ML22230A048
| ML22230A048 | |
| Person / Time | |
|---|---|
| Issue date: | 01/11/1978 |
| From: | NRC/OCM |
| To: | |
| References | |
| Tran-M780111 | |
| Download: ML22230A048 (22) | |
Text
RETURN TO ~,=rRJ:T J\\ DI~ T Ri:-~nQD('
NUCLEAR REGULATORY COMMISSION IN THE MATTER OF:
Public Session Adjudicatory Session 78-1 DISCUSSION OF ANTITRUST DECISION IN MIDLAND (ALAB-452)
Place -
Washington, D. C.
Date -
Wednesday, 11 January 1978 ACE - FEDERAL REPORTERS, INC.
Official Reporters 444 North Capitol Street Washington, D.C. 2000 l NATIONWIDE COVERAGE* DAILY Pages 1 -
19 Telephone:
(202) 3.47-3700
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DISCLAIMER This is an unofficial transcript of a meeting of the United States Nuclear Regulatory Commission held on January 11., 1978 in the Commission's offices at 1717 H Street, N. w.;Washington, D. C.
The meeting was open to public attendance and observation.
Th1s transcript has not been reviewed, corrected, or edited, and it may contain inaccuracies.
The transcript is intended solely for general informational purposes.
As provided by 10 CFR 9.103, it is not part of the formal or informal record of decision of the matters discussed.
Expressions of opinion in this transcript do not necessarily reflect final determinations or beliefs.
No pleading or other paper may be filed ~,Jith the Commission i:i any proceeding as the result of or addressed to any statement or argument contained herein, except as the Commission may authorize.
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25 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Public Session Adjudicatory Session 78-1 1
DISCUSSION OF ANTITRUST DECISION IN MIDLAND (ALAB-452)
Room 1130 1717 H Street NW Washington, D.C.
Wednesday, 11 January 1978 Hearing in the above-entitled.matter was convened according to notice, at 2:20 p.m., JOSEPH HENDRIE, Chairman, presiding.
PRESENT:
JOSEPH HENDRIE, CHAIRMAN RICHARD KENNEDY, COMMISSIONER VICTOR GILINSKY, COMMISSIONER PETER BRADFORD, COMMISSIONER J. Kelley R. Bell K. Pedersen J. Nelson
- s. Chilk
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P R O C E E D I N G S CHAIRMA.i~ HENDRIE:
Why don't we go ahead.
Commissioner Gilinsky called and said he was sorry he was late, and for us to please go ahead.
The subject this afternoon for this section of the *:-_eorrtmission meetings is a discussion of the antitrust decision in the Midland case, ALAB-452.
Jim Kelley is going to give us something less than that full report, but rather a background summary of where we -stand, the recommendation on what the Commission ought to do I guess in a procedural sense, rather than with regard to the merits of the case.
MR. KELLEY:
Exactly.
Wha_t we want to hopefully get moving on today is how-and in what fashion and when to review this.
We don't have, given the length and complexity of this decision, even any preliminary view on the merits of th~s
-issues,.1. one way or another.
I did think to set it in context would be helpful if Ruth could give you a general layout of what the issues were and what happened and where it stands.
And then we might move on to, a discussion of procedural options.
CHAIRMAN HENDRIE:
Elease do.
MS. BELL:
The Appeal Board covered a lot of legal and factual material in this, and I am only going to skim the cream and.touch* the high points of their opinion.
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First, I want to state that the application for a 2 construction permiii:.t: was requested in 1969 by. Consumers.
3 Under the 1970 Amendments to the ct, unresolved 4 antitrust issues canlnld up the issuance of a construction per-5 mit. But this application fell into the exception recognized by 6 the Congress in 105(C) (8), in.which an antitrust review can 7 proceed without -- and>a,*;cp*_could issue without resolution of 8
9 10 11 12 13 14 15 the antitrust issues.
The Attorney General's;letter here recommended a hea~ing, and the hearing was-'held with the Attorney General as a participant; and two generation and transmission coops, Northern Michigan and Wolverine Electric, which were themselves formed by seven distribution coops; and then several municipaliti s; and:.. the.. Michigan Municipal Electrical Association.
I won't summarize the Licensing Board opinion, I 16 will only summarize the Appeal Board decision.
17 18 19 20 21 22 23 24 The antitrust analysis was intended to discover whethe the entity in question.. here, Consumers, had monopoly power in th relevant markets, and whether Consumers had exercised that power.
The first thing that the Appeal Board concentrated on was the market definition, The importance of market definition is obvious in that it sets in context the actors in the arena in which they act.
For example, if one were discussing an entity that manufactures shoes, it would be important to know whether Ace-Federal Reporters, Inc. you were discussing sboes in general, women's shoes, women 1 s 25
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fashion shoes, women's dress shoes, or something like that.
2 And the smaller or larger the definition of the 3
market, you can see where that leads in ~erms of analyzing the 4
actors who act in that market.
5 The Appeal Board looked at markets in two ways: the 6
geographic market in which Consumers operates, and the product 7 market.
They found here three product markets.
The first they 8
found was one for coordination services. This was the interchange 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of power and joint planning of additional generation to achieve the economic benefits that are not attainable to one who acts alone.
The coordination allows utilities to spread among themselves, necesary reserve generating capacities so that each relies in part on the reserves of others ahd the ability to coordinate that way provides substantial benefits in terms of their -- each individual not having to build a reserve margin of as great a size as it would if it had to act alone.
If it acts together, the reserve margin is reduced and they can rely on reserve margins of others.
COMMISSIONER BRADFORD:
Is this plant wholly owned by Consumers?
MS. BELL:
Yes, it is.
COMMISSIONER BRADFORD:
And are the municipals within Consumers' overall territory?
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Or, are they '.'.,both inside and outside?
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5 MS. BELL:
They are largely inside, I believe.
MR. KELLEY:
In and on the edge.
MS.. BELL:Y: In and on the edge, I guess.
COMMISSIONER KENNEDY:
I didn't hear you.
MS. BELL:
Largely in, and on the edge.
Closely tied b~the coordination services, aTu:element 7 of coordination services the Appeal Board found to be the wheelin 8 or transmission services. That is, to make coordination meaningfu, 9 transmission isn't necessary, and later on in the discussion the 10 Appeal Board discussed the control that Consumers had over 11 transmission in that area.
12 The second market that the Appeal Board found was 13 that for retail services.
14 In this analysis, the Appeal Board followed the leadin 15 Supreme Court case in this area, which is Otter Tail, focusing 16 not on door-to-door competition of which there is some, but very 17 little; but on potential competition that exists through the 18 letting of franchises.
19 That is, retaih customers, while normally not able 20 to decide themselves between one company *and another company 21 that might provide them this service, can decide through their 22 municipal governments periodically whether to renew fran'chises 23 with existing utilities or whether to let the franchise to a 24 different utility, or whether to go into business for themselves.
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25 And that, the Appeal Board:found consistent with the
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2 Supreme Court case to be an element of retail competition and a way of analyzing the provision of retail services.
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COMMISSIONER BRADFORD:
In Michigan is this a -- it would be a state-granted franchise?
MS. BELL:
To some extent there are, and to some extent there is not.
There was a short-lived law which allowed 7
franchises to be let without consent or control of the individua 8
municipalities.
That law terminated after only a few years, and 9
a certain number of franchises are let by the municipalities 10 themselves.
11 And the third market that the Appeal Board found was
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that for wholesale services, which is the provision of bulk 13 power.
14 Next, the analysis asked whether Consumers had 15 monopoly power,that is the power to exclude competition or con-16 tnol.pri~es,.i. *. In;1.the coordination services area, they found 17 this power to exist, through the control of the transmission 18 network.
That is, the transmission network provided access to 19 coordination.serv+/-*ces, and Consumers Power had control over the 20 significant transmission facilities.
21 In the retail market, Consumers was found to have 22 an 84 percent market share. And in-the wholesale market, an 23 85 percent market share.
24 Last, the Appeal Board examined whether Consumers Ace-Federal Reporters, Inc.
25 had exercised its power to foreclose competition.
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- The Appeal Board found evidence of exclusionary conduct, which had the effect of maintaining its monopoly posi:::-: *.
tion.
And I won't detail those, but largely they consisted of acquisition of other utilities, refusal to wheel for neighboring 5
large utilities, coordination practices which included refusal 6
to coordinate with the generation and transmission coops, and 7
refusals to share reserves on an equalized percentage basis with 8
the smaller utilities.
9 And finally, -the Appeal *Board discussed the relation-10 ship betweendhese findings and the application for the license 11 to build the Midland plant, saying; 12 "a:aving held that Consumers has previously 13 used th~ opportunity for abuse that it~ size affords, 14 we cannot purn a blind eye to the further opportunity 15 it will have to do so through its activities under 16 the Midland license."
17 That is, it found that the activities under the 18 Midland license would allow it to maintain and reinforce its 19 monopoly position that it found it to hold.
20 That, basically, summarizes very briefly what 21 they said.
22 COMMISSIONER.BRADFORD:
But they said nothing as to 23 remedy?
24 MS. BELL:
No.
They sent that phase back to the Ace-Federal Reporters, Inc.
Licensee -- to a.. Licensee.
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COMMISSIONER BRADFORD: With what kind of instruction?
MS. BELL: Well, with very general instructions.
They did say that they didn't discuss relief exactly.
They did say:
"In fashioning a remedy, we offer the Licensing Board one further caution.
We.believe that no type of license condition, be it a requirement for wheeling, coordination, unit power access, or sale o~ an interest in the plant itself is necessary foreclosed as a possible form of relief."
But beyond that they didn't really.go into much detail about --
COMMISSIONER BRADFORD: Had the Licensing Board originally held that there was no antitrust problem?
MS. BELL: That's a correct.
COMMISSIONER BRADFORD: So it is a reversal.
MS. BELL:
That's correct.
MR. KELLEY: That's why there were no conditions on this permit, and hence the need to:,: remand. it.
CHAIRMAN HENDRIE:
What seemed to be the key difference in perception of the Appeal Board Board versus the Licensing Board?
MS. BELL:
Well, the --
by the Appeal CHAIRMAN HENDRIE:
Or, is that more complex than my lay mind is ~Jkely to be able to assimilate?
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MS. BELL:
Well, their differences are pretty 2
substantial.
The whole analysis -- the Appeal Board felt 3
4 compe1*1ed to really start the analysis from point one and move it all through because they disagreed almost entirely with the 5
analysis --
(Inaudible.)
6 COMMISSIONER KENNEDY:
At what point d.idany of these 7
other parties assert their interest in the Midland plant or 8
a portion thereof or rights to its power, or parts of it 9
(Inaudible.)
10 MS. BELL: Well apparently they must have done it 11 quite early because the Attorney General's letter itself 12 recommended a hearing which is normally the case when there is 13 some evidence disclosed by the application and responses to 14 the application that problems exist.
15 And then in response to -- the Attorney General's 16 advice is normally published in the Federal Register with a 17 call for interested persons to intervene or come before the 18 Board with their views.
And there were interventions by these 19 parties at that stage.
20 21 22 23 24 MR. KELLEY:
There is*no question of timeliness in this decision as I recall it.
MS. BELL:
No.
CHAIRMAN HENDRIE:
Okay.
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As to procedural matters and where we might go and in what fashion we might start there.
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Well, under the rules as they are written in the normal course of events, we would be at this stage where parties could~*seek Commission review by filing a petition under our rules adopted last summer.
We had before the Commission a motion from Consumers Power Company asking for two things.
Normally you have got to file in jargon, a cert petiti6n(?), 15 days after the opinion is served,. which is like in.;a.:couple more days, arid they ar.e limited to ten pages.
Now in a case like this with a decision like that (Indicating) -- Consumers says, and frankly we agree and I think all the parties do, that the normal time and page limits are too tight. And they have asked in their motion for an additional 30 days within which to file petitions for Commission review and for a 30-page limit instead of l0, in order to state their positions.
Their motion recites that none of the other counsel for the other parties object to this.
stands submitted before the Commission.
So that is a request that It seems to us that that relief, or some similar form of relief is clearly called for.
The question we raise, suggestion we make in our paper to the Commission is that there does appear to be another way in which the Commission might go about this, and we tend to think that that is the preferred Ace-Federal Reporters, Inc.
course of action; namely that the Commission simply issue an 25
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25 11 order saying that it is going to defer its review.of this entire matter until after the remand hearing has been completed and the following Appeal Board consideration of whatever emerges from that.
Our feeling is that since there wasn't any relief ordered by the Licensing Board, nobody knows yet what kinds of conditions might be appropriate here. The relief is a very critical part of the whole picture.
And if you undertake to review it in the abstract without reference to conditions that a record might support, it has a tendency towards piecemeal review. You tend to decide an issue somewhat in the abstract.
We think a concrete setting with a conditioned license is a better setting in which to look at this.
Whether that would expedite matters in the long run is a very speculativ exercise.
COMMISSIONER KENNEDY:
It seems to me, Jim -- could you explain that, because it seemed to me.almost prima facie it would expedite it. It seems to me, otherwise, we do it twice.
MR. KELLEY:
Well, here is why I think it is a little speculative.
The utility might feel strongly that this Appeal Board decision is just wrong, that they are not monopolists and they can qome up here and convince you and it is going to be all over with, and that would take six months.
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9 12 On the other hand, if you let the hearing run its course, that is going to take an additional increment of time.-
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It gets further speculative, though, if the Commissio at this point reviews and decides that :there does have to be a hearing. Then you have built in X months of Commission review before you even start the hearings.
So the time element, I think, is somewhat;:speculative and it can go either way.
The Commission can, I think, quite properly take into account its own priorities in the coming months, as to 10 whether it wants to tackle this issue now or later.
It is such 11 a big case, and it is going to ta~e a fair amount of time in any 12 event, that it also occurred to us that it might be appropriate 13 on a fairly quick turnaround, to simply ask the parties what 14 they thought of the idea of deferring Commission review.
We 15 could get views back, I think,. in a week or two, and then come 16 back with a firm recommendation. in light of whatever the parties 17 had to say.
18 COMMISSIONER BRADFORD:
Outside of the conduct of 19 this case; aren't there two or three others of these pending?
20 MR. KELLEY:
That's right.
21 COMMISSIONER BRADFORD:
What is the effect on those 22 of deferring review here.
23 MR. KELLEY:
I would say zero.
24 You would make it clear, you could in your order, You Ace-Federal Reporters, Inc.
25 are not intimating any views on the merits one way or the other.
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Commission is not saying yea or nay, it is just saying we are 3
going to wait.
4 So I would assume that-Licensing Boards with ongoing 5
are.'..simplly.-:c :'.'='- going to follow that decision, that's one effect.
6 COMMISSIONER BRADFORD:
But if we modify that in any 7
way, then those other proceedings that will have gone on 8
without that modification, will have to back up and consider it.
9 MR.KELLEY:
I gues, I myself would have to stop and 10 say_ I know there are other cases in the works.
In order to make 11 a fallout assessment of the kind of question you are raising, I 12 guess I would have to know more than I know.
Whether some 13 14 15 16 17 18 19 20 particular hearing board is right on th~ edge of some inquiry that the Commission might decide is irrelevant -- it is probably p~etty hard to assess.
close down the pike.
But I know there are other cases fairly Now another reason it seems to me why the Commission doesn't risk its resonable opportunity to address these issues, you are going to get very similar legal issues and contentions in other cases that will be up here soon.
Midland might dis-appear. Maybe they will settle, and that would be the end of 21 22 23 24 this case in terms of actual relief.
That isn't to say that if you wanted to, even after a settlement, you couldn't speak to this Appeal Board decision Ace-Federal Reporters, Inc.
if you disagreed ___ wi th some of the principles that are stated 25
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I think you can keep options open, is what I'm sayi~g COMMISSIONER BRADFORD:
It certainly is true that if 4
in the end we more or less accept. that decision, then the most 5
efficient way of handling it is probably wait.
6 But tb. the extent that we change it in any way, if 7
there are two or three other proceedings of that size that are 8
also;. coming along, then I would think that it might wind up 9
losing more time than it gained if each of those then had to 10 come back and take into account what we had done on this one.
11 MR. KELLEY:
Yes, I think that is a serious practical 12 consideration.
13 One of the things I thint we might get from asking 14 the parties what shall we do, shall we go down that road,*
15 particularly the Regulatory Staff could give us a better feel 16 for how many cases might he affected.
At least they are the 17 best people to ask.
18 I think it is a hard question to answer, but --
19 20 21 22 23 24 COMMISSIONER KENNEDY:
Can we ask them?
MR. KELLEY:
They would be in a good position to advise us.
COMMISSIONER KENNEDY:
Since they are here, why don't we ask them?
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MR. KELLEY:
I think it womld be a more orderly procedure -- time is not of the essence. We have got them here, 25
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CHAIRMAN HENDRIE:
Give all parties a chance.
COMMISSIONER KENNEDY:
Oh, I would assume you would 6
want to do that.
I meant ask them if there were any more cases 7
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MR. KELLEY:
Yes.
We could certainly put in an order extending review for now, the time for now, and say let's hear from the parties; what practical impact on pending cases is there likely to be, by Commission review now as opposed to 12 later?
And they could give their best shot.
13 14 15 16 17 18 19 20 21 22 23 24 CHAIR'rv!AN HENDRIE:
Does that seem reasonable?
COMMISSIONER KENNEDY:
Reasonable to me.
COMMISSIONER GILINSKY:
(Nodding affirmatively.)
COMMISSIONER BRADFORD:
(Nodding affirmatively.)
CHAIRMAN HENDRIE:
We seem to be in agreement.
I would then ask for your affirmative handraise.to go ahead with the recommendation here.
(All Commissioners raise hands.)
CHAIR'rv!AN HENDRIE: There is a draft order which you will MR. KELLEY:
Which we will modify along the lines and circulate to your offices.
But the operativE:! part would be Ace-Federal Reporters, Inc.
defe:i;:-te;l_ pendj.ng_r~ceipt' Qf the views. of *the parties on'*how to 25 do i:t.
mm 16 CHAIRMAN HENDRIE: Yes.
And asking the views, includi g 2
effects on other cases, which the Staff presumably, as you say 3
may have assembled.
4 COMMISSIONER BRADFORD:* One quick question about 5
the order.
6 It does not move one way or the other on Consumers' 7
petition?
8 MR. KELLEY:
It defers, I think, the last line or 9
two -- our ruling on the motion is deferred, pending receipt 10 of the views of the parties.
That is what it would do.
The 11 motion is still alive.
It just doesn't roll.
12 COMMISSIONER BRADFORD:
Does it do any -- what would 13 happen if we just granted the motion?
14 15 16 17 18 19 20 21 22 23 24 MR. KELLEY:
Well, it seems to me that the next step is to get these views. And one could just grant that motion fairly easily.
Once you get the views if you get the views and decide this deferral idea is a bad idea, you can grant the motion.
By granting it right now, I --
COMMISSIONER BRADFORD:
We are in a posture in which under no circumstances are we likely to deny it.
MR. KELLEY:
If you decide to review it now, you are going to grant some such motion, r-would think.
And if you don't decide for another couple of weeks -
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suppo~e in two weeks you decide not to defer review.
Maybe they 25
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COMMISSIONER BRADFORD:
I am just thinking, as far as allowing them to relax about the deadline, since there isn't any possibility of their being held to it.
MR. KELLEY:
In revising this order, we could make 6
that clear, that the Commission realizes they are going to 7
need time, since it is going to be reviewed.
I think we can 8
sharpen that.
9 CHAIRMAN HENDRIE:
Yes, I think it would be useful to
'10 do that.
11 Let's see.
I don't know. You have*got the 20th 12 in there.
You may want 13 MR. NELSON:
If we are going to hear from people, 14 what about the impact of all this on the ratepayer, if it has 15 any.
And that is, the proceeding goes on, which costs a 16 certain amount of money, which ultimately gets passed on to the 17 ratepayer, which proceeding may turn out not to be necessary.
18 You have to factor that in there.
Like the time probability 19 that will be unnecessary in matters of that nature.
20 You don't want to really set in motion a chain 21 of chain of events that commits everybody to use this proceeding.
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All I know about this case is what I heard in this (Laughter.)
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25 But, it could be a hypothesis that you go through
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18 and find out that the first board was correct,there aren't any antitrust violations, go home. And if that happens, but in the meantime there has been six months of proceedings, somebody has got to pay *for it.
MR. KELLEY:
That's right.
MR. NELSON:
So that is a factor that maybe yom.:will 7
be considering in getting comments from people.
That is all I'm 8
suggesting.
9 10 MR. KELLEY:
We can do that, too.
CHAIR~AN HENDRIE:
It is one of the aspects to be 11 considered.
12 I was just going to say, Jim, that you have got 13 January 20th as a date to get views in. You*may want to take a 14 look at that against the time it takes to amend the draft, 15 circulate to the Commissioners and so on.
Give people a 16 reasonable cut at it, I would think.
17 18 19 20 21 22 23 24 MR. KELLEY:
All right.
CHAIRMAN HENDRIE:
We are agreed then that this is a reasonable way to go?
(All: Commissioners nodding affirmatively.)
CHAIRMAN HENDRIE:
So ordered.
Let's see, when -i,s the deadline * :-,"!'.:' the Commission I s time to say what it wants to say here ruhs out the end of
~~1 the month, is that the way I read this?
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MR. KELLEY:
Yes.
I think we extended that, too --
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yes, that~s a good point, it is a good fix.
We will extend sui sponte review time also.
We will keep that option open.
That can be built into the order.
CHAIRMAN HENDRIE:
Yes.
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Nevertheless, let me ask my colleagues not to take 6
solace from the fact that, :you know,the time limit runs out, 7
don't feel a need, please, to delay and polish this order beyond 8
practicable reasonable point.
9 I think that takes care of the matters on ALAB-452 10 at the moment.
11 Doesn't it?
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MR. KELLEY:
Yes.
13 CHAIRMAN HENDRIE:
In which case*, the Commission 14 will recess.
15 (Whereupon, at 2: 4 5,, p. r:n., the hearing in the above-16 entitled matter was adjourned.)
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