ML20149M519

Answer of City of Cleveland,Oh in Opposition to Ohio Edison Co Application for Suspension of Perry OL Antitrust Conditions.W/Certificate of Svc

ML20149M519
Person / Time
Site:	Perry
Issue date:	02/19/1988
From:	Albert K, Goldberg R CLEVELAND, OH, GOLDBERG, FIELDMAN & LETHAM, P.C.
To:	NRC COMMISSION (OCM)
References
A, NUDOCS 8802260093
Download: ML20149M519 (188)

Text

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UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION O

In the Matter of )

} Docket Nos. 50-440A, et al.

THE CLEVELAND ELECTRIC )

O' ILLUMINATING COMPANY, et al. )

TO: Chief, Policy Development and Technical Support Branch, Office

<) Of Nuclear Reactor Regulation s

[) ANSWER OF CITY OF CLEVELAND, OHIO, IN OPPOSITION TO OHIO EDISON COMPANY'S APPLICATION FOR SUSPENSION OF PERRY OPERATING LICENSE ANTITRUST CONDITIONS

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1 Marilyn G. Zack Director of Law "O June w. wiener Chief Assistant Director of Law

William M. Ondrey Gruber Assistant Director of Law City Hall, Room 106 601 Lakeside Avenue

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Cleveland, OH 44114

! Reuben Goldberg Kenneth M. Albert

] Goldberg, Fieldman & Letham, P.C.

1100 Fifteenth Street, N.W. 1 O washington, D.C. 20005 i

Attorneys for City of Cleveland, Ohio i

O February 19, 1988 ra22;gggtgee24};O 4 op  ;

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O UNITED STATES OF AMERICA BEFORE THE.

NUCLEAR REGULATORY COMMISSION

O In the Matter of )

) Docket Nos. 50-440A, et al.

THE CLEVELAND ELECTRIC )

ILLUMINATING COMPANY, et al. )

)

)

TO: Chief, Policy Development and  !

Technical Support Branch, Office ,

Of Nuclear Reactor Regulation ANSWER OF CITY OF CLEVELAND, OHIO, IN OPPOSITION TO OHIO EDISON COMPANY'S APPLICATION FOR SUSPENSION OF PERRY OPERATING LICENSE ANTITRUST CONDITIONS The City of Cleveland, Ohio ("Cleveland"), files this answer in opposition to the application submitted by Ohio Edison l0 Company ("Edison"', in which it asks the Director of Nuclear Reac-tor Regulation ("NRR") to suspend the antitrust liconse condi-P tions imposed by the Nuclear Regulatory Commission ("NRC") in r

O this proceeding. Edison asks that the suspension of the condi-tions apply only to it as co-owner of the Perry Nuclear Power 4

Plant Unit 1 (Perry)1/ and remain in effect "until such time as i

!O there may be a factual basis for imposing (the conditions)" (App.

}

80-81). Cleveland requests summary denial of the application.

-1/ In addition to Edison, there are four co-licensees: Edison's

O wholly-owned subsidiary, Pennsylvania Power Company ("Penn 4

Power"), Cleveland Electric Illuminating Company ("CEI"),

Duquesne Light Company ("Duquesne"), and Toledo Edison Com-pany ("Toledo"). In 1985, CEI and Toledo merged and a public utility holding company, Centerior Energy Corporation, was

, established which owns all of the stock of the two utilities.

K3 For ease of reference, Edison

overseeing the licensee's business conduct" in view of the alleg-i i

edly higher cost of nuclear power. Id. i O Edison's application seeks the requested relief on its own behalf in its status as co-owner of Perry along with CEI, -

Toledo, Penn Power and Duquesne. But if Edison were to prevail I H3 and secure suspension of the antitrust license conditions, its ,

1 l co-licensees, who are quietly watching and waiting in the wings, 2/ In the decisions of the Licensing and Appeal Boards, these co- (

iO licensees are collectively referred to as "Applicants". In 1

this answer, Cleveland also sometimes refers to the five co-

licensees as "Applicants". They are the only members of CAPCO.  ;

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O will be quick to file applications on their own behalf seeking n

v the same relief. The consolidated proceeding in which the anti-trust license conditions were imposed involved Perry as well as Davis-Besse Nuclear Power Station, Units 1, 2, 3 (906 megawatts O each). Davis-Besse is co-owned by CEI and Toledo. In short, this application is not merely an Edison application, affecting only Edison. Indeed, the NRC's treatment of Edison's applica-O tions could set a precedent applicable to other proceedings.

In Section III, below, Cleveland shows that the NRC l de not have the authority to suspend or amend the Perry anti-O trust license conditions. Edison's application requests the NRC to conduct another review of the antitrust consequences of the licensed activity. However, Section 105(c) of the Atomic Energy O Act provides that an antitrust review can occur only in connec-tion with a pending construction permit application and, in a narrower fashion, to an application for an operating license.

O Cleveland shows in Section IV, below, that even if the NRC finds that it has jurisdiction to address Edison's application, the relief sought by Edison must be denied because it is barred by O the doctrine of res judicata, or, alternatively, collateral es-toppel. This is because the arguments made by Edison in its ap-plication here were made, or at least could have been made, dur-O ing the construction permit and operating license proceeding. If these doctrines are for some reason not applied, laches bars Edi-son's application, as shown in Section V below.

O Cleveland demonstrates in Section VI, below, that even if the NRC chooses to address the merits of Edison's application, O

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the application must still be denied. Among other things, Edison i

) misinterprets the Atomic Energy Act and NRC precedent in arguing l

that the NRC cannot impose antitrust license conditions if nu-clear energy is not the cheapest source of power. Moreover, as O cleveland demonstrates, the events citod by Edison as the basis -

for its application do not undermine the legal or factual basis i

of the NRC's decisicit to impose the antitrust conditions. The I) NRC based its imposition of the conditions on the finding that, unless the conditions were imposed, the substantial baseload ,

power generated by the new plants and the expanded coordination 0 and wheeling services which would result as part of the associ- l i

ated transmission lines would exacerbate the pervasive anticom-

petitive conduct t the Applicants. Purported changes in the ,

.O cost of nuclear power do not in any way undermine the NRC's analysis.

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O II. BACKGROUND ,

O A. THE CONSTRUCTION pef (MIT PROCEEDING Both the decision by the Licensing Board 3/ and the Ap-peal Board 4/ provide comprehensive statements of the background

.O of this proceeding. Cleveland briefly reviews this background.

1. The applications The five Applicants -- Edison, its subsidiary Penn O

Power, CEI, Toledo and Duquesne -- are investor-owned utilities engaged in generating, transmitting and distributing electric energy to wholesale, retail and industrial customers in a 14,000 square mile area of Ohio and western Pennsylvania. In 1967, the Applicants formed CAPCO. As members of CAPCO, the Applicants

,O agreed to engage in operational and developmental coordination.

As part of operational coordination, the Applicants agreed to coordinate their operations by, inter alia, exchanging power and sharing reserves. As part of developmental coordination, the

O Applicants agreed to plan their future generation and transmis-sion facilities as if the pool's requirements were those of a single power system.

The applications by the co-licensees at issue in this proceeding were an aspect of this developmental coordination l 1

plan. The Appeal Board described the applications in this way:

Commencing in 1969, the Applicants sought permits l from the commission to build a series of nuclear i

O 3/ LBP-77-1, 5 NRC 133, 138-40 (1977). l 4

4_/ ALAB-560, 10 NRC 265, 270-81 (1979).

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O power plants with a combined generating capacity n in excess of 5,000 megawatts. The first applica-V tion, filed by CEI and Toledo Edison jointly, was for United (sict Unit) No. 1 (906 megawatts) of the Davis-Besse facility in Ohio. The Attorney General, while noting a dispute between CEI and Cleveland pending before the Federal Power Commis-si n ver the City's request for an interconnec-O tion, did not request an antitrust hearing on Davis-Besso 1. 36 Fed. Reg. 17,888 (September 4, 1971). The city of Cleveland did, however. In a petition filed on July 6, 1971, Cleveland stressed that MELP (its municipal power system)[5/] both g purchased power at wholesale from CEI and competed with it at retail. Cleveland alleged that the utility had exercised its control over generation and transmission facilities anticompetitively to block MELP's attempt to obtain bulk power at lower cost from other sources. In addition to other relief, the city asked for license conditions giv-O, ing MELP access to power generated by the nuclear plant.

In March of 1973, the five applicants sought Com-mission permits to build Perry Units 1 and 2 in Ohio. This time the Attorney General's advice I.) letter (dated December 17, 1973) recommended an antitrust hearing. The letter stressed activities of CEI, which was described as "engaged in intense

, competition with the city of Cleveland at the re-tail distribution lavel, and, to a lesser extent, with [the city of) Painesville." After observing

.O that "CEI controls all of the transmission facili-ties surrounding these two cities," the Attorney General portrayed CEI's objectives as being "to reduce and ultimately eliminate" the two municipal systems. The advice letter recounted a history of unsuccessful negotiations between CEI and the

.O municipalities over interconnections, wheeling, coordination, and access to large-scale genera-tion, and characterized CEI's conduct in these matters as "inconsistent with the antitrust laws" 39 Fed. Reg. 2029 (January 16, 1974). The city of Cleveland also petitioned for an antitrust hearing

() on this application and asked leave to intervene and participate aa a complaining party.

5/ At the time of the proceedings before the NRC, Cleveland's O municipal electric system was known as Municipal Electric Light and Power System ("MELP"). The municipal system's pre-sent name is Cleveland Public Power.

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O In August 1974, the five applicents jointly re-q quested construction permits 2or Units 2 and 3 of V the Davis-Bosse facility (906 megauatts per unit).

The Attorney General again recommended an anti-trust hearing. His advice was based on the Appli-cants' refusal to admit the municipal systems into the CAI CO pool and what he judged a pattern of anticompetitive dealings by the applicants with g' the smaller systems. According to his advice let<

ter, "[t]he Applicants' refusals to wheel power, to interconnect and to engage in coordinated op-eration with smaller utilities raise problems which should be considered in the perspective of their monopoly control of the transmission facili-g' ties surrounding the smaller systems of their com-petitorn. Antitrust principles have evolved which place distinct limits upon a supplier's exercise of monopoly power at one level of distribution to adversely affect competition at another level,"

citing the Supreme Court's decision to that effect 0 in Otter Tail Power Co. v. United States, 410 U.S. 366 (1973). The Attorney General stated that a section 105c hearing was called for because the

"(clonstruction and operation of the Davis-Besse Nuclear Power Station, Units ? and 3, and market-ing of its power output would maintsin such an 0 ant 1 competitive situation. Granting the license applied for without adequate antitrusc conditions will generate new opportunities for the Applicants to engage in coordinated operation with each other and will provide them with a new source of rela-tively low-c.ost power and energy at the time they O are effectively foreclosing any possibility of their competitors sharing in the benefits of coor-dinated operation and development." 40 Fed. Reg.

8395-96 (February 27, 1975). The city of Cleve-land petitioned to intervene in this proceeding as well, footnotes in original omitted; footnote in brackets supplied; 10 NRC at 275-76.

O 2 ._ The Licensing Board decision The NRC consolidated the proceedings and dire-ted the Licensing Board to conduct an evidentiary hearing to examine O whether antitruet liconse conditions should be imposed on the construction permits. The Attorney General (represented by the O

,0 l Justice Department's Antitrust Division); Cleveland and the NRC O staff were admitted as complaining parties.

The Licensing Board comprehensively examined each of the antitrust allegations. The trial took place over seven O months and resulted in a record of nearly 13,000 transcript pages with over 1,300 exhibits. The Licensing Board issued its initial decision on January 6, 1977. Briefly, the Licensing Board found C that the Applicants possessed monopoly power individually in the relevant markets within their respective service territories and jointly in the co-called Combined CAPCO Company Territories O (CCCT)6/s Within their respective service areas, each in-dividual Applicant is dominant with respect to generation, transmission, and sale of electric energy.

O a) Generation. In 1973, CEI controlled 94.11% of all generating capacity in its service area Duquesne 99.90%; Ohio Edison 96.61%; Penn Power 100%; Ohio Edison and Penn Power 97.08%; TECO 95.68%. In 1973, Applicants controlled 95% or more of all existing generating capacity in the O cCCT.

b) Transmission. CEI controls 96.8% of all transmission facilities 66 KV and above within its service area; Duquesne 100%; Ohio Edison and Penn Power 99.8%; TECO 99.2%. On a combined basis, Applicants control 99.3t of transmission facili-O ties 69 KV and above in the CCCT.

citatiorts to record omitted; 5 Nhc at 153.

Moreover, the Board found that Applicants used this O control to engage in pervasive anticcmpetitive and unlawful con-duct, both individually and jointly as members of CAPCO, to mono-O 6/ The CCCT "refers to the region bounded by the outer peri-meters of the present service areas of the five CAPCO mem-bers. . . " 5 NRC at 142, n. 8.

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D polize the product markets. That Board summarized its findings O in this way:

. . . each of the member companies of (CAPCO) had participated in actions intended or having the ,

foreseeable effect of reducing the reliability and I the economic viability of competing electric gen-n erating and distribution entities within their re-v spective service areas . . . . Applicants provided I bulk power services to each other even as they )

avoided competition in the retail and wholesale power transaction market. This avoidance was not passive since several Applicants were parties to i affirmative agreements or understandings not to l O compete with one another. Moreover, each Appli- {

cant took actions intended or with the foreseeable i effect of eliminating competition with non-Appli- i cants in' retail power transactions. These re-straints took the form of agreements in restraint of trade with municipal generating and distribu-O tion systems including territorial or customer allocations, attempts to fix prices for retail power transactions, and refusals to provide bulk power services where the refusale had the known effect of reducing the reliability and the eco-nomic competitive potential of these rival sys-O tems. Thus, each Applicant has entered into agreements and understandings the effect of which is to create and maintain a situation inconsistent with the antitrust laws within its own service territories. These actions or policies have con-

_ tinued over a period of years and their cumulative U effect has been to reduce the level of competition within the CCCT or to prevent such competition from being as vigorous as it otherwise might have been, footnotes omitted; 5 NRC 223-24. The Licensing Board went on to find that CAPCO, from its very inceptien, was used as a tool to exacerbate the anticompetitive situation by excluding competing utilities from access to the developmental and operational coor-dination:

Although a a inry purpose for the formation of CAPCO was 16 c ure certain lawful advantages to Applicants tnemselves, . . . a collateral and well (3 understood result of the formation of CAPCO was to deny to competitive entities in the CCCT access to I coordinated operation and development.

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O g citations to record omitted; 5 NRC at 224. This unlawful ob-a jective was effectuated in certain instances by simply denying requests by utilities, such as Cleveland, to join CAPCO. CAPCO als acc mplished the same result by imposing burdensome reserves O

requirements for membership which, in purpose and effect, dis-qualified competing utilities. 5 NRC at 223-237. Exclusion of mPeting utilities from the CAPCO transmission facilities and, O

hence, the coordination and pooling services, was designed as one part of CAPCO's plan to undermine their ability to compete offec-tively.

In addition, the CAPCO members rejected requests by Cleveland and others seeking to purchase either ownership inter-ests in the nuclear plants or unit power. M. at 232-35.

The Licensing Board found that these anticompetitive activities constituted violations of the federal antitrust laws.

That Board then determined that, in view of these findings, the criteria governing NRC autlwrity to impose antitrust license con-ditions - "whether the activities under the license would create O or maintain a situation inconsistent with the antitrust laws" --

had been met. The Licensing Board noted the significance of "the size of the five large generating etations involved in this li-cense proceeding and the substantial contribution they will make to the resources of the CAPCO pool and in particular to the sat-isfaction of its base load requirements" 5 NRC at 240. The Board recognized that, in view of the Applicants' pervasive and coordinated anticompetitive conduct, any new electric generation O

O by the CAPCO members would simply allow them to expand their mar-O ket power to serve exclusively the increased demands of present l

l customers and the demands of new customers. Competing utilities f

would be foreclosed from competing for the load because of the

O Applicants, conduct.

Second, the Licensing Board noted that the con-struction of extensive, high voltage transmission lines in con-O junction with the nuclear plants would exacerbate the Applicants' exclusionary tactics regarding access to these facilities for wheeling and coordination services:

O . . . there is a direct tio between the generating station construction program and the transmission program which Applicants describe as complementing it. As described in CAPCO memoranda, far more is contemplated than the mere extension of a line from the site of the proposed nuclear station to O the closest terminal o.? the Applicant in whcse service area of (sic) the plant in to be located.

Applicants are engaged in substantial planning studies and construction programs specifically in-tended to develop a plan for high voltage trans-mission at low cost among CAPCO members. Thero O will be commingling, but the commingling will be on an extraordinary scale.

5 NRC at 239. The Licensing Board also noted that construction of the new lines would heighten the barrierr. to construction of other lines by the non-CAPCO utilities:

Although access to transmission facilities is a necessary concomitant of reliable and economic energy production, small systems frequently find O it infeasible to construct duplicative transmis-sion facilities. Both economic and environmental q considerations prevent such construction. Appli-cants' construction of the high voltage transmis-sion grid necessitated in large part by the Davis-Besse and Perry plant additions, togethnr with the O existence of excess capacity on their present sys-tems, render the construction of duplicative transmission lines essentially impossible.

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itati na t rec rd mitted; 5 NRC at 156. At the same time, the O

Licensing Board noted that the new lines would facilitate even l more extensive coordination services. M. at 156-57. Thus, the .j O

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i bate the adverse competitive impact of the Applicants' exclusion-ary policies. M. at 239-41. This, in turn, would exacerbate the anticompetitive situation.

O Finally, the Licensing Board found that the Applicants' policy of placing anticompetitive restrictions on access to nu-clear power also constituted an obvious nexus between the licens-g ing of the facilities and the anticompetitive situation. 5 NRC at 241-43.

The Licensing Board imposed ten conditions. The condi-O tiens required each of the Applicants:

1. to refrain from conditioning the sale or exchange of wholesale power or coordination services to any en-tity(ies)2/ on the purchaser's agreement O

' (a) to restrict the use or alienation of such energy or services to any customer or territories, (b) to give up any other pcswer supply alterna-tives or to deny itself any market opportunities, O or (c) to withdraw any petition to intervene or forego participation in any proceeding before the NRC or refrain from instigating or prosecuting any antitrust action in any other forum.

2. to offer interconnections on reasonable terms and conditions at the request of any other electric enti-1/ The license conditions define "entity" as meaning any elec-O tric generation and/or distribution system or municipality or cooperative with a statutory right or privilege to engage in either of these functions.

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ty(ies) in the CCCT, such interconnection to be available for operation in a closed switch synchronous O operating mode if requested by the interconnecting on-tity(los), subject to reasonable safety procedures that do not deprive purchasing entities of a means to offect additional power supply options, j

3. to engage in wheeling 8/ with respect tc any unused

') capacity on the Applicants' transmission linea, for and j at the r6 quest of other entities in the CCCT, of elec-tric energy from delivery points of the Applicants to the entity (les) and of power generated by or available to the other entity as the result of its ownership or entitlements2/ in generating facilities to delivery O points of the licensees designated by the other entity, and to make reasonable provision for future require-ments for wheeling services in planning future trans-mission capacity.

4. to make available membership in CAPCO to any entity O in the CCCT with a system capability of 10 megawatts or greater or to a group of entitios as a single member-ship with the s ) capability on an aggregate basis, subject to certain specified conditions and restric-tions, iO 5, 6 and 7. to sell maintenance power, emergency l

power, or economy energy to requesting entities in the CCCT upon terms and conditions no less favorable than those the Applicants make available to each other or to other entities outside the CCCT.

O 8. to share reserves with any interconnected genera-tion entity upon request on an equal percentage basis or by use of the CAPCO P/N allocation formula or on any l other mutually agreeable basis, at the requesting on-l tity's choice.

.() 9. to make available to entities in the CCCT access

to Davis Besse Units 1, 2 and 3 and Perry Units 1 and 2 nuclear units and any other nuclear units for which the licensees, or any of them, shall apply for a construc-

tion permit or operating license during the next 25 C) 8/ The license conditions define "wheeling" to mean transporta-tion of electricity by a utility over its lines for another utility, including the receipt from and delivery to another system of like amounts but not necessarily the sane energy.

O 9/ "Entitlement" includes but is not limited to power made available to an entity pursuant to an exchange agreement.

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O years, either as an ownership sharo (up to 10% of capa-

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, city of the Davis-Bosso and Perry Units and up to 20%

of futuro units), unit participation, or contractual propurchase power basis, at the requesting ontities option. Commitments for the Davis-Besse and Perry units must bo mado either two years after "this deci-sion becomes final" and for the future units, within two years after a construction permit application is

() filed with respect to such a unit or within two years after recolpt by a requesting entity of detailed writ-ten notice of applicants' plans to construct the unit, whichever is earlier, subject to the 25 year limita-tion.

O 5 NRC at 256-59. Condition 10 states:

These conditions are intended as minimum condi-tions and do not preclude Applicante from offering additional bulk power services or coordination op-tions to entities within or without the CCCT.

C) However, Applicants shall not deny bulk power ser-vices required by those conditions to non-Appli-cant entities in the CCCT based upon prior commit-ments arrived in the CAPCO Memorandum of Under-standing or implementing agreements. Preemption of options to heretofore deprived entities shall O be regarded as inconsistent with the purposes and intent of these conditions.

3_. The Appeal Board decision O The Applicants submitted a 300 page brief challenging the Licensing Board's decision.10/ In its decision issued September 6, 1979, the Appeal Board rejected this challenge and C) affirmed the Licensing Board's findings. 10 NRC 265. The deci-sion had a somewhat unusual pedigree. Jerome Sharfman, the Ap-peal Board member who wrote the original draft of the decision, O resigned from the NRC before the draft was reviewed by the other members of the Board. The remaining Board members decided to "concur in (the) ultimate factual and legal conclusions (of Mr.

O Sharfman's draft) and the result it reachos except where indi-10/ "Applicants' Initial Brief In Support Of Their Individual And Common Exceptions To The Initial Decision", filed April 14, 1977. For ease of reference, the brief is cited as "App. Dr.".

O cated in our separate opinion." Id. at 270. Hence, analysis of C) the Appeal Board decision requires examination of both the Sharf-man draft and the Board's decision, g a. The Applicants' anticompetitive activities The Appeal Board adopted Mr. Sharfman's analysis of the anticompetitive acts committed by the Applicants individually and )

g collectively in their status as CAPCO members. The Appeal Board noted that the Applicants "control a 95 percent or greater share of the bulk power generation and transmission facilities in their respective service areas." Id. at 273. The Appeal Board found

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that the CCCT is the relevant geographic market for purposes of antitrust review and that there were three relevant product mar- ,

kets: l (1) the retail market, (2) the wholesale power O i market (which includes all firm bulk power production, whether retailed for 'in house' retail purposes or wholesaled 'outside' for independent retail distribution), and (3) the coordination services market. Id. at 301.

The Board then agreed with the Licensing Board's find-l ing that the Applicants, both individually and as members of CAP-lO CO, used their domination of generation and transmission to mono-polize each of these product markets. First, the Applicants pre-cluded other utilities in their service areas from purchasing power from alternative suppliers by refusing to provide the l

wheeling services on their transmission lines which provided the 1

only interconnection with other suppliers. Id. at 327-34. The

O Appeal Board pointed to the repeated refusals of Edison, CEI and 0

O Toledo to wheel power for competing utilities. For example, the O Appeal Board noted that Edison refused to wheel power from Buck-oyo Power, Inc. to the Buckeye member cooperatives located in Edison's service area. Id. at 331-33. Likewise, CEI refused to O wheel inexpensive power from the Power Authority of the State of New York (PASNY) to Cleveland. Id. at 327-28. The Appeal Board noted that the competirj utilities could not, as a practical mat-O ter, construct their own transmission lines to duplicate the Ap-plicants' facilities. Hence, the Appeal Board found that these refusals to grant access to these essential, or so-called bottle-O neck, transmission facilities violate Section 2 of the Sherman Act. Id. at 328.

The Appeal Board agreed with the Licensing Board that O the Applicants' unlawful acts did not stop there. The Appeal Board determined that the Applicants not only excluded competi-tors from access to alternate suppliers but also imposed perva-O sive restraints on their competitors' ability to resell the power bought from them. The Appeal Board found that these resale re-l straints were designed to prevent the utilities from competing O for customers, especially industrial loads. Id. at 311-22.

These resale restraint s included territorial restrictions, cuse i

tomer allocations and agreements not to resell power in the O wholesale market. Id. at 313-14. The Appeal Board noted that these resale restraints constituted a per se violation of the antitrust laws. Id. at 316. Edison and CEI were found to te as O guilty as their cohorts in imposing resalo restraints. For ex-ample, Edison barred its utility customers from reselling powet O

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aJ areas in which the power could be resold. 5 NRC at 198-201.

The Appeal Board also found that the Applicants barred the utilities from receiving coordination services which, as O noted, are necessary in order for a utility to operate in the a

efficient manner needed to be competitive. The Applicants re-peatedly refused requests by the utilities to use-the Applicants' Wv transmission facilities for coordination services. The Appli-cant, also refused access to nuclear power unless the utilities gra..ted Applicants a right of first refusal to repurchase excess O power for which the utilities had no immediate need. The prac-tical impact of this restriction was, again, to bar access to co-ordination services and to relegate the utilities to a continued O role as isolated utilities. 10 NRC at 313-14 (Edison); 321 (CEI).

i To further consolidate control of retail and wholesale 53 markets, Edison, like the other Applicants, engaged in a panoply of anticompetitive acts and practices including (1) seeking to acquire municipal electric systems in their service areas (id. at

O 376-378, 380-82), and (2) charging wholeaale rates to municipal systems which were higher than comparable industrial rates, thereby creating unlawful price squeezes (id. at 382-84).

C In addition, the Applicants entered into numerous agreements among themselves dividing up service areas. Id. at 369-75. Both Edison and CEI were parties to several such agree-

!O ments. Id. The Appeal Board found these agreements were 11-c legal, per se, under the antitrust laws. Id. at 375.

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.O The Appeal Board agreed with the Licensing Board that.

O the Applicants, acting collectively as members of CAPCO, engaged in additional anticompetitive and unlawful acts. CAPCO excluded competing utilities from access to CAPCO's coordinated operations Cf and development. The Appeal Board found that the Applicants did this by repeatedly denying requests by utilities to join CAPCO.

Id. at 339-52. Cleveland was among the utilities whose requests I) were denied. Id. at 349-58. Again, the Board found that these refusals constituted concerted refusals to deal and, hence, were illegal per se under the antitrust laws. Id. at 352. The Appeal O Board noted that CAPCO also adopted burdensome reserve require-ments for membership in CAPCO in order to "provide a useful ex-cuse for refusing pool membersLip to municipalities" in CAPCO.

O Id. at 339.

Moreover, the Board agreed.with the Licensing Board that CAPCO's anticompetitive conduct extended di.rectly to the

'O CAPCO nuclear plants. The Board found that CAPCO refused to ac-cept Cleveland's proposal to either purchase an ownership share in, or unit power from, CAPCO's nuclear units unless Cleveland O agreed to "unreasonable, anticompetitive terms." Id. at 358-62.

b. The nexus between the proposed nuclear plants and the anticompetitive situation

'O Armed with these findings of pervasive and pernicious anticompetitive conduct, the Appeal Board then considered whether the nexus between the "activities under the license" and the

O "situation inconsistent" with the antitrust laws required by Sec-l clon 105(c)(5) was present. The Appeal Board recognized the

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O NRC's broad mandate in Section 105(c) to impose antitrust condi-O tions:

The provision conveys the message.that Congress did not want nuclear plants authorized in circum-stances that would create or maintain anticompeti-tive situations without license conditions de-

,O signed to address them.

10 NRC at 291.

The Board adopted the Licensing Board's finding that Or there was an integral link between the activity to be licensed --

construction and operation of the nuclear plants -- and the anticompetitive situation extant in the CCCT. Id. at 384-85.

O The Appeal Board summarized the Licensing Board's findings:

Given Applicants' one-system planning and coordi-nated operations, the unconditional addition of five large nuclear power plants advantageous for "baseload" (low operating cost) generation would O increase the CAPCO system's bulk power generating capacity by nearly a third. This would exacerbate the existing anticompetitive situation, making it even more difficult for the isolated public power systems to continue to compete with the Appli-cants.

O Another linking factor was discerned by the Board in those instances where Applicants had deigned to make nuclear power available to the municipal and cooperative systems. The Board found that as part of the price for furnishing that power, Ap-O plicants had insisted on such anticompetitive con-ditions as agreements not to compete, allocations of service territories and customers and fixing of prices. These factors (among others) satisfied the Licensing Board that there was more than a sufficient "nexus" between the licensed activities O and the situation it found to be inconsistent with the antitrust laws and, therefore, that remedial license conditions were in order.

footnote omitted; 10 NRC at 281.

O The Appeal Board found that "the Licensing Board em-ployed the correct legal standards in determining whether O

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I O.

licensing these plants 'would create or maintain a situation in-O consistent with the antitrust laws'". 10 NRC at 285. Thus, by adopting the Licensing Board's reasoning and findings, the Appeal Board recognized the integral nexus between the proposed nuclear lC facilities and the Applicants' pervasive and pernicious anticom-petitive and unlawful conduct. Therefore, the Appeal Board af-firmed the decision of the Licensing Board to impose antitrust

O license conditions.

c. The antitrust __ license conditions g The Appeal Board approved the license conditions drafted by the Licensing Board with only minor modifications.

Significantly, the Appeal Board rejected Mr. Sharfman's proposal to restrict the scope of the conditions ensuring non-discrimina-tory access to coordination and wheeling services to customers purchasing nuclear power or ownership interests in the plants.

10 NRC at 290-294. The Appeal Board noted that this restriction 0s would allow the Applicants to continue their anticompetitive con-duct in connection with pooling and coordination services and to thereby undermine the competitive position of utilities which did not buy nuclear power. M. at 291. That would be inconsistent with the clear "message" conveyed by Section 105 of the Act that "Congress did not want nuclear plants authorized in circumstances that would create or rmintain anticompetitive situations without license conditions to address them", noted the Board. M.

Therefore, the Appeal Board found that this restriction would be inconsistent with the NRC's broad mandate to impose antitrust O

!O conditions if the license activity would cause or continue situa- ,

O tions inconsistent with antitrust requirements. Io. at 284.

The Appeal Board also added Condition no. 10, which en-sured that non-CAPCO utilities could purchase any amount of O wholesale power they needed from the Applicants:

l Applicants shall sell wholesale power to aay re-  ;

questing entity in the CCCT, in amounts needed to meet all or part of such entity's requirements. i The choice as to wnether the agreement should I

O cover all or part of the entity's requirements I would be made by the entity, not the Applicant or-Applicants.

10 NRC at 408.

The Appeal Board rejected the Applicants' challenge of l O ,

the appropriateness of a uniform set of conditions applicable to all of the Applicants: l Applicants forget that many of the violations of C the antitrust laws which appear from the opinion below were the result of joint and concerted ac-

)

tion by the applicants. Indeed, the CAPCO pool '

established a system whereby many of their activi-ties are conducted jointly, many of their deci- ,

sions are made jointly and, where this is not so, l

.O an individual decision may sometimes require the i consent of the other members. In this kind of situation, it was necessary to have a single set of conditions applicable to all Applicants, footnote omitted; 10 NRC at 393-94.

d. Subsequent review l

On October 22, 1979, the Applicants submitted petitions I O to the NRC challenging the Appeal Board's decision.H/ They in-L M/ "Ohio Edison Company's And Pennsylvania Power Company's Peti- l tion For Review Of ALAB-560"; "The Petition Of The Cleveland l O Electric Illuminating Company And The Toledo Edison Company For Review Of ALAB-560"; "Petition Of Duquesne Light Company i For Review". )

O. l

i

!O corporated by reference their arguments in their brief challeng-  :

O ing the Licensing Board's decision.

The NRC declined to review the Appeal Board's decision.

Therefore, the decision became a final NRC action.

O Penn Power and Duquesne filed petitions for review in the Third Circuit under the name Duquesne Light Co. v. NRC.12/

However, on September 26, 1980, the petitioners submitted a O "Stipulation To Dismiss With Each Party To Bear Its Own Costs".

The Third Circuit dismissed the appeals on October 6, 1980.

g E. THE OPERATING LICENSE PROCEEDING The Applicants submitted an application for a full  !

I power operating license in 1980. The NRC staff asked the Appli- .

1 cants to comply with Regulatory Guide 9.3 and to provide informa- l tion concerning any "changes that have occurred or are planned to occur since submission of the construction permit application".

The NRC staff also asked the other parties to the construction permit proceeding to comment on the Applicants' responses to Reg-ulatory Guide 9.3. On November 7, 1983, the NRR Director deter-mined that, pursuant to Section 105(c)(2) of the Atomic Energy Act, "the changes that have occurred since the antitrust con-struction permit (CP) review are not of the nature to require a O decond antitrust review at the operating license (OL) stage of l

\

the application." 48 Fed. Reg. 52,992 (Nov. 23, 1983). i Hearings on the operating license application were con-i O i 12/ Third Circuit Docket Nos. 80-1295 and 80-1296 (filed Feb. 29, l 1980) and Docket Nos. 80-1307 and 80-1310 (filed March 4, 1980). j O

.O -

ducted in 1983 and 1985. The record was closed on May 3, 1985.

On November 7, 1986, the NRC issued a final order granting a for-ty year full-power operating license effective November 13, 1986.

The license incorporated the antitrust license conditions imposed I) during the construction permit proceeding. Because of a pending petition for review before the Sixth Circuit challenging an NRC order denying intervention by a party, the court stayed implemen-O tation of the license. The court consolidated the petition with other petitions challenging the issuance of the license. On March 17, 1987, the court affirmed the NRC's intervention order O as well as the decision to grant the full-power operating li-cense. State of Ohio v. NRC, 814 F.2d 258 (6th Cir. 1987)13/

O

O i

l 1

O l

O 1

l l

i 13/ The court decision summarizes the events accompanying the NRC

'O review of the operating license application. That summary is not repeated here, i r l l

o i l l

O' III. THE NRC DOES NOT HAVE JURISDIC-TION TO GRANT EDISON'S APPLICATION O

Edisor, is seeking suspension of the antitrust license conditions pursuant to Sections 2.101 and 50.90 of the NRC's reg-ulations. In order to show that the NRC has the statutory au-

)

thority to grant the requested relief,. Edison cites certain language by the Licensing Board and Appeal Board in this proceed-g ing. Edison also argues that this authority is a corollary of the NRC's authority to modify license conditions in entirely dif-ferent settings.

As shown below, Edison's arguments are flawed. As O

shown in subsection A, Edison simply canvasses NRC decisions ad-dressing the NRC's authority in contexts entirely different than that at issue here. Edison chooses to overlook the pertinent NRC decisions in which the NRC has recognized that Congress, in en-acting the 1970 amendments to the Atomic Energy Act (Act), pre-cludes the NRC from exercising the sort of continuing jurisdic-tion over antitrust aspects of an operating license requested by Edison. Hence, the NRC has already recognized that it does not have the authority to provide the type of relief requested by Ediscn. Consequently, the precedent cited by Edison is inap-posite. In subsection B, Cleveland shows that the NRC decisions cited by Edison undermine Edison's argument. In subsection C, O

Cleveland shows that the language citeQ by the Licensing Board b

and Appeal Board in this proceeding is dicta and is misconstrued by Edison.

O I i

l O

U A. THE NRC HAS RECOGNIZED THAT THE c 1970 AMENDMENTS PRECLUDE IT FROM MODI-.

l FYING ANTITRUST CONDITIONS SUBSEQUENT l TO ISSUANCE OF AN OPERATING LICENSE 1

Edison begins its analysis by citing NRC precedent ad-dressing Section 105 of the Act and suggests that NRC authority

)

to grant the relief requested by it is a direct corollary of this precedent. Edison's reasoning, in its entirety, is as follows (App. 49-50):

Subsequent to the issuance of an OL for a nuclear power plant, no further antitrust evaluations ordinarily take place unless a license amendment is sought which is determined would result in "significant (antitrust)

,.s changes" to the licensed activities. In such circum-

,O stances, the NRC undertakes another antitrust review.

footnotes omitted; Edison goes on to draw the following inference from this statement (App. 50):

C The regulatory scheme desc.ribed above ensures that sig-nificant changes in the competitive environment are taken into account in the NRC regulatory process. If an antitrust remedy is warranted subsequent to the ini-tial antitrust review of the application that takes

, place when a construction permit is sought, the NRC V Staff is expressly authorized by its organic statute to impose it. Similarly, if (as we believe is the case here) a previously imposed antitrust remedy no longer is warranted, then the NRC Staff also must have author-ity to remove the unjustifiable conditions.

O Edison's reasoning is undermined by the very precedent cited by it. In footnote 111 of its application, Edison cites (1) Houston Lighting & Power Co., et al. (South Texas Project, C Unit Nos. 1 and 2) ("South Texas"), CLI-77-13, 5 NRC 1303 (1977),

(2) Detroit Edison Co. (Enrico Fermi Atomic Power Plant, Unit No.

2), ALAB-475, 7 NRC 752 (1978), and (3) South Carolina Electric O and Gas Co., (virgil C. Sumner Nuclear Station, Unit No. 1)

("South Carolina II"), CLI-81-14, 13 NRC 862 (1980). Edison also O

'O cites Section 50.90(b) of the NRC's regulations.

O South Texas and the related subsequent decision in Florida Power & Light Company (St. Lucie Plant, Unit Nos. 1, 3,

4) ("Florida Power"), ALAB-428, 6 NRC 221 (1977) (whic" is not O even mentioned by Edison) are the seminal NRC decisions on the statutory limits of the NRC's authority to modify antitrust con-ditions. In South Texas and Florida Power, the NRC reviewed the O legislative history and objectives of the antitrust review pro-visions of the Act. As discussed below, the NRC concluded that it cannot conduct an antitrust review outside the context of a 33 construction permit or operating license proceeding and, hence, cannot impose or modify antitrust conditions outside these con-

- texts. Because Edison is seeking suspension of antitrust license O conditions outside these contexts, South Texas and Florida Power show that the NRC lacks the statutory authority to grant the re-quested relief. Because of the direct applicability of South O Texas and Florida Power here, the decisions are described in de-tail below.

1. South Texas O '-

South Texas, 5 NRC 1303 (1977), stemmed from an ap-plication for construction permita jointly filed by Houston Lighting & Power Company (Houston), Central Power and Light Com-pany (Central) and the Cities of San Antonio and Austin, Texas.

The Attorney General reviewed the application for the permit and recommended that an antitrust hearing was unnecessary. Id. at 1305. No person submitted a petition to intervene or a request C

y for a hearing on the antitrust aspects of the proposed project.

) Hence, no antitrust hearing was conducted. The construction per-mits were issued in late 1975.

In 1976, Central established for the first time an in-N P terconnection between its distribution facilities and those of certain out-of-state utilities. Houston responded by breaking off interconnections between its distribution system and the sys-tems of certain other utilities, including Central. These ac-l tions led to a flurry of judicial and administrative actions in which both Central and Houston challenged the actions of the other in various judicial and administrative forums.

l Pertinent here is. Central's filing before the NRC of a j petition seeking intervention and an antitrust hearing. Central

) argued that Houston's termination of interconnections was a supervening development which warranted the imposition of anti-l trust conditions. The petition was addressed, in turn, by the

) Licensing Board, the Appeal Board and the NRC. By that point, 1

l all parties agreed that an antitrust hearing should be held at l l

i the earliest opportunity but differed as to the appropriate pro-

) cedure for conducting the hearing.14/

]

The NRC began its analysis by noting that this osten- l sibly procedural dispute raised "significant issues a concerning

) the NRC antitrust review authority:

. . resolution of this dispute requires a defi-nition of the scope of our responsibility in en-1 l

)

14/ The position of each of the parties and the NRC staff is described in the decision. 5 NRC at 1307-08.

i l

)

l l

I

l i

) 1 l forcing the antitrust laws and the policies under-g . lying them in relation to the enforcement respon-sibilities of other agencies, particularly the Department of Justice. Some of the parties' argu-

, ments would assign to us a broad and ongoing an-titrust enforcement role; they envision that we l would have a continuing policing responsibility over the activities of licensees throughout the lives of operating licenses. As we shall show, we j believe that the Congress envisioned a narrower l role for this agency, with the responsibility for

! initiating antitrust review focused at the two-l step licensing process.

x 5 NRC at 1309.

J The NRC first examined the legislative history of the 1970 amendments to the Act which established pre-licensing anti-l trust review pursuant to Section 105. The NRC found that Con-I gress deliberately limited antitrust review to the construction permit proceeding.and, in a more narrow fashion, to the operating licerse proceeding. The NRC noted that "[c]oncern with the com-j petitive aspects of licensing in the nuclear area . . . goes back to the original legislation enacted in 1946." Id. at 1313. The i

1946 Act provided for anticipatory, antitrust review in the 11-O

! censing context coupled with referrals to the Attorney General.

The Act was rewritten in 1954 and a two-stage licensing process for privately owned reactors was set up. But antitrust review

)

l applied only upon a demonstration of the "practical value" of the facilities for industrial or commercial use. The NRC never made I

a "practical value" finding. In the 1970 amendments, Congress responded by finding that nuclear power has commercial value, i

thereby eliminating the need for a NRC finding of "practical val-ue".

The NRC noted that the legislative history of the 1970 l

\

l

D-amendments indicated that antitrust review was to take place only in limited circumstances. The NRC quoted a statement by the Chairman of the Joint Committee on Atomic Energy in which he l noted that the Committee "sees no sense" in plenary antitrust review as part of both the construction permit and operating license proceedings. I_d . at 1316. The Chairman noted that plon-ary antitrust review would ba inequitable to a utility which had O invested immense sums in a nuclear facility on the basis of the construction permit. Hence, limiting antitrust review to the l prelicensing stage was necessary to encourage investment in nu-O clear facilities, he stated. I_d .

The Joint Committee also noted that prelicensing anti-l trust review was advantageous because the utility would have "a O time-related incentive to expedite the entire process and to com-ply with reasonable antitrust safeguards before any competition l 1s damaged."155/

1 O The NRC observed that these concerns shaped the revi-sions to Section 105 enacted in the 1970 amendments. Pursuant to Section 105(c) of the Act, whenever an application for a con-

O struction permit is submitted to the NRC, the NRC is required to submit a copy of the application to the Attorney General. 42 l

U.S.C. S2135(c)(1). Within 180 days, the Attorney General must j O advise the NRC as to whether "there may be adverse antitrust as- i i

t pects" to the application which would warrant a hearing to more l

l \

!O 15/ Id. at 1314, quoting statement of Charles A. Robinson, Jr.,

l Staff Counsel to the General Manager, National Rural Coopera-l tive Association.

i

! l L

i b

fully evaluate these aspects. Id. If the Attorney General finds b that there may be adverse antitrust aspects, the NRC must conduct a hearing.16/

Alternatively, if the Attorney General does not recom-O mend a hearing, the NRC must still conduct the hearing if-an in-l tervenor challenges the antitrust impact of the application and i

requests a hearing.17/ If neither the Attorney General nor an b intervenor requests an antitrust hearing, the NRC cannot conduct a hearing.M /

If an antitrust hearing is conducted, the NRC must re-O view all the evidence and "make a finding as to whether the ac-tivities under the license would create or maintain a situation  !

l inconsistent with the antitrust laws. . . . "19/

i h

l On the basis of its findings during the hearing, the l NRC has the authority to refuse to issue a license, or to issue a j license with such conditions as it deems appropriate.M/

h The NRC noted that there is a much narrower antitrust i

review in connection with an application for an operating license j for a commercial facility. Section 105(c)(2) of the Act, 42 l

) U.S.C. S 2135(c)(2), states that the antitrust review procedures l l M/ Kansas Gas and Electric Co., (Wolf Creek Generating Station Unit 1), ALAB-279, 1 NRC 559, 565 (1975).

h 17/ Id.

l l 18/ Florida Power & Light Co. (St Lucie Plant, Unit No. 2), LBP-82-21, 15 NRC 639, 640 (1982).

i n/ Section 105(c)(5), 42 USC S2135(c)(5).

D 20/ Section 105(c)(6), 42 USC S2135(c)(6).

h i

)

applicable to an operating license application apply only ift O' . . . . the Commission determines such review is advisable on the ground that significant changes in the licensee's activities _or proposed activi-ties have occurred subsequent to the previous re-view by the Attorney General and the Commission under this subsection in connection with the con-O struction permit for the facility.

"Signiticant changes" are changes which "(1) have occurred since t

the previous antitrust review of the licensee, (2) are reasonably

5) attributable to the licensee, and (3) have antitrust implications that would likely warrant some NRC remedy".21/

The NRC recognized that Congress, by setting up this O two-step review process, intended to limit antitrust review to

'his process:

We find the specificity and completeness of Sec-tion 105 striking. The section is comprehensive;

.O it addresses each occasion on which allegations of

! anticompetitive behavior in the commercial nuclear l power industry may be raised, and provides a pro-l cedure to be followed in each instance. The Act links Commission antitrust review with the licens-ing process, demanding a thorough antitrust review t

,O at the stage of application for the construction l permit and allowing a narrower second review at j

! the operating license stage, if such a review is -

i deemed advisable on the basis that significant l changes have occurred in the licensees activities. l The clear implication of the "significant change" lO language is that the holder of a construction per- <

mit is not subject to a second antitrust review at l the operating license stage unless "significant changes" in the proposed project with antitrust implications have occurred in the interim.

O footnote omitted; Id. at 1312. The NRC went on to notes i

21/ South Carolina Electric and Gas Co. (Virgil C. Summer Nuclear i Station, Unit 1) ("South Carolina I"), CLI-80-28, 11 NRC 817, O 824 (1980). Note that the purpose of the antitrust review at the operating license stage is to add -- not delete -- anti-trust conditions.

r l

1

g l

But even among those who argued in favor of preli-cense review, no evidence emerges that anything

) more than license connected review was considered.

l There is no hint in the legislative history that i anyone -- advocate or foe of prelicensing review l

--- anticipated anything more. Indeed, the rea-sons underlying support for the bill as enacted

, indicate the importance of anticipatory review to f its advocates.

emphasis in original; Id. at 1314. The NRC summarized its find-ings:

O In summary then, we conclude that Congress had no

intention of giving this Commission authority l which could put utilities under a continuing risk I of antitrust review. Had Congress agreed with the proposition.that this Commission should have broad j) antitrust policing powers independent of licens-

" ing, the statute that emerged from these discus-l sions would have looked quite different. Little attention would have been paid to defining a two-step review process. The terminology of all par-ticipants in the drafting process would not have been focused so directly on "prelicensing" review.

,g Id. at 1317. '

The NRC also observed that the limit on the NRC's au-thority in the one' instance in which post-licensing review of l O

antitrust matters is permitted also reflected the desire by Con-gress to proscribe such review in all other circumstances. Sec-tion 105(a) of the Act permits the NRC to modify antitrust condi-tions if a court finds that the licensee has violated any of the federal antitrust laws "in the conduct of the licensed activ-  !

ity."22/ Referring to this language, the NRC noted:

,O l

. . . . if a broad, ongoing police power in the antitrust area had been assumed, the language in 105(a) authorizing the Commission to act with re-0 22/ Here, again, observe that the NRC action contemplated is the addition, not deletion, of conditions consistent with the court's findings.

O

C) spect to licenses already issued, in light of the g antitrust findings of courts would have been, if not superfluous, certainly redundant.

Id. at 1317.

The NRC also rejected the argument that Sections of the O Act other than Section 105 could give the NRC "general antitrust police powers in the nuclear industry" which would justify re-opening licensing proceedings. Id. Again, the NRC noted that O the carefully circumscribed and detailed antitrust review process set forth in Section 105 was intended to alone govern the anti-trust review process. Hence, other sections of the Act which O deal in a general way with the NRC's authority -- such as Section 161, 42 U.S.C. S2201, and Section 186, 42 U.S.C. S2236 -- do not I govern this process. Id.

O The NRC found that in the special circumstances at is-sue in South Texas, antitrust review prior to the filing of the operating license application would not conflict with the poll-O cies underlying Section 105 of the Act. The NRC noted that all of the parties favored an antitrust review. The NRC then stated:

. . . if antitrust review is found necessary in the period between issuance of a construction per-O mit and application for an operating license, we can fashion remedies to expedite the review. This necessary flexibility can allow us to resolve an-titrust allegations in a timely fashion, without unduly delaying the licensing process.

O Id. at 1318.

The NRC recognized that, due to the special circum-stances in the proceeding, it did not need to address whether O antitrust review would be warranted in certain other circum-stances:

3 40 b

l 1

O j

Thus, we_need not and do not decide whether anti-trust review may be initiated in case of an appli-g cation for a liceese amendment which would result in a "new or substantially different facility," or

~here an application for transfer of control of a license has been made, or where "significant changes" occur after an operating license is is-sued. We note, however, that the report of the g' Joint Committee explicitly refers to our authority to conduct a review in the first situation, H.R.

Rep. No. 91-1470, 91st Cong. 2d Sess., 3 U.S. Code Cong. and Adm. News, 4981, 5010 (1970). Authority in the second situation, not explicitly referrad t in the statute or its history, could be drawn O as an implication from our regulations. 10 CFR 550.80(b). The third situation presents the is-sues pending in the Florida Power and Light pro-ceeding, n. 1 supra, which we do not have before us and need not resolve to decide this case. We go no further than to conclude that Section 186 O can have at best limited application, in light of the "significant changes" restriction of Section 105(c)(2) and its relation to the overall scheme of Section 105.

Id. at 1318.

Remarkably, Edison in its terse discussion of South Texas simply cites the portion of the above statement in which the NRC notes that it did not decide whether an antitrust review can be justified where "significant changes" occur after an oper-i ating license is issued. Edison does not even acknowledge, much less attempt to address, the NRC's finding that Congress did not ,

intend that the NRC "should have broad antitrust policing powers )

i independent of licensing". Id at 1317. l l

Moreover, Edison chooses to overlook the second portion l 0 i of the NRC's statement in which it notes that this situation "presents the issues pending in the Florida Power and Light pro-ceeding." As shown below, this omission is not surprising.

Florida Power reinforces the finding in South Texas that anti-l O l

l

) l i

l j trust review can only occur in the context of a construction per-C) mit or operating license proceeding. Moreover, Florida Power clarifies that this statutory bar on antitrust review applies l even if there are significant changes in circumstances subsequent LJ to the license proceedings.

l l 2. Florida Power g The Florida Power proceeding referred to by the NRC was i

l that involving St Lucie Plant, Units 1 and 2 and Turkey Point l

Plant, Units 3 and 4 in Docket Nos. 50-335A, et al. In that pro-ceeding, numerous municipal electric power utiiities sought to o,

intervene 31 months late in a proceeding and petitioned for an l antitrust hearing. The NRC had already issued operating licenses in the proceeding for three of the four plants at issue pursuant ,

O '

l to Section 104(b) of the Act: St Lucie Plant, ' Unit 1 and Turkey ,

I l

Point Plant, Units 3 and 4. For ease of reference, these are re-t ferred to as the Turkey Point plants. No requests for an anti-lO trust hearing had been filed during the construction permit pro-l

[

ceeding. )

i The Cities pointed to an array of allegedly anticompet- l l{} l itive practices of the applicants subsequent to the issuance of  !

the operating licenses. Id at 798. These activities included refusals to (1) enter into an integrated power pool, (2) sell wholesale power, and (3) wheel power.23/ Among the sections cited by the Cities as a basis for their request for relief were  ;

l i

O 23/ See "Joint Petition Of Florida Cities For Leave To Intervene Out Of Time; Petition To Intervene; And Request For Hearing",

pp. 49-85 (Aug. 6, 1976).

1

() l l

i

l iD L l l

l Section 105 of the Act and Section 2.206 of the NRC's regula- l 0 tions.24/ l The Licensing Board rejected the petition. LBP-77-23, 5 NRC 789 (1977). The Board pointed to the Appeal Board's deci-O sion in South Texas (then pending before the NRC) in which it found that neither the Licensing nor the Appeal Board has the "authority to reopen a terminated construction permit proceeding 33 by ordering a hearing on supervening antitrust questions." 5 NRC at 791. The Board noted that this finding applied with full force to the Cities' joint petition despite the allegations of O anticompetitive activities subsequent to the issuance of the op-erating licenses. Id. "Therefore," stated the Board, "the Joint Petition must be and is dismissed." Id.

O The Licensing Board found that this same reasoning in-  :

dicated that there was no jurisdictional bar to establishment of an antitrust hearing in connection with the remaining plant: St {

-O Lucie Plant, Unit No. 2. For ease of reference, this plant is  !

referred to here ac the St Lucie plant. The Board noted that the

construction permit proceeding regarding that plant was still  ;

O pending before the Licensing Board. The Board vant on to find 4

that the Cities had satisfied the standards governing interven-tion in Section 2.714 of the NRC's regulations by showing that

.O (1) they had a sufficient interest in the proceeding due to con- #

cerns about alleged anticompetitive conduct by the applicants, l j) 24/ See "Notice of Appeal and Appellate brief of Florida Cities",

pp. 11-?2 (April 29, 1977).

i

!O

• I' ' -

C and (2) they had good cause to file late because (1) the Cities O and-applicants had agreed to allow the construction permit to issue subject to certain conditions ensuring that the Cities had access to, or at least the opportunity to purchase access to, the O nuclear capacity, (ii) the applicants had failed to meet these commitments, and (iii) the fossil fuel shortage which began in 1973 exacerbated the impact of the applicants' monopoly of nu-O clear power.

The Appeal Board affirmed the Licensing Board's deci-sion regarding the Turkey Point plants, on one hand, and the St O Lucie Plant No. 1, on the other, in two separate decisions. 6 NRC 8 (1977) (St Lucie No. 1); 6 NRC 221 (1977) (Turkey Point).

Most significant here is the Appeal Board's decision affirming O the denial of the petition seeking post-oporating license anti-trust review of Turkey Point. The Appeal Board noted that the NRC had decided to not review the Board's finding in South Texas O that it could not order an antitrust hearing "'in the absence of a pending construction permit or operating license proceeding.'"

Id. at 223.25/ Hence, the Appeal Board agreed with the Li-O censing Board that South Texas was fully applicable and precluded the Licensing Board from directing a hearing on antitrust issues despite the allegations of anticompetitive acts by the licensee O subsequent to the issuance of the operating licennes.

However, the Appeal Board noted that the NRC had, sub-O 25/ The NRC decision was issued on March 31, 1977 and was not reported. Ici , at 223.

O

(3  !

I sequent to the Licensing Board, directed the Appeal Board to con-O sider a related issue: whether the NRR Director could address the antitrust issues raised by the petitioners. The Appeal Board first noted that the Turkey Point units received construction ,

1 O permits prior to the 1970 amendments to the Act requiring preli-censing antitrust review. Id. at 224. The Board observed that Congress, in enacting the 1970 amendments, decided to exclude O frou antitrust review under Section 105(c) plants, such as Turkey Point, which had received construction permits under Section 104(b) before 1970. Id. at 224-225.

O Directly portinent here is the alternative justifica-tion given by the Appeal Board for its decision. The Board pointed to the NRC's finding in South Texas, 5 NRC 1303, that O post-operating license antitrust review is precluded by the Act and found that this reasoning applied even where significant l changes had occurred 21/2 O In its own South Texas decision, the Commission j

, recently considered at length the extent of its l authority to hold antitrust hearings. The precise i issue in that case involved when an antitrust pro-ceeding under Section 105(c) may be ordered after a construction permit has been issued but before O the necessary additional license to commence oper- i ations has been granted. The Commission did not i confine its South Texas opinion to that relatively narrow question; instead it chose to address the broad spectrum of NRC antitrust responsibilities.

In so C ? g, it manifested the judgment in no un-

.O certain tetus that the NRC's supervisory antitrust jurisdiction over a nuclear reactor license does 20 21/ 6 NRC at 226.

ll iO

'O not extend over the full 40-year term of the oper-ating li ense but ends at its inception.12/

O o l 12/ Except perhaps as necessary to enforce the l terms of a license or to revoke one fraudu-

. lently btained, or in circumstances where a lO plant is sold or so significantly modified as l to require a new license. See CLI-77-13, supra, 5 NRC at 1318.

The NRC declined to review the Appeal Board's decision. The O Cities submitted a petition for review in the D.C. Circuit. The court affirmed the NRC's decision.

Pt. Pierce Utilities Au-thority v. NRC, 606 F.2d 986 (D.C. Cir.), cert. denied, 444 U.S.

O 842 (1979).

3. South Texas and Florida Power in-dicate that the NRC does not have the statutory authority to grant O the relief sought by Edison The reasoning in Florida Power is directly applicable here. By requesting a suspension of the antitrust license condi-O tions, Edison is asking the NRC to conduct yet another antitrust review. Edison recognizes this. In its application (App. 42),

Edison states that "[t]he critical fact, . . . for purposes of O Section 105(c) review, and the fact at issue today, was the low cost of nuclear power." (emphasis added). Moreover, Edison run-ognizes that the relief it seeks opens the door for yet addition-O al antitrust reviews. In its prayer for relief (App. 81), Fiison asks the NRR Director to suspend "the license conditions in ques-tion until such time as there may be a factual basis for imposing O them."

As the NRC recognized in South Texas and Florida Power, 0-

I 3

$~

l an antitrust review can only take place pursuant to Section

^

'-)

105(c) of the Act. 5 NRC at 1317. Section 105(c) permits this review only in connection with a construction permit or operating license proceeding. In the situation here, t;he construction per-

'O mit and operating license proceeding terminated long ago. Conse-quently, as shown in South Texas and Florida Power, the NRC does not have the statutory authority to consider Edison's applica-O tion. Hence, Edison's application must be summarily rejected.

Indeed, Florida Power represents, in effect, a sort of flip side of the circumstances here. In Florida Power, the NRC O found that it could not conduct an antitrust review even in the face of changes in economic conditions which exacerbated the Ap-plicants' monopoly power despite the allegation that the appli-O cant had also engaged in specific, anticompetitive conduct.

Here, one of the Applicants (Edison) argues that supervening cir- l cumstances have eliminated the need for antitrust license condi-  !

n v tions.

\

The antitrust review sought by Edison is even less jus-l tifiable than the review sought in Florida Power. Edison merely l l

0 points to changes in economic conditions which purportedly reduce the Applicants' monopoly power.

l The changed circumstances cited by Edison to support i

O suspension of the antitrust conditions are not the type of cir-cumstances which could even support antitrust review at the oper-ating license stage pursuant to Section 105(c)(2) of the Act.

O Edison asserts that subsequent to the issuance of an operating license, antitrust review is available pursuant to the standard lo i

O in Section 105(c)(2) (App. 49). As noted earlier, Section

3) 105(c)(2) states that antitrust review is available at the opera-ting license stage to determine whether additional antitrust con-ditions should be imposed only if "significant changes in the C licensee's activities or proposed activities have occurred subse-quent to the previous review by the Attorney General and the NRC" t

during the construction permit proceeding. "Significant changes" d) are limited to changes which (1) have occurred since the previous antitrust review of the licensee, (2) are reasonably attributable to the licensee, and (3) have antitrust implications that would O likely warrant some NRC remedy. South Carolina I, 11 NRC at 824-25.

Even putting aside the fact that Section 105(c)(2) an-iO titrust review is limited to imposition of additional conditions, '

Edison has not met the Section 105(c)(2) standard. The primary j factor cited by Edison in trying to justify another antitrust lO review -- a change in the economic attractiveness of nuclear i

3 power -- is obviously not "attributable to the licensee". Thus, if this factor had been raised during the operating license pro-43 ceeding, an antitrust review would not have been justified.

Moreover, the policy concerns underlying the decision by Congress in the 1970 amendments to limit antitrust review to O the construction permit and operating license proceeding are directly applicable here. As noted above, the NRC in reviewing  ;

the legislative history of the 1970 amendments in South Texas >

0 observed that Congress recognized that strict limits on the fro-quency of antitrust reviews were needed to ensure that utilities O

I)

could rely on NRC licensing decisions. 5 NRC at 1314-16. The O NRC cited statements by th3 Cheirman of the Joint Committee on i

Atomic Energy and others during the congressional hearings oppos-ing an unlimited reopening of antitrust review in the operating n

U license proceeding. Id.

i These same concerns about encouraging reliance on the findings in the construction permit proceeding apply with O equal force here to protect the competitive positions of benefi-claries of the license conditions. In the situation here, the relief sought by Edison -- elimination of the license condition O restraints as to it -- would have the sort of disruptive impact -

i which Congress acted to prevent by limiting antitrust review to the construction permit and operating license proceeding. Prior 33 to the imposition of the antitrust license conditions, Cleveland j Public Power fuced extinction due to the anticompetitive activi-i ties of CEI, in particular, and its sister members of CAPCO. See  !

i

.O 5 NRC at 165-76. Cleveland Public Power was dependent entirely l on power purchased from CEI for its continued existence. Cleve-land Public Power had a single interconnection with CEI, and only

.O the ability to purchase firm and emergency power from CEI.

Imposition of the license conditions provided Cleveland Public Power access to transmission and coordination services, a

O variety of wholesale purchase power sources, and to various 1

agreements between the Applicants and between them and other

] utilities. Because of the license conditions, Cleveland Public

!O Power has been able to add a second interconnection and plans to i

4

!O

O add a third. Cleveland Public Power has also made use of CEI

.O transmission services to buy and transmit low cost hydroelectric power from (1) PASNY, (2) Buckeye Rural Electric Cooperative, Inc. ("Buckeye"),22/ and (3) Bic Rivers Electric Cooperative

) ("Big Rivers"). Cleveland Public Power has also been able to diversify its power supply, and take advantage of the variety of  ;

surplus power available as short-term, limited term, emergency .

.O and even "dump" power. These arrangements provide. Cleveland Pub-i lic Power and, in turn, its customern with substantial reductions in costs from what would have been paid to CEI without such com-O petition.

Cleveland Public Power's first firm power purchase from an alternative supplier began in 1980 as a direct result of the l O license conditions and involved a purchase from PASNY. This pur-chase involved inexpensive hydroelectric power. Clevelanet Public i Power continues to buy this power. Cleveland Public Power had O applied for an allocation of PASNY energy back in the late  !

1970's, and was allocated a share of the power. But Cleveland 1 Public Power could not take advantage of this cheap power source N3 until CEI was forced by the license conditions to transmit the j i

power to Cleveland Public Power. '

As the PASNY Power Bargaining Agent for the State of

O Ohio, Cleveland Public Power has represented the entire State and has fulfilled its responsibility to facilitate making PASNY Nia-gara Power available for transmission to municipally-owned elec-10 21/ Buckeye is now known as the Ohio Rural Electrical Coopera-

] tives, Inc.

1 l

i 0

tric systems throughout the State. Cleveland Public Power could O not have obtained low cost Niagara Preference Power for the 75 municipal electric systems in Ohio receiving the power without ,

l the ability to have the power actually transmitted from New Ycrk O to each municipal system through the transmission facilities of Edison and CEI. Indeed, all but two of the 75 recipient munici-i pal systems receive the power by having it transmitted at some O point over the systems of Edison and CEI.

Cleveland Public Power's purchases in October 1987 11-lustrate the way the license conditions have permitted Cleveland O public Power to diversify its supply sourced to procure the chea-pest power available. During that month, Cleveland Public Power purchased more than 60 million kwh of power from five sources.

O Cleveland Public Power bought 34.86 percent of its power from l Dayton Power and Light, 25.79 percent from PASNY, 23.97 percent from Ohio Power, 15.14 percent from Big Rivers, and .24 percent O from CEI. During Cleveland Public Pener's peak months of July and August., 1987, when it provided its customers approxirdately 70 million kwh of energy, Cleveland Public Power purchased power O from ten different sources: Dayton Power and Light Company,

! PASNY, Ohio Power, Big Rivera, CEI, American Elc,ctric Power Company ("AEP"), Toledo, Duquesne, Michigan Electric Coordinated

O Systems and PENELEC. Clevoland Public Power ale) purchased power from Edison, Ontario Hydro and Buckeye during the past eight years.

O In entering into those transactions, Cleveland Public Power has relied on its access to wheeling servicos and coordina-O

O  :

tion service provided by the CAPCO members pursuant to the-li-O cense conditions. These power purchases obviously are a key com-ponent of Cleveland Public Power's supply plans.

I Moreover, even if the license conditions were suspended and later reimposed, Cleveland Public Power and other utilities in the CCCT would still not be able to rely on the services  !

available pursuant to the license conditions in planning its O power supply.28/ Cleveland Public Power could not assume that 6 the services available pursuant to the antitrust license condi-tions would continue to be available. Therefore, Cleveland Pub-O lic Power's ability to make advantageous purchase power arrange-ments with other power suppliers, and thus its ability to compete with CEI, would be impaired. As noted, Congress, in enacting the O 1970 amendments, intended to prevent that sort of continuing un-certainty regarding the conditions governing a nuclear facility. ,

B. NRC PRECEDENT REGARDING s'NTITRUST RE-O VIEW IN CONNECTION WITH Ch.\NGES IN THE NATURE OF A PLANT'S OPERATIWS OR OWNER-SHIP IS INAPPLICABLE HERE In its application, Edison cites other decisions be--

O sides South Texas in its atttmpt to show that the NRC has the authority to suspend the license conditions. These decisions are ;

no more helpful to Edison than South Texas. Edison cites (App.

jO 49, n. 111) Detroit. Edison Co. (Enrico Fermi Atomic Power Plant, Unit No. 2) ("Detroit Edison"), LBP-78-13, 7 NRC 583 (Licensing Board), aff'd, ALAB-475, 7 NRC 752 (1978). Detroit Edison in-

'O 28/ As noted, Edison argues that antitrust conditions can be sus-pended and reimposed by the NRC at any time.

O

O.

i l volved an application by the permittee subsequent to the issuance O of a construction permit to add new co-owners to the termit. The applicant cited South Texas and argued that the NRC did not have the jurisdiction to conduct an antitrust review of the proposed O amendment. The Licensing Board rejected this argument. It noted ,

that this finding was consistent with Congressional intent re-garding the meaning of the term "license application" in Section O 105(c). The Licensing Board cited the Joint Committeo report on the 1970 amendments in which the Committee stated:

The Committee recognizes that applications may be g amended from time to time, that there may be ap-plications to extend or review a license, and also that the form of an application for a construction ,

permit may be such that, from the applicant's standpoint, it ultimately ripens into the applica-tion for an operating license. The phrases "any g . license application", "an application for a 11-cense", and "any application" as used in the clarified and revised subsection 105(c) refer to the initial application for a construction permit.

footnote omitted; emphasis in original; Id. at 588. The Board C) also noted that this interpretation was necessary to ensure that '

the NRC's antitrust review authority was not circumvented:

As to the two cooperatives, the present applica-O tion for an amendment to add them as co-owners of Fermi 2 must be approved by the Commission before an ownership interest is acquired, and the coopor- ,

atives will be required tc submit applications to become co-licensees of the facility prior to the  !

issuance of an amendment allowing change in owner- i ship. Without exalting form over substance, it 1 O is clear that these applications are within the  !

scope of the phrase "any license application" for antitrust review purposes within the meaning of S105c(1), supra, and trigger an opportunity for intervention raising antitrust issues as to the two cooperatives. To construe the statute other-O wise would permit a utility with no antitrust problems to undergo an antitrust review and obtain

-i an unconditioned construction permit, and then  !

C) l l

l

O sell an ownership interest to another monopolizing n

utility. Under the Licensee's argument, there could then be no antitrust review until the later operating license stage, which itself could be a more limited review than the normal prelicensino antitrust review contemplated by the statute.

Such an unequal treatment of Applicants, insula-q* ting from prelicensing antitrust review those who came in later by way of amendments to construction permits, would subvert the Congressional intent and purpose of S105c.

footnotes omitted; emphasis supplied; Id. at 587-88.

O The applicant did not raise this jurisdictional issue in its appeal to the Appeal Board. Hence, the Appeal Board ob-served that it did not need to reach this issue. 7 NRC 752, 756, O n.7. Nonetheless, the Appeal Board said that it is "sufficient simply to note our essential agreement with the decision below on this point." Id at 755, n. 7.

() Detroit Edison only serves to further undermine Edi-son's position. Detroit Edison highlights the NRC's concern about ensuring against ploys to circumvent the antitrust review 0 needed to determine whether antitrust licenso conditions should be imposed. The NRC recognized that a change in ownership of a nuclear facility introduces a new owner which has never been the l i

n I v subject of an antitrust review. Hence, this sort of change war- 1 rants the comprehensive antitrust review provided for in connec-tion with construction ,rmit applications to determine whether O antitrust license condicions should be imposed.

The situation presented in the application here is en-tirely different. Edison is seeking suspension, not addition, of O the antitrust conditions. In addition, the antitrust review of the Perry owners has already occurred. Consequently, there is O

i O

simply no need to repeat this review.

O l C. THE DICTA IN THE APPEAL BOARD DECISION IN THIS PROCEEDING DOES NOT AND CANNOT SUP-PORT POST-OPERATING LICENSE ANTITRUST REVIEW Edison makes much ado about certain dicta in the Appeal Board decision approving the imposition of comprehensive anti-

, trust conditions on the Applicants because of their anticompeti-tive ndu t. Edis n ites the separate opinion written by Ap-O peal Board member Sharfman who, as noted, resigned from the NRC while the Board was reviewing his then-draft opinion. In his draft opinion, Mr. Sharfman affirmed the license condition re-quiring the Applicants to provide wheeling services and to not reduce these services in the event of a capacity shortage until the capacity allocated to the other Applicants is reduced by at O

least five percent. But Mr. Sharfman went on to find that a waiver of this condition might be granted if it caused an "ex-treme hardship":

However, should this license condition confront the Applicants with a situation of extreme hard-ship or impossibility at some time in the future, they may petition the Licensing Board for relief from it. We hereby vest the Licensing Board with O continuing jurisdiction to entertain such a peti-tion.

Id. at 392. Mr. Sharfman also went on to voice his approval for waiver of any license condition that causes an "extreme hard-ship":

If compliance with a request authorized by one of the license conditions would cause extreme hardship, an applicant may seek relief from the Licensing Board. We O vest that Board now with continuing jurisdiction to entertain such a request. But the burden will be on O

O

, - 49 _

the Applicants to demonstrate a right to relief. Up to n w, n su h demonstration has been made.

l0 M. at 398.

In its ceparate opinion, the Appeal Board said this ab ut Mr. Sharfman's reasoning:

O In a number of instances Mr. Sharfman-would,.for an indefinite period, "vest the Licensing Board with continuing jurisdiction" to relieve the Ap-plicants from conditions that might prove an ex-treme hardship or impossible of compliance. See, O e.g., pp. 392 and 398, infra. We agree that license conditions seemingly fair today may prove inequitable tomorrow. It is not necessary, how-ever, to extend the Licensing Board's jurisdiction to provide for the possibility of such modifica-tions. Commission regulations give the Director O of Nuclear Reactor Regulation -- who is assisted by an able antitrust staff -- authority to modify license conditions where necessary and provide as well as means for review of his determinations.

10 CFR Sections 2.00-2.204 and Section 2.206. In-deed, the Director has already acted to modify one O of the license conditions imposed in this case (albeit not at the applicant's request). We therefore see no occasion to continue the Licensing Board's jurisdiction over aspects of the case. Accordingly, we do not join in the portions of Mr. Sharfman's opinion that would do so.

M. at 294-95; footnotes omitted.

Edison errs in interpreting this statement as a blanket endorsement of any sort of modification of antitrust license con-ditions. First, this statement is mere dicta. Nowhere in the licensing conditions approved by either the Licensing and Appeal Boards is there any mention that the conditions can be modified  ;

in the event circumstances change. ,

Moreover, the Appeal Board's statement does not go as far as Edison suggests. Again, the Board simply says that the NRR Director has the authority (pursuant to Section 2.200, et O ,

Q al,. of the NRC's regulations) to modify license conditions where O necessary". Those sections of the Regulations authorize the Director authority "to modify, suspend or revoke a license or to take other action for alleged violation of any provision of the

'O Act or this chapter or the conditions of the license" (emphasis [

supplied).

The only decision cited by the Board to support its

'O contention highlights the limits on'the'NRC's authority to modify antitrust license conditions. The Board cites the June 25, 1979 decision by the NRC in the consolidated proceeding enforcinq one O of the license conditions in view of CEI's failure to comply with the condition._2_9_/ The June 25 order was in response to a request by Cleveland on January 4, 1978, asking the NRC to take enforce-l  !

O ment action pursuant to section 2.201, et al., of the NRC regula-tions against CEI for violations of antitrust license condition l l

no. 3 in its construction permits and operating license. License lO 1

condition no. 3 requires the joint Applicants to provide wheeling for entities in the CCCT. Cleveland argued that the transmission j schedule filed by CEI with the Federal Energy Regulatory Commis-O sion (FERC) did not comply with this license condition. On June 28, 1978, the Acting Director of the NRR Office responded to 1 Cleveland's motion by issuing a Notice of Violation to CEI pur- I O suant to Section 2.2011 of the NRC's regulations. In the ictice, 29_/ "Order Modifying Antitrust License Condition No. 3 of Davis-Besse Unit 1, License No. NPF-3 And Perry Units 1 and 2, O CPPR-148, CPPR-149" (unreported). The order (but not the at-tached appendices) is reproduced in Appendix A at the end cf this pleading.

O

]

O the Director reviewed CEI's January 27 transmission schedule and CEI's response to a Staff questionnaire concerning Cleveland's motion and stated that "it appears that CEI has not complied with antitrust license condition No. 3 of the subject license and con-O struction permits. . . . n/

Cleveland, CEI and the NRC_ Staff met in an unsuccessful attempt to address the concerns raised by Cleveland's filing. On O June 25, 1979, the Director found that CEI had not complied with license condition no. 3:

CEI has approached its responsibility to file a g wheeling schedule for the City as if it had not been required as a condition of its operating license and two construction permits to comply with Antitrust License Condition no. 3.

mimeo. at 6. The Director noted that an April 27, 1979 initial O decision by a FERC administrative law judge (ALJ) addressing CEI's transmission schedule "deals effectively with most items cited by the NRC Staff to be in violation of Antitrust License O Condition No. 3" (mimeo. at 4). With respect to the matters not resolved by FERC, the Director ordered CEI to file an amendment to its transmission tariff to ensure compliance with the anti-O trust license condition. Consistent with these findings, the Director exercised his authority pursuant to Section 2.204 of the NRC's regulations and modified license condition no. 3 to add O language requiring CEI to file a revised transmission schedule reflecting the changes ordered by the NRC and FERC.

Thus, the Board's citation to the director's enforce-O M / The Notice is reproduced in Appendix A of the June 25 order.

O

.0-l ment order merely reflects the Board's recognition that a license  !

n v condition can be modified to ensure that it is not circumvented by the Applicants. Significantly, the Board does not even men- 4 tion the NRC decisions in South Texas and Florida Power. In view '

O of this, it is clear that the Board was not saying that the anti-trust conditions could be suspended in'the circumstances here.

O j

.O 1

I i

10

!o  ;

iO l

i 4

lO I

i O

i i

lO

~ . . _ . . . . _ _ _ _ . . _ . . . . _ . .

_ , ~.

r f

l IV. THE RELIEF SOUGHT BY EDISON IS l BARRED BY RES_JUDICATA OR, AL-

) TERNATIVELY, COLLATERAL ESTOPPEL .

An just shown in Section III of this answer, the NRC does not have the statutory authority to conduct an antitrust

) review subsequent to the issuance of an operating license. .The .

F NRC, therefore, simply cannot grant the relief sought by Edison.

But even if the NRC finds that an antitrust review can i occur at any time and that the NRC has the statutory authority l to grant this relief, the NRC should still deny the relief.and ,

can do so without reaching the merits of Edison's arguments. ,

) This is because these arguments involve issues raised in the con-struction permit and operating license proceeding and were or i

could have been raised in those proceedings. Therefore, the )

)

i arguments are precluded by the doctrine of res iudicata or, al- )

l l ternatively, collateral estoppel.

l In subsection A, below, Cleveland reviews the policies

) underlying the doctrines of res iudicata and collateral estoppel.

1 In subsection B, Cleveland examines the criteria used by the NRC  !

l in applying these doctrines. In subsection C, Cleveland shows i

)

4 that res judicata is the pertinent preclusion doctrine in the circumstances here and that the doctrine precludes the arguments raised by Edison in its application. Consequently, res judicata

) bars consideration of these arguments at this late stage. In subsection D, Cleveland shows that if the NRC finds that this proceeding is a different proceeding than that in which the con-3 struction permit and operating license were issued, collateral estoppel would come into play and bar Edison's application.

)

I l

[)- '

r l

A. RES JUDICATA AND COLLATERAL L ESTOPPEL AND THEIR APPLICA-lg BILITY TO NRC PROCEEDINGS l

In a decision affirmed, in pertinent part, by the NRC, j the Appeal Board cited Supreme Court precedent and set forth the

) basic policies underlying res iudicata and collateral estoppel:

Res judicata and collateral estoppel are judi-cially formulated doctrines founded upon "consid-

• l erations of economy of judicial time and [the) p public policy favoring the establishment of cer-V tainty in legal relations". Commissioner v. Sun-l nen, 333 U.S. 591, 597 (1948). These considera-tions dictate that those who have contested an issue shall be bound by the result of the contest, and

.C) that matters once tried shall be considered forever settled as between the parties.

Baldwin v. Iowa State Traveling Men's Assoc., 283 U.S. 522, 525 (1931). They further require that a

'g party who is given the opportunity to present his case before competent judicial authority must then put it forth in toto, rather than advance it piecemeal in multiple proceedings. Cromwell v.

County of Sac, 94 U.S. 351, 358 (1877).

Alabama Power Co. (Joseph M. Farley Nuclear Plant, Units 1 and 2)

("Farley"), ALAB-182, 7 AEC 210, 212, rev'd on other arounds, CLI-74-12, 7 AEC 203 (1974).

The Appeal Board in Parley cited the "general princi-O ples relating to the application and effect of" res judicata:

Res judicata comes into play in circumstances where (1) there has been a final adjudication of the merits of a particular cause of action, claim, O or demand by a tribunal of competent jurisdiction; and (2) one of the parties to that adjudication (or a person in privity with such party) subse-quently seeks to advance or defeat the same cause of action, claim or demand in either (a) the same suit or (b) a separate suit involving the parties ,

C) to the first action or their privies. (citations omitted). Given those circumstances (and subject '

to the qualifications to be discussed below), the O

)

- ss -

earlier adjudication is deemed to conclude the "parties and those.in privity with them, not only 3 as to every matter which was offered and received to sustain or defeat the claim o.t demand, but as to any other admissible matter which might have been offered for that purpose". -

g 7 AEC at 212. The Appeal Board distinguished collateral estop-pel For its part, collateral estoppel does not require an identity between the two causes of action, de- .

mands or claims. It is enough that the issues of 3- law or fact previously receiving final adjudica-tion are the same as those being now asserted --

and that that adjudication was by a tribunal em-powered to consider and decide those issues. Un-like res iudicata, however, collateral estoppel can serve to conclude only "those matters in issue 3 or points controverted, upon the determination of which the [ earlier) finding or verdict was render-ed."

citations omitted; Id. at 213. The criteria governing collateral 3 estoppel have also been summarized by the NRC:

In order to apply collateral estoppel several re-quirements must be met: The prior tribunal must have had jurisdiction to render the decision, there must have been a prior valid final judgment 3 on the merits, the issue must have been actually litigated and necessary to the outcome of the first action, and the party against whom the doc-trine is asserted must have been a party or in privity with a party to the earlier litigation.

O Commonwealth Edison Co. (Braidwood Nuclear Power Station, Units 1 and 2) ("Braidwood"), LBP-85-11, 21 NRC 609, 620 (1985).

I B. APPLICATION OF RES JUDICATA

[) AND COLLATERAL ESTOPPEL IN l NRC PROCEEDINGS The NRC has recognized and applied the doctrines of res judicata and collateral estoppel in NRC proceedings. In Farley, j the Appeals Board noted:

l l

G

~

As the Court of Appeals for the Fif th Circuit ob-O served in Painters Dist. Coun. No. 38 Etc. v.

Edaewood Contractina Co., 416 F.2d 1081,.1084 (1969):

The policy considerations which underlie res judicata -- finality to litigation, prevention of needless litigation, avoidance of unneces-()' sary burdens of time and expense,- .are as relevant to the administrative process.as to the judicial. [ citations omitted).

And any doubt that the~ doctrines of res iudicata and collateral estoppel are not strictly confined O- to the judicial' arena has been laid totally to.

rest. In United States v. Utah Construction and-Minino Co., 384 U.S. 394, 421-22 (1966),-the Su-preme Court acknowledged that (o]ccasionally courts have used language to

() the effect that.res judicata principles do not apply to administrative proceedJngs, but such language is certainly-too broad. When an ad-ministrative agency is acting in a judicial capacity and resolves = disputed issues of fact Properly before it which the parties have had O an adequate opportunity to litigate, the courts have not hesitated to apply res iudi-c_ata to enforce repose. . . .

7 AEC at 214.

O The Appeal Board also observed that the "exceptions to .

the application of res judicata and collateral estoppel which are  ;

found in the judicial setting are equally present when adminis-O trative adjudication is involved -- namely, changed factual or l

1egal circumstances and overriding competing public policy con- l siderations." citations omitted; Id. at 215.  !

C) In its order, the NRC approved the finding that res judicata and collateral estoppel apply to NRC proceedings subject l O  !

i 3

l l to certain limits 31/

3 . . . . we are in full agreement with the conclu-sion reached by the Appeal Board that "res judi-cata and collateral estoppel should not be entire- r ly ruled out of our proceedings, but rather ap-l plied with a sensitive regard for any supported j_ assertion of changed circumstances or the possible ,

l existence of some special public interest factors j in the particular case. . . . "

citation omitted; 7 AEC at 203.

Changed circumstances can justify an exception to res O

iudicata only if there is ' cogent and compelling new evidence (showing) that the situation has changed substantially" subse-l quent to the prior stage of the proceeding. emphasis supplied; Schieber v. Immigration and Naturalization Service, 520 F.2d 44, l 47 n. 11 (D.C. Cir. 1975),

m The NRC has repeatedly applied the doctrines of res M

l iudicata and collateral estoppel to preclude relitigation of is-sues. Most of these situations have arisen in the context of issues raised both at the construction permit and operating lO l

lice.nse stages of an NRC proceeding. The NRC in Farley pointed j out, that "an operating license proceeding should not be utilized ,

1 1

to rehash issues already ventilated and resolved at the construc-

,O tion permit stage". 7 AEC at 203. Thus, the intervenor in an operating license proceeding was barred from relitigating an is-sue -- the environmental impact of the supplementary cooling 31/ The NRC remanded the proceeding because, inter alia, the petitioner against whom the Appeal Board invoked res iudicata was not spec 1';,cally "afforded an opportunity to make a par-lO l

ticularized atowing of such changed circumstances or public interest factors as might exist with respect to this particu-lar proceeding". 7 AEC at 204.

I O l l

\O

\

l water system of the nuclear facility -- because the intervenor O -did not mention any changes or new information that has come to light in this regard since the construction permit was issued."

Philadelphia Electric Co. (Limerick Generating Station, Units 1 O and 2), ALAB-804, 21 NRC 587, 590 (1985).

A party cannot escape the grasp of res iudicata and collateral estoppel simply by concocting a new argument in the O operating license proceeding regarding an issue litigated in the construction permit proceeding. As noted, res iudicata applies

"'not only as to every matter which was offered and received to O sustain or defeat the claim or demand, but as to any other admis-sible matter which might have been offered for that purpose'".

emphasis added; Farley, 7 AEC at 212.32/ Collateral estoppel i O has the same preclusive effect regarding arguments which could have been made in the prior proceeding 33/

(t)he analogy to the rule against splitting a single cause of action is striking. Like a cause l O of action, "an issue may not be . . . split into i pieces. If it has been determined in a former i action, it is binding notwithstanding the parties j litigant may have omitted to urge for or against J it matters which, if urged, would have produced an <

opposite result." Any contention that is neces-O l sarily inconsistent w.th a prior adjudication of a >

material and litigated issue, then, is subsumed in  ;

l

--32/ See also Ness Investment Corp. v. United States, 595 F.2d O 585, 588 n. 6 (Ct. C1. 1979) ("The assertion of different legal theories in a second suit will not defeat application of res judicata . . . nor will the fact that different types of relief are sought. . . . ").

O --33/ Carolina Power and Licht Co. (Shearon Harris Nuclear Power Plant) ("Shearon"), ALAB-837, 23 NRC 525, 537 (1986), quoting 1B J. Moore, J. Lucas & T. Currier, Moore's Federal Practice  ;

10.443(2) at 761 (2nd ed. 1984). footnotes omitted. )

i O

l  !

! that issue and' precluded by the prior judgment's .

collateral ectoppel effect.

'Moreover, the NRC has-recognized that res iudicata ap- l plies in a situation (similar to that involved here) in which a F party seeks to relitigate an issue subsequent to the issuance of j g

i the operating license by asking the NRR Director to modify the license. Consolidated Edison Co. of New York, Inc. (Indian Point, Unit Nos. 1, 2, & 3), ("Indian Point"), CLI-75-8, 2 NRC g i 173, 177 (1975). In Indian Point, the NRC observed  !

i

. . . parties must be prevented from using 10 CFR l 2.206 procedures as a vehicle for reconsideration of issues previously decided, or for avoiding an O existing forum in which they more logically should i

be presented. [

2 NRC at 177.M/

7 O C. APDLICABILITY OF RES JUDICATA TO EDISON'S APPLICATION l In view of these principles, Edison's argument is ,

barred by res judicata. In subsection 1, below, Cleveland shows i O '

that because Edison submitted its application in the same pro- l ceeding as that in which the construction permit and operating i

license were issued, res judicata, not collateral estoppel, is i 0  !

the applicable foreclosure doctrine. Cleveland shows that Edison  ;

t raised the argument regarding the high cost of nuclear power in -

O M/ In Indian Point, the NRC permitted litigation in a pending l Appeal Board review of an operating license application of an i issue raised regarding the safety of a license nuclear plant. l The NRC noted that the issue was based on "recently developed  !

seismic data" and raised "substantial safety" concerns. Id. ,

at 174, 177. The NRC also pointed out that the licensee,  !

O staff and the intervenor "all agree that the subjects raised l' warrant hearing in an adjudicatory proceeding." Id. at 177.

l

i O l l

its appeal of the Licensing Board decision during the construc-

'O tion permit proceeding. Edison does not show why it should be i able to reargue the issue. In subsection 2, Cleveland shows that even if the NRC looks at the circumstances cited by Edison, res  !

O iudicata should still apply. Each of the purported changed i circumstances occurred well before the conclusion of the opera-ting license proceeding. Therefore, Edison had the opportunity O at the operating license proceeding to make the arguments it pre-sents in its application. Consequently, Edison is foreclosed from seeking the relief requested in its application.

O

1. Res judicata is the applicable preclusion doctrine here As noted in section III above, both res iudicata and O collateral estoppel preclude a party from relitigating issues and are based on the same fundamental policy: "economy of judicial time and [the) public policy favoring the establishment of cer-  !

O tainty in legal relations." rarley, 7 AEC at 212. Both doc-trines come into play where there has been a final adjudication  ;

of the merits of a particular cause of action by a tribunal of O competent jurisdiction. I These criteria are met here. In the construction per-mit proceeding, the NRC reviewed all aspects of the Perry Unit 1 l O facility and the other nuclear plants at issue and imposed the antitrust license conditions. In the operating license proceed-ing, the NRC again looked at the antitrust ramifications of the O nuclear plants at issue and determined pursuant to section 105(c)  ;

of the Act that there were no "significant changes" that would i

O

l 3

warrant an additional antitrust review to impose additional an-titrust conditions on the licenses. Edison and the other Appli-cants actively participated in this aspect of the proceeding and ,

urged the NRC to find that there were no significant changes. i O Edison's application arises in the same "cause of ac-tion" as the construction and operating permit proceeding. The 1

NRC has indicated that all regulatory acts in connection with a O nuclear facility are part of the same proceeding or "cause of action" as the proceeding in which the operator of the facility originally sought authorization to construct and operate the fa- l lC cility. For example, in the seminal decision in Parley on ry judicata and collateral estoppel, the Appeal Board observed:

It seems to us that, for the purposes of the ap-plication of res judicata, there is a sufficient ,

'O basis for treating an operating license proceeding  ;

as involving the same "cause of action" as the construction permit proceeding relating to the same reactor. See Section 185 of the Atomic Ener-gy Act of 1954, as amended, 42 U.S.C. 2235. There is, however, no need for a definitive decision on

,0 that question here.

7 A2C 210, 215, n. 7. Likewise, the Licensing Board in its de- l 1

cision in South Texas noted that, as a practical matter, the O various stages of NRC action on an application for NRC authoriza-tion are part of the same proceeding:

1

. . . the application to NRC for a license in this, as in other cases, requests the issuance of lO both a construc31on permit and an operating li-cense for the proposed nuclear facility. It is hardly reasonable to act as though there is a rig- )

idly circumscribed construction permit proceeding, ,

which terminates when the permit is issued even for nontimely but permissible antitrust proceed-

.O ings, and assume that the Applicants will spend j i millions of dollars to construct a plant and then <

decide later whether or not to seek an operating I l

O I l

=-- "

1

{3 l l

l license. The Applicants undoubtedly view the NRC l

,9 licensing procedure as an integrated and continu- l 1

ous process from the initial license application ,

to the ultimate issuance of a license. It is un-realistic to rigidly define two separate insulated l boxes, one defined as a construction permit pro-  !

ceeding and the other as an operating. license pro- ,

ceeding . . .

)

4 NRC 571, 575 (1976).JS/

The same reasoning applies with equal force here. Edi-g son filed its current application in the same consolidated pro-ceeding -- Docket No. 50-440A, et al. -- in which the joint Ap-plicants originally sought authorization for the construction

• permit and operating license in connection with Perry Unit 1

})

along with Perry Unit 2 and Davis-Besse Units 1, '

and 3. Doc-ket No. 50-440A is also part of the same proceeding in which the q) NRC issued the construction permit and operating license subject to the antitrust conditions at issue here. Hence, Edison's ap-plication is part of the Docket No. 50-440A proceeding.  !

! In view of this, res iudicata is triggered here. In i

.O its application here, Edison is seeking to defeat the judgment

! regarding antitrust issues in the prior stages of the same cause _

of action. That ia, Edison is trying to show that the antitrust 3) conditions imposed as part of the construction permit and opera-ting license should be suspended. This satisfies the second  :

criteria for res judicata. Parley, 7 AEC at 212. i

() ,

4

.I I

, JS/ As noted in subsection III(A)(1), above, this decision was j) j reversed by the Appeal Board which found that the licensing board erred in finding that it has jurisdiction to direct a i

1 hearing on antitrust issues in the absence of a pending con- '

struction permit or operating license proceeding, i

)

i  :

O

2. Res judicata bars the argu-ments made by Edison O

Because res iudicata applies here, Edison is barred from seeking to rely on "every matter which was offered and re-ived t sustain r defeat the claim (as well as) any other ad-O missible matter which might have been offered for that purpose."

Farley, 7 AEC at 212. Again, for purposes of this analysis O nly, Cleveland is accepting Edison's contention that the,NRC can modify or remove antitrust conditions at any time, including dur-ing the operating license proceeding. Given this premise advanced by Edison, Cleveland shows in this section that each of the arguments raised by Edison in its application to support the contention that the antitrust conditions should be suspended was an admissible matter which was or might have been offered for that purpose during the construction permit and operating license proceeding. Hence, res judicata bars Edison from making these arguments at this late date.

Cleveland also ahows that, even putting aside Edison's failure to make these arguments during the operating license pro-ceeding, Edison has not put forth "cogent and compelling evi-dence" that there are any "substantial changes" in the circumstances reviewed and relied on by the NRC in imposing the antitrust license conditions. Thus, there is no basis for pro-viding an exception to res judicata here,

a. Edison already made its arguments here durino the construction permit proceeding O

In the joint brief submitted by the Applicants in their l

l O

'O appeal of the Licensing Board's decision to impose antitrust con-  ;

O ditions as part of the construction permit, the Applicants made

an argument remarkably sirtlar to that contained in Edison's ap- l

i plication here. The Applicants challenged the Licensing Board's l 0 finding that there was a nexus between the licensed activity and j the anticompetitive situation sufficient to justify imposition of

?

I antitrust conditions pursuant to Section 105(c)(5) of the Act.

JO The Applicants argued that the requisite nexus could only exist if nuclear power was cheaper than any other type of power 36/:

It should be understood that such a finding is an ab-solute prerequisite to the Licensing Board's "structur- l lO al" analysis. An Dr. Pace testiflod, there first must 1

be made a "determination of whether or not the nuclear

plant offers to its owners cost advantages of such a magnitude that those excluded from access to the nu- '

clear unit in question or to similar units are at a

significant competitive disadvantage"; if that is not

.O the case, the analysis need be carried no further.

The Applicants challenged the Licensing Board's finding that "the pronounced effect (of nuclear generation) on the over-f jo all economics" of power generation would mean that the Applicants s ,

l "will derive a competitive advantage by virtue of the Perry and Davis-Besse facilitics" (App. Br. at 125-26). The Applicants l lO pointed to various exhibits and testimony showing that the cost ,

i advantage of nuclear power had just about disappeared 3_7_/ l d We would initially observe that, what appeared to

, Applicants several years ago to be "the superior jo base load choice" may no longer be nearly so at- ,

tractive from an economic standpoint. 3 i

l The Applicants went on to nota that a small coal-fired plant  !

l l

iO 36/ citations omitted; App. Br. at 127, n. 147.

l 37/ citations omitted; App. Br. at 127. l i i I

l 1

D J

l could generate cheaper power than the proposed nuclear facili- j O ties 38/

f

(

(The testimony of Mr. Kampmeier on cross-examina-tion) indicates that, given a municipal or cooper-ative system's lower cost of money, due to both g tax and financing advantages conferred on such electric entities, a single or small group of such systems may well be able to build a small coal-fired plant in Ohio or Pennsylvania and get power at a total cost equal to, or closely approxi-mating, the cost of power to Applicants from the large nuclear facilities being licensed. Mr. Ger-O bor was even more confident that such could be the expected result. The availability of such an op-tion provides the non-A plicant CCCT entities with the ability to obtain an independent power re-source on a cost basis that would permit wholesale competition with Applicants -- if that is really D desired. It would, moreover, require these "wholesale competitors" to assume much the same planning, managing and operating responsibilities that Applicants presently undertake, thereby pro-viding the stimulus for greater efficiencies that

, must exist if competition is to be viable.

In their October 22, 1979 petitions asking the NRC to review the Appeal Board's decision, the Applicants incorporated by reference the arguments in the joint brief.

In its application here, Edison is trying to resusci-tate the same argument. True, Edison's current version of this argument is based on events subsequent to the construction permit proceeding. But for purposes of applying res judicata, this makes no difference. Edison is asserting the same propositions nuclear power has no cost advantage and, as a result, the requi-site nexus between the licensed activity and the anticompetitive situation is lacking. Curiously, Edison does not even mention D

38/ Emphasis in original; citations omitted; App. Br. at 132, n.

155.

D

C1

- 6 b' -

3-4 that it made this argument in its appellate brief. Nor does Edi-

[)

son try to distinguish the original and revised version of the i

i argumenta. Thus, it appears that Edison is seeking a second bite l l

at the apple. The basic policy underlying res iudicata -- pro- l Y) tection of litigants from the vexation and expense of repetitious litigation -- applies with full force here.

b. The events cited by Edison could

O have been raised during the op-erating license proceeding i

Even putting aside the fact that Edison already raised the argument in its application here in its appeal of the Licens-

0 ing Board decision, each of the events cited by Edison could have been raised during the operating license proceeding./ Conse-4

quently, res judicata bars consideration of these arguments at

O j this late stage.

I i i i 1. Increased cost of nuclear power lO

Edison's principal argument is that recent events have j undermined what Edison asserts was the only basis relied on by

the NRC to impose the license conditions, namely, the economic d) superiority of nuclear power from Perry Unit 1. As shown be2ow, 1

each of the events occurred well before the termination of the operating license proceeding and, hence, could have been cited by l () Edison in that proceeding. Also, Edison was aware of the cummu-i lative impact of each of the events on the cost of Perry Unit 1 power well before the termination of the operating license pro-0 Ja/ Again, this analysis accepts, arguendo, Edison's cor.tention that antitrust issues can be raised at any time. O

) i i I i I j ceeding and could have cited that cumulative impact in the opera-b- ting license proceeding. j In addition, Edison has not provided "cogent and com-pelling evidence" that these events caused substantial changes in l h the previous circumstances. Consequently, Edison has not justi-  ; j fled and exception to res iudicata. } j - New statutory requirements , Edison refers to new, more stringent federal environ-mental laws adopted in the 1970s as one of the reasons for the g increased cost of Perry Unit 1 (App. 62). Edison refers specif- l ically to several statutes: the National Environmental Policy l l Act of 1969, the Clean Air Act Amendments of 1970 and 1977, the Federal Water Pollution Control Act Amendments of 1972 and the  : Endangered Species Act of 1973. l There are two flaws in Edison's arguments. First, Edi-son does not argue that it could not have made the same, arguments during the course of the operating license proceeding. Again, most of the statutes cited by Edison were enacted in the early l 1970's. By the time the operating license proceeding was under-way, CAPCO had already increased the projected cost of the Perry l project twelve times to reflect additional costs.40/ New statu-tory requirements were one of the factors cited by CAPCO in ex-plaining the increased cost projections. Thus, Edison had al-ready anticipated the impact of the new statutes and could have raised these arguments at the operating license proceeding. Edi-4_0/ These revised cost projections are described in Appendix B. O

o

                                     ,     son does not contend otherwise.

O Even putting aside Edison's failure to raise this argu-ment during the operating license proceeding, Edison also does , not provide detailed evidence regarding the extent to which these i O new requirements may have changed the economic status of Perry Unit 1. Edison merely says (App. 62) that the statutes "signifi-cantly affected nuclear plant siting, design and construction -- , O and hence cost." Edison cites a page from the study of the Perry projects prepared for state regulatory proceedings by Pickard, Lowe and Garrich, a nuclear engineering firm, on behalf of CEI.  ; O I_d . However, thu study is not provided or even quoted. Therefore, Edison has not satisfied its burden of sho-wing that the 1970's statutes constitute "cogent and compelling O evidence" that new legislation caused the economic status of the ' nuclear plants to "change substantially" subsequent to the opera- f ting license proceeding. o  !

                          - Regulatory chances

[ l Edison cites new technical regulations adopted by the NRC as another reason for the increased cost of nuclear power I from Perry Unit 1. Edison says that "[t]he regulatory climate at f the NRC between 1975 and 1981 can best be described as highly 9 unstable" (App. 64). O But the flaws in Edison's argument regarding the new I statutes adopted in the 1970's also undermine thio argument. l Again, Edison does not show why it could not have raised this argument during the operating license proceeding. As noted in  ; i l O l

 ^\

J t ! Appendix B, Edison was aware of the cost impact of the new regu-l O 1ations during the operating license proceeding and repeatedly revised its cost projections for the Perry project. For example, in a March 23, 1983 press release 41/, CEI announced, on behalf of h [s the joint Applicants, a revision of the estimated cost of the ! Perry Units 1 and 2 plants from $3.23 billion, to $3.6 billion, which represented an increase of 10 percent. CEI noted that the i O increased cost of the Perry "is the result of implementation of regulatory requirements that affect the final design and con-struction activities. All nuclear power plants under construc-O tion have been greatly affected by these conditions (and) time schedules and budgets must regularly be reviewed." Consequently, Edison clearly could have cited these increased costs during the O operating license proceeding and opposed the continued imposition of the antitrust license conditions. Instead, Edison's position was that no significant changes had taken place subsequent to the O antitrust review at the construction permit stage.

                           - Adverse economic conditions Edison also makes much ado about adverse economic con-ditions which purportedly increased the costs of constructing Perry. Edison says that "[p]lants like Perry that were begun in the early 1970s had to cope with sustained high inflation and high interest rates in the 1970s and early 1980s, which drama-tic. ally increased plant costs" (App. 65). Edison also points to O

41/ Appendix C. O

() r the reducod growth rate in demand for electricity which emerged f C) beginning in the mid-1970s due to conservation and the economic recession, t The flaws in Edison's argument regarding the impact of l () new statutes and NRC regulations on Perry Unit 1 undermine Edi- f son's argument regarding adverse economic conditions. Edison [ does not show why it did not raise this argument in the operating l 0 license proceeding. Again, as reflected in Appendix s, Edison i had repeatedly increased the projected costs of the Perry pro- l ject. For example, in the March 23, 1983 press release, CEI i C) pointed out that the interest costs associated with constructing I the project had increased. Conse uently, Edison could have ( raised this argument during the operating license proceeding.  ! C) Edison could also have raised in the operating license i proceeding its concerns about the reduced growth rate in demand  ; for electricity. For example, in its January 23, 1980 press re- l 0 lease cancelling construction of units 2 and 3 of the Davis-Besse  ! Nuclear Power Station and the 1260 megawatt Units 1 and 2 of the  ; Erie Nuclear Plant and delaying construction of Perry Units 1 and f 1 0 2 and the 833 megawatt Beaver Valley Unit 2 plant, CAPCO cited,  ! t inter alia, a decrease in the average growth of electricity de-  ! I mand from 3.3 percent to 2.8 percenti2/. CAPCO said that the re-l l O duced growth rate is "httribut[able) mainly to a showdown in in- ' dustrial growth, the increased availability of natural gas in the CEI service area, and conservation efforts by customers."i3/  ! s

                        ^

j(3  ! ! 42/ The press release is reproduced in Appendix D. l 43/ Id. at 3.  ! u l p i

P ! 1 In addition, Edison falls to provide any "cogent and , O compelling evidence" of any "substantial changes" in economic conditions subsequent to the operating license proceeding which might have caused a "substantial change" in the cost of Perry D Unit 1. j

                                - Overall costs of Perry Unit 1 g                     After citing the events discussed above, Edison goes on to compare the projected cost of power from Perry Unit 1 and a coal-fired plant (1) in 1976 and (2) under current conditions.

Edison states: l i OE's comparison shows that in 1976 it would have been anticipated that the 30-year levelized cost  ; (including capital, operations and maintenance, L and fuel) for a nuclear power plant would be about 9 $27 per MWh. The actual 1987 30-year levelized I cost for Perry (including capital, operation and maintenance, and fuel) is $184 per MWh, or 380% 3 higher than the $27 per MWh projected in 1976. By i contrast, the projected 30-year levelized cost of  ; a coal plant in 1976 would have been $38 per MWh,  ! C or 41 percent higher than the then-estimated cost  ; for Perry. Based on a recent Electric Power Re- [ nearch Institute survey, the cur ent levelized i cost estimate of a 300 megawatts coal-fired unit with a 1987 in-service date, which represents OE's t l approximate ownership share in Perry, would be ap-O proximately $92 per MWh -- one-half of the cost af  ; Perry, i ( t footnotes omitted; App. 70. f But, once again, Edison misses the mark. Edison fails to mention that it has been continuously monitoring the projected  ; cost of Perry Unit 1 throughout the construction process and has  : repeatedly revised the costs upward beginning in 1976. As the l cost projections in Appendix B demonstrate, the bulk of the in-i

O creased costs were projected well before the close of tho e.pera-O ting license proceeding. Thit i. not surprising because, as noted, the events cited by Edison as the bas,is for the increasad costs also occurred well before May 1985. Therefore, Edison i O could have argued during the operating license proceeding that , these cost increases justified suspension of the license condi-  ! tions. Edison chose to not do so. Res ludicata bars raising , 0- this issue now.  ! In addition, Edison has not even tried to quantify the  ; extent, if any, to which the increased costs occurred subsequent [ O to the operating license proceeding. Consequently, Edison has l f ailed to provide the "cogent and compelling evidence" of "sub.- stantial changes" in the economic status of Perry subsequent to O that proceeding needed to justify an exception to res judicata. [ Moreover, Edison's contentions regarding the cost bur-den of Perry Unit 1 are erroneous. The comparison offered by O Edison of the projected cost of nuclear power and coal-fired I power in 1976 and at present is flawed. Edison has omitted vital  ; information. For example, Clevoland cannot determine what mega-  ! O watts capacity was ar.sumed in connection with the derivation of [ the coat of the nuclear power. Was it capacity equivalent to the total capacity of the nuclear units or was this total capacity of { O the megawatts capacity of Perry Unit 1 alone? Or was the assumod i i capacity simply the capacity represented by Edison's ownership j share of Perry Unit I? Edison does not tell us. But Edison does  ! l 0 tell us that the cost per megawatt hour for the coal-fired power was based on capacity equal only to its ownership share of Perry. O

l l Q l If the cost per megawatt hour for the nuclear power was derived O

on the same basis, the comparison is worthless because the cost per megawatt or megawatt hour for Perry must be based on its to-tal capacity. If the cost derived for the nuclear power is based

  ) on the total capacity of the nuclear unit, then the comparison j    with the coal-fired power costs is egregiously invalid since cost

? j per total capacity is being compared to a fictitious cost based O on a fraction of the total capacity. Such a comparison is the I equivalent of comparing apples and oranges. Edison's contentions are also contradicted by recent $) actions by it and the other Applicants. Perry Unit 1'and Davis-i l Besse Unit 1 are in full commercial operation and provide sub-l stantial base load power. Obviously, if the plants were as inef-I) ficient as Edison suggests, it would be imprudent to use the l plants for base load power. CEI recently stressed the importance l of Perry as a source of base load power in urging the Public

5) Utilities Commission of Ohio (POCO) to recognize for rate pur-poses the operating expenses of Perry Unit 1 for its first full l

l year of commercial operation beginning when Perry was placed in

  ) commercial operation on November 18, 1987.44/      The PUCO agreed    .

i with CEI and noted:45/ P l 44/ "In the Matter of the Application of the Cleveland Electric Illuminating Company for Authority to Amend and Increase Cer-tain of Its Filed Schedules Fixing Rates and Charges for Electric Service", Case No. 86-2025-EL-AIR (Dec. 16, 1987). (Appendix E). Cleveland and several other parties have filed O rehearing requests which are now pending before PUCO. 45/ Id. at 55. i i

                                                                           )
 .O                                                                        i H

t

l l- f 1 j The Perry plant did generate substantial amounts , L3 of electricity during the test period and the com-  ! pany has incurred substantial costs in generating that electricity. And in a recent interview, CEI spokesman Rick DoChant noted46/: 1 l \ y"s I don't necessarily know if (the power generated by Perry 1 is] going to be cheaper but it's. going to help to stabilize rates -- down the road it ' will, specifically in fuel savings. Indeed, CEI recently decommissioned a 223 megawatt lI) coal-fired generating station because it "was probably the least cost-efficient unit in the company's system."42/ Nowhere did CEI suggest that its nuclear power was high cost. O Moreover, as shown in Section VI(c), below, the changes in the cost of Perry, regardless of its scope, would not under-mine the NRC's reasoning in imposing the license conditions. As .O discussed in more detail in Section VI(c), both Perry Unit 1 and l Davis-Besse Unit 1 are now in full commercial operation and pro-vide substantial base load power. The NRC recognized the possi-O bility that this power may be more expensive than anticipated. But the NRC found that the availability of this substantial new l l source of base load power, per se, would exacerbate the anticom-l 0 petitive situation in the CCCT absent the antitrust license con-ditions. Consequently, the increased cost of this power does not represent the sort of "substantial change" in the prior circum-O stances necessary to justify an exception to res iudicata. l 46/ Interview on WPCN radio in Cleveland, Ohio, Dec, 21, 1987. 42/ Pruzinsky, "Avon Lake capacity cut as CEI retiren generator", Crain's Cleveland Business (Jan. 4, 1988) (Appendix F). O l

)

11. The reduction of the CAPCO nuclear program

) Edison also points to the reduced scope of the CAPCO nuclear program as another basis for suspending the antitrust license conditions. Edison contends that (1) construction of h Perry Unit 2 has been "indefinitely suspended", (2) Erie Units 1 and 2 have been cancelled, (3) Davis-Besse Units 2 and 3 have been cancelled, (4) Perry Unit 1 reached full power in June 1986, and (5) Davis-Besse Unit 1 returned to service in December 1986 following an 18 month outage. But, again, Edison fails to mention that the plant can-O cellations and suspensions occurred well before the operating license oroceeding. As early as November 1978, the status of i Davis-Besse Units 1 and 2 was uncertain.48/ On January 22, 1980, lO the CAPCO companies cancelled Erie Units 1 and 2 and Davis-Besse l l Units 2 and 3.M/ The indefinite suspensjon of construction of Perry Unit 2 was announced in September 1984.50/ Again, Edison lC had ample opportunity to cite these events during the operating license proceeding as part of an argument against continued impo-sition of the antitrust license conditions. lO Moreover, even putting aside Edison's failure to raise this argument during the operating license proceeding, Cleveland shows in Section VI(c), below, that the changes in the scope of O M/ See Edison Securities and Exchange Commission Form 10-K for 1978, pp. 37-38 (Appendix G). M/ See Appendix D. O 50/ See Edison 1984 Form 10-K, p. 11 (Appendix H); "Cost Estimate i Revised For Cleveland Electric Perry-1", Nucleonics Week, p. l 7 (Sept. 20, 1984) (Appendix I). O

i C) l l l I the CAPCO nuclear program do not represent the sort of substan-O' tial change in circumstances necessary to justify an exception to res judicata. As explained in more detail in Section VI(c), the full commercial operation of Perry Unit 1 and Davis-Besse Unit 1, O especially in conjunction with the new transmission lines con-structed to connect the plants to the Applicants' existing trans-mission network, is sufficient to justify continuation of the li-O cense conditions. The delays in the construction of Perry Unit 1 and Davis-Besse Unit 1 also do not change the applicability of res O iudicata. True, Davis-Besse Unit i did not return to service until December 1986 and Perry Unit 1 did not reach full power until 1987. Edison, however, has not made the requisite showing .O that these two events change substantially the circumstances at issue in the operating license proceeding. Starting well before the operating license proceeding, CAPCO repeatedly announced de-O lays in the completion dates for the nuclear plants. For exam-ple, on November 15, 1978, CAPCO announced a delay in the comple-tion date for three plants: a 16 month delay in construction of O Perry Unit 1 to 1983, a 22 month delay in construction of Perry Unit 2 to 1985, and a 24 month delay in construction of Davis-Besse Unit 2.51/ On January 22, 1980, CAPCO announced another 1

O year delay in the construction of Perry Unit 1 to May 1984, a 3 year delay construciton of Perry Unit 2 to May 1988 and two year delay in construction of Beaver Valley Unit 2 to May 1986.52/

O 51/ Edison 1978 Form 10-K, p. 37 (Appendix G). h2/ Appendix J contains a complete list of these delays.

O

.O Thus, in the operating license proceeding, Edison and O- the NRC were undoubtedly aware of the potential for additional delays _in the completion date of the nuclear plants. Consequent-ly, the fact that additional delays have occurred certainly can-O not be viewed as a substantial change in the circumstances con-templated by the NRC during the operating license proceeding. iii. Termination of the CAPCO pool Edison also points to the termination of the CAPCO pool as another event which justifies suspension of the antitrust con-ditions (App. 73-76). .Se following events are cited:

1. On December 31, 1979, the CAPCO companies ceased mandatory purchases and sales that were required to be made among them under prior agree-ments.

O 2. On September 1, 1980, the CAPCO companies terminated the CAPCO Memorandum of Understanding (dated September 14, 1967) and certain other agreements. The companies also agreed to imple-ment pool restructuring principles, the most sig-nificant of which was the abandonment of the "one-O system" planning concept. Each company is now responsible for future capacity planning, authori-zation of additional generating units, and estab-lishing acceptable reserve margins.

3. The CAPCO Base Operating Agreement was O amended on September 1, 1980, August 1, 1981, September 1, 1982 and July 1, 1984. As a result, the companies no longer have unqualified entitle- l ments to replacement capacity and energy. Instead )

                                                                       ~

more limited and qualified rights to "back-up" and emergency power have been established.

4. In addition, numerous other (less signifi- 1 cant) administrative and operating principles have I been ravised or eliminated. I At the outset, it must be noted that the certain of changes in the operating terms ar.d conditions stem directly from O

O 78 - the NRC decision imposing the antitrust license conditions. It .O is, therefore, somewhat disingenuous for Edison to portray the changes as voluntary. Also, because those same license conditions were part- j O of the overall set of antitrust conditions, CAPCO's compliance with the conditions can hardly be viewed as a changed circum-stance justifying suspension of all of the license conditions. l 0 Even putting this concern aside, however, consideration of these events involving the CAPCO pool is barred by res iudi-cata. Once again, these events occurred well before the close of O the record in the operating license proceeding. Clearly, Edison had the opportunity to raise this argument during the operating license proceeding. O Moreover, even if one overlooks Edison's failure to raise this argument during the operating license proceeding, Cleveland shows in Section VI(c) that termination of the CAPCO O pool does not affect the NRC's analysis in imposing the antitrust license conditions. Consequently, the termination cannot justify an exception to res judicata. O Thus, res judicata applies here to bar Edison's chal-lenge of the antitrust license conditions. As shown, Edison made or could have made its arguments during the construction permit O and operating license proceedings. Moreover, application of res judicata is necessary to ensure that Cleveland is not harmed as a result of the extensive business commitments it has made in reli-O ance on the antitrust license conditions (as outlined in Section III(A)(3), above). O

!O i l

3. Alternatively, collateral estoppel is appli able and bars Edison's arguments O

As noted in subsection C(1), above, Edison's applica-tion arises in the same "cause of action" as the operating li ense pr eedin9- Hen e r res iudi ata en mpasses the situa-O tion here. But preclusion is still warranted even if the NRC finds that the application arises in a different "cause of action". In that instance, collateral estoppel would apply to the circum-stances here. As noted above, collateral estoppel applies if four criteria are met: O (1) The prior tribunal must have had jurisdiction to render the decision, (2) there must have been a prior valid final judgment on the merits, (3) the issue must have been actually litigated and neces-sary to overcome of the first action, and (4) the O party against whom the doctrine is asserted must have been a party or in privity with a party to the earlier litigation. Braidwood, 21 NRC at 620. O Each of these criteria is satisfied here. First, the NRC clearly had jurisdiction to issue the operating license dECi-sion. Second, there was a valid final judgment on the merits of O the antitrust conditions. Third, the antitrust issue was actually litigated and was necessary to the outcome of the pro-ceeding. As noted, the antitrust issue was addressed both in the O construction permit and operating license proceeding. During the latter proceeding, the NRC addressed the antitrust issue in the context of determining pursuant to Section 105(c)(2) of the Act O whether there were any significant changes in the licensee's ac-tivities or proposed activities subsequent to the antitrust re-O

O view during the construction permit proceeding. Edison and the O' other joint Applicants actively participated in the proceeding and urged the NRC to find that there were no significant changes.53/ And, again, only for purposes of this analysis, n V

                                                                                           \

Cleveland accepts Edison's contention that the NRC can review the ' appropriateness of a license condition at any time, including during the operating license proceeding. Therefore, Edison had O the opportunity to argue then that the antitrust conditions should be eliminated. Finally, Edison was obviously a party to the earlier litigation. O Because each of these criteria are met, Edison cannot , now raise arguments it failed to raise during the operating license proceeding. As noted, the NRC has recognized that col-O lateral estoppel precludes a party from raising in a subsequent proceeding any argument that it neglected to raise during the prior proceeding. "If (an issue] has been determined in a former O action," the NRC has observed, "it is binding notwithstanding the parties . . . may have omitted to urge for or against it matters which, if urged, would have produced an opposite result." O Shearon, 23 NRC 525, 537 n. 37. As shown in Section IV(c)(2), above, virtually all of the arguments raised by Edison in its application could have been raised during the operating license O proceeding. Thus, these arguments cannot be raised now. Like-wise, as shown in Section VI(c) below, the events cited by Edison O 53/ See March 6, 1984 letter from CEI to Harold R. Denton, NRR Director. l l O

O do not constitute significant changes and, therefore, do not jus- >O tify an exception to collateral estoppel. l l O l 1 0 O O O .O

'O O

i O l

           \

D 82 - V. THE RELIEF SOUGHT BY EDISON g TS BARRED BY LACHES If the NRC finds for some reason that neither res  ! judicata or collateral estoppel apply here, laches should be ap-j plied to bar the relief sought by Edison. Laches is an equitable doctrine which bars the late filing of a claim if a party would be prejudiced because of its actions during the interim in reli-j ance on the right being challenged in the claim. Three indepen-dent criteria must be met before laches can be invoked to bar litigation. A party must show that there was (1) a delay by j another party in asserting a right or claim, (2) the delay was not excusable, and (3) the party suffered undue prejudice as a result of the delay. Environmental Defense Fund, Inc. v. Alexan-der, 614 F.2d 474, 478 (5th Cir.), cert. denied, 449 U.S. 919 (1980); see Costello v. United States, 365 U.S. 265, 282, (1961). Because laches is an equitable defense, "the doc-trine . . . is flexible" and "all the particular circumstances of each case must be considered, including the length of the delay, the reasons for it, its effect on the defendant, and the overall fairness of permitting the plaintiff to assert his or her ac-tion." Citizens and Landowners Against The Miles City /New Under-wood Powerline v. Secretary, U.S. Department of Energy ("Under-wood"), 683 F.2d 1171, 1174 (8th Cir. 1982). The NRC has recognized that the policies underlying l l laches are fully applicable in administrative proceedings. In l O finding in South Texas that the antitrust review at the operating license stage can only encompass "significant changes", the NRC D t

cited laches: n"

                     . . . a limited review at the operating license stage is consictent with the well established con-siderations consolidated in the doctrines of res-judicata and laches. Although these judicially developed doctrines are not fully applicable in
   )                 administrative proceedings, particularly where, as here, there was no adjudicatory proceeding at the construction permit stage, the considerations of fairness to parties and conservation of resources embodied in them are relevant here. We see no reason why the Attorr.ey General, our staf f, and q"                    possibly a hearing board should plow the same ground twice. Nor, in fairness to utilities en-gaged in long range planning, should a potential petitioner for antitrust intervention be able to stand on the sidelines at the construction permit stage and raise a claim at the operating license g                     stage that could have been raised earlier.

5 NRC 1303, 1321. In view of the flexible nature of laches, there is no g fixed rule regarding the Jength of the delay necessary to support laches. Likewise, there is no rigid formula governing the type of explanation which can justify delaying the filing of a claim. _ But the explanation must provide a rational and satisfactory J basis for the delay. Underwood, 683 F.2d at 1175-77. One type of prejudice which typically supports the de- , fense of laches arises when a party makes financial commitments J which it would not have made if the plaintiff had not delayed. Lingenfelter v. Keystone Consolidated Industries, Inc. ("Lingen-felter"), 691 F.2d 339, 342 (7th Cir. 1982). This detrimental reliance has been summarized in this ways 4/: 3 54/ footnotes omitted; 27 Am.Jur.2d (Contracts) S171, p. 717 (1966 & 1987 Supp.). D

-0 Proof of prejudice or injury consists frequently n in evidence showing the expenditure of money or

"                   the incurring of obligations by the defendant in-the belief that he had a clear or unencumbered right. The suit will be dismissed where it ap-pears that the complainant stood by and permitted the defendant to expend sums of money in improving g                   the property. The showing of injury is especially plain where it appears that the defendant has un-dertaken a public improvement.

Numerous types of pecuniary loss may be considered in weighing g the prejudice suffered by a party as a result of the delay. Lincenfelter, 691 F.2d at 342. Each of the criteria for laches is interwoven. For example, the extent of the delay necessary to support the laches O defense depends, in large part, upon the extent of the prejudice suffered by the defendant: If only a short period of time has elapsed since C) the accrual of the claim, the magnitude of preju-dice require before the suit should be barred is great, whereas if the delay is lengthy, prejudice is more likely to have occurred and less proof of . prejudice will be required. O citations omitted; coadman v. McDonnell Douglar corp., 606 F.2d 800, 807 (8th Cir. 1979), cert. denied, 446 U.S. 913 (1980). Laches has repeatedly been found to bar a claim not O diligently pu;=ued by the claimant when another party incurred financial obligations during the delay because of a reasonable reliance on the rights challenged by the claimant. For example, O laches was found to bar a challenge of the construction of an electric transmission line because the plaintiffs delayed three years before filing suit. Underwood, 683 F.2d at 1175-77. The O court noted that the plaintiffs could not justify the delay and that the delay prejudiced the defendant because it had construc-O 1

I X3 ted the transmission line at substantial expense by the time the n ^' suit was filed. Id. Similarly, a suit challenging a municipal ordinance rezoning certain property was barred by laches because the plaintiff waited 21 months to file suit and the owner of the iO property had during that period incurred substantial expenses to improve the property. Richards v. Ferguson, 479 S.W.2d 852 (Ark. 1972); see also Lundgren v. Lundgren, 54 Cal.Rptr. 30 C) (Cal.Dist.Ct. App. 1966). Likewise, a court held that a challenge of a property use was barred by laches because the plaintiff de-layed three years and the property owner spent over $282,000 on C improvements during that period. Bresnahan v. City of Pasadena, 121 Cal.Rptr. 750 (Cal.Ct. App. 1975). This reasoning applies with equal force here and bars O Edison's application. As noted in Section V(c) above, each of the events cited by Edison as the basis for its application -- changes in regulatory requirements, adverse economic conditions, T) the reduction in the scope of the CAPCO nuclear program and ter- , mination of the CAPCO pool -- occurred no later than 1981. But Edison did not file its application until September 18, 1987. O Nowhere in its application does Edison even try to justify this delay. Moreover, as shown in Section III(A)(3), above, Cleveland has made significant financial commitments during that period in O reliance on the antitrust conditions by purchasing power from  ! alternative suppliers. This reliance was justified at the very latest by October 1980, when the Third Circuit granted the Appli-I3 cants' motion to withdraw their petition for review of the NRC decision imposing the license conditions. Hence, in view of (1) 0

!O 86 - i Edison's lengthy and unjustifiable delay in submitting its re-i O quest for relief, and (2) the severe prejudice to Cleveland which would result if the antitrust license condit.'ons were suspended, laches bars Edison's application. O i

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O VI. THE EVENTS CITED BY EDISON DO NOT UNDERMINE g THE LEGAL OR FACTUAL BASIS FOR IMPOSITION OF ANTITRUST LICENSE CONDITIONS The premise of Edison's application is that events sub-l sequent to the NRC decision to impose the antitrust license con- I o V ditions undermine the basis of the NRC decision. Therefore, ar-i gues Edison, the antitrust license conditions are not needed in l current circumstances and, hence, should be suspended. ) O Specifically, Edison argues that Cong.*:ess' adoption of l l mandatory prelicensing review as part of the 1970 amendments was 1 based on its assumption that nuclear power would be far cheaper C) than any other source of power. Consequently, according to Edi-son, the only concern of Congress was to ensure that all utili-ties had fair access to this low cost power source. Therefore, O according to Edison, antitrust license conditions cannot be jus-tified if nuclear power does not have cost advantages over other power sources. O Edison then points to the NRC decisions imposing anti- - trust license conditions and argues that these decisions were based exclusively on the assumption that the nuclear power would O be low cost. Next, Edison turns to the decisions in the consolidated proceeding in which the antitrust license conditions were imposed O on Perry. Edison argues that the NRC's decision to impose the i antitrust license conditions in the consolidated Perry proceeding was, again, based exclusively on the assumption that this power O would be low cost. Because circumstances have changed subsequent to the NRC decision, argues Edison, continued imposition of the l l O A 1

l 'O antitrust license conditions is unjustified and the conditions I) should be suspended. As shown below, Edison's argument is flawed. In sub-section A, below, Cleveland demonstrates that Congress, in enact-Du ing the 1970 amendments, was not exclusively concerned about the anticipated low cost of nuclear power. Congress was equally con-cerned about the immense size of nuclear generating units and the O transmission facilities that accompanied them. Congress recog-nized that a nuclear facility and the associated transmission facilities could enhance a utility's ability to exercise market C) power in the retail and wholesale power markets and the coordina-tion services market unless conditions were incorporated into the license. O These concerns apply regardless of the cost of nuclear power. Hence, Congress did not intend to limit antitrust license conditions to plants which produce nuclear power that is cheaper

 'O  than any other power source.

In subsection B, Cleveland shows that, consistent with this Congressional mandate, the NRC has repeatedly recognized l O that a utility which has a dominant role in the generation and transmission of power will be able to exercise even greater mar-ket power if it operates a nuclear facility along with the asso-

() ciated transmission lines and coordination services. The NRC's analysis reflects its understanding that this exacerbation of an anticompetitive situation occurs regardless of whether the power

O is low cost. As a result, the NRC has consistently imposed li-cense conditione requiring non-discriminatory access to nuclear

.I O

) 1 l l power as well as the coordination and wheeling services needed to h obtain non-nuclear power. 1 Turning to the decisions in this proceeding, Cleveland shows in subsection C that the NRC, in imposing the antitrust license conditions on Perry, did not base its decision on the l l assumption that the nuclear power would be low cost. The NRC was concerned about the Applicants' pervasive control of generation h and transmission facilities and, moreover, their use of this con-trol to discriminate against other utilities in connection with access to coordination, wheeling and other related services. The

) NRC recognized that the additional generation and transmission l  facilities which would accompany the Perry and Davis-Besse plants would exacerbate this anticompetitive situation. A change in the 3 relative cost of nuclear power would not alleviate this condi-l  tion.

l A. THE 1970 AMENDMENTS WERE BASED ON FACTORS OTHER THAN THE ANTI- ) CIPATED COST OF NUCLEAR POWER Edison argues that the adoption by Congress of the pre-licensing antitrust review procedures in section 105 as part of 3 the 1970 amendment was based solely on the assumption that nu-clear power would be the lowest cost source of power. Edison points to certain statements made during the hearings before the O Joint Committee and during Congressional debate of the legisla-tion. The analysis below of the legislative history of the O 1970 amendments, especially the Joint Committee report, indicates that Congress was not concerned only with the anticipated cost of 1

C) nuclear power. Instead, Congress recognized that in view of the O large scale of a nuclear facility, and the associated transmis-sion facilities and coordination services, operation of the facility by a utility with a dominant role in generation and O transmission of electricity in a market could enhance the utili-ty's market power. Therefore, Congress intended the NRC to im-pose antitrust license conditions regardless of the cost of the O nuclear power to ensure that neighboring utilities have access to the transmission facilities, and the associated coordination and wheeling services, which accompanied the nuclear plant. O This analysis must start with the language of section 105 and the Joint Committee's explanation of this language. Sec-tion 105(c) states that the NRC in the prelicensing antitrust O revieu "shall make a finding as to whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105a." If the O NRC finds that an anticompetitive situation would result, the NRC has the authority pursuant to Section 105(c)(6) to refuse to is-sue a license or to issue a license with such conditions as the O NHC deems appropriate. The Joint Committee emphasized the broad scope of the type of activities under the license which would justify imposi-O tion of antitrust conditions if the activity would "create or maintain" an anticompetitive situation 55/: The standard pertains to the activities of the O 51/ H. Rep. No. 91-1470, 91st Cong., 2d Sess., reprinted in 1970 l U.S. Code Cong. & Ad. News 4981, 5011 ("Joint Committee Report"). l O

si license applicant. The' activities of others, such as designers, fabricators, manufacturers, or sup- ) pliers of materials or services, who, under some kind of direct or indirect contractual relation-ship may be furnishing equipment, materials or services for the licensed facility would not con-stitute "activities under the license" unless the license applicant is culpably involved in activi- ) ties of others that fall within the ambit of the standard. The Joint Committee also noted that the NRC need only find that there was a "reasonable probability of contravention of the an-titrust laws or the policies clearly underlying these laws" }{/ ! The legislation proposed by.the committee provides ! for a finding by the Commission "as to whether the activities under the license would create or main-3 tain a situation inconsistent with the antitrust l laws as specified in subsection 105(a)." The con-cept of certainty of contravention of the anti- , trust laws or the policies clearly underlying  : i these laws is not intended to be implicit in this 'i standard; nor is mere possibility of inconsistan-3 cy. It is intended that the finding be based on  : l reasonable probability of contravention of the ! antitrust laws or the policies clearly underlying l these laws. It is intended that, in effect, the l NRC will conclude whether, in its judgment, it is  ! reasonably probable that the activities under the 3 license would, when the license is issued or l thereafter, be inconsistent with any of the anti-trust laws or the policies clearly underlying these laws. l l In the hearings conducted by the Joint Committee on the 1970 amendments, there were certain statements alluding to the , anticipated cost of nuclear power. But Edison overlooks the Com-mittee's recognition that the relative cost of nuclear power was far from certain. Indeed, in a report prepared for the Joint Committee, Philip Sporn, former president of the American Elec-tric Power Company, noted that the cost of nuclear power was 51/ Joint Committee Report at 4994. ( I i. m +

                                           -,7 m ,g _ - ----

y . - -- -

I ) L i j rapidly rising 52/: C During the past two years there has taken place a

remarkable and ominous retrogression in the eco-l nomics of our nuclear power technology. The light i

water moderated reactor, which two years ago of-l fered potentials for nuclear puwer generation com-petitive with fossil fuel at 22c to 24.8c per mil-  !

- lion Btu has today lost position where it is com- l l petitive at 286 to 29.5c per million Btu fossil l l fuel cost.

This in turn makes it difficult to accept without L something more than a -grain of salt the statenent h of the Atomic Energy Commission [that] "the out- ! look for the future for nuclear power continues to l be very promising [because] of the continuing eco-nomic competitiveness of nuclear power in spite of l increasing costs as prices for both nuclear and g fossil plants increase." l How did this come about? The reasons for that are i many. Among the most important, but nowhere near all, are higher costs of nuclear components, higher cost of turbines, higher construction

 ,                    costs, continuing escalation during the entire v                    construction period due to the inflationary cycle, longer construction time which results in higher interest and overhead charges, higher capacity     i charges in view of the current coupon rate of ap-proximately 9.5% on AA utility bonds which brings the necessary capital charge to give an adequate   .

C) return up to 16% lower capacity factor due to the recognition that with the growth of atomic power which will take place between now and 1980 no atomic plant can, except for the shortest time, be expected to operate at a capacity factor as high as 80% and that, therefore, a more rational capa-O city factor is one five points lower, or 75%. Moreover, Mr. Sporn noted that nuclear power was rapidly losing its competitive position vis-a-vis power generated by fossil 'O f u e l s _5_8 / : 52/ Prelicensing Antitrust Review of Nuclear Powerplants, Hear-ings Before the Joint Comm. on Atomic Energy, Part 1, 91st Cong., 1st Sess. 300 (1970) ("Joint Committee I"). 58/ Joint Committee I at 300.  ! O l

? ! It is true that fossil fuel costs also have gone j up, but even so, nuclear power has lost position l vis-a-vis fossil fuel (mainly coal). This can be seen very clearly in Table 1, which shows costs of both coal-fired and nuclear-fueled plants, the , former in terms of an 800-megawatts unit and the ! latter in terms of an 1100-megawatts unit, as of July 1, 1969, for completion in the case of nu-3 clear in 1976, and in the case of coal in 1975. All the figures in that tabulation are significant and striking but two stand out in particular -- the cost of switchboard delivered nuclear energy of 7.00 mills per kwh as against 6.65 mills for g coal-fired energy with coal at 256 per million Btu. On the basis of these figures, the competi-tive break-even point for nuclear power is 29.7c per million Btu cost. ,- Table 1 is reproduced in Appendix K of this pleading. h) Mr. Sporn noted that, in view of the increasing costs of nuclear l l power, the growth of nuclear power had virtually stopped 59/: It is not surprising that all these developments 1, have already had a significant effect on the re-cent experience of the nuclear industry. It has l caused cancellation of one or two previously an-l nounced projects, delay in scheduling of other units committed for; it has brought about inter-position of fossil fuel units to be completed ahead of what might have been scheduled atomic () units, and in some cases it has brought about plain decision (s) to go fossil when, if things had gone differently, atomic units would have been ordered. In connection with the last, it needs to be pointed out that every time a fossil-fueled unit is ordered for whatever reason, when an l O atomic unit might have been ordered under condi-tions more favorable to nuclear power, the parti-cular nuclear unit is lost for approximately 30 years. n Such developments obviously go beyond the loss of s/ domestic orders. Their effect can be and most likely will be worldwide, but this will be dis-cussed in more detail later. Regardless of the effect, it is obvious that we have had a slowdown in the ordering of atomic generating capacity. As g against a peak of 25,780 megawatts placed on order 59/ Hearings at 300-01. O

O in 1967 and 19,159 megawatts average capacity "g- placed on order in the three years 1966-1968, or-ders declined in 1968 to 16,044 megawatts and in 1969 to 7,190 megawatts. This, of course, does not mean that the figures for orders will not be better in 1970 than they were in 1969, but the utility industry, being young, has as yet.not taken t heart the fact that in the long run it O cannot safely order more capacity than is repre-sented by its growth plus the necessary reserve.  ; i Thus, Congress, in adopting the mandatory prelicensing review j requirement, was well aware that nuclear power might not be low

 )                                                                     l cost power. Consequently, there is no basis for Edison's as-      l l

sertion that Congress based the antitrust review provisions on l the assumption that nuclear power would be low cost. Indeed, in testimony during the hearing, several key witnesses supporting the antitrust review provisions focused not on the cost of nuclear powor but on the fact that a nuclear fa-cility could create or maintain an anticompetitive situation by enhancing the cost efficiencies which can be achieved through coordination services, thereby increasing the anticompetitive im-pact of a discriminatory exclusion of access to these services. The NRC has noted the important efficiencies which can be achieved by a utility which has access to coordination ser-vices.60/ In their testimony, two key officials of the Anti-trust Division of the Department of Justice noted that the NRC O 60/ There are innumerable types of coordination services, includ-ing reserve pooling. The NRC has noted that "[a]ll are in essence variations on one leitmotif the utilities' attempt to reduce their production cost by either purchasing or .O selling "surplus' power, or to put it more accurately, power from the surplus generating capacity inherent in the indus-try." Consumers Power Co. (Midland Plant, Units 1 and 2), 6 NRC 892, 956-57 (1977). O

l can use its antitrust review authority to require non-discrimina-tory access to the coordination and other services associated j with the plant. They recognized that, absent non-discriminatory access, the plant would exacerbate the market power exercised by a license. For example, in his testimony on behalf of the anti-I trust division of the Department of Justice, Ronald W. Donnem, j i the Director of Policy Planning said 61/  !

 )                 So far, we have been focusing on the disposition of the power of a single nuclear plant. However, i

the largest generating plants now being planned l are apparently in the neighborhood of 1,000 l megawatts. "Today, only a few individual systems j can by themselves undertake 1,000 megawatts units." However, pools may be created in which even such large units may be coordinated. Such pools have a number of economic advantages: reduction in number of p1. ants necessary to be held j in reserve to be used in case of plant breakdown, j avoidance of excess capacity by staggering construction of plants to more closely parallel load rJrowth, and permitting economic loading of the cenerating plants depending on size and location of load demands on the system. These pooling arrangements reach substantial size. ) l Because they can afford these officiencies, and are so common, the AEC will undoubtedly encounter l pooling arrangements forming the necessary support l for some of the plants it will license. And it ! will need to determine whether such arrangements l tend to create or maintain a situation incon- ? sistent with the anti-trust laws. In doing this ! it will need to apply the same standards I have j already discussed. There may be circumstances in which it would be necessary to determine whether ' parties seeking participation in pools are re-quired to do so because they are unable to enter ) into other similarly beneficial and less restric-tive arrangements. It will need to determine whether the efficiencies gained by a pooling ar-I rangement outweigh the reduction in diversity, i rivalry, and innovation created by the joinder of a number of competitors in a common program. If 6_1/ citation omitted; Joint Committee I at 11. l ) t ,

,O participation in the pool is justified, the AEC must insure fairness of the terms along the lines g previously discussed. In particular,. pooling ar-rangements which-reserve major benefits to some companies-and exclude others, with the result that the favored companies gain a decisive competitive advantage, would oe inconsistent with antitrust p li y. And we w uld n t be-inclined to accept O the view that some companies should be excluded, or the terms of their entry made unduly burden-some, solely because their participation gives them substantial benefits but offers relatively i I little to other participants. Although there muy sometimes be a basis for urging small utilities to 13 join with others before joining the pool in order to bring more economies to the pool it is still l true that a small company affords to the pool the i same proportional advantages as any equally sized portion of any of the larger companies in the pool.

Likewise, Walter B. Comegys, acting Associated Attorney General in charge of the Justice Department's Antitrust Division, recognized that any service which "would be an intricate part of

.O the (licensed) facility" should be subject to antitrust re-view 62/:

Mr. England. One further brief question If the

;O                      smaller utility wore only looking to share power from the pool but were not looking for ownership participation in the nuclear power plant, would the AEC have jurisdiction to entertain his peti-tion?

O Mr. Comegys. I could not answer that question, sir, until I saw the entire arranger.ent. I think , that you do not license the pool. The license , would be the facility but maybe the poo' would be l an intr?cate part of the facility or vice versa. O I am sure you know that one type of pooling ar- i rangement is where one of the joint venturers - builds a plant this year and it serves all for a  ;

time and as demand grows, another aspect of the pooling provision would require another joint ven-20 2 62/ emphasis added; Joint Committee I at 134.

O [ i

0 turer to add to a pool a second plant that he did n t have to build up to that time. So the various 'O types of pooling arrangements or other arrange-ments are myriad. l Thus, the Justice Department officials recognized that if pooling i 1 r rdinati n servi es are utilized by a utility in an anticom-  ! 0 petitive manner in connection with a licensed facility, requiring non-discriminatory access to these services is essential in order t ensure that the facility does not "create or maintain" an an-O ticompetitive situation. The cost of the nuclear power is irrel-event. Likewise, it does not matter whether the neighboring

;             utility actually purchases any nuclear power.

Another indication that Congress was not focusing sole-ly on the relative cost of nuclear power was the repeated refer-ence during the Joint Committee hearings to the need to ensure that licensees which dominated the transmission facilities in a [ 2 service area provide non-discriminatory access to wheeling ser- i vices on their transmission facilities. Numerous witnesses tes- -- O tified during the Joint Committee's hearings about instances in which dominant utilities were not permitting competing utilities to use wheeling services.13/ As a result, the competing utili-ties had no choice but to purchase power from the dominant utili- t ty. The Committee was referred to litigation in which the Jus-tice Department alleged that a dominant utility's refusal to pro-vide wheeling services violated the antimonopoly provisions of . l

  .O 13/ Remarks of Mr. Donnem, official in the Department of Justice      l Antitrust Division (Joint Committee I at 9-10).

(3 l

i t

O the Sherman Act, 15 U.S.C. SS1 and 2 14/ The Committee also re-O printed a court decision which held that the Securities and Ex-change Commission, in evaluating a proposal by a dominant utility to acquire a utility operating a nuclear facility, must take into

O account the anticompetitive effects of a dominant utility's re-fusal to wheel.15/ Because wheeling is needed to buy third party power, the concern of Congress about the need for non-discrimina-O tory access to wheeling services was not based on an assumption of low cost power.

Indeed, the concerns underlying the 1970 amendments I3 indicate that an increase in the relative cost of nuclear power  ! heightens the need for continued imposition of the antitrust con-ditions. Again, antitrust conditions which require access to O coordination and wheeling services make it possible for a utility to buy power from an alternative supplier. If the licensee is the dominant utility in a geographic area and its rates rise, O anticomp'titive practices by the dominant utility which preclude access to coordination and wheeling services would force compet- . ing utilities to buy this more expensive power. Hence, an in- , O crease in nuclear costs exacerbates the anticompetitive situation to an even creater extent, s

O 14/ Joint Committee I at 79-80. This litigation culminated in the Supreme Court decision in Otter Tail Power Co. v. United.

States, 410 U.S. 366 (1973), in which the Court held that the utility violated these provisions of the Sherman Act. i 15/ Joint Committee I at 259-69. I 33 ,

1 l C) j 99 - 1 i B. NRC PRECEDENT REFLECTS THE NRC'S RECOG-NITION THAT FACTORS OTHER THAN THE COST O: OF NUCLEAR POWER CAN BE THE BASIS FOR IMPOSITION OF ANTITRUST LICENSE CONDITIONS Edison goes on to argue that NRC precedent supports its P siti n that antitrust nditi nF are aPPr Priate only if nu-O clear power is low cost. Edison points to the handful of NRC decisions in which an antitrust review was litigated and the scope of the NRC's authority pursuant to section 105 was at is-g sue. As shown below, the NRC decisions indicate that the NRC  ; recognizes that its authority to impose antitrust conditions re-quiring non-discriminatory access to coordination and other ser-O vices associated with a nuclear facility does not depend on the relative cost of the nuclear power. 1 The antitrust proceeding in Louisiana Power and Light Co. (Waterford Steam Electric Generating Station, Unit 3) i ("Waterford"), Docket No. 50-382A, presented the NRC with its first opportunity to discuss the scope of Section 105. Waterford addressed an application for a permit by Louisiana Power and Light Company authorizing construction of a 1,065 megawatt nu- , clear plant. The Attorney General negotiated an agreement with the applicant pursuant to which the app.. cant agreed to antitrust conditions es part of the permit. The conditions ensured that competing utilities had access to coordination arrangements. According to the Attorney General, the antitrust conditions would provide "prompt relief against many of the alleged anti-competi-tive practices of the applicant". CLI-73-7, 6 AEC 48 (1973). Several competing utilities petitioned for permission to inter-l O  ; I

lO . l

                                       - 100 -

vene and asked the NRC to conduct an antitrust hearing. In eval-O uating these petitions, the NRC anal' ' zed the scope of its anti-I trust review authorlty. The NRC said that the standard in Sec-tion 105(a): O requires thats (1) the allegations raised by petitioners describe a aLtuation inconsistent with the antitrust laws or the policies clearly under-lying these laws, and (2) the specified situation be "created" or "maintained" by "the activities under the license". Thus, it would be insuffi-O cient for a petitioner simply to describe a situa-tion inconsistent with the antitrust laws, regard-less of how grievous the situation might appear to be. A meaningful nexus must be established be-tween the situation and the "activities under the g license". In this connection, the relationship of the specific nuclear. facility to the applicant's total system power pool, e.g., size, type of own-ership, physical interconnection, may need to be evaluated. Generally, "activities under the license" would not necessarily include all the applicant's generation, transmission, and distri-  ! O bution of electricity. On the other hand "activi-ties under the license," in most circumstances, would not be limited to construction and operation of the facility to be licensed. Careful analysis

• of the facts in each case is necessary, particu-O larly in view of the ground breaking nature of the initial decisions in this new area of the Commis-sion's responsibility.

6 AEC at 49. The NRC granted the petition which sought imposi- , tion of an antitrust condition requiring the applicant to provide non-discriminatory access to the facility. The NRC found that the other intervenors, who sought to challenge the Applicants' allegedly discriminatory practices regarding interconnections, wheeling and sales of power, had not specified "the relationship, if any, between these practices and the "activities under the license" involved in this preceeding." Id. The NRC remanded the proceeding to the Licensing Board and gave the intervenors the 1 D

O

                                   - 101 -

opportunity to provide the missing information. O The Licensing Board applied this criteria and granted the hearing petitions. LBP-73-46, 6 AEC 1168 (1973). The Li-censing Board began its analysis by summarizing the intervenor's 3 allegations 66/: The petitions, fairly read, encompass a common ccmplaint as to the nature of the anticompetitive acts alleged and the effect on the competitive situation alleged to flow from Applicant's con-O struction of waterford station Unit 3 (waterford 3), a 1,065 megawatts nuclear facility. They al-lege a monopoly in and an attempt to monopolize the construction and ownership of large, low cost, electric generating units in Applicant's area. This alleged monopoly of generational facilities L> is maintained, it is further alleged, by a monop-oly by Applicant of bulk power transmissJon facil-ities. It is further alleged that petitioners' cost disadvantage is exacerbated due to Appli-cant's alleged refusal to enter into coordinated operation agreements. In the absence of such

O agreements or transmission facilities that could permit petitioners to coordinate among themselves, the petitioners claim their only option is to op-arate as isolated power producers. This results in even higher unit costs, thus increasing their competitive disadvantage and lessening incentives

.O                   to compete in the production or sale of electric power.

The Licensing Board recognized that the operation of the proposed nuclear facility would exacerbate the anticompeti-O tlve situation by (1) encouraging the applicant to expand its an-t1 competitive practices to ensure markets for the nuclear power,

;    and (2)  expanding the scope of coordination services and,

O therefore, the adverse impact of the applicants' exclusionary j 1

practices: l l

O  !

66/ Id. at 1169-70. ]

O l

11 O l

                                 - 102 -

(1)' Applicant has or is attempting to acquire a. ,g monopoly of large low cost electrical generating units in the relevant geographic market; (2) Control over the bulk power transmission sys-tem in the relevant geographic market is fundamen-tal to the creation or maintenance of such.a mon-opoly, and Applicant has a monopoly of facilities O. for the transmission of bulk power and power for system coordination;. l (3) Applicant has or is attempting to acquire a i monopoly in coordination reserve power sales; j O (4) Applicant alone or in combination with others attempted to hinder or provent efforts by the petitioners to construct their own transmission systems for bulk power and coordinating power. This conduct of Applicant, whether legal or ' illegal, was intended to maintain its monopoly O positions;  ; (5) Construction of Waterford 3 would maintain or strcngthen Applicant's monopoly position by pro-viding Applicant with the ability to serve the increasing demands of present customers and the O demands at new customers while foreclosing peti-tioners from the ability to serve these demanda; , (6) Construction of Waterford 3 would materially - assist Applicant in providing for its own coordi-nation and reserve sharing needs without entering 0 into agreements with intervenors.  ; t Id. at 1169-70. Thus, the Licensing Board recognized that the increase  ! O in market power which would accompany operation of the nuclear facility would occur recardless of whether the nuclear power was f low cost because the applicant was excluding its competitors from i O access to alternative suppliers.  ! The NRC affirmed this decision. CLI-73-25, 6 AEC 619 (1973). In doing so, the NRC again clarified the scope of its O antitrust review authority: I O ,

                                 - 103 -

In our view, the proper scope of antitrust review n turns upon the circumstances of each case. The V relationship of the specific nuclear facility to the applicant's total system or power pool should be evaluated in every case. Denial of access to transmission systems would be more appropriate for consideration where the systems were built in con-n nection with a nuclear unit than where the systems a colely linked non-nuclear facilities and had been constructed long before application for an AEC license. While the propriety of pooling arrange-ments and physical interconnections could certain-ly be considered in appropriate cases, such mat-tors in most circumstances could not be dealt with O by this Commission where no meaningful tie exists with nuclear facilities. Id. at 621. Significantly, nowhere in its analysis does the NRC suggest that the relative cost of nuclear power would affect either (1) the nexus between the nuclear facility and the alleged discriminatory practices regarding interconnection and other ser-vices, or (2) the importance of access to these services. In-stead, the NRC recognized thar " t. sed for non-discriminatory access to these services is 1 .c . ment of the relative cost of the nuclear power. This same reasoning underlies the NRC's analysis in Kansas Gas & Electric Co. (Wolf Creek Generating Station, Unit No. 1) ("Wolf Creek"), ALAB-279, 1 NRC 559 (1975). Wolf Creek involved review of an application for a permit seeking authoriza-tien to construct a 1180 megawatt nuclear facility. The  ! Attorney General recommended that certain conditions be imposed on the permit and the applicant agreed. The conditions imposed three obligations on the applicant First, the applicant must offer the cooperative the right to purchase an ownership interest with a O

O

                                   - 104 -

share in the power generated by the Wolf Creek j gJ facility or, at the cooperative's option, to sell

• it a portion of that power. Second, in the event of the partial or total unavailability of the co-operative's share of the Wolf Creek power, the applicant must, at the cooperative's option, either (a) supply the cooperative with an equiva-lent amount of power; or (b) transmit across its O lines, i.e., "wheel", that amount of power ob-tained by the cooperative from some other source.

Third, the cooperative may elect to have a portion , of its Wolf Creek power "wheeled out" by the-ap- i plicant; i.e., transmitted to some third party. , If the cooperative makes this election, the appli-

.O                  cant must "wheel in" an equivalent amount of power at the cooperative's request.

footnotes omitted; M. at 562-63. < The cooperative filed a motion to intervene and re- I quested an antitrust hearing. The cooperative wanted to purchase an ownership interest in the facility pursuant to the license conditions recommended by the Attorney General. But the coopera- ! tive argued that this option was "illusory" absent the access to transmission services on applicant's transmission lines needed to be able to purchase supplemental power from other suppliers. M. at 567. The applicant objected. It argued that its refusal to wheel supplemental power was an existing policy and, hence, has no "causal connection" with its proposed operation of the nuclear  ; plant." M. . The Appeal Board rejected the applicant's contention [

O l and affirmed the Licensing Board's grant of the petitions. The Appeal Board noted that "the Commission's antitrust mandate ex-tends only to anticompetitive situations intertwined with or ex-acerbated by the award of a license to construct or operate a l

r r

O j

O

                                  - 105 -

nuclear facility." Id. at 569. The Board observed that this O could include activities associated with operation of the facili-ty I l The words of the statute upon which the applican , relies direct the Commission to consider not only i O whether granting a license would "create" an anti- l competitive situation but also whether it would "maintain" one. Thua, to the extent the appli-cant's argument suggests that the Commission's cognizance under section 105c is limited to anti-competitive consequences directly attributable to O. . applicant's use of the nuclear plant and its out-put, it makes no sense. As the staff points out, for activities under a license to "maintain" a pre-existing situation inconsistent with the an-titrust laws, some conduct of the applicant apart from its license activities must have been the O .cause" for bringing about those anticompetitive conditions. Nothing in Section 105c suggests that Congress wanted the Commission to focus on an ap-plicant's extra-license conduct when determining whether an anticompetitive situation would be "maintained," but to close its eyes to that con-O duct in deciding whether such a situation would be "created." Indeed, were we to accept the dichot-omy inherent in the applicant's position, we would be at a loss to perceive how a licensing board should proceed when it is alleged -- as it is in this case -- that granting a construction permit O would both create and maintain an anticompetitive situation. footnotes omitted; emphasis in the original; id. at 568. Moreover, the Board observed that Congress contemplated that antitrust review should consider whether the applicant domi-nates transmission facilities and excludes competing utilities from the access to these facilities needed for wheeling services. Id. at 571. Thus, Wolf creek, too, emphasizes that the NRC's anti- _ trust review authority encompasses any services associated with a U nuclear facility -- including coordination and wheeling service - i O s -- r -

7 O L i - 106 -

   - if the applicant's anticompetitive practices in performing this I)  service "is intertwined with or exacerbated by the award of a 11-I cense to construct a nuclear facility."      The impact of such an-l   ticompetitive practices is wholly independent from the relative                       !

5) cost of the nuclear power or, indeed, whether a competing utility l

6 intends to buy nuclear power.17/ This reasoning was applied once again by the Appeal O Board in its subsequent decision in Consumers Power Co. (Midland Plant, Units 1 and 2) ("Midland"), ALAB-452, 6 NRC 892 (1977). Midland is especially instructive because, unlike Waterford and O wolf Creek, this decision addressed the merits of an antitrust review subsequent to an evidentiary hearing. In this construc-tion permit proceeding, the Attorney General recommended that an 0 antitrust hearing be conducted. Several competing utilities in- - tervened and urged adoption of antitrust conditions. The Appeal Board found that the licensed facility would enhance the appli- , O cant's existing domination of generation and transmission facili-  ! ties and, hence, exacerbate the applicant's anticompetitive prac- , tice of excluding its competitors from access to bulk power sup-O plies. specifically, the Board found that the market for coor-dination services was a distinct market for antitrust analysis , i 0 17/ Although the Appeal Board found that it had the authority to grant the type of relief requested by the cooperative, it found that the cooperative had failed to (1) show why the practices of the applicant were inconsistent with antitrust policies, and (2) describe the relief it sought. Id. at 575-

76. As a result, the Board remanded the proceeding and gave O the cooperative the opportunity to file an amended pleading to correct these deficiencies. Id. at 577.

I 1 O l l l l

__ r

                                     - 107 -

pursuant to Section 105. The Board noted that the applicant con-I trolled 80 percent of generating capacity, 85 percent of all transmission lines and 98 percent of lines 138 kV or higher in the relevant geographic market. 6 NRC at 1005. The Board found 0 that the applicant used its dominant role to exclude competitors from wheeling and coordination services and power pools. Id. at 1036-89. The Board also noted, that, as a practical matter, the O competing utilities could not construct a large generating facil-ity absent such services and could not construct duplicative transmission lines. Id. at 933, 1095. The Board recognized that O the applicant's anticompetitive conduct prevented its competitors "from turning to the most economical sources [of power) and mak-ing the most efficient uses of baseload power." Id. at 1095. O Moreover, the NRC found that these anticompetitive ac-tivities had a sufficient nexus to the proposed nuclear genera-ting facility to justify imposition of antitrust license condi-O tions: Now Consumers wishes to increase its efficiency by installing large nuclear powered generating units. Manifestly, this will exacerbate the anticompeti- , tive situation. U Id. To be sure, the Board did emphasize the need for non-discriminatory access to bulk power as a way of ensuring access O to nuclear power. But this is understandable because the inter-venors were seeking access to the nuclear power. The Board's 1 emphasis on the impact of the facility on the applicant's domina- l 1 0 tion of generation and transmission in the relevant geographic highlighted its concern that the addition of this new power and j l O l l I

0 108 - the associated facilities would "exacerbate the anti-competitive O- situation regardless of whether the power was low cost.68/ The most recent litigated decision involving the NRC's antitrust review authority confirms this analysis. In Alabama O Power Co. (Joseph M. Farley Nuclear Plant, Units 1 and 2) ("Far-ley II"), ALAB-646, 13 NRC 1027 (1981), the Appeal Board cited Midland and found that the coordination services market and re-O tail service markets are distinct markets for purposes of anti-trust analysis. The Appeal Board in Farley II noted that the applicant had the dominant share of generation and transmission O in the relevant area and used this domination in an anticompeti-tive manner to control the coordination services and retail mar ~ kets service ar.d discriminate against its competitors. Id. at O 1069-70. The Board recognized that the nuclear plant would in-crease the c3st efficiencies achievable through the coordination O services market and, hence, increase the anticompetitive impact of the applicant's discriminatory practices. The Board also recognized that the new transmission facilities which would ac-O company the nuclear plant would exacerbate the applicant's mono-poly power over transmission services. Hence, the Board ordered the applicant to provide non-discriminatoty access to transmis-O sion services. Id. at 1108-10. 1 6_8/ The Appeal Board remanded the proceeding to the Licensing j Board because of the applicant's apparent willingness to sell  ; ownership interests in the plant. Id. at 1098-99. The par-O ties reached a settlement which was approved by the NRC. 12 l NRC 177 (1980). i O i l

O

                                      - 109 -

Moreover, the Board recognized that access to these J

*n   services was not tied to actual purchase of the nuclear power.

The Board found that one of the intervenors -- Municipal Electric Utility Association of Alabama (MEUA) -- did not compete with the . O applicant in the retail market and, therefore, was not entitled to be able to purchase an ownership interest in the plant. I_d . at 1109-10. But the Board found that, because the facility would i O heighten the applicant's domination of transmission facilities, j this would exacerbate the existing anticompetitive practices of the applicant regarding access to the facilities regardless of

;O  the cost advantages, if any, of nuclear power.       Consequently, the Board found that MEUA was entitled only to non-discriminatory access to transmission services.

'O The NRC declined to exercise its discretionary review authority over the Appeal Board's decision and the decision be- l' 1 came the final action of the NRC.

O The Eleventh Circuit rejected the applicant's petition for review and affirmed the NRC decision. Alabama Power Co. v.

NRC, 692 F.2d 1362 (11th Cir. 1982), cert denied, 464 U.S. 816

O (1983). The court affirmed the NRC's consideration of prior an-ticompetitive conduct of an applicant to determine whether an unconditional license for the nuclear facility would allow the O applicant to maintain an anticompetitive situation. Id. at i 1367-68. The court also affirmed the NRC's finding that the l j wholesale retail and coordination service markets represent sepa-jO rate markets which were dominated by the applicant and that the license would exacerbate the anticompetitive situation in each 4

lO i

                                                                                                                \

()  ;

                                    - 110 -

market. Id. at 1369. Consequently, the court found that the O NRC's imposition of antitrust conditions dealing separately with (1) the ability to purchase an ownership interest in the facili-ty, and (2) access to the applicant's transmission facilities, iO was "not an abuse of nor beyond [the NRC's) delegated discre-tion." Thus, the court recognized that the cost attractiveness of nuclear power has nothing at all to do with the NRC's author-() ity to impose antitrust conditions to ensure non-discriminatory access to an applicant's transmission facilities to use coordina-tion and wheeling services. O Hence, NRC precedent undermines Edison's argument that the sole, lawful basis for the imposition of antitrust license conditions is the assumptio. that nuclear power is low cost. O C. THE EVENTS CITED BY EDISON DO NOT UNDERMINE THE CONCERNS UNDERLYING THE NRC'S DECISION TO IMPOSE THE ANTITRUST LICENSE CONDITIONS In arguing that the key factor underlying the NRC's decision to impose the antitrust license conditions in this pro-ceeding was the anticipated low cost of the nuclear power gener-i ated by the CAPCO plants, Edison points to statements in which O i the Licensing and Appeal Boards refer to the anticipated cost of the nuclear power. Edison goes on to review the evidentiary record in the antitrust proceeding and points to certain evidence which pur-

                                                                                                                ]

l portedly reflects the expectation that nuclear power would be low l cost base load power (App. 33-36). l !(3  ! Edison also notes other aspects of the CAPCO program as l l

0

O

                                  - 111 -                               !

presented to the NRC in the antitrust proceeding. These include O the substantial scope of the proposed nuclear generation, the plan to build substantial transmission lines to transmit the nu-clear power and the CAPCO pool arrangement to provide coordina-O tion services (App. 41-42). But, again, Edison argues that "[t]he critical fact, however, for purposes of Section 105(c) review, and the fact at 0 issue today, was the low cost of nuclear power" (App. 42). Edison argues that, in view of subsequent events, the underlying basis for the imposition of the antitrust conditions O -- the low cost of nuclear power -- has been nullified. As 1 noted, Edison cites the (1) increased cost of nuclear power, (2) the shrunken CAPCO nuclear program resulting from the cancella-O tion of Davis-Besse Units 2 and 3 and the indefinite suspension of Perry Unit 2, and (3) termination of the CAPCO pool. However, Edison totally mischaracterizes the Licensing O and Appeal Boards' reasons for imposing the antitrust license conditions and impact of the events it cites. As noted in the summary of the Boards' decisions, the Boards' concerns were not O based on the assumption that nuclear power would be the cheapest i source of base load power. Instead, the Boards were concerned about the way in which this new generation and the associated

O transmission facilities would heighten the Applicants' market l

power and the incentive to continue their pervasive anticompeti-

tive conduct. The Licensing Board noted "the size of the five

O large generating stations involved in this license proceeding and i

the substantial contribution they will make to the resources of , l l l O ' l

) i

                                    - 112 -

the CAPCO pool and in particular to the satisfaction of its base l 3 load requirements" 5 NRC at 240. The Licensing Board recognized that, in view of the Applicants' pervasive and coordinated anticompetitive conduct, any new power generation by the  ; 3 Applicants would simply allow them to expand their market power to exclusively serve the increased demands of present customers and the demands of new customers. Moreover, the Licensing Board ) realized that the new generation would give the Applicants even r greater incentive to prevent the CCCT utilities from purchasing power from alternative suppliers and to thereby ensure a market  ! O for the new generation. l The NRC's recognition that the anticipated cost of i nuclear power, per se, was not the basis for the imposition of O the antitrust license conditions is reflected in the Appeal Board's decision to reject Mr. Sharfman's proposal to restrict the scope of the conditions ensuring non-discriminatory access to , C) coordination and wheeling services to customers purchasing nu-i clear power or ownership interests in the plants. 10 NRC at 290- , 294. The Appeal Board noted that this restriction would allow ' h) the Applicants to continue their anticompetitive conduct in con-nection with pooling and coordination services and to thereby  ! undermine the competitive position of utilities which did not buy O nuclear power. Id. at 291. That would be inconsistent with the clear "message" conveyed by Section 105 of the Act that "Congress did not want nuclear plants authorized in circumstances that O would create or maintain anticompetitive situations without license conditions to address them", noted the Board. Id.

O

                                                                                             \

l

O

                                  - 113 -

Therefore, the Appeal Board found that this restriction would be U inconsistent with the NRC's broad mandate to impose antitrust conditions if the license activity would cause or continue situa-tions inconsistent with antitrust requirements. Id. at 284. O Thus, the NRC was not looking at the relative cost of the nuclear power but at the competitive impact of the presence of a new and substantial baseload power generation source for the O CAPCO members along with the associated new transmission facili-ties. This concern applies with full force now. As noted, C) Parry Unit 1 and Davis-Besse Unit 1 are in full commercial op-eration and provide substantial base load power. Edison and the other Applicants have repeatedly indicated that the plants are O important parts of their overall generating program and will remain in full commercial operation. Likewise, the second factor reviewed by the Boards -- O the impact of the construction of the transmission facilities associated with the plants -- had nothing to do with any assump-tions about the relative cost of nuclear power as a source of O base load power. The Licensing Board noted that the construction of extensive, high voltage transmission lines in conjunction with the nuclear plants would exacerbate the Applicants' exclusionary C) tactics regarding access to these facilities for wheeling and coordination services:

                   . .  . there is a direct tie between the generating station construction program and the transmission

.O program which Applicants describe as complementing it. As described in CAPCO memoranda, far more is contemplated than the mere extension of a line O

O- 1

                                 - 114 -

from the site of the proposed nuclear station to j g the closest terminal of the Applicant in whose  ; service area of (sic) the plant is to be located. Applicants are engaged in substantial planning studies and construction programs specifically intended to develop a plan for.high voltage transmission at low cost among CAPCO members. There will be commingling, but the commingling O will be on an extraordinary scale. l 5 NRC at 239. That Board also noted that1 construction of the new lines would heighten the barriers to construction of other lines 0 by the non-CAPCO utilities: Although access to transmission facilities is a necessary concomitant of reliable and economic i energy production, small systems frequently find it infeasible to construct duplicative transmis-O sion facilities. Both economic and environmental  ; considerations prevent such construction. Appli-cants' construction of the high voltage transmis-sion grid necessitated in large part by the Davis-Besse and Perry plant additions, together with the existence of excess capacity on their present sys-O tems, render the construction of duplicative > transmission lines essentially impossible. citations omitted; 5 NRC at 156. At.the same time, the Licensing l Board noted that the new lines would facilitate even more extensive coordination services. Id. at 239-40. Thus, the Board recognized that construction of the new lines would exacerbate the adverse competitive impact of the Applicants' exclusionary policies. Id. That would exacerbate the anticompetitive i situation. This concern about the impact of the construction of i the new transmission lines had nothing at all to do with any  ! 1 assumptions about the cost of nuclear power. This concern is fully applicable now. Several ex-  ! tensive, high voltage transmission lines have been constructed to connect the nuclear plants with the Applicants' transmission net- l 5 h i O  !

)-

                                               - 115 -

work. These include at least four 345 kV transmission lines ) connecting Perry Unit 1 and the rest of the CAPCO transmission system 69/ and at least one 345 kV line between Davis-Besse and Beaver Valley.20/ These new transmission lines have increased ) the scope of the transmission network owned and operated by the Applicants. Therefore, construction of these new lines heightens , the cost efficiencies and the competitive advantage associated 3 with access to these lines. Thus, these new facilities would exacerbate the anticompetitive impact of the exclusionary policies pursued by the Applicants prior to imposition of the 3 antitrust conditions. Indeed, the increased nuclear power costs cited by Edi-son increase the need for the antitrust conditions to prevent re-3 emergence of the anticompetitive activities. Prior to the im-position of the antitrust conditions, the Applicants, including Edison, unlawfully refused to provide the wheeling services O needed by their customers to purchase power from alternative sup- , pliers. The need for access to such services in a competitivc market is obviously heightened if the rates of the traditional O supplier are higher than the rates of alternative suppliers. l l The same analysis applies to the other events cited by  ; 69/ "Long-Term Forecast Report -- Electric -- Submitted To The [) Public Utilities Commission Of Ohio, Forecast And Power Siting Division (May 15, 1987)", filed by Centerior Energy Corp. (Appendix L); CEI 1986 Annual Report (Form 1) filed  : with the Federal Energy Regulatory Commission (FERC), p. 216 (Account 107) (Appendix M); Edison's response to Regulatory Guide 9.3, item C (May 12, 1981) (Appendix N). j 3 i 20/ Edison 1986 FERC Form 1, p. 422 (Appendix 0). '

 )                                                                                                             >
                  -   -,    ,- - - - - - - , ,           .  . . . .  - - , .  -m _ - . - , - . - - .         ,

O

                                  - 116 -

i Edison. As just shown, despite the reduced scope of the nuclear O plant construction program, the Perry and Davis-Besse plants are  ! in full commercial operation and produce substantial base load Power. Hence, the Appeal Board's concern about the way which the l O new generation would motivate the Applicants to maintain their l anticompetitive acts is still applicable even though not all five plants were built. j O Likewise, these plants are tied to the new transmission lines. Consequently, the Boards' concern about the way an ex-panded transmission network would heighten the competitive harm O of the Applicants' exclusionary policies still applies despite l the reduced scope of the plant construction program. The final event cited by Edison -- the termination of O the CAPCO pool -- also does not undermine the Appeal Board's analysis. The Board found that both before and after , establishment of the CAPCO pool, the Applicants denied competi-  ; O tors access to transmission facilities to preclude the other I utilities from using the coordination and other services needed i to compete effectively. The Board recognized that construction O of the proposed facilities and the associated transmission fa-cilities would heighten the Applicants' market power absent ac-cess to these services. Therefore, the Board ordered non-dis-O criminatory access to coordination services to ensure that the i utilities could compete effectively. The purported termination of the CAPCO pool does not C) affect the Boards' analysis. Despite the termination of the  ! i pool, the Applicants' transmission facilities are still used and C)

O  ; 117 - s needed for coordination services. Therefore, the importance of O access to these services has not changed. The antitrust condi-  ; i tions are still needed to ensure that the Applicants do not re-  ; vive their pervasive anticompetitive conduct which, again, ter-O minated only because of the imposition of the antitrust condi- l i tions. i

                                                                     ?

VII. CONCLUSION I O For each of the foregoing reasons, Edison's application should be summarily dismissed or denied. , Re8pectfully submitted,  ; O Marilyn G. Zack [ I Director of Law June W. Wiener Chief Assistant Director of Law William M. ndrey Gruber  ! O Assistant Director of Law  ! City Hall, Room 106 l 601 Lakeside Avenue  ! Cleveland, OH 44114 , Tele (216) 664-2000 i O f? phone in d4 w/ 9A. Reu en Goldberg At f l Kenneth M. Albert t Goldberg, Fieldman & Letham, P.C. 1100 Fifteenth Street, N.W. 1 O Washington, D.C. 20005  ! Telephone: (202) 463-8300 Attorneys for ] City of Cleveland, Ohio O l O February 19, 1988 5 O l 1

f i i - t t J i l 1

                                                                                                                                                               -l 3                                                                                                                                                              i.

i i t D i 1 l O APPENDIX A  ! I s O i L O l , I 1 , l l O  ; i l 1 O l [ 1 l

I O UNITED STATES 07 ;t: 3. NUCLEAR REGULATORY C2.M!SS;CM 10 the Matter of 50-346A THE TOLEDO EDISON COMPANY and ) HRC Okt. No. O ) THE CLEVELAND ELECTRIC ILLUMINATING COMPANY ) (Davis-Besse Nuclear Power Station, ) i Unit 1) i THE CLEVELAND ELECTRIC ILLUMINATING NRC Okt. Nos. 50-440A i O COMPANY, ET AL. GO-441A (Perry) 1&2 Nuclear Power Plant, Units , ORDER MODIFYING ANTITRUST LICENSE CONDITION NO. 3 0 0F DAVIS-BESSE UNIT 1. LICENSE NO. NPF-3 AND PERRY UNITS 1 AND 2. CPPR-148. CPPR-149 The Cleveland Electric Illuminating Company ('CEI") is the co-bo1' der of O an operating license f'or the Davis-Besse Unit 1 (License No. MPF-3) and a co-permittee of construction pemits for Perry Units 1 and 2 (CPPR f48, CPPR-149) issued by the Nuclear Regulatory Comission ("NRC"). The Davis-Besse 1 oper-O ating Itcense was issued on April 22, 1977. The Perry 1 and 2 construction permits were issued on May 3,1977. CEI is also a co-appiteant for construction permits for the Davis-Besse Units 2 & 3. An Atomic Safety and Licensing Board. O ordered inclusion of antitrust iteense conditions in the license and permits for the Davis-Besse and Perry units. Toledo Edison Co. & dieveland Electric Illuminating Co._, LBP-77-1, 5 NRC 133 (1977). l O II On January 4,1978, t.he City of Cleveland ("City") requisted the NRC to  ; O take enfon:ecent action against CEI for violations of Antitrust License l Condition No. 3 in its o;erating Itcense and ccnstruction pemits. By letter dated February 28, 1978, the Assistant Attorney General, Antitrust O Division, advised the NRC of the cepartmenc of Justice's support for the City's request. i Operating License No. NPF-3 and Construction ?ermits CPPR-148 and CFPR 149 O eacn contain anti:ns: canditiens. Antitrust Condition no. 3 in each of these

1 i p

                                                -i l

I I licenses provides as follows: L / l "(3) Applicants _ shall engage in wheeling for and at the request  ! of other entities in the CCCT l l i a) of electric energy from delivery points of Applicants to the ! entity (tes); and. O b) of power generated by or available to the other entity, as a result of its cwnership or entitlements y in generating facilities, to delivery points of Applicants designated by the other entity.

                   'Such wheeling services shall be availabl.e with respect to any unused lC          capacity on the transmission lines of Applicants, the use of which wil not jeopardize Applicants' system.

i ' wheeling services to other entities due to lack of capacity, such reduction shall not be effected until reductions of at least 5 percent have been made in transmission capacity allocations to other Applicants in these proceedings and thereafter shall be made in proportion to reductions imposed upon other

 .O         Applicants to this proceeding y "Applicants shall make reasonable provisions for disclosed transmission requirements of other entities in the CCCT in planning            future istransmission By "disclosed"       meant either indi.vidually or within the CAPCO grouping.                                      -

the giving of reasonable advance notification of future requirements byilable by  ; O untities utilizing wheeling services to be made ava be included in all the licenses involved This license condition was ordered t' f by an Atomic Safety and Licensing Board that concluded, a_fter.a full evidentiary.. C hearing, that the activities under the licenses of CEI (and others) violated each of the antitrust laws specified in ,Section 105a of the Atomic Energy Act of 1954, as amended. 42 U.S.C.12135(a), 5 NRC 133 (January 6.1977). The Licensing O Board's decision is now on appeal before the Atomic Safety and Licensing Appe Board.

        "J/ Entitlement includes but is not limited to power mai available to an entity pursuant to an exchange agreement."      (rootnote in License Condition).

0 .

         *2] The objective of this requirement                             is to prevent the pree Competitive entities are        ;

the transmitting Applicant deems nonccmpetitive. to be allowed opportunity to develop bulk power services  ! 'O This relief is required in order to avoid prolongation transmission channels. of the effects of Applicants' illegally sustained dominance." (Footnote in License Condition). O i

O .:. CEI's cution (filed with, other Applicants) for a stay, pending appeal, O .of the ordered antitnast license condttions, including license condition No. 3, was denied by the Licensing Board,' 5 NRC 452 (1977) and subsequently by the Appeal Boani, 5 NRC 621. ALA8-385 (1977). O  !!! Upon receipt of the City's request for enforcetnent action, the NRC Staff O undertook an investigation of CEI's recently filed transmission service schedule and wheeling policies. As a result of (i) the NRC Staff investigation, (ii) , an analysis of the transmission service schedule filed by CEI with the Federal O Energy Regulatory Cocmis'sion on January 27, 1978, and (iii) a review of CEI's t Answer of March 17,1978 to the NRC Staff's questionnaire, the Acting Director of the Office of Nuclear Reactor Regulation on June 28, 1978 issued a Notice O of Violation to CEI pursuant to 10 CFR 52.201 of the Comission's Rules of Practice. The Notice also stated that, inter alia, Civil Penaltites would be considered in order to assure compliance. A copy of that Notice is attached 3/ O hereto as Appendix A. ~ On July 14, 1978, CEI responded to the Notice of Violation and generally denied that it had not complied with' Antitrust License Condition No. 3 as set forth in the Notice. O Subsequently, Representatives of CEI, the City, and NRC Staff met on August 10, 1978, in an attempt to resolve problems concerning comp 1tance identifled in the Motice of Violation. At the meeting, CEI stated that many provisions of O its January 27, 1978 transmission service schedule to which the City, NRC Staff, and Department of Justice objected were necessary because the transmission service schedule was meant to apply to the Combined CAPCO Ccmpany Territories (CCCT) 3f Attacnec to the Notice of Violation as Appendix B was CEI's January 27,1973 transmission tariff with suggested changes by the NRC Staff. Appendix B is also attached hereto. O

O ._ rather than just the City. Since the City (and Painesville, Ohio).were the only O entities located in CEI's service area, the Staff suggested that CEI draft a more specific transmission service schedule. On September 15, 1978, CEI submitted to' the Staff a revised transmission schedule. As to the deficiencies found in the O January 27, 1978 schedule CEI drafted its new schedule so as to ameliorate some. of the specific objections of the Staff and City. However, CEI's revised draft contained new anticompetitive restrictions which, in part, form the basis for ,this , O Order in that it shows CEI's intent not to comply with the license conditions. A copy of CEI's Septe:ber 1978 transmission schedule is attached hereto as Appendix C. On November 28, 1978, the NRC Staff met with CEI and the City in a continuing O effort to reach agreement or to narrow the issues concerning CEI's second draft transmission schedule. However, the participants were unable to agree or narrow the issues at. this meeting. O IV During the same tic:e period that' the NRC Staff was attempting.to work O out a mutually satisfactory transmission schedule with CEI, the Federal Energy 27,1978 Regulatory Cennission (FERC) conducted its own inquiry of CEI's January transmission schedule under FERC Docket No. ER 78-194. Evidentiary hearings were 0 held by the FGC on December 19-20, 1978 and an Initial Decision (I.D.) was rendered by the Administrative Law Judge (ALJ) on April 27, 1979. The changes ordered by, the ALJ to CEI's January 27, 1978 transmission schedule are attached hereto as O Appendix 0. While the ALJ noted that. the FERC does not have jurisdiction to enforce h~4C license conditions, the Initial Decision desis effectively with nost items cited Those by the NRC Staff to be in violation of Antitrust License Condition No. 3. O matters not c:mpletely covered by the FERC Initial Occision are listed as items 3 and 5 in the NRC Notice of Violation (See Apoendix A). i Itec 3 concerns the preec:stion of available transmission apacity by O Tne FUC Admints:rstive Law Judge sa-;d there was inadecua: 3 reco rd CEI.

                                                                                               }

'O  :

                                                    .s.

i - support to justify the NRC preemption requirement of a five percent reduction

O in transmission allocations to other CAPCO members before reducing such services to other entities. however, CEI in its separate negotiations with the NRd Staff and the FERC has expressed a willingness to comply with the NRv five ,

N In view thereof, the NRC Staff has determined lO percent preemption requirement. that CEI should file an amendment to the CEI transmission tariff as modified by the FERC Initial Decision to include. the five percent reduction requirenent O set forth in Antitrust License Condition No. 3. In Item 5 of the Notice of Violation, the Acting Ofrector found unreasonable l CEI's requinment of filing a separate supplenental' schedule for each wheeling 4 The FERC Administrative Law Judge noted at pages 23-25 of the Initial l0 request. Decisien that such a requirement in and of itself was not unreasonable under j ' FERC filing requirements and that the filing of contracts governing wholesale-1 '0 service is mndated by Section 205(c) of the Federal Power Act. However, the Administrative Law Judge found that CEI's tariff language was redundant and.un-v necessarily complicated and could lead to unnecessary delays in providing!r re 10 The Administrative Law Judge thereupon modified and simplified qtJestad service. r the language of the supplemental schedule requirement and allowed it to remain t ir, the tariff. In view of the modifications an'd simplification of the tariff l )0 language, the NRC Staff is?of the opinion that its concerns set forth in Item 5 j of the Notice of Violation have been satisfied. Therefore, the NRC Staff will not object to the modified requirement of filing supplemental schedules for lO-wheeling transactions.

4/ sne Ine cleveland Electric Illuminating Comoany, FERC Occket No. ER 78-194, iO Initial Decision on Proposed Transmission Tariff. Slip Op., p.12, (April 27,1979). Letter from William Singham, Principal Rate Engineer, CEI, to j Jerone Salt =un, Chief. AntitnJs- & Indetmity Group, Nuclear Reactor .

Regulation, dated F.rJt 17, 1978.  ! l f iO i 5 -

i 3 9 l nnother matter raised by the FERC Initial Decision pertains to wheeling h of power for or among entities within the Cor.bined CAPC0 Company Territories (CCCT). Although the FERC Administrative Law Judge clarified the extent of the transmission service requirement with raspect to the municipals and cooperatives within the CCCT, he did not include other entities or other l l delivery points as required by the NRC license conditions. HRC License Condition No. 3 requires CEI to wheel power for other entities in the CCCT frcm delivery O points of appitcants to the entities and to delivery points of applicants designated by the other entities. Further, entity is defined as any electric l generation and/or distribution system or municipality or cooperative with a 'O statutory right or privilege to engage in either of these functions. Thus , 'the NRC Staff has determined that the CEI should file an amendment to the CEI j transmission tartff, as r.odified by the FERC Initial Decision, to expand the- . O 1 transmission serifces to include deliverter for all entities within the CCCT j as required by Antitrust License Condition No. 3. - O y . l From the foregoing, t$e Staff has determined that CEI has been in non-compliance with Antitrust License Condition No. 3 of its- operating license and construction pemits at least since January 27, 1978, in that CEI has raaintained and engaged in a policy and practice of noncompliance with Antitrust Condition - No. 3 of its license a.1d permits. CET has approached its responsibility to file a wheeling schedule fu- the City as if it had not been required as a condition e r its operating license and two construction permits to comply with Antitrust License Condition No. 3. In view of this, and the pubile interest, the Director of Nuclear P,eactor Regulation has determined that, pursuant to 10 CFR 52.204, License No. NPF.3 and Construction ?ercit Nos. CPPR.148 and 149 shall be amended

O offective immediately to requiro CEI to filo o trcncmiccion toriffs ordered bsj the FERC (Appendix D) and an attached amendment thoroto iden tifi d SS App ndix EW with the Federal Energy Regulatory Commission lO within twenty-five (25) days after the Order and so fi?.e this tariff in conformity with applicable FERC filing requirements. Accordingly, pursuant to the Atomic Energy Act of 1954, as ameeded, and the lg Comission's regulations in 10 CFR Parts 2 and 50, IT IS HEREBY ORDERED THAT: Antitrust License Condition tio. 3 of License fio. fiPF-3 and Construction Permit flos. CPPR-148 and 149 shall be amended with the following language added

                ~

O_ asparagraph(3)c): The Cleveland Electric l'1uminating Corppany 'shall file within twenty-five (25,) days of the Order of1979, the Director of tiuclear the transmission 'O Reactor Regulation dated June 25

             -         service tariff and amendment attached as appendices 0 and E to the Order in conformity with the applicable filing re-quirements of the Federal Energy Regulatory Comission.

IO I rder e d e pu lic nt res requ res t s lat has d e n t t effective immediately, pending further order of the Commission. O CEI may, within twenty (20) days after the receipt of this Order, request However, any a hearing with respect to all or any part of this Amendment. O request for a hearing will not stay the imediate effectiveness of this order. If a hearing is requested, the Connission will issue an Order designating the time and place of hearing. In the event a hearing is requested, the issues to O be censidered at such hearing shall be: O 27,1978 draf t transmission schedule as modified f 5/ Appendix E is CEI's January by the FERC on April 27, 1979 in Docket tio. CR 78194 and further modt fied l by the tiRC to implement requirements set forth in Antitrust Lictise Condition j fio. 3. i l

                                           .s.

[3 - (1) schether CEI has been in noncompliance with Antitrust License !O ' Condition No. 3 since January 27, 1978, the date it filed its first trans , mission tariff with FERC; and (2) if so, whether this Order should be sustained. O FOR Tile NUCLEAR REGULATORY C0iWISSION F W f~ f ar5Td~0enton, tBrector .O Office of Nuclear Reactor Regulation Dated at 3ethesda, Maryla'nd lO this 25th day of June,1979

Enclosures:

O Appe.Hices A-E O -

l i lO  : l l < O l l l \ l lO i l i l I l !O - l l 1

4 .sh.m. I a-Aa_* .A e- L, b l l \ i  ; ll j I l 4 I J l l i < i le s i t 4  : I f i  : 1 'i ! l le 4 a [ i I E i i i l l t O APPENDIX D  ! I t e i , .I , fe ' i L i t i , l b l I I i 3 i 4 1 4 ,

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 ~

O O O PUBLIC UTILITIES COMMISSION OF OHIO O AN EXECUTIVE

SUMMARY

OF THE RESULTS OF THE REVIEW OF COSTS OF THE PERRY NUCLEAR POWTR PLANT O TAUCHE ROSS & COJNIELSEN-WURSTER GROUP / CHAPMAN & ASSOCIATES O AUGUST.1986 0 l l 0 l 1 i O l 1 O i

                                                 /

o COST AND SCHEDULE HISTORY Over the duration of PNPP, there have been twelve (12) estimates of project cost and schedule. Total project cost estimates increased from .O $1.234 bil; ion in February 1973 for the total project (including Unit 2) to

    $4.153 billion * (excluding Unit 2) as of December 31,1985. The commercial operation is not anticipated prior to- fourth quarter,1986 for Unit 1. The following table summarizes these estimates:

PNPP COST AND SCIEDULE ESTIMATES Total Cost) Project In-Service Number Estimate Date ($ Billiord E_;;;ds Date (Unit 1) 1 2/73 1.234 Total Project 4/79 .O 2 10/74 1.444 Total Project 4/79 3 6/75 1.547 Total Project 6/80 4 8/76 2.023 Total Project 12/81 0 5 8/77 2.127 Total Project 12/81

                                       **                               12/81 6            2/78 7            1/79            2.552         Total Project          5/83 0       8            4/80            3.890         Total Project          5/84 9           10/81            2.150         Unit 1 & common        5/84 10            5/83            2.770         Unit 1 & common        5/85 O      11            4/84            3.470         Unit 1 & common    ,

12/85 12 9/84 3.945 Unit.1 & common 12/85 13 12/85 4.153* Unit 1 & common O

• This figure represents the expenditures incurred through December 31, 1985. CEI estimates additional project ccsts, including AFUDC, to accumulate at the rate of $2 million per day until the plant is in-service

    ** The February 1978 definitive estimate of $2.125 billion prepared by gal O         was never officially adopted by CEl.

l l l O I-7 , LO u #6

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                                                                                                                       . Irsa arIrss: in n:w.x, n eCE 23, 1933, 8 a.n.

O 622 9300, ext. 2231 ( FERRI KCG5' F.U ISED O Le Cleveland D.ectric m--* nating Conpany today e.nnx.nced a revision in the esti.ntted cost of co :pletion of the Ferry Generedng P2 Ant Project. Wineering e.nd construction are nov esti sted to cost $3.6 billion, e.n increase 'O of $MO = inion ^ran er.rlier estinstes. Ferry is a joint p-oject of CA?:'O (Centre.1 kee Power Coordinatiou G:-oup) which includes CH, CT io Edison e.nd its vno11y-ov .ed subsidie.ry, .%nnsylvania ( Pover, Toledo Edisen c.nd Daquesne Light. In addition to the construction budget, CH seyr, interest end rele.ted costs of funds czy add at lee.st $1.6 billion, for a total est'.cated cost of $5.2 O 311110a. ne previous total, estimated <n 1983, ps 44 bt111on. Last week, CH announced a deity, of up to one year in plans to load fusi at Perry U::it 1, with that activity nov predicted to take place in late 1934 'O ne $1.6 tinion interest is based on c:.:isting treettent of interest charges as provided under Ohio law and Public Utinties Co==ission of Ohio (PJ:0) r"U ngs. Proposed legislation in the Ohio Icgishtu.re cocid increase interest ,

                                                                                                                                                )

i O charses on .wrry by as m:ach as $400 million. j

                                                                                                                                                )

CEI says the revised schedule and incree. sed cost of the Perry Project is l the result of implementation of regulatory requi.mnents that affect the final de ic end construction activities- All nucleer P7"er P ent$ l under const:Sction

O have been greetly effected by these conditions nearic6 tire schedulet and budgets curt regulcrly be revieved.

l .O l

O T.se fael locd date for Unit 2, late 1987, &-r'ns uschexe:! at this tin.e. [ O smyer, as vort progresses ou unit 1, the unit 2 : .2dule sen de enlueted. T.ne five C/JCO ce=panies are dedicated to inm=ing that Per:f is a safe, reliable facility, according to CH, stich is in chcrge of building the tsin 'O 12os-=egavatt senerators. CU osas 31.n$ of the project and viil receive a correcponang percentage of the electricity generated. Ohio Edison and its Peracylve.=ia Rmer subridiary est 35 2Vp; Toledo Edison,19 91%, and D2;uesne Light,13 7Vp. O Tse five co=panies se:9,e so:e 7 z::1111on people in an industriel crescent across northern and cestral Ohio and vecte. %*1va=ia. O O . O O . k O O O I O

n a a n. 4 , - - -O !O

 'O O

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O APPENDIX D .

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-O E
 'O

O f '

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O

     ,n.,,. ,w,v,-~.- , , ,-- -,,.     . - -,, - ,- , , - - _      -

a- - ,m- _ , , .-. . _ , ..,n.. .,- - ----,n,- ,--n ,.,a - - , -ww,

1 I V, 1-5 TROM: Fublic Info.-.ation Department 0- The Cleveland riect.-ie Illu-inatine Cc=peny 622 oSOc, .r_xt. 27L2 P. O. Eox. 5000, Cleveland, Ohio LL101 Or 623-1060 (2h-hour ;:.one)

                   . POR FI*.2/.SE C.'.ES nY, A,.::e N JA:TJA3Y23,(1980-

O CAPCO NEWS E_ EASE The Co .panies in the Central Area Power Coord.inating Group (CAPCO) today -

announee:! the ten.ination of plans to build. Tour addition-1 nuclear units presently in the desicn stage. The esticated cost to build those units was $7.3 billion.

                    ?!o :ever, construction vill continue under an _ ex* ended sebedule on two nuclear units nest :lorth Ferry, Ohio, and another at Shipp'ncport, Pennsyl.ania.

-O

                            .le rer.ain convinced after consie.ering all of the options, that nuclear                            ,

power is a ' sere, econo .icel and enviror.wntelly superior =ethod of generatin5 electricity" said the statenen , issued by Robert M. Ginn, President of the

 'O b'          Clevelena nectric Illu .inating Co:pany., Justin T. Rogers, President of Ohio i

Edison, J:' n F. ! illiamson, Cheirr_an r4 Toledo Edison, and John M. Arthur, Chair-en o.' la.:quesne Light Co:pany. "Accordingly, ,we are ect pletin6 i: ree nuclear O units already well along in construction." ) Accorling to the CJ.PCO chief executives, the estir.ated dates for co=pleting i

                   .the three CA!CO nuclear units now under construction have been extended between O

12 and 36 nonths. Unit 1 at the Perry Nuclear Power Plant near North Ferry, Ohio-has been rescheduled fro: May 1983 to May 1)Sh; Unit 2 at the Beaver valley Power s . Station at Shippingport, Pennsylvania from ".sy 1984 to May 1986; and Unit 2 at the 10 Ferry F1snt fro: "ay 19c5 to l'.ay 1988. Const ruction of these units range fron 32 to 52 per cent <:or:plete. The new target dates reflect a more realistic time frame

                    .'or the construction and licensing of r:uelear plar.ts.

lC  ! ( (sore) t i io . 7

                                                        .   ,,y-      -       y      - . .        . - .              --..v,.w

i O s i i i l ( l n U L:e tony.r.ie r e. pinin .i , ' Int politi:el end regulatory uncertainties 3 . .'nt in; ti:t wit tre cons :w:. ion ni nucles. plan. he: intensified follcr. in;

           ' !.e e c ci.%n. si .'nree :'.11e Isis t.<l. !!u:le:r cor.st vetion scheduled further ir.

O ta, ;utu,, eer,1,3 gre,ter un ,rtainty or ,yentu,1 co,s. In spite or our con /i:tio,n res:re.inc nucie:r po.;er, this uncertainty has conpelled the CAPCO

           '*o.penics to '.er .inete those nucle:        units not yet under actual construction in O         ;,3,7 to re3u:, t3, ;ut.. e costs to our custo=ers and shareowners," they said.
                     "T.nse decisions are not without rish,' the joint stetesent said.            "Eecisions

s de .od.s; .-ili s ?. e :-c adequo ty of electrical supply in the future. The comper.ies

O are e:n:cened eheut the relieeility or electric ser.-iee to their customers in the

            .ia-1,20's - p:rtirularly by the 1993's. These con:crn: cre beinc continuelly s di. e:s   d. c.s 'e:h :orp2.-J :oni . ors the grovth in customer de=and in relation to O        c:pa :ity," - he ene :uti ze s con;inued.

The C'.P^0 Co:panies' plenn for 905 f fJ each of the Units 2 and 3 at the

i. ovis-Iest.e liuelect Power ':to ion near Port Clinton, and the 12o0 !!.! each of O the I.-ie ::u:le:r .vient vaits 1 anc e at a site nodh or serlin heichts, all .

presently in the Ge:ign rtc;e, were terminated. he J.'.P'.'O Companies--Cle veland Elcet.-ie Illuninating, Duquesne Light,

.O       chio Idi:en, Pe .nsylie tte Pover, e.nd Toledo Edison--rer te sose 2.5 million custoners in en industri:1 crescent in northern and central Ohio and western Pennsyl.enic. The revised pro'ected rate of growth in customer denand for
,0       electricity for the C/.Pco Companies in the 1950's is in the rense of two to four per cent each year.

l The statenent also announced another decision reached by members of the O carco croup. *tne c.evelane : ler:trie Illn tinatina Company (CII) vill increase , g its o.nership shore in the Perry Pi. ant, now vell along in construction. CII,  ; I O (more)

!O:

O -

wnich vin build end ope.-: .e the plant, vill increase its o :v.rship of Perry ' end 2 by 50 necavstts per unit. Ohio Edison ownership of en:h unit vill be reduced by 80 no euatts . O CEI vim increase its ownership in each of the two 1205 lo! Perry Units frc: '95 !.: (2'. 47,',) to 375 C.: (31. n $), Ohio Edison (and Penn Pover) v ul reduce their ownership from 505 ff.! (bl.880) to 425 M' (35.245). There s-ill be O no chen6e in the ueuesne Light ownership of 165 IE (13.7L%), or in the Toledo Edison o. lership of 24010: (19 916) in each unit. The percenteges or ownership in the 833 !E Seaver Vaney Huelear Unit 2, O under const.-uetion at Shippincport, Pennsylfania, is es follows: CEI, 24.b75, hquesne Licht 13.7h6, Ohio Idison Ll.88%, and Toledo Edison 19 915. The constru:t. ion schedule and percentages of ownership of the 825 IG h Bruce ::ansfield Unit 3, also at Shippingport, Pennsylvania, a coal-rited CAP 00 unit to be completed later this year, are un:henced.

                  "Tne Illn tinsting Conpeny's decision to increase our ownership share in 10 the Ferry S: leer Pouer Plant, reflects CII's belief in and co._.ittent to nue' ear         .

i po.er," seid Ginn. "This purchase of e.n additions 1 160 megauetts of the Perry Flent cives us the ce.pa:ity ve need to meet our customers erpe:ted demands for electrielt; throughoat the decede o' the 80's."

                 'lhe I'.lu .insting :'oupuny said its re vised forecast anti:ipetes an average      ,

inerecse in demenu for electri:ity of 2.6% a yeer for the ne::t ten years. As 'O re :e .'._; e ne year ego, in December of 1976, the Company was ferecesting an  ; l everece rinual C.~o"th rate of 3 3%. The decrease in the crowth rete is attributed

        .cini. to aloudoun in indust.-ini growth, the increased availability of naturel l

Crs in the 2.*.I ser rice are , and consertotion efforts by customers, t (note) 0

O

                                                               .L.
                          "3y 1)?C ue e::pa ct to h: re r. pech de . mar' of L,750 te a..etts,'" Ginn said.
               ".'ith cu pe_ c'.nse o.' en in:. ease.1 shr.re ol tne 7erry Ple..t, our Cenerating esp:ity vi). he :pper:i n .el; 3301. e r..ictts by 1390, h*e are confident thst this increased e)u          gene,.atin; capani y vill pro tide adequate supplies of electricity in'our ser.dce etee
             -thro 2-h I??O."
                        /. or:in- to ^^^     -'lu. .iasting Cospe.ny, all o ? the decisions made_ have caused D              r.one do. nve-d re rision in tiv monst.uction budget. The p-e tious construction budset 10 the Ji e year'.1979 to l?33 ver 01.7 billion. Prior to the decisions being                   ,

rede end i.dth e, additionel o.ie yeer's in.*lation, the 1980 to 198L constructio.. l) huice:

• c. : ettineted. to be Gl.)h bil'lon. Termination of the Cour future nuclear unit: e-C er.ension o the construction schedules of the three others results in e

              .CI ranstractic) buicet for 1950 through 1904 estimated to be sonevhat less than C)  (,, '

51.7 billion. The co=pany plans to deteil its 1960-1984 construction prog.-a= et a 1c ~mt C.c '. e . The Illuminating Co..paay also said it did not expect to lay off any construe-Vm tion vo.':crs cu rently buildi - the Terry Nu: lear Power Plent. The e: ;.ension of the const.-u: tion schedule vill pemit the Co:peny to censt. uat the plant without a prior enticipeted increase in the nu=ber of vorhers 13 and e.i the er.nc time reduce anticipeted overtime.

                       ?ne !iluminating Co pon-/ reported that it had intested approximately $60 million in p.-eliminery work for the four nuclear units that were terminated. Cleins

()' .'or cdditienel chsrces may Le made by contractors. Althou6b the amount of the eleiss l connot ng. be estinated, the Company belie'/es their resolution should not have a neieriel .'dcerse impact. The company plans to ask the Public Utilities Co= mission  ; i () o ' Ohio to.- euthority to a:ortise these costs over a suitable nu=ber of years. I Until these e. mounts can be reesonably estimated end the PUC0 acts, none of the charges dll be re "lected in eernings or rates. l () (,n-,) '

         .    ...                 .               .    -.                      -. -. .         . . ~ .                . -. . . . - - . .

i i D' l l 1, p In a final co= tent CEI Treside. t Ginn said, "The Illu-insting. Co..pse,y is i f.ise,poir,ted that the four planned nuclear units cust be te: .inated. F.o ever, ue belie /e this action to be pruf.ent and in the best interests of our custo .ers D- and shareovners while :naintaining our co:r.itment to nuclear power throu6 h our lercer chare of new plants already well along in constniction. 1.' hen the uncertainties i sre resolved, te upect nuclear power to be a .-iable alternative in our future plant. construction pro [,rs=." D n s. I ) (. I t i D 1 0 , D D i P 1 l- _-.._ _.. ,. _. . . . _ . . , _ - . . _ _ _ - . . . - _ . ... .. ... ,.._. . . -.___ - . _ . _ . . , - . . - . . _

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l l .O O APPENDIX E o 1 0 .O i l I O O l l l 1 i t o

     . _ , . . _ , _ . - . . _ . . _ , _ , ..m., , , .. , . __ . . _ ,m.._ . . . . , _ . , _ _ - _ _ _ _ _ . _ . . . _ _. _ _ . , . _ . ,   _ _ _ _ . . _ . _ _ . _ _ . - _ , _

R M Y rG- g I , BEFORE

               -          THE-PUBLIC UTILITIES COMMISSION OF OHIO            e 50 !

In the Matter of the Application )

                                                          )

of The Cleveland Electric Illumi- ) Case No. 86-2025-EL-AIR l

nating Company for Authority to ) I. Amend and Increase Certain of Its Filed Schedules Fixing. Rates and ) L3 Charges for Electric Service. ) OPINION AND ORDER The Commission, coming now to consider 4909.18,the above-entitled Revised Code; the application filed pursuant to Section to Section 4909.19, Staff Report of Investigation issued pursuant Rossell lO Revised Code; having appointed its attorney examiners, R. Gooden and Paul J. Duffy, pursuant to Section. 4901.18, Revised l Code, to conduct a public hearing and to certify the record

                                                                ~

directly to the Commission; having reviewed the testimon'y and exhibits introduced into evidence at the public hearing commenc-4, 1987; and being ing July 6, 1987 and concluding September O otherwise fully advised in the premises, hereby issues its Opinion and Order.

             ~ APPEARANCES:

Messrs. Alan D, wright, Vice Pres.ident

                                                                          -    Governmental and O            Public Affairs, and. Victor F. Greenslade,                Vice President and General Counsel, Centerior Energy Corporation,                     P.O. Box 94661, Chancellor', Secretary Cleveland, Ohio 44101-4661; Messrs.               Carl E.

and General Counsel, and Craig I. Smith, Senior Corporate Counsel, The Cleveland Electric Illuminating- Company, 55 Public Square, P.O. Box 5000, Cleveland, Ohio 44101, and Messrs. Squire, Sanders McLaren, O and Dempsey, by Messrs. Alan.P. Buchmann, Richard W.Building, 1800 Huntington 1 Jr., and Charles R. McElwee, II, j Cleveland, Ohio 44115, on behalf of the applicant, The Cleveland l l Electric Illuminating Company. Mr. Anthony J. Celebrezze, Jr., Attorney General.of Ohio, by B. Gainer, O Messrs. Robert S. Tongren, David C.Henkener, Champion, James Assistant Attorneys Thomas W. McNamee, and Ms. Ann E. General,'180 East Broad Street, Columbus, Ohio 43266-0573, on . l behalf of the staff of the Public Utilities Commission of Ohio. l Mr. william A. Spratley, Consumers' Counsel, by Mmes. Beth j O Ann Burns, Victoria L. Mayhew, Evelyn R. Robinson, and Messrs. Michael McCord, Richard P. Rosenberry, and G. James Van Heyde, Associate Consumers' Counsel, 137 East State Street, Columbus, Ohio 43266-0550, on behalf of the residential customers of The Cleveland Electric Illuminating Company. O Messrs. Bell & Bentine, by Messrs. Langdon D. Bell and John Sanders, 33 South Grant Street, W. Bentine and Ms. Judith B. lC 4 l

O 86-2025-EL-AIR the cost savings it claims DeVore would believes the occur ascan company a result evaluate of the the at savt origina iation. Mr. achieved in a mannersavings similar to thatthe from used by the company affiliation for the SEC g ly to estimate the The Senior Citizens argue that the Commis-(Staffshould sion Ex. 12,not at 7). allow recognition can establishofthe thecost affiliation savingscoststo thein rates until the company company's customers. it-O The Commission finds that before the company will ibe tedperm

                                                                                      -with ted to include the start-up and         it relocation must          costs assoc aprovide the Commiss the       formation   of  Centerior, information of the achieved savings and benefits                    Untilthat suchhave time, its books occurred to its customers from the affiliation.the compa O    until its next rate case.                  to quantify the achieved savings           ith argument that it is impossible because one cannot accurately compare the existinglcsituation                         If the w

what would have occurred if no affiliation had taken p a e.through a hypo the company could estimate, achieved by the affiliation prior to its initia-some savings to be see why the company cannot quantify with O tion, we fail to savings it has achieved and the the degree of reliability the costbenefits received by itsrelocation customers from the fact. Accordingly, the Commission will exclude the and start-up cost associatedIfwith the Centerior company wishes from operating to include expens in this proceeding. rate case, it should be prepared to O those costs in its next savings and benefits to its customers quantify the achieved costas recommended by the staff in this proceeding. Perry Operating Revenue and Expense Adjustment: O Sections 4 909.15 ( A) (4 ) and (B), Revised Code, require that the. Commission, when fixing just and reasonable rates, shall determine the cost to the utility of rendering public of its determination utility that service for the test period and that i h cost shall be used to compute the gross annual revenues to wh c the utility is entitled. The g' ment of approximately $70 million to test year operating expenses which to recognize that the costs of operating the Perry plant, have been charged to a capital account during the test year, d in would be charged to expense accounts(CEI onceEx. thelA, plant is place Sched. C-3.5; commercial operation by the company that the Perry operating g CEI Ex. 21). The staff recommended recognized in operating income if revenue and expense effects beits generating capacity by the end of the Perry reached 40% of test year (S.R. , at 12). There appears to be little doubt that Perry was generating lectricity during the test period theand test that it did period, reach which 40%July ended of O its generating capacity during O

            -EL-AIR Kaplan testified that Perry              firstand 1987,                       l 31,     1987. Company        sitnesslevel for a 24-hour period on.May 18,i ds of time sinc cxceeded the        401                                             On June 30, 1987,       W, O that     it has that date (CEI Ex.

exceeded 26, at 3 andthat level Attachment B).for various per othe pla full reactor power. while in net testgeneration, condition 6,and was operating atPerry generated 677 million or 96% During the first six months of 1987,II, 9-10). At the end of the dition 6. Mr. kilowatt hours of electricity (Tr. the Perry plant was still in test con be completed test period, test condition 6 would not that test, he O Kaplan testified that Following the completion ofh test conditions 7 and until mid-September.ctated that the Upon plant completion would in of thethroug proceed commercial tests 0, followed by a 100-hour warranty. plant'would be placed the and the warranty run, On November 20, 1987, the CEIPerry servedplant a operation (Tr. II, 12). is that November 18,.1987. O notice upon the Commission andtheallexpenses part ehad of been pla The company's adjustment to recognizefull t year of commer-rating and maintenance is date that the plant O operating expenses for the year following the during the Perry plant its firscial op develop the Perry (O&M) Company placed was in commercial operation.followed (Tr. IV, 150; during V, 14-17). the the last quarter of first-year operating budget the work being performed at similar to the witness Solanics explained thatquarter of 1986 would (Tr. erational be IV, 150, plant during the last that the budget O work performed when the plant became op The applicant 157, 189; Tr. V, 144). it believeswas prepared by employees who is reliable because ocess and because estimateassigned to Perry' during the budgeting properating which are units were developed the different plant (Tr. V, 14). Because costs were it was theby Perry in first-year Perry budget associated with included the O similar to those period when Perry was generating CEI argues elec-incurred during the test of the company's customers, lized and included as tricity for the benefitthat those test period costs should be norma test period expenses in this case. the Commission does O in this case argue hthattype of post-test-year The.'intervenors staff. They cite not have adjustment the legal authority to grant t erequested is by their not the comp numerous cases in their briefs which they conthe Commissionto position that, in rate case proceedings, incurredalthough by a utilitythe subsequent data empowered to consider costs contend that O the test period. Intervenors nths actual and nine submitted by the company is labeled "three mo(Tr. of IV, estimated 121, 122). estimated," it is actually twelve months months The company did not contest this pointthe company has not data. intervenors point out thatthe test period, but Further, various costs duringPerry plant were capital-expensed any Jerry operatingassociated the with O rather all costs O

                                                                       ,     j.

86-2025-EL-AIR ,

                                                                           =

O ized. Certain intervenors have also argued.that the company's fully forecasted cost data is unreliable, includes non-recurring start-up costs, and exceeds the operating costs of other com-parable nuclear plants. , O The company argues that it is merely transforming Perry costs that were capitalized during the test year into expense items to represent what will occur during the time that the rates approved in this case will be in effect. In support of its~ position, CEI cited Ohio Bell Telephone Company, Case No. 81-1433-TP-AIR (December 22, 1982), at 41, where the Commission allowed ~O as test period operating expenses the station connection charges which had been capitaliz,ed costs during the test period. Although the case was appealed to the Ohio Supreme Court and reversed for the reason that the Commission failed to justify its inconsistency with an earlier Commission decision on the same subject, CEI .g argues that the Court did not reverse based upon the Commission's decision to allow the inclusion as test period expenses the costs which had previously been capitalized. The Commission justified its action in that case as follows: It is important to note that the Company actually in urred all of the expenses at O ' issue during the test period. The added revenue requirement is not a result of recognizing certain additional costs, but of expensing these items rather than capitaliz-ing them. The issue that we must decide is what treatment should be given known and ,g measurable expenses, not what the expenses - are. Thus, the argument set forth by OCC on the issue of post-test-year. expense really misses the point. These are not post-test-year expenses. They are known and measurable expenses that were booked during the test -0 year. (Emphasis added.) The company has also cited Bd. of Commrs. v. Pub. Util. Comm., 1 Ohio St. 3d 125 (1982), in support of its argument that the costs incurred by the company in operating the Perry plant O during the test period should be normalized. In that case the Commission allowed, and the Ohio Supreme Court affirmed, a post-test-year inclusion of line clearing costs because of the danger of power outages and safety hazards and because the Commission ordered Dayton Power and Light Company to clear the lines. The court found in that case, as it had in others, that, "in certain circumstances, inclusion of costs not incurred in the O test year is proper." The tree trimming costs would be incurred in the period when the rates would be in ef fect and thus the Commission, and the court, found it appropriate that the costs be normalized. Similarly, in this case, the company contends that' the costs not only will be incurred in the future, but also were 'O O _m..m_

). -2025-EL-AIR incurred during the test period, and thus it is appropriate that they be normalized. ) In response to OCC's contention that Bd. of Commrs. is not applicable and that the Commission should not create a new exception to the rule against post-test-year expense adjustments, CEI argues that what it is proposing that the Commission author-ize in this case is not an exception to existing ratemaking principles. The company contends that the Commission has previ-h ' ously recognized and normalized operating expenses for a new generating unit which was generating electricity during the test l period, but was not used and useful as of the date certain. See Cleveland Electric Illaminating Company, Case No. 80-376-EL-AIR (May 10, 1981), at 2 9 .. In that case, the Commission approved a ) i normalization adjustment to include the expenses associated *with operating the Bruce Mansfield Plant, Unit No. 3, which was placed into service during the test period, but after the date certain in the case. The adjustment was made to recognize the major change in the company's plant in service and the impact it had L upon operating income. The Commission did not extend its ruling J to other minor projects because it fcund that, unless the impact of the addition was significant, it would violate the test year concept to make adjustments for every additien to plant in service. The Commission finds that the recognition cf the Perry ) operating revenues and expenses is proper in this case. The Perry plant did generate substantial amounts of electricity during the test period and the company has incurred subatantial costs in generating that. electricity. The Commission agrees with the company that those costs should be normalized and recognized for rate making purposes in this case. If we fail to include I those costs in rates at this time, they will either not be i recovered by the company or they will be deferred and be recovered from future ratepayers. Inasmuch as the costs are being incurred l i for the benefit of the company's existing customers, then it is . I appropri' ate that those customers bear the costs, b The fact that the costs were capitalized on the company's books during the test period, rather than expensed, does notas preclude their inclusica in test period operating expenses, the intervenors contend. The company has established that the level of costs capitalized during the test period would be comparable to the level of expense incurred during the first year 3 that the plant is in commercial opera tion. Because the level of expense is seemingly both known and measurable, in addition to being comparable to the level of expense that was booked during the test period, as in Ohio Bell, supra, it is only appropriate that the costs he normalized and incluaed as test period expenses because we are setting rates for a prospective period and the b company will be actually expensing all such costs cn its books during the time that these rates will be in effect. We do not b

 .o  4_.a.. A _ e .2..._ - ~.. _- .-. --

m - m - , . .. _- , _ q r i l l l 'O i O i O l l O APPENDIX F I O 1 J O O

                                                                         \

1 i 4 i O O

.. V U U U U U U U V U d' ~ wetand Buu.wst. January 4.1%9 3

                                                                                                                                     ...Avon Avon Lake capacity cut c! car plants and a coal-burning as CEI retires generator                                                                                               ' = = -

action would have no impact on utility rates. and that no layoffs are cess to nuclear power from the Perry plant in uke expected as a result ol the move.In By OAV!O PRIZINSKY County and the Beaver Valley plant in Pennsylvania. late December. the company re. CEI doesn't expect to decommission any additional ceived approval for a two-step. Cleveland Electric Illuminating Co. has reduced the 2.2% rate hike; a 1.7% increase was operating capacity of its Avon bke power plant by units over the near term. Mr. lorton said. immediate, and the remainder about 20% with the decommissioning late last month of CE! owns 31% of Perry and 24% of Beaver Vaticy. The will go into effect over the next 18 one 233-megawatt unit at the coal-fired generating sta- two nuclear plants began producing electricity in months. November. CEI now has access to 375 megawatts at tion. The move reduced the Avon uke plant from four to Perry and 204 megawatts at Beaver Valley. The closing of Avon No. 8 didn't The Avon bke unit went into operation in 1959. Mr. come as a surprise to Dougfas Fox' three operating units, including Avon No. 9. a 680- terton said that it was designed as a prototype unit and vice president of associate megawatt unit. Two smaller units also remain in opera- Mcdonald & Co. Securities, a local tion with a capacity of 8', megawatts each. The com- incurred more than its share of maintenance costs over brokerage firm. pany keeps an additional unit on standby; four. 40- the years. megawatt units were decommissioned in 1983, and a Mr. terton said Avon No. t was probably the feast "The company has been saying cost-efficient unit in the company's system, which in. for about four to five years that et another unitis mothballed. Steve forton. a spckesman for Centerior Energy cludes coal-burning plants in Cleveland. Ashtabu!a. intends to decommission some of Corp.which owns CEI. said the plant's No. 8 unit was Eastlake and Avon bke, as we!I as interests in three nu. its older units." Mr. Fox said. taken out ci service to avoid 54 million in maintenance See AVON, Page 22 costs this year and because the company now has ac.,

                                                      ..mm                     e        ,-.                  -- ;

I I

O , l 1

1 i 4 i l I d 1 i 10 1 i f

O i

l i 1 l 4 e lO !O APPENDIX G

O 4

I.

 'O                                                                                                                                                                                  ,

1 1 .O 4 1 10 i l I 10  ; i 4 l

                                                                                                                                                                                  -I l

l 1 O  : 1

     - - - . , - - - - - - - - - _ . - ---- , , , - , ,, - - - - ---,,- - - -- -- - - -     --.r-----w-nn.--
                                                                                                .                 ---.- ,, - - - --- -,n -,. . --. . ., -- . --,----r,-- n--n---- -

1 }O i j . StrURITES A.D EXCP.NCE CCHMISSION itashirgton D. C. 20',k9

                                                                                                                                                                          /d)Mh          i i
                                                                                             ~ ' "

0 lC emw g.ge aJ -

                             .P R O a, .ce                    Axm ane: 7:=mf to SECTIO:: 13 m ista) er DE SEC:n..E EXCF.NCE ACT OF 193b

• 3 g-j l

                                                                                                                                                                        /

For e

cal year e%.d December 31,15r78 r*=f ssion File Number 12578 q7

! b thC'

                             '8[                                                  CcIO EDISO'J COMTC.Y O                                                       l'****"       '''*"'P***'**d*"****"'

l Chio 34-0437766 1 (State or other jurisdiction of (I.R.S. Ecpicyer l incorporation or organization) Identification No.)

                                                                                                                                                                                           )

I l 76 South "ai t Street. Akroc Ct.i: 44303 I i ( Adiress cf ;rirwi;a.1 execu ,1.e :rnce) (7.1p Coue) l l -O segistra.nt's telerhone n;= der, imeluti g area cose (216) 3865100 l

                                                                                                                                                                                           \

j Securities registered pursuant to feetion 12(b) of the Act: I Eame of each exchange on ] title of es-5 elus whleh registered j Q Cocron Stock, $9 ;ar value Bev York Stock Ezeberge i Midwest Stock Excharge i i Cmd ative Preferred Stoci i $100 par value 1 i 3.9% Series ( ) k.ko% Series ( ) k.kk% Series ( )

'Q                                                    k.56% Series                                                                (New York Stock Excharge) 7.2k% Serbs                                                                 (                and         )

7.36C Series (Midwest Stock Excharge )

 ;                                                    8.2Cf. Series 10.76% Series I

10.k M Serie: ( ) 8.6k% Series ( ) 9 125 Series ( ) 'O ! First Mortga;e 3cus 9-1/2% Series due 2006 ( ) 6-3/S$ Series due ICt.r* ) B-1/21 Ceries due 20C6 ) ] 9-1/2% Series due 2CC6 (New York Stoe*, 7tcharge ) i 10 5 Series due IM1 ( ) 2-7/M Series due 1960 ( )

'O                                Securities r, gist,r,a yo,suant to section 12(g) ef the es:

i Mene hticate bj- cheek r.r.rk whether the registrar.t (1) hu filed all reprts requires to t-e filed by Sectics 13 or 15(d) of the Securities Excha.nge Act of 193!. durine the trecedire 12 mor.ths (or for such shorter pertW that tre registrant was required to file such reports), aM (2) has been subject to such filing requirements for the p st 9C days.

O i

Yes x . No . IrkiAcate the truber cf shares outsta.sfir4 of each of the issuer's cla.sses of rocron stock, as of the close of the period covered by this report. Clu s outstandire at Decenter 31, 1778 lO Coreon Stock,19 rar value 52,120,230 Shares 1 i Y .O

\

i

  - - . . - . - - - . - - ~ . -                                                      - - . - . - . - - - . . . . . - - -                                          .-_        ._----

D ITEM 3 PROIERTIES The Co=pa ,y owns 9 coal-fired generating plants which, together with the cape. city of one coal-fired plant (the New Castle Plant) owned by Pennsyl-vania, have a total net de=enstrated capability of 3,504,000 kv. The Company and Tennsylvania alsc avn oil-fired generating units having a net demonstrated capability of L23,CCO kv. Together with one or more of the other CAKO companies, the Co:pany and Fennsylvania own, as tenants in coccon: Sammis Unit No. 7, a coal-fired ger.erating unit at Stratton, Ohio, which has a nel demonstrated capability of 650,000 kv. and which vent into coeur.ercial operation in 1Wl; Bruce Mansfield Unit No.1,' a coal-fired generating unit with a net demonstrated capability of g 825,0C0 kv. , which *.ent into full co:xtercial operation in June lW6; Bruce Mansfield Unit No. 2, an 825,000 kv. coal-fired generating unit which vent into full excercial xeration on October 1,1977; and Beaver Valley Unit No.1, a nuclea unit which has full demonstrated reactor capability of 810,000 kv. ar.d which vent into full reactor coemercial operation en April 30, lW7. With their ovnership interest in Sam .is Unit No. 7 (aggregating L47,200 kv. ), Bruce Mansfield Units Nos. 1 and 2 (aggregating 909,800 kv.) and Beaver Valley Unit No.1 (eggre-g gating L25,2!C kv.) the total capacity owned by th: Company and Pennsylvania as of rece=ber 31, 1978 was 5,709,250 kv. (See "Item 1 - Business-CANO Program" ) regarding other capacity and energy entitlements.) here is also available to , the Cc pany under conditions existirs at the date of this Form 10-K approxicately 86,000 kv. of power under contracts with other utilities. For a description of arrangenents involving Chio Valley Electric Corporation ("0VEC"), see Note (2) , of Notes to Censolidated Financial Statements. ' l b Seaver Valley Unit No.1 was taken out of service March 9,1W9 and, pursua.:t to ceder of the Nuclear Regulatory Co:rtissien ("NRC"), vill remain out of sertice rendinr s reaaalysis of the adequacy of safety >related pipe and pil e supports shcu'd an earthquake occur. Moreover, the length of the study and the length of the outage is net determinable at this tite. The cost of purchased / pcver recuired because of the outage of the unit, having taken into account the g unavai'.abili y of cther units during the period in question, averaged approxi-mately .t20,CCC per day duri the period frco March 9, 1979 to March 31, 1970 cf which apprcxicately L,C00 relates to costs attributable to Fennsylvania,

     ;ut the Cogany car.not predict that such                             costs vill renain at that level. Due to ceasenti vari -icns the load during this                             period vu at a leval substantially lever than that vr.1:h enn occur in subsequent                            months. In the future, fluctuatiens in lead 1.3 th+ tvailability of other units                           will affect the amounts of pcver the g    Cogany cus t ;urcha.se as a result of the outage of ~eaver Vall,ey Unit No.1 and the c:st: thereof vill %;end c:. the rates associated with the source and classi-fi:ati:n of ;cver that is available.when purchases are recuired.
            '"he CAMC cce;snies, as further discussed under "Item 1 - Business-CANO Pro ra ", have undertaken a program for the joint develepsent of pcver seneration and trar.scissicn facilities. All of the c:sjor additions to the generatirg capacity of the Coepany and Pennsylvania presently planned er D     beire :enstructed are a part of this program as shown below. On November AS, IP8, the CANG cc panies, citing present econo:ie, environmental and regulatory :n=ertainties, together with reduced loa /t forecasts, announced the deferral tf con.structicn schedules for three generating units and the cor.w nee ent :f ietsiltd studies with respect to four other units. Ferry
     'Jnit 2.1 vin be ieferred 16 :onths; Perry Unit No. 2 vill be deferred 22 men 12; int Waver Valley Unit No. 2 vill be defe.* red 2b months. The
 ]   statur of Davir-Se:se Unit: Nos. 2 cnd 3 and Erie Units Nos. ,1 a.no 2 is ur.cartlin peniirg ec pletion of studies, but it is cu?rently conterplated that -he:e ; nits ay be delayed by a.n average of three years, h ese studies vill sidres: :ertain of the CAKO capacity plannine; concepts and vil.1 develop a defi .itive p rogra:: with re rect to these four units. The resultant cct-pletien hte: a.i esti .ated total cost are reflected in the table below:

D , D

g -- _ i 1 1 1 i l i 1 l

E

tinated Estimated Companies l Estiented To ni Coat Total Cost as of l In-Service to the per December 31, Site (a', ?c- e a.-

C: r tbility (b) Date Companics (c) Kilowatt (c) 1978 , )

Heaver 'lalley IMelcar 833 i3-initial 19A $ 590,836,000 $1,636.66 $214,662,000 l Et at'cn,1:.it 2. in E62 I'.'-ultinctc e..;pirc.crt, Pa.

tvi:- h::e Station, Ihclear 906 I3 each Unit 2 - 1938 $1,452,36L,000 $1,911.01 $ 45,7h2, coo "cit: 2 in:1 3, in Unit 3 - 1990 ) Cttr.71 Ocunty, Chio I :ru:e M1 : field Coal-fired 825 Cf 1980 $ 2h7,h60,000 $ 715.20 $166,oo7,000

!                           Flcn' , l'n' t 3, in ri-in ir;;crt. Pa.

j Frcr r Fit-*. , Units 1 I:u lec'" ' , 205 ;".f ecch Unit 1 - 1983 $1,o24,o76,000 $1,013 94 $290,772, coo I t.; 2, in i.erth Ferry Unit 2 - 1935

Villif3 Chic

e j s

rie .:::10 r plant, Nuclear 1,16o 73 etch Unit 1 - 1989 $1,593,049,c00 $1,513 30 4 35,587,000 O'

N it; 1 cni 2, in Unit 2 - 1991

                               .r!'n ?:Ois; hts, Ohio i

hdl2 7@4'o 2 $752,7. 90_,c_oo ] ! (n; .. nn :..: u.coptica cf 2 caver Valley Unit 2, in which Tennsylvania no longer has any interest, the Cogarf and j iv .:. :;iv:nic will h:cic un.11vi.!cd f ntercat: as tenanta in ce==.cn with cne or core of the other CAICo cerpanies i: e r ;.: 2; the unit: listeI ch ve. Exc2pt fcr Barter Vclicy Unit 2, their interests will be 35.6% and 6.28G, re;;20tively, h'ith rc:;cct to g aver Valley Ucit 2, th: Ccepany's intere:t 1: 41.8%. )j (t) T. : ri; hts of the orners of the va.ricu: units to the entr; y produced by such units are sub.iect to the ecpacity 2.; cn r.;c entitlerenT.: dccerihad inder Ite:a 1 - Busine:0-CAFCo Frc3r:m". See "Item 1 - Basines:-Environmental i

                                     . .:ter;" rith rc:pect to the cifc:t on ::I bility that the pollution control equipment presently being installed l                                     nt the 3r.:ce ::nn:ric1d F1:nt : rill here.

i $ (c) The cost: 11:t:0 do not includ the ecst of fuel for the nuclecr plants ("Item 1 - Dusiness-Fuel Supply") not do

-l                                   t'c.ey incluh the ecst: ($28,C33,000 of which $1,266,000 r r. Opent pricr to 1979 and $1,1k6,0C0 has been or vill
                                     'ea 2:cpen.::1 durirs 19'/9) er st r-t11 transfort: Ora ascociate.1 with the various units (except unit: at the Ferry i                                    F12nt) an.1 related equip ent nerc::try to pre ride connection to the s-ester. The listed ecsts do include costs

' in connection uith the air tad v ter p:llution contre 1. equipment presently kn:wn to be required. 4 A 4 i

_ ..-_.___m. .. . _ . . . _ _ . - - . _ . _ - _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ __ 5 1 i O i 1 l l ~O .O O APPENDIX 11 O .O

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PAGE 1 SECURITIES AND EXCHANGE COMMISSION HASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) 0F THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1984 COMMISSION FILE NUMBER 1-2578 OHIO EDISON COMPANY (EXACT NAME OF REGISTRANY AS SPECIFIED IN ITS CHARTER) OHIO 34-0437786 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IllCORPORATI0tl OR ORGANIZATION) I DENT I!-I ATION NO.) 76 SOUTH MAIN STREET, AKR0tl, OHIO 44308 J (ADDRESS OF PRIllCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHallE NUMBER, INCLUDINd AREA CODE: (216) 384-5100 SECURITIES REGISTERED PURSUAtlT TO SECTION 12(B) 0F THE ACT: ilAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED D Common Stock, $9 par value flew York Stock Exchange Midwest Stock Exchange Cumulative Preference Stock, no par value

                                      $1.80 Series New York Stock Exchange
                                      $3.92 Series New York Stock Exchange Cumulative Pref erred Stock, $100 par value 3.90% Series 8.20% Series

() 4.40% Series 10.76% Series All series registered on 4.44% Series 10.48% Series tiew York Stock Exchange 4.56% Series 8.64% Series and 7.24% Series 9.12% Series Midwest Stock Exchange 7.36% Series Cumulative Class A Preferred Stock, $25 par value

                            $3.50 Series     tiew York Stock Exchange Convertible Adjustable -- Series A New York Stock Exchange First Mortgace Bonds

() 11-7/8% Series due 2010 8-1/2% Series due 2006 15-1/2% Series due 2010 9-1/2% Series due 2006 All series registered on o-1/2% Series due 2008 15-1/4% Series due 1987 New York Stock Exchange 8-3/8% Series due 2007 _ SECURITIES REGISTERED PURSUAtlT TO SECTI0ff 12(G) 0F THE ACT: None (') Indicate by check mark whether the registrant (1) has filed all reports re-quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1954 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X tio 75 tate the aggregate market value of the voting stock held by non-affiliates of (j the registrant: $1,653,141,474 as of January 31, 198S l () Indicate the number of shares outstanding of each of the issuer's classes of connon stock, as of the latest practicable dates CLASS OUTSTAt101:lG AT MARCH 7, 1985 Connon Stock, $9 par value 123,879,292 Documents incorporated by reference (to the (y extent indicated herein): PART OF FORM 10-K INTO HHICH DOCUMEllT DOCUMEllT IS IllCORPORATED Annual Report to Stockholders for the fiscal year ended Decenber 31, 1984 (Pages 18-373 Part II (Page 39) Part I Proxy Statenont for 1985 Annual Mocting of Stockholders to bo held April 25, 1985 Part III (3 J

1

                                                                                               \

-s .( kJ PAGE 11 (. A number of safety modifications required by the NRC to be made on all J nuclear units operating in the United States have been completed at Beaver Valley Unit No. 1, in addition to routine maintenance work and equipment inspections in connection with a scheduled refueling outage of the unit which began on October 11, 1984 and ended January 5, 1985. The currently estimated ( cost of anticipated remaining modifications is included in the Companies' e3 L/ construction program (see "Financing and Construction Program"). The construction and operation of nuclear generating units are subject to ( the regulatory jurisdiction of the NRC including the issuance by it of con-struction permits and operating licenses. The NRC's procedures with respect to application for construction permits and operating licenses afford opportu-nities for interested parties to request public hearings on health, safety, ( environmental and antitrust issues. In this connection, the NRC may require gg s/ substantial changes in proposed operation or the installation of additional equipment to meet safety or environmental standards with consequent delay and added costs and the possibility exists for denial of licenses or permits. The (- construction permits for Beaver Valley Unit No. 2 and for Perry Units Nos. I and 2 have been issued, and a full power operating license for Beaver Valley Unit No. I was issued on July 1, 1976. See "Item 2. Properties" for a description of the status of the application for a full power operating ( license for Perry Unit No. 1. O ' In September 1985, the Ohio Cffice of Consumer's Counsel, The City of Cleveland, the Board of County Commissioners of Geauga County, Ohio and three (- local public interest corporations filed a petition with the PUC0 and the Ohio Power Siting Board (the "0PSB") requesting that each of those bodies investi-gate the public need for the construction of Unit No. 2 at the Perry Plant. The petition alleges that completion of Unit No. 2 will result in an undesir-( able and unreasonable level of excess capacity for each of the Ohio utilities () in CAPCO and that the rates charged or proposed to be charged by those compa-nies will therefore be unjust, unreasonable and unjustly discriminatory. The petition asks that construction of Unit No. 2 be halted and that no further ( AFUDC be accrued with respect to that Unit (approximately $3,600,000 of AFUDC is currently being accrued monthly by the Companies and that amount will gradually increase each month as construction continues). The petition fur-ther requests a declaration be issued stating that the issuance of securities, { the proceedt of which will be used to finance construction of Unit No. 2, will () not be approved. The Company is contesting the petition. In another proceeding, the OPSB has denied a request to delay hearings on the siting of the Perry-Hanna transmission line, which will serve Unit No. 2, until the PUC0 (' completes its investigation of Unit No. 2. The CAPCO companies are continuing to review the status of Perry Unit No. <

2. Until this review has been completed, there will be no defined schedule

( for the completion of Unit No. 2. Possible alternatives being reviewed with , () ,, respect to Unit No. 2 include temporary cessation of work on the Unit and termination of the Unit. In accordance with the CAPCO Agreement, none of these alternatives may be implemented without the approval of each of the ( CAPC0 companies. Presently, the only significant work being performed on Unit No. 2 is that necessary to enable Perry Unit No. 1 to be placed in service. This work is expected to be completed sometime in 1985. Under those circumstances it is not likely to be appropriate to continue capitalizing ( AFUDC (as described in Note 1 of Notes to Consolidated Financial Statements) () "~to Unit No. 2. Accordingly, if the CAPCO companies do not decide to resumo significant construction, the Companies do not expect to be able to include this AFUDC in net income. Instead, a reserve would be provided for AFUDC k capitalized to Unit No. 2 prospectively. This would not affect cash flow but (  ! () l l O O

() -( it would cause a corresponding reduction in net income. As of December 31, 1984, the Company and Penn Power had invested approxi-( mately $348,700,000 and $57,300,000, respectively, applicable to Perry linit No. 2. Delays in the completion of the Unit can be expected to increase its total cost by amounts which are not presently determinable. If a decision A) ( were made to terminate Unit No. 2, certain costs which are currently assigned to Unit No. 2 would be reassigned, where appropriate, to Unit No. 1. However, cancellation charges payable to contractors and other costs of termination could be incurred. Pending completion of the CAPCO review, the Company is ( unable to predict whether the construction on Perry Unit No. 2 wil! continue or, if continued, on what basis such continuation will proceed. If con-struction of Perry Unit No. 2 is terminated, the Company would seek to recover its investment as it is presently doing with respect to previously terminated () ( units (see "CAPCO Program") but cannot now predict whether its investment in Perry Unit No. 2 applicable to its PUC0 jurisdictional customars will be recoverable. If no means of recovery of the costs of Unit No. 2, in the case of termination, were available to the Company f rom its PUC0 jurisdictional customers and no other basis for recovery could be found or anticipated, the ( Company would be required to write off the portion of its investment applicable to its PUC0 jurisdictional customers. Based upon the Company's investment in Unit No. 2 as ?f December 31, 1984, the Company estimates that () ( :~ this write-off could be in the range of $205,000,000, net of income tax effect. The Company 11 ( C) ( ( . C) ( ( - O ( i t - i ( l J 1 lC) ( 13 ( !C) i IC) l l

l .: O i .O l l 10 O t ( r O APPENDIX I I I !O b i a I 1 4 1 1 !O 1 l

.O i

2 i 4 )G i t i l i I 1 4 !S i i 0-,.., - - - - , , - - - , , _ . , , , . , , - - - . . , , , , , - - . . . . , . , , . . . - , . - . , , , _ , _ , _ . _ , , . , - _ _ , , , - . . - . . , - . . . , _ . , . _ _ _ _ , , , , , , , , , . - - , . . ~ ~ .

:.v - . ,. , .

acted O runding ror gmrnment progr ms that have not received FY-85 fun ing yet thr'ou'gh separately h^ di  ; appropriations bills. nat continuing resolution will be taken up by Congress before it adjourns in estly October. An amendment to increase funding for the IAEA is expected to be offered, at least in.the Sen- [ l]l g y l(

                                                                                                                                .,. m., . u j ..., ,                                       )             ;

ate, sources saya , ,y h 4,,, .g;f,. , , , . ,, 3.: .. ;..a y, , , , , The U.S.'s voluntary contribution goes primarily to the IAEA's technical assistance and coopera-

                                                                                                                                                                                            ',                  q r
                                                                                                                                                                                                                 '          8     -

ti n fund and to the program of technical assistance to safeguards. Money also goes to pay for such. ' ' " O things as fellowships fo'r foreign specia!!sts studying in the U.S. and other technical assistance projects, 3 s the so-called footnote A projects, which are not funded through the IAEA's reguhr program but ' ' which are judged. to have technical merit). , . . . y, f [ h' A. reduction,in funding in the U.S 's veluntary contribution would, says the administration, "seri-

                                                                                                                                                                                            ].                    '

ously undermine U.S. effort's to put forth a positive record of compliance with Article IV of the Non- ; j! 4 f ] j proliferation Treaty (NP~O," which calls .for cooperation yith nonnuclear weapons states in , exchange j ! r 9 O for,their agreement not.to' acquire nuclear weapons. This funding.is particularly

                                             ~

(~ important at,thi,j says the administFation'.because of the'NFr review conference scheduled for 1985. ", Clearly,.,a! cut in:', , p our. technical.'asustance In.l,this)reparptori peiiod.would seriously. impair the ,credib_i_lity of,U.,5,.soeclar-e atory. policies in suppor@f the.NPT and mak,e,it more difficult to promote.a constructive, outcome . CI t,o  ! I

            ' 'the'reiiew                 conferenci,",th'eladrninistration
                                                                  ..>.~.c.   :         2.-

t , s: ~ '. . . says.,gX.

                                                                                                                   *         .~      v .'.-4. ?a,yJ, .K,{. . .,n.... R.l '.: @is lj ?

n s.a . < , .v - w. re. r..  ! COST ESTIMATE; REVISED FOR CLEVELAND ELECT,RIC'S,PER3Y 1. Wc.o -stpyezogri . O

                                                                                                                                                                                   ,-       ( y     ,
            'f gWClevelaixi. Electric 111uminating Co.,,(CEI) has revised its, cost estimate f'             for     completio'n 5
                                                                                                                                                                                                    .,               tg
         -    .,to,53.94-billion from $3.47;billiory U_tility sources said that the total estimated cash, construction( cost o -                                                              ;
               ' Perry-1 had b en raised,to.52.76-billiori from,52.4-billion. In addition, they estimated an incrgase.i,n                                                              ( j l t,h

1. allowance for, funds;used during construction ,to $1.18-billion from S1.07. lbi!1 ion.s.ti

                                                                                                                                          ,, ,.fzt.(.3 y '
                                                                                                                                                                                                              $l      l}          :

[ O

                 .nf ,iUtility sources said,that the revised estimate included $218-miUion for additiona cons,truc o,ng
               - costs and sl47-million for costs previously budgeted for Perry 2 or.for facihties common to both units. .*

j ,

                                                                                                                                                                                                                         ,y a

j ney said that the costs of cornmon. facilities such as fuel handling equipment and emergency diesel  ; g . generators hadbeen. reassigned to Perry 1,on advice from,the company's auditors. A utility spokesman - L p %h said that Price Waterhouse had recently completed a four: month review of the project's costs to deter-mineAhere certain expenses should.be properly assigned..,... . q;, -

                                                                                                                                   . :,        ..f             Q.                              f Perry-                                                                 f
                     , ; , The reopportionment of costs has fueled speculation that the utility will eventually etncel fg ;.3 2; however, the company.spckesman denied that there was any connection between the two. He said .

y t- j ii that the comp.any w:as considering four. options for Perry 2,.which include canceDation, but,he denied 4 'h suggestions that any decisiongould be made soon. Construction at Perry-2, which is 44% complete,y . }{

                .was sirtually, stopped,in Apr,il..but, the company said that its compt,etion schedule and budget 4are still
                  .";under revi,ew,".De spokesman said ,that a decision on the future of Perry-2.would                                           1     hich is           be made "some-          1
                                                                                                                                                                                                         ' }p%
                 . time between.now and the completion of unit.l.".The company ha+ estimated that Perty , sv
                                                       ~                        '

ji i

                 '9.5% complete, Vitt begin commercid operation'is the end or 19ssfThey emphasti'd that "absolutely O

q@'0

                                                                                                                          . . , . +.,;             ;,     g, , .                                  s N!

P9"Shanges hav,e been mad,e in.the schedule.for Perry l. ...,, ,;g., f, f CEI and the four other utili.

Standdrd fQoor',s,,Co,rp,. sai,d that it is reviewing .the debt ratings.o 4

             'i d                                                                                                                                                                                4       .

p

                .f.t.i.es.:in
                       - .~            the.
                                               . .C.en tral .A, res..[.o, .w..e.r. .C. .oo.rd. in.at.i.on.. G.roup.,(C. A.P_CO),
                                                                                                                                                                                                 ? .
                                                                                                                                                                                                                                 .wh,.

analyst said that the review, was initiated after.CEI announced its estimated cost

                                                                                                                                                                                                 ] i incr bhatise units. TheCAP'CO  of th'e       "su'bsthitial nilities                         fmancial stres?$c'uiTS{ bylley-l.and.-2{.

are',ilso'buildmg"Beave'r'Va . (' ..].[4 . j'1'  :

 .O , l

• M Each Perry. unit is a 1,205-megawatt BWR. He '

architect-engbw at Perry is Gilbert Common-

                                                                                                                                   ~

M '- ol

                                                                                                              ."n- N. n ,n+
                                           ~
                                                                    .-                                                                      . ..i . a. . .1
                                                                                                                                                          ,..1                                     -
                               .r u' ' '.~ .v. c. m. T ;n- m rh hm c.w' :.L /wr
                 " w. ea. lth.
                                                                                                                                                                                         ~

I o . 3'eIb s RESPONSE TO 3EAL TABLE. LEAK FTROJAN RAISES EYEBROWS AT NRC r [ .hg y J Utihty response to a reactor coolant '. sk found in the seal table room at Pott!and Generr.1 Elec.

                   .tric Co.'s Trojan last week while the unit was at'an elevated pressure and temperature has NRC raising                                   [y
                                                                                                                                                                                                               -y>!
                                                                                                                                                                                                                                     ]          )
;O i                                                                                                                                  erence between this in.

questions about whether the response was proper..While there is a "world of difr

      '              cident and what happened at Sequoyah,"..where                        i the Tennessee Valley Authority's (TVA) plant staff                                                (!l                                      '

l c tried to perform seal table maintenance while the unit was st 30% power (NW,23 Aug., Special Is- [ ' ;p,J l l

l. j sue), NRC sources said that workers at Trojan "probably should not have dohe what they did."

                                                                                                                                                                                                   }i j

While the plart wes retuming to service after a refueling outge, a leak was obsened in the seal

      .l table ro>m at Trojan. Workers detem,ined that it was being caused by an improperly seated compres-
.O !
                                                                                                                                                                                                                         .i.

sion fitting and attempted to fu it. The reactor cc,ntinued to operate at 2,235 pounds per square inch. and the coobnt tempera'ure remair.-d at 550 degrees F. while workers attempted to adjust the fitting. l '

                                                                                                                                                                                                     ;.. .                                      l In their attempts, however, workers end up 1%ening the two bohs and bracket that functioned as the primsry support devices holding the fitdng in place. As a result, the entire futing broke off, caudng d                                                                                        h' I

t. l e

                                                                                                                                                                                                       ,: 1 NL C! LONICS        F K - Secremt-r 20,1944
                                                                                                                                                                   .7
                                                                                                                                                                                                       ;u(i J

l O I O i i

                                                       \

O O O APPENDIX J O 'O s 4 O

'O O

t O APPENDIX J i DELAYS IN CONSTRUCTION OF, AND CANCELLATIONS OF, THE CAPCO NUCLEAR PLANTS November 15, 1978 -- CAPCO announces Jeferral all of construction schedules for three plants: (1) Perry Unit 1 (16 month delay to 1983), (2) Perry Unit 2 O (22 month delay to 1985), and (3) Beaver  : Valley Unit 2 (24 month delay). CAPCO.says that "[t]he status of Davis-Besse Units Nos. 2 and 3 and Erie Units Nos. 1 and 2 is un-

                                                                ~

certain pending completion of studies, but it is currently contemplated that these  : O units may be delayed-by an average of three years." (Edison 1978 Form 10-K,-p. 37, re-produced in Appandix G). January 22, 1980 -- CAPCO announces termination of plans to con-struct Davis-Besse Units 2 and 3 and Erie () Units 1 and 2. Construction of three plants is delayed: (1) Perry Unit 1 (12 mol.chs to May 1984) (2) Perry Unit 2 (36 months to May 1988), and (3) Beaver Valley Unit 2 (24 months to May 1986). CAPCO says that "[t]he political and regulatory uncertainties af-O fecting the future construction of nuclear ' plants has intensified following the (1977) accident at Three Mile Island". CAPCO also points to the dramatic decrease in projected , growth rate of demand for electricit/ "at-tribut[able) mainly to a showdown in indus- I O trial gr0wth, the increased availability of natural gas in the CEI service area, and conservation efforts by customers." (CAPCO January 23, 1980 news release, reproduced in Appendir. D). () March 8, 1983 -- CEI announces "a delay of up to 12 months in the fuel load date of Unit #1 of the Perry ' generating plant." (CEI press release, re-produced in Appendix C). May 1983 -- CEI reschedules Perry Unit 1 fuel load date O to May 1985 (Public Utilities Commission of Ohio, "Comprehensive Assessment Or The Perry Nuclear Power Plant", study prepared for PUCO by Touche Ross, The Nielsen-Wurster  ; Group and Chapman & Associates ("PUCO Study"), vol. I, p. III-1) (1986)). O 9 0

       ..m         . _.          ~                    .-

j

    .+

fl.  !

           < February 1984 -- CEI announces delay in' completion of con-     ,

struction'of Perry Unit 1 to-May-1985 (PUCO

(3 ' Study,-vol. I, p. III-10)

April 1984 -- Construction'of Perry' Unit 2, which was 44 percent complete,fis terminated-and.indefi-  ; nitely suspended.'CEI says that the status (Ohio Edison 1985 of plant is-under review. jl$

;                             F6rm-10.K, p. 6, reproduced in Appendix P).            +

E q

i 4

, I () 4  ; a  !

()  !

f 1 ' 1 n ]O o I bo 4 , I I I  ! I 20 i ) O l 1 () ' l l

I l e 0 l l 0 0 O APPENDIX K O O

O

O O

O

              ~ gfG-                                                                                          W & 310 M W                                                        W

o yg Mp,.g..

being nuctenr). nla in turn will make possible the seneration, transminalen, aml

                                                                                                                                                                                                                                    . 3 lE5 33
           .                          utilization of all energy without politating r.oll, water, and nir,                                                                                                                                               t

[p';W* * . It will aiotre the problem of the utilisation of the three great W national l r/ laboratories With thene much enlarged terina of referere, they will no longer h acel to carry out. their diragatiests into strasse areas of rmblic health, ninni-O tion, agronoenica.itransportatJos3nrbanlaatiori,45per s-llt inere a snajor tank iC Mk rationalisits our energy emen.R #- M "h hWith broadened authority,(thdCAE and t .IIDC would bs regonalble for

                                                                                                                                                                                                                                             +

a ' gulding andl reviewing the constry's energy planning, enerzyTreeeerrh energy  ; beonversion"andjtransportation,'and energy utt11sation. Review and .renmieling. N ' ! 'of the entire decision making proeges with regeet to energy in the morernmental' ., Vand private. sectors be twiulred. -At a time whco our requiresnents are releidl.r .. -

                                   'acceleratinge.the. decision. making procemi Isi betag extemled rather than short.

This redects the inany institatlonal Intercats which enll for lelancing amt > C ' resolution. Failure to tela'see or Irresolution helle no one. . 1

                                                                                                                                                                                                                                                          )

1 Of,h . hk% a-WYn- . %S. .'. W. 3 sf A'

                                                            ' .n TAsti I.-41ucttAa VEasus 00AHtntB4Tts ELECitfC E31918Y A5 0F M4Y 1. Het F0e myw. w .                                      courttricol,(nucttAa. lsm-rosset, as75)                                                                                                 ,y         l SJig W                                      C. " JM
                                                                                                              ;' y At 14 possent. 7.004 hears per per
                                                                                                                                                                                   ' At 16 percest. 6,570 bears por yer 9                                                                                v

.O

.; '.gv '

nesse, ce,, nease, c.i 1 77 ' [f$ed tharses -

                                                                                                                                                  $1 54            321 08 -            $3156              $27. 30 9 WFixed charps.Yper kw.4. . . . . . . . . . . . . . .. . . .. . . . . . . .                                                        4.97            1 41               4.95              4.16 Feel char ps, eme s per kw.4.. . . ... . . . . .... . . ...... . . . . . . . .                                     LM          e t it                 1.70              L 19 M~ . Operstseg and mantensere, miHs                                                              per ts.+
                                                                                                                 .............     ..                   . 30             . 30              . 30                .M k              .               less,s ute. nufts per k w.W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              .30 .. .........                  .11 .       . ......

Q. Tetet s'michbeerd cost, uses E. IF 1.90 7.96 6.65 .O 4.y""d' **"*'*' '"n'--per k w. br .. . . . . .. ..' ' .- . ....... ........

                                                                                                                                                                      . . . . . , s. r                  ..
                    , F 8 At 25 cents. -

Z.'y 8 Cests per sealise 5.ts. nees: Ca6tal cod-l.100 arW esdaar, $N3.5 per kv.I 800 efW cost, IM.4 per k w.

                              .b             TASLE 2Ma0WT)! IN DEMAND AND IN CtMERATING CAPASIUTY, ELECTaiC IfTILITY 1ROUSTRY a.D                                      .

c ie .e , ca.e, e,.or,e%,e.,O e, 3 .-

                     #,a 7 *. '

re- oo o m. i.. m.e. .

                                                                                                                                                                                                                    .                                     1
                                                                                ~

Y Y V" I M O .... ............. . 66.7 17t $ ....... .. ,, ..... .......... 2951 ..... ....... .. .. 4. 8 104.7 . ............... ..... .. .. . ..... p . 3952..... .. ...... ...... 3. 5 191 6 ............ . ... .. . ... . . ....... 1 190.. . . . .... ...... LF 295. 3 . . . . . . . c '. - 1964.. ... ................ 89.7 11L 5 l

           %                        2985... . . . . . . . . . . . . . . . . . .                                      L4                s 225. 9                             iL I5                   21.94
      . . t .:                      HE......................                                                         9. 2                2et ?                              It.15                   42.57 6                     1987.....................                                                        4. 9                257.95                                                     54. M
       . *;w
           >S  .                    3000 . . . . . . . . . . . . . . . .

193........... ........... l .8 *:'* 95 ft 4 22.2 as. 40

        ,                                                                            .                           1 I                   e 30L 0 '                            24.0                83146 y '.*' ' '                             Isid.                                                               II.8 ....................                              '
                  -                                                                                                                                                                             195.15
             "                      Aswese .. .. ....   . . . .....
                                                                 . . . . .....  ...                                  7. 4 . . . . . . . . . . . . . . . . . . . ........    . . . . . . . . . .touo . . 104 1
.C                                  se ,..... . . .. . ..                                                               . .................,............ ..... . ,

eg. cepedty 8 Doesod 8 Sense,er pne.peak. e mencetadeest sessmer peek 198,300 htW. Reserve eveRs64e. 23.5 perteet.

 >                                     8 tsesenseed j

8 Intefet eveNsMe 88 el Dec. 8.1969. Sessse: fa=== Doctrle laspesie stetteucal Yeerteek for 1988. I l l i l l 2 j

                                                                                                                                                                                                                                         .W m .d. Q q
                                                                                                                                                                                                                                                      'I l

j ; lO

'O i 1 , i ' I i

l

! I ,0 1 I , i i I i,

O i ,

i  :

i

! i 6 L i .;0 J 1 1 I

 }                                                                                                                                                                                                      '

i e i APPENDIX L i ' s I 1

;S I

i i 1 4 1 4 0 ' 1 1 1 h , s l t h, f, ic 4 4 4 s 4

]

O LONG-TERM FORECAST REPORT J ELECTRIC SUDMITTED TO 2 THE PUBLIC UTILITIES COMMISSION OF OHIO FORECASTING AND PO'4ER SITING DIVISION May 15, 1987 q a O By: Centerior Energy Corporation 6200 Oak Tree Blvd. Independenca, Ohio 44131 Telephone: (216) 447-3100 0 Mail Address: P.O. Box 94661 Cleveland, Chio 44101-4661 Fred J. Lange, Jr. LJ Assistant General Counsel Centerior Energy Corporation P.O. Box 94661 Cleveland, Ohio 44101-4661 Telephone: (216) 447-3248 () o] 's. r

                  .           .        ..    -. .          .  . . - . . . - .             . .-     .         _ - _ . - . _ . _             _        . _ ~ . . _ - . . -.
                                                                                                                                                    .                               .1 ._._..         .. . . .         .    .-

TME CLEVELAND ELECTRIC ILLUMlldATING COMPANY CDOE form FE3 1: CNARACTERISTICS OF EXISTING TRAN$ MISSION LINES n tM Transelestwn Voltene (ky) Pinht-of way type of Number substetton $ n Point of Orlisin operating Deelen Length supportsng of Nemes on g NA . (1,n.1Meme end Terminus Ltytl Efvel (Mlles) structure Circuits the line s Ct 78

1. Avon seever Avon 345 kV statloss - 345 345 6.4 s.C.T. 1 U (Ohle Edloon) Point of Interconnrection  ;;i '

with ohto Edloon, Sheffield M Township O o O Juniper Subetetters - 345 345 0.6 0.C.T. "= II. Juniper-star t (ohlo Edloon) Point of Intercorvsection 1.5 S.C.T. 3 with chio Edloon, 8tichfleid 9.2 D.C. H Frame g Township g s o Z. Ill. Juniper Centon Juniper Subetetten - Point 345 345 54.6 s.C.T. 1 Nonne chio Edison (Ohio Power) of Interconnectleen with station Ohlo Power, Oensburg Town-ohlp . 7 IV. Ashtsbete-Erle Ashtebula 345 kW Stetton - 345 345 14.9 s.C.T. 1

                                &          West (Penetec)                    Interconnection Point with Pennsylvente Elrictric Co.,

Chlo Penn State Line V. Perry Esetteke Perry Stetton - Emetteke 345 345 345 17.9 s.C.T. 1 kV 5tation . 2.6 0.C.T. w w vl. Juniper Esottate Juniper subete'tlen . Eastlake 345 345 30.8 s.C.T. 1 345 kV statloa. 6.1 0.C.T.

                                                                                                                                                                                                                                  'Y o

VII. Avon-Juniper Av e 345 kV stetton - Juniper 345 345 1.0 a.C.T. 1 X (Ine substetton 12.9 0.C. M-Frame t=s 20.9 0.C.P. M Frame X 9.2 S.C.T. ._ v. en vitt. Ne5.stng Supply Juniper Subetetton - Nording 345 345 0.9 0.C.T. 2 Substation 2.1 0.C. M Frame 5.0 D.C.P. _ . - _ - _ - _ , _ . _ _ _ _ .. . _ . . . . . . - - . . . . -~~--, -- .-

 .-               . _ ~ - . .             .. . . , _ . .          . _. - ._..               . ~ . _ -                        . . ~ . _ . _    .

TME CLhELAND ELECTRIC 11LUMINATING COMPANY 000E F0en FE3-1: CnARAcitalstICS or Exisitwo inAusMtssion Lists en E H Transelsalon Voltese (kV) Rieht-of-Way Type of Number Substation " i h Polnt of Ortelp Operating Design Length Supporting of names on ** A m h and Termines Leytt tevet (Mlles) Structure Circuits the Line $ l N Marding Substetton - Fox l z j tr. Marding Fox Line 345 345 5.1 0.C.P. 2 m Evbstetton 0.1 0.C.T. $

x. Celsale supply Fowles substation - Catsale 132 132 1.8 0.C. m-frame 2nd Circuit o' SubetatIon 345 11.8 D.C.P. M Frame Q O

xl. Avon-Beaver Avon 345 kV Stat ten - Point 345 345 3.6 0.C. M Frame 2nd Circuit 5 ei (CE) Line of interco.pnectlen uith CE y Avon Seaver ROW, Loreln County :a: rit. Perry Macedonle- Perr,y jtetlen - Intend 345 345 43.8 D.C.T- 2 Intend Line Substation 11.4 D.C.S.P. 7 utif. Inteed Marding Point en Perry-Macedonte- 345 345 1.8 0.2 D.C.s.P. D.C. 2P Structure 2 w Line Intend Line - harding substatico 0.1 :D.C.T. xfV. Perry Ashtabula ~ ferry A L.lon - Tap Polnt 345 345 1.1 D.C.T. 1 tW fshtabute Township, 22.1 s.C.I. Ashtabula County - u. u t av. Juntper Menefield Juniper Substation - Point 345 345 0.6 0.C.T. 1 . (Ot3 Line of Interconnection with OE, 1.5 D.C. m t reme s-Segemore Mitts 7 o. u n l

• ggg r

n-

                                                                                                                                                                                                                                   %.e n

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    .-.____ __ _ _____ __. ._                              __      _ . _ _ _ _ . . .          ._ _ _ - _ _ _ _ _ _ . _ . - -                          __            .                  . - _ . _ _ . . _ .       u_     . .

l, 1 CENTERIOR ENERGY CORPORATION 1551:1-1-03(E)(1)(b) . l THE CLEVELAND ELECTRIC ILLUMINATING CO.

                                          ~ ~

ODOE FORM FE3-2:

SUMMARY

OF EXISTING SUBSTATIONS - Line L)- Line Association Existing ( (FE3-1 or.FE3-3 or , ! Symbol Substation Name Voltage Notation) Proposed  ; i-XX Maxwell 132-13.2 kV 11~ E' i NB Newburgh Substation 132-66-11 kV 22 E lh) NE Newell Substation 132-13.2 kV 26 E l NP Northfield Substation 132-33 kV- 11 E () NL Nelson Substation 132-13.2 kV 11- E NP Newport Substation 132-13.2 kV 24 E , NS Nash Substation 132-13.2 kV 26 E l () NT Nathan Substation 132-33 kV 26 E 132-13.2 kV NW Norway Substation 11 E NY Nursery substation 132-33-13.2 kV 26 E - PG Pinegrove Substation 132-13.2 kV 27 E () PV Pleasant Valley 132 kV 11 E Switching Substation 12 E 13 E t 20 E () PY Perry Plant 345 kV V E Transmission Substation XII E XIV E 108 P SN Sanborn Substation 132-33 kV 25 E

• h 132-13.2 kV 25 i SP Spruce Substation E ZN Zenith Substation 132-13.2 kV 29 E l ,

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i 'G t APPENDIX M v 4 F k 5 I e i, e i.

O I

i , s  ! t 1 a < I i i i .O l l i i l 4 4 lO e 1 4 I ) t l 2 0 J, e i 1 1 -O

O December 31, 1986 The Cleveland Electric Illuminating Company Line (a) m O No. 1 Davis-Besse - Cont'd 112,143 2 783 - Emergency Diesel Generator 235,240 899 - 1983 Ceneral Project 3 1,239,930 4 916 - Contamination Containment 274,276 5 933 - Reactor Coolant Pump 695,858 n 6 988 - 1984 Ceneral Project 112,990 V 7 991 - 2 Spare Letdown Coolers 8 9 Eastlake Plant 724,919 10 7 - 011 Ignitor Syste: 136,787 11 24 - Coal Belt and Dumper Samplers 236,260 12 56 - Modify Basement Sump 655,285 0 13 133 - Ste== Seal Conversion 101,270 14 145 - Replace Coal Burner Lighters 761,767 15 169 - Lov Pressure Turbine Reblade 113,452 16 582 - Turbine Buckets 11,011,227 17 918 - Balanced Draf t Conversion  ! 18 f 19 Perry Plant i,930,228,353 i O 20 35 - Construction of New Nuetear Piant 21 107 - New 345 kV Transmission Station Lines 6,624,183 , 22 and Equip =ent 23

 -  24 25 Various Plants                                                           117,082 Q    26     707 - 1981 Project for Fossil Fuel Plants                            188,814 27     977 - 1984 Project f or Fossil Fuel Plants                           748,189 28      66 - 1985 Project for Fossil Fuel Plants                            918,547 29     141   - 1986 Project for Fossil Fuel Plants                          270,673 30     733   - 1981 Project for Nuclear Fuel Plants 65  -  Various  Replacement Projects, All Plants (1985)             505.836 31                                                                          315,458 32     140 - Various Replacement Projects, All Plants (1986) 400,484 0    33     178      as3er Ceneral Pro 3eee for rossil ruet rianta 34 35 Transmission-Substations 36     108 - Rainbov - South ROW                                       3',90 2        '690 4,24 37    370 - Juniper - Construet 345 kV Circuit 38    377 - Northfield - Automate                                        '     '

l,lg3,225 39 512 - Newburgh - Automate n Q 40 525 - Clinton - Automate 41 42 Hiscellanuous Transmission Projects 837,868 43 33 - New Automatic System SOC 146,543 44 129 - New 11 kV UC Service at St. Alexis Hosp. n 45 146 - Lake Shore & Newburgh, Upgrade Relays and V Optic Cable 551.334 46 362,569 47 157 - PCB Capacitor Replacement for 1986 0 216-A O

4 A. J- m --a- . . .-- a r ap.. ,eAm . J.h.a J --~ . --a 4. - m__.A t __w 4 AiA -z ,A AAaf..;_4m..an .4 dan--is ;., h 1 e 6 O P k

• I 1 I t

i ,0 i l i 4 ) ) i 1,O. 6 1 1

lG APPENDIX N i

i i N l ,.

!G                                                                                                                                                                                                   !

4 i

O b l i

j i IO 1 1 i I 1 00 4 t 1 i 1 iG i 1 i l l 4 ! I

4 O

o I

, I i i ! 0110 EDISCN CCe! PAW jo l Nuclear Regulatory Ccxmission f (10CFR Part 50J Licensing of Production and Utilization Facilities lo lo d PERRY NUC15.AR PCLER PIANT tNITS NOS. 1 M 2 !O lh O Informatien Needed by the !bclear Reculatorv Com-O mission fer . Antitrust Feview of Operatine License Applications for Nuclear Power Plants as detailed in Reculatorv Guide 9.3_ i I jO s , O O , O

!--                                                   - . . - _._ _ . - .                                                               "*N

O Item 1.c. (Cont'd)

2. The following changes in interconnections have occurred or will occur O within the Ohio Edison Syst s (CES).

1. The Samis (CES) - South Canton and South Canton - Star (OES) 345 kV interconnections with Ohio Power Company were previously metered together and considered a single interconnection. Today they are separately y metered and have been classified as separate interconnections.

o

2. The 345 kV Beaver Valley - Shenango (OES) interconnection with Dmuesne Light Ccepany has been replaced by 2 - 345 kV interconnections. At the Fhnsfield Plant, this was changed to fom the Beaver Valley - bbnsfield (OES) and the Crescent - bbnsfield (OES) interconnections with Duquesne Light Ccepany,

3. A 345 kV transnission interconnection with GI is scheduled to be put in service in 1981. The circuit will extenci between the Avon Power Plant (GI) and the Beaver Substation (CES).

4. A 345 kV transmission interconnection with GI is scheduled to be put into service between 1982 and 1984. The circuit will extend between O the Ibnsfield Power Plant (CES) and the Juniper Substation (GI).

5. The 345 kV Chio Edison Fhnsfield - ILmna line, which currently passes near DWuesne Light's Beaver Valley hbclear Plant, is scheduled for codification in 1986. The line will be changed to fom a second Beaver Valley (DL) - Fbnsfield (CES) 343 kV interconnection (the first

'O discussed in Item 2 above) and a Beaver Valley (DL) - Hanna (OES) 345 kV interconnection.

6. A 345 kV tranmission interconnection with GI is scheduled to be put \

into service in 1988. The circuit will extend between the Perry Nuclear Power Plant (GI) and the Hanna Substation (OES). , O These changes are reflected in the following table: - Ohio Edison System Interconnections (In Service and Planned) Year 345 kV 138 kV 69 kV 34.5 kV Total 1976 9 14 5 29  ! 10 1 ! 1980 11 14 5 1 31 1981 12 14 5 1 32 1984 13 14 5 1 33 l 1986 15 14 5 1 35 1988 16 14 5 1 36 0 O . . f i

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lInts Re:Crt ts: i tatt of Pencrt  : Tear of Recort E fase of Kessendent

(1) : l An Ortstaal (so. #a. Yn  ! g

;,           OHl0 EDISCN CCRPC T (2)      : A pesutaission             !                                           !      Cec 31. 1986                :
.        . .          ...................~.--.~~~~~--..~~....~......~.....~                                                                                        ~ ~ ~ .......
                                                                                                                                                                ..........      -....~......

TRAliSRI!5!CN LINE SIAi!STICS  :

... .. .... .......... ~ ...... ~ - .... ~ ....-..- ~ ~ ... ~ ...... ~ .............                       ~   .. ~  .    ~  ............      ~ ~     ........

transensiten line nas sore the cae tyce of suceertins strue.

                                                                                                                                                                ~  .... ...........:    :    B l

1. Pecort infersatten concerntes transatssica lines. cost of  :

tats and elfenses for the fear. List each transelsstoa litie liaving ture. inf tcate the atlease of each tyte of ecostuction tv (fte ceinal voltate of 132111Cv:lts er creater. Re: Ort trastatssten use of trackets and estra lines Miner sorticas ei a (ransenssten  :

 #es teles these volta;es in ;rcus totals caly for each voltate.                            line of a etHerett tnt of constructics need not te distintutshed:

R fransatssten itses include all lines r.ciered by the definitt:n free the reestater si the line.  : if transsissten systes plants elven in the L%tfora $vstes of 6. Re: Ort in (clusas (f) ed (e) the tetal sole sites of each  : . cteunts, is est re::rt substatten ccsts ant ritenses en thts caer, transsissten Itat. Shce it coluen (f) ta; cole sites of line :n :

1. Pe::irt f ate tv tritytfual lines ter all vcita:es if 50 re:utrec strr.ctures the cost cf =hich is reecrtes fer the line dest: sated: i:

;v a State tesatssten.

comerselv, stes in celusi tc) tre c:le atles of line en struc.

4. Esclude fres tais :a:e any transsissten lines fe* match tures the c:st of snicli is recorted f or another line. Resert sole :

staat costs are included in Accept 121,3:nuttitty Pr:serty, alles of Itie en leased or tartly ce9et structures in celuss it). 5.1;dicate ehetner tne tvae of su::crttaa structure recerted in in a festacte, enslain the lasts of saca occusancy ans state  : nPether eteenses eith 'estect to such structures'are incluitd  : 4'ussfe)is: (1) stesle Cale. s0:d. cr steel: (2) ef rase, ucci. in the eisenses rescrtes ter the line cestcaates.  : E

. lleel 90lest (3) tesert er (4l u ader:rovie c:nstructicn. If a                                                                                                                        :   5 V0LIASE               l                   l                L!iSIH i     (Pele Filest            t              :

CEllisAi!Cii :t!rticate entre etner :  : ila the case cf unsercrouna l  :

lthan 60 cycle. 3 onase): Iv:'e of  :  !!nes, res:rt circutt attes) :  :

.tnel---~~~~-~.-~~~~~-----~~~~-~l-~~---------------:                                                   Su::orttas      l---------~~~~~~~----~~:                              bater !        l
  %c.
                                                                                    !                  Structurt       l                         :                       : cf           l   p

Free  : To  : C:erattoo : Cestenet : :0n Structures ci :Ci Structsres Of lCtrcuits:

                                                                !                   !              !                      Line festinates : Ancther t,tne                l               :

O: ( (c) th!

";                    (4)                          (:)          :        (c)        :      (2)     l       (e)         :            ifi          :                                      l
  ...;-~....~.....l........................l...........:...........:..............:.................:.................:........:

1 lAvon (CEI) leaver il  : 345 tv 345 tv Steel te er : 9.74 : - 1  : 345 KV ! 345 tv : Steel To.er : 1,29 : 9.74 1 l 2 lAvon (Cell (1) leaver 12 1,53 : 3 lAven (CEl) lteaver 12  : 345 KV : 345 tv l Steel P:le  :

1  :

 ,1 tleaver                          Icarlisle                  : 345 tv                345 BY : Steel Tener :                           17.50 :                         :     1         l (2) lDavls lesse (TEl           : 345 KV                345 KV     l Steel.I er        '

tt.02 : 3.35 1 J,$ lteaver lleaver 345 tv 345 tv Steel P:1r  ; 1.56 : - i  !

                                     !!aits lesst (IE)          .

M : leaver Valley (R) (3) lHanna 345 KV : !45 tv l Steel T:str - : 52.02 i !  : 8 l leaver Valley ( R} :Hanna  : !45 RV ! 345 KV sc:$ H Frate : 0.69 : . l l 9 !!eaver Valley (R) (4) l! stats  : 345 KV : 345 kV lt::d H Frase : 0.21 .  ; I  : $ g 10 !!eaver Valley (R) lSassis  : 345 tv : 345 RV Steel Tener : 0.17 : . l 1  : 11 Canton Central (CP) lPanna l 345 KV : 345 tv Steel icier ! 0.07 : .

1  :

!!ar l 3R tv : 345 RV !! teel T:ser l ;3.37 : t,73 : 1  :

  !? Carlisle                                                   : ;45 tY : 345 IV lte:c H Frast                        '
                                                                                                                                           !.14 i                    -

1  : 13 trarliste  : Star 23.76;  ; 14 Hana lFichland 345 KV : 345 KY eeed M Frase : - i 1 p lHana :st s'il a9d  : 345 tv i 345 tV l Steel i:.er , 0.70 : - l 1 i 16 !Hanna :Partina (CEI)  : 345 tv ! 345 tv l$ teel I: er .

0.07 : 1  :

17 lMarttr.t (CE!) (5) ?anifteld  : 45 tv 345 KV : Steel Tener  : 7!.11' : 0.70 : 1  : 18 lMartist (CE!) l?nsheld  : 345 tv : 345 tv l Steel fele  : 0.03i - I  : 19 Harcina (CE!) l?ansfielf  : 145 tv !45 tv lt:ed M Frase : 2.21 : - l 1  : 70 :::tenland (i) l?nsfield  : 385 tv 345 tV !! teel Tener : 40.61 l - l 1 l 21 lHittilaad '.nsiteld !45 tv : !45 tV 15 teel P le  : 0.16 : .

1 l 22 :  : .

:  :  :  : l

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\)!

19:enti:9 Teres Of learly l l l l l l 25 : hace cf lessee cate lease Feet . l l

: I h . .

l 27 i (1) .CEl. TE. k, pa 9'01/!1 540 e:s. I 661.175 Ceterstaes fr:: CAM O 4reettet date: 9/14/67 l

  't           (2) CEl. TE. R                         !?!01/75      !40 a:5.             1.163.011 tete steed free CAHO 1:retient tates 9/14/67                            :              l          l 2? !         (3) CE!. TE. R . FP                     9/01/!0      540 ::s.             l.1;9,1:5 ieterstatt it: G?CO 4reesent cated 9:14/t,7                             l              l
  ;0 :         (4) CEl. TE R. FP                      12/01/70      5405.                   56.144 Ceterstatt ir:s CtK0 4reeseet cated ?!!4/67                             .              l
  *1 :         t5) t!!. TE. R. FP                     10/01/77      540 ::s,             6,5:s.735 Oeterneet fr:: C#C0 4retient f atec 9/14/e'                             l              l         !

(ja.l (1) CE!. TE. R. FP alet/77 540 :5. 1.19 3.1H Oet? sired free CtM0 e artenent f ates H14/67 l 4i C the terstnals cf all 345 av e !!3 !V lines are :est: nates tv  : . i l

  ;5 i             ! u seissten iststatten ease eless tee .tse sh:en.                                                                              :                       l                         l
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jo ' 1  : 1 > r i f i d !O , i f APPENDIX P I f k l ' i

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'G I 10 I l l ' - - - ~ ~ - - - , - - - - . , - _ _ _ . _ . _ , _ _ , , _ _ _ , _ , _ _ _ _ __ __,__ __ _

c, 4 _ _ _ _ PAGE 1 SECURITIES AND EXCHANGE COMMISSION ~j U A S H I N G'l O N , D.C. 2 0 '.> W 4

   )             _

FORM iu-K n Q) ANNUAL GPORT PURSUANT IU SECTION 13 OR 1S(D) 0F

   )                                                                                                                     THE SECUF1IlIE. EXC!!ANGE ACT OF i%4                                                                                                                                                                                           -

7 FOR THE FISCnL YEAR ENDFA DECEMDER 31, 1905 COMMISSION FILE NUMDER i -2576

    ,                                                   - _ , . . .                                         - ---q                                                                                   ,

4 OHIO EDISON COMPANY . _ _ _ _ . (EXACT NAME OF REGISTRANT AS SPECIF1ED IN ITS CHARTER) 34-0437786 OHIO -

                                                                                                                                                                                                   ~~ ~

TT.R.S. t M t'0 E k

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uiATE Of~0TiriITT-._TIEbTCT!ON 07--~~ IDENTIFICATION ) NO.._ . . - O _ INCORPORATION OR ORGANIZATION) ..

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( , .. J PAGE 4 . _ _ , , _._ . _ _p g y_. 3 ( . _ . _ . . _ . _ . . - . . _ _ - . ._. .. _ , . . _ . . _ . _ . . _ . . _ _ . . . . _ _ _ _ _ ._ a ._ X _4v.tL 3. m. . ...a. .~ j. 7 g_e. . . . q . n -- . - . . . ._

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M TELL. lUN .l; ( STREn AKR0r , ' _' H . . _ . _ . . - - . . . _ N> THE COMPAtW FURNISHES i-LECTnIC % , .' .; C E IN - Cf h.nMIl lt ' A c  : Th % 4.-:m -A W M -'rr 3H lO . --M 5 L9 H_  ! f  ? tt @ i 91 Sjur 'L-n W -f0 H vrdr - O C00PEtniiIVES, ELECiRIC ENERGi FOR RESAJ TG s Hui41C. i ALil : LI AND tOTH Ht#- x--

          --+RhHFhi-S9ieH-2EiW-ith-iHW&-EL-FCTirio-ENERG i- F0x -fics+eE--i 0-4 -ii Wi31H L OHIO.            THE COMP'ANY ALSO ENGAGES IN THE SALE, PURCHASE AND INTERCHANGE OF
                                                                                                                                                                                                                         ,J         .              -

E L E C T la E-EN E RErt-C : T. ; 9THE R-iH_E E-Y+'I9-CO M P s iH E E .- - +H E-+R E A --l T-+ -H VE F FOPULAlIO. OF APPROXIMATELY 2,500,000. O THE COMPANY OWNS ALL OF THt DUTSTAsDING COhnDN' STOCi: OF

           --J E+JNE'i N Anis--PGWER---GGHFANY M PENN PGWER %--4 3ENN EYM'AH rA -C6FPOPAT+E4HIGH -

4 FURNISHES ELECTRIC SLRVICE }N iM CimMUNI T IE , AS t&. . L A > 1N fURAL AREAS U

          -- E s C E                4 O N SYbhW( 6,                             '.NO-Whi-EH W -;*W ;-4 -L---!------vmiY i-:6 t- ni--HH&-EMM--"
   ,          NUNIClr>ALITIES.                                 THE         AREA       SERVED BY PENN F O S. N HAS A PU?ULAlluN OF api Nu i-i MC&iMS 99;-                                                                                                --

r a -- - ei;- D."-(-ON.'iRifi--i eh_. 6&HA n--- -- - - - IN SEP'IEMDER 1967, THE CENTRAL AREA POWER C00RDI'riATION GROOP g ('CAPCO') COMPANIES, CONSISTING OF THE COMPANY, PENN PCLER, T HE CLEVEL AiU A L L U n,i n,n_Irn, Lum w, t ( *LEA _ 1m,._D Uu. lits iw.'T.l t.n t tunt srii s,.aQUtint. t ,d L ._,,i n u, s AND THE TOLEDO EDISON COMPANY ( ' 'T O L E D O * ) , ANNDUNCED A ' ROGR Aii FGU JOINT o ,._' :l t, s.UDED 14: ,~n DEVCLU,'nENT Uf POWER GENERAL]UN AND I N A N S h .1 ?iL 10i! F A C ll ) T I E.s . SAhMIS PLANT, UN il . J AND c. Ai I I H' THE PROGRAM ARE UNIT 7 AT IHE W.H. 1, 4 DHUCE N Ar4St'lLLD PLAN 1 AND UN11 1 A1 THE DLAVER VALLEY STAllCN, LACH NOW IN ( SERVICE. THE CURRENT CAPCO PROGRAH INVO_L_VES THE CONST RUCTION OF iJUCLEAR GENERA 11NG UNITS. THE iAULL ON l HE F ULLOdira, PAGE SHOWS CEklAlN DLiAILS n WITH RESPECT TO THE UNITS UNDER CONSTRUCTION IN WHICH T i . .: C0t)PANY AND PEUN V FUWtR ( "Cont ANILS ' ) heiVE UWN E31Tl P } fiTD~C i a . e--__--..*_- i n d i '

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i iiE CTT't U L0"riiNTT TE- CONT 170ING~. TD TE7TrU-'TTIC TTTiTUT0F i ' t K TT~~~- UNIT 2, UHIch JS ADOUT 44?. CUhPLLlf. lHE ONLY SIGNIFIC WT UORK lHAT HAD

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RELATED TO PERRY UNIT 2 IN NET INCOME AND INSTEAD BEGAN CREDITING AFUDC --

               - C AF A i At. RCD 't ti-PCRtreN ri 2 10- A NESLT/E tiCCOLtt!T-CJ T M.tI-SitC7TCN- 1 RTT-PURPOSE.                         PRIOR TO f H1 S CH AN' E , THE COMPANIES' AFUDC RELATED TO PERRY UNIT
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i1L:.1ON" t - U PER MONTH. THIS CHANGE HAS NOT A r c c m i c. D UASH FLOW BUT HAS -CnUSED - - - - - - RT 1NCUN. " -- -

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THERE WILL Dr NO DEFINED SCWDULL CCR lH2 COMPLETION OF UNIl 2. POSSII L -

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ASSIGNED TO UNIT 2 LOULD f:E C Af;dIGNCD, WHERE APPROPRIATE 3 TO UNIT i. --

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AND S7UDIES IND1CM E THAT THE fiAGNITUDE OF ANY ':UCH URITE-OFF COULD DE MU SMALLER. IF, DESPITF. ITJ bEST CURRENf I t 6 0 RI V4T 1. 0 W , A WCH LARGER WRI fE-OFF WERE REGUlRED, DEPENDING UPON THE 11 MING INVOLVED, SUCH A WRITE-OFF COULD ni

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CURREN T LEVELS. UNDER THff COMP ANY ' S IIDENTURE , lHE COMPANY'S CONSOLIDATED 0 TTKITiCT CnRRTriCT UNREIT R'ICTED' TDR75YNENT~0F ' C5SR 3 DECEHDER M ,DIVTDEND~S1905. TJIT TRE COMPANY'S COhMON STOCK WERE $31'_? fi1LL10W M . 4

• DASED ON THEIR EXPERIENCE TO DATE, THE COMPANIES UGULD EXPECT TC 3

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PENNSYLVANIA PUDLIC UTILITY COMMISSION ("PPUC') JURISDICTIONAL CUSTOMERS,

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     )              RATES IS STILL PEFORE THE COURTS IN PENNSYLVANIA.                                                                                                                                                                                                                       ~                                         ~

Tin i i c.C~'r R7iTE~THE@TFTEUTO~ TERiU N ATED' CDNSTnCCTION TRDUECTS . ' O acc~n.s n n rnrncm ann RcSErmS Foren,ESCrrrTrorT OF" A TWUCCEDr

• ING PENDING DEFORE THE PUC0 S E E K I N L, A HALI 40 CON 5TRUCTION OF PERRY UNIT 2.

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O CERTIFICATE OF SERVICE I hereby certify that I have this day served a copy of the foregoing document upon the participants in this proceedistg. Dated at Washington, D.C., this 19th day of February, 1988.

-O t' kfW,      /7 Kenneth M. Albert b          .

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C) u - ICE LIST ' a Mr. Thomas E. Murley. ,, Director of Nuclear. Reactor Regulation 't > U. S. Nuclear Regulatory Commission Washington,'D.C.-20555 Benjamin H. Vogler, _Esq. Office of the General Counsel' U. S. Nuclear Regulatory Commission d~ Washington, D.C. 20555

    'Deborah B. Bauser, Esq.

Counsel for Ohio Edison Company and Pennsylvania Power Company Shaw, Pittman, Potts & Trowbridge. C 2300 N Street, N.W. Washington, D.C. 20037 David R. Straus, Esq. Counsel for American Municipal Power-Ohio Spiegel & McDiarmid O Suite 1100 1350 New York Avenue, N.W. Washington, D.C. 20005-4798 Janet R. Urban, Esq. O Antitrust Division / TEA U.S. Department of Justice SSS Fourth Street, N.W. Room 9816 Washington, D.C. 20001 C. E. Chancellor, Esq. O Secretary and General Counsel The Cleveland Electric Illumirating Company Post Office Box 5000 Cleveland, Ob 44101 Alan P. Buchmann, Esq. O Squire, Sanders & Dempsey 1800 Huntington Building Cleveland, Ohio 44115 Michael M. Briley, Esq. Counsel for Toledo Edison Company O Shumaker, Loop & Kendrick North Courthouse Square 1000 Jackson Toledo, Ohio 43624-1573 Office of the General Counsel O Duquesne Light & Power Company 1 Oxford Centre 301 Grant Street Pittsburgh, Pennsylvania 15279 0

0-CERTIFICATE OF SERVICE g I hereby certify that I have this day served a' copy of the foregoing document upon the participants inithis proceeding. Dated at Washington, D.C., this 19th day of February, 1888* O

                                                       /LddAent Kenneth M.~   Albert O

O O l O O O O O

                                                                                    =____

4 SERVICE LIST Mr. Thomas E. Murley o Director of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, D.C. 20555 Benjamin H. Vogler, Esq. Office of the General Counsel C) U. S. Nuclear Regulatory Commission Washington, D.C. 20555 Deborah B. Bauser, Esq. Counsel for Ohio Edison Company and Pennsylvania Power Company o Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W. Washington, D.C. 20037 David R. Straus, Esq. Counsel for American Municipal Power-Ohio O Spiegel & McDiarmid Suite 1100 1350 New York Avenue, N.W. Washington, D.C. 20005-4798 Janet R. Urban, Esq. o ' itrust Division / TEA

. Department of Justice d.3 Fourth Street, N.W.

Room 9816 Washington, D.C. 20001 O C. E. Chancellor, Esq. Secretary and General Counsel The Cleveland Electric Illuminating Co.npany Post Office Box 5000 Cleveland, Ohio 44101 O Alan P. Buchma r;n , Esq. Squire, Sanders & Dempsey 1800 Huntington EJilding Cleveland, Ohio 44115 Michael M. Briley, Esq. O Counsel for Toledo Edison Company Shumaker, Loop & Kendrick North Courthouse Square 1000 Jackson Toledo, Ohio 43624-1573 o Office of the General Counsel Ducuesne Light & Power Company 1 Oxford Centre 301 Grant Street Pittsburgh, Pennsylvania 15273 0

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