ML20072R668

Corrected Ltr Re Antitrust Issues Raised by Proposed Acquisition by Northeast Utils of Public Svc Co of Nh. Conditions Imposed on Merger by FERC Administrative Law Judge Will Not Be Adequate to Resolve Antitrust Issues

ML20072R668
Person / Time
Site:	Seabrook
Issue date:	04/01/1991
From:	Roth A, Scobbo N FERRITER, SCOBBO, SIKORA, CARUSO & RODOPHELE, MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC CO., SPIEGEL & MCDIARMID
To:	Office of Nuclear Reactor Regulation
Shared Package
ML20072R666	List: ML20072R664 ML20072R668
References
NUDOCS 9104030024
Download: ML20072R668 (7)

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U.S. Nuclear Regulatory Commission  ; ";",;;;,yl;,7,:,",=,,,,

Washington, D.C. 20555 i,

ATTENTION: Chief, Policy Development and Technical Branch Office of Nuclear Reactor Regulation Re Public Stirvice Co. of New Hampshire; Transfer of Ownership Interests and Transfer of Management, Docket No. 50-443; Fedoral Register Notices of February 28 and March 6, 1991 Dear Commission >

The Massachusetts Municipal Whol.esale Electric Company

("MMWEC"), a_ joint _ owner of Seabrook and a Massachusetts joint action electric power agency, hereby submits its comments relating to the-antitrust >ssues_ raised by the proposed transfer

.of..the license for the operation of the Seabrook Station,-as i described'in the commission's notices published February 28, 1991 at 56 End. En.g.. 8373-75 and on March 6, 1991 at 56 Egd. Re.g.

9372-74, 9384.

The transfers sought in this case are associated with Northeast. Utilities' ("NU") proposed acquisition of Public Service Company-of New Hampshire ("PSNH"). The Nuclear-Regulatory Commission (" Commission") has declared that it will I

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consider the FERC proceeding concerning this proposed acquisition "to the maximum extent possible." The Administrative Law Judge

( " A LJ " ) in the FERC proceeding has already determined that the competitive structure of the New Ergland electric utility industry would be changed as a result of the merger and the accompanying license transfer. Northeast Utilities Service Company (RE: Public Service Company of New Hampshire), 53 FERC para. 63,020 at p. 65,215 (1990). Such a change clearly constitutes a greater than dg minimis license modification warranting further atititrust review.

The Director of the Office of Nuclear Reactor Regulation (the " Director") should find that significant changes in the licensee's activities and proposed activities, inconsistent with the policies of the antitrust laws, have occurred after the Attorney General's Advice Letter on Seabrook issued December 4, 1973. Egg South Caroline Electric and Gas Comesny, (Virgil C.

Summer Nuclear Station, Unit No. 1), 13 NRC 862, 864, n.3 (setting forth criteria for a finding of significant changes).

Conditions imposed on the merger by the FERC ALJ will not resolve adequately antitrust issues for purposes of the Atomic Energy Act. FERC's standard of review requires only that the applicant show that the merger is compatible with the public interest. Utah Power & Licht Co. (Opinion No. 318), 45 FERC para. 61,095 at p. 61,278-279 and 61, 299 (1988).

Ant 1 competitive acquisitions are permitted under this standard.

El.orida Power & Licht Co., 8 PERC para. 61,121 at 61,457 (1979).

However, the Atomic Energy Act requires the NRC to guard against an acquisition creating or maintaining a situation

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• inconsistent with the policies of antitrust laws, irrespective of any compelling public interest. 42 U.S.C. 12135. The Commission 1

must independently evaluate the anticompetitive situation and impose appropriate conditions beyond those imposed by FERC. The NRC staff has already recognized that conditions additional to those imposed by the FERC ALJ are required by the Atomic Energy Act. In this regard, the NRC staff conditioned the proposed

- transfer to prohibit North Atlantic Energy Service Corporation

("NAESCO*) from marketing or brokering Seabrook power.

NU's acquisition of PSNH's share of Seabrook is intertwined with and would execerbate the anticompetitive situation, already found to exist by the FERC ALJ. NU currently controls a substant ial percer.tage of New England's power supply b and surplus generating capacity. The merger will further extend NU's control over the surplue generating capacity in New England, because NU will gain control of, inter alla, PSNH's 35.6% share

, of.Seabrook capacity. Egg 53 FERC at p. 65,215. The rest of New j England is or will be capacity deficient. In addition, the merger will expand and in some ways perfect NU's control over.

transmission and therefore its ability to control or stymie other New England _ utilities' access to power supply alternatives.

Thus, there is an important-nexus between the Seabrook nuclear license and the anticompetitive situation sufficient to warrant independent NRC action. Comoare Kansus Gas and Electric Comoany, 1 NRC 559, 569 (1975); Consumers Power Comoany, 6 NRC 892, 917 (1977).

As to Seabrook specifically, . the FERC ALJ's

-consideration ins limited to synergies of NU's takeover of-PSNH.-

4-l The FERC ALJ did not address the anti-competitive aspects of NU's management and operation of Seabrook. This issue should be addressed in the Commission's review of the requested license transfers.

NU has used its market power to insulate and exculpate j itself from liability associated with its acquisition of PSNH's Seabrook interest and its takeover as Managing Agent to operate

- Seabrook. Unlike PSNH, which ovned and operated Seabrook as part of its overall utility operations, NU proposes to sever both the ownership function and management function of Seabrook from each other and from its acquisition of PSNH's non-Seabrook assets. It proposes to amend f acilities license No. NPF-86 to permitt (1) ownership of PSNH's Seabrook-interest by a subsidiary, North Atlantic Energy Corporation (NAECO) with no assets other than the former PSNH Seabrook interest; and (2) management of Seabrook through the newly created NAESCO, a subsidiary with no assets at all.

NU's anticompetitive market power is demonstrated by the >

July 19, 1990 Agreement which, among other things, provides for NAESCO to take cvsr as Managing Agent to operate Seabrook. See Exhibit 1 to the application. NU won support for the July 19, 1990 Agreement from other joint owners, United Illuminating Company'("UI") and New England Power Company (" HEP"), by entering into settlement agreements, which provide UI and NEP with special transmission benefits in exchange for UI and NEP acquiescence in NU's acquisition of PSNH.

The July 19, 1990 Agreement exculpates NAESCO and its affiliates from liability for breach of the Joint ownership m - , ,4- - -- , --. ,m.- -

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Ag/sement and related agreements except for their willful K

misconduct. The exculpatory clause purportedly would not only free NAESCO and its affiliates from harm done directly to MMWEC but also from responsibility for third party claims by others against MMWEC for any harm related to Seabrook. MMWEC cannot insure any reckless or negligent conduct of the Managing Agent or its affiliates. When MMWEC has objected to the exculpatory

} clause contained in the various agreements presented to the joint owners for approval, NU has repeatedly responded that the clause was agreed to in the July 19, 1990 Agreement. Yet HMWEC and certain other joint owners (whose Seabrook ownership shares total approximately 30%) are not signatories to the July 19, 1990 Agreement.

Undoubtedly, the Joint Ownership Agreement is the seminal document governing Seabrook. The July 19, 1990 Agreement is predicated on the provision in the Joint Ownership Agreement permitting a change in Managing Agent based on a vote of at least 51% of the ownership sharee which NU has been able to muster through settlements with UI and NEP. Amendment of the Joint Ownership Agreement requires an af firmative vote of joint owners owning at least 80% of the ownership shares, a percentry NU has been unable to achieve. NU has nevertheless proceeded to install NAESCO as Managing Agent (inclucing this application to the NRC).

NU is executing a plan whereby it has separated the Seabrook management function and the ownership function from each other and utilized its market power to insulate itself, those functions and its other affiliates from any liability, except liability imposed by willful misconduct. NU does not seek to I

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execute this plan through the Joint ownership Agreement. Rather, t NU relies on the July 19, 1990 Agreement which was entered into l by other Seabrook joint owners which settled their anti-  ;

competitive complaints in the FERC case. MMWEC contends that the unrestricted transfer of the license, as proposed by NU, merely

! furthers this anticompetitive scheme. l The Commission must act to prevent NU from raaintaining a t situation inconsistent with the policies of the antitrust laws.

At a minimum the commission should condition approval of the license transfer to require appropriate amendment of the Joint Ownership Agreement and to prohibit NAECO, NAESCO and their affiliates from freeing themselves from liability for misconduct.

Sincerely, OL . RA Alan J. Rot Scott H. Strauss David E. Pomper SPIEGEL & McDIARMID 1350 New York Avenue, N.W.

Suite 1100 Washington, D.C. 20005 (202) 879-4000 YldC W a^ f . E c d.) 6,' p .

Nicholas J. Scobbo, Jr.,

4 "-f(  !

Robert Granger FERRITER, SCOBBO, SIKORA, CARUSO & RODOPHELE One Milk Street Boston, MA 02109 Attachments April 1, 1991 cc: Mr. Ted C. Feigenbaum New Hampshire Yankee Seabrook Station-Route 1, Lafayette Road P.O. Box 300 Seabrook, New Hampshire 03874

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, . . - 7 Mr. John F. Opeka Northeast Utilities Service Company P.O. Box 270

,. Hartford, Connecticut 06141 Mr. Thomas T. Martin Regional Administrator United States Nuclear Regulatory Commission Region I 475 Allendale Road King of Prussia, Pennsylvania 19406 Mr. George L. Iverson, Director Office of Emergency Management i State Office Park South 107 Pleasant Street

-Concord, New Hampshire 03301 Mr. Victor Norses Senior Project Manager i Project Directorate I-3 Division of Reactor Projects U.S.. Nuclear Regulatory Commission Washington, D.C. 20555 Mr. Noel Dudley NRC Senior Resident Inspector P.O. Box 1149 Seabrook, New Hampshire 03874 4 .

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