitive effect in the relevant retail and wholesale markets when Midland comes on lis.e , and Consumers' monopoly position in those markets will be enhanced commensurately.
The nuclear industry originated as a government monopoly developed in great measure with public funds. Section 105c reflects 'a basic Congressional concern over access to power produced by nuclear facilities ' and legislative intent that nuclear power not be used as a tool to further the monopolization of electric generation. Waterford, supra, fn. 5. The record in this unae reveals that Consumers' refusal to allow the small utilities access to Midland is part and parcel of its monopo-lization of electric generation within the relevant geographic market. That refusal thus falls within the proscriptions of Section 2 of the Sherman Act and is counter to antitrust law and policy."
Consumers Power Company (Midland Plant, Units 1 and 2), ALAB-452, 6 NRC 8 9 2, 1079-1085 (1977, footnotes omitted).
Like Consumers, FPL is advantaged by arrangements with other systems which aid it in its operation of nuclear units. s Indeed, FPL will benefit financially from the sale of par-ticipation shares to others. 6 NRC at 1083. Therefore, it is not necessary to establish a separate nuclear product market, although Florida Cities will do so if summary disposition is denied.
Questions (4)-(7) are inapplicable to Florida Cities.
t
39 -
Question:
(8) Specifically, what additional relief does Cities seek?
Answer:
Florida Cities set forth tsilow specific requested changes to the license conditions that have been approved by the Board, subject to Cities' right to seek additional relief.
" Memorandum and Order" (April 27, 1981). It is of benefit to Florida Cities to resolve remaining issues without protracted .
hearings. Therefore, they are willing to accept less relief now than they would argue for in hearing. Where this is the case, they so indicate.
The principal additional relief sought by Florida Cities is:
- 1. License condition rights (as modified below) should be extended to all interveners in Peninsular Florida, including all Florida Cities hereby represented, and not geographically limited to the entities listed in License Condition I.
- 2. Transmission services should be made available in I
accordance with tariffs to be filed at the Federal Energy e Regulatory Commission. Transmission investments by Florida Cities should be recognized by FPL on a peninsular-wide recipro-cal basis in establishing transmission rates. FPL should be barred from opposing transmission in Peninsular Florida on either a regional investment-recognition basis 1/ or joint rate basis.
I-l 1/ Such as dhe Florida Municipal Power Agency proposal, which i has been made to FPL and is provided. Attachment 10.
i W ^--2* - - - -w- -r- g, y1-m, ,,,,
a
- 3. FPL should be required to offer Florida Cities access to FPL's operating nuclear units on a load rat!.o basis either through participation at investment cost or through unit power sales, at FPL's option. However, Florida Cities would accept an alternative license condition, if ordered or agreed to
~
' now, providing for FPL's sale of either reserved or unreservet base load power at Cities' option, on an annual contract basis.
Such power should be made available by FPL for at least ten years in duration, although Cities could designate shorter periods.
The power would be limited to the load ratio equivalent of. - -
Florida Cities' participation in FPL's operating r..fclear units.
Such power would be priced at the average capacity cost for such base load units planned to meet base load requirements on the FPL system for such year, including such firm annual base load power sales. Energy will be priced at the average fuel cost plus appropriate variable operation and maintenance costs from all units actually scheduled to supply base load requirements on the 1
FPL system, including such firm annual base load power sales.
The following set forth the specific proposed changes to j the effective license conditions that Florida Cities propose:
I. DEFINITIONS
-(a) " Applicable area" should include all of Peninsular Florida.
a 4
_ 41 -
~
Explanation: For most purposes, the " applicable area" comprehends entities which are entitled to the benefit of license conditions. Since a major part of the " situation inconsistent" relates to actions by FPL that have had the effect of limiting power supply rights and opportunities of smaller systems
~
throughout Peninsular Florida, including the Uholesale terri-torial agreement found by the Fif th Circuit in the Gainesville case, the " applicable area" should cover Peninsular Florida.
(b) Acceptable.
(c) Add the words "directly or indirectly" to (c)(1) after the clause " technically feasible of interconnection with those of the Company". Add the words "in Peninsular Florida" after " facilities". The definition of " neighboring entity" should be changed to include intervening entities and entities represented by the intervenor FMUA (excluding, however, inter- -
veners which have settled or withdrawn), plus such non-intervening entities as FPL propcses or as the Board may designate.
Explanation: These additions cover utilities in Peninsular Florida which may be connected to other systems which in turn are interconnected with Florida Power & Light Company.
FPL now interchanges power through such " indirect" interconnec-tions.
(d) Add "directly or indirectly" af ter the words
" connected or technically feasible of connection" . Add the words I
1 1
r "in Peninsular Florida" after " facilities". Also, the definition of " neighboring distribution system" should be changed to include intervening systems and systems represented by FMUA (excluding, I
however, interveners which have settled or withdrawn), plus such non-intervening systems as FPL proposes or as the Board may designate. -
'~
Explanation: As stated in paragraph (c)(1) above.
(e) This definition appears to be acceptable as writ-ten. However, we understand " costs" to be costs as recognized and af fected by regulation. If thigis not-the understanding of the parties, those words should be added to the definition to make clear -that " appropriate" costs take into account regulatory standards.
(f) Acceptable, subject to changes regarding service area limitations.
II. INTERCONNECTIONS (a) Acceptable.
(b) Acceptable.
f (c) Acceptable. c (d) Acceptable.
l (e) Add: "The cost of interconnection facilities with another system shall be shared in a manner which takes into account the various transactions for which the interconnection facility is to be utilized."
,-ye-.c w..- . . , ,y.a-- -,i----+e- , - - - - - %, -ew - - - -. =y-- - =- -
l
~
Explanation: While this language does not apply a spe-cific standard, in accordance with the Midland Appeal Board deci-sion, supra, 6 NRC at 1050, and general industry standards, it recognizes that there should be a sharing of the costs of inter-connections on a reasonable basis.
III. RESERVE COORDINATION AND EMERGENCY POWER Acceptable.
IV. MAINTENANCE POWER AND_ ENERGY
~
Acceptable.
V. ECONOMY ENERGY Add af ter the first sentence: " Licensee shall sell to, purchase from or exchange with any neighboring entity other firm or non-firm capacity or energy which the supplying system deems to be surplus, when such transactions would serve to reduce the overall costs of bulk power supply without a loss to either party. Such bulk power transactions shall be on terms and con-ditions consistent with good utility practice under regulatory standards. Licensee shall enter into pooling, economic dispatch, c
generation coordination and joint planning with neighboring enti-ties and neighboring distribution systems. However, it shall not be required to do so when transactions would result in a net eco-nomic detriment to the Company (not including loss of revenues resulting from loss of sales of power which it otherwise might have obtained)."
. . _ _ . _ . _ . _.m__ ._. ._.__
i l
1 Change heading to " ECONOMY ENERGY AND COORDINATION".
Explanation: The clause rightly expands or clarifies coordination obligations.
VI. SHARING OF ICTERRUPTIONS_AND CURTAILMENTS Acceptable.
'~~
VII. ACCESS TO ST. LUCIE UNIT NO. 2 (a) " Applicable area" should be Peninsular Florida.
Florida Cities have in the past objected to the terms and procedures involving participation. In the event there is a
~hn# ng, they would reserve the right to seek elimination of the deposit requirement and changes in the procedures concerning par-ticipation. However, the opportunity for participation under the settlement license conditions will in general provide a practical test of those conditions. Under these aircumstances, Florida Cities do n,ot seek present changes to this Section, except as ;
follows:
(e)(l' Delete the following language: "provided, however, that the provisions proposed by the Company as to its liability to the other participants, and as to the sharing of costs e discharging uninsured third party liability, */ in connection with the design, construction, operation, maintenance and decom-missioning of St. Lucie Unit No. 2 shall be approved by the arbitrator unless he determines that the provision proposec by the Company constitutes an unreasonable proposal which renders meaningless the Company's offer of participation in St. Lucie Unit No. 2."
45 -
(i) Add at the beginning: "In accordance with good uti-lity practice and on behalf of all participants in a non-discriminatory basis". Add at the end of the paragraph: "If Company takes voluntary actions detrimental to the interests of other parties, in the design, engineering, construction, opera-tion and maintenance of St. Lucie Unit No. 2, including actions regarding changes in construction schedules, modification or can-cellation of the unit, then it shall compensate them for any loss or harm suffered as a result of such decisions."
Explanati_on: To the extent that the Company claims the right to retain complete control of the unit, it should be sub-ject to a standard such as good utility practice. In some situations there could be a divergence of interests between the Company and others. FPL should not be entitled to take opera-tional actions for its own benefit without compensating co-owners for the harm to them. There is no justification for per-mitting FPL to have complete control over the un).t, yet excusing the Company from all liability as a result of its actions. While Cities are flexible as to the specific language for improving the J conditions, they belive that the present terms of the license
! conditions as to control and 12 ability reflect the bargaining power inherent in the Company's nuclear monopoly.
VIII. ACCESS TO FU_TURE NUCLEAR PLANTS Eliminate the provided" clause after " January 1, 1990".
8 .
1 8
- as -
4 Explana, tion: Future units should be sized in accordance with needs. FPL should not be allowed to perpetuate its nuclear advantage into the future. The offending language implies that there should be a ceiling for future nuclear participation so that Cities cannot obtain more nuclear capacity than FPL.
Interestingly, the restrictions imposed by FPL admit the impor-tance it places on nuclear capacity. The strictures placed on the Cities obtaining more nuclear capacity than FPL admit an anticompetitive design.
IX. WHOLEFALE FIRM POWER SALES (a) The paragraph should read: " Subject to the limita-tions contained in paragraphs (c) and (d), Company, upon' timely request, shall sell firm wholesale power on a full or partial i requirements basis to any neighboring entity or neichboring I
distribution system up to the umount of that system's retail load. Any sales made under this subsection may be decreased by the sum at any one time of pcwer made available to such neigh-boring entity or neighboring distribution system as a result of $
participation in (or purchase of unit power from) one of
(
Company's generating units. However, neighboring entity or neighboring distribution system shall be entitled to all energy associated with the maximum billing demand and with that system
- or entity's wholesale power entitlements."
I
47 -
. Exglanation: Proposed additional restrictions are anticompetitive. The modifications make clear that Cities are entitled to purchase and resell energy associated with wholesale power up to the amount of their entitlement. Otherwis e , cities may be forced to pay for capacity, but ceuld be restricted in the use of associated energy.
- FPL is in the business of selling wholesale power. The only colorable basis for a restriction on FPL's obligation to sell, subject to reasonable notice, would be the extent of the system's retail needs. However, such restriction to retail load (which is accepted) limits the ability of purchasers to sell wholesale in competition with the Company and this restriction is therefore questionable (but accepted). The further restriction on resale of energy under the settlement license conditions is truly anticompetitive and unacceptable, as the FERC has held.
E.g., Georgia Power Co. v. FPC, 373 F.2d 485 (5th Cir. 1967);
Mississippi Power Co., 45 FPC 269 (197'l): " Order Approving Settlement Subject to Condition", Gulf States Utilities Co.,
Docket No. ER76-816 (October 20, 1978) (Attachment 11). Accord, United States v. Topco Associates, 405 U.S. 596, 603, 612 (1972);
Consumers Power Co., sup.ra, 6 NRC at 1092.
In view of the decision of the Federal Energy Regulatory Commission in Florida Power & Light Company, Dockst No. ER78-19, the further restrictions on Cities' purchase of wholesale power are anticompetitive and otherwise unreasonable.
~
(b) Acceptable.
(c) Acceptabla.
- 43 _
(d) Delete.
Explanation: This section incorporates added restric-l tions on FPL's obligations to deal and are not justified. l l
Even the largest of the Cities cannot add base load plants com-parable to those of FPL. There is no reason for such restric-tions other than that FPL desires to restrain trade in wholesale l
1 power.
(e) Acceptable.
(f) Add the following provision: " Company shall offer to neighboring entities and neighboring distribution syutems megawatts of base load power. The power shall be offered on
. a reserved or unreserved basis at each entity's option. The power shall be made available for at least ten years, although entity may designate shorter periods, and priced at the average fuel cost plus apprcariate variable operation and maintenance costs from all units actually scheduled to supply base load requirements on the FPL system, including the firm annual base load sales. At an entity's or system's "equest, the power shall be priced at FPL's bus bar. <
Explanation: See p. 40, supra. Power is priced at bus bar to avoid paying double transmission charges, if transmission is provided separately. FPL has testified that it will price power at bus bar 1/ (but it objects to use of joint transmic
. rates).
1/ See testimony of. Robert Gardner, Florida Power & Light Co.,
FERC Docket No. ER78-19, et al. Attachment 7.
49 -
, (7) Add the following provision: Company shall offer to neighboring entities and neighboring distribu*. ion systems par-I
- ticipation in each of its operating nuclear units on either a unit power or ownership basis at Company's option. Each neigh-boring entity or neighboring distribution entity shall have a i right to such access on a load basis equivalent share with i
Florida Power & Light Company. FPL shall not discriminate as among neighboring entities and neighboring distribution systems with regard to the terns of participation.
- (
Explanation: See pp. 30-40, supra.
X. TRANSMISSION SERVICES
- (a) Modify as follows: "The Company shall transmit -
power {l) between or among Company or other power _ sources Eliminate the clause: "(5) a reasonable magnitude, time and dura-tion for the transactions is specified prior to the connencement of the transmission. " The notice clause reinforces Company restrictions on transmission, making it more difficult for neigh-
' boring entities to obtain service and giving the Company added- ,
e leverage. The Company should file a tariff with the Federal Energy Regulatory Commission and le governed by it.
Explanation: This assures transmission availabi3ity from power sources other than the Company to various entities.
Ac written, the license conditions could be interpreted to m
.-w-,-w,.y v-<e-r- y3 ,-- =g- s -
,y,- y ,-#
+-----3.-r -,w gr y
o '
exclude transmission from independent generation sources.
(b) Eliminate the words: "a transmission agreement (s)"
in the first and second sentences. Eliminate the third sentence.
The subparagraph should read:
"(b) Company's provision of transmission service under this section shall be on the basis which com-pensates the Company for its costs reasonably allo-cable to the service. Company shall file tariffs pr ;viding for such transmission service with the Federal Energy Regulatory Commission or its suc-cessor agency, including transmission to and from Georgia. Company shall also file a transmission tariff providing for regional cr joint service and shall agree to provide transmission on a reciprocal basis to neighboring entities or neighboring I distribution syster s (including when joint agenciee act on their behalf) when and to the extent that such neighboring entities or neighboring distribu-tion systems invest or contribute in the State or Company transmission grid. Nothing in this license shall be construed to require Company to wheel power and energy to or from a retail customer.
Mcwever, a co-generator or municipally or govern-mentally owned source of generation shall not be deemed a retail customer."
Explanation: The basic " situation inconsistent" involves monopolization through blocking Florida Cities from alternative generation sources, including refusals by FPL to deal outside its retail area of service. The Company's refusal to c agree to a joint or regional transmission rate or to give Cities credit for transmission invcstments can only have an anticom-petitive purpose or effect. FPL should not be sale to preempt transm!.ssion to new potential markets in Georgia. The final sen-tence proposed here would avoid wheeling restrictions that could kill beneficial projects which may ccmpete with FPL generation, such am generation from waste disposal plants, and would avoid the Company's monopolizing generation cutput from such plants.
(c) Acceptable.
(d) Change "not decline to cooperate in transmitting power produced" to "shall transmit power produced in accordance with paragraph (b), supra. Add at the end of the last sentence, "but shall afford them reciprocal nondiscriminatory transmission rights in accordance with paragraph (b)."
Explanation: FPL should not be able to bottleneck transmission to Georgia. If Cities make transmission investments, they should obtain fair access to the Florida grid.
i XI. ACCESS TO POOLING ARRANGEMENTS Modify as follows:
" Company shall sponsor the membership of any neigh-boring entity in any pooling, interconnection or coordinating arrangement, including power supply arrangements, to which Company is presently a party or which, during the term of this license, becomes a party; provided, however, that the neighboring entity, cr, as applicable, neighboring distribution system satisfies membership qualifications which are reasonable and not unduly discriminatory. To the extent that Company enters into pooling, interchange or coordination arrangements (including power supply arrangements) during the term of this license, it shall use its best efforts to include
,' provisions therein which permit requesting neigh-boring entities the opportunity to participate in the arrangement on a basis that is reasonable and not unduly discriminatory. Company shall not enter into any joint generation or transmission projects without offering participation on a non-i discriminatory basis to neighboring entities or c neighboring distribution systems."
Explanation: The disability facing small systems is that FPL has monopolized or restricted access to economic genera-l tion sources and has restricted coordination opportunities, j
Whatever corrective measures may be taken relating to past FPL actions, certainly future joint action by the Company should be l
on a non-restrictive basis. If FPL enters into joint genera tion or transmission projects, it shou _4 make availablo such par-
ticipation to all on a non-discriminatory basis rather than to be subject only to a best efforts obligation. Exclusionary joint
. ventures would be plainly illegal, and FPL should not be able to enter into new exclusionary power supply arrangements on grounds that its co-participants refused to accede to municipal par-ticipation.
XII. JURISDICTION OF OTHER REGULATORY AGENCIES Acceptable.
XIII. IMPLEMENTATION Acceptable.
Quen t i_on :
(9) What are FPL's current policies concerning wholesaling, interconnection, wheeling, sales of unit power, and sales of intersts in the St. Lucie plant to Cities?
Answer _:
Cities presume that FPL's current policies are expressed in the settlement license conditions. Florida Cities would seek a statement as to FPL's current policies, if they are otherwise, l,
and a statement concerning sale of base load power to Cities.
1 Florida Cities would also seek confirmation that FPL is willing to price power sales at the bus bar. (FPL testified in Locket No. 78-19 that it would.) 1/ '
Question:
(10) What is a reasonable schedule for the completion of discovery, including estimates of reasonable time l
periods in which others may be expected to respond to discovery requests which you expect to make?
Answer:
Scheduling will depend on the Board's Order on the
~
d'otion for Summary Judgment.
Of course, if the Board grants Cities' Motion for summary disposition, there would be' no need
{/ See p. 48, n.1, supra.
I
for further discovery with respect to finding a situation inconsistent, and the parties can proceed almost immediately to discovery and hearing with regard to relief. If the motion is denied in whole or in part, Cities believe discovery can be rapidly and efficiently moved to a close. As has been discussed in previous filings, discovery in this proceeding has been substantially completed. Cities believe little er no further discovery would be needed before proceeding to hearing to determine relief, or relief and other issues unresolved by summary disposition. 1/
A. Status of document discovery.
- 1. Cities have substantially responded to requests for docu' ment production for 11 of the 13 interveners issued in this docket; they have substantially responded to broad requests for production of documents from Cities' consultants, R.W. Beck &
Associates and Smith & Gillespie in district court litigation against FPL.
17'~fhe'~5cheddfE' Cities propose in this answer would be
~
l appropriate if the Board orders a little or a moderate amount of additional discovery. However, the proposed expedited discovery l
l schedule is r.ot meant to preclude use of other expedited sche-l duling devices. For example, it may be that following the Board's decision on Cities' motion only a few issues will remain l
to be resolved in order for the Board to determine whether a situation inconsistent with the antitrust laws exist. In that case, the proceeding may be best expedited by providing for rapid
! discovery and hearing concerning outstanding issues relevant to the determination of the inconsistency with the antitrust laws and providing for separate, phased proceedings on the issue of relief.
. _ - . . - , - - - , - , - , , , - - . - - - - . . . . ~ , . , - - .._, - . - - . . - . . . . . . - - _ _ ,_
Of the two intervenors whose offices have not been searched, one, Lake Helen, has sold its electric utility system and will move to withdraw from this proceeding. The other intervenor, FMUA, has offered to produce all responsive documents for FPL's inspection on two week's notice.
In the other Cities , and at R.W. Beck & Associates, a number of loose ends remain outstanding; however, Cities will complete all outstanding discovery by September 15, 1981.
As far as Cities are aware, FPL is likewise close to i
completing production in response to the document request directed to the Company in this case. Therefore, Cities believe
-FPL can complete previous discovery requests relating to docu-ments within 30 days of any Board order, if not sooner.
- B. Interrogatories.
Neither Cities nor FPL have responded to interrogatories served upon them in this case. However, because these I
interrogatories substantially parallel interrogatories in the l
district court case, it should take little time to file I
t responses. Cities propose that counsel mutually agree on a date c
- for completion of these interrogatories (if such a date can be I
set before a Board order) or, alternatively, that the Board require completion of interrogatories 20 days after any Order.
C. Future discovery. Because of the scope of the initial interrogatories and document requests, 1/ Cities believe that c 1/ As the Board is aware, FPL served 421 interrogatories, more
- dr less, and document requests on each of the Cities: Cities i served 75 interrogatories and document requests on FPL.
. =
.- ~ _ _ _ _ - . _ - . .-
few, if any, adaitional document requests or interrogatories are 4 .
required. The need to depose experts should be eliminated if the Board adopts Cities' suggestion that experts - file written testimony with exhibiss four weeks before hearing. The attached schedule can be expanded slightly or contracted to reflect Board
- determinations as to the future scope of discovery. However, in view of the amount of discovery that has already been made available, Cities support immediate cessation of discovery and proceeding to hearing. .
Depositions of City officials may not be necessary or appropriate. The Board is given broad authority over discovery matters. The Board has indicated a strong desire to streamline discovery consistent with protecting procedural rights. Given
- the extent of discovery here, depositions should be allowed only on motion, and scrutinized and limited, if allowed at all.
If any further discovery is allowed, Cities propose the following schedule:
j 1. By 15 days after any Boarc Order, parties should initially designate the witnesses daey expect to appear at a hearing; /
1
- 2. By 30 days after any Board Order, compliance with all outstanding discovery requests, including
, answers to interrogatories, should be completed;
- 3. By 30 days after any Board Order, subject
- to the supervision of the Board, parties should serve on each other all requests for any additional discovery that may be . warranted and permitted; 5
56 -
- 4. By 40 days after any Board Order, a pretrial conference should be held. Parties may object to discovery or seek any additional relief.
Discovery should clase no later than 70-100 days af ter the Board Order (depending on the nature of discovery permitted);
- 5. Ninety-120 days af ter the Board Order, all testimony should be filed (depending on the nature of discovery permitted); __
6 Hearings should begin 120-150 days after the Board Order (depending on the nature of discovery permitted).
In seeking to close discovery, Cities do .aot, of course, 3
preclude special information requests for goca cause, such as for _.
witness' workpapers, or narrowly specified types of documents necessary for trial. Because Cities and, we are sure, FPL seek to complete this proceeding before St. Lucie 2 goes into operation, a target schedule which rapidly moves the parties to hearing is required; this schedule suggests that even if additional discovery is required, hearings can begin as early as December of this year. If no additional discovery is ordered, Cities believe hearings can begin 60 days after any Board Order.
The schedule should present no hardship to any party.
Since the Board's Memorandum and Order of July 7, 1981, the parties have been on notice that discovery has resumed. All parties have thus had due opportunity (and have been under Board Order) to consider what further discovery is required.
They have further been on notice that they should move to complete outstanding discovery. The schedule prescribed above simply provides dates by which the parties each must comply, so that no party is placed at a disadvantage to the other.
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Question:
(11) What special rules could expedite discovery or otherwise hasten its conclusion?
Answer:
The key to moving discovery to a close will be supervision by the Board. Thus: -
If the Judge assumes special judicial control of the case, ascertains counsel's current views of the issues ..., allows early discovery to narrow the issues , schedules ear'ly submission and determination of preliminary legal questions to narrow issues and denies requests for abusive ~
discovery, it will be impossible for any-party to engage in abusive discovery.
1 Moore's Federal Practice,.0.60 (Manual for Complex Litigation).
Early discovery has already been ordered and is now
- nearing completion. The Board has already taken a significant step toward hearing by ordering FPL to respond to Cities' motion for summary disposition. Should the Board grant summary i
disposition, all that will remain to be resolved is the issue of relief; future proceedings can be tailored accordingly to allow discovery relevant to this issue, if any is required at all. If the motion is wholly or partially denied, the Commission may speed up proceedings by defining the remc.ining issues.
In addition, the Board's Order may expedi'e prehearing proceedings by (1) establishing a target hearing date; (2)
! limiting time and subject matter for discovery; and (3) l scheduling two additional pretrial- conferences to resolve issues.
I o
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- 1. Establishing a target hearing date. It hae been recognized that establishing a target hearing data will better permit scheduling of pretrial procedures. 1 Moore's Federal Practice 12.80. Here, it is particularly important that this Commission and the parties are able to aim toward some date, so that discovery does not lag, and thus create unnecessary delay.
- 2. Limiting time and subject matter of discovery on the merits. Significant amounts of discovery have been completed; FPL has been ordered _to clearlyAd4 care the questions it will explore in . future discovery. This Board should, on the basis of this showing, fix a date for filing additional requests (assuming the parties have shown good cause for engaging in any discovery at all); limit requests in light of the issues unresolved by Cities' motion; and set a time for completion of this discovery. (And, as noted below, this Commission should establish a date for a further pretrial conference to speed discovery).
- 3. Prepared testimony. To eliminate the need for
, depositions, to speed hearings and to facilitate cross-
- examination, cities suggest the filing of written prepared testi-many with attached exhibits two weeks before trial. At the least, expert direct testimony should be prefiled. This the the practice at other agencies, notably the F.E.R.C. It aids compra-hension and trial preparation.
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- 4. Pretrial conferences. Cities suggest a pretrial conference should be held following filing of all remaining diccovery requests. The reason for this conference is twofold:
First, the Board may be able to quickly rule on disputes 1
concerning discovery s6"that the parties' precise obligations are defined. Second, the Board will be able to establish firm dates for completion of discovery in light of the substance of the requests and will hence be in a position to move firmly establish subsequent procedures.
The dates to be set at this conference would include a final, firm date for close of all discovery; lists of witnesses; and testimony.
~
Cities suggest a final prehearing conference be held at which all important aspects of the hearing, and methods for expediting presentation of evidence, would be considered.
In the event that, contrary to Cities' recommendations,.
the Board deems either that the major issues of liability are not ripe for summary disposition or that substantial additional C
i discovery is required, then the schedule proposed by Cities should be stretched perhaps 60 days, but not stretched so long as to delay completion of this proceeding beyond the expected in-service date for St. Lucie Unit No. 2.
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i Miscellaneous:
Florida Cities desire to address briefly the following question (not asked by the Board) at the August 17 Conference:
Questi_qn:
"How are these proceedings affected by 'lorida
'~
Power & Light Co., Opinion No. 517, 37 FPC 544, and the orders in Florida Power & Light Co., ?ERC Docket No. ER78-19 of December 21,
! 1979 and February 6, 1980?"
Answer:
Cities believe that_these decisions also support summary
'~
disposit a ns stated in the text of this pleading.
Respectfully submitted, O
Robert A. Jablon Alan J. Roth Joseph Van Eaton
- BY __ ____
Attorneys for The Lake Worth Utilities Authority, the Utilities Commission of New Smyrna Beach, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Mount Dora, Newberry, St. Cloud and Tallahassee, <
Florida, and the Florida Municipal Utilities Agency i
August 7, 1981 Law offices of:
Spiegel & McDiarmid
- 2600 Virginia Avenue N.W.
Washington, D.C. 20037
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BEFORE THE UNITED STATES NUCLEAR REGULJ. TORY COMMISSION ATOMIC SAFETY AND LICENSING BOARD Before Administrative Judges:
Peter B. Bloch, Chairman Michael A. Duggan Robert M. Lazo Ivan W. Smith, Alternate
)
FLORIDA POWER & LIGHT COMPANY ) Docket No. 50-389A
)
(St. Luc ie Plant, Unit No. 2) ) August 7, 1981
)
FLORIDA C.ITIES' RESPONSE TO BOARD QUESTIONS INDEX OF ATTACHMENTS Attachment 1 Florida Power & Light Company, FERC Docket Nos. ER78-19, et al., " Order Denying Rehearing, Accepting for Filing and Suspending Rate Schedules and Denying Motion for Extension of Time", February 6, 1980 (and Erratum Notice, February 26, 1980)
Attachment 2 Florida Power & Light Company, FERC Docket No.
ER78-19, et al . , " Order Directing the Submission of a Transmission Tariff in Substitution for Individual Rate Schedules",
December 21, 1979 ]
Attachment 3 City of Homestead, Florida v. Florida Power &
Light Company, FERC Docket No. EL78-28, " Order Tarminating Proceeding", November 8, 1979 Attachment 4 Florida Power & Light Company, FERC Docket No.
EL78-4, " Order Terminating Proceeding,
. November 8, 1979
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I Attachment 5 Florida Cities v. Florida Power & Light Company, FERC Docket No. EL78-4, " Order to Show Cause", June 12, 1978 Attachment 6 Florida Cities v. Florida Power & Light Company, FERC Docket No. EL78-4, " Staff Investigation Report", April 7, 1978 Attachment 7 Florida Power & Light Company, FERC Docket No.
ER78-19 (Phase II), Excerpts of testimony of Robert J. Gardner as to FPL"s willingness to
' file wholesale power rate for power at the bus l 9r, November 15, 1979 Attachment 8 Florida Power & Light Company, FERC Docket Nos. ER78-19 (Phase I) and ER78-81, Excerpt from " Application for Rehearing of Florida <
Power & Light Company", September 4, 1979 Attachment 9 Letter from Calvin R. Henze to William Lesnett dated July 3, 1979, transmitting
" Proposal for a Joint Transmission System in the State of Florida by the Florida Municipal Power Agency to the Technical Advisory Group of the Florida Electric Power Coordinating Group" Attachment 10 Excerpts from 1970 National Power Survey (Part II), Federal Power Commission.
Attachment 11 Gulf States Utilities Company, FERC Docket No.
! ER76-816, " Order Approving Settlement Subject l to Condition", October 20, 1978 l
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f Attachment 1 Florida Power & Light Compunl, FERC Docket 1
Nos. ER78-19, et al., " Order Denying
- Rehearing, Accepting for Filing and Suspending Rate Schedules and Denying Motion for i Extension of Time", February 6,1980 (and Erratum Notice, February 26, 1980) 3-T 5
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