ML20092N713

Ack Receipt of 840626 Memo Re Meeting W/Representatives of Alabama Power Co.Util 840629 Formal Request for Enforcement Petition Re Alabama Power Co Conduct Encl.Meeting Transcript Requested

ML20092N713
Person / Time
Site:	Farley
Issue date:	07/02/1984
From:	Boskey B, Macguineas B, Macguineas D ALABAMA ELECTRIC COOPERATIVE, INC., VOLPE, BOSKEY & LYONS
To:	Palladino N NRC COMMISSION (OCM)
References
NUDOCS 8407030468
Download: ML20092N713 (14)

Text

f l 2.:. : 1 "1

~

~-

= - - -

• m 3y w--~;-

Se

~

W

.3*

f.

a

,g<p.6",

VO LPE, BOS KEYi AN D lLYON S.

~

~

VJ a

twonto ccurc= ewtoino lw

'sienew stacct.u.wc

, fl, _

l' WAP HINGTON, D. C. 2O OO6

{

7 pp c.sosten voter,see

. x troal 737. esso l

' 3ewustTsosnEy, W

[

a.7, oo.s.1

' : July:2; 1984' (cJoiano m couincas 7

f (b

f sowtN E. MVDDLEsON,25 i A

L

~

A tva'r. snaamam i D0c;gyg.,

d 30 %

- PROD.a unt, g g

(;

earnicia 4.mavc"3 4 -- 3 (o 92g

- DocnTrnas.

~<

MrS Nunzio:J.'~Palladino

.. SER CE NCH 6

CY Chairman-N M

!NuclearjRegulatory Commission edij g \\

'j Washington,,D.C.,;20555

+

cc,

DearIChairman Palladino:

M* ;,

~pagal" Memorandum for Files," dated June 26, 1984, "

Subject:

~

In thisimorning5s mail'we received a copy of your three-7 Meeting-with Representatives'of-Alabama Power Company," which

had been mailed to us on: June 28 by the. Commission.

{L

. Thi's is the1first knowledge we have had of.the apparently.

y ivory l extens'ive _ and well attended' meeting which took place lbetween you 'and representatives.of Alabama-Power Company on TJune 26,n1984. -Naturally,.as counsel to Alabama Electric 1

~

Cooperative we are interested in learning from your Memoran-dum thati such a: meeting 'did take place and' the ' substance of

_7 wiiat was;said.-

Wo. are~, however, :s'omewhat surprised to learn from your Memorandum that such.an extensive meeting with Alabama Power

Company'was held on an y parte basis, without notice to s

JAlabama. Electric ~ Cooperative or its counsel, Land that the meeting wasLpermitted to continue even after, according to whattis: indicated in-your Memorandum, it'was stated by Alabama Power ~ Company rather early in the meeting'that "AEC' informed

' Alabama Power that'AEC is contemplating an enforcement petition ~

Land-may file'a, paper with-NRC this week."

1 LForiyour information, Alabama Electric Cooperative did on

' June 29,fl984, file with the Commission a formal request for enforcement,.andimailed' copies of it to Mr. Farley, President of Alabama Power Company, and to Mr. Buettner, one of its

counsel.

At that-time, as indicated above, we were wholly

.' unaware of.the meeting which Alabama Power Company had had Ob

.[

@gg

7

~. _...

~

.s-

k u

' q ; _p f. +,

- *'s k

Ql M

Page Two i

^

LvoLPc; sosKEY AND LYoNS

~*

jwithlyouLon June 26, Land of any representations which Alabama 93 Power: Company _may have made to you.in connection with this

]+ '

Natter.[ A1 copy of the-Alabama Electric Cooperative formal "T

requesti(not~ including the various Tabs which are. attached to hthelcopies1 filed!on. June 29), together with a copy of our j

letter of transmittal, t is; enclosed herewith for your informa-Ltionb EAstyou1willlsoe-from the Alabama ~ Electric' Cooperative l

y l request for-' enforcement, the manner in which Alabama Power-.

I

~

cCompany!has been conducting itself since the date on which j

'the11icense? conditions-became final has led Alabama Electric I

Cooperative to' conclude that-prompt enforcement action should j

4

-be sought from, iand. taken by,~ the Commission at this time.

LYour* Memorandum'does.notrindicate that.in the meeting of -

[

LJune126,ul984,cAlabama Power ~ Company' representatives even j

alludedito. most of 'the specific-items which form.the. basis ue

~of' Alabama. Electric Cooperative's request for enforcement.

j

. ur In the event that anything of substance.was-said at the i

1 meeting.on. June 126, 1984, which~is'not reflected in your

'I Memorandum _of1that date, we request that-such be communicated 2

4 If~a7 ranscript of the meeting was made or is being_

l t

.to'us..

7made, we:likewise request that-that be-furnished to us.

i n,

t We are furnishing copies of this' letter to those persons.

[

ftofwhom your Memorandum shows you.sent. copies.of your Memo-i frandum1(other than Commissioner Gilinsky whose term has mean-l while expired), and also to Messrs. Farley and Buettner.

i On page 1 of your Memorandum, at the top of paragraph 2,

-it isistated that:"At the meeting, Alabama. Power representa-They met pre-

[

itives told me the following informations:

-viously iniseparate' meetings with Commissioners Asselstine and Bernthal and with Mr.'Dircks to discuss the points

}

presented' to. me. "' We hereby request that we be. furnished with -

Jcopies of any notes or memoranda or transcripts which have n,.

beenimade, or are being'made, of any.of those meetings.

1 qincerely yoyrs, k/A%TT Dt%

a Bennett_Boskey

/WAe, x--ad

' 1

" Enclosures ar MacGuineas

-cc:. Commissioner Roberts j

Commissioner Asselstine f

Commissioner Bernthal Herzel H; E. Plaine SECY Docketing & Service (Docket No.s 50-348A, 50-364A)

-Joseph M.-Farley i

Robert"A.. Buettner, Esq.

h

I o

Alabam3 Electric Coop;ritiva. Inc.-

Post o*ce 20s 5D Ancafus 3. A.aca: a 36420 t20$i 222 2571

i =,C)

Q f

June 29, 1984 Mr. Richard C. DeYoung Director Office of Inspection and Enforcement-U.S. Nuclear Regulatory Commission Washington, D.C.

20555

Dear Mr. DeYoung:

Alabama Electric Cooperative, Inc. (AEC), pursuant to Section 2.206 of the Commission's Rules of Practice, requests the Director, Office of Inspection and Enforcement, to take appropriate action against Alabama Power Company (APCo) in connection with APCo's licenses for the operation of Farley Nuclear Plant, Units 1 and 2, based on APCo's wi.1-ful and continuing violation of Antitrust License Condition

~

No. 2.

Under the circumstances set forth below, it is submitted that appropriate action should include (1) suspend-ing APCo's licenses to operate Farley Nuclear Plant unless, within the period fixed by you for APCo's response, APCo has discontinued all such violations and has demonstrated that

}

it has brought itself into full compliance with said Condi-tion No. 2; and (2) imposing upon APCo the maximum civil penalty provided by law.

All licenses issued to APCo for the Farley Nuclear Plant, Units 1 and 2, are subject to Antitrust License condi-1 tion No. 2, which provides:

.M "2.

Licensee shall offer to sell to AEC an undivided ownership interest in Units 1 and 2 of the Farley Nuclear Plant.

The percentage of ownership interest to be so offered shall be an amount based on the relative sizes of the respective peak loads of AEC and the Licensee 3

s.1 _ _. _,.s.... c...,

=

y l

l yQ

,lJ;g

n K-

'37 as.

4,_^

a-s-

- {

-PAlabama Electric; Cooperative,,Inc.

Page Two

_ f 5; H.

x s

j'

~,

'in v

r

~

f

(excluding ~ from

the : Licensee's peak load that amount fimposled/by membersLof~AEC upon:the electric system Fof{thelLicensee)loccurring.in~1976. ;The price to'be

, paid?by;AECiforfitsjproportionate share-of Units 11 m~~

and 2,::determinedEin accordance with the. foregoing

_ f( _

iformula,swillibe established by:the; parties through E6'

- j good $ f aith inegotiations '.. The. price.shall be

- sufficient'to< fairly reimburse' Licensee:for the 7

E

proportionate 1 share of its1 total costs relate'd to I*

}[

theiUnits~11and 2~ including, but.not limited to,

^

fall"costsiof.. construction, installation, ownership.

1 (and:: licensing, as of.a date, to.be agreed to by the two:.partiesJ which fairly'accommodateszboth their

^

y*

frespect'ive interests.- The offer'by Licensee to sell:

c

, s R Lan undivided ownership interest in Units 1 and 2 may

x.:

l be : conditioned,; a't; Licensee 's option,. on the agree--

Y

• Lmentiby AEC :to1: waive' a'ny ' right.of partition of the t

Farley/ plant'and to) avoid interference in-the day-to-

day operation. of the f plant. "- [.1))

- i Thelintentl of? this ' License Condition was: explicated at y ~

~ his condition has Ilength liit 'AIAB-646, 13 NRC ' ati1102-1108.

T (beenpfinalland bindingLon: APCo since August' 10, 1981.~ How-4 1 fever [inth'enearlyfthree!yearssince.thatdate, it' is ' the

<submissionL of(AEC that ; APCo ha's ;made no (good faith offort

~

g'

'whatsoeverctoycomply with this License, Condition; that.APCo nJ Sinst'ead lhas ' refused.;to 'n_egotiate afreasonable ~ ownership.

g",

,f Lagreementlwith3 AEC; andT to Lthe c extent APCo has been' willing -

E o idiscus'sithe matteriat fall, J APCoLhas proposed highly-L

^

t iirration~al, bizarre and unreasonable. terms.and. conditions-

~

1:with respectito[AEC's ownership! rights. such that APCo's

~

position (clearly. evidences bad: falth and :a ; deliberate v

y 1

, s 4

2,V ' 1Th'isiLicensei conditionjwas imposed, and its lawfulness.

4

... i

'.and1 appropriateness lwas'-upheld-and affirmed-in extensivenlit-3 In i he Matter of' Alabama Power' ComeanY, AIAB-64 6, Ligation..

A -,

t il3 NRC11027, () 981)',. Commission review denied,' 14'NRC-795.

((1981), raffirmed Alabama ' Power Co.. v. Nucle' r Regulatorv a

u

' : Com ' n,1692 F. 2d 1362 -(llth Cir. - 1982 )',

rehearing and rehear-

' g enlbanc? denied 1698 F.2d'1238 (1983), certiorari denied

U.S.-

104 S.Ct.

72-- (1983 ).

x. (

, N i

e

...5 x

y

v..

~

.89 n *h y r h-

=

c

}

Ahabama(Electric; Cooperative,:Inc.

Page Three

,y

~

[p'racticeland' course of conduct of refusing to comply with LthefLicense Condition required by this' Commission.2/

E9 lOn1JulyJ17, 1981, AEC by letter requested APCo to ef6rnish-detailedJ cost information on the Farley Units to

. enable; meaningful discussions.to get1under way.

On July 23, (1981,.APCo1by letter refused to initiate discussions and, by

.its,' silence.on:the subject, refused to. furnish the requested cost data. :After a renewed request-by AEC in' October, 1981, APCo responded that-the cost _ data would be forwarded later; fisplicit in this response was the incredible claim that APCo did'notithen have cost data for its nuclear units currently lavailable.~ LAPCo also took'the position'that AEC would have

~.to pay replacement cost to APCo for the amount of capacity represented by AEC's share'of the nuclear units.

Some data was furnished by-APCo in November 1981; however, it

-required a number of clarifications and explanation due to its.barebones< nature.: This was requested by letter from counsel-for AEC to. counsel for APCo, January 6,.1982.

Av partial' response.was. received from APCo in February 1982.

i1 The. foot-dragging and bad faith tenor of APCo's approach to discussions regarding its, compliance with its License-Condition may'be gleaned from passages from its letter-of May 6,-1982,. written at the. time that AEC was still trying-to get reasonably detailed cost data'from the Company:

"As you=are aware,'the sale of plant as required-by this license condition will result in the need to replace;the capacity sold with capacity costing in. the thousands of dollars per kilowatit.

This

-additional cost. must then be recovered'in our rates to our customers'.

We.would be interested in getting 12/~

APCo's numerous requests for stay of the effectiveness cf this' ownership' access License Condition were denied suc-cessively by'the Commission (14 NRC 795, October 22, 1981),

byithe Eleventh' Circuit (orders issued January 20, 1982, and March 4,fl983),'and by. Justice Pcwell acting as Circuit Justice (order issued April 6, 1983).

Thus, at all times since August 10, 1981, APCo has had an affirmative obligation to comply with Antitrust License Condition No. 2.

ygpq -

x<'

,3.oc Ma ma Electric Cooperative, Inc.

Page Four

+

.i your;. views as to'how the price of the capacity to be 7

_..s D TD

< sold 4 to AEC~should.be' established in view of the additional ~ cost: burden which'the sale will. impose:

on' customers.

"2.

1We would also be interested in your. views

_ as-tolprovisionsito_be included in any; agreement for

. sale--dealing with how2such' sale-could be reversed fat-la.later:date-should Alabama. Power's appeal of the idecisionLrequiring imposition of the condition be 1

> ^

successful."

• =

"As you are~ aware, the Appeal Board order penalizes gg7

- the retail and otheriwholesale consumers of Alabama

~PowerLby: accepting'AEC's~ argument"and requiring a

~ '

sale:which would_ allocate part of the-Farley. Plant

.to;AEC's, customers which1the-plant was not designed-L-

c Lto serve.

This was done-not?only;by_ including in ithe calculation loads offAEC which were never intended to be served by'.the Farley. Plant,.i.e.,

the L ' onl: system' customers, but also, by-allocating-

~

ithe plant'-onL the: basis :of the. non-coincident peak

~

• ~

de

.loadEof'AEC rather~than the coincident-peak demand of1 Alabama Power's' customers."

hx

~, ;

EAEC's responseLdated June 4,-1982 to;these alleged APCo concerns constitutes TAB Aihereto.

S

'Some? cost-datalwashfurnishedjby<APCo:in June,and: July-lof S1982,::and 'some; time was required _to attempt ' to -resolve.

L, 4 inconsistencies _and~ discrepancies:among thefdata.

-A. meeting; o n M a y 1 2 4,,: 1 9 8'3, zwas-scheduled by-telephone. 'On April.29,

~

~

m y

1983,:-prior.to-that meeting,TAPCo submitted an-outline"of-

conditionsiof.fsale. ;APCo's. letter ~ expressed inter:alialthe

[

J.

~ ~,following positionso 1

)

i t

"As1you:are' aware,1APCO-continues to dis-Jagree,with the1 necessity for anyl license?condi-

'tions to be imposed,-andlwith the; propriety of

~ '

the1conditionsLimposed, particularly the one i

trequiringJforced sale of;the-plant to AEC."~

l

• =

"Thisnoutlinetis_ subject.to revision during g

~

negotiations to reflect mattersinot hereto-L'

' fore' recognized as. problems associated with-

the' proposed joint. ownership arrangement."

p^

'" Fees for. operating and maintaining the plant,

-shall bel $1.0 million per year, escalated each f

7 b

dj

+

w.

ik[ s.

.I ~ Q f

c 4

i

^'

- LAlabamaTEle'ctric7 Cooperative, Inc.

Page Five

+

[ ',

x

-^

I f1 i

Jyear based on'an; acceptable' Government'index.

^ ~ ~

~ 1Ac fee; shall also :be assessed equal 1 to '15% of c

j g AEC's pro rata shareLof_all.. direct and indirect 7.

Kn

,f E expenditures associated;with the. making of any

["1

" ycapital-; improvements.

A. fee. equal ~to; ten per-

.centn(10%) of AEC's pro rata. share:of'theEannual

.~fuellcosts'shall also-be' assessed.

These~ fees 1

have'been"setion'the assumption that APCO will

- y? -

have'no:responsibilityLto AEC for any loss associated withithe' plant, arising out of: opera-mc r X

+ -

-.tions,fmaintenance',.makingiof1 improvements or e

J,..

nuclearJfuel acquisition' activities."

c'-

-s i

" Provision ~will4 be included to exclude liability on(the.part of APCO'for losses or costs to AEC

.for conduct-of APCO, itsLagents, contractors or Lemployees_even-thoughcsuch conduct is alleged tor determined to be willful, wanton, reckless

^

.or merely negligent."

4

^'

"AEC sh'alllbe'~ responsible for a pro rata share e'

.of' alls fines or penalties of any-nature, under av

-any law or regulation, associated with the

. operation, maintenance or~ decommissioning;of

' the plant, including those' imposed byf NRC, EPA, tother _ federal,_ state'or-local regulatory bodies,.

ior by> federal,-' state or-local courts."

L, L

'"REAishall-guarantee the contingentfliabilities

-of AECLassociated with its ownership interest-Lincthe nuclear plant and.its responsibility for-payment of costs and expensesLunderithe-Operating

-Agreement.".

~

"AEC's obligations,under the Agreement shall Ebe secured byja second mortgage on AEC's n

system.

"We'would' note further that in view of our offer made in~this-letter, we are hereby with-

/

-drawing'our. offer made in 1974 to negotiate the 1

g~

sale of unit _ power to_AEC from the nuclear' plant."

Apart from~other highly unreasonable terms and condi-itions which:APCo has been proposing, it is also clear that APCO's proposal' for pricing AEC's share of the Farley-Units demonstrates'by_itself'APCo's bad faith-and unreasonableness.

Itfwill be recalled'that the license conditions require an p

.h

7 jf['

L Alabama' Electric Coopera tive, Inc.

Page Six t.

s+.

f offer-to. sell at the cost of the plant to be determined by

AEC's (not ' APCo 's) cost of financing.

ALAB-646 specifically rejected a. unit power sale because inter alia it " includes a

. rate of return (profit] on the owner's (APCo's] investment,"

Jthereby depriving AEC of "the benefits of the advantageous financing otherwise available to it for the capital costs attributable to:it (AEC 's ]. share of the plant. "

13 NRC at 1104.

APCo's ' pricing proposals are contained in Exhibit I to the Company's-letter lof April 29, 1983 '[ TAB B], APCo's-data

_m

't.

responses of June 10, 1983-(TAB C], APCo's proposed Purchase And ownership Agreement (April 11,.1984) (TAB E], and APCo's

_ proposed Operating Agreement (June 1, 1984) (TAB F].

AEC's response of June 24, 1983, to some of the objectionable

. aspects:of APCo's June 1983 proposals is attached as TAB D.

In its proposals APCo attempts to extract from AEC an

approximate 100% profit for APCo above APCo's (unverified) book cost.~ From this aspect of-APCo's position,.it is evi-dent that-APCo remains blatantly contemptuous of its obligation to adhere to the terms of the. licenses granted to

'is by this Commission.

APCo's techniques for attempting to

- extract windfall profits in violation of its = license require-

?

ments11nclude:.

(1) attempting to charge AEC partially on the basis of replacement value of the Plant (i.e;,

charging AEC appreciation on a Plant which was depreciating during the period during which APCo

. -has unlawfully denied AEC ownership access);

(2) attempting' to charge a fictitious "incre-mental gross AFUDC" ($393 million for the Plant) which denies AEC its own cost-of-money benefits, which violates the Uniform. System of Accounts, and which would. profit APCo for APCo's continued refusal to grant ownership access for a decade and a half;

-(3)

. attempting to charge an incremontal $70 million for the Plant for " ownership risk" on the irrelevant claim that utilities building nuclear plants _today have higher equity costs than existed at the time the Farley. Units were built;

~

( k:l i

J.

~

V EL

~

c i

lAldbama: Electric Cooperative, Inc.

Page Seven A.

1(4)) attempting to. include an income tax fac -

f

/g

torfof $246 million for

the Plant (based in large

~

y

,partf on ;the " profit-APCo< seeks to make from AEC) l

-4

.without; showing or even claiming-that APCo will.

-actually;sufferfany income tax-payment because of j

L.the sale, Land without' recognition that if any' t

7 adverse income tax effect were to result, it would l

r

.be-solely the_resultcof APCo's management's' i

'g jdeliberate-decision to unlawfully withhold owner -

l Eship access.from AEC and therefore must be borne

'n

^

by APCo: stockholders; t

-(5).

attempts to' collect an-" entitlement fee"

[

^

($170Lmillion above Plant cost) ac an arbitrary

-profit',.contraryLto the license conditions; L

(6) Lattempts'to receive $114 million per Plant for " adverse. financial consequences" to~com-

..pensate-for-alleged depressed; Southern Company

+

stock prices L(without: regard 'to whether these so-i calledf" adverse financial; consequences" were

~i attributabis; to' the financial-community.'s negative 4

l

. opinion-as:to APCo's management, or a variety of l

m

[

.other'possible causes);;

g

'(7) attempts. to recei've ' substantial' profits -

l from AEC over and above APCo's actual' costs' from

(

,the sale of nuclear-fuel rights, and for the

~

t

operation-of the! facility..

i LApart from~such" unreasonable and unwarranted components in its ' pricing proposals, APCo has also proposed a percentage ownership ior1AEC which is' contrary to the formula developed l

~

in AIAB.646 (see 13 NRC at 1107-1108) and which attempts to.

l deprive AEC of 'AEC's fair share of. the Farley Units.

As AEC responded on June'24, 19831[ TAB D]-

t r

i s

" l ~. - We mustifirst' disagree with the ownership percentage (5.95%) suggested by APCo.

The.243.9'MW AEC on-system peak and the.40 MW deduction for in-dustrial ~and Florida load 'were provided by AEC.

C LHowever, we estimate the load contributed by AEC's off-system members to be higher than what you have

.4 s

Alabama Electric Cooperative, Inc.

Page Eight

. utilized.

In any case, it appears that your 184.0 MN estimate is at the delivered level.

If this is true, losses must be added to your estimate to obtain a generation level number consistent with the generation level on-system load.

Further we cannot accept your subtraction of SEPA preference customer demand from the off-system component.

ALAB-646 makes clear that the proper measure is the peak load, or demand, of AEC and off-system members --

not merely the increment of demand furnished by APCo.

As the Board said (13 NRC at 1108)

'ALC suggests instead that the ratio should be pegged to the load of AEC's on-system and off-system members and of the applicant at the time of their respective peak loads.

[ Emphasis in original.]

"We agree with this position of AEC.

Basing the allocation formula on the time of applicant's peak demand skews the result in its favor.

A more equitable division of ownership would result if the shares were to be determined by the respective peak demands of AEC and the applicant occurring during 1976.

The license condition we impose-is based accordingly.'

There is simply no rational basis for APCo to de-duct the SEPA increment from the peak load measure.

" Finally, we note that the Company used 5880.5 MW as the measure of its peak load, July 26, 1976 at 1:00 p.m.

However, this is not consistent with Company representations made elsewhere.

The Company's 1976 Form 1 and rate case historical data for July 1976 indicates that the Company's peak occurred on July 14, 1976 with the hour ending at 4:00 p.m.

The rate case data also indicates a greater contribution by AEC members than the 173.3 MW shown in your June 10, 1983 data.

We also believe that this number does not include losses, but is measured at the delivered level."The Company's computation of AEC's load component is clearly defective as noted above, and the better measure is the 410.9 MW furnished to you in my letter of June 4, 1982.

While the Company has had this measure for over a year it has never taken issue with it.

Even this measure understates the load component AEC is entitled to,

r T..

a Aldbama Elcctric Cooperativo, Int ;.

Page Nine

>~

since it sums AEC's peak and the demands on the off-system members coincident to AEC's peak.

Under the Antitrust License Conditions, AEC is entitled to a measure that sums AEC's peak and the non-coincident peaks of each off-system member.- Thus, the 410.9 MN measure understates AEC's actual load component under the ALAB-646 formula."

Properly computed (based on AEC's and its off-system members '

peak load), AEC's ownership share is 6.7%.

While APCo has subsequently accepted some corrections which would bring its figure above the 5.95% it initially proposed, it has stead-fastly refused to accept the correct 6.7% figure.

Other contract terms insisted upon by APCo which evidence and confirm APCo's bad faith and refusal to comply with its NRC licenses are found in correspondence from APCo, positions stated by APCo at negotiation meetings, and in

-APCo's proposed draft Ownership and Operating Agreements (TABS E and F], which were submitted in response to AEC's proposed Joint Ownership, Operating and Nuclear Fuel Agreement of January 20, 1984 [ TAB G).

Among these A9Co-proposed unconscionable conditions are (a ) ' APCo's insistence that the Rural Electrifi-cation Administration " guarantee" AEC's performance for the life of the agreement.

APCo continues to insist on this even though it has been informed that REA could not agree to such a condition.

Nor has APCo indicated any basis upon which one might con-clude that REA has the statutory authority to take such a position.

Indeed, it must have been apparent to APCo from the beginning that there was not the slightest possibility that REA would ever issue such a guaranty.

Accordingly, it would be difficult to avoid the conclusion that the proposal was advanced not in good faith but for the purpose of forestalling a contractual arrangement of the type required by the license.

Alabana ' Electric Cooperative,.Inc.

Page Ten 7

d (b).

Though APCo insists that AEC pay in advance for all capital and operating costs (even prior ~to the determination of the dollar value of those costs), APCo also demands a second mortgage on AEC's entire electric

~

system, while at the same time APCo refuses to make even the barest commitment to y

operate'the Farley Plant in a reasonable manner.

(c)

Not only has APCo refused to agree in any way to assist in the gaining of necessary regula-tory approvals for AEC's acquisition of its ownership share, but APCo has informed AEC that APCo fully reserves the right to raise objections thereto.

(d)

APCo refuses to accept any responsibility to

~AEC for any gross' negligence or reckless

.misconduc'c by APCo in the operation of the Plant.

At the same time, APCo insists that AEC share payment of ary fines or penalties incurred by APCo as sole operator of the-facility.even to the extent that the APCo conduct resulting in such penalties occurred prior to the time when AEC takes.

title to AEC's share of the Units.

(e)' APCo insists that AEC is. fully liable for' any i

" incremental costs" (whatever that may mean) of ' AEC's ' joint ownership,. and APCo attempts to reserve the right to define solely in its own discretion what such an " incremental cost" is.

i A review of APCo's proposed agreements will demonstrate a_ number of other plainly unreasonable' terms and conditions, i

However, the above examples are sufficient to establish that APCo has not been and is not pursuing' compliance with its NRC license obligations in good faith, and that enforcement

- action by the Commission is promptly required to cure APCo's contemptuous refusal to meet its obligations as an NRC

licensee.

In the absence of enforcement action by. the ccm-mission, there is a high probability that, because of the t

6:

l l

o I

Alabama Electric Cooperative, Inc.

Page Eleven course APCo is pursuing, the Farley Units will serve out their useful operational life before some reasonable agreement can be arrived at with APCo.

Respectfully submitted, ALABAMA ELECTRIC COOPERATIVE, INC.

Brss4/4-1 4eneral Manage,r' N

5 I

d 5

W l

d 3

3 L

[

V

1 VO LP E, B OS K EY' AN D LYO N S l

40460 CthtCA av LOING 9646 *._* S T R C C f. N. W.

WAS=:NGTCN. O C. 20006 sosCPM voLPC. Ja.

5 2 02, 7U 9 5 a 0 eCNNC?TSQS4CY I

CLLis LYCNS COWARO A. C AOC S C AT O. st A40 MacousNCas C OWIN C. MuCO LC SO N.M June 29, 1984 CVA F. S M C A M A*e P ATRl".l A A. M Af C R 1

l l

Mr. Richard C. DeYoung Director N

office of Inspection and l

Enforcement U.S. Nuclear Regulatory Comission Washington, D.C.

20555 l

l

Dear Mr. DeYoung:

1 As counsel for Alabama Electric Cooperative, Inc., we are filing herewith the Cooperative's request that you take l

appropriate action against Alabama Power Company in connec-tion with Alabama Power company's licenses for the operation of the Farley Nuclear Plant, Units 1 and 2.

I If there is any additional information which you would regard as helpful in connection'with this matter, please let us know and it will be promptly furnished.,

Sincerely yours, l

VOLPE, BOSKEY AND LYONS

~

N

'~

By:

Bennett Boskey C

d&A6LL-

~ D. Biard MacGuineas Enclosure cc (with enclosure)

Joseph M.

Farley President, Alabama Power Company Robert A.

Buettner, Esq.