ML20058B263

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Request of Terrebonne Parrish Consolidated Govt for Reevaluation of Finding of No Significant Changes Re Change in Util Ownership & Operation.Certificate of Svc Encl
ML20058B263
Person / Time
Site: River Bend Entergy icon.png
Issue date: 11/19/1993
From: Beeny S
AFFILIATION NOT ASSIGNED
To:
Shared Package
ML20058B229 List:
References
NUDOCS 9312020020
Download: ML20058B263 (14)


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UNITED STATES OF AMEPICA NUCLEAR REGULATORY COMMISSION l

In the Matter of

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Gulf States Utilities

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NRC Docket No. 50-458 (River Bend Station,

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Unit No. 1)

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i REQUEST OF TERREBONNE PARISH CONSOLIDATED f

GOVERNMENT FOR REEVALUATION OF FINDING-OF "NO SIGNIFICANT CHANGES" I

Terrebonne Parish ConEolidated Government ("Terrebonne")

i hereby requests reevaluation of the finding of the Director of i

the Office of Nuclear Reactor Regulation that no significant changes have occurred in the activities or proposed activities'of Gulf States Utilities Company ("GSU") since the last antitrust l

review of its license to operate its River Bend Station.

The k

i acquisition of one multistate transmission monopolist by another l

is on its face precisely the sort of change provided-for in Section 105c(2) of the Atomic Energy Act, 42 U.S.C. S 2135 (c) (2).

The Director's finding abdicates the Commission's statutory I

responsibility to insure that it does not license conduct f

inconsistent with the antitrust laws and.cannot be~ redeemed by f

the Director's proposed remission of the victims of that conduct to protracted, uncertain license enforcement proceedings.

Whatever the Commission's staff might prefer, Congress has provided that what staff itself characterizes as "the changes in GSU's activities since the previous antitrust review,-which may I

have competitive implications in the bulk power services market 9312020020 931119 i

PDR ADOCK 05000458/

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i in the south central portion of the country"' must be addressed in this proceeding pursuant to Section 105c(2), not somewhere else pursuant to other statutory authority.

These are changes 4

that raise Entergy's anticompetitive advantage by $1 billion.

1.

The Mercer Constitutes a Sionificant Chance The Staff Recommendation upon which the Director's finding t

is based concludes that the GSU-Entergy merger satisfies the first two of the Summer 2 criteria for "significant changes" contemplated by Section 105c(2) of the Act.

Staff Recommendation at 33.

The Staff Recommendation does not actually explain why F

these changes do not also meet the third Summer criterion:

that the changes "have antitrust implications that would likely warrant some Commission remedy."

11 NRC at 824.

Instead it f

merely characterizes commenters " concerns" as raising

" enforcement issues" to be raised in different proceedings at the NRC or the Federal Energy Regulatory Commission ("FERC").

Staff f

l Recommendation at 26-27, 33-34.

The Staff Recommendation does not explain why conduct, some which may well have "its genesis" in violations of antitrust license conditions, but which nevertheless admittedly constitutes a change in a licensee's own voluntary conduct since the last antitrust review, is not also, or alternatively, remediable, as Congress ordained, pursuant to l

3 Staff Recommendation Post OL No Significant Antitrust j

Changes, dated October, 1993 at 2.

(" Staff Recommendation")

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South Carolina Electric and Gas Co. and South Caroling Public Service Authority (Virgil C.

Summer Station, Unit 1),

11 NRC 817, 824 (1980).

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Section 105(c) of the Act.

The Staff Recommendation affords no analysis or authority to support its recommendation that changes which would otherwise be "significant" for purposes of Section 105c(2) be regarded as insignificant for that purpose I

because they also involve license violations.

i 2.

The Staff Recommends Abdication of NRC's Antitrust Responsibility To the limited extent that the Director's finding and the supporting Staff Recommendation even address the commenters' allegations that the GSU-Entergy merger -- as distinct from unilateral conduct of the companies -- creates a situation inconsistent with the antitrust laws, they abdicate the l

Commission's statutory responsibility in favor of the FERC's cursory treatment of the competitive consequences of the merger pursuant to entirely different statutory authority than that Congress afforded to the NRC to enable it to discharge its very I

different, explicit antitrust responsibility.

a.

Difference Between NRC's and FERC's Antitrust Responsibilities Preclude Wholesale Reliance on FERC's Findinas The Staff Recommendation's sole reference to the fact that the NRC and the FERC have different statutory authority and responsibilities for assessing and remedying anticompetitive effects of mergers is to state that it decided that these differences "were not significant."

This position requires i

reevaluation.

The statutory standard governing the NRC'F review of the effects of the GSU-Entergy merger are entirely different from 3

t that governing FERC's merger review.

Section 105c provides explicit authority and responsibility to determine whether the l

change in ownership creates or maintains "a situation

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inconsistent within the antitrust laws."

Section 207 of the Federal Power Act, 16 U.S.C.

S 8246(a), on the other hand, j

permits the FERC to approve a merger merely on finding it

" consistent with the public interest."

While antitrust policy is f

one of the considerations that the FERC must take into account in assessing "the public interest," the application of the antitrust laws is not determinative in that assessment.

Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973); United States v. Radio l

Corp. of America, 358 U.S.

334, 350-53 (1959).

In contrast, the NRC is expressly charged to determine whether conduct under its a

licenses would create a situation inconsistent with the antitrust laws.

The Commission and its licensing boards have recognized i

that, because whether conduct would somehow serve the "public interest" is a entirely different question than whether that c

tuct would violate the antitrust laws, the "public interest" i

standard applied by the FERC is not appropriate for Section 105c purposes.

Toledo Edison Co. and Cleveland Electric Illuminatina C2x (Davis-Besse Nuclear Power Station, Units 1, 2,

and 3), ALAB-l 560, 10 NRC 265, 283 (1979).

Cases decided under a "public interest" standard are, therefore, are not' persuasive in an analysis under Section 105c.

Id. at 284, citina, Houston j

Lichtina and Power Co. nt, al (South Texas Project Unit Nos. 1 and 2), CLI-77-13, S NRC 1303, 1312 n.8 (1977).

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1.

Plainly, the NRC cannot rest the discharge of its explicit duty to ensure that the merger does not create or maintain a situation inconsistent with the antitrust laws on the FERC's summary findings on competition issues as it conceived them under its "public interest" standard.

b.

FERC's Summary Findings Made Without Benefit of Even a PaDer Hearina Are SusDect The FERC findings upon which the Director's finding ultimately rests entirely are so suspect as a procedural matter as not to warrant reliance even if such reliance were otherwise lawful.

The FERC's summary merger orders regarding competition are themselves bootstrapped from its earlier summary orders regarding Entergy's open access tariff.

In neither proceeding were Entergy/GSU's affiants or the FERC's anonymous analysts subjected to cross examination on their conclusion -- remarkable on its face -- that the market power created by the merger of two entities with strategic dominance over electric transmission in a market involving much of four states is mitigated by a tariff undertaking, perhaps, to bargain for point-to-point transmission at an undetermined price.

In the merger proceeding FERC simply assumed that the product or service market that would be affected would be the same as that in the open-access case. 'It ignored its own definitions of service categories to arrive at the markets it used.

It did not use the market definitions accepted by iae NRC even though it had used those definitions in previous cases.

By the same token, the factual allegations of other parties such as Terrebonne pointing to the opposite conclusion 5

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were simply ignored or contradicted.

Evidently by way of response to commenters' contention that it would be error for the i

NRC to rest its findings in this proceeding on the FERC's

' finding, the Staff Recommendation-invites commenters to seek appellate court review of the FERC's orders.

Of course, relief obtained by that means would do nothing to remedy the l

consequences of the NRC's abdication of its Section 105c responsibilities.

The Staff Recommendation makes no effort to grapple with factual, economic and legal deficiencies of the FERC's antitrust i

analysis.

Among the more remarkable of these deficiencies is a i

studied indifference to evidence from one of Entergy's own witnesses impeaching the factual basis for the FERC's conclusion.

As the Staff Recommendation recognizes, the cornerstone of l

the FERC's conclusion that it need not even try the disputed j

facts regarding the effect of the merger on-competition was that any increase in market power over transmission that would result from the merger would be sufficiently mitigated by the open

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access tariff which the FERC had earlier accepted, also without a hearing on factual issues disputed by intervenors.

In this proceedit<, and in the earlier open access case.the FERC found,-

l without holding even a paper hearing, that all first-tier utilities -- i.e. all utilities that directly interconnected with i

an Entergy company -- were in the same geographic market because-i the open access tariff provided sufficient access to transmission to enable each of these utilities to engage in transactions with a

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one another.

In such a large geographic market Entergy had, l

according to the Commission, minimal market power.

In so holding i

the Commission rejected contentions from many intervenors, including the Louisiana Energy and Power Authority ("LEPA"), that many of the provisions of the open access tariff were so burdensome and uncertain, and placed so many limitations on the transmission service ostensibly being made available, that a hearing was needed to determine whether the tariff,,in fact, mitigated Entergy's market power sufficiently to authorize market based pricing and to not require any transmission conditions on the merger.

As part of its presentation in the merger proceeding, Entergy and GSU presented a study sponsored by Mr. Frank F.

Gallaher, a primary Entergy witness, that allegedly demonstrated significant savings would result from merger.

To determine the alleged merger savings, Enteray/GSU compd"s1 the costs of meeting their loads if they were two stand-alone utilities with the costs of meeting their loads if they were merged.

In calculating the cost of GSU meeting its loads on a stand-alone basis, Entergy/GSU assumed that Gulf States would engage in some economy transactions but only with Entergy and with other utilities with which GSU was directly interconnected.

In the merged case scenario, however, Entergy/GSU assumed that GSU would also engage in significant economy transactions with first-tier utilities --

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those with which it was interconnected through Entergy but not directly.

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,a During Staff's cross-examination of a Mr. Gallaher in the truncated FERC merger docket hearing on issues other than I

competition, he was asked why he did not include economy energy transactions with first-tier utilities in calculating the cost of i

operating GSU as a stand-alone utility.

He stated that he did not include economy transactions with utilities with which GSU' was not directly interconnected because GSU's own projections showed a practice of only engaging in economy energy transactions with utilities with which it is directly interconnected.3 5

i Well, for the reasons that I have stated, I think it is f

difficult for Gulf States to try to tap this market that we have identified.

Most of the market is to the North of

[Entergy), and it is a long way from Gulf States, even thouah they could use the open access tariff, it is still difficult to make decisions on a real time basis when you 4

have to utilize the open access nrovisions of an intervenina t

utility to make economy purchases as you are dispatchina the system.

It is more likely that you would use the utilities that ourchases.

So I really don't see that it would be imorudent on the Gulf State's side.

There are a lot of other factors that ao into it rather than iust-there beina an availability of economy enercy, and that Enterav has an i

open access provision.

Transcript at 863 (emphasis added).

I In essence, Mr. Gallaher confirmed that the availability of the open access tariff, does not mean that all first-tier I

utilities could or would use it to engage in economy transactions.

Yet this is exactly the assumption the FERC had to j

make, and did make, finding that the market power of a merged 3

The pertinent portions of Mr. Gallaher's testimony were attached to Louisiana Energy and Power Authority's Request for Rehearing, dated June 18, 1993, in FERC Docket Nos. EC92-21-000 et al., which was, in turn, attached to the Reply of Terrebonne To Response of GSU To The Comments on-Antitrust Issues, filed in this proceeding July 9, 1993.

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4 Entergy/GSU would be mitigated by the open access tariff.

Mr.

Gallaher's testimony demonstrates conclusively that Entergy's own expert believes that the mere existence of the open access tariff does not mean that it is practical for all first-tier utilities j

to deal with one another, since there are many other factors that i

must be considered.

At the very least this testimony requires an evidentiary inquiry into the extent, if any, to which the existence of the open-access tariff facilitates transactions between all first-tier utilities and defines the scope of the geographic market.

Mr. Gallaher's testimony flatly contradicts the cornerstone of the FERC's decision in both the open access case and the merger case.

Nevertheless, the FERC explicitly refused even to consider this testimony,' and the Staff Recommendation ignores it.

3.

Enforcement Proceedings Are Not Substitutable For 105c(2) Proceedinas Relegating commenters such as Terrebonne to enforcement of existing antitrust conditions is no substitute for the action the facts require in this proceeding.

For one thing, the Staff Recommendation cites no authority for the notion that after-the-fact enforcement proceedings --

inevitably protracted by the licensees' comparatively unlimited ability to protract resistance -- is the proper means of dealing with a merger which the staff itself admits raises transmission d

64 FERC 1 61,801 at 61,009.

The FERC ruled that it was t

without power to consider this testimony in the same docket because it was given more than 30 days after the deadline for petitions for rehearing of its initial order in the proceeding.

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l issues that may have competitive implications.

The Congress 4

prescribed a prospective, prophylactic proceeding pursuant-to Section 105c(2), to invest the licensees as well as the other participants with an interest in prompt resolution of the controversy.

A Substantively, the tenor of the Staff Recommendation also i

raises a serious doubt as to whether the proceedings envisioned by the Staff would materially remedy the anticompetitive effects of the merger.

As detailed in Terrebonne's Comments, at pages 25-36, Entergy/GSU claim that their merger will create a i

network that will save them more than a billion dollars; these savings can only be achieved by using the companies' combined 4

transmission systems as a network; the companies deny Terrebonne and their other competitors comparable access to the transmission network, denying those competitors of a means of reducing their costs; the competitive gap between Entergy/GSU and their i

competitors will increase; a substantial change in the nuclear license conditions is needed to remedy the situation.

The staff's invitation to replead these contentions in an enforcement rings hollow.

Nowhere does the Staff Recommendation affirm that

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Entergy network service, if proved appropriate, actually could be cobbled out of the existing conditions on GSU's River Bend license, Louisiana Power & Light Company's Waterford license, J

Mississippi Power & Light Ccmpany's Grand Gulf license and Arkansas Power & Light Company's Arkansas Nuclear One license.-

The crabbed interpretation the Staff Recommendation places on the 10 i

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I license conditions relating to pricing in its discussion of the stranded investment feature of the open access tariff does not betoken a flexible enough interpretive approach to extend the reach of the transmission conditions to Entergy's entire post-merger system.

And nothing less than such access to that system on terms that permit Terrebonne to continue compete will avert the anticompetitive effect of the merger.

Given the staff's approach, at best, license conditions enforcement can result in three sets of network transmission access to three systems at about three times the cost of Entergy network access.

Entergy network access is what is needed to permit fair competition by the beneficiaries of the license conditions in the light of an added $1 billion in anticompetitive advantages afforded to the merger participants.

Under the circumstances, a change in the license conditions to carry out this remedy can't be obtained by enforcement of existing i

conditions.

l Terrebonne is authorized to state that Brazos Electric Power Cooperative, Inc., also seeks reevaluation of the Director's finding.

WHEREFORE, for the foregoing' reasons, and for the reasons stated in Terrebonne's previous submissions, Terrebonne requests that the finding of no significant changes by the Direct of the-Office of Nuclear Reactor Regulation be reevaluated, that a finding of significant change be made and that the procedures provided in Section 105c of the Act be put in train with a view l

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to impose new conditions on GsU's license which will remedy any anticompetitive situation maintained with added vigor.by its merger with Entergy.

Respectfully submitted, f

m S'ean T.

Beeny O

BRAND & BEENY 1730 K Street, N.W.

Suite 1000 Washington, DC 20006 (202) 347-7002 Attorneys for Terrebonne Parish Consolidated Government' Dated:

November 19, 1993 t

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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of

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Gulf States Utilities

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NRC Docket No. 50-458

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CERTIFICATE OF SERVICE I hereby certify that I have served a copy of the foregoing Request of Terrebonne Parish Consolidated Government for Reevaluation of Finding of "No Significant Changes," in the above-captioned proceeding by causing a copy to be deposited in the United States mail, first class postage prepaid, addressed as set forth below on this 19th day of Nove ber, 199

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Sean T.

Beeny

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BRAND & BEENY t

1730 K Street, N.W.

Suite 1000 Washington, DC 20006 (202) 347-7002 Attorneys for Terrebonne Parish Consolidated Government Office of the Secretary Zachary D. Wilson, Esq.

U.S.

Nuclear Regulatory 321 Maple Street Commission P.O.

Box 5578 Washington, DC 20555 North Little Rock,2U1 72219 Robert C. McDiarmid, Esq.

Jonathan A.

Liebowitz, Esq.

Spiegel & McDiarmid Robert A. O'Neil, Esq.

1350 New York Avenue, N.W.

Miller, Balis & O'Neil, P.C.

Suite 1100 1101 14th Street, N.W.

Washington, DC 20005-4798 Suite 1400

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Washington, DC 20005 I

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Daniel Guttman, Esq.

Robert Weinberg, Esq.

i Spiegel & McDiarmid Duncan, Weinberg, 1350 New York Avenue, N.W.

Miller & Pembroke, P.C.

I Suite 1100 1615 M Street, N.W.,

Suite 800 Washington, DC 20005-4798 Washington, DC 20036 James D.

Pembroke, Esq.

Earle H. O'Donnell, Esq.

Duncan, Weinberg, Dewey Ballantine Miller & Pembroke, P.C.

1775 Pennsylvania Ave., N.W.

1615 M Street, N.W.,

Suite 800 Washington, DC 20006-2605 Washington, DC 20036 Robert B. McGehee, Esq.

Mark J. Wetterhahn Wise, Carter, Child & Caraway Winston & Strawn 600 Heritage Building 1400 L Street, N.W.

Congress at Capitol Washington, DC 20005-3502 Jackson, MS 39205 Joseph Rutberg, Esq.

Joseph B.

Knotts, Jr.,

Esq._

Office of the General Counsel Winston & Strawn U.S.

Nuclear Regulatory 1400 L Street, N.W.

Commission Washington, DC 20005-3502 l

Washington, DC 20555 William M. Lambe Geoffrey Grant Eugene Holler, Esq.

Acting Chief U.S.

Nuclear Regulatory Nuclear' Regulatory Commission Commission 11555 Rockville Pike Washington, DC 20555 Rockville, MD 20852 Regulatory Publication Branch Division of Freedom of l

Information and Publication Services Office of Administration U.S.

Nuclear Regulatory Commission Washington, DC 20555 1

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