ML20245H706
| ML20245H706 | |
| Person / Time | |
|---|---|
| Site: | Hatch, Vogtle, 05000000 |
| Issue date: | 08/08/1989 |
| From: | Rhex Edwards GEORGIA POWER CO., TROUTMANSANDERS (FORMERLY TROUTMAN, SANDERS, LOCKERMA |
| To: | Thomas C Office of Nuclear Reactor Regulation |
| References | |
| A, NUDOCS 8908170252 | |
| Download: ML20245H706 (20) | |
Text
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TROUTMAN, SANDERS, LOCKERMAN & ASHMORE.-
a paav=ensme suctuo.wo enorEssiona6 con =onavio=s A T T O R N E' Y S s AT L'A W CANDLER BUILDING, SUITE 1400 127 PEACHTREE STREET, N.E.
ROBERT P, EDWARDS, J R, ATLANTA, GEORGIA 30043-7101 wRitERis DIRECT DIAL I,UMSER '
404/658-8000 404 868-8207 C ABLEt.4 AESTRO T E LE COptE nt 404-934 0459 August 8, 1989' Mr. Cecil 0. Thomas Chief, Policy Development and Technical Support Branch
- Programs Management, Policy Development and Analysis Staff Office of Nuclear Reactor Regulation United States Nuclear Regulatory Commission Washington, D.C.
20555 Re:
Oglethorpe Power Corporation (A Generation And Transmission Cooperative) (hereinafter "Oglethorpe") Allegations Of.Non-Compliance'With Antitrust License Conditions, Docket No. 50-424A.
Dear Mr. Thomas; Georgia Power Company (hereinafter." Georgia Power" or.the
~
" Company") appreciates the opportunity to' respond to l
Oglethorpe's allegations of non-compliance with the antitrust license conditions which are appended to the operating licenses for the Edwin I.
Hatch Nuclear Generating Plant Unit 2 and the Alvin W. Vogtle Nuclear Generating Plant Unit 1 and' Unit 2
( hereinaf ter " license conditions ") U U
Although Oglethorpe styles its response as relating to the Vogtle Unit 1 operating license, the license conditions l
are the same for each unit and have not changed since they were agreed to by the affected parties.on April 24, 1974,.in the Settlement Agreement concerning claims thatlwere pending before the United States Atomic-Energy Commission in Dockets l
Nos., 50-366A, Plant Hatch Unit 2 and.50-424A, 50-425A, 50-426A, and 50-427A, Plant Vogtle Units 1, 2,
3, 4.
L respectively (hereinafter "USAEC Settlement-Agreement") and appended to the construction permit for Plant Hatch Unit 2 on August 19, 1974, and to the construction permits for the Vogtle units.
yans sa:
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TCOUTMAN, S ANDERS, LOCKERMAN & ASHMORE Mr. Cecil O. Thomas August 8, 1989 Page 2 Staff's questions provided Oglethorpe with a full opportunity to state how it alleges that Georgia Power has violated its license conditions.
Oglethorpe did not respond to the Staff by showing grounds to invoke the NRC's " authority to initiate a postlicensing enforcement proceeding in the event of violation of a specific antitrust licensing condition.?I" Oglethorpe failed to identify any license condition that Georgia Power is alleged to have violated.
Instead, Oglethorpe argues (at page 24) that it should have itc way concerning the Company's transmission obligation "whatever its [the license condition's] specific language."
Oglethorpe concludes its response to the Staff (at page 57) by requesting "new license conditions" that Oglethorpe would now prefer to have instead of enforcement of existing license conditions.U The reason Oglethorpe falls to articulate a violation of a specific license condition and instead wants "new license conditions" is because Georgia Power is in full compliance with its license condition obligations.
That Oglethorpe has evolved from nonexistence into the nation's Jargest generation and transmission cooperative over the past fourteen years is compelling evidence of compliance.
Oglethorpe and all of its meebers have access to bulk power from sources other than Georgic, Power.
All of Georgia Power's transmission and partial requirekants obligations are expressly embodied in rate schedules which have been effective 1/
Houston Lighting & Power Company (South Texas Project), 5 N.R.C.
1303, 1311 (1977).
Section 186 of the Atomic Energy Act authorizes the initiation of enforcement proceedings if there has been a " failure to operate a facility in accordance with the terms of the license."
Oglethorpe (at page 56) incorrectly represents the South Texas decision as having " held" that the NRC's " power to revoke would normally imply the leeser power to modify licenses to incorporate conditions which would have been imposed at the time of initial licensing had subsequent developments then been known."
Id.
Not only is this not the " holding" of South Texas, it is a proposition the NRC expressly rejected in the conclusion of the same paragraph,.which Oglethorpe omits:
"[W]e find that the generality of Section 186 should be treated as subordinate to the specific, limited regime adopted by Congress as recently as the 1970 amendments to the Act." Id.
3I Oglethorpe bases the relief its seeks solely on its incorrect representation of the holding in South Texas.
See infra n.2,.
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I i
TROUTMAN. SANDER 3, LOCKERMAN & OSHMORE Mr. Cecil O. Thomas August 8, 1989 Page 3 j
i for many years with no antitrust complaint from Oglethorpe.
I oglethorpe has taken the benefit of these low embedded cost l
rates and generous co-ownership arrangements with " buy-back" I
arrangements that phase-in and mature Oglethorpe's ownership of modern generating plants.
Now Oglethorpe wants to rewrite the rules in a fashion
]
that increases Georgia Power's planning risk and the costs of i
all of Georgia Power's other customers in order to achieve I
more benefits for Oglethorpe.'l Georgia Power's license condition obligation to deliver Oglethorpe's power off-system arises only from circumstances specified by the license conditions.
Oglethorpe never even alleges that those circumstances have been satisfied.
Moreover, it is apparent that those conditions have never been met.
Even though it is not under a current license condition obligation to export Oglethorpe's power off-system, Georgia Power has implemented such transactions on a voluntary basis, making pragmatic arrangements to accommodate these transactions within the existing service arrangements.
Georgia Power has also negotiated at length with Oglethorpe to establish a new service arrangement that would establish bulk power supply responsibilities and moot the conditions which Oglethorpe has not satisfied.
Oglethorpe attempts to turn its disappointments with wholly voluntary arrangements with Georgia Power into license
'l Oglethorpe joined Georgia Power in identifying "some form of commitment from current customers with regard to load dnd Capacity responsibilities as an issue that must be addressed "before such an agreement [a new Georgia Power Gupply Agreement that addressed relations to the Southern Pool, treatment of future generating units and off-system transactions) can be consumated."
Georgia Power Supply Study Scope Working Group Review of Issues, January 31, 1986, at 1.
Oglethorpe now wants to be able to engage in off-system j
transactions without responsibility for the bulk power supply 1
consequences of its actions by burdening Georgia Power (and its customers -- including other partial requirements customers) with total responsibility for mismatches between Oglethorpe's load and the resources put in place to serve that load.
TROUTMAN, SANDERS, LOCKERMAN & ASHMORE Mr. Cecil O. Thomas August 8, 1989 Page 4 condition violations by using sweeping accusations of misconduct without supporting specifics.
As shown above, under the South Texas standard, Oglethorpe has failed to provide a basis for further enforcement activity by the NRC.
Georgia Power has responded to most of Oglethorpe's allegations in its prior correspondence with the NRC and with Oglethorpe.
George Power is also forwarding under separate cover a chronological set of documents with a brief commentary related to each document.
The documents and the related discussion supplement this response.
Georgia Power has both implemented the license conditions and has engaged in transactions and negotiations beyond the requirements of the license conditions.
Even if the NRC has jurisdiction over the latter, Oglethorpe has failed to present any indicia of unreasonable conduct by Georgia Power.
A review of the applicable license conditions, their implementation and the ongoing discussions with Oglethorpe shows that Oglethorpe has not presented appropriate grounds for NRC enforcement activities.
There is no need for further enforcement action by the NRC because (1) Georgia Power has implemented its license condition obligations; (2) Georgia Power has no current license obligation to export power for Oglethorpe or to enter into a
" generic scheduling agreement"; (3) Oglethorpe's current policy theories are not substitutes for the license conditions themselves; (4) Georgia Power has properly engaged in voluntary projects with Oglethorpe beyond the scope of license condition requirements; and (5) the FERC is fully capable of addressing any and all issues Oglethorpe wishes to raise in a comprehensive fashion as provided for by the USAEC Settlement Agreement and license conditions.
1.
Georgia Power Has Implemented Its License Condition Obligations Paragraph 2.1 of the USAEC Settlement Agreement provides that Georgia Power "shall file tariffs to implement commitments undertaken by it to provide partial requirements and transmission service as set forth in paragraphs 4 and 5 of Attachment "B"
(" Proposed License Conditions, USAEC Docket Nos.
50-366A, 50-424A, 50-425A, 50-426A and 50-427A").
The same requirement is stated in Paragraph 8 of the license conditions as the means by which the license conditions are to be Implemented.
Georgia Power has filed the appropriate tariffs.
These rate schedulesti provide partial requirements ("PR") and El Georgia Power FERC Electric Tariff Original Volume No. 2 and Original Volume No. 3.
TROUTMAN, SANDECCS, LOCKERMAN & ASHMORE '
A SANTNBptettP 198CLUDiMO PetOFESt#0sa4L COftpoaIATIONE Mr. Cecil O. Thomas August 8, 1989 Page 5.
transmission service ("TS"),.and define what is known.as the partial requirements customer relationship-between Georgia Power and (1)'Oglethorpe, (2) the Municipal Electric-Authority of. Georgia (hereinafter,"MEAG") and (3) the City of Dalton, Georgia (hereinafter " Dalton").-U Each and every bulk power issue Oglethorpe raises is addressed by a tariff, agreement or practice that-is regulated-by FERC.
The transmission tariff filed at.FERC expressly encompasses the license conditions in sections 3.01-and.5.20 of TS.
The PR rate is a comprehensive treatment of the bulk power relationship provided for by the license conditions, including treatment for certain mismatches between a partial requirements customer's resources and load and notice provisions to facilitate orderly and efficient bulk power planning by the supplier of requirements power, i.e., Georgia Power.
PR and TS have been in effect for almost fifteen years.
Had Georgia Power failed to file appropriate tariffs responsive to the license conditions, NRC enforcement action would be an option.
Oglethorpe, however, does not make such an allegation.
By filing tariffs which embrace in a comprehensive fashion its license condition obligations, Georgia Power also divested itself of any power to act unilaterally to impair implementation of the license l
tl These three partial requirements customers do not operate electrically independent systems.
Instead, their systems are integrated into the Georgia Territory for which Georgia Power provides full requirements, partial requirements, and retail service on an integrated basis.
An important issue is whether these partial requirements L
customers will remain customers that rely on Georgia Power to l
serve their load on a requirements basis or whether they will become self-sufficient systems.
Oglethorpe has agreed to l
self-sufficiency, but has failed to date to take reasonable steps to implement its agreement.
Instead, Oglethorpe continues to purchase the power its members need on a second by second basis just like the other partial requirements customers.
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TROUTMAN, SQNDERS, LOCKERMAN & ASHMORE ew o..o on co o Mr. Cecil O. Thomas August 8, 1989 Page-6 conditions.L/
Instead, as provided for by Paragraph 8 of the license conditions, Georgia. Power, by filing appropriate and comprehensive rate schedules with FERC, has empowered the FERC to direct its conduct in a fashion consistent with the terms of the license conditions.
In addition to offering partial requirements power and transmission service pursuant to. filed and effective rate.
schedules, Georgia Power'has actually provided these services-and has in fact implemented its existing transmission service obligation.- The transmission license condition which is effective today is the obligation to " import" power to Georgia territorial utility systems established by Paragraph 5(a).
Understanding Paragraph 5 requires review of an important defined term.
Oglethorpe is a beneficiary of the license conditions because it is an " entity" as defined by Paragraph 1(a) of the License Conditions:
(a)
" Entity" means any financially responsible person, private or public corporation, municipality, county, cooperative, association, joint stock association.
or business trust, owning, operating or proposing to own or operate equipment or facilities.within the State of Georgia (other than Chatham, Effingham, Fannin, Towns and Union Counties) for the generation, transmission or distribution of electricity, provided that, except for municipalities, counties, or rural electric cooperatives,
" entity" is restricted to those which are or will be public utilities under the laws of the State of Georgia or under the laws of the United States, and are or will be providing retail electric service under a contract or rate schedule on file with and subject to the regulation of the Public Service Commission of the State of Georgia or any regulatory agency of the United States, and, provided further, that as to municipalities, counties or rural electric cooperatives, " entity" is restricted to those which provided electricity to the public at retail within the State of Georgia (other than Chatham, Effingham, tl Since the Atomic Energy Act does not contemplate ongoing antitrust regulation by the NRC, the'USAEC Settlement Agreement and license conditions expressly rely on Federal Power Act regulation as the means to implement partial requirements and transmission service.
Oglethorpe deletes from its discussion all references in the license conditions to the filing of rate schedules and the anticipation that these rate schedules could be modified pursuant to the Federal Power Act.
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1 TROUTMAN, SANDERS, LOCKERMAN & ASHMORE
. muc
- .,.ucwo. one o= co oau.ons Mr. Cecil O. Thomas August 8, 1989 Page 7 Fannin, Towns and Union Counties) or to responsible and legally qualified organizations of such municipalities, counties and/or cooperatives in the State of Georgia (other than Chatham, Effingham, Fannin, Towns and Union Counties) to the extent they may bind their members.
The definition of entity means that it is possible for Georgia Power to meet its license condition obligations while still serving the Georgia Territory on an integrated i
basis.8/
Georgia Power is not required by these license l
conditions to plan or operate its system to meet the needs of non-territorial systems.
In other words, because_of the role played by the territorial definition of entity, Georgia Power can optimize the operation of its system for service to Georgia requirements customers, including retail consumers, partial requirements customers (Oglethorpe, MEAG, and Dalton),
and full requirements customers (the Cities of Acworth and i
Hampton, Georgia).
The Paragraph 5(a) transmission service i
obligation is as follows:
1 5.(a)
Applicant shall transmit (" transmission servico") bulk power over its system to any entity or entitles with which it is interconnected, pursuant to rate schedules on file with the Federal Power Commission which will fully compensate Applicant for the use of its system, to the extent that such arrangements can be accommodated from a functional engineering standpoint and to the extent i'
that Applicant has surplus line capacity or reasonably available funds to finance new construction for this purpose.
To the extent the entity or entities are able, they shall reciprocally provide transmission service to Applicant.
Transmission service will be provided under this subparagraph for the delivery of power to an entity for its or its members, consumption and retail distribution or for casual resale to another entity for (1) its consumption or (2) its retail distribution.
Nothing contained herein shall require the Applicant to transmit bulk power so as to have the effect of making the l
Tennessee Valley Authority ("TVA") or its distributors, directly or indirectly, a source of power supply outside the area determined by the TVA Board of Directors by l
resolution of May 16, 1966 to be the area for which the TVA or its distributors were the primary source of power supply on July 1, 1957, the date specified in the Revenue Bond Act of 1959, 16 USC 831 n-4.
ni See infra n.6.
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TROUTMAN, $ANDERS, LOCKERM AN & ASHMORE Mr. Cecil O. Thomas August 8, 1989 Page 8 Paragraph 5(a) insures that every entity will have access to sources of bulk power other than Georgia Power Paragraph 5(a) does not, however, establish a general common carriage of I
power obligation.
Instead it provides for delivery of power j
"to any entity for its members' consumption and retail i
distribution or for casual resale to another entity for (1) its consumption or (2) its retail distribution."
(emphasis added).
Paragraph 5(a) expressly provides that transmission will be " pursuant to rate schedules on file with the Federal j
Power Commission [FERC)
An equality of access arises i
from the license conditions because "[t]o the extent the entity or entitles are able, they shall reciprocally provide transmission service to [ Georgia Power]."
The license conditions do not provide for dedicated set-asides of transmission capacity for a particular party as Oglethorpe demands because Georgia Power is required (and only required) to transmit power "to the extent that such arrangements can be accommodated from a functional engineering standpoint and to the extent that [ Georgia Power] has surplus line capacity or reasonably available funds to finance new construction for i
this purpose."
These conditions and the arrangements that
{
result from them are also subject to the provisions of Paragraph 2 of the license conditions.
Paragraph 2 expressly permits Georgia Power to enter into arms-length agreements with others.
Paragraph 2 also provides that all bulk power arrangements "must provide for adequate notice and joint planning procedures consistent with sound engineering practice 1
and must relieve [ Georgia Power] from obligations undertaken by it in the event such procedures are not followed by any participating entity."
Paragraph 5(a) of the license conditions solved the access i
problem for all municipal and cooperative systems in the j
Georgia Territory.
It enabled Oglethorpe and MEAG to be
~
formed and to replace Georgia Power as the wholesale supplier for almost ninety municipal and cooperative systems.
" Georgia Power's move precipitously altered the competitive market in the Georgia area
[ eliminating] close to 20 percent of the total kwh sales made by the company."
Suelflow, James E.
et al.,
" Energy and Competition: the Saga of Electric Power,"
1980 Antitrust Bulletin, 125, 133.
These developments were noted in the United States Department of Justice's advice l
letters and the NRC "no significant change" reviews relating l
to the four nuclear units owned by Georgia Power, Oglethorpe, l
MEAG, and Dalton.?J The special case of Okefenokee EMC, P/
The "immediate access" referred to by the Department of Justice in its 1976 Advice Letter did not rewrite the license conditions.
It simply refers to the reality that they were in fact being implemented.
- TROUTMAN, SANDEQS, LOCKERMAN & ASHMORE
.Mr.' Cecil,0.-Thomas
- August 8, 1989 Page 9 which was erroneously cited by Oglethorpe as authority;for-interstate wholesale power brokering,.shows how the transmission obligation works.
This EMC straddles the.
Okefenokee is an " entity" because-it serves the public in Georgia.
Georgia Power is obligated by Paragraph 5(a) to offer transmission service to deliver power for this EMC's consumption or retail sales (even for use by its Florida retail consumers),-but not for sales for resale to other utilities that are not entities.11/
2.
No Current License Condition Obligation To Deliver Power Off-System Or To Enter Into A " Generic Scheduling Agreement" Exists.
The License Conditions impose a second transmission service obligation which has never come into effect.
Paragraph 5(b) provides a safety valve in the event an entity-constructs capacity that exceeds.its requirements.
This subparagraph provides as follows:
i (b)
Applicant shall transmit over its system from-any entity or entities with which it is interconnected, pursuant to rate schedules on file with the' Federal Power Commission which will fully compensate-Applicant for the.
use of its system, bulk power which results from any such entity having excess capacity available from'self-owned generating resources in the State of Georgia, to the extent such excess necessarily results from economic unit sizing or from failure to forecast load accurately or from such generating resources becoming operational' earlier
)
than the planned in-service date, to the extent that such arrangements can be accommodated from a functional engineering standpoint, and to the extent Applicant has surplus line capacity available.
J.Rl Georgia Power will schedule for Oglethorpe imports of power for Oglethorpe's consumption and its members' l
consumption and retail distribution.
Whenever Oglethorpe undertakes to obtain capacity, whether from self-owned generating resources or purchased power, Georgia Power will provide PR capacity credits in accordance with the contract
'3 and notice provisions incorporated into the partial requirements rate schedule.
Because Oglethorpe does not operate an independent electrical system, it and its members obtain capacity through the mechanism of capacity credits through PR billings.
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TROUTMAN, SANDERS, LOCKERMAN & ASHMORE Mr. Cecil 0. Thomas August 8, 1989
-Page-10 This safety valve has never come.into play because no entity other than Georgia Power has excess capacity available from self-owned generating resources in the State of Georgia "11/
Although Oglethorpe (and its predecessor organizations and members) originally planned.to own or control enough generation to serve its load (i.e., be "self-sufficient") by 19901L1, Oglethorpe did not continue on this schedule.
Today Oglethorpe, like the other partial requirements customers, does not have sufficient capacity to-serve its load, plans on relying on purchased. power for the immediate future (but has~not contracted on a firm basis for sufficient power to meet its requirements), and therefore does not risk having excess capacity to export as provided~for by Paragraph '5(b). L1/
Oglethorpe never alleges with' respect to any alleged off-system power arrangement that it has satisfied the circumstances' prescribed by Paragraph 5(b).
The transmission rate schedule filed by Georgia Power encompasses both Paragraph 5(a) and Paragraph 5(b).
This transmission schedule provider for Georgia Power'and Oglethorpe to provide each other with reciprocal access to each others transmission facilities as defined by that tariff and to maintain a parity of investment based on peak load responsibility.
Once a transaction is treated as included within this tariff and contract, there is no need to negotiate It/
Also, Paragraph 5(b) makes no reference to
' exchanges" of power as asserted by Oglethorpe.
LLI January 15, 1976, Regulatory Guide 9.3 Submission, NRC Docket No. 50-366, Plant Hatch Unit 2 Operating License Application, at 2.
13I Oglethorpe reported to the NRC in 1983 that it had adopted its own special definition of self-sufficiency, that as long as it only purchased " peaking power" it would be self-sufficient.
October 17, 1983 Regulatory Guide 9.3 submission of Oglethorpe, at 2.
However, Oglethorpe's labels for its business decisions do not change the meaning of Paragraph 5(b) or the normal meaning of self-sufficient.
Also, Oglethorpe is not self-sufficient even under its own
" definition."
i 2.__._
,m____
_ _ _ _ _ _ _____________i____
_m__.m_:________.
TROUTMAN, SANDERS, LOCKERMAN & ASHMORL A PAftfMEmSMN8 GNCLUDHeG PHOFEht*0NAL COm*0maf TONS Mr. Cecil O.
Thomas August 8, 1989 Page 11 transmission access or payments.2'I The transmission tariff has never been changed in any material respect.
Service is provided to Oglethorpe and its members every second of every day under this tariff.
Since Oglethorpe does not possess any capacity in excess of its requirements, Paragraph 5(b) of the license conditions has never come into play.2)/
No " generic scheduling agreement" is required by these license conditions provisions either.
Oglethorpe cites no license condition provision in response to the Staff's pointed inquiry on this issue.
Even so, Georgia Power has for years negotiated with Oglethorpe towards an arrangement which would yield such a " generic scheduling agreement," and has done so within a framework of priorities Oglethorpe itself found necessary and appropriate.
For example, on January 31, 1986, a Scope Working Group chaired by Oglethorpe reported on (1) " feasible alternatives in which the (proposed) Georgia Power Supply Agreement could operate within the Southern Pool"; (2) "the method by which future generating units could be treated in the [ proposed]
Georgia Power Supply; and (3) the " method by which off-system transactions could be treated in the Georgia Power Supply."
Although the report stated that these "three issues should be 2Al Oglethorpe persistently and erroneously seeks to escalate Georgia Power's characterization of access as equal as a grand concession that Oglethorpe has the right to deliver power off-system at will.
No such concession or representation to the NRC has ever been made.
In the context of the plain language of existing tariffs and license conditions, Oglethorpe's ultimatum demanding
" equal access without regard to self-sufficiency" and for a special dedication of 640 megawatts of transmission capability to Florida can only be described as Orwellian.
2S/
For example, the transmission arrangements for Ogiothorpe's two sales to Seminole did not arise from License Condition compulsion.
They arose from voluntary cooperation by Georgia Power.
Once the parties agreed to treat these transactions as within their Integrated Transmission System Agreement, there was no need for further negotiations concerning the transmission component of these transactions.
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1' TROUTMAN, SANDERS, LOCKERMAN & ASHMORE c-on c-co.
...o Mr. Cecil O. Thomas August 8, 1989 Page 12 l
considered as separate and independent and do not encompass all of the concerns of the parties involved," it 4
identified the self-sufficiency issue as common to all three of these topics:
"A critical area not addressed by this document is some form of commitment from the current customers with regard to load and capacity responsibili-ties before such an agreement can be consumated."
Georgia Power Study Scope Working Group Review of Issues, l
January 31, 1986, at page one (emphasis added).
The necessary linkage between generation self-sufficiency issues and off-system transactions, given the structure of power relations in the Georgia Territory, is reflected by the terms of Paragraph 5(b).lAl Oglethorpe now, years later, appears to have abandoned the necessary structure of these negotiations.
Oglethorpe has no grounds, however, to claim that Georgia Power is unreasonable in having adhered to the correct and essential priorities.
3.
Oglethorpe's Public Policy Theories Are Not Substitutes For The Express Provisions Of The License Conditions Georgia Power's successful implementation of the i
license conditions is reflected in the fact that Oglethorpe makes no allegations that any specific license condition has been violated by Georgia Power.
In the absence of an allegation of a violation of a specific license condition, there is no basis for the NRC to proceed with enforcement.
Instead of alleging violations of one or more license conditions,.Oglethorpe invokes alleged' policies that Oglethorpe perceives behind the license conditions as grounds for the NRC to find l'ault with the Company's conduct.
Even had the United States Department of Justice LEI The Scope Working Group Report also identifies a major rate issue that must be addressed in order to develop a
" generic" scheduling agreement:
"Off-system transactions are typically arranged and priced before-the-fact Report at 15.
The existing PR rate is not a "real time" pricing mechanism.
It is an after the fact accounting rate schedule to account for the portion of the customer's requirements deemed supplied by Georgia Power.
j
_ _ _ _ - _ _ _ _ - _ _ _ _ _ _ ~
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- TROUTMAN, $ANDERS, LOCKERM AN & ASHMORE Mr. Cecil'O. Thomas
' August 8, 1989 Page 13 expressed views in its advice letters that supported
-Oglethorpe's positions today, LLI there was no-determination on the merits of any of.the Department's expressed concerns.
The 1972 request for the hearing relied.on by Oglethorpe'was withdrawn.
The license conditions were. issued by the NRC-pursuant to the dismissal of the antitrustLproceedings.
The public interests in reliable and economical utility service.
and the promotion of new competitors were served through the adoption of the specific license conditions that were agreed to by all parties.
Because the license conditions.have 1
objective meanings, they are capable of application by their terms.
In the absence of an alleged misconduct that can be 3
judged against the language'of a. specific license condition,-
'l there is no basis for NRC enforcement activity.
Since Oglethorpe has failed to articulate any alleged violation of a single requirement of the license conditions, there is no basis for further enforcement efforts.
Oglethorpe confuses the enforcement-authority of the NRC with general legislative policy-making authority such as that I
exercised by administrative agencies that determine "just and
{
reasonable" utility rates.
In South Texas, the NRC noted that the standard it administers is "unlike one which authorizes licensing (or rate setting) under a broad 'public interest' standard."
5 N.R.C.
1303, 1312 n.8.
Oglethorpe exploits the 17I i
The policies Oglethorpe perceives are of-its own invention, aided by selected editing of sources.
For example, at page two of its response, Oglethorpe omits the reference to the geographic market that was the subject of the advice.
The 1972 Advice Letter asserts that the issue was alleged " efforts to prevent the other distribution systems in Georgia from obtaining access to alternative sources of bulk power.
(emphatis added).
1972 Advice Letter, at 6.
The resale l
restrir.tlons in question were restrictions on retail sales, 1
not wholesale brokering of requirements power.
1972 Advice
')
Letter, at 7. Oglethorpe deletes all references to this product market. The 1976 Advice Letter specifically refers to
" wheeling arrangements for electric systems in Georgia."
~
(emphasis added).
The Department of Justice did not urge that it was necessary, appropriate or competitive for a partial requirements customer which (1) lacks sufficient resources to serve its native load and (2) is' integrated in'its operation with other partial requirement customers and their partial requirements supplier, to be able to commit unilaterally the delivery of power off-system or to broker partial requirements j
power in off-system sale for resale markets.
TROUTM AN, $ANDERSe LOCKERMAN & ASHMORE A MANfteERS*HP eNCbUDiseO PROFE9heO*eAL CDRpOnateoseB -
Mr. Cecil O. Thomas August 8, 1989 Page 14 confusion it creates between the enforcement and legislative functions by seeking to substitute the general positions it advocates today for the actual license conditions themselves.
Oglethorpe states, without any basis, that the Staff and United States Justice Department have adopted Oglethorpe's interpretations, which are now somehow engrafted on the license conditions.
Oglethorpe should not make a cavalier assertion that a multiparty settlement agreement has been abrogated without due process of law.
Oglethorpe erroneously-suggests that freewheeling policy-making may be substituted for the license conditions themselves.
4.
Georgia Power Has Properly Cooperated'With voluntary Transactions Beyond The Scope Of The License Conditions.
A fundamental error that Oglethorpe makes is assuming that voluntary commercial accommodations made in the context of ongoing negotiations effectively revise the license conditions.
For example, since Oglethorpe lacks any excess generating capacity, let alone excess capacity that satisfies the conditions of Paragraph 5(b), Georgia Power has no license condition obligation to transmit power from Oglethorpe to Florida utilities.
In light of various power supply considerations, including the fact that it appeared that Georgia Power and Oglethorpe were evolving towards an agreement that would effectively provide for self-sufficiency, the Seminole arrangements seemed commercially reasonable to l
Georgia Power.
Oglethorpe wrongfully takes Georgia Power's willingness to facilitate a variety of transactions as legally binding concessions and " interpretations of the license conditions."
Oglethorpe escalates its error by taking Georgia Power's willingness to negotiate a new relationship in which 3
Oglethorpe (1) would be responsible for its own power
]
requirements either by purchases of definite amounts of firm power or by self-ownership of generating capacity, and (2) could therefore independently market power excess of.its requirements off-system pursuant to what Oglethorpe calls a
" generic scheduling agreement" as describing the status guo and-the current effect of the license conditions.
Oglethorpe erroneously exploits the confusion it creates i
between the world that would exist if certain arrangements --
arrangements that are not required by the license conditions --
come about and the existing world and license conditions.
For example, in seizing on Mr. Dahlberg's 1983 lett'er at the outset of renewed negotiations toward a successor relationship to the partial requirements rate _as a concession, Oglethorpe i
forgets to inform the NRC that Oglethorpe was at'that time 4
I
.i TROUTMAN, SAMDER3, LOCKERMAN & ASHMORE i
A 8*RTefERBM0p ONCLUDesse pseOFttaaO* SAL COR*DhaveONS Mr. Cecil O. Thomas August 8, 1989 Page 15 under a separate contractual commitment to sell certain Plant Scherer energy to Georgia Power in addition to certain tariff provisions for sale of Scherer energy to Georgia Power.
i Oglethorpe obtained a release from those contractual l
restraints.
Even though the negotiations of the successor l
relationship initiated by Mr. Dahlberg's letter have not yet yielded a substitute for the partial requirements customer relationship that exists, Oglethorpe did make sales out of Plant Scherer to Seminole with cooperation from Georgia Power.
Oglethorpe's false efforts to recast Georgia Power's commercial
{
cooperation as duplicity create no grounds for enforcement i
action.
Georgia Power's cooperation and good faith is shown by its record of cooperation beyond the requirements of the license conditions: (1) facilitating and backing up oglethorpe's first sale to Seminole; (2) facilitating with great speed an off-system purchase coupled with a second sale to Seminole; (3) l offering repeatedly to implement case-by-case agreements to deliver off-system; (4) assisting Oglethorpe with refinancing its ownership of Plant Scherer; and (5) making a general offer to deliver nonfirm Plant Vogtle and Plant Scherer energy off-system, which Oglethorpe expressed no interest in.181 The partial requirements customers and Georgia Power may reach an agreement concerning an alternative to existing arrangements.
They may not reach such an agreement.
Under the existing license conditions, the Georgia public is served reliably by competing viable electric suppliers.
As soon as Oglethorpe has more generation than its load and satisfies the conditions of Paragraph 5(b) of the license conditions, it is guaranteed access to outside markets to sell that excess by the licenso conditions.
q 1
Stripped of its rhetoric, Oglethorpe is complaining that an optional new power system agreement for Georgia that is satisfactory to Oglethorpe has not been adopted.
The possible j
optional arrangements necessarily would be complex multiparty j
agreements.
No agreement may ever be reached.
None is required by the license conditions.
For over a decade, Georgia Power, Oglethorpe, MEAG and Dalton have explored and negotiated potential alternatives to the existing partial requirements customer relationship.
Jointly retained third party consultants have assessed the options.
Elaborate computer assisted studies have been undertaken.
Drafts have been circulated.
Sometimes called a " Georgia Pool," sometimes 18/
F.D. Williams May 3, 1988 letter to G.
Stanley 11 i 3 1, at 2.
TROUTMAN, SANDERS, LOCKERMAN & ASHMORE Mr Cecil O. Thomas August 8, 1989 Pags 16 called the Georgia Power Supply Agreement or the Georgia Alternative Power Supply System, these discussions have yet to yield a substitute for the existing partial requirements customer relationship.
These alternatives have included the so called scheduling services Oglethorpe desires because they would identify appropriate resources which are available to be scheduled off-system and assign economic responsibility for the costs of such operations, thereby avoiding serious free-rider problems.
The service of scheduling a transaction from one power system to another, such as from the Southern electric system control area to the Florida coordinating group control area can be quickly negotiated, as is shown by Oglethorpe's second sale to Seminole Electric Cooperative.tEl The key difficulty with scheduling power deliveries lies in identifying appropriate resources and assigning economic responsibility for the consequences of using those resources.
A glimpse of the complexity can be seen in the delay implementing the first Oglethorpe sale to Seminole.
Even though co-owner energy is generally " absorbed" through the partial requirements tariff, and even though Oglethorpe agreed to sell any Plant Scherer energy which was not so absorbed to Georgia Power, Georgia Power had told Oglethorpe at the outset of the current alternative power system negotiations that "OPC i
is not restricted by the PR-7 tariff, or any contractual relationship between the parties from making off-system salestAI" Therefore, the provisions of the Scherer LEI Oglethorpe complains that Georgia Power treated the energy it purchased to resell to Florida as nonfirm, but artfully avoids asserting that this energy was anything other than nonfirm energy subject to multiple contingencies.
Unless Oglethorpe asserts that it purchased firm energy it has no cause for complaint.
tRI Oglethorpe erroneously reads into the October 12, 1983 Letter from A. W.
Dahlberg to G.
Stanley Hill an agreement that Georgia Power will deliver power for Oglethorpe off-system even though Oglethorpe lacks sufficient generating capacity to serve its own load.
The negotiations initiated by Mr. Dahlberg's letter were to establish a relationship in which Oglethorpe would be self-sufficient.
The key to this, identified jointly by Georgia Power and Oglethorpe, was revising the existing PR rate, which has not been accomplished.
February 1984, Project Plan To Develop A Georg_la Territorial Power Supply Agreement, pages 1-2.
Those arrangements have not been concluded through no fault of Georgia Power.
TROUTMAN, SANDERS, LOCKERM AN & ASHMORE A PAfMNEMSHIP INCL 4fD4NG PROFES&#O*eAL CORWDRAT+DNS Mr. Cecil O.
Thomas August 8, 1989 Page 17 co-ownership contracts for Oglethorpe to " order up" generation outside of economic dispatch with the consent of the co-owners created a means, in theory, to define a resource to associate with the desired Florida deliveries.
In addition to backing up oglethorpe's sales, Georgia Power obtained the necessary co-owner consents to Oglethorpe's venture.
Oglethorpe never characterized Georgia Power as " uncooperative" at the time.
Oglethorpe presents no indicia of any dilatory conduct on Georgia Power's part.
Efforts to generalize the Scherer/ Seminole transaction into what Oglethorpe calls a " generic scheduling agreement" through an agreement that would establish power system cost responsibilities both for any requirements-type power and interchange contracts understandably have been complicated.
No " delay tactics" have been engaged in by Georgia Power.
The 1987 hiatus in negotiations was for the mutual convenience of the parties in order to negotiate Oglethorpe's purchase of the Rocky Mountain pumped storage project.LLI No " opportunities" for Oglethorpe have been lost due to Georgia Power's fault.
Oglethorpe neglects to inform the NRC that whenever Oglethorpe has sought cooperation that cooperation has been afforded.
An example is Oglethorpe's successful leveraged lease refinancing of its ownership of Plant Scherer.
The would-be lessor / creditor wanted Oglethorpe to provide a transmission service to deliver Scherer capacity off-system in the event of a default by Oglethorpe.
In December of 1985, Georgia Power reviewed with Oglethorpe its inability to confirm the availability of that service under the license conditions.
Georgia enabled the transaction to close by offering to negotiate such a transmission service with Oglethorpe's creditors in the event of a default.221 Georgia Power's long history of cooperation with Oglethorpe has enabled Oglethorpe to succeed in many ventures to date, thereby refuting Oglethorpe's efforts to portray the Company as unreasonable.
Oglethorpe's success is reported in the "no significant change" reviews conducted by the NRC.
UI W.J.
Smith January 13, 1987, letter to J.A.
Johnson.
1 22/
Oglethorpe erroneously claims that Georgia Power has " sprung" a "new interpretation" of the license conditions on it.
TCOUTMAN, SANDERS, LOCKERMAN 6 ASHMORE Mr. Cecil O. Thomas August'8,.1989 Page 18 5.
The FERC Is Authorized To Address Oglethorpe's Concerns
~
'In A Comprehensive Fashion.
Unlike-a license conditionLinvolving the sale of an asset, the tariffs implementing the services in issue are fully subject tc the jurisdiction o.f the FERC.
The FERC has comprehensive jurisdiction to enforce or modify the partial requirements and transmission services with which Oglethorpe is concerned.
Nor is this'a case in which a prompt challenge-is brought when a newly filed tariff is alleged to-contain unreasonable conditions that frustrate a license' condition.
Service has been taken pursuant to these' tariffs for almost fifteen years. -Oglethorpe seeks to sidestep the primary jurisdiction of FERC over the reasonableness of bulk power tariffs and practices.2U A new issue Oglethorpe raises brings into sharp focus the reality that all of Oglethorpe's concerns are FERC ratemaking issues.
Oglethorpe quarrels with the PR tariff capacity credit for purchased power notice provision.
The role of FERC l
as the arbiter of tariff notice provisions is recognized in Paragraphs 4, 5, and 8 of the license conditions.
As to notice provisions, the USAEC Settlement Agreement provided-that Georgia Power was " free to include provisions treating these subjects [the notice provisions Oglethorpe takes exception to] in the Initial Tariff and all subsequent tariffs for partial requirements service, and the protestants will be free to oppose the same, all pursuant to the Federal Power Act."
USAEC Settlement Agreement at 5-6.
Oglethorpe now i
complains about adherence to the contract and notice provision in order to receive capacity credit for bulk power purchases,-
a provision that has been filed and effective with FERC;for 14 years, and by operation of law, is presumed reasonable.
j Paragraph 9 of the PR Terms and Conditions expressly provides j
that a customer is entitled to capacity and energy credits for purchases from other sources, "provided the customer has (d) complied with all contract end notice l
L 2.3 i Oglethorpe also takes exception to the performance 1
I of Georgia Power's contract with the Southeastern Power Administration ("SEPA") which was filed with FERC on March 28,
^
1985, and made effective in'FERC Docket No. ER85-?si-000 with Oglethorpe's support.
Paragraph Two of the Licensu Conditions also expressly provides that Georgia Power'need not " forego a reasonably contemporaneous arrangement with another, developed in good faith in arms length negotiations
. which affords it greater benefits."
!TROUTMAN, SANDERS, LOChERMAN & ASHMORE
. um meume nenemma co-amon Mr. Cecil O. Thomas August 8 1989 Page 19 requirements of Section 6."
Oglethorpe, having accepted service under these terms and conditions, now-wants to evade their force.
It is important that FERC have jurisdiction over this issue since waiving the notice period will-result in an increase in MEAG's reserve costs,_ Dalton's reserve costs, and 3
-l Georgia Power's reserve costs.21/
The central issue raised by all of Oglethorpe's concerns is the economic value received by it for the capacity it owns versus increased planning risk for Georgia Power..In accordance with the USAEC Settlement Agreement, partial requirements customers which are not self-sufficient consistently have not been permitted to increase the Company's planning risk by shifting some of their capacity off-system.
Instead they have received increasingly favorable PR rate credit for their self-owned generating capacity constructed pursuant to joint planning The need to address this central PR rate issue was recognized at the outset of the ongoing discussions between Georgia Power and Oglethorpe, as is shown by the 1984 Project Plan To Develop A Georgia Territorial Power Supply Agreement by Oglethorpe and Georgia Power.
FERC is the appropriate agency to address these issues when the cooperative customer has taken service for many years under a tariff which complies with the license conditions.
This is especially true in circumstances such as.these in which the rate has been adjusted over time to take account of the issue, as was specifically noted by the 1984 Project Plan To Develop A Georgia Territorial Power Supply Agreement jointly developed by Georgia Power and Oglethorpe.
NRC activity in this context inevitably would. interfere with a ratemaking regulatory regime that fully complies with the license conditions.
In summary, Georgia Power surrendered its_ power over municipal and cooperative systems when it filed rates with FERC that comprehensively embody the partial requirements and transmission service obligations.
In the context of this rete regulated partial requirements relationship, Georgia Power has.
implemented the license conditions and has cooperated in efforts that reach beyond the requirements of its licenses and beyond the scope of NRC antitrust responsibilities.
Oglethorpe's desire to substitute new license conditions instead of enforcing the existing ones, and Oglethorpe's position that the NRC should require that Georgia Power act in the regulated bulk power arena in accordance with Oglethorpe's t3 /
The contract and notice provisions adopted in the USAEC Settlement Agreement show the reasonableness of the current PR provisions.
i TROUTMAN, SANDERS, LOCKERMAN & ASHMORE
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A SESPTNESPSNtP INCLtJDesse PROFESteOfeAt CORDO81AfsO8e8 Mr. Cecil O. Thomas I
August 8, 1989 Page 20 wishes "whatever" the terms of the licent es, present no i
grounds for NRC antitrust enforcement activity.
j l
Should the Staff require any further information j
concerning any assertion made by Oglethorpe, please let us know.
Very truly yours,
/A B&w4 9,.
Robert P.
Edwards, Esq.
Counsel for Georgia Power Company TROUTMAN, SANDERS, LOCKERMAN
& ASHMORE 1400 Candler Building 127 Peachtree Street, N.E.
Atlanta, Georgia 30303-1810 (404) 658-8000 l
_;