ML20077P657
| ML20077P657 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 08/31/1990 |
| From: | Goldberg R CLEVELAND, OH, GOLDBERG, FIELDMAN & HJELMFELT |
| To: | Murley T Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20077P653 | List: |
| References | |
| A, NUDOCS 9108190065 | |
| Download: ML20077P657 (16) | |
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DAvio c. Hartwr(4' VIA IIAND-DELIVERY Thomas E. Murley, Ph.D.
Director, Office of Nuclear Reactor Regulation United States thi. clear Regulatory Commission 11555 Rockvillo Pike Rockv1110, Maryland 20852 Re Application of Ohio Edison Con pany to Suspend Antitrust License Conditions (Perry Nuclear i
Power Planta Unit.1), NRC Docket No. 50-440A
Dear Dr. Murley:
The City of Clevoland, Ohio (Clevoland) presents this response to the July 24, 1990 letter from Gerald Charnoff, coun-sol for the Ohio Edison Company (Ohio Edison), concerning the ap-plication by Ohio Edison in which the utility asks the NRC to suspend the antitrust licenso conditions in the operating licenso 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 Justico (Jun-tice) sent an advice lotter to the NRC in which Justico found that, even if Perry's operating costs could be shown to be higher than anticipated, the legal basis for continued imposition of t.he 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 lottor to the NRC attacking Justice's findings, simply rehashes the ar-guments presented in its application.
Those arguments were re-viewed by Justice in emphatically rejecting the underlying basis of Ohio Edison.'s application.
In addition, Cleveland has already rebutted each of Chio Edison's arguments in its response to Ohio h
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GO L D HC RG F~lC L DM AN & L CTH AM. P. C, Thomas E.
Murley, Ph.D.
August 31, 1990 Page 2 Edison's application 1/ as well as in Clevoland's responso to both Ohio Edison's answer to Clovoland and a similar application by the Clovoland Illuminating Company (CEI) and Toledo Edison Company (Toledo), co-owners of Perry and Davis-11osso Nuclear Power Station, Utdt 1 (Davis-Besso), for suspension of antitrust conditions.2/
Thorofore, in the interest of brevity, Clevoland
)
will simply summarizo its robuttal and cito the appropriato por-tions of its prlor pleadings.
f In its letter, Ohio Edison points to-(1) "logislativo history" of the AEA, (2) " economic reasoning", and (3) "DOJ and NRC Past Practicos."
As shown below, each of those factors un-dormines Ohio Edison's application.
I.
LEGIST.ATIVE !!1 STORY In finding that thoro is no basis for suspension of the antitrust licenso conditions, Justico first pointed to the stan-dard that is clearly set forth in section 105(c).
Section 105(c) requires the NRC to determino "whether the activities undnr the licenso would create or maintain a situation inconsistent with the antitrust laws".
Justico noted (p. 2):
This broad standard invests the NRC with the re-sponsibility to datormine, on a case by case basis, whether owneral.ip of a-particular plant by a particular utility system is likely to have anticompetitivo offects of the typo the antitrust laws are intended to remedy.
The statute directs the NRC not only to look for-ward to determine if an anticompetitivo situation could arise, but also to look at the past to 800 if "an anticompetitivo climato exists and to see if the applicant has acted in an anticompetitive manner."
1/_
" Answer of City of Clevoland, 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 Appil-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 Contorior application.
Contorior Energy Corporation is a holding company that owns all-of the common stock of CE) and Toledo.
.L
[
Thomas E. Murley, Ph.D.
August 31, 1990 Page 3 This language, Justice observed, shows Congress' intent to re-quire the NRC to examino all of the factors surrounding a pro-posed nuclear plant, not just the anticipated cost of the power, in evaluating whether operation of a nuclear generating plant would foster anti-competitivo conduct.
Justico went on to note that the Joint.Committeo Report on the 1970 Amendmonts to the AEA, which modified section 105(c),
supports this interpretation.3/
Justico noted (p. 3):
[
There is nothing in the legislative history to suggest that Congress intended a narrower inter-protation of the statute than is indicated by its language.
The Joint Committeo Report, in discuss-ing the language that was onacted, does not sug-gest.that anticompetitive effects must be traco-able to a finding that the nuclear plant will bo low cost.
In fact, cost is not mentioned at all, and the Report does not specify or limit thoso situations that could be found to bo inconsistent with the antitrust laws.
In its responso, Ohio Edison criticizos Justico for focusing on the Joint Committoo Report and cites statomonts by cortain witnesses who testified at the congressional hearing.
In I
(
a similar voin, the affidavit of Dr. Joe D. Paco (attached to Ohio Edison's letter) suggests that the alleged belief that nu-clear power would be low cost must have been the solo factor un-derlying section 105(c).
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:-
begin with the familiar canon of statutory construction that the starting point for inter-proting a statute is the language of the statute itself.
Absent a clearly expressed legislative 3/
" Amending the Atomic Energy Act of-1954, As Amended, to Elim-inato 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. Codo Cong, & Ad. News 4981.
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Thomas E.
Murley, Ph.D.
August 31, 1990 Page 4 i
intention to the contrary, that languago must or-dinarily be regarded as conclusivo.1/
L Thus, in rejecting a similar attempt by another nuclear licensco to constrict the NCR's broad remedial authority pursuant to sec-tion 105(c), the court noted that the " express languago* of soc-tion 105(c) *is the primary sourco of its moaning.*5/
Ohio Edison does not even try to robut Justice's find-ings that the clear language of section 105(c) Jndicatos that the NRC_must look at the totality of circumstances in ovaluating the nood for antitrust conditions.
In addition, Justico correctly recognized that section 105(c) is a remedial provision and, hence, should be construed broadly.
"[W) hon Congress uses broad generalized languago in a remedial statuto, and that language is not contravened by author-ativo logislative history," a court has observed, "a court should interpret the provision generously so as to offectuate 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 Justico for focusing on the Joint Committoo Report is also at odds with other principios of statutory construction.
The Joint Committoo Report is the "best source of legislative history" bearing on the Congressional in-tant underlying AEA section 105(c).7/
Moreover, Clovoland, in its response to Ohio Edison's application (pp. 90-94), cited additional portions of the Joint Committoo Roport that reflect the recognition that the NRC would have to review the totality of circumstances in ordor to detor-mine whether oporation of a nuclear plant "would croato or main-4/
U.S. Consumer Product Safoty Commission v. GTE Sylvania, Inc.
447 U.S. 102,-108, 64 L.Ed.2d 766, 100 S.Ct. 2051 (1980).
5/
Alabama Power Co. v. NRC (Alabama Power), 692 F.2d 1362, 136' (11th Cir. 1982), cert. denied, 464 U.S. 816 (1983).
s/
Cia. Petrolora Caribo, Inc. v. Arco Carribean, Inc. 754 F.2d 404, 428 (1st Cir. 1985).
7/
Alabama Power, 692 F.2d at 1367; soo Siorra Club v. Clark, 755 F.2d 608, 615 (8th Cir. 1985).
l
Thomas C. Hurley, Ph.D.
August 31, 1990 Pago 5 tain a situation inconsistent with the antitrust laws."
Clovo-land showed that Congress recognized that, rogardless of whether nLclear power was low cost, a nuclear plant could exacerbato anti-competitivo practicos by (1) providing the nu:loar utility with a largo, now supply of power, thoroby increasing the utili-ty's incentivo to continuo to engage in anti-competitive to on-sure a captivo market for the power. (2) oxpanding the scopo of, and the cost officienclos ongendere by, coordination services controlled by the nuclear utility, thereby increasing the anti-
-competitivo harm caused by a discriminatory denial of accosa to thoso services to customors who need the coordination services to facilitato power purchases from other suppliers, and (3) oxpand-ing the scopo of the nuclear utility's transmission facilition, thereby increasing the utility's control-over whooling services nooded to procuro power supplies from other suppliers.
Clovoland noted (pp. 91-94) the significanco of the Joint Committoo's deci-sion to includo in the report a study that showed the rapid in-creaso in the cost of nuclear power.
Inclusion of tho study un-equivocally indicated that Congress understood that a nuclear plant could "croato or maintain a situat ;n 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-too Report mentions the cost of nuclear power in an " indirect" mannor only.
The portion of the Report cited by Ohio Edison sim-ply citos early congressional statomonts that commercial develop-mont of nuclear power must await technological advancos in nu-clear power that ensure that the power can be gonorated et
" competitive pricos."8/
Thus, thcse statements have nothing at all to do with the meaning of section 105(c).
Apparently recognizing that the Joint Committee Report undonninos its position, Ohio Edison focuses instead on a few isolated statements by witnessos at the congressional hearings on the 1970 Amendments At the outset, a statement at congrossional hearings by a porst-who is not a member of Congress is far loss probative of congri.asional intent than the language of the sta-tuto and the committee report.9/
In any event, the testimony at the hearings on the 1970 Amendments does not bolstor Ohio Edi-son's position.
As shown in Cleveland's responso to Ohio Edi-8/
Joint Committoo Foport, 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).
4.
Thomas E.
Murley, Ph.D.
August 31, 1990 Page 6 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 powar.
Instead, they focused on the way that a nuclear facility, in view of its large generating capacity, could create or raintain nn 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 discriminatocy exclusion of access to these services, these witnesses noted, and could justify imposition of antitrust licent conditions.
Indeed, as discussed in Cleveland's respons (pp. 95-96), two of the witnesses cited by Ohio Edison--
Ronald K Lonnem, then-Director of Policy Planning of Justice's Antitrust Division, and Walter B. Comogys, then-acting Associate Attorney General in charge of the Antitrust Division--cited these fac* ors.
In addition, severa'. 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 C1'voland'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 caly thing that can possibly distinguish nuclear power frem, 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 uandete was not based on any eTpectation 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 gcVernment (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, Congrens stated that an overriding policy was to
" strengthen free competit'on" (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 nucleer 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-ior's application (pp. 30-32), the 1970 Amendments also reflected 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 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 that a nuclear plant could increase the incentives for a nuclear utility to continue to engage in anti-competitive conduct to ensure a market for the nuclear power.
II.
NRC PRECEDENT Ohio Edison tells us that NRC precedent supports Ohio Edison's position that antit ist conditions may only.be continued if nuclear power is low ccst.
Significantly, Ohio Edison can provide only a single sentence of analysis regarding a single NRC decision to try to support this assertion--Consumern 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 facf'ities.
The NRC noted that additional power generated by tb2 .dland 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. Parley Nuclear Plant, Units 1 and 2) (Farley), ALAB-10/ S. Rep. No. 1699, 83d Cong., 2d Sess., reprinted in 1954 U.S.
Coce Cong. & Ad. News 3456, 34S8.
l l
Thomas E. Murley, Ph.D.
August 31, 1990 Page 8 646, 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 Appeal Board in Farley noted 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-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 appl cant to provide non-discriminatory access to transmis-sion and other coordination services.
Id. at 1108-10.
Moreover, the Board recognized that access to these services was not tied to actual purchase of the nuclear power.
The Board found that one of the intervenors did not compete with the applicant in the retail market and, therefore, was not enti-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 prectices 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-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-present separate markets which were dominated by the applicant and that the license would exacerbate the anti-competitive situa-
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.
Thus, the court recognized that the cost attractiveness of nuclear power has nothing at all to do with the NRC's author-ity to impose antitrust conditions to ensure non-discriminatory 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 laws."
Moreover, it is striking that Ohio Edison does not even try to show that the NRC's reasoning in imposing the antitrust 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-owned 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 power generation and transmission facilities.
Ohio Edison cites (pp. 5-6) only tho'" initial conclusion" by Justice that an anti-trust hearing was not required in connection with Davis-Besso 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 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 l
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 ths 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 pcwer 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.
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 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 the Zimmer Nuclear Power Station (Zimmer) and cited by Ohio Edison (p. 6) involves circumstances that bear no similarity to
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, Juetico 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 power generation, coordination services and transmission facilities of the applicants and thereby increase the applicants' incentive 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-petitive conduct by the licensee in coordination and wheeling servicas, regardless of whether the nuclear power turns out to be low cost.
For example, Appendix L asks for information about (1) coordination contracts to which the applicant is a party (section II(24)), (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 (19)).
Thus, NRC precedent, especially the NRC's danision to impose the Perry antitrust conditions, clearly indicates that the imposition of antitrust conditions does not depend on whether the
Thomas E.
Murley, Ph.D.
August 31, 1990 Page 12 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 a nuclear plant heighten the need to impose antitrust conditions to ensure that the nuclear utility acts in a non-discriminatory 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 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 highar 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 economic principles and the fundamental mandate of section 105(c) 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 Shoo, 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 Corp., 660 F.2d 1123, 1133 (6th Cir. 1981).
Colisequently, the alleged increase in nuclear power costs heightens the importance of the continued imposition of antitrust conditions in the Perry license.
IV.
LEGAL AND POLICY ASPECTS OF REVIEW QF EXISTING ANTITRUST CONDITIONS Cleveland, in its opposition to the application of Ohio Edison (pp. 25-52) and Centerior (pp., 11-14), shows that the NRC lacks the statutory authority to modify antitrust conditions.
Even if the NRC has the legal authority to modify an-titrust conditions, the NRC should not exercise this authority 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 clusive na-ture of a low cost standard in 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 nationwide pursuant to the proposed amendments.13/
That enhances the ccmpetitiveness of nuclear power.
11/ Journal of Commerce, Aug. 15, 1990, at SB.
12/ 1989 Annual Report to Shareholders, p.
16.
13/ Sillin, " Nuclear Generating Companies--Some Heat and Light",
126 Public Utilities Fortnightly 6 (Aug.
2, 1990).
l l
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 conditionp 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. S2011 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 14/ 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 (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 parported 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).
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 trsly yours, Craig S.
Miller, Esq.
Director of Law June W.
Wiener, Esq.
Chief Assistant Directcr of Law William M.
Ondrey Gruber, Esq.
Assistant Director of Law City llall, Room 106 601 Lakeside Avenue Cleveland, Oli 44114 (216 664-2800 Teleghone:(kuSCL 6t{hh)ts utV 1A&
k.
&~~
Reuben Goldberg, Esq.
Kenneth M. Albert, Esq.
Goldberg, Fieldman & Lotham, P.C.
1100 Fifteenth Street, NW Washington, DC 20005 Telephone: (202) 463-8300 Attorneys for CITY OF CLEVELAND, OHIO August 31, 1990 cc Joseph Rutberg, Esq.
Deputy Assistant General Councel Nuclear Regulatory Commission Gerald Charnoff, Esq.
Attorney for Ohio Edison Company 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-Besso and Perry plants.
There-fore, that application, too, should be summarily dismissed.
l
- ..8.,
1,
Thomas E.
Murley, Ph.D.
August 31, 1990 Page 16 Alison L.
Smith, Esq.
Deputy Assistant Attorney General U.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