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Reply to Util Memorandum Re 810817 & 18 Conference of Counsel,Per ASLB 810918 Order.Util Failure to Deal W/Outside Cities on Same Pricing Basis Is Anticompetitive
	ML20031B355
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Site:	Saint Lucie
Issue date:	09/28/1981
From:	Roth A; FLORIDA CITIES (FLORIDA MUNICIPAL UTILITIES ASSOCIATE
To:	; Atomic Safety and Licensing Board Panel
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Florida Cities: 9/28/81 BEFORE THE

(

UNITED STATES NUCLEAR REGULATORY COMMISSION P

ATOMIC SAFETY AND LICENSING BOARD h,,

Before Administrative Judges:

ts

//

DXGED Peter B.

Bloch, Chairman ugggg s

Michael A.

Duggan

. O SEP2 81981! > C Robert M.

Lazo Qb Ivan W.

Smith, Alternate 2 Seer 3

Educh ro 4

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)

FLORIDA POWER & LIGHT COMPANY

)

Docket No. 50-389A

)

(St. Lucie Plant, Unit No. 2)

)

September 28, 1981

)

FLORIDA CITIES' REPLY TO

" MEMORANDUM OF FLORIDA POWER & LIGHT COMPANY ON MATTERS RELATING TO AUGUST 17 AND 18, 1981, CONFERENCE OF COUNSEL" I

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e SEP3 0 gggy _'

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" Tggrm 3

Robert A.

Jablon

,Q Alan J.

Roth Vn

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f?

f Daniel Guttman

/D Marta A.

Manildi

- ID Attorneys for the Lake Worth Utilities Authority, the Utilities Commission of New Smyrna Beach, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Ft.

~

Meade, Homestead, Key West, Kissimmee, Mt. Dora, Newberry, St.

Cloud, Starke and Tallahassee, Florida, and the Florida Municipal September 28, 1981 Utilities Agency OE s

Law offices of:

Spiegel & McDiarmid

[ hb 2600 Virginia Avenue N.W.

Washington, D.C.

20037 8110010270 810928 DR ADOCK 05000 L-

TABLE OF CONTENTS i

Page iii Table of Authorities a+

ARGUMENT I.

FPL' S UNWILLINGNESS TO DEAL WITH "OUTSIDE" CITIES IN PENINSULAR FLORIDA ON THE SAME COMPENSATORY PRICING BASIS THAT IT DEALS WITH OTHERS IS ANTICOMPETITIVE, NOT SOUND BUSINESS 2

A.

Introduction Concerning "In And Near" 2

Cities.......................................

B.

FPL's Refusals To Deal With "Outside" Cities, Except Perhaps At Prices Based On Replacement Cost, Are Irreconcilable With FPL's Dealings With "In And Near" Cities At Average Cost Or Unit Cost And Are Irreconcilable With FPL's Takeover Programs, Retail Expansion Programs, Etc. For Sales 3

At Average Cest 3

1.

Takeover programs 7

2.

Retail sales promotion 3.

Retail franchise retentions 8

4.

Yardstick competition, foot in 8

the door l

l 5.

Retail monopolization, not 10 l

legitimate business l

11 l

6.

Dealings with some Cities 7.

Injury tc competition in the 13 bulk power market 8.

Maintenance of a market division 14 9.

FPL's shareholders 15 l -

t

1 Page

'C FPL's Refusals To Deal With "Outside" Cities In The Peninsular Florida Bulk Power Market Are Anticompetitive Because The Refusals Injure Competi-tion There And Because The Refusals Have The Purpose And Effect Of Main-taining And Expanding FPL's Retail Monopoly.....................................

17 II. FPL'S ARGUMENTS AGAINST COLLATERAL ESTOPPEL 20 ARE NRONG.........................................

A.

Regarding Gainesville, Florida Cities Were Not Sideline-Sitters And Are Not Otherwise Ineligible For Collateral Estoppel.

Even Absent Collateral Estoppel, Florida Cities Are Entitled To Summary Disposition On The Market 20 Division Issue B.

Regarding FERC Opinion No. 57, Collateral Estoppel Is Not Precluded In This Case By Any Shift In The 28 Burden Of Persuasion C.

Regarding FPC Opinion No. 517, Florida Cities Rely On Determinative Findings That Were Affirmed; FPL Should Therefore Be Estopped By Those Determinations 30 1.

The FPC's findings on the benefits of coordination were neither reversed nor abeyed on 30 appeal 2.

The FPC's fi ndings concerning FPL's refusa.

to deal with Clewiston wert _ssential to the FPC's decision; FPL should be estopped from relitigating those 33 findings 3.

Intervention in the FPC proceeding is not e prerequisite to Cities asserting collateral estoppel here 35 37 CONCLUSION............................................

l Appendices -.

4 TABLE OF AUTHORITIES Cases Page Borough of Ellwood City v. Pennsylvania

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Power Co.,

462 F.Supp.

1343 (W.D. Pa. 1979) 7

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Broadway Delivery Corp. v. United Parcel Service of America, Inc., 651 F.2d i

17 122 (2d Cir. 1981)

Carr v. District of Columbia, 646 F.2d

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599 (D.C. Cir. 1980) 22 City of Gainesville et al. v. Florida Power & Light Company, No. 79-5101-CIV-JLK (S.D. Fla. April 18, 1980) 12 City of Mishawaka, Indiana v.

Indiana

& Michigan Electric Company, 560 F.2d 1314 (7th Cir. 1977), cert.

denied, 436 U.S.

922 (1978) 11 Eastman Kodak v. Southern Photo Materials 11 Co.,

273 U.S.

359 (1927)

Florida Power & Light Company, Opinion No.

517, 37 FPC 544 (1967), reversed, Florida Power & Light Company v. FPC, 430 F.2d 1377 (5th Cir. 1970), reversed, FPC v. Florida Power & Light Company, 5,

12, 16, 404 U.S. 453 (1972) 30, 32-35 Florjida Power & Light Company, Opinion No.

67, 32 PUR 4th 313 (August 3, 1979),

appeal dismissed, Florida Power &

_icht Company v.

FERC, D.C.

Cir. No.

7612414 (April 25, 1980) 4, 6,

8, 12, 28 l

Gainesvile v. Florida Power Corporation, 402 U.S. 515 (1971) 31 Gainesville Utilities Dept. v. Florida Power & Light Company, 573 F.2d 292 (5th Cir.) cert denied, 439 U.S.

966 (1978) 14, 17, l

20, 24, 26

- 111 i

Page Lentin v.

Commissioner of Internal Revenue, 226 F.2d 695 (7th Cir. 1955) 28

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Liberty Leasing Company v. Hillsum Sales Corp.,

380 F.2d 1013 (5th Cir. 1967) 26 Otter Tail Power Company v. United States, 410 U.S. 366 (1973) 11, 15 Parklane Hosiery Company v. Shore, 439 U.S.

20-21 322 (1979) 3EC v.

Everest Management Corp., 475 F.2d 1236 (2d Cir. 1972) 21-22 s..............................

South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (4th Cir.),

certden{ed, 385 U.S. 934 (1966) 17-19 Starker v. United States, 602 F.2d 1341

( 9 th Cir. 1979) 23, 29 United States v. Borden, 370 U.S.

460 (1962) 13 United States v. Griffith, 334 U.S.

100 (1948) 14, 17-18 In re Yarn Processing Patent Validity Litigation, 472 F.Supp. 174 (S.D. Fla. 1979) 27 Young v. United States, No. 79 Civ. 3430 (S.D.N.Y. June 23, 1981) 24 i

Miscellaneous l

Atomic Act of 1954, 3105, 42 U.S.C.

32135 (1970) as amended by Pub.L.No.91-560 $6, 84 Stat. 1473 (1970) 24 l

t 0

e

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Florida Cities: 9/28/81 BEFORE THE UNITED STATES NUCU:AR REGULATORY COMMISSION O

ATOMIC SAFETY AND LICENSING BOARD O

Before Administratir3 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)

)

September 28, 1981

)

FLORIDA CITIES' REPLY TO

" MEMORANDUM OF FLORIDA POWER & LIGHT COMPANY ON MATTERS RELATING TO AUGUST 17 AND 18, 1981, CONFERENCE OF COUNSEL" Pursuant to the Board's order of September 18, 1981, Florida Cities hereby file their reply to FPL's further argt~aents concerning "outside" Cities and coll :teral estoppel, the two matters covered in " Memorandum of ~ Florida Power & Light Company On Matters Relating To August 17 and 18, 1981, Conference Of Counsel" ("FPL's September 14 Memorandum").

Also, following up Cities' interim report on the interest of other FMUA members (Cities' September 14, 1981 Supplemental Memorandum, pages 19-20), spokesmen for Vero Beach and Leesburg

~

i have told Cities' counsel that the governing boards of those two Cities have affirmed their active interest in relief in this proceeding.

ARGUMENT I.

FPL'S UNWILLINGNESS TO DEAL WITH "OUTSIDE" CITIES IN PENINSULAR FLORIDA ON THE SAME COMPENSATORY PRICING BASIS THAT IT DEALS WITH OTHERS IS ANTICOMPETITIVE, NOT SOUND BUSINESS.

A.

Introduction Concerning "In And Near" Cities.

FPL argues (FEL's September 14, 1981 Memorandum) against any obligation to deal with "outside" Cities and against Florida Cities' assertion of collateral estoppel.

We answer those tw) arguments below, but pause here to observe that FPL has presented nothing further against the "in and near" Cities.

Even without collateral estoppel, che case is overwhelming in favor of the "in and near" Cities; as to them, the Board should summarily find that FPL has created and maintained a situation inconsistant with the antitrust laws.

FPL has previously contended (FPL's August 7, 1981 Respcnse, page 4), however, that the "in and near" Cities' claims " based on assertions of past refusals by FPL to deal are irrelevant to this

-proceeding" because the settlement license conditions provide for dealings with the "in and near" Cities.

FPL utterly begs the question whether the license conditicus are an adequate remedy in j

light of FPL's historic refusals to deal.

If FPL has acted i

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ inconsistent with the antitrt.st laws ( the first question),

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l then an unconditional license would maintain the situation inconsistent; the issue then becomes, whether the settlement nnditions go far enough to cure che situation inconsistent ( the second question).

At least the "in and near" Cities are entitled to summary disposition in their favor on the first question.

B.

FPL's Refusals To Deal With "Outside" Cities, Except Perhaps At Prices Based On Replacement Cos+., Are Irreconcilable With FPL's Dealings With "ID And Near" Cities At Average Cost Or Unit Cost And J.ra Irreconcilable With FPL's hkeover Programs, Retail Expansion Programs, Etc. For Sales At Average Cost.

FPL contends (FPL's September 14, 1981 Memorandum, pages 2-5) that it hus a sound business reason for refusing to sell firm power to the outside Cities : regulation would force the sales at sub-marginal prices, requiring established customers to cover the cost of replacement and burdening shareholders with the dilution associated with replacement equity financing at below book value.

FPL would make the same argument against its obligation to offer sales of unit power and unit participation at the unit's cost, instead of replacement cost.

FPL's argument is irreconcilable with -- and is refuted by -- its retail expansion programs, its wholesale dealings with some systema, and a myriad of other considerations.

1.

Takeover programs.

Over the past twenty-five years, FPL has made many attempts to acquire municipal systems by purchase or lease.

Those efforts occurred during times of

4-inflation.

The takeover of a retail system should have the same cost-imposing effects,

.' any, 1/ as selling to a new wholesale s

customer, except where FPL was already meeting the retail system's bulk gower needs or where the takeover afforded special econcmies (in which case one wonders why the economical muncipal system would sell out or, therefore, why FPL would waste its time trying to acquire a specially economical municipal system).

The following is a sannary of FPL's takeover attempts over the last three decades.

The FERC has reviewed the detailed evidence of FPL's acquisition efforts since 1958.

Florida Power & Light Company, opinion No. 57, 32 PUR 4th 313, 327-330 (August 3, 1979), appeal dismissed, Florida Power & Light Company v. FERC, D.C.

Cir. No.

79-2414 (April 25, 1990); slip opinion, pages 20-24.

FPL attempted to acquire by purchase or lease the municipal systems Il 1/

Cities do not concede FPL's contention that the load growth from new wholesale sales woui.d necessarily be cost aggravating.

(Cities' asked FPL for the workpapers to Attachment C to FPL's l

September 14, 1981 Memorandum, but FPL has refused.

The request i

and the refusal are attached as Appendix D. )

Inde,ed, a FPL l

spokesman has stated that additional load can be beneficial to FPL in the context of a takeover of a municipal system (Cities' May 27, 1981 Motion, pages 86-87).

To the extent the amount of l

the alleged cost effect is crucial h1 any context in this proceeding, Cities seek a hearing on the issue.

There is no-need for a hearing, however, on the obvious proposition that a small amount of relief would have a small cost effect at worst.

In other words, the question of cost effect should be a matter of degree related to the amount of relief and cannot be a complete exoneration of a situ > tion inconsistent with the antitrust laws.

See also point 4 above.

When a monopolist uses or threatens refusals to deal with competitors in a related market in order to gain a competitive advantage in the monopoly market or the related market, it violates the antitrust laws.

See United States v. Griffith, 334 U.S.

100 (1948), discussed in Arg ument IC below.

l 8.

Maintenance of a market division.

The division of the wholesale power market in Florida was serious and effective as well as unlawful.

Gainesville, supra.

Although Florida Power Corp. withdrew from the conspiracy in the early 1970 's, FPL has continued to refuse to deal with "outside" Cities in firm j

wholesale power or unit participation.

Cities within Florida l

j Power Corp. 's territory have thus been forced to continue to rely on Florida Power or their own resources.

In offect, though the market division cracked and even leaked, it has not crumbled.

l l

l L

By FPL's refusals to deal with outside Cities i<, many important ways, it has been able to preserve markets that it had established or solidified through the market division.

(It took Gainesville until 1981 to win the relief it sought from FPL.)

The proper remedy for FPL's naintenance of the fruits of its market division is a Board condition requiring FPL to deal with "outside" cities.

The license conditions allow the "in and near" Cities to l

l share their participation in St. Lucie Unit No. 2 with the "outside" Cities, but cutting that baby in half affords no proper relief on either side of the line.

To cure the situation inconsistent, FPL should be required to deal with the "outside" Cities on the same basis that it deals with the "in and near" Cities.

9.

FPL's shareholders.

If FPL's actions have been inconsistent with the antitrust laws, Florida Cities do not sec why FPL should escape any relief obligation on the grounds that its shareholders may be injured.

See Otter Tail Power Company, supra, 410 U.S.

at 380.

FPL argues that shareholders would be injured if it must make wholesale sales to new customers and restore the necessary capacity for established customers by financing with new stock at prices below book.

On that trail, FPL still has not shown when such financing would need to occur and can hardly predict that stock prices will then be below book.

Anyway, the fact that FPL's stock now sells below book does not w

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relieve FPL from responsibility to deal or from the remedy for anticompeti'cive refusals to deal.

The FERC acknowledged FPL's a gument about FPL's stock selling below book, Opinion No. 57, 32 I!UR 4th at 338, slip opinion at 36, but nevertheless ordered a remedy based on FPL's anticompetitive refusals to deal, at 339-340, slip opinion at 38-40.

Furthermore, an FPL offer of participation in generating facilities (or transmission) to the "outside" Ci;ies should help relieve, rather than har m FPL's shareholders.

That is, FPL's sale of more generating megawattage (or of transmission partici-pation) would reduce. FPL's own financing requirement and either directly relieve the need for equity financing or preserve FPL's borrowing capability and defer the need for other equity financing.

Of course, according to FPL's argument, the Company I

would still need to invest in higher cost generating facilities in the future; but the Company cannot say that stock prices will then still be below book. 1/

In conc *usion, FPL's purportel business justification for refusing to deal on the basis of pricing considerations simply begs the question of Whether FPL has been acting anticompeti-tively.

Under regulation, FPL could not keep the extra profits from marginal-based prices (it would have to give one class of 1/

So long as the stock prices are equal to or above book, the higher future investment should actually help shareholders.

.- 4 customer or the other or all classes the benefit of those extra t

profits).

When it uses its theory to help it maintain and enhance its retail monopoly sad impede its competitors, FPL's purported justification becomes part of the abuse and not an j

excuse.

C.

FPL's Refusals To Deal With "Outside" Cities In The Peninsular Florida Bulk Power Market Are Anticompetitive Because The Refusals Injure Competition There And 3scause The nsfusals Have The Purpose And Effect Of i

Maintaining And Expanding FPL's Retail Monopoly.

4 FPL scorns Florida Cities' reliance on United Stater; v.

Griffith, 334 U.S.

100 (1948) and South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (4th Cir.), cett denied, 1

385 U.S. 934 (1966).

Here, again, is how those cases justify summary diaposition for the "outside" Cities, assuming that FPL l

has monopoly po cr within its retail tarritory but not throughout peninsaler Florida. 1/

i 1

i 1/

Th( Cities are entitled to summary disposition on other l

bases.

For one, FPL's refusals to deal with the "outside" Cities naintain a situation inconsistent witn the antitrust laws, where FPL helped establish and solidify its monopoly through an illegal market division, Gainesville, supra, and FPL has perpetuated the fruits of that market division by continuing to refuse to deal.

l (Cities' May 27, 1981 Motion, Argument IA; Argument IB8, supra.)

Furthermore, the settl ement agreement... this case helps FPL to continue its refusals to deal and thus refreshes the market i

division (Cities' May 27, 1981 Motion, Argument IB).

If not granted summary disposition concerning the situation incon-sistent with the ant'. trust laws, Cities would also attempt to l

prove at trial that ?PL has monopoly power and has exercised monopoly power in the peninsular Florida bulk power market.

Compare, e.g.,

Broadway Delivery Corp. v. United Parcel Service of America, Inc., 651 F.2d 122 (2d Cir. 1981), holding that defendant's having a fifty percent market share or even less does not preclude a finding of market power.

Cities also reserve r

their rights, if deni.-d summary disposition, to prove a nuclear product market and FPI ' ? monopolization of it.

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i i

. In Griffith, the theatre owner owned che only movie house in some towns and competed in others.

He used his monopoly power in the single theatre towns to help win first run contracts, restricting his competitors resources, thereby putting them at a disadvantage, eind sometimes driving them out of business.

This case parallels Griffith in determinative ways.

FPL can maintain and enhance its retail monopoly by restricting resources, here bulk power resources that FPL itself owns.

It can thereby, for example, help defeat any effort by Tallahassee to provide Daytona Beach's bulk power needs.

Even a?ide from FPL's maintaining and enhancing its retail monopoly, FPL's :efusals to deal give it an advantage against competitors in those facets of the bulk power market where FPL does attempt to deal, including

. economy sales and other interchange transactions.

Furthermore, FPL's r fusals to deal with the "outside" Cities perpetuate the effects of the previously established market division.

See Argument IB8, supra.

The South Carolina Milk Producers case carries Florida Cities' argument one step further.

In that case grocery store ownere conspired to monopolize the sale of various grocer,'

products, including milk, by selling the milk at a loss (as a loss leader). 1/

Here, FPL has monopolized the bulk power and i

1/

Conspiracy to monopolize was assumed for purposes of defendants' motion to dismiss the antitrust complaint.

retail markets within the perimeter of its retail territory, by refusing to deal in bulk power resources.

In South Carolina Milk Producers the raw milk producer was entitled te maintain an antitrust action against the conspiring grocery store owners, even though the raw milk producer did not compete with the groc>ry store owners, if "the plaintiff can show himself within the sector of the economy in which the violation threatened a breakdown of competitive conditions and that he was proximately injured thereby.. " 360 F. 2d at 418.

Here, the "outside" Cities should be entitled to relief from FPL, even if the Cities are found to be limited competitors of FPL, because FPL's monopolizations within its retail territory have seriously restrained competition in the peninsular market and the "outside" Cities have been injured thereby.

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II. FPL'S ARGUMENTS AGAINST COLLATERAL ESTOPPEL ARE WRONG.

A.

Regarding Gainesville, Flarida Cities Were Not Sideline-Sitters And Are Not Otherwise Ineligible For Collateral Estoppel.

Even Absent Collateral Estoppel, Florida Cities Are Entitled To Summary Disposition On The Market Division Issue.

Florida Cities contend (Cities' May 27, 1981 Motion, pages 10-17) that FPL is estopped from relitigating the issue, resolved by the Fifth Circuit, that FPL engaged in an unlawful conspiracy "to divide the wholesale power market in Florida." Gainesville Utilities Dept. v. Florida Power & Light Company, 573 F.2d 292, 294 (5th Cir.) cert denied, 439 U.S. 966 (1978).

FPL persists (FPL September 14, 1981 Memorandum, pages 12-13) on the basis of its unsupported allegation that Cities could easily have joined in the 1968 Gainesville suit and are therefore ineligible for collateral estoppel here, citing Parklane Hosiery Company v.

Shore, 439 U.S.

322, 331 (1979).

On the contrary, Florida Cities are (as explained below) like the plaintiffs in Parklane, who were afforded collateral estoppel.

Even without collateral estoppel, Florida Cities are entitled to summary disposition on the issue, because FPL has not suggested any evidence that would l

cast doubt on the compelling evidence proving a market division.

l Gainesville's 1968 complaint (Attachment C) alleged, in

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essence, that FPL and Florida Power Corp. had unlawfully refused l

to interconnect with Gainesville and that the refusals were aided and aggravated by a conspiracy to di' ride the market.

Other i

l i

i L

. l Cities were also wrongfully refused interconnections and, admittedly, they want to prove that market division.

However, their joinder in the Gainesville case would have complicated that antitrust suit and substantially lengthened it.

For example, other Cities had claims that FPL or Florida Power Corp.

wrongfully refused to sell the Cities Wholesale power.

The Cities would have been obligated to assert those other claims or lose them, if they had joined the Gainesville suit.

Furthermore, from the 1968 perspective the plaintiffs could not have been sure of proving a market division; they would have needed to press and i

prove their monopolization claims, which in turn would have required additional proof, thereby complicating Enat case.

In Parklane the Supreme Court affirmed the plaintiff's right to collateral estoppel where joinder in the prior suit would have complicated it.

Tnere, the Supreme Court quoted (439 U.S.

at 1

332, note 17) from SEC v. Everest Management Corp., 475 F.2d 1236, 1240 (2d Cir. 1972):

"the complicating effect of the additional issues and the additional parties outweighs any advantage of a single disposition of the common issues."

In Everest the Second Circuit affirmed the denial of a motion by private parties to join in an SEC action.

The Courc observed that the private parties' claim was based on the same alleged fraud as the SEC action, that there were other considerations

" favoring intervention," and that district courts had the discretion to allow joinder in appropriate cases, but that the cost of the litigation would be greatly increased for the SEC by l

the proposed joinder in that case because of additional issues.

475 F.2d at.239-1240.

Now, after years of frustration, the Cities have themselves agreed to join toget ter in An antitrust action, Lake Worth Utilities Authority et al. v. Florida Power &

Light Company, United States District for the Southern District of Florida, No. 79-5101-CIV-JLK.

However, in 1968 the Court could well have decided against any joinder in Gainesville's unilateral and comparatively narrower antitrust suit.

Post-Parklane decisions have sensibly interprated the ease-of-joinder test as a practical litigation question, not a technical question of procedural possibilities under the Federal Rules.

These cases ask whether the asserters of collateral estoppel had been sideline-sitters, waiting to see the outcome of the prior case.

In Carr v. District of Columbia, 646 F.2d 599, 605-606 (D.C. Cir. 1980), the plaintiff sued to set aside a prior j udgment on the grounds that the District of Columbia had no authority to impose conditions on " original alles closings."

Subsequent to the initiation of the set-aside action, other parties sued independently on that issue and won.

Carr then asserted collateral estoppel against the Government on the ground that it had lost on the issue in the suit by the other parties.

The D.C.

Circuit affirmed the application of collateral estoppel in favor of the plaintiff on the grounds that (whether or not the plaintiff could technically have joined in the other suit) it had l

to maintain the separate set-acide aci an and therefore was not a

" wait and see" plaintiff.

j Likewise, in Starker v. United States, 602 F.2d 1341 (9th Cir. 1979), the plaintiff sued for a tax refund on the ground that his exchange of property for federal timberland was not a taxable transaction.

In a separate suit by the plaintiff's son,

a related transaction under the same contract was held not a taxable transaction.

The 14inth Circuit concluded that the plaintiff was entitled to collateral estoppel on the issue decided against the Government in the son's suit; the plaintiff's case involved additional issues, so he could not be characterized as a " wait and see" plaintiff, 602 F.2d at 1349-1350:

The Court's " general rule", that a plaintiff who could " easily have joined" a first suit cannot assert collateral estoppel in a second, raises more troublesome questions.

It is unclear from Parklane Hosiery what type of " ease" is relevant.

In the present case, Fed. R. Civ. P. 20 may have technically authorized T. J.

Starker's joinder in his son ar.d daughter-in-law's refund suit.

The father's suit differs from that of his son in so many respects, however, that there are numerous possible explanations Why T.

J.

Starker -- or for that matter, Bruce and Elizabeth Starker -- might have wanted the lawsuits tried separately. 6/

We decline to speculate on motivation.

This is not a case in which a litigant adopted a " wait-and-see" l

l 6/

As noted in our discussion of the facts of Starker I and Starker II, supra, the first case involved three direct transfers from Crown and numerous other direct transfers from another corporation to the taxpayers, whereas the second involves nine direct transfers from Crown, three indirect transfers from Crown, and none from any other corporation.

The case l

at bar also presents the question of the proper l

treatment of the " growth factor" added to T.

J.

Starker's accounti his son and daughter-in-law received no such credit.

l

__. _ _ _ - _ _ _ _ attitude for u'e obvious purpose of eluding the binding forca of an initial resolution of a simple issue.

Thus, we exercise our discretion in favor of T.

J.

Starker and hold that the government can be estoped as against him because of the final resolution of Bruce and Elizabeth Starker's suit.

The Cities cannot be characterized as " wait and see" plaintiffs here.

FPL's application in this proceeding was not filed until the 1970 's, and antitrust review was not available until after the 1970 amendments of the Atomic Energy Act.

Atcmic Act of 1954, 105, 42 U.3;C. $2135 (1970), as amended by Pub.L.No.91-560 $6, 84 Stat. 1473 (1970).

Cities could not have held off joining in the Gainesville suit, initiated in 1968, in order ta wait and see how it might affect their subsequently enacted rights in a future proceeding before this Ccemission.

Of course, the additional antitrust claims associated with the other Cities present additional practical reasons for their not joining in Gainesville's comparatively narrow 1968 antitrust complaint. 1/

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FPL invokes Young v. United States, No. 79 Civ. 3430 (S.D.N.Y. June 23, 1981) [FPL September 14, Memorandum, page 3 and Attachment D], but that case has no bearing here.

In that 1,

Furthermore, FPL and Power Corp. opposed the Cities hiring legal and engineering advisors, and the utilities treated any such potential hiring as a further bnpedance to dealings between the utilities and the Cities (Cities' May 27, 1981 Motion, pages 80-84).

That canstitutes another practical reason why the Cities did not litigate and helps prove that Cities were not playing a cunning litigation game of " wait and see."

The Cities were struggling to convince the utilities to do business with them.

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. case the New York plaintiff sued for damages alleged to have resulted from a swine flu vaccination.

The plaintiff moved for partial summary judgment on the ground that the defendant should be estopped by an Iowa decision which determined that tho government had given inadequate notice of the risks of the vaccine.

The New York courts refused to apply collateral estoppel, for several reasons.

First, the Iowa decision had t

determined inadequate government warning of risks under a national standard or, alternatively, an Iowa standard; but the New York court indicated that a local standard (there New York) may govern, so that the government should not be estopped from showing that it gave adequate warning under the New Ybrk standard or under the national standard if a national standard applies.

Sccond, numerous other decisions were in favor of the government on the warning issue; the New York court concluded that it would be unfair to estop the government by the one anti-government decision on the issue, where the New York plaintiff had not I

joined in the Iowa suit against the government.

Third, the New York court noted that granting estoppel for the plaintiff in this kind of case would encourage " wait and see" attitudes.

That i

concern was peculiarly apt in the swine flu litigation, where plaintiffs across the land might outwait pro-government decisions until they could take advantage of some pro-plaintiff decision if collateral estoppel were then available.1/

1/

Still, Florida Cities are skeptical that the New Ybrk Flaintiff could easily have joined in the distant Iowa FOOTNOTE CONTINUED ON NEXT PAGE

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Finally, even if the Florida Cities are somehow ineligible to assert collateral estoppel with regard to the Gainesville decision, Florida Cities are still entitled to a summary determination that there has been a market division according to i

the same facts that were compelling to the Fifth Circuit.

In the face of Florida Cities' Motion For Summary Disposition, it was up to J"N. to come forward with facts and analysis to disprove Florida Cities' supported allegations of a market division; but FPL still has not suggested any fact that would put in doubt the compelling evidence of a market division.

In Liberty Leasing Compurrf v. Hillsum Sales Corp.,, 380 F.2d 1013, 1015 (5th Cir.

1967), the plaintiff answered defendant's motion for summary judgment with a deposition containing only general assertions and legal conclusions.

The Fifth Circuit held that FOOTNOTE CONTINUED FROM PREVIOUS PAGE litigation.

The sounder reason for the decision in the Young v.

United States case may be that it would be inequitable to estop a defendant who had won ecuivalent cases on the same issue.

See Parklane, 439 U.S.

at 330: " allowing offensive collateral estoppel may also be unfair to a defendant if the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant."

Starker

v. United States, 602 F.2d at 1349: " such unfairness [ rendering offensive collateral estoppel inapplicable] could arise if the judgment in the first action was inconsistent with a previous decision in the defendant's favor.."

That real equitable consideration is different from the spuricus equity claimed by FPL (FPL September 14, 1981 Memorandum, page 12, footnote 1) that Cities. should be disqualified from offensive collateral estoppel on the market division issue because FPL may not stop the Cities by the judgment against Gainesville's monopolization claim in Gainesville.

FPL is simply trying to resurrect the discredited mutud.ity doctrine.

See Parklane, 439 U.S.

at 326-320.

.n 7

27 -

"... mere general allegations which do not reveal detailed and precise facts will not prevent the award of summary judgment."

FPL invokes In re Yar;_'rocessing Patent Validity Litigation, 472 F.Supp. 174 (S.D. Fla. 1979).

(FPL's September 14, 1981 Memorandum, page 13; FPL August 7, 1981 Response, page 84).

As we understand that complicated case, a patent holder had sued alleged infringers in a multi-diatrict litigation; but the patent was held unenforceable because of misuse.

The further question remained whether the misuse had been purged, so that the patent holder might still maintain hin suit.

Some of the defendants sought a trial and judgment that the plaintiff had not purged the misuse of the patent.

However, other defendarts declined to join in the trial and, furthermore, declined to be bound by the result of the trial.

Venue considerations prevented the trial court from ordering those other defendants to join in the trial.

At this juncture the trial court ordered that the other defendants, which declined to join in the trial of the purgation issue and declined to be bound by the result of that trial, would be precluded from asserting collateral estoppel against the plaintiff in the event that the plaintiff lost at the trial on the purgation issue.

Plainly, the sideline defenda.nts were playing " wait and see": ' the court is presented with the possibility that others are holding back, apparently, with the hope of later amending their answers to include the collateral estoppel defense on remand."

472 F.Supp. at 177.

That " wait and see" consideration simply does not apply to the Floride Cities in this case, for 'he reascns discussed ebove.

B.

Regarding FERC Opinion No. 57, Collateral Estoppel Is Not Precluded In This Case By Any Shift In The Burden Of Persuasion.

Florida Cities seek to estop FPL from relitigating the 1

matters decided by Florida Power & Light Company, Opinion No. 57, 32 PUR 4th 313 (August 3, 1979), appeal dismissed, Florida Power p Light Company v. Et3C, D.C.

Cir. No. 79-2414 ( April 25, 1980).

See Cir.ies' May 27, 1981 Motion, pages 10-17 and Cities' August 7, 1991 Response, psges 18-24.

FPL persists (FPL's September 14, 1981 Memorandum, pages 14-16) in arguing that it is not eubject to estoppel with regard to opinion No. 57 because the burden of persuasion has shifted from FPL in the FERC deciaion to the Cities in this proceeding.

Cities rely on their previously submitted analysis (Cities' September 14, 1981 Supplemental Memorandum, pages 1-13) as adequate to answer FPL's arguments in this regard.

Two additional comments may be in order, however.

First, Florida Cities did not anticipate FPL's reliance on Lentin v. Commissioner of Internal Revenue, 226 F.2d 695, 699 (7th Cir. 1955).

The case is inapposite.

The Piice Administrator had successfully sued Lerdin.

An issue decided in that pricing case recurred in a tax case, and the Tax Court estopped Lentin from relitigating the issue.

On appeal, Lentin contended that he should not have been estopped because he had the burdon of persuasion in the pricing case, bat the burden of persuasion allegedly shifted to the Commissioner for Internal Revenue in the tax case.

However, the Court of Appeals hei no j

occasion to decide whether a shift in the burden of persuasion l

l would preclude collateral estoppel, because the Court of Appeals found that there was no shift.

The Court's complete di;cussion of the issue is as follows :

The petitioner here argues at length that the doctrine of collateral estoppel cannot be applied where the burden of proof in two actions is on different parties.

The petitioner says that in the OPA case he had the burden of proof to show that he was not guilty of willful violations of the OPA regulations, btit that in the case before the Tax Court the burden of proof shifted to the Commissioner.

We cannot agree that there was such a shift in the burden of proof.

In the case before the Tax Court the petitioner was claiming a deduction and the burden was upon him to prove facts which would entitle him to the deduction.

(citations omitted)

Second, FP!, Again argues that because a reduction in the degree of proof precludes collateral estoppel, then a shift in

-he burden of persuasion from one party to tue other should a fortiori preclude collateral estoppel.

FPL is wrong.

With regard to the degree of proof, the evidence may be insufficient for proof beyond a reasonable doubt in the first case, but may be preponderant and therefore sufficient in the second case.

For example, the government may be unable to convict the defendant in a criminal case, but may have sufficient evidence to win damages from the defendant in the second case.

That consideration has no logical application in the context of a shifting burden from one side in the first case to the adverse side in the second case.

Assuming adequate incentive and opportunity for the losing party to have litigated the first case, the shift to the other party would have no practical effect except where the evidence in the first case was evenly balanced, a consideration which has no relation to any reduction in the degree of proof and which has no bearing here for reasons previously explained by the Cities (Cities' September 14, 1981 Supplemental Memorandum, pages 5-8).

C.

Regarding FPC Opinion No. 517, Florida Cities Rely On Determinative Findings That Were Af firmed; FPL Should Therefore Be Estopped By Those Determinations.

1.

The FPC's findings on the benefits of coordination were neither reversed nor abeyed on appeal.

The FPC determined years ago that FPL benefits significantly from its coordination with other utilities.

Florida Power &

Light Company, opinion No. 517, 37 FPC 544 (1967), reversed, 430 F 2d 1377 (5th Cir. 1970), reversed, Florida Power & Light Company

v. FPC, 404 U.S.

453 (1972).

Florida Cities rely on those findings (Cities' May 27, 1981 Motion, pages 22, 34, and 92; Cities August 7, 1981 Response, pages 6, 14; Cities' September 14, 1981 Supplemental Memorandum, page 23).

Indeed, Florida Cities seek to estop FPL from relitigating the FPC's determination that FPL benefits from coordination (Cities' August 7,

1981 Response, pages 10, 60; see also Cities' May 27, 1981 Motion, pages 11-15).

FPL contends that it is not estopped in that regard (FPL's September 14, 1981 Memorandum, pages 16-21),

because the FPC's findings on the benefits of coordination were allegedly tied to the " electromagnetic unity" theory of interstate flow and jurisdiction, which the Supreme Court put l

l

_ aside, 1/ and were unnecessary to the " commingling" theory of interstate flow and jurisdiction, which the Supreme Court affirmed.

FPL gives no explanation for its erroneous contention

~

that the FPC findings on the benefits of coordination were tied to the electromagnetic theory. 2/

In fact, as we explain below, the FPC's findings on the benefits of coordination were responsive to an affirmative defense by FPL that it should not be subject to the FPC's jurisdiction even if there were an interstate flow of electricity (under any theory).

Furthermore, in affirming the FPC's jurisdiction over FPL, the Supreme Court expressly acknowledged the facts of coordination and recited as true some of the benefits of coordination found by the FPC, which establish "the focal issue in this case."

404 U.S.

at 456-458. 3/

Thus, there is no logical or factual basis for FPL's avoiding collateral estoppel on this issue.

1/

"We do not find it necessary to approve or disapprove the Federal Power Commission's analysis based on unity of electromagnetic response."

404 U.S.

at 462-463.

2/

The electromagnetic theory would help establish utility interdependence and the benefits of coordination (see FPL's September 14, 1981 Memorandum, page 21, note 1); but that theory is not and was not necessary to establish the benefits of coordination, as explained in the text of this argument.

l 3/

The Supreme Court had previously noted some of the benefits I

of coordination and interconnection for the members of the Florida Operating Committee in Gainesville v. Florida Power Corporation, 402 U.S.

515, 518-521 (1971).

- _~

The ultimate issue in the FPC proceeding was whether FPL had engaged in interstate commerce and was therefore subject to the Commission's jurisdiction.

The key question was whether electricity flowed in interstate commerce to and from FPL.

The presiding examiner and the FPC, which affirmed him, found that there was interstate commerce in electricity according to the electromagnetic unity theory and alternatively according to a commingling theory.

FPL disputed both theories, but in addition FPL argued that any interstate flow of electricity was incidental or adventitious because FPL had " planned its syp.em to be sel f-suf ficient, and it possessos sufficient generating capacity of its own to meet its load without any dependence" on others.

37 FPC at 551.

The FPC rejected this affirmative defense, holding that FPL did not in fact operate independently and instead benefitted substantially from pooling and coordination.

37 FPC at 551-552.

The complete FPC finding on the issue is as follows :

e ' co FPL's Consideration has been giv assertion that because of the tf Iue peninsular nature of its service area it planned its system to be self-stafficient, and that it possesses sufficient generating l

capacity of its own to meet its loads without any dependence upon the spinning reserves or emergency power of other Florida or out-of-state systems.

Ne do not find this assertion

~

persuasive.

The fact that FPL could operate as a self-sufficient utility is not controlling because FPL simply does not operate its system in that manner.

The record in this proceeding makes it plain that FPL receives substantial benefits from its participation in the Florida Pool in the coordination of spinning reserves, the arrangement of plant maintenance schedules, and the assurance of reliability of frequency control and frotn both the Florida Pool and ISG in the form of automatic assistance in the case of emergencies.

As we stated in our opinion in Indiana k Michigan Electric Company, supra, it is the system's actual mode of operation, not how the system could operate, that is important.

Moreover, the particular operating pattern actually used by FPL is consistent with sound operating practices and with the principles enunciated in the Commission's National Power Survey issued in December 1964 in which all segments of the electric power industry participated fully and cooperatively.

2.

The FPC's findings concerning FPL's refusals to deal with Clewiston were essential to the FPC's decision; FPL should be estopped from relitigating those findings.

The FPC's presiding examiner found that FPL had refused to deal with Clewiston and had proposed to take over the Clewiston system by leasing it.

37 FPC at 572-573.

Florida Cities rely on those findings (Cities' May 27, 1981 Motion, pages 48-56) and they seek to estop FPL from relitigating those findings.

FPL contends (FPL's September 14, 1981 Memorandum, pages 21-23) that the findings concerning Clewiston were not an essential part of the decision partly because Clewiston's complaints were settled before the Commission's decision.

FPL is mistaken; the findings concerning Clewiston were essential, for the following reasons.

In the FPC proceeding FPL had argued that, even if it might be subject to the FPC's jurisdiction, the Commission shou.td wait to assert jurisdiction until it had a real problem to solve such as a complaint by a potential wholesale customer.

37 FPC at 553.

In response to that consideration, the presiding examiner made the findings cc acerning Clewiston, to help demonstrate the propriety of asserting jurisdiction immediately: " A r.tnding of jurisdiction herein would enable the Commiseton to take action

~

with respect to similar problems if they st.0.uld arise and if such a step should be found appropriate."

37 FPC at 573.

The Commission expressly affirmed and adopted the decision of the presiding examiner: "The decision of the Presiding Examincr, as supplemented above, is adopted as the decision of the Commission."

37 FPC at 556.

Further, the Commission generalized on the issue as follows, 37 FPC at 553-554:

The suggestion by counsel for FPL during the oral argument that we should wait to consider assuming jurisdiction until there is an actual complaint by a Wholesale customer, either existing or potential, misconceives the broad statutory design which Congress had in mind in enacti19 Parts II and III of the Federal Power Act.

Congress sought not only to give this Commission exclusive jurisdiction over &lholesale sales in interstate commerce, but, in addition, to supplement local regulations at the federal level in such areas as accounting, interlocking directorates, mergers and consolidations, and the promotion of interconnection and coordination of the I

nation' s facilities for the generation, I

transmission and sale of electric energy.

l.

None of these latter objectives depend upon the extent of wholesale sales or the i

percentage of interstate transmission in any particular case.

The independent importance j

of these regulatory activities was spelled out in detail by the Commission, in light of the Act's legir.lative history, almost 20 years ago in the Connecticut Light and Power case, supra.

FPL has presented no argument which would now persuade us to a contrary l

conclusion.

l l

. FPL apparently did not press its argument that the Commission should exercise its discretion (assuming it had any) to delay or abnegate jurisdiction under the circumstances.

The Supreme Court affirmed the Commission and " remanded for reinstatement of the order of the Federal Power Commission" asserting jurisdiction.

404 U.S.

at 469.

The Supreme Court did not provice for any further consideration of possible delay or abnegation of jurisdiction.

The findings which supported the immediate assertion of jurisdiction, including the Clewiston findings, thus form an essential part of the Commission's decision as affirmed on appeal.

FPL's apparent decision not to press the issue should not deprive those findings of collateral estoppel effect.

1 3.

Intervention in the FPC proceeding is not a prerequisite to Cities asserting collateral estoppel here.

None of the Florida Cities in this proceeding intervened in the FPC proceeding that led to Opinion No. 517.

FPL contends (FPL's September 14, 1981 Memorandum, page 23) that the Florida Cities could easily intervened in that FPC proceeding and, having failed to do so, they are precluded by t'.e Parklane doctrine from asserting collateral estoppel here.

FPL is mistaken.

Parklane denies collateral estoppel to " wait and see" plaintiffs; the purpose of Parklane is to reduce inequities and minimize the proliferation of litigation.

Those considerations are wholly inapplicable here, because as a matter of stare decisis Florida Cities are in fact bound and estopped by the jurisdictional I

3G -

determination in opinion tio. 517, whether or not they intervened and whatever the jurisdictional decision.1/

Their failure to intervene would not proliferate any jurisdictional litigation.

l 1/

We put aside the possibility of substantial changes in fact and circumstance which would entitia the Cities or FPL to renew the jurisdictional question.

I 4

O f

e

_ ~ ~..,

-.x,---

r ~,..

CONCLUSION For the foregoing reasons and the reasons stated in Cities '

tay 27, 1981 tiotion, their August 7, 1981 Responsa, and their September 14, 1981 Supplemental Memorandum and in Cities' oral argument of August 17 and 18, 1981, the Florida Cities urge the Board to grant their motion.

Respectfully submitted, Robert A.

Jablon Alan J.

Roth Daniel Guttman Marta A.

Manildi By

(

Attorneyu for Lake Worth Utilities Authority, the Utilities Commission cf New Smyrna Beach, the Sebring Utilities Commissidn, and the Cities of Alachua, Bartow, Ft.

Meade, Homestead, Key West, Kissimmee, Mt. Dora, Newberry, St.

Cloud, Starke and Tallahassee, Florida, and the Florida Municipal Utilities Agency l

l September 28, 1981 Law offices of:

Spiegel & McDiarmid

(

Washington, D.C.

20037 2600 Virginia Avenue N.W.

i l

t l

l I~

Florida Cities 9/28/81 BEFORE THE UNITED STATES NUCLEAR REGULATORY COMMISSION ATOMIC SAFETY WD LICENSING BOARD Before Administrative Judges:

~

Peter B.

Bloch, Chairman Michael A.

Duggan Robert M.

Lazo Ivan W.

Smith, Alternate

)

Flcrida Power & Light Company

)

Docket No. 50-389A (St. Lucie Plant, Unit No. 2)

)

September 28, 1981

)

INDEX OF DOCUMENTS APPENDED TO FLORIDh CITIES' REPLY TO

" MEMORANDUM OF FLORIDA POWER & LIGHT COMPANY ON MATTERS RELATING TO AUGUST 17 AND 18, 1981, CONFERENCE OF. COUNSEL" Appendix A Excerpts from the deposition of Benjamin Fuqua,. former FPL Vice President, taken September 22 and 23, 1981, in Lake Worth Utilities Authority et al. v. Florida Power & Light Company, Case No. 79-5101-CIV-JLK, re: municipal electric systems.

Appendix B

[

Excerpt from the deposition of Marshall Mcdonald, FPL Chairman of the Board, taken September 1, 1981 in Gainesville Regional Utilities et al. v. Florida Power &

Light Company, S.D.

Fla. Case No. 79-5101-CIV-JLK re:

I regulation of utility profit.

Appendix C Complaint filed August 13, 1968 in Gainesville Utilities Dept. and City of Gainesville v. Florida Power Corporation and Florida Power & Light Company, M.D.

Fla., Civil Action No.68-305.

{

~

Appendix D i

Letter from Alan J.

Roth to J.A.

Bouknight, requesting workpapers, September 22, 1981.

Letter from J. A.

Bouknight to Alan J.

Roth, refusing workpapers, September 25, 1981.

I

APPENDIX A Excerpts frorn be deposition of Benjamin Fuqua, former FPL Vice President, t.,

September 22 and 23, 1981, in Lake Worth Utilities Authority et al. v. Florida Power & Light Company, Case No. 79-5101-CIV-JLK, ret municipal electric systems.

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2 SRTgdv i

Southeast.ern Electric. Exchange?

2 A

Wel.1, there again I think I have attended a f ew 1

3 metttings, but I can't specify when.

Do you recall were you a member of any committ.ees 4

0 5

of the Southeastern Electric Exchangei 6

A Not so far as 1 recall.

7 Q

During the 1.950s, that is when you came to the 6

ompany, was F1. rida Power & Light providing any servica to 9

the rural electr.ic cooperatives, fo ycu rec.a.117 10 A

Yes.-

Yes, they were.

11 0

Can you tell me,. do you recall what kind of 12 service they were pr.oviding?

13 A

Witolesale.

14 Q

And wnen you use the term 'whciesale," can you

(~

15 axplain what you mean?

16 A

Well, energy for res. ale.

17 0

At that time, during the 1950s, were you providing 18 any service to the munic.ipal systems in Florida?

l 19 A

To the best of my recollection the only en:lty we 20 were s 'pplying to, municipalities, was in the case of New 21 Gmyrna Beach and Homestead where we were serving, as a 22 matter of.being a good neighbor and helping out because i

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those p. laces did not have capacity.

We didn't want to 2

wholesale to them but w.e' provided. them.with energy so they 3

wouldn't black out and in reporting it.we reported it as 4

emergency energy, not wholesala.

5 0

Why didn't you want to wholesale to them?

6 A

Well, one of the imp.elling reasons.was.we didn't 7

have the capacity..

Every. night we would go to the peak and 8

we wouldn't kno.w whether we.were going through the r. cot or 9

not.

10 The other one was that we-wanted to continue as an i1 integrated puhlic utility and we didn't want just to be a 12 wholesals outfit.

13 0

Could you explain how would serving Homestead or 14 New Smyrna Beach have impaired your ability to continue as

(

15 an integrated public utility?

16 A

We.11, the municipal people, of.ccurse, believes 17 that only the go ternment can do anything at all, or at least 18 very well.

And.we took the opposite view, that we wanted to 19 continue as a privately-owned company created out of private 20 capital and nt out of tax dollars and.be an arm of the 21 government.

'. Tat's our ideology.

22 0

I understand what you.are saying but I'm not sure

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I understnd how serving wholesals to Homestead and New 2

Smyrna Beach would have aff ected -

3 A

We.11, it's a foot in the door, sir.

You wholesale

')

4 this one, then the next one wants you to wholesale.

Then 5

they want to get in the retail business themselves.

And you 6

may h(ge a franchiser there.

7 de don't agree with that point.

8 Q

Why don't you agree with that point of vie.w?

9 A

I have already explained it to you, sir.

As 10 clearly as.I can.

11 O

Okay.

What was the reason that you wholesaled to

'2 the REA co-ops, then?

13 A

Mall, we f elt that truly they represented a 14 different situation.

They were created to bring electric 15 energy to areas tha.t couldn't be economically served, rural 16 areas, if you.wlli, and that they were entitled to some

!7 special consideration. because of' that.

la 0

Y es.

19 A

Of course what happened, as you. k.now, is that they 20 have grown and grown and grown..Now they serve as.much 21 commercial and industrial - more than they do residential.

22 It's the same thing as.I just described in connection.with

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the municipalities.

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2 0

Do you recall a provision in your contract with 3

the REAs about their. ability to resell to municipa o'

4 systems?

i 2

A To municipals?

6 i

S 9

30 11 12 13 14

('

15 to 6l 1/

lu 19 l

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0 Why did you want to acquire the New Smyrna system 2

in 19587 3

A Why did we want to?

i-q A.

4 0

Right.

~

o A

Well, there again we have got a situation that is 6

a cancerous sore.

They didn't have any f acilities of their 7

own.

They were leanirig on us.

And it just made good 8

business sense to go ahead and try to incorporate them in 9

our sys. tem.

This could be done on a reasonable economic 10 basi s.

But it never occurred.

It didv t work out.

11 Q

Do you recall making a proposal to acquire.the 12 system shortly af ter. this memo in 195.8 or '59?

13 A

1 doMt recall it but it,might Savo been done.

I 14 don't think I did, personally, suomit any proposal.

O 15 0

Once again in the case of New Smyrna Beach, why 16 would you have been interested in acquiring them but not 17 serving them wholesale?

Io A

Well, you get back to the same thing that I have 19 testified on. before.

We didn't choose to who2.esale at that 23 time because we wanted to stay a retail company and we 21 figured that the old f oot in the door get some arm of the 22 government to handle it saying that nobody can do anything l

.:3 a

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but some arm of the government, a totali.tarian thing.

And 2

we didn't agree with that.

3 0

How wculd New Smyrna Beach be an arm - would you g._

U 4

explain a little bit more how would New Smyrna Beach be a 6

f oct in the door and an arm of the government?

6 A

Mell, if you could get all your boys collected

/

together, arm a;11 up and lobby up here in Washington and S

Tallahassee and sake it.so that all of them were under some 9

form of - some arm of the government, their facilities all 10 created out of tax dollars, rather than investor funds, then 11 that is what I am talking about.

12 Q

Well, first of all let me ask you, did you 13 consider New Smyrna Beach and Homestead and Fort Pierce, the 14 municipal systems, to be an arm of the government?

I O

la unde rstand -

15 A

Of their government, certainly they are.

They are is owned by a governmental agency.

The city is a governmental Ic agency.

19 23 21 2

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0 I understand tha t.

But did you consider them to 2

be an arm of the government in Washington, for example?

l 1

3 A -

Well, I thought it, you know,' they have this thing et,g A

called Yankee Dixie they were going to connect up everybody i

6 and his brother.

6 All of these proposals of those who support public I

ownership and government control, they are alwt/s looking i

8 for ways to tie everyth.iiig together.

You see?

And knock 9

Out the investor--owned companies.

They say that we are 10 trying to knock them out.

They are trying to knock us out 11 harder than we are them.

You see?

12 It's the difference of ideology.

It's been going on f or 13 a long time.-

You know all about it.

I'm not telling you 14 anything.

O 16 Q

What was Yankee Dixie.7, You just re.ferred to 16 Yank ee Dixie.

17 A

Well, that was a scheme -- the government would 18 have - use coal from Appalachia and all up and down from 19 here to breakf ast, I don't know, New. York to Key West.

They 20 were going to have one great transmission grid and have 21 mammoth coal mines, and they would overrun everybody, scr t 22 of like the TVA did, you know.

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Q Did you follow that idea?

That proposal of Yankee 2

Dixie ?

3 A

Did I follow it?

I)-

4 Q

Ye s.

See what was happening with it?

5 A

Well, I think it finally fell of its own weight.

6 But that was a proposal taken seriously by the municipal and 7

governmental ownership people at the time.

1 o

0 Was it taken seriously by municipals in Florida, 3

9 do you know?

10 A

I think so.

I believe so..

Tha t's my be ll e.f.

I1 0

Why would t'.nat have been a bad idea, in your view, 12 obviously?

13 A

Well, I have just gone over it.

I 14 MR. BOUKNIGHT:

I object to his having to go over O'-

15 it.

16 SY MR. GUTiMAN:

1i Q

Simply because government would be takinc over an 18 activity -

19 A

Tnat we already had.

Yes, sir.

Tney will gobble l

l Z) you up if they can, yes, sir.

21 Q

Was FP&L concerned about Yankee Dixie?

22 A

Yes, sir.

Or any other covernmental threat to l

O I

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your operation.

l 2

Q Were there others th.a you recall besides Yankee

\\

l 3

Dixie?

('_T 4

A Other what?

6 Q

Governmental threats, as you have just ur,ed the 6

term.

I A

Well, I suppose the sche 9e that Seminole had, and i

which are probably in the works now.

They want to have 2

j I

9 generation here and coal plants th are want to chop off a j

10 piece of your nuclear. facility and so on.

Right now.

1

}

11 Q

Is that a threat to FP&L in your view?

1' 12 A

Yes, sir, it very de. finitely could be.

13 Q

Why is that?

14 A

- Because they want to run - because of the 15 governmental situation, where the government wants to take 16 you.

!?

Q But is Seminole - are cooperatives governmental to agencies?

19 A

Yes, sir.

By all means.

They even get l

l 2) 2 percent money down to this hour for those co-ops.

21 Q

Intere s. ting.

22 A

And when we are paying L8.

Certainly they are an l

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arm of the government.

They were created by the 2

gove rnmen t.

i 3

They weren't meant to do whai they do today.

They'll be

!e) 4 here serving Washington next, I imagine.

a Q

Did you. believe that the service that was being 6

provided by the municipal system was qualitatively inferior 7

to that provided by FP&L7 3

A I made no such charge,' no, sir, 9

Q So it was a question of who owned it.

Was it a i

10 question of cas quality of the ownership or just who -

!'i 11 MR. BOUKNIGHT:

Objection to the form of the 12 q ues.t ion.

I don't understand it.

13 THE HITNESS:

It's a two pronged question.

14 BY.C SUITMAN O

16 Q

My question is, was the objection that FP&L had to j

16 the ownership?

Or was there a question of~ quality as well?

I/

MR. BOUKNIGHT:

Again, I don't understand that 18 question.

If you do. you may try to answer it.

1

~

BY MR. GUTTMAN:

19 I

20 Q

Did you have any reason to believe that municipal 21 systems in FJ 2rida could not serve at rates as low as those 22 that FP&L was offering?

I l

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A No.

I didn't have that.

When you make up those 2

rate comparisons, ' bear in mind thet the municipals and the i

3 REAs, neither otA of them are under any form of regulation

(

4 as f ar as I know.

Perhaps these,last years the municipals 5

have had to fila something on rate structure, whatever that 6

is.

Maybt yotFve got a definition of it.

7 But I don't cir's that they are inferior in quality.

I think you could nrobably ccetend that a place like New o

l 9

Smyrna was because they didn't have cnything to speak of to 10 keep. going there.

That would be inf erior, Fd say.

i 11 They had no reliability except what we provided them 12.

with.

And there's a lot of other cases.

13 These cases are not isoletad.

ife didrr't want c 5e jurisdictional, under the Federal Power Commission.

12 n was 14 b

15 a reason that you didn't like to t'alk about wholesaling 16 because, you know, you'd come under the umbre lla of the 17 Federal Power Commission.

18 But we did serve a lot of people when they got in 19 trouble, cities other than New Smyrna and Homestead.

A lot

!~

20 of them.

When they were in trouble, we would come to their 21 essistance.

22 And we would report it as emergency power.

And that's l

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what we reported New Smyrna and Hones.tead all those years.

2 But I ceuldn't sit up there an/ longer when we had beer.

3 bailing them out for ten years with uninterrupted service, 4

almo s t.

in the case of New Smyrna, and 75 percent of the 5

time in Homestead.

I couldn't sit there and claim that was 6

not wholesaling because it was, 7

Q Did you tell that to the Federal Power l

Es Comission.7

[

9 A

They told me that.

10 0

Did you tell tham that when they had that case 11 about whether or not you were jurisdictional?

12 A

No, the case was tried on transmission and not on 13 wholesale.

14 0

Just to clear that up, are you saping that you h

1::

were concerned if you sold wholesale to municipal systems 16 then you would be doing something that might subject you to 1/

tm jurisdictin of the Federal Power Commission?

Iw A

Yes.

I think it could have strengthened their 19 hand, probably.

Although the lawsuit, or the case that 22 finally went to the Supreme Court of the United States where 21 we lost by one vote - we were trying it on transmission.

22 The Jossle theory - that's electromagnetic interlocking.

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And if a lightbulb of 40 watts is turned on in Atlanta, 2

Georgia, it would have some effect on the generators at 3

Turkey Point, a thousand miles south.

Even though it can't 4

be "easured the theory says that would be there.

5 Therefore, since that occurs across a state line, you are 6

Jurisdiction.

That was the argument of the Jossel theory.

7 0

That's the staff with you are referring to?

o A

Ye s, Dr. Jo ssel.

9 0

Was Florida Power Corporation connectea with 10 Georgia at that time?

11 A

Yes, sir, they owned Georgia Power & Light Company 12 which.3erves lower Georgia.

I think. their headquarters were 13 at Valdosta, Georgia.

la Q

Do you recall in the early '60s or mid '60s when b

1.5 this case was going on, did Jacksonville tell you it was 16 interested in building an interconnection to Georgia?

17 A

Ch, I'm sure they did.

IS Q

Were you supportive?

Did you say that was a good 19 idea, do you recall?

3 A

Well, at that time when we were trying to escape 21 jurisdiction, of course, what we contended was that the 22 Fede ral Power Commission had never approved any transmission i

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across state lines and we were careful to operate in 2

Florida, and insulate ourselves by ' Florida Power Corporation 3

or Jacksonville, whoever was hooking in to Georgia.

.e,

4 0

Do you recall telling Jacksonville in the 1960s,

[

I a

in the mid '60s during the period when the jurisdiction 5

question was at issus,. that you didn't think that you would

/

support you would desire them to go build a line to 3

Georgia?

?

A I don't know whether we said that to them or not.,

10 before the final decision in the jurisdictional case.

But 1I we, for a. period of years, undertook to escape the Federal 12 Power Commission jurisdiction on the grounds that we were an 13 intrastate conpany.

We didtt't operate outside the state of 14 Florida at all..

h 13 And that more power came in'from Georgia than went out, 16 down here, anyway.

17 I think they do have a tie now, though.

I believe one l

Iv exists at this time.

But I can't testify to that because I 19 don't know it for sure.

3 O

Did, when you were involved with the legislatura 21 in Tallahassee, were there proposals to tax the municipal 22 electric systems in Florida, do you recall?

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A No, sir.

Not thet I recall.

2 Well,. let me think a minute.

I believe that -- I believe 3

that a man named Tom Adams, he was a state senator from 4

Green Cove Springs, Florida, did introduce some legislation 5

undertaken to tax municipal operations when they were 6

outside of the county of domicile.

7 In that instance, Green Cove Springs was served by 8

Jacksonville,. wh3 ch is municipal.

Green Cove Springs is in 9

Clay County.

I.t's not. municipal.

And Mr. Adams sought to 10 tax thtt part of the property.

11 Sut it failed -- no, it did:Vt fail.

It passed but it 12 was krocked otit by the court because they never could decide I3 what a proprietary capacity was versus a municipal or 14 governmental :2pacity.

j la We claimed it was a proprietary at that point.

i 16 0

You say, "we claimed"?

It A

Florida Power.& Light claimed that when you get 19 down to Green Cov6 Springs, just as Senator Adams did, 19 that's a proprietary operation at that point.

20 0

Did you take a position on that legislation?

Did l

21 Fp&L take a position?

l 22 A

Sure we did.

i l

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Q What was the position?

2 A

That it was good legislation, and they ought to be 3

taxed when they get outside of their county.

4 0

Nhy?

Why did you. think it was good ---

(.

3 A

Nhy shouldn't they be taxed?

6 Q

What difference would it make to Florida Power &

I Light whether they were taxed or not?

e A

It's the same. thing 'of trying to arrest the march 9

forward of the mighty government.

10 C

Were you afraid they would come into the territory 11 you were serving?

!2 A

Well, they might have, or done anything else if 13 you could hook up enough of them.

Jacksonville could sit 14 there tax free and crank up enough to go all the way to the

~#

15 and of Florida, all tha way to Cape Sable.

16 0

Were you afraid that Jacksonville would do that?

17 A

I had it in my mind, yes,' sir, I did.

18 0

Were other FP&L officials concerned that was a 19 passible -

23 A

I think they shared my viewpoint on these matters 21 pretty much.

22 Q

Do you rem ember the " stay put" bill.?

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A Yes, sir, I remember.

2 0

Can yor tell me what that was about?

3 A

Well, the " stay put" bill provided that if you -

X.'

4 let's say Florida Power & Light is operating in & territory 5

surrounding a city and that city is. municipal, it. reaches 6

out and annexes the part that belongs to Florida Power &

I Light.

It's now within the city.

{

And then the city would claim, "Well, you have uken all c

9 this property over by annexation, you've got to get out.

10 This legislation says, "No, you don't.

You can stay put 11 where you are and continue to serve and expand in that 12 a rea. "

That's the " stay put" bill.

13 Q

Did that actually become a law, do you knew?

14 A

Yes, sir to my recollection it did.

-b la Q

P!as FP&L SJpporting that bill?

16 A

Yes, sir.

1/

Q And for what reason again?

18 A

So they wouldn't take our property away from us.

19 Isn't that a good reason?

20 0

Can I ask you - I'll say yes.

But can I ask you 21 a dJmb question about that7 22 Why were you concerned that they would take your property c4ce-9edesa( cReporteu, Dnc.

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away froc you if you offered better service and lower rates?

2 Why should you have had a concern?

3 A

Because that's what they did - historically.

h 4

Today - I'd say we, Florida Power & Light, have some a

property lef t in the city of Jacksonville and they are going 6

to run us out sooner or later.

See, we have been there all

/

these years.

8 What they did there, they.went different from what 9

usually occurs.

In these consolidations of cities and 10 counties, the dominant governmental entity that usually 11 survives is the county.

But in the case of Jacksonville, it 12 was the city.

13 So the boundaries of Duval County, which is abolished, is 14 now the boundary of the city of Jacksonville.

It's the C

16 largest city in the world.

1o And we are in there.

And we have tried to stay.

It We have a franchise at a place called Baldwin.

But they lo are. going to run us out.

Yes, sir, they will run us out.

19 Q

Is there anything FP&L can do too prevent 23 itself -

21 A

I doubt it.

22 Q

What about offering service at lower rates?

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A Than Jacksonville?

2 0

Yes.

3 A

They won't let us serve in there.

Wouldn't have a E

4 praye r.

You know that.

5 Q

Did FP&L compare its rates with the municipal 6

systems in the state?

7 A

Ch, there are always rate comparisons being mede.

o Arguments pro and con..Usually the rate comparison is on 9

thousand kilowatt hours, which is, or was, a sort of an 10 average residential consumption.

11 0

Yes.

12 A

And on that basis, you can erove different 13 things.

Rates on some -- or others --- but Florida Power &

14 Light Company's rates, I think, are competitive..

But, of

,b 15 course, you've got a lot of other rates besides that.

That 16 isn't a true yardstick.

You got commercial accounts and

@f[

lt you've got industrial, and you've got municipal -- street to lights, flat rates and so forth.

19 MR. BOUKNIGHT Let's take a few minutes.

23 (Recess.)

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--Y

Transcript of Proceedings l'..

U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT.OF FLORIDA

_ _ _ _ - - _._ _ _ _ - - - - -x LAKE WORTH UTILITIES AUTHORITY, et al.,'

Plaintiffs, v

vs.

~'

.: Case-No. 79-5101-Civ.'-JLK FLORIDA POWER ~= LIGHT COMPANY,

- Defendant.

(

--. _.---x DEPOSITION OF BENJAMIN FUQUA (CONTINUED)

~..

Washincton, D. C.

Wednesday, 23 Septerber 1981 ACE-FEDERAL REPORTERS,INC.

'~

OffidalReponers 44 Ncrth Ccpitel Street i

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Q I see you've got your answer there is that 2

corr ect.?

3 A

Yes, sir.

Apparently so.

]

4 0

okay.

The first question I have is that the cover 5

meno, July 9, your cover memo says you've given Mr. Mcdonald 6

five possible catastrophic threats.'

But the n:xt page is 7

apparently number 3.

Do you know whether that was the o'ily one you gave him er whether there were four others?

4.

9 A

I don't know.

10 MR. GUTTMAN:

Lon, we would like to request if 11 there were four others, whatever is missing -

12 MR. BOUKNIGHT*

What I'd suggest that you do is 13 that you can request at the end of the deposition - if

(

I4 you'd write me a letter so we dorFt have to dig it out of 13 the transcript?

16 BY MP. GUITMAN:

li Q

Do you recall discussing your answer or the 18 answers of others with the senior management group or the 19 offic.ials in that group?

20 A

No, sir, I do not.

21 Q

Have you had a chance to look at your answer 22 there ?

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A Yes, sir, I havs glanced through it.

2 Q

Could you take a look at 38.

3 A

Yee, sir.

4 Q

You state there tha.t you believe that FP&L should

~

i undertake to " resist the encroachments of tax dollar-created 6

public power. entities."

/

Did that include, municipal syster.s2 6

A

. Yes.

Sure.

9 Q

So when you say " government takeover" in the 10 heading, that included municipal systems?

11 A

It could.

12 Q

And you assume that New Smyrna Beach or 13 Tallahasses woulo take over FP&L - what were you thinking 14 ot2 15 A

They might undertake it.

16 Q

And you were concerned about that as a il possibility?

Ic A

Yes, sir.

Obviously.'

19 Q

How would a Tallahassee or New Smyrna Beach go 2) ahead and tal.a over FP&L7 21 A

We L', we have discussed that in my testimony 22 al. ready, the various proposals such as the Yankee Dixie and u

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others, and efforts to tie them together, get federal 2

subsidies and grants.

That's all.

3 My testimony is replete with answers to that particular j

4 item.

5 Q

When you say! in item 3B that you should undertake 6

to resist this in a. balanced and reasonable way what kind 7

of method would you have used to. resist 2 o

A Well, I. think if you. read on thrt, ugh you probably 9

will find the answer right here in the memorandum.

10 Q

Okay.

Looking at 3C then, the next one, it says, 11 one specific area to watch is the antitrust field and the 12 demands made for ownership and sharing, wheeling, and 13 coordination.

{

14 Was it your opinion that these~ demands were made in la Ficrida ?

16 A

Well, I believe I testified that two cities, New I/

Smyrna and Homestead, and Seminole, were involved.

That has 18 been testi.fied to time and time acnin.

l l

19 0

Is that to say that th

..ere concerned - tha t 3

those systems were interested in ownership sharing l 21 whee ling, and coordination?

22 A

So far as I know they were.

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Q Okay.

At the time of this memo, in 1974, do you 2

know, was FP&L voluntarily providing ownership anaring, 3

wheeling, and coordination to those systems and any others?

{

4 MR. BOUKNI.GHT:

Objection, Mr. Guttman, I think 5 -

that's vague beyond the point of being answerable.

6 BY MR. GUTIMANs

/

Q Can you tell me what you mean by ownership 8

sharing?

9 A

Well, ownership sharing, I presume, would be to 10 alot, or sell, or however you go about it, a share in the 11 capacity of a nuclear power plant.

12 Q

And what about coordination?

What was meant'by 13 coordination?

{;

14 A

That I derf t know.

15 Q

Do you know why you would have used the term?

16 A

No.

.I don't recall why I did.

17 Q

Down at the item E it says, 'Have plans to resist to takeover in the courts."

19 Do you recall having the opportunity to discuss such I

plans in the senior management group?

21 A

I have no recollection of it.

22 0

Could you 1cok at the next page.?

~

b c:Oce-9ederal c:Reporten, Sne.

AM NO97M CAPf70L STREET WASHINGTON. D.C.

20001 3023 347-3700 N ATIONWIDE COVERAGE

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7

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l 3390 01 14 198 3

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A Yes, sir.

2 Q

Lock at item G

" Takeover may be total or 3~

part i a1."

.m

(.

4 Do you recall,.I guess just :before you lettl Dade County

~

5 was..considering getting into the solid waste generation 6

business?

Do you recall that.?

7 A

I have a vague recollection of it.

About the time o

I re tired.

9 Q

Were you concerned that-that might be a way in 10 which Dade County coulo enter the electric operatir.g field?

11 A

I don't think so, no, sir.

Not the waste parts 12 that it would use waste as a fuel.

13 Q

You say, "If Dade County entered the operating 14 field it would he a near disaster, as it would be a f oot in b,

la the door or entering wedge."

16 Can you explain what you meant?

I/

A That. speaks for itself.

It would be, in my 18 opinion, a. disaster for..this investor-owned, ta xpaying 19 company,' to be destroyed and taken over by an arm of the a

gove.rnment.

I think thaFs a disaster.

21 Q

But if it were not the entire company but just 22 part of Dade County, why would that be a disasttr?

l f

c4ce-9ede:al cReporteu, Dnc.

444 NORTM CAPITQ4 STREET WASNINGTON. D.C.

20001 (3033 347 3700 NATIOMwlOE COVER ACE y9

- ?

w-u----,r m

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l 3390 ?! !5 199 1

BRTgdv I

A Nell, it would fragment it and a large portion of 2

the company's business was done in Dade County.

It was a 3

metropolitan governments the largest political entity. except m

4 the state itself.

6 Q

Are you aware, and if you are not aware I won't 6

ask further questions, of the company's position in the last

/

five or six years that it does not have the capacity to 8

serve some of the municipal systems that have been asking 9

for service?

It lacks the power capability?

It doesn't 10 want new cus.tociers insof ar as they are municipal systems?

II A

I don't truly understand what you are asking.

12 13 f-14

(,

15

}

y 16 17 Io 19 1

20 21 b-l c4ce-9edera( cReposteu, Bac.

444 NORTN CAPtTot. STREET WASHINGTON. O.C.

20001 G033 347-3700 NATIONS"ftOE COVER AGE l ~'

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3390 02 01 200 l

BRIrcb I

0 My questi.on is this:

Is it your understanding 2

that the company, FP&L,' is looking for service 2 That it is 3

aage rly searching for anyone to service at. this time ?

4 MR. BOUKNIGHT:

Are you asking about six years 5

af ter he is rettred -

6 MR. GUTTMAN:

Do you understand the question?

7 THE WITNESS:

I.have no idea.

.a BY MR. GUITMAN:

9 Q

Suppose metropolitan Dade County wanted to buy 10 oower from Tallahassee, New Smyrna Beach, or some municipa; 11 systat Would that have the same effect.?

Would that be a 12 near di.sas.ter as well?

13 MR. SOUKNIGHT:

.I object to that on the ground l

14 that questio: is not understandable.

Is BY MR. GUTTMAN 16 Q

Mell, would ycu have been concerned if one of the le municipal systems wanted to sell power to me tropolitan Dade 18 County and Dade County would have bought that for resala, 19

~ culd that have been a concern for you?

n 20 MR. BOUKNIGHT:

Are you assuming here that Dade j

21 County has once established itself as an electric system, 1

22 accired FP&L's f acilities or are you suggesting that Dade f;

v cAce.Jedesaf cRepostess, Soc.

444 NORTM CAPITOL STREET WASNINGTON. O.C.

2000t (202) 347 3700 NATIONwtOC COVERAGE

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~

, TL _-. _,, _ -._,

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3390 02 02 201 1

BRTreb 1

County might want to have its office served by the City of 2

Tall ahass ee ?.

3 BY MR. GUTTMAN r

4 0

Suppose Dade County started meeting with some 3

other systems in the state, municipal systems, about the 6

possibility of their supplying Dade County Instead of FP&L.

/

Would that have been of concarn to you?

8 MR. BOUKNIGHT:

I have the same objection.

.I 9

car / t Understand that.

10 MR. GUTTMAN:

Answer the question, please.

11 MR. BOUKNIGHT:

If you can understand it you can 12 answe r.

13 THE WITNESS:

Well, I really don't understand it O

- " " d t ' * * * * ""

r" '

' ""aa "* t' " " d ' "

"**r"-

IS I testified time and time again in regard to the proposition 16 that FP&L wants to continue as an investor-owned, taxpaying 17 company.

And anything that would. tend to destroy that would lo be of cencern, I think.

19 BY MR. GUTIMAN:

20 Q

And any taking.over of your customers by a 21 municipal system would be something that would tend to 22 destroy that in your mind?

v c4ce 9ederal cReporten, Soc.

4e4 NORTM CAPITCL STREET WASHINGTON. D.C.

20000 (3023 347-3700 i

NATIONWIDE COVERAGE L

~

~ ' '

~

3390 02 03 202

'l BRTreb i

A It would.

It would. chip away, I suppose.

The 2

foot in the door again.

3 Q

Mould you take a look at the memo before that?

']'

4 Mr. Autrey's response which is right before yours.

5 A

Yes, si.r.

6 Q

Take a. look at his answer I and 2.

7 A

Yes, sir.

8 Q

Do you agree with his statement 1, that the 9

Federal Government r.aqu. iring you to wholesale and wheel 10 power would be a possible catastropic threat?

Il MR. BOUKNIGHT:

I object to the characteri::ation 12 of that, Mr. Guttman.

13 MR. GUTTMANs I am just reading from the heading.

14 MR. BOUKNIGHT:

You c.an read the heading and then C

1:2 you can read statement number I, and that does not ge t you 16 to the point that Mr. Autrey said what you just paraphrased ie him saying.

18 BY MR. GUTTMAN:

19 0

Did you share the concerns that Mr. Autrey states 20 in 1. tem I there.7 21 MR. BOUKNIGIR:

I objeet to that on the grounds 22 that I think y.ou first need to lay e foundation that he l

c4ceSederd cRepsteu, Dne i

444 NORTH CAPtTOI. STREET l

WASHIMSTON. D.C.

2000t taca> 347 37eo MAT 10NWtOE CovtRA4C

-~

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t 3390 06 02 260 1

BRTreb 1

Q Could you lock at LLW 2-27-75, p6ge 3 of 47 2

A LLW2 1

3 Q

Look at the entire LLN, 2-2 7-75, " Major provlsions

.(..

of the wholesale tariff."

4 o

A All right, Major provisions.

Yes.

6 Q

Do you recall Mr. Lloyd Willlams in the rate o

department?

e A

Yes, sir.

I recall him.

9 Q

Do you know if he was LLW7 1s.that his initials 2 10 A

Yes.

II Q

This. series cf pages appears to be a presentatice 12 of the provisions of the wholesale tariff and associated 13 potential problems.

Will you look at page 3 which has the (v'

14 heading " potential problems"?

15 A

Yes.

16 Q

Can you tell me if you viewed those items 17 identified, as potential problems with wholesale tariff Ic service ?

19 A

I don't recall whether I viewed them as potential 23 problems or not.

21 0

Will you take a look at item 47 Mas that a 22 potential problem that you saw with wholesale service to l

G" s

l YCC* $ C Qf StyCTfCT4 YMC.

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444 NORTH CAPl?Cl. STMEET WASHINGTON. D.C.

20001

AaB 347 3700 NAMONWtOE CO WERAGE f

4 3390 06 03 261 i

BRTreb I

municipal systems?

2 A

Well, I would say that we would seek to renew our 3

t ranchi.sen, yes, sir.

?k 7

4 Q

Why would you seek to renew your franchises 2 6

A Because we wanted to stay in business.

6 0

Well, item 4,* under that item, the franchise would 7

continue to buy from FP&L at wholesale -- would FP&L stay in S

business if it served former franchises at wholesele?

9 A

L don't know that -- you are making the statement to that they would perform wholesale.

I didn't testify to 11 that.

12 0

My question is would -- did you view it as a 13 problem that a system -- that a franchise would not renew,

(

14 and then would purchase from you at wholesale?

I:a MR. BOUKNIGHT:

I object.

You have asked him that 16 question and he has answered it to the best of his ability.

It MR. GUTTMAN:

.I understand his answer.

But h's to answer, I think, was that you wanted to keep the business 19 that you had, is that correct?

33 Yes 21 MR. BOUKNIGHT:

I abject to that.

His answer --

22 whatever is in the. record will stand for 1.tself.

e e'

(_

l l

c4ce-9edera( cAepostezs, Sac 444 NORTM CMf70L STMEET WASMINGTON. O.C.

30001 (3031 347 3700 NATIOMW10E CQVERAGE

3390 06 04 262 4

BRTreb 1

MR. GUTI' MAN:

Okay.

~

2 MR. BOUKNIGHT:

What you are trying to do is you 3

are trying to put somebody else's words in the wi tness' 4

(.~-

He has told you that all he can say about this is 4

mouth.

5 what he had said.

6 BY MR GUTTMAN 7

Q In your view, do you recall what difference did it e

make to FP&I. if it. sold to Miami Beach at wholesale as 9

opposed to retail?

10 A

I stated over and over agair, that we wanted to be 11 a retail company, not a wholesal.ing organization.

12 Q

For the reason. that if you sold wholesale to one 13 system that would be a foot in the door to public -

C i4

^

sur it 1 -

They woute f 11 11x eo tao a= vou 15 went along, one af ter the othar.

We dide.t want that.

16 Q

Okay.

So you would serve to Miami Beach but you 17 wanted to serve them at retail and would not serve them at i

18 wholesale.

Is that correct?

!?

MR. BOUKNIGHT:

.I object to th' t.

I don't think 20 it makes any sense.

21

.THE MITNESS:

I ca# t answer the question and you 22 are now trying to put words in my mouth and there is'no c4ce-9ea'ew! cAcyodeu, $nc 444 NORTM CAPITCL *014EET WASNINGTON. D.C.

20001 (202 347 3740 NATIONW10E COVENAGE

3390 06 15 273 BRTreb I

is a long meino, v.

analysis -

2 A

Strategic planning department?

3 Q

Right.

I just ask you. initially do you recall

( ~.

4 having seen this document?

3 A

No, sir.

.I don't recall it.

I don't know what 6

date it is even.

i Q

Can you take a look at page 67 A

All right.

Page 6.

3

~

9 Q

Under the heading, " joint projeets?"

1 10 A

Yes, sie.

11 Q

Was FP&L concerned that joint projects could be 12 forced upon FP&L by regulatory. requirements?

13 A

I don't know if they were or not.

Whoever is the h

14 author of. this statement apparently thought that they may be 15 forced to do so.

16 Q

Can you take a look - looking at C, " Wholesaling 17

- SR ra te. "

Take a look at that paragraph.

to A

Well, I think that SR rate is the sale for resale 19 rateI wholesale rate.

Yes.

20 0

The document says that the rate at which FD&L 21 wholesales can affect FP&L's ability to compete with r

22 competitive sys. tams.

Do you agree with that?

dfCT$M C&*

?!C

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444 NORTH CAPtTOt. STREET WAsMNGTON. O.C.

20001 (SOS Jd7-3700 MATIOMW10E COVERAGE

..,...,.. _.. _ _. - _ _., +. -..,,, -, _,,,. -,,.,...,.. _,._,

3390 06 16 2 74 3

BRTreb I

A Well, we will have to have -

yes, we will have to 2

have a proper computitive rate.

Yes, sir.

3 Q

Why would you have to have a compe titivs rate?

('

4 A

To stay in business and fight off the ene my, the 5

government.

6 Q

And when you say big government, including -

7 A

Including any arm of the government.

8 Q

Including municipal systems.7 9

A Certainly.

10 0

When you say " government" you included municial 11 systems?

12 A

Yes.

13 0

What makes a rate competitive in your mind, as

{

14 someone who was in charge of the rate department for a 15 period of time at least?

16 A

Well, it is a rate that certainly would impel a it customer to sign a power contract with a company rather than 18 putting in their own facilities.

That would be one reason.

19 If you. price it too high then they will put in their own 20 gene ration.

And 1.f the Federal T war Commission prescribes 21 a. rate too low, then we would be forced to charge that rate 22 under that regulation, whereas,' the. municipal boys are undar l

C 1

l c4ce-9ederaf c:Reposteu, Snc 444 NORTH CAPITQt. STREET t

WASMf M4TO N, D.C.

2000f (30s 347 3700 NA7tONWIOS COVERAGE

3390 06 I7 275 3

BRTreb I

no regulation at all.

They can do as they please.

2 0

But if you are forced to charge a rate that is too 3

low and they charge. a highsr rate, won't you get the

.-(*,

D 4

business because you are charging a lower rate?

3 MR. BOUXNIGHT:

Objection to the form of the 6

question.

I don't know what business you are talking about.

I THE WITNESS:

Yes, I don't either.

c BY MR. GUTTMAN:

9 C

Were you concerned that the potential customers 10 might go to the municipal boys instead of FP&L if you don't il charge a competitive rate?

12 MR. BOUKNIGHT:

I have the same objection to the 13 vagueness of that. question.

{

14 THE WITNESS:

Can be too high. Can be too low.

We 15 are regulated.

They are not.

I can go either way.

16 Then you have over here the industrial plant that may 17 want to go in business too, unless you have rates that, 18 shall we say, are competitive.

19 BY MR. GUTTMAN:

20 Q

They may want to go in business generating their 21 own power?

22 A

That is right.

l l

cAce-9edemi cReporte1s. Dnc.

A/d NORTM CAPtTCt. STREET WASNINGTON. O.C.

200G1 GOS 347-3700 MA710MWlOE COVEA AGE

' 3390 06 01 2 76 2

BRTreb i

Q May they also want to go into business in 2

com etition with the municipals?

3 MR. 800 KNIGHT:

I object to the vagueness.

(3 7

4 THE WITNES3:

I suppose they could.

3 (Whereupon, at 11:50, the taking of the deposition 6

was r.ecessed, to reconvene at.I*15 p.m.,

this same day.)

I 8

9 10 11 I

12 13 C

'4 la 16 h

iI lo l

19 l

m D

l 22 s

C i

i c4ce '.5de:af cReporteu, Snc.

444 FO2TH CAPITQt. STREET WASMI.44 TON. D.C.

20001 taeal 3476 NATICMW10E COVERAGE

\\

A APPENDIX B Excerpt from the deposition of Marshall Mcdonald, FPL Chairman of the Board, taken September 2, 1981 in Gainesville Regional Utilities et al. v. Florida Power & Light Company, S.D.

Fla. Case No. '9-5101-CIV-JLK re: regulation of utility profit.

f I

l

7 ~. ]

J{m.E_,

[

463

=,-a M_d 1

i IN THE UNITED STATES DISTRICT

[-]

OF FLORIDA COURT FOR THE SOUTHERN DISTRICT r0 T 2

BO e 3

CIVIL ACTION NO. 79-5101-CIV-JLK Ss

=ctc.?

4 l

T@lil l

GAINESVILLE REGIONAL UTILITIES, 7;;G 5

i THE LAKE WORTH UTILITIES AUTHORITY,

.Oct. i THE UTILITIES COMMISSION OF NEW 6

SMYRNA BEACH,' THE SEBRING UTILITIES Sa COMMISSION, AND THE CITIES OF gg 7[

ALACHUA, BARTOW, FORT MEADE,

_ _ _~

HOMESTEAD, KISSIMMEE, MOUNT DORA, n/-

8 l

NEWBERRY, ST. CLOUD, STARKE, AND

~ ' " '

l

'I ALLAHAS S E E, FLORIDA, F='

9

~

Plaintiffs,

-. g 10

' i ',9 l

vs.

EG4 11 R' 9--@

FLORIDA POWER & LIF,HT COMPANY, 12 u z, m,.<

m.-

-iC-Defendant, m;rt=".

13

....-.ME

/

, d._.i.;

L*

.14 15 9250 W.

Flagler Street d

Miami, Florida l

"' ) '.

16 Thursday, September 3, 1981

-ilE 9:30 a.m.

@=.in, 6..

17 n.- - ^.

5;cg'-?

13 DEPOSITION OF MARSHALL MCDONALD ng;>

l I

77t 19

a. -:-

314C Taken before ELAINE GASS, Court Reporter and i

~ [~.,

20 c

Notary Public in and for the State of Florida a *. Large, 21

.s...

l_.;;h.

pursuant te Notice of Taking Deposition filed in the 22 y

above-styled cause.

23 24

/ ~

25 s

.c ikf' NEW YORK NATIONAL REPORTING SERVICE

,,',,[,,,,,,,

MARTY LESHAW MiAM:

44 w. FLaGLER 57.

FFIClaL COURT REPCRTER 1392: TR $.4444 Cl#Culf court OF Tug s t ree Ju OeCI AL CIR Cutt. CADE C olJ N TY. FLA.

+.

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tL 499 1

A I hope so.

I.

G Why do you hope so?

i

{

A Because the rate-payers are the only ones 3

2

7 4

who would benefit.

~

3 g

Well, if the company becomes more efficient i

I 4

and successful through the research and development, would the stockholders benefit as well?

3 A

No.

t j

0 0

Even if it became more profitable as a I

PJ result?

ii II A

No.

i G

Why not?

A Because any profit would be taken away 3

by the regulatory authorities.

There's no way the

'3 stockholders can benefit, in my opinion.

t G

Alternatively, if the company was not

.. t

~'lable to keep up with innovation and lost business, I

..s.. would the stockholders be hurt?

i A

Yes.

4 Carry it to the extreme, whi'ch is?

i i

"j A*

That the company goes out of business.

v..

_ j G

And then everybody is hurt?

(

s

~."

i A

Th,at is my assumption.

I' 2:

O I'm s. lowing Mr. Mcdonald'Gardner Exhibit "9*

Number 36, a cover letter containing a document dated NEw voax NATIONAL REPORTING SERVICE f,'*,*,f[,'";,",,';

tover sr.

MARTY LESHAW MIA MI Caric Ai. Couar acecarca CIR Cust Cou n t' CF TN g ster JU DICI AL CIR Cu t T. DADE C o u N TY. rLA.

L

I J

APPENDIX C Complaint filed August 13, 1968 in Gainesville Utilities Dept.

and City of Gainesville v. Florida Power Corporation and Florida Power & Light Company, M.D.

Fla., Civil Action No.68-305.

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ML20031B355

Text

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