ML20057B594
| ML20057B594 | |
| Person / Time | |
|---|---|
| Site: | Farley  |
| Issue date: | 06/27/1983 |
| From: | Plaine H NRC OFFICE OF THE GENERAL COUNSEL (OGC) |
| To: | |
| Shared Package | |
| ML20049A457 | List:
|
| References | |
| FOIA-92-436 ALAB-646, SECY-83-255, NUDOCS 9309220291 | |
| Download: ML20057B594 (15) | |
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ADJUDICATORY ISSUE June 27, 1983 (NEGATIVE CONSENT)
SECY-83-255 For:
The Cormnissioners From:
Herzel H.
E. Plaine General Counsel M
Irforma! ion in !!;is retctd was d:'cled in &cardance with trejpebn c; ;nictraati; Act, ercrnaticn: _4__
TDIA. [' 2 -Y.]b 9309220291 930428 i
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.y September 10, 1981 SECY-81-532 ADJUDICATORY ISSUE (Affirmation) i For:
The Commissioners From:
James h. Fitzgerald Assistant General Counsel
Subject:
REVIEW OF ALAB-646, IN THE MATTER OF ALABAMA POWER l CO. (ANTITRUST), AND ALABAMA POWER COMPANY'S' APPLICATION FOR STAY PENDENTE LITE
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Facility:
Joseph M. Farley Nuclear Plant, Units 1 and 2
Purpose:
To recommend that L
Review Time' September 30, 1981, as extended.
Expires:
Discussion:
t I.
Introduction This paper focuses on two separate matters for decision with respect to' antitrust conditions ~ ordered by the Appeal Board in ALAB-64G (June 20, 1981) on Alabama Power Company's (APCO)-licens~e for the Joseph M.
Farley Nuclear Plant.
The Commission must, as usual, decide whether review of the decision is warranted -- here i
CONTACT:
Mar-jorie S. Nordlinger, OGC 4-3214 4
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a review is sought by two of five parties. 1/
Also pending is APCO's motion for a stay of the effectivenoss of the antitrust conditions while ALAB-646 is being litigated. 2/
Because the background of Farley is lengthy -- going back to 1971, the record voluminous, 3/ and the questions for decision inter-related, we believe the review and stay questions are best addressed in one paper.
After presenting the background common to both questions and highlighting those areas where ALAB-646 disagreed with the decision below (Part II), we turn to the issues presented by the petitions for review (Part III).
In brief, APCO's allega-tions of error lie in five key areas t (1) scope of Commission antitrust review pursuant to section 105c of the Atomic Energy (2) desi~ nation of relevant product and geographic markets; Act; g
(3) findings of monopoly power; (4) findings o,f anticompetitive conduct; and (5) appropriateness of license conditions.
MEUA claims a finding that it is not a competitor in the wholesale for resale market is erroneous, and that a denial of due process occurred when the Licensing Board exc1 ded if from the remedy
)b40 phase of the evidentiary hearing. 4/
We conclude that 1/
The applicant Alabama Power Company and an intervenor, Municipal Electric Utility Assn (MEUA), seek review, the former complaining of the license conditions, the latter complaining that they don't go far enough.
Another intervenor.
Alabama Electric Cooperative (AEC), the Department of Justice (DOJ) and the NRC staff (Staff) all oppose review.
All five parties had appealed from the decision of the Licensing Board.
See ALAB-646, slip op. at 8, for description of size and activities of the parties.
2/
As the Solicite 's memorandum of July 29, 1981 (SECY-81-461) advised, APCO has sought review of ALAB-646 in the 5th Circuit Cou: e of Appeals, and has moved the Commission for a stay during the pendency of litigation.
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The Appeal ~ Board decision and pleadings related to both review and stay questions have already been provided to Commissioners.
ALAB-646 alone is 164 pages and there are easily again that many pages of pleadings pending.
To keep this paper physically manageable we have arranged with SECY to provide separately any additional copies the Commissioners may request.
4/
MEUA incorporates a request to consider new information in a reopening of the remedy phase of the hearing.
It appears
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that this matter could have been raised before the Appeal Board (see 10 CFR 2.786(b)(4)(iii)), but in any event is incon sequential.
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Accordingly, is recommended.
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APCO's application for a stay,is_ discussed.I In. P art IV, _
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II.
Background
A.
Relevant Chronology Date Even t October 10, 1969 APCO's application to construct 860 megawatt nuclear reactor at Farley June 26, 1970 Amendment to application to permit construction of a second reactor at same location December, 1970 Atomic Energy Act amended to provide prelicensing antitrust review August 6, 1971 Attorney General's statutory advice letter recommends hearing September 2, 1971 AEC,p,eti,tioned_,fo,r leave to intervene February 23, 1972 MEUA petitioned for leave to intervene -
June 28, 1972 Commission issued notice of antitrust hearing and appointed a Board j
July 21, 1972 -
Prehearing conferences on scope, issues; j
September, 1973 commencement of discovery j
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See 10 CFR 2.786b(4) set forth in relevant part infra in section IVB.
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.9 August 15, 1972 Construction ' permit issued subject "to ' outcome of antitrust proceeding.
Permits recited that they were granted without prejudice to any subsequent licensing action, specifically includ-ing imposition of antitrust conditions phase one was to determine whether i.cate hearing;
' Board granted APCO's motion to bifur
- May 23, 1974 ssuance of the license would create or maintain a situation inconsistent with the antitrust laws with. phase two to determine remedies, if necessary December 4,'.1974 y, Evidentiary hearing on phase oneL
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April 26, 1976 November 22, 1976 Oral argument April 8,1977 Licensing Board decision finding a situation inconsistent with antitrust laws, LBP-77-24, 5 NRC 804.
The Board urged the parties to try to reach a settlement in lieu of proceeding with phase two and to report on whether they had been successful in doing so.
April 22, 1977 Parties reported failure to reach settlement May 9-17, 1977 Evidentiary hearing on phase 2, excluding MEDA based on Licensing Board's finding that MEDA was not' a competitor in the wholesale market, and that retail competition where MEUA was a competitor was so inframarginal as not to invoke antitrust protection June 24, 1977 Licensing Board decision on license conditions.
LBP-77-41, 5 NRC, 1482, most notably requiring.
unit power 6/ for AEC July, 1977-1978 Appeals and cross-appeals taken by all parties; briefs and reply briefs filed j
December, 1977 Commercial operations began i
March, 1979 Oral argument before Appeal Board 6/
Unit power is a percentage of the output of the plant',
as opposed to participation in ownership of the facility.
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June 30, 1981 Appeal Board Decision, ALAB-646 I
June 30, 1981 APCO filed petition for review in 5th Circuit at Atlanta July 22, 1981 APCO timely filed 1/ application for a stay pendente lite July 27, 1981 APCO and MEUA filed petitions for review July 30 -
The parties filed responses to review and stay August 11,,.19,81_
requests.
B.
The Appeal Board's Decision ALAB-646 reviews in painstaking detail a two-phase Licensing Board decision in what is only the third fully litigated antitrust proceed--
ing in AEC-NRC history. 8/
The Appeal Board divided its opinion into six parts :
1.
Background and Summary, 2.
Applicant's Arguments.
Against Antitrust Scrutiny, 3.
Relevant Markets, 4.
Monopoly Power, 5.
Monopoli ation, 6.
Remedy.
Under those headings we sketch the 164-page decision in broad outline, noting particularly any major' Appeal Board -disagreement with the Licensing Board.
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APCO requested and the Commission granted in part an extension of time in which to file application for stay and petition for
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review.
In light of exceptional circumstances where a quorum of the ALAB-646 Appeal Board was no longer in the Commission's employ, the Commission considered it proper for APCO to file its stay-related motions with the Commission.
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The two previous decisions were Consumers Power Co. (Midland Plant, Units 1 and 2), AL AB-4 5 2, 6 NRC 892 (1977) and Toledo
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Edison (Davis-Besse Nuclear Power Station, Units 1,_ 2 and 1
3), 10 NRC 265 (1979).
In each case, the Commission declined to review the Appeal Board decision.
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11 Petitions for Review of ALAB-646 1 !
III.
A.
Catalogue of Pleadings with respect to Commission Review 1.
Alabama Power's Petition for Review and Request for Oral Argument, July 27, 1981.
2.
Municipal Electric Utility Association's Petition for Review, July 27, 1981.
3.
Alabama Electric Cooperative's Opposition to Alabama Power Company's Petition for Review, July 31, 1981.-
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Alabama Electric Cooperative's Opposition to the Municipal Electric Utility Association's Petition for Review, -
August 3, 1981.
5.
Answer of the Department of Justice in opposition to Alabama Power Company's Petition for Review of ALAB-646, August 11, 1981.
6.
Answer of Department of Justice Opposing Petition
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for Review Submitted by the Municipal Electric Utility Association of Alabama, August 11, 1981.
7.
Answer of the NRC Staff in Opposition to Petition for Commission Review by Alabama Power Company, August 11, 1981.
8.
Answer 'of the NRC Staff in Opposition to Petition for Commission Review by Municipal Electric Utility Association, August 11, 1981.
9.
Opposition of Municipal Electric Utility Association of Alabama to Alabama Power Company's Petition for Review, August 11, 1981.
- 10. Alabama Power. Company's A'nswer to the Municipal Electric Utility Association's Petition for Review,
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Issues Presented for Commission Review, Positions of the Parties and Suggested Resolution The parties' positions on the five areas in which APCO alleges error in the Appeal Board decision and on the two main points made by MEUA in its petition for review are set forth below.
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Scope of antitrust review APCO raised the so-called " nexus" issue, alleging that the -Appeal '
Board erred in refusing - to limit the scope of the antitrust review to matters that have a substantial connection with the nuclear facility.
In particular APCO challenged the Appeal Board's right to consider past conduct, specifically-APCO's pricing and marketing activities going "as far back as 1941, 194 6, _1950 and 1962-1963* in finding that APCO's activities under the license will create or maintain a situation inconsistent with the ' anti-trust laws.
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13 AEC argues that adoption of APCO's reading, giving section 105cand a forward thrust only, would render that section meaningless, that Wolf Creek (ALAB-279, 1 NRC 559 (1975)) settled the issue of the Commission's ability to consider past conduct contrary to MEUA notes that even APCO concedes that it is a
-APCO's position.
" natural monopoly" and thus, it is irrelevant whether the Appeal context or Board limited its examination to the present market considered APCO's "well documented history of exclusionary and anticompetitive activities. "
Moreover, the issue does not meet criteria for review.
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IOGC concludes that il(, $
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2.
Designation of relevant geographic and product markets APCO asserts error in the Appeal Board's designation of the relevant product and geographic markets, particularly in " reversing" the Licensing Board with respect to coordination services and APCO also alleged error in the finding retail power sales market.
that the relevant market was in central and southern Alabama.
AEC contends that the Appeal Board did not reject the underlying.
f acts found by the Licensing Board but rather used them to reach 4
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'di5ferent conclusions.
It said that the Licensing Board had recog-nized the importance. of the cluster of product factors that the Appeal Board designated as a coordination services market, but its misreading of Grinnell led it to a wrong conclusion on the market.
In like fashion, misreadings of the law led the Licensing Board to reject a retail market.
MEUA states that the Appeal Board's'
~ findings on market designations are fully supported by the record and are not clearly erroneous.
I 8 It' is likely that i iccordingly,'in our view 3.-
Findings of monopoly power l
APCO alleges error in the Appeal Board's finding of monopoly power
.The principally because APCO is subject to pervasive regulation.because AP gist of the argument is:
APCO additionally asserts be considered to possess monopoly power.
that the Appeal Board erred in finding that APCO had control of transmission in the face of a record showing that AEC owns 1,000 l
miles of transmission lines, has interconnections with Georgia APCO claims, moreover, Power and has lines close to other systems.
i that the Appeal Board wrongly found monopoly power based on predominant market share of sales and control of generation and transmission.
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15 AEC quotes the Appeal Board in reference to the " pervasive regula-calling APCO's position ' timeworn and discredited" tion" argument, and noting further that both boards rejected APCO's view that as a AEC cites exten-factual matter it cannot have monopoly power.
'sively to the record showing the Licensing Board's thorough As a factual consideration of the transmission control issue.
HEUA finding held by both Boards, it is not subject to review.
asserts that the Appeal Board's conclusion that APCO has monopoly power in the relevant markets today is plainly correct and amply supported by the record.
Full consideration was given to APCO's legal arguments., No important questions are raised,.
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Findings of anticompetitive conduct APCO argues that the Appeal Board erred in rejecting testimony by Mr. Farley that had been accepted by the Licensing Board and some "uncontroverted evidence" that the allegedly anticompetitive rate decreases came about as a result of requests by the Rural l
Electrification Administration (REA), and further erred in af firm-APCO ing a variety of factual findings by the Licensing Board.
claims that error resulted from use of the wrong standard, i.e.
that applicable to dominant unregulated enterprises.
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3g AEC asserts that the Appeal Board did not reject Mr. Farley's testimony, but rather based its finding of APCO's anticompetitive j
refusal on Mr. Far, ley's testimony viewed against the record of i
APCO's conduct.
AEC argues that the Appeal Board gave detailed i
consideration to the record in reaching its conclusions on the low anticompetitive rate question, and in its affirmances of
' f actual findings of the Licensing Board.
AEC says APCO's raising the issue of the correct standard is the argument, in another gusse, that regulated, industry cannot monopolize.
MEDA believes the Appeal Board properly considered the law and the facts and that no important issues are raised.
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{ OGC concludes that
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Appropriateness of license conditions APCO alleges that the Appeal Board erred by imposing license conditions without proper findings of liability and without deter-mining whether the conditions are necessary to protect the public interest and have a nexus to the license.
Specifically, APCO says it is wrong to hold that APCO should be required to wheel for any municipally owned distribution system when only MEDA 4
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17 intervened and there are other mtinicipals that are not members of MEUA.
And it is also wrong and in contravention of the Rural Electrification Act of 1936 to require APCO to share Farley with AEC in order to enable AEC to maximize its use of tax immunities and subsidized capital arrangements available through REA.
AEC contends that APCO's complaints relative to the license conditions are based on mischaracterizations of the Appeal Board's articulated grounds for imposing the conditions, contain serious errors of law and raise no matters warranting review.
No important antitrust or public policy question has been raised.
"The shallow-ness of APCO!s. claims of error with respect to remedy is typified by its complaint 'ihat the Appeal Board took into consideration the
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directive of Section 1 of the Atomic Energy Act in its remedial determination. "
APCO had criticized the Appeal Board's considera-tion of the aim of the Atomic Energy Act to use atomic energy so as to " strengthen free competition in private enterprise" in reaching its conclusions.
MEDA says that the Appeal Board properly found that the conditions it imposed are required "as a minimum" to achieve the purposes of the Atomic Energy Act, and with one exception -- the exclusion of MEUA from the remedial portion --
had before it a more than adequate basis for finding liability on the part of APCO.
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OGC concludes that i
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. review of the record-In our h$i 15!
La-6.
MEDA's allegation of error-in not finding
- that it is a competitor at wholesale MEDA bases its appeal of the Appeal Board's affirmance of the-Licensing Board's finding that MEUA is not an actual or potential competitor at wholesale on a recent factual development, the establishment of an Alabama Municipal Electric Authority for t he express purpose _ of permitting municipals jointly to acquire funds and operate generation facilities.
MEDA claims that this develop-ment warrants reopening and further alleges that it could not -
have brought this matter before the Appeal Board because the statute authorizing the Authority was not passed until May 18, 1981.
i APCO argues that the recent developments relied on by MEUA do not k
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change MEDA'.s status in the alleged wholesale market and in any event occurred too late for consideration in this proceeding.
i AEC asserts that MEUA has no legal or equitable basis for urging commission review or reopening on the basis of the new developments it alleged inasmuch as MEUA had six weeks to bring the matter to the attention of the Appeal Board before ALAB-646 issued.
In any the new development has no impact on the factual findings i
- event, oQBoards which are entirely consistent on this point.
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