ML20126J997
| ML20126J997 | |
| Person / Time | |
|---|---|
| Site: | San Onofre  |
| Issue date: | 07/12/1971 |
| From: | Comegys W JUSTICE, DEPT. OF |
| To: | Schur B US ATOMIC ENERGY COMMISSION (AEC) |
| Shared Package | |
| ML20126J991 | List: |
| References | |
| ISSUANCES-A, NUDOCS 8105080249 | |
| Download: ML20126J997 (11) | |
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'[r});;rfinetti nf 3usiire APPENDIX 5 p.m. iinston P C- M530 .
(
EL 12 E71 Bertram H. Schur, Esquire '
Associate General' Counsel . ,
United. States Atomic Energy Commission Washington, D. C. 20545 Re: ' Southern' California Edison Company and San Diego Gas & Electric Company, San Onofre Nuclear Generating Station Units 4 ano 3, AEC Docket Nos. 50-361-A
.and 50-362-A
Dear Mr. Schur:
g,y You have requested our advice pursuant to the provi-sions of Section 105 of the Atoric Energy Act of 1954, as amended by P.L. 91.-560,, in regard to the above cited appli-
. c a t:.on .
- 1. The Aeolicant_
The San Onofra Nuclear Generating Station, Unit s 2 and 3, w.ll consist of two 1,140 mw units located c cari hePendle-ton, iour miles south of San Clcmente, California.
plant will be owned jointly by two invcstor ouned ut .lities:
. South :rn Calif ornia Edison Company (80".) and San Die .o Gas and Liectric Company (20%). The original estimated :ost of the units at co=pletion was $436,960,000; we are inforced by the cpplicants that because of various factors, including the possibility of more stringent seismic safety recaire-ments, current cost estimates are well in execs's of':his figure. Unit 2 is scheduled to go into operation June of 1976, and Unit 3, one year later. Southern California Edi-son Company will have complete responsibility fer construction and operation of the units.
Southern California Edison Company (" Edison") is a private.ly owned integrated electric utility which cerves a 50,000 scuare mile area in Southern California with approx-imately 7.2 million customers. Edison presently supplies the full . bulk power requirements of six municipalitics as well cs one rural electric cooperative. In 1969, Edison's
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. -total operating rr - nues were in excess of $642 r i llion.
Edicon's major interconnections are with Pacific Gas & Elecer c Company to the ncrth. Arizona Public Service Ccupany to tne i east, San Diego Gac & Electric Ccapany to the south and the 1 City of Los Angeles. It is also interconnected uith the Bureau of Reclamation, the Metropolitan Water District, Imperial
- . . . Irrigation District, and other smaller utilities engaging in self generation in adj acent areas. ,
- San Diego Cas & Electric Company (" San'Diego") is also
.a privately owned integrated electric utility which. serves
. south of the service. area of Edison. San Diego does not have
.any wholesale. customers. In 1969, San Diego's electric
. operating' revenue was $99,487',000.
- 2. Relations with other Utilities
.,- Edison and San Diego are both members of the California Power Pool. The third and final me=ber is Pacific Gas &
- Electric Company ("PG&E"). All members are interconnected, -
. dircetly or indirectly, and exchange surplus energy and provide emergency service; at this time, the.menbers do not share installed or spinning reserves although titey expect to e commence reserve sharing in 1974. The California Power Pool was. established in 1964 v.nder an agreement which contains no arovision which would allow other cualified utilities to Secome pool members. Such utilities may participate in the
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benefits of the pool only through arsociation with one of the three members. The pool agreement also established installed and spinning reserve recuirementa fo: members and for third parties with which the members a e interconnected. The effect of these reauirements is to limit severely the degree to which a pool member may interconnect atd coordinate with a whole-sale customer which is just begli ning to generate a part of its reouirements. One other provision which should be noted sets forth limitations with respect to standby service to non-members of the pool. A pool member may draw on spinning reserve capacity for two hours but a non-member may d cw on such reserves for only one-half hour.
At present, San Diego does not sell bulk power at . thole-sale to any non-generating utility. Imperial Irrigati:n District, the only utility other than Edison with which San
. Diego is interconnected, has satisfactory alternative sources of bulk power supply and high voltage transmission and has .
not expressed any interest in participating in this .prcj ect.
All of Edison's i.nterconnection partners which are engaged in generation have alternative poaer supply and transmission 2-eQ .q d m
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APPENDDC 5
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six. municinallti e s 1/.' and one cooperst '.. .
requiremen'ts u'...: usale cus cmcrs of Ediern, nrce mun ripcl-itics have sou..... intere:ntien to prc'ec:: this cppli.c:icn, and im cdditional city and the cooperceive hr.vc c::prerred the
-view that they ^have been disadvantaged by Edison's prier course of conducc. .In'the case of all of these cus:c=crs,
-Edison represents the-single availabic source of bulk powcr supply and high voltage transmission.
In this' context it should be noted that Edison has pur-sued, a policy of acquiring the systems of its competitors cnd customers. In the last ten-years, it has acquired four elec:ric utility systems, two of which.wcrc'all-recuirements wholesale customers, and made offers to or indicated in: ercs: in pur-chasing the systems of two additional all-rcquirements whoic- .
sale customers.
Edison has in the past acted to block efforts of its all-rcquirements wholesale customers to receive bulk power
- from alternative sources through wheeling over Edison s trans-
- ' mission facilities. Anza Electric Cooperative is an all-requirements wholesale cus
- cmer of Edison with annual load growth'of approximately 37%. At vcrious times, Anca hcs applied for and received allocations of federal power, but In Edison has denied requests to wheel this power ' to Anca. with 1967, Edison renewed for a 25-year term an agreemen: :ha
. Imperial Irrigation District which provided, in part.
the District would not sall or wheel }over to Edison's uhole-sale customers. The Dis 1rict's service area borders en that '
. of Anza. It has adhered to its agreem2nt with Edison and refused to wheel power ec Anza.
The City of Colton, an all-requirements wholesale customer of Edison with an estimated annual load grow:h of 207., indicated that Edisen has similarly refused to wheel federal power to its sys:em.
The largest intervenors, the citics of Anaheim and River-side, have been engaged for the last decade in attemp:s to secure Edison's cooperation with or acquiesence in the ci:ics' acquisition of lower cost alternative sources of bulk power supply.. In 1957, Edison raised its rate for electric service to municipal customers above its rate for service to large industrial customers, thereby placing the municipal 1/ 'The cities are Anaheim, Azusa, Banning, Colton, Riverside ,
and Vernon. ..
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APPENDD( 5 cuctr---- ct a severe disadvantcw_ '. conocticien with Edio '
to cteract large' industrial loads c heir service creas. :n 1961, s. acim, Riverside and Colton icined torccher to censid::
. possible citernatives to their rem:ihine uncle',ccle full reavire mants cus tomers of Edison. . In November 1962, an entincering conculting firm submitted a report, recommending thic the cities explore several such alternatives, including scif-gereration, peak-shaving generation, and access to capacity from the. projected Northwest-Southwest Intercie. After roccipt of the report, the cities engaged in negotiations with Edison which ultimately resulted in a 5% rate reduction.
In July of 1963, virtually every resale city signed a ten year all-requirements contract reflecting this 5% rate reduction. In addition to requiring the purchase of all power requirements from Edison and res tricting disposition of the power purchased to use or resale within the city limits, these contracts prohibit the purchaser from operating any generating facilities in parallel with those of Edison. That is, any .
generation ouned by a city must be isolated; it ccnnot be integrated into the electric network supplie.d~by Edison.
Sometime during the i963-64 period, representctives of Riverside met with officials of Edison to discuss the possi-
.bility of the city's developing peak-chaving generation.
Edison was allegedly axtremely firm in its stand that it
, would not allow its rasale customers to develop their own generation.
Early in 1964, Ri vert ide and Ancheim met with officials of Bonneville Power Ad ainistration regarding allo:stion to the cities of a block of power from the Morthwest-Southwest Intertie. When Edison war asked to wheel this perer to the cities it s tated that i 2elt that the Intertie concept was "econom,ically unfeasible" and would never come to fruition.
The attemp s to obtain Intertie power were effectively pre-cluded from success by existence of the all-requirements contracts.
In February of 1964, af ter lengthy negotiaticas Edison's municipal customers rcccived an Additional 2% race reduction.
In February of 1967, Edison attempted to get Riverside to c'ommit itself to. a now ten year all-requirements contract
, based on Edison's installation of new transmission facilitics.
Edison followed a similar course of action with respect to Anaheim beginning in April of 1968. Neither city entered the new contract and negotiations were terminated in December of.1968. '
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APPENDfX 5 On April 1, 196?, /~ cccived cnother censu:..
engineers report en futur- ;.; power supply. The n set forth four possible alt itive sources of bulh pee. .
at reduced cost: (1) hip:. voltage delivery from Edi c:..
(2) peak-shaving, (3) inder:ndent self generation, (4;
. participation generation. Inc lace alternative was bar: s upon the assumption that Anaheim might participate as a j oint owner of coal-fired er nuclear f acilitics in Arir na j or nucler: facilitics in California, with city-ouned gas turbine generation used for peak-shaving and standby reserve.
No specific projects were centioned.
Upon receipt of the report, Anaheim' began to explore all'of the alternatives. The.dctails of its efferts are set forth, together uith supporting documentation, in the cities' " Petition to Intervene, Request for Hearing, and Request.for Submission of Vicus to the Attorney General for ,
Antitrust Review" which was filed with the Commission on '
April 21, 1971. A brief summary of these activities is helpful here.
. After Anaheim had indicated interest in participating
, in the Navajo-Four Corners multiparty coal-fired generation project, Edison wrote to Anaheim and presented the city with a choice: Anaheim could continue to receive' service at 66 kv or it could receiv'e 220 hv service at a lower rate under a new ten year all-recuirements ccntract. Edison set a time limit for Anaheim's answer which uould not allow the city to ascertain whether it could economically participate in Havajo-Four Corners. Nonetheless, Analeim decided to become a study participant in Navajo-Four Corners in April 1969. On May 15, Edison withdrew frem the project. Ultimetely, Anaheim also withdrew since it was witaout tronsmission facilitics to transport power west of the Colorado River.
l On May 19, Anaheim responded to Edison's recuest by not electing either of Edison's alternatives but rather by making a counterproposal that it join with Edison in the constructicn and operation of future generating facilities. On May 25, Edison replied that such a proposal was boycnd the scope cf the subj ect under discussion.
On August 13, Anaheim requested that Edison wheel certain federal Anaheim's power system.from the system Edison refusedofto thedoCity so.of Los Angeles to In September 1970, Anaheim made two requests. 'The first was for an allotment of capacity from Edison's planned addi-tion to its Huntington Beach generating plant. This proj ect 5
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' APPENDDC 5 cnceantered environ =cntal prebic=s cnd sec::od -- =-.11cd; the city did not follow up its initial requesc. T. . . ccend requett was for terms and conditions under chich E-irenin vould provide partial requirc=cnts and standby e.- vice Edisen the event Anaheim installed peak-shaving gencrc:icn.
met on several occasions with renresentatives of Anahei to explore the feasibility of a rate form which wou1C permit On May 13, 1971, Edison peak-shaving informed Anaheim generation by the that since the city.
city had intervened in Edison's i l
rate proceeding before the Federal " Power Commission cnd in the instant proceeding before this Commission, the ccapany was
. suspending consideration of such a rate..
On February 2, 1971, thi'rteen months after the appli-cants' plans for San Onofre Units 2 and 3 became public !
knowledge, Anaheim and Riverside requested participation in l' these units. San Diego responded that due to the lateness of the cities' requests, it was no longer possible to alter the sizing of the units and that any attempt to reduce the I amount of capacity for which it had contracted would jeopar-dice San Diego's system reliabilit Edison indicated villingness to discuss the cities'y. request.. Edison, Anaheim and Ri.verside held five meetings during March and April, Banning was represented at two of these. While Edison repeatedly stated that it uould consider any specific propos-
' als the cities wished to make, it emphasized thct it eculd be extremely d!.fficult for the cities to make a f easible proposal. On apr:'.1 19, Edison wrote to the cities reiter-ating this view at d setting forth four general criteria which
- any proposal by Ar3heim and Riverside would have to meet to be acceptable to Edison:
These criteria are that the arrangement makes good
- business sens.: and is mutually advantagecus to Edison and the other generating agency. In addition, such arrangement must not result in unreasonable dis-crimination against or burden Edison's cus tc=crs, and must not impair Edison's ability to render adequate service to its customers.
In May, the cities responded that they sau littic sense in attempting to formulate a soccific preposal chich would meet
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it a variety of specific criccria uhen Edison might On reject June 30, on the basis of its four general criteria.
Edison replied reiterating its willingness to consider a specific proposal cnd again outlining its four basic criteria.
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I APPENDZX 5 3._ Comoetitive Incli. cations l
1 A's we have indicatad, chere are feu small utilitien u- 'acent to the San Diego service area, and it has no cil-a=quirements wholesale customers; this antitrust revicu has thus focused primarily upon the effect uhich the grancin,, of this application would ha've upon Edison's relationship to its present wholesale all-rcquirements customers . .
- Edison provides electric service throughout a wide crea to millions of customers. In order to operate efficiently and reliably on this scale, Edison has established cn extensive integrated high voltage transmission network con-necting its various generating resources uith its load centers. The Los Angeles' Department of Uater and Pouer also operates an extensive transmission system in southern Californit There are, however, many areas within the bounds of the Edison's system including the arcas of the intervonors and other wholesale all-rcouirements customers where Edisen's control of the only available high voltage transmission facilitics amounts to a monopoly. Practically all of the .
alternatives which the cities have considered,for accuiring their own generation or other alternative source of b'ulk power supply would be dependent upon their obtaining accces to the Edison transmission system.
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. Even trough its internal generating resources and trans-mission netsork are very largo, Edison has obtained important benefits in aulk power production by joining with other utilities in cooporative ventures. Since the generating and transmission elements of a bulk power supply system are subject to forced outages, it is necessary to provide against thin risk. The California Pcwer Pool, though less tightly knit than some power pools in other areas, affords Edison the economic adventages of dcaling with this risk collectively.
. . At the same time, its participation in jcint generation and .
transmission projects have enabled Edison to take trccter advantage of the economics of scale associa:cd wien inrge generating units and high-voltage transmission. Thus, Edison has joined with other utilitics in such mcjor projects ac the i
Northuest-Southwest Intertic, the Four Ccrners projec: in New Mexico, the Mohave project in' Arizena, and the subject of immediate concern here, the San onofre nuclear plant.
Edison's ability to participate in major joint projects throughout a wide geographic area is facilitated by.its cxtensive transmission system; in those instances, such as Four Corners, in which it has participated in projects well 7 .
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- APPENDIX 5 outside the bound- -- :s trcnsmission svrtrm, it has been abic to arr:nge fer t.-- use of transmiss' ion u nes owned by other participating u. lities. , _
In our previce: :ntitrust revicu lettert v2 have pointed out that there can 5% cnd of ten is , subs tanti:1 cc= petition among electric utili:ics. We would enpect to find th:t there is significant competition here between Edison and its major resale customers., particularly in the efforts to attract large industrial users of electric power to locate new facilities within the service area of a particular supplier.
But,we do not believe that the existence or entent of such i retail competition is a central antitrust-issue with respect l to these app 1'ications. ,-
We have outlined in part 2 of this letter an entensive history of efforts by Edison's municipal wholesale customers to alter their status as all-requirements purchasers from Edison and to assu=c some measure of responsibility for their own bulk power supp1y. The alternatives uhich they explored ,
.' generally involve t,eir n acquiring the ounership of generating facilities or their nurchcsing generating. capacity from entities other than tson; ole of to the extent they are implemented ,
Edison ac a supplier of they would reduce the
' generating capacity L ; . a. =unicipalities. Regardless of
. whether there exists sia ~icant conpetition at retail betucen Edison and the municipa$nsystems which now purchcsc at uholesc'.
from it, substantial antitrus: issues are raised in the light of the evidence, outlined above, suggesting that Edison may
- have attempted to foreclose ti e possibility of any Princip1cs of its
- wholesale customers becomina Einerating entities.
which have evolved under the aititrust laws place distince
- limits upon a supplier's exerc.se of monopoly power to prevent its customers from dev : loping alternative sources of supply.l Section 2 of the S.terman Act is par:icularly
- relevant to this situation. Aa the Supreme Court stated, "The offense of monopoly under Section 2 cf the Sherman Act has.tuo elements: (1) the possession of monopoly power in the relevsn-i market and (2) the willful acquisitica or maintenance of that power as distinguished frem th2 grouth or development of a superior product, business acumen or his toric accident."
United States v. Grinnell Corcoratien, 384 U.S. 563, 571 (1966 No proot of speci31c intent to vloic;c the antitrus t laus is required in a Section 2 monopolization case. See United S:ccc:
- v. Griffith, 334 U.S. 100 United States v.
Grinnell, 236 F. Supp. 24d,105 248 (D(1948); . R.I . 19o4) , arrirmed 384
- U.S . 5 6I. Rather tne cuestion is whether a person uno main:cir a monopoly has separately, or uith others, carried out busines; 8
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APPENDDC 5 l policicc v. . .. .:aise unnecessary "barri--"- -
cc petition."
l United State.: . United Shoe Machir.cr" "--- , 110 F. Supp.
295, 444, aus (D. hass., 193a), a ;tr-'a - ~ curiam 347 U.S. l
-521. l r' -
Established antitrust principles are also relevent in evaluating the reasonableness of the exclusion of prospective i
. entrants into electric power generation from access to jointly j controlled fccilities. Generally the antitrust laus rec:uire that uhen business entities jointly control an essential l
-resource, they m'st u grant access to it, on equal and non-
-discriminatory terms, to all those engaged in the given business. This principle has been videly applied to a variety of business organizations -- ' including terminal railways, Uniecc l States v. Terminal R.R. Ass 'h, 224 U.S . 3S3 (1912); nationai
' securities marnets , Silver v. New Yor'.: S toc!: Exchence, 373 :
U.S. 341 (1963); dominant neus ga:nering c:ganiza::en, Associated Press v. United States, 3 26 U.S .1 (1945) . The :
reason for tne rule is to prevent those holding a unicue i monopoly position from using that lawful monopoly to foreclose competition in related activities which should be competitive.
This is also closely related to the antitrust rule which denies to the individual firm in a monopoly ' position the usual 'right to select the persons with250 which it uill deal.
U.S. 300, 307, (1919).'
See United States v. Colcate and Co.,
In rendering our antitrust advice, we have found it neccssary to consider the totality of Edison's conduct in
-~ relation to its wholesale custo=crs during the period examined in Part 2 of this letter. A number of the actions
- taken and positions asserted by Edisc 1 during this past period appear, on the basis of prese'nt infor:.ation, to have had the effect of unreasonably foreclosing it: wholesale customers
. -from bulk pouer supply alternatives. We note first that upon a number of occasions Edisen appears .o have refused flatly to provide availabic transmission capreity for the wheelin; of pouer from other generating entitics to its uholesale custcmars Secondly, we note that Edison has renewed the provision in a contract with Imperial Irrigation Dis trict which precludes Imperial from providing such a wheelin; service to Edisen's whoicsale customers . Third, ue note the allegation of Riversid that in the 1963-1964 period Edisen :: fused to censider the development of a wholesale rate schedule which uould permit the cunicipality to supply part of its requirements with its own generation.
- More recently, Edison has engaged in some discussion with
. Anaheim about the possibility of a whc1csale rate schedule which would permit installation of peak-shaving equipment, e
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APPENDfX 5 but we note .at rdec'ntl'y Edica. . .cd ruch discussiens l becauce of the municipality'c :- .:_len i n this prececdi - l and oppe:ition to Edison's wholes .'" -ste increase in the FFv.
Fourth, we have noted that throutnc.m :he period Edison has ,
maintained provisions in its ful_-rcquirements contracts 0:ith l wholesale customers which appecr u.necessarily to restrict those customers' access to citernctive bulk pouer supplies.
We refer in particular to the previsions forbidding the operation of any electric generation on the customer's system in parallel with Edison's and the provinions pr.eclud-ing the resale or use outside of the customers's system of the purchased power. Finally, we have noted that Edison, together with San Diego and PG&E, has established the Cali-
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fornia Pool on terms which appear not to contemplate the l.
admission of small'er generating entitics and which appear to
- impose unnecessary barriers to the interconnection and coordination of a pool member's system with the system of a non-member. In additien, there is some indication that Edison has insisted upon terms comparable to the California Pool requirements as a condition to any interconnection agreement with smaller generating entities. ,
i While we believe that the municipal wholesale customers request for participation in the San Cnofre units must be considered in the context of the total history of the relationships discussed above, we do not think it is possible
" rat this time to reach any definitive conclusion as to the appropriateness of now requiring such participatien. We n:ce first that the municipal customers initiall,r indicated that they wished to participate in these units scme thirteen menths
- - - after the plans were publicly announced. It is not clear to wi.at degree this delay would make it impracti. cal to arrange their participation. It is similarly unclea whether --
assuming participation is available on reasonable terms -- the
- cities are either willing or able to make de.'inite commite nts for participation within the time frame required for an orderly development of the project. It is not uncom: ion for utilities engaging in joint generation projects to speadAtseveral years hammering out the details of participation. this point, Edison has not flatly refused to allow the cities to partici-pace and, in the normal course of things, it would cece unreasonable to expect the parties to have reached an agree-ment after the limited time for discussions available here.
Nevertheless there is presently sc=e reason for concern whether the general criteri'a which Edison has established for evaluating any spe,cific recuest for participation by the cities are consistent with the obligation to afford reasonable access 10 -
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- 8 APPEN0fX 5 on renc---= ;e terms , uhich may well be found to be
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in the prem'ses. One of the general criteria uculd r: .:_r:- l that the transaction accord significant benefits t o ./. a . . . .
and Edison has made clear that its weighing of the b -'l ts will take into account the economic detriment to it :rrr the loss cf a full-rcquirements wholesale custemer. ' nis .
may make it just about impossible for such a custemer Further- to submit a proposal which would satisfy the criterion.
more, it appears unlikely that a municipal wholesale customar could submit any worhable offer of particination in these units without some substantial modification of the reserve require-ments to which the major California utilities have adhered to
- ba dealine, among themselves and with the small utili:ics.
Considering all of these circumstances, we do not believe that the cuestion of access here can be lef t totally to the results of the present discussions among the parties.
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- 4. Conclusion Based on the evidence and-information currently available, it is impossible for us to state that Edison has refused toAt
- consider participation by the intervenors in. San Onofre.
the same time, consideration of the totality of Edison's conduct makes it equally impossible to conclude tha: the applicant's activities under this~ license, if granted, would not maintain a situati'on inconsistent uith the artitrust laws. The issuns here are so complex and cloudec that there is no alternative but for the Department to reque st a hearing
- -on this application. .
Sincerely yours.
lh lAd .0 Wlh//
Q/
h LKER 3. COMEGil
- Acting Assistant Attorney Geheral -
Antitrust Division 4
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