ML20056G537
| ML20056G537 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 08/31/1993 |
| From: | Rudebusch T CAJUN ELECTRIC POWER COOPERATIVE, INC. |
| To: | Atomic Safety and Licensing Board Panel |
| References | |
| CON-#393-14262 OLA, NUDOCS 9309030240 | |
| Download: ML20056G537 (200) | |
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& e UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION D% N '
ey BEFORE THE ATOMIC SAFETY AND LICENSING BOARD AllB 31 1993 - DOCKETING & 5 SERVICE BRANCH SECY-NHC Obrk / In the Matter of ) Docket No. 50-458 -g % GULF STATES UTILITIES COMPANY ) (Transfer of Ownership
) and Control)
(River Bend Station, Unit 1) ) CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, AMENDMENT AND SUPPLEMENT TO PETITION FOR LEAVE TO INTERVENE, COMMENTS AND REQUEST FOR HEARING O James D. Pembroke , C Thomas L. Rudebusch
- DUNCAN, WEINBERG, MILLER &
PEMBROKE, P.C. 1615 M Street, N.W. Suite 800 Washington, D.C. 20036 (202) 467-6370 , 3 Attorneys for Cajun Electric Power Cooperative, Inc. g h c S Dated: August 31, 1993 O 9309030240 930831 PDR ADOCK 05000458 c9
/
C PDR s e
I i i UNITED STATES OF AMERICA ! () NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD ; In the Matter of ) Docket'No. 50-458 l
) :
Gulf States Utilities Company ) (Transfer of Ownership
) and Control)
(River Bend Station, Unit 1)
)
i CAJUN ELECTRIC POWER COOPERATIVE, INC 'S, ; AMENDMENT AND SUPPLEMENT TO { PETITION FOR LEAVE TO INTERVENE, COMMENTS { AND REQUEST FOR HEARING AND CONDITIONS j Cajun Electric Power Cooperative, Inc. (" Cajun"), i pursuant to 10 C.F.R. 55 2.714(a)(3) and 2.714(b) and the Nuclear ) Regulatory Commission's (" Commission" or "NRC") " Notice of ; Consideration of Amendments to Facility Operating License, ! Proposed No Significant Hazards Consideration and Opportunity for f () Hearing," 58 Federal Register 36423, 36435-36 (July 7, 1993), 1 submits this Amendment and Supplement to its Comments, Petitions 7 for Leave to Intervene and Request for Hearing and Conditions' 1 1/ Cajun has filed " Cajun Electric Power Cooperative,-Inc.'s l Comments, Petition for Leave to Intervene, and Request for j j Hearing and Conditions, on Application for Approval of Transfer of Ownership" on April 26, 1993 (Appendix A), in response to the Commission Notice of Filing of Amendments on , March 25, 1993. 58 End. Egg. 16246 (1993); " Cajun Electric l 1 Power Cooperative, Inc.'s Comments, Petition for Leave to Intervene, and Request for Hearing and Conditions, on Notice of Consideration of Issuance of Amendment to Facility J Operating License, Proposed No Significant Hazards Consideration Determination and Opportunity for Hearing" on ,
- August 6, 1993 (Appendix B); and a " Cajun Electric' Power .
j Cooperative, Inc.'s Amendment to its Previously Filed Comments, Petition for Leave to Intervene, and Request for . Hearing and Conditions, on Notice of Cayenne of Issuance of Amendment to Facility Operating License, Proposed No ' Significant Hazards Consideration Determination and Opportunity for Hearing" on August 17, 1993 (Appendix C). , The Commission Staff has specifically invited Cajun to amend I (continued...) J
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t i
.. and states as follows:
I. BACKGROUND 'f i This proceeding involves license amendments related to ; I the proposed merger between Gulf States Utilities Company ("GSU") i and Entergy Corporation ("Entergy"), pursuant to the June 5, 1992 [ Reorganization Plan between GSU and Entergy. l On January 13, 1993, GSU filed an application (RBEXEC- l 93-034) seeking approval of an effective change of control over GSU, and for a license amendment to the River Bend' Station Unit 1 Facility Operating License NPF-47 to reflect such approval in NRC : i Docket No. 50-458. GSU asserted in its application that, in ! l accordance with the Reorganization Plan, GSU will continue to l ~ operate as a utility after the n.erger, but will be a subsidiary ! l of Entergy. Purportedly, ownership of River Bend will remain unchanged, and Cajun's entitlement to energy and capacity will be l unaffected. GSU's January 13 Application, at 1-2. I In support of its Application, GSU stated that the 'i
- merger does not require any changes in the design or operation of. j t
the River Bend Plant, but it does affect the change in ownership of GSU. Therefore, GSU seeks a modification in Paragraph 1.A of License NPF-47 to reflect the merger of GSU into Entergy. Egg ! Application, Attachment 1, Exhibit 3. The Application also notes that this amendment involves no change to the organizations or 2 i 1/(... continued) and supplement Cajun's pleadings to date. Egg Staff's ! August 26, 1993 Response to Cajun's Comments, etc., at 2 and fn. 3. 1 n--.+e ,
h personnel responsible for the operation of the facility ! T ! Application, Attachment 1, at 11. The Application also asserts that This application does not in any way alter Gulf States'. ability to obtain the funds necessary to l cover its share of costs for the operation, 'l maintenance, repair, decontamination, and i decommissioning of River Bend. . . Gulf States' l financial responsibility for its share of River ; Bend and its sources of funds to support the i facility will remain the same following the change l in ownership of Gulf States. ! Id. at 11. Finally, the Application addresses the need for an antitrust review b3 this Commission. GSU requested action on the - Application before October 1, 1993. . Separately with that application, GSU filed another i application (RBEXEC-93-035), requesting an amendment of the i 4 license, to reflect approval for Entergy Operations to be ; included as a licensee of River Bend with authority to operate j i the facility on behalf of its owners. j On March 25, 1993, the Commisison issued a notice of ! filing of the ownership transfer application of GSU, and established a thirty day deadline for comments and interventions by interested parties. The Notice also provided that, pursuant to 10 C.F.R. g 2.101, the Staff of the Commission requests any ) interested person to submit comments on or information relating to any antitrust issues raised by the transfer of license request. The NRC noted that GSU had also filed a request for an i S 50.90, amendment to the license for River Bend under 10 C.F.R.
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to allow the change of operating authority from GSU to Entergy l i
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i i Operations, Inc. ("EOI"). That request, however, was stated to l be the subject of a separate Federal Register notice. l On April 26,'1993, Cajun filed a Comments, Petition for i Leave to Intervene, and Request for Hearing and Conditions, on. j 4 Application for Approval of Transfer of ownership. Cajun's April l 26, Motion to Intervene contains Cajun's full concerns regarding the proposed transfer of ownership, including the antitrust j 4 consideration. Egg Appendix A. Cajun specifically noted that it ! I would file separate Comments, Petition for Leave to Intervene and l i Request for Hearing when the Commission issued a Notice of Filing ; of the proposed operating transfer to EOI. l l On July 7, 1993., the NRC issued its formal " Notice of j l l Consideration of Issuance of Amendments to Facility Operating License, Proposed No Significant Hazards Consideration , Determination and Opportunity for Hearing." 58 Fed. Reg. 36423, i i 36435, 36436 (1993). On August 6, 1993, Cajun filed its i i b " Comments, Petition for Leave to Intervene, and Request for
- Hearing and Conditions, on Notice of Consideration of Issuance of ,
Amendment to Facility Operating License, Proposed No Significant l i Hazards Consideration Determination and Opportunity for Hearing." l 1 ; Egg Appendix B. Cajun amended its petition on August 17, 1993. , Egg Appendix C. > r y On August 19, 1993, an Atomic Safety and Licensing i ] Board (" Board") was established to rule on petitions for leave to i intervene and/or requests for hearing related to the proposed ! a 5 change in ownership of GSU, pursuant to the Commission's Notice j []) of July 7, 1993. 58 End. Eng. 36423, 36435. 1 f 2 :
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I i i On August 23, 1993, GSU filed an " Opposition of Gulf ! i States Utilities Company to the Petition to Intervene and Request ! for a Hearing of Cajun Electric Power Cooperative, Inc." In its l i answer, GSU, inter alia, claims Cajun, GSU's co-owner and co- l licensee, has failed to satisfy the Commission's requirements for l i intervention. On August 27, 1993, GSU supplemented its answer ; with a pleading entitled " Response of Gulf States utilities Company to Cajun Electric Power Cooperative, Inc.'s, Amendment to ! its Petition to Intervene and Request for a Hearing and License ! Conditions.E On August 26,-1993, the Commission Staff filed with the Board its Response to Cajun's Comments, etc. The Staff states that Cajun has standing to intervene in this proceeding. Staff Response at 2, 11. Staff suggests that Cajun amend its Petition to Intervene to clarify Cajun's position on the license amendments on which Cajun seeks leave to intervene. Id. at 2, ! fn. 3. l On August 27, 1993, counsel for Cajun was notified by telephone that a prehearing conference is scheduled for September ; 15, 1993. As of August 31, 1993, Cajun had not received or been l able to obtain a copy of the August 27 Order. II. AMENDMENT TO PETITION TO INTERVENE l Cajun has presented Comments, Petitions for Leave to ; intervene and Requested a Hearing and Conditions regarding both of GSU's proposed amendments to the operating license. Egg 2/ Cajun reserves the right to reply to GSU's answer and l supplemental answer within the time period permitted by the i Commission's Regulations.
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l i l
i I Appendices A, B and C, incorporated herein by reference. To - eliminate any possible confusion, Cajun clarifies that it seeks , leave to intervene in GSU's proposed amendment related to the i change in ownership of GSU and in GSU's proposed amendment to , include EOI as a co-licensee with authority to' operate the ; d facility. To the extent necessary, Cajun hereby so amends its { t Petitions for Leave to Intervene, pursuant to 10 C.F.R. Section 2.714(a)(3).
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III. SUPPLEMENT TO PETITION TO INTERVENE Pursuant to 10 C.F.R. Section 2.714(b), Cajun hereby ! supplements its Petitions for Leave to Intervene to list the contentions Cajun seeks to have litigated in the hearing.I' I Along with each contention, Cajun provides (1) a brief i explanation of the bases of the contention; (2) a concise ; statement of the facts and expert opinion which support the l contention; and (iii) information to show there is a dispute with f 4 j the applicant on a material issue of fact or law with regard to each contention. 1 In recognition that the Commiss1on has stated it will 1
- issue a separate Notice of Filing regarding antitrust ;
information, Cajun will not list contentions related to antitrust ; , issues at this time. Information regarding Cajun's antitrust f 1/ Pursuant to a telephone conversation with the Presiding Judge's chambers on August 30, 1993, counsel for Cajun was - informed that it was not necessary to submit a list of i contentions at this time and that Cajun would have the right j to submit contentions in the future. Cajun reserves the ) right to file additional or amended contentions as this j proceeding develops. ;
contentions is contained in Cajun's April 26, 1993 Petition to ; Intervene. Egn Appendix A. i Cajun's list of contentions is as follows: ;
- 1. The Procosed Amendments Fail to Reflect the Public ,
Interest and Interests of Co-Owners. Wholesale i Customers and Customers That May Be Affected By the Outcome of the Caiun and Texas Litiaation This Board should examine fully from its unique : i perspective the potential effects of the possible outcome of the l Cajun Litigation and the Texas Litigation on GSU, prior to [ I combination, end on GSU, Entergy and Entergy Operations in the event a merger is consummated, and the regulatory options available to the Commission to ameliorate that adverse financial impact. In satisfying its obligation to protect the public : interest with regard to the impact of a substantial judgment / settlement by Cajun in the River Bend Litigation or > affirmance of PUCT in the Texas Litigation, this Commission must analyze the adverse financial impact which GSU, Entergy and EOI would experience from such judgment / settlement and affirmance. ; Cajun currently owns a 30 percent undivided interest
^
(282 MW) in GSU's River Bend nuclear plant, with a current total investment in River Bend of approximately $1.6 billion. Under
- the Joint Ownership, Participation and Operating Agreement
("JOPOA"), Cajun and GSU were to share costs, expenses and benefits of River Bend in proportion to ownership. GSU is project manager with the authority and obligation to construct, operate and maintain River Bend, subject to duties, among others, to act in good faith and in Cajun's best interests. , i e i E
l On June 25, 1989, Cajun initiated Cajun Electric Power Coooerative, Inc. v. Gulf States Utilities Company, No. 89-474-B, United States District Court for the Middle District of Louisiana (the " Rescission Case"). In the Rescission Case, Cajun has requested that the JOPOA be rescinded and that damages of at least SI 6 billion be awarded to Cajun, inter alia, because of GSU's misrepresentations of material facts intended to fraudulently induce Cajun to enter into the JOPOA and to finance the construction, ownership and operation of River Bend. Two of Cajun's Members initiated the Nullity Case on November 25, 1992. Ecuthwest Louisiana Electric Membership Corporation. et al. v. Gulf States Utilities Comoany, No. 92-2129, United States District Court for the Western District of l Louisiana. Cajun is a plaintiff-intervenor in that case. The Nullity Case rests on the fact that the JOPOA was never submitted to the Louisiana Public Service Commission ("LPSC") for its consideration as is required by a General Order of the LPSC issued on October 28, 1968. Failure to have submitted the JOPOA to the LPSC for its consideration results in the JOPOA being a nullity. GSU would become the sole owner of River Bend and Cajun will receive at least $1.6 billion in damages from GSU. Placing additional strains on the GSU/Entergy financial picture is the order of the Public Utility Commission of Texas ("PUCT") which disallowed approximately $63.5 million of GSU River Bend plant costs and ordered the abeyance of approximately
$1.4 billion of GSU River Bend investment and $157 million of deferred River Bend costs (" Texas Litigation").
l l i The Testimony of Michael J. Hamilton, a partner in the !
, Public Utilities Industry Services Group of Price Waterhouse !
I 1 (attached to Appendix-A), amply demonstrates that a judgment / settlement in Cajun's favor, anywhere in-the range from i
$700 million to $1.6 billion, would drop GSU below investment j grade parameters and that a judgment / settlement in Cajun's favor in any substantial amount would probably render GSU bankrupt with a
attendant adverse impacts on Entergy. Affirmance of the PUCT in i 1 the Texas Litigation would substantially exacerbate GSU's and Entergy's financial deterioration. , In the events just described, on a combined basis, GSU/Entergy's net earnings would fall from $2.29 per share to a t inss per share in the range from $3.34 ($1.6 billion Rescission l Case judgment / settlement) to a loss per share of $0.69 ($700 [ l million Rescission Case judgment / settlement). In the event of a ;
$1.6 billion Rescission Case judgment / settlement, even on a ,
i consolidated GSU/Entergy basis, the combined entity would fail to 4 meet three of the four Standard and Poor's investment grade bench marks. l i 1 Given these risks, Cajun recommends that this Commission should carefully consider: {
- (a) The potential effects that the adverse l litigation scenarios may have on the [
combined financial integrity of Entergy . and GSU; j < l (b) An acceptable financial arrangement i 4 whereby available resources of a l combined Entergy/GSU could meet the j
- requirements of the adverse litigation l scenarios; and ;
t i t I i
l (c) Regulatory options to ameliorate the financial impact of the adverse ! litigation scenarios prior to granting l approval for the merger in order to j ensure that the public interest and , Entergy's and Cajun's best interests are l served. fl l In its January 13 Application, GSU asserts that, in !
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accordance with the Reorganization Plan, GSU will continue to l l operate as a utility after the merger, but will be a subsidiary j [ of the new Entergy Corporation. Application, at 1-2. , Therefore, GSU seeks a modification in Paragraph 1.A of l l License NPF-47 to reflect the merger of GSU into Entergy. Sag ! Application, Exhibit 3. It also asserts that ! This application does not in any way alter Gulf States' ability to obtain the funds necessary to l cover its share of costs for the operation, i maintenance, repair, decontamination, and j O decommissioning of River Bend. . . Gulf States' financial responsibility for its share of River Bend and its sources of funds to support the l l facility will remain the same following the change ! in ownership of Gulf States. j Id. at 11. ; Even though GSU has taken the public position that the Cajun suits are without merit, Entergy and other parties interested in the merger have expressed concern about the impact ! of the Rescission Case and related litigation on the proposed j transaction. Entergy has included in the Reorganization Plan i specific conditions that allow it to withdraw from the merger if an adverse decision in the Cajun Litigation is rendered before ! the merger is consummated or if information comes to light which i is materially adverse to GSU's position in the litigation. The
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() further concern is that if the merger is consummated and Cajun
l subsequently prevails against GSU, there would be a substantial l adverse financial impact on GSU, Entergy and EOI. !
- 2. The Fronosed License Amendments May Result in a l
Significant Reduction In The Margin of Safety at River Bend j i The contractual framework for maintaining River Bend a operation is tenuous, as proposed, and does not require Entergy j i to guarantee EOI funding for River Bend operation. GSU proposes '; i to transfer the operational duties and obligations for River Bend ! to EOI. GSU and EOI propose to enter into an Operating Agreement ; for the provision of those services by EOI and for payment by GSU ! (attached to Mr. Mohre's FERC Testimony as Exhibit i CJN-2, Schedule 2, Egg Appendix A). The Operating Agreement , provides that EOI shall take all actions necessary to manage, control, possess, use, monitor, repair and decommission, and to i take all actions necessary to make capital improvements at River
- Bend. Sag Operating Agreement, 55 1.13, 2.1. However, because ;
the Operating Agreement runs only between GSU and EOI, GSU has ! the full obligation under the Operating Agreement to compensate l EOI for River Bend operation. Sag id., g 3.1. Under the ! Operating Agreement, EOI cannot look to Entergy or Cajun for . payment. Related to the Operating Agreement is the River Bend ; Guarantee Agreement, the parties to which are EOI, GSU and ' Entergy (attached to Mr. Mohre's testimony as Schedule 3, s22 Appendix A). Under the Guarantee Agreement, Entergy " guarantees" to be responsible for funding EOI's activities under the Operating Agreement, however that guarantee is in effect only so (
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i 1 long as GSU meets its payment obligations to EOI under the l 1 Operating Agreement. This specific exclusion makes Entergy's f i
" guarantee" totally illusory. ;
This loophole is critical. EOI is very thinly ! I capitalized. It has no authority to seek external financing and i its sole revenue stream related to its operation of River Bend is j i GSU's payments under the Operating Agreement. If GSU ceases to make its Operating Agreement payments, Entergy is not obligated l t to financially support EOI, and EOI has no other sources of funds l to maintain safe and reliable operation of River Bend. The possibility that GSU may be unable to fund EOI i operations of River Bend under the Operating Agreement is much ; more than an academic concern. As noted, GSU faces severe j i a exposure from litigation with Cajun and from certain Texas j l regulatory proceedings which could render GSU bankrupt and unable j i to make adequate payments to EOI to maintain safe and reliable { River Bend operation. ; In GSU's January 13, 1993 license amendment ! t application, GSU included a one and two-thirds page " discussion" regarding that requested determination. Egg Attachment 2 to ! i GSU's January 13, 1993 Application. That " discussion" merely recited that no changes to the physical design or operation of ; the plant will be made and then reaches the bald conclusion that 1 2 the proposed change meets the requirements of 10 C.F.R. [ i g 50.92(c). f i The license amendment application did not even mention ; the potential shutdown scenario which the chief executive ( r I ~ i-
officers of both Entergy and EOI admitted was possible. EEE : 1 Appendix B at pp. 24-26. ! l
- 3. The Proposed License Amendment Cannot Be Approved l Without Caiun's Consent {
As can be seen from GSU's filing, GSU submitted its l license transfer application (RBEXEC-93-035) on its own behalf l l and, purportedly, on behalf of Cajun. Under the JOPOA, GSU can. l act as Cajun *s agent, and take actions on behalf of Cajun, only l i where GSU's judgment and discretion have not been exercised i r i unreasonably. Sea JOPOA, S 4.1. Cajun asserts that GSU's j . judgment and discretion have not been exercised reasonably (and
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particularly not with reference to Cajun's interests) in GSU's I i application to amend the operating license and transfer j operational responsibility for River Bend to EOI as proposed. The primary flaws in the proposed plan for operation of River Bend after the license amendment are that GSU will be a barrier ! 4 between Cajun and the proposed plant operator, EOI. The plant may no longer be run in the best interests of GSU and, j I I purportedly, Cajun. Instead, it will be run in the best j i interests of the Entergy System. Cajun has therefore notified GSU that this attempted exercise of its agency authority is ! I improper and ineffectual. Indeed, under Louisiana law, GSU's l ~ authority to act as Cajun's agent in this regard no longer ! I exists. ! Cajun states unequivocally that the license amendment i i request has not properly been made on Cajun's behalf, that ! l Cajun's consent to the license amendment has not been obtained, !
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and that Cajun opposes the license amendment application as ! i proposed by GSU. l t
- 4. The Prorosed License Amendments Will Adversely Affect Caiun's Richts Recardino The ODeration Of River !
Bend l t I GSU has requested approval by this Commission of the license amendment which will be implemented by the arrangements under which EOI will operate River Bend for GSU. These ; arrangements are proposed to be implemented by agreements which include the GSU-EOI Operating Agreement, the GSU-EOI Support Agreement, the GSU-EOI Switchyard and Transmission Interface {; Agreement, the GSU/EOI/Entergy Corporation Guarantee Agreement and the GSU/Entergy Services, Inc., Service Agreement. To f Cajun's knowledge, none of these agreements has been formally presented by GSU to this Commission for its review. i GSU's proposal for the transfer of ownership and i operation of River Bend is in derogation of Cajun's rights under j the Cajun /GSU JOPOA. Any approval by the Commission of ! Applicants' arrangements must be conditioned to protect Cajun's t rights as a thirty percent co-owner of River Bend. i As described in the FERC Testimony of David Lee Mohre, Cajun's Executive Vice President and Chief Executive Officer (attached to Cajun's April 236 Comments, Appendix A), GSU's and l Cajun's obligations are currently defined by the JOPOA. The , Applicants propose to effect the transfer of River Bend operational responsibility to EOI through the license amendment request and the proposed agreements enumerated above. Obviously, j () if EOI becomes the operator of River Bend, the relationship l
l I i l I i between GSU and Cajun will change significantly and j fundamentally. Whereas the JOPOA provides for a considerable and significant direct relationship between the co-owner of the. l facility, Cajun, and the project manager or operator of the j f facility, GSU, the agreements proposed by the Applicants to enable EOI to operate River Bend insert GSU as a non-operating ; s owner between the operator, EOI, and Cajun. Indeed, Cajun has no f t direct contractual privity with EOI. This relationship, very ! different from that which Cajun negotiated, is totally l 1 unreasonable and is not in accordance with the JOPOA or good 4 l utility practice. Efa Mohre PERC Testimony at 6-10 (Appendix A). l t i The proposed agreements change the rights for which j i , Cajun bargained. They would change GSU from an operator-owner to I I simply an owner. GSU will no longer be making decisions on an l independent basis, serving the interests of GSU and, purportedly, Cajun as joint owners of River Bend. Rather, the decisions will l l j be made by EOI, with input from GSU as a member of the Entergy f system and a party to the Entergy System Agreement. GSU will no j t longer be accountable to a board of directors whose primary goal is to protect the interests of Gulf States. If the merger is 4 consummated, GSU will be accountable to a board of directors ; ? ! which must consider the interests of the five operating companies ! l and numerous other subsidiaries. Moreover, if GSU becomes a f d party to the Entergy System Agreement, as proposed by the ! Applicants, the Entergy Operating Committee, rather than GSU, f . I will make critical decisions regarding loading criteria for River ! i () Bend, additions or changes in facilities related to production
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I requirements, refueling outages, and system dispatching and i switching. Id. The econcmic convergence of interests between GSU and Cajun assumed under the JOPOA will no longer exist. i i Further, the proposed River Bend arrangement, I q particularly the proposed GSU-EOI Operating Agreement would have the following additional detrimental impacts on Cajun:
- 1. It would undermine Cajun's current f rights with the plant operator since [
Cajun will have no direct contractual ! privity with EOI- i ! i
- 2. It would impair Cajun's rights of access }
l to auditors, INPO audits, and key ; ) reporting data on the plant since such j l rights run only to Gulf States. Egg i i Operating Agreement, Sg 5.1, 5.4, and i
- 5.9; t
- 1 l 3. Co-owner approvals of budgets, capital i i projects, and major undertakings are not !
addressed; rather the proposed { arrangement appears to structure a j
" blank check" approach for EOI and GSU i
- to access Cajun's money. Egg Operating {
Agreement SS 3.1, 5.1, and 5.2; ! 1 4. Relationships with and among Entergy l ! affiliates are ill-defined and could be i costly to Cajun. One example of this is ! , in the scheduling of outages. Another ; l is in the area of allocation of costs. ! , Egg Operating Agreement, Sg 2.1, 2.5, ! l and 5.1; Entergy System Agreement, j j g 4.08; ; i j 5. Administrative, general, and other costs j to Cajun would be expected to increase with the imposition of GSU between the operator and Cajun; and i 3 6. The proposed arrangement substantially j limits EOI's liability to actions which
- constitute " Gross Negligence or Willful Misconduct." Egg Operating Agreement, }
i Article VI. l ! Egg Mohre Testimony (Appendix A) at 9-10. l l 4 t i e . n- - - - --. . . , - . - ~ , I
I As noted, under the JOPOA, GSU lt.cks authority to l execute the proposed River Bend agreements as Cajun's agent, to i the extent it would be contrary to good utility practice, ; i 1 unreasonable, or show absence of good faith. The proposed l . .I agreements violate each of these conditions; therefore, GSU lacks l authority to execute them as agent on behalf of Cajun. ; l ! . 5. The ProDosed License Amendments Cannot Be Approved ; Without Certain License Conditions ; i j Despite these substantial problems with the mechanisms l i ! proposed by GSU to effect the transfer of operating ! i } 1 responsibilities from GSU to EOI, Cajun does not necessarily ! i ; oppose the requested license amendment related to EOI operation. l I i The Applicants have claimed that transfer of operational } 1 : responsibility to EOI will result in cost savings which will l i inure to Cajun's benefit, at least in part. i i ! Cajun hopes that cost savings are a result of any }
- license amendment. As the Commission is aware, River Bend's !
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operation and maintenance costs and administrative and general ! l i costs are among the highest of any nuclear unit in America and are consistently and substantially higher than any other i comparable prudently run single unit' boiling-water reactor. Sgg j i Mohre FERC Testimony at 11-12 and Ex. CJN-2, Schedule 5, attached > thereto. ; 2 Thus, Cajun hopes that the purported savings occur if ; the merger and requested license amendments are approved. However, such approvals should be made only upon the imposition l l of conditions adequate to protect Cajun's interests as a thirty ; i i 1 b I
l > l 1 percent co-owner of River Bend. These license conditions would l l include, among others: l
- 1. The agreement pursuant to which EOI will operate River Bend must be a tripartite agreement among GSU, EOI and Cajun;
- 2. EOI must be the direct agent of Cajun, equally and ,
without preference or prejudice in favor of GSU; ,
- 3. EOI must be directly liable to Cajun under a reasonable liability standard; l l
- 4. Cajun must have meaningful input into decisions !
related to maintenance and fuel outages, budgets, capital improvements and major maintenance items;
- 5. Cajun must have access to EOI records, meetings j and decisions affecting operations, maintenance or !
ccheduling of River Bend- !
- 6. EOI should submit regular reports to Cajun and j provide copies of all communications and documents i submitted by EDI to the NRC, SEC, or other l l
governmental agencies regarding River Bend or ! affiliate transactions involving EOI's nuclear management or cost allocations, , l 7. Cajun should have access to INPO documents and be able to attend INPO meetings; and
- 8. Other conditions appropriate to protect Cajun as a thirty percent minority owner of River Bend.
These conditions are the minimal conditions needed to protect Cajun in these circumstances. Particularly in light of the expansion of the protection of nuclear plant minority owners' interests, these conditions are appropriate and necessary.
- 6. The Pronosed Ownershio Amendment Should Be ADproved Only With Conditions Adequate to Remedv Its Adverse Imoacts on the Cajun /GSU Interconnection Agreement The proposed ownership amendment will have detrimental effects on an agreement that is critical to the continued effective operations of Cajun, and thus to the overall interests '
of its consumers. In the normal course of events, these
contractual and operational matters would be examined by the FERC in its review of the proposed merger. However, as previously noted, neither those operational and contractual matters (nor competition issues) has been set for hearing by FERC. This Commission should conduct a hearing to examine these matters. As reflected in the attached FERC Testimony of Victor J. Elmer, Cajun and GSU have a power interconnection agreement, or PIAF, which provides, along with its Service Schedules, for the transmission of Cajun-generated or purchased power over the Cajun /GSU jointly-owned high voltage transmission system, the ITS, for ultimate delivery to Cajun's Member distribution cooperatives located on the GSU and Entergy systems, and for transmission of Cajun-generated power for delivery of third party sales. Further the PIA and Service Schedule CTOC to the PIA provide for the joint planning of the ITS by Cajun and GSU. Service Schedule CTOC is a transmission equalization and access agreement which provides, among other things, for the allocation of ownership and the cost sharing responsibilities for the ITS, which allocations are driven in large part by the relationship between the relative levels of Cajun and GSU IIS investment to the relative levels of ITS usage by Cajun, and by GSU and third parties. Egg Elmer FERC Testimony at 13-15. In general, if the merger is approved as proposed, the planning functions of the PIA, its service schedules, and the construction obligations, l O 1/ Attached as Exhibit CJN-4, Schedule 1, to the Elmer FERC Testimony, Appendix A.
1 [ i access rights and the cost sharing mechanisms of Service Schedule i CTOC will be severely impacted in several ways. f The Applicants have admitted that they have not even analyzed the impacts of the expected changes regarding the.ITS. ! l ! Fred F. Gallaher, Entergy Senior Vice President, testified in a
- deposition taken in the LPSC rerger proceeding that Entergy has undertaken no studies'to determine what changes are necessary to
] I ) the Entergy or Gulf States' transmission systems to accommodate i i
i this increased usage. Egg Gallaher LPSC Deposition, Attachment f i ' l C, to April 26 Comments (Appendix A).
- Since Entergy's stated position on the record is in ;
i cont.adiction and violati7n of Cajon's existing contractual ! rights, and is detrimental tc Cr.;cn's consumers, no approval of l 1 f j this proposed merger should be issued until this situation has [ ] been clarified and corrected. j For these reasons, the impact of the proposed merger on. f r .a f the PIA and its attendant service schedules, on Service Schedule , CTOC and on the ITS must be analyzed by this Commission. As argued supra, this analysis should not take place in a vacuum. l i j Rather, it should be undertaken only after a full review of those , f ,
- impacts after the taking of discovery arm the conduct of a trial t
. type hearing. . I 1 i J
- 7. The River Bend License Conditions Must Be Enforced i !
As the Commission is aware, there are two pending l 4 ! .. lawsuits which may dramatically affect Cajun's ovvership in' River l l Bend. In the Rescission case, Cajun seeks rescission of the i JOPOA and damages in the amount of, at least, $1.6 billion based . 1 4 l t
c l 21 - ]! upon, among other matters, alleged fraud in inducing Cajun to () 'f I enter into the JOPOA. In the Nullity case, similar relief is j I sought, i.e., a determination that the JOPOA is a nullity since l GSU failed to obtain necessary approvals from the Louisiana l Public Service Commission. ~j i In this litigation, Gulf States is seeking to have the j Cajun /GSU Power Interconnection Agreement (" PIA") and related service schedules declared void by the court. The PIA is the i contract pursuant to which, among other things, GSU provides ; I Cajun with transmission services. This action, seeking to have i the PIA declared void, is in direct conflict sith NRC license 1 condition 10. That license ccndition requires GSU to transmit [ E I power over its system on behalf of utilities engaging in bulk j
- - power supply in GSU's service area. The Commission should evaluate this condition of the River Bend license in its f censideration of the public interest aspects of the merger and l amendrnent , and should inquire of the Applicants whether, if the merger is consummated, GSU will cease its attempts to have the i I
] Cajun /GSU PIA and related service schedules declared void. i l Under license condition 12, GSU is obligated to sell t J power for resale to any entity engaged in retail distribution of f x i electric power where such power is not available from alternative l resources at competitive costs. GSU has refused to' provide lj certain delivery points which are necessary for one of Cajun's j i distribution cooperative Members to supply power to two large j industrial customers. This refusal is in violation of River Bend j l
~
license condition 12, and this violation should be set for
\ hearing as part of this license amendment proceeding.
CONCLUSION Wherefore, for the foregoing reasons, Cajun Electric Power Cooperative, Inc., respectfully requests that the ; Board:
- 1. Grant Cajun's requested intervention in this proceeding for all purposes;
- 2. Order a full evidentiary hearing to determine whether the requested license amendment to reflect the change in ownership of GSU should be granted and whether the requested license amendment to effect EOI operation of River Bend should be granted;
- 3. Impose on any approval of the proposed license amendments conditions as described herein; and
- 4. Grant such other relief as the Board deems appropriate.
Dated: August 31, 1993 Respectfully submitted, _ D 01 -& James D-. Pembroke i Thomas L. Rudebusch DUNCAN, WEINBERG, MILLER & PEMBROKE, P.C. 1615 M Street, N.W. , Suite 800 Washington, D.C. 20036 (202) 467-6370 Attorneys for Cajun Electric Power Cooperative, Inc. i
l CERTIFICATE OF SERVICE C I, Thomas L. Rudebusch, hereby certify that I have this , 31st day of August, 1993, served the foregoing document upon each person designated on the attached service list by first class mail, postage prepaid. ) M _ 2 0 -Ml _ Thomas L. Rudebusch ; DUNCAN, WEINBERG, MILLER 6 PEMBROKE, P.C. 1615 M Street, N.W. i Suite 800 Washington, D.C. 20036 (202) 467-6370
- s. 5 6
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4
s. i t i 3 i APPENDIX A i k n i h i e i I f I l l I i
t l UNITED STATES OF AMERICA j BEFORE THE ; NUCLEAR REGULATORY COMMISSION ! Gulf States Utilities Company ) Docket No. 50-458
- i t
CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, i COMMENTS, PETITION FOR LEAVE TO INTERVENE, AND i REQUEST FOR HEARING AND CONDITIONS, ON APPLICATION I
- FOR APPROVAL OF TRANSFER OF OWNERSHIP [
t i f i
.i f
i ' t t James D. Pembroke s Janice L. Lower l Thomas L. Rudebusch l DUNCAN, WEINBERG, MILLER & PEMBROKE, P.C. 1615 M Street, N.W. ; Suite 800 l Washington, D.C. 20036 i (202) 467-6370 i i Attorneys for Cajun Electric f Power Cooperative, Inc. i l I Dated: April 26, 1993 l l l l 1
l l 1 1 TABLE OF CONTENTS i Pace INTRODUCTION 1-I. . . . . . . . . . . . . . . . . . . . . . f II.
SUMMARY
OF CAJUN'S POSITION . . . . . . . . . . . . 3 l III. THE PARTIES AND THE NATURE OF THE PROCEEDING . . , , 4 > A. Cajun Electric Power Cooperative, Inc. . . . . . 4 t B. The Entergy Corporation . . . . . . . . .. . . . . 6 C. Gulf States Utilities Company . . . . .. . . . 8 : 9 i D. River Bend Station . . . . . . . . . . . . . . . E. Other Generation and Transmission Arrangements l Among the Parties . . . . . . . . . . . . . . . . 10 i F. Applicants' Plan of Reorganization . . . . . . . . 15 i G. The Application for Transfer of Control of i
+
Ownership of Licensee and License Amendment Before the NRC . . . . . . . . . . . . . . . . . . 17 , f H. Other Jurisdictional Proceedings . . . . . . . . 20 i
- 1. State Approvals: The Texas and Louisiana j Applications . . . . . . . . . . . . . . . . . 20
- 2. Review by FERC Under Federal Power Act .
Sections 203 and 205 . . . . . . . . . . . . . 23
- i
- 3. The Application-Declaration before the !
SEC . . . . . . . . . . . . . . . . . . . . . 26 ! IV. PETITION TO INTERVENE AND REOUEST FOR HEARING . . . 27 i V. ABSENT PROPER CONDITIONS. THE APPLICATION SHOULD NOT BE APPROVED . . . . . . . . . . . . . . . . . . . . . 39 : t A. The Public Interest and the Interests of ! I Wholesale Customers and_ Consumers May Be Affected by the Outcome of the River Bend Litigation and Regulatory Disallowances i Regarding River Bend . . . . . . . . . . . . . .. . 39 .{ i I i
'f i
y n - , e - ,
J t i
- 1. Nature of the River Bend Litigation . . . . . 36 l
- 2. Financial Impacr of Adverse Decisions ;
in the River Bend Litigation and Texas ; Litigation on GSU and Entergy . . . . . . . . 44 j B. This Commission Must Consider The Anti- , Competitive Effects of The Proposed License ! Transfer . . . . . . . . . . . . . . . . . . . . . 49 i
- 1. The Merged Entity Would Be Among the i Largest Utilities in the World . . . . . . . . 49 i
- 2. The Proposed Combination Of Entergy And l GSU Would Have Anticompetitive Effects l Which Will Not Be Remedied By The ,
Transmission Service Tariff As Filed By i Applicants . .. . . . . . . . . . . . . . . 53 i
- a. Entergy and GSU Have Market Power '
in the Relevant Product and Geographic Markets . . . . . . . . . . 55 i
- b. The Defects in the Transmission '
Service Tariff Exhibit the Adverse Competitive Effects of the Proposed i Merger . . . . . . . . . . . . . . . . 59 C. The Proposed Transfer is Not in the Public ; Interest Due to Its Impact on Cajun's Rights , Regarding the Operation of the River Bend Plant . . . . . . . . . . . . . . . . . . . . . . 65 P 1
- 1. The Applicants' Proposal for the !
Operation of River Bend is in Derogation i j of Cajun's Rights Under the River Bend ! Joint Ownership Agreement . . . . . . . . . . 66 t 1 -
- 2. Entergy Should Be Required To Guarantee EOI's Financial Ability to Perform its i Duties as River Bend Operator . . . . . . . . 70 ;
D. This Commission Must Determine Whether GSU Is j In Compliance With Its River Bend License ; Conditions . . . . . . . . . . . . . . . . . . . . 71 ! E. The Proposed Ownership Amendment Should Be [
~
Approved Only With Conditions Adequate to ' Remedy Its Adverse Impacts on the Cajun /GSU Interconnection Agreement . . . . . . . . . . . . 74 l l 1 11 - 1 I i
E t t e i I VI. THE COMMISSION SHOULD IMPOSE CONDITIONS ON ENTERGY/GSU AS TERMS OF APPROVAL OF A MERGER OR } COMBINATION . . . . . . . . . . . . . . . . . . . . 85 l VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . 87 5 I i t i
.j l
i t l 1 h P i d
-]
i l l t l l l i i i l. f it iii i t t a h i s J 6 I
. - + , . . ~ . .
[ f t b TABLE OF AUTHORITIES CASES Ca4un Electric Power Coocerative. Inc. v. Gulf States Utilities comoany, No. CV-89-2294 (W.D. La.) . . . . . . 72 ; Caiun Electric Power Coooerative. Inc. v. Gulf States Utilities Co., 47 FERC 5 63,024 (1989), aff'd in part and rev'd in part, 59 FERC i 61,041 (1992) . 11, 61 : 1 Caiun Electric Power Coooerative. Inc. v. Gulf States Utilities Co., 59 FERC I 63,024 (1992) . . . . . . 13,72 Charbonnaces de France v. Smith, 597 F.2d 406 (4th Cir. ! 1979) . . . . . . . . . . . . . . . . . . . . . . 35 ,
\
Citizens of Allechan County v. FPC, 414 F.2d 1125 (D.C. ! Cir. 1969) cert. denied, 422 U.S. 1026 (1975) . . . . . . 35 l City of Lafayette v. SEC, 454 F.2d 941 (D.C. Cir. 1971) affirmed, 411 U.S. 747 (1973) . . . . . . . . . . . . . 36 Enterav Services. Inc., 58 FERC 5 61,234 (1992) . . . . . . 7 Entergy Services, Inc. and Gulf States Utilities , comoany, Docket Nos. EC92-21-000 and ER92-806-000, s 62 FERC 1 61,073 (1993) . . . . . . . . . . . . . . Dassin General Motors v. PERC, 656 F.2d 791 (D.C. Cir. 1981) . . . 34 i Gordon v. National Youth Work Alliance, 675 F.2d 356 (D.C. Cir. 1982) . . . . . . . . . . . . . . . . . 34 In the Matter of Louisiana Power & Licht Co. (Waterford Steam Generatina Station Unit No. 3), 8 AEC 718 (1974) . . . . . . . . . . . . . . . . . . . . . . . . 73 Louisiana Power & Light Co., 48 FERC 1 61,151 (1989) . . . . 13 Mississioni-Power & Light Co., 51 FERC T 61,039 (1990) . . . 14 i Poller v. Columbia Broadcastina System. Inc., 368 U.S. 464 (1962) . . . . . . . . . . . . . . . . . . . . . 34, 35 , Public Service Comoany of New Hamoshire, NRC Docket No. 50-443A (August 1991) . . . . . . . . . . 37 South Carolina Electric & Gas Co. and South Carolina f Public Service Authority (Virgil C. Sumner Nucler , P iv l
J Station Unit 1), NRC Docket No. 50-395-A (1980) . . . .. 3 :, Southwest Louisiana Electric Merbershin Corcoration and Dixie Electric Membershio Corporation v. Gulf States , Utilities Comcany, Civil Action No. 92-2129 , (U.S.D.C. W.D. La.) . . . . . . . . . . . . .. . . . 10 White Motor Co. v. United States, 372 U.S. 253 (1963) . . 38 j Wisconsin's Environmental Decade v. SEC, 882 F.2d 523 (D.C.Cir. 1989) . . . . . . . . . . . . . . . . . . . . . 39 i STATUTES / REGULATIONS l i 5 U.S.C. 5 556 (1988) . . . . . . . . . . . . . . . 40 ' Rural Electrification Act of 1936, 7 U.S.C- 55 901, 21 i sea. (1988) . . . . . . . . . . . . . . . . . . 5 Public Utilities Holding Company Act, 15 U.S.C. 55 79f 21 seg. (1988) . . . . . . . . . . . . . 26 ! Atomic Energy Act, 42 U.S.C. gg 2135, 2239 (1988). . . , passim , 10 C.F.R. 3 2.101 (1993) . . . . . . . . . . . . . . . . . 20 , 10 C.F.R. g 2.708(e) (1993) . . . . . . . . . . . . . . 2 i 10 C.F.R. 5 2.714 (1993) . . . . . . . . . . . . . . . . . 27 { 10 C.F.R. S 50.80 (1993) . . . . . . . . . . . . . 1, 32, 71 ! , 10 C.F.R. 5 50.90 (1993) . . . . . . . . . . . . . . . . 20 Department of Justice / Federal Trade Commission Mercer i Guideline.a, 57 Fed. Reg. 41,553 (Sept. 10, 1992) . . . . 51 l 58 Fed. Reg. 16246 (1993) . . . . . . . . . . . . . . 1, 25 f
?
l F P t r k i 4 l l
UNITED STATES OF AMERICA BEFORE THE - O' NUCLEAR REGULATORY COMMISSION Gulf States Utilities Company ) Docket No. 50-458 ! CAJUN ELECTRIC POWER COOPERATIVE, INC. S, l 4 COMMENTS, PETITION FOR LEAVE TO INTERVENE, AND REQUEST FOR HEARING AND CONDITIONS ON APPLICATION I FOR APPROVAL OF TRANSFER OF OWNERSHIP 1 I. INTRODUCTION , Pursuant to the Notice issued by the Nuclear - i Regulatory Commission ("NRC" or " Commission") on March 25, I 1993, 58 Fed. Reg. 16246 (1993), Cajun Electric Power Cooperative, Inc. (" Cajun"), hereby petitions to intervene, files its comments, requests a hearing, and requests { a substantive relief in the above-captioned proceeding on the application for transfer of control of the ownership of Gulf States Utilities Company ("GSU" or " Gulf States") (which is l f a joint licensee of River Bend Nuclear Station) from its f l stockholders to Entergy Corporation ("Entergy") (together j i
" Applicants" or " Merged Companies") under, inter alia, !
Section 105 of the Atomic Energy Act ("Act"), 42 U.S.C. l r 5 2135 (1988), and 10 C.F.R. 55 50.80 and 50.90 (1993) of l the NRC's Rules and Regulations. j Cajun's petition is supported by: The attached l t testimony1 ' of David Lee Mohre, Cajun's Executive Vice { r
, 1/ This testimony was filed on March 24, 1993, in the related merger proceeding before the Federal Energy i Regulatory Commission ("FERC") in Entergy Services. {
Inc. and Gulf States Utilities Comrany, FERC Docket ;' Nos. EC92-21-000 and ER92-806-000. J
,r 5
1
t i President and Chief Executive Officer; Victor J. Elmer, i Cajun's Vice President of Operations; and Michael J. i
' i Hamilton, a financial consultant to Ca]un; and by the J
attached affidavit of Roger Odisio, an economic consultant to Ca]un, each of which is incorporated herein by reference. f This motion reflects a substantial portion, but not all, of l the materials in these testimonies and affidavits. The Commission is, therefore, respectfully referred to the , testimonies and affidavits themselves. Also attached as Exhibit CJN-4, Schedule 1, to the Elmer FERC testimony is a , copy of the June 26, 1978 Power Interconnection Agreement (" PIA") between Cajun and GSU which is the basic agreement [ governing the interconnected and coordinated operations of GSU's and Cajun's electric systems. The' August 20, 1979 ] River Bend Station Joint Ownership Participation and t Operating Agreement ("JOPOA"), is attached as Exhibit CJN j i to the Mohre FERC testimony. ! 1 In accordance with 10 C.F.R. 5 2.708(e) (1993), , the following are designated as the persons on whom service- l
- of pleadings and other papers in this proceeding should be made
- :
I James D. Pembroke, Esq. ; Janice L. Lower, Esq. ; Thomas L. Rudebusch, Esq. . Duncan, Weinberg, Miller
& Pembroke, P.C. !
1615 M Street, N.W., Suite 800 , Washington, DC 20036 (202) 467-6370 l' (202) 467-6379 (facsimile) W I t i s 1 c--, -
.i '
Victor J. Elmer Vice President - Operations ( Cajun Electric Power Cooperative, Inc. 10719 Airline Highway Baton Rouge, LA 70895 ' (504) 291-3060 II.
SUMMARY
OF CAJUN'S POSITION . Cajun is in a uniquely intertwined position with i regard to GSU. Cajun is a joint owner and co-licensee with l l GSU of River Bend. Cajun is a joint owner with GSU of a , coal-fired electric generating unit. Cajun is a joint owner j with GSU of a high voltage integrated transmission system. i Significantly, within these roles, Cajun is a wholesale transmission service customer of GSU and is a major competitor with GSU (and Entergy). l GSU seeks the approval of the Commission of a ! O change in its ownership from its current common shareholders to sole ownership by the Entergy Corporation with the result l that GSU will become an affiliated Operating Company of the : i Entergy system. This merger will have severe ramifications i on the GSU/ Cajun relationship and will have adverse impacts r on the competition in the region. ; i The full significance of this proposed change in i ownership can be analyzed only through a full trial-type ! evidentiary proceeding on both competitive and operational, issues. This Commission does not have the benefit of an .[ t I FERC review of the competitive and operational impacts of the proposed merger, since the FERC refused to conduct a l L I t J i
h
-4 -
l J ' hearing on these matters. Thus, a heavier. burden is placed on this Commission to fully examine the proposed merger. ; i Unless consented to by Cajun, as a thirty percent owner of River Bend, and unless properly conditioned to protect the public interest and the interests of Cajun, the license amendment should not be approved. I III. THE PARTIES AND THE NATURE OF THE PROCEEDING , .i A. Caiun Electric Power Coorerative. Inc. j Cajun is a Louisiana cooperative corporation with ; its principal place of business located in-Baton Rouge, i Louisiana. Cajun is engaged in the generation, transmission, distribution and sale of electricity to, among j others, the following thirteen rural electric distribution '! i cooperatives which are Cajun's Members, under all i i requirements contracts: Beauregard Electric Cooperative, ; DeRidder, Louisiana; Bossier Rural Electric Membership Corporation, Bossier City, Louisiana; Claiborne Electric i Cooperative, Inc., Homer, Louisiana; Concordia Electric j Cooperative, Inc., Ferriday, Louisiuna; Dixie Electric f Membership Corporation, Baton Rouge, Louisiana; Jefferson Davis Electric Cooperative, Inc., Jennings, Louisiana; I Northeast Louisiana Power Cooperative, Inc., Winnsboro, f Louisiana; Pointe Coupee Electric Membership Corporation, New Roads, Louisiana; South Louisiana Electric Cooperative l Association, Houma, Louisiana; Southwest Louisiana Electric ! Membership Corporation, Lafayette, Louisiana; Teche Electric i I i l
Cooperative, Inc., Jeanerette, Louisiana; Valley Electric j Membership Corporation, Natchitoches, Louisiana; and f
)
Washington-St. Tammany Electric Coope-ative, Franklinton, I Louisiana (collectively " Cajun's Members"). l Cajun and Cajun's Members are non-profit , i cooperatives formed under the Rural Electrification Act of l 1936, 7 U.S.C. gg 901, er seg. (1988). Cajun is eligible to l
'I apply to the Rural Electrification Administration of the j United States Department of Agriculture ("REA") for loan i
r guarantees to allow it to construct or purchase generation l a and transmission facilities. j As a generation and transmission cooperative, l 3 Cajun functions as the power supply and transmission f component of a vertically integrated system in which Cajun's Members have responsibility for the distribution and retail l a sale of all power and energy for their consumer-owners. l Cajun's Members serve approximately 1,000,000 people in 54 l 9 l of the 64 parishes in Louisiana. Cajun's primary purpose is i i ! to provide an adequate and reliable supply of economical ! a power and energy to meet the full requirements of Cajun's
- Members. Cajun currently has power supply responsibility l for all of Cajun's Members' loads, whose normal system peak {
load is approximately 1,300 MW. Cajun currently owns or.is entitled to approximately 1,976 MW of generation capacity. l See Elmer FERC Testimony at 3, 4, 7. ! I
--- - - . ,,,- ,,n , - . , .
. .. - ~ . -. . . . . - _ - . .- _
j r B. The Entergy Cornoration fI Entergy (formerly Middle South Utilities, Inc.) is ( t I a Florida corporation with its principal place of business located in New Orleans, Louisiana. Entergy owns all of the l common stock of certain operating subsidiaries, including: Arkansas Power & Light Company ("AP&L"), Louisiana Power & } Light Company ("LP&L"), Mississippi Power & Light Company ("MP&L"), and New Orleans Public Service, Inc. ("NOPSI") (collectively " Operating Companies"). The Operating Companies collectively distribute l T and sell electric power and energy to approximately 1.7 million customers at wholesale and retail in portions of l. 1 Arkansas, Louisiana and Mississippi. The electric -{ facilities of the Operating Companies are integrated and , operated on a system-wide basis, under the terms, inter ! i alid, of the Entergy System Agreement. Entergy's System j
+
l Operations Center, located in Pine Bluff, Arkansas, ! 4 i centrally dispatches the resources of the Operating ! I Companies over the interconnected and integrated i i transmission system. Peak demand in 1991 on the Entergy i l system was approximately 11,800 MW, while available j . i generating capacity was 15,700 MW. { Entergy Services, Inc. ("Entergy Services"), is an 1 affiliate, wholly owned by Entergy Corporation, which acts as the service agent for the Operating Companies in regulatory and contractual matters. Entergy Services also operates the System Operations Center and performs other
functions. Entergy Power, Inc. ("Entergy Power" or " EPI"), is a public utility affiliate, wholly owned by retergy Corporation, which currently markets 809 MW of capacity and energy from two generating units in Arkansas, Independence , Station Unit No. 2 and Ritchie Station Unit No. 2.F The operation of Entergy's nuclear generation is managed by another affiliate, Entergy Operations, Inc. ("Entergy Operations" or "EOI"), under agreements with the Operating Companies. Entergy Operations operates four , nuclear units: AP&L's Arkansas Nuclear One Units 1 and 2 ("ANO"), LP&L's Waterford Unit 3 ("Waterford"), and Grand Gulf Unit 1 (" Grand Gulf"). A ninety percent share of Grand Gulf is owned by another Entergy public utility affiliate, also wholly owned by Entergy Corporation, System Energy Resources, Inc. ("SERI"). Another wholly owned Entergy 3 affiliate, System Fuels, Inc. (" System Fuels"), plans and implements programs for the procurement, delivery and storage of fuel supplies for Entergy's generation. The above list of Entergy affiliated companies is not all-inclusive. In addition to various corporate subsidiaries., Entergy is organized into various Strategic Business Units ("SBUs") across and within the Entergy affiliates. From 1990 until August 1992, Entergy had four SBUs organized 2/ Entergy Power has a Power Coordination Interchange and f Transmission Service Agreement with AP&L which the FERC ! has ordered Entergy to terminate. Egg Entergy Services. Inc., 58 FERC 1 61,234 at 61,765-66 (1992) i I
- .- . - _ . . = . . . . .-. -. . ~ . .
[ around (i) nuclear generation,l' (ii) fossil generation' and i transmission, (iii) distribution and customer service and j (iv) business support. In particular, Entergy's fossil } generation and high-voltage transmission operations, along , a
}
- with Entergy Power and System Fuels, comprised what Entergy { called its "G&T" SBU, In August 1992, Entergy annnounced { j another reorganization of itself into three SBUs. The G&T j SBU was split in two, with the fossil generation combined { with nuclear generation and the transmission function combined with distribution, resulting in SBUs organized i around (i) Energy Supply, (ii) Distribution and ! l Transmission, and (iii) Business Support. ! r C. Gulf States Utilities Comeany i 4 GSU is a Texas corporation with its principal i place of business located in Beaumont, Texas. GSU is an investor-owned public utility which owns and operates facilities for the generation, transmission, distribution
- and sale of electric power and energy in interstate {
i commerce. GSU sells electric power and energy to i approximately 575,000 customers in Louisiana and Texas. GSU l also distributes and sells natural gas and steam products in j the area around Baton Rouge, Louisiana. GSU's 1991 system 'l peak was approximately 5,200 MW. Its generating capacity is ; 1 i i . 1/ Nuclear generation comprises approximately 25% of the ! 4 capacity and provides approximately 48% of the total i energy generated by the Entergy affiliates. j A/ Fossil generation comprises 75% of the Entergy system's ! generating capacity, and provides 52% of the Entergy !
- system's energy.
l r i
I _ g - l approximately 6,750 MW, comprised of coal, gas and nuclear ! units. GSU has a wholly owned affiliate, GSG&T, Inc., which i owns the Lewis Creek Station, a 520 MW gas-fired generating I plant leased and operated by GSU, as well as two other affiliates. D. Ri%or Bend Station The River Bend Station (" River Bend"). is a 940 MW, ; single unit, boiling water nuclear electric generating , station, located in West Feliciana Parish, Louisiana. GSU holds a 70% undivided interest (658 MW) in, and is a joint licensee of, River Bend. Cajun currently owns a 30% ] undivided interest (282 MW) in and is a joint licensee of ; River Bend. Cajun's current total investment in River Bend ; a ! is approximately $1.6 billion. Cajun and GSU entered into j O i i 4 the JOPOA on August 28, 1979. Under the JOPOA, Cajun and GSU were to share costs, expenses and benefits of River Bend -l 1 in proportion to their respective ownership shares. GSU is i Project Manager with the authority and obligation to construct, operate and maintain River Bend, subject to ,
, duties, among others, to act in good faith and in Cajun's :
best interests. ;
-)
On June 25, 1989, Cajun filed a complaint against { GSU in the United States District Court for the Middle District of Louisiana, in Civil Action No. 89-474-B l i (" Rescission Case"). In that case, Cajun has requested that the JOPOA be rescinded and that damages of at least $1.6 , r i billion be awarded to Cajun, inter alla, because of GSU's j t 1 l
i misrepresentations of material facts intended to fraudulently induce Cajun to enter into the JOPOA and obtain REA-guaranteed loans to finance the construction and operation of River Bend. i On November 25, 1992, two of Cajun's Members filed > suit against GSU in Southwest Louisiana Electric Membershin i Corcoration and Dixie Electric Membershio Corcoration v . Gulf States Utilities Comeany, Civil Action No. 92-2129 (U.S.D.C. W.D. La.) (" Nullity Case"). Cajun is an , intervenor in that case. In the Nullity Case, plaintiffs ! assert that the JOPOA is absolutely null since the JOPOA was 3 not submitted to the Louisiana Public Service Commission ("LPSC"), for its consideration, as required by the LPSC i General Order of October 28, 1968. The Rescission Case and , - the Nullity Case may be referred to jointly herein as the i
" River Bend Litigation."
E. Other Generation and Transmission Arrangements i Amonc the Parties Additionally, Cajun operates the two-unit 210 MW , i gas-fired Big Cajun No. 1 plant and the three-unit 1,620 MW coal-fired Big Cajun No. 2 plant. Cajun owns the Big Cajun j No. 1 plant and Units 1, 2 and the majority of Unit 3 at Big ) Cajun No. 2. According to the terms of a separate I agreement, GSU owns 42 percent of the 540 MW Unit 3 at Big l Cajun No. 2. Cajun also has a 91 MW allocation of l 1 i hydroelectric peaking capacity from the Southwestern Power 1 Administration ("SWPA"). Elmer FERC Testimony at 4. { i l i
Ca]un has a joint transmission ownership arrangement with GSU, which established the Cajun /GSU Integrated Transmission System ("ITS"). Under Service Schedule CTOC and the Cajun-GSU PIA, Ca]un has rights, inter alla, of equal access to and use of the ITS.I' The ITS consists of transmission facilities rated at 200 kV and above that are otherwise " qualified" under Service Schedule CTOC to the PIA. Cajun owns certain transmission , facilities, including six 230 kv substations and various substations at lower voltages at points on the transmission systems of GSU to deliver power to Cajun's Members. Cajun also owns two 500 kv transmission lines in the area around 6 Baton Rouge and a 138 kv transmission line. Elmer FERC Testimony at 4-5. s Cajun owns and operates an Energy Control Center where its load control and dispatching functions are performed. Since 1981, Cajun has been established as a load control area and it is a voting member of the Southwest 1 Power Pool ("SPP"). Cajun maintains its own control area through the telemetering of load data from the delivery , points serving Cajun load. Cajun performs real time control , of its system in accordance with the criteria of the SPP and the North American Electric Reliability Council ("NERC"). l l i i 1/ The status of Cajun's ownership rights in the Cajunf GSU ITS is currently at issue before the FERC on rehearing in Docket No. EL87-51-000, 59 FERC 1 61,041 (1992) ("CTOC Litigation").
1 1 l I 4 Cajun's Members are supplied by Cajun at delivery l
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points which are connected to the transmission systems of i l GSU, LP&L, Central Louisiana Electric Company ("CLECO") and ! Southwestern Electric-Power Company ("SWEPCO"). Currently, . i Ca3un has a total of approximately 130 delivery points. ! There are forty-three delivery points located on GSU i transmission and subtransmission facilities, of which twelve ; are at voltages at 138 kv or above. Cajun's GSU delivery - points had a peak load in excess of 530 MW in 1991. There i k i are forty-five delivery points on the LP&L portion of the Entergy system, of which seventeen are at voltages of 115 kv or above. Cajun's LP&L delivery points had a peak load of f r approximately 400 MW in 1991. t i Cajun's ability to function and to fulfill its l t purposes, including meeting its Members' power supply f i requirements, is directly related to the agreements which ! provide interconnection capability between Cajun and .l i neighboring utilities, including GSU and LP&L. In addition ! I to the Cajun-GSU PIA, including Service Schedule CTOC, Cajun f utilizes other agreements between Cajun and GSU which are a j part of the PIA: } i Under Service Schedule CSTS, GSU l provides "special transmission service" so that Cajun can serve its delivery- j points located on GSU transmission : facilities from p l other resources.",ajun generation or from ; i f/ Certain matters in dispute between Cajun and GSU ! related to Service Schedule CSTS are presently before l the FERC in Docket No. EL89-44-002 on exceptions from ; (continued...) : l l
f l Under Service Schedule CITS, GSU provides " integrated transmission l service" over its facilities from Cajun ; generation resources or from purchases l from GSU to interconnect 1ons with other i entities, including LP&L, so that Cajun i can serve its delivery point loads located on the transmission systems of other utilities, including LP&L. ] Under Service Schedule CTS, GSU provides ,
" transmission services" over its facilities from Ca]un generation to ,
interconnections with other entities so that Ca]un may conduct both firm and i non-firm "off-system" sales.I' Cajun's interconnection arrangements with LP&L are t accomplished through the Electric System Interconnection i Agreement ("ESIA"), dated May 25, 1976 (LP&L Rate Schedule FERC No. 64), as amended.I' The Cajun-LP&L ESIA defines the l l terms and conditions of interconnected operations between Cajun and LP&L. The Cajun-LP&L ESIA provides that Cajun may ; f receive or deliver power and energy over the facilities of ; i . other entities which are connected to LP&L, including all of f
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LP&L's interconnections with MP&L, AP&L, GSU, Mississippi J 1/(. . continued) i ] an Initial Decision, 59 FERC T 63,024 {1992) ("CSTS ! Litigation"), and before the United States District , Court for the Western Division of Louisiana. .; 2/ There are other schedules which have been made a part ! of the PIA. In addition, Cajun has submitted to GSU , , for its consideration another agreement, tentatively ; called Service Schedule CWS, which would provide the l terms and conditions under which Cajun could provide j wheeling service utilizing its rights over the Cajun /GSU ITS. l 1/ The Cajun-LP&L ESIA was amended, effective October 2, i 1988, by a settlement agreement before the FERC in ) Docket No. ER88-540-000. Louisiana Power & Licht Co., 48 FERC 1 61,151 (1989). , i [
i l i l Power Company ("MPC") and CLECO.I' The Cajun-LP&L ESIA i provides also for reciprocal interchange of emergency, supplemental, surplus and economy power and energy under service schedules for generation coordination. However, 2 Ca]un does not have the right currently to firm transmission service among LP&L's interconnection points with other utilities (so-called "through-wheeling" service), although i Cajun has for years attempted to obtain such firm through- , wheeling service from LP&L. Service Schedule FTS to the j Cajun-LP&L ESIA, at LP&L's insistence, provides only for l , firm transmission service from LP&L's interconnections with I other utilities to Cajun's delivery points on the LP&L ; portion of the Entergy system. ; Cajun and MP&L are parties to an Interconnection ! l Agreement, with an effective date of December 1, 1989'(MP&L l i 5 a Rate Schedule FERC No. 279).U' Cajun does not have any delivery point loads located on the MP&L facilities. The - Cajun-MP&L Agreement defines the terms and conditions of ; interconnected operations between Cajun and MP&L. The ) Cajun-MP&L Agreement provides that Cajun may receive or , deliver power and energy over the facilities of other 1/ While Cajun supplies its delivery point load on the ! LP&L system mainly from its own generation, Cajun has the right to supply those loads with capacity and energy purchased from LP&L, GSU or any other utility , where Cajun has transmission rights to deliver power to a LP&L interconnection point. lH/ The Cajun-MP&L Agreement was accepted for filing in . FERC Docket No. ER90-126-000. Mississioni Power & Licht Co., 51 FERC 1 61,039 (1990). ; J l
l l 1 1 1 I entities which are connected to MP&L, including all of MP&L's interconnections with LP&L, AP&L and GSU, as well as MPC and others. The Cajun-MP&L Service Schedule FTS, unlike ; the Schedule FTS with LP&L, does provide that MP&L may l provide Cajun with firm "through-wheeling" service. The j Ca]un-MP&L Agreement provides also for reciprocal ,
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interchange of emergency, supplemental, surplus and economy i power and energy under service schedules for generation , i coordination.U' l F. ADDlicants' Plan of Reorcanization On June 5, 1992, Entergy and GSU executed an i Agreement and Plan of Reorganization Between Entergy j Corporation and Gulf States Utilities Company j t (" Reorganization Plan")U' providing for the re organization of their corporate structures and the combination of their , i utility systems. Following the reorganization, GSU, AP&L, i LP&L, MP&L and NOPSI are proposed to be wholly owned - subsidiaries of the new Entergy. The Reorganization Plan contains conditions on the { reorganization, and provides for numerous representations ;
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11/ Cajun does not have currently effective interconnection j agreements with eitrer AP&L or NOPSI. A Cajun-AP&L : agreement expired by its terms. AP&L Rate Schedule l FERC Nos. 106 and 112. The expired Cajun /AP&L ! agreement also did not provide for firm through j wheeling. It was limited to transmission of Cajun's ! allocation of hydroelectric peaking capacity from the i SWPA. Egg AP&L Rate Schedule FERC Nos. 106 and 112. l i 11/ The Reorganization Plan is attached as Exhibit 1 to l Attachment I to GSU's January 13 Application to this Commission. i l 4 2
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and warranties from Entergy to GSU and from GSU to Entergy. The Reorganization Plan also provides for termination of the i Reorganization Plan in certain circumstances. One such ; i circumstance is termed a " Cajun Material Adverse Effect" l i which results from either the (1) settlement or resolution i of the " Cajun Litigation" prior to the closing on terms ; which result in a material adverse effect on GSU, or (2) if ; the " Cajun Litigation" has not been settled or resolved ! prior to the closing, and all other conditions have been i satisfied, and there is a " reasonable probability" that the , j " Cajun Litigation" will be settled or resolved on terms l which would result in a material adverse effect on GSU. . San Reorganization Plan at S 8.1(1). If there is a Ca]un , 1 Material Adverse Effect, Entergy retains the right to l J
- terminate the Reorganization Plan and attendant agreements.
Id. ; The " Cajun Litigation" referenced in the l Reorganization Plan is apparently the Rescission Case filed j on June 25, 1989, by Ca]un against GSU in the River Bend , i Litigation, and any present or future related actions, and j ] < a thus may include the Nullity Case.U' In the Rescission j I
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11/ Specifically, " Cajun Litigation" is defined as "any currently pending litigation or agency proceedings (other than the suits and proceedings referred to in l Section 4.1(a)(iii) and other than the ' steam water' litigation) with the Cajun Cooperative and any existing or future litigation ... arising out of essentially the same facts or issues as such pending li'tigation.. . " Reorganization Plan at S 8.1(i). Thus, the "Ca]un Litigation" would also appear to encompass the Nullity (} Case, as well as the Rescission Case.
Case, GSU has, inter alia, counterclaimed requesting termination or rescission of the Cajun-GSU PIA and attendant service schedules, and the ownership and operating agreeraent related to Big Cajun No. 2, Unit 3. The Rescission Case is currently in the discovery phase and a settlement phase i before a magistrate selected by the District Judge. The ; Nullity Case is in the early stages of development. It : appears that the CTOC Litigation and the CSTS Litigation and related judicial proceedings are not included in the " Cajun i Litigation" as defined in the Reorganization Plan, and could ! I not become " Cajun Material Adverse Effects." Egg id. at 55 4.1(a)(iii) and 8.1(i). ! i G. The Apolication for Transfer of Control of Ownershio of Licensee. and License Amendment. Before the NRC (f On January 13, 1993, GSU filed an application (RBEXEC-93-034) seeking approval of an effective change of control over GSU, and for a license amendment to the River j Bend Station Unit 1 Facility Operating License NPF-47 to reflect such approval in NRC Docket No. 50-458. Separately
< i j with that application, GSU filed another application (RBEXEC-93-035), requesting an amendment of the license, to reflect approval for Entergy Operations to be included as a licensee of River Bend with authority to operate the facility on behalf of its owners.M' GSU asserts in its 11/ Cajun will file a pleading relating to GSU's application for an amendment to the license to permit Entergy Operations to operate River Bend when that proceeding is noticed by this Commission.
] ( 1 i i
-- - . . . - . - - -- .~ .. .- - .
~ I _ is - application that, in accordance with the Reorganization :
)' Plan, GSU will continue to operate as a utility after the f merger, but will be a subsidiary of the new Entergy l l
Corporation. Ownership of River Bend will remain unchanged, l. and Cajun's entitlement to energy and capacity will be unaffected. Application, Attachment 1, at 1-2. ; i In support of its Application, GSU states that the j merger does not require any changes in the design or l operation of the River Bend Plant, but it does affect the , i change in ownership of GSU. Therefore, GSU seeks a ; i modification in Paragraph 1.A of License NPF-47 to reflect j i the merger of GSU into Entergy. Egg Application, Attachment ! I 1, Exhibit 3. The Application also notes that this amendment involves no change to the organizations or s personnel responsible for the operation of the facility. j Application, Attachment 1, at 11. It also asserts that This application does not in any way alter Gulf States' ability to obtain the funds : necessary to cover its share of costs for the operation, maintenance, repair, _ i decontamination, and decommissioning of River Bend. . . Gulf States' financial responsibility for its share of River Bend 1 and its sources of funds to support the ! facility will remain the same following the l change in ownership of Gulf States, j Id. at 11. l i The Application also addresses the need for an l antitrust review, stating: Th[e] change in ownership is subject to [ separate reviews of antitrust considerations ; by the Department of Justice, the Federal Trade Commission, the FERC and.the SEC. l Moreover, the License for River Bend contains ! l I
____. _ . _ _ . _ . . . _ _ _ _ _ - _ _ . _ . _ . - . _ _ _ _ . _ _ __ ._. _ ... .m _ _ . . - f conditions relating to antitrust issues that l are rpplicable only to Gulf States and not to l Cajun . . . Accordingly, the' NRC need not i conduct an extensive antitrust review . . . j id. at 12. In particular, GSU. assures the NRC that the potential effect of the business combination of Entergy and Gulf States on , competition is among the issues that will be ) I considered in proceedings before the FERC and the SEC in connection with proceedings before those agencies . . Id. GSU asserts that "no significant change" has occurred j or will result from the proposed business combination, 14., l ] and that the NRC should properly defer to agencies having l t { primary jurisdiction in these areas, especially where r o testimony has been filed (as at the FERC and the SEC) l
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purportedly demonstrating that Entergy's so-called open l- access transmission tariff ("TST") will alleviate any constraints on power purchase opportunities by all utilities in the region. Id. at 13-14. Although providing no data or J j testimony, but making only bald assertions, GSU concludes f f 1 i that the NRC should find that the proposed merger will not f I -! cause a significant change in the competitive environment with respact to activities under the River Bend License, and ; that an antitrust review is unnecessary. Id. at 16. GSU ; l also relies on existing license conditions purportedly as f f 5 ) proof of no future antitrust concerns after the merger is approved: I Additionally, Gulf States is presently ! bound by certain antitrust conditions ; l relating to River Bend, and will remain j subject to those conditions following i the business combination (See Operating I License NPF-47, Appendix C). j 3 i i l I I i
t Id. at 14. () Finally, GSU requests Commission action before f l October 1, 1993. Id. ! l As published on March 25, 1993, the NRC noticed }
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the application of GSU, and established a thirty day l t deadline f.or comments and interventions by interested parties.U' The Notice also provided that, pursuant to 10 ; i C.F.R. 5 2.101, the Staff of the NRC requests any interested . I person to submit to the NRC comments on or information j relating to any antitrust issues ras. sed by the transfer of f i license request. Based on those submissions and its own f i analysis, the Director of the Office of Nuclear Reactor j i d Regulation will issue a finding whether significant changes i 1 in the licensee's actual activities or proposed activities j have occurred since the completion of the previous antitrust !
- review. This submission by Cajun is in response to the j i
j Federal Register notice. I H. Other Jurisdictional Proceedings
- 1. State Acerovals: The Texas and Louisiana I Aeolications On July 1, 1992, Entergy and GSU filed a Joint F Application before the Public Utility Commission of the State of Texas ("PUCT") for a determination under Section 63 I of the Texas Public Utility Regulatory Act that the proposed i
11/ The NRC noted that GSU had also filed a request for
, amendments to the license for River Bend under 10 C.F.R. S 50.90, to allow the change of operating authority from GSU to Entergy Operations. That request, however, will be the subject of a separate
, Federal Register notice.
i e I I I combination of their systems is in the public interest j ("PUCT Proceeding"). 2 Ecatergy and GSU proposed a five year rate cap for J Texas ratepayers, subject to a force ma,eure clause for l l changes in GSU's costs due to "incoma taxes, labor . i agreements, NRC requirements, Clean Air Act implementation, major hurricane damage," and the like. During this time, ; Applicants proposed to retain any non-fuel so-called synergy i savings which are achieved, as an incentive to shareholders ; i to support the reorganization. The Texas Application ;
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proposed to pass on any fuel savings that will be achieved l l e from the proposed reorganization to Texas ratepayers through ! GSU's fuel clause. The Texas Application stated that fuel t d savings will re ult from joint system dispatch and the sharing of costs and benefits. Applicants also proposed an eight year [ amortization schedule for synergy savings which would j j specify the maximum decreases in base rates, if GSU's base j rates are determined to be unreasonable and excessive. The I proposed eight year amortization schedule presents total savings of only $358 million of the $483 million identified. The PUCT has not yet issued an order in that f 1 proceeding. j I I On July 1, 1992, Entergy and GSU also filed a !
- - Joint Application for Authorization to Combine Their Systems with the LPSC ("LPSC Proceeding"). Applicants offer the ,
same five-year rate cap in Louisiana as in Texas, with - i v -v vrP-, w . . m m. . , wie-
. _ . . . - - . _ -. = . -- . _ . - . -- - -_- ._ . .
i , a provision for changes in federal taxes and certain catastrophic events, allowing shareholders the right to retain any non-fuel synergy savings which are achieved, j i through the rate amortization schedule, while promising to j i pass any fuel savings to GSU*s ratepayers in Louisiana j automatically through fuel cost adjustments. j t The Louisiana Application also seeks LPSC approval-of the proposed contract by which Entergy Operations would assume control of the operations of River Bend. Id. at [ 11-13. Applicants assert that all River Bend capacity and energy to which GSU was entitled before the combination will I remain " dedicated" to GSU and its ratepayers, even though i 1 River Bend will be jointly dispatched with the Entergy ! I system. Id. at 6, 12-13. Applicants state they will need I the approval of the SEC and the NRC for such a transaction, l i and suggest that the River Bend operating license No. NFF-47 may need to be transferred to Entergy Operations. Id. at
- 12. l Cajun, as joint owner of River Bend and as a customer and competitor of GSU and Entergy, has an interest_
{ in all of these approvals. The LPSC has held hearings to l examine the Application. The LPSC Staff has filed testimony l i 4 "i I questioning the claimed merger benefits and recommending , that additional time be taken to examine the proposed ! i merger. A decision is expected around the end of April, ! i 1993. l i l i
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i l v i The progress and outcome of these state ; proceedings are critical to the consideration that must be f given to the Application of GSU by this Commission. No j approval of the Application before the NRC would be ! f appropriate unless and until both of the state proceedings l i' are complete, including any judicial appeals or review.
- 2. Review by FERC Under Federal Power Act Sections 203 and 205 l On August 28, 1992, GSU and Entergy Services., as t I
agent for Entergy and the Operating Companies, also tendered j for filing a Joint Application for Authorization to Combine , Systems ("the Section 203 Application") and a Joint ; Application for Rate Schedule Change ("the Section 205 Application") before the FERC. The Section 203 Application , I requested that the FERC issue an order finding that the merger and reorganization of Entergy and GSU are consistent , i L with the public interest. The Section 205 Application requested that the FERC accept for filing amendments to the Entergy System Agreement which would incorporate GSU into , the integrated operations of the Operating Companies. The Applicants also filed a motion to consolidate the two , i applications and requested expedited consideration and ) limited hearing procedures. p i Central to the Applicants' Section 203 and 205 t Applications is their reliance on the so-called "Open i Access" Transmission Service Tariff ("TST"). Under the TST, l 4 which has been conditionally accepted for filing in Entergy j r f l t i t
l Services. Inc., FERC Docket No. ER91-569-000,H' Entergy purports to offer through-wheeling transmission services on f I a point-to-point basis across the Operating Companies' systems for one rate. Applicants propose to modify the TST, ! I inter alla, by extending it to cover GSU's system, if the- l t FERC Applications are approved. j In support of their Sections 203 and 205 , i Applications, Applicants stated that they have recomputed j the claimed cost savings associated with the proposed merger !
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since the Texas and Louisiana filings. The claimed fuel' f I savings have increased to $849 million over ten years. An ! additional production cost savings of $184 million are also 3 l claimed, through alleged capacity deferrals. For non-fuel [ 3 i synergy savings, the claimed savings have increased to $673 ; ( million over ten years. While the_ Applicants have taken I time to recompute their cost savings estimates and prepared i written testimony, they did not provide the studies (e.c., i i the PROMOD III modeling) or all the assumptions used to make either the original estimates or the revised estimates. ; i
- Further, Entergy stated that, in August, Entergy reorganized l itself from four into three SBUs. Entergy admits that its !
f recomputations do not reflect this reorganization.U' t J ! i 15/ Certain participants in that proceeding, including i Cajun, have petitioned the United States Court of Appeals for the District of Columbia Circuit for review I of those FERC orders. i i 11/ Egg FERC Testimony of Donald Hunter, FERC Ex. App. 6 at ! i 22. j ;
i l l On September 1, 1992, the FERC issued Notices of Filing in FERC Docket No. EC92-21-000 and ER92-806-000 i (unconsolidated). On September 28, 1992, Cajun filed in l those proceedings a " Motion to Intervene, Protest, Request i for Hearing, and Answer to Motions of Cajun Electric Power f Cooperative, Inc." In addition to Cajun, thirty-two other , l entities filed petitions to intervene or other pleadings in ; those cases. The FERC has issued two orders in its proceedings { that are of great importance to the instant proceeding at i the NRC, because of the Applicants' urging that the NRC rely ; on the FERC's analysis and decision on the antitrust issues, and the NRC's statement in the Notice of Filing issued on > i March 25, 1993, that its Staff is following the FERC j proceeding closely.E' In these orders, the FERC makes it clear that it refuses to undertake an examination of the I competition issues raised by the merger--and so a deferral { by the NRC of an antitrust review based on a FERC analysis ! i would mean that no antitrust examination would be conducted. l On January 28, 1993, the FERC issued its " Order on Applications" in Entergy Services. Inc. and Gulf States Utilities Comeanv, Docket Nos. EC92-21-000 and ER92-806-I l 11/ The Notice states: "Although the Staff is providing i the opportunity for comments concerning the competitive aspects of the proposed transfer, the Staff notes that it is aware of and is closely following the proceeding at the Federal Energy Regulatory Commission (FERC). The NRC will consider the FERC proceeding to the maximum extent possible in resolving issues brought before the NRC." 58 Fed. Reg. 16246 (1993).
L 000, 62 FERC 1 61,073 (1993), accepting for filing the joint i application for approval of merger of Entergy and GSU, and I setting it for hearing. The Commission clearly identified as a set of issues which it would n21 set for hearing the effect of the merger on the existing competitive situation, including various competition issues raised by Cajun, and I wholesale and retail competition issues raised by Cajun and ; other parties. Id. at 61,374. On February 18, 1993, the Commission issued an
" Order on Motion for Expedited Clarification" in the ,
consolidated proceeding, 62 FERC i 61,156 (1993), in response to a motion filed by CLECO, joined in by Cajun. The Commission clarified that it did not intend to set for l hearing certain operational issues related to the merger's , impacts on the costs and rates of interconnected utilities, r including decreased transmission availability and operational complications. Id. Several parties have , requested rehearing of these orders by the Commission, but no final ruling has yet issued. In the absence of any l treatment of the competition and operational issues by the FERC, or the SEC (which has not yet issued any order on the SEC Application), the necessity and appropriateness of a full antitrust review by the NRC is clear. i
- 3. The Acolication-Declaration before the SEC On September 28, 1992, the Applicants filed their l
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Application-Declaration before the SEC under the Public Utilities Holding Company Act, 15 U.S.C. SS 79f at sag. I
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l (1988), and the SEC's Rules and Regulations ("SEC I t
-1 Application"). In their SEC Application, the Applicants i
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i requested a final decision approving their SEC Application. , l by June 30, 1993. SEC Application at 97. ! l The SEC noticed the filing on November.6, 1992, with a deadline date for comments and motions to intervene of November 30, 1992. Cajun filed a comprehensive Motion to Intervene, Comments, and Request for Hearing on the proposed combination and merger on November 30, 1992, raising issues, j among others, of competition and antitrust concerns. The i SEC has not yet acted on the interventions in that
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proceeding, or on the SEC Application. l l t IV. PETITION TO INTERVENE AND REOUEST FOR HEARING l The Commission's Rules of Practice and Procedure, f 10 C.F.R. 5 2.714 (1993), permit intervention petitions by l I any person whose interest may be affected and who desires to participate as a party. The petition must set forth with i i' r particularity the interest of the petitioner in the j proceeding, how the interest may be affected by the results ; of the proceeding (including financial or property interests), the petitioner's rights under the Atomic Energy I a Act ("Act") and the impact of any order on the petitioner's j I interest. j Under the Act, 42 U.S.C. g 2239, the Commission j l must grant a hearing, and permit intervention by interested ; persons, in proceedings such as this one: l h
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l In any proceeding under this chapter, for the I granting, suspending, revoking, or amending of any license or construction permit, or - application to transfer control, . . . the j Commission shall grant a hearing upon the i request of any person whose interest may be affected by the proceeding, and shall admit 'l any such person as a party to the proceeding. ; 42 U.S.C. g 2239 (a)(1) (1992 Supp.) j a : For the following reasons, Cajun requests the ~; Commission to admit it to full party status in this l L proceeding, and to hold a full evidentiary hearing in this proceeding, both on operational and competition issues. f i Cajun has an extremely large and important stake s ! 1 in the future of GSU as a corporate entity. Cajun is l; j concerned, inter alia, about the effect of the proposed l i merger and related transactions on the future of GSU as a l co-owner and operator i the River Bend Plant, especially !
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the proposal that Entergy Operations would operate River [ r Bend under contract with GSU. ! Cajun is a native load transmission customer of ; b both GSU and Entergy. Cajun has an interest in these proceedings, inter alia, as a customer of GSU, under the j I Cajun-GSU PIA, and as a customer of Entergy, under the Cajun-LP&L ESIA and the Cajun-MP&L Agreement. Cajun must f utilize the PIA and the Cajun-LP&L ESIA to deliver power and l energy to Cajun's Member delivery points located on the transmission facilities of GSU and LP&L Cajun's delivery arrangements are recognized both historically and by contract as native load obligations by GSU and LP&L. Cajun is concerned about the effects of.the proposed merger, and
l the addition of GSU to the Entergy System Agreement, on _ GSU's and Entergy's native load obligations to Cajun and Ca]un's Members, and on Cajun's rights under the PIA and Service Schedule CTOC to the PIA. Further, Cagun is concerned about the higher transmission service costs which may be imposed on native load transmission customers, and ; the increased transmission usages which may foreclose native load transmission, as a result of the GSU-Entergy ! combination.U' Cajun is also a competitor of GSU and Entergy in the bulk power and requirements markets. Cajun competes 1 with GSU and Entergy for long-term requirements sales of capacity and energy. '.or long-term and short-term firm power ; and energy sales, anu for economy energy sales. In making power sales, Cajun depends on the transmission access, usage l - and services available under the Cajun-GSU PIA, and, as i i appropriate under the circumstances, the Cajun-LP&L ESIA and Cajun-MP&L Interconnection Agreement. Cajun is concerned j about the effect of the proposed combination of GSU and Entergy on the bulk power and requirements marxets, and , i Cajun's ability to compete fairly with the combined GSU and Entergy systems.U' . l l 12/ Except as to the impact of the proposed merger on Cajun's rates, the FERC did not set for hearing the impacts on Cajun's operational or contractual rights. Enterav Services. Inc. and Gulf States Utilities Co., 62 FERC T 61,073 at 61,370-61,372 (1993). lQ/ As noted, the FERC did not set these matters for ( hearing. l
i i t F t Cajun has a further vital interest in this l; proceeding because of its joint ownership with GSU of the Cajun-GSU ITS. Cajun depends on this arrangement as a powe
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supplier to Cajun's Members and to other purchasers. Cajun l is concerned about the effect of the proposed combination of GSU and Entergy on the ownership, operation and utilization I of the Cajun /GSU ITS.U' { i Cajun moves this Commission to grant its motion l for intervention as a full party to this proceeding, with l rights to participate fully in all aspects of the l l proceeding, including an evidentiary hearing. As described ! i above Cajun is a representative of interested consumers, numbering approximately 1,000,000 people, who may be affected by the proposed merger. Cajun's participation in
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this proceeding will be in the public interest, and is l 1 necessary for the protection of rural electric consumers in l l Louisiana. ! I Cajun also requests that the Commission institute l a hearing to review, among other matters, the antitrust implications of the proposed transfer of ownership and modification of license to reflect that transfer. The NRC l reviews licenses under Section 105 of the Act, 42 U.S.C. . g 2135 (1988). Section 105(a) provides that nothing I contained in Chapter 23 (Atomic Energy) of the Code shall I relieve any person of liability under certain federal 1 antitrust and labor laws, and gives the Commission the power 21/ Era footnote 19, supra.
to " suspend, revoke, or take such other action as it may , deem necessary with respect to any license issued by the ; Commission under the provisions of this chapter." Id. Only after an evidentiary hearing would such action be appropriate. j Section 105(c)(1) requires that the Commission ! forward to the Attorney General of the United States a copy t of any license application, and further requires that the l Attorney General forward her advice with regard to antitrus* matters. Section 105(c)(2) provides in pertinent part: (2) Paragraph (1) (Attorney General ' participation) of this subsection shall apply to an application for a license to construct or operate a utilization or production facility under section 2133 of this title: Provided. however, i That paragraph (1) shall not apply to an i application for a license to operate a utilization : or production facility for which a construction s permit was issued under section 2133 of this title unless the Commission determines such review is advisable on the ground that sianificant chances l i in the licensee's activities or crerosed activities have occurred subsequent to the previous review by the Attorney General and the Commission under this subsection in connection with the construction termit for the facility. 42 U.S.C. 5 2135(c)(2) (1988) (second emphasis added) A review thus takes place if a finding is made that a "significant change" in the licensee's activities has [ occurred. Section 105(c)(5) calls for the Commission to give ;
"due consideration" to the advice received from the Attorney ;
General, and make a finding as to the effect.of the licensee's activities on the competitive situation. 42 U.S.C. g 2135(c)(5) (1988). Finally, Section 105(c)(6)
. - .- - .. - - . --. ~ - . . . -
~'
i e gives the Commission the authority to refuse to issue a -! license, rescind a license or amend it, or impose' conditions l l upon it. 42 U.S.C.'S 2135(c)(5) (1988). l i Part 50, Section 50.80 of the Commission ! I b Regulati ns, governs the transfer of a license. 10 C.F..R. ! i 5 50.80 (1993). Section 50.80(a) expressly requires l
- Commission approval for a license to-be " transferred, l l
assigned, or in any manner discosed of ... directly or . i ,- indirectly .... Id. Also, i an application for transfer of a license j
- shall include as much of the information {
described in 55 50.33 and 50.34 of this ; part with respect to the identity and [ 4 technical and financial qualifications i of the proposed transferee as would be i required by those sections if the application were for an initial license, ; and, if the license to be issued is a j class 103 license, the information ! required by 5 50.33(a). [
)
10 C..F.R. 5 50.80(b) (1993). Section 50.33(a) is the ! i section which governs antitrust review. These regulations l t t require, inter alla, that the applicant file information on j l generating resources and capacity, long-term system planning 4
?
forecasts including load growth, and information on l n ; transmission arrangements. The information sought by the i i Commission covers many of the issues which arise in the i i Entergy/GSU transaction. The Commission uses the "significant changes" . I . standard for determining whether to conduct full antitrust : review of a license transfer. Furthermore, the Commission has clearly set out the general criteria which it considers i j.* P i
, .-. , . , . - - - . < nv.
when makinc a "significant changes" determination. Those criteria were enumerated in South Carolina Electric & Gas Comoany and South Carolina Public Service Authoritv (Virgil C. Summer Nuclear Station. Unit 1), Docket No 50-395-A (1980) As the Commission stated, "since our full arsenal of antitrust remedies is available when an OL [ operating license) antitrust hearing shows that remedies are warranted ; and since a determination that there have been "significant ! P changes" is the necessary precedent to an OL antitrust hearing . it follows that the requirement of such a j determination establishes a threshold of some importance." ! l Id. The NRC then set forth its criteria for a "significant changes" determination: (1) "the significant changes, if f I any, need to have occurred ' subsequent to the previous i review by the Attorney General and the Commission under this subsection in connection with the construction permit Ior f 1 the facility'"; (2) the change must be reasonably ] attributable to the licensee, for the_ applicant cannot be { 1 held responsible "because the competitive picture had been ; altered in ways for which the applicant could not reasonably- i be held answerable"; and (3) the antitrust implications of ! < t the change create a likelihood that the Commission will be ;
, i l required to invoke its antitrust remedial powers to correct r I
the competitive situation." Id. ; r The changes wrought by the Entergy/GSU transaction pass this test with flying colors. The Entergy/GSU
- i transaction is one which meets the threshold set by the NRC, t
'l and constitutes a "significant change" which warrants a i
hearing on the antitrust implications of the transactions. Cajun therefore urges this Commission to provide ; for full discovery and an adjudicatory hearing on the ; antitrust implications in this proceeding. The evidence ; submitted by Cajun raises disputes with regard to, among i l other things, the future efficiency of the operation of the ! River Bend Plant, the adherence to antitrust license conditions, and the effects of the proposed combination on' f I competition and consumers. Under Commission and federal l judicial precedent, a full evidentiary hearing should be l
)
held by this Commission in order to compile a record j sufficient to resolve these disputed issues of material fact. l () Moreover, an agency bears a heavy burden when it i approves applications, such as those tendered in the instant : proceeding, without the benefit of a full and fair j i evidentiary hearing. General Motors v. FERC, 656 F.2d 791, 798 (D.C. Cir. 1981). Such approvals are. analogous to f grants of motions for summary disposition, and it is'well- {
- established that when considering such motions, the facts '
i must be considered in the light most favorable to the party j i - opposing the motion. Poller v. Columbia Broadcasting ! System. Inc., 368 U.S. 464, 473 (1962); Gordon v. National } t Youth Work Alliance, 675 F.2d 356, 360 n.3 (D.C. Cir. 1982). { The non-moving party (here, Cajun) is entitled "to have the i credibility of his evidence as forecast assumed, his version : u t t
i of all that is in dispute accepted, all internal conflicts in it resolved favorably to him, the most. favorable of i possible alternative inferences from it drawn in his behalf; and finally to be given the benefit of all favorable legal l theories invoked by the evidence as considered." Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. i 1979). Cajun has attached detailed testimony and affidavits j to this motion to intervene and request for hearing, and all of the facts asserted therein and the legal theories : i advanced therein must be examined and given considerable ! I weight by this Commission. Furthermore, in a proceeding such as this where, h because of existing license conditions, the antitrust , implications of a transaction must be considered, an agency ) i bears an even heavier burden when it fails to conduct an j evidentiary hearing. In Citizens of A11echan County v. FPC, l l 414 F.2d 1125 (D.C. Cir. 1969), the United States Court of : Appeals for the District of Columbia Circuit discussed agency approval of utility asset acquisitions without an evidentiary hearing, and suggested that it was inappropriate l
"to reach a conclusion on the bare bones of the documentary ]
evidence," instead of " disposition in the light of a trial developing more information as to the actual impact on ] i competition of the arrangements under attack." Id. at 1129, i quoting Poller v. Columbia Broadcasting System, 368 U.S. 464 l (1962), and ynite Motor Co. v. United States, 372 U.S. 253 (1963). The court further reasoned.that when an agency
l 1 l l weighs antitrust considerations pursuant to its statutory j mandate, an evidentiary hearing may be called for: Similar considerations may be pertinent when i an agency is considering approval of a merger ; or other issues of consolidation or control. ! These and other questions of pur'tc interest l confronting an administrative a; .cy will j i often be illuminated by an exploration in greater depth than can be provided simply by pleadings and documents. Id. Nor does the fact that the Applicants' activities are , regulated by other agencies weigh against a full inquiry I I into the anticompetitive impacts of the merger by this ; l Commission. City of Lafayette v. SEC, 454 F.2d 941, 948-49 ! a i (D.C. Cir. 1971) ("It is a fair consensus of the cases cited 9 t 1 ! 3 that the nation's profound and pervasive devotion to ; I competition as a fundamental economic policy ... is , applicable at least presumptively even in the case of 1 l monopolies or quasi-monopolies characterized by various ; degrees of government control and protection ...."). { I If this Commission can at all rely upon the i j judgment of other administrative agencies to fulfill its f i, > obligations, it may do so only with extreme circumspection. l 2 At the very least, any such deference by the Commission to l another agency must be " watchful" deference so as not to constitute an abdication of the Commission's statutory ! i ) responsibilities. Wisconsin's Environmental Decade v. SEC, l
}
882 F.2d 523, 526-27 (D.C.Cir. 1989). Thus, when this l 1 Commission's staff proposed a finding of "no significant ; change" with respect to an amendment of the facility l i ! operating license for Millstone Unit 3 in connection with { 1 f i
the Northeast Utilities /Public Service of New Hampshire merger, the staff explicitly noted that it was " closely following the proceeding" at the FERC. Docket No. 50-423, 1 56 Fed. Reg. 22024 (May 13, 1991). Likewise, in the " Staff ; Recommendation: No Post OL Significant Antitrust Changes" with respect to the amendment application for Seabrook Unit 1 in' conjunction with that same Northeast Utilities merger, j the Commission staff emphasized the extensive nature of the. ; i record established at the FERC proceeding. Egg Public ; i Service Company of New Hamoshire, 31 al., Docket No. 50-i 443A (August 1991), Staff Recommendation No Post OL [, Significant Antitrust Changes at footnote 11 (" Twenty-five dayc of hearings were held during August and September 1990, i Thirty-five witnesses were cross-examined, and 809 exhibits ; were admitted into evidence"). In the instant proceeding, l the Commission staff has been precluded from relying on the 'l l FERC record since little or no public record exists in the l FERC docket with regard to numerous irsues, including the j issue of the anticompetitive effects of the merger. -i - + The Administrative Procedure Act demands that this ! Commission must base its decisions upon " substantial ; evidence." 5 U.S.C. S 556(d) (1988) ("A sanction may not be ! imposed or rule or order issued except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, 4 and substantial evidence.") Furthermore, "[t]he transcript of testimony and exhibits, together with all papers and x-~e a m --e-e -mi -e ,- e me
I j i requests filed in the proceeding, constitutes the exclusive
\ record ....
for purposes of Commission decision-making. -5 U.S.C. 5 556(e) (1988). This requirement that the j Commission's decisions be based upon substantial evidence ! applies in both rulemaking and adjudicatory-type f - proceedings. 5 U.S.C. g 556(a)- (1988). ! I As a threshold matter, the FERC has determined not j i to set the issues of the anticompetitive or operational l, effects of the merger for an adjudicatory hearing. ! Therefore, the claims of the Applicants with respect to f these issues have yet to be examined in any detail. j Furthermore, and perhaps of greater significance for the j Commission's purposes here, the FERC relied in large part on I the findings of a study performed by its own staff, which ; has yet to be scrutinized by any party or intervenor. It , I would be an abdication of this Commission's statutory-I responsibilities to rely upon a decision of the FERC, which is based on an evidentiary record consisting largely of a f FERC internal study which neither the NRC nor intervenors { have examined. This Commission cannot fulfill its j obligations under the Act if it follows that course of { action. . As shown herein, Cajun has, at the very least, l l raised substantial issues of material fact, both as to the ' i alleged benefits of the merger transaction, the effect of { the merger upon concentration and competition in various ! l product and geographic r rkets and the impacts of the merger ; O : I t 5
e i on Cajun's operations. Precedent demands that when such , ) disputes of material fact are raised, a full evidentiary hearing be held in order to allow this Commission to base l its judgment on a full, complete, and substantial evidentiary record. Moreover, as discussed above, the FERC f has already declined to examine the issues of competition or i k operational impacts in the proceeding before it, which places an even greater burden on this Commission to protect the public interest by conducting an antitrust review. l t V. ABSENT PROPER CONDITIONS. THE APPLICATION SHOULD NOT BE APPROVED < A. The Public Interest and the Interests of Wholesale Customers and Consumers May Be Affected by the ; Outcome of the River Bend Litigation and j Reculatorv Disallowances Recardino River Bend As the attached FERC Testimony of Michael J. Hamilton demonstrates, should Cajun prevail in the Rescission Case or the Nullity Case, GSU, or its future incarnation as a subsidiary of Entergy, will be bankrupt, { l with a substantial resultant detrimental impact on Entergy and its shareholders and ratepayers. Concomitant l l detrimental impacts could be expected to flow through to 1 Entergy Operations, the proposed post-merger operator of , I River Bend. l
- 1. Nature of the River Bend Litiaation Cajun currently owns a 30 percent undivided interest (282 MW) in GSU's River Bend nuclear plant, with a current total investment in River Bend of approximately $1.6 billion. Under the JOPOA described above at 9, Cajun and
l l GSU were to share costs, expenses and benefits of River Bend () in proportion to ownership. GSU is project manager with the authority and obligation to construct, operate and maintain j f r River Bend, subject to duties, among others, to act in good faith and in Cajun's best interests. On June 25, 1989, Cajun initiated the Rescission ; i Case. Cajun has requested that the JOPOA be rescinded and [ I that damages of at least $1.6 billion be awarded to Cajun,- inter alla, because of GSU's misrepresentations of material -(: facts intended to fraudulently induce Cajun to enter into j l the JOPOA and to finance the construction, ownership and- { operation of River Bend. The case is in active discovery, ; and it is expected to go to trial in 1994. Two of Cajun's Members initiated the Nullity Case on November 25, 1992. Cajun is a plaintiff-intervenor in. ; I that case. The Nullity Case rests on the fact that the j t JOPOA was never submitted to the LPSC for its consideration j as is required by a General Order of the LPSC issued on ! l October 28, 1968. Failure to have submitted the JOPOA to i the LPSC for its consideration results in the JOPOA being a i b nullity. The relief in the Nullity Case will be to place r the parties back to the situation which existed prior to the i 4 execution of the JOPOA, i.e., GSU will become the sole owner of River Bend and Cajun will receive at least $1.6 billion in damages from GSU. Even though GSU has taken the public position that the suits are without merit, Entergy and other parties
- l 1
I l l l
i 7 I i interested in the merger have expressed concern about the j impact of the Rescission Case and related litigation on the ! ' proposed transaction. Entergy has included in the l l Reorganization Plan specific conditions that allow it to l l withdraw from the merger if an adverse decision in the River l r i Bend Litigation is rendered before the merger'is consummated j or if information comes to light which is materially adverse }; to GSU's position in the litigation. The further concern is that if the merger is consummated and Cajun subsequently i - prevails against GSU, there would be a substantial adverse ! d financial impact on GSU, Entergy and Entergy Operations. f The overall concern about the impact of this f
?
litigation has been clearly manifested at the FERC, in the j t protests and interventions of several parties, including } regulators and wholesale and retail consumers, e.o., the ! i Arkansas Public Service Commission, the New Orleans City [
- i 1
Council, the Arkansas Energy Users Group (large industrial , t a j customers of AP&L), and Missouri cities that purchase f I wholesale power from AP&L. t
- i Placing additional strains on the GSU/Entergy -j financial picture is the order of the PUCT which disallowed j approximately $63.5 million of GSU River Bend plant costs and ordered the abeyance of approximately $1.4 billion of ,
i GSU River Bend investment and $157 million of deferred River l l Bend costs (" Texas Litigation"). l These matters are of concern not only to f l GSU/Entergy customers and regulators, but also to the FERC. ! i
-)
I i h . i
I The financial impact of the River Bend Litigation and the j Texas Litigation was among the few matters affirmatively set for hearing by the FERC. In its Order on Applications issued on January 28, 1993, the FERC clearly voiced its ' concerns over the River Bend Litigation and the Texas
-i Litigation stating: )
i In addition, Applicants have not adequately l addressed the impact on costs and rates of possible adverse judgments which Gulf States faces 73' noth in its litigation with Cajun on River Bend I and litigation before the Texas Commission involv costs., iggThe retail rateand recovery of River rate Bend costs potential impacts of l this litigation could affect Entergy Corporation's ! risk in capital markets (reflected in a higher , cost of capital borne by ratepayers); ! additionally, if Gulf States loses the litigation, this could result in higher rates to the Operating ; Companies' ratepayers if Entergy Corporation seeks to recover the costs in rates Gulf States' litigation liability in these two cases of $2.4 ; billion exceeds Applicants' entire quantified l O projected savings from the merger (of $1.7 billion). i 4 l 1 1 21/ On June 26, 1989, Cajun filed a civil action ! against Gulf States in the U.S. District i Court for the Middle District of Louisiana, j Cajun stated in its complaint that the object of the suit is to annual, rescind, terminate, i and/or dissolve the Joint Ownership
- Participation and Operating Agreement entered i into on August 28, 1979 (Operating Agreement) >
related to River Bend because of fraud and error by Gulf States, breach of its fiduciary [ duties owed to Cajun, and/or Gulf States' i repudiation, renunciation, abandenment, or ! dissolution of its core obligations under the i Operating Agreement, as well as the lack or failure of cause and/or consideration for : Cajun's performance under the Operating Agreement. The suit seeks to recover at least Cajun's alleged $1.6 billion investment ; in the unit as damages, plus attorneys' fees, interest and costs. The district court () appointed a mediator on March 31, 1992. A { Y
t Section 203 ! trial date has been set. Application, Volume 1, appendix C, Gulf States' June 30, 1992 SEC Form 10-Q at p. 8 ! and Gulf States' 1991 Annual Report at p. 32. 21/ In 1988, the Texas Commission, among other things, disallowed as imprudent approximately : S63.5 million of Gulf States' River Bend plant costs and placed in abeyance ' approximately $1.4 billion of Gulf States' River Bend plant investment and $157 million , , of deferred River Bend costs. Various i appellate proceedings have ensued. Pending !' resolution of these proceedings Gulf States has made no write-off for either the disallowed costs or the costs placed in abeyance. Section 203 Application, Volume 1, ; appendix C, Gulf States' June 30, 1992 SEC ! Form 10-Q at pp. 10-11 and Gulf States' 1991 : Annual Report at pp. 35-36. Applicants state [
~
that if Gulf States loses its appeal, the company might face a non-cash write-off o' approximately $830 million. Louiselle [FERC) L Direct Testimony (Ex. BML-1) at p. 31. j 11/ As indicated at n.56, supra, Entergy , Corporation represents that Gulf States' status as a subsidiary of Entergy Corporation ! will insulate the other operating Companies a from any direct legal liability for Gulf States' obligations and that Entergy Corporation and its subsidiaries will not undertake any direct legal liability on ! behalf of Gulf States. However, the fact i that Entergy Corporation and the other l operating company subsidiaries will not undertake any direct obligations on behalf of ; Gulf States does not mean that they may not be indirectly affected by Gulf States' litigation risks. For example, the potential l for an adverse judgment may affect Entergy Corporation's risk in capital markets and, thus, its cost of capital. The cost of capital for the parent, in turn, will affect
- all of the subsidiaries. l l
62 FERC Y 61,073 at 61,370-371 (1993). 1 l This Commission should examine fully from its unique perspective the potential effects of the possible outcome of the River Bend Litigation and the Texas
j Litigation on GSU, prior to combination, and on GSU, Entergy l
/
( and Entergy Operations in the event a merger is consummated, ; i and the regulatory options available to the Commission to ameliorate that adverse financial impact.
- 2. Financial Imoact of Adverse Decisions in the River Bend Litication and Texas Litigation on GSU. Entercy and Entergy Ooerations In satisfying its obligation to protect the public interest with regard to the impact of a substantial judgment / settlement by Cajun in the River Bend Litigation or affirmance of PUCT in the Texas Litigation, this Commission must analyze the adverse financial impact which GSU, Entergy and Entergy Operations would experience from such judgment / settlement and affirmance.
The attached FERC Testimony of Michael J. , Hamilton, a partner in the Public Utilities Industry ; Services Group of Price Waterhouse, amply demonstrates that . I a judgment / settlement in Cajun's favor, anywhere in the range from $700 million to $1.6 billion, would drop GSU j below investment grade parameters and that a judgment / settlement in Cajun's favor in any substantial f amount would probably render GSU bankrupt with attendant l t adverse impacts on Entergy. Affirmance of the PUCT in the ; Texas Litigation would substantially exacerbate GSU's and , Entergy's financial deterioration. ; In his FERC Testimony (attached), Mr. Hamilton i analyzed the impact of a Cajun victory in the River Bend
7 ;
- 45 .
i Litigation and the affirmance of the PUCT in the Texas ; (f Litigation in four schedules- 'i Ex. CJN-11, Schedule 1--Analysis of the $ 1. impact on GSU of a Cajun victory or favorable l settlement of the River Bend Litigation. l i
- 2. Ex. CJN-11, Schedule 2--Analysis of_the !
impact on GSU of a Cajun victory or favorable ! settlement of the River Bend Litigation and j the affirmance of the PUCT in the Texas ; Litigation. } l
- 3. Ex. CJN-11, Schedule 3--Analysis of the l impact on a combined GSU/Entergy of a Cajun victory or favorable settitment in the River '
Bend Litigation. i
- 4. Ex. CJN-11, Schedule 4--Analysis of the l impact on a combined GSU/Entergy of a Cajun victory or favorable settlement of the River !
Bend Litigation and the affirmance of the { PUCT in Texas Litigation. In each of Mr. Hamilton's four schedules, he l analyzed four hypothetical judgment / settlement scenarios j related to the River Bend Litigation, i.e., Scenario A ($1.6 : billion), Scenario B ($1.3 billion), Scenario C ($1.0 ; billion) and Scenario D ($700 million). Each scenario { 1:,cluded a value to GSU of $492 million relating to Cajun's 30% ownership in River Bend which would be transferred to i f GSU. Egg Hamilton FERC Testimony at 11. Mr. Hamilton's attached FERC Testimony should be
-)
consulted for his analysis of each'of the four described ! judgment / settlement scenarios in his four schedules under i FERC Ex. CJN-11. For purposes of brevity, Cajun will describe here only two of Mr. Hamilton's schedules, Schedule 1 which analyzes the impact on GSU on a stand-alone basis of a Cajun victory or favorable settlement in the River Bend _ () ; i 0 t
i Litigation and Schedule 4 which analyzes the impact on a
- combined GSU/Entergy of a Cajun victory or favorable l
).
settlement in the River Bend Litigation in combination with j I an affirmance of the PUCT in the Texas Litigation. ! With regard to Schedule 1, the impact on GSU of a d' Cajun judgment / settlement in the $700 million to $1.6 f billion range are, as expected, severely adverse to GSU's l i financial condition. Whereas GSU's actual common equity ratio as of June 30, 1992, was 37.8 percent, that equity [ t ratio erodes substantially under all scenarios analyzed: j t Scenario A (14.5%); Scenario B (19.9%); Scenario C (25.3%); Scenario D (30.7%). Id., at 12. ; l The impact on GSU's earnings per share is equally severe. Whereas GSU's actual earninas per share for the a . twelve month period ending June 30, 1992, was $0.69, that
; i garnings amount drops to the following losses per share for l I f the four judgment / settlement scenarios, as follows: !
4 i . Scenario A ($10.29); Scenario B ($7.42); Scenario C ($4.55);
- Scenario D ($1.69). Id. at 11-13.
Most dramatic, however, is the impact the { i judgment / settlement scenario on the key financial ratios and l i benchmarks used by Standard & Poor's in assessing.whether or l f not a utility is " investment grade" (BBB rated or higher), l 1 i 1.e., the total debt to total capital ratio, the pre-tax j interest coverage, the funds flow interest coverage and the l funds from operations to total debt ratio. GSU will fall j
! below investment grade for all four of these benchmarks in !
i I
- I I
l
- . . - - _ ~ . . - - . _. . -
l Scenarios A, B, and C. In Scenario D, GSU scarcely reaches investment. grade status for the total debt to capital ratio, ! l while still falling below investment grade in each of the l i other three benchmarks. Id., Ex. CJN-11, Schedule 1 at 15. l Indeed, in the event of a judgment / settlement at the $1.6 l billion level, even Entergy's common equity ratio coula be ; significantly impaired, deteriorating to 33.0%. Hamilton . I FERC Testimony at 15. I Indeed, any judgment / settlement in the range j contemplated by Scenarios A, B, C, or D would significantly i i impair GSU's access to the capital markets and, in all i likelihood, would render GSU incapable of honoring its : obligations then currently due. Id. at 12-13. Indeed, in l testimony before the FERC, even GSU admits that an adverse ; 1 ruling in the River Bend Litigation would probably result in f GSU's bankruptcy. Such a post-merger bankruptcy would ! j create negative pressure on the credit ratings of Entergy's ! operating subsidiaries. Egg id. at 16. Such negative pressure would seem likely to increase the cost of capital of these operating subsidiaries with the incremental cost of capital having to be borne by Entergy's ratepayers and i shareholders. ; I In his FERC Testimony, Mr. Hamilton also analyzes ! i the impact on a combined GSU/Entergy of a Cajun victory or t favorable settlement in the River Bend Litigation in ; conjunction with an affirmance of the PUCT in the Texas Litigation. Id. at 16-17. Summarizing Mr. Hamilton's i i
i I testimony, in the events just described, on a combined j basis, GSU/Entergy's net earninas would fall from S2.29 per f share to a loss per share in the range from S3.34 ($1.6 l l . billion Rescission Case judg. Tent / settlement) to a loss per share of S0.69 ($700 million Rescission Case judgment / l settlement). In the event of a $1.6 billion Rescission Case judgment / settlement, even on a consolidated GSU/Entergy [ basis, the combined entity would fail to meet three of the 5 four Standard and Poor's investment grade bench marks. l 1 Given these risks, Mr. Hamilton recommends that ! the FERC should carefully consider: ! l t (a) The potential effects that the i adverse litigation scenarios may ; have on the combined financial l integrity of Entergy and GSU; i (b) An acceptable financial arrangement ! whereby available resources of a i combined Entergy/GSU could meet the i requirements of the adverse ! litigation scenarios; and t
- (c) Regulatory options to ameliorate ;
the financial impact of the adverse l litigation scenarios prior to ; granting approval for the merger in [ order to ensure that the public- i interest and Entergy's and Cajun's l best interests are served. ' { Id. at 18-19. l Cajun concurs in that recommendation, and asserts j i i that these recommendations are equally' applicable to the l NRC's consideration of the application before it. { 0 I s f 3 I I
- - . ~. -. - - - - - , ___________._-__!
B. This Commission Must Consider The Anti- j Comretitive Effects of The Prorosed Licenso ' Transfer
- 1. The Merged Entity Would Be Among the Larcest J Utilities in the Country and Would Create ,
Additional Market Power t The NRC is required to examine the effects on ! concentration and competition of an application for the i transfer of ownership of a license, and may only approve a transfer if the Commission makes a determination that it is not anticompetitive. The merger and combination of Entergy and GSU would create one of the largest utilities in the :
- ountry. With reference to its proposed operating revenues, i the Merged Companies will be the sixth largest utility in the country, and the second largest in the southern region l.
of the United States. The other utility, the Southern ; Company, is, like Entergy, a registered public utility [. holding company with certain operating affiliates (" Southern Companies"), with which the merged entity will have substantial agreements. See SEC Application, Ex. I-2; l Odisio Affidavit, 11 28-30. Currently, Entergy is eleventh l in size, and GSU holds the thirty-fifth place in the ranking j t by operating revenues. SEC Application, Ex. I-2. l 5 The number of retail electric customers to be ! I served by the Merged Companies, over 2.3 million, will place it eighth in the country; currently, Entergy ranks twelfth, f: and GSU, with its 578,660_ customers, ranks forty-first. i Id., Ex. I-3. By comparison, Cajun serves about 300,000 l customers. t i f i i I
I
)
i The Merged Companies' total retail service area f will more than double the current territory of GSU, and ; place it seventh in the nation, with over 73,000 square miles of service territory in four states. Id., Ex. I-6. The Merged Companies' retail KwH sales alone are l i projected by the Applicants to be almost 83.6 billion, making it the third largest utility in the country. i Currently, Entergy is ninth (with 56.9 billion kWh) and GSU 'I a mere twenty-seventh (with 26.7 billion kWh) in national !
- rankings. Id., Ex. I-5.
In terms of electric generating capacity, the ; t Merged Companies will rank fourth in the nation if the l merger is approved, with just over 21,000 MW of generation. ; Id., Ex. I-4. Currently, GSU is ranked twenty-fourth with ; . I 6,777 MW. Id. Cajun has 1,976 MW of generating capacity, -{' i ' less than half of the capacity owned by the utility ranked thirty-fifth nationally, according to the Applicants. Id.
- In addition to creating one of the largest j J utilities in the country, the merger will unacceptably add l u
to Applicants' market power in the provision of generation j services. Pre-merger, whviesale markets are dominated by ; only a few utilities. Together, Southern Companies {30,192 l MW) and Entergy (16,509) own and operate 55.4% of installed l l capacity in relevant wholesale markets (84,311 MW).E' 1 22/ In the FERC proceeding, relevant wholesale markets included all utilities able to reach each other , directly with the so-called open access tariff--TST-- in place. These are what FERC has called "first tier" (continued...)
y Merging GSU (6,797 MW) with Entergy produces a post-merger t Herfindahl Hirschman Index ("HHI") in installed capacity of 2241, with an increase of 274 points due to the merger. [ According to the Department of Juscice/ Federal Trade Commission ("DOJ/FTC") Merger Guidelines, "[w]here the post- i i merger HHI exceeds 1800, it will be presumed that mergers l l producing an increase in the HHI of more than 100 points are j likely to create or enhance market power or facilitate its exercise."U' Egg Odisio Affidavit, 1 25. Applicants also filed estimates at FERC concerning ; the amount of capacity that utilities in the market expect to have available for sale through 1997, in order to [ evaluate the merger's immediate impact on competition. These data are riddled with specification and measurement problems.U' According to intervenors at FERC, the Southern Companies have a policy against using a transmission tariff .I A I 12/(... continued) , utilities. Applicants' data filed at FERC erroneously includes the Tennessee Valley Authority ("TVA") in these markets, but TVA is statutorily prohibited from selling to many of the utilities in the relevant market. i 21/ Department of Justice / Federal Trade Commission Mercer . Guidelines, 57 Fed. Reg. 41,553 (Sept. 10, 1992). The ! DOJ and FTC have joint federal responsibility for enforcing antitrust laws. The merger Guidelines have , been developed by the DOJ, and now joined by the FTC, . to " articulate the analytical framework the agency applies in determining whether a merger is likely to substantially lessen competition." (Guidelines, ! Section 0.1 at 41,553). , 11/ Moreover, without a hearing at FERC, intervenors have I not had the opportunity to use discovery to' fully evaluate the data supplied by Applicants. ,
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r I t I containing " reciprocity" provisions that would force it to l make available its own transmission to others. Yet l Applicants' data before FERC includes Southern Companies as ; a major seller of capacity and energy. Applicants' capacity l for sale consists significantly of efficient base load units Entergy had spun-off from rate base to its neely created affiliate Entergy Power, Inc. (" EPI") But no information ; t is provided on the types of units others may have for sale--whether they are base load, intermediate, or peaking units. Clearly base load and peaking capacity are typically i sold in different markets because they cannot compete with j each other on the basis of costs. See Odisio Affidavit, .! T 26. t At a minimum, Applicants' estimates of capacity available for sale shows the following. By 1997, the Merged l Companies would have 2 1/2 times as much capacity to sell as the next largest supplier, and control almost 1/3 of all { such cap: city (32.9%).U' The market would be highly concentrated throughout the period measured by Applicants-- . the post-merger HHI would be 1782 in 1994, for example, and t i 21/ While other suppliers may enter the market during this time, the Applicants failed to make any convincing j arguments about the ease with which new suppliers could quickly compete with them for sales. For this reason, ~! FERC typically chooses to separately analyze the "short i term" market for existing capacity--for which data is { available--and "long term" markets that allow for entry ; but for which there is no reliable data. All HHIs, of j course, apply to the short term market as defined by j FERC. ; e l l l l 1
i the merger would add 347 points to that HHI.2' Because the Merged Companies would be by far the largest supplier of l i existing capacity, and some " uncommitted" capacity of others J is committed to sale during the period, the Merged Companies' market power would increase as buyers' needs (1) are greater (they would have to rely more heavily on Merged Companies' capacity), (2) are for longer duration, or (3) begin at a later date (Merged Companies' share of capacity rises over time). By any of these measures, it is clear that the Applicants will have a concentration of control in the southern r.tgion of the United States that would enable them to exercise market power in ways that would have anticompetitive impacts on Cajun and its electric consumers. This Commission must examine that concentration and control ~ in an evidentiary hearing,U' to determine what conditions must be placed on any merger approval to eliminate the , anticompetitive impacts of the combination at issue.
- 2. The Prorosed Combination Of Enterov And GSU Would Have Anticompetitive Effects Which Will Not Be Remedied Bv The Transmission Service Tariff As Filed By Acolicants i
i The Merged Companies' control and ownership of
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regional transmission facilities, the integrated nature of its operations and its enhanced size and access to resources, will create anticompetitive effects which will , 15/ This HHI excludes Southern Companies as a seller, j 1 22/ The Commission has no FERC hearing record upon which to l rely.
not be remedied by the TST, the so-called "open access" transmission tariff, which Applicants state will be made l l applicable to GSU after the consummation of the merger and ) upon which Applicants rely as the vehicle for mitigation of Applicants' market power. Egg Odisio Affdiavit, 5 8; Application, Attachment 1 at 14-16. The proposed merger will enhance the market power of Entergy and GSU over Cajun and other native load transmission customers. As filed in ( i i the context of an application for a permanent merger, the l t TST is woefully inadequate to meet the requirements of Cajun ; and native load transmission customers which compete with , Entergy and GSU in the requirements and bulk power markets. The TST is unlikely to be used by the very
< competitors, including Cajun, which would be most affected f by the proposed merger, i.e., the native load transmission j i
customers. As a group, the native load transmission 1 i customers contribute the majority of the Applicants' t " wholesale transmission service revenues, not only for 4 coordination services but for requirements service to the [ native load transmission customers' retail consumers. Cajun and its Members have historically contributed to the - l development of the Entergy and GSU transmission systems. ! Cajun Members were wholesale requirements customers of 4 l Entergy, GSU, CLECO and SWEPCO prior to their taking service j i from Cajun. Currently, Cajun's transmission service to its l Members' delivery points is recognized as native load by Entergy and GSU. If the proposed merger is to be consistent f c I
i t with the public interest, there must be transmission conditions which respect to the rights of Cajun and other j native load transmission customers which allow them to ! compete effectively with the Merged Companies.
- a. Enterov and GSU Have Market Power in the Relevant Prcduct and Geocrarhic Markets In light of Entergy's and GSU's control and r
ownership of the transmission resources in their service areas, the Applicants do not contend that they have no market power, in the absence of their so-called "open access" TST. Egg, e.a., FERC Testimony of Jerry J. Saacks (Entergy Vice-President of Transmission), FERC Ex. App. 42 at 8. Instead, Applicants' apparent strategy is to claim that the TST mitigates any and all market power in the , () context of the proposed merger. Affidavit, T 8. Egg id. at 14; Odisio There are disputed issues of material fact related to the enhanced market power of the proposed Merged Companies and the alleged effect of the TST in mitigating ; that market power. In the interest of brevity, Cajun has i focussed on the bulk power and the requirements markets.U' ; At the outset, any attempt to analyze the Merged Companies' market power must recognize the multiple roles of Cajun and other native load transmission customers as both customers and competitors. On one hand, Cajun is a competitor of Entergy and GSU in the sale of long term and ; 21/ In focussing on these markets, Cajun does not waive any ; arguments concerning competition in other markets. For ! example, there is intense competition between Cajun and y its Members and both GSU and LP&L at the retail level. 4 l
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short term bulk power and economy energy. Cajun has 1 approximately 650 MW of generating capacity currently available for sales in the bulk power markets. However, the f 4 control of transmission access, through physical connection _ ' and by contract and the operation of transmission ; i facilities, affects what entities are in a relevant bulk i
> i power product and geographic market at any given time.
1 i 4 Cajun is also a competitor with Entergy and GSU in j i i the sale of all requirements power and energy to consumers. i The requirements market services differ from the services . I provided in the bulk power service market. While bulk power i consists of a variety of transactions ranging from non-firm ; I energy to long-term bulk power, requirements service { 4 requires firm service along with voltage regulation, load l t following, long-term planning and coordination and access to j i relevant information. As described above, Cajun supplies ; its thirteen Member distribution cooperatives under all j l requirements long-term contracts at delivery points located P t j on the transmission facilities of GSU and LP&L, as well as CLECO and SWEPCO. Cajun's Members located on Entergy and' J GSU systems are transmission dependent entities, i.e., they _j t are embedded within and therefore dependent upon the ! transmission facilities of Entergy and GSU for the delivery- l of their power requirements. Cajun's transmission service , contracts with GSU and Entergy, although restrictive in ! t various ways, contain planning and coordination elements' i e
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i I I
necessary for Cajun to supply requirements service to Cajun's Members. The Entergy Operating Companies and GSU compete in the requirements market. Through, inter alla, the System Agreement, the Operating Companies have the flexibility to share generation reserves, centrally dispatch and transmit power and energy throughout the system. Egg Odisio Affidavit at S 9. The Operating Companies have access to joint planning and operations through Entergy Services. Following the proposed merger, GSU would become a party to the System Agreement and become one of the Operating Companies, thus greatly expanding the opportunities for coordinated operations and planning. The Merged Companies would have the flexibility to transmit power and energy on a ( network basis throughout the regional transmission grid. While the Merged Companies would have the ability to provide requirements service on a coordinated network basis throughout tne areas served by Entergy and GSU, Cajun and other native load-transmission customers are limited to the rights in their existing agreements with Entergy and GSU. Egg Odisio Affidavit at ST 9-18. In Cajun's case, Cajun has the right to meet its delivery point loads on GSU facilities, under Service Schedule CSTS, based on charges calculated on a peak delivery point load, without having to specify a transmission path. Cajun also has the right to serve its delivery point load located on LP&L facilities on a similar basis, under Service Schedule FTS.
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i l Following the merger, as proposed, Cajun will not have the ability, as would the Entergy Operating Companies, j to integrate the operations of Cajun's GSU and LP&L delivery point loads in a manner similar to the way the Merged Companies would operate their GSU and LP&L loads. The Merged Companies would be able to economically dispatch to i capture the diversity of their GSU and LP&L loads, while j , Cajun would be limited under Applicants' proposal to its existing arrangements. Similarly, under the proposal, Cajun would also be denied the opportunity-to coordinate planning, j i reserve sharing and other operational benefits with other native load transmission customers in the Merged Companies' l 3 i 4 service areas. This is accomplished through Applicants' l 4 1 effective denial of network transmission service to Cajun i and other native load transmission customers. Applicants have made clear in their FERC testimony their intent to force customers such as Cajun to choose between the limited network transmission service under j f existing contracts and the point-to-point service allowed l t , l under the TST as propoced. See FEPC Testimony of Jerry J. l Saacks, Ex. App. 42 at 28-30. The denial of network : transmission service by Applicants, as discussed below, will l 1 enhance their market power and facilitate the exercise of ! market power. } i i t I l
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- b. The Defects in the Transmission Service Tariff Exhibit the Adverse Conceritive .
Effects of the Procosed Merger That the proposed merger of Entergy and GSU would have adverse competitive effects is evident from examining the defects in the Applicants' TST. Applicants' claim that the TST "is intended to crovide open access to Entergy's entire bulk transmission system for utilities, electric ; t cooperatives, and wh,lesale power sellers at a single cost-based rate." Id. at 9. In fact, the TST is the Applicants' j 1 sole grounds for contending that the Merged Companies would not impair competition. If the TST does not function as Applicants claim is " intended" there is no evidence that the market power of the Merged Companies would be mitigated. , , i Applicants' antitrust witness before the FERC, Joe (, D. Pace, purports to examine the competitive situation following the proposed merger with the TST in place. I Witness Pace's testimony before the FERC assumes that the Merged Companies would provide TST open access transmission i service at cost-based rates across the Merged Companies' l entire system, so that any first-tier utility directly interconnected with Entergy can conduct transactions with any other first-tier utility. Egg FERC Tebtimony of Joe D. > Pace, FERC Ex. App. 49 at 4-5, 11-13, 21-26, 32-36, 37-38, 39-42, 43-46, and 53-55. However, Mr. Pace's claims rest on at least three invalid assumptions. Therefore, Applicants j i have failed to demonstrate that the merger is consistent l with the public interest. I j r
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- First, Applicants' witness Pace assumes that the I
transmission service provided to others under the TST is identical to the transmission service the Merged Companies ! i would provide to themselves. This is demonstribly false'in j both the bulk power and requirements markets. The FERC ; required, in its March 3, 1992 Order in Docket No. ER91- l l 569-000, that Entergy Power and the Operating Companies must f utilize the TST when making sales at negotiated rates. } However, this requirement is extremely limited. Eng Entergy l, Services. Inc., 58 FERC i 61,234 at 61,765 to 61,766 (1992). i Importantly, the Merged Companies will engage in i requirements market transactions between and among 7 i themselves without utilizing the TST. Indeed, the TST as l filed is not amenable to being used for requirements market l O transactions, because of the point-to-point, transaction- ! by-transaction nature of the service offered therein. The ; 1 Merged Companies would be able to utilize the Entergy/GSU l t system to extract new efficiencies in the requirements l 1 market, from which Applicants propose that Cajun and other - native load transmission customers be excluded. Cajun must ? have the option of utilizing a network transmission service ; between and among native load wholesale customers and others in the requirements market. Second, Applicants' witness Pace assumes that l Cajun and other native load transmission customers would be l I able to use the TST for one system-wide charge. See FERC Testimony of Joe D. Pace, FERC Ex. App. 49, at 12. To the i r
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I l 2 contrary, Cajun and others will have to pay two or more , times for the same transmission service in the bulk power markets, for Cajun to retain its native load contract , rights. See Odisio Affidavit at i 11. In the requirements market, Cajun and others would have to pay many times over , f for the requirements transmission services available to the , Merged Companies following the proposed merger. An example will illustrate the double charges. < Assume Cajun purchased 100 MW from a seller located in the AP&L system over a four-year term to serve a portion of Cajun's delivery point loads located on LP&L transmission facilities. If Cajun attempted to utilize the TST to i deliver this 100 MW to its LP&L delivery points, Cajun would , pay the claimed $1.33 per kw-month for transmission service under the TST from the seller's generation over AP&L , i facilities to the AP&L-LP&L interconnection. Cajun would j then utilize Cajun-LP&L Service Schedule FTS, where the current charge is $0.89 per kw-month, to transmit the 100 MW . from the AP&L-LP&L interconnection points to Cajun's LP&L t delivery points. The TST charge of $1.33 and the Schedule l I 3 FTS charge of $0.89 are each calculated on the basis of the i entire Entergy transmission system costs, resulting in a l double charge. The same is true if, e.o., Cajun engaged in a sale of 100 MW to entities on the MP&L system. r Applicants assert that when an existing native load transmission customer uses the TST to serve a portion of its load, then the megawatt demand of its existing : t 5 I p
62 - ! contract would be reduced by the amount of TST service i utilized. Egg FERC Testimony of Jerry.J. Saacks, FERC Ex. f i App. 42, at 29. However, Schedule FTS to the Ca]un/LP&L , ESIA contains a twelve-month rachet, requiring that Cajun pay the full price, even though the service is not utilized. l
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Additionally, Applicants' witness Saacks states that Cajun j would lose the planning responsibilities and load growth ' i services for which Cajun pays Entergy under Schedule FTS for j 4 the 100 MW. Id. at 29-30. Thus, Cajun would have to choose i l between continuing to pay the full contract demand under j Schedule FTS, or lose its valuable native load rights. . Third, Applicants' FERC witness Pace assumes that i Cajun and other native load transmission customers would not ! give up any existing rights. This assumption is ! demonstrably false because Cajun would lose its native load ; i rights for transmission services which utilize the TST under j t the scenario outlined by Applicants. See id. at 29-30. In the above example: (1) Cajun would lose its native load l status for the 100 MW; (2) because its TST service is point-
- to-point, Cajun can lose its networking rights for the 100 ;
MW; (3) since the 100 MW are no longer considered native ; I load, LP&L would have no requirement to plan its transmission system for Cajun's full requirements; (4) at _ i the conclusion of the ten year transaction, Cajun would have I no assurance of continued transmission service for the 100 1 1 MW; and (5) if service is provided, at that time, it would i not necessarily be at normal embedded cost rates, but might
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i i include compensation for transmission upgrades and l t redispatch costs. Cajun and others may be unwilling to i utilize the TST to serve requirements loads if they are j forced to give up the bundling and coordination rights that ; i they have obtained and paid for under existing contracts. i According to the Applicants' FERC witness Pace, ; Entergy will lack market power over Cajun and native load transmission customers because of services available under , l the TST This conclusion is unreasonable and insupportable, because Cajun and others will be unwilling to forego their native load rights. Moreover, to the extent that Cajun pays ; a double charge if it engages in a TST transaction, to . i protect its existing rights, this double charge is a measure t of the market power of the Merged Companies. To the extent l i Cajun is unwilling to pay a double charge, including the cost of giving up native load contract rights, Cajun and ; - 'I other of Entergy's competitors in the bulk power and j 1 ~ 1 requirements markets, will be foreclosed from arranging transactions with would-be purchasers or would-be sellers. .} As filed, the TST is a barrier to entry, rather , i than a mitigating factor. The Commission must recognize that the Merged Companies can foreclose competition through j i the TST. At a minimum, the Commission must set the matter for hearing to determine if the.TST actually will mitigate j i the Merged Companies' market power. I t While Applicants have promised to hold GSU's j ' retail rates constant for five years, no such commitments l l
I l 1 have been made for transmission service customers. Instead, , Applicants propose to increase transmission usage to reduce ! fuel costs and build additional transmission facilities. As { i a result of the proposed merger, Cajun and other ! transmission customers may face (i) reduced transmission i i capacity related to the increased transmission usage by the ; Merged Companies, (ii) reduced reliability due to less O&M j expenditures by the Applicants, and (iii) increased f I transmission rates to pay for new facilities needed by the : i Merged Companies. l Entergy has indicated that the claimed fuel-i related savings projected from the merger will require- ( t transmission upgrades. Undoubtedly, the cost of such upgrades will be included in the transmission investment
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l customers, including Cajun. In contrast, if such l - transmission upgrades are required to meet a transmission service request of Cajun or other native load transmission i i : customers under the TST, for essentially the same purposes, t i
; Applicants propose to charge for the incremental cost of the f upgrade and, potentially, for the " stranded" investment.
-l This situation is obviously one-sided in favor of the Merged l Companies, and leads to double or triple charges. [
i The license amendment should not be approved i l without a full antitrust review and the imposition of
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- I conditions adequate to protect Cajun's ability to compete I effectively with the Merged Companies, t
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C. The ProDosed Transfer is Not in the Publin ; Interest Due to Its In act on Caiun's Rights , j Recardina the Oceration of the River Bend Plant" ! i Applicants have requested approval by this Commission of the arrangements under which Entergy ; Operations would operate the River Bend plant for GSU. These arrangements are proposed to be implemented by
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agreements which include the GSU-EOI Operating Agreement, the GSU-EOI Support Agreement, the GSU-EOI Switchyard and , Transmission Interface Agreement, the GSU/EOI/Entergy Corporation Guarantee Agreement and the GSU/Entergy Services, Inc., Service Agreement.E' The Applicants' proposal for the operation of River Bend is in derogation of Cajun's rights under the Cajun /GSU JOPOA. Any approval by the Commission of l
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Applicants' arrangements, must be conditioned to protect : I Cajun's rights as a thirty percent co-owner of River Bend. : i As a further condition for approval, Entergy must be I i i J l 12/ These matters will be considered only in summary fashion here since they are more germane to the Commission's consideration of GSU's related request i that the River Bend operating responsibilities be j transferred to Entergy Operations through the issuance i of a license amendment. Egg GSU letter of January 13, ; 1993 (RBEXEC-93-035). Cajun will fully respond to this proposed license amendment in due course, subsequent to the issuance of the Federal Register Notice related to that license amendment request. These matters are discussed here to give the Commission a complete picture of Cajun's position regarding the impacts of the proposed merger in all areas germane to this Commission's jurisdiction. 12/ To Cajun's knowledge, none of these agreements has been formally presented to this Commission for its review. , i
required to guarantee Entergy Operation's financial ability [ to perform its duties as River Bend operator.
- 1. The Aeolicants' Proposal for the Operation of River Bend is in Deroaation of Caiun's Richts
Under the River Bend Joint Ownershic Acreement GSU submitted the license amendment application regarding the transfer of River 3end operating i responsibilities to Entergy Operations (RBEXEC-93-035) on I its own behalf and, purportedly, on behalf of Cajun. Under the JOPOA, GSU can take certain actions on behalf of Cajun l where GSU's judgment and discretion have not been exercised unreasonably. Egg JOPOA, S 4.1. Ca]un asserts that GSU's judgment and discretion have not been exercised reasonably in GSU's application to amend the operating license to l transfer operating responsibility to Entergy Operations. Cajun has notified GSU that this attempted exercise of its ; f agency authority is improper and ineffectual. l Cajun states unequivocally that the license I amendment request has not properly been made on Cajun's j behalf, that Cajun's consent to the license amendment has_ , not been obtained and that Cajun opposes the license amendment application as proposed by GSU.E' I As described in the accompanying FERC Testimony of ; David Lee Mohre, Cajun's Executive Vice President and Chief ]
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11/ Cajun's argument on GSU's right to act as Cajun's agent l in this license amendment will be fully made when Cajun files its response to the proposed license amendment related to the operating responsibility of Entergy Operations.
l l l Executive Officer, GSU's and Cajun's obligations are () currently defined by the JOPOA.E' Cajun is also a co-The Applicants propose to effect licensee of River Bend. the transfer of River Bend operational responsibility to EOI through the license amendment request and the proposed agreements enumerated above. Obviously, if EOI becomes the l operator of River Bend, the relationship between GSU and i i Cajun will change significantly and fundamentally. Whereas l the JOPOA provides for a considerable and significant direct , J relationship between the co-owner of the facility, Cajun, , and the project manager or operator of the facility, GSU, the agreements proposed by the Applicants to enable EOI to operate River Bend insert GSU as a non-operating owner between the operator, EOI, and Cajun. This relationship, 5 very different from that which Cajun negotiated, is totally ! i unreasonable, not in accordance with the JOPOA or good ; utility practice, and inconsistent with conditions imposed in similar circumstances by regulators. Egg Mohre FERC Testimony at 6-10. ! The proposed agreements change the rights for i which Cajun bargained. They would change GSU from an operator-owner to simply an owner. GSU will no longer be making decisions on an independent basis. Rather, the decisions will be made by GSU as a member of the Entergy [ i system and a party to the Entergy System Agreement. GSU I 12/ As noted in Section V.A.1, suora, as part of the River
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Bend Litigation, Cajun is seeking rescission of the JOPOA and damages in excess of $1.6 billion. l l
i l will no longer be accountable to a Board of Directors whose { primary goal is to protect the interests of Gulf States. If the merger is consummated, GSU will be accountable to a ! Board of Directors which must consider the interests of the j five Operating Companies and numerous other subsidiaries. Further, if GSU becomes a party to the Entergy System i Agreement, as proposed by the Applicants, the Entergy Operating Committee, rather than GSU, will make critical decisions regarding loading criteria for River Bend, i l additions or changes in facilities related to production [ i requirements and system dispatching and switching. The ! economic convergence of interests between GSU and Cajun assumed under the JOPOA will no longer exist. See id. , It appears that the proposed River Bend l arrangement, particularly the proposed GSU-EOI River Bend 1 l Operating Agreement which is attached to Mr. Mohre's FERC ! Testimony as Exhibit CJN-2. Schedule 2, would have the i following additional detrimental impacts on Cajun: , ~ i
- 1. It would undermine Cajun's current .i rights with the plant operator. {
For example, the good utility l practice standard is different in ] the JOPOA than under the proposed j arrangement. Egg Operating { Agreement, 5 1 8- , e l
- 2. It would impair Cajun's rights of :
access to auditors, INPO audits, l and key reporting data on the plant l since such rights run only to Gulf ! States. See Operating Agreement, l 55 5.1, 5.4, and 5.9.
- 3. Co-owner approvals of budgets,
- capital projects, and major undertakings are not addressed;
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k r rather-the proposed arrangement appears to structure a " blank > O_ check" approach.for EOI and GSU to access Cajun's money. Egg , Operating Agreement 55 3.1, 5.1, and 5.2. 4
- 4. Relationships with and among i Entergy affiliates are ill-defined and could be costly to Cajun. One example of this is in the scheduling of outages. Another is ,
in the area of allocation of costs. Egg Operating Agreement, gg 2.1, l 2.5, and 5.1; Entergy System Agreement, g 4.08.
- 5. Administrative, general, and other t costs to Cajun would be expected to l increase with the position of ,
another co-owner, GSU, between the operator and Cajun.
- 6. The proposed arrangement [
substantially limits EOI's : liability. Egg Operating t Agreement, Article VI. ,
) Ein id. at 9-10.
Under the JOPOA, GSU lacks authority to execute i the proposed River Bend agreements as Cajun's agent, to the extent it would be contrary to good utility practice, ! i unreasonable, or show absence of good faith. The proposed ! agreements violate each of these conditions; therefore, GSU , lacks authority to execute them as agent on behalf of. Cajun. , 1 Despite these substantial problems with the j mechanisms proposed by GSU to effect the transfer of operating responsibilities from GSU to EOI, Cajun does not , necessarily oppose the requested license amendment related' , t to EOI operation. The Applicants have claimed that transfer i of operational responsibility to EOI will result in cost
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l savings which will inure to Cajun's benefit, at least in l t part. f Cajun hopes that cost savings are a result of_any l license amendment. As the Commission is aware, River Bend's j l operation and maintenance ("O&M") costs and administrative } i and general ("A&G") costs are among the highest of any nuclear unit in America and are consistently and substantially higher than any other comparable prudently run single unit boiling-water reactor. Egg Mohre FERC Testimony at 11-12 and Ex. CJN-2, Schedule 5, attached ; 5 thereto. Thus, Cajun hopes that the purported savings occur i if the merger and requested license amendments are approved. j i l However, such approvals should be made only upon the i () l imposition of conditions adequate to protect Cajun's f l interests as a thirty percent co-owner of River Bend. I 2. Enterav Should Be Recuired To Guarantee EOI's [ Financial Ability to Perform its Duties as f ] ' a River Bend Orerator To date, the Applicants have failed to submit to j i. this Commission their proposed River Bend Station Guarantee l . Agreement between GSU and Entergy Corporation, although the j i Agreement has been submitted to the SEC and the FERC. The Guarantee Agreement apparently places only a~ limited obligation on Entergy to be responsible for the financial ) i ability of EOI to perform its obligations under the River Bend Station Operating Agreement. Egg Guarantee Agreement, 51 (Ex. CJN-2, Schedule 3 to Mohre FERC Testimony).
( However, Entergy has that obligation only so long as GSU P meets its payment obligations to EOI under the Operating [ i Agreement and the Guarantee Agreement specifically states that the Guarantee Agreement shall continue only for so long { as GSU continues to meet those payment obligations. Id., [ SS 1, 2. As discussed in Section V.A.2, suora, it is clear ! t that a Cajun judgment / settlement in the River Bend ; Litigation anywhere in the range of scenarios considered j (S700 million to S1.6 billion) would result in a GSU f l bankruptcy. Entergy has not stated whether, in the event of i such a bankruptcy and an inability by GSU to provide funds to EOI to operate the plant, Entergy would commit its own ; funds to continue the operation of River Bend, irrespective l of its contractual obligations, vel n2n, under the Guarantee ; Agreement. The Commission needs this information to f determine if Entergy Operations has adequate " financial qualifications" to act as the River Bend operator. See 10 f C.F.R. S 50.80(b) (1993). If Entergy is unwilling to j l continue such financial support, this Commission should I condition its approval of the license amendments on such continued support to ensure that River Bend can continue to { i run, particularly if Entergy expects Cajun to remain a partner in the plant. Egg Mohre FERC Testimony at 17-18. D. This Commission Must Determine Whether GSU Is In Compliance With Its River Bend. License Conditions In the River Bend sitigation, Gulf States is seeking to have the Cajun /GSU PIA and Service Schedule CTOC
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l 1 declared void by the court. This action is in direct 1 conflict with NRC license condition 10, appended hereto as Attachment A. That condition requires GSU to transmit power i l over its system on behalf of utilities engaging in bulk i power supply in GSU's service area. The Commission should - evaluate this condition of the River Bend license in its ( consideration of the public interest aspects of the merger ! i and amendment, and should inquire of the Applicants whether, l if the merger is consummated, GSU will cease its attempts to ; have the Cajun /GSU PIA and Service Schedule CTOC declared [ void. Under license condition 12, appended hereto as ! Attachment B, GSU is obligated to sell power for resale to I i any entity engaged in retail distribution of electric power l l where such power is not available from alternative resources GSU has refused to provide certain at competitive costs. delivery points which are necessary for one of Cajun's I 4
- distribution cooperative Members to supply power to two i large industrial customers.E' This refusal is in violation f 0 ,
of River Bend license condition 12, and this violation ; should be set for hearing as part of this license amendment j proceeding. i 11/ Cajun has complained to the United States Courts and to FERC that GSU is in violation of the antitrust laws and t in breach of its PIA obligations in refusing to l establish such delivery points. See Cajun Electric ! Power Cooperative, Inc. v. Gulf States Utilities ] Company, No. CV-89-2294 (W.D. La.), appeal pending; Cajun Electric Power Cooperative, Inc. v. Gulf States l Utilities Company, 59 FERC (CCH), 1 63,024 (1992), j pending on requests for rehearing. j 1 1 4 1
In addition, it appears that a condition of the NRC operating license for the Waterford 3 Nuclear Unit, held now by LP&L, might not be fulfilled should the merger become l final without mitigating conditions related to transmission ! I among those utilities and customers such as Cajun. License Condition 5 applicable to the Waterford 3 Unit provides: [LP&L] shall transmit power and energy over its transmission facilities among ; entities in the State of Louisiana with which it is interconnected and has or I will have a transmission schedule in l effect. For each coordinating group of ! entities there shall be a single ; transmission charge. The term "among" the entities was added by the Atomic Safety l and Licensing Board because of the following observation: ! The limitation of "between two entities" s in Applicant's [ proposed license conditions] is not an adequate provision designed to permit coordination (both operation and development) sufficient to , overcome a situation inconsistent with ! the antitrust laws. A change from j "between" to "among" will correct this deficiency. In the Matter of Louisiana Power & Light Co. (Waterford Steam Generatina Station Unit No. 31, 8 AEC 718, 733-4 l (1974). The Commission also stated: The purpose of this change [from !
"between" to "among") is to prevent multiple transmission charges for transmission of a contracted transmission entitlement among a coordinated group of two or more entities. To make the purpose of this change free from doubt, a clarifying sentence has been added.
Id. at 737.
f i i The Atomic Safety and Licensing Board clearly ! t found that the opportunity for transmission customers within i i the Entergy (formerly Middle South) system to obtain network l e transmission service in order to coordinate their services i m and is necessary in order to alleviate antitrust j i conditions that would otherwise exist. The TST, which the l i Applicants suggest will alleviate all anti-competitive concerns, simply does not fulfill the license condition. Moreover, the TST clashes with other applicable i i license conditions in its treatment of stranded investment. j i River Bend License Condition 1(c) and Waterford 3 License ! i Condition 1(b) provide that transmission charges cannot include a provision for lost sales, while the TST provides , that transmission charges may reflect stranded investment. ; The NRC should examine closely all of these conditions in i the light of the TST which the Applicants urge is the j i solution to all antitrust concerns; Cajun believes that, in ! i doing so, the NRC will clearly see that the TST is not only l i apr the panacea that it is made out to be, but it is in fact ! inconsistent with earlier decisions reached for the sole purpose of alleviating anticompetitive conditions on the Entergy system. E. The Procosed Ownershio Amendment Should Be I Accreved Only With Conditions Adecuate to Remedy
~
Its Adverse imoacts on the Caiun/GSU Intercon-nection Aareement I The proposed license amendment will have detrimental effects on an agreement that is critical to the j l l 1 l 1
-i j
i r overall interests of its consumers. These impacts must be i examined by this Commission, and no license amendment.may be I approved where harm to the public interest or to the efficient ops ; ion of the interconnected public utility i system results. 1 In the normal course of events, these contractual l and operational matters would be examined by the FERC in its , review of the proposed merger. However, as y reviously s
}
noted, neither those operational and contractual matters nor j l competition issues has been set for hearing by FERC. This i Commission should conduct a hearing to examine these matters ; i or, at a minimum, communicate to the FERC this Commission's j I determination that it cannot act upon the requested license I amendments until the FERC conducts a hearing, develops a [ record and issues a substantive order on aperational and competitive issues. , I 2 As reflected in the attached FERC Testimony of , i Victor J. Elmer,U# Cajun and GSU have a power interconnec-i tion agreement, or PIAU', which provides, along with its f Service Schedules, for the transmission of Cajun-generated i e I I 11/ Cajun notes that Cajun's operational concerns regarding ! the merger were contained in'Mr. Elmer's prefiled , testimony appended hereto. Portions of Mr. Elmer's ; FERC testimony were stricken by the FERC Presiding ; Judge since the FERC refused to consider the effects of I the merger on operational matters. Thus, portions of l the Elmer FERC testimony appended hereto will not be available to the FERC in its review of the proposed , merger. l ll/ Attached as Exhibit CJN-4, Schedule 1, to the Elmer ! () FERC Testimony, c , _ -
r l or purchased power over the Cajun /GSU jointly-owned high voltage transmission system, the ITS, for ultimate delivery j t to Cajun's Member distribution cooperatives located on the j i GSU, LP&L, CLECO and SWEPCO systems, and for transmission of 1 Cajun-generated power for delivery of third party sales. i ( t Further the PIA and Service Schedule CTOC to the ! PIA provide for the Joint planning of the ITS by Cajun and i I GSU. Service Schedule CTOC is a transmission equalization j i and access agreement which provides, among other things, for l f the allocation of cenership and the cost sharing [ responsibilities for the ITS, which allocations are driven ! l ! in large part by the relationship between the relative l ) ! J levels of Cajun and GSU ITS investment to the relative l levels of ITS usage by Cajun, and by GSU and third parties. Egg Elmer FERC Testimony at 13-15. l I In general, if the merger is approved as proposed, j i the planning functions of the PIA, its service schedules, f i and the construction obligations, access rights and the cost l 4 sharing mechanisms of Service Schedule CTOC will be severely impacted in several ways. First, GSU's planning and i dispatch responsibilities will be transferred to Entergy l I with the result that decisions will be made on an Entergy
- system basis rather than on a GSU Cajun specific basis.
Following the merger, as proposed, Cajun will no longer have a meaningful contractual planning or operating relationship j with the actual decisionmaking entity. Sea Elmer FERC ! i Testimony at 17-22. Second, the increase in the use by the i l i i
I l l I t Merged Companies of the ITS, which will result from i redispatch of the Merged Companies' resources to achieve the j
?
claimed fuel savings derived from the merger, could result l in " undue burdens" on Cajun which, under the terms of the ; PIA, GSU must avoid. Id. Third, changes in the relative i use by the Merged Companies and Cajun of the ITS will f i substantially affect'the cost sharing mechanisms of Service Schedule CTOC. Id. at 23-25. The completely intertwined ! Cajun /GSU relationship cannot easily be transformed into a { Cajun / Merged Companies relationship. Absent operating modifications, and perhaps formal amendments to the PIA and ! 2 i - Service Schedule CTOC, the Cajun /GSU relationship will not i i fit into the mold of a Cajun / Merged Companies relationship. f i Further, these are not matters which can be sorted ; 3 out after the merger occurs. These important planning a > responsibilities, payment obligations and access righ'ts will , affect the day-to-day operatior.r of Cajun in carrying out l its obligation to serve over one million consumers. Simple statements from Applicants that these matters will work themselves out after the merger are inadequate to resolve i the uncertainties and questions surrounding the impact of i the proposed narger on Cajun's activities as a control area i operator, as a full requirements power supplier, as a joint j owner of the ITS, as a major competitor in important bulk i power markets and as a major transmission service customer of Entergy and GSU. Following are some of the specific l 1 3 i 'l . i l l
-.- - - - - - . = . . . - -=. - . . .
concerns of Cajun with regard to its contractual rights and l t obligations. Egg Elmer FERC Testimony at 17-22. Section 2.2 of the PIA requires Cajun.and GSU to maintain adequate interconnection facilities. The. principal physical interconnections between Entergy and GSU are located in the Baton Rouge area. This is the very ; interconnected area in which Cajun's generating plants and { 4 , two 500 kV transmission lines are located. Cajun does not j and currently cannot know, in a post-merger scenario, how f those interconnection facilities will be affected by Entergy's economic system-wide dispatch, or with whom Cajun ! must interface and how Cajun must undertake to enforce its ! t rights and obligations under this PIA provision. ! 1 Sections 2.2(4) and 2.3 cf the PIA require Cajun i to coordinate load dispatching with GSU. The Applicants plan to add GSU to the Entergy System Agreement and dispatch GSU on an Entergy system basis. Particularly since GSU's l facilities will'be dispatched by Entergy Services after_the ! i merger, Cajun does not and cannot currently know what its ! rights and obligations #are with regard to load dispatching. i Section 2.2(5) of the PIA requires Cajun and GSU to " cooperate" in matching interface requirements for ! l 1 communications and telemetering; Cajun's rights and l obligations in the post-merger scenario regarding these { matters is an open question since dispatching a7.3 { coordination will be undertaken by Entergy Services. , i f i I
~ , - ,r, - .
. . - - . .- ~. - - . . . . - -
- 79 -
I Sections 3.2 and 4.12 of the PIA provide for the i accounting for power _and energy and treatment of inadvertent f l energy between GSU and Cajun. Cajun needs to know what its rights and obligations with the Merged Companies regarding ! I inadvertent energy will be. This is particularly true since {
- . the Merged Companies' generation resources, including River i
Bend, will be dispatched from Pine Bluff and are subject to an array of contracts with other major control areas in the . southeastern United States. Section 4.1 of the PIA provides for the i t establishment of Cajun as a control area. In the post- l t merger world, with the increased coordination among GSU and f the Entergy Operating Companies, Cajun cannot and does not' { i know what changes will occur in the practices or procedures O regarding the coordination of Cajun's control' area with that f t of the Merged Companies and how those changes will affect i Cajun's vital role as control area operator. l j Section 4.3 of the PIA, a most significant l provision, requires that "neither party should be burdened .j , t by circumstances created by the other party." This l provision could well become operative due to the ; i t modifications in the dispatch of GSU's and the Entergy i I Operating Companies' plants to achieve the hoped for fuel ; savings which is the alleged driving force of the proposed I i ~ merger. Cajun's concerns include the potential for i decreased.available transfer capability for Cajun, both l l under the PIA with GSU and the Cajun-LP&L ESIA, for l l I r i
- . - , . ., - -- - - e
l 1 increased losses, for decreased system reliability and for j additional use or misuse of the ITS which is jointly owned - and jointly used by Cajun and GSU. > Section 4.11 of the PIA requires the coordination ; I Particularly since the Merged of scheduled maintenance. Companies will operate their plants to maximize the system's i benefits, rather than GSU's benefits, maintenance schedules. l may change, potentially with resulting " undue burden" on Cajun. ; i Section 7.1 of the PIA governs planning j i responsibilities of Cajun and GSU. Since the Merged j l Companies will-plan on an "Entergy basis".rather than a "GSU basis," Cajun must have additional input, directly in the t l Entergy Services arena, to ensure that Cajun will suffer no l undue burden resulting from Entergy system planning. ! Section 7.9 of the PIA governs curtailment j i obligations. This provision, which gets to the heart-of the l provision of electric service, may be implemented , differently when the dispatche_ of the system, Entergy
, t Services, has an overriding concern regarding the " system" ]
rather then one operating company of the system. Again, the { Merged Companies cannot " unduly burden" Cajun due to their system responsibilities after the merger. ; - Service Schedules CITS, CTS and CSTS to the PIA require a araat deal of coordination and planning by Cajun and GSU. Further, the transmission services provided in accordance with those Service Schedules are subject to the i 4 F i
- - - - - - - - , - yy
f i availability of transfer capability. The merger will impact
) Cagun's rights and obligations under these Service Schedules in the following ways, among others: (1) the redispatch of GSU's facilities to serve system needs and achieve the i expected fuel savings may affect the level of available j transfer capability, the level of losses and the timing and i
need for upgrades; (2) planning activities then must be undertaken directly between Cajun and Entergy, thus Cajun must have access to Entergy personnel and must have direct and meaningful input into the Entergy planning process; and , (3) ratchet provisions under the Service Schedules may be triggered, or in all events, will be affected by Cajun's i acceptance of service under the TST resulting from the so-called open access case (if and when Cajun takes such ,) service). Egg Elmer FERC Testimony at 22. Service Schedule CTOC to the PIA is a transmission i ownership and equalization agreement which establishes the ITS, governs Cajun's and GSU's use of the ITS, imposes payment obligations related thereto, and is driven in large part by the relative investment in and relative use of the ITS.E' See 14. at 22-25. What is significant for these l proceedings regarding Service Schedule CTOC is that any modification to the relative levels of use of the ITS can i 11/ This service schedule is now the subject of litigation before the FERC. Ca]un Electric Power Cooperative, Inc. !
- v. Gulf States Utilities Co., 47 FERC 1 63,024 (1989), i l
aff'd in part and rev'd in part, 59 FERC 5 61,041 (1992). It is currently pending before the FERC on l rehearing. l
impact both the timing and amount of needed transmission : construction and the relative payment obligations of Cajun , l ) , and GSU. Thus, redispatch of GSU generation to achieve the l hoped for fuel savings from the merger will impact Cajun L through Service Schedule CTOC. [i Among the many concerns related to Service Schedule ??OC which result from the proposed merger are the l , following. Sections 1 and 2.2 of Service Schedule CTOC call [ for the coordinated development of the ITS. Since the Merged Companies' transmission system will be developed on a j i system basis, rather than on a GSU specific basis, Cajun ! I must have meaningful input into the Entergy system transmission planning decisions in order to coordinate f i development of the ITS which is jointly owned and used by l
?
() GSU and Cajun. That coordinated development could be f achieved, for instance, through direct participation by : i Cajun with the Entergy System Operating Committee. Further, since the Merged Companies' transmission j requirements will differ from those of GSU as a stand alone , t 4 - company, Fuch difference may constitute an undue burden t which GSU, under Section 4.3 of the PIA, must avoid, i Further, under Section 2.2(a) of Service Schedule CTOC, if i i Cajun's investment in so-called " Qualified Transmission ; i Facilities" is below its load ratio share of the ITS, Cajun (
- has the right and obligation to construct any transmission !
facilities needed on the ITS. Different transmission usage I on the ITS will affect that need to construct. Indeed, the , i I
)
L
~
t
i
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transmission construction obligation in the TST directly l conflicts with the transmission construction obligation of } Service Schedule CTOC. Service Schedule CTOC provides that l l the entity which is under investment parity shall have the l first opportunity to construct the facilities, whereas the TST provides that the entity requesting the incremental capacity which causes the need for construction has that -l I 5 obligation. ; I As noted above, Section 2.2(e) and 2.6 of Service j Schedule CTOC provide that Cajun and GSU "shall have access 1 with equal priority" to the ITS and "the right to continuous l use" of the ITS. Cajun must maintain that equal access and , i continuous use regardless of modified use of the ITS j i resulting from the merger. f f Further, Cajun's payment obligations under Service , i Schedule CTOC are driven in large part by the relative use ] of the ITS by Cajun, on the one hand,- and by GSU and third j parties on the other. To determine whether any undue burden j would fall on Cajun resulting from modified use of the ITS . the Merged Companies' anticipated use of the system must be i analyced to determine how such use will affect the l l l equalizing charge (CTOC 5 3.3(b)(4)), and to determine how l such use will modify the demand calculstion in Service l t Schedule CTOC where the GSU/ third party use of the ITS } affects eight of the thirteen inputs into the calculation of ; I the demans calculation. Further, since the proposed merger : would result in GSU undertaking the obligations found in l i t I i
Entergy's TST, which could be expected to increase third i party use of the ITS, such additional use must be charged to t GSU since all third party usage of the ITS should be charged ; to GSU under Exhibit A to Service Schedule CTOC. ! t Indeed, the Applicants have admitted that they j have not even analyzed the impacts of the expected changes ! regarding the ITS. Fred F. Gallaher, Entergy Senior Vice ! President, testified in a deposition taken in the LPSC l merger proceeding that Entergy has undertaken no studies to l determine what changes are necessary to the Entergy or Gulf j i States' transmission systems to accommodate this increased l usage. Egg Gallaher LPSC Deposition, Attachment C, hereto. . j-Since Entergy's stated position on the record is ! l in contradiction and violation of Cajun's existing [ contractual rights, and is detrimental to Cajun's consumers, no approval of this proposed merger should be issued until j l this situation has been clarified and corrected. ' i Normally, these would be matters which the FERC would hear, consider and determine in its review of the ! i proposed merger. However, the FERC has cavalierly waived i off the concerns of Cajun and other intervenors regarding l . i the operational impacts of the proposed merger and has taken l the position that operational problems will be considered i only in the future in response to complaints regarding the ; operational impacts of the merger which will arise after the l merger is consummated. FERC's response is problematic in : two prime areas. First, post-merger review of these ; i
problems is simply too late--as a very practical matter, the merger will'not undone as a result of future operational problems. Second, and more germane to the instant proceeding, is the fact that this Commission cannot defer to the FERC's review of these matters in the FERC merger proceedings since FERC has abjured its obligations in these matters. This Commission must fill the FERC void and determine whether the requested transfer of ownership should be approved which would allow the merger to go forward in the face of these unanswered operational problems. For these reasons, the impact of the proposed merger on the PIA and its attendant service schedules, on Service Schedule CTOC and on the ITS must be analyzed by this Commission. As arguet apra, this analysis should not take place in a vacuum. Rather, it should be undertaken only after a full review of those impacts after the taking of discovery and the conduct of a trial type hearing. In the alterative, this Commission could defer action on GSU's applications, communicate to FERC this Commission's concerns regarding FERC's failure to conduct a hearing and substantively consider these matters, and issue its order on GSU's license application amendments only after FERC deals in substantive fashion with these matters. VI. THE COMMISSION SHOULD IMPOSE CONDITIONS ON ENTERGY/GSU 2? TERMS OF APPROVAL OF A MERGER OR COMBINATION The conditions that Cajun would request be placed on any approval of this combination and merger are those
I conditions which are adequate to' ensure (1) that Cajun's (I rights as a thirty percent co-owner of River' Bend are protected; (2) that Entergy assure the financial viability } f of GSU and EOI to avoid potential health and public safety 1 dangers should GSU become bankrupt or financially unable to j undertake its responsibilities regarding River Bend; ; i (3) that access to transmission on the Entergy system be ; i provided on a non-discriminatory and equal price basis such i that competitors, like Cajun, can utilize the transmission , i system in the same fashion as do the Entergy Operating i Companies; (4) that GSU's and Entergy's contractual { i obligations to Cajun are not obviated; (5) that GSU and i Entergy comply with all license conditions on R.iver Bend and the Entergy nuclear plants; and (6) that the public interest l (k is fully protected. , Additionally, this Commission should delay _ issuance of its order in this proceeding, or should retain jurisdiction over this docket, until final orders have been j issued by the LPSC, the PUCT, and the FERC, following i
- hearings where full factual records were developed, on all i
, substantive matters germane to each agency's jurisdiction. Once those agencies have issued their final orders, this i l i Commission will be fully apprised of the status and nature , of the merger proceeding, can rely on the factual records i generated in these proceedings, to the extent appropriate, i and, significantly, will be cognizant of any conditions placed upon the Applicants by those agencies. Particularly ,
- S'? - !
l if this Commission, in making its decision on the merger j i request, is disposed to rely, in whole or in part, on the (: conditions imposed by those other agencies, this Commission f must analyze those conditions to determine if the proposed i license amendments, so conditioned, meets the standards which this Commission is charged with applying and i enforcing. VII. CONCLUSION : Cajun protests the proposed license amendments for [
'I all the reasons stated herein. The Commission must hold an _;
t evidentiary hearing to decide disputed issues of material l fact regarding the effect of the proposed license amendment f i' on the public interest and impose conditions adequate, inter , alla, to protect the public interest, and Cajun's interests as a thirty percent owner of River Bend. WHEREFORE, Cajun Electric Power Cooperative, Inc., e respectfully requests that the Commission: !
- 1. Grant Cajun's motion for interventior and -f allow it participate as a party to this i proceeding for all purposes, i
- 2. Grant Cajun' 'equest for a trial type evidentiary hearing; -
- 3. Delay the issuance of a decision in this .
proceeding or retain jurisdiction over this proceeding until issuance of the orders of , the LPSC, PUCT and FERC so that such orders can be analyzed by the Commission to determine if the license transfer is in the public interest; i
- 4. Approve the requested license amendment only upon conditions adequate to protect the
() public interest and Cajun's interests as a l
i j l i thirty percent owner of River Bend-and is a l customer and competitor of GSU and Entergy; (s and
- 5. Grant such other and further relief as the Commission may deem just and appropriate.
Dated: April 26, 1993 Respectfully submitted,
% o P~dL JamWs D. Pembroke ;
Janice L. Lower i Thomas L. Rudebusch i DUNCAN, WEINBERG,_ MILLER & PEMBROKE, P.C.
- 1615 M Street, N.W.
Suite 800 Washington, D.C. 20036 (202) 467-6370 - Attorneys for Cajun Electric , Power Cooperative, Inc. k . i i i i O l, ______l
( ' 1 CERTIFICATE OF SERVICE i l l i I hereby certify that a copy of the foregoing document, I plus attachments, was served upon the following persons by United States Mail, postage prepaid, this 26th day of April, 1993. Philip D. Graham Vice President River Bend Nuclear Group P.O. Box 220 St. Francisville, LA 70775 i Mark J. Wetterhahn, Esq. Winston & Strawn 1400 L Street, N.W. Washington, DC 20005 b Jafes D. Pembroke . i s N
I
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1 I l l C l t ATTACHMENT A , f 5 4 4 d l l l 4 I I 1 e l l f a
( entity. This provision shall not be construes to rtovire G5U to pur-4 O- chase or sell bulk power tf it finds such purchase or sale infeasible or its costs benefits in connection with such purchase or sale would exceed its therefrom. (9) G5U and any successor in title, shall offer an opportunity to partici-pate in River Send Station. Unit 1 for the tars of the instant Itcense, or any extensions or renewals thereof, or such shortar ters as 65U and the participant (s) may mutually agree upon, to any entity (tes) in er within reasonable proximity to G50's service area in the State of
. Louisiana which has in writing requested participation therein prior to 1 4 March 1, 1974, and which no later than March 31, 1975 has entered into
' l all necessary action for it to lawfully do so prior to so 1
g.. fair and reasonable extent and on reasonable tares and con a basis that will fully cosq>ensata $50 for its costs incurred and to be , 's- incurred ting andnuclear of this that willunit. not adversely affect the-financing and construe.
- participate in any additional nuclear generating unit (s) the65Ui which is intended for use in 65U's general systaa operations, power which from G5U
! any construct own, and operate in Louisiana during the ters of the , instant license (s), or any extension (s) or renewal (s), thereof. 1 ( Participation shall be either by ownership of or purchase of unit par-4 ticipation power from the respective nuclear units. Participation in any form shall be on an equitable basis dereby the participants, in proportion to theirunits. respective nuclear interests, share fully in all costs and risks of the In connection with such participation. G5U 1
' will offer transmission service as may be required for delivery of such for its costs. power to such participant (s) on a basis that will fully compensate !G , i ,
t I (10) GSU shall facilitate the exchange of bulk power by transmission over it ' transmission facilities between two or more entities engaging in bulk power supply in its service area in Louisiana with which it is inter-4 l connected; and between any such entity (ies) and any entity (ies) engaging in bulk poner supply outside 65U's service area in Louisiana between { i whose facilities 65U's transmission lines and other transmission lin would form a continuous electrical path; provided that (1) permission to
- utiltre such other transmission lines has been obtained by the entities i involved; (ii) 65U has appropriate agreements for transmission servica with the entities interconnected with $50 at both the receiving and
. delivery poinu on 85U's system; and (iii) the arrangements reasonably can be accmanodated from a functional and technical standpoint. Such transmission shall be on terms that fully compensate 45U for its cost.
Any entity (ies) requesting such transmission arrangements shall give reasonable advance notice of its (their) schedule and requirements. ( (The foregoing applies to any entity (ies) engaging in bulk power supply 4 to which 65U any be interconnected in the future as well as those to which it is now interconnected). O e N
.,, . . ~ . . - - - - - ., . , - -
O l i i ATTACHMENT B O 1 0 1 i 1 i b l O i J
l t I (11) G5U shall inc19de in its planning and constrvction program sufficient transmission capacity as required for the transactions referred to in O paragraph (10); provided. that any entity (tes) in its service area in Louisiana gives 65U sufficient advance notice as may be necessary to i accommodata its (their) regirteents free a functional and technical stanapoint and that such entity (fes) fully compensata G50 for its cost. 550 shall not be rewired to constrvet transatssion facilities which will be of no demonstrable present or future benefit to G50. (12) G5U will sell power (when available) for resale to any entity (ies) in its ! service area in Louisiana now engaptag in or proposing in good f aith to engage in retail distribution of e ,ectric power, whenever power to meet the needs of such entity (its) is not available from alternata sourcas at competitive costs. (13) The foregoing conditions shall be in all respects implemented on ressen-able tarins and conditions in a manner consistant with the provisions of
.._ the Federal Power Act and other applicable Federal and. State laws and .
E~~ regulatory orders, and shall be subject to force majeere, applicable cur-tailment programs, and engineering and technical feasibility for GSU's-system. None of the foregoing conditions shall require 65U to sell : power, perform any service, or engage in any course of action on a basis weich would be unlawfully preferential or discriminatory under any appitcable law or that would impair 650's ability to render adequate and ( reliable service to its own customers. All rates, charges or practices in connection therewith are to be subject to the approval of regulatory agencies naving jurisdiction over them. i j 1 1 i O ' I 6
a w 4 1 a -A m s ^ 4l 4 e 4 i i, s J J f f 6 ATTACHMENT C 4 e , I 4 0 ., s I b f 7 v i l 5 r J .i Y E 9 I e , d i I f l, l i I
- . i
< i I
L l , J l 4 I l h 1 i r i I k 1
'RFY'
)
.5: l the definition of that atght de 1
2 Q. L What I am concerned w :h :s 3 what the average capatt:y on the ITs w ;; he, 4 what the load factor will be to 5 deliver this purchased energy to GSU i 6 A. i I don't know. 7 Q. Would the increased use o* s purchase power, to make up the gas-!: red 9 transmission, the gas-fired generatics \ l 10 that GSU was going to not have avatlable 11 to it, increase the use by GSU of tne 12 integrated transmission system? i 13 A. 14 I wouldn't see that it would. but I don't know. For sure, l t 15 Q. Have any studies been made to
) 16 determine what effect the purchase power 17 flowing through the ITS will have on the 18 capacity of the ITS. l i
19 A. No. 20 Q. I Is that a study that you 21 think you will' do? 22 A. I am not sure that we would 23 or would not do it. 24 Q. 1 Are you aware that Cajun has I 25 the right of equal access on the MARY VIRGINIA EUGEES Suite 1515, 333 St. Charles Avenue New Orleans, Louisiana 70130 1504) 522 1515 522-0702 tg%
- . . . . _ . . _ ._ .m i
UNITED STATES OF AMERICA BEFORE THE i NUCLEAR REGULATORY COMMISSION i ( Gulf States Utilities Company ) Docket No. 30-548 , i I AFFIDAVIT OF DR. ROGER ODISIO i l SUEMITTED ON BEHALF OF CAJUN ELECTRIC POWER COOPERATIVE, INC. l CITY OF WASHINGTON )
) SS: ;
DISTRICT OF COLUMBIA ) i Roger Odisio, being duly sworn, deposes and says: l l
- 1. My business address is J.W. Wilson & Associates, {
Inc., 2715 M Street, N. W., Washington, D. C. 20007. l l
- 2. I am a professional economist with 13 years of ;
i experience in the regulation of electric utilities. I graduated : i i from Duquesne University with a B.A. in Business Administration I in 1965, and received my Ph.D. in economics from the American j l University in 1983. From 1979 until last year, I was employed as [ i an economist with the Office of Economic Policy (formerly the i i Cffice of Regulatory Analysis) at the Federal Energy Regulatory { Commission ("FERC"). I advised FERC on a variety of issues ( pertaining to electric utility rates and corporate reorganizations. I joined J.W. Wilson & Associates in March of i I 1991. I
- 3. My affidavit is sponsored by Cajun Electric Power Cooperative, Inc. (" Cajun"), a generation and transmission ;
i cooperative.
- 4. Cajun serves, through its members, retail customers 1 r
located within.the Applicants' service area in Louisiana. Cajun j i i 6 i l
j i owns and operates generating resources to serve its member , distribution cooperatives, and, ultimately, Cajun's members' end-
.use consumers. Ca]un is dependent on use of the Applicants' transmission facilities for sales to its members and to engage in other transactions. ,
- 5. Ca3un competes with the merged company and others ,
for sales and purchases in wholesale bulk power markets and the f market for requirements customers located in the merged company's ! r control area. Cajun must buy transmission service from the merged company in order to compete in those markets.
- 6. The merger of Entergy and Gulf States ;
Utilities Company ("GSU") will create the third largest utility system in the country, as measured by both assets and kwh sales, , with assets of $21.3 billion and sales of 83.6 billion kwh in 1991,1' whose access to resources, transmission ownership, t integrated nature, and system planning agreements with other-l large utilities give it potential competitive advantages over ! Cajun and other utilities in the region.
- 7. Both this Commission and Cajun are handicapped in assessing the impact of the merger on competition by GSU's i summary treatment of the competition issues in its January 13, j i
1993 filing. This complex matter is covered in only five pages : of the January 13, 1993 license amendment application.
- Applicants merely refer to their FERC presentation to support j y
their claim that the merger will not create enhanced market power j i 1/ Applicants' filing at the Securities and Exchange Commission ) (August 28, 1992), Exhibits I-1 and I-5. l l l l l l 1
in any relevant market. Applicants have not provided this Commission with an antitrust analysis which is adequate for the 3 t Commission to use in its deliberations of the effects on ? competition likely to result from the Commission's approval of the license amendment application and the concomitant merger of the companies. l i. APPLICANTS' COMPETITIVE ADVANTAGES OVER TRANSMISSION USE !
- 8. Applicants claim that to remedy the potential !
anticompetitive effects of the proposed merger it is necessary f only to extend Entergy's so-called "open access" transmission l l j tariff ("TST"), approved by the FERC in a prior case, FERC Docket ! l No. ER91-569-000, to include GSU. This is no remedy. Rather, it 4 serves to extend the competitive advantages, over time and a , wider geographic area, that the merged compaay enjoys over its ! I competitors by reason of its ownership and control of essential ! transmission facilities. i
- 9. Applicants' competitive advantages in the use of :
I transmission are clear. The merged company will provide itself j with what is generally known as network service, permitting it to transmit power from any generation resource or interconnection with other utilities to loads on its system for a single charge, l based on its share of system transmission costs at peak. In this way, the merged company will be able to engage in coordination and central dispatch of its units so as to lower system costs. j
- 10. To efficiently plan and coordinate their systems, Cajun and similarly situated utilities need the same transmission i
l 1
i t t service from the merged company. Applicants refuse to offer such l i service allowing such flexibility of use. Instead, Applicants j i offer only " point-to-point" service under the TST.F ; i
- 11. The " point to point" service offered in the TST j puts Cajun and other similarly situated utilities at a core l 4 disadvantage in competing with the merged company. As I read the TST, use of the merged company's transmission between and among j a
Cajun and similarly situated utilities can involve several 1 , different " points" and thus different charges. Multiple utilities mean multiple receipt points and multiple charges. Because of point-to-point pricing under the TST, Cajun and similarly situated utilities typically will have to pay a j
- ) i d significant multiple of the price to get the same network 1
t transmission service the Applicants' affiliates receive. Thus, ;
\ the merged company's affiliates will pay less for transmission i
I than Cajun and similarly situated utilities and/or have less restrictions put on their service.
- 12. Throughout the proceeding at the FERC to consider ;
l their merger request, Applicants have claimed that transmission-customers will be on " equal footing" with them in using the TST l . I to compete for sales and purchases in wholesale markets. Yet j I I Applicants' own witness,' Jerry J. Saacks, Entergy Vice President of Transmission, contradicted this claim in an affidavit filed I l 4 2/ While more flexibility is provided in Cajun's individual agreements with GSU and LP&L than in the TST, Cajun is limited i to those affiliates' systems--current agreements with the , Applicants do not allow Cajun and similarly situated utilities ) the system-wide service they require for planning and ] coordination of their systems. ; I
~'
A t five days before FERC voted to summarily dispose of questions { [
\ about competitive impacts of the merger. Mr. Sacks unambiguously l asserted that " network service would not be available [to ;
transmission dependent utilities (TDUs) on the Applicants' i - system] for sales to utilities geographically located outside the Entergy-Gulf States interconnected electric system".I' .
- 13. There are two important points to be made about i
the Saacks affidavit. First, despite the Applicants' numerous , statements to the contrary, they now admit that the TST does not provide the necessary transmission service for others to use to i efficiently serve their loads and to compete with them in ! c wholesale and retail markets. In the Saacks' affidavit, l Applicants offer to negotiate about providing " intercompany network" service, but only for transactions within the Applicants' control area. j i
- 14. Second, by agreeing to talk about offering network
)
a for that limited purpose, Applicants tacitly admit there are no , 4 physical or technical impediments to providing others with that > j service on their entire system. At the least, Applicants have j failed to make any argument that offering network service for l off-system sales is more technically difficult than offering .t i i for transactions on its system.
- 15. Significantly, this Commission has already examined the effect on competition of limited point-to-point service (what it called "between two entities" service), and 1/ Affidavit of Jerry J. Saacks, January 22, 1993, FERC Docket Nos. EC92-21-000 and ER92-806-000, p. 9.
n 4 l
l . i found it to be anticompetitive: "[t]he limitation of 'between j i t two entities' in Applicants' Commitment No. 5 is not an adequate n provision designed to permit coordination (both operation and l development) sufficient to overcome a situation inconsistent with j i the antitrust laws". Louisiana Power and Licht Comeany, Atomic ! I i Eneroy Commission, Atomic Safety and Licensing Board, Docket No. 50-382A, Memorandum issued October 23, 1974. In my opinion, the j i Commission must come to the same conclusions about the ; I ant 1 competitive effect of point-to-point service as offered by j i the merged company in this case. i 16. The TST allows the merged company to impose ! discriminatory transmission charges as well. Under the TST, if ; ! the merged company determines capacity must be built to provide ! service upon a request, the requesting utility may be required to i j pay the incremental costs of that capacity, rather than system embedded cost: This provision, coupled with the entrenched j 3 affiliate preferences, is likely to raise Cajun's rates compared to the those of merged company, further stifling competition. If l j a new transmission line is needed by the merged company, and the i i i
- technically feasible alternatives may benefit merged company i
affiliates and competitors differently, the fact that merged company affiliates are directing transmission planning provides them with the opportunity to bias the outcome. As a result, the incremental cost of the line may be charged to the requesting party, but not to affiliates of the merged company,
- 17. The merged company's proposed discretionary pricing of non-firm transmission similarly provides additional i
i opportunities for unchecked preference for its affiliates. Under the TST, the merged company can negotiate for up to one-third of [ the cost savings produced by utilities seeking non-firm transmission. If those utilities are reluctant to disclose savings information because of natural competitive concerns, the l merged company can charge the rate for firm service. Thus, the merged company has an incentive to charge its affiliate, for example, EPI,F less for non-firm service because the shareholders of the affiliates will keep profits that the merged company does not bargain for, whereas if EPI were charged a higher firm transmission rate, some portion of the revenue would l be credited to the native load transmission customers which pay ; for the transmission system. The lower rate for non-firm 4 transmission will allow EPI to try to undercut competition from () others for wholesale power sales.
- 19. Where a power marketer has preferred access to the i
transmission owner, and the transmission owner has a strong [ incentive and opportunity to favor the marketer, in this case all merged company affiliates, there is an elemental need for , remedies to insure that the transmission monopoly is not abused. i I
- 20. The merger enhances Applicants' market power in transmission. By adding GSU to the Entergy system, each of the i
Applicants' competitive advantages over the use of its , i 1 transmission system I have described are extended over a wider ! l l A/ EPI is a wholly-owned subsidiary of Entergy which has received I FERC approval to sell up to 1000 MW of power and energy at market rates. Additionally, FERC has authorized the Entergy operating companies to sell up to 1,500 MW of power and energy (~ at market rates. ] f I l I
I i' i geographic area, further disadvantaging utilities who would compete with the merged company for sales and purchases. f 3 , I APPLICANTS' CONTROL OF INFORMATION 21 The merged company's integrated operating , utilities will have unduly preferential access to information - l t needed to plan and coordinate its system, and the sole right to ! I
~
make decisions about what gets built, where it is built, and how , i it operates. i i a 22 Neither the TST nor existing agreements provides j anything to assist competitors which need information about l transmission to plan for longer term requirements and coordination services. Under the TST, the customer must present a .) the merged company with a proposal for a specific transaction, ) identifying receipt and delivery points. There is no provision . for customers which need information for planning purposes, or, t for example, which want information to compare alternative -l potential receipt and delivery points. However, affiliates of l t . the merged company, evidently will have daily access to, and { s involvement in transmission planning. j i
- 23. Moreover, Cajun and similarly situated utilities j t
- need network transmission and access to planning _information to j compete effectively as buyers, as well as sellers, in wholesale ; markets. For example, the ability of any supplier to compete and flourish is enhanced if it can reach buyers other than the j utility from which it must buy transmission. Cajun is just such j a buyer. However, in the absence of efficient access to l l k J 1 l l
,,.y.,, , _
, -- . - . . . - - - - - ,- , - - , w+
.I i
9- i transmission planning information, transmission dependent j utilities will be little match for the transmission-owning l l monopsonists as potential customers.
- 24. Refusal to provide the planning and operation information needed by competitors is a source of market power, as FERC has recognized in its recently issued Notice of Proposed j i
Rulemaking (NOPR) implementing parts of the Energy Policy Act of j 1992: . The Commission believes that access to planning and j l operating information by vertically integrated utilities !
^
(and more fundamentally, the potential ability to restrict l i l access to such information to competitors) can be an important source of market power. This is especially l 3 g relevant as greater competition emerges in wholesale i electricity markets. It is possible that a utility could j I use its access to superior information to its advantage in l i competing with other suppliers, especially with those.that a do not own transmission facilities and therefore do not have i access to relevant information. (NOPR, RM93-10, issued March i I 30, 1993, p. 21) i r FERC's NOPR proposes that transmission owning utilities be ! t , required to make available detailed information about the l planning and operation of their transmission systems. No merger f can be found to be in the public interest without clear provision j of such information to competitors. I i d l i i n l
I l ENHANCED MARKET POWER IN GENERATION DUE TO THE MERGER l
- 25. In addition to extending the Applicants' market l power in transmission, the merger will unacceptably add to Applicants' market power in the provision of generation services.
Pre-merger, wholesale markets are dominated by only a few utilities. Together, Southern Companies (30,192 MW) and Entergy . (16,509 MW) own and operate 55.4% of installed capacity in relevant wholesale markets (84,311 MW).F Merging GSU (6,797 MW) with Entergy produces a post-merger Herfindahl Hirschman Index (HHI) in installed capacity of 2241, with an increase of' 274 points due to the merger. According to the Department of Justice / Federal Trade Commission (DOJ/FTC) Merger Guidelines,
"{w}here the post-merger HHI exceeds 1800, it will be presumed l
-?
that mergers producing an increase in the HHI of more than 100 + points are likely to create or enhance market power or facilitate [ its exercise".F :
- 26. Applicants also filed estimates at FERC concerning i i I
the amount of capacity that utilities in the market expect to i i 1/ In the FERC proceeding, relevant wholesale markets were : defined as including'all utilities able to reach each other 3 directly with the TST in place, what FERC has called "first { e tier" utilities. Applicants' data filed at FERC erroneously 1 includes TVA in these markets, but TVA is statutorily j prohibited form selling to many of the others there. i l 1/ Department of Justice / Federal Trade Commission Merger Guidelines, 57 Fed. Reg. 41,553 (Sept. 10, 1992). The DOJ j i and FTC have joint federal responsibility for enforcing antitrust laws. The Merger Guidelines have.been developed by i the DOJ, and now joined by the FTC, to " articulate the j analytical framework the Agency applies in determining whether a merger is likely to substantially lessen competition" ; (Guidelines, Section 0.1 at 41,553). > l l 3 I
i I l have available~for sale through 1997, in order to evaluate the merger's immediate impact on competition. These data are riddled , with specification and measurement problems.F According to I intervenors, Southern Companies have a policy against using a j transmission tariff containing " reciprocity" provisions that , i would force it make available its own transmission to others. Yet Applicants' data includes Southern Companies as a major seller of capacity and energy. Applicants' available capacity consists primarily of efficient base load units Entergy had spun-off from rate base to its newly created affiliate Entergy power, ! i Inc. But no information is provided on the types of units others ! may have for sale--whether they are base load, intermediate, or l 1 peaking units. Clearly base load and peaking capacity are : typically sold in different markets because they can not compete j with each other as to costs. Data that do not distinguish i between types of units are not very useful for analyzing market' i structure or performance. ! i
- 27. At a minimum, Applicants' estimates of capacity available for sale shows the following. By 1997, the merged company would have 2 1/2 times as much capacity to sell as the l I
next largest supplier, and control almost 1/3 of all such l capacity (32.9%).F The market would be highly concentrated - 2/ Moreover, without a hearing at FERC, intervenors have not had the opportunity to use discovery to fully evaluate the data supplied by Applicants. 1 I 1/ It is true that other suppliers may enter the market during j this time. We have no data on that, nor have the Applicants ! made any convincing arguments about ease with which these new l suppliers could quickly compete with them for sales. For this i (continued...) f l
throughout the period measured by Applicants--the post-merger HHI I would be 1782 in 1994, for example, and the merger would add a g huge 347 points to that HHI . I' Because the merged company would i l be by far the largest supplier of existing capacity, and some a uncommitted" capacity of others is committed to sale during the i t period, the merged company's market power would increase as buyers' needs (1) are greater (they would have to rely more heavily on merged company capacity), (2) are for longer duration, i or (3) begin at a later date (merged company share of capacity { rises over tine). k i
,6 PLANNING AND OPERATING AGREEMENTS WITH OTHER UTILITIES ;
)
- 28. The proposed merger is one part of a complicated web of tariff conditions, system planning agreements with other major suppliers, and the terms of existing contracts with merged company affiliates, designed by the Applicants to limit competition by Cajun and others, and extend their control over power markets. Entergy's system planning and operation I agreements with two of the merged company's larger potential lt competitors, Central Louisiana Electric Company ("CLECO") and the f I
-i i
f 1/(... continued) reason, FERC typically chooses to separately analyze the "short term" market for existing, capacity--for which data is-available--and "long term" markets that allow for entry, but for which there are no reliable data. All HHIs calculated by j parties in this case, of course, apply to the short term j market as defined by FERC. ! I, 2/ This HHI excludes Southern Companies as a seller. i I L L
~
i i
l Southern Companies, may allow them to divide up markets instead of competing.
- 29. Since the 1950s, Entergy operating company Louisiana Power & Light Company ("LP&L") and CLECO have operated under a coordination agreement that provides for joint )
?
transmission planning and ownership. Following the demise of GSU, CLECO would be the largest remaining independent investor j l owned utility in Louisiana. In the early 1980s, GSU, Entergy, l 1 and the Southern Companies entered into a transmission l . reliability agreement, that in turn committed them to a second agreement to coordinate the planning and operation of their j a generation and transmission facilities. These agreements appear , to provide for the kind of system planning and operation by each f , utility with the merged company that allows them preferential j access to the planning and operation information denied to Cajun ; I g and other utilities. For this reason, as well as those discussed j i above, the competition in wholesale markets the merged company is ! likely to face from other major transmission owners could be ] negligible. f
- 30. In sport, while the TST appears to disadvantage {
all competitors of the merged company in regard to access to l
\
t vital transmission planning information, some larger potential i P competitors appear to be protected by separate agreements. In ! fact, the merged company's agreements are not with just another t large utility. While, as I mentioned, the merged company will be. j the third largest utility system in the country, the Southern l 4 Companies is the largest utility in the country as measured by i f l
kilowatt hour sales, and second largest when ranked by asset value. The proposed merger, in this context, is the capstone on a combine of arrangements which, if left unexamined, will allow the preferential use for anticompetitive purpose of the transmission system by other large investor-owned utility but to : the exclusion of Cajun, other smaller municipal and cooperative , t systems, and other utilities. i i RELATIONSHIP BETWEEN THE TST AND EXISTING CONTRACTS ,
- 31. Moreover, it is now evident that, read in light of j GSU's and LP&L's existing contracts with Cajun, the promise of l f
open access to Cajun may be illusory. Entergy has proposed, and the FERC has agreed, that TST access is a subject to pre- ! existing contractual arrangements. However, Entergy and the [ 5 merged company's repeated filings and testimony in the FERC case leave unclear the extent to which, in the merged company's view, l , the contracts will permit Cajun and similarly situated utilities ; to use the TST--at least, absent lengthy bargaining and/or i litigation, or at the cost of losing preexisting contract rights. !
- 32. The merged company insists on holding Cajun and similarly situated utilities to contracts that will be, and are f being, used to limit their access to the TST. This is ,
unacceptable. A monopolist must not be given a tariff right
- which negates its bargains (e.g., the right to collect " stranded investment" fees), while the ostensible beneficiaries of the I
tariff are denied its use on the grounds that they are limited by , their contracts. l i l [
- ~
i j
- 33. In the case of smaller systems, the existing l r
contractual arrangements with Entergy affiliates typically ; represent the bargains extracted by a transmission monopolist. -l I The agreements with transmission owning investor-owned systems l represent a set of arm's length relationships from which those , transmission dependent systems were excluded. The merger has now ! l followed these actions as the latest in the series of steps by i the Applicants designed to enhance their wholesale market power. i If it is to be effective, any remedy to the merged company's i market power must consider the full range of their actions. ! l i SOME REMEDIES
- 34. The problems of service and contractual ;
4 relationships should be addressed together. Either the TST, 1 Cajun's existing contracts, or both should be revised to require j that the terms of access, as to flexibility of use and price, are ; equivalent to those received by the Entergy companies, i.e., non-discriminatory. Point-to-point service, as defined in the TST, must be replaced by a system-wide tariff for service at a single i 4 charge, based on a sharing of system-wide costs. The purpose of 1 such a tariff is to enable Cajun to provide for coordinated' ) utility operations which achieve the market entry and planning l and operating efficiencies equivalent to those of the merged company affiliates.
- 35. The merged company must be precluded from using contracts it negotiated when it had unmitigated monopoly power to limit access to the merged company's transmission system. At a
4 minimum, the relationship between these prior contracts and the TST must be clarified so as to not result in Ca]un receiving service inferior to that of merged company affiliates. One alternative is to expand the geographic scope of Ca3un's existing ; l contracts with GSU and LP&L to encompass the entire merged l l company system, with service provided at the same rate charged j merged company affiliates. f i
- 36. The Commission must act to ensure that merged l l
company affiliates (including EPI) are not unduly preferred in l gaining access to transmission. This will require, at the least, { provision for parity of access to transmission pricing and I planning information. Competitive parity also may require access j to planning information about the merged company's generation, as l well as the opportunity to jointly coordinate or own future I generating facilities. ;
- 37. The web of contracts in which the TST sits must be ;
i , examined. The merged company must be required to provide Cajun l t with access to planning and coordination information and activities on the terms made available to other transmission i owning utilities. f
- 38. The FERC refused to set competition issues for i
hearing. This Commission must conduct such a hearing to develop i a record which would permit a reasoned decision by it on the { l potential harm to competition by the merger. i r
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1 O : Av Os - dOGER ODISIO l SUBSCRIBED AND SWORN TO BEFORE NIE THIS 26TH DAY OF APRIL 1993
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1 i I l l l l APPENDIX B f p e P I r i b p n
{/ L-i i l O e UNITED STATES OF AMERICA . BEFORE THE i NUCLEAR REGULATORY COMMISSION l In the Matter of )
) i Gulf States Utilities Company ) Docket No. 50-458
)
(River Bend Station) ) j
) l f
CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, . COMMENTS, PETITION FOR LEAVE TO INTERVENE, AND f REQUEST FOR' HEARING AND CONDITIONS, ON NOTICE OF CONSIDERATION OF ISSUANCE OF I I AMENDMENT TO FACILITY OPERATING-LICENSE, PROPOSED NO SIGNIFICANT HAZARDS CONSIDERATION l DETERMINATION AND OPPORTUNITY FOR HEARING r m ) c 5 d % i O We A cn 1 Y t il
+ %
7 'l y ; N c,
~
James D. Pembroke N j Janice L. Lower -! Thomas L. Rudebusch DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C.
1615 M Street, N.W., Suite 800 ; Washington, D.C. 20036 ; (202) 467-6370 ; Attorneys for Cajun Electric Power Cooperative, Inc.. Dated: August 6, 1993 0
.* - H. my
1 TABLE OF CONTENTS PAGE i I. INTRODUCTION........................................ 1
)
II.
SUMMARY
OF CAJUN'S POSITION......................... 3 i III. THE PARTIES AND THE NATURE OF THE PROCEEDING........ 5 ; A. Cajun Electric Power Cooperative, Inc....... .. 5 B. Gulf States Utilities Company.................. 7 C. The Entergy Corporation........................ 7 1 e D. River Bend Station............................. 8 ; E. The Application For License Amendment i To Transfer Operational Control Of l River Bend To EOI And The Application ! For Transfer Of Control Of Ownership , Of License..................................... 9 ! IV. PETITION TO INTERVENE AND REQUEST FOR HEARING............................................. 10 A. Cajun's Intervention Should Bo Granted......... 10 l B. A Hearing Should Be Conducted Prior i To A Determination On No Significant .! Hazards Consideration.......................... 12 j V. THE OPERATING LICENSE AMENDMENT, AS j PROPOSED, MAY RESULT IN A SIGNIFICANT ; REDUCTION IN THE MARGIN OF SAFETY AT RIVER BEND.......................................... 16 l A. The Contractual Framework For i Maintaining River Bend Operation Is { Tenuous And Does Not Require Entergy To Guarantee EOI Funding For River ; Bend Operation................................. 16 - l B. GSU's Risks From The Cajun Litigation And The Texas Litigation Are Real And i Substantial................................. .. 18 l
- 1. Nature Of The Cajun Litigation And Texas Litigation...................... 18 f
- 2. The Impact Of The Cajun j Litigation And The Texas j Litigation Is Substantial................. 19 1
- i-I L _ _ _ ,
?
C. Entergy And EOI Officials Have : Testified That A GSU Bankruptcy ,
' Could Result In A River Bend Shutdown....................................... 23 :
D. The NRC Cor.ot Make A No Significant i Hazards Consideration Determination
- Without Full Analysis Of River Bend's '
Future Safe And Reliable Operation............. 25 VI. THE LICENSE AMENDMENT SHOULD BE GRANTED AND , THE NO SIGNIFICANT HAZARDS CONSIDERATION DETERMINATION SHOULD BE GIVEN, ONLY UPON : APPROPRIATE CONDITIONS TO ENSURE THE SAFE t . AND RELIABLE OPERATION OF RIVER BEND................ 26 ! VII. CONCLUSION................. ........................ 29 ! t l f i I
?
i i l I i i l
- ii-
~ I
;( TABLE OF AUTHORITIES CASES Brooks v. Atomic Enerav Commission, 476 F.2d 924 (D.C.
Cir. 1973) . . . . . . . . . . . . . . . . . . . . . . 13 Commonwealth Edison Comeanv, 14 NRC 616 (1981) . . . . . . . 13 Enteroy Services. Inc. and Gulf States Utilities Comnany, 62 FERC S 61,073 (1993) . . . . . . . . . . . . . . . . . . 21 Southwest Louisiana Electric Membershin Corcoration and Dixie Electric Membershin Corocration v. Gulf States Utilities Comoany, Civil Action No. 92-2129 (U.S.D.C. W.D. La.).. . . . . . . . . . . . . . . . . . 19 STATUTES / LEGISLATIVE MATERIALS / REGULATIONS 7 U.S.C. gg 901, gr sea. (1988) . . . . . . . . .. . . . . . 6 15 U.S.C. S 791(b) (1988) . . . . . . . . . . . .. . . . . . 28 42 U.S.C. g 2239(a)(1)(A) (1988) . . . . . . . . . . . . . . 12 S. Rep. No. 97-113, reorinted in, f 1982 U.S. Code Cong. & Admin. News 3598 . . . . . . . . . . 14 .
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Joint Explanatory Statement of the Committee of Conference, ! reorinted in, 1982 U.S. Code Cong. & Admin. News 3607 . . . 14 2 5 2.708(e) (1993) 10 C.F.R. . . . . . . . . . . . . . . . . 10 C.F.R. g 2.714 (1993) . . . . . . . . . . . . . . . . . . 10 2 10 C.F.R. S 50.90 (1993) . . . . . . . . . . . . . . . . . . 10 C.F.R. S 50.92(c)(3) (1993) . . . . . . . . . . . . . 4, 14, 25 t 17 CFR S 250.23 (1993) . . . . . . . . . . . . . . . . . . 29 17 CFR S 250.45 (1993) . . . . . . . . . . . . . . . . . . . 28 j t 58 Fed. Reg. 36436 (1993) . . . . . . . . . . . . . . . . . 14 58 Fed. Reg. 16246 (1993) . . . . . . . . . . . . . . . . . 10 58 Fed. Reg. 36423 (1993) . . . . . . . . . . . . . . . . 1, 5, 9, 14 P
-lii-- l l
i
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I i [ i UNITED STATES OF AMERICA BEFORE THE ; NUCLEAR REGULATORY COMMISSION l In the Matter of ) i
) !
Gulf States Utilities Company ) Docket No. 50-458 i
) !
(River Bend Station) ) i
) t i
CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, f COMMENTS, PETITION FOR LEAVE TO INTERVENE, AND l REQUEST FOR HEARING AND CONDITIONS, ON l NOTICE OF CONSIDERATION OF ISSUANCE OF l AMENDMENT TO FACILITY OPERATING LICENSE, ! PROPOSED NO SIGNIFICANT HAZARDS CONSIDERATION ! DETERMINATION AND OPPORTUNITY FOR HEARING I. INTRODUCTION Pursuant to the Notice issued by the Nuclear Regulatory ! Commission ("NRC" or " Commission") on June 29, 1993, 58 Fed. Reg. 36423, 36435 (July 7, 1993), Cajun Electric Power Cooperative, , Inc. (" Cajun"), hereby petitions to intervene, files its ! I comments, requests a hearing, and requests substantive relief in i the above-captioned proceeding on the Notice of Consideration o { Issuance of Amendment to the Facility Operating License, Proposed j t No Significant Hazards Consideration Determination and j Opportunity for a Hearing. ! This proceeding was initiated by the filing on January 13, 1993, by Gulf States Utilities Company ("GSU" or " Gulf j f States"), which is a joint licensee of River Bend Nuclear. Station with Cajun, of GSU's request to amend the River Bend Facility l Operating License NPF-47, to include as a licensee Entergy l
i Operations, Inc. ("EOI"), purportedly pursuant to 10 C.F.R. O 5 50.90 (1993) of the NRC's Rules and Regulations. ; Ca3un's petition is supported by testimony'1 of David [ Lee Mohre, Cajun's Executive Vice President and Chief Executive , Officer, and Michael J. Hamilton, a financial consultant to Ca]un, both of which testimonies are incorporated herein by l reference. In accordance with 10 C.F.R. 5 2.708(e) (1993), the following are designated as the persons on whom service of l pleadings and other papers in this proceeding should be made: i James D. Pembroke, Esq. Janice L. Lower, Esq. Thomas L. Rudebusch, Esq. Duncan, Weinberg, Miller ,
& Pembroke, P.C.
1615 M Street, N.W., Suite 800 Washington, DC 20036 : (202) 467-6370 (202) 467-6379 (facsimile) Victor J. Elmer , Vice President - Operations Cajun Electric Power Cooperative, Inc. ;
~
10719 Airline Highway Baton Rouge, LA 70895 (504) 291-3060 . I i 1/ This testimony was filed on March 24, 1993, in the related merger proceeding before the Federal Energy Regulatory ' Commission ("FERC") in Entergy Services. Inc. and Gulf States Utilities comoany, FERC Docket Nos. EC92-21-000 and ER92-806-000 ("FERC Merger Proceedings") and was attached to Cajun's Comments, Petition for Leave to Intervene and Request for Hearing and Conditions on Application for , Approval of Transfer of Ownership, filed with the NRC by 1 Cajun on April 26, 1993, in Docket No. 50-458. ! l l 1
II.
SUMMARY
OF CAJUN'S POSITION . GSU proposes to transfer operational authority for i River Bend to EOI, which is a wholly-owned subsidiary of Entergy i Corporation ("Entergy"). EOI will operate River Bend under the f terms of the proposed GSU/EOI River Bend Station Operating. Agreement (" Operating Agreement").F EOI is very thinly j i capitalized and will receive its funding for River Bend operation l l solely from GSU under the terms of the Operating Agreement. f Although EOI is a wholly-owned subsidiary of Entergy, ; 1 as will be GSU if the merger is approved, Entergy has no ! obligation to provide funding to EOI to maintain the safe and reliable operation of River Bend should GSU not fully compensate l
?
EOI under the Operating Agreement. Entergy's sole obligation to fund EOI activities is found in the Entergy/GSU/EOI River Bend , Station Guarantee Agreement (" Guarantee Agreement").F Entergy's obligations to provide EOI adequate funding to safely and : I reliably operate River Bend extends only so long as GSU continues , i to meet its payment obligations under the Operating Agreement. l
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I This financial arrangement might not normally raise j 2 safety concerns. However, as more fully discussed below, Cajun l d . and GSU are involved in substantial litigation regarding Cajun's { , t ownership status in River Bend. If-GSU loses that litigation, i GSU will be obligated to pay Cajun at least $1.6 billion and will ; i e 2/ The Operating Agreement is attached to the FERC Testimony of ! David L. Mohre, as Ex. CJN-2, Schedule 2. f i 1/ The Guarantee Agreement is attached to the FERC Testimony of I David L. Mohre, as Ex. CJN-2, Schedule 3. ! I 4 i ) ~ L
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receive back Cajun's thirty percent ownership of River Bend. In j . that case, GSU has stated that it will likely be forced to l 2 declare bankruptcy. If bankrupt, GSU's payments to EOI under the Operating Agreement are drawn into considerable question. If ; i those payments cease, EOI has no sources of external funding and l I Entergy has no obligation to provide funding under the Guarantee ; i Agreement. T Closing the circle on Ca]un's safety concerns are the j extraordinary statements by Entergy Chief Executive Officer, ) Edwin A. Lupberger, and EOI's' Chief Executive Officer, Donald C. . Hint:, that, if adequate funding for EOI was not forthcoming from GSU, EOI may be forced to shutdown the River Bend Station I' -j The shaky financial underpinnings of EOI, coupled with ; the statements of the chief executive officers of Entergy and EOI 'l l that a GSU loss in the Cajun litigation could result in a River l Bend shutdown, give rise to concerns that the license amendment to transfer operating responsibilities for River Bend to EOI ! could " involve a significant reduction'in a margin of safety." i 10 C.F.R. 5 50.92(c)(3) (1993). Thus, the proposed license l
- transfer does not meet the criteria for a finding of no ,
significant hazards consideration. The Commission should undertake a full investigation, ,
- including an evidentiary hearing, of the safety issues which L
1/ These statements were made in cross-examination in the FERC Merger Proceedings. See pages 23 to 25, infra. 4 m we, , n - s- ~e , .--e ,c, - --m s - ,
arise as a result of the proposed license transfer and condition the amendment of the license accordingly.F III. THE PARTIES AND THE NATURE OF THE PROCEEDING ! A. Caiun Electric Power Cooperative. Inc. , Cajun is a Louisiana cooperative corporation with its principal place of business located in Baton Rouge, Louisiana. Cajun is engaged in the generation, transmission, distribution and sale of electricity to, among others, the following twelve rural electric distribution cooperatives which are Cajun's Members, under all requirements contracts: Beauregard Electric Cooperative, DeRidder, Louisiana; Claiborne Electric Cooperative, Inc., Homer, Louisiana; Concordaa Electric Cooperative, Inc., Ferriday, Louisiana; Dixie Electric Membership Corporation, Baton Rouge, Louisiana; Jefferson Davis Electric Cooperative, Inc., Jennings, Louisiana; Northeast Louisiana Power Cooperative, Inc., Winnsboro, Louisiana; Pointe Coupee Electric Membership I Corporation, New Roads, Louisiana; South Louisiana Electric ; Cooperative Association, Houma, Louisiana; Southwest Louisiana ; i 1/ These Comments, Petition for Leave to Intervene, etc., are i filed in accordance with the July 7, 1993 Pederal Register ; Notice which elicited comments on the proposed. determination , i on significant hazards considerations 58 Fed. Reg. 36423 ; (July 7, 1993). When the Commission notices GSU's license amendment request for general' comment, Cajun will submit , comments on the following matters, among others: (1) lack ; of GSU authority to amend the license without Cajun's consent; (2) operational impacts on Cajun of license amendment; (3) GSU and Entergy compliance with license ; conditions; (4) impact on Cajun's rights regarding the [ operation of River Bend; and (5) conditions needed to be imposed on the license amendment. Cajun's general positzen l on these matters can be found in Cajun's Comments, etc., filed with the NRC on April 26, 1993, in Docket No. 50-455,- , in response to GSU's request for approval of transfer of ownership. , i
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t Electric Membership Corporation, Lafayette, Louisiana; Teche ! l Electric Cooperative, Inc., Jeanerette, Louisiana; Valley l l Electric Membership Corporation, Natchitoches, Louisiana; and : i Washington-St. Tammany Electric Cooperative, Franklinton, ( i Louisiana (collectively " Cajun's Members"). Cajun and Cajun's Members are non-profit cooperatives ! I formed under the Rural Electrification Act of 1936, 7 U.S.C. i gg 901, g; agg. (1988). Cajun is eligible to apply to the Rural j Electrification Administration of the United States Department of ; Agriculture ("REA") for loan guarantees to allow it to construct or purchase generation and transmission facilities. i As a generation and transmission cooperative, Cajun j functions as the power supply and transmission component of a l vertically integrated system in which Cajun's Members have ( responsibility for the distribution and retail sale of all power and energy for their consumer-owners. Cajun's Members serve l approximately 1,000,000 people in a large portion of rural I Louisiana. Cajun's primary purpose is to provide an adequate and reliable supply of economical power and energy to meet the full l l requirements of Cajun's Members. ; Cajun currently has power supply responsibility for all j of its Members' loads, whose normal system peak load is ! approximately 1,300 MW. Cajun currently owns or is entitled to approximately 1,976.MW of generation capacity. Cajun has expended billions of dollars in building its own generating stations, Big Cajun No. 1, Big Cajun No. 2, and in securing the j l e i
I i i rights to other power supply sources, including its 30 percent l (282 MW) share of River Bend. B. Gulf States Utilities Company GSU is a Texas corporation with its principal place of l 2 business located in Beaumont, Texas. GSU is an investor-owned public utility which owns and operates facilities for the j generation, transmission, distribution and sale of electric power l l and energy in interstate commerce. GSU sells electric power and I energy to approximately 575,000 customers in Louisiana and Texas. GSU's 1991 system peak was approximately 5,200 MW. Its generating capacity is approximately 6,750 MW, comprised of coal, l [ gas and nuclear units. GSU currently owns 70 percent (658 MW) of i River Bend. l l C. The Enterav Corocration i i Entergy (formerly Middle South Utilities, Inc.) is a ( Florida corporation with its principal place of business located in New Orleans, Louisiana. Entergy owns all of the common stock i of certain operating subsidiaries, including: Arkansas Power & l Light Company ("AP&L"), Louisiana Power & Light Company ("LP&L"), f
)
Mississippi Power & Light Company ("MP&L"), and New Orleans l Public Service, Inc. ("NGPSI") (collectively " Operating l Companies"). -l The Operating Companies collectively distribute and t sell electric power and energy to approximately 1.7 million ; 2 customers at wholesale and retail in portions of Arkansas, ! l Louisiana and Mississippi. The electric facilities of the j Operating Companies are integrated and operated on a system-wide i
_a-I basis, under the terms, inter alla, of the Entergy System Agreement. Entergy's System Operations Center, located in Pine i Bluff, Arkansas, centrally dispatches the resources of the Operating Companies over the interconnected and integrated j i transmission system. Peak demand in 1991 on the Entergy system was approximately 11,800 MW, while available generating capacity ; was 15,700 MW. ) The operation of Entergy's nuclear generation is- ; i managed by EOI under agreements with the Operating Companies. j i EOI operates four nuclear units: AP&L's Arkansas Nuclear One Units 1 and 2 ("ANO"), LP&L's Waterford Unit 3 ("Waterford"), and :
.l Grand Gulf Unit 1 (" Grand Gulf"). A ninety percent share of :
Grand Gulf is owned by another wholly-owned Entergy public i utility affiliate, System Energy Resources, Inc. ( " S ERI " ) -. j The above description of Entergy affiliated companies f is not all-inclusive. ; D. River Bend Station { l The River Bend Station is a 940 MW, single unit, boiling water nuclear electric generating station, located in j r : West Feliciana Parish, Louisiana. GSU holds a 70% undivided l 2 interest (658 MW) in, and is a joint licensee of, River Bend. t Cajun currently owns a 30% undivided interest.(282 MW)'in and is l 4 a joint' licensee of River Bend. Cajun's current total investment 1 in River Bend is approximately $1.6 billion. Cajun-and GSU
' entered into the Joint Ownership, Participation and Operating l 4 Agreement ("JOPOA") on. August 28, 1979. Under the JOPOA, Cajun -
4 ! and GSU were to share costs, expenses and benefits of River Bend : . \ l s 4 l i
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in proportion to their respective ownership shares. GSU is j pro 3ect manager with the authority and obligation to construct, j operate and maintain River Bend, subject to duties, among others, ! to act in good faith and in Ca]un's best interests. E. The Aeplication For License Amendment To Transfer f Ooerational Control Of River Bend To EOI And The Apolication For Transfer Of Control Of Ownershio Of License , [ On January 13, 1993, GSU filed an application (RBEXEC- ! 93-035), requesting an amendment of the River Bend Station Unit 1 i Facility Operating License NPF-47, to reflect approval for EOI to be included as a licensee of River Bend with authority to operate i the facility on behalf of its owners. On July 7, 1993, the NRC ; t I issued its formal " Notice of Consideration of Issuance of . I Amendments to Facility Operating License, Proposed No Significant ! Hazards Consideration Determination and Opportunity for Hearing." j 58 Fed. Reg. 36423, 36435-36 (1993). That Notice specified that f the NRC was seeking public comment on "this proposed l determination," i.e., the no significant hazards determination. f I Cajun files these Comments, etc., in response to that Federal Register Notice and will file its more general pleading when the ! NRC issues its general notice regarding the proposed license transfer.I' , Separately, with that license amendment request on ! January 13, 1993, GSU filed application (RBEXEC-93-034) seeking i approval of an effective change of control over GSU, and for a i i license amendment to the River Bend license to reflect such !
.i s/ See footnote 5, suora at 5. j l
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4 approval. The NRC issued its Notice of that filing on March 25, i 1993, 58 Fed. Reg. 16246 (1993), and Cajun filed its Comments, , etc., in response to that Notice on April 26, 1993. The NRC has taken no formal action on that filing to date. However, by } letter dated July 7, 1993, the Acting Chief of the NRC's ! t i Inspection and Licensing Policy Branch, Program Management, Policy Management and Analysis Staff, Ca]un was asked to respond to four specific inquiries related to GSU's. applications to this ! Commission. Cajun responded on August 2, 1993. -) IV. PETITION TO INTERVENE AND REOUEST FOR HEARING A. Caiun's Intervention Should Be Granted The Commission's Rules of Practice and Procedure, 10 { C.F.R. 5 2.714 (1993), permit intervention petitions by any l < ) person whose interest may be affected and who desires'to i participate as a party. The petition must set forth with . i
- particularity the interest of the petitioner in the proceeding, ;
how the interest may be affected by the results of the proceeding l r (including financial or property interests), the petitioner's j t i rights under the Atomic Energy Act ("Act") and the impact of any l t order on the petitioner's interest. j Cajun has at least three cognizable interests which .. I will be affected by this phase of the proceeding involving the no significant hazards consideration determination.I' l
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Cajun has a considerable number of other vital interests in l 1/ the proposed license amendment to make EOI the River Bend- ! operator. See footnote 5, suora at 5. } l n I
l l l First, when Cajun prevails in the litigation surrounding its ownership of River Bend,U the relief is expected I l to be the payment of at least S1.6 billion to Cajun and Cajun's , return of its 30 percent share of River Bend to GSU. However, ; Cajun cannot be totally assured that its share of River Bend will i I revert to GSU Thus, Cajun could remain an owner of River Bend, I thus having obvious interests in maintaining the safe and ; reliable operation of River Bend after a GSU River Bend ! litigation defeat. , Second, if the Texas litigationF is concluded prior to ! t the Cajun litigation over River Bend, Cajun could still be a 30 i percent owner of River Bend when GSU suffers a S830 million write-off related to the Texas litigation. Again, Ca3un has l l obvious interests in maintaining River Bend's safe and reliable -l operation, as such operation would be adversely impacted by the l Texas litigation. i Third, River Bend is physically located within the service territory of one of Cajun's Members, Dixie Electric Membership Corporation ("DEMCO"). Further, DEMCO's end-use , consumers reside in the geographic area surrounding River Bend. l l Cajun, DEMCO and their consumers, being physically proximate to i River Bend, have an interest in the continued safe and reliable I operation of River-Bend, as such operation would be adversely affected by the outcome of the Cajun litigation or the Texas litigation. 1/ See pages 18 to 19, infra. 0/ See page 19, infra. l i
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- 3. A Hearina Should Be Conducted Prior To A Determination l On No Significant Hazards Consideration !
\w i Cagun hereby requests a hearing as mandated by Section i 189(a) of the Act, as amended, 42 U.S.C. 5 2239(a)(1)(A) (1988).
Ca]un requests that the mandated hearing be held prior to the , final determination on these issues so that Cagun and other f interested parties may have a meaningful opportunity to ! i participate and contribute to a determination of these crucial r safety concerns. ! Section 189(a) of the Act states in pertinent part as , follows: ! In any proceeding under this chapter, for the l , granting, suspending, revoking, or amending i of any license or construction permit, or ; , application to transfer control, ... the Commission shall grant a hearing upon the l l request of any person whose interest may be j affected by the proceeding, and shall admit l any such person as a party to such l , proceeding. < 42 U.S.C. 5 2239(a)(1)(A) (1988). As shown above, Cajun has j 4 i vital interests in the license amendment occasioned by the ; inclusion of EOI as a licensee to use and operate River Bend. l t This Commission and the courts have repeatedly affirmed ( I ' i the plain language of the Act which gives petitioners such as l Cajun the right to a hearing in cases where applicants seek license amendments. As this Commission stated in Commonwealth Edison Comoany: A hearing is required if the petitioners f satisfy the Commission's criteria for ! intervention. Petitions for hearings have been received, and Section 189a. of the Atomic Energy Act of 1954, as amended ') ("Act"), provides that the Commission shall j conduct a hearing at the request of persons l l
I whose interest may be affected. If the < petitioners are found to have standing and come forward with at least one litigable contention, the only remaining question is l whether or not that hearing must be concluded - ior to initiation of the proposed l s contamination [for which the license ! amendment was required]. l l Commonwealth Edison Comnany, (Dresden Nuclear Power Station,-Unit ! 1), CLI-81-25, 14 NRC 616, 622 (1981). Egg also Brooks v. Atomic Enerav Commission, 476 F.2d 924, 926 (D.C Cir. 1973) ("The i i language of this section clearly seems to require that the Commission grant a hearing upon the request of any interested l person.") In this instance, not only must the Commission hold a ; i hearing with regard to these crucial safety issues, but it must j i hold the mandated hearing prior to a final determination on l i whether significant hazards consideration are raised by the proposed license amendment. It is not appropriate for this , i Commission to rush into a crucial safety finding absent a careful j l review of the relevant facts. Furthermore, there is no 1 i compelling reason for the Commission to rush to judgment on these- !> dssues. ! Congress made clear that the Commission should be l circumspect in the use of its authority, provided by the'"Sholly Amendment," to issue license amendments upon a determination of ) I no significant hazards considerations prior to the hearing required by the Act. As the Senate Report on the Sholly Amendment made clear, the NRC was not to treat this new authority lightly:
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By including this provision, the Committee l seeks to address the concern expressed by the O-Commission that a requirement that the NRC ! grant a requested hearing prior to making l effective a license amendment involving no ; significant hazards consideration could + result in unnecessary disruption or delay in the operation of a nuclear power plant and ; could imposo unnecessary regulatory burdens ! upon the NRC that are not related to .! significant safety benefits. l Senate Report No. 97-113, reorinted in 1982 U.S. Code Cong. & Admin. News 3598. Egg also Joint Explanatory Statement of the ; Committee of Conference, reorinted in 1982 U.S Code Cong. & ' r Admin. News 3607 ("These standards [of no signifiv..x hazards consideration] . should ensure that the NRC staff does not .. resolve doubtful or borderline cases with a finding of no j significant hazards consideration.") ; This is, at the very least, a borderline case in which- , the Commission must not rush to Judgment. As Cajun shows herein, ! 3 the operation of River Bend by the thinly capitalized EOI raises , significant safety concerns. Officers of Entergy and EOI have admitted that in the event GSU cannot fully fund EDI operation of ; River Bend, that a River Bend shutdown could occur. Furthermore, j the Federal Reaister Notice indicates that NRC Staff has relied ; upon the no significant hazards consideration discussion provided by Gulf States in its application for the license amendment. Egg ) 1 58 Fed. Reg. 36436 (July 7, 1993). Yet GSU's " discussion" is a ' mere one and two-thirds pages long and consists of nothing but conclusory statements which merely mimic the language contained in the Commission's regulations. Egg Attachment 2 to GSU's January 13, 1993 Application; 10 CFR g 50.92 (1993).
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i Moreover, a hearing in this matter, prior to the j i Commission's decision, will not result in unnecessary disruption or delay in the operation of River Bend. GSU will continue to d operate the plant during the pendency of the hearing. Furthermore, no additional regulatory burdens or delay will be , occasioned by a hearing conducted prior to the Commission's j decision. Other federal and state agencies have not concluded
! their regulatory procedures regarding the proposed Entergy/GSU {
l ! merger. Indeed, the FERC, at a minimum, is many months away from } issuing its final order in the FERC Merger Proceedings. This j i Commission is considering other issues raised by the proposed 1 amendment to the River Bend license. The regulatory process necessary to evaluate the Entergy/GSU merger will not be delayed i t i by a hearing prior to a determination on the crucial safety issues which are the subject of the Commission Notice. 7 i Cajun is an interested party and has standing to ! intervene in this proceeding. Cajun has raised contentions which ; bear upon the requested amendments which are the subject of the j 1 I
)
Commission's Notice. Cajun has properly requested a hearing to *
- address these issues, and therefore a hearing must be held.
Cajun has raised significant safety issues which, particularly l f considering the lack of urgency of this case, require a hearing ) i i to be held prior to Commission action in order to ensure a 4 meaningful opportunity to participate in these crucial safety j
- determinations. Such hearing should be conducted prior to a . {
Commission determination of these issues, ! l
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t l 1 I V. The Operating License Amendment. as Prorosed. May Result In A Sicnificant Reduction In The Margin Of Safety At River O Bend A. The Contractual Framework For Maintainina River Bend j Operation Is Tenuous And Does Not Require Entergy To Guarantee EOI Fundina For River Bend OD_eration As discussed, GSU preposes to transfer the operational
)
duties and obligations for River Bend to EOI. GSU and EOI ; l propose to enter into the Operating Agreement for the provision l of those services by EOI and for payment by GSU. The Operating. i Agreement provides that EOI shall take all actions necessary'to manage, control, possess, use, monitor, repair and decommission, and to take all actions necessary to make capital improvements at l River Bend. See Operating Agreement, 55 1.13, 2.1. Because the Operating Agreement runs only between GSU and EDI, GSU has the , full obligation under the Operating Agreement to compensate EDI for River Bend operation. See id., 5 3.1. Under the Operating Agreement, EDI cannot look to Entergy or Cajun for payment. Related to the Operating Agreement is the River Bend Guarantee Agreement, the parties to which are EOI, GSU and Entergy. Under the Guarantee Agreement, Entergy " guarantees" to be responsible for funding EDI's activities under the Operating Agreement, however that guarantee is in effect only so long as l GSU meets its payment obligations to EOI under the Operating Agreement. This specific exclusion, which makes Entergy's
" guarantee" totally illusory, is clear from Sections 1 and 2 of the Guarantee Agreement:
- 1. Entergy guarantees and agrees to be responsible for the financial ability of Entergy Operations to perform its obligations to Gulf States pursuant to i { said Operating Agreement, so long as Gulf States l
l
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r j 1 l! meets its payment obligations to Entergy
- Operations under the Operating Agreement, and Entergy agrees to guarantee Entergy Operations' ,
ability otherwise to meet its financial : obligations incurred on behalf of Gulf States !
, under the Operating Agreement, so long as Gulf j States meets its payment obligations to Entergy i Operations under the Operating Agreement. l
- 2. This Guarantee Agreement shall continue only for -[
so long as Gulf States continues to meet its ' payment obligations to Entergy Operations as those j s obligations are set forth in said Operating ! Agreement. ; i
- This loophole might not be problematic in a normal :
case, however, in the River Bend situation, it is critical. EOI l 1 is very thinly capitalized. It has no authority to seek external financing and its sole revenue stream related to its operation of i River Bend is GSU's payments under the Operating Agreement. If GSU ceases to make its Operating Agreement payments, Entergy is ; not obligated to financially support EOI,U' and EOI has no other ! sources of funds to maintain safe and reliable operation of River Bend. 1 The possibility that GSU may be unable to fund EOI operations of River Bend under the Operating Agreement is much [; more than an academic concern. GSU faces severe exposure from ! litigation with Cajun and from certain Texas regulatory , proceedings which could render GSU bankrupt and unable to make adequate payments to EOI to maintain safe and reliable River Bend 1 operation. - i i i l 12/ Indeed, Entergy has indicated that it will not financially support EOI in such a circumstance. See page 23, infra. : i r
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i B. GSU's Risks From The Caiun Litication And The Texas Litigation Are Real And Substantial l As the FERC Merger Proceeding reflects, should GSU lose , the Cajun Litigation, GSU, or its future incarnation as a -; I' subsidiary of Entergy, will be bankrupt, with a resultant i substantial detrimental impact on Entergy and its shareholders and ratepayers. Concomitant detrimental impacts could be 1 expected to flow through to EOI, the proposed post-merger operator of River Bend.
- 1. Nature Of The Ca,un Litiaation And Texas Litigation ;
Cajun currently owns a 30 percent undivided interest (282 MW) in River Bend, with a total investment in River Bend of ; approximately $1.6 billion. Under the JOPOA, Cajun and GSU were ! to share costs, expenses and benefits of River Bend in proportion to ownership. GSU is the project manager with the authority and ; obligation to construct, operate and maintain River Bend, subject , to duties, among others, to act in good faith and in Cajun's best 1 interest. On June 25, 1989, Cajun filed a complaint against GSU in the United States District Court for the Middle District of Louisiana, in Civil Action No. 89-474-B (" Rescission Case"). In , that case, Cajun has requested that the JOPOA be rescinded and that damages of at least $1.6 billion be awarded to Cajun, inter alla, because of GSU's misrepresentations of material facts intended to fraudulently induce Cajun to-enter into the JOPOA and obtain REA-guaranteed loans to finance the construction and
]
1 l 1 operation of River Bend. This case is scheduled to go to trial , t
\ in November, 1994. i On November 25, 1992, two of Cajun's Members filed suit !
against GSU in Southwest Louisiana Electric Membershio l Corcoration and Dixie Electric Membership Corocration v. Gulf States Utilities Company, Civil Action No. 92-2129 (U.S.D.C. W D. j La.) (" Nullity Case"). Ca]un is an intervenor in that cace. In , the Nullity Case, plaintiffs assert that the JOPOA is absolutely null since the JOPOA was not submitted to the Louisiana Public j Service Commission ("LPSC") for its consideration, as required by f the LPSC General Order of October 28, 1968. The relief in the
+
Nullity case is the same as that sought in the Rescission case. , Placing additional strains on the GSU/Entergy financial picture is the order of the Public Utility Commission of Texas , ("PUCT") which disallowed approximately $63.5 million of GSU River Bend plant costs and ordered the abeyance of approximately
$1.4 billion of GSU River Bend investment and $157 million of deferred River Bend costs (" Texas Litigation").
- 2. The Imoact Of The Caiun Litigation And The Texas +
Litication Is Substantial The Cajun Litigation and Texas Litigation are of I
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concern not only to GSU/Entergy customers and regulators, but i also to the FERC. The financial impact of the Cajun Litigation and the Texas Litigation was among the few matters affirmatively set for hearing by the FERC. In its Order on Applications issued , on January 28, 1993, the FERC clearly voiced its concerns over j the Ca]un Litigation and the Texas Litigation stating: l t L
i t In addition, Applicants have not adequately addressed ; the impact on costs and rates of-possible adverse 3' judgments which Gulf States faces both in its litigation with Cajun on River Bend"' and litigation j before the Texas Commission involving retail rate I recovery of River Bend costs.'" The costs and ! potential rate impacts of this litigation could affect i Entergy Corporation's risk in capital markets j (reflected in a higher cost of capital borne by i ratepayers); additionally, if Gulf States loses the , litigation, this could result in higher rates to the . Operating Companies' ratepayers if Entergy Corporation seeks to recover the costs in rates."' Gulf States' ! litigation liability in these two cases of $2.4 billion exceeds Applicants' entire quantified projected savings ! from the merger (of SI.7 billion). I 22/ On June 26, 1989, Cajun filed a civil action against Gulf States in the U.S. District Court for i the Middle District of Louisiana. Ca]un stated in i its complaint that the object of the suit is to j annul, rescind, terminate, and/or dissolve the Joint Ownership Participation and Operating i Agreement entered into on August 28, 1979 l (Operating Agreement) related to River Bend ! O because of fraud and error by Gulf States, breach of its fiduciary duties owed to Cajun, and/or Gulf States' repudiation, renunciation, abandonment, or l l dissolution of its core obligations under the j Operating Agreement, as well as the lack or ; failure of cause and/or consideration for Cajun's l performance under the Operating Agreement. The i suit seeks to recover at least Cajun's alleged l
$1.6 billion investment in the unit as damages, plus attorneys' fees, interest and costs. The ,
district court appointed a mediator on March 31, l 1992. A trial date has not been set. Section 203 j Application, Volume 1, appendix C, Gulf States' ' June 30, 1992 SEC Form 10-Q at p. 8 and Gulf ! States' 1991 Annual Report at p. 32. 11/ In 1988, the Texas Commission, among other things, disallowed as imprudent approximately $63.5 million of Gulf States' River Bend plant' costs and placed in abeyance approximately $1.4 billion of Gulf States' River Bend plant investment and $157 million of. deferred River Bend costs. Various appellate proceedings have ensued. Pending resolution of these proceedings Gulf States has made no write-off for either the disallowed costs or the costs placed in abeyance. Section 203 O Application, Volume 1, appendix C, Gulf States'
June 30, 1992 SEC Form 10-Q at pp. 10-11 and Gulf States' 1991 Annual Report at pp. 35-36. O Applicants state that if Gulf States loses its appeal, the company might face a non-cash write-off of approximately S830 million. Louiselle [FERC] Direct Testimony (Ex. BML-1) at p. 31. 11/ As indicated at n.56, supra, Entergy Corporation represents that Gulf States' status as a subsidiary of Entergy Corporation will insulate the other operating Companies from any direct legal liability for Gulf States' obligations and that Entergy Corporation and its subsidiaries will not undertake any direct legal liability on behalf of Gulf States. However, the fact that Entergy Corporation and the other operating company subsidiaries will not undertake any direct obligations on behalf of Gulf States does not mean that they may not be indirectly affected by Gulf States' litigation risks. For example, the potential for an adverse judgment may affect Entergy Corporation's risk in capital markets and, thus. its cost of capital. The cost of capital for the parent, in turn, will affect all of the subsidiaries. 62 FERC S 61,073 at 61,370-371 (1993). Further, even the merger applicants, GSU and Entergy, recognire the substantiality of the Cajun Litigation. First, the rerger agreement itself recognizes that the Cajun Litigation greatly affects the benefits of the merger. Section 8.1(i) of the Agreement and Plan of Reorganization between Entergy and GSU provides, in the event of a Cajun settlement or victory in the Cajun Litigation which adversely affects Gulf States, that Entergy can walk away from the merger. I Indeed, even during the pendency of the litigation, Section B,1(i) provides that if there is a significant ruling or event or j the discovery of a significant fact which materially increases GSU' liability, Entergy can walk away from the merger. Further, the Cajun Litigation is the only specifically named litigation O
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P which can trigger the termination provisions of the merger : i agreement. j i On cross-examination at the FERC hearing, Joseph Donnelly, GSU's President and Chief Executive Officer, testified _ j that the Cajun Litigation is a large risk if lost by GSU. _ , t Additionally, Edwin A. Lupberger, Entergy's Chairman and Chief f Executive Officer, testified that the Cajun Litigation was one of , o the two major risks facing GSU.U' Without going into detail, it , is fair to state that numerous witnesses in the FERC proceeding - testified that the Cajun Litigation constitutes a serious risk to f GSU and to the merged company. , Further, the impact of the Cajun Litigation and the , Texas Litigation was thoroughly examined in the FERC testimony of l l Michael J. Hamilton, a partner in the Public Utilities Industry Services Group of Price Waterhouse. That testimony amply I demonstrates that a judgment / settlement in Cajun's favor, anywhere in the range from $700 million to $1.6 billion, would l drop GSU below investment grade parameters and that a ! judgment / settlement in Cajun's favor in any substantial amount would probably render GSU bankrupt with attendant adverse impacts > on Entergy. Affirmance of the PUCT in the Texas Litigation would l substantially exacerbate GSU's and Entergy's financial l
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deterioration. 1 The Cajun Litigation risks and the Texas Litigation' f a risks are real and substantial. If Cajun prevails in the , litigation, GSU would, most probably, be rendered bankrupt. 11/ The other major risk is the Texas Litigation. I i a I j i
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1 l C. Entergy And EOI Officials Have Testified That A GSU l Bankruotcy Could Result In A River Bend Shutdown l I Reflecting the seriousness of this GSU bankruptcy scenario, coupled with the lack of an. obligation on Entergy to l fund EOI operation of River Bend in the case of a GSU bankruptcy, l Entergy officials made startling admissions at the FERC merger trial. l i Entergy's Chief Executive Officer, Edwin A. Lupberger, testified as follows in response to inquiries regarding Entergy's l willingness to extend its credit to EOI in the event of a GSU f bankruptcy: I Q. If the transfer of [ River Bend] responsibility i back to Gulf States is not accomplished, would i
- Entergy financially back EOI to the extent that j would be required to keep the River Bend Plant l running in a safe enough and efficient manner? f l
A. [Lupberger] I think that is something we would l have to determine at the time. Based on some of l the experiences I have had over the last ten years, if a particular operating entity has l financial problems, the parent has not and does i not have the wherewithal to step in and l financially support that operating company during ; those troubled times,- and our tendency would be ; then to probably safely shut the plant down. ; Q. If you chose to shut the plan down, you would be i
- [re] moving one of your major low energy cost i resources in the Entergy system, would you not? j A. Gulf States would be hard pressed to meet their ;
loads to their customers, but that is what happens i to a bankrupt company. j , i FERC Merger Proceedings, Transcript at 524 (5/12/93).E' I
}
i 12/ On redirect amination, Mr. Lupberger undertook some ; I substantial cack-pedaling by explaining that he did no* consider the shutdown scenario likely. Egg id at 550. 4 5
l Further, Donald C. Hintz, EOI's Chief Executive l Officer, testified that a shutdown could occur in'a GSU i bankruptcy scenario and that the possibility of such a shutdown { is an important safety consideration in NRC licensing l l proceedings: ! t Q. Accept the assumption in your report which you have identified, which is that there is an i inability of Gulf States to pay its cost of' > operation of River Bend, if that were to happen, l would that raise serious issues with the NRC ! regarding the safety of the unit, and could rasult ! in a long-term shutdown of the unit, I have read those words directly from the report? - A. [Hintz] There are things that can be done to : reduce cost beyond what we are projecting and ; still run the plant safely We could run longer l outages and, if you paid no overtime-and did'some 3 things, you probably could run for less doing ; that. I suppose, if there ic no money available, ! 3 the unit could be safely shutdown. L Q. But certainly the NRC, in looking -- f A. [Hintz) And the NRC probably wouldn't'have any l problem with that. ; I Q. With shutting down? ! t A. [Hintz} Yes. ' t Q. The NRC, in evaluating license applications and i evaluating performance of licensees, pays ! attention to the financial health and viability of ! the licensee, does it not? t A. [Hintz] Yes, it does. l Q. That is an important consideration in issuing a ! license? A. [Hintz} Yes, it is. Q. Would it be an important issue to the NRC in whether to modify a license or even take a license away?
- i A. (Hintz] It is a factor that is seriously (f' considered by the NRC in issuing the license.
i h l I l I
=.. . ,
1 4 I Id , at 1065-1067 (5/14/93). The report to which Mr. Hintz was referring was a Ca]un j exhibit in the FERC Merger Proceedings entitled, " System Energy Resources, Inc., Merger Opportunities Study, River Bend Operations and Economic Analysis, May 21, 1990." On page 34 of that study is its analysis of the legal issues: The poor financial condition of [ Cajun], which owns a ! 30% interest in River Bend, and the pending litigation > between [ Cajun] and Gulf States by which [ Cajun] is trying to annul its purchase of its interest in River ; Bend, raise very serious issues _that should be weighed ; I heavily in any decisions made by Entergy Corporation i regarding merger opportunities with Gulf States or [ Cajun]. The inability of either Gulf States or [ Cajun] to pay its costs of operation of River Bend would raise serious issues with the NRC regarding the safety of the Unit and could result in a long-term i shutdown of the Unit. Both Entergy and EOI have identified uncertainties regarding River Bend funding which are safety issues to which the NRC must give serious consideration. L D. The NRC Cannot Make A No Sianificant Hazards Consideration Determination Without Full Analysis Of ! River Bend's Future Safe And Reliable Ooeration [ Based on the current record regarding the future safe and reliable operation of River Bend, the Commission cannot make a no significant hazards consideration determination. In GSU's January 13, 1993 license amendrent [ application, GSU included a one and two-thirds page " discussion" regarding that requested determination. San Attachment 2 to January 13, 1993 Application. That " discussion" merely recitec that no changes to the physical design or operation of the plant ] I will be made and then reaches the bald conclusion that the b proposed change meets the requirements of 10 C.F.R. S 50.92(c)
I k The license amendment application did not even mention f the potential shutdown scenario which the chief executive ; officers of both Entergy and EOI admitted was possible. This shortcoming is fatal to GSU's position that a no significant f i hazards consideration determination should be made. , On this record, the NRC should not issue the requested
.l determination. Rather, the Commission should conduct the hearing l requested by Cajun to determine the level of increased risk to {
River Bend's safe and reliable operation which will be caused by i the proposed license amendment and as argued below, impose conditions which are necessary and appropriate to ensure safe and i reliable operation.of River Bend if the license amendment j i application is granted. ! The requested no significant hazards consideration f i determination should not be made absent such review, hearing and l condition. 1 , I VI. THE LI?ENSE AMENDMENT SHOULD BE GRANTED AND THE' NO SIGNIFICANT HAZARDS CONSIDERATION DETERMINATION SHOULD BE ! . GIVEN. ONLY UPON APPROPRIATE CONDITIONS TO ENSURE THE SAFE .i AND RELI ABLE OPERATION OF RIVER BEND '! If the Commission is disposed to issue the no significant hazards consideration determination and if the f Commission is further disposed to approve the requested license f 1' amendment, the Commission should impose a condition requiring Entergy to indemnify, to extend its credit to, and to otherwise
- i financially support GSU in the event of a C03un victory in the Cajun Litigation or a GSU defeat in the Texas Litigation, or '
i i E I i
, -- - -n - , - -, .n.. , , . . - - - . . .- ,
'l l
[ i require Entergy to fully fund EOI's operation of River Bend to avert a shutdown.U' l t 1 First, such financial backing could avert a GSU bankruptcy which might otherwise occur if GSU must fund a Ca]un i judgment or weather the S830 million write-off in the Texas i i Litigation. GSU, in its 1991 Annual Report to Shareholders, l stated that, in the event of a substantial Cajun judgment, GSU would probably not be able to pay such a judgment and would ! probably have to seek relief from its creditors under the i Bankruptcy Code. This bankruptcy would be accompanied by the attendant uncertainties related to utility bankruptcies and, in , this case, as discussed above, could include the spectre of shutting down River Bend. These results should be avoided and can be avoided by Entergy financially supporting GSU in such an occurrence or by requiring Entergy to fully fund EOI operation of i River Bend in a safe and reliable fashion. Second, when GSU and Entergy entered into the merger { agreement, they were keenly aware that GSU was under a substantial risk in the River Bend case. Indeed, Section 8.1(i) ; of the merger agreement specifically identifies an adverse event in the River Bend case (judgment, ruling, discovery of facts, ' etc.) as an occurrence which could trigger Entergy's ability to walk away from the merger. Since Entergy was fully cognizant of the River Bend risks when it entered into the deal, it should not 11/ This could be accomplished by requiring GSU, Entergy and EDI to amend the Guarantee' Agreement to remove the loophole which currently allows Entergy to avoid funding EOI if GSU ceases payments to EOI under the Operating Agreement. ; r g -
l be able to insulate itself from the impacts of those risks should they become a reality. f i 4 Third, it is clear that Entergy has the legal ability }
}
to indemnify or extend its credit to.GSU or to fully fund EOI to f ensure safe and reliable operation at River Bend, if it so i i chooses or if this Commission so orders. Section,12(b) of the < Public Utility Holding Company Act ("PUHCA") of 1935 provides: ! l It shall be unlawful for any registered holding company I
. directly or indirectly, to lend or in any manner j extend its credit to or indemnify any company in the ,
same holding-company system in contravention of such 1 ~ j rules and regulations or orders as the [SEC] deems ; necessary or appropriate in the public interest or for ! the protection of investors or consumers or to prevent : the circumvention of the provisions of this chapter or ! the rules, regulations, or orders thereunder. l l 15 U.S.C. 5 791(b) (1988). > Clearly, under PUHCA, it is lawful for a holding l t company to indemnify or extend its credit to a subsidiary so long } I as it does not do so in contravention of the applicable rules,
- regulations, and orders of the Securities and Exchange Commission j
("SEC"). ;
' Section 45(a) of the SEC's Rule U provides: I No registered holding company or subsidiary company ;
shall, directly or indirectly, lend or in any manner j extend its credit to nor indemnify, nor make any i donation or capital contribution to, any company in the j same holding company system, except pursuant to a j declaration notifying the Commission of-the' proposed i transaction, which has become effective in accordance j with the procedure specified in S 250.23, and pursuant l to the order of the Commission with respect to such { declaration under the applicable provisions of the Act. j 17 CFR g 250.45 (1993). h 1 Section 23 of Rule U provides, among other things, that I i a declaration filed under 5 12(b) of PUHCA, which complies with j i l t i a
i i l the applicable requirements of PUHCA and the rules and f regulations thereunder, will be come effective by an order which issues upon the expiration of the period prescribed in the notice of filing. 17 CFR S 250.23 (1993). The SEC may order a hearing, , f in which event the declaration does not become_ effective until [ further order. i Therefore, Section 12(b) of the PUHCA and the f regulations thereunder clearly permit a holding company to { guarantee the obligations of a subsidiary. The statute simply j provides that it may not do so in contravention of the applicable J rules of the SEC. The law does not stand in the way of Entergy I i either guaranteeing satisfaction of GSU's contingent liability to l Cajun or in the Texas Litigation, or fully funding.EOI's operation of River Bend, which could be accomplished through an ;
- ~
amendment to Sections 1 and 2 of the Guarantee Agreement to remove the non-GSU payment loophole. Such conditions should be imposed by this Commission if I it is disposed to issue the no significant hazards consideration j determination or approve the proposed license amendment. t VII. CONCLUSION d ; Wherefore, for the foregoing reasons, Cajun Electric ! i Power Cooperative, Inc., respectfully requests that the , Commission:
- 1. Grant Cajun's requested intervention in this proceeding for all purposes;
- 2. Order a full evidentiary hearing to determine whether the requested no significant hazards consideration determination should be granted and whether the requested license amendment to effect i EOI operation of River Bend should be granted; ;
1 i I
1 I
- 3. Impose on the issuance of the no significant
(' ( hazards consideration determination and the approval of the proposed license amendment, a condition which would (a) Jequire Entergy to extend its credit to, indemnify and otherwise l fint..cially support GSU in the event GSU loses the Cajun Litigation or the Texas Litigation, and/or i (b) require Entergy to fully fund EOI operation of River Bend to ensure its safe and reliable operation; and t
- 4. Grant such other relief as the Commission deems ;
appropriate-. Dated: August 6, 1993 Respectfully submitted, Jadis DT Pembroke Janice L. Lower Thomas L. Rudebusch DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C.
1615 M Street, N.W. Suite 800 ' Washington, D.C. 20036 (202) 467-6370 (q ./ Attorneys for Cajun Electric Power Cooperative, Inc. 1 i N l i 1
CERTIFICATE OF SERVICE O I hereby certify that I have this day served the foregoing document upon each person designated on the official service list in this proceeding by U.S. Mail. Dated at Washington, D.C., this 6th day of August, 1993. . i Jafes D. Pembroke : DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C. .
1615 M Street, N.W. ; Suite 800 Washington, DC 20036 (202) 467-6370 , O
--~ 62
+
1 r 1 9 L f APPENDIX C t b I 1 l l l 4 l 1 l
1 t UNITED STATES OF AMERICA BEFORE THE () NUCLEAR REGULATORY COMMISSION r In the Matter of )
)
Gulf States Utilities Company ) Docket No. 50 458
) :
(River Bend Station) ) j CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, AMENDMENT TO ITS PREVIOUSLY FILED COMMENTS, PETITION FOR LEAVE , TO INTERVENE, AND REQUEST FOR HEARING AND CONDITIONS, ON dOTICE OF CONSIDERATION OF ISSUANCE OF AMENDMENT TO FACILITY OPERATING LICENSE, PROPOSED NO i SIGNIFICANT HAZARDS CONSIDERATION DETERMINATION AND OPPORTUNITY FOR HEARING James D. Pembroke Janice L. Lower Thomas L. Rudebusch DUNCAN, WEINBERG, MILLER & -! PEMBROKE, P.C. 1615 M Street, N.W. Suite 800 Washington, D.C. 20036 [*: (202) 467-6370 c, LI End (5, : Attorneys for Cajun Electric Power ; Cooperative, Inc. , Dated: August 17, 1993 0
i TABLE OF CONTENTS , O PAGE i I. INTRODUCTION. ...... . ... . .. .. . 1 II.
SUMMARY
OF ARGUMENT. . .. .. ..... . .. . 2 III. ARGUMENT. .. ........... ... ..... .. . 5 4 A. The Proposed License Amendment Cannot t Be Approved Without Cajun's Consent. .. .. .. . 5 B. The Proposed License Amendment Will Adversely Affect Cajun's Rights Regarding The Operation Of River Bend.. .... ... . .. . 8 C. The River Bend License Conditions Must l Be Enforced... . . .... .. ..... . ....... . 13 ; IV. CONCLUSION.. ........ ... ... ...................... 15 , ( t l i e i I i
~ ,
I 1 l v
l l 1 1 a fs , TABLE OT AUTHORITIES () : CASES Assunto v. Coleman, f 158 La. 537, 104 So. 318 (1925) . . . . . . 8 ! Entergy Services. Inc. and Gulf States Utilities Comranv. FERC Docket Nos. EC92-21-000 and ER92-806-000 . . 2 Caiun Electric Power Coonerative. Inc. v. Gulf States Utilities Comoanv, 59 FERC (CCH) 1 63,024 (1992) . . . . . . . . 15 C.a,un Electric Power Coouerative. Inc. v. Gulf States Utilitias Company, No. CCV- 8 'd -2 2 9 4 (W.D. La.) . . . . . 15 Caiun Electric Power Ccenerative. Inc. v. Gulf States llities Cercany, No. 89-474-B (M.D. La.) . . . . . . . 13 Fowler v. Phillies. 159 La. 668, 106 So. 26 (1925) . . . . . . . . . . 6 ; Hobson v. Peake, L 44 La. Ann. 383, 10 So. 762 (1892) . . . . . . 8 ;
~
Landreneau v. Granger, 401 So. 2d 634 (La. App. 1981) . . . . . . . . . . . . 6 Marchand v. Gulf Refinino Co., 187 La. 1002, 175 So. 647 (1937) . . . . . . . . 6 Montaomerv v. Foreman, 410 So. 2d 1160 (La. App. 1982) . . . . . . . . . . . 7 Neal v. Daniels, 217 La. 679, 47 So. 2d 44 (1950) . . . . . . . . . . 8 Noe v. Roussel, . 310 So. 2d 806 (La. Sup. 1975) . . . . . . . . . . . . 7 Robinson v. Commercial Cattle Co., 82 So. 2d 108 (La. App. 1955) . . . . . . . . . . . . 8 i Robinson v. Hunt. et al., l 211 La. 1019, 31 So. 2d 197 (1947) . . . . . . . . . . 7 ; Southwest Louisian Electric Membershin Cornoration v. Gulf States Utilities Comnany, {"' ~ No. 92-2129 (W.D. La.) .. . . . . . . . . . .
. . . . 13 11 i
I i 1 l l r O- STATUTES / REGULATIONS I l l
.I La. C.C. art. 1950 (1992) . . . . . . . . . . . . . . . . 7 l
$ La. C.C. art. 3028 (1992) . . . . . . . . . . 7 : 3 1 10 C.F.R. 5 2.714(a)(3) (1993) . . . . . . . . . . 2 ] 2 i f 2 I i i
?
4 h f a l i i O i 1
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1, A e 1 I l l O 111 i l i I
.- .. =-. _.
i f i L UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION In the Matter of ) ;
) i Gulf States Utilities Company ) Docket No. 50-458 :
) !
(River Bend Station) ) , CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, AMENDMENT TO ITS PREVIOUSLY FILED COMMENTS, PETITION FOR LEAVE TO INTERVENE, AND REQUEST FOR HEARING AND CONDITIONS, ; ON NOTICE OF CONSIDERATION OF ISSUANCE OF AMENDMENT TO FACILITY OPERATING LICENSE, PROPOSED NO i SIGNIFICANT HAZARDS CONSIDERATION DETERMINATION
- AND OPPORTUNITY FOR HEARING !
I. INTRODUCTION ! On August 6, 1993, Cajun Electric Power Cooperative, l t Inc. (" Cajun"), timely filed its Comments, Petition for Leave to ; O Intervene, and Request for Hearing and Conditions, on Notice of I i Consideration of Issuance of Amendment to Facility Operating License, Proposed No Significant Hazards Consideration
)
Determination and Opportunity for Hearing (" Comments"). In its i i Comments, Cajun noted that it would raise additional matters with .; I the Commission regarding the proposed amendment to the River Bend Operating License NPF-47, which is intended to effect the transfer of operational responsibilities for River Bend from Gulf j States Utilities Company ("GSU") to Entergy Operations, Inc. l ("EOI"). Egg Comments at page 5, n.5; page 9, n.6; page 10, n.7. ) i Rather than awaiting the issuance of any further Notice .) l by the Nuclear Regulatory Commission ("NRC" or " Commission"), l O e md
- W
l
)
l l : Cajun hereby amends its Comments to place before the Commission ( the full panoply of its concerns regarding the proposed license amendment. Thus, in accordance with 10 C.F.R. 5 2.714(a)(3) ) l (1993), Cajun files this amendment to its Comments. , In addition to the matters raised in its Comments, 1 ' 1 Cajun argues here: l (1) The proposed license amendment cannot be approved without Cajun's consent and Cajun has not given its consent; f (2) The proposed license amendment cannot be approved due to its adverse impacts on Cajun's rights
- regarding the operation of River Bend; and (3) GSU and EOI should be required to comply with the i current River Bend license conditions.
() II.
SUMMARY
OF ARGUMENT t As more fully discussed in Cajun's Comments, Cajun and GSU are joint owners of River Bend, with Cajun owning a thirty percent interest and GSU owning the remaining seventy percent. River Bend is owned and operated under the terms of the Cajun /GSU l l Joint Ownership, Participation and Operating Agreement ("JOPOA") dated Av. gust 28, 1979.1' 1/ The JOPOA is attached as Exhibit CJN-2, Schedule 1, to the testimony of David L. Mohre, Cajun's Executive Vice l President and Chief Executive Officer. This testimony was j' filed on March 24, 1993, in the related merger proceeding before the Federal Energy Regulatory Commission ("FERC") in Enterov Services. Inc.. and Gulf States Utilities comoany, FERC Docket Nos. EC92-21-000 and ER92-806-000 ("FERC Merger Proceedings") and was attached to Cajun's Comments, Petition for Leave to Intervene and Request for Hearing and Conditions on Applications for Approval of Transfer of (continued.. ) _() i l \ k
GSU proposes to merge with the Entergy Corporation j ("Entergy") and, by entering into the Entergy System Agreement, will become an operating company of Entergy, along with Louisiana 1
,1 I
Power & Light Company, Mississippi Power & Light Company, l s Arkansas Power & Light Company and New Orleans Public Service, { l Inc. As part of the merger plan, GSU proposes to amend the River f Bend Operating License, NPF-47, to include EOI as a licensee with : operational responsibility for River Bend. In addition to the health and safety concerns raised by i I Cajun in its Comments, Cajun raises three additional matters here e with regard to the proposed license amendment.E' ! First, GSU has submitted the proposed license amendment purportedly on behalf of, and as agent of, Cajun. GSU's agency l authority does not extend to this proposed license amendment which restructures the entire relationship of Cajun with regard j 1 to the operation of River Bend. Since the proposed license amendment falls outside the parameters of the agency granted to GSU under the JOPOA, Cajun's consent to the license amendment l must be sought and obtained. Cajun does not consent to the license amendment in its current form. t I i 1/(... continued) i Ownership: filed with the NRC by Cajun on April 26, 1993, in l Docket No. 50-458. l 2/ On April 26, 1993, Cajun filed its Comments, Petition for l l Leave to Intervene and Request for Hearing and Conditions on l GSU's Application for Approval of Transfer of Ownership. , That pleading contains additional concerns related to the ! overall merger transaction, including its impact on competition and on Cajun's power supply activities. ! l t i 1 l l l I
a _ .,L__-L--- - - A _ . - J; 4 a.-J l -< - I . Second, the proposed license amendment should be rejected since it totally restructures the operational regime of ( River Bend. Currently, Cajun has direct contractual relations ; I with the River Bend plant operator, GSU. If the license < amendment is granted, GSU will be a barrier between Ca]un and EOI, the proposed River Bend operator. Ca]un will have no direct f contractual privity with EOI. Further, and more problematic, EDI, in concert with GSU, will make decisions regarding the ;. operations of River Bend as part of a multi-state, multi-nuclear j l unit system which may not have GSU's interests, and certainly not Cajun's interests, as its prime concern. l Third, GSU currently is taking actions which are in > violation of its current River Bend license conditions. In l litigation involving Cajun and River Bend, GSU is seeking to have i declared void the contract pursuant to which GSU provides transmission services to Cajun. Such action violates River Bend ! I license condition 10, which requires GSU to transmit power on . behalf of Cajun, among others. Further, GSU's refusal to provide certain delivery points for Cajun violates River Bend license condition 12. In brief summary, the license amendment application should not be approved absent Cajun's consent and only upon ; i proper condition to ensure that Cajun's rights as a thirty percent owner of River Bend are fully protected.
i 5- :
- i III. AFouMrNT {
A. The Prorosed License Anendnent Cannet Be Arproved .i Without Ca,un's Consent. i As can be seen from GSU's filing, GSU submitted its i license transfer application (REEXEC-93-035) on its own behalf and, purportedly, on behalf of Cajun. Under the JOPOA, GSU can ! i act as Ca3un's agent and take actions on behalf of Cajun, only where GSU's judgment and discretion have not been exercised l unreasonably. Egg JOPOA, 5 4.1. Ca]un asserts that GSU's ! judgment and discretion havc not been exercised reasonably (and particularly not with reference to Ca]un's inuerests) in GSU's { application to amend the operating license and transfer operational responsibility for River Bend to EOI as proposed i herein. As more fully described in Section III B, infra, the ; i primary flaws in the proposed plan for operation of River Bend after the license amendment are that GSU will be a barrier l [ between Cajun and the proposed plant operator, EOI, and that the ; plant may no longer be run in the best interests of GSU and, purportedly, Cajun; it will be run in the best interests of the j Entergy System. Cajun has therefore notified GSU that this l attempted exercise of its agency authority is improper and ineffectual. Indeed, under Louisiana law,l' G3U's authority to act as Cajun's agent in this regard no longer exists. r The agency' language included in the JOPOA, while broad, does not appear to fall within the narrow definition of the irrevocable agency condition known as a " mandate coupled with an_ ; 1/ The JOPOA is to be interpreted under Louisiana law. See JOPOA, g 6.14. j l l l
interest" [ecognized by the law of Louisiana, which could, ( possibly, allow GSU to file the license amendment without Cajun's consent. To have a mandate (agency) coupled with an interest, the agent must be given, by the principal, an interest in the property that is the sub3ect of the mandate, such that the agent may deal with the property in its own name. Marchand v. Gulf Refining Co., 187 La. 1002, 1009, 175 So. 647, 650 (1937); Fowler
- v. Phillips, 159 La. 668, 693, 106 So. 26, 28 (1925) l Louisiana courts have held that even where, as here, the agency i contract stated that it was coupled with an interest and irrevocable, the agency was still revocable. Landreneau v. :
l Granger, 401 So. 2d 634, 638 (La. App. 1981) ("Although the power of ettorney and management contract contains language designating i the agreement as a mandate coupled with an interest and that it is irrevocable, such language is of no legal effect", where no interest in the property itself was conveyed); Marchand, 187 La. at 1009, 175 So. at 649 ("The fact that it was stipulated in the mandate that it was irrevocable could not avail since the very t nature of the transaction s! tows that no interest in the property } itself was conveyed.") Thus it is clearly established that, f regardless of language to the contrary in the JOPOA, where the [ agency contract provides that the agent does not have the right : I or power to deal with the property in its own name, but only as agent, and where the agent was given no power to alienate or i mortgage the subject property (Cajun's share of River Dend), there is no irrevocable mandate or agency. If GSU's mandate is l f t i i
-7 -
not coupled with an interest, it is revocable at will. La. C.C. } Art. 3028 (1992). l Even if the agency is coupled with an interest, the i Louisiana courts have held that it is nonetheless revocable for l cause. Robinson v. Hunt et al., 211 La. 1019, 1061, 31 So. 2d , 1 197, 211 (La. Sup. 1947). Even where there is an interest in the agent, of a high enough level, that derives from the contract ' rather than a property interest, as where the contract is a [ bilateral agreement or the agency is granted as a condition of , the contract, the agency can be revoked for cause. Montgenery v. Foreman, 410 So. 2d 1160, 1167 (La. App. 1982). i A change in the basic conditions motivating the agent i (here, GSU) may serve as the required "just cause." Cf. La. C.C. j Art. 1950 (1992), and Comment thereto. Obviously here, with GSU's proposed change in ownership and membership in the Entergy system, the conditions motivating GSU have changed dramatically. l Thus, GSU's mandate may be held to have terminated when GSU sought to serve its own private interest that is totally l inconsistent with the interests of its principal, Cajun. The standard to which GSU is held as agent in the JO'POA is good faith and good utility practice. JOPOA 3 4.2. GSU has failed that
- standard, and that failure is "just cause" for the termination of the agency.
Louisiana law provides that an agent may not lawfully serve or acquire any private interest that is in opposition to the interest of its principal. Noe v. Roussel, 310 So. 2d. 806, 819 (La. Sup. 1975) (" . . the agent or fiduciary may not take I i
even the slightest advantage, but must zealously, diligently, and honestly guard and champion the rights of his principal against all other persons whomsoever, and is bound not to act in 1 antagonism, opposition or conflict with the interest of the principal to even the slightest extert."); Robinson v. C o r r.e r c i a l Cattle Co., 82 So. 2d 108, 111 (La. App. 1955); Neal v. Daniels, 217 La. 679, 682, 47 So. 2d 44, 45 (1950); Assunto v. Coleran, 158 La. 537, 540, 104 So. 318, 319 (1925) (" . an agent owes the utmost fidelity to his principal and cannot acquire any , interest adverse to him."); Hobson v. Peake, 44 La. Ann. 383, 388, 10 So. 762, 764 (1892). One effect of acquisition of an adverse interest (by, as here, requesting a change in the license that will directly place at risk Cajun's interests and Cajun's operations) is to terminate the agency No other result is equitable or logical; Cajun did not transfer any ownership or i other interest to GSU at the time it agreed to the JOPOA, and 1 Cajun certainly did not agree to GSU's actions as agent that , would be contrary to Cajun's interests. , Cajun states unequivocally that the license amendment request has net properly been made on Cajun's behalf, that , Cajun's consent to the license amendment has not been obtained, and that Cajun opposes the license amendment application as proposed by GSU. ; i B. The Procesed License Amendment Will Adverselv Affect I Caiun's Richts Recardine The Oceration Of River Bend. GSU has requested approval by this Commission of the license amendment which will be implemented by the arrangements O i
i under whic6 EOI will operate Rive. Bend for GSU. These arrangements are proposed to be implemented by agreements which l Include the GSU-EOI Operating Agreement, the GSU-EOI Support Agreement, the GSU-EOI Switchyard and Transmission Interface ! Agreement, the GSU/EOI/Entergy Corporation Guarantee Agreement , and the GSU/Entergy Services, Inc., Service Agreement. i GSU's and EOI's (" Applicants") proposal for the , operation of River Bend is in derogation of Cajun's rights under i the Cajun /GSU JOPOA. Any approval by the Commission of Applicants' arrangements must be conditioned to protect Cajun's rights as a thirty percent co-owner of River Bend. As described in the FERC Testimony of David Lee Mohre,1' Cajun's Executive Vice President and Chief Executive Officer, GSU's and Cajun's obligations are currently defined by l the JOPOA. The Applicants propose to effect the transfer of River Bend operational responsibility to EOI through the license amendment request and the proposed agreements enumerated above. Obviously, if EOI becomes the operator of River Bend, the i relationship between GSU and Cajun will change significantly and fundamentally. Whereas the JOPOA provides for a considerable and significant direct relationship between the co-owner of the facility, Cajun, and the project manager or operator of the l facility, GSU, the agreements proposed by the Applicants to i i enable EOI to operate River Bend insert GSU as a non-operating j i 1/ To Cajun's knowledge, none of these agreements has been formally presented by GSU to this Commission for its review. ]i 1/ ERR footnote 1, suora. j i I
i owner betwsen the operator, EOI, and Cajun. Indeed, Ca3un has no direct contractual privity with EOI. This relationship, very different from that which Cajun negotiated, is totally unreasonable and is not in accordance with the JOPOA or good utility practice. Egg Mohre FERC Testimony at 6-10. The proposed agreements change the rights for which ; Cajun bargained. They would change GSU from an operator-owner to simply an owner. GSU will no longer be making decisions on an Independent basis, serving the interests of GSU and, purportedly, Cajun as joint owners of River Bend. Rather, the decisions will f be made by EOI, with input from GSU as a member of the Entergy system and a party to the Entergy System Agreement. GSU will no f longer be accountable to a board of directors whose primary goal is to protect the interests of Gulf States. If the merger is - consummated, GSU will be accountable to a board of directors which must consider the interests of the five operating companies and numerous other subsidiaries. Further, if GSU becomes a party ; to the Entergy System Agreement, as proposed by the Applicants, the Entergy Operating Committee, rather than GSU, will make [ critical decisions regarding loading criteria for River Bend, , additions or changes in facilities related to production i requirements, refueling outages, and system dispatching and switching. The economic convergence of interests between GSU and Cajun assumed under the JOPOA will no longer exist. Egg id. l i Further, the proposed River Bend arrangement, l particularly the proposed GSU-EOI River Bend Operating Agreement l which is attached to Mr. Mohre's FERC Testimony as Exhibit f I h 4 7 +
CJN-2, Schsdule 2, and attached to Cajun's April 26, 1993 pleading before this Commission, would have the following additional detrimental impacts on Ca]un:
- 1. It would undermine Cajun's current rights with the plant operator since Ca]un will have no direct contractual ,
privity with EO!;
- 2. It would impair Ca]un's rights of access to auditors, INPO audits, and key reporting data on the plant since such rights run only to Gulf States. Egg Operating Agreement, SS 5.1, 54, and 5.9;
- 3. Co-owner approvals of budgets, capital projects, and major undertakings are not addressed; rather the proposed arrangement appears to structure a
" blank check" approach for EOI and GSU to access Cajun's money. Egg Operating
- Agreement gg 3.1, 5.1, and 5.2; ;
- 4. Relationships with and among Entergy affiliates are ill-defined and could be O costly to Cajun. One example of this is in the scheduling of outages. Another is in the area of allocation of costs.
I Egg Operating Agreement, gg 2.1, 2.5, and 5.1; Entergy System Agreement, ; 5 4.08; '
- 5. Administrative, general, and other costs f to Cajun would be expected to increase with the imposition of GSU between the {
operator and Cajun; and l
- 6. The proposed arrangement substantially ['
limits EOI's liability to actions which constitute " Gross Negligence or Willful Misconduct." Egg Operating Agreement, , Article VI. , Egg 14. at 9-10. , t As noted, und.t the JOPOA, GSU lacks auth;1 1ty to l execute the proposed River Bend agreements as Cajun's agent, to r the extent it would be cont ary to good utility practice, b
- 12 -
j unreasonable, or show absence of go:e.: faith. The proposed () agreements violate each of these conditions; therefore, GSU lacks authority to execute them as agent on behalf of Ca]un. Despite these substantial problems with the mechanisms - i proposed by GSU to effect the transfer of operating responsibilities from GSU to 60!, Cajun does not necessarily ; oppose the requested license amer..iment related to EOI operation. The Applicants have claimed that transfer of operational responsibility to EOI will result in cost savings which will inure to Cajun's benefit, at least in part. Cajun hopes that cost savings are a result of any license amendment. As the Commission is aware, River Bend's operation and maintenance costs and administrative and general costs are among the highest of any nuclear unit in America and ( are consistently and substantially higher than any other comparable prudently run single unit boiling-water reactor. Egg Mohre FERC Testimony at 11-12 and Ex. CJN-2, Schedule 5, attached thereto. Thus, Cajun hopes that the purported savings _ occur if the merger and requested license amendments are approved. However, such approvals should be made only upon the' imposition of conditions adequate to protect Cajun's interests as a thirty percent co-owner of River Bend. These license conditions would include, among others:
- 1. The agreement pursuant to which EOI will operate River Bend must be a tripartite agreement among j GSU, EOI and Cajun;
- 2. EOI must be the direct agent of Cajun, equally and without preference or prejudice in favor of GSU;
(
- 3. EOI must be directly liable to Ca]un under a reasonable liability standard; s
- 4. Cajun must have meaningful input into decisions related to maintenance and fuel outages, budgets,
- capital improvements and major maintenance items;
- 5. Cajun must have access to EOI records, meetings I and decisions affecting operations, maintenance or scheduling of River Bend; )i
- 6. EOI should submit regular reports to Ca]un and i provide copies of all communications and documents submitted by EOI to the NRC, SEC, or other i governmental agencies regarding River Bend or affiliate transactions involving EOI's nuclear I management or cost allocations;
- 7. Cajun should have access to INPO documents and be able to attend INPO meetings; and
- 8. Other conditions appropriate to protect Cajun as a thirty percent minority owner of River Bend.
i These conditions are the minimal conditions needed to protect Cajun in these circumstances. Particularly in light of i the expansion of the protection of nuclear plant minority owners' interests, these conditions are appropriate and necessary. C. The River Bend License Conditions Must Be Enforced As the Commission is aware, there are two pending 5 lawsuits which may dramatically affect Ccjun's ownership in River , Bend. In the first case, Caiun Electric Power Coonerative. Inc.
- v. Gulf States Utilities comoany, No. 89-474-B, United States .
- District Court for the Middle District of Louisiana, Cajun seeks {
rescission of the JOPOA and damages in the amount of, at least,
$1.6 billion based upon, among other matters, alleged fraud in f inducing Cajun to enter into the JOPOA. In the second case, i Southwest Louisiana Electric Membershio Corporation. et al. v.
I Gulf States Utilities Comrany, No. 92-2129, United States ! I
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District Court for the Western District of Louisiana, similar relief is sought, i.e., a determination that the JOPOA is a j nullity since GSU failed to obtain necessary approvals from the i Louisiana Public Service Commission. l I In this litigation, Gulf States-is seeking to have the Ca]un/GSU Power Interconnection Agreement (" PIA") and related i service schedules declared vold by the court. The PIA is the , l contract pursuant to which, among other things, GSU provides > f Cajun with transmission services. This action, seeking to have the PIA declared void, is in direct conflict with NRC license condition 10, appended hereto as Attachment A. That license condition requires GSU to transmit power over its system on behalf of utilities engaging in bulk power supply in GSU's service area. The Commission should evaluate this condition of the River Bend license in its consideration of the public interest aspects of the merger and amendment, and should inquire of the Applicants whether, if the merger is consummated, GSU will ; i cease its attempts to have the Cajun /GSU PIA and related service ! a schedules declared void. Under license condition 12, appended hereto as Attachment B, GSU is obligated to sell power for resale to any entity engaged in retail distribution of electric-power where l such power is not available from alternative resources at j I competitive costs GSU has refused to provide certain delivery l points which are necessary for one of Cajun's distribution l cooperative Members to supply power to two large industrial E
i customers.F This refusal is in violation of River Bend license condition 12, and this violation should be set for hearing as ; part of this license amendment proceeding. IV. CONCLUSION KHEREFORE, for the foregoing reasons and for the reasons stated in Cajun's August 6, 1993 Comments, Ca]un . t respectfully requests that the Commission:
- 1. Grant Ca3un's requested intervention in this proceeding for all purposes;
- 2. Order a full evidentiary hearing to determine I
whether the requested no significant hazards consideration determination should be granted and whether the requested license amendment to effect EOI operation of River Bend should be granted;
- 3. Impose on the issuance of the no significant hazards consideration determination and the approval of the proposed license amendment, a condition which would (a) requ' ire Entergy to extend its credit to, indemnify and otherwise financially support GSU in the event GSU loses the Cajun Litigation or the Texas Litigation, and/or (b) require Entergy to fully fund EOI operation of River Bend to ensure its safe and reliable operation; ,
- 4. Approve the proposed license amendment only upon Cajun's consent;
- 5. Approve the license amendment only upon 4 conditions, described herein, which are adequate to protect Cajun's interests as a thirty percent ,
owner of River Bend; ! 1/ Cajun has complained to the United States Courts and to FERC i that GSU is in violation of the antitrust laws and in breach of its PIA obligations in refusing to establish such delivery points. Egg Caiun Electric Power Coouerative. Inc.
- v. Gulf States Utilities Comoany, No. CV-89-2294 (W.D. La.),
appeal pending; Caiun Electric Power Coooerative. Inc. v Gulf States Utilities Comeanv, 59 FERC (CCH), T 63,024 (1992), pending on requests for rehearing.
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- 6. Order that GSU and EOI fully comply with River Bend license conditions 10 and 12, as requested O herein; and I
- 7. Grant such other relief as the Commission deems ;
appropriate. Dated: August 17, 1993 Respectfully submitted, A L Jaditis D. Peinbroke Janice L. Lower Thomas L. Rudebusch DUNCAN, WEINBERG, MILLER & PEMBROKE, P.C. 1615 M Street, N.W. Suite 800 Washington, D.C. 20036 (202) 467-6370 Attorneys for Cajun Electric Power Cooperative, Inc. ; O . r E i l O !
m .a- 4 am -.m sr .m e 1
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s i d h I P 4 ATTACHMENT A ! l 8 4 ! f I i ! l 1 6 a 'l [ i 9 I 4 e
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( O entity. This provision shall not be construes to reevire G5U to pur-chase or sell bulk power if it fines such purchase or sale infeastale er its costs benefits in connection with such purthese or sale would exceed its therefr58. (9) G50 and any successor in title, shall offer an opportunity to partici-pata in River Send Station. Unit I for the tars of the instant license, or any extensions or renemals thereof, or such shortar ters as G5U anc ! the participant (s) may snitually agree upon, to any entity (tes) in er ! within reasonable premietty to $50's service area in the State of ! Loutstana which has in writing requested participation therein prior to ' March 1,1974, ans etch no later tAan March 31, 1975 has enterne into
~ 1 any executory contract with respect to such participation, having taken all necessary action for it to lawfully es so prior to so doing to a fair and reasonable extent and on reasonaale terns and conditi a basis that will fully compensate 55U for its costs incuned and to := i Incurred ting andnuclear of this that willunit.
not adversely affect the financing and construe. i E5U shall steitartroffer an opportunity to : participate in any additional nuclear generating unit (s) the power frUm I 1 which is intended for use in 65U's general system operations, which G5U may construct, own, and operate in Louisiana during the ters of the instant license (s), or any extension (s) or renanal(s), thereof. ( Participation shall be either by ownership of or purchase of unit par-ticipation power from the respective nuclear units. Participation in ; O any form shall be on an equitable basis whereby the participants. In proportion to theirunits. interests, share fully in all cents and risks of the { respective nuclear ; In connection with such participation. 65U i will offer transmission service as any be required for delivery of suco for its costs. power to such participant (s) en a basis that will fully cospensate G t (10) G5U shall facilitate the esshange of bulk power by transmission over itsi . ; transmission facilities between the or more entities engaging in bulk ;
- power supply in its service area in Leuttians with which it is inter- ;
1-connected; and between any such entity (ies) ans any entity (ies) engaging : in bulk power supply outside 83U's senica area in Louisiana between whose facilities 65U's transatssion lines and other transmission lin! would form a costinuous electrical past provided that (1) permission to ; utilise seen other transmission lines has been etteined by the entities .! tavelved; (11) $$U has appropriate agreements for transatssion service witA the entities interconnected with S$U at both the receiving and ' delivery potats en 45U's systas; and (111) the arrangements reasonably can be accessedated from a functional and technical stenspoint. Such transmission shs11 he on teres that fully coepensate SSU for its cost. Any entity (tes) requesting such transmission arrangements shall give reasonable aevance notice of its (their) schedule and requirements. ( (The to whichforegoing 650 an applies to any entit,y(its) engaging in bulk power supply wich it is no.y be interconnected in the future as well at.those to O intarconnected). n - - - . . - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ . _
1 A' 4 ATTACHMENT B
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l I l
__ _~ . .- . _ . . - . - . . - . - - _ _ - - _ _ _ - J
-4. I 4
, (11) 65U shell inc]vde in its planninf and construction program sufficient i transmission capacity as required for the transactions referreg ta in j paragraph (10); provided, that any entity (tes) in its service arsa in . Louisiana gives $$U sufficient advanca notica as may be necessary to i accommodata its (their) retirements fras a functiceal and technical I stanepcint and that such entity (tes) fully campensata 65U for its cost, ! ESU shall not be remired to constrvet transatssion facilities unica i w111 be of no demonstraele prosent or future benefit to G50. (12) G5U will sell power (den available) for resale to any entity (tes) in its i service area in Louisiana now engagtag in or proposing te good faith to : engage in rttail distribution of electric power. vnenever power to meet the needs of such entity (ies) is not available from alternata sourcas at , ! competitive costs. ! i (13) The foregoing conditions shall be in all respects implemented en ressen-
. able terum and conditions in a manner consistant with the provisions of
..- the Federal Power Act and other applicable Federal and Stata laws ane .
E~~ regulatory creers and shall be subject to force majeere. applicable cur- , ! tailment programs, and engineering and technical feasibility for 65U's-systas. None of the fortgoing canditions shall require 650 ta sell j power. perform any service or engage in any course of action on a basis i weich would be unlawfully preferential or discriminatory under any applicable law or that would ispair 650's ability to render aceouata see ( reliable service to its sua customers. All rates, charges or practicas in connection therewith are to be subject to the approval of rtgulatery I agencias having jurisdiction over them. t J v i e h i l
- l k
i O : I
I
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CERTIFICATE OF SERVICE l i I hereby certify that a copy of the foregoing document, was served upon the attached service list by United States Mail, postage prepaid, this 17th day of August, 1993. , l J a tf:15s D. Pembroke l l l I I I 1 i 1 i 1 1 l l 1 1 1 i 1 l
e David N-. Carne A.J. Rowe & Asso., Inc. O Gene Sweat Farmers Electric Coop. Corp. Post Office Box 400 4312-D Evergreen Lane Newport, AR 72212 Annadale, VA 22003 Cathern Wilkins, Gen. Manager Zachary D. Wilson, Esq. N.L.R. Electric Department Attorney at Law P.O. Box 159 321. Maple Street No. Little Rock, AR 72119 Post Office Box 5578 No. Little Rock, AR-72119 (ACC) Mayor Dickie Kennemore Edwin J. Reis City Hall NRC, OGC Post Office Box 443 One White Flint North
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Osceola, AR 72370 11555 Rockville Pike Room 15 D5 Rockville, MD 20852 Mayor James Johnson John Schwab, Esq. City Hall Schwab & Walter Post Office Box 676 10636 Linkwood Court Prescott, AR 71857 Baton Rouge, LA 70810 U.S. Nuclear Regulatory Larry Stockton Commission City Hall Office of the General Counsel Post Office Box 676 11555 Rockville Pike Prescott, AR 71857 Room 17 A2, 17A3 Rockville, MD 20852
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t Wallace E. Brand, Esq. Victor J. Elme. , Melvin G. Berger, Esq. Vice President - Operations ! Os Sean T. Beeny, Esq. Brand, Beeny, Berger & Whitler Ca]un Electric Power Cooperative, Inc. l 1730 K Street, N.W., Ste. 1000 10719 Airline Highway ; Washington, DC 20006 Baton Rouge, LA 70895 ; (LEPA) , i Philip P. Graham, Vice President James D. Pembroke, Esq. Gulf States Utilities Company Jannice L. Lower, Esq. { 5485 U.S. Highway 61 Thomas L. Rudebusch, Esq. ! Post Office Box 220 Duncan, Weinberg, Miller St. Francesville, LA 70775 & Pembroke, P.C. : 1615 M Street, N.W., Ste. 800 Washington, DC 20036 , 4 Cecil L. Johnson, Esq. Mayor Jim Presnall Vice President - Legal Services City Hall : Gulf States Utilities Company Post Office Box 607 350 Pine Street Benton, AR T2015 Beaumont, TX 77701 i I t J.A. Bouknight, Jr. (Esq.) John Walden i Newman & Holt:Inger, P.C. City Hall 1615 L Street, N.W. Post Office Box 607 > Suite 1000 Benton, AR 72015 Washington, DC 20036 (Entergy) ; i e Joseph B. Knotts, Jr. Bill Hegeman l Mark J. Wetterhahn Conway Corporation 1400 L Street, N.W. Post Office Box 99 l Washington, DC 20005-3502 Conway, AR 72015 (GSU) s i - ~ ~
9 r [ David R. Hunt, Esq. Robert Weinberg, Esq. , Ross, Hunt, Spell & Ross Michael A. Postar, Esq. Post Office Box 1196 Charles A. Braun, Esq. ; Duncan, Weinberg, Miller : 123 Court Street Clarksdale, MS 38614 & Pembroke, P.C. i (MEAM) 1615 M Street, N.W., Ste. 500 - Washington,HDC 20036 (SMEPA) i 1 t Robert C. McDiarmid, Esq. ' Bonnie S. Blair, Esq. James N. Compton, Esq. , Spiegel & McDiarmid Compton, Crowell & Hewitt ! 1350 New York Avenue 146 Porter Avenue , Suite 1100 Post OTfice Drawer 1937 Washington, DC 20005-4798 Biloxi, MS 39533 [ (MEAM) f Earle H. O'Donnell Stephen Page Danie' Judith A. Center J. Bertram Solomon i Dewey Ballantine GDS Associates, Inc. i 1775 Pennsylvania Ave., N.W. 1850 Parkway Place, Washington, DC 20006-2605 Suite 720 l (OCC) Marietta, GA 30067 l I i Anthony G. Tummarello Don A. Ouchley, P.E. l Director of Energy Frank D. Ledoux, P.E. Occidental Chemical Corporation Lafayette Utilities System ) 5005 LBJ Freeway Post Office Box 4017-C l Dallas, TX 75244 Lafayette, LA 70502 f i John Carley, Manager Daniel Guttman, Esq. Corporate Planning & Operations Spiegel & McDiarmid So. Mississippi Elec. Power Asso. 1350 New York Ave., N.W. 6401 Highway 49 North Suite 1100 P.O. Box 1589 Washington, DC 20005-4798 Hattiesburg, MS 39401 (Lafayette,ELA) Wallace E. Brand, Esq.
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