ML20030D234

Opinion & Order That Proposed Limitations on Requirements Svc Availability Not Justified.Rejects Tariff Provisions & Notices of Concellation

ML20030D234
Person / Time
Site:	Turkey Point
Issue date:	08/03/1979
From:	Cashell L FEDERAL ENERGY REGULATORY COMMISSION
To:	FLORIDA POWER & LIGHT CO.
Shared Package
ML20030D178	List: ML20030D177 ML20030D234
References
ER78-19, ER78-81, NUDOCS 8108310590
Download: ML20030D234 (43)

Text

{{#Wiki_filter:e r CTIM STATIS OF AME.tCA 'IOE3AL ENERTl REGC.A; CRY COMPCSSICN ^ CPDTICN NC. 57 Wer E Wh ) Cccket Ncs. .ER78-19 ) (Phase I) and 2373 31 p CPDTICN AND ORDER RM-dig DTI*IAL DECISICN AND REJECTDiG TAa yy AyA nga m 7 W P.ATICNS AND NCTICI CF CAN h 7CN ( l 0 I Issu-d: August 3, 1373 1 CC-A-7 V 1 8108310590 810827 PDR ADOCK 05000250 M PDR

s CN N STATES OF AMERICA FICERAL CTERGY REGULATCRT CCMMISSICN m ^/ Florida Pcwer & Light ) Decket Nos. IR78-19 Company ) (Phase I) and E378-81 1 CPINICN NO. 57 APPEARANCES Harry A Pcth, Jr., Rchert T. Eall III, James K. Mit= hell and flovd L. Nor =n IV (.' lead & Priest) for Florida Pcwer & Light Ccapany William E. Chandler, William C. Wise and Robert Weinberg for (~ Sem:nole Electric Cooperative ~- Robert A. Jabicq, Daniel J. Guttman and Sand u J. Strahel for cne Utill:1e. Commission of New Smy:na Seacs, Fcrt Pierce Utilities Authority, Cities of Starks and Ecmestead, Ficrida Rchert f. Shamiro and Harvev L. Reiter for the Staff of the Federal Energy Regulatory Ccamassion I e .e-m.~ s O l' s S 40 = e ~1./ _ _ _ _.. -, ~ _. - - - _ - - _-,_.._,___-_.m ,--m._.v- ..,,w

~ __ _ l WECLISALE ELECTRIC SE7VICE: AVAILABILITY: ANTITRUST .i UNITED STA"*IS CF AMERICA FIDERAL ENERGT REGULATC9Y CCMMISSIC!T Before Commissioners: Charles 3. Curtis, Ch=4 -ma: Georgiana Sheldon, and Matthew Holden, Jr. i Florida Power & Light ) Cocket Nos. ER78-19 I i Company ) (Phase I) and ER78-81 CPINICN No. 57 l I CPIMICM AND CRDER REVCRSING INITIAL DECISICN I AND REJECTING TARIFF AVAILABILITY LIMITATIONS AND NOTICE OF CANCELLATICN (Issued August 3,1979) Before.the Commission is a consolidated proceeding to determine whether certain limitations on the availability of firm wholesale requirements service, along with notices of cancellation of such service to specific wholesale customers, are unjust, unreasonable or unduly discriminatory, and particularly whether they are anticompetitive in effect. With one esception, we find that the proposed limitations on requirements service availability have not been justified. Accordingly, we reject these tariff provisions.

Moreover, 7

since the notices of cancellation are founded upon one of these rejected limitations on availability, they must s likewise he rejected. To set the stage for our' discussion, we wish to state at Os outset our view that, where a utility possessing me.rket power in a relevant market seeks to amend a general l tariff to impose conditions which foreclose supply options or increase the costs of competitors, or which otherwise contribute to the acquisition or maintenance of monopoly power, its application for amendment must be rejected and found unjust and unreasonable under Sections 205 and 206 of the Federal Power Act - unless the utility can show th'at . compelling public interests justify the service' conditions. t e e a e

l Cocket Nos. E273-19, et al. - Moreover, even where overriding public policy objectives are I m j .) shown to justify some restriction on wholesale service, such a utility must be called upon to demonstrate that its l proposal is the least anticompetitive method of obtaining legitimate planning or other objectives. Cn the basis of our analysis of the record before us, we conclude that FPEL's proposed tariff restrictions would i eliminate the only practical source of base-load power or energy to competing utilities within the markets dominated by the Company. Furthermore, the proposed restrictions would appear to create the potential for additional anti-competitive effects by inhibiting the formation of new distribution utilities within these markets. FPsL has failed to satisfactorily demonstrate countervailing public interests that warrant approval of any of these proposals, / except for the one which would provide separate parcial requirements service. To the extent that legitimate pur-poses are sought to be attained by FPsL, there appear to be a number of alternativ.s means of less anticompetitive effect for their acccmplishment. The Commission wishes to emphasire l l that we are not today holding that a utility with market power is, oer se, precluded from amending a genical tarif f to impose conditions which limit service availinility. The Federal Power' Act accords a utility the right to propose such Iizitations and an opportunity to demonstrate that'its proposed change in service is just and reasonable. In the instant case, we find only that FPEL has failed to carry its burden of justification. An initial comment is also. in order concerning the applicability of antitrust laws and policies to our pro-caeding s. From its inception, this proceeding has focused ( on issues related to the justness and rsamonableness of FPEL's rate proposals when evaluated in light of their alleged anticompetitive effects. The allegations and evidence of staff and the intervenors together with the associated responses of the company have coalesced into issues typi-l cally examined in the context of a monopolization case under Section 2 of the Sherman Act. The Commission acknow-ledges that it is. net specifically responsible for enforcir.g the Sherman Act or any other of this nation's antitrust laws. And we wish to emphasize that in evaluating the anti-comps:itive effects of a proposed rate change and in making findings with respect thereto, we do not make find;ags that violations of the antitrust laws have occurred. Instead, it is our calication to evaluate the public policitr~ expressed in Federal antitrust laws and to reflect those policies ~in-l the conduct of our responsibilities under the Federal Power Act. 1/ This we have endeavored to do in the instant case. ["' 1/ It ts now teyond quescion that antitrust law"and policies do relate to this Commission's responsibilities under the ~ 1 Federal Powee Act. See, Gulf States Utilities Co. 7. r?C, 411 U.S. 747 (1973); and FPC v. Conway Cor:oracion, 425 U.S. l 271 (1976). l ~

l 4 Cceket Ncs. I273-19, et al.

• While we believe our evaluation of the anticompetitive

<^. effects of the proposal is correct and supported by -d the record, we recogni:e that these anticompetitive effects may not have been demonstrated with the rigor as would be demanded in proc iedings where specific findings of violations of the antitrust laws are an issue with attendant potential for the imposition of civil and criminal penalties. Lastly, we wish to note that the fairly elaborate account of F76L's past conde.ct in its market place 1 is not intended by this Commission to be a determination of f actual disputes which may be the subject of litigat' ion in l other forums. Rather we merely observe that the evidence in l this escord of that past conduct casts a shadow over F76L's claimed need to restrict service and, therefore, is of pro-bative value in dotermining whether the Company has satis-factorily. carried its burden of justification for the proposed ( service limitations. The structural and conduct analyses coquired in an antitrust proceeding, and presented to us j here, are of considerable assistance in isolating demon-strated anticompetitive effect from unfocused allegations. It i's important to examiae the m1rkets in which relevant electric services are bought and said and then determine how the questioned rate provisions may affect the competition, or pctentizi competition, in these markets. This opinion attempts to prasent our interpretation of the facts and law along these lines. - RACKGROUND The Procedural Eistorv Cn October 14, 1977, T7EL filed in Coexec No. ER79-lT proposed changes to its firm wholesale electric tariff, schedule SR-1, which would bifurcate that schedule into a full requirements schedule I SR-2 and a separate partial requiremeses schedule PR, and increase the rates for each of these sort ices. Under i ~ schedule SR-1 firs service has been generally available

• in all territory served by the Company."

T7EL now proposes to Ibnit the availability of firm wholesale i services to those existing customers named in the two new schedules, which previously purchased under schedule SR-1. Also, the Company would itait service under schedule PR to existing customers which do not own sufficient generating capacity to meet their peak load requirements. O f e %J l 1

y 4~ ~ Docket Nos. E373-19,s : al. ~ In a related action, FPEL filed in Docket No. EP78-81, s;;

0-

cckat Ncs. EK78-19, d M,. -

The court was particularly impressed by the documen-tary evidence which demonstrated a " routine" course of conduct spanning twe decades whereby each utility would refuse to sell power to existing wholesale customers of the other or to municipalities served at retail by the other which were attempting to establish new distribution utilities. Cn remand, the case is once again before the district court for precise determination of the effect of the wholesale territorial allocation on Gainesville's difficulty in obtaining an interconnection, plus attendant damages. Until the trial ecurt enters its new judgment, we shall not know how FPEL is to be enjoined from engaging in anticcmpetitive conduct against municipal utilities or directed to remedy the damage done. Accuisition Efforts and Franchise Commetition The \\ principal allegation leveleo against FPEL's tariff limita-tions is that by restricting access to wholesale power the Compan supplier. y may thereby increase its dominance as a retail The record is richly detailed with evidence of retail ecmpetition to serve entire communities between FPEL and existing municipal systems. PPsL's first attempt to acquire the Lake Worth util-ity is documented in a letter to FP&L employees from the Company's West Palm Beach Division Manager, dated June 18, 1958, which sought "a list of your relatives and friends who live in Lake Worth." The District Manager proposed to send these sympathetic members of the ccmmunity infor-mation concerning a forthecming election on a proposed 30-year lease of the municipal system to FPEL, where a successful vote would " assist us in our negotiations for other municipal systems" (Ezhibit GT-34, at 64). Liter-ature distributed to Lake Worth voters promised better service and an immediate rate reduction averaging 20%, plus .ut aggregate reduction of $14 million over the 30-year lease. Although winning a simple majority vote, the elec-tion failed to attract the requisite 60% voter participa-tion and the proposition failed. Efforts were renewed in 1968 through a Lake Worth property owner; however, preliminary discussions were terminated without action. TPEL offered to furnish firm power to the New Smyrna Beach municipal utility during the winter of 1958, provided the City Ccnsission would' agree not to order any additional generating equipment and enact an ordinance which would permit disposition of its electric utility on a

jority Q

I

f Cocket Mcs. E378-19, et al. - 21 ~ vote. 33/ F?EL then planned to negotiate a lease of the ~ utility the following spring and submit it to the voters fer approval (Exhibit GT-34). An April 1959 report to Company management stated that the proposed acquisition " ertainly provides some distinct advantages other than just taking over a municipally owned property." The report noted the considerable possibilities of industrial and residential develcyment in the area (Exhibit GT-34, at 73). The Company's action in 1959 did not win it a lease of the New Smyrna Beach system (Exhibit GT-34, at -61); however, FPEL tried again in 1965, sending an inquiry to the City Commission which was virtually identical to the letter sent to Port Pierce in May of that year (Exhibit GT-34, at 75). }4/ FPEL Executive Vice President R. C. Fullerton descrimed the prospect of taking over the New Smyrna Beach municipal system to the chairman of another investor.-owned utility as something the Ccmpany viewed "with natural enthusiasm" (Fxhibit GT-34, at 75). Also La 1965, FPEL purchased from New Smyrna Beach all of its electric utility facilities in the City of Edgewater - -~ where it had previously provided retail service to only 7 a portion ;of the community. Intermittent negotiations occurred between FF&L and New Smyrna Beach in 1970 and 1973. In 1974, the Company s devised an internal plan for acquiring the municipal utility (Exhibit GT-34, at 32), and sent senior manage-ment representatives to discuss an acquisition proposal with the city utility commission, estimating a rate reduction of more than S600,000 under FPEL ownership. Company management informed the utility commissioners that FPEL could provide cheaper and more dependable service because of its greater power plant capacity and 32/ Characteristically, Florida municipal charters recuire the approval of greater than simple majority of voters for disposition of local utilities. Similar terms were extracted from the City of Clewiston in 1965. See, the initial decision in Florida Power & Licht Co., 37 F.P.C. 560, 573, adcored, 37 FPc 544 (1967), a3?irmed sub nom., Federal Power Commission v. Florida Power & Lient Co., 404 U.S. 453 (1972)~. 34/ Infra, at 22. L: e

Cocket Nos. IV; t-15, et al., its diversity of fuels (Exhibit GT-34, at 34). Another acquisition presentation was made to the utility ccamis-sion in 1975, at the City's request. TPEL sought to acquire the Fort Fiercy utility in 1965 when the subject was raised by a citi commissioner at a meeting convened to discuss a possible interconnec-tion of the two systems (Exhibit GT-59). The response of the Company's division manager mentioned the inter-connection only as an interim arrangement, concentrating instead on the sale or lease of the municipal utility. FP&L stated that any lease should be for a period of 30-years to coincide with the term of a standard electric franchise. In return, the Company offered to lumediately interconnect the systems, apply FP&L's icwer retail rates and " land its full support toward attracting industry to ( the area.* Fort Pierce thereafter invited lease or sale proposals; however, negotiations stopped short of acqui-sition. Acquisition was again raised by Fort Pierce officials in March of 1976. The minutes of a meeting with FPEL senior management officials record that the City felt that disposition of its utility system was necessitated by ar. inability to exploit the economies of scala in electri-

~'

city production: Mr. Skinner (Fort Pierce's Chief Engineer} said we think its very efficiently oper-ated. We realire the big problem facing us is not the high cost of fuel or the inefficiency of our system, but the ineffi-ciency as compared with putting oil into \\ a larger boiler and turbine. That's where we're getting caught sho.-t on the heat cate-input to the boiler. We have a problem competing with ??&L favorably today because it represents around 65% roughly of the cost of doing business, the cost fot fuel oil. ( Exhibit GT-31. ) When Fort Pierce inquired at that same meeting about the purchase of 30 MW of base-load firm power, the Company responded that it did not wish to sell firm power unless l the purchaser could reciprocate with sales of. firm power to the Company. This would require Fort Piercs to main-tain generating capacity sufficient to meet its own load. F?&L also discouraged purchase under the SR-1 schedule, l C

<T _ 23 Decket Nos. E378-19, et al. indicating that' it was not really firm and 'awfully expensive" ( Exhibit GT-31, at 17). The Company centinued to develop an acquisition pro-posed throughout 1975 (Exhibit GT-34). However, enthu-siasm was apparently dampened when Fort Pierce inter-vened in proceedings before the Nuclear Regulatory Commission regarding FPEL's preposed South Dade nuclear generator. FPEL proposed a sale or lease of the Homestead utili*.y in 1976 when its president met with city offi-cials to discuss Homestead's request for a retail ted-eitorial agreement, an emergency interconnection and wholesale purchases (Exhibit GT-18, at 1). In 1976 the Ecmestead City Council discussed the topic with FPEL; however, negotiations were apparently not continued. The record indicates that acquisition of the vero Beach utility was considered by FPEL in 1957, 1958 and 1959. 35/ Thereafter, a serious effort to accuire the Vero Beach system was undertaken in 1976 which' cuL71-nated in approval of the sale by the City electorate and an application to the Federal Power Ccamission under Section 203 of the Federal Power Act. Internal management correspondence cone.orning implementation of tha acquisition by FPEL suggests that Vero Beach would be viewed as a bellwether by other municipals thinking of entering or leaving the utility business: The impact potential' of the Vero 3each acquisition on the franchise election in Daytona Beach and other Municipal operations such as Pt. Pierce, Ecmestead, etc. makes it imperative enac we not under achieve with our vero Beach operation. (Emphasis supplied.) 36/ After hearings in Docket No. E-9574, the Vero Beach acquisition was approved by an administrative law judge on grounds, advocated by FVEL, that the municipal utility could no longer efficiently generate its own power require-ments and that FPEL would provide an economic source of retail supply for the citizens of Vero Beach. This con-35/ Exhibits GT-34, at 74; GT-52; and GT-62. 36/ Staff Exhibit GT-34, at 1. Q:

Cocke: Nos. ER78-19, ec al c n \\ a: tr usts with the finding by the Presiding Judge that Vero Sesch was a "truly excellent" utility with outstanding growth potential. See, Florida Power & Licht Co., Docket No. E-9574, Initial auling and order on Phases I and II (February 6, 1978). However, FP&L thereaf ter withdrew its application in early 1978 prior to t5e commencement of a final phase of the acquisition proceeding which was to consider the possible anticompetitive effects of the proposal. In summary, the record documents 20 years' worth of franchise competition between FP&L and the municipal utilities located within its service territory. At various times FP&L has promoted acquisition or willingly received municipsi proposals. Most, if not all, of those incidents occurred when the municipal systems -sare arranging 7ew bulk power supplies from the options cf self-generation, wholesale purchase frem-FP&L, and retail purchase from FPEL after franchise disposition. The Ccmpany has not succeeded in many acquisitions, . because the municipal candidates solved their supply problems by adding gercration. However, the record strongly indicatas that self-generation is becoming ( less and less attraccivt to the point where FP&L's - _ _. witness Gerber has described small scale generation as ~ ~ an anachronism. Since TP&L controls the remaining two opciens, 37g we conclude that its wholesale monopoly power can only increase, and, thereaf ter, its retail power as well. See, Borcuch of Ellwood City v. 9ennsylvania Power Co., 462 F. Supp. 1343, 1346 (W.D. Pa. 1979-). The Presiding Judge expressly accepted the Ccmpany's representation that it was not interested in acquiring Homestead or Fort Pierce because of capacity pecblems i and operating difficulties. Since we find the premise of l this representation unconvincing, 38/ we would be remiss to wholeheartedly accept its conclusion. In any event, it does not overccme the weight of the evidence to the contrary. ]9/ 9 l 37/ As discussed infra, at 31, municipal purchase of ~~ entitlements in large generating units constructed by TPGL does'not currently appear to be a viable option. t 28/ Infra at 34-37. 39/ Alternatively, it appears that the Florida Public Service ccmmission could require ??sL to provide retail service ~~ if the customers of a municipal utility voted to dis- \\u band operations. See, Florida Statutes Annotated, 5366.03.

Docket'Nos. Et78-19, 9. al.. Potential Losses of Franchises Che Company appears well aware of ene relationship between its wholesale sales to municipal utilities and its ability to retain existing retail franchises. In March of 1977, a market development presentation was made to FPEL management which stressed, inter alia, the need to maintain the integrity of the Company in ~ relatien to publicly financed utilities (Exhibit GT-64). 40/ Between 1976 and 1985, for example, franchises covering retail sales to 41.8% of FPEL's customers are to expire (Exhibit GT-66). In addition, FP&L serves another 93 communities at retail with no franchise agreement. Franchise competition can be a positive force to encourage better service and lower (. cates; thus, a utility should not be allowed to tilt the balance by artificially making wholesale service unattractive to potential retail market entrants. United States v. Otter Tail Power Co., i sucra, 331 F. Supp. at 61. The record concales evidence relating to three franchise expirations, of which Daytona Beach is the most fully documented. In 1975 or 1976, the City of Daytona feach under-took a study of municipal distribution versus F?&L franchise renewal. In response, the Company mounted a significant effort to inform City residents of the benefits of franchise renewal. Of particular note are the Company's statements that each of the Florida municipal utilities had rates higher than FP&L (except for two with access to hydroelectric power) and that municipals charge these higher cates because FPEL "can gain greater economies of scale in all facets of its opera-tio t." (Exhibit ST-5, at 1 and 3). FPEL won renewal 40/ In a 1975 paper on " Strategic Isaues In Inter-utility Relations" prepared by Company witness Gardner, emphasis was placed, inter alia, on franchise renewals and phase out of wnolesale tarif fs ( Exhibit GT-30). See also, Exhibit GT-49. l l (_:

l l Cocket Nos. IR78-19, ac al. l 1 s of its franchise af ter a record high election expendi-ture ( Exhibit GT-76). Due to the continuing expirations of retail franchises, we conclude that vigorous franchise competition exists within the retail market which FP&L can influence through its wholesale sales policies. The Company characterires its efforts to renew l franchises and acquire others as sales promotion and business preservation. 41/ However, these actions may still run afoul of antitrust law and policy when undertaken by a possessor of monopoly power. Otter Tail Power Co. v. United States, 410 U.S. 366 (1973); and City of Mishawaxa v. Acarican Electric Power Co., 465 F. Supp. 1320, 1329-32 (N.3. Ind. 1979). l FP&L's Relationship with Ecmestead Traditionally, FPEL' has demonstrated consideracle reluctance to engage in fien power transactions with municipal utilities, even within its own service territory. During the 1950's and 1950's this amounted to an u. qualified refusal. Rate schedule RC under which firm service was provided -to-cooperatives required that capacity and energy "not be resold or distributed by the Customer to any munici-pality or unincorporated community for resale" ( Exhibit ~ ~ GT-51). In an inititi decision adopted by the FPC in Florida Power & Licht Co., 37 ??C 544 (1967), 42/ Hearing Examiner Wenner recounted six separate instances over a period of 13 years when the Clewiston municipal utility requested and was refused wholesale service by F?&L. 43/ In 1963, the Company's president informed the City on Winter Garden that FPEL did not " supply 41/ ??&L brief on exceptions at 45. 42/ Affirmed, Federal Power Commission v. Florida ""~ Power & Lient Co., 404 U.S. 453 (1972). 43/ 37 FPC at 572-73. l O E i l l

,o,' c ( Cocket Ncs. g373-19, et gi. - =unicipal systems fir = wholesale power for distribution through a municipal distribution system" ( Exhibit GT-16). d4/ Homestead first requested firm wholesale service from F?&L in 1967, to which the Company responded that it did not provide this service to municipalities and did not wish to serve any. Wholesale power from F7&L was Homestead's alternative to the immediate installa-tion of new generation or disposition of its system (Exhibit GT-22). Robert Fite, the Company's president, and F.E. Autrey, a vice president, stated chat FP&L would not refuse to sell wbclesale power, if that was the only arrangement negotiable; however, they added that the City would not receive the cate at which firm I sales were made to cooperatives and that a retail territorial allocation was a necessary precondition to l any service. F7&L emphasized the ecmparative benefits l of an energency interchange agreement or sale of the municipal system in lieu of wholesale purchases (Exhibit GT-lS). Homestead was unable to negotiate a firm wholesale contract and instead made intermittent purchases from FPEL over the ensuing five years at average prices that were considerably higher than thosts paid by FP&L's cooperative customers ( Exhibit GT-29, at 33). Zn April of 1972, Eomestead requested a more sophisticated interchange agreement with F?sL including the purchase of fira power to meet a portien of the City's load; however, FP&L negotiators responded that FP&L was only interested in an interchange where both parties had capacity to meet their own demands plus ample reserves (Exhibit GT-29, at 1-3).

Instead, Homestead and FPEL wnhered into new emergency service agreements whereby the Company only agreed to supply eaergency power needs "to the extent it has capacity I

available. FP&L applied its then-existing cate schedule "WH," applicable tc total requirements pur-chases by cooperative custom =rs (Exhibit GT-29, at 4-11). Homestead next requelted power from F75L in August of 1973, proposing a firs purchase of 12-16 MW from 1975 through 1980. The City stated that it intended to use if/ See also, Gainesville Utilities Decartmenc v. Florida l Power & Lient Co., su=ra, 573 F.2d at 298. l

's Cocket Nes. IR78-19, eji, d. - m this capacity for base load, purchase interchange energy to meet its intermediate lead and use its own generation only for peak load capacity and reserve (Exhibit GT-29, at 12). 35/ The Company first decided to respond to Ecmestead's request with the so-called ' Marshall Theory": Ecmestead was to be told that FP&L had no firm power to sell. Company negotiators were advised to have load and re-serve estimates available to substantiate this respcnse (Exhibit GT-29 at 14). Immediately thereafter, however, the Company concluded that Homestead had been listed as a custemer under all requirements schedule SR and was l actually receiving firm power at committed intervals. 36/ FPEL then decided that 11 Homestead requested a trans-i i mission interchange agreement as well as firm power, it would employ Schedule D and use Schedule SR as the nego-tiated rate thereunde'r. In October of 1973, Eomestead submitted a compre-l l hensive request for an interchange agreement and simul-l taneous purchase of fien power from FP&L to serve the base-lead portion of the City's requirements (2xhibit l GT-29, at 24-25). However, Exhiaic GT-29 (at 29-31) reveals that the company wanted to avoid any ooligation to sell firm power to Ecmestead by withdrawing schedule SR frem its existing wholesale customers, including Ecme-stead and replacing it with an " Emergency Rate Schedule" telling the city that it has no fira power to sell. I i 15/ The Ccmpany's chief representative at this meeting was its vice president, E.L. Bivans, who later testified in this proceeding. Copies of Sivan's notes (Ezhibit GT-29, at 12) were sent ec the Cem-pany's president and other executives. 16/ This discussion is recounted in the notes of Cem-6 pany employes "WMK* ( apparently W.M. Klein, a nego-l tiator in dealings with Homestead), Exhibit GT-29, l at 15. The notes bespeak a certain surprise in l learning that Homestead was an SR custemer: " Rate SR offers firm power. Apparently, the Company has I been honoring their request or a number of years, and is not in a good positio to refuse to continue offering firm base lead powerNof 12 MW to 14 MW, which is consistent to (sic] their previous demands."

• 6

l' 'J, l Decket Nos. Ere 3-19, et al. "' Alternatively, it acnsidered offering Homestead a 1 Schedule D (firm incerchange) rate lower than schedule SP in return for a signed contract stating that the City would install additional generation capable of carrying its electrical load. The final paragraph of this internal memorandum seems an apt summariration of FPEL's reaction to Homestead's request for firm power : It is our belief that if we refuse to sell the City of Homestead Firm l Power they will immediately request us to wheel from other municipalities. If we encourage them to increase their generation where we can purchase power from them, we may offset the demand for wheeling as well as avoid a long- \\ term Firr Power commitment. ( Exhibit l GT-29, at 31.) FPEL's hope to induce Homestead to construct addi-tional generation for base load requirements in lieu of fira power purchase was not done wittout knowledge of the consequences for the City. In December of 1973, FPEL's financial planning department prepared an analysis of FPEL and the municipalities in or near its service ~~~ ~~' area entitled " Comparative Analysis of Municipal and Investor owned Utilities and the Henefits to Their Customers". ( Exhibit GT-34, at 42-44 ). This study determined that, except for Orlando and Jacksonville, municipal utilities charged higher retail rates than FPEL, because: The sire of most municipal units is limited by the sire of the city. This Itait on sire prevents the snaller muni-cipal utilities from realiring many of the economies of scale available to large utilities. This fact was clearly revealed in the analysis. The smaller utilities had less efficient heat rates and higher fuel and operating costs per KWH of power sold. These higher costs appeared to be major contributing factors in the high cost of power to their custcmers. Negotiations on the Homestead inturchange agreement continued and in December of 1973 a final set of discus-sions occurred, from which FPEL learned that the

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q Cochec Nos. IR78-19, et al.,. 2: " key" to this agresement was F?sL's willingness to simultaneously supply service under both the in terchange agreement and schedule SR af ter construction or neces-sary interconnection facilities by Homestaae. Engin-eering and billing problems weee not considered serious by FP&L personnel. However, Company negotiators opposed a written commitment to serve the City under Schedule SR af ter completion of the interconnection "because we (FP&L] already have + contract to serve them on SR and the agree-ment does not necessarily prohibit such an arrangement to continue" ( Exhibit GT-29, at 39). Instead, FPEL's vice president, R. G. Mulholland did send a letter to Homestead's City Manager, in January of 1974, af ter the interchange agreement was signed, stating the Company's understanding that it would provide Homestead with elec-tric power for 36 months af ter ccmpletion of the City's ( new interconnection facilities at a rate not to exceed the Company's approved wholesale rate schedule in effect at that time ( Exhibit GT-29, at 43). Eomestead's high-voltage interconnection facilities were completed in October, of 1977. Without advance notice to Ecmestead or any indication from the City that it no longer wanted average-priced firm power, FP&L filed i tce cate change application with this Cennission which proposes to terminate it service to Homestead. In place of SR power, FP&L str ces it will sell Ecmestead incre-mentally-priced, cur :ailable Schedule D power, which the Ccmpany admits it more expensive than schedule PR when used for base load. Thus, Ecmestead has received wholesale service from FP&L since the 1950's, including firm requirements ser-vice under the SR-1 tariff since that tariff first became e f f ec tive. Frem the time of agreement in 1973 to completion of the interconnection in October 1977, FP&L served Ecme-l stead under the SR-1 tariff (Exhibit 29). We find no evidence to support FPEL's contention that ecmpletion I of the interconnection somehow eliminated Ecmestead as an existing wholesale requirements customer. Nor is it persuasive to assert that the parties intended for Ecme-stead to be served at ~ an incrementally-priced Schedule D rate instead of the average-cost schedule SR. 47/ 1 47/ The record indicates that FPEL did act pub.lish a -~~ i rate level formula for Schedule D until February 10, 1 1978, when it made an offer of Schedule D cacacitv to Fort Pierce. E ~ l i L

l. Docket Nos. ER79-19, et al. Indet inowing Homestead's desire for base-load firm power, the Company's representations as to the meaning of their interchange agreement in January of 1974 are guite to the contrary. It would be difficult to reach any other con-clusion, given the weight of this largely unrebutted evidence. F7&L's Relationshic with Fort Pierce The efforts of Fort Pierce to purenase firm power from FP&L cear a marked similarity to those of Homestead. In March of 1976, Fort Pierce approached the Company about purchasing firm power to meet the the City's base load requirements and using its own generators for peasing purposes. Fort Pierce renewed itu request in letters to FP&L in April and December of 1976. The December letter requested separate price quotations for base, inter-mediate and peaking capacity. The City also informed FPEL l ( that it ismediately wished to begin purchasing " base capacity and energy on a year-round basis in ameents ranging from 25 MW to 30 MW," and requested a statement of the Company's terms and conditions. Although FPEL recognized its obligation to provide servica under schedule SA-1, both in an internal memorandum and in a letter to Fort Pierce, the Company failed to respond with specific information on which Fort Pierce could act. After enother letter to 1?&L in April of 1977, the parties met in July and Fort Pierce was told that. FP&L had no firm power to. sell 48/ Fort Pierce maintained its position that it was entitled to firm power under the SR-1 tariff throughout the remainder of 1977. r tober 14, 1977, FP&L filed changes to the l tariff wh' aited its. availacility to existing customers. l Thereafter, che Company offered Fort Pierce up to 240 MW of capacity through the end of 1980, but under the terms of interchange Schedule D, not schedule SR. Cn March 24, 1978, during the cross examination of F?&L's cata design witness, Lloyd Williams, by counsel for Fort Pierce, Mr. Williams acknowledged that the City was eligible to purchase fien service under the SR-1 tariff. The same day, FP&L delivered a draft service agreement to the City and firs service began immediately. However, a dispute remains. concerning the duration of service and F?&L has stated its intention to terminate service to Fort Pierce if we approve its proposed re-striction of firm service to named and existing customers 48/ Ecwever, in July of 1976 F?&L's System Planning i i Depart =ent prepared a market assessment of firm intercharge sales between 1977 and 1985 which pro-f f ected an "available supply from FIL" ranging between N' 1604 MW and 1995 MW in 1977. This report assessed the l opportunities for sale of firm power to 10 different utilities in peninsular Florida, including Fort Pierce (Exhibit GT-7).

I b Docket Nos. ER78-19, el 31.~ ~ which do not have genersting ccpacity sufficient to meet their peak loads. Limitations on Alternadive Sources of Caescity Unre- ) it is butted Company documents in evidence indicate tnat FP&L's policy to retala full ownership of the nuclear generating plants which it constructs. The CLipany has i stated that the full capacity of these units is needed l to serve its own customers, so shacing is not to be anti-l cipated until FPEL teaches the optimum amount of nuclear l capacity for its system (Exhibit 27). However, no party disputes that joint ownership of such facilities would l provide municipal and cooperative utilities (ar, well as other utilities in the region) with access to FPEL's economies of scale (Exhibit GT-1, at 6). FP&L is the sole owner of three operating nuclear plants having aggregate capacf.ty of 2,188 MW. FPEL has i agreed to share a portion of St. Lucie No. 2 nuclear plant with neighboring systems including Homestead and New Smyrna Beach; however, FPEL documents in evidence indicate that this was done at the insistance of the Justica cepart-ment and that FPEL has not committed itself to share the capac!,t of any future unit (Exhibis GT-71, at 22).19/ 9 The Availability of Transmission fievices FP&L now offers four waeollag services. walen cortaspond to its interchange capacity and energy services. 50/ Wheeling may be provided for one-year periods, with service available at the sole discretion of FPEL when trans-mission capacity is not otherwise required by the Company. Transmission schedules TA, T5 and TC correlate to inter-49/ In 1973 FPEL considered cancelling St. Lucie No. 2 ~ l because of " escalating costs and Justice Depart-ment review of 6ur antitrust status" (Exhibit 20). l Then in 1976 the Company considered a shif t to i coal-fired plants for future base-load generation l "to eJ iminate the Atomic Energy Act as a route to municipals' investment in generation" (Exhibit GT-1, at 13). See also, the decision of the Atc'aic Safety and Licensing Appeal Board, Nuclear R6gulatory Commission, in. Florida Pow' r & Licht Co., e ' ~ "~~ Decket No. 50-389A (ALAS-420, July 12, 1977), negarding antitrust review proceedings on St. Lacle No. 2. 50/ A complete description of enese four services is found ~~ in Exhibit 23 (REB-AX), a draft service agreement gg ../ sent to the City of Fort Pierce on Decenber 6, 1977. The rate for these services is currently under adjudication. ---w-.,---..

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a l i Docket Nos. ER78-19, e,t d.,. change schedules for emergency, scheduled and economy ca,pacity cad /or energy services. 51/ of particular significance to this case is sche'dule TD, denominated i 1 " firm transmission service." However, " firm" is a misnomer because Schedule TD service may be reduced or interrupted at the Company's discretion for periods up to 30 days. H / ~ In short, these four sheeling services only offor surplus transmission capacity on an as-available basis. i FPEL does not contend that any of these four wheeling services could be utilized to transmit alternative power supplies to utilities within the relevant markets from third parties equivalent to those obtainable under schedules SR-2 or PR. Tha Company states that J an appropriate rate would have to be negotiated at the time a potential wheeling customer arranged its ( alternative power supply. E/ 5_1/ Supra at 4-5. 1 H/ Section E of the draft agreement (Exhibit 28, REB-AX) providen: In the event that Firm "'ransmission Service - cannot. be provided due to an unanticipated reduction or interruption of FPEL's transmiszicn facilities supplying such service, or if such service is provided in an amount less than 80% of the-Contracted Demand for Firm Transmission Service as a result of unanticipated reduction or interruption of power delivered by the Commission to FPEL for the Cit.f's account pur-suant to Service Schedule D of the City-commission contract, and such reduction or interruption continues for a period of thirty (30) days, the l i Charge for Firm Transaission Service will be adjusted as follows: In each suc=sedin'g month, l the higher of (a) the maximum a delivered to FPEL in any one hour during that month, or (b) the maximum W delivered to FPEL in any one hour during the preceding.six months, will be substitutad for the contract Demand for Fira Transmission Service for purposes of cal-culating the Charge for Firm Transmisison i service. Upon such reduced or inte' erupted service being restored to 80% or more of the Contract Demand for Firm Transmission Service, the Charge in each succeeding month shall bc based upon the full Con':racted Demand for Fir = Transmission Service. O" 5_3/ F7EL brief opposing exceptions a: 42.

i Cocket Nos. E373-19, et al. - 3 4 - ) THE REASONS GIVEN SY FPEL FOR ITS TARIFF LIMITATION PROPOSALS FPEL would seek to justify its proposed limitations on full and partial requirements availability in terms of operational constraints. Specifically, it asserts that future power supply is too uncertain to allow unlimited access to its requiresents service. According to FP&L, customers which are self-sufficient in generating caFacity could arbitrarily shif t their load between service frew FPEL and their own generation. This would purportedly lead FPEL to maintain capacity in excess of its other custom 2rs' needs but with no assurance that such capacity would be fully utilized, thereby increasing rates to all custemers. The Company proposes to remedy this uncertainty by making these on-again/off-again custamors ineidgible fcc service under schedule PR. However, the difficulty wi.th this proposition is that it has virtue 137 no record support and is based ~on 2 few conjectural statements by Company witnesses. In fact, FPEL's rate design witness prepared a mod.el lead duration curve in 1975 showing that customers with generating capacity less than peak demand and customers l with capacity greater than peak demand would each purchase base-load requirements frem the Compacy, under an SR schedule modified for parallel operation, and use their own capacity intecnittently to meet intermediate, peak and reserve demands (Exhibit GT-71, at 33). This is consistent with t'.e repeated requests of Ecmestead and Fort Pierce for base-l icad firm power. 54/ Moreover, the natural inclination of these systems to buy base-load power would apparently be reinforced by the design of FPEL's PR rate which is Latended to pecmote high load factors. Sjh/ 54/ Cunta at 27-?l. Again in their testimonyu Flor.ida Cities state their intention to use schedule PR for base-load purposes and use their own generation for peaking (Tr. 639). 51/ Su=ra at 3-4. While FPEL is discouraginc. purchases by salf-sufficient municipals it has apparently adopred a marketing strategy which promches high lead factor usage as a means of improving its declining system load factor (Exhibit GT-64). l -twp-ym--- e-- -w w e-g r r m-g - & e--tre-+,mm--ww-w we e ger-e++w+ew - w p-wy---n a-e,-- - - - - r%--w-- ew--we.---e - - - - ---ee-e-o.-3:eeew--.:---,,, e- -m-= ew-vs------w

~ Occke-Nos. ER78-19, et al. 35 FPEl relies on oil, natural gas and uranAum to fuel its generation. It cites the 1973 oil embargo 1 resulting drastic oil price increases and the expiration of long-term oil supply contracts and replacement by three-year contracts to cast uncertainty upon its oil supply. As for gas supplies, it references high levels of curtailment and the expiention of a major gas supply contract in 1979. Concerning nuclear fuel, FPEL notes that it only has a two year inventory and that its long-term supply contract was cancelled by the seller in 1975. FPEL may well face fuel supply problems, as do other suppliers in the electric utility industry. However, they are not of a magnitude that would justify the proposals before us in this case. It appeces that FPsL continues to possess long-term fuel oil contracts and that it has entered i into shorter-term oil contracts (3 years) with favorable cancellation peevisions in order to gain greater flexibility in responding to price changes on the open market (Exhibits 22, at 3 r 51, at 9). FPEL's natural gas warranty contract with Amoco Production company provides for daily deliveries of 200 MMrf through 1988, such deliveries being beyond the purview of the present curtailment. plan of the transporter of this gas. Florida Gas Transmission Corporation (Exhibit 51, at 9; Tr. 431). 56/ Finally, an affiliate of FPEL is engaged in uranium exploration (Tr. 454) and FPEL's existing nuclear units do not appear in danger of being curtailed due to fuel shortage. 52/ 56/ Cee, Sebring Utilities Commission v.

PERC, F.2d

~~ i 5 th Cir. Nos. 77-2911 and 77-2972 (Maren 20, 1979). 51/ In 1978 FPEL and several other utilities won a judgment in federal district court against their nuclear fuel requirements supplier, Westinghouse Electric Corporation. ._ vircinia lectrie & Power Co. v. Westincheuse Electric Cor;., Cav. No. 75-0514-R (E.D. Va. Cctocer 27, 1978). In an unreported opinion the court held that Westinghouse was not excused for delivering nuclear fuel by reason of force maieure provisions in str-contracts with the various utilities. See, Antitrust Trade Regulation Reporter, No. 887, at A-15 (Novemb,er 2, 1978). 1

Docket Nos. *;R78-19, at al. t l Among the fuel-related problems which FP&L gives as a reason for limiting firm wholesale service is its inability to peccure a coal supply contract.

However, on cross earmination, FPEL vice president Gardner acknowledged that the company has no coal-fired generatien and has no plans to construct any.

These points are confirmed by the testimony of FPEL's vice president in charge of fuel procurement which was l Jt:esented to the Florida Public Service Commission in the spring of 1977 (L;nibit 22). 58/ Cn brie-f, FPEL has argued that the inability to oTeain a coal supply contract i has impaires its ability to plan coal-fired seneration. .i However, the only evidence in the record of FP&L's need for such a plant was its desirs to avoid municipal access to nuclear generation, the base load alternative to coal, which could come from. antitrust review before the Nuclear ,i Regulatory Commission. ig[ PP&L points to environmental regulations which make construction of coal-fired units difficult and make nuclear units almost impossible to build. It also points to escalating costs, litigation and' regulatory delays and l requirements as additional factors stopping future nuclear unit construction, or at least yielding a 12 year lead time which necessitates equal lead time for lead forecasting. It refers to its cancellation of the proposed South Dade nuclear units and the substantia 1 ' delay in licensing and j resulting increase in capital costs of its St. Lucie No. 2 nuclear unit. As for existing generating units, FPEL l states that its Turkey Point nuclear units have experiencad steam generator leaks causing unscheduled outages in the past and requiring extensive acheduled outage in ene future for repair, and that its ccmbined cycle Putnam units, due ~ to their no el design, have not beer. reliable. Fina11's, FP&L refers to its common stock selling below book valce as evidence of financial difficultiis which have limited its construction budget to internally generated cash. 58/ Exhibit 22 indicates that while coal may well be used in the future, economic, environmental and reliability problems make it largely irrelevant to FPGL's current capacity planning. 51/ Suora at 32, n. 48. ( l ( ---s ---%wse-,*.--m--n-r--..>- =e=we-w.as.iin--ii--wv.-w.- ww w e-w w--- ---- w ww ee = r e e vw.w--==m,ar-ye---+v w-*w-mw-w,--~,ev---+*- y

. e Docket Nos. Z378-19, ej al,. We certainly cannot deny that these constraints do i posa problems for utilities such as' FPEL, but the record ] fails to establish that FPEL is so hampered by regulatory requiremen:s and financial difficulties as to be incapable of expanding its generating capacity as needed in the future. FPEL is, af ter all, offering 240 MW of Schadule D capacity to Ecmestead and Fort Pierce, and the recent rate of increase in demand by FPEL's other customers cannot be charactacized as rapid. FPEL has been getally reducing its demand and load forecasts in recent years, with the actual rate of growth being relatively low averaging at most around four percent annually (Tr. 848). To the extent I that tne record gives any indication of FPEL's current l financial condition, it reveals that FPEL has experienced significant improvement in earnings and related market factors. About the time FPEL filed this case, it was reporting lower, more manageable growth; geester internal generation of funds; improved earnings and coverage ratios; / and increased dividends (Exhibit GT-78). Suffice it to sav that the record, comprised largely of company documents,' is i ambivalent on this issue. t FP&L would support the separation of full and partial i requirements tariffs in terms of. costs of service on the l basis of dif.farent lead patterns. 60/ These separate full r.nd partial requirements tariT!s differ both in tu.m of demand and energy charges. F?SL contends, therefore, that it has designed different rates to reflect more precisely the different costs of serving these different customer grnups. Establishment of separats full and partial who'lesale requirements rates is common practice. We have in fact reccquized the differences in the costs of serving full and partial requirements customers,' not to mention different types of partial requirements customers. j61 In the present case, FP&L's proposal of separate full and partial requirements rates appears reasonable. 62/ 2 1 =. _ _ - 60/ FPEL asserts that its wholesale customers without any generating capacity have relatively stable and predictable load patterns wnich allows it to plan operations and design rates to recover costs of serving these full requirements customers. It further con-tends that partial requirements loads are less stable but that the PR tariff allegedly encourages such customers to stabilize their purchasss of power. 61/ !.c., 3.:ston Edison Commanv, Cpinion No. 809-A, Docke t Nos. E U738 and E-7784, 133ued December 9, 1977 (mimeo at 2C;. G-62/ Of course, in Phase I of this docket we -are not addressing the specific costs of service and rate designs of the SR-2 and PR tariffs. Accordingly, our determination does not reflect on how these two ratas will actually function. -,-n.__ ,-,n..--,,,-..c--,--,,-,

Cocket Nos. ER73-19, ef,al,. BALANCING THE PUBLIC INTEREST CCNSIDERATICNS When the SR-2 and PR tariffs are viewed from a per-spective on the relationships between FPGL and other utilities within the relevant markets, the Presiding Judge's conclusion that the Company's proposal has 'no discernible anticompetitive effect in and of it-self" is inadequate. 63/ With alternative sources of base-load wholesale capacity unavailable, FP&L's tariff restrictions would deny to Ecmestead, Fort Pierce and other nominally self-sufficient utilities within the relevant market the only remaining source of supply, schedule PR. It would conclude, finally, the municipals efforts over ten years to obtain a source of economically-priced, base-load power. Municipals like Homestead and Fort Pierce would become likelise to leave the utility business. Indeed, the citi=enry might force these utilities to come to FP&L requesting takeover. See, Citv of Mishawaka v. American Electric Power Co., suora, 465 F. Supp. ac 1329. Of even greater importance to ene Company would be the assurance that in future frsachise renewal contests with potential retail market entrants, it could point to existing municipal utilities as characteristically expensive and unable to exploit scale economies. Homestead and Fort Pierce would not be able to economically utilize higher-priced, lower-quality Schedule D. service to meet their base-load requirements. Such offers to sell at impractical prices and terms have been construed as uni?"ful refusals to deal, when done to further monopoly power. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927). { ^ ^ - l 63/ We recogni:e and fully appreciate that the Initial Decision was written before FP&L agreed to continue to serve Eomestead and Fort Pierce under its PR tariff pending the final outcome of this case. We have not been I burdened by the time constraints faced by the Presiding Judge. Under the circumstances the Judge is to be commended for his efforts. 1 l l-.- ---.--.--w-------

~. ,.. s g Cocket Nos. En73-19, et al. 39_ The restriction of wholesale service to named and existiny customers is an even greater threat to potential franchise competition. The record indicates that FPEL generally plans to minimi:e sales of average-priced wholesale power to municipals and cooperatives (Exhibit ST-17).. Af ter reviewing the record of FP&L's efforts to renew the Daytona Beach frachise, it does not appear likely that the company would offer a potential distribution uuility an average-cost rate. The signal to potential retail dis-tributors in areas presently served by PPEL at retail and over which FPEL has wholesale monopoly power is quite clear. Cf., City of Mi:ihawaka v. American Electric Power Co., sunca. TfiL's offer to discuss the feasibility of service to new ~ customers under specific contract rates does not reassure us. 6J/ The balancing of competition against other public interest considerations, required by City of Huntinebure

v. FPC, 65/ hecemos relatively simple once esis case is 64/

As staff notes in its brief on exceptions, at 9, the ~ Presiding Judge erred in finding ttat FPEL had committed _ to__ serve new systems _in..FPEL's.<er rice territory. 65/ 498 F.2d 778 (D.C. Cir.1974). l l t 4 , l' ' l

i ' Cceket Ncs. ER78-19, et al. _ stripped to its essential elements. The proposed restrie-t tive provisions are anticempetitive, we find no counter-vailing ceasons for their implementation, and they are to l be deleted. The Company has not demonstrated that it should be al. ass 4 to change the general availability provision of schedule SR-1 which makes wholesale service available to all municipal and cooperative customers in FPEL's service I territory. 66/ Proposed terminations of firm, average-cost service to Icmestead and Fort Pierce are based on these f restrictive provisions, so the proposed cancellations are r ej ected. The Homestead cancellation would also violate the understanding of the parties that this custcmer would continue to purchase schedule SR after the completion of their inter-connection. FPEL shall continue to serve Homestead and Fort Pierce, under schedulle PR. However, the proposal to bi-furcate schedule SR-1 into separate rates for total require-ments and partial recuirements service is soundly based with no discernible anticompetitive effect and we approve it. In spite of the anticompetitive conduct recounted above, we wish to stress that there may be acceptable service limitations with diminished anticompetitive effects which ameloriate some legitimate operational problems faced by FPEL. Indeed, the intervenors recognize that the Company should be allowed to fashion reasonable terms and conditions to wholesale service. However, FPEL has not provided us with any middle ground, much less a showing that it has selected a tariff limitation that is the least anticempetitive means of solving any such operational problem. Finally, we note that FPEL has matters pending before us in over 30 dockets, most involving interchange transmission l service filings in which antitrust allegations have been made. 66/ Schedule SR-1 provides: AVAILABLE: I In all territory served by the Company. APPLICW1 ION: s To electric service supplied to a municipal electric utility or to a cooperative non-profit membership corporation organized under the provisions of the aural Electric Cooperative law for their own use for resale.- \\_ ...e--_._...,..,-.---..--m.,.,_.. y_,,-,e,,_. -.w -v,..,,.,-.-,.,,.__._,_.m,

.'. {. Cocksc Ncs. Ea78-19, g al. - a We see little need in those cases for the kind of elaborate presentacion made in this one. It would be helpful to the l Ccmmission for the parties to pinpoint the ecmpetitive pro-blems and defenses relating to the filings in each of these cases. l The Commission orders: 4 (A) The Initial cecision issued in these consolidated proceedings on April 21,1S78, is hereby reversed. (B) All limitations on the availability of whole-sale requirements service, as proposed by FPEL, except for the limitation of full requirement service under the SR-2 tariff to utilities with no generating capacity, are j hereby rejected. l t (C) FPEL is directed to revise its proposed SR-2 and PR tariffs to conform to this order within 60 days. 4 Until revised tariffs are accepted by the Ccamission, the 4 availability provisions of the otherwise superseded SR-1 tariff shall remain in effect. (D) The' notices of cancellation of requirements service to Hemestead and Fort Pierce are hereby rejected. (E) Exceptions not granted are denied. By the ccamission. (SEAL) s Lois D. Cashell, Acting secretary. e b

3 y . o UNITED STATES OF AICRICA FEDERAL ENERGY REGULATORY COY _ MISSION ( m. OPINION NO. 57-A 1 Florida Power & Light ) Docket Nos. ER78-19 Company ) (Phase I) and ) ER78-81 OPINION AND ORDER DENYING REHEARING l ~ l l l Issued: October 4, 1979 i i DC-A-21 f' ) l / t a s 11 O l 51 1 v(y( i

., i UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY CCMMISSICN ' -S Before Commissioners: Charles B. Curtis, Chairmant Georgiana Sheldon, Matthew Holden, Jr., and George R. Hall. Florida Power & Light ) Docket Nos. ER78-19 Company .) (Phase I) and ) ER78-81 ~ OPINION NO. 57-A OPINION AND ORDER DENYING REHEARING (Issued October 4, 1979) On August 3, 1979,.the Commission issued Opinion No. 57 in these ennsolidated proceedings which rejected the proposal m of Florida Power & Light Company (FPEL or Company) to li=it _) the availability of its firm wholesale requirements service to certain named and existing customers. Notices of cancel-lation filed by FPEL with regard to two existing wholesale customers were' also rejected, because they were based on the Company's restrictive availability proposal. In our decision we found that FPEL's proposals were unjust and unreasonable under the standards of Sections 205 and 206 of the Federal Power Act, particularly because of their anticompetitive ef' 3 facts. On September 4, 1979, FP&L filed an application for rehearing of Opinion No. 57 in which it requests that the decision be modified in,certain limited respects.1/ The Com-pany has raised no legal or factual consideration not pre-viously considered and we shall deny the application. However, we wish to reemphasize the holding of our opinion in light of several representations made by FP&L in its latest pleading. FPEL now represents a willingness to provide wholesale requirements service under its tariffs to a number of Florida utilities in addition to those presently served: The Company is either serving, or is willing to provide servier co, the following: Clewiston; 1/ No other party applied for rehearing. _ r O s m s- ,g Qif= m

Dockot Noc. ER78-19 (Phase I) and ER78-81, Florida Public Utilities at Fernandina Beach; Fort Pierce; Green Cove Springs; Homestead; ) Jacksonville Beach; Key West; Lake Helen; Lake j Worth; New Smyrna Beach; Starke; Vero Beach; Clay Electric Cooperative; Florida Keys Electric Cooperative; Glades Electric Cooperative; Lee County Electric Coopteative; Okefenokee Rural Electric Cooperative; Peace River Electric Cooperative; and Suwanee valley Electric Coopera-tive. Reasonable terms and conditions, including reasonable notice provisions, will, of course, be necessary, as the Commission itself recognizes (Mimeo, p. 40). The Company is willing to continue providing service to the cooperatives listed above to the extent of their loads in the geographical C,, areas in which they are now receiving service from FPEL. 2/ No controversy remains regarding the provision of wholesale requirements service to these utilities. Also, FPEL now agrees to provide requirements service to."new utilities in its service area that may be established by those en-tities it presently serves at retail. " 3/ The sole purpose of FP&L's application is to request that we modify Opinion No. 57 to permit the insertion of i a new availability restriction into the Company's require-ments service tariffs. FP&L now proposes to exclude large self-sufficient utilities, including the Jacksonville Electric Authority, the Orlando Utilities Commission and the City of Gainesville. The Company does not represent (.. that any such large utility has requested service. 2/ Application for Rehearing of Florida Power & Light Company at 3. Two of these utilities, Fort Pierce and Homestead, were the subjects of the notices of cancellation rejected in Opinion No. 57. 3/ Id,. at 2. See, Opinion No. 57 at 39. I (Ns l t _........A I.

Docket Nos. EK78-19 (Phase I) and ER78-81. In support of itL request for modification FP&L reiterates the arguments considered during our earlier deliberations. It argues that our decision should be modified in light of the Company's wheeling policy and opportunities offered to other utilities to participate in FP&L's St. Lucie No. 2 nuclear power plant. We shall not consider adoption of the Company's new proposal at this stage of the proceedings. If FPEL wishes to propose any term or condition of service undet its requirements tariff, the Company should do so in a new filing wherein it should be prepared to demonstrate that the proposal is "the least anticompetitive method of obtaining legitimate planning or other objectives." 1/ The Commission seders: FP&L's application for rehearing of Opinica No. 57 is hereby ' denied. s By the Commission. (5EAL) s Kenneth F. Plumb, Secretary.

• ~/

.-

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) e e e, g. Sur., s4pt. 3, Ifn, Vero B2ach, Fin PRE $S.JoURNA1. l l I G =*

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y j -{y r 1,2 b Ec.e FLORIDA POWER & L:GHT COMPANY n open etter to everyVeroBeach resident from Floric Power & Light Comparr s Ralph Muholand. e._.-. M September 4,1976 DearVero 8each Residetic On September 3,1976, Fimida Power & Ught Ccmpany w informed the Public Service Ccmmission ofour int.ention to Sie fcr ::te relief. When you first heard er read that Rorida Pcwer & Ught Com-pony was asking for rate relief, two questions probably pepped right into your mind: What will this do to rny electric bill if we vete to sell cu.relec=ic system to Florida Power & Ught Companyt .Why does this ccme nou; at the last minute, hefere the - referendum? i ,.. I'd like to ease your mind en both th'se points'widt quick e answers. q . - First, there will be no e.Tect dn ycur e!cctric bill at all fer quite a while. It generally takes menths for the Public Service Commission to , study and act on a race request. We will be well into 1977 before a naal ' . decision is made. Meanwhile, ifycu approve the safe inTues&y's vcte and it !s <.cncluded in the nearfuture, ycu will begin enicying Rerida Power & Ught Ccmpany's present rates-which are, as ycu know, c:::uiderably ~ lower than what you now pay. Ifour race request is eventelly gmnteci by the Public Service Commission, the electric bills ofcil Herida Power & Ught customers will rise. But ycu ussail pri signipc=ndy les when Rorida Power & Ught Company pnn ides you e!ectricsen ice than ifVero Beach con-tinued to cpe: ate the eleenic stem. As for the timing: Friday, September 3, was the earliest pessible day we could prepare all the details and parenverk for the Public Se:vice ~' Commissien. In fact. E SiSr?t c:cpect to be ready until the end cf. <1 . Septemben We wantedyou to have all the facts before you vete,so a let ef.- pecple at Rcrida Pcwer & Ught Compa ny werked overtime to speed . things up. Get:ing the news a few days befo re the vcce may net he idc=1...,, but it sure beats getting the news after the vote. l l

• Now, I'd like to give you mere cf the details becatse yeu're en -

. tided to a full. frank explanation.To give you an idea ho'w tha vote and'. our rate request r :ight afiec: ycur elec:ric bills, here are some Ggures based on a residential customerin b Beach who uses ICCMilowatt- ' heurs per month. First. we made a ccmpanson using the av,eg: men chy, bills this custcmer wuld have paid over the Arst eigh t mendu cf1976.. ?. s... . ATPRESENTRATES ".l .2 .. ',VERO BEACH... < FI ORIDA POWER & LIGHT' J '] ] ' ~ $47.58 y,h $38.40 .'C,npany.* % Beach faces are 24% higher than Rcrida Power & Ug Now suppose during 1977 the Public Service Commission ' approves.Gerida Power & Ught Company's request for rate reliefin full. Compse the average bill based en that with what this same customer would pay ifh Beach centinued to cpecte the e!ectricsystem.To . make this comparison realistic, we must add to the h Beach rate the 12.7% increme which its acccuncing Arm: Emst & Emst, informed the C1q would be necessary: ~ AFTER RATE INCREASES VERO BEACH FLORIDAPOWER & LIGHT $53.60 .s $46.60 .This still indicates h Beach rates to be 15% higher than' Horida Power & Ught Ccmpany Allthesefigures include local ualicy taes, fueladlustment and fmnchise fees. We expect eo ha <e a new nuclear genemting unic ac St. Lucie ' in servicc in the near future.This should bring annual fuel savings ef more than $1C0 millien that will be passed directly to cur customers through a reduction in che fueladiustment. which has been reflected chove. '. So there you have it: even with Rorida Power & Light Com- . ponys full rate reliefrequest approved, ycu wi!! still reali:e a considerable aving. h . Why dor.s all this ecmejust now, with the referendum only a fewdays away! All thrcugh the negotiations with h Beach we have been completely frank about the possibility of a race increase. We pointed cut that Florida Power & Light Company faces the mme tremendous cost pressures that are squee:ing every electric unlicy in Florida. Florida Power & Light Company is paying the inflated costs cf 1976 with income from a 1974 race structure. Florida Power & Light Company rates have traditional!y been among the lowest in Ecrida. We are confident that in the Icog run, when the other Florida electric utilities adjust to meet rising costs, you'!! find Rorida Power & Light Company races near the bettom of the list. It' true that we didn't suddenly decide on the moming cf. s September 3 to askforrate relief. Allyearwe'vesaidpublicly thatwe were seriously concemed about rising costs and the possibility ofa rate request has often been censidered. When we couldn't postpone the inevitable any Icnger, we started. =... l , preparing the facts and figures we need to support our request. Its a big t .. and complicated job and, as I said before, it locked like we cculdn't be 4*". / ready until the end of Septembe. -

I O j. ~his wenied me a let because I knew yeu'r referendum was c comingon September 7. I asked cur cecple to really put the pressure en. i to work nights and weekends ifnecessary to get cur request to the Public ? Service Commission ready be;bre September 2 They did a great icb. { Wirhin a few minutes after we 6!ed our reque:c with the Public Se:vice [and ychtlocal news media. Commission, I was able to pass the f[.. ! ' To sum it all up, we did eve.ything we ceuid to give ycu the > news before the' referendum. Even ifRcrida Power & Lights' full request

. is granted, vou11 still pay less for Rcrida Power & Lightservice than T you'd pay if Vero Beach continued to cperate the e!ectric system.

{~ ) . We sincerely believe the preposed sale will be a good thing-good forVe:o Beach electric custeme:s, and good for the City itself. Ifit is ! approved, we pledge to deliver you reliable electric service at t I possible cost.We hope you will give us the oppertunity to keep .this promise.

i.. -

v: . :i '- 3; FLORIDA POWER & LIGHTCOMPANY e r ~ - . f&WMJL A ~ R.O. Mulholland Senior %:e President ' / Ov m M N l ,,N w e aue.c - a* w ^

DISTRICT OF COLUMBIA, ss: AFFIDAVIT 1 My name is Brenda Scott. I am a secretary at the Law Firm of Spiegel & McDiarmid, 2600 Virginia Avenue, N. W., Washington, D. C. 20037. I have listened to excerpts from a tape recording of the January 23, 19C0 Vero Beach City Commission Meeting with remarks by R. J. Gardner, Florida Power & Light Company. The attached is a transcription from such tape. Brenda Scott i Subscribed and sworn to before me titis 27th day of August, 1981. b.., - t s. N' /. / / s Notary /Public, D. C. \\II Cenunissiosgres Sege,mber 30,193+ l L -

o.,, Mr. Gardner I only have one question. What is the liklihood, in your opinion, that FP&L will reactivate its offer to purchase Vero Beach power? The plant, the system? Well, John and I were talking about that a Gardner little bit before. I warned him somebody might ask him that question. I don't think there's much liklihood of the Gardner reactivation of the arrangement that we had in 1976 and 7 in that same form. I think that there is at least a glimmer of possibi-t- N.' lity that other arrangements might be worked out if depending on what y'all's objectives were and what your desire I'm saying that depending on what you really wanting to were. accomplish is I think Ehat the in addition to Ehe antitruct problems there was some vulnerability to the arrange-ment that we had before. I'm ju.at speaking of my own personal assearment of that. The problem two standpoints. One is the substitution of private capital and its costs for municipals capital may have cost. And the other was a. merger of the rates of the two systems. If we could find acceptable ways around l those problems, it may be possible to .. and if Vero Beach's l desires simply to not have the concerns of managing a system, I think it may be possible to put some arrangements together. I have not given it a great deal of thought only a cursory thought, but if you want to explore it, we'd be happy _to do so. l 4 l { l

e a e 2-Bob, what I thought I heard you say earlier was that every since our aborted day with Justice, Dave and I were there, so was Tom, everybody, that you have in fact been taking care of those so-called 10 conditions that they said would be something ;ou'd have to agree to in order for them to withdraw from the FERC proceeding. Now if what I'm hearing you say is that you have or are dealing with those ten conditions then the next question is if we went back to FERC tomorrow with a similar arrangement by mutual agreement, would Justice stay out of it? l Gardner I don't know. We have'nt really talked to them directly about Ehat question yet. Well, I wouldn,'t think that this would be the time to be talking to them about it. t l Gardner Well, that's mainly the reason. we haven' t talked to them. l I '4%.' a s I l l l t O I i 1

j, [. UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of ) ) Florida Power & Light Company ) Docket Nos. 50-389-A ) 50-335-A (St. Lucie Plant, Unit Nos. 1& 2; ) 50-250-A Turkey Point Plant, Unit Nos. 3 & 4) ) 50-251-A CERTlFICATE OF SERVICE I hereby certify that the foregoing MOTION TO ESTABLISH PROCEDURES filed in the above captioned proceeding has been served on the following persons by deposit in the United States mail, first class, postage prepaid or by hand delivery (*) this 27th day of August, 1981: Peter B. Bloch, Esq., Chairman Michael C. Farrar, Esq. Administrative Judge (50-389A) Atomic Safety and Licensing Atomic Safety and Licensing Board Appeal Board Nuclear Regulatory Commission Nuclear Regulatory Commission Washington, D. C. 20555 Washington, D. C. 20555 Michael A. Duggan, Esq. Donald A. Kaplan, Esq. Administrative Judge Robert Fabrikant, Esq. College of Business Antitrust Division Administration Department of Justice University of Texas Washington, D. C. 20530 Austin, Texas 78712 J. A. Bouknight, Jr., Esq. Robert M. Lazo, Esq. Lowenstein, Newman, Reis & Administrative Judge Axelrad Atomic Safety and Licensing Board 1025 Connecticut Avenue, N. W. Nuclear Regulatory Commission Washington, D. C. 20036 Washington, D. C. 20555 John E. Mathews, Jr., Esq. Ivan W. Smith, Esq., Chairman Mathews, Osborne, Ehrlich, l Atomic Safety and Licensing Board 1500 American Heritage Life l (50-335A, et al.) Building Nuclear Regulatory Commission Jacksonville, Florida 32202 Washington, D. C. 20555 Reubin O. D. Askew Jerome E. Sharfman, Chairman Greenberg, Traurig, Askew, Atomic Safety and Licensing Appeal Hoffman, Lipoff, Quentel Board & Wolff, P.A. Nuclear Pegulatory Commission 1401 Brickell Avenue Washington, D. C. 20555 Miami, Florida 33131 e=a. William C. Wiso, Ecq. Robert R. Nordhaus 1200 18th Street, N. W. Van Ness, Feldman, Sutcliffe, Suite 500 Curtis & Levenberg Washington, D. C. 20036 1050 Thomas Jefferson St., N.W. 7th Floor William H. Chandler, Esq. Washington, D. C. 20007 Chandler, O'Neal, Avera, Gray, Lang & Stripling Janet Urban, Esquire P. O. Drawer 0 Department of Justice Gainesville, Florida 32602 P. O. Box 14141 Washington, D. C. 20044 Daniel H. Gribbons, Esq. Herbert Dym, Esq.

• Chase Stephens, Chief Covington & Burling Docketing & Service Section 888 16th Street, N. W.

Nuclear Regulatory Commission Washington, D. C. 20036 Washington, D. C. 20555 Florida Power & Light Company A. Toalston, Chief ATTN: Dr. Robert E. Uhrig Utility Finance Branch Vice President Nuclear Regulatory Commission Advanced Systems & Technology Washington, D. C. 20555 P. O. Box 529100 Miami, Florida 33152 Tracey Danese Florida Power & Light Company Benjamin M. Vogler, Esq. P. O. Box 529100 A.tn P. Hodgdon, Esq. Miami, Florida 33152 Counsel for NRC Staff Nuclear Regulatory Commission Washington, D. C. 20555 l WA /& l Robert A. tablon l Alan J. Roth Attorneys for the Lake Worth Utilit:'.es Authority, the New Smyrna Beach Utilities l Commission, the Sebring Utilities Cenimission, i and the Cities of Alachua, Bartow, Fort Meade, Homestead, Key West, Kissimmee, Mount Dora, Newberry, St. Cloud, Starke and Tallahassee, Florida, and the Florida Municipal Utilities Association. August 27, 1981 1 l l Law Offices of l Eciegel & McDiarmid 2600 Virginia Avenue, N. W. Washington, D. C. 20037 (202) 333-4500 -}}