ML20112F056

Agrees Public Meeting Unnecessary & Submits Short Reply to City Further Pleadings to Assist NRC in Pleadings of 2.206 Petition to Enforce Antitrust Conditions

ML20112F056
Person / Time
Site:	Davis Besse, Perry
Issue date:	06/06/1996
From:	Doris Lewis SHAW, PITTMAN, POTTS & TROWBRIDGE
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
2.206, NUDOCS 9606070201
Download: ML20112F056 (7)

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SHAw, PITTMAN, PoTTs & TROWBRIDGE A PARrneRSHIP INCLUDING PROFIESS40NAL CORPORATeONS 2300 N STFiEET, N.W. 1501 FARM CREDIT DRIVE t WASHINGTON, D.C.20037-1128 McLEAN. VIRGtNIA22102-5004 I (202) 663-8000 (202) 6 3 8007 LaiE U GV GNA 76-2721 e4 June 6,1996 1

By lland Deliverv U.S. Nuclear Regulatory Commission Att'n: Document Control Desk One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 Re: In the Matten e. Cleveland Electric Illuminating Company,

, Dockets Nos. 50-410 and 66-346 (City of Cleveland's 2.206 Petition to Enforce Antiirust Conditions) i

Dear Sir:

, On May 31,1996, the City of Cleveland filed its " Reply of the City of Cleveland, Ohio to Response of Cleveland Electric Illuminating Company to Section 2.2.06 Petition" in lieu of public meeting. The Cleve:.and Electric Illuminating Company agrees that a public meeting is unnecessary and hereby submits a short reply to the City's further pleadings to assist the NRC in deciding this matter. A copy of this reply has been sent to the Petitioner, as well as to the persons identified on the attached service list.

4 Sincerely, 3 David R. Lewis Counsel for Licensee Enclosure cc: Service List (w/ encl.)

I 9606070201 960606 j PDR M

ADOCK 05000346 DDR  % '

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I SERVICE LIST David B. Matthews David R. Straus Chief, Generic Issues and Environmental Speigel & McDiarmid Projects Branch Suite 1100 Office of Nuclear Reactor Regulation 1350 New York Avenue, N.W.

U.S. Nuclear Regulatory Commission Washington, D.C. 200005-4798 Washington, D.C. 20555 John B. Ilopkins, Sr. Project Manager Sharon Sobol Jordon, Director of Law Prejr Directorate III-3 William T. Zigli, Chief Ass't Director of La DivL>mn of Reactor Projects - Ill/IV City of Cleveland, Ohio Office of Nuclear Reactor Regulation 106 City Hall U.S. Nuclear Regulatory Commission 601 Lakeside Avenue Washington D.C. 20555 Cleveland, Ohio 44114 Steven R. Hom, Esq. Glenn S. Krassen Office of the General Counsel Climaco, Climaco, Seminatore, Lefkowitz a U.S. Nuclear Regulatory Commission Garofoli, Co. L.P.A.

Washington, D.C. 20555 The Halle Building, Suite 900 1228 Euclid Avenue Cleveland, Ohio 44115 Regional Administrator, Region III U.S. Nuclear Regulatory Commission 801 Warrenville Road Lisle,IL 60532-4351 316195-01/ DOC 5DCI

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l June 6,1996 i UNITED STATES OF AMERICA l NUCLEAR REGULATORY COMMISSION Befa e the Office of Nuclear Reactor Regulation In the Matter of )

) Docket Nos. 50-440 l CLEVELAND ELECTRF ILLUMINATING ) 50-346 COMPANY )

) (City of Cleveland's 2.206 Petition (Perry Nuclear Power Plant, Unit 1, and ) to enforce antitrust conditions)

Davis-Besse Nuclear Power Station, Unit 1 )

l CLEVELAND ELECTRIC ILLUMINATING COMPANY'S REPLY TO FURTIIER PLEADINGS OF CITY OF CLEVELAND j On May 31,1996, the City of Cleveland filed " Reply of The City cf Cleveland, Ohio to

! Response of Cleveland Electric Illuminating Company to Section 2.206 Petition" (City Reply).

To ensure that the NRC is not misled by the City of Cleveland's further pleading, the Cleveland Electric Illuminating Company (CEI) provides this short reply.

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1. NRC/FERC Consistency l

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l The City of Cleveland argues that CEI is taking inconsistent positions before FERC and l

the NRC, so that "the license conditions would never be enforced because the NRC and the FERC would be simultaneously deferring to the other." City Reply at 3. This is not the case.

CEI's position that NRC, not FERC, is responsible for enforcing the antitrust conditions in the NRC licenses is entirely consistent with NRC deference to FERC on certain substantive matters.

The NRC license conditions require wheelmg in a manner consistent with the Federal Power Act (FPA) and subject to the rates, charges, and practices approved by FERC, and it is therefore f

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perfectly appropriate for the NRC to allow FERC to determine whether certain transactions are consistent with the FPA and with the rates, charges and practices that FERC has established un-der the FPA. Indeed, Regulatory Guide 9.1 cited at page 9 of the City's Reply, supports such deference. "In general, reliance will be placed on the exercise of Federal Power Commission (now FERC] and State agency jurisdiction regarding the specific terms and conditions of the sale of power, rates for transmission services and such other matters as may be within the scope of theirjurisdiction." Id, Just to be clear, CEI has never advocated that FERC should decline to decide matters pur-suant to the Federal Power Act or defer to the NRC in establishing rates, charges, and practices under that act. Indeed, all of the matters raised in the City's petition are substantively before FERC, and FERC is proceeding to decide those matters? Once FERC has decided these issues within itsjurisdiction, the NRC will be in a position to determine whether there has been any violation of the license conditions warranting NRC enforcement action.

2. Retail Wheeling The City next argues that there is no credible basis upon which to contend that the Medeo transaction constitutes retail wheeling. City Reply at 6. CEI's basis for this contention is stated specifically at page 7 ofits prior Response," and is undenied. Whether these facts are sufficient is a matter that FERC is currently considering. The City further argues that, "even if the services L'

CEl's position is only that FERC should decide CEl's obligations under its filed tariffs consistent with the Fed-eral Power Act, and not attempt to esablish independent obligations as an enforcer of NRC's antitrust conditions.

2 The Cleveland Electric illuminating Company's Response to the City of Cleveland's 2.206 Petition (May 6, 1996).

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• e sought constituted ' retail wheeling,'" the NRC license conditions require such retail wheeling.11 l

at 6-7. This is not true for two reasons. First, as explained in our prior Response (at page 9 and l

l n.3), the license conditions were constructed and intended to refer to wholesale wheeling

• Sec-ond, the conditions collectively require wheeling "in a manner consistent with the provisions of the Fo r Power Act," and retail wheeling is inconsistent with current sections 211(a),212(g),

and 212(h) of the act.

l The City attempts to avoid this dilemma by arguing that section 211 did not exist when the antitrust conditions were formulated. City Reply at 8. This is irrelevant, because there is no indication that, in formulating antitrust condition 11 of the Perry license and condition 10 of the  ;

Davis-Besse license, the NRC intended to freeze the requirements of the FPA and ignore subse-  !

l quent amendments to it. The requirement that antitrust conditions be " implemented in a manner i consistent with the Federal Power Act" must be read as referring to the current act.

The City's suggestion that the language requiring implementation "in a manner consistent  ;

with the Federal Power Act" is merely a reference to FERC's authority over the terms of services j l

required by the antitrust conditions, and not a limitation on the services that the NRC can E

The pithy discussion of the NRC findings that prompted the license condition, at pages 6-7 of the City Reply, l does not provide any support for expanding the license conditions to require retail wheeling. In fact, the City's cita-l tion to the Licensing Board's decision at 5 N.R.C.167,177-78, does not even relate to wheeling. Further, if the l Medco transaction is in fact a sham to facilitate retail wheeling between Ohio Power and Medco, as CEI claims and i FERC should decide, the transaction would have nothing to do with loss of [CEI] customers to competing munici-pals' systems."

l The City's characterization of Gty_9f Cleveland v. NRC. 68 F.3d 1361 (D.C. Cir.1995), is also inaccurate.

1 Contrary to the representation in the City Brief at 7, there was no " finding" by the Court that CEI (along with other I

CAPCO members) had used its size to forestall competition from other smaller entities in the region. In the portion ofits decision cited by the City,68 F.3d at 1363, the Court merely summarized the Licensing Board's 1975 findings.

i Those prior Licensing Board findings were discussed by the Court but were not subject to itsjudicial review.

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9 obligate (see City Reply at 8), is equally unpersuasive. First, the City's interpretation would make this language redundant and therefore meaningless. Since the condition states elsewhere that rates, charges and practices are subject to the approval of regulatory agencies having juris-diction over them, if the language requiring implementation of the conditions in a manner consis-tent with the FPA is to have any meaning at all, it must be something more than a reference to FERC's ratemaking authority. Second, FERC's recognized authority to establish rates, charges and practices governing transmission services necessarily includes the authority to rule that cer-tain transactions are permissible and others are not." Finally, the City's notion that NRC's wheel-ing condition is not limited to currently allowed wholesale transactions, and therefore may be used to order other types of retail transactions, would wreak havoc and is clearly unreasonable, j

A decision to require a utility to engage in retail wheeling is in effect a decision to deregulate the retail market and requires careful consideration of many matters, including how stranded costs l

should be recovered in a deregulated market. Such a momentous decision must be made by the j states or Congress, not through reinterpretation of an NRC license condition that was never in-tended to reach beyond wholesale transactions.

For these reasons, and the reasons discussed in our prior Response, the City's petition should be denied.

• When FERC approves a tariff establishing the terms and conditions governing the wheeling of power by CE!,

CEI is under no obligation, either under that tariff or under the antitrust conditions, to wheel power for the City un-der different terms.

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, Respectfully submitted, 1 David R. Lewis SHAW, PITTMAN, POTTS & TROWBRIDGE 2300 N Street, N.W.

Washington, D.C. 20037 (202) 663-8474

Mary E. O'Reilly

. Michael C. Regulinski CENTERIOR ENERGY 6200 Oak Tree Boulevard Independence, OH 44131 i

(216)447-3206

. DATED: June 6,1996 9

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