ML20059D645

Requests Dismissal of Ohio Edison Co Application to Suspend Antitrust License Conditions in OL & Follow Recommendation of Doj.Alleged Increase in Nuclear Power Costs Heightens Importance of Continued Imposition of Antitrust Conditions

ML20059D645
Person / Time
Site:	Perry
Issue date:	08/31/1990
From:	Albert K, Goldberg R GOLDBERG, FIELDMAN & HJELMFELT
To:	Murley T Office of Nuclear Reactor Regulation
References
A, NUDOCS 9009070130
Download: ML20059D645 (16)

Text

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GOLDBERG, FIELDMAN & LETHAM, P. C.

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DA.'ID C. HJt tmF tLt VIA HAND-DELIVERY Thomas E. Murley, Ph.D.

Director, Office of Nuclear Reactor Regulation United States Nuclear Regulatory Commission 11555 Rockville Pike l Rockville, Maryland 20852 i Ret Application of Ohio Edison Company to Suspend I Antitrust License Conditions (Perry Nuclear l Power Plant, Unit 1), NRC Docket No. 50-440A l

Dear Dr. Murley:

The City of Cleveland, Ohio (Cleveland) presents this response to the July 24, 1990 letter from Gerald Charnoff, coun-sel for the Ohio Edison Company (Ohio cdison), concerning the ap-plication by Ohio Edison in which the utility asks the NRC to suspend the antitrust license conditions in the operating license of Perry Nuclear Power Plant Unit 1 (Perry). The basic thrust of Ohio Edison's application is that there is no basis for continued imposition of the antitrust conditions because Perry's operating costs are allegedly higher than anticipated. On June 13, 1990, the Antitrust Division of the U.S. Department of Justice (Jus-tice) sent an advice letter to the NRC in which Justice found that, even if Perry's operating costs could be shown to be higher than anticipated,-the legal basis for continued imposition of the

conditions pursuant to section 105(c) of the Atomic Energy Act

,(AEA), 42 U.S.C. S2135(c) would not be undermined.

As discussed below, Ohio Edison, in its July 24 letter to the NRC attacking Justice's findings, simply rehashes the ar-guments presented in its application. These arguments were re-i viewed by Justice in emphatically rejecting the underlying basis of Ohio Edison's application. In addition, Cleveland has already rebutted each of Ohio Edison's arguments in its respense to Ohio u

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Thomas E. Murley, Ph.D.

August 31, 1990 Page 2 Edison's application 1/ as well as in Cleveland's response to both Ohio Edison's answer to Cleveland and a similar application by the Cleveland Illuminating Company (CEI) and Toledo Edison Company (Toledo), co-owners of Perry and Davis-Besse Nuclear Power Station, Unit 1 (Davis-Besse), for suspension of antitrust conditions.2/ Therefore, in the interest of' brevity, Cleveland will simply summarize its rebuttal and cite the appropriate por- ,

tions of its prior pleadings.

In its letter, Ohio Edison points to (1) " legislative history" of the AEA, (2) " economic reasoning", and (3) "DOJ and NRC Past Practices." As shown below, each of these factors un-dermines Ohio Edison's application.

I. LEGISLATIVE HISTORY In finding that there is no basis for suspension of the antitrust license conditions, Justice first pointed to the stan-dard that is clearly set forth in section 105(c). Section 105(c) requires the NRC to determine "whether the activities under the license would create or maintain a situation inconsistent with the antitrust Er- Justice noted (p. 2):

This broad standarc r, vests the NRC'with the re-sponsibility to 3tennine, on a case by case basis, whether to,aership ' a particular plant by a particular ut; 3 ; sp M likely to have anticompetitive s -+ tue type the antitrust laws are intenci~ i eway The statute direc  : 6 N ,not only to look for-ward to determira -

.nticcapetitive situation could arise, but also to look at the'past to see l if "an anticompetitive climate e.ists and to see i

if the applicant has acted in an anticompetitive manner."

l 1/ " Answer of City of Cleveland, Ohio, In Opposition To Ohio Edison Company's Application For Suspension of Perry Operat-ing License Antitrust Conditions," filed Feb. 19, 1988.

2/ " Comments of City of Cleveland, Ohio, In Opposition To Appli-cation For Suspension Of Operating License Antitrust Condi-tions", filed Sept. 13, 1988. For ease of reference, this application will be referred to as the Centerior application.

Centerior Energy Corporation is a holding company that owns

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all of the common stock of CEI and Toledo.

t Thomas-E. Murley, Ph.D.

August 31, 1990 Page 3 This language, Justice observed, shows Congress' intcet to re- ,

quire the NRC to examine all of the factort surrounding a pro-posed nuclear plant, not just the articIpated cost of the power, in evaluating whether operation of 5 nuclear generating plant would foster anti-competitive ccoeuct. l Justice went on to note that the Joint Committen Report ,

on the 1970 Amendments to the AEA, which modified section 105(c), j supports this interpretation.3/ -Justice noted (p. 3):

There is nothing in the legislative history to suggest that Congress intended a narrower inter-pretation of the statute than is indicated by its language. The Joint Committee Report, in discuss-ing the language that was enacted, does not sug- l gest that anticompetitive effects must be trace- 1 able to a finding that the nuclear plant will be l low cost. In fact, cost is not mentioned at all, l and the Report does not specify or limit those I situations that could be found to be inconsistent with the antitrust laws. l In its response, Ohio Edison criticizes Justice for focusing on the Joint Committee Report and cites statements by certain witnesses who-testified at the congressional-hearing. In a similar vein, the. affidavit of Dr. Joe D. Pace (attached to Ohio Edison's letter) suggests that the alleged belief that nu-clear power would be low cost must have been the sole factor un-i derlying section 105(c).

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Ohio Edison's response wholly ignores. established rules of statutory construction as well as the genesis of section 105(c). Interpretation of a statute must: 4

. . . begin with the familiar canon of statutory construction:that the starting point for inter-I preting a statute is-the language of the statute

! itself. Absent a clearly expressed legislative l 3/ " Amending the Atomic Energy Act of 1954, As Amended, to Elim-

! inate the Requirement for a Finding of Practical Value, to Provide for Prelicensing Antitrust Review of Production and-Utilization Facilities, and to' Effectuate Certain Other Pur-poses Pertaining to Nuclear Facilities", Report by the Joint Committee on Atomic Energy, H.R. No. 91-1470, 91st Congress, 2nd Session (1970) (" Joint Committee Report"), reprinted in 1970 U.S. Code Cong, & Ad. News 4981.

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Thomas E. Murley, Ph.D. '

August 31, 1990 Page 4 l

intention to the contrary, that language must or- I dinarily be regarded as conclusive.4/

Thus in rejecting a similar attempt by another nuclear licensee to constrict the NCR's broad remedial authority pursuant to sec-tion 105(c), the court noted that the " express language" of sec-tion 105(c) "is the-primary source of its-meaning."5/

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Ohio Edison does not even try to rebut Justice's find--

,ings that the clear language of.section 105(c) indicates that the NRC must look at the totality of circumstances in evaluating the need for antitrust conditions.

In addition, Justice correctly recognized that section 105(c) is a remedial provision and, hence, should be construed broadly. "[W] hen Congress _uses broad generalized language in a remedial statute, and that' language is not contravened by author-ative legislative history," a court has observed, "a court should interpret the provision generously so as to effectuate the broad congressional goals."s/ The court in Alabama Power, 692 F.2d 1362, applied this principle in finding that the NRC has broad authority pursuant to section 105(c) to impose antitrust conditions.

Ohio Edison's criticism of Justice for focusing on'the Joint Committee Report is also at odds with other principles of r statutory construction. The Joint Committee Report is the "best source of legislative history" bearing on the Congressional in--

l tent underlying AEA section 105(c).2/

Moreover, Cleveland, in its response to Ohio Edison's application (pp. 90-94), cited additional portions of the Joint Committee Report that reflect the recognition that the NRC'would have to review the totality of circumstances in order to deter-mine whether operation of a nuclear plant:"would create or main-

, 4/ U.S. Consumer Product Safety Commission v. GTE Sylvania, Inc.

! 447 U.S. 102, 108, 64 L.Ed.2d 766, 100 S.Ct. 2051 (1980).

}/ Alabama Powar Co. v. NRC (Alabama Power), 692-F.2d 1362, 1367 (11th Cir. 1982), cert. denied, 464 U.S. 816 (1983).

1/ Cia. Petrolera Caribe, Inc. v. Arco Carribean, Inc. 754 F.2d 404, 428 (1st Cir. 1985). ,

1 1/ Alabama Power, 692 F.2d at 1367; see Sierra Club v. Clark, 755 F.2d 608, 615 (8th Cir. 1985).

l Thomas E. Murley, Ph.D.

August 31, 1990 1 Page 5 l l

l tain a situation inconsistent with the antitrust laws." Cleve-land showed that Congress recognized that, regardless of whether nuclear power was low cost, a nuclear plant could exacerbate anti-competitive practices by (1) providing the nuclear utility 3 with a large, new supply of power, thereby increasing the utili- .

ty's incentive to continue to engage in anti-co.mpetitive to en-sure a-captive market for the. power, (2) expanding the scope of, and the cost efficiencies engendered by, coordination services controlled by the nuclear utility, thereby increasing the anti-competitive harm caused by a discriminatory denial of access to these services to customers who need the coordination services.to facilitate power purcnases from other suppliers, and (3) expand-ing the scope of the nuclear utility's transmission facilities,.

thereby increasing the utility's control over wheeling services needed to procure power supplies from other suppliers. Cleveland noted (pp. 91-94) the significance of the Joint Committee's deci-sion to include in the report a study that showed the rapid in-crease in the cost of nuclear power. Inclusion of the study un-equivocally indicated that Congress understood that a nuclear plant could " create or maintain a situation inconsistent with the antitrust laws", even if the power was not low cost.

Ohio Edison's scant citations to the Report do not help its position. Ohio Edison concedes (p. 2) that the Joint Commit-tee Report mentions the cost of nuclear power in an " indirect" manner only. The portion of the Report cited by Ohio Edison sim-ply cites early congressional-statements that commercial develop-ment of nuclear power must await technological advances in nu-clear power that ensure that the power can be generated at

" competitive prices."8/ Thus, those statements have nothing at all to do with the meaning of section 105(c).

Apparently recognizing that the Joint Committee Report undermines its position, Ohio Edison focuses instead on a few isolated statements by witnesses at.the congressional hearings on l the 1970 Amendments. At the outset, a statement at congressional l hearings by a person who is not a member of Congress is far less probative of congressional intent than the language of the sta-tute and the committee report.9/ In any event, the testimony at.

the hearings on the 1970 Amendments does not bolster Ohio Edi- '

son's position. As shown in Cleveland's response to Ohio Edi-1/ Joint Committee Report, 1970 U.S. Code Cong. and Admin. News at 4988.

9/ Kelly v. Robinson, 479 U.S. 36, 50 n. 13, 93 L.Ed.2d 216, 107 S.Ct. 353 (1986).

Thomas B. Murley, Ph.D.

August 31,-1990 Page 6 i son's application (pp. 94-98), another indication that section 105(c) requires analysis of the totality of circumstances is that several key supporters of the 1970 Amendments did not focus on the cost of nuclear power. Instead, they focused on the way that a nuclear facility, in view of its large generating capacity, could create or maintain an anti-competitive situation by enhanc-ing the cost efficiencies which can be achieved through coordina-tion services. That would increase the anti-competitive impact of a discriminatory exclusion of access to these services, these witnesses noted, and could justify imposition of antitrust license conditions. Indeed,-as discussed in Cleveland's response (pp. 95-96), two of the' witnesses cited by Ohio Edison--

Ronald W. Donnem, then-Director.of Policy' Planning of Justice's Antitrust Division,'and Walter B. Comegys, then-acting Associate Attorney General in charge of the Antitrust Division--cited these factors.

In addition, several key supporters of the 1970 Amendments repeatedly referred to the need to ensure that licen-sees which dominated the transmission facilities in a service area provide non-discriminatory access to wheeling services on their transmission facilities, as discussed on pages 97-98 of Cleveland's reply to Ohio Edison's application. Mr. Donnem was one of these witnesses.

In his affidavit, Dr. Pace ignores the genesis of sec-tion 105(c) in arguing (p.-3) that section 105(c) must be based on a belief that nuclear power would be low cost because "[t]he only thing that can possibly' distinguish' nuclear power from, say, coal-fired power is the cost of that power." As. recognized in.

Alabama Power, 692 F.2d at 1368-69, and discussed in Cleveland's opposition to Centerior's application (pp. 28-29), the pro-com-petition mandate in section 105(c) was based on the substantial federal investment in the development of nuclear power coupled with the recognition of the way in which a large nuclear generat-ing plant could enhance a dominant utility's market power. -This mandate was not based on any expectation that nuclear power would be low cost. In enacting.the AEA in 1946, Congress noted that research on the development of nuclear energy would be funded by the federal government (AEA section 2(g), 42 U.S.C. S2012(g)).

The government was concerned that the fruits of this research not be exploited in an anti-competitive manner. Thus, in enacting the AEA, Congress stated that an overriding policy was to

" strengthen free competition" (AEA section 1(b), 42 U.S.C.

2011(b)). At the time, "[t]he generation of useful power from

Thomas E. Murley, Ph.D.

August 31, 1990 Page 7-atomic energy was a distant goal, a very distant goal."10/ As noted, Congress simply recognized that nuclear power would not be commercially viable until it could be sold at " competitive prices". Consequently, there was no way of knowing whether nuclear power would be cheaper than other types of power.

Moreover, as noted in Cleveland's response to Center-  ;

lor's application (pp. 30-32), the 1970 Amendments'also-reflected 1 the recognition by Congress-that federal environmental laws fa-vored construction of nuclear plants, as opposed to coal-fired plants, to reduce the capacity shortages in many parts of the i nation. Congress realized that the generating capacity of a nu-clear plant is far larger than that of other types of generating plants,-such as coal-fired plants. As a result, Congress noted i thet a nuclear plant could increase the incentives for a nuclear  !

utility to continue to engage in anti-co.npetitive conduct to l' ensure a market for the nuclear power.

II. NRC PRECEDENT Ohio Edison tells us that NRC precedent supports Ohio l Edison's position that antitrust conditions may only be continued if nuclear power is low cost. Significantly, Ohio Edison can provide only a single sentence of analysis regarding a single NRC decision to try to support this assertion--Consumers Power Co.

(Consumer Power), Midland Plant, Units 1 and 2), ALAB-452, 6 NRC 892 (1977).

Cleveland, in its opposition to Ohio Edison's applica-tion (pp. 106-08), provided an exhaustive analysis of Consumers power and showed that the NRC was concerned about the way opera-tion of the Midland Plant would heighten the applicants' existing.

domination of generation and transmission facilities. The NRC noted that additional power generated by the Midland Plant would exacerbate the applicant's anti-competitive practices in connec-tion with wheeling and coordination services as well as power ,

sales. The NRC recognized that this adverse impact would likely '

occur, regardless of the cost of the power.

Moreover, Ohio Edison chooses to not even mention, much less try to distinguish, the most recent litigated decision re-garding the NRC's section 105(c) authority. In Alabama Power Co.

(Joseph M. Farley Nuclear Plant, Units 1 and 2)'(Farley),_ALAB-l l 10/ S. Rep. No. 1699, 83d Cong., 2d Sess., reprinted in 1954 U.S.

Code Cong. & Ad. News 3456, 3458.

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Thomas E. Murley, Ph.D.

August 31, 1990 Page 8 i

646, 13 NRC 1027 (1981), the NRC Appeal Board cited Midland and found that the coordination services market and retail service markets are distinct markets for purposes of evaluating the need to impose antitrust conditions. The Appea.1 Board in Parley noted l that the applicant had the dominant share of generation and transmission in the relevant service area and used this domina-tion in an anti-competitive manner to control coordination ser-vices and retail markets and discriminate against municipally- l owned electric utilities in its service area. Id. at 1069-70.

The Board recognized that the nuclear plant would in-crease the cost efficiencies achievable through the coordination services market and, hence, increase the anti-competitive impact of the applicant's discriminatory practices. The Board also re-cognized that the new transmission facilities which would ac-company the nuclear plant would exacerbate the applicant's mono-poly power over transmission services. Hence, the Board ordered the applicant to provide non-discriminatory access to transmis-l sion and other coordination services. Id. at 1108-10.

l Moreover, the Board recognized that access to these

! services was not tied to actual purchase of the nuclear power.

l The Board found that one of the intervenors did not compete with l the applicant in the retail market and, therefore, was not enti-l tied to be able to purchase an ownership interest in the plant.

Id. at 1109-10. But the Board found that, because the facility would heighten the applicant's domination of transmission facili-ties, the existing anti-competitive practices of_the applicant regarding access to the facilities might be exacerbated, regard-less of the cost advantages, if any, of nuclear power. Conse-quently, the Board found that MEUA was entitled only to non-dis-criminatory access to transmission services. ,

If (as Ohio Edison asserts) low cost power was the pre-dicate for imposition of antitrust conditions, this condition would not have been imposed.

The Eleventh Circuit in Alabama Power, 692 F.2d 1362, rejected the applicant's petition for review and affirmed the NRC decision. As noted, the court pointed to the broad remedial na- i ture of section 105(c). The court affirmed the NRC's considera-tion of prior anti-competitive conduct of an applicant to deter-mine whether an unconditional license for the nuclear facility-would allow the applicant to " maintain" an anticompetitive situa-tion. Id. at 1367-68. The court also affirmed the NRC's finding that the wholesale, retail and coordination service markets re- I present separate markets which were dominated by the applicant I and that the licenso would exacerbate the anti-competitive situa- l l

i _s p ,

Thomas E. Murley, Ph.D.

August-31, 1990 Page 9 tion in each market. Id. at 1369. Consequently, the court ap-proved the NRC's imposition of antitrust conditions dealing sep-arately with (1) the ability to purchase an ownership interest in the facility, and (2) access to coordination and wheeling ser-vices. ,

b Thus, the court recognized that the cost attractiveness of nuclear power has nothing at all to do with the NRC's author-L ity to impose antitrust conditions to ensure non-discriminatory l access to an applicant's transmission facilities and coordination ,

services.

Hence, this NRC precedent (as well as the other NRC de-cisions discussed in Cleveland's opposition to Ohio Edison's ap-plication (pp.99-106)) makes it clear that low cost nuclear power is not the predicate for continued imposition of antitrust conditions. Instead, the NRC must review the totality of circum-stances to evaluate whether operation of the nuclear plant "would create or maintain a situation inconsistent with the antitrust i laws."

Moreover, it is striking that Ohio Edison does not even try to show that the NRC's reasoning in imposing the antitrust l conditions at issue here was based on any assumption that the nuclear power would be low cost. The NRC proceeding addressed the application by Ohio Edison, Centerior, Pennsylvania Power Company (Ohio Edison's wholly-owr.ed subsidiary), and Duquesne Light Company to construct and operate Perry 1-and Perry 2 as well as an application by Centerior to construct and operate the 906 megawatt Davis-Besse 1 facility. The applicants are members of the Central Area Power Coordinating Group (CAPCO) and proposed the facilities as part of a program for the joint development of l power generation and transmission facilities. Ohio Edison cites (pp. 5-6) only the " initial conclusion" by Justice that an anti-trust hearing was not required in connection with Davis-Besse 1.

However, Ohio Edison-fails to mention that Justice subsequently changed its position when the CAPCO members sought permits to build Perry 1 and 2 and Davis-Besse 2 and 3. 39 Fed. Reg. 2029 (Jan. 16, 1974); 40 Fed. Reg. 8395 (Feb. 27, 1975). Justice pointed to the pervasive anti-competitive conduct by the CAPCO members, collectively and individually. Justice noted the CAPCO members' " refusal to admit the municipal systems into the CAPCO l pool. The Applicants' refusals to wheel power, to interconnect and to engage in coordinated operation with smaller utilities",

observed Justice, " raise problems which'should_be considered in the perspective of their monopoly control of the transmission facilities surrounding the smaller systems of their competitors.

Antitrust principles have evolved which place distinct limits

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Thomas E. Murley, Ph.D.

. August 31, 1990 Page 10 upon a supplier's exercise of monopoly power at one level of dis-tribution to adversely affect competition at another level."

Justice realized that operation of the nuclear plant "will gen-erate new opportunities for Applicants to engage in coordinated operation with each other". That would increase the competitive harm caused by the anti-competitive way in which the applicants provided their coordination-services, observed Justice.

As discussed in detail in Cleveland's opposition to Ohio Edison's application (pp. 5-22, 111-15), the NRC, too, noted the pervasive, anti-competitive practices by the CAPCO members, individually and as members of CAPCO. The NRC realized that the additional power generation, coordination services and transmis-sion facilities that would accompany the Perry plant and the i other nuclear plants at issue would heighten the applicants' market power and the opportunity and incentive to continue to act in an anti-competitive manner in connection with power sales and coordination and wheeling services. The NRC recognized that, in view of the applicants' pervasive and coordinated anticompetitive conduct, any new power generation by the applicants would give them an incentive to expand their market power to exclusively serve the increased demands of present customers - and the demands of new customers. The NRC also noted-the substantial transmis-sion facilities that the CAPCO members planned to build in con-junction with the nuclear plants and recognized that the facilities would increase the applicants' control over transmis-sion. 1 The NRC's recognition that the anticipated cost of nu-clear power was not the basis for the imposition of the anti-trust license conditions is reflected in the Appeal Board's deci-sion to reject a Board member's proposal to restrict the scope of the conditions ensuring non-discriminatory access to coordination and wheeling services to customers purchasing nuclear power or ownership interests in the plants. 10 NRC at 290-294. The Appeal Board found that this restriction would allow the appli-cants to continue their anti-competitive conduct in connection with pooling and coordination services and to thereby undermine l the competitive position of utilities which did not buy nuclear power. Id. at 291. That would be inconsistent with the clear

" message" conveyed by section 105 that " Congress did not want-nuclear plants authorized in circumstances that would create or maintain anticompetitive situations without license conditions to address them", noted the Board. Id.

The advice letter issued by Justice in connection with 1 the Zimmer Nuclear Power Station (Zimmer) and cited by Ohio ,

Edison (p. 6) involves circumstances that bear no similarity to l l

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I Thomas E. Murley, Ph.D.

August 31, 1990 Page 11 those at issue here. 37 Fed. Reg. 14246 (July 18, 1972). The intervenors in the Zimmer proceeding were municipalities which were seeking imposition of antitrust conditions solely to permit them to purchase a portion of the capacity of the plant from the applicants. Thus, Justice focused solely on'whether denial of these participation rights would maintain an anti-competitive situation. As part of this analysis, Justice considered whether the municipalities already had access to power cheaper than that which the nuclear plant would generate. Significantly, Justice did not cite any anti-competitive conduct by the Zimmer appli-cants.

By contrast, the CAPCO proceeding involved a pervasive pattern of anti-competitive conduct by the applicants. Moreover, the municipalities that intervened in the CAPCO. proceeding did not solely seek the imposition of antitrust conditions that would permit them to purchase capacity from the nuclear plants. The municipalities also sought antitrust conditions that would give them access to the applicants' coordination.and wheeling services needed to purchase power from other suppliers. As noted, the need for these conditions did not require a finding that the nuclear power would be low cost. Instead, these conditions were ,

based on the way the operation of the nuclear plant would expand the pewer generation, coordination services and transmission facilities of the applicants and thereby increase the applicants' incer.tive and opportunity to continue their anti-competitive con-duct.

Ohio Edison notes (p. 5) that Appendix L of 10 C.F.R. Part 50, section II (11) and (12), asks for information about the cost of the applicants' existing power-supplies. However, Ohio Edison overlooks the fact that Appendix L does not ask for data regarding the anticipated cost of the power to be generated by the nuclear plant at issue. In addition, Appendix L asks for detailed information regarding non-cost factors that bear on .

whether operation of a nuclear plant could exacerbate anti-com- l petitive conduct by the licensee in coordination and wheeling '

services, regardless of whether the nuclear power turns out to be ,

t low cost. For example, Appendix L asks for information about (1) I 1

coordination contracts to which the applicant is a party (section II(14)), (2) the applicant's response to requests to provide co-ordination services (section II(13)), and (3) attempts by the applicant to purchase other utilities (sections II(17), (18) and L (19)).

Thus, NRC precedent, especially the NRC's decision to impose the Perry antitrust conditions, clearly indicates that the imposition of antitrust conditions does not depend on whether the l

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Thomas E. Murley, Ph.D.

August 31, 1990 Page 12  ;

i nuclear power is anticipated to be low cost. As shown, the NRC has repeatedly recognized that the additional power generation, ,

coordination services and transmission facilities that accompany- i a nuclear plant heighten the need to impose antitrust conditions to ensure that the nuclear utility acts in a non-discriminatory i manner in connection with wheeling and coordination services.  :

These services have nothing at all to do with the relative cost of nuclear power.

III. ECONOMIC THEORY I In his terse' statement, Dr.-Pace opines that there is no need for continued imposition of. antitrust conditions because the cost of nuclear power is higher-than anticipated.

At the outset, Dr. Pace fails to cite any NRC decision, court decision or even any economic treatise to support his as-sertions. Instead, Dr. Pace provides bald conclusions.

Even putting aside this flaw, Dr. Pace ignores basic l economic principles and the fundamental mandate of section 105(c) i to promote competition. As noted by Cleveland in its opposition to Centerior's application (pp. 37-38), if nuclear power is more expensive than anticipated, the need for antitrust conditions is heightened. The NRC, in imposing the wheeling condition as part of the Perry license conditions, recognized that access to wheel-ing and coordination services is needed'to ensure that the nu-clear utility cannot prevent its customers from procuring the most economical power available. Ensuring access to alternative suppliers of a commodity _is the very essence of competition and is the necessary incentive for economic efficiency. Obviously, a customer is unlikely to need to use wheeling and coordination services if the nuclear utility offers the most economical power.

Thus, inherent in the NRC decision to impose the antitrust condi-tions in the Perry license was the NRC's recognition that the services covered by the conditions are needed when the price of nuclear power is above market levels. The need for this access obviously increases as the nuclear power becomes more expensive compared to other types of power.

In addition, in these circumstances, the competitive injury caused by denial of access to transmission facilities is exacerbated. For example, one measure of damages resulting from a violation of the federal antitrust laws in which the monopolist prevents its customers from purchasing a commodity from alterna-tive suppliers is the extent to which the price charged by the monopolist exceeds the market price of the commodity. Hanover

Thomas E. Murley, Ph.D.

August'31, 1990 Page 13 Shoe, Inc. v. United Shoe Machinery Co., 392 U.S. 481, 491, 20 ,

L.Ed.2d 1231, 88 S.Ct. 2224 (1968); Bell v. Cherokee Aviation i corp., 660 F.2d 1123, 1133 (6th Cir. 1981).

Consequently, the alleged increase in nuclear power costs heightens the importance of the continued imposition of j antitrust conditions in the Perry license.

IV. LEGAL AND POLICY ASPECTS OF REVIEW l OF EXISTING ANTITRUST CONDITIONS ,

i Cleveland, in its opposition to the application of Ohio l Edison (pp. 25-52) and Centerior (pp. 11-14), shows that the NRC lacks the statutory authority to modify antitrust conditions. ,

i Even if the NRC has the legal authority to modify an-titrust conditions, the NRC should not exercise this authority I simply because a licensee may be able to show that the nuclear power was more expensive than anticipated. As Justice noted,

"[a] ' low cost' standard is inherently elusive." (p. 3 n. 6).

Ohio Edison does not challenge this assertion. The elusive na-ture of a low cost standard is heightened in current, volatile natural resources markets. The price of the fuel sources used in generating power are subject to sudden and dramatic swings.

For example, during the week following the August 1990 Iraqi in-vasion of Kuwait, crude oil prices leaped by $8 per barrel, or 47 per-cent.11/

Legislative and regulatory changes also can cause dra-matic changes in the relative attractiveness of various fuel sources. Ohio Edison has noted that the more stringent emission controls proposed in connection with the 1990 amendments of the Clear Air Act would require the installation of expensive pollu-tion control equipment in,its coal-fired generating plants, but not in its nuclear plants.12/ The cumulative emission reductions achieved by nuclear power plants are valued at about $80 billion i nationwide pursuant to the proposed amendments.13/ -That enhances l the competitiveness of nuclear power.

i 11/ Journal of Commerce, Aug. 15, 1990, at SB.

12/ 1989 Annual Report to Shareholders, p. 16. l 13/ Sillin, " Nuclear Generating Companies--Some Heat and Light",

126 Public Utilities Fortnightly 6 (Aug. 2, 1990).  ;

s Thomas E. Murley, Ph.D.

August 31, 1990 Page 14 Consequently, if a change in the relative cost of nu-clear power is found to justify a modification of antitrust con-ditions,-the NRC would be faced with a continuous barrage of ap-plications to suspend the conditions whenever the relative cost of nuclear power increased, followed by applications to re-impose the conditions whenever the cost declined. These hearings, noted Justice, would be "long and resource intensive" and would impose an intolerable burden on the NRC's resources (p. 3,_n. 6). In addition, as Cleveland noted in its opposition to Centerior's ap-plication (pp. 12-13), the potential for constant review of an-titrust conditions would prevent a municipality from relying on the wheeling and coordination services provided as a result of the conditions to enter long-term power supply contracts with power suppliers _other than the licensee. That would impair the express goal of the AEA to " strengthen free competition", 42 U.S.C. 52011.14/

V. CONCLUSION As shown above, there is no basis for Ohio Edison's criticism of Justice's emphatic finding that the NRC's authority to continue to impose existing antitrust conditions does not de-pend upon'whether the nuclear power at issue is low cost. The l

11/ In its response to Ohio Edison's application, Cleveland cited several grounds for rejecting Ohio Edison's application that were not addressed by Justice. Cleveland showed that rejec-tion of Ohio Edison's application can be justified on the basis of the doctrines of res judicata and collateral estop-pel (which preclude relitigation of an issue) and.laches l (which precludes a party from raising an issue after an un-reasonable delay). (Cleveland's response to Ohio Edison, pp.

53-87; Cleveland's response to Centerior, pp. 18-28). Cleve-land also showed that none of the events cited by Edison, including the purported increase in the cost of nuclear power, justifies suspension of the antitrust conditions (Cleveland's response to Ohio Edison, pp.87-117; Cleveland's response to Centerior, pp. 34-42).

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1 1

Thomas E. Murley,.Ph.D.

August 31, 1990 Page 15 NRC should follow the recommendation of Justice and summarily dismiss Ohio Edison's application.15/

Very truly yours, Craig S. Miller, Esq.

l Director of Law e June.W. Wiener, Esq.

Chief Assistant. Director of Law -

William M. Ondrey Gruber, Esq.

Assistant Director of Law City Hall, Room 106 ,'

601 Lakeside Avenue Cleveland, OH 44114 Tele hone: (216) 664-2800 4 .8 Reuben Goldberg, Esq.

Kenneth M. Albert, Esq.

l Goldberg, Fieldman & Letham, P.C. '

1100 Fifteenth Street, NW Washington, DC 20005 1 Telephone (202) 463-8300 Attorneys for CITY OF CLEVELAND, OHIO August 31, 1990 cc: Joseph Rutberg, Esq.

Deputy Assistant General Counsel Nuclear Regulatory Commission Gerald Charnoff, Esq.

Attorney for Ohio Edison Company 1

The Honorable James F. Rill Assistant Attorney General U.S. Department of Justice 15/ The same reasoning applies with equal force to the applica-tion by Centerior seeking suspension of the antitrust condi-tions applicable to the Davis-Besse and Perry plants. There-fore, that application, too, should be summarily dismissed.

4 Thomas E. Murley, Ph.D.

August 31, 1990 Page 16 Alisoa L. Smith, Esq.

Deputy Assistant Attorney General I'.S. Department of Justice Mark C. Schechter, Esq.

Chief of Transportation, Energy and Agricultural Section Antitrust Division U.S. Department of Justice Janet Urban, Esq.

Antitrust Division U.S. Department of Justice l

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