ML19331A256

Brief on Exceptions of Mi Cities & Cooperatives.Urges Adoption & Ordering of Municipals & Cooperatives Proposed License Conditions

ML19331A256
Person / Time
Site:	Midland
Issue date:	11/13/1975
From:	Davidson D, Jablon R MICHIGAN MUNICIPAL COOPERATIVE POWER POOL, SPIEGEL & MCDIARMID
To:
Shared Package
ML19331A258	List: ML19331A256 ML19331A260
References
NUDOCS 8006190748
Download: ML19331A256 (230)

Text

{{#Wiki_filter:t . N-/3 73 UNITED ST//i'ES OF AMCRICI. 3t:1:'OP.P. "'!!E NUCLFAR PCCULATORY COI1"TSSION In . the flit tter of . '

                                                                                         ~ 'N
                                                                )     Docket Gor. 4 4 2.0 L Connu:ners Pauer Conpany                                )                 50-330A Midland Plant (Units 1. and 2)                           )
                                                                  ., ,,... 3
                                                       ..........1.~),

i & i....~*4 ERIEF CN H}CEPTIONS ( OF MICIiJON.i ClTIES .YiG COOPERA'.'.' L'/I:S

     ,                                       THIS DCCUMENT CONTAINS POOR QUAUTY PAGES Robert A. Jablon Danici I. D 'lidcon AttorneyE, for the Citd :_:s of rol.dwa ter,
                                            . Grand Haven, Holland, Traverso City                 ,

and Zeeland, the Northern Ilichigan Electric Cocporative, tlie Wolve.rine Electric Cootcarttiv2, and the Michigan Municipal L iec cric /tracciat ).ran , Michigar. 13th McVember 1975 La' t Of2 ices of: Spicgel & lacDiarmid i 2600 Virgin a Avenua, U . h' . L'achington, D.C. 20037  : 1

) i l

iS006190 7 4 [ u - J

          .   . ,~                    i~

3. 1The Atomic Energy Act Amendmentsfas well asLCase Law Evidences a. Specific' Concern

                                       ' that Antitrust Principles Be Made Applicable to.the Electric Power Industry . . . . . . . . .                                97

4. :The' Trial Board's Reasons for Failure to Follow Otter Tail are Not Tenable . . . . . . 100

                                         .a. In.this case, there is the requisit
                                         -joint action required under the trial board's                                              ,

standards to establish the rights sought by Munis/ Coops . . . . . . . . . . . . . . . 103

b. The trial board's distinction of Otter Tail based upon Otter . Tail Power Company 's claimed unlawful purpose ignores Consumars

                                                ~
 .;                                         Power Company's cqually unlawful purpose                                .. 106 5..       A Utility' Applying for a Nuclear License.

Has No Absolute-Right to Rafuse to Deal . . . 112

6. The Trial Board's Clained Limitation of Consumers Power Company's Obligations under the Atomic Energy Act Based Upon Claimed Omissions in the Felcral Powcr Act Is in Error . . . . . . . . . . . . . , 116

7. :The Trial Board's Failure to Recognize '

that Control of Major Transmission, Genera-tion and Cocrdination-Facilities Constitutes a'" Bottleneck" Is Error . . . . . . . . . .. . 119

a. .The claimed successful operation of i ,

Big Rock does not negate the importance of access to large naac load nuclear units . 125

b. The fact that some interveners have -

limited: transmission-facilities within their retail service arcas doen not bar them from

            .                            . access to transmission                   . . . . . . . . . . .                 127

c. The limited coordination afforded through the MCPP does not substitute for coordination with the major utilitics . . . . . . . . . . 133

                   ' III.-      CCORDINATION WITH-THE-SMALLER MICHIGAN SYSTEMS-
                             'SUOULD NOT DE ON A' DISCRIMINATORY DASIS                                    . . . . .       134
                                                         - - i t --

1- . d

u TABLE OF CONTENTS

                               ~

STATEMENT OF TI!E CASE . . . . . , . . . . .. .. . . . . 1 ARGUMENT . . . . . . . . . . . . . . . 27 I. . NUCLEAR REGULATORYLCOMMISSION LICEMSES WERE NOT INTENDED TO CREATE OR MAIMTAIN SITUATIONS INCONSISTENT WITH THE' ANTITRUST LAWS . . . . . . 33

         . II. A SITUATION INCONSISTENT WITH TiiE ANTITRUST LAWS CLEARLY E'(ISTS        . . . . . . . . . . . . . .                                  49 A.  - Consumers ower Company 's Control of the Bulk Power Facilitics .i n the Lower Michigan L

Peninsula Disadvantages Munis/ Coops . . . . . 54 7

1. Consumers Power Company Dominates Bulk .

Power Generation and Transmission Facilities . .. . . . . . . . . . . . . 54

2. Consumere Power Company Maintains Ad- ,

vantages Unavailable to Interveners Through Its Control of Major Coordination Agreements . . . . . . . . . . . . . . . 6,3 B. = Consumers Power Company's Coordination *Ar-rangements Provide a Market for Pouer Trans-actions'from which Interveners Are Excluded . 64 C. . Consumers Power Company lias Used Its Domina-tion Over the Dulk Power' Facilities to Its f Advantage Relative to' Smaller Systems . . . . 73 D. The Trial Board Erred in Determining that Consumers Power Company IIas No Legal Obli-gation to Deal- . . . . . . . . . . . . . . . 86 -

1. Otter Tail Power Co. v. United States Establishes the Obligation of Consumdra Power Company to Deal in'Its Bottleneck.

Facilities fand Agrecrecnts . . . .. . . . 87

2. Otter Tail Supports and Confirms Other t.ntitrust Law Establishing the Obligations of Those Possessing Monopoly Power over Essential ~Facilitics:cr Lines of Com9erce s

                                                                                                                ~

Not to Use Such Control to the Disadvantage of Potential or Actual Competitors . . . . 93

                            #4                                                                                        ,

e -

A. An Equalized Reserves Standard Is Required under Coordination Arrangements to Avoid Penalty to Smaller Systems . . . . . . . . . 134 B. The Trial Board'n Examples Purporting to Justify Its Failure to Order Equalized Reserves Are Contrary to the Record . . . . . 147 C. The Refusal of tha Trial Board to De ter-mine a Standard for Interchanges Is an Abdication of its Responsibility . . . . . . 255 D. The Alleged Requirement of Sclf-Suffici-ency for Coordination is Erroneous . . . . . . 138 f IV. THE LI.W REQUIRES THE GRANTING OF DROAD RELIEP . . 165 THE TRIAL BOARD ERRED IN NOT DETCE'INING THAT

                                                                                                    ~

V. APPLICATION HAS THE ULTIMATE DURDE!! OF PROOF . . . 166 VI. THE TRIAL BOARD ERRED IN NOT PERIGTTIi?G INQUIRIES 11' CO CONSUMERS PONER COU?AN'l' S GAS AND POLITICAL OPERATIONS . . . . . . . . 173 VII. IIISCELLA.liFOUS EXCEPTIONS . . . . . . . . . 179 A. The Purchaued Power Alternative . '. . . . . 179 B. "You Never Asked For It" . . . . . . . 180 C. The "Public Interest" of Applicant's Retail Customers . . . . . . . . . . . 181 D. Alleged Waiver . . . . . . . . . . . . 185 CONCLUSION . . . . . . . . . . . . . . . . . . 186 , 5 t _ __

                                           - flii -

i o CASES: American Tobacco Co. v. United S't'ates , 328 U.S. 781 (19~6) . . . . . . . . . . . . . . . . . . . . 116 Arizona Grocery Co. v. Atchiso1, Topcha & Sant:a Fe Railroad Co., 284 U.S. 370 (1932) . . . . . . . . . . . . 15P Associated Precs v. Terminal Railroad Asscciation, 224 U.S. , 383 ('1912) . . . .

                                        . . . . . . . . . . . . . .                          116

, AssociM.ef. Press v. United States, ( 326 U.S. 1 (1945) . . . . . . . . . . . . . . . . 51-52 Atlantic Refinino Co.

                    ~

v. PSC of New Yo;;s., 360 U.S. 378 (1959) . . . . . . . . . . 43 Banana DisFributors v. United Fruit Cc., 162 F.Supp 32-'S.D.U.Y., (

1958), rev'd on other grounds and rcmanded, 2G9 F.ZC 750 (ed Cir., 1959) . . . . . , 111 Brulotte v. Thys Co., 379 U.S. 29 (1964) . . . . . . 106 California ". FPC, 369 U.S. 482 (1962) . . . . . . . 156 California Motor Transport Co. v. Trucking Unlimited, 4'.4 U.S. 500 (1972) . . . . . . . . . 175 Carolina Pcwer & Light Co. v. South Carolina l'ubl_ic_ Service Authority , 28 F.Supp. 854 (E.r.S.C., 1937), aff'd, 94 F.2d 520 (4th Cir., 1938), ' cert. denied, 304 U.S. 578 . . . . . . . . . . . . 188 Charles P. B. Pincon, Inc. v. FCC, 3 21 . . 2 d 372 (D.C.Cir., 1963) . . . . . . . . . . 171 City of Pittchurqh v. FPC, 237 F.2d 'i41 (D.C.Cir., 1956) . . . . . . . . . . . 39 City of St.atesville v. ACC, 441 F.2d 952 (o.C.Cir., 1969) . . . . . . . . . . . . 39-40 t V Y

• 4

                    .: Colorado Antidiscrimination Commission

v. Continental Airlines Ca., 372 U.S.

714 (1963). . . . . . . . . . . . . . . . . . . . 156 Con'snmor Fcdcration of - America v.

                                     ~

FFC, 515 F. 2d 3 4 7 - (D. C. Cir. , 1975).. .. . . . - . . 45 Eastern Railroad-Conference v. Noerr Motor Freight, Inc. , 365 U.S. 12 T (1961) . . . . . 175, 176 0

                  - Edstern States Retail Lumber' Dealers Ass'n v. United States,-234 U.S.

600 (1914) . . . .. . . . . . . . . . . . . . . 53

                 ' Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927)                                   . . . . . .. . .              52

( Ethyl Gacoline. Corp. v. United States, 309 U.S. 436-(1940) . . . . . . . . .' 46 Fashion Originators Guild of America - v.'FTC, 312 U.S. 4.57 (1941) . . . . . . . . . . 53 FPCLv. Idaho Power Co., 344 U.S. 17 (1955) . . . .. . . . . . . . . . . . . . . . 31, 113 FPC v. Sierra-Pacific Power Co., . 350 U.S. 348 (ib56) . . . . . . . . . . . . . . . 158 FPC v. Sunray DX Oil-Co.,

                                 .                                  391 U.S.      9-(1968)                 . _ . . . . . . . .. . . . . . .                             14 3 FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1-(1961) . . . . . . . . .                          . . . .                      43 FTC v. Cement Institute,'                                                                       -

333 U.S. 683-(1948) .- . . . . . . . . . . . . . . 97 . FTC v. National' Lead Co.,_350 U.S. 419 (1956) . . . . . . . . . . . . . . . .. 163 Fortner Enterprises v. U.S. Steel Ccg,.394RU.S. 455 f(1969) . . . . . . . . . . . . . 53, 147 Gainesvil)e' Utilities. Dept. E City of Gainenville, Florida v. Florida Power

                       ~. Corp . , -'4 0 FPC 12 2 7 . (19 6 0 ) , set asiae sub                                               s nom. F3 orida: Power Coro. v. rPC, reversed                                                      R23, 74, 10 Ein nom. Gainesvillo Utilition Dept. v.                                                           103, 117, Florida Power Corp., 402 U.S. 515 (1971)
                                                                                                         . . . . .        139, 144, 152, 153    l 1

l 1

• w.

                                                                                 +
                  .' Gulf . 'S tates Ut'ilities Co. - v. PPC ,

411 U.S. 747 -(19'/3) .. . . . . . . . . . - . . . 21, 39, 52, 8 2,; 102,-117-118, 139,.152, 153,

                                                                                      -                                                                     156, 157 Heart of Atlanta-Motel.v.. United                -

States , 379 U.S. 241 l(1964) . . . , . . . . . . . .112 1 - -

                   ' International'Doxinu Club of New York.v. United Sta ten , 3SU U.S.

2421(1955) . - . . . . . . . . . . . . . . . . 123 International Business Machines v. United-States,.293.U.S. 13f-(1936) . . . . . . 22, 191 i/

        ',         Klor's, Inc. v. Broadway _-Hale Stores, e                       Inc.,.359-U.S. 207 (1959) . . . . . . . .                                  . . .                                             .

53

                  . Lafayette,'La. v. AEC, 454 P.2d 941 (D.C.Cir., 19 71) , . af f ' d sub nom.

Gttlf Staten Uti~litics Co. v. FPC, 411 U.S. 7c 7 - (197 3) . . . . . . . . . . . . . . 23, 100, 103, 139, 153 LnPeyra v. FTC,.366 F.2d 117-(5th . j Cir.,.1966) . . . . . . . . . . . . . . 106 Lorain Journal.'Co. v. United States, l- 342 U,S. 143-(1951) . . . . . . . ' . . . . . . . . 52 Marnell v. United Parcel Service of

        <             America, 1971 CCH Trade Cases 973,671

., ( D . C . Co.l . , 19'il) . . . . . . . . . . . . . . . 123

                  -Moriord- Corp. - v. Mid-Continent Co. ,

320 U.S. 6611(1944) .. . . . . . . .. . . . . 46 '

                  'Montacun n ' Co. v. Lowr'[, 193.U.S.-38

(1901) . .:. . - . . . . . . . . . . . 53

                - 'Morningsida'nenewal' Council, Inc.

189-1S0-

                                                                                                                                                                        ~

v.=AEC, 4 02 F. 2d .2 34 ' (D.C.Cir. , 1973,) . . . . . iMorton Salt v.- Suopiger Co., 314-U.S. 488-(1942)- .. . . . . . . . . .. . . . . 46

                                                  ~

A I i I e,'-

                                                                   - vi' '

3

                                                                                        .w..-        . .     .. ..
                                                     +
 ,       a v.

Municipal Electric Association of Mass. v.n FPC , . -414 F . 2d .1206 (D.C.Cir., 1969) . . . . 183 Municipal' Electric Association of hass.

v. SEC, 413EF.2d 103~2, 419--F.2d 757 46, 114 (D.C.Cir., 1969) .. . . . . . . . . . . .

                                                             ~

Munn v. Illinois,.94'U.S. 133 -(1877) . . . . . . 95 NLRB _ v. Vircinia Electric Co._, 314.U.S.

                           ~

175 4 469 -(1941) . . . . . . . . . . . . . . . . . .

                  - New York ex rol. New York & Queens Gas                                      114 Co. v. McCall, 245 U.S. 345 (1917) .                . . . . .
           -       New York es rel. Woodhaven Gas Co. v.

Poblic Soryice Con 2 mission of New Yo k, , 114 . 269 U.S. 244 (1925) . . . . . . . . . . . . . Niagara Mohawk Power Cory,. v. FPC_ , 379 , F.2d 153 (D.C.Cir. , 1967) . . . . . . . . . . 113 .t

                   . Northern Natural Gan Co. v. FPC, 399                                        39, 43, 156, F.2a 953 (D.C.Cir., 1960)           . . . . . . . . . . . .

183 Otter Tail Po.ier Co. v. United States, passim

410 U . S . 366 (1973) . . . . . . . . . . .

                                 ~

Pacific Power & Light Co. v. FPC,

                       -111 F.2d 1014 (9th Cir., 1940)            . . . . . . . .                170 Panhandle Eastern Pipeline Co. v.

Indiana-Public Service Commission, 507 (1947) . . . . . . . . . . . . . 157

                        -332 U.S.

j

                   .. Permian Basin Area Rate Cases,
                                                    . . . . . . . . . . . . .                    43, 189                   l 390 U.S. 747_-(1900)
                                                                                                                         ~I Phillies Petroleum Co. v. U.i cennsin , _

43 307 U.S. 672-(1954) . .. .- . . . . . . . . . Ryan -.v. - FlemT:ing, 137. F. Supp. 655 171

                        .(D.Mont.,-1960)         . . . . . . . .. . - . . . .                                              ,

1 SchenckHv. . United States , 249 U.S. , 175- - 47 -(1919) . _ . . .: . .. . . . . . . . . t

r i Schine Chain Theatres v. United States, 334 U.S. 110 (1948) . , . . . . . . . . . . . . 91, 94 Silver v. New i*crh Stock E:: change, 373 U.S. 341 (1963) . . . . . . . . . . . . . . 52, 117 Six Twenty-Nine Productions Inc. v. Rollins Telecastina, Inc., 365 F. 2Ai 4 7 8 (5th Cir., 1TE6)~

                                       ^
                                                                  . . . . . . . . . .                   43 Southern Steamship Co.
              ~

v. NLRD, 316 U.S. 31 (1941) . . . . . . . . . . . . . . . 119 United Gas Transmission Co. v.

Callery Properties, Inc., 382 U.S. 223 (1965) . . . . . . . . . . . . . . . . 43 ( Union Carbido 8 Carbon Corp. v. Nislev, . 300 F.2d SG1 (10th Cir., 1962), apyeal diumissed, 371 U.S. 801 . . . . . . . . . 121 United Church of Christ v. FCC, 425 P.2d 543 (D.C.Cir., 1969) . . . . . . . . . 167, 168 United Gnr Pipo Line Co. v. Mobile Gas Service Corp., 350 U.S. 332

                   ~

(19 6"G ) . . . . . . . . . . . .'. . . . . . . 158 United Mine Workers of America v. Pennington, 381 U.S. 357 (1965) . . . . . . . . 175 United S tates v. Aluminum Co. of

                                ~~

America, 148 F.2d 416 (2d Cir., 1945) . . . . . 47, 52, 73, 184 United States v. Crescent Amusement _C o_ . , 323 U.S. 173 (1944) . . . . . . . . . 75 - Unitc0 States v. Grlffith, 334 U.S. 100 (1948) . . . . . . . . . . . . . . 53, 109, 110, 111, 124 Unii:c d Sta tes v. Grinnell Corp., 384'U.b. 563 (1966) . . . . . . . . . . . . . . 164 United States v. Line Material Co., - 33,U.S. 287 (1946) . . . . . . . . . . . . . . 46

                                          - viii -

l United States v. Loew's Inc., 371 U.S. 38 (196fI . . . . . . . . . . . . . . . . . 52 United States v. Masonite Corp.,

                     ~

316 U.S. 265 (1942) . . . . . . . . . . . . . 46 United States v. Otter Tail Power Co., 331 F. Soup. 57, (D.Minn., 1971) a f f ' d 410 U . S . 306 (1973) . . . . . . . . . . . passin United Si.ates v. Ph.iladelphia 'intional Bank, TT4 U.S.~3Y1 (J I62)

              ~
                                                          . . . . . . . . . .                     117, 156 United States v. Reading Co.,

253 U.S. 26 (1920) . . . . . . . . . . . . 54, 116 United States v. Einger Mfg. Co., 174 (1963) 374 U.S. . . . . . . . . . . . . . 46 United States v. Soco g ,"acuum Oil Co., Inc., 310 U.S. 1S0 (1940) . . . . . . . . 116 United State.s v. Tocco Ass.o..c.iates,

                -        a-         _ _ _ -

Inc., 405 U.S. 596 (1972) . . . . . . . . . 51, 116 United States v. United Shoe . nachiporv.She.a Coro.., 110 F. Sue"r 29d (D.Hass., 1953),~. aff'd per curiam, 347 U.S. 521 (1954) . . . . . . . . 47, 73 United States v. Univis Lens Co., 316 U.S. 241 (1942) . . . . . . . . . . . . 46 Utah Pie Co._ v. Continentcl Unhing Co., 386 U.S. 695 ( .L 9 0 'i > . . . . . . . . . . . . . 54, 108 Wickard v. Filburn, 317 U.S. 111 (1942) . . . . . . . . . . . . . . 112 s A

Ol'!IER AUT!!ORITIES : Al,plications of the Detroit Edison Comoany and Co_naumars Power Co:m;any, Federal Power Commincion, Docket Nos. E-720G et al. (Jun. 12, 1974) 17 Atomic Energy Act, Section 105 92 U.S.C. S2135, 60 Stat. 938, an amended by P.L. 91-560 (Dec. 19, 1970) 5, 38, 41 Bond, Paul J., " Oil Pipelines - Their Operation & Regulation" ICC Practitioners Journal (1958) 132-133 (' Clayton Antitrust Act . 15 U.S.C. S7 50

                                     ~

Congressional Record, Vol 116 42, 44, 45 4 In re Consolidiited Edison Co. of Hew York, Inc. (Inclian Poin t Station. Unif No. 2), RAI-74-4-356 (151i)~ 166-167 col 7umers Power Company, Annual

• R_cpo et to Podoral Powa'; cosaiscion ,

("Fcrm 1") (19 72, 19'i3) 3, 28 Consumers' Power Company, 1973 Annual Report to Stockholders 2 Consumers Power Co. Oiidland Plant, Un'its 1 and 2), RAI-74-1 (197f)~ 167, 169 Federal Power Act, Section 205, 206 ' 16 U.S.C. SS824d, 824e passim Federal Power Commission, 1970 National Power Survey, (1970) 9 Federal Trade Commissica Act, Section 5 ' 15 U.S.C. S45 50 Florida Power Corp. , FPC Docket No. E-7679 56 1

                                  -na

Fuller, The Problems of Jul isprudance (Foundation Frans, 1949) 102 IIcaring_s Before the Committoe of Commerce, United Staten Senate on_S. 218, 89tE Cong., Eit Sess. 81 (Scrial No. 89-30, 1965)

       !!allman , Governm2nt, Comnotition in the Electric Utility Innustry:

A Theoretical and Empirical Stt'dl[ (New York: Praeger, 1972) 80, 182 Kansas Gas & Electric Co'. and Kansas (

    ~

City li6wer & Light Co. (Molf Creek Genera _ ting Station, Uni t No. Q, 31, 32, 35-36 NRCI-7 576, 559 (ALAB 279)(1975) . 36-37, 38, 39

                                         -                         47, 100, 102 P.oody's Public Utility Manual (1974)                       75
      .Municioal Licht Donrds v. Boston Ediron                     123 Co., MPC hocket 1"o. U-7400 (J uly 19 , 19 7.'!)

Natural Gas Act, Section 7c -

                                                                   .45 15 U.S.C. S717 f (a)

NRC Economic Analysis Section, '.' Coo rdin ation , Competition and Regulation in the r Electric Utility Industry" NMREG-75/061, p. 1 7, 22, 80, (June , 1975) 135, 147 Report of the Joint Committee on Atomic 40, 41-42 Energy, Senate Report 91-1247 . Sherman Act, Section 1 49-50 15 U.S.C. S1 Western 1.%scachusetts Electric Co., FPC Do5 net No. E-8798 ("Orctor t.pprovi ng - Settlements" Oct. 20, 1975) 157 i

                                       - ni -

u

UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSICN In the Matter of ) Docket Nos. 50-329A

                                                )

Consumers Power Conpany ) 50-330A Midland Plant (Units 1 and 2) ) , BRIEF ON EXCEPTIONS OF MICHIGAN CITIES AND COOPERATIVES . ! STATEMENT OF THE CASE These consolidated proceedings involve license ap-plications by Consumers Power Company (" Consumers Power") for construction permits for two large nuclear units. Decision, p. 6; NRCI-75 7, 29, 32. 1/ Applicant hopes to obtain approxi-mately 1,300 megawatts of electrical energy from these units. R. 9244. The first unit is a joint venture by Consumers Power Company and DON Chemical Corporation, so that a substan-4.' tial portion of the capacity of the unit will be used in DOW's industrial processes.

                   .This brief is written on behalf of the Cities of Coldwater, Grand Haven, Holland, Traverse City and Zeeland,                     ,

Throughout this brief, the trial board decision and order 1/ July of 18, 1975, under revicw is cited as above, first to the Slip Opinion and second to NRCI. The July 1975 designation will be omitted from subsequent NRCI references; only the page references will be cited. . M M

                                                                                 ~

the Northern Michigan Electric Cooperative (" Northern"),  ; the Wolverine Electric Cooperative (" Wolverine"), and the Michigan Municipal Electric Association ("MMEA") , whose membership consists of nearly all of the tunicipally owned electric utilities in Michigan. For convenience, they are referred to collectively as "Munis/ Coops" or " interveners." Consumers Power Company is a large midwestern utility that generates, transmit's and distributes 91ectricity, through-e ( .out the lower Micnigan peninsula, except for the Detroit met-  ; ropolitan area and Michigan',s southwest corner. It provides natural gas utility service as well. In 1973, Consumers Power had approximately 1,181,000 electric customers and 936,000 gas customers. Its utility plant is valued at over 1

      $3 billion and its annual operating revenues are over SS35

• million. Of-these amounts, its annual electric utility plant and annua'l' electric operating revenues are respectively close

  \   to $2 billion and over $500 million.                1973 Annual Report to stockholdors, pp. 1, 20.

According to its counsel, Consumers Power Company is either the seventh or eighth largest electric utility in the country. R. 94. In 1973, its electric load was 4,394 megawatts. Its 1972 nameplate generation ratingc were 2,846.0 mw fossil steam, 886.7 mw nuclear, 68.0 mw hydroelectric and 496.9 mw other. Thus, it had capacity to provide a total of _ _ - . _~ . _ __

4,297.6 megawatts of generation. The Company's projections for 1982, shortly after the Midland units should be on the line, were for 11,994.8 megawatts, of which it had been pre-dicted that 4,568.0 megawatts would be nucleir generated. Exhibit 1001, JC-3. While these figures include genero. capacity for the proposed Quanticasseo nuclear units, whose applications have been withdrawn, they indicate the magnitude of the present and anticipated size of Consumers Power Company ( and its existing and planned mix of generation from various fuel sources. 1/ The smaller systems constituting the joint interveners are surrounded by Consumers Power Company. Therefore, with limitations not herc relevant, absent accccc to use of Con- , sumers Power Company's transmission facilities', they are barred from buying or selling to other major utilities systems. R. 4664:14-18,- 22-23 (Gutmann). 2/

  \

1/ This factual statement and the references throughout this brief are based upon' figures contained in the record. The 1973 generation statistics are contained at pages 432-44A of Con-sumers Power Company's annual report to the Federal Power Com-mission (" Form 1") , which has been supplied the trial board by Consumers Power Company. Ex. 12,022. The timing and figures contained above would vary, of course, depending upon future economic conditions and reapplication Zor the Quanticasse units as well as the timing of the " putting on line" of future generation. 2/ Record citations to direct testimony are generally cs above, listing nearest transcript page, folio page and the wi tne s.s ' name. Most direct testimony was incorporated and i not individually paginated. 1

                                                                             ]

r -- Through an examination of Exhibit 1001, the Appeals Board can readily determine the differences in size between the inter-vening municipal and cooperative systems and Consumers Powcr Company. As is stated above, Consumers Pcwer Ccapany has exist-ing generation of ,4,298 megauatts. Holland has less than 100 megawatts. Coldwater, Hillsdale and Marshall (each named inter-veners or members of the MMEA) have less than 20 megawatts. The combined generation of the ,MCPP, the Municipal Cooperative Power ( Pool, a small pool consisting of Northern, Wolverine, Traverse City and Grand Haven, as well as Wolverine's "satellited," is l less than 250 megavatts. Even Lansing, which is the largest municipal system in the state, has only 631 megawatts of existing generation, as against a 1972 load of 321 megawatts. 1/ Other than Lensing, the record shows that no cooperative - or municipal, system has more generation than 100 megawatts. Indcod, except for the MCPP members and Holland, no municipal or

    \

1/ It is generally agreed that Lansing, the largest municipal system in the state (and one of the largest in the country) is

        -atypical of.the other municipals and cooperatives. However, l        - even Lansing could not individually support the building of a large nuclear unit. As.is discussed, infra, the disparity between_ Lansing's generation and the load to be served from it illustrates the difficulty of independent systems in the lower l         Michigan peninsula. Decause of the requirements forced upon them by _ Consumers Power Conpany, they have been forced to operate with almost 100% reserves capacity.

cooperative system has generation substantially above 20 mega-watts. The 1970 amendments to the Atomic' Energy Act state that the Commission "shall make a finding as to whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105a." Atomic Energy Act, Section 105c (5) . Section 105a specifies the antitrust laws, including the "Sherman," "Clayton," " Robinson-Patman" and

 ,, " Federal Trade Commission" Acts. Portions of these acts are set forth in Appendix A to the trial board's initial decision, as are Sections 105a and c of the Atomic Energy Act.

As do the Department of Justice and the Nuclear Regulatory Commission staff, Munis/ Coops take the position that, unless the propocca licensec are conditioned to avoid their becoming the vehicle for. aggravating the anticompetitive situation that exists in Michigan, the licenses that Consumers Power Company here applies

 \

for cannot properly issue. Assuming that they are appropriately conditioned, Munis/ Coops do not oppose the license grants. The intervening municipalities and cooperatives have requested three unin arcac of relief: (1) direct acccca to nuclear power produced from the Midland units; (2) nondiscriminatory access to transmission services and (3) nondiscriminato::y access l . l l

to coordination. They further request the right to purchase wholesale power on a full requirements or partial requirements basis on nondiscriminatory terms and conditions. Proposed license conditions of Munis/ Coops are contained in Appendix A. In essence, the smaller coopera,tives and municipally-owned electric systems in Michigan seek access to nuclear power (' and to the ability to integrate that power'into their systems in a coordinated fashion in the same way as Consumers Power Company proposes to use that power. They seek no structural changes in the form of generating, transmitting or distributing power in Michigan or elsewhere or of the basic system of owner-ship and coordination that now exists in the electric power industry, such as a limitation to the basic vertical or horizontal integration of Consumors Power Co. In its decision in this case, the trial board held that no anticompetitive situation inconsistent with the antitrust lcus cnists. Therefore, it refused to adopt the license

    . conditions proposed by the intervening cystems, the Departne.it t

                                                                  ~

of Justice or the NRC regulatory staff.1/ Decision, p. 182; NRC1, p. 144. Before the trial board, Muris/ Coops raised claims that Consumers Power Company has refused to grant the smaller sys-tems the right to purchase part of the Midland units. They raised further claims that Consumers Power Company has utilized its economic power to deny them access to transmission and coordination on terms of equality with larger, non-competing FYstems. . Munis/ Coops argued that Consumers Power Company has attempted to use its economic power over electric power supply to limit competition at retail, including systematic attempts to acquire _emaller systems or to limit their development. The record shows it is not to our knowledge disputed that there are three separable elements involved in the sale of electricity: generation, transmission and distribution. E . g. , R 46G4: 4-5 (Gutmann). Accord, NRC Economic Analysis Section,

    " Coordination, Competition and P.egulation in the Electric Utility Industry," NU REG 75/061, p.      1 (June, 1975).

1/ A joint motion had been filed with the trial board, that, should.that board find a " situation inconsistent," it should so rule, giving the parties an opportunity to jointly agree upon license' conditions that would comply with its order. In-

   'dividual negotiations leading toward this end have taken peace between the intervening systems and Consumers Power Compart.

However, such negotiations have not resulted in settlement . k,

                                           ~
   ~

Because of economies of scale, there are clear $3 vantages to a utility's having access to large-scale generation units. E.g., R. 7239: 50, 61-62, 67 (Pace), 2556-2558, 2651-2652. At the same time, because of the public necessity of having a continuous supply of electricity even during periods of peak usage, a system must have access to sufficient reserve generation capacity to maintain that supply in the event of an outage of even its largest units. As the trial board found, this principle requires that on an isolated system generating reserves must be at least equ'al to the load served by the largest generating unit on that system. Thus, if that unit ( goes out of service, capacity would still be available to serve the maximum anticipated demand. Decision', pp. 14-15, l NRCI, pp. 36-37. Large units tend to have low operating costs per unit of output (kwh). Decision, pp. 17-18; NRCI, p. 38. They are i designed to operate nearly continuously. Ibid. However, they are exceedingly c:: pensive to build and are becoming more so. l l Cince the peak den:nnd en a cyntem vr.tles both dai]y and annually, part of a system's capacity mus'c be kept idle during "off peak" periods. No system can (or should) afford rn we -

o to keep high capital cost' units idle during off peak periods. Therefore, "interme. ate" or " peaking" units are maintained to serve levels of Ic-d in addition to those that can be served continually b" 2 larger " base load" units. These units are more expensive to operate on a kwh unit basis. However, be-cause of their lower associated capital costs compared with base ~ load units, intermediate or peaking units provide a less expensive means of serving demand levels that occur during ( , only portions of the day. Decision, pp. 18-20, NRCI, pp. 38-39. See generally R. 5090: 6-10, 16-13 (Chayavadhanangkur) ; 7~'9: 62, 65-67 (Pace). Nuclear generation is becoming an increasingly impor-tant . source of base load generation, so much so that it is projected in the rederal Power Commission's 1970 National Pouer Survey 1/ that in 1990, nuclear power will account for almost one half of the energy production of the nation's major ( utilities. Exhibit 1001, JC-1,_p. 5. In applying for the Midland licenses, Consumers Power Company, " anticipates that the power produced from the units will produce no low, if not lower, costs i in energy for base load purposes ne any other alternutiva." l l

                                                                                )
     -1/ Federal Power Commission, The'1970 National Power Survev, (1970) at-table 18.8, p. I-18-7.

_9_

Chayavadhanangkur, p. 3, quoting Aymond, the chief Executive President and Chairman of the Board of Directors of Consumers-Power Co., Exhibit 1004, pp. 225-2o. Thus, the Company recognizes nuclear power as providing for an important source of future base load ener;;. While large nuclear units, such as the proposed Mid-land units, have the advantages of achieving potential econo-mies of scale, they have the disadvantage that their size man-

 's dates the maintenance of large reserve capacity to protect against outages of the unit. ' Larger units present an additional problem. A utility that relies on large units assumes an economic and reliability rich, should one or more of its unics not perform as well as the system anticipated.      Ex 1004, 137-138; 225-226; Ex 1605, 105-108, 5090: 3-5, 8-10, 17-18 (Chayavadhanangkur) : 2825-2826 (Mayben) .
 \

In balancing the advantages and risks of nuclear generation, Consumers Power hopes for two other marked advantages from the construction and operation of the Midland un!.ts. Since the units cre not fossi] fueled, they may avoid probleins acsocinted with coal,. oil and natural gas generation. Oil and gas may become virtually unavailable for gonarction; at the least their l

                                                                        ~

supply availability is questioned. In addition,'except for natural gas which is in exceedingly short supply, the use of fossil fuels is becoming subject to increasing criticism and concern over the resultant air and water pollution. And whi1e coal is in apparent greater supply (although it is subject

        ~

to at least short-term supply disabilities and may have location disadvantages and create 1,and use problems), of the fossil fuels

  ' coal' creates the most severe pollution problems.

-( Even if it is assumod that nuclear fuel will bd subject to independent disabilities from fossil fuels, being a different source of fuel, it would be subject to different problems at least.in degree.. Thus, through obtcining nuclear fuel, a utility has the ability to spread its risks by not being dependent Ex 1005, 19-21. solely uporggne or two sources of fuel supply. Consumers Power Company and other utilities attempt to i serve their load with the most economic mix of generation. This includes a balance between large and small units. Ex 1005, 21-23.

            -The means of integrating powcr supply from a number of differant generation sourcc:, ic trancmiscian.       Uhlle, of course, transmission is necessary to deliver power between generation and. load centers, it also serves the function      of tying together l
   'different generation units so that the company can instantaneously           J
          .                                                                      j 1

                              .r      -                               -

obtain the lowest cost power supply available to it. Ex 1005,

     '44-46.

Transmission similarly serves ~ reliability purposes by allowing for the instantareous substitution of. power sources in the event of a failure of a generator or transmission line. Sc3 R. 5090: 17 (Chayavadhanangkur). It provides access to sources of power outside its

                                 ~

i system and, in the case of Consumers Power Company, the ability ( to transfer of energy between itself and among other utilities, including the means whereby it can coordinate its power supply with other major power suppliers including Detroit Edison Company, the Hydroelectric Commissicn of Ontario (" Ontario-Hydro") , the American Electric Pouer System and.other utilities operating throughout the midwest, Canada and the northeast. Id. Ex 1005, 51-33; 38-47, 77-78. _ s The distribution function is severable from the generation and transmission functions. Indeed, Consumers Power Company sells "wholescle" power to municipals and cooperatives, includiner

• hose who have no independent ganer:'. tion. (E . ,q. ,

Day City, Petockey). Internally, Cannumers ' .:er Co:2.ptny

• u ge'neration and transmission similarly serve its distribution needs.

_e . , .

Consumers Power Company operates an integrated system of generation, transmission and distribution. For the reasons discussed above, the economics associated

     .with.large unit generatio.1 require large associated reserves

( i . e,. , idle capacity). For this and other reasons, utilities find it desirable to coordinate their operations, including the sharing of generating reserves. By coordination, it is meant that utilities will enter' into contractual arrangements whereby i

   ' each agrees to supply the uther with electrical energy in the
;    event a unit breaks down at o_r near to incremental ( i . c, . , out-of-pocket generating) cost.           Sales or " exchanges" of such back-

up energy include specialiced transcet_ionp auch as " emerge,ncy" power. E.g., R. 5090: 17. .

Similarly, utilities will jointly cchedule maintenance of their units and sell each other power, as necessary, to c replace power that would be generated from a unit shut down for maintenance. Decision, p. 21; NRCI pp. 39-40. Othe: forms of coordination or " interchange" sales include, s+asonal power, chort-term power sales, economy ex-change and unit pouer trer.n Lations. IIowever terned, under cach of'these transactions a selling utility makes availabic 9 O v e - e +n

excess capacity or energy Jj/ in an individually. scheduled or contracted transaction on a specialized basis. For example, under an economy exchange transaction a purchasing utility

could generate energy at a given time, but another utility l

can generate an equivalent amount of energy less expensively. Decision, p. 21; NRCI p. 39. The purchasing utility buys energy at a cost that tends to split the savings between the l buyer and seller from operating the lower cost unit. A l i seasonal exchange transaction will make use of lower priced l generation that is available during a selling utility's off peak season rather than 'more expensive generation available from the l purchasing utility. For example, Ontario-Hydro has a winter 1 peak. Therefore, it can sell power from its excess capacity at favorable rates during the summer to summer peak _ing companies,' thereby better utilizing the total capacity i ( of both systems. In short, " coordination" is a tern that describos the j electrical inte~gration of separato utilities to make available l f 1/ Capacity is the right to call on a given nmount of energy over a period of time either on a " firm" hasis or on the basis of the availability of the resource. Energy refora to the sale of electrical energy during a discreet time period.

                                                                                                       .                   l I

  ~ power from the lowest cost available unit (i.e. / the planning and/or operation of units among utilities as if they were operating a single system) .1/

The effect of coordination is to allow'for greater reliability of service and reduced costs, while at the same time allowing utilities to take advantage of economies of scale. It allows a system to build larger units than it might otherwise. Obviously, without coordination, a system having a demand (or load) of 800 megawatts cannot build an 800 megawatt unit, since it viould need 100% generation reserves, the latter normally remaining idle; nor can a 1,600 megawatt system, since that system would ne6d 50% reservcc capacity and, in ad6.ition, w'ould be placing undue reliance on a single unit. An additional limitation is that since except for distribution utilities, any given utility will have existing generation, s new units serve replacement and growth needs. 1/ Coordination is an encompassing term. Of course, utilities can make available only some of the above-listed services uithout entering into full ccordination agreements.

Since a large' integrated (i.e., coord.!.nated) system would have larger total loads taan individua1' systems, the combined coordinated system can plan for a better balanced mix of generating units, taking raaximum advantage of economies of scale, while avoiding the necessity of main-taining la*.ge amounts of reserves or the placing of undue reliance on a single unit. And, of course, the more units that are coordinated, the lower will be the generation cos.s due to the mix of generation that can be obtained. (' To achieve the above purposes, Consumers Power Company har closely integrated its operations with the Detroit Edison Company so that thcae two utilities operate practically as a single system. Units are dispatched as if they were on one system. Additionally, Consuncrs Power Company and Detroit Edison Company have coordination arrangements *with Toledo , Edison Company, Ohio Power Company, Indiana & Michigan Electric Company,' Morthern Indiana Public Service Company and Ontario-Hydro. Consumers Power Company has agreemente whereby Commonwealth Edison Company of Chicago purchases unit pouer through two intervening utilities from the.Luddington pumped stcraga project ai Luddington, Michigan. As the Ceupany has stated in one of its applications to the L'ed:;ral Pouer Ccn-mission (for expanding its interconnection facilities with Ontario Hydro), Consumorr Powcr Company's interconnection and coordination with other utilities has an impact on power supp1y in Michigan, Indiana, Illinois, Ohio, Ontario, and j i 1 15 -

                                                                                                )

                                                                               ~
                                                                                 ' ~ - -

t indirectly,.into New York State. See, generally, the matter of the Applications of the Detroit Edison Company and Consumers Power Company / Docket Nos. E-7206, et al,., especially pp. 7-11 (June 12, 1974)._1/ The proposed operation of the Midland Units is made

          - economic only because of the ability of Consumers Power Com-pany to integrate the power from such units into the combined Consumers Power Company-Detroit Edison Company coordinated system. Absent such coordination, units of this size would
 .(        not be economic.      Moreover, even if their large output could be absorbed into a single system the size of Consumers Power Company, this would be so o'nly because of the Company's large internal size.      In any event, Consumers Power Company proposes
          - to operate in such a manner that it utilitzes the power from Midland as part of a coordinated system.            .

The Midland units are of such size that Concumers Power Company apparently felt it had to enter into a joint venture with Dow to utilize a larga part of the capacity of ene of the unite (and possibly spread the risk associated i with such units). 4 _lj It is inpoccible to bring together all the record referencen to coordination =and its ndvcntagon. However, we. call to the Doard's nttention the coordination agracmento themselves (e.g., DJ-67, DJ-71-78) and the testimony of the Department Witness Mayben explaining them. Witness Rogers summarizes those advantages at-R.5515A.as does Witneca Chayavadhananghur at R.5090:12-19. The Deposition of Harry R. Wall, En. 1005, discusses these extensively, Accord Aymond, Ex. 1004, pp.167-172,  ! IIosely, Ex.. 1008:49-57, 76-79, 121-132. See generally Federal ' Power Commission, 1970 National' Power Survey. - i l

Given'the above factual situation, Munis/ Coops petitioned for intervention in this proceeding, which was granted. So that they would not be precluded by their size from participation in nuclear power generated from large base load units such as Midland, they argued to the trial board that they should be able to purchase a portion of the Midland units either by direct ownership o r unit purchase. _1/ They argued further that they should have attendant transmission and coordination rights similar to ( those presently in existence between Consumers Power Company and its neighboring large investor-owned utilitics." They claimed that license. conditions to afford such rights were necessary to correct the " situation inconsistent with the antitrust laws" in Michigan of Consumers Power Company's domina-tion of large scale generation _&/, transmission facilities and coordination agreements and its use of such domination to advantage itself in competition with the smaller systems. _1/ A unit purchase arrangement is a purchase of power from a particular unit. The unit purchase owner is entitled to his proportionate share of energy when the unit is operated. Charges for pouer are based upon the costs of that particular unit. However, ownership and financing responsibility remains in the celling utility.

 ,2/ J.s a practical matter, even if the cualler systems Ucre granted-access to Midland, they would still be disadvantaged since they would now be purchasing new higher cost units and could not obtain access ~ rights to the e::isting Palisades unit or other large base load units.
                         - 18   -

I

m On August 28, 1973, Munis/ Coops moved for summary judgment or for a narrowing of the issues to avoid an unnecessarily long and costly trial, since the essential facts were n9t in dispute. _1/ As the trial board's decision

          .here under review later demonstrated, the difference between the applicant and other parties resulted largely from dif-
          -forent views of law as to what its obligations are and not of the facts.

Munis/ Coops'notionwasdenked. I Because of the costs involved, as well as their belief that the case had becomo unduly complicated,'Munis/ Coops have relied mainly upon the factual record developed by the Department of Justice and the Nuclear Regulatory Commission staff. Minis / Coops procented three witnesses, Janjai Chayavadhanangkur, O. Franklin Rogers and Peter Guttman, so that their position and the facts upon which it rested would be clearly' presented. Additionally, they have presented deposi-

 /         tion material (largely developed by Counsel for the Department of Justico) and discovery metorial.        These depositions and            j discovery documents confirm Consumers Power Company's intent to acquire as many small systems as possible or to limit their grovth and deny them reauenable accecs to coordination and                  ,

1 trancmissi'on. rights . In both their motion for sun.;aary judgr.e.nt i 1/:" Motion to Limit Discovery and Issues and Alternatively ' Yor Summary Finding Rcquiring Imposition of License Conditions" (August 20, 1973). 1 1 19 - l l I

and their brief on proposed findings and reply brief, _1/ Munis/ Coops presented the following legal propositions to the. trial board.

1. Antecedent to the proposed construction and operation of the Midland units, Consumers Power Company had

   . created and has. maintained a situation inconsistent with the antitrust laws through its refusals to grant smaller competing systems transmission rights and coordination similar to those rights which Consumers Power Company. enjoys internally as a singic corporate entity and which it enjoys externally through

{ _ joint action with others. The Company's building of the Midland units is made pcssible solely because of its size and integrated operations.

2. The building of the Midland units to supply appli-cant with base load power would be the mechanism that would maintain--and in fact uould enhance--Consumers Power Company's economic domination of the lower Michigan peninsula, absent protective conditions allowing access to Munis/ Coops.

(-* 3. Denial to Munis/ Coops of transmission and coordi-nation advantages vould make utilization of nuclear power less valuable to them, assuming they were granted nuclear access, since they would be limited in their access to opportunities to purchauc, nell and exchm a auch power and in th2ir chility to i:3tegrate Midland power in the same coordinated manner as 1/ For convenienca, the parties' briefs on proposed findings fTled October 8, 1974, are referred to by the name of the party followed-by page references. E.g.,~ Munic/ Coops, brief, p.- .,,The formal designations of Munis/ Coops of the two briefs to the' trial board were resepctively, "Brief on Pro-posed Findings of Michigan Citics and Cooperatives" and " Reply

    'Brief of Michigan Cities and' Cooperatives." (Dated Movember 25, 1974),-

Consumers Power Company._1/

4. Any limiting of access on the part of Munis/ Coops would result in Consumers Power. Company's use of nuclear power enhancing its competitive situation, since Munis/ Coops would be able to use such power and energy to less advantage than the Company (i.e, if Munis/ Coops must pay disproportionately for emergency power when the unit is down, the use of Midland power becomes more expensive to them; if they cannot obtain economy exchange, they are limited in their external markat

( for the sale of such energy). Munis/ Coops argued to the trial board.that O'tter Tail Power Co. v. United States, 410 U.S. 366 (1973) , was determinative; while Consumere Power Company might lawfully retain its raoncpoly over large-sen3 e generatj on, including nuclear, and transmission, it has an obligation to use such L.onopoly facilities in a way not to advantage itself in competi-tion with Munis/ Coops._2/ Thus, that case is determinative that ( 1/ On this point see R.5524-5532 (Rogers); R.5090:16-19 Tchayavadhr nangkur) . 2/ At the beginning of the hearing, before decision in Otter Tail Power Co., supra, counsel for the Applicant stated (Tr. 103-104; see 131-132).

                    . .  . [M] e do have a fairly c.ignificant event hanging over this procaoding, which is the possi-bility of a decision by the Supreme Court in two case, particularly the Otter Tail case now pending before them uhich could have a definite bearing on the state of'the law uhich would control, in part at least, the issues being raised by the intervenors and the Department of Justice."

Theiother case referred to would have been Gulf States Uti]ities Cn. v. EEC.,L411 U.S. 747 (1973).- Assuming ~that there may have been doubt before the decisions in those casescof Consumers Power's obligations to deal, these cases conclude the issue.- . 21 -

it11s inconsistent with antitrust law and policy for i Consumers Power' Company to fail to grant transmission and l coordination access. As a separate and distinct legal matter, Munis/ Coops I argued that Consumers: Power Company had created and maintained L a situation inconsistent with the antitrust laws by " tying together" its sales of specialised power services (i.e., L L emergency power, maintenance power, etc.), & per se violation i . of the antitrust laws. Consumers Power Company holds itself

  -(            out as willing to sell to a utility its requirements for firm power.      That is, if a smaller utility within its                              area of.scrvice," wants to act ns a distributor, Consuners Power l

l . Company is willing to sell it power sufficient to meet its nesda (whether or not supplemented by its own generati.on) . However, Consumers Power Company will not sell separate interchange services to such utility so that it miglit pur-chase ~only " peaking" service, emergency or maintenance power,

    .           economy exchange, or forms of reserves sharing.

( w The Municipal and Coopeartive intervenors argued that such refusal to sell wholesale power services separately l- .from the sale of firm power is a classic tying arrangement under Tntern.tionr3 5".cf nos:- Unchinct v. Unit? C: .tgg, "'?C U . L. . 151 (1953). Accord, H.R.C. 1:concrc.ic Analysic Sc-ctiun, k'Coordinat' ion, Competition, and Regulation in the Electric i l Utility Industry", NMReg-75/0G1 (pp.23-25, June 1975). i

                               ~

In_ order to sell " firm" power, a utility must have i f j' . y 9 ..%., _ q ,p. n.e.y. -.__q , y.n.-.m g w- er

                                                   ~

F .

                                                                                ~

available base load, intermediate and peaking units, including rese'rves capacity, as well as transmission availability. As f.3 explained above, generation needed for the base load of a purchasing utility's demand would come from more expensive units that operate continually, while capacity needed a por-tion of the time would come from less capital expensive units. The selling company would provide reserves to assure firm power supply and transmission access. l i consumers Power Company does in fact sell wholesale

i l \

power services separately and charge separately for them in its dealings with the larger utilities. Thus, the refusal to make availabic interchange service or transmission service to Munis/ Coops, e:: cept upon its own terms, discourages a muni-cipal or cooperative power system from installing its own generation or obtaining purchased power from sources other than Consumers Power Company and makes such generation that it may install 'exccesively c:: pensive. l Munis/ Coops further argued that the exclusion of l 1 the Municipals and Cooperatives frc~a either. the Michigan Power Pool or interchange agreements similar to those enjoyed by itrelf and Detro.it Edison constituted an illegal refusal in Uc.al up?m: ptter 3 G Pover Co., sm irr.; C n.i n e.s v i .U e Utilities' Department v. Florida Power Corp., 402 U.S. 515 (1971); j and L$fayette, Louiniana v. AEC, 454 F.2d 941 (D.C. Cir. , 1971) , affi:med sdb nom. Gulf States Utilities Co. v. FPC, supra. b _.

Additiondily, the Municipals and Cooperatives argued

       ~

that Consumers Power Company's activities -resulted in a num-ber of other illegal activities under the antitrust laws and policies, as is discussed herein. Consumers Power Company denied that it had violated the antitrust laws. (It claimed there had to be a clcar legal violation in order for relief to be ordered.) It further i claimed that even if the allegations of Munis/ Coops and the Government were true, a connection to the activities under the license of the nuclear plant and the claimed illegal activities had not been shown cufficient to aJlow f6r condition-ing; that it had not engage'd in anticcupetitive activities; that, in any event, the acte complained of were under the protection of state or federal inw or subject to the primary jurisdiction of the Federal Power Commission and Michigan Public Service Commission cnd, that the j oint intervenors could receive all the benefitc of nuclear power development (, to which they were entitled through the purchase of wholesale firm power from the Company. The trial board broadly denied the contentions of the joint intervonors, Department of Justica and Nuclear nerplctory Cc~.mincion staff. , Unile thcre Era nuuurous c.ubraint:s cr ftetual sta< a- i ments'cubject to-possiblo contention, essentially the trial board held, as a natter of law: (1) that a Muclear Regulatory Commission license constitutes a grant of authority to generate  ; l and sell power-from a nuclcar-unit and, 'therefore, normal use l of such unit to. generate power to meet a utility's loads v ,-

l-

• cannot' result in a situation inconsistent with the antitrust laws (Decision, p. 60; NRCI, p.60); (2)that there is no

    ,       obligation by Consumers Powcr Company to deal with competing (or prccamably other) systems (e.gi, Decision p. 84; NRCI,

p. 72); (3) that through the purchase of wholesale power, the joint intervenors can receive all the benefits of nuclear power to which they are entitled (Decision, p. 77; N I,

p. 112); and (4) that there is no legal obligation for Consumers Power Company to coordinate on terms of equalized re-s serves with intervenors (Decision., pp. 66-03; NRCI, pp.66-74).

e S 4 e

  /

l

The: trial board also held that (1) while coordina-tion had been denied certain of the interveners as a matter

of ~ fact, this had been justified because the affected inter-seners had not demonstrated their generating self-sufficiency (i.e., they had not had sufficient reserves capacity to K

justify coordination) ; (2) in any event, there was no demonstra-tion that coordination on an " equalized" reserves basis

 .('        is always mutually beneficial and, thereforo, that such basis for coordination could not be required; (3) Consumers Power company is chargeable.with an intent to monopolize through acquisition, but that this finding is irrelevant to the deci-sion since Cons'umers Power Company was never in,pocftion to                                 '

carry out its intent due to refucals of the smaller systems to sell; (4) attempts of consumers Power Company to monopolize ( through use of possible political activity or leverage gained from'ite gas nicnopoly are irrelevcnt to the procceding. Contrary to the position of the Applicant, the trial l board df.d hold that in int. 3rpre ting the A tmic Energy Act, the Cranisuica anst Ice: bayond Mhether thra htc beer . proved violation.of the antitrust lawu'to the policieg of thoso. laws; h'ouover, the trial boat d held it was not con-

         .corncJ Mith' broader public- interacts.

1 l

                                                                                                      .I l

c -

    . . .g.

gp , ( f. n The board held that the proponents of license conditions-had the burden of proof. The-joint interveners appeal. The joint. interveners set forth their positions in this brief. They also rely upon the Department of Justice and Nuclear. Regulatory Commission staff briefs.

                                            , ARGUMENT

k. As is true with other utilities operating throughout the United Statec, the record here shows that Consumers Power Company clearly expects nuclear power to provide a'chiof source ,

of its future base load generation. Ex. 1004:138, 5090:3-56 (Chayavadhanangkur) Ex.1001, JC-3, DJ-1, 18-20 Such nuclear produced energy will be integrated into its operations. R. 5525-5529. See generally direct testimony of Mayben and , ( Chayavadhanagkur. l The record also ..howa that cons imora Power company dominates bulk potter generation ~ and transmicsion, and for that r.mtter electric service, in tha lower Michigsn peninsula cuttir:a c!? the Detroit are .. E L e h 0 2 tl:e in 21 '.duul inte:.- l l Veners ,(including the Municipal and Cooperatives Power Pool, l

              -." MCI'P" ) are currounded by and dependent upon thic dominant

electric system for coordination and, in the case of wholesale power. purchasers, for their entire service. Ex. 1001, JC-2--JC-3, 4664 12-13: 19-20, 29 (Gutmann) See generally Consumers Power Company Annual Report to Federal Power Commission (" Form 1") Simply stated, the issue presented is whet'rer the

         , Nuclear Regulatory Commission will follow the trial board in allowing nuclear power and its benefits to be monopolized by dominant companies and, more broadly, even- though nuclear energy will be a principal means of continuing this economic domination of Consumers Power. Company, whether the Commis-sion. will countenance the continued refusal of Consuraers Power Company to refuse smaller utilities the e>;act same rights and advantages that it itself enjoys in its coordi-nation with other larger utilities.1/ Nuclear power can be

(. 1/ Concumers Power Co:apany agrees, the Midland units are part of ' of and supported by an integrated system of generating plants tied together by transmission facilities, whose operations are made feasible by broad cocrdination agreements. (Slem.c.er, pp. 13-14: 8837; Accord, Chayavadhanangkur, pp. 16-17:5090;_ Rogers, 5522; 5525-5529). a V 1 5

If utilized because of.the integrated and coordinated activities of the larger companies; it is more advantageous because of that coordination; yet Consumers Power Company desires to advantage itself through use of nuclear power in the context of coordination, but refuses direct access and cocrdination to the smaller systems. Recognizing that. nuclear power'is likely to become 3 J a chief means of future generation of electricity so that grants of nuclear licenses will have a profound impact upon the future market structure for the generation and sale of power, the Nuclear Regulatory Commission has been granted a broad conditioning power in licensing nuclear units. Section 105 addresses itself to the practical problem T of the preexisting domination of the electric market by cor-( tain large utilities and the likelihcod that, if unchecked, the unconditicacS licenaing of nuclear peticr plants to such entities would worsen the situation. Bacance of itc cice, Consumers Power Company can take 24 vantage of nuclear pwcr dc.volop:acc.e, larged y ,7varnw:nt - financed. Ths value to Consumers Powcr Company from utili-zing nuclear capacity will ba enhanced by its ability to oper-ate such capacity 7 in conjunction with coorc.nated units on- ,

                ~-                                                          !

L

its systems land other systems due to the broad bperating agreements between.itself and other utilities. Compared with Consumers Power Company, frcozing interveners from eqlal advantages of coordination will lessen the value of nuclear capacity to them. R. 5524-5532 In denying antitrust license conditions, the trial board chose to ignore that1the Midland. units were being con-

 .structed.in the context of the Company's transmission and

( coordination availability. To foreclose interveners from equal access to such transmission and coordination--let alone from nucletr accesc itself--and the consequent ability to integrata Midland puser into their systems (or at lccst s'ubstitute for it through suitable alternative ' access) will allow the licensing of the Midland units to result in undue , economic advantage to Consumers Power Company, a situation i that Congress explicity sought to avoid. Thus, the issue becomes not-merely whether the joint interveners will obtain nuclear cecess, but whether neulear power vill form a foundction stone of - cor.gime d iM:ct ., ' a .gn e :. of '..:r..mcm.r nic:a c2 coordination agrocmants thet allowc Consumars Poeor Coatpeny to maintain a pocition of economic dominance, which will bc

protected from erosion or competitive impact. The trial board says yes. Directly contrary, is this board's decision in Wolf' Creek, not even cited or referred to in- any way by the trial board. Kansas Gas & Electric Co. and Kansas City Power & Light Co. (Ifolf Creek Generating Station, Unit Ho. 1), Docket No. 50-482A; NCR - 75/6, 559 -(June 30, - 1975) 1/ ( To the extent that Consumers Power Company wishc.1 to continue its refusals to deal and to discriminato against smaller systems, contrary to antitrust law and policy, and foregoes the use of nuclear power, remedies may be found elsewhere. When Consamers Power Company partakes of the "public domcin" 'and reque::ts a licence from this Commiscion,

    .it cannot at the.same time argue its freedom to do so with-
  ; out license conditions to clininate its anticompetitive prac-tices. PPC v. Idahe Power Co., 344 U.S. 17, 23 (1952).      C on--

sumers Power Company's use of nuclear power will provide the sour cc ad enc.cc;y---tho mot.nc--whuaLy it wil? .;dntain and enhance ita Cr.r.nant ponition cnd this Commiction lot c:pseted by Congrens.to ignore this fact. 1/ IIoreaf ter, Wo '. Crech, supra will be cil ed to the relevent ' page or pages in HRCI-75/6. L L_ -

Nuclear power is largely the development of .public investment. A granting of the benefits of the fruits of

           .public development to Consumers Power Company must require the

, applicant to act. con'sistently with established law and not to arrogate the benefits from such development to itself alonc.

                        "In its Waterford decisions, the Commission explained the reasons underlying its involvement in antitrust matters.    'The requirement in Section 105 of the Atomic Energy Act for prelicensing antitrust review reflects

( a basic Congressional concern over access to power pro-duced by nuclear facilitics. ' Louisiana Power & Light Co. (Wa terfoqd Steam Electric Gcreratina Sta tion, Unit 4

3) , CLI-73-7, 6 AEC 48=49 (1973) (Waterford I). The antitrust responsibilities placed on the Commission

         .             are .a Congressional roccgnition that the nuclear in-dustry origine.ted as a Government monopoly and is in grc;t mcastro the product of public fundc. It was the intent of Congress that the oricinal public con-trol should not, be permitted' to develoo into a private monon>lv via-thn AEC licensite crecess, and that ac-cess to nuclear facilities be as wide spread as pon-sible.'     Louisiana Power & Licht Co. (Waterford Steam Electric Generating Station, Unit 3L, CLI=73-25, 6 AEC 619, 620 (1973) (Waterford II)." Wolf Creek, NRCI,

• pp. 564-565 r

f

                                                  ,-       ,     e               r

I. NUCLEAR REGULATORY COMMISSION LICENSES WERE NOT INTENDED TO CREATE OR MAINTAIN SITUATIONS'INCON-SISTENT WITH THE ANTITRUST LAWS. Clearly underlying the trial board's conclusion that a situation inconsistent with the antitrust laws does not now exist with regard to Consumers Pouer Company is its premise that the grant of a license itself insulates a potential licensec from being in viplation of the' antitrust laws, absent

( proof that the potential licensee's purpose in obtaining or using a licenso is a conspiracy to violate the antitrust laws.

The trial board'u analogy of a nuclear license to a patent or

                                                ~

a collectivo bargaining crerption frcm application of the anti-trust law (Dacision, pp. 51-61; UECI, pp. SS-G1) combined with its tisht requirement that "nexua" must be shcun between the grant pf the license and the antitrust violation clained (Decision, pp. 41-51; NRCI, pp. 50-55) ine::orably leads to the ( conclusion that the'only_way a " situation inconsistent" could i be shown is if the obtaining of the nuclear license is itself part of a broader scheme to violate the antitrust laws. The trial board sta tes (Decicion, pp. 43-44; 1mC1, p. 52):

               "Where the Congress _has by legislation provided for
              'the grant of specified righta, it is a;;iomatic that the use [enphasis in originel] of activitics . author:. zed by.such a grant or license cannot create or maintair-

a situation inconsistent with the antitrust laws. The use of the licensed activities are immune'from the anti. trust laws." 1/ Later on, (Decision, p. 44: NRCI,.p. 52) the trial board states:

                   "If,there is evidence of intent to carry out a scheme or conseiracy to achieve an anticompetitive result, the execution of such a scheme is anticompetitive conduct'."

Then, after discussion, including quotes from the Latin con-(, cerning " nexus," the trial board concludes (Decision, pp. 50-51; NECI, p. 55):

                   "Ne::us e::ists between otherwisc lawful activities under a license or proposed license and a situation inconsistent with the antitrust laws if, and only if, the snid nativitien are ni.eured so es to hn a rat a-3 e.1 element and a substantial fccto:_ in a scheme or conapi-racv, the purpcce or'effcet of which is'to cause .the crcation or maintenance of said situation."

Reasoning (Decision, p. 51; URCI, pp. 55-56) that " [t]he problen now becomes one of distinguishing betucen use and misuse a-V of activitics under the licence," 2/ the trial board states,.

       "The bect analogy is found in the patent law. "        And the trial board-concludes, (Decision, p. 58; HRCI, p. 59) that so long 1/    Emphasis supplied.throughout these quotations from the trial board.

2f Emphasis in original. 1 as a patentee -(or labor union) does not " misuse" the " granted exemption from the antitrict laws," there can be no antitrust r law violation. By the same token, so long as a licensee under the Atomic Energy Ach does not " misuse" a license, there can be no situation' inconsistent with the antitrust laws. . Thus, the trial board holds that, like a patent, a Nuclear Regulatory-Commission license is intended as a grant of poucr that insulates the licensec from the impact of the antitrust laws. - It-must be stressed that, if the trial board's major and clearly stated premise that the grant of a lluclear Regulatory Commission license is intended by Congr'ess to insulate from the antitrust laws is in error, its' entire decision that there can be no conditioning of the IIidland licences falls. (.. .. There.is no basis for the proposition that Congress intended a license to be the basis for creating nuclear monopolics

         -in.the larger systems.           Its concern ras opposite. 1/ In Wolf C_r_e.<.- h. .

an ac,licant t for a license, Yuisas Gau e Electric Comoany - - r.rg uad tha t " . . . Section 105c limits the suission' n anticrt.r t 1/ Indeed, if the trial board is correct one wonders what the Congicscional purpcsc was in establishing elaborate anticrust review.

                                                  -3 5 -

9 responsibilities to investigating only those'anticompetitive practices which have~a ' causal connection' with the activities sought.to be licensed." MRCI, p. 569. Thus, absent " causal connection" betueen the operations of the proposed nuclear plant and the clcimed antitrust violations, there could be no conditioning. This Board ruled: ,

               "In our judoment, the a!.2plicant's contentions are

(" at odds with the wordina of the statute, unsur.corted by the legislative _ history, and inocusistent uith the decisione-of this Cciv.ission.

               "The applicant in the case at bar uould have us con-struc ' activities under th2 licence' in Cccticn 105c as foreclosing inquiry into whether it has engaged in anticorpatitive conduct uhich is not traceable           ,

irac.ediately and directly to the operation.: of tho'

              -licensed nuclear facility itself.     [I.e., in the Midland trial board's lenico:1, whether it has " mis-used" or proposes to " misuse" the licensed facili-( __          ties.)    It maintains this position even though such conduct night enhance its ability to use nuclear-generated power to the dicadvantag3 of cor:pctitors.

The cases cited above cut against giving Section 105c such a narrow and in our judgment artificial reading. Moreover, the acetion cannot be fairly read to bear the meaning applicant ascribes to it.

               "The, words of the ntatute upon which the applice.nt relies direct the Commission to consider noi. only whether granting a licence vould ' create' en anti-competitive' situation but also whether it uculd 'nain-
              .tain' one. Thus, to the extent the applicant's argu-ments cuggest that the Commission's cognizance under
             '105c is limited to anticompetitive consequences directly attributable to applicant's use of the nuclear plant and its output, it makes no sense.

As the staff' points out ~[ footnote deleted], for activities under a license to ' maintain' a pre-existing situation inconsistent with the anti-trust laws,- some conduct of the applicant apart from its-license activities must have been the

               'cause' for bringing about those anticomnetitive conditions  . . . . NRCI at p. 568.    (Emphasis supplied).

After considering the words of the statute, this board then goes on to dis, cuss the legislative history of e ( Section 105c. While the trial Board in Midland finds the

                                                                     ~
     " history and hearings which formed g,-basis fpr PL 91-560           ...

sterile in the sense of not providing 'huidance as to the ap-propriate construction of the spc.ific language of the Act," (Decision p. 33; URCI, p. 4 '/ ) this Boar. acaclu' des that the legiclative history and statute are cc sietent in cknying ap-plicant'c contention that antitrust revic.7 is limitc0. to "the operations of each nuclear plant in isolation." Wolf Creek, i NRCI, pp. 569-570. While this board agrees that "

                                                              . . .        the
 , Commission's antitrust mandate extends only to anticorpetitive situations intertuined_vith or exacerbated by the e.vard of a licence tv consD.nn. or npar: ate u nuclear '..cil cy"       
                                                                   ._.CI,   p. i.Sh;'

it~ rejects the facile conclusion that the Commission must ignore 4 W

the uselof nuclear power to support pre-existing anticompetitive sit'uations. 1/ Apart from the fact that the trial board's theory has'been totally rejected by this Board, .the premise that there~is a valid analogy between Nuclear Regulatory Commis-sion law and patent law is incorrect. Patents are specific grants of speciti privilege to reward invention; similarly, unionization and collective bargaining are viewed as serving ( purposes consistent with public policy. Thus, by its, nature a patent is designed to grant- a monopoly right. However, a nuclear licenso allows a licensee to use government developed technology for private profit. No rea-son is shoun why its grant should create an immunity from the . o application of antitrust policies. Atomic Energy Act, Section 105a. To the contrary, being a grant of special privilege, a nuclear licence should and does carry with it a clear obligation 1/ This board cites the Joint Committee Report e::amples uhere alleged antitrust activities involve ". . . designerc, fabri-catorn, manufacturers, or supplicrs of materials or services, vho, un0.cr co:w kind of direct or indirect contractual relatiow-ship nay be'furniching cquipment, materials or servjces for LM

                                  "                     as an enarple licensed facilities-.    . .     (NRCI, p. 569) where ne::us 'uculd not be shown. These are     in marked contrast to the trial board's attempt to insulate from antitruct review the use offthe nuclear. plants-in conjunction uith coordination excluding Jr limiting the smaller systems.                                   ;

9 t

   ;that the~licencee not use the economic benefits' granted to further its interests as.against smaller competing systems.

Moreover, the courts have held many times that immanity from the antitrust laws is not to be lightly assumed. E,. g. , Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973) ; Otter Tail Power Co. v. United States, 410 U.S. 366, 372 (1973); Northern Natural Gas Co. v. FPC, 399 F.2d 953 (D.C. Cir., 1968). ( ". . . (f]or this reason, even where regulatory agencies are not expressly required by the statutes they administer to consider the anti-trus: implications of cases before then, the courts have held them to be nevertheless cbliged

             'to take full account of those lava and their underlying policies before acting. Gulf States Utilities Co. v. FPC, supra, 411 U.S. at 759-761; California v. FPC, 355 U.S. 482, 484-405 (1952);

City of P3:;tsburch v. FPC, 237 F.2d 741 (D.C. Cir., 1956). And where Congress has explicitly mandated the type of conduct to be screened for anticompeti-tive effects, attempts to limit the scope of that obligation by giving a narrow or artificial meaning

 ,            to the statutory terns have been rejected. E,.g.,

(, Volkswagerwerk v. FMC, 390 U.S. 261 (19 6 8) . " Wolf C r,co k , supra, MRCI, p. 568. Moreover, not.only did this Commission have antitrust jurisdiction before the 1970 amendments, but it must be stressed thnu tho::e ama/ecnto resulte? from c Congrecsional reaction to Stctcrville. And in'StnLesvillq even uno er the old law the

   ' Court'of Appea'.s unanir..ously agreed that there vould have to

be thorough antitrust review for " commercial" licenses. City of Statesville v. AEC, 441 F.2d 962 (D.C. Cir., 1969). 1/ As amended, the Atomic Energy Act, requires a finding by the Commission whether a grant of a license "would creato or maintain a situation inconsistent with the antitrust laws." Atomic Energy Act, Section 105 (c) (5) .

                    'The Renort of the Joint Committee on Atemic Enerqu on the amendments, Senate Report 91-1247, sets forth the pur-pose of the logislation:                                   .
                     "It is intended that,"in effect, the Commission will concluda whether, in its judgment, it is repconably probable that the activities under the license vould, when the licence is issued or the;eafter, he inconsistent with any of the antitrust laws or the policies , clearly underlying these there laws."   Rcoort,, at 14.

1/ Statesvjlle affirmed a grant of an Atomic Energy license unconditiened as to its anticompetitive impact on grounds that k the units there involved were "experir' ental. " Congress then acted to strengthen the Atonic Enerty Cormiss.j.on's antitrust review, commanding the agency to determine whether new plants would " create or maintain a situation' inconsistent uith the antitrust laus' and further confirming this agency's condition-

         'ing power, where_it found such anticompetitive "cituation" to e::ict. Atomic Energy Act, 5"ction 105 (c) , 42 U.S.C. S 2134 (c) .

In this contenc, there can be obsolute.ly no basis for the trial Locrd's prouwption that the grr.ut of c license is analogouc to a' patent and therefore creatcc an insulation from antitruat review.

                  .                                                                                                            i I

1

A Thus, the Commission is clearly charged with deter-

         ' mining whether the-gra~nt of a license-will have any likely future anticompetitive impact.

However,,the obligation of the Commission to make such finding is totally inconsistent with the trial board's precumption that the granting of a licens e implies an exemption from aTtitruct structures under normal use. l Moreover, the sta'tute requires that if a " situation inconsistent" is found, the Commission must determine wheth er to

       . deny the_ license outright or issue the license under conditions.

To be sure in er.ercising its conditioning powers--as is th e case with administrative agencies in general--it cust consider factors such as the public interest and the need for pcuer . I i Atomic Energy Act, Section 105 (c) (6) . This provision for additional ~ findings, however, wac clearly not intended to allow t the Commission to grant a license freoly despite a findin g of ( antitrust violations. _E.. c . , sec Municipal Electric Association of Massachusetts v. EEC, 413 F.2d 1052, 419 F.2d 757 (D.C. Cir., 1959). 1 Ect only 3 c the statutt explici~, but contrary to the i trial board's conclucion that the legislative history ac an aid . to this decision is " sterile" ' (Decision , p. i ' 33; NRCI, p. 4 7) , Congrecs made clear'its intention: b m

             "The Committee believes that except in an extra-ordinary. situation, Commission imposed conditions should bo able to eliminate the concerns entailed in any a'ffirmative finding under paragraph (5) while, at the same time, accomodating the other public interest concerns found pursuant to paragraph (6) . "   Joint Committee Report, supra
           -at 3.

Moreover, even the.small opening left by the Committee's language and the language of the amendment for possible extra-ordinary grants of licens.es despite a finding of adverse anti-trust consequences so deeply troubled proponents of the bill (

                                                                ^

that they sought an interpretation of this section frcm the Justice Department. The response from the then cssistant

                                              ~

attorney general, Mr. Richard W. McLaren, was:

             "We do not think that the p.oposed subsection c(G) would cmount to an exemption from the antitrust provisicne in the Atomic Energy Correission Act
             . . . . He would not think that the AEC could
             'a. void the conditioning of licenses to. cure adverse antitrust findings simply upon a finding  ,

that there was a need for power in the affected ( area. Rather, we expect, and we believe the Commission expects, that the Co:mainsion's conditioning authority could be used to cure competitive problems while allowing construction and utilization of facilities ~." 116 Cong Record at 39621. 3 r

Accord, e.g., Atlantic Refining Co. v. PSC of New York, 360 U.S. 378 (1959). 1/ Based upon this interpretation, the bill's proponents spoke in favor of it, specifically referring to the provisions for antitrust scrutiny. Senator Metcalf. stated:

               "I am satisfied that no e::emption from the anti-trust provisions of the Atomic Energy Act can be inferred from the language of subsection 105 (c) (6) .

The interpretation given by the Department of Justice of this subsection makes it clear that ( AEC will be given the appropriate power to stop - the monopolisation of nuclear generating facilities and open the door to participation in such plants to all utilities when monopoly is a threat." Ibid. 1/ The history of natural gas litigniicn aricing from rederal Power Commission natural gas regulation,is instructive. In Phillips_ Petroletv1 Co. v. Misconsin. 347 U.S. 672 (1954),.the Supren.2 Court held that producer aales of natural gas in interstate commerce uere jurisdictional. In Atlantic ncfining, cited above, the Co.T. mission fclt itself forced to issue natural gas certificates to major producers because of the need of the consuming public for natural gas. The Suprene Court mandated ( that the Commissien could not ignore its responsibilities under the Act and absent compelling circenetances thac it was required

        ~

to condition the grant of the certificates ar to price. Natural Gas Act litigation is replete with implicit or e::plicit court holdings that not only is the conditioning power permissive, but that it is mandatory to avoid conflict with statutcry purposes. E.c., U_GJ v. Callc -" Procertice , Inc., 382 U.S. 223 (1965); FPC v. S w a" N' Oil Co. , '51 U.S. 9 (19GS). nmW rn IMxrr l Gan Co. v. Prc, 3S9 r.2d 953 (D.C. Cir., 1960). See Ptr-ian pasic Area Rate Crnen, 390 U.S. 747,-7'/S-700 (1968), interpreting ' the scope of Section 16 of the Natural Gas Act, 15 U.S.C. S7170, which grants the Conmission power to perform "necesssry or appropriate" acts. See also FPC v. Tranncontinental Gnn Pig; Line Corp., 365 U.S. 1 (1961), affirming the Commission's denial of a natural gas transportation certificate on grounds of the impact.-of natural gas use by end users.on the price and avail-ability o.f gas, even though the alleged inferior une would have taken place'after the gas had pacsed Dcyond the :iurjsdichion of the Comminsion. Senator Aiken expressly conditioned hie support of the bill on assurances found in a similar letter to him from Mr. McLaren that uhere an antitrust a'.tuation existed, license conditioning would result. Thus, Senator Aiken stated:

               "Mr. President, with that assurance from the 7             . Department of Justice and the cooperation of the entire Joint Conmittee on Atomic Energy, the bill was reported unanimously, so that I feel we should enact thic legislation." Id.., at 39620.

Senator Hart stat 3d: (. "Under no circumstances would the Commission be relieved of its responsibility to require applicants for licens,es to conform to the anti-trust provisions of the act and the cntitrust laws generally. . .

               "It would be a dintressing developrant if nuclear pouer we) e allovted to gaua--bct kreu.Jh L with it monopolistic practices which had the effect of limiting the supply of power to scro energy CompaniUS.
               "It is clear from the facta and opinions I have
             ' cited that it definitely is not the intention of

(' Congress in amending the AEC Act that this should occur." Id., at 39622.

3Tho' intent of Congress ,and the clear language of the amend-1 ment was that no-exemption to the antitrust laws be provided by Section .105 (c) , but only that under appropriate circum-stances, such as a projected severe power shortage,-1/ a conditional-license might be-issued so that plant construction could begin. However, the Congressional intent is that even there,. antitrust violations should be cured. As Senator Hart stated:

                  "If an adverse antitrust finding is made by the Commission, it may issue or continue a license when there is a 'need for power k-              in an area,' but this issuance or continu-ance mnst be accompanied by appropriato              ,

conditions in the licenso which require the applicant to cure the adverso antitrust findings ~. If the applicant or holder of

the license does not cure the antitrust findings, then the AEC may suspend or revoke the license regardless of the 'need for puwer in the affected arec.'" IG., at 39622 In short, the granting of a license to construct a

       ' nuclear , facility was never ' intended to confer an exemption from the antitrust laws.

Therefore, the trial board's analogy (-- to a patent -- and similar analogies-- is irrelevant. While t the grantee of a patent may be liable only on antitrust for i 4

        " misuse" of his patent, any violation of antitrust law or 1

policy by the applicant for an NRC license by statute is grenad.o for a finding;cf incontdst:ency and the ba. is for i 1/ . Compare Consumers :'ede:tation of 7 america , 515 F.2d 347 >- TD.C. ' Cir. , 196 3) , - cert.i orari d E isi, where under a provision of the Natural Gas Act allowing for emergency gas sales without certification, it was- hcid - ultra vircs for that Contaission to avoid price review of natural gas sales for a limitad time period despite a severe gas shortage. Natural Gas Act, S7c, 15:U.S.C. S717f (a) .-

denia1Lof the-license or conditions to cure such inconsistency.-1/ At Decision,:p. 41;oNRCI, pp. 50-51, the trial bbard states:-

                           "Once,a Board has found'an. actual or prospec-tive situation inconsistent with the antitrust
                          ' laws (anticompetitivo conduct) , it must con-sider whether such situation will be created or maintained by activities under the license.

The-said activities must have a causal con-nection 'with the creation or maintenance of. said situation." At Decision, p. 41-51; NRCI, pp. 50-55,.as well as a. in its following section (Decision, pp.-51-61; NRCI, pp. 55-61), the trial board makes clear that its. holding on " causal con-k- nection-nexus" is intertied with its theory that the're can 1. only be a situation inconsistent with the antitrust laws where there is potential " misuse of activities under'the license." 1/ Although the older cases cited by the trial board (1896 . 1910)' infer a broad grant of innunity frcm the antitrust laws . to patent nolders, recent casos consider patents to be special ~ privileges giving far more limited exemptions and narrowly construing the monopoly rights granted under pa tents. Recognizing that patents are.an exceo_t_ ion to the antitruch laws, these cases have held that the limited noncpoly granted

  ~{'      cannot bo> cxtended to areas beyond the specific grant in the patent. Ethyl ~Gasoliye' Corp. v. United Statea, 309 U.S.
            ~J (1940); norton Saf3 v. Suppiger Co. , 314 U.S. 488 (1942);                i United States v. Univis Len'Ee Co., 316~D.S. 241 (1942);

United _ States v. Masonite Corp., 316 U.S. 265 (1942);  ! Neriord Cerp_., v. iiid,--Contine: t Co. , 320 U.S. 661 (1944), United :1 S ta ?.;s_ v . Line Material Co. 2B U.G. 287 (lN C) ; Unito6 S tee-

v. - !v.noer .14aouf acttTin:t Co., 374 U.S. LE O N '" . 1 l

TM limitcU relevance -? the e wly G . r.: nhould ' . l recognized. Even if modern patcat lau vere cc implied by the early cases, these emphasize the public poli.cy mentioned by Article-1,-Section S of the Constitution, of rewarding and on-couragin_g invention by granting inventora in nddition to the right to_Qayment for their products, the ircentive of raonopoly. Inicontrast, atomic energy was-largely stato developed ~ . While Con < tress has sought to encourage development of atomic energy

          -.for peaceful purposos, as the text indicates the emphasis hac
          .bcan .on assuring. that the grant of rights to use. nuclear                   )
          -power not give undue advantage to tha users in light of                       l the antitrust 'lmin.                                                          !
                                               - t. 6 -

l

As this board stated in Wolf Creek (NRCI, p. 572-573):

               "Accordingly, we conclude that the legislative history of Section 105c does not support the applicant's argument that the Commission must consider the operations of each nuclear plant in. isolation when making its prelicensing anti-
              -trust review. On the contrary, the Commission's statutory obligation is to weigh the anticom-petitive situation--which to us means'that operations in any ' airtight chamber' were
                   ~

not intended . . . . It was a key purpose of the prelicense review to ' . . . nip in the bud any incipient antitrust situation.'_1/ TJe can therefo,re perceive no~ valid reason why the Commission should wear blinders when 3 confronted by such matters. No statute should be construed to render it ineffective. . . ." (emphasis in original; footnotes deleted) . - The trial board usbs " nexus" as a club to break the relationship between cause and effect. The antitrust laws are intended to limit. unbridled economic power (and often associated political power). . The reference to which the tricl board should haye looked in defining nexus, its recearch into the Latin notwithstanding, is the antitrust case

   -lau where a classic test utilized to deternine if there hac

( been antitrust violation has been market " domination." And as the courts have determined in this context, unconscious acquisition of monopcly power by dominant corporations does not just happen. United States v. Alu'inum Co. c? Icorica,

   '148 F.2d 116 (2d Cir., 190;)       (L. I?cD C . J.); UMted Stato        v.

United Sho+ Machinery Corp._, 110 F. Supp. 295, 344-346 (D. Mass., 1953) (Mycanski, J.), aff'd per cur.iam, 347 U.S. I

   ;521 (1954).       Nor can it be presumed as to Consumers Poue:t                          l Company, which: grew through a process of consolidation, whose l_/? Joint'Committec Report, p. 14.

internal documentation indicates a direct intent to further its monopoly power (Decision, pp. 150-155; NRCI, pp. 102-104) and which has entered into far-reaching facilities and coordina-tion agreements.

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l l Insofar ac intent is concerned, men--and even corpora-  ! timis--are presumed to intend the conocquences of their acto. 17.J :. bl 7al fr.tenct u ;id' . Lb- s? -ve c - .

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cht .me s agree: ^ats and e:;pansio:, o3 i ens inevite' ' y .lcac to e result. Indecd, direct proof of intent to ccntral is of ten dif ficult becausa the c::pansion process is contai.ned in a myriad of small transactions and only cporadically is the over;)1 de..ign ari.iculated. It G as not . . e w '. !:n be. Hu. -v a ,

                                                                                                                       -4B-

s, in this case,~ Consumers Power Compsny's economic.justifica-tions'for~its anticompetitive conduct admit the' knowledge

           .and,,indeed, the purpose of obtaining and maintaining dominant control over the bulk power facilities in Michigan's lower peninsula.

The stntute and legislative history conclusively rebut the premise that normal use of a license prohibits a finding of inconsistency under the antitrust laws. II. A SITUATIO INCONSISTENT WITH THE ANTITRUST LAWS CLEARLY EXISTS. { In conjunction with the grant of a license for any nuclear plant, the Commission is required to "make a finding as to whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105(a) " Section 105 (a) both makes clear that "[n]othing contained in this Act shall relieve any person from the operation" of the antitrust laws 1/ and it lists specific antitrust acts. Thus, the Comnission must make a finding whether the grant of a license will be inconsistent with the above-named acts. In the event of such inconsistency, Section 105(C) gives the Ccamission clear authority either to deny the l

           -)icenna o;- La et,adition it in canaiderats .. of th. c 'in6!og.

Among othe;: 'thic.gs, Section 1 of tha Ohm:ca A:r 't;_w . , i Act declaros illegal "[e]very contruct, combination in the form 1/ -.This phrase alonc rianifests the Congressional intent, contrary Io'the holding of the trial board, that the grant of an NRC . licence carries with it - no exe:r.ption ' from the antitrust laun under normal vae.

                     .                                                           1 L                                                                                 1

      . of: trust or' otherwise, or conspiracy, in restraint of trado or commerce among'the several States..         . ." 15 U.S.C.. 51 -

Section 2 makes it illegal'to " monopolize or' attempt to monopolize, or comb'ine or conspfre with any other person or persons,-to monopolize any part'of the trade or commerce among the.several States . . ." 15 U.S.C. 92 Section 7 of the Clayton Act prohibits acquisi - tions "where in any line of commerce in any section of the country, the effect of such acquisition may be.substantially to lessen competition, or to tend to create a monopoly." 15 U'.S.C. 513 - Section 13 of Title ~15 (the Robinson Patman Act) , not' quoted by the board, broadly prohibits sellers from engag-ing.in price discrimination where such discrimination may have l . s ubstantial anticompetitive impact. - . Section 5 of the Federal Trade Coruission Act prohibits

       " unfair methods in competition-in commerce, and unfair or decep'qi Je acts or practices in commerce .      . . " 15 U.S.C. 945 l

These Acts have been interpreted to prohibit certain kinds of actions. (~ , The Sherman Antitrust Act and other antitrust acts ~1/ l l condemn attempts of dominant compruiec in particuler markets to , "re:P ain" en: r hinion i th2.:vc m'm in rhic' t'my .m:m ac .:i: = n l l/ The Sher: nan Antitruct Act directly proh.ibits actions "in restraint of trade." I!cuever, the-Company'.s discrimina-tory policios in granting or-denying access to bulk power coordination and-trancaiscion also clearly constitute " unfair methods'of' competition" and discr'inination as proscribed by

      -the Itobinson Patman Act.

or in other markets. For example,-Consumers Power Company. has the power to. deny necess to large generating units, high voltage transmission facilities and to coordinating and inter-change arrangements through which wholesale power transactions take place. In refusing access by the smaller systems to these facilities-and arrangementr, Consumers Power Campany--in the w ords.of the' statute--is " maintaining a situ-ition inconsistent with ' the antitrus t lawr . " It " restraints ccmpetition" for Consumers Power LCompany to use-its control of essential facilities to block I access of intervenors to alternate cources of pouer, thereby-lessening intervonors' ability to compete for the sale of power services in wholesale and retail powe; mrrkets. Similarly, the limiting of their alternatives limits their ability to obtain low cost' power and limits competition of other sellers who might ccrr.peto uith Camumen Power Company ta nell

                                                                                        ~

power to intervenors. i The Sherman Act further prohibits pooling arrangements (.' among ac tual' or pc hential competitors. Clearly, the only reason why the ' Michigan Power Pool (consisting of Detroit Edicon Company and Consumecs Power Company) or the other national pcuer pools are legal is the mom; poly p; vilaga yrcntcJ u t i3 ities. . Unii ec' ~ ': " M c " . Tm e n A rw - - hoc, 6 l l

       .U.S.l59y (1972;                                                                           I i

l However, to the c' tent-thri poolins alrangeuants may l be considered not to result -in an othc.: uise illegal restraint , of trade,. pools must'allou potential competitors entry on t l ' nondiscriminatory' bases;.otherwise they would constitute i illegal Larriera -Lo ent.cy. D.q., Ar.nocia ted Prconn v. Uni ' .c ?

rc - kr 1 k. States,L326 U.S. 1.(1945); Silver v.'New York Stock Exchange,

                                              ~

373 U.S. 341 (1963). _ Additionally, it has been held to be illegal for a com'pany that'has obtained dominant power over a specific aspect of commerce, even though that power ma'y have been obtained lawfully (for example, through the grant of a patent) ,

         =to use that power to protect or expnnd its market share at a different level of competition or over a different line of commerce.- Thus, for example, a fabricator of ingots, who Y. lawfully. obtained a dominant position over the market for the sale of raw ingots could not use that position of' dominanco-to improve its position in selling products made from the raw i          material through charging competitors higher prices for the raw in_gots than the- dominant sellars ' internal transactional price to itucif as a raw material for its own fabricating opera-                       .
          .tions.                   United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir.', 1945).                    Accord, United States v. Loews,Inc., 371 U.S. 38 (1962); Lorrain Journal Co. v. United States, 342 U.S.

( 1 t. 3 , 1951); Enstmen Kodak v. Southern PIcto I N.erials Co.,

273 U.S. 359, 375 (1927). Similarly, a public utility that sells electric power at retail cannot refuse to sell such pg.

er & uholesale to a competitc; in order to retain or I

improt i c sha::c of the n taf l elca'c cic nr . M .ligil Fouar Co. v. United States, /,10 U.S. 366 (3 ??) . Sec Unf States Utilitics Co. v. FPC, 411 U.S. 747 (3073). l 4 . l A classic means of a monopol.ist to maintain or improve Lits markot position for the sale of products or services where

                                       ~

it doas not have a competitive advantage is for it to " tie"  ! l_ l L - . . _ _ . . . --. . __ J

t e sale'of the product.or servicolto where it does have advantage to the product or. service'where it does not. More simply stated, a " tying arrangement" is where a party with market power over one product or service uses his market power'to tie the-purchaue of the first product or service to a- second product or service. Such tying arrangements are illegal ner se under the Sherman Act. E.g.-, Fortner Enterprises v. U.S. Steel Co., 394 U.S. 495 (1969);

                                                         ~

UnitedJStates v. Griffith, 334 U.S. 100 (1948). < Similarly, a concern or group of concerns having ( control of a market mechanism may not conduct an illegal bo'ycott to the exclucion of disfavored firms. Montague4 Co. v. Lowry, 193'U.S. 38 (1904); Eastern States Retail Lumber Dealers Ass'.n v. United States, 234 U.S. 600 (1914); Fy h ion _ Orig in a,-- tors' Guild of America, Inc. v. F.T.C., 312 U.S.. 457 (1941); Klcr's, Inc. v. Broadwavrgale Stores, I r. c . , 359 U.S. 207 (1959). Fcr example, a group of dspartrent stores controlling access to a' dominant chopping center could not crclude a potential s competing firm or dictate the terms of that competing firm's entry-into the shopping center.- By the sana token, a firu or group of firms that hava contrclling por.c over an essential facility cannot n c.t . tid.t _ po'- r 4. . , adh ':c 2ge tb w mlec c 'a caratin. for

   -uarhee.s:that a at rei. ' ucc of ti.at f acJ. lit y c_             in a:'.m et..m, the prices or- terms add conditit.as of the ultinate sale of p'.oducts using such facilities.                 For exampin, if a railroad. or group o f-railroads nlso' ouned coal inte:rcsts, s ch railroads could not j

establish frei'ght charges for. coal in a manner *that would equalize.the price of coal sold at retail markets. United States v. Reading Co., 253 U.S. 26 (1920). See Utah ele Company v. Continental Baking Co., 386 U.S. 695 (1967).

                                                                            ~

Consumers Power Company has violated each of the above prohibitions. InLthe following subsections, intervenors demonstrare that-the record fully supports _that cuch violations have occurred. In Subsection D we demonstrate that such actions are. clearly contrary to law.

 - (-           A. Consumers Powcr Cocoany's Control of the Bulk Power Facilities in _the Lover .Vichigan Penine.d.a Oi:;advan~

tages IIunic/Cocpc.

1. Consumers Po'.ter Co$pany Dominat es Bulk Power Generation and Transmission Facilities Consumarc Fouer Company doninatos electric service in the lcwer Eichigan "eninsula cutside of the Detroit arca Erch of the individual interrenors (including the Municipal and Ccope;;atives Power Pool) are surrounded by and dependent upon this dominant electric system for coordination; non-k generating systcus are. dependant upon Consuncrs Power Company for their total.scavices. And, as we have statcd, supra, and as the trial borad finds, in its operating arrangementc, the Company is closely tied to Detroit Edison Company (Decision p.121; ND? . . p.95). 1/

Eter.uso c5 their s..e, ir tex "ano: s c: oth~c ct.nll cystens ennnet build nuclear units thems:lves. R. 2 '6 9 6- 2 6 9 5, 2 0 0 8 ; -. R. 5 0 '; 0 : 10-12 (Chayavadhanunghur). Therefore, uniccs 1 Io/intly~ Consur.ters Power form-the Company Michigan andPool. Power Detroit Edison Company

                                                        -S4'

                                   ~
     "they can directly buy portions of nuclear gener'ation or power
                                 ~

specifically~ assigned from them (unit power) , 'they will be barred.frcm access to a major tource of generation and perhaps from independent generation as well. Morcover, as witnc: s Mayben'and others testify, especially in view of increased fuel costs and decreaced fuel availability, the installation of small units is-becoming less and less economic. R.2806-1 2008. ,_1_/ Not only does Con 3uemrs Power Company cun all large ( base-load gcnerato.cs in its service area, but as has been

     ~ testified to on this record--and is agr?.cd to by. Con'sumers Power Company--it is this control of high voltage tranumission facilitics which allcus it to integrato its generation uith I

its :rarkets. This in turn allows for obicining eccnomics

     .of scale.         E,.g., R.7239:38 (Pace) r Ex. 1005, pp. 31-47,77;
     . E:: . 1004,.pp.165-167.           Fcr cost, envi:.onaten tal and n:arket reasons, the smaller systen:s cannot duplicate Consumers Power Company's transmissica network. E.g., R.2O l-2817;                                       ,

4 Ex.-1005:33; R. " 6 6 4 : 14- 15 (Cutnann). Through high voltage I 1/ The trial borrd implies that Munis/ Coops can generate as , Escaply as Conctraars ?cuer Company through small unit generation,  ; o r ,- a l t e r n e. c.i v e l y , tie;; they es:.n obtdn th- aNcn t.aqcs of nuclee r , now.r' through pu .chr ..:9 t;ho2 ccc ic pc'.wr :from t.::e Compnny. 2 We  !

      -discuns the: a stn tc: .Jnte la:cr.             iiorov r it c. :uld be.utrossed                i hero-that-'thc iscrS. its not Uhatact nu:lccr ovn:c; ship in nreter-                           l ablo"to other fcrus of owner:h p Or purchased i.c"er (acauming                                 i this can hc detcrmined with nry degree cC certainty), but whehhor
      -the smaller systens shall have the p ortunity-to make that                                     i decision. The ult.iMat.e . decision and respons2 6ility for pouer                               l supply-should..be that of the-in~.ividu11 rystem, and, in making this decision, small systems rhould not LO- forcelosed from -

direct nuclear-. access. It is notenorthy'that, as evidenced by'their actions, dominant utilbics, such as Consumers Power

      -Company, do belicyc this right'of choice is important.                                         j
                                                  -59_

f. F . i L transmission lines large. amounts of power can be transmitted without substantial line losses. Thus, for example, 345 kv lines integrate thc. Midland units into the Consumers Power-l Detroit Edison systems. _1/ Moreover, '.or transmitting powcr over long distance (apart from coordination), high voltage

            . transmission is necessary. Ex. 1005, supra, R.             5090:16-19,
            .21-22 (Chayavadhanangkur) ; R.          4664:13-22, 29-30 (Gutmann) ._2/

l Thus, without access to such transmiscion the smaller systems are denied the opportunities to obtain

      .. alternate pouer sourcos and to coordinate with other systems,

( thereby depriving them of the type of economics of scale and of operational efficiencice poscessed by Consumorn Power l l Company. Absent its large markets (or enordination with cther systems having largo markets) a utility cannot build large, cfficient baco load units. 111thout such marketr> , it cannot obtain financing-for such' units. Nor can it cell enough pcuer to pay for the carrying chargea and c:: ponces of units such as Midland. Sea references above. E:: . 1005, pp. 36-38, 77-78. Transmission lines raintain system reliability.3_/ 1/ We refer to the systems jointly, because they dispe.tch power Joint 3y and for practical purposes their systeas fora an electricrl unit. ,E.g., En. 1005, 4-7; R.5070:11 , (Chay.vachem nghur).

               ' / For 6::.vnle , a 23 0 . hv li f . coutu appruximctely 1.G timen l             n 11* kv lino, but etn carry 2.5 ti:we '?: re pov: .                ?:.Thut

! "thsaling"cerven environiaont .1.:s well as engincerinfner 'a. E.g. , . R. 50')0 : 2 G (Chr.yavadhanan:thur) . Sea Ex. 1004, pp. 181-- ! 152; sco Ex. 1005,-pp.43-45. 3/ Nor c::ai/ple, in a setticia::nt appcoved by the l'odcral rover

             % .aission in Septci:ber, 1974, 60% of the costs nacribable to l             trancmission were allocated to "rcliability" purposes and only l             40% to "trancuission of~ power" purpoces. Florida _ Power Corp,.,

FPC Docket Mo.-E-7679 (5432). C ec E::. 1004, p. J. 6 7 , . 16 9 - J. 7 0 . i

liigh voltage transmission is neccesary both tc* transmit the  ; power from large base load plants to market and to back-up such plants. _l,/ Relatively recent advances in technology have ellowed for and demanded increasingly high transmission voltages. The limitations on the amounts of power that ,:an be effectively transmitted are dependent upon the transmiccion voltage icvel. First, low voltage trancmission lines do not have the carry-ing capability to tranceit r.. ore than relatively small amounts

    .;     of po:cr.               Equally as iPportant, the distances that power can he transmitted (i.e. , the distance betveen the ge.nciating cource and the need for thd power) nrc ocvercly limitad cver lov voltr.ca lincc becat.se of their far greater line los.scs.

Thus, the aracunto of power that can he trc.nccitted at each increasing voltage lovel increace exponentially. See p.56

n. 2 , ruprc.

Increanes in scalo of genere.t.ing imits demand higher

  <        voltage transmicsien.                    For c:: ample, Consumers Poucr Ccmpany is plancing to conutruct 245 kv traun~:iccion to abcorb the output of the Midland units. (Sce, R.9160).                         This otitput could nimply not be abscrbed utili.irg 152 hv.                         High voltern trans-l         r.it.cior O: w:.c ~.. ry . ath N cahic, . tb ."r                            rn- m   cd

n tre w - a 3 ..

= n. in m :ix.

f 1/ The ydrious ftwetions corved by tranum.i%1on to integrating UFste:::s tud the relativo efficienci.>s cf higher voltage linco are fc tind reper.tedly in the record, including citaticas above. Sce' generally the fol17.iing references: D: . 1004, pp. 160-lG'?, 181-102; E:< . 1005, pp. 44-47, 6 4 - G  ; D: . 1008, pp. 214--?l5; R.5090:16-19, . 21-22 .(Chayavadhananghur) ; R.4C64:13-22, 29-30; R.5430-5432; R.255G (Maybon).

For~ obvious cost, land uso and other environmental reasons, thc. higher tho transmission voltage the less govern-mental-authoritics or the public will tolerato duplicating facilities. While the public may accept'(with or uithout i enthusiasm) duplicato low voltage lines, it is becoming increasingly restivo about the visual impact and land pre-cmption of towers utilized for high voltage transmission. The record is absolutely clear that the costs required'for high voltage transmiccion would obviously L( preclude s:naller systcms from building any extensiv,2 high voltage transmissien network. i l At page 13G cf its decision, the trial board finds: i l "The applicant's trcnsmiccion system io not a unique facil i ty, without- which tbo smal]er systons (1.,g., tha ECP) cannot coordi.:.r.tc nmong themse.3vcs as demonstre.ted by the exhibits of Justice." This ctatc=cnt is cupported by the fact that the cooperatives (according to D:hibit DJ 10) havo 1,102 miles of 46 :.nd 60 hv

      \

trancaiscion linen cnd, furthar, that the MCP is presently i l constructing 138 kv transmincion. While the icgal implications behind the board's con-i clucienc Oro discuanad separately, an a fcctual natter the l~ }. . utd in rd ag th::; : c .p:n;c t. : 4.'in ' ;: g . F.ir c:+ 34 fin? l t i L.it the sadller cystemu.hz.vu trancrac:' .1 / t tha 133 1:v

          . lev el . or b a.7 -/,: . Occand, it f.:.nd. thai. J.;r ndjnq q.;n -Nir 16 cation, . nono of thc cr. aller systems rey be able to build

! sufficient trancmincjon to interconnect uith occh other (e.u., thc bcard-findu that Lcacing in culy 20 miles from

the MCP's projected 130 kv line and a lessor distance from the MCP's existing 69 kV line). Third, the board finds that the exiei.ing or planned-transmission of intervenors is sufficient to absorb their (small unit) generation. ("From this evidence, it is fair to conclude that the M-C Jool deemed 138 kv transmission to be adequately high voltago for its needs . . . " Decision, p.139; NRCI, p. 98).-1/ Underlying the'so conc 1 unions is the premise that ( it is sufficient for the smaller syctenc to be hleched l

 .frc.r.~1crge-scale gcncration, coordination and trans$ission or, for that enticr, frou the purchase of wholesale powcr from nystems.other than Concurera Power Conpany (or inmediately cdjacent nyctcms that can be reached by Ic. vol. t au e lime . .

Iiowever, the trial bourd makes no finding (as it cannot ,

                                                                                          ~

under the utnte of the record or of the factual situa. tion that exists) thdt Consucers Power Com:any ( o s not own all present and contemplcted transmission chove 130 hv or that Consumero Pc'. c:. Compay 60er not m:n all ganaratin'; unii.c in its, genural area e 1 / The board api.arently does 'ot concider that higher voltnge Eancmiasion unc not constructed beenuno it war economict.1ly unfeccible, even t.'w4.'. the mellcr cy .h .s r.ighT. not umt t.c b0 purDGII"nDly TGUtriited hr- .~l O O h i:r C O N e $ L y g c F '.:.r a t i e d 6 . '.' i I transniccion iacilitics.- Cf.. DiccMedim to Obtitir i ':'~OCTt0 nuclC;:2 their innc vent:ien in this ' T.' W3r l' nc. Si l high voltagg tretustission nctuork. l j

m service greater.than 160 megawatts. n.4664:12. (Apart from Lansing, the intervenors own no generating units of more than 30 megawatts. By contrast, Consumers Power Company now has a-nutuber of units of above 500 megawatts on the line. See:1973 Annual Report'to Federal Power Commission, p.401h.) -

     -                 Thus, as a factual matter, because of their exclusion from transmission of above 138 kv, absent obtaining access to Consumcra Power Compary's transmicsion grid, intervenors would be severely limited or totally c:ccluded from participating in
 '(,     joint venture to build larger generating units, from buying or selling pcwer to systema not in immediato pro::imity to thcaselvcn or from coordinating with systers of any relative sico.      Korcover, while the trial board givoc e::amples that certain of the conparatives and municipals in woutern Michigan could interconnect with themselves (as an inferior alternative                     .

to interconnecting and interchangin. pcLar uith Concumcre it Power Company which had been denied by the-Company), ignorces the fact that icolated municipal syctems, such as { Co. r'cv Ser , uculd not be able to enter into any traaningful 1 coordination-arrangccent with cven the cooperatives or municipa3..c uithout. obtaining access to Concumers Scwer Com- , pc .) ' e .t r :< : /; n io.- m . 7. . i 5.ha a',iility of Cont:u.w.:.c Pr.v e C: .. a ::i C m ' 'in.9

         ' hip voltaga trancmicnien is he;' ho it:              c, '?ty
                                                                   ;      to cc:it.o?

the norheto for povo; supply. l The situation of Col 6uater is illu :trat.ive. l l l i i l 2 l , i ! i

If in order to take advantage of economics of scale-- or simply to expand its marke.t--Coldwater desires to build a large plant, even in relationship to its load, it cannot do so. It presently has a load of less than 20 mw. 5426. Moreover, to sell bulk pouer to other cystems end thereby allow for building larger unitc Coldwater must be able to purchase transmission services. If Consumers Power Corapany either _efuses to sell transmincion servicos or places unreasonable conditions upon such calec,

, (-

Coldvater is rodtrict::d in' the size of the _ units it may bui? d. Siriilarly, if it wishec to take advantage of a large plant to i be built-by cnother syacora, it enraot do so. Gutmann, pp. 17-18,

              '22:~4GG4 1

Consu:rers Power Company covers such a wide service area i .

              .that for it. elf the prebiet dcas net arino.                       DJ-19.          From any paraible site on its system, it'can use its own trans::.ission k            to bring the power to r.arket, including to its wholcoale pouer custercers who cannot do the sanc.

_ Ascuming that Colduater docci build a'relatively large

              ' un ! c. , it enn t:1 into p.'rm h o f r; i e : sp N .m only i hrc:1ph eco of the e::leting trans.miscica hei? itie r: , again < ned L-j Conc en.c:.3 Pm er Cacpan e. Thus, e:tapt i.o v.hc e;: tent thut
              - Coni.: n'.a rU Powrr'CClapany uill.por,.dt it to do 30, Coli ater 4
                        ,         ,-                  e .      -    - - , -, --        --,,, ,        ,, .. -     ,.n

will not have access to emergency or maintenance power to back up its plant;.nor can it coordinate its operations 4 among'a number of plants, enabling it'to generate from the most officient units relative to its-load curve. Paco, pp. 35-68: 7239. The;transmicsion faciliticc give control. Coldwater alco aptly illustrates the detriments from not ht.ving access to coordination. Although having i . i small generating units, at the same time that Celdwcher had

        .1C.5 mw of genaratica and a 10.7 mu ma::imum load it was pay-ing Consttnc rs Power Coc;pany for nn additional 71.2 r.v. monthe 1]

e

        .of capacity through wholesale purchasez.                          Ex. 1001, 5426.

T h u.s C o 1 0.: n '.c .c eithcr c:nad er va purchaci.g cr.20 city equal to approriun.t.ely 1350-of its 1chd. Altc/ natively,' Lansing,.uhich ,

;.       docs not uich .to purchase powcr from Censur.varc Power Core;any, i

l had ^ G31 mv of generation to cervice a 321 ru load; I!olland had ('

,        .7_7. 3 nu of generation to serve a 49. 3 nu load. ,2/ Chayevadhananghur, b

pp. 20-21:.$090. In contrast, the gigLntic Consrmers Pouer 1/ ILra m.f:E Pcrr+.r sts 1.he cree. bin; age la v.mrwai..a on a mo;.thl" hacis. '.'nis amonn en no an av2r p annual purch ze of .5'.9 mw, although .n scree uonths it could hn- hifur. 2/ .It.chould be noted r. hat Concv.r.ern Pocar Company is fon.. of using reservcc figuroc much higher th::n it in tot main-

-taine. Thus, it will talk of recorvec ev.fr 200. Unch figur2c are ecually "pinnning" figuren. Indeed, even its inutalled reserves unuclly.do not include alleuances for. cat-of-cor/ico plants, such,as Palisades. See Tr. 5S23-552*.

                                                                                                         \

1

                                                        - G T. -

l i l.

                                                                                                                   . y

~ Company.had 1972 main system peak demand of 4,080 mw and name-plate capacity of 4,298 mw or roscrvcs of 5.3% of load. Ex. 1 i 1001, JC-3, 1972 Annual Report " Form 1" to-the Federal Power i Commission,'p. 431-B. See also pp. 54-66. i Because of its cunership of transmission facilities throughout the Lower Peninsula, Consumers Pouer Company has s availab3e_to it the internal coordination that intervenors have to ask for--or beg for--or litigate for. _E . _c . , Ex. 1005, ( pp. 19-22. Chayavadhanangkur, pp. 10-12:5090; (Gutmanr!), p. 29,

4604. See Pace, p.l38:7239. 5;ce also 5525--5530 (Engers testintny concerning Midland's icpact.on the Consumers Power system).

, '2. Conon=crr Ecwer Colgany itaintains Adynn!: ages Unavailable to Intervencrs C'hrough Its Control of Hajor Coordination Arrangcments. Not only are intervenere surrounded and iso]cted by Consumers Po.er Ccmpany, which can achieve.intarnal self-co-

   .(  ~

4 ordinatien, but this largo utiliFy finds it necessary and desirable to enter into complex coordination arrangements 4

              .with equally large utilities who in turn dominate their service arcae.           ~/       TL : a c:,xC nC.ica pro c.12 cu io;- nio crix'.

e J/ It -is impeccible to bring together all roccra rafnences . to .the advantages of coerc'ination. IIowever, we call to the Appeal.Doard'u attention:tho coor6ination agreemants the.crelves i '(c.g.,-DJ-G7, DJ-71-70) and the . Let4timony of the Dcpn:hment of Justice witners Mayben. onplaining thera. - mitness Tiocers capsulizes these' advantages at 5515A. Alao witness Chayavadhenanghur

            -at:pp. 12-19:5000. The deposition of IIarry P.. Wall, Ex. 1005, discut.ica thece:entensivoly. 7.ces:-6, AyneM , Ex. 10M , pp. IC7-           _

s 172.

                                                                                                     ^

12 _

operations on multiple systems similar to those that would occur.on an independently owned system. Thus, through coordination and interchange, Consur.iars Power Company achicves i the economic advantages of having cccess to generation and pcuer supply facilities throughout nichigan and the midwest. B. Consumers Power contenv's' Coordination ?.rrangerents Pro-Vide c MarMet for Power Tranni:ctions from which Inter-t . veners Are Encluded

     -                         Pooling and interchange c'reemente              g                   provide a francwork
   .(

annlegous to a market where varied pouer transactionc can take Gutmcnn, pp. 5-7:4654;'5550-5554. place; Thus, for enemple, if an indepenCant cystera (assur.'ing the enict ence of adequate

             ' iu 'we.cu cumilcn fuc; l; Lis .1) lost.c a : nit, it would have to negotiato for pouer cs a repasatt discrete ecstly transaction.

Assuming the power was trc.10a.itted, the terrcn would likely he i such that the nyctem would be econcricali.y cor.pelled to atterpt to maintain large crcunts of cnces: capacity eithcr through wholencle

             -purchane or.cwncrchip to avoid such transactions.                                                   This would resuln i.n. locs of cff' ciency. hocauce of the nucsssity to main-tnf n                  r .U.4      s. : :ii:y (L.,      . :  m         cc} Oc pr e U ' O 1;-d       ..

4

                                                                 *   %             m O

4  % e  % s

                                                         $   e             e .

footnote. e WB 5 M

Power pools or interchange contracts are. formal

         - mechanisms or markets.whereby individual systems enter into i

transactiors to buy and sell various types of- spociali:'ed-power services as the need may arise. Access to the stock exchange gives the opoortunity to buy or sell securities at the besc available terms. Access to-the supermarket makes-it poscible to buy a variety of fruits, or vegetables, or meats, as the need-ariscs. Access to a shopping center or businecs district allcus

 -f ,

m a' seller of goods to reach the public. . If a utility has access to the powr pool, it can buy or soll emergency, maintenanco, econczy e: chango, chort torn or sennent? parer cnd a panop1.y cf other creci ali: red rew r muf cee , If it is barred from this market, it must oparate independently , or it muct-buy and sell crecialized power services in a different, more limited marhet and at Icss favorable tems. Thus, just as

      . a holdt:r of stech c.xcluded fron accens to the New York Stock E:: change might be able to sell or buy but at less advantangeous prices due to incdequate cccces to fcuer buyern and cellors, co a uti.U ty c::cluon6 from the mjor power pc61n cc.n on < into partiedar posci M enar.c d ec.3 with ,:c:ss cc ;                vr r .;: . fcer'-

buyers dnd nellerr;. Houever, in tha name uay ability 1.o r, ell L ..

      .x._.,     -_..__._.._x__

stock over-the-counter.does not equate to.a lioting on 2

• the New-York ^ Stock Exchange,a less advantageous interchange

. arrangement or membership in the M.C.P.P. does not equate to i membership in the Mic.higan Power Pool. e For examplc, a utility in need of energy when a unit is~down will purchaso emergercy power from the seller having

                        ~

the lowest cost emergency power available. If that utility has access to energency power from units on only one system

(i_.e., to a limited nu:rber' of units)- because it is excluded i

from access to aren accrdination agreements, its increr. ental cost fer pouar at any particular time will be higher than tha costs of pcwer fron, less e:: pensive available capacity. 1 For nost of the smaller pouct systems in Michigan the < l_ market for buying and. selling pcuer is Consurers,Pcuer Cc;.ipany. i a Since the smclier cyster.s cannot obtcln general access to the , 1 i . . I high voltarje trancniccion grid without the concent of applicar.E,  !

   /     Concurcrc Porer cen, to a great e:cten t,      dictate the ter:aa under 1

uhich coerdinacion with the shitiler systenc will tako placa. Henry Ford reportedly once caid, you can buy any color Ford so long as it is painted black. Ti. roc.sh cctablish!,g.acccer to n brec/ r- - c mC.: r .

. Ccnrun.cr Poh-

' n ccordinati'on a:Tangem r n givr th Ccape r.2 ' Ole i ab'i[lity to'tnilor ith poucr cupply to 4.Lc demand. If it nee ds l

(.' v . 4 - - -

                                                         .  ,e         r ., . - ~ . , - , , .   -r - - , . + - ,

only emergency power for short periods of time when its units are'down, it can.obtain that type of power at a prico specifically geared for the service. It can obtain such power from Detroit Edison or Ontario-Ilydro or Toledo Edison-or Indiana & Michigan.or even intervenors, looking towards the

 ,                       most favorable prico.

on the other hand, if Coldwater vants emergency power 1 t ( i_. e_. , energy for a licited time period when one of its unita a , breaks down and needs repair), it must purchase partial re- {s _ quirements wholesale po'.;er at a rate based upon the cost of

rupplying totcl power needc, including a monthly demand charge cubject to an ennual " ratchet." This is, it must purchase a

block of firm power for a 3cng puriod. If, to replc.ce energy frnn t --

n gene.:c. tor that geos out of service, Coldwater purchacas energy k 1 above its prc.viat' ::ly purt :.wed rouer loada cven for only cnc l hour--from Constrars Pc?'er Companf, under it.s ratchet it can be. c made 1.o pr.y.chargon for en entire year. Soc previouc referencoc i

 , (
            - to advantcc,os of ccordin:.i.io:'                  n. '.7
                                                                 -                 v. I s un. _ r..n . I .1 cddition, see diccussion of a ratchct clause-as to partial requircmants custerarc at Tr. 5113-5119.

Colduatec's c'a c:. g. : 2cr:m .OweG r'-*^r cro hi:  ;. . Upc .>

             ..     .J   hi        [%  .Y fe, n I) (   . t e   o

• k .1 ) C hI% bi If s ..N 1.iutt p q a dCMand charga baccd upon a fractic5 9C its a.khcGC p l:

l i E l

              - monthly usage during an integrated 30 minute period for the
              ~11 preceeding months or the full-amount of the demand charge based upon its h).ghest use during the raonth, 'whichever is higher.

Id;. Qis is analogous to the situation that would exist if one person had access to automobile rentals as well as taxi cabs, buses and cubuay service, but another had access only i-

            ,  to annual car rentalc.         If the first person has to rush to
   ...         a hospital, he can take a cab; the latter, in order to insure t
,      I gatting to the hocpital would have to pay car rentals fpr a
              -year. 1/                           -

The botto:a line of the board's deci cion is thr..t althougP it is of obvious advantacte to coorrli.nah, and although 1/ Not only ic the requiremant that Coldnater pay annual dc - mand charge hased on its na::irun power purchaces (ineD10.ing omergency power) anticompetitive, but it dictor ts power une , ( crer. tin"; cdc'itional " barriers to entry . " O/100 a systco crc- ___aten a datcend, it is economic for it to centinue to purci'se

              - energy thredghout'the year e.c a res10.b of n purchr.co frca Concu'.,rs
              - Pouer Co. An in the car.r.Tc.al situation, uhsr.3 & person n.:.shn choose to ce;1tinue driving a car once he is cca:titted to paying the weekly or annuel bnce charge, a utility mny be cccnonically forccd to rely on purchased power from a largc- utility, it if cannot cbtain' coordinc tien r.n? ': nows that at cara tima #.t m y need br.ch-up power.       Chile Colwat " cun avol.O c nyimi C r.~ un ro Foua.:-Ceg:my ( nergy chargen by not prenau_ag . :cm i t , if it is alVG dy ~~;EMired tG Day c9 * "TE l d r '. JA ~ chC T* P h*A r , '. i t l!.G hIgh0Gt [ '11 - HM , id P'Jy.chcCEO tO 80 Sc.

GO-4 s er S m - -r-~ ~ , ,- w ~m ,,, ,-

                                                                                     .            ,y -+yrv-,, -

the-economic and service reliability advantages from coordination among major systems are )f. great -significance - (because - a seller or buyer of power in any single trancactions will have access to ~ far broader-alternative sources of power or outlets for power than it would on its'oun system or under a coordination agreement limited to smaller cystems i:.volving a smaller number of smaller units or a limited nnrket) , the board leaves the Munis/ Coops in this obviously disadvan'ta<; ecus competitive situation. (- Through coordination Consurers Power Company la able to construct and cperate large. units such as I!idland, thereby achicving the af. vantages of scale, boccuee it has cvailable access to the reccrve capaciF.y in the units not only on its T own synten, but also those cuned by Detroit Edicen, Ontario Hydro and the MIIO systems. Ex. DJ 66-76. Because of its ability to plan maintenance schedulee jointly and the reduced ( probability of-concurrent rultiple cutages, the reserves necessary to support.such large units are reduced as a result of the Company's

        - coordination.       This broad coordination gives Consumers Power Conc.pny the advantnrns of oparatint; large unite while alco redreing its L: - ~-

c: - c're . , h :pc > -

                                       ,                 in ci ' ' '           3 M.a       v:              '*~  . : ,-
                                                       ~69-e 3

4 f

r. -

generati'on mix. E,.g, , see generally Ex. 1005, especially pp. 1-65, Chayavadhanangkur, pp.. 12-17:5090. If Internal and external coordination gives Consunors 4 Power Company nore flexibility. There can be no question that a large system, ccpecially one having broad coordination 't opportunitics, has more alternatives available to it, ' and

therefore, more choices, in case one type of unit should become.

technologically or otherwico outsc:'od. Ex. 1005, pp. 21-23.

7 s.-

           'For enapple, at the present time Consurerc Pom.c Corpsn,y has a

> balance of liuc'. car pc?:er, coal- fired generatior., ges e.nd oil unito, pur: ped stcrage hycTro-alectric pcuer ar voll as other i hydro ,dect ic pour and a di.fferent nix of lerae bnse load unitc,

           . intermediate size. units and ennller peaking tinits.                                        I:dditionclly.

thcsc tnits are cf various vinteges. Er. , 1001, JC-3. Ex. 1005, 21-22;. Srtaller systers do not enjoy this type of fle::ihility. (

                   -..    .__                                   _z lj. Marco . :r, coordinct. ion (internal or external) results in reducing.the rich associated uith building large units. A
           'systcr. having a. large number of units on its c'.m systen or r.vcilnblo through interchanne crn r c-1 :c adj .1 y u.ch bui1Cin; y :1 crc' ': ' e.it thi n c- - n .v:lle -- V a:/-it? Jc ':2r b 3 22n i:1 Uh'!r.!' tC pl C CO i!*O CG; = . I. .' . 10 E .' .* p.  02361. 3 iD .:

in cl':cb; u gun . Y an an y c .ui: <c&c in- =

                                                                                              .. r;c    <: *    ' -
           ' thC Ch JTtUni.ty CJ'l: Gild L - ! . '.* qt .$ ~ ^ i .'W f; O a= I. < ' "? f                   . 11 *
            * 'C Cu.I. DU in GubeCD.Iti.al C'VingS I o.i'
             .                                                               . UT*2.1 10 f C,7EtCC. h.G.,

2S5J-2535. !=

    -~                          - - - . _ _ . . - -

                              ~

The recent oil shortages, increased fossil fuel pricos and environmental concerns dramat5.cally illustrate the dangers faced by systems which do not h' ave access to alternative sot rces of power. Ex. 1005, pp. 19-21, 105-108; Chayavadhanangkur,

pp. 3-5

5090; 5455-54C8. Ex. 1000, 198-207, 313. Gutmann, p. 36:

4664. Ex. 1005, 19-21, 10 5-=10 8 . The President of Constre.ers Pover Ccn:pany testified "that nucienr pcuer is quite important" becauceoflimitedfossilhuolavailability. Ex. 1004, pp. 138,

    -[.'-

166. Regulatory changes in the application of rate-making princip1cn - provide another c::enple of cost uncertainties , t 5110-5103, 5119-5121. A grnarer nurr.ber nF nr 4 6.e n11c.ra fcr gro=ter relieb!11ty of. service. Cocrcinated operation alle':.'s for operation at any onc time of the rott efficiant 1: nite concis'.cn : with the total doncnd for porer on the cecrdinated systems. E_.g,,, Chayavadhanangkur,

    '(._    pp. 11-12:5090.

Coordination incra: es the feasibility of capital . invect ' cat ' for botter trantmicsion facilities . It allc.rs

)                                                                                                          .              ,

r"i74t4:' uiM Pyr're -elec t- i.c plct!- ':0 t<'co 'va -Jr < p o' s trer i .s

            ; ; c; 6 e
                                . c: - 1n    a,      -
                                                         - b ,. . m           . .: _ ,      e. .e             ,

2 3.l t t.o cor.w.'i n cc.a :..c.ietn. .nce pc ogrc:~ . rein: 397/ -J9 75. It cllo.m 71_ F "1p8 w y' *^-p-v r .- - - ' ' ' ? "i t- v g V 4

for management contact and exchange of information. It allows for coordinated development of units so as to place optimal sizo units on the line (through purchases or sales of capacity to coincide with a system's load growth). 1,/ By allowing flexibility in the timing of new units, coordination provides financing advantages. Consumers Foiter Com,'any's cecision to pactponc building Quanticarse due to a tight mency cituaticn would doubtless have Lcen less poscible ( abcent its coorCinatien screcuen'c. , Cecrdination centrols access to alterna+1.vce. The poc34 r.c and interchange arrangenents are t'io legc.1 structu? " tr J u.. v: :Ich

• crc ractic ^c tf;e pir.ce . Doni::1 of accecs to su;h arricccren tn c:- Oiscra ninctory acec.ss obviously Ciancycntcgcs Munic/ Coops.

( 1/ A5 cent coorf.ir:ction, because of its der a.Mc for power, ~ ci ier mig >3 has. to b 11.d s:v 11e:- thau op di.w.1 niza units or have idle capaci e in a larger unit. After it builds a uni'c il night still have excess ccpacity e.ich it night not be able u scil hecanac of lach of cocrdincLud operationc.

e C. Consumers Power Company Has Used Its Domination Over the Bulk Pouer Facilitics to Its Advantage Relative to Srdaller Systems Under the bottleneck monopoly doctrino, there is no need for intervencrs to show "unreaconableness" cn the Company's part. J/ However, the record does indicate a purposeful intent on the part of Consumers Power Company to achieve domination ever the icwer nichigan peninsula in violation of the antitruct laws and policy, and the trial board so finds. Decision, pp. 150-155; NRCI, pp. 102-104. The Alcoa and United Show Machinery cases dis- { cussed at pp.- 47 _ , sug g are dete]:ninative. United Stato11,

v. Aluminum Co. of 3rerica, 1(3 F2d 416, 430-432 (2d Cir.

1945) ; Uni'.cd Si.ntes v. Uni hed Ghoe. I,'c chinery Ccro., 110 , F. Supp. 2.95, 346 (D. Mass., 1953) , cff 'd per curien, 347 U.S. 521 (1954). . Concur. . : Few:.r Cc:; ny has t err iter i.'. ' cgrecr.wato or " understandings" with decinant cm rcunding sy:stenc who might have lesen able to build duplicata trcncrirsion f acili-I~

   ' ties or to otheruise ocnpete directly with Conc. marc Porer Compcny ior wholect10--or for that act.ar, retail--marhets.

DJ 110, 112, 2160-21C3; DJ 157. See DJ 212-113;-n.46G4:35-36, (G0trunn). .

                          " n y c ral t n n t ,. i'c hc.: m:cd .te a s t;o? over bulh L. .   ~ ~ en . . ,       : u .'   ..

c c r .;. c ,, :c:  ;; ".:= -w ? p ,' . c: Le 1,1,. n . ,p o . c tJ ,i .a C S .r , . . i . w ._ si .:... ' u ec 1/ Uc. discuss this iscue separately ct pp. v;-4 9 , 0 .

                                                                                                   }

integration ~into their operations and resalo to ultimate con-sumers). The existing. interchange arrangements are illustrative, i Lansing wanted a more favorable reserves contract, among other a things. R.2098-2116,2121. Ilowever, even a system of Lancing's 4 size could not; obtain coordintion on the same terms that Con-sunors Pc.wer Company freely grants to Detroit Edicon Company,

           - a non-competing system.                                      DJ 91--92A.

The Holland Consumers Power Cocpany agreement is a primo e::cmple of discrimination. DJ 99-101. Under this (' agrectent, IIolland in required to aaintain rese.cvos equal to

,1./2 (Largest unit + 1/2- 2d Irrgoct unit - 0.15 annual pock

! load).+.0.15' annual pech load. Undar thic formula, Hellcn?. L i

1 was required to maint.nin recorvos in 1973 ccrual to 47.2% of itc peak locd.  !!oreover, if I

o117.:4 vrn to instala. a inrger,

           - more efficient unit, itr rest.arv4.n .cqui;:enent uculd go up.                                                                                   _ ,

n.5090:20-21 (Chayavndhanangkur). Thus, the formula not only penaliccc effici, cy, but it also discourogas smaller l k. systems from inctalling generation con.potitive with Concwerr

           . Pc'.!cr Conptny. _1/ i:o :Jcv:;r, b.4th ths 1:oJ'.and a.id Lansing agreements contained c:: press provisions, required as a con-i            dition of intercenneetion, that t.he citica could nos- buy 1

1

                   / -- Gain. .e. n.v. i .U e O til i. tion Dv arts.cn t v . Flo:':A Fem r Cc                                             .,
            ---40 F?C 1227, .1238 0 9 a r. ) , se t cw a ric , -. 4 2 F " . 2d .!.19 6 (bth Cir.,

1570), reve r ce ci, 402.U.S. 515 (1971, aPf'ing FPC opinion).

                                                                             "d

power from or sell powcr to other systems. 1/ See pages Intervenors discuss separately the trial board's hold-ing that " equalized reservec" are not required legally or fac-tually. However, the record chows clearly that Concumers Power Company has refused to deal with smaller systems on terms similar to those granted the larger surrounding entities. This pattern of concictent refusal to deal conctitutes an intent and roe of Consumers Power Company's domination cvor bulk power facilitie- to avoid ccrpetition. The r.och obvious uny to avoid competition is to purchase such synte... .Unitod _S_t a t e s v . Crescent w rat'nt.co., 323 U.S. 173 ( 19 4." ) . Con-sunera Pouer Co:r.pany has attained its large sine pr.2tia: 1j through a prot asa of concolidi.hion and purchac .. g_/ Ccr mne;.- Pok.ar Ccmp ..cj :sc a: ' ct., ted uc take os c : nr:. aller corpehing utilitics M.j nennt to i; or within its nervice arc- and hac been at I? rat p:.rtin'.ly succccaful. The- ben:cd so findF Decisio"., pp. 151-J 5 2 ; m'C1, pp.10/~105. ( There is ofditional cvidence of ancerted activitiec by

 --1 /        Con s u:".o r ' Po.. e .- Oc. .w.nv ac>n. . :. m n t ] y . r a' s to da:.'nd s u c5 artangements c.n atte ota to avoid fed - 1 jurirdici.icn 'and not to li'-1c. thase runicipal ryste9c.                                       Daci 'on p .  E 9 ; MRC.E ,0. N1                  Se*

E:, . +00: W 34. . <mm- . y- <c o . d ; n m  : D:/. . . 1 j's.-i r65 nu?t - r,  : ' ai ty nv . v. a :: ;'.'.. \ta w :r , -

                                                                                                .,    i. ~      Oc ., ?       -

f. K L .I. 4 7 n t ' Ult is.!! ' ' d <

                                                                    ..] o         ..s  (!   O   >O'     (. 11;1.' T      .

c.m i t. Fe ; cm.us:ad ub:.t the Cc ocy did no - '. n ht i t: c.: .gc - - hibition1 t h " f- '.3rn piciniv v et<, into i ts con L enc en. C om-- pc.r- It.rei , ben, p- -.,; . . w 2. , e'. 2 , y ggg,,g U a u...,.!. , r.qu ' 3 % 7 . __f 7974 . p ,. 1 i

                                             ..e   U ti l i ".v                      -

_-.r.. 4

the Company to limit generation of compcting smaller systems. Such activitics have included attempts to block REA financing and to break up the generation and distribution cooperativen. DJ 42-44, 46:2006. Ex .1017-10 S 3, 1073-1074, 1076, 1095-1097, 1099-2000, 2003-2007, 2016-2020, 2024, 2029-2030, 2032-2040, 2044, 2051, 2062-2063, 2086, 2092, 2103-2123, 2126-2127, 2129-2133, 2154-2157, 2172, 2174. Tr. 1023-1031; Ex. 1004, pp. 25-27. Decision, pp. 150-155; R.4664:24 (Cutmann); URCI, pp. 102-104. As t'r. Robert H. Paul, et uitness in this proceeding and presently General Supervisor of Commercial Elec-t..ic and Goveru.tental Fervicec, stated:

                    "The first goal of our tv.riceting activity or pro-gram concerning other uti!.ity syF. aT..; in our cervice area i .s , of cour.:,3, to a n'.l u j e ti:c c y c t o:0 c .                       Since 19:20, Cola num > ra ra'..cr In I, purchar' ' C n u.t h.:' p.:1 e.i n c -

tric sys tems. An offer to purch..% We Cpirityoix system t.'.u turbed Coun , b'3 '. .e are n supplyeng most of Churlevoix' c rcy'..ircunts . In 1?,3, rhen it be-came appntent tha t Travc-::so 09:y was about. to expand its generating plant, we autapted to head t w. off with a lec.co proposal . . . Also in 1965, wc offered to pulcimcc the S t.. Loui: EJectric S;.3 tem for G825,000 . . We are in the procasu of sui:,mitting pu;chac9 proposals to the Citi ce of A't.lmsn for its cyctelt, ancl to Grand

                    $3g ip .= ' al thc C. i ; c g ,_ . ;. ., _ o c . c . s.J . .' l .'. g '. '. ' -

ing systems . . ." E:: . 2 .* _ (19C.6). J/

 ,, 3_/       This statommt was apparentlu p.rt of a                                tpench to Divis.io:.

Engineer; of Cc am' :e r r, )~."" C:':q : ay , Y.' '-e m cOUld d-e '

• D .. " f ~i #. *'b;q.

                                .             j'       . . , ' O.Y
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                                                                              ':             L.       .

u s.c l . m t'w " t '1.' r in . -

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e Even assuming that such acquinitions and attempted acquisitions were not illegal, Consumers Power Company's per-sistent attempts to limit competition through attempted take-overs or limiting self-generation negates any claim that Con-sumars Power Company's growth and resulting control over bulk power facilities was tiithout kno'..ilodge or motivation. It so chose to expand and achievo dominant control. The fact that it did obliges it to deal. a f

 ,                     Significant evidence of Concumer:_. Power Company's

( knu.iledge end use of its dmonation cud control to limit com-petition it, found in the testimony of its chicT executivo. On dopovitic.1, witne:; A. H. AymOnd, the chief executivo, Pret.iden t e.nd Cinicnan of thu Coard of Directe::s of Concumars P o'.ze r C o tt p a n y , testified as follo;ia (Ex. 1004, pp. 182-185, , 202-203, cityt asic sup;f i ed) - Q. 'Just to b? clear about it. it, say, a municipal entity in the :,:. ate of Ohio desired to buy '.: hole-- sale po..m r f rom conau-.ers ?ower, would you soll it? A. " I d 'm ' P t.'.nk co, I e e . 8 (

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Q. "You do scl.1 power to Ontario !!ydro, do you not? A. "Well, .we c:< change Iower with Ontario !!ydro. Q. " Assume that Ohio p ower or Buckeyo p ower or Ontario Ilydro or some other entity were willing to sell poucr to a municipality within your cervice terri-tory, would you sell trancmicsion services to get the power there? A. "The matter has never come up and I think I would 5 tant to know more of the details of the transaction. Q. "What kinds of things would you want to know? A. "I would 'emn e to knov , for one thing, whether or not our lawyers felt un vere obliga tod to do so. For another, I would want to kno.4 for what purpo.:;e ( the pover e n being sold and at what rate -- Q. " Sold by whcm? A. "By a colling firn. At uhat rahe, uhnP the r :. : i.v- . d ing utili ty intended to de u.1a it, uhat impact i t vould have in the 1.n:g run on t.he ability of Con - sumers Poe Compiu.y to mainLain ite, pic- 3 2nt mar-k a. ti . Q. "Is i '- f air to ca" that "our iu^ c?nt u.ir'.d:.ube ,

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te sc ri t ol '. h .. led :.t to r# '. . .. tc ra t c;, in c mr-tit.*C:. L. & Con L.7 :r:- Power? i' A. "I think 1-M t would be a f actc . Q. "A large fr e to r,? A. "I think co. Q. " Apart frca th.; ques tion of your legal obliga tion, are thare any other .rajor factors?

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Q. "iGy iJ tb at? A. " h'a ll , i t ni gh h Le a matter thi.t all things con-n i f.e r e d i' .1 ' t tou :sj gni ^ica' L . I th L' ' whe the - the r.acei virc n' :.11 to a c .m . 1 1 - a o <.- ' : . t r. ' ur.s. - -

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Q. "What do you mean by ' invade our present market area?' A. "Well, start taking away our customers which we have invested.a great deal of money in order to serve them. Q. . . ."I bclieve this uorning one of the reasons you mentioned for, an limiting the willingnans of Concuters Power to sell transmission to publicly owned utilitics wau the impact that such sale might have on competition between the buying en-tity and Consumars Power. My quection is, first, (. uhether that ute a fair characterization end secer/.ly, assur ng it t.*c n, ucre yet .:ainly ::efor-ring to large cocmcrcial and inCustrial'custevers or recidential custr.ers or both? A. "I van referring pri ocipally te large cuctonars but I think the pro':lem alco exists uith respect to rersidential cu2Lomer., even thou;h the amornta

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3. . . a [.u_J Chaar a Jh 1a 9141. .u rea, t L I V m Ay small inbofar aC tire L*.*a D S f t' r o f C U / bC' .' r S froM one supplier to another because of, as I menticaed in ren; :n . to c .e of Mr. B_.nn d ' n quo'3 ticr ? yc0 ;.OI-day, w0 do conc rn ourselves with the relative r a t e ?>

at t:hich we are able to srrply cc.Nic; to cur ct's-tomers as compare? with those of other entities. Frankly, va don' 'ike to put ours']ven in a posi-(- tion uhere ne are increasing the entent to ubich our performance lochs bad 5n relationship to thLt o f o tb :. . . . i t:U : s . Q. "Does that complete your ancwor? A. "Junt one final thought on that ar.5 that is t a tiv catent that we do we increase out enposure to 105-ing our 1rnri^ts."

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The record clcarly shows the competitive impacts on retail markets in Michigan .1_/ as the above quotation demonstrates. First, in some limited circumstances, such as Day City and Traverse City, there is direct house to house competition between Consumers Power Company and roupec-tive municipally-owned systems. In those situations a homeowner has the choice of transferrinej clectric supplicrs. The more usual form of competition is for initial service to larger industric.1 users, norn'.lly ca the fringos of se:cvice territories. Whil9 by its nn'c uro cuch congetition is 11 mat oa.

                                 ,      it may hecome intense.

AdCitionrlly, them is the r.'re subtle--but va.cy real--for. cf cenpatition crr...te: by the enictcnce of . y

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testi::.ony, but in the careful stude Jt!'o Ccnm. n.s s i netkes of the re tu of :migt '.or.' ng utilitics , the Con.pc.ny e;i6cnacs g.Jedt concern abcut the level of n.c.'.icipal tad coopcrc ' ivo ra'.ac .

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to pcesib'.y cr cu,2 publ.1 :' cuor ,w ':ch: d by j r . csi.o" -ounod utilitics o. ter rr :.onal di z brenc.!, i.. w;W . cUncd re' ail

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consumers. . There is competition for service territory. This competition includes the possibility of Consumero Power Company permanently eliminating municipal or cooperative ownership in an area. This is not hypothetical. Doth in flichigna and throughout the United States, smaller cystems have gene out of existence. .E.. g . , Sen. Bill No. 213, Ihnrings Lefore the Corsnittee cof Cc; z:lerce, 80th Congress, Icb Session (Serial no. O S ..' C '. , pp. 52-93 (1905). l_/ _. / '.Chn hcara c. cog,ni' m :0 the goni ci Concu.icc pc.nv 'r.:. Por . Com-te la us .' r.Jj a ct':' t cyct7 < s and tha F tc: 3 i ; "an c.:, t 2 c u r '. t. iu t s - M er: a b m. sac y . x. . . . f a . .ilu.i.'>n by S 2 of Ll. F'c_ r.;w .at' (Decision, p. 155; U". 1, pp.104), bt t c t e.t w tMt 01: ' - p.1 ic ircpouniki c .o c.:hiac bectuse if . the Nco.1ve ';f th nwu  : of ;t':h systv.

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While the board recognizo's the existence of such compe-tition, it undorplays its importance. (This is despite the fact that in monopolistic industrics the preusures of compe-tition whero they may ci:ict would take on in';renned rather than decreased importance.) ,1) Iiowe ve r , Conauracra l o.7cr Company's chicf c::ncutive clearl;; evinces a concern, cithough the bor.ul doce not . Thus, Alfonco Aymond 6 tat.es that a large i facto. in the Com/sany's determinution wh0ti / .i t . 71.11 ,e c il transe esion service ic hev the cale of such c:.rvicec .T.ay a f fec : cc.mpetit.icu for certc ers. Furt'e . .O r c. , na c;.ndidly c:; pro r , .3 the via- M,a e '- i ; < k t .'i n v . m 1 t..- the comp ny to lco? bz :'" c o m p r<.- with cr?:?r entitier .

Iore . imp 2y stat. , tbo Co. .p. ny ' , chic C c: sceti v.: is stating that h3 UI.ll not re 1 tr. M r.:_ c - io:c. s.P;viceo chen such uCO CT:1 t .1;Cri t O ret'.: $ 1 CC '.p' Cil i.OD .

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   -power ral<3) in c. dinct viols.tica of the .nti.truct la.- an.i
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     .ill'U.S. 7 17 (1973).
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Consumcra Power Company and neighboring large, investor-owned utilities have no difficulty in allowing each other free use of their respective transmiscion facilities so that, for example, Consumers Power Company allows use of its facilities to transfer energy between Detroit Edison Company and Toledo Edison Company. Ex. 1005, pp. 64-66. DJ 72 ~77. Ucither cor.- potei with Conc.umors Pcwer Company. Iiova ver , the Ce:!pciny ha: an intere.ct in preventir.7 a calc brettcon cu9. ccc.ra nics and municipain c:: ~ :. cpera ti c <_

.d in I:ichican ..a.d vill rou cell tr t. u.: # w 2.cn u ' t.bs t I ' 1,

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Apparm.tly finding th'e Co:t'any' c i.31tial pacetti on tur-ten:t'b c , d' -irg hi:; to: t !. lac y I'r . t y.. cnd c t.a r. , Cn ini:cti:. or tc d:.i.' . .h la c. : n - 'av . 3 . -: c*  :. tht. : r e:,::':r..c c c. . . ) ;' r iG w: 1 ling to 3 211 c,r '. t.ie.i m.:.4 G n '. 1' it /l, tr?no, .- '.' s e rvi c:': etc., e minir:1 cc.:.mit: to rh'ch tc...; ~ocg n7 sh 40 br. bound. C O?6-60 ?l- C106- C] :','J,, t Will Cor.nomers Po 6 Cev_ L <r ' 1.1

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arguments in sheeps' clothing, the intent is still apparent: to pull the vool over everyone's eyes. This record contains clear, direct, unambiguous efi-

   .dence, from the Company itself, that its intent is to grant or deny use of necessary facilities which it dominates on the basis uhether, in its judg.u nt, such uce will adversely affect the Corapany.                                                               s Consumarc Power C.orapany's intent is further demc-( etrated by it:n pm.t cuppe t for legir.'. :i.on :nintaining thc so-callc6 15% rulc, chich in .bita rei.ni). cen; titica b.

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undesirables could be. DJ 170 1/ . We have stated the obvioua to give thic' Board speci-fic evidence of the obvious: To the extent that evidence of motive to control or affect competition is required under :.he

        " bottle-neck" monopoly theory or more generally under the Sherman Act, cuch evidence exict.s.                                                              However, the trial board not with-standing, the recolta prove the intent.                                                                                        Young Brian Dailcy coald not cuccessfully de: fond ogainst pulling a chair from under his aunt on the r:round                s                  that he did not " intend" hic aunt to f a 'i.1; i

\ consc.n.:n Poue:: Ceg any cannot def2c6 on the groum a that it only intended to build the i cili . ..m an? r,- N the c..n h a cte n.cer ary to cra.te r ;:ct t. l ...:cesck rconorolf, but did noi. inNnd to c-cs. a ih ? .tle._ d .

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v. D.,il ~ , 4 6 'Ja t-h . ?G 197, 29 U.2d 1C91 (l'a3 5) . The;, there is no it: ,;nl ba ci s for the ty;ial bosrd 's aut.:c. _ tien c E :.r nocca c grc w!.h o<. the re rt o f C ," :.ci:s P -'c Ccmpa.y (which its c<rn finU ".,7 n a g '. t e ) . D e c i.s i c 7 , pp. 150 '.5T.

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D. The Trial Board Erred in Deternining that Consumers Power Company Has No Legal Obligation to Deal The trial board's holding that Consumers Power Con-pany nay deal with or refuco to deal with whom it wishes ap-pears to be predicated upon "laizc z-faire" political and economic notions. However, the t. rial board does hold that there would be obligations to deal in joint action or " con-spiracy" situations. Decicion, p. 95. MRCI, p. 78

   \

In addition i.o i!s holding that Concumyrs Power Cem-pany i n not i: hcr'.ntly chltr.joted to deal c ci its pa4 /'nt -r.tir.ted analogi.es that mono >olistic refr.sals to deal are inctleted from g.rzernmanG.1 inter .:.;.ance except '.;her the mono 7ol:- is "miutr. ed ," the ' card hele , at le.:t uith rear.ru to 'ro7i.in. transiciacion service, tl- '. the f ailure of Co.wress to requirc-tranu . 5 ct. _s d c ' ..m . .- -- na en tb- l a c k o f c::,1.i .ica to Jo so. DOCiF. ion,.t;p. 9 0 ' '. , NBA pp. 75 -

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1. Otter Tail Power Co. v. United States Establishes the Obligation of Consumers Power Company to Deal in Iia Bottleneck Facilities and Agreements Otter Tail Power Co. v. U_nited States, 410 U.S. 366 (1973), i s de terminativo of this case.

1/ The trial board makes a seri;s of specific findi.ngs of Yacb that Conaumors Fcwor Company's completo contrcl over high voltage trancaiasion (i.2., above 138 hv), nuclear powered c..oncrat ' on and other large hue lor . g:neratcrs

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Otter Tail involved a utility like Consumers Power Company that has the power to block access of, smaller enti-- ties, which it' surrounds, to alternative power. supply nources through refusing to deal. As the briefs to the United States Suprene Court demonctrate, it was ucll unde :ctood (as it is clear here) that Otter Tail Po'.ter Ccmpany's refusal to take available transmission wo.uld block accecs to alternative power , so >. :ce ' . /.10 U.S. at 563. IIov:c ve r ,  :

                                                                                                                                               .his rc.f una l                                     w.'        de f:endi' on mcct" .                                      pi.m c.c e l.y M- ' ' .wi by ti 4                                                   trial (1) i. h ..

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m- . 4 The District Court hold, however (United States v. Otter Tail Power Co., 331 P.Supp. 54, 61 (D.Minn., 1971):

                                 ".             . .             [T]he court finds that defendant has a mono-poly in the relevant nurket and has consis tently re-fused to deal.with municipalities which desired to establish municipally owned systems on the alleged                                                                                                                                                             l justification that to do so would ir.: pair its posi-tion of dominance in selling pouer at retail to towns in its service estea.                                                                                         The court co'tcludes                                                                       ,

1 that thi.s conduct is prohibitcd by the Sherman acc. It j a wl.1 established that the t'nilateral refuscl to den t with another, n.civatec. . a p rre x,e to ure-serva a :unooolv cosn.: ca is 111ega.t. E;.ctman nedak Co. v. SouLn:rn 7ho*n ~ - ' "rialc Co. , 273 U.S. 359, ( 47 S.Ct. 400 71 L.2 d. 6- 1 (J927';; Lorain Journal Co. v. I!.nii td S tatec , .M .' U.S. 1;3, 72 S.Ct. 161, 9f 1 s, ( _,. ,m i .

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                                           'The Sherman Ac.t requires t-hat where f acili-ties cannot practically be duplicated by would-be competitors, those in possecsion of them mest allow thera to be shared on fair terms.'
                     "This ctatement epitomizes the holdings in federal cases which have established the pi:Inciple: United States v. Terminal Railroad Assoc., 221 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810 (1912); Gamco, Inc. v. P.tovi-dence Fruit & Produce Building Inc., 194 P.2d 4G4 (Int Cir., 1952); Packaged Programs, Inc. v. Westing-house Urcadcasti og Co. , 255 F.2d 705 (3d Cir., 1958);

Six Twenty-!iine Productien1 Inc. v. Rollinn Tclecast-ing, Inc., 365 P.2d 478 (5th Cir., 1966).

                    "The bat tleneck principlr Ic applic M c to Ottcr Tail.

T te em: h .- c. , I:' i.n =mi.u r non Er 1: cic? i n :.:u c . <= La service a':ca gis cr i.t cubstant: : effec _ix" "o' :- M over potential coc9e titic a Zro:a r' . i.cipal o'..w- ship. By its refusal t.o cell or ubuel pc'.mr, de f c:ncl . n t pro - vents t.c-t c o m, i. .' ica + . cr. r ua. 6:.;1:J." (: . , ~ u c u t. plied- icatc. ate o...:.cr.e:.'). O Lt. T r .:. 1 P a.' - r C oca.a..t w a b r:w.1 e d o n <:r o: .;6.

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is a violation of the ' attempt to monopolize' clause of S2 of the Shcrman Act. Lorain Journal v. United States, 342 U.S. 143, 154, 96 L.Ed. 684, 47 S.Ct. 400. So are agreements not to compete, with the aim of preserving or extending a monopoly. Schine Chain Theatres v. United States, 334 U.S. 110, 119, 92 L.Ed. 1245, 68 S.Ct. 947. In Associated Press v. United States, 326 U.S. 1, 89 L.Ed. 2013, 65 S.Ct. 1416, a cooperativo news association had bylaws that por.r.l.tte0 me nbn net.apapers to bar competitors . . from. Joi ning the associ.ati on. We ,a eld t.nnu vna practice violated the Sherr.an /.ct, even thoug.: the trancgressor

                'has not yat achi. wad a co.mplete r.:onepoly. ' Id., at  .

13, 89 L.Ed. 2013." 410 U.S. at 377. f hs to c2cima thch ". . . by rearon of the ;c :rn3 ( B > ta r 3: it it ct ;ub j : _ - i o a ut z. c.r cs ; rc r-- " t i o n , .. E.1 re.nnec' to its re fu. cal to Ocel," the Supreau cour .: stated:

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                                       . . .                Otter Tail's theory collides with the Sherman Act as it sought to substitute for competition anti-competitive uses of its dominant economic power. "

(footnote omitted). Thus, the Supreme Court af firmed the . District Court's decree enjoining the Company

                                        . . .               fron refusing to ' wheel' elec t ri c pr wcr ove-the lines f rom the eJ ectric pc'ecr srppli er to e r. s t i ng-or pro :osed municical .watema in the au e, f Aca entering int.o or eni. orc'..ng any contract sc,alca probibits u:re of Ottar Tail' a linas to 'cheel' olectric power to mn:t.i cipal electric pr.wr cy. stems, or fron en-tering into e:- er. forcing a.w co"l act ..s tJ ':h l i.f u                                                                                                                                                           the en.cemen n-                                         ;1          m     c     d        r2         ci.s                    '

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(1912); Associated Press v. United S tatec , 326 U.S. 1 (1945); Silver v. New York Stock E:: change, 373 U.S. 341 (1963). For may a monopolint refuse to deal in order to avoid competition. Eastman Kodah Co. v. S'outhern Photo Materials Co. , 273 U.S. 359, 375 (1927); I.crain Jourm.1 Co. v. Ur.ilcd States, 3A2 U.S. 143 (1951). -/ 1 In deciding Otter Ta[1, L3th the District Court and . the Suprem.o Ccart were cpp]ying t'.w " E ' '.t?. On '.uk " racacpoly ( theor; i.ha t : co77 ny L e obtai u m u or. m1.1 in a vi ul pro-CGS: '

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The bottleneck monopoly theory is not new. It is based upon ordinary principles of fairness. If one operates the only bridge at a river crossing; or the only inn, neces-sary to human comfort, on a highuay; or a stock marl;ct ex-chancJe, throucjh which the bulk of s tock trading is done; or a movia theat.cr chain with the only theater in toun, under the antitrust laws he mcy not lavfully tv.ke advant se of the cituation. A company may ::o enti tief to profit from that

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~ , _ (1924) (" Chicago Junction Case") ; United States v. Griffith, 334 U.S. 100 (1948); United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir., 1945). Similarly, an Otter Tail Power Company or a consumers Power Cortpany cannot refuse accecc to a direct form of cunership of nuclear power or to its bulk transminaion lincs o osnecir.lly in om er to a Crect co'epeti tion on the retail level or to prcuerve its c::izting pholesale mar-1:ets .

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3. The Atomic Energy Act Amendments as well as Case. Law Esidences a Specific Concern that Antitrust Principles 13e Made Applicable to the Electric Power Indur.try The Supreme Court in Gulf States, citing Otter Tail among other caaes, reaffirmed thit regulatory agencies should not be reuics in their consideration and applicatica of anti-truct principles to the electric power industry.

This concern that. smaller systems be alla.ted access to nuc] ear pow.a c acve.l opr.ent and' a t t endun t- coordint:*. ion is n c't !ir'.ied to O'_ m'  :. g a n d r; 1 2 c; tea, a I t houg- M,Oco caseu, cl.cng ' tith Cc.iD] F.y! ~.] Q, CCnC 'J i .tUtG reOOnt Supreme Court

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In Municipal Electric Association of Mass. v. SEC, 413 P. 2d 10L', 1055 (D.C.Cir., 1969), the basic issue was phrased whether approval [of an acquisition under the Public Utility IIolding Company Act, Section 10, 15 U.S.C. S79j] E auld be given "in a manner which would give munic'. pals an opportr,nity on reasonabie terms to chtain accesc, to this now 1re.;er coct [nucic a:.;] power." The Court presented the is-sue in tornr of blocking e cces s to nt t :lez.r bn o 1000 and

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e. The reasons for policing the control of facilities and terms of access to coordinatior were well expressed by Chairman Joseph C. Swidler. If Chairman Swidler stated:

                                     "To the large privately owned electric utilit'; a retail curtomer, even a lary industry, is simply a customer.                               Howeve , a whoicsale customer is frc~

quantly also a competitor, actual or potentic1. The customer at wholescle may not only be a cowpatitor in the fringe arca where the two syntomu are contiguouc but may also be e direct or potential competitor foc the comtrercial and industrial businocaps tha' are ( able to tr ha costs and conclitions of electric v,. . .. servi .'. c, . ce anro acc e t 1.n m, c.u a ng r.'>. :. a no lo 'nt e anc,. . r

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pruar supplier t> patronico.

                                      "The elec'.ric power iholesn':r n.ny in fact be sco:cing to put the retailec cet of bunirecs.                                                                                         't'hia i n p o'.

r.arely theor tica1. L've r y, y2ar me j me.nicita1 r; s-teos suca ,b ue p.,ccha. e o . a :c l ; '* a cor-e ..:nG thn1nc: i c .- p o-y li.. 3 , , ," J/ He addit!.e' ally poin Led out t' art t h '1

                                                                                                                                                                    ..ilcs:'1" power industry invcived                                                        ..;ulti - t '._ t ? po n 1L '                                       m.c           "r-           sty CC                      ulc-sale ani. Epacie.lizeci serv;;ac, incitAia                                                                                                          cacr ecacy v':v! ':e ,

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r. the Committee of Commerce, United States Senate on S. 218, 89th Cong., 1st Sess. [ Serial No. 89-38], pp. 92-93 (1965). The Atomic Energy Act Amendments are not an isolated action by Congress and indeed make reference to other statu-tory Icu, including broad reference to the ant itrust laws. hnd, as w have stated, recan t ca.mos confirin the applicn tion of antitrust principien to the wholcuale electric indur.ary. In the wordc. of t' a Dis tr.i ct of Coln ' ic Circ 1 '. L , Ga i n w.ti ll e c.,... ( (: t* .! * { . .

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h the t' rust of the trial board's decision is thatmply it si does not like dtter Tail. However, whether read in a broad or narrow context, that case is clearly at war uith two major prenisoc of the trial board: first,

t. hat an absolute refucal to deal by a company having a dominnnt position in t rancaincion can.eccape the antitr"st lawn, and, second, that a Congressional intent een be established in support of such refusal. Moreover, even if thc can is read'narrculy, ence the proposition of a p.:c.w. ' i~e ri;ht to rc:t: ;i. &: r ~ .- -'

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o f c ~-. w . r._ P Jer Cc uny. . The trial ! ; trd's afenni t.: follcw Otter Tai), pr wise t'12 ' Otter en u.e

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Munis/ Coops had not known that dissents took prece-dence over majority Supreme Court decisions. However, since the trial board appears to rely on its premise tha t Otter Ta Q cannot stand, it should be pointed out that in Gulf States, which Uas decided shortly thereafter, the entire Suprw.e Court ear.phasited the app]icat. ion of ..hc antitrus* laws to M'e electric p,ser inducicy, the Court split ting only on wheti er the I'e6eral Power Ccrc u.dsion had t appli antit. :st princip1m ( cv ' i : n ac ' nt. 01 ~m v: irannrv' ". n t c. a t i d. e r:- Oe

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Interveners believe that Otter Tail is conclusive on the question of the rights of Consumers Power Company to refuse to deal, or its attempts to impo.7e-unduly onerous terms on intervenera. Lafayette, La. v. SEC, supra, 454 F.2d at 952; Cainesville Utilities Dept. v. Florid.' POW r Cc:p., g prc. Soc Section D 1., giprq. Moreover, the trial board. not withstanding, the lau is absc.lutely ele c.r tha t not only is there no cbcelute right to recuse to decl, but there is ( cne'.. 4tio; a th y "c'- _ "r, -

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are being built in conjunction with coordination arrangements which directly and advantageously affect the economics of operations. The undisputed evidence is that Consumers Power Company's coordination arrangements allow for the addition of large units cuch as Midland and that such agrea.unts signi-ficantly affect 1-he economics of gzaoration of power from them. Indood, t.here can bc no doubt thr.t but for ito joint ventu;e ( tri L - 7 an' coccd.i: '. tic a . 'li dl n , r ) f b e '. = b e c"- fa - 10':9 e c c. .o::ii .' a r.d ; . .i. ' .t not h c.1 . been 1.n . 1: a t r.l l . The ti. .i a l. b a s rri ;eccqniv r.;,d n ta !.. - LSat (Pocinic .

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In discussing " refusal to wheel" (Decision, pp. 89-97; MIICI, pp. 74-79), the trial board states (Decision, p. 92; NRCI, p. 76), in the middle of its discussion of O'ter e Tail ,

           "All of the bottleneck cases involvo conspiracics."

Mithout meaning to be overly pejorativo, Munis/ Coops find the trial board's balancing act to bc nothing short of aunzing. First, Otter Tail Poe Company "as itself intercoa--

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U While interveners dispute the trial board's contentions (1) that joint action does not exist here and (2) that it 5.s required, they point out that ender the antitrust cases, in-cluding Ot!cr Tail, a unilateral refu.nal_to deal can violate _ the antir rus '- laws The very thrust of the "hottlenech" casen is thac a monopolist raay not ur:o his position to extend that monopoly. ( Such a rula extencP oven to patent:---monopolinn ,Trented by

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F t I of Otter Tail beforer althe board. ti To the extent If the record is very clear that C that direct motivation . mus t be proved, torpting to limit Mu i onsumers Power Company i n s/ Coops' s at-arrangements, access includi to bulk power minrion cervice supply ng access to the Midland and to unito, to trans-on terms dictcted by it nondiscriminatory coordin ation except is alro . As has been stated rep clear that at eatedly, it leant one is tP m it feel- the syctnas. thraa t of competitio of Consumars Potter's sons rea n from the sn.al:.or Eeycc thnt, the t'sa t C a :s u:, ;ial be ei 2.' Fw Dr Cc:pc ir,p.., motiv, in cc, ha indcca I-

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m to engage in such vexatious litipation under the law, the Suprcme Court still confirrued that power company's obligation to deal. In Otto) Tu}, it was evident that a large power company was trying to foreclose the existence of several po-tentially congeting municipalities. What the trial board seems to imply is that Consurr ars Power Company's conduct must demonctrably deprive the nunicipc.litino of all accecc ( to bulk pauar. l'hus , no t e its findin ;t. tha t so:: . Of the smaller syntims ha a racess tu their enn Ic'rer voltage t.rnncmiccica lines (Dec aica, pp. T1-41; IGC I , pp. S0-99) and, :acat notchly, it:1 fi.i dia :; ,

                                           .t whc'c '1> pu . ased p                                                                : provide" adequ e.: te a cc c ;.       to ti'.. ' li'diand u.1.ta.                                                 D.n:. sic:t . pp                             175-17/; '. ..!,

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               - other antitruct violations. l_/                                                                                Rather, it is based upon cases such ac Griffith v. United States, 334 U.S.                                                                                                                         100 (1948),
               . holding that a monopoliat may not uso his monopoly posi ti on to c:: tend that monopoly.                                                              Moreover, this record contains clear, direct, unambiguous evidec ce that Conf u:rors l'ower Company's intent is to grant or deny the use of necessary facilities which it doainates on the basis whether, in its judgrant, sucit use will a'dversely affect its economic position.

l, Even a s sic..i m i th' Co.pany's reviced stat"m-:nts of willingncas to deal upon terms dictated by it, nada in the course of the he=.ri..g, a r e a cc: ..,. . % 1 c ,;c i the).r ix'. , the"e s ta te:c mt.. rol ' GG D D th'.. O;"p v 'y ' C W illi:1 03 ^- ' d to c. ell participGtion in

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the joint negotiation of contrr'.ts for movie houses with monopoly power and those without monopoly power violated Section 2 of the Sherman Act. The court expressly stated that its holding.did not rest upon the fact that more than _one chain of tevie the::'.ters was i n'rolved:

                          "'Ihe conaequence of such ust. of monopoly power is that films are licensed on a noncompetitive basis in what would otherwise be con:petitive cituations.

That is the e.Cfcct whether one c::hibitor nahes th.:: bargain with the distributor or whether t.co or more o>:hibitors Irrped tog thc : their bnying p~ a(, cs ap-( .use of pelleec did h.'re. It ' in eit.her casa c r.. r..' ops >1y po;ce unact the Shorn. Act." 3. U.c. Et 100. . The Distric t Cocrb : n Or!.f fith focad tha'- the defendan ts d1' 0 a ~.(,". G D '-

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_ ~. .t. L, . t... . , n. .

u. c. . .e 4 ., A. ,.s ,.  ; c.f .L s . . 4.4I.. e. -.

g. u .o. u. . , .

• r ..

v. <.4

                                                                                                                .                       4. , . . . .
                                                                                                                             .... w .. . . .% 1                          ,.ae . ,.. ui .i .. ?3 a .  ,m .. r..

to 9 - at f:h. i approvsla .'hi ch w= rc not gi cr.t =.d to their cor,- l p .> t i Lo.c 3 or Ubich ga'. t ne a am., E t.'ctam 1 advan tages orcr I ti' .or;.nt'.io a. I!O't.2 ? ; r , the S m.eN Court in .G.ri f f i .c h.. _ -- l

1. ., i . -

                                       -                . .    .s.         .                  t- s.. 2..

t . . n U C .' M t (30 's.*bC23 I I././ dd f enddD ' O. l . . .'> th2 OEly E 'J O 1.O C C c Q DOS ' ~ ) f ; * * ' '. 3  ! .1;. ' . '. C 1 *; p , - '? 10 ~,V' -C 4'.,' El .. t.' f C 1.N '- ( ' J' I ' C M ". -- t*. i (- ', - .,

                            '.                    r... i.
                                          . e      s2:                                            .
                                                                                                                                                                         -[ '
                                                                                          '                                  ~

OC, . -. ' .J , F- lo . k. O ' t.

                                                                                                                                                                                                     .                      i
                                                                                                                                                                                                    .W t o ' . - : l '~ i i,
                                                      ,ijd                                                                                                                  -~.Ey                               ITD -'    l t .1. t 1 'i:                             .ti         , 2g              : 3.*                                                w             c 1

i' ',. ', I . j J. T'.1.* . . ... . . , 1 1 1

                                                                                                             -liU-

In Banana Distributors v. United Fruit Co., 162 F.Supp. 32, 37 (S.D.M.Y., 1958), reverned on other gron'3as and re-manded, 269 F.2d 790 (2d Cir., 1959), the rule of Griffith was applied to a uniln'g al refusal to deal on reasonabic terms: If "A sincio >roducer in a purely cornetitive 'rarhet will orc.tnuriig sell to all cc:acrs and is frae not to do so if it. chocces; but the mi nuation is different _w hen t he p. r_o_._du c e r h a s a cubstantw] degree o.. reeno coly 1mwer s temming r. rom ca_.m.a.r . a t2. m.. _s.t z c , ' Wi th.i n the

1) "i !: - or ha.1 :.onopoly posinica rhc prcducer c.n une

( r<'fusal to cc11 as a devi::a to 2nanonc.. pric's Morenver, he has a wc;.pc. w j t h '. 'c. i , . to e :r.cini his powcr over the marhut. See SC Yale Lau OcuTn-1 1121, ' ne f'.u : a .'

• to Sell and Fuhl c Contrcl of Con-petition.' ncfunal to on21 on ch- pur ; cf a prac.ucar haviN ronoy Q contra' i n orda M influen a prices or to Ri? .t a tain or C w? ' it7 efa.cCulV0 M5th ; con.ol is il1cc,al a .: is ar ; otPer d;'. P.: desi" n to accog:lish 3.

s. h. e. b t ' . l .0

                                    .                                                                                   .      .,4         . . - ,

G /12. m .. Oi , 1 y s b. , a .u.t

                                                     . a J-         ..Un.:    u'u  ? J r . -_ % v.

U.S. IC O ,. 10 -' , . . '; S.Ct. 41 92 L

                                                                   .                                         . 12P3; United Statec v. Alu.1inun Co. of Amrica , 2d Cir., 1945, n

o, ,w .. r .a . a. , , .x m. ov .

                         "In the case at bar, the"e is prool from which a jury
  ,'                    raight conclude that the de fendc n t : engaged in refusalc to sell 1:hich vay h<nre sc rvc d to perpetuato defendanh '

1/ "be District Court stated:

                        "Whe:.he                 cr n:,t %7 dc l cin.rni. c.                         g 12 canciRerad a
                         ' C ii t 'j .' '_' ! . 3 5 0 '. -           u 11 , the;C70 c, n.; C E c c 2. 0.                  5; . "

IIG' 4 ';

• 1, in E'J / G *.'C f ; (-  :, ^ C'jord$ 4.i OD :st' j din t; t r n li;i;, ,_

c.gf G. . . ?ntS h C '. O i.'re actio.1S tahun "in CO.. n atio' und'2r S' c ric.1 1 of .*hO SherlttMI ACh. I*.crCoVer,1.'hethar CGhOum0rs PGMer Com Nmy act0 *lcr,. a ia i.'? rc leva": t under Section 2 ef the. Shcrman Act.

                                                                                -111-k_

marP.et status and to affect the price of bananas ultimately charged to the consur:dng public. It is clear, therefore. that, at least for the purpose of theco motions, the refusals to sell (or pa rtial r '- fusals to sell) with which the defendan ts are charged , when considered with attendant facts and circumstaneen here prNont, n:ty have coun tituted , per ce, both a private wrong to the plaintiff and a pablic urong ac-tionable under the trahle dao gcc provision of the antitce.st lat ? (Titln 1. 5 , U.S.C.A. ll15 ) . " 162 P.Supp. at 37 ; . mj)ha c ia c<id'. d .

5. A Utility Apnlying for a Nuclear Liconne lias No Abnolute Right tc Rcfuse tu Deal The trial bourJ ctetec (Oncicion, p. 9 t3 ; 1.E.'I , p. 78):

         . . .     [Elut be c.ro OtL.          T.'. 5 1,   no cour:- 1:n c evcr forces an catity into bucine:S uhich it (J.a not vic.) ta entar uring an                                               1 I

the : Ntatrup e:cuse to Gw.0 to volunem :13 e r0 n t . . c a s ::. h bu.'_:. .

                         ' " 'e f.v nGi beliz.

L-hn ': G t . .or no h e ld . "

                                                                        '.'c__11..

Fi rs t. , : l then:# n pi n t in c!rn.vua, 4. t should be stat-J thtt cow ic m.' n'a s olu L a i @ t of it usa l v.o dca l baned upon prcprietary grounde. E.g. , IIenry of AtlanS; Mc N 1

v. Uni ted Ptat c. , 379 U.S. 241 (1964). See Wi'ard v. Filbarn, N

317 U.S. 111 (1942). Second, in its general ansciaption that Concunarc Power Company 's obligr.:icas can b2 analogized to th'.> hypoth2 ti.cr.1 indivicw L who r'ducec tc ' s o v< a .:" c.ing "nn" (D e c a. .0 c , ,

p. P2; L"' 0 I , p.73), c r t.c, c ) indt . . .; : cpt., 'a3 in c..e pati-tive m rMt atroci ac. t% trial bon ' a ?.g.2on > thu fc : that Consure.cn. Pcuer Company ir an applicant for u valuable

                                                    - 112 --

6

c . , governmental gran t. 1/ Whatever the merits of the board's assumptions in an atomized society where large businescos have limited obligations in the abstract, they can have no application where a governmental grant is being sought. 11uc-lo'.r pover uns developed largely unde'- the aegic of the federal yoverna.r.:nt and the fruits of that dcvclopmat are part of the "public domain." Thus, obligations inuru to Conam. ors Pev.:r Company, no a recult of its acc.:ptance of the license ( 4.od its here-fits. Indeed, where n liconce or privile" i.c reocht, an adminictrat.ive ap;ncy' c po or to 9: an t re'l i<'f U nt'~ ~l )'r' - t' i ts b .'Oi_d ? S t . [7in ga r - Dh ni t'/. PC'.or Corn. v. FPC,

   .") / a.

_m . s . .,-- 1. .r*>c.,. ( p, . f. .,. u; ,, ,

                                                  .                         i. .2i g (- w ) .

I ., g i s ._ u. ..

                                                . 3 j. , .. q. 3 . . . ., ,
                                                               .m . ;.          . _; :. 3 . s { f .,
                                                                                                            ;. p. c. :.,r. .,       ' ,w 1 n.

Po'.n . Co. 241 U.G. 1*/ (1952), the " Coral Pot: - Corrt. i c '. cn conditii: ncd a licence to devc:.cp hydroclectr c facilities granted to Idahe Fo;.or Conpany on its willing:. ass to wheel power fo.: t'.e Burncu of Rocleration. Over the strong objec-( t .ons of ichho Porzur Cc:cpc y t.o being oblicM .&.: to ticscr.it,

   ,l/      Uhile tha triel board's " good snaaritan" annicgy may in-riicate i ts ideology, the qu: ntion of the relevanca of t!.c ecc 1 sr'; 2,. t . n o ris l ; t o c o s ;; 1 e . in t e r.' a l e '. 2 0 m a a v.C c p r. ',-

lew. in tu :rmuc c t bcs c . In my even t , if for no othe: ro<.cen, <'ar reace of ethic., the rule of tet: 1 ' a c k o f o':rls. - gation to help ethera hac been quec c.i oned and .linited i.o the sitxation u ura there is absolutely no relanionnbig betueca the potential good nanaritan and the oc ten t.i a l 'ictim. 't'he trial board itself so recognizes. Dacinica p. 3 3 ; I' ." '.'1, p. 'i ?. .

                                                                          -112-

e the Supremo Court approved the licenso condition. Itere , where the IJRC is required to make antitrust findings and given c::plicit conditioning po::cr, thoro is no baci for the trial board concluding that Consumers Power Compar.- 1.s an abstract right to refuse to doni. The power of the i ri.a1 beard to ascoce f air daali.ng ste.mn frc:.1 th; pouar to grant the licensa. What th board's conclusion cort.cz to is that a major corporation can bene '. ! t f frr.n state developc0 t.ebnolo .y to t he e::clusion of sr.al:.nr en'.ities. Th u 1, in its ar- aumpi: ions that concurinu Po.ier Co...;any ' he :, r.o inhor:nt obligation to deal ( .4 n d tb f r e fo r e. Is not in con '.ic' vi ch poli cieu f e.. c o ri n r. ce .T a ti;. ion uh t..r i t- refu.'.e.- to 60 .s o ) , the trial Lcurd fix thur ignoron Cor.cunA.cs Powcr Cc:npany's public utilii y obligt. ions. E. 'f o r ?. ex rel. h..i Yo rk r. Q u a c n.<a pas CQ,._ v. Mcce]3,':45 U.S. 343 (1017); I?ef 'for? e:: rel . Moota'/ca Ca : Co. v. Public Sor 'I ce Corri::s t.On of it'? \ Yo: .': , 269 U.S. N4 (3925). In ?..a genorni arca of

                                                    .                                   >rvice, Constuncrs Pouer Company cwns all transmission above 133 kv                                              i (and most 133 kv tra::s:nissior) and              ,'1.1  large base load generat-
    .u y u* . .: c .

n. a m. . . .

0 ; i vc rcc4 1 :. :- . m m , c ..cc

                                                                                             -. n-1 1

to p>.ct :ct. Ti. ir cn., aged in c. baninenu c'varlf "n ,_achqC with 1.ha pablic interect." lier v. IP.lccia, 92 ii .S . 133 (1C77). t

                                               -114-

While the board'E. opinion that Consumers Power Com-pany has no inherent obligation to deal night conceivably be sustained if it did not receive st.ato and federal grants of privilege, M it were not here seeking a federal license and if.it consented to a brcahing up of its dominant economic po.vr over b:.se load genernU on cnd trannniasion facilities s- that it no longe centrollcd tha bulk of lercle ccale gen . ra-tion and transmission, as troll as hreing legal cen trol cd the (- major coorc..a n a h.en ar;recc.an t. , t m.a p u.c a c l. 1ts monopoly i ec..- trol .is. u oblicaclon io der 1.. rut in ihe convarca, t. trin1 bc r3 : .umac tP - Co:m ci.m., Po.  : Cen.,.r y ho c '-ha n r.a rights ac a c: :;ormion ep =. '.iny a.'cagsuMw. : .a r:Nc s ia ":.u o . ' he t.u ;er -E . ,e ri t h t c ir; I:.9 . (Evm.n th me, Mur.is/C ac.) .. u;,ni t they cr.. :ar lecc then the trial ' card uould c.;nur..?. )

                                          .                              However, the es-scnce of Consuners Pcuer CcIrpar.y's poret to centrol cuena from

( its larga growth mada economically and legally possible by its lt.rge franchised retail service area and by state and federal grants of corporate c.uthority. 'Ihe e:.:istence of this e at;ol by & Sinition lir.its th: opporto rirlou cf I n u .l e / :: o t co:. . . n. J : n !c i: . van c r. ~ :Lenit5 : - r^ .L' d u.. is O ni.0/Cocps verO not cach 21w.ma :d b;? 1.'us Mjer corporate catity.

                                                      -115-i

Fourth,. Otter Tail cctablichen that control of a vital area of commerce or factor cf production carries an attendant oblication to perrcit reasonable accesc, where to do otherwise vould extend raonopoly control. Thua , Cor. sun.ers Po.,er Cc:apc.ny's a ttcap ta to bloch cmaller synter:4 f rom a l. tern a-tive whole.?. ale power ':curces and marl:et:: or to use i ts do:ai - na:+t power to c;:act a conopoly prica for such access are in-I herently anticcmpa titiuo and', thcrofore, condmiod. Fifth, in fo aiing the I*ichigan Potzer Pcol and enioring inio other interchat,; agrect.. n ts cc 11..cag lar coo:'c.inc.' -I

                                                                                                 ~

upc. i. ion:.,, which ag cucL :nts *. cula ba i l lc jt.'. but for th-pciuileqc cnic/cd b7 th . clect.-!c , 7 " un duc t ry J_/ , Con n e v r':s Pr.' r C:' .'p r a-; u suv .3 un obliget'.cn t i t. l . ,

6. The Trial De :rd's Cicia' d eLua nc. tion c f Con.icce r>>

5 Power Co:cna. 's Obligation.: under the W:caic Energy Act .acd Upon Clairad C::aticions in the Federal Po.rur Act ~. In Error i The board's other claim that, s i : .e .. the Federal Pcwor 1/ E.g., Associalmd F us: v. Uni Ped Si c Ms , 326 U.S. 1 (1945). d c - U n.i t ' d F - - .., s/ . Ss c.cn" Vecon'. Oi! Co I n..c . , 310 U.0. 150 (lt d t. ) ; t ! .s .i t a Star a v. 'Lo c,c i c . .i c t . .t m : , 405 U.S. M.'G

    -(1072). S cw N. . i..t.c. 6. ..J. P a %.c..c. v . . i,. im (              ,   WU,.            26   (l' ,

Ar. ; / i c.v Tcl.:cco Co. . v. . . Unitt, 5 ,2. 1 e. '.., J2C U.S. 7tl (l M C)- 1 (v'tring u.30 G :. 100nogO ly f CC.i ) .h t.icu tO CGntrol mOrk3b co.u.a. .:: ons ,

                                                       - l l G--

i i

Act allows for voluntary coordination arrangements, the exis-tence of theso arrangements cannot be taken into consideration as creating or confirming an obligation to deal on the pa:.t of Concumers Pouer Company becav:.o the Federal Power Act encour-ages voluntsry coordination (otheruine illegal) is equally ill feunt'ed. As has been extensively diactused, 0_tyr Teil e::plicitly , rejncts Lho nction of "'repea.lu of t1- an ti tr as t inws by i:cpli-cution frora a regu'.ntcry s La tute . . .,

                                                                    '" citiny uni.te1 Ftit's

v. Philvk 2 b i ny.fr i' mal Bt :t':, 374 U.S. 321 (15 G3) , dil r.r v.

Net York Stoci E::chan 12, 371 U.S. 3 '! 1 (J 903) O int 'r T.1il 'c'. c r co. v. Uni tr <' S h ;.c , c us) , .;10 U.S. at 373. .!.,c c o v e r , the Cc er tz. 's c i ti: ti aa of G.i i.f.tc i . li c , au h 3 'acn rravicusly .lis-cr." cod, indicacuc ti- need ur tpplicabu.a o# c1titrust prin-C3plOS. 7.nd Gulf C D ,]: ,' i 'V.*

                                              ;' L '.' P. C a C 3 ' i h C f CC Cl l10 ion 05 riunicipal systcmc from an in . .o;oancchicn and pooling agreox. ant.

f In those caces, the rederni PC mr Act Las clcar3y hold not to insulate refucals to deal as to coor(. mtion, centrary to the trial board's apparent inference. Indeed, Gulf States reaf-firmed that the policic.c of cocpetition were to 1;e applied ec the e.' .:tric pc.:cr ir 7 . , - . c , e catw

            ".    . . The IFedcral Pc'v':] Ach U'c pacum3 i.n tha coa-ted of and in ' Japet'no t o g > a ': coucca ;.r r icn ? o ~

economic and cvan pola ':S cal poc, r vented in pc.'er truct.c, and i ne chaenc : cf an ti truct enforcement to restrain the grouta t nd practic: 2 of public utility

                                             -137-

holding companies. See S. Rep. No. 621, popra, at 11-12; Utility Corporat-ions--Su:". mary Report, 70th Cong., 1st Sess., S. Doc. No. 92, Part 73-A, 47-54; 79 Cong. Rec. 8392 (1935).

                    "In order to achieve federal regulation of these and other perceivcd problet                                        on the operational level of the interstate public utility buniness, ':' i t . II was ennetcu.                   S .1M p . L.'o . 621, sunra, at 17; H . P. . Rep. NO.

131S, sunra, <t 7. Part II of Tit. II wn doncai ;ted t he Foc'.cral P r a r I.c t , 49 Stat. 86). Title II c% cain~ ly did not preclu00 the operatice of the antitruct lawc , and it vented th. Pederal Forer Cor.m.:ission wi th in;pe tc ut and broad re.w.]a tory Vr.er in t.ha arecs descriled abo.v. Sec Ottar Tail Pnwer Co. v. United ( Ctai. ' :, 410 U.S. 35i (15/3); M . ;c , Conc s ;6 tion in ti.. &:c t r i c l'o ze r Ind ..tcy. n. T.aptct r.f Anti-t r u n t. */1 Col. T, . Rev. 64 (1972). Mi >i p o u:' :- clear.'tyPolicy . carr m c.tch

                                                                     ..t t x, ro cp on.~ i.bi l .'. t v be courtue ,                     ..

in ci f re c: e 1 cc or :. i- ' - "

                                                                                       ,    ti s        c. t. i c    .y n.2 tiva oc fcc', oi re9.'1;c.d a m n                                           .2     i c he:s te.t :. utility opr:-

tionr D'n ::ut a :. i.c 67202 nad '0 ? , :ad under likc d33*'c-tisas m ntai:cd a <M '>. G S , 20G, vnd 207. rna ;,c t d:d n o i. .cm3 er _aci: -t p r '. '  ; i r: l. , te .:1 e ter

a. ion c requirr;ic e o f t!- .. -

u l.un c ' .:rsr inOn.try. In-- deed,

                ,                 within the confinr at a ho: 4: n::ter i acnorolf p , . i. r ".. .' * . , ) _ . . i. 's . '. . . ' , , ' _ . .
                                                                  "                   ' .r.
                                                                                                    -u . .

u '._- -n s-'.. --

                                                                                                                        ,e.. .s t . . c ". _ m' by the ancitrua b 1m s s.x r.s to hzc .                                                     ten nC ;cipated.

See Otter Tril '8*;r Cc. v. Un:'tcd States, C.0 U.S. ab 374; California v. FPC, 3G9 U.S. 432 (1962): S. Rep. No. 621, nr..e. , n. t 12; ': car ur>n be brc: the Hrso Cc:.d

                                       .n u..~                           .

mitt- 2e cu Interat 2te ana foreign Comrce on H.R. 5423, 74Lh Cong., su, 1st Sess., 157-159 (19.35 ) ; S n:. m-2:y Repo r t ,

                                   .t 5?; n ~'a,
              -     J- r. a.

v. Um. i ca. S ta tca , sunra, 411 U.S. c o p:.r . " Gulf . . t :e U m b 1. :.2.cn Co.

at 75&-759. While discunsing the authority of the Federal Pouer Cert. . h -i,an , in:.:ra it wc c all vgo.i .

c t':a D C c ac.1 6 r e e c.,-

siCC .u ticci c J ti ci'?O cc.nd uc t of rq;ulatut. sn bitien propo.;in.j to iccua c a c u r:s i.ic a , G U .. S tate:- t a b ll)" ra.i e c'.s tt : pr w i.m that (allecc6) l'.itctionc of th. Soecral Pcwor Cw.13 ssion can be boat .s trc2pped into Lhe propouition tha t electric utilit.5 e3

                                                                  -118-

should be free from conforming to antitrust policies. In-deed, had Congress intended to leave the problem of antic petitive situations in the electric po'./or industry to volun-tary action by the utilities themselve : plus the authority of tha red 0ral Power Com.r.icsion, the antitrust revait.' c i '.*e n t h i s C o u.rc.i t ..:;n world hmze bean not only unn.crscary, but self-defcating.

      /.

7. The Trici Roard's Pai]u'.o to Reco *

                                                                                                                                   'no that Cont: ol of Major Tranum.. .::.                                          'n,   G e n e ;. a t i o n af.

Coo' . nation Far i '.i t ics Cc"s tit"' ~' a "5pttie-nec1: . .u Error The b;-ial bee':S firide , c.c a " f actuel" ca t ter , that the L a c ?. ,t i th c ..nvC3 Ma Me Imt unirttr. Decluion, p. 1.,3 m, c. ; u tu ,

o. 90 . In :his reger5, th boa C rec. mir,ec the ur.dJ r nite.d aa? obviouc fact th a '. 01ce ' cra.t"  ; can e2 g e r 7 I.eu ron ..;:.m ll units and ccr. be 'c r _ c'..i tt ed at 1 c.' v o i.L a.:a . It vic.ts as net relevant - tbe fact that use of nach al;: crna tives may ha coro

( co s t i.v . a

                                'Tho + -4 al heard's porition is tha t beca:

• e the em:ller systems can arguably survive without direct access to the liid-lend units, transmis sien and th 2 a t ten (an *: coordication ag):eo-t,m,.,

                                                                                    . . , ~ . , . . . . .s., .7.                     . . . _ .: .,.. .. q3
         .,,               .. 1., .

n. ..r.- .,

         ,m      .

1_ c.- ., , .~. . .. ... . , c.... . . .. c; ..,.1 . 3 3 m2.uod cocrd2.n a b2 on v .t t,n cach ot.iier) , tu s au f.1. .t c c. n . l_f

         --1/-      The bcard es:prescly and incorrectly anchews looking. et                                     -

the broader ram,;c public interest. Deci sion , pp. 165'-171; HICi,'p. 109. C o m n a_ _r e , Southern Stcamship Co. v. N L P._b , 316 U.S. 31 (1941).

                                                                                           -119-

Basicially, the antitruct ' ws deal with economics and uith prose.rving access to alternatives. Thus, the argu-ment that the smaller systems ha*.c not demonstrated that they cannot generate power from cme.ller units or opera te success-fully in relative isolation dans not address the proposition that smalle: systems shou.'d not La precir.: led from alternative purchased poimr and generation sources and outleto, fron direct ace nu to ownership in L; ace load nuclear facilitics or fron coordinetion. Tbc antitruct laws protcet opportc..:ity. The trial bem 3 errs in concleiing th at , cince .3:cr.11 unit calf gcr.eratich, pa.ticipation in Midlend, purchan- of whclecolo po :: 2ren Cacu: car- P ,.cc - Cm:: a'y and purchace of V;h;3esalc cc'.er Cro:. ei hc '. ; , til function to nrovj 4 pouce: for di atri bt'_ ion , if .uuc.is/Cougc have ac.ct:as 50 any of theco cli. crna t. ze , thay ore not, t r c.r; un untitrust utandpoint, in-c jutcd by the denial of others. Per enc ple, the at c' orca t to trcct self g. ,mration and bulh pcwor as equivalent ignoren i that each factor of nrcene.icn ae'vos e turcicula-4 4 f en :1-i cn wi thin the electric powr inductry . 14unis/ Coops need ub alasa.le power to serve the nac6:' o f ul .i:: ccatcmrt . In rc.s etir.g t! .-: m:J , th " 2. . . . . . .2 oc. . thcir de.aand curvea f rom vi ria.:a source.= of baca load, i intetr?v;iate c::d pc ching pou er. The fa:t that th'y have the c.?, ternativw; of genarating their own powr frou swller

                                           -120-1 1

units or purchacing power from Conauncrs Pcuer Company does not mean that they can be excluded from other factors of production. With regard to the purchased power alternativo, we 1:now of no ence in antitirr t 3nu thn' ruppe-te the properitico that a poten tin.'. cc:apr titor che de'.:irc.: to p:oduce and distri-bute a creduct L or s2rvice may be blockad frca the v.m nu of

' , product en en t.'m grounf.c t1 : ho c:n purcha                                                   ':ho fia' hed product . .:alecale and then 5intribu hc it.                                           The trial bocrd's brai c mi ;,mf ers'; axing resu~. tn f. :+: Its f ailure to di<: tin guic'..

betreca t.h e f a c to';; o f p re 'mian end Lha m.' product.. c' En U.n..i J. : . C.W.' .d.:~.. - -.- .3.{.. C r ' ", ; o. " C c Yn . . . 7.

                                                                                              .Ni 1 tn , 3 G C 'i 2(.
     .il 00'.h tir., 19 C 2 f , a..:.cl cia.. c . v.' , 371 U.9.                                        801, the Cocrt str.4es that the L.n. u a c2 prcuactio- . '.w .J U n u :~. be confucer.vith thu end pre.r t in osfining the relevant market:
                 "There w a not.1c evidm ce th t ferrevancdium wc s sold ic                in 1.hc ferro alloy parke t in co:rpetition with other alloys. And, ccrr,rd.iti cs '..'hich a ce "reasonabJ y ir. -

torenangeable by cc :..m: .2 c.: for i.c.2 . ma purgca. :auh e up that 'part of trada or commerce,' monopolization of which nay be illegal. Se= Dupont, 351 U.S. p. 395, 76 S.Ct. p. 1007, quoted in In carnational Eo.':i ng Club. But, Sectian 1 of the Sherme n Act condvans unrea;cnab3 r

                 'estraints               > ro cp.-m-i '         '

nf E:: m.'rn' of tr-{' or coca-cJ ?J C .:: i ll'/ 0 3. i/O d ; i'. . 'i (. 'J t i on . c CD d% '. . it . o0 09 0.i " Or a,utc=rea to monaco 3,. ---"t... uier ?.n ccncer; or indivluu-ally - ' any part of t1_ trc-;da e r com._,r ?;ce . ' Sac United l

            . Stater v. T- Irav.o un t 1 i c t u i'c': , 334 U.S.                                 131, Go S.Ct.          i 915, 9 2 L . F.d . 1260, ilco cuote'l in I.wernationci 3cx-                                                l ing Club. 1.'s do not orderstand the DuPr.nu cas: to held thc.t evety comm.odity which is reasonabi.y intcrthenge-o abic with (mother 'cor.odity canact be the subject of
                                                             -121-

a Section 2 illegal monopoli :ation, for, ' industrial activities cannot be confined to trim categories. Illegal monopolics under $2 Inay well exist over li-mited products in narrow fields where competition is limited.' Duport, 351 U.S. p. 395, 76 S.Ct. p. 1007. In our cace, the mining, processing and raarket-ing of the finisbr.:d prodr. cts from vanadium ore were undoubtedly an in tegrated indus try forming a defini-tive p.,rt of trad .' and c omc.c ree , acd li. 70s undoubtedly the subject of nopopoli ention witho'it relatio abip to

t. ! her cown titive oro it:.cte .  ? !o rc m . ". . " 9:. a i..r t .o f-th; cla 101 he ro i c no t tim m".C'o 'i .. i n 'a o : ..h ' fi-nished r Jci c c t , i rroc'nadlco, bro rn. :v c. H.e rau

                                                                                                                                                                -e..

materla]c trc.m wn:c;n it r-ace. T.. ;inine in d

                            !.M rke t im o '. the r .' ' I ma t a r.; :. . . c ' 20;;'                                                               .u i .iO db ceG 1 x                       an
   ,                           r. o.n

.a ci.d : a p .r u: in ce r; . 2P. c '. -

                                                                                                                                                                    at d n. such i..

_E, uM.nc e t . o a .S.e. .c c ] n a ..'. .- - -

                                                                                                                                                        .           Un i ".<. C t t a i:e n V. i'c110. 'f2b Co., 312, .ro.i.s.                                           . '           . :300

o. 2 . W. a.4.. .535: . . .? .....* h m :-

opplied, u

                           . .s. ., .m,
                                      .        .u

-i .. . ,s. . . .

                                                                  .....w,...          ,,             , o e.                                                                 -

m, oac-

                                                                                      .                .                                                   .a . ...c<,     .l. oc,...... ....o producLion to prc"ide thei;.                                                      O. ; 't; u . povar.                                           ~'.) state thec i,.,
      ~ w .3. .-
                   .., r     ... -   .1   ~, La. . .     ; , . t. . .                                                                     -

p . . s . 4. ..u .. u ., .. L .t ... t...a . t , . . . ..i u . 4, t .a s. . ,s. A ,

s. .L t 4 4. t t.

of prct'uction vi 2 "h . e:R Oriuc . It Leno 'a pr ma t intervene:N from competinc, 11 the sale and ca-banga of uhcle-sdle pON^r SerVICOC, as 1l611 a3 in EOZCil Darha a where corpe-( tition e;:ists. Ultimately, denying s. aller F.in to:a.: accans to x (.1. i.. L v p, , J .i. . imn s gs

                                        . r.*s.* p +. . oc..v. . . .- .. . . > s.
                                                                                   .        ,w.,.-    - n ,. . { .          -,                                -               *

• 4..a.v....

s L. . , w. 7.. s 2 s d .: ., L1. ' kc. a. from busincss, leading to a takeover o.- their retail markets:.

• The adver; e f fec:: tpon comptition of high c :': pc zer , re l.,--

t{ o ta c (';.ue n. u !.li :., ' ra n reco(, c, c d i . . 2

• 7 ; F. . .'

Pohar Cor.ai.njon proceeding in .hich wholecch '; t:2.'- ate Echeduler era rej"ctc.d c:, balu, ani.a .i c0c4 7 ? ti ri'/O :

                         "It ic reasonnble to conclu50 that u n i.c. .c c e. ore equitabic and a more competiti o rate ctructure is
                                                                                        -122-W.

c-t 9 afforded the municipalitica, the crocion of consumcr confidence in the municipal nystems will continue, particularly if I'dicon maintains its practice of pacing its price increases to its S-1 customers a:- intervals apprecicbl.y earlier than its price ineccanen to its own direct customers. As has boon stated above, as the crosion of concueer confidencu in the municipal systerac continues , voter rupport for such syetems de-crearea, and the continued curvival of these r:ystems as independant utili tics becomes an ationcble. " F.un i_ci..pa - l. L i.c.i.h.t.-- % . c d s v. O.-to a E di r a Co., P"C Dechet Fe. -Ji-7 iou- --(Opinion issued July 19, 1973, at

p. 183; Eirenbe-g, A.L.J.).

As to the claim that self-c;cocration in a read; cubsti--

  ,(

tute for the rcquiral services and therefore justifi;. c.zclu-cf.on of ? x ic/Cocpa from nuclear gen rction, high voitcg2 trans-r;.i s .s . = c.nd coo::dina i-i oi , t:. - tri :1 bcard aa,r,tr.as th_ the suhitrt.:t leuc r. qu.: re abaclu tc n% : ititut bili ty. Sec cc Leo ciu i abor . ._ d i n 5:ction - . c' ,

                                                                                          .n u.

am .-. 'b. n c:e nro-

                                                                                                                                  ~

Coct er service (t . r. . . , oc1h t - n o r a c.wn '- of.1- Ci r .: c d : ;n-- tagen over another, it cann t be con:,idered stithin the sar..e produc t m.irke t . Sea. .e 4.,

                                                                     !P.' ncll v. United l'arcel Se rvice of enerica , 1971 CCII Tracio Carn 572,761                                                  (D.C. Cal., 1971; the
                                             ~

facu thc.c one pat .iec d:.J I.mry servica mido an. Loma delisariac i l on a regular schedule, followad up cttempted deliveries whcre , 1 1 cuotc: , v.>ro not at hc'- and inivre ~ all gcchage.: ; 15..c. c ' l l

       ,, .-.s,,.   ,

y . J, u. . gr .: ~> . 2. u _a . . _ . ., ... .. s ,. l

a. w u a . . , ._ . ,u,. .s ... .m....a....

u > .... . . _ . u -. .-a) g, . . ,

                                                                                                                                         ,     l l

n . i c .r. ' N . .,. n o C]r. o t :- yn r' , v. un ' ': . i e t ; ' .. ..;, 3C. r:..:. ' 1 I

       4 2 (lC W ; chmrglon ' hip bon ;g :c ter : ; 2re h ld to cc:a: Litui e a distinct proGrct r.arhet ficr' bo::in g ma tc her. an a vholt.).
                                                                     -123-
                                                                                                                                              \

l

One can extract from these cases the six.ple principle that productn are not readily substitutab3 c when they cerve different purposes in the production procons. Ultimately, the trial lward's pocit. ion that large base load unite and large~ transminaien f e.cila.t i e s are not "uniquc" fa:ci]itics and ti:erefore the "bottlenech" nonopoly principles do not apply is predicated upon an erranaous pre-

,. su:. prion the.t the bu_ cloneck mor.opoly casc., require checlu'ce r

nonsatstile.'mbility and totally unique facilities. Of course, Ott_: r ?_,i_l and the rela ted '!t attlea.:ck" tm: encl.r cacec recIui> o no -ah thing. '2 hen , the to; na. .-erve:6 by Onter Tail Po.ver Ct..o. r ./ ha ce '. h e alte rn it ive of :. e lf--aar. s ' i oa to r.rch the sa e:.':ca , a*; du tha ichigan cu.rtmitir , f'i. nil c r ly , nece-p2 p.- n. ucinded ccm Lau ,'isccciated Prene .:d nynili.le other ne"- ecur :s end. indecd, potenti?.lly oth2r press cervices. Movie i heater ceners in the Griffith case had availchle other k filra . Travelers wishing to croan the Missiezippi River at St. Louis could have dicembarked and croscod the river by boat or coul(; have fou:sd aome other technologically feasible ro u t :> . I n d .,e ? ,. Lho 4ravaler on ,e highur; ir rcir., y c .1 C. En91 cnd, teho nn . n _ r:at & cf ac:e.oo 1.w un , enticien to carvio.; et it.n..olong Nic 1:ty, could no d ab; hm e .; 2d 1: Enn ec:/ - 1/ 1 i l 1/ The trial bm.rd's claimed equivalent substitute to nuclear t l access is rer.iniscent of the presun:od equali ty under French law l that equally prohibited beggar and hing fro:., sleeping under i the bridges c the Seine.

                                             -124-1
                  .                                                                                 1

a. The claimed successful opyrat-i"n of Big Rock dogs not negate the importance of acccan to inroe baco load nuclear units. On its own initia tive, tl.a trial board raises an additional iscue. The D.tc Rock Toint NucL ar Plant was built as a 75 mw unit. Decision, pp. 172-174; HRCI pp . .l l) . M e.onre:. tl ; 7 i t r, cos'c ewz 4

                                            . tence connarca f avorcbly with ot:her nuclen: uni as , although ,daent evid>nce of reemed, A'unis/ Coops cannot c.caer : the infor: utien. The trin:. bcr:rd concludes r

\ that, aince Mun! /Cocpr ' ;r. not u _ :; proval un: hypc ioccis (r al c .1 i2y n u h o. at hcar.:.ng) tha chey er imild e- adingly smo11 welr ar c' _ t n , thi: :: a p c .; 0 f :: l e v .. - .iteS: ?:o: 'a o C . n uc 1 c. c.. acce ,, EV"3 C. " u::1 Ag thD . i.h'? 'rIn' l'.2arO'S p rcT' I ' ."

                                                                                      's i tc.~_ 0 correct, I:unis/ Ccopr u t ne a :. th a t .h.5'acccca                   1.. all nbcut i:s provic ing uu:,:.7 :s of 11alivid a.a2               7y. 2en.-     thu g.7 E ur.i";

to chco n an ng niternatic n, and not to be preclua.d from ( cecesr to nucloc" technoloc;y ts 1!. is prasoncly being develtpud and used. 5. he P.ut is ti re i: .hiv ' ecim010gy ic be % e 20 ca build and operate plants with capacity substantially over 500 nni; I:unis/Ccorn do not wish co be 6maicd thc cppare:n it . to p r P.i e , . - in L ' 2 '- de ve 1 , .. .;:R . In addicina to p'ov.i?ji'g <u al"=rnccive fuci 'ourco LO O." . . ' ' f*CC15, llP.OlCar t'Ch'.010_ * - llO': 0i ..L 3rrge ..C3 '

 -load unii:.              There ic no reacon uhy intervenrn should 1:e k
                                                   -125-

cxcluded from such units. In any event, there is no record evidence that small unit nuclear technology is practically available. This record has been fortunate in having in Mr. Maybon a leading e:: port on porar planning. There is no ques-tion t at he .ia :. oil versed in avaiic.b D tcchnolog".  :. has testified un.ler oath c: ar. ni. : lear uni - are !wint.r built uith capacity creator than 500 m.l. P. . 2558. Tha fact that ha is ( nct a nuc? .7 pltn t & -ig:- u rt acca cot rican thut he for, for t-hnt matt .r, Mr. ^!olfo o' the Lanr; g Boarf of Pcwcr t. I.igh t , rhar.e te stir. .y is r,1:0 t r) .. o; no b ; - c .- c2 the FO' ;n i:.lal .: G- sca.Vi r":itc , 'Z it cxin'xd. Por en.lart to ti-4 .w .,.,u_...a ,m ....- __.__..._,._a.

                                                                  ,.<.                             , , . 3 .. 2
  .., , p. ;. . ,
  . . . .                                            . . . ..                 .._._m              ,e
                                                                                                                       . .; f Morc o*/e u , ti'r: b:,ar' i ;ncroc : . q cwn finding th;t Li.g P.ack Point P'. ant is an e;:ptri m nbal u: ;t.                                                             That, plus t'm frict that it !a.0 bcilt years ago, wo1 1.d have rc.uch to do '7ich its cos t chcr:'.c borinties .                                         TDc ro is <:.bsclutely                      w., shaving i h;. _          .S the p ree. a r.t.                       1.'      7'. _ _ + nucler : p l a n t -- .' ' .: ulom a plant of sma tler sine---can be economically built for commer-c i .'l p's , t.a c < m . 2f 3/

C' er :: t ' # nn ' tha t b : in nM .' n'? ' o vc p c re- vrt h h!.ch

 .k          4      4                   .       k.       4    g .   ,.                 .s k     .d       * .         7%k       8     =     e hu UG::' ill'tDi** ;d i n th's vC ry ' b .".,'i n n i nt,' Of plODDihg" an C 00 In; nur;1CCr UDit b?. 2560) and, : n : .;3ronr.o to boa rd "uestions , he r;o .;_ on to (,,iGcuSS pinnr.] ng GituGti onS in90lVing hUclCGr'uDit3. .

9, _ .. . ,. .

      /        MUr f3On1b/. loops . .O.ne con sv.1. u d* '.On o t- a .3        .

7- Hic? Unit.

                                                                                                                                ' f o uA, ',,. r O -

9u170 the aVa.i .) a,113. .~.y C L. Y.r a n L L i G G i O D O c 2." Vi CO S DI!G C o o r C!1 M a t i o n . J

                                                                              -126-

1 i l This Board can note the number of applications re-ceived by the f:RC for nuclear units ui.th a capacity of 75 mw or less--although it may be that the entire electric industry is unaware of the potential. It may also be than the trial board ic indniging'a flight of fancy. 1/

b. '" h e fa- thct som ins rvenbra h..- liuited tran c:nic cion Errilitiec within their retail service arer.n does not bar them frc.. ccceso t_o h

• c n s u n i..o._n .

The trial board rules: .

                   "Th a Lpplica n t ' ~ trancmission system is not a unigae f a cility , withon:_ ; '.i-Q the o.uller ry :e a cannot coord.in a :e rnong themselves c.                                         'cn o:s t .ud 1.rj the ed:hibits of Justice.                            E.s:h j '-d t           DJ 1 G       . . .      she; q in 3cd 1182 milst of lin.;n < ? oitt                                                C0 cc '5 Hv cf Northern m3 17olverin.2 (Tr i254).
                   "E:hibit DJ 20                   . . .         alco cho- d in red a prop ~ed 13E K'-          tra n . :.is uio. 12 :w for J.orthc n cr i Wolua_rint                                     . . .

Part of thic propo.x6 systed hced be_cu construc e2 prior to the date or the tcctimony . . .

                   ".  . .         we note that                 . . .        the M C Pool was at t.h n t time ple wi::9 app o:ma tely EM miles                                                       . . . of 15G

( KV over optirely different cight-of-vays.

                  "From this evidence, it is fair to c6nclude that the M-C Pool decn.ed 138 KV trancmission to be adequctely high voltage for its needs and that the .'i-C Pool doomed the con.-t::ticcion ;f over 500 it.iles of .-vch line ove ndu righ b -af-v:ny n
                                                          . . .          to b > aconocieelly fear-i cle. "
                 .         , 4a.. . ..      ,p.

_ ,; ,nc. . . , . . . -

v. ~ .r. , .. . t s'. - +" c .

3/ Surcly sono uiincas woulC have manLloned t : " mil , . economic nuclear u::ita were potential.lv available. 127..

0 A more complete non-necuitur can hardly be imagined. Of course, the smalter systems presently have sufficient trans-mission capability to serve their e::1. sting systems. However, the record clearly drin.ountrates that eco-nomies -of scale obtain as to both generation n :d tranGai srion , Tacts which are not only uncontacted but affiructivcly .oro-pounded by Consumo : Pcwer Cc:r.pany. . And, as has been c.clained . earlier, tranoniccion capability of r. a then Q3 h in neces-6 stry to prolida foe' generat.ica bac';pp and to ab; orb pc..r f rom n'a jor bul': pc:mr generatcrs, ine]uding Midland. T; , 31G hv .?n:.r.2 ,r.ivn fcc 11 i L N.. are b-?. ng bul.1t 4 :' conje 'bc.cn

     '*ith th M.W.lt. :46 stiLG anc, i j . J a e c'. , Cc' J umers '. c e r '.'ong :1y ic coatribnL:.ng to 1J; > cct:                                     r u .

• 0.):' c1 7';5 kV c .J:..; c:;3 Or.

facilities ac pa'ct of the interrte trannnission grid. D* . , 10 f.1, 181 .LG2. Eae discur.:i.a concerning tran raiscicn ac Pp Mf;._, e uprg;,. Thc fact th a' tha P.ic.higan liunici.r :tl Poe:e c Paol

 \

independer';1f is ccurtructi:g, or hi constrec'c.d. role.:1 ly low voltage transmiscion does not make that transmission a subc titute for Consumers Powcr Co;rpeny' c tranr=.iccion neb:ork

    ... .y
    +
         . . . . . J .3 G3 4 t..

o..(. , l .- .. ,. .,

t. . ,,)..,...

                                                                .uy      .--
                                                                        ..G     ,. , ,.
                                                                              ....t...,.,3    . < , .  .,,   .. ,         , .

u... ,

                                                                                                                  ,.    ,t.        .
                           '1' k b ' ' sj~ h $. t C t.'. On T"U L (On Gr5dg con!.n C rri "Ci+'Or CO!'.,,,dny C4.11 cporat.. u CCCrdin'.ted GODO:!;4ciOn Ta0 Grans:'15c.cn syf VD n130uing il to riehudule generation, in eco iu iction with Detroit
                                                                       -120-

Edison Company, from nearly overy major generation unit in Michigan. Absent access to the State's transmission grid, it is clear that interveners are blocked from cuch coordination (except to the extent that Concup'ern Power will let 1. hem in) and from alternative cources of supply and outlets for pcuer cales outsid the stete as uell. Indeed, the tri:.1 1.ca rd recogni.w s the latter fact. Decision, p, irr 5; ImC X , p. 108. Thus, the beard Js statin <g orly that the orc.alle "

, systci.w hav

se.Ticient t e c n er:i :r i os. to enable their p.ne. rated pouer to r.ach their mark ': c .

The irc7y Of thu trIhl board'G hold' 1 M . Whi', a OGld OXClO ' I5Un i.S/CCop0 froM c c OD O;'iie :' c 5 S t , l , i '3 that c'

                           .                                                                                                                                  of
                                                                              ,   s.                                                           .+

u. i . h. r.,,.,...

                      .      ._c.2     .:v. . . . w.  .. .

2. s. .,..!.v... . . . . . ..e.

                                                                                                                           . ,, s
                                                                                                                                       .,4
                                                                                                                                       .4    _

s..

                                                                                                                                                            , . .s is the.i. relaci'>1"                                      a.n. ara.1" cett: M service creas anJ the 4

re.sultir.g need for e:: tent.ive low 'zultag.- trancri asim lines. Furt'.mr, the record clearly demonchratun that tha c-. . c . . 3 . . . , calca er.cf or t. ens'n ssion .:.a gree t.ry tc.mintsneo, o cir vol-tagl C _le c tu e <'i r, ' c . - - line Ic... c, th #

                                                                                                                                  . c. . ;. t - .;

which power can be transmitted economically at 69 kv or less (or for that matter at 13l1 hv) is mininhl cm.jared to the L . .w.. ; .. c. . n< - . . .s..

                                                              . . , . . . ' * . . .' "w-
                                                  , . . , , ,L*'-**-
                                                                                           ' -       ~,    L.t',
                                                                                                                                        ~}    *-

l

   )_/ In codit?.on, uhilo the po':.lic r...y                                                           ::aler:; 2 c :' ;r                               :,

relativC y ioorpennivo, 30.-7 volt.ig; ta  :.nnmi: , ion , ti: - cw t , , e nviron: cat .1 an?.1::nd use facter- involved in high voltace I 3 transmisulca rnatato againct pu. ol c neceptance of e: tensive duplication of such trant.:ainsion. R. 4664:29 (Gutmann).

                                                                                     -129-I

_i

In short, the trial board neates the fact that the smaller sydteras (or come of them) have low voltage transmission, but it demonstrates no basis upon which to assume that thin is the functional ocp:.ivalent of high vel-tage trancminsion unless its parallel ascuaptions that Muu.i s/ Coop:: are not entitled to 1,vgc bace load gener:tinr Lourcen# alternativo cources of purchace pcaer and c:1ual co- - ordination righta ar nico neceptcG. If there premices are nec. fuel, tha, thv trin1 hoard is absolutely corrnt.t thbt F.unir./Coopc ' t u nsr.u .; -ic. ic .njhable fac "its nend:,." A:' li tiers 11 ; , it.c :rie; ho:.rd baser i t ; h c lc h n_ upon t'e milec of trars.u.C3cien lim.s halonging to tbc MCP2 md Ic.n sin g . It t.a Lal l; ii. n a c a tha t c.oor.21.w ' '

                                                    .                                             a     aric ng the smal2 cistems in th: MCOP (Menu.=e th b pcol dccc not '.wic access to large unitt:) is no svi'stitute for the type of co-ordinatioh that can be achieved through interconnection iith the larger systere..                           But such coordination requirec accesc t-     'a .s c,^    .M....>..       -
                                   't . .  .~.a'.-

v

                                                      .*     . s' . . .

The trial beard's decision docma any municipal or cccparativa cyctemn beyond tha reach of th<- h2P? lines (auch w, , , s, ,1 i. 3

                           ,   . , , _ , . T.,.

t.. t .i . , d n. ..

                                                ..                J. e. . . i. s.
                                                                                     , s:. cncs - .
                                                                                            ~
                                                                                                    ,.2  .    .

from alucinn t ve < - coes of i s:chr. 0 pT.o r o. untlM r . their p'caer, c::ccpt 'cith -Lhe ac;rac:..eu E e f Concur. ara Po~e c. 1;x. 1003:2'3. Mhilc the tric.1 hoard presumas, baccd ej:a the

                                                                      -130-

relative distances involved, that Lanning and hiolland are capablo of interconnecting with MCPP facilities, there is no evidence of record to su.o. port that such construction would be econonic.

                         " Transmission ir essential to obtain alternatives."

R. 4664:29 (Gu tn' ann ) . Considaring that Concumora Power Cen e unv has agreed with other s,vntecc in Illinoic r Indiana and Ohio to transrait for each other, wi th 'hn result that p7zar i.s haint: trana,ritted to ar., f ro a Conn a .u. .! P c'. ; c r Com-pu,y to :tih tl es thron.jh the :Li d-e.ec ; , th.=ra is no legal .

;'.n P_'. '- '. t, - *

   -  .m.      . u ". o' .a' - L a' c-        -
                                                            .           1. : ' . . ms
                                                                                                   .,4. 1

_ g s .'. .'. .s-j

                                                                                                                       -                             ~
                                                                                                                                           's . . . 1 o .+. .-

v.. L i.. srn J b= r cy:.-te.nc within Conc ur.m n P c . ' : c Cu c c ny ' ', t o'cr i. Lc ry ' to re"'ain nei.r1y ~ot~11, n- tot-01j ir:0  ;<I Eco P 5090: J.4 - 16 (ChayavaJh. aan@ud . If Connur ra t o c.: Com e v wichas to purchasa hyc .:alectric char m.u f 'Ma Can ,( e or 2c11 a nor- . tion of the Lu Eington Puc. pad Storaga Project to Chicago, f there is no qucation that transm! c.:icn facilities vill be i a ';a 1.1. .-N - ta L:n '..e-- m th . . .e r:7; 'm .:lm 6. '<- ev r, 12 he Norti.vrn Rural Electric Cooperative wished to purchase - Luddinguan Pum'.md Storage Projec'. pcrer fron the unit power L e- #

      .. q c.   . }J<..
                     ,,   O..n ra <,
                                  ,    s. i .      141.

L ss r* * , Ls.

                                                                       ..s    g .7
                                                                                    \' . s. ,a .      e

4. s..

                                                                                                                         ,     s, g s 5

a . build ti:ar :nica t.ra to ths p;oject. Tb c. 1.rit.1 board nnam n to suggest. that I? Ucrth n vishe.- cn pui.aaco a portice of a unit in Chica,c, it chrcld bui.ld 130 hv tran ar:iccion lines to Chiergo.

                                                                             -131-

A utility needs its transmission network to make generation capacity available for distribution to retail custoners and to coordinate that power so that .i.t can be marketed as firm power. T.s a practical matter, the board's dacin'en means that the nuaicipalities are c::cluded from entering the bulk pcuor r.arkct, vi th the .n:cep r. ion o f trans-actions with Concumerc Power Cong.ny and i: m diately adjac?nt s ys tec.:. . The trial board would force Munic/cocps to con - 1 tinue to roJy cocolatelv upon th : c Efi fier.av. and jud;,;cancs of Conm cars Po,.er Coinpa:iy.

                                                             ~

Suc'a decision sm cifically s tifl'. s comp;tition by the steller sycter. in buy ng and ;e.lling h 'li- p cW c. 7.. i t .s. , . ., , .- , n .c.

                                  ..       -     : ..%. c. ,.v.,. ~..,. ~: , , .,. . . . c.. .o.
                                                                                   .            . . t. ., a.

c. y . . v .

tion that controle th 1.ranadecica s t.: m in proviG-;d ny an analocy to the pipeline network e.1 thin t!, pet.':oloun in-dustry:

               "An oil refinery cannot shut clown and again start

( c,perations at will, as reoct :r anufacturing pir.nts can. Tht:y aro II: ^ the sr<al mil'.- in :6..n t r ;pcb - once shut doun it takes several da'c to get them , back in operation--on strean ve call it. The re-fincry mush operate 24 hourc a day 365 days a year. Therefore, they must have an unple and never ending supply of en de oil.

               "For this reencu '.% pigo lim.-                                       in      .b. aarly c:t.y -

were ca.v t newd b" rafi ning cocpan ! :n frir. LE-p ro e.u t ;. . ._. .: 3 e a, .n w t.,ia re .tae r-. ,

                                                                                         .: r a ucre ey :r.. cad as plen? facilit,ec.                             Thi.c icd to vone p re t t_. bud practicc a :r/ not                        -:lur:.-n te o i: the i ndus try , parti-cularly cy the old L tandard Oil group, whic'. cm you
                                                               -132-

know, was dissolved by court action in 1911. Tha Standard group gradually acqui red moct of the pipe-lines cast of the Pocky Mountainc and made its own rulon. It vould trancport only oil to which it held the title. To obtain transportation for his oil, a producer would have to cell it to the pipeline .it the Icase tank. Of courno, thic placed many producorn and refinern outrida Lhe Stancard Group prett.y much at the r.arcy of Standstd. :J tanda :d pr tty much dic-tated tM prices it would pay for oil .in the field an.1 the prcducer either accepted their pric or he could not dicpose of his oil. On the other hcani, s tem da rd was also in :-he bef inesa of re. fin i ng t;:e cil and other refi r.'.ra unre at the mercy of Stande.rd for their crude oil supply. Na birally , there wac som dicerimianti.on bot een Stand:trd and .H he c re fincrc in crue:.2 cepply tr d these sull inds, adant refina :a ucra in no position i.o challenge uhe largar , coup. " 1/ Finally, not only ic Ot. tor gil contro.lling, but in that cac3 reliti.uly los volter.c (tnd incsuces ve) cubt.,.%-ie- - c.i on lin 0 ;ere im,ulved, c.nd the co r.- found r. bet:lenc &. .

 'ihiS "Q H. . u L C r       .5 ~ .> e ) f .

c. . r,,

u ,.. 1_:1.,.4... q c. ,_ ~ . . . ..: , . t . o r.

                                                                               .      s% . ..; ., .. ,. 9u..,    , n.    .

u . ., M:'PP dc e c. nnL cub.4ti.rute fe r co.4rdim. icr, with 'c ' ' ma-ior utilitier. The fach that com. c . n. l .' utilit"1 suste : are coor??- - ( nating with each other uhcre fcacibl.o er are calf-genereting is not evidenc') that chece modes of sa::.stitution are reclly natur.1 cub.stituten for coordination with Consuir. cura Powc . I m n' u : it 4 c. evi le.r- th:it Concc.r.cr. n. 70 r Co.r :.ny ' c e:: m.c c iva 1/ Paul it . Pend, '. e O p e r - rion,n.an a e,;.'ss .-."O51 - , nro P.pe'. 1 he C. .r.cago r - Th C..i.. p t e r a'..10. - .:n:2 a t e.n A3so,. a t.1 cn of ICC practitionors, Februar/ 21, 195U. Printca at ICC ;'rac ti-t.ier.arv .Tourna l 730, 735 ( Apl . , 1950).

                                                         -133-

reserves requirements have driven the smaller systems into funding for themselves. The fact that come of those sys-tems havc survived is no r.'cacute of the number of systeus thc.t have boon precluded frou entry into the bulk power mbrhet. III. CO eJ RD +1. 4,., ., .1.T.C '3) i .' ve A A .'.t m.Iu' *TT u .ns

                                                                                     .c acM.%.

4 t. .D'.'.'

                                                                                                             .rk7 "u%' M .c. v. au
                                                                                                                                .e m '

• e. -a' SHOUL9 IiOT BE ON A D'ESCh.9?'iTCOR'l LnSIS A. An Ecualired R ?cerves Strralard Is Fecuired ';mler Coorc' inn c. ion Arran5.w.:mus to s w t J. Pe, . L tv to S.:.  ; .er Svc .m.4 Dec; inning at page 72 of its Decision (NRCI, p'. 66 ),

the trial board confi re.- t:

• 1rqartance of "rcuerve charin ;"

to tha cice;1ic utility indur;t'f, schile at L':c s u.e.: refucing tc: trc'.a s.wne-rus eauer wn;.c,o s ec te s "v3 chn ' i n g trou.;.c. . , trJee placs. S e e c i '. : c a ) 1.j , t5.

• b o r.:: d f i n.: s thaS ..hc impc.si-t.1,.a c2 L lii. on z o co.cla ticn r .: ;u cin.; Cu. .: c n :; 'dcitar Co.ip ' n' to charc rc c - rvos vith Munis/r ec.;ce on . bes i s thet requi.ns each particient to orovide rercrv9a ore :cciona te tc the L s u

loeds to be .se;ved f.om " pooled" gencrn'cica ( i . e.. . . "ema liz ed" . . - reserves) ney be inequitable to one or the other of the co-ordinating partl.cs and, thercicre should be disallet. red. The .cc, oM L.n. e.u - i o r :vi n 5 ..' uet e r. - 'e r.hc -i r is caccmtie' te oce.' . . , and r.:intenuaco o n :rvie' i1 the ele c ".. . I e p t. . .c indu:. P.cy . Coo..:dn.. tion i 4. 1 c e );.

vm 69 en-r:c n ta ere ,are lica ted upon ecce t -

ch a rir.g. If 1/ Indeed, the abcVe terus are eften unoC interch ngably. (Continuad)

                                                                 -130-1 1

J

Thus, by joining together and coordinating their operations, utilities can increase the size of their generat-ing units thereby taking advantage of economics of scale (through increasing the ar.ount of rc..er' rec avn11able in the

 <'vant such larger units choul.d break down);                         can obtain c bet N r m.i :' cf avail ab.l o units (incluc'J ng diversity among unita in ternc of size, fuel *:o"rce, r.tc., allcwing oparction of the n.os t ef ficien s.         udit at any tine); und can reduce total

( rese rvc reg'irer.on h . In econoaic to rn.s , such sharinc' of roscrves through coordinatien and ini . chanoo arranc.>er: us crec.cca a rc.a :": M-for the sale of sp ciclized po' - survices, incloding c: rcency

 <nd m.nn'vn.nc= pc vr, o c c r.r~.,                c. cr.an ge , seescaci a J e i n'.    ;t teric. firm ca l o1,       a s wc ll 7 '.; th:;    ;s.i' sus hspects c~           ,

coordinated develep:nant. E.g., pp. CF2 , supra; h'ucig : T<c gula t or '; Commissic: Economica Anciv..Itc Sectica, Cu " .- C nn:ica ( Co"_.ne l t i ti r n and Re~ulation in the Elactric Util4H,- I n d u. ' c "t , J ur.L , 1975. (j / C:mt' d) c i ro l."

                          .        'a a d ,   r. '      va :.im ' a t: is the grco-

n. . a '_ cacnq .ciliti..s u.w .. s ujreed t y. pn:c ma thu elontria en>:ty frc. :i its cc :Se corn ;". my , r c *F , tinz m //

137 4

         'ing s         total 1:" "vea Jeqcire~.n.!~. n  t): : c:mbinen individual           v r tm:es. In the ricot a ur.3 . brw              cu on or a/ae othe: need arises, &ch ind.i v1.'. al sys tem woulc' la s'a the : igi.c to call on th? rc cci v.# qcnar.w:cn ces.hi.:1ty of thn oth :r ryr. cona , thereby reducis m the ratscrves requir d be cacb in-dividual utility.
                                                  -135-

e Munis/ Coops subuit that the facts are absolutely clear and the econorlico obvious that a utility which in excluded frorr. reserve sharing or coordina ulon--or economically bcy-cotted-- in competitively disadvantaged. While the trial. board accout_s. - tha advantaq.au of co-ordinated cparations, it acida in effec: that the 3rn11cr syntern mus t coordinate on disadvan::cgc'>un terme es cenipar "I with the terwa enjoycd by the larger systeme-ansuming that r eml10r r,yctcac have right of ecord' nat !.ca ai. d 1 F: hic' Liv tric1 beard would apparcatij alco d.:ny). . Tn a coorditii' tad j n hc:W.cag2 or orservos clv rin g agra'_: in t ' 10 partion ' gree ( '. ) Lc p'"y, id a a ce r t:ii" i. ",0 u n t

p. f 3. . wws e ; e. ., , f p-. /, ..,, [ :- b. . .

• t.b ,y, _ , i. r - - ~ + . w, i n. .. .

c, . .,. '.'. r .n.

                              .            .-                       .     .           .          .      .      r,- r.* . .

• 1 tien coy. city available for u:x chen ca.'. lod upon or thro'.'gh purchr. sing s(.ch reserved and ( ?. i to pay for ener ,y supplicC .

under d.u agre;.;ent at agree 6 :ttes. To the c:: tent that one party is fo;ced to maintain or purchtaa dicproporticr.ctely 3arg? re r,a r v. - 4 a cr&  ;:0 3 : 1 .'. c i.p a

• e 1;. .r n n c :, e ' c:.c fallim under the agreement, it is forced to pay a discrinina"orily h3 9h price for bein.; clloited to participato in the overall s,- ,s

              ,u 2.-   .-5
                     . A L - .

Co.13 w. a Po:.c .- . ' wgan .

                                                                            .:.ic i c v; tha =dv.sc 4                       of
    " rc r(.Z . uG ShC.rinC*" on ;. L .; CUn ;y n e ";; 1.                                 l';   ting I;tany p..it                    of Varying Si"OS, it in able to plan for the Optimal cir? Units, 1

l

                                                                      -13F.-

taking advantage of economics of scale 'in conjunction with the minimum rodarves responsibili Ly to support such units. And while a s". a stem such as Cour.tmers Posicr Compan,* that can support 10 or 20 units (copecially units of large .i nn) neeca les ra:;cr cer roir.tive to its size than a smaller lated synton, cvan Consurr.ern Po.,cr Company hac found it . r a'.>ie to optcr recu rves ciuring agroomente with nei.ghbor entities.

                                                                      ~

Ex. 1005, pp. 30-42. ( The t2:3al hoerd acceptc n o tana:o .3 ahc re', y ch2 .3ma ~'se system are rc. quired to :raintz.in greatw. than " ecy l ' re-s e.: s c s . Trun, it wet.li. alic.: ca ed.nse m 2,- to s .. t into the club. Co:wunero Pru~ r and nc-tzcit N ic ou , au ell as o,c,,ar wyur : c .u. .....

s. c.w .3 , .ay ca, .aa s,ur :ne c. s t . c a,. c .: : v .~, ,

f . , . . - cna l ., o r s fs te. i but . n c.

                 .^.
                                                                  . nuec p.,.y an a n.' t : c e. o n re:, thin tee l

DC ilRI the f j u i '. c G? nt thGD CMCO;;.~iiVO.'.7 lary: reCer"Or dd maintalnud. One cc.nnot imagine a more cLviouc for.t of bar-l

 , rier to entry,                                curthcre. ore, i t mahec le.=.a valut: le the barc-fiv., o                   coc ,.n..iic.:, i n u x . .. e ; i n ::: ;c n : ; ~ c to t!:a ci m y tage of Consumers Po.;c                                              Company.

The .n.2. e chr.ngc in cune;.r tip of a 'aypothetic.:1 100rc-

l. ... .. .> .. . ,.

              . . .** .,....s                 . s......w.L.               . 1 L,
                                                                           .4            s        .      . C. A     - . . . ... , . e.         .
                                                                                                                                                       ..r.

7.9. e.

a. . ' , e .

                           . p.q. : :..        v. v..
                                                    . w r.m. . . .f n ~.
                                                                            .);      e..

t . . . s. .

i. , ,d.'. u .' ,,_ .. .

T

                                                                                                                                      . . + ...-

2. e.> ,a s m A.

4. u d dt','Ul' .1 Z d d .J C L'!'.*V C En (C.'71c. '.11rf . .I. M sUrdC 'c k PD j. bOEmG t c. .' Un Sl,f u s' $.-* 7ON rl.* s ' ' rY - . . o['a7slI t'. '[ U $ .' I ' ' 4 9 t 13 ('. r Os C 9*s*.3k')a) 2' 't'd E' t } 17

                                                                                       -137-J

reservec requirement to the relativo sino of the intercon-necting systems. However, the " situation inconsistent" is the urc by Consumars Power Company of its control of large unit generation and high voltage trancmission to provent in-tervoners' acces3 to pouer tran: tction 3 on terms equal to

t. hose enjoyed by Michigan Pry,ter Pool me:rbers. Offering in-terca,.'ago scevice on an unequalized reservea ,nas t. c no a s no t.

corrtet thic nituation. / \ Ecual i.: .>d rece: ve t, is a short-hand c:o1 rcanion n.ean-ing th-d parties to coor:line': ion agreement *.; uill contriSutc resc a.u, prcjoction.ite to th'd tc. u.1 lo.:i . Or, ia aLher UCrad, that thcy Will pay an equal pl.a.c8 fW1 What t. iOy 1. 0-c e l '.'t.1 .. , u. .:.., .3 .

                                                       . . . 13 1.n .
                                                                                   ..y C 2 G.           as1Cag                '. d ,- wn   d L. U d e-          **, v t'.

c;:Nc 'uTra tie n havi:n,' c ,. 0 1 b a r c a > e.l M> strer.c,th co cr.ter into. Id. It uy n tent relativel; largor thca the other negotiating partien '(and therefore huving grar.ter bargair.ing strangth) c;u3 d a::cet more. R. 2630-2632. Thic Board should not perr C on...a..

          .. . . , . .... cv.c..        .: ., . , u, s.
                                                     . r.y.  .u.. . .
                                                                                   .,...._.,.,.,.i.......,,e.
                                                                                     . <. v .       u.: s.      ...u            s              .._1  . .     ,. . . q,,_ u; . . 2.
                                                                                                                                                             .u                 , . ..   ,

the smaller systemc to maintain disproportionately large re-servec in or&r t o cbtci. escentini comrdinnbion. vu ..~ g , ... o. - . 2 . . ,:. .. . u z,. ,. i - . .e, (. . ,. , . , . , , , , .

                                                                                                                 .4.        - -      ,,,.,,t..
                                                                                                                                     .y    . . . .

i.-..s.o,,.. c,a i ni archane,c n:ral:;cic m' c of f aren to 4 n" mcr::, ..i h vill he abl. to ef f. etively c c'.ch them, a. ': 1c: % pa r tia .1 c , f.cc: . part i c.i pci:icn la interchrng markot'.

                                                                       - 130 -

The Federal Power Com:nission han approv~cd an equalized reserves standard, which was confirmed by the Seprena Court. Gainenville Utilitica Deot. v. Florida

 . Power Corp. , 4 0 2 U. S . 515 (1971), a case that Judge Levanthal later characteri;>ed as standine: for the pro-pocition that nuaicipals chould not be interconnected o n terma maru onerour thcn thoce required of other invectoc-o.cnod u'c ili ties . "            tr. f a f u t. :: 3 ,   La.,   v.
                                                                         , I' C , *34 F.2d 952 (D.C.Cir., 1971), afi'd sob ncm. Cole Stctus Utilitiac Co.                                                  v.

PPC, s o u. c . - la .+; a ri;i c.; ,x Ccu r w . ; ra 1 t r C:q > . tr to u.e the rplitti: , of Icana'!it te.s t , .o triat hard :. s racognizing tr.c Cea.;.a ny 's n.c ar p/.. f pm;e - in s ..t.uig d r. hn ab mga rc. ma . t c v . u . . *

                                                 ^

V..._. , ~. 2 -- ~.3 .n~. . .- .t.~*.~..~. ~

                                                                                       . * '. 'w'
                                                                                                   . o . a g c' arrencan :ts uit*c other ccq. aier.                                 Tha c~,c arrang:n:.en'es almost uniforaly provide mutual becam: to tr:.nmis ti ca ccpacity .nd 1

thei r rc.cmzos fort ?las result in ec;o'11 reserves requi ne.3.n to proportiona::e to load and charad acvings frora the interconnected operation. DJ 67, 71- 78. For exampla, hir*h voltage tranc - ril: T ica 2 ; e =sr " to allc, fer 3 r . 'r<nangc ; c,:or t: .Cera ri..c.:.g * :- o r utili t : e s over 1.239 O y 7, . The blnic ".r,33 If 1/ A gravp of inte cennnect:ed nide' 'Ote in utilities.

                                                   - 139 -

agrecmunta (and most of Consumers Power Con.7any'c intercPange arrangements) do not provide for anv charge to any party for the use of the inte rconnected transmission f acilities. DJ 76. Ex. 1005, pp. 64-66. Si milarly, whatever the contractual for-n.alationn :tay be, in practice either occh utility is reupon-Jible for nsintaining arlequate reserves as based upon its own j udgn.ent , or the reserves recuirerent is established ac-cording to proportioncl~ percentage of loads. Thuc, use of transmissir.r. capeciuy is encouraged co f(. cili. t o te pcwa t.- ti.a::s-fors; cpecicli:ed power transacticns, such or er.crge$w: power, will b. enam:cd e incrementtl co:c t without rc.g i. ring dispro-portiena N recar /ations of c.n.pacit; by or.e sys'ceu cf 'acther or provis ni; 2.or up :clal at,o r c_ ton:. . . ennr u ca by iue cycten to anoth;r. If ono nyttem c.2n oporate a trit not'in service , more cher.pl-f than a unit en another system, the syctem with the lowcr cost unit t;ill operate its generation and the two systemr trill - nit the amount of :r.oney saved. Such arrange-

'ren ts obviously bent lt all p.;ri-ien to the::i.

By contrast, an exanination of the interchango con-tracts be tween Cone urora Power Comparc and the smaller nyntems e,.'.'n . rvier t.c ;- i. to chcis ch ;ollc .72.. .. . Firsi. there is g; proviJie , for joint u:- J trar sm u sn - cap';it", c:.. Ovcn for th= purc h e or < c.. '.a . c ap e. s. ty . 1/ --

                                                                                                                           \

l t l ,l/ One e;ception, *:hich is not a rc.t e r o f re c o rc'. , in a (Coa t.i n n.e d ) 1 l 1 l

                                                    - 140 -

Second, such arrangements have uniformly provided for larger reserve dediention by the rmaller isolated systems. The forc.ulac have invariably been based on sone kind of "lar-gest unit" concept, which results in Car greater reserves being required of th: cualler syste: c in proportion to their load, even though there is no showing that such systemo' ur.i t s are leca .:e liab le . Such reserves requirac.cnts inhibit the ability of the small unit syctem to install Inrger and I:.oro i efficient units. DJ 99-105; 5090:10 '.2 (Chayr.vac'.hanangt.cr) . Such agr.'.a.ents 1. ave beca enter:.d into only with M: - '% , iicl. land cr'? the ?~K . Lansir d Mnd .lo'la- S bcVe h:-- la rg c- cract.n in of am s capac cy, which corln ' :b c n Do - :ci . C ,,~...... '. .c o .' Co, , . r. o .v

s. . g. . .

s- s m. a ..- p o: y c,,.

s. t 2 . ... J . . . , .. J .. L. * ..E.r s...t...

                                                                                          -    * .* s
                                                                                                       ,,*'C. . . .. u .o ,    's se.,. s J. w .

G i s t uen c a c t _ c.n r.:. .y v.1 be e

                                                                                                                                                ~

Ca pny's line! . . uit thi p ro e f. -:.n n . Ho.m cc, it i e note.so:.:; h'r t N. t. in order to

                                                                                                        ~

oba 11 r-U .; la  :.:i ': c :, t5 a "? ir: '. - a ;. ,.j m , a pW S o.? er. Agy ch;'rt:" , i n c. ch:- potcr t rarc ".a u e m .'n te ' 1 cr : d a -- w'.nd char gs . lJ Such e:: cess capacity raults frau hair inoi.ction and thn oneroua 2.uuervcs r.rquiren p t ce t by Conrun cr:.: P o..'e r n' a condition to obtaining coordiantion. ] m n/itt m  ;

not maintain this interconnection undoubtedly the City and Wolverino Electric Cooperative will enter into such an agree-ment." DJ 150. Holland could not interchange with both Con-sumers Pc<ecr and Polverine because Consumerc Power Company precluded such e dual arrangemant. DJ 99, 100. 1/ The Municipit] Cooperative Poe'c.r Pool is comprised of once iso-lated systems which joined together only after they could not reach r.atisfratcry arrangements uith Con::umers Poczar t Com.oanv. a Tha oth _ r more ino.l a cod sW craa have a .c accors to such ccordi;etion. The in.pi : . c 5 the disprcporc2. enate re c.c r ia s r :.:; n r e ~ r'anP by Consu e.r Pv.er, l'ised upon.the> larg;;L unit cac. cept,

   ..r.  .

4 1.,. ,. . u. $. m ..... ,

                                                                       .: - < s . ,
                                                                  .,..-2.              . ,,.....g o . .,,.m. s.        .
                                                                                                                           .,_,..,_i.e..,
                                                                                                                                       ,         .c             m 7,_,...
                                                                                                                                                                  . ,. a     t. p m,....

4 he i r r.u 'd e t limitatio.7, e. acmicallp to bui? -i ' crge ri:i ts , beca.use they would have to deJicate to reservoc exec.ss2 "o renounts of idle ca.pncity. Indacd, Lnnaing and liolland nch co ,n ave ,u.:rge amovu ts or enccas cepcicy, raa.s2.ng t a co:sts ( cme m. 3, es'. . ~v .- Lv t.'..'.. -v - _, . , u '.: -

                                                                                        .            n. 4.        . ..-
                                                                                                                  .           v. .
                                                                                                                                         '%. e-v      ". ..r,.

2 =. A .: s -

                                                                                                                                                                                  ~.          ~. .~2 cliergy is liraited to Consumers Power Cccpany. 2/
                      . -           ,}                 8
                                                                    -.'.4y%  y9',-a %.                -              .M                    e     *e

[ La

  .._ /         1 d%+   ; .,                                        g ,. q[e ..e.              .e.A g.4
                                                                                                                                                          ,.j. . .          .I',

g 4 4 i,'r.~ n tlw . ".'uch prc ci:- len c, <, a no c 2nt.enued t o m' en .i. c r t. e d , nin:e Con...wrn Po'.tc Company c.s - n: a te a . 11 1.. lor , p . l 'b'= ;

 *.; IlC J. ,         p.            '! '   .

D,...$p,

              .                              e
                                                       ).     .      )          g$          %g                   g         ..            %   44    k      ,g             $jk       . w*   p
 ..but not bO                            T.'.'.1n teliI' C :'.CO S C i '. e rC SCTW '                                           .      Ej'Oy Ca-t P CI. Ch ' 30 power fro.:' C O M S U'C O r 0 P O 40 r--- o n 3D CI:01 '.1 bdCiS, Subject to a dC AMnd ratChO t.
                                                                                - 142 -

Yet, these systema had to enter into thene arrange-ments with Cennumors Power Company or be cut of f from coordi-nation. The willingness of Consumerc Powcr Company to coordi-ncite and the establishr.nnt of reacrves reg"iremnts have been related to the ability of interveners to do without. This explains why the I4CPP, after joining together, could get como interchange advantages. ' It explains why Ifalland (which is ( geograt.,hically located so that it might have joined t:ha 24CPP) could obtain an interchange agreement froa Consumurc Pc. c-r Compm . It explaina c'q Lancinc, vit.h it re] atively grcatm: sina and larger qccicarti.n.; units (cna less ncud of an .cter-chenc> crange i t) , cnrld obt4tr one. It c 0 lain 2 vhy Col; 70 . - and ID_11 6 1c r.nd Marshai? cannot. DJ 150, n. 2636- . 2652. Indeed, Concumrs Pcwer Con n:my's legal theory appears to be that becausa the small municipal systcm3 do not now ( have Ccnaumarc Power's vart markcts, 1 ;ge base load gencra-tion ad high voltage tr'aacmas2.i.:n ucilit!23 to stnrt with, they uould be disproportionately advantaged from changen in their intnrcharm acrean:m bs and that ther Eo sz.: they rQculd contri. 1i.c gre: .a reser" than Ccu x..:r - M:e : Ccmpt r,. Prahas ;ag Srie' ft;r Ar p 15.c: , . , p7 2.3 5- 12 C . The Colland-Consurca Pc'..cr Ccmpany agreement i:. a prir.c ear.mpla o C di..,criri .dLen. PJ 99-101. Und?r t h s :.

                                - 143 -

agreement, Holland is required-to maintain reservoc equal to 1/2 (Largect unit + 1/2 2d largest unit - 0.15 annual neak load) + 0.15 annual neak load. The practical im.o. net of this for:aula in 19'13 was that Holland's rese':Vos computed to 47.2% of its peak load. Moreovar, if l!o] land vere to in-stall a larccr, .o re afficient unit, its reserv?s rcquirenant would go up. 5090:20-21 (Chayavadhanang k . .:) . The formulo not onlv. n. enclizes ef ficianc'1, but it discourac - as smaller i sys tet:'c f ron installi: q gor e ra tion comp : t i . - .*c wi t h Co n s um:.' r.s Powa Compe-t . ,1/ In addition, hMh the Ho.'. land ,. O the 1, ; n 'i * : n a g .,. n. n .q ;-. r.

                                                .. .        , g v.     ..u, ;.,> . n. L;. w n... v ,..:.,
                                                                                                               .        ,g .r. e-, ..-<j , .    , .. .- s.,.. . ,   v . . r.,"a ' u~.. M. a dC a Condit._Oi C f i P t C /.' c o n D _ c t i . .: , th;i ; tdOy could nQ t DUy                                         '

P ON. .I N:C:2 0 , '.s ^ 2 .L p O' .: " '* O Cd ' ' ' yf.DC3. ,{/ p.. 1. . . su.2q'd 7r. t ,1. 6. . I n e.c p- ,. . .L.. . ., , a (u. c.

                                    .             1
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s., - v s 1 g. .. . , 2g ,s .c 3 thEt i- h G " CQ 1:~. $ Z e d rG nC T V O S " COD Cpt 10 MOL rCQUirc.d 1Cgl.lly or factually. HoWCVar, the reCwrd ShGWC Cloarly that Con 3UN r8 ( Pouer Co;tpany has refused to dc-al uith snallar syn terc.s on Ln.a.;arger SurrOudL].ng ut131t L M !i, . t e rL.G 3 3 311a;f EO cnoSC 0 1 12 r 0 4 1/ C .' O C C V i l l * . Utiliti. ' D:'pt. 40 !.PC

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                                                                                                                                                                                          .=rs; vr..       ' . , 4U2 U.o.515 (bit, n                                               i' .                     l'i'C oc u..?.C

_2,/ Conc uma r.- Pr 'er C.. y w apparc a t ly r; - ': 'co i22. ' cuch arrangci,enta 0- attempt., to aveld roderni ivr.eSietico and not to lilait tho;e r..unicipal. v. ' t eca . D:cl ci. , p- . . 12 :.12 /; Itc , p. 92 93 , see 1; . 100, 10236. 7.

• uM ng thc': the m:rh yn t.i nn to .:vaid federal j urisc retion h;. i , lec..inate i be.ui ..u1 im cpt 2, thic c . . a c t io n r> m ca v.m ,m,,a o un a:Lul does net ' un.l.m. 3 on oc..n< r g rour d.c . 1;or e n it be presuecd tha t the Co pany did not in teu 0.

the prchibitio.- that core plcin ty writte:. inec its contracta. i 1

• 1

                                                                           - 144 -                                                                                                                               l

As we have stated, the liidland units are niajor invest-monts planned ac part of a generation and transmionion network of integrated generation and tran: mission facilitien. They can be expteted to have a " tremendous impact" on Consumers Power's nyteri. R. 55.?3-5529, 5525. Interveners cannot them-selven build occh facilitics.  ?!or could Consun'er- Power Com-pany do so economically without the advantage:3 of internal and crhernal pcecr coo;-dination. Indeed, absent such access / . . .. ,- to trcn. ca..ns1< n nnd coorninc: tion , tr von.ui ,co unecoacnic for a in. 2ri.cners tr. even consider accenn to :.:i dland. n. 2827-2E45, 55:' ';125. 12 the Mi c'J < nd uni cs a ce licc.wea, int.. rvaacrs shca~. 0 not be deprimd or tha obflity to utilize po.er as part of an in b gi eted c7t rat. ton in i.nc cc w mannm: c .. Con.fers PowCr Ccmpan'j. '.i' ls hD3 d OthOrM: w ca ? alle- the iu,otit!.on -f dieproportionate reacrves recptirernais as te flunis/ Coops would 9 i ve Concurrarn Power Cor,aanv, dis.nroucrtionate advantaca ( from the liccusing of thesa facilities, to the substantial 6etria :n.; cf intervencrs. 't. 5536 5546. In antitrust terms, the question is whether to par-ticipnt-_ in tha t speci +1: zed econt.mic m:1rket whcre particula-t::m a c.tica s T v- the t d. purch, < t u d c : - A . eg e o f. ._.1 : p'  : take --'~:2. 'the 'maller r-in terra ui.11 nave t'.i t. ? int- a Girpro.co: . :.cnaLe re."CrV.33 to d (x:3 r J J:baiU4d by tnc ln.gec sycLers. Cinei the

                                    - 145'-

only reason th .t such ccanomic penalty could be imposed would relate ,_ s he greater economic bargaining power of the larger system, in light of Consumers Po'.Jer Counctny's control of entrance into the market Q.e., the coordinatica arrangerents) such inposition is condemned 17f the antitruct 1cws. Consu.cers Powe r Co.npany benefits from its nonopoly power over large unit generation and transmission by being able to support a mi:: of large units and to control t.h e ( trensoirsion grid on the lcwcr Michigan peninsu3a. It ad-vanteces ittr.lf further by entering into coordinatic$ agreu-m:m cs ui tb c L bc r msier inver to.e:-c ,n:d utaiitias c f like d ue. There is no rer.;on uhy i.hia menupoly po.ez nhould be-rc ccgr.ined to ret g es:.tc r re.12.rc . 2a" - fc: coo rd i r. c.:.ic o for the atuller syst.e:ra for the enact nz c's rca.=on t.b a t there is no j ust.ificc4;ic7 for the exclu"icn of the smaller systems from coor'dinated transactions in the first place. Indeed, , the inposition of a penalty is th> practical equivalcat in lec:cr pagr.e to the cD a lute .eCural to 6au'.. The trial board refuse.c to recognize that involved in the question of egenlined rccc ,:ves is the queci-ion of berga u ng "u. rc.n u.i t ic. i- ?rc. . m 1 mm 13 pm - paasocsed by Censumers P eer Ccipan7, sinan it refr: t., to accept the tw h.e.sition that Concu.mern Pover Coe em," s initi. l domi-- nant con trol c. <r.: both p;ver f acilitia.s c.nd transci.nc;ic, 9 l 1 146 -

facilitics cannet be ured in such a way to c:: tend its al-ready exis tinct control.

              -                        -                                     .E.. g . , O t t e r T..a.il._ Powe r Co. v. United States, 410 U.S.                                366 (1973); United StcLen v.                                                 Locu's, Inc.,

371 U.S. 38 (1962); Fortng En terprises v. United States Steel Corp., 394 U.S. 495 ( 1.9 6 9 ) . Since an economi.c mr, te t where comp -titica takes place for specieli;ed v.holesal.2 cer-vices ic forc. .d by interchange agreemen to, an

    .imnas.ition t .-                       uo. an a unaller utility of e::czasive reserver re-                                                   _ -.

gpicements af, the nrico of particip+tt ; a in thos<a acroe-ments limits opport'nities an? constitutes a direct re-

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n . .. m* *. ' ~ _ . . . , r. c ~, . V. .< *. ^. . '..sn. C v~ .v. .~U. .m . a '_; 2;r.r.r...3 e

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3

a. **-.'S.

I t ic prn'.2abl; for Mtis r.  : con n'.at tbr ' rlal hat ri refusac ta - :c yn d. u e th= right in ti. fttat pl a that it cinilc:cly refucac to recognin that the imposition of c::traordinary terms for coordinaFlon on the caaller e fatem cr-:rtas the saiw evil as a total refusal to coordinate. B. The Trial Board's E:':amsoles Purnoruine, to Juntify Its > Pailure to Order l'oualized Ecserves Are Contrary to the , Record. - Th trial her. ? con 4u a c ," ut tm e. r.colo 0 '9 era it . clt;it..a the ':encrv2u ;hr. ring ' na eqt .h7.ed b.v ic :s no!. . j ur ':if i e d . D' cision, pp. 7S-7 tc ; IOCI, 90 G7-GS . :Mnic/Cncq;0 would have no objection to a q, ;1ificatica to proposed lici n i;e con:li tient providing H.a t. t;he r, c:cordit ' tion inem v:es Ebn

                                                                          - 147 -

L _.

amount of reserves a system would have- to maintain, the amount increased should be provided by the party creating the increase. As a pract.ical matter, of course, if both parties would be disadvantaged by sharing reserves on an equalized basis, a different arrangement would be negoti.ated. The trial board's examples are not realistic. In the first exanple, the board postulaten a larger system with four 40 mw units and a smaller syntem with one 95 mu unit. The ( recult of equalized reservcs coordinntion would he to increase ti' 2 reservcq requircd on the part of tM smaller s.v. sted. A smaller sy sten in sue' sittoti on , of couri:c , mic ht not request coordination. The cracpi o 6 .o:- illustra.cc 1.hnt if a cFrller c; c tcm having c:t :11 unit:3 joinc a reserves sharing agroanent with a cyc:cm having large units, the total rc: serves requirer.ents of the s:saller system may increace. Ind sd, an irony to this proceeding is that the ar.:unt of reserves requircua in any lil aly . ccc i.*0'n ation agrecman vill M ttarn:u: :S 'or t-Jw enui-neering reliability of Consum2rs Power Company'n large units, nuch as Palisad23 which has h'.c' c hi c :: cry of cen tinued forced g g ; ( L . .j n.n &.c. r..*..

                                  .o y

4. L.1 s a 3. ;. 3 ., av .

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                                                                                     ..>.. .L . 5.s been reple O Uith cC:dplaints about L;:r.- alleged uncm ttabi]; ny o f .'.h O C ra d l l a r S y s L92 R 9 CS CoGrdinatipn pi'.rtnel:                   O'?hich cD11,3 aints hMe h3en LlirrCr0d In LI!O t:::ial UO ' rd '  aMSUIT*)LiCP S of UIbit
                                                  - 148 -

1

constituten suitable coordination partners), not only has there been no demonntration that the. smaller systems' units are of a lesser degree of reliability than those of Cor.sumers Power Company! but it is the latter's units that will have a tendency to increase the reserves requirementn of pooled operations rather t.han the smaller sys te.ms. The fact that coordination bet -Icen a larger and a smaller e/ stem may increase the reserves requirements of the smaller systoca provides no reascn for _ ailing to require , that Cons'imars Po.;er Company share reserves on an equalized resc.rves bani.? , should the :naaller sy s tem reun t. While the parties i.ac.; negotiate a 6ifferent :tandard, failuia to ruquire cqualized rou.rve charina as an alterr.: r ve c4 '. lc er., Cc: au:m 's l'c..ar C~q:any to ir.D c a l cc w n a y t . 'n or.n ._ p ee- - condition it wishc3 on reserve sharing. The secor.:1 c:: ample chevi a larger systen with cmiler_ cized units than the smaller systen. By coordinating the re-serves of tLa larger and smaller cycteas, the rewrves ra-quirement of the larger syctom increasec. This e:: ample also use: acx0in s%Ltem with c? un!.t cqt il to 3.L9 antir:; load. T~a ic c::agle is so ca :eal.a.u tic ac to be mos.uinglcss: i;: n n s t=c - b.: . h c a s t a larp

                                        ; ;; tam m c.16 not take adva:,rr..;<n of its cine, but woui           build units at equal sinc <.nd that a i

1 c1Hitll SySLf?a Uould build a Hait equal to itS Gntira lOnd l l 1 1

                                  - 149 -                                             l l

thereby requiring 1003 reserves as an isola t.ed systera t o maintain service reliability. IIowever, again , Munis/ Coops would not object to protecting a larger system in such hypo-thetical eituation by imposing a requirement that if coor . dination with a system forces Constracrs Power Company to add to its reserves, the scaller systei.. would provide the increasc. In conjuring up hypothetical c:<araples, the board fails to recognize the reality of the situation presented, where

 '(

Consumerr. Power Company and Detroit Edison Co:apany , piichigan 's dominait utilities, insia!. t.c.on a highly discriminator-l re-serves fortc.ala for analler sys L nac to part'.cipate in peoling arrar.genan tz , Contrars Pct cr Compar c 'u specific genera-tion tai a ara of recora ir.n ludiq: t'..e i r c i . (Thic is in Ex. 1001,.3C 3) Such generati on mi:: is congletely con-trary to the c::amples proferred by the board. Of recor/ is the fact that covalized reserves treat-men t. "is a com;aon practice within the established power pools such as the Pennsylvania - Maryland -- New Jersey Power Pool, and tha "eu I'aglenC Dool. ' 5070:19 (Chayav .dh nangkur) . A'.so of record is the eco a:aic penally to the cr.. aller cfr. m" *hi are deprived of equalix5 concrva. For cruple , JanJai Chaynvadh '..w r:g):ur of Cou th. m Engineering Corc my .uho

                        ,,1CCu. .IACh

l.t. G a. e d ,

    ,las ConcluC , .le.

a L r.:, .'> r t circCit Stur...lcc, E cono; Lt c l L .- 150 - {

analycon of alternative pcwer supply sources, and generation and trancmicsion feasibility studies Ecr cooperatives and nunicipals in 14 ctates" testified (5070:20-11):

                     "An unequalined reserve requirceent ia related to the site of unito a system han installed or the power pool has set . . .                        Therefore, each system in the power pcol aill contribute different percer> tages of its lond to the power pool for its reserves re-sponsibilities.               This results in a higher reserve requirement or makes it impossible to install units.                                              '
                     . . .      There is a[n unequalized) formula in the Agree-raent used to calculate the reserve rescensibilities

( of the City of IIolland. . . . '"he fomula states that the City of I:ollcnd's cererve responsibilities cqu::ls 1/2 (L:;rgest Unit + 1/2 Second Largest Unit - 0.15 Annel Peak Load) + 0.15 Annual Peak Load. The formula has the effect of forci.ng the City of Holland to p' ovido c .,rc than its pro!. chara of the reserve. At the pr: c. an t the largest un .t c J the .?ity of Holland is rated at 31,000 kilcazatts and the second largc t anit is r; tad at 24,500 kilovutta. The cnpacttd. .n-nual 19??, pa.d. Ioad is 54,500, kilo.atte. After the matheicatical a n a r c.tn e , the rcFeive respersibilitico c i~ s '1a Cit y c 2 !!cile".C is 2F ceb ja l mw. . ts c,- '. 7 . .l i, of its orp-red annual 1973 a::a:: load. The formula 1 also penal :.as the Cli.y of Hollaad if it instaJlc a larger end nare efticient unit. For example, if the largest unit of the City of Holland is rated at > G0,0 00 kil owa l-tn , the City's reserve recponsibilities will be incream :1 t.o 41,800 kilowatts or 76.7'A of ibn c:m ated rLnual 1C73 reik lcca of 54,500 kilownt.*. M"roover, I!allanu has contructed a new 21,000 hw unit to go into operation in June, 1974 "

7. .- the ret.oni shc 17, Conss a., '

cw r Ca y ny only 3r.te r a d i:;t o co'.r:C ; ; O t i c a w i '.a d e l b . . J. he cre.f w f. ell,ma Crom l jo.ining tS :: . ? m i ci n .3 Co c :c.r. a._':.i._v__o_P m_ n* '_e.r Po o_l_ , whi'. 'i la tur . arcsa cut Of the nceescity that Conc'urara Pot.cr Coreany rc:f uled to coordinab ui th h!-30c smilc  : a mb" : rg uemc. E '< . DJ 150; cao DJ 47.

Conclusion:

The Federal Power Commiscion has approved an equalized reserves standard, which wac confirmed by the Supreme Court. Ca_inesville U tilities Dept. v. Plorida Power Corp., 402 U.S. 515 (1971) As it ignores Ot ter ';" ail and Gulf States, tile trial board also seeks to avoid Gainesvilpg.

   '2hus , despite three Supror.c Court cacos in the last five years clearly demanding the application of antitruct principles to the electric power industry, in a case that is a prototype

(, of a maio., utilib'

             -                    e  seeking to preserve its monopoly positi3n ,

the trial board cannot find any basin for modifying th, si-tuatica.

               'che trial board traals Gaing
               .                                                  >i.T le, a<   me re ly a f fi  A-in"a tb? d cicien of the P~                  a.n d t h <.or > " c r>> n n F  'd dirn. ' .a r n it. At tim semc tie , the trial be cd re f t.:cr. to fcllo" the Federal Pcwer Conuni,.cion ' t applicatic- of an cqualized reservcs formula ca the grot.ada that that latter aguacy has "pri'ary j urisdi c !; ion. "         Thuc, by co a tuict of logic, the trial 'coard i

finSc .it ennnot foll m *- h e C' p re.- a C c u -f- b .c a '.i 1: t he ' "? m>: a Court affirmed the Fedcral Power Cormiccion and finds that it cannot follo*1 the rederal Pouer Cec."incion b'.causa it er n ' t. b b O .I.' t 17 UEU;r tkle bupifCC,0 COL Jt 's dGCj 3 ong U .b ' Coll C D of lippa'.t.I C for thu Dj3trict O2 Colli.l>l: 6 Ch irac' Orir3 C.-i r:...: J 'j n ar clanding for the propoal ion that ann '.ci i ;.cl:, should riot ha l l i n tC TCOn'10 c tC d "C'1 l elTJJ FOro enarou3 th;11 thCCS ICON} ' rcd Of oth2r l l l l

                                           - 152 -                                                  l l

investor-owned utilities. " IgfayeEto, La. v. FFC, suprjl, 454 F.2d 941, 952 (D.C.Cir., 1971). This case was affirmed by the Supreme Court. in Gulf Staten, c'pra, which emphasized the importance of application of the antitrus t laus to the wholesale power indu: try. And, as har been discussed pre-viously, Otter Tail decided contemporanacusly with Gulf States, after citing the bottleneck cases, specifically refers to ". . . the difficulties and problems of thone

<\

\ - isolated electric power cystems," citing Gainesville. w- w Otter Tail Power Co. v. United States , ~10

                                                                    ;    U.S. 366, 378

( 19 '/ 3 ) . Mc::c. eer, what Gainenvillc; vas all abou t vai, the clairn by Plcrida Pcw~ Corporitiva that '.ha cocis of intt :- connected services cho';1f be cha..ed on th bssic of benefit u - rectived, an Consumers Pcwor Co."pany argues here, rather than upon " burdens" ( i,_ . e . , coatc) imposed. Gainesville_ (< Utilities Dont. and City of Gainaville, Florida v. Florida Powo; Cc:2., 40 FPC 1227, 1237 (196S), ce t. aside sub nom. Florida Power Corp. v. PPC, 425 P.2d ]l96 (5th Cir., 1970), reve med cub n m. Gni r e nvi] ] n U1" li!;ica. Dent. v. Pior.ida Pc..cr coro., "02 U.S.. 515 (19)1;. 1/ T. t o e S u;.. ea Co.r c 1/ The Federal Power Commission noted a' 40 FPC at l?'?, that c special charge based en Gair..:svillc 's la ry. r '- onit would reduce "che econrmic inccotiva for Galacsv2.lle to i v-stall larger and more e:-?icient acnoratinq unita," preciculy the antic' air.pcLitive ef f ne t t h r. t runulla f rc:n Con c er..O r s Power Co!ap?.cy 's va rious refur.'lu to doni on nondincriminatcry teimc and conditionc. l l l

                                              .ngs -                                           i

put it:

             "An airplano seat may bring more profit to a pas-songer flyi.ng to California to clone a millic.n-dollar business deal than one f3ying went for a va-cation; as a conccquence, Lhc former 1.;ay be willing to pay more for his ncat than the latter. But focus on the willingness or ability of the purchaecr to pay for a service is the concern of the iaonopolict, not of a governmental agency . . . 402 U.S. at 528.

In rejecting the value of service concept, whnt the FPC was stating and-what the Supremo Court confirmed is that economic transactior.s in poner pools should be baned ( upon cost and not upon the bcrgaining power of the dbninant utility. r l

                                                                                     )
                             - 154 -

i l C. The Mcfusal of the Tria] 1 card to Determine a Standard for Interchanges in an Abd.tcation of its Responsibilih The trial board concludes that the issue should be left to the Federal Power Cc> mission. This agency has a j.urisdictional. directive from Congress to correct through license conditioning anticompetitive situations that may be created or maintained in conjunction with activities under nuclear licenses. If it is agreed that refusals to coordinate result in such anticompetitive situa-tions, the trial board cannot ignore them; further, it cannot ignore the potential imposition of requirements of eptry l into interchange arrangements that result from a similar en-action of monopoly power. Indood, if the c:: tensive hearings below could have been jusLified at all, their only justifica-tion would have been the development of expertise in this agency to d'oeide icauce such cc the one pcudiny. Sco *

  " Motion to Liuit Discovery and IrJues and Isltornati',ely for Summary Finding Requiring Imposition of License Conditions",

i filed August 28, 1973. The- plain language of Section 205 of the Atomic Energy Act gives the Commission - responsibility to assure that the licensing of nuclear power facilits os doe not aid Consumers Power Company in creating or maintaining a situa-tion i nconsic tent with the an bitrust law.. Mercover Otter Tail confirras that the jurisdiction of the Federal Power Com-micsico la not c::clusive '. han it cc .ics to m;_; plication of com-petitive standards to the electric pcacer indu::try. Act:orq,

                            - 155 -

g .- .

    ' Cali fornia v. FPC, 369 U.S. 482 (1962). Indeed'. after otter Tail and Gulf States, which determine the need for strict ap-plication of the antitruat policios to i.hc electric power in-ductry, the trial board cannot be correct in arguing agai;,st applying such standards here on the basis that the Federal Power Comminnion may also have ;tuthority. 1,/ The basic dif-ficulty with i.he board'n decision ic that, cultong other titings ,

it fails to allow for the possibility of concurrent jurisdie-tions. Compare Gulf Statec Utilities Co. v. FPC, 411 P S. 747 (- (1973): United States v. Philad21phia National Dank, 374 U.S. 321, 350 (1963). See Colorado Antidiscrimination Cobaienion

v. Cy titinen tal Airlines Co._ , 372 U.S. 714 (1963).

Moreover, the trial board ignores that, while the Fedo ./.1 Power Corwin3 ion uay bc mcre. inti:ntoly invcived in day -to-day regulation of tern:; and c?ndi tioc'; of the sale of wholesale power than this Commission, the patterna estab-lished at the point of installation of major facilities likely

 ?

1 have far greater long-term consequances than the regulation of specific transactions. California v. FPC, supra ; Northern Natural Gas Co.,v. FPC, 399 F.2d 953 (D. C .Cir . , 1963). They establ:.sh low;. cana coct consequmcos , and often t - bacic fraceuork which agreements will rche. Thu:, the Jicencing i authority car nt be troarce as r n 4 u;illary pcs.'ar f c t.ha lj I'unic/Coopa i culd not object to a reopening of the liconse l conditions, should the rederal Poucr Co.suistica dater.:ine chat. l a stand.trd pro,iding for coc';dinaion on an eqccliwd recorvee banic is inconsistar.t with the Csar.ds of the Federal Power Act.

                                - 156 -

FPC' n juri sdict i.on. The crankin of a license to build fa-futurc course of regula-cilities such as. Midland commits tha 1,' ti.on and the conduct oc regaint.t d companies as W ll. It should be pointed out that there is no shcwing that the Federal Power Commission has greater expertise to And as establich antitrust standards th a has this Commission. a practical matter, in cornidering agency c = ertise, regulated entities generally come to administrative agencies with already formulated rate proposals or interchange transactions. At that time the industry structure, including the configuration of generation, is a given. Thus, uhen a particular FFC rate ( filing is made, or contract filed, generation and transmission will ucunally have already been built purce: nt tc pracxisting contractual arv..ncoments. Even in terms of ' 4 censing applicatic is or initial . interchange transactions, the fori.i of agracc.nts will usually' have been entered into prior to na applic:.t. ,. to ti'r Fcderal Power Commission. Proposals are thus initiated within a given ind".stry structu re and will generally be approved if not inccnsis-t GranPed there is oppor-tant v:ith p'iblic interes '- standards. If In any event, the spectre of coc.51ict 1.? ' roon the Nuclear Regui.> tory Comminsion anO thc Federal Pouer ~' annis s i on is largel", if not to tally , artificial Liho tl . 1:P.C , th F deral , Power Cornir. .icn is under a rnuitc to con' c antit.:u::t

                                                                                                  .11 U.a.         747              I p oli c a.e s . _G_'H _f s_t_a te s U t_i_.l._i tie s _C o_.v . _P.P_C .

1 is by the (1973). Revie, o f thc actions or noth agenc. same courts. There is no shouing . h e.t the : or im_ are likely to make different determinations and %tutable til co:W to escapo ict is a Leality reguleted e m janies uhould no'- , . . . . .

                                                                                                                          ,00-app,.lca..L.Icn oc n'1 ci trus t.,

pola.clon ;.7 C L alir , Jur1.%,1ction fore c ach ager " lia:, in the otb . Pn nli ' - ie E:ae tc . cn Pi;mli r, Co. v. Indiana Pohlic Ser" cc c . i :10.1, c U.S. W. (190). I Sec Vostern .". .c'a uoe t t: ML;etrie Un., n :' . c h c '- I ! o . F-87W r. r.,

                   ,71 . , " a rt Le r o pi orov i ng S e t tJ ew. . . t. ." (Oct. 2',            3975; approving set-l L 1.:Ir n t:. f ur- ' . cing coop" L ivi.            ..aa ! L . )

1 f- *1 _

tunity for intervention and h .u:ing. liowever , thia does not negate that proposals are industry initiated and that the prime focus of the Federal Power Commission is not upon antitruct matters. It is in light of considera:lons such as these that the law has long distinguisheri between Cor. mission established rates or terms or conditions of service and company-initiated Co., ones. Arizona Grocerv Co. v. Atchison Topeka (x Santa Fe R.R. 28' U.S. 370 (1932); poitec; Ga:' Pipe Line Co. v. I4cbile Gas ( Scr';tco Coi;o., 350 U.S. 332 P.9 5 6 ) ; EPC v . Sierra-Pacific Pc.er Co., 350 U.S. 348 (1956). Finally, it must be emphasized that failure to establish a reserves s tendard m<.o ns tim t constmers Power Ccap iny can negate any other rclief ordered by requiring exccmsive reserves. An e::cessive rescrves standard can prevent inter-venors from installing economic units and is inherently unfair. R. 5090:18-20 (Chavadhanagkur) See generally, R. 2538 (Mayben). f 1 Thoca is no br.ris for t.he presir'ption that this agency should not assure in conjunction with the licensing of mtjor nuc1 car facilities th2t 'till shape industry genarc. tion

_:n coordin _cn_ for y c cr., to oc th:' L '. m s ":- ' ._ O un:

which they will be owned and cparated are conc.inhcnt uith antitrust 17.; and polimf. D. The Alleqad Reaciremo;iu of fielf-Suf fi.cienc / rer coorfi.nnclon Is . roneous The 1. rial boarsi acceptn Connerc.m:c Powe r Compa ny ' ', argu-ments limiting coo rdin at ic.) t o self nuf Eicien t systecr. , 1 l

Application of this standard is ironic since recent ruports to the Securities Exchange Commission and neuspaper articles indicate that because of disabilities of its own generation, Consuners Power Company is purchasing appro::imately 300 of its total power needs from other systems. As witness Rogers testified (5523:4-5524:7):

                       "Q. In your opinion, if a utility chose

( to generate part of its requirements and purchase part of its requirements, would this preclude"coordi-nation or an entitlement to coordination on an equal-iced basis?

                       "A. Absolutely not.
                       "Q. Why not?
                       "A. Well, you can purchase power. You can purchace firn po. c:t . You can purcI me pcuer that         .

you intend to have for rcscrvos. For instance, in'1972 I believe Consumers Power Company c::perienced their peak on December 12th. At that tims I believe they did not have installed capa-bility equal to the load of Consumers Power Company if you take into account the fact that they could not run the Palisades Unit at nameplate. This did not stop them from participating, to their advantage and of cource to the advantage of Detroit Edisca, in a very , very o f f ective a nd L:e an-ingful p:ol. In the old days or a few yeal- age, it wasn't at c.ll unce: con for sys tere:- t.o plnn " -called staggered units; thc.P is to say in orw- to ta advantage of the economies of acn3c, tvo systers .c!jacent to each other would decide that mistc n A vour. .' inctall a large, efficient unit uith the thou@t in n 'J that pccer would bc Jold to the other ca:. aany v.,;ch uculd La 1 1 I l i j 1

                                  - 150 -                                      1

short of generation. And t' hen it comes time to add more lead, the other system, system B, would then in turn add a unit which would partially be sold to system A. So this does not preclude a person or a system from a pool; no, sir. ( A non-generating system or partially generatEng system must at once provida generating capacity sufficient to meet its total system need plus reservcs or it can get no coordina-tion at all. A systen with a 20 net lead, 11. 5 rcc- of gent- ntien - and a 15% recerves requirement would form the conceptual l analog of two separate systems each having a 10 mw lead, but ( one system having 11.5 mw of generation. The cystem uith 11.5 mw of generation would meet ti.a tests for coordination, having 15% reserves to cerve 10 mw of load. The second 10 mw system pould purchace 10 m'.7 of power frcu Concucara Pouer Compcny. (The price for purchaced peaer of course includec reserved capaciti.) l l l l

                                - 160 -

What the trial board assumes (without discussion) is that, although a cmaller system may have units in perfectly good working condition and although that system may agree to provide reserves either by purchasing them or by not operat-ing the units to serve load on its own system greator than the gaaeration capability of the units locs recorv g , the systcIn. cuning such units are entitled to absolutely no bach-, 1:,p and such units cannot be considered for coordination pur-poSOS. The argur. ant accepted-by the tric1 board consPitutas an argument for a classi.c barrier to entry. To go back to our earlier cr.ar::ple, the ccmbined cystems (i.e., a syctem bcVing a 20 mv lo d) chould be equally entitled to coordination fo-. the 1 _ 5 .e7 of generation. How-ever, because of a reserves requiremcnt, that 11.5 mw of genero-tion would be adequate to nerve only 10 mu of load. Thus, their total generation plus 10 mw of purchased power would ( total 21. 5 mw, providing 1. 5 mw of rccervc:- to backup their generation. Or stated differently, they would be paying demand - charges.to Consumers Power company for power, which when added

 - to thai e generat Lt. n , vot la r ecu. t to  1155 c? i:.' ir lcud . Thern in no rencon uhy there abould not be coordination for tha 10 rn.
                                -_161 -

Consumers Power Company argues that it would obtain no " benefits" in such cituation. Iloweve r , it ignores that it is selling not 8.5 n.w of wholesale power but 10 mw of wholesale power because of discounting the systems' 11.5 mw to provide for reserves. It also ignorec that it would then have the right to call upon this reserve ccpacity. 1/ Marnever, whi?.e reserves are stated as a percentage of peak load the reserves in actual operating practice would bo higher, because the peak ( is reached only for a very short period of the year. . Again, it should be recognized clearly that what the trial board'.s decision means is that the transfer of a generating unit to or frca Consumarc Pouer Company would result in that unit carrying different reservec. Thus, the econct.ic benefits to coordination wculd depend on who owned the unit rathnz than its capability. Not to be raisunderstood, Munic/ Coops support nondiscriminatory coordination standards and insict merely that artificial criteria not be used to discriminate against their entry into mar,:ets for interchange power. Assuming that a utility 's ' equipx.ent is in recsonable order, benefits result frori ocu tdinni. ion; the ability of a r.mnller cyctea to obtaii such benefits for units in good operating c:: der c::ould not br artilIcially lJmited.

 -1/    If the system were to utilize its in11 11.5 r.w of gonaration, It vould still bo purchaninq 10 rcw from Consumem Pot'e r Con pany ,

J eaving 1. 5 rx..* o f renerves .

                                       - 162 -

In our society,in buying and ac] ling transactions the normal mennu of providinq benefits is payment.' Thun, for transactions under coordinated arrangements--dr any other transactions proposed by Munis/ Coops--including plant parti-cipation and transmission, there should be payment for the scr-vices raccived. However, those benefits should not be denied, because of claimed inappropriateness of coordination under disguised criteria. If there were specific detriments to what Munis/ Coops proposed, by this time surely Consumers Power Company could have pointed them out and the board could have dealt with them aside from contrived hypotheticals.- Finally, Munis-Coopc vould point out that in all probability no abstract criteria that can be derived will reach perfection. Munic/ Coops would hope and expect that cnce the bacic structure of lbgal requirements vere established, agreement on the details et operations could ba v;orked out among the parties. However, given the history of this litigation and the difficulty interveners have had in obtaining equalized reserves coordination, they believe that an NRC licence con-dition is both necessary and reasonable to avoid future litiention. Indeed, in antitrust contexts, in order to afford effective reliet?, the courta havc- no heid, includi:" 0:ter Tri? Pcc m Co., supra, 410 U.S. at 381. Quoting the District Court and ihmif in r"!C v. Nati' nal Le - Co. 350 U.S. 419, 431 (1956) the Suprece Court recognized, "Thosa caught violat-j: ing the act must c;:pecL som fcnci ng in. "  !

                                                                             \

l

                               - 163 -

i

And in Uni ted St a ts .:, v. Grinnell Corp. , 304 U.S. 563 (1966), the Supreme Court stated:

              "No start from the premise that adequate relief in a monopo]ization case should put an end to the com-bination and deprive the defendants o f any of the be--

nefits of illegal conduct, and it breaks up or renders impotent the monopoly pouer found to be in violation of the Act. That is the teaching of our cases, no-tably Schine Theatres v. United States, 334 U.S. 110, 128-129, 92 L.Ed. 1245, 1258, 68 S.Ct. 947." 384 U.S. at 577. There is no doubt' that, as the trial board has done, ( one can conjure entrame hypotheticals as to uhy equali:*.ed reserves is an inappropriate standard. Munis/ Coops cmphasize that in requesting such standard, they intended to signify marely that nondiceriminatory reserves criteria should be c.stablished and they do not preclude a discounting of reserves due to units that are dencastrated unreliable; nor they do , suggest that engineering criteria for reserves cannot be es-tablished uhich recognize a losser degree of reliability for certain types of units. All they suggest is that reserves utandatUa should apply uniformly and equally and should not

   'Se se* to penalize the smaller systetas.-1/ Houover, if at               '

1/ Note that Cc:.:;ume:.1 Pcv.or compem and D..toit Edicon Company will de:uinate any Eichigan pool agrcoments. 'r h u s , if a raajor Consu zern Power Company unit or units are unreliable, the requi':cd resareas go up. Even though intar'renerr' systen= n't.y be cara retichle, they would be so craall in terms >.- theic impact on the peul reserven requirem2nts that they uould ha.'c to bear the higher reservcc responm bility required by the pool. A caalier cysten inevitably finds it.3clf in th:. posi-

 -tion that, if its ua!.t it claimed to en unrelu ble, it in re-auired     to pay a h_ichar share or to discount the valu. of its unit, but if the units of the major pool members are unreliable, its racerves go up.
                               - ALA -

4 least this much is not octabliched, Con:<umers Power Company can well provide excuses to prevent meaningful coordina tion. In the context of this proceeding, a discriminatory standard cannot be countenanced. IV. THE LAW REQUIRES TiiE GI' ANTING OI' 13RGAD RELIEF Ultin:tely, the thrust of the trial beard's decision is to narrow the intended jurisdiction of this Commission in a way that it vould creato in the major investor-owned utilities who are most in a position to directly invest in and i utilize nuclear power exclusive proprietary benefits! It would further allow already dominant utilities to enhance their positions. Munis/ Coops believe that they have prasorted fully in th,:.Te exceptions and the record bnloc rea. cons uhy this is inconsistent with the Atcmic Energy Act, with j udicir 1 decisione applicable to the electric power indu'stry, with the public interect and with cor=on sense. Mowever, in the context of the sweeping and generalizad deci: ion of the r (' trial board, ef fectively narrowing the cenpe of this agency's authority, and, as a matter of precaution, with minor modificchien for the convenience of this Coard, 71 anis / Coops repeat ns lipp;ndin D the lega] e.u Lhora.i..i cr, presented c.o the trial board demons trati ng that thu lau regaires ' 'w gran ti ng of 'e rcad relie f.

                                                      - 165 -

t___.__ - , . _ . ..

4 V. Tl!E TRIAL l'.OARD ERRED IN MOT DCTF.R'iIMING TIIAT APPLICANT Hiss THE ULTIMATE 13URDEli OF P1100F The terse discussion of burden of proof in the trial board's Decision (pp. 20-31; NRCI, p. 45) states:

           "7n litigation, the burden of prcof rests with the party accusing another of unlawful behavier.          In the present proceedings, Jus Lice, with the acquiescence of Staff and Interveners, proposes an order that the activities under the licenses sought by the Applicant would maintain a situation inconsistent with the Antitrust law. . .        ."

k "In this country persons or entitics accused of criminal or tortious conduct do not have the burden of proving a negative; i.e., that no such misconduct 7- s Rules of Practice, 1C CFR exists. The Commis5 ion 92.732 which follows S5 5G (d) of the Adminictrative Procedure Act, provide: 'Unless ctherwise crdered by the presiding officer, the Applicant or the pro-ponent of an orde> has the burden of proof.' . . . Therefore, in accordance with the tsuni principles of law and Con 21ssion's nules of Pract. ice, the bur-den of proof resto upon Justice, Staff and Inter-venors." The trial board's decision overlooks the simple fact that it is the applicant which here applied for the receipt of a license. Thus, the applicant is also in this instance the proponent of an order. Therefore, according , to the normal rules governing the burden of proof, it is the n;.,tlican t '.hich must runtain th t burd n. In the Ma tter of Consolidated Edicon Co. of Urw York, Inc. (Indian Poinb Statica. Unit. Mo. 2), P1. T-- 7 4 3 M (1974), this Lcard stated " the cen. rally applicable nrinciple. "

                                  .                                 It flatly conclufed, "Under the Commi. mien's Rules of Practice
                               - 366.-

(10 CFR 2.732), the applicant has the burden of proof. 142/" Footnote 142 states:

              "The ultimate burden of proof as to whether a license should be issued remains on an applicant.       But where, as here, . . . one of the other parties advances a contention, that party has the burden of going forward with evidence to buttress that contention. As a general proposition at least, once that party has pro:iuced suf-ficient evidence to establish a prima facie case, the
                                                    ~

burden then shifts to the applicant Uho, as part of his overall burden of proof, must provida a sufficient rebuttal to satisfy the presiding board that it should reject the contention advanced by the parti-cular party." I

 \                                                                        .

In the Matter of Consumers Power Co. (flidland Plant, Units 1 and 2), RAI-74-1 (1974), the Atomic Energy Cor;. mission itself Itcid that:

             " Established rules of burden of proof governing conven-tional civil litigations ate not necessarily completely dispositiva in agency licensing proceedings shore affir-mative public interest findings are requisite.        See, c.c., United Church of Christ v. FCC, 425 F.2d 543, 546-350 (1969).    . . .
             "The burden of proof on the ultimate question whether a license . . . should be issued is on the applicant."

(citatio;w omitted). In this prcceeding, an cffirmative public interest re-quirenent finding is clearly required. Section 105c (5) states ' that uhere the Attoraey General advises that there may be edverse m titrust ".pec ts nnd recon :. ends that there be a hearing "the Commissicn shal] give due consideration to the advica ' received frc:a the At ia::ney Cer.eral and to such evidence as may be provi6 :d during thu proceed! ng in connec _lon irt th ' RET -

such subject. n.atter, and chall make a finding as to whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws as specified in cubsection 105a." (emphnsis supplied) . Thua, under the governing statuto, once the Attorney General advises the Coramission tha't there may be adverse antitrust aspects, it is up to the Commission to make the public interest finuing as to whether activities under the license would create or maintain a situation inconsistent with the antitrust lawn. Und2r the authoritics cited above, the burden of proof in

                                  ~

cctablishing that the activities under the license woulci not create or naintain a situation inconsistent with the antitrust laws clearly rests on the applicant. While it may be that in some situations those opposing the granting.of an unrc-stricted license may have a burden of coming fontard with sufficient evidence to establish a prima facie case the letter of the Attorncy Cencral advising of adverse antitrust aspects would in itself he enough to shif t the burden of coming forward to the applicant. In any event, no fair reading of the record can deny tNit tPo Dc,.rt'.ent of Ju tice. the Star cr.d the i n t.c r u a.. . introducca t. ore than sufficient evidence to establish a pr.itna f a cit. eanc. In Office of Co munications of United Church of i

                              - 168 -

Chrint v. FCC, 425 P.2d 543 (D.C.Cir., 1969), cited in the Opinion of the Commission in Connumers Power Co., supra, the court of 7.ppeals reversed the rederal Commu:lications Commission for not placing the burden of proof on an appli-cant for a renewal of a television license. When that case was previously before the court, 359 P.2d 994, it stated, at p. 1007, "When past parformance is,in conflict with the public interest, a very heavy burden is on a renewal appli-l cant to show how a reneual can be reconciled with the public interest." Here, of course,, the Commission is dealing with an original application for a license and not with an appli-cation for renewal. Horever, past conduct must be looked at to see if the applicant has maintained a situation incan-siatent with the antitrust laws. Proof that the applicant's past performance is in conflict with the public interest as expressed in the antitrust laws is found, inter alia, in the finding by the Atomic Safety & Licensing Board that applicant had "the intent . . . to monopolize the retail and wholesale power markets by destroying competition fro,n a group of healthy, growing, effective and aggressive cc.v.patitors. W2 find as a fact that constitutos an anticompetitiva schem:." Decision, p. 15 5 ; NRCI ., pp. 102-10,*. Such past conduct and uuch more antivompetitive conduct is shrin in the 1ccord,. s including the tcxtimony of app'tican;'u chairman, quoted on i

                            .n   W

A page 76 of this brief. A very heavy burden must therefore rest on the applicant to show that a past conflict with the public interest can be reconciled with the public interest an eapressed in Section 105-of the Act. See also, Pacific PeNor & Light Co. v. FPC, 111 F.2d 1014 (9th Cir., 1940), which dealt with a provision of the Federal Power Act prohibiting a public utility from disposing of certain of its facilities withotit first obtaining approval from the '( Federal Power Commission. The statute provided that _"if the Comnission finds the proposed disposition, consolidation, acquisition or control will be consistent with the public interest it shall approva the sama." Id., at 1016. The Court st.ated, "The Comztission promptly required app'.icants

                                                           ~

to make full disc]ocure of all material facts. The burden is on them of showing affirmativolv that the acquisition or merger is consistent with the public interest." Id., at k 1017; emphasis supplied. The same burden is on the applicant here. The basis for the position t'aken in the trial board's Decision, that the burden of proof did not rest on the appli-cant, uas the baliel- that "in litigation, the burden c.' proof rests 'sith the party accusing another of unlawful behavior" (Decinion, p. 20; NRCI, p./3 _). Uhat the litonic Safety & Licencing naard called te recognize was that it uns dealing 12m_- 1

with an applicant who sought a benefit (an unrestricted license) from the governmant. The lau i.s well established, as stated e.g. in Ryan v. Flemmir:q, 187 P. Supp. 655 (D. Mon., 19G0) that, "The burden of proof rests upon one who files a claim with an adn.inistrative agency to establish that required conditions of eligibility have been me t" (cita-tions omitted). Id. at 656. This burnen of proof does not change if one of the conditions waich must be determined is ( whether the applicant has previously acted in a manner incon-sistent with the public interest. Thus, in Charles P. B. Pinson, Inc. v. FCC, 321 F.2d 372 (D.C.Cir., 1963), the appli-cant complained ' hat the Federal Cc:zmnicati ons "Comm i.s sion ~ improperly placca the burder of proof on him to sho.i that he was qualified to hold n (commen carrier radio station. - license]." Id. at 374. The court held that the stature placed the burden of introduction of evidence as well as the ( burden of proof on the applicant. More significantly, the court, with the citation of authoritative precedent, went on to show that the burden rests on the applicant even when the issue was his misconduct, criminul or otherwise. Thus, the court etai.ed, " E e ~o.t e the .tatute moda the ti. location of burden of proof definite, this Court had repeatedly held i. hat the appliennt for renoval had that burden even where the roascn ie': denial uas alleu9 G mincen/'uct of th- appli. cant.

                               - All -

Sce, e.g., Deebe v. Federal Radio Commission _

                                                               . . . 61 F.2d 914 (1932); Drahv v. redoral etdio Comraiscion                . . .       59 F.2d 879 (1932); niker v. Federal Radio Comminsion                 . . .

55 F.2d 535 (193]). (emphasic supolied) Id. at 375, n.8. Thus, the notion relied upon in the initial docacion that the burden of proof rests with the party raicing the issue of unlawful behavior is not applicable in a license proceed-ing to determine s;hether the grant of the license is in the ( public interest, as the Corninsion must find. Furthermore,

                                                                         ~

the scopo of this proceeding is'not defined by criminal antitruct

                                       ~

standards but rather by the broader public interest standard of whether there e::ists a reasonabic probability of an incon-sistency with the antitrust laws and underlying policies if an unconditioned license were to be granted the applicant who has 1 i chosen to sceh it. As we show elsewhere in this brief, it was its misapplication of the burden of proof which led the i

t board to reach the conclusion that no situation inconsistent with the antitrust lcw would be created or maintained by issuance of an unrestricted license. This is particularly ,

apparent in the over atringent requirements of nexus employed in the dr. cit. i.on. Sce Decisio::, pp. / 51 ; NRC1 up. 50-55. e

                                   - 172 -

J

VI. Til0 TRIAL DOARD CRRED IN NOT PERT.irTTING INQUIRIES INTO CONSUMERG POWER COMPANiS GAS AND POLITICAL OPERATIONS At the beginning of this pyoceeding, the Department of Justice, the NRC hegulatory Staff and Manis/ Coops attempted to obtain from Consumers Power Company discovery concerning that Company's uso of its gar monopoly to aid it in comt.e-tition for clectric customers and discovery concerning Con-sumors Power Company's attempts through political activitics to, among other things, restrict the opportunities of Munis/ Coops, including systch acquisitions and atte.:: pts to limit their self-generation. Consumers Power Company contested such discovery and it was denied by the Trial Board. On June 29, 1973, Utnis/Cocps f.iled a " Motion for Reconsideration of the Trial Board's UcVomber 28, 1972, Order [ denying such discovery] and Motion to Compel," in which they argued for recensideration of these issues. That notion was canicd. The Trial Board in its initial decision again con-firmd its prior rulings (Occisien, p.179; MX'T, p.113) , stching, ernr.g oSar things, that ' evidence oc to the gas busi ness and as to poli-tical activitieu would have been irrelevant and in'm.<terial to mattera in controversy . . ." -

                'liur is/Cocps respectfully incorporate. their June 20, 1973 motion by reference, which is attached hereto as Appendix D,
                                       - 173 -

On June 29, 1973, Intervenors filed a " Motion for Reconsideration of the Trial Board's Novembet: 28, 1972, Order and Motion to Compel" in which they again argued for considera-tion of Consumera Power Compar.y's use of its gas monopoly to aid it in competition for elcatric customers and for considera-tion of Consumers Power Company's political activitics. That motion was denied. Rather than re' argue the merits of our position, Intervencrc recpectfully incorporate that Motion by reference. Briefly, Intervonors' position ir, that any demonstration of use of Consumers Power Company's gas monopoly to aid it in clec-tric competition or vice-versa would aid Applicant competitively. As the Supra:re Court stated in Unit ed States v. Griffith, 334 U. S. 100, 108, "If monopoly power can be used to heget monopoly, the [Sherman] Act becoraes a feeble instrument indeed." Intervenor,' position is further that, while applicant may have the right to petition the state legislature or other governing - body, such activitics are not protected from cerutiny. What ap-plicant f ails to understand is that it has been granted certain monoroly or francht a righ tr:, including right:, of incorporation. 1

                             - 174 -

As a result, it taken on certain ebligations. Indeed, regulation could be totally inhibited, if applicant could hide behind claimed First Amendmcnt rights to refuse to. reveal its activities even to Governmental bodies. The question is not the right of communica-tion, but the claimed right of maintaining i;s activities secret. Intervenors' furthcr position in that, cven wherc Consumers Power Company's political activities may not be illegal per_ ne, such activities may violate independent laus. What the famed ( dictum about shouting fire in a crowded theatre was all about-is

                                                                 ~

l_/ that through speech one can commit independently illegal acts. Otheraise Consumers Powcr Company could have nn absolute de-fense that it s contracts could not be claiued to violate the antitrust laws since they are printed matter. Moreover, even fully protected speech may evidence a course of conduct giving color to other non-protected actions. NLRB v. Virginia Electric _ 2_/ Co., 314 U. S. 469 (1941).

                             ~

1./ "The most stringent protection of free spe'ech wculd not pro-tect a man in falsely shouting fire in a theatre, and causing a - panic. It does not even protect a man from an injunction against uttering words that may have all the effcet of forc.?." S ch e n c'-

v. Uaited Ren!es, 249 U. S. 47 (1919, Holnes, J.)

_.2/ It is no:crorthy that on rounnd the Distrie:_ C: art hcld against Otter Tail in its claimed I;carr-Pennincton defense to the i usa cf litigation to dolny and prevent the cztablisi.mnt of municipal electric syster.rs,. Eastcro Railrond Confernnco v. Noorr En'.or Freicht, Inz._, 365 U. S. 127 (1901); Unitrd Mine l l Worke r of Amhric, v. P,nnIncton, 3G1 U. S. 657 (1965), but &ue - California Motor Trannuort Cc. v. Tcuckinq Unlimited, 444 U. S. SGS (1972).

                                   - 175 -

Unless it is determined unavoidable, after almost three and half years of litigation, to secure rights that most large utilities have agreed to voluntarily, Munis/ Coops certainly have no desire to begin with discovery all over again. On the other hand, the refusal to have granted such discovery is plainly at odds with the Trial Board's decision that liccase conditioning is impermissible unless interveners can demonstrate a conte:nplated

    " misuse" of the license or other evidence of motivation to violate

( the antitrust laws. If a major portion of Consumers Poior Company's activities are immune from discovery, especially thoce activities involving political action whereby Consumarc Power Company n:ay have sought to influcnce governmental decision makers on city boarde or on state legis'lative levels, how is such evidence to be obtained? Evidence had been obtained that one of the chief assistants of the governor of Michigan had been retained by Consumers Power Company, Detroit Edison Company and the Michigan Bell Telephone Company "for a six month reccarch project," leading to the possi-bility that applicant'n political activitics were "a mere sham." See Eastern dilec,C P:.nr!'ents conference-. v. 1:carr ;intor Preicht, 305 U. S, 127 (1061). s 0

                                   - 176 -

Evidence was further obtained that Consumers Power Company supported legislation litniting the sales areas of municipally and cdoperatively owned utilitics. E 4hibit 1005. Evidence further shows that Constuners Power Company at least considered using gas sales as a device to limit electric sales of interveners and one report specifically shows that it con-sidered gas promotion a means of improving its competitive situation in electricity with the Bc.y City Light Dcpartment. Another document shows that Consumers Power Company attcupted to tie natural gas and electric service to Chippewa Hill School. Moreover, there is plain evidence that not only did Consur.-ers Power Ccmpany have a clear acquisition policy, Decision,

 .trg. 151-156; NFCI, pp.102-10',, but thtt it sp?cifically atterpted to influe ice governmental authoritics to prevent generation by Northern Michigan Rural Electric Cooperative and Wolverine Rural Electric Cooperative.

i s Dec i.m ion, pp. 153-154; NRCI, p. 103. It further attempted to forestall the building of new . generation faci'ities by other utility systems. Decision, pp. 152-15'; NRCI, pp. 103-104. 1/

                  ~

l_/ ~The ' board concludes that tM acquisition program of the applicant is not a " relevant matter in controversy" on the grounds that it is not related to ccordination. Tha argument - - is, of course, semantic. The best and must total way to eliminr.to a corapetitor is to acqui.:e it. And, of course, by withholding altcrnativco, including the coordination that can make the continued existence of a small electric distri.bution utility _cconomic, a major utility can make such acquisitions more econcuic.

                                  - 177 -

But again, Munis/ Coops ask the cuestion how the board c::'ected thdt they could possible have ret tin burdai of prcof inproperly required of them for licence conditioning, t. hen the rest serious anticompetitive actions of the company would have been demonstrated attempts to restrict competition at politi-cal levels,-and they were co be denied access to the documents. While Munis/ Coops respectfully submit that, if the legal standards of proof for condit!.oning held che trial board were to be confirmed by this board, then there would be no choice but to reopen the case for renewed discovery so t. hat they could Ircot such tests, Munis/ Coops believe that in the circumstances of this caso it would be inappropriate to force them tu bear the burden of additional evidentiary gathering, analysis and trial. The denial of discovery into Consumers Power Company's political activities and gas opera-tions were at the behest of that company. In this situation, the law is clear that reasonabic adverse inferences uust be drawn as to what such doc:uments would havc chown and thccc inferences must be that the discovery of such documents would - demons': rate that Consumars Power Con.pany had, indeed, entered inte a conepirc cf to pr am t ccty M* :lonc o: ' ' io , _:. c u .? c'. i e smaller Michigan entiti s. l l l l I 1 l

                            - 178 -

VII. MISCELLANEOUS EXCEPTIONS A. The Purchased Power Alternative As a final coup de crace, the trial board holds:

   "By exercising the option to buy wholesale power from appli-cant, [l/l the remaining smaller utilities could participate directly [in Consumers Po'..er Company's nuclear units]."       De-cision, p. 175; NRCI, p. 112         The fact that the trial board even refers to this alternative (deemed the appropriate means

( of participation in nuclear power by Consumers Power Company) illustrates its misunderstanding of the antitrust laws. The fact that intervencrs have the option of purchasing wholesale power (which includas power generated from the Midland units) does not vitiate their right to enter or remain in the powar suppl _y_ business. Indeed, the statemmit stands fo : the proposi-tion that Consumers Power Company can use its bottleneck con-trol to bar interveners from competing in wholesale markets or from obtaining individualized power transactions separately, bpcause they can buy from the Company. Munis/ Coops can hardly imagine a position more in- - consistent with the antitrust laws. This is the same argu-r.rnt meCc by Otter Tail Pc.s:_ Company 0 the Erprema Cen:. : 1/ HoOcVer, the tric.1 board does not impose a license condi-tion maintaining the availability _of this option. - 9

                               - 179 -

and rejected by it. l_/ Even i f the suggestion that interveners should pro-for to buy from consumers Power Company were-somehow legally and economically justifiable, a manager of a system should have the choice whether to be dependent upon a major supplier or to enter wholesale power markets directly. Certainly, the decision should not be lef t to Consumers Power Company. Given the uncertainties, changing decisions, and i delays of regulation, a utility manager can well determine to atten.pt to control his orn power supply cources. h/ B. "Ycu Never Ached For It" The trial board further accepts Consumers Power Company's argument that Munis/ Coops' requests for participation in IIidland 1/ Brief for Appellant, supra, pp. 24-25, 81-83. The promise of the argument is that interveners are and should be considered like re tail customers (i.e., that they should be disabled from competing in wholesale power markets). The complete g answer is that the antitrust laws give them the specific right to compete at wholesale on fair terms. 2/ We note that at the same time that Consumers Powcr Com-pany resists selling direct access to nuclear facilities and - specialized coordinated power services, but notes the al-ternative that the smaller utilities can purchase wholesale power from it, applicant alsa res.:.sts allowing a sale of trans-micsion cervices (encept pe:hapc ca its te r; . , -- i . e . , uncro it will not hurt Consu.ners Pow: r Company) . Thus, EcEsumers Power would also cut of f the avai3 ability of competitive alternatives of pur, chasing from other utilities ai- the sure time that it is incisting that a direct purcilase o/~iiholesale power -is an al-tornativa to obtaining direct accesc to Midland generation. E.[1., 6723:17-19, 25-26 (S telzar) . ~ 1GO -

are too late and should therefore be denied. Decision, p. 1'5; NDCI, p. 100 If this record makes anything clear, it is that interveners could have had no hope of an affiririative responso f ree Consurers Pouer Company to requests for partici-pation in Midland but through this proceeding. The trial board finds that Midland v.as p]anned and publicized in 1967. Decision, p. 145; NCCI, p. 100 . This was during a time peri-od when "onsun:ers Pcuer' Company was helpfully trying to acqcire every smaller system in sight and forestalling acquisition of new generation by the smaller systems wherever possible. De-cision, pp. 130-157; MRCI, pp. 102-105. If the trial board was to accept Consumers Po.ter Company's "laches" argument, ct least the Cwpany should have bcon under an oblic:aticn to givo come form of direct notice to intervoners'of its plans and of their opportunity to participate. Apart from rumor, there was no way interveners could have had knowledge of ap-plicant's plans before the plant was " sized."

 ,f C. The "Peb.1ic Interest" of Applicant's P.ctcil Car tcaero Sprinkled throughout the trial board's decision are             -

references to Consumern Power Company's obligations to its shtd % cide.c.;s r.nd custc?23rs ufth the im;j ?.cz. tion thrt ; ram.J n? relief here trould be advarse to their interes ts. Wi.t.hout re-oponding to all the references 9.ecifically, Munis/Co,ps are constrained t o aga.i n _ note the public in teres t in their appil.:n - tion.

                                 - 101 -

First, of couruc, Munic/Coopu propose to pay for their ownership chare of Midland and to pay nondiscrimi:.atory rates as established by contract or by the Federal Power Commlusion for all transmission er services pursuant to co-ordination agrcoments that' may be requried. Thus, the presumad I arm tu Consur.. orc Power Company' c shareholders or ratepayere is promised upon the legitimacy of the stntus quo. Of courso, if it presumed that Concumers Power Company is entitled to a 4 nuclcar monopoly or to advantage itself from colling firm wholesale power to a smaller system when its unit brieaks down rather than incremntal'ly coated emergency pouer that it would ce]1 to or purchace from one of itc coordinating partnern, then the aegument is correct. IIowever, M'. mis /Cocps cannut believe tha t a continuation of such discriminatory denial of accecs to the cmaller cystems can be justified. Moreover, the benefits from ordering the relief re-quested by intervenera are likely to reach beyond the borders (, of intervenerc' service arcas. 1_/ Studien have repectedly shown the validity of the " yardstick" concept. 2_/ Where . l_/ S'c the e::'.m.' tha t it it arg :.n: d t ha t the tjpe e? ic: . i.' c - criminatory acce?.: and ccordinatica cought by intervencrn will raise cc:_.tc to Consumers ?c.icr Conrany , this mnrely argues that the c::isc.ng cituhtien of inn veners is '.tca f olly dir :ri-- minatory. 2/ IIellman, Gowrnmant Cor unti tion in the ricctric Indum t: y (Praeger, 1973)~." ~~ ~

                                  - 182 -

k

conpatitive power sources exict, there are incentivec to ef-ficiency of all utilitics. Thus,'for examplc, one can draw concentric circles around major public power systeuc, such as T'/A , and demonstrate reduced power costs for pcwcr sold by all systems not explicable solely by reference to power

  . cavings that result from less expansive public po'.ler produc-tion costs due to government financing.            The importance of comparitive rates is demonstrated by the fact that Consumers Pc6?cr Company closeJy monitors intervenerc' .etail rates and maintains detailed rate comparisons.            Seu previous rdferences.

Indeed, given the limitation of regulatory agencies efficiently policing exces:.ive cost incurrences, com.ratition may be the only effectiva 'tay of ultim tely protecting the pnbli c against exceesive rates. Courts have commented on this phe-nomenon many times and for thi.s reason have admonished regu-latory agencies to provide for competition to the greatest ex-tent practicable, even within the conte::t of regulated on- \ tities. E.g., Northern tatural G.'s Co. v. FPC, 399 F.2d 953 (D.C.Cir., 1968); Municipal Electric Association of Mass. v. PPC, 414 F.2d 1206 (D.C.Cir., 1969). I.itmic <' Cec .s alac po i.r.t o - tha t iun aa sed c 0.-d' nc.t!. betucca Consemars Po'.;er Company and interveners abould provide bancfita in the ca::a way that any cocrdination does and for the sano reacons. Obviously, Cont.mors Posar Company nay face .

                                 --183 -

e a detriment to the extent that it must clininate unreaso:iable activitics as a result of greater ccmpetition. Howeve r , on a longcr range basis, municipal and cooperative systems do provide a potential source of capital for financing of new generation and transmission facilities, which can be coordi-ated to the benefit of all systems. 1/ In terms of the public, the benefits are not all mone-tary. The coordination ' rights requested world allow genera-tion from the most efficient units. Nuclear access would al-low interveners access to nuclear energy. Granting access to tran.sw.ssion cr. the pcrt of intervencrs can substitute for relinnees on duplf.cative or low voltage transmissicn lines. The resu?.t woul-1 tend to aid censo:vation and environ =cntal values. - 1/ The trial board assumos a static pie thcory that to the cxtent granting interveners any relief that they may seek reduces Consumers Power Company's costs, Consumers Power must increase its customers' costs. Apart fron the fnct that it depends upon the level and design of the regulated retail rate and upon demand and production cost curves, the argument - mixes the " wholesale" and " retail" power supply markets. In-terveners arc entitled to obtain low-cost wholesale pouer cup-ply regardless of whether this nids or limitt. Consumers Ecwer Comonny in comps tition for retail ces tenerc.. C.y., U ni te d States v. Aluminu? Co. of America, 140 r.2d 415~(2d Cir., 1945). Of coursc, to the extent c h r.t c there is actual competificn for cur. tome rs (anci the record shoves thai: there are creas of compe-tition), the opportunity for alternat.2 suppliers does exist and there is a direct beno"it to retail custo:ces. t

           .                - 104 -

Avoiding duplicative trannmistsion lincs has obviouc aesthetic and land preservation valucc. Encouraging officient generation also has land use gains. It aids goaln of fuel conservation and avoidance of unnecessary air pollution. To the extent nuclear power is balieved to have environmental valueu over fossil fuels, intarveners should not be deprived of such access. 5090:17-18, 26 (Chayavadhanangkur) . Moreover, Monis/Cocps do not believe it appropridte t. to ignore the benefits to them, their ratopayers and citizens from the opening of alternate sources and outlets for whole-sale power. Assuming ' chat this vere the or.ly impact of a Nuclear Regulatory Coraionion ordor, and accuraing further that such impact were detrimental ao Qancuraers Power Company or its ratepaiors, relics would still be justified end mandated because the retail custo:aers of interveners have the right to expect their supplier will be able to obtain the lowest t' l available povier supply--or at least not be restricted for anticompetitive reasons in attempting to do so. l

            ,Ileg,od Haiver D.
                  /ho trinl bo # . m trices the i ^ ne to u:.6 ' o   grari-of the license in qucction would "mnintain" a situation incon-sistoric with the anti.truct laws.       Dacision, p. 131; 1 MCI, p.

11.' .

        .      Intervonora, by letter of Ilarch 5, 1974, te former Chairman Garfin:;el      (a'             ;

c tached an Ig,>endix C) pointed out that e.

they had never intended to waive, nor had they waived, their right to argue that grant o.F the licence would " create" a situation inconcistent with the antitruct lawa. They noted that this position would not invo] .u "new, different factual considerationc as to affect trial." Finally, intervaners noted (citing canes) the overriding public interest require-ment that the board consider such matters which would make it imperative that the board consider such issues even if they ( had not been raiced by a party. Under these circunstances, the failure of the board to consider whether the granting of the license in questicn would " create" a situation inconsic tent with the antitrt: t lawc was clear error. COMCLUSION The trial board made its decision based upon the record below, as ic appropriate, and this appeal is based ( upon the facts contained in that record. Not to mirlead the Appeals Board, since the close - of the record belou, ther.. hcVe been negotiations between intervancre as 6 grc.mp and ce rtain intervene - ' n d i v i d u :. 1 : j , including sot.e changes in or ceditions to basic agreements. The f ot rernins, hcwever, that Munic/ Coops (and the Depart - raent of Jestice and the MRC Regulatory Staff) have not been ,. able to reach settlement of this case. While there may have _ __w

been minor changes in detail, Consumers Power Company adheres to its basic position that it has no legal obligation to offer participation in Midland, transmission rights or equalized recorves coordination except upon terms acceptable to itself, which Munic/ Coops believe contrary to the prin-ciples in the Atomic Energy Act and bacic antitruct standards. Regretfully therefore, they believe that a decision of this Appeals Doard on the merits is necessary. w Munis/ Coops had proposoi specific license conditions, ( which are attached hereto as ..gpendi:: A. Munic/ Coops frankly ~ recognize the normal disinc]ina-tion of a reviewing body, even within an adminictrative agency, to cdopt a specific cct of conditions. However, the practical situation in which they find thepselvas is that with minor excepticus after a long, extend >d trial and exten-sive briefing, the trial board has totally rejected their position and that of the Covernment. A remand to the same

 ~

trial board that hac clroady had an opportunity to pass upon these proponed conditions would very likely lead to further , extended proceedings and briefing and ultimately to renewed cppects.- rurther, given the c pie te rc jcetion of their pc ai-tion by the trial board, it is difficult to perceive the . benefits from a remand, especially to i; hat .ta new a Luo-taan board; al;ernatively, a rem nd to a reconsti utcd board

                               - 187 -

would be likely to result in further protracted proceedings. The partics belov had jointly moved to the trial board that that board should incue a decision, leaving t11ae for the parties to work out specific implementing provicions among thercc1ves in accordance with the framework established and subject to revieu of that board (assuming that conditioning were ruled appropriate). Ifoweve r , negotiations having been attempted and not successful, interveners are dubious of this ! suggestion at this time. Intervonors do believe that the NRC has a rehiponsi-bility to assure fair standards in conjunction with the is-suance of nucleer licences. An interveners, who munt bear the e2. pense of what has proved to be costly prcccedinga, they hope that roversal of th trial boards decision will result so as not to make the Atomic Encrgy Act a practical nullity and the hearings an e::orcise in futility. They believe it ( would be appropriate for this board to issue conditions in order to avcid further unduc delvf and prae!.ical lir.itation of rights which the agency has a statutory obligation to pro- - tect. Cf., Carolin1 Power & Licht Co. v. South Carolina Public Scrvit' A Chori!;, 23 F.Cupp. 05', U60-Gdl CC..;.S.C., :' 9 37 ) , aff'd 94 F.2d 520 (4th Cir., 1938), cert. denied, 304 U.S. 578.

 ". .  .' The trial took eight solid ucchs cad i t is cc: .non sence in such a long, e::.jen sivo , and extended trial every necessary
                            - 183 -

l

incue s'hould be rcised and diop.osed of." In this conto::t, it is not unusual that af ter long protracted hearings or where the public interest so requires that appellate courts will attempt to receive neccccary issues before them, even though a rcnand for further proceedings is an alternative. E.g., Pernien Dasin Arca Rate Cases, 390 U.S. 747 (1968). Here, however, the Board does not have to deal with the prob 1cm of the revic' wing authority of an appellate court. Section O(a) of the Administrative Procedures Act, 5 U.S.C S557 (b) , grants the agency "all the powers it would have in making the initial decision." In Morningside Penew. Coun., Inc. v. AEC, 482 F.2d 234 (D.C.Cir., 1973), the Court of Appeals approved the cchion of an AEC appaals board. The court stated:

            . . . As the Board said:
                   ' Holding of a proceeding of this type is clearly within the Appeal Board's jurisdic-(                   tion. The Administrative Procedure Act, which is specifically made applicable to proceedings of this type by Section 181 of the Atomic Energy Act of 1954, as amended, 42 U.S.C.

S2231, contemplates that when an initial - decision is subje.ct to review within an agency, the reviewing body may " restrict its decisions to questions of law, or to the queation of whether the findings are supported by substan-tial evidence or the weight of evidence . . . [orl it may Irahc enti rel.y new find

                                                         .y-__

i.ncrs cithe_r upon the record or up_on ne'.-r ev.tcence unten it takes._' . . . Tne auchocity vested in the Appeal Board includes the entire authority and reviou functions which would otherwise be ' i l i

          .                   - 189 -

c:ccrciced by the Commission in a given cace. It follows that the Appeal lioard has the Con-mission's authority, as conteraplated under the Administrative Procedure Act, to take evidenco incident to its appellate review.

                      . .  ." (Footnote omitted.)

482 F.2d at 239; emphasis supplied. Since the Appeala Board is acting under th, authority of the agency, it must assure that licensing conditioning is in accordance with law. ( For the reasonn stated herein and in their briefs to the trial board,14unis/Coopc urder this Board to 6dopt their proposed license conditions. I'ot only will their citi-zens and ratepayers benefit from such an order, but they know of no better aid to stimulating price raductions for all consuccrs, including customers of Consumern Power Company, than encouraging additional competition for wholocale power supply. While this case may have noe:ced overly complex, from { the beginning intervencro have been requesting an entitlement to participation in bulk power generation, to access to the , purchase of tranc:cission services and to coordination on an cquali :ed rece:. von br I.n. Thccc enncipts < carm in the utility inductry and are supported by lau. Unlecs there is to be continued, drawn out litigation, thu clear stenda:-dn established by the courts chould be reaf fir: red. Indeed, the r ~ i l reward for Consumars Power Company' c holding out should not 1 j

                               - ASD -

be licence conditions less onerous than otherc have agreed to voluntarily. R. 5515-5517. We must again note that ,Iy:j establishes that a neller of severable comnoditics with control over one element of the package (e.g. , here transmission) cannot " bundle" them together. Ottar Tail establishes the validity of the bottle-neck Ir.onopoly concepts as applied to the utility industry. And Golf States reaffirms the duty of. administrative agencies to apply the concepts of antitrust law to the wholesale i i power industry. There is little argued by Consumers, Power Company or found by the tria.1 board that was not argued by Otter ' Tail; nor is it reaconable to assume that the Court that decided otter Tail would dis tinguirh that situation here. , 11arrod relief *.111 not recolve the "aituation inconsistent. " Nor will it ser/G any public purpose. WIIEREFORE , for the foregoing reacons,Jtunis/ Coops request that their proposed license conditions be ordered. ( Respectfully submitted, m .;' . .. Y,p , . . ~/ w~ /

                                                   /

Rob,ert A. Jablon . -

~. .? f .C .. n_n

                            ,Q.. ,; < , *, e. ? w s    -

Daniel'I. Davidson Attorneys icr the Citie*: of CraldW.ter , !!allar.( Grund IIaven, T::averce City and Zealand, and the Michigan lianicipal Electric Association, Wolverine Elcctric Cooperative end I;orthern Michi gan Electric Coope.:ative 13th November 1975 Law Officca of: Spiegel & McDiarmid 2600 Virginia Avenue, M.W. Washington, D.C. 20037

                             - 191 -

UNITED' STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMI!!SION In the Matter of )

                                               )           Docket Nos. 50-329A Consumers Power Company               )                       50-330A Midland Plant (Units 1 and 2)         )

s t APPENDI.CES

                                                                                          ~

BRIEF ON EXCEPTIONS OF MICHIGAN CITIES AND COOPERATIVES , O9 e r . . Robert A. Jablon Daniel I. Davidson Attorneys for the Cities of Coldwater Grand Haven, Holland, Traverse City and Zeeland, the Northern Michigan Electric Cooperative, the Wolverine Electric Cooperative, and the Michigan Municipal Electric Association, Michigan 13th November 1975 - 0 Law offices of: - Spiegel & McDiarmid 2600 Virginia Avenue, N.W. Washington, D.C. 20037 i

a APPENDIX A Interveners' proposed license conditions, Midland Units 1 and 2 d b 9

s . INTNRVENORS' PROPOSED LICENSE COND$TIONS , MIDIAND UNI 2S 1 AND 2'

1. As used heroin;.[(a) " Appl'icant" means Consumers

• Powcr Company; (b) " utility" means a public utility undeaf ,

federal or Michigan law; an REA Cooperativo; a governme.ntal. ,

   .              .              (federal, state or municipal) unit or agency having an elec-           .                                                                                 i tric. generation or distribution system; .(c) "ontity" means-(~'
                          .      (1) a " utility"; or (2) any person or' organization which is
                            . legally authorized to represent one or morc utiliti,es.
                                   .                  2.   ' Consumers Power will interconnect with and co--

• Ordinate rauezves Ay .em n e a no g-A asa,n~ 4 ,. j- og emegency and maintenance' pow'or with n'ny entity or entities

                                 !n it=           service area ) engaging in or proposing to engage in electric bulk power supply on terms that will provide for f

Applicant's costs (including a reasonable return) in con-nection therewith and allow the othe'r participant (s) full acccas to the benefits of . reserve coordination and reserve sharing'. .

                                 */ Thc use of the term "scrvice aren" in no way indicates                                                                                                !

an assignacnt or allocation of wholesale market areau.  ! It is int.cnded only as a gonca:al indication of an arca, l

                                        ,within the State of Michigan whero Applicant provides r.ome clans of clectric service.                                                                  .

( . s L- ,.

j The participant (s). to the reservo sharing arrange-ment shall, jointly with Applicant, establish from timo to time the minimum reserves to bh installed and/or purchased , as necessary, to maintain adequato .rcliability of power supply - on the interconnected system of Applicant and participant (s) . .

                          -     The roscrve responsibiiity thus dUcrmineci sha'11 be calculated f.

as a percentage of peak loads and is not to be directly re- - lated ter the size of generating units. Under no circumstances

       \

will minimum spinning 'or operating rose ve requirements ex- . . cecatheinstalkedreservorequirement. . . a, . 7tt the regucat. of. a participant or the Applicant, soll and each shall, to the ' extent it has surplus available, furnish spinning and/or operating reserve services to the-other at terms which are compensatory, subject, however, that ' f.

• those terms be no higher than those charged to any other f

utility with which Applicant or th'c participant (s) is inter-

                                                                                                   ~                              -
         -                           connected.                                                                              ~

3. Interconnections wiki be made at the transmissien voltage requested by the entity if 'such voltage is availabic on Applicant's installed or planned facilities in the arca .

                                       ,-                                                                                                                   l s

where interconnection-is desired, if the costs to Applicant Where the entity payn ( will not execed ApplicanUs benefits. e i .

• 7 ,,

I ( the full costs of the interconnection,' the benefits to the ' Applicant will always he deemed to excccd the costs. ,

4. Mutual emergency and maintenance service provided

     .                              under such agreements will lie , furnished by each party to the other to the fullest extent available as desired where such' r                                  ' supply does not impair service to the supplier's customers.

- . \

Reimbursement for these services shal.1 be on a non-discrimi- ,

                                  'natory basis and rates shall be no higher than those estab-lished with any other utility with which the supplier is
             ,                       interconnectcf.                                                             .

The Applicant and cach participant shall provide - to the other emergency and mainteriance power if and when avail-

                .                    able from its own generation, or through its transtnission
                         .           from the ge'ncration of others to the extent it can do so without disrupting service to its own customers.

+

     .'                                             5.      Applicant will purchase from, or sell "btilk power" to any other entity or entities in the aforesaid area
     ~

engaging in, or proposing to engage in, the generation or -

                             .     ' ownership of clectric power in bulk, at its c:ost, including a reasonable return, when such transactions would serve to reduce the overall coct of new bulk power supply' for Appli cant or the other participant (s), to the transaction.                                     This
                                                                                  -   3-e                                        ,

o- , 4 . . . x

           ~

refor' spec'ifically to the opportunity to coordinato in the. . planning of new generation, transmission, and associat d facilitics, includ[ng the joint ownership..of new generation and transmission facilities or a portion of the capacity in , such facilities. , ..- . In c3.rcumstances where coordinated planning results , in any new generating unit (s) which Applicant owns, constrdets, G organizes, or is a joint participant witii others, Applicant will, upon timely rcquest, sell to any other entities who seek to participate in such planning, either an appropriate undivided intercat in the plant in -fee, or r yvillarr of- thc' plant capacity (i.e. , unit power) upon the basis of a rate that will recover to the Applicant the average fixed costs - (including a reasonable return) of the plant. In either y . .

     ..                cvent the utility receiving power will pay the associated energy and operating costs incurred for the power it receives, at rates and terms no greater than those charged to any other utility.to whom such power is sold.                           The above shall include a

the right to participate on an equitable basis in' the owner- _ ship of the Midland Units Nos. 1 and 2, or a portion of the" _ cap $ city and associated energy thereof. * ( .

          ~

6. Applicant will provide transmission service over its system between or alhong two or more entities with which' it is interconnected on the. samc terms as exist between Ap-

                                                                         ~

>

• _,~ .. ,

plicanh and any other utility with,which it is interconnected to the extent that subject arrangements reasonably can be ,ac-commodated from a functional and t6chnical stan~dpoint. This condition applies to entitics with which Applicant may be , ( interconnected in the future as well as those with whicit it is now interconnected. ,

               -                     Applicant is obligated under tilis conditio[1                  to trans-mit bulk power for other entities on the terms stated above,
                   '    and to include in its p'l'anning and construction programs suf-ficient transmission capacity as required therefor, provided
                                                                     ~

1

• that such other ent[ ties give Applicant sufficient advance

        .               notice as may be required to accommodate the . arrangement from a functional and technical standpoint and that the other enti-ties will be obligated to compensate applicant for the use of its system at rates and terms no higher than any other utility with which Applicant is interconn.ected.                           ,

7. Applicant will not directly or indirectly,, enter into, adhere to, continue, maintain, renew, ' enforce or claim any rights under any contract, agreement, understanding, joi146

{ pinn or joint. proJrnm wJ t.h antitics . to limit, allocate, rest.ric

                                                                                                     ~

r . divida or accign, or to" iinposo, or attempt to impose, any

limitations or restrictions respecting the markets or 'terri-

{ tories in which either the Applicant or any other entity . may hc rcafter sell or transmit _cicctric bulk power supply.

                                   . 8.       Upon request the hpplicant will sponsor the.

membership of any entity in its aforesaid arca and will-take all necessary and available steps to facilitate membersh3.p for said entity in utility planning organizations or power pools including the Michigan Power Pool and the Michigan

                                          -                                ~
     +

Illinois Indiana Ohio ("MIIO") group with which the Applicant is or may become affiliated. Membership 'shall be sponsored

                    ~

on the basis of terms and conditions established' herein.

9. To the extent that compliance with the foregoing

                  ,        conditions requires filings to be made                     under the provisions
                    ,. of the Federal Power. Act or by the statutes of the Sizte of Michigan or by any regulatory agency, the Company shall sub-                                     i mit all necessary filings to the Federal Power Commission or to the MPSC or any other approprinto regulatory agency in ac-cordance with the provisions of the respective laws, the regu-l ationr; thereunder, and the provisions set forth therein.                                    '
                                    -IO.. Unless otherwisc spccified, should a dispute arise -

between the Applicant and an entity over . obligations undcr 0

                                                            - 6 ,-   _                .

De e f _ . - '

s *

                                                                            -0                                        .

( those licenso conditions, this commission shall have' con- . tinuing jurisdiction to resolve such dispute. -

11. Should a dispute arise between the Applicant and an.ontity over the compensation to be roccived by the Appli-cant for services. it is obligated to provide horcunder, .the

              .                                                                                                            ~

Applicant will nonetholoss provide the serviccs and refund . to the entity, or receive from the entity such amounts rot-roactive'ly to the date of initiation 'of the service as de-terminecI by a final order of the Federal Power Commission to be either less then, or in excess of, a just and readonable

                         . rate.. therefor.                    _

g ge* ( q . e

                                                                                                           /

M

                                                                                                     ~

t { . .- - 8 . e

                        .                      APPENDIX B ~                 _

Section III, from " Reply Brief of Michigan Cities and Cooperatives," filed on November 25, 1974 in NRC Docket Nos.~50-329A and 50-330A s i 4 4 l i i . T' e , 4 4 0

                                     -p         r- ws                            --w.e .- , --wy.   ,--e-:,-w..

III. THE LAW REQUIRES THE GRANTING O.' BROAD RELIEF A. The Atomic Energy Act Gives the Atomic Energy

• Commission Broad Authority to Regulate all

{. - Operations Flowing from the Activitics of the Licensee that would Maintain or Create competitive Situation. - 126. At various times, consumers Power Company has argued that the Commissian 's authority under the Atomic Energy Act is ' to be read narrowly, if it is exists at all. Indeed, from reading the Company's past expressions on the mat,ter, one would get the

      ,-      impression that the purpose of the 1970 amendments was to' narrow t

the Commission's jurisdiction. The plain words of the s tatute give the Commission a jurisdiction over a " situation", clearly not a narrow expressica, " inconsistent" with the antitrust laws. We, notethat - the-st tute:'uses. the wos:cL "in=c4 = . tant" ~ a.ral. rh "in.

         ~ ~ violatidn o    'f". Upon that fundihg, ther.e .is no limita tion s.ta ted in-the Act on the conditioning power of the Commission.             Clearly, the         ,
   .        ~ jurisdiction is granted to resolve the problems created by Ehe
                                                .                                                   I situation.

127. Moreover, it must again be stressed that the 1970 amend- l l ments were a reaction to Statesville, in which Congress was con-corned that the commission was not paying sufficient heed to its function of antitrust review. Considering that the Company admits i that large scale nuclear plants will and must be electrically inte-4 l grated int.o its entire operation and that what i . involved is a ( l licensing of major facilities, which 'will inevitably shape the pro-duction of electric power, we do not see how the jurisdiction could

b3 rcrd narrowly, of E.g., pp. 35-36, supro. 128. There is no que.htion that Congress has intended that the Atomic Energy Commission '("AEC") be given broad authority in executing the Atomic Energy Act, to assurc that licensccc granted the benefit of billichs of dollars of public research and development do not utilize.. that grant in ways that arc iit

                       .vio'lati6n of the letter or spirit of the antitrust laws.                 Section          i 1(b), which states the Congressi.onal. declaration of policy in the Act, is notably expansive:                               -
                                                                                            ~      '
                                            "S1." Congressional declaration of policy.

l . Atomic energy is capable of application ' for peaceful as well as military purposes. It is therefore declared'to be the policy of the

• United States that ---

r . (b) the development, use, and control of atomic.

                                      '.. energy shaII he directed so as to promote world
                                      ' , peace, improve the general welfare, increase the                  ..

standard of living, and strengthen free comneti, . tion in private enterprise."' (cmphasis added) - 129. Although the commercial' deve opment of nuclear po'icr

           ,,          for the generation of electricity was still a conccpt to be developed in 1954, when tho' Atomic Energy Act.of 194G was revised, the 1954 Act mado clear that when commercial develop-                            -

mont arrivacU there would be ampic regulations governing its use

                        */    It is of note, that it is projected that within a lO-year period over half Consumers Power Company 's total generation will be from nuclear energy. Ex. 1001 M/ Sl of,,the Atomic Energy Act of 1954, 42 U.S.C. S2011.

                                                                                                '~'

• in cc'cardanc'c with the above-stated Congreccio6al policien. -

Thus, the 1954 Act specifically provided, among other matters,. (1) that any facilitics for the production and utilization of atc:nic

                                                               */

I. oncrgy would be subject to AEC licensing, (2) that licennes for co:mncreial developm6nt (i.e., found to be of practical value) would be " subject to such conditions as the Commission may by

                                            ~

rule or regulation cstablish to cffectuate the purposes and .

                                              **/

provisions of this. chapter"7 ' (3) that the licence would be subject to revocation or "such other action as it (i.e., the , AEC) may deem necessary"' if the licensco. violated any of the -

                                                                                     ***/

antitrust laws "in the conduct of the licensed activity," and (4) that prior to the issuance of any commercial license, the AEC should notify the Attorne.y General of the proposed licenso and the proposed terms and conditionc thercof for his advice on - whether the " proposed lic'ense would tend to create or maintain a situation inconsistent with the~ antitrtict laws, and.such

                                                                               ****/
-         advice shall be published in,the Federal Register."                          In"addi-tion, the Act provided for notice "to cuch regulatory agency as may havo jurisdiction over the rates and services of the proposed                           !

activity, to municipalitics, privato utilitics, public bodies, and, ,

                                 -                                        .                           l cooperatives within transmission distancc authorized to engago
                                                             *****/

in the 21istribution of clectric cncrgy" and preferred

           */   M., S101, 42 U'.S.C. S2131 (1954).
           **/   I_d., S103, 42 U.S.C. S2133 (a)      (.19 5 4) . _                            ,
           ***/   M. ,, '.S105 (a) , 42 U.S.C. S2135 (a)      (1954)..((~ ,
                                                                                      ./
            **h/ MI, S105(b), /.2 U.S.C. 52135(b)              (19 51.) .

.( ~

           *****/    M. , SIC 2 (c) , 4 2 U.S.C. 92232(c) '(19 54 ) .                               ,
                                          '                                                           i

(. . _. . consideration to applicants from " hight cost power areas" if there Woro conflicting applicatio.u .for a limited opportunity for commer-

                                                        */                                              -

cial power licenses.~ ( 130. In 1970, Congress amended the 1954 Atomic Energy Act to eliminate the requirement for a finding of practical value for nuclear power plants. During bhe course of amending the Act, it was evident that Congress was most concerned .about retaining the offectivencss of the antitrust provisions. Thus, the Report by the Joint Committee on Atom'ic Encrgy accompanying the 1970 Amendments (" Report") stated that "no sensible legislation to rc-

      ;         , move the roadblock to ' commercial' licensing .                                           . .      could fail to
          ~

clarify and revise the prcsont provisions of Subsection 105 (c) ,"

            ,                                                .**/

the antitrust provisions. Accordingly, Section 105 (c) was

                ' replaced by a detailed set of procedurcs that re-einphasized the necessity, for antitrust review and consideration that had been
                                                                                                                         ~
                .in the -Act -since its inception.                           In pertinent part, Soction 105 (c) statos:                           <                  -
                               ,,, " (1)           The Commission shall promptly transnit to the Attorney General a copy of any licensc application . . . and the Attorney. Concral shall, within a rousoncble time . . .                                ronder
    ~
                                               . such advico to the Commission as he actermines                                      .
                               .                   to be appropriato in regard to the finding to
                                      .            be made by the Commission pursuant to paragraph (5) of this subsection..
                                             .                                   e       c    c              ,
                                  .(ki)            Prouptly upon receipt of the Attorney General's
                           .                     ' advice, the Comrainsion shall publish . the advice .in the Federal Registcr.             Whcre the Attorncy General 182 .(d) , 42 U.S.C. d232 (d)' .
                  */ Id.,

j( **/ Report by the Joint Co::rsiy,tc;c ,o,n_ji opj,aj t ,linnyfiv_,,(to,jicimppan c

11. l? . 18679), 11 . R. l'ep t . 140. 91- J..". 7 0 , 91nt Cong., 2c! _ Deus. J. 3 T.Off0) , licreinaf ter cited as the Joint Co:caittee Itapo:.-t.

i m . -

 ---                             -        -                                                                     ~"

cavises that there may be 'adveruc ar titrunt .- aspects and reco:nmends that there be a hear-ing, the Attorney Cencral or 'his denignce mav participato as a party in the proceedings there-a'f tcr held by the Co;nmission on'such liccus i.ng matter in, conncction with the subject matter of his advice. The Cornission shall give duc ( - consideration to the advice roccived from the Attorney. General and to such cvidence as may be provided during the proceedings in connee-tion with such subject matter, and shall : ake a finding as to whethcc the activitics under

                                   .-                   the license would create or maintain a situation inconsistent with the antitrust laws as specified in subsection 105a.

(6) In the event'the Commission's finding under paragraph (5). is in the affirmative, the Com-mission shall also consider, in determining whether the license should be issued or con-

                                    .                   tinued, . .     . other factors . . . as the Com-(        - -
                             .                          mission.in its judgment decms necessary to protect public interest. On the basis of its findings, the Commission shall have the author-ity to issue or continue a license as applied for, to_ refuse to issue a license, to rescind a license, or amend it, and to issue a licenso with such conditions as it deems appropriate. "

(cmphasi;5 added) 13i. In its Report on the bill .to _ amend the 1954 Itct, the Joint Committee explained in great detail its philosophy in revising

            .           the antitrust provisions, as the following passAlge il'lustrates:

i "Of coursc, the committee is intensely aware thnt around the subject of prelicensing raview and the provisions of subsection 105c, hover opinions and emot, ions ranging from one extreme tar the other polo.

                                                                                                                   ~

At one extremity is the view that no pre).icensing antitrust review is either necessary or advisable and that the first two subsections of section 105 concerned with violation of the antitrust laws and the information which the Concaission is obliged to report to the Attorney General arc wholly adequate

                               .                to deal with antitrust considerations.. Additionally, there are tho::c who point out that it is unreason--

able and umiisc to inflict on the construction or

                                             . operation of nuc1 car powerplants and the AEC licon          .

sing process any antitrust review mechaninm that is f 'not required in connection w.i th 6ther types of genera-

• ting faci 3itics. At the oppani te polo in the viou l that the licensing process should be used not only L

I l l

                                                                                        ~

6 to nip in the bud any incipient c'ntitrust situation but also to further such competitive postures, o u t-- side of the a6. bit o'C the provisions and establinhed policies of the antitrust laws, as the ccnmiisni.on might consider beneficial .to the free enterprisc svntem. ( , The Joint Committee does not favor, and the bill does not satisfy, cither extrecc view. The Committcc is recommending the enactment of prelicensing review provisions which . . . do not stop at the p6 int of the Attorney General's advic'c, but go on to describe the ro]c of the Commission with respect to potential antitrust situations. (emphasis added) It is intended that the finding be based on reason-able probability of contravention of the antitrust ( ' laws or the policies clearly underlying these laws. It is intended that,'in effect, the Commission will conclude whether, in its judgment, it is reasonably probable that the activities under the license would, when the license is issued or thereafter, be incon-sistent with any or the antitrust laws or the policies clearly underlying these laws. (enpnasis added) . It is important to note- that the antitrust laws within the ambit .of subsection 105c of the. bill are all the laws specified in subscetion 105a. The ommittee is well aware of the phrases 'may be' ( .

                                         .and ' tend to' in the Clayton Act a:10 of the meaning they have been given by v'irtue of 'eccisions of the Supreme Court and the will of Congress--namely, reason-
             ,                             able probability. The committee has--very deliberately--
                                          'also chosen the touchstone of reasonable probability for the standard to be considered by the Commission under the revised subsection 105c of the bill."
                         .The above passage makes cicar what Congreca intended the ?.EC to do in conducting .its licensing procedurcs, namel'y, to conclude for itself whether the activitics under the license would, apply-ing all the antitrust laws and the policies they represent, bc inconsistent with such laws and policict. Morcover, the test

( n

I , in its dol'iberations was "the focus of reasonabl.c probability-- of Af ter such ' consideration, not certainty or possibili-ty." . and aided in its deliberation by not only the Attorncy Goncral ( but such intervenors and such oth.cr. regulatory agencies and per'- sonnel as may wish to or be requested to participate, the Com-mission may Tssue, deny, amend'or condition a license with'"such

                                                                                      **/
                                                                                     ~~

conditions as i.t deems appropriate."

                         '132.                  The same concern for maintaining competition expressed by the Joint Committee was repeated in .the floor discussions of the bill. For example, Senator Hart, Chairman of the Senate l

l

      \                                                                                                                                    !

Antitrust and Monopoly Subcommittec, stated'the purpose of'the

                       ~

1970 Amendment as follows;

                       -                         "It seems to*me that the clear intent of this language in subsection 105 (c) (G) is to enable                                     '

the Atomic En'ergy Commission to expedite the Iicensing of mrclearpower faM 1 M aG while.,at. the same time, taking those steps nccessary to

                                                ' cure adverse -antitrust findings under the pro -

visions of the act."* **/ 133. The legislative history is replete with the concerns - 1

                                              ~

( of Congrcr[s that the ptoposed bill be adequate to deal with anti-competitivo situations, and the remarNr cf Ecne. tor Aiken, b.: ranking member of the Joint Committee on Atomic Energy, on this issue are enlightening: - } Sen. Aiken. 'i . . . I was concerned that the language of the bill clearly would result in the application of the antitrust laws in this country to the producers of electrical energy _/ Id.,,at 31. ,. **/ S10N(c) (G) of the Atomic Energy Act of 1955, as amended, I 42 U.S.C. S2135 (1970). ,

                              ***/ 11G Cong. Rec., 39622 (1970).                           ,                                             ,
                                                                             - fitTL

from nuclear plar.ts. Therefore,): consulted with the Dcpartment of Justico quite freely and rcccived bill. . . " their assurance that this is a good

                                                              . If

( Sen. Aiken then inserted in th,e rccord a lettcr dated November 9, 1970 from Richard W. McLaren, Assistant Attorncy General, Anti-trust Division, to Son._ Aikon concerning the bill to amend the Act, the last tuo paragraphs of which read as follows: -

                                                   "The Committee's intent scens clear:                      .

if AEC finds that a situation ' inconsistent With the antitrust laws 'would result from activities under a license; it may either (1) deny the license or (2) condition grant . of the license on action by the applicant (s)

                '                            to climinate the inconsistency. . . .                     For

( - example, applicants for a license for a joint venture nuclear power plant could be granted a license by AEC to construct a vitr.11y needed facility; houever, grant of the license would be conditioned upon appli-cants' atfording access to lou cost power ~ trom tne" nuclear facility on reasonable ..

13. rnsjo a uti;11tv tneretofore excLucin.cl from;

                                          ,. par.ticip a n. ton ,

1r cxc.tus. ton or une . Lancer would sub]ect it to unreasonable competitive. disadvantage. (Emphasis ad.ded)

                                                  "On the basis of our understanding of the
                                        . . purpose and meaning of S.4141, as set forth i

F above, the Department of. Justice supports '

                                       ,. enactment of this legislation."

n "MR. AIKEN. Mr. President, with that assurance {

            ~                           . from the Department of Justice, and the coopera-                          '

l tion of the entire Joint Committee on Atomic 1 Energy, the bill was reported. unanimously, so that I feel we should enact this legislation._,_,/

                      ).34. n It is c rident that Congress felt the AEC's conditioning huthority was not only sufficient to cure any anticompc'titive offects in existence or flowing from the issuance of a license but alsd srcquired to deal adequately with situations in which e

(- . heals -- Conn. ncc. 39c2a (1970). -

                    **/     _Ibi.d...                                .

m . . -

anticoupatitive cond1tions were or likely Gio Yo presc nb Eliu c , ~ ~ ~ ~ 1 in discussing the bill, Congressman Italifield.of the Joint - c/

                                                                      ~

Committcc cxplained in the !!ousc: - ( "The Committec belicves that, execpt in an extraordinary situation, Commission imposed . conditions should be able to eliminate the concern's entailed in any affirmative finding under paragraph (5) while, at the same time,

       .                               accomodating the other public interest concerns found pursuant to paragraph (6)          . . . In
                  -                    connection with the range of Commission discrc-                     .

tion, the Committec notes that pursuant to sub-section 105a the Commission may also take such licensing action as it deems necce;ary in the event a licensee is found actually tg, violated any of the antitrust laws."--. pave

           * ' Furthermore, in floor debate in the Senate, Senator Hart.
                 ' of the Antitrust and Monopdly Subcommittee stated:
                                                "If an adverse antitrust finding is                -

made by the Commission, it may issue or

   .                                       continue a license when there is a 'need for power in an area,' but this issuance or
                                           .cnntinuence must be accomoanied by appro-
     .                                    priate conditicns- in the license terrich rcqaire
                                          'the applicant to cure the aaverse antitrust findings. If the applicant or holder of the                          .

license does not cure the antitruct findings,

                                   *,then the AEC may suspend or revoke the license regardless of the 'need for power in the affected area.'       (Emphasic added)                          .

c "Under no circumstances watdd the Com:Jo' ion be ' relieved of its responsibility to require , . applicants for licenses to conform to the antitrust provisions of.the act and the anti-

                                 .         trust laws generally." # i*/

1/ 116 ,Cong. Rec. 34312 '(1970).

              **/ To' same effect, see the following statomont by Congressman' Prico at 116 Cong. Rec. 34318 (1970):
                                   ,,'         The Committec .    .   . cxpects the Commission
                                    ;       normally to take care of both the need for energy as well as to remedy the situation uhcre there has been an affirmat_ive finding undcr paragraph

( (5) ." .

              ***/            116 Conn. Rec. 39622 (1970).
                                                                ~
                                                                      ~

Reinforcing the Congrbssional intent to' grant broad scope to the AEC's conditioning authority was the interpEctc. tion of the bill's antitrust provisions by the Justice Depart-ment's Antitrust Division. In a letter to Scnator Metcalf, in response to his inquiry about

• the bill's antitrust provisions,

                                    .          _/                                      -

the Antitrust D'ivision s.tated: .

                             "We would not think the AE,C could ' avoid the conditioning of licenses to cure adverse antitrust findings' simply upon a finding that there was a necd for power in the affected                           .

y area. Rather, we expect, and we believe that N . the Commission expects, that the Commission's conditioning authority could be used to cure competitive problems while allowing construc-

   ..                    tion and utilization of facilities."              ,
        . Stated simpli, the legislative history of the Act and the relevant provisions plainly indicate a comprehensive authority                 ,

granted by Congress 'to the AEC to license nuclear power plants, subject to denial or conditions curing or preventing

-         anticompetitive effects created or maintained by the issuance of

(- such liennso, ,, , 135. _ An we have noted, C ,ngress,' in' the pacsage of the 1 970 cr:ndments to the Atomic Energ.y Act, intended that this Commission have broad authority to insure that the nuclear plants to be li'cenred by the commission not be used in a manner which would create or maintain ,a situation inconsistent with the antitrust laws. In effect, this dologation of authority

             */   Letter of Acting Assistant Attorney Ccncral, Antitrust Division,

( 9alker B. Comogyu to Senator Lee McLealf, dated September 2, 1970, rc 3.4141 quoted with approval in 116 Cong. lu c. 39621 (1970).

                                                   - en -

( ,

to the Commission, as the Sup:: cmc Court stated in Gulf States Utilitics Co. v. FPC,_411 U.S. 747, 3,6 L.Ed. 2d 635, 644 (1973), in an analogous case, "scrves the important function of tstablishing ( , a first line of defense against those competitive practicos that might later be the subject of a.ntitrust proccedings." For this jurisdiction to be effectivo, however, it is necessary that this Commission enter its order in such a fashion as to ensure the parties.and itself that the conduct of the parties pursuant to that order will in fact be such as to climinate the anticompctitive situation found to exist under Section 105 of the Act. . ( 136 "'fhe Cor.'ssion's authority to set conditions to a

 -(

licenw. under Sociions :.0.3 End 3 05 d the in 1s PW M- -  %. e.g., United Gas Ik.provement Co.,v. Callory Propertien, 382 U.S. 223 (1965); FPC V, Sunrav DX Oil _C o. ,1,391 U.S 9 (19 6'8) ; Atlantic, t - Refining Co. v. PSC of,Neu York, 360 U.S. 370 (1959); Russell v. 1063 (1882) ; FPC_ v. Hunt, 376 Farlc_g, 15. Otto 433, 2G.L.Ed. 1060, U.S. 515 (1964); Texaco v. FPC, 290 F.2d 149 (CA 5,1961); Admiral-Merchants

• Motor Freicht v. United States, 321-. F. Supp. 353 (D. Colo.

1971), affirmed 40i U.S 802, rehearinn acnica 404 U.S. 987. ( - as . 4 e

                                 # e

• B. Antitru'st Law niid Administrative Law Refutes the Claims that the Atomic Energy Act mus t be Given a Narrow Reading.

137. As has been established previously, consune rs Power Com- , pany is operating an integrated system. pp. 18-37, suora. To the extent that a monopoly situation has been create d or maintained by such practices, the construction and operation of the Midland units, makes that situation more feasible. Thus, in determining the "no::us" that need be shown to grant relief, the jurisdictional reference must be the extent to which the construction and opera-tion of nuclear power plants have an impact on Consumers Power Com-pany's operations. Especially consider.i.ng the broad language of the Act enco.5. passing a situation" (from interveners

• standpoint a problem) inconsistent with the antitrust laws,not limiting itself to the operations of the plant, the relief granted must be consis-tcut with'i.aolution Ul! the "cituution inconsistent."

130, Marcover, 'since the statutory reference of the Atomic Energy Act is to the general antitrust laws, so must the scope of relief be reforclecd to those inws. Ec situation ir. this case 1 is that, ' contrary to agreements for settlement that have been reached I l 1

                  .                                                 .     .                           l t                           .

i

                                                                     .                               1 by numerous other major utilitics,. Consumers Power Company refuscs
           -to deal in major areas of Wholesale power transacti'ons with smaller

( utility systems within its area of , service or will do so only on discriminatory terms. Eo deal, barriers 139. In light of cases condemning refusals to entry, tie-in sales, exclusive dealing requirements, basing ,

                                                                                  'such as point pricing -- in short the attempt to monopolize --
   '        those being practiced by Consumers Power Company, the Trial Boa'rd has a mandato to take a broad view as to Ehe appropriate relief.

(~

           . There can be no public interest in narrowing the scope of relief.

As the D.C. Circuit stated in reference to the Federal Power Act, it is predincly in remedial situations that an administrative agency's power to grant relief is "t its broadest. .

                          Thc statutory authority to issue cortificates or peccits on conditions implies broad authority to take effective action to achieve regulation in th= public interest. We are mindful of the
                         ~ liberal ~inte.rpretation the Supreme Court has
                          <jivci. si eiln' p .uvinions in other statuts an
                         . reflecting broad authoxity, and in appropriate cases a correlative dut'y to effectuate the public interest . c            a I?inally, we observe that the breadth of agency discretion ist if anything, at denith. when the action relatos primarily not to the issue of
                          . ascertaining Whether conduct violates the statute, or regulations, but rather to the fashioning of policies, remedies, and sanctions, including
                         , enforcement of voluntary compliance programs in order to achieve maximum effectuation of Concressional jobiectives.            The source of discretion is available  . . .

Where the agency's order, though having aspects of determination of individual fault, is a denial to a wrong-door of participation in a U overnment program f- generally extended to businessmen, for the purpose of maintaining the fairness, equity, and efficiency nJSD ~

o. -

o . of the program. Here the case is stronger, for Petitioner seeks a license or orivilece. While " that license may not be unreasonably or unlawfully withheld, it certainly need not be extended to ' an applicant not ready to redress his default by

 -                           discharging the duty he should by rights have assumed without nudging". Niagara Mohawk Power Co. v. FPC 379 F. 2d 153, 158, 159 (CADC, 1967, emphasis stippiied)                    \

140. Nuclear po ter development was largely created through the aegis of Federal development and the fruits of that development are part of the"public domain". In this situation, the public in-terest obligations which result from the acceptance of a licence much be at their broadest. Compare PPC v. Idaho Power Co. , 344 U.S.17 (1952) . 141 In determining the extent of its power, the Board should consider -that -th. re is no public purpose in permitting a continua-tion of Consumers power company's refusals to deal and to coordinate on an equalized basis. Compare colorado Antidiscrimina tion com--

           .m...icr. j on v. Pontinmu nl. Airli. w.c ro . '372 U.S. 714 (196 3 ) r .S.-ou. t.h.er. n..

S teamshio Co. v. NLRn , 316 U.S . 31, 46-49 (1942). Expecially re-levant are antitruct cases holding that in the case of violations, courts or agencies should loot; to the transactions and violations as a whole and not limit themselves to the isolated acts irmnediately complained of. E.g., Swif t & Co. v. United S ta tes , 196 U.S. 375

            .(1905); Contilental Oil Co. v. Union Carbide Corp., 370 U.S. 6 90,6 98 -E (1962).         Sc,e United States v. Mason _ite Corp. , 316 U.S . 265, 2 74-276 (1942)
                                                   - as -

142. Moreover, in determining the extent of .its authority, ( ' the Board should also look to cases interpreting the general obliga-tion of regulatory agencies in considering antitrust matters and cases establishing the scope of the conditioning authority which attaches to' licensing and certificating authority. In licensing and certification, the scope of conditioning power to protect the public interest has been held to be very broad. Indeed, even where a Commission cannot command the alternative or where it may have

       ~

no direct -- or limited -- regulatory authority over a subject { matter, it has been held that consideration must be given to nationa.1.. policies beyond the immediate statu-tory jurisdiction. E.g., FPC v. Transcontinental Gas Piceline Coro, ,

         "365~U.S. 1 (1961) ; Denver and Rio Grande Wes tern Railroad Co. v.

United Sta tes, 387 U.S. 485 (1967); FMC v. Svenska Amerika T,inien, 390 U.S. 283 (1968) ; City of Pit Esburch v. FPC, 237 F. 2d 741 (CAD:3 1.956); Norttern Natural Gor Co. v. "Pq, 399 F 2d 953 (CADC , 1968). See Udall v. PPC, 387 U.S. 428- (1967) ; Scenie Hudson Pre-servation Conference v. FPC, 354 F. 2d 608 (CA 2, 1965), cert. denied sub. nom. Consolidated Edison Co. of New York v. Scenic Hudron Pre-servation Conference, 384 U S. 941 (1966); United Church of Christ v. FCC, 359'F. 2d 994, 425 F. 2d 543 (CADO, 1966, 1969). Especially, considering the strong national policy underlining the antitrust t

                                           ;(                                                    .

O

                                                   ~.

I 12ws ,Y and the explicit antitrust authority granted this agency,"'/ this Board can do no loss. . (143 ~ Finally, ,we call to the Board 's a ttention that the Supreme Court sp"ecifically considered and rejected in Otter Tail claims that

   'the scope of relief should be limited, noting that a company in Otter Tail's situation could expect to be somewhat " hemmed in ". 410 U.S . q t p. 381 144                  If one is caught s tealing a RCA television set, an in-
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junction or consent decree need not limit itself to say that one may no longer steal ~RCA television sets. Relief, as the word implies,

   ,r' ould provide a remedy to the basic problem.                      Mr. Justice Jack-son st::ted in International Sal t Co. v. United S ta ten, 332                      U.S. 392,,

400 (1947):

                         "The District Court is not obliged to asstrr.e, contrery to cc:rmon experience,, t:he.t a violator
          ~
                     ' of the antitruct laws wil1l relinquish the fruits of his violation more completely t'h an the Court requires him to do so. And advantages already in hand may be held by methods more subtle and informed, and more difficult to prove than those which, in                               ,

the first place, win a market. On the purpose of p restrcin trede appears from a* clear violation-of - [ Ime, - :- .in nct n cost.- y tt.9 r u of the ; : avc 7- j

                        .coads to that end be icf t open and that oldy the l

warn one be closed. The usual ways to the prohibited ,' goal may be blocked against the proven transgressor and the burden put upon him to bring any proper claims for relief to the Court 's attention. " j E.g. , Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973). H/ In view of the breadth of the conditioning poaer granted admin-istrative agencies, it is difficult to preceive that in the situ-ation herb presented, action of the Atomic Energy Commission to limit the scope of its jurisdiction would he coacidered lawful, especially here where there has been given direct statutory ( authority to apply antitrust law. This is especially true since the Act does not limit itself to violations of the Antittunt laws, but - ra ther to "situa tions inconsis tant". And, as was further stated, id. at 401: ( "

                                                   ~"~~

the end to be served is not punishment of past transgression, nor is it merely to end specific illegal practices. ;A public interes t served by such civil suits is that they effectivly pry open to competition a market that' has been closed by defendants ' illegal restraints. If - this decree accomplishes less than .that, the govern'mont has won a law suit and lost a cause. " In short, the Commission's jurisdiction is not to be part of a legal game whereby 'if Consumers Power Company can find the pre- ., t , cice iritellectualized argument to narrou relief, interveners here should be forced to go elsewhere, continually searching for the right formula to find the c>:act number of proceedings, and forums which have the precise jurisd'icticn to give relief. If cnything-in clear from the legislative history of the 1970 Amendments, it is that Congress did not intend the AEC to do a half-way job, result-( ing in int c xvaners going from acicncy to agarcy for passible years oL he.ria.;a at u..uGL u , :m a i.a Lo; , . ub tr.J.nl _u ' :i at .x

                                                                           .               1.u.. .   ..
                                                                                                        ';u do not Felieve that Congress intended administrative agencies to become the tools whereby intervencrs are submitted to a "shell
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gr. .c" to find where they can get poscible agency or judicial correction. Compare Gulf States Utilities v. FPC, 411 U.S. 747 (1973).-

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                                                                                                                                                                                      -        - i APPENDIX C 1

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                - Letter from Robert A.'Jablon, Esquire, to-Hon. Jerome
                     -Garfinkel,-Chairman, Midland Units Trial Board, dated
 ;                    5 March-1974-4 4

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