ML20059G135
| ML20059G135 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 07/23/1990 |
| From: | Pace J NATIONAL ECONOMIC RESEARCH ASSOCIATES, INC., OHIO EDISON CO. |
| To: | |
| Shared Package | |
| ML20059G102 | List: |
| References | |
| A, NUDOCS 9009120142 | |
| Download: ML20059G135 (13) | |
Text
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JNITED E ::TES OF AMERICA NUCLEAR PA LATORY COMMISSION LIEPORE THE DIRECTOR. HQQ,$AR s(EACTOR RECyt, A_ QO3
)
In the Matter of )
)
OHIO EDISON CCMPANY ) Docket No. 50-440A :
)
(Perry Nuclear Power Plant, )
Unit 1) )
_ _ _ _ _ _ . . - )
AFFIpAyIT,,OF JOE D. PACE City of Washington )
) se:
District of Columbia )
I, Joe D. Pace, being duly sworn, depose and state as follows:
- 1. I am an economist and Executive Vice President of l National Economic Research Associates, Inc. The focus of my aca-demic trai.'ing and profess.loital background - has been on compet i-tive issues in regulated ladustries and the electric utility '
industry in particular. A more complete description of my quali- ,
fications is attached. ;
i
- 2. I have been asked by Ohio Edison company to review the .
Department' of Justice's June 13, 1990 Advice Letter concerning ,
the petition filed with the Nuclear Regulatory Commission (NRC) by Ohio Edison Company (Petitloner) for an amendment to the Perry nuclear plant Itcense. My assignnent A .o examine the economic i
9009120142 900724 ,
PDR ADOCKOS000ggO M
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e reasoning that underlies t'..e Advice Letter and assess its validity.
- 3. The first thing to emphasize is that the Advice Letter does not advance any economic theory to support its view that the NPC should dismiss the above-referenced petition ---that is, no j cttempt is made to explain how a resource could be relatively high-cost and nevertheless " create nr maintain a situation incon- .
sistent with the antitrust lawn" or result in "anticompetitive effects of the type the antitrust laws are intended to remedy."-
Instead, the Advice Letter bases its conclusion on the fact that "the Atomic Energy Act does not (explicitly) require a finding that a plant will be ' low cost' as a predicate to imposing anti-trust conditions" and on the assertion that "there ia nothing-in the legislative history to suggest that Congress intended a nar- ;
rower interpretation of the statute than that indicated by its !
language."
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- 4. The Justice Department's view that the Petitioner seeks -
to narrow the interpretation of Section 105(c) of the Atomic Energy Act reflects a fundamental misperception of the argument.
To contend that the relative cost of nuclear power is critical to the NRC's jurisdiction over competitive issues does not argue for a " narrow" reading of the statute any more than contending that a relevant market must be defined in a monopolization case or that costs must be measured in a predatory pricing case can be I
said to be arguing for a " narrow" interpretation of Section 2 of i
the sherman Act. The Petitioner's contention is that a situation inconsistent with the antitrust laws cannot be created or main-f toined by the construction and operation of a nuclear plant i
unless that plant produces relatively low-cost power. What is advanced is an economic proposition and that proposition _is not !
addressed in the Justice Department's Advice' Letter.
- 5. The only thing that can possibly distinguish nuclear power f rom, say, coal-fired power is the cost of that power. !
This is true because electricity is a homogeneous product; elec- ,
tric energy does not come in colors or flavors. .There is no dif-ference between electricity generated in a nuclear plant and electricity generated by any other type of baseload plant. More-over, from a transmission or system operation point of view, there is no distir.ction between a nuclear power plant and a comparably-sized fossil fuel plant constructed contemporaneous 1y.
Given this, common sense and sound economics compel the conclu- ,
sion that the relative cost of nuclear iover is the oniv thing that can logically support the NRC's jurisdiction to conduct antitrust-oriented inquiries and impose competitive conditions on nuclear construction and/or operating licenses.
- 6. The Justice Department's own past advice letters have made it clear that the relative cost of nuclear power is in fact the critical determinant of whether the NRC needs to consider the r
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.,4 , t competitive situation in a given case. (1971 Advice Letter for Davis-Besse Unit 1 and 1972 Advice Letter for Zimmer.) How can I the relative cost of nuclear power be critical to determining the ,
need for a NRC antitrust inquiry initially but be irrelevant to the NRC's continuing authority to impose conpetitive licsns' .sn- 1 ditions? Any economic rationale for such:a distinction would have to turn on a distinction between g3 ante expectations about relative costs and gx post results. Such an ex ante /gg post dichotomy in viewing the issue does not withstand scrutiny, how-ever. The key facts are as follows: (1) If the Perry nuclear '
unit had not been viewed as relatively low-cost resources at the "
time the Justice Department's advice was sought, there would.have been no NRC antitrust proceeding and obviously no license condi- f tions would have been considered. (2) The antitrust inquiry did i take place and license conditions were imposed to prevent the. -
Petitioner from gaining any competitive advantage in the market-place in the event that the licensed activities did_ turn out to ,
be relatively low-cost. Competitors had the option of partici-pating in the ownership of the nuclear unit (or buying its output .
1 at cost) if they also believed them to be relatively low-cost.
Alternatively, competitors could turn to other power supply j sources if they were deemed more attractive. (3) The competitors ;
did not select participation in the Perry nuclear unit and the cost of that unit has turned out to be relatively high, Given these facts, the only party adversely affected by the elifference i
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.,.o.. -.
e between gx ante expectations (relatively low nuclear costs) and the ex post situation (relatively high nuclear costs) is the Petitioner who bears the nrciear unit costs. If it would have been inappropriate to impose license conditions on the Petitioner had one known initially _that the Perry unit would not be. low cost, then it must be inappropriate to continue enforcing license_
conditions once the plant is known to have become high cost and thus is known to convey no competitive advantage to the Petitioner, i
- 7. In sum, I find the Justice Department's Advice Letter devoid of economic reasoning. It misses the mark by failing to consider whether control of a high-cost nuclear unit could ever logically be said to create or ...aintain a situation inconsistent with the antitrust laws and thus creatc- a basis for NRC-imposed license conditions.
>-e N. are-Joe D. Pace Subscribed and sworn to before me this 23r>] day of July, 1990. ,
My Cummission expirest 9!/V 72.
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Attachment i Page 1 of 8 i i
PROFESSIONAL BACKGROUND f
?
STATEMENT j OF JOE D. PACE BUSINESS ADDRESS:
i National Economic Research Associates, Inc.
1800 M Street, N.W., Suite 600 South Washington, D.C. 20036 (202) 466 3510 EDUCATION:
COLLEGE OF WILLIAM AND MARY l
B.A. With Honors in Economics,1966, Phi Beta Kappa i
t UNIVERSITY OF MICHIGAN 1
M.A., Economics,1967 Ph.D., Economics, specializing in industrial organization, public utility economics and labor economics,1970, f
EMPLOYMENT:
NATIONAL ECONOMIC RESEARCH ASSOCIATES, INC.
1988 Present Executive Vice President 1980-1988 Senior Vice President 1976 1979 Vice President 1972 1975 Senior Consultant 1970 1972 Senior Economist 1969 WASHTENAW COUNTY PLANNING COMMISSION Assistant Planner, Washtenaw County Planning Commission 1968 1969 UNIVERSITY OF MICHIGAN .I Instructor i
i iM ~
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'. 1*
Attachment Fage 2 of 8 CONSULTING EXPERIENCE:
Electric Utility Industry Telecommunications Industry Computer Industry Textile Machine Industry Banking Industry Beef S aughter and Fabrication Consumer Glassware Wholesale Dnig Distribution Publication of Petroleum Information Electronic Cash Registers PUllLICATIONS:
Pace, Joe D., John H. Landon, and Paul L. Joskow, " Opportunity Costs as a Legitimate Component of the Cost of Transmission Service,* Public Utilities Fortniehtiv. Vol.
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124, No.12, December 7,1989, pp. 30-33, 73.
Pace, Joe D., ' Wheeling and the Obligation to Serve,' The Enerev 12w Journal.
Vol. 8, No. 2,1987, pp. 265 302.
'Deregulatinb Electric Generation: An Economist's Perspective,* Current Issues in Public Utility Economics. edited by A.L. Danielson and D.R. Kamerschen, Lexington Books, Lexington, MA,1983.
Pace, Joe D. and John- H. Landon, " Introducing Competition into the Electric Utility Industry: An Economic Appraisal," The Enerev Law Journal, Vol. 3, No.1,1982, pp. I 165.
Pace, Joe D., ' Lifeline Rates: Will They Do the Job 7," Public Powe.I, Vol. 33, No.
6, November December 1975, pp. 2130.
"The Poor, the Eld:rly and the Rising Cost of Energy,' Public Utilities Fortnightiv.
Vol. 95, No.12, June 5,1975, pp. 26 30.
" Rate Structures and the Changing Cost Picture," NRECA Management Ouarteriv.
Summer 1973, pp.15 20.
"The Relative Performance of Combination Gas Electric Utilities,' The Antitrust Bulletin. Vol. XVII, Summer 1972, pp. 519 565.
" Relevant Markets and the Nature of Competition in the Electric Utility Industry,'
The Antitrust Bulletin. Vol. XVI, No. 4, Winter 1971, pp. 725 765.
"The Subsidy Received by Publicly owned Electric Utilities," Public_ Utilities Fortnightiv. Vol. 87, April 29,1971, pp.19 29. '
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Attachment Page 3 of 8 ;
I SPEECHES: >
" Competitive Procurement of Generation Capacity: Beginning a New Decade? !
Speech presented at " Bidding for Electricity" Conference sponsored by The Institute of l Governmental Affairs, University of California, Davis, Sacramento, California, March 15, 1990. 1
- Summary and Critique of the FERC Transmission Task Force Report? Speech presented at the eel Chief Executive Conference, The Wigwam Hotel, Litchfield Park, Arizona, January 11 12, 1990.
" Antitrust Policy for Electric Utilities," and panel member on " Changing Industry Structure? Seminar presented by Reid & Priest,." Utilities in the 90s: Strategic Issues," Park >
Hyatt Hotel, Washington, D.C. November 7 8, 1989. i 1
" Accommodating Growing Competi*ive' Forces in the Electric Utility Industry.:" l Speech before the 42nd Annual Management Conference of the Wisconsin Utilities Association, Inc., Stevens Point, Wisconsin, September 12, 1988.
" Emerging Competitive issues in.' the Electric Power and Telecommunications- i Industries- Electric Power? Speecia before the National Economic Research Associates, Inc..
Ninth Annual Antitrust and Trade Regulation Seminar, Santa Fe, New Mexico, July 7 9,1988. ,
i "Recent Changes in the Electric Power Industry and Pressures Brought to Bear on the Transmission Sector? Speech before the Keystone 11 Project on Transmission, Keystone, .
Colorado, March 21 23, 1988.
i
" Critical issues Underlying the Customer Wheeling Debate? Speech before the Edison Electric Institute Systt.m Planning Committee, Tampa, Florida, January 31 to February '
2, 1988.
" Restructuring the Electric Utility Industry. Controlling the Urge."' Speech before {
the Energy Daily Annual Utility Conference, Washington, D.C. November 5,1987, j
" Increased Competitiveness and the Ob:igation to Serve: An Oxymoron?" Speech before the Elcon Annual Seminar, Washington, D.C., October 8 9, 1987.
" Economic Guidelines for Addressing the Obligation to= Sen>e Problem? Speech before The Aspen Institute Policy Issue Forum, Aspen, Colorado, July 30, 1987. !
l " Retail Wheeling: Can We Do It? Should We Do it?" Comments before the California Foundation on the Environment and the Economy, Carmel, California, July 24,1987. J "Providing Access to the Electric Utility Transmission Grid- Boon or Boondoggle?"
Speech before the 1986 Utilities Law Institute, Washington, D.C., June 25 26, 1986. ;
"Some Issues in the Pricing of Transmission Senices to Native Load Customers?
Speech before the 1986 Spring Meeting of the Edison Electric Institute Legal Committee, San Francisco, California, May 3,1986.
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, Attachment !
Page 4 of 8 l
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Pace, Joe D. and J.A. Bouknight, Esq., " Antitrust and the Electric Utility Industry in the Next Ten Years." Speech before the NERA Electric Utility Conference in Scottsdale, !
Arizona, February 12 15, 1986. ;
1 Pace, Joe D., "The ChanginJ Role of Supply Substitutability in Defining and -)
Measuring Relevant Markets" Speech xfore the National Economic Research Associates. ;
Inc., Fourth Annual . Antitrust Seminar, Aspen, Colorado, July 8 10,.1982, i
" Alternative Scenarios for Deregulating the Electric Utility Industry." Speech before l the Practicing Law Institute Seminar, Electric Power-Current lasues in Regulation and Financiag. Washington, D.C., June 18, 1982.
"The Subsidy, (Or Lack Thereof) Received by Cooperative Electric Utilities."
Speech before the National Rural Electric Cooperative Association, 1982 National Tax Conference, Minneapolis, Minnesota, May 25 27, 1982. i
" Deregulating Electric Generation: An Economist's Perspective." Speech before the ,
International Associstion of Energy Economists, Hird Annual North American Meeting, 1 Houston, Texas, November 12 13, 1981, Washington, D.C., November 20, 1981. 1
" Comments Prepared for the California Public Utilities Commission Workshop on j Electric Generation Deregulation." Speech before the California Public Utilities Commission Electric Generation Deregulation Workshop, Hastings College of Law, Univereity of California, i San Francisco, California, July 30 31, 1981. 3
' Antitrust and the Electric Utility Industry.' Speech before the Edison Electric '
institute Legal Committee, Spring 1981 Meeting. Afton, Oklahoma, April 21 24, 1981.
- An Economist Looks at Price Squeeze." Presentation before the Federal Energy Bar Association, Mid Year Annual Meeting on Emerging Competitive Rules for Bulk Power Transactions- Price Squeeze and Related Matters, Washmgton, D.C., January 24, 1980. ,
"Does Social Ratemaking Make Sense?" Speech before the Indiana University. 1 Oraduate School of Business sponsored by the Edison Electric-Institute Rate Research .
Committee, Indiana University, Bloomington, Indiana, June 21, 1979. !
" Lifeline Rates (An Idea That Sounds Better Than It Is)." ~ Speech before the ,
Western Conference of Public Service Commissioners, Annual Conference, Phoenix, Arizona, ;
May 5,1976. +
" Lifeline Rates: Will They Do the Job?" S)eech before the American Public Power Association Services and Communications Workshop, . acksonville, Florida, September 17, 1975.
"%e Poor, the Elderly and the Rising Cost of Energy.' Speech ibefore the Pennsylvania State University / Pennsylvania Electric Association, Hershey, Pennsylvania,' April i 23, 1975.
" Problems in the Measurement and Application of Demand Elasticity to the Electric Utility Industry." Speech before Executive Enterprises, Inc. Seminar on Current Trends in Public Utility Ratemaking, New York, New York, June 18,19'4.
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- Attachment Page 5 of 8
" Electric Utility Rate Structures and the Changing Cost Picture." Speech before the National Rural Electric Cooperative Association,31st Annual Meeting, February 28,1973.
REPORTS:
Joskow, Paul L, Joe D. Pace and Michael B. Rosenzweig, " Comments of National Economic Research Associates, Inc.," prepared for the Utility Working Group in response to a Federal Energy Regulatory Commission Notice- of Technical Conference: Regulation of Independent Power Producers, Janua y 1988.
Frame, Rodney and Joe D. Pace, " Approaching the Transmission Access Debate Rationally, TRO Working Paper No.1," prepared for the Transmission Research Working Group, Washington, D.C., November 1987.
Pace, Joe D. and John H. Landon, " Comments Responding to BPU Staff's Assessment of Cogeneration and Small Power Production," prepared for Public Service Electric and Gas Company, Newark, New Jersey, August 31, 1987.
Pace, Joe D., " Expert Report of loe D. Pace," In the Matter of Borough of Ellwood City, Pennsylvania, Borough of Grou City, Pennsylvania v. Pennsylvania Power Company before the U.S. District Court for the V'estern District of Pennsylvania, Civil Action No. 771145, March 1,1984.
" Expert Report of Joe D. Pace," In the Matter of City of Newark, sLaL and the City of New Castle v. Delmarva Power and Light Company before the U.S. District Court for the District of Delaware, Civil Action Nos. 77 254 and 77 2%, December 15, 1982. !
Working Paper: " Tax Losses Associated with the Construction of Electric Generating Plants by Government Owned and Cooperative Electric Utilities," March 1981.
" Report of Defendant's Economic Expert," In the Matter of the Village of Elbow uike, Minnesota v. Otter Tail Power Company before the U.S. District Court for the District of Minnesota, Civil Action No. 6-67 244, October 1980.
Pace, Joe D. and Abraham Gerber, " Analysis of Proposed United States Senate Bill S.1469." Report presented before the United States Senate Committee on Energy and Natural Resources, September 8,1977.
Pace, Joe D., " Report of Defendant's Expert Witnesses," Matter of the City of Groton, cLal. v. Connecticut Light and Power Company, ELat before the U.S. District Court for the District of Connecticut, Civil Action No.15609, August 1976.
Pace, Joe D. and Lewis J. Perl, "The Costs of Reducing SO, Emissions from Electric Generating Plants." Report to Electric Utility Industry Clean Air Coordinating Committee, June 1975.
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, Attachment Page 6 of 8 TESTIMONY BEFORE STATE AND FEDERAL REGUIATORY COMMISSIONS:
Regarding subsidies received by electric utilities:
Florida Regarding proper cogeneration' policy:
New Jersey Texas Regeling electric utility rate design:
Arizona Connecticut Massachusetts Minnesota New Jersey New York Oregon Utah Wisconsin Wyoming .
Regarding electric utility productivity and efficiency:
New Mexico Federal Power Commission o On Behalf of Georgia Power Company Regarding the application of antitrust principles to electric utilities:
California Nuclear Regulatory Commission o On Behalf of Alabama Power Company o On Behalf of Consumers Power Company o On Behalf of Toledo Edison Company and Cleveland Electric Illuminating - '
Company Federal Energy Regulatory Commission o On Behalf of Boston Edison Company o On Behalf of Central Maine Power Company <
o On Behalf of Pennsylvania Power Company -
o On Behalf of Union Electric Company o On Behalf of Southern California Edison Company TESTIMONY BEFORE LEGISLATIVE BODIES:
Regarding combination gas and electric utilities:
Senate Subcommittee on Antitrust and Monopoly, Committee on the Judiciary, U.S. Senate J
, Attachment Page 7 of 8 Regarding electric utility rate design:
Subcommittee on Energy and Power, Committee on Interstate and Foreign -
Commerce, U.S. House of Representatives New York State Assembly Committee on Corporations, Authorities and Commissions Regarding subsidies received by electric utilities:
Senate Subcommittee on Agriculture Credit and Rural Electrification of the Committee on Agriculture, Nutrition, and Forestry.
TESTIMONY BEFORE UNITED STATES DISTRICT COURTS:
In the Matter of City of Concord, Massachusetts, and Town of Wellesley, Massachusetts v. Boston Edison Company, before the U.S. District Court for the District Massachusetts, Civil Action No. 87-1881 C, April 24, 1989.
In the Matter of City of Malden, Missouri v. Union Electric Company and Missouri Utilities Company, before the U.S. District Court for the Eastern District of Missouri, Southeastern Division, Civil Action No. 83 2533 C, June 910,1988.
In the Matter of Cities of Anaheim, Riverside, Banning. Colton and Azusa California v. Southern California Edison Company, before the U.S. District Court for Central District of California, Civil Action No. CV 78-810 MRP, September 1986.
In the Matter of Citizens Electric Corporation v. Union Electric Company before the U.S. District Court for the Eastern District of Missouri, Eastern Division, Civil Action No. 83 2756C(c), March 1986.
In the Matter of Monfort of Colorado, Inc. v. Cargill, Inc. and Excell Corporation before the U.S. District Court for the District of Colorado, Civil Action No. 83 3 1318, October 1983.* 1 In the Matter of the Southern Pacific Communications Corporation, gLAL v.
American Telephone & Telegraph Company, gLal before the U.S. District Court for the District of Columbia, Civil Action No. 78-0545, June 1982.
In the Matter of the U.S. Department of Justice v. American Telephone & I Telegraph Company before the U.S. District Court for the District of Columbia, Civil Action No. 741698, December 1981.
In the Matter of Deering Milliken, Inc., et al, v. Duplan Corporation, ELat before the U.S. District Court, District of South Carolina, Civil Action No. 71306, November 1980.
In the Matter of the City of Groton, City of Norwich, ELal v. Connecticut Light and Power Company, et al. before the U.S. District Court for the District of Connecticut, Civil Action No.15609, June 1980, i
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. Attachment
-4 Page 8 of 8 In the Matter of ILC Peripherals v. IBM Corporation, Memorex Corporation v.
IBM Corporation before the U.S. District Court for the Northern District of California, Docket No. MDL163 RM, March 1978.
- Scaled under protective order of the Court.
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