ML20058N824
| ML20058N824 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 10/15/1993 |
| From: | Gillespie F Office of Nuclear Reactor Regulation |
| To: | Murley T Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 9310210045 | |
| Download: ML20058N824 (48) | |
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< :0ctober 15, 1993-g' Docket.No. 50-458
~ MEMORANDUM FOR: Thomas E. Murley, Director Office of Nuclear Reactor Regulation FROM: Frank P. Gillespie, Director Program Management, Policy Deveiopment and Analysis Staff 1 Office of Nuclear Reactor Regulation L
SUBJECT:
POST OPERATING LICENSE ANTITRUST ANALYSIS 0F THE RIVER BEND STATION Enclosed for your signature is a finding of no significant changes' pursuant to the post operating license antitrust review of the River Bend plant. This finding is based upon an analysis by the antitrust staffs of PMAS and OGC l
{after consultation with the Department of Justice), which concludes that a j
" post OL no significant change" finding is warranted. The staff analysis is !
enclosed as background information. '
This is an initial finding which will be noticed in the Federal Reaister, i thereby providing the public the opportunity to request a reevaluation of your finding. If there are no requests for reevaluation, the finding will become final, and the post operating license antitrust review of the River Bend plant will have been completed. Original s@ned by Frank P.Gillespie Frank P. Gillespie, Director Program Management, Policy Development and Analysis Staff Office of Nuclear Reactor Regulation
Enclosures:
As stated DISTRIBUTION: [RIV. BEN]
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. l RIVER BEND STATION GULF STATES UTILITIES COMPANY, I
CAJUN ELECTRIC POWER COOPERATIVE, INC.
POST OPERATING LICENSE ANTITRUST REVIEW l FINDING 0F NO SIGNIFICANT CHANGES i
Under Section 105 of the Atomic Energy Act of 1954, as amended, 42 U.S.C.
s 2135 (Act),10 C.F.R. Es 50.80 and 50.90, the Nuclear Regulatory Commission (NRC or Commtssion) requires an antitrust review of changes in ownership or operator of a power production facility after initial licensing. In situations where requests for a change in ownership or operator have been received after issuance of an operating license for such a facility, the staff has conducted, with the Commission's approval, a significant change review to determine whether the licensee's activities create or tend to create a situation inconsistent with the antitrust laws. The Commission delegated the authority to make the significant change determination to the Director, Office of Nuclear Reactor Regulation (NRR). :
Based upon an analysis of the extensive comments received, the record and findings in other regulatory proceedings involving the proposed merger of Gulf '
States Utilities Company (GSU) and Entergy Corporation (Entergy), and after consultation with the Department of Justice, the staffs of the Inspection and Licensing Policy Branch of NRR and the Office of the General Counsel (hereafter, " staff"), have concluded that the changes in GSU's activities which have been identified by the staff do nop constitute significant changes as envisioned by the Commission in its Summer decision. The conclusion of the staff analysis is as follows:
After review of the filings in this proceeding, the record and testimony developed in the related proceedings at the Federal Energy Regulatory Commission and other public information, the staff determined that the changes in GSU's activities since the previous antitrust review, which may have competitive implications in the bulk power services market in the south central portion of the country, should be addressed in the context of a petition pursuant to 10 C.F.R. Section 2.206 requesting initiation of an antitrust complianco proceeding, not in the instant significant change proceeding. Consequently, the strff recommends that the Director of the Office of Nuclear Reactor Regulation issue a post OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend from GSU to Entergy. The staff further has determined that as a result of the inclusion of a license condition prohibiting E0I's marketing or brokering of power or energy from the River Bend facility that the proposed transfer of operating responsibility of River Bend from GSU to E01 presents no relevant antitrust issues to the instant licensing review process.
' South Carolina Electric and Gas Company and South Carolina Public Service Authority, (Virgil C. Summer Nuclear Station, Unit 1), CLI-80-28,11 NRC 817, 824 (1980).
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Based upon the staff analysis, it is my finding that there have been no "significant changes" in the licensee's activities or proposed activities '
since the completion of the antitrust operating license review of the River '
Bend Station.
/ f Thomas E. Murley, Director >
Office of Nuclear Reactor Regulation s
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RIVER BEND STATION GULF STATES UTILITIES COMPANY, CAJUN ELECTRIC POWER COOPERATIVE, INC.
DOCKET NO. 50-458 STAFF RECOMMENDATION !
POST OL NO SIGNIFICANT ANTITRUST CHANGES OCTOBER 1993 s
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CONTENTS s
I. The River Bend Amendment ADolications................... 1 II. Annlicable Statute and Reculations...................... 3 A. Authority for NRC Antitrust Reviews.............. 3 B. NRC Operating License Antitrust Reviews.......... 4 i C. Change in Ownership After Operating License Issuance.......................................... 5 III. Previous NRC Antitrust Reviews of River Bend............ 6 A. River Bend Construction Permit Review............ 6 B. River Bend Operating License Review............... 7 IV. Other Reaulatory Reviews................................ 8 A. State Public Utility Commissions.................. 8 B. Securities and Exchange Commission............... 9 C. Department of Justice............................. 9 D. Federal Energy Regulatory Commission............. 9 V. Ammendment Aeolication Comments Received By The Staff.. 12 ,
A. Cities & Cooperative............................. 13 B. Brazos Electric Power Cooperative, Inc........... 14 C. Cajun Electric Power Cooperative, Inc............ 15 D. Lafayette Public Power Authority................. 17 E. Louisiana Energy and Power Authority /Terrebonne.. 18 F. Occidental Chemical Corporation.................. 20 j G. Municipal Energy Agency of Mississippi........... 21 '
H. South Mississippi Electric Power Association..... 22 VI. NRC Staff Analysis of Addition of Non-Owner Operator... 23 VII. NRC Staff Analysis of Chance in Ownershin.............. 25 A. Effects of the Proposed Merger on Competition.... 27 :
B. NRC Staff Findings Regarding Change in Ownership. 32 VIII. CONCLUSION............................................. 34 Appendix A - Previous NRC Reviews of GSU and Energy i
I. The River Bend Amendment ADDlications Nuclear Regulatory Commission ("NRC" or " Commission") License No. NPF-47 authorizes Gulf States Utilities Company ("GSU") and Cajun Electric Pouer Cooperative (" Cajun") to possess the River Bend Station, Unit 1 (" River Bend") and further authorizes GSU to act as agent for Cajun with exclusive responsibility and control over the physical construction, operation, and maintenance of River Bend.1 By letter dated January 13, 1993, the NRC staff (" staff")
received an application from GSU for Commission consent, pursuant to 10 C.F.R. S 50.80, for GSU to transfer control of River Bend to ,
a newly formed holding company to be called Entergy Corporation.2 By separate letter dated January 13, 1993, the staff also received an application from GSU, submitted on behalf of itself and Cajun, to transfer operating responsibility and management of River Bend t
i Gulf States Utilities Company ("GSU") has a 70% undivided ownership interest in River Bend Station, Unit 1, and Cajun Electric Power Cooperate (" Cajun") has the remaining 30% undivided ownership interest.
2 Entergy Corporation currently exists as a public utility holding company organized under the laws of the State of Florida, and, through its operating companies, engages principally in the generation, transmission, distribution and sale of electricity in Arkansas, Louisiana, and Mississippi. The Entergy operating companies include: Arkansas Power & Light Company, Louisiana Power ,
& Light Company, Mississippi Power & Light Company and New Orleans Public Service, Inc. Under the proposed plan to combine the business of GSU with Entergy, a series of mergers will result in the termination of the existing Entergy Corporation and the renaming of the surviving corporation as Entergy Corporation with GSU as a wholly owned subsidiary of the new Entergy Corporation.
from GSU to Entergy Operations, Inc. ("EOI").8 Under section 105 of the Atomic Energy Act of 1954, as amended, 42 U.S.C. S 2135,
("Act") the NRC requires an antitrust review of changes in ownership after initial licensing. Further, the Commission has e
noted, with approval, the staff's practice of conducting a significant change review for a transfer of control of an operating license issued under section 103 of the Act.'
After review of the filings in this proceeding, the record and testimony developed in the related proceedings at the Federal Energy Regulatory Commission and other public information, the '
staff determined that the changes in GSU's activities since the previous antitrust review, which may have competitive implications in the bulk power services market in the south central portion of the country, should be addressed in the context of a petition pursuant to 10 C.F.R. Section 2.206 requesting initiation of an antitrust compliance proceeding, not in the instant significant change proceeding. Consequently, the staff recommends that the Director of the Office of Nuclear Reactor Regulation issue a post OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend from GSU to 8
Entergy Operations, Inc. (EOI) is a subsidiary of Entergy which is licensed by the NRC as a non-owner operator of the four nuclear units of the Entergy system (Arkansas Nuclear One, Units 1 and 2; Grand Gulf Nuclear Station, Unit 1,; and Waterford Steam Generating Station, Unit No. 3).
Sj;Le Ohio Edison Comoany, (Perry Nuclear Power Plant, Unit 1); Cleveland Electric Illuminatina Co. and Toledo Edison Co.,
(Perry Nuclear Power Plant, Unit 1; Davis-Besse Nuclear Power Station, Unit 1), CLI-92-11, 36 NRC 47, 60 n.45 (1992).
Entergy. The staff further has determined that as a result of the inclusion of a license condition prohibiting EOI's marketing or brokering of power or energy from the River Bend facility that the proposed transfer of operating responsibility of River Bend from GSU to E01 presentG un ruluvant antitrust issues to the instant licensing review process.
6 II. Aeolicable Statute and Reculations A. Authority for NRC Antitrust Reviews ,
Section 105 of the Act defines the antitrust authority of the NRC.8 Subsection 105c(1) of the Act, as amended in 1970, requires the Commission to transmit, to the Attorney General, a copy of any license application to construct or operate a nuclear. I a4:llity under section 103 for the Attorney General's advice regarding a Commission finding pursuant to subsection 105c(5) as to whether the grant of an application will create or maintain a situation inconsistent with the antitrust laws. Subsection 105c(2) provides an exception to the requirements of subsection 105c(1) for a license to operate a nuclear facility for which a construction '
permit was issued under section 103, unless the Commission determines that an antitrust review is advisable on the ground that "significant changes" in the licensee's activities or proposed activities have occurred subsequent to the previous review by the !
Attorney General and the Commission in connection with the '
5 Sie Houston Lichtina & Power Co., (South Texas Project),
CLI-77-13, 5 NRC 1303, 1317 (1977).
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construction permit for the facility. In a decision regarding the !
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significant changes determination for the Viroil C._jiginy_er Nuclear Station, the Commission stated the criteria to be applied in making )
significant changes determinations: i The statute contemplates that the change or changes (1) have occurred since the previous antitrust review of the licensee (s); (2) are reasonably attributable to the licensee (s) ; and (3) have antitrust implications that would likely warrant some Commission remedy.'
To warrant an affirmative significant change finding, thereby triggering a formal OL antitrust review that seeks the advice of the Department of Justice on whether a hearing should be held, the particular change (s) must meet all three of these criteria.
B. NRC Operating License Antitrust Reviews The regulatory scheme regarding antitrust review of applications for operating licenses, as set out in the Commission's regulations at 10 C.F.R. SS2.101(e) and 2.102(d), contemplates a ;
determination by the Director, Office of Nuclear Reactor Regulation
("NRR"), whether an antitrust review is advisable on the grounds that "significant changes" in the licensee's activities or proposed activities have occurred. Only if the Director concludes, using the criteria in Summer, that significant changes have occurred, i vill the application be referred to the Attorney General for review pursuant to section 105 of the Act. If the application is referred to the Attorney General, interested persons have an opportunity to request a hearing after receipt of the Attorney General'c advice.
' South Carolina Electric and Gas ComDany and South Carolina Public Service Authority, (Virgil C. Summer Nuclear ;
Station, Unit 1), CLI-80-28, 11 NRC 817, 824 (1980). l l
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C. Change In ownership After Operating License Issuance ,
Section 105 of the Act, by its terms and legislative history, and the Commission's regulations do not directly address an antitrust review by the NRC when a transfer of control from the original ouncr(s) cf a power reactor occurs after issuance of the initial section 103 operating license. In these cases, the stsff generally has followed a process wituilar to that set out in 10 C.F.R. SS 2.101(e) and 2.102(d). This process generally L
consists of notice to the public of receipt of the application, solicitation of antitrust comments, and a determination by the Director, NRR, after consultation with DOJ, regarding "significant changes" since the last antitrust review. A determination that there are no significant changes is published in the Federal Reaister with an opportunity for interested persons to request a reevaluation of the finding. A determination that there are significant changes requires transmitting the application to the Attorney General for his advice regarding whether the Commission should conduct an antitrust hearing.7 This process does not apply to applications to transfer ownership to new owners with sLg minimis electrical generating capacity at the time of the application8 or to facilities licensed l
under subsection 10 4 b . ' The process also does not apply to J l
7 FjlLQ suora note 4. j i
e SjlLt 10 C.F.R. S 50.33a.
only section 103 facilities are subject to the antitrust requirements of subsection 105c. See American Public Power (continued...) l l
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applications to transfer control of a facility to a non-owner l 1
operator where the ability of the non-owner operator to affect 1 competition has been limited through appropriate license l 1
conditions.10 III. Previous NRC Antitrust Reviews of River Bend A. River Bend Construction Permit Review The staff conducted a review of GSU's competitive activities in 1974 in conjunction with the River Bend construction permit
("CP") application. As part of the CP review, GSU entered into a set of policy commitments with DOJ regarding access, interconnection and reserve sharing, wheeling, and exchange of bulk power. Although DOJ identified several instances of alleged abuse of market power by GSU, DOJ indicated in its March 25, 1974 advice letter to the NRC that if the policy commitments made by GSU were imposed as license conditions to the River Bend plant, "an antitrust hearing on this application would appear unnecessary."
The commitments were imposed as antitrust license conditions to the River Bend construction permit. The license conditions provide a :
(... continued)
Association v. NRC, No. 92-1061, slip op. at 7-8 (D.C. Cir.
April 13, 1993).
10 The antitrust issues that the staff believes are associated with amending a section 103 license to authorize operation of a power reactor by an entity that has no ownership in the facility is discussed in SECY-91-246 (August 7, 1991). In a memorandum from Samuel J. Chilk, Secretary, to the Executive Director of Operations and the General Counsel, dated September 9, 1991, the Commission approved the staff's proposal to include license conditions that limit a non-owner operator's ability to affect the marketing or brokering of power.
broad array of access to bulk power and coordinated bulk power ,
services including wholesale power for resale, transmission, interconnections, reserve sharing and other services to primarily smaller power entities in and adjacent to GSU's service area.
B. River Dend Operating License Review In 1985, pursuant to section 105c(2) of the Act, the staff conducted a significant change review of GSU's competitive activities prior to issuance of the River Bend operating license.
The staff identified several changes in GSU's activities that were the result of the license conditions imposed upon GSU during the CP antitrust review. The staff did identify one area of concern during its significant change review regarding a refusal by Gulf States to provide transmission services to ann-generating power entities. The staff concluded after extensive review of the relevant data that the affected non-generating entities in GSU's service area could receive transmission service through interconnection agreements with Cajun Electric Power Cooperative, Inc. and the Louisiana Energy and Power Authority as well as through a Power Delivery Agreement which was proposed by GSU.
Based on the CP antitrust license conditions and the origination of power delivery agreements that made transmission access available to non-generating entities, the staff made a no significant change determination pursuant to GSU's application for an operating ;
i license for the River Bend Station. .
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IV. Other Reculatory Reviews I A. State Public Utility Commissions l l
The proposed merger precipitated lengthy proceedings before two state public utility commissions, Texas and Louisiana, with each very much focused on the "public interest" concept of the :
proposed merger in terms of what effect it would have en rate payers in their respective jurisdictions. The Louisiana Public Service Commission ("LPSC") approved the proposed merger in April 1993. The LPSC staff declared the proposed merger to be in the public interest and recommended approval of the merger with several ,
conditions. Approval was based primarily on projected fuel savings for the merged GSU/Entergy system of over $560 million over ten years with most of the savings coming from GSU operations. The merger conditions were designed primarily to protect Louisiana rate payers and did not directly address the competitive effects of the proposed merger on bulk power services markets.
In March 1993, GSU, Entergy, the Texas Public Utility Commission ("PUCT") staff and various parties to the Texas proposed merger proceeding agreed to a stipulation that resulted in a tentative settlement of the outstanding issues in the Texas proceeding involving the proposed GSU/Entergy merger. The settlement stipulates that the parties recommend the merger for regulatory approval, calls for 100% of merger-created fuel savings in GSU's Texas servica area be passed through to its Texas customers, allows for GSU customers to receive over half the non-fuel operations and maintenance savings created by the merger for
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eight years, and puts a five-year cap on GSU's Texas retail rates, !
based on the rates in effect on the merger closing date. The stipulated agreement also assured other members of the Electric Reliability Council of Texas ("ERCOT") that Entergy did not intend to subject its Texas cperations to interstate commerce by interconnecting GSU's Texas operations with non-ERCOT power systems. The PUCT approved the settlement agreement in July 1993.
B. Securities and Exchange Commission In August 1992, pursuant to the requirements of the Public Utility Holding Company Act of 1935, Entergy filed an application '
with the SEC for approval of the proposed GSU/Entergy merger and various related transactions. The SEC review of the proposed merger will encompass competitive implications as well as the projected structural efficiencies and economies associated with the merger. Numerous petitions to intervene were filed with the SEC.
As of the date this staff recommendation was completed, the petitions to intervene had not been accepted by the SEC, nor had a hearing date been set.
C. Department of Justice In March 1993, pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, GSU and Entergy filed notification of their intent to merge with DOJ. On August 24, 1993, DOJ withdrew its second request for any additional information from the applicants. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act has expired. -
D. Federal Energy Regulatory Commission
There have been two proceedings before the Federal Energy Regulatory Commission ("FERC") that relate to the competitive issues raised by the proposed Entergy/GSU merger. In the first proceeding in 1992, the FERC examined the impact of an open access transmission tariff that was submitted by Entergy. Ep3 Enterav Services. Inc. , 58 FERC 1 61,23 4 (1992), (March 3, 1992 Order). In that proceeding, the FERC determined, among other things, that, after certain modifications to the proposed tariff, Entergy does not possess market power in its relevant geographic or product markets.
The second proceeding began with the filing by GSU and Entergy of a joint application with the FERC, in August 1992, requesting the authority and approval for a merger and reorganization to combine the facilities of Gulf States with the facilities of the operating electric utility subsidiaries of Entergy. Thirty-four notices or motions to intervene were filed before the FERC. The majority of the intervening parties requested a hearing and imposition of conditions on the merging companies as a condition of FERC approval.
The FERC issued an order on the merger and rate applications on January 28, 1993. Enterav Services. Inc. and Gulf States Utilities Co., 62 FERC 1 61,073, slip op. at 87-88 (1993),
(January 28, 1993 Order). The January 28, 1993 order set a limited, expedited hearing schedule for issues pertaining to the merger's effect on costs and rates, the applicants' proposed accounting treatment and the applicants' proposed amendment to
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Entergy's System Agreement. The FERC indicated in its order that' the issues raised by intervenors pursuant to the competitive effects of the proposed merger were adequately mitigated by Entergy's open access transmission tariff, which the FERC approved in March 1992, and, for this reason, the FERC would not hold hearings on issues pertaining to competition or market power.
Before making its findings, the FERC accepted and considered extensive initial and supplemental filings on competition and transmission issues in connection with the Entergy-GSU merger application. The FERC, on the merits, granted " summary disposition on the effect of the proposed merger on competition" and found "that the provisions approved in Entergy's open-access tariff, when extended to Gulf States' service territory and in perpetuity (or until the Commission deems it unnecessary), will adequately mitigate any increase in market power in the relevant geographic and product markets that may arise from the proposed merger, if approved." 1s1. at 106-07.
Subsequent to the FERC's January 28, 1993 Order, several parties filed requests for rehearing, indicating that FERC had not adequately addressed the competitive issues attendant to the proposed merger. In a July 1, 1993 Order, the FERC denied the requests for rehearing and set September 30, 1993, as the date for the FERC Administrative Law Judge Initial Decision on the matters set for hearing. Enterctv Services. Inc. and Gulf States Utilities h, 64 FERC 1 61,001 (1993), (July 1, 1993 Order). The FERC Administrative Law Judge issued an Initial Decision on September 9,
1993. The FERC's January 28, 1993 order limited the time period in which briefs on exceptions could be filed to 20 days, and briefs opposing exceptions to 35 days, after the administrative law judge's initial decision is rendered.
V. Amendment Aeolication Comments Received By The Staff On March 25, 1993, the staff published in the Federal Recister notice of receipt of license amendment requests from GSU for approval of the proposed transfrr a of manership control and operation of the River Bend plant from GSU to Entergy Corporation.
58 Fed. Reg. 16246 (1993). Comments were received from the following entities:
Arkansas Cities of Benton, Conway, North Little Rock, Osceola, Prescott, West Memphis and the Farmers Electric Cooperative Corporation (collectively, " Cities and Cooperative");
Brazos Electric Power Cooperative, Inc. ("Brazos");
Cajun Electric Power Cooperative, Inc. (" Cajun");
Lafayette Public Power Authority and the Lafayette, Louisiana Utilities System (" Lafayette");
Louisiana Energy and Power Authority ("LEPA");
Municipal Energy Agency of Mississippi ("MEAM");
Occidental Chemical Corporation (" Occidental");
South Mississippi Electric Power Association ("SMEPA"); and Terrebonne Parish Consolidated Government ("Terrebonne").
On June 11, 1993, GSU filed a response to the comments and on July 9, 1993, Terrebonne filed a reply to GSU's response.
Additionally, Brazos, Cajun, Lafayette, LEPA, MEAM, Occidental, and
Terrebonne provided additional information in response to queries from the staff dated July 7 and 9, 1993.
Several of the commenters have similar concerns regarding the proposed merger between GSU and Entergy. Generally, the commenters allege that the propnned merger vould adversely impact the competitive bulk power services market (s) served by the newly formed GSU/Entergy by restricting meaningful access to transmission facilities in the combined GSU/Entergy service area. The comments are summarized below:
A. Cities and Cooperative Arkansas Cities and Cooperative each own and/or operate electric generation and distribution systems or electric distribution systems within the State of Arkansas and are completely surrounded by the facilities of AP&L. Arkansas Cities and Cooperative are full or partial requirements wholesale customers of AP&L. Cities and Cooperative Comments, dated April 23, 1993, at 2-3. Cities and Cooperative allege that the merger will have a detrimental impact on competition for wholesale load within the combined GSU/Entergy service area and that no regulatory agency has reviewed the anticompetitive effect of the merger to date. Cities and Cooperative also allege that the proposed merger will eliminate GSU as an independent competitor in their regional area and that the Entergy open access transmission tariff approved by the FERC in March 1992 will not effectively mitigate the potential anticompetitive effects of the proposed merger. Moreover, cities and Cooperative assert thet a subset of
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l the transmission access tariff granting Entergy reciprocal wheeling rights discouraged meaningful competition for wholesale supplies.
H. at 18. Cities and Cooperative recommend that the NRC and the Attorney General conduct a thorough antitrust review and give consideration to the imposition of entitrust license conditions which would grant comparable rights to the customera of all of Entergy's operating company subsidiaries and would allow and require GSU and all of Entergy's operating company subsidiaries to compete for wholesale load in Entergy's service area. M. at 28-29.
B. Brazos Electric Power Cooperative, Inc.
Brazos is an electric generation and transmission cooperative which provides power and energy to its members, which resell to ultimate consumers in over 60 counties in the north central region of Texas. Brazos purchases power and energy from GSU under a FERC-jurisdictional rate schedule. Brazos also purchases from GSU transmission service for hydroelectric power and energy which Brazos obtains by contract from the Southwestern Power Administration ("SWPA"). Brazos Comments, dated April 26, 1993, at 2. Brazos asks the NRC to conduct a complete evidentiary hearing and review of the proposed merger between GSU and Entergy notwithstanding the ongoing review of the merger at the FERC. In its petition to intervene, Brazos emphasizes the fact that the original River Bend antitrust license conditions were imposed upon a " stand-alone GSU" and the addition of Entergy to the GSU system could result in the second largest utility in the United States i
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with GSU a part of a centrally coordinated system of operation.
Brazos asks the NRC to develop a complete evidentiary record to determine if the existing River Bend antitrust license conditions, as well as those of Louisiana Power and Light ("LP&L") and Mississippi Fower end Light ("MP&L"), are adequate to deal with the anticompetitive effects aricing from such increased centralization of control over the nuclear operating licenses granted by the NRC.
M. at 7-8. Brazos requests that the NRC find that the stranded investment 11 provision of the Entergy open access transmission tariff is contrary to the River Bend antitrust license conditions; ensure that GSU offer transmission to competitors on non-discriminatory rates, terms and conditions; and take any further action necessary to redress the "significantly changed circumstances resulting from GSU's proposed license amendment with regard to change in ownership of GSU." M. at 10.
C. Cajun Electric Power Cooperative, Inc.
Cajun, the co-owner of the River Bend facility, is a generation and transmission cooperative, headquartered in Baton Rouge, Louisiana, serving thirteen rural electric distribution cooperatives in Louisiana under all requirements contracts. Cajun states that its primary purpose is to provide an adequate and l
reliable supply of economical power and energy to meet the full 1
si Stranded investment costs usually refer to generation costs ,
allocated to supply a particular wholesale load, which in return l makes use of the host generating system's transmission facilities i to leave the system and take wholesale power from another source. l l
e requirements is of Cajun's Members. Cajun Comments, dated April 26, 1993, at 5. According to Cajun, the merged companies' control and ownership of regional transmission facilities, the integrated nature of its operations and its enhanced size and access to resources, will create anticompetitive effects which will not be remedied by the open access transmission tariff, which Entergy and GSU state will be made applicable to GSU after the consummation of the merger and upon which Entergy and GSU rely as the vehicle for mitigation of their market power. Cajun further alleges that the proposed merger will enhance the market power of Entergy and GSU over Cajun and other native load transmission customers and that the open access transmission tariff is inadequate to meet the requirements of Cajun and native load transmission customers which compete with Entergy and GSU in the requirements and bulk power markets. 151. at 53-54. Cajun asks the NRC to ensure that the following conditions are a part of the NRC's approval of the proposed GSU/Entergy merger:
- 1. that Cajun's rights as a thirty percent co-owner of River Bend are protected;
- 2. that Entergy assure the financial viability of GSU and EOI to avoid potential health and public safety dangers should GSU become bankrupt or financially unable to undertake its-responsibilities regarding River Bend;
- 3. that access to transmission on the Entergy system be provided on a non-discriminatory and equal price basis such that competitors, like Cajun, can utilize the transmission system in the same fashion as do the Entergy Operating Companies; 12 Full requirements customers are those customers with no generating capability of their own.
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- 4. that GSU's and Entergy's contractual obligations to Cajun are not obviated;
- 5. that GSU and Entergy comply with all license conditions on River Bend and the Entergy nuclear plants; and
- 6. that the public interest is fully protected.
H. at 86. Moreover, Ccjun asks that the NRC delay its decision until final orders have been issued in other fora where the merger is also being reviewed. Cajun asserts that the NRC is relying on ,
findings of other agencies in making its own determination and must, therefore, analyze those decisions to determine if proposed conditions meet the standards which the NRC is charged with applying and enforcing. M. at 87.
D. Lafayette Public Power Authority Lafayette Public Power Authority ("LPPA") was created by the City of Lafayette, Louisiana for the purpose of acquiring and maintaining public power projects. LPPA owns and operates a municipal electric system that provides service to the City of I Lafayette. LPPA owns approximately 650 MW of generating capacity and has a peak load of approximately 320 MW. LPPA has considerable surplus generating capacity and sells power to other utilities.
LPPA. competes with the Entergy operating companies in the sale of wholesale power and is totally dependent upon the Central Louisiana Electric Company and GSU for transmission of power and energy.
LPPA alleges that Entergy is engaged in discriminatory treatment of its competitors largely through the exercise of its monopoly power in transmission. LPPA contends that, Entergy's point-to-point (contrasted to a form of network transmission
t service) limitation is also at odds with long-standing antitrust license commitments made by Entergy to the Nuclear Regulatory Commission. Laf ayette Comments, dated April 26, 1993, at 12. LPPA also alleges that the a portion of the Entergy transmission access 4
tariff approved by the FERC in March 1992 includac a provicion that allows for Entergy to include in its transmission rate funds allotted for stranded investment contrary to the NRC license conditions for the Waterford Steam Generating Station and Grand Gulf Nuclear Station. To remedy the allegations of abuse of market power by Entergy, LPPA requests that the NRC require Entergy to offer non-discriminatory transmission service, including network service; to find that the stranded investment provision afforded ,
Entergy by the open access FERC approved rate is contrary to NRC license conditions; and to take any additional action needed to remedy the alleged anticompetitive implications- of GSU and Entergy's proposal to transfer the River Bend license. Id. at 17.
E. Louisiana Energy and Power Authority /Terrebonne Parish Louisiana Energy and Power Authority ("LEPA") is a political subdivision of the State of Louisiana that provides the facilities to generate and transmit power and energy for its 19 member municipal electric systems. Terrebonne Parish, also known as the City of Houma, Louisiana, is one of the 19 members of LEPA.
Although both LEPA and Terrebonne made separate filings, they both have overlapping concerns and LEPA indicated in its filing that it intends to incorporate Terrebonne's Comments by reference. L]2A Comments, dated April 26, 1993, at 2. LEPA was formed to meet the
l ne.ed for an effielent bulk power supply by municipal electric systems throughout the state during a period in the late 1970s when gas fuel was in short supply and at a very high price and expected to go even higher. Terrebonne Comments, dated April 26, 1993, at 5. LEPA and ito 2cubers, in an effort to reduce the costs of their baseload power supply, purchased an interest in a coal-fired generating plant, the Rodemacher Unit No. 2 from the Central Louisiana Electric Company ("CLECO"). Moreover, LEPA, contracted for transmission and other power exchange services from GSU, CLECO, and Louisiana Power and Light to deliver coal-fired power from the Rodemacher plant and backup for that power to its municipal !
members. M. at 6.
Terrebonne alleges that the proposed merger between GSU and Entergy will eliminate GSU as an independent entity in the bulk power services market in which it operates. Terrebonne argues that elimination of the second largest utility in the region as a potential coordinating partner will reduce substantially the potential for coordinated development of generation available to Terrebonne and LEPA and makes reasonably assured access to transmission all the more crucial. Terrebonne, at 11. LEPA has similar concerns pursuant to the loss of an independent GSU and argues that assured transmission access at a fair and readily ;
determinable rate with coordinating partners is absolutely essential if LEPA is to continue in business. M. at 12.
Both LEPA and Terrebonne argue that the provisions in the open access tariff, approved by the 7ERC in March 1992, that allow for l
1 l
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t b
" point-to-point" transmission charges and " stranded investment" costs are anticompetitive and inconsistent with existing NRC antitrust license conditions. LEPA and Terrebonne allege that if I
LEPA does not obtain meaningful access to the coordination services market, which contains the varicus factors of production that are melded together to produce a low-cost, reliable supply of wholesale requirements power, its ability to compete in the wholesale requirements market is greatly diminished because its rates would be much higher relative to the rates of those that have access to this market. Id. at 32. LEPA and Terrebonne ask the NRC to make a significant change finding, hold an antitrust hearing on the proposed merger, and condition the proposed change in ownership of River Bend by adding a series of license conditions which provide .
for transmission of a given quantity of power among points for one transmission charge and remove stranded investment charges from the .
i transmission rate. -
F. Occidental Chemical Corporation t
Occidental is the largest retail electric customer on the Entergy system and is one of the 25 largest retail customers of GSU. Occidental asserts that the transfer of control of River Bend ,
would impact competition in electric markets and thereby directly and substantially affect Occidental. Occidental Cominents , dated i April 26, 1993, at 2. Occidental alleges that the stipulation entered into by GSU, Entergy and Texas Utilities Company in the Texas Public Utilities Commission proceeding involving the proposed merger of GSU and Entergy amounts to an agreement among these three -
i
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entities not to compete in the state of Texas and, therefore, is a violation of Sherman Act section 1 principles. Occidental asks the NRC to find, because of the stipulation before the Texas PUC and >
the proposed merger between GSU and Entergy, that significant changes have o; urred ince the previous antitrust review of the River Bend plant.
G. Municipal Energy Agency of Mississippi
- MEAM is a joint action agency organized under the laws of Mississippi in 1978 by eight municipalities to furnish reliable electric service to its member cities at the lowest possible cost.
MEAM engages in the sale and purchase of power for its members and is interconnected with MP&L. MEAM is a transmission dependent utility with respect to MP&L and to the Entergy syster. ]iEAM Comments, dated April 26, 1993, at 3.
MEAM argues that point-to-point transmission service, though providing for access to transmission facilities, does not provide meaningful access because the costs are duplicative and prohibitive compared to a single system network transmission service. MEAM l
also argues that the FERC hearing did not fully consider the competitive implications of this distinction nor the fact that the NRC license conditions require network transmission service for individual Entergy operating subsidiaries. MEAM also alleges that j the Entergy open access transmission tariff is inconsistent with ;
l NRC antitrust license conditions in that it allows for stranded ;
I investment costs to be included in transmission costs whereas the NRC conditions specifically preclude such costs.
1 l
5 MEAM asked the NRC to make a significant change finding pursuant to the proposed merger amendments and review the existing antitrust license conditions imposed upon the Entergy subsidiaries and GSU to determine whether they are still adequate or should be modified to cover the entire Entergy system in crder to reflect the operating realities of that system as it has evolved.
On September 9, 1993, MEAM notified the NRC that it had reached an accommodation with Entergy which resolved the objections MEAM had previously asserted to the proposed merger and accordingly, MEAM was withdrawing its objections to the merger contained in its April 26, 1993 corsents.
H. South Mississippi Electric Power Association SMEPA is a generation and transmission cooperative owned by electric distribution cooperatives serving rural areas in the state of Mississippi and supplies all the power and energy requirements of its members in Mississippi. SMEPA 'perates and maintains its own transmission system within its own control area, has an undivided 10 percent interest in Grand Gulf, and utilizes Entergy's transmission system to supply power to its members' load in the MP&L system control area served through delivery points located within MP&L's transmission system. SMEPA Comments, dated April 26, 1993, at 5.
SMEPA alleged that the Entergy open access transmission tariff approved by FERC in March 1992 does not provide meaningful access to the GSU/Entergy transmicsion grid in that it offers, effectively, a more costly point-to-point service as opposed to
network transmission service. SMEPA alleged that as a result it will be put at a greater competitive disadvantage in the purchase and sale of bulk power and energy after the proposed merger compared to the existing competitive relationship between SHEPA, GSU and the Entergy cperating subsidiaries.
On August 19, 1993, SMEPA notified the NRC that it was withdrawing its opposition to the proposed merger.
+
VI. NRC Staff Analysis Of Addition Of Non-Owner ODerator In the case of new operators, it has been the staff's position that any new plant operator that agrees to separate itself from marketing or brokering of power and energy from the facility under review, ostensibly removes the ability of that plant operator to affect the bulk power or coordination services market under review.13 In August 1989, System Energy Resources Inc. ("SERI") (Grand Gulf licensee), Arkansas Power & Light Company (Arkansas Nuclear One
("ANO") , Unit 2 licensee) and LP&L (Waterford licensee) submitted to the NRC proposed license amendments to designate EOI as the licensed operator for all of Entergy's nuclear power plants, i.e.,
Grand Gulf, ANO 1 and 2 and Waterford. EOI, at the time of the amendment applications for each of these plants, was slated to become Entergy's system wide nuclear operating company, replacing SERI in the same role. EDI, like SERI and the operating companies 13 M suora note 10.
of the Entergy system, is a wholly owned subsidiary of Entergy.1*
The staff was concerned with what competitive impact EOI, a new corporate entity, would have, via its ability to market or broker power or energy from each or all of the Entergy nuclear plants, on relevant bulk power services markets served by the entire Entergy system. The staff and Entergy developed a license condition for each of the Entergy nuclear plants licensed under section 103 of the Act that effectively removed EOI from any competitive activities associated with the power or energy produced by the nuclear facilities it would be operating.15 After discussions among representatives of Entergy, CSU, and the staff, GSU, by letter dated June 29, 1993, supplied language for two proposed new license conditions for River Eend. The proposed license conditions would reaffirm GSU's commitment to comply with existing GSU antitrust license conditions, prohibit EOI from marketing or brokering power or energy produced by River Bend, and hold GSU accountable and responsible for EOI's actions to the l'
Spa suora note 3.
is A license condition was added to the Grand Gulf plant which held licensees, SERI and MP&L, responsible and accountable for the actions of its agents -- including EOI -- to the extent said actions contravened the antitrust license conditions of the Grand Gulf plant. A similar license condition was included as a part of the Waterford license, holding LP&L responsible and accountable for the actions of its agents. Because there were no existing antitrust license conditions as part of the Arkansas Nuclear One, Unit 2 facility, the licensee, AP&L, and the staff developed a specific license condition that prevcnted EOI from marketing or brokering the power or energy produced by the Arkansas Nuclear One, Unit 2 facility. The same license condition held AP&L responsible and accountable for the actions of its agents, including EOI, regarding the marketing or brokering of power or energy from the plant.
extent EOI's actions contravene the antitrust license conditions for River Bend. If the proposed license conditions limiting EOI's ability to participate in the bulk power services market served by River Bend are made a part of the River Bend license, the staff finds that the changa in cperator cf the River Bend facility from GSU to EOI will not adversely impact the relevant bulk power market ,
served by River Bend.
VII. NRC Staff Analysis Of Chance In Ownershio The purpose of this review is to determine whether there have been significant changes in the licensee's proposed activities since the last antitrust review which have antitrust implications that would likely warrant some Commission remedy. It is apparent from the filings in this proceeding that the change in ownership and control resulting from the proposed merger between GSU and Entergy have precipitated allegations of non-compliance with existing antitrust license canditions. An allegation of non-conformance with license conditions is a matter properly dealt with in a 10 C.F.R. S 2.206 petition. Stated anothe- ay, illegations of non-conformance with license conditions, if ;mt antiated, are dealt with by enforcing the existing license conditions. A significant change, as that term has been defined by the Commission in Summer, on the other hand, may require a proceeding to determine i
what remedy would be appropriate to address the anticompetitive implications of the significant changes. In making its findings and completing its review of the licensee's activities, the staff
has had the benefit of testimony and hearings at the FERC concerning the proposed merger between GSU and Entergy and the related rate pr4ceeding involving the Entergy open access transmission tariff. Although many of the FERC findings are not germane to the instant review, many others have been heJpful to the staff.
The FERC in its review of the proposed GSU/Entergy merger, i indicated that the Entergy open access transmission tariff approved on March 3, 1992, effectively mitigates the potential anticompetitive effects of the proposed merger raised by the t
intervening parties at the FERC. The intervenors at the FERC disagreed with this finding, indicating that the form of '
1 transmission service offered was, on occasion, less desirable than their existing agreements with GSU and' individual Entergy operating subsidiaries. Moreover, intervenors argued that they are afforded ;
access to network transmission service under the NRC River Bend, Grand Gulf and Waterford antitrust license conditions. In response
- to this argument, the FERC stated that any parties believing themselves eligible for service they perceive to be different, 4 1.e., better, than allowed under the Entergy open access tariff, should come to the FERC with a specific service agreement to ;
resolve any differences. In filings to zhe NRC, commenters have i indicated that such an approach is not satisfactory based primarily on the fact that resolution of the service agreements are too time l consuming, perfunctory, and do not delineate the parameters of the problem which, according to the commenters, is the open access j l
)
tariff itself. For the purpose of this significant change analysis, the staff decided that any jurisdictional differences or standards of review differences between the NRC and the FERC in reviewing proposed mergers were not significant in determining whether all thras SE agr criteria have been met, i.e., in large ;
part, the concerna raised by commenters appear to be enforcement issues and not issues that address changes in licensee's activities.
A. Effects of the Froposed Merger on Competition From the filings received at the NRC and the record established to date at the FERC, the staff believes that the GSU/Entergy merger impacts the bulk power services market in the south central portion of the country. The FERC has ruled on the merger's effect on competition, finding that, with the transmission changes comritted to by Entergy, the merger will not adversely affect competition. January 28, 1993 Order, slip op. at 87-88. To the extent that the FERC may be in error in reaching this conclusion as asserted by NRC commenters, there is an opportunity in the fcderal courts, for the same parties that are raising these issues before the NRC to seek review of the FERC decision. With respect to any alleged violations of NRC license conditions that have or may occur as a result of the merger, the mechanism for requesting the NRC staff to take appropriate action for alleged noncompliance with license conditions is a petition filed pursuant to 10 C.F.R. S 2.206. S,gLq, Consolidated Edison Comoany of New York, (Indian Point, Unit 2) and Power Authority of the State of
~ 28 - ,
New York, (Indian Point Unit 3), CLI-83-16, 17 NRC 1006, 1009 (1983).
- 1. Network Transmission The overwhelming competitive concerns expressed by the majority of the intervenors in the FERC procecdings and commenters-in the instant proceeding pertain to meaningful access to the combined GSU/Entergy transmission grid. Intervening parties in the FERC and commenters in the NRC proceeding allege that they cannot effectively compete against larger, more integrated power supply systems like GSU and the Entergy operating subsidiaries -- and have even more difficulty competing with a merged GSU/Entergy -- without access to alternative sources of power and energy.
The staff believes competition in the electric power industry is enhanced by access to transmission. Moreover, access to transmission must be meaningful in both its terms and conditions.
Competitively priced transmission allows both the requesting party and the transmitting party to benefit and obtain optimal allocation of scarce resources from the arrangement. Although the staff believes unencumbered transmission access promotes the competitive process in bulk power services markets, the staff does not equate such access to a " free ride" for the requesting entity. Until industry-wide terms and conditions associated with network transmission service are generally accepted and considered by the FERC, e.g., in the context of developing regional transmission groups or agreements throughout the country or various regional pooling arrangements which address transmission access issues, the
staff will review relevant allegations involving network versus point-to-point transmission service on a case-by-case approach considering all relevant arguments as well as other federal agencies' findings. In the instant proceeding, the staff believes the issues before the NRC relevant to network transmission are most appropriately addresced in the context of a 2.206 petition seeking initiation of an enforcement proceeding.
- 2. Stranded Investment Similar arguments have been raised by FERC intervenors and commenters to the NRC regarding the treatment of stranded investment costs. Simply put, stranded investment costs usually refer to generation costs allocated to supply a particular wholesale load which in return makes use of the host system's transmission facilities to leave the system and take wholesale power from another source. Intervenors argue that the open access transmission tariff provides for stranded investment costs to be included in a transmission rate whereas certain NRC antitrust license conditions for River Bend, Grand Gulf and Waterford ,1' preclude such costs from being included in transmission costs.
I The reading of the pertinent license conditions leaves some doubt in regard to whether the language in the license conditions refers to stranded investment costs or opportunity costs -- two related, yet different concepts. Opportunity costs represent lost revenues or increased costs associated with foregone sales or l'
The relevant license conditions are: River Bend (1) (c) ;
Grand Gulf I. (d); and Waterford (1) (b) .
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purchases or power or energy over an identified transmission path.
Although stranded investment costs could conceivably be construed as a type of cost which was intended to be excluded by the pertinent license conditions, it is the staff's opinion that the license conditions referred to by intervenors vero intended to preclude opportunity costs as defined cbove and not stranded investment costs. Moreover, costs associated with particular wholesale transactions are often case specific. The staff believes that if someone has specific examples where costs of particular transactions are in any way exorbitant or discriminatory, the proper forum for such a determination is the FERC (in a rate proceeding) and not the NRC.
'Ihe FERC, in its January 28, 1993 Order on Applications, agreed to review specific examples where parties objected to inclusion of stranded investment costs. January 28, 1993 Order, slip op, at 11. The phrase, " cost shall include a reasonable return on the applicant's investment," is included in the license conditions of the River Bend, Grand Gulf and Waterford NRC licenses. Determining cost of service and rates of return for j wholesale power transactions is under the jurisdiction of the FERC, not the NRC.
- 3. Elimination of GSU as an Independent Competitor Cities and Cooperative raise relevant questions pertinent to the significant change review by identifying areas where wholesale competition may suffer as a result of the elimination of GSU as an l l
independent competitor in the bulk power services market. The I I
f JG'
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l staff is also concerned with GSU's disappearance from this market; j however, GSU does not represent Cities and Cooperative's only l alternative source of power supply (alternative to AP&L) as evidenced by the fact that there were ten (apparently meaningful) responses to Cities and Cooperative's most recent request for service. Moreover, there are seven power systems, including GSU, "still under active consideration" to fulfill Cities and Cooperative's wholesale power requirements upon termination of selected contracts with its principal supplier, AP&L.17 The entities listed by Cities and Cooperative all appear.to be viable systems, capable of furnishing Cities and Cooperative the power and energy they are seeking. However, without a more in-depth analysis of the instant request, which is difficult given the proprietary nature of the negotiations, the staff could not label GSU's '
elimination as sig minimis. Even if GSU were a non-sig minimis competitor in this market, there are several other competing '
systems willing to provide cities and Cooperative marxet-tested rates for the services it is seeking. For the above reasons, the staff does not believe the loss of GSU as an independent competitor to AP&L for Cities and Cooperative represents an irreplaceable loss. Consequently, cities and Cooperative will not be significantly disadvantaged in the relevant bulk power services markets because of the clinination of GSU as an independent I competitor. >
27 Letter to Geoffrey Grant from Zachary D. Wilson, dated July 22, 1993, p. 4.
s
- 4. Market Allocation Occidental Chemical Corporation expressed concern over the agreement reached before the PUCT between GSU, Entergy and Texas Utilities Electric Company (TU Electric) which resulted in resolution of outs' ading issues before the PUCT pertaining to the ,
proposed GSU/Entergy merger. Occidental alleged that the agreement represented a market allocation agreement in violation of section 1 of t.he Sherman Act. The staff does not view the aforementioned stipulation as an agreement to allocate either wholesale or retail power markets. Given the long history of the independent nature of electric utility systems in the Electric Reliability Council of Texas, the staff believes the PUCT stipulation acts to preserve the intrastate, non-jurisdictional nature of ERCOT and its member systems and not to allocate or segment markets between GSU, Entergy and TU Electric.
B. NRC Staff Findings Regarding Change in Ownership ;
As previously discussed, the staff believes section 105 of the Act requires NRC antitrust review of changes in ownership after initial licensing. The staff undertakes this review by performing a significant change review to determine whether there have been significant changes in the licensee's proposed activities since the last antitrust review using the criteria set out by the Commission in Summer for making the determination. The change in licensee activities that precipitated the instant significant change review is the request by GSU to transfer control of its ownership in River Bend to the Entergy Corporation and the request by GSU to change l
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the operator of the plant from GSU to EOI. These changes occurred since the previous antitrust review associated with the River Band operating license review in 1985 and are reasonably attributable to the licensee, thereby saticfying the first two Summer criteria.
The staff believes ths.t}ucre of the concerns raised in connection with the transmission issues involving the proposed merger and NRC license conditions are, if substantiated, enforcement issues, involving existing license conditions that can be dealt with ;
appropriately pursuant to a 10 C.F.R. S 2.206 petition. The issue of stranded investment cost is a matter within the jurisdiction of the FERC. Further, the staff has no basis to disagree with the :
FERC finding that entities will not be competitively disadvantaged ;
by the loss of GSU as an independent competitor. Lastly, the staff, based on the information presented, does not view the agreements entered into by GSU and Entergy with TU Electric as a market allocation agreement in violation of the Sherman Act.
The staff believes there have been issues raised in the instant proceeding that may warrant commission remedy, but not in the context of a post operating license significant change review.
The staff believes there is no need to institute a new licensing proceeding at the NRC to effectively remedy a situation that has its genesis in activities !.nvolving alleged non-compliance with antitrust license conditiona by GSU and Entergy operating subsidiaries LP&L and MP&L. For these reasons, the staff believes that the proposed merger does not have antitrust implications that
. , , , - - - .. ,. . ~ ,-,,..,e ,e
warrant some commission remedy in this proceeding and, therefore, that the third Summer criterion has not been met.
VIII. CONCLUSION For the reasons discussed above, and after consultation with DOJ, the staff recommends that the Director of the Office of Nuclear Reactor Regulation issue a post OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend to Entergy and transfer operation of River Bend from GSU to EOI.
5
. Appendix A - Previous NRC Reviews of GSU and Entergy The staff has conducted several competitive reviews of the activities of both GSU and Entergy involving different nuclear facilities and various ownership arrangements. The issues and matters in controversy in many of these reviews have reemerged in the instant licensing proceeding. The following highlights are provided as background.
A. Grand Gulf In 1972 Mississippi Power & Light Company (MP&L), an operating subsidiary of the Middle South Utilities, Inc. holding company, submitted an application to construct the Grand Gulf Nuclear Station. [In May 1989 Middle South Utilities, Inc. changed its name to Entergy Corporation, the holding company system involved in the proposed merger with GSU.) During the Grand Gulf CP review, MP&L entered into a set of policy commitments with:the Department of Justice to remedy various allegations of abuse of market power by MP&L. As indicated in the Department's advice l
letter to the staff of the Atomic Energy Commincien dated May 24, 1973, 1 i
In the course of our antitrust review, certain allegations were received, the general import of which l was that Applicant has misused its monopoly position in '
generation and transmission to restrain the competitive opportunities of smaller systems in western Mississippi.
l l
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A-2 As a result of the commitments made by MP&L and the inclusion of .
1 these commitments as license conditions to the Grand Gulf plant, the Department concluded that the benefits associated with the commitments would provide smaller systems in the affected marketing area alternative sources of power and energy and "substantially eliminate the grounds on which complaints made to the Department by the smaller systems were based."1 As a result, the Department concluded that an antitrust hearing would not be necessary pursuant to MP&L's application to construct the Grand Gulf plant.
In 1981, in conjunction with the issuance of an operating license for the Grand Gulf plant, the staff conducted a significant change analysis of MP&L's competitive activities since the completion of the antitrust review at the CP stage. During this review, the staff identified an on-going dispute between MP&L and several smaller power systems in MP&L's service area.
Over the past six or seven years (1973-80) various municipal and cooperative electric systems in MP&L's service area have been trying to consummate workable transmission and power supply arrangements with MP&L -
using the Grand Gulf CP license conditions as a basis for negotiations. These negotiations have led to various allegations and disputes which are the focus of staff's investigation in this review.:
2 Department of Justice advice letter dated May 24, 1973.
2 Grand Gulf Nuclear Plant, Unit 1, Mississippi Power & Light Company and South Mississippi Electric Power Association, Docket No. 50-416: Staff " Finding of No Significant Antitrust Changes",
- p. 7.
A-3 Negotiations between MP&L and the Municipal Energy Agency of Mississippi (MEAM), which represents the municipal systems in MP&L's service area, concerning access to MP&L's generation and transmission facilities, continued until early 1979 when the parties reached an impausc.
In May of 1979, counsel for MEAM sent a letter to the NRC expressing concern over MP&L's non-compliance with its CP license conditions and requested NRC to take enforcement action against MP&L.8 The staff initiated a compliance proceeding and began investigating MEAM's allegations. The staff concluded that MP&L was not living up to its Grand Gulf antitrust license conditions and issued a Notice of Violation to MP&L on May 29, 1980.
Subsequent to the Notice of Violation, MP&L proposed a settlement which offered MEAM access to both the Grand Gulf plant and the MP&L transmission grid.
1 In its significant change operating license review of the Grand Gulf plant, the staff did not identify any anticompetitive activity by MP&L that represented changed activity. A compliance proceeding was initiated by the staff and at the time the Finding was made, was apparently leading to a resolution of the competitive issues raised by MEAM pursuant to MP&L's non-compliance with the Grand Gulf antitrust license conditions.
3 Ibid., p. 8.
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. . . all present indications are that MP&L has l reversed its apparent policies that occasioned the l notice of violation in June of 1980, has essentially l reached a settlement agreement with the complaining parties, and is pursuing acceptance of rate schedules and agreements before FERC that would bring it into l full compliance with its license conditions. In the unlikely event that the settlement negotiations or the rate schedule implementations are unsuccessful, these matters can be resolved before the NRC in the present compliance proceeding which will remain in effect until l the matters are satisfactorily resolved.* l i
The staff analysis concluded that no additional antitrust remedies were required, i.e., beyond any proscribed as a result of the on-going compliance proceeding, and as a result, a significant change finding was not warranted under the NRC's criteria set forth in Summer.
B. Waterford
- The Louisiana Power & Light Company (LP&L), like MP&L, was an operating subsidiary of Middle South Utilities, Inc. -- a predecessor of Entergy Corporation -- at the time it filed a construction permit application for its proposed Waterford Steam Generating Station, Unit No. 3 (Waterford) with the staff of the Atomic Energy Commission in December 1970. Subsequent to the filing of its application and initiation of the antitrust review, the Department of Justice entered into a settlement agreement with LP&L and concluded that an antitrust hearing on LP&L's
' Ibid., p. 11.
A-5 application would be unnecessary. However, several intervenors were not satisfied that the policy commitments agreed to by LP&L would adequately mitigate the alleged abuse of LP&L's market power and petitioned the Atomic Energy Commission requesting a hearing on antitruut is] sues and tne right to intervene in said hearing. The Atomic Safety anil Licensing Board (Board) established to rule on the petitions to intervene decided to hold evidentiary hearings with respect to whether the proposed conditions would afford adequate relief. As a result of the evidentiary hearing, the Board issued a memorandum in which it concluded that the proposed license conditions were inadequate in three areas: 1) access to nuclear facilities; 2) transmission "between" and "among"; and 3) reserve sharing. After reviewing the record, as it existed at the time, the Board was able to set forth its views with respect to an adequate set of license conditions, assuming a situation inconsistent with the antitrust laws.3 The Board stated at 8 AEC 737 that:
Should Applicant elect to accept the Conditions. . . ,
this Board would be in a position to advise the Commission that, insofar as antitrust matters are concerned, a construction permit with the conditions
. . . can be issued promptly.
The principal difference in the license conditions proposed by LP&L and the Board that provides meaningful guidance in the instant license amendment request involves license condition No.
3 Louisiana Power and Licht Company, (Waterford Steam Generating Station Unit No. 3), LBP-74-78, 8 AEC 718 (1974).
. A-6
- 5. The term "between two entities" used by LP&L in its commitments was changed by the Board to "among entities".
According to the Board, The purpose of this change is to prevent multiple transmission charges for transmissicn of a contracted i transmission entitlement among a coordinating group of two or more entities. [and) To make the purpose of this change free from doubt, a clarifying sentence has been added.' [ Brackets added.)
Rather than participate in a " plenary hearing," the licensee accepted the license conditions prepared by the Board and the proceeding was terminated. 8 AEC 887 (1974). An appeal of this decision was made by the Department of Justice with respect to a different aspect of the decision and the Appeal Board noted that, as was its custom with respect to economic issues, it did not review any other issue in the decision since there had been no other appeals. 1 NRC 45 (1975). Thus, there was no appellate review of this aspect of the decision.
In 1982, in conjunction with its application for an operating license for Waterford, the staff conducted a significant change review of LP&L's competitive activities. Several changes were identified by the staff; however, the net effect, according to the staff was, ,
l
'The clarifying sentence added by the Board reads as fellows: "For each coordinating group of entities there shall be j a single transmission charge." Memorandum of Board, dated October 24, 1974 [LBP-74-78), 8 AEC 737, 744 (1974).
d
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. A-7 the changes that have occurred since the construction j permit antitrust review are not significant in the !
context of 105c of the Atomic Energy Act, as )
amended,and do not warrant action by the Nuclear Regulatory Commission.7 l In May 1989, LP&L submitted an application to amend its operating license for Materford. The amendment requested approval on one or more sale /leacebcOk transactions by LP&L with respect to any portion of its 100% ownership interest in Waterford to one or more passive equity investors and at the same time lease back from said equity investors such interests sold in Waterford and receive from said equity investors the right to use and enjoy the benefits of the undivided ownership interests sold in Waterford.
As in a similar sale / leaseback arrangement involving the Grand Gulf plant (cf., "SERI", infra), the staff is concerned with new owners of nuclear power production facilities and examined the proposed arrangement for any possible anticompetitive effect upon the bulk power services market served by the Waterford plant.
LP&L and the staff resolved any potential for any abuse of market power associated with the purchase of Waterford ownership shares by including an antitrust license condition as a part of'the operating license. This license condition prohibits any new equity owner involved in the proposed sale / leaseback arrangement from engaging in the marketing or brokering or power or energy from the Waterford plant. The license condition also prohibited 7
Waterford Unit No. 3, Docket No. 50-382A, Operating License Review: Finding of No Significant Antitrust Changes, October 1982
A-8 any such investor from exercising, directly or indirectly, control over the Waterford plant or any Waterford licensee. [A similar license condition was imposed upon potential equity investors involved in the Grand Gulf sale / leaseback amendment which was reviewed in late 1988 and early 1989.]
C. SERI In October 1988, System Energy Resources, Inc. (SERI), a wholly-owned subsidiary of Entergy, submitted to the NRC a proposed operating license amendment to Grand Gulf, Unit 1. The amendment proposed changing the ownership of Grand Gulf by way of a sale and leaseback of a portion of SERI's 90% ownership share in Grand Gulf to passive equity investors. In its review of the proposed amendment, the staff emphasized the importance of canvassing potential new owners of nuclear power production facilities in order to determine how a new owner will use the nuclear plant and any attendant facilities in its participation in the relevant bulk power services market served by the plant.
Owners and potential owners that possess the ability to control various aspects of the bulk power services market, i.e., those with market power, are reviewed by the staff in an effort to ensure that the addition of the nuclear facility to their generation and trans-mission mix will not adversely impact the competitive process -- specifically, staff is charged with preventing the creation or maintenance of activities that may be inconsistent with the antitrust laws.' j 8
Staff input to SER pursuant to sale / leaseback of a portion of Grand Gulf by SERI, dated December 9, 1988, p. 1.
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- A-9 The licensee and the staff developed an antitrust license condition which was made a part of the Grand Gulf license. The license condition prevented any new owner involved in the proposed sale / leaseback from marketing or brokering power or energy produced by Grand Gulf and to abstain from any direct or indirect control over the Grand Gulf plant or any Grand Gulf licensee. As a result of this license condition, the staff concluded that any new Grand Gulf owner involved in the sale / leaseback would not possess market power and therefore be unable to affect the bulk power services market served by the Grand Gulf plant. Consequently, the staff did not recommend initiation of a significant change and subsequent formal antitrust review in this proceeding.
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