ML17207A354

Motion by Fl Cities Requesting That FERC 790803 Opinion & Order Rejecting Fl Power & Light Tariff Restrictions Be Incorporated in Proceeding for Relevancy.Opinion & Certificate of Svc Encl

ML17207A354
Person / Time
Site:	Saint Lucie, Turkey Point
Issue date:	08/09/1979
From:	Guttman D SPIEGEL & MCDIARMID
To:
References
NUDOCS 7909050226
Download: ML17207A354 (63)

Text

( -/'etgp 0UNITED STATES OF AMERICA AUg 1$ ';

NUCLEAR REGULATORY COMMISSION Florida Power & Light Company (St. Lucie Plant, Unit No. 1) No. 50- 35A

~ /p p'ocket Florida Power & Light Company (Turkey Point Plant, Unit Nos. Nos. 50-250A 3&4) CITIES'ocket and 50-251A FLORIDA MOTION TO LODGE The Commission is considering whether to conduct a 5105(a) antitrust proceeding in these dockets, possibly to be consolidated with the 5105(c) proceeding in Florida Power & Light Company (St.

Lucie Plant, Unit No. 2), NRC Docket No. 50-389A. In its pleadings, Florida Power & Light Company ("FP&L" ) has raised issues as to the scope of the Fifth Circuit decision in Gainesville Utilities De artment v. Florida Power & Li ht Co., 573 F.2d 292 (5th Cir. 1978), which would trigger such 5105(a) proceedings. Other parties have contended that the violation of the antitrust laws found in Gainesville, ~su ra, must be deemed continuing. 1/

On August 3, 1979, in deciding issues relating to Florida Power

& Light Company' proposed tariff restrictions" on wholesale power and coordination, the Federal Energy Regulatory Commission considered the f inding in Gainesville, ~su ra, and reviewed FPaL's conduct. Florida Cities 2/ believe that "his Opinion is relevant to the issues stated 1 ~E.., "Reply of Florida Cities in Opposition to Memorandum by Florida Power & Light Company," pp. 12-23, September 5, 1978.

2/ Florida Cities include the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utility Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud and Tallahassee, Florida, and the Florida Municipal Utilities Association.

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-'2 above and particularly to the conclusion that FP&L's anticompetitive activities must be deemed to be -continuing.

Therefore, they move to lodge this opinion. 1/

WHEREFORE, Florida Cities respectfully request that the "Opinion and Order Reversing Initial Decision and Rejecting Tariff Availability Limitations and Notice of Cancellation", Florida Power & Light Company, FERC Docket No. ER78-19 (Phase I), et al.,

(Opinion No. 57, August 3, 1979) be lodged.

Respectfully submitted, Robert A. Jablon Daniel Guttman Attorneys for the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utility Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utiities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida, and the Florida Municipal Utilities Association Law Offices of:

Spiegel & McDiarmid 2600 Virginia Avenue, N. W.

Suite 312 Washington'E C. 20037 (202)333-4500 1/ In the event that the Commiss ion should de termine that cannot determine whether 5105(a) is applicable as a matter of law it without an evidentiary review of one or more issues, this Opinion and Order should be made part of the record and considered by the off icers assigned to make such initial determination.

~ITED STATES OF AMERICA N~EAR REGULATORY COMMISSI Florida Power & Light Company )

(St. Lucie Plant, Unit No. 1) ) Docket No. 50-335A

)

Florida Power & Light Company )

(Turkey Point Plant, Unit Nos. ) Docket Nos. 50<<250A 3&4) ) and 50-251A CERTIFICATE OF SERVICE I hereby certify that the foregoing MOTION TO LODGE has been served on the following persons by deposit in the United States mail, first class, postage prepaid, this 9th day of August, 1979:

Chase Stephens, Chief Herbert Dym, Esq.

Docketing & Service Section Daniel Gribbon, Esq.

Nuclear Regulatory Commission Joanne Grossman, Esq.

Washington, D. C. 20555 Covington & Burling 888 16th Street, N. W.

Lee Dewey, 'sq. Washington, D. C. 20006 Fred,Chanania, Esp.

Dave Evans, Esq. Mel Berger, Esq.

Office of the Executive Mildred Calhoun, Esq.

Legal Director Department of Justice Nuclear Regulatory Commission Antitrust Department Washing ton, D. C. 20555 1101 Pennsylvania Avenue, N. W.

Washington, D.:C. 20530 Ivan W. Smith, Chairman Atomic Safety & Licensing Board John E. Mathews, Jr., Esq.

Nuclear Regulatory Commission Mathews, Osborne, Ehrlich, Washington, D. C. 20555 McNatt, Gobelman & Cobb 1500 American Heritage Life Bldg; Robert Lazo, Esq. Jacksonville, Florida 32202 Atomic Safety & Licensing Board Nuclear Regulatory Commission J., A. Bouknight, Jr., Esq.

Washington., D. C. 20555 E. Gregory Barnes, Esq.

Lowenstein, Newman, Reis & Axelrad Jerome Saltzman, Chief 1025 Connecticut Avenue, N. W.

Antitrust & Indemnity Group Washington, D. C. 20555 Nuclear Regulatory Commission Washing ton, D. C. 20555 Valentine B. Deale, Esq.

Atomic Safety & Licensing Board Nuclear Regulatory Commission Washington, D. C. 20555 Robert A. Mblon, Attorney for the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utility Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud and Tallahassee, Florida, and the Florida Municipal Utilities Association

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMXSS ION OPIiVXON NO 57 Florida Power & Light Doc>cat Nos .. ER78-19 Company (Phase I) and ER78-81 OPINION AND ORDER REVERSING INXTXAL DECISION AND REJECTING TARIFF AVAILABILITY LIMITATIONS AND NOTICE OF CAN CERATION Issued,: August 3, 1979 DC-A.-7

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATOR'Y COMMISSION F1or da Power & L ght Docket, Nos. ER78-19 Company (Phase I) and ER78-81 OPINION NO. S7 APPEUQVQl CES Harry A Poth, Jr., Robert T. Hall ZXX, James K. Mitchell and F o L. Norton ZV Rem & Priest for F orx a Power & Light Company William H. Chandler, William C. Wise and'obert Weinber for Seminole E ect z.c Cooperative Robert A. Jablon',Daniel J. Guttznan and Sandra J. Strebel for tne Utxlxtxes Coamu.sszon of New Smyrna Beach, Fort Pierce Utilities Authority, Cities of Starke and Homestead, Florida Robert F. Sha iro and Harve L. Reiter for the Staff of the Fe era Energy Regulatory Commzsszon

WHOLESALE ELECTRIC SERVICE: AVAILABILITY:

ANTITRUST UNITED STATES CF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners- Charles B.. Curtis, Chairman; Geoxgiana Sheldon, and Matthew Holden, Jr.

Flor ida Power a Light ) Docket Nos.'R78-19 Company ) (Phase I) and ER78-81 OPINION NO ~ 57 OPINION AND ORDER REVERSING INITIAl DECISION AND REJECTING TARIFF AVAILABILITY LIMITATIONS AND NOTXCE OF CANCELLATXON (Xssued Auqust 3, 1979)

Before the Commission is a consolidated proceeding to

..determine whether certain limitations on the availability of firm wholesale reauirements service, along with notices of cancellation of such service to specif ic wholesale customers, are un j ust, unreasonable or unduly d iscr iminatory, and particularly whether they are anticompetitive in effect.

,Hith one exception, we find that the proposed limitations on re'cuirements, service, availability have not been justified.

Accordingly, we reject these tariff provisions. Moreover, since the notices of cancellation are founded upon one of these rejected limitations on availability, they must likewise be rejected.

To set the stage for our discussion, we wish to state at the outset our view that, where a utility possessing market power in a relevant niarket seeks to amend a general tariff to impose conditions which foreclose supply options or increase the costs of competitors, or which otherwise contribute to the acauisition or maintenance of monopoly power, its application for amendment must be rejected and found unjust and unreasonable under Sections 205 and 206 of the Federal Power Act - unless the utility can show that compelling public interests justify the service'conditions.

Docket 'Aos . "-R78-19, et al . Mar cover, even where overr iding publ ic policy obj ectives are shown to justify some restr iction on wholesale service, such a utility must be called upon to demonstrate that its proposal is the least anticompeti tive method of obtaining leg i timate planning or other obj ectives.

On the basis of our analysis of the record before us, we conclude that FP&L' proposed tariff restrictions would eliminate the only practical source of base-load power or energy to competing util'ities within the markets dominated by the Company.'urthermore, the progosed restr ictions would appear to create the potential for additional anti-competitive effects by inhibiting the formation of new distr ibution utilities within these markets. FP&L has failed to satis factor ily demonstr ate countervail ing'ubl ic interests that warrant approval of any of these progosal s, except for the one which would provide separate partial reauirements service. To the extent that legitimate pur-gases are sought. to be attained by FPSL, there appear to be a number of al ternative means of less anticompeti tive ef fect fo r the ir accomplishment. The Commission wishes to emphasize that we are not today holding that a utility wi th market gower is, oer se, precluded fram amend ing a general tar iff to impose cond x tions which limit serv ice availability. The Federal Power'ct accords a utility the right to propose such limitations and an opportunity to demonstrate that its arogosed change in service is just and reasonable. In the ins tant case, we find only that FPaL has failed to car ry i ts burden of j ustif ication.

An initial commen t is also in o rd er concerning the applicability of antitrust laws and policies to our pro-ceedings. From its inception, this proceeding has focused on issues r e 1 a ted to the justness and reasonableness oZ FP aL '

rate proposals when evaluated in 1 ight of their alleged anticomgeti tive effects. 'The allegations and evidence of staf f and the in ter venor s together wi th the associated responses of the Company have coalesced into issues typi-cally examined in the context of a monopolization case unde r Section 2 of the Sherman Act. The Commission acknow-ledges that it is not sgecif ically responsible for enforcing the Sherman Act or any other o f this nation' antitrust laws. And we wish 'o emphasize that i'n evaluating the anti-compe ti tive effects of a proposed rate change and in making findings with respect thereto, we do not make findings that violat'ons. of the antitrust laws have occurred. Instead, xs our obli@ation to evaluate the public gol ic ies expressed it in Federal antitrust laws and to reflect tnose policies in the conduct af our responsibil i ties under the Federal Power Ac" 1/ ~ his we have endeavored to do in tne instant ase .

1/ It do is now beyond cuestion that relate antitrust law and policies ta h ' Cammiss ion ' respansib ili ties under the

- n~ ar a > Never h{.t . see, v.

Docket Vos. KR78-19, et al.

~awhile we believe our evaluation of the anticomgetitive effects of the proposal is correct and supported by the record, we recognize that these anticomoetitive ef fects may not have been demonstrated with the rigor as would be demanded in oroceedings where specific findings of violations of the antitrust laws are at

'ssue with attendant potential for the imposition of civil and criminal penalties. Lastly, we wish to note that the fairly elaborate account of FP&L's gast conduct in its market place is not intended by this Commission to be a determination of factual disputes which may be the subject of litigation in other forums. Rather we merely observe that the evidence in th'is record of that gast conduct casts a shadow over FP&L's claimed need to restrict service and, therefore, is of pro-bative value in determining whether the Company. has satis-factorily car'ried its burden of justification for the grooosed service limitations. he structural and conduct analyses required in an antitrust proceeding, and presented to us here, are of considerable assistance in isolating demon-strated anticomoetitive effect from unfocused allegations.

Et is imoor tant to examine the markets in which relevant electric services are bought and sold and then determine how the questioned rate provisions may affect the competition, or ootential corn"etition, in, these markets. This opinion attemots to present our interpretation of the facts and law along these lines.

BACKGROUND The Procedural Histor On October 14, 1977, FP&L filed xn. Docket No. ER78-19 proposed changes to its firm wholesale electric tariff, schedule SR-1, which would bifurcate that schedule into a full requirements schedule SR-2 and a separate partial requirements schedule PR, and increase the rates for each of these services. Under schedule SR-1 firm service has been generally available

" in all territory served by the Company." FP&L now proposes to limit the availability of firm wholesale

~services to those existing customers named in the two new schedules, which oreviously purchased under schedule SR-l. Also, the Company would limit service under schedule PR to existing customers which do not own sufficient generating cagacity to meet their oeak load requirements.

Docket Nos. ER78-19, et al.,

In a related action, FP&L filed in Docket Vo. ER78-81, on December 1, 1977, a notice of cancelLation of firm partial requirements service to one of its SR-L customers, the City of Homestead, Florida, which has sufficient capacity to meet its load. Instead, the Company would make wholesale sales to Homestead under rate schedules in an interchange agree-ment between these two par ties. Under Sections 205 and 206 of the Federal Power Act, a utility must receive Commission approval to replace one service to a whoLesale customer with another service. Commission jurisdiction over changes in

~ rates, charges, classification or service necessarily en-compasses this situation. The Commission must first find that this customer reclassification is in the public interest.

See, Penns lvania Mater and Power Com an v. FPC, 343

U.S. 414 g 422-424 (1952) .

By order of December 30, 1977, the Commission consoli-dated these dockets, suspended both the tariff availability restrictions and the. Homestead cancellation for five months, and suspended the proposed rate changes for two months.

Phase I of these consolidated proceedings was established to allow for separate hearing and decision on the Legality of the tariff availability restrictions and the cancellation of the firm"service to. Homestead.

Following a schedule of conferences, evidentiary sub-missions, hearings and briefs, Presiding Administrative Law Judge Curtis Wagner issued,.his Initial Decision on April 21, 1978. He concluded that the proposed availability limita-tions for full and partial requirements services are just and reasonable, and approved the cancellation of firm par-

- tial requirements service to Homestead.

Briefs on exceptions, to the Initial Decision were filed .on Hay'of8', 1978, by the Commission Staff, the Cooper-ative group wholesale customers, 2/ and the municipal group of wholesale customers ( the Florida Cities) . 3/ On May 12, 1978, FP&L filed its brief opposing these except'ons, 2/ The Cooperatives include Seminole Electric Cooperative, Clay Electric Cooperative, Lee County Electric Cooperative, Okefenoke Rural Electric Membership Corporation, and Suwannee Valley Electric Cooperative.

3/ The Florida Cities include Fort Pierce, New Smyrna Beach, Homestead, and Starke.

Docket Nos. ER78-19, et al. 5 Ey order issued June 1, 1978, the Commission stated its intention to issue a fin~1 decision in Phase I as soon as possible and urged FP&L to refrain from implementina the tariff availability restrictions and cancellation of reauirements service to Homestead, pending a final ruling on these issues. By letter dated June 9, 1978, FP&L informed the Commission that, without waiving its legal rights, it would provide PR service to Homestead and also to the City of Ft. Pierce, Florida, pendina final Commission action.

The Rate Chan e Pro osals Firm wholesale service under FP&L schedule SR-2, fz.led on October 14, 1977, would be- available to meet the total capacity and energy require-ments of purchasing utilities over the indefinite future.

Et is comprised of a two-part demand and energy rate, based on FP&L's average system costs which includes the production costs of its nuclear, gas and oil-fired generating plants.

Its. predecessor, schedule SR-l, was made available to all wholesale purchasers within FP&L's service territory. However, the Company now proposes:;o limit full requirements service to six rural electric cooperatives which presently take this service. A potential purchaser reauesting full requirements service from FP&L in the future could not anticipate receiving this service and would not

~

receive the SR-2 rate for any service it was able to arrange.

While there, will be no abatement of retail sales to new 4/

customers, FP&L has stated that it is not willing to commit itself to serve any new wholesale customers but would be willing to discuss the possibility when the situation arises. 5/

FP&L wholesale schedule PR, also filed on October 14, 1977, is a modification of schedule SH-1 desianed to meet partial power and energy reauirements, complementing the purchaser's own generation or other firm power purchases.

Like schedule SR-2, it is composed of a two-part demand and energy rate based on average system cost ; however, the rate levels are different and the demand component is stratified to reflect differing prices for peak and base/

intermediate demand. Each tariff has two energy rate blocks, but,the SR-2 lower block is attained after purchase of 4/ FP & L br ie f o!posing exceptions at 10.

-/ Zd.

Docket Vos "R78-19, et al .

275 kWh per kW of billing d'emand, versus 400 kWh under eche"ul PR. ."moreover," schedule PR'equires the customer

."o s"ec' its "contract demand" on FP&L for succeeding 2;..onth "eriods. The customer's monthly billing demand

's less than 90$ of its contract demand plus 75% of i"s never maximum recorded peak demand. Conversely, the demand charge for purchases above 110$ of contract demand is higher and the customer may not increase its contract demand for succeedina 12 month periods by more than 125% without the consent of FP&L. The Company asserts that these design differences between schedules PR and SR-2 encourage partial requirements customers to increase their load factors.

Partial requirements customers, including the Cities of Homestead and New Smyrna Beach, previously took service under schedule SR-1 which, as noted earlier, was available to all customers in FP&L's service territory. With the filing of schedule PR, however, FP&L proposes to limit this service

,to three customers, the Keys Electric Cooperative and the Cities o" New Smyrna Beach and Starke. Homestead which, like Fort P'erce, has suff'cient generating capacity to meet its load, would be 'excluded from this service. 6/

Although not directly at issue in this proceeding, would aid the clarity of this decision to describe the four it intercnange power and services which FP&L and several utilities reciprocally energy provide under bilateral .agreements.

The transactions under these agreements are voluntary and of relatively short duration. Rates are determined at the time of sale, based on incremental instead of average system costs.

Emergency intercharge service, denominated Schedule A, provides the buyer w'h capacity and energy in the event of a forced outage, for a period lasting no longer than 72 hours8.333333e-4 days <br />0.02 hours <br />1.190476e-4 weeks <br />2.7396e-5 months <br />. For pricing purposes, Schedule A service is deemed to be provided by the seller's designated fossil-fired steam or combustion turbine generators and recovers only out-of-pocket energy costs. 7/

6/ As will be discussed later, Fort Pierce began purchasing under schedule PR on March 28, 1978. Homestead also continues to receive service by agreement of FP&L. However, FP&L asserts that Commission approves ititswillrateterminate changes.

service to both, if the 7/ ~nder certain circumstances, the buyer may alternatively re~urn capacity and energy in kind within the current bi ling per'od.

Docket Nos. =R78- 9, et al. Scheduled interchange service, Schedul'e B, provides capacity and energy for per iods of less than 12 months, when the buyer is short of capacity primarily due to forced or scheduled plant outages. The buyer must meet the reserve reguirement associated with Schedule B service. Delivery of Schedule B power and energy occurs when in the seller's discretion no impairment of fuel stocks or service to other customers would result.

Capacity and energy rates are based on the production costs of the seller's fossil-fired and combustion turbine generating units. Economy interchange service, Schedule C', provides for non-firm energy exchanges of short duration, priced to split the savings between' the seller's incremental cost of generation and the buyer deer cmental cost. 8/ Finally,

'firm interchange power, Schedule 0, provides capacity and energy for periods of 12 to 36 months. Unlike firm service under Schedule SR-2 and PR, this service is cur tailable during extreme cold weather and emergency conditions, in which case the demand charge may be adjusted. Schedule D service i" apparently priced at the scheduled outage rate, Schedule B, for fossil-fueled and .combustion turbin~'apacity and energy (Exhibit 29). With intermittant usage Schedule D may be chea'per than the PR rate; however, it apparently becomes more expensive than Schedule PR as the customer' load factor increases (Tr. 254) . FPaL proposes to provide firm service to Homestead and Fort Pierce only under Schedule f

D, and has o f er ed them 240 NN o f Schedule D capacity through 1980.

The Xnitial Decision 'The basic issue of this proceeding as characterized by the Presiding Judge is whether FPaL can justify a reclassification of wholesale servicesbased on the r lationship of customer load to customer generating capacity.

Xn hearing this case, the Judge imposed the burden of proof on FPRX to demonstrate that its proposed tariff modifications and restrictions were just and reasonable. He largely refrained from considering the evidence presented by Staff and the Florida Cities intended to demonstrate that the proposed restrictions 8/ The price of interchange energy is characteristically determined by FP&Z,'s generating units with high operating costs, not by base-loaded nuclear or-na tur al gas- fir ed uni ts.

Docket Nos. ZR78-L9, et al. - 8 were oart of an anticompetitive pattern of activities bv the Company, leading toward monopolization of the the retail power market.

The Presiding Judge concluded that FP&L's proposed restrictions on eligibility for wholesale services were justified on the basis of differences in cost of service.

He agreed with the Company that the load'atterns of customers with capacity eauaL to their peak demands could be so eratic as to make FP&L system planning unduly difficult, warranting the complete exclusion of such customers from wholesale service at average-cost rates.

He decided that incrementally-priced interchange services, described above, were acceptable alternatives for customers such as Homestead and Fort Pierce. The Judge found that interchange power could be used to meet their base load recuirements "at a lower rate than under the partial reauirements schedule," Initial Decision at 14, and suggested that these self-sufficient utilities could purchase bulk power from other sources because FPsL has agreed to wheel. He deferred to civil courts the allegations of these two customers that FP&L had breached contractual obligations to serve them under schedule SR.

The Judge also found that the bifurcation of schedule SR-1 into separate SR-2 and PB schedules was just and reasonable. Moreover, he concluded that the Company could change the availability provision of its tariff to limit wholesale services to customers named in schedules SR-2 and PR. This was based on his assessment of certain financial, operational and capacity planning problems asserted by FP&L and his determination that the two-year notice of termination provision in the schedules did not assure that the Company would recover all capacity costs.

The Judge dismissed the allegations that FP&L's proposals wouLd have an anticompetitive effect, based on a Company representation that it had no interest in accuiring new retaiL franchises because of fuel problems. Finally, he sought to mitigate concern that FP&L would strictly construe its tariff limitations by reciting several of the Company's interpretations made during the course of the proceedings, but not added to the proposed tariffs.

In sum, the Presiding Judge approved each of the Company's proposed changes to its wholesale tariff. Based on this, he a'so approved the proposal that Homestead (and Fort Pierce) become inel igible or serv'ce under FP&L' average-or iced wholesale rates and allowed to take firm intercharge ser rice only.

Docket Nos. ER78-19, et al. - 9 Positions of the Parties The position of the applicant, FPRL, has been summarized in the two proceeding sections of tnis opinion. It fur ther states that public utility obligations under the Federal Power Act are limited. However, we are basically concerned here wi th. the obligations under taken by FPGL itself in its schedule SR-1 tariff, which makes wholesale service generally available throughout the Company's service territory, in contrast to the proposed limitations on availability of schedules SR-2 and PR. 9/

Finally, FPSL denies that it has engaged in anticompetitive activities, states that Staff's and Florida are largely irrelevant and questions their Cities'llegations application of the antitrust laws.

Exceptions -to the Initial Decision raised by Florida Cities are prolix. However, they may be simplified, briefly.

Florida Cities contend that the proposed tariff is an attempt to abandon service to the City of Homestead because Homestead is currently receiving full interchange service and under the terms cf the proposed rate schedule could no longer receive partial requirements service although it desires to do so. Cities claim that re trictions in the proposed fell and partial requirements tariffs are tana-mount to refusals to deal in either total or partial requirements service. FP&L's partial requirements tariff, they assert, is designed to limit the sale of wholesale power. This is accomplished by restructuring the sale of partial recuirements service to only those systems which require'uch service to complement the insufficient genera-ting capacity or firm power purchases to meet their native loads and therefore does not apply to systems which nominally have generation sufficient to meet their loads regardless of the age or efficiency of such generation. Both Homestead and Fort Pierce would be served only at interchange rates, creating a price squeeze.

9/ To the extent the Presiding Judge may suggest that schedule SR-1 does not make wholesale service generally available because service contracts may still be required, Initial Decision at 8, this is not reflected in the provision itself. During cross examination FP&L's rate design witness acknowledged that utilities within tne Company's service territory, such as Fort Pierce, Jacksonville and Orlando, were eligible for firm service tnde" the terms or Schedule SP.-1. ~ee, infra at 30..

a=to all, the ouroose of this proceeding has been to lim'" that provision to certain named and existing customers. moreover, FPaL has in the past filed unexecuted service "agreements" when customers have commenced service.

Docket Dos. ZR78-19, et al.. -].p-Cities contend that FP&L is attempting to deny or make it more difficult for them to estab'.ish economic al ernatives. Apart from the tariff proposals at issue, his is accomplished by denying joint participation in new nuclear generation, opposing municipally supported legislation, anc refusal to file or establish a general rate for trans-mission. They also state that FP&L has refused to support a general integrated power pool in Florida.

he Cooperatives assert in their brief on exceptions that the Initial Decision ignored their position and relied excessively on FP&Z testimony. The Cooperatives, which through Seminole are planning base load generating units, will require partial requirements service in the future instead 'of schedule SR-2 service. Because they are not named in the PR tariff they are not assured of this service, so that these limitations deny them the necessary supply flexibility to account for changing situations.

Staff alleges several acts of monopolization by FP&L.

S"af states that FP&L has refused to sell wholesale power to the municipal utilities, thereby constituting a refusal to deal proscribed by United States v. Otter Tail Power Co.,

331 F. Supp. 54 (D. Minn. 1971), aff'd> 410 U.S. 366 (1973) .

In this regard, it points to an hrstoric FpaL policy not .to serve municipal systems at wholesale, an FP&L refusal to serve Fort Pierce under the SR-1 tariff, and the limitations on the availability of the SR>>2 and PR tariffs presently at issue. Staff views FP&L's dominance over transmission facilities and its corresponding refusals to wheel as bottleneck monopolization proscribed in United States v. Otter Tail Power Co., suora. Staff cites examples of Fp&L's refusing to .wheel thrrd party bulk power to the Cities of Jacksonville, So>aestead, and Lake North, and i" asserts that, while FP&L has very recently announced in Docket No. ER77-175 a new policy to permit wheeling, that policy is far too restrictive in terms of rates and terms. Staff sees another example of monopolization in FP&L's restrictions on access to its nuclear generating units.

Specifically, Staff asserts that smaller utilities do not have the individual loads to justify a nuclear unit but, due to the economies of such units, utilities may become uncompetitive without access. Staff also alleges that FP&L has unreasonably re tricted coordination, both in terms of economy exchanges and power pooling. It then contends that FP&L has established barriers to entry in the form of restrictions in its franchise agre m nts w'h municipalities, -particularly the stancard thirty year " rm. his is occurring, according to Staff, while F'P&L

.-.,a'ntarns a pol'cy "of acquiring municipal. sys"ems; however,

.=P&L ',".as not acquired another utility in recent years. he "Sta=f concludes that FP&L's proposed tariff restrictions would rther its monopoly. =ower in the relevant markets, as ce. ned bv i ts economic wi tness.

Docket Vos. ER78-19, et al.

THE EXZSTENCE OF COHPETZTZOtl A'AD N10ViOPOLY POWER

'he ".elevant Markets We begin our discussion of F?&L's tariff "roposals by defining the relevant markets, wh'c.. "rovide a framework'or determining the possible existence of moropo'y power, the opportunities for com-pe:ition and 'he required bre dth of any remedial action

~e may order. The Staff economic witness identi iec two broadly-defined product markets as rele-vant to the investigation of the anticompetitive effect of F? &Z,' proposed tariff = restrictions. This analysis was not challenged by any party arid reflects FP&Z,'s own con-ceptuali"ation of its business. 10/ The retail market involves sales of capacity and energy to ultimate consumers by vertically integrated utilities such as FP&L and by distribution utilities. The bulk power market involves sales of wholesale power and energy to retail distributors

( 'nclud'ng the captive retail distribution centers of vertically-integrated systems) by bulk power producers and suppliers.

These product market definitions are amply supported bv the record, and we adopt them in our analysis.

The bulk power product market was further disaggregated by the Staff witness into five submarkets essentially consisting of full recuirements power, partial reguirements and coordination services, component bulk services, sales at transmission vol-t ges to ultimate consumers and transmission services.

Zn so doing he attempted to demonstrate the inter-changeability of firm full reauirements power with "unbundled" bulk power services which may be purchased from several sources to meet the reauirements of a retail distri;butor, in conjunction with generation owned by that dist ibutor.

1vhile we do not dispute the validity of this subdivision of the wholesale market, a more practical method of analyzing that market for purposes of this proceeding is to separate bulk power transactions into discrete firm reauirements and coordination submarkets. Essentially, this parallels the distinction between FP&L's schedule SR-2 and PR firm services on the one hand and its interchange services on the other. F?&L's firm services are non-interruptible; priced on the basis of average system costs; designed to meet a 1p/ Zn a 1976 presentation to the Company's Senior Management Council, F?&L's vce president for strategic planning sub-divided the Company's activities into discrete bulk power are el ct ic se vice businesses (Exhibit G -3, at 3) .

Docket Dos. ER78-19, et al.

customer's base, intermediate and/or peak load requirements; and continuously available. over the indefinite future. Con-versely, interchange services are interruptible; incrementally pr iced on the basis of oil-fired generation costs; ancillary to bulk power supply and not practicable sources of base load power; and of limited duration. Depending on the feasibility to the customer of self-genera'tion or supplementary firm-power purchases, partial requirements service is reasonably inter-changeable with full requirements power to meet a retail load.

Such interchangeability is a requisite for grouping products in a common market. See, United States v. du Pont &

Co., 351 U.S. 377, 393 (1956). Of course, PPaL did not between these two firm services in its SR-1 rtself'istinguish schedule prior to this case. However, interchange- services cannot be used to sustain load requirements and may only be used to augment other primary sources of bulk supply.

ln particular, FP&L's wholesale customers do not regard Schedule D firm power as interchangeable with SR or PR firm power and the Company describes them as different services.

FP&L sells electric power and energy to most of the heavily populated areas along the eastern and lower western coasts of peninsular Florida and portions of central and north-central Florida. 'ithin or adjacent to this service territory are 22 smaller areas served by municipal and, coop-erative utilities. The Staff witness identified this composite area, comprised of some 35 Florida counties, as the relevant geographic market for both retail and wholesale product markets. This was primarily determined from information in FP&L's 1975 annual report. The service territories of larger bordering util'ties 11/ were excluded from the retail geographic market because of the unavailability of wheeling service into the FP&L service territory and the existence of retail territorial allocation agreements with FP&L which prohibit retail competition (Exhibit GT-6, at 8-9). 12/ This is not to say that competition does not exist xn the relevant retail market. As we discuss later, there is significant competition, primarily franchise and yardstick competition, 11/ Florida Power Corporation and Tampa Electric Company.

12/ These retail territorial agreements are not at issue in this proceeding and we express no op'nion as to their merit. They "equire approval bv the Florida Public Service Commission and have heen upheld on judicial review. Storev v. Ãavo, 217 So. 2d 304 (Pla. 1969), c rt. den., 395 U.S. 909 (1969) . Zn 1974 this authorrty was exoressly given to the Flor ida Commission. See, Florida 'Statutes Annotated

$ 366.04.

Docket Nos. ER78-19, et al.

and FPsL itself has recognized that its neighboring utilities are both customer's and competitors (Exhibit GT-6, at 1).

Furthermore, even territorial allocation agreements are subject to modification under limited circumstances in pro-ceedings before the Florida Public Service Commission.

peoples Gas System v. Mason, 187 So .2d 335 ( Fla. 1966) .

The wholesale. bulk power geographic market was similarly constrained because 'relatively few wholesale transactions are made across its boundaries. This geographic limitation applies as well to the bulk power submarkets, particularly the firm requirements submartet, described sunra, because of wholesale territorial agreements and the absence of firm power transmission services. Although there is a potential for competition in the wholesale market, actual competition has been inhibited by PPSL, as we discuss below. We are not required to remedy that situation now. This opinion reflects our concern that wholesale monopoly power not be used to maintain or enhance a utility's retail market position.

Monopoly Power Monopoly power has been defined 'as the ability to control prices or exclude competition from a relevant market. United States v. Aluminum Co. of America, 148 F.2d 416 (2d. Cix. 7945). Zt may be readrly apoarent in cases where prices have been controlled or competition U. (1 I *,

demonstrably excluded; however, 'such showings are not essen-tial. American Tobacco Co. v. United States, 328 U.S. 781 h *b * *

• on a firm's share of the market, and a predominant share warrants the inference of monopoly power. United States

'*b Crinnell Cora., 384 U.S. 563, 571 (1966) . In United Statesv. v.

Otter Tarl vower Co., 331 F. Supe. 54 (D. Minn. 1971), aff 'd, 410 U.S. 366 ( 973), an inference of monopoly power was based on a finding that the defendant utility possessed a 75.6%

share of the relevant market. We find that PP&L has monopoly power in these relevant markets, as determined by Dr., Taylor in unrebutted testimony.

Based on, 1976 data, PPSL has been shown to possess a 76%

share of the retail market in terms of customers served.

Its closest rivals are the eight municipal utilities located within PPSL's service territory which generate a portion of their power requirements. 14/ Collectively, these eight 13/ Monopoly power can be exercised as well through subtle efForts to prevent competition from developing. Unit d S ates v. Griffith Amusement Co., 334 U.S. 100 (1948) .

The eight utili ies are Florida Public Utilities in F rnandino, Fort Pierce Utilities Authority, the City of Homestead, Jacksonville Electric Authority, City of Key best, Lake Worth Utilities, the City of Hew Smyrna Beach and the City of Starke (Exhibit GT-5) .

Docket Ncs. ZR78-19, et al.

systems have a 12% share of retail customers served (Exhi-bit GT-3). En 1976 FP&L's share of total kilowatthours sold at retail was 758, compared to the collective 13% sold bv the eight generating municipals. 15/

The statistical measurement of power adopted

'n United states v. Otter Tail Power monopoly Co., snore, was the oercentage or towns serve at retarl wrthin the relevant market. FP&L provides retail service to approximately 90%

of the communities in the relevant market with populations of over 1000 people (Tr. 1569). ~16 The inference of FP&L's monopoly power in the retail market is strengthene'd by several additional considerations.

First, the existence of territorial allocations obviously provides a very effective barrier to new retail competition from existing utilities. Second, the substantial cost of accuiring utility property at the expiration of an existing supplier's franchise could be a barrier to competition for existing firms and new entrants as well (Exhibit ST-8). Third, the absence of wheeling services that would allow a utility to provide retail service to a noncontiguous area would stop any retail competition which overcame the first two barriers. 17/ Zn sum, these high market entry barriers confirm the inference of monopoly power based on 15/ FP&L's share of the relevant market has grown some-what between 1966 and 1976 from 73% to 76% of total retail customers and from 74% to 75% of retail sales (Tr. 1568).

16/ Cf., Brown Shoe Co. v. United States, 370 U.S. 294, 337 (1962), a case brought under g7 of the Clayton Act where monopoly power was measured on the basis of cities in the relevant market with populations exceeding 10,000. Xn Cit of Hishawaka v. American Electr'c Power Co., 465 F. Supp. 1320, 1325 (N.D. Ind. 1979),

the court found monopoly power where the defendant served at retail 89% of the municipalities in the relevant market.

17/ Cf., Boston Edison Co., Docket Nos. E-8187 and E-8700, Order Reversing in Part and Affirming in Part initial Dec is ion, mimeo at 3 ( December 7, 1976 ), wher e the Commi sion dealt with a transmission rate for retail serv ice'o a noncont'guous terr itory.

Docket Nos. E378-'19, et al. - 15 FPaL' market share. Consumers Power Com an, 6 NBC 892,

'013 (1977). Moreover, entry barriers enhance the opportu-nities for exploitation of this gower.

Although the record does not contain precise statistical indicia of FPGL's share of the wholesale power market, bulk it is clear that the Company has monopoly gower over power transactions as well. PPSL's share of the retail market is a suitable base on which to assess its share of the wholesale market, because the bulk gower which the Company produces to as part of the wholesale market.

f least a 75't share 148 .2d 424~

serve its own captive retail service territory must be included

~. United States v. Aluminum Co.

p of the wholesale market, to which must be added the Company's wholesale sales to municipal and cooperative utilities within the relevant market. The only other supplier of wholesale requirements service within the relevant market is the Jacksonville Electric. Authority which supplies its own distribution system, plus the distribution utilities in Jacksonville Beach and Green Cove Springs.

Moreover, included in FPaL's bulk power resources are virtually all of the nuclear generating capacity and sub-stantially all of the gas-fired generation available within the relevant market, each of which give the Company a signi-ficant. edge in the production of low-cost power for base load requirements. Three of the four operating nuclear plants in the State of Florida are solely owned by FPsL (Tr. 588, 1625). 18/ Only New Smyrna Beach and the Cooperatives, acting through their generation and transmission subsidiary, have gained direct access to nuclear generation, through small ownership interests in FLorida Power Corporation's nuclear plant. The Company does no t dispute that its long-term, noncurtailable supply of natural gas gi.ves it it however, an advantage over municipal generating systems; 19/

asserts that it should be alLowed to retain this bargained-for advantage for sales to existing customers (Tr. 205). By comparison, municipal generating units are small-capacity, oil-fired steam or internal combustion machines LS/ See, Fort Pierce Utilities Authority v. Nuclear'ecrulatorv Commission, F.2d , D.C. Car. Nos. 77-1923 and 77-2101 (March 23, 1979).

9/ Se aenerallv, Sebrina Utilities Commission v. ~ZRC, F.2d , 5th Car. Nos. 77-2911 and 77-2972 (March 20, 1979).

Docket Nos. ER78-19, et al. - 15 which characteristically have high operating costs and are ill-suited to provide baseload requirements. 20/

Finally, we note that FPSL owns 81% of the transmission lines within the relevant market with operating voltages of 59 kV or above. The Jacksonville Electric Authority owns the next-largest share, 5% (Exhibit GT-5). These are the facilities over which bulk power is transported within the relevant market and FPaL's ownership share gives it "strategic dominance" over transmission. United States v.

Otter Tail power Co., ~su ra, 331 P. Supp. at 60.

As noted above, FPt Z did not undertake to define relevant markets and did not challenge the analysis of Staff ' economic witness. Instead, its economic policy witness challenged the basic relevance of structural analysis to regulated public utilities. The Company's thesis is that regulation prevents a utility haying monopoly power from controlling prices and excluding competition from the market, i.e.,

the indicia of monopolization under Section 2 of the Sherman Act. 21/ However, this is 'not really a rebuttal to Staf f '

.positron. Instead, it simply confirms the role of the Commission in eliminating 'or modifying rate provisions, desi ned b a price control utilit, or which would otherwise facilitate exclusion of competitors. 22/ We believe the idea that regulated utilities are immune from charges based on the exercise of monopoly power has been thoroughly discre-dited by United States v. Otter Tail Power Co., sunra.

ACTIONS OF COMPETING UTILITIES WITHIN THE RELEVANT MARKETS Introduction In cases where the anticompetitive e ffects o f wholesale rate schedules are at issue, we anti-cipate focusing primarily on structural analysis to measure the existence of monopoly power, and on the suspect rate orovisions themselves to determine their effects on the 20/ Florida Cities'rief on exceptions at, 76-77. See, Exhibits 28 (REB-C) and 41 (JW-1, at 3-4) .

21/ FPSL br ie f . opposing exceptions at 43.

22/ Clearly, regulation does not insulate electric utilities from operation of the antitrust laws. Cantor v. Detroit Edison Co., 42& U.S. 379 (1976); see, Consumers Power power Comnanv, suura, 6 SRC at 1011-12. Sor rs this Commission precluded from considering antitrust law and policy. Gulf States Utilities Co., Docket No.

ER76-816, Order Approving Settlement Subject to Condition (October 20, 1978).

Docket Nos. ZR78-19, et al.

enhancement or maintenance of monopoly power. If, for example, a rate provision would weaken a competitor or raise the entry barriers to a market where competi-tion can exist, that will likely be sufficient evidence of anticompetitive effect to warrant its, elimination or

- modification absent a weightier showing that the provision serves some countervailing public interest.

City of Huntin bur v. FPC, 498 P.2d 778 (D.C. Cir.

1974); Northern Natural Gas Co. v. PPC, 399 P.2d 953, 971 (D.C. Cxr. 1968). 23 P

Unlike presentations in civil and criminal actions to enforce the antitrust laws, it is not necessary in our deliberations to have an extensive record on the past conduct of a utility towards its customers, or its intent in establishing or maintaining a restrictive rate provi-sion. See, Missour i Power 8 Li ht Com an, Opinion No.

31, mimeo at 9-10 (October 27, 1978) . 24 Every rate case in which anticompetitive effects are alleged need not become a fulL-blown antitrust proceeding.

23/ In rate change proceedings such as this one, heard under Section 205 of the Pederal Power Act, the appli-cant bears the ultimate burden of nonpersuasion.

However, Staff and intervenors may be required to come forward with some evidence to focus their allegations of anticompetitive effect, and to relate that evidence to the targeted rate provi-sion. See, Northern California Power A enc v.

FPC, 514 P.2d 184 (D.C. Car. 1975).

24/ However, there may be situations in which the rate proponent may demonstrate the innocuity of- a questioned provision because, for example, the utility has a general wheeling tariff, or undertaken other actions which weaken 1 " "PlPP Power Pool, Opinion No. 775, mimeo 1 . 11111,

~

at

~1 33 of GrotonP et al. v.'ERC, 987 F.2d 1298 (D.C.

Car. 1978I.

Docket Sos. ZR78-19, ee al. 18 However, as noted suora, at 2, conduct may be relevant to our assessment of the justification for and purpose of a service limitation. Zn the case before us a ull record has been compiled and we are further aided by a recent decision of the Court of Appeals for'he Fif th Circuit'5/ in fully understanding the 1

anticompetitive ef ects of FP&L's rate proposals. 26/

Moreover, the documentary evidence of Staff and the Cities, largely obtained from Company files, is frequently incongruous with the testimony of Company witnesses. 27/ By and large the testimony of witnesses presented- by Staff and the Cities is a summary recapitulation of hundreds of pages of correspondence and internal company documents contained in over 200 exhibits.

This evidence has been ef significant assistance in probing the effects of FP&L's alleged need to restrict the availability of service under schedules SR-2 and PR.

The Company's reaction to the voluminous evidence of the Cities and the Staf f relating to anticompetitive conduct is essentially a demurrer. FP&L asserts that this evidence is irrelevant to its proposed tariff modifications and that issues of anticompetitive conduct should be raised in other forums. While we agree that the Commission has no authority to enforce the antitrust laws, this does not make the evidence irrelevant to the formulation of remedies well within our authority. 28/

25/ Gainesville Utilities De artment v. Florida Power &

was U.S.,

issued after 99 S.

1 Ct. 454 (1978) . Thus opinion Judge Wagner wrote his Initial Deci-sion.

26/ This evidence confirms our conclusion that FP&L has monopoly power in the relevant markets. Judge Wagner was also concerned by what he characterized as "disturb-ing episodes of Florida Power & Light Company's past conduct which raise serious antitrust questions."

Znitial Decision at 5. However, time constraints led him to defer to the Commission or the Justice Department.

27/ -Se, Gainesville Utilities Oenartment v. Florida Power

< 'oht Co., suora, 573 29adt 301, note 14.

28/ Fede al Power Commission v. Conwav Cora., 426 U. S.

271 (1976); Cs tv of Plttsburc v PPC( 237 F 2d I4'

~ ~

75'D.C. Cir. 1956); Pacific Gas and Electric Co.,

order of Apr i',

FPC Project Nos. 1988 and 2735, msmeo at 10-13, 1976.

19 Docket Sos. ER78-19, et al.

tvholesale ~tar ket Division FP & L has been found to have engaged in a oer se violation of the Sherman Act bv conspiring with Florida Power Corporation to divide the Florida wholesale power market. In Gaines-ville Util'ties Denartment v. Florida Power & Light Comoanv, 29/ the Unrted States Court of Appeal for the Fif-h Circuit r'eversed and remanded a district court judgment, based on a review of the evidence which "com-pelled" a finding that the two,largest utilities in the State of Florida had conspired to avoid selling wholesale power to customers in each other's service territories. 30/

This case arose from efforts by the Gainesville, Florida, municipal utility system to end its costly operat'on in isolation by interconnecting with either F+&L or Florida Power Cor'p. 31/ The Court found that beginning in 1965 Gainesville's efforts to interconnect and coordinate its operations were met with a joint strategy to induce the municipal to interconnect with Florida Power Corp., on precondition that all three svstems agree to a retail territorial allocation.

Correspondence sent to Gainesville and to the Federal Power Commission, regarding an interconnection applica-tion under Section 202(b) of the Federal Power Act, was routinely passed between FP&L and Florida Power Corp. with the understanding that-concerted action was contemplated and inv i ted. 32/

29/ Suora, note 24. The record in this case contains a number of exhibits from that antitrust proceeding. tt 30/ Gainesville Utilities Department v. Florida Power vrlle and tloxzda Power Corp. reached a settlement be ore the action was tried .

31/ See, Gainesville Utilities Denartment v. Florida Power Coraoratzon, 40 FPC 1227 (1968), reversed, 425 F.2d 1196 (5th Cir. 1970), reversed, 402 U.S.

515 (1971).

32/ See also the consent decree in United States v.

Florida Power Cora. and Tamaa Electric Co. (1971 race Cases para. 71, 637, A. D. Fla. 1970) .

Docket 'Dos. ZR78>>19, et al. 20 The court was particularly impressed by the documen-tarv evidence which demonstrated a "routine" course of conduct spanning two decades whereby each utility would refuse to sell power to existing wholesale customers of the other or to municipalities served at retail by the other which were attempting to establish new distr ibution utilities. On remand, the case is once again before the district court for precise determination of the effect of the wholesale ter r i tor ial allocation on Ga inesv ille '

difficulty in obtaining an interconnection, plus attendant damages. Until the trial court enters its new judgment, we shall not know how FPaL is to be enjoined from engaging in anticompetitive conduct against municipal utilities or- directed to remedy the damage done.

Ac uisition Efforts and Franchise Comaetition The principal allegation leve ed against FPaL's tariff limita-tions is that by restricting access to wholesale power the Company may thereby increase its dominance as a retail supplier. The record is richly detailed with evidence of retail competition to serve entire communities between FPaL and existing municipal systems.

FPSL's first attempt to acauire the Kake North util-ity is documented in a letter to FPaL employees from the Company's Nest Palm Beach Division Manager, dated June 18, 1958, which souqht "a list of your relatives and fr iends who live in Kake North." The District Manager proposed to send these sympathe tic members of the communi ty info r-mation concerninq a forthcoming election on a proposed 30-year lease of the municipal system to FPaL, where a successful vote would "assist us in our negotiations for other municipal systems" (Exhibit GT-34, at 64) . Liter-ature distributed to Lake North voters promised better service and an immediate rate reduction averaging 20%< plus an aqgreqate reduction of $ 14 million over the 30-year lease.. Although winning a simple majority vote, the elec-tion failed to attract the requisite 60% voter participa-tion and the proposition failed. Efforts were renewed in 1968 through a Lake North property owner; however, preliminary discussions were terminated without action.

FPSL offered to furnish firm power to the 01ew Smyrna Beach municipal utility during the winter of 1958, provided the City Commission would agree not to order any additional generating eauipment and enact an ordinance which should oermit disposition of its electric utility on a majority

Docket Dos. ER78 19F et al.

vote. 33/ FP&L then planned to negotiate a lease of the spring and submit it to the voters utility the following QT-34) for approval (Exhibit . An April 1959 report to Company management stated that the proposed acquisition "certainly provides some distinct advantages other than just taking over a municipally owned property." The report noted the considerable possibilities of industrial and residential development in the area (Exhibit GT-34, at 73) ~

The Company's action in 1959 did not win it a lease of the New Smyrna Beach system (Exhibit GT-34, at 61);

however, FP&L tried again in 1965, sending an inquiry to the City Commission which was virtually identical to the letter sent to Fort Pierce in Nay of that year (Exhibit GT-34, at 75). 34/ FP&T. Executive Vice President R. C.

Fullerton descrxEed the prospect of taking over the Hew Smyrna Beach municipal system to the chairman of another investor-owned utiLity as something the Company viewed "with natural enthusiasm" (Exhibit QT-34, at 75). Also in 1965, FP&L. purchased from New Smyrna Beach all of its electric utility facilities in the City of E gewater

~here it had previously provided retail service to only a portion of the community.

Intermittent negotiations occurred between FP&Z and Hew Smyrna Beach in L970 and 1973. In 1974, the Company devised an internaL plan for acquiring the municipaL utility (Exhibit GT-34, at 32), and sent senior manage-ment representatives to discuss an acquisition proposal with the city utiLi'ty commission, estimating a rate reduction of more than $ 600,000 under FP&L ownership..

Company management informed the utility commissioners that FP&Z, could provide cheaper and more dependable service because of its greater power plant capacity and 33/ Characteristically, Florida municipal charters recuire the approval of greater than simple majority of voters for disposition of local utilities. Similar terms were extracted from the City of Clewiston in 1965.

See, the initial decision in Flor ida Power & Light Co., 37 "-.P.C. 360, 673, adooted, 37 FPC 344 (1967),

affirmed sub nom., Federal Power Commission u.

Florida Power & Light Co., 404 U.S. 453 (1972) .

34/ infra, a" 22.

et al. 22 "ocher, Nos. ER7S-19, i"s diversitv of fuels (Exhibit GT-34, at 34). Another acquisition oresentation was made to the utility commis-s'on in 1975, at the City's request.

FP&L sought to acquire the Fort Pierce utility in 1965 when the subject was raised by a city commissioner t a meeting convened to discuss a possible interconnec-tion of the two systems (Exhibit GT-59) . The respon'se of the Company's division manager mentioned the inter-connection only as an interim arrangement, concentrating instead on the sale or lease of the municipal utility.

FP&L stated that any lease should be for a period of 30-years to coincide with the term of a standard electric franchise. In return, the Company offered to immediately interconnect the systems, apply FP&L's lower retail rates and "lend its full support toward attracting industry to the area." Fort Pierce thereafter invited lease or sale proposals; however, negotiations stopped short of acqui-sition.

Acquisition was again raised by Fort Pierce officials in March of 1976. The minutes of a meeting with FP&L senior management officials record that the City felt that disposition of its utility system was necessitated by an inability to exploit the economies of scale in electri-city production:

Mr. Skinner [Fort Pierce's Chief Engineer]

said we think its very efficiently oper-ated. We realize the big problem facing us is not the high cost of fuel or the inefficiency of our system, but the ineffi-ciency as compared with putting oil into a larger boiler and turbine. That' where we'e getting caught short on the heat rate input to the boiler. We have a problem competing with FP&L favorably today because it represents around 65% roughly of the cost of doing business, the cost for fuel oil. (Exhibit GT-31.)

When For t Pierce inquired at that same meeting about the purchase of 30 MW of base-load firm power, the Company

esponded that it did not wish to sell firm power unless tne "urchaser could reciprocate with sales of firm power

-o the Company. This would require Fort Pierce to main-tain generating capacity sufficient to meet its own 1oad.

FP&L also discouraged purchase under the SR-1 schedule,

23 Docket Nos. K378-19, et al.

indicating that it was not really firm and "awfully expensive" (Exhibit GT-31, at 17).

The Company continued to develop an acquisition pro-

"osec throughout 1976 (Exhibit GT-34) . However, enthu-s'asm was apparently. dampened when Fort Pierce inter-vened in proceedings before the Nuclear Regulatory Commission regarding FP&L's proposed South Dade nuclear generator.

FP&L proposed a sale or lease of the Homestead utility in 1976 when its president met with city offi-cials to discuss Homestead's request for a retail ter-r itor ial agreement, an emergency interconnection and wholesale purchases (Exhibit GT-18, at 1) . In 1976 the Homestead City Council discussed the topic with FP&L; however, negotiations were apparently not continued.

The record indicates that acquisition of .the Vero Beach utility was considered by FP&L in 1957, 1958 and 1959. 35/ Thereafter, a serious effort to acquire the Vero Beach system was undertaken in 1976 which culmi-nated in approval of the sale by the City electorate and an application to the Federal Power Commission under

~

Section 203 of the Federal Power Act. Internal management correspondence concerning implementation of the acquisition by FP&L suggests that Vero Beach would be viewed as a bellwether by other municipals thinking of entering or

' av ing the utility business:

The impact potential of the Vero Beach acquisition on the fr anchi se election in Daytona Beach and other Nunicipal operations such as Ft.

Pierce, Hcmestead, etc. makes rt reparative that we nct under achieve wi th our Ver o Beach oper ation. ( Emphasis supplied.) 36/

After hearings in Docket No. E-9574, the Vero Beach acquisition was approved by an administrative law judge on grounds, advocated by FP&L, that the municipal utility could no longer efficiently generate its own power require-ments and that FP&L would, provide an economic source of retail su-plv or the ci 'zens of Vero Beach. Th's con-35/ Exhibits GT-34, at 74; GT-52; and GT-52.

36/ Staff Exhibi" G -34, at 1.

Docket Nos. ER78-19, et al " 24 trasts with the finding by the'residing Judge that Veto Beach was a "truly excellent" utility with outstanding growth potential. See, Florida Power & Light Co., Docket

'Ao. E-9574, Initial Ruling and Order on Phases I and II (February 6, 1978). However, FP&L thereafter withdrew its application in early 1978 prior to the commencement of a final phase of the acquisition proceeding 'which was to consider 'the possible anticompeti'tive effects of the proposal.

In summary, the record documents 20 years'orth of franchise competition between FP&L and the municipal utilities located within its service territory. At various times FP&L has promoted acquisition or willingly received municipal proposals. Roost, if not all, of those incidents'ccurred when the municipal systems were arranging new bulk power supplies from the options of self-generation, wholesale, purchase from FP&L, and retail purchase from FP&L after franchise disposition.

The Company has not succeeded in many acquisitions, because the municipal candidates solved their supply problems by adding generation. However, the record strongly indicates that self-generation is becoming less and less attractive to the point where FP&Z's witness- Gerber has described small scale generation as an anachronism. Since FP&L controls the remaining two options, 37/ we conclude that its wholesale monopoly power can only increase, and, thereafter, its retail power. as well. See, Borou h of Ellwood Cit v.

Penns lvania Power Co., 462 F. Supp. 1343, 1346 (W.D.

Pa. 1979) ~

The Presiding Judge expressly accepted the Company's representation that it was not interested in acquiring Homestead or Fort Pierce because of capacity problems and operating difficulties. Since we find the premise of this representation unconvincing, 38/ we would be remiss to wholeheartedly accept its conclusion. In any event, it does not overcome the weight of the evidence to the contrary. 39/

37/ as discussed infsa, at 31, municipal purchase of entitlements in large generating units constructed by FP&L does not currently appear to be a viable option.

38/ In=ra at 34-37.

39/ Alt rnatively, it appears that the Florida Public Service Commission could require FP&L to provide retail service i f the customer s o f a mun ' ipal util i ty voted to dis-band operations. See, Florida Statutes Annotated, 5366e03.

Docket Nos. ER78-19, et al. Potential Losses of Franchises The Company appears well aware of the relationship between its wholesale sales to municipal utilities and its ability to retain existing retail franchises. In March of 1977, a market development presentation was made to Epr L management which stressed, inter alia, the need to maintain the integrity of the Company in relation to publicly financed utilities (Exhibit GT-64) . 40/ Between 1976 and 1985, for example, franchi.ses covering retail sales to 41.88 of FP&L's customers are to expire (Exhibit GT-66). In addition, FP&L serves another 93 communities at retail with no franchise agreement. Franchise competition can be a positive force to encourage better service and lower rates; thus, a utility should not be allowed to tilt the balance by artificially making wholesale service unattractive to potential retail market entrants. United States v. Otter Tail Power Co.,

suer a, 331 E. Supp. at 61. The record contai.ns evidence relatinc to three franchise expirations, of which Daytona Beach is the most fully documented.

In 1975 or 1976, the City of Daytona Beach under-took a study of municipal. distribution versus FP&L fr anchise renewal . In r esponse, the Company mounted a significant effort to inform City residents of the bene f i ts o f fr anchi se r enewal . Of par tie ul ar no te ar e the Company's statements that each of the Florida municipal utilities had rates higher than FP&L (except for two with access to hydroelectric power) and that municipals charge these higher rates because FP&L "can gain greater economi.es of scale in all facets of its ope ra-tion" (Exhibit ST-5, at 1 and 3) . FP&L won renewal 40/ In a 1975 paper on "Strategic Issues In Inter-utility Relations" prepared by Company witness Gardner, emphasis was placed, inter alia, on franchise renewals and phase out of wholesale tariffs (Exhibit GT-30) . See also, Exhibit GT-49.

Docke .yos. ER7S-19, et al. - 26 of its f anchise after a record high election expendi-ture (Exhibit GT-76). Due to the continuing expirations of retail franchises, we conclude that 'vigorous franchise competition exists within the retail market which FP&L can inf'uence through its wholesale sales policies.

The Company characterizes its efforts to renew franchises and acquire others as sales promotion and business preservation. 41/ 'owever, these actions may still run afoul of antitrust law and policy when undertaken by a possessor of monopoly power. Otter Tail Power Co. v. United States, 410 U.S. 366 (1973); and Catv of Aishawaka v. American Electric Power Co.,

465 F. Supp. 1320, 1329-32 (N.D. End. 1979).

FP&L's Relationshi with Homestead Traditionally, FP&L has demonstrated considerable reluctance to engage in firm power transactions with municipal utilities, even within its own service territory. During the 1950's and 1960's this amounted to an unqualified refusal.

Rate schedule RC under which firm service was provided to cooperatives required that capacity and energy "not be resold or distributed by the Customer to any munici-pality or unincorporated community fo>> resale" (Exhibit GT-51) . Xn an initial decision adopted by the FPC in Flor ida Power & Li ht Co. 37 FPC 544 (1967) 42/

g Hear ing Examiner Wenner recounted six separate instances over a period of 13 years when the Clewiston municipal utility requested and was refused wholesale service by FP&L. 43/ En 1963; the Company' president informed the City of Winter Garden that FP&L did not "supply 41/ FP&L brief on exceptions at 45.

42/ Affirmed, Federal Power Commission v. Florida Power & Light Co., 404 U.S. 453 (1972).

43/ 37 FPC at 572-73.

goc~e" Sos. ER78-19, et al "

~

."..unic'pal systems firm wholesale power for distribution through a municipal distribution system" (Exhibit GT-

'6) . 44/

Homestead first requested firm wholesale service

'rom FP&L in '967, to which the Company responded that it d'd not provide this service to municipalities and c'c not wish to serve any. Wholesale power from FP&L was Homestead' alternative to the immediate installa-tion of new generation or disposition of its system (Exhibit GT-22). Robert Fite, the Company's president, and F.E. Autrey, a vice president, stated that FP&L would not refuse to sell wholesale power, if that was the onlv arrangement negotiable; however, they added that the City would not receive the rate at which firm sales were made to cooperatives and that a retail territorial allocation was a necessary precondition to any service. FP&L emphasized the comparative benefits of an emergency interchange agreement or sale of the municipal system in lieu of wholesale purchases (Exhibit GT-18). Homestead was unable to negotiate a firm wholesale contract and instead made intermittent purchases from FP&L over the ensuing five'ears at average prices that were considerably higher than those paid by FP&L's cooperative customers (Exhibit GT-29, at 33).

In April of 1972, Homestead requested a more sophisticated interchange agreement with FP&L including the purchase of firm power to meet a portion of the Citv's load; howevers FP&L negotiators responded that FP&L was only interested in an interchange where both parties had capacity to meet their own demands plus ample reserves (Exhibit GT-29, at 1-3) . Instead, Homestead and FP&L entered into new emergency service agreements whereby the Company only agreed to supply emergency power needs "to the extent it has capacity available. . . ." FP&L applied its then-existing rate schedule "NH," applicable to total requirements our-chases by cooperative customers (Exhibit GT-29, at 4-11).

Homestead next requested power from FP&L in August o" 1973, proposing a firm purchase of 12-16 MW from 197S through 1980. The City stated that i" int nded to use

<<4/ See also, Gainesville Utilities Denartment v. Florica ecwe a Lucre Cc., auut, .=73:-.3d at 398.

Docket Vos. ER78-19, et al.- 28 this capacity for base load, purchase interchange energy to meet its intermediate load and use its own generation only for peak load capacity and reserve (Exhibit GT-29, at 12) . 45/

The Company fir.st dec ided to respond to Homestead '

request with the so-called "Marshall Theory": Homestead was to be told that FPSL,had no firm power to sell.

Company negotiators were advised to have load and re-serve estimates available to substantiate this response (Exhibit GT-29< at 14) . Immediately thereafter, however, the Company concluded that Homestead had been listed as a customer under all requirements schedule SR and was actually receiving firm power at committed'ntervals. 46/

FP&L then decided that if Homestead requested a trans-mission interchange agreement as well as firm power, it would employ Schedule D and use Schedule SR as the nego-

. tiated rate thereunde'r.

Zn October of 1973, Homestead submitted a compre-hensive request for an interchange agreement and simul-taneous purchase of firm power from FPsL to serve the base-load portion of the City's requirements (Exhibit GT-29, at 24-28). However, Exhibit GT-29 (at 29-31) reveals that the Company wanted to avoid any obligation to sell firm power to Homestead by withdrawing schedule SR from its existing wholesale customers, including Home-stead and replacing telling the City that itit with an "Emergency Rate Schedule" has no firm power to sell.

45/ The Company's chief representative at this meeting was its vice president, E.L. Bivans, who later testified in this proceeding. Copies of Bivan's notes (Exhibit GT-29,- at 12) were sent to the Com-pany's president and other executives.

46/ This discussion is recounted in the notes of Com-pany employee "NHK" (apparently N.M. Klein, a nego-tiator in dealings with Homestead), Exhibit GT-29, at 15. The notes bespeak a certain surprise in learning that Homestead was an SR customer: "Rate SR offer s fizm power . Appar ently, the Company has been honoring their request for a number of years, and is not in a good position to refuse to continue o f fer ing f irm base load power of 12 NN to 14 NR, which is consistent to [sic] their previous demancs."

Docket Nos. ZR78-L9, et. al.

Alternatively-, it considered offering Homestead a Schedule D ( f irm interchange) rate lower than schedule SP in return for a signed contract stating .that the City would install additional generation capable of carrying its electrical load. The final paragraph of this internal memorandum seems an apt summarization of PP&L's reaction to Homestead's request for firm gower:

It is our belief that if we refuse to sell the City of Homestead Pirm Power they will immediately request us to wheel f'rom other municipalities.

If we encourage them to increase. their generation where we can purchase gower from them, we may offset the demand for wheeling as well as avoid a long-term Pirm Power commitment. (Exhibit GT-29, at 31.)

PP&L's hope to induce Homestead to construct addi-tional generation for hase load requirements in lieu of firm gower purchase was not done without knowledge of the consequences for the City. In December of 1973, PP&L's financial planning department prepared an analysis of PP&I and the municipalities in or near its service area entitled "Comparative Analysis of Municipal and Investor Owned Utilities and the Benefits to Their Customers",(Exhibit GT<<34, at 42-44). This study determined that, except for Orlando and Jacksonville>

municipal util'ties charged higher retail rates than PP&L, because:

The size of most municipal units is limited by the size of the city. This limit on size prevents the smaller muni-cipal utilities from realizing many of the economies of scale available to large utilities. This fact was clearly revealed in the analysis. The smaller utilities had less efficient heat rates and higher fuel and operating casts per KWH of power sold. These higher costs appeared to be major contributing factors in the high cost of gower to their customers.

3egotiations on the Homestead interchange agreement continued and in December of 1973 a final set of discus-sions occurred, from which PP&L learned that the

Docile Nos. ER78-19, et al.

"key" o this agreeement was'P&L's willingness to simultaneously supply service under both the interchange agreement and schedule SR after construction of neces-sary interconnection facilities by Homestead. Engin-eering and billing problems were not considered serious by FP&L personnel. 'owever, Company negotiators opposed a written commitment to serve the City'nder Schedule SR after completion of the interconnection "because we [FP&L]

already have a contract to serve them on SP. and the agree-ment does not necessarily prohibit such an arrangement to continue" (Exhibit QT-29, at 39) . Instead, FP&L' vice president, R. G. Mulholland did send a letter to Homestead's City Manager, in January of 1974, after the interchange agreement was signed, stating the Company' understanding that it would provide Homestead with elec-tric power for 36 months after completion of the City' new interconnection facilxtres at a rate not to exceed the Company's approved wholesale rate schedule in effect at that time (Exhibit GT-29, at 43) .

Homestead ' high-voltage interconnection facilities were completed in October of 1977. Without advance notice to Homestead or any indication from the City that it, no longer wanted average-priced firm power, FP&L filed the rate change application with this Commission which proposes to terminate SR service to Homestead. In place of SR power, FP&L states it will sell Homestead incre-mentally-priced, curtailable Schedule D power, which the Company admits is more expensive than schedule PR when used for base load.

Thus, Homestead has received wholesale service from FP&L since the 1950's, including firm reauirements ser-vice under the SR-1 tariff since that tariff first became effective. From the time of agreement in 1973 to completion of the int rconnection in October 1977, FP&L served Home-stead under the SR-1 tariff (Exhibit 29) . We find no evidence to support FP&L's contention that completion of the interconnection somehow eliminated Homestead as an existing- wholesale reauirements customer. Nor is it persuasive to assert that the parties intended for Home-stead to be served at an incrementally-pr iced Schedule D rate instead of the average-cost schedule SR. 47/

The record ind'cates that FP&L did not publish a rate level formula for Schedule D until February 10, 1978, when it made an offer of Schedule D capacity For" P rce.

Docket Nos. =R7S-L9, et al. Indeed, knowing Homestead' desire for base-load firm power, the Company' representations as to the meaning of their interchange agreement in January. of 1974 are quite to the contrary. It would be difficult to reach any other con-clus'on, given the weight of this largely unrebutted evidence.

FP&L's Pelationshi with Fort Pierce The efforts of Fort Pierce to purchase firm power from FP&L bear a marked similarity to those of Homestead. In March of 1976, Fort Pierce approached the Company about purchasing firm power to meet the the City's base load requirements and using its own generators for peaking curposes. Fort Pierce renewed its request in letters to.FP&L in April and December of 1976. The December letter requested separate price quotations for base, inter-mediate and peaking capacity. The City also informed FP&L that it immediately wished to begin purchasing "base capacity and energy on a year-round basis in amounts ranging from 25 NW to 30 MW," and requested a statement of the Comcany's terms and conditions. Although FP&I recognized its obligation to provide service under schedule SR-L, both in an internal memorandum and in a letter to Fort Pierce, the Company failed to respond with specific information on which Fort Pierce could act. After another letter to FP&L in April of 1977', the parties met in Jul.y: and Fort Pierce was toLd that FP&L had no firm power to seL1. 48/

Fort Pierce maintained its position that it was entitled to firm power under the SR-1 tariff throughout the remainder of 1977. On October 14, 1977, FP&L filed changes to the tariff which limited its. availability to existing customers.

Thereafter, the Company offered Fort Pierce up to 240 NW of capacity through the end of 1980, but under the terms of interchange Schedul'e D, not schedule SR.

Cn March 24, 1978, during the cross examination of FP&L's rate design witness, Lloyd Williams, by counsel for Fort Pierce, Mr. Williams acknowledged that the City was eligible to purchase firm service under the SB-L tariff. The same day, FP&L delivered a draft service agreement to the City and firm service began immediately.

Ho~ever, a dispute remains concerning the duration of service and FP&L has stated its intention to terminat service to Fort Pierce if we approve its croposed re-striction of firm service to named and existing customers 48'owever, in July of 1976 FP&L' System PLanning Depar "vent prepared a market assessment of firm intercharge sal s between 1977 and 1985 which pro-jec "ed an "available supcly from FPL" ranging betwe n 1604 MW and 1995 MW in 1977. h's report assessed "he opportun'ties for sale of firm power to 10 different utilit'es in ceninsular Florida, incl.uding For" Pierce

(".xhibit GT-7) .

32 Docket Nos. ER78-19, et al.

which do not have generating capacity sufficient to meet the ir peak loads.

T.imitations on Alternative Sources of Caaacit Unre-butted Company documents in evidence indicate that FP&L's policy to retain full ownership of the nuclear it is generating plants which it constructs. The Company has sta ted that the full capacity of these units is need ed to serve its own customers, so sharing is not to be anti-cipated unti'1 FP&L reaches the optimum amount of nuclear capacity foi its system (Exhibit 27). However, no party disputes that joint ownership of such facilities would provide municipal and cooperative utilities (as well as other utilities in the region) with access to FP&L's economies of scale (Exhibit GT-1, at 6).

FP&L is the sole owner of three operating nuclear plants having aggregate capacity of 2,188 Nf. FP&L has agreed to share a portion of St. Lucie No. 2 nuclear plant with neighboring systems including Homestead and New Smyrna Beach; however, FP&T documents in evidence indicate that this was done at the insistance of the Justice Depart-ment and that FP&L has not committed itself to share the capacity of any future unit (Exhibit GT-71, at 22). 49/

The Availabilit of Transmission Services FP&L now offers four wheeling services. which correspond to its interchange capacity and energy services. 50/ Wheeling may be provided for one-year periods, with service available at the sole discretion of FP&L when trans-mission capacity is not otherwise required by the Company.

Transmission schedules TA, TB and TC correlate to inter-49/ In 1973 FP&L considered cancelling St. Tucie No. 2 because of "escalating costs and Justice Depart-ment review of our antitrust status" (Exhibit 20).

Then in 1976 the Company considered a shift to coal-fired plants for future base-load generation "to eliminate the Atomic Energy Act as a route to municipals'nvestment in generation" (Exhibit GT-1, at 13) . See also, the decision of tne Atomic Safety and Lacensing Appeal Board, Nuclear Regulatory Commission, in Florida Power & Light Co.,

Docke t No . 50-389A ( ALAB-420, July 12, 1977 ),

reaardina antitrust review proceedings on St.

Lucie Vo. 2.

50/ A complete description of these four services is "ound in Exhibit 28 (RES-AX), a draft service aareement sent to the City of Fort Pierce on December 6, 1977.

he rate for these services is currently under ad ud ication.

j

Docket Nos. ER78-19, et al. "

change schedules for emergency, scheduled and economy capacity and/or energy services. Sl/ Of particular significance to this case is schedule TD< denominated "firm transmission service." However, "firm" is a misnomer because Schedule TD service may be reduced or int rrupted at the Company's discretion for periods up to 30 days. 52/

In short, these four wheeling services only offer surplus transmission capacity on an as-available basis.

PPaL does not contend that any of these four wheeling services could be utilized to transmit alternative gower supplies to utilities within the relevant markets from third parties eauivalent to those obtainable under schedules SR-2 or PR. The Company states that an appropriate rate would have to be negotiated at the time a potential wheeling" cus tomer arranged its alternative gower supply. 53/

51/ Suara at 4-5.

52/ Section E of the draft agreement (Exhibit 28, REB-AX) provides:

In the event that Firm ransmission Service cannot be provided due to an unanticipated reduction or interruption of PPaL's transmis ion facilities supplying such service, or if such service is provided in an amount less than 80%

of the Contracted Demand for Firm Transmission Service as a result of unanticipated reduction or interruption of gower delivered by the Commission to PPaL for the City's account pur-suant to Service Schedule D of the City-Commission Contract, and such reduction or interruption continues for a period of thirty (30) days, the Charge for Firm Transmission Service will be adjusted as follows: In each succeeding month, the higher of (a) the max'mum NN delivered to PPSL in any one hour during that month, or

'b) the maximum MN delivered to PP&L in any one hour during the preceding six months, will be substituted for the Contract Demand for Firm Transmission Service for purposes of cal-culating the Charge for Firm Transmisison Service. Upon such reduced or interrupted service acing restored to 80% or more of the Cont"act Demand. for Firm Transmission Service, the Charge in each succeed 'ng month shall be based upon the full Contracted Demand for Firm Transm ssion Service.

53/ PPsL brief opposing except'ons at 42.

Docket Nos. ER78-19, et al.- 34 THE REASONS GIVEN SY FPRL FOR ZTS TARIFF LIMITATION PROPOSALS FPsL would seek to justify its proposed limitations on full and partial requirements availability in terms of operational constraints. Specifically, it asserts that future power supply is too uncertain-to allow unlimited access to its requirements service.

According to FP&L, customers which are self-sufficient in generating capacity could arbitrarily shift their load'etween service from FP&L and their own generation.

This would purportedly lead FPGL to,maintain capacity in excess of its other customers'eeds but with no assurance that such capacity would be fully utilized thereby increasing rates to all customers.

p The Company proooses to remedy this uncertainty by making these on-again/off-again customers ineligible for service under schedule PR.

However,. the difficulty with this proposition is that it has virtually no record support and is based on a few conjectural statements by Company witnesses. Zn fact, FP&L's rate design witness prepared a model load duration curve in 1975 showing that customers with generating capacity less than peak demand and customers with capacity greater than peak demand would each purchase base-load requirements from the Company, under an SR modified for parallel operation, and use their own'chedule capacity intermittently to meet intermediate, peak and reserve demands (Exhibit GT-71, at 33) . This is consistent with the repeated requests of Homestead and Fort Pierce for base-load firm power. 54/ Moreover, the natural inclination of these systems to buy base-load power. would apparently be reinforced by the design of FP&L's PR rate which is intended to promote high load factors. 55/

54/ Sunra at 27-31. Again in their testimony, Plorida Crtres state their intention to use schedule PS or base-'oad ourposes and use their own generation for peak'ng tTr. 659) .

55/ Sunr 3-4. Ph le PP'&L is acing purchases eel=-tuff 'c'ent municipals dis.cour a

'oy a

it has apoar ently aoooteo marketing strategy which promotes high load factor usage as a means of improving, its declining system load actor (Exhibit GT-54).

Ooc Yet Nos . ='R78-19, et al . 35 FP&L relies on oil, natural gas and uranium to fuel its generation. It cites the 1973 oil embargo and resulting

-rastic oil price increases and the expiration of long-term oil supply contracts and replacement by three-year "ontracts to cast uncertainty upon its oil supply. As or gas supplies, it references high levels of curtailment and the expiration of a major gas supply contract in 1979.

Concerning nuclear fuel, FP&I notes that it only has a two year inventory and that its long-term supply contract was cancelled by the seller in 1975.

FP&L may well face fuel supply problems, as do other suppliers in the electric utility industry. However, they are not of a magnitude that would justify the proposals before us in this case. It appears that FP&L continues to possess long-term fuel oil contracts and that it has entered into shorter-term oil contracts (3 years) with favorable cancellation provisions in order to gain greater flexibility in responding to price changes on the open market (Exhibits 22, at 3; 51, at 9) . FP&L' natural gas warranty contract with Amoco Production Company provides for daily deliveries of 200 NHcf through 1988, such deliveries being beyond the purview of,. the present curtailment plan of the transporter of th's gas, Florida Gas Transmission Corporation (Exhibit 51, at Tr. 431) . 56/ Finally, an affiliate of FP&L is engaged "in 9;uranium exploration (Tr. 454) and FP&L's existing nuclear units do not appear in danger of being curtailed due to fuel shortage. 57/

56/ Eee, Sehrinc Utilities Commission v. FEEC, F.2d oth Cir. Eos. 77-2911 and 77-2972 (March 20, 1979) .

57/ In 1978 FP&L and several other utilities won a judgment in federal district court against their nuclear fuel r ecuir emen ts supplier, Nestinghouse Electr ic Co rpo r ation.

Virginia Electric & Power Co. v. 'Westin house Electric f~g Coro., Crv. No. 75-0514-E (E.D. Va. October 27, 1978) .

ln an unreported opinion the court held that Westinghouse was not excused for delivering nuclear

• ' ' fuel by reason

• " " h var ious utxlxtxes. See, Antitrust Trade Regulation Reporter, No. 887, at A-15 (november 2, 1978) .

Docket Vos. ER78-19, et al. Among the fuel-related problems which FP&L gives as a reason for limiting firm wholesale service is its inability to procure a coal supply contract. However, on cross examination, FP&L vice president Gardner acknowledged that the Company has no coal-fired generation and has no plans to construct any. These points are confirmed by the testimony of FP&L's vice president in charge of fuel procurement which was presented to the Flor ida Public Service Commission in the spring of 1977 (Exhibit "22) . 58/ On brief, FP&L has argued that the inability to obtain a coal supply contract has impaired its ability to plan coal-fired generation.

However, the only evidence in the record of FP&L's need for such a plant was its desire to avoid -municipal access to nuclear generation, the base, load alternative to coal, which could come from. antitrust review before the Nuclear Regulatory Commission. 59/

FP&I points to environmental regulations which make construction of coal-fired units difficult and make nuclear units almost impossible to build. It also points to escalating costs, litigation and regulatory delays and requirements as additional fac'tors stopping future nuclear unit construction, or at least yielding a 12 year lead time which necessitates equal lead time for load forecasting.

It refers to its cancellation of the proposed South Dade nuclear units .and the substantial delay in licensing and resulting increase in capital costs of its St. Lucie No. 2 nuclear unit. As for existing generating units, FP&L states that its Turkey Point nuclear units have experienced steam generator leaks causing unscheduled outages in the past and requiring extensive scheduled outage in the future for repair, and that its combined cycle Putnam units, due to their novel design, have not been reliable. Finally, FP&L refers to its common stock selling below book value as evidence of financial difficulties which have limited its construction budget to internally generated cash.

58/ Exhibit 22 indicates that while coal may well be used in the future, economic, environmental and reliability problems make it largely irrelevant to FP&L's current capacity planning.

59/ Suuta at 32, n. 48.

Docket. Sos. FR78-19, eC al. Ne certainly cannot deny that these constraints do pose problems for utilities such as FP&K, but the record fails to establish that FP&T. is so hampered by regulatory recuirements and financial difficulties as to be incapable of evpandinq its generating capacity as needed in the future. FP&?. is, after all, offering 240 MW of Schedule D capacity to Homestead and Fort Pierce, and the recent rate of increase in demand by FP&Z's other customers cannot be characterized as rapid. FP&L has been greatly reducing its demand and load forecasts in recent years, with the actual

~

rate of growth being relatively low averaging at most around four percent annually (Tr. 848). To the extent that the record gives any indication of FP&G's current financial condition, it reveals that FP&h has experienced significant improvement in earnings and related market factors. About the time FP&T. filed this case, it was reportinq lower, more manageable growth; greater internal generation of funds; improved earnings and coverage ratios; and increased dividends (Exhibit GT-78). Suffice it to say that the record, comprised Largely of company documents, is ambivalent on this issue.

-P&5 would support the separation of full and partial requirements. tariffs in terms of costs of service on the basis of different load patterns. 60/ These separate full and partial, requirements tariffs differ -both in terms of demand and energy charges. FP&L contends,-therefore, that it has designed different rates to reflect more

~

preciseLy the different costs of servinq these different customer groups. Establishment of separate full and partial wholesale requirements rates is common practice.

We have in fact recognized the differences in the costs of serving full and partial requirements customers, not to mention different types of partial 6L/ Xn the present case, FP&Z,'s,proposaL requirements'ustomers.

of separate full and partial requirements rates appears reasonable. 62/

60/ FP&L asserts that its wholesale customers without any generating capacity have relatively stable and pred'ctable load patterns which allows operations and design rates to recover costs of serving it to plan these full requirements customers. L't fur ther con-tends that par tial requirements loads are less stabl hut .tha t the PR tar iff allegedly encour ages such customers to stabiLize their purchases of power.

6L/ boston Edison Company, Opinion lo. 809-A, Docket

.los. E-7738 and Z-7784, issued December 9, 1977 (mimeo at 20} .

62/ O" course, in Phase X of this docket we are not addressing the specific costs of service and rate designs of the SR-2 and PR tariffs. Accordingly, our determination does not reflect on how these two rates will actu v

Docket Nos. "-R78-19, et al. 38 BALANCING THE PUBLIC INTEREST CONSIDERATIONS Nhen the SR-2 and PR tariffs are viewed from a per-spective on the relationships between FP&L and other utilities within the relevant markets, the Presiding Judge's conclusion that the Company's proposal has "no discernible anticompetitive effect in and of it-self" is inadequate. 63/ Pith alternative sources of base-load wholesale capacity unavailable, FPsL's tari f restrictions would deny to Homestead, Fort Pierce and other nominally self-sufficient utilities within the relevant market the only remaining source of supply, schedule PR. It would conclude, finally, the municipals efforts over ten years to obtain a source of economically-priced, base-load power. Municipals like Homestead and Fort Pierce would become likelier to leave the utility business.

Indeed, the citizenry might force these utilities to come to FPaL requesting takeover. See, City of Mishawaka v.

American Electric Power Co., auora,.465 F. Supp. at 1329.

Qf even greater rmportance to the company would be the assurance that in future franchise renewal contests with potential retail market entrants, it could point to existing municipal utilities as characteristically expensive and unable to exploit scale economies.

r Homestead and Fort Pierce would not be able to economically utilize higher-priced, lower-quality Schedule D service to meet their base-load requirements.

Such offers:to sell at impractical prices and terms, have been construed as unlawful refusals to deal, when done to further monopoly power. Eastman Kodak Co'. v. Southern Photo Materials Co., 273 U.S. 359 (1927) .

63/ Ne recognize and fully appreciate that the Initial Decision was written before FP6L agreed to continue to serve Homestead and Fort Pierce under its PR tariff pending the final outcome of this case. Ne have not been burdened by the time constraints faced by the Presiding Judge. Under the circumstances the Judge is to be commended for his efforts.

Docket Sos. ER78-19, et al. The restriction of wholesale service to named and existing customers is an even greater threat to potential franchise competition. The record indicates that. FP&L generally plans to minimize sales of average-priced wnolesale power to municipals and cooperatives (Exhibit ST-17). After reviewing the record of FP&L's efforts to renew the Daytona Beach frachise, it does not appear likely that the Company would offer a potential distribution utility an average-cost rate. The signal to potential retail dis-tributors in areas presently served by FP&L at retail and over which FP&L has wholesale monopoly power is quite clear.

Cf., City of Mishawaka v. American Electric Power Co., sunra.

roaL's offer to discuss the feasrbrllty of service to new customers under specific contract rates does not reassure us. 64/

The balancing of competition against other public interest considerations, required by Cit of Huntinabur

v. FPC, 65/ becomes relatively simple once thxs case is 64/ As Staff notes in its brief on exceptions, at 9, the Presiding Judge erred in finding that FP&L had committed to serve new systems in F?&L's service territory.

6~/ 498 Fe2d 778 (D.C. Cir. 1974).

Docile+ Nos. ER78-19, et al;40-T stripped to its essential elements. The proposed restric-tive provisions are anticompetitive, we find no counter-vaili.".g reasons for their implementation, and they are to be deleted. The Company has not demonstrated that it should be allowed to change the general avaiLability provision of schedule SR-1 which makes wholesale service available to all municipal and coooerative customers in FP&L's service territorv. 66/ Proposed terminations of firm, average-cost service to Homestead and Fort Pierce are based on these restrictive provisions, so the proposed cancellations are rejected. The Homestead cancellation would also violate the understanding of the parties that this customer would continue to purchase schedule SR after the completion of their inter-connection. FP&L shall continue to serve Homestead and Fort Pierce, under schedulle PR. However, the proposal to bi-furcate schedule SR-1 into separate rates for total require-ments and partial reguirements service is soundly based with no discernible anticompetitive effect and we approve it.

In spite of the anticompetitive conduct recounted above, we w'sh to stress that there may be acceptable service limitations with diminished anticompetitive effects which ameloriate some legitimate operational problems faced by FP&L. Indeed, the intervenors recognize that the Company should be allowed to fashion reasonable terms and conditions to wholesale service.

However, FP&L has not provided us with any middle ground, much less a showing that it has selected a tariff limitation that is the least anticompetitive means of solving any such operational problem.

Finally, we note that FP&L has matters pending before us in .over 30 dockets, most involving interchange transmission service filings in which antitrust allegations have been made.

66/ Schedule .SR-1 provides:

AVAILABLE:

In all territory served hy the Company.

APPLICATION:

To electric service supplied to a municipal electr'c utility or to a cooperative

,.on-profit membership corporation organi-ed under the provisions of the Rural Electric Cooperative law for their own use for resale.

Docket Hos. ER78-19, et al. Ne see littlemade presentation need in those cases for the kind of elaborate in this one. It would be helpful to the Commission for the parties to pinpoint the competitive pro-blems and defenses relating to the filings in each of these cases.

The Commission orders:

(A) The Initial Decision issued in these consolidated proceedings on April 21, 1978, is hereby reversed.

(B) All limitations on the availability of whole-sale requirements service, as proposed by FPaL, except for the limitation of full requirement service under the SR-2 tariff to utilities with no generating capacity, are hereby rejected.

(C) FPSL is directed to revise its proposed SR-2 an'd PR tariffs to conform to this order'within 60 days.

Until revised tariffs are accepted by the Commission, the availability provisions of the otherwise superseded SR-1 tariff shall remain in effect.

( D) The notices of cancellation of requir emen ts service to Homestead and Fort Pierce are hereby rejected.

(E) Exceptions not. granted are denied.

By the Commission.

( S E A L )

Lais D. Cashell, Acting Secretary.

0 9~1~~

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION In the Matter of FLORIDA POWER 5 LIGHT COMPANY NRC Docket Nos. 335A (St. Lucie Plant, Units No.' 0-389 and No. 2)

FLORIDA POWER 5 LIGHT COMPANY NRC Docket Nos. 50-250A (Turkey Point Plant; Units 50-251A No. 3 and No. 4)

STAFF RESPONSE TO'FLORIDA CITIES'ARCH 28, 1979 AND APRIL 2, 1979 MOTIONS 1/

By motions dated March 28, 1979 and April 2, 1979, Florida Cities request the Commission to initiate an antitrust hearing in the above cap-2/

tioned matters pursuant to Section 105(a) of the Atomic Energy Act. This request is based upon the Commission's July 27, 1978 Order asking for advice as to whether, in view of the Fifth Circuit Court of Appeal s decision in Gainesville v. Florida Power 8 Li ht, 573 F.2d 292 (1978), cert.,denied, U.S. , 47 USLW 3329 (No. 78 -

476)(ll/14/78), an antitrust pro-ceeding at the NRC should be initiated and, if so, when it should be initiated and whether it should be consolidated with the current antitrust hearing in Docket 50-389A for St. Lucie Unit 2. In urging the Commission

~1 Florida entities involved in this petition include the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utilities Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida, and the Florida Municipal Utilities Association.

~2 The only substantial difference between the two motions appears to be that the March 28, 1979 Motion requests that a Section 105(a) pro-ceeding be initiated while the April 2, 1978 motion requests that the Section 105(a) proceeding be consolidated with the pending Section 105(c) proceeding involving Florida Power 5 Light's St. Lucie Unit 2.

to initiate this hearing Florida Cities cite the recent U.S. Court of Appeal s opinion in Ft. Pierce Utilities Authorit of the Cit of Ft. Pierce, et. al. v. Nuclear Re ulator Commission which specifically refers to 3/

the Commission s authority oVer matters pertaining to Section 105(a).

Florida Cities also point out that Commission action is now more appropriate then it was at the time of the July 27, 1978 Order in view of the. Supreme 4/

Court's denial of certiorari of the Fifth Circuit's decision in Gainesville.

5/

Staff's response to the Commission's July 27, 1978 inquiry was that there was no need to institute a Section 105(a) proceeding against Florida Power 8 Light Company regarding the Gainesville matter since the same issues were already incorporated in an ongoing Section 105(c) NRC antitrust proceeding involving the licensing of St. Lucie 2 in Docket 50-389A. He further pointed out that if a separate 105(a) proceeding was determined to be necessary, then to avoid duplication of trial efforts such a proceeding should be formally consolidated with the St. Lucie Unit 2 proceeding,

~3 F,2d (D,C, Cir. 1979), Dkt. No. 77-1925, et al., S'lip Opinion pps, 30-31; March 23, 1979. In this regard, the Court stated that,

"...Section 105(a) not only provides that nothing in the Act preempts the normal operation of the antitrust laws, but also vests the Commission with authority to revoke or modify FPSL's operating licenses in the event that a court finds that FPSL has violated those laws in the course of licensed activity, thereby confirming'the Commission's antitrust authority in this regard."

4/ See November 29, 1978 letter from Mr. Jablon to Commission Secretary Chilk, enc'1osing a copy of the denial of certiorari.

5/ August 25, 1978 NRC Staff Response to Commission Order of July 27, 1978.

I Neither the developments noted by the Florida Cities nor their argu-ments based on those developments warrants the action they have requested of the Commission. The Ft. Pierce case to shich they refer has no bearing on the manner in which the Commission may implement Section 105(a).

Similarly, the 'Gainesville case is not relevant to the matter of whether a separate Section 105(a) proceeding may be instituted. Nothing in these cases or in the Florida Cities argument in support of their requests alters the Staff s position reflected 'in its August 25, 1978 brief with respect to the Commission's authority to initiate a separate proceeding in this matter.

Accordingly, the Florida Cities motions should be denied.

Respectfully submitted, Lee Scott Dewey Counsel for NRC Staff

/La.~c edric D. Chanania Counsel for NRC Staff David J. Evans Counsel for NRC Staff Dated at Bethesda, Maryland this 17th day of April 1979.

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION In the Matter of )

)

FLORIDA POWER & LIGHT COMPANY ) NRC Docket Nos. 50-335A (St. Lucie Plant, Units No. 1 ) 50-389A and No. 2) )

)

FLORIDA POWER & LIGHT COMPANY NRC Docket Nos. 50-250A (Turkey Point Plant, Units 50-251A No. 3 and No. 4)

CERTIFICATE OF SERVICE I hereby certify that copies of STAFF RESPONSE TO FLORIDA CITIES'ORCH 28, 1979 AND APRIL 2, 1979 HOTIOflS,in the above-captioned proceeding, have been served on the following by deposit in the United States mail, first class, or, as indicated by an asterisk, through deposit in the Nuclear Regulatory Commission's internal mail system, this 17th day of April 1979.

Ivan W, Smith, Esq,, Chairman J.A. Bouknight, Jr., Esq.

Atomic Safety and Licensing Board E. Gregory Barnes, Esq.

Panel Lowenstein, Newman, Reis & Axelrad U,S, Nuc1ear Regula ory Commission 1025 Connecticut Avenue, N.W.

Washington, D,C. 20555

• Washington D.C. 20036 Valentine B. Deale, Esq. Tracy Danese, Esq.

Atomic Safety and Licensing Board Yice President for Public Affairs Panel Florida Power & Light Company 1001 Connecticut Avenue, N.W. P.O. Box 013100 Washington, D.C. 20036 Miami, Florida 33101 Robert H. Lazo, Esq., Member Jack W. Shaw, Jr., Esq.

Atomic Safety and Licensing Board John E. Mathews, Jr., Esq.

Panel Hathews, Osborne, Ehrlich, HcNatt, U.S. Nuclear Regulatory Commission Gobelman 8 Cobb Washington, D.C. 20555

• 1500 American Heritage Life Building 11 East Forsyth Street Docketing and Service Section Jacksonville, Florida 32202 Office of the Secretary U,S. Nuclear Regulatory Commission Harry W. Wright Washington, D.C. 20555

• Executive Yice President Seminole Electric Cooperative, Inc.

Jerome Saltzman, Chief. Suite 108 Antitrust & Indemnity Group 2410 East Busch Boulevard U,S, Nuclear Regulatory Commission Tampa, Flori da 33612 Washington, D,C. 20555

• Hr . Robert E. Bathen Daniel l<. Gribbon Nr, Fred Saffer Herbert Dym R,H; Beck 8 Associates -

Covington 8 Burling P.O. Box 6817 888 Sixteenth Street, N.H.

. Orlando, Florida 32803 . Washington, D.C,. 20006 j Dr.. John.H, Wilson Chairman Hendrie .

Wilson Associates lm Office of the Commission 2600 Yirginia Avenue, N.W.

U.S. Nuclear Regulatory Commission Washington, D.C. 20037 " Washington, D. C. 20555 "

Thomas Gurney, Sr., Esq. Commissioner Gilinsky 203 North Hagnolia Avenue Orlando, Florida 32802 Office of the Commission U.S. Nuclear Regulatory Commission Washington, D. C. 20555

• Robert A. Jablon, Esq.

Daniel J. Guttman, Esq..

. Alan.J, Roth, Esq, Con>sssoner Kennedy 2600 Virginia Avenue, N.H. Office of the Commission

'ashington, U.S.. Nuclear Regulatory Commission Washington, D. C. 20555

• D,C. 20037 Donald A. Kaplan, Esq.

David A. Leckie, Esq. Comissioner Bradford P.O. Box 14141 Office of the Corrmission U.S. Nuclear Regulatory Commission Washington, D. C. 20555 *

, Washington, D.C. 20044 William H. Chandler, Esq.

Commissioner Ahearne Chandler, O'NeaI," Avera, Gray, Office of the Commission Land 8 Stri pl ing Post Office Drawer 0 U.S. Nuclear Regulatory Commission Gainesville, florida 32602 Washington, D. C. 20555

• Hi11iam C. Wise, Esq.

Robert Weinberg, Esq.

Suite 200,1019 19th Street, N.W.

Washington, D.C. 20036 Hr. David Springs Southern Engineering Company 1000 Crescent Avenue, N.E.

Atlanta, Georgia 30309 fredric D. Chanania Atomic Safety and Licensing Board Counsel for NRC Staff Panel U.S. Nuclear Regulatory Commission Washington,'.C. 20555

• UNITED STATES OF Ai~IERlCA LEAR REGULATORY COMMISSI Be fore the Commission

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)

) 0 $4~

to<"

io qg4 Florida Power Light Company

& ) Docket No. 0-33 ~

(St. Lucie Plant, Unit No. 1). )

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)

)

Florida Power & Light Company ) Docket No. 50-250A (Turkey Point Plant, Units 3 ) 50-251A and 4) )

RESPONSE OF FLORIDA POWER & LIGHT COMPANY TO CITIES'O IONS On March 28, 1979, the Cities filed a "Motion for an Antitrust Hearing," and, on April 2, 1979, they filed a "Motion for Consolidated Hearings." There is no discernable difference between the two pleadings.

No proceeding is pending in which these two motions can be considered; accordingly, the motions should not be considered or acted upon. For reasons previously stated in filings requested by 1/

the Commission, Florida Power & Light Company opposes the relief requested by the Cities.

Respectfully Submitted, Daniel Gribbon Herbert Dym Covington & Burling 888 16th Street, N.W.

Washington, D.C. 20006 J.A. Bouknight, Jr.

Lowenstein, Newman, Reis, Axelrad & Toll 1025 Connecticut Avenue, N.W.

Washington, D.C. 20036 John E. Mathews, Jr.

1500 American Heritage Life Bldg.

ll East Forsyth Street Jacksonville Flo a.da 32202 By:

fA.

/

Bou ig , Jr.

See Florida Power & Light Compan 's pleadings dated August 25, and September 5, 1978.

ll os<~'c gO pe gV UNITED STATES OF AlKRICA CON'EMISSION NUCLEAR REGULATORY py9

()pic+

Before the Commission b In the Matter of: ) 1

)

Florida Power & Light Company ) Docket No. 50-335A (St. Lucie Plant, Unit No. 1) )

)

)

)

Florida Power & Light Company ) Docket No. 50-250A (Turkey Point Plant; Units 3 ) 50-251A and 4) )

CERTIFICATE OF S" RVICE I HEREBY CERTIFY that copies of the following:

RESPONSE OF FLORIDA POWER & LIGHT COMPANY TO CITIES'OTIONS have been served on the persons shown on the attached list by deposit in the United States Mail, properly stamped and addressed on April 13, 1979.

By:

.A. Bou nz.g , Jr.

owenstein, ewman, Reis, Axelrad & Toll 1025 Connecticut Avenue, N.W.

Washington, D.C. 20036 Counsel for Florida Power & Light Company

Chairman Josepn .'I. Hendr' Valentine B. Deale, Escuire Of=-'ce of the Comnissione s Atomic Safetv and Licensing U. S. Nuc'ar Reculatory Commission Board Panel Nashihgton, D.C. 20555 U. S. Nuclear Regulatory Commission Nashington, D.C. 20555 Commissioner Victor Gilinsky 0 f'ce of the Commissioners Robert A. Jablon, Esauire U. S. VLucl ar Regulatory'ommission Spiegel & 5'tcDiarmid Nashincton, D. C. 20555 2600 Virg'nia Avenue, N.N.

Nashington, D.C. 20037 Commiss'oner Ric"..ard Kennedy Of ice o= the Commissioners Melvin G. Berger, Esquire U.S. Nuc'ear Regulatorv Commission An"itrust Division Nashincton, D.C. 20555 U.S. Department of Justice P.O. Box 14141 Commissioner Peter Bradford 'ashincton, D.C. 20044 Office o f the Commis s ioneis .

U. S. Nuc'ar Reculatory Commission Lee Scott Dewey, Esquire Nashinc on, D.C. 20555 Counsel for the Staff U.S. Nuclear Regulatory Commission;.

Conmiss 'ner Joi:n F. Ahearne Nasi:ing ton, D.C. 20555 Office of the Commissioners U. S. Nuclear Reculatory Commission '.R. Stephens, Supervisor (20)

<Uashircton, D.C. 20555 Docketing and Service Stat'on Office of the Secretary of the Alan S. Rosenthal, Escuire Commis sion Atomic Safety and Licensing U. S. Nuclear Regulatory Comm'sioa Appeal Boa"d Panel Nashington, D. C. 20555 U.S. Nucle " Reculatory Commission Nashington, D.C. 20555 Nill'am C. Nise, Esauire Suite 200 Jerome E. Sharfm n, Esauire 1019 19th Street, N.lU.

Atom c Sa tv and Licensing Nashington, D.C. 20036 Appeal, Board Panel U.S. Nuclear Reculatory .Commission Nilliam H. Chandler, Escuire Nasnington, D.C. 20555 Chandler, O'Neal, Avera, Gr y Lang & Stripling Richard S. Salzman, Esauire P.O. Drawer 0 Atom'c Safe+'r and Licensing Appeal Gainesville, Florida 32602 Board Panel U. S . Nuclear 'Regulatory Commission Jerome Saltzman Nashincton, D.C. 20555 I Chief, Antitrust and Indemnity'roup Robert !1. Lazo, Esauire U.S. Nuclear Regulator r Connissior, Atomic Safety and Licensing Board Nashington, D.C. 20555 Panel U.S. Nuclear Regulator: Commission Sanue 1 J. Chi1k.

LUashinc"on, D.C. 20555 Secretary U.S. Nuclear Reculatorv Conmissicn, ivan "1. Sni tn, Escuire !lashington, D.C. 20555 Chairna."., A"on' Sa.f ety and Licensing

~a'<

Pool M Qv~ai

~4 U. S. Nuclear Reculatorir Commission Nash> ..eton, D.C. 20555

LAW OFFICES SPIEGEL Sv iWXCDIzlRNID 2600 VIRGINIAAVENUE. N.W.

WASHINGTON. D.C. 20037 TELEPHONE (202I 333 4500 GEORGE SPIEGEL BONNIE S. BLAIR ROBERT C. MODIARMID TELECOPIER (202) 333.2974 ROBERT HARLEY BEAR SANDRA J. STREBEI THOMAS C. TRAUGER ROBERT A. JABLON JOHN MICHAELADRAGNA JAMES N. HORWOOD CYNTHIA S. BOGORAD ALAN J. ROTH ,(MASSACHUSETTS SAR ONLY)

FRANCES E. FRANCIS GARY J. NEWELL DANIEL I. DAVIDSON MARC R. POIRIER THOMAS N. MCHUGH. JR.

DANIEL J. GUTTMAN PETER K. MATT DAVID R. STRAUS April 2, 1979 Chase R. Stephens, Chief Docketing & Service Section U.S. Nuclear Regulatory Commission Washington, D. C. 20555 RE: Florida Power & Li ht Co. (St. Lucie Plant, Unit No. 2; Turkey - tgPlant, Unit Nos. 3 and 4),

Docket Nos. -335A, 50-250A 6 50-251A

Dear Mr. Chilk:

Enclosed for filing in the above-captioned dockets, on behalf of: Florida Cities, are twenty copies and a signed ori-ginal of the following document:

MOTION FOR CONSOLIDATED HEARINGSR We would appreciate it if you tional copies enclosed date and time would have the two addi-stamped and returned to this office in the envelope provided.

Very truly yours, Robert A. Jablon Attorney for the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric Water and Sewer Utilities, the Lake Worth Utilities Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and

, the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida, and the Florida Municipal Utilities Association

UNITED STATES OF'MERICA NUCLEAR REGULATORY COMMISSION

)

)

FLORIDA POWER 6 LIGHT COMPANY )

)

(St. Lucie Plant, Unit No. 2) ) Docket Nos. 50-335A

)

(Turkey Point Plant, Unit ) Docket Nos. 50-250A Nos. 3 a 4) ) and 50-251A MOTION FOR CONSOLIDATED HEARINGS

'On July 28; 1978, the Commission issued an Order in these dockets requesting advice whether it should institute a 105(a) proceeding with regard to these dockets in view of-the adverse antitrust finding against Florida Power & Light Company in Gainesville Utilities De artment v. Florida Power

& LicLht, 573 F. 2d, 292 (l978) . This decision is final and no longer subject to,Supreme Court review. Letter of Robert A.

Jablon to Mr. Samuel J. Chilk, Secretary, NRC (November 29, 1978).

By a ruling dated March 23, 1979, the United States Court of Appeals for the District of Columbia in Fort Pierce Utilities Authorit of the Cit of Fort Pierce, et al. v.

United States, et al., No. 77-1925 et al., upheld the Commission's determination that it does not have jurisdiction to order an antitrust review under Section 186 of the Atomic Energy Act with regard to these plants. 1/

1/ This determination is subject to certiorari review by the Supreme Court, although action here could moot such review.

However, the Court held:

"To so immunize the licenses at issue here from post-licensing antitrust review under Section 186(a) is not as Florida Cities assert, to give FPGL a 'carte blanche use [its] facilities directly contrary to the

'o antitrust laws. Section 105(a) not only provides that nothing in the Act preempts the normal operation of the antitrust laws, but also vests the Commission with authority to revoke or modify FPGL's operating licenses in the event that a Court finds that FPGL has violated those laws in the course of licensed activity."

(Slip Opinion, Pages 30-31) .

In view of the conf irmation by the Court of the Commission's authority under Section 105(a) "to revoke or modify FPGL's operating licenses" and the Fifth Circuit deci-sion, now final, that an antitrust violation has occurred, it is appropriate that the Commission now,rule pursuant to its July 28, 1978 Order. Florida Cities do not deem it appropriate to reargue the grounds for such order, since the matters at issue have been fully briefed. However, they do point out the pendency of the hearing in Florida Power 6 suggest that in the event the Commission does not deem it appropriate for it to rule on the issues involved initially, the matters may be consolidated for ruling with that docket,

subject of course to the Commission's appellate review pro-cess. However, in any event, the matters are plainly ripe for decision.

Respectfully submitted, Robert A. Jablon Attorney for the Fort Pierce Utilities Authority of the City of Fort Pierce, the Gainesville-Alachua County Regional Electric- Water and Sewer Utilities, the Lake Worth Utilities Authority, the Utilities Commission of New Smyrna Beach, the Orlando Utilities Commission, the Sebring Utilities Commission, and the Cities of Alachua, Bartow, Fort Meade, Key West, Lake Helen, Mount Dora, Newberry, St. Cloud, and Tallahassee, Florida, and the Florida Municipal Utilities Association April 2, 1979 Law Offices of:

Spiegel & McDiarmid 2600 Virg inia Avenue, N. W.

Washington, D. C. 20037 .

(202) 333-4500

UNITED STATES NUCLEAR REGULATORY COMMISSION In the Matter of )

)

Florida Power "& Light Company )

)

(St. Lucie Plant, Unit No. 2) ) Docket No. 50-335A

)

(Turkey Point Plant, Unit ) Docket Nos. 50-250A Nos. 3 & 4) ) and 50-251A CERTIFICATE OF SERVICE I hereby certify that the foregoing MOTION FOR CONSOLIDATED HEARINGS has been served on the following per-sons by deposit in the United States mail, first class/

postage prepaid, this 2nd day of April, 1979:

Ch'ase Stephens, Chief Herbert Dym, Esq.

Docketing & Service Section Daniel Gribbon, Esq.

Nuclear Regulatory Commission Joanne Grossman, Esq.

Washing ton, D. C. 20555 Covington & Burling 888 16th Street, N. W.

Lee Dewey, Esq. Washington, -D. C. 20006 Fred Chanania, Esq.

Dave Evans, Esq. Mel Berger, Esq.

Office of the Executive Mildred Calhoun, Esq.

Legal Director Department of Justice Nuclear Regulatory Commission Antitrust -Department Washington, D. C. 20555 1101 Pennsylvania Avenue, N. W.

Washington, D. C. 20530 Ivan W. Smith, Chairman Atomic Safety & Licensing Board John E. Mathews, Jr., Esq.

Nuclear Regulatory Commission Mathews, Osborne, Ehrl ich, Washing ton, D. C. 20555 McNatt, Gobelman & Cobb 1500 American Heritage Life Bldg .

Robert Lazo Jacksonville, Florida 32202 Atomic Safety & Licensing Board Nuclear Regulatory Commission J. A. Bouknight, Jr., Esq.

Washington, D. C. 20555 E. Gregory Barnes, Esq.

Lowens te in, Newman, Re is &

Jerome Saltzman, Chief Axelrad Antitrust & Indemnity Group 1025 Connecticut Avenue, N. W.

Nuclear Regulatory Commission Washington, D. C. 20555 Washington, D. C. 20555 Valentine B. Deale 1101 Connecticut Avenue, N. W.

Suite 504 Washington, D. C. 20036 Ro ert A. Jp on Attorney for Florida Cities

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