ML20210P627

Response of New England Power Company.* Nu Allegations Unsupported by Any Facts & No Genuine Issues of Matl Facts in Dispute.Commission Should Approve Application Without Hearing

ML20210P627
Person / Time
Site:	Millstone, Seabrook
Issue date:	08/10/1999
From:	Murphy M External (Affiliation Not Assigned), LEBOEUF, LAMB, LEIBY & MACRAE, NEW ENGLAND POWER CO.
To:	NRC COMMISSION (OCM)
References
CON-#399-20728, CON-#399-20729 LT, LT-2, NUDOCS 9908130045
Download: ML20210P627 (6)

Text

l

.g,9 00CKETFD UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION 5m AUG 12 P4 :15 i

In the Matter of

)

CJ 50-423'a4-lh Northeast Nuclear Energy

) Docket No.

5 Company, et al.

) License No.

NPFk9 MillstoneeStation, Unit 3

,)

~

In the Matter of

)

North Atlantic Energy

) Docket No.

50-443 Service Corporation, et al.

) License No.

NPF-86 Seabrook Station, Unit 1

)

Response of New England Power Company On August 3, 1999, The Connecticut Light & Power Company, Western Massachusetts Electric Company, and North Atlantic Energy Corporation, all subsidiaries of Northeast Utilities (and referred to collectively herein as "NU"),

filed a Reply to support their previous request for a hearing.

New England Power Company ("NEP") hereby files this response.

While the Commission's rules do not specifically contemplate responses to a reply, they do not specifically forbid such responses.

Moreover, NEP feels compelled to clarify the record, because NU has raised a brand new (and, fictitious) legal standard for the first time in its reply, and has failed to demonstrate any facts which merit a hearing.

NU claims that it is entitled to a hearing simoly because it has an interest in the case, has raised issues within the scope of tSe proceeding, and has provided a concise statement of facts.

EmpJL at 3.

However, to merit a hearing, NU must also show that "a genuine dispute exists with the applicant on a material issue of law or fact." 10 C.F.R. S 2.1306 (b) (2) (iv).

NU has not done so.

Since applicants are fully qualified as a matter of law, there is no need for a hearing.

9908130045 990810 PDR ADOCK 05000423 PDR G

1100)9 yso3 L

1 3

1.

Because NEP Will Remain-An Electric Utility As A Matter of Law, NU Has Not Raised Any Issues of Fact Which Merit A Hearing NU still alleges that NEP might not be an " electric utility", as defined by the Commission.

NEP meets the I

definition of an " electric utility" so clearly that there is no dispute about any material fact.

The Commission's definition of an " electric utility" reads in pertinent part as follows:

1 Electric utility means any entity that generates or distributes electricity and which' recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority.

Investor-or :ed utilities... are included within the meaning of " electric utility."

10 C.F.R. S'50.2.

NEP will distribute electricity, and NU does not dispute that fact.

NEP will be an investor-owned utility, and NU does not dispute that fact.

NEP has and will remain rate-regulated by the FERC and absolutely nothing about the character of that regulation will change post-merger.

These undisputed facts prove that NEP meets the definition of an electric utility, under the plain meaning of the rule.

NU has not alleged any facts which contradict that plain meaning.

There are no facts to be addressed at.a hearing.

Instead of disputing the facts, NU has invented a new legal standard.

According to NU, it is no longer enough simply to meet the definition in the rule.

Now, suddenly, NEP is required to show "what proportion of NEP's business" will be regulated.

Reply at 6.

NU cites no authority for this imaginary new requirement, which rppears nowhere in the rule.

NEP is j

unaware of any case in which the Commission has required an investor-owned utility to show proportional regulation in a license transfer.

However, it bears repeating that virtually all j

of NEP's activity will continue to be regulated.

Unlike NU, NEP has divested its non-nuclear generation, and chosen to concentrate on'the delivery of electricity through the transmission grid,.an area which will remain pervasively 2

I regulated. Therefore, the question of " proportionality"'is unnecessary as a matter of law and moot as a matter of fact.

I To require an electric utility to show that it meets l

financial qualifications, an intervenor must " establish that the Applicants lacked suf ficient funds to operate safely [. ] " Public Service Company of New Hampshire, 28 NRC 573 (1988).

NU has not even tried to make such a showing, and could not do so.

Finally, NU has not alleged that anything about this transfer will affect NEP's status as an electric utility or its financial resources.

Rather, NU seems to feel that the emerging competitive environment will somehow affect that status.

Competition will continue to emerge whether or not this transfer is granted, and the transfer is irrelevant to that issue.

In that sense, NU's claim is not within the scope of this l

proceeding, because it has nothing to do with the transfer. There l

is no need for a hearing to dismiss that claim.

)

2.

The Transfer Will Comply With Commission Precedent As A Matter of Law, and NU Has Raised No Facts About Foreign l

Ownership Which Merit a Hearing.

NU's second point is that, although the Commission approved. foreign ownership in Amergen, it should forbid foreign ownership here, because the statute refers to ownership of licensees,.not to ownership of facilities.

Reduced to its i

essence, 7U's position is this: a foreigner can own 50% of a licensed facility in Amergen, but cannot own 34.5% of a licensed l

facility in this case.*

That position makes no sense, as a matter.of fact, policy, or law.

The policy behind the foreign ownership prohibition is focused on whether the foreign entity has "the ability to restrict or inhibit compliance with the security and other regulations of the AEC, and the capacity to control the use of nuclear fuel and to dispose of special nuclear material. generated in the reactor \\.] " General Electric Company and Southwest Atomic Energy Associates, 3 AEC 99 (1966).

NEP does not control any nuclear facility, but is a passive owner with no operating rights or access to any nuclear materials.

Therefore, no British parent 2 NEP does not own more than 34.5% of any licensed facility.

The foreign party in Amergen also owned half the licensed operator.

NEP owns no interest in any licensed operator.

3 i

of NEP will have any authority to cause a violation of any Commission rules, a default of any license obligations, or the diversion of any nuclear fuels.

NU has not even alleged that any British company will have those rights.

Instead, NU would have the Commission focus solely on control of one of the licensees, and ignore control of the facility. The Commission recognized, in its Standard Review Procedure, that control of the facility is the most critical fact, in tenns of law and policy.

Congress did not expect the Commission to be blind to the facts.

The fact is that 34.5% control of a facility is not as significant as 50% control of a facility, the amount approved in Amergen.

To ignore that fact would contravene the substance and purpose of the law.

In addition, of course, NEP has taken steps to prevent foreign control which provide greater assurance than those provided in Amergen.

As a matter of logic and of law, the Commission cannot disapprove NEP's application without reversing the decisions taken in the SRP and in Amergen.

These facts were discussed in NEP's July 27, 1999 response.

This transfer is consistent with that precedent and should be approved.

3.

NU's Concerns are Not Sincere.

The Reply goes to great -lengths to demenstrate the sincerity of NU's interest in the proceeding, with an elaborate proclamation of sincerity.

However, NU cannot seriously be concerned about the issues it has raised.

As to NU's first point, NEP is in a more financially stable position than NU.

As to the second point, NU cannot maintain seriously that the acquisition of NEP by a British entity is a risk to the common defense.

That issue already has been decided when on April 29, 1999, the Department of the Treasury, Committee on Foreign Investment in the United States, concluded that National Grid's acquisition of NEES did not raise issues of national security.

More recently, on August 9, 1999, the New Hampshire Public Utilities Commission approved the merger and indicated that any national security concerns had been resolved by the Department of the' Treasury.

NEP always has been a minority licensee company operating under a holding company.

This same corporate structure will continue after the acquisition with only the addition of another holding company imposed above the existing holding company.

The foreign ownership issuc is a question of public 4

I

\\

policy-that has no bearing upon the operations of the facilities in this proceeding.

l NU claims that it is merely trying to preserve the financial integrity of the facilities and-their operators, but NEP has never beenJa threat to that integrity, and NU-knows that.

NEP has never defaulted ~on any financial obligation regarding Seabrook or Millstone.

Nothing about the. merger will threaten NEP's financial position, and NU has not alleged anything to the contrary.. NU cannot credibly contend, nor has it even tried to argue, that-the-British are going to sabotage Seabrook or Millstone,. divert nuclear. fuel, or take other actions ~that are contrary to national. security or the public interest. Nor can NU

-justifiably care whether one or more of NEP's directors are U.K.

-citizens.

In short, NU has. raised not a single legitimate concern with the proposed transfer that is grounded in the Atomic Energy Act.

One must therefore search outside its pleadings for the reason for NU's filing.

The answer may reside in the fact that NEP has sued NU-for mismanagement of Millstone (See NEP's Response to NU's Requests for Hearing, p. 3 n.3).

It is not unreasonable to conclude that NU is really motivated by a desire to retaliate against NEP for pursuing'this. litigation.

The NRC should not allow its procedures to be misused for such ancillary: purposes.

4.

Conclusion.

The Commission has;previously held that a hearing is i

-not necessary in-a license transfer proceeding, unless "potentially.significant health or safety issues were raised."

Long. Island Lighting Company, 35 NRC 69 (1992).

NU has not even alleged any. threat to the public health or safety.

As to those I

issues or-any others, mere allegations will not suffice.to require a hearing. Cerro Wire & Cable Co.

v.

FERC, 677 F.2d 124,

127 (D.C. Cir. 1982).

NU's allegations are unsupported by any 5

l f -. -

facts.

Thus, there are no genuine issues of material fect in dispute.

The Commission can and should approve the application without a hearing.

j L

}

Respectfully submitted, A A Dwok Edward Berlin, Esq.

SamueT4'Qehrends IV);End, Scott P.

Klurfeld, Esq.

Mary A.

Murphy, Esq.

Swidler Berlin Shereff Yvonne M.

Coviello, Esq.

Friedman, LLP LeBoeuf, Lamb, Greene 3000 K Street, NW, Suite 300

MacRae, L.L.P.

Washington, DC 20007-5116 1875 Connecticut Avenue, NW, (202) 424-7500 Suite 1200 (202) 424-7500 Washington, DC 20009 (202) 986-8000 Thomas G.

Robinson, Esq.

Paul K.

Connolly, Jr.,

Esq.

New England Power Company LeBoeuf, Lamb, Greene &

25 Research Drive

MacRae, L.L.P.

Westborough, MA 01582 260 Franklin Street (508) 389-2877 Boston, MA 02110 (617) 439-9500 Atto neys for New England Attorneys for NGG Holdings LLC Power Company August 10, 1999 6

l

A

[9h 9

00CKFTFD UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION g

. P4 :15 In the Matter of

)

Gi-l Northeast Nuclear Energy

) Docket No. 50-423 [

Company,'et al.

) License No.

NPF-9 Millstone Station, Unit 3

)

l j

In the Matter of

)

North Atlantic Energy

) Docket No. 45044316 b b Service Corporation, et al.

) License No.

NPF-86 Seabrook Station, Unit 1

)

Response of New England Power Company On August 3, 1999, The Connecticut Light & Power Company, Western Massachusetts Electric Company, and North Atlantic Energy Corporation, all subsidiaries of Northeast Utilitiea (and referred to collectively herein as "NU"),

filed a j

l j

Reply to support their previous. request for a hearing.

New England Power Company ("NEP") hereby files this response.

While l-the Commission's rules do not specifically contemplate responses i

to a reply, they do not specifically forbid such responses.

]

'Moreover, NEP feels compelled to clarify the record, because NU has raised a brand new (and fictitious) legal standard for the first time in.its reply, and has failed to demonstrate any facts which merit a hearing.

NU claims that it is entitled to a hearing simply because it has an interest in the case, has raised issues within the scope of the proceeding, and has provided a concise statement of facts.

Recly at 3.

However, to merit a hearing, NU must also showJthat "a genuine dispute exists with the applicant on.a material issue of law or fact." 10 C.F.R.

S 2.1306 (b) (2) (iv).

NU has not done so.

Since applicants are fully qualified as a matter of law, there is no need for.a hearing.

11012 390 McSt ud Gy-

.~

.,g '

l.

Because NEP Will Remain An Electric Utility As A Matter of-Law, NU Has Not Raised Any Issues of Fact Which Merit A Hearing NU still alleges that NEP might not be an " electric utility", as defined by the Commission.

NEP meets the definition of an " electric utility" so clearly that there is no dispute about any material fact.

The Commission's definition of an " electric utility" reads in pertinent part as follows:

l' Electric utility means any entity that generates or distributes electricity and which recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority.

Investor-owned utilities are included within the meaning of " electric utility."

10 C.F.R.

S 50.2.

NEP will distribute electricity, and NU does not dispute that fact.

NEP will be an investor-owned utility, and NU does not dispute that fact; NEP has and will remain rate-regulated by the-FERC and absolutely nothing about the character of that regulation will change post-merger.

These undisputed facts prove that NEP meets the definition of an electric utility, under the plain meaning of the rule.

NU has not alleged any facts which contradict that plain meaning.

There are no facts to be addressed at a hearing.

Instead of disputing the facts, NU has invented a new legal standard.

According to NU, it is no longer enough simply to meet the definition in the rule.

Now, suddenly, NEP is required to show "what proportion of NEP's business" will be regulated.

Reply at 6.

NU cites no authority for this imaginary new requirement, which appears nowhere in the rule.

NEP is unaware of any case in which the Commission has required an investor-owned utility to show proportional regulation in a j

license transfer.

However, it bears repeating that virtually all j

of NEP's activity will continue to be regulated.

Unlike NU, NEP has divested its non-nuclear generation, and chosen to l

concentrate on the delivery of electricity through the

[

-transmission grid, an area which will remain pervasively I

(

2

F;

(

regulated. Therefore, the question of " proportionality"'is l

unnecessary as a matter of law and moot as a matter of fact.

i i

To require an electric utility to show that it meets j

i financial qualifications, an intervenor must " establish that the 4

Applicants lacked sufficient funds to operate safely [. ] " Public Service Company of New Hampshire, 28 NRC 573 (1988).

NU has not even tried to make such a showing, and could not do so.

Finally, NU has not alleged that anything about this transfer will affect NEP's status as an electric utility or its financial resources.

Rather, NU seems to feel that the emerging competitive environment will somehow affect that status.

l Competition will continue to emerge whether or not this transfer is granted, and the transfer is irrelevant to that issue.

In that sense, NU's claim is not within the scope of this proceeding, because it has nothing to do with the transfer. There is no need for a hearing to dismiss that claim.

2.

The Transfer Will Comply With Commission Precedent As A j

Matter of Law, and NU Has Raised No Facts About Foreign ownership Which Merit a Hearing.

-NU's second point is that, although the Commission approved foreign ownership in Amergen, it should forbid foreign ownerchip here, because the statute refers to ownership of licensees, not to ownership of facilities.

Reduced to its essence, NU's position is this: a foreigner can own 50% of a licensed facility in Amergen, but cannot own 34.5% of a licensed facility in this case.2 That position makes no sense, as a matter of fact, policy, or law.

The policy behind the foreign ownership prohibition is focused on whether the foreign entity has "the ability to restrict or inhibit compliance with the security and other regulations of the AEC, and the capacity to control the use of nuclear fuel and to dispose of special nuclear material generated in the reactor (. ) " General Electric Company and Southwest Atomic Energy Associates, 3 AEC 99 (1966).

NEP does not control any nuclear facility, but is a passive owner with no operating rights or access to any nuclear materials.

Therefore, no British parent 2

j NEP does not own more than 34.5% of any licensed facility.

i The foreign party ~in Amergen also owned half the licensed operator. -NEP owns no interest in any licensed operator.

3

F

+

of NEP will have any authority to cause a violation of any Commission rules, a default of any license obligations, or the diversion of any nuclear fuels.

NU has not even alleged that any British company will have those rights.

Instead, NU would have the Commission focus solely on control of one of the licensees, and ignore control of the facility. The Commission recognized, in its Standard Review Procedure, that control of the facility is the most critical fact, in terms of law and policy.

Congress did not expect the Commission to be blind to the facts.

The fact is that 34.5% control of a facility is not as significant as 50% control of a facility, the amount-approved in Amergen.

To ignore that fact would contravene the substance and purpose of the law.

In addition, of course, NEP has taken steps to prevent foreign control which provide greater assurance than those provided in Amergen.

As a-matter of logic and of law, the Commission cannot disapprove NEP's application without reversing the decisions taken in the SRP and in Amergen.

These facts were discussed in NEP's July 27, 1999 response.

This transfer is consistent with that precedent and should be approved.

3.

NU's Concerns are Not Sincere.

The Reply goes to great lengths to demonstrate the sincerity of NU's interest in the proceeding, with an elaborate proclamation of aincerity.

However, NU cannot seriously be concerned about the issues it has raised.

As to NU's first point, NEP is in a more financially stable position than NU.

As to the second point, NU cannot maintain seriously that the acquisition of NEP by a British entity is a risk to the common defense.

That issue already has been decided when on April 29, 1999, the Department of the Treasury, Committee on Foreign Investment in the United States, concluded that National Grid's acquisition of NEES did not raise issues of national security.

More recently, on August 9, 1999, the New Hampshire Public Utilities Commission approved the merger and indicated that any national security concerns had been resolved by the Department of the Treasury.

NEP always has been a minority licensee company operating under a holding company.

This same corporate structure will continue after the acquisition with only the addition of another holding company imposed above the existing holding company.

The foreign ownership issue is a question of public 4

4 policy that has no bearing upon the operations or the facilities in this proceeding.

NU claims that it is merely trying to preserve the financial integrity of the facilities and their operators, but NEP has never been a threat to that integrity, and NU knows that.

NEP has never defaulted on any financial obligation regarding Seabrook or Millstone.

Nothing about the merger will threaten NEP's financial position, and NU has not alleged anything to the contrary.

NU cannot credibly contend, nor has it even tried to argue, that the British are going to sabotage Seabrook or Millstone, divert nuclear fuel, or take other actions that are contrary to national security or the public interest. Nor can NU justifiably care whether one or more of NEP's directors are U.K.

citizens.

In short, NU has raised not a sing:te legitimate concern with the proposed transfer that is grounded in the Atomic Energy Act.

One must therefore search outside its pleadings for the reason for NU's filing.

The answer may reside in the fact that NEP has sued'NU for mismanagement-of Millstone (See NEP's Response to NU's Requests for Hearing, p. 3 n.3).

It is not unreasonable to conclude that NU is really motivated by a desire to retaliate against NEP'for pursuing this litigation.

The NRC should not allow its procedures to be misused for such ancil]ary purposes.

4.

Conclusion.

The Commission has previously held that a hearing is not necessary in a license transfer proceeding, unless "potentially significant health or safety issues were raised."

Long Island Lighting Company, 35 NRC 69 (1992).

NU has not even alleged any threat to the public health or safety.

As to those issues or any others, mere allegations will not suffice to require a hearing. Cerro Wire & Cable Co. v.

FERC, 677 F.2d 124, 127 (D.C. Cir. 1982).

NU's allegations are unsupported by any 5

r I'

facts.

Thus, there are no genuine issues of material fact in dispute.

The Commission can and should approve the application without a hearing.

Respectfully submitted, bhd Eduard Berlin, Esq.

Samuel *%ehrends IV);En4N Scott P.

Klurfeld, Esq.

Mary A. Murphy, Esq.

Swidler Berlin Shereff Yvonne M. Coviello, Esq.

Friedman, LLP LeBoeuf, Lamb, Greene 3000 K Street, NW, Suite 300

MacRae, L.L.P.

Washington, DC 20007-5116 1875 Connecticut Avenue, NW, (202) 424-7500 Suite 1200 (202) 424-7500 Washington, DC 20009 (202) 986-8000 Thomas G. Robinson, Esq.

Paul K. Connolly, Jr.,

Esq.

New England Power Company LeBoeuf, Lamb, Greene &

25 Research Drive

MacRae, L.L.P.

Westborough, MA 01582 260 Franklin Street (508) 389-2877 Boston, MA 02110 l

(617) 439-9500 Attorneys for New England Attorneys for NGG Holdings LLC Power Company August 10, 1999 1

l l

t I

6 i