ML19326D339

Answer to Notice of Hearing & Opposition to, & Motion to Reconsider Review Authority Delegation & Dr Weiss Designation.Certificate of Svc Encl

ML19326D339
Person / Time
Site:	Midland
Issue date:	05/09/1972
From:	Ross W, Watson K CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.), WALD, HARKRADER & ROSS
To:	US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML19326D333	List: ML19326D339
References
NUDOCS 8006090762
Download: ML19326D339 (16)

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UNITED STI.TES OF AMERICA I BEFORE THE ATOMIC ENERGY COMMISSION' In the Matter of )

) Docket Nos. 50-329A' Consumers Power Company' ) and 50-330A

'(Midland Plant, Units 1 and 2) )

ANSWER TO NOTICE OF HEARING AND OPPOSITION TO, AND MOTION TO RECONSIDER, DELEGATION OF REVIEW AUTHORITY AND DESIG:1ATION OF DR. WEISS' Purcuant to the provisions of 10 CFD section 2.705 of the Commission's Rules of Practice, Consumers Power Company (hereinaf ter " applicant") files this An'swer to the-Notice cf Antitrust Hearing on Application for Construction permitc pub-lished in the Federal Register-(37 F.R. 7726, April 19, 1972)

(hereinaf ter " Notice") . - Applicant also opposes, and moves the Commission to reconsider, that portion of the Notice (1) dele-gating final review of the proceeding to.an Appeals,Scard and

'(2) ' designating Dr. Leonard W. Weiss to be a member of the hear-ing Board.

Applicant's Position "

1 It is applicant's position that the activities under the permits in ques tion would not create or maintain a situa-

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tion inconsistent with the antitrust laus as specified in subsection 105 (a) of the Atomic Energy Act, as amended, 42 U.S.C. 52135(a). Subsection 105 (c) of the Atomic Encrgy

'8006090 M _

Act, as amended, 42 U.S.C. S 2135 (c) , recuires the Commission, whenever antitrust issues have been properly raised in a licensing proceeding, to "make a finding as to whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws .. . ." An " affirmative" antitrust ,

finding does not preclude unconditional issuance of a license, howcVer, since the Commission is further directed by this section to "also consider . . . such other factors, including the need for pcwer in the affected area, as the C.onaission as its judgment deems necessary to protect the public interest."

The legislative history of the ?.ct demonstrates that Congress intended the Commission to consider the implica-tions, from the standpoint of antitrust laws and policios, of the construction and operation of the proposed facilities only, and not to assume the responsibilities of the Department of Justice and the courts for the enforcement of the antitrust laws with respcct to an applicant's overall activities as a

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utility. Rather, the statute commands that the Commission scrutinize the possible effects of the " activities under the license", and only those activitics, in an antitrust context.

The licenses applied for in this proceeding would permit appli-cant to const uct and ultin.ately to opcrate the Midland units, but no more. The licenses are not concerned with the operation of Applicant'r, system in a broader context, including other generation, ' rannmission facilities, sales contracts, coordin-ation arrangemsnts and the like. Thus issues relating to co-ordination, wheeling, pooling, and proposed or exis ting inter-1 1

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.3-connection agreements, as set forth by the Justice Department, in its ' advice letter dated June 28, 1971, and the intervention petitions filed by Traverre City et al and Wolverinc~ Electric Cooperative, Inc., are irrolovant to the inquiry which the 1

statute contemplates, and.should not be considered in tnis

. proceeding.

, Subject to - and withcut .vaiving - the foregoing position, it is applicant's furthcr position that it has not monopolized any relevant market uithin the meaning of Section 2 of the Sherman Act, 15 U.S.C. 52. Nor has applicant engaged in any other conduct or a~ctivity which is inconsistent with i

any of the. federal antitrust laws, to the entent thht these la.s are applicable to an industry characterized by pervasivo i

government regulaticn and natural monopoly economies. In addition to othcr alternatives available to applican t 's neigh- >

' boring utilities , such utilitics presently enjoy the option of non-discriminatoryand wholly adequate access to the benefits ,

of-large scale generation and transmission through. purchases e

j under' applicant's wholesale rate schedules approved by the j

I'cderal Power Commission. Applicant's neighboring utilities, including those obtaining all or part of their requirements

{- under applicant's wholesale schedules, are financially vi;2 ale

and, to the extent contemplated by Federal and state law,

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. competitively viable as well.

It in applicant's position that requiring applicant to grant some of its customers' a preferential form of ac.: css l-(

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to its generation and transmission system would be unfair and discriminatory to applicant's customers who are not afforded such access and would therefore violate the Federal Power Act and the laws of the State of Michigan. Additionally, to afford such access to nunicipal or cooperative systems, which enjoy tax advantages and governmental subsidies, would place such entitles in a position to competo unfairly with applicant for uhcl+c, ale and retai] load, and -ould be inconsistent with the antitrast laws and the public interest.

Specificction of Issues and " acts Applicant denics that the activities under the per-mits in question would create or maintain a situation 11 con-sistent with the antitrust ic.ts as specified in subsection 105 (a) of the Atomic Energy Act as amended (42 U.S.C. 2135 (a)) .

Applicant also denies and takes issuc with the statement that Wolverine Electric Cooperative, Inc. (hereinaf ter " Wolverine")

filed a " timely" petition to intervene in this proceeding (Notice , p . 3) . Holverine's petition was filed on November 1, 1971, twenty-seven days after the filing deadline established by the Commission.

Appearance Applicant proposes to appe'ar and present evidence in this proceeding.

Opposition to Delegation o f Ec Vi c *./ authority Applicant res"ectfilly opposcs, and moves the Cerr.ic-Sion to roconsider, that portion of die .!ctice hich delecct ?n ,

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pursuant to Section 2.785, to the Atomic E afety and Licensing Appeals Board (hereinaf ter " Appeals Board") , the final authority, including the review function, which would ot>crwi se be exercised and performed by the Commission.

Applicant submits that the issues to be considared in the above-captioned proceeding are so fundamental, and so novel to this Co.mmission, that they require a full review by*the Commission itself. The hearings will be held to deter-mine uhether the activities which applicant proposes under the construction permits in question lould create or maintain a situation inccnsistent uith the antitrust laws, pursuant to arc.endmants to the Atomic Energy 7.ct enacted in December, 1970. See 42 U.S.C. 2132 et seg. Until the 1970 amendments, the Co::uission's antitrust review under the 1954 c.tomic Energy Act renained inoperative because all reactors were licensed under Section 104 of the Atomic Energ;' Act, as amended, to which the antitrust review provisicns did not apply. The 1970 amendments changed the law so that almost all reactor licens-ing proceedingc now require antitrust review. See bortram Schur, Bechgroun6 Diccussion of Antitrust Aspects of luclesr Power Licensing, ALI-A3A Course on Atomic Energy Licensing and Regulations, Washington, D. C. (Iioverder 12, 1971) pp.

1-3.

The instant proceeding is die first to be noticed for hearing c- antitrust issues pursuant to the 19 70 arendrents.

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Many additional antitrust hearings presumably will follow, since, of the first fifteen license applications which the Justice Department has reviewed, it has recommended that hearings be held in seven. Schur, suora, at 11. These hearings will

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undoubtedly tax the resources of the commission, its staff',

and license applicants . In the words of one Justice Department official, "many of the applications involve issues just as complex and difficult as those which we encounter in a major antitrust investigation under the Sherman Act." Milton J. Grossman Antitrust Aspects of Muclear Power Licensinc -- The Role and Philo#ioph" of the i.ntitrus t Decision , 7.LI-il3A Course of Study on Atomic Energy Licensing and Regu]ations, Washington, D. C.,

(Novenber 12, 1971), p. 3.

In addition to the cor. plex questions of fact and law arising under the Sherman Act, this proceeding (and those uhich uill follow it) raises difficult' questions about the Commission's role in enforcing the antitrust laws, serious issues of comity with the Federal Power Commission and other federal and state governmental agencies, and vital questions concerning the nature and scope of hearings required by the 1970 amendments. The Commission has never before had to address itself to these or other fundamental issues of antitrust law and public policy.

The published amendments to the Commission's Rules which implcncnt the 1970' amendment (see 33 F.R. 19655) are of little guidance in this regard since, " ce nc r:'l ly , thene rules simply crank into our regulatory sy;.: tor tha statutor/ r._ndn nt." Schur, a rm;aj

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Given the lack of Commiscion precedent and the funda-mental nature of t'.e issues raised, applicant cubmits that the delegation of final review to the Appeals Board would bc par-ticularly unwice and impractical. An appellate review board's role is to apply agency policy to given factual cirecmstances, not to formulate policy. See Freedman, Revicw Boards in the Apminictrative PrcCass, 117 U. Penn. L.R. 545 (1969). Signi-ficantly, in the Federal Communications Corraicsion and the Inters tat Cc=merco Comaission, where Congress has enplicitly, provided for the establichment of appellate revic . boards, 47 U.S.C.

155 (d) (1) and 49 U.S.C. 17 (5) , such boards are not utilized as final authority wherc Erportant policy cuestions are concerned.

Sec Note, Intertrediv.te :nnollate Revic c- Boards for Administrative Agencics, 81 Harv. L.R. 1325, 1329 (1968). Similarly, the Administratirc Conferenca's proposed amendment to Section 8 (b) (1) of the APA, 5 U.S.C. 557, calls for Corc:aission-level review of cases where a party makes a " reasonable showing" that the case involves "a decision of law or policy which is important". See Freedman, supra, at 577.

Here, there vill be no entant Commission policy for the Appeals Eoard to apply, and the Commission's on going regu-latory process will suffer from a lack of Commission guidance in policy areas. Unlike the ICC and FCC, the Coramicsion 's Rules of Practice, Section 2.786(b), do not permit parties to petition the Commissica to revicu T.ppealc Board decisions.

This provicion e:g..asi.:cs that the Appeals ':oard wchanism

.c-was established to review ordinary cases , not to forr: alate Commission policy or otherwiso resolve inportant questions of law and public policj. Thus, here, where.the issues are novel, corcplex , and fundamental, the parties are entitled to have the issues heard and ravicwed by the Commission itself, the agency designated by Congress."

Ocposition to Desicnation of Dr. Ueiss Applicent cpposes, and moves the Cer.unission to recon-sider, that portion of the Notice designating Dr. Leonard W.

Weiss as a ne 6cr of the .'itontic Safety and Lictnsing Board (hereinafter " Board"). In view of Dr. Weiss' connection with ano of the partius to the proceeding and his publicly-ct: pressed prejudgmant of the law and ",c'- "' th is c;uc , his membership on the Ecard would deny c.pplicant a fair hearing in this pro-ceeding.

1. Dr. Meiss and the Antitrust Dlvision of the Justice Department, the " prosecutor" and one of the parties in this proceeding, have maintcined a clore relationship for several years'. Dr. Weiss' connection with the Antitrust Division dates at leas t to Septer.ber, 19 69, when he became a .special econonic assistant to tne Assistant Attorney General for Antitrust.

Department of Justice E:hibit ::o. 220, American Electric Pcwer Company Inc. (SEC file Mo. 70-4596) (January, 1971) p. 2-3.

He continued in this position until June, 1970 during which timo, cccording to his testimo:" in the aforcrantioned SEC

_9-proceeding, he devoted et least one month 's time to a study of the electric utility industry and frcquently consulted with Mr. i!allace Drand, the Division's counsel in this prcceeding.

Transcript of the SEC proceedin <, pp. 14, 929-930.

After leaving the full-timo cmploy of the Antitrust Division in Juno, 1970, Dr. Meiss prepared testinony for the Division in the AEP proceeding before SEC and in January, 1971, testified for more than a week as one of the Division's chicf economic witnessos in that case. That proceeding, and Dr.

Maiss' testimony in particular, concerned many of the same

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issues as have been rcised in the ins tant precacci e a tv. the Antitrust Division and the propssed intervenors .__1/

Applicant has resson to believe that D r . t!ai s s ' close relationship since Januhry of last year, Uith the Antitrust Divisicn of the Justico Depart. cant has continued and that he

_1/ In the AEP proceeding, the SDC is considering the antiurus t im.olicaticas of AEP's o.rcPosed accuisition of a neichhorinc - -

Chio utility, pu::s uan t to section -10 (b) (1) and,10(e) o. the Public Utility dolding Ccmpany Act of 1935, 15 U.S.C. .479, et seg. The ?.nti trus t Division of the Justice Depart;. cat intervencd in th a precaeding to crpose the proposed awfuisi-tion. The tcstir.ony of 'na Departmn t's .itnesses , in.lud-ing Dr. Sciss, raised issues relating to the dagree of con-centration in the industry, the fea;1bility of industrial and wholasale pc'ecr congenitica, the effects of 'acclia::

anc,. pooling , ana :.h e c: n.s t.c n ce o r. n a t ura.,

tonopoly economics.

These issues hava also becn raised in the ins tant prece;d-ing by the Antitrus t Division and b i, the proposed int:rvenors.

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played a significant role in the formulation of the Depart. Tent's policies whica led to the aforementioned advica latter from the Division to the Commission on June 23, 1971. As recently as October, 1971, Dr. Weiss and several attorneys in the Antitrust Division met under the auipices of Brookings Institute, Washington, D. C., to discuss a paper by Dr. Weiss which, as noted bclo.1, expresses ' factual and legal conclusions about.-

this crococdina.

The foregoing demonstrates that Dr. Weis - has been so intimately related to and connected uit.' the Ahtitrust Civi-sicn that his membershi.n on the Bocrd 'tould La i.Te. ro.ocr._2/

The law re:mi ring disqualification a.pplice ith eenal force to judgas and to administrative adjudicctors; indeed, the latter are often erbjected to even higher stan6a:ds since "many of the safeguards '.'hich have been thrcwn around court proceedine;s, have, in the interest of expedition and a scyposed ad.ninistrative officiency, been relaxcd [in administrative adjudicationj."

NLR3 v. Phelq.1 , 136 F.2d SG2, 563 (5th Cir. 1943); see also Long Beach I'cdoral Savinc;s & Loan Ass'n v. Federal Hete Loan Bank Board, l?9 F. Supp. 599, 612 (S.D. Cal. 1960), reversed on other grcunds, 295 F.2d 403 (9th Cir. 1961).

_2/ If, in the Ccmmission's view, the foregoing is not Ju:'ficient to so demcastrate, applicant shculd be permitted to utili::e the d.iscavery procadurcs cat forth in the Corr.icnion 's Rules of 'ractice ta as certain the rel:aicn-ship batvtaca Dr. ..'c i a s and the Dapcrtmant of Justice in the more recent period follo.ing wraination of his crgl sy ..c n t re l a tic:v h t;. .

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Federal law pronibits a judge hearing.a case in which he "is no related to or connected uith any party or his attorney" that his c. articipation would be improu. er. 28 U.S.C. 9455.

t See Texaco, Inc. v. Chandler, 354 F.2d 655 (10 th Cir. 1965);

U . S . v. Ar.o rin a , 411 F.2d 1130 (6th Cir. 1969) (trial judge who was United States Attorney then criminal complaint was filed is disqua'tified even if he lacked actual 1:nowledge of the case) . The came standard has been applied to adminis trative adj udica tions . Thus, where an E.C.O.C. board member war considerin a non-pecuniary position with an organisation which had taken a stand on an inste before the E.E.O.C., the meriber was dis-qualifi ed. Air Transoort Ac.ccciation v. Hnrnanfez, 264 I.

Supp. 227 (D.C. D.C. 1967). In the :nstant case, where Dr.

Meiss was formarly employed by the prosecuting party. has recently appeared at that party 's chief witness in a case involving simi-lar allegations, and has maintained continuing profe.ssional contacts uith the party, his participation would destroy "the appearance of detacb. 3 impartiality" which administrativo due 9

procces requires. Raco v. Van Ducen, 350 F.2d C06, 812 (3rd Cir. 1965).

2. Even apart frca Dr. Weiss' close connection lith the Antitrust Division, his publicly expressed ciews concerning the facts and lav> of this proceeding are sufficient to require disqualification. Dr. Ueiss presented and discussed a paper enti':od c " a Ev 'uncion of r.ntitri'Jt in the 31cetric Po.'ar

4 Industry" at a Brochings Institute aceting, in October, 1971, which was attended, inter clia, by atterneys from the Antitrust Division of the Justico Departernt, the Securitier and D: change Commission, and the Federal Power Cc rission. The paper, which reportedly vill soon be pu'olished as a portion of a book, refers to the instant procecding in the f.ollmzing conte::t (pp. 37-

38) :

"Duc perhans to its,long issolation [ sic) from antitrust, the electric pcSter indus try seem to enga.ge f airly cc: .o.,1y i n practi.cas th.?t would be of doub tful legal d M "1se hera. L'hol33alc contractn seem co c.only to contain provisions preventita purchasers from rea lling encapt at retail, f rc n s u.e.n 1'/ in a. cartain classes af indus-t ri a '. c u:-! no:' 3 rs , o r c'. c n f N : i ' n t o r'Je nuC Ctir1 vibh or chocling for third partics. -Pdh.-e n.:ree-ments invc'"= 'og (sic] term recuiremnt ron-tracts. _40/" .

According to footnote 48:

"The Justice Departna.9t cited a number of such rectrictions in contracts of Const;ers Pcuer auf. of Souchern California in its advisory letterc cn Jidland Units 1 and 2 . . .

The tcnt of the paper then continues: *

"These restrictions hardly seem consistent with the tough positions the court has taken in f Standard Stations or Schcrinn [ Footnote omitted]

. . . In gen:ral, tha rer?.o. val o f these res tric-tions scems within the reacn or crosent l a', - and '

woula, ge n o rc u, ,." serve to en.aanco competition in ' . . . /

t.heL no:cr industry with fe. if any harmful side effects."

Althouch thcne statomonts are couched in the somcwhat cautious tor.c of ten associated with academic cfforts, thcf leave little doubt that Dr. Neiss "has in sore no ;ure adjudged nIn ,e ..-<.n

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it". Cinderella Career and Finishinc Schools, Inc. v. FTC, 425 F.2d 503, 591 (D.C. Cir. 1970) ( emph as.i n supplied). Indeed, Dr. Ucius' conraents regarding this proceeding are at least as strong as Chairman Dixon 's disqualifying s tater.onts in Cinderella, supra. There, a case involving a charm school was pending before the Federal Trade Ccmnission at the same 1

time that the Chaircan made a speech to netspaper editors advising them not to accept deceptive advertising, such as ads from charm schools which make inflated clairs. Although the Chairman did not identify he school by name a: d despite the fact that previously-decided FTC cases 'r ad also dealt tith deception by charm schcols, the court held that the Chairman 'tas dicqualificf from hearing che case. See alsc I mriqr Cyanaaid Co. v. FTC, 363 F.2d 757 (6th Cir. 1966); TcNaco, I n c_. **

. F2C, 336 F.2d 754 (D.C. Cir. 1964), vacated on other grounds, 331 U.S. 739 (1965). ,

3. The case for disqualification is particular1 -

strcng in the instant case since Dr. Meiss was designated for

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B :ard membership f rom " private life', pursuant to the Atomic Energy Act, as amanded, 42 U.S.C. S2241. Th us , the rule of necessity, which states that disqualification will be discouraged where no other individual or board has jurisdiction to hear the case, in not applicable here. Sco, c.q.,

2 FTC v. Cement Inctitute, 333 U.S. 683 (1940). Rather, the selection process envisior:.d by 9 2 stch'te may be ecnaid::nd ard agous :o scluc~'cr of a. jury. .i 'ur;* Fe.Our id I;o ,; e:Q'CL0d to he t i t .'.O C.C C:!J ! 'JiOMG :

_19 or generalized mental attitudes, but he must ba free of pre-conceived views about the case 'ocfcro him. Cf. Memorendum r, Order, In 24atter of Lonc. Islarci Lic. ' tinc Comenn" (A:,C Dochet .

50-322) (October 28, 1970); :.~enorandwa & Order, In "atter of Toledo P6ison Cc;nany and' Clavoland lectric Illu-inati nc- Comcz.nv (AEC Doe::et 50-34 6) (February 19, 1971). Here, it is clear that Dr. I:ciss is not only a'.are of the facts of this case, but' hac also reached and publicly e>: grossed legal conclusions about the ecse; he is therefora disquali fied fron hearing it. ~

Ispplicant .s ubmi ts that either Dr. ' leis s ' clonc rela-tio n s h i.* 'a.ch th- o. ri"aa::V. movinc.

.n. r e.z in this jrccandinc or his publicly stated concluaions about the procacdings ;c cuf-ficient to require disqualification. Together, these con.;ider-atio is clearly ecupol disqualification since Dr. 'ciss' parti-cipation would deny Appliennt its right to a hearing " attended not only uith every clcmont of ~ fairness but with the very cepea):anct of fairnces." Cinderella, stnra, at 591. His continue-2 participat:

will cloud the proccedings froa their inception, and.lcad to litigation and delay and uncertaint." in the outccme. S e e ?_r.cs._

Treat & Co. v. Securitics and Exchanc e Cc mir:sion , 306 P.2d 260 (D.C. Cir. 1962).

4. It should not be necessary to add that applicant's motion to disqualify Dr. Weisc is not intended in any 'tay as a personal reficction upon him. H o v. c v a r , for the r e a r. o n s already Jr.ated, Dr. b'eiss' participation i. n t h .i n prcr.ccding

raises substantial question of fairness which should be avoided in this, first, precedential proceeding under the 1970 Amend-ments to the Act.

Conclusion For the foregoing reasons , applicant prays thct the Commission. reconsider that portion of its Notice delegating final review authority to the Appeals Board and designating Dr. Weiss to be a member of the hearing Board.

Respectfully submitted,,._J

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,Wm. Ucrfield nos:s 4 / d .? NJ Keitn S. Watson Attorneys for Consumers Power Company WALD, HARKRADER & ROSS 1320 Nineteenth Street, N. W.

, Washington, D. C. 20036 (202) 296-2121 /

Of Counsel:

Harold P. Graves Consumers Power Company 212 West Michigan Avenue Jackson, Michigan May 9, 1971 5

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CERTIFICATE OF SERVICE I hereby certify that copies of the forogoing Applicant's Answer have been served on the following by deposit in the United States mail this 9th day of May, 1972:

Jerome Ga5finkel, Esq., Chairman Atomic Safety and Licensing Board U. S. Atomic Energy Commission Washington, D. C. 20545 Hugh K. Clark, Esq.

P. O. Box 127A Kennedyville, Maryland 21645 Dr. Leonard U. Weiss Department of Economics ,

The University of Uisconsin Madison, Wisconsin 53706 James F. Fairman, Jr., Esq.

2600 Virginia Avenue, N. W.

Washington, D. C. 20037 Joseph Rutberg, Esq.

Antitrust Counsel for AEC Regulatory Staff U. S. Atomic Energy Commission Washington, D. C. 20545 Wallace Brand, Esq.

Department of Justice Rocm 8107, Star Building 1101 Pennsylvania Avenue, N. N.

Washington, D. C. 20530 .

f,.6 N,..

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. b-w.

Em. Mari.tcid Ross Attorney for Consumers Potter Company l

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