ML20031E534
| ML20031E534 | |
| Person / Time | |
|---|---|
| Site: | Turkey Point  |
| Issue date: | 10/09/1981 |
| From: | King J U.S. DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA |
| To: | FLORIDA CITIES (FLORIDA MUNICIPAL UTILITIES ASSOCIATE, FLORIDA POWER & LIGHT CO. |
| Shared Package | |
| ML20031E531 | List: |
| References | |
| 79-5101-CIV-JLK, NUDOCS 8110160080 | |
| Download: ML20031E534 (12) | |
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UNITED STA~ES DISTRICT COURT 4 0CT131981 SournERN DISTRICT Or rLoRIc DENbe CASE NO. 79-5101-Civ-JLK Lowenstein. Newman. Reis.
F,ORIDA CITIES,
^* # 'd:8 ORDER DENYING MOTIONS FOR
SUMMARY
JUDGMENT ON PLAIN-Plaintiff, TIFF'S GAS CLAIM AND GRANTING DEFENDANT'S
SUMMARY
JUDGMENT vs.
MOTION ON PLAINTIFF'S NUCLEAR ACCESS CLAIM F~,CRIDA POCR & LIGHT CO., 3 Defendant.
This cause came before the Court on motit.ns for summary judgment on plaintif f Tallahassee's nuclear access and natural gas clairz.
There are three motions before the Courts de.
'<'.nt a motio'
'or s.::=ary judgment on plaintiff's nuclear access a; defer' ant's motien for summary judgment on plaintiff's natu.
.as claim; and plaintif f's cross-motion for summary judgmeat on the same natural gas claim. These motions were mace pursuant to Fed. R. Civ. P. 56.
In essence, plaintiff's natural gas and nuclear access claims allege that defendar.t's actions have injured plaintiff and violated the federal antitrust laws.
In the natural gas claim, plaintiff alleges that defendant conspired with a natural gas supplier end a natural gas producer to reduce the quantity of naturul gas supplied to plaintiff. In the nuclear access claim, plaintiff alleges that defendant has blocked and continues to block access by plaintiff to nuclear-generated electricity and the associated benefits that result from participation in nuclear power production. The natural gas and nuclear access claims are considered separately below.
The Natural Gas Claim 2rus claim primarily involves four entities: Florida Gas and Transmission Co. (FGT), the alleged exclusive pipeline supplier of nat_:.al gas to peninsular Florida; Amoco Production Co. (Amoco),
a prcducer and seller of natural gas and the major supplier of natural gas to FGT; defendant, Florida Power and Light Co. (FPL),
a publicly-owned utility; and plaintiff, the city of Tallahassee, Ficrida. The events which gave rise to plaintiff's natural gas P** naRo
claim against FPL may be summarized as follows.
In 1964, Amoco and FGT entered into a twenty year warranty gas supply contract. The following year, Amoco and defendant entered into a twenty year warranty gas supply contract (the MMBTU cc. tract). The Anoco-FPL agreement allowed either party to legally terminate the agreement in the event that the regulatory permits z.ecessary for the execution of the contract were not ob-tained within a specified time.
A regulatory delay occurred, and as of January, 196,7 Amoco legally cancelled the contract.
. In the mid-1960's, defendant contracted with FGT for the transportation of natural gas.
The contract required FGT to obtain whatever regulatory approval was necessary to transport defendant's gas, and for FGT to keep defendant informed about "all contracts, authorization, permits and approvals which may affect the transportation of defendant's gas."
National Gas Transportation Agreement, Art. II, Par. 3 (Mar. 12, 1965 ).
On March 1, 1967, the Federal Power Commission (FPC) issued a decision allowing FGT to expand its gas pipeline, but only if FGT could shew the Commission that it had a stable source of purchaser income. FGT was given a certain amount of time to show FPC it had such an income.
On March 22, 1967, Amoco and FGT entered into an agreement which has been referred to as the " banking arrangement." This agreement, which apparently was not disclosed to the public or the Federal Power Commission until 1975, modified the existing contract between Amoco and FGT.
It permitted Amoco to supply FGT with varying quantities of natural gas instead of uniform quantities as the criginal Amoco-FGT contract required. Plaintiff alleges that this modification was exacted by Amoco as a quid prg guo for the reinstatement of the MMBTU contract between Amoco and defendant.
The reir statement of the MMBTU contract, which occurred in May, 1967, apparently enabled or facilitated compliance by FGT with the F;C's March 1, 1967 decision.
Sc:n after the consumation o! the " banking arrangement,"
Accco shipped surplus gas to FGT.
FGT scid some of this surplus
.?.
~ _
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4 te its custo=ers, and some to a difterent supplier.
In.the early 1970's, as prices rose and gas supplies apparently dwindled,Amoco z
reduced gas supplies to FGT.
FGT, in turn, curtailed supplies to
[
a its own customers, including plaintiff. Plaintiff had an inter-ruptible crpply contract with FGT ar.d thus was subject to cuts in supply. Defendant, on the other hand, had a non-interruptible centract'and continued to receive the amount egreed upon in the reinstata'd M:iBTU contract.
Plaintiff essentially contends that FGT, acting as defendant's 1
agelt, negotiated the reinstatement of the HMBTU contract for de f epdan,t, and that the " banking arrangement" was made with the U
.O purpose of reducing--or had the Ilkely effect of reducing--future gas supplien to plaintiff. In addition, plaintiff claims that defendant's actions wrongfully and tortiously interfered with the contract rights of plaintiff.
Defendant contends that FGT did not act as its agent in effcrts to reinstate the MMBTU contract. Defendant also asserts J
that even if such an agency relationship is held to have existed, I
it would be improper to hold defendant responsible for the reduction in supplies frcm FGT to plaintiff because the occurrence of the Arab Cil embargc and the scarcity.of natural gas supplies could not have i
been forseen in 1967. Defendant further contends that FGT and Ameco had independent business reasons for entering into the 1957 " banking arrangement," and that plaintiff and others believed that' natural gas would remain in plentiful supp1*.
After careful censideration of the record, the comprehensive written submissions of the parties, and the oral arguments o'f counsel, it is CRDERID and ADJUDGED that defendant's motien and plaintiff's i
cross-motion for summary judgment on plaintiff's gas claim are both denied. The Court denies these motions because it finds that-there exist genuine issues of material fact, the resolution of-which are integral to a judgment as a matter of law.
One such c:ntrovarted fact is defendant'; participation in, or influence
'over, the 1967 " banking arrangement." Whether defendant did in 4 - - -.. -.. _., -
~
4 j
4 fact conspire with TGT and/or Amoco through the " banking arrange-ment" to deprive plaintiff of a portion of its natural gas supply is a' question that simply can not be satisfactorily resolved based'on the existing record. It is clear, however, that the
^
issue of agency is far more concrete than the " mere suspicion" alleged by defendant. Plaintiff supports its agency theory by referring to an agency provision in the MMBTU contract between Amoco and defendant, an agency provision in the Gas Transportation Contract between PGT and defendant, testimony by Amoco's Harold it.
1 2
Hawkins, and an internal memorandum of defendant.
The Court simply.can not conclude on the basis of this evidence, in addition to the, apparent incentives for defendant to reinstate the MMBTU
- ontract, that no genuine issues of fact exist with respect to the ager.cy theory.
Other facts remain at issue. One such fact is whether the
' " banking arrangement" had the purpose or likely ef fect of diminishing gas sapplies to plaintiff. The existence of this and other disputed material facts, which, if proved, may lead to a violation of federal law, require this Court to deny summary judgment on the natural gas claim.
The Nuclear Access Claim The facts which gave rise to this claim are briefly as follows.
Defendant's first nuclear generadmg plant, Turkey Point No. 3, began operation in 1972. Defendant now owns and operates three nuclear generating f acilities -- Turkey Point Nos. 3 and 4, and St. Lucie No. 1 -- and is constructing a fourth f acility, St. Lucie No. 2.
These-anits presently provide 29% of the total amount of electricity 3
produced by defendant and, when the fourth unit is completed, will have cost defendant in excess of $1 billion, 650 million. Defendant asserts that these nuclear facilities are extremely cost efficient 4
1.
See plaintiff's remorandum in support of its motion for summary ju3gnent (Motion) at 10.
2.
Id. at 10-11.
3.
Affidavit of kobert Gardner (Gardner Affidavit) at 7.
i A.
-~
4
- reducers of electricity.
Plaintiff owns'a share of Florida Power Corp.'s Crystal 7;ver No. 3 nuclear faciliti but does not own, or deal with, any cf defendant's piants. Plaintiff claims that when it notified defendant in 1976 that it was intere,sted in participating in defendant's proposed South Dade nuclear facilities, the request was flatly denied.
Plaintiff contends that defendant has a legal cbligation tc provide plaintiff'with access to nuclear generated electricity for
' the following reasons: defendant is monopolizing the market of r.uclear. generated electrical power; defendant acheived and is maintaining his monopoly through anticompetitive means; defendant's tehavior has denied plaintiff access to economies of coordination and scale, the benefits of nuclear power production in general, and the ability tc compete effectively with defendants and defendent's de reicpment of nuclear power was not innovative or undertaken alone tr.d therefo-* is not defensible under judicial precedent. Plaintiff further contends that defendant is obligated to deal wi:h plaintiff because defendant's nuclear facilities constitute essential facilities 5
under a " bottleneck theory" of monopolization, Defendant maintains that even if it concedes for the sake of argument that nuclear-genera ed electricity is a separate market, that plaintiff is a competitor of defendant, and that plaintiff's lack cf access to defendant's nuclear facilities has denied plain-tiff the ability to compete effectively with defendant, defendant s-ill has no legal obligation to share nuclear power facilitics acquired through business acumen and various efficiencies with an entity that simply did not have similarly insightful business judg-ment. Defendant contends that plaintiff's claim is also defective because: plaintiff's request for participation occurred only in 1376, af:er defendant had assumed substantial risk in constructing and operating its nuclear fscilities: plaintiff's expressed interest 4.
~See " Memorandum of Florida Power & Light Company in Support cf Metion for Summary Judgment of City of Tallahassee's Nuclear Access Clain" (Def. Memo) at 3.
5.
"T1orida Cities' Answer to " Motion to FPL for Summary Judgment of City of Tallahassee's Nuclear Access Clain" (Answer) at 113. - -
in ranicipating in defendant's facilities conste.ts only of a desire to have the " opportunity to consJder" participations and defendant is using its nuclear facilities only to supply its customers with electricity, not to injure plaintiff.
l l
After careful consideration of the record, the voluminous
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submissiens by the parties, and the oral srguments advanced by cobasel, it is I
ORDEFID ar.d ADJUDGED that defendant's motion for summary judgment en plaint,1ff's nuclear access claim is granted. This
.Cour; recognir.es that in considering a motion for summary judgment, it "must construe all pleadings liberally in favor of the party against whcm the motien is made, and [that) the motion should be granted'only where the moving party is entitled to judgment as a matter of law and the record clearly shows that no genuine issue of material fact exists." Dassinger v. South Central Bell Telephone Cempany, 505 F.2d 672, 674 (5th Cir. 1974). In the instant case, a Itberal construction does not save plaintiff's nuclear access clair from summary judgment.
Plaintiff's claim alleges violationc of the Sherman Act, 15 U.S.C. $1 et. seg. Plaintiff argues in its response to defendant's 6
summary judgment motio::, that its claim under 51 of the Sherman 7
Act, 15 U.S.C. 51, survives a motion for summary judgment.
The Court disagrees. Section 1 bears on all contracts, combinatiens or conspiracies which unreasonably restrict competition. There has been no showing whatsoever by plaintiff that evidences the existence of any such conspiracy, combination, or contract. Defendant apparently sold nuclear generated electricity only to its own custo!.ers prior to a recent sale translated pursuant to a settlement agreement with 8
the Nuclear Regulatory Commission and the Department of Justice.
Apparently, no other sales to non-customers have occurred. The on t sale, particu)stly given the circumstance, under which the sale occurre:
surely does not indicate a combination or conspiracy in restraint af trade. Moreover, 6.
See Answer at 3.
7.
Plaintiff's Claim under Section 1 does not appear to be specifically alleged in its complaint. However, for the purpose of deliberation on this mution, the Court shall assuma a Section 1 violation has been alleged.
8.
See Reply Memorandum of FPL in Support of Motion for Summary Judgrer.t o! City of Tallahass 's Nuclear Access Claims (rep memo) at 19
i eten if defendant voluntarily initiated sales to non-customers f:r purely business reasons, a concurrent refusal to sell nuclear energy to plaintiff does not by itself support a Section 1 claim.
Since the Court further finds that defendant did, in effect, "go it alene" in developing nuclear power, no Section 1 claim is made cut.
Thm gravaman of plaintiff's nuclear access claim lies under Section 2'c1 the Sherman Act, 15 U.S.C. 52.
This section prohibits cenopolization, attempts to monopolize, or conspires to monopolize.
'A viblation of this section occurs if the following elements are shown:
"(1),the, possession of monopoly power in the relevant market and (2) the v111fal acquisition or maintenance of that power as distinguished f:cm growth or development as a consequence of a superior product, business acumen, or historic accident."
U.S.
- v. Grinnell Corporation, j
3 5 4 '.*. S. 563, 5'0-71 (1966). Plaintiff's nuclear access claim fails 3
to establish a state of facts that would meet either element.
A.
Moncpolv Power The Court finds that the relevant market for purposes of Section 2 analysis is not nuclear generated electricity, but i
e*ectricity generated fron all sources, including such fuels as gas, coal and oil. According to U.S. v. E. I. du Pont de Nemours &
Co., 351 U.S. 377, 396 (1956), "In determining the narket under the Sherman Act, it is the use or uses to which the commodity is i
put that control." DuPont decreed that the litmus test is whether j
the commodities are " reasonably interchangeable by consumers for i
the same purposes." 851 U.S. at 395.
Du Pont's directives govern the instant case. Although nuclear power may be more cost-efficient than other methods of electricity generation, nuclear generated electricity is simply one typa of electricity production. It is lik.ely that consumers use the electricity produced withcut regard
- the production source. Hence, the interchangeability of nuclear i
generated electricity suggests that it should no+ be treated as an independent market.
Examination of the elecrzicity market reveals that nuclear generated facilities produce but a small share of the total amount
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J of electricity generated. Even defendant, which operates three 1
nuclear facilities, obtains only 29% of its electricity from i
nuclear power. Moreover, defendant does not control all the nuclear facilities in close proximity to plaintiff. The Crystal River facility and Georgia Power's Vogtle nuclear units are two examples of facilities now owned by defendant.
Under du Pent and Grinnell, monopoly power exists if an entity c:ntrols "he price or competition in the relevant market, or owns t
9 a predominant share of the relevant market.
The Court does not
- find.that defendant has monopoly power as defined by du Pont and Grinnell. Therefore, plaintiff's Section 2 claim must fail.
l B.
Willful A~auisition of Monopoly Power vs. Business Acumen t'en if defendant is deemed to have monopoly power in the v
relevant market, plaintiff's Section 2 claim still fails.
Basically, the Ccurt finds that defendant's acquisition of nuclear generating f
facilities occurred as a rekult of its business acumen, and is therefore protected under the second element of a Section 2 claim.
The Court finds that defendant did not engage in anticompetitive acts in acquiring or maintaining its nuclear facilities, that defendant's facilities are not bottleneck recaurces, and that plaintiff has not shown a firm interest in or need for access-to defen(ant's facilities. Plaintiff's attempts to controvert these 1
facts have been unconvincing, 1
Business Acumen l
I Plaintiff claims that defendant's nuclear facility acquisitions '
were not due to business acumen. Rather, plaintiff asserts that i-government assistance, concerned action, and a cautious, risk-averse approach to nuclear power led to defendant's acquisition of nuclear facilities. Plaintiff supports its assert 47n that defendant did not
"=o it alone" in developing nuclear facilities by pointing to the existence of a joint study group of which defendant was a member,
- 9..See 351 at 380 and 384 U.S. at 571.
I - -
and the contention that defendant's units were " effected by 10 coordinatien."
The Court believes that plaintiff's evidence dees not reasonably allow an inference of joint effort. Plaintiff's attempts in its Answer to describe other concerted activities participated in by defendant also do not warrant the conclusion of joint development of nuclear facilities. It is to be expected that an entity as large as defendant, in a business as' interconnected as electric power production, would interact with other power pro.13cers and even seek out advice. It is improbable that defendant woul.3 Se
, ble,to, or would want to, literally "go it alone."
It thus is a
unfair to look upon the interactions presented to the Court as evidence o'f co'nce'r'ted activity, passicularly given the size and complexity of a project such as a nuclear generating facility.
A 'further indication that defendant acted alone in constructing and cperating its nuclear facilities is the Court's finding that defendant assumed the risk in the construction and operation of its nuclear facilities. There has been no contradictory evidence showing that defendant did not assume such risks or that the risks were not substantial. Plaintiff contends that although nuclear power production may involve some risks, the risks were taken by "pior :42, and not 11 defendant.
The extensive outlay of capital required to construct a nuclear facility, combined with the uncertain acceptance of nuclear generated power, indicates that the risks assumed were substantial.
Defendant's assumption of substantial risk and its individual foray into the nuciear facility business leads this Court to con-clude that defendant's acquisition of nucicar generating facilities was simply the result of sound business judgment.
As stated in Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 176 (2d Cir.
1979), "la) large firm does not violate 52 simply by reaping the competitive awards attributable to its ef ficient size..." Hence,
'l 10.
Statement of Mr. Jablon, counsel to plaintiff, at hearing en September 30, 1981.
11.
The Three Mile Island disaster, however, is evidence of the cr.-going risks of nuclear power production. Millions of dc11ars are surely lost when a facility lies dormant, whether the reason be a breakdown or a denial of regulatory permission to operate.
~_ - _.
I although we find defendant's reliance on Berkey to be ndsplaced, plaintiff has not shown that defendant's propitious investments t
in nuclear power was anything but the sound business judgment of a large firm.
The court also agrees with defendant that plaintiff's "public domain" argument is irrelevant to the Section.2 Sherman Act analysis. The presence of the Atomic Energy Act Amendments of 1954, P.L. No.83-703, 83d Cong., 1st Sess., indicates that
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individual electrict utilities may indeed construct and operate r.uclear generating f acilities.
So Anticeepetitive Acts There is no evidence that defendant attempted to block or is blocking access by plaintiff to nuclear power participation.
As defendant has repeatedly stated, it has used its nuclear 12 ge..erating facilities to service its cwn customers.
The recent sale to non-customers was made pursuant to a settlement agreenent and does not indicate any sort of diseramination against plaintiff. Plaintiff's unsuccessful effort in 1966 to join the Tlerida Operating Committee has not been shown to have been due to illegal or improper " muscle flexing" by defendant. Rather,
't is 13 r.oteworthy that plaintiff was subsequently admitted to the Committee.
refendant's 1976 refusal of plaintiff's request to pn.rticipate in i
defendant's nuclear power production, moreover, has r:St been shown to be anything but a sound business decision. As defendant argues, sale of elc-2ricity to plaintiff would have forced defendant to seek alternative energy soerces at its own cus'emers' expense.
In addition, plaintiff's allegation that defendant blocked
'egislatien that would have permitted expanded nuclear participation is misleading and unsubstantiated.
E.C. Shreve, Jr., Executive
'* ice PJesident of Florida Municipal Utilities Association, asserts in his affidavit that the defendant refused to endorse a model statute patterned after the Georgia legislation which created the 12.
See, for example, Def. Hemo. at 6, 8.
13.
Plaintiff was invited to join the Florida Operating Ct..ittee in 1971. See Answer at 82. _
-. _. =._
I I
- enicipal Electric Authority of Georgia.
Mr. Shreve alleges that defendant's refusal was motivated by anticompetitive concerns.
shreve dces not alleges direct knowledge that such was the case, how-ever, just that it was his " understanding". There is no additional evidence that defendant was motivate,d by anticonpetitive concerns, cr that defendant's actions were not justified by legitimate busi-ness concerns.
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The 1976 request raises questions of plaintiff's earnestness in seeking nuclear power. Plaintiff's request came well after
~ defendant had 'cegun operation of a nuclear power facility. The requ,est,only consisted of an " opportunity to consider" purchasing l
a share of defendant's facilities or unit power from defendant.
There is no indication that plaintiff had a specific plan or even had the necessary approval of the governing board of plaintiff, 14 the Tallahassee City Commission.
Without such approval, an agreenent of sale would have been pointed.
There is also inadequate evidence as to plaintiff's purported inability to obtain adequate alternative energy sources, or to enter into nuclear generation on its own.
Plaintiff's evidence simply points out that access to defendant's facilities would be more economical than alternative sources and would be more beneficial -and economical,-than starting nut on its cwn.
Bottleneck Resources The Court also finds that defendant's generating units do not constitute " bottleneck resources." Plaintiff has not shown, that defendant's facilities are essential to plaintiff's electric utility systen. Although the essential nature of a facility may 4
potentially present a factual issue, the only showing by plaintiff to this effect has been that access will simply improve plaintiff's existing electricity sources vis-a-vis defendant.
In sunnation, plaintiff has failed to establish the existence of a genuine issue of fact which would preclude judgment agais.st it as a matter of. law.
There has been no showing of a contract, 14.
See Def. Memo at 24, Note 4. -
1 cc.bination or conspiracy in restraint of trade, that defendant pos-sessed monopoly power, or, even assuming that defendanthad mono-poly power, that defendant acquired or maintained its. nuclear facilities through other than business acumen. Basically, plaintiff appears to be seeking the fruits of another's labors j
without justification. Fairness and the law dictate that defendant should be able to reap what it has sown.
DONE and ORDERED in chambers at the United States Courthouse, a
Miar.1, Dade County, Florida, this 9th day of October, 1951.
IUDO$I M M JAMES LAWRENCE KING U.S. DISTRICT JUDGE cc Alvin Davis Mr. Jablon Joseph C. Jacobs Ron M. Landsman Alan J. 30th Daniel Guttman Marta Manildi Joseph Van Eaton J.A. Louknight, Jr.
Herbert Dym Edward Brinson i
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