ML20207K110
| ML20207K110 | |
| Person / Time | |
|---|---|
| Site: | Davis Besse, Perry, 05000000 |
| Issue date: | 09/13/1988 |
| From: | Albert K, Goldberg R CLEVELAND, OH, GOLDBERG, FIELDMAN & LETHAM, P.C. |
| To: | |
| References | |
| A, NUDOCS 8809280244 | |
| Download: ML20207K110 (50) | |
Text
7_ . _ _ _ _ _ , _ _ _ _ . ___ _ _ _ _ _
l- '
pOon s
/\_ f UNITED STATES OF AMERICA BEFORE THE k h '
NUCLEAR REGULATORY COMMISSION O,"
In the Matter of ) /
THE CLEVELAND ELECTRIC
}
Docket Nos. 50 OA 4 Q[
)
ILLUMINATING COMPANY ) and 50-346A \
)
and )
)
TOLEDO EDISON CiMPANY )
(Perry Nuclear ower Plant, )
Unit 1, and Davis-Becse )
Nuclear Power Station, Unit 1) )
TO: Chief, Policy Development and Technical Support Branch, Office Of Nuclear Reactor Regulation COMMENTS OF CITY OF CLEVELAND, OHIO, IN OPPOSITION TO APPLICATION FOR SUSPENSION OF OPERATING LICENSE ANTITRUST CONDITIONS Reuben Gcidberg Kenneth M. Albert Goldberg, Fieldman & Letham, P.C.
1100 Fifteenth Street, N.W. .
Washington, DC 20005 Telephone (202) 463-8300 Marilyn G. Zack ;
Director of Law June W. Wiener !
Chief Assistant Director of Law l William M. Ondrey Gruber :
I Assistant Director of Law City Hall, Room 106 ;
601 Lakeside Avenue l Cleveland, OH 44114 )
Telephone: (216) 664-2800 Attorneys for City of Cleveland, Ohio l
September 13, 1988 l 0
8809280244 88091336 /
DR ADOCK OCO
t 9 TABLE OF CONTENTS Page I. CENTERIOR'S APPLICATION........................... 2 II. OVERVIEW OF THESE COMMENTS........................ 3 III. CENTERIOR'S APPLICATION IS A THINLY-VEILED ATTEMPT TO RENEW PERVASIVE ANTI-COMPETITIVE CONDUCT.......................... 7 IV. THE NRC LACKS THE STATUTORY AUTHOR-ITY TO GRANT THE REQUESTED RELIEF................. 11 V. NRC REGULATIONS DO NOT AUTHORIZE SUSPENSION OF ANTITRUST LICENSE CONDITIONS................... 14 VI. CENTERIOR'S ARGUMENTS ARE PRECLUDED............... 18 A. Res Judicata Bars The Relief Sought By Centerior........................... 18 B. Alternatively, Collateral Estoppel Bars The Relief Sought By Centerior........... 23 C. Laches Bars The Relief Sought By Centerior........................... 24 VII. THE ANTITRUST PROVISIONS OF THE AEA WERE NOT BASED ON AN EXPECTATION THAT NUCLEAR POWER WOULD BE LOW COST..... ..................... 28 A. Legislative History........................... 28 B. Judicial And NRC Precedent.................... 32 VIII. THE EVENTS CITED BY CENTERIOP DO NOT UNDERMINE THE BASIS OF THE ANTITRUST LICENSE CONDITIONS...................... 34 A. Increased Cost Of Nuclear Power............... 35 B. Emergence Of AMP-Ohio And Other Competitors......................... 38 IX. IF THE NRC DOES NOT SUMMARILY REJECT CENTERIOR'S APPLICATION, THE APPLICA-TION SHOULD BE SET FOR HEARING AND SHOULD NOT BE PERMITTED TO GO INTO E FF ECT DU R I NG ."H E H E AR I NG . . . . . . . . . . . . . . . . . . . . . . . . . 42 VII. CONCLUSION........................................ 45
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r p o .
UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION In the Matter of )
)
THE CLEVELAND ELECTRIC ) Docket Nos. 50-440A ILLUMINATING COMPANY ) and 50-346A
)
and )
)
TOLEDO EDISON COMPANY )
(Perry Nuclear Power Plant, )
Unit 1, and Davis-Besse )
Nucitsar Power Station, Unit 1) )
TO: ~ Chief, Policy Development and Technical Support Branch, Office Of Nuclear Reactor Regulation COMMENTS OF CITY OF CLEVELAND, OHIO, IN OPPOSITI0N TO APPLICATION FOR SUSPENSION OF OPERATING LICENSE ANTITRUST CONDITIONS The City of Cleveland, Ohio ("Clevelanda), files these comments in opposition to the application submitted by The Cleve-land Electric Illuminating Company ("CEI") and Toledo Edison Com-pany ("Toledo") in which they ask the Director of Nuclear Reactor Regulation ("NRR") to suspend the antitrust license conditions imposed by the Nuclear Regulatory Commission ("NRC"). For ease of reference, the two applicants are referred to as Centerior Energy Corporation ("Centerior"). Centerior is a holding company created in July 1985 as a result or the merger of CEI and Toledo.
Centerior owns all of the common stock of the two utilities.
Centerior as):s that the suspension of the conditions apply only
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. e to it as co-owner of the Perry Nuclear Power Plant Unit 1
("Perry")1! and the Davis-Besse Nuclear Power Station Unit 1
("Davis-Besse"). As shown below, the application should be sum-marily rejected.
I. CENTERIOR'S APPLICATION Centerior says that its application is submitted pur-suant to 10 C.F.R. SS50.90 and 2.101. Centerior asks NRR to amend the Perry and Davis-Besse operating licenses "by suspending the antitrust conditions imposed therein" (App. 1). At the out- l set of its application, Centerior cites (App. 3) the companion application submitted by Ohio Edison on September 18, 1987 seek-ing the same relief and says that "Ohio Edison's arguments apply with equal force to CEI and TE." Relying heavily on Ohio Edi-son's arguments in its application, Centerior argues that there are two grounds for suspension of the antitrust conditions.
First, Centerior says that both (1) the 1970 Amendments to the Atomic Energy Act ("AEA"), Pub. L. No.91-560, clarifying the NRC's authority to impose antitrust license conditions, and (2) the decision by the NRC to impose the antitrust conditions in this proceeding, were based on the expectation that nuclear power would be low cost and would, thereby, exacerbate the market power of nuclear licensees. Centerior argues taat nuclear power is 1/ In addition to Centerior, there are three co-licensees: r Ohio Edison Company ("Ohio Edison"), Ohio Edison's wholly-owned subsidiary, Pennsylvania Power Company ("Penn Power"),
and Duquesne Light Company (*Duquesne"). For ease of refer-ence, Centerior's application is cited as "App." whenever specific pages are referred to. For example, page 8 of the brief is cited as "App. 8".
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high cost and, hence, there is no statutory basis for continued imposition of the antitrust conditions. Centerior asks the NRC to summarily grant its request for relief on this ground.
Centerior states that if the NRC rejects this argument, i the requested relief should be granted because the "competitive [
environment in which TE and CEI operate has substantially and materially changed in the years since the antitrust license con-ditions were imposed" (App. 4). Centerior argues that (1) "the f
electric industry within the combined CAPCO service territories has been completely restructured", (2) "(n)uclear generation has proven to be vastly more costly than anyone did foresee or could have foreseen ten years ago", and (3) "[t]he emergence of a major independent power within CEI's and TE's service territories has created power supply opportunities that did not exist ten years ago" (App. 22-23).2/ Centerior argues that the NRC can and l l
should issue the requested relief immediately pending completion I of an evidentiary hearing to address the material factual issues !
I raised by this alternative basis for relief (App. 42-46). ,
l II. OVERVIEW OF THESE COMMENTS j Cleveland operates Cleveland Public Power ("CPP"). CPP f
is primarily an electric distribution system which supplies elec- [
I 2/ CAPCO is an acronym for the Central Area Power Coordination f group formed in 1967 by CEI, Toledo, Ohio Edison, Duquesne '
and Penn Power. The CAPCO members agreed to engage in (1) operational coordination by, inter alia, exchanging power ;
and sharing reserves, and (2) developmental coordination by l planning their future generation and transmission facilities ;
as if the pool's requirements were those of a single power ;
system. (
i
r e tric power in approximately 35 percent of Cleveland's area and to approximately 22 percent (about 50,000) of the electric consumers in Cleveland. CEI is the only utility to which Cleveland is in-terconnected.
Cleveland actively participated in all stages of the prolonged NRC proceeding which culminated in the imposition of the antitrust conditions challenged by Centerior. The background of this proceeding is described in detail in Cleveland's answer to Ohio Edison's application filed in September 1987 in which Ohio Edison seeks the same relief -- suspension of the antitrust license conditions applicable to Perry -- as sought by Centerior in connection with Perry and Davis-Besse. Briefly,' e antitrust conditions stem from a proceeding in which the NRC consolidated construction permit applications by the CAPCO members to con-struct Perry 1, 2 and 3 and Davis-Besse 2 and 3.E The Atomic Safety and Licensing Board ("Licensing Board") found that the CAPCO members had engaged in pervasive anti-competitive conduct.
5 NRC 133 (1977). Therefore, the Board concluded that antitrust license conditions should be imposed to require the CAPCO members to (1) permit other utilities to purchase nuclear power or a share of the nuclear plants, and (2) provide coordination, pool-ing and wheeling services. These findings were affirmed by the Atomic Safety and Licensing Appeal Board ("Appeal Board"). 10 NRC 265 (1979). The Appeal Board modified the Licensing Board 3/ On January 22, 1980, the CAPCO companies cancelled Davis-Besse 2 and 3. Construction of Perry 2 was indefinitely suspended in 1985.
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_g-decision by imposing additional antitrust conditions. As a direct result of the antitrust license conditions challenged here, Cleveland and other municipally-owned systems in Ohio have for the first time been able to purchase power from alternative power suppliers and wheel this power over Centerior's facilities.
In its answer to Ohio Edison's application, Cleveland showed that there is no legal or factual basis for the relief sought. Specifically, Cleveland showed that the NRC does not have the statutory authority to suspend an antitrust license con-dition subsequent to the conclusion of the operating license pro-ceeding (pp. 24-52). Cleveland went on to demonstrate that even putting as!.de this statutory bar, the requested relief is unjus-tified. Cleveland noted that res iudicata and collateral estop-pel preclude the application because Ohio Edison raised, or could have raised, the arguments in its suspension application during the operating license proceeding (pp. 53-81). Clevelend also showed that laches bara the relief sought by Ohio Edison because (1) Ohio Edison unjustifiably delayed seeking the relief, and (2)
Cleveland would suffer severe and undue prejudice because of the delay if the relief were granted (pp. 82-86;.
Cleveland then demonstrated that the events cited by i
Ohio Edison do not undermine the legal or factual basis of the NRC's decision to impose the intitrust license conditions.
Cleveland noted that the provisions in the AEA authorizing the NRC to conduct a prelicensing antitrust review were based on con-corns of Congress that operation of a nuclear plant would in-crease the licensee's control of both generation and transmis-I I
- P sion (pp. 89-88). Congress was aware that a nuclear plant gen-erates a vast amount of power and that extensive high voltage transmission facilities would be constructed in conjunction with a nuclear plant to transmit this power. Congress wanted to en-sure that this increase in market power could not be exploited by a licensee to' engage in anti-competitive conduct, especially be-cause federal funds were used to develop nuclear power technol-ogy. Thus, the antitrust review provisions of the AEA were not based on expectations regarding the relative cost of nuclear power.
Cleveland then showed that the events cited by Ohio Edison do not undermine the concerns underlying the NRC decision to impose the antitrust conditions in this proceeding (pp. 110-17). The Perry and Davis-Besse plants have expanded the control which their owners enjoy over power generation and transmission facilities. Cleveland pot.nted to the extensive transmission f acilities constructed by the CAPCO members to connect Pc>:ry and Davis-Besse to their existing transmission network. Consequent-ly, the antitrust conditions are still needed to ensure that thir.
control is not used by the CAPCO members to renew their anti-com-petitive conduct which ceased only because of the imposition of the conditions.
On July 5, 1988, Ohio Edison filed a response to the comments filed by Cleveland and other parties in opposition to Ohio Edison's application.
Again, Centerior relies heavily on Ohio Edison's argu-monts in its application and response to comments. Centerior
8 P makes it clear that the two applications represent a coordinated effort to defeat the antitrust conditions. Consequently, in order to provide a comprehensive response to Contorior's applica-tion, Clevoland responds to the arguments prosented by Contorior as well as the arguments by Ohio Edison in its response to the comments. To avoid repetition, Clevoland incorporates by rotor- i ence its response to Ohio Edison's application. The arguments by Clovoland in its answer to Ohio Edison's application apply with cqual force here. This answer addresses only new arguments raised by Centerior and Ohio Edison.
III. CENTERIOR'S APPLICATION IS A THINLY-VEILED ATTEMPT TO RENEW PERVASIVE ANTI-COMPETITIVE CONDUCT The relief sought by Centerior would suppress the com-petitivo forces which were only able to emerge because of the antitrust conditions. The express goal of the AEA, as stated in Section 1 of the Act, is to "strengthen free competition". 42 U.S.C. S2011. The 1970 Amendments were designed to effectuate
.his gocl by clarifying the mechanism for prelicensing antitrust review to ensure that activities by a licensee do not "create or maintain a situation inconsistent with the antitrust laws." 42 U.S.C. S2135(c)(5).
In implementing this goal, the NRC has reviewed the activities of over ninety licensees. Antitrust license condi-tions have been imposed in thirty-six licenses. Prior to imposi-tion of the conditions, most of the licensees, including the CAPCO members, refused to provide wheeling or other bulk power
services to smaller utilities to which they were connected. The antitrust conditions gave smaller utilities interconnected with the licensee access for the first time to purchase power from alternative suppliers. In its answer in opposition to Ohio Edi-son's application, the American Public Power Association notes (P. 3)*
(Antitrust license) conditions benefit several hundred public power systems across the country.
In Ohio alone, at least 76 locally owned electric utilities depend on the antitrust conditions con-tained in the Perry and Davis-Besse nuclear plant licenses.
In its answer to Ohio Edison's application, Cleveland outlined the numerous contractual commitments it has made to purchase power from alternative suppliers in reliance on the access to wheeling services guaranteed by the antitrust conditions (pp. 42-45).
This, in turn, has introduced competitive forces in electric markets. Competition la needed to effectuate the goals of the AEA and to provide incentives for officient operations.
As one commentator has noted Every scholar who has analyzed the structure and performance of the electricity industry has con-cluded that effective competition cannot exist in the bulk power market without mandatory equal ac-cess to transmission facilities.
(citations omitted) R. Pierce, A Proposal To Deregulate The Mar-ket For Bulk Power, 72 Va.L.Rev. 1183, 1215 (1988) (hereinafter referred to as "Bulk Power").
l The pervasive anti-competitive conduct by the CAPCO members which justified imposition of the antitrust license con-i
_9-ditions demonstrates the importance of the conditions to mainten-ance of competition. In its answer to Ohio Edison's application, Cleveland reviewed the findings of the Licensing Board and Appeal Board regarding the anti-competitive activities by the CAPCO mem-bers (pp. 7-21). Not surprisingly, both Ohio Edison and Cen-terior, in arguing for suspension of the antitrust license condi-tions, do not focus on the NRC's findings. Ohio Edison buries these findings in an appendix. Centerior does not even montion the findings. The Applicants also conveniently fail to mention that only as a result of the antitrust conditiono have the CAPCO members permitted Cleveland and other similarly situated munici-pal systems access to wheeling and other services.
Indeed, Centerior and Ohio Edison make it plain that they do not like dealing with the competitive forces unleashed by the antitrust conditions. In its application, Centerior decries the purported injury to the public caused by the decision by municipal systems to purchase the cheapest power available, even if sold by sources other than the CAPCO members (App. 15, 23, 32-33). Centerior tells us that competitive forces "will lead to an erosion of (its) municipal sales markets" (App. 23). Centerior also proclaims that suspension of the antitrust conditions would mean that Cleveland could no longer "avoid the cost burdens of nuclear power". Thus, the Applicants state in a clear and un-equivocal manner that the purpose of their applications is to put an end to competition and to restore the Applicants as the ex-clusive power suppliers in their respective geographic areas.
Recent actions by the CAPCO members reflect their de-
, , ?
sire to renen anti-competitive activities. In April 1988, Ohio :
Edison submitted a filing to the Federal Energy Regulatory Com-mission ("FERC") in Docket No. ER88-329 purportedly to implement a settlement sgreement with AMP-Ohio concerning the terms under which Ohio Edison would sell power to AMP-Ohio.A FERC found that Ohio Edison was trying to impose unilaterally restrictions i
on the sales nervice agreed to by the parties as a result of the 4
{
a antitrust conditions. 43 FERC 161,316 (1988). Specifically, i Ohio Edison sought to renege on its agreement to offer the whole- (
sale customers a choice of full or partial requirements service.
Id., pp. 61,882-883. Ohio Edison also sought to unilaterally preclude the purchasers from selling the power to wholesale cus- L tomers. Id. Conaequently, FERC rejected the filing. ;
i j In its answer to the suspension application submitted r by Centerior and Ohio Edison, AMP-Ohio points to other efforts by :
the utilities co frustrato efforts by municipal systems to in- ,
crease their purchase options.E# !
Thus, the relief sought by Centerior and Ohio Edison is 1 1 !
i 1
1/ AMP-Ohio was incorporated in 1971 as a non-profit corpora-l tion for the purposes, among others, of generating, pur-j chasing, acquiring, transmitting and selling electric powet l and resources to, and prorcating the interests of, municipal i
- electric utility systems in Ohio. It is operated on a coop-erative basis for the mutual benefit of its members, each of
, which is a political subdivision of the state of Ohio that j owns and operates an electric utility system. Of the j eighty-four municipal electric utilities in Ohio, seventy-1 five are AMP-Ohio members, including Cleveland. All twenty- f
- one of the municipal electric systems in the Ohio Edison >
service territory are members of AMP-Ohio. ;
4 e
5/ AMP-Ohio answer to Centerior's suspension application, pp. !
i 7, 11 (filed July 13, 1988); AMP-Ohio answer to Ohio Edi- !
son's suspension application, pp. 15-16 (filed April 6, l 1988). [
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u o part of a thinly-veiled attempt to renew the anti-competitive conduct found by the NRC to be repugnant to the goals of the AEA.
The arguments in their applications must be read in light of these objectives.
IV. THE NRC LACKS THE STATUTORY AUTHOR-ITY TO GRANT THE REQUESTED RELIEF In its answer to Ohio Edison's application, Cleveland reviewed the legislative history of the 1970 Amendments and showed that Congress limited the NRC's authority to review the antitrust impact of a nuclear license to two occasions: the con-struction permit proceeding and operating license proceeding (pp.
25-48). Cleveland discussed the decisions in which the NRC pointed to the legislative history and recognized that it cannot modify the antitrust conditions in any way subsequent to the op-erating license proceeding.5 Centerior (App. 10-14) and Ohio Edison (pp. 12-15) re-spond by arguing that Congress was only concerned about nnsuring that nuclear utilities, not their customers, could rely on anti-trust license conditions imposed by the NRC. As a result, they argue, Congress only intended to preclude imposition, not deletion, of additional antitrust conditions outside the purview of an antitrust review during the construction permit and opera-ting license proceeding, s/ See, e.g., Houston Lighting & Power Co., et al. (South Texas Project, Unit Nos. I and 2) ("South Texas"), CLI-77-13, 5 NRC 1303 (1977); Florida Power & Light Co. (St. Lucie Plant, Unit Nos. 1, 3, 4 ("Florida Power"), ALAB-428, 6 NRC 221 (1977).
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Centerior and Ohio ' dison overlook the plain meaning of AEA Section 105(c) and the policies underlying the 1970 Amend-monts. An "antitrust review" within the meaning of AEA Section 105(c) occurs whenever the NRC reviews whether there is a "rea-sonable probability" that activities by an applicant pursuant to a license would "contraven(e). . . the antitrust laws or the policios clearly underlying these laws." H.R. Rep. No. 91-1470, 91st Cong. 2d Sess., reprinted in 1970 U.S. Code Cong. & Ad.
News 4981, 4994 (1970) (hereinafter referred to as "1970 House Report"). AEA Section 105(c) provides that the NRC can conduct an antitrust review only at two stages. An antitrust review can occur during the construction permit proceeding. A second, more limited, antitrust review can take place during the operating license proceeding to determine if activities by the applicant subsequent to the construction permit proceeding justify imposi-tion of additional antitrust conditions.
The relief sought by Centerior and Ohio Edison would require an additional antitrust review. Analysis of the impact of the supervening events cited in the requests for relief would requira an analysis of whether there still exists a "reasonable probability" that the licensees will engage in conduct which would "contraven(e) the antitrust laws or the policies clearly underlying these laws." That is just the type of review which AEA Section 105(c) limits to the construction permit and opera-ting license proceeding.
Centerior and Ohio Edison also err by arguing that Con-gress was not concerned about the disruptive impact of elimina-
f I
s e i
tion of antitrust license conditions. Again, the express goal of ;
the AEA is to "strengthen free competition", 42 U.S.C. S2011, and to ensure that activities by a licensee do not "create or main-tain a situation inconsistent with the antitrust laws", 42 U.S.C. f S2135(c)(5).
A utility cannot engage in the long term planning ,
needed to ensure reliable service unless the conditions governing (
its access to supply options are stable. Consequently, adoption of the position advocated by Ohio Edison and Centerior that the !
AEA permits suspension of antitrust conditions at any time would f mean that the conditions could not be relied upon by Cleveland or f
the other entities interconnected with the CAPCO members. That !
interpretation would defeat the very purpose of the AEA to pro-mote competition in electric markets.I'Y The only NRC decision Centerior can come up with to try to support its position is Radiobiology Research Institute ("Re-search Instituto"), LBP-82-24, 15 NRC 652 (1982) (App. 16, n.17).
Centerior cites Research Institute as support for the proposition that "(1)n applying Section 187 to license amendments effected by generic rule, the NRC has taken for granted its authority under Section 189 to effect license amendments by case-specific adjudi-7/ Cf. FERC v. Martin Exploration Manaqoment Co., 486 U.S. __,
100 L.Ed.2d 238, 246 (1988) (rejects interpretation of Nat-ural Gas Policy Act, 15 U.S.C. S3301, et seq., which would base maximum lawful price on market price of gas, subject to change on a daily basis; notes that "[w}e see no reason for inferring that Congress intended such a regulatory regime or the disuniformity and administrative difficulties it would en'. ail *); see AMP-Ohio's answer to Ohio Edison's suspension application, p. 20.
cation." The Research Instituto decision addressed a proceeding in which a licensoo sought renewal of its licenso to store radio-activo material pursuant to 10 C.F.R. S30. The issue arose as to whether to grant a motion to intervene and request for hearing pursuant to AEA Section 189(a), o2 USC S2239(a). Apparently, Contortor interprets this to mean that the NRC can modify an antitrust condition.
Contorior misinterprets Research Instituto. AEA Sec-tion 103(c), 42 U.S.C. S2133(b), expressly provides that a license "may be renewed upon . . . expiration". Thus, the NRC's statutory authority to renow the license was clear and was not disputed. Contorior does not show what possible bearing this provision has on the NRC's authority pursuant to AEA section 105 to modify or suspend an antitrust condition.
3 Thus, the NRC lacks the statutory authority to suspend the antitrust licenso conditions. Cleveland goes on to show that even if the NRC has the statutory authority to grant the rol.lof requestod by Contorior, Contorior has not justified the grant of this relief.
V. NRC REGULATIONS DO NOT AUTHORIZE SUSPENSION OF ANTITRUST LICENSE CONDITIONS In their suspension applications, Conterior and Ohio Edison cito 10 C.F.R. SS2.101 and 50.90 as the basis of NRR's authority to suspend the antitrust conditions. As shown below,
! neither of those NRC regulations grant this authority.
In citing S2.101, Centerior and Ohio Edison refer to
the Appeal Soard decision in this proceeding. Specifically, they refor to the Board's' discussion of the draft of the decision pre-pared by Board member Jorome Sharfman, who resigned prior to tho issuance of a decision:
In a number of instances Mr. Sharfman would, for an indefinito 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, e.g., pp. 392 and 398, infra. We agree that li-cense 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 of Nuclear Reactor Regulatien -- who is assisted by an able antitrust staff . authority to modify licenso conditions where nec saary and provide as cell means for ruview of his determinations. 10 CFR Sections 2.200-2,204 and Section 2.206. In-dood, the Director has already acted to modify ono i
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of the license conditions imposed in this care (albeit not at the applicant's request). We therefore see no occasion to continue the Licen-sing 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.
(footnotes omitted) 10 NRC at 294-95.
In its comments on Ohio Edison's application, Clovoland quoted Section 2.201 and noted tnat the sections of the regula-tions cited by the Appeal Board (SS2.200-2.206) simply authorize NRR "to modify, suspend or revoke a license or to tako other ac-tion for alleged violation of any provision of the Act or this chaptor or the conditions of this license" (emphasis added).
In its response to comments (p. 11), Ohio F.dison ac-cuses Cleveland of "quoting from the wrong section of the Commis-sion's regulations". Ohio Edison says that Section 2.200 gives NRR the authority to modify antitrust conditions. Section
( . .
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i 2.200(a) states in pertinent part l t
This subpart prescribes the procedure in cases initiated by the staff, or upon a request by any ,
person, to impose requirements by order, or to modify, suspend, or revoka a license, or to.take .
other action au may be proper, against any person l subject to the jurisdiction of the Commission, Centerior asserts that Section 2.206 gives this authority to NRR (App. 17, n. 10). Section 2.206(a) states in pertinent part:
Any person may file a request for the Director of , '
Nuclear Reactor Regulation, Director of Nuclear Matorial Safety and Safeguards, Director, Office of Inspection and Enforcement, as appropriate, to institute a proceeding pursuant to 52.202 to mod- i ify, suspend or revoke a license, or for such ,
other a: tion as may be proper. j Both Ohio Edison and Centerior misconstrue the NRC reg- f ulations, The langange of Sections 2.201-2.206 (referred to hare as 52.200, et seq.) clearly indicates that these regulations en-compass action taken by the NRC to enforce a license against a f licensee. Ohio Ediron omits the last phrase of Section 2.200 j which clarifies that the procedures described in Section 2.200, [
et seq., refer to NRC "action as may be appropriate against any person subiect to tbodyrisdicti_on_of the Commissi_on." In prom- 1 d I l ulgating this regulation, the NRC noted that the regulation f
[
]
"authorizes enforcement actions against (licensees and) non- l licensed persons who fall within the scope of the Commission's statutory authority.*E# This means that Sections 2.200, et seq.,
do not provide procedures for a licensee to seek modification cf
- a license. This interpretation is supported by Section 2.201 :
i d/ "Authority to Issue Noticas of Violation to Non-Licensers (
i and Delegation of Authority to Fegional Administrators", 48 !
Fod. Reg. 44170, 44171 (Sept. 28, 1983). j i
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'j which requires NRR to issue "a written notice of violation" to l the licensee before taking action pursuant to Sections 2.200, et !
j sea. l section 2.206 is subject to the same limitations. The procedures outlined in section 2.206 are available to "members of the public", not licensaan.E! Moreover, the proceeding must be
) "to modify, suspend or revoke a ricense of_tske other enforcement action."1SI
- Thus, Sections 2.200, et agg., of the NRC's regulations i do not authorize NRR to grant the ralief roquested by Centerior l i l
and Ohio Edison. 'Ia its answer, Ohio Edison cencedes (p. 12) that "[ijn commenting on the Director's authoritj, the Appeal Board majority was not creating any new authority. It was simply i confirming that authority which alruady eristed under the Commi1- '
- nion's rules" (p. 12). Hence, in discussing Mr. Shdefman's draft, the Appeal Board si.nply clariflod that enforcement act!on !
i can be taken against a licenseo pursuant to Cections 2.200, et 1 i
, d!/l. l
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I section 50.00 of the MRC regulations also does not au- !
1
$ thorize NRR to grant the relief requested oy Conterior Jnd Ohio '
4 i Edisen. Soctions 50.90-50.92 (Section 50.00, et seg.) outlino ,
' ?
- j. the procedurer 4.o be unea in ruviewing an application by a licer.- ,
sen to amend a licenne proviolon. Hcwever, these replations i f
l1.1 "Requests To impose Roquiremente by Order on a License 9, or l To Modify, Suspend or Revoko a License", 39 Pod. Reg. 12353 ,
(Apr. 5, 1974). i 10/ (emphasia addoa) "Pe...tions for Review of Director's Denial j of Enforcement kequents", 42 Fed. Reg. 36239 (July 14, 1977), j 1
)
, only encompass amendments involving technical aspects of opera-tivn of a nuclear plant. In promulgating the regulations, the NRC referred ,o **s authority pursuant to AEA Section 103, 42 U.S.C. S2133, Set i n 104, 42 U.S.C. S2134, and Section 161, 42 U.S.C. S2201, Sect' 182, 42 U.S.C. S2232 and Section 183, 42 U.S.C. 52233. Th6 NRC did not mention AEA Section 105, which ad-dresses the NRC's authority to review tne antitrust ramifications of a license.11! In addition, S50.91 requires the NRC to deter-mine whether the amendment could cause "significant hazards".
This determination clearly has no relevance to an application to amend an antitrust license condition.
Thus, neither 52.100, et seq., nor S50.90, et seq., au-thorize NRR or the NRC to amend or suspend an antitrust license condition.
VI. CENTERIOR'S ARGUMENTS ARE PRECLUDED A. Res Judicata Bars The Re-lief Soucht By Centortor In its answer to. Ohio Edison's application, Cleveland showed that the doctrine of res judicata bars the relief sought by Ohio Edison (pp. 53-78). The Appeal Board has noted the ap-
,plicability to NRC proceedings of the "general principles rela-ting to the application and effect of" rot iudicata:
i r Ros judicata comes into play in circumctances where (1) there has been a final adjudication of the merits of a particular cause of action, claim, or demand by a tribunal of competent jurisdiction; and (2) une of the parties to that adjudication (or a person in privity with such party) subse-11/ 21 Fod. Reg. 355 (Jan. 19, 1956).
j s
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l 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 !
to the first action or their privies. Given those circumstances (and subject to the qualifications to be discussed below), the earlier adjudication is deemed to preclude the "parties and those in privity with them, not only as to every matter which was offered and received to sustain or de-feat the claim or demand, but as to any other ad-missible matter which might have been offered for that purpose".
(citations omitted) 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). Cleveland showed (pp. 60-62) that res judicata is the applicable preclusion doc-trine here because Ohio Edison's application arises in the same proceeding as that in which the antitrust license conditions vere imposed in connection with both Perry and Davis-Besse. Cleveland went on to show (pp. 66-78) that Ohio 2dison, as a member of CAPCO along with Centerior, presented, or could have presented, during the antitrust review which occurred during the construc-tion permit or operating license proceeding all of the factual arguments now made in its suspension applicati.on.
Cleveland noted that CAPCO has continuously monitored the rising costs of Perry and could have cited this data during the certificate permit and operating license proceeding. The ownere of Davis-Besse had even more informatior, about the cost of operating that plant than Perry. avis-Besse was placed in ser-vice in 1977 Perry did not go ~
tco until November 1987.
llence, sufi. qt cost data was available to the CAPCO members during the ccastruction permit and ooerating license proceeding l
- 20 -
to raise the arguments in the suspension applications.
Clev61and pointed to the brief submitted by CAPCO chal-longing the Licensing Board's finding that there was a sufficient nexus between the licensed activity and the anti-competitive sit-uation caused by the CAPCO members pervasive anti-competitive conduct to justify imposition of an '. trust conditions pursuant to AEA Section 105(c)(5).1 In the brief, CAPCO stated that "what appeared to Applicants several years ago to be the superior base load choice may no longer be nearly so attractive from an eco-nomic standpoint." (App. Br. at 127). The pertinent portions of the CAPCO brief are quoted on page 63 to 66 of Cleveland's answer.
In its answer, Ohio Edison says (pp. 18-19) that its argument in its appeal brief regarding the rising costs of nuclear power cannot serve as the basis for application of res iudicata. Ohio Edison statec that the argument was made in order to support a proposition not raised by its suspension applica-tions that there was not a sufficient nexus between CAPCO's anti-competitive activit!.es and the licensed activity to justify impost n of the antitrust license conditiont, Ohio Edison says (p. 19) that its argument in its suspension application is dif-forent because it "is in the nature of a jurisdictional attack."
This purported distinction is specious. In both its appeal brief and suspension application, Ohio Edis,on challenges 12/ "Applicant Appeal Brief In Support Of Their Individual And Common Exceptions To The Initial Decision", submitted April 14, 1977 (hereinafter referred to as "App. Br.").
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the NRC's authority to impose antitrust :onditions.
In any event, the purported distinction is irrelevant.
The purpose for which CAPCO raised the argument does not matter.
Again, res judicata applies "not only as to every matter which was offered and received to sustain the claim or demand, but as l
to any other admissible matter which might have been offered for that purpose." Farley, 7 AEC at 212. At the time of the con-struction permit proceeding, CAPCO knew that tba cost of its nuclear power w63 rapidly rising. Consequently, CAPCO could have f cited this factor during the construction permit proceeding to l
show that the antitrust license conditions were inappropriate. ,
1 As a result, res judicata precludes both Ohio Edison and Cen- l l terior from raising the argument now. l Another purportedly new event cited by Centerior -- the emergence of AMP-Ohio as a "major player in the electric utility industry in Ohio" and the emergence aew municipal systems --
dlso does not prevent application of res judicata. Imposition of the antitrust license conditions gave AMP-Ohio and municipal sys-l tems the ability for the first time to purchase power from alter-native sources and to oecome aggressive power marketers. The 1
emergence of these competitors was a direct and foreseeable ro-sult of the antitrust conditions. As a result, this factor could t
have been raised by CAPCO during the construction permit and op-erating license proceeding.
In its answer to Ohio Edison's suspension application, Cleveland went on to show (pp. 66-78) that the oth=r events cited by Ohic Edison (and again cited by Centerior) could also have
o- .
been raised during the operating license proceeding.
Ohio Edison notes in itr answer (pp. 21-24) that AEA Section 105(c)(2) limits antitrust review at the operating license proceeding to evaluation of whether "significant changes in the licensee's activities or proposed activities have occurred sequent to the (construction permit proceeding)" which might war-rant imposition of additional antitrust conditions. Ohio Edison argues that the events cited in its suspension application could not jt.stify imposition of additional antitrust conditions during the operating license proceeding. Accordinq to Ohio Edison, this means that it had no obligation to raise these concerns during the operating license proceeding.
Ohio Edison cannot have it both ways. Ohio Edison tells us that NRR can suspend an antitrust condition at any time. If so, the operating license proceeding must be viewed as an appropriate forum to seek suspension of existing antitrust conditions. If the CAPCO members had sought this relief at the time of the operating license review, the NRC could have reviewed the request in conjunction with the AEA Section 105(c)(2) anti-trust review.
Ohio Edison also says that ros iudicata cannot apply becauso "thoro was no hearing or formal administrativo proceeding that considered antitrust issues at the operating license stage" (p. 22). There was a proceeding at the operating license stage to consider antitrust issues. NRR solicited comments from inter-ested persons to use in ovaluating whether significant changes in the licensoo's activities had occurred subsequent to the anti-
l trust review during the construction permit proceeding. See 10 C.F.R. S2.101(e)(4). There was no need for further proceedings because NRR determined that "the changes that have occurred since the antitrust construction permit review are not of the nature to require a second antitrust review at thn operating license stage of the application." 48 Fed. Reg. 52992 (Nov. 23, 1983).
Again accepting, for the purpose of argument, Ohio Edison's premise that a licensee can request modification of antitrust conditions at any time, the only reason the operating license antitrust review did not go further was because the CAPCO members chose to not make the request at that time. A party can-not escape the grasp of res iudicata by withholding an argument which would have led to i full blown hearing and then arguing that the failure of the NRC to conduct such a hearing precludet application of res judicata. See Parley, 7 AEC at 212.
Consequently, res iudicata applies with full force to the arguments raised by Centerior and Ohio Edison in support of suspension of the ant. trust conditions.
B. Alternatively, Collateral Estoppel Bars The Relief Sought By Centerior Cleveland showed in its answer to Ohio Edison's appli-cation that, alternatively, collateral estoppel precludes Ohio Edison from making the arguments in the suspension application (pp. 79-81). The NRC has noted the criteria for application of collateral estoppel In order to apply collateral estoppel several re-quirements .iust be met: The prior tribunal must have had jurisdiction to render the decision,
y , - ,
. o there must have been a prior valid final judgment 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.
Commonwealth Edison Co. (Braidwood Nuclear Power Station, Units 1 and 2) ("Braidwood"), LBP-85-11, 21 NRC 609, 620 (1985).
Cleveland demonetrated (pp. 58-59) that colleceral es-toppel precludes raising an argument in a subsequent proceeding if the argument could have been raised in the prior proceeding.
Cleveland pointed out that the antitrust conditions were the focus of review during the operating license proceeding and that the CAPCO members could have raised their suspension arguments (pp. 79-J1).
Ohio Edison says that collateral estoppel cannot apply here because "there was no formal administrative proceeding that considered antitrust issues at the operating license stage" (p.
24). But, again, there was a formal proceeding at the operating license stage. The only reason for the limited nature of this proceeding was the decision by thL CAPCO members to not raise their argument for suspension of the license conditions. Conse-quently, collateral estoppel is fully applicable despite the lim-ited scope of the operating license proceeding.
C. Laches Bars The Relief Sought By Centerior _
i In its answer to Ohio Edison's suspension application, Cleveland showed that the doctrine of laches bars the relief sought by the utility (pp. 82-86). Laches is an equitable doc-1
trine which bars the late filing of a claim if a party would be prejudiced because of its actions during the interim in reliance on the right being challenged in the claim. A party invoking laches must show that there was (1) a delay by 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. Alexander, 614 F.2d 474, 478 (5th Cir.), cert. denied, 449 U.S. 919 (1980); see Costello v.
United States, 365 U.G. 265, 282 (1961).
Cleveland noted that the CAPCO members could have raised the arguments in its suspension application no later than at the time of the operating license proceeding in 1981. Cleve-land also showed that it would be unduly prejudiced by suspension of the antitrust conditions. Cleveland noted that it has made substantial and long-term financial commitments to purchase power from alternative suppliers in reliance on the antitrust condi-tions (pp. 42-45). Cleveland would ado that it has entered into long term firm power purchase arrangements with AMP-Ohio and the Power Authority of the State of New York ("PASNY"). Transmission through a number of intervening utilities is necessary for these arrangements to continue. AMP-Ohio has purchased a power plant (the Gorsuch Station) based upon its reliance on the antitrust conditions. The conditions ensure that AMP-Ohio will be able to sell and deliver the power produced at the Gorsuch Station to the municipal systems which own portions of the plant or have long term power purchase contracts with AMP-Ohio. i r
i Even more critical to Cleveland than specific long term
_ -- - _ = _ _ _ _ _ . - . _ . . - - . . . . . - - - _ _ - _ -
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powcc purchase arrangements is the fact that Cleveland has issued
$50 million in bonds in order to expand its electric system, and has relied in this issuance on the continued ability of the sys-tem to obtain the most economical power available. Thus, Cleve-land relied heavily on the antitrust conditions when it made long-term financial and capital improvement commitments which require access to the purchase power market. In their answers to Ohio Edison's application, AMP-Ohio and the City of Clyde, Ohio pointed to the financial commitments they, too, made in reliance on the antitrust conditions. Suspension of the antitrust condi-tions would cause these parties to default on these commitments.
In its answer, Ohio Edison asserts that it did not de-1"v filing its suspension application (pp. 27-28). Ohio Edison notes that (1) the "NRC did not issue a full-power operating
. licenso for Perry until the fall of 1986", (2) "(j)udicial review of tb.t license was not completed m*.11 the spring of 1987", and (3) "Perry was not placed into commercial operation until Novem-bor 1987." These assertions are true. But they are also irrele-vant. The antitrust conditions have been in effect since 1981, well before Perry went into service. The events cited by Ohio Edison and Centerlot to support their suspension applications
! occurred years ago. Hence, there is uimply no reason why delays in completion of Perry could justify withholding an application to suspend the antitrust conditions.
This reasoning applies with even greater force to Davis-Besse. A sia, that plant received an operating license and went into commercial operation in April 1977. Thus, if (as Ohio
Edison suggests) the suspension application had to await the plant service date, the eleven year delay cannot be justified.
Ohio Edison also says that it "had a legitimate inter-est in waiting until all licensing action for Perry was com-pleted, so that the pendency of this amendment application would not unduly complicate or delay the licensing of Perry" (p. 28, n.
36). This concern could not possibly justify Ohio Edison's delay in seeking suspension of the applicabiljty of the antitrust con-ditions to Davis-Besse. As noted, the Davis-Besse operating license was issued in April 1977.
Ohio Edison's concern also does not apply to Perry.
The NRC considers antitrust issues in separate proceedings during its review of both construction permit and operating license ap-plications. Consequently, review of the relief sought by Cen-terior would not have affected the Perry operating license pro-ceeding.
Ohio Edison also states in its answer (p. 26) that Cleveland assumes that Ohio Edison would act in an anti-competi-tive manner if the antitrust conditions are suspended and that this assumption is "wholly unsupported". This allegation is dis-ingenuous, at best. As shown in Section III of these comments, Centerior and Ohio Edison make it clear in their suspension ap-plications that they want to prevent C:eveland and the other municipal systems from buying power from alternative suppliers.
Actions by CAPCO both before and after imposition of the enti-trust conditions indicate that CAPCO is already trying to limit competition. Consequently, there is a sound basis for the con-l l
' cerns expressed by Cleveland and the other customers of the CAPCO members.
VII. THE ANTITRUST PROVISIONS OF THE AEA WERE NOT BASED ON AN EXPECTATION THAT NUCLEAR POWER WOULD BE LOW COST A. Legislative History In its answer to Ohio Edison's application, Cleveland reviewed the legislative history of the AEA and the 1970 Amend-monts, in particular, and showed that the AEA antitrust provi-sions were not based on an expectation that nuclear power would be low cost (pp. 89-98). C11 nland pointed to a study prepared for the Joint Committee on Atomic Energy by Philip Sporn, former l
president of the American Electric Power Company, in which Mr.
Sporn noted that the cost of nuclear power was rapidly rising and construction of nuclear plants was slowing (pp. 91-94). Cleve-( land also pointed to statements by Justice Department officials during the Joint Committee hearings in which they noted that the
) NRC would be able to order a licensee to provide access not only to nuclear power but also to transmission facilities and coordi-nation and pooling services associated with the nuclear plant (pp. 94-98).
In its answer, Ohio Edison argues that the "unique" feature of nuclear power that distinguished it from other power sources and which underlies the 1970 Amendments was the expecta-tion that it would be low cost (p. 38).
Ohio Edison overlooks the background of the concern by Congress for ensuring that nuclear power would be developed in a
pro-competitive manner. In enacting the AEA in 1946, Congress noted that research on the development of nuclear energy would be funded by the federal government. AEA Section 2(g) 42 U.S.C.
52012(g). The government was concerned that the fruits of this research not be exploited in an anti-competitive manner. Thus, in enacting the AEA, Congress stated thet an overriding policy was to "strengthen free competition". AEA Section 1(b), 42 U.S.C. 2011(b). At the time, "the generation of useful power from atomic energy was a distant goal, a very distant goal."13/ -
l Consequently, there was no way of knowing the cost of this power.
Significantly, the prelicensing antitrust review provi-sions of the AEA were introduced by the Amendments enacted in 1954. At that time, the development and regulation of commercial users of nuclear power "were matters for the distant future."
1970 House Report, p. 4994. Thus, the prelicensing antitrust mechanism was not based on an expectation that nuclear power would be law cost.
The 1970 Amendments were designed simply to "clarif(y) the antitrust review standard and explicitly describ[e] the Com-inission's authority and responsibility in relation to advice from the Attorney General." Id., p. 4994. Congress again noted that "Government funds are extensively devoted to the research and development aspects of atomic e.torgy." Id., p. 4995. As a re-sult, Congresa admonished the NRC to "be mindful of the general objective of strengthening competition". Id.
13/ S. Rep. No. 1699, 83d Cong., 2d Sess., reprinted in 1954 U.S. Code Cong. & Ad. News 3456, 3458.
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In its answer, Ohio Edison says that "all the Congres-sional reports (in connection with the 1970 Amendments) con-sistently refer to an expectation that nuclear power would be low cost" and "[t]hus it appears that Mr. Sporn's prognoses were not accepted by Congress" (p. 37, n. 57).
Ohio Edison's reasoning is flawed. Ghio Edison does not deny that Mr. Sporn's report provided a comprehensive analy-sis of the rising cost of nuclear power. The Joint Committee's decision to attach the report as an appendix reflected that the report drew the attention of the Committee. In addition, Ohio Edison cannot reconcile its position with the statements by the Justice Department officials quoted by Cleveland.
Ohio Edison also fails to recognize that the 1970 Amendments stemmed from the belief at that time that there would be a surge in construction of power plants generated by nuclear power and other sources to meet a severe capacity shortage. Con-gress felt that, to accommodate growth in nuclear power, the pre-licensing antitrust review process "need[ed) to be clarified and revised". 1970 House Report, p. 4992. Congressman'Holifield introduced the 1970 Amendments on the floor of the House and noted:1SI MR. HOLIFIELD. At this point I want to depart from my prepared script to say that this country is facing a crisis in electrical energy. We must double the electrical generating capacity of this country within the next 10 years, and then double that again in the succeeding 10 years. We Members in this Capitol know that just a week ago we had half of the lights turned off in the Capitol be-14/ Cong. Rec. 34313 (Sept. 30, 1970).
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cause of reduced availability of power in this area. I am telling you that this whole country faces that situation; we are facing brownouts and blackouts unless we get these electrical plants into operation these new additional generating capacities. Now, I am [not] speaking today for nuclear power alone. I am saying that we are going to have to have c]ectricity from uranium, from coal, from oil, and from gas. We are going to need every kilowatt we can produce from all of these substances, and we are going to have to re-vise our methods so that present contaminating effluent are removed.
Mr. Holifield stated that nuclear power was expected to play a more prominent role for two reasons, each of which was unrelated to the anticipated cost of the power. First, there were serious shortages of natural gas and coal (id.):
MR. HOLIFIELD. The gentleman will agree with me, coming from a gas-producing area, that there is going to be a shortage of gas this winter. There is already a shortage of coal and delays in the delivery of coal. You cannot got a contract today for coal longer than 1 or 2 years. The customary time used to be 5 and 10 years for coal contracts for delivery at a specified tirae. On the averago, the cost of coal has gone up about 56 percent in the last 18 months. The cost of imported residual low sulfur content oil has almost doubled. So these are some of the factors that are building up to an actual and ser' scarcity of energy. The fact that the coal is avw being delivered, pur-suant to contracts to these electrical plants, as it has been in the past, is another factor. These are the factors that mako me bolleve we are going to havo serious blackouts and brownouts in this country before we realizo it.
Second, now fodoral air pollution standards favored development of non-polluting fuels such as nuclear power (id.):
MR. HOLIFIELD. I tell you, we will never -- never solvo the problem of pollution itself without ado-quato nonpolluting energy. I do not care whethe.-
the problem is cleaning up our water, or taking the particulates out of smokostacks so we can have clean air, or whether it is solidifying old auto-mobiles into small massos to be disposed of pro-
perly or recycled for some reuse of material -- it does not make any difference what field of pollu-tion we. face, we are going to have to have ade-quate, economical, and clean electricity to solve that problem. We are just kidding ourselves if ,
we overlook this basic fact. This is one of the reasons we are here on tho floor of the House today to see, in connection with this bill I am explaining, that we do have an adequate chance to get these plants into operation without a Jot of interference from people who do not have a suffi~
cient understanding of the technical problems involved or about the technical safeguards that have been engineered into nuclear plants.
True, certain members of Congress may have believed that nuclear power would be low cost and that this would be yet another factor which would favor development of this power. But clearly this was not the primary basis for the belief underlying the 1970 Amendments that development of nuclear power would be rapid and that, as a result, the prelicensing antitrust review procedares needed to be clarified.
B. Judicial And NRC Precedent Cleveland, in its answer to Ohio Edison's suspension application, provides a comprehensive analysis of the court and NRC decisions in which antitrust license conditions were ad-dressed (pp.99-110).15/ Cleveland showed that in each of these decisions it was recognized that a nuclear license could exacer-bate a licensee's control of electric power as well as transmis-15/ Louisiana Power and Light Co. (Waterford Steam Electric Gen-erating Station, Unit 3) ("Waterford"), Docket No. 50-382A, 6 AEC 619 (1973); Kansas Gas & Electric Co. (Wolf Creek Generating Station, Unit No. 1) ("Wolf Creek"), ALAD-279, 1 NRC 559 (1975); Consumer Power Co. (Midland Plant, Unita 1 and 2) ("Midland"), ALAB-452, 6 NRC 892 (1977).
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sion facilities and coordination and pooling ' services. Cleveland pointed, in particular, to the Eleventh Circuit decision affirm-ing the NRC's imposition of conditions in the operating license sought by Alabama Power Company ("Alabama Power").Ib! The condi-tions required Alabama Power to provide wheeling services even to those customers who were found to be not entitled to an ownership share in the nuclear plant. The NRC explained that the purpose of this condition was "to enable (the customers) to deal with other suppliers of bulk power". 13 NRC at 1109-110. Thus, antitrust license conditions were found to be necessary to ensure access to the wheeling, coordination and other services provided by the licensee, independent of access to the nuclear power it-self.
Ohio Edison responds by dismissing Cleveland's analysis with a few terse comments (p. 41). Ohio Edison mentions only the Waterford decision and points to references by the NRC in that
- decision to the anticipated low cost of the power.
Again, Cleveland recognizes that many members of the electric industry expected nuclear power to be low cost. But at the same time, Congress .ecognized that the pro-competition goals of the AEA required antitrust license conditions to be imposed to ensure access to wheeling, coordination and other services which could be provided by the licensee entirely independent of access to the nuclear power itself. The NRC implemented this mandate by 16/ alabama Powor__Co. (Joseph M. Parley Nuclear Plant, Units 1 and 2) ("Farley"), ALAB-646, 13 NRC 1027 (1981), aff'd, Ala-bama Power Co. v. NRC, 692 F.2d 1362 (11th Cir. 198?), cert.
dento_d, 464 U.S. 816 (1983).
O
- repeatedly imposing wheeling and other conditions unrelated to access to the nuclear power. Ohio Edison does not even try to reconcile these decisions with its position that antitrust condi-tions are appropriate only if nuclear power is low cost.
VIII. THE EVENTS CITED BY CENTERIOR DO NOT UNDERMINE THE BASIS OF THE ANTITRUST LICENSE CONDITIONS Centerior argues that "the competitive environment in which TE and CEI operate has substantially and materially changed in the years since the antitrust license conditions were imposed" (App. 4). Centerior citos (1) the high cost of nuclear power, (2) the termination of CAPCO's "one system" planning concept, and (3) the emergence of AMP-O as a "major independent power sup-plier".
The NRC's decision 'o c impose the antitrust license con-ditions would not be undermined by any of these events. As noted in Cleveland's response to Ohio Edison's application, the NRC's decision was based on its concern about the way the substde.tial power generated by the nuclear plants and the construction of a network of associated transmission lines connected to the plants would heighten the market power of the CAPCO members and encour-ago them to expand their pervasive anti-competitive conduct.
(pp. 111-117). Cleveland noted that Perry and Davis-Besse are now in full commercial operation and extensive transmission facilities have been constructed to connect to these facilities.
Consequently, as discussed in detail in Cleveland's answer (id.),
the antitrust conditions are still needed.
, Moreover, as shown below, Centerior's analysis of the supervening events is distorted.
A. Increased Cost Of Nuclear Power Centerior argues that unanticipated increases in the cost of constructing and operating a nuclear plant have under-mined;the basis for the imposition of the antitrust license con-ditions.
Contorior distorts the meaning of the factual material it cites and misconstrues the NRC decision imposing the antitrust conditions. Inoustry-wide cost studies are of dubious value un-less Centerior can show that the data is representative of its nuclear plants. Centerior has not tried to show ohis. It is noteworthy that Centerior has touted the efficiency of its nuclear plants. On June 9, 1985, Davis-Besse was shut down due to failures in its main and auxiliary feedwater system 7. Cen-terior claims that during the eighteen month shutdown "substan-tial changes were made and about $179,000,000 was spent to re-4 pair, enhanco, and upgrado the equipment to make Davis-Besse a current state-of-the-art plant and to improvo its operation."17/ -
Contorlor does not explain whethor industry-wide cost studies apply to a state-of-the-art plant.
Turning to the studios cited by Contorlor, they provido little support for Contorior's arguments. Contorior citos a finding in a report by the U.S. Department of Energy whjch simply 17/ FERC Form 1 (annual report) filed by CEI for 1986, Sched.
108-C, p. 2.
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says that "continued escalation operating costs could erode any cost advantage that operating nuclear plants may have" (emphasis added; App. 24). Centerior also cites the finding that the cost advantage of nuclear plants may not" persist "if operating costs continue to escalate." These tentative findings hardly provide a basis for Centerior's arguments.
Centerior also cites a 1986 study by the Electric Power 4 Research Institute ("EPRI") which, according to Centerior, shows that (1) "plant investment in a 1100 MW nuclear plant had jumped to $2871 per kWe versus $1268 per KWe for a comparable coal-fired plant", (2) "[t]otal O&M costs including fuel jumped to 14.2 mills per kWh for the nuclear plant versus 22.4 mills per kWh for the coal-fired plant," and (3) "capital costs of nuclear plants as of 1985 exceeded those of coal-fired plants by 126%" (App. 27-28). Centerior does not identify the EPRI study. Hence, Cleve-land can neither analyze the methodology used by the study, nor determine whether the study applies to Perry and Davis-Besse, f
Interestingly, the study does show that nuclear plants ara cheaper to operate than coal plants.
Centerior also falls to recencile its allegations about j the high cost of Perry and Davis-Besse with its use of these
! plants to supply base load power. Nucioar generation comprises 22 percent of CEI's generation capacity and 39 percent of Toledo's generation capacity.10/
Moreover, imprudent activities by Contorior appear to l 18/ Centerior 1987 Form 10-K, pp. 35-36.
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have substantially increased its nuclear construction and opera-t!ag costs. In an order issued January 12, 1988, the Public Utilities Commission of Ohio (PUCO) disallowed $627.8 million, or 15.12 percent, of the $4.135 billion construction costs of Perry
- 1. In 1987, the PUCO found that the 18 month outage at Davis-Besse in 1985 and 1986 was a result of imprudence in the manage-ment and maintenance of the plant by Toledo. The PUCO ordered Toledo and CEI to provide refunds of $33,595,000 and $32,563,000, respectively, which represents certain replacement fuel and pur-chased power costs collected from customers during the outage.
Thus, Centerior's claims about the high cost of its nuclear plants fail to take into account the imprudent conduct which caused many of these costs.
Moreover, assuming arql endo that nuclear power is high cost, that is even more reason for maintaining the antitrust con-ditions. In imposing the wheeling conditions, the NRC recognized that wheeling is needed to ensure that the nuclear utility cannot use its control over transmission facilities to prevent its cus-tomers from procuring the most economical power available. Ob-l viously, a customer is unlikely to need to use wheeling services I if the nuclear utility offers the most economical power. Thus, i inhoront in the NRC decision to impose the wheeling condition is its recognition that this servico is nooded when the prico of nuclear powar is above market lovels. The nood for this access
]
- obviously increases as the nuclear power becomes more expensivo i
- compared to other types of power. In addition, in those circum-Ftancos, the competitivo injury caused by denial of access to i
s 1
1
l' transmission facilities is exacerbated. For example, one measure of damages resulting from a violation of the federal antitrust
' laws in which the monopolist prevents its customers from pur-chasing a commodity from alternative suppliers is the extent to which the price charged by the monopolist exceeds the market price of the commodity. Hanover Shoe, Inc. v. United Shoe Mach. ;
Co., 392 U.S. 481, 491 (1968); Bell v. Cherokee Aviation Corp.,
660 F.2d 1123, 1133 (6th Cir. 1981). Moreover, an increase in rates makes it even more important that competitive forces (in the form of access to alternative suppliers) exist to give the nuclear utility the incentive to maintain competitive rates.
Consaquently, the increase in nuclear power costs increases the importance of the antitrust conditions.
B. Emergence Of AMP Ohio And Other Competitors Centerior makes much ado about the emergence of AMP-Ohio and other municipal systems in the wake of the antitrust 1
l license conditions. Centerior argues that competition is unde-sirable because it "will lead to an erosion of CEI's and TE's ,
i sales markets" and increase the rates charged by Centerior to its l
remaining customers (App. 23, 33).
Contorior's argument turns the pro-competition objec-i tive of the AEA on its head. One of the objectives of the anti-
, i trust conditions was to ensure that municipal systems in the l CAPCO service area have access to wheeling services so that they can purchase the most economical power available. The emergence of AMP-Ohio simply shows that the antitrust conditions are work- '
l i ing.
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Centerior also fails to recognize that the primary benefit of competition is that it provides incentives for a util-ity to reduce its power costs. Philip R. O'Connor, former chair-man of the Illinois Commerce Commission, has observed: 1E Arguably, from a traditional utility regulation standpoint, allowing wheeling to specific custom-ers within a utility's territory will necessarily result in higher prices for the remaining custom-ers, since it leaves the utility's undiminished rate base to be covered by a smaller customer base . . . . If rate base regulation continues for the local utility's distribution and transmis-sion system (since it remains a monopoly transpor-ter of power), but its generating capacity is sold at market prices, the other customers will not be disadvantaged. In fact, importation of lower priced electricity into the area will force the local utility either to lower its prices or foreco the opportunity to sell its electric power to some larco customers.
Moreover, loss of load by Centerior will not necessari-ly result in a rate increase. Centerior would have to submit a rate increase filing pursuant to Section 205 of the Federal Power Act, 16 U.S.C. S824d. FERC has made it clear that it will reject this type of proposal if the load loss resulted from imprudent marketing or other practicos by the utility. Tennessee Gas Pipo-lino Co., 21 FERC 161,004, p. 61,009 (1982). FERC can also make the utility's recovery of its full return on equity "contingent on tho utility's success in avoiding load loss." Id.22/
19/ (emphasis added) P. O'Connor, et al., The Transition To Com-petition In The Electric Utility Industry, 8 J. Energy Law &
Policy 223, 240 (1988).
20/ The Supremo Court has endorsed this principle:
If the establishing of now linos of transportation should causo a diminution in the number of those who nood to uso a turnpiko road, and, consequently, a diminution in the tolls
Centerior also suggests that AMP-Ohio and the municipal )
systems no longer need access to the CAPCO transmission system.
Centerior points to the decision by the City of Clyde, Ohio to form a municipally-owned distribution system and to build trans-mission fac.'lities linking the City with, among others, Ohio Power Company ("Ohio Power") (App. 31-32). Centerior claims that
"[t]he Clyde situation . . . demonstrates that municipalities are able to build their own transmission lines to access power sup-(
pliers" (id).
Clyde's ability to build a transmission line stems from its proximity (two miles) to Ohio Power. Cleveland is not as fortunate because the only nearby transmission system is owned by CEI. Centerior fails to recognize the significant barriers to construction of a transmission line by Cleveland and other sim-Ilarly situated municipal systems. A recent analysis of electric markets notes:
Transmission of electricity is a classic natural monopoly, subject to large economies of ccale through the entire range of output relevant to any markot. For this reason, the transmission lines available to deliver electricity to any particular distributor or consumer are almost invariably owned by a single firm. That firm has monopoly power over all distributors and consumers con-nocted to its transmission facilities.
(footnoto continued) collected, that is not, in itself, a sufficient reason why the corporation, operating the road, should be allowed to maintain rates that would be unjust to those who must or do uso its property. The public cannot properly be subjected to unreasonable ratos in ordor simply that stockholders may earn dividends.
Covington & Loxin_gton Turnpike Road Co. v. Sandford, 164 U.S. 578, 596 (1896).
. o A market cannot be contestable when there are large sunk costs acting as barriers to entry and to exit. Under present regulatory policies, the bulk power market is not contestable at all. The need for large, immobile investments, in the form of transmission lines accessible only to their ownc.s, excludes new entrants from virtually every bulk power market.
(footnote omitted) Bulk Power, 72 Va.L.Rev. at 1216, 1220.
There are also formidable regulatory barriers to con-struction of a new transmission facility:
Today it is entremely difficult to obtain regula-tory approval to construct a new high voltage transmission line. Construction of a new fifty-mile transmission line now requires the approval of as many as fifty to one hundred state and local -
agencies. This cumbersome and time-consuming reg-ulatory process has created costly transmission bottlenecks.
(footnote omitted) Id. at 1233.
Those insuperable obstacles to construction by a cap-tivo customer of a duplicative transmission system have led to the finding by courts that an unroesonable denial of access to this type of facility violates the federal antitrust laws. Otter Tail Power Co. v. U.S. ("Otter Tail"), 331 F.Supp. 54, 59-61 (D.Minn.1971), aff'd in portinent part, 410 U.S. 366, 377 (1973).
Indood, the NRC cited Otter Tail and rejected CEI's contention during the construction permit procooding that "it has boon feasible for Cleveland to construct a transmission f acility from its Lake Road Gonorating Plant to any cno of four intercon-noction points with utilities other than CEI." The Licensing Board statod
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t Cleveland did study the problem. Its studies showed that Cleveland was completely surrounded by c high density residential and commercini areas and that construction of separate transmission lines from Cleveland was simply not feasible, particu-larly in view of the fact that it would duplicate .
already existing and operating CEI facilities. '
Existing CEI transmission facilities have surplus capacity available.
(citations omitted) 5 NRC at 175. The Appeal Board affirmed i t
these findings and noted that "(i)t is thus clear that CEI's re- ,
i
- fusal to wheel PASNY power to Cleveland was a violation of Sec-tion 2 of the Sherman Act." 10 NRC at 328.
IX. IF THE NRC DOES NOT SUMMARILY REJECT CENTERIOR'S APPLICATION, THE APPLICA-1 TION SHOULD BE SET FOR. HEARING AND SHOULD NOT BE PERMITTED TO GO INTO i EFFECT DURING THE HEARING I i If the NRC finds that it has the statutory authority to t
- suspend the antitrust conditions, Cleveland requests that an l evidentiary hearing be scheduled to evaluate the numerous materi-al issues of fact which surround Centerior's argument that the l
- ar.citrust conditions are no longer needed. Centerior agrees that
! an avidentiary hearing 9ould be necessary in these circumstances i
(App. 41).
j However, Centerior errs in asserting that the NRC can j immediately suspend the antitrust conditions pending completion l of the hearing (App. 42-43). Centerior points to the so-called
~
Sholly amendment to AEA Section 189(a)(1), 42 U.S.C. S2239(a)(1),
! which states, in portinent parts i
j The Commission may issuo and make immediately of-factivo any amendment to an oporating 11conso, upon a determination by the Commission that such
) amendment involves no significant hazards consid-b
. + ..
eration, notwithstanding the pendency before the Commission of a roquest for a hearing from e.ny person. Such amendment may be issued and made immediately effective in advance of the holding '
and completion of any required hearing. In deter-mining under this section whether such amendment.
involves no significant hazards consideration, the Commission shall consult with the State in which !
the facility involved is located. In c.11 other respects such amendment shall meet the require-ments of this chapter.
Centerior misinterprets the scope of the Sholly amend-ment. The Sholly amendment applies only to proposed license t amendments dealing with technical aspects of operation of the plant. Consequently, Sholly doos not epply to the suspension of an antitrust condition. The amendment stemmed from the D.C. Cir-cuit decision in Sholly v. NRC, 651 F.2d 780 (D.C. Cir. 1980),
reh'a denied, 651 F.2d 792 (D.C. Cir. 1981), vacated and remand- I ed, 454 U.S. 1194 (1983), vacated, 706 F.2d 1229 (table) (D.C.
Cir. 1983). Sholly involved an NRC order which modified an l operating license to permit the licensee to role.ase radioactive !
gas from its reactor building at a faster rate than permitted by the existing specifications in its license. The Court held that the NRC cannot amend a license prior to completion of an eviden- f i
tiary hearing if a party has requested a hearing, even if the NRC determinet that the amendment involves "no significant hazards consideration."
The NRC asked Congress to enact legislation to overrule the decision. This recommendation was based on the NRC's concern that delaying implomontation of certain license amendments which involve no significant hazard consideration until af ter a hearing "could result in unnecessary disruption or delay in the opera-
tions of nuclear power plants by imposing regulatory burdens un-related to significant cafety matters."EI!
In enacting the Sholly amendment, Congress embraced the NRC's concerns E!
By including this provision, the Ccamittee seeks to address the concern expressed by the Commission that a requirement that the NRC grant a requested hearing prior to making effective a license amend-ment involving no significant hazards considera-tion could result in unnecessary disruption or delay in the operation of a nuclear power plant and could impoce unnecessary regulatory burdens upon the NRC that are not related to significant safety benefits.
Significantly, each of the examples of license modifications dis-cussed by Congress and the NRC in describing the impact of the Sholly amendment involved changes in technical aspects of the operation of the nuclear plant. 51 Fed. Reg. at 7750.
Thus, the Sholly amendment was not intended by Congress or tne NRC to encompass a proposed license modification, such as the suspension of antitrust conditions, which has nothing at all to do with the operation of a nuclear plant. Consequently, the Sholly amendment does not apply to Contorior's susponsion appli-cation. As a result, the NRC cannot suspend the antitrust license conditions prior to the evidentiary hearing.
21/ "Final Procedures and Standards on No Significant llazards Considerations", 51 Fed. Reg. 7744, 7746 (March 6, 1986).
22/ S. Rep. No.97-113, 97th Cong. 2d Sess. 14, reprinted in 1982 U.S. Code Cong. & Ad. News 3592, 3598.
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VII. CONCLUSION For each of the foregoing reasons, Centerior's suspen-sion application should ba denied. ,
F Respectfully submitted, I%rilyn G. Zack Director of Law l June W. Wiener Chief Assistant Director of Law William M. Ondrey Gruber Assistant Director of Law +
City Hall, Room 106 601 Lakeside Avenue i Cleveland, OH 44114 i Telephones (216) 664-2800
/fu+ /h./ * '
. thu Go g(dber$
Reuben
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Kenneth M. Albert ,
4 Goldberg, Fieldman & Letham, P.C. .
1100 Fifteenth Street, N.W.
Washington, DC 20005 Telephone: (201) 463-8300 Attorneys for
! City of Cleveland, Onio 4
September 13, 1988 l
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< o CERTIFICATE OF SERVICE '
I hereby certify chat I have this day served a copy of <
the foregoing document upon the participants in this proceeding.
Dated at Washington, D.C., this 13th day of September, 1988.
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Kennet.1 M. Albert m 't. E r' l
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SERVICE LIST Hr. Thomas E. Murley Director of Ni : lear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, DC 20555 Benjamin H. Vogler, Esq.
Office of the General Counsel U. S. Nuclear Regulatory Commission Washington, DC 20555 Deborah B. Br. user, Esq.
Counsel for Ohio Edison Company and Pennsylvania Power Company Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W.
Washington, DC 20037
! David R. Straus, Esq.
Counsel for American Municipal Power-Ohio Spiegel & McDiarmid Suite 1100 1350 New York Avenue, N.W.
Washington, DC 20005-4798 Janet R. Urban, Esq.
Antitrust Livision/ TEA U. S. Department of Justice
! 555 Fourth Street, N.W.
Room 9816 Washington, DC 20001 C. E. Chancellor, Esq.
Secretary and General Counsel e The Cleveland Electric Illuminating Company [
Post Offico Box 5000 :
f Clevoland, 011 44101 Alsa P. Buchmann, Esq. '
I Squire, Sanders & Dempsey t
1800 Huntington Building Cleveland,Oli 44115 Michael M. Briley, Esq.
Counsel for Toledo Edison Company Shumaker, Loop & Kandrick North Courthouse Square ;
- 1000 Jackson 43624-1573 Toledo, Oli l 4
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@ b Office of the General Counsel Duquesne Light & Power Company 1 Oxford Centre 301 Grant Street Pittsburgh, PA 15279 i
Victor F. Greenslade, Jr.
General Counsel Centerior Energy Corporation 6200 Oak Tree Boulevard Independence, OH 44101 l James P. Murphy -
Squire, Sanders & Dempsey 1201 Pennsylvania Ave., N.W.
P. O. Box 407 Washington, DC 20044 ,
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