ML20039B319

Forwards Response to Reg Guide 9.3 Re Antitrust Review,Per NRC 810209 Ltr

ML20039B319
Person / Time
Site:	Midland
Issue date:	12/14/1981
From:	Wells R CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.)
To:	Harold Denton Office of Nuclear Reactor Regulation
References
15108, NUDOCS 8112220520
Download: ML20039B319 (7)

Text

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i Consumers Power Company n"",",% ,,oje, r,,,,,,,,,,,

and Construction General Offices: 1945 West Pernall Road, Jackson, MI 49201 e (517) 788-0453 December 14, 1981 k

Harold R Denton, Director Office of Nuclear Reactor Regulation US Nuclear Regulatory Commission

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Washington, DC 20555 t 'i[ '

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NRC ANTITRUST REVIEW OF 'dlE MIDLAND OPERATING LICENSE g APPLICATION RELATIVE TO REGULATORY GUIDE 9.3 FILE 0485.5 SERIAL 15108 7_I a4Nf3 ENCLOSURES: (1) NRC ANTITRUST REVIEW OF MIDLAND OPERATING LICENSE APPLICATION (2) ATOMIC SAFETY AND LICENSING BOARD MEMORANDUM AND ORDER OF AUGUST 4, 1980 WITH EXHIBIT A

" ANTITRUST LICENSING CONDITIONS" In respense to the NRC's correspondence of February 9, 1981 relative to the Staff's antitrust review of the Midland operating license application, we are providing a response to the information requested in the October 1974 issue of Regulatory Guide 9.3. Enclosure I contains this item-by-item response to Regulatory Guide 9.3.

As you are probably aware, Consumers Power Company participated in a lengthy contested antitrust review proceeding over the Midland construction permit application, commencing in 1971 and culminating in an Atomic Safety and Licensing Board (ASLB) order on August 4, 1980, which imposed antitrust license conditions. A copy of this August 1980 ASLB Order with these licensing conditions is attached as Enclosure 2 for your convenience.

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' Executive Manager 2 778 3

For J W Cook JWC/RLT/dsb CC RJCook, Midland Resident Inspector, w/o DSHood, NRC, w/a (2)

MEMessier, NRC, w/a 8112220520'911214 oc1281-0503a100 PDR ADOCK 05000329 M PDR

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BCC JEBrunner, M-1079, w/a RWHuston, Washington, w/a WAKirkby, M-1011B, w/a DBMiller, Midland, w/a TJSu11ivan/DMBudzik, P-24-624A, w/a Licensing Clerk NRC Correspondence File i

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i ENCLOSURE 1 URC ANTITRUST REVIDT OF

, MIDLAND OPERATING LICENSE APPLICATI03 Pursuant to your request, Consumers Power Company (" Consumers Power") submits the following information to facilitate your operating license antitrust review of the Midland Plant, Units 1 and 2. As you are probably aware, Consumers Power Company participated in a lengthy contested antitrust review proceeding in Docket Nos. 50-329A and 50-330A, commencing in 1971 and culminating in an Atomic Safety and Licensing Board order on August 4,1980 imposing antitrust license conditions (a copy of which is attached). These license conditions were supported by all parties to the proceeding, including the Nuclear Regu-latory Commission Staff, and the Atomic Safety and Licensing Board found the license conditions to reasonably address the situations inconsistent with the antitrust laws found by the Appeal Board.

The following items cddressed by Regulatory Guide 9.3 have occurred since the Co= mission's completion of the construction permit stage antitrust review on August 4, 1980:

la. At the time the Nuclear Regulatory Com=ission's antitrust review was completed with the Atomic Safety and Licensing Board's order of August, 1980, the Consumers Power Company had projected installed electric generation reserves of 22.9 percent and 46.7 percent for the su=mer peak load periods of 1983 and 1984, respectively. Consumers Power Company now projects installed electric generation reserves of 24.6 percent and 44.2 percent, for such summer peak load periods in 1983 and 1984, respec-tively. The comparison of the earlit- reserve percentage values with those now projected indicates little change.

Ib. Recent revisions to the Coordinated Operating Agreement between Consumers Power and the Municipal-Cooperative Pool (originally signed in 1973) have added the City of Zeeland, Michigan as a party. This agreement

NRC Antitrust Review 2 contains the rates, charges and conditions of service for exchanges of Emergency Capacity and Energy, Short Term Capacity and Energy, and Economy Energy between Consumers Power and the Municipal Cooperative Pool.

Ic. Consumers Power is in the process of constructing approximately 40 miles of 138 kV transmission line to connect its Moore Road and Batavia sub-stations with a 55 Mw coal-fired electric generating plant being con-structed by the Michigan South Central Power Agency in Litchfield, Michigan.

This line will facilitate the delivery of the generating plant's output to the members of the Agency, which are the Cities of Coldwater, Hillsdale and Marshall and the Villages of Union City and Clinton.

Id. None 1e. None If, On January 1, 1981, the City of Hillsdale elected to cancel its Interconnec-tion Agreement _with Consu=ers Power which provided for exchanges of Emergency and Short Term Capacity and Energy and Economy Energy and to commence purchasing firm wholesale power from Consumers Power. This change is of short range i= pact, as the Michigan South Central Power Agency (of which Hillsdale is a member) has recently signed a coordinated operating agreement with Consumers Power to become effective on the com=ercial operation date of the Agency's generating plant. Effective upon such commercial operation date, the Cities of Coldwater, Hillsdale and Marshall and the Village of Union City have elected to terminate purchasing firm wholesale power from Consumers Power.

2. On August 15, 1979, Consumers Power entered an agreement with all of the municipal and cooperative electric utilities in its service area to jointly propose a group of antitrust license conditions to the

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. NRC Antitrust Review 3

, Atomic Safety and Licensing Board as complete resolution of the construc-tion permit stage antitrust review proceeding. While these license conditions were not formally adopted until August 4, 1980, Consumers Power has operated under policies consistent with the license conditions since August 15, 1979. Since that time, Consumers Power has taken the following actions to implement the major subject areas addressed by the license conditions.

a. Coordinated Operations (see license conditions, pp 7-11)

Consumers Power has revised its coordinated operating agreements with the City of Lansing, the City of Holland and the Municipal Cooperative Pool (composed of Wolverine Electric Cooperative, Northe n Michigan Electric Cooperative, and the Cities of Grand Haven, Traverse City and Zeeland). The primary revisions related to the other parties required minimum reserve percentages. Consumers Power also recently executed a new coordinated operating agreement with the Michigan South Central Power Agency, a joint a5ency created in 1979 to serve tLa bulk power supply requirements of the Cities of Hillsdale, Coldwar- and Marshall, and the Villages of Union City and Clinton. This agrc t will become effective upon the commercial operation date of.the Agency's Project I Generating Plant (projected to occur on or about July 1,1982).

b. Access to Nuclear Generation (see license conditions, pp 12-14)

J While the license conditions afford an opportunity for the utilities located in Consumers Power's service area to participate in Midland Units 1 and 2, and such utilities were notified of the opportunity to participate therein and provided with economic and technical informa-tion, none chose to participate. Therefore, Consumers Power anticipates 4

no participation in Midland Units 1 and 2. However, several of such

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NRC Antitrust Review 4

, utilities have recently purchased undivided ownership interests in Consumers Power's James Campbell Unit No. 3 (" Campbell 3"), a coal-

, fired electric generating unit with a design nameplate turbine capability rating of 770 MW located in Ottawa County, Michigan.

Campbell 3 was placed in commercial operation in September of 1980.

The Michigan Public Power Agency, a joint agency created by a group of municipal electric systems in 1979, purchased a 4.8% undivided ownership interest in Campbell 3 on behalf of ten of its member municipal electric utilities. This purchase was calculated to provide MPPA with approximately 38 MW of electric capability and energy under normal operating conditions. Wolverine Electric Cooperative and Northern Michigan Electric Cooperative purchased a total 1.89% undivided ownership interest in Campbell 3, which was calculated to provide the Cooperatives with approximately 15 MW of-electric capability and energy under normal operating conditons.

The Cities of Lansing and Grand Haven, and the Michigan South Central Power Agency, while once actively considering participation in Midland Units 1 and 2, have elected to construct generating facilities of their own,

c. Transmission Service (see license conditions, pp 14-17)

On November 19, 1980, Consumers Power Company filed transmission service tariffs with the Federal Energy Regulatory Commission for firm and inter-tuptible transmission service. The purpose of this filing was to place into effect uniform transmission tariffs for similar service to any elec-tric utility located in Consumers Power's service area. These transmission service tariffs became effective on January 18, 1980 and remain in effect.

NRC Antitrust Review 5 i

In addition, Consumers Power has facilitated access to its transmission system by selling undivided ownership interests in various 345 kV trans-mission lines. The Michigan Public Power Agency, Wolverine Electric Cooperative and Northern Michigan Electric Cooperative purchased owner-ship interests in 345 kV transmission lines to facilitate the transfer of their capability and energy entitlements in Campbell 3. The Michigan South Central Power Agency, recently purchased an ownership interest in a 345 kV transmission line to facilitate the transfer of the bulk power requirements of its member municipal electric utilities. The coordinated operating agreements described in item 2a hereof also now contain' pro-visions whereby Consumers Power will provide transmission service to facilitate exchanges of Emergency and Short Term Capacity and Energy and Ec romy Energy.

d. Obligation to Sell Firm Bulk Power (see license conditions, pp 17-19)

Consumers Power presently provides wholesale electric service to 19 elec-tric utilities under Rate "WR" as currently filed with the Federal Energy Regulatory Commission. All of these utilities have purchased wholesale power from Consumers Power for at least ten consecutive years except i Northern Michigan Electric Cooperative (since December 1977), the City of Lowell (since October, 1978) the City of Hart (since December, 1980), and i

the City of Hillsdale (since January,1981).

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e. Access to Pooling Arrangements (see license conditions, p 19)

No ' requests have been received for membership in any pooling or coordination arrangement in which Consumers Power is presently a party except the addi-tion of the City of Zeeland to the coordination arrangement described in item ib hereof.

1.

.' E!?CLOSUE 2

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, g UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION 3 UD USNRC .

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THE ATOMIC SAFETY AND LICENSING 30ARD ., 4 EN > C Ecgh K. Clark, Esquire, Chairman Marshall E. Miller, Esquire, Member  %

Dr. J. Venn Leeds, Jr., Member ,

In the Matter of )

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CONS'uTRS FOWER COMPANY ) Docket Nos. 50-329A

) 50-330A (Midland Plant, )

Units 1 and 2) )

MEMORANDUM AND ORDER (August 4, 1980)

On January 13, 1969, the Consu=ers Power Company (Conse=ers) filed an application for the licensing of two pressurized-wa:er nuclear power reactors, designated as Midland Plant, Units one and two, to be located on Consu=ers' site on the south side of the Tittabawassee River, in Midland Township, Midland County, Michigan.

After review of =atters related to siting, safety and environ =ent, Construction Per=its CPPR 81 and C??R 32 were issued on Dece=ber 15, 1972, and subsequently a= ended on May 23, 1973.

l The license application was filed before S105c of the Atomic Energy Act or 1954 was amended to require prelicensing antitrus:

review. Under 31'05c(S) , the " grandfather clause", construction per=its .were issued subj ect to appropriate action as a result of this subsequent antitrust proceeding.

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The parties to this proceeding are Consumers, the United States Nuclear Regulatory Commission Staff (Staff), the United States

, Department of Justice (Justice) and a group of intervenors (Inter-venors). The Intervenors include the following parties : the Cities of Coldwater, Grand Haven, Holland, Traverse City and Zeeland, the Northern Michigan Electric Cooperative, Inc., and theMichigan Munici-pal Electric Association.

l In its decision dated December 30, 1977, the Atecic Safety and Licensing Appeal Board found ". . . it reasonably probable that Consumers' activities under the Midland Licenses would maintain the present situation inconsistent with the antitrust laws", ALA3-452, 6 NRC 892 at 1098. This case was re=anded to the Atenic Safety and Licensing Board (Board) for for=ulation of License Conditions to alleviate the concerns entailed in that finding.

At a prehearing conference on March 2, 1978, the Board urged

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the parties to meet forthwith to discuss whether there was a reasonable probability of settlement of the issues in the remand

, proceedings. The parties cet promptly and began serious negotiatiens looking toward a settlement of all issues. The Intervenors and Consumers desired to settle not only the proposed License Conditions b'ut all other satters between them. The Board foresaw that the negotiations would take many conths, and was reluctant to per=it suspension of its proceedings, but with the advice of the Appeal Board, ALA3-468, 9 NRC 436 (1979) , hearings were suspended pending such negotiation.

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- 3-At a preliminary meeting a=ong counsel for all parties, Justice and Staff presented to Consumers and Intervenors proposed License Conditions which would be acceptable to Justice and Staff as a basis for settlement. Progress reports from Consumers and Intervenors have been made periodically to the Board. After extensive negotia-tions, Consumers and Intervenors reached agreement on proposed License Conditions and on a supplemental agreement between these parties for implementation of the conditions and other matters con-carning relationships between them. Both the proposed License Conditions and the supplemental agreement were submitted to the Staff and to Justice for review.

By letter dated September 6, 1979, the staff advised the Board that the proposed License Conditions were satisfactory to the Staff. ,

The letter further stated that the remainder of the supplemental 7 agreement was under review to insure consistency with the proposed License Conditions, and that the Board would be infor=ed of the outcome of this review.

By joint motion of Consumers and the Intervenors, dated September 25, 1979, these parties requested that the Board impose the proposed License Ccaditions attached to the motion. They further requested that this antitrust proceeding be terminated.

On October 12, 1979, the Staff filed its response to the said motion. The response stated that the Staff's review of the supple-mental agreement led it to conclude that it appeared to be consistent 4

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f with the rights, benetits, and entitlements of all parties under the proposed License Conditions. The response reiterated the Staff's satisfaction 'with the said conditions. The Staff supported the aforesaid motion.

l On October 15, 1979, Justice tiled its response to the said

.= otion. The response stataithat Justice had reviewed the proposec, ,

License Conditions and the supplenental agreement between Consu=ers l and the Intervenors implementing those License Conditions. Justice

agreed that the attachment of cuch License Conditions to the Midland licenses will assure that Consumers' activities under the licenses will not create or maintain a situation inconsistent with the laws; and will allow this antitrust proceeding to be terminated.

The Joint Motion of Septe=ber 25, 1979 by Consumers and Inter-venors and the responses of the Staff and Justice a=ount to a .

stipulation : hat (1) all parties agree to the i= position of the said License Conditions and (2) such imposition.will allow termination of of this antitrust proceeding.

The proposed License Conditions have been reviewed in the light of the Appeal Board's decision and instruction (6 NRC 892 a: 1098-1100). The review included a detailed comparison of these conditions with conditions hereto: ore i= posed to remedy similar situations.

Although the proposed License Conditions are the product of co= pro-

=ise, this Board concludes that the proposed License Conditions reasonably address the situations inconsistent with the antitrust laws found by the Appeal Board. Also, this proceeding should be terminated

with the i= position of the proposed License Conditions. Accordingly, the Joint Motion of Consumers and the Intervenors, dated Septe=ber 25, 1979, is granted.

It is hereby ordered that Construction Permits C??R 81 and C??R 82, as heretofore amended, be further amended by appending to each of them the antitrust conditions at: ached to this Menorandum and Order as Exhibit A, and that this proceeding be terminated.

In accordance with 10 CFR 552.760, 2.762 and 2.785, and party

=ay appeal this Memorandum and Order to the Acccic Safety *and Licensing Appeal Board by filing exceptions within ten days after service of this Menorandu= and Order. 3riefs must be filed within the times set for.h in the Regulations referenced above.

It is so ORDERED.

THE ATOMIC SAFETf A2TD '

LIENSING 30ARD A

[.VennLeedf,Jr.,Menber 9

Marsnail E. Miller, Metcer

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Hugh K. Clark, Chairman Dated at Bethesda, Maryland this 4th day of August 1980.

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p EXEI3IT A MIDLAND NUCLEAR PCWER STATICN, UNITS 1 AND 2 AUTITRUST LICENSE CONDITIONS I. DEFINITICNS

1. As used heroin:

(a) " Licensee" means Censu=ers Power Cc=pany, or any successor or assignee of.this licensee and includes each present er future subsidiary in which Licensee owns more than 50% interest and any successor there te.

(b) " Bulk power" means the electric pcwer and attendant energy supplied or =ade available at trans=issien er subtransmission voltage for resale.

(c) " Neighboring entity" =eans a private or pub-lic corporation, a govern = ental agency er authority, a -

municipality, a eccperative, or a lawful associatien of any c.! che forescing, which is all or partially in Licensee's ,

service area-(as defined belcw) and which =eets each of the l .

l folicwing criteria: (1) its facilities, existing or pro-

. . posed in the i==ediate future following a , proposal for arrangements under these conditiens, are econc=ically and technically feasible of intercennection with these of the Licensee; (2) it cwns and cperates or proposes to cwn and operate electric generation, transmissien or distribution facilities or has joint ownership participation er centrac-tual rights in generation, transsissien or distribucien facilities cperated by others; and (3) with the excecticn of i

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~ generation and transmission eccperatives, municipalities ,

govern = ental agencies or authorities, and associations, it is, or upon ecumencement of cperations, will be a public utility or cecperative and subject to regulation with respect to rates and service under the laws of the State of Michigan or under the Federal pcwer Act; provided, hcwever, that as te assceiations, a majority of me=hers cf such .associatien is either a public utility or cecperative as discussed in this clause (3) or a =unicipality, gover== ental agency or authority.

(d) "Neigbhoring ccordinating entity" means a " neigh-boring entity" which is currently planning its future bulk pcwer supply so that its "teral generatien capacity" (as defined belcw) will be at least equal to its projected peak load demand and reserve requirements established pursuant to Section 3(a) hereef. Total generation capacity shall be calculated as the sum of the system's (1) native installed capacity, ( 2) fer= ally executed bulk pcwer purchases (in-cluding purchases under a wholesale tariff) frem or arrange-ments with Licensee or other parties for perieds of one or more six-month peak lead seasons and (3) participatien in generating units of Licensee or other electric systems.

An electric distribuYtc.n system that satisfies its entire peak Icad demand wit fid= pcwer purchases frca another electric system (including an association of which it is a member) does not qualify as a neighboring coordinating entity.

. l 3-l (e) "

Ces tr * =eans all apprcpriate costs, including a reasonable return en invest =ent, which are reasonahly alle-cable to an arrange =ent between two er =cre electric systems under ccordination principles or generally accepted industry practices. In deter =ining ecsts, ne value shall be included for icss cf revenues fr=m a sale cf .ocwer h.v.cne party t= a .

customer which ancther party might otherwise serve.

(f)

Net benefits" =eans that, fer each party thereto, the benefits derived from an arrange =ent exceed its ecsts. Receipt cf compensasien which covers Licensee's ecsts, in acccrdance with the applicable tariff or race filed by Li-censee with a regulatcry authority, er established by such au-therity pursuant to a final, ncn-appealable crder, shall be deemed to previde Licensee with net benefits as to such arrange-

=en t; provided that Licensee shall not decline to enter into an arrange =ent during the pendency of administrative c: judicial preceedings involving filings applicable to such arrangement.

Ccmpensation under a tariff er rate applicable to a particular arrange =ent er a particular party shall not necessarily be deemed te provide ne: benefits as applied te different arrangemen:s er different parties. In calculating net benefits frem a particular arrangement, Licensee shall also take account of value (pesitive er negative) other than ecmpensatien under a rate er tariff, including i= pact en system reliability and risks of forced cutage.

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, (g) " Integrated bulk pcwer system" means the inter-connected generatien, transmission and sub-trans=ission f a-cilities used to serve a system's principal lead centers.

(h) "

Licensee's servic~e area" means all counties in Michigan's Lcwer Peninsula with the fellcwing exceptions:

(1) the entirety of the counties cf Berrien, Cass, Euren, Lapeer, Maccmb, Sanilac, St. Clair an'd W ayne, and ( 2) the tcwnships in wnich Licensee is not franchised to provide electric service in the ccunties of van Buren, St. Jcseph, Menrce, Washtenaw, Oakland, Tuscola and Livingsten.

II. GENERAL PRINCIPLIS 2(a) The arrangements described in the follcwing

. sections shall be cf the types, and pursuant to terms and conditions, which are censistent with gecd industry prac- -

tice. The terms and cenditions of any individual arrange-ment 'shall be en a basis that will ce=pensate Licensee fer

its costs incurred thereby. No party shall be obligaced te enter into an arrangement if-en-bal-ance.- there dces._ne' ap ____ _

paar to be any demenstrable net benefit to such party arising frem that arrang=ent. It is reccgniced that, in any particular arrangement the net benefits may net be equal er identical fer each party and that the net bene-fits of an arrangement for a small system er for a syscem not theretcfere engaging in such arrangements may be greater e e-r-- y, , , , . - , er,a -,n,.-- - - . - - - - - - - , ~n-- m - , <-, , - - - - - - . e-- -

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than that realiced by a larger electric system er one already engaging in such arrange =ents. The relative net benefits to be derived by the parties f cm a prepesed arrangement shall not therefore affect a decisien with respect to parti-cipating in any such arrange =ent, subject to the c her ter=s and ccnditiens of this license.

(b) Any neighboring ccordinating entity entering inte any arrange =ents provided fer in these license ccnditiens will be expected insof ar as practicable and in accordance with gecd industry practice - taking into acccent laws, rules and ' ether restrictiens affecting taxatien and financing - to grant recip-recal. rights ' and benefits to Licensee, and to undertake recip-recal obligations with respect te Licnnsee. Nothing herein shall tequire a neighboring cecrdinating encity to ccnstruct generatien facilities except where to de so is necessary to

=aintain its reserve obli~gations under section 3(a) belev.

(c) Intercennection, interchange of pcwer, cccrdi-nation or cther arrangements under this' license shall be re-quired only if such arrangements wculd not adversely affect Licensee's system cperations er the reliability cf pcwer sup-ply to Licensee's custcmers or other electric systems with whom it has p.rier centractual ec=mitments, and if such ar-rangements wculd not jeepardize Licensee's ability to finance or ccnstruer on reasonable terms f acilities needed te neet its

cwn anticipated system requirements, including the sale of firm bulk pcwer pursuant te Section 11(a) hereof.

(d) The fo11cwing conditions shall be i=plemented  ;

in a manner censistent with the provisions of the Federal

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Pcwer Act and other applicable regulaterf statutes; regula-tiens and crders. All rates, charges or practices in cennec~

tien with any action taken by Licensee pursuant to this li-cense, which are subject to the jurisdictica cf a regulatery agency, are subject to the approval of that agency. Ncthing in the foregoing shall be construed to waive any of the Li-censee's rights er protection afforded by law with respect to the retail distributien of electricity in those areas of Michi-gan in which it transacts local business. Licensee. shall net be required to enter into'any final arrangement pric: to rese-lution 'of any substantial questiens as to the lawful authority ,'

cf another party to engage in the arrange =ent.

(e) If Licensee participates in any of the follcwing arrangements with an associatien of electric syste=s, Licensee shall not be obligated to take acccunt cf requests or require-ments of me=bers of that asscciatien which do net qualify as a " neighboring en:ity", as defined in section 1(c) hereef.

(f) Agreements i=plemencing the fc11cwing sections shall not i=pese limitations upon the use or resale cf cajacity and energy af ter delivery to a neighbcring encity, except as may be necessary to protect the reliability of Licensee's systa=.

(g) Licensee shall also negotiate in gced f aith intercennection and other appropriate agree =ents with a neighboring entity which has bona fide plans to beceme a neighboring ecordinating entity in the immediate future ac as to permit such entity the opportunity te participate in arrang,ements described in the fellcwing sections as seen as it becc=es a neighbcring eccrdinating entity.

(h) The cbligations set forth in the following secrions shall be coverned hv conditiens and limitations set fcrth in this section. .

III. COORDINATED C5ERATIONS

3. Obligation to interconnec: and share reserves (a) Licensee shall interconnect and enter int.c appropriate cecrdinatien agreements with a neighbering cocrdi-nating entity which se requests and operate acr ally in -

parallel in accordance with gecd cperating practice, previded that a reciprecal plan of reserve sharing is agreed to by a neighboring ccordinating entity as crevided herein. Licensee and such entity shall jointly establish and separately maintain the mini =u= reserves to be installed er otherwise previded under such a plan in accordance with sced industry practice.

Further, under such a plan, Licensee shall not.be cbligated ?.c agree that a party may maintain a =inimum reserve percentage less than Licensee 's cwn reserve percentage. The reserve re-quire =ent thus established shall be calculated as a percencage of peak lead de=and (adjusted for firm power purchases and sales)

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and, except as provided herein, no party to the interconnection shall be required to maintain as its reserve requirement more than such percentage of peak load demand. If the reserve re-quirements of any party to a reserve sharing plan under this paragraph are increased over and above the amcunt such party would be required to =aintain without such intercennecticn, then the other party shall be required to carry or provide for as a part of its reserve responsibility the full amount of kilowatts of such increase. If over a reasonable peried one system demands emergency support from the other to a disproportionately greater extent than the system delivers such support, by reason of the unfavorable reliability experience of the receiving system's generation or transmission facilities, the receiving system shall take all reasonable steps to avcid such de= ands (e.g.,

by purchasing capacity and energy other than emergency energy, -

or other reascnable step.s). Each party to any such recipre-cal plan shall maintain such amounts of operating reserves as may be consistent with goed industry practice and adequate to avoid the imposition of unreasonable demands on either party in meeting the reasonable centingencies of operating its own system. However, in no circumstances shall'a party's cpera-ting reserve requirement exceed its installed reserve require-ment.

(b) Interconnections with neighboring coordinating entities shall not be limited to lower voltages when higher voltages are requested and available from installed facilities

, of the party te whcm the request is =ade in the area where the interconnecticn is desired. Each party shall =aintain centrol and metering facil11 ties as required f== safe and pru-dent cperation of the inter ==nnected system in acccrdance with gced industry practice.

(c) The cest of inter ==nnection facilities between Licensee and ancther system shall be allocated in a manner which takes ace =unt cf the varicus transactions for which the inter ==nnection facility is to be utilized.

l (d) Except as pr=vided in Secticn 10(a) infra, interconnections shal'1 be made to the integrated bulk pcwer syste=s of each entity. Any party may require that the trans-mission f acilities between the inter ==nnected parties =eet reascnahle prctective standards to avoid credible centingen-cies cascading to areas cutside of each party's system.

(e) Inter ==nnection agreements shall not prohibit neighboring coordinating entities fr m entering into cther interconnecticn agreements, but =ay include appropriate pre-visiens to protect the reliability of Licensee 's syste=, and to insure that Licensee is ce=pensated for additional costs resulting f r== such other intercennections.

4. obligation.for reciprecal sales of e=ergency p cwe r.

Licensee shall exchange emergency pcwer with neigh-boring ccordinating entities which se request. Licensee shall be required t= engage in such transactions if and when

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. it has pcwer and energy available for such transactions fr==

its ewn generating rescur es er f =m inter ==nnected systa=s

. but only to the extent that it can de so withcut impairing I

service to its customers or other electric systems with whem I . .

it has centractual c=mmitments, provided, hewever, e=ergency service shall take precedence ever any sales of ec=nc=y energy.

5. Obligation to eccedinate saintenance scheduling and for purchases and sales cf =aintenance pcwer and energy.

Licensee shall exchange jcint =aintenance schedules and shall engage in purchases and sales cf maintenance pcwer and energy with any neighbcring c=c dinating entity which se requests when it can reascnably de sc. After agree =ent to each such transaction, pcwer shall be supplied := the fullest extent practicable f== the ti=e scheduled and in ace:rdance with generally. accepted industrv. =ractice f=r maintenance . .

pcwer and enerry sales.

6. Cbligatien to engage in sales of ecenc=y energy.

Licensee shall exchange data en ecsts of energy f re=-

generating rescurces available t: it and, censistent with sys-tem security sell te, purchase f rem, or exchange ec=nemy energy i

! when appropriate to de so under principles of ecenemi dispatch with a requesting neighboring c=crdinating entity en a basis that will appertien the. savings f r:m such transactiens equally between Licensee and such entity.

7. Obligation to sell, purchase or exchange other ncn-fir = surplus capacity and energy associated herewith.

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Licensee shall sell t=, purchase frem or exchange witr any neighboring c=crdinating entity other ncn-firm bulk power which the supplying system deems to be surplus, when such transactions wculd serve to reduce the everall c=sts of bulk pcwer supply without a 1 css to either party. Such bulk pcwer transacti=ns shall be en ter=s and ccnditiens c=csistent with generally accepted industry practice.

8. Reciprocal Perfor=ance With regard to transactions in emergency and =ain-

!t enance pcwer, ecenc=y energy and other ncn-firm surplus capacity-energy, as set forth in Secticns 4, 5, 6 and' 7 above, other parties to such transactions shall maintain (and ade-quately plan to provide) bulk pcwer supply f acilities and capabi,11 ties sufficient to reasonably assure Licensee that reciprecal perf ermance will be forthc= ming. Recipr= cal per-fer=ance requires plans and bona fide efforts necessary to t

maintain the established reserve levels under the c=crdina-i tien arrange =ent. Temporary short-falls in =eeting this requirement due to cir=usstances beycnd a party's contr:1 would not p = vide a basis f=r the ether party's f ailure t:

l l perform in this regard. Recip;ccal performance dces not i

necessarily require that neighboring cecrdinating entities i

supply Licensee with the same accunts of pcwer er energy which they receive frem Licensee.

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IV. ACCESS TO NUCLIAR GENERATION

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9(a) Licensee shall, upcn timely request, afford any neighboring entity an opportunity to participate in Midland Units 1 and 2. . Licensee shall, prior to the time major equip-ment items fer nuclear generating units are crdered, upon re-quest by any neighboring entity, afford such entity an opper-tunity to participate in all future nuclear generating units for which Licensee applies for a construction permit on or be-fore December 31, 1999. Participation shall be thrcugh rea-sonable joint cwnership or other jcint financing arrangements in which the participating neighhering entities pay their share

cf costs cf ccnstruction apprcximately (but nc later than) as they are incurred by Licensee. The fers of such participatien in such generatien units shall be at the optien cf the parri-cipating entity to the extent that such an entity is legally .

able to participate in the unit under such a fer= cf partici-pation. Such participatien shall be en reascnable ter=s and conditions and en a basis that will ecmpensate Licensee for its cests incurred and to be incurred for such generating units; provided, the aggregate participation of others in any nuclear unit shall not he required to exceed the icwer cf 49% cf the capacity of such unit or an amcunt based upon a ratio of 4

(i) mest recent aggregate peak Icad demand of requesting participants to (ii) the st= of such demands and Licensee's most recent peak icad demand (less the nest recent peak icad demands en Licensee by the requesting participants. )

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_ 13 _ -

A request frem a neighboring entity for participation in Midland Units 1 and 2 shall be deemed timely only if a letter of intent to participate (subject only to financing contingencies) is executed by the governing body of the participating entity and received by Licensee within a mutually agreeable time peried following the effective date of these license conditions. As to future nuclear units it plans to construct, other than Midland Units 1 and 2, Licensee shall provide to requesting neighboring-entities all available financial and technical data required to assess the feasibility of participation therein. A request for such participatien shall be deemed timely only if a letter of intent to participate (subj ect only to financing centingencies) is executed by the governing board of the participating entity and received by Licensee within six

=cnths following Licensee's provision of such data. A neigh-boring entity's participation request in a nuclear unit shall also be deemed timely cnly if it executes, within one year after execution of such letter of intent, a legally binding and enforceable agreement with Licensee to assume financial responsibility for its share of the costs associated witn a unit.

(b) As a part of any arrangement that may be reach'ed with respect to any participation under subsection 9 (a) above, Licensee shall intercennect with and deliver to the integrated bulk power system of a participating neighboring entity any power to which it :ay be entitled under such arrangement at a

_ 14 _ -

delivery point er peines en Licensee's system en a basis that will cc=pensate Licensee as provided in Section 10(b) infra.

(c) Licensee, as icng as it maintains majcrity cwn-ership, may exercise final authority in all decisions neces-sary in accordance with goed industry practice in the engineer-ing, design, ccestruction, cperation, maintenance and schedul-ing cf a nuclear generating unit where a joint cwnership cr joint financing arrange =ent is entered under subsectien 9(~a) .

An adviser.v ce=mittee shall be organiced .cre.ceri.v to censider the needs and desires cf each party theretc.

(d) In. the event that ene or =cre neighhcring en-tities cheese to obtain majority ewnership in any nuclear unit.

Licensee shall be afforded the opportunity to participate in such unit under cc= parable ter=s and conditions as these de-scribed in subsecticn.9(a). Nothing in these License Condi-tiens shall require any party to enter into a nuclear unit

• jcin: venture where to de sc wculd cause less of tax-exe=pt status or c herwise significantly increase the tax liabilities of such party.

V. TRANSMISSICN SERVICE 1 l

10(a) Licensee shall facilitate bulk pcwer trans- 1 actions b'etween two er more neighhcring enti:ies by providing transmiss-ion-service-between er a=cng the intecrated bulk

o. cwer s.vstems of such entities er to such inte9 rated bulk pcwer systems frc= the genera:icn facilities cf such entities.

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. 1 Licensee shall also provide trans=issien service for bulk pcwer transactions ever its transmission f acilities between the integrated bulk pcwer syste= cf any neighboring entity and any electric system engaged in bulk power transactions which is outside Licensee's service area. Licensee shall pro-vide . transmission service under this paragraph cnly if (1)

Licensee's and other connected transmission lines fer= a con-tinuous electric path between the supplying and the recipient systa=s; (2) per=ission to utilice other syste=s' trans=iss ien lines has been obtained by the propenent of the arrange =ent; (3) the services can reasonably be acec==cdated f rc= a func-tional technical standpoint without s gnificantly i= pairing Licensee's reliability er its use of transmission facilities; and (4) reasonable advance request is received frc= the neighber'ing entity seeking such services to the extent that ,

such notice is required for operating er planning purpcses.

(b) Licensee's ' provision ef _ transmissien services under this section 10 shall be en a basis which cc=pensates it for its costs of transmission reascnably allocable to the _

service er en another =utually agreeable basis and in accor-dance with a reascnable trans=issicn agree =ent. Licensee shall file tariffs previding for transmissien services required to i=ple=ent these license ccnditions with the Federal Energy

Regulatory Cc==issica or its successcr agency. Nothing in this license shall be ccnstrued to require Licensee te wheel

O 16 -

pcwer and energy to er from a retail customer. Each neighber-ing entity to whom Licon:see provides trans=ission services here- .

under shall be expected to provide transmission services to Licensee under cceparable ter=s and conditiens, to the extent if has transmission facilities available to do so. Licensee shall keep requesting neighboring entities infor=ed of its trans=ission planning and construction pregrams and shall in-clude therein sufficient transmission capacity as required by such entities, provided that such entities provide the Licensee sufficient advance notice c# their requirements. Ecwever, Li-censee shall net be required to construct any trans=ission facility (1) which will be of ne denenstrable present er future electrical benefit to Licensee, (2) which wculd jecpardice Li-censee's ability to finance er censtruct, c= recsonable ter=s, facilities to =eet its ewn anticipated system requirements er to satisfy existing centractual obligatiens to other electric systems, er (3) which cculd reasonably be constructed by the requesting enticy withcut duplicating any pertion of Licensee's transmission system. In such cases where Licensee elects net to construct transmission facilities, the requesting system shall have the cption of constructing and ewning such f acili-ties and intercennecting them with Licensee's f acilities.

. 9 VI. 03 LIGATION TO SELL FIRM EULK PC'JER 11(a) Upon ti=ely request, ' Licensee shall intercon-4 nect with, execute appropriate agreements with, and sell fir =

. bulk pcwer under tariff previsiens filed with the Federal Energv Regulatory Cc==issicn er its successer ac.ency to anv.

neighhoring entity (i) which was a wholesale custoner of Licensee en the effective date of these license conditiens and (ii) which is not a party to a cecrdinatien agree =ent with Licensee, um_ to the a= cent rec _uired to su_cci.v elecoric _

service to the retail customers or the retail lead of

. distributing cecperatives (located in Licensee's service area) which are supplied by such neighbering entity.

(b) Upen timely request, subject to the ter=s of subsecticn 11(c) hereof, Licensee shall sell fi=n bulk pcwer to neighhering ccordinating entities to which Licensee is not selling bulk pcwer under subsection 11(a) hereef; provided, hcwever, that the purchasing entity agrees to sell such firn hulk pcwer as it has available to Licensee cader ec=parahle ter=s and conditiens. Nothing shall require Licensee to sell fir = bulk pcwer under the preceding sentence in a: cunts which exceed the purchasing encity's an-nual peak Icad demand and reserve requirements minus its total generating capacity (other than fir = bulk pcwer purchases frc= Licensee), as defined in paragraph 1(d) hereof, ao l

the ti=e of the sale. hs used in this subsection (b), " peak Icad" shall nean the greatest previously experienced Icad

.. _ _ . . _.. _ _ _ _ _ _ _ . _ _ . . _ __ . .~ ._..~ _ _ , - -_ _ _

plus esti=ated lead growth attributable to the retail custc=ers er the retail lead of distribution cecperatives (lecated in Licensee's service area) to the extent that such 1 cad and lead gr=wth are supplied by the purchasing entity in questien for perieds of requested purchases.

(c) Licensee shall keep requesting neighboring enti-ties i=for=ed of its generation planning and constructicn p c-gra=s. Licensee shall include in such planning and prcgr=~<

sufficient generation capacity to satisfy requests for fir = bulk power frc= a system which was a whclesale custc=er of Licensee on the effective date cf these license cenditions. Licensee shall not be required hereunder to censtruct generation facilities er advance generation schedules to satisfy bulk pcwer requests cf a system which was not a wholesale custc=er of Licensee en the effective date of these license -

~

cenditions.

(d) As used in this paragraph, " wholesale custc=er of Licensee en the effective date of these license ccnditions" shall include a neighboring entity which is fer=ed 'in the future whose lead includes lead served at retail by Licensee i==ediately pric: to its formation (hereinaf ter a "New Neighboring Entity"); previded, however, that when_the tctal load cf a New Neighboring Entity also includes lead served-at-retail hy an entity at :r than Licensee i==ediately prior to its fer=ation, Licensee shall caly be required to sell fir:

= .

bulk pcwer under this paragraph in an encunt equal te the lead in kW served at retail by Licensee during the year in-

=ediately pricr te the New Neighboring Entity's for=ation, plus the g cwth of retail lead experienced in the geographic area previcusiv . served by Licensee.

(e) Firs bulk pcwer sales under this paragraph shall net be limited to lcwer vcitages when higher voltages are re-quested and available frc= Licensee in the area where the inter-connection is desired.

VII. ACCESS TO FCOLING ARRANGEMEMOS

12. Licensee shall net cppese the =embership cf a neighboring cecrdinacing entity in any pecling or cec dinatien arrangement te which Licensee is presently a party, c within the te== cf this license becc=es a party; c.revided, hcwever, that the ' entity satisfies =e=bership qualifications which are -

reascnable and de not eccstitute undue discri=inatien. Ct the extent that Licensee enters into pocling, cecrdination er si=ilar joint bulk pcwer arrangements during the ter= cf the -

license, it shall use its best efdcrts to incicde previsiens therein which per=it requesting neighboring cecrdinating en-tities the cppertunity te participate in the arrange =ent en a basis that is reasonable a'nd which de not constitute undue discrimination .