ML20133C368

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Requests Commission Schedule Full Hearing on Georgia Power Co Monopoly Position & pre-condition Any Nuclear Plant License on Util Termination of Unlawful Restraints on Trade in Power Supply Market in State of Ga
ML20133C368
Person / Time
Site: Hatch, 05000000
Issue date: 09/14/1971
From: Adams L, Duncan C
DUNCAN & ALLEN (FORMERLY DUNCAN, ALLEN & TALMAGE, HEARD, LEVERETT & ADAMS
To: Schur B
US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML20133C325 List:
References
FOIA-85-320 NUDOCS 8507200477
Download: ML20133C368 (12)
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Text

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4 4 1"=",et b f175 5 A we& J fe,8end$ $ $ $ A0006 (son) ass-asoo September 14, 1971 Bertram H. Schur, Esquire Associate General Counsel U. S. Atomic Energy Commission

  • Washington, D. C. 20545 Re: Georgia Fower Company Edwin 1. Hatch Nuclear Plant Unit No. 2 AEC Docket No. 50-366A Department of Justice File 60-415-37

Dear Mr. Schur:

By various letters dated August 1971, Assistant Attorney General Richard W. McLaren requested the comments of certain Georgia Power Company customers regarding antitrust aspects of the operations of the Georgia Power Company in conjunction with his investigation of the Company's application to the Atomic EnergyThe Commission for a nuclear fueled electric Power Section of the Georgia Municipal power generating plant license.

Association has undertakego rcspond to that letter and to you directly on behalf of 48 municipalities- in the State of Georgia which currently operate their own electric power systems and purchase electric energy at wholesale from the Georgia Power Company. A copy of this letter is being forwarded to Mr. McLaren.

The Cities of Acworth, Adel, Albany, Barnesville, Blakely, Braselton, If Brinson, Buford, Cairo, Calhoun, Camilla, Cartersville, College Park, Commerce, Covington, Doerun, Douglas, East Point, Elberton, Ellaville, Fairburn, Fitzgerald, Forsyth, Fort Valley, Grantville, Griffin, Hogansville, Jackson, Lafayette, LaGrange, Lawrenceville, Mansfield, Marietta, Monroe, Monticello, Moultrie, Newnan, Nor-cross, Palmetto, Quitman, Sandersville, Sylvania, Sylvester, Thomas-igham. - -

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As demonstrated below, the Georgia Power Company k i has ach and maintained its monopoly position in the electric We, therefore, energy request that the supply m Georgia in violation of the antitrust laws.

Commission schedule a full hearing on this matter and pre-condition it an nuclear plant license on the Company's termination of its unlawful restr on trade in the power supply market in Georgia.

1. The Electric Energy Industry in the State of Georgia The supply of electric energy in the State of Georgia is totally The Company, y operating ti dominated by the Georgia Power Company. l affiliate in the Southern Company holding company system.._. sells e power in Georgia at wholesale to 50 municipalities As theand sole 39 ele ahip corporations and at retailto customers-in 645 communities.

has a complete monopoly on the State's-bulk ively controls the sale of electric energy to all consumers of elect The Company also monopolizes the generation of electric energy in Georgia.

It has acted in concert with.its sister operating companies sinc the 1920's to coordinate the development of.nearly all i sources t al of stea electric energy generation facilities and since 1930 has engaged n cen load dispatching, creating what is commonly referred to as "the So Pool. "

During the 1940's the federal government began In i d States. developin of hydro electric generating facilities in the Southeastern lus Un power te accordance with federal " preference laws" (16 U. S. C. 825s) the surp t generated at these government dams was made available by Power Admmistration (SEPA) to publicly owned electric system Due to the lack of municipally owned ndtransm tracts were entered into between SEPA,. the municipally sup- o the Georgia Power Company.

and remains that the Company delivers to the pubile systems t to a fi ply at rates which take cognizance of the municipal systems' e 2/

The Southern Company owns all of the commond Georgia stock of G any, Mississippi Power Company . Alabama Power Company an Power Company. The latter two companies 1,000,000 each own KW50% o

Electric Generating Company which owns and operates a

' steam electric generating plant in Alabama.

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low cost 3 EPA energy. In return, the Company receives all non-firm capa-biliths of the facilities and is also allowed to schedule and take the energy output of the SEPA dams to suit its overall system needs.

The Georgia Power Company remains today as the sole entity in bulk power supply industry in Georgia. It controls all facilities to generate

, and transmit electric energy in the State. As is demonstrated below, its monopoly position is maintained by the contractual details of its arrangements with SEPA and the municipal systems which purchase wholesale energy from the Company.

2. Competitive Implications of Georgia Power Company Activities Beyond the assumption of its- role as sole firm.in the bulk power supply market in Georgia, the Georgia Power Company has continually pur-sued an active policy to maintain its monopoly position. Through its critical role as the delivery agent for SEPA power, the Company has imposed many anti-competitive restraints on publicly owned systems which are unrelated to its transmission function. These anti-competitive restraints have had the effect of not only preventing municipal. systems from developing facilities to reduce their own energy costs or develop alternative sources of energy but also of makmg the consequences of an attempt to develop such alternatives so catastrophic as to preclude their consideration..

These anti-competitive restraints have been imposed upon the municipal systems by various contractual arrangements over a span of years. ,

They are presently contained in four contracts which are attached hereto as exhibits:

Erhibit 1: SEPA-Georgia. Power. Contraet (June 19,.1970)

Exhibit 2: SEPA-Municipal Contract (June 20,1970)

Exhibit 3: "WR-4" Rate Schedule 3_/

Exh bit 4: "WR-6" Rate Schedule3,/and other excerpts from Tariff filed June 1, 1970, FPC Doc. No. E-7548 3,/ These are rate schedules under which the Company sells energy to publicly owned systems. The Company has proposed a rate increase pending now before the FPC (Doc. No. E-7348) which would supplant the WR-4 Schedule with higher rates contained in the WR-6 Schedule.

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- 'Amt MM.,4. 44 8 dIptember 14, 1971 Should a public system breach any of the following contractual provisions, the Company may, within 20 days, cease all electric service to that system.

a. " Full Requirements" Clause. The most onerous anti-competi-tive restriction to which thegunicipal systems have been subjected is the

" full requirements" clause.- It essentially disables municipal systems to the point where they cannot seriously compete with the Company for new in-dustrial customers at the retail level.

The full requirements clause precludes municipal systems from looking to any alternative sources of wholesale power which include self generation or purchase from TVA and power companies in South Carolina, Florida and Alabama. The terms of the interlocking SEPA-Company and SEPA-Municipal contracts would cause the municipalities to lose their SEPA allocations.should they in any way seek to improve their power costs by ob-taining.any portion of their system requirements from a source other than the- Georgia Power Company. Thus, under the contracts, the municipalities may neither separately or together generate energy to meet future loads nor " peak shave" to reduce their current energy costs.

b.. "Ratcheted' Demand. The company employs a ratchet.5,/i n its rate. schedules to determine the municipal customers' peak demand which compounds the burden of the prohibition against " peak shaving. " We note that such a ratchet was viewed as a potentially dangerous anti-competitive device by the Justice Department in its letter to the Atomic Energy Com-mission of August 2,1971, relating to the Duke Power Company. We believe it u equally serious implications in this case. .

c. Restricted Voltages and Delivery Points. The Company has restricted the voltage level it will deliver energy to municipal purchasersb which further limits any cornpetitive force that municipal systems might otherwise exert.. The Company supplies energy at no more than 12. 5 KV to wholesale cusMmers at multiple delivery points. Due to the distance limita-tion on the transmission of large blocks of energy at such low voltages, when additional service is needed for a large new customer or for genera 11oad growth new delivery points become necessary. New industrial customers 4_/ Exhibit 1, p.13, 54.2; Exhibit 2, p. 5 51(a)(3); Exhibit 3, p.1; Exhibit 4, First Revised Sheet No. 23 and Second Revised Sheet No. 35.

{/ Exhibit 3, p. 2 Exhibit 4, First Revised Sheet lio. 24.

6) Exhibit 3, p.1; Exhibit 4, First Revised Sheet No. 23.

- ' b m,'d',an/d 2 S Ismber 14, 1971 often demand service at higher voltages, from 34.5 KV to 69 KV, and this voltage restriction severely limits the Company's wholesale purchasers from competing for these new industria11oads. The Company has also been reluc-tant to establish new delivery points further impairing the municipal systems' ability to serve their customers.

These practices create three additional burdens on the municipali-ties. First, they force the municipalities to sectionalize their systems and operate them in isolation for each delivery point because no single delivery point is capabl e of handling the load of any other delivery point in the event of outages. Thus, a. municipality is prevented from providing effective internal service protection. Second, the proliferation of delivery points creates an excessive capital cost burden on wholesale service which is directly charged to-the municipalities. Third, as a municipality grows and delivery points pro-liferate,.the municipal system becomes completely surrounded by the Company's distribution facilities which are then used to serve new areas which would rmrrndly constitute the anticipated growth areas of the municipal system.

d. Resale Limitations. Finally, the Company further restricts its wholesale customers by p ohibiting them fro reselling any energy beyond the_ Georgia Power Company service area.7 Thus a municipal system has very little, if any, opportunity to successfully achieve coordination with another energy source beyond the Georgia service area since it would be prohibited from selling. energy.
3. Conclusion -

l When the effects of these anti-competitive restrictions are analyzed against the background of the electric energy industry which now exists in Georgia. one is compelled to conclude that the Georgia Power Company not only possesses monopoly power but has willfully maintained that power through the imposition of anti-competitive contractual restrictions on its wholesale hibited by customers, Such conduct is c1 Se ction 2.of the ShermanFreedom Act.8.7arly within of access into andthe outscope of conduc of the market place is a prime yardstick for measuring competitive performance, and we 7/ Exhibit 4, First Revised Sheet No. 23. .

,8] United States v. Grinnell Corporation, 384 U.S. 563, 571 (1966); United States v. United Shoe Machinery Corporation,110 F. Supp. 295, 344,345, (D. Mass.,1953), affirmed per curiam 347 U.S. 521.

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, 7. . kratAk/erswes. M L September 14, 1971 Power Company must be seen ces ofas aimed a the Georgia from entering the electric energy generatio eventing municipal systems 3

has pursued a policy of restricting what they are currently doing.

voltage theitsCompanywholesa the electric coown ability to Thus, the Company compete in meetingfaces the energy no test of it need l

i e

performance, nsumer of any yardstick by which to me ing-(FEC Docket No. E-7548) all of ng continued. these coUnder rate proceed-the. Company would again be barredafromThe the Company. e power from munici offa municipal system's request to gain access to y the Company market; rather, the municipal system is prevented be bulk pow of:the Company from even seeking any ysuch arran contract gement.

and practices burdensome as the Company constructs facilities. es even more new ex l i

t whereby applicants for nuclear generation es an opportunify facilitiT their. activities are in the best interests of es must demonst scale hearing under the Acts is test and that a full to det required We sub-be made to the Company's current policies t modifications must ne what characterize its current operations.the egal restraints on tradeCompany which wo Respectfully submitted,

-DUNCAN, ALL N and MITCHELL By: E #

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C. Emerson Duncan,11 _

HEARD, LEVERETT & ADAMS By:_ .

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L. Clifford Adams, Jr. 3 Attachments Attorneys for Power Section, Georgia Municipal Associat8-

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$newnd bn/,a/mb bYcIe$. h '4 ens (775 fdma }k,msf T/$dsylonc$$ 20006 (202) 833-2300 September 14, 1971 Bertram H. Schur, Esquire Associate General Counsel U. S. Atomic Energy Commission -

Washington, D. C. 20545 Re: Georgia Power Company Edwin I. Hatch Nuclear Plant Unit No. 2 AEC Docket No. 50-366A Department of Justice File 60-415-37

Dear Mr. Schur:

By various letters dated August 1971, Assistant Attorney General Richard W. McLaren requested the comments of certain Georgia Power Company customers regarding antitrust aspects of the operations of the Georgia Power Company in conjunction with his investigation of the Company's application to the Atomic Energy Commission for a nuclear fueled electric The Power Section of the Georgia Municipal power generating plant license.

Association has undertakego respond to that letter and to you directly on behalf of 48 municipalities- in the State of Georgia which currently operate their own electric power systems and purchase electric energy at wholesale from the Georgia Power Company. A copy of this letter is being forwarded to Mr. McLaren.

1/ The Cities of Acworth, Adel, Albany, Barnesville, Blakely, Braselton, Brinson, Buford, Cairo, Calhoun, Camilla, Cartersville, College Park, Commerce, Covington, Doerun, Douglas, East Point, Elberton, E11aville, Fairburn, Fitzgerald, Forsyth, Fort Valley, Grantville, Griffin, Hogansville, Jackson, Lafayette, LaGrange, Lawrenceville, Mansfield, Marietta, Monroe, Monticello, Mouhrie, Newnan, Nor-cross, Palmetto, Quitman, Sandersville, Sylvania, Sylvester, Thomas-igham. --

ton, Thomasville, Washington, West Point, o - y/ S . ~.. 5 1 -

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As demonstrated below, the Georgia Power Company k in has achiev and maintained its monopoly position in the electric energy supply Georgia in violation of the antitrust laws.

Commission schedule a full hearing on this matter and pre-condition i any nuclear plant license on the Company's termination of its unlawful res on trade in the power supply market in Georgia.

1.

The Electric Energy Industry in the State of Georgia The supply of electric energy in the State of Georgia is totally The Company, g operating i dominated by the Georgia Power Company.

affiliate in the Southern Company holding company system,- . sells e power in Georgia at wholesale to 50 municipalities and As the sole 39 elec ship corporations and at retailto customers in 645 communities. Company supplier of electric energy to wholesale purchasers in Georgia, the has a complete monopoly on the State's bulk power supply system ively controls the sale of electric energy to all consumers of electri The Company also monopolizes the generation of electric energy in Georgia.

It has acted in concert with.its sister operatingft companies sinc the 1920's to coordinate the development of.nearly all sources t ol s eam electric energy generation facilities, and since 1930 has engaged in cen load dispatchmg, creating what is- commonly referred to as "the So Pool. "

During the 1940's the federal government began developin In of hydro electric generating facilities in the Southeastern United Sta r

accordance with federal " preference laws" (16 U. S. C. 825s) the t generated at these government dams was made available by Power Admmistration (SEPA) to publicly owned electric system Due to the lack of municipally owned transm d tracts were entered into between SEPA, the municipally y sup-o the Georgia Power Company.

and remains that the Company delivers to the public systems a firm ply at rates which take cognizance of the municipal systems t

2/

The Southern Company owns all of the common stock iof Gu any, Mississippi Power Company . Alabama Power Compa The latter two companies each own 50% of Southern Power Company. 1,000,000 KW ,

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Electric Generating Company which owns and operates a steam electric generating plant in Alabama.

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MMnun/d M aptember 14, 1971 low cost SEPA energy. In return, the Company receives all non-firm capa-bilities of the facilities and is also allowed to schedule and take the energy output of the SEPA dams to suit its overall system needs.

The Georgia Power Company remains today as the sole entity in bulk power supply industry in Georgia. It controls all facilities to generate and transmit electric energy in the State. As is demonstrated below, its monopoly position is maintained by the contractual details of its arrangements with SEPA and the municipal systems which purchase wholesale energy from the Company.

2. Competitive Irnplications of Georgia Power Company Activities Beyond the assumption of its- role as sole firm in the bulk power

~

supply market in Georgia, the Georgia Power Company has continually pur-sued an e policy to maintain its monopoly position. Through its critical role as relivery agent for SEPA power, the Company has imposed many anti-com, aitive restraints on publicly owned systems which are unrelated to its transmission function. These anti-competitive restraints have had the effect of not only preventing municipal systems from developing facilities to reduce their own energy costs or develop alternative sources of energy but also of makmg the consequences of an attempt to develop such alternatives so catastrophic as to preclude their consideration..

These anti-competitive restraints have been imposed upon the municipal systems by various contractual arrangements over a span of years. ,

They are presently contained in four contracts which are attached hereto as exhibits:

Erhthit 1: SEPA-Georgia Power.Contraet (June 19,.1970)

Exhibit 2: SEPA-Municipal Contract (June 20,1970)

Exhibit 3: "WR-4" Rate Schedule 3_/

3 "WR-6" Rate Schedule,/and other Exhibit 4: l excerpts from Tariff filed June 1, 1970, FPC Doc. No. E-7548 3_/

These are rate schedules under which the Company sells energy to publicly owned systems. The Company has proposed a rate increase pending now before the FPC (Doc. No. E-7548) which would supplant the WR-4 Schedule with higher rates contained in the WR-6 Schedule.

h aasar.58/em4 4 . d,8 $sptember 14, 1971 Should a public system breach any of the following contractual provisions, the Company may, within 20 days, cease all electric service to that system.

a. " Full Requirements" Clause. The most onerous anti-competi-tive restriction to which thegunicipal systems have been subjecteo is the

" full requirements" clause.- It essentially disables municipal systems to the point where they cannot seriously compete with the Company for new in-dustrial customers at the retail level.

The full requirements clause precludes municipal systems from looking to any alternative sources of wholesale power which include self generation or purchase from TVA and power companies in South Carolina, Florida and Alabama. The terms of the interlocking SEPA-Company and SEPA-Municipal contracts would cause the municipalities to lose their SEPA allocations should they in any way seek to improve their power costs by ob-taining any portion of their system requirements from a source other than the Georgia Power Company. Thus, under the contracts, the municipalities may neither separately or together generate energy to meet future loads nor " peak shave" to reduce their current energy costs.

b.. "Ratcheted' Demand. The company employs a ratchet 5 / in its rate. schedules-to determine the municipal customers' peak demand which compounds the burden of the prohibition against " peak shaving. " We note that such a ratchet was viewed as a potentially dangerous anti-competitive device by the Justice Department in its letter to the Atomic Energy Com-

-mission of August 2,1971, relating to the Duke Power Company. We believe it has equally serious implications in this case. .

c.. Restricted Voltages and Delivery Points. The Company has restricted the voltage level it will deliver energy to municipal purchasers $.I which further limits any competitive force that municipal systems might ctherwise exert. The Company supplies energy at no more than 12. 5 KV to wholesale customers at multiple delivery points. Due to the distance limita-tion on the transmission of large blocks of energy at such low voltages, when additional service is needed for a large new customer or for general load growth new delivery points become necessary. New industrial customers 4_/ Exhibit 1, p.13, $4.2; Exhibit 2, p. 5 $1(a)(3); Exhibit 3, p.1; Exhibit 4, First Revised Sheet No. 23 and Second Revised Sheet No. 35.

f/ Exhibit 3, p. 2; Exhibit 4, First Revised Sheet No. 24.

6_/ Exhibit 3, p.1; Exhibit 4, First Revised Sheet No. 23.

b M M Wed d. 2 S .cmber 14,1971 f often demand service at higher voltages, from 34.5 KV to 69 KV, and this voltage restriction severely limits the Company's wholesale purchasers from competing for these new industrial loads. The Company has also been reluc-tant to establish new delivery points further impairing the municipal systems' ability to serve their customers.

These practices create three additional burdens on the municipali-ties. First, they force the municipalities to sectionalize their systems and operate them in isolation for each delivery point because no single delivery point is capable of handling the load of any other delivery point in the event of outages. Thus, a municipality is prevented from providing effective internal service protection. Second, the proliferation of delivery points creates an excessive capital cost burden on wholesale service which is directly charged to the municipalities. Third, as a municipality grows and delivery points pro-liferate, the municipal system becomes completely surrounded by the Company's distribution facilities which are then used to serve new areas which would norrnally constitute the anticipated growth areas of the municipal system.

d. Resale Limitations. Finally, the Company further restricts its wholesale customers by prohibiting them fro reselling any energy beyond the_ Georgia Power Company service area.2. Thus a municipal system has very little, if any, opportunity to successfully achieve coordination with another energy source beyond the Georgia service area since it would be prohibited from selling. energy.
3. Conclusion .

When the effects of these anti-competitive restrictions are analyzed against the background of the electric energy industry which now exists in Georgia, one is compelled to conclude that the Georgia Power Company not only possesses monopoly power but has willfully maintained that power through the. imposition of anti-competitive contractual restrictions on its wholesale ibited by customers. Such conduct is cl S~e ction 2.of the Sherman Act.of 8yarly

. Freedom within access into and outthe scope of the market of cond place is a prime yardstick for measuring competitive performance, and we 7/ Exhibit 4, First Revised Sheet No. 23. i United States v. Grinnell Corporation, 384 U.S. 563, 571 (1966); United l 8] States v. United Shoe Machinery Corporation,110 F. Supp. 295, 344,345, (D. Mass. ,1953), affirmed per curiam 347 U.S. 521.

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September 14, 1971 Power Company must be eseen as aimed ats practices of the Georgia

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from entering the electric energy generati preventing municipa  !

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has pursued a policy of restricting its wh lgene From very voltage the Company what they are currently doing.

own the ability electric co to compete inThus, meeting thetheCompany energy n faces no test l

performance nsumer of any yardstick by whichs to m ing-(FPC Docket No. E-7548) all pending continued.

of theseUnder rate proceed- the the. Company would again be barred the Company.

fromThe o esale power from munic of.a. municipal system's request to gain a y theaccesThe Company is of:the Company from even seeking y contract andany rangement.

such practices burdensome facilities. as the Company constructs comes even more newThe e whereby applicants for nuclearrovides generation an opportunityfaciliti i

their. activities are in the best interests es must demonstr scale hearing under the Acts is test required and that a full to det We sub-be made to the Company's current policie the Company would not further pursue rmine th what modifications must t

characterize its current operations. esillegal to insure that as an AEC licensee restraints on trade which i

Respectfully submitted, DUNCAN, ALL N and MITCHELL A

By: -

t y"# T C. Emerson Duncan, II ~

HEARD, LEVERETT & ADAMS By:_ . A 8 L. Clifford Adams, Jr. .

Attachments Attorneys for Power Secti f Georgia Mumet al

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