ML20042C801

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Forwards Finding of No Significant Change in Licensee Activities Re Antitrust for Facility for Signature & Analysis.Finding Will Be Noticed in Fr W/Opportunity for Public to Request Reevaluation
ML20042C801
Person / Time
Site: River Bend  
Issue date: 03/20/1985
From: Knight J
Office of Nuclear Reactor Regulation
To: Harold Denton
Office of Nuclear Reactor Regulation
Shared Package
ML20042C775 List:
References
FOIA-89-559 A, NUDOCS 8504120153
Download: ML20042C801 (70)
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March 20, 1985 Docket'No'. $0 458 MEMORANDUM FOR:

Harold R. Denton, Director Office of Nuclear Reactor Regulation FROM:

James P.* Knight, Acting Director Division of Engineering

SUBJECT:

OPERATING LICENSE ANTITRUST-ANALYSIS OF RIVER BEND STATION, UNIT 1 s Av

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Enclosed, for your signature, is a finding of.no significant change in licensee activities relative to antitrust for the River Bend Station.

This finding is based on-an analysis by the antitrust staffs of SAB and OELD, after consultation with the' Department of Justice, which concludes that a "no significant change" finding is warranted. This staff analysis is attached as background information.

This is an initial finding which will be noticed in the Federal Register with an opportunity for the public to request a reevaluation. -If there are no requests for reevaluation, the initial finding will become final, thus

- concluding-the operating license entitrust review for Unit 1 of the River Bend Station.

On..l S.gma ignedby William V. Johnston, Acting James P. Knight, Acting Director Division of Engineering.

Enclosure:

As stated b tion:

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RIVER BEND STATION UNIT 1 OPERATING LICENSE ANTITRUST REVIEW FINDING OF NO SIGNIFICANT CHANGE Section 105c(2) of the Atomic Energy Act of 1954, as amended, provides for an

_ antitrust review of.an application for an operating' license if the Commission detemines that'significant shanges in the licen;.ee s activities or proposed activities have occurred subsequent to the previous construction pemit review.

The Commission has delegated the authority to make the "sitoificant change" detemination to the Director, Office of Nuclear Reactor Regulation. Based upon an examination of the events since issuance of the River Bend 1 construc-C tion pemit to Gulf States Utilities Co. and Cajun Electric Power Cooperative, Inc., the staffs o* the Antitrust and Economic Analysis Section of the Site Analysis Branch. Office of Nuclear Reactor Regulation and the Antitrust Section of the Office of the Executive Legal Director, hereafter referred to as " staff",

have jointly concluded, after consultation with the Department of Justice, that the changes that have occurred since the antitrust construction pemit review

-are not of the nature to require a second antitrust review at the operating license stage of the application.

In reaching-this conclusion, the staff considered the structure of the electric utility industry in Louisiana, the events relevat to the River Bend construc-tion pemit review and the events that have occurred subsequent to the construc-tion permit review.

The conclusion of the staff's analysis is as follows:

" Staff has identified changes in the conduct of Gulf States Utilities Company (Gulf States) since the completion of the construction pemit (CP) antitrust review that may have competitive significance in the Louisiana-

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bulk power industry. Gulf States:

(1) has offered ownership shares in River Bend to power entities in Louisiana and Texas; (2)-negotiated new interconnections and service agreements with other generating systems throughout Louisiana and adjacent states; (3) has joined with other power entities in the development and construction of additior,a1 non-nuclear base load generating facilities; (4) is serving new wholesale customers;,

(5) has provided transmission services to generating power entities in its service area; (6) has prepared a draft " Power Delivery (Agreement" to provide transmission services to non-generating entities; and 7) has curtailed or cancelled the construction of new generating plant and equipment, due in large measure to the slow down in projected load growth of' Gulf States' system.

"Many of these activities, e.g., the offer of nuclear plant access, trans-mission service to generating power entities and various wholesale for resale agreements, represent changes in Gulf States' conduct as a result of commit-ments(andsubsequentRiverBendlicenseconditions)madetotheDepartment of Justice 'dur'ng the CP antitrust review. The River Bend license conditions and the changes which evolved as a result of the license conditions, have provided smaller power systems the means to seek out alternative sources-of power and energy and gain a foothold in the market occupied by a broad

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The spectrum of power suppl 16rs in Louisiana and surrounding states.

license conditions have provided a competitive stimulus among bulk mer suppliers.in Louisiana and surrounding states. At the same time, tie license conditions have provided the customers of these power ruppliers, i.e., smaller..less integrated power systems, the ability to purchase more cost effective sources of power and energy. Staff encourages more of these types of changes for they tend to promote the most cost efficient allocation of power and energy throughout the Louisiana bulk power market.

'One area of concern identified by staff in its review of Gulf States' activities since the completion of the CP review concerned allegations that Gulf States was unwilling to provide wheeling rights over its transmission The River Bend system to non-generating power systems in its service area.

license conditions required Gulf States to provide transmission sermo to generating power entities. A refusal by Gulf States to provide trae.1ssion services to non-generating power entities was looked upon by staff c:, a change in GuTFStates' conduct that could represent a significant chage m

since the CP review and if any relief were required, it would evolve from an operating license antitrust review, not from a compliance proceeding.

After review of the available data and contacts with the Gulf States and i

other affected power entities in Louisiana, staff believes-that the allegations pursuant to Gulf States' refusal to provide wheeling services to non-generating power entities is being resolved. Gulf States has (indirectly') offered wheeling services to a large number of non-generating power systems in Louisiana through its interconnection agreements with Cajun Electric. Power Cooperative, Inc. (Cajun)' and the Louisiana Energy and Power' -

Authority (LEPA). Moreover, it appears that non-LEPA power ehtities without generating capability can now gain access to Gulf States' transmission system through the " Power Delivery Agreement" (PDA) proposed by Gulf States.

(Although the PDA is presently in draft fom, Gulf States has indicated to staff that the PDA will be made available to eligible entities requesting it.

Staff will continue to monitor Gulf States' activities to determine if any eligible non-gen 2 rating power system is refusu ' wheeling services under the proposed PDA.)'

" Staff believes that the changes which have occurred in Gulf States' rela-(:

tionships with smaller power systems in and adjacent to its service area since the completion of the construction permit antitrust review have been generally pro-competitive. Acce:s to the benefits associated with large base P

load power plants has beta made available to many smaller less integrated-power entities incapable of financing such plants on their own. Through the implementation of the River Bend license conditions requiring wheeling, generating power entities in Louisiana (particularly the smaller systems)

' i are now better able to supplement and coordinate their generation with other generating systems. Moreover, through new agreements negotiated or presently being offered by Gulf Stai.::% non-generating power entities in and adjacent to Gulf States' service area nw have access to alternative sources of E

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l power and energy via Gulf States' transmission system. As a result'of these developments, staff is recommending that no affirmative significant change determination be made pursuant to the application for an operating license for Unit.1 of the River Bend Nuclear Station."

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Based on the staff's analysis, it is my finding that a formal operating license antitrust review of the River Bend Station, Unit 1 is not required.

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Darren G. Eisenhut Harold R. Denton, Director.

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RIVER BENO STATION, UNIT 1 GULF STATES UTILITIES COMPANY AND CAJUN ELECTRIC POWER COOPERATIVE, INC.

DOCKET NO. 50-458A FINDING OF N0 SIGNIFICANT ANTITMST CHAH6f f O

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li introduction...................................................

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11. Geographic Area of Review and Relevant Power Systems............

3 A.

Gul f S ta te s Uti l i ti e s Compa ny.............................

3 8.

Cajun Electric Power Cooperative, Inc......................

,4 Ill. Pre-Construction Permit Antitrust Investigation.................

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IV.

Construction Permit Antitrust Reviews...........................

8 A.

River Bend CP Antitrust Review..............................

8 8.

Cajun and San Rayburn Antitrust Reviews....................

11 V.

Operating License Application...................................

12 VI; Changes Since the Construction Permit Review.'...................

14 A.

-Ownership Share Changes....................................

15 8.

Joint Participation in Non-Nuclear Generating Facilities...

17 C.

New Interconnections and Interconnection A Wholesale Power Developments.............greements........

18

- D.

24 E.

Transmission Service......................................

27 F.

Formation of the Louisiana Ener Abbeville and St. Martinville.gy and Power Authority......

30 i

G.

31 H.

Transmission Service From Lafayette to Plaquemine......,,..

33 1.

Transmission Service to Non-Generatin Misc 311aneous Changes...............g Entities............

34 J.

.................l....,

36 VII. Summary and Conclusion.........,.................................

38 APPENDICES A.

Service Area Maps - Cajun Electric Power Cooperative, Inc. and

. Gulf States Utilities Company 8.

List of Cajun Member Cooperatives 9

C.

City of Lafayette v. Securities and Exchance Commistion, 454 F*

2nd 943 (1971)

D.

Department of Justice Advice Letter for River Bend dated March 25, 1974

. E.

Lettar dated April 27, 1984 from W. J. Cahill, Gulf States Utilities Co., to William Pegan, Jr., U.S. Nuclear' Regulatory Commission 4

Draf t of Gulf States Power Delivery kgreement l

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Introduction A prospective operating licensee is not required to undergo *a formal antitrust

. review unless the Nuclear Regulatory Commissiop (NRC or Commission)* determines

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, that there han been "significant changes" in the licensee's act,1vities or pro.

posed a-tivities subsequent to the review by the Attorney General and the Cosmission at the construction permit (CP) stage.

Concentration on changes in the applicant's activities since the previous antitrust review exped,ites and focuses the review on areas of possible competitive conflict heretofore not analyzed by the Attorney General or the Commission.

In its Summer decision,** the Commission has provided the staff *** with a set of criteria to be.used in making the significant change determination for

. operating Itcense (0L) applicants:

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"Thestatutecontemplatesthatf.hechangeorchanges(1)have y

occurred since the previous antitrust review of the licensee (s);

L (2) are reasonably attributable to the licensee (s); and (3)

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have antitrust implications that would most likely warrant some Commission remedy."****

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  • The Commission has delegated the responsibility for making a significant change determination to the Director of Nuclear Reactor Regulation.
    • Virgil C. Summer Nuclear Station Unit 1, Docket No. 50-395A, June 26, 1981 at 13 NRC 862 (1981).
      • " Staff" hereinafter refers to the antitrust staffs of the Office of Nuclear Reactor Regulation and the Executive Legal Director.
        • Commission Memorandum and Order, p. 7, dated June 30, 1980 (CLI-80-28).

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~To warrant an affirmative significant change finding, i.e., to trigger a t

folial OL antitrust review, the particular change (s) must meet all three of these criteria.

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The antitrust review process at the operating license stage is fdcused only on

  • those. changes in the applicant's. activities that have occurred since the completion of the CP antitrust review.

In order to identify and subsequently measure any of these changes against the criteria established in Summer, it is helpful to review those activities of the applicant, along with the general market structure, that were designated as problem areas during the CP antitrust review.

It is only after reviewing applicent's,past. competitive behavior that staff can make a determination that any particular act or practice which has l

taken place after the CP antitrust review is a chanced activity a'nd thus L

relevant-to an OL review.

If the changes are contrary to specific license -

-conditions, then the appropriate remedy lies in en enforcement proceeding l

under the Commission's rules and regulations and not in a significant change s

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In surmary, staff's focus for the OL significant change analysis is l

on changes that lie outside those antitrust license conditions imposed during

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the CP review stage.

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In its analysis of-the River Bend Unit 1 (hereinafter, River Bend) OL rppli-cation, staff has documented several changes that warrant review under the Summer criteria.

However, it is staff's opinion that.none of these changes meets all three Summer criteria and consequently staff is not recommending L

that the Director of Nuclear Reactor Regulation (Director) institute a forrr.al i

OL antitrust review.

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L To view the significant change analysis in its proper perspective, it is helpful to view the structural makeup of the applicant (s) and. focus on the applicant's interrelationships with oth'er power systems'within'a petLinent geographic area. Using this data base and tiie initial CP antitrust review as a benchmark, it is.then possible to apply the Summer criteria to all changes attributable to the applicants and determine'which changes, if any, are signifi-cant in an antitrust context.

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.4-II. Geoaraphic Area of Review and Relevant Power Systems River Bend is located in West Feliciana, Parish, Louisiana on the east side of the Mississippi River,--approximately 24 miles northwest of the city of Baton L

Rouge, La. The nuclear unit is co-owned by two power systems, Gulf States Utilities Company with t*venty percent of the unit and the Cajun Electric Power Cooperative, Inc, with thirty percent of the unit.

The relevant marketing

. area for power and energy and ancillary services associated with River Bend encompasses most of the state of Louisiana and portions of east Texas--from 60 miles east of Austin, Texas, in the west to the Sabine River on the Texas-Louisiana border on the east."

'A.

Gulf States Utilities Company The power system responsible for construction and operation of River Bend, i.e., the lead applicant, is Gulf States Utilities Company (Gulf States, GSU, or Company) with headquarters in Beaumont, Texas.

GSU's principal business is in the generation, transmission ano distribution af power and energy in a "See service area maps of each applicant attached as Appendix A.

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N 28,000 square mile area in southeastern Texas and south central Louisiana--

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primarily adjacent to the Gulf of Mexico.

In 1982 Gulf States had generating capability of 6,388 MW, approxima,tely r

1 2,800 pole alles of transmission line and a summer peak of 5,164 MW along with E

operating rever.9es of $1.360 billion.

Ninety-one percent of GSU's operating revenues was derisad from its electrical business, 6 percent from its sale of steam and 3 percent from its sale of natural gas.* Sales of electricity to

-l industrial users accounted for 42 percent of the total electric revenues for

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1982.

The percentages of total electric revenues from other sources were resi-dential, 30 percent, commercial, 19 percent, wholesale for resale, 6 percent and other, 3 percent. Of the electric operating revenues, 50 percent was derived l

l from operations-within Louisiana and 50 - tent from operations within Texas.

i B.

Cajun Electric Power ' Cooperative. Inc.

. Cajun Electric Power Cooperative, Inc. (Cajun or CEPCO) is a generation and transmission (G&T) cooperative headquartered in Baton Rouge, La. G&T coops are primari1/ engaged in the business of generating anc transmitting power and energy to member :; ops who in turn resell poser and energy to ultimate consumers i

at retail.

i Cajun presently supplies 13 member ** distribution coops located throughout Louisiana--serving in all portions of the state with the exception of the

  • The Company produces and sells steam for industrial use and purchases and resells natural gas in the Baton Rouge, La. area.
    • See Appendix B for a list of the member cooperatives served by Cajun.

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northwest corner and t,he New Orleans area.

In 1982, Cajun had generating cap-

- ability of approximately 1,830 MW and a summer peak of approximately 1,170 MW.

111. Pre-Construction Permit Antitrust Investigation 1

Prior to receiving Gulf States' application for Ri /er Bend, the Department of

<L Justice (Department or 00J) had been conducting an investigation into the L

competitive ' practices of Gulf States and,two other investor owned utilities in j

Louisiana

  • pursuant to allegations that these three companies attempted to l

frustrate the development of an interconnection and power pool agreement among l

non-investor owned systems ** located throughout Louisiana.

These allegations l

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were raised by the non-investor owned petitioners in City of Lafayette v.

1 Securities and Exchance Commission,*** and the Department l at the urgirq of i

the Court cf Appeals (of the District of Columbia), was given the opportunity to comment on the antitrust issues raised by the petitioners.

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Staff believes that it would be helpful to briefly outline the issues involv-ing anticompetitive conduct that were raised in the Court of Appeals case and l

by reference,- identify those issues already under investigation by the Depart-ment prior to Gulf States' submission of its River Bend construction permit l

application.

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  • Louisiana Power & Light Co. and Central Louisiana Electric Co. were the two other systems being revieweo by the Department.
    • This' group of non-investor owned systems included the Louisiana Cities of Lafayette and Plaquemine, the Dow Chemical Co. and the Louisiana Electric Cooperative, Inc. (an early predecessor to the Cajun Electric Power Cooperative)'.
      • City of Lafayette v. Securities and Exenance Commission, 454 F. 2nd 943 (1971).

Copy attached as Appendix C.

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The Court of Appeals proceeding was thitiated by the Cities of Lafayette and Plaquemine, Louisiana (Cities) iri the form of a petition before the Court to i

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Exchange Commission (SEC) pursuant to the approval by these two regulatory agencies of applications by Gulf States Utilities Co. and Louisiana _ Power and 3

Light Co. (LP&L) concerning the issuance of bonds, notes and stocks to finance l

1 capital requirements of the two utilities.

The court stated:

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l "The gist of petitioner's complaint is that the agencies failed i

l to take proper account of their claims that the proceeds would be used for the Companies' unlawful conspiracy to suppress competition."

The case revolved around two 1970 requesto, one by LP&L and one by GSU, for I

financing before the SEC and FPC, respectively.

LP&L applied for approval l

before the SEC for the issuance of $20 million of first mortgage bonds and $7 million in preferred stock, indicating that these offerings would be used to j

repay short term borrowings it had made as temporary financing for its 1970 j

1 construction program and for other corporate purposes.

GSU filed an appli-

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t cation with the FPC to issue $30 million of first mortgage bonds at competitive bidding--indicating in its application that the proceeds would be used to pay off part of its commercial paper and short term notes.

i Tne Cities of Lafayette and P'laquemine intervened in both of these proceedings q

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contending that the funds rasulting from the proposed sale of securities would i

enable both LP&L and GSU to continue, if not exacerbate, existing anti-t competitive acts and practices employed by these companies in the past in l

their efforts to forestall 'the development of a non-investor owr.ed power pool i

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~ in Louisiana. The' Cities' principal contention was that the three investor owned utility systems in Lo*uisiana, GSU, LP&L and Central Louisiana Electric (CLECO), were engaged in a concerted effort to " frustrate" or impede the formation of a pooling agreement among non-investor owned systems in Louisiana.

According to the Cities, a large sum of Sordes had been allocated by the Rural Flectrification Administration (REA) in 1964 to a group of' Louisiana coopera-tives organized as the Louisiana Electric Cooperative, Inc. (LEC) to finance the construction of a 200 MW generating station and the necessary transmission l

l lines (1,611 miles) to supply all twelve LEC member systems.

The Cities further alleged that in 1968, a group of non-investor owned Louisiana power entities, comprised of the Cities, Dow Chemical Co. and LEC, joined together to execute an Interconnection and Pooling Agreement which provided for' the interconnection of their generating systems,and a long term pooling and coordination arrangement.- Accordin'g to the Cities, the investor owned utilities-in Louisiana, through " frivolous and repetitive" litigation succeeded in holding l'

up the loan money to LEC from ths Rural Electrification Administration until

'1969 thereby preventing members of the newly formed pool (Dow, Cities and LEC) from implementing their agreement in a timely manner.

Moreover, during the five year delay (1964,69) from allocation to dispersing of the loan funds from 1

-REA, the cost of the proposed LEC generation /transmiesion project had risen l'

dramatically, REA, under a new administrator, advanced funds only for the LEC generating station, not for transmission lines, thereby leaving LEC to negoti-l lL ate with the three investor owned companies for use of their transmission lines.

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Petitioners contend that the conspiracy continued during these negotiations. They say that the Companies, while~illing to w

supply transmission of power to some of the LEC members, refused to supply transmission services between pool members.

They further say the Companies demanded that LEC limit its power capacity to the 200 MW already planned, and that the Companies supply all further power needs of the twelve cooper-

.atives, thus precludi,ng further LEC expansions to service its

I members' expanding load."*

On October 12, 1971, the Court of Appeals rendered its decision, affirming the SEC orders and remanding the FPC order to the FPC "for further proceedings"'

kjiat would consider the antitrust ' claims raised by the petitioning Cities, In issuing its decision, the Court indicated that although both the SEC and FPC were regulatory agencies with antitrust oversight responsibilities, the SEC's-prime area of antitrust jurisdiction revolves around a corporate structural nexus, whereas the FPC's antitrust jurisdiction is primarily *in the area of operations of companies. The petition filed by the Cities pertained to the det.rimental effect the additional monies resultant from the various stock and!

bond offerings would have on GSU and LP&L operations vis-a-vis small systems in Louisiana, i.e., Cities alleged that the additional monies would be used by the two companies to continue their conspiracy to prohibit the formation o.f a j

power pool among non-investor owned entities in Louisiana.

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l IV. Construction Permit Antitrust Reviews A.

River Bend CP Antitrust Review The final official antitrust information pertaining to the River Bend CP

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application was transmitted to the Department of Justice on September 23,

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- -.e 1973. Preliminary information had been transmitted as early as September 11, 1972.~ Notice of the receipt of the CP application and the associated antitrust

- information was published in the Federal Reaister on October 23, 1973.

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Rayburn Das Electric Cooperative, Inc. (Sam Rayburn' Dam) responded to the Federal Reaister-notice on December. 26, 1973, alleging that Gulf States dominates production and transmission facilities _in the area it serves and requested

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license conditions to assure access for competitors'to all facets of power 1

supply.

Sam Rayburn's comments were forwarded to the Department of Justice j

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for its consideration in the ongoing antitrust review of the CP application, q

L At the completion of its review, thc epartment of Justice submitted its anti-a trust advice letter to the NRC by letter dated March 25, 1974.* The advice.

letter concluded that if certain policy commitments m'de by Gulf States were a

imposed as license conditions, an antitrust hearing would not be necessary.

The Department's advice letter was published in the Federal Reaister on April 5, 1974. No petitions for a hearing were received in response to the Federal Reaister notice.

As indicated earlier, the Department, at the urging of the Court of Appeals, was given the opportunity to comment on the antitrust issues raised by the petitioners in the City of Lafayette v. Securities and Exchance Commission proc 6edings.

In its antitrust advice letter to the NRC, the Department noted

.that an investigation of Gulf States' activities in Louisiana was. underway at the time the Department received GSU's application for a construction permit

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1 from the NRC. Moreover, it is apparent from the advice letter tha,t the Department's investigation'was nearing a completion:

1 "It is unnecessary to detail here the allegations or our conclu-sions.with respect thereto. Within the past year or so. Applicant

.has evidenced a constructive attitude in its relations with smaller systems'in Louisiana."*

Negotiations between Gulf States and the Department resulted in a set of license conditions that resolved many of the issues raised by the petitioning C'ities in the Court of Appeals case.

The River Bend license conditions provided smaller generating systems in G5U's

-service area with'most of the anticipated benefits ** proposed by the-non-investor owned pooling' group in the Court of Appeals case at the time of the construction permit antitrust review.

Howeyer, the emphasis at that time focused on joint

. planning and coordinatlon of generating resources and the license conditions negotiated between the Department and Gulf States did not provide for power supply servi,ces to non generating entities.

Since the CP antitrust review, Lafayette has obtained power.which-is surplus to its needs and cheaper than that which Gulf States has to offer.

As a result, non-generating distribution systems served at wholesale by Gulf States are seeking to obtain all or a portion of their power requirements from Lafayette l.

  • " Advice Letter", p. 3.
    • The non-investor owned pooling agreement sought, "...according to petitioners, assurance of a market for all surplus capacity and secondary energy, as well as coordination and substantial savings, in the construction of new generators; in sum, economies of scale, plus benefits in the form of back-up for each sys-tem and energy interchange's." City of Lafayette v. Securities and Exchange Commission,.454 F. 2nd 945 (1971).

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. instead of Gulf. States.

They must obtain transmission service from Gulf States in order to obtain the power from Lafayette. Gulf States is not required under its license conditions to furnish transmission services to non generating j

1 entities. This has led to the principal issue in this antitrust review.

The

- matter is discussed in detail in Section VI of this analysis.

8.

Cajun and Sam Rayburn CP Antitrust Reviews By letter of October 26, 1979, Gulf States, acting as agent for the Cajun Electric Power Cooperative, Inc. (Cajun) and Sam Rayburn G&T, Inc. (Sam Rayburn),

submitted antitrust information in connection with the planned ownership participation by those two parties in River Bend.

Notice of receipt of the l

information was published in the Federal Register on January 16, 1980.

A comment was submitted by Mr. Stephen M. Irving regarding Cajun's participation in River Bend." The essence of the comment was that Gulf States may have used its control of transmission facilities, necessary for Cajun to deliver power to its members, to coerce Cajun into buying a portion of River Bend. The comment letter was sent to the Department of Justice for the Department's t.

consideration in its antitrust review of Cajun's planned participation.

The Department advised the NRC by letter dated May 5, 1980, that it had concluded 1

that the ownership participation in River Bend by Cajun and Sam Rayburn would not create or maintain a situation inconsistent with the' antitrust laws.,The advice letter was published in the Federal Register on May 29, 1980.

No 1

l

?.

  • Mr. Stephen M. Irving, Director, Public Law Utilities Group, April 18, 1980, I

l to L.S. Rubenstein, Acting Chief, Light Water Reactor Branch No. 4, Division l

of Project Management, U.S. Nuclear Regulatory Commission.

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.n-e petitions for intervention were received in response to the Federal Reaister i

notice, effectively closing the CP antitrust review for Cajun and Sam Rayburn.

L l-4

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V.

Operatino License Application i

l' I

5;:

l:

By letter of April 22, 1981 Gulf Statta supplied antitrust information in conjunction with its operating license application for River Bend.

The infor-mation, in response to the NRC's Regulatory Guide 9.3, listed changes that had occurred since the CP antitrust review.

Notice of the receipt of the antitrust c

i; information was published in the Federal Reaister on August 6, 1981.

The l

notice invited comments from the public regarding matters that the staff j

i.

L' should consider in its review of the applicants' activities for any significant l-'

changes of an antitrust nature that may have occurred since the CP antitrust review. No comments were received in response to the Federal Reaister notice.

i Subsequently, the staff received information that the River Bend plant would,

~ be delayed from its original operation date. Accordingly, the staff requested i

updated antitrust information from Gulf States on August 16, 1983.* By letter j'

of September 15, 1983, the City of Lafayette, Louisiana (Lafayette) provided information to the NRC claiming that the 1981 antitrust information provided I=

by Gulf States was outdated and that Gulf States was not abiding by the anti-j i

trust conditions contained in its CP.**

Subsequently, Gulf States submitted by

  • Letter fr'on Wm. H Regan, Jr., Chief, Site Analysis Branch, Office of Nuclear j-Reactor Regulation, U.S. Nuclear Regulatory Commission, August 16, 1983, to Mr. E. I. Draper, Jr., Vice President Nuclear Technology, Gulf States p

Utilities Company.

E l

    • Daniel Guttman, Law Offices of Spiegel and McDiarmid, Attorneys for the City of Lafayette, Louisiana, September 15, 1983, to William Regan, Chief Site Analysis Branch Office of Nuclear Reactor Regulation, U.S. Nuclear Reguia-tory Commission.

(Staff did not solicit information from Guttman's Client.

l The timing of staff's data request and the Guttman letter was coincidental.)

l 12 M i d:L W dr.d2d i M %ik M &&& Mi4%.pk MW ;i O & &.i-l&O $.&,5-~,.n 0

5 26, 1983, updated antitrust information as requested.*

letter of 0ctober L

Notice of receipt of the updated antitrust information was published in the L

Federal Reaister on January 4, 1984.

Three parties ' responded to th6 January 4,1984, Federal Recister notice. '

F Mr. Irving** resubmitted a comment which he had submitted on April 18, 1980.

As discussed previously, the comment was considered during the CP review and therefore could not represent a significant change since the CP review.

l; Mr. Frederick Ritts*** representing Sam Rayburn G&T, Inc. informed the staff that'the G&T had signed an agreement with Big Rivers Electric Corporation (a Kentucky generation and transmission cooperative) to purchase 100 MW of firm power and energy and was negotiating wheeling and other arrangements with Gulf States.

Mr. Guttman **** renewed and supplemented Lafayette's earlier September 15, 1983, allegations against Gulf States.

The crux of the alleged'significant changes can be summarized as follows:

  • Letter from J. C. Doddens, VP, Gulf States Utilities Co. to Wm. H. Regan, Jr.,

Chief, Site Analysis Branch,-U.S. Nuclear Regulatory Commistion.

    • Stephen M. Irving, Attorney at Law, February 3, 1984, to Section Leader, Antitrust and Economic Analysis Section, Site Analysis Branch.
      • Frederick H. Ritts; Ely, Ritts, Peitrowski and Brickfield, February 17, 1984, to Argil Toalston, Office of. Nuclear Reactor Regulation, U.S Nuclear Regulatory Commission.
        • Daniel Guttman, Law Offices of Spiegel and McDiarmid, February 3, 1984, to William Regan, Chief, Site Analysis Branch, Of fice of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission.

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Changes in the load and capacity projections of Gulf States has resulted in an excess of capacity and energy, l

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2.

The City of Lafayette air.o has an excess of capacity and energy, j

' 3.,

Lafayette wanted to sell its excess capacity and energy to various t

1 municipalities served at wholesale by Gulf States,.and 4.

Gulf States has refused to provide transmission service, or has set unreasonable ~ conditions for providing transmission' service, from Lafayette to the various municipalities that Lafayette would like to serve.

l VI. Chances Since the Construction Permit Review i

From the data furnished in connection with the operating license application as described above, from telephone contacts with members of the industry in Louisiana, and from meetings held with representatives of GSU and other parties, staff has identified ten broad categories of changed activity-that have occurred since the CP review that may affect competitive conditions in the Louisiana bulk power industry.

These rather broad categories are:

,/

(1) Ownership share changes; (2) Jointly owned non-nuclear generating facili-ties;'(3) New interconnections and service agreements; (4) Wholesale power developments; (5) Transmission services; (6) Formation of the Louisiana Energy and Power Authority; (7) Developments involving the Cities of Abbeville and F

St. Martinville, La.. (8) Transmission services from Lafayette to Plaquemine; i

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L (9)-Transmission services to non generating entities, and (10) Miscellaneous changes. A review of these changes follows.

A.

Ownershio Share Chances L

Consistent with the negotiated license conditions providing access to a wide -..

spectrum of power generating entities throughout Louisiana and portions of t

Texas,'the following events have occurred:

?

Ir

1. -

By letter dated August 10, 1977, Gulf States offered participating shares of: River Bend to 21 entities in Texas--only'one power entity l

responded positively, the Sam Rayburn Generation and Transmission l,

Cooperative, Inc. (SRG&T).

l 2.

The Cajun Electric Power Cooperative and Gulf States entered into a Joint Ownership Participation and Operating Agreement on August 28, a

1979. Under this sharing agreement, Cajun would own 30% of River Bend.

l

3. -

In 1978 when Gulf States cancelled its proposed Blue Hills Nuclear 1

Plant (to be constructed in Texas), the company offered participation in River Bend to all of those entities who'espressed an interest in Blue Hills.

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4.

In January of 1979, Gulf States sent letters to five investor owned utilities

  • offering them participation in River Bend.

Acetrding to l

Gulf States, nothing has developed from these contacts.

4 t.

5.

As a result of Gulf States' offer to Texas power entities to share l

6 in the ownership of River Bend (in lieu of Blue Hills). SRG&T con-l l

tracted to own 7% of River Bend and'en October 11, 1979, entered l

into an amended Joint Ownership Parilcipation and Operating Agreement t

i n

with Gulf States and Cajun.

Under this amended agreement, GSU would own 63%, Cajun, 30% and SRG&T, 7% of River Bend.

SRG&T has not received approval from the Rural Electrification Ad-ministration for the necessary funds for its 7% contracted share of River Bend. SRG&T has reduced its anticipated participation to 3-1/2%, but still has not received approval from REA.

Consequently, for purposes of this review, SRG&T is not being treated as an applicant.

l The effect of the negotiated license conditions has been pronounced in the area of nuclear access as shown by Gulf States' willingness to share the benefits of scale economie esseciated with large base load nuclear plants.

Gulf States not only offered access to River Bend but also to its planned Blue Hills nuclear plant. When the Blue Hills plant was cancelled in 1978, those Texas

  • Letters were sent to:

Southwestern Electric Power Co., Kansas Power & Light Co.', Oklahoma Gas & Electric Co., Middle South Utilities, Inc. and Central Louisiana Electric Co.

16 1

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power entities interested in participating in Blue Hills were offered ownership l

shares in River Bend as an alternative."

)

L Even though power entities in Louisiana and Texas have entered into River Bend i

participation agreements with Gulf States after the construction permit revie,w, the license conditions negotiated during the CP review required Gulf States to

[

offer access. A failure to offer access would not represent a significant change in the sense of triggering an OL review, but such a failure would most i

likely be investigated by the staff in the context of a compliance proceeding, However, Gulf States has followed through with its commitment to offer nuclear access and staff views this changed activity as procompetitive.

B.

Joint Participation in Non-Nuclear Generatino Facilities r

Since the completion of the CP review, both Gulf States and Cajun have also entered into joint participation agreements involving the construction and operation of large non-nuclear base load generating units.

1.

On June 6,1980, Gulf States, Sam Rayburn Generation & Transmission Cooperative and the Sam Rayburn Municipal Power Agency (SRMPA)**

g signed a Joint Ownership Participation and Operating Agreement under F

  • AlthoughGulfShtesdidnotagreeduringtheRiverBendCPreviewtoprovide Texas power entities access to River Bend, the company in its statement of policy commitments to the Justice Department indicated that similar policy commitments, providing for access to the nuclear plant, transmission over G50 E

lines, interconnections, etc., would also be entered into when GSU applied for its Blue Hills nuclear plant scheduled for commercial operation after River Bend.

I

    • Comprised of three municipal electric systems in Texas and one in Louisiana.

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L 17 i

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which Gulf States will own 70% of the 540 W Unit 6 Nelson coal-fired generating station; SRG&T will own 10% of Unit 6 and SRMPA will own -

20% of Unit.6.

s l

2.

On November 14, 1980, Gulf States and Cajun signed a Joint Ownership j

Participation and Operating Agreement for Big Cajun No. 2. Unit No. 3 under which Cajun would own 51%, Gulf States, 42% and SRG&T, 7% of i

the 540 W coal-fired unit.

Though not required to offer access or participate in non-nuclear power plants by the River Bend license conditions, both Gulf States and Cajun have actively sought out partners for coal-fired plants constructed after the River Bend CP review.

Staff views these developments as constructive extensions of applicant's procompetitive behavior initiated by the River Bend license conditions and l

- would urge power entities-in Louisiana and adjacent areas to continue to provide the opportunity for interested parties to share in the benefits asso-ciated with large base load power plants through joint ownership of all forms.

- of generating facilities, nuclear or non-nuclear.

Cs New Interconnections and Interconnection Aareements L

'One of the principal concerns raised by the petitioning Cities in the Court of Appeals case was that Gulf States Utilities was unwilling to enter into inter-connection agreements with smaller (nonvinvestor owned) power entities throughout its service area. Gulf States in it. statement of policy commitments to the i

Justice Department in 1974, agreed to interconnect with other generating y

entities in its service area.

Since the review at the CP stage, both Gulf 18 j

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q States and Cajun have entered into various interconnections and interconnection o

h agreements with both large investor owned power systems and smaller. non-investor r

owned systems.-

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1.

Gulf States entered into separate power interconnection agreements, 1

each dated January 8,1974, with the Cities of Lafayette and Plaque-1 aine, Louisiana.

Each contract provides for C'J1f States to furnish ~

Lafayette or Plaquemine with transmission service to or from other entities, to interchange power and energy with the cities under various schedules, as well as allow for reserve coordination of gen-l l

eration.

(Though tho' construction permit antitrust review had not j

been formally completed, these interconnection agrar.ments were formu-lated in anticipation of the policy commitments agreed upon by Gulf 1

States later in 1974.

Had these agreements not been consummated, there may have been grounds to initiate compliance proceedings against Gulf States.)

i 2.

Gulf States entered into a Power Interconnection Agreement, dated June 26, 1978, with Cajun which provides transmission service to two gas generating units owned by Cajun and for two additional Cajun generating sources consisting of three coal fired units and a co-owned nuclear unit (River Bend).

The agreement provides for service to all of Cajun's delivery points in or near G$U's service area as well i

as emergency service, replacement energy,- economy service and trant-mission of bulk power.

Accompanying this agreement is a Wholesale Power Agreement which provides for GSU to supply full requirements 19

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to certain delivery points. The. interconnection agreement also

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. includes a service schedule for ownership of an integrated transmis-sion system by Gulf States and Cajun (primarily those facilities accompanying jointly owned generating units).

3.

' On June 6,1980. Uulf States, San Raybur,n Dan Electric Cooperative Inc. (SRDE), $as Rayburn Genention & Transmission Cooperative and I

$as Rayburn Municipal Power Agency signed a Power Interconnection Agreement, an Interim Power Supply Agreement, and a Power Supply Agreement.. These agreements provide for transmission service, coor-dination of generation, sharing of reserves, obtaining reserves, and credits to SRDE for $as Rayburn Hydro Project Capacity and Energy.

~

4.

A 345 kV interconnection was. completed on April:7, 1981 with the Southwestern Electric Power Company.

t I-5.

A 138 kV interconnection was completed on April 11, 1981, with the Central Louisiana Electric Company.

l L

6.

Cajun and CLEC0 entered into an agreement for Cajun's purchase of-unit capacity from CLEC0's Rodemacher Unit 1 for interim periods during 1981-1982 in the amounts of 130 to i80 MW.

The agreement was implemented and terminated as scheduled.

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7.

Gulf States Utilities and the Southern Companies signed an Interchange-Contract dated February 25, 1982. The purpose of this agreement is 20

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-s for'the purchase, sale and interchange of power.

(Gul'f States agreed to purchase.500 MW in 1984 and 1000 MW for the period 1985-92 from coal based generation of the Southern Companies.)

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8.

On October 1,~1982, Cajun and Big _ Rivers Electric Corporation (a Kentucky G&T) entered into an Interchange Agreement; The agreement.

provides for the interchange of emergency assistance power, purchase t

and sale of short term fire power, interchange of maintenance power, purchase and sale of economy power, purchase and sale of non-displacement energy and purchase and sale of unit power.

9.

Gulf Statgs and the Louisiana Energy and Power Authority (LEPA)*

signed a Power Interconnection Agreement dated November 15, 1982, whereby CSU would provide transmission service and the parties would interchange power and energy.

(Currently, transmission service is L

.being provided under this agreement to the Town of New Roads, La.

and the City of Plaquemine,'La.)

t

10. Gulf States and the Town of New Roads, La. signed a Power Inter-onnection-Agreement dated February 1, 1983 which became effective July 22, 1983. The agreement provides for interchange of power and for transmission service.

GSU is presently supplying transmission service to New Roads under this agreement.

  • LEPA'is a joint action authority representing municipal electric systems in Louisiana.

The authority is described in Section VI-F of this analysis.

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11'. - -Cajun' and the City of Lafayette, La. entered into an Interchange Agreement dated May 23 1983.

The agreement provides for the sale g

-of short term fire power, interchange of replacement energy, purchase F

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and sale-of economy energy, purchase and sale of second'ary energy and the purchase and, sale of surplus, unit or system power energy.

l i

12. Gulf States and Mississippi Power and Light Company signed an Inter-1 connecticn Agreement dated June 15, 1983.

The agreement provides for transmission service and interchange of power and energy.

I

13. ' A 500'kV interconnection between Gulf States and the Mississippi Power Company was completed in 1984, i

i Both applicants, Cajun and Gulf States, have been actively engaged in negoti-i ating and consummating interco'nnections since the completion of the construction permit' review. The presence of new interconnections between large and small

. power systems and also new interconnections (or interconnection agreements)

{

between large. integrated power systems in and adjacent to Louisiana has opened r

up new opportunities for both bulk power suppliers and purchasers of bulk

-i power and ancillary services.

I Gulf States has consummated six interconnection agreements with non-investor owned systems since the CP antitrust review and in doing so has significantly improved the competitive process in its service area by providing the means

.)

for these systems to participate in GSU generating facilities and/or to shop for alternative sources of power and energy. Moreover, GSU har enhanced the 22 l

1 g

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e availability of new power sources to all generating systems in its service L"

area by completing five new interconnections with neighboring investor owned systems. Power and energy'now flows more freely throughout Louisiana as a result of these new interconnections.

Cajun. the successor to the Louisiana Electric Cooperative (LEC), has also l

entered into several interconnection agreements since its initial antitrust l

review in 1979.

The majority of Cajun's new interconnections has been with larger, investor owned power systems thereby providing Cajun with the means to market its excess capacity and generally increase the overall reliability of its power system.

- Those interconnections between applicants (particular1' Gulf States) and y

i non-investor owned systems are consistent with the construction permit license condition requiring interconnections and therefore have no adverse antitrust l

implications.

L 1

i Those interconnections which have occurred between applicants and investor L

owned power systems have for the most part resulted from normal corporate

. growth patterns as well as the changing ' fuel s,upply situation in Louisiana and i

l-surrounding states.* Such interconnections do represent changes in applicants' activities since the CP review and come under the purview of the Commission's operating license review process.

It is staff's view that applicants' intercon-nections since the CP antitrust review have had a procompetitive effect upon

  • Costly oil and gas as fuel sources heve precipitated sharing arrangements i

among utilities with excess lower cost coal-fired capacity to sell.

New interconnections and/or interconnection agreements were needed to implement these sharing arrangements.

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To the extent that new intercon-

-:the bulk power services market in Louisiana.

nections have increased reliability of power systems and-broadened access to power supply alternatives for Louisiana power entities, staff would encourage applicants to continue the. development of new interconnectons and interconnec-tion agreements which has characterized the period since the completion of the construction permit review.

-t D.

Wholesale Power Deve,lopments iThr: applicants, ' principally Gulf States Utilities, have been responsible for a

.l series of power supply developments at the wholesale level since the construc-tion permit antitrust review.

L.

1.

On April 11, 1977, the City of College Station Texas became a i

municipal. customer of Gulf States Utilities.

I

'2. - On June 1. '1977, Gulf States began serving the City of New Roads, La.

under an " Agreement for Wholesale Electric Service to Municipalities" which provides for finn power and emergency service.

L 3.

On December 1,1978, Gulf States and Brazos Electric Power Cooperative, i

L Inc. (a Texas power cooperative), initiated an " Agreement for Whole-

.saleElectricServicetoRuraiElectricCooperatives"underwhich L

Gulf States serves several delivery points, some of which are at trans-mission voltage.

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_On May_1,1979 Gulf < States began serving the City of Rayne, La.

under an " Agreement for Wholesale Electric Service to Municipalities."

e The agreement provides for Gulf States to serve the City and also i

give the City an allowance for maintaining their electric generating plant in a standby service mode.

i 1

5.

At the request of the City of Plaquemine, La., Gulf States suspended l

its interconnection agreement with the City in 1980 and began serving the City under a " Wholesale Agreement for Municipalities." The wholesale service was in effect from January of 1980 until July of 1983, at which time the " Power Interconnection Agreement" between Gulf States and the City was reactivated..

6.

On July 11,_.1982 Gulf States established two new rates for service i

to cooperative and municipal power systems. A "WS0" rate was estab-lished for service to' coops and municipals at 34.5 kV or less and a "WST" rate for customers taking service at 69 kV or above.

J s

7.

At the request of the City of New Roads, La., Gulf States cancelled its " Wholesale Agreement for Municipalities" and signed a " Power Interconnection Agreement" with New Roads on February 1, 1983, t

Presently, New Roads is receiving transmission service from Gulf States under three separate rate schedules:

1 1.

Transmission of capacity that New Roads owns in the Rodemacher 4

coal-fired unit on the CLECO system, under Schedule LESTS of the LEPA-GSU interconnection agreement; 25 mammw. mon com

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'2.-

Transmission of secondary energy from Lafayette, under Service h

Schedule LTS of the Lafayette-GSU inte,rconnection agreement; and 3.

Transmission service for non-scheduled energy, under Service Schedule LTS of the New Roads-GSU interconnection agreement.

L 8.

On May 27, 1983 Cajun entered into a letter agreement with the City

~

L of Ruston, La. to supply short term, off peak power and energy on an as available basis.

As a' result of the River Bend license conditions, competition among wholesale i

power suppliers in Louisiana has increased.

Smaller generating entities, notably Cajun and the City of Lafayette, are now better able to' offer their wholesale power services to entities seeking wholesale for resale power.

Examples of this increased competitive' activity at the wholesale power level I

l are-the recent agreements negotiated between the City.cf Lafayette and the t

Cities'of Plaquest'ne and New Roads. Heretofore, these two cities had been supplied wholesale power by Gulf State's Utilities, now the City of Lafayette is supplying powe. to the cities over Gulf States' transmission lines.

The' ability of wholesale power purchasers to change power suppliers in search of i

the most cost effective source of power indicates the presence of competitive 1

forces = at work in 'the Louisiana bulk power industry.

Staff believes these new power supply options have resulted in increased competitive activity at the j

wholesale power level and have been made possible by the River Bend license

. conditions-particularly license condition.No. 10 requiring Gulf States to j

transmit power over its transmission lines.

26 sweassa.emerwerm,-mx-emmt mv..m, mu m.mmJl

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E.

Transmission Service p

Transmission of power and energy represents the life blood of the electric L

. power industry, particularly for power entities engaged in the purchase and sale of bulk power and related services. The Department of Justice' noted* in

)

its advice letter that various power entities located in Gulf States' service e

area were unable to market substantial excess generating capacity because these generating entities were not directly interconnected to their prospective customers or they had no means of transmitting or wheeling their excess capacity, i

L Gulf States, in,its " statement of policy commitments" to the Department, indicated a willingness to provide interconnections and transmission rights over its lines to those generating entities located in,its service area.

l Staff has documented the following changes pursuant to Gulf States' transmis-l sion policies and activities since the construction permit review.

1.

During the CP antitrust review, Gulf States and the City of Lafayette, La. negotiated a Power Interconnection Agreement that also included provisions for the City to wheel power over GSU lines to the City of Plaquemine, La. (Schedul.e "LTS").

2.

In late 1978 the City of Lafayette, La., requested Gulf States to I

transmit approximately 5 MW to Louisiana Power & Light Co. for delivery to the City of Clarksdale, Miss. After extended negotia-j tions between GSU and Mississippi Power & Light pursuant to an i

  • The Department, in its River Bend advice letter indicated its concern pursuant to transmission access, by referencing the Court of Appeals case, City of i

Lafaye6te v. Securities and Exchance Commission.

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interconnection agreement and a FERC proceeding init.iated by MP&L,

-i the power began flowing to Clarksdale over GSU transmission lines in 1981 for a limited term of one year.

l l

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3.

Gulf States now provides Cajun transmission service for the Big l

Cajun.No. 1. Plant, Big Cajun No. 2 Plant and will provide such service for Cajun's 30% share of River Bend. This service is or

(

will be provided under the " Power Interconnection Agreemen " between,.

Cajun and Gulf States effective July 1,1981. Cajun has purchased a-l=

portion of the-500 kV line which links the River Bend and Big Cajun power plants.

(The purchase was pursuant to Gulf States' Service j

Schedule CT0C of'the " Power Interconnection Agreement" and provides i

[

for an equalization of investment and coordinated development of I

transmission facilities between the two power systems.)'

i 4.

By letter dated November 2, 1982, the City of Lafayette requested r

GSU to provide transmission service for the City of Lafayette so^

that Lafayette could provide 18 MW to the Municipal Energy Agency of Mississippi (MEAM)--a similar transaction to that which occurred in

'#2 above. At'the time Lafayette requested transmission service, the interim GSU/MP&L interconnection agreement established in #2 above had expired and GSV informed Lafayette that GSU could not implement the power transaction without an interconnection agreement with MP&L.

Therefore, Lafayette made arrtngements with Louisiana Power and Light and Central Louisiana Electric Company to transmit the power.

Since the 1982 request, GSU and MP&L have entered intc, an Interconnection Agreement, dated June 15, 1983, and GSU has indicated to Lafayette 28 rnwxrmu -

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)

that it is,now willing to provide the necessary transmission service S.

1 from Lafayette to MEAM.

l 5.

Cajun' Electric Power Cooperative expects to conclude negotiations

[

with Arkansas Power & Light Co. pursuant to a transmission service agreement which would provide delivery of Cajun's future allocation j

of Southwestern Power Administration hydroelectric power to the Louisiana Power & Light Company,for transmission to Cajun's delivery points on LP&L's system.

J Gulf States' policy regarding wheeling has changed considerably since the j

i construction permit review. As indicated in City of Lafayett,e,v,. Securities l

andExchanceCommj,ssion,andintheDepartment'sRiverBendadviceletter,

- Gulf States had a past history of denying wheeling requests by smaller generat-i ing systems within its service area. In its policy constitments to the Depart-j ment of Justice, Gulf States agreed to provide wheeling services for generating s

l power systems within or adjacent to its Louisiana service area, The changes noted above indicate that Gulf States has implemented license condition No. 10 pursuant wheeling, thereby enabling smaller systems in the area to better serve their customers by providing more cost effective power supply alterna-tives.- It was the intent of the River Bend license conditions to promote increased competition and cost efficiency in Gulf States' service area. The

. implementation of transmission agreement? negotiated since the construction permit review has served as an effective vehicle in providing the smaller generating systems the means to actively contribute to the competitive process in the Louisiana bulk power services industry. Staff encouraDes the continuation of this activity by Gulf States Utilities.

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F.

Formation of the Louisiana Enercy and Power Authority

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'In 1979 the Louisiana state legislature passed-the " State Power Authority Act" which paved the way for the formation of the Louisiana Energy and Power Authority i

(LEPA)*. By establishing LEPA., the Louisiana legislature provided a vehicle whereby many smaller municipal electric power systems could join together as one.

and participate in the benefits of scale economies associated with large scale 1

j

. generation and transmission facilities.

Prior to LEPA, purchasing ownership shares of large baseload power plants, heretofore the primary domain of the 9

1arge, vertically integrated investor owned power systems, was not only

[

L impractical for a single municipal system but also illegal under Louisiana law.

It was the intent of the state legislature in creating LEPA:

y l

"... to insure an adequate, reliable and economical supply of

{

electric power and energy to the participating municipalities."**

Now, under the LEPA Act, Louisiana municipalities are~ authorized:

"... to jointly cooperate and to plan, finance, develop, own and operate with [other) municipalities and investor owned electric l

ly power companies and electric power cooperative associations or corporations, within the State, electric generation and trans-j mission facilities in order to provide for the present and future requirements of the Authority and participating munici-

} =

palities."***

Changes in the organizational structure and charaster of the electric power industry over the past decade have resulted in the formation of joint action i

I

?

  • Comprised of the following municipals: Abbeville, Erath, Gueydan, Kaplan, Lafayette, Plaquemino, Rayne, St. Martinville and Welsh, Louisiana,
    • Excerpted from the Louisiana Energy and Power Authority Act (No. 772), p.1.
      • Ibid.

l 30

'i 1

NEMYiEI_ISI21NNES I'IN a,3^I49 Ur I11'YM */XTEM7 stilt'1O 7/fM8'#iR* mmh 923W'?NW 'Z%'WM 'TM 'IWN W"? M*74N-

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p.

agencies such as LEPA.in many states throughout the country. With the develop-j p

ment of technology allowing economies of scale at the point of power generation, f

-more and more smaller power systems have begun to pool their resources, thereby t

enabling individual member systems to participate in the benefits associated with large scale generation and transmission facilities.

j Staff believes the formation of LEPA has provided a stimulus to competition in the Louisiana bulk power industry by giving smaller power entities the oppor-tunity to participate in the decision making processes that determine their

.I By gaining a' cess to alternative sources of power supply, bulk power supply.

c smaller power systems in Louisiana are better able to secure the most cost effective source of power supply available.

LEPA has nurtured this develop-1 mental process in Louisiana.

~G.

Abbeville and St. Martinv111e

).

l Staff has received allegationt that Gulf States Utilities.would not wheel power over its transmission lines to the Cities of Abbeville and St. Martinville,

)

[

La.--municipal power systems in Gulf States' service area.

Staff was concerned with these charges and has fully considered them.

Staff's concern was twofold:

(1) If Gulf States was in fact refusing to wheel to SLeneratina systems in its service area, such a refusal (s) could represent a violation of its construction I

permit license condition (No.10) requiring wheeling and may require remedy in a Commission compliance proceeding; and, (2) If Gulf States had refused to wheel to non generating power systems, such a refusal could represent a change 31

.i M w xcru m we?n.-w m

4 ll

}

5 in the company's activities since~ the construction permit antitrust. review that may require relief through a formal antitrust operating license proceeding, Upon investigation and review of.the available data pursuant to Abbeville and St. Martinville, staff believes that Commission remedial action is not warranted at the present time in either a compliance or operating license proceeding.

[

Specifically, the Louisiana Cities of Lafayette and Abbeville claimed that

.GulfStateshadrefusedtoprovidethenecessarytransmissionright[overits lines to accommodate a power sale between the two cities.

Lafayette, a gener-1 ating power system, has a considerable amount of excess capacity and is actively seeking markets for its power.

Abbeville, a non generating distribution system, is a wholesale customer wholly served by the Gulf States Utilities Company.

Lafayette and Abbeville worked out an agreement in 1983 whereby Lafayette was willing to provide Abbeville with all of its powar needs at a lower cost than that provided by Gulf States.

Though Gulf States was inter-connected to both systems, the company refused to provide transmission service to Abbeville because, according to Gulf States, Abbeville was not a generating power entity. Abbeville claimed that under the River Bend license conditions, Gulf States was obligated to wheel power to all power entities in Louisiana; generating and non generating entities alike.

Later, in early 1984, a similar situation developed between Gulf States Utilities and the Cities of Lafayette and St. Martinville, La. Gulf States again refused to wheel to St. Martinv!11e.

indicating that,it was not obligated to wheel to non generating systems.

Subsequent to the completion of the construction permit review, Gulf States entered into a power interconnection agreement with the newly formed Loulslana

' Energy and Power Authority.

Incorporated in this agreement are schedules and 32

7-

=_ --

~- -- - _--.

.w n

[-

l rates designed specifically for transmission of power and energy to LEPA members.

In both the Abbeville end.St. Martinville situations, Gulf States refused to

[

transmit power to the cities directly (because, according to Gulf States, the citieswerenon-generatingentities),butindicatedawillingnisstoaccommodate I

the power sale.r. der its rate schedules with LEPA, with LEPA acting as the j

trans,fer agent, buying the power from Lafayette and reselling it to Abbevil.le p

l and St. Martinville (both LEPA. members).

k H.

Transmission Services From Lafay'ette to Plaouemine i

Staff has also received allegations

  • that Gulf States has refused to provide j

f transmission service from Lafayette to Plaquemine.

Both Lafayette and Plaquemine j

have interconnection agreements with Gulf States that were entered into in o

1973 coincident to the imposition of the construction permit antitrust conditions.

s' l

Included with the interconnection agreement is a transmission schedule referred i

to as "LTS" which provides transmission services by Gulf States between gener-ating entities that are interconnected with Gulf States.

In April 1983, Lafayette entered into an agreement with Plaquemine to supply its power and energy requirements from June 1, 1983, through April 1986.

By L

letter of April 27, 1983, Lafayette requested Gulf States to provide trans-f mission er

e to Plaquemine under the rate scheddle "LTS."

Gulf States L

ref'use on '

basis that Plaquemine was not a generating entity.

At the time, Plaquemine was receiving its full requirements from Gulf States.

Although Plaquemine has generation of its own, the generation was not operating at the 1

time.

" Guttman, February 3, 1984, Loc. Lit. pp. 19-21.

33 i

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1 Plaquemine did not agree with Gulf States that its generati,on had to be operating t

for it to qualify under the "LTS rate schedule." Plaquentne suggested thst it could operate a small amount of the inefficient generation in order to satisfy dulfStates.

In response to this proposal Gulf $tates noted that when it began supplying the full requirements pcwor to Plaquemine some years earlier, some of the equipment required for interconnected operations (i.e., with systems J

having generation) had been removed and that it would take some time for the equipment to be reinstalled.

Under the circumstances, Lafayette and Plaquemine decided instead to take transmission service under the Gulf $tetes LEPA agreement.

Transmission Service to Non Generatina Entities Under the River Bend license conditions, Gulf States is required to provide l

transmission services to generating power entities in or adjacent to its service area. The requests for transmission services from Abbeville, St.

Martinville and Plaquemine were turned down by Gulf $tates. However, Gulf States did agree to provide transmission service from Lafayette to LEPA--i.e.,

between two generating power entities engaging in bulk power supply, as required by the license conditions.

Staff does not believe that Gulf States' refusal to wheel directly to Abbeville, St. Martinville or Plaquemine represents a violation of its license conditions.

The second and more germane question to the operating license review is whether or not Gulf States' refusal to wheel to non generating power enta les represents a significant change in,the Company's activities since the CP review, a change that would warrant a remedy by the Nuclear Regulatory Commis-i sion., Staff believes Gulf States his taken steps since the completion of the 1

1 f

i wwxsmw?"# o m mesmnemvmmw.~nmem - m er m m ~ m w rm-r w mne-,m x.

y construction permit antitrust review to provide transmission services to l

non generating systems in its service area. As discussed earlier, Gulf States l

has agreed to transmit power and energy to LEPA for resale to non generating l

LEPA members." Moreover, Gulf States has indicated to staff that it is wi111ng to provide transmission services directly to non generating systems throughout f

its service area with the recent development of a draf t " Power Delivery Agree-ment."**

Tne purpose and function of the Power Delivery Agreement (PDA)_ are defined at pages 1 2 of the draft PDA, "The purpose of this Agreement is to establisn the terms, conditions, and consideration pursuant to which the Company will provide Power Delivery Service to a Qualified Customer.... Power Delivery Service is the transmission of power and energy over the Company's trans-mission system from a Power Supplier (Supplier) or Entity which is directly connected to the Company's system to the Point of Delivery which is directly connected to the Company's system... to fulfill the load requirements of the Customer's integrated system."

i l

The Power Delivery Agreement does not restrict *Taalifying customers" to generating power systems.

" Customer" as defined by the PDA means, i

"an incorporated municipality or a rural electric cooperative within or joining Company's service area and which owns and operates its own electrical distribution system for retail sales of electricity within its system.***

l L

Gulf States has agreed to wheel Lafayette power to LEPA, thereby providing 1

l indirect transmission service to the LEPA member Cities of Abbeville and St.

l 1

l

  • See letter dated April 27, 1984, from W. J. Cahill, Jr., Senior Vice President for Gulf States Utilities Co. to William Regan, Jr., Chief, Site Asialysis Branch, Nuclear Regulatory Commission at pages 5-6.

Letter attached as l

Appendix E.

j

    • Copy.of June 16, 1984, draft attached as Appendix F.

l

      • ! bid., pp. 2-3 l

s 35 l

l

_. _ m,,, _

L.._..-_._.__...._.....__

i f

Martinville. Moreover, Gulf States has initiated an agreement, i.e., the PDA, j

l-wherebyanynon-generatingmunicipalityorcooperative(locatedwithinor l

adjacent to Gulf States' service area) c'an directly receive transmission i

service without going through LEPA as a broker agent. Staff will be monk j

toring events associated with the P0A. Should Gulf States, upon request, fail to femaltre the Power Delivery Agreement, or a itke facsimile, before the FERC such a posture by Gulf States could imply that the company may not be t

willing to wheel to non generating power systems.in its area and may consti-tute a significant change since the CP review with anticompetitive repercussions in the bulk power market in Louisiana and surrounding states.

Staff believes that the development of LEPA and the newly created availability of transmission services through the Power Delivery Agreement (once filed before the FERC) will provide most of,the non-generating power systems in Gulf' States' service area the means to seek out alternative sources of power and energy r.ecessary to provide the most cost effective service for their customers.

With the emergence of the non-generating municipalities and coops into a broader bulk power supply market, competition among bulk power suppliers in Louisiana should intensify.

I J.

Miscellaneous Changes i

During the period since the completion of the River Bend construction permit L

review, there have been a number of seemis. gly unreleted changes involving applicant systems that, on their face, may have competitive implications in bulk power supply in Leni:.tana. These changes are:

1.

Gulf States' Board of Directors authorized the cancellation of the BlueHillsNuclearPlant(twounits)inAugustof1978, f

36

.h.

a

2.

Ir. 1979 Cajun Electric Power Cooperative became a member of the Southwest Power Pool.

i 3.

On July 2,1981. Gulf States acquired all of the stock of the Prucential Drilling Co. in exchangt for 588,000 shares of Gulf States comon stock.

4 By letter dated October 15,1982, the City of Austin, Texas inquired as to whether or not Gulf States was interested in purchasing the City's share of the South Texas nuclear plant. Gulf $tates, in its reply to the City, indicated it would not be interested in such a purchase.

I 5.

Gulf States deferred the construction of a 540 MW coal-fired plant, l-Nelson Station No. 5. until 1994.

l 6.

On January 5,1984, Gulf States' Board of Directors adopted a resolu-tion to cancel.the construction of Unit 2 of the River Bend plant (previouslydeferred)becauseoftheavailabilityofadequate i

generating capacity and purchased power in the foreseeable future.

l The slow down in economic growth throughout most of the country in the early 1980's ' caused many. power systems to reevaluate their load growth projections and planned capacity additions. This has been apparent in Gulf States' lack ofinterestinnewcapacity(SouthTexas)anditsdeferralofalargecoal-fired plant (Helson No. 5) as well as the cancellation of three nuclear units (RiverBend2andBlueHills1and2). Gulf States' acouisition of an oil end l

l i

37 9

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1

...,.,,,,.,i.i..iin ii..iii,.iii.i h ' ',

gas drilling company complements GSU's interest in developing its own source of fuel for many of its oil and gas fired units.

(This is particular'ly signifi-cant for Gulf States in light of the expiration of Gulf States' long terin gas contract with the Exxon Company in January of 1985.) Cajun's membership in

.the Southwest Power Pool coincided in large part with the emergence of the coop as a major bulk power supplier in Louisiana '(i.e., as evidenced by Cajun's participation in River Bend anet the construction of other large base load coal-firedplantsinthelate1970's). Membership in the Southwest Power Pool enables Cajun to participate in and provide input to the planning and developnient of existing and new generation and transmission facilities in Louisiana and surrounding jurisdictions.

Staff views these iciscellaneous changes as resulting from corporate growth and business activities over the years since the construction permit review and sees no significant anticompetitive etfacts in the Louisiana hik power industry as a result of these changes.

Yll. Sumar.y and,.,C,onclusion Staff has identified changes in the conduct of Gulf States Ut.111 ties Cnmpany (Gulf States) since the completion of the constructjon permit (CP) atititrust review that ma.y hcve enmpetitive significance iti the Louisiana bulk power industry. Gulf States:

(1)hasofferedownershipsharesinRiverBendtopower entitiesinLouisianaandTexast(2)negotiatednewinterconnectionsandservice agreetnents with other generating systems throughout Louisiana and adjacent states; (3) hcs joined with other power entities in the deveinpment and construc-tion of additional non nucient base load generating facilitiest (4) is serving 38 m

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l newwholesalecustomerst(S)hasprovidedtransmissionservicestogenerating power entities in its service are,at (6) has prepared a draft'" Power Delivery Agreement" to provide transmission services to ron-generating entitiest and (7) has curtailed or cancelled the construction of new generating plant and equipment, due in large measure to the slow down in projected load growth of Gulf States' system.

i i

Many of these activities, e.g., the offer of nuclear plant access, transmission l

service to generating power entities and various wholesale for resale agreements, 4

l represent changes in Gulf States' concoct as a result of comitments (and subsequentRiverBendlicenseconditions)madetotheDepartmentofJustice duringtheCPantitrustreview. The River Bend license conditions and the changes which evolved as a result of the license conditions, have provided L'

l smaller power systems the means to' seek out alternative sources of power and I

energy and gain a foothold in the market occupied by a broad spectrum of power suppliers in Louisiana and surr.ounding states. The license conditions have l

j provided a competitive stimulus among bulk power suppliers in Louisiana and surrounding states. At the same time, the license conditions have provided l

the customers of these power suppliers, i.e., smaller, less integrated power j

systems, the ability to purchase more cost effective sources of power and l

energy. Staff encourages nore of these types of changes for they tend tn promote the most cost efficient allocation of power and energy throughout the Louisiana bulk power market.

One area of concern identified by staff in its review of Gulf States' activities l

f since the completion of the Cp review concerned cliegations that Gulf States N

kar wwwnmamen3mnummmemr m-mamam m e

a was unwilling to provide wheeling rights over its transmission system to non-generating power systems in its service area. The River Bend license conditions required Gulf States to provide transmission service,s to generating power entities. A refusal by Gulf States to provide transmissinn' services to non-generating power entities was looked upon by staff at a change in Gulf States' conduct that could represent a significant change since the CP review and if any relief were required, it would evolve from an operating license anti-trust review, not from a compliance proceeding. After review of the availabic data and contacts with Gulf States and other affected power entities in Louisiana, staff believes that the allegations pursuant to Gulf States' refusal to provide wheeling services to non generating power entities is being resolved. Gulf j

States has (indirectly) offered wheeling services to a large number of non-generating power systems in Louisiana through its interconnection agreements with Cajun Electric Power C9 operative, Inc. (Cajun) and the Louisiana Energy andPowerAuthority(LEPA). Moreover, it appears that non LEPA power entities without generating capability can now gain access to Gulf States' transmission system through the Power Delivery Agreement" (PDA) proposed by Gulf States.

(Although the PDA is presently in draft form, Gulf States has indicated tn staff that the PDA will be made available to eligible entities requesting it.

Staff will continue to monitor Gulf States' activities in determino if any eligible non-generating power system is refused wheeling services under the proposedPDA.)

Staff believes that the changes which have occurred in Gulf States' relationships with smaller power cystems in and adjacent tn its service area since the completion of the construction permit antitrust review have been generally pro-competitive. Access to the benefits associated with large base load power l

plants has been made available to many smaller less integrated power entitics i

e 40 wama;wreammee:mummavruewsmterommmmtremeausur~nn-w saamm~s

incapable of financing such plants on their own. Through the implu..entation of the River Bend Itcense cor}ditions requiring wheeling, generating power entities in Louisiana (particularly the smaller systems) are now better able to supplement and coordinate their generation with other generating systems.

Noreover, through new agreements negotiated or presently being offered by Gulf States, non-generating power entities in and adj utnt to Gulf States' service area now have access to alternative sources of power and energy via Gulf States' transmission system. As a re'sult of these developments, staff is recomending that no affirmative signif' cant change determination be made i

pursuant to the application for an operating license for Unit 1 of the River Bend Nuclear Station.

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CEPC0 MEMBER COOPERATIVES REA Eg33 Lgcation Desianati2D Beauregard Electric DeRiddar Louisiana 18 Cooperative, Inc.

Beauregard Bossier Rural Electric Bossier City Louisiana 11 Membership Corporation Bossier Claiborne Electric Homer Louisiana 17' cooperative, Inc.

claiborne Concordia Electric Ferriday Louisiana 20 Cooperative, Inc.

Concordia Dixie Electric Membership Baton Rouge Louisiana 13 Corporation E. Baton Rouge Jefferson Davis Electric Jennings Louisiana 19 Cooperative, Inc.

Jefferson Davis g

Northeast Louisia'a Power Winnsboro Louisiana 12 n

Cooperative, Inc.

Franklin Pointe coupee Electric New Roads Louisiana 15 Membership Corporation Pointe Coupee So'uth Louisiana Electric Houma Louisiana 8 Cooperative Terrebonne southwest Louisiana Electric Lafayette Louisiana 9 Membership Corporation Lafayette Teche Electric Cooperative, Jeanerette Louisiana 6 Inc.

st. Mary

' valley Electric Membership Natchitoches Louisiana 7 Corporation Grant Washington-St. Tammany Franklinton Louisiana 10 Electric Cooperative, Inc.

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Q$

c!TY or LArAYETTE.1.0U181ANA ir. SECURITIES & EXCE. COEN 941 t;4

?

' " ' ' ' * ' ' ' * " ' (*"

8 d

l L Corporations #*894J(1)

%d Aft,the Where cit 4es made plain their ob.

p c s

(,'

CITY OF LAFAYETTE, LOUIStANA, jections to applications of electric com.

M City of Plaquemine,Imulslana, panies, and Securities and Exchange

i.. d

)*

Petiuoners, Commission ruled on merita, there was

{,' k a-not failure by cities to exhaust admin.

be based v.

J

' fg P

SECURITIES AND EXCHANGE Collt.

letrative temedies, even if there was

N P

MISSION; Respondent, failure to fully comply with Securftles

$% /

1Aulslana Power & Light Company' Exchange Commission procedures. Pub.

for that lehool in Intervenor, lic Utility lloiding Company Act of 1935.

N)

I a),4 U.M.A. I 79x(sh Nnal g$

da. A1 1

hid

. CITY OF LAFAYETTE, LOUIStANA, Power Act, t 818(b),16 U.S.C.A. I 825l 3

City of Plaquemine.14ulsinna, (b); 6 U.S.C.A. I 702.

' :{

Pouuoners,

".( [

le 'estab.

V'

t. Corporsuons east 4.stl)

}.p 4 seti:n FEDERAL POWER Com118810N.

Eletricity est

.1 Where cities alleged injury In fact E

r gg,,,,

Respondent, from alleged failure of Securftles Ex.

Tj Dover. al.

cult States Utillues Company, Interrenor, change Commlaston and Federal Power m made Nos. S41H, 24943,11-1N1.

Commission. In considering certalo ap.

,}

not chal.

s t -

United states Court of Appeals.

plications of electric companies to con.

la la any District of Columbia Circuit, alder cities' objections as relevant, and

'[

i biler, by ne their A I"'

""' I ' I cities asserted nonfrivolous claim that ij nke their Decided Oct. 12,1971.

"public interest" requirements of stat.

~

ute required consideration of antitrust

.]

p ladies.

Petition for Rehearing Denied in conspiracy asserted by citlen. cities were

,y was even No. 71-1041 Dec.15.1971.

" aggrieved" by agency actions and had

school, 4

standing to seek review. Public Utility rolled by Holding Company Act of 1935, i 24/a),

4:

,Perala, Proceeding by cities for review of 15 U.S.C.A. l TDx(a): Federal Power 1 Ed.2d orders of the Federal Power Commis, Act. I 318(b).16 U.S.C.A. I 825!(b);

' 'j sta rant slon and Securities and Exchange Com. 6 U.S.C.A. I 702.

U.S. 886.

misalon approving applications by slee.

1

,-(1961),

trle utilities proposing lasuance of bonds.

8. Administrative Law and Procedure llstrative notes and stock to finance capital re.

Arguments of counsel on review

]l c=455 ind cim.

quirements. The Court of Apleals 14v.

.itirney" enthat. Circuit Judge held that where nn could not take place of arener findings.

l g

t In 1:ne.

stency such as the Federal Power Com.

4. Electricity C*3 ement is '

mlaston has some regulatory jurisdiction Where Federal Powtr Commission's

. [

mentally over operations. It must consider wheth. reason for denying or deferring request.

[

I U.S. at er there is a reasonable nexus between ed hearing of anticompetitive lasues on f

ny Judy.

matters subjnt to its surveillance and application of electric company to sdl

hat test.

those under attack on anticompetitive first mortgage bonds was not clear on y oppor.

prounds, but the general dottrine re, record, or meaningfulin findings or dis.

4 4 ca<e.

quiring an agency to take account of an.

eussion, it was necennary to remand or.

luired, titrust considerationn does not extend to der approving application. Federal Pow.

q ter seem the cane where an agency such as the er Art, l) 201 et seq.,204 tr. U.S.C.A.

r seri:u,.

Securities Exchange Commisslun han not

!! 824 et acq., 824c; interstate Com.

i allure ta been given any rerulatory jurisdiction metre Art. I 203, 4D U.S.C.A. I 20a.

,j

sdies, over operations of a company, us.c it Ordern of SceuriticA l!sthange Com*
5. Adminhtrathe 1.nw nml l'nwdurc mission af firmed; in No. 71-1041,coune c=no Apeney la not requh rd to hold remanded in Federal Power Comminion hearinrn in mattern where ultimate de.

for further proceedings.,

a I

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._____.____..._._._.m..~._.

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k gg 464 FEDERAL REPORTER,2d SERIES clalen will not be enhanced or assisted curitles Eschenge Commlaston has not by receipt of evidence, been given any regulatory jurisdiction our operadens of company. Fednal

8. Carpeestions #8HJ(1)

Power Act, ll 201 et seq.,202, tot (a, b),

gig.g,g,ggy pg.

As to laterventions ralains antl. 203, 204, 204(a, b) 206,18 U.S.C.A. ll competitive issues on applications to 824 et seq.,824a 824a(a, b) 824b,824e, Federal Power Commission or Securl. 824e(a, b), Side: Interstate Commerce ties Exchange Commission, disposition Act, 4 20s, 49 U.S.C.A. I 20a PuWie Utility Holding Company Act of 1936, may be made without hearing if accom.

ll 1 et seq.,4. 4(b),7,7(c. d f, g), (e)

'I -. " '

panied by explanation, supported in ree, (2). (d) (4),15 U.S.C.A. Il 79, et seq.,

ord, the Intervenor's contentions are too l

e Insubstantial or barren to indicate es.,79f,79f(b),793,79 (c, d, f,

) (c) (2),

istence of substantial anticompetitlw la. (d) (4).

b sues, or to meet requirement of reasons.

16, CorpoMons #864.S(1) ble nexus between activilles challenged Generally, Internnor objecting to h

. r, i

and equities furthered by applicatio Issuance of securilles eennot require Se.

I Federal Power Act, il 301 et seq.,204, eurities Exchange Commianlon consider.

18 U.S.C.A. ll 824 et seq.,824c: Inter. ation of applicant's operating setivities state Commem Act, I toa, 49 U.S.C.A.

from point of view of undue restraints 3

$20s: Public Utility Holding Company on competitors or potential competitors,

+

f Act of 1938, l 7(d) (4),16 U.S C.A. I but appropriate resolution must be made 79s(d) (6).

If in particular ease operations anssited are of such nature as to be equivalent,

1. Action #6

{n significance and consequence, to

.i.

Even in courta, doc ine of moot. structural affiliation, or if purpose of tr

,f, "

ness does not apply to questions of re. utility's sale of securities is otherwise y

curring natues.

shown to have reasonable nesus to mat.

ters within Commission's jurisdiction p

4. Corpomons #364.3(1) under other provisions. Publie Utility gi cggggy p g Federal Power Ccmmlulen or 8,.

Holding Company Act of 1935, il 1 et 1

eurities and Eachange Comm'ssion may seq., 6,4(b), 7; 7(e, d, f, g), (c) (2), (d)

I defer its disposition of application to is. (4),15 U.S.C.A. ll 79a et seq.,79f,79f sue securilles pending determination of (b), 7tg. fig (e, d, f, g), (c) (2), (d) relevant court litigation where same will.(6): Pederal Power Act il tot et seq.,

1 aid in determination of "public interesta 304,204(a, b),16 U.S.C.A. II 824 et sNI.,

! j lasue. Federal Power Act,11201 et seq 824c,824c(a,b).

]

204,16 U.S.C.A. {l 824 et seq., 824ci Interstate Commerce Act. I 20s,49 U.S.

hir. Robert C. McDiarmid Washing.

]

C.A. I toa t PuHic Utility lloidina Com. ton D. C., with whom Mr. Geo'rre Spie, q;

pany Act of 1935, l 7(d) (6).16 U.S.

rel. Washington, D. C., was on the brief.

a l[

C.A. I 70r(d) (6).

for petitioners in Nos. 24.764 and 24.0G3.

9. Monophics Celttis)

Mr. George Spletel. Washington.11 j

Where agency such an Federal Pow.

C.. with whom Mr. Robert C. McDiar.

-l er Commission has some rerulatory ju. mid. Washington, D. C.. wnn on the brief.

N risdiction over operations, it must con, for petitionern in No. 71-1041, sider whether there is renannable nemus Mr. David Ferber. Solicitor. Securi.

between matters subject to its survell. ties and Enchange Comml>> inn, with d

lance and those under attack on anti. whom Mr. Philip A. loomis. Jr.. Gen.

{

competitive grounds, but rencral doc. Counnel. Securillen aml P.u hange Coim.

trine requiring agency to take account mlaslon, was im the brief. for re>1mnd.

N,?

of antitrur.t considerations daen not ex.

ent in Nos. 24.764 and 24.963. Meters temt to case where agency, such as So. Richard E. Nathan. Special Counsel, and L' * ***

. __ n,. w _

"*'emi

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y. ~ r.,p,. 7 m.. c.

...w. -

p g. pan.

W' b

,D 08T7 0F LAFATBTTd L0tf!81ANA v. MCURITTE8 & E10M. 00M*N943 cueeeesF.seess stle

.',.' i t

Enchange Commission also entered ap. dets of the Securities & Enchange Com.

!l ~s'!

j, Stuart A. Mores. Attys. Soeurities and competition. We affirm as to the ori f:

pearances for respondent la Nos. 84 mission, and romand as to the order of I'%.

p'.

764 and 84,948.

b Federal Power Commission, i  %

PU Mr. Gorden Geseh. Gen. Counsel. Fed.
  • eral Power Comalaslea with whom

!. BACR0ROUND

;. P

[ K;~

Messrs. J. Riehard Tiano, Anat. Solleltw.

A, p,g gg,e.g,,

r rs tc Federal Power Commlaston, and taen.

%e PubHe Vuuty Aet of 12. passed ard D. Eseley. Aast. Gen. Counsel. Fed. August St.1986, O mat. m. unWas, j p ;, g a-i*

eral Power Commission, were en the In

1. h Pubue Utluty Holding Company Act.16 U.S.C. I 79 et seq n. q. t.

brief for reapendent la No. 71-1041.

p.

Mr. Melvia 1. Sehwartaman. New Or. whlen provides tw regulation of public i,.41 r

leans.14 with whom Meests. Charles utility heldlas eempanies and is admin.

ltb+t 'j

.t A. Road. New York City, and Richard talered by the SEC. Ita T!tle !! enact.

E' M. Merriman Washlaston. D. C were ed the Federal Power Act. Parts !! and i.' y. 't o

on the brief, for latervenor.la Nos. 34.*

!!!.16 UJ.C, 8 884 et seg, with provl.

'. '. ' t 764 and 34.948. Mr. Charles King Mal

  • alona. for regulation of.electrie utility

' !4 9

wg a

lory. III. alee entered an appearanee for companies engaged la Interstate tom.

til p; latervenor la Nos. 84.744 and 84,948.

meree, administered by the FPC.

Ui;:

a

' : t:-

l.

Mr. John B.' Holtalager. Jr., Wash.

e-Instoa. D. C., with whom Mr. B. H.

Nolding Company Act g.

a d

Hughes. was on the brief, for laterven.

Seedons 6 and 7 of the Holding Com.

)

4 1

or la No. 71-1041.

pany Act give the SEC jurisdiction over

, d,., 1 '

sales of swurluu by holding ampanlu i, p,! D Before BAEELON. Chief Judge, and their subsidiaries, subject to cer.

Q,, <

FAHY Senior Circuit Judge. and LEY. tala eanpuona. notably an esempuon in 4e..

ENTHAL. Circuit Judge.

I 6(b) for lasses approved by state com.

J.' ~. 2 b.4.,:

i,p'%

salesions) 8' LEVENTHAL, Circuit Judget Sestlen 6 forbids the sale of a escurity h.

The Cities of Lafayette and Plaque. by a holding tempany or its subsidiary, r.,,, d.g ;

l}

mine. Loulalana (" Cities") petition this unless the sale is la seewdence with a

..:M.Q

,g

g i eeurt to review orders of the Federal declaration it has filed under l T. and Power Commlaston and the Securttles

)'

with an order of the SEC permitting p.3 and Eachange Commlaston whlek ap. such declaration to become effective, q

prove ( applications. presented to the 8e, eurities and Eaehange Commlaslon by Under l T W 8EC may not permit a

'i e

Loulalana Power and Light Company declaration to become effective unless it

("LP&L"). and to the Pederal Power fines compilance with certain require. '

e Commission by Culf States Utilities ments. One of these requirements set

.. =

Company, proposing lasvance of bonds, fwth in I 7(e) (t). la ratisfied if the D

f.

notes, and s'ock to finance espital.re. Commlaston finds "(t) such security is

~

  • * * (B) 7
3. :

quirements. The alst of petitioners' to be leaued or sold solely

).-

complaint la that the areneles failed to for the purpnee nf financing the bust.

take proper account of their claims that ness of the declarant as a public utillly r,

g, the proceeds would be used for the Com. eompany * * * " If the rt quirements

+

panies' unlawful conspiracy to suppress of ll T(e) and (3)' are met. I 1(d) te.

f I

4

l. Meetion 0 le owlilled na 18 l'.MP, 6 Tnt.

meulltinne ne it dwen. ai+ti+. late in the 3

g Meetion T la redtfini no 15 l' Nf. I Tys.

liul46e intet+=t ut fut tie p.nia.lan nl I'~

Hection elbl presides tlist if a l*ttice.

Inventat. of ni.inun ets *

  • 8."

E*

Int security leone of a ouhel.laty line been 3, g g g, g p,g, pan,,g,, g,,,.ui..a f.am 1.-

8'..

espece ly outl.ntined by the al+nmelair enentne effectise if the P ei.nd..i.m lin.

e ntale utility.venanlenina, the MMf' thall eu leen Info.m*J l.. = 8:31

..m.i.o...n hn.

eenpt tlw lentw "ouh n t in such letins and the ju.l 4w Hi. u oet n.. u o.wi. is oce l

l bd-i e

L f

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4

T S((

464 FEDERAL REPORTER, 24 821128 quins that the SEC *shall permit a dee. "as to the particular purposes, uses, and laration * *

  • to become effective eatent to which 4 *
  • any security unless (It) finds that
  • * * (4) the or the proceeds' thereof may terms and eenditions of the issue or sale be aphiled * * *." s of th6 soeurity are detrimental to the publie laterest or Submuon @ of l RH estaWahm an

,,,,,,,,,,,,,..the Interest of lavest. escluelen as to a utility organised and operating in a state under the laws of

(~

Finally l f(f) provides that the Com* whleh its security leaves are regulated mission's order permitting a declaration by a State commlaslon.'

y to become effective "may eentain such terms and conditlens as the Commlaalon finds necessary to aneure compliance B. Petifloners' Antitrust Allepsfless J

with the tenditions speelfled la this see.

14ulalana Power and Light is a i

tion [f].a

. holly. owned subsidiary of bliddle w

U South Utilities, Inc., a holding company y

rederet Pemer Ae8 registered under the lloiding Company

(

Section 304 of the Federal Power Act. Act. It is emppd. as is Gulf States and It U.S.C. I 824c, relates to the lasuann Central 14ulslana Electric Company of a soeurity by a publie utility,--de-(CLECO) (the thrw companies together fined by 8 201 as a company transmit. being sometimes referred to as "Com.

ting Plectrie energy la interstate com. panies"), In generating, tran*mitting gt merce or selling electrie energy at whole. and selling electrielty at whole nle and aale in laterstate commerce. Section 304 retall in laulalana. Culf States also

,f' (a) pmvides that no such public utility does this la Tesas. The three Compa.

e

. },,

, shall laeue any security eneept as author. ales are Interconnected, engage in sales

  • g;.

Ised by FPC order. It eentinuest and enchanges of electrielty amont

, d,..

The Commission shall make such er, themselves, and are members of the

'id..

der only if it finda that such lasue eleven " South Cotrol Electric Compa.

' t..'.

(a) la for some lawful ob. nies" whleh engage in a seasonal n.

D ject, within the corporate purposes change of puty with the Tennesaw M

of the applicant and compatible with Valley Authority. The Companies are

'P' the public intervet, which is necessary owners in Loulalana of major trans.

or, appropriate for or constatent with misalon faellities handling voltages up c'

l.'

the proper performance by the appil. to 600 K Y.

,. ),. l eent of service as a public utility and Petitioners allege that them three whkh will not impair its ability to Companies engand in a conspiracy to perform that service, and (b) is rea' suppress and defeat an Interconnection sonably necessary or appropriate for and pooling agreement between the Cit.

wh purpoon, les, Dow Chemical Company and 14ulsi.

Subacetion (b) of I 204 irlwa the Com. ana Electric Coolerative. Inc. l"LEC").

minolon broad authorisation to place con.

LEC. a steheration anil transmlulon co.

ditions on the granting of an application, cierative financed by the Itural Electri.

and speeltically contemplates provisions fication Administrattun, la music up of eif narutittee. nt eherntenn af eighte e.f ee.

fut sim I enu.e ehua n, u nke such sup-rutit) lud.le ts. thitt Ninte Ine s nptdienble di enuntal ut.htm in tie perimmes na ti tieteen linse tu.t I.en ownt4u4 mith, aun) fin 1 um *=nt) or neptope6 ate. no.1 enny by n>> wwh supplenwesal otaet om.li.

3. "tbl Tiw t'equeul**lun, af tet upportuutty in llw 3.tes tsinus of any 3.trsinus ped.t fut lwarpig tuay graht an) atqdp ut6nn un.

no to the puH6.ulat lastpre. u.ca, niel slet llas w rth.h in aln.le ne en patt, and entrut tu t hi li et ti.e omdatiah. up4. t with sml. an.hfientlues nn4 upm owli oldeh. nur scoutett

. tlatetaf..te eu.

terne nn.I n.tuHil.mo as it inn) find licero, tiertent et the pru ml. thern f enny'le enty ut appenprinte, and niny itenu time apt.hed. subres pla nn in e l.c tequier.

tu tltne. Mfirt upleittiinlis I..t lia ntileg nh4 letehts e l Dule Iluh int 4 8 this troth.h."

h

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4.

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i

[

c1Tr or LArAYETTE, LOU 181ANA e. SECURITIES & F4CE. COEN 945 b i..

en s.su r.se ut imu

,.,p

, and.

twelve electrie distribution cooperatives, and transmission needs. Therefore, the

" r.' '

staty all of whlek operate in Loulalana, new Administrator, advanced funds only WT mai In September 1964, W REA under. fw h LEC genusung staden, but W

]

tak to make a $66.5 million loan to LEC for transmisalon lines, and LEC was leit to negotiate with the three companies

[,;,.

for constreetlen of a 200 n!W general, for use of their transmission lines.

a)

Ing station with 1611 miles of transmis.

.a of slon lines through whlek the LEC could Petitioners contend that the conspir.

^j.M lagg serve eight of its twelve member coop, aer continued during these negotiations.

j eratives. Prior to this time,ithe three They may that the Companies, while will.

1 Companies had been selling power to ing to supply transmission of power to these coopstatives. Acewding to pett, some of the LEC members, refused to l ' '"

tiens tieners, the Companlu sueemded in de. supply transmission services between is a laying h actual use of the funds thus pool members. They further say that iddle '

provided for more than five years, the Companies demanded that LEC limit p

t..

panF through a series of lawsults filed by the its pown capselty to the 200 htW al.

Pa:F Companies themselees and by the Com. nady planned, and that the Companies and panies' attorneys on behalf of other supply all further power needs of the

  • W panF putative plaintiffs.

twelve cooperatives, thus precluding fur.

S ther kr LEC expansion to serve its mem.

Com, Petitioners allege ht in August, bers' expanding load.

!' C tting 1948, the Cities, Dow and LEC esecuted s,

and an Interconnection end Pooling Agrw.

C, Agency Proceedings

' ;'f also.

ment providing for the laterconnection of their generating systems and a long 1, Seevelites and Erchange Commission sales term poollag and coordination arrange.

Case No. 31,784 On September 16,

Y ment, with a minimum term of ten 1970, LP&L filed with the SEC a dec.

mens the years. The agreement, approved by the laration for authority to issue and sell P

REA administrator on November 19, 480 million of first mortgage bonds and M

es.

1968, provided for a combind planning 37 million in preferred stock. The stat.

,d of load requirements for the Cities, the od purpose of this financing was to en.

~;'

are LEC members and Dow, It meant, ae. able LP&L to repay short term borrow.

ns.

cording to petitioners, assurance of a Ings it had made as temporary finane.

up market for all surplus capaelty and see. Ing for its 1970 construction program, ondary energy, as well as coordination, and for other corporate purposes, and substantial savings, in W construe.

thru tion of new generators, in sum, econo.

On Oeteber 9,1970, counsel for the Cities submitted a letter to the Commis.

to mies of scale, plus benefits In the form tl*2 of back up for each mystem and enugy sion, setting forth the allegations out.

liwd above. The Cities asked the Com.

Cit' interchanges,

outsi, mission to order an investigation of Petitioners state that by engaring in these matters by its staff, to consult C",1 frivolous and repetitive titlantion, and with the staff of the FPC, and to with.

l e.

laetri, by mounting a public relations drive hold action on the authorisation pending op,(

and lobbying effort against LEC. the the results of the investigation or at

^

three Companien were able to hold up least a conference with the parties. The esp.

disbursement on the loan money unt!1 Citien contended in their letter that the g

January,1969, when a new REA admin. funds, if approved, would be utilised for

  • it W

istrator was sworn into office. This the construction of facilities that would prevented the members of the new pool assist I.l'&L and its associates in their n.)

from going ahead with their arreement. unlawful oh.lectiven, and asked that such tn Furthermore, a ri*e in conts during the approval, if Franted, he ennditioned on s>

five. year delay rained a s.crious question cessation of these netivities and the es.

{l" whether the originni loan would sufflee tablishment of a program to remedy to finance all of the LEC's reneration the damare already done. The Citien

. u...-

r

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~ ~ = " "

. r.m m L y c-.,

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m..

~

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\\

WiB5

^20N.10;..

.?

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p?h

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^

-d.iY@!n M mas,i.

M '

7dh.. DSS

3 6

7 i

946 464 FEDERAL REPontta, to states roquated at m matter be eet d wn be engaged with other partie " Thi

. for - hearing unless LP&L's parent SEC eencluded that h allegations in agrud to such a condition. The Cities the Protest did not present issues rete.

also requested a conference with the vant to Section 7 and therefore did not Commission and the Companlee, justify withholding the requested Or.

On October 27, 1970, b Commlaston der.

l lasued its order stating ht the Cltles The SEC made findings in each pro.

had not filed a Notlee of Appearance eeeding "that it is appropriate in the j

as a party pursuant to Rule 9(a) of its public interest and in the interest of a

Rules of Practice, or requated a hear. Invntors and consumers" that the dec.

m Ing. The order further stated that laration be permitted to become ef.

il "this controversy does not justify with. fective. 'It permitted both declarations

$1 holding of the requested order since it to become offective without a hearing, T

le not relevant to the conalderation of and the security sales authorised were f

the proposed trananettons which in all promptly completed, i

respects antisfy the standards of Section L TM Codh Cue No. 34,N#t On November 2, 19f0, G 8 tat fled n a p catfor 1970, LP&L filed with the SEC a dee*

laration for authority to laoue and sell with the FPC to sell $30 million of first up to (40 million of short term notes. mortgage bonds at competitive bidding, The application stated ht the pro.

5 during the period through December, 1972. The stated purpose of these bor. eeeds would be used to pay off part of Gulf States' commere!al paper and rowings was to finance the construction short. term notes. On Oc'tober 16. 1970, of new feellit!*t and improvements, and fu iner corporate purposes.

the FPC notleed the application and an.

nounced that protesta or petitions to in.

On November 30, 1970, petitioners tervene should be filed on or before filed with W SEC a formal " Protest November 2,1970.

. j and Intervention," whleh contained seb.

On November 2. W Cities filed their g

q etantially the same allegations as W protest and petition to intenene with

(

October 9 letter, and further requested the Commission. The protest set forth that the Cities be made parties to the the (2.egations outlined above, claiming 1

proceeding and that the SEC hold hear. thr.t Culf States had violated the anti.

Ings.

trust laws, the Federal Power Act, and On December 29, 1970, the SEC is. the lluiding Company Act. The Cities sued lin Order permitting tia declara. requested that the application be set 3

tion to become effective. The SEC down for hearing unless, as a condition l

found that the Cities did not directly to receiving approval for the sale of its attack the proposed use of proceeds securities. Culf States would agree to k,

  • 1 or tha terms and conditions of the pro. purge itself of these alleged violations L 1l poned securities, but were simply main. and remedy the damage already done.

'l telning "that authorisation for the pro.

Following an answer by Culf States.

1*

posed finanelns enhances Loulelana's the Commission, on December t.10h'.

finanelat tmition to pursue the alleged entered an order denying a hearing and violations of the antitrust laws." The authorigint Gulf States to issue the pro-

b. a[;

SEC held ti ut its authority under Sec. posed bonds. The Commission stated t

-d Q

tion fell (6) of the Act, to impoac that the Cities' allerations were "irrrh-b'A terms and conditions related solely to vant to a requested authoritation of se-p*,{5 the terma and conditions of the security curities." und further found that:

4..

to be Inued, and "does not extend to the The proposed innuance and sale of go.

  • resolution e,f collateral and unrelated 11onds, as hereinafter authoriaid. will

.., CA controserties in which a declarant may be for a lawful object, v.ithin the

W.d y~p O

_m__. _ __. _-

s<~.

v_

+.

.u..

- myy.-

?

.h y.

1

.t CITY OF IAFAYETTE, LOUISIANA e. SECURIT!E8 as EXCE. 00M'N 947 i

%{c.

o eu.s..u r.se m imu j '.r.'?:j f The

- torporate purposes of Applicant and relevant to a Sectiott 204 determination pas in compatible with the public fnterest, generally, or only because, in this par.

(.', p3 F

e role.

whleh is appropriate fw and consist. tiestar case, a refunding rahr than 3

3 i lid not ont with the ptspor.perfwmance by new funding was involved. Th,e Cities-led 4r.

Applicant or servlee as a public util. again urged that the Commlaston condl.

$f Ity and whleh will not Impt.lr Ita abil. tion its approval to assure that the bond

,. f,:,.J

' ! - {f hhpro.

Ity to perform that servlee, and is proceeds "would not be used to the det.

.t

!8a the -

reasonably necessary and appropriate riment of the Cities or in a manner j...(l bt of for such purposes.*

Inimical to the proposed pool." The be dee..

The FPC refused the Cities' request Commission denied rehearing, stating

,[

Ice ef>

for a hearing statingi

. that the Cities' grounds for rehearing ls, t

htlons The requested approval of the lasu. pneented no facu w kral pHndplu sA g NananWs any danse h. M dn.

j,ql

isarl2s, anee of the Bonda allows the Compatiy

,.@g t

4 MM only to change h form of a portion g.

of its outstanding ladebtedness, Jt

!!. PROCEDURAL PROBLEMS.

i does not call for W Initiation of any Before proceeding to the substantive

,. h.?. :.

f gg, construction or ohr program by the issues involved in this case, we note that Company whleh might offeet (sic) the g,g,,,,,,,, gpgg,,g g,gg 3g,g,,,,,,

.g gg,g,,,

,8 I intonat of b Pedumra. The al.

2 o

tend petitioners are not properly before

'ffirst leged violations which petitioners at*

this court. Neither the SEC nor the

.h ' 'h Wddirg.

tempt to raise in this proceeding are FPC suggest any procedural obstacle to

.f M i y,,,,

1rrelevant to a requested authorisa. the petitions.

.k i i

p,g _

tion of securities. There la no relief 1

""d

  • f that h Commission can order in av.

(1) We find no merit in intervenors' therlains the issuance of the Bonds procedural contention. LP&L's initial

. 7 I-a for refinanelag purposes that would contention 8 la essentially grounded in a u.

g

, gg g,,

' gg, have any effect on the laterest of the claim of failure to eahaust administle.

.j.W.

Petitioners, or solve any of the prob. tive remedies. While the Cities may not

..e,d !

lems outlined by them, have followed SEC procedures to the

.1(.{

letter, they made plain their objections In the petition fw rehearing, filed De.

and the Comentsalon ruled on the mer.

eember 16.1970, h Cities argued that f eth Ita. We see no impediment to judicial n

the Commisalon could not have known bl"I"8 review. Joseph v. FCC,131 U.S. App.

the purpose for which the bond proceeds

$g"hg*

would be used, because Culf States had D.C. 807,404 F.2d 207 (1968).

g

> Cities stated aly that by would be added to (2) Intwvenors contend that the the Company's general funds, to be used Cities sie not aggrieved by the actions 3

be set mdltion as part of interim funds for construe. of the SEC and FPC, and therefore may

' of its tion. Furthermore, the Cities ' argued, not seek judicial review of their orders, it was unclear whether the Commission either under the review provisions of l

e gree to considered their antitrust allegations Ir.

the partleular agency 6tatutes.s or un.

olaHms 4*"

4. liy an.eu.hnent nic. ti. inlet n into, lefne ii., t'innini. ion. w hiei. i..c.4.lc.

States tielt state. n.iii.nl ti, enmminion af pi.heint review un&t s vains of ti, ilubl.

{

B,1970, ele seems it vrun at in nept in it.*

tus Canapany.\\et.1.*e l'.8.P. I inun t, t

12g and h"",*'4*8-tetens 1'y an atilet filal the anme s so.iion v.,4ini af.Halnt ptmbles pelwial

{

'I

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af the I'v.letal l'owet.\\et, til l'.N.P. I 4

bll 5 l.I'Al. siegues llu.t in t rier 24.TtH l'tt.e*

    • fellbl prml.Les poliv6nt retirm fut nn) f allat t.. file n tmtere nf pte.ntnnw

.t

ently tu n pt..ve.Inir un. net sla. chap.

aale Sf '

furinallt reineent a hentine, meni t hi.

Ict n;tteleeni h,s un cret i..umn by the s

e 4 4,"

nun.unteil set a f atiIHr 10 nege Ils Sll).'Cli..ns t',etnglossgeeh lg unch pteevnlapg hin the 4

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n-v.

Y V.

948 464 FEDERAL REPORTER, Sd SERIE8 der the peeral review proylalons of the its approval by the Federal stency in.

Administrouve Precedure Act.'

volved.

This eentention must be rejected on /fTe regunstory library includes a host the authority of Assoelation of Data.of deelslons establishing that when an i

Processing Servlee Organlaation, Inc. v.

agency is called upon to determine i

Camp, 897 U.S.160, 90 8.Ct. 887, as whether a propeaal or condition satisfies L.Ed.34184 (1970), and Barloir v. Col. the "public laterest." or another similar

!!ns. 307 U.S.169 (1970). The petition. ' broad standard, the agency has the av.

ere have allegeql injury la fact resulting,thority and typleally the responsibility from the Commission's failure to con. to consider a challenge based on the an.

sider their antitrust contentions relo. ~ sorted anil.compeutive purpose or con.

vant. The laterest asserted by the pett. ! sequence of the proposal.e }

tieners arguably falls within the sone i This generality la not neceaanrily con.

of Interests to be protected by the stat.

.elualve. The same statutory phrase may utes.

There is a non frivolous claim '.have different meanings in different that the "publie laterest" requirements

' contests, and the statutes, agencies and of these statuten requires considerstlet:

' urt deelslons are not necessarily fun.

p of antitrust eenspiracy.s Even assuming ;gible. A partleular statute may have petitioners' eententions should be reject. jouch a setting that, on eensideration of ed on the merita, they raised an argu. Its legislative history, the nature of the able claim of right under the relevant ' agency, and breadth of responsibility in.

statutes that establishes procedural

  • volved, and other material factors, a standing. -

i court may come to the conclusion that I..i

- though its public interest language is

!!!. VALIDITY OF THE ORDERS. broad its meaning in context warrants The orders of the FPC and SEC are grelatively restricted reading:4L.,,-

accompanied by conclusory findings that Kowever it is a fair consensus of the fI approval of the applications is la the cases cited that the nation's profound q!j "public laterest." The lasue is whether and pervaalve devotion to competition

}

these orders are valid in view of the as a fundamental economic polley, and p l.

refusal of these agencies to order a hear. conviction that the public interest is dis.

t C

Ing on the allegations of intervening advantaged when private enterprises are parties of the anti. competitive purpose permitted to engage in antl. competitive

, and c9nsequence of each application and agreements and restraints, is applicable

7. Medius 10 of the Administrative prwe.

482. 484-446 (1s02): l'altoJ fitotes v.

date Act. 5 U.R.C. 9 MC. stante Jedicial Itedle Cerierstlea of Aimerica. 3M l'.H.

g review to e "perose suffettee legal wrens 3H.19 S.Ct. 451. 3 I Ed.2d 354 (1950s t necause of asener eetles. of advefselt Alelses Trucklas Co. t. L'alted Biotes, effected or ascrieved br apeect settee 321 l'.a. 07. 04 8.Ct. 370. R41 L'. M4 l

within the snesolas of a televant statute.

(1944): hierlee Hpace Esekieures loc. v.

s. Nortleeta.*istural Gas Co. v. PI'O.130 I
  • N' N N' I'9. D' N'N'AUD'or wa. su.8. m "t.D' l'.N.Apitll.C. 220, 31ft F.2 8 p*a (19tN :

M M*

^-

.s.A pp.i.

nt, nn.6.,sh v. rPe. an c.x. Api, 145, 413 P.2d 3C tim N i

lu' 113. 237 F.2d 741 (1950s.

Natural Gas Un. v. FPP.13861,enlinn

.S.A pp.

4. Pale v. Ahtleleinset Htemeka Amerika ItC. 220. 22G. suu P.2d W.3. W.D tileN l.inien. Sia l'.M. 334. 242 24tL M H.Pt.

City or Pittsburgh v. PPO. Uti l'.8. App.

lis

  • 19 I DI.2d 1071 (1ft(N 1 Denver it.c.113. 23i F.2d 141 (1N46.

I

& Ilin Urande Western St. Co. v. l'alted Wintes. 347 l'.M. 44 bi 8.08.1W. IN le. Alslema Eleotth Cooperstite. lue, t.

I.Dl.219tt's 119071: l'alted Mentre t. El Fl:P. 122 1*Jt. App.ttf. 307. It.*a Pad Pa= Natural Une Co., 376 l'.8. uM. A4 9o*. IIIeG*.t. etti. denied. 3t.3 l'.M. this. W 8.n. )n44.121.Lt.2412 4)DG4 l'altr.1 F.Ct. m3. 10 f blad Sic (1fois.

8 tat. s v. l'hlladelpida National Itank.

Alal.unia Elecirle reinierathe. Inc.

s.

t:4 l'.8. 321 b3 It.Ct. Alth. In I D).1 800. 3*dt F31 434 (5th Cle. ItavR DI.*. tliarli: Callforal <. PI'O,300 l'.k.

t

)

.n,- W p3-ag.g

<m. w.r.

m._

--m

^

v n e e er en.rwr wwn. -.m.m.m.g.,,.g ~..y gnep..,..m.www.v

m

._m

y... ;. y n

t.. ;4 f CITY CP IMAYETTE.1.0V181ANA v. SECU!',1 TIES 4: EXCE/00M'N, 949

.. t ;

i

T- ]

n.3.su r.u m oo m

'M.O f k

at least presumpuvely even la the case to the ICC for further proceedings. It

,h,g.

of monopelles or quaal. monopolies char. set forth la unmittakable terms the av.

aeterleed by various degroos of govern. thority and responsibility of the ICC to

j ment control and protection. subject of consider the " anti. competitive" lasues.

e, [T i

course to offset or rebuttal on ar.alysis See $87 U.S. at 492. 87 8.Ct. at 1769:

g g.; k

.an -

by the cognisant ageney.

We do not agree that Congress lim.

g M

g g

'8es

.i K h

lar With these gen'eral observations as a ited ICC eensideration undw $ toa to letnt of departure, we consider the er.

an. inquiry into fleeal manipulation.

g,1 j.,l l

,e -

lity -

ders and statutes befon us. '

Even if Congress' primary concern

[ '.i m av.

was to prevent such manipulation, the 6

  • $ I ao.

Feders! Power Commheten Order broad terms "publie interest" and

( '. ty; el company engaged in interstate com*

of a mandate to the ICC to close its

(.T.t j A

Since Gulf States is an electric utility blawful object" negate the existence 4 : s M.cf mem. subject to regulation under Title eyes to facta indlesting that the trap.

N

!! of the Federal Power Act,its proposal action may eseeed limitations imposed to nell 830 million of first mortgage by other relevant laws. Common

,g bonds required an application by Se sense and sound administrative polley

!! d y,

company, and approval by the FPC. un*

point to the conclusion that auch Vd n

der 8 204 of the Federal Power Act.

broad statutory standards require at

,,g Section 204 of the Feder,al Power Act is hast some degree of conalderation of P, M..

d gg almost identical with the pertlunt pro.

control and antleompetitive conse.

, g,[

visions of I 80a of the Interstate Com*

quences when suggested by the cir.

h B merce Act, as amended. 49 U.S.C. I 80s, eumalanees surrounding a partleular "t,i /

g,g whleh was recently given an authorita*

trananction.. Both the ICC and this

':.i eb tive medina in Denver & Rio Ceande Court have read terms such as "public T

,,3 Western R. Co. v. United States. 387 U.S.

Interest" broadly, to require consider.

i.d O f i

.lm,fj i

4g5. 87 8.Ct. 1764. 18 1,.Ed.td 906 ation of all important consequences

  • e nom.

ineiwing anucom,euuve effnts.

th h'

[*,8 In Denver e Afo Crende the Court The PPC observes that in another il C

    • 8 c'h#Nd wie 8# SPP '80** 'I passage the Court aald that the ICC was p

'% s and Railway Espnas Army w tell thans not required to hold a hearing in every

die.

equal to 20% of its outstanding stock ease. That language merita esposition.

/

to, Greyhound Corporation. On a find. See 887 U.S. at d98. ST 8.Ct. at 1762:

U th Ing of urgent need the ICC au&orised We eenelude, thenfon, that the

[3 mbk this issuance without a hearing, and de.

ICC h nquind, an a ammi ruk, un.

n ferred decision of contenuem prmated a,,it,4,,, g g,g,,,i,gg,g g3,p, by chjectors that the proposal was not posed transmetlen is in the "public in.

l0 I

.s.

4:

In the "public interest" or for a " lawful 9,,go,g g,,,., b ful objw t. u p

g object" because it would result in " con.

conalder the control and anti compell-Qt trol" of the applicant by the carrier pur.

gg.e puequens befm approving P

chasing the shares, with "antl.compell.

stock issunneep under I toalt). This

[

y.

tive consequencen.

dms at mean Se 100 must grant n h

The Court rejected the Government's

' hearing in every cane. or that it reny

'f' ee.

tontention "that i 30s was deslyned to never defer comideration of insun til accomplish only the limited objective of which arise when special elreumstant.

(

pp..

protecting stockholders and the publir n are prearnt. Ilut it don menn that, P*-

I

      • "H when the ICC enmino its diarretion from fineal manipulation The Court held that the 100 had erred to approve Isauances without first

'.2 l in entering its approval while defeirtny comidering Imlertant control ant v.

consideration of the antl.comletitive ef.

enmpetition locues. the reviewinr I

ferts of the trapaction, and remanded ruurt must tionely arrutinise its au I

II. p, at l'.w. ni 4 min'. 4 wi. ni 172 s

um -wwwnn- ~~ va.- -

x '

s p iig, 4 c q. s

m....

a.

r..

m.xn g,.

_ws p.m-% _,

r m

y 4,.o e

950 664 FEDERAlintroRTER. 2d starts Lion in light of the ICC's statutory mission's view, the plain purpose of sh obligations in protect the public later. Section 204 was 'to prevent the issu.

sh est and to enforce the anutrust laws..anee of securities whleh might impair in.

Whether or not an abuse of disention

  • the company's finanelal integrity or Ita sh le present must ultimately depend up-ability to perform its public utility re.

,v on the tranaaetion approved, its poesi. sponsibilities.' lHd."

th Q and any justiflea.

We are not called upon to review the con p.,

g FPC's deelslon in Pselffe Power a st In this passage the Court plainly ear. Ligni, or to take secount of the points et j

marked the ICC's authority to omit a raised in Commissioner klorgan's vig.

pn hearing on antleompetitive issue 6 or to orous dissent. The FPC's 1962 ruling en defer consideration thereof in cases pre. came prior to the Supreme Court's 1967 wt senting special circumstances-as an av.

dwiston In Denwr & Rio Grande, a hn thority that required agency "justifica. point that merita particular emphasis er l

1 tion" and close aerutiny by the review. since the FPC ltself stressed that I do ing court to assure against ai., tbuse of 204(a) was " copied almost vubatim tr i

discretion or default in statutory obil. from Section ton of the Interstate Com.

no e

t ration.

~

merce Act" (27 F.P.C. at 627), and n.

sa i

F The setion of h FPC in the orde'r be.

lied on the proposition that the purpose ni fore us is plainly inconsistent with its of l 20s was to ensure a sound railroad at

)

duties as developed in Denwr e Rio credit structure ts But of eeurse the th Grande..The FPC contends to us that Court's Deneer and Afe Grende opini9n I 204 does not require the FPC to con. establishes that while sound finar.clal sider antitrust allegations when author. credit was the dominant objective of tr i

c I

ising the issuance of soeurities. We 120a of ne Intustate Commuu Act.

of a'ie cited to Paelfle Power di 1;lsht Co the breadth of the "public Interest" dt-9 27 FPC 622 (1962), and urred to show criterion eatends to the antleompetitive g

6 th 9

deference to the Interpretation given a lasues. Thus the FPC's own 1962 rea.

m-statute by the agency charged with its soning.that its law tracks the ICC's th

?

administration. In the Paeffle Power statute undereuts the survival of its

)

e Light proceeding the FPC was con. broad conclusion that i 204(a) is limited corned with an application to issue "first to financial matters.

~

th P

mortgage bonds and common stock to The same may be said for the FPC's in use a portion of the proceeds to build a. conclusion that its authorlty !s neces.

eli r

transmission line from Ongon to Call.

[

p fornia at a higher voltage than would sarily limited since an interstate electric be presently required. The FPC noted utility may lasue short term notes with.

da. -

t I

that it had not been given certifieste out FPC authority pursuant to i 204(e) ou Jurisdiction and " concluded that Section of the Federal Power Act.li and could pc 204 could not be used as a vehicle for launch its construction with those funds.

let

'compichensive lleensing. type regulation The same might have been said as to the n:

' ' 27 FPC at 626. In the Com. ICC, which has even lena authority over th i'i C"

u. O.hu t. Tanman. swi t'.x.1. e. 8.Pt.

Cons 1.t 8ea. (1Hr.i n..w.

lini thi.

t*

7tc.1:t 1.F.al.21010 (1tn'.*.l.

8cnnte Ileinert in nu may neratives Ju tire l'

Itrennan's evenment in Desitcr si Ris.

K l

13. c'eting Nhatfman, intetstate Pununctiv tirende that tble a)nmlinut evieven la E

l "Pennuilul.in, lint IN.Y.IlrJ13.

.t etelushe.

I

14. TI.c Pl*P hatril timt line Neunte Coun.
15. 't'n.ler 6 204tel. In l'.8.P. I W4esel.

emetre *strencil'* that evnttol mer ent*

ti.e PI'C la hot shrn authorsty ne to to. ors Itallinthm le nn e.nentini menne e.f safe, of Ices than n sent's mntuent) nererenting U

gune. ling II.e giublic ngainst ununun.1

' 1 rue Ilinn M of fler sumlinois's e ut.tiin l.

it j.

finnu..ial practime, nee N.ltep.Nn.lCl. T4tle ine ne'euritica, l

t l.

I w. m.r,

-w-

_ m

{

gm)

W.",., *,,, %

t&.g.

r N'

e.

. 2,, y / p y.p, $

aty,',

? *.

g:

3

. 951 p*

etty oP t.ArAvzTTE, LotnStANA v. SECtfR!?!ts & EXCE. COWN u

'a ene os est F.ad til(letti 5 DurPese of short term notes than the FPC,no The for the genwallon, transmitolon, and salef,,,

et the W.

shwt answer is that a utility would be of electrie energy" and pronounced it

.might impelt improvident ladeed if it telled on its the " duty of the Commission to pro.

I Marity w its short term authority to obylate agency mote and encos'rege such intercon.

b 8' UUIIIT M*

overview on application for approval of nection and coordination within each such district and between such districts."

the long term nocurities.

The Peelfde Pou'er a Lfakt ruling Section 303(b) gives mandatory au.

j; stated that the FPC lacks authority to thority to the FPC, upon application of.

to review the

  • certifleate a utility's operation or es. any State commi6sion or of any person 3

'b Peuer e 4

pension. This has some weight, but not engaged in the transminston or sale of of the points 36tgan's vig.

enough. It would have more if the FPC electric energy, to order an interstate i

s 1948 ruling were in the same position as the SEC, of electrie utility "to estabilah physical 1

connection of its transmission faellities

- Court's 1947 having no regulatory authority over op. with the facilities of one or more other i*

de Grande, a erations of the utility. But the FPC Alar emphasis does have authority over interstate else. penons engaged in the transmission or essed that I trle utilities, and that authority is by tale of electric energy, to sell energy to IF.

.est verbatim no means insubstantial. As was rightly or enchange energy with such persons" iterstate Com.

aald in its most recently avallable an. This authority exista if the FPC makes nual reput, the FPC "eaereises nation. a finding that its eaucise is in tf sub.

427), and re.

at the purpose al responsibility for the regulation of lia Interest, subject only to the t..

viso the laterstate electric power Industry. that the interconnection not require the sound railroad Mgulated utility to enlargo its genent.

of eeurse the e e e a s' i ends tpinion ing facilities or impair its existing serv.

r end financial Apart from regulating interstate elee, i

lees.

i objective of trict utilities in regard to their issuance In view of the FPC's broad public 8

of securities, the FPC is mandated un. laterest charter to enhance optimum ammerte Act.

du the Federal Power Act to regulate Interconnection and interchange of elec.

bile interest" g

their charges for the interstate trans. trle energy, not to mention its array ntleompetitive mission of electrie energy (l 200), and ke the ICC's their mergers or consolldations (l 208). of other activities in furtherance of elec.

Own 1968 rea.

tele energy capability.is the circum.

Significantly the FPC has been given stance that Its jurladletion has not been

)

1 it authority and responsibility by 8 tot of entended to twMeaung responsibility the Act,16 U.S.C. I 424a. In regard to N

nnection and coordination of fa.

",', ',",f,';'[f t ubde fn l

g g

f t FPCs At oral argument the Commisalon's

_rstateelectrie

..For the purpose of assuring an abun. General Counsel put it that the FPC is g

dant supply of electrie energy through. Interested in safeguarding costa, rates

-m n;tes with.

ittol204M out the United States with the greatest and reliability, but it wants to stay out

't.as and could possible economy and with regard to the of the fight between investor owned util.

proper utilitation and conservallon of itles on the one hand and cooperatives

. national resourecs," I 202ini directed and municipalities on the other Wheth.

ih thtse funds.

the FPC "to divide the country into re.

er or not this is tactical wisdom, it may

. said as to the authority over rional districts for the voluntary inter. not be achieved at the expenac of ab.

connection and coordination of fntilities dicating responalbility. And we nec no no. Ihn slit.

settere Justi e 16 t'edet i 20nini of the intetstate ('om.

teen of nonprehrmaler triettln lo all seg.

taents of the elect ric imma t industry forer d Ifi.

tuerie Art. 4ft t'.M*, I Quatne, the eu.

(private, giuhlir, empetnthe mud l'rderati it sentra is thatity of the It't'.ku a not,nietut in of infurinatinn an oprenting data and nd.

notes of tsu yente nt Irme derntion not 3 nuning by Imset i. 4. contab d

I,* I D'*

es.wding r,';", of outstm.dans errutitles.

venee IF. 11110 Antiunt ltesmet, l'I't'. ii. "4.

ll,

,",",f,*,'

.7,

,,,,,,,,l.,,,,,,,,,,.

t mart il s

e...nt.tn.,a.

,,. 7,,,,,,,,s,,,,,,,,,,,,..,,,.,,,,,

the 3 nth nf its Tn.h l'utit nh I'untnh.

nha. ite I'1ecttle l'un et lis thildher l'idhi s ment.

edoption in smesnun., thetraf, of "a sys-

,...,4,s======.*

Y 8N

[

f a

REBRRBaismimr s

464 FrotRAt, attonTza, sd starts 952 c

reason why the responalbility of consid. authority forthwith to issue an addl.

tional $30 million in ahort term notes?

ering tfie publie interest requires any It is not clear *whether FPC counsel G.

jeopardy of ne kind of objectivity that would have urged the name contention Is eentemplated for an independent regu. If the outstanding short term notes had latory com:nission.

been of one year's duration and had been The Commisalon is expected to make lasued by Culf States, pursuant to i 204 determinations as to the public interest (e) of the Act.on its own authority and In matters where there is such under, without an FPC order. A contention

??

lying confilet. Its v whet contains a this broadly put would raise most serl.

'l' '>

number of complaints by public utilities ous qnstions.

y and by ee'seratives againgt. private com.

panies, both for physical laterconnee".

(3) The ultimate twon, however.

f, tion and for termination of charges at for rejecting this contention of FPC

."t tooked as discriminatory or otherwise counsel is that the cryptic statement of yg unlawful.la It is illuminating that only the FPC does not permit us to conclude recently the Supreme Court sustained with reasonable confidence that this an FPC laterconnection order that m was the position taken by the FPC.

p I.

,. f,,,

jected the claim of a private utility to And we cannot permit arguments of make an interconnection with a munfel. counsel to take the plaec of agency find.

t

-(

pally owned utility on terms more ener.

g"8" i

g ous that those required of other inves.

Our problem la not a merely technical

, s,..

tor owned utilities.8' The point hm urged by mnael l

ip one.

<t:. E Repleecuent of SAori.Ferm Notes has significance only on the assumption f

The FPC's counsel vigorowly urged that at another time the FPC would

. t. g an alternative contention, that the Cit

  • consider the anticompetitive issues as j

les' intervention did not require a hear.

material. But that assumption means j.

  • 4-j P f'h ing since their allegations concerning a modification or restriction of the I

Q Colf States' operations could have no FPC's 1H3 ruling in Peeille Perrr &

I meaningful relation to an application I.fyAf, supra. We have no guidance e

I g~ 7{,i,,

that only mgit to rel,ince short term from the FPC that is accepted a limits.

3 notes with long teten bonds' tion of that rullag. Indeed we have

. This contention is not without appeal, been asked to affirm its order on the 4,

and also not without problems. First. reasoning of that 1968 ruling. More.

t', d the order giving Culf States authority over when the Cities, in their petition to issue $30 million bonds to replace for rehearing. expressly requested the short term notes apparently operated.to FPC to advise whether the repon for denial of a hearing was the nnture of give Gulf States authority to incrosse the apphcation as seekitig npproval for its overall debt, sluce It would have had It. Abnuni tiet..rt fut IDUt. Tulile 188. p. Vil

31. lie presluusly grantel pnil. sits in 6

"""0*'"iU"*'I"#""""'"*"""""'

30. 44ainensille l'tilities lectenttuu ut et al. %

I'"' '

W"" ""'"I'

'"#I' N'*

Pintbla IStet l'ntp SC l'.8. MS. Cl

"'""I""""'""""""'^'"""I'""

8.t't. l'ilc. 211 t,%I.21 14 11971). Tl*

I'"" '"I"*I I'8 U" I"P'" *I ' ""' '

Fl*4' rejecteil tiw rialni af Pl..ti.14 1%n.

$2. Iluthertun Triph 1.thee,14... b (*hilnl et ('ntlwernunn llant tim etty optesu ley 8tates. M l l' 8. l'el N'l 8 t't. ;:ti li 1. I'I ~.

I not only tie enpital swt of ti.e tutet.

Vil 2p7 tlinth a l'ul.lir 8et s. t'ienu. of Hic esmewtinn I.ut nlan an nunun! pnpownt Ntute nf Nrn Ynth L PI't'.141 l'.N Api.

fut tle luu kup nettlev. It twetr.1 minous t.tl.rt nintlets t1616 Pluti.In l's.n et liti.I IHnt ll.t'. ITl. DI I. 41 $nll Ilit$tet. w A I*l' 6ailiulnl a ownputal.le elintre in any of Il;olue t. Pl*t'.1;'7. l'.8 Al p l a i'. Mt. Ils i t.e evut tneta Int twietamuerti.e solun P.U l lifil litutti ; litanitl Aite m. lu.

t. Pall.12il l' N App la e' ltes. ::!d P '.NI Intil; nevnttnint s uh savint..e. of clie J

4..ll t llaG* t.

Plathlt (0prtullbg Penionittee, nu thintinni genup suuriHnnhur lie tm hural ulete.

th n* uf f 6se Plutila utilidn.

-- M

+.E e

7Cmrwrwmygg m.,.m

. w.wr w

.m,

,y

?.m n['

l. j'

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u r3 b

CITT OF IAFAYETTte 1.0tR8!ANA e. 820VRIT!ts 6 EXCII, corn 953 ca. m rmi sem i

haddl.-

' aetaa,es long. term bonds on a refunding of short reasonable neuve, whleh we thirsk is U N".i i"g esensel term notes, the FPC declined to any this, fairly implied in the jurir dence. De.

Wlopment of ele mlui.tment must l

etenden (4) We de not consider what rullag await eensider& den la the first instance

g*y n

sies had we would make on the basis of such a by Se agency invoind, and an analysis

,t i

W ##

~ peeltlen if thought through and embed. of k factual eentent.

led in FPC polley and findings. It auf.

2 8264_

WitF and flees for present purposes to any that We are aware too, of the pertinence j h.*V intentin the FPC's terse and cryptic statement of the comment of FPC's enunut, that 6

met eetl*

did not comply with the requirennent escurity lasses to provide funds for a f$'

we see la Denwr & Rio.Crande, ht utility's constreetion must th deelded

's i.

the ag'ney's Mason for denying og do, in a time frams tauch more limited than r

beweeh ferring hearing of antleompeutive to. ht often conteniplated for antitrust g yp sus be elear on ne rword, meanit.gful litigation. But the deetrine of public in.

'c

,,,,g g in findings or dmensalon, terest consideration does not contem.

o plate that an agency will be engaged in a

*.M

,,,g,g,

','""F16, 6) Aecordingly we deein it mos. determination of antitrust luues as l.h bt Els -

(

e

.' vestry to romand the order under re. such.as he FPC.

view. To avoid salsunderstanding, we

'W' ments cf esy find.

  • think it appropriate to say espressly (f) In the content of P pa$leular hj that aaJ ene is not yt**d to hold matter, it may become evid:nt that the hearings a jere the ultimate agency may approve forthwith a large p

teshalcal deelslon wilf"siot

.g

' 'or aspisit( portion of the application, and W use

,'a ;

y munal byVe.' ' " ~

'Aiid as to of ne funds contempleted thereby, while l

~

..i laterventions lag ant compeutive is. senerving deelslon on W difficult lasue.

sb tes;ption Indeed even an entire application may 8C would sues we see no objoetlen in law to a i

dispealtion without hearing that is at, be approved if the agency stands ready

,.,j leemos as companied by an esplanation, supported to prwnd with hearing and considers.

p es uneans t W the la the record, that h intervenor's son. Hon of he antleompetitive luns. and

j..

tentions are too luubstanual or barren to take W problems into account in the

'y Pearee e

' guidance to ladleate the entstenee of substantial disposition of another apptlentic,n pro.

,3 I a limita, antleompetitive leaves. or to meet ihe joeted for presentation to the agency Within a reasonable time.ee

',c we have rpgul *atant aL&.gtaaene),lt,pesus so.

er en the tween the activities thallenged an'M

'i

?

",8

  • 8 "'[

g l

gg y,.

f* peduon tellvilles rurtheres or the Dppuranten.=

J mold Se We do not undertake to determine now alty to obtain the symments of b De.

tason f:r what is involved in the retiulrement of partment of Justlee.81 It may even.

t

.anture cf Proval IIr 33 lieutet l'ahm kii k Yant ('s. v. I'Fe.

ruttime aminee. shmthren l'arific Tet.

e duwto 1.lttotee k hinthetlha A='n. TWI snimal Ow v.181'. :In l'.g. 40% 31 MA*t.

gfli. fa 1.I',l. 3)u 111:118 t l l'alled 8tuten. IVs l',N.Applu','tichJ n l'.k. 2ac. 2st. f s MA*t 134. ; I l;.l 2d til ity la le.

i 3:3,35%

seeshi mut 1110% 1 l'illti h. fut Allrrna t*uuntt. Inc.

t. l'I'n' 131 l'.M. App l e.I'. *.*Jll, 414 )*St l',24 f.tu litante.

ihe elitz.

isl4 have 11:a JittNil.

g 3.,,, g,,

3,,

'h tt in Stunk lpd 1:1... A..'n of St... i.

.se e. 1:ti l'S.A polit'. ut '*.'t.:H e l'pd v.' l'alle.1 MI:t'. 1:ll l'.H.Ai.p.t i t *. lla.1*c. 413 nt feat. Intetienne nt veir. th,a g als L 9 t.Dt

)*31 lu*c. lu*.li allman, it.c eunet mui I int of the tklesal tw.c, wt.her...

nas.af the.

4-tlial lle i mth4 thalk psc.I by tla. entice eni furth a.duti tu tia l'I't' tu tep.et l'.n. App.

"6 tied in olentfiennt nuihuve tu lle nr.

antittual stulathm. to the Attuguey tich l

l WAIT quleltkm of the... L" f.e wl.p h op etal auth n. app.nn d in 3 '.myne..f the l

, Bit. 41%

pruial m u.

mshi.

Natutal tie. Ai t

..t 193% If thi p

""*' ' b""

'" ""*4""' "I d' dI""8 ' l"-

i

  • I""'

tl Nuttle tu Natueal tin. tw t l'IM *.

lethele inathius lle rhnhee hetonm lin't'.

I' iters, haev H, l*Wi l'.k.Apyli e '. nt *.*Jo.

and IMs,6 di in.t luun u, nud.uin) ut

"'Dl, Mi l'."4 at larJ. tat'l the nerp. i e ndu s t.. erfer suntere. tu O.c 16 llsru in nmit. t he d.. tnu. nf n..i.

A n unie > Gru eal

..t i, emi. e t.un t...

he. 4..i.

npidi tu que.eum

..f a te.

p,e.rionnuu, eu t se-sess e

j.

-a-m.,

q pgg,

1,,4.p..,g\\ig D,,

c,

,3

,,.3,

EFW"'urT k,5' f) "3JBg-g -(. y

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qq wqgM

@g f",{*k

,Nlggieg y

  • p,{f[.*

7, scremc-mwm-mmm m,,..m y.s.y,ya,m.,,

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't N'

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.-.'.c..$ h 5 $ $.;;' & &s'un..]y'..$%. gy n'g w"$ lT..~:$..l adw

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  • y

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954 464 rzDERA1. REFORTER. 84 SERIES Indeed, defer its disposition'pending de.

conditions as no Commission finds l

termination of rolesant eeurt litigation necessary to assure compliance with where that will eld in the determination the conditions speelfled in this sec.

)

1 of the "public interest" lasue. This tion." Autherlaation to impose terms would be in effect a reverse appliestl6n and conditions under Section f(f) does of the doctrine of primary jurisdiction., not ostrnd to the resolution of collater.

j a doctrine that has been appropriately al and unrelated controsersies in which a declarant may be enanged with oth.

i referred to as supple and flealble.#

er parties. 'See Alabama Power Co.,

J l

The doctrine of primary jurisdiction (lloiding Company Act Release No.

.j "has become one of the key judicial

'n{

. switches" in furtherance of "coordina.

16361. June 1.1966), affirmed, Ala.

l tion between judicial machinery

.+d bama Electric Cooperative. Inc. v.

(administrative) agencies" in matters SEC (its U.S. App.D.C. 347). 363 of mutual aneern.se Switches operate FJd 906 (1946). eert. denied. 383 U.S.

hoth ways, ande depending on the na.

968 (46 8.Ct.1873,161.Ed.2d 300).

]

e ch i

ture of the issue, an agency may wait.

We turn first to the precedent cited for a court as well as the reverse, by the 8tc. In Alabams Electric Co.

l It i

We ibave been at pains' to set forth operative v. SEC 122 U.S. App.D.C. 367 to the latitude available to the agency in 363 F.2d 906 (1966). Alabama Power.

tw to approach and procedure to obv!ste any seeking to issue $14 million of common h.

)

toneern that this court seeks to inter. stock, claimed an esemption from SEC 1

fere with its emerelse.of discretion. supervision under i G(b) of the lloiding I

si.

p, i

What the court does require is that the Company Act, on the ground that the ol l;.

agency take a "hard look" at problem issue was subject to regulation by a state commission. The Cooperative ob.

p.

areas.8' li.

joeted that the holding company intend.

j de SecarlHes and Eschange Commfufen ed to use the proceeds of this sale so as Section 7(d) (S) of We llolding Com* to duplicate its lines and facilities, and i

oc ti.

pany Act is not written in the same asked the SEC to prnent such use.

i.,

it N

terms as ( *204 of the Federal Power, through its power to impose conditions t'l l

Act. The SEC In holding petitioners on an enempth in the public laterest cl antitrutt allegations irrelevant to its de.

or for the protection of investors or con.

i termination, and refusing to set the,,,,,,. ' When the !LEC refused, the ri I,,

matter down for hearing, stated:88 Cooperative argued it had erred in re.

I The phrase " terms and renditions" as fusing to consider the claim of anti.

here used relates solely to the terms competitive effret. We affirined the i

le and conditions of the sceurity to be Commlulon maying.122 U.S. App.D.C.

issued. and therefore, the phrase at 300. 353 F.2d at il07H 8".

p

" detrimental to the pulilie interest" The purpoac of the punitie t*tillt) n, I

I refers to such terms and condition, lloiding Company Act

  • ' ' was 1.

and not to extraneous mntters. See, I*

to supplement state regulatica-.nnt l'

tion h f) provides that " ay order l'

permitting a declaration ta liecome ef.

to supplant it. Nowhere in Lt.e Art a

(cetive may contain auth terms and is there a provision granting to the h

  • l' to J. St. Iluti e t'.. 1. s. I h nui sh. 34 P."l 38

'I'r*'"

II*h* T*l#"'i'*

"'I' PI't'. II;l P^ alt l'i' El. *t l'.;'.le C-in n. lit t.'.tl t'it. liua.

4il P"il %ll. nt li A*.1 4 ID*Hi, utt g

to pues nf it.. tun blatow Trnainal A**.n

,p.,g, 4,n p g g,eg, pg >i.i. y;;g, gn lic.netiakt u l..inge t 'It an. it t.hHr. 4'86 i nbi h. WAIT llalu, s f

r r i. c..a. m wi x. :: g.i.i

1. P l p I f.,utex3,,, o,t

.n t. mr g.

yt., v.,

i ven iniinit utn.nre buili.eie. in

s. -

.a.i m.i t uttii.

kl. l.i ei 143 l' A A i l. t 'I *. l'.

1 l'! P '.*.i

t. g sijails t

n.p.a. r l'i.e. I ktntra 34 JA 1 08 ', llolIn.d

"h+

"5 kl Ib

g. St..pr ih. *litt P.N IMI. IDI. s" N l *l.

l # b " U I'-

l ite. s:t 1.1;.1 1;11 til<tu h

" N N N G N S M*M m was,m y w ~rm y m

.....gele

. 7 y

.g%%%_ myg%r--N p., %,

p ygj ni N

N N

lW NMMYW W

n.

. c...n h.

q ctTT OF 1AFAYETTE,1.0V!81ANA v. SECURITIE8 & EXCE. COM'N 955 9

eu.= os rae on omi

li.!

E848 !

SEC tl.e sort of regulatory power at. extent detrimental to the public Inter.

f,U:,

with tributed to it by the petitioner. In. est or u:e interest of Investors or consum.

fesen dud, the congressional cholee of that - era.

ga

) ' *. '. '

i arms-Commlasion to administer the Act is.

The Ale 6 ems Cooperative case is not

.; t does-19 ltself, the stroegest sort of proof to be read as limiting 8EC's considera.

'l I

ater*

.htt the general purpose of the Act tion under i f(d) (6) solely to review.

j h

h rhieh.

was to. regulate the lasuanee of securl* Ing the financial terms of the security otb ties which cou J wt be reached by - to be issued. The force of that 1966 l '

Co '

3 state commissions.

l K*

opinion is weakened. apart from the 9

Ala*,

in Municipal Electric Ass'n of Massa. 1947 cpinion in Demwr d Ato Grande,

. r, chusetta v. SEC.134 U.S. App.D.C.146, by Ita erroneous assumption of the nar.

.p 413 F.2d 1062 (1969). however, this row reading to be given to i 10. an as.

'Y]'

863 U'8'L court required the SEC to eonalder anti. - sumption undereut by our 1969 opinion competitive effects. That ease involved la Afonteipel. Moreover. Ala6ama Coop.

..G l'

F.4 g

an application by several New England erelise did not involve an SEC approval ted electrie ut!!!tles, under i 10 of the la the course of esereising P.a jurisdie.

tM Co.

Holding Company Act,15 U.S.C. I 79j. tion under ll 6 and 7. but the question p{F $

887.L to approve their acquiring the stock of whether it could impose terms to qualify

.m r,

two nuclear power electrie. generating the exemption provided by i s(b) for se.

0e 3

companies.. The Municipals sought a curity lasues approved by a state com.

'M<

8EC hearing on their charge that any ap.- mission. In Munletpal Else. Ass'n of

' ' }F>

lag :

preval of the acquisition, to the exclu. Mass. v. SEC.136 U.S. App.D.C, 176.419 thb slon of the Municipals' opportunity to F.2d 767 '(1969), we sp6elfleally re.

a In power directly from the nuclear. served the issue of whether antitrust ob.

wer plants, would not be in the pub considerations are included in the pub.

N nd.

lie or consumer Interest, since it would lie laterest referred to in approvals of

.1 ; "

i as.

deprive the Munleipals of aceeas to a ll 6 and 7.

o. '.

and.

source of theap power and thus harm (9) We think proper resolution of O

use.

them competitively. The SEC denied ons the request for a hearing. holding that the problem now before us la provided by the affirmance of the SEC's order.

rest.

the Munleipals had presented no issue son.-

of fact relevant to the proceedings. We but with modification in part of our dis.

I

'i eussion in Alabama Cooperoffve. W.bere I

the reversed, and remanded for a hearing

. re.

before the SEC concerr'.ns the impos!* agtagency has somt tegylatory lRTisdic.

tion over o'34atlsna, it iiis S'i whEther there is's Hoso^pl,39ntider aIti...

.the.

tion of appropriate conditions on the mus lae.

i i

transaction.

tween th 'mattern subject to its survell.

f*

D.C.

Petitioners claim that both our action lame 'and th5ke Tiniter attack on a,nti.

f and opinion in Municipal establish the cWp~eliffre Br66uFBut the general I

lilty necesalty of considering antitrust allega. doctrine requiring an asency to take ae.

(

wu tions before granting approvals to stock count of antitrust considerations does not issues under il 6 and 7.

Ilowever, the not entend to a enn like the one before

. Act Munidpal opinion expiessly asserts that us where the antitrust problem arises t

g a line. albeit a " fine bne." la to be drawn out of operations of the regulated cim.

between SEC's approval of an acquiet. pany tpast and projetteds arel the agen.

tion of stock by a utility, and a sale el ey. here the SEC. has not been given securities by a v'llity. Acquisitions are any regulatory juriulietion over opera.

roverned by in ti and in of the-Ilold. tions of the company. The SEC has no P

ing Company Act. Our Municipal opin. jurisdiction over operations and stands

[.'

lon pointed out that i 10 unlike 17. In a different tuture from the PPP l

expressly prohibits upproval of a trans. whleh, as we have already noted, has action if the Commimon finda that it regulatory jurisdiction over operations j

will tend toward interlocking relations in view of itn n'ithority. intrr clin. to di.

or the concentration of control of pub.

reet utilitien to interconnect on reason.

lic. utility companies, of a kind or to an uhle terms, or to prohibit a utility from i

?

-""4P*Noww'~

mn;wmen%&mmrmmmrw~mmww=w mmmm~m m

11 o,.

..H-

~

+

E o.u WTMfb l

3 MN!IMe'cbW. -..w r, ' ', :.

=M mE any y "q;,.-ggg;

_v- =-M MMbOM

'b' i ' 2 "'

_7 f

~

956 4H rzotaAL atroatza. ed starts y.f 1

discriminating. In rates and faellities There may also be. circumstances against its municipal customers, where a partleular proposed operating

-j' In Afsnielpels the utility's acquisition use of funds will, it is claimed. be link:d of stock was subjoet to SEC Jurisdiction, significantly to operations within the And the court held that the esercise of SEC surveillance contemplated by Con.

gress. Suppose it were objected that the l

n.

the authority to approve acqelallions re, utility planned a covert use of a signifl.

quins consideration of antitrust mat. cant part of the proceeds of a security ters, particularly in view of the statu.

issue to establish a political slush fund tory purpose to avoid undue concentra, prohibited by i It(h) of the Holding

[J tion of control in public utility holding lf companies. This is a more static issue Company Act. We think the SEC would be under a duty 40 give consideration to than direct surveillance of operations, It is rather a review of proposed strue..the claim, for the matter challenged is I

within the reasonable contemplation of ture to aseertain whether it embraces a substantial posalbility of undue con. Congress as one in which the SEC has a l

U centration of eentrol. Of course a deel. sphere of interest, and should explore slon on. structure requires " economic further when the issue is brought to 114 l

1:

m attention, 3

forecasting eoneerning operations, in

'l

.i, such mattets as e. g.. profitability, con.

[10) Addressing ourselves broadly.

3:

L.h sequence of Independence of nunage.

however. to the question of sale of m I

ment. SEC v. New England Elee.u8ys. eurities, and taking into account the r-tem. 390 U.S. 307, til. 88 S.Ct. 918.19 regulatory volumes involved H and the r-G led.2d 1042 et seg. (1968). Yet i.l.

lack of any SEC authority tu regulate op.

g.

though the matters are interrelated, the, orations of utilities, we think on object.

e SEC's jurisdiction relates to structure Ing intervenor esnnot require SEC con.

3, rather than directly is operations.

sideration of the applicant's operating f

i

.f :

misunderstanding, we are activltles from the point of view of un.

)'.

3(

.t iu re. %,ang the contention of due restraints f.n competitors or poten.

i g

{A

,GC sam.M m 'he distinetton lisa he.

tial competitors. We state this doctrine E

q.m a.wpe c.nder i 10 for acqul.

In terms of broad application rather than r

n a W,n % cres consideration of in categorleal terms, ivr we leave open 1

vn1Mut le, %d applications under the resolution appropriate if in n par.

t4 fer ep)N.il of security issues, ticular case the operations asaalled are

'**, 4 net As to applications under

,e, ch a nature as to be equivalent, in i G the q'uestion left open by second

' ancs ind consequence to strue.

i I

.tlunicipale is still open. So I,4this ffiliation. or if the purpose of the i

opimon la conectned the cou Ill be

. sale of securities is otherwise u.

l' free to determine, if the circumstances shi. n to br.ve a reasonable nexus to 5

warrant. that the neplication umler i 6 matters within ' the SEC's jurisdiction s'

f requires consideratinn of nmitrust

(**

under other prm L4 ions. Within the 8

pues beenuar the purpow of the appli' broad reach of the diwtrine we deem ention is signifienntly related to th" apphenWe we do ud think ptitioners i

struttural pmition af the applicant in have made a aht 4ing of reversible error.

the industry-perhapa by a proposal for in Nos. 24.M4 and 24.9ti:1 the order, r

operating affiliation n< well as one for capital affihation whiih l re cnts the of the SMt* nre affirmed. In.N*n 71,

kind of luue. t.f undui inntentration of in41. the enuse i. reinanded to the fly runtrol, that he* within the terulatory for further prmerdinv. not niconstent

{

juri. diction of

!..' upon mn.nleration with this opinion.

i of an appliention un.ler '; In.

.% ordered.

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4 l

i APPENDIX 0 I

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'b 9

t.

(

I i

4 9'

7 i

e l ',

i I

?

O i.

p W

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  • #
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