ML20082B224

Submits Opinion Re Application of Section 105 of Atomic Energy Act to Application.Nrc Should Hold Antitrust Hearing

ML20082B224
Person / Time
Site:	Perry
Issue date:	12/17/1973
From:	Kauper T JUSTICE, DEPT. OF
To:	Shapar H US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML20082B211	List: ML20082B224
References
ISSUANCES-A, NUDOCS 8311210078
Download: ML20082B224 (8)

Text

-

, 657 ANT,ATrdak[3' O.EpsEst4L.

Aurr7=us7 om! oes

-[eparhuent of 3ustice Einipayme, PE. 20530 l

9 h

i

'DEC 17 1973

~"~

u..

Howard K. Shapar, Esquire Associate General Counsel

~

..l U. S. Atomic Energy Commission Washington, D. C.

20545 i

Re:

Duquesne Light Company Ohio Edison Company I'

Sj Pennsylvania Power Company The Cleveland : Illuminating Company and 4

The Toledo Edison Company --

Perry Nuclear Power Plant, Units 1 & 2 AEC Docket Nos. 50-440A & 50-441A l

Dear Mr. Shapar:

You have requested our advice pursuant to the provi-sions of Section 105 of the Atomic Energy Act, as amended, in regard to the above-cited application.

I.

The Applicants Perry Nuclear Power Plant, Units 1 & 2, which'will be located near Lake Erie in Lake County, Ohio, 35 miles north-east of the City of Cleveland, will consist of two units with outputs of 1205 mw and 1265 mw.

The units will be jointly owned by the following invest 66o"wned utilitiss inn. as yet, undetermined shares:

Duquesne Light Company, Ohio Edison 7

Company, Pennsylvania Power Company (a subsidiary of Ohio Edison Company)

The Cleveland Electric Illuminating Company, in and The Toledo Edison Company.

The total -estimated cost. of M

the units at completion will be $1,302-million.

Unit 1 is 4 A.

~

scheduled to go into operation between 1978 and 1980; Unit 2,

'l. /

between 1979 and 1981.

The units will be constructed and 4' N operated on behalf of the Applicants by The Cleveland Electric:

111timinating Company.

z-Duquesne Light Company (Duquesne) is an investor-owned

. i "._

integrated electric utility which serves an 800 square mile -

I area in the northwestern part of Pennsylvania which has a H

i 8311210078 831114 l

PDR ADOCK 05000440 M

PDR t

+

i

~\\

population of approximately 1,615,000 individuals.

At pres-ent, Duquesne supplies the full bulk power requirements of' one municipal electric utility.

In 1972 Duquesne's total rj electric operating revenues were in excess of 315,079,000; the company has a net generating capacity of '2,T6Tmw.

} f.c:

s Ohio Edison Company (Ohio Edison) is a fully integrated i

i investor-owned utility serving an area of approximately

[.

j 7,400 square miles with a population of approximately 1

2,321,000 people in central and rortheastern Ohio.

Ohio Edison's net generating capacity H s 3,494 mw.

Ohio Edison i

supplies the full bulk power requirements of 19 municipal electric utilities and the partial bulk power requirements of two municipals.

In 1972 Qhio Edison and its subsidiaries

.,~._ -

v.

had electric operating revenues in excess of $340,435,000.

Pennsylvania Power Company (PPC), a subsidiary of Ohio Edison Company, provides electrical-service throughout an I

area of approximately 1,500 square miles in western Pennsylvania which has a population of 324,000 people.

PFC supplies the full bulk power requirements of five city T

~

systems.

In 1972, PPC_had operating revenues of $45,522,000 and a net generating capacity in excess of 579 mw.

~

.i The Cleveland Electric Illuminating Company (CEI) is a l

i fully integrated investor-owned utility which serves an area

{

in and surrounding the City of Cleveland of approximately 1,700 square miles which has a population of approximately 2,100,000 people.

CEI does not provide full or partial require-j ments wholesale electric service to any municipal or ~coopera-tive electric utility.

In 1972 J2Eljhad electric operating.

revenues in excess of $287,77s.noO and a net generating capacity of 3,930 mw.

~

The Toledo Edison Company (Toledo) is a fully integrated investor-owned electric utility serving an area of 2,500 square miles, including the City of Toledo and territories to the west, south and east thereof, with a population of approximately

' ~4 719,000 people. ~ Toledo supplies'the full bulk power require-ments of 14 municipal electric utilities ' and the partial bulk'

-.qd

. power requirements of' one f such system at. wholesale.

In 1972, _

Toledo had electric operating revenues of. $_115,767,000 and -

1 a net generating. capacity of 1,046 mw.

t

. II.

The CAPCO Pool-The Applicants are.all members of a five-company power pool, known:as CAPCO, which was organized in.1967.

CAPCO 1

i 2

._.7_.._._..~_.2..

_.,.s. _. -. J -

~..

- ^ -

provides the framework within which the members coordinate their operations, interchange power and share reserves.

Generation and associated transmission facilities for the CAPCO members are planned on the basis of the requirements of the pool as a single system.

The Perry Nuclear Power Plant, Units 1 & 2, as well as the Davis-Besse and Beaver Valley facilities, are nuclear generating. units planned and constructed by the members of CAPCO to meet these require-ments.

The CAPCO members serve approximately 2 million i

customers within a 14.,000 square mile area in northern Ohio

,S; and western Pennsylvania.

~

III.

Competitive Considerations The Applicants herein have made two previous applications to the Commission on which the Department was reque sted to render antitrust advice:

Davis-Besse Nuclear Power Station (Docket No. 50-356A) and Beaver Valley Power Station, Unit No. 2 (Docket No. 50-412A).

Since there had been no formal request for participation in either facility, and since the Applicants appeared to be responding voluntarily and adequately to certain allegations of anticompetitive conduct, the Department did not recommend that an antitrust hearing be held upon either application.

The competitive situation outlined in the Depart-ment's advice letter dated April 20, 1973, on the Beaver. Valley facility appears to be unchanged with respect to all but one of the Applicants, CEI.

Therefore, we will not at this time i

reiterate the conclusions concerning the activities of the other Applicants which we set forth in our prior correspondence.

Although CEI does not serve any municipal or cooperative wholesale customers, its facilities are located adjacent to and surrounding the municipal systems of the City of Cleveland and the City of Painesville.

CEI controls all of the trans-i mission facilities surrounding these two cities.

CEI is engaged in intense competition with the City of Cleveland at i

the retail distribution level, and to a lesser extent, with i

Painesville.

It is CEI's objective. to " reduce.and ultimately I

eliminate" the systems of both of these. municipal competitors. 1/

In our Beaver Valley advice letter, the Department indi-cated that Painesville, presently an isolated system, has been J.j; seeking an interconnection with CEI for several years.

• 'S Painesville alleged that this interconnection was required'if

~,7 f' l

the City was to remain competitive with CEI.

Early in April

,'c,6 of this year, DEI informed the Department that it expected an interconnection agreement with Painesville to be concluded

.~

Nn 1/ October 9, 1970 Memorandum from R. H. Bridges, CEI Public Information Department, to Lee C. Howley, CEI Vice President and General Counsel; Exhibit 24, City of Cleveland v. Cleveland Electric Illuminating Company (FTC Docket Nos. E-7631, E-7633

& E-7713).

3

.w..

,,e

~ ~~ "

• * * * * * * * ~ ' ' ' ' * ' * ~ * " * * * * * * * '

e

,,~-m,,----

-n-

-,n

.--------,,,e

,---w

i "within a few months. "

Eight months later no agreement has 1

been concluded; CEI and Painesville have now been negotiating i

for three years without reaching such an agreement.

On April 11, 1973, Painesville wrote to CEI requesting participa-tion in the Perry facility "on a shared capacity basis."

In August of this year, CEI informed the Department that it would permit unconditioned participation in Perry by Painesville.

However, this offer was apparently not effectively communicated to Painesville:for, in the following month, the City wrote to I

the Commission requesting participation and stating "unless j

they [CEI] are compelled to sell us power from the Perry l

Nuclear Plant they will, within a very few years, effectively monopolize the distribution of electric energy in this entire area."

Painesville has informed the Department that unless it can secure either access or interconnection and coordina-i tion, it will be unable to remain a viable competitor.

It does not appear that CEI has at any time flatly refused either to interconnect with Painesville or to allow them access to the Perry units.

CEI and Cleveland have a long history of litigation and mutual antagonism.

Both have made allegations to the Depart-ment that the other has engaged in anticompetitive conduct violative of the antitrust laws.

They are presently engaged i

in litigation concerning Cleveland's payment for past services l

rendered by CEI.

For many years, Cleveland was a completely isolated electric system.

Recently, upon Cleveland's petition, the Federal Power Commission ordered CEI to establish both temporary'and permanent interconnections with the City's system.

Cleveland s system serves approximately 20 per cent of the retail distribution load existing inside the city' limits; the remaining 80 per cent is served by CEI.

The City s system had a peak load of 104 mw in 1971 and has a proj ected peak of 280 mw by 1980.

It presently-has a nominal summer generating capability of 193.6 mw, but the system has experienced serious reliability problems in the past.

~'

Cleveland alleges that without coordination, including I

wheeling, reserve sharing, and j oint planning of and participa-l tion in large-scale generating units, it cannot continue to compete with CEI.

Cleveland further alleges that CEI's member-ship in the CAPCO Pool has provided CEI with the benefits of coordination, reserve sharing: and wheeling, as well as the ability to take advantage of the economies of scale associated with large-scale generating units.

Cleveland also alleges that the CAPC0 Pool members have been able to monopolize the presently available sites for the location of large-scale nuclear generating facilities.

4 i

i

• ~

4 i

i On April 4, 1973, Cleveland wrote to CEI and requested participation in the CAPCO Pool.

On April 13, 1973, Cleveland again wrote to CEI and specifically requested access to the Perry units, either through unit power purchase or ownership participation by the City or, on the City's behalf, by American

,,,,f Municipal Power-Ohio. Inc. (AMP-0). g/

On April 17, CEI m

responded to the City's request. noting that both CAPCO j

contractual arrangements and Perry ownership raised the same questions; CEI suggested that the City arrange a meeting with p

CEI's General Counsel to discuss these questions.

While a j

continuing interchange apparently took place between the City l

and CEI in the following monchs concerning litigation and other matters, the Department is unaware of any further communication t

concerning CAPCO membership or participation in Perry until, i'Of August of this year.

j On August 3,1973, Cleveland wrote to CEI conveying a detailed proposal for membership in CAPCO and for participation in all proposed CAPCO nuclear units.

This proposal provides that the City would receive 55 mw from Davis-Besse (proj ected to come on line in 1975), 26.6 mw from Beaver Valley (on line 7

in 1978), 30.1 mw from Perry Unit No. 1 (on line in 1979), and p,,,

30.1 mw from Perry Unit No. 2 (on 1.ine in 1980). g/

These fy 1

i gradual increments of power comprise a total participation in COe.

CAPCO units of 141.8 mu and are scheduled to correspond to the City's proj ected load growth.

We are informed by the City that this power would be used exclusively to provide for load growth and not to replace existing generating facilities.

i i

The August 3 letter requested a meeting on August 20.

On l~

August 13, CEI replied in a noncommital fashion and indicated that, no later than September 1, it would be prepared to schedule a meeting in the future.

On September 10, Cleveland again wrote to CEI reiteratinglite-desire for.CAPCO membership.

l i

1 On September 26, CEI replied that it, was prepared to meet with the City's regresentatives.

On October 25 this meeting was s

finally held but did not result in even a commitment in principle I.

!sd 2/

AMP-0 is a nonprofit Ohio corporation which was estab'lished a> /

3ii 1971 to coordinate the generation, transmission and distribu-JE; i

tion of electric energy within Ohio by municipally-owned electric

d utilities.

It now represents 44 such utilities, including the City of Cleveland.

. 9 3/

As previously noted, at the time of the Department's advice on the applications for both Davis-Besse and Beaver Valley, no formal. requests' for participation had been made.

Subsequently, J

Cleveland made such requests and filed petitions to intervene in I

the proceedings before this Commission concerning both of these l

applications.

5 6

=

by CEI vith respect to any element of the City's proposal.

On December 12, CEI finally made a counterproposal to the City.

CEl has said that it will agree to negotiate with Cleveland concerning the City's participation in CEI's share of the Davis-Besse, Beaver Valley No. 2 and Perry.

nuclear generating units, as well as.concerning the attendant

~ j.1:

wheeling and reserves.

This offer to negotiate is subject to P

several conditions one of the more significant of which is that, prior to the commen, cement of negotiations, Cleveland must with-draw all requests for antitrust hearing'on the applications i

relating to all of the above units.

Also on December 12, CEI ft ~

.c informed Cleveland that membership in the CAPCO Pool was out of the question. 4/

In addition, CEI allegedly informed the City that the company would not wheel any power for the City except from the three nuclear installations.

AMP-O has supplied to the Department information suggesting l

further anticompetitive conduct.by CEI.

On November 27, 1972, AMP-0 wrote to CEI inquiring whether the company would allow AMP-0 to participate in large scale bulk power generation, and whether the company would provide ~ wheeling for power from various i

sources to AMP-0 s member systems.

CEI replied that it would be willing to meet with ANP-O's representatives to discuss these matters.

Early in 1973, AMP-0 made application to Power Authority of the State of New York (PASNY) to secure an alloca-

~..~

tion of 30 mw of hydroelectric power which was to be made avail-able to a public agenc'y.

AMP-O allegedly satisfied all of PASNY's requirements concerning the financial feasibility of the transaction and its authority to enter into the contract.

The one remaining requirement which AMP-0 would have to meet before being in a position to secure the PASNY power was proof of its ability to deliver the power from PASNY to the point of ultimate consumption.

AMP-O made preliminary arrangements to sell the PASNY power to the City of Cleveland and made the following proposal for wheeling of the 30 mw;_ PASNY's wheeling agent, Niagra Mohawk, would wheel the power to the New York-Pennsylvania state line, from which point it would be wheeled by Pennsylvania i

Electric Company (Penelec) to the Pennsylvania-Chio state line; 4/

Duquesne wrote to the City on December 10, 1973, informing l

them that Duquesne would not agree to participation by the City in either CAPCO or the three nuclear installations.

h 6

l i

l 7

i I

at this point, it would be delivered to CEI, which could wheel the power to the City of Cleveland.

On May 1, 1973, counsel i

for AMP-O wrote to both Penelec and CEI outlining its intent to secure the PASNY allocation and asking'whether they would

]

be prepared to wheel this power.

Penelec s general counsel allegedly made an immediate commitment in principle to wheel

<f.

the PASNY power.

No such commitment was forthcoming from CEI, the only remaining company whose c.ooperation was necessary in order to transmit the power from PASNY to its proposed recipient.

Counsel for AMP-0 and CEI engaged in extended negotiations which culminated in CEI's letter of August 30, 1973, refusing to wheel the power.

The letter gave the fo? low-ing explanation of CEI's refusal:

As you may know, The Illuminating Company competes with the Cleveland Municipal Electric Light Plant on a customer-to-customer and street-to-street basis in a sizeable portion p

of the City.

This competitive situation is clearly unique.

Economic studies indicate that an arrangement to transmit the PASNY power would provide the Municipal system electric S. ;L.

energy at a cost which would be injurbus to The Illuminating Company's competitive position.

The iss'ues raised by Painesville's and Cleveland's requests for coordination (through both interconnected operation and membership in the CAPCO Pool) and for participation in large-scale nuclear generation planned by CAPCO do, as observed by CEI, raise the same issue.

These requests must be considered under the antitrust principle requiring those who control an p

essential resource to grant access to it, on equal and non-t discriminatory terms, to all vchers engaged in the given b'usiness.

See, e.

383 (19127;g., United States v. Terminal R.R. Ass 'n, 224 U.S.

Associated Press v. United States, 326 U.S. 1 (1945);

Gamco, Inc. v. Providence Fruit & Produce Bldg., 194 F.2d 484 (1st Cir. 1952), cert. denied 344 U.S. 817 (1952).

As we have indicated in past advice letters, this principle applies to bulk

~hdk power supply arrangements.

United States v. Otter Tail Power

~. ~.

Co., 331 F. Supp. 54 (D. Minn. 1971), aff'd 410 U.S. 366 (19/3).

- "E Wile it does not appear that CEI has completely rej ected any

F -

of the requests made by Painesville or Cleveland (with the y

exception of Cleveland s request for participation in the 4

CAPCO Pool) the Department is not convinced that CEI is fully prepared to commit itself to grant access to either coordination or large-scale nuclear generation in a manner which would be free of anticompetitive effect.

At.least with respect to the 7

i i

City o' f Cleveland's request, CEI has been unwilling to make a commitment in principle which we feel would be sufficient--

to permit Cleveland to participate in such a way as to main-l l

tain its present cc petitive posture.

I CEI's refusal to wheel power for AMP-0 raises a somewhat I

.h different problem which should be considered in the perspec-tive of CEI's monopoly control of those transmission facilities surrounding the City of Cleveland.

Antitrust princi evolved which place distinct limits upon a supplier'ples have s exercise of monopoly power at one level of distribution to adversely affect competition at another level.

The District Court in

. {j i

United States v. Otter Tail Power Co., supra, clearly held that a utility could not use the power derived from a lawful j

monopoly at the bulk power supply level (in that case a mono-H poly of subtransmission facilities) to impair competition it the retail level.

IV.

Conclusion Based upon our review,. the Department of Justice can only conclude that a failure by CEI to grant the requests by Painesville and Cleveland would create a situation inconsistent with the antitrust laws.

CEI's refusal to wheel. power for AMP-0 appears to be another indication of this inconsistency.

Construction and operation of-the Perry units appear likely to enable CEI to maintain this anticompetitive situation.

Accordingly, the Department of Justice concludes that the Commission should. hold an antitrust hearing on this application.

Sincerely yours, E

THOMAS E. KAIrPER

~

I Assistant Attorney G neral i

Antitrust Division f

e

sm-t 4-w J~-i.---haJr-esa-'-MMm4EM-M++m

-N-ur-au.a.a ana m.Am,

.m.._.,wa,m_A.

w e -we--Aeean.e m - e w.A-m.m.maM Am.hw.Aap4

..sA_.v._4

,___5*_A MMMw o.2,m=%.ha-e m-

- - ' -#_LJag i

l l

\\

i i

l t

}

S 1

I 1

1.

4 4

i i

1 I

i l

i t

e I

f 4

l APPENDIX D r

I r

l l

l I

i i

i r

i t

s e

f i

f b

I t

i n

4 k

i s

O I

i l;

I i

l

- -. - ---- --.--.,. _..-.-.--~...

.~,m.,--m---_-_--,._------_-wwwm N

UNITED STATES OF AMERICA ATOMIC ENERGY COMMISSION Before the Atomic Safety and Licensing Board In the Matter of

)

)

TdE TOLEDO EDISON COMPA!N

)

THE CLEVELAND ELECTRIC ILLUMINATING )

Docket Nos. 50-346A COMPAln

)

50-440A (Davis-Besse Nuclear Power Station) )

50-441A

)

TdE CLEVELAND ELECTRIC ILLUMINATING )

COMPAIN, et al.

)

ps \\ O' I w g

(Perry Nuclear Power Plant,

)

N Units 1 and 2)

)

S' DCCT.ETED 4

l'.EC i

~

l' JUL 231974J1 PREHEARII;G CONFERENCE ORDER #2 L

g,.g n..

\\ :9, t;:. : ;, r.a'ru

1..?.s s8

/,-

.s s

A.

Background

4 f,g g\\@

Pursuant to Notice and Order for same, the Second Prehearing Conference in _ this consolidated proceeding was held on June 25, 1974.

Counsel for all parties were present T

and participated except counsel for State of Ohio, who had 1/

earlier requested, and the Board had granted, leave to be absent.

1/

By letter dated-June 20, 1974 from Deborah M._Powell,

~

Esq., Assis tant" Attorney General, incorporated herein by reference.

By attachment to_said-letter, the State, with agreement of the parties, set'forth the nature and scope of its pcrticipation under Section '2.715(c).

The Board-approved scme.

e

the contentions to relate primarily to structure, and only incidentally to conduct.

Accordingly, any discovery directed

-(g; to conduct should be limited and clearly designed 'to develop whatever evidence of conduct is needed beyond structure to t

demonstrate the " situation" referred to herein.

D.

The Issues and Matters in Controversy b..L-r i

The following Issues and Matters in Controversy, as finally formulated by the Board, and based on the joint stip-ulation and record to date, are admitted as issues in the proceeding for purposes of discovery:

?.

BROAD ISSUE A i

i i

Whether the structure of the relevant market or markets 9/

and Applicants ' position or positions therein gives them the

.x. _

ability, acting individually, together., or together with l~

~

others, to hinder or prevent; g {g q:.

19?%

9/

Applicants are the five participants in the Davis-Besse

7. l}

and Perry nuclear units:

Cleveland Electric Illuminating Mi'l k (CEI), Duquesne Light Company, Ohio Edison Coupany, fyf Pennsylvania Power Company and Toledo Edison Company.

C-? i The Applicants are also the five members of CAPCO, i' ?

referred to below.

i l

. l_0/

(1)

Other electric entities from achieving access 11/

-~

to the benefits of coordinated operation either s

1. "~

among themselves, or with Applicants:

l~.

(2)

Other electric entities from achieving access to i~

the benefits of economy of size of large electric 12/

generating units by coordinated development,

.,s.

either among themselves, or with Applicants:

BROAD ISSUE B.

If the answer to Broad Issue A is yes, has Applicants '

• %]

ability been used, is it being used, or might it be used p4T l

to create and maintain a situation?or situations inconsistent l

l with the antitrust laws or the policies underlying these

{

laws.

10/

"Other electric entities" r'eTeYs to commercial firms, (other than the five Applicants), cooperatives,. govern-(

mental units or similar organizations that generate, transmit or distribute electric power within the relevant market (s).

'~..,

11/

" Coordinated operation" includes but is not limited to such activities as reserve sharing, exchange or sale of l

finn power and energy, deficiency power and energy, i

emergency power and energy, surplus power and energy,

j and economy power and energy.

l 12 /

" Coordinated development" includes but is not lLaited to l

joint planning and development of generation and 'trans-mission facilities.

. MATIERS IN CONTROVERSY UNDER BROAD ISSUES A AND B h

(1)

Whether the Combined CAPCO-Company Territories

t..

l3/

5 ;. ;,

(CCCT) is an appropriate geographic market S ~ '3

~

for analyzing the po'ssible cre) tion or maintenance of a situation inconsistent with the antitrust laws or the policies underlying

[,~

p.R.,

those laws.

(2)

Whether there are any relevant geographic sub-l markets, and, if so, what are the boundaries.

(3)

Whether any or all of the following are

.'f

~.:

relevant product markets for analyzing the possi-t ble creation or maintenance of a situation incon-sistent with the antitrust laws or the policies l-I underlying those laws.

(a)

Regional power exchange transactions within power pooling arrangements invol' ing ex-v changes and/or sales of electric power for

' e i$

d,6 res ale.

'.w

• 9,M

,.2 My 13/

The Combined CAPCO Company (Central Area Power Coordi-

-d.lch nation Group) Territories (CCCT) refers to the region

( J "'

~~

bounded by the outer pertmeters of the geographic ter-Fe.;

r ritories of the five CAPCO members, as shown on the map submitted by CEI as Exhibit F to Information Requested by the Attorney General for Antitrust Review in con-nection with the Perry Nuclear Power Plant Units 1 & 2.

(The map is entitled " Principal Facilities of CAPCO as of October 31, 1969" and was prepared by Duquesne Light Co.)

. (b)

Bulk power transactions involving individual yl..

I;, 7 contracts for sale-for-resale of firm electric

.G"b

??.':

power or for emergency, de.ficiency or other types of wholesale power.

I.'..2; (c)

Retail power transactions involving sales of electricity to ultimate consumers.

1. i'9 14/

n/

r. 'fj (4)

Whether Applicants ' stipulated dominance

]

l of bulk power transmission facilities in the CCCT d

gives them the ability to hinder or preclude com-petition in the transmission of bulk power.

j i

(5)

Assuming the ' answer to (4) is yes, whether Appli-cants have, do or could use their ability to pre-clude any other electric entities within the CCCT from obtaining sources of bulk power from other electric entities outsld2Cihe CCCT.

~

~

l (6)

Assuming that the answer to (4) is yes, whether

[,,.

Applicants have exercised, are exercising, or

, (. <.

-4

c. ; :

intend to exercise, their ability to prevent i

l' other electric entities in the CCCT from achieving:

[* '.

l I

~

14/

Transcript pp. 448-451; 473; 483-484 15/

Dominance here and below refers to percentage shares of 75% or more in relevant service market areas l

l L_

(a) the benefits of coordinated operations either among themselves or with Applicants.

'!":.;i$

$'5?

(b) access to the benefits of economy of size l -

P' '..

from lafge nuclear generating facilities.

l -:+. :

l.-

(c) any other benefits from coordinated de-velopment either among themselves or with

^.

-:::>

Applicants.

(7)

Assuming the answer to (6) is yes, has this ability to hinder or preclude competition been exercised for the purpose or effect of eliminating one or l-more of the..other electric entities in 'the CCCT.

i M/

{.

~

(8)

Whether Applicants ' stipulated dominance of l

bulk power generation in the CCCT gives them the ability to hinder or preclude competition in one f0'"

or more relevant marketL.

w (9)

Assuming the answer to (8) 'is yes, whether Appli-

'hh--

2:

cants have exercised control over bulk power fa-hk[fq cilities to deny to other electric entities in h

.

Qc

.e the CCCT:

['.. 7; (a) access to the benefits of coordinated oper-l n.:b ation, either among themselves, or with s

Applicants.

M /

Transcript pp. 440-441.

13 -

(b) access to the benefits of economy of size I.

[..t -

of large electric generating units.

[h,4-(c) assess to any other benefits from coordinated

!. ~ ~.

. S.

development, either among themselves or with App licants.

(10)

Whether Applicants' policy or policies with respect

'l-I' to providing access to their nuclear facilities to other electric entities in the CCCT, that are or could be connected to Applicants, deprives these other electric entities from realizing the benefits of nuclear powef.

(11)

Whether there are logical connections between the activities under the proposed licenses for the nuclear facilities and each of the matters in i

contention (1) through ~(EU) that meet the nexus 17/

~~

test established by the Atomic Energy Commission.

l The Board will not address issues and matters in con-troversy with respect to remedy until a situation 17/

In the Matter of Louisiana Power & Light Company, Waterford

~-'

Unit 3, Docket No. 50-382A, Memorandum and Order of i

l February 23,1973, RAI-73-2-48 and In the Matter of l

Louisiana Power & Light Company, Waterford Unit 3, Docket No. 50-382A, Memorandum and Order of September 28, 1973, RAI-73-9-619.

l

~

inconsistent with the antitrust laws or underlying policies thereof has been established.

Consequently, at this time,

'[h no discovery specifically directed to potential remedies is appropriate.

E.

Clarification of AMP-O's Contentions In its Memorandum and Order of April 15,1974, the Board required AMP-0 to explain more fully the mechanisms and relationships that it believed would result in operations I

under the licenses for the Davis-Besse and Perry plants l,

inj uring AMP-0.

Tnis requirement was held in abeyance i

pending the development of the Joint Statement.

The Joint I

Statement did not provide the information the Board scehs, i

I and consequently, such requirement is hereby reinstated.

AMP-O's statement shall be filecF'Jihin 10 days 'of this Order.

In any event, since AMP-O's contentions were' limited

.(...-

..u t to wheeling, its discovery shall also be so limited.

$$N Sc2:

?. f:'.

'$N$'9 The Board notes that AMP-0 has not filed the proposed I?? :-

schedule requested and did not file timely a response to the M$@)

' "*J Board's Order requesting clarification.

Henceforth, the Board will not accept an untimely filed pleading unless it is I

49 9'

APPENDIX E

1 -

"W r

I APPENDIX License Conditions Approved by the Appeal Board.

1.

Applicants shall not condition the sale or exchange of wholesale power or coordination services upon the condition that any other entity:

a.

enter into any agreement or understanding restricting the use of or alienation of 'such energy or services to any customers or territories; b.

enter into any agreement or understanding requiring the receiving entity to give up any other power supply aAternatives or to deny itself any market opportunities; c.

withdraw any petition to intervene or forego par-ticipation in any proceeding before the Nuclear Regulatory Commission or refrain from instigating er prosecuting any antitrust action in any other fort.

2.

Ap,61icants, and each of then, shall offer interconnections upon reasonable terms and conditions at the request of any other electric entity (ies) in the CCCT, such interconnection to be available (with due regard for any necessary and applicable safety procedures) for operation in a closed-switch synchronous operating l

mode if requested by the interconnecting entityO es).

Ownership of transmission lines and switching stations asssciated with such interconnection shall remain in the hands of the party funding the interconnection subject, however, to any necessary safety procedures relating to disconnection facilities at the point of power delivery.

Such limitations on ownership shall be the least necessary to achieve reasonable safety practices and shall not serve to deprive purchasing entities of a means to effect additional I

pcwer supply options.

i 3.

Applicants shall engage in wheeling fcr and at the request of other entities in the CCCT:

e 1

(1) of electric energy from delivery points of Applicants to the entity (ies) ; and, (2) of power generated by or available to the other entity, -as a result of its ownership or entitlements81/

in generati'ng facilities, to delivery points-of applicants designated by the other entity.

81/

" Entitlement" includes but is not limited to power made available to an entity pursuant to an exchange agreement.

I-

.e

y 39 7 -

- ;: ": xi~.

.. +

......:.;z :. :2.5krdb=.

n :.. ST'l? i x r. w -L __ _

Lx r

_ r.,:;LL:(1

., Such wheeling services shall be available with respect lines of Applicants,to any unused capacity on the transmission the use of which will not jeopardize Applicants' system.

In the event Applicants must lack of capacity, reduce wheeling services to other entities due to until reductions of at least 5% have been made in these proceedings and thereafter shall be made proportion to redu5tions82/

to this.oroceeding.

imposed upon other Applicants Applicants shall make reasonable provisions for disclosed transmission requirements of other entities in the CCCT in planning future transmission either individually or within the CAPCO gronping.

is meant the giving of reasonable advance notificatio By disclosed" of future requirements by entities utilizing wheelingn cervices to be made available by Applicants.

(a) to any entity in the CCCT with a system capabilitApp 10 Mw or greater; y of (b)

A group of entities with an aggregate system capa bility of 10 Mw or greater may obtain a single membershi in CAPCO on a collective basis.83/

p (c) to License Condition 4 shall become members su the terms and conditions of the.CAPCO Memorandum o o

Understanding of Septembey 14, agreements; except that new members may elect 1967, and its implem a p/N allocation formulapate on an equal percentage of reserve basis to partici-for a period of.twelce years '

Th. objective of this requirement is to pre

' 82/

~~~

tien of unused capacity on-the lines of one Avent the preemp-'

deems noncompetitive.other Applicants or by entities the transm pplicant.by

(

opportunity to develop bulk power services options' Competitiv p

cant this results in reallocation of CAPCO trans i e

even if-This relief-is required in order to-avoid pm ssion channels.

the effects of Applicants illegally sustairolongation of ned dominance.

83/

E.c.,

Wholesale Customer of Ohio-Edison (ECOE).

ee

~

~ _

m _..

v._____

_ _ m i

. from date of entrance.81/

Following the twelfth i

year of entrance, new members shall be expected to adhere to such allocation methods as are then employed by CAPCO (subject to equal opportunity for waiver

~

or special consideration granted to original CAPCO members which then are in effect).

(d)

New members-joining CAPCO pursuant to this provision of relief shall not be entitled to exercise voting rights until such tire as the system capability of the joining member equais or exceeds the system capability cf the sad icst rember of CAPCO which enjoys voting rights. 85/

5.

Applicants shall sell maintenance power to requesting entities in the CCCT upon terms and conditions no less favorable than those Applicants make available:

(l' pursuant to the CAPCO agreements or pursuantto ccch other either to bilateral con-tract; or (2) to non-Applicant entities curside the CCCT.

6.

Applicants shall sell emergency p;wer to requesting entities in the CCCT upon terms and conditions no less favorable than these Applicants make available:

(1) to the CAPCO agreements or pursuantto cach other either pursuant to non-Applicant entities outside the CCCT.to bilateral contract; or (2) 84 /

The selection of the 12-year period r eflects our determination that an adjustment period is necessary since the P/N formula has a recognized effect of discriminating against small systems

,nd forcing them to forego economies of scale in generation it order to avoi-d carrying excessive levels of al.:o fcund that P/N is not entirel reserves.

We 3 irrational as a method 3

of reserve allocation.

We have obscrved that Applicants them-se:ves provided adjustmedt periods and' waivers to integrate c;rtain Applicants into the CAPCO reserve requirement program.

The 12-year period should permit new entrants discrimination but to accommodate an' adjust to avoid initial system over some reasonable period of time, to the CAPCO entrants will be acquiring ownership shares presumably new and entitlements during the 12-year period so that adcarse consequences of applying the P/N formula will be mitigated.

T 8j/

Our objective is to prevent impediments to the ope;ation and development of an areawide power pool through the inabilit-planning commitments.of lesser entities to respond timely or to make necessa While we grant new member entities the opportunity to participate in CAPCO it is not our intent to relieve joining entities of responsibilities and obligations necessary to the successful operation of the pool.

of obligations associated with CAPCO membership w For those i

vided for access _ to bulk power service options which will further their ability ta survive and offer competition in the CCCT

j.

i l

t 7.

Applicants shall sell economy energy to requesting entities in the CCCT, when available, on terms and conditions no less favorable than those available:

(1) to each other either pursuant to the CAPCO agreements or pursuant to bilateral contr&ct; or (2) to non-Applicant entities outside the CCCT.

8.

Applicants shall share reserves with any interconnected generation entity in the CCCT upon request.

The requesting entity I

shall have the option of sharing reserves on an equal percentage basis or by use of the CAPCO P/N allocation formula or on any other mutually agreeable basis.

9.

(c) Applicants shall =cke available to entities in the CCCT access to the Davis-Besse 1, 2, and 3 and the Perry

'_ and 2 nuclear units hnd any other nuclear units for which Applicants or any of the'm, shall apply for a construction permit or operating license during the next 25 years.

Such the option of the requesting entity, shall be on access, at in ownership share, or unit participation or contractual pre-purchcse of power basis.86/

Each recuesting entity (or collective roup of entities) may oEEnin up to 10% of the capacity of the

avis-Besse and Perry Units and 20t of future units (subject o the 25-year limitation) except that once any entity or sntities have contracted for allocations totaling 10% or 201, respectively, no further participation in any given units need I

te offered.

(b)

Commitments for the Davis-Besse and Perry Units i

rust be made by requesting entities within two years after this decision becomes final.

Commit,ments for future units must be

ade within two years after a construction permit application is filed with respect to such a unit (subject to the 25-year

~ imitation) or within two years after the receipt by a requesting

.intity of detailed written notice of Applicants' plans to

onstruct the unit, whichever is earlier; provided, however, that the time for making the commitment" SHAT 1 not expire until at least a

three months af ter the filing of the application for a construction germit.

Where an Applicant seeks to operate a nuclear plant ~with respect to which it did not have an interest at the time of the filing of the application for the construction permit, the time periods for commitments shall be the same except that reference i

should be to the operating license, not the construction permit.

7

--36/

Requesting entities' election as to the type of access may be affected.by provisions of state law relating to

" dual ownership of generation facilities by. municipalities and investor-owned utilities.

Such laws may change'during the period of applicability of these conditions.

Accordingly, we allow requesting entities to be guided'by relevant' legal-and financial considerations (including Commission regulations on nuclear power plant ownership) in fashioning their requests.

i w

w e

J s__.._.__,.

1 10.

Applicants shall sell wholesale power to any requesting entity in the CCCT, in an,ounts needed to meet all or part of such entity's requirements.

The choice as to whether the agree-ment should cover all or part of the entity's requirements should be made by the entity, not the Applicant or-Applicants.

11.

These conditions are intended as minimum conditions and do not precitide Applicants from offering additional wholesale power or coordination services to entities within or without the CCCT.

However, Applicants shall not deny wholesale. power or coordination services required by these conditions to non-Applican: entities in the CCCT based upon prior ccmmitments arrived at in the CAFC0 ::cmorandum of Understanding or imple-t menting agreements.

Such denial shall be regarded as incon-sistent with the purpose and intent of these conditions.

The above condit;.is are to be implemented in a i

manner cc..ristent with the provisions of the Federal Power Act 8

and all r: :es, charges or practices in connection therewith are to 're subject to the approval of regulatory agencies having jurisdic: cr over them.

1 h

1

(

g* wm 4

.e

4 APPENDIX F

e

.s J aj,C I N. V

• OI

.. !.! ! '

• 4, I ~~ I ')i 3 Clas.7 f I C. ! O '.; *.

j

'* 2 I

{ \\ U 'j I l

M.f; n.

i

.; i.

e

.v m.

8 0 box 5000 e CLEVELAND. Omc 44101 m TELE *wCNE 62151 622 5400 e ILLUMlNATING BLOG e $$ PUBLIC sOUAAE Serving The Best location in the Nation September 18, 1980 Federal Energy Regulatoi? Com=ission S25 Capital Street, N.I.

Wa shington, D.C.

20426 Attention Kenneth F. Plu=b, Secretary Gentlemen:

On behalf of each of the following listed Co=panies, we hereby trans=it for filing under Section 205 cf the Federal Power Act twelve (12) copies of the CAPCO 3asic Operati g Agreece:: as amended September 1, 1980 (the " revised Agree =ent") to replace without interruption the CA?CO 3asic Operating Agree-ment dated as of January 1, 1975, as amended (the " Agreement"), which is on file with the Cc:=issicc and which is ide:tified by the rate schedule. nu bers show: for each listed Cs=pacy.

Cecea=v FIRC Rate Schedule Nc=ber The Cleveland Electric Illu=i=ating Co=pany 13 Duqueste Light Cc=pany 14 Chio Edison Co:pany 120 Pen =sylvania Power Cc=pany 29 The Toledo Edison Co=pany 26 Please return one (1) time-stamped copy of the filing documents to each of the c=dersigned.

The documents accompanying this letter include:

l.

The CAPCO Basic Operating Agreement as amended September 1, 1980.

2.

Cost support data for each of the Co=panies for the rates specified in the revised Agreement.

3.

Three (3) copies of a form of Notice suitable for publication in the Federal Rerister, in accordance with Secticn 35.8 of the Commission's Regulations.

4 A check covering the required filing fee.

The signed copies of the revised Agreement evidence the agreement cf the Parties, and all of the Parties to the CAPCO 3asic Operattng Agreement have approved this filing.

e e

1 Feders'. Energy Regu'ator/ Co==issic:

Page 2 Facilities over which services will be provided under the revised Agreement have been provided for pursuant to de provisions of the CAPCO Trans=ission Facilities Agreement among the Parties, dated as of September 14, 1967, which is on file with the Consnission and is identified by the rate schedule numbers shown for each listed Company.

Company FIRC Rate Schedule Number The Cleveland Electric Illuminating Company.

8B Duquesne Light Company 123 Chio Edison Co=pany 963 Pennsylvania Power Cocpany 223 The Toledo Edison Company 213 The Parties to the CAPCO Basic Operating Agreement respectfully request that the Commission waive any requirements not already complied with under the Com-mission's Regulations and permit the revised Agree =ent to become effective as of September 1, 1980.

A check in the amount of $500 is enclosed to cover the filing fee of $100 for i

each of the Parties pursuant to Section 36 of the Coc=ission's Regulations.

The revised Agreement amends the CAPCO Basic Operating Agreement dated as of January 1, 1975 by addition, substitution and deletion in the following re-spects without in any way changing or modifying the-Appendices to Schedule E of the Agree =ent.

Article 1, entitled Purpose of Agreement, is amended chiefly by deletion of reference to the CAPC0 Basic Generating Capacity Agreement which was to be formulated among the Parties and which the Parties have decided not to for-mulate, and by deletion of reference to the CAPCO Basic Transmission Facilities Agreement.

Article 2, entitled Definitions, is amended by deletion of the definitions for CAPCO Capacity, CAPCO Operating Rescr% CAPCO Operating Reserve Requirement, Committed Capacity, Common Facilities, Daily Operating Capacity, Daily Operat-ing Capacity Requirement, Daily Operating Reserve Requirement, Monthly Actual l

Reserve, Planned Outage, Replacement Capacity and Replacement Energy, and by the addition of the definitions for Operating Capacity and Power.

Article 3, entitled Ouerating Committee, is amended by revising Subsections 3.05 (d), (e) and (f) to direct the CAPCO Operating Committee to establish rules and procedures for determining minimum Operating Reserve for each Party and for scheduling CAPCO Back-Up Power in lieu of determining Daily Operating Reserve requirements for each Party and the scheduling of Replacement Capacity and Replacement Energy.

Article 4, entitled CAPCO Coordinating Office, is amended by deleting reference in Subsection 4.02 (a) to specific types of operating information which the CAPCO Coordinating Office shall have the duty and responsibility to collect, record and disseminate.

Federal E:ergy Regulatory Cc==issie:

Page 3 Article 5, entitled Deeratier Conditie=s, is amended in consequence of a si=i-lar provision described in Article 3 by deleting the Section 5.07 requirements of each Party to provide Operating Reserve deter =ined consistent with the rules and procedures established by the Operating Co==ittee; and by deleting the Sec-tion 5.09 obligation of the Parties to suyply capacity and energy to each other on the mandatory basis presently provided in Article 6.

~

Article 6, entitled Coordinated Deeration and Services, presently consisting of 11 pages, is extensively revised into a new Article 6, entitled Coordinated Maintenance and CAPCO 3ack-Uo Power, consisting of four pages.

The amended Article continues Coorc:=2:ed."ai=tenance responsibilities a=e:g the Parties,

but discontinues unqualified Replacement Capacity and Replace =ent Energy en-titlements and obligations between the Parties in favor of a li=ited and qual-ified mutual back-up system designated as CAPCO Back-Up Power.

CAPCO 3ack-Up Power shall consist of CAPCO Unit Back-Up Power calling for back-up entitle-ments and obligations upon the loss of a CAPCO Unit designated in the revised Agreement, and shall consist of CAPCO System Back-Up Power to provide back-up entitle =ents and obligations upon the outage or outages of other units of the Pa rtie s. yhese entitlements to CAPCO Unit Back-Up Power and CAPCO System Back-Up Power shall be setted, scheduled and billed as CAPCO Back-Up Power, and such power will be nade available from the least cost available p'over.

Article 7, entitled Co==unications, is substantially unchanged, but has been amended to include voice'ce==unication and auto =atic ge=eration control as a means of cec =unication.

Article 8, entitled Service Schedule, is amended by changing the title to Services, by changing the Schedule A title from Replacement Capacity and Replacement Energy to CAPCO Back-Up Power, by changing the Schedule B title from Short Term Power and Energy to Short Term Power, by changing the Sched-ule C title from Interchange Capacity and Energy to Non-Displacement Power, by changing the Schedule D title from Economy Interchange of Operati=g Capac-itI and/or Energy to Econe=y Power, by changing the Schedule I title from Specific Unit Capacity and Energy to U=it Power, by changing the Schedule G title from Pre-Commercial Equivalent Eqgrgy to Emergency Power and by delet-ing Schedule H, entitled System Capacity and Energy, which otherwise would expire December 31, 1980 under the Agreement.

Article 8 is further amended by the additions of Sections 8.02 and 8.03 re-lating to transmission loss, accounting and procedures; and relating to modi-fied transactions resulting in material interference with facilities or opera-tion of the system of any Party, respectively.

Article 9, entitled Executive Co'mmittee, is. substantially unchanged.

Article 10, entitled Ohio Edison System, is substantially unchanged.

Article 11, entitled Interconnection Points and Metering Points, is insubstan-tially amended to change the title to Interconnection Metering, to delete Section 11.01 which defines the term "Intercon=ection Point," and to renumber the remaining sections of the Article.

- - = =

l i,

Federal Energy Regulatory Cc=nissien Page -

Article 12, entitled Records, is unchanged.

Article 13, entitled Statements. Billings. Settlements and Pavments, is un-changed except that Section 13.02 requires tse payment of billing statements on the 15th day of the month in which presented or on the' 15th day following receipt, whichever date is later, in lieu of requiring payment 15 days af ter the date of such statements.

Article 14, entitled Gover== ental Aterovals,,is amended by the addition of Section 14.02 which subjects the revised Agreement to the jurisdiction of gover== ental authorities and which expresses the right of any Party to uni-laterally =ake application to the Federal Energy Regulatory Commission for a change in rates under the Federal Power Act and pursuant to the Co= mission's Rules and Regulations pro =ulgated thereunder.

Article 15, entitled Notices, is amended to require written confirmation of certain oral notices to be given within three working days rather than within three days.

Article 16, entitled Non 'w'aiver, is not amended.

Article 17, entitled Arbitration, is not amended.

~

Article 18, entitled Assign =ent, is not amended.

Article 19, entitled Governing Law, is not amended.

Article 20, entitled Other Arreements, is amended by the substitution of the date of August 31, 1980 for the date February 2,1968, so that the revised Agreement is not to be interpreted as conflicting or interfering with the performance of any agreement between any Party and any system effective prior to August 31, 1980. Article 20 also terminates the following agreements iden-tified by FERC rate schedule numbers shown for each listed Company:

Company FERC Rate Schedule Number (s)

-.-~--

The Cleveland Electric Illuminating Company 2 and 2.1 Duquesne Light Company 10 Ohio Edison Company 42, 42.1, 68, 68.2, 71, 71.1, 71.2 and 71.3 Pennsylvania Power Cocpany 21, 21.1, 21.2 and 21.3 The Toledo Edison Company 3 and 3.2 Article 21, entitled Term of Agreement, is amended by deleting the Section 21.01 expiration date of September 1, 1980 and by substituting language to continue the revised Agreement in effect until such time as all CAPCO Units are retired; and by adding Section 21.02 to permit any Party to withdraw from the revised Agreement by giving one year's advance notice in writing, provided that such withdrawal shall not discontirue Coordinated Maintenance of CAPCO Units, CAPCO Unit Back-Up Power, and CAPCO Cecrdinating Office obli-i gations until such time as all CAPCO Units are retired.

7 k

yederal E:ergy Regulaterf Co==ission Page 5 Article 12, entitled Seearate Indentities, is not amended.

Article 23, entitled Force Majeure, is not a= ended.

Article 24, entitled Eiability, is anended by deleting the Section 24.02 reference to Section 6.12 and by substituting therefor a reference to See-tion 8.03.

Schedule A, entitled Reelacement Ca acity and Reelacement Energy, which p'ro-vided for sandatory replacement capacity and replace =ent energy transactions, co=pensation for such transactions and the banking of entitle =ents and obli-gations resulting from such transactions, is deleted and substituted for by a new Schedule A now entitled CAPCO 3ack-Uc Power.

Settle =ent of all inhalances in the replace =ent capacity and replacement energy accounts under the old Sched-ule A shall be made within 60 days in accordance with Section 5, entitled, "Effect of Ter=ination," of old Schedule A.

The new Schedule is applicable to CAPCO Bact-Up Power transactions among the Parties pursuant to the provisions of Article 6 cf the Agreement, shall ter=inate as to provisions relating to CAPCO Systen Back-Up Power on August 31, 1982 unless extended, and sets forth co=pe=sation charges for CAPCO 3ack-Up Pcwer.

Schedule 3, entitled Short Term Power and Energy, is amended by shortening the title to Short Term Power; by pr'oviding for the reservation of short term power for periods of one er more days in addition to the weeks previously pro-vided; and by revising the co=pensation sections.

Schedule C, entitled Interchance Caeacity and Energy, is amended by changing the ' title to Non-Disclacement Power and by revising the compensation sections.

Schedule 3, entitled Economy Interthange of Ooeratine Canacity and/or Enerry, is amended by shortening the title to Economv Power and by providing for multi-ple party transactions.

Sc5edule I, entitled Seccific Unit Cavacity and Energy, is amended by shorten-ing the title to Unit Power and by deletin

~

tory CAPCO Group allocation proceduref.'~ g references to the previous manda-Schedule I, entitled Out-of-Pocket Costs, is amended by deleting specific ref-l erences to various costs and by substituting a generic listing of operating capacity costs, energy costs, and purchased power costs.

Schedule G, previously entitled Pre-Cemmercial Ecuivalent Enerry, terminated under its own terms on December 31, 1975 and is replaced by a new Schedule G entitled Emerrenev Power. This Schedule requires the Parties to provide emer-gency power in the event of breakdown or other emergencies in or on the systems of other Parties except where a supplying Party cannot deliver emergency power without interposing a hasard upon its operations or without impairing or jeop-ardining its load.

~

?

f Peders'. Energy.;egulat ry 0.:=ission Page 6 I

Correspondence with respect to this filing should be addressed to each of the undersigned.

Very truly yours, hI Y /

o

&ffdf)

/-4/ Q

~

.. i.

Aies R. Edgerly,'Esq.[/ f/

Russell J. Spetr:.no, Esq.

/ Vice President and Generar Counsel Vice President and General Counsel Pennsylvania Pever Co=pany Chio Edison Company One East Washington Street 76 South. Main Street New Castle, Pennsylvania 16103 Akron, Ohio 44308 dd d

k I

,w a

,m c

Willian J. Kerner, Esq.

Walter f.' Wardnnski, I sq.

Senior Corporate Counsel General Attorney J

The Cleveland Electric Duquesne Light Company Ill=inating Company 435 Sixth Avenue P.0, Box 5000 Pittsburgh, Pe=nsylvania 15219 Cleveland, Ohio 44101 A

6-C J

atrl Pi. Sna'rt,1s f Fuller, Henry, Hodge & Snyde 1200 Edison Plaza P.O. Box 2088 Toledo, Ohio 43605

=

.w

\\

e l

4 i

l j

i

= _ - -

i APPENDIX G r

I l

l

i NOV 4 1982

!!r. R. A. liiller Executive Vice President Cleveland Electric Illuninating Conpany Cleveland, Ohio 44101 In the l'atter of Toledo Edison Cor.pany and

~

The Cleveland Electr.ic Illuminating Conpany (Davis Eesse fluclear Power Station, Unit 1) f!RC Docket lio. 50-346A The Cleveland Electric Illuminating Co. et al.,

(Perry !!uclear Power Plant, I! nits 1 and 2)

IRC Docket I:os. 50-440A, 50 441 A

Dear I;r. itiller:

This letter is in reference..to the petition fi Cleveland on January 4,1978, reauesting an en, led by the City cf forcement proceed:r.g, pursuant to 10 C.F.R. Section ?.206 of the Connission's Rules, 2:ainst the Cleveland Electric Illuminating Company (CEI), for allege: violation of the antitrust conditions attached to the licenses and permits of the captioned nuclear units.

In view cf the Federal Energy Regulation Commission's (FERC) acceptance for filing of the revised transnission service tariffs submitted to the FERC by your filings of liay 29, June 22 and Decer.ber 15, 1981 and the termination of FERC Dockets ER78-194 and.ER78-194-001, we are now satis-fied that compliance with the conditions has been obtained.

this matter is closed.

~

Accordingly, T

Sincerely, Orkinal Steed by

. E E Dedon Harold R. Penton, Director Office of !!uclear Reactor Regulation -

cc: 1..

Reuben Goldberg, Esq.

2.

B. L.1tikessell, Dir. Util.

Cleveland Division of Light

- Q_

f h((

and Power

~

e G

A n

ma

-.1

-w A

m

-aen.Aw k

n a

i i

l APPENDIX H I

4 e

i r

. i,, "

r f.

jp%

Einittb OMtn Dtpartment of 3iustitt

. ;s & 0 n

-.?O b 'd Vi /.SHLNC' ION, D.C. 20530 E

h g

e e,a s, AT10agt ? Ct sel ft AL e

FEB 2 81978

..., m, -,,.o k

i f

i Mr. Edson G.

Case

~

Acting DirectoJ-Office of nuclear Reactor Regulation Nuclear Regulatory Co.r.ission 1717 H Street, N.W.

.:Tshington, D.C.

20555 6

Re:

Docket Nos.

3-346A, 440A, 441A, 500A and 4

-" 5 01A, Reques_"by City of Cleveland for Order to Show Caur'

Dear Mr. Case:

t.

[

By letters' dated.anuary 4 and February

~3, 1978, the

[.

City of Cleveland' rec _2 sted f. hat the Nuclear Regulatory l

Commission commence pr:ceedings pursuant to 10 C.F.R. 5 2.202 to require the Cleveland Electric Illuminating Company to comply with the 1.j. cense conditions attached to-E the operating license for Davis-Besse Nuclear Power Station Unit 1 and the constr : tion permits issued'for Davis-Besse p.

Nuclear Power Statio. Units 2 and 3 and Perry Plant Units y

1 and 2.

The Depart tnt of Justice hereby advises that v

1%

it supports the city -f Cleveland's request.

W t%-

On January 6, 1977, an Atomic Safety and ~ icensing k_

Board

(" Licensing Boa r-4 ")

issued its initial decision in 4'ib -

the above-cited dockets.

The Licensing Board found that...

hdIf

. issuance of uncondit'_h e f1'Icenses for the Davis-Besse. :[

E-pp

'and Ferry nuclear power plants would create 'and maintain'"

c-2/ ' '

a situation inconsistent with the ant-itrust laws.

Accord-ingly, that Do'ard' ordered that ten conditions be ' attached t/ -' -

to the Davis-Besse and Perrv licenses to alleviate that h.D situation.

Since the date 'of'the initial decision, those jy:, -

conditions have attached to the operating lice.;se for 'b Davis-Besse Unit 1 and the construction permit for Perry,

= ',

Nuclear Power Plant Units 1 and 2.

@F-t.t On January 27, 1978, the Cleveland Electric Illumi-

'T nating Company ("CEI") filed a transmission service tariff p'

with the Federal Energy Regulatory Commission which

(*

- L

$n,or4f. 'V' l

• I " ? -

E

h.,

' ppk E

~

($$)

m

~, ~

z 9

-)

mW _.

2--_-

Q-___--

42

Q- __

-..-q

purports to implement Condition 3 ordered by the Licensing Ii The City of Cleveland has objected to various terms Board.

of that tariff, claiming that they are inconsistent with the After review of the subject, tariff,

!?RC license conditions.

~

the Department believes the objections of the City to be correct.

For example, the provision which cancels the tariff even if that decision upon a final decision of the Commission, does not overturn Condition 3, would relieve CEI of its obli-gation to wheel despite the existence of such a requirement in

~

Furthermore, the tariff provision which the subject licenses.

to wheel only if it does not interfere with its obliges CEI other CAPCO transmission obligations directly conflicts with 4

Condition 3 which requir,es CEI to reduce its CAPCO transmis-4 J'1 sions by five percent prior to reducing transmission for non-CAPCO. entities.

I O.,

\\

t'he Department of Justice suppr..-ts the City k

Accordingly, of Cleveland's request that this Co:=nission coic.ence proces. ings S 2.202 to require CEI to com,ly with the t

pursuant to 10 C.F.R.

outstanding license conditions.~

4ncerely

urs, h)u r

h) s o

H. Shenefield Assis ant Attorney General Antitrust Division tl o%.

Counsel of Record j

cc:

vack M.

Schulman

,( -

?:n

N teL

• • • • h i

g

~

l I

i

~

A i

l j

y be er 9;

4 9

N h

APPENDIX I a

l t

1

l

gh Elmttb s:atts s3:partment of Justitt 3 ws" 'pj W.SHINGTON, D.C. 20530 ser

- n -.n - e. u.. m Aedit a e gm WWCao 1'O AUg 1919 Mr. Barold Denton Director Office of Nuclear Reactor Regulation Nuclear Regulatory Commission 1717 B Street, N.W.

Washington, D.C.

20555

Dear Mr. Denton:

The Department of Justice requests the Nuclear Regula-tory Commiss ion ("NRC") to institute proceedings pursuant-to section 234 of the Atomic Energy Act (42 U.S.C. S 2282) and

.section 2.205 of the Nuclear Regulatory Commission Rules of Practice (10 C.F.R.

S 2.205) to imoose a civil-The Cleveland Electric Illuminatin's Company '(I.oenaltv on

~

CEP) for violating the license conditions attached to the operating license for Davis-Sesse Nuclear Power Station Unit 1 and the construction permits issued for Ferry Plants Units 1 and 2.

The specific basis for our request is that CEI is, and has been, in violation of license condition 3, which requires that Applicants engage in wheeling for n or.- Applicant entities within Applicants ' combined service areas. 1/

On January 6, 1977, 2n"#tomic Saf ety and Licensing Board

(" Licensing Board") issued.its :nitial-Decision in The Toledo Edison Company, et al. (Davis-Besse Nuclear Power Station, Units 1, 2,and 3), Docket Nos. 50-346A, 50-500A, 50-501A, and The Cleveland Electric Illuminatino Company, et al. (Perry Nuclear Power Plants, Units 1 and 2), Docket Nos. 50-440A, 50-441A, 5 N.R.C. 133 (1977)

(" Perry proceeding").

The Licensing Board f ound that the issuance of unconditioned licenses for the five nuclear units which were the subject of that proceeding "would both create and maintain.a situation in-consistent with the antitrust laws and the policies underlying

-those laws."

Id. at 133.

Accordingly,'the Licensing-Board-ordered that ten conditions attach to the requested licenses.

Among those conditiony was' condition 3, which reads:

(_

1/

CEI was che of the applicants for the Davis-Besse coeratino-

~

license.

W r

f* '3T gg. u Q i T " W '. ' '

PD4L m '

S

3.

Applicants shall engage in wheeling for

{

~

and at the recuest of other entities i~n i

the CCCT: 2/

1) of electric energy from delivery points of Applicants to the entity (ies); and, 2) of power generated by or available to the other entity, 'as a result of its ownership or entitlements in generating facilities, to delivery points of Applican'ts designated by the other enti ty.

Such whe,eling services shall be available with respect to any unused capacity on the _

transmission lines of Applicants, the use of which vill not jeopardine Applicants' system.

In the event Applicants must reduce wheeling service.s to other entities due to lack of capaci.ty, such re6uction shall not be. effec-tive until reductions of at least 51 have-been made in transmission capacity allocations to other Applicants in these proceedings and thereafter shall be made in crocortion.to re-ductions imposed upon other ipplicants in this pr oce eding.

Applicants shall make reasonable provisions for disclosed transmission recuirements of other entities in the CCCT in planning future trans-mission either individually or with the CAPCO grouping.

By " disclosed" is meant the giving of reasonable advance notification of future recuire-ments by entities utilizing wheeling services to be made available by Applicants.

(Footnote added)

On Jcnuary 14, 197?}<hyplicants moved to stay impositio:

of the license conditions pending _ appeal. The motion to stay-was denied by the Li, censing Board on February 3, 1977, and by.

the Atomic Safety.7 an.6 Licensing Appeal Board on March 23, 1977.

e 2/

Within the context of the NRC proceeding'the'CCCT referred-to the Combined CAPCO Companies Territories.

es e

k e

On Aprtl 22, 1977, tne operating license for Davis-Eesse Unit I was issued vitr the antitrust conditions attached.

On F.ay 2, 1977, the construction permit for the Ferry Nuclear Power Plants, Units 1 and 2, was issued with the antitrust conditions attached.

On January 6, 1978, CEI filed a transmission tariff with the Federal Energy Regulatory Commission. On June 28, 1978, after a request by the City of Cleveland that was supported by the Department, the NRC issued.a Notice of Violation to CEI statinc that "at least as of CEI's sub-mittal of the January 23, 1978, transmission schedule to the Federal Energy _ Regulatory Commission ("FERC"), a continu-ing refusal to wheel in accordance with mh e license con-

~

ditions began to occur."

The Notice of Violation cited

~

five ccnditions contained in CEI's filed tariff which ind;.idually and collect vely violated license conditicr 2, and nich amounted to 2 refusal to wheel. 3/

Cn April 27, 1 9 7 _:, a FERC Adminis trattve Law Judge ("ALJ") issued an Ini: al Decision which f ound that the CEI transmission tar;:f filed January 27, 1978, was " unjust, unreasonable and undu'y discriminatory" (Initial Decision at 56), and ordered CEI o file the revised tariff described in the Initial Deci ion. The ALJ specifically declined to rule on whether "CE: is in ccmpliance wi th the NRC license conditions or the

.titrust laws of this country," beccuse "[t} he NRC and other duly constitued bodies will be the judges of that."

(Init tal Decision at 6). 4/

On June 25, 1979 the SRC

_3/

Cne conditions described bv the NRC Staff in Appendix A tc the Notice of, Viola tion were:

1) agreeing to provide wheeling services only until the date of the final dec: r ion of the NRC in the Perry proceeding; 2) providing tha CEI is the sole judge as to whether it has the capa-

cit, to make available wheeling services; 3) conditioning the neeling services in a manner which allows CEI to pree pt unused transmission cipTcity; 4) requiring that the atnimum wheeling transaction last for a period of no.

less :.an 12 months; and 5) proposing wheeling services boon :ne condition th'at :CEI file separate supplemental wreeling schedules for each wheeling transaction.

I 4/

The tariff required by FERC does not bring CEI into compliance with the NRC license conditions.

CEI was not required to reduce transmission service to the other Applicant companies prior to reducing such service tc non-Applicant entities and was not required to consider i

disclosed transmission needs of non-Applicant entities in its future planning.

l O

F

issued an Order P.cdifyin: Antitrust License Condition So. 3 oY Davis-Besse Unit 1, L3 cense No. NPF-3 and' Perry Units 1 and 2,

C ? ? ?.- 1 4 E, CPPE-149 ("Crder").

The Order amends CEI's licenses and construction permits to require CEI to file with the FERC within 25 days of the Order the transmission tariff ordered by the FERC ALJ.

In addition, CEI is recuired to file with the FERC other specified amendments to its transmission schedule which will bring CEI into compliance with license condition

3. 5/

On September 15, 1978, subsequent to the issuance by the NRC of the Notice of Violation and while the January 27, 1978 tariff-was pendi.ng at the FERC, CEI sub-mitted to the 'N;RC staf f a second proposed transmission

~

schedule (" september 15, 1978 schedule"), but this pr.cposal did little to undo tne anticompetitive restraints that tne Licensing Ecard had ordered CEI to remove.

While the September 15, 197E schedule'which CEI submitted to the NRC staff for acoroval cured some of the defects found in the January 27, 1978' tariff, it contained new provisions which

~~

violated license condition 3:

(1) it limited wheeling ser-vices to the estimated native peak demand of the City's system unless otherwise agreed, thereby allowing CEI to control the City's load growth since the estimate of the City's native peal demand must be agreed upon by the City and CEI; (2) it prcvided that wheeling service shall be at 138 kv or above; (3) it provided that the wheeling schedule terminates if a final decision-in the Perrv pro-ceeding alters 1.icense' condition 3, whether or not that alteration is significant; and (4) it provided that nothing in the schedule sr.culd be construed as requiring CEI to enlarge its facilities to wheel, despite the fact that license condition 3 specifically requires CEI to make reasonable provision for disclosed requirements of other entities in planning f uture transmission capacity.

To our knowledge thir prcposed tarif f was not filed with FERC.

.~_

~

Section 234 of the Atomic Energy Act, 42 U.S~.C.

5 2282, expressly authorizes the NRC to impose civil penalties on any person who violates any license condition imposed by the KRC.:

Prior to the 1969 enactment of section l

234, the NRC was authorized only to revoke or modify l

l 5/

Within 20 days of the Order, CEI may request a hearing with respect to all or any part of the license amendments.

A request for'a hearing will not stay the ef f ectiveness of the Order.

(Order at 7)

M

~

4 -

m

licenses in the event cf a violation cf license cen-ditionsv See section 186 of the Atomic Energy Act, 4 2 U.S.C. 5 2236.

The legislative-history indicates that section 234 was enacted in order to permit the NRC

. to impose penalties less drastic than revocation or modification in the event of a violation of a license condition.

Congress believed that furnishing the NRC with a broader range of. powers to deal with persons wno violate license conditions would enhance compliance with license conditions.

See 1969'U.S. Code Cong. and Adm. News at 1616. 6/

The imposition of civil penalties on CEI is com-pelled by CEI"s longstanding and willf ul refusal to abide by the conditions to which its licenses to construct l

and operate nuclear power plants are subject.

While the Depar ren supports the Orde r recently issued by the NRC which w;11 bring CEI into compliance with license con-dition 3.

additional action is necessary because of CE:'s intentic..a1 non-compliance with that license conditicn.

l In the l' months since the issuance of the Initial Decision in Perry CEI has failed to bring itself into compliance witn tne antitrust license conditions imposed by the Licensir-Board.

It was a full twelve months af ter the issuance of the Initial Decision bef ore CEI filed its initial

tariff, nich, although purporting to comply with license conditi - 3, contained numerous provisions which were in obvious conflict with both the letter and spirit of the license.

Not only did this tariff recuire the NRC tc issue a Notice of Violation, but it was also held by a FERC ALJ to be " unjust, unreasonable and unduly discriminatory."

Twenty c:nths af ter the issuance of the Initial Decision, CEI filed the September 15, 1978 sche 6ule with the NRC in response to the Notice of Violation,.but this schedule still contair.ed numerous provisions which conflic'ted with tne antitru r-license conditions imposed by the Licensing Board.

6/

The _ :gislative history of section 234 discusses that

~

section i-terms of. health and safety violations.

This may be attributable: to the f act that when section 234 was enacted only commercial f acilities for which a finding of

" practical value" had been made were subject to prelicensing antitrust review.

Since all nuclear plants at that time had been licensed as developmental, not' commercial, facilities, no antitrust reviews had taken. place prior to the enactment of section 234.

It is the Department's view that section 234 applies ecually to antitrust violations as it does to health and saf ety violations.

e 6 '

e

~

The J anuary 27, 1975 and September 15, 1976 tariffs a:e so clearly violative.cf license condition 3 that CEI must be considered as having intentionally engaged in activity designed to avoid cceplying with.the license ' con-diticis.

In so doing, CEI should be held to have perpetua ed a s itua tion which the Licensing Board f ound to be "incon-sistent with the antitrust laws and the policies underlying those laws."

Perrv proceedine, 5 N.R.C.

at 133.

Because of CEI's flagr ant disobedience, it is incumbent upon the Commission to impose the maximum civil penalty pe.rmitted by section 234 of the Atomic Energy Act.

By-imposing the maximum civil penalty, the NRC will encourage CEI to desist from flaunting the authority of the NRC to enforce license conditions and will enhance the integrity of its entire licensing progr am by serving notice that future antitrust violations wil.1 not be tolerated.

The Department proposes that a civil ; nalty of S1.2 tillion be imposed on CEI.

This civil peni ty is cal-,

7 culated by multiplying 525,000, the maximum penaa :y permitted f or all violations occurring within a 30-day period by 16, which is the number of months of continuous violatio n since the Notice of Violation was issued, 7/ for each of the three licenses to which the antitrust license conditions attached.

A penalty of this magnitude is justified by CEI's continuing, willful violation of the license conditions and its direct restraint on competition that has resulted by ' virtue of that violation.

The civil penalty recuested by the Dept

-t is of the same order of magnitude as the maximum fine yhich Conc.ress has found a.c.e.rc.eriate for violation of sections 1 and 2 of the.Sherman Act (15 U.S.C.

SS 1 and 2). 8/

Finally, the Department urges that the NRC recommend to FERC and other appropriate agencies that CEI not be allowed 1/

The Corrission may also determine that it is appropriate to i= pose a f ur ther civil penalty on CEI for failing to file a tarif f consistent w'ith-the license conditions within a permits were issued.

~

operating license and construction reasonable period after the 8/

In 1976 Congrest increased the penalties for violation of-the Sherman Act f rom a misdemeanor. to a felony and increased the fine to S1,000,000 for a corporation.

Antitrust Proce-dures and Penalties Act, Public Law 93-528, 88 Stat. 1706, 15 U.S.C.

51 (1976).

I s

e e

k

te past through tc i ts r c.e c ay e rs the civil.enalties

,~ecP here.

If CEI's :

ne"-c-e,

.ch o a r e '.wh ollv 'i nn oce nt, a r,e r ec e : r ec to ansere t.nese c:v 2 penastaes, tne ce-terrent effect of imposing civil cenalties will be creat1v c =inishea..

,In conclusion, the Department believes that in order for the SRC's antitrust licensing program to maintain its effectiveness in preventing utilities from using nuclear licenses in an antico=petitive manner, CEI, and other licensees, must be made to understand that willful violations of antitrust license conditions will not be tolerated, and that civil pehalties imposed bv the NRC cannot be considered' as just a minor cost of doing business.

5 :. nc e r e lv,'G

• ^

r

x. '\\ r /

0 LCAL RN l

V

/ John E.

Shenefield Ass'ista6t Attornev General

'9.nti tru st Div'i sion cc:

Service L :: in This Proceeding Except f c r Members of the NRC Safet.y an: _ c e n s,,i n c. Ac.ceal Board e

• *se g* %

e f

e e

I ee 1

-1 em

I APPENDIX J i

v t

2 SEPT 51980 :

Docket Hos. 50-345A

-?,,n, o

vn 50-441A The P.cnorable Sanford I'.. Litva:h Assistar.t Atte ney General Antitrust Division U. S. Departuent of Justice Washington, DC 20530 P.s :

The Cleveland Electric Illuminating Compan.y, et al.

(Davis-Lesse I;uclear Fower Station, Unit 1)

SRC Doche: No. 53-345A; (Ferry Mu:le:r F0wer Fiant, Units 1 and 2)

NEC Do:het Sos. EC liDA and 50-441 A)

Dear l'r. Litveci:

At the recuest of the Comission I am providing this interim response to 10, 1975 and your subsecuent ietter of lir. Shenefield's letter of Aucest requesting the imposition of a civil penalty on the Cleveland June 20, 1920 Electric Illuminating Company (CEI) for its tileged failure to cc ply uith antitrus license conditica no. 2 that is contained in CEI's licenses and ; emits auth0rizin; the ccr.struction and cperation of the above captioned units.

Af;er a review cf your recuest the SRC Sttff has ' concluded that a civil

-. ~

penalty should not be imposed on CEI. -Tne Office of the General Counsel The Comission has believes that further staff revie.< is re:uired.

split 2-2 on these '6ptions.

Accordingly, the matter will be reconsidered by the Ccmission upon the appointner,t and confirnation of a nevt NF.C chairman, hh Sincerely,

. :.a u. n,- 1 ri '-

L

& A /Pu a

. ~.

- q'pj y,

Millia J. Dircks l

Acting Executive Director for Operations enn

=

6

- - _.,