ML20042C783
| ML20042C783 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 07/20/1984 |
| From: | Toalston A Office of Nuclear Reactor Regulation |
| To: | Vogler B NRC |
| Shared Package | |
| ML20042C775 | List: |
| References | |
| FOIA-89-559 A, NUDOCS 8408010369 | |
| Download: ML20042C783 (79) | |
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JUL 2 01984 i
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Ben Vogler l
Bill Lambe Arg11 Toalston d,/ b FRm:
SUBJECT:
RIVER BEND OL ANTITRUST ANALYSIS i
t On July 18, 1984, I telephoned Mr. Al Naylor, Manager of Power Interconnections for Gulf States Utilities Company (GSU) to clarify certain provisions in i
the June 16. 1984, draft Power Delivery Agreement which is being prepared by GSU to provide transmission service to electric utilities having no operating generation. $ concern was with the phrase "the Supplier shall supply generation to continuously match the Customer's load requirements, plus associated losses....." Because of limitations in the accuracy of metering and telemetering equipment, and limitations in the response of generation to changes in load. " generation to continuously match the Customer's load" is not possible.
Mr. Naylor explained that the phrase is be. sed on North American Power Systems Interconnection Committee (NAPSIC) guidelines and the intent is that j
generation would be 'available so as to continuously match the required load.
He stated that "inadvertancy" which would occur due to equipment limitations would be covered under the NAPSIC guidelines. These guidelines provide for balancing the plus and minus inadvertancies overtime. With i
this explanation, my concerns are resolved, although I believo it would be better if the delivery agreement was more explicit.
1 I also asked Mr. Naylor about the "New Roads" controversy. He stated that this was a different problem. The generation was available to match 'the l oad. The problem was that because of the delayed notification of a proposed transaction, the power' delivery did not meet the requirements of j
the preferred transmission schedule, and therefore was considered to have occurred under a more costly transmission schedule.
' After talking with Mr. Naylor I phoned Sylvan Richard, Manager of the Louisana Energy Power Authority (LEPA), to discuss the New Roads situation and the proposed Power Delivery Agreement with him. He still believes that the technicalty used to justify the higher cost transmission rate for New Roads n
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Q was not justified, that the cost should have been assessed against Lafayette.
instead of New Roads because Lafayette was responsible for the delayed notification, and that GSU assessed the penalty soainst New Roads to show them.
the dangers of not buying their power from G$U. fte stated that all of the investor owned utilities in the area were vigorously fighting tb keep their customers, to. oppose the development of cogeneration, and to prevent legislation bene,fical to LEPA.
As to the preposed Power Delivery agreement, iv. Richard said he had.seen it but had advised St. Martinville that it wasn't necessary because the LEPA agreenents already'had provisions for power delivery to non-genersting entities.
He apparently didn t realizef or didn't chose to acknowledge, that this propcsed Power Delivery Agreenent was intended to bypass LEPA.
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4 BEFORE THE FEDERAL ENERGY REGULATORY ColWISSION Gulf States Utilities company Docket No. ER84-568-000 AFFIDAVIT OF ROY P. HEBERT Roy P. Hebert, being duly sworm, on knowledge, information, and belief deposes and says:
1 1.
My name is Roy P. Hebert.
2.
I as a power and energy consultant to the Louisiana Energy and Power Authority.
3.
I maintain offices at 315 Johnston Street, Lafayette LA, 70501.
4.
I have been in the electric power business since 1944, a period of 40 years.
5.
During that period I have been responsible for the operation of
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power plants, I have been responsible for the operation of bulk power supply l
systems; I have negotiated interconnection agreements, bulk power supply, sales contracts, and transmission agreements, principally in the state of Louisiana.
i 6.
Through w activities in Louisiana I became generally familiar
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L with bulk power rates and bulk power costs of the various bulk power
' suppliers in the state of Louisiana.
Gulf States Utilities (GSU) year period which will and on January 1,198 7.
For at least a 10 has.had a decided cost advantage over other power suppliers because of long term low cost pas fuel supply contracts for gas-fuel supply contract for boiler fuel except to the extent that the Louisiana Power & Light Company continued to resume deliveries under similar contracts.
8.
On the other hand, in g opinion, for a long period, perhaps as long as 10 years,' following January 1,1985. GSU will operate at a decided cost disadvantage from competing sources of power such as that of the Louisiana Energy and Power Authority (LEPA).
9.
Of course LEPA is dependent on GSU and others for transmission service for the delivery of such power.
L 10.
It has been my understanding that GSU is required by its nuclear license to transmit power for others under certain circumstances.
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1 SSU has entered into a contract for a carefully limited and rest LEPA members as transmission power for LEPA to certain cities which were/ws/f fa 11.
l Nava.Af the date of the contract, which is dated The transmission rate schedules for that contract provides for 12.
several delivery voltages including 13,2 KY, The contract also provides that LEPA may add additional member 13.
the same contract, but only by mutual agreement.
St. Martinville became a member of LEPA in the Fall o 14.
i int at 13.2 KV
. SSU has mfused to add St. Martinvill'a as a del very po under the contract, stating as reason only that it had no obligation t 15.
and it was unwilling' to do so because it was not in SSU's best interes I have been advised by LEPA menbers and other municipal ele systems in Louisiana that in 1982 or themabout, SSU embarked on 16.
j of attempting to lock up several of its municipal wholesale customers r
t 10 year contracts.
I understand the method it used was to offer a slight discount by offering to provide setvice at SSU's WST rate which provides for d 17.
at the GSU voltage of 6g KV and 138 KY but to continue to provide t necessary transfomation services of a facilities change for the 138/13.2 or 6g/13.2 KV transformers and substation facilities.
in place It is my information, understanding, and belief that SSU mad at least, the sites of Abbeville. Sueydan, Kaplan, Erath,' and
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It is niy understanding that SSU permitted Abbeville to cancel contract after four years (after three years and
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of a certain 138 KV transmission line that I as advised by Abbev11 engineer would have had to be constructed by S$U for its own L
that said four year contract and termination charges are a deterrent Abbev111e's commencing purchase of its power needs from LEPA.
Based on all of the foregoing facts, I have no doubt in my min j
that SSU's purpose in carrying out these activities was to preven 20.
or deter and hinder Louisiana municipal electric systems from a c t-lower cost source of bu,1k power supply.
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Further deponent sayeth not:
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Roy P. ~Hebert
'On this 16th day of August.1984, Roy P. Hebert personnaly appeared before me to acknowledge this, and stated to me that the' foregoing is true to the best of his knowledge, infor1 nation, and belief.
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0' EXHlB." #.2 BEFORE THE FEDERAL ENERGY REGULATORY C0!941SSION Docket No. ER84-568-000 Gulf States Utilities Company AFFIDAVIT OF ROBERT G. LABBE Robert 8. Labbe being duly sworn, deposes and says:
1.
I as the office manager of the City of St. Martinville. Louisiana.
2.
Since being employed by the City in 1975. I have been the employee in the City having principal responsibility for negotiations with Gulf and other matters relating to the purchase and States Utilities (GSU)by the City's municipal electric system.
resale of electricity As of 1982, we had been purchasing wholesale power from 850 3.
and at least since.1975, and probably longer under a-contract which had an initial three year /tempas renewable from year to year, thereafter.
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4.
Power under that contract was purchased at a voltage of about Jf Sometime in-1982 I was approached by Mr. Harold Beacgh 13,000 volts.
of SSU who offered to sell power to the City at nominally a transmission voltage under its rate "WST" in an arrangement in which S$U would also
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lease to the City its existing substation which transfomed the power down to' distribution voltage.. The net effect of this arrangement was
.that we would continue to receive power as before but at a signifi-cantly lower rate which difference was partially offset by a facilities charge for the use of the substation.
5.
In order to qualify for this arrangement,'GSU said initially that we would have to obligate the City under a contract for a tem of 10 years, 6.
At approximately the same time, SSU had sought a substantial rate increase and I would not roccamend to the City a 10 year contract out of concern that otyr rate increases might also be imposed.
For some time also, I had known that 85U's favorable gas fuel 7.
contracts at a> proximately $.25 an MCF were going to expire in the near future and higier fuel costs would automatically be passed on to us.
8.
I learned of an alternative power source from the Louisiana Energy and Power Authority (LEPA) and from the City of Lafayette, g.
The City employed a qualified rate engi.neer to compare the costs of the alternatives.
10.
On my return from vacation, I learned that 650 proposed to pemit the City to cancel-the "WST" Contract after 4 years; but, I
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still would n'ot recommend the four year term.
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The City's rate engineer prepared a study which he presented to the City in sisunary fom culminating in a meeting of the City Council on March 19, 1984, in which both ESU on the.one hand, and LEPA and the City of Lafayette on the other were invited to explain their proposals and pemitted to compare their proposal to the other alternative.
U bs to the assumptions used by the
- 12. There was some
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City's rate engineer and by GSU and additional time was made available to clarify the underlying assumptions.
13.
The question was put off until a special meeting of April 4,1984, and,a final special meeting of April 11, 1984.
14.
In order to take power from LEpA and Lafayette, it would be necessary to have the power wheeled by GSU.
It refused to provide wheeling service for delivery at 13.2 KV even though our load was the only load served by one of two transfomers at its local substation.
15.
Based on the study of our rate engineer, it was igy conclusion, and I believe the conslusion of the City Council o.f St. Martinville, that the LEpA - Lafayette alternative was the preferrable one.
16.
Because SSU refused to provide the wheeling service at our distribution voltage, the City commenced the planning for~the construction of its own substation.
17.
ESU finall'y offered a one year contract to commence retroactively so.that the City would be bound only for approximately 11 months.
18.
The not effect was to delay the City from switching to an alternative, which I believe to be significantly lower in cost than ESU's proposed rate.
19.
ESU has recently further delayed the City's inviting bids for the transformers it will require at its substation by introducing uncertainty as to the voltage at vY eh SSU will deliver power at the high side of the substation.
20.
I am advised by the City's electrical engineer that the result will be to further delay the completion of the substation, and as a result, further delay St. Martinville's switch to an alternate source of power.
21.
I, believe a reasonable inference that can be drawn from all the circumstances I have discussed in this affidavit, is that GSU undertook these activities for the purpose and with the anticipated effect of egindering and delaying its wholesale customers from switching to competing sources of power.
- 22. My view is confirmed by ESU's offer to sell or leare St. Martinville the necessary transfomer $4W$t. Martinville would enter into a noncan-ce11able ten year contract for power at 650 WST rate.
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Further deponent sayeth not:
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Robert s. Labbe before me to acknowledge this, and stated to
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true to the best of his knowledge, infomation, and belief.
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- 4 t BEFORE THE FEDERAL ENERGY REGULATORY COM41SSION-r.
Gulf States Utilities Company Docket No. ER84-568-000 AFFIDAVIT OF DR. LER0Y G. SUIRE
.Dr. Leroy G. Suire being duly sworn, deposes and says:
1.
My name is Leroy G. Suire.
2.
I have been Mayor of the Town of Erath since July 1, 1961.
- 3.. In 1982 GSU's representatives approached me with a proposal to give Erath a slight discount in,its electric bill.
4.
Under this proposal Erath would take power under GSU's rate WST, which provides for del,1very at transmission voltage.
5.
In order to use the electricity we would need to continue to use.GSU's existing, in place step down substation for which Erath would be charged a facilities charge.
. 6.
After considering both charges, we would get a slight discount.
7.
GSU stated that Erath, in order to get the discount, had to sign a ten year contract.
8.
Initially it proposed an even longer contract, which to the best of my recollection was 20 years,
- g.. I asked GSU for a shorter term contract, but I was told it was not available.
10.
I was also told by Mr. Beaugh of SSU that there was no GSU rate I
increase anticipated for the foreseeable future.
11'.
I believe Mr. George Irving was' also present.
12.
I'took GSU's representative to mean that there would be no increase for the tem of the contract.
13.
I was so certain about this, that when asked about it, I first was under the impression that the representation was included as a term of the contract.
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Further deponent sayeth not:
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D G.eroy G. Suite On this 16th day of August,1984, Leroy G. Suire personnaly appeared before me to acknowledge this, and stated to me that the foregoing is true to the best of his knowledge, infomation, and belief.
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'8EFORE THE FEDERAL ENERGY REGULATORY COMMISSION Docket No. ER84-568-000
- Gulf States Utilities Company AFFIDAVIT OF DALFARES J. TRAHAN 1.
% name is Dalfares J. Trahan.
2.
I am Mayor of the City of Kaplan and have been since July 1,1982.
3.
Within three months after I took office GSU proposed to sell power to Kaplan at a new rate.
4.
Under the proposal they would sell power to Kaplan at GSU's DST rate which provides for delivery at transmission voltage and would use the existing in place transfomer and substation facilities to bring the voltage down to distribution voltage, which we needed in order to receive it and use it.
They also made minor improvements to upgrade the substation.
5.
They offered first 'a larger than ten year contract, but ultimately
' insisted on ten years.
6.
We wanted a much shorter term contract.
= 7.
GSU proposed to make a facilities' change for the use of the existing substation facilities, but even after that change, we got a slight discount from the earlier change.
8.
Soon after I to'ck office, GSU imposed a 30% rate increase made retroactive July 1, 1982.
g.
ESU's representatives at that time, Mr. George Irving and Mr. Harold Beaugh, told me they did not anticipate any further rate increase withir the foreseeable future which the manbers of the City and I understood to maan at least after four, five, or six years.
Further deponent sayeth not:
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'M De' fgf4s#J. Trahan On this 17th dty of August,1984, Dalfares J. Trahan personnaly appeared before me to acknowledge this, and stated to me that the foregoing is true to the best of his knowledge, infomation, and belief.
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.BEFORE TEE' FEDERAL ENERGY REGULATORY COMMISSION
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i Gulf States Utilities Company ) Docket'No. ERS4-568-000 i
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o PROTEST, NOT1QN TO INTERVENE, NOTION TO RFJECT OR TO ISSUE DEFICIENCY LETTER, REQUEST POR FIVE-MONTS SC3pBNSION, FOR BEPEDITED BEARING ON' CERTAIN Z880ES, AND FOR INITIATION 1
OF PRICE SQUEEEE PROCEDURES BY ABB WILLE, ERATE, GUEYDAN, EAPLAN, RAYNE, ST. MARTZWILLE AND NELSE, LOUISIANA Pursuant to the notice of filing. issued August 8,1984, Abbeville, Erath, Gueydan, Kaplan, Rayne,.St.~Martinville and Nelsh', Louisiana,-(' Louisiana Towns" or " Towns") hereby protest.the proposed new superseding rate schedules filed by l
- ~ Gulf States Utilities Company ('GSU")', move to intervene in this docke.t, move that the new schedules be irejected or a deficiency letter issued, request that the new schedules be suspended for five months, request that an expedited hearing be-held'on GSU's anticompetitive contract practices, and request that price squeeze procedures be initiated.
I.
PROTEST GSU proposes to increase its. rates for wholesele service to municipal and cooperative customers by
$29,017,393, or more than 36 percent, based on test year billing determinants.
GSU also proposes that, if the Commission elects to suspend this increase for more than one.
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day, it bb allowed to increase its rates in the interim by
$23,107,000, or approximately 29 percent.
GSU failed to include in its application information required to be filed under 18 C.F.R. 5 35.13 and necessary to measure-accurately the-degree to which the proposed rates exceed G80's legitimate revenue requirements.
The commission can and i
should reject the application or, in any event, not accept it for filing u'nless and until G80 furnishes the required
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information.
Louisiana Towns maintain that both rates are unjust and 1
unreasonable and, exceed substantially G80's lawful revenue r
requirements..The proposed rate increase also seeks to exp1'oit anticompetitive contract practices by G8U -
practices which are remediable by this commission and which have made the Towns its captive customers-by foreclosing 4
their. access to power supply alternatives.
Moreover, the increase would create a severe price aqueese on the Towns' ability to; compete for retail load of'all kinds.
For these reasons which are more fully detailed below, the commission should not allow either the. full or the interin proposed rate to become effective for-five months after the date accepted for filing, should hold an expedited hearing to
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examine and remedy the anticompetitive contract practices, and should initiate price squeeze procedures.
The Louisiana Towns. request the foregoing relief in the event the l
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- 3 Cocunission-does not reject Gsc's application in its entirety -
or defer acceptance pending correction of deficiencies.
II.
INTERVENTION The Towns of Abbeville, Erath, Guaydan, Kaplan, Rayne, St. Martinville and Welsh, Louisiana, all purchase their full requirements of power from 48U at_ wholesale for resale and,'as customers and competitors of G80, satisfy the requirements for. intervention stated'in the Commission's Rule 214 (b) (2) (B) and (C).
-The names, addresses and telephone nushers of persons
- to whom communications concerning thistd.ocket should be 1
addressed ares' Wallace E. Brand, Esq.
c David A. Leckie,.Esq.
Sean T. Beersy, Refu a BRAND &'LECKIE 1901 L.Streen,iN.W.
Washington, B.C.
20036 Telephone:
(207.) 347-7002 Mr. Robert M. ' Gross, Jr.
Southern Engineering Company of Georgia 1800 Peachtree Street, W.W.
Atlanta, Georgia 30367-8301 Telephone (404)_352-9200
'l Towns respectfully request waiver of Rule 203(b) (3) to allow them to designate their attorneys and engineering consultants as well as their mayors'for inclusion in the offical service list in order ~to expedite necessary communications..
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i-e sonorable Larry Campisi Town of Abbeeille-304 Charity Street' Abbeville, Louisiera 70510 Telephones -.(318) 893-8550-Bonorable Leroy Suite s-Town of Brath B.
115'W.-Edwards Street Brath,-Louisiana 70533 Telephone:- (318)-937-8401 BonorableL anso'n J. Saltsman M
Town of Guaydan 600-Main Street Guaydan, Louisiana 70542 Telephones
-(318) 536-9415-Bonorable Dalfares Trahan Town'of Raplan 511 N. Cushing Avenue Kaplan, Louisiana 70548 Telephone (318) 643-6602'
. Honorable Ralph 8tutes Town of Rayne-P.O. Box 69 Rayne, Louisiana 70578 Telephone:
(318) 334-3121 Bonorable Earl B. Willis Town of St. Martinville 121 N. Market Street-St.'Martinville, Louisiana 70582
. Telephone s -
(318) 394-6367' Bonorable Charles Bull, Jr.
Town of-Welsh P.O.-Box 786-Welsh, Louisiana 70591 Telephone:
(318) 734-2231 I
'5 III.
REJECTION OR DEFERRING ACCEPTANCE-FOR FILING PENDING RESPONSE TO A DEFICIENCY LETTER Utilities'like GSU applying to file superseding rate j
schedules are required to file the information spec'ified in s
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1 5 35.13 of the commission's regulations.- 18 C.F.R.
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$ 35.13 (c).
The failure to furnish the required information L
impairs the Commission's ability to evaluate the extent to j
which-a-proposed rate likely exceeds the utility's legitimate revenue needs.
It also impairs the ability.of-1 L'
other parties, such as' Louisiana Towns, to' prepare their
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e.g., order No. 91, Revised Recuirements for l
Filine Chances in Electric Rate 8chedules and for Preparation and Submission of Supporting Data, FERC Docket No. RM79-64 (June 27,1980), 45 Fed. Reg. 46,352 (July 10, j
l 1980).
Section 35'.13 (d) (5) of the Commission's regulations I
requires that~a utility filing Period II data submit all workpaperstrelating to such data and provide a comprehensive.
explanation of the basis for its adjustments or estimates.
GSU has ignored its obligation under that rule.
The most l
- serious of.Gsu's failures to comply concern the projected-I fuel-expenses - (Statements ABJ and BI), the demand and energy-cstimates'used in the demand-and energy allocation fadtors (statements.BB-and BD), the demands 'used in the billing comparisonsJfor Period II'and rate design for Period II (sta'tements BG, BE and BL), and the estimates for the l
balances of the items claimed.as pollution control facilities,-100 percent of which were included in the rate base (Statement AG).
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The single largest expense included in the projected Statement AE.contains Period II estimates is fuel cost.
estimated fuel costs by FERC account number, and Statement BI includes the fuel proposed-to be include,d in the fuel adjustaant provision.
Witness Willis is responsible for Statement AB and witness Waggoner is responsible for
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8tatement BI.
Mr. Willis at page 16 of his testimony used only eight lines to describe G8U's method of estimating fuel costs and provides at best a brief summary.
Mr. Willi,s's workpapers for Statement AE in Volume 11 contain only the Period I and Period II fuel expenses by account and the difference
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They contain no details or workpapers-between-the two.
demonstrating how the fuels expenses in the three fuel accounts were developed.
Mr. Waggoner's testimony and exhibits and workpapers
.In fact, are even less. illuminating than are Mr. Willis's.
he has. filed no workpapers at all~for Statement BI.
At page six of his testimony, lines one through four, Mr. Waggoner-o simply says, "the fuel adjustment factors calculated in Statement BI utilized cost data from Statement AB and the methodology now accepted by FERC in 18 C.P.R. Section Mr. tiaggoner's testimony sheds no further light on 35.14.*
the method used to project fuel costs., In addition to S 35.13(d) (5)'s general requirement of workpapers' and a comp'rehensive explanation of the basis for GSU's estimates, I
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supporting detail on cost by type of fuel, and shall show amparately'the allowable fuel cost component of purchased or l
interchanged energy."
G80 has not provided even a summary.
of the-projected Period II cost of fuel by type.
In i
addition to making careful analysis of GSU's fuel cost-estimate' impossible, the absence of fuel burned-by type v
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-makes it impossible to determine the actual number of days i
of fuel inventory by type included in statement-AL.
m Gsc's esticat.es of the demand and energy used in the B
allocation of demand and' energy costs and the billing comparisons and, rate design for Period II are similarly
-barren of-support.
The demand and energy used for allocation purposes are included in statements BB and,D and B
L the demand and energy used in the revenue comparison and.
rate design are included in Statements BG, BB and BL.
1 Mr. Waggoner is' responsible for all'of these statements.
While Waggoner did include Gsc's estimated demand and energy
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i amounts used for cost allociation _ purposes and rate comparispn and. rate design purposes in the required L
statements, he did not provide an explanation of the method used in. developing these estimates, nor did he provide any-workpapers used in. making the projection of the Period II amounts.
The only discussion of how the estimates were made j
j was included in the testimony of witness Willis at page 15, lines 18 through 27.
Mr. Willis's entire explanation wast I-
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The initial starting point for these projections, as for any of~the C l,eny's operating budgets, isthe kilowatt-hours sa es, by
_ hich is drawn our rating revenues.- These-sales-ware estimated using istorical data which are l
normalised for temperature variations and are
'l adjusted.to reflect expected ~obanges in customer usageMtternsandare-alsoadjustedtoreflectforecasts for_eacJ
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customers-and wholesale customers.
necessary, we estimate billing demands for these customers as well.
The total base revenue is developed from these sales estimates.
No explanation or workpapers p r's furnished to show how the J
" historical data" were "normalised for temperature-variations," such less the " historical dats" themselves.
Nor was it explained under what circumstances it was deemed "necessary" to estimate billing demands or how those-estimates were made.
4 E
GSU's application casts a thick fog over-an important
~*
0 asset account which makes it impossible.to determine whether i
it properly qualifies for inclusion in the rate base.-
section 35.13(h) (7) (ii), requires that, the utility state the component balances in Account 107 individually and in total, L
for each ites of construction work in progress for pollution y
control or-fuel conversion facilities.that qualifies for a.
L,,
inclusion in rate base.,
G8U simply ignored that rule and y
g did.not. include the component balances for each item of As shown in jf!
pollution control facilities included in CWIP.
volume 5, Statement'AG, Period II, page 5, the only thing i'
GSU has included in its filing are 13 monthly balances, the total of the 13 monthly and the average of the 13 monthly
,r l
' j
-v -,
,um. e, uw,t rm_ _ n
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- balances', all included on 15 lines in one column headed b '
' Pollution Control Facilities.'
The identical numbers are L
reiterated on page 6 under the added heading ' River Send."
(
l L
1 The workpapers on volume 11 for Statement AG contain no
)
numbers or narrative relating to pollution control CWIP at p
p all.
In its. Opinion No. 110, Louisiana Power & Licht Co., 14 r
L FERC 1 61,075-(1981), the commission evaluated the types of l
nuc2sar facilities which were and were not includable as po13ution control, In so doing, it evaluated each item of l
L the facilities at the nuclear plants of I.ouisiana Power &
Light company which'had been claimed as pollution control, s
~
The Commission found that a number of these items were properly included.as pollution control facilities but that,a numbnr of these items would not qualify for rate base treatment.
Without a detailed statement of the balances for-i each ites of pollution control CWIP claimed, it is impossible to make the type of analysis relied upon by the Commission-in opinion 110.
Additionally, S'ections 35.13 (e) (2) and (3) require that in order to avoid delay in processing rate filings, the utility's originally filed statements, testimony, and other-exhibits shall be its case-in-chief in the event the matter is set for-hearing and that the utility has the burden of proof to demonstrate the justness and reasonableness of its rate and the components which develop its proposed rates.
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GsU's filing certainly does not carry its burden of proof with respect to the $83,206,038 included.in rate base as pollution: control iacilities.
Finally, the Company disregarded its obligations under i
section 35,.13 (h) (25).
Subsection (ii)- of that section j!
requires that if the utility serves in scre than one.
l s
jurisdiction for revenue or state income tax pur' poses, the utility shall state the appropriate tax rates for each wholesale customer group at_ issue and for all other l-customers as.a composite grou;;:.
This paragraph also refers si 1
to skatement BA for the definition of wholesale. customer i
l p supings.
GSU grouped its wholesale customers in Statement b
-i l
BA, 'and in its cost of service Statement BK, into a distribution group and a transmission group.
It did net,-
however, provide the requisite tax. rates for each of these groups nor for all other customers as a composite group.
For' the:ioregoing reasons GSU's: application should be rejected.. In any event, it should not be accepted for 1
filing until-G8U has remedied these deficiencies.- By its p
1 disregard of the Commission's regulations, G80 has made an l
l 3
accurate estimate of the excessiveness of its rates significantly more difficult.
It should not be allowed-to profit by these omissions.
p i
)
i-IV. SUSPERSION AND EXPEDITED REARING ON CONTRACT AND TRANSMISSION PRACTICES Each of the rates tendered by G80 should be suspended for five months.
Each substantially exceeds the legitimate revenue requirements reasonably interable from GsU's j :
+
woefully deficient case-in-chief.
Suspension for the i
longest possible time, in tandem with an expedited hearing on limited' issues,.is also necessary to avert the anticompetitive effects of G80's efforts to tie up Towns i
with unnecessarily long-term contracts and to foreclose their turning to other' suppliers by other means.
A maximum suspension is also required to avert, or at least delay, the
- anticompetitive effects-of the price squeeze that each of G80's tendered rates would-create.
Lost opportunities,
simply cannot be compensated by refunds.
Finally, the commission should suspend both proposed interim and permanent rates in order to effect the ost;ensible objective of its West Texas suspension policy or appear to collaborate in G80's effort to maziaise its unlawful exactions over the period of this litigation.
Each'of these reasons standing alone is enough to warrant suspension for the full five months.
However, the i
Commission should not consider them as if each were complained of in a separate and unrelated lawsuit.
It cannot compartmentalize these reasons and wipe the slate
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e
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clean after consideration of each.
The character and effectM of G80's acts must be looked at as a whole.
Continental (ore Co. v.-Union Carbide & Carbon Coro., 370 U.S. 690 (1962)t United-States-v. Patten, 226 U.S. 525 (1913) p American 3,obacco Co. v. United States,147 F.2d 93,106 (6th Cir...
1944).
G80's Anticompetitive Contractino and Transmission, A.-
Practices Have Denied the Tewr.s the Ovscetunity to obtain cetit:.ve Bulk Power Sucoly For the'last 10 years, G80 has bad a decided cost
' advantage over other bulk power suppliers in Louisiana because it had long-term contracts to purchase gas for
. boiler fuel at about-25#/act when the market price rose to c
$4.00/acf and above.
Exhibit No. 1 (Affidavit of Roy P.
These contracts will and on December 31, s
Robert), 1 7.
1984,.and'aost persons familiar with the cost structure of the electric utility industry in Louisiana recognise that G80 may be at a cost disadvantage in Louisiana after June.1, Exhibit.
1985, for a period perhaps as long as'10 years.
No. 1,18.
It is against the backdrop of these-fundamental economic forces that G8U's bulk power supply contracting and transmission practices vis-a-vis Louisiana Towns must be viewed.
I
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Sometime in 1982 after an earlier wholesale-rate increase.in the order of 40-50%, GSU embarked on a program of attempting to keep the Towns out of the-bulk power -supply aarket for the next ten or even twenty years by getting.them' j
to enter into long-term power supply contracts.
Exhibit No.
2 (Affidavit of Robert G. Labbe),14; Exhibit No. 3 (Affidavit of Dalfares J. Trahan),13i Exhibit No. 4 (Affidavit of Dr. Leroy G. Suire'),1, 3; Exhibit No.1,1 16. -
Several-of the Towns were taking power under G30's wholesale rate for service for deliveries made at h
distribution voltages, i.e.,
13.2 kv.
GSU proposed to give them the benefit of the wholesale transmission-rate'for deliverie's -at transmission voltage, at the.high side of the substations owned'by GSU, ordinarily 69 kV. 'As part of the' deal, GSU would lease or license the. existing substation facilities to the Town at a facilities charge based en a percentage of installed cost.
The sume of the wholesale rate for service at transmission voltage and the facilities charge offered'a slight discount 'to these Towns over the whol,esale rate for service at distribution voltages.
Exhibit No. 4,1 4, 5, 6; Exhibit-No. 3,1 4, 7; Ezhibit No.
2, 1 4; Exhibit No. 1, 1 17.
The smaller Towns, who had fewer expert resources available to evaluate these proposals, nevertheless balked at arrangements for longer than 10 years.
They finally 1 -
_A_____._a_._._.._._____..___________
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7 4.
2, acquiesced in 10 year contracts.
These included Gueydan, Kaplan and Erath.
Other, larger Towns-called in engineering consul'tants to explore their alternatives.
These' included Abbeville and St. Martinvill's.
Exhibit No. 2, 1 9.
The consultants' evaluated alternatives available'to the Towns, and:in particular the alternative of taking their bulk power supply requirements from the Lc.uisiana Energy and Power Authority (LEPA) who would utilise surplus coal fired capacity from one of its members, the City of Lafayette, L$uisiana.
Exhibit No. 2, 1 8.
As one of the antitrust conditions of its license for the River Bend nuclear unit, G80 had agreed to wheel bulk power' supply.to municipal electric utilities.
In 1982, it entered into a very carefully restricted contract with LEPA to permit the use of its transmission system for LEPA's members as of the date of the contract.
.A transmission rate schedule associated-with that contract would permit the
- Towns to receive wheeled. power at voltages down to and including 13.2 kv.
That schedule is on file with the Commission in Docket No. ER83-172.
In. negotiating that contract, G8U refused to have the contract apply to new members of LEPA without G80's'further consent.
Becoming a member requires a vote of the citizens in the town contemplating membership.
After making theit 14 -
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' evaluations of alternative costs of bulk power supply, Abbeville and St. Martinville voted to join LEPA in the fall of 1983'.
LEPA had signed its transmission contract with G50 in November, 1982.
Abbeville sought wheeling froa Gs0 under the LEPA contract.
Although G8U could have given.its consent, it^was not obligated by'the contract to do so.
It took the position that since it was not obligated to provide service at 13.2 kV and since it was not in-its self-interest to do so, it would not do so.
Exhibit No.1,1 15.
As a result, Abbeville, faced by severe financial difficulties, was forced into accepting the slight discount,9m'arred by G8U and a 10 year contract.
It was able to secure the right'to 4
cancel the 10 year contract in four years.
As an added deterrent to substituting service of LEPA over-the subsequent 6 years, however, GSU required Abbeville to pay a substantial sua for early termination.
It pegged that charge-to the cost of the 138 kV facilities GSU needed to install in any event to serve not only Abbeville but to serve its own retail load in the area.
St. Martinville was not faced with immediate financial difficulties.
It also asked GSU to wheel power for it for
- redelivery at 13.2 kv.
Again the answer was that GSU was not, obligated to do so and would not because it was not in
-GSU's self interest.
'GSU's representative implied that even,
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the offer of the higher voltage wheeling service was made only because he had been ordered to do so.-
[
St. Maitinville was able to secure a 10 year contract withtheprivilegeofcancellationafteroneyear.(The minimum ters was actually 41 months; the transaction was, made retroactive to increase the incentive.)
Although St.
j Martinville is proceeding to plan for the construction of
' ts substation, this process has been f'arther delayed by.
i GSU'.s introducing uncertainty over whether it would deliver power to St. Marti,nville's substation facility at 69 or
~
138 kV.
Exhibit No. 2, g 19.
G80's unreasonable refusal make a practical use of the esisting transformer in St.
to Martinville-will only result in the costs of that facility
~
being passed on to GSU's other customers including its other wholesale customers.
At least one of the Louisiana Towns and perhaps others.
have not as yet formulated a policy of substituting LEPA's service for GsU's.
Bowever, those which have made that-choice have been blocked by GSU's unreasonable and discriminatory conduct.
The Commission mus't give due regard to the policies of the anti' trust laws in its administration of the Federal Power Act.
Conway Corp. v. FPC, 426 U.S. 271 (1976); Guir' States Utilities Co. v. FPC, 411 U.S. 747 (1973).
The Commission has recognized this responsibility and, when e-~a
gy w
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f.
l
^
~
'v.
~
1' j,
e necessart, bas'aoved to prevent utilities from engagin'g in
. ant compet t ve. con ract practices.
Louisiana Power a Licht i
ii t
T h, 17 PERC 1 61,230, aff'e and adoptine 17-FERC 1 63,020 l
.l
. (1981) : Florida Power & Licht Co., Opinion 57, 8 FERC 1
1'61,121.(1979)
{
G80's foreclosure of alternative sources of supply by, insisting upon unnecessarily restrictive contract terms -
especia11y'by insisting upon unduly long contract periods and termination penalties that bear no relation to costs -
and by restricting the reasonable availability of transmission service is contrary to the policies of 5 l' of l
t the Sherman Act, egg, Standard 011 Co. v.-United States, 337 U.S.'293 (1949), as well as 5 2,,s,gg, United States v. United Shoe Marketine Corp., 110 F. Supp. 295 (D. Mass 1953),- aff'd per curiam, 347 U.S.-521 (1954).
There also can be no doubt that the interaction between the proposed rate schedules and the underlying contracts is a matter subject to the commission's scrutiny under 5'205 of the Federal Power.
Act.
Cities of Batavia v. FERC, 672 F.2d 64, 77 (D.C. Cir.
1982).
A five months' suspension of this rate increase is necessary to give complete justice to the Louisiana Towns.
A refund after hearing of GSU's excessive rate collections would be an inadequate remedy for those of the Louisiana Towns who would not be GSU's wholesale customers
_ = -_= _.
mmumr.wc:w,m,,cma,m.wacu;. m,,;c, mum,31, h
today, but for_Gsc'a misconduct.
The reason most of them
. desire to contract with another source of bulk power is that i'
they view the other source as enjoying lower semia.than 480.
Under these circumstances, a refund order cannot remedy ~theit harm.
It is questionable whe.ther the Commission would have iJ jurisdiction to set esc's rate after hearing to recover less-than prudently incurred costs plus a reasonable return.
Therefore, unless the Commission finds it can do so and a reviewing court ultimately agrees, refunds could not restoce
-Louisiana Towns to the position they would have held but for-G80's use:of unreasonable and discriminatory contract terms
'and transmission delivery voltage requirements - devices GSU has employed to prevent the Towns from enjoying thope lower costs.
This is because even rates based on G80's prudent costs plus a reasonable return (or even the lowest end of the sone of reasonableness) are probably significantly higher than the price.to the Towns today-and in the future from an alternate source.
The Commission has discretion to determine an appropriate suspension period but_it could be an abuse of discretion not-to employ the only procedure that can do justice under the circumstances of this case.
In a recent case involving review of a suspension order, Judge Skelly Wright cast a little light on what has
- y..
t q:.
been. a surky area of. the law.
In his concurring op$nion in-s Exxon Pipeline Co. v. United States, 725 F.2d 1467,1475
~(D.C.iCir. 1984), Judge Wright stated.it was the ability or-inability to satisfy the party _ aggrieved by the suspension order-though a refund remedy at'the time of final judgment
-that was the raison d'etro for judicial review of such an As shown above it is questionable whether the
. order.
Commission can provide such remedy or with-any assuredness can predict whether a reviewing court will find that in giving such relief at final judgment the Commission was In* essence,
. acting within the scope of its jurisdiction.
Judge Wright is laying out the standard of irreparable bara which has.been one of the standard for preliminary relief See, e.g., vireinia Petroleum Jobbers Ass'n for many years.
- v. F.P.C., 259 F.2d 921 (D.C. Cir.1958).
Two of the Louisiana Towns, Abbeville and St. Martinville, are already LEPA members.
They could move quickly to switch power supply. sources once the Commission-has ruled on the issues of discrimination in contract teras Other Towns could and in transmission delivery voltages.
schedule a vote under state law in October, 1984, permitting them to join LEPA and be in position to switch sources by The discrimination issues are relatively January 1, 1985.
It is also clear that simple compared to the rate issues.
i they do not raise a question whether GSU aust wheel in the f -
. ~... - - -
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(.
first instance, but go only'to the terms and conditions of wheeling - i.e.,
the delivery voltage - a question 4
manifestly within the, Commission's. jurisdiction.
The Commission could order these issues to be heard separately and the hearing could be concluded'relatively quickly even before the five month suspension period is up and' l
1 possibly even before 0ctober.
The result-would be a
.j l
complete remedy.
B. The Prima Pacie Price Scueese G80'8 Rate Increase Would Impose Reinforces The Case For A Five-Bloath Suspension
'i i
The anticompetitive conduct just reviewed-plainly
~
warrants a-five-month suspension of G80's, entire rate increase.
The case for the nazimum suspension period l
becomes even more-powerful, however, when the strong prima facie-evidence of G80's price aqueese is taken into account in context with that conduct.
Not only has'1885 foreclosed.
the Louisiana Towns from lower cost alternative bulk power 1
supplies by its contract practices, but it_now proposes a rate to them far exceeding what its Louisiana large power service retail customers pay.
The evidence is as followse.,
G80's proposed rate increase will render Louisiana Towns unable to compete with GSU's Rate Schedule LPS, Sheet No. 15, effective December 15, 1982, captioned "Large Power naweuemaumsua,wmw:v+mummvvem.wummunawrawswaww.mmamw.wmm. -
Service,* and with GSU's other schedules for retail service.
Towns individually strive to compete with G8U in
{
retail markets for residential, ocamercial and industrial customers..Thisincludes<.hapetitionfornewcustomers-which might-be. served either by one of the Towns or by G8U, competition'to attract and retain industrial customers.whicht have a choice of location or service, and competition to determine whether G8U or a Town will own the' distribution system and sell electricity at retail in a particular area.
G8U's proposed rate increase to Townh would produce substantially higher revenue frca each of them than if they were billed under Rate Schedule LPS, which GSU offers to large Louisiana customers which purchase at retail.
The following table'shows the differences for each..
f i
sILLInGS TO TOWN BILLINGS UNDER-TO TOWN PROPOSED WST WST.
UNDER SCHEDULE (PROPOSED (PROPOSED INCREASE)
INCREASE) 4 SCHEDULE WST TOWN LPS INCREASE' OVER LPS OVER LPS' i
ABBEVILLE
$4,417,248
$5,067,020
$649,772 14.7%
.j ERATH
$728,475
$829,387
$100,912 13.9%
GUEYDAN
$711,890
$786,830
$74,940 10.5%
KAPLAN
$2,215,643
$2,445,886
$230,243 10.4%
RAYNE
$3,058,101
$3,204,693
$146,592 4.8%
ST. MARTINVILLE $2,135,272
$2,596,877
$461,605 21.6%
WELSH
$1,301,432
$1,374,695
$73,263 5.6%.
amura~.xmmemsweere:nowawsummwmr p
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.I-This revenue comparison is the best evidence available to Towns at the suspension stage.
The data the Commission j
. requires Gau to submit with its rate increase application is insufficient-to permit a oceparative rate of return study of l
ti e kind the PERC Staff would perform in the course of a h
l price squeese hearing.
Towns are aware that-the Louisiana Commission has
]
i applied =a policy of requiring substantially lower rates of return in jurisdictional retail rates to residential and commercial customers than in rates.like LPS for service to large industrial customers.
For example, the s'tudy
--i presented -by FERC Staff in Louisiana Power & Licht Co.,
Docket Nos. BR81-457 and EL81-13, showed an earned 40 percent return on LP&L'a schedule to industrial ~. customers compared to-11 percent return on its residential service.
4 Exhibit No. S-1, Schedule 1, p.3, Tr. 2423-24.
Applying the-same policy to G80's regulated retail service indicates j
strongly that Towns would be subjected to an even greater squeeze in competing for those other kinds of retail customers.
Bad the Towns not been restrained from power supply alternatives, an attempted price squeeze by G8U could not hurt them now.
But, with their choice of competitive power a______.__--,.--.-.._..-
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C suppliers foreclosed by Gsc's contract practices, the price squeese-GSU now proposes will cripple them if permitted to take.. ef f ect.
These are-surely 'estraordinary circumstances" oflthesort-theCommissionmusthavecontemplatedwould[
warrant its consideration'of price aqueese evidence in determining an appropriate suspension period.
In any event, Louisiana Towns submit'that their prima facia evidence of price squeese'by'itself justifies a five-month suspension of.this entire rate increase.
Time is of the. essence in price squeese situations.
The harm to competition which is the raison d'etre of the price. squeeze doctrine begins when a squeeze goes into "effect and a captive wholesale customer must increase its retail rates to recover its higher purchased power costs or find some other!way to make up its loss.
The injury to the wholesale customer is irreparable.' once he becomes noncompetitive as a resul,t of his power supplier's squeese, he'will lose business.
This harm cannot be: remedied-by refunds collected perhaps many years-later, after-the wholesale rate has been found unduly discriminatory and remedied to a just and reasonable level.
This time-criticality has been clear from the. Commission's first encounter with price squeeze jurisdiction.
See Conway Corp.
- v. F.P.C., 510 F.2d 1264,1268-69 (D.C. Cir.1975), af f'd, 426 U.S. 271 (1976).
For the Commission to adopt a policy 23 -
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,7 deferring consideration of price squeeze from the suspension e
stage to a la,ter time, after a bearing and decision on what would be a-justi and reasonable but-for-price-squeese rate, ia'to leave an aggrieved wholesale customer without an effectiv.e remedy for a rate that may have violated the undue 4
discrimination prohibition of the Federal Power Act from the day it was allowed to become effective - even if the rate did not appear more:than 1 percent excessive considering solely (and very preliminarily) the matter of rate level.
Regulated electric utilities like G8U are obligated to file rates'that are not unduly discriminatory.
City of Mishawaka v. American Elect'ric Power Co., 465 F. Supp. 1320, 1334 (N.D.-Ind. 1979), aff'd in relevant part, 616 F.2d 976 (7th Cir.1980), cert.- denied, 449 U.S.1096 (1981).
They are not being punished or penalized when required to conform.
their. rates to that standard.
Boroughs of Ellwood City v.
F.E.R.C., 731 F.2d 959 (D.C. Cir. 1984).
The commission abdicates an'important part of its suspension responsibility if it fails to enforce that obligation and to prevent irreparable harm to the wholesale customers intended to be protected by use of that suspension power.
The vulnerability of wholesale customers to anticompetitive price squeezes is too serious a concern and the commission's responsibility to protect them from such situations too clear to permit such a result.
The Commission should find a 24 -
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remedy for price squeeze except in " extraordinary circumstances
- of possible harm to the filing utility, Ellwood-City, 731.F.2d.at.979, rather than declining,to afford timely relief unless'a wholesale customer can somehow i
-demonstrate. extraordinary circumstances supporting h s t
relief.
The remedy of suspension is within-the Commission's
. jurisdiction and is the only e!ffective interia remedy for price _squeese.
C. GSU's Proposed Rate Increase Would Produce Over-one= Third Excess Revenues -Even G5U's " Alternate Interim Rates" would be substantially Excessive.
Louisiana Towns' preliminary analysis of this rate filing indicates that GSU-has overstated its claimed revenue requirements by more than one third.
Even G8U's so-called
" alternate-interia rates," designed to evade West Texas' policy justification and obtain a minimum suspension period-withou't any countervailing benefit to whalosale customers or to the Commission's hearing docket (Sea D.,
infra),
overstate G8U's apparent revenue needs by more than 20
~
percent.
Commission policy. requires a five months' suspension of the entire increase, even without taking into account the very serious matters already described.
-The following table shows necessary adjustments and their amount:
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PORTION-0F PROPOSED OVERSTATED INCREASE OVERSTATED MATTER ANQUNT REPRBSENTED a
1)' Improper inclusion of Nelson 5
$444,000 1.5%
equipment and certain land
?
in rate base
- 2) Unwarranted claim of 17.5%
$2,133,0'00 7.44-rate of return equity instead of 15.594
- 3) Failure'to use actual capital
$836,000 2.9%
structure as per Texas Commission's order j
i
- 4) Improper amortisation of
$1,733,000 6.04 River Bend No. 2 over a 5 year rather than 15 year i
period
~
- 5) Failure to utilise'
$1,706,000 5.9%
appropriate 1L sonth average.
i t
CP demand allocation factors
- 6) Failure to properly allocate
$794,000
.2.74
~ investments between costs i
- arising irom' demand and those arising from customer.
-ed 4
- 7) Improper inclusion of general
$141,000
.5%
advertising, sales and customer.information expenses y
- 8) Improper inclusion of'
.$477,000 1.6%
L amintenance as a demand-L related expense b
9): Improper. treatment of
$484,000 1.7%
L.
depreciation ~ expense
- 10) Improper.inclusio'n of
$1,495,000 5.2%
pollution control CWIP in rate' base _ _ _..
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y PORTION OF PROPOSED OVERSTATED
' INCREASE OV m TATED-NATTER AMOUNT REPRESENTED
- 11) Improper. inclusion of
$287,000 1.04
oash working capital in-rate base T
TOTAL $10,610,000 35.6%
The excess revenues of $10,610,000 for period II (calendar 1984) are 35.6% of the entire rate-increase.
Reducing the increase to the level of G80's " alternate
' interim rates' still leave's excess revenues of $4,699,607 or over 20% of the $23,107,000 sought..
The details _of the adjustments follow.
Nelson Unit 5 Bauioment and Certain Land Should Be 1).
Removed From the Rate Base-As recently as July 10, 1984, the Texas commission ordered-GSU to eliminate Nelson Unit 5 turbo generator units m
from its rate base'because G8U did not " demonstrate that the equipment will ever be in service, much.less within 10 years.'
Without'any additional explanation to show-why this commission should reach a different result, Gsu has overstated its rate base asset accounts substantially.
The revenue effect of removing Nelson Unit S equipment
($20,072,955) and land and land rights ($4,656,290) from plant held for future use is to reduce the revenue required from. wholesale customers by $444,000 or 1.5%.
' l ba -. -_.,
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.-,1 2)- The Proper' Rate of Return on Equity is 15.65%
Rather Than 17.5%
_ Discounted cash flow (DCF) analysis,. the methodology favored by'the Cocaission, produces an appropriate return on common equity of 15.59%.
G80's reasons for using a-cost almost'2% higber and substantially higher than the Louisiana and Texas Commissions have allowed for its retail service should not be credited.- This reduces G80's revenue requirement by $2,133,000 or 7.44.
3)
The Actual Capital Structure Inc1'uded in the Texas Commission's order should Be Used Bore g
After a reasonable time for hearing, the Texas Commission determined that use of_G80's actual capital structure rather than some fictitious, hypothetical structure was proper.
Without' advancing any additional reasons for use of a hypothetical structure tilted toward high cost equity capital, G8U demands the use_of a fictitious capital structure in its Period II statement.
Use of the actual capital structure included in the Texas Commission's order 1s proper and reduces-G80's proposed revenue increase by $836,000 or 2.9%.
4)
River Bend No. 2 Should be Amortised Over a Period of 15 Rather Than 5 Years River Be'nd No. 2 was GsU's mistake.
I't will never n'_9L' t N A N M h w Pa at th haA d sesse a-
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It is an expensive hole in the
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generate any power.
It-will. never be of any service to the 1,ouisiana.
ground.
wholesale purchasers or adybody else, esoept as a training It is understandable that GSD program for Gsc'.s management.
wants to forget about it as quickly as possible.
- However, 12 it is to be charged to the ratepayers at all, the period of amortisation should, be 15 years rather than 5 years.,, The Texas commission used 15 yeares.
This reduces the revenue requirement by $1,733,000 or 6.0%.
m 19e Month Averase CP M end Allocation Factors 5) 3bould be Usee GSD employed the average and excess demand method to develop the production demand' allocators utilised in its cost of service study for period II.
It used the data for the 2our contiguous summer months of June through September to determine the a,verage system coincident peak demand l
It inc1'uded (direct testimony, D. R. Berkman, Page DN5-17).
an assignment for stema products (statement BB, Period II, i
The average of the twelv.- monthly coincident page,1).
peaks, with an allowance for steas. :alculated as,the product of the average capacity assignable to steam multiplied by the ratio of steam average CP to average capacity allocated to the pool can be calculated.
(Wecessary data is found in Volume 12, Tab C, Period II, WP-84 allocation factor DP, Page 2.)
Comparing the average and excess demand allocator
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assigned by Gs0 to wholesale customers, 0.084815, with the result of the 12 months average calculation, 0.082597, shows a significant reduction in the demand assignaient to such customers under the 12 months average method.
The use of
, that method, traditionally favored by the FERC Staff, reducestherevenuerequirementfromwholesadecustomers'by
$1,706,000 or 5.9%.
6)
Reall M etion of Inves W ats Between Costs Arisine from Demand and costs Artaine From Customer Weed should Be Made G80's application separates investment assigned to distribution lines between investment assigned to ' Primary,
-~
Lines' and " Secondary Lines,' respectively.
The ' Primary Line" investment is allocated. wholly on demand at the distribution level; the ' Secondary Line" investment is oy directly assigned to retail service.
In its treatment of
'Becondary Line" investment, GBU apparently acknowledges that it is proper not to assign such facilities to wholesale customers, since it made no such assignment.
G80's allocation of " Primary Line" investment on demand is improper an'd results in the assignment of excess investment to the wholesale customers.
A proper allocation of ' Primary Line' investment would, first, classify such investment between costs arising.from a demand need and costs arising from a customer need; and, then, allocate the demand-caused q 1
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level and the customer-caused portion on customers at the distribution level.
)
This reclassification is necessary because use of the type of facilities assigned as
- Primary Lines" inven'taent is -
l not wholly demand-related as GSU's classification implies.
- P'timary Lines" includes investment from Account 364 -
j Poles, Towers & Fistures; 365 - Overhead Conductors and r
Devices; 366 - Underground Conduit; 367 - Underground
,l and a portion of Account 360 - Land and Land Conduit The investment in these facilities is not' based on Rights.
i a direct relationship to the demands of the customers se'eved l
q by these facilities.
This is evident when one considers the esemple of facilities necessary to provide electric service to a The typicai rural area adjacent to an urban community.
ru'ral area would be served by lines with an average pole Assuming this area is developed spacing of 500-600 feet.
and subdivided into 1,ots for residential construction, with a lot sina of 150 feet frontage, some additional poles will be added to provide electric service for the new The investment in these additional facilities is customers.-
not entirely demand-ctused.
The investment in such facilities is a function of bot the number of customers served and the demands of the 4
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.l e.steners served.
It.follows that a portion of the investment in these Accounts aust be classified as customer-related.
The Electric Utility Cost Allocation Manual, a publication of the National Association of Regulatory commissioners, recognises this and requires the following:
The customer ocuponent of distribution facilities is that portion which varies with the naaber of customers.
Recognising that poles, conductors, E
transformers, sortices and meters are required to serve
. customers'regardless of their. Load requirements, the customer component is the theoretical miniaea distribution system required to serve at nominal load conditions.
Poles, wires, etc. would be a ired even 12 the customer had only a 25-watt light GSU advances no reasons justifying a departure face the rule.'
' Primary Lines" investment and expenses should be reclassified b'etween demand and'oustomer using a separation analysis.
The appropriate analysis assigns approximately 45% of the " Primary Lines" investment as demand-related and' l
55% as customer-related.- This reclassification of " Primary Lines" into a demand and a ;ustomer ocuponent re& aces the wholesale revenue requirement by $794,000'or 2.7%.
I 7)
General Advertisine, Sales and Customer Information Exoenses should Be Escluded Wholesale for resale customers derive no benefits,from GSU's general advertising, sales and customer information activities.
They perform the same functions within their respective organisations.
To assign these expenses to the
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wholesale customers would not only require them to pay twice for the performance of these functions but also to subsidise 9
the marketing program of GSU, their ocapetitor.
Deletion of these expenses reduces the requested revenue i,ncrease by $141,000 or.St.
8)
Maintenance Expenses free Steam Power Generation Are Not Properly Classified as Demand-Related Exoenses GSU has improperly classified steaa power generation expenses assigned as " Maintenance supervision and
. Engineering" (Account 510) and " Maintenance of Electric Plant" (Account 513) as demand-related expenses.
The FERC's
~
staff almost invariably classifies these accounts as energy-related.
It can hardly.be disputed that maintenance is a function of hours of use which is energy-rela vd.
- The, reveaue effect of properly eeclassifying accounts 510 and 513 as energy-related expenses is a reduction of $477,000 or 1.64.
9)
Depreciation Excense should Be Treated As In G80's Present Rates and In Rates Assroved by the Texas commission G8U's treatment of depreciation expense should be rejected in favor of the method adopted recently by the Texas' Commission.
The Texas Commission had approximately half a year to consider the matter.
GSU advances no reasons
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to ignore its conclusions.
The " agreement" referred to by G8U in its filing was an agreement solely to facilitate settlement of an earlier rate case and is act agreement on-the correctness of the method, despite representations of l
GBU to the contrary.
This redhoes the revenue requ'irement by $484,000 or 1.7%.
- 10) Pollution control CWIP Bas Not Been Justified As mentioned earlier, in esplaining why esc's application should be rejected, Section 35.13(h) (7) (ii) of
~
the Commission's regulations, Statement AG-Specified Plant
~
Accounts (other than plant in, service) and Deferred Debits, requires that the ut'ility state the component balances in Account 107 individually and in total, for s_ech_Ltaa of construction work in progress for pollution control or fuel conversion facilities that i.e to qualify for inclusion in rate base.
Without advancing any reason.for its blatant disregard'of the Commission's Rules, GBU simply coitted the component balances for each item of pollution control facilities included in CWIP.
As shown in volume 5, statemant AG, ' Period II, Page 5, the only thing G80,gid, j
include in its filing are 13 monthly balances, the total of the 13 monthly balances and their average, all on 15 lines in ont column headed ", Pollution Control Pacilities," and the identical numbers on page 6, which add the heading " River
- 34
.. ib Send.'
Even the workpapers (in Volume 11) for Statement AG contain no numbers or narrative relating to pollution control CWIP.
Opinion No. 110, Louisiana Power & Licht Co.,
14 FERC 1 61,075 (1981), evaluated the types of nuclear
, facilities which are and are not includable as pollution.
control facilities.
A number of items claimed as pollution,
I control facilities in that case were found not properly included as pollution control facilities which would qualify for rate base treatment.
Without a detailed statement of the balances for each iten of pollution control CWIP claimed by G8U, it is impossible to determine how much of the claimed rate base would qualify under Opinion No. 110's standard.
$1,495,000 for pollution control CWIP ~ an amount equalling 5.2% of the total revenues requested by G8U -- should therefore be deleted.
- 11) 080 should Rave Utilised its Lead / Lac Study in Cosoutine Cash Workino Capital In opinion No. 19-A, Carolina Power & Licht Company, 6 FERC 1 61,154 (1979), the Commission held that the 45-day formulary approach m be used if a fully developed lead / lag study is unavailable.
Louisiana Towns will submit a fully developed lead / lag study.
In the majority of cases, as presently recognised in the commission's pending notice of rulemaking " Calculation of Cash working capital for Electric Utilities," Docket No. RM84-9-000, March 9, 1984, a lead / lag I
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(1982), stated that it would suspend increases for only one i
day _when it appears that they are not 'substantially L
excessive."
More speciffeally, the Commission docilated that i
l it would suspend rates for no more than one day so long as j
the increase did*not escoed by more than ten percent an l
L amount that the commission found likely to be substantially l
l cost-justified.
The rationale offered to square the policy I
with that of the Act was that.it would create "a strong r
incentive.,.. for the filing of lower, cost-justified ratew.' & at 61,375.
That is, utilities would be induced to file modestly unlawfu'l rates if they were assured that j,.
such rates would be suspended for no more than a day.
Conversely, utilities would be deterred from filing outrageously excessive rates by the certainty of a five-month suspension.
The scheme of consumer, protection introduced by M l-Texas rested explicitly on a corollary policy opposing the filing of interia rate increases within the pcriod during which a substantially excessive rate is suspenGod. & at 61,376.
In other.words, a utility that files an outrageously excessive rate should not, when caught out, be able to file to collect a rate more closely approximating a lawful one while the outrageous-one is under suspension.
otherwise, of course, utilities would not be induced to file more cost-justified rates but a4 rely to bifurcate their i
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fill.ngs into cost-justified and nonjustifiable portions and request that the former be allowed to be vollected while the 1atter were under suspension.
Although the commissite has stated that it distavers such stratagens, & at 613.YJ4: Looisiana Power & Licht'co.,
16 FEac 1 61,265, at 61,577 (1981), 480 has 2iled just auch a bifurcated increase.
If the rationale for the West Texas rule is to withstand scrutiny, the commission must enforce its corollary policy. against " alternate interin" increases -
including the one proposed by GSU bere.
If it does not, the commission risks the appearance of collaborating in a manipulation of the statutory' scheme that nazimises, rather
~
y than minimises price-gouging by utilities.
B. Towns Reserve The Rieht To Raise Additional Issues Respectine GBU's Tendered Rates In view cf the shortness of time available to fashion a response to the 12 volume filing, and the deficiencies of the ' filing itself, Towns anticipate that further study of G8U's application and discovery will disclose other defects in G8U's case.
Therefore, Towns must reserve the right to raise additional issues as they discover them.
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a V.
INITIATION OF PRICE SQUEEEE PROCEDURES As stated hereinabove, Towns' preliminary comparison of the rates tendered herein and esU's retail rates shows a patent price squeese.
Accordingly, Towns request that the Cerenission order a price squeese inquiry.
Recognising that de Commission's poicy is t'o structure any such inquiry in accordance with Arkansas Power & Lisht Co., 8 FERC.1 61,' 31 i
(1979), Towns expressly reserve the right to petition the Presiding Administrative Law Judge to schedule a hearing on price squeeze prior to the cost of service phase.
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CON OUSION l.
WHEREFORE, for the foregoing reasons, Towns, respect-fully protest the subject filing, move to intervene, move that the application be rejected or that its filing be deferred until G8U has remedied its deficiencies, request that the proposed rates be suspended for five months, that.
an expedited hearing concerning G80's contract practices be held, that price squeeze procedures be initiated and that they be afforded such other relief as may be appropriate.
Respectfully submitted, F
WUU
/
Wallace E. Brand 2.'
David A. Iesexie Sean T. Beeny
()
BRAND & LECKIE 1901 L street, N.W Suite 480 Washington, D.C.
20036 (202) 347-7002 Attorneys for Towns of Abbeville, Erath, Gueydan, Raplan, Rayne, St.
Martinville and Welsh, Louisiana 9
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CEkTIFICATE OF SERVICE I hereby certify that'I have caused the foregoing document to be served upon each person listed below by depositing a copy e:
he same in the United States mail, j
first class, postage prepaid.
Mr. William J. Jefferson Vice President Rates & Regulatory Affairs Gulf States Utilities Co.
i P.O. Box'2951 Beaumont, Texas 77704 George A. Avery, Esquire Mald, Markrader & Ross 1300 Nineteenth Street, N.W.
Washington, D.C.
20036 Dated at Washington, D.C., this 2@ day
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of August, 1984.
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David A. Leckie BRAND & 1.ECKIE 1901 1. Street, N.W Suite 480 Washington, D.C.
20036 (202) 347.-7002 Attorney for Towns of Abbeville, Erath, Guaydan, Kaplan, Rayne, St.
Martinville and Welsh, Louisiana S
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WG Hao,a arrte 0c March 12, 1985 BY HAND John D. Whitler, Esquire Attorney Antitrust Division U.S. Department of Justice 414 - lith Street, N. W.
Washington, D. C.
20510
Dear Mr. Whittler:
During the hearings this week at the Federal Energy Regulatory Commission in Gulf States Utilities Company, FERC Docket No. ER84-568-000, settlement discussions con-tinued hatween principal representatives of Gulf States and of the four Louisiana towns of Erath, Kaplan, Gueydan and Abbeville.
Yesterday, March 11, these discussions produced a full settlement of all contract disputes between Gulf States and these four towns.
In accordance with standard procedure at the FERC, an on-the-record report of this settlement was requested by the Presiding Administrative Law Judge.
Enclosed herewith is the transcript of the aftornoon hearing session on harch 11 at which that settlement report was made.
We call your attention particularly to page 303, line 24, through page 305, line 2, in w'aich it was reported to the FERC that a specific stipulation of the settlement is that the town of Abbeville has settled its differeness with Gulf States and has no need to have any hold put on the operating license in connection with the antitrust
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AFTERNDON SESSION (2:35 p.m.)
E 2
PRESIDING JUDGE:
On the record.
3 Mr. Brand, do you hav,e a preliminary statement to make?
4 MR. BRAND:
Yes, your Honor, I would like the 5,
record to show that Mayor suire, Mayor Trahan and Mayor 6
Saltzman were here this morning and Mayor Trahan and Mayor 7
Saltzman are still here but will have to leave shortly to 8
catch a plane.
We have the goed fortune to announce a 9
complete settlement of this hearing.
May the record also 10 show that Mr. Durwood conque is also here and present, and 11, in accordance with the request of the presiding examiner 9
12 that he be he,re to take cross-examination.
, 13 PRESIDING
- JUDGE:
Thank you very much.
I.
14 appreciate the attendance, gentlemen.
Mr. Avery?
15 MR. AVERY:
Yes, your Honer, we have been able 16 to work out a complete settlement as Mr. Brand has "fo v a 5 17 indicated.
The settlem$nt with the three seeneoire cf 18 Kaplan, Gueydan and Erath is slightly different than the 19 settlement with Abbeville.
I assume you would lika a..
20 brief sununary.
21 PRESIDING JUDGE:
That would be helpful.
32 MR.'AVERY:
We'll go through the terms with the 23 three towns first so that the mayors if they need to leave 24 in order to catch their plane.
25 PRESIDING' JUDGE:
They should feel free to leave m 2 %m-nhep t m o t s: * - a
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-22396.'0 292 K5W 1
at any time.
Thank you.
2 MR. REUscEt Your Honor, speaking for the 3
commission staff, I believe it's the consnission's policy 4
to try and encourage settlement and Staff always tries to 5
work with all parties involved to achieve a settlement 6
wherever possible, and it's really made settlement a los 7
' more possible and easier to have the principale here and 3
very often they are not able to come.
So when principals V
are able to come to a settlement conference and are able 10 to participate directly and especially when they come from 11 small communities with rather limited resources, it makes 12 the job *of running the FERc a little easier.
So I 13
- certainly, speaking for staff, appreciate the. imayors' 14 coming also.
15 7 RESIDING JUDGE:
I appreciate those comments, 16 Mr. Rausch.
They certainly are pertinent cosasants because 17 right now I'm going to hear settlement results as-to what 18 transpired.
Thank you, te v is 19 MR. AVERY:
The settlement with the esenee&e..ef 20 Kaplan, Gueydan and Erath has two major elements to it.
21 One is an economic settlement.
We've had an agreement on 22 a ne's rate offor dich will embody entering into a new 23 contract with a shorter term than the existing contract.
24 And the other major elements, there are certain 25 stipulations that accompany the economic settlement.
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I will first describe the economic settlement.
i 2
The existing contract under which they have been
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3 taking power under the WST rate will be cancelled.
A new 4
contract will be entered into which will have a term of 5
four years with one year cancellation notice at the
,6, anniversary date after four years by either party.
The 7
rate will be the WST rate for a portion of the 8
requirements of these towns.
However, another portion of 9
the requirements of the towns will be served by having 10 them buy certain atated percentages of the purchased power' 11 which Gulf states itself will be purchasing off system.
12 The purchased power that they will. have a right to 13 participate in will exclude a portion of the Nel' son Six 14 buy-back, exclude cogeneration power and exclude certain L
15 hydropower that Gulf states purchases.
Other than that, 16 it includes all outside sources of purchase power 17 including e nergency power.
l 18 Mr. Johnson and Mr. Jefferson reminded me it also 19 excludes the River Band buy-back.
We have a joint
~ 20 ownership for River Bend and there's a buy-back and that's 21 also excluded.
i l
22 The percentages of the monthly kilowat hours which j
23 will be served by the.purcfhasedpower rather than by the 24 WST rate are the following year by year:
10 percent in 25 1985, 25 percent in 1986, 30 percent in 1987, 35 percent 4
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in 1988, 40 percent in 1989.
2 in order to deliver the purchasedpower component of 3
the power with which the three towns will serve their load, we will' charge in addition to the cost' of the purchasej 4
5 power a transmission rate and that will be -- the 6
transmission rate will be our standard transmission j
i 7
service rate and losses.
Of course this entire y
8 arrangement has to be subject to regulatory approval and I
9 if in looking at that regulatory approval, if the concept 10 is challenged, Gulf states has the right to cancel the 11 purchase power part of the agreement.
If we ut2cose 12 because of this regulatory out to cancel the purchased 13 power aspect of the agreement, the gustomer has the right 14 to cancel the entire wholesale contract.
j 15 I guess Mr. Johnson pointed out there's a little 16 ambiguity.
hhis option to opt out doesn't sisqply apply to the regulatory commissions]f any governmental body, I
17 L
18 whether it would be -- a judge in a Federal Dietrict Court, I
l 19 if it's challenged at all by any legal authority, then-20 this regulatory out would apply.
If the cost of the 21 purchasedpower, inc10 ding losses the transmission 22 service charge which I' mentioned earlier, exceeds the l
23 wholesale rate, the WST rate, for any consecutive 12-month l-24 period, the customer has the right to go to the wholesale l.
l 25 ra t. ; hm all of its needs.
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Now the arrangement forthispurchase)poweralso 2
contemplates that Gulf states will not be the agent of the 3
three towns in purchasing the power for wholesale 4
customers.
This arrangement that we've entered into with 5
tho' three towns of Erath, Gueydan and Kaplan is similar to 6
an arrangement which we've also entered into with certain 7
others of our wholesale customers and basically what we 8
did was to offer to make this' arrangement available to 9
these towns and with some negotiation with regard to 4
10 certain aspects of it.
It was that offer of that power 11 ' which formed the economic basis for this.
12
_ Basically the purchasedpower'comes in at a lower cost 13 than'the WST rate, so in,effect it gives the towns savings 14 over what they were looking at if they had had to serve 15 all their loa 0 under the,WST rate.
And I think it's that 16 cost saving mat we were able to make available to them in 17 accordance with a transaction that we discussed with other 18 customers thst. made it possible for them to see that it 19 was to their economic advantage to enter into the l
20 settlement.
That's the first major element.
21 The second major element involves certain accompanying
.The sett ement agreement l
22, understandings that go with it.
23 will provide that the three towns of Kaplan, Gueydan and 24 Erath have no Stievances against Gulf States as to the 25 prior rates and contracts. ' And of course that they will t.
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=22396.0' 296 K5W-1 support the settlement, and I think the two mayors are 2
prepared to state that or Mr. Brand on behalf of them.
3 And that involves not only the settlement on the contract 4
issues but also the cost of service settlement.
We had 5
already agreed on that.
6 MR. BRAND:
Yes.
Your Honor,' I can affirm that 7
th's towns of Raplan, Gueydan and suire, -without condition --
8
'e'acuse me,- Erath, without reservation, support both the 9
cost of service settlement and this settlement.
I would 10 like to add some remarks after Mr. Avery is through.
11' PRESIDING JUDGE:
All right.
12 MR. AVERY:
As I said, the settlement agreen 3nt 13 will provide not only that they'supposit it but'they have.
14 no grievances against Gulf states as to the prior rates 15 and contracts.
16 MR. BRAND:
We affirm that that's the case, your 17 Bonor.
18 MR. AVERY:
We already mentioned there will be a 19-new contract to replace 6e preceding contract.
The 10 proceding contract has had a 10-year -term, this contract
, 21 has a four-year term.
The effective date --
l 22 (Discussion off the record.)
$3 PRESIDING JUDGE:
Back on the record.
24 MR. AVERY:
The four-year term will start to run 25 when the contract has been prepared and submitted for O
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1 filing here, and we will certainly make every effort we L
2 can to get that done as quickly as possible.
The rates 3
will be of course effective upon the new rate that I've l
described involving the purchase $ power, would of course be 4
5 effective upon the date When FERC allows it to be j
6 effective but the four-year term will become effective 7
when we file the contract at FERC.
8 PRESIDING JUDGE:
While you were discussing his 9
with the witnesses and the attorneys, I asked Mr. Brand i
10-whether or not the penalty provision would apply to these 11 contracts.
He informed me it would not only insofar as 12 Abbeville is concerned.
13 MR. AVEkY:
That's correct.
The penalty 14 provision is only in the Abbeville contract., I will 15 discuss that when I get to a summary of the Abbeville 16 settlement.
17 The, final element covered in the settlement document 18 is that it will state that Gulf states'present intent is 19 as to River Bend 1, as to the reflection of River Band,,1-20 in rates.
The towns were interested in whether that would-21 be phased in or whether it would be put in rates all in 22 one rate case, and we discussed that with them and they 23 wanted to know what wouldt happen in' that regard.
We've 24 told them that it is our prosent intention to have scene 25 form of phase-in for River Bend 1.
And however, there's o
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been no final decision as to that
+.a to whether or not
~
2 there would be a phase-in and if so, what form it would 3
take.
That would take an action by the board of directors, 4
was not possible to make a firm connaitment in that 5
regard th'is afternoon but we informed them that that's the
~
6-Company's intention to have a phase-in of River Band into 7
' the rate base in whatever rate case involves getting that
~
8 into the rate base.
9 PRESIDING JUDGE:
If possible.
10 MR. AVERY:
Right.
The only thing we're talking 11 about here obviously is our intention with regard to how 12 we would file, and of course it would be the Comunission's 13 ultimate decision to accept whatever form of phase-in we 14' proposed or do whateve'r it chose.
There was no attempt in 15 this settlement to try to control how the corsaission would 16 decide that issue.
Their interest was in how we would 17 file an'd we said it is our intention to file that in some 18 form of phase-in but we were unable to give them a firm 19 commitment in that regard because a. decision of that 20 magnitude would require a board of director action and 21 that has not been taken and it wasn't possible for that 22 reason to'do that today.
23-should I stop at this point, Mr. Brand?
If you want 24 to coassent on those three towns and if the mayors want to 26 leave, they could do so having hear?, everything and then l
n arx.=nmwn;av a:m.nma w.w.,,awg 299 22396.0
.,K5W I'll' come back.on the Abbeville thing afterwards.
1 t
MR. BRAND:
In my view, Mr. Avery's sunmary was 2
of
.a very accurate outline of the proposed settlement.
3 course a contract has to be drawn up which Would encompass 4
the principles that were outlined by Mr. Avery and we 5
recognize that and hope to do that shortly.
6 7
I would say this:
With respect to the dollars that were involved, at the very outset two sheets of paper were S
One sheet had the conditions 9
circulated to the towns.
10 that Mr. Avery just stated, the other sheet was for each town the numbers that were estimated by the company in 11 connection with the proposal.
In"other words, to fairly 12 Wo forth the company' a best estimate of the proposal.
13 set 14 believe they do.
We inquired as to how long a phase-in was incorporated 15 in these numbers on which the towns relied and were 16 it was a four-year phars-in and we'did in 17 advised that fact seek guarantees and the company stated they were not 18 available for the same reason Mr. Avery mentioned just -.
19 20 before.
Bowever, we think that it's important to note this on 21 the record because ve think that at some future time when 22 this point is argued in some succeeding rate case, it 23 should be noted that the towns accepted this offer based 24 Aside on the numbers predicated on a four-year p'taae-in.
25 I-i
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1 from that, I would like to offer the sheets for these three towns so that,he record is complete.
t 2
Your Honor, on that I would like at 3-MR. AVERY:
4 least a moment to consult on that.
We conMdered those 5
settlement documents confidential, and frankly, up to this 6
moment I hadn't even thought about the possibility of 7
he.ving those documents made public documents.
I would S
like at least a chance to consult with my eliant.
9 PRESIDING JUDGE:
Let me interjaet here.
10 Mr. Brand, do you consider that absolutely necessary under 11 the circumstances?
i 12 MR. BRAND:
It's not absolutely necessary, your l
13 Honor, but I think it would be very helpful.
2 tis is a 14 settlement that was no't rejected-but was accepted.
This
. 15 was the basis for the settlement that's being offered 16 today.
17 MR. AVERY:
We may have no problem if we could 18 have a minute or two here.
19 (Discussion off the record. )
20-PRESIDING JUDGE:
Back on the record.
21 MR. AVERY:
I've got a suggestion to make in 22
. this regard.
Our problem with regard to having these i
, offered now in the manner in which Mr. Brand has suggested 23 is that we really haven't had a chance to think through 24 25 the words thac. we would think to be necessary to accompany e
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1 the submission of these numbers.
Basically there's a los j
2 of estimates on here and projections.
We're not trying to 4
3 back off and we've done the best job we can with them but if they,are going to,be in the record and time is :N-k 4
5 to pass and you don't have it clearly stated exactly what l-6 these are, then there's a lot of room for misunderstanding 7
in the future as to whether these were firm fixed numbers 8
or whether they were estimates.
9 We have no problem with Mr. Brand's basic suggestion 10 of having a part of the settlement submission here.
Our 11-thought is we won't submit them this afterno'on.
We will 12 agree now that they will be part. of the settlement papers 13 submitted but. that will give us an opportunity to, you 14 know, have some words accompanying them that will give us 15 comfort that people in the future will understand what 16 they are.
17 MR. BRAND:
Th$t's perfectly agreeable.
I 18 thought I took care of that problem.by indicating they 19 were good faith efforts of the company, but the alternate 20 procedure suggested by Mr. Avery is perfectly agreeable.
21 PRESIDING JUDGE:
Thank you.
MR.'AVERY:
Is that everything on the three 22 23 t' owns ?
s 24 MR. BRAND:
Yes.
Now we go to Abbeville.
25 MR. REUSCH:
Your Honor, if I could have a word --
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M 22396.0 302 KSN 1
MR. AVERY:
The mayors want to leave --
2 MR. REUSCH:
Your Honor, I wanted to say that 3
Staff is hearing this settlement for the first time as 4, your Honor is at the present moment.
But we noted earlier
,5 in the week that - or late last week that advisory Staff.
6 notified us that the three power supply contracts 7-presently being submitted under had never been filed and 8
we still want to see those contracts filed, even though 9
the settlement doesn't cover those.
10 PRESIDING JUDGE:
As a-matter of fact, I had a 11 note to that effect.
I was going to inquire about that.
12 MR. AVERY:
It is our. full intention to file 13 those and'in fact Mr. Koffsky is back at the, office 14 working on it now.
15 MR. SRAND:
There's no objection to that, your 16 Honor.
We have no objection.
17 PRESIDING JUDGE:
In effect they;will not be 18 part of any matters that would be certified to the 19 Commission with respect to this case.
20 MR. REUSCB:
I believe that's correct, your 21 Honor.
22 PRESIDING JUDGE:
You may be excused. - Thank you.
23 for your attendance, each and every one of you.
24 MR. BRAND:
I'm authorised to state on behalf of 25 these gentlemen and on behalf of Dr. Suire that this -
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although of course we want to see a complete and detailed 2
settlement document,'but the outline as presented here 3
today is completely acceptable including all the other 4
concepts mentioned.
I believe I'm authorised by Dr. suire 5
to make the'same representation.
6 MR. AVERY:
That brings us to Abbeville, your 7
Honor.
The settlement with regard to Abbeville is a much
~
8 more simple one to describe.
Abbeville had a contract 9
under which it's being served at the WST rate Wich had a M $E Ei date of January 1, 1987<
10,
=,
11 (Discussion off the record.)
12 M'R. AVERY:
It's a 10-year t:entract but it had -
13 they had thTa right to cancel as of January i,.1987, upon l4 six months' notice - 12 months' notice.
Sorry, I'm 15 winging it here.
The deal we reached is that they will l
16 now have the right to cancel as of March 1, 1986, with six
{
i 17 months' notice.
Now, you'll recall that there was a 18 discussion about the cancellation charge on the line.
19 They have agreed that if they cancel as of March 1,1986, i
20 they will pay 100 percent of the cancellation - 100 21 percent of the cost of the line as the dance 11ation charge.
22 Now there were a couple of other stipulations that 23 will be reflected in the settlement document that 24 accompany that.
They have agreed that the settlement in 25 this case resolves the issues between Gulf States and the l
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1-City rof' Abbeville to the enent that in connection with 2
our operating license at the Nuclear Regulatory Commission 3:
for River Bend 1, which as you may know involves an antitrust review,h the operating license stage, thoce's 4
5 also an antitrust review required, and they will agree 6
that as a result of this settlement they will take the
' position that they have settled their differences 'vith us 7
8 and they have no need to have any hold put on the 9
antitrust license.
I mean the-operating license for 10 antitrust review, basically.
In other words,.our 11 differences are over and they wouldn't be saying to the 12 NRC that-anything'needs to be done in connection with the
}3 review associated with the operating licasse. Obviou' sly-,I
.Q don't know 4....n we'll work out the language on this4 14 15~
Mr. Brand very carefully said and we agreed. with him that 16 they would ' comply with any information requests they get
. 17 from Justice or NRC and of course we would want them to do 18 that.
We're not seeking to restrain them in any way in 19 cooperating with the Justice Department and the NRC to-the 20 extent they seek that cooperation.
21 MR. BRAND:
Your Honor, yes, it would be very.
22
.unwice not to cooperate with the-Justice Department.
I 2b once ahvised a client'not to do that and he was promptly 24 summoned into a very expensive grand jury.
25 MR. AVERY:
Mr. Brand was careful to make sure s
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e 1-that-we're not seeking to constrain them in that regard 2
and we're not of cour'e.
s
- 3 The other stipulation that will be reflected in the "t
document addresses the situation which would arise if 5-Abbeville does choos,e to cancel their contract-and leave 6
the G,ulf States system.
If they do that, of course the 7-possibility ex,ists that at some future case ti.cy might :
8 want to return to the Gulf-states system and'we all have a
~
4 9
go-ahead between us that Gulf States would have no -legal 10 obligation in those circumstances to take them back as a 11' customer.
3x would be up to Gulf. States to make that determinatioE, vej hing whatever it chooses to weigh and 12 g
13 we unted that clear in the settlement document and 14
- Mr. Brand agree $ with us that 'that's the law and that the 15 document could fairly reflect that.
16
'MR. BRAND:
I think that's correct, your Honor.
17 There is one exception that this ca.se doesn't' fit into.
18 The only case !I know that indicates that a ecapany has the 19 obligation to sell both power to a-distribution system,.is 20 the one' involving a predecessor in interest of Duke Power, s
21 which says where the predecessor of Duke Power, I believe
'22, the Southern Power Company, sold.only at wholesale, that 7
23 it had the obligation to sell at wholesale to a company 24 that wasn't being served.
25 However, it's abnost universal throughcut the United e
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. I where a company sells power to the public at retail, it is 3
my view that it is not the law that the company can be 4
. required to sell power at wholesale under. common law and 5
has only a limited obligation to sell various what'I call 6
power-exchange services.under section 202-B of the Federal 7
- Power Act.
So therefore there's no difference and 8
Abbeville is not contending now that Gulf states'is 9
required to sell at wholesale.to it except as required by j
10 contract and it will not make such a contention in the s
11 ' future.
12 I should say, just so we have. entirely our view on the
.c 13 record, it is my, position however that if a company is 14 selling at wholesale to another company before it has I
15 ceased supplying the service; the Federal Power Commission-16 has regulatory jurisdiction tio make it continue, but once 17 it has left the wholesale service of a company, then it 18 has no obligation, the company has no further obligation 19.
under the Federal Power Act except as provided in 202-B, 20 which does not apply to full service but only to power 21' exchenge service-4 22 ICL. AP.Y:
That's basically the settlemer.t with 23 Abbeville.
It's a rather simple one.
.We gave them a
'24 contract reduction and they agreed to pay more on the
~
25 cancellation charge on the line.
That's it.
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PRESIDING JUDGE:
Thank you.
2 MR.' BRAND:
It.may for purposes of:avaiuating 3
the settlement and its fairness be worthwhile to note that-4 the three towns' contracts were reduced from 10 years to 5
approximately six years as a result of the settlement 6
which is about a 40 percent reduction in length of' term 7-and I would expect that 19 months to about a career is 8
about the sane 40 percent or so, so it seems.to sne an 9
equivalent and quite reasonable settlement.
10 PR.ESIDING JUDGE:
Did you have the opportunity 11 to talk to a representative of Abbeville?
12 MR. BRAND:
'les, your. Honor.
We were on the 13 telephonin to the Mayor of Abbeville and we have two.
14 representatives here, a city attorney and ' engineer Harold 15-Beard, so Abbeville fully supports this settlement.
16.
MR. AVERY:
I would add that the city attorney, 17 of Abbeville was here and was a very atlo ano very 18 effective participant in the discussions.
I told him ha 19:
should= stay in Abbeville.
He's too good as it.
20-MR.-BRAND:
Your Honor, we didn't meet here for-21 the first time to discuss settlement.
Discussions have 22 been on-goitig and we appreciate the G5U attending 23 settlement discussions at late as about 9:00 or 10:00 last' 24 evening, Sunday evening, to see if we couldn't reduce the 25 burden on the commission..
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1 PRESIDING JUDGE:
That's fine.
I appreciate 2 '.
that, and I'm sure the Commission does and the Staff.
3 Sounds to,me to be a very equitable settlement from the 4
terms'as described to me.
i
)
' 5.
Hight I address you, Mr. Reusch, is it much too early 1
J 6
for Staff to indicate their position with respect to she
-0
-7 settlement terms as explained here.this afternoon?
y-q 1
8' MR. RE SCH:
Yes, your Honor.
We just heard j
w 9
them for the first time as they were explained to your 10 Honor.
I.tnank normally once a settlement is filed, the 11~
Staff is given 15 dar2 to comment on settlement.
I 12 haven't heard anyth.bg particularly egregious here that we i
, _13 absolutely could not ai;ree with and so we pook forward to 14' seeing the document once it's reduced to writing.
L 1
-15 PRESIDING JUDGE:
In that respect, if there is
!a 16 settlement oc hat we don't have to go that estra step of 17 comments, a
~. ora, perhaps I could be notified of that.
p 18 MR. REtiSCH:
Your Honor, the: Staff doesn't' sign 19 settlements.
The parties sign settlements and Staff' ~
.e 20-always.provides comments.
21
, PRESIDING JUDGE:
I mean.the comment aspects, 22 the time for the answers and comments.
23 MR. AVERY:
You mean trying to do away with that 24 conenent period?
25 PRESIDING JUDGE:
If it's possible at all.
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MR. AVERY:
1.think you've got,to do that under
' l 2
the rule.
3 MR. REUSCE:
If all the parties come in with, a 4
joint settlement and Staff comments favorably, there's no 5
need for answering comments.
n 6
'MR. AVERY:
I would like to note on the record
- j
-7 that we are = concerned about the Staff fully understanding
]
8 the settlement and we made the offer to Mr. Reusch during l-9 one of the many breaks, we had to sit with him and go-over j
10 it with him to the extent he wishes to do so and he got 11-his technical people over to assist him in that and'we're 12 very anxious to do that.
We think it's important for the 13, Staff to have a full opportuni,ty to understand all aspects 14 of the settlement and we want to work with him in that t
15 regard.
16 PRESIDING JUDGE:
My comment was simply-17
' addressed to the possible expedition of this matter, but 18 certainly I recognize Staff's-or any other party for that 19 matter's right to file const.ents with respect to all' the 20 terme of the settlement agreement as I do with the 21 cost-of-service issues ' involved in this proceeding as well.
- 22 Mr. Johnson, I simply am a person that doesn't like 23 loose ends, and I have a couple documents that are not 24 identified for the record.
There's testimony with respect 25 to both.of them._ The first being the affidavit of Barc1d i
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2 Do you wish to withdraw ?.hese, since they have 3
voltage.
'4 not_been assigned any numbers?
5 MR. JOHNSON:
I think the easiest thing is 6 --
simply to withdraw them.
PRESIDING JUDGE:
So they will not be part* of 7_
the materials that will be certified to the Conunission.
8 Let me just go 3 rough my notes to see if I have any other 9
Am I safe to say that til of the -issues 10 questions.
involved now at this time are settled and subject to the
,11 submission of settlement agreementis?
12 13 MR. AVERY:
I believe that's the case', your 14-Honort yes.
15 MR. BRAND:
That's my firm view, your Honor.
16 PP.ESIDING JUDGE:
Staff?
17' MR. REUSCH:
I believe so, your Honor.
18 PRESIDING JUDGE:
All right.
Now there was
^
I' m mention that the contract would be submitted shortly.
19 not quite sure what " shortly" me&ns to the parties.
20 Mr. Brand, you indicat[ed that the contract has to be drawn 21 up and that will be submitted shortly and I'm wondering if 22 the time frame can be placed around that word " shortly."
23 MR. JOHNSON:
Your 1*.cnor. if I might address.
di First I'll break it into twc, arts as Mr. Avery did 25 tat.
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when addressing it earlier.
2 The Abbeville situation is simpler and is one we could c.
3 put on a' quicker schedule.
The one with the other three 4
towns it-just took longer to expiain it.
It's certainly
-5 more complicated but I will report to you-and Mr. Brand I
6
- v. hat' as Mr. Avery said, we' re working. n a very similar 7
concept with another group of our customers and I have 8
been part of that and we have ready, I believe, or will 9
have within the next day or two a draft of that contract 10 and will contain much of the same language as in this 11 -
agreement.
So we'll be forwarding to them very promptly.
12 some of the arithmetic-type things may be different 13 because that's a giroup of customers with a multitu'de of -
14 billing points and these towns have individual billing 15-points.
But that's a technical. thing.
And by getting 16 them the legal language that talks about the regulatory 17 outs and when you say you're not an agent ~ and other kinds-18 of things, we've agreed to that once they get that, that 19 will start p:::Mgress moving and hopefully result in it-20 being brought to g letion expeditiously.
But I'm leery 21 of handicapping !; because we've never done this kind of 22
. deal before.
But I think we're looking at no more than a 2,3 few months.
May be shor'ter than that but it's going to be 24 a tough one.
.25 MR. BRAND:
Your Honor, I think with respect to s
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it = could well'be that these three could precede the GNT.
3 4
MR. JOHNSON:
I t.hink that's quite possible.
5 That's true.
6 MR. BRAND:
The Cities in evaluating the n
7 contract are able to use'-- they have the good fortune to 8
have the same very capable engineers who are also 9
evaluating the GNT arrangement, and so there won't be any 10 time' lost if we could promptly attend to the cities but we 11 d>: recognize some problems that GSU has.
I think perhaps 12 maybe a-best efforts coactitment to circulate a draft wih.hinaspecific.timewoul.1probablybethebestwayto 13 14 do it.
15 PRESIDING JUDGE:
Yes, if you could possibly 16
- give me a date.
17 (Discussion off the record.)
18 PRESIDING JUDGE:
Back.on the record.
19 Mr. Johnson.
20 ~
MR. JOHNSON:
Mr. Brand and I took this opportunity to. discuss it and have agreed to proceed be a; 21 v-good efforts basis that I have a draft to him-as'soon as 22 23-we can produce it.
And we're look'ing at! March 5 as what 24 we would expect best efforts to produce one by.
~
25 PRESIDING JUDGE:
Would I have a copy of the
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1 letter but not the draft material itself?
2' MR. JOHNSONs Absolutely.
3' PRESIDING JUDGE:
Those are the three towns as I 4'
understand it.
5 MR. BRAND:
Yes, and Abbeville, as I understand i
6 it sooner than that.
7 (Discussion off the record.)'
4 8
MR.. JOHNS $N We know what they have got-with 9
Abbeville and the money is not quite so much of a problem.
10 MR. BRAND:
We have no problem.
You take what-l 11 time you need.
' 12 MR. J0ENSON:
We'll proceed diligently.
13 PRESIDI17", JUDGE:
In any event, I will'be be 14 notifiedt is that correct?
15 MR. JOHNSON:
Yes, sir.
16
' PRESIDING JUDGE:
So it's my understanding,the j
17 cost-of-service issues.will be circulated March 5 and with 18-respect to the three towns and the issues we have been 19 discussing Friday und today, a draft will be submitted,,
20 March 25.
21 MR. AVERY:
I think you misspoke.
The date we 22 set for circulating the draft on the cost of service is 23 March 22.
24 MR. JOHNSON:
It was the 25th for the three 25 towns.
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- 1FSW-1 MR. BRAND:
And Abbeville just on a best efforts 2
. basis, but we're of course not thinking of anything more 3
than a month or two.
Jai 4-
. MR. JOHNSON's I'll be surprised if it goes that 5~
5 long.
6 PRESIDING JUDGE:
I wonder,if it would be best 7
insofar as the-settlements are conce ed to have a 8
specific approach, and let's go off the record.
9 (Discussion off the record.)
e 10 PRESIDING JUDGE:
Back on the-. record.
As an 11 off-the-record discussion, since this case started out as i2 a rule 717 case end at the request of the-parties I had 13 altered some of the da'tes principally based ppon 14 considerations raised by Louisiana towns;and the antitrust-15 and discriminatory aspects potentia 4. in this proceeding, 16 as a result we have not followed.the 717 weekly schedule 17 and we have set forth our own which was acceptable by all 18 parties.
19 Now in an off-the-record discussion it's been 20 indicated to me that on March 22 or thereabouts or sceaetilne 21 thereafter sometime in April when the settlement is sent 22 to me, a clear statement of the sumanary of the terms of 23 the settlement of 'the cost-of-service issues will be set 24 out and it will be indicated what portions of this s
it 25 proceeding could be sent, rather, certified to the h-O i~.'
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.Ccrumission, and then insofar as the towns are concerned, 2
we ean work that a's a different stage, that is to certify.
~
. 3 those. issues. to the Commission unde. separate cover.
Does 4
anyone disagree-with that procedure?
5 MR. AVERY:
That's fine, your Honor.
6 MR. BRAND:
-No, your Honor.
7 MR. REUSCH:
That's fine, your Honor.
S PRESIDING JUDGE:
Okay.
I don't have anything 9
further.
Would any other party wish to make any other 10 statement?
11' MR. AVERY3 I would like to thank your Honor for 12 your patience as we've brought you in and op? of the room, 13.
for indulging Eur whims as -we tried to sork.this out.
It 14' was'a wise decision for you because it's enabled us to
- 15 save the parties and the Commission a great deal of time, 16 but I know it' requires patience on your part and I 17 appreciate it ane". I'.. w/o she other parties do, too.-
18 PRESIDING M 1Es It might to a degree require 19 some patience, but the real work was the parties and their 20 witnesses, et-cetera,.and the applause should go to all 21 parties-including staff.
Thank you very much.
Hearing is
's$
22, closed.
23 (Whereupon, at' 3:30 p.m.,
the hearing was 24 concluded.)
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