ML20057A989

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Transcript of 930915 Hearing in Bethesda,Maryland Re Petition to Intervene on Two License Amends Involving River Bend Plant.Pp 1-88.Related Documentation Encl
ML20057A989
Person / Time
Site: River Bend Entergy icon.png
Issue date: 09/15/1993
From:
Atomic Safety and Licensing Board Panel
To:
References
CON-#493-14330 93-680-04-OLA, 93-680-4-OLA, OLA, NUDOCS 9309170035
Download: ML20057A989 (90)


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OFFICIAL TRANSCRIPT OF PROCEEDINGS

?

i Agency:

Nuclear Regulatory Commission Gulf States Utilities Company

Title:

(River Bend Station, Unit 1)

Docket NO.

50-458-OLA and ASLBP No.

93-680-04-OLA O

I i

1 LOCATION:

Bethesda, Maryland DATE:

Wednesday, September 15, 1993 PAGES: 1 - 88 16110"!

O

(

ANN RILEY & ASSOCIATES, LTD.

/) h i h 1612 K St., N.W., Suite 300 Washington, D.C. 20006 f

9309170035 930915 (202) 293-3950 PDR ADOCK 05000458 l

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1 1

BEFORE THE 2

UNITED STATES OF AMERICA 3

NUCLEAR REGULATORY COMMISSION 4

-X Docket No.

5 In the Matter of:

50-458-OLA 6

GULF STATES UTILITIES COMPANY ASLBP No.

7 (River Bend Station, Unit 1) 93-680-04-OLA 8

-X 9

Nuclear Regulatory Commission 10 Fifth Floor Hearing Room 11 4350 East West Highway 12 Bethesda, Maryland 13 Wednesday, September 15, 1993 14 15 The above-entitled matter came on for prehearing 16 conference, pursuant to notice, at the Atomic Safety and 17 Licensing Board, at 9:00 a.m.

18 19 BEFORE:

20 HON.

B.

PAUL COTTER, JR.,

CHAIRMAN 21 HON. RICHARD F.

COLE, MEMBER 22 HON. PETER S.

LAM, MEMBER 23 Atomic Safety and Licensing Board 24 U.S. Nuclear Regulatory Commission 25 Washington, D.C.

20555 ANN RILEY & ASSOCIATES, LTD.

Court Reporters 1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006 (202) 293-3950

i 2

1 APPEARANCES:

2 3

on behalf of Gulf States Utilities Company:

4 MARK J. WETTERHAHN, ESQ.

5 Winston & Strawn 6

1400 L Street, Northwest 7

Washington, D.C.

20005-3502 8

.f 9

ROBERT B. McGEHEE

.I 10 Wise Carter ChildE& Caraway J

11 600 Heritage Building l

12 Congress at Capitol 13 Post Office Box 651 1

14 Jackson, Mississippi 39205 15 16 On behalf of Cajun Electric Power Cooperative:

17 JAMES D.

PEMBROKE,.ESQ.

18 THOMAS L. RUDEBUSCH, ESQ.

19 Duncan, Weinberg, Miller & Pembroke, P.C.

20 Suite 800 21 1615 M Street, Northwest 22 Washington, D.C.

20036 23 24 25 O

ANN RILEY & ASSOCIATES, LTD.

Court Reporters 1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006 (202) 293-3950

i a

3 j

1 APPEARANCES [ continued) :

2 1

j 3

On behalf of the Nuclear Regulatory Commission Staff:

?

l 4

EDWIN REIS, ESQ.

3 l

5 ANNE HODGDEN, ESQ.

i 6

Office of General Counsel l

7 U.S.

Nuclear Regulatory Commission.

?

8 Washington, D.C.

20555' i

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ANN RILEY & ASSOCIATES, LTD.

Court Reporters 1612 K Street, N.W.,

Suite 300 i

Washington, D.C.

20006

~

(202) 293-3950 2

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PROCEEDINGS 1

I 2

[8 :58 a.m.]

l 3

JUDGE COTTER:

We will go on the record.

4 Good morning, ladies and gentlemen.

This is a I

5 proceeding on a petition to intervene on two license 1

E i

6 amendments involving the River Bend Nuclear Plant, j

i l

7 I am B.

Paul Cotter, Jr.

I am the Chairman of i

j 8

this Board.

To my right is Dr. Peter Lam, who is a

^

I 9

physicist; and to my left is Dr. Richard Cole, who is an j

i 10 engineer.

I j

11 Let me ask counsel if they would enter their I

12 appearance at this point.

Let me start with counsel for l

13 Cajun.

I 14 MR. PEMBROKE:

My narae is James D.

Pembroke with 1

15 the law firm of Duncan, Weinberg, Miller & Pembroke, P.C.,

i 16 Suite 800, 1615 M Street, Northwest, Washington, D.C.,

i l

17 representing Cajun Power Cooperative.

]

4 1

18 Also appearing with me today is Thomas L.

l 19 Rudebusch of the same firm.

i 20 MR. WETTERHAHN:

Good morning.

My name is Mark 21 Wetterhahn with the law firm of Winston & Strawn 1

j 22 representing Gulf States Utilities Company.

With me seated j

23 at the table is Robert B. McGehee of the firm of Wise Carter 24 Child & Caraway.

I 25 JUDGE COTTER:

Where is Mr. McGehee's firm a

i i

i lt ANN RILEY & ASSOCIATES, LTD.

Court Reporters 1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006 (202) 293-3950

l r

5 1

located?

2 MR. WETTERHAHN:

His firm is located in Jackson, 3

Mississippi.

4 JUDGE COTTER:

Thank you.

l 5

MR. REIS:

My name is Edwin J. Reis.

I appear on I

6 behalf of the Nuclear Regulatory Commission Staff.

With me 7

is Anne Hodgden.

8 JUDGE COTTER:

Let me see if I can briefly 9

summarize where we are, and then ask you to address groups 10 of issues that we see present here.

As the Board or I guess 11 maybe we shouldn't say Board, but as I understand it so far, 12 we have two applications to amend the license that Gulf 13 States Utilities and Cajun Electric hold.

Gulf is the agent i

i 14 for Cajun, as I understand it, under an agreement.

Gulf 15 owns approximately 70 percent of the plant in question and 16 Cajun owns 30 percent.

17 The two license applications or amendment 18 applications would change the operator of the River Bend 19 Plant from Gulf States Utilities to Entergy Operations, 20 Inc., substituting it for River Bend.

21 Entergy is a wholly-owned subsidiary of Entergy, 22 Inc., and Entergy, Inc., is, I guess, the. successor to l

23 Middle South Utilities, which is the owner of several 24 nuclear power plants and some other operations in various 25 states.

ANN RILEY & ASSOCIATES, LTD.

Court Reporters-1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006 (202) 293-3950

~ -

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l i

6 i

1 There is pending a merger between Gulf States 2

Utilities and Entergy, I think, which has just been approved I

3 by the Federal Energy Regulatory Commission, if I. understand i

4 it correctly.

1 5

There is apparently still remaining unresolved i

1 l

6 several pieces of litigation, one of them is a piece of i

j 7

litigation between Cajun and Gulf States, and I am.not clear j

8 here whether that litigation was -- I guess it was initiated 1

l 9

by Cajun or was it initiated by Gulf States, but the object 1

10 is either to abrogate the joint agreement which is referred 11 by the acronym "JOPOA" to rescind that agreement and have 12 Gulf States take $1.6 billion in compensation for its 4

3 13 interests in the plant, and I am not clear as'to whether on j

14 the other side of that coin there is a counterclaim or a i

15 separate suit by Gulf States which involves the distribution

)

4 16 agreement that it has with Cajun.

i 17 Then there is a second-piece of litigation which I

18 is between one of Cajun's subsidiary electric cooperative

]

19 companies and that seeks to nullify the operating agreement 20 between Cajun and Gulf States on the grounds that it had 3

a 21 never been approved by the Louisiana Public Service 4

22 Commission.

23 Finally, as I understand it, there is pending'on 24 appeal a 1988 Texas Public Utility Commission decision wh'ich i

25 disallowed a certain amount of revenue from.the River Bend j

i

/'.

ANN RILEY & ASSOCIATES, LTD.

Court Reporters 1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006' (202) 293-3950

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7 1

Basin, also certain assets, certain expenses as being 2

imprudently incurred.

3 With that general background, we,;at this point, l

i 4

see three things to do, the first one is to deal with i

I 5

Cajun's challenge to the no significant hazards finding _and l

i 6

the immediate effectiveness of the two license amendments.

7 The second U ing to do is'to deal with the standing issue 8

and the third thing to'do is to.get the positions of the i

9 parties on the seven contentions that were filed in Cajun's 10 August 31 proceeding.

l 11 Before some of you get too excited, we_would like

{

12 to hear your current positions on the seven contentions, but i

1 13 we will certainly allow both Gulf States and Staff time to 14 file written pleadings in response to this before we issue O

r 15 any kind of final ruling on the matter.

)

16 Is there anything else that any of you think 17 should be added to those three major matters to be. resolved?

l l

18 MR. WETTERHAHN:

No,_ sir, but I would like to 19 address some of the opening remarks to put them in context.

20 JUDGE COTTER:

I am sure you will.

We have about l

21 three hours for that.

l 22 MR. WETTERHAHN:

Okay.

I will do so probably in 23 the standing portion of the argument.

l 24 JUDGE COTTER:

That's fine.

25 Is there anything that Cajun wants to add to that l

ANN RILEY & ASSOCIATES, LTD.

I Court Reporters 1612 K Street, N.W.,

Suite 300 Washington, D.C.

20006 (202), 293-3950 l

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laundry list of three general categories of things to take 2

care of?

3 MR. PEMBROKE:

I would say also that the i

4 procedural fee schedule to take care of the remainder of 5

this proceeding.

6 JUDGE COTTER:

We always do that; thank you.

1 1

7 Mr. Reis?

8 MR. REIS: -The only thing that I can think about 9

is to have the other two parties better explain what the 10 litigation is.

I am not sure that the litigation is exactly t

11 as set forth.

I am confused as to what it is also, but I am l

12 not sure that it was set forth correctly by the Chairman.

13 JUDGE COTTER:

All right, that's good.

i 14 All right.

Let's deal first with the 15 applicability of the no-significant hazards finding.

Is j

16 there any reason to spend any time discussing that issue?

17 It seems to me that the law is absolutely clear i

18 that the decision is completely within the jurisdiction of l;

19 the staff, and that the only way that it can be changed is l

20 if the Commission on its own initiative decides that it 21 wants to hear it.

l f

22 MR. PEMBROKE:

I am not disagreeing with your 1

23 description of the status of the law.

I would like to 24 clarify, however, that we filed our petitions in the 25 proceeding on April 26, August 7th to August 17th.

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Board had not yet been constituted or established.

l

()

2 Therefore, we raised those concerns through our Commission 3

filing in order to apprise staff _of what our concerns-were.

4 That is the clarification of that matter.

s 5

JUDGE COTTER:

So, I take it at this point that, l

6 as an issue, is withdrawn from the proceeding before this j

7 Board?

8 MR. PEMBROKE:

That is correct.

9 JUDGE COTTER:

Thank you.

10 All right,. secondly, let's deal with the standing-l 11 question.

Maybe it would be more efficient for each of you i

12 to take about four or five minutes and tell me how I got it 13 wrong in the opening before we go right to the standing 14 issue.

O 15 MR. PEMBROKE:

Yes, Your Honor.

With regard to i

t 16 certain questions that you had, I believe the first question i

17 you may have is that the merger proceeding has been approved 18 by the FERC.

It has not yet been approved by the FERC.

19 What has occurred is that the Presiding Judge at 20 the FERC, Judge Leventhal, has issued his initial decision l

l 21 in the case, which is a recommended decision.

l l

I 22 JUDGE COTTER:

I stand corrected.

23 MR. PEMBROKE:

There are two rounds of pleadings 24 to be filed by the Commission.

The matter will not be 25 pending before the Commission for its determination until l

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early November.

2 JUDGE COTTER:

If you were to crystal-ball here, 3

Mr. Pembroke, what do you think the chances are that the 4

Commission would reverse the ALJ's findings?

5 MR. PEMBROKE:

I would imagine that the Commission 6

will reverse certain of his findings with regard to the j

7 ultimate conclusion that the merger should be approved with 8

certain conditions, and perhape additional conditions.

I-9 think that will be what the Commission will ultimately do.

i 10 JUDGE COTTER:

All right, thank you.

11 MR. PEMBROKE:

Reserving all rights for 12 litigation, of course.

i 13 JUDGE COTTER:

Absolutely.

I wouldn't have you 14 give up a thing.

Is there anything else that you wanted to 15 add to that?

16 MR. PEMBROKE:

Yes, you had certain questions 17 regarding the status of Cajun and Gulf States' litigation of l

18 River Bend.

There are certain clarifications I would like 19 to make.

20 First, with regard to the question of who l

21 initiated the litigation, in the case entitled Cajun v.

Gulf l

22 States Utilities Company, Cajun initiated that case in the 23 U.S. District Court in Louisiana in 1989.

24 The primary complaints and claims there are that 25 Cajun was fraudently induced into entering into the JOPOA, ANN RILEY & ASSOCIATES, LTD.

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and should be rescinded with payment by Gulf States to Cajun 0'

2 of $1.6 billion.

3 GSU has, of course, answered the complaint and has f

4 counter-claimed requesting that the Power Interconnection 5

Agreement between Cajun and GSU also be found to be void 6

since part and parcel of the execution of the Joint 7

Operating Agreement.

That case is currently.pending, is in 8

stages of discovery.

The trial date has been set for.the

{

9 fall of 1994, October.

j 10 With regard to the second piece.of litigation 11 regarding River Bend, that case was initiated by two of 12 Cajun's members -- South Louisiana Electric Menbership I

13 Corporation and Dixie Electric Membership Corporation 14 against Gulf States Utilities -- claiming, as Your Honor

'O

i 15 accurately portrayed, that the JOPOA, not having been 16 submitted to the Louisiana Commission for its approval, is i

17 void ab initio.

l 18 Cajun's status in that proceedingfis'an 19 intervening party plaintiff in that case currently.

To my j

20 knowledge there has been no date set for hearing in that 21 matter.

22 Finally, with regard to the Texas Public Utilities 23 Commission decision, my current understanding of the status I

24 of that case is that it is still pending before the 25 Commission on appeal, and has not yet been finalized.

l i

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.1 JUDGE COTTER:

Is that right?

It is still before-2 the Commission itself?

3 MR. PEMBROKE:

That is my understanding.

It could 4

be the Texas courts.

I could stand corrected on that,.Your.

5 Honor.

But it is not a final order at this point.

6 JUDGE COTTER:

Okay.

Is there any. prospect of a 7

finality date, or a reasonable estimate when it might become 8

final?

i 9

MR. PEMBROKE:

With regard to the Texas-j 10 litigation?

I don't have anything on that.

11 JUDGE COTTER:

All right.

Thank you, Mr.

l 12 Pembroke.

13 Mr.. Wetterhahn?

i i

14 MR. WETTERHAHN:

I have a couple of matters 7of 15 clarification.

I hope I can sit and take advantage of the 16 microphone.

I 17 There were two applications filed.

They are 1

18 separate applications.

The EOI application, or the operator

't 19 application as I may refer to it later on this morning, was 20 filed for Gulf States Utilities and on behalf of Cajun.

l 21 The other application which seeks NRC consent to i

22 the merger -- actually the transfer of control over Gulf 23 States -- was not filed on behalf of Cajun.

Ek) issues and

)

i 24 problems related to the agency of Gulf States are not i

25 present in that application.

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i l

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Otherwise, we would generally agree with the

()

2 description and the status of. litigation as stated by Mr.

3 Pembroke.

4 JUDGE COTTER:

Mr. Reis, do you have anything to l

5 add?

6 MR. REIS:

Nothing to add, Your Honor.

1 7

JUDGE COTTER:

No clarifying questions?

8 MR. REIS:

No.

9 JUDGE COTTER:

Then I guess it is time to turn to 10 standing.

As I understand the positions of the parties, the 11 staff feels that, given an appropriately amended filing, 12 that Cajun has standing in the case, j

13 MR. REIS:

That is the position of the staff.

14 JUDGE COTTER:

What exactly does Cajun have to do, 15 in your view, to complete its standing requirements?

16 MR. REIS:

Well, it did file contentions.

Those 17 contentions have to be answered.

That will determine i

18 whether it is a party to the proceeding.

The question of 19 standing is one whether their interests could be affected 20 and are in zone of interest protected by the Atomic Energy 21 Act.

We think they've met that.

Whether they can raise j

22 issues here that are within the jurisdiction of this l

23 Commission is another matter.

24 JUDGE COTTER:

So as far as you're concerned, it 25 is just a question of whether or not there is an' acceptable

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contention?

2 MR. REIS:

That is right.

3 JUDGE COTTER:

You're not concerned about the 4

other prong or ground for their standing of an individual 5

who is a member of the Dixie Electric Coop?

6 MR. REIS:

They haven't perfected that and they i

7 had ample opportunity to do so.

They filed several amended-8 petitions since the time we -- or at least one amended 9

petition -- since the time we filed alerting them to this r

10 necessity.

I think that's abandoned.

I think the only 11 question really is one of possible radiological damage to 12 property.

13 JUDGE COTTER:

All right.

14 Mr. Wetterhahn, as a thorough utility lawyer, I s

15 believe that I have never heard you accept standing on the 16 part of any intervenor in any case, is that correct?

17 MR. WETTERHAHN:

That is not correct.

18 JUDGE COTTER:

That is not correct?

19 MR. WETTERHAHN:

That is not correct.

Certainly, 20 in the operating license or construction permit case where 21 an individual as opposed to a corporation resided within a 22 distance of 30 or 40 miles or less from the facility, we 23 would not argue that that individual has standing?

But this 24 is vastly more complicated.

25 We beliave that the Atomic Energy Act is there to l

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15 1

protect the health and safety of the public, and standing 2

must be viewed in the context of the health and safety of 3

the public, t

4 JUDGE COTTER:

What about property?

I 5

MR. WETTERHAHN:

The property rights are from I

6 damage to radiological injury, property damage.

7 Apparently, what the staff is substituting for 8

that is their liability for any radiological damage.

As I 9

understand, the staff argument is there is some increased 10 probability of radiological damage because of the operation 11 of EOI.

Through two things, that issue is easily. addressed.

12 First, the pleadings as I read them-of Cajun never 13 state that there will be an increased risk.to operation due i

14 to EOI operating the plant.

The pleadings say many things, 15 but they never allege that there would be an increase in the i

16 risk of operation to EOI, and there is good reason for it.

17 EOI is a good operator, it has experience, and there is no 18 basis in fact to assert that the risk would be greater.

19 secondly, this matter as a legal matter is covered 20 under the Price Anderson Amendments.

The risk of Cajun is i

21 not determined as far as property damage and its obligations l

l 22 to pay for property damage are not related to who is i

23 operating, it is only related to its ownership share of the 24 facility which is not changing.

Therefore, as a legal 25 matter, that cannot constitute an interest in this ANN RILEY & ASSOCIATES, LTD.

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1 proceeding.

Cajun's requirement to pay, as an example, O

j 2

retrospective premiums is not affected by who is operating 3

the plant, such that, as a legal matter, that can't 4

constitute interest in this proceeding or in these two-5 proceedings.

6 Let me step back and -- maybe I sound like a 7

broken record, but there are two proceedings.

They were 8

noticed separately in the Federal Register.

Each has 9

independent utility, at least the merger application does.

10 We believe that the board must find ~ standing in each of the 11 two proceedings before it can admit Cajun as a party in each 12 of those proceedings, and because what is requested is

]

13 different in each, as we have discussed in our brief, the 14 requirements for standing and maybe even the answer to the

)

i 15 standing decision is different.

j 16 As I read the staff brief, and as contained in our 17 brief, we don't believe that Cajun has demonstrated standing 18 in the what I would call " merger proceeding."

Any interest 19 that it might have is purely an economic one, a financial j

l 20 one, which does not fall within the standing requirements of

]

21 this Commission as stated in its decisions and as stated in 22 its regulations.

l So I want to be careful to separate the two, and I l

23 l

24 think the staff will confirm that they have a different view 25 of the standing and the demonstration in both instances..

2

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1 JUDGE COTTER:

I take it you don't dispute that 2

financial inadequacy is a sufficient ground for an i

3 intervention?

4 MR. WETTERHAHN:

It depends, Your Honor, on what 5

is being requested.

In this proceeding -- let's parse that 6

-- in the EOI proceeding, what will be transferred and the 7

reason that EOI is becoming a licensee is that it will 8

operate the facility.

It is a red herring to say that they 9

are thinly capitalized or don't have financial 10 qualifications because, as the. application clearly states, 11 no reliance is placed on the capitalization or a showing of 1

12 financial qualifications.

Therefore, any argument that EOI 13 is thinly capitalized or their financial qualifications i

14 issues as to EOI cannot support standing in this proceeding.

l lO b

15 JUDGE COTTER:

Do you think we should approve this I

16 if EOI were in bankruptcy?

j i

17 MR. WETTERHAHN:

If EOI were in bankruptcy?

For j

18 this, I don't think that's -- that's not the situation, but 19 I don't think that would be a basis not to approve that 20 because --

l 21 JUDGE COTTER:

You don't think that would be a l

l 22 threat to the safety of the plant, if the operator was in 23 bankruptcy?

24 MR. WETTERHAHN:

No.

I think there are plants 25 that have been operated in bankruptcy before.

As it is in ANN RILEY & ASSOCIATES, LTD.

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this case, EOI looks to Gulf States as it will be.

Gulf l

2 States will look -- I am sorry.

EOI will look to Gulf 1

3 States Utilities to provide the funds.

GSU, in turn, will 4

look to Cajun to provide 30 percent of the funds.

It is 5

EOI's obligation to operate the plant and produce power so 6

long as it-is receiving the necessary funds.

7 JUDGE COTTER:

And then when~it stops receiving 8

the funds, then it can stop operating'the plant, is that 9

correct?

10 MR. WETTERHAHN:

It would have to place.the plant l

f 11 in a safe shutdown condition and it would have to look to 12 funds from Gulf States Utilities.

That is nothing unchanged 13 from what it is today.

l 14 If any owner of any power plant -- let's not O

15 particularize it -- has financial difficulties, the 16 Commission would see that the plant is shut down if it 17 didn't have sufficient funds to safely operate the plant.

18 But as this Commission has previously found in the context 19 of rulemaking, safety and financial qualifications don't 20 necessarily mix, that there is not a direct relationship 21 between finances and safe operation of the plant.

22 But in this case we are not looking to EOI for any

~

l 23 financial qualifications.

24 JUDGE COTTER:

All right.

Mr. Pembroke, I may owe 25 you an apology for starting in the middle, but I was trying ANN RILEY & ASSOCIATES, LTD.

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1 to cut to the heart of things, if I could, but if you want 2

to go ahead and state your position?

l 3

MR. PEMBROKE:

Yes, Your Honor.

First, let me say 4

that the matter before you currently is pending on three 5

pleadings -- four pleadings that have been submitted by-6 Cajun Electric.

1 7

First is the April 26th, 1993 petition to 8

intervene in comments-that were filed primarily in the 9

transfer of ownership docket.

10 The second is the comments of petition to 11 intervene on August 6th with regard primarily to the 12 transfer of the operating responsibility to EOI, 13 JUDGE COTTER:

Do I have the April 26th filing?

14 Oh, yes I do.

15 MR. PEMBROKE:

On August 17th we filed the 16 amendment to our August 6th pleading and then on August 31st 17 we filed an amendment and supplement to those pleadings.

18 The purpose of the filing of the August 31st i

19 document was in part to ensure that the Board did have the 20 April 26th pleading because it had not been referenced in 21 either order with regard to initiation of this proceeding, 22 so we wanted to confirm that you had had that document 23 indicating Cajun's position on transfer of ownership issues.

24 Additionally, the August 31st filing was 25 undertaken to ensure compliance with prehearing requirements

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l 1

of the rules of intervention, although we felt we met them i

l 2

already.

3 Let me clarify in response to some uncertainty on 4

Staff's part that Cajun intended to intervene in both of the 5

proceedings which have been initiated by Gulf States on

]

6 January 13th.

.i 7

Basically Cajun is in agreement with both Gulf 8

States and Staff with regard to the. legal standards of i

i 9

standing, and that is that it must go tofestablish injury in 1

10 fact and that the injury'is the zoning ventures arguably _

11 protected by the Act.

12 We additionally assert.that in' order to establish 13 standing and the right to intervene, there must only be one 1

14 well-pleaded contention in order to grant ~ intervention and 0

J 15 have standing established.

I think it is clear from the 16 nature of the request for relief'that GSU is seeking here 17 that Cajun establishes standing-in both proceedings.

18 First, it's relatively clear from the Commission's 19 July 7th order that Cajun has a right to intervene as the 20 Licensee in this proceeding.

The July 7th notice stated 21 that the Licensee may file a request for hearing with 22 respect to the issuance of the amendment'.

That's on page 23 36, 424, Volume 15 of the Federal Register.

24 The reason for this is obvious.

Cajun as the 25 Licensee must have standing and has a clear interest in any ANN RILEY & ASSOCIATES, LTD.

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amendments to operate its own plant.

Particularly here Q(/

2 where the two amendments seek to have approval of the change 3

in ownership from GSU as a shareholder of the company to 4

being one of several holding companies in a public utility 5

holding company situation will have an effect upon the way 6

the plant is being run.

7 Second, we request the interjection of EOI as the 8

joint Licensee with Cajun and GSU and designate EOI as the i

9 operator of Cajun's 30 percent share of the River Bend j

i 10 plant, all of this being done without Cajun's consent.

11 Cajun also has standing to intervene as River: Bend 12 owner, I believe as indicated in Staff's response'that the 13 safety to property is an issue which is germane and its own.

14 interests being protected by the-Act, and we concur in that.

15 Additionally, the July 7th notice indicated that l

16 any person whose interest may be affected by the proceeding 17 may file an intervention.

I would submit that Cajun's l

18 interests as an owner of the plant and as the Co-Licensee.of 19 the plant, fully give it standing in this proceeding, i

j 20 Getting more specific to the specific allegations 21 and facts which give rise to our standing in this 22 proceeding, it is cajun's position that the change in 23 ownership and transfer of-operator responsibility will

)

24 adversely affect the safe and reliable operation of River 25 Bend.

This is the matter with which you had a discussion

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1 with Mr. Wetterhahn.

Mr. Wetterhahn described it as a red 2

herring.

Cajun feels that it is vital to this proceeding to 3

understand the limited liability that EOI has in this 4

proceeding and the result that that limited liability could 5

affect the safety and reliability of the plant.

6 As proposed, GSU intends to enter into an 7

operating agreement with EOI. Only those two entities are J

8 parties to the operating agreement.

Cajun is not.

Under 4

9 the operating agreement, EOI has the obligation to take all i

10 actions necessary to manage, possess, control, use, operate 11 and decommission River Bend.

12 Since the operating agreement runs only to GSU and 13 specifically in Section 3.1 of the operating agreement, the 14 only source of funds for EOI to perform its duties and O

4 15 obligations is the stream of revenues from GSU, which would 16 be paid in accordance, presumably in'accordance with the 17 operating agreement.

18 EOI is a thinly capitalized corporation and 19 significantly it has no independent means of obtaining 20 capital like going to the financial markets and the like.

21 It is quite significant because when the stream of funds is 22 interrupted, if it is, from GSU to EOI, there is no way for.

23 EOI to obtain funding to safety and efficiently operate the 24 plant.

25 Despite the fact that EOI is a subsidiary of the ANN RILEY & ASSOCIATES, LTD.

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Entergy Corporation and that GSU will upon consummation of

)

2 the merger if it is concluded will also be a subsidiary of 3

Entergy.

It is significant that Entergy has today refused 4

to extend its credit or in any indemnify or support the-5 payments from GSU to EOI in order to maintain the safe and 6

reliable operation of the plant.

7 The limitation appears in the so-called guarantee 8

agreement, which is a tripartite agreement among EOI, 9

Entergy Corporation, and GSU whereby Entergy agreed to 10 provide adequate funds to EOI to maintain River Bend 11 operation only so long as GSU makes its payments to EOI 12 under the operating agreement.

13 There is a large hole in the guarantee such as it 14 is from Entergy to EOI and that is contained in Sections 1 l

15 and 2 of the guarantee agreement.

16 I would submit that at that point having alleged 17 only those matters, the financial maxeup and contractual 18 relations with these parties indicates that EOI may not be 19 able to operate this plant safely and gives rise _to adequate 20 standing for Cajun.

21 JUDGE COTTER:

What is your response to Mr.

l 22 Wetterhahn's statement that if the finances, if EOI's 23 finances became inadequate then all they have to do is shut 1

24 down the plant?

l 25 MR. PEMBROKE:

Well, that was one of the options ANN RILEY & ASSOCIATES, LTD.

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24 l

l 1

and that was one of the statements made by both Entergy's l

2 Chief Executive Officer and EOI's Chief Executive Officer, 3

stating that they would be forced to shut down the plant.

4 Whether or not they would be able to shut down 5

safely is another matter, not happily before us today,.

6 because one would presume that if it is being shut down as a 7

result of the GSU bankruptcy and inability to fund EOI, 8

Cajun as a 30 percent owner in the plant who wants the 9

capacity out of the plant,-no doubt would oppose the 10 shutdown of the plant and it's unclear as to whether or not l

l 11 the shutdown would be allowed.

i 12 It is also unclear in the interim where EOI will 13 develop the funds to effect the shutdown which would occur t

14 no doubt over a substantial period of time and would be

'O 15 substantially expensive.

16 JUDGE COTTER:

All right.

17 MR. PEMBROKE:

This is not an idle concern on 18 behalf of Cajun.

We had discussed a bit earlier the nature i

19 and status of the current Cajun litigation and who will 20 prevail in that litigation, of course, is an open question.

21 We have certain strong feelings that Cajun will prevail, but l

22 it was, however, an adequate risk for the FERC in its merge 23 proceeding to set that Cajun risk for hearing, one of the 24 few items set for hearing in that proceeding.

Testimony was 25 taken on it and as a result of the presentations with ANN RILEY & ASSOCIATES, LTD.

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regards to Cajun's risk and GSU's risk, one of the 2

conditions placed on the merger was that none of the i

3 operating companies will be responsible for increased costs j

4 of capital resulting from a GSU bankruptcy or GSU's 5

inclusion in the holding company.

There is a hold-harmless 6

provision to protect the customers of the Entergy Operating 7

Companies from bearing the cost of any increase -- cost in 8

capital resulting from this rask.

9 So that the risk is there and the result of the 10 Cajun prevailing in litigation or, in effect, if the Texas 11 litigation were not resolved in favor of GSU, GSU has stated 12 that particularly with regard to the Cajun litigation that 13 if Cajun prevails it must seek relief from the bankruptcy 14 laws.

Which one might call into serious question his 15 ability to pay EOI in an ongoing basis which is complicated.

16 by the fact that Entergy will not fund EOI operation at 17 River Bend.

)

18 JUDGE COTTER:

Well, so far what I'm hearing is a 19 lot of financial risk with respect to that.

I 20 MR. PEMBROKE:

Well, there is financial risk, 21 There's no doubt about that, but vis-a-vis what we're to j

l 22 talk about is standing.

It is risk to the safety of the 1

l 23 property of Cajun Electric Power Cooperative, that is, River l

24 Bend.

In the event of a shutdown or EOI being unable to 25 properly shutdown the plant, that will give rise to an i

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interest in Cajun protecting the safety of-bis property.

2 JUDGE COTTER:

I am still a little hung up, Mr.

[

3 Pembroke.

What I've got so far is inadequate funding might t

l 4

create a safety issue because-EOI might not be able to shut i

5 down the plant properly.

j 6

MR. PEMBROKE:

That's correct.

7 JUDGE COTTER:

That's fairly. speculative without a 8

little bit more underpinning.

Otherwise, all the other l

9 consequences are financial which are remediable in other.

10 forms.

11 MR. PEMBROKE:

Vis-a-vis-the EOI activities, they l

i 12 may be financial, but I don't think it's speculative, Your 1

l 13 Honor.

I do believe that in light:-- even without going to 1

14 who will litigation or what will be instant may occur here-j 13 that the contractual arrangement = proposed by Gulf States, 16 Entergy, and EOI here, that is what calls into_ question the 17 safety of the operation of the plant'because they have an 18 operator who is thinly capitalized.and may not be.able'to 1

19 operate the plant in a safe and reliable fashion.

20 JUDGE COTTER:

Okay.

21 MR. WETTERHAHN:

May I respond?

22 JUDGE COTTER:

As soon as he's finished.

l 23 MR. WETTERHAHN:

I'm sorry.

24 MR. PEMBROKE:

And I would submit that NRC staff 25 concurs in the safety of the property analysis, the' analysis j

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27-1 and conclusion that Cajun has standing under that matter.

2 Cajun also has standing since the proposed t

3 amendments could affect Cajun's rights under its license and 4

of the operating agreement that it has with regard to River-5 Bend and GSU.

Obviously, currently the licensee did -- GSU 6

is the operator of the plant and the relationship between 7

Cajun and GSU is governed by the joint ownership 8

participation operating agreement or the JOPOA.

9 GSU has obligations under that agreement as plant.

10 operator to operate the plant.

They have a good-faith 11 obligation to cooperate with Cajun, they have an obligation 12 to supply information to Cajun, they have an obligation to 13 submit to audits by Cajun, and significantly they are under 14 the joint ownership agreement as the management advisory-15 committee which allows Cajun.to make recommendations and 16 have input into GSU's decisions as project manager.

17 JUDGE COTTER:

Isn't all that a contractual 18 matter, Mr. Pembroke?

l l

19 MR. PEMBROKE:

It is a contractual matter which 20 arises out of the status of Cajun as a licensee of the 21 project.

22 JUDGE COTTER:

What does that have to do with us?

23 MR. PEMBROKE:

It has to with the fact that the 24 proposal -- the proposed transfer of the operating 25 responsibilities to EOI will result in the insertion of a ANN RILEY & ASSOCIATES, LTD.

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barrier, i.e.,

GSU, between Cajun and the plant operator.

2 Under the proposed contractual scheme --

3 JUDGE COTTER:

We are all in agreement here that 4

our jurisdiction is health and safety.

5 MR. PEMBROKE:

Yes.

6 JUDGE COTTER:

How is that a health and safety 7

issue?

8 MR. PEMBROKE:

The insertion.of GSU as a. barrier 9

between the plant operator and Cajun, the plant owner,.is 10 that Cajun will have a lessening of its ability to oversee 11 that input into the plant operator and to assure that the 12 plant is operated in a safe and reliable fashion.

Certain 13 of those rights are contained out in the-JOPOA and the 14 rights of the licensee, Cajun, will be decreased where we no 15 longer have contractual privity with the plant operator, 16 since the contract runs on between Gulf States and EOI.

17 And, indeed, there's a -- well,. additionally under 1

18 the JOPOA, none of the other obligations which GSU currently 19 has that to cooperate with Cajun, supply information, that 20 Cajun has input into GSU's decisions, and significantly 21 Cajun has any direct rights under the operating agreement to 22 sue EOI for its failure to properly operate the plant.

All 23 of these are currently extant in the working relationship 24 between a contractual relationship between GSU and Cajun and 25 the proposed license amendment to transfer to-the operating ANN RILEY & ASSOCIATES, LTD.

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1 responsibilities to EOI whicn separates the plant operator (k

2 from one of the plant owners and significantly lessens 3

Cajun's ability to have input into the EOI, operation of the 4

plant to confirm that the plant is operated in a safe and l

5 reliable fashion.

6 Additionally, the two license -- at least as 7

admitted, the one license amendment has been submitted by i

{

l 8

Gulf States reportedly on behalf of Cajun under an agency.

l 9

relationship through the joint ownership agreement.

Cajun's j

l l

10 August 17 pleading at pages 5 through 8 goes into some 11 details with regard to our legal conclusion that GSU does 12 not have the right to file this license amendment on behalf 13 of Cajun and that it has exceeded its agency responsibility 14 and authority under the joint ownership agreement.

i 15 Since the filing of this amendment is predicated 16 upon GSU's purported ability to act as Cajun's agent, i

17 whether or not GSU has the legal ability to file that 18 license on behalf of Cajun is a matter that also gives rise 19 to the standing for Cajun because it is through this 20 mechanism that each of these amendments is intended to be i

21 implemented.

22 JUDGE COTTER:

This goes on the premise, I take 23 it, when essentially the variation on a ultravirus theory 24 it's beyond the agreement?

25 MR. PEMBROKE:

That's correct.

That's correct.

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JUDGE COTTER:

And that all the other amendments 2

that GSU has filed in the past, in which Cajun has not l

l 3

objected to, have been within the terms'of the agreement?

4 MR. PEMBROKE:

That's correct.

And the reason for 5

that is that as the tradition of the case, the license j

6 amendments which are usually filed by the plant operator 1

7 have to do with really the operation of the plant.

And this 8

goes far beyond the operational responsibilities of Gulf I

9 States Utilities Company.

It goes into the arena of 1

10 modifying substantially the relationship that Cajun has with i

11 the plant operator.

This is an entirely different animal 12 from the day-to-day -- if there are any day-to-day license 13 amendment applications which GSU has filed on Cajun's 14 behalf It is Cajun's position that the license amendment l

.15 application since it adds to the disinterest of Cajun cannot 16 be filed on Cajun's behalf under the Agency laws of the 17 State of Louisiana.

And it is different substantively and 18 different in its nature from the operational license 19 amendment application filed by GSU as plant operator.

20 JUDGE COTTER:

Again, why isn't the resolution 21 there in either damages or contract reformation?

22 MR. PEMBROKE:

The damages aspect I don't think 23 would be an adequate remedy at all.

I think the real 24 question here is has the applicant, GSU, established a 25 sufficient basis in order to file the license amendment over O

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l 31 l

1 the objection of the co-licensee.

They purport to have done 2

it through an agency contract, the Joint Ownership _

l l

3 Agreement.

We contest that.

4 At this point, we have a license amendment which 5

is being proposed by one co-licensee but not by a 30 percent 6

owner of the plant, and absent an agency relationship which 7

extends to that dramatic undertaking that GSU can file a 8

license amendment application of this nature in opposition 9

to Cajun, the co-licensee's desires and wishes, that matter 10 must be established prior to the license amendment being r

11 granted.

12 Additionally, the transfer of ownership 13 application has raised concerns with regard to the operation 14 of these facilities between Cajun and GSU.'

As you might be I

15 aware, you referenced the Power Interconnection Agreement 16 between GSU and Cajun which provides for the 17 interrelationship and interconnected operation of Cajun j

18 System and Gulf State System.

l l

19 With the transfer of ownership from GSU, from its 20 current shareholders, to Entergy Corporation, the

)

21 convergence of interest which laid a foundation for the 22 Power Interconnection Agreement dissipates.

Whereas Gulf 23 States currently reports to its board of directors, has 24 concerns for its ratepayers and shareholders currently and 25 has the operation responsibility for one nuclear power i

l' l

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plant, when a transfer of ownership is concluded and 2

consummated, GSU will report to the Entergy board of 3

directors, which has responsibilities for four states, for 4

five operating companies and four nuclear power plants.

I 5

JUDGE COTTER:

It seems to me all that clearly 6

falls within the realm of damages if, in fact, Cajun or any 7

of its members did not'get the energy supply that they were 8

entitled to under those agreements.

i 9

MR. PEMBROKE:

Well, the energy supply is one 1

10 matter, but what we are more concerned about here is Cajun i

11 operates its own control area.

It is an independent j

12 utility.

It is not merely a purchaser of power energy and 13 other services from Gulf States Utilities Company.

We are 14 located geographically in access to --

15 JUDGE COTTER:

I am not making any distinction 16 between access and energy supply.

17 MR. PEMBROKE:

The point'being with regard to the 18 relief on the effect of an interconnected operation, damages 19 is not an available remedy because we have an ongoing 20 control area responsibility, a responsibility to our members 21 and the ultimate end-users, consumers, which would be i

22 affected on a day-to-day basis by the interconnected 23 operation of GSU.

24 Should the interconnected operation not be 25 undertaken in accordance with various agreements or be O.

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33 1

modified, that does not necessarily give rise to a remedy in 2

damages from the standpoint of, for instance, a failure to i

3 deliver power that would be quantifiable.

l 4

Additionally, the --

i 1

5 JUDGE COTTER:

I hear you, but I don't believe 1

6 you.

I mean, it sounds to me like you are talking about an I

7 issue that would be more appropriate to FERC or something i

8 than to this board.

l 9

MR. PEMBROKE:

Well, we submit that it is 10 appropriate both to FERC and to the NRC, but unfortunately i

11 the FERC in its wisdom determined that operational issues

- I 12 were not germane to its consideration in the merger 1

l 13 proceeding.

i 14 The PIA is connected to the NRC's activities here-i j

15 since it was part and parcel of the development of the i

i 16 control area and actually of the obligations under License i

j 17 Condition 10 of River Bend that GSU transmit bulk power'for 18 any entity, including Cajun, and also that series of events f

19 which the --

20 JUDGE COTTER:

Does that license condition specify 1

21 how much and how often and that sort of detail?

I 22 MR. PEMBROKE:

No, it does not.

1 4

23 JUDGE COTTER:

How about 12?

Is the same-true of 1

24 12, License Condition 12?

25 MR. PEMBROKE:

Twelve does not go to the provision i

d I

i i

()

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34 1

1 of electric services by Gulf States to entities.

Section 12 l

2 goes to the supply of power to --

.i 3

JUDGE COTTER:

So one is access and one is power; 4

is that correct?

5 MR. ?EMBROKE:

I would say so.

That is correct.

)

6 And there is no specification in License Condition 12 or 10 7

of the amount or type of power.which must be supplied or 1

8 transmitted.

9 JUDGE COTTER:

It sounds like a great public i

10 utility issue.

11 MR. PEMBROKE:

We had thought so, but we also l

l 12 think it is an issue for this agency-as well.

l

[

13 Finally, reflecting the concerns on the adverse 1

14 impacts that will be suffered by Cajun as a result of the j

f-k_)g 15 transfer of ownership and the transfer of the operating 16 responsibilities to EOI, Cajun in its August 17th-pleading 1

17 posed several conditions to the merger, which, without going.

18 through them independently, basically would put Cajun in a l

19 position of being able to adequately interrelate with EOI as 20 a plant operator, would be able to have contractual privity 21 with EOI and would be able to hold EOI liable for its 22 failures to properly perform its operating functions.

23 That protection is necessary for Cajun to 24 adequately input into the EOI activities in order to assure 25 that the River Bend project is operated in a safe and ANN RILEY & ASSOCIATES, LTD.

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reliable fashion.

2 I am not going into this in any de. ail because I 3

think we have established a standing on these matters.

When 4

we get to the question of intervention, we feel that not j

5 only have we established our right to interv^ne in the case 6

as a licensee and co-owner, but also that ' '.:retionary 7

intervention would be appropriate here if he intervention 8

that is required is denied The nature ana extent of 9

Cajun's property and financial interest is significant, as lo is the effect these orders may have on Cajun's rights vis-11 a-vis the River Bend plant and the safe operation of the l

12 River Bend plant.

j 13 With regard to the standing issue,'that would 14 conclude my presentation.

15 JUDGE COTTER:

All right.

Thank you, Mr.

16 Pembrole.

17 Do you want to get your remarks in here, Mr. Reis?

' {

18 MR. REIS:

Yes, I would like to at this point, if 19 I may.

20 The basic problem in this case is that I think i

21 Cajun is trying to bring things before this Commission and 22 particularly before this board that this board and the j

23 Commission do not have jurisdiction over, and there is j

i 5

24 probably a small scintilla out there that they do have 25 standing on and that is properly within the jurisdiction of 1

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36 1

this Commission and this agency.

O-2 As far as the competitive interest and the i

3 competition, traditionally in NRC proceedings and the notice 4

here, this is not the board that considers the antitrust and 5

competitive provisions of the Atomic Energy Act and Section-6 105 of the Atomic Energy Act, so that these matters about' i

7 the Interchange Agreement, about supplying power and so 8

forth and other license conditions that were put on 9

originally on the River Bend license are not before this l

10 board.

i 11 If Cajun feels they are being violated, it has 12 remedies under 2206 and can go to the Commission with those 13 matters and ask for the license to be enforced, particularly

(

14 for those provisions that the Commission put in there for f

15 the benefit of competitors of Gulf States Utilities in the i

16 supplying of power from River Bend.

17 So those are not before this Board.

l l

18 JUDGE COTTER:

You are saying'their only_other I

i i

i l

19 remedy is 2206?

l i

20 MR. REIS:

Well, it is_ essentially under.2206.

I 21 They also have remedies in Court.

But the' license itself 22 now provides that they are to have certain interchange 23 agreements and certain things to level the playing field as 24 to competition.

If they feel those things are not being 25 carried out, their remedies are essentially are under 2206.

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JUDGE COTTER:

What percentage of 2206 petitions 2

have ever been granted?

3 MR. REIS:

There have been a few, sir, in this 4

area more than in other areas.

In this area, quite a few, 5

actually.

We have looked at this.

6 The 2206 petition, and the question of the FERC 7

proceeding, and the effect on competition and competitive 8

interest are not what we are here for today.

Those are'not 9

matters before this Board.

Dismissing them from this 10 proceeding would not affect whether they are to be i

t L

11 considered by the Commission otherwise.

l l

12 Let me also state that the notice of these 13

. proceedings was published in July.

I don't particularly l

14 feel that what is contained in an April pleading.goes to l

l l

15 what the notice of the proceeding in July, the notice of i

l 16 hearing, opportunity to intervene, involves.

t 17 JUDGE COTTER:

Those matters were not being 18 discussed in April?

19 MR. REIS:

They were being discussed in April, but 20 we didn't focus on the April pleading that came in long 21 before we put the notice in the Federal Register of this 22 proceeding.

23 JUDGE COTTER:

You said you did not consider the i

24 April pleading when you noticed these proceedings?

25 MR. REIS:

That is vight, Your Honor.

I think ANN RILEY & ASSOCIATES, LTD.

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1 that is the case.

It is a separate proceeding.

That is an 2

antitrust proceeding.

I 3

JUDGE COTTER:

Are you asking us to do something 4

with the April document?

5 MR. REIS:

No, I am not asking you to do anything 6

except that we don't see its relevance, and to essentially I

7 ignore it.

l r

8 JUDGE COTTER:

Okay.

9 MR. REIS:

It deals with the antitrust matters,.

10 the competitive matters, and not with the health and safety

{

~

i l

11 matters that are before this Board.

l l

12 Much of these-matters that Mr. Pembroke and Mr.

l l

13 Wetterhahn have discussed, of course, including the_ matter 14 of whether Gulf States is a proper agent of Cajun in this l

15 instance, and whether it is acting contrary to the interest

[

16 of its principle here, are matters for state law.

17 However, under Commission precedent, we are to go 18 forward and decide the issues before us.

If the matters-j L

19 decided in state courts should ultimately undermine the j

20 decisions made by the Commission, the proceeding may be l

21 reopened and looked at again.

22 But I don't think we should be sitting here 23 waiting for a determination as to whether they are the 24 proper agent for one to the_other.

It would behoove'the 25 parties to settle this matter-quickly by perhaps bringing a

( )

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39 1

declaratory action proceeding in state court to determine 2

this.

But in the meantime I think we can go forward.

3 I think the only issue right, now, of-course, is 4

this.

Let me get rid of one other matter.

Mr. Pembroke, 5

for the first time, mentioned discretionary intervention.

I 6

may be wrong, but I do not recall it being mentioned every 7

before.

I think it is rather late to raise that.

8 I don't think it is a proper matter to raise'at t

9 this stage of the proceeding of discretionary intervention, 1

10 nor do I third it is grounds'for discretionary intervention, j

i 11 which was stated was essentially not the radiological safety 12 of the property, but just financial interests of the I

l l

13 intervenor, or the-petitioner, provided a ground for 14 discretionary intervention.

'O 15 The only issue before us at this point, I think 16

-- at least at this point of this discussion this morning 17

-- is the matter of standing.

j 18 The first matter, I must disagree with Mr.

19 Wetterhahn in that I think the Atomic Energy Act ~in many l

l 20 places talks about damaged property.

There is the general i

21 idea of interstate commerce being protected in the Act, in 22 the basis set forth in the Act.

23 JUDGE COTTER:

When you speak of property, Mr.

24 Reis, you are speaking of the interest of Cajun in the 25 plant?

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l 1

MR. REIS:

Basically the interest of Cajun in the l

2 plant.

They didn't spell it out, so I guess I know of no 3

other property that they are speaking about.

-l 4

JUDGE COTTER:

You are not just. talking about 5

their financial interest.

You are talking about the-6 physical security of the plant, or are you talking about l

7 both?

i 8

MR. REIS:

I am talking about'both.

I think'the l

9 Atomic Energy Act itself talks about protection ~against 10 possible interstate damage.

That was interstate damage in

)

.i 1

and the effect on j

11 the sale and transmiss~ ion of electricity, l

12 interstate commerce, in that sense.

l 13 The Act talks about minimizing danger in a couple 14 of places to life and property.

They do have a property 15 interest certainly in River' Bend.

I don't think it.could be 16 questioned that they do.

So, we have that question.-

17 Further, which touches on this, is it intertwines 18 with interest, and whether they have shown the requisite 19 interest.

The regulations of the Commission have provided i

20 that electric utilities, as defined in the regulations i

21 themselves, need not show financial qualifications because 22 they are presumed to-have financial qualifications.

23 What we have here is a takeover.by getting rid of 24 an electric utility as defined in the Act and bringing EOI.

1 25 into it as operator.

EOI will be a licensee.

It has to be ANN RILEY & ASSOCIATES, LTD.

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shown to be financially qualified.

It is not presumed to be 2

financially qualified.

3 So, to the extent that they issues are raised, 4

those seem appropriate.

5 JUDGE COTTER:

What happens to Cajun as a 6

licensee?

Will Cajun remain the licensee?

j 7

MR. REIS:

Cajun will remain as a licensee.

We l

8 see nothing changing that.

We see that the licensed 9

operator will change.

Cajun is not the licensed operator; 10 it is a licensed owner.

It has responsibility under the Act 11 as a licensed owner, also.

It is not just operators that we 12 license.

I think there is an old Marble Hill case that I

13 deals with all owners of a facility must be on a' license.

14 We are now just talking about standing and not j

O 15 about contentions.

Principally, I'm talking about standing 16 in the EOI matter that was noticed and not in the other i

17 proceeding involving the transfer -- whether Gulf States can i

l i

18 become a subsidiary of Entergy generally.

I don't think the 19 standing of Cajun is demonstrated in that matter in that 20 their interests are as to who is the operator, what the l

21 operator does and whether their interest will be protected 22 by the operator.

I l

23 Let me conclude.

As I said before, the staff i

24

-- and I don't think the Commission wishes to get in this i

25 cat and dog fight between Cajun and. Gulf States and Entergy; 1

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42 1

however, there are things we are concerned with that Cajun 2

has brought before us in its petition, and that it does have 3

standing to raise the basic questions.

4 There are many basic questions' involving contract 5

interpretation and so forth that are more appropriate for i

6 state courts, certainly, and questions of competition more 7

appropriate for FERC and certainly not for this proceeding.

8 Maybe there should be a proceeding under Section 105 of the-9 Act, but that is not before us.

10 I think that concludes what I-want to say.

j 11 JUDGE COTTER:

Thank you.

l 12 Mr. Wetterhahn?

13 MR. WETTERHAHN:

Let me address one'of the items I

14 that Mr. Reis noted toward the end of his argument.

No one

>O 15 is getting rid of GSU.

GSU will be a licensee in this 16 license.

It will remain a utility.

It-will have its own 1

17 board of directors and-be responsible, as it is now, for j

-j 18 raising funds.

So GSU will be there after the merger.

It l

19 will not have common stockholders, but essentially that is 20 the difference.

As now, it is responsible for raising 70 21 percent of the funds associated with operation of the 22 station.

Nothing will change.

23 The assertion that EOI must show financial-24 qualifications is not borne out by any Commission precedent.

25 If you look at a number of operating companies approved by; ANN RILEY & ASSOCIATES, LTD.

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the NRC, including EOI as the operator of four other plants,.

)

2 the issue of its technical qualifications was there, but not 3

its financial qualifications, because the utilities there,-

4 as we do here, do not assert that they have any financial 5

qualifications.

They are an operator and will look to Gulf i

6 States and indirectly to Cajun for its operating funds.

7 So, if I can clarify one thing, I hope to make the 8

board understand that we are not looking to EOI for any 9

showing of financial qualifications.

10 Let me go back to the GSU-Cajun litigation.

11 Yes, sir?

i 12 JUDGE LAM:

Before you go further, who are.the i

13 beneficiaries of the merger?

't i

l 14 MR. WETTERHAHN:

Hopefully the ratepayers, the

(

15 customers of the utilities, and, as I think is outlined in 16 the initial decision before FERC, the utilities and i

17 hopefully it is a win-win situation.

18 There are major benefits of EOI operating this L

19 facility.

Those are outlined in that application.

EOI-has 20 expertise, its got a professionalism that.we hope will 21 improve the operation and efficiency, and, in turn,.the l

22 capacity of River Bend.

Hopefully, everybody can benefit 23 from the operation of River-Bend by EOI.

So we believe that i

24 the merger will be a winning ~ situation for everyone 25 concerned.

I think the initial decision of FERC indicates ANN RILEY & ASSOCIATES, LTD.

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1 that.

2 With regard to the litigation, the litigation 3

existed long before the merger was discussed.

It is not i

4 related to the merger.

We can't predict what the outcome 5

will be.

We're hopeful that Gulf States will prevail, but-6 whatever will happen as a result is not tied in, in the 7

least, to the merger, and I think that's important to j

8 recognize.

9 With regard to antitrust matters, Condition 10 and 10 12, they are clearly not before this licensing board, which 11 has jurisdiction over the safety matters.

The NRC, in 12 conjunction with the merger, is separately considering 13 matters of antitrust, and pursuant to a Federal Register 14 notice, Cajun,'as well as a' number of other entities, have I

t i

15 commented on the antitrust implications.

But it is clear 16 and we agree with the staff that antitrust matters are 17 beyond the jurisdiction of the board, and that is also' 18 discussed in our pleading.

l 19 The JOPOA, as I will call it, -- I've' heard 20 different pronunciations -- the Joint Participation and 21 Operating Agreement, we believe is clear.

22 JUDGE COTTER:

If you could call it just the-Joint i

23 Operating Agreement.

24 MR. WETTERHAHN:

The: Joint Operating Agreement.

25 JUDGE COTTER:

If I had my way in the world,.I.

,e (m/.

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i 1

would reduce the number of available acronyms to 100.

(

2

[ Laughter.]

i 3

MR. WETTERHAHN:

And this would not be one of 4

them?

5 JUDGE COTTER:

And that would not be one of them.

6 MR. WETTERHAHN:

We believe that there are certain 7

sections which make clear Gulf States' ability to file this 8

type of amendment.

The language speaks of its plenary i

9 authority, its absolute authority to file these things.

But 10 in any event, we don't disagree with the staff that this is l

11 not the appropriate forum to try to interpret this contract, 12 particularly make an interpretation under Louisiana law, 13 which I understand is quite different from the_ law of the 14 other 49 states.

So this board should not take'it upon O-15 itself to try to interpret this.

For the.last decade or 16 more, GSU has been filing amendments of all types for this, 17 and I think it does have the authority, but this is not the 18 forum to determine that.

19 We believe that GSU is the property agency.

With 20 regard to discretionary intervention _ I guess that's a last 21 hope.

I don't believe they have met:the standards.

_The 22 licensee did address that in its responsive pleading and we 23 would stand on that.

24 Essentially, if I can summarize, we believe that 25 all the elements of standing have not been met. 'That at 3

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46 j

1 most what we have proposed is an economic injury.

An 2

economic injury which is not a safety issue -- a safety 3

injury.

We shouldn't have to look and neither should the 4

Board have to look through these many pleadings to try and l

5 determine what the safety issue is and ho. safety affects l

1 6

standing.

I must say it's clearly not set forth in the 7

Petitioner's briefs, the many briefs that it has filed, and i

8 I would urge the Board to deny both petitions on the basis 9

of lack of standing.

l l

10 JUDGE COTTER:

And that is because there is no 11 property, financial, or other interest. stated that is-I 12 cognizant by this Board?

1 13 MR. WETTERHAHN:

That is correct, as a legal i

14 matter.

Certainly there are property interests, but under

,O 15 the Atomic Energy Act as it has been interpreted there are l

16 no such property interests which would give rise to l

17 standing.

18 JUDGE COTTER:

Mr. Pembroke?

19 MR. PEMBROKE:

Yes, thank you, Your Honor.

First l

20 I would like to clarify certain matters, one with regard to l

21 whether or not there exists other property of Cajun which 22 make the safety and security which might be affected by the 23 safety issue.

The answer to that is, yes.

A. substantial 24 amount of property in the general vicinity of River Bend 25 which includes Big Cajun 1 generating unit owned by Cajun O

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,e---

47 1

Electric completely, a 210 megawatt gas unit; Big Cajun 2

Number 2, units 1 through 3, each of which unit is a 540 3

megawatt coal generated -- electric generating station; 4

units 1 and 2 of which are owned solely by Cajun.and unit 3 5

is a shared ownership between Cajun and Gulf States 6

Utilities.

So Cajun has substantial property in addition to 7

River Bend which would be affected by safety concerns at 8

River Bend.

9 Second, with regard to Mr. Wetterhahn's statement l

10 that we are not looking to EOI for any financial 11 qualifications, I would submit that under the Commission's 12 regulations that EOI's financial qualifications are at issue 13 in this proceeding.

Referring to 10 CFR Section 50.33 (f),

14 like in Frank, which states that "except for an electric fg V

15 utility applicant for a license to operate a utilization 16 facility information sufficient to demonstrate to the 17 Commission the financial qualification of the applicant to i

18 carry out in accordance with regulations of this chapter the 19 activities to which the permit or license is sought."

l l

20 Now, the items that were cut out is if the entity.

j 21 is an electric utility, electric utility is defined in 10 22 CFR Section 50.2 which states, and I'll quote, " Electric 23 utility means-any entity that generates or distributes 24 electricity and which recovers the cost of its electricity i

1 25 either directly or indirectly through rates established by-1

\\

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the entity itself or by a separate regulatory authority "

2 EOI does not generate power, EOI does not distribute power, 3

and EOI's costs are not generated through rates, rather, 4

they are generated through the operating agreement that it 5

has with GSU.

6 So, I would submit that the financial 7

qualifications of EOI are at issue in this proceeding, and a 8

particularly troublesome ora in light of the thin 9

capitalization discussed earlier.

4 i

10 Finally, turning to the issue of the --

11 JUDGE COTTER:

Do we have any evidence of EOI's 12 capitalization?

13 MR. PEMBROKE:

I have some information believe --

14 I believe they're capitalized at $1 million, but I could 15 stand corrected on that.

16 JUDGE COTTER:

Is that essentially correct?

17 MR. WETTERHAHN:

Yes, that's correct.

We would 18 stipulate that if EOI did not receive funds from Gulf States 19 Utilities under its agreement and indirectly from Cajun, it 20 could not operate the plant.

It is not financially 21 qualified in its own behalf.

That's not a matter at issue 22 That's disclosed in the application.

23 JUDGE COTTER:

All right. LYour stipulation is 24 accepted.

Thank you.

25 MR. PEMBROKE:

Finally, with regard to the ANN RILEY & ASSOCIATES, LTD.

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necessity for this Board to determine the Louisiana. state 2

law issue regarding the efficacy of GSU's agency authority, 3

rather than being tertiary or secondary or premature late, 4

since GSU is predicating its filing on an agency power which 5

Cajun is disputing in this proceeding, it is incumbent upon 6

the Board to make a determination as to whether or not the 7

agency relationship is being properly exercised.

Absent 8

that, we have a license number request which is being.

9 opposed by one of the licensees, co-licensees of the 10 project, and that determination -- while it will require 11 some analysis of state law -- is one which is a predicate to 12 this Board's determination that the license amendment 13 application has been properly filed.

14 Finally, with regard to the status of Cajun's 0

15 April 26th pleading, Cajun's April 26th pleading was filed 16 in response to the Commission's Federal Register notice of 17 March 25th regarding the transfer of ownership.

This 18 proceeding and the related proceedings throughout the other 19 jurisdictions have resulted in the death of a lot of trees 20 from the filing of papers around here, and to the extent 21 that Cajun adequately asserted its position in the April' 22 26th pleading that is before the Commission and before this 23 Board for consideration'particularly in light of the fact 24 that it was a timely motion to intervene and attach the 25 April 26th motion to the amendment.

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That's all I have, Your Honor.

2 MR. REIS:

Your Honor, the very fact of the April 3

26th petition and the Federal Register notice that precedes 4

it shows that this Board does not have jurisdiction over 5

those issues.

It is a different matter and it is totally 6

separate from this.

As far as, if I can add, the fact that 7

we shouldn't wait for all state decisions, but could go 8

ahead and otherwise the Appeal. Board and the Commission has 1

9 indicated that there would be untoward delay and we would 10 never get anything done if it was an Alphonse & Gaston l

11 situation, everybody waiting for everybody else to complete i

j 12 things.

l 13 I think there are some cases that I would like to l

l 14 cite to the Board at this point.

I wasn't aware'of them l

l C:)

15 that this would be a major issue or an issue that cases i

l 16 should be cited at the time I filed my pleadings.

I would 17 like to cite the most recent one,-is the Kerr & McGee case, i

18 CLI 82-2, 15 NRC, 232 and particularly 269.

And another 19 case and the cases cited therein is the Perry case a 20 Cleveland Electric case at ALAB 443, 6 NRC 741, 748.

That 21 cites some earlier cases and quotes some earlier cases and 22 essentially that we should not await possible action and an-23 interpretation of a contract that is particularly subject to 24 state law.

Although that case didn't deal with a' contract 25 particularly, but it should not await a determination of'

)

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state legal matters before the Commission and the Board goes l

0 2

ahead.

1 3

I think that's all I'd like to say at this point.

4 JUDGE COTTER:

Is there any more to be added to 5

this issue of standing?

6 MR. PEMBROKE:

Two clarifying points, Your Honor.

7 First, lest I be misunderstood, I'm not requesting that this 8

Board or the Commission defer its decision in these matters i

9 pending a resolution of the agency _ issue before a state 10 court.

Cajun's position is that the license of an 11 application being predicated upon is the existence and 12 proper operation of this agency relationship is a matter 13 which is to be determined by this board in order to i

h 14 determine of the license of an application is properly O

25 before it.

l I

16 Second, with regard to Mr. Reis' comment that the 17 transfer of ownership activities are somehow in a different 18 docket, I would just refer the Board to the Commission's 1

19 August 19th-order establishing this Board which states that 20 the, quote, "The proposed amendment would revise the license 21 to reflect a change in ownership of Gulf States Utilities."

22 So I think this matter clearly is before this Board in j

23 accordance with the Commission's August 19th order.

i 24 JUDGE COTTER:

All right.

Anything further on 25 standing?

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l 52 j

l 1

MR. WETTERHAHN:

We would agree with the staff l gg l MF 2

that the April 26th submittal was not before this Board and I

i 3

it relates to matters not before the Board, subject of a j

4 separate Federal Register notice that the reference to the 5

Board's jurisdiction as defined by the Commission relates to A

health and safety of the public rather than anti-trust or i

/

anti-competitive aspects.

8 One final word, I will just reiterate that as to I

9 off-site property the Cajun as well as any other legal l

10 entity which owns off-site property is protected by the l

I 11 Price Anderson amendments.

Who operates the plant doesn't l

12 affect their protection and their financial protection and 13 financial interest.

14 JUDGE COTTER:

Why don't we take a seven-minute 3

\\.-]

15 break and then we will come back and talk about contentions.

16

[Brief recess. )

17 JUDGE COTTER:

The hearing will come to order.

18 We will now get the parties' positions on the contentions.

19 This time, Mr. Pembroke, I will not start you in the middle 20 or at the end.

If you would proceed.

21 MR. PEMBROKE:

By large part, Your Honor, I was 22 expecting to be responsive to the other parties' statements 23 on our contentions.

Our contentions are as reflected in the 24 pleadings and summarized in the August 31st pleading with 25 regard to the each contention that had been filed.

Would 10

(_)

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you like for me to go through and comment generally on it or 2

respond to --

3 JUDGE COTTER:

If you are satisfied with your 4

statement of it and you don't have anything to add to it, 5

then let's not repeat it all.

6 JUDGE COLE:

Mr. Pembroke, can it be safely said 7

that you have proposed seven contentions and they are 8

articulated in the August 31st document?

9 MR. PEMBROKE:

That's correct.

10 JUDGE COTTER:

We will leave it at that.

11 MR. PEMBROKE:

Yes, sir.

I may have some 12 substantial comments in response to staff and GSU, but they 13 stand as pleaded, Your Honor.

14 JUDGE COTTER:

All right.

O 15 Mr. Wetterhahn?

i 16 MR. WETTERHAHN:

I'm looking first at footnote 3 17 to Mr. Pembroke's pleading which talks about a reservation 1

18 of his right to file additional or amended. contentions.

19 JUDGE COTTER:

What-page is that?

20 MR. WETTERHAHN:

Page 6, footnote 3.

21 JUDGE COTTER:

We can go over that.

22 MR. WETTERHAHN:

I understand then that this is a 23 list of his proposed contentions.

I will brierly summarize 24 our position on each one of these, reserving our right to l

25 submit a formal pleading on the record on that.

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i 54 1

JUDGE COTTER:

A written statement of your 2

position.

l 3

MR. WETTERHAHN:

That is my understanding of the 4

board's wishes.

5 JUDGE COTTER:

Right.

6 MR. WETTERHAHN:

I will look at these contentions 7

and speak to them as they are numbered and underlined.

I 8

will take those as the statement of the contentions, and the 9

remainder being the bases.

It is very difficult in some of l

10 these contentions to determine what the contention is.

I 1

11 won't go through, again, the standards for-particularity and I

l 12 bases which are required.

We will do so in our brief.

13 JUDGE COTTER:

Good, good.

Thank you.

14 MR. WETTERHAHN:

Also, I needn't remind the board.

j

!O 15 that it must determine in which proceeding each of these 16 contentions is being filed, such that if it finds standing 17 in one but not both of the proceedings, it can make a l

18 determination of whether the contention should be admitted.

19 The first one relates to the proposed interest in 20 interest of Conar's wholesale customers and customers that-21 may be affected by the outcome of the Cajun and Texas 22 litigation.

This contention has several deficiencies.

As 23 we view it, it talks to competitive antitrust matters.

24 Wholesale customers -- their interests are purely economic; 25 the public interest generally -- a reference to that does ANN RILEY & ASSOCIATES, LTD.

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not support contention.

2 If we look further in the contention, it talks 3

about the board examining the potential effects of the 4

possible outcome of the Cajun litigation.

Well, whatever 5

outcome is going to be, is going to be.

At this point in 6

time, it is impossible for anyone to try to predict what is i

7 going to happen as a result of litigation in these 8

proceedings and there is no reason given how the board would 9

proceed to try to determine the possible outcome of this 10 litigation and how it is_ relevant to the question before the 11 board, to an issue before the board.

12 The first one, Cajun's lawsuit against Gulf 13 States, as I understand it, is not scheduled to go to trial l

l 14 before 1994.

We can't expect the final outcome until long.

l 15 after that.

I don't think there is any way that the board 16 could delve into possible outcomes.

f 17 What range of outcomes should it look at?

It is l

18 not specified here.

I'm sure Cajun believes it is going to 19 be victorious, I am sure that is.their. belief, but there is i

20 no basis for stating that they will be victorious.

As a 21 matter of fact, I believe that the administrative law --

22 JUDGE COTTER:

Your objection, I take it, is that 1

23 it is speculative?

)

24 MR. WETTERHAHN:

It is speculative, remote,

)

25 related to financial -- it doesn't relate to the two 4

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particular contentions.

2 JUDGE COLE:

The two applications.

3 MR. WETTERHAHN:

The two applications, I'm sorry.

4 The suit is against Gulf States.

Whether this 5

'nerger ever takes place and whether EOI operates the 6

facility or not is not related to the outcome of this 7

litigation.

If this merger never occurred, we'd still have 8

litigation, so it is not related.

I. don't believe that 9

there is a remedy that this board could construct if this 10 litigation wasn't concluded.

11 So I believe that it is too general and doesn't 12 have the proper specificity which is required.

There is not i

[

l 13 an issue that we could meet and contest.

14 With regard to the second contention, it says --

15 and the words are important here -- that "The amendment may 16 result in a significant deduction in the margin of safety at 17 River Bend."

18 Well, what is that the test for?

That is the test 19 for whether the licensee or the amendment should be issued 20 before or after a hearing is held.

That is an issue with 21 regard to the significant hazards consideration finding 22 which the Board has noted and counsel-for Cajun has conceded 23 is not a matter before the Board.

24 This matter, this issue, relates to the 25 significant hazards consideration.

The margin of safety is O

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one of the tests for significant hazards consideration.

2 Given that wording, it is entirely inappropriate for-3 consideration by this Licensing Board.

I 4

Moreover, the margin of safety we are talking l

5 about is not specified in this contention.

It rambles on 6

about thinly capitalized.

We won't get into that.

But it 7

doesn't present a direct and specific litigable matter 8

before this Licensing Board.

9 With regard to Item 3,

" Cajun's Consent," we have 10 discussed that before.

We don't believe for-the reasons l

11 discussed in the context of standing, and as indicated by 12 counsel for the staff and the cases that they cite, that 13 questions of state law, as the Appeal Board said, are beyond 14 its ken.

The Board should not have to probe into these 15 matters.

16 With regard to Item 4, it relates.to Cajun's 17 rights regarding the operation of River Bend.

Well, again, 18 this is a contractual matter.

For the' Board's benefit, let 19 me cite a ruling by Judge Leventhal in the FERC case on'page.

20 21.

He cites the testimony of an Applicant's witness.

i 21

" Gulf States has represented to Cajun that the 22 proposed arrangements between Gulf States and EOI will not 23 adversely affect Cajun's current rights to information and 24 access to the River Bend site its right of access to

{

25 auditors, audit reports,. and other reporting data, and other l

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I 58 s

1 rights under its existing contractual arrangements with Gulf 2

States."

3 1 am omitting the footnote.

Judge Leventhal.

4 continues:

"Even if Cajun does not take the witness' 5

assertion at face value, it can certainly enforce its

-l 6

contractual rights in an appropriate forum."

7 That mirrors our position, that it is a 8

contractual matter.

Their rights have not been affected by 9

a third party contract.

10 If I, as a lawyer, could affect one party's rights 11 by contracting with a third party, I would be the first to 12 do it.

But it is clear under the law that we cannot affect l

13 the agreement between Cajun and Gulf States by a third -

14 party contract.

Cajun has rights under that Joint Operating O

15 Agreement, and it can enforce those rights.

Those rights 16 are not changed by this amendment.

17 With regard to Item 5, the license conditions, I 18 don't think that is really a contention.

That is a relief.

19 In any event, these are the suggested changes of contractual 20 matters.

Let us look at the eight enumerated changes on 21 page 18.

22 JUDGE COTTER:

Let me go back to 4 for a minute, 23 Mr. Wetterhahn.

24 MR. WETTERHAHN:

Yes.

25 JUDGE COTTER:

Are you.saying that under the Joint ANN RILEY & ASSOCIATES, LTD.

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s 59 1

l 1

Operating Agreement that Cajun can have the same voice in 2

the operation of the plant that it does now?

3 MR. WETTERHAHN:

Yes, it has the same rights under l

l 4

the new operation.

5 JUDGE COTTER:

I didn't say that.

I said:

Would 6

it have the same voice in operating the plant that it does j

7 now?

1 I

8 MR. WETTERHAHN:

Yes.

9 JUDGE COTTER:

So, it could go to the plant l

10 operator and exercise whatever --

s 11 MR. WETTERHAHN:

Whatever rights.

Let me make 12 clear those rights are not related to safe operation. Those 13 decisions related to safe operation of the plant must be 14 located in a single entity.

The NRC must'look to a single 15 entity to make those rights.

i i

j 16 Certainly before Gulf States Utilities, or after i

l 17 the amendment, EOI would listen to all the parties.

It l

18 would listen to Gulf States.

It would listen to Cajun.

But f

19 as to safety matters, it still has to have the final say.

l 20 There is no question about it j

21 But as to access for information, and the ability l

22 to recommend matters, I don't see any difference.

I think i

i 23 that is the import of the stipulation that the company was 1

24 willing to give.

j l

25 JUDGE LAM:

Who has the final say on the safety i:-

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matters?

2 MR. WETTERHAHN:

After the EOI amendment is 3

approved, EOI will have the final say on safety matters as 4

to whether the plant can be safely operated, or must be 5

safely shut down.

6 If it makes that determination, that determination 7

is binding on the owners.

It can't be any other way.

That 8

is the same way as it exists now.

Cajun can make 9

recommendations, can visit with the Company, but Gulf States 10 Utilities, presently the operator of the plant, has the 11 final say in operating the plant.

12 JUDGE COTTER:

EOI doesn't have to listen to 13 Cajun.

14 MR. WETTERHAHN:

But it is indicated it will

(

15 listen to Cajun.

16 JUDGE COTTER:

That's very nice, Mr. Wetterhahn, I

17 but I don't think that is the kind of thing that you would 18 advise a client to hang your hat on.

19 MR. WETTERHAHN:

Well, as to safety matters, I I

20 think it has to be the way you have to hang your hat on.

I l

21 don't think the Commission --

22 JUDGE COTTER:

No, no.

Now wait a minute.

There 23 is a difference between a contractual obligation and what is i

24 nice.

There is no contractual obligation-here on the part 25 of EOI to be responsive to Cajun.

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l 1

MR. WETTERHAHN:

Certainly, right.

If Cajun is 2

injured by the fact that EOI doesn't follow its 3

recommendation, its remedy is clearly not against EOI.

It l

l 4

is against Gulf States Utilities.

5 The measure of the damages is contained in the-6 Joint Operating Agreement.

We can't change that by sub-l 7

contracting, or sub-delegating the right to operate the 8

facility.

1 9

But the rights between Cajun and Gulf States are 10 contained in this document.

To the extent that EOI seeks to 11 limit its obligations against Gulf States, that may be one 12 thing.

But as to Cajun's rights against Gulf States, it's i

13 determined by the Joint Operating Agreement, and wouldn't be 14 affected by that.

I 15 JUDGE COTTER:

The Joint Operating Agreement has 16 to do with the operation of the plant.

17 MR. WETTERHAHN:

That is correct.

18 JUDGE COTTER:

And Gulf States isn't operating the l

19 plant anymore under this regime.

20 MR. WETTERHAHN:

Certainly, but Cajun has the 21 right to have the plant operated using good utility 22 practice, for example.

And if for any reason it believed 23 that it wasn't operated using good utility practice, its remedy was against Gulf States Utilities for damages.

24 l

25 JUDGE COTTER:

That is after the fact.

Now maybe l

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1 I do not have a clear grasp of the joint operating agreement i

2 but as it stands now, Cajun has a right to go directly to I

j 3

Gulf States and deal with them on whatever aspect they want i

{

4 to in the operation of the. plant.

Is that not correct?

i 5

MR. WETTERHAHN:

That's correct.

i j

6 JUDGE COTTER:

And under this new regime they l

7 would not be able to go to the plant operator; they would j

8 have to go to a third party and say would you please go to-t i

I 9

the plant operator.

t 10 MR. WETTERHAHN:

As we envision the operation of l'

j 11 the station, as discussed in the initial decision, and.has i

12 been discussed among the parties, they would have 13 substantial say and they would have in effect --

i 14 JUDGE COTTER:

Is.that in writing anywhere?

i 15 MR. WETTERHAHN:

It's been proposed.

Yes, sir.

j 16 JUDGE COTTER:

It's not in writing now?

j 17 MR. WETTERHAHN:

As a proposal, that's correct.

I 18 It's in the --

l 19 JUDGE COTTER:

It's in the same status as the 1

)

20 litigation that you don't want us to wait for?

j 21 MR. WETTERHAHN:

No, it's in the -- it's' Cajun's I

22 ball park.

They have the offer and they can deal with it.

23 I'm not trying to influence the Board or-influence Cajun but i

24 that's the proposal that was made and I'm sure'that Mr.

a 4

25 Pembroke will confirm that is the proposal on the table.

i t

ij'.

j.

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I 63 1

JUDGE COTTER:

The proposal is a direct k

2 contractual relationship between Gulf, Cajun, and EOI?

_j i

3 MR. WETTERHAHN:

Yes, it would have those elements i

4 in it.

-i 5

JUDGE COTTER:

And you think we should act on that 6

one but not act on the accompanying litigation?

i 7

MR. WETTERHAHN:

No.

No, I am saying as a legal 8

matter, and I think you have pinpointed it, these are 9

contractual matters.

f 10 The Commission has determined that presently Gulf j

11 States Utilities has the technical qualifications to operate 12 the facility.

In making the decision whether to amend the-13 license to allcw EOI to operate the facility, it will make l

14 similar findings.

l(

)

l It does not rely presently on any technical i

15 r

l 16 qualifications of Cajun with regard to operation of the i

17 facility.

It's found no technical qualifications in l

1 la granting the license.

That's why it's licensed not to i

19 possess -- to operate the facility but merely to own or to 20 use the NRC terminology, to " possess" the facility.

l l

21 Therefore, its interaction with Gulf States 22 Utilities is a matter of economics, of scheduling, of 23 matters such as this and not safety issues which are issues 24 before this licensing board.

25 JUDGE COTTER:

Does it have the-right under the

)

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l-l 64 a

1 agreement to raise safety issues with Gulf States Utilities i

2 now?

3 MR. WETTERHAHN:

Yes, and.it will have that right 4

to raise safety issues with EOI as any-individual or any 5

company does, and I would assume should it not be satisfied, 6

that the plant is not safely --

f 7

JUDGE COTTER:

You are not representing to me,-Mr.

l l

8 Wetterhahn, that Cajun is going to have the same rights vis-l 9

a-vis EOI as it does vis-a-vis Cajun under the joint i

10 operating agreement, are you?

j 11 MR. WETTERHAHN:

I think it has exactly the l

12 same 13 JUDGE COTTER:

I don't see how you can, since j

i 14 there is no written agreement.

l r

15 MR. WETTERHAHN:

I don't think under-the NRC 16 precedents that we could prevent and we could' encourage'as'a 17 matter of fact Cajun from raising safety issues.

Certainly j

j 18 they would be heard by either River Bend or Gulf States 1

19 right now or Cajun but to the extent that a decision --

20 JUDGE COTTER:

We're going back over the'same j

21 ground.

22 MR. WETTERHAHN:

-- to the extent a decision has 23 to be made, that decision has to be made by the entity l

24 having the technical qualifications.

In any event, if it is 25 dissatisfied like anybody else it can raise matters with the i

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NRC.

2 JUDGE COTTER:

They could file a 2206 petition.

3 MR. WETTERHAHN:

And I'm sure it would be heard.

4 Let me return to i

l 5

JUDGE COTTER:

I think there's an issue here 6

somewhere and that's why I am annoying you.

What I'm saying 7

is there's a safety issue here -- there may be a safety 8

issue somewhere.

9 MR. WETTERHAHN:

There may be a glimmer of an l

10 issue but our dialogue should not have to unearth it.

I

)

l 11 think it is up to the Petitioner to specify a_ safety 12 contention and I'd be glad to continue the dialogue but i

13 clearly under Commission precedent the burden.is on.the.

)

14 Petitioner to identify with specificity and particularity O

1 15 the safety issue that is involved and I_have got to say, i

16 reading all these pleadings, I haven't seen that.

l 17 identification of a specific litigable safety issue.

18 JUDGE COTTER:

I am not sure that I have the same 19 vision that you do and I thought maybe I could your 20 expertise to clarify mine.

21 MR. WETTERHAHN:

Okay.

Does the Board have any 22 further questions with regard to this?

j 23 JUDGE COTTER:

Why don't you proceed.

24 MR. WETTERHAHN:

The issues marked 1 through 8 on 25 page 18 are really asking the Board to change the O

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1 contractual relationship among the parties, and while that 2

may be volunteered or agreed upon, there is no basis under.

3 the Commission's jurisdiction having to do with safety to 4

impose such conditions.

i 5

With regard to Item 6, this relates, as I read it, j

6 to antitrust matters, which is clearly beyond the

]

l 7

jurisdiction.

We are talking about the transmission of the 8

output of the facility, access to transmission, and the l

9 Contention 6 is a matter related to antitrust matters.

i 10 I think that is abundantly' clear.

It's a matter i

11 which I understand has also been given some consideration i

12 before FERC but as I mentioned in the context of standing, 13 antitrust matters as to this merger are being considered 14 separately pursuant to a separate Federal Register notice i

O

'i 15 cited by the Staff.

l 16 I believe that covers all the contentions, at i

17 least briefly.

1 l

18 JUDGE COTTER:

All right, thank you, Mr.

l 19 Wetterhahn.

Mr. Reis?

20 MR. REIS:

Yes.

Of course at this time, this will 21 not be our final position on the contentions.

We intend to 22 file something and we will at'that time. fWe do view these 23 though as the definitive contentions of the Petitioner and 24 any changes that he wishes to make or additions would have 25 to be governed by the rules on how those changes or Os ANN RILEY & ASSOCIATES, LTD.

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additions have to be made,.and I particularly am talking i

2 about 2. 714 (a) (1) uf our regulations.

3 Going to the first item, the first item by its 4

terms a competitive or anti-trust matter and the notice of 5

hearing setting this proceeding down itself-said that that 6

is not involved in this, but it was noticed previously in 7

the March 25th notice in'the Federal Register and that 8

appears in the notice of July that it was noticed 9

previously, and so the earlier matter involving anti-trust 10 issues is not before us.

11 In order to get a hearing, the Staff has to first

)

12 make a determination if there has been a significant change.

13 The Staff is still considering that and, at'that time, will i

l 14 take whatever action is appropriate after it makes that l

15 determination.

l l

l 16 Going to the Contention Number 2, the very fact-i 17 that it is a matter that might also be relevant to a no 18 significant hazards consideration doesn't mean that a safety l

19 matter cannot come before a licensing board, that is not the 20 test.

The fact that the Staff makes a no significant f

21 hazards determination, which is definitive for the primary l

22 issuance of an amendment doesn't mean that the licensing 23 board can't consider the matter later and say, " Hey, the i

. i 24 amendment was improperly issued on safety grounds or another 25 grounds that it faces at that time."

We do have some I

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questions and great questions about the basis and (k

2 specificity set out herein and, generally, on a preliminary

[

i 3

reading of this, and I do not feel that it is set forth with i

4 the basis and specificity required in 10 CFR ' 2.714 (b) (1)- or l

5 (2), particularly (2).

6 JUDGE COLE:

Mr. Reis?

7 MR. REIS:

Yes, sir, i

8 JUDGE COLE:

What is the status of the no j

9 significant hazards determination by the Staff?

l' l

1 L

10 MR. REIS:

It is still pending, sir.

l 11 JUDGE COLE:

You don't have a schedule for that, I

l 12 no estimate of when it will be finished or out?

13 MR. REIS:

No.

There is none.

The matter

{

14 involving what I guess are EOI's operation, the' licensee has f

Q 15 informed me that they will not be ready for EOI to take over f

f 16 in any event until some time after. November 1st.

I don't i

17 know exactly which date.

It would be well for us to be able

~

18 to act by that time, but it is not something we have acted

-I i

19 on as yet.

l 20 JUDGE COLE:

All right.

21 MR. REIS:

As to Contention Number 3, it was a 22 matter that I talked about before on State law and State i

a 23 agency and if Cajun really -- I think it is a matter -- I l

24 know there is a lot of litigation pending between the f

25 parties, but certainly it is a matter that if Cajun felt i

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1 strongly on or GSU felt strongly on is a matter that a i

2 summary disposition proceeding could be brought in the 3

state.

It is something we should not be facing.

+

l 4

On Contentions 4 and 5, which are in somewhat i

e 5

similar -- 4 has essentially the same license conditions as

]

6 the matters it sets forth as detrimental impacts and'how l

4 l

7 they can be remedied.

Let me point out first that Cajun is l

f 1

i l

8 also a licensee, and Cajun as a licensee has duties as well.

l 9

It doesn't have the primary duties of an operator to operate 10 the plant safely, but it has duties to see that a plant'is j

11 safely operated and, be it through the operating agency or 12 whatever, Cajun is still looked to to be responsible for the 13 health and safety of the plant.

Now, it may not have the 14 duty to operate the plant but it still has a duty to 2

15 maintain a safe plant.

16 Therefore, I can't be as sanguine that nothing set 17 forth therein cannot be raised before this Commission and 18 before this Board.

There is still duties of Cajun as a 19 licensee, and they are saying their duties, as I read this, 20 as a licensee to be concerned about health and safety are 21 being affected because they don't have' direct privity 22 anymore with the new operator, and some of these conditions 23 may be things that may be appropriate if there is the proper 24 basis and specificity set forth in 4 and 5, and I really 25 haven't given it enough time yet, or the Staff hasn't given ANN RILEY & ASSOCIATES, LTD.

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it enough time to focus on that and talk about that.

2 The next thing is 6.

3 JUDGE COTTER:

Before you get to 6, if, in fact, j

l 4

you were to conclude that the lack of privity affects

)

l 5

Cajun's duties to the health and safety of_the plant, would 1

6 you conclude then that it would be appropriate for this j

7 Board to impose either some kind of condition on the EOI 8

Operating Agreement or to require some sort of --

l 9

MR. REIS:

Not on the operating agreement but on 10 the license itself.

I don't think-you can change, 11 necessarily, the operating agreement, although you may 12 indirectly, but the license can certainly have a condition 13 that Cajun shall be heard as to these matters not have the 14 definitive word.

The safety and the operation of-the plant, i

15 as Mr. Wetterhahn well said, we look to one person to 16 operate that plant.

We don't want to mess it up.

i 17 But certainly, as an owner of the plant, Cajun has 18 a duty to see that that plant is safely operated as well, i

19 and should definitely have the ability to communicate 20 directly with the operation of the plant, and whether we 21 view it after a proceeding to determine that a license j

22 condition is appropriate, we can look at that at'that time.

23 I don't know yet, I don't even know whether there

]

l 24 is enough specificity in basis here to day that.

t

)

25 JUDGE LAM:

Mr. Reis, would you clarify what you O

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just said about Cajun being a co-licensee.

In light of_the 2

joint ownership and agreement, Cajun is not responsible for i

3 running the plant.

4 MR. REIS:

Yes, but Cajun may not be responsible 5

for running the plant, I agree.

We look to one person to 6

run that plant and one person we can hold responsible, but 7

all licensees, be they owners or not, have duties under the.

8 Atomic Energy Act and our regulations, and those duties are 9

be it somewhat of an oversight function.

.They are'not 10 supposed to walk away and say, " Hey, Entergy Operations has 1

l 11 this and we can forget about it and we can completely walk l

12 away."

We think it is a two-way street, they have duties 13 and they have responsibilities.

14 JUDGE LAM:

But how are these duties partitioned?

lO T

15 MR. REIS:

How are they done, by counselling.

16 They don't have the primary duty to run the plant, but they i

17 have a duty and have a responsibility to-counsel and to make l

18 recommendations.

If they wantEto see the INPO reports and 19 think they are necessary for them to perform their' duties, 20 they ought to have a right to see the INPO reports.

They 21 ought to have a right to have a say in how much money is 22 spent on maintenance of the plant.

23 JUDGE COLE:

They currently do not have the right 24 to see the INPO reports related to the plants.

25 MR. REIS:

I don't know.

What they want is a O'

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72 1

contractual right to say it and a contractual right or a l

i 2

license right may be something that is appropriate.

I don't l

~'

3 know whether they do or not.

I hear Mr. Wetterhahn saying, 4

Oh, we'll give it to them, but it is not contractually there i

5 where apparently when -- or is there presently when GSU runs 6

the plant.

And it's just a matter of degree.

I think it's 7

a matter, certainly, that a few heads could be knocked i

8 together and we could get some agreement on it.

I don't see 9

it as a --

10 JUDGE COLE:

It sounds like something that could

[

11 be worked out?

12 MR. REIS:

Yes.

But the question was, do'es Cajun-

[

l i

13 have an interest in the safe operation of tlua-plant and, 14 yes, it'has a duty and a responsibility there -- the primary 15 responsibility and we look to one person,.the operator.

i 16 They are also a licensee and they have duties as a licensee j

17 although it's a licensee as an owner.

18 Now, can I go to 6, or are there more questions on i

19 4 and 5.

20 JUDGE COTTER:

Go to 6,

please, j

21 MR. REIS:

Okay.

On number 6, the. interchange 22 agreement and anything -- this is a matter of contractual l

23 law between the parties, 2206 petition, and the question 24 came up before about a Commission grant of 2206 petitions.

25 And I will say that.particular in the antitrust field -- and t

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I know -- and there are at least two cases where 2206 2

petitions were granted in antitrust as to competitive 3

matters, even as to safety matters I would point to the 4

important matter involving environmental qualifications and 5

the UCS petition.

The Commission granted in substantial I

6 part that petition of the Union of Concerned Scientists

)

7 involving environmental qualification and formulate 8

regulations after that petition came in.

So, 2206 petitions 9

aren't just an empty exercise though we often say, hey, j

10 they're never granted, and smile about them.

It is not i

i 11 necessarily so and particularly in the antitrust field.

l 12 Going to contention number 7 which is license j

13 conditions must be enforced, well, that's certainly, by its l

14 terms itself, a 2206 matter.

If they're trying to get the

. O I

15 license to be enforced, that's a matter to file a 2206 l

16 petition on it and it can't be presumed that the' Commission 17 will not do its duty if it's a proper petition.

18 That's very preliminary comments on this.

We will I

19 ask for time to prepare and submit written comments on this.

20 Let me just make also one other thing, we have a prehearing 21 today, we're all here together.

Usually it's been customary 22 for Boards to have a prehearing also on contentions and hear i

23 arguments on them,.but we sort of heard them today.

Now, 24 the Appeal Board, and I can't remember the case off-hand, i

25 has said, "The Intervenor or Petitioner has a right to k

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1 respond to other parties' answers to petitions."

And we 2

would not oppose Cajun's responding to a written pleading.

3 We don't necessarily feel another prehearing is necessary-4 and we think some limitation could be put'on that response l

5 because we've had this hearing already as to the length and' l

6 the extent of that response.

But they probably-do have a 7

right to respond to our written pleadings after they come 1

8 in, be it orally or in writing.

l 9

JUDGE COTTER:

Thank you, Mr. Reis.

Mr.-Pembroke?

10 MR. PEMBROKE:

Thank you.

Turning to Mr. Reis' 11 final point, I would also urge that Cajun does have the 12 opportunity to respond to the written position of the 13 parties on the contentions that Cajun has posited and we-14 would reserve the right to do that in accordance with the 15 regulations.

16 I will also have to sign off that these are 17 preliminary responses to these preliminary comments and I 18 would like to take them in that vein.

i 19 With regard to contention number 1 --

20 JUDGE COTTER:

There is no question that this is a l

21 room full of lawyers.

)

l 22 MR. WETTERHAHN:

There are some people who may J

23 exception to that.

24 (Laughter. ]

25 MR. PEMBROKE:

With regard to contention number b(_/

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I 75 1

one, it is Mr. Wetterhahn's statement that this really t

2 involves competition and antitrust matters and indicated l

3 some concern about the ability to issue a possible remedy l

4 with regard to this contention.

There is a portion of this 5

proceeding going to antitrust matters, and certain ofLthe 6

allegations here may also be relevant to antitrust concerns,

[

i 7

but vis-a-vis this portion of the proceeding it is relevant 8

to the safety operation of the project.

We have the

(

9 pendency of this litigation which, if successful,.GSU has i

10 admitted would result into turning into bankruptcy.

.That 11 being the case, the impact of the litigation must be

.j i

12 analyzed and remedied to the extent that remedy can be i

l j

13 devised to --

3 l

14 JUDGE COTTER:

What sort of remedy would you have 15 in mind?

16 MR. PEMBROKE:

The remedies'were actually the ones l

17 that were proposed in -- I believe it.was the August 17th 18 hearing, and that is that in the event of a GSU bankruptcy l

l 19 one of two things would occur:

either that prior to 20 bankruptcy and prior to the resolution of the River Bend

+

21 litigation that it be appropriate for this Commission to-l 22 require as a condition of the license that Entergy 23 Corporation extend its credit to and otherwise stand behind-24 GSU in the event of a River Bend litigation victor for 25 Cajun.

Or in the alternative that it extend its credit and i

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indemnify and fund EOI operation of River Bend should-the O

2 GSU become bankrupt in this situation.

3 JUDGE COTTER:

So you would reasonably expect us 4

to issue a decision that said that if this happened, then 5

this, or if that happened, then that?

6 MR. PEMBROKE:

No, not -- just, if in the event 7

that Entergy -- strike that.

In the event that GSU is.

8 unable to fund a Cajun judgment or unable to properly, fund 9

EOI operation of River Bend, that the resources of Entergy 10 Corporation should be made available to those two entities 11 in order to maintain a safe operation of the plant.

So_

12 there is a triggering mechanism, but not a series of hoops 13 that you must go through.

14 JUDGE COTTER:

I don't think I've ever seen a O

15 decision like that.

If the sky falls tomorrow we'll-have a.

16 recourse.

t 17 MR. PEMBROKE:

Well, I'think it's a bit.different j

18 here in that we do have statements by GSU.to, for' instance,.

19 the Securities and Exchange Commission which indicate'that 20 they would become bankrupt in the event of a Cajun victory-21 to the litigation.

l 22 JUDGE COTTER:

Yes, but I'm talking about the 23 simple fact that you're asking -- if I understand you 24 correctly, you're asking -- you would be.asking us to issue 25 a decision on a contingency that may or may not take' place.

1 l

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l 1

MR. PEMBROKE:

That would be correct.

As I.

1 2

understand their concerns now, yes.

3 JUDGE COTTER:

Okay.

4 MR. PEMBROKE:

But the condition would be 5

currently. extent and currently effective, but the obligation 6

to perform under the condition would be subject to a 7

condition in the future -- an event in the future.

8 JUDGE COTTER:

It is sort of like the way my kids 9

ask for money.

All right.

Go ahead.

10 MR. PEMBROKE:

Not being a parent, I missed that 11 one.

12

[ Laughter.]

13 JUDGE COTTER:

You were very lucky.

1 14

[ Laughter.]

0 j

15 MR. PEMBROKE:

I will now go to Contention Number 16 2.

That was discussed in some detail in the standing. issue.

I 17 We do feel that the contractual arrangement which is

~

18 currently proposed by GSU, Entergy and EOI will result in a l

19 lessening of the safety and reliable operation of the plant i

20 and that is a matter which-is germane t'o the proceeding and~

21 should be considered by the board.

l 22

-Contention 3 is the matter regarding the necessity 23 of having Cajun's consent to file the license amendment 24 applications on Cajun's behalf.

This, again, was discussed 25 with regard to the standing matter, but, again, I reiterate O

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78 l

1 that we are not asking the board to defer to any state 2

determination.

We don't feel it is incumbent upon Cajun to f

I

(

3 initiate a state proceeding in order to have this matter l

4 determined.

Whether or not the GSU as licensee has the 5

legal authority to file the license amendment-application on 6

Cajun's behalf ie a matter which must be determined by the 7

board, 8

If, indeed, you accept the license amendment 9

application as filed, you have at least sub rosa determined 10 the legal issue that they do have the right to file this 11 licensing amendment' application on Cajun's behalf under the

(

12 JOPOA, under the Joint Operating Agreement.

It is a matter 13 which must be resolved now and not with deferral to a state 14 proceeding.

It is a. matter which this board is able to and O

15 should resolve.

t 16 With regard to the fourth contention that Cajun's 17 rights regarding the operation at River Bend would be 18 limited by'the proposed license amendment, I believe that I

19 Judge Cotter's questions went directly to'the point in that f

20 we've been. asked for a long time by GSU to trust them on 21 these matters; trust them, we'll do this; trust them, we'll 22 do that.

l l

23 What we need is contractual obligations to require-24 that Cajun have direct contractual relations with EOI in 25 order to be able to have input into EOI's decisionmaking ANN RILEY & ASSOC.TATES, LTD.

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1 process and to assure that the plant is running in a safe r

2 and reliable fashion, and the relief sought there primarily 3

is that'there will be a tripartite agreement among EOI, 4

Cajun and GSU.

5 With regard to Mr. Wetterhahn's discussions 6

regarding settlement negotiations, I'd be happy to confirm 7

that settlement negotiations are going forward.

We have not 8

come to any resolution'in those matters.

To indicate that 9

the tripartite arrangement is one that will be part of the 10 settlement, although Cajun will be pleased to hear that if 11 it is part of the settlement, that'has not yet occurred, i

12 nothing has been executed, and we are negotiating.

13 JUDGE COTTER:

If the tripartite arrangement 14 became final, would that take care of all your concerns, Mr.

O' 15 Pembroke?

16 MR. PEMBROKE:

No, sir.

It would take care of 17 some of the concerns, but not all of them.

Much would have l

l 18 to do with the nature of the rights which are included in-19 the tripartite arrangement.

Merely having a three-party.

l l

l 20 agreement, although the first big step forward, doesn't 21 resolve Cajun's concerns with regard to the nature of the l

22 rights which it would have vis-a-vis --

23 JUDGE COTTER:

The devil is in the details.

24 MR. PEMBROKE:

I am sorry?

25 JUDGE COTTER:

The devil is in the details, as i

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i l

i 80 I

l I

l 1

we're hearing these days.

l l

2 MR. PEMBROKE:

Yes, sir.

3 JUDGE COTTER:

But otherwise it would resolve your 4

concerns?

5 MR. PEMBROKE:

Solely with regard to the nature of l

l I

6 the parties to the agreement.

As I understand Mr.

7 Wetterhahn's statement, that's the extent to which his l

8 representation went and that is to who would be.the parties 9

to the agreement.

If that were the case, that would take 10 care of Cajun's concerns with regard to the privity of

)

i 11 contract with EOI, but then the nature of that contractual i

12 relationship must also be analyzed to determine if the 13 rights which Cajun gets under the tripartite agreement are 14 those which are adequate to protect its interests and the O

15 safe and reliable operation of the plant.

16 JUDGE COTTER:

Right.

I was assuming that.

If i

j i

17 those details were satisfactory, then that would resolve all 18 of this for you?

l 19 MR. PEMBROKE:

If we have a deal, then everything 20 will be resolved.

21 JUDGE COTTER:

Thank you.

22 MR. PEMBROKE:

And the devil is in the details.

23 With regard to Contention Number 5, I concur with l

24 Mr. Reis's comments that Mr. Wetterhahn's concerns with 25 regard to the remaking of a contractual relationship are not

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i 81 1

significant in that the Commission does have the right to j

2 impose conditions upon a transfer of its license which could 3

grant Cajun the relief requested in this contention.

4 Particularly, I note that on page 18 of the pleading, we are 5

asking for license conditions which would take care of these 6

matters.

7 With regard to Contention Number 6, and that is 8

the impact of the merger on the interconnected operations of

[

9 Cajun and GSU, that was discussed briefly within the 10 standing section as well.

i 11 What is significant here is that, although these 12 matters may smack of items which may have been discussed by 13 the FERC, I wanted to make it clear that the FERC in its 14 January 28th order setting the merger proceeding for O

i 15 hearing, and as affirmed in.its July 1st order, did not set l

l 16 operational matters for hearing in the case. It clearly said l

17 it is outside the realm of that' proceeding,-and we were not 18 allowed to submit evidence on the nature of the impact of-r I

l 19 the merger on operational activities between Cajun and GSU.

20 The transfer of the ownership of the plant is what l

21 gives rise to these concerns of the interconnected operation 22 of Cajun and GSU.

Because of the change in the nature of i

23 the entity that Cajun would be dealing with from the current 24 status of GSU which has obligations to its common l

l 25 shareholders and to its ratepayers in Texas and Louisiana, i

l I

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1 the entity which Cajun will be dealing with after the merger O

\\_/

2 is consummated, if it is, would be an entity which reports 3

to the Entergy board of directors now covering five states, 4

five nuclear plants and five operating companies.

The 5

interests which then GSU must serve are not those of its t

6 Texas and Louisiana ratepayers or of its interconnected

(

7 customers and other' entities dealing in its control area,in l

8 and around the control area.

l 9

The impact on Cajun's operational rights under the l

10 Power Interconnection Agreement must be determined by the 11 board, particularly since the Power Interconnection 12 Agreement in certain part was developed as a result of the 13 license conditions which required GSU to transmit. bulk power 14 on behalf of the entities within its geographic area.

15 With regard to contention number 7, with regard to 16 license conditions, 2207 may be a reliable mechanism to have 17 the performance of GSU with regard to this license l

18 conditions reviewed, but we are in a position now of having 19 the license, the operating license, transferred from GSU to 20 EOI and a great interrelationship between GSU and Entergy 21 Corporation and all of its subsidiaries, so it's significant 22 at this point in the proceeding to determine whether or not 23 the new Licensee or the new Co-Licensee, how it views its 24 obligations under license conditions 10 and 12 and if it 25 does not intend to comport with license conditions that this l

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is a matter which should be set for hearing in this license

(

2 amendment proceeding to determine what the position of the 3

new Licensee may be in these matters.

4 JUDGE COTTER:

All right.

5 JUDGE LAM:

Mr. Pembroke, I would like to go back-6 to contention number 2.

7 I would like to ask if you would be more specific i

8 in describing how a potential lack of finance or. resources 9

could lead to a reduction of safety margin.

10 can you give the Board some examples of how this 11 argument would go?

12 MR. PEMBROKE:

Yes.

The prime' example is one-13 which was brought to surface at the FERC merger proceeding.

14 There both the Chief Executive Officer of Entergy 15 Corporation, Edwin Lupberger, and the CEO of EOI, Inc.,

16 Donald Hintz, was examined on the contractual relationship i

17 that is proposed between Entergy, EOI, and Gulf States.

18 It was determined in that proceeding that Entergy.

19 views its obligations to support EOI in the event of a lack 20 of funding from GSU to EOI to be very, very limited and that 21 the EOI would be forced if it lacked adequate funds to 22 properly operate the plant would be forced to shut.the plant 23 down.

)

i 24 Now two questions arise from that.

First -- three i

25 questions arise from that, at least.

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First, can the plant be shut down in a safe 2

fashion if EOI lacks funding and therefore does not have the 3

funds available in order to undertake the shutdown process.

4 Second, in the event that the GSU or EOI seeks 5

shutdown of the plant, it could be expected that Cajun as 30 6

percent owner of the plant would want the plant to maintain 7

operation in order to get the capacity and energy out of the.

8 plant, that that authority to. shut down the plant could well 9

be delayed, again giving problems of EOI operating the plant 10 in a safe fashion.

11 I guess those are the two that come to mind right 12 now.

Basically, it's the contractual relationship whereby 13 the lack of funding which is part and parcel and integral to 14 this contractual relationship would deprive EOI of the funds O

15 necessary to safety operate the plant and potentially to 16 safely operate the plant even during the pendency of a 17 shutdown of the plant.

j 18 JUDGE LAM:

So you don't have any specifics as to 19 how the lack of money would lead to unsafe operation?

20 MR. PEMBROKE:

I think it is quite specific, and 21 that is that the two companies, both the Entergy Corporation J

22 and Entergy Operations, Inc., have stated that there would 23 be no funding, artificial funding for EOI should GSU not pay 24 its obligations under the operating agreement.

25 Now can I say whether or not we are going to have ANN RILEY & ASSOCIATES, LTD.

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a meltdown or we're going to have lines tripping?

No, I O'

2 can't say that, but what I can say is that the companies 3

have indicated that they would shut the plant down and they-4 would not support the continued operation of River Bend j

5 absent these payments by Gulf States.

6 JUDGE COLE:

And you are talking about the safe 7

shutdown and maintaining it in a safe shutdown condition?

8 MR. PEMBROKE:

Yes.

9 JUDGE LAM:

Thank you.

10 JUDGE COTTER:

Anything further to add to this?

11 MR. WETTERRAHN:

I would like to just add a 12 notation on the procedural comment by_Mr..Reis, t

13 Before we decide whether another prehearing 14 conference is necessary, perhaps we should await the 15 pleadings and responsive pleadings and perhaps have a 1

16 conference call among the Board and parties.

Perhaps there 17 is something to be gained by way of. stipulation for other 18 narrowing of the issues at a prehearing conference, i

19 The oral interchange sometimes helps in deciding 20 and resolving issues of statement of' contentions,-for 21 example, so we wouldn't want to rule out another prehearing 22 conference at this point in time.

23 JUDGE COTTER:

All right.

24 MR. WETTERHAHN:

And rather than comment and 1

25 burden the record with additional comments, since we are l

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1 submitting a pleading, I'll address those issues in our

!N 2

response to the pleading.

3 JUDGE COTTER:

All right, good.

Then if you

}

4 would, Mr. Wetterhahn, today is the 15th, if you would.

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5 submit your written statement of position on the 29th of i

i 6

September and the Staff would submit theirs on the 13th of t

j 7

October; Mr. Pembroke would submit Cajun's responses on the i

8 27th of October.

9 We'll look at them and determine whether or not we l

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10 need any further prehearing conference before issuing a.

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11 decision on both the standing issue and the contentions j

12 issue.

j 13 At this point my instinct is we will not.

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14 MR. WETTERHAHN:

As a courtesy, we will serve i.

Intervenor in Washington and Staff by either overnight 15 l

16 delivery or messenger that day to speed their response.

~

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17 JUDGE COTTER:

That would be good, thank you.

J l

18 If I get my way, we'll have a little electronic f

19 interchange set up and everybody will get it simultaneously, i

i 20 but I'm afraid that may be a little premature for this case 21 but I am working on it.

i 22 MR. WETTERHAHN:

Certainly our firm uses j

23 Wordperfect.

We'd be glad to provide a disk for the Board i

1 24 if they wish.

25 JUDGE COTTER:

What I have in mind is a direct l

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1 computer-to-computer filing, but I appreciate the offer, 1

2 thank you.

3 We may get into that a little later if we proceed 4

to trial.

I don't see any point at this point in scheduling

.j 5

beyond that until we have a decision and we know whether.or j

i 6

not we have a proceeding.

i 7

When we issue a decision, if the decision is that 8

we have a proceeding, then we probably -- well, I' guess 9

there would be a question as to whether we'd proceed by 10 conference call or whether we'd have a prehearing conference i

11 just to set out a schedule and that sort of thing..

12 My impression is that there may be some interest 13 in doing this in Baton Rouge rather than here, even though 14 most all the counsel are here.

15 MR. WETTERHAHN:

At least as to prehearing r

16 matters, we have no objection, if the next prehearing 17 conference was held in Washington.

I'm not sure what the 18 other parties' preference is.

19 MR. PEMBROKE:

Washington, D.C. would be Cajun's 20 preference, both for the prehearing conference and perhaps 21 for the trial itself.

22 JUDGE COTTER:

If there is a trial, you don't want i

23 to hold it in Baton Rouge?

1 24 Mr. Reis, do you have anything to say about that?

25 MR. REIS:

Our preference is Washington or ANN RILEY & ASSOCIATES, LTD.

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Bethesda for a prehearing conference.

For the hearing j

2 itself, I agree with the Chairman, If it does go to 3

hearing, it would be more appropriate to hold it 4

--considering Commission precedent and practice -- in Baton j

5 Rouge, or someplace in that area.

6 JUDGE COTTER:

They have a very nice. court 7

facility there that we all visited about 10 years ago.

1 8

Is there anything else that we need to cover 9

before we close?

10

[:No response.]

11 JUDGE COTTER:

All right.

Then we will call this 12 proceeding closed.

Thank you all very much for your 13 contributions, which were particularly appropriate'and 14 useful.

Thank you.

(

i 15

[Whereupon, at 11:25 a.m.,

the prehearing 16 conference was concluded.]

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J REPORTER'S CERTIFICATE This is to certify that the attached proceedings before the United States Nuclear Regulatory Commission in the matter of:

NAME OF PROCEEDING:

Gulf States Uti ities DOCKET NUMBER:

50-458-OLA PLACE OF PROCEEDING: Bethesda, MD were held as herein appears, and that this is the original transcript thereof for the_ file of the United States Nuclear Regulatory Commission taken by me and thereafter reduced to typewriting by me O,

or under the direction of~the court reporting company, and that the transcript is a true and l

accurate record of the foregoing proceedings.

YIV? tr Gs in n 06 Tim Official Reporter d

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