ML20133F872
| ML20133F872 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon, Humboldt Bay |
| Issue date: | 01/09/1997 |
| From: | Duncan W DUNCAN, WEINBERG, MILLER & PEMBROKE, P.C. (FORMERLY |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| Shared Package | |
| ML20133F876 | List: |
| References | |
| NUDOCS 9701150054 | |
| Download: ML20133F872 (3) | |
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- ALLACE L. DUNCAN EDWARD WEnNBERG (1968-1999)
SUlTE' 8OO MN DUNCAN, WEINBERG, MILLER & FEMBROKE, P.C.
JAMES R PEMBROKE 1615 M STREET, N. W. noo STANDARD PLAZA
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ROBERT WEIN8 ERG WAS H I N GTO N, D. C.2 o 03 6 PORTLAND, CREGON 9 7404 JANICE L. LOWER (5o3) 444-7 asa JEFFREY C. GENZER (202)467-6370 j THOMAS L. RUDEBUSCH T ELECOPY (202) 467-6379 640 Ms.CANDLESS TOWERS
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- SANT C R CAL FOR 1A 99054 (doel 948-4404 09 CounstL * ' #"#
FREDERICM L. MILLER, JR.
RICHARD x. Petz t HAROLD K. MGCOMBS, JR.
January 9, 1997 JWM@
2700 BELLEVUE AVENUE TERRY E. &lNGER SYRACUSE, NEW YORK t3219 (3451 471-1318 t ADMITTED IN t'A ONLY THOMAS J. LYNCH C ADMITTED IN NY MA & CT of CouhstL United States Nuclear Regulatory Commission Washington, DC 20555-0001 ATTN: Docket Control Department
Subject:
Corporate Restructuring of Pacific Gas and Electric Company
Dear Sirs:
On behalf of the Transmission Agency of Northern California ("TANC"), I am pleased to acknowledge and respond to the Nuclear Regulatory Commission's letter of December 6, 1996, received by the undersigned on December 10, 1996, requesting further information to document TANC's assertion, per its filing on April 29, 1996 (copy attached), that Pacific Gas and Electric Company ("PG&E") has violated the terms and conditions of its nuclear power project licenses.
In separate filings made by TANC and Modesto Irrigation District (a Member of TANC) on April 29, 1996, TANC and MID calle'l the Commission's attention to PG&E's anticompetitive condu_ and its blatant disregard for the terms and conditions of f its nuclear power project licenses, known popularly as the /
"Stanislaus Commitments," in the context of PG&E's application to transfer its nuclear power project licenses as an incident of a proposed corporate restructuring of the Company. /h[}() g As TANC noted in its filing, PG&E consistently and persistently disregarded and ignored the terms and conditions of 9701150054 970109 PDR ADI ..V 05000133 P PDR
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l theLStanislaus Commitments in refusing to provide an '
interconnection, coordination services and related transmission
. services in conjunction with the development, construction and operation of,the California-Oregon Transmission Project ("COTP"),
of which TANC is the Project Manager and the owner of approximately seventy-nine percent. As a result, TANC was forced
'to engage'in protracted litigation before the Federal Energy Regulatory Commission to secure the necessary interconnection, coordination arrangements anc ;ransmission rights to enable the COTP to commence commercial operations.
l Through such litigation, some of which involved ;
allegations that PG&E had violated the Stanislaus Commitments in t refusing to interconnect the COTP with the PG&E system on fair, reasonable, non-discriminatory and non-preferential terms, TANC and the other owners of the COTP were successful in obtaining orcers.from the FERC which enabled and facilitated the commercial operation of the COTP. Althcagh this litigation is still active and pending at the FERC, PG&E is currently providing transmission l services to IANC, has interconnected the COTP with the PG&E ]
electric system, and, as the control area operator, operates the
-COTP in coordination with the Pacific AC Intertie ( " PAC T " ) .
Together, the COTP and the PACI comprise the three high voltage AC lines that interconnect utilities in California with those
- located in the Pacific Northwest. !
In TANC's . filing of April 29, 1996, TANC documented the history of'its transmission and interconnection disputes with )
PG&E and -provided citations to relevant FERC orders and opinions which document PG&E's anticompetitive conduct. As TANC pointed out in its April 29th filing, the primary purpose of its filing was to support and assist in. documenting the claim of its Member, MID,-that PG&E has ignored and continues to disregard and violate the terms and conditions of the Stanislaus Commitments.
As MID explained in its April 29, 1996 filing and in a supplemental filing made by MID at even date herewith, PG&E has L once again refused to provide transmission service, an interconnection and otherwise accommodate MID and its bulk power supplier, Destec Power Services, Inc., in allowing MID to provide L service to potential customers in Pittsburg, California.
TANC made its April 29, 1996 filing herein to provide l historical context to MID's claim that PG&E has engaged in a L
persistent pattern of anticompetitive behavior in dealing with would be competitors which meet the definition of " Neighboring Entity" or " Neighboring Distribution System" as those terms are used and defined in the Stanislaus Commitments.
Subject to final determinations by the FERC and the Court of Appeals, TANC has effectively resolved its dispute with
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PG&E over transmission service, interconnection of the COTP with the PG&E electric system and the coordinated operation of the !
COTP and the PACI. As a result, TANC has no new or further )
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information to provide in support or further explanation of its April 29, 1996 filing herein. The litigation between TANC and PG&E which is described in TANC's April 29, 1996 filing are matters of public record at the FERC and are fully documented in the written opinions and orders cited by TANC or in the underlying record of the proceedings in which such orders and '
opinions were entered by the FERC. 4 l
TANC encourages the Commission to conduct a thorough and meaningful investigation of PG&E's conduct and to take ,
effective action to enforce and protect the integrity of the i Stanislaus Commitments.
If TANC can be of furcher assistance in locating or providing information related to the matters addressed in TANC's April 29, 1996 filing, we would be pleased to do so upon your ,
request. 1 Sincerely, l
l l ggy,e k r
.=: Q Wallace L. Duncan Special Counsel Transmission Agency of Northern California Attachment j cc: Steven D. Bloom l
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e ATTACHMENT UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION Pacific Gas and Electric Co; ) ,,, .,.
Humboldt Bay Power Plant, Unit 3;, ) Docket Nos. 50-133, i Diablo Canyon Nuclear Power Plant, ) 50-275, and 50-323 Units 1 and 2 ) !
COMMENTS SEEKING CONDITIONS OF.THE, TRANSMISSION AGENCY OF NogHg MtoderIA Pursuant to the notice o( .thg Nugl. par Regulatory '
r y; _ . . . .
Commission ("NRC" or " Commission"), the Transmission Agency of ,
Northern California ("TANC") respectfully tenders these comments seeking conditions on the approval of the proposed corporate l restructuring of Pacific Gas and Electric Company ("PG&E"). 61 Eed. Egg, 15314 (April 5, 1996). PG&E's proposed restructuring may impair the effectiveness of the antitrust licensing conditions that the NRC ordered for PG&E (the Stanislaus Commitments) and may hinder the Commission's ability to enforce and monitor those conditions. PG&E's apparent failure to adhere to the Stanislaus Commitments, as described more fully in the COMMENTS IN OPPOSITION TO, REQUESTING FURTHER PROCEDURES, AND REQUESTING CONDITIONS OF MODESTO IRRIGATION DISTRICT, filed in the aforementioned dockets of same date, compels the Commission to condition its approval of PG&E's reorganization to ensure compliance with the Stanislaus Commitments and the l
continued effectiveness of those Commitments.
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1 I. INTRODUCTION l 1
TANC is a joint exercise of powers agency, organized and existing under the laws of the State of California and is a l I
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" municipality" as defined in Section 3(7) of the Federal Power l
] Act, 16 U.S.C. S 796(7)(1988). Among TANC's purposes is the provision of electric transmission facilities and services for l the use of its Members.l' TANC is a participant in, and the )
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Project Manager of, the California-Oregon Transmission Project l
("COTP"), which is a 500 kV transmission project extending from the California-Oregon border to near PG&E's Tesla" Substation'in
! central California.
II. DISCUSSION A. Description of Stanislaus Commitments 1
In 1976, as part of the' commitments made by PG&E to the I Nuclear Regulatory Commission and the Department of Justice in connection with PG&E's application for a license to construct the Stanislaus Nuclear Project, Unit No. 1, PCLE agreed to the-inclusion of licensing conditions known as the Stanislaus Commitments. (41 Fed. Reg. 20225-20228, May 17, 1976). The Stanislaus Commitments bar the application of rates, terms or conditions that are contrary to its terms. PG&E subsequently agreed to the application of the Stanislaus Commitments to the license for its Diablo Canyon nuclear power plant. The 1/ TANC's Members are the California cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Plumas-Sierra Rural Electric Cooperative; the Sacramento Municipal Utility District; the Modesto Irrigation District; and the Turlock Irrigation District.
-a-3 I. INTRODUCTION ,
TANC is a joint exercise of powers agency, organized l
and existing under the laws of the State of California and is a 1
" municipality" as defined in Section 3(7) of the Federal Power P Act, 16 U.S.C. S 796(7)(1988). Among TANC's purposes is the provision of electric transmission facilities and services for a the use of its Members.l' TANC is a participant in, and the Project Manager of, the California-Oregon Transmission Project l
("COTP"), which is a 500 kV transmission project extending from l
- the California-Oregon border to near PG&E's Tesla' Substation'in !
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central California.
v I II. DISCUSSION A. Description of Stanislaus Commitments I In 1976, as part of the commitments made by PG&E to the
! Nuclear Regulatory Commission and the Department of Justice in 1
connection with PG&E's application for a license to construct the j
! Stanislaus Nuclear Project, Unit No. 1, PG&E agreed to the
! l inclusion of licensing conditions known as the Stanislaus l
Commitments. (41 Fed. Reg. 20225-20228, May 17, 1976). The l
Stanislaus Commitments bar the application of rates, terms or conditions that are contrary to-its terms. PG&E subsequently agreed to the application of the Stanislaus Commitments to the license for its Diablo Canyon nuclear power plant. The ,
1/ TANC's Members are the California cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Plumas-Sierra Rural Electric Cooperative; the Sacramento Municipal Utility District; the Modesto Irrigation District; and-the Turlock Irrigation District.
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Stanislaus Commitments constitute binding and enforceable legal obligations which, among other things, require that PG&E interconnect and operate normally in parallel with any neighboring entity, or to interconnect with any neighboring I
distribution system, consistent with good utility practice.
The first substantive section of the Stanislaus
! Commitments addresses the matter of interconnections between PG&E and neighboring entities or neighboring distribution systems (Ege 41 Fed Reg. at 20226. Under that section, PG&E has undertaken to agree to interconnect its transmission system with any qualified <
4 l applicant (" Neighboring EncAty" or " Neighboring Distribution !
l System") subject to certain conditions. Section II. A. provides: l Applicant shall not unreasonably refuse to interconnect and operate normally in parallel l with any Neighboring Entity, or to interconnect with any Neighboring Distribution System. Such interconnections shall be consistent with Good Utility Practice.
41 Fed Reg. at 20226.
Section II. B. provides for the number of interconnections, voltage level and power factor conditions.
Section II. C. limits the facilities and control equipment that PG&E can require.Section II. D. provides for the allocation of the cost of new facilities.Section II. E. generally precludes PG&E from restricting the use or resale of capacity or energy sold or exchanged under an interconnection agreement. Section II. F. precludes PG&E from entering into an interconnection agreement that precludes other interconnection agreements. j I
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Finally,Section II. G. provides for underfrequency load shedding and tie separation.
The Stanislaus Commitments also address reserve Coordination (Section III), Emergency Power (Section IV), Power Exchanges (Section V), Wholesale Power Sales (Section VI),
Transmission Services (Section VII), and Access to Nuclear Generation (Section VIII).
The Stanislaus Commitments have proven essential to regulators and competitors of F GE. In some instances, the I l
Stanislaus Commitments have provided, and continue to provide, '
the only means of obtaining access to areas in which PG&E exercises market power. In the context of Pacific Gas and Elec.
Co., Docket No. E-7777, FERC required PG&E to file portions of the Stanislaus Commitments with that Commission, which were accepted and implemented as part of FERC Rate Schedule No. 38.
FERC has, on several occasions, applied and enforced the ,
l Stanislaus Commitments, and it is clear that FERC retained the authority and jurisdiction to continue to enforce those Commitments in any matter in which it has the jurisdiction to regulate PG&E.I' In fact, PG&E has represented to FERC that the Stanislaus Commitments are a contractual obligation that is available to mitigate its market power. See Western Systems 1/ See, esa., Pacific Gas and Elec. Co., 49 FERC 1 61,116 at 61,497 (1989) ("We also disagree with PG&E that the Stanislaus Commitments are not subject to the Commission's review."); Pacific Gas and Elec. Co., 11 FERC 1 61,246 at 61,484-86, reh'a denied, 12 FERC 1 62,097 (1980), aff'd, 679 F.2d 262 (D.C. Cir. 1982).
Power Pool, 55 FERC 1 61,099 at 61,335 (1991) (Trabandt, C.
dissenting). According to PG&E, the Stanislaus Commitments are directly applicable to the issue of access. See Pacific Gas and Elec. Co., 52 FERC 1 61,347 at 62,378 (1990). PG&E is bound to I abide by the entirety of the Stanislaus Commitments regardless of whether the relevant sections are filed with FERC. See Florida Power & Licht Co., 30 FERC 1 61,230 at 61,459 (1985).
B. PG&E's Exercise of Market Power Is And Remains a SiaDJficant Concern PG&E's conduct and treatment of its transmission customers and bulk power supply ccmpetitors illustrate that many of the problems that the Stanislaus commitments were intended to address still exist and the justness, reasonableness and lawfulness of the terms and conditions under which PG&E allows access to its transmission system are still at issue and pending before the Commission, at various procedural stages, in Pacific Gas and Elec. Co., Docket No. ER92-595-000 and Southern California Edison Co., et al., Docket No. ER92-626-000 (consolidated and now pending before the Commission on cross-motions for rehearing); Pacific Gas and Elec. Co., Docket No.
ER93-413-002 (now pending before Judge David Harfeld for hearing on remand from the United States Court of Appeals for the Ninth Circuit); and Pacific Gas and Elec. Co., Docket Nos. ER91-505-000 and EL92-18-000 (consolidated and pending Exceptions to Initial Decision).
A review of the background and history of these cases provides the Commission with ample and graphic examples of the very type of abuse, misconduct and discriminatory practices by
PG&E that the Stanislaus Commitments were intended to prevent.
This history also shows how regulatory processes can and has been used by PG&E to v.hwart or delay service. In positing.these examples, TANC does not have to embellish or interpret the facts or the implications thereof for the Commission. The Commission needs only to review the finding and conclusions of sister agencies and the strong and decisive language of those orders and' 3 the decisions of the Presiding Judges who have presided over these proceedings, to appreciate the lengths to which PG&E has been willing to go to protect and enhance its market control and transmission dominance.
- 1. SOTP On August 25, 1989, after four years of negotiations, PG&E and TANC entered into the SOTP. Pacific Gas and Elec. Co.,
58 FERC 1 61,214 at 61,669 (1992). The SOTP were intended to provide TANC with 300 MW of firla, bidirectional service over l
PG&E's transmission system between PG&E's Midway substation, the individual TANC Member's systems, and the COTP Terminus / Tesla et substation.. Actually obtaining SOTP service once the agreement was entered into, however, proved to be a difficult and illusive goal for TANC.
While the SOTP called for the parties to enter into a successor agreement by September 1, 1989, by December 1990, that had not happened and TANC filed a complaint with the Commission.
Id. After rejecting a proposed " successor agreement" filed in 1/ The SOTP service was proposed by PG&E during the planning of the COTP as a cost-saving alternative to constructing the ,
COTP to PG&E'c Midway substation.
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1991 by PG&E "because it did not embody the terms and conditions of the SOTP," the Commission ordered PG&E to file the SOTP as the applicable rate schedule for SOT transmission service. Id. Once j again, PG&E filed a successor agreement, this time purportedly to replace the SOTP. Id. This attempt fared no better, and the j Commission rejected PG&E's proposed transmission arrangement,
- j finding that PG&E's filing would force TANC into the position of "taking service significantly less valuable than the service TANC bargained for or facing further delay in receiving the service it contracted for." Id. at 61,673. The Commission ' stated thati l 1
PG&E has not even come close to conforming l the Replacement TRS to the SOTP as required I by the SOTP itself as well as ordered by the Commission. PG&E has had over two years to file an agreement consistent with the SOTP I
and has failed to do so.
Id. Since PG&E had " ignore [d] its contractual commitments and !
the Commission's directives [,]" the Commission then summarily adopted the SOTP as an interim Rate Schedule, and, on March 1, 1992, some 3-1/2 years and numerous Commission orders after PG&E had agreed to provide SOTP service, service actually commenced.
Shortly after service commenced, PG&E-resumed its attack on the service. First, in July 1992, PG&E filed proposed changes and additions to the SOTP, which TANC and its Members challenged and opposed. After an evidentiary hearing, the Presiding Judge issued an Initial Decision accepting in part, and rejecting in part, PG&E's proposals. See Pacific Gas and Elec.
Co., 67 FERC 1 63,009 (1994). PG&E and TANC have both filed Exceptions to the Initial Decision. This matter is still pending review and decision by the Commission. Since one of the primary
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issues in this proceeding is TANC's and TANC's Members right to 4 use SOTP Transmission Service for transactions within PG&E's control area, the scope and value of this service remains j uncertain and in doubt.
Second, while the initial rate under the SOTP was
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$.50/kW/ month, based upon TANC's use of PG&E's backbone subfunction,f' PG&E filed proposed changes in the rate !
methodology for South of Tesla ("SOTP") Transmission service. In
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Pacific Gas and Elec. Co., Docket No. ER93-413-000, PG&E sought 1
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methodology rather than the subfunctionalized rolled-in rates 1
historically used by PG&E. The change proposed by PG&E would j have increased the rates for SOT Transmission Service from
$.50/kW/ month to $1.80/kW/ month. TANC moved to reject the J proposed rate filing and, on April 30, 1993, the Commission entered an order rejecting PG&E's filing on the ground that PG&E
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! was contractually bound to base its SOT transmission rate on a j subfunctionalized methodology until December 31, 1998, or until j PG&E ceased to be a " participant" in the COTP. Pacific Gas and I
j' Elec. Co., 63 T' AC 1 61,13 6, reh'a denied, 65 FERC 1 61,312 (1993).
PG&E appealed the Commission's Orders in Docket No.
ER93-413-000 to the United States Court of Appeals for the Ninth Circuit. During the pendency of that appeal, the Commission 4
A/ PG&E's subfunctionalized rolled-in rate method is a more
- precise variation of system-average cost rates, since it only includes the costs of the portion of the transmission system that is actually used.
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requested the Ninth Circuit to remand the case to the Commission for further consideration and, by order dated October 4, 1994 (Pacific Gas and Elec Co., 69 FERC 1 61,006 (1994)), the Commission ordered a hearing on the meaning and intent of the SOTP. Docket No. ER93-413-002 is now suspended pending further developments under the Commission's rulemaking proceedings on open-access non-discriminatory transmission arrangements.
This summary of the history of the SOTP is a case-study l
that demonstrates the need for e:fective measures to curb PG&E's use of its market power.I' The inability of TANC and its Members ,
1 to access markets and resources during the.3-1/2 years of SOTP litigation imposed a cost that was borne by ultimate consumers l
which is contrary to the public interest. Strict enforcement of '
l the Stanislaus Commitments, while not a panacea, would at least !
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chill PG&E's penchant for adopting and implementing predatory I
practices.
- 2. COTP j l
In 1984, long before the Energy Policy Act amendments l l
to the Federal Power Act, (Pub. L. No. 102-486, 106 Stat. 2776 (1992)), and before the advent of proposals to restructure the electric power industry, TANC and the other COTP Participants entered into the COTP Memorandum of Understanding ("COTP-MOU")
which, inter alia, called for the joint development and 5/ In fact, the FERC has specifically noted and described PG&E's outrageous conduct in the SOTP saga and cited it as
"[a]nother way of frustrating access" by transmission dominant utilities. NOPR at 33,073 n. 151.
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construction of the COTP, the third high-voltage AC link between California and the Pacific Northwest.0' s
Initially, PG&E, SCE and SDG&E were Joint Participants in the COTP and would have owned approximately 42% of the COTP.
However, the California Public Utilities Commission denied the applications of PG&E, SCE and SDG&E to participate in the COTP t ,
and, in late 1991, the three California investor-owned utilities l withdrew from the COTP. TANC, and others, immediately undertook i i i to assume responsibility for the investor-owned utilities' share l of the COTP, including the financing thereof, and'TANC now owns approximately 79% of the COTP, which was completed at a cost of i 1
approximately $430 million and placed in commercial operation on j March 24, 1993.
As planned, the COTP was to be interconnected with the PG&E electric system and operated in coordination with the PACI.
TANC's, and the other COTP Participants', efforts to obtain
- timely, satisfactory, and workable interconnection and 1
l coordination arrangements by negotiations, which extended over a seven year period with PG&E and the principal owners of the PACI, l failed and resulted in litigation before this Commission which commenced in 1992 (FERC Docket Nos. ER92-595-000, ER92-596-000 and ER92-626-000) .
4 1/ The Pacific AC Intertie ("PACI"), which consists of two 4 lines which were constructed in the 1960's, is owned and operated, for the most part, by the California investor-owned utilities (PG&E, SCE and SDG&E). Capacity commitments
- on the PACI to its owners and their customers prevented 4 TANC, its Members, and others from accessing important 1 markets in the Pacific Northwest.
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In Pacific Gas and Electric Co., Docket No. ER92-595-000, PG&E filed the Rate Schedule for the Interconnection of the e California-Oregon Transmission Project ("CIRS"), in which it
.i sought to impose numerous and onerous restrictions on the 1
interconnection of the COTP with the PG&E electric system and the use of the COTP by its owners, the COTP Participants, including TANC. Among other things, PG&E insisted on having the unilateral right to determine when, and if, the interconnection with the COTP should be made, and to impose additional costs for effecting the interconnection. PG&E also imposed, in the CIRS,
! unreasonable terms relating to adverse impacts and modifications l which would have permitted PG&E to impose mitigation measures 4 with respect to the COTP for adverse impacts which resulted from circumstances unrelated to the COTP. As filed, the CIRS would have permitted PG&E to impose significant additional costs on 3
TANC and the other COTP Participants for adverse impacts having nothing to do with the interconnection or operation of the COTP.
i Additionally, PG&E sought to impose joint and several liability on TANC and its Members, although TANC's Members have no i
2 ownership interest in the facility or responsibility for its operation.
In Pacific Gas and Electric Co., Docket No. ER92-596-000, PG&E filed the Transmission Rate Schedule for CGTP l
Transmission Service (" CTS"), which would have required TANC and its Members to obtain all ancillary transmission services for access to the COTP from PG&E at rates formulated on a system-wide j rolled-in rate methodology. Such rates would have duplicated i
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services already available to TANC and its Members under the SOTP and under the Members' bilateral arrangements with PG&E at CTS rates which were approximately three times more than the existing j rate schedules for similar services. l In Southern California Edison Co., et al., Docket No.
ER92-626-000, the three largest California investor-owned utilities and the principal PACI owners, filed the Coordinated Operations Agreement (" COA"), under which the COTP was to be operated in coordination with the PACI. The COA, as originally filed by the Companies, imposed numerous discriminatory provisions which favored the PACI and its owners over the COTP and its owners, imposed restrictions on the ratings and rating l process for the COTP, denied the COTP owners the right to use their own facilities, including among themselves, for transactions within PG&E's control area, and failed to permit the COTP Participants to obtain access to, and use of, various points of interconnection between the COTP and various other transmission facilities, including points of interconnection with Western. The COA also initially required the COTP Participants, and TANC's individual Members, to obtain all control area services from PG&E under interconnection agreements or other bilateral arrangements with PG&E. The COA also sought to impose several liability on TANC and its Members.
While the Presiding Judge, in his Initial Decision,Il and the Commission in affirming in part and reversing in part, 2/ The Initial Decision in these consolidated Dockets was issued by Presiding Judge Stephen Grossman on June 30, 1993.
Pacific Gas and Elec. Co., 63 FERC 1 63,018.
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5 the Initial Decision,E' have eliminated many of the most objectionable features of the CIRS and COA, and rejected the CTS Rate Schedule in its entirety as unjust, unreasonable, unneeded, i l
and unwanted,2' the principal parties to this litigation have sought rehearing of the FERC's decision and those motions are 1
I still pending before the Commission. Thus, more than 12 years j j ,
- after the parties, including PG&E and the other PACI owners, i
signed the COTP Memorandum of Understanding, over four years ,
after the Companies unilaterally filed the COA, CTS, and CIRS Rate Schedules, and more than three years after the COTP became i operational, these important issues are still unresolved and the l uncertainty created by the pendency of these matters continues.
As the history of the development of the COTP and 1'
related litigation in conjunction with such development indicate, 4
TANC and its Members have attempted to avail themselves of new
] bulk power supply sources, to reduce electricity costs to the I consumers served by TANC's Members, and to be able to compete successfully in the new markets and opportunities, the Commission must ensure that the Stanislaus' Commitments remain in force and l thet PG&E fully complies with such terms.
Obtaining an interconnection with PG&E will be made 1
more difficult without fully effective antitrust licensing conditions. PG&E can create obstacles to construction, and then, 1
1/ On May 26, 1994, the Commission issued an Order Affirming In i Part and Vacating In Part Initial Decision. Pacific Gas and Elec. Co., 67 FERC 1 61,239. Motions for Rehearing were filed on or before June 27, 1994, and have been pending before the Commission since that date.
H/ Een 63 FERC at 65,098.
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as in the case of the COTP, can seek to impose terms for the interconnection with, and operation of, the new facility that are discriminatory, unjust and unreasonable and inconsistent with the Stanislaus Commitments. The net effect is to discourage others from constructing necessary transmission facilities, thereby preserving the market power of PG&E.
The history of the development and implementation of both the SOTP and the COTP demonstrates the very point that the Stanislaus Commitments remain important and their strict enforcement must remain a priority with this Commission.
- 3. Reddina and PG&E's Control Area Reauirementq In addition to exercising its market power as the dominant transmission owner in northern California, PG&E has used its position as the area's Control Area Operator to inhibit or impede the use by TANC's Members', of their percentage share of TANC's entitlement to the COTP and to SOTP service. PG&E's treatment of Redding, California, a Memoer of TANC which is not physically interconnected with PG&E, is illustrative and demonstrative of this problem.
For years, Redding operated under an agreementU with PG&E under which Redding received its control area services and incremental power requirements from PG&E. Under the Redding/PG&E Agreement, Redding was required to purchase all of its supplemental power from PG&E and, in the event that Redding elected to purchase supplemental power from a source other than 12/ Agreement for Sale of Electric Capacity and Energy dated May 9, 1980.
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- PG&E, the. agreement provided that the Redding/PG&E Contract would terminate.
With the construction and operation of the COTP, I Redding sought to use its percentage share of TANC's entitlement i to the COTP and Redding's allocation of TANC's entitlement to SOTP transmission service to access other bulk power resources.
To accomplish this, Redding negotiated detailed agreements with Western under which, inter alia, Western agreed to provide ,
Redding with all of its control area requirements.F With arrangements in place between Redding and Western, under which Western would provide control area services, Redding entered into agreements with Bonneville Power Administration and other power suppliers to provide supplemental power to Redding. l 1
Redding then notified PG&E that it was terminating i,ts contract l I
with PG&E, effective on June 1, 1994, and would thereafter take i 1
its control area services from Western.
However, PG&E refused to accept Redding's notice of cancellation of the Redding/PG&E contract on the ground that )
Redding's arrangements with Western were unacceptable and inadequate, inter alia, insofar as they provided for control area .
services.
lif In the context of the COTP proceedings (FERC Docket No.
ER92-626-000), PG&E (and the other sponsors of the COA), had reluctantly agreed to modify a provision of the COA which would have required Redding to have an Interconnection Agreement with PG&E in order to use the COTP and to allow i TANC's Members and other COTP Participants to obtain control area services from a third party. Pacific Gas and Elec.
G2z, 67 FERC 1 61,239 at 61,761 and n.38 (1994) reh'a DendinG. l l
a , .
Although PG&E and Redding had engaged in extensive negotiations for over two years leading up to Redding's attempt to terminate its contract with PG&E, and despite the fact that PG&E had assured Redding that it would not attempt to prevent Redding from turning to other suppliers for Redding's supplemental requirements, PG&E insisted that Western was not providing all the control area services needed by Redding and proposed an agreement in which it sought to impose its own control area requirements on Redding and under Redding's agreements with Western.
Redding responded first by filing its own Notice of Termination of its contract with PG&E with the FERC.E' PG&E countered by unilaterally filing its so-called Control Area Rate Schedule (" CARS").U' Redding opposed PG&E's CARS filing and requested that the FERC reject the CARS. While these matters were pending, Redding, on June 1, 1994, commenced taking 12/ Redding's Notice of Termination was Docketed by the Commission as Pacific Gas and Elec. Co., FERC Docket No.
ER94-1129-000. The Commission rejected Redding's Notice of Termination on the grounds that Redding was not a jurisdictional utility and therefore could.not file such a notice. Pacific Gas and Electric Co., 68 FERC 1 61,144 (1994).
Redding's filing of a notice of termination is ineffective since customers like Redding are not I I
jurisdictional utilities and, as such, cannot file Rate Schedules or f notices of termination under the Federal Power Act and the Commission's Regulations promulgated thereunder.
1 Id. at 61,721. !
13/ Pacific Gas and Elec. Co., FERC Docket No. ER94-1150-000.
a
, 3 -
deliveries of supplemental power from third-parties and obtaining its control area services from Western.
On July 29, 1994, FERC issued its Order in Docket No.
ER94-1150-000, gt al., rejecting PG&E's CARS filing and recognizing that Redding's agreements with Western, which had become effective on June 1, 1994, were sufficient to meet the control area requirements applicable to Redding. Pacific Gas and Elcc. Co., 68 FERC 1 61,144 (1994).
FERC's discussion of PG&E's treatment of Redding is ]
revealing and instructive.
PG&E's proposed CARS Schedule included various services for which PG&E would bill Redding if Redding did not meet the basic operational and planning requirements of the CARS on its own or through contracts with other parties. 68 FERC at 61,716.
The CARS also purported to satisfy the requirement under the COA that Redding have in place an acceptable control area agreement. l Id.
Also, PG&E contended that:
[A]bsent the CARS Schedule, Redding could not f schedule power over the COTP or use MTS service because there would be no arrangement i in place to govern the schedule. PG&E adds I that, if Redding is unable to schedule over the COTP or use MTS Service, Reddina would have to continue to purchase from PG&E.
151. (emphasis added) .
PG&E argued that the CARS was necessary since Redding's operations affected Western and, in turn, might affect PG&E. The argument strained credulity since Redding, of course, is not ,
interconnected with PG&E. In rejecting the CARS, and PG&E's
attenuated argument in support thereof, the FERC stated that any possible effect of Redding's operations on PG&E was "the ordinary consequences of interconnected utility operations," id at 61,720, but, that fact "provides, in and of itself, no basis for PG&E to file a rate schedule to charge Redding for servicas which Redding has already contracted with [ Western to provide]." Id.
FERC also stated that, if, in fact, PG&E had to provide services' that Western had contracted, for but could not provide, "PG&E may seek relief from [ Western]." Id.
PG&E also argued that the PG&E/ Western agreement was inadequate to protect and compensate PG&E because the agreement did not contemplate the additional services that,PG&E would have to provide as a result of the Redding/ Western agreement. The FERC responded:
l
[T] hat PG&E believes that its agreement with l
[ Western] is inadequate does not justify i PG&E's filing a rate schedule to charge Redding. Rather, PG&E should address its concerns to [ Western)....E I
' PG&E's intent was clear. By claiming that the Redding/ Western agreement was inadequate, and by insisting on 1
imposing its own CARS Schedule, PG&E sought to force Redding to l l
either forgo its entitlement and allocation to COTP and SOTP l service and continue to purchase supplemental power from PG&E, or l
to pay PG&E for services that Redding did not want, need, or that j it had already contracted with Western to provide. Despite its efforts to become an independent utility by participating in the construction of a new transmission line (the COTP) and obtaining s
11/ 14 l
i
. l
. 3 alternate bulk power supplies, and despite its contract to obtain control area services from another party, if PG&E had prevailed, Redding would have continued to be at a competitive disadvantage to, and dependent upon, PG&E.
It was in PG&E's "self-interest to maintain and use market power to retain (or expand) market share for [its] existing generation facilities...." NOPR at 33,071. This case, therefore, provides a classic and blatant example of the practices of PG&E that are unduly discriminatory and anticompetitive and which violate both the letter'and intent of the Stanislaus Commitments. See cenerally NOPR at 33,071-076.
C. The NRC Must Ensure PG&E's Adherence With The Stanislaus Commitments I
The failure of PG&E to adhere to its NRC antitrust licensing conditions will be exacerbated by the corporate restructuring that PG&E seeks the NRC to approve. The NRC must ensure that PG&E is in compliance with its licensing conditions. j Part 50.80 of the NRC's regulations provide, in relevant part, that Commission consent is required for the transfer, assignment, l or disposition of any license or right thereunder. PG&E's reorganization necessitates Commission review and consent under this section. Approval of such reorganization necessitates, inter alia, that the transfer of the license is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission.
The NRC's review must include a determination that the licensee is in compliance with the terms of its license.
Relatedly, the NRC should conduct an antitrust review, including
, e *> >
an assessment of whether the reorganization would allow the new entity to' exercise market power. The NRC should reject PG&E's suggestion that an antitrust analysis is unnecessary. Such analysis is essential. :
FERC's Open Access Final Rule does not address the subject matter of Section II of the Stanislaus Commitments.
While FERC has addressed certain transmission services,.
interconnections and power sales are not part of the new final ,
rule. Accordingly, FERC's Open Access Final ~ Rule does not resolve the questions that are raised by PG&E's application under Part 50.80 of the Commission's regulations l
The NRC must resolve the issue of PG&E's failure to I
comply with its antitrn.st license conditions, the commitment of i l
PG&E to adhere to those license conditions, and the need for l procedures to ensure PG&E's continued compliance with the
. l Stanislaus Commitments.
IV. CONCLUSION Wherefore, for the foregoing reasons, the Transmission i
Agency of Northern California urges the Commission to investigate !
PG&E's failure to adhere to the Stanislaus Commitments, condition any approval of the requested reorganization on PG&E's adherence to and reaffirmation of its intent to the Stanislaus Commitments, l
m_ _
., *e j
- and order such procedures to ensure PG&E's continued compliance
-with the Stanislaus Commitments.
Dated: April 29, 1996 Respectfully submitted,
\
^
~ & )+%
Wallace L. Duncan
-_ _ j James D. Pembroke, Richmond F. Allen.
Thomas L. Rudebusch 1 Michael Postar
)
Duncan, Weinberg, Miller j
& Pembroke 1 1615 M Street, 'N.W. , Suite 800 Washington, D.C. 20036. l (202) 467-6370 l l
Attorneys for the Transmission l Agency of Northern California I I
J .; a * ,, e j CERTIFICATE OF SERVICE
. I hereby certify that I have this day served the foregoing document by United States first class mail, postage
. prepaid, upon the following:
i
. Gregory M. Rueger j
- Senior Vice President i 4
and General Manager Nuclear Power Generation Pacific Gas and Electric Company i 77 Beale Street, Room 1451 P.O. Box 770000 San Francisco, CA 94177
[
Dated at Washington, D.C., this 29th day of April, 1996.
-- =:=-
'-Wallace L. Duncan I l
DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C.
1615 M Street, N.W.
Suite 800 Washington, DC 20036 (202) 467-6370
.