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Objections to ASLB 811211 Memorandum & Order.Requests Oral Arguments Re ASLB Findings on Listed Findings
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Site:	Maine Yankee, Saint Lucie
Issue date:	01/14/1982
From:	Van Eaton J; FLORIDA CITIES (FLORIDA MUNICIPAL UTILITIES ASSOCIATE, SPIEGEL & MCDIARMID
To:	; NRC COMMISSION (OCM)
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1 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION I

In The Matter Of

)

i Florida Power & Light Company

)

Docket No. 50-389A

)

(St. Lucie Plant, Unit No. 2)

)

Florida Cities

)

1/13/82 i

l l

j FLORIDA CITIES' OBJECTIONS TO MEMORANDUM AND ORDER CONCERNING FLORIDA CITIES' MOTION FOR

SUMMARY

DISPOSITION ON THE MERITS C

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ad 27 J AN 151982 >

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cmcc cf ra n::arj i

. i s &:isa S

Ernth Robert A. Jablon Alan J.

Roth Daniel Guttman Marta A.

Manildi Joseph Van Eaton Attorneys for Florida Cities January 14, 1982 Law offices of:

Spiegel & McDiarmid 2600 Virginia Avenue N.W.

Washington, D.C.

20037 NEE'iB82R*088gsig, PDR l

l

o e

1 TABLE OF CONTENTS 4

j Page I.

OBJECTIONS AS TO WHICH CITIES REQUEST ORAL ARGUMENT.

1 A.

There Is A Genuine Issue Of Fact As To The Existence Of A Nuclear Product l

Market.

2 i

l.

The unique characteristics of j

nuclear generation are well i

recognized by the industry, including FPL.

5 a.

Economics.

5 ii b.

Fuel type.

7 C.

Cost Components.

8 d.

Environmental and safety characteristics.

8 e.

Economies of scale.

8 i

f.

Uncertainties.

9 2.

FPL itself admits the unique and nonsubstitutable character of nuclear generation.

10 a.

FPL's Board Chairman has testified that there is no substitute for nuclear in the area where FPL needs generation.

10 4

b.

Nuclear is essential to FPL because it provides diversity.

11 c.

FPL's refusal to share its nuclear units has been in i

i express recognition of the i

low price of the power generated.

11 i i x.)

1

r 1

i Page 4

I l

3.

The Board should not grant summary judgment against Cities on the basis of this record.

12 B.

FPL's Agreemen' With Other Utilities In Settlement Makes Cut A $1 Violation Of The Sherman Act.

15 1.

The settlement establishes a

" contract, combination or conspiracy" under the Sherman Act.

16 2.

The proposed settlement contract is clearly exclusionary; it has not been shown to be justified by legitimate business reasons.

19 l

C '.

Certain Further Cities Should Be Included i

As "Inside," Even Under FPL's Test.

22 D.

There Is Evidence Compelling Summary l

Judgment As To FPL's Monopoly Power In Relevant Markets.

23 i

1.

Abuse of monopoly - the Griffith 25 argument.

2.

FPL's abuse of monopoly power in its market is relevant even if the outside Cities are considered a part of a separate market.

27 3.

Exclusion from a market.

30 l

l E.

There Is Evidence That FPL Took Affirmative 1

Action To Block Outside Cities From Participating In Nuclear Power Generation.

31 II. OBJECTIONS RESERVED FOR APPEAL.

34 AFFADIVITS APPENDICES 4

\\ 4 e

-,y c

4

i 1

TABLE OF AUTHORITIES

(}

Court Cases:

Page l

Aladdin Oil Co. v. Texaco Co.,

603 F.2d 1107 j

(5th Cir. 1971) 19 Albrecht v. The Herald Co.,

390 U.S. 145 (1967) 16 American Federation of Tobacco Growers v. Neal, 183 F.2d 869 (4th Cir. 1950) 20 Associated Press v. United States, 326 U.S. 1 (1945) 20 Avnet, Inc. v. FTC, 511 F.2d 70 (7th Cir. 1975) 3 Babcock & Wilcox v. United Technologies Corp.,

435 F.Supp 1249 (N.D. Ohio, E.D. 1977) 12 Begnaud v. White, 170'F.2d 323 (6th Cir. 1948) 14 Brown Shoe Co. v. United States, 370 U.S. 294 (1961) 3 Dougherty v. Continental Oil Co.,

579 F.2d 954 (5th Cir. 1978) 18 E. A. McQuade Tours Inc. v. Consolidated Air

~

Tour Man. Com., 467 F.2d 178 (5th Cir. 1972) 16, 27 Eastman Kodak Co. v. Southern Photo Material Co.,

273 U.S.

359 (1927)................................

17, 30 Florida Cities v.

Florida Power & Light Co.,

(S.D. Fla.) No. 79-5101 13, 37 l

Fountain v. Folson, 366 U.S. 681 (1949) 14 t

l Fulton v. Hecht, 580 F.2d (5th Cir. 1978) 29 j

Gainesville Utilites Dept. v. Florida Power &

l Light Co.,

573 F.2d 292 (5th Cir.) cert.

l denied, 439 U.S.

966 (1978) 20,37,38 Gamco Inc. v, Providence Fruit and Produce j

Bldg., 194 F.2d 484 (1st Cir. 1952).............. 16,17,19,30

(

Klor's Inc.

v. Hale-Broadway Storss, 359 U.S.

j l

207 (1959) 16 t

1 LaPeyre v. FTC, 366 F.2d 117 (1966) 29

.C-'

- 111 -

i t

Page

()

Larain Journal v. United States, 342 U.S. 143 (1951) 30 Missouri Pacific Railroad v. National Milling Co.,

l 409 F.2d 882 (3d Cir. 1969) 14 Northern Pac. Railroad Co. v. United States, 356 U.S. 1 (1957) 20 i

Otter Tail Power Co. v. United States, 410 U.S.

366 (1972) 2,17,30,32 j

Parklane Hosiery v.

Shore, 439 U.S.

322 (1978) 29 Peelers Co.

v. Wendt, 260 F.Supp. 193 (W.D.

Wash.

S.D.

1966) 3 j

Reynolds Metal Co. v. FTC, 309 F.2d 223 (D.C. Cir.

{

1962) 28 i

Sanitary Milk Producers v.

Bergjans Farm Dairy Inc., 368 F.2d 679 (8th Cir. 1966) 23,27,30 South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (4th Cir.) cert.

denied, 385 U.S.

934 (1966) 20 Timken Roller Bearing Co.

v.

United States, 341 U.S. 593 (1951)

.....T.........................

20 United States v. Addyston Pipe & Steel Co.,

85 F.

271, aff'd, 175 U.S.

211 (1899) 5 United States v. Aluminum Company of America, 4

l 377 U.S. 271 (1964) 4, 32 l

United States v. Aluminum Company of America, 148 F.2d 417 (2d Cir. 1945) 5 i

United States v. Colgate & Co.,

250 U.S. 300 (1919) 17,

i l

United States v.

E.

I.

DuPont De Nemours & Co.,

351 U.S. 377 T1955) 2, 4

l,

United States v. Griffith, 334 U.S. 100 (1948) 23,27,30,32 United States v. Parke, Davis & Co.,

362 U.S.

16 29 (1929)

- iv -

a n

i t

l l

Page 4

Volunteer State Life Insurance Co. v. Henson, 234 F.2d 535 (5th Cir. 1956) 14 Agency Cases:

Consumers Power Company (Midland Plant, Units 1 and 2) 6 NRC 89' (1977) passim Florida Power & Light Co. (St. Lucie Plant, Units 1 and 2) (Turkey Point Plant, Units 3 and 4),

CLI-79-12, 10 NRC 767 (1979) 34 Florida Power & Light Co.,

32 PUR 4th 313 (Opinion No. 57) (Aug.

9, 1979) passim Florida Power & Light Company, Opinion No. 517, 37 FPC 544 (1967) 38 Florida Power & Light v. Federal Energy Regulatory Commission, (5th Cir. No. 80-5259) 35

" Order Directing the Submission of a Transmission Tariff in Substitution for Individual Rate Schedules," Docket No. ER78-19 et al.

(December 21, 1979).......... 77..................

35 Miscellaneous:

Areeda and Turner, Antitrust Law T333 et seg..........

27 Atomic Energy Act, $105(a), 42 U.S.C.

2135...........

34, 35 Clayton Act, {4, 15 U.S.C., $15 27 Federal Rules of Evidence 801(d)2.....................

35 i

Federal Trade Commission (FTC) Act, $5, 15 U.S.C.

$45 29 Moore's Fed. Prac., $56.12 14 Moore's Fed. Prac., {56.13 14 Sherman Act, 15 U.S.C.

$1 et seq.

passim

-v-Os I

I

s UNITED STATES OF AMERICA NUCLEAR REGULATC8Y COMMISSION O

)

In The Matter of

)

Florida Power & Light Company

)

Docket No. 50-389A

)

(St. Lucie Plant, Unit No. 2)

)

Florida Cities

)

1/13/82 FLORIDA CITIES' OBJECTIONS TO MEMORANDUM AND ORDER CONCERNING FLORIDA CITIES' MOTION FOR

SUMMARY

DISPOSITION ON THE MERITS On December 11, 1981, this Board issued a Memorandum and Order which found that unrestricted operation of Florida Power &

Light's Nuclesr Plant Unit 2 would maintain a situation incon-sistent with the antitrust laws. The parties were directed to file any objections they may have to that Order.

I.

OBJECTIONS AS TO WHICH CITIES REQUEST ORAL ARGUMENT.

Cities generally object, and desire oral argument, as to the Board's findings concerning:

the existence of a nuclear product market [ Board Finding #3, Order at 31]; whether FPL's sale of i

nuclear capacity to some, but not all plaintiffs creates a cause of action under $1 of the Sherman Act [ Board Finding #2, Order at 31]; whether, with respect to "outside cities," FPL has monopoly power in a relevant market for electricity [ Board Finding #4, order at 32]; and whether defendant took affirmative action to block outside Cities from participating in nuclear generation, or exercised anything other than sound business judgment in refusing Tallahassee's request for nuclear access [ Board Finding #6, Order at 34]. 1/

()

1/

The Board granted partial summary judgement against Cities as l

to Findings 2 and 3 [ Order at 31].

It did not grant summary judgment as to Findings 4 and 6, so that these findings could be

t We discuss these objections seriatim.

A.

There Is A Genuine Issue Of Fact As To The Existence

()

Of A Nuclear Product Market.

It is hornbook law that " delineation of the boundaries of any relevant market is a ' question of fact' heavily dependent upon the special characteristics of the industry involved. " 1/ Here, however, the Board has not merely summarily adjudicated the foun-dation for a major claim against FPL without the benefit of a full hearing on the issue before it, but evidently done so on the basis of a preliminary decision made by a district court in Miami, which expressly did not have th'e issue of the existence of a nuclear product market, vel non, presented before it. 2/

As Cities will demonstrate below, a full airing of the facts would show that under the test established by United States v.

E.

I.

DuPont De Nemours & Co.,

351 U.S.

377 (1955), and as discussed in Consumers Power Co.,

supra, nuclear generated power forms a-distinct sub-market or product market, 3/ over which FPL has FOOTNOTE CONTINUED FROM PREVIOUS PAGE the subject of proof at trial.

1/

Consumers Power Company (Midland Plant, Units 1 and 2) 6 NRC 892 at 919-920 (1977).

2/

As counsel for FPL noted before this Board:

"If I may explain the basis for the summary judgment motion [before the district court]

on the nuclear issues, we filed a summary judgment motion on the assumption that FPL had monopoly power in the relevant market.."

(Tr. 1434 emphasis supplied) 3/

Alternatively, FPL's nuclear facilities constitute essential facilities under Otter Tail Power Co. v. United States, 410 U.S.

366 (1972), and Cities are entitled to access on that

()

ground.

l t

3-monopoly power. 1/

The Board should reverse its grant of partial

^

summary judgment against Cities and permit the parties to present j

their case on this issue.

The Board, in Finding #3, Order at 31-32 finds that the interchangeability of nuclear generated electricity with other electricity requires, pursuant to the principles set forth in United States v.

E.I.

DuPont de Nemours & Co.,

351 U.S.

377, 396 (1956) that the generation of electricity be treated as a narket that is not subdivided into separate markets related to the way electricity is generated.

That electricity is a single market because, as the Board puts it, at 31, all electricity is " physically indistinguishable" i

is at odds with the finding of FERC Opinion No. 57, Florida Pcwer

& Light Company, 32 PUR 4th 313 (1979), which the Board adopts in pertinent part, and governing findings of the NRC, as stated in Consumers, supra, 6 NRC at 945-976.

Both Consumers (and its progeny) and Opinion No. 57 establish j

that the " physical indistinguishability" of electricity not-withstanding, there are submarkets in electricity -- at least for l

those engaged in supply and purchase at the wholesale level. 2/

In both cases the agencies have found, at least, " coordination" 1/

Anticompetitive acts which restrain trade in either a market or submarket violate the antitrust laws.

As the Supreme Court has held "[W] ell-defined submarkets may exist which in them-selves, constitute product markets for antitrust purposes."

Brown Shoe Co. v. United States, 370 U.S.

294, 325 (1961).

See also affidavit of Robert E. Bathen.

2/ As Gamco, citing American Federation of Tobacco Growers v.

Neal, 183 F.2d,869 (4 th Cir.1950) noted, "having set up the market in this way, defendants may not be heard to say that they have not established a monopoly merely because they do not inter-fere with an outside warehouse if it can fend for itself."

FPL should not be able to exclude some Cities from the market it has created.

3/ An agreement which has the effect of enforcing territorial restraints is per se illegal, see, e.g., Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951), Gainesville Utilites D ep t. v. Florida Power & Light Co., 573 F.2d 292 (5th Cir.) cert.

denied, 439 U.S.

966 (1978).

Agreements among producers to divide te ritories constitute per se violations.

United States v.

Addysto.1 Fine & Steel Co., 85 FT 271, aff'd, 175 U.S.

211 (1899), cited approvingly in Northern Pac.R. Co. v.

United States, 356 U.S. 1 (1957) where subsequent agreements serve only O'

to perpetuate the territorial division and do nothing to mitigate their pernicious effects, it is at least a rule of reason question whether these agreements also restrain trade unreaso-nably.

l

. apparent on the face of the settlement that FPL is attempting to establish a purely geographic basis for providing access to nuclear generated power.

If there were any doubt, counsel for FPL has made it clear:

The inside Cities listed in the license conditions consist of each relatively small municipal system which is adjacent to FPL's system either by virtue of being connected with FPL or abutting FPL's distribution system (or the distribution system of a rural electric cooperative or portion thereof which is supplied at wholesale to FPL), together with the City of Gainesville.

(Reply Memorandum of Florida Power & Light Company, dated October 13, 1981 at 11.]

Nor does FPL even attempt to justify the territorial division on the basis of electrical necessity, or on the basis that those who receive access are competitors of FPL and those who are excluded do not compete,1/ or on the basis that the ones who will obtain access were customers of FPL prior to settlement. 2/

The Board finds that "a sale to existing customers and a con-current refusal to sell... to outside Cities that were not custo-mers does not by itself support a Section 1 claim."

Whatever the validity of this conclusion, it does not coincide with the facts.

FPL had certainly not considered Orlando Utilities Authority, l

Gainesville Regional Utilities, Lake Helen, or Green Cove Sp rings, " customers" prior to settlement and had not apparently numbered Key West or the Fernandina Ber.ch Division of the Florida i

1/ Counsel for FPL stated at oral argument that "it is FPL's position that Cities who are adjacent to its service area are not in competition with FPL. "

(Tr. 1253).

2/ Of course, FPL defends by saying the restrictions are plainly rational and evenly applied.

Such assertions prove nothing.

FPL n,

here is like a cartographer who, based on assumptions that the s

world is flat, draws a map which is " rational," but nonetheless invalid.

, Public Utilities Company among its customers (see, e.g.,

Cities

" Motion to Establish Procedures" at pp. 61-62).

[}

C.

Certain Further Cities Should Be Included As "Inside",

Even Under FPL's Test.

The Board's conclusion that there has been no illegal subgrouping of customers implies that FPL has reasonably applied a rational line between "inside" and "outside" Cities.

Above, we indicated the line is not rational.

[See also Florida Cities' Supplemental Memorandum In Response To Board Qaestions At Oral Argument of August 17-18, 1981, dated Sept. 14, 1981 at 14-16].

We now show that "outside" Cities should apparently be named in 4

the license conditions even under criteria developed by FPL.

FPL's stated criteria, quoted above, indicate that FPL included as "inside" cities systems which abutted the distribu-tion system of a rural electric cooperative (or portion thereof) served at wholesale by FPL.

Half of the "outside" intervenors --

Ft. Meade, Bartow, Alachua, Newberry, and the Sebring Utilities Commission -- abut rural electric cooperatives which are served at wholesale by FPL.

Only Tallahasssee, Leesburg, Mt. Dora, St.

Cloud and Kissimmee do not abut such cooperatives. 1/

Cities request at least that FPL be required to provide access to all such systems, which appear to meet its stated criteria, while the Board considers further whether the condition makes electri-cal, as opposed to anticompetitive, sense.

In sum, there is no reason to suppose that the territorial restrictions serve anything other than the anticompetitive pur-1/

Kissimmee and St. Cloud, of course, abut the Orlando (T

Utilities Commission which is included in the license conditions.

A/

FPL offers no reason for including systems which abut cooperati-ves while excluding systems which abut municipals named in the license conditions (like Kissimmee and St. Cloud, and Alachua and Newberry, which are near the Gainesville Regional Utilities).

=

. pose which the Board found sufficient to justify relief for out-side Cities -- i.e.,

that "the division of markets effectuated by O

FPL and Florida Power Corporation affects the existing terri-l torial division which FPL asks the Commission to recognize."

D.

There Is Evidence Compelling Summary Judgment As To

.]

FPL's Monopoly Power In Relevant Markets.

I Finding number 4 states: "With respect to Tallahassee and other 'outside Cities' there is no evidence that FPL possesses monopoly power in a relevant market for electricity (Order at 32)."

Cities do not object to Finding #4 insofar as it deter-j mines that the issue of whether FPL possesses monopoly power in a peninsular-wide market is still open.

For purposes of the sum-mary judgment motion, Cities did not ask the Board to find that FPL possesses monopoly power in a peninsular-wide market for electricity.

The Board, accordingly, did not grant partial sum-mary judgment for or against Cities on this issue, instead i

leaving the issue open for trial.

Cities do object, however, to the extent that the finding may be read to dispose of the issue of whether exercise of FPL's monopoly power in its own territory affects or harms the outside cities.

Cities, therefore, request oral argument as may be appropriate to show that United States v. Griffith, 334 U.S. 100

(

(1948) and South Carolina Council of Milk Producers, Inc. v.

Newton, 360 F.2d 414 (4th Cir.) cert. denied, 385 U.S. 934 (1966) are apposite here,' and that there are least questions of fact which, under these cases, preclude summary judgment against Cities. 1/

l ()

1/

Cities recognize that they did raise Griffith and Milk l

Producers on brief and at oral argument, but, in view of the i

importance of the argument and the question as to the effect of the Board finding, respectfully ask the opportunity to focus the argument further.

i

l.

. The problem may be stated simply: Cities are small.

They

()

require state-wide coordination in order to obtain the full bene-fits of, for example, economies of scale.

Their situation is the same as that faced by the municipal systems in Michigan, discussed by the Appeal Board in the Midland decision:

[Bly reason of their size, coordination among themselves does not allow the small utilities to obtain the benefits available by coordinating I

with larger systems.

Even in combination they are too small to achieve the maximum economics of scale... By themselves, they cannot afford generating f acilities of the capacity of the modern nuclear power plants...

Consumers Power Co., supra at 1000.

Here, FPL controls 81% of the transmission lines with operating voltages of 69 KV or above in its composite area (Order at 19).

FPL used its monopoly control over bulk power as a lever to discourage requests by Homestead for wheeling from other muni-cipal systems (Order at 24).

FPL, in short, controls access to its system, and has the ability (and the will) to use its mono-poly power to block development of state-wide coordination, joint planning, and other activities critical to the municipals.

This monopoly power is quite relevant to the outside Cities -- indeed, this Board has itself noted that

[o]ur findings concerning joint coordination necessarily imply that Committee members acquired an advantage with respect to nuclear power that was not enjoyed by cities which were not members.

Order at 45.

Possession of monopoly power is also quite relevant to FPL, which is able to prevent the sort of state-wide coordination by O

municipals that, as former FPL Vice President Ben Fuqua testified, the Company feared because of its effects on FPL's

. competitive position. 1/

Absent monopoly power, outside Cities

[}

would have access; with monopoly power, FPL is in a position to prevent peninsular coordination of all systems (both investor-owned, municipal and cooperative), to limit even inter-municipal coordination, and to block access to competitive power supply.

Such exercise of monopoly power with the intent or inevitable I

consequence of harming the outside Cities and providing FPL with i

l a competitive advantage is illegal under the antitrust laws.

1.

Abuse of monqpoly - the Griffith argument.

Here, FPL has engaged in beneficial coordinated activities I

which have been denied to Cities through exercise of FPL's mono-poly power.

Moreover, FPL has gained a competitive advantage through this abuse of power.

Thus, FPL can prevent outside Cities from entering into its territory to compete for loads in for example, Daytona Beach.

Thus, FPL's refusals, insofar as they have given FPL cost / rate advantages, have given FPL an advantage in utilizing the state-wide " brokerage system".

Oral j

1/

Q:

[By Mr. Guttman] And you assume that New Smyrna Beach or y

Tallahassee would take over FP&L -- What were you

[

thinking of?

L A:

[By Mr. Fuqua]

They might undertake it.

t Q:

And you were concerned about that as a possibility?

r A.

Yes, sir.

Obviously.

Q.

How would a Tallahassee or New Smyrna Beach go ahead and take over FP&L?

j A.

Well, we discussed that in my proposed already, the various proposals such as Yankee-Dixie and others, and efforts to tie them together, get federal subsidies and grants.

That's all.

(Emphasis supplied).

O

" Florida Cities Reply to Memorandum of Florida Power & Light Company... " dated September 28, 1981, at Appendix Document A, Deposition of Benjamin Fuqua at 195.

w w

em---

-w mm m

e,e w

. Argument, September 17,18, Tr. 1246, 1298.

Thus, FPL has been

()

able to disadvantage all Cities in order to limit " yardstick competition", and thus to advantage itself in the " vigorous 1

franchise competition" which exists within FPL's territory. l/

See, e.g.,

" Motion to Establish Procedures," dated May 27, 1981 at 70-72; Cities " Motion" document numbers 96, 97; Florida Cities Reply To Memorandum of Florida Power & Light Company... " dated September 28, 1981, Appendix A (deposition of Ben Fuqua at 194-202; Oral Argument, September 17,18, Tr. 1293-1295.

This I

material shows that FPL considers itself engaged in " yardstick" 1

1 competition with all utilities in the state and uses 'the yardstick to help maintain its retail monopoly.

FPL's actions would be consistent with prior Board findings in, for example, Consumers Power that the existence of small independent systems "in general exerts a procompetitive influence at the retail level in the form of yardstick competition. "

Id. at 988.

Ultimately, by dint of its monopoly control over retail territory and transmission, FPL has the means to construct large baseload units, including nuclear units.

By limiting smaller systems' access to peninsular-wide coordination -- and by creating market constraints -- FPL reduces or eliminates the abi-lity of smaller systems to construct competing efficient baseload units.

Thus, when it deals selectively, for example, by selling S t.

Lucie to some, but only some, systems (e.g., Orlando), when it enters into a joint venture to build a coal plant with the Jacksonville Electric Authority, when it buys coal output from

(]}

1/

FPL has been able both to maintain its retail franchises and to seek to expand its power through attempts to takeover utility

(

systems in Vero Beach, New Smyrna Beach, Clewiston, Homestead, F t.

Pierce, et al., see discussion in Florida Power & Light Co.,

3 2 PUR 4 th 313 (Aug.

9, 1979) and Order at 22.

i

, Tampa Electric Company, but limits its dealing with "outside

()

Cities," it closes the circle.

It preemp ts alternative arrange-ments under which smaller systems might continue to aggregate loads and build generation which competes with FPL's own.

As in Griffith, the favored entity can obtain a better power supply (or movie supply) and the less favored entity is foreclosed.

2.

FPL's abuse of monopoly power in its market is relevant even if the outside Cities are considered a part of a separate market.

FPL's abuses would be actionable even if it is assumed that outside Cities are not part of any relevant market in which FPL possesses monopoly power (or competes).

All that is required is that the Company's anticompetitive acts injure Cities in their business or property, Clayton Act S4,15 U.S.C. 515.

The law provides little basis for excluding wholesale all potential plaintif fs simply because they are in a dif ferent market than the defendant; the cases instead stand for the proposition that some claimants may be denied standing because the damage is somehow l

too attenuated, or remote, to justify recovery under the Sherman i

Act, see Areeda and Turner, Antitrust Law 1333 et seg.

That is, the test looks to the proximity of the action and the injuries alleged.

For this reason, Cities cited South Carolina Milk Producers, which sets forth the so-called " target area" theory

-i.e.,

that a plaintif f is entitled to recover if its injuries are in the " target area" of the antitrust violation. 1/

1/

Cf.

E.

A.

McQuade, Inc. v. Consolidated Air Tour Man. (CATM)

Com., 467 F.2d 178 (5th Cir. 1972).

There plaintiff, a tour agent, was excluded from a Manual which listed tour operators, and which was virtually a necessity for success in the industry.

(])

McQuade won in district court; on appeal, the first question con-sidered was whether McQuade had standing to assert violation of the antitrust laws..

The Manual was controlled by airline companies, not competing tour agents.

Nonetheless, though

, Given the interrelationships among electrical utilities in

{}

Florida, and having indicated the effect on inter-area transac-tions of both FPL's conspiracy with Florida Power Corporation and 4

its actions within its own territory, any violation within FPL's territory clearly includes within its " target area " outside Cities. 1/

Under such circumstances, outside Cities are entitled to relief under the Sherman Act. 2/

FOOTNOTE CONTINUED FROM PREVIOUS PAGE neither CATM or its member airlines were in direct competition with McQuade, the Court first held that there was a cause of action:

"We find that...McQuade was clearly injured in his busi-ness or property by CATM's rejection of his tour programs in both j

1965 and 1968 and thus has standing to assert whatever rights it might have under the antitrust laws."

The court then proceeded to reverse judgment for McQuade because McQuade had failed to conform to reasonable rules on which listing in the Manual was conditioned and failed to show facts sufficient to show a ger se offense.)

1/

Documents produced in connection with Cities Motion to Establish Procedures show that (1) FPL recognized the Cities' need for statewide coordination, see e.g.,

" Motion to Establish Procedures" at 46-84, Cities " Motion," Appendix Documents 5,17, 19, 22, 23, 41, 42; (2) statewide coordination provided FPL with 4

significant benefits (Order at 3); (3) FPL prevented Cities from having the benefits of statewide coordination; (4) FPL attempted to discourage Cities isolated within its transmission system from making wheeling requests and indeed, refused wheeling altogether

[

prior to 1977; [see Florida Power & Light Company, sup ra, 3 2 PUR l

4 th 313 ; see e.g., Cities " Motion," Appendix Document 25.

(5)

[

FPL promoted bilateral transmission contracts to all Cities by which it intended to discourage formation of a formal pool, Cities " Motion," Appendix Document 29 and; (6) FPL and/or its co-i conspirator feared state-wide activity of municipals (see also deposition testimony of Fuqua, sup ra ).. These documents show not only that injury to the outside Cities was the necessary result of FPL's activities, but also show FPL's intent to harm all Cities.

2/

In Sanitary Milk Producers v. Bergjans Farm Dairy Inc., 368 F.2d 679 (8th Cir. 1966), defendant Sanitary Milk Producers claimed that two plaintiffs, Bergjans Farm and Patke had no standing: Bergjans was merely a supplier to an identically-owned sales company (which had not entered the suit); Patke sold milk outside the area in which Sanitary Milk Producers was accused of exercising their monopoly power.

The Court held both Bergjans and Patke had standing, and both recovered against Sanitary Milk s

Producers.

There, as here, the key was the linkage between the markets and the directness of the harm.

Id. at 688-689.

Cf.

~ _ - - _

a

, Even were the Sherman Act inapplicable here, the Commission

(])

could still find a situation inconsistent under 55 of the Federal Trade Commission Act.

As noted in Consumers:

"The Federal Trade Commission Act is of course one of the laws which Congress empressly commanded the Commission to apply in Section 105C pro-ceedings...That Congress intended FTC jurisprudence to be used...is scarcely debatable.

Idl. at 910.

Section 5 of the Act prohibits " unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce."

In LaPeyre v.

F.T.C.,

366 F.2d 117 (1966), the Fif th Circuit found a violation of the Act where a manufacturer of shrimp machinery charged higher prices to Northewest shrimp pro-cessors than to Gulf Coast shrimp processors.

The Court found that utilization of monopoly power in one market, resulting in discrimination and the curtailment of competition in another, fell within the scope of conduct prohibited by the Act.

Here, i

FPL has (at least) used monopoly power in one market in a manner that results in discrimination between "inside" and "outside" Cities and larger utilities generally.

The result, as noted above, is that Cities have been handicapped by a lack of access to coordination and therefore are restricted in their ability to l

construct competing generation with FPL, and more generally, in wholesale and retail competition; under LaPeyre, such a handicap should be sufficient to make out a S5 violation. 1/

FOOTNOTE CONTINUED FROM PREVIOUS PAGE Peelers Co. v. Wendt, 260 F.Supp. 193 (W.D. Wash.

S.D. 1966)

(patent holder liable under Sherman Act for injury to competition in another market).

1/ The scope of potential S5 relief is illustrated by Fulton v.

Hecht, 580 F.2d (5th Cir. 1978).

The Court there found that an action by kennel owners, who did not compete with dog owners, to

T e.

I.

l 3.

Exclusion from a market.

(}

Even assuming FPL did not gain a coqpetitive advantage, and even assuming no relevant peninsular market exists now, FPL's abuse of monopoly would still be legally relevant, for FPL has l

used its control to prevent development of a peninsular market.

1 Exclusion of potential customers is ger set unlawful.

Thus, 4

Gamco prohibits exclusion of competitors from a market and in Otter Tail Power Co. v. United States, 410 U.S. 366 (1972) the 4

Supreme Court held that:

Use of monopoly power 'to destroy threatened competition" is a violation of the attempt to monopolize" clause of 52 of the Sherman Act.

l Lorain Journal v. United States, 342 U.S. 143, 154; Eastman Kodak Co. v. Southern Photo Material Co., 273 U.S. 359, 375.

Id. at 377.

d As noted in Opinion No. 57, the geographic limitation exists because of the wholesale territorial agreements and the abuse of 1

firm power transmission services.

FPL has thus prevented com-petition from entering its market illegally.

3 Cities suggest that on the basis of Griffith, or South Carolina Milk Producers, or in light of FPL's actions which uni-laterally prevented entry into its market, the Board can find that, as to "outside" Cities, FPL possesses monopoly power in a relevant market and has abused that power in a manner which creates a situation inconsistent and which justifies equivalent FOOTNOTE CONTINUED FROM PREVIOUS PAGE exclude one dog owner from their kennels, did not state a cause of action under S1.

In dictum, the Court reasoned that there is no violation of the Sherman Act when a monopolist harms only com-petition in an adjacent market by acts which do not harm its com-petitors.

However, the Court also noted that this was not true O

under 55:

"[Section] 5 of the Federal Trade Commission (FTC)

Act, 15 U.S.C. 545, prohibits a monopolist from discriminating between buyers in the' price he charges for his product."

o relief for "outside" and "inside" Cities.

The harm 1/ of being deprived of access to coordination, and the competitive disabili-O ties endured by outside Cities are amply discussed in the Board's decision.

See, e.g.,

Order at 45, 48-49.

E.

There Is Evidence That FPL's Took Affirmative Action To Block Outside Cities From Participating In Nuclear Power Generation For purposes of the Motion, the Board found [ Finding #6, Order at 33, 34] that there was no evidence that FPL's activities were aimed at blocking outside Cities from participating in nuclear power generation, and that there was not evidence that FPL was motivated by oEher than sound business judgment in refusing Tallahassee's 1976 request for access.

Summary judgment should have been granted for Cities. 2/

Here, there is strong (and Cities believe, conclusive) evi-dence that FPL knew Cities could not build nuclear if it blocked them frem coordination and it did in fact block coordination (at least by dividing territories with Florida Power Corp.) see discussion, supra, see, e.g.,

discussion at pp.

46-53, Cities

" Motion to Establish Procedures."

FPL vice president, Robert l

Gardner, spelled out these disadvantages in a July 30, 1976 docu-1/

At trial Cities would show additional harm, including (a)

Inability to engage in desireable wholesale transactions; (b) inability to sell power inside FPL's territory; (c) inability to l

plan economically sized units because of lack of statewide coor-dination.

As the affidavit of Mr. Bathen suggests, Cities were prevented from seeking the most economic sources of power as a result of FPL's activities.

2/

The issues discussed herein were before the Board.

Cities raise these is6tes again to bring the Board's attention to material which certainly indicates that there is evidence suggesting FPL's activities were aimed at blocking Cities from nuclear, and to respond to the legal implication of the Board's

()

order -- that FPL did not affirmatively act to block Cities from nuclear if it did not specifically intend to do so.

This legal issue may not have been fully briefed previously.

s l ment which noted that municipals were:

"Too small to add econo-l L

mical generation..."

"Cannot support planning, project, pro-curement, nuclear organizations."

Cities " Motion," Appendix i

Document 42.

In short, this Board can find that FPL knew the effect of blocking coordination would be to restrict municipalities from obtaining access to nuclear generation.

That is enough under the Sherman Act.

The holding of the Board may intimate that FPL must be found to have a specific intent to block Cities nuclear access before the Board can conclude that FPL acted affirmatively to block Cities.

Such is not the law.

A monopolist, regardless of speci-fic intent, has acted affirmatively in violation of the antitrust laws if it has engaged in activities which have the consequential effect of restraining trade.

As noted in United States v.

Aluminum Co. of America, supra, 148 F.2d at 432, "no monopolist monopolizes unconscious of what he is doing." 1/

The Board also found, at 34, that FPL's 1976 refusal of Tallahassee's request to participate in nuclear power production had not been shown to be anything but a sound business judgment.

Cities submit that the weight of the evidence is otherwise.

The law does not permit a monopolist in the utility industry to exclude others from resources in order to maintain its franchise or to protect its profits, Otter Tail Power Co. v. United States, supra, 410 U.S.

at 380, 381; far from being " sound business 1/

In United States v. Griffith, supra, 334 U.S.

at 105, the Supreme Court endorsed Hand's language finding, holding that a

()

specific intent was not required: "It is sufficient that a restraint of trade or monopoly results as the consequence of a defendant's conduct or business arrangements

- judgment," such motives for exclusion indicate anticompetitive intent id. at 380.

Cities presented evidence in their Motion to Establish Procedures which indicates that FPL's exclusions can only be explained by anticompetitive intent, " Motion to Establish Procedures..." at 84-90.

This' material shows, for example, that FPL's exclusionary tactics prevented the Company from achieving maximum economies of scale in building generation.

The Company's simultaneous efforts to prevent municipal access to the St. Lucie Unit No. 2 and the proposed South Dade nuclear units, which it ultimately cancelled in the face.of requests by Cities for participation raise further questions con-cerning the motive behind FPL's actions.

Thus, this Board, through Opinion No. 57 is already aware that in 1973, FPL con-sidered cancelling St. Lucie Unit No. 2 because of escalating costs and Justice Department review.

Opinion No. 57 supra, 32 PUR 4th 313 at 335.

(Similarly, while Company analyses were touting the benefits of nuclear generation, FPL's Vice President for Strategic Planning, Robert Gardner, was so concerned with the l

antitrust review requirements of the Act that he considered I

switching to an alternate fuel, coal, which was otherwise con-sidered inferior from the Company's point of view (Document Appendix 6)).

The actions alone should create doubts about the Company's motives.

Moreover, it can be shown that in about 1973-74 as a result of the Company's actions, at-least Orlando was lead to believe FPL would provide access to the South Dade units.

In 1976, Cities timely intervened in the South Dade Unit proceedings.

Then in 1977 FPL made a decision to cancel the South Dade units.

- ~ -

,,,_e,m,m-,

c a As described supra at 10, the cancellation was curious, since building the plant promised to provide the Company with signifi-O cant benefits.

Depositio'n testimony indicates that the Company did not sell to the Cities because it did not want to share with the Cities its nuclear resources -- even when to do so could have

~

permitted the Company to proceed with a seemingly needed facility (Appendix Document 7; Mcdonald deposition).

There is every reason to suppose that FPL intended to deny Cities' access to nuclear, and did not act on the basis of " sound business judgment."

j II. OBJECTIONS RESERVED FOR APPEAL.

1 The following provides a list of Cities' remaining objec-tions to the Order, and a short description of the support for each objection.

In some instances the objection is, in fact, l

more in the way of a clarification of certain wording in the Board's Order, and Cities contentions should be undisputed by any party.

Objections which may be non-controversial are indicated by an asterisk.

j

l.

Cities object to the Board's conclusion [at p. 50] that i

questions concerning FPL's generating nuclear units "could have been raised in those prior cases."

FPL's generating plants were licensed as research and development facilities and that hence, under the Atomic Energy Act, Cities were not entitled to raise antitrust considerations during licensing proceedings.

Cities requested the Commission open a $105(a) proceeding on the old h

plants; the board denied this relief, Florida Power & Light Co.

()

(St. Lucie Plant, Units 1 and 2) (Turkey Point Plant, Units 3 and 4), CLI-79-12, 10 NRC 767, 769-770 (1979).

Cities appealed.

On i

D

' Brief, the Commission argued to the Court of Appeals that no

{}

separate $105(a) proceeding was necessary, since this Board had jurisdiction to grant the relief requested (i.e., access to FPL's operating units, "Brief for Respondents, U.S. NRC and U.S.A."

July 7, 1980, pp. 25-26, No. 80-1099 (D.C. Cir.).

2.

The Commission finds [at p. 15] that ER78-19 was reversed by Florida Power & Light v. Federal Energy Regulatory Commission, (5th Cir. No. 80-5259).

In fact, the Court only reversed an order made by the Commission during the pendency of Phase II of that docket, ruling in favor of a staff motion to require FPL summarily to file a transmission tariff.

" Order Directing the Submission of a Transmission Tariff in Substitution for Individual Rate Schedules," Docket No. ER78-19 et al.,

issued December 21, 1979.

The Fifth Circuit noted that these orders were not essential parts of either Phase I or Phase II of the docket.

Florida Power & Light Co. v. FERC, supra 22 FPC 6-270 at fn.

3.

Opinion No. 57 which was the culmination of Phase I of Docket No. ER78-19, is final and, of course, never been reversed.

(

3.

The Board finds [at p.

19] that three of four generating 1

nuclear plants are owned by FPL, except for some small interests that New Smyrna Beach has in Florida Power Corporation's nuclear plant.

We note that a number of Florida municipalities and cooperatives own a total 10% share in Crystal River 3.

New Smyrna Beach is the only municipal system within FPL's retail service territory with an ownership share in Crystal River Unit No. 3.

4.

The Board found [at p. 38] that document 16 was not an admission by a party, since it was signed by several parties and

o

, therefore could not be the views of an agent expressed within the scope of his authority.

[The document was admitted on other i

(

I grounds.]

That document was clearly admissible as a statement of the views of an agent of FPL.

The Advisory Committee notes in b

Fed.

R. Evid. 801(d)2 state that under established principles an admission may be made by acquiescing in the statement of another.

FPL's Buchanan signed his name to the report; there is no evidence that FPL protested the Report's contents; it is there-fore plain that the document is admissible as the views of FPL.

We know of no principle of law that one is not legally bound by his signature because a document is signed by more than one party.

As the Board is aware, questions as to admissibility of docu-i ments have not been fully briefed, and therefore consideration of this issue on appeal is appropriate.

5.

The Board found [ Order at p. 33] that FFL assumed substantial business risks in constructing and generating nuclear

]

facilities.

Cities agree that building generation involves risks.

But they do not agree that FPL assumed out-of-the-ordinary 1/ utility risks in building nuclear units, and par-ticularly do not agree that FPL took substantial risks in constructing its first nuclear units.

Mr. Gardner's affidavit filed in the District Court, which is intended to support the risk proposition, indicates plainly that FPL had contractual arrangements which protected the Company against escalation in

(])

1/

While risks associated with nuclear power are not identical to those involved with other generation, Cities contend they have been comparable.

=- -__

1 o

- the costs of construction and nuclear fuel.

" Motion of Florida Power & Light Company for Summary Judgment of City of Tallahassee's Nuclear Access Claim," Appendix B, affidavit of Robert Gardner, filed February 23, 1980.

The issue of " relative risk" was not central to the Board's ruling, and was not fully 1

]

briefed.

This issue should remain open for trial, if found rele-1 l

vant to the proceeding.

6.

The Board found [ Order at p. 343 that Tallahassee's 1976 request for access to nuclear power raises questions concerning l

its earnestness in seeking nuclear power and, further, that there

]

is no indication that Tallahassee had a specific plan of the necessary approval of the governing board of the Tallahassee City Commission.

This issue was not briefed before the Board.

In fact, it is clear the City Commission gave specific approval to efforts to obtain right to access to nuclear units.

I a.

In 1975 Tallahassee passed a resolution expressing a good faith interest in purchasing a portion of Crystal River I

Unit No. 3 (and the City subsequently bought into the plant) f (Appendix Document 9).

l b.

In 1977, the Tallahassee City Commission adopted a resolution which indicated the City sought rights to nuclear i

capacity allocations (Appendix Document 10).

c.

In 1979, the City of Tallahassee authorized a treble damage suit before the District Court in Miami in No.

i.

79-5101 Civ-JLK (now sub nom Florida Cities v. FPL (Appendix Document 11).

Cities therefore object to any finding that suggests that Tallahassee was not " earnest" in seeking nuclear power.

The for-4

--n-.

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

., mal actions of the Board indicate the City had authority to seek rights to access to nuclear capacity. 1/

7.

The Board ruled [at p.

21] that the Gainesville case makes positive findings for FPL, and that when Cities request i

4 collateral estoppel, they must accept the good with the bad.

To preserve the record, Cities point out the law is otherwise.

The rule of mutuality - that neither party can use a prior judgment as an estoppel against the other unless both are bound - has been thoroughly discredited.

Parklane Hosiery v.

Shore, 439 U.S.

322 at 326 (1978).

FPL's complaint that it is j

unfair that it be bound when Cities are not ignores the fact that Cities had not previously been heard, and they are prepared to show a broad pattern of dealing in which FPL's activities vis-a-vis interconnection and territorial agreements with Gainesville may very well appear in a different light.

We note that Cities are not in privity vis-a-vis the Gainesville litigation; application of collateal estoppel against them would be wholly impropar.

See e.g.,

Parklane, supra at 327 fn.

7.

8.

The Board found [ Order at p. 16] that Cities could not use FPC Opinion No. 517 for the proposition that FPL receives benefits from coordination, since the Board construes that to have been but a peripheral issue, irrelevant to the case, and f

hence collateral estoppel should not be accorded.

The Board did L

l not speak to Cities' further assertion that Opinion No. 517 l

estopped FPL from denying that it refuced to sell to Clewiston and tried to take over the Clewiston system.

Cities believe the 1/

Cities however, do not believe such action would have been necessary to give City's agents authority to seek nuclear access.

1 l

, Board is in error with regard to Opinion No. 517, for the reasons stated in Florida Cities' Reply dated September 28, 1981, pp.

O-20-36, Response dated August 7, 1981, pp. 10 and 60, and Motion dated May 27, 1981, pp. 11-15; hence they raise this issue for appeel.

WHEREFORE, Cities respectfully request that their ob,,ections be set for oral argument, granted, and/or taken due notice of, as stated above.

Respectfully submitted, Robert A. Jablon Alan J. Roth Daniel Guttman Marta A. Manildi Joseph Van Eaton By M

$4

~

A eys for Florida Cities January 14, 1982 Law offices of:

Spiegel & McDiarmid 2600 Virginia Avenue N.W.

Washington, D.C.

20037 O

ML20039G550

Text

SUMMARY

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