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Reply Brief Re Intervenors' Initial Brief Requesting Items of Relief Concerning Access to Midland,Transmission Svcs & Coordination.Certificate of Svc Encl
	ML19329F228
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Site:	Midland
Issue date:	11/25/1974
From:	Jablon R; MICHIGAN MUNICIPAL COOPERATIVE POWER POOL, SPIEGEL & MCDIARMID
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{{#Wiki_filter:- O. UNITED STATES OF AMERIO BEFORE THE ATOMIC ENERGY COMMISSION ~ ' ' In the Matter of )

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Docket Nos. 50-329A Consumers Power company ) 50-330A Midland Plant (Units 1 and 2) ) REPLY BRIEF OF MICHIGAN CITIES AND COOPERATIVES November 25, 1974 , Robert A. Jablon Spiegel & McDiarmid 2600 Virginia Avenue, N.W. Washington, D.C. 20037

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  ,                                 TABLE T CONTENTS Page INTRODUCTION AND St%v.ARY OF ARGUMENT        ....................       1 I. RELIEF SHOULD NOT BE DENIED MERELY BECAUSE SOME OTHER AGENCY COULD CONCEIVABLY GRANT SIMILAR RELIEF. .              O A. The Plain Language of Section 205 of the Atomic Energy Act Gives the Commission a Responsibility to Assure that the Licensing of Nuclear Power Facilities Does Not Aid Consumer Power Company in Creating or Maintaining a Situation In-consistent with the' Antitrust Laws ..............            9 B. There is No Showing that the Federal Power Commission Has Greater Expertise to Establish Antitrust Standards than the Atomic Energy Commission ......................................              18 C. The Public Interest Supports the Relief Being Sought by Interveners .'....................             25 D. Consumers Power C ompany's Miscellaneous Limiting Arguments Against the Exercise of the AEC's Jurisdiction Provide No Reason for Failure to Condition the License ...........................              33

1. The approved or natural monopoly argument.... 33 2, The tax and financing benefits .............. 37

3. The Federal Trade Commission Act ............

42

4. 'The " actual violation" argument ............. 46

5. The " burden of proof"' argument............... 47

6. Parker v. Brown, 317 U.S. 341 (1943) argument .................................... 47 II. THE FACT TIL\T CONSUMERS POWER COMPANY MIGHT VIOIATE THE LAW INDEPENDENTLY OF THE CONSTRUCTION AND l OPERATION OF MIDLAND DOES NOT ELIMINATE THE l AUTHORITY OF THE COMMISSION TO ORDER CORRECTIVE l LICENSE CONDITIONS ............. ................... 55

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Page III. THE APPLICANT MAINTAINS A SITUATION INCONSISTENT WITH THE ANTITRUST LANS ........................... 61 A. Applicant Misconstrues the Legal Standards which Are Useful in Determining the Relevant Markets and Sub-Markets ....................... 64 B. Appiicant Maintains Monopoly Power over the Services to which Interveners Seek Access ..... 73

1. Bulk Power Generation ..................... 77

2. Transmission .............................. 83

3. Coordination .............................. 86 i

C. Contrary to Its Claims Applicant has Violated the Antitrust Laws by Using Monopoly Power for competitive Advantage in Other Markets . . . . . . . . 89 IV. LICENSE CONDITIONS SHOULD NOT BE READ NARROWLY AS IS SUGGESTED BY CONSUMERS POWER 00MPANY . . . . . . . . . . . . . . 94 A. Interveners are Entitled to Direct Ownership of the Midland Facilities on an Ownership ; and Unit Power Purchase Basis ................. 95 B. Consumers Power Company Proposed Limitations , on Selling Transmission Services are j

             ' Inapp ropr ia te . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98    l l

C. Consumers Power Company's Arguments Against l Coordination,on an Nondiscriminatory Basis ' Are Insubstantial ............................. 103 4 CONCLUSION ....'...............................'......... 111 l 1 l

m TABLE OF. CITATIONS CASES: _Page Arizona Grocery Co. v. Atchison Topeka & Sante Fe R. Co., 284 U.S. 370 (1932) .......................... 20 Associated Industries v. Ickes, 134 F.2d 694 (CA 2, 1943) ......................................... 32 Associated Press v. U.S., 326 U.S. 1 (1945) ............ 75 Banana Distributors v. United Fruit Co. , 162 F. Supp.

32 (S.D.N.Y. 1958) reversed cn1 other arounds and remanded, 269 F.2d 790 (CA 2, 1959) .................. 92 Brulotte v. Thys Co., 379 U.S. 29 (1964) ............. 90 Business Aides, Inc, v. Chesapeake & Potomac Co. of Virginia, 400 F.2d 754 (CA 4, 1973) .................. 48 California v. FPC, 369 U.S. 482 (1962) .._............. 9, 18, 33 California v. LaVaca Pioeline Co., 379 U.S. 365

            , (1965)   ...............................................                                          56 Calvert Cliffs' Coordinating Committee v. AEC, 449 F.2d 1109 (CADC 1971)                  ................................                           7, 44 Carolina Power & Light Co. v. South Carolina Public Service Authority, 20 F. Supp. 854 (E.D.S.C. 1937),

affirmed, 94 F.2d 520 (CA 4 1938), cert. denied 304 U.S. 578 ............................................. 8, 40 Colorado Antidiscrimination Commission v. Continental Airlines Co., 372 U.S. 714 (1963) .................... 6 Consumers Power Co., FPC Docket No. E-7803 ........... 21 Continental Ore Co. v. Union Carbide a pa, 370 U.S. 690 (1962) ...................... 6: .. .. ............ 102 Detroit Edison Co., Consumers Epwer j, et al., FPC Docket No. E-7206 .................................... 23 9 FPC v. Idaho Power Co., 344 U.S. 17 (1952) ........... 99 1

FPC v. Louisiana Power & Light Cn , 406 U.S. 621 l 1 (1972) ...... ......................................... 56 l

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O Page FPC v. Sierra pacific Power Co., 350 U.S. 348 (1956) ............................................... 10, 20 FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972) .. 46 Fortner Enterprises v. United States Steel Coro., 394 U.S. 495 (1969) .................................. 66, 90 ' Gainesville Utilities Deot. v. Florida Power Corp., 402 U.S. 515 (1971)............................ 102, 106 ! j C Gas Light Co. of Columbus v. Georgia Power o., 440 F.2d 1135 (CA 5 1971) ........................... 48 l George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25 (CA 1 1970) .............. 54 Greene County Plannina Board v. FPC,,458 F.2d I . 412 (CA 2 1972) cert. denied 409 U.S. 849 ............ 44 Griffith v. United States, 334 U.S. 100 (1948) ....... 90, 91 1 Gulf States Utilities Co. v. FPC, 411 U.S. 747 I (1973) ............................................... 16, 18, 25, 74 Hardin v. Kentucky Utility Comoany, 390 U.S. 1 (1938).. 26 Holloway v. Bristol-Myers Coro., 485 F.2d 986 (CADC 1973) ............................,..................... 44 Houston E. & W. Texas Ry. v. United States, 2'34 U.S. 342 (1914)' ............................................ 56 Huron Portland Cement Co. v. Michican Public Service Commission, 351 Mich. 255, 88 N.W.2d 492 (1958) ....... 50 l Idaho Power Co. v. FPC, 346 F.2d.956 (CA 9 1965) cert, denied, 382 U.S. 957 ............................ 99 International Boxing Club of N. Y. v. United States, 358 U.S. 242 (1959) ................................... 73

                                                -iv-

Page International Tel. & Tel. Coro. v. General Tel. & Electronics Corp. , 351 F. Supp.-ll53 (D. Haw. 1972) appeal docketed CA 9, 73-1513 ........................ passim Lafayette L.A. v. AEC, 454 F.2d 941 (CADC 1971), affirmed sub nom. Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973) ............................. 2 LaPeyre v. FTC, 366 F.2d 117 (CA 5 1966) ............. 90 Lamb Enterorises, Inc.,v. Toledo Blade Co., 461 F.2d 506 (CA 6 1972) cert, denie'd 409 U.S. 1001 ........... 36

Louisiana Power & Licht Co. (Waterford Steam Electric Generating Station, Unit 3), AEC Docket No. 50-382A... passim Marnell v. United Parcel Service of America, 1971 CH Trade Cases 173,761 (D.C. Cal. 1971) ............. 73 Missouri Portland Cement v. Cargill,'Inc., 498 F.2d 851 (CA 2.1974) ................... ............. 34 Municipal Electric Association of Massachusetts v.

SEC, 413 F.2d 1082 (CADC 1968) ....................... 25 l Municipal Light- Boards v. Boston Edison Co. , FPC Docket No. E-7400 (July 19, 1973) Slip. Op. at 183 (Edelstein, A.L.J.) .................................. 72 National Aviation Trade Association v. CAB, 420 F.2d 209 (CADC 1969) ................................. 69 New England Power Co. v. FPC, ~349 F.2d 258 (CA 1 1965). 107 Northern Natural Gas Co. v. FPC, '399 F.2d 953 (CADC 1968) ................................................. 18, 30, 75 Otter Tail Power C o. v. United States, 410 U.S. 366 (1973) ................................................ passim Panhandle' Eastern Pipeline v. Indiana Public Service Commission, 332 U.S. 507 (1947) ....................... 6 Par'ker v. Brown, 317 U.S. 341 (1943) .................. 41, 47

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S Page Richmond Power & Licht v. FPC, 481 F.2d 490 (CADC 1973), cert. denied sub nom. Indiana & Michican Electric Co. v. Anderson Power & Licht, 414 U.S. 1068 (1974) ............................................. 25 Souther Steamship Co. v. NLRB, 316 U.S. 31 (1942) ....... 5 Tennessee [lectric Power Co. v. TVA, 306 U.S. 118 (1939)................................................... 40 Union Carbide and Carbon Coro. v. Nisley, 300 F.2d S61 (CA 10 1962) anoeal dismissed 371 U.S. 801 ..... 70 nion Leader Corp. v. Newscaners of New England, Inc., 284 F.2d 582 (CA 1 1960) cert. denied, 365 U.S. 833 (1961) ............................................... 36 United Gas Improvement Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) ............................... 10, 20 United States v. Aluminum Co. of America, 148 F.2d . 416 (CA 2 1945) .......................................... 31, 90 United States v. Charles Pfizer and C o., 246 F. Supp. 464 (E.D.N.Y. 1965) ...................................... 68 ' United States v. Columbia Steel Co., 334 U.S. 495 (1948).. 37 i United States v. E. I. DuPont-Nemours and Co., 351 U.S. 377 (1956) .......................................... 66 United States v. El Paso Natural Gas Co., 376 ) U.S. 651 (1964) .......................................... 76 United States v. General Dynamics Coro., 415 U.S. 486 - (1974) .................................................. 37, 38 United States v. Grinell Corp. , 384 U.S. 563 (1966) ...... 35, 69 United States v. Loew, Inc., 371 U.S. 38 (1962) .......... 76 United States v. Marinebank Coro., 94 S. Ct. 2856 (1974).. 34 United States v. Philadelphia National Bank, 374 U.S. 321 (1963) ................................................... 16

                                                     -vi-1

Page United States v. Socony-Vacuum Oil Co., Inc., 310 U.S. 15 (1940)-.......................................... 75 United States v. St. Regis Paner Co., 355 F.2d 688 : (CA 2 1966) .............................................. 45 United States v. Tocco Associates, 405 U.S. 596 (1972)... 39, 75 United States v. United Shoe Machinery Coro., 110 F. Supp. 295 (D. Mass., 1953) affirmed oer curiam 347 U.S. 521 ... 93 Utah Gas Pineline Coro. v. El Paso Natural Gas Co. , 233 F. Supp. 955 (Utah 1964) ................................ 54 Washin cto:1 Gas Light o. v. Virainia Electric & Power Co., 438 F.2d 248 (CA 4 1971) ........................... 48, 49, 50 STATUTES: Atomic Energy Act, 5105(c), 42 U.S.C. S2135(a)........... 42 Bank Merger Act, 12 U.S.C. 91828 ........................ 46 Federal Aviation Act, 49 U.S.C. 51378 ................... 46 Federal Trade Commission Act, S5, 15 U.S.C. 545 ......... 42, 63 Federal Power Act, S205, 16 U.S.C. 824(d) ............... 21 Interstate Commerce Act, 49 U.S.C. 55 ................... 46 Michigan Compiled Laws Annotated $460.502, S460.505. . . . . . 50

                                                '5460.556................          52 i

l Public Utility Holding Company Act, 15 U.S.C. 79 et. seg. ................................................... 16 MISCELLANEOUS: Hearings Before the Committee on Commerce, United States. Senate, on S. 218, 89th Cong. 1st Sess. [ serial No. 89-38), pp. 92-93 (1965) ............................ 29 Report, Joint Committee on Atomic Energy, No. 91-1247, l 91st Cong., 2d Sess., Sept. 29, 1970 .................... 43 l

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P UNITED STATES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION In the Matter of )

Consumers Power Company ) Docket Nos. 50-329A Midland Plant (Units 1 and 2) ) 50-330A MICHIGAN CITIES AND COOPERATIVES' REPLY BRIEF

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                 ^ INTRODUCTION AND

SUMMARY

OF ARGUMENT As is set forth'in their Initial Brief, the intervening Cities and Cooperatives $/ have requested three main items of re-lief: (1) direct access to Midland; (2) non-discriminatory ac-cess to transmission services and (3) non-discriminatory access to coordination. Interveners further request the right to purchase wholesale power on a full requirements or partial requirements basis from Consumers Power Company (" Consumers Power" or " Applicant ") on non-discriminatory terms an'd conditions. Implicit is that Consumers Power not frustrate interveners' obtaining access to the above en-titlements. Consumers Power Company does not appear to seriously

     */ The intervening municipalities and cooperatives are as follows:

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 Assoc-iation. Hereinafter, they are referred to collectively as "Munis - Coops " or " Interveners ". For convenience parties ' Initial Briefs filed October 8, 1974, are refer. red to as such. l

contest its obligation to sell wholesale power. */ In pressing the:.r entitlements to non-discriminatory access to the Midland 7... s, eransmission facilities and coordi-nation, interveners desire to be treated as utilities--not merely as customers. The types of transactions interveners request .(e.g., access to large base load nuclear facilities, transmission and coordination) are available to dominant utilities and are consis-tent with industry practice. The key word is "non-discrimination." Interveners re-quest no power service for " free" unless such service is provided without cost to others; they ask for no special advantage. They do maintain that Consumer's Power Company's policies applied to them should be consistent with its policies to larger companies, such as Detroit Edison Company. The market structure of the power industry is such that wholesale power transactions take place within coordination or pooling agreements. The interveners"did not create this market structure. They should not be excluded from it. Lafayette, L.A.

     */    To the extent the Department of Justice contends that Con-sumers Power Company does not have such obligation, interveners disagree. Apart from the antitrust laws, utilities have in-herent obligations to provide service. Department of Justice Initial Brief, p. 174, 189-190. The Company would appear to agree.- Finding of fact, 4.02 Initial Brief, p. 215. In any event, it'the question is in issue, it is only tangential and          !'

is not necessary to decision. i l l

v. AEC, 454 F2d 941, 952 (CADC, 1971), affirmed sub. nom.

Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973). In one sense, Consumers Power Company's Initial Brief is encouraging to interveners. Unlike at the beginning of thic case, Consumers Power Company appears to recognize other utili-ties' general rights of access to nuclear generation, transmis-sion, and coordination. While attempting to preserve its legal position, in essence the Company. asks the Board to adopt its

            " Policy Statement."    (8106-8109). Ecwever, that statement is so qualified that it leaves the company with almost complete con-trol of whether it will enter into particular transactions.

Stripped of its verbiage, Consumers Power Company argues that the A'tomic Energy Commission has no authority to limit its ac-tivities because it is a regulated utility. Its corollary pro-position is that the antitrust laws have limited impact on regu-lated entities. */

 ,                    In its brief, the Company attributes to the Federal Power Commission, the Michigan Public Service Commission, or the Courts all authority over its activities related to the relief sought by the Department of Justice, the Atomic Energy Commission Regulatory
           */   This position is notably contary to Justice Department policy.

Appendix A. The fact of grants of monopoly privilege should make a firm more subject to antitrust structures -- not less.

Staff and Munis-Coops. According to the company, since each action it has taken to deny Munis-Coops ' rights would have been directly or tacitly approved by one or the other agencies, the Company further argues that in any event, relief should properly come from one of

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those other forums. Compare, International Tele. & Tel. Corp.

v. General Tele. & Electronics Corp., 351 F. Supp. 1153, 1178-1183, 1198, 1203 (D. Haw 1972) , appeal docketed Ca 9, 73-1513, cited by Appli-cant on pp. 85, 96.

Second, the Company argues that there is no requirement tha t the AEC grant relief, since MuniswCoops can obtain wholesale power through self-generation or wholesale ' power purchases. Finally, it argues that, since any violations of the anti-trust laws it may have committed would have occurred regardless of its planned operations of Midland, there is no basis for granting relief as a condition to building or operating the units. We shall discuss these arguments herein. To avoid undue repetition of the initial briefs, interveners do not respond to all of the various sub-arguments and defenses the Company makes. How-ever, at the outset we think it important to focus that despite its many and varied claims, the Company is saying not much more than I that other agencies should regulate Consumers Power Company and that this Board has no substantial role. , The Atomic Energy Commission has clear authority to cor-

s rect "situati'ons inconsistent" with the antitrust laws that may

    .be " maintained" through the use of Nidland Power, even though the source of the original actions ' deemed to be inconsistent with the 1

antitrust laws was not the building of the units to be licensed. The clear lan'guage of the statute states that, if a " situation inconsistent" will be maintained by the construction or operations of the plant, the Commission has the authority to order relief. The statutory use of the word " maintain" in addition to the word

     " create" recognizes that an anti-competitive situation may pre-exist the building of units to be licensed. It ill-behooves Consumers Power Company to claim that this Board can ignore an anti-competi-tive market structure because such a market structure would exist without reference to nuclear power.      What the Company is asking the Board, an agency of the United States Government, to do is to ignore violations of the law, even in the face of a specific sta-tute requiring the Board to exercise an' antitrust r(view. Southern Steamship Co. v. NLRB, 316 U.S. 31 (1942). */

The attempt to avoid corrections of wrongs by the Atomic Energy Commission because some other agency may also have the power

      */ The unstated thesis that nuclear generation is unimportant or incidental must be rejected. This is especially so con-sidering that Consumers Power Co. thinks it sufficiently im-portant to apply for a license and to make heavy nuclear invest-ments.

N of correction ignores the responsibilities given the AEC by Congress and, we submit, also the public interest. Any action any agency may take witi regard to Consumers Power Company may conflict with an action another agency may take, but absent a showing of clear likelihood of con-flict and of public harm from a participating agency's action, a re-gulated entity should not be able to defeat legitimate control over admitted public utility functions because some other agency could al-so correct the wrong. Compare Colorado Antidiscrimination Commission

v. Continental Airlines Co., 372 U.S. 714 (1963). In arguing potential jurisdictional conflicts where no specific existing conflicts have been shown, Consumers Power Company merely attempts to put forw'ard a ghost of interagency conflict to its tangible advantage. Pan-handle Eastern Pipeline v. Indiana Pub'lic Service Commission, 332 U.S. 507 (1947).

The interveners agree that the Board might properly move cautiously before upsetting an industry market structure. However, here neither the interveners, the Department of Justice or the Atomic Energy Commission Regulatory Staff request funda-mental changes in the means by which wholesale or retail power is bought, sold or exchanged. They do not seek a " breaking-up" of Consumers Power Company or a termination of existing pooling arrangements. What they request is that the same arrangements that already take place between Consumers Power Company and other 9 l

 .   +

larger entities be made available to smaller ones. Nor do interveners, the Department of Justice or the Atomic Energy Commission regulatory staff request the establishment of spec-ific rates, terms and conditions as a result of this proceeding. We

       . propose no interchange contracts for the Board's approval.                                      What is proposed is that standards be established to assure that contracts that may be entered into or rates that may be applied for do not vio-late the basic premises of the Nation's antitrust laws.

To conclude, Consumers Power Company asserts the lack of authority of this Commission. The' Atomic Energy Commission has the authority to license the construction of major facilities whose existence will affect contracts, costs and operating relationships far into the future. The technological fact of increased scale associated with nuclear plants cannot fail to have an effect on the way the electric power industry operates. At the same time the Commission has the direct responsibility to examine competitive impacts. Thus', the Commission combines a fccus on both technology and economics. l This hearing demonstrates the ability of the Commission to investigate major problems. Consumers Power Conpany's narrow 1 reading of the Commission's authority asks the Commission to avoid its responsibility. Compare Calvert Cliffs' Coordinating Committee v.-AEC, 449 F2d 1109 (CADC, 1971). Indeed, acceptance of the Com-w

pany's thesis that other agencies-should resolve antitrust prob-lems would leave the Commission with hardly any antitrust review function, making the passage of the antitrust review section of the Atomic Energy Act a practical nullity and these hearings an exercise in futility. */ In the above context, we are pleased by the suggestion that after the Board's decision establ'ishing basic principles, the parties again attempt to specifically resolve problems re-I lating to the license, if they have not been resolved before-hand. l l As they stated in their Initial Brief, the interveners have always believed a'nd hoped that this case could be resolved through negotia-tiens. Since the rights claimed.by interveners largely involve ac-ce'ss to non-discriminatory coordination, which the industry and re-gulatory agencies have found to be generally mutually beneficial, interveners believe that agreement on technical matters is probable, providing that the Board confirms the existence of the rights of access and coordination for the smaller systems. l l

         */   Cf. Carolina Power & Licht Co. v. South Carolina Public Service Authority, 20 F. Supp. 854, 860-861 (E.D.S.C., 1937), affirmed, 94 F. 2d 520 (CA 4, 1938), cert. denied, 304 U.S. 578.
                      ". . . The trial took eight solid weeks and it is common sense that in such a long, expensive, and extended trial every necessary issue should be raised and disposed of".

l I. . RELIEF SHOULD NOT BE DENIED MERELY BECAUSE SOME OTHER AGENCY ~COULD CONCEIVABLY GRANT SIMILAR RELIEF. A. The Plain Language of Section 205 of the Atomic Enercy Act Gives the Commission a Resconsibility to Assure that the Licensing of Nuclear Power Facilities Does Not Aid Consumer Power Company in Creating or Maintaining a Situation Incon-sistent with the Antitrust Laws Consumers Power Company argues that each agency has an exclusive jurisdiction over problems entrusted to it and that no cther agency should even potentially encroach. The Company 's par-tially stated premises appear to be (1) that it is more proper in the scheme of _ things for other agencies to deal with the antitrust problems that have been discussed in this case; (2) that other agen- l cies have more expertise than the Commission in the matters at hand; (3) th'at possible conflicts between agencies may result unless the Commission stays its hand. Consumers Power Company contends that the regulatory struc-l ture of the electric power industry requires that other agencies ex-clusively deal with antitrust problems. But see California v. FPC, 369 U.S. 482 (1962)-; Otter Tail Power Co. v. United States, 410 U.S. 366 (1973). To be sure, the Company does not make this argument as explicitly as is set forth here. However, the Com-pany attempts to establish that any relief they may be granted involves subject matters with which other agencies, principally the FPC,'are concerned. It then contends that these other _ o__ ._

agencies--and not the AEC--should contend with problems concern-ing such jurisdiction. Consumers Power Company is of course correct that there are potentially over-lhpping jurisdictions between this Commission and the Federal Power Commission as well as between courts and other regulatory' authorities, i.e., that there may be areas of concurrent jurisdiction. Considering that Consumers Power Company is a regulated entity, this could hardly fail to be the case. Since to a large extent the Federal Power Commission (or the Michi-San Public Service Commission) . reviews the rates and/or contractual arrang;ments between Consumers Power Company and other utilities or customers, obviously any significant action this agency takes may have some impact on actions which other agencies might also take. */ i What Consumers Power Company fails to consider is that the Atomic Energy Act, including its 1970 amendments, gives the ;

Atomic Energy Commission an extremely broad statutory responsibility l

       */  Note, for example, the Mobile-Sierra doctrine, under which                                            .

the FPC is -limi,ted by private contracts in raising rates other-wise subject to its jurisdiction. United Gas Imp'rovement Co. v. l Mobile Gas Service Corp., 350 U.S. 332 (1956); FPC v. Sierra l Pacific Power Co., 350 U.S. 348 (1956). The fact-that FPC juris- ' diction may be limited by actions external to itself, such as private contracts, is-consistent with the fact that a company

     - might be limited by a court injunction or an AEC . license condi-tion from making an anticompetitive filing.

i

r to assure that the licensing of nuclear plants neithel areates or maintains an anti-competitive situation in the electric power industry. This' fact remains despite the Company's selective and of ten misleading reliance on legislative history. Certainly, in passing the Atomic Energy Act and its 1970 amendments, Congress was not unaware that Consumers , Power Company and other utilities similarly situated were regulated. The Company should not be

 -       able to use the fact that it is-regulated as an excuse to avoid further Congressionally required regulation.                               l l

At the risk of some repetition of their Initial Brief, Munis-Coops again stress the language of the Atomic Energy Act, which provides the Commission's mandate. The Act requires i the Commission to investigate whether activites under the li-cense will create or maintain a situation inconsistent with the anti-trust law. It further grants a broad, uncircumscribed power to deny a license or condition it to avoid that situation. As we point out

in our Initial Brief, similar conditioning power has been held to give agencies a broad authority and responsibility to assure that licensed or certified activities do not violate public interest standards. Initial Brief, Section III.B., pp. 86-91. Congress focused in the Commission Ehe. power of scrutiny I over two broad aspects of the electri.c power industry. First, is the impact;of' nuclear power itself and the second is the resultant e

application of the antitrust laws. Since, as Consumers Power Com-pany readily concedes, nuclear generation is anticipated to provide a chief means of providing for base load capacity and energy, the { construction and operation of nuclear plants will have a pervasive impact on the Company's operations. In this situation, the Board can hardly avoid ' scrutinizing the contractual relationships which underlie the generation and sale of electric power and energy. To do less would allow nuclear energy to provide the means under which existing anti-competitive market structures could be maintained de-spite the specific Congressional requirement to the contrary. Consumers Power Company attempts to argue that be-cause the alleged anti-competitive market structure existed in-dependently of the nuclear facilities to be licensed, the Commission 's authority to order relief is limited. However, as we discuss in Section III,- infra, the Ato,,mic Energy Act specifically provides a conditioning power, if the activities under the license will main-tain a situation inconsistent with the antitrust laws. Thus, the situation need not be " created" by the nuclear facilities to be li-censed. If these facilities are the means whereby the status quo will be maintained or aggravated, Consumers Power Company is not granted a license to continue antitrust violations because such vio-lations m'ight also be continued by different means. Thus, the Atomic l . Energy'Act negates the premise that remedies for anti-competitive impacts resulting from-nuclear licensing shall be the exclusive domain of other agencies. Consumers Power Company argues that the regulatory authority of the Federal Power Commission forecloses action by the AEC. It further argues that, wh3re the FPC may not have authority, this would be a result of a purposeful Congressional decu. ion . To the contrary, Otter Tail makes clear that despite i its jurisdiction over interconnections, application of the anti-trust laws was not to be left to the FPC's exclusive domain and that the Federal Power Act supports applying a policy of strict antitrust application. It further makes clear that whatever authority ! may not have been given that commission is not to be read as creating an exemption for the electric power industry to application of the antitrust laws:

                 " Otter Tail contends that by reason of the Federal Power Act it is not subject to anti-trust regulation with respect to its refusal to deal. We disagree with that position.
                 " Repeals of the antitrust laws by imolica-tion from a regulatory statute'are stronalv              -

disfavored and have only been found in cases of plain' repugnancy between the antitrust and regulatory provision. ' United States v. Phi ~1adelphia National Bank, 374 U.S. 321, 350-351, 10 L. Ed. - 2 d - 915, 83 S. Ct. 715. See also Silver

v. New' York Stock Exchange, 373 U.S. 341, 357-361, 10 L. Ed. 2d. 389, 83 S. Ct. 1246'. Acti-

               *vities which come under_the jurisdiction of a regulatory agency nevertheless may be subject to scrutiny under the antitrust laws.
         ~

E "In~ California v. FPC, 369 U.S. 482, 489, 8 L.

                 -Ed. :hi 54, 82 S. Ct. 901, the Court held that approval of an acquisition of 'the assets of the
                 - Natural Gas Company by the Federal Power Com-mission' pursuant to Section 7 of the Natural Gas Act 'would be no bar to- [an] antitrust suit ' .

Under Section 7, the standard for approving such . acquisitions is 'public convenience and necessity'.

                 ' Although 'the impact on' conpetition is relevant to the   1 Commission determina. tion, the Court noted there          j was 'no pervasive regulatory scheme ' including the        j antitrust law that had been entrusted to the Com-          '
           -      mission, id, at 485, 8 L. Ed. 2d 54. Similarly, in United States v. Radio Corp. of America, 358            l t

U.S. 334, 3 L. Ed. 2d. 354, 79 S. Ct. 457, the Court _ held that an exchange of radio stations that

l had been approved by the Federal Communications Commission as in the "public interest " was sub-ject to attack in an antitrust proceeding.

                   "The District Court below determined that Otter l                  Tail's consistent refusal to Wholesale wheel           .

power. to its municipal customers ~ constituted illegal monopolization. Otter Tail maintains here that its refusals to deal should be immune'

                - from antitrust prosecution because the Federal Power Commission has the authority to compel in-

, voluntary interconnections of power pursuant to

 ,               $202 (b) ' of the Federal Power Act. The essential thrust of S202, .however, is to. encourage voluntary interconnections of power. See S. Rep No. 621 74th Cong, 1st Sess, 19-20, 48-49; HR Rep No. 1318, 74th Cong, 1st Sess, 8.

Only if a ' power company refuses to interconnect voluntarily may_the Federal Power Commission sub-ject to-limitations unrelated to antitrust con-siderations, order the interconnection.. The stand-ard .which governs .its decision is Whether such action is "necessary or appropriate in the public

                 . interest".- Although antitrust considerations may be relevant, they are not determinative.
                   "There is nothing in the legislative history'Which reveals a purpose to insulate electric power com-           i A

e 4 panys from the operation of the antitrust laws. To the contrary the history of Part II of the Fed- ' eral Power Act indicates an over-riding policy of maintaining competition to the maximum extent pos-sible consistent with the public interest. As originally conceived Part.II would have included a " common carrier" provision making it the duty of every public utility to . . . transmit energy for any person upon reasonable request . . ." In ad-dition it would have impowered the Federal Power Commission to order wheeling if it found such action to be necessary or desirable in the public interest. HR 5423, 74th Cong, 1st Sess; S 1725, 74th Cong, 1st Sess. These provisions were elimin-ated to preserve the " voluntary action of the utility". S. Rep. No. 621, 74th Cong. 1st Se.ss. 19.

                "It is clear, then, that Congress rejected a per-vasive regulatory scheme 'for controlling the int er-state distribution of power in favor of voluntary commercial relationships.        When these relationships are governed in the first instance by business judg-ment and regulatory corrosion, courts must be hesitant that Congress intended to over-ride the fundamental                       '

National policies embodied in the antitrust laws , see United States v. Radio Corp. of America, supra,

    ,          at 351, 3 L.Ed 2d 354        This is particularly true in this instance because Congress, in passing the Public Utility Holding Company Act, which included Part II of the Federal Power Act, was concerned with "re -

straint of free and independent competition"among public utilities holding companies. See, 15 U.S.C. Section 79(a) (2) [15 U.S .C . S . 79(b) (2 ) ] .

              "Thus, there is no basis for including the limited
            - authority of the Federal Power Commission to order interconnections was intended to be a substitute for immunize Otter Tail from antitrust regulation
             .for refusing to deal with munic.ipal corporations. "

Otter Tail Power Co. v. United States, 410 U.S. 356, 372-374 (1973) (emphasis supplied) .

                                     - 15'-

We have quoted at great length from the Supreme Court 's recent decision in Otter Tail above -- and have appended Otter Tail's Brief to the Surpeme Court to our Initial Brief .to this Board -- because Consumers Power Arguments are those of Otter Tail. These have been foreclosed by the Supreme Court in Otter Tail. In this proceeding where, similar to a court, much of the Commission's authority stems from antitrust statutes--indeed, where Congress specifically gave the Commission authority referenced to those statutes--Consumers Power Company cannot claim a want of authority based upon Federal Power Commission power--or lack of it. */

        ,        A basic difficulty with the Company's position is that it fails to allow for the possibility of concurrent jurisdictions.

Compare Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973); United States v. Philadelphia National Bank, 374 U.S. 321, 350 (1963). Under the Company's thesis, the Public Utility Holding Company Act, 15 U.S.C. 79 et seq., which would impose far more stringent relief than is here considered, would be a nullity

     */ Consumers Power Company creates the perfect "Ca tch 2 2 " .      Heller, Catch 22. If the Federal Power Commission has jurisdiction to
                             ~

grant a specific remedy, then the Atomic Energy Commission should avoid involvement. If the rederal Power Commission does not have

          . authority, then Congress intended the company be left alone.

l m.

since the FPC would also have jurisdiction over the concerned utilities. Similarly, price control regulations, minimum wage standards, franchise limitations, securities regulations, or any other government restraints could be questioned, since the FPC or MPSC could take actions to remedy wrongs in each of these areas. As the Court in IT & T Corp; stated, */ with regard to similar primary jurisdiction claims:

                    "It may well be that the FCC is given the power to consider and evaluate the relationship between com-munications, common carriers and suppliers of their equipment against the services rendered.          The Court in United States v. RCA, supra, note 31, by dicta has indicated the FCC has such power in a horizontal                  l acquisition situation. 358 U.S. at 351-352, 79 S.Ct.

457, 3 L.Ed.2d 354 (**/]. The FCC may even have all l the duty so to act, as it self-servingly maintains, q but, in reality, if it be a duty, th'at obligation has been but niggardly, laggardly, and tardily exercised... . 351 F Supp at 1181; 1180-1182, 1198-1203.

 ,                  The Federal Power Commission may be more intimately involved in day to day regu'lation of terms and conditions of                      I sale of wholesale power than this Commission, although it might be noted that its primary focus has been on natural gas regula-tion. Regardless, the patterns established at the point of in-stallation of major facilities likely have far greater long-term L       */    International Tel. & Tel. Corp. v. General Tel. Corp., 351

! F Supp 1153, (D. Haw, 1972), appeal docketed, No. 73-1513 (Ca 9, 1973) . l **/ 358 U.S. 334 (1959). no

        . consequences th'an the regulation of specific transactions.

California v. FPC, supra; Northern Natural Gas Co. v. FPC, 399 F2d 953 (CADC, 1968). They establish long-term cost conse-quences, and often the basic framework which agreements will

        .take. Thus, the licensing authority is not to be treated as an ancillary power. The granting of a. license to build facilities commits the future course of regulation and the conduce cf regu-lated companies as well.

In any event, the specter of conflict between the Atomic Energy Commission and the Federal Power Commission is largely, if not totally, artificial. Like the Atomic Energy

        . Commission, the Federal Power Commission is under a mandate to consider antitrust policies. Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973). Review of Federal Power Commission and Atomic Energy Commission actions is by the same courts.         There is no   showing why the FPC is likely to make determinations dif-ferent from those of the AEJ.

B. There Is No Showing that the Federal Power Commission Has Greater Expertise to Establish Antitrust Standards than the Atomic Energy Commission Ce< 'Amers Power Company argues that any antitrust reme-l dies that may be necessary should be left to the Federal Power L Commission (or anybody else besides the AEC), implying that that I ( Commissio'n has greater expertise than do'es the AEC. E.g., Appli-L ' cant's Brief, pp 42-43, 113-125. In its arguments Consumers l

Power-Company overlooks _that " expertise" tends to follow juris-diction and is not'~the exclusive province of one group of men. Agencies tend to have greater or lesser ability to deal with specific problems depending upon their current staffing, budget considerations, and the way they happen to view particular pri-1 orities and particular problems at particular times. It is not profound to note 'that the effectiveness of individual agencies varies with their administration. Consumers Power Company's argu-ments concerning Federal Power Commission " expertise" provide Company statements that the AEC should avoid its jurisdiction to regulate Consumers Power Company rather than a detailed analysis of why the Federal Power Commission is in fact better equipped t'o dea 1 with the problems raised by interveners and others in this proceeding. */ Indeed, if Consumers Power Company is correct, we wonder what the proceeding was about. Moreover, in considering industry expertise, Consumers Power Company ignores that for practical purposes 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 gener -

                                    ~
          */. Compare the specific analysis of other agencies' exercise of jurisdiction by the Court in International Tel. & Tel. Corp., supra, 351 F. Supp    at 1178-1183, 1198-1203

_ 19 .

ation,is a given. Thus, when a particular FPC rate filing is made, or contract filed, generation and transmission will usually have already been built pursuant to already existing contractual arrangements. Even in terms of licensing applications or initial interchange transactions, the form of agreements will usually have been entered into. Proposals are initiated within a given

   'in6n stry structure and will generally be approved if not incon-sistent on their face with public interest standards.

Granted, there is often the opportunity for intervention and hearing. However, this does not negate that proposals are industry initiated and that the prime focus of the FPC is not upon antitrust matters. It is in light of considerations such as these, that the law has long distinguished between Commission established rates or terms or conditions of service and Company initiated ones. Arizcna Grocery Co. v. Archison, T & SFR Co., 284 U.S. 370 (1932); United Gas Pine Line Co'. v. Mobile Gas Corp., 350 U.S. 332 (1956); FPC v.-Sierra Pacific Pcwer Co., 350 U.S. 348 (19,5 6) . In a similar vein consumers Power Company alludes to potential conflicts between this agency's exercise of authority and the Federal Pouer Commission. What conflicts? The Federal Power Commission has no jurisdiction to ignore the antitrust laws. More-

over, even if there were variations in particular decisional re-sults, compared with the generation capacity and sales of the major utilities, the granting of access and coordination rights to interveners can hardly upset the economic structure or well-being of the industry. */ , Finally, Consumers Power Company argues that relief should not he granted here because the same interveners raised questions of antitrust policy before the FPC. **/ , However, be-fore the Federal Power Commission, it argues against that Com-mission's ability to resolve similar antitrust matters as it has

 .          before the Atomic Energy Commission.                                       .

In their since' settled rate case, Consumers Power Com-pany's wholesale customers attempted to argue that the "just and , reasonable" rate ***/ had to consider elements of what a compe-titive rate would be (e.g., the impact of denying interveners

             */   While Consumers Power Company raises the specter of jurisdic-tional conflict and of economic harm to itself from the proposals of interveners and others, it should be remembered that the total present requirements of the named interveners are hardly more than 350 mws. Ex. 1001, pp. 10-11. The total sales of purchased power by Consumers Power Co. to non-generating systems are an equivalent artount. Thus, under any circumstances, what is at issue is avail-ability of participation, access to transmission and coordination for relatively small amounts of power, whose impact on Consumers
         ' Power Company even if "under-priced" should not be significant.
             **/    Actually, for what- it is worth, there were different, although somewhat overlapping, parties in the varying proceedings, for ex-ample, in the cases before the FPC, Grand Haven, Holland and Zeeland, three of-the six named intsrveners, were not parties.
             ***/     Feder'al Power Act, S205, 16 U.S.C. 824 (d) .
                                              -A

their access to transmission and coordination., thus forcing them to purchase from Consumers Power). Consumers Power Company, sup-ported by Staff, argued that except for the price squeeze issue, */ there was no " nexus" between the issues sought to be raised by interveners and a rate adjudication. Consumers Power Company, FPC Docke t Mo . E-780 3, " Consumers' Opposition to Intervenors'

       ' Application for Subpoena Duces Tecum *and Production of Documentary Evidence'," pp. 26-33.           The Presiding Law Judge agreed. Con-sumers Power Company, Docket No. E-7803,           Ruling on Application I

of Intervenor Cities of Bay City, et al, for Subpoena Duces Tecum l (August 9,1973) . The interveners appealed the FPC ruling. **/ ' Consumers Power Company replied:

          '           '" Interveners persist in their failure to establish
                        ~
                    'requisit nexus between the subject matter of the P

documents sought and the questions at issue here. This is, of course, a rate proceeding under Section 205 of the Federal Power Act...

                       "Similarly, the interconnection and coordination arrangements of Which the Interveners complain largely relate to system reliability and have no
     */ The FPC has since determined it has no jurisdiction concern-ing price squeezes, but this issue is subject to court review.

See references in Munis-Coops' Initial Brief, pp. 96-97. l

     **/ Consumers Power Company, Docket No. E-7803, " Emergency Ap-peal'from Presiding Administrative Law Judge's Denial of ' Cities Co-ops' Application for Subpoen- Duces Tecum (August 23, 1973).

e reasonable . relationship to the ' rates and condi-tions under which Consumers serves its wholesale customers. To be .sure, under Section 202 of. the Federal Power Act, the Commission is charged with encouraging voluntary interconnection, and it may compel interconnection under certain pre-scribed circumstances. See Gainesville Utilities Department, the Florida Power Corporation, 1227 (1968) . - But, according to the Act, disputes about interconnection terms are to be heard in proceedings under Section 202 -(b), not in Section 205 rate' pro-ceedings, as the Interveners suggest." The Company added:

                     "As the Supreme Court recently affirmed, 'although i

the impact on competition is relevant to the Com-mission determination...there (is) no pervasive regulatory scheme including the antitrust laws that has been entrusted to the commission. '" Otter Tail v. United States, 93 S. Ct. 1022, 1027 ... (1973), " California v. FPC, 369 US 482, 485 (1962 ) ", Consumers Power Company, FPC Docket No. E-7803,

           '        " Answer Appeal, pgs. 10-16, 11, 15, 13 (September 12, 4

1973). . When some parties attempted to raise the issue */ in the context of a joint Consumers Power Company-Detroit Edison ~ Company application to build interconnection facilities with the Hydro-Electric Power Commission of Ontarioa, Consumers Power Company cited this Com-mission's September 28, 1973, Waterford decision **/ (incorrectly, we believe) to support lack of " nexus" between the Consumers Power i

     */                                                                                                               !

Coldwater, Marshall, Niles, Hillsdale and Petosky. '

   -**/ .In the Matter of the Louisiana Power and Licht Cornany (Water-ford Steam Electric Generating Station, Unit 3), Docket No. 50-382A - (September 28, 1973).

Company-Detroit Edison application and the claims of interveners. Consumers Power Company added:

                 "While the Atomic Energy Act, of course, differs from the Federal Power Act, the concept of ' nexus' in the context of antitrust review is similar. There must be some relationship between the agency's statutory area of responsibility and alleged antitrust activity. In this case, the ' activity under the license ' so to speak, is the fourth interconnection between appli-cants and Ontario-Hydro. Cit!.es have not pleaded any relationship between such interconnection and the complained anti-competitive practices. No nexus, therefore, has been shown. In these circumstances, intervention should be denied. The Detroit Edison Company, Consumers Power Company, et al, FPC Docket No. E-7206, et al.   " Answer of Consumers Power Com-pany and Detroit Edison Company to Cities Protest Petition to Intervene and Request for Hearing" pp.        ,

9-10 (October 17, 1973). , W'e do not argue the correctiveness of the Federal Power Commission rulings. The point is, however, th'at at the same time the Company disputer the Atomic Energy Commission's jurisdiction to . condition the Midland license on grounds of FPC authority and lack of requisite " nexus", it argues exactly the same thing before the Federal Power Commission. It ought not to be able to resist anti- ) l trust review in both olaces. If violations of antitrust policy are shown, there is no reason why an agency having jurisdiction over the matter can-not and should not rectify the matter. Certainly, the claim that another agency might also correct a wrong is not a basis for the agency's denying relief.

                                    - 24  -

C. The Public Interest Supports the Relief Beina Sought by Interveners While Consumers Power Company makes jurisdictional and

         " nexus" arguments to the effect that other agencies should deal with the antitrust problems raised by interveners, its real
     . claim is, of course, that the relief requested should not be granted anywhere. The Company fails to show the public        interest

. in* acceding to'its arguments. To be sure, the Company does make the argument that competition is not always desirable. Brief, pp. 43-50. How-ever, neither interveners--nor to our knowledge any other parties-- request a change in existing rules concerning competition over areas where such-arguments might-be factually supportable. For example, without taking a position on the merits of state law re-stricting retail competition, Munis-Coops do not ask the Board to make any ruling concerning it. */ _ And the Company does not estab-lish why the relief sought by interveners cannot be disposed of by the AEC. Moreover, in a fundamental sense, in arguing the lack

         */ 'The Courts have clearly affirmed'the necessity of wholesale competition. E.g., Otter Tail Power Co. v. United States, 410 U.S.

366 (1973); Gulf States Utilities Co. v. FPC, 411-U.S. 747 (1973); Richmond Power & Light v, FPC, 481 F2d 490 (CADC, 1970) , cert. denied sub nom. Indiana & Michigan Electric Company v. Anderson Power and Light, 414 U.S. 1068 (1974); Municipal Electric Association of Massachusetts v. SEC, 413 F2d 1082 (CADC, 1968). I O O

of desirability of additional competition, Consumers Power Com-pany fails to come to grips with the fact that in passing the 1970 amendments Cpngress opted for competition. */ As Otter Tail determined in considering arguments similar to those made by Consumers Power Company with regards to the Federal Power Act:

      "To the contrary, the history of Part II of the Federal Power Act indicates an overriding policy of maintaining competition to the maximum extent possible consistent with the public interest."

i 410 U.S. at pp 373-374. The relief sought by interveners includes access to the Midland Units,themselves, access to transmission services and coordination on an equalized reserved basis. Dealing with the specific relief requested, there is no showing that Munis-Coops' customers, members and citizens are

      */  Consumers Power Company argues (Brief, pp 48-49) that in re-stricting the service area of the Tennessee Valley Authority, Congress "has exhibited a recognition that competition between electric suppliers may not be desirable with regard to both power service." The company cites Hardin v. Kentucky Utility Company, 390 U.S. 1 (1938). It ignores that, while there may have been reasons for limiting the service area of TVA, a large government financed project, to protect surrounding investor owned utilities, here Congress specifically determined that AEC focus should be on maintaining competition.

Hardin itself indicates that the primary interest of the statutor'y restriction related to retail service area. Moreover, even where statutory limitations on competition were indicated, the Supreme Court there determined that TVA could sell wholesale power.to the two communities involved. -

                                    - 9YK -

not entitled to direct access to and participation in nuclear power. They submit that, if granting relief were to have no other public benefits, providing them access to lower cost power and to environmental and conservation benefits which are predicted to result from nuclear power would justify and demand an affirma-tive Board order. In addition to the benefits which would naturally flow to the ratepayers of the intervening systems, experience teaches that competition itself creates beneficial impacts. Granting direct access to the nuclear units on the part of interveners will hope-fully reduce their power costs and, perhaps more importantly, allow them more certain fuel supply and more environmentally compatibl'e generation sources than fossil fuel alternatives. To the extent that such actions further a competitive environment for wholesale power supply, all ratepayers would benefit. ; Interveners also request a correction of the existing market structure to allow them transmission and coordination rights similar to those enjoyed by Consumers Power Company. Both in benefits to their ratepayers and in creating greater industry com-petition there is no public interest reason why Munis-Coops should not have access to alternative markets for power supply. Moreover, while Consumers Power Company argues its interests in denying in-1 terveners transmission access (although it would be paid for such 1 9 l 1 m as n J

services), it. ignores that, even if it does lose captive business, third parties would gain. There is no purpose consistent with the antitrust laws why. Consumers Power Company should be able to retain wholesale business at the expense of other potentially more efficient suppliers. */ Even where interveners might have an ability to dupli-cate lines (But see Initial Brief, at p. 22), granting access to transmission would serve broader public purposes of avoiding the excessive cost and land use detriments associated with such dupli-cate transmission facilities. Coordination is the market in which wholesale power transactions take place. Interveners should have access to that market place where power is bought and sold on equal terms to Consumers Power Company. The argument that competition may not be desirable as a generality does not justify an exclusion from those coordination rights, which represent cooperative efforts

     */   We again note that any likely loss of wholesale power sales would tend to be minimal. Moreover, since for at least the im-mediate future, Consumers Power Company claims itself to be limited-in its ability.to ,financa capital construction, i.t is in no posi-tion to argue that it would be harmed from losing load.      Brief,

p. 219. References in Argument IV.C., infra. Of course, in a com-petitive market structure for wholesale power lor.g range relation-ships would be expected to be governed by contracts, approved by the Federal Power Commission, which contracts would give it what-ever protection against losing loads it may deserve.

                            .                                             l

to establish a workable wholesale power market. Consumers Power Company participates in and, indeed, helped establish this mar-ket. Thus, whatever the ~ claimed limitations may be to competi-tion in monopoly industries in general, Consumers Power Company advances no public interest reasons for specifically limiting the relief requested by intervener's.

          ,        Not only are interveners' citizens and ratepayers en-titled to access to competitive, low-cost power sources, but it should not be overlooked that the purpose of Federal regulation of the power industry, including that by the AEC, is premised upon the need for protection of the smaller utilities.       Having broad service areas and hundreds of millions of dollars of existing                '

plant' investment the larger utilities have been deemed to have sufficient bargaining strength to take care of themselves. Indeed, regulation has been found warranted precisely in light of such strength. See Statement of Joseph C. Swidler, Hearinas Before the Committee on Commerce, United States Senate, on S. 218, 89th Cong. 1st Sess. [ Serial No. 89-38], pp. 9.2-93 (1965) , quoted at Initial Brief, pp. 65-66. For the Atomic Energy Commission to fail to provide for the type of access that interveners seek would be to fail to protect the~ class for which Congress gave it specific responsibility. 9 e e

1

l l

Nor on the merits is there any reason why any class of customers should be deprived of direct access to nuclear develop-ment, largely developed at government expense, or to access to the broad in'dustry pooling of power resources through coordination

         ' agreements and sharing of transmission facilities that allows for the most efficient use of power resources.      Similarly, to the extent that wholesale power competition exerts cost reducing pres-sures, there is no reason why any customers should be deprived of the beneficial aspects of such competition.*/ Nor is there reason why all customers should not advantage from the environmental and fuel conservations aspects of coordination.

Coordination allows for the use of the most efficient source of generation at any particular time regardless of owner-ship. Since air and water pollution are generally caused by discharges of unburned (or not fully burned) materials, an economically inefficient unit will usually be an environmentally inefficient one for the same reason. Thus, operating efficient units creates fuel conservation and environmental benefits. Similarly, joint use of construction sites, transmission lines, etc., create ob-vious land.use advantage.

          */  The Company attempts to argue that competition and regulation are subst'itutes. The Courts and common sense hold that they are complementary--and not mutually exclusive. E.g., Northern Natural Gas Co. v. FPC, 399 F2d 953 (CADC, 1968).

30 - . -

Consumers Power Company does argue that granting the relief sought by interveners will result in giving them a dis-criminatory advantage as against other customers. E.g., Brief,

p. 218. However, in doing so the Company clearly fails to sepa-rate the wholesale and retail power markets. The fact that under i

a competitive wholesale market' structure interveners may purchase power at reduced costs compared with a Consumers Power Company re-tail customer creates discrimination no more than the fact that Consumers Power Company's internal wholesale costs would be less J than its price for retail power. Compare United States v. Aluminum do. of America, 148 F2d 416 (CA2, 19 45) . Nuclear power on a direct ownership basis should hav6 the rssult of reducing interveners' cost of wholesale power sup-ply. However, interveners would provide for the costs relating 4 to their ownership interest. This is all Consumers Power Company l is entitled to. i There are further broad public policy arguments for this commission's not avoiding its jurisdiction to make available the benefits of nuclear power ownership to the smaller systems within the electric power industry. To a greater or lesser ex-

            . tent these.are reflected in the passage of the Atomic Energy Act
            .and its 1970 amendments and in Court decisions.                   In addition to               '

the immediate benefits 1of competition and coordination, it has

e. _ __. _

31 __ _ _ _ . _ ._ _ _- _ - . -

9 been long felt that there are political ~, social and economic rea-sons for having decentralized ownership.- Justice Brandeis refer-red to-the " curse of bigness." To the extent that opening up.ac-cess aids interveners, it protects smaller entities in an industry becoming incre~asingly dominated by large size. Such diversity allows for more numerous voicds in the power industry, diversity of, decision making and potential innovation. For example, the industry has generally maintained, per-haps correctly, that scrubbing devices do not work to eliminate sulphur pollution of the air from coal-fired generation, a proposi-tion that interveners do not dispute. Louisville Gas & Electric Company, an independent investor-owned utility near the coal fields ,

with a strong interest in furthering the effectiveness of such de-vices, has argued contrary. The availability of Louisville to test the proposition is of public benefit. Similarly, the manager of Holland, one of the interveners, is pioneering in combining genera-tion and waste disposal. And we would even go so far as to say that the availability of interveners to raise the types of issues raised in this proceeding--or merely to challenge claims of a dominant major utility--is of public benefit. Compare Associated Industries v. Ickes, 134 F2d 694 (CA2, 1943); International Tel. & Tel. Corp., supra, 351 F Supp at 1185-1186. o

1 D. Consumers Power Company's Miscellaneous Limiting Arguments Against the Exercise of'the AEC's Jurisdiction Provide Mo Reason for Failure to Condition the License

1. The approved or natural monopoly argument. Con-sumers-Power Company makes various arguments why in view of Michigan Public Service Commission and Federal Power Commission--

or other--regulation, the Company cannot be deemed to have vio-lated the antitrust laws. It argues that the Company cannot be monopolistic in the sense of unlawful because the Michigan.Public Service Commission and Federal Power Commission control its rates.

    .      Since its rates are controlled, any actions that it may have taken, it claims self-servingly, must have been lawful.         It adds that it is a "na'tural monopoly" so that its economic success could not '

be. contrary to antitrust policy. See generally, Initial Brief, Sections IV-V. The' fact that the Government may approve a Company ac-tion does not-insulate that, action from antitrust scrutiny, as Otter Tail directly held. Otter Tail Power Co. v. United States, l 410 U.S. 366, 372-374. Nor to our knowledge did any other agency ever claim the authority to insulate Consumers Power Company from l antitrust claims; in any event, it would not have the-jurisdiction to do so. */ _E.g., California v. FPC, 369 U.S. 462 (1962).

l

           */ It'is of interest that the Justice Department claims an urgency to prosecute antitrust. violations by regulated companies despite
          - such claims of immunization as Consumers Power Company makes here.       l This is required because there is monopoly power to begin with.          j i

I' I a i

Consumers Power Company relies principally on United States v. Marinebank Corporation */ and Missouri Portland Cement

v. Cargill, Inc. **/ to support its thesis that its monopoly has resulted from a combination of legal and economic forces and, ,

therefore, creates no anti-competitive constraints. Brief, pp. 139-141. However, in Otter Tail, the Supreme Court specifically addressed this " natural monopoly" issue. Both Otter Tail and

l Gulf States, as well as a host of other cases, clearly stand for the proposition that in the wholesale power industry there

1 is room and necessity for competition. Moreover, Marinebank Cor- l poration and Missouri Portland Cement both involve acquisitions, which were held not to violate the Clayton Act. While Consumers l Power Company attempts through such acquisition cases to justify use of the dominant power already acquired to restrict coordina-tion'and transmission and nuclear access, at most the cases cited ; merely stat.e that an acquisition which does not restrain compe-tition is not unlawful under the Clayton Act. More specifically, Marinebank Corporation involved an l acquisition by a Seattle banking system of a Spokane banking sys- - tem where, due to' restrictive state and federal iaw, there was

   */ 94 S. Ct. 2856 (1974).
   **/  498 F2d 851 (CA2, 1974).

l 4 no realistic possibility that the Seattle bank could otherwise compete in the Spokane market. The Supreme Court held that under this legal framework there could be no substantial restraint or competition by the entry of the Seattle bank into the Spokane banking market. In Missouri Portland Cement, a firm not producing cement and not likely to enter the cement market other than by acquisi-tion sought to acquire the stock of an existing cement manufacturer. Judge Friendly held that under these circumstances the acquisition was lawful. These cases would appear to be more relevant to the question.whether Consumers Power Company should disgorge i ts pas't acquisitions, or perhaps to whether it has a right to retain own-ership in its dominant facilities, than to the question whether it has to grant access to facilities or deal fairly with others. Consumers Power Company further relies on United States !

v. Grinnell Corporation, 384 U.S. 563 (1966), principally for its thesis that since its monopoly power arises from " natural" forces, it is protected. We discuss Grinnell, infra.

However, unless Consumers Power Company notices something that we do not, we fail l l f to understand its fondness for the case. */

*/,

The case is cited at pp. 84, 112, 113, 134, 137, 155 and 156 of its Brief. l 4 Like Consumers Power Company,.Grinnell acquired mono-poly pSwer through a number of means, including restrictive agree-ments, acquisitions, pricing procedures and territorial agree-ments. The court , ordered stringent relief. */ , In addition to Grinnell, Consumers Power Company cites Lamb Enterprises **/ and Union Leader ***/ Corporation. Lamb Enterprises is a case where a defendant was held on the facts not to have violated the antitrust laws. Union Leader held it a "per se" violation of the anti-trust laws to promote a group boycott against a competitor in an area that could support only one newspaper, 284 F2d at 584-585.

   */     Grinnell viewed the situation in exactly the same manner as interveners do:           that relief ordered should be sufficient to re-medy the problem created by the anti-competitive sit 2ation that exists.
                  "We start from the premise that adequate relief in a monopolization case should put an end to the combina-tion and deprive the defendants of any of the benefits of illegal conduct, and it breaks up or renders impotent the monopoly power found to be in violation of the Act.

That is the teaching of ou; cases, notably Schine Theatres v-. United States, 334 U.S. 110, 128-129, 92 L.Ed. 1245, 1258,'68 S. Ct. 947." 384 U.S. 577.

                                                                    ~
   **/ Lamb Enterorises,            Inc. v. Tolado Blade Co., 461 F2d 506 (CA6, 1972), cert. denied,                    409 U.S. 1001.
   ***/     Union Leader Corp. v. Newspapers of New England, -Inc. , 284 F2d 582 (CA1, 1960), cert. denied, 365 U.S. 833 (1961).

l l l l l

                                              .m h               -

The Court further held that' discriminatory pricing to advertiser's constituted "an unfair practice evincing an exclusionary intent."

284 F2d at 585-586. Likewise,. Consumers Power's activities in what it terms a " natural monopoly" situation of maintenance of pool agreements that provide for preferential interchange rates and denial of access to basic facilities are equally unlawful. */

2. The tax and financing benefits. Consumers Power Company principally relies on United States v. Columbia Steel Co.,

3 34 U. S . 495 (1948) and United States v. General Dynamics Corp., 415 U.S. 486 (1974) to support'its arguments that the Commission may deny otherwise justifiable relief because of tax and financing benefits possessed by mun'icipalities and/or cooperatives. Speci-fically, it cites Columbia Steel for the proposition that "evalua-tion of the ' strength' of the other firms in the market place (i]s j ident'ified as a necessary consideration engaging whether a company with a high market share has acquired monopoly power." Brief, at

p. 126. However, the " strength".in the market place looked to in

         -Columbia Steel was the market shares of the acquiring company in l

order to measure the extent of market domination and the probable

effect-on competition that would result from an acquisition.

There is'no suggestion.in Columbia ~ Steel that an otherwise unlaw-

         . */ Similarlto Consumers Power Company, when its competitors were weakened,.the Union Leader attempted to purchase competing. news-                   ;

papers. ',

'm-

f ful merger or other predatory conduct might be approved because some potential competitors had off-setting advantages, let alone that the company could violate antitrust policy to off-set a com-petitor's economic strength. */ United States v. General Dynamics Corp., 415 U.S. 486 (1974) similarly approved a merger where there could be no tendency to substantially 1cssen competition, s'ince a firm proposing to ac-quire another coal producer had virtually no uncommited coal re-serves and limited capability of deep reserves mining, a capability which the acquired corporation possessed. Consumers Power Company makes no similar claim of an inability to compete because of lack of resources. Indeed, it controls the basic bulk power resources. In essence, Consumers Power Company attempts to turn the issues in this case into a factual question of the Board's judgment of the relative future competitive abilities of itself and interveners as justifying its refusals to deal, a continued ' control of markets, tie-in sales and other unIswful activities. However, the cases it cites merely allow for acauisitions (not

       */   In Columbia Steel a proposed merger was approved larcely on the grounds that the acquiring and acquired companies served dif-ferent markets and that, in any event, there would be a d_ minimus impact on competition from the nerger. There is also the sugges-tion of a unique situation arising from government sponsoring of plant construction during World War II to serve wartime needs.

l refusals to deal, discriminate, or other anti-competitive activi-ties) in some situations by firms not having market power. In i this regard, it is important to call to Consumers Power Company's attention the recent case of United States v. Topco Associates, 405 U.S. 596 (1972), in which the Supreme Court prohibited trade restraints by smaller grocery outlets so that they could success-f

fully compete with larger chains.

Furthering competition (and access to basic facilities to allow for competition) is different from equalizing cost or price. Competition assumes that some firms will be able to sell at lower prices and some at higher prices. Thus, Consumers Power Company cannot deny interveners access to basic generation and. ! transmission facilities or power coordination agreement because 4 this might allow them to compete-at a more favorable price. United States v. Topco Associates, Inc., supra. We must reemphasize two further facts. First, the al-leged advantages of smaller systems are vastly overstated. Con-sumers Power Company is among the largest corporations in the United. States. Initial Brief, at p. 116. The corporate form has . l been found to be so advantageous to organizing production that l 1 even governments resort to it when they want to get things done. This is illustrated by New York State's various " authorities" that are currently in the news due to Governor Rockefeller's

Vice-Presidential nomination. The thought of the smaller sys-

tems taking over Consumers Potter Company is unrealistic in the extreme. The converse is not. Second, the law flatly prohibits the kind of equaliza-

           . tion where a corporation attempts to equalize assumed advantages of a larger company.        Under a, mandate to apply antitrust policy, the Board should not attempt to do this by indirection.              In this regard, in addition to Topco, supra, we call the Board's atten-tion to Tennessee Electric Power Co. v. TVA, 306 U.S. 118 (1939),

which held that the petitioners did not even have a legal right to raise the question of the lawfulness of.TVA competition.

           ".   . . [T]he damage consequent on competition, otherwise lawful, is in such circumstances damnum absque injuria, and will not support a cause of action or a right to sue."              306 U.S. at 140.

And Carolina Power & Light Co. v. South- Carolina Public Service Authority, 20 F Supp 854 (EDSC, 1937) , affirmed 74 F2d 520 (CA4, 1938), cert. denied, 304 U.S. 578, found:

                          . . . there is no escape'from the conclusion that the competition of the finished [ South Carolina Public Service Authority] plant will practically destroy the South Carolina Power Company; will seriously injure the Broad River Power Company; and will affect to a large degree the business of the Carolina Light &

Power Company. That the only escape-from such damaging effect, if the rates of the new project are appreciably lower than the rates of the present companies, will be

                      , a phenomenal increase in the c,onsumption of power in
                                .              AO~ _                              _

                                                                  ^
                       .      the 200-mile area. We must, therefore . . . accept _                   .

as the more probable course that the plaintiff com-panies are going to be seriously damaged . . ." , 20 F Supp at 859. The Court held, however:

                              "This question of the destruction of business and business _ values by reason of change in the method of doing business is the question that every indi-vidual, firm or corporation must contemplate when he enters upon a given business. . . .             Certainly, .

it is apparent t. hat generation and sale of electricity may be a proper activity to which municipalities may return. '

                                       " Investors who have in the meantime put large sums of money into privately owned properties may lose, and we may regret the loss, but they were at all times charged with the knowledge that there might c'ome such a change in the general method of operating electric power plants."             20 F Supp at 864.                -
                             .Considering that more conservative courts held lawful

the potential destruct' ion of entire businesses from the competi-tion of Government-owned power, Consumers Power Company cannot 4

maintain a right to off-set hypothetical advantages by limiting Muni-Coops' rights of direct access to nuclear power participa-tion. The Atomic Energy Act clearly intends contrary. */

              */      We reitetste that the success or lack.thereof of a particular municipality, cooperative or investor-owned plant is dependent upon many factors, mainly canagenent and service area. Thus, Consurers Power Company would agree that rural electric coopera-tives' costs are about its own. Moreover, given the existence of tax benefits (as a matter of Constitutional and statutory law:

See Parker v. Brown, 317 U.S. 341 (1943)). The tax deductions resulting'from the investrent tax credits,' liberalized deprecia-

3.. The Federal Trade Commission Act. As it must, Con-sumers Power Company admits, "One of the statutory provisions to which the AEC may refer in considering whether the activities

under its licenses will create or maintain a situation inconsis-tent with the antitrust laws is Section 5 of the Federal Trade Commission Act, 15 U.S.C.S 45." Brief, pp. 50-51. However, it th,en attempts to. narrow such consideration to the point of its being meaningless, arguing that the provision adds nothing to the antitrust laws, that the Commission's power is circumscribed by the Federal Trade Commission Act and, more generally, that the Commission has no independent role. Brief, pp. 50-57. The company's proposed limitations are inconsistent

with the grant of authority by the Ccmmission in S105 (c) ,42 U.S.C.

S 2135 (a) , to consider Section 5. The report of the Joint Commit-i . tee on Atomic Energy states: l "It is important to note that the antitrust laws within ; l the ambit of Subsection 105c of the bill are all the laws specified in Subsection 105a. These include the statutory provisions pertaininc to the Federal Trade Commission, which normally are not identified as anti-trust law. Accordingly, the focus for the Conmission's l finding will, for example, incluf.e consideration of the admonition in Section 5 of the Federal Trade Com-mission Act, as amended, that, ' Unfair methods of com-(Footnote continued from p. 42] tion, etc'. from the building of capital, intensive nuclear plants may.. improve the status of an investor-owned utility compared with a municipally- or cooperatively-owned one. The creation of tax deductions beyond revenues from the plant may affect taxes other-wise owed on other operations. This explains the low investor-owned utility effective tax: rates. See Initial Brief, p. 116. I A

s . petition in commerce, and unfair and deceptive acts ' in commerce, are declared unlawful'." Report, Joint Committee on Atomic Energy, No. 91-1247, 91st Cong., 2d Sess., Sept. 29, 1970, p. 15 (Emphasis supplied). Moreover, the proposed limitations are inconsistent with-the Congressional policy on nuclear licensing that "the development, use, and control of atomic energy shall be directed so as to . . . strengthen fre'e competition in private enterprise." 42 U.S.C. S2011. To carry out this and other purposes, the Con-gress has delegated to this Commission the authority to make policy judgments. In addition, th'J Commission has a special duty to " report promptly to the Attornby General any information it may have with respect to any utilization of special nuclear material or atomic energy which appears to violate or to tend toward the violation of any of the (antitrust laws], or to re-strict free competition in private enterprise." (Emphasis sup-plied) . The very fact that this Commission has direct juris-diction to consider antitrust violations in connection with atomic energy licensing implies that Congress expected this Commission to acquire the expertise to determine antitrust policy in the l context of licensing (or refusing to license) nuclear facilities. There is no basis'for Consumers Power Company's contrived assump-tions that like any cour't or administrative agency, the Atomic Energy Conmission does not have the right and. responsibility to determine the law in the first instance, including where this may d demand a creative function. Interveners' Initial Brief, III.B., pp. 86-99. Compare, cases cited therein and, e.g., Calvert Cliffs' Coordinating Committee v. AEC, 449 F2d 1109 (CADC, 1971); Greene County Planning Board v. FPC, 458 F2d 412 (CA2, 1972), cert. denied, 409 U.S. 849. In a further attempt to narrow the scope of the Com-mission's authority, Applicant contends that this Commission should not construe Section 5 to extend to any practices except those explicitly found unlawful by the Federal Trade Commission.

          ,           Consumers Power ignores the fundamental purpose of
         . Section 5 in relation to the more detailed prohibitions of the other antitrust acts:                                                         *
                            " Congress recognized, however, that any attempt at an exhaustive catalogue of anti-competitive prac-                         :

tices would tempt those bent upon thwarting or cir- l cumventing the antitrust laws to adopt new and dif-ferent artifices to achieve the same ends. The legifd lature felt, moreover, that there was need for action of an early, preventive nature, to strike down de-vices and schemes in their incipiency, before they became entrenched in structure and industrial concen-tration. . . . Holloway v. Bristol-Myers Corn., 485 F2d 986, 990 (CADC, 1973). Cases cited by Applicant for narrow relief largely " involve notice questions not present here where the unfair methods of competition alleged interfere with exclusively pri-

       - vate interests, requiring that private parties be advised
                    ,                                                                              l l

1

                                                  ,                        7,--       m.- -.r---

4 whether their. conduct constitutes an unfair trade practice. */ Thus, the courts held 'that no private right of action was created by 55 since the Federal Trade Commission could establish policies under it. These would become matters of public record. However, in view of the specific statutory power given the Atomic Energy Commission to refer to S5, Applicant shows no reason to negate that power by pretending that the Atomic Energy Commission cannot independently enforce the Act. **/ The Atomic Energy Commission is specifically charged with the duty.of considering antitrust laws. But beyond this, the express statutory language indicates that Congress desired that this Commission should have the power to specify practices which' violate the policies of the antitrust laws. Thus, the statute uses the words " create or maintain a situation inconsis-tent with" rather than the word " violate." The Federal Trade Commission Act by its terms authorizes

     */   This is especially so after a cease and desist order is issued by the Commission.

_,/ Intervene,rs cannot understand the reliance placed upon United States v. lit. Recis Pacer Co., 355 F2d 668' (CA2, 1966), by Consumers Power. The case held that the Department of Jus-tice is without power to enforce Federal Trade Commission orders without certification from the FTC. An application of the re-sult to this Commission would leave it with no role to play concerning S5. Clearly, this is contrary to the express AEC statutory command. O

and demands an exercise of jurisdiction to remedy harms connected with unfair practices. Thus, the FTC has stated that in determining whether a practice is unfair it will consider:

                               "(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise--whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen)."

Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking. 29 Fed Reg 8355 (1964). Cited with approval, FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244, n. 5 (1972) (Emphasis supplied) . The Commission should do no less. */

4. The " actual violation" argument. Consumers power Company further interprets the Atomic Energy Act to grant severely limited Board discretion. These arguments are mainly based upon distortions of legislative history and not upon a reading of the statute. Contrary to common administrative 1,aw, the Company l

      */   The inclusion of Section 5 jurisdiction in this Commission j

mandate is consistent with other delegations of primary juris- ) diction to federal agencies other'than the FTC to consider anti- ' competitive practices. See, e.g., Interstate Commerce Act, 49 U.S.C. SS, Bankbbrgar Act, 12 U.S.C. S1828, Federal Aviation Act, 49 U.S.C. 51378.

argues that for a license condition to be issued there must be proven an " actual violation" of the antitrust laws. The Company ignores the plain language of the statute which says not that there must be a " violation," but merely a situation " inconsistent" i with the antitrust laws. It also ignores the body of administra-t tive practice. I 5. The " burden of oroof" argument. In a complicated ] fashion the Company. argues--as a matter of Constitutional right, no less--that the proponents of license conditions have the bur-i I den of proof. The company confuses the burden of proof and the burden of going forward. If interveners--or other parties--ini-tiate a claim, they should provide a reasonable basis for doing' so. However, it is the Company that is applying for a license. 4 This license grants of the public domain the rights to develop nuclear energy for purposes of private profit. The ultimate find-l ing that must be made by this agency is that the' granting of the i license to Consumers Power Company will not be contrary to the l public interest, or in statutory terms that it will not create or maintain a situation inconsistent with the antitrust laws.

6. Parker v. Brown, 317 U.S. 341 (1943) argument. The Company makes a Parker v. Brown argument that state action (and even Federal Power Commission action) insulates it from antitrust scrutiny.. Brief, pp. 160-170. However, the cases cited by the

       . - . , , - -   __ . . _              .. . _ f -. _    _ _ _ _         _ _ .. _ - . _ .__            ,_ . . . _ . _ _

Company concern activities and practices that are commanded by state law, or activities that relate to matters where state re-gulation is predominant. In Business Aides, Inc. v. Chesapeake & Potomac Co. of Virginia, 480 F2d 754 (CA4, 197 3) , the court stated that since the utility was not a state ag,ency, the scope of its tariffs should be " carefully analyzed in order to determine whether it acted pur-suant to the direction of the state in refusing to provide the re-quested services." 480 F2d at 756. Only because the court deter-mined that the utility would be in violation of state law, if it granted the requested services, did the court hold the Parker v. Brown doctrine applicable. Likewise, in Gas Licht Co of Columbus

v. Georgia Power Co., 440 F2d 1135 (CA5, 1971), the court found that the specific rates being attacked were in accordance with tariffs express 1v approved by the appropriate state agency. The court held that because this approval was express, it fell within l the confines of Parker v. Brown.

l Applicant can only place its reliance upon Washington l Gas Licht Co. v. Virginia Electric & Power Co. (VEPCO), 438 F2d . ) 248 (CA4, 1971)

for the proposition that a comprehensive regula-tory scheme by a state affords antitrust immunity to activities which are implicitly approved by the agency's failure to correct

l 1 O w ---

a situation inconsistent with the antitrust laws. But that case has little relevance here because the anti-competitive activities complained of related to promotion of electric power in the re-tail market, which was the focus of the state statutes. The gravamen of the complaint here lies in anti-competitive activi-ties relating to the wholesale markets (bulk power, transmission services, and power-exchange and coordination). This is primari-ly a matter of federal concern. Interveners Initial Brief, pp. 121-123. The Atomic Energy Act has created an express obligation of the AEC to license with a view towards antitrust considerations. At the time the Act was passed, the'same degree of state regula-tion of the elatric utility industry, similar to the present Michigan statute, was present in most states. And Applicant fails to show how the Michigan regulatory scheme is any different from the usual pattern of state regulation which was present when Con-gress passed the 1970 amendments. In all of the cases cited by Applicant, the courts did not have to consider an express statu-tory command which dictated that they review antitrust matter re-lating to specific industries, as the Atomic Energy Act does here. */

     */     The VEPCO case was decided before the Supreme Court ruled in Otter Tail that regulatory authority of the FPC did not immunize electric utility company practices from antitrust review. Clearly, it would be. anomalous to say that a state's passive acquiescence l

                        .Nor, doe's the Michigan regulatory scheme' foreclose com-petition within the electric.ctility industry. L/

i [ Footnote continued from p. '30] to the practices of a utility company provides antitrust immunity , where passive acquiescence by the FPC does not. The holding of ;

, the VEPCO case is grounded'in the alternative remedy available to the plaintif f before the State Corporation Commission (SCC) .

           "The antitrust laws are a poor substitute, we think, for plain-tiff's failure to promptly protest to.the SCC and to seek the a$ninistrative remedy ultimately shown to have been available and. effective.". 438 F2d at 252. However, such reasoning was.re-jected by the Court in Otter Tail when it held that the availability of an alternative remedy before the FPC is no substitute for anti-

! trust review.. 410 U.S. at 372-375 I I ji/ Under the statutes, the Michigan Public Service Commission ! may grant a certificate of public convenience and necessity to allow a utility to extend its services into a municipality where i similar systems .are already operating. M.C.L.A. 5460.502. The

          -Commission is. directed to consider "the service being rendered by the utility then serving such territory, the investment in such ur',11ty, the_ benefit,.if any, to the public in the matter of ra'_es and such other matters as shall be proper and equitable j           in dstermining whether or not public convenience and necessity

requires the applying utility to serve the territory." M.C.L.A. !

S460.505. . 1 Applicant argues that there is a broad statutory scheme in Michigan. However, this is questioned by the Michigan l Supreme Court decision in Euron Portland Cement Co. v. Michigan t- Public Service Cormission,.351 Mich. 255, 88 N.W.2d 492, 496-97: I

                           .  "At the ou'tset we will observe that the Michigan                                                ~

public service commission has no common. law powers. As

we stated ~in Sparta Foundry Co. v. Michigan Public Utili-1 ties Commission, 275 Mich. 562, 564, 2G7 N.W. 736:

1

                                     'The Mic'higan public utilities commission is an administrative body created'by statute and
                             .the warrant for the . exercise of all its "powcur and authority must be found in statutory enactments.'
                                                                -50_;-                                                           -

               . [Footnotsd'continusd from'p. 51) 7'                                        "We turn, then, to the statutory enactments. Ap-                                                                                                                         l pellantufirst cites to us section 6 of Act No. 3 of the Public Acts of 1939 (C.L.S. 1956, S 460.6 (Stat.

Ann. 1955 Cum. Supp. 5 22.13(6)]), which thus describes . the statutory jurisdiction of the commission:

                                                    'Sec. 6.                 The Michigan public service commis-sion is hereby vested with complete power and juris-diction.to regulate all public utilities in the
                                      ' state except any municipality owned utility and                                                                                                                          -'

except as otherwise restricted by law. It is here-

by vested with power and jurisdiction to regulate

;                                       all rates, fares, fees, charges, services, rules,                                                                                 .

! . conditions of service.and all other matters pertain-j' ing to the formation, operation, or direction of such public utilities. It is further granted the power and jurisdiction to hear and pass upon all 1

,                                       matters pertaining to or necessary or incident                                                                                                                            -

to such regulation of all public utilities, in-I cluding electric light and power conpa.nies, whether

, private, corporate, or cooperative, gas . companies, *

telephone, telegraph, oil, gas, and pipeline com- ,

, panies, motor carriers, and all public transporta-j tion and communication agencies other than railroads and railroad companies.

                                                    'The Michigan public service commission shall have the same measure of authority with respect to railroads and railroad companies as is granted and

conferred under the various provisions of the sta-

                                      --tutes creating the Michigan railroad commission and                                                                                                                        i its successor, the Michigan public utilities com-                                                                                                                          l mission, and defining their powers and duties.'                                                                                                                             l i
                                        "The broad language, however, furnishes no grant of i                                specific powers.                       It is an outline of jurisdiction in                                                                                                         1 j                                the commission and does not purport to be more.                                                                                               If,                        ,

l indeed, the general language quoted had the effect of ' i vesti*ng particular, specific, powers in the commission, not only would a constitutional question be presented arising from an asserted lack of standards (42 Am.Jur.

p. 343; Schechter Poultry Corporation v. United States, .

295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570; Harrigan & [= Reid Company v. Burton, 224 Mich. 564, 195 N W. 60, ( ,

                                                                           -    51 -

4 g . - - - - , - , - ,-.7 -9,.,.m -.-..,-ws.,--. .-,mm. g,,-1 gp-- , ,.y,--s y gw wMm rw--ts -en g- f-r de -

6 We call especial attention to Internation Tel. & Tel.

. Corp. v. General Tel. & Elec. Corp., 351 F Supp 1153 (D. Hawaii, 1972), supra, where the. court held that regulation of a utility by a state regulatory commission did not insulate the regulated 4

company from antitrust review unless the regulating agency con-sidered the anti-competitive impact of the defendant's actions 4 (Footnote continued from p. 52] 33 A.L.R. 142) , .but there would have been no need what-ever for the many statutes enacted (both before and j after the effective date of Act No. 3 P.A. 1939) vest-ing specific powers in the commission." (Footnote omitted). . i The Court went on'to hold that there was no statutory i authority for the Public ' ervice S Commission to order a public

        ' utility to supply power in municipalities beyond those through which its transmission lines passed.          The Court considered M.C.L.A.

5460.556 which provides: l "The Commission shall have power in its discre-tion to order electric current for distribution to be delivered at a suitable primary voltage, to any city, l village or township through which a transmission line ' or-lines may pass; to order, service to be rendered by

,                    ;any such electric utility in any case in which it shall be reasonable for such service to be ordered .                    . ."

In light of the narrow construction of the Commission's powers by the Michigan Supreme Court, it is at best doubtful what sta-

        .tutory scheme contemplates that'the Commission should play a role in the wholesale markets beyond orderin g the sale of firm bulk power, in appropriate instances, where the transmission lines owned by - the utility pass through the municipality.

Moreover, this Commission has a clear Congressional jurisdiction. Absent a clear showing of conflict and a limita-tion on :its ' jurisdiction, it is questionable whether it should )_ ; attempt to interpret local law.

or had determined that the activity was justified by a greater public purpose than competition. In doing so, the court noted that the state statutory scheme under consideration did not con-template any restraint of trade beyond a monopoly of local tele-phone service:

                             " Antitrust immunity does not automatically follow, however, when the putative state action consists of regulatory rulings by a state agency and the regulated corporation's compliance therewith.      This court also rejects the ' facile conclusion that action by any pub-lic official (or regulatory agency] automatically con-fers [ antitrust] exemption.'     Unless it is inherent in the statutory scheme or program that antitrust re-straints flowing from an ' approved' merger were both anticipated and intended by the state tc result therefrom and, nevertheless, were intended to be pro-tected from antitrust attack as a necessary concomi- -

tant of the implementation of the state's scheme or

program,.and.the state's regulatory policy is consis-tent with federal national policy, then ' approval' of such a merger, horizontal or vertical or both, by a state regulatory agency does not cloak such merger with Parker immunity. In the telephone industry there might possibly be some acquisitions which might be held to implement some necessary intrastate regula-tory objective and which, after in-depth investiga-tion and evaluation of resultant trade restraint by a commission, might upon ' approval' fall within the distinctive walls of Parker. On the record here, however, there is nothing to indicate that even the horizontal aspects of GTE's questioned mergers were so studied and evaluated by any commission. Neither the interstate nor intrastate restraint of trade as-pects of the vertical side of the GTE mergers were ever so evaluated or ' approved.'

                            "As a policy matter a state may conclude that it is an economic necessity that certain public services be supplied to its residents through a privately owned

monopoly. However, there is nothing in the record or the statutes of the several states here considered to indicate that any of the several states intended that their regulations were expected.to bring about any restraint of' trade other than through a state-given monopoly of local or state telephone service. Nor is there any indication that Congress has ever intended to give them any other' immunity power. As the court said in Hecht v. Pro-Football, 444 F2d 931, 935 (D.C. Cir . , 1971) :

                             '[W]e suggest that it may be inaccurate and con-fusing to speak of " valid governmental action which is immune from application of the antitrust laws." Rather, the proper inquiry would seem to be to what extent Congress has knowingly adopted a policy contrary to or inconsistent with the previously established antitrust laws, or, where state action is concerned . . . the inquiry should be to what extent is the state action permissible as not contravening the federal antitrust laws,.

which in our federal system constitute overriding legislation under the federal commerce power.'

                            "GTE's acquisitions are not protected by Parker."

(Footnotes omitted). Also see: George R. Whitten, Jr., Inc. v. Paddock Pool Builders,

        - Inc., 424 F2d 25, 30-31 (cal, 1970) (State regulation of public contracts does not preclude antitrust review) ; Utah Gas Pipeline Corp.-v. El Paso Natural Gas Co., 233 F Supp 955 (Utah 1964)

(State regulation of gas distribution cannot preempt review of gas line fields under the antitrust laws) . .f O e 6

       .                  II. THE FACT THAT CONSUMERS POWER COMPANY MIGHT VIOLATE THE LAW INDEPENDENTLY OF THE CONSTRUC-TION AND OPERATION OF MIDLAND DOES NOT ELIMINATE THE AUTHORITY OF THE COMMISSION TO ORDER CORRECTIVE LICENSE CONDITIONS Consumers Power Company states, "Under the standards set forth in the Commission's Opinion in the Louisiana Power &

Light Comoany Antitrust Proceeding license conditions relating to antitrust matters cannot be imposed unless there is a causal connection between applicant's proposed " activities under the license" and a " situation" allegedly inconsistent with the anti-trust laws." Brief, pp. 6-7. From this basic premise, the Com-

 ,           pany leaps to the conclusion that there is no " causal connection" because the " situation ~ inconsistent" claimed by the Department of Justice and others would exist regardless of the construction and operation of Midland. That is, the company claims its dominant position concerning pooling and interchange arrangements pre-dated its Midland application.
                         .The Company ignores th'at the statutory language speci-fically included the " maintenance" of a situation inconsistent with the antitrust laws. No one disputes the importance of Midland power to the Company's operations.      The fact that a similar situation inconsistent might arguably be " maintained" with the Company's construction and operation of large fossil fuel plants        !

or otherwise does not negate the fact-that Consumers Power Company is using nuclear fueled generation. And that the " situation incon-

            -sistent" might be maintained in some other way is irrelevant.

Moreover, to the extent that nuclear power has'advan-tages over other forms of generation and interveners or others are

             ~ deprived of access, the dominant situation of Consumcrs Power j              Company can only be enhanced.

Ignoring the statute, Consumers Power Company makes extensive arguments based upon its selections from " legislative history". Its principle legislative history argument appears to be based upon language to the effect that a licensing proceeding should not be "an appropriate forum for wide ranging scrutiny of general industry affairs essentially unconnected with the plant under review." Brief, page 16, quoting from Senate Antitrust and Monopoly Subcommittee Hearings, Part II, at 365-366. Of course, the degree of relationship between a " situation incon-sistent" or relief sought and the construction and operation of i the_ plant is a factual matter. In this proceeding, Consumers l Power Company admits tha,t there will be a commingling of power from the Midland Units with "the Company's- other generating capa- i city through'its transmission system". Brief, p. 8. California

v. LeVaca Pioeline Co., 379 U.S. 365 (1965). Nor will this power i

be an inconsequential part of the Company's operations. See also r Houston E & W Texas Ry. v. U.S., 234 U.S. 342 (1914);

FPC-v.. Florida Power & Light, 404 U.S. 453 (1972); FPC v. Louisiana ! ' Power-& Light Co., 406 U.S. 621 (1972). Rather, the Company clearly intends 'to _ rely on nuclear power for most of its base load power t- sources. It'is unlikely in the extreme.that the construction and L ' [ - 7 _ _ _ _ _

operations of units the size of Midland could take place without the existence of broad pooling and interchange contracts. The construction and operation of Midland is vital to Consumers Power Company's generation program and is supported by its general transmission network and interchange agreements. Absent such agreements, Midland Power would be far less valuable to it, if it would be feasible at all. For the same reasons, absent equal access to such transmission and pooling arrangements, Midland power would be far less feasible for interveners. The Company admits the basic facts. Its only argument is based.upon an out-of-context sentence from an LP&L initial order that power is generally " commingled" and a premise that the fact of commingling should limit the Commission's authority. However, Congress clearly intended the Commission to scrutinize the facts. Nor would it solve the problem of the situation inconsistent to allow for more limited relief than that which would put interveners on a par with applicant in their resource opportunities. The company attempts to imply that by seeking access to the same types of arrangements enjoyed by Consumers Power Com-i pany on the same terms and conditions that interveners are recom-mending a change industry structure contrary to its selected reading of the legislative history. However, neither interveners, the Department of Justice or AEC Regulatory Staff, seek relief changing the basic- means whereby power is mar'keted. on either wholesale or retail levels, unless allowing access to bottleneck facilities and

                                               .--y    _        -    .. -,, ,- -- ,        - . - , ,

l

coordination is somehow deemed a basic structural change. Indeed, all that is sought is inclusion in the existing arrangements of l interveners on equivalent terms. Moreover, while the relief sought by interveners would l l be appropriate even under Consumers Power Company's legislative l history selection, the company itself admits that there is legis-lative history looking to a far broader interpretation of the statute (Brief, pp.16,19), but argues there was opposed opinion. While it attempts to brush off such material contrary to its posi- l tion as inconsistent, there is no po.'. icy reason for favoring its narrowed reading of selected portions of legislative hearings as ; l determining the intent'of the statute.,*/ Thus, the Waterford licensing and safety board has held allegations,that the construc-tion of an atomic facility would maintain the Applicant's monopoly position and that the construction of the plant would materially assist the applicant in providing for its own coordination without entering into agreements with competitors, alleged the requisite nexus:

                     "In sum, the petitioners allege nexi between the situation alleged to be inconsistent with the antitrust laws and the activities under the Water-ford 3 license. It is asstered that:

(1) Applicant has or is attempting to acquire a monopoly of large low cost electrical generating units in the relevant geographic market; (2) Control over the bulk power transmission , system in the relevant gebgraphic market is funda- l mental to the creation or maintenance of such a ' l i

        */ We discuss the legislative history of the Act principally             l in Section III A of our initial Brief, pp. 75-85.

l j 1 monopoly, and Applicant has a monopoly of facili-ties for the transmission of bulk power- and power for system coordination; (3) - Applicant has or is attempting to acquire a msnopoly in coordination reserve power sales; (4) Applicant alone or in combination with others attempted to hinder or prevent efforts by the petitioners to construct their own transmis-sion systems for bulk power and coordinating power. This conduct of Applicant, whether legal or- illegal, was intended to maintain its monopoly positions; (5) Construction of Waterford 3 would maintain or strengthen Applicant,'s monopoly position by pro-viding Applicant with the ability to serve the in-creasing demands of present customers and the demands of new customers while foreclosing petitions from the ability to serve these demands; (6) Construction of Waterford 3 would materially assist Applicant in providing for its own coordina-tion and reserve sharing needs without entering into agreements with intervenors. See also " Memorandum of Board with Respect to Appro-priate License Conditions Which Should Be attached to a Construc-tion Permit assuming Arquendo a situation Inconsistent with the Antitrust Laws", Louisiana Power & Light Co. (Waterford Steam Generating Unit No. 3), Docket No. 50-382A, pp. 18-19, and 24, deeming nexus part of the assumed situation inconsistent (October 24, 1974).

                        "The contention of the Cities can be simply stated as:    The lack of right of access to Waterford (1) gives Applicant an unfair competitive advantage due to economies (a) related to nuclear facilities and (b) related to large-scale facilities, and (2) gives Applicant an unfair competitive advantage in the ability to generate power even when plagued by shortage of fossil fuel (Tr. 960; Tr. 969-973; Tr.
                   ,    1779; Tr. 2038-2039; Post-Trial Brief for Cities September 5, 1974, pp. 18-19).

        "From the time of the Atomic Energy Act of 1946 to the present, the Congress has been concerned lest small entities be excluded from the economies of large-scale nuclear facilities. During the hearings before the Joint Committee on Atomic Ener-gy, Congress of the United States, Ninety-First Congress, on Prelicensing Review of Nuclear Power Plants (1969-1970) there was concern lest small
       , entities. would be at an unfair disadvantage by lack of access to nuclear power facilities due to fossil fuels (Joint Committee Hearings, Part 2, pp. 352, 388, and 404). Thus, the Cities' posi-tion is essentially that the fears of Congress have come true, so that the remedies provided by law should be applied."
        "As a general rule, where the granting of a con-struction permit for a nuclear facility would create or maintain a situation inconsistent with the antitrust laws or the policy clearly under-lying such laws, a condition providing for the   .

right of access to that same nuclear facility is deemed an appropriate remedy, absent cogent rea-sons to the contrary. In response to the show cause order, under the assumption arquendo, the Cities have demonstrated a need for right of access to Waterford, and a careful study of Appli-cant's reasons for denying access to Waterford fails to reveal a sound basis for departing from the general rule. Therefore, Applicant's Commit-ment No. 4 is deemed an inadequate condition." Louisiana Power & Light Co., suora, Slip. Op. at 18-19, 30 (October 24, 1974).

             ,                              e 4

a

III. THE APPLICANT MAINTAINS A SITUATION I INCONSISTENT WITH THE ANTITRUST LAWS l l In their initial briefs, the Department of Justice, the AEC Regulatory Staff and Interveners have demonstrated that Consumers Power Company has been using its dominant power to block or limit access on the part of Munis/ coops to low-cost power supply. In conclusory terms, the company has monopolized or attempted to

      ' monopolize both facilities and markets.

Varying violations of the antitrust laws and policies are involved, including that by control over the major base load l generation, transmission facilities and access to coordination, Consumers Power Company can and does limit the access by the smaller, systems to alternative markets for purchased power, to lower cost sources of generation and to non-discriminatory coordination. Apart from technical responses that it has not violated the law, Con-sumers Power states that it does indeed intend to make access to nuclear generation unavailable and to exclude interveners from transmission and coordination rights when this would be disadvan-( tageous to itself, but claims that this is justified on varying , grounds among which are the ability of Munis/ coops to compete without access to the " bottleneck" sources. To be more specific, the Department of Justice and other parties have accused Consumers Power Company of maintaining a classic monopoly. Summarized, the Department of Justice Brief l 1 demonstrates that Consumers Power Company dominates -- and limits

p v access to -- the " power exchange" market and'also, more generally, that it dominates the wholesale power supply markets.

The-inter-veners agree with and support this position. The Department of Justice, the AEC Regulatory Staff and the Interveners have further demonstrated that Consumers Power Company has a complete domination over the large scale generation, high voltage transmission and attendant coordination arrangement's. Denial of access to these facilities and arrange-ments deprives interveners of access to low cost nuclear power, joint venture arrangements and the purchase of plant capacity from others. Denial of coordination further deprives the Munis/ coops of the most efficient use of their own generation. The former market analysis theory appears to be more

 ,         emphasized by the Department of Justice and the latter " bottleneck" theory.is emphasized by interveners, but they are mutually suppor-tive. Be it through a monopolization of a market or sub-market or the control of vital facilities, the use of dominant power to pre-vent competition creates an unlawful monopolization or tendency to monopolize under the Sherman Act.*/

The Atomic Energy Commission Regulatory Staff supports both theories. The AEC Regulatory Staff stresses that Consumers

           */ Cons'umers Power Company treats this case as if it were only charged with violation of Section II of the Sherman Act. How-ever, it also viol ta es the Section I. Brief, p. 2.      Its pooling and interchange arrangements are clearly actions taken in con-junction with others that limit interveners ability to compete in bulk power markets. Moreover, Midland'is a joint venture with Dow from which interveners would be c::cluded.
       -Power Company isLutilizing its control over markets and vital facilities to engage in unfair competition, which would be equally prohibited under the Federal Trade Commission Act, 38 Stat. 719; 52 Stat. 111; 64' Stat. 21; 66 Stat. 631; 72 Stat. 942, 15 U.S.C.

45, as well as other antitrust laws. Finally, we point out that

       'to the extent Consumers Power Company refuses to sell individual power services separately or conditions the. sale of such separate services, it engages in unlawful tie-in sales.

The above listing of basic arguments made by the Depart-ment, the AEC Regulatory Staff and Interveners is not meant to be exclusive. Indeed, Consumers Power Company is additionally engaging in a host of antitrust violations ranging from exclusive marketing arrangements to unlawful territorial agreements. What should be stressed is that all the arguments have in common the element that j Consumers Power Company is in one way or another using its dominant position to prevent the smaller systems from having an equal access to power. supply. sources. Consumers Power Company states that interveners have sufficient alternatives available so that it is not essential for them to have access to nuclear generation, transmission or coordina-l tion, although we note that in attempting to distinguish Otter Tail (Brief, p. 152) , the Company concedes that under certain factual 1 circumstances there would, in fact, be an obligation on its part to deal. What the Company.says here is.that, since the alternatives of self-generation and purchased power are available, these are sufficient. .- . . _ - -

It needs be stressed that, although the Company structures its brief as if it were making separate arguments in answer to the charge of monopolization of the power supply (and wholesale power markets) and the exercise of power over bottleneck facilities,. Consumers Power's answer to all charges is the same. The Company's entire case is dependent upon its thesis that its willingness to sell wholesale power and the ability of Munis/ coops to self-generate are sufficient to allow Munis/ coops to be deprived of access to alternate sources through transmission, to nuclear generation or even to coordination of the generation that they do possess. A. Apolicant Misconstrues the Legal Standards which Are Useful in Determining the Relevant Markets and Sub-Markets Otter Tail establishes that control of a vital area of commerce, or factor of production, carries an attendant obli-gation t.o permit reasonable access, where to do.otherwise would extend monopoly control. Thus, Consumers Power's attempts to block smaller systems from alternative wholesale power sources and mar'kets or to use its dominant power to exact a monopoly - price for such access are inherently anti-competitive. Consumers Power Company would blunt the thrust of Otter Tail, however, by citing an intermixture of antitrust cases that use broad markets to analyze monopoly and cases that excluded segments of commerce froir. the market. 4 5

At the same time, the Company argues that the entire wholesale. market should be used as a basis for analysis and that the retail market should exclude areas that Consumers Power con-trols. It further argues that the wholesale market should exclude generation for self-use. But the Company reargues Otter Tail, which determined that control of.a factor (e.g., " wheeling") sufficient.to limit competition is enough to find monopoly con-trol and a basis for relief. The purpose of antitrust review is to look for restraints on competition -- not to engage in sophis-

ticated market share analyses for its own sake International T & T Coro, v. General Telenhone & Electric Corp., supra, 351 F Supp. at lli4-ll75. .

                               ~Before specifically discussing the company's case ana-lysis, we make one further general comment.                                                                     A defendent to an antitrust claim will often argue for an all encompassing " market".

By.so doing, the control of an area of the market is a smaller percentage of the whole. Thus, if a hypothetical manufacturer sold 100% of corn flake sales, it might only sell 50% of cold cereals, 25% of all cereals and 1% of food. A. hypothetical case, holding , that because other cereals are substitutes for corn flakes, in an acquisition case the court will analyze control of the cold cereal market,does not excuse use of a dominant position in a narrow mar'ket -- be it corn flakes or transmission -- to extend control over other markets. Nor, assuming freedom of entry, could an airline defend anticompetitive practices in the airline industry 4 because of competition from rails or busses. E.g., Fortner Enterprises v. U. S. Steel corp., 394 U.S. 495 (1969). Applicant relies upon United States v. E. I. DuPont-

   'Nemours and Co., 351 U.S. 377 (1956), for the proposition that a supplier does not have monopoly power, if there are available substitutes in the market.          Thus, at pg. 81     of its Brief, the Company argues that the " power supply" or " coordination" market must be subsumed in the " single bulk" power market due to their
     " reasonable interchangeability".          It similarly argues that DuPont answers Otter Tail (although Otter Tail came later) "because there are other adequate substitutes for these resources available to others in the relevant bulk power market -- self generation, whole-    ,

sale purchases, and under approoriate circumstances, coordination power." .Brief, pgs. 150-151 ff (emphasis supplied). DuPont stands for the proposition that if there is functional interchangeability among products, the products can be considered as part of the same market. The Company argues the l case stands for the proposition that the Board should find a broad market, encompassing all wholesale power supply. Thus, it seeks. , to avoid examination of its soecific control and ability to exclude I access to nuclear power, transmission, and coordination, j 1 There are limits to how far courts will expand a prc-

   . duct market.       Consumers fails to note that in the DuPont case the substitutes available would have substantially served the same
                                                                                   ~

I pureose as cellophane, the product which DuPont was alleged to possess monopoly power over. The Supreme Court stated:

            "In considering what is the relevant market for determining the control of price and competition no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purnose make up that part of the trade or commerce, monopolization of which may be illegal" . 351 at U.S. 395 (emphasis added).

The Court also stated:

            "When a product is controlled by one interest with-out substitutes available in the market, there is monopoly power. Because most products have possible substitutes, we cannot, as we said in Times-Picayune Co. v. United States, 345 U.S. 594, 612, give that
            " infinite range to the definition of substitutes".

351 U.S at 394. - In reaching its conclusion that cellophane was part of the trans-parent wrapping market, and not a separate relevant mar'ket, the Supreme Court noted that for every one of its uses the produce faced competition from a product with different physical character-istics but adapted for the same use. Consumers' attempt to draw self-generation and bulk power into the same relevant market ignores the fact that each factor of production serves a particular function within the elec-tric power industry. Here several municipal and cooperative utili-ties seek to supply the needs of their customers. In doing so, they must fill out their demand curves from various sources of base load, intermediate and peaking power. Consumers argues that, these because utilities can generate their own power or buy it from Consumers, they don' t need access to the factors of production. i But this is not the teaching of the DuPont case. Nothing in l the DuPont line of cases holds that products are part of the i same market where the user would have to stop producing'his ! I product and buy it somewhere else. Consumers also relies upon United States v. Charles Pfizer and Co., 246 F. Supp. 464 (E.D.N.Y. 1965). However, that ! case does not support that products.which have different uses may l be included within the same market. The product being considered in that case was Citric-acid. Citric acid is used as an acidulant in a number of foods. While no one substitute was interchangeable with Citric acid in all its uses, the Court noted that for each use of citric acid, the product faced vigorous competition fr'om other acidulants:

                               "Despite advantages of Citric acid, other acids were available and functionally interchangeable with it.

An examination of tne use of acidulants in specific foods and beverages and effervescent alkalizing pre-parations, will determine whether such assets were in active competition with Citric acid in those mar-1 kets during the complaint period". 246 F..Supp. at l 468 '

After noting the availability and use of other acids, which were also useable for each type of food product, the court rejected i

inclusions of acids in baking powders, baking products and rye ! l sours as part of the relevant market: l l

                               " Acids are used in baking powders, and baking pro-                                       l ducts to release carbon dioxide. They produce a                                            l chemical reaction similar to that of effervescent                                         j alkalizing powders. It is not used, as in foods and beverages, to add an acid tang and thus to enhance the flavor-                                                                        I

                       . of the products; and its release of carbon dioxide is not as an alkalizer. I have, therefore, declined considering baking powders, baking products or rye sours as part of the relevant market". 246 F. Supp.

, at 469. Consumers cites Pfizer for the proposition that

        " functional interchangeability does not require complete identity of use".      However, the Pfizer court uses a two part test to deter-
       ,mine the inclusion of other products within the relevant market.
                         "Having found one or more products functionally interchangeable with Citric acid in a particular use, the next question to be resolved is one of purchaser reaction -- the willingness or readi-

! ness to substitute one for the other.

                         "In determining (reactive) interchangeability of acids for the use referred, the factors that normally determine the choice or preference of the user must

-be considered. The difficulty of co,st in adapting a method or process of manufacturer to the varying physical characteristics of a substitute, as well as transportation in storage must be examining a determining reasonable interchangeability. The significance of each factor varies with' the user and the requirements of each product." 246 F.

Supp. at 468.,*/ Consumers also misconstrues the holding of United States v. Grinnell Corp., 384 U.S. 563 (1966), discussed earlier )

        */ National Aviation's Trade Assoc.       v. CAB, 420 F. 2d 209 (D. C.
            -Cir. 1969), also cited by Consumers, does not justify its pro-
                    ~

posed rejection of the needs of interveners. While airports incapable of handling high performance aircraft were included within the relevant product market, the Court no,ted that as the l amount of air space available over New York is limited, the airports immediately. surrounding New York City would not serve the needs of general aviation enthusiasts anyway. Thus, the CAB could reasonably. conclude that there would be market pressure to improve outlying airports to accomodate high performance air-craft.

when-it states that the Supreme Court combined in a single market a number of different products and services.*/ The relevant market i issue in.Grinnell was whether a particular combination of pro-tective services ava'ilable through central dispatching could be substituted ,for by various other protective services available in the market place. The Court noted that some buyers of the service required the broad protection and held that the other alternatives were not reasonable substitutes. The basic misunderstanding underlying Applicant's view of the relevant product market is the confusion between factors of production and the end product. In Union Carbide and Carbon Corp.

v. Nisley, 300 F. 2d 561 (10th Cir. 1962) appeal dismissed,,371 U.S.

801, the Court stated that the factors of production should not be 4 confused with the end product in defining the relevant market:

                        "There was some evidence that ferrovanadium was sold in the ferro alloy market in competition with other alloys. And, commodities which are " reason-ably interchangeable by consumers for the same purposes ma'ke up that 'part of trade or commerce',

monopolization of which may be illegal". See DuPont, 351 U.S. p. 395, 76 S. Ct. p. 1007, quoted in International Boxing Club. But, Section I of the Sherman Act condemns unreasonable restraints - irrespective of the amount of trade or commerce involved; and Section II condemns a monopoly or 1 l 4

           */ Continued-                                                                                     )

The exclusion of consideration of the needs of high per-formance aircraft owners from the relevant market determination - l was ' justified by the determination that there was a strong like- I lihood of development of strong competition in outlying areas. I No such similar consideration is present in this case. There ! is no similar pressure alternative transmission facilities. l l i l

continued-

                          " attempts to monopolize -- either in concert or individually - 'any part of the trade or commerce'.

See United States v. Paramount Pictures, 334 U.S. 131, 68 S. Ct. 915, 92 L. Ed. 1260, also quoted in International Boxing Club. We do not understand

                      -   the DuPont case to hold that every commodity which is reasonably interchangeable with another conmodity cannot be the subj ect of a Section II illegal mono-polization, for, " industrial activities cannot be confined to trim categories. Illegal monopolies under S2 may well exist over limited products in narrow fields where competition is limited".

DuPont, 351 U.S. p. 395, 76 S. Ct. p. 1007. In our case, the mining, processing and marketing of the. finished products from vanadium ore were un-doubtedly an integrated industry forming a defin-itive part of trade and commerce, and it was un-doubtedly the subject of monopolization without relationship to other competitive products. More-over, the gist of the claim here is not the mono-polization of the finished product, ferrovanadium, but rather of the raw materials from which it was made. The mining and marketing of the raw materials were undoubted 1v an "anoreciable part of interstate : commerce" and as such subiect to a Section 2 mono-polization. United States v. Yellow Cab Co., supra.' l 300 F. 2d at 585. l Here, interveners seek to use the various factors of production to provide their own bulk power. To , state that bulk power is avail-able in the market confuses the factors of production with the end product. It tends to foreclose interveners from competing in the sale and exchange of wholesale power services, as well as retail markets where competition exists. Ultimately, blocking smaller systens from competitive power sources can drive them from busi-ness, leading te a takeover of their retail markets. This adverse l l effect upon competition of high cost power, in relation to a dominant 1

utility was. recognized in a recent Federal Power Commission pro-ceeding where wholesale power rate schedules were rejected as anti-competitive: 4 It is reasonable to conclude that unless a more equitsble and a more competitive rate structure is afforded the municipalities, the erosion of consumer confidence in the municipal systems will continue, particularly if Edison ~ maintains its practice of pacing its price increases to its S-1 customers at intervals apprecisbly earlier than its price increases to its own direct customers. As has been stated sbove, as the erosion of con-sumer confidence in the municipal systems continues, voter support for such systems decreases, and the continued survival of these systems as independent utilities becomes questionsble. Municipal Licht Boards v. Boston Edison Co. , FPC Docket No. E-7400 (July 19, 1973) Slip. Op. at 183 (Edelstein, A.L.J. ) The second misconception underlying Applicant's sub-stitutsbility argument lies in the use of the claim that self-generation is a ready substitute for the required services. Con-sumers Power Company argues that small unit generation is a substi-l I tute for nuclear access,, transmission, and coordination. However, suc availsbility m&kes self-generation more feasible. Thus, Consumers Power Company would limit the effectiveness of the " alternative" of self-generation. Consumers Power Company argues that purchased power is an alternative to the relief requested. However, a city or cooperative may choose to self-generate as more profitable than i purchasing power. ! Consumers Power Company should not be sble to fore-stall a smaller utility's citizens or ratepayers from making l l

O that choice. Cases which have applied the DuPont-Cellonhane tests have always recognized that where one product or service (e.g., self-generation) offers distinct advantages over another, it cannot be considered within the same product market. See, e.g., Marnell v. United Parcel Service of America, 1971 CCH Trade Cases 173,761 (D.C. Cal.1971) (The fact that one package de-livery service made at home deliveries on a regular schedule, fol-lowed up attempted deliveries where customers were not at home and insured all packages, placed it in a market distinct from regular common carriers.) International Boxing Club of New Yor'k v. United States,.358 U.S. 242 (1959) (Championship boxing matches were' held to constitute a distinct product market from boxing matches as a whole.) One can extract from these cases the simple principle that products are not readily substitutable when they serve dif-ferent purposes in the production process. B. Apolicant Maintains Monocolv Power over the Services to which Interveners Seek Access Consumers Power Company cites DuPont for the proposi-tion that the Board should find a broad market. However, as we point out in. the previous section, it attempts to eliminate the obvious demonstration of its power over that mar'ket by the simple device of excluding its generation used to serve their loads. The result is made more marked by the inclusion of Lansing's self-genera-tion. Lansing, which has over 600 mws of generation, is far larger than any other cooperative or municipal' system in Michigan, the next largest generating system being less than 100 mws,Ex. 1001,

                                  -m m

I I

p. 11. Clearly, any fair market analysis would have to treat

. self-generation of applicant and interveners in the same manner. i l However, after. Otter Tail, interveners fail to see l how ' Consumers Power ' Company can continue to deny access to bottle-i neck facilities based upon determinations of market shares. As i 1 Otter Tail pointed out in its brief to the Supreme Court, and as Consumers Power points out here, to a large extent ' control of retail markets goes to the successful competitor. Further, for. generating systems, absent elimination of barriers to wholesale competition, the j i amount of self-generation will be limited by the extent of the utilities retail market. The resulting partial monopolization did

,           not give           rise to a right of refusal to deal b'y the dominant Otter                                         '

! Tail Power Company. To the contrary, as the Supreme Court found, i the partial monopolization that resulted made more important the necessity to preserve competition where posdible by allowing access to bottl.eneck facilities. The same principles apply'here. 1 The difference between Minis / coops'and Consumers Power's position is that Munis/ coops contend that because of the partial monopolization of the electric power industry, where competition is feasible it should be encouraged, whereas Consumers Power contends

         ?diat -the partial monopolization of the industry should be extended to provide it complete protection from any compe tition.                                  It is j-          precisely that latter contention that Otter Tail rejects.                                          Accord

, Gulf-States, Utilities Co. v. FPC, 411 U.S. 747 (1973); Northern e

      =                  . + - .  ,         w-           y--- .          v,-               -,y--   ----.-,-e,-gy      +wy,   -

Natural Gas Co. v. FPC, 399 F2d 953 (CADC, 1968); International Tel. & Tel. Corp. v. General Tel. & Electric Corp,, supra, 351 F Supp at 1180-1186. To be very clear about the matter, there can be little doubt that if Consumers Power Company did not possess the requisite

retail franchises and other. local permissions, it would not have been able to support its domination of bulk power transmission. The same large markets are necessary to absorb the output of large scale nuclear generation. And finally, the legality of its coordina-tion arrangements themselves are dependent on the public utility status of applicants.*/Thus, there can be no doubt that Consumers Power Company's coordination arrangenents would be unlawful; if such arrangements were attempted by non-regulated corporations. E.g. Associated Press v. United States, 326 U.S. 1 (1945). See United States v. Socony-Vacuum Oil Co., Inc., 310 U.S. 15 (1940); United States v. Tocco Associates, Inc., 405 U.S. 596 (1972). What Consumers Power Company seeks to do is to use the advantages it possesses in maintaining bottleneck facilities and coordination agreements to further limit the competitive - opportunities of the smaller systems and make more secure its existing monopoly power. Having secured the special privileges represented by its franchised areas, facilities and coordination agreements, Consumers Power Company cannot then successfully argue '

       */These arguments are factually supported in Part I of Munis/

coops initial brief.

++

l 1 l i that smaller entities can be excluded from such arrangements. It certainly should not be able to do so on the basis that they are a 1 natural extension of those rights already granted. E.g. United States v. Loew, Inc., 371 U.S. 38 (1962). 1

The construction of major new facilities, such as Midland, especially demands the preventing of anticompetitive consequences from dhe beginning. United States v. El Paso Natural , i Gas Co., 376 U.S. 651 (1964). ) l By not having access to transmission facilities and power coordination arrangements, Muni-Coops' opportunities for I reduced power costs are lessened'. Lack of access to transmission facilities reinforces existing territorial arrangements covering wholesale power, whether written or understood. -It similarly re-duces the opportunity of interveners to build larger plants and sell the excess power to others -- or even to each other. Moreover, as we have explained extensively in our initial brief, as well as being sold as full' requirements power, wholesale power is bought and sold through individualized transactions, usually pursuant to pooling agreements. If interveners do not have rights to equal interchange arrangements and to fair access to the facilities that are necessary for. efficient generation and interchange they will be less equipped to buy and sell specialized power transactions, such as emergency power, ' maintenance power, economy exchange, short-term firm power, ' l i seasonal power, etc. If Consumers Power Company or Detroit Edison i company,- for example, must purchase a block of power for a specific m . _. . .-_1

e purpose, the sale is more likely to be made by Detroit Edison Company or another major company rather than by a Munis/ coop. Or if because of a discriminatory arrangement, interveners will obtain less financial benefits from the transactions, their revenues will be reduced. Under such discriminatory arrangament, interveners will obtain less financial benefits from the trans-actions, their revenues will be reduced. Under such discriminatory arrangements, because of their lesser opportunity to obtain and sell " backup" or interchange power on a fair basis, it,is less economdc for interveners to construct' larger more efficient units, limiting them in competing for future wholesale power transactions.

1. Bulk Power Generation l

The record clearly supports the inadequacy of self-generation for smaller systems compared with access to larger bulk 1 power generation and, more specifically, to nuclear generation. As the company itself admits, smaller units are less efficient than l large base load. units and have both higher capital costs and out-put costs per unit of generation. This issue has been fully dis-cussed in our initial brief. Eg., pp. 19-21. Moreover, as we have stated, smaller units are apt to create greater environmental problems and less efficient energy utilization. At issue is the licensing of 1,300 mw of nuclear capacity. As not 'only this record but the very enabling statute under which this case is being decided recognizes, that nuclear power has unique l - 1: =

characteristics. From an economic standpoint, while its initial 1 capital investment costs are high, it provides far lower energy cost generation per kwh than existing units. Nuclear energy avoids air. emission problems associated with fossil fuel genera-tion. Especially considering the uncertainities from both avail-ability and cost standpoints of fossil fuels, the availability of direct access-to nuclear powered generation cannot be equated-to the ability to self-generate from small units. In attempting to deny them permanent access to nuclear 1 technology, Applicant would relegate Munis/ coops to permanent second class. status. We stress that in our view the issue is not whether nuclear posered units are to be preferred to fossil fueled units, l although there is ample evidence in the record to support that find-ing and no evidence to the contrary. Rather, the issue is whether Consumers Power Company is correct in its contention that the pos-sibility of generation by the small systems with fossil fueled units is sufficiently similar to ownership-of nuclear generation to make l them virtual equivalents. Even before.the recent focus on energy shortages- and environmental problems, Congress determined otherwise. 7 . - j A manager of a smaller system may choose that it would be r

desirable for that system to have an ownership in nuclear capacity.

We do not believe that Congress intended -- or.this record can support

              --- that that system should be denied such alternative.                                 This is
              -especially so when-it is considered'that against the 1,300 mw of nuclear generation planned.by Consumers Power Company (in addition to
                                                          ,.n. ,._ . - . - .-                           '   ' ' ' '

 ,   thnt'which.it plcns in tha futura and alrecdy possedeco), tha largast existing ~ unit of any of the interveners is no greater than 30 mw.*/

consumers Power Company eludes to hearsay discussions that certain of the interveners have considered installation of 350 mw coal-fired units. (Brief, p. 220) . Interveners have been studying various alternatives available to them as any pru-dent system managers would do. No interveners,or any group of

          ' them, has found such generation feasible and this record confirms that they could not, absent transmission and coordination under equalized reserves conditions.         See text, infra.
      .                  Consumers Power Company completely dominates large unit generation and transmission.         Excluding interveners from nuclear units can merely increase the tendency towards such monopolization.

Nor, can we comprehend the public interest in excluding one seg-ment of the industry from such nuclear access. In addition to its argument that the small unit self-generation available to interveners suffices to exclude them from

          ' access to the more desirable        Power supply sources, as stated, Consume:'

Power Company argues that interveners .can purchase from it and th,at the availability of this alternative protects it against both a mono-polization charge under the Sherman Act and more specifically against Otter Tail. First, it is important to note that Consumers Power Company never expresses a willingness to coordinate with a utility

**/

Jand sell it wholesale power at the same time. It must be stressed

           */ . Munis/ coops Initial Brief, p. 19. ' Lancing has a 160 mw unit. ed.

jL/ 1 While .the situation is distinguishable, Consumers Power Company coordinates with Detroit Edison and purchases wholesale power Qwc14ctfBn9Am16se W

that Consumers Power is stating that it is willing to sell wholesale power under certain conditions, defined by it, and not that it is willing to make wholesale power generally avail-able on terms which would allow for the development of alter-native self-generation. Since failure to obtain coordination increases the cost of self-generation, the purchased power al-ternative is really another pressure to limit the practical value of the self-generation alternative. */ At the same time, as we also discuss later, the Company wholesale power rates contain a " demand ratchet," which results in charging power rates over a 12 month period bas'ed upon the largest amount of power bought from the company during any 1/2 hour period. Thus, should a partial requirements customer have an emergency outage,

   ,             it becomes economic for it to buy up to the ratchet level throughout the year, another discouragement to self-generation--

1 or alternatively, an encouragement to excessive purchased power. - The Company tries to distinguish Otter Tail on the basis that that Company would not sell wholesale power, while Consumers

                 */   Since Consumers Power Company does not hold itself out as willing to provide coordination, for a utility that self-generates to serve part of its load and purchases wholesale power to serve the remainder, self-gene. ration becomes more sub-jact to abandonment. Thus, the Company's argument that the                                   -

smaller systems can self generate or purchase from the Company really amounts to the proposition that they may do one or the other, unless they are willing to pay a high penalty.

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

. . Power Company-is willing to do so. However, Consumers Power 1

Company.does not commit itself to~ sell power to potential wholesale systems. (Brief, at p. 215) . The professed " option" of purchasing power from Consumers l Power Company as a power supply alternative is a claim in fur-therance of monopolizing wholesale power sales, clearly incon--

sistent with antitrust policy. */ ,

A system that wishes.to enter the' power supply business--or stay in it--ought to be , i ' able to do so without being told that it can buy from Consumers Power Company. , Consumers Power Company attempts to argue that its "pur-l chased power" alternative is reasonable, since this allows a. system to purchase Consumers P'ower Company's total " mix" of power from all its plants at Consumers Power Company's average cost levels. As we explained in our Initial Brief, this sug-l . gesion amounts to nothing more than a tie-in sale forcing in-terveners to buy Consumers Power Company's total mix of power de-spite the fact that they may also wish to self-generate. If, for example, Consumers Power Company's managerial judgment, its retail l market characteristics, its load curve, its-financing availability, ' its other fuel alternatives or any one of the other factors which i 1 may go into'such decisions result in its reaching a decision to I have 50% of its generation in nuclear capacity,

             */   Consumers Power Company concedes that such sales would con-

stitute a separate market . for purchases of Sherman Act analysis.

Initial Drief, p. 152. _.81 -

     ,      cn intorvanor cught to hcva the right to hava acces's to a different amount of such capacity.         Such judgment may of course greatly harm or benefit an intervener, but it is precisely the opportunity to make such alternative choices that are important.

Moreover, Consumers Power Company implies tha t the pur- , chased power a'lternative is " fair" because the rates chargedI, as regulated by the Federal Power Commission, will be based upon the average historic costs of capital which comprise the total invest-ment in the Company's system plus current operating expenses. But the company ignores that there is no guarantee that this will be the

*/

case.- There is nothing to guarantee that Consumers Power Company will not file for -- or the Federal Power Commission might not grant **/ - rates determined upon other than an original cost basis or upon costs assignments or allocations unrelated to wholesale gen-eration and transmission. As anyone sophisticated in rate making knows, costing formulas for rate purposes vary. This is one of the factors which a manager may legitimately take into consideration in determining whether or not to purchase direct access in the Midland Units as opposed to purchased power. (Eg., 5129-5130). In at, tempting to avoid Otter Tail, Consumers Power Company argues that its bottleneck facilities are not " unique". This is part 1 of a bootstrapping argument, where the Company first interprets the bottleneck monopoly cases as requiring absolute non-substitutible and I

       */ A license condition forcing such limitation, however, in the rates it files before the FPC might be considered.
       **/   Ne agree that such method of costing would be improper.

totally unique facilities and then argues that interveners have not met its.cwn self-imposed test. Of course, Otter Tail and the re-lated " bottleneck" monopoly cases require no such thing. Thus, the towns served by Otter Tail had the alternative of self-generation to the same extent as the Michigan communities. Similarly, newspapers excludalfrom the Associated Press had available other news sources and, indeed, other press services. Movie-theater owners in the Griffith case had available other films and we warrant to say that the traveler on the highway in Olde Merry England could no doubt have camped in the woods.

2. Transmission .

Transmission serves a separate purpose within the electric power industry than generation. Both are required for the production of firm power that can be sold to retail

 .         customers. While generation makes power available at a given point, a transmission network is required to make that generation capacity available for distribution to retail customers elsewhere and to coordinate that power so that it can be marketed as firm power. Selfgeneration does not make excess power which might Transmission be available in Ontario also available in Michigan.

facilities are required for this purpose. Complete reliance upon the resources of one municipality requires Ehat the municipality fore-

           */
               'The situation of the ability of interveners to self-generate
           ~

equally to Consumers Power Company is reminiscent of the presumed equality of French laws that equc'ly prohibited beggar and king from sleeping under the bridges of Paris.

go the economics of scale that might be availabic clsewherc. Forced reliance upon -purchases of bulk power from consumers means that the. municipalities are excluded from entering the bulk power market to fill their own demand curves. It forces.c_omplete reliance upon the , efficiency and judgments of Consumers Power Company and the efficacy of regulation in the face of statutory policies favoring competition. A measure of the economic power afforded the corporation 4 that controls the transmission network is shown by an analogy to the oil pipelines within the petroleum industry:

                       "An oil refinery cannot shut down and again sEart operations at will, as most manufacturing             '

plants can. They are like the steel mills in that respect -- once shut down it takes several days to get them back in operation -- on stream we - call. The refinery must operate 24 hours a day 365 days a year. Therefore, they must have an

ample and never ending supply of crude oil.

                        "For this reason the pipelines in the early days                              l were constructed by refining companies from the                               l producing fields to the refineries and were oper-                            l ated as plant facilities. This led to some pretty                             l bad practices by some elements of the industry, particularly by the old Standard Oil group, which as you know, was disolved by court action in 1911.

The Standard group gradually acquired most of the pipe-lines. east of the Rocky Mountains and made its i own rules. It would transport only oil to which held the title. To obtain transportation for his , oil- a producer would have to sell it to the pipe- l

           */    One of the clearest holdings of several recent Supreme court cases is that regulation is no substitute for effective competition.

E.g., Otter Tail Power Co. v. United ' S tates, 410 U.S. 366-372-73 (1973. '

                                                    ~
                                    ~

l line at the lease tank. Of course, this placed , many producers and refiners outside the Standard j Group pretty much at the mercy of Standard. Standard pretty much dictated the prices it would pay for oil in the field and the producer either accepted their price or he could not dispose of his oil. On the other hand, Standard was also in the business of refining the oil and other refiners were at the mercy of Standard for their crude oil supply. Na turally, there was some dis-crimination between Standard and other refiners in crude supply in these small independent re-finers were in no position to challenge the larger group. "jb/ The availability of transmission allows a large utility such as consumers to coordinate its generation among its own plants a'nd to further coordinate with other utilities. Consumers had in 1972 main system peak demand of 4,080 mws and name plate capacity of 4,298 mws or reserves of 5.3% of load. Ex. 1001, JC-3, 1972 Annual Report " Form 1" to the Federal Power Commission, p. 431-b. Compare the situation of municipalities without this access to trans-mission. The largest municipality, Lansing, had 631 mws of genera-tion to serve a 321 mW load. Holland had 77.3 mws of generation to serve a 49.3 mw load.. (Chayavadhanangkur, pgs. 20-21:5090). Be.cause of its ownership of transmission facilities through-out the lower peninsula, Consumers can achieve the internal coor-

            */     Paul J. Bond, " Oil Pipelines - Their Operation and Regulation,

address before the Chicago Chapter of the Association of ICC practioners, February 21, 1958. Printed at - ICC Practioners Journal 730, 735 (April, 1958) .

i . . dination which munis/ coops are denied.- Denial of. access to

                     'these essential transmission facilities places interveners at a                                                                                                                   -

severe competitive disadvantage. Just as control of the oil pipelines allowed the Standard Oil' group to' control the petroleum industry before 1911, so.does the availability of the transmission network provide Consumers'the same advantages.

'3. Coordination Coordination plays a unique role in the production of firm' ,

power that can be sold to customers. It provides an assured avail-l ability of reserves which would benefit both the Interveners and ; i i the Applicant. The use of such coordination by. consumers Power Company. i amply illustrates the importan'ce of. coordination throughout the

l

industry. ,

j . Coordina tion is used to reduce the reserve each member of a network is required to carry in the form of idle equipment. These reserves are used'for emergency power, coordination of main-l tenance, and economy power exchange. While the utilities might be able to continue to function- wi thout ' coordination, they can only [ do so at significantly high costs. Absent coordination the small Lutilities are faced with a H obson's choice of relying upon small inefficient units or allowing a large amount of capacity from -larger l units - stand idle. See Mayben at '2552-2555. i - .l 1

                                                 '.-a      . _ . .   .-     _ . , - . _ - . . _ , . . . . . . _ . . _ - . , - . _ . . . . .     -

Tho illu2tratione cited by Consumora Power Company in support of the " alternatives " available to interveners stress the unique characteristics of both transmission and coordina tion. As the record supports, in view of their size it is readily apparent that for interveners, or any combination of them, to build large units to take advantage of minimal economies of scale, they must have available

*/

transmission and coordination on reasonable terms. Since none of the interveners are anywhere near large enough to utilize a large amount of incremental generation -- or for that matter total gener-ation -- power from such plants must be transmitted for sale to other joint owners or potential purchasers of such power. Obviously, if the transmission rate is too high, the economies from building the

       */ Especially where nuclear power is concerned, an important technological breakthrough in the industry, Interveners request the Board to correct the situation where they are foreclosed from ob-taining initial direct access to the most efficient power supply, which failure must effect their ability to compete far into the future.
 '     While it is a dramatic example, _the ability of applicant to use nuclear power having low incrimental costs in conjunction with the Luddington Power Pump Storage Project,* exemplifies the advantage of internal and external power coordination.        Only through its coordination is Midland feasible. -Only through being able to sell off a portion of Luddington is Luddington economically feasible.          Having access to low cost nuclear power, Consumers Power Company is able to generate from Midland 24 hours a day and in off peak hours to utilize energy to drive water upstream which, during peak hours, will be released to provide for low-cost " peaking" power. Since it takes approximately 3 kwh of energy to drive water upstream for every 2 kwh that results from its release (5390), Luddington is made feasible by the avail-ability of low energy-cost generation sources such as Midland.

(5090: pp. 15-16, 5385-5397, Chayauadhangkur). Consumers Power Company claims it offered Luddington to Intervenors (Brief, p. 185), which is news to Interveners. (5398-5399, 1901-1904). In conjunction with Midland Power, Inter-veners would very much like to. consider the opportunity to buy Luddington power.as well. l

   ,  larger plant are forfeited.       To encourage such transactions within the Michigan Power Pool, Consumers Power Company enters into t1 ns-mission arrangements at a zero incremental cost basis.         Si.'ilarly, absent coordination from such units on an equalized reserves basis, the reserve capacity would have to be so high as to negate the econ-omies of the transaction.

Consumers Power Comp'any demands that munis/ coops maintain additional reserves to those established for its own system. This is no more than a requirement that they pay an extra price for coordina-tion, which because of its monopoly control over vital areas of the electric power market, it can exact. Consumers Power Company argues that the smaller systems can survive without access to coordination. Maybc they can. How-1 ever, it is true that by consumers Power Company 's own admissions l the REA Cooperatives have higher costs than Consumers Power Company and that most of the municipalities in Michigan have gone out of 1 1 the generating business. The rights ,to access cannot be predicated l upon the ability of some of the interveners to survive with sub-stitutes for the major facilities and coordination arrangements developed in the electric industry. Such deprivation is not fair l to their customers. Moreover, increasing the costs of their gener-ation' to their customers limits competition directly contrary to the entire thrust of the antitrust laws.

The fact that some small utility systems are coordinating with each other where feasible or are self-generating is not evi-dence that these modes' of substitution are really natural substitutes for coordination with Consumers. Rather it is evidence that the excessive reserve requirements,of Consumers have driven the smaller systems into fending for themselves. The fact that some of these systems have survived is no measure of the number of systems that have been forstalled from entry into the bulk power market.

C. , Contrary to its blaims Applicant has Violated the Antitrust Laws by Using Monopoly Power for Competitive Advantage in Other Markets Consumers seeks to get out from under the thrust of ' 8 . _Qtter' Tail Power co- v. United States, 410 U.S. 366 (1973), which

  -        we analyzed in our initial brief, by reciting the numerous abuses by Otter Tail Power Co. and claiming that since the abuses may not all be present here, Otter Tail does not apply. lBecause in Otter Tail it was evident that a large power company was trying 'to fore-close several-municipalities from competing.                                  Consumers argues tha t

a predatory. intent must be equally manifest. It seems to argue that the conduct must deprive the municipalities of all access to bulk power. But as_the court made clear in Otter Tail, the fact that some of

the intended victums of anticompetitive conduct are still l

1

*/

Brief, pp._ 151-152, 158 89 - e

z- - -

te - , -g-r , -r- ,- ,- ---,-.c- - - - -- -

-em

                                       #,+1s             .--s as     ai-   6 economically viable is no defense to an antitrust suit.                In Otter TadJ. only~one of the four municipalities directly involved was act-ually foreclosed from building its own power system.                The holding of Otter Tail that refusal by a large utility to wheel power is a violation of the antitrust laws does not rest upon the' happenstance                    j that it was joined with a refusal to supply Wholesale power.1/Rather, it is based ~upon the-thrust of cases such as Griffith v. United States , 334 U.S .100 -(1948) , that a monopolist may not use his
                                                                 ~~/

monopoly position to extend his monopoly.

                  */ ' Consumers attempt to distinguish Otter Tail also fails because it fails to take into account the fact that the relief ordered
   .                   was tailored to fit the violations of the antitrust laws which were found. 'The Supreme Court found that the refusal to pro-vide bulk power and the refusal to Wheel bulk power from other

. sources were violations of the antitrust laws. It upheld in-i junctive relief that compelled Otter Tail to both wheel and sell power.- The fact that Otter Tail was compelled to wheel and sell implies that selling bulk power by itself was not a complete remedy for a situation inconsistent with the antitrust laws.

On the other hand, the Court determined that there might not have been a violation of the antitrust laws based upon the

litigation sponsored by Otter Ta,il. Accordingly, the court re-manded the case to the District Court to reconsider the relief I that ; ordered' Otter Tail to refrain' from lit'ifation against the j' municipalities, which relief was subsequently reaffirmed by the '

District-Court.

          --**/      .Such a rule.cxtends even to patents, a State granted monopoly.

A patent holder may not contract to give a license where the l_ i renumeration_is based upon-goods produced after the patent expires. Brulotte v. Thys-Co., 379 U.S. 29 (1964). Nor may a

patent holder discriminate in the license. terms he offers to potential licensees.- LaPeyre v. FTC, 366 F.2d 117 (5th Cir.1966) .

The fact that its monopoly control of essential facilities may partially result from public franchises does not justify.an ex-tension of that monopoly to other markets. Nor does it justify the use of this monopoly power for competitive advantage in other markets.. Eg. Fortner Enterprises v. U.S. Steel, 394 U.S. 495 (1969); United States v. Aluminum Co. of America, 148 F.2d 416 (CA2, 1945).

                             .                                                        il In Griffith several movie house chains negotiated with film dis-        -

tributors for exclusive first run showings in all of their movie houses. Some of the movie houses were located in towns where there was a single theater; others faced substantial ,, competition. The Court held that the joint negotiation of contracts

        'for movie houses with monopoly power and those without monopoly power violated Section 2 of the Sher' man Act. The Court expressly stated that its holding did not rest upon the fact that more than one chain of movie theaters was involved:
                     "The consequence of such use of monopoly power is that films are licensed on a non-competitive basis and would otherwise be competitive situations.

That is the effect where one exhibitor makes the bargain with the distributor or whether two or more exhibitors lumped *ogether their buying power, as appellees did here. It is in either case a misuse of monopoly power under the Sherman Act. " 344 U.S. at 108. The District Court found that the defendants did not enter into agreements with distributors wnich gave them unreasonable clearances. The Court also ,found that the defendahts did not compel or attempt to compel distributors to grant them approval which were not granted to their competitors or which gave them any substantial advantage over their competitors. However, the Supreme Court in Griffith held that even where the acquisition of monopoly power is innocent (as where the defendant owns the only movie house in town) such monopoly

power may not be used to foreclose competitors or to gain a compet-itive advantage in another-market.

                       "[T]he use of monopoly power, however, lawfully
                     , acquir ed, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful". 3 34 U.S. at 107.

The Supreme Court reversed the lower court 'dec'is' ion because it held

that the necessary effect of the joint negotiation of movie licenses for theaters that faced competiton and those that did not was to use monopoly power in one market for competitive advantage in another, Compare . ' In Banana Distributors v. United Fruit Co., 162 F. Supp. 32, 37 (S.D.N.Y. 1958), reversed on:other grounds and remanded,269 F.'2d 790 (2nd Cir. 1959) , the rule of Griffith was applied to a unilateral refusal to deal on reasonable terms : -/

                        "A single producer in a purely competitive market will ordinarily sell to all comers and is free not to do so if it chooses; but the situation is dif-ferent when the producer has a substantial degree            l of monopoly power stemming from comparative size.            !
                         'Within the limits of his monopoly position the producer can use refusal to sell as a davice to influence prices. Moreover, he has a weapon with which to extend his power over the market' . See 58 Yale Law Journal 1121, ' Refusals to Sell and
          */  The Court stated:
                   "Whether or not the defendants may be considered a ' single tr.ader ' is, therefore, not decisive."

However, in any event here the coordination and joint transmission-agreements are actions taken "in combination" under Sherman Sl. Moreover, whether Consumers Power Ccmpany acts alone is irrelevant under Sherman, S2.

                                        - 9h9 -                             __     .,

Public Control of Competition' . Refusal to' sell on the part of a producer having monopoly control in. order to influence prices or to maintain or

extend its effective marketicontrol is illegal, as is any other device designed to accomplish these ends. See United States v. Griffith, 1948, 334 U.S. 100, 107, 68 S . Ct. 941, 92 L. Ed.1236 ; United States v. Aluminum Co. of America, 2 cir., 1945, 148 F. 2d 416, 427-428.

                 "In the case of bar, there is proof from which a jury might conclude that the defendants engaged ir refusals to sell which may have served to perpetuate defendant 's market status and to affect the price of bananas ultimately charged to the consuming public.

It is clear, therefore, that, at least for the pur-pose of these motions, the refusals to sell (or partial refusals to sell) with which the defend. ants are charged, when considered with attendant facts and circumstances here present, may have constituted, per se, both a private wrong to the plaintiff and a public wrong acr tionah]e undar the treble damages nrovicien of the anti-trust law (Title 15 U.S.C.A. S15). (emphasis added) . " Consumers maintains monopoly pouer over largo bace load i generation, coordination and transmission. Consumers uses the facilities of bulk power generation and transmission and its major coordination agreements to further its competitive position in i the bulk power market. The denial of these facilities to the i interveners and the attendant coordination agreements has the inevitable effect of raising barriers of competition "in the bulk j

   . power market.

United States v. United Shoe Machinery Corp. , 110 F Supp 295,-344-345-(D. Mass., 1953) affirmed per curiam, 347 U.S. 521 i (1954). While Consumers is happy to' sell a smaller utility its total requirements, it will only ' coordinate or sell transmission if it feels that the transactions are beneficial for itself. The benefit Consumers seeks-to gain is the foreclosing of competition. e

IV. LICENSE CONDITIONS SHOULD NOT BE READ NARROWLY, AS IS SUGGESTED BY CONSUMERS

         ,                      POWER COMPANY.

Consumers Power Company apparently accepts some obligations- (1) to sell firm power at both wholesale and retail, (2) to sell transmission services and (3) to coordinate with other systems. Brief, pp. 213-233. It further expresses.some willingness to allow participation in nuclear power, albeit upon an insistence that the purchasing entity resell equiva-lent capacity to Consumers Power Company. Brief pp. 216-224 However, in most instances its expressed willingness to deal is so limited tha t , if broadly interpreted, the limitations would negate the con-cessions. Consumers Power Company's stated restrictions upon its willingness to deal would' generally permit participation and

           ' coordination with only large systems; moreover the limitations are so broadly stated that ultimate decision and control remains in Consumers Power Company as to what it will and will not do.                l The Board should clearly affirm Consumers Power Company's obligations.       Discriminatory or ambiguous qualifications are not justifi'ed. Munis/ coops have stated previously the interveners are hopeful of working with Consumers Power Company to derive implementing conditions or procedures.         However, they reiterate that absent ultimate agreement even at the expense of some flexibility, fairness demands license conditions that be sufficiently clear and self-implementing to allow for practical enforcement.
                                           ._ 94 _

A. Interveners are Entitled to Direct Owner-ship of.the Midland Facilities on an Ownership and Unit Power Purchase Basis. We shall not repeat here the reasons why we think it essential from both a legal and policy standpoint that interveners be able to have access to direct ownership of the Midland Units. The Board so found in the LP&L case and numerous utilities have agreed.to participation voluntarily. Clearly, Consumers Power Company prefers that the inter-veners be given the option of direct ownership rather than unit power purchases, if it is to be allowed to control participation. Brief, p. 221 This is understandable, since Consumers Power Company does not desire to. finance plant construction for power to be sold to in terveners . By and large, interveners would prefer direct owner-ship rights a'lsb, since they can see no public purpose to the Boards re-quiring a method of ownership that will involve high financing charges and therefore higher Consumer rates. However, there are instances where due to system financing limitations or other

*/

factors unit power purchases would be preferred." Consumers Power Company makes two specific arguments against participation in addition to its more general legal argu-

     */   See letter to Joseph Rutberg, Esq. from William Ross, Esq., July 5, 1973. Unit power purchases might'also involve the necessity for additional FPC or other review to price such unit power.

4 e 4

ments that it is not required to deal. First, it claims that intervener requests "were untimely" (Brief, pp. 219-20) and, second, it claims that the statute would not have contemplated construction delays inherent in granting interveners ownership rights (Brief, pp. 20-22). Intervenerc acted to assert their rights immediately subsequent to the Department of Justice " advice letter". Moreover, at the early stages of these proceedings they requested settlement discussions and were rebuffed. As was found in Waterford, supra, (pp . 22-26 of slip opinion), having exercised their rights in a manner contemplated by statute before a duly constituted administrative tribunal, it would be contrary to the statutory scheme and intent to say that, following the methods prescribed by statute, interveners' requests were untimely. In any event, interveners.could have had no hope of an affirmative response to requests for participation from Consumers Power Company but through the proceeding. Moreover, if the Company seeks to raise an affirmative " latches" argument, it should ; have been under an obligation to give at least some form of

                                 .                                              l direct notice to interveners of its plans. Indeed, apart from rumor, there was no way interveners could have had knowledge of applicant's plans before the plant was " sized".

Consumers Power Company makes a statutory argument that Congress could not have intended direct participation or other l broader relief because it was concerned to avoid delays in nuclear plant construction. Insofar as the Midland Units are concerned, l .

i interveners ar,e not aware of any delay resulting from this proceeding. Moreover, the dimensions of this proceeding result from the fact that the Company is contesting rights claimed by the Department-of-Justice, the AEC Regulatory Staff and interveners at least as much as interveners' assertions of their rights. Especially' where many other companies have agreed voluntarily to granting rights, a hold-out company cannot place the blame for delay on,his adversory. ! However, the claim raised by Consumers Power Company with regard to delay in licensing resulting from antitrust 1 proceedings does emphasize the need for clear and unambigious state- I ments of rights. As we stated in our initial brief, interveners at least are convinced that once such rights are finally determined, it would become desirable for parties to - agree on appropriate license conditions or other agreements nec-essary for participation and coordination.**/

I l

      */   As the Board is aware, interveners requested summary judgment earlier in this proceeding and made clear throughout that they thought summary disposition appropriate.
     **/ The Waterford Trial. Board limited access to unit power purchases.
     ~~

This limitation should not be applicable here, where questions of state law are not in issue (although' Consumers Power Company should not.be able,to frustrate a Board order by attempting to prevent local legislation to ease participation) and.where minimum pre-trial relief is not being ordered. Louisiana Power & Light Co., Docket No. 50-382A, " Memorandum of Board with Respect to Appropriate License Conditions Which Would be Attached to a Construction Permit

          ' Assuming Arguendo a Situation Inconsistent", (October 24, 1974, p. 32 IfLjoint ownership is ordered Consumers Power Company would, of course, operate the plant. We point out that in Mi'dland, Applicant has already agreed to a form of joint ownership with Dow (9260-9261) and has similar arrangements with Detroit Edison and Common-wealth Edison concerning Luddington as well as joint agreements for construction and' operation of transmission and interconnection facilities. . Eg.-D.J. 72, 73, 74, 75.

b

Consumers Power Company makes the further-point that granting participation will be costly in depriving it of Midland capacity. (Brief, pp. 214-221) We rely on the Department of Justice reply brief in analyzing this issue. However, we do point out the following: First, Consumers Power Company assumes the out-come of the proceeding in making its claim. If munis/ coops have a legal right to participate in Midland, there is no " loss" to Consumers Power Company from its selling such capacity. Second, the statement by the Company of costs, if correct, merely points out the economic importance of nuclear ownership. The Company fails to consider the extent to which sales of Midland power will offset current power demands and, thereby reduce costs to Consumers for wholesale and interchange power purchases. This is especially important in light of the deferral of building capacity and excess capacity on the system. As a practical matter, Consumers Power Company is constantly adding generation and load, which would off-set particular capacity sales. B. Consumers Power Company Proposed Limitations on Selling Transmission Services are Inappropriate. Consumers Power Company attempts to condition the offer of transmission services on a number of factors, including that it l l does not lose business as a result of the transaction and that the I rates be set by the Federal Power Commistion. Brief, 226-227 l l

     */   Calculations such as these heavily depend upon estimates of demand, output, capital cost, etc., making them highly conjectural, in any event.

(8106-8107) The first limitation provides the clearest imaginable example-of the use of. monopoly power over facilities to limit competition. To the extent the Company is entitled to protection against losing retail markets, the Michigan Public Service Commission or local statutes provide. However, interveners can see no basis for this Board's circumscribing retail competition beyond whatever is provided by state law. And, regardless of how desirable it may appear fr'om the Company's standpoint, beyond the protection given by the Federal Power Act and contracts it may enter into, the Company is not entitled to exclude other systems from wholesale power sources in order to protect its market power. As they have stated in our initial brief, in the present context of this pr.oceeding munis/ coops do not ask the Board to order specific transmission rates. However, we emphasize the obvious fact that if a transmission rate is high enough in comparison rates charged others, utilities subject to such higher rate will be economically excluded from buying and selling transactions. Indeed, at some point a too high transmission rate becomes an absolute barrier. In this context, the record. fully establishes the need for and desirability of license conditions which' provide that transmission servicer be provided fo'r on a .an-discriminatory basis to munis/ coops compared with amounts charged larger utilities and, further, that their charges be limited to the costs allocated for

       */ '

Consumers Power Company argues based on pre-Otter Tail FPC cases

            ~that it.would:not impose transmission requirements for hydro-electric cases. Brief, p. 13    We do not profess to know what conditions the FPC would today impose on smaller hydro-electric plants, let'alone hypothetical hydroelectric plants the size of Midland, but Otter Tail is determinative that conditions would be appropriate for plants causing the potencial impact of Midland.

See, FPC v. Idaho Power Co., 344'U.S. 17 (1952); Idaho Powcr

            'Co. v. FPC,_346 F.2d 956 (CA 9, 1965), certiorari denied, 332 U.S. 957.

_ na

y the services provided. Interveners do not imply that one allocation method as opposed to another should be selected. For example, we would deem "a postage stamp" rate, commonly used in the industry, which allows for a uniform transmission charge averaging in costs of all like facilities generally preferable to a "po!.nt-to-point" transmission charge, which is based upon specific' lines used for specific transactions. But, we do not ask the, Board to select any method of allocation or form of rate so long as it is non-discriminatory. However, to the extent that transmission investment is used to serve multiple purposes, such as'providing for generation or transmission line backbp, for reserve transmission capacity, or for interstate power transfe s, and a specific transaction utilizes only a limited number of functions such as emergency power, which is delivered only when transmission and generation capacity is "available",,the assigned charge should make some allocation transmission costs to services not being used. We propose that this allocation be determined by . negotiation or by the Federal Power Commission. However, a customer should not be charged for s'ervices he is not using. A specific example of this would be a purchase of power by Cold-water say from Toledo Edison. To the extent that capacity exists or lines are built-to "back up" Consumers Power Company's own generation Coldwater would not be purchasing that service, since it is not using-on Consumers Power Company's generation. In its firm wholesale purchas s from Consumers Power Company, full trans-mission investment is included and to include it again would be a

       */ ,

See Interveners' suggested license conditions. l

                                       - 100 -

F double-count. We make no argument as'to the' amount of the difference or the nature of allocations here except to say that there should be some restriction to prevent a clearly anticompetitive transmission charge.

               .In this context it is imparative to note that for year Consumers Power Company has been entering into transmission trans-actions on an incremental zero cost basis in recognition of the importance and desirability of facilitating power transfers and the fact that much transmission investment really serves reliability purposes.    (Eg.; 5432-5433)  In the face of the record showing that by and large there are no transmission charges among the inter-connection entities, it would be totally inopposite not to recognize the potential for an anticompetitive charge, if there were no standards set or limitations on the transmission rate to avoid an anticompetitive charge.

Consumers has announcea during the course of these , hearings that while it is willing to wheel power,'in certain circumstances, it will not allow its transmission lines to be used for " cream skimming" or where it will suffer an economic loss. Brief, p. 146, n. 103. That is -- Consumer s wants to protect its most profitable customers from the deleterious effect of obtaining competitively priced bulk power. Such a policy ignores the. rights of municipalities and cooperatives. Concerning retail competition, there are existing protections provided by local law that we do not here challenge. However, otter Tail establishes that the Company has no right to a guaranteed market for wholesale

   -power. In announcing its transmission policies, Consumers admits its intention to'use its control over a bottleneck facility to limit competition.

Consumers Power Company.makes much of the fact that it Thas agreed'to* transmit 20 mws of power between Detroit Edison Company and the MMCPPi-although on terms'that are anticompetitive

            .on their face.           We can only speculate the extent to which the existence of this proceeding led'to such a favorable result.
                                      ~

Consumers also makes much of the alleged lack of demands by' interveners for transmission service. This issue has been briefed in our initial brief ~ (pp. 126-127) and was determined in LP&L, Memorandum of Board, supra. However, we wish to point f

           . out that the law does not require repeated demands for a service where the issue is a refusal to deal.         The Supreme Court stated in Continental Ore Co. v. Union Carbide Corp., 370 U.S.           690, 699-700 (1962):                                                                        '
           -*/ The. terms of the contract negotiated with the MMCPP to wheel power from. Detroit Edison facilities demonstrates the use of monopoly control of the transmission to restrict access to the lower Michigan' peninsula to other bulk power suppliers who want to compete with Consumers. The rate is based upon the rate charged by Detroit Edison to MMCPP (15% of energy) in addition to the demand charge. This rate has no cost relationchip. As the Supreme ~ Court stated in Gainesville:
                                "An' Airplane seat may bring greater profit' to a passenger flying to California to close a milliondollar business deal than to one flying west for a vacation; as'a consequence, the former might be willing to pay      .

more for his seat than the latter. But focus on the willingness or ability of the purchdser to pay for a service is the concern of the monopolist . . . .a 402 U.S. at 528. t e m ___ - -

                  "Furthnrmorn, wa do not believn that roopondentn '

liability under the antitrust laws can be measured by any rigid or mechanical formula requiring Con-tinental both to demand materials from respondents and to exhaust all other sources of supply. The Court of Appeals ' appears to have accorded no weight to Con-tinental's evidence which was offered to show that I respondents had interfered with, acquired, or destroyed the several small independent sources of vanadium oxide relied upon by Continental. Under the criteria used by the Court . of Appeals, respondents could, with im-punity, concertedly refu'se to deal with continental while the latter was able to obtain some oxide from independent sources, 'then proceed at their leisure to dry up those other sources, and finally insist that Continental make repeated demands for respondents' oxide before incurring antitrust liability. The cases relied upon by the Court of Appeals clearly do not sup-port any such formula and we cannot deem the injury alleged to flow from a monopolist 's elimination of one 's independent suppliers to be so " remote " as to justify refusint to let the damages issue go to the jury." (emphasis added). */ This Commission must deterlraine if the.use of monopoly power la going to continue into the future. C. Consumers Power Company's Arguments Against Coordination on an Nondiscriminatory Basis Are Insubstantial Consumers Power Company states two broad qualifications to its willingness to coordinate. First, it states that coordination transactions should have " substantial" net benefits. Second, it

        -*/ In any event, even assuming such technical defenses would be relevant to a court, they should not be to an administrated agency entrusted to assuring that nuclear facilities are not the means for continuing or establishing unfair use of economic power by dominant utilities. In this regard, the reference to the Federal Trade Commission Act is especially relevant.

Moreover, the very nature of the defenses raised imply that even if they were valid, an unlawful situation would be created by the licensing of the plant once they were removed,

a. situation the Board could not coutenance. If there is any doubt munis/ coops request the license conditions and services set forth in Appendix A to their initial brief.

-T

states that they must' avoid what it calls one system " leaning" upon-another. It apparently intends to use the above principles to object to coordination with less than fully self-sufficient generating entities. While its proposed limitations are somewhat interrelated and not overly clear, we shall attempt to deal.with them in turn.

                    . Munis/ coops do'not disagree that coordination transactions should involve benefits to each party, although we are at a loss to know what the word " meaningful" adds. In a dictionary sense 1

we do not object to the concept of " meaningful" net benefits. [- However, as'part of an order or license condition, the concept would appear to be an invitation for refusals to coordinate by 4 the Company with regard to individual trans. actions, presenting

             . great potential for litigation as to whether a " benefit"'is l              " meaningful".

Coordination is a means whereby two or more systems agree to sell each other backup and other power services. By pooling units, the necessary reserves for each system are reduced. In this context, assuming a utility's equipment is in reasonable

    ,         order, benefits result.

There is no question that benefits result. Thus, if it 'were assumed that' an individual system by not coordinating

             -would have-higher reserves of its own system, so long as as Con-sumers Power: Company is being paid for the energy it sellt.            #*

an' emergency, Lor ~ maintenance or-power transaction,.it suffers no harm e wi' - yp- % rw y i 7 ,p,. nfgp-g- y. =et- y g gw

states that they must avoid what it calls one system ' leaning" upon another. It apparently intends to use the above principles to object to coordination with less than fully self-sufficient

       -generating entities.

While its proposed limitations are somewhat interrelated and not overly cicar, we shall attempt _to deal with them in turn. Munis/ coops do not disagree that coordination transactions should involve benefits to each party, although we are at a loss to know what the word "raaningful" adds. In a dictionary sense we do not object to the concept of " meaningful" net benefits. Ilowever, as part of an order or license condition, the concept would appear to be an invitation for refusals to coordinate by

   . the Company with regard to individual transactions, presenting great potential for litigation as to whether a " benefit"*is
        " meaningful".

Coordination is a means whe~reby two or more systems agree to sell each other backup and other power services. By pooling units, the necessary reserves for each system are reduced. In this context, assuming a utility's equipment is in reasonable order, benefits result. There is no question that benefits result. Thus, if it were assumed that an individual system by not coordinating

       -would have higher reserves of its own system, so long as as Con-sumers Power Company is being paid for the energy it sells in an emergency or maintenance or power transaction, it suffers
                  ,                                                    no harm l

~ 4 9 s True, if Consumers: Power Company can make such self-sufficienty expensive.enough to allow it to sell wholesale power, it.will make more money,;but this does not support Consumers Power Company's position.. Rather it suggests anticompetitive profits resulting from its failure to co6rdinate'on reasonable terms. In our society in buying and selling transactions,.the l normal;means of pr'viding o benefits is payment. Thus, for coordina-tion -- or for that matter any of the transactions here involved -- including plant participation and transmission, the Board should l determine that where there is payment there is deemed to be a net l benefit. While-coordination transactions should and do provide l for " net benefits", if the Board is to enter the matter, we suggest that negative language is to be preferred, such as that a trans-action not provide a " detriment" to Consumers Power Company. The reason is not that we intrinsically disagree with the concept of net benefits, which we believe to be practically synonomous, but rather that it has an obvious potential for litigation where Consumers Power' Company might claim absence of a benefit, thus I-forcing expensive litigation over individual transactions to prove

      " benefits". If Consumers Power Company cannot claim an affirmative l      detriment to itself, given the general advantages of coordination,                     -

munis/ coops shou!1d not be forced into litigation. 'We note that such. negative. language is-found in other license conditions approved l by the AEC. h, e 4 q 'K's.

We would hope that the difference would not come up

or, in any event, would not be substantial in real world trans-actions, but given the history of this litigation and the difficulty interveners have had in obtaining equalized reserves coordination this additional assurance to av.oid future litigation would be rea-sonable, even if it does ' involve some " hemming-in." Otter Tail Power, Co. v. United States, supra. Under this net detriment test, Consumers Power Company cannot be affirmatively harmed, since in the event a transaction provided a detriment, it would not be forced to enter into it. , Consumers Power Company stresses a concept of " leaning", which it claims to be consistent with the Gainesville case. Gaines-ville Utilities Department v. Florida Power Corp., 402 U.S. 515 (1971). If all Consumers Power Company is stating is that for a unit to bc , a pool unit, it must have demonstrated reliability, we do not dis-agree. We have never implied, nor do we believe has the Department of Justice or the AEC Regulatory Staff, that systems do not have a responsibility to pool members to have reliable, generation. How-

*/

ever, Consumers Power Company appears to be arguing more than this.-

           */ As we state in our initial brief, the record fully supports l

~ that l't is Consumers Power company 's units, because of their size and not interveners units, which are likely to experience disoroportionate forced outages. Eg., Palasaides. e

It_cleim3 that it chould not hava to ccordinato absent a sp:cial charge, where for one reason or another, a smaller system may purchase (for payment) more interchange power than does Consumers Power Company. The argument is nothing more than a variation on the theme that Consumers Power Company does not want to coordinate with smaller systems or that it does not want to do so without exacting a special charge. (Eg., Brief 228-233) Cf. New England Power Co. v. FPC , 349 F.2d 258 (CA 1, 1965). If the generation of interveners.is in working order, in time of Consumers Power Company need, such as an outage of a unit on its system, it can contribute energy to Consumers Power Company. However, it should be pointed out that in any jointly

   ' dispatched system, Consumers Power Company engineers are likely to control the dispatch and interveners will have little control over the extent to which.they are the " selling" or "buyinf entity.

Furthermore, by the nature of things, a system with smaller numbers of units might buy more interchange power from outside its system; interchange power; transferred among units on the larger system - will be masked because of single legal ownership. However, each unit will contribute its share. As the Federal Power Commission noted in Gainesville, the attempt to exact higher reserves or other payment for what Consumers Power Company here refers to as " leaning" inhibits smaller systems from building larger units, in order to avoid use of emergency power from other systems (i.e., to avoid use of the inter-connection). However,'as Consumers Power Company itself recognizes, t

0

                                       - 107 -                          .

it r calvac.b3nnfit from the smaller cyctems building larger units, which can~more readily provide low-cost interchange power to Consumers Power' Company when it is required. Interchange transactions'do not provide an exact balancing. A coordination partner is entitled to an availability of reserves capacity on which it can sell when needed and payment

for its costs when it is selling power. An attempt to exact an additional _ charge because of size is merely an attempt to keep the smaller systems small. Moreover, while the " leaning" arguments have an appearance of fairness, the fact is that Consumers Power Company and not interveners have been having reliability difficulties. Despite this, a putting into effect of the conditions requested by Consumers Power' Company can well provide excuses to prevent

*/

meaningful coordination.~ Consumers Power Company argues that it should not have to coordinate with systems that are not fully self-sufficient. It does so at a time when its reports to the SEC and newspaper articles indicate that because of disabilities on its generaton, it is purchasing approximately 30% of its total power needs from l

 -*/   Note that Consumers Power Company and. Detroit Edison Co. Will dominate any Michigan pool agreements.. Thus, if a major          .

Consumers Power Company unit or units are unreliable, the necessary reserves go up. Even though interveners systems may.1x3 more reliable, they would be so small in terms of their impact on the pool reserves requirements that they would have to bear the higher reserves responsibility required by the pool. A smaller systemLinevitability finds itself in the position that, if its unit is claimed to be unreliable, it is requested to pay a higher share or to discount the value of its unit, but if the units of the major pool members are unreliable, its reserves go up. l

m

                                   - 108 -            -

set,htr. cyst ma. .Prorpactus, $50,000,000 Consumore Power Company First Mortgage Bonds, 11 1/4% Series'Due 1982, p. 12 (August 21,

*/

1974); Wall Street Journal,. October 8, 1974.- Consumers Power Company's argument is a classic barrier to entry. A non-generating system.or partially generating system must at once provide generating capacity sufficient to meet its total system need plus reserves or

 'it can get no coordination at all.

Assume a system with a 20 mw load, 11.5 mws of generation and'a 15% reserves requirement. This system is the conceptual analog of two separate systems each having a 10 mw load, but one having 11.5 mws of generation. The system with 11.5 mws of gener-ation would meet the tests for c~oordination, having 15% reserves to serve 10 mws of load. The second 10 mw system would purchase 10 mw of power from Consumers Power Company. (The price for pur- . chas.ed power of course includes reserved capacity.)

  */   Compare the statement of Mr. W. J. Mosley, Vice President of Consumers Power Company:
                   "If the Palisades Nuclear Unit is in operation, Consumers has a reserve of 11.7 percent.       This com-pares with a design reserve of 15.5 percent, which is regarded as necessary to enable the Pool to handle the estimated peak demand during an anticipated outage.

At the design reserve the Pool.would, on the basis of probability analysis, be-able to handle the anticipated peak demand only once in 20 years." Then he says:

                   "If the Palisades plant is unavailable to the Michigan Pool, in July and August 1970 the Pool capacity reserve will fall to 7.3 percent.
                  'This increases the probability that the pool
              ~would fail to handle the peak demand, by a factor of 600,-.to once in every three months." Tr. 5466 "and the fact ,is-that Palisades has not been in service.",Id.
                                       -104 _   _ _ _

The combined systems (i.e. , a system having a 20 mw load) should be equally entitled to coordination for the 11.5 mws of generation. However,~because of a reserves requirement, that 11.5 mws of generation would be adequate to serve only 10 mws of load. Thus, its total generation plus 10 mw purchased power would total 21.5 mws, providing 1.5 mw of reserves to backup its generation. Or, stated differently, it would be paying demand charges to Consumers Power Company, which when added to its generation would be greater than 1.5 mw its load. There is no reason why there should not be coordination for the 10 mws. Consumers Power Company argues that it would obtain no

    " benefits" in such situation.        However, it ignores that it is     .

selling not 8.5 mws of wholesale power but 10 mws of wholesale power because of the discounting of the system's 11.5 mws to provide for reserves. It further ignores that it would have

*/

a right to call upon this reserve capacity. - Mo.reover, while reserves are stated as a percentage of peak load, the reserves in actual operating practice would be higher, because the peak is reached for a very short period of the year.

   */                                                           '

If the system-wore to utilize its full 11.5 mws of generation, it would.still be purchasing 10 mws from Consumers Power Company, leaving.l.5.mws of reserves.

                                      - 110 -             '

a CONCLUSION , consumers Power Company raises varied arguments either concerning the limited Commission jurisdiction, as it reads the statute, and varied technical reasons why it would be unfair for it to enter into the types of arrangements with interveners that it enters into with larger systems. Munis/ Coops hope that the Board will allow for relief sufficient to resolve the problem of Consumers Power Company re-fusing to deal with them in the manner in which it deals with other major utilities. They further hope that relief will not be so cir-cumscribed as to be practically meaningless. We believe the relief requested by interveners, the Department of Justice and the AEC Regulatory Staff to be in the public interest and hope that this relief will be ordered. We specifically recommend to the Board

   .Munis/ Coops proposed licensed conditions submitted with our pro-posed findings.                -

Respectfully submitted,

                                        /b,b7 gf.':./       -

Robert A. Jablon Attorney for Municipals of Coldwater, Holland, Grand Haven, Traverse City and Zeeland, and the Michigan Municipal Electric-Association and the Wolverine and Northern Michigan Electric

                ,                     Cooperatives.

Dated: - -November 25, 1974 Law Offices of: Spiegel & McDiarmid 2600 Virginia Ave'. ' Washington, D.C. 20037 ._ yyy _

v - . UNITED STATES T AMERICA BEFORE THE ATOMIC ENERGY COMMISSION In the Ma'tter of )

                                            )       Docket Nos. 50-329A Consumers Power Comp,any         )                     50-330A Midland-Plant (Units 1 & 2)      )

CERTIFICATE OF SERVICE I.HEREBY CERTIFY that I have this day served a copy of the foregoing document upon the following persons by depositing a copy thereof'in the United States mail, with first class or air mail postage affixed, this 25th day of I November, 1974: Honorable Hugh K. Clark William W. Ross, Esq. Atomic Energy Commission Keith S. Watson, Esq. Post Office Box 127A Wald, Harkrader & Ross 1320 Nineteenth St., N.W. Honorable J. Venn Leeds, Jr. Washington, D.C. 20036 Atomic Energy Commission Post Office Box 941- ' Harold P. Graves, Esq. Houston,. Texas 77001 - Vice President and General Counsel Atomic Safety and Licensing Consumers Power C ompany Board Panel 212 West Michigan Avenue U.S. Atomic Energy Commission Jac'kson, Michigan 49201 Washington,'D.C. 20545 Chairman, Atomic Safety and Joseph Rutberg, Esq. - Licensing Appeals Board Benjami.n H. Vogler, Esq. U.S. Atomic' Energy Commission Antitrust Counsel for AEC Washington, D.C. 20545 Regulatory Staff U.S. Atomic Energy Commission Mr.' Abraham Braitman, Chief Washingto n, D.C. 20545 Office of Antitrust and Indemnity U.S. Atomic Energy Commission

         -Washing' ton, D.C. 20545 e

.o. w

                                             -Mr. Frank W.,Karas, Chief                     Honorable-Fran'k Kelly Public Proceedings Branch                     Attorney General Office of the Secretary of                    State of Michigan the commission                              Lansing, Michigan 48913 U.S. Atomic Energy Commission Washington, D.C. 20545 Wallace E. Brand                              Joseph J. Saunders, Esq.

Department of Justice Department of Justice

       'Antiturst Division         .                  Antitrdst Division Washington, D.C. 20530                        Washington, D.C. 20530 James B. Falahee General Attorney Consumers Power Company 212 West Michigan Avenue Jackson, Michigan 49201 6Robert 4 #.a.)'. L A". Jablon Attorney for Municipals of Coldwater, Holland, Grand Haven, Traverse City
                   .                 and Zeeland, and the Michigan Municipal Electric Association and the Wolverine and Northern Michigan Electric Cooperatives November 25, 1974 Law offices of:                                                               "

Spiegel & McDiarmid 2600 Virginia Avenue, N.W. Washington, D.C. 20037

-9

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en Reculated O Firrns u arned - e e,se n Oiran3 nt. 4a r u s t P,.enaaty.. ^. f..,-. .* A Justice Department couragerment to eng' age in e'ven tougher stance against official says the department predatory or anticompeti- economic regulation than it is going to seek jail for offi. tive conduct from any offi- 13as in the past.The depart-cials in regulated industries cial of any state or federal ment. for sorse years has who violate federal anti. regulatory commission," sought through both legisla-' trust laws. Clearwaters said. tion and regulatory proceed- . Keith I. Clearwaters, He added that there is an ence gec mpe(numbgs to ht reg apon a.d deputy assistant attorney erroneous belief among . general in the Antitrust lawyers and their clients in Clearwaters was partice-Division. told participants .' regulated industries-com- larly perturbed about the at a transportation law munications. transporta. recent Civil Aerocautics seminar here yesterday tion. natural gas and the Board rulirg which set for tnat in deciding to seek like-that "the mere exist- the first time a minimum prison sentences the depart- ence of regulation is . . . rate floor for charter air ment will not accept argu. sufficient to relieve regulat. fa es across the Atlantic. " rnents that regulated indus ed companies and individu- .. . .

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                                                   . UNITED STATES OF ' AMERICA                                                 B         = *     : B00 4 C0 3'I FEDERAL POWER COMMISSION Consumers Power Company                 )                                 Docket No. E-7803 RULING ON APPLICATION OF INTERVENOR CITIES OF BAY CITY,.ET AL., FOR SUBPENA DUCES TECUM
                                                       '(August 9, 1973)
       '.     .                                                                                                                                                               1 The intervenor group referred to as the Cities / Coops 1/'

filed, on July 10, 1973, an " application for subpena duces tecum and production of documentary evidence" directing the Chairman of the Board of respondent Consumers Power Company F to appear at the offices of the Commission on August 15, 1973, "to testify," and to produce at said tLae and place all docu-ments " relating" to a number of subjects, for the period since January 1, 1960. 2/ , A subpena duces tecum may be directed to a corporation. j An ad testificandum clause is not essential to the validity J 1/ Cities of Bay City, Charlevoix, Coldwater, Harbor Springs, I Hillsdale, Marshall, Petoskey, St. Louis and Union City; the Village of Chelsea; the Northern Michigan Electric Cooperative, Inc.; the Southeastern Michigan Rural Electric Cooperative, Inc.; and the Wolverine Electric Cooperative, Inc. 2,/ On July 27, 1973, respondent Consumers Power Company filed a motion supported by an affidavit to the effect that it

        ,.                    had not been , served with a copy of the application and had i                 first-learned about it from Commission Staff on July 26,

, 1973; and it accordingly requested that it be permitted

. to serve a response to the application on or before August 3, 1973. The motion was granted, and the time further ex-tended informally to August 6, 1973, following a conference

telephone discussion and agreement among all counsel and l the Presiding Judge on August 3; 1973.

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of such a subpena; where it is included, it is separable from the duces tecum clause and may be disregarded as sur-plusage. McGarry v. S.E.C. ,147 F. 2d 389, 391; Wilson v. United States, 221 U.S. 361, 374. The documents sought cover every conceivable foon of document or recording, over the period from 1960 to date,

           " relating" to any of the following subj ects: (1) competi-                                                                                   !

tion with any of the Cities for customers or service area; - ' (2) efforts of Consumers to influence.any municipal action, - ' i or the election of any agentaor employee, of any political ,y ! subdivision in Consumers' service area; (3) efforts to in- / I fluence any legislation in the Michigan legislature; (4) action or positions taken by Consumers with respect to publicly-cwned transmission within Consumers' service area, or partic-ipation by its wholesale customers in Michigan Power Pool arrangements; (5) any refusal by Consumers or any other utility to (a) wheel power for or to Cities / Coops or to cer-tain other entities, (b) coordinate with Cities / Coops or other entities, or (.c) sell wholesale power; .(6) sales or natural gas as boiler fuel to its wholesale electric cus-tomers; (7) competition between-Consumers' retail sales of - natural gas and electric power sold by other electric utilities; (8) negotiations for the acquisition of electric

         -power facilities or Nichigan Gas and' Electric Company; (9) acquisition or disposition of hydroelectric power sites; and (10) offers, or failures to offer, to any utility opportuni-ties to participate in the ownership of or to purchase unit power from any hydroelectric plant.

In addition, unlimiIted demand is made for all of the company's "indivi' dual" files, including billing data, per-taining to.all of its wholesale electric customers, including but not limited to files identified by~ specific customer name. The relevance of these subjects, or- any documents re- . lating thereto, to this rate proceeding under Section 205 of the Federal Power Act (the "Act") is not apparent, on the i.

                 . .-                      .                                                       x.~. . . .: o r

face ot the papers, and no effort is made to show any such relevance. Section 1.23 of the Commission's Rules of Practice and Procedure provides that written applications for subpenas "shall specify as nearly as may be the general relevance, materiality, and scope of the testimony or documentary evi-dence sought, including, as to documentary evidence, specifi-cation as nearly as may be, ot the documents desired and the facts to be proved by them in sufficient detail to indicate the materiality and relevance of such documents." n This proceeding concerns changes in the wholesale elec-

             .     .'       tric rate schedules of Consumers Power- Company. In support of the rate increases proposed herein, Consumers alleges, as summarized in.the Commission's order of January 5,1973, that its earnings have become inadequate due to inflation; that its current rates yield only a 4.5% return trom wholesale service on a 1971 test year basis; and that it was apending about $379 million on construction in 1972, and expected to spend over two billion dollars in construction by the end of 1976. Its rate filing included cost or service and financial data based upon a rate of return allowance of 8%.                                   l

( Cities / Coop's applicatica for a subpena does not refer

    .                          to any of these matters, directly or indirectly. The nearest approach is one conclusory paragraph which alleges:

The documentary items requested are material

 ,                                    and relevant to the matters in controversy and are necessary and vital for an adequate preparation by Intervenors of their defense to the proposed rate increase by Consumers Power Company (emphasis added).

It is well established that this Commission has the responsibility to consider, in appropriate circumstances, the I anticompetitive. effects of regulated aspects of interstate utility operations pursuant to Sections 202 through 207 of

             '<                the Act. Gulf States Utilities Co. v. Federal Power Commis-sion,       U.S.       , May 14, 1973, slip op. p. 4. That is to say, in undertaking any of its authorized regulatory func-                         ,

tions under the Act, it must consider the policies of the antitrust laws, which dre a part of the public interest, in l

                                                                       ~
                                                        ,   -                                        ~) .

i determining itsHown action and the results which may flow - from its action. It may have to weigh the conflicting anticompetitive implications, under traditional antitrust

concepts, of its duties under the Act--as, pursuant to Section 202, in providing and encouraging interconnection and coordination for the generation, transmission and sale of electric energy within and between regions. Cf. Federal Maritime-Commission v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 243 (1968) . In exercising its duty to authorize the-issuance of certain securities under Sec. 204, it must f I consider possible anticompetitive consequences flowing from I 4

the issuance. Gulf States, supra, slip op. 9, 10. Here the cities / Coops alleged, early in the proceeding, that the proposed rates will produce a " price squeeze" lLaiting their ability to compete for large commercial and i- industrial customers in violation of antitrust laws and policies (Response of Cities / Coops to Motion for Extension of Time and Request for Immediate Hearing on Price Squeeze Issue, filed April 27, 1973). By order of May 22, 1973, the Commission directed that the "anticompetitive issue," ) referred to earlier,in the order as the " issue of anticompeti-tive rates," be tried first, although it -specified that a single initial decision issue upo'n the entire proceeding. ! Cities / Coops filed their evidence purporting to relate to the " price-squeeze issue" on June 5, 1973. That issue, which by its nature may upon its face have some relation to the rate proceeding, thus requires no further discovery, and none is sought in the present subpena application. In a " Motion to Establish-Hearing Dates," Cities / Coops repeated

that it.had filed its direct testimony addressed to that issue, and insisted that the Commission immediately set hear-4 ing dates on the " price squeeze." l In serving its " price squeeze" case, however, Cities / . 4 Coops included a covering letter stating: " Additional testi-mony'concerning anticompetitive, as well as other rate issues, _' j will be filed with our cost-of-service ' presentation." The' Commission's order of May 22, 1973, which referred to "the ,. anticompetitive issue" and "anticompetitive rates," had been designed to " provide'a full and complete hearing on the entire anticompetitive issue." Noting that this had been e

i its understanding, the Commission by order of July 2,1973, amended its order of May 22, 1973, to provide for trial of all issues in the proceeding at a single hearing. The result of all this is that there has been no specifi-cation by the Cities / Coops, and hence by the Commission, of any anticompetitive issue to be heard, particularly any issue conceivably relevant to the rate proceeding, other than the alleged " price squeeze" issue involving "anticompetitive > rates." Voluminous papers filed by Cities / Coops in numerous procedural motions and replies to motions have included docu-ments from an Atomic Energy Commission licensing proceeding, which are alleged to indicate general antitrust violations. Apart from the fact that none of these documents is incon-sistent with conduct not in violation of the antitrust laws, none of them _has any apparent relation to any issue properly betore the Commission in the instant rate proceeding, and Cities / Coops make no effort to point out any such relation. We are told, in the subpena application, that the Com-mission "has an obligation to, ferret out potential mis-conduct felled (sic) upon its jurisdiction." It 1.s simply not the Commission's obligation, nor is it- authorized, to enter upon - a general antitrust investigation per se. Thus it is not granted any power to adjudicate antitrust issues. California

v. F.P.C. , 369 U.S. 482, 486 (1962) . "To avoid misunderstand-ing, we think it appropriate to say expressly that an agency is not required to hold hearings in matters where the ulti-mate decision will not be enhanced or assisted by the receipt of evidence." City of Lafayette v. F.P.C.,454 F. 2d 941, 953 (D.C. Cir.1971), aff'd Gulf States, supra. The " ultimate decision" referred to in City of Lafayette was the decision upon an application, pursuant to Section 204 of the Act, for the approval of financing; here it is the decision upon the lawfulness of rates.

Thus in the Atomic Energy Commission proceeding referred to above, the Trial Board of the AEC has, according to Cities / Coops, " narrowly lLaited the issues in that proceeding to l

6-

whether ' applicant (a) has the power to grant or deny access to coordination;- (b); applicant has used its power. in an

1. anticompetitive fashion against smaller utility systems; (c) applicant's said use of its power has brought into existence a situation inconsistent with the antitrust law, which situa-tion would be maintained by activities licensing that appli-cant seeks.' (Daphasis added)

. Upon the present application, the Presiding Judge is required under Section 1.23 or the Rules to determine whether a proper showing of relevance, materiality, scope and specifi- ) l city has been made, with respect to a proceeding under , Section 205 of the Federal Power Act--not with respect to a pre-complaint antitrust investigation conducted by an offic-ial charged with enforcing the antitrust laws, for the purpose of ascertaining whether any person is or has been engaged in any antitrust violation, as the form of subpena suggests. l See 15 U.S.C.A. 1311-1313; Gold Bond Stamp Co., 221 F. Supp. l 391 (D.Minn., 1963), aff'd 325 F. 2n 1018 (8th Cir. 1964). As far as concerns the subject matter of the application for

a subpena, nothing in the application, or elsewhere in the .

record, is sufficient "to meet the requirement of a reason-able nexus between the activities challenged and the activ- } , ities furthered by the application" City or Lafayette v. l Federal Power Commission, supra. . In Pacific Power & Light Co., Docket No. E-7796, the l Commission denied intervention to a group which alleged con- !

    -       duct violative of the antitrust laws and policy, where it                                      !

found that the group's claim " falls short of establishing ! a reasonable nexus between the activities challenged and the activities furthered by the application," citing City of Lafayette, supra. The same principle is applicable with respect to an application for a subpena duces tecum where ; an intervenor, although its intervention may have been per- ! missible on other grounds, fails to show relevance ot the 1 activities challenged, by implication, in its demands for documents-to the purpose or possible effect of the proceed-ing. 4 The scope of a subpena duces tecum in a rate proceed-ing does not properly extend to a drag-net investigation to 9 l

y y ' determine whether or not respondent's files-contain any evi-dence that it has, or is now, engaged in any unrelated violation of the antitrust laws. Enforcement of the anti-trust laws per se is not delegated to this Commission. A subpena duces tecum cannot properly be issued in a Section 205 proceeding before this Commission in the absence of any relevance or materiality, demonstrated or tairly to be implied, of the documents sought to the action which the respondent. seeks through its rate filing and which may be furthered by the action of Commission as a result of~its investigation

              ;            pursuant' to Section 205 of the Act.

Consumers has filed a comprehensive memorandum in opposi- , tion to tne application. It points out that the proposed

       ,                  discovery relates to alleged antitrust issues which have no
                           " nexus" to Consumers' filed rates and tariff. As more fully set forth above, the' Presiding Judge finds this circumstance, which may be expressed as a lack of relevance to the relief at issue in this proceeding, determinative or the application.

Consumers further demonstrates, in painstaking detail, that it has other strings to its bow. It reveals that, not-withstanding the 1 imitation in scope of the AEC proceeding as described by Cities / Coops, it has produced to Cities / Coops more than 25,000 pages of documents relating to alleged anticompetitive matters referred to in the present applica-tion; that these documents were p.roduced after an eight-month search by 14 people consuming thousands of man-hours; and that the present request, wnile largely duplicative, would

,                         require a new search because of changes in the wording of requests.      It argues, and it is found, that a second burden-some search of subject areas recently covered by discovery proceedings pursued by Cities / Coops before the AEC should not be required, since a substantial repetition of this task could be expected to produce few, if any, additional docu-
           ,              ments and particularly since Cities / Coops allege that the documents slready in'their possession establish violations of antitrust law and policy contrary to the Act in these areas. Objections of undue burden and expense are especially to be considered where it appears that the research required would be time consuming and expensive and the results rela-tively minimal; see, e.g., Greene v. Raymond (re interroga-tories), 41 F.R.D. 11, _14 (1966) .

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                                                                                                            ,f Consumers further contends that it should not be re-quired to L respond to demands already considered and rejected by'the AEC Hearing Board, which include those relating to political activities before municipal and state legislative entities (cf. Duke Power Co., Docket No. E-7557, Opinion No.

641, Dec. 18, 1972, p. 11 of slip op., and p. 17 of slip op, of initial decision affirmed by Opinion No. 641), to its complete wholesale customer files, and to its operations as a natural gas utility. These matters, it appears, were i discussed and briefed extensively before the Board; and Con-sumers briefs them at some length upon the instant applica-tion. These items are clearly improper fo; reasons of subject-matter and scope in addition to the over-all infirmity discussed above. In view of the Presiding Judge's disposition of the application, there is no occasion to discuss them here in detail; it should be noted, however, that Consumers has presented facts, arguments and authorities which raise serious questions as to the propriety of the individual items of

Cities / Coops' demands and as to the public interest in the burden they would impose, apart from the fatal lack of rele-vance to the matters-to be decided by the Commission in this rate proceeding.

4 Finally, Consumers states that it is willing to supply appropriate documents fully reflecting its actions and positions taken with respect to publicly-owned transmission within its service area, and concerning hydroelectric power sites and offers to participate in power from hydroelectric plants; subjects which apparently are in addition to those brought up before the AEC. The ruling herein does not pre-vent any arrangement of the kind'among the parties, however immaterial it may be to the matter now before the Commission.

   .        This matter, to repeat, is a proceeding under Section 205 of the Act to determine whether Consumers' proposed wholesale rates and charges, and rules and regulations affecting or

. pertaining thereto, are in all respects just and reasonable and not unduly preferential or discriminatory, within the meaning of that section of the Act as interpreted by the Cczmission and the courts.

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FEDERAL POWER COMMISSION In the Matter of )

                                                              )     Docket No. E-7803 CONSUMERS POWER COMPANY                )

CONSUMERS' OPPOSITION TO INTERVENORS'

                                        " APPLICATION FOR SUBPOENA DUCES TECUM AND PRODUCTION OF DOCUMENTARY EVIDENCE"

WM. WARFIELD ROSS GEORGE A. AVERY KEITH.S. WATSON Attorneys for Consumers Power Company
WALD, HARKRADER & ROSS 1320 Nineteenth Street, N. W.

Washington, D. C. 20036 (202) 296-2121 Of. Counsel: - Harold P. Graves James B. Falahee , Consumers Power Company 212 West Michigan-Avenue Jackson, Michigan 49201 August 6, 1973 e v - - ,

. _ = -          ___           _ . . .       . . . _ . _ - _ .        - _ - - -   _ - _ _ -- _     - . - -

discovery agains't Consumers and these non-parties will substantially delay this proc,eeding and obfuscate the , appropriate antitrust issues which have been raised here. I consumers therefore requests , pursuant to the dictates of Section 1.23, that any subpoena request issued

                ~herein be confined to the Company's relations vis-a-vis the intervening systems herein and that the document requests be confined to material found in the files of
              ~

certain specifically-identified Company personnel. Absent such specificity, the Application should be denied. , IV. To the extent that no reasonable

                                                    " nexus" exists between this pro-ceeding and some issues raised by the Intervenors, discovery founded on those issues should be denied Another, completely separate and independent defect common 22/ to the subpoena requests is that they relate solely to issues which . bear no " reasonable nexus" to this wholesale rate case and, as s'uch, are not rele-
 >               vant to 'this proceeding. ~Under Section 1.23 of this Commission's Rules of Practice and Procedure, parties V

2f Except possibly to requests AT-4 (a) , 8, and 9,,to which Consumers has agreed to respond voluntarily, and AT-1 and AT-5 (3) which could encompass some

                      " price-squeeze" materials; however, AT-1 and AT-5(3) duplicate AEC discovery. See Section I, supra, and Appendix A, infra.

applying ~for subpoenas must define documents they desire "in sufficient detail to indicate the materiality and relevance of such documents." Under the Commission's decisions, and under judicial interpretations of compar-able provisions of the Federal Rules, subpoenas are not issued as a " matter of right" and those which do not call for relevant and material documents must be denied. Nelson Bunker Hunt Trust Estate, 15 FPC 1187, 1189 (1956). See also Demeulenaere v. Rockwell Mfg Co., 13 FRD 134 (S.D. N.Y. 1952); Novak v. General Electric Co., 10 FR Serv. . 45 b.31, Case 2 (S .D. N. Y. 1967); Texas Eastern Trans-mission Corp., 25 FPC 759 (1961) ; Champlin Oil and Refining Co. et al., 21 FPC 533 (1959). 1 In assessing whether the requested documents are material and relevant, the test is whether such documents "would tend to establish a relevant fact." Nelson Bunker. Hunt Test Estate, supra, at 1189. Therefore, discovery seeking fac,tual-support for issues and allegations which are beyond the scope of this proceeding as a matter of law must be deemed irrelevant to the instant case and therefore improper under Section 1.23. At the very least, s

             -before Consume.-; [s compelled to engage in an extensive
             ' file search for documents relating to such issues, it B

6

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                                      .              should be resolved whether these' issues are relevant.        In our view, they clearly are not.

According to_the Intervenors, every conceivable anticompetitive activity which Consumers may have possibly considered or engaged in since 1960 shculd be litigated in this wholesale rate proceeding because, according to their Application (p. 19), "the~ Federal Power Commission has an obligation.to ferret out potential misconduct felled [ sic] upon its jurisdiction". Thus, the Intervenors would have - the Federal Power Commission step into the shoes of the , Department of Justice and the Federal Trade Commission as the chief prosecutor of the nation's antitrust laws. Such : a proposition is clearly contrary to the Commission!s statutory mandate under Section 205 of the Federal Power Act which charges the Commission to ' sanction "just and reasonable" electric rates. The Commission's responsibilities under the antitrust laws, although important, are limited by the - scope 13f its p$ramount jurisdiction. As the Supreme Court recently affirmed, "although the impact on competition is relevant to the Commission's determination . . . there [is] 'no ' pervasive regulatory scheme' ~ including the anti-trust laws that has been entrusted to the Commission.'" o e % e 6

1022, Otter Tail Power Co. v. United States _, 93 Sup. Ct. 1027 (1973) , quoting California v. FPC, 369 U.S. 482, 485 (19 62) .' Rather, as enunciated in City of Lafayette

        .v. SEC, 454 F.2d 941, 953 (D.C. Cir . 1971) aff'd sub.

nom. Gulf States Utilities v. FPC, 93 Sup. Ct. 1870 (1973) , there must be a " reasonable nexus" between the anticompetitive allegations and the activities subject t7 the Commission's scrutiny. In this regard, the Court of Appeals also sanctioned the Commission's resolution . of " nexus" issues without an evidentiary hearing. The holding made clear that:

                      ...[A]s to interventions raising anti-competitive issues we see no objection in law to a disposition without hearing _

that is accompanied by an explanation, supported in the record, that the inter-venor's contentions are too insubstantial

                                        . to meet the requirement or barren       .

of a reasonable nexus between the activ-ities challenged and the activities furthered by the application. (footnote omitted] [ Emphasis supplied] 454 F.2d . at 953. These principles were recently summarized as o follows by a hearing examiner in the Duke Power Company _ case, supra, and subsequently deemed " correct" by the Commission itself: [T]he duty of the Commission is to consider the underlying policies of those [an titrus t] laws and any anti-

t competitive consequences shown.and

                                -give them weight, but only to the extent that they ma'y bear a reason-c                                 able relationship to, be in harmony
                                'with, or be complementary to,'the purposes of the provisions of the statute-to be effectuated in th4 particular proceeding _. . . -[ Initial Decision, Duke Power Company, supra, pp.. 19-20, (Footnote omitted. ) . [Em-phasic supplied.)
 ~

In theLinstant case, the " statute to be effectua-ted" is Section 205 of the Federal Power Act, under which the Commission ~is-charged with determining whether filed rates and tariffs-are "just and reasonable". Among the

                    -issues which the Intervenors have raised in, this proceed-ing is whether' " Consumers Power's proposed rates create a i

direct ' price squeeze' which makes it impossible on either ' an a.verage or incremental cost basis for municipal or

                                                   -                                                                        {

I cooperative utilities to purchase from Consumers Power j and re-sell to large customers" (p. 10-11). The Inter- l Venors have: also alleged that Consumers ' wholesale sales q contracts contain provisions which "may have the effect of preventing sales to new large customers by municipals or Ecooperatives without consent of the Company. " . (p. 12). Although there appe.ars'to be sufficient next.s_between theso. issues'and the rates and tariffs which the Commission'is charged with reviewing under Section 205, l

1 23/ most of- the subpoena requests do not relate to these allegations. Rather, the proposed discovery relates to alleged antitrust issues which have no " nexus" to Con-sumers'-filed rates and tariffs. These issues, as set forth in the Application, include the following: (1) whether Consumers has granted " fair and non-discrim-inatory access to bulk power facilities", including sale of " transmission services to Cities / Coops" (pp. -

           ,7, 9); (2) whether Consumers has " refused participation by the Cities / Coops in new units" (p. 10) ; '{3) whether Consumers."has refused to coordinate on reasonable terms
   .        with Cities / Coops" (p. 11; see also p. 9) ; and (4) whether Consumers has us'ed "its monopoly power over natural gas" in an anticompetitive fashion (p. 17).

In evaluating the " nexus" of an issue to this proceeding, one test is whether adjustment in wholesale rate levels would serve to ameliorate particular claimed , antitrust violations. None of the foregoing issues or the discovery based'upon them have any relation to the wholesale rates and tariff provisions which are sub-23/ In Appendix A attached hereto, we s'et forth on an item-by-item basis the relationship between the discovery requested and those issues which have no

                 " nexus" to this proceeding.

ject to this proceeding and none of the Intervenors' allegations in this regard could be ameliorated by ad-justments to Consumers' wholesale rates. For example, the Intervenors' complaint about " access" to Consumers transmission system is beyond the jurisdiction of this Commission to remedy, and adequate relief in this regard is available through the Federal courts. See City of Paris v. Kentucky Utilities Co., 41 FPC 45 (1969); Otter Tail Power Co. v. United States , 93 Sup. Ct. 1022 (1973). - Similarly, the interconnection and coordina-tion arrangements about which the Intervenors complain largely relate to system reliability and have no reason-able rel.ationship to the rates and conditions under which Consumers serves its wholesale customers. To be sure, i under Section 202 of the Federal Power Act, the Commission is charged sith encouraging voluntary interconnection, and it may compe-1 interconnection under certain pr.escribed , circumstances. See Gainesville Utilities Department v. Florida Power Corporation, 40 FPC 1227 (1968). But, according to the Act, disputes about interconnection terms hre to be heard in proceedings under Section 202 (b) , 1 not.in Section 205 rate proceedings, as the Intervenors 9 4

                                 ,                    8

I 4 5 j suggest. Consumerssubmits,hherefore, that most of the subpoena requests do not relate to issues which bear any

                " nexus" to this rcte proceeding and that such requests should thus be struck from the proposed subpoena as un-related "to the establishment of any relevant fact."

Nelson Bunker Hunt Estate, supra. ; V. The Subpoena's Return Date is Unreasonable The subpoena prepared by the Intervenors calls for the production of documents by Consumers' president on August 15, 1973. That date is clearly unreasonable. However, until Consumers is apprised which, if any, of i the subpoena requests are to be issued, it will not be l in a position to offer its views as to an appropriate 21/ date for compliance. We, therefore, reserve our rights to present our views in this regard and recpect-3 fully urge that no return date be established prior to 3 that time. 24/ The discussion .concerning burden in Section II(C) , supra, is particularly appropriate in'this regard. 1

                                   ' UNITED STATES OF AMERICA BEFORE THE FEDERAL POWER COMMISSION In the Matter of                        )
                                                   )     Docket No. E-7803 CONSUMERS POWER COMPANY                 )

ANSWER OF CONSUMERS POWER COMPANY TO CITIES / COOPS' EMERGENCY APPEAL INTRODUCTION Consumers Power Company (Consumers) , the applicant in this rate proceeding, hereby answers the August 28, 1973,

           " Emergency Appeal" of certain intervenors (Cities / Coops) from         ,

a ruling of the Administrative Law Judge denying their applica-

tion for a st -na duces tecum. In their Appecl, Cities / Coops request .the Commission to require production by Consumers of- documents which the Presiding Judge described as follows :

                              "The documents sought cover every conceivable form of document or recording, over the period from 1960 to date, ' relating' to any of the fol-lowing subjects:        (1)' competition with any of the Cities for customers or service' area; (2) efforts of Consumers to influence any municipal action, or the election of any agent or employee, of any

' political subdivision in Consumers ' service area; (3) efforts co influence any legislation in the _1/ The Cities / Coops subpoena application was filed on July

9. Consumers 'was not served with the application, how-ever. Accordingly, Consumers sought and was granted leave to file a response on August 6. The Presiding Judge issued his Ruling denying the' subpoena on August 9.

e

i

to supplement an already extensive, time-consuming, and bur-densome discovery project with one of even greater magnitude, not with an initial attempt to obtain access to basic facts.

As discussed more fully in the next sections, the Presiding Judge was fully justified, on a number of grounds, in denying the requested subpoena. II CITIES / COOPS HAVE FAILED TO DEMONSTRATE THE

                      " EXTRAORDINARY CIRCUMSTANCES" REQUIRED FOR RELIEF, AND THE COMMISSION SHOULD DISMISS THEIR APPEAL ON THIS BASIS The Appeal seeks Commission review, on an interlocutory basis, of a ruling by the Presiding Judge on a matter of discovery.       This type of evidentiary ruling is normally lef t to the sound discret '.on of the Judge.       Accord-ingly, the Rules (S1.28) preclude Commission review absent a showing of " extraordinary circumstances where prompt decision by the Commission is necessary to prevent detriment to the public interest. "     Cities / Coops' Appeal makes no such'show-ing. Hence, the Commission should dismiss their Appeal on this ground, without reaching the merits .

A. The Basis for the Ruling Below Does Not Give Rise to Extraordinary Circumstances. The ruling of the Presiding Judge does not give rise to emergency circumstances justifying consideration of this Appeal. In attempting to make the requisite show-

o ing, Cities / Coops seize on the grounds relied upon by the Presiding Judge. They argue that his " ruling was based primarily upon his stated belief that antitrust issues raised by Cities / Coops are not relevant to a rate case." (Appeal, p.1; see also pp. 7-9). They dien claim that the Commission must hear this Appeal in

order to make it clear to the Pre-siding Judge that antitrust issues are in fact relevant.

(Appeal, pp. 7-10). The flaw in this content!.on is that it completely mischaracterizes the Presiding Judge's ruling. He clearly did not rule, that antitrust issues are irrelevant to a rate case. To the contrary, he recognizes that "this Commission has the responsibility to consider, in appropriate circum-stances, the anticompetitive effects of regulated aspects of interstate utility operations . . ." (Ruling, p.3). Indeed, the anticompetitive " price squeeze" issue, on which Cities / Coops have already filed their t,estimony will be tried in this proceedi.3g. Judge Southworth made~ the basis for his ruling very clear. It was not the irrelevance of antitrust issues in a rate proceeding but the failure of Cities / Coops to show that the particular subjects covered by the subpoena have a " reasonable nexus" to the relief at issue in this proceeding. The Judge repeatedly made' clear that his

ruling was based on this failure to make the necessary showing. Thus, he made the following statements at various points in his Ruling:

                                "The relevance of these subjects [i.e., the subjects covered by the subpoena) or any documents relating thereto, . . . is not apparent, on the face of the papers, and no effort is made to show any such relevance. "

(Ruling, pp. 2-3)

                                  . . . [T]here has been no specification by the Cities / Coops, and hence by the Commissien, of any anticompetitive issue to be heard, parti-cularly any issue conceivably relevant to the rate proceeding, other than the alleged ' price squeeze' issue involving 'anticompetitive rates ' .

(Ruling, p.5)

                                  . . . [N]othing in the application, or elsewhere in the record, is sufficient ' to meet the re-quirement of a reasonable nexus between the activities challenged and the activities furthered by .the application. '" [ citing City 1

of Lafayettel (Ruling, p.6)

                              "A subpoena duces tectm cannot properly be issued in a Section 205 proceeding before this Commission in the absence of any rele-vance or materiality, demonstrated or fairly to be implied...." (Ruling, p. 7)

Two facts, thus, are clear: first, the Judge 's ruling was not based on a conclusion that antitrust issues are irrelevant; second, his ruling was based on a finding that the Cities / Coops had not made the necessary showing of relevance and materiality. This kind of procedural ruling does not create the " extraordinary circumstances" which justify interlocutory Commission review. ; I l 1 l l 1

basis would open a Pandora's box of objections and appeals. In short, there is nothing " extraordinary" about a Judge 's ruling that a subpoena applicant has failed properly. (i.e. , within Rule 1.23) to specify the documents sought. Certainly, Cities / Coops have failed to make any showing on this point. In conclusion, on these points, Consumers submits that the Commission can and should deny and dismiss this appeal on the ground that Cities / Coops have utterly failed to demonstrate any " extraordinary circumstances" to justify inter-locutory review of the Presiding Judge 's Ruling. III THE RULING OF THE PRESIDING JUDGE ON RELEVANCE WAS CORRECT

   ,                       As discussed in the preceding Section, the Commission would be fully justified by procedural considerations in leaving the Presiding Judge's ruling undisturbed.      However, should it choose to examine the merits of his ruling, the Coramission will find ample grounds for sustaining him. .

In his Ruling, the Presiding Judge rejected the position, which lies at the heart of this appeal, that the Commission has an obligation to enter upon a general antitrust investigation whenever requested to do so .in connection with any application pending before it. Relying upon the opinion of the court of appeals in City of Lafayette v. FPC, 454 F.2d _ ~ -- , +

941 (D.C. Cir. 1971), sustained by the Supreme Court in Gulf States Utilities Co. v. FPC, U.S. , May 14, 1973, the Presiding Judge ruled diat the intervenor must show "a reason-able nexus between the activities challenged and the activities furthered by the application" (Ruling, p.6, quoting City of Lafayette, supra.). The Presiding Judge plainly stated that intervenors had neither made, nor tried to make, such a show-ing. He said:

                          "A subpoena duces tecum cannot properly be issued in a Section 205 proceeding before this Commission in the absence of any relevance or
 -                   materiality, demonstrated or fairly to be implied, of the documents sought to the action which the respondent (Ruling, p.7) seeks through its rate filing .         . ."

[ Emphasis supplied.] Thus, the Presiding Judge's ruling was clearly based on inter-venors' failure to make the requisite showing of relevance. Intervenors ' effort to twist this ruling into a pre-judgment by the Presiding Judge that antitrust issues are irrelevant in this proceeding is entirely without justification. Intervenors persist in their failure to estab' lish the requisite nexus between the subject matter of the docu-ments sought and the questions at issue here. This is, of course, a rate proceeding under Section 205 of the Federal Power Act. The Presiding Judge has ruled. that the " price squeeze" allegations raised by intervenors bear on the ques- 1

tion, whether the rate increase sought should be granted. i

However, the subpoena, for the most part, does not deal with I the price squeeze. . lit seeks information on interconnection, coordination, wheeling, unit power sales and similar subjects.

                    .       Having been told by the Presiding Judge that they have made no
                           . showing of relevance, what do the intervenors now say?. They claim that these subject matters are- relevant because it is their -

intention to' seek relief in this proceeding dealing with inter-j connection, coordination, pooling, etc. (Appeal, pp. 8-9). This does no more than beg the question. The central query is whether the intervenors 'can and should, obtain relief of this kind in I 4 a Section 205 rate proceeding. Section 202 deals with inter-connection and provides a .means through which the Commission w can explore questions ' dealing with such matters. Hence, inter-connection and pooling do not become relevant in a rate pro-ceedingimerely because intervenors say they are. They must 1 J demonstrate that there. is a reasonable connection between such d j matters and the rate relief sought by Consumers. They have not i done so.

Indeed, reading their Appeal amply confirms the view 1

                         - -7/ Consumers reserted the nexus point with regard to Items                 '

2, 3, 4b , . -5 (1) and (2) , 6 and 7. See~ Consumers' Opposi-

                                 ; tion,; Appen dix A and : footnote 22, p. 26. It did not choose to assert the point .with regard to Items 4 (a) ,
'                                 ~ 8 and: 9, where, in an effort to accommodate, it offered to comply with a suitably modifled request. See Con-
                                 ..sumers'; Opposition, pp.      3 1 5.

,r s t

     . . .-            :-         .a                                  -,                       - - - - - . .                   .

of the Presiding Judge that intervenors are resting on the theory that' the filing of a rate application provides the occasion for a general antitrust investigation. See, e.g., the

        ' discussion at pp. 11-20 of the Appeal, which shows no connec-tion between interconnection and rates but argues that the
                                            ~

Commission must consider antitrust questions in any sphere of a company's activities when such questions are raised in a rate proceeding." This is not the holding of Gulf States. As we pointed out to dhe Presiding Judge in our Opposition, the Commission's responsibilities under the antitrust laws, - ~ although important, are limited by th ' scope of its paramount jurisdiction. As the Supreme Court recently affirmed, "cl-though the impact on competition is relevant to the Commis-sion's determination . . . there [is] 'no ' pervasive regulatory s cheme ' including the antitrust laws that has been entrusted - to the Commission. '" Otter Tail Power Co. v. United States , 9 3 S up . Ct. 1022, 1027 (1973), quoting California v. FPC, 369 U.S. 482, 485 (1962). Ra ther , as enunciated in City of Lafayette

v. SEC, 454 F.2d 941, 953 (D.C. Cir. 1971) aff 'd s ub. nom.

Gulf States Utilities v. FPC, 9 3 S up . Ct. 1870 (1973), there _8/- The argument'at pp. 20-27 of the Appeal also begs the question. It . shows . only that where relevance and ma- ; teriality are demonstrated, a subpoena should issue. i The question relevance heremade, has been is whether the requisite showing of , l i l l l

                       .                                    must be a " reasonable nexus" between the anticompetitive allegations and the activities subject to the Commission's scrutiny. In this regard, the Court of Appeals also sanctioned the Commission's resolution of " nexus" issues without an evi-dentiary hearing. The holding made clear that:
                          . . .  [A]s to interventions raising anticom-
          .              petitive issues we see no objection in law to a disposition without hearing that is ac-companied by an explanation, supported in the record, that the intervenor's contentions

.' are too insubstantial or barren . . . to meet the requirement of a reasonable nexus between the activities challenged and the activities furthered by the application. (footnote omitted] [ Emphasis supplied] 454 F.2d at 953. In evaluating the " nexus" of an issue to this pzo-ceeding, one test is whether adjustment in wholesale rate levels would serve to ameliorate particular claimed antitrust violations. None of the foregoing issues or the discovery based upon them have any relation to the wholesale rates and tariff provisions which are subject to this proceeding and nona of the Intervenors ' allegations in this regard would be ameliorated by adjustments to Consumers ' wholesale rates. 1 For example, the Intervenors ' complaint about " access" to Con-sumers tran'smission system is beyond the jurisdiction of this Commission to remedy, and adequate relief in this regard is available through the Federal courts. See City of Paris v. Kentucky Utilities, Co., 41 FPC 45 (1969); Otter Tail Power Co. v.UnktedStates, 93 Sup. Ct. 1022 (1973). e

15 - I Similarly, the interconnection and coordination arrangements about which . the Intervenors complain largely

                  ~ relate to system reliability and have no reasonable relation-ship to the rates- and conditions under which Consumers serves j

, its wholesale customers. To be sure, under Section 202 of - j the Federal Power Act, the Commission is charged with encour-f aging voluntary interconnection, and it may compel intercon-3 nection under certain prescribed circumstances. See Gaines-ville Utilities Department v. Florida Power Corporation, 40 , FPC 1227 (1968) . But, according to the Act, disputes about

interconnection terms are to be heard in proceedings under j Section 202(b), not in Section 205 rate proceedings, as the . Intervenors suggest. At .pp. 30-34 of their Appeal, intervenors attempt an item-by-item showing of the requisite nexus. Once again, i they do no more .than assert their intention to seek relief dealing with coordination and interconnection as a grounds i for requiring the information sought. At no point do they d face up to the question whether a section 205 rate proceed-ing is the appropriate vehicle to seek such a result. Hence, the Presiding Judge 'was correct in refusing to issue the subpoena as requested. He ' rightly perceived that intervenors are asserting that the Commission has an

L obligation to embark upon a general antitrust investigation c

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in connection with any application filed with it. His reading' of Gulf States on this point is precisely correct. The Commis-sion does have an obligation to consider antitrust policy in determining its actions. However, a particular antitrust question is not germane unless it is shown that there is some reasonable connection between that question and the action sought by the application before the Commission. Intervenors have persistently refused or failed to show the requisite connection here.

                                          'IV                              '

THE RULING OF THE PRESIDING JUDGE WAS ALSO BASED ON OTHER VALID GROUNDS The ruling of the Presiding Judge rested primarily on the relevance question just discussed. As pointed out, that ruling is fully justified. However, should the Commission think otherwise, or have any question on the point, its inquiry should not stop there. Cons umer's asserted a number of other, independent grounds for denial of the subpoena and these were specifically endorsed by the Presiding Judge. His rulings in this regard should also be sustained. I t 1 There~is, firs t , the objection on the grounds of bur- ! den because of the prior file search in connection with the AEC proceeding.

                                             ~~
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UNITED STATES OF AMERICA , ;. - BEFORE THE . FEDERAL POWER COMMISSION a The Detroit Edison Company ) Docket No. E-7206 and Consumers Power Company )

                                                         )
                                                         }

The Detroit Edison Company ) Docket No. E-8308 ANSWER OF CONSUMERS POWER COMPANY AND DETROIT EDISON COMPANY TO CITIES PROTEST, PETITION TO INTERVENE, AND REQUEST FOR HEARING On October 2, 1973, The Cities of Coldwater, Marshall, and Niles (Cities). filed, out of time, a " Protest, Petition to

              . Intervene and Request for A Hearing".         Consumers Power Company I

(Consumers) and Detroit Edison Company (Edison), Applicants herein, hereby answer this pleading pursuant to S1.8(e) of the Commission's rules. For the following reasons, Consumers and Edison oppose the petition for intervention and ask that it, and the protest, be rejected. . INTRODUCTION The Application in this proceeding was jointly filed by Consumers and Edison on June 14, 1973, pursuant to S202(e) of the Federal Power Act and Executive Order No. 10485, issued

              -September 3, 1958. .The Application seeks Commission approval for the construction of an interconnection between Applicants and the Hydre Electric Power Commission'of-Ontario, Canada
              ~(Ontario-Hydro). On October 10, 1972, the Commission approved l 1
                                                                                                                                     , . i

the basic' interconnection agreement between Applicants and Ontario-Hydro. This approval included approval of the inter-4 L/

                  . change'of. power by way of three existing interconnections.-

The instant Application merely seeks to add a fourth inter-connection. The amounts of energy for import and export under the basic interconnection agreement were authorized by the Commission in an Order dated October 10, 1972, in Docket No.

                  -E-7206.      The instant Application involvss no change in that authorization.        The justi,fication for the fourth interconnection
                ' is' simply that the respective systems of Consumers and Edison 4

t and Ontario Hydro have grown considerably in recent years. A fourth interconnection is needed to insure continued system reliability in the event of multiple forced outages of the larger generation units.- In sum, this Application involves only a minor addition to existing faciliti'es to insure the continued reliability of Applicants' and Ontario Hydro's systems. It is in the context of this limited Application that Cities seeks to intervene solely in order to inject a broad 2/ range of totally unrelated antitrust issues.- The Cities of J/ The. original interconnection was between Edison and Ontario-Hydro. 2/ Consumers and Detroit Edison deny evdry allegation of anti-

                          . competitive activity.   .The voluminous out-of-context documents
                ' (continued next page)

Coldwater and Marshall are parties to FPC Docket No. E-7803, a Consumers rate proceeding under S205, where they are seeking

           ,to raise the same issues. In addition, all-Cities are parties to a case before the Atomic Energy Commission, Docket Nos. 50-329A and 50-330A, a proceeding involving the licensing of a Consumers nuclear power plant, where they have also raised these same issues.

The Cities of Coldwater and Marshall are wholesale customers of Consumers. Neither has any relationrhip with Detrcit Edison or Ontario-Hydro. The third City, Niles is a full requirements customer of Indiana and Michigan and has no relationship with either Applicants or Ontario-Hydro. Nowhere in their Protest, Petition to Intervene and Request for A Hearing do Cities explain how or in what way they will be affected by Applicants' proposed interconnection with Ontario-1 Hydro. (continued) appended to Cities' protest and petition are similar to documents filed by Coldwater and Marshall in Docket No. E-7803. Judge douthworth accurately characterized the documents in that case: Apart from the fact that none of these documents is inconsistent with conduct not in violation of the antitrust laws, none of them has any apparant rela-tion to any issue properly before the Commission in the instant . . . proceeding, and Cities / Coops make no effort to point out any such relation. (Ruling of August 4, 1973, at p. 5) -

_4_ I. THE UNAUTHORIZED FILING OF A LATE PETITION BY CITIES IS IPSO FACTO GROUNDS FOR DENIAL OF THEIR PETITION In its Notice in this docket, the Commission set August 27 as the date by which protests and petitions were to be filed. On August 24, Cities requested an extension until October 1. They sought no further extensions. In an Order of August 31, the Commission granted the extension to October 1. The Cities, however, despite the lengthy delay they obtained, failed to file their protest and petition on time. Commission Rule 1.8(d) provides: Petitions to intervene . . . may be filed at any time . . ., but in no event later than the date fixed for the filing of petitions to intervene in any order or notice with respect to the proceedings issued by the Commission or its Secretary, unless, in extraordinary circumstances for. good cause shown, the Commission authorizes a late filing. By filing their protest and petition late without 1 first having obtained Commission authorization under Rule 1.8(d), the Cities are in plain violation of the Commission's . I rules. The fact that Cities do not even mention their lateness, let alone attempt an explanation or' justification of it, demonstrates the kind of cavalier attitude which this

                    -c                                   .

Commission should not countenance. Under these circumstsaces, Cities' failure to file timely constitutes, ipso facto, suffi-cient grounds for denying their intervention in this case. II. PETITIONERS-HAVE SHOWN NO NEXUS BETWEEN THE

           -          ALLEGED ANTICOMPETITIVE ACTIVITY AND THE RELIEF REQUESTED Cities request their " admission .     . . to the benefits of the related interchange and ancillary agreements
       . .   ." involved in the Application as well as " access to Applicant's transmission lines and full coordination and pooling rights". This relief has no relationship or " nexus" to the relief which can be obtained under Section 202 (e) of the Federal Power Act.

The Commission's responsibilities under the antitrust laws, although important, are limited by the scope of its paramount jurisdiction. As the Supreme Court recently affirmed, "[allthough the impact on competition is relevant to the Commission's determination . . . there [is) no ' pervasive regulatory scheme' including the antitrust laws that has been entrusted to the Commission.'" Otter Tail Power Co. v. < United States, 410 U.S. 366, 373 (1973), quoting California v. FPC, 369 U.S. 482, 485 (1962). Rather, as enunciated in e

City of Lafayette v. SEC, 454 F. 2d 941, 953 (D.C. Cir. 1971) aff'd sub. nom. Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973), there.must be a " reasonable nexus" between the anti-competitive allegations and the activities subject to the Commission's scrutiny. In this regard, the Court of Appeals also sanctioned the Commission's resolution of " nexus" issues without an evidentiary hearing. The holding made clear that:

               ...[A]s to interventions raising anti-competitive issues we see no objection in law to a disposition without hearing that is accompanied by an explanation, supported in the record, that the intervenor's con-tentions.are too insubstantial or barren . . .       to meet the requirement of a reasonable nexus between the activities challenged and the activities fur-thered by the application.      [ footnote cmitted]

[ Emphasis supplied] 454 F.2d at 953. These principles were senmarized as follows by a , Presiding Administrative Law Judge in the Duke Power Company case, Opinion and Order on Increased Rate Filing, Docket No. E-7557 (December 18, 1972), and subsequently deemed " correct" by the Commission Itself: [T]he duty of the Commission is to consider the underlying policies of those [ antitrust] laws and any anticompetitive consequences shown and give them weight, but only to the extent that they may bear a reasonable relationship to, be in harmony vith, or be complementary to, the purposes of the provisions of the statute to be effectuated in the particular proceeding . . . [ Initial. Decision, Duke Power Company, supra, pp. 19-20, February 2, 1972.][ Footnote omitted, emphasis supplied.]

In the instant case, the " statute to be effectuated" is Section 202(e).of the Federal Power Act, under which the Commission "shall" approve an application to transmit electric energy to a foreign country unless, after opportunity for hearing, "it finds the proposed transmission would impair the sufficiency of electric supply within the United States or would impede or tend to _ impede the coordination' in the public interest of facilities subject to the jurisdiction of the Commission." The scope of this proceeding is limited solely to these standards. Cities have made no claim that the proposed inter-connection would " impair the sufficiency of electric supply within the United States". Indeed, no such claim could seriously be made because a fourth interconnec' tion with Ontario-Hydro will clearly improve the sufficiency of electric supply. Similarly, Cities do not allege that the inter-connection will impede coordination. Again, a fourth inter-connection-is specifically designed to facilitate improved coordination. In short, Cities make no allegations which relate to system reliability, which is the primary concern of a Section 202(e) proceeding. Rather than coming to grips with 3/ The narrow ~and negative standard contained in Section 202(e) of the Act contrasts with the broad "lawfullness" standard contained in Section 204(a) which was, of course, the section interpreted'by the Supreme Court in Gulf States Utilities Co.

v. FPC,~411 U.S. 747 (1973).

the standards which control the scope of this proceeding, cities request the Commission to conduct a full scale anti-trust hearing on issues unrelated to Section 202 (e) of the Federal Power Act, In a recent decision, Administrative Law Judge Fribourg dismissed similar contentions in the context of a rate proceeding under Section 205: The main advantage to intervenors in th2ir presently chosen course appears to be the greater possibility of settlement arising from prolonging, perhaps for years, the time during which the rate increase re-nains subject to refund. To tie up a public utility's funds in this way exerts considerable leverage on it.

In lengthening the time required before refunds are made, it lessens the likelihood that they will be made to the original payers of the overcharges. It
is not fair to the public or to the company. As to matters other than the " price squeeze" (considere. -

tion of which is omitted because the Commission has decided it), the detriment would perhaps be worth accepting if it produced the needed substantive relief. It does not do so. Denial of the increase neither satisfies the demands nor compensates for their refusal. None of the other issues sought to be. raised by the intervenors could be resolved by an order in this proceeding. It is not suitable that the proceeds of a rate in-crease be treated as ransom for relief not related to the increase. [ Pacific Gas.& Electric Company, Docket No. E-7777, September 28, 1973.] , Althobgh this Section 202(e) proceeding does not involve the problem of refunds, the other points made by Judge Fribourg apply equally to this application. First, denial of the Application herein will not provide substantive relief

5 to Cities. Secondly, "[d]enial of the (application] neither satisfies the demands nor compensates for their re-

         -fusal."  Thirdly, it would be inappropriate to treat approval of the Application as " ransom for relief not related to" the scope or purpose of Section 202(e). It would seem that petitioner's claims are no more proper'ly before the Commission in this proceeding than in a section 205 rate case.

Significantly, the Atomic Energy Commission, which is expressly charged with prelicensing antitrust review under the Atomic Energy Act, has recently rejected the notion that such review extends to activities of an Applicant unrelated . to the " activities under license": If activities relating to a facility have no sub-stantial connection with alleged anticompetitive practices, there is no need for a hearing as to such practices or proposed forms of relief from them. In short, an intervenor must plead and . -prove a meaningful nexus between the activities under the nuclear license and the " situations" n alleged to be inco'sistent with the antitrust laws. (footnotes omitted) In the matter of Louisiana Power and Light Company (Waterford Steam Electric Generating Station, Unit 3), Docket No. 50-382A, September 28, 1973. While the Atomic Energy Act, of course, differs from the Federal Power Act, the concept of " nexus" in the context of an antitrust review is similar. There must be some relationship between the agency's statutory area of responsi-bility and the alleged antitrust activity. In this case, the

                                                        " activity under license," so to speak, is a fourth intercon-nection between Applicants and Ontario-Hydro.      Cities have not pleaded any relationship between'such interconnection and
         -the claimed anticompetitive practices.      No nexus, therefcre, has been shown. In these circumstances, intervention should be denied.-4/

III. CITIES COULD NOT AVAIL THEMSELVES OF THE REQUESTED RELIEF EVEN IF IT WAS GRANTED Cities request that they be given full access to

the pooling, interconnection, and coordination arrangements between Applicants and Ontario-Hydro. It is apparent, however, from the face of their petition to ir.ervene, that they are physically unable to enter into such arrangements. In their Petition, the City of Coldwater states that its generation capacity is approximately 16.2 mw and its peak

demand is 18.4 mw. Thus, Coldwater has no reserve capacity whatsoever and, therefore, has no energy to exchange. The same is true of_the City of Marshall which has a generation capacity of 600 kw and a peak demand of 1050 kw. The City of Niles, being a full requirements customer of the Indiana and Michigan Company, clearly has no generating capacity. l 4/ Consumers and Edison believe that, entirely apart from Cities failure to demonstrate a nexus between their anticompetitive claims and the subject of the application, Citics' interest in ! this application is so remote and tenuous in every respect that-they lack the requisite standing for intervention.

The interconnection for which approval is sought by Applicants is part of an energy interchange arrangement whereby, essentially, Applicants and Ontario-Hydro draw on each other's reserves in the event of outages. There is no point to such an arrangement, in principle or otherwise, unless each party has excess reserves. Cities have no excess capacity nor, for that. matter, do they have sufficient generation to meet their own needs. Even were they to become a party to Applicants' interchange agreement With Ontario-Hydro, they would be totally unable to participate in the arrangement. Under these circumstances, where Cities are incapable of availing themselves of the requested relief, their petition to intervene borders on the frivolous. Since granting the requested relief would be an empty gesture, their participation in these proceedings would not assist the Commission or be in the public interest. The Commission, therefore, should deny their petition'to intervene. CONCLUSION None of the Cities seeking intervention have an interest which would in any way be affected by a Commission order in this proceeding. They are simply too remote from' this interconnection and, in any event, could not avail j themselves of the broad antitrust relief they seek even l l

assuming the Commission could grant it here. Therefore, . the sole result of the granting of Cities' intervention would be to transform a 5202(e) proceeding into a massive, prolonged antitrust case. This, Consumers and Edison submit, . could have serious effects upon public and private interests

alike. Hence, the protest and petition to intervene of Cities should be rejected. We so request. Respectfully submitted, For Consumers Power Company: Wm. Warfield Ross James K. White Richard A. Brown Wald, Harkrader & Ross 1320 Nineteenth Street, N.W. Wash *; ton, D. C. 20036 James B. Falahee General Attorney Consumers Power Ccmpany 212 W. Michigan Avenue Jackson, Michigan 49201 For Detroit Edison Company: Harvey A. Fischer

                      '-                          Fischer, Franklin & Ford 1700 Guardian Building Detroit 26, Michigan October 17, 1973

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                                                  .                                                                       The dep:cted condition of many firms his Company b.ec.s Cruel Iloax.                                                  .

n= u , mda.cy.r.a ;overnm.:ntce u s . frap:n; far solutions. Altrady tl:e !!xtic W q n i !!rw U.iramt' tee has ep- .xe.! Hy Joit N it. Di>iin ti.t.t n nn I: retac in the imcatnacnt tax cre'd.t for s v Rep.rter*! Tn< u*Asi.a'rs.o.s.t4.* r w . Ut:h'.lcs. and other ta:obreak schemes h1ce J A0lGON. >!ich.. .The year 1M uw a becu advancco. AI,o propos?d ate fed rn;:y terrific one for Consumers Power Co.. ,.hs A tred debt inues and the caste.g of s!cetric and gn utility that prevides ener,.y nvironmertal can:rols. Federn! en-for much of 3tichi:23. The 1.uze camnt u* y'and fanar.cial of. kit 4.tre n!8o ur;ing had recorti carnings increased its dalde].y ..d cr.d was rc;:arded as one cf the country's But If the pii;ht of Consumers Power is test run utittles. any ind!;ation. q::ick cures are rm ~- in bc F.irly that year, the thriving cc.p ny hard to come by. Like raany.- uti!. tics, t*nn. comp lctedl 43rs for it.s me.*t ambitious rop suracts. Power m.L t rope with a hast cf ..d. ect ve*: a $.M nii; hon Palisades nucicar

                             .                                                                                      Territ!cs bevond its control: furt scarcain P'wer plant on IAke. Sticht;;an near ..mth                                                 -                   -
         .                                                                                                          skyrcel.r:in* prices cf cil and n:her cup.'

Itaven The prefert was to be the first ..iant plies, ticht menev- nnd pal =D;!!v sinw r.;ta - step in c. pro:ra:n pautn; the comptny in . increarc.4. On top cf t. art, the company al.,o the vanguard of an industrpe,.,.e move to. g ,,, , , awau : puer. . g, g.,4tr! r nd 94 operations Sotor of

                          .Despite emtrnratentti tattles. t! e p!st                                                n., , ger.,. *m from wra M's 3:et t.ut:t.* Pro.lu6n; 6L4 first c!cetricity c3                                              cwn rm e a!culat.e.ng.

Dec. .*!,1971. It unytrationah!y was a ; tant step: Constra tien.cet overrunt rnore than En<nv.Inne qw finned drab!:d the final price it;. to !!O miP.1:n. Where it once c jnyed a high reputat:en. Cut over the last year, the plint ha' p ~ Comur..:rs P recer new finds critics ch11 duced a mere trickle of cicetricity, ivrein; lent,ing its management ability. Even a:ine Consumers Power to shell out more than m former adntircrs are uneasy: Kenneth Ect. million for replacement powcr from other lister, v:ce president of the brokerage !!rm utilattes and prornptin; the cernpany to sue of Dean Witter & Co., stys he used to think f:ve enntractors for d: mages exceed!n; P. 0 , Con 4u:.: cts Power had "one cf the best tr;8. millin 3. neerm; tanna:c'atnis in the Industry. tut I

         \ .c - Only One P.ittar                                                                                   Ico's at tacir res ts mw and have to chan;e A.s vn tly >nd f r $ub! nome as that has                                               th.M ):':n.cnt."

b. a. It it. . */ o/ !setor in a d a:aatic Tcp affkla!4 ni the company feel that' ta . 3 .. f- sa of one c: t2 a nl. #*' h N! *ct i . * ! . *h a v +

                                                                                                                                              ..                  rit n .h
                                         * * *Piat. Af ?r st??i!y in.                                             tu.p a laf:s s pa.u .s!. 3.                   .her.igas t a? Idw e' rre win: l'c iM:an 1 'h:2.n: !' ' t " JJ. C m-                                               I'  3        h"T ~    '

nt:u'.c'. .'re ft ".>;ir onmere Power : .e 14 str .::hn: to keep it ha..:. a xi they reint cut that even wi:5 :.!!

at $2. Fur 1:.0 !! mantt en.'ed At::. O!. the la scil.ch?. tNc inmpany h1.s tcatin::cd to company's carrier.'s ehr.mk to it.M a shtte meet G..tcmcr::ccds for cncr;y. from 12.74 a year carher. As far c3 chairman Aymond and other Con #umers Power's om c te:i credit rat. officers are concerned. tha uti! sty prmS!y in; has d4oppe.!, anl the compary has cn. wot.Idn't be in fra pre.ent s. traits if it had got countered increash:; d.If!cuity rais!n; cart, the rate !cesca.cs it haa aned in acc.nt tal. It b.id to' scrap p ana for a b:g commen. years from the Stich!;an Pubile Service clock efterin; Init sprm; amt fina::y msn. . Commisy:en. Opp.:si-ion to r!>!n; utility' P;cd to raise 3:n nutilea by em!th; hives. rates, vehich lu.s been grv.cm; natiosa:!y. tors u. tis ccstiv It';.pt3 b+da un1 a rsrc 'nay be at Its hercest in SI! chi:Tn. where f.:rn r rs cci h Ir i ref t*. : %k s with an powe rfii! I nfitwal fcrect. in.1+hn:: .sta'.e At. ur.umit:V h f.1 unia d rg g torney Ccncr.'l Frank Kell'y an! the l'.:ited

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                                        ..nh'un have te:or. c "sn ad%.                                                                        .rit's       th.
                                                                                                                                              &' ctr@ urc=t                         of C n~! trh3 nir.*%r re!cs in tu!!d:r the :'?"'Mes ye.g ,.. rru' ' .'c;. . *, in v?. .ih , c,.'t'.
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ures g.4 h.jve tr.5W en the pat.ic's lack oficac's by snn;! u'.Ctica in the state. Thchted front ra::!!.::.cticnir eq'.:!Pr.tr..t rn.1 fm M. The s't!! c!.alnts th-*. dir.t' .:1 te. kr.ow!?.;e to p. rp:tu ste a enet .. cts: the p;ar.t. ori::inliy st:rr+cd ts co?L $"O nii!.':c:ce suerteil f.'!!ures to ine up to ci.itrtet Idn thit ,reope sor.: chow can avoid psyin% hen a.a! een thi. year, now is due to start.irrme. e the ec:* e,. the 5:rv:ce4 they recetre..'

                                                                                                           .n                                                                                                                The utility la s!u tcakta; en nw fac!!.

O s tFe et'vr l w! A'imey Gener.t! Ke!.hp.: la,-2m. ; at .: 413 n:: :ng,e;: its f:nst price tsg now, 13lfce! :;encr d:t r* : ts t:ut an dc,t..rt ley pn.1 :9.,*.4n'.

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AP.',*:7 ? .. t-ho h:n gte:r.cy G:. tra! Itu.;.t 0:: cr poM! cms htee grown out of theWmir; on stre.im this ycir. An:! ut.i!o the

                                                          . es       ry.e.cm            tr*:rven* na.:!rt Qfucultan. .%t tiu 103 t <>! t?.ese is4:mp any s.titt censiders r.ucle.tr power st.

tions tifore th: Pt;'.!!c Eer.!:e Commissi: N that Ceraumer l'o.ver, counting on tc.c tyco'traettre. It hu sc:,;bbe'l Tiars ter n thi-d cectar.1 trcst Cw.me s I'mr t.q sen adibi e<;We ret ur. cxreuive. rate r:hef in the,ne;w ;%i .fu'lmi. imer l..epl.ints phnts. in thshn.t111t'rche.*u!ce! t conc:etel any:;Snt. 1.> st .rtn.1 t ;) Li!.icn l*s the no:10.tr INCs. . :atatt tr.-t it

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ccC.1 rro.e em;. urn;n;. For r.enat an:q ,

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can Nat!r.at Ca9 C&. h9 s3 much ss i'a>* d.tyt th31 it'a eve.1 st.:e to sell so:: e in C n- . Sem crt Paucr. .WI. nee:rdin; lo W: *:r .

                                        .\1sc :.' /.nterlenn Natural c!nirman. th .t's

beta: =c ?.!!cht;*n Cons: id.ited yesta :go specins!!y so.:?.t c::t ether :st sc. ire.'s thin P.chandte Eastern, whic:t h J be:n its l

se!c si:rrlier tea. Str. 3!sek rays it wa9 dt. *

                                      .cided a ringie tsurce was **too chancy. '
     . ,                                     On the cther hand, Consumers Power de.

, , cided to stick wit!: Par. hand!c and d;dn't l even start seri.ns (xp!cratio:t work cf its cv.Tt until the late It@s. whe:t 2:atural. :as. surpN Troblems first immed. On a: ert! occasions in the m!d.!MCs.' sirs Conrcuts Power's >!r. Sin:r:oc. Coniurners Power I.sd! considered addir.; s:r?!! cts but reftetad the' .

                                     .ider because P.tr'a.ncia had lower rr;ees.

lsa!d 11 cou!d deliver enagh ;as red .*.r**t. .e

                                    .cr.:d ta ecr..r:s ' ;**. C .. :..ura 1-av.:r eat t,1; in.h:? trial c::9 :n-tr if ;P. tit':t vient gebewhere, a char;o Panhar.314 der.les.                                                  .

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        .                           SECURITIES AND EXCHANGE COMMISSION g        PROSPECTUS                                                                                                               .,...
  *Q                                    '

d 4st

                                                                                                                                 '~
                                                                                                                                                                      /f o                                                                                                                                                          r
    ~                                                                                                            -
               ;                                                                 (150,000,000                                              6#

99 0011stimers Power Compan3L..

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. i; FIIEST . MORTGAGE BONDS,11%Yc SERIES.DGE 1952 j Interest payable .31 arch 1 and September 1 ,

                                                                                                                                       'Q.
                                                                                                                                                         ~,,

'n; . - p .. y . , .o. %. .

                                                                                                                                                                         .s Not redecmable prior to September 1,1981; thcrs redwnable at 100% plus                                                                              accr
                                                                                                                                             . C. ,

cc5

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                                     .4pplication will be made to list the New Bonds on the New York Stock Excha                                                           ,.

h THESE AND SECURITIES EXCHANGE COAEA!!SSION HAVENOR HAS NOT THE BEEN APPROVED OR DIS COAIA!!SSION PASSED UFO'N f 'THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE. b ' SENTATION TO THE CONTRARY IS A CRIAllNAL OFFENSE. J . d .

' PRICE 100%$5 AND ACCRUED INTEREST 8

1 ( ' Undertsriting Price to Discounin anri

                                                                             ,       Public(D                                               Proceer's to Comr:sissions(!)              Companc(nfa)

PerDor.<!.............................................. 100.507c 1.15% 99.35 % ( Tofa1............................................ S50,250,000 l S575,000 . S49,C75,GG0 (1) P':s acer:rrd ht war, !! cay, fra n Septsmirer 1. :en. (t) 21.e Csr:panv lu.s eg <<d to in<temnify 11.e l'nderscriters ccaint ecriain 5ccuritses .fet of 1953. . . , liabil' ties ine%1i ing li.s1.i!!t:a s.adcr t?.e (2) hfree c:<d etion r'f <s*Inutc<t r pruc< cl SDS,oGo. .payalle L ..v t'e Cnmt;a* y Th ' Nc!** Benni ? wl;<n. oc and if acccpted 1.y the (*v.la writer <'v.' OL trid l'y tIsc wrrral I'mh r;* rih r.; .r, neraitsi 1 r .'egal m. die.v. ly Sirapon. T!.acher f Bartlett. coun.el for ti.c l'nderteri!Itn.nne! i< e.rp.ucl,L:et N. cy: proval'of ca.rie s 140 Broadway, New York, N. Y., agairst payment therefor

                                                                                                                                         .             >       c,                i MORGAN STANLEY & CO.

Incorporated

                     .luguct 21, 1974                 ,

v.a

.{                     .
                         ,                Comi:.r.. r "e.n or *.r ; irt) f ti e "ren.:.an> ** ) ! . t ! h et to il inf..:m.itirri .I rer,.r: es;:ce*                              e t ..
     '                             f s carMe a v.a .: u . t of 19.~.: .nw. i.e .:co.rd.ince tht re..il: . til                     (p: ass aret en a r insure :n'..:. M 8

t're Sc. . r::!.. .. ./ I ' . .: , e i umo i n.r.. it.T.e.n.ar.. ... .i et pas U...i.:r da tes. .veu r s , c: . et, . . 3

                     "            i4"cer . de.L o or m. iic:.. th: ps :. ips !Im!:.:s oi s .i.ritir . er :.e Ceeg. us; an ! a. . t n.nt. eiai ; . .i 1                                  t.f sa l. pt.oas u. sr.muslions s.ith lite Company. .is of p.erticul::r date . is di cfmed ic prosy si:.ttments distribi:ted to shareho; dtrs of the Com;:an) amt fikd with the Commi sinn.

Such tcports p....sy statemes.is and other inf.ern.arinn can be inspected at the ofiive of the Commiwinn at floom (.101. I tuo 1 Street. N. W.. W . hie;:!c.i. D. C.. . here s u;iio can !.e u!.t.iined fiora ti.e Cummi ston at prewtD. sri rates. In addition, rcpurts, proy statements and other information conceri.in;t the Company can he inspec the ntP.ecs of the New iork Stock Exchant.e. the Detroir Stock Esch.imte unt! the Miduest Stect,

       -                          Esrbt.n.:e. Tbc (Wans's e ecu'b e c".ien cre Int e. ed :i 212 We t Mid.':pn N ia . . : :. , t . ..
                                  .*ikh.,t .n 6M peie;- .ue mueber: $17-78';.1fi.10).
        *:s
       ..\

{

. "i

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No person is authorized to cise any information or to make any representations other than those contained in this Prospectus in connection with the offer contained in this Prospectus and, if chen or made any such information or representation must not be relied upon as hasing been suthorized b

          ~}                     Company or any Underwriter. Neither the delliery of this Prospectus nor any sale utade hereunder sh under any circusassances, creete any implication that there has been no change in the utfairs of the
  .         .t                   Company        since the date hereof. The First Mortgage Bonds offered hereby are herein sometim.es r to as the "New Bonds",

h o e j . 1 .

             !.                                                                           TABLE OF CONTENTS                                                                                      "

I . t 4 Face P4e

            ,!                 Th e Co m pa ny.. ... .. ............ ... .... . .. .... . .... . 3        Operadng Statistics.. ........ .... .. . .. .......... . 24 i                  Use o f Proceed s ..... .... .            . . . . . ... .. .. .. . 3      . Description of New Bonds..... . .. .. .... . .                                    26

[ Construction Expenditures... . .. . .. .. ..... .. ... 3 Expcrts.--

                                                                                                                            . . . . . . . . . . . . . . .   ..................28 tl                       Ca pitaliza tion ... ........... ... .. .... . ... . ...... 6              Legal Opinions .. .. . ................ .. .. . ....... . . ... 2 8 j                   Statemen t af Income ... .......... .. .. .. ....... .. 7                  Underwriters.. . . .... ....                                                       2'9
      '{                       B u siness . ... . ...... .... . . . . .. . .                  . 1I        Report ofIndependent Public Accountants.. 31 Recula tion . . . .... . . . .... . .. . .. .                 . 16         Financial S ta temen ts.. .. .. . .... .. . . ..... ... . 32 sh 4
     .f   *
     *4 j                             i. CONNi:Ci!ON WIT!! TI:th OFFFP.;Nt;. TI! : UNDErWi !TFIts

1/ \ OPEil.41.t A.:i Utt 1:FFE( r TF.*.hSACTIONS WillCI: SU.i;!LI7.E Oit M AINTAlN TiiB M AIMET PiSC i$ O' iJE

         .-                                                                                                                                                                                                  j HEW 110ND AND ANi O'ff!!:r! !!ONDS Or TI!E CO.'I:'ANY AT i.E'.'E!.S '.':O'.T Ti" :iF WiHCd MiuiT OTiiF.;tW:SL. FilhVAlt. IN Tile OPI'..N MAISET. SI!Ci! 'l RANSACTIO '~S                                                                                           i l

MAY iW EFFECTED ON "li1E NrW T OltN 4rOCF FXC!! ANG 0" !N T!:P OVf*; i!H . cot Ni 4:t it.*,!:h" tit. M C 1: STA'i!!.!XING. IF 00*.1MENCED. MAi iE P:W.t GTi> i TO '. I

.y                             ANi Il' iH.                                                                                                                                                                   j
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F. 4-

7 5 W p. SECURITIES AND EXCHANGE COMMISSION , o ..

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F. 'I ' v TIIE coa!PANY ' Consumers Power Company was incorporated in Michigan in 19f,8 and is the successor to a corporation of the same name which was organized in Maine in 1910 and which did business in Mis. from 1915 to l'.;6S. The Company is a public utility engaged in the generation, purchase, distribution and sale of electricity, and in the purchase. production, manufacture storage, distribution and saic of gas. in the 1.ower Pe:dnmia er the State of.'.fichigt.n. The Company also stipp'ies s: cam wrvica in e: crw.m

The population of the territory served is estimated to exceed 5.200.000. The Company's udGry cf nd revenues were derived about 55% from e!cetric scrvice and 427o from gas service for the twelve rnonths ended May 31,1974. ' The indu*tries in the territory served by the Companyinclude automobi!c and automobi!c equi)"r.ent primary metuh. chemicals. fabricated metal products, pharm:ceuticals, machinery, oil refining, paper paper products, food products and a diversi$ed list of other industries. General Problems of the Industry The Company has been experiencing problems common to the utility industryin general, such as the difficulty in obtaining an adequate return on invested capital (see " Statement ofIncome" and " Michig Public Service Commission" t,nder " Regulation"), the testricdon on opendons and increased costs and delays'attributabic to emironmental consideradons (see " Compliance with Environmental Requireme and " Atomic Energy Commission" under " Regulation"), the necessity of obtaining substantial amounts of

   -                 outside capital to fmance the Company's construction program (see " Construction Expenditures") an difiiculty in obtaining adequate supplies of fuel at reasonable prices (see " Electric Fuel Supply" und                 -
                     " Business").                                                                                                 -

USE OF PROCEEDS The net proceeds from this sale of New Bonds will be used to finance in part the Company's

construction program and to repay short-term borrowings made and to be made in connection with intedm

     '              financing of the construction program. It is estimated that just prior to this sale of New Bonds short-term borrowings will aggregate approximately S85,000,000.

The Company estimates that its construction program for the years 19.74 through 1978 wil! tequir

                 expenditures of approximate!y 52.2 billion. In order to finance this program and to meet First Mongas Bond maturities of $170,334,000 during this period, it will be necessary for the Company to sell substantia additional securides, the amounts and types of which have not yet been determined. The sale of cenain securities may be restricted as set fonh under" Statement ofincome". In August 1974 the Company scId S60,000,000 principal amount cf First Mortgage Bonds, Ilh% Series due 1994,'and 600,000 shares of S6.00 Preference Stock (the "New Preference Stock"), and it may issue additional equity secerities later 1974. References herein to SI10.000,000 of First Mortgage Bonds include the New Bonds and such First Mortgage Bonds, t th% Series due 1994.

CONSTRUCTION EXPENDITURES As of June 5.1974 the Company had mcde or proposed to make capital expenditures Gr prope:ty additions in !(n4 in 'an estimated an:ount of S3ti0,318,250. which estimate gives efht to a de 6 i y C.c Company in Jur,e 1974 to elrect a rettenchment program involving the elimination of aryo;.in.2tely S60.000,000 from its canstruction budget for 1974. The 1974 program as projceted incicdes Si97,552,G3 of expenditures towards the constraction of three major p oJcets as fol!am: Project and Estir.sted 2%::r M IAcatha W:r or Ltd Cat Featurcs Opratioa to Cwr.per.m) Palisades Piant Nuclear fueled wnh initial fu!! czpacity or about 700 %0 t Van ihren Uowatts and ulumate capaoty cf about 173.000 bh (b) S 168,MO,nc0

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MiF.:n 8 Nr.t T4., . vide.fr (Jded m.its wft J::r*::;a e c:Neizy of ahcut lim c:t in i.87 8. . e. 1 %:.tur,t.co

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Two oil fired units at exi3dag plant to add approximately Unit 3 in early 1975, 5 234.000,000

/p$ .- Plant. Units f.3M.000 kilowatts ofcapacity(d ) Unit 4 in late 1975 41 3 and 4 (Near M Enem!! . Mi6htgan) . ftl.s $NT

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/N                                             (a) Expenditures have been made or are scheduled to be made as foliows:

Go Q Prior to 1974 1974 After 1974 sh' Pa!iudes P! ant SISO 043.000

S S.552.000 5 -

I M;dianJ Pianr S!04n73/J00 5'101.tMMO S 734.9?7hA

                                  ,                     D. E. Kara P! art                               S 92.573,000        5 H,tt0.006             S 53.J22.0c0
%                                              (b) Referer.ce is made to "Ato:ric Energy Commission" under ' Reguladon" and to Note (b) to the
      ,f                                 Statement of Income herein.                                                                                                    .

Qe (c) The steam will be furr.ished to The Dow Chemical Company for industrial prccesses. (d) In connection with the construction of the two oil fired uni:s r.nd the conversion of other units to rf; burn oi!, the Company has a purchase agreement with a Canadian supplier to import oil from Canada. t(* _ See ~ Business J. Electric Fuel Supply". h,

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                                             .The 1974 construction program includes S162,766,250 for other ftcilities, including other electric
                                                                                                                       ~

production facilities, power supply projects, elcetric transmission and distribution facilities, gas supp'iy

'2                                      lin-, gas p' rod _uction, transmission and distribution facilities, steam additions and general and mis-P, c.                                    ce!!aneous additions. Of this amount,it is estimateti SI12,934,650 will be expended for electric additions, L.A                                      $41,906,000 for gas additions and $7,925,600 for general, miscellaneous and steam additions.

Z 1974 construction expenditures estimayd to amount to S360,318,250 as of June 5,1974 plus sinking

   .I                                 fund and other long-term debt retiremerer. in 1974 of $17,309,000 total S377,627,250. This requirement will be tinanced througn the issuance and sale of long-term securities, and the balance from internal 3..(:                                  sources 'and_ short-term borrowings. The long-term 1974 fmancing consists of S34,700.000 principal
              .                        amount of Installment Sales Contracts issued in February 1974; S50,000,000 Term Bank Loan made in
,f;i,                                  June 1974; S60,000,000 principal amount of First Nfortgage Bonds issued in August 1974; 600,000 shares (S30,000,000) of Preference Stock issued in August 1974; S50,000,000 principal amount of New Bonds in ky%

S

                                      - September 1974; S35,0'J0,000 proposed sale and lease bac'. arrangement for nuclear fuel later in 1974; W                                    plus S50,000,000 in long-term securities of a type to be determined later in the year. Af ter underwriting
      -ly                              commissions and estimated. expenses of issuance, the balance of approximately S72,500,000 'will be provided from interasi sources and from short-term borrowings.

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q. SECUR*TfEE AND EXCHANGE [COMM!ESION [U- . T:: 0..:i. . . ii.. m. .L: r!.ar a .. :.m.c. .: t.v c . 2.3~; u.cs r. :: nue; car rwer r' . . r Q.. mis <>ee. .'.i chi:; n f.it itd:ial use in 1954 arid 1986. The decision to cance! the 51.4 bil!!cn pr. pet: we.s , m.:de f.'r the rea on ti..d in view of curren:!y prevailing ma:ket eendit: ens for uti!i:y securitie3 and the . r ; v4 pvent'y ini.iequatc carninp. the Company cocid not he cuered of r.::.mg sumerer.t avw i c.q :.d us er the !cngthy con <truction pened of the project to :mance the pa.jee:In edJ;nva to tne nacreds

            ~ cf r:il!iens of dcilar> wFich mu<t be raised fer c:her projects to meet cu tomer demands over the next ten                .

3e.. . Tm:d eats ; net including I.md ces:o incurred te da:e for the rbnt are approximately fl3Jeo,r3 ,

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v ch u.m n.ay he u!va;.eah:e in :be ewn :he Cemp.my lue.oc> : pisn: on :!6 ti:.; A s-;c ti;ne in the ftaufe. The Company intends to pe:ition the Michigin PuHic S6rvice Comnan for et- hcri:y to amordre any rem:ining costs ta opera: ions over a pericd ef years. If +ucit at.ti 2 !y :< ret

             ; " d. it n. y is . .   .     .>ary te enck: a charge against curr.:nt oper.sions in 19 4 for :.l! cr a rart .-r :;.e e > in:ened.

Con:inuation of the Companfs construction program depends upon condnuing availability of substan:ial amounts of outside capital from frequent sales of debt and equity securides over the foreseenh!c future. The balance of funds needed is expected to be provided from internal sources. The Company will need significant and timely rate increases if revenues and income are to be maintained at levels wl.ich will result in sutlicient internally generated funds and which will permi: external financing ofits cons:ruedon program and its operational requirements at reasonable cost. If adequate funds cannot be obtained frca outside financing and internal sources, the Company, of necessity, will furtl er curtail its construcdon program to the extent feasible. The Company is currently studying its revised construeden schedules and-budgets with a view to additional future cc: backs should the unavailability of funds make this neceuary. Any expenditure reductions which might result from the deferral of construction could be significantly offset by cost escalations and by general infladonary price trends.' 4 9 ,

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power upf!i sd the e:ree:in;.: ef ecinomies by Dunhaated deve!o;iment and ewhans of power. Two

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Tj e GNam ha ;; ::me wM er d et'w m.jer eNe:c ed*: . . 4 r.u% ii ? !%; a. O!.h. F Indiar.a nM !:hneis p.-Miding :hr ir.:erwnectica 3:rti;:es and other tranu.dcr o l!x Cc : may a!w malmain, imereonnee:!ons with the Alichigan Municipab and Ceoperatives Po&:r Pod. tite Ci.ies of ]~

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                                  - Lan in;: and Ho!!and and imerchanp> pawer with de Ediwa Sault Electric Company.

The maximum net demonstrat:d capability for the summer of 19'7 4 of the Company's interconnected system including supplemental purchases is 5.525.000 kilowatts (including the Palisades Nuclear Plant) to

 ;[                                 serve a projeued maximum demand of 4.330.000 kilowatts. The net maximum demand on the j                                -imereonnes:ed system thmu;h July 31,1974 was 4.394.295 kilowatts en August 27,1973.

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                                - Eicetric Fuel Supply -

i . In addi: ion to substantial and continuing increases in fuel costs, the Company is also experiencing N Ei limitations and restri:tions en the availabili:y of fuel. For the twelve months ended Af ay 31,1974, approximately 55% of the Companyi kilowatt-hour }I - - requiremems were chtained from coal fired generation,6% from nuclear,7% from oil,31 from peaking A units -(oi! and gas),' -l% from hydro (inchiding net pumped storage ;eneration) and 30c'a from q purchee.! ud imerchan;ed pper.

' .j Approximately 55% of the Compaa>'s owned pnera:ing capability (excluding p :mped scragd is dependent upon coal::s a suun;e cf fuci and re-taires arn:simately 6.5 mi!! ion tors of ca i ancaaih. ihe

d. Cc.mpwy hn to :g-term coal comracu which provide for the delivery of appmximat:!y iO7 ofits ceal d.

requiren. cts in 1974. These long-terra contraeu pre,ide for deliveries through IC and in some

           .                     - instances Ororah 1982. The su' fur coment of the'caatract coal ranges fram 0.6% to 4.0% by veight. the

'I . majority of which falls between 2.07, and 3 0% sulfur. Approximately 900,000 tons oflow-suh'ur coal per Q

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year is under long-term centract from mines located in eastern Kente:ky, and 3.7 miliion tens of high. su! fur coal ; :r year is under long-term contract from mi:es loca:ed in Ohio. The rema!aing long-term 3.j- contract coa! tupp!!es are f.om mines in nenhern West Virginia. Indiana and western K: mucky. Due to 4t- shortages of railroad cars, eaforcement of the Federal Coal Mine Health and Safety Act of Ih9 in mines Terving the Corapany, equipment breakdowns at mines aad breakdowns ot' coal-handling facilities at the ! ]j_ Company's plants, as much as 10% of the loag-term contract coal may not be available in 1974. The

    '[                             balance of the Company's coal requirements not under long-term contract and that quantity of coal under
   ,J                              long-term contracts which cannot be delivered must be supplied through short-term agreements or spot
                                                                                               ~

'] purchases at prices substantially higher than coal obtained underlong-term contracts. At present the price

      -[                           for such spot purchases of coal with less than 1% sulfur ranges from S25 to S37 per ton as compared to long-term contract prices of from $13 to S20 per ton.
      -{                               ? As of August 1,1974 the Company's coal inventoh amo mted to approximately 78 days' supply. The M                           Company is undertaking a program to maintain or improve coal invent'ories to a level equal to or above f.j                           normal seasonallevels because of the expiratian in November 1974 of the labor agreement between the

1. United Mine Workers and the mine owners. Future changes in governmental requiremems pertaining to j- ~

the coal industry' could ~ adversely affect cost and availability of coal supplies. See "Regu-i 'lation-Cornpliance with Environmental Requirements" for matters pertaining to meeting EPA regu-lations on coal-iired generating units.

        !                                The Company is negotiating for supplies of!ow->ulfur coal from two or more new mines which are to

, ; become operational from 1976 to 1973. These new sources are imended to suppiy low-sulfur coal to i supplemint existing long-term contracts and to possibly replace the existing fuel supplies at one or more j J; existing generatint. units. A ' hhough there is no ' assurance that the Company will complete such Q - negodations, the Company be!! eves that any successful comp!ction of current negotiations for n'ew coal-g); ' _ supplies will require the Company's participation in partial or total ownership of the coal mines.

- In connection with generating units which burn crude oil and the construction of new oil-burning

    -)                            generating units, the Company expects co import from Canada approximately 2.7C0.000 barrels in 1974 yi                                 incre.bic; tvan annual rate of approximately 11.000.000 b3rreis beginnin'g ~in November 1975. As a result

_ 12~ 1

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S EC U RI T it. ::: AND L.XCH ANGE ( OMN1551GN M h I c g . l

                                                                                                                                     .e dn., .aj . :her increa,es in east. imported liw sulfer crude oil frinn Canada increr .<J to 512.46 pa ,                  i*

> .i trrd as of June 1.197a as cempared to $4.12 per barrel a year earlier. 'Ihe Company ex::eus to recover j P ,un .t.tnti.sity all of such additional expense thtuugh the operation of fuel adjustment clau<es included .j in its rge ahedu!:s for c!cctric ser ice. For additional information see " Gas Service" below. - e 'h the Federal Energy Ollice ("FEO") adopted mandatory fuel allocation regulations, under which h volumes of middle disti!!ates, residual and erude oils are to be allocated. Such regulatio% are now ] i $ & admiaistered by the Federal Energy Administration ("FEA"). The Company is to be allocated 100To ofits j .j g m wiume of middle disti!! ate oil (25 reduced by application of an allocation factor), or as othernise . 1 Jetermined by the FEA, but not less than 100% of current requirements for nuclear plants. st:rt-up, testing. .f $ and llame stability of coal-fired plants (except for peaking uses). Crude and residual oils used as fue for j dectric generation are to be allocated among utilitie> using such fuel on the basis of the amount available j;. S and abe recommendations of the Federal Power Commission ("FPC") so that, if necessary, each utility ;.t

?>         - v: thin appropriate groupings" will absorb an equal percentage cutback of power generation to the                       j I-               ni num extent possible. While the Company is not assured of receiving its required al!ocations and the l4
%           fai!are :o receive the same could have an adverse e!Tect upon its supplies of oil and the Company's j
          ,,eae..nica, to date such suppfies have been adequate to meet the Company's requirements.

Under the Energy Supply aad Env:roa rental Coordination Act of 1974. the FEA is also authorizcd to j. a a:;oca:e toal to plants switching from gas or petroleum products by rea>on of FEA order and to 0:her A peruns to the extent necessary to als>ist in meeting the nation's fuel requirem::nts in a marncr consistent, .[ - to

             .ne (d!est extent possible, with environmental requirements.

ihe Company's overail average cost of fuel burned has increased s65stantially. as shov.n below, and .l nnNr increases are capeeted for the foreseeab'c future. ] t Centher Mil;ian h Percentaae of 'l otal U

hl Coa umJ Fuel Cowumel ;

1973 1%9 1973 1972 1971 1910 iW j 4 _3 197 1972 1971 G

                                                                                                                    ,       4 c       e     c              %

g, c 4 36.6 31.2 70.1 75.5 S5.0 86.2 92.9 : 3 ro.d. 4S.9 44.0 42.9 9.7 5.0 2.7 .3 .2 h k~ Od.. .. 35.4 77.8 79.9 34.1 43.0 32.7 41.1 5.3 7.7 10.1 11.3 4.4 .d M Gas.. 66.4 54.8 45.4 ~ 2.2 2.2 2.5

Nuclear . 24.1 24.3 27.8 36.0 33.9 14.9. 11.8 f ar'; : i 37.4 31.3 100.0 100.0 100.0 100.0 100.0 4 All Fuds.. . 49.6 44.2 43.8 _

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for the five months ended.May 31. 1974, the Company's o'verall average cost of fuel consumed [% Ji macased to 69.le per million Btu as a result of higher fossil fuel co>ts and a lower percentage of nuclear f.} fud ornsumed. For this period, the percentage of total fuel consumed and cost per million Etu of fuel b 4

 .y            consumed Ibr th four fuel classes are, respectively, coal: 31.5% and 59.0c, oil: 9.2G and 157.6c, gas: 7.4%

yi and 83.2c and nuclear. l.9% and 20.lc. ((: a X The Company's present nuclear fuel requirements are for the Big Rock Point Plant and the Palindes l:i'

              .N&ar Plant. The Company has comracts for each of these plants providing for the supply of all 11 egmtm. of the nudear fuel supply chain. induding uranium ore concentrates and the conversion :o                         :!

[f '::ana:m hexafluoride; enrichment of the uranium hexafluoride; fabricatioa of nudear tu.! assemLties; and transportation, reprocessing and reconversion of the " spent" nuclear fuel assemblies. The contracts cover :l p._ req.:irernents for a minimum of the next nve years. These agreements are with major priute industrial :i @ 3 M Wl'phers of nudear fuel and related sertices and with the United States government. @ (( The Company also has contracts for mest but not all segments of the nuclear fuel cycle for the initial Z. wres for the Midland P! ant. These include contracts for the supply of uranium ore concentrates, " i,.,. fr.sertion to uranium hexatluoride, enrichment of the uraniunt hexatluoride. and fabrication of nuclear i. f {f y tad aurmblies for the initial cores for the Midland Plant, together with transportation, reprocessing and (}

                                                                                                                                                ?
                      -    mioa of the ini:ial barhes of" spent" nudear furt assemNies dicharged from each of the two Y'          . Piant unit .

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4 Dona 4 Cook vs. E. ?. A. pollutants from coal. fired moratorium on leasing of To date there have been H 1O electric power plants. He also Federally-owned low sulphur 32 full.page ads, most rf ((1 contends that emission stano- coal deposits in the West and them running in the New. hrds set by state governments by the Clean Air Act and by York Times, the Washington Cl$$hOy@{ are unrealistic." E.P.A. regulations which re- Post, the Wall Street Journal, At 65, Donald Cook does stnct the use of Eastern and Time, Newsweek. U.S. News . not look or act his age. There Midwestern . .. high-su!,hur I i cod 1 d[1d are no lines in his face, no coa!. pouches Sneath the sharp , ....,j' Continued on page 14 i . eyes. He speaks-at length- !

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1@dU fil[ J, . with fervor and some elo-quence, pr yn.g ) , He was recently quoted in . ,/ 1.. Nation's Business magazine - By E.W. KENWORTHY as saying he got his greatest pleasure out of work. He also [4 s o' y /; s. , WASHINGTON "All of a admitted that "I don't rnind sudden . It's their environ- being abrasive if it will make r'

                                                                                                                      .Q,.4M-4. - ,,           .

merit and we're monsters," a contribution." - if ' ' 'J - t 9 sad Dcnald C. Cook, bitter- A colleague said recently, ly, the other day at the end " Don Cook may sometimes "m-i c- '

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of a three-hour interview. be wrong, but he's never in ' By "we" Mr. Cook meant doubt." j . , ,j ,

                                                                                                                                                               '-f g' the electric utility industry            Mr. Cook believes that he                'M A1                              - e ~.X'
                                                                                                                                                                   -a in general and particularly and the " rabid environmen-                               *N,j.

the American Electric Power talists" are met at Armaged-s s_ 1 Company, of which he is don, and that he is battling

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chairman and chief executive for the Lord, the nation, the '% T', g3 l officer. American Electric, , economy, the electric power with $5 billion in assets, is mdustry-and American Elec- g, the nation's largest privately tric. - 2 owned generator of electrici-His critics grant his sin. M-ty-sni 93 per cent of its cerity, but some of them- % A ./

                                                                                                                                                             /:             i..

gencrat.ng c:ps::ty is ce21 inc! ding John R. Quaries, N '" fired. E.P.A. deputy administrater \ By "they" Mr. Cook meant -question whether - Mr. what he calls " rabid environ- Cook's priorities are neces- , ks . N

                                                                                                                              \                    ;.*
                                                                                                                                                      /

menta'ists." most especially Sarily in the above order. Mr. ., ' the Federal Environmental Cook has chosen Mr. Quarles .e-f. . Protection Agency, which in as the prime target of his Q3 g ;s his view is infested with abrasiveness because he re- j / .. ,3 them. gards him as the toughest , .

                                                                                                                       -J , 4' f,g.

1' 2.y'. . and smartest of the agency's t. - , For nearly a year. Mr. bureaucrats.

Cook, a former chairman of Daaald C. Cook ,

the Securities and Exchange His crttics, inside and out-Commission, has been direct. r,fde the industry, think Mr. ing from his office at No. 2 Cock has overstated his case Broadway, in New York, a and been unnecessarily harsh. furious-and some think But they give him good wronpheaded-battle against marks for fighting in the what he regards as the "ig. open rather than trying to norant" dogmatists and ideal. work his will behind the ists in char;;c of the agency's sc*nes in Washinrton as so' enforcement of the 1970 many industry officials do. Cican Air Act. Seeking to prevail by gen. g .

He is particu!.:r!y entaged erating public suppo t for his by E.P.A/s aggresive cham.

cn:ssde, Mr. Cook last Feb- .

pioning of " scrubbers" to ruary launch.ed an advertis-capture pollutants in flue ing campaign built aruund cases from ccal-fired steam three points: generating phntt. Mr. Cook CThat the solution of the l contends that these " mon- energy crisis lies in generat-strous contraptiens will not ing more power and r.ot sim. work reliably, and are ruin. ply conserving it, ously expensive and unnec- CThat the way to do this is - essary. to relieve the nation progres. But Mr. Cook's offensive sively from its dependence

      ' otso extends to what he cahs on Middle East oil by ex-                 '

i.he " unreasonable standaros ploiting its abundant coal ihemselves - namely the reserves, nealth related standards inr qThat this sensible se!u-alyash and su!phur dioxide, is being thwarted by the De- I which are the two principal partment ,of the Interior's .

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Donald CooiBa: ties Cleas AiE . Continued from page 1 - e e mpanfs 20 power Nants han a generating capacity of more than 13.000

megawatts (exceeded only by the Tennes-7 and World Report and Business Week. . .L ,

The ads have also run in the 69 daily see Valley Authority system) and it expcets , and 102 weekly papers in the seven. state 'l to expand to 26.000 rnegawatts by 19S2. area where A.E.P. sells power. Those states Some years ago it decided to rely on coal are Virginia, West Virginia, Tennessee, Ken- and not to go for nucl car power in a big tucicy, Ohio, Indiana and Michigan, served way. Its only nuclear plant will not start up by the oper.tting subsidiaries of the parent until.i. ext month. It ateo has one oil-fired crmpany: the Appalachian Power Ccmpny, and two hydtc Octric plants, all sma!!. thn Indiana and Michigan Electric Compa- In 1973, the A.E.P. system consumed 31 es. the Kentucky Power Company, the million tons of coal-nearly one-tenth of Kin;:soort Power Ccmpany, the Michigan the coal used by the nation's electric utili-Power Company, the Ohio Power Company j ties and about one-fifteenth of all the coal and the Wheeling Electric Company. consumed in the whole country. Its own A.E.P.'s interlocking grid is, for most of mines supp!y about one.fifth of its coal and its length, built stop bituminous coal fields, by 1981 are expected to supply 50 per cent. some mined deeply and others stripped. , Some of the ads have diawn strong pro- ne average suiphur content in what '9 A.E.P. burns is 2.5 per cent, but about one- ' l tests but alsonot fromon!y from Russell environmental Peterson, chairman groups third is only 1 per cent or less. The rest, cf the White' House Council on Environ- particularly that bu ned by Ohio Power, the

      .           mental Quality, and Jahn C. Sawhill., de-                biggest company in the system, is high ~

posed head cf the Fedcql Energy Adm:ms- sulphur. tration. , There is no dispute between 6. Cook For example, in several ads last spring. l and the E.P.A. over the avai!ab!!ity of tech-A.E.P. Inveighed against those "who shrit! ' notorf to deal with flyash, also called - for less enerEy and no growth." assertin't particulates, which give the plume from an that the government's energy conservation unregulated power p' ant its grey. black proposals would " generate galloping uncm- co!or. ployment, and reduca Amer:ca to the " bad Electrostatic precipitators, which hfe." a magnet, were developed in the n,act like meteen-Government officials immediately

pro- , thirties and have been improved to the trsted that Washington does not advocate ' point where nearly all flyash can be col-

                   "no growth" in generating. capacity, not a            ,lected.                                                   .

cut. hack, but cather reduction in the annual "We were environmentalists long before rate of growth cf energy consumption- it was popular." says one AT..P. ad, addirg from about 5 to 2.5 percent. that the company tested its first precip:- Mr. Sawhill wrote the ccmpany "I urge ! tator in 1941. Ilowever, it did not install you to cease this kind of advertising. It precipitators in all its plants, and did not masks the total energy probiem and g,ives keep abreast of the developmg technology. th3 incorrect impression that conservation As a result, m order to meet the, standards , impiies strongly negnive impacts." under the Clean Air Act by 19, s, A.E.P. t,s Mr. Peterson' wrote that the " galloping 3nvesting nearly $300.milhon to backfit unemptoyment" ad was not only "nonseng' , S boi'ers,11 plants w:th, new precipitators, but " subversive of the public interest." Mr. Cook s complaint is that the cost of the new equipment is excessive for the small

               .       Mr. Cook was infuriated when Mr. Pehr-son w: eased tt.e Ictter to the pren and so             additional control.                                                     ,

wrote to then.Prrsident Nixon, complairirg We backfitted [one] plant, he sa,id, ,'to shnut the " scurrilous" letter, and adinit achmte flyash contro: of 93 5 per cent, and that

vo" 'ully im estig.ite both the off.:ial then when West n entation p'an m}January,197

rginia tesund its imp'e.

                                                                                                                   , it was an! .Lestine act:vitin of Mr. Pctenen                   twice as strmger.t as the l,ederal req:r:re-in th

conduct of hb office." ment; and we had to rebarkf:t to ach,: eve hi ar.v event, the 53.7 m!!!!cn ad c$m-pign ripresents small change for A.E.P., 99.7 per cent control. That additional 1.2 which i11 eperating revenues of $*i7-mil. per cent c st 556-milh,on.

lion. and profits of SIS 3.million in 1973. Its Sulphur Dioxide is another matter. Here profit nurgin was IS.9 per cent, much above Mr. Cook cisagrees veMwat!y with the t* e ind:ntry average. Revenues for 1974 are E.P.A. not on y on hoyv to con:rol emissions cxpected to reach $1.2. billion although of this colorlest, toxte gas but also on its in eres pa) nts d r a s' am also nspW-ble for about 56 per cent of the 00 million tons of sulphur d: oxide e:nitted into t!w

1

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M: u ..=:.-m -At a Glance 3 mos. ended Sept. 30 1974 1973 Revenues. . . . . . .

                                                                      $338,300.000.... . ..         . .. . .            $239.100.000 Net income.          _                    . 45.700.000 :                                        45,000.000 Earnings per share .. ...              . .... . .. 6 2 c           .        ... .. ...... . .           68c 12 mos. ended Dec. 31                            1973                                             1972 Revenues...                        .        $966.500.000                                   ..$860.600.000 Net income.. . . .               .          .182.600.000                 ..         ..     . 156.300.000 Earrung per share .                               . 2.85                                              -2.63 Assets. Dec. 31,1973 .... ......_                                                          35,071,320.000 Stock once (N.Y.S.E.). Nov. 22,1974...                         .                           . . .~. 14 3'4 Stock price.1974 range                                 -
                                                                                                                  -.. 271/s., .13 5/s
      .                    Employes .                                                 -
                                                                                                            -.                  16,303 f.ta;or set sesnes-Accatac' tan P;wer (Vaj. In$a*a ard Michigan E!cetric. Kentucky Power.

Kegsport Few2r tf ennJ. M.cn gan P:wer. On:o Poner. Wnces .ng E'e::nc (W.Va.) r~'~. a r nen. u. a ..-a n :r -.::u n . :wum = A.; natinn's air each year. The E.P.A. has set mittent contrni system"-tall :ta.:ks 800 en atmosphere standard of 50 micrograms feet or more, of which A.E.P. alttady has per e bic meter, equivalent to 0.03 parts of 11, to disperse the sulphur diordde hi;h in the gas to per million parts of air, effective the air and a!!ow the standard to be met June 1,1973. Atany states hase set much. most of the time at ground level. IIe argues tougher standards. The target sought by that it is wrong for the E.P.A., and the the E.P.A. and most sihtes is a 90 per cent. states. to base regulations on measurements . pus control of emi3sions. at the top of the stack rather than at

                      ..'+. Ccok outlined four strategies for s.t.              grour.d level "where peop'e live."

tacir a the su'ohur dioxide problem, three A ground monitoring system, of which w ih he approvec, and t!:0 one-scrub- A.E.P. has several, v.cu!d warn a plant le -that he vio:ently cpposes, rnanager whereser atmospheric condiaor.s nrst, he snid, is " conforming fuel." with cr: ate excessive ground. level concentratnms Im thrn 1 per cent sulphur con' cat. He cf the gas. The manaer cou'd then switch says that 46 per cent of A.E.P.'s generadng to an emergency supply of low. sulphur coal capacity is alrea !y in comp'iance with state or cut back his prn?uction and call on emission !!mitations burning Appa'achian another p ant in the sy3 tem to make up the and Nestern Inw scir,hur cott. deficit. The E.P.A. aprecs on this solution. if Mr. Cor.k's advocacy of tall stacks has there* is s:rict central of s: rip-mining t) the back;c; n,t orty di mur.h of the indas. prevent the rasagin;t cf Western istm and try but Go of the Federal Power Com-grazir?. lands.13at it asscrts that Western mission. Tbc rederal Enerrv Administration low.dphur cott wi;l not be avai!.ib:e in and tre Whue House Office of 51:nage. an.sth:rg like the e,ennt; ties needed until ment and Ilud:et. the I dd.nin Teen-e:;... Ms. Dat the E.P.A. responds that intermittent Scrnrd. as a :r>~ .rm. enlu: inn. Mr. ('nak enntrH !< a. cc-tr+'o as an irtar:m device, wru;d ramm.e the y a by a "fron* em but r.M at a p. rmanent contin! measure. !t pretewach as eM !hp:hetion cr ;isi- arzucs that ctither low.su!rhur coal nor an . fir ;th.0-lm 'n: a dr n fu*! to be E.rr* ahe- .:e mareofpa er may lec availiole A;. ' . th ' : P.A. 2:r m. ht., '.tr. 9 :.:r!?s d.rir;: a ; c uution r. -t

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, 3 p . B ,t' ihe E P.A. ate admits that the evi- The first is that, because of the arnount J n is sttil "tentatice" ard it has rot set cf sludge, t!:e usui! 1.me md limcste.e

                     . sulpuate standards,                                               processes are not well adapted to power
                        . Mr. Cook leaps on this admission. "There                       plants in, or near big cities. If such p! ants -

have been a lot of statements on sulpnates, use high. sulphur coal, they wi;I probaMy i: he said, "all cast in terms of suspicton. II- - have to install a system that produces We start running a governrnent on suk usable products such as su'phur or sulphuric _ picion, we are not far from a knock on the acid, rather than sludge. (!toston Edison h.u

                     , door in the night. If they have anyth:ng on                       a -150 m-gawatt plan tmng a magnesium sulphates let thern promu!; ate regulations."                     oxide serunber produciag sulphuric ' acM The E.P.A., meanwhile, is still holding out                   and the Piti!ade!phia E!cetric Company is for " scrubbers," as the tnost immediatefy                        p anning to invest $$.miU;on in magnes:um premising control system for sulphur diox.                        ox'de scrubbers.)

ide. Thev h as Mr. Cook contends, have The we.nd conclusion is that a !ar;~

                       "horrend'ous problems."                                           numbar of ce.Stired piartwfrom 63 ta iw

_ The chemistr/' is simp:e in th: cry but - -will m b ,able f to cr.mply v.i:a its s&.% tricky in practice: the chemical en;:incering _ ards by E ., by 1. y t:=IM scrubNrs. *1? a is complex and difficult. Caleiem sulphate titre i+ too mort ar (irgn, manuf.twuc and sulphite formed in the process piug up and installation. Therefore, thesq plants spray nozzles and valves. Every few days, must he given va-iance , or th* !aw mnt the sca!c has to be removed b'y high-pres. be chanced to extend the enmiGance da e, sure hoses, or, in bad cases, with hammers, probably to the mid-njre;can-c. gat:cs. , regjria; a s.,.utdcwo., . Wlmre Mr.does A.E.P. f.t that f r.:olu.cce

i Mr. Cook cites the recent findings by sions? Cook boasts cor; 2 s compa f herring examiners for the Ohio Environ. ha$ always been a " pioneering' utility, amt meatal Protection Agency, who salt that no citc5 its deve!cpment of very %;h temp = . scrubbing had yet met the criteria set by sture boilers, the nation s largest generatt ; (4 National Academy of Engineering in umts high voltage transmission and M. IDIO-that a scrubber shculd operate for a vanred circuit breakers and so on. year with 00 per cent availability on a 100 When Mr. Dowd, the general coun.a,. . megawatt er larger unit stressed this pomt at. E.P.A. heari,ng.; a Furthermcre. he contends that dispoel of year.ago, howeser, an a:ency official r.h. the " massive amotmts of sludge' predured served that "A.E.h is wnlmg to take in and POssib*'a leachic"" from dhpnsal sites, rm (of investiag larger sums]when 'e t

                       .mio the water supply myolve cmirxmcrt1;                          tech :olcev  U in q:6:!cnhha$;r m%W       to hc [ n-and l'ea!th hazards greater thaa these pae.                                           : -                           m say nsk w by dispersal cf sAphur d;ox:de by tail at ! cast su!ya .t cmm to poHug. pact pollution centrol. ,n wntQ E h. officials rep!v that the prebicms                           To which Mr. Cook terl.cs ,that A,.E.P.
                                                   ~

are being surmounted. that several units are has ,mvested over $1.bilhon m envircn. apprnaching the rehability cri:ena, and that mental controh--precip'tators, tall s se :s ' . durin the hst year thirumters of scrub and monitoring. huge towers to coot

undar construction er ree:rcahte wat+2r to prevent thermal Lt. p .5.,4 bar< d uw 'd*in operation'cd ha from a ; % 01 TM - te of rivers, rechmation and tree. plan, y r"epresents n.s I'umIundreds of of a company mp...om np (g;owned arm.Mr;;> *nine in C . 9, of capital miestment ano operating and an.1 contracts for b'w-su';>hur coal. maintenance tests. Ut.t Fe stads Erm ap:nc sper.dmg o en one do!;ar for scrubber tednolo v.

                                      ..                   . . .                    .       TM EP.Al< 191 Qua rl ., thinh %

These offic:als are partay' 9/ nc " atte.ude irre<pensio:c. lie does not see why by what they reprd as en- ' I 5' S tb , 1 ALP. v.;th a b:!im ' his a year m?nts in some - A E P. aa . epl ' rr we ard an 10 per cent pmtit tr;:in

                       " Applied to a 12.000 nym sys:cm. F r-tone se e a !N en
                                                                    .ft Mrc !            O ::d nnt inte.s in this fort of su!;w:r fue year 3 ied;ce C              h

enmrci " _ m fr.r en , th" D W e. %

to cmr, for istanc SM ("N ' Gas a d Fi~tric renr ay, we rcuws cf 51< n m % ari e 12J - o .t nore:n, Wacinnton, it C Im . e a a .,p. -r j, gng , ,,; ,, g.gg, ad, el: ~t an 1 n rW IP >~

                                                                  ~ 17 ' . 2                r .. -                    y e - > ., s o , y t3
                                                             - ua%

Web ; M, d. re Jt . A;my othciah rdt s t! ty me w .a e,a r:.' megawatts is aNoit as Ltrps as tM . ."

                      . sere . ma / **.P. sy< tem an l that e

l wold be dapersed among m.m/, relit di small remote !" , and at a depth :nuch ;

                      - more than fise c: 10 feet.                                                                                                                         I In the !!;ht of industrv expc'irnce W!!h sen.bbm w far, the E.PA Jraws two conclusions, c.

b _ .____m____ _ ___ -

4 4 m z m. - 1 nr.ee m'J.aHLS .t :1.Bree n, x,u.enences WAS!!!NGTON - la one six boilers, representin. 220 to 60 per cent of the gas has more than 09 per cent of the

  . advertisement, the American me;awatts,                    has e    been been removed. Flyash remov- flyash.

E!'etric Power Company honked feto a re:rmtetiveiy al is over 97 per cent. The scrubbin:: agent in the s;ated that stack gis scrub- fitud. , four- module Emc ' Sir. Pernick. Is com~ident slurry is carb:de lime, a

                                          **         "5 E'" ,                   that if d: oxide scrus,bers throwaway product from an bers to remove st.tphur oxide            The first is a mul unh, wers add'd to t. e t tree ace:v:ene plant. nearby. The imet power p,. ant emissions w;g o7,e umbb2r removin;t s:n;;ic flyash un!LS,' the plant. plan't turns 4 per cent sul-are,, urreliab s and impracts         f;yash, and the ether, su!rbur which burrrs coal containing phur coal.

C3- d:cxide. The other thrte are 2 per cent sulph.:r, wou!d bc The scrubber unit was It a press - relnse two chiefly for f'yash removal, in con plittice w:th the state's p! armed by Robert P. Van run:% a;:c. the Environmen- with one of them oa standh). eminion limitations. Ness, reanager of the compa-

  .ta: Pa tection Agency sait                Steve L. Pernkk in chrrr               Dirosal of stude?--over ny*i environmental affairs "The cxperi?9ee of electric . of Duquesne's erviren ncnul S00 0a0 tens a sear if a11 and a chemical entineer. It
 . ut:: hies so far with ' scrub- preuram, has been placued boiler < were. hoded to dual went into operati6n Apri!,

bers' in acttt.tl opera:ica _w; h problems cince the dual scrubbers-is a prohle n be- 1973. and Str. Van Ness says sho rg they can be used cen- scrubber went into cperatirn ciuse the plant is on the that 00 per cent of the ;;as is tinunus y, reliably and effec- last 11 arch. outskirts of the citr. now bein;t removed, tirely." There has been much scat- Comnleted inst.llation i at He attributes the system's Among the plants where in;; and plugging by calcium Phi!!ips, and another at the success to the fact that, by 1:me or timestcr.e scrubbers su!? hate and calcium sul- company's Etrama plant, carefully contro!!ing the

hrece been installed are: The phite solids produced by the would rhean a capital cost of chemical reaction, he winds PEFps Station cf the Du- up with co!cium bisu!pW,
qua:, f Light Com;'.iny of and nactica the lime. cf @'w.:ur

                                                            't o or dir:id: ' S!!0-mi';!c: ? n:'ut! ' o;u: rat- soluble salt. meaning no e d-three in;:, (csts, IncIuirg .N:e Ii'tshurch, the Pa$iy's Ptm . thum a r tonth it has been di<pM. would 1 e S3Sm!!- in;; or ph7:ing problers
     .m; tsa of the Louisv:he Gas down fer a day or two at a . ; on. T;Q mi,:ht mcri a 25

From April throu.: D z-and Electric Compary end ti:ne. per cant increa<e m cor.<am- cember lut vear, whe:' :Fe the !.a Cy;:nc F!ati on in Kan- At fcr efficiency w hen er hPlc, 3* r. Pernic'c esti- boi:er was 'oneratina tull sa<, joirtly cu red by the cper..th;, the ital un
h:s - mated. time. availahii!!v of Oe

  . K::nsas City Power and Light . been removing 90 per cent of . Paddy's Pun is the E.P.A 's                   scrubber was 70 per cent, Company and the Kansas the m'phur diosnie rassing shawricce.1:s capacitv is 330 and from Au;:ust throu;:5 D -

G.u and Electric Ccmpany. throgn it-which is oEr 20 megawa:ts. but oriy one cember,it was 98 per ec:,. . The es:ds se freat their per n .t of that preduced by bc;ler repr:sentin;: 63 mega- The capital cost was SU-experience is rdxcd. the p; ant. watts is attached ta th' sul- mi!;icn, or about $57 c nlo-Pri'hps hn a ted capaci*y llcwever, by injection .of phur dioxir?e <crubbers h e- uait compared v-ith bl a d 357 mcgawans.1ise of its !!me ituu the other caits. 50 hind a precipt:ater remming kilowatt for Duque:ne.' n B

l.

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_1.ouisvil!e Gas and Electric scrubbers ' use timest ne.

                                         .ls planning to add scrubbers . quarried a -mile :way, the
                    ,                      to four other unfir,. Annual ~ plant barns 2 million tnns of '
                                      - operating cost of the f,ve will - coal a vcar and uses 5tM000
                                         - be $14 million, costing con. tor.s of *!imestone.

sumers about 15 per cent in .'There is only one hM!cr; rateincreases,it is estimated. the stack is 70d feet. Of the The five units will produce ' 'p0 tons of flyash produccd p^9.000 tons of slud::e a year. every hour, two-tirrds is is and Mr. Van Ness thinks that moved from the bottotn of

                                      - es entually this should be the boiler and the rest, a!ang
                                      ~ piped into worked-out mines with 40 tons of sulphur dios-or u ed for hll in strip-mined - ide an hour, goes to scan
                        .                 areu.                                scrubber modules.

De Cygne, located in the - Clifford P, McDanic!. the Kan.tas Iunsas prairie 50

                                                    . City, Mo'   miles began scrubbers,inhas from ~  engineer       char;;e hadof. the rac:h op rating June 1.1973. It's problems with sca!!ng and

h:g, with .tnral- cap city of phrdng.

829 megawatts. Each ni;;ht of the w?ck. In 11ewever, it is producing . rotation, one module is Act 6nly 630 ine;.awatts because - dcrxn fx cicanin;:-an ep t- . c.f . a design miscalculatien ation that takes two or thr.,e that has recessitated ** steal- men ten hours and loss 9) ing'ict air from the boiler to !!O megawatts of output. to help nush flue gases up Nevertheless, Mr. McDaric! the . ' stack after passing . - says, at present 95.4 per cent thrmh the scrubbers. The of flyar.h and 69 to 83 pr scruh'ers cent $ 12-million, or cent of sulphur dinxid? : re

                                      . $51 a kilowatt.         .

being remoted. Availa!>!!My Tre plant burns coal.'strio- of the system has increas<d m, ed about three miles dis- from 37 per cent last Jo:m-tant, that is 5 to 6 per cent ary, to tic per cent in May, to su!phur ar.d 25 per: cent S3 per cent in September. flyash. both very high. The E.W.K. G

                                 -k.m D
                                                                                                               'o

                       .y' 1x ,-10W BOrub,berS nV' Ork m

Th? coitrcre sial scrubber of gases In a forced up the stack by large induction fans.

            . coal-fired operation-to vastly over-simplify ~                       The studre containing the calcium sul.
                -    is a lar; e metal container f:tted with                      phate and calcium sulphite-truly, as scrub-
              . n37':cs and haff!cs.                                              ber critics char;;e, **an oory gook - is Frora a plant's boiter, flue gas containing                  pumped from the settling tanks to small tex:e suip;wr troside is purged into this.                        ,nnn?s where it is stabillied by the addition cont.,Iner and there churned v.ith a chemical                     of flyash and lime and p.artially dried.11nal-

n.tr.r un::-mnn ccmmonly a slur y of li.ne ly, it is trucied er sent by pipe to a disposal er Tr nims: Int resets veith the d:nxide site to harden.

f t. ;e' .: s e!:itnt su!p? tat? . nd enleium sul. The prine *t.nl companies to have deer.ed p'i' "hm re!.di can 1 ? drawn o!f with the scrubber syste us for majcr pl.tatt. of 100 et 'nf o kr .e tan'a wh:re thcy setth out.

                                          -                                       megawatts or larger, include Combi.. tina M.* . cf 'h2 v.ater is then ptm ped bacl: into                   En:;ineering. Inc.: the P.abenck & W1eox the n ::'b?r.                                                     Company; the Chemical Construction Coc.

JA: re tcal cf the .stlphur dioxie, the pnratice, a s:Sidiary of the General Tire rer.ta:n'r'; ;h*: rp-mm:ly water vapor and and llubber C.v'ipany; the l'eabody ti.ilion non tc ;Ic carbon dioxide -is rehea:cd and Corporation, and Research-Cottrell, Inc.

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                                                                                    "I grene up as a New Dealer and teas imbued seith remaking America. I learned one thing: You get a liberal scho has an idea he unnts to push, that he belieres is in the public interest, and he i                                                                              will stop at nothing, absolutely nothing, in order to push it. lie btlieves the end justifes the means, period. I'm talking
                                             -                                      about the people at the Environmental Protection Agency."
                                                                                    -Donald C. Cook, chairman, American Electric Power Co.

Obviously, Donald Cook is not a man g who pulls his punches. For the last sev-t g eral months, Cook and the $1-billion [ y utility system he tightly contruls have i i* l been engaged in a blunt, far reaching 4 l t crusade against federal environmental l I policies. In the most hard-hitting at-

               !                                                               l tack ever directed against a govern-               I
                                                                              ! ment agency, Cook personally launched a controversial $3.1.million advertising
                                                                               ,    campaign to mobilize public opinion against EPA policies (page 68). In addi-
                                                              /                     tion, AEP has filed several lawsuits 6                                ,
                                                         ,.'                        challenging EPA's enforcement of the
?

Clean Air Act, and it has threatened to close several power plants rather than I install scrubbers to purge sulfur oxides I g ,

              '                                                                ,    from utility smokettacks. Terming the i                                             .

i scrubbers " monstrous contraptions," } ~' Cook insists that they do not work and

              !                                                                     are not needed to comply with federal air quality standards.

) , If getting his message across also means sparring publicly with govern-ment officials, Cook seems eager to do battle. He has accused EPA Deputy Ad-ministrator John 11. Quarles, Jr., of "in-i timidating" AEP and trying to q muzz!c"its right to speak. And earlier Q this year,when Russell Peterstm, chair-I *

a f man of the White !!ouse Council on

                                                                                !) Environmental Quality, wrote to AEP lI criticizing one of its ads as "irrespon-

i. I ,

l Cook's sty!c is to come out fighting

         .,                                                                         rather tnan work behind the scenes.

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                                                                                                                                                                                     . i At its 2.900-Mw. Arnos plant in West Virginia, AEP employs giant cooling to ers and tall stacks for pollution control.                                                                   l sible" and " subversive of the public in-                     Its argument is well summed up by an plant, sited on Lake 31ichigan, is still terest," Cook fired back a letter accus- early ad, drawn by New Yorker car- two months from startup.

( l'

i ing Peterson of " vituperative and toonist Charles Saxon, showing two In emphasizing coal, AEP has been l i

cppressive conduct." Then, irked that defiant-looking Arab sheiks standing able to push the technology further - Paterson had released his AEP letter to in frontof a Rolls-Royce. AEP's answer: than any utility. Under Philip Sporn, j the press before Cook had a chance to "We have more coal than they have oil. who 5uilt the AEP system and retired in i reply, Cook took the extraordinary step Let's use it!" Cock is so delighted with 1961 after 41 yeam with the company, l

  .cf writing to President Nixon asking the ad ("I like our two Arabs very AEP pioneered supercritical boilers, de-                                                                                 h him to " investigate" Peterson's "ofli - much") that AEP has turned the slogan yeloped the first high-voltage trans-j jj citl cnd clandestine activities.'.'                           into posters, lapel buttons, bumper mission lines, and built the industry's                                                        -

To environmentalists, such tactics stickers, and matchbooks. first large cooling towers. . ;l ! make Cook the devil incarnate, a know-nothing executive railing at needed en-Subsequent ads took the memge much further. We could be free of , .b The most efficient utility , 1

                                                                                                                                                                                                '   (

4 vironmental laws. But those who know blackmail, they said, if only the EPA Cook, whether they agree with him or would relax its " unnecessarily restric. Everything about AEP is on a Brob- , not, insist that he is deeply disturbed tive regulations" requiring scrubbers dingnagian scale. It has the tallest by the nation's energy dilemma and by and if only the Interior Dept. would smokestacks (some are nearly as high the financial woes facing utilities. And speed the opening of more low-sulfur as the Empire State Building), the j ! because he is a strong-willed and coal reserves in the West. largest cooling towers (the floor area is ; scrappy man, Cook's style is to come In the view of environmentalists and as big as the playing field at Shea Sta- - cut fighting rather than work quietly government regulators, however, re- dium), and the largest strip-mining ! behind the scenes, as other utility laxing emission standards entails sub. machine (capable of scooping up two ; executives are doing. As a result, AEP, stantial risks to public health, partic- Greyhound buses). Its 2,900-31w. Amos f 1 which generates more electricity than ularly among the young, the' elderly, plant in West Virginia is the nation's , a cny cther private utility, is increas- and the 5% of the population that suf- largest generating station, and its vast ; l ingly identified in the public eye as the fers from respiratory disease. If utili- distribution system is the major power ; 1:ading critic of environmental rules. ties want to burn high-sulfur coal, they thoroughfare between East Coast utili-contend, they must install' scrubbers. ties and those west of the 31ississippi. - l Czk's case for coal And many Westerners fear that wide- Such economics of scale have enabled . > spread strip-mining of their low-sulfur AEP to run the nation's most efhient i Behind the rhetoric lie important is- reserves will permanently scar their utility system. Its plants, on average, i sues that affect national energy pol- land, rendering it useless for grazing need to burn only 9,256 Btu of fuel to l' generate one kilowatt-haur of electric-icies as well as environmental quality. and ngriculture. ll' The major question, put simply, is To AEP, opting for greater coal use ity, compared with an industry average wh:ther the U.S. can soon tap more of makes obvious sense. A New York- of 10,429 Blu. AEP has never had a its abundant supply of high-sulfur coal . based holding company, AEP owns power shortage, has the highest load (r whether air pollution rules will re- seven major utilities that operate in factor in the business, and has among - i strict its use until utilities install seven states in Appalachia and the the lowest rates of any private utility. j scrubbem. The answer will determine 31idwest (map). They are all connected The results show on the bottom line. , q-the role of coal over the next 10 years, and are run as an integrated system- Operating revenues, which will top $1-influence the price of electricity, and from a computerized control centerin a billion thie year, have more than , tiTect the quality of the nation's air. bomb shelter in Canton, Ohio. In all, doubled in 10 years, and earnings have g l N;t least, the controversy illustrates Acr has a generating capacity of more grown 163'E. Last year AEP carned j the di!!iculty of applying a vital social than 15,000 megawatts, second only to $182.6-million on salea of $966.5-mil- ib lari-the 1970 Clean Air Act-to the the Tennessee Valley Authority, and lion, for a profit margin of 18.9'i, well q workaday world of electrie utilities. 93% of it is coal-fired. While other utili- above the industry average. , 1 AEP, of course, wants the U. S. to free ties were mapping ambitious plans to All this is based on coal, and the com-itself from high-priced, politically risky go nuc! car in the 1960s, AnP stuck with pany's ' commitment to coal is deep. foreign oil by tapping domestic coal. coal. Even today AEP's first nuclear When oil supplies are control!cd by for- :l

    - .. ..                                                                                                                                     _._ _ . _ . .,                                    !1

Cook's key argurnent:'Monsttous* scrubbers aren't needed to me'ct air quality rules cign producers and nuclear power is fired plants emit tims of fly ash and :ts unit. Itut Cook begnidge's the, money needed. in enme cas. s. Just to achi. G pl.igun! by ni cratine problem <, .wr one of the bin.-t m d no rs. ArP 1.e-shoul.1 he sittine pretty. Ilut coal came one . .( the biggest N bter4 the cst ra ty or *IJ or contn>I. "Ther.. u presents serious envin.nmental prob- Sme of it., phnts emp6yed im :!L ient no reasimable relationship between t Icms. Over the years, Cook says, AEP equipment, while others were long un- cost and the benefits.** he complains. has invested $1.hillion in environmen- controlled even though Ily ash collec- liigh-sulfur cual also produces sulfur tal contmis-one-fifth of the company's tors were developed decades ago. In oxides, and it is on the SO: rules that tot-1 assets. Over the next two years, part, AEP relied on the fact that its Cook has decided to fight. The EPA AEP plans to spend another $375-mil- plants were located in rural backwn- wants utilities that burn high-sulfur

  - lion en air and water pollution control.                     ters, and it used tall stacks to disperse coal to install sembbers, a chemical sys-the sooty particles. But the pollution tem that strips the flue gases of about A mixed record was highly visible and brought 90. of the S02 This requirement frequent complaints. Says E. H. Gloss, would cost AEP another $400-million or In some areas, AEP has volunt'arily manager at the Sporn plant in West so and boost its operating costs at least cpplied its technological expertise to Virginia:" Ten years ago we were writ- $110.million a year. Moreover, AEP says cnvironmental problems. Because some ing letters to'New York saying we had that the scrubbers do not yet work wcil cf its plants were on small rivers, AEP dust problems that should be corrected.                                    tions of  cnough     under a utility     the demanding to warrant installa- condi-built cooling towers years ago to avoid New York said no."

th:rm:t1 pollution. And its successful Today, AEP is finally upgrading all tion. And AEP firmly belicves. that re*clamation work on strip-mined land its major plants with the most ad- scrubhcrs are not needed to comply in Ohio goes back 30 years. There, the vanced electrostatic precipitators with federal air quality standards. As a result, while other utilitics are company planted 35-million trees on available-at a cost of $500-million. The rechimed land, creating a 35,000-acre precipitators.which act like giant mag- testing and installing 93 scrubbers, AEP recreation area that attracts 250,000 nets, trap 99.7% of the fly ash and will has refused to experiment with the visitors a year. "llell, I don't think bring all AEP plants into compliance system at all. AEP's annual report puts Quarles [of EPA) could spell 'reclama- with the toughc t particulate rulus by it this way:"We see no purpose served

 ' tion'30 years ago," snaps Cook.                                1977.One plant, only recently equipped in spending tens of millions of dollars In other areas, tough laws wer'e with a precipitator that is 9S% ef. . just to confirm the failures of previ-nieded to push AEP into action. Coal- ficient,is being refitted with the 99.7% ously tested processes. . . ." Quarles of Tillinghast. AEP's senior vice-         Administration. Along the way, he Arnetican filactric Power:                                                      pre.,iaent for enginnring. carned two law hweu from George Powerhouse in seven states
                            -                                                           "But we don't have faith and           Washington Univemity (he already confidence in scrubbers. If you        had an m from Stichigan), became a f/ Ca.

( , ,. ,' .' don't believe in somethine, cPA. and deve!olel a cloe friendship you don't do it." And Cook, with a young Texas e.,ngressman Fort Wa#n.e Ns characteristically, puts it more named Lyndon B. Johnson. Cook PA. colorfully: "We know enough served as unpaid chief counsel of every E canton. about scrubbers to know Congressional committee that Johnson m D. they're no good. We're not go- chaired. And when Johnson became oHto ng to prostitute our engineer. a*. .9ygnecijng ing judgments in this com-President, he asked Cook to be Secre-tary of the Treasury. But Cook says

                                                      .        W.VA.                    pany merely because some               that Johnson was a"hard man to work bureaucrats thmk sembbers for" and he feared that "scrvice in the Ashland s      s ,Charint"                      are the road we ought to go Johnson Administration, far from ec-e      .*                              down."                                 menting our personal relationship, KY.                                Ibmhe                   In short, AEP is putting its could destroy it." So Cook stayed at 7

technological reputation on AEP, where he, had already become VA-g the line to challenge the EPA's 'prcsident. TENN. $ findings that scrubbers are ef-Kinyport e C- "{s- { fcctive and reliab!c. Other Committed to fighting back d itma$g" g.

                        .ust4 ehe E]-"                    N.C.                j utilitics, including TVA.. also

share AEP's hostility to scrub- Still. Cook's government experience bers. But no company has has left its mark. He frequently refers gone to the mat quite the way to his stint as a New Dealer, and, as the EPA calls this an " intriguing" posi- AEP is doing. And the reason, everyone Lyndon Johnson did, he talks of the tion for a company that has pioneered agrees,is Donald Cook. needs of poor' people with passion and so many other technologica. Other cri;- Cook came to AEP in 1953 from the conviction. But at the same time, he ics ask where science would be todr.y if Securitics & Exchange Comminion. deeply resents the fact that EPA regu-cverybody took AEP's "can't do" atti- where he started as a financial analyst lators and environmentalists (whom he tude.

in :1935, left in 1945, and returned in calls " Johnny-come.! ate!!cs") are l'ie-

                "We are innovators," replies John A. 193 as SEC chairman in the Truman tured as representing the public inter-

                                                              ,                               est, while businessmen who may sin-Chairman Cook speaks h,is mind                                                            cerely disagree with certain rules are depicted as selfish and greedy. In short, B; fire this interview, a Bt'81 NESS WEEK of the Sliddle East as possible. Can we          Cook believes that the SO: rules are reporter asked an AEP representative do it? I say yes."                                    needlessly discouraging coal use and wheth:r using a tape recorder would                                                        raising electricity rates, and he sees it inhibit Cook from talking freely. His On using more coal                                   as his duty to protest. "Someone has to reply:"Nothing inhibits Donald Cook."            "We have a very critical situation        speak out," he says. "What is going on A sample:                                      with oil and gas. But we have a trea-       is wrong. It bothers me."

sure house of coal to produce vast Last April, when Cook turned 65, the Cn the EPA . amounts of electric power. That elec- board of directors asked him to remain "It's better for them politically to tric power can substitute for many uses as AEP chairman for two more years. tak2 a tough stance on everything that of oil and gas. But the government According to Frank Stanton, former th;y touch. They're political with re- tells us that the high-sulfur coal that head of cas and an AEP director, the spect to auto emissions, with respect to we can mine in the East we can't burn, board felt that Cook was needed at a electric utilities. They're political, pe- and the low-sulfur coal that we can critical time. SIoreover, because Vice-riod." burn from the West we can't mine. We Chairman Herbert B. Cohn, 62, and have the means in our own country to President George V. Patterson, 63, Cn students who protested the ads take care of the energy crisis if we only were themselves soon to retire, the "We got some letters from some col- wake up." board did not want to choose two new liga girls complaining about our ads. Th:y're good earnest young people and On nuclear power A shouldn't be discouraged. It's wonder- " Nuclear plants have more problems ful f:r them to have ideals and stand than a hound dog has fleas. I'm talking f up for them. I see myself 40 yesra ago about operating and engineering prob- '1 W@ when I look at them. But there s a big lems unrelated to safety." difference between the right to speak . . b) cut and the fmaulation of national On coal exports

k; policy on the basis of ignorance. They "We're exporting 55-million tons a ['II IkIl .\ \ d I know as much about the subject as the year of the finest coal in the world. If America has more coat h:t dog vendor here in front of 2 we cut back on exports of that low-sul- than the Middle East Broadway." fur coal and made it available for utili- has oit. Let's dig itt ties, we would substantially solve the Cn c:rporate responsibility pollution problems of Eastern plants." AEP has turned a cutoon and s'ogan into

         " Government people think they're                                                    posters. lapel buttons, bumper stickers.

the only people who love their country. On future power shortages . I don't need some EPA bureaucrat to "The utility industry has cancelod or chairmen within three years. And tzll me about the woods, or the land, or delayed 134-million kw. of new capac- promising ycanger men, such as Til-tha water." ity. I tell you that in 1978,1979, and linghast and Senior Vice-President 1980 we're going to have a power short- W.S. White, Jr., were deemed to need Cn W: stern strip-mined land age in. the U. S. . . Environmental another couple of years of operating

 ,       "I've been through that country. I regulation is a major factor. It has               experience. (One board member, Court-know what it's like. You're not dealing forced companies to raise a lot more              ney C. Brown, former dean of the Co-with the Garden of Eden . . . We be- money at a time when interest rates                  lumbia Business School, dissented and lieve that with fertilizer and some irri- are high. They can't do it."                    resigned partly because he felt Cook        I gstion to get the grasses started, there                                                  should step down.)

should be no ditliculty whatsoever in ~ On why he did not retire at age 65 Bat the problems of succession were restoring the land to at least the condi- "I don't have to work. I'm willing to not the only reason Cook was eager to tion it was in before . . . We've never stay on because of the problems stay at the helm. "I was willing to stay been anti-reclamation. We've been re- c cated by the unreasoning attitude of on," he says, "because I believe in claiming strip-mined land for 30 years rabid environmentalists who haven't countering the unreasoning attitude of in Ohio." Hell, I don't think Quarles (of the slightest idea of balancing consid- rabid environmentalists who haven't EPA] could spell reclamation 30 years erations to get decent results for the slightest idea of balancing consid-e go." society as a whole." erations to get decent results for society as a whole." On ebeying ' unreasonable' rules On L.yndon D. Johnson Though colleagues say Cook likes the y

         "We don't run the country. We only           "I had a close relationship with him. power and prestige of the job, staying run a utility system. But we're going to He was an extraordinary figure, a               mear.t some personal sacrifices. An ur-tell our story. If somebody then wants much better man than he's generally               bane and cultured man who collects us to act like damn fools and they have given credit for. He got Congress to             art, travels widely with his wife, and the power to force us, we're going to do pass more difficult but needed legisla-         enjoys ballet and opera, Cook now exactly what they tell us to do. You tion-civil rights, medicare-than any                 works almost constantly. " Utilities know, it isn't in my job description tr President since Franklin D. Roosevelt.            now have so many problems," he says, ga to jail."                                 Of course, he made one very serious         "that rtmning a major system is a mistake, fighting a war we shouldn't         seven-day-a-week job."

Cn Project Independence have been in . ." Unlike many executives, the voluble "Esen though President Nixon exag- ". . . He was a hard man to work for. AEr chairman does not mind tighting gerated how quickly it could be accom- He could he understanding, he could be in public in 1971, Cook and Charles F. plished, Project Independence is a very dogmatic. He could be idealistic, he l Luce, chairman of Consolidated Edison , . good concept. We ought to be doing ev- could be cynical. lie could be gent!c, he Co., engaged in a feud, partly carried crything we can to get as independent couhl be ruthless. . . " on in the letters column of the Nm York Times. Among other things, Cook

 'A                     As on0 of thb biggest coal users. AEP b; cams one of tho biggest polluttrs charged that Con Ed's " serious man- of shortages of miners, mining equip- nificant progress. Louisville Gas &

agerial problems" were giving the en- ment, and transportation facilities. Electrie installeil a limestone scrubber tire industry a black eye and that Luce Even so, AEP has pushed hard to get on a 6.M1w. peaking station and had used " devious" methods in hiring low-sulfur coal, spending some $150- that it removed more than 90"o of the

   -                    away an AEP executive. Later that million to acquire and ship the fuel SO: emissions, experienced no majo year, Cook took on General. Electric from mines in Appalachia and the reliability problems, and was ec and Westinghouse, suing them for al-                              West. "No company has committed cally feasible (BW-Aug. 31). LG&E executives are so confident that it will legedly conspiring to monopolize the .more than AEP to get a clean fuel," work continuously on large plants that
        >               turbine-generator business. (In 1972, Cook claims.

l GE countersued, accusing AEP of ille- The payoff, according to AEP legal they want to spend $108-million to l gally boycotting its equipment. Both counsel A. Joseph Dowd,is that AEP is equip all nine of their coal-tired cases are pending.) Says one high-level already in compliance with SO: stan- with scrubbers. That will enable L

        ;                                                                                                   dards at 46" of its capacity. to burn abundant high-sulfur coat i                                                                                                   But AEP plants in Ohio, a without violat:ng air standards.

( J , - . ,_, _ '-~ j state with no low sulfur coal, Similarly, Boston Edison Co., which are in trouble. Not enough recently ended a two-year test of a hh "' I i

                                                                                         \                  Appalachian low-sulfur coal magnesium oxide scrubber, overcame j                                    '

can be mined to serve Ohio, early operating difficulties and decided 1; M : Dowd says, and it will be the that "this is a viable technology for our l ; 1980s before the more abun- particular purpose." It is now studying

                                                                                .s ' i '{                   dant reserves in -the West the costs and weighing them against 4 ,

alternatives. And Philadelphia Electric.

m N Y are sufliciently developed, Co. has agreed to install a scrubber on i 'T

                                                                                   ~'
                                                                                             )                 Under the second N              1       %,                      f/                  strategy, the nation's vast one unit and,if it works, to equip two f

j store of high-sulfur coal more plants with it. "The sulfur re-( f,,

                                     )     '             k                                  .,

would be converted to a moval system we have under develop-g- e s clean fuel before combustion. ment is a good one," reports James Lee

                                      /
                                         ~

r"~' t / '. A But such technology is not Everett, the utility's president. I have

                                         /                     O 'i                          f  */ >. yet    were available.

developed Even if one at reason- workgreat faithto"-a if we have we sharp can make contrastanythin l i /7-44

                                                          , /n                                      .)j able cost, another decade to AEP's"can't do" attitude.

h'Q j* ./' /

  ,         j
                                                           ,'                    <                       % would clapse before the pro-            In sum, scrubbers have not yet Y

L ym 1 i cess produced enough clean passed the strict test set by the Na-l li fuel for utility needs, tional Academy of Engineering, but l

                   'l._- - - -                   ->       dd      3   s    .  -                                 AEP    executives    express  that   day seems close at hand. Says EPA's John Ousrtes finds it "intnguing" that l                        Cook refuses to he!p develop workabio scrubters.                                   great enthusiasm for such a Quarles:" Scrubbers are the only tech-
                                                                                                             " front-end" process. But the nology right before us on the horizon.

insider: " Don likes to fight. For some company is spending surprisingly little Alternatives are at least a decade reason, he always seems to have a chip on developing one. It has joined with fectsaway. Whennow that exist we and lookare at the health likely to ef-on his shoulder." Allegheny Power System, Inc., and In-Whatever the reason, Cook is a very terior's Of! ice of Coal Research in a develop as this country turns increas-dominant chief executive, and what he $13-million research program to liquefy ingly tc coal,as it must, then we must wants, AEP generally does. The key high-sulfur coalinto a clean fuel. AEP's move ahead in developing this tech- . question, of course, is whether Cook's share: $1-million over two years, less nology." Are scrubbers needed? In regions stand on the SO2 issue is correct. than one-rixth the cost of its current advertising campaign. By contrast, where the SO: standards are now ex-Is Cook correct? Commonwealth Edison is contributing ceeded-and that includes parts of most

                                                                                             .$17-million to a $2S-million project to major cities-scrubbers a.e definitely Under the Clean Air Act,the AEP set gasify high-sulfur coal. Cook's reply; needed. In Louisville, for instance, the                                               j J

air quality standards for several pollu- "We can't pour millions into.long-term EPA has testified that existing SO: lev-( 4 tants, including SO:; at levels designed research when compliance dates are on els probably cause 20.000 asthma a 1 to protect public health by* July J.1975. top of us. Our first priority is getting tacks annually,4,000 chronic cases of luhg disease, and several thousand res-The act does not specify how to meet the available low-sulfur coal." the standards and, in theory at least, The last two strategies-scrubbers piratory ailments in children. In regions that already satisfy the coal-burning utilities have four ditier- and tall stacks-are at the center of the ! ent routes open.They can: AEP. EPA fight, and they raise a number S02 standards, the need is less clear. of complex questions: ' AIost AEP plants arc in such regions, 31ine and burn low-sulfur coal.

                             = 31ine high-sulfur coal, then clean it                              co the scrubbers work? The National and the utility argues that tall stacks before burning.                                                   Academy          of Engineering has stated are a better solution there. By dispers-1                                                                           -

a Burn high-sulfur coal, then purge the that scrubbers should operate for one ing the SO:, the tall stacks can keep SO2 with sembbers. year on a power plant of at least 100 concentrations at ground level within t a Burn high-sulfur coal, then disperse 3Iw. before they can be considered the safe limits defined by the federal the SO with tall stacks. commercially reliable. By that defini- standards. In addition, AEP is install-

               '                 Both AEP and EPA agree that the tion, scrubbers have not yet been com- ing a comprehensive monitoring sys-first strategy is acceptable. Unfortu- mercially demonstrated. Utilities that tem. Thus, on days when and                                         atmospheric ground.

t nately, low-sulfur coal is scarce now, installed the first scrubbers two years conditions trap the SO 2 and production cannot be increasd ago enenuntered serious plugging and level concentrations build up AEP says enough to satisfy utility nec& until corrmion problems. !!ut more recently it will either switch to an emerancy 3 _

                              .well into the 1930s, primarily because a number of utilities have made sig- sul3 ply of low-sulfur coal "within

EN%noNWNT

ec: & IStill waiting fzr cvid nco cn sulfat3 hazards hours" or' cut power production by "If there were, they'd set stamlards." switching the load to other plants in Quarles concedes that the evidence the system. Such "intermitient con- "is not sulliciently complete for us to is-trol" is backed by several other utili. sue regulations-we're not ready to be ties, the Federal Power Commission, cross-examined in court." But he be-and the Federal Energy Adminis- lieves that the agency shou!d be pru-tration. Says Cook:"We are interested - dent and push scrubbers if, however, in what takes place at ground level- the EPA's suspicions about sulfates are where the people live, where the ani- wrong, AEP contends, utilities that op-mais are, where the vegetation is." erate in clean-air regions will be forced is intermittent control adequate? Envi-- to install several billion dollars' worth a ronmentalists raise two objections to of scrubbers that are not needed to sat-intermittent control coupled with tall isfy the SO2 standards. i stacks as a substitute for scrubbers. Legally, the EPA can still force utili-First, the utility must be counted on to ties anywhere to install sembbers. The ' cut production or switch fuel when a Fifth Circuit Court of Appeals ruled pollution alert is saunded. This is not this year that the Clean Air Act re ' always possible. Last August, for ex- quires constant emission controls ample, the region around Steubenville, (scrubbers, for example) and that tall Ohio, which includes two AEP plants, stacks, by themselves, are not suf-experienced a three-day pollution alert. ficient. AEP has joined with the TVA and AEP's Tidd plan had agreed to switch other utilities to challenge that ruling i to low-sulfur coal within three hours, in a similar case in the Sixth' Circuit. i bat nesmEss WEEK has learned that "We're trying to precipitate a contlict the Tidd plant did not have any low- between circuits," says AEP counsel sulfur coal available at all. 31oreover, Dowd. In that event, the matter would the emergency plan, which was written probably go to the Supreme Court. by AEP and appruved by the state, calla lleanwhile, the EPA's enforcement for power cutbacks only as far as pos- strategy partly reflects the weakness , sib!c. Thus, if power demand is high of the sulfate evidence. At present,the l and cannot be picked up by other agency is forcing scrubbers only on the l pants outside the alert area. the utility utihties that operate where SO: levels j is not legally bound to (ut production. are most hazardous. By 1950 the EPA i' Pollution levels remain dangerously wants scrubbers on 90,000 31w. of coal-high, making a mockery of inter- burning plants-30'1 of projected coal-mittent control. Ohio officials are now fired capacity-at a cost of at least $6-working with AEP's Ohio Power Co. to billion. The rest, including many of tighten the emergency rules. AEP's plants, may escape without Second, tall stacks do not control SO scrubbers for the time being. emissions-they only disperse them. Says Quarles: "We're not making The EPA believes that the SO emitted utilities install scrubbers just for sul-is chemically converted in the atmo- fates at present." But he quickly adds, sphere into' tiny sulfate particles, "I hope by the time we get to those which can be blown hundreds of miles, plants in remote areas, we'll know a descend to ground level, and then be great deal about sulfates. Possibly I 1 inhaled. Such sulfate pollution, the EPA some modifications of our requirements

  -      says, endangers health, even where the will be reasonable. But it's far more S0: levels satisfy the standards.            likely that we'll conclude our original How serious is the sulfate problem? judgment was correct'and they should Based on epidemiological studies, EPA indeed put in scrubbers."

scientists believe that when sulfate There the matter rests, complex and i levels exceed 6 to 10 micrograms per incomplete. Thousands of hours of liti-cubic meter of air, asthma attacks in- gation lie ahead, while researchers try crease; when the level exceeds 9 micro- - to sort out the scientific evidence. Ten grams, heart and lung disease worsens years from now, it may well turn out in the elderly; and above 5 micro- that AEP was right: that the EPA's rules a . grams, death rates increase. Says an were needlessly tough, forcing rate EPA report: "These levels are exceeded payers to waste billions of dollars. In

    -     in many areas of the country "               that case, Donahl Cook will be remem-

! The evidence,' however, is so tenta- bered the way he wants to be: as a i tive and measuring techniques so un-- forceful, committed defender of the j certain that the EPA cannot yet set sul- public interest. But the verdict of his- -

j - fate standards. The lack of such tory is just as likely to go the other standards is the weak link in its argu- way- AEP will have failed to lend its ment against tall stacks as a substitute technological prowess to the solution of a ~ for krubbers in clean air regions-and a serious health problem. Then Donald AEP has protested : vigorously. "It's. Cook will be remembered by many as a

        ; crystal clear that there's no evidence stubborn m:n who, on this questbn, whatsoever on sulfates," Cook charges.' was simply wrong.                            a h oWOO                                                   BusWESS WM octeter 26,474   77

m . y By Stepheh B. Shepard h20C@NMy The ad campaign that stirred the ruchus When Donald Cook decided to go public the ads have been blasted by the gov- this he wrote kind ofto advertising. AEP: "I urge Ityou to cease masks the in his campaign against environmental crnment's big environmental guns, in-policies, he envisioned an ad program cluding Russell Train and John total energy problem and gives the in that would stir people up. "Most insti- Quarles, the two top men at the Envi- correct impression that conservation

    - tutional advertising is dismal," he says. ronmental Protection Agency, and implies strongly negative impacts."

No one knows for sure how much the "It puts more peop!c.to sleep than all Russell Peterson, head.of the Council U.S. energy growth rate, which has the somnifics sold in the nation. If we on Environmental Quality. were to accomplish anything,we had to The controversy does not seem to been running close to 5% a year, can be put together advertisements that bother Cook very much. "I would be cut without economic harm. But most would provoke interest." disappointed if there weren't a tre- analysts agree that the rate can be That Cook has done. Where other mondous adverse reaction to these halved with no major impact on em-businessmen might have retained their ads," he says. "Since they are directed ployment. How? By manufacturing traditionallow profile, Cook has taken to deflating a very vocal, very.intelli- lighter cars, using more home insula-a forthright stand on controversial gent, very hard-hitting group, believe tion, shifting more freight to the rail-public issues.So far, AEP has run 23 dif-me, if we didn't get this reaction, I'd roads, and designing more eflicient buildings, appliances, and industrial ferent ads in every newspaper in-the say this program was just a dud." Debatable points. Most of the contro- machines. Indeed, without such conser-utility's service area, plus major na-tional publications, including P,t'SINESS versy centers on two issuescrer depicted in vallon to achieve techniques,inthe U.S. self-suiliciency WEEK. Some of the ads, to le sure, are the ads at the right. In one ad, aimed not controversial at all. One, fo'r in- at no-growth advocates, AEP warns energy Nor will such a program hurt stance, states the important truth that that generating less energy is sure to the econcmy, according to a study by the end of the Arab oil boycott did not generate galloping unemployment. Dale Jorgenson. lbrvard, economics and Edward professor liudson of Data at mean the end of the fuel crisis. Other That is undoubtedly truc, but to many Re>ources, Inc. (BW- J une 1). ads are justifmble. corporate image- people, the ad raises a red herring. Just making, such as the one reporting that about all the proposals for energy con- The other most controversial ads AEP is the most ct!! dent user of fuel of servation otrered by government and center on scrubbers to purge sulfur ox-any utility in the U. 8. private study groups call for reducing ide emissions from smokestacks. The But several others have drawn the the rate of gnarth of energy d< mand, ads insist that the scrubbers are " mon-strous contraptions" with " horrendous ire of environmentalists, government not cutting present consumption. regulators, and ordinary citizens. AEP The" galloping unemployment" ad so prob! cms." And they claim that the has received more than P00 letters crit- annoyed John C. Sawhill, head of the most promising system, the wet time-icizing the ads. And, of course, some of Federal Energy Administration, that stone scrubber, wouhl ! cave the na LtWJtONyt NT 68 etSMss VvCf K Octetxt 26.1974 ,

~ - 4' - with "a disposal nightmare" from one thing, some scrubbers produce no elemental sulfur, which the utility

    . waste sludge, which the ads call " oozy sludge at all. The system t!iat Phila-             plans to scl!. Similarly, the system gook." Counters Quarles:" Fortunately, ' delphia E!cetric plans to install will            found " technologically viable" by Bos-they will make very little headway on convert the S0s in the smokestack to                 ton Edison produced magnesium sul-the scrubber issue. The operating expe-rience being accumulated by other-                                                         fite, which the utility processed into compr.aies is providing pretty convine.                                                    sulfuric acid and sold.

ing answers on our side." Though limestone scrubbers do leave a sludge residae, the disposal probicms Tha scrubt:er issua. Cook defends the h' g. , , l'1 are hardly insurmountable. Lo&E, ac. scrubber' ads by pointing to studies that say scrubbers should operate for d. g3, *>f7' .. id.e knowledged to have the most advanced scrubber in the U.S., will dry the ene year on a 100-megawatt power ' sludge into a stable, inert landfill, then plant before they can be considered re. - liabic. By that definition, scrubbers haul it to abandoned strip mines and have not yet been commercially dem-gravel, pits nearby. In some urban Dave aboug7g$p,carathcone escrut, bets! areas,tuch disposal is not possib!c, but enstrated. But several utilitics, includ-ing Louisville Gas & Electrie, Boston that is not a major problem for AEP ,

 . Edison,and Philadciphia Electric,have                           ' 5? b.-f' Elmqh_

plants, which are sited in rural areas, not far from mining operations. expressed - confidence in the tech; nological performance and promise of g33 Clearly, AEP's ad campaign raises the scrubbers they have tested. Lcan, complex issues that need to be aired. In EVESGy taking its case to the public, 4er is in fact, la ready to spend $103-million to equip all its coal-fired plants with rightly seeking to widen the debate

                                                                  /p'fl,                       over matters that are vital to U.S.

scrubbers. Adds James Lee Everett,- g,. president of Philadelphia Electric: energy and environmental policies. s% n, - That, in turn, imposes a responsibility "The sulfur removal system we have 8%4ngy , on the company to assure that its ads under development is a good one." In ,,, Isa g.

. [.,g$rwes*cnet fairly portray the complexities in both sum, while scrubber technology is still ,g,f letter and spirit. Some of the ads sat-crolving and some bugs remain, some engmeem say that calhng them g :9' Sit

                                                ;g,y-           li gg mon-s...
                                                                     .%.;. gl.
                                                                              ;f :a-
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77)~j-- isfy this diflicult test. But it is hard to-stre.e mntraptions" with " horrendous - ; p#j 1.'i~ ;S ff.., p. avoid the conclusion that some of them proi,n. is an overstatement. seriously overstate the problems that f [leQ, ; A.'? g;.; l rJ ;. - utilities face -in developing workable AEP's claim that the waste sludge 7CI '"'***e f M't scrubbers. They h!cmish what is other-trould present a "dispoc.;d nightmare" i *~"* wise .s legitimate effort to broaden slso appears to be exaggerati6n. l'or [, _ , _ public understamling. (NYMX'47 cUDf4 css %TrK ocfWr261974 69 s

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TCRRENCC R MyspMy NCAL P AUTLCOGC Ws LLI AM m. W css g ua N STCPHEN w TaytTT JAMESM WMtTC - M 'N ,"m* c> "e*C ." 1 . July 5, 1973 J AM E S DOtrGL AS WCLCM PCBCRT A. Su tTCL . THOM AS W. 84UN N CR e emo? acaseTTE D e4 D- C- , Joseph ^Rutberg, Esq. Office of General Counsel United States Atomic Energy Commission Washington, D. C. 20582 Re: Consumers 2ower Company, Midland Plant Units 1 and 2, AEC Docket

                                                    .Nos. 50-329A, 50-330A

Dear Mr. Rutberg:

This is in response to Mr. Jablon's letter to you of June-5, 1973 proposing a basis for settling the Midland antitrust proceedings. The Applicant has given careful consideration'to the statements contained in the letter, and the attached list of proposed license conditions. It has concluded that the proposals are merely a restatement, with some elaboration, of the'Intervenors,' total. demands in these proceedings. This being the case, Applicant cannot view the Jablon letter as a proposal for settling this pro-ceeding,"and believes'that no useful purpose would be served by discussions based on' this document. Applicant remains prepared to consider any sub-stantial: proposal for settling these. proceedings. In this regard, Applicant and representatives of the muni/ coop pool are currently in process of negotiating an inter-connection agreement which could provideTmutual benefits

                           'to both-parties.-

f> > s e. T J 6 m

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a r;; s f- t 2-

-., . _ In: any event,. ' Applicant- is ' appreciative of Staff's effort in initiating this-exchange.

Sincerely yours, j ,m . 1 .i

                                                                      . J-                   .

W,.

                                                                                                   .~             ~

Wm. Warfield Ross 7

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INTH11EST ON t;UAl:ASTY 1)EPOSITS

           .-                                                                                                                   h
      .j P.A.ite1, No. 017                              g
      !                                      Sects.in                                                                           in
                                             .t eloA"> 1 Interest on ruaranty deposits.                                         g; itIO.tiTd Same; semi-annual pa3 ment; enforcement of claim.

6

       ,                                                                                                                       .1:

1 i P

t

    'I                                                                 PUBLIC SE11VICE CO3131ISS10N                              >

4 Transfer of Functions s

                                                         .The public sc_rrico commission teas transferred intact to               .

1

                                                      .the department of commercc by scciion 1G.331.
   't                                                                                                                             i
                                                                     . P.A.1939, No. 3. Imd. Eff.' Feb.15 1                                          AN ACT'to provide for the regulation and control of public              *
             . g-                                     utilities and other services atTceted with a public intere.4 within this state; to create a public service commission and to prescribe i-and define the powers ami dutien thereof; to abolish the Michigan public utilities commission, and to conftr the powers and di: ties
                !                                      now vested by law therein, on the public service commission here-I by created; to provide for the continuance, transfer and ccm-pletion of matters and proceedings now pending; to provide for l+

appeals; to provide appropriations therefor; to declare the effect of this act and prescribe penalties for the violations of the provi-l sions thereof; and to repeal all acts contrary to the provisions of I this act. . I The People of the State of .Alichigan.cnnet: t, i

                                              ~ 460.1 . rublic service conimission, creation; members, appoint-ment, quailfication :, terms, vacancies f

8 Sec.1. A commission to be known and designated as the "31ich-igan public service commission" is hereby created, which shall consist i of 3 meir' crs, not more than 2 of whom shall be members of the same political po..y, appointed by the governor with tha advice and consent i of the senate. - Each member shall be a citizen of the United States, and of the state of Alichigan, and no member of said commission shall be pecuniarily interested in any public utility or public service subject to the jurisdiction and control of the commission. During his term -l

                                                 .no member shall serve as an ofTicer 'or committee member of any

{ political party organization or hold any office or be employed by any

                       -l'                        other commission, board, department or institution in this state. No d                           commission member shall be retained or employed by any public util-

ity or public service subject to the jurisdiction and control of the com-mission during the time he 1.s actinh as such commissioner. and for G monthr, thereafter, and no memba of the commission, who is a mem- - '

1

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m x. 3-i I e PUlli.IC SEltVICE CO.TDilSSION 460.1 l ber of the bar of the state of Michigan, shall practice his profession or act as counselor or attorney in any court of this state during the time

            ,       he is a member of said commission: Provided, hmvever, This shan
             ,      not require any commissioner to retire from. or dissolve any part-

nership, of which he is a member, but said partnership, while he is a member of the commission, shall not engage in public utility practice.

?,

Immediately upon the taking effect of this act, the ofiices of the present members of the Michigan public service commission are hereby abolished, and the members of the Michigan public service commis-sion as herein created shall be appointed by the governor with the ad-vice and consent of the senate, for terms of G years each: Provided, b That of the members first appointed,1 shall be appointed for a term of 2 years.1 for a term of 4 years, and 1 fora term of G years. Upon the expiration of said terms successors shall be appointed with like qualifi- s fc cations and in like manner for terms of G years each. and until their .; )n successors are appointed and qualified. Vacancies shall be li!!cd in the ' b same manner as is provided for appointment in the first instance. As l' amended P.A.1931, No. 2'T3, i 1, Eff. Sept. 28. N h y Ilittorical Note ~ p Source:

(3 P.A.lD3D. No. 3. I 1. Imd. Eff. Feb.15. Opposition party representation was 4

g P.A.1947, No. 337, Imd. Efr. July 3. prosidcd for in 195h

                                                                                                                      ],    '

Constitutional Provisions

Art. S. ; G. provides: "Appointmcrt by Art li. ! 7, providm "\*acancies in and with the ad.i;c and censent of the any offite. appointm mt to w hich re-senate when used m this constitution or quires adsice and consent e,f the senate. ,

MIDI

Ims in effert or lwreafter cnacted shall I;c fillsd by th:' rmernor by and means appointme"t subject to disa p- with the advice and v.n3ent of the n n.

provcl by a 1.:ajonty s o'e of the mem- ate. A person who a appointment has bers elected to and .scrying in the senate been disapproved by 'he senate .shall r.ot )!!ch-if such action is t*iken within 00 :es. don h: cli;.ble for an interim appointraent to gisist days after the date of such appointment. the same of fice. EUUM Any aptadntment not disapproced within staI h period > b;.l! Hand confinrei" Ment. &IcS, Cros:: Itefer,:ns es ' shall j0ct lof-rstate (*u:nmcro Act. See l') U.S.C. A. s 1 (t :a'cl. I t.k,e utdihes unmn.ssion. m Din.51. Jerm any law !!rview C.mir.ie:it.uies any lielution ard d,: solution ni pr blic State utililH and th '; ym. ' bur' No utility la vt. ! di.i:1 C. t hiuda rd, .:2 l' N-1:u 5

                                                                                      'llmra a I.c 1:     .. e:1. 2a Ahch.I._th y 577 (19tly.                           Airi.1.3 v.siI(1931 f g,                    t ed. .:1 p- cr t on mt : !an. jurci.. -            'Ir.m .icr of onerati ng riftt a

' (.2 t.on us er dah' of Ja c!npc.l lea . i. al in. Alii h.l.1:..v.10lG (ID : y. br C f w:t of . , . , fe: r.:.. t . 1 t. ' 4 4. R:n- I !!<' .13i t h::. 9 5 r s .- - . . .

i r PUBLIC SI:RVICI: CO.TDIISSION 460.2 4G0.2 same; cath, chairman, removal, quorum, scal, onices 1Ic ' Sec. 2. Members of said commission shall qualify by taking and

                                   - subscribing to the constitutional oath of ofilce, and shall hold ofilce
                  '                  until the appointment and qualification of their successar. The gov-crnor shall designate 1 member to serve as chairman of the commis-use                                sion. Any member of the commission may be removed by the gov-

7. der .

ernor for misfeasance, malfeasance or nonfcasance in oIIice af ter hear-d 513. ing. A vacancy in the commission shall not impair the right of the 2 remaining members to exercise all the posters 'of the commission. Two members of the commission shall at all times constitute a quorum. wis-The commission shall adopt an ofilcial seal, of which all the courts shall y,*,d take judicial notice and proceedings, orders and decrees may be au-sust thenticated thereby. It shall be the duty of the board of state auditors nm-to provide suitable oflices, supplies and equipment for said commission

,C , " -        '                                                                                                                              ,

in tite city of Lansing, the expenses thereof to be audited, allowed and , ss paid in such manner and out of such funds as may be provided by law. ; As amended P.A.1951, No. 228, s 1, Eff. Sept. 23. tc. ,I st

I ded 11 storical Note g

nds . Suurec: A quorum was reduced from three to nis-P.A.1939, No. 3, ! 2 Imd. Eff. Feb.15. two members in 1951. p ler. t. On ; Constitutional Provisions < Art. 5. I 10, prosides: "The Fovernor Art.11, ! 1 provides: "All officers, 7" f shall have power and it shall l'c his duty Ic;:islative, executive and judicial, before ," to inquire into the rendition and admin. enterim: uren the duties of their respec. t trat;on of any public office and the acts tive offices, sha!! take on 1 r.ubscrib<; tha ef any public of ficer, elective or art,nin. followin:: oath or affirmation: I do sol. til. tice. Ile may ren.ose or suspend from emnly swear (or affittn) that I will sup. effice for pross neglect of duty or for port the Constitution of the IInited

tj rorrupt conduct in office, or for any oth. States and th? conctitution ,f this state.

an. -

,lic -                             er misicasance or malf.'asance therein, and that I will faithful y detharpo the any elective or aplaintiu state of ficer. dutiu of the offiie of                     . .

the .

!c.

rNecpt legi-lative or judici:tt, and shall accordin:: to the best of my ability. No

c. ' report the rcasnn:t for such remaval or other ocih aftin. ition or sny religion sustiensioa to the legislature." test shall bo r(quired as a qualification m.

rir for any office or public trust." rt. Library References M.LP. Public Senite Commi slon ! I. Nutes of Decisir.ns on I. Commic. inners "E ' to C .i "rr.ia. Grt chermd C..rpma: inn th Whenc conmiiAnner of pablir sersice V- Mh'*'tu I""IIC ' "rv. rder in ques. %e b. .t: iin;t that Coim.ii~ ioner of tion was "rante d tu perform the duties pub ie. erviec (omminien ch m rel his M "

< f hei ntnce v.ithat.t his ri,.:ht to do su re. iden.e ? om Mn h:;:an to t '..hfondA leing que tium,1 fro:n any na.rce, l.. he was at i<:ca a de fac ta ollin r and f;"' ' was a "de facto officer" and his action Sut h entitled to tat:c part in the businest Q"
' in sh'ning the or&r w v: not stihject to a of the cominim.:an : o lon:: ,i, h
roatin-c 4!.'lecal attac k notnithstanding hi3 al. ued to .at in that capacity and tx.ndin" l l
leged change of re>idence from Mid.i;;an the appointmentt of hi.; succewor. Id. 7 . l 1 l
~ -
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"w- ,. s m , , _:. 2, 4gj -l' " + - - - - - ~ ~ . --. - a _ . . j g y_. -~
n.n .
t 4G0.3 pen:.m rriu nt.+ , 4G0.31 Jame: cmnpenention, employees, experts. appoiniment: ex- M j penses ret I, Sec. 3. l The elmtrman of the commission and each of the other_ pif
'1 members sha*.I 1=* paid stii h' annu il sal n y as is established foe such pr' ollices in th. appropriation art most recently etTectise prior to the ef-fective date of their confirmation by Ihe senate. The commission may - FP er
'j appoint niceretary and such depitties, clerks, assistante, insin clors, of h ad.4 of divisions ami employees us shall ha necessary for the proper 18
^
ewrci.6 of the powers unit duties of the commission:. All salaries in. s .- r.1 other expenses incurreil by th'e conunission shall be paid out of *I l j. .us"h famis ns may he uppm[uiated by the Ict:Islature therefor, aiul be
- p.id out of the ncnemi fttnd of the state. .ill fees and other inoneys (b.
i t r.
; eceived by the riammission < hall be paid over at Ihe end of each month ! en ' to Ihe slate Iremurer, takinq a receipt therefor. The ronunission shall ti 1, have authority to employ engineers and experts in public utilities and f"
I - public service t.:atters atul fix Iheir compensation for such services, to of f b. pahl out of the appropriation provided by the h-gislature therefor. c' A Tbn members of the commission and the engineers, inspectors ami em-b.
'! ployees thereof shall be crititled to their actual and necessary expenses ~
ee ineurred hi the performance of the work of tha commission. Each
.l.' . such deputy, clerk, assistant, engineer, inspector or expert shall per- n . M-;]- form stich duties as may be rurguired by the commission. Each mem- le her of the commi.uion shall devote his entire time to the performance o of the du'ies of his ofGee. As amended P.A.10 >1, No. 220, ll 1, Eff. o:
Sent. 28; P.A.19.TT, No. 20S, R 1,Imd. Eff. June G; P.A.1p39, No.102. 1: L . 1 O 1. Imd. EiT. July 1G; P.A.10G1, No. 'T 1, s 1, Eff. Sept. S. . ' 1:
~ Ilistorical Note ,
c 1t Source: t'
P.A.lD30. No. 3. ! 3. Imd. Eff. Feb.15.
i, P.A.1017, Mo. 337, Imd. Eff. July 3. g!
.; t-L;brary References g P.uhtic Servico Commissions C:'3. C.J.S. Public Utilities 13G. g j.
Notes of Dc:;sions t i I. - Inspectors tion of hh annual tcave allowancs, in. 3 Inspector.1 cmployed by the public spectors who v.cre employed by the I-tersice comminion had- no "s estcd public utilities commisaan and ita rue. ri;,'it** to rsrtain in the c!auified sessice ecseor. the public service fommissit n. of the state. Ramty v. State (IDil) 20G dar:ng a!i of 19M and unnt nbirn .tuv 2
' N.W. 321, ':tiG Mic h.1 P). L 19w. v. hen they were di< charged, hwi '
linder civil servlee commi3sion ruic a " vested ri;;ht
in com; enmion for u' . '
t rovid;a; II..it vacations w;tt i gny b' .u al Icm aHowance. ca Mai 13. b % ;.
. pl.cn crapW.ee.i in the cielfied cisit uhen amendment ren:ovin;; the pmtunts service and that any em;doyee who is se- from the c!.is.sified senice becam efie . 1 - parated from state nnice with lease tise. so as to entitic 1:Km to recoger 2
j unt. hen Iw cwreauud for unused por- amount thereof Id. g _ ;i .
j . 8 .
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runuc snnvien comussias 460.4 ex- 4G0.4 same; powers; pending matters; orders, etc.. review
~! Sec. 1. The Stichigan public utilitics commission, havint; failed and refused to properly carry out the legislative mandates with respect to her.
public safety, and having' failed and refused to properly enforce the ach
luovisions of the several acts conferring jurisdiction upon it with re-ef- '
.spect to the use of the various highways of the state in a safe and prep-yy. er manner, is hereby abolished, and immediately upon the taking effcet y[.
,pe - of this act said 311chigan public utilitics commission shall cease to ex-ist, and the tenure of ofilce of the members thercot and other employ. ries . ment of each employe of said commission shall be thereby terminated. jcf All the rights, powers, and duties vested by law in said 3Iichigan pub- $be lie utilities conuni::sion, and in the 3Ilchigan railroad commission and gys transferred to the Slichigan public utilities commission, shah be deem-tnth ed to ba transferred to and vested in the Alichigan public service com- [ hah and
.mi.ssion hereby created, and shall hereafter be exercised and per- !
formed by said commission. All hearings, mattera and preccedings p, t; of whatsoevec nature pending before raid 311chigan publie utilities jfor, c"mmission or any court shall not be terminated or abated, but shan 'em- be tonsidered to have been transferred to the 311 chi":an public service Inses commission hereby created, and shall be continued, carried on anct Sach per. completed in th2 same manner and subject to the same rights, privi-icm; Icca, immunities and procedure as though the same were carried tance on and completed by said 31ichigan public utilities commission, with-Eff. out any requirement of amendment, modification, or change by ' M2, ren>on of the trcusfer herchy made. ' Said hiichignn public service commiwlon shall have and exercise all riahic imd privlieges and tho .iurisdiction in all respects as has been conferced by law and e:;- i eci od by the Slichigan public utilitic:; commission under the laws of this state; and wherever reference is or has been r.md4 in any law to th " commission" or to the "31ichigan public utilities commission" or the ',31ichigan railroad commi einn" ruch reference chall be construed to mean the 31ichigan public s..rvice commi wion hereby provided fo". wit'inut. fui t her ameninent or change tirareof. Any onice or decree of the 3fichig:m publie service com.nivsion sh.dl be subj ret to review ia the nn:enen now pn cided by lave for tesienih onter:; and decrees of th 31ichS.m railromi commiwien or the 31iciti can publi. utiliti;.; emr. miwit.n. In no c:.w. hsuc ec shan any injum tion or other oni .-
f. in-
,, fg imum.ns enw .t.cng any derece or or+r or ih 3Hehigan pubiic s rvic, wmmimion except an.. due n aice io ihe connni-ion and a
%n.
st Jtmo reaNn.

h!" opporumity for horim: titi reon. All appeal from ordr w fd.1*l of Ihe ali. hin m Imblic utilities ro.nmi: don inilia:cd tM r ihe 1 rot i-
. for un-M"n3 of any other act ansi now is tuh.ng in imy i ntict .,h.d! na: he di - g y ,,y, Wition, mis <ed. terminated, or abated but . hall be continued, carried on, and k crm cony,leird oveHy as thou.;h this section had been in cli. et at the time burh yppi als were {alp,3) and 3ue]g ;ippen[,; jnj[hg(ed ttndep,[he prog j. 9 l c,L, L 4
-~~~~ -
g, .u- -- bwe b I .., r
- 4GO.4 Pill 11.tc 1;TILITII:S I ,
sions of this section. ' The Michi;pn public setTice cornmi.<sion shall be m Mich. 3 Pub. A<"
- substituted as defendant in all such causes. tr m pub!s, ur Ilistoric.d Note .]!
the Mishig Source: powers a liA.1000, No. 3, ! 4, Imd. Eff. feb.15. were derit imthority . Michigan Administrative Code
+
therein. I
.For Rules and Regulations u: uter m:mbered designation corresponding 2'EI N *,* '
to M.C.LA. Chapter 4GO, see Mic hhtan Admini trative Code.
3. Procc.i Cross Referencea Notke '
to telepho Public utilitics commission, see i 4GO SI et seq. would 1 - compauv'. Law Review Commentaries smt be c' Federal power commission. Juri die-Put,lic utilitiet statutory revisw tw r.o adi - the state supreme court of a decision by mi us'-i/
tion over sale of devsloped Icasehold in-f' terest of ga; in formation. 6.1 Mich. the commissiort. 25 Mich1Rev.17s r, surt g date - x t-LRev. IM (19G4). (1926). epient dc' g
2 made. Library References I""" " g.~ MLP, Carriers 12. "' ' Public Service Commissions C:'G. CJ.S. Public Utilities 133 et seg. MLP. Public Service Commission 1 1. .g , g;c g f M.LP. Automobiles ! 42. M.LP Railroads i 1. f Theis Notes of Decisions l'uhlic -
PC E##
Judgment dismi.ssing complaint in ac. """ In' general I - liearing 4 tion by members of Michigan public util- , I" *A'. "I Injunction 5 Ities comn itsion. to have the immediate "dYh
j Powers 2 effect provision of statute which abol- hs n,uw}
4 Proceshire in general 3 ished the Michinan public utilities com- , mission and created the Michi;;an public tied to i Review 6 service commission, declared unconstitu- !I- ' tional, and for injunction restraining ap- "[ pointees to new commission from as- made n -
1. In ;:eneral suming duties of their offices, was af- t . t
Reasonable ** with relation to utility firmed by a divided court. Todd v. liull g,4 y ;
f- rates such as that for sewage service de. (1939) 285 N.W. 4G,2S3 Mich. 521. pended upon comprehensive examina. W bt tiorr of all factors involved. having in 2. Powers
The public service commission had 1*i"!
' mind the obJcctive to be obtained, l.and and ali ;
v. City of Grandville (19G0) 141 N.W.2d only such powers relative to fixing rates amtne 370,2 Mich. App. GSI. or carnings of a telephone company as
+
were by statute expressly or by neces-c In fixing telephone rates. the puhtic sary implication vested m the commis- {' l.Wf{, service commission acted in a legislative sion. out higan Ile,Il Tel. Co. v. olichigan gri j' capatity, and therefore the commissinn's i [ order fixing rates was to be construed as h" 0'{". 3 nmMh n (IDIG) 24 N.W. pea; g a statute of like character would be The public service commission had construed. Mithigan 13cli Tel. Co. v. neither express nor implied power under 4,c , Michiran 21 N.W.2d 200, I*ub.$15 Serv. Mkh.Commission 533. (19 86)- statute to reduce rates or accrued carn-t inns of a telerhone company within the '- '
'I ' All r.'tatutes are prospective in their state retroactively. Id.
operation cxeci.t where the contrary In the case of City of Jackson v. Con-PM.' -1 1 clearly appears from the cor. text of the sumers Power Co. (1913) 29 N.W.2d 2GS, be ic.- ) 1= statute itself. Id.
' 10 l
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.) I s, '460.4 erauc tmr.mi:s sions of this section. Tite .Tlichit:an inthlic setTice commission shall be .substitut ed as defendant in all such catises. 'h llistorical Note I }, '
Sourec: 1 P. A.1000, No. 3, ! .1. Im<!. Eff. Fth.15. I n Michigan Admbdstrative Codo For Rules and Reaulations unsler mm.bercel designation et rresponsfing
'!-- to M.C.LA. Chapter wo, see Mic higan Administrative Code.
Cross Heferences
!. Public utilitics commission, see 1.!G0.5! et re<g.
r [j Law Review Commentaries
. 6 j rederal power comminion, imisdic.
t Public utilitiet: statutory resiew by
' tion tsver s.de of developed leaschold in. th.. state supreme court of a derision by . .( terest of gas in formatian. 03 Mis h. the commission. 2a Mich.LRev. 173 ,' i LRev.153 (10GI).
i e, (1926). {. Library References Public Service Commissions C=>G. M.LP. Carriers 12. C.J.S. Public Utilitics 133 et seq. M.LP. Public Service Commission I 1.
.! M.LP. Automobiles i 42. M.LP. Railroads i 1. ~f Notes of Decisions In general 1 Judgment dismissing complaint in ac.
IIcaring 4 i ' Injtmetion 3 tion by members of Mich!gan publi: uti!. itics commission, to have the immediato
'.I Powers 2 effect provision of statute which abOI. -; Procedurein general 3 ished the Michihan public titilities com.
g Review G , mission and create.1 the Michigan public I service commission. declared uncc.nstitu.
. j tional, and for injunction restraining op.
e I. In general pointees to new commission from as. suming duties of their offices, was af.
"Reasonab!c with relation to utility firmed by a divided court. Todd v. Ilull rates such as that for sewage service de. (1030) 2SS N.W. .lG. 2S8 Mich. 521. . pended upon comprehensive examina-tion of all factors involved, hating in 2. Powers ; ; mind the objective to be obtained. Land The public service cornmission had t
v. City of Grandville (10GG) 141 N.W.2d only such powers relative to fixing rates
' a70. 2 Mich. App. GSI.
or carnings of a telephone cornpany as in - fixing telerhonc rates. the public "'8.by statute expressly or by necca.
'~ eervice commission acted in a legislative sary implication vested m the commis.
capacity, and therefore the commission's si n. .,Hch. Man De order fixing rates was to be construed as Pub. Serv. Comrm,Il Tel. Co. v. Michipmt sglon (1010) 24 N.W. l 'd 200. 'H5 Mich. 53,,. a statute of like character would bc con ,true l. Michigan ILll Tel. Co. v. The public serviec commission had Michl;;an Pub. Serv. Cemmiolon (191G) neither express nor implied power under 24 N.W2d 200,315 Mich. 533. statute to reduce rates or accrued cain. A'l r'tatutes are pro:pective in their ings of a tele;ihonc ecmpany within the operation enept where the contrary state retroactivs!y. Id. clearly appears from th2 context of the in the case of City of Jackson v. Con. statute itself. Id. sumers Power Co. (1915) 20 N.W.2d 2G3 10 i e
- m2-s -
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f rum.IC SERVICE CO.M.MIWlON 4G0.5 ion shall bc 3:2 stich,437, the court said: ". set No. 5. Iniunction
1. Pub. Acts of 1939, vested in the Mich-
.Mdiough general .a.upervisOn of tcte-
igan public service commission powers phone companics had been relegated to and jurisdiction of the type here in- the railroad commission by P.A.1911, volved which theretofore were vested in No. IUt (repeated) and' P.A.1010 r
the Michigan utilities commission." No. 200 (section .1Sl.101 et seq.) a tele-Powers of public utilities commission phonc company would be enjoined from
' were derived solcly from statutes, and VMaring its franchisc contract obliga-authority for its acts was to be found tions until action was taken by the Cora-70" "E therein. In rc . foe Brown & Sons (193G) mission. Traverse City v. Citizens
Tele-2G3 N.W. SS7,273 Mich. G52. phone Co., (1917) 1G1 N.W. DS3,19a Mich. 373.
3. Procedure in general g gy;g Notice by public service,comm,ission Where public service commission to telephone company that investigation would be hcid to determme whether eranted first natural gas com;>any a cer-company's profits were too high couh! Eif cate of public ccnvenience and neces-r.ot be considered as the institutica of sity to make direct safe af natural gas to y review by rate adjustment proceedinp. In order t certain steel company, and second natur-i decision by cuthorire commission to order refund of al as company o'ppeated to Circuit i.L.Rev. 17S revenues by comt wy to con 3umers frorn Court under statutes. and first company a
date of not!ce rather than from subsc- intersened as party defendant. nnd addi- '
<!uent date when order for refund was tional and other evidi.nce was adduced made. Michigan Bell Tel. Co. v. Mich- in C reuit Court, and such esidence was
{ ican Pub. Serv. Commission (1916) 21 transmitted to comminion by Circuit NM .2d 200, 315 Mich. 033. Court as providtd by statute. 'and com- i rnission thereafter order which rescinde$1 granted certificateits and oricinal re-
N### f.
The railroad commission act and th? ported its action to Circuit Court, and ( pt.bbc service co.umission act did not Circuit Court dismbsed action, first o plaint in cc.
C Mu J C W" M f company was aggrieved by ecm nission's
> pub!!c util- any of its members them<ch hold ordcr r$cindhig its oriuin.d cru :r grant-
immediate "3*** a f iny certificate, and fir 3t cunruny we "h.1,kh abol- .y omm emhted M appal t ) Mrcuit 0,urt from r h one of ordt of tot :mi cdon rescindirm is origi-ni!Wes com-e s pa m ckdWch nal orkr. I';mhandl? I: astern pire Linc hi n Eublic r.i:.si6n. cny m!cre,ted party was enti- .
g stb tkd to a rehearing before futi connaie- ('o. . Michivan public Sersice Commis. straining ap- ' y up n request, and in ab::ence o, Lion (1030) G3 N.W.2d 592, U7 Mich. 2S2. en from as- aa request no amplaint could tw . ces, was af- a. .le of a hearin;t by :m examiner. De. """ "I "" 0PP I'F Todd v. !!ull Irmt & T. S. L R. Co. v. Michigan t'uhlic pnblic se'rs ice commiwion held that t 521. 9tsepCommission enunMon had no pmi unk Matuto wq, g g. h.191 (190) 3G N.W.2d to inake ratm for te! retroa. Iis". Saptevre (y. hor.c
.oart w i'uld ,c*nanv not Where public service commicion or pr u on contrniion of b b phone rompa-mission had P"invd an examiner to hold hearine
> Iixin:.t rates "'"! all pat ti^ appeared befoix examiner nv. oleanced ein vuuu: f.nn IL .t 51-ggqyyy ag . tid no ob}>ction ha i i tade a to hi; preme ( *<.urt ruiW hr ! ' %tute i 1 nov: ur by n0c o , cre 1 mrum ;< ,4 t in r it. c tro..n lu ari in lhe s prembes and therutitt r p gggmjg. tiv. that st atute vra< unconmit:tional, I' -t hount M E :.L'hrai!f rd r$1 cre!Dtly < t m . is; Iha gmstilqibi.d sjag op.;) ms g g:o(
v. Michinan w hich madr an order thereca, p u t:. ar- t x nti d t , the d-ridon. Mit la .n. Uc'.!
i g ; g 3,w, unm d by ordar W iised it i oida lion ten L ' u dnn cui ' ..! mel v e hl not ap. 'I t I. W v. .E hir:m Pub wrn (ha %.
, 'itl on th.:t pr ound. Id. .n (1904 /t *;.W. M 2.0, / , ' . S.
wen had 5. ? ow er undar (cmed earn-4 v.imn the C 0.5 same; books, n conk, mn g, i M leks, record ,11!c- pa per.e. deuments and other ,a m s.Cen. N.W.2d 2rc,, pnnertv Irlongitm to the Michicm liuHic utilities commission shall h' forthwith turtnl over to the .'.II'-higan pubh.e sers tee commiwlon 11
. . .m . _ _ _ <- ~. .
_. u .s. 33 .. m
-- _ s....._..... _ m._ e f - _ ,, j n
4G0.5 .Pn:ue oTit.mes and shall be continued as a liart of the record <. files, and ot her property m of said commission. The Stichigan public service commission shall in ti"
;j ~i1 all respects be considered to be 3he successor in ollice of the 31ichiuan ' pt .public utilities commission in respect to all of the powers Anyor un-duties now pi r vested in or. imposed upon saisi public utilities commission. ut i expended balance of moneys in the state treasury and any fees or l' - .[ other moneys now owing to said public utilities commission shall be t-
t. and the same are hereby transferred tmd acsigned over to the Michigan li I-
public service commission hetchy created, to be used and disposed of v.
x as ptovided by law. ,
, Ilistorical Note .%urce: ;; I'.A.lD30, No. 3. ! 5. Inid. Eff. Feb.13. .jf Notes of Decisions F' I. In general Judgment dismissing complaint in ac- service commiwion. declared unconstitu.
j. tional, and for injunction restra!ning ap.
tion by members of Mtchigen public util. ities comm4. ion, to have the immediate sumingpointees dutiesto of new their commission offices. was af- from as. l'
' cffect prosi< ion of statute which abol- fmmd by a divided court. Tmtd v. Ilull ished the Michigan public utilities com-g mission,and created the Michigan public (193'J) 235 N.W. 40,28S Mich. 521.
g 400,6 same; pmvers ana jurisaietion; rates, ruks, service or pub-j lic utilities l Sec. G. I'owers and jurisdiction. The Michigan public service com-
i. mission is hereby vested with complete power and jurisdiction to reg-i ulate all public utilities in the state except any municipally owned utility and except as otherwise restricted by law. It is hereby vested 1-with power and jurisdiction to regulate all rates, fares, fees, charges, services, rules, conditions of service and all other matters pertaining It is to the formation, cperation or direction of such public utilities.
further granted th power and jurisdiction to hear and pass upon all I matters pertaining o or necessary or incident to such regulation of all , J public utilities, inel ding electric light and power companies, whether private, co'rporate or cooperative, gas companics, water, telephone, j telegraph, oil, gas and pipeline companies, motor carriers, and all public transportation and communication agencies other than railroads and railroad companies.
' ! frailroads. The Michigan public service commission shall have the same measure of authority with respect to railroads and railroad com-j Iwnies as is granted and conferred under the various provisions of the i'
statutes creating the Michigan railroad commission and its successor, the Michigan public utilities commission, and.delining their powers and dut:es. 12 e
,f- - .. ~ . . . ~ - . . . .:- - -. . ..,- , .. +
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I't'I1LIC SI'ItVICE CO313118SION 4G0.6 perty Construction and operation of gas service and pipe line facilities. It kil in may make reasonable rules and regulations to provide for the protec-higan lion of the publie in the constructica and operation of facilities by now l public utilities rendering gas service and by companies operating a pipe line or lines for the transportation of gas, or any petroleum prod-(un- trets that.are gases at normal atmospheric temperatures and pressures: hs c r til be Provided, however, That such power and jurisdiction shall not extend igan lo field gathering lines in either, gas producing fields or gas storage .d of fields except as such lines may cross state trunkline highways or rail-roads. As amended P.A.1932, No. 210, s 1, Eff. Sept. IS; P.A.1960, No.11, s 1, Imd. Eff. April 19.
}Iistorical Note Sourec: The last paragraph was added in 1952.
P.A.1039, No. 3, ! O, Imd. Eff. Feb.13. Water companies were inc!Jded in . 10C0. 7 istitu. Michigan Administrative Codo , 3 aP' For Rules and Regu!ations under numbered desi;: nation corresponding . [.1 to M.C.L.A. Chapter 400, see Michigan Adtr.inistrative Code. as as* cf- , Ilull I *. Cross References .' Public utilities commission, powers, duties. 2ee 14GO.51. ,
?"D* Law Revice Commentarics Cer'if! cates of comenience and necs. Lk tho Is of tatin : the constitution i-mm- .si t y. Fcrd P. llall. 23 Mich.LRev. 27G lity of rate s'atutes involvin;: heasy men. '
t Pna): Tord P. ILi!!. 2S Mich.L.Rc c. alties. 20 Mich.LRev. 415 (1929.
rt'c iti7 gin 23)- Municipatity as a unit in rate makin;:
vned commissbn iuriadiction orcr utility and confi . cation ex es. Imb< rt li. Arm. ?Sted r encratiscs. 1-rael Packel 33 Mich. strong. 32 Mich.LRev. 259 (1934). rges, I R>v. 411 (l!G7). pg,w'o proo cliaa of propert.v in rate ning IM.ht'i. nt a::d th-vohtiion of pubEc casca. 2 t Lii .h.LRcv. !Gi; (l!Cli). It j" 4:tibtv knt. 1.dn in C. Goddard, 32
\lii b'I .Rev. 577 (!!G 1).
I"*. "l!IIIiC' - n all Powsr of comme:szon to i lam". ' q gjg , ir.t on .i..l e rics in pu!'!ie utihty i!'prm t.ae pait! 1.y priv.ite user um! -r
' iMon. l'u! ( r: D. Ilaun. ".3 M k !i. .sp. t i il cinir. . t wi'h utili:y. 21
'Iher I .Pcv. Ir.n (1:UD). . Mich.LRev. 32 (142'0. tone, lh duction et ih; tet iation for rate R.o ' i. ; utatioir s ahdi'- of 1.tc. j g}g b i e l urp e,c.4 R..hert I). !!.iu:. p ir.c s t.a t e onie r. :M Mili.L , 4tds :M Mk h I Rev. 479 (10:o). Rev.i.'(19a93. M. cure c 4.f I. mil vbfue foe uti!itv sc : R ,. t e re; chticir public titilitit ., .'. u:. : n. 'r ton 1:. 1; uvs. 39 Mii h.f- !.lich Ll:ev. W. (19: n.
,g l ;7 (1910).
com- ,. g 1.ibr.try ihferences y p' Pu'.ii %rs is e ('cmmi sien : C ed7, 7 M.LP.1.1.cctri, ity and das H 2. 't C..f..N I i'ilie Ctilit .i. : l a t t .sett , ' 1, M. L i'. l'uh!ic Sers it e Coaum wi .n WCTS 12. ; ! I, 2. M LP. C.irriers !! SI,101. M.LP. Tolewmmunication: !! 1,10. 13
4G0.Ga PUlli.lC SEltVICE CO3DilS810N ,otiorr 460.Ga cas, telephone or electric utiitties: increase in rates, no-tice, hearing, finding, relief, investigation, report; non- ?"YN t
' domestic fuel adjustment charges erric . was 8 Sec. Ga.
When any finding or order is sought by any gas, tele-issues
s was phone or electric utility to increase its rates and charges or to alter,
'*' changa or arnd any rate or rate schedules, the effect of which will n b.* to increase the cost of services to its customers, notice shall be
.W.2d When such utility shall

iwn within the setvice area to be afTected.
, from lut. phud in evidence facts relied upoti to support its petition or ap- '35 "0L piic ition to so i;:ercase its rates and charges, or to so alter, change or
.m. nd any rate or rate schedules, the commission, pending the sub-fe# r ic .
iniwon of all proofs by any interested parties, may in its discretion rets Cr. and upon written motion by such utility make a finding and enteri an (' *512" unter granting partial and immediate relief, after first having g ven . i"; th0 uilice to the interested parties within the service area to be affected ,aat the in the manner ordered by the commission, and after having afforded . per:,on to such interested parties reasonable opportunity for a full and com. rari any ; the: plet. hearing: Provided, That no such finding or order shall be au. thowd or approved ex parte, nor until tne commission's technical '
cept in shff has made

m inve3tigation and repott: And provided further, aute.it 0 That any alteration or amendment in rates or rate schedules applied b g tor by any public utility which will result in no increase in the cost 611.203
!i of senice to its customers may bo authorized and approved without b any notice or hearing. Nothing contained in this rection shall be con- 14 s whk:s an rait- . trued M prohibit the commision from permitting the incorporation h do. s y[j"' of fugi adjustment clauses in rate schedules for service otherNo.
P. A.1939, t an ; mr.she service pursuant to notice and hearing thereon. qatsmon . ; Ca. added by P.A.1932, No. 243, s 1, Eff. Sept. IS,1932, as amend-were not ed P.A.1935, No. l'T2, ! 1, Imd. Eff. June 13.
,"g i ;;uaran- llistmical Note ince they >y suit, in ny. Ld'entenm n .d;a; d to f.i.'l ad-e actmg j,t tai m dau .m, was added in 1955.
Michip.an Ashaini.tratisc Code 4 (<: action cun'pany rot Rdo al Re Miom und T nunk d bi'meFm Wm.pomlim .r 1 i t t.. M.t'.I A, Cl a.yter EO. we.Mk htm Adnunistratis c Code. Law Review Commentaries
, f[ Dedu.ti n of e:(y r i..ti ci for raf-( Commi':- ' ' ' 9.wion imi di tiaa oser utility pu ; o :e - (N;i <
1). !! a1,
' e c.. I d.4 1;ts Lcl, U Nk h li e< i
N Mich.l. Rev. r;q ( : ,, to).
'dich. 51.i. L", t t i i i r. 3.
,4. ,t T.M- lh olution and deselntion of public M e.wures or lan.1 tah;e for teihty Dr of the JJi tm I &. ia C. G ..ld u d. P2 rm "J m .n. tr e ut R. ILu ccs, 3') 'du h.
si:1 in na- ,"! ' 't ? b v. 57. (!m 1). [.1:. 't; (19 in). 'ipan R. R.
1. Ry. Cr. h~n istenties in puldie utility d. rre Munk in dity i, a unit in rate.nrdde; and i onfi< cation c:ises. Ib.bert D. Arn;
',i.c en. gos.4 D. II.mn. :Is Math.
strony ;2 Mkh.l..Rev. 2D (19::1). N T. IN (Ittt9). 4 "3
,, s. .
?--. -
.....L-.- - . - . . - - - - - -
4 . . . . . i < PUI1LIC SEIWICE CO3DIISSION 460.Gb , cas utility rates, authorily of pidilic .,enice commission; W ;. 460.Gb rates, etc., on file with federal power commission re-
.t2 ' ;
ceived in evidence; proceedings; appeal; refund
.Nc. Ob. If the rates of any gas utility shall be based, among other r.insiderations, upon the cost of natutut gas purchased by said gas util- ! ity v,hich is in turn distributed by said gas utility to the public served l by it, and the cost for such gas is regulated by the federal power com-
'd, t miwlon, the Slichigan public service commission shall have the au-abority set forth in this section. In any proceeding to increase the i12. , rates and charges or to alter, change or amend.any rate or rate r 3rhedule of a <;as utility, the Michigan public service commirs on i s ah ll full be permitted to and shall receive in evidence the rates, charges, classi-i ab- tirations ar.d schedules on file with the federal power commission fj"[. whereby the cost of gas purchased or received by such gas utility !s ' lixed and determined. If, while such proceeding is per. ding before the A v. esim 31ichigan public service commission, a proceeding shall be instituted 3D5- or _be pending before said federal power commission, or on appeal
is h:n therefrem in a court having jurisdiction, with respect to or affecting "
[jn";l th cost of gas payable by such gas utility, said Michigan public serv-ice commission shall consider as an item of operating expense to said lo his
ms utility the cost of gas set forth in said rates, charges, classifica-
?"hCf . lions and schedules on file with the federal power commission. If the r[-: (.$ en to rost of gas payabic by said gas utility sh511 he reduced by the final et :p ,o d,*r of tim federal power commission or the final decree of the cout t, if appealed thereto, and the Michigan public service cominission shall have entered an order approving rates to said gas hiility as aforesaid J not , ha od upon the cost of ::as ret forth in the rates, charges, clacsifica tions and >chedu!cs on file with the federal power commission which were Pj"[ Iiter reduced as above set forth, the Michigan liublic senice comnyis-rea. ,
,ut ib dioa upon it.< own motion or upon complaint and after notice and hear-My ittitr.ay pn eced to order refund to the gas utility's cu3tomers of any sunw refsmded to the said gas utility for the periosi subsciiuent to the
, Mich. (1935) - olfertive date of the Michigan public service conunission order ap-I ratin:: rates for the gas utility as above set forth. P.A.19:19, No. ':, f G'. .Aled by P.A.1932, No. 272, ' J, Imd. Eff. June .l6.1932. utility Michi:pn Adinh.htrathe Code
;e and m rate g . R.dm iid Mc; dd n; ned: tun. den d desineAlan mm >pendig f38 i, 441! .A. t hapter 100. : re Misi i.".an hhainistratn e ( vie.
imtice p g g .m.g t Atty,
' * ' tM .u . we Ii l'.5.C,A ! 717 et .scq.
I.mv Ites:cw ( oi.uacata.ies 8h . i u fa tot : ,f r.w nn*.II. ratm. 1%iation vnd devolution of Imblic utihty law. I .d w in C. G,d,Lud, :'2 Uh k e ? I. Updevasi, 29 Mn:t L.ller. 46 b.u t Mich LRev. 577 (ltul).
- 25 l = ...
n
.x m.m,;; - * ~ ^ m~ ' - ' ("a-- - - - # - ~ "
J,
g. 4 i. ~
'l "
1 -'4G0.53a penur rrit.mrs 4
, - ri tion of maintenance of way employees. This scetion s1 11 not apply ?- 'i . to motor vehicles n. ed Io Iran t> rt i mployees di.-Ianres of le.w th.m ..t 5 miles from their regtdar assembly point nor in cases of extreme . - emergency. If any di.spute mises as to the adequacy of the facilities t . herein provided for, it may le submitled to and decid.il by the public service comtr.ission. P..\.1919. No.119, s 3a, added by P.A.1962, No. t:
30, s 1, Imd. Eff. April-lG,1962. I.thrary iteferences .* rauroaA c 2::o. . CJ.S. nauroah ?! :00-:a2. L [ - 4G0.54 connoission, pmrer.4 and dnties nspecting mics: fnin-l . chise rights; unnic pally owned ul ;ily - l S ce. 1. In addition lo the rights, powers and duti.s nste4i in and l impo.<cd on said cuaneirsion by the preceding : cclion. its jurisdiction . [ .s h
19 d+med to extenil to and inehtde the cont rol and requ!ation. in-chh: . ; IIm dxine of rates and charnes, of all publie utilities within this .-tate. proilucing, t ransmitting delirt ring or furidshing steam for heating or [w m er. or gas for heating or lightiir4 prirposes for Ihe public use. Subject to the provisions of this act the said commission shall have the some measure of authority with reference to such tililities
. I as is gianted and conferred with respect to railroads and raih cad com-panies under the various provisions of the statutes creating the Alich ,
igan railromi commission and definine its poweis and duties. The
. po ver atul authority granted by this act shall not extend to, or include, i ! any poner of regulation or control of any mimicipally owned utility; and it shall be the duty of said commission on the request of any city l
L ; or village to give advice and render such assistance as may be reason-
; able and expedient with respect to the operation of any utility o,vned i and operated by such city or village. In no case shall the commis-l - sion have power to change or alter the rates or charges fixed in, or ree- 'i l .[ ulated by, any franchise or agreement heretofore or hereaf ter granted ] or made by any city, village or township. It shall be competent for i ; any municipality and any pub ic utility operating within the limits of i
' .j said municipality, whether such utility is operating under the terms ' of a franchise or otherwise, to join in submittim; to the commission l any question involving the fixing or determination of rates or charges, 1 or tin making of rules or conditions of service, and the.commielon l' shall thereupon be empowered. and it shall be its duty to make full , investigation as to all matters so submitted and to fix tmd establi.sh Suelt reamnable maximtun rates and charges. and pvescribe such rules
- and condition.; of service and make such determinmion and order rela-tive thereto as shall be juct and reaeonable. Such order when so made t shall have 1:ke force and effect as other ordars made under the provi.
4' sions of this act. In any case where a franchise under which a utility is, or has been, cperated, including street railways, shall have hereto-
! 32 .
l_
q 1 3
.h i * ,g.- -
y 9 _ y
_.4. -% ,,2_.....~,. , h t I i PUlli.IC UTILIT!ES CO31311S81ox 460.54 I pply fom c. spired or shall hercarter expire, the municipality shall have than the right to petition the commission to fix the rates and charges of s.iid utility in accordance with the provisions of this act, or to make leme - stles complaint as herein provided with reference to any practice, service hblic or remilation of such utility, and thereupon said commission shall have R, ) full jurisdiction in the premises. I
$ IIIstorical Noto 9
Source: p.A.1910, No. 419, ! 4 Imd. Eff. May 'C.L.1929,1 11000. l I'.A.1031, No.133, Efr. Sept.18. I 15. ran- . Cross References
'Jotor carricts, sec ! 473.1 et seq.
E overcharces. time limitation on recovery, sec ! 600.5311. Tnd 1:ailroad ' commission, sco 11 102.2 to 4G2.30. l~
, tutes. ;
Generally, see ! 4G2.4 et seq. (tion
*in- t j Liectricity and pas, see ! 4%233.
ithin Express char 3;cs, sec 5. 462.23. 1 for l'rc@ht rates, see !?. 4G2.3. .subd. b. 4G2.12. - atwat gas, pit ase u nwrtatim and sale. sec ! 4E110. Iblic t Rai! road brid:e and tunnel companies, sec ! 4G1.9. subd. 9. l hall ; Railroad, inttrurban railv.ay, etc.. sec !! 4GS.1-lG3.4 and 46S.31 >.GS.37. , litics ! Street radu.y companics. see 1 472.20. . i*
; Surface or elevated raihvay companics, sec ! 4G7.103. I om- t Swit(hin;: rates sec !! 4G2.G et seq...!GS.101. '
{Jch- ' r eleph vv' companics. sce U 4S4.10.'-ts !.110 j Transmission or electricity on highways, sec 11460.532, 4GO.337. . The Uninn depot (ompanics operating local passen:;cr trains, see 1 471.30. 'j '; gg' ; Water, c.iriiers by, sce !! 4G9 201-1G0.20G. Ility; ' ra;.a r.. n.ibre disposal corporatins, rat,;s to be determined by pub!:e utilitits ' city commi sion. See M 12J.243 and 123.240. isom ( Law Review Commentaries Tned Charter contracts and the re,tulation Dedaction of d. pm iation for rate UDIS' of rates Clurl( s G. l'enwick, 9 Mich. be.e purposes. Itobet t D. Ilaun, ' reg- 1 i liev. 22' (1911). 33 Mich.l..Itev. 479 (1910). tuled Commid ion jurisdi. tion over uti!ity Rate recu!: ; ion: validitv of temnorary Il for C 'operatius. l>rael packel, 33 Mich. rate order. 39 MichLitev. 72 0 939).
- I Teb phone rates, hypothetical compa-its of ny te(hnique. consideration of actual ex-I"C""O""'i's in public utility dopre-crms i htion. INhe rr D. Ilaun .*N .W h.I- penacs. 63 Mich.LRev.10G (INI).
l8dion j :;.y,p,o g g g
irges, ljbrary References gjg Pulilic Syrs in C...urnivi..nn C'7 M 1 P. rlect ricity hnt! Ga !! 2. 9. .
g [n}] C.J.S.1..bh. Uplities ; t 13 et :.cy. 11. 21 t P. Pub'ic S. rsis e t omiaicion 12. MIE RI p. C.o r.cn i S t.- M.L.P. TeixumT.unication; i 10. Tules , pgja, Notes of U whienu ln 1:ent'ral I Confi rafory rates I3
nade Const urtion of prosisi'ms, ordinances,
". M. .%niniurath e re:.traint 17 ' g~ n:nd;ng nr m n:ractual c!f :t. or- Lanchises or u:hcr contracts 3 l
11i111y o rnances, fran(hi< '. or oth.r crutraen .' imimination 7 j 4 Leidenca 13 ereto.
srmeta-3 3:1 i
; . .;- . . . . . - + - -- - - -= -- -+ - - - - ~ - ' " ' < e
i. J j CEllTIFICATE OF CONVENIENCE AND NECESSITY 4G0.501 CERTIFICATE OF CONVENIENCE AND NECESSITY Transfer of Functions
} The 31!chiyon putblic utilitics commission tcus abolishcd and its functions lette transferrcel to the 31ichigan public servicc commission by scclion olCO..} (P.A.1939, No. 3,1 -f).
Thc public screicc commission, in turn, Icas transferred , - intact to the dcpartment of commercc by section 1G.331 (P. A.lDG3, No. JSO,- i 231). . k' Cross References i c f. Alplication of this cet to ciectric or gas corporations, see i 4SG.250. Library References
. ;- l'ublie Sersice Commissions C=G.G. '
y. C.J.S. Public Utilities ! 42.
{ l'.A.1929, No. 69, Imd. Eff. April 23
.{ AN Af'T to define and rc; ulate certain public utilities and to ,
y rrepaire (firm to recure a certificate of convenience and necessity I gnual in C* rtain cases, . t . The 1%ple of the State of 3fichigan enact: y 'dility . -' fiscal ' '
. 4G0.501 nefinitions
{ a first , ,
;p . .% . 1. The term " municipality", when used in.this act, means a g g7 ril.v. vil'a';c or townslu,p.
ain GO i. *h term "public utility", when u;cd in this act, n.eans persons and ,
.mme ; corporatium, other than municipal corporations, or their lessees, if n r t hustees mhl rectivers now or heseafter ownin;; or operatint; in this 3!.ite equipment or facilitim for producing, ;;eneratinc. tran.smittism, p
f. ly, g neg. . 'Hivering er furnlehing gas or electricity for the prcduction of light, made.
hmi or power to or (01 1he public for compensation. 4
. )e the . " "-' tert.1 "commis.sion", w hen tteed in this act, me m< the Alichi;:an which I'86 ' utilitica c onunis.< ion or .such other state t.overnan of al agency hi 1_ ^ in .v t wreise the lowers now conferred upon said commis.4 ion.
!s.uired I!istorical Note Smirec: P11:UA No. 63, i 1. Im.! I fl. Apn! 25. O Li1 A 1 Iles;. I.aw uniev. Comment.nies ho nean.< of consrisience ;nal neces. Tra n .I'e r oi" operain.- rights. 02 %ng 2 W:'!<lo O. Willhatt. In Mit 1i S ILI. Mis h.l..Rev. 1016,1021(l'J01). . IPHIL l'oril l'. Itall. 2M Mis h.l..lkv.
I'/* d"2"n i nid l'. Itall. 2s Mit1. LRev.
I(1929).
+
I.it;rary iteferences at LP, ikjectricity anil Gas !J 2,3. 73 4
h L._
7 - .. n :. . . . . ;a.= :- _
'460.502'. runr.ic trrn.rrms r1%
TJute t certificate of convenience; neces.;.ity for gas or electrie splico r 4G0.502
]' ^
utilities e . .. v. (Petm > Sec. 2. No public utility shall hereafter bogin the construction or 2. Im opemtion of any publie utility plant or system thereof nor lshallit l ren- n;,, tiec any service for the purpose of transacting or carrying on a oca state r; business either (lirectly, or inclirectly, by serving any other utility or : ""21" .i agency so engagetl in such local business, in any municipality in this ,",';#'., '! ' 2 state where any other utility or agency is then engagetl in such local poet bu<iness anti remiering the same sort of settice, or where such mn- wit hm-nicipality is receiving se:Tice of the same sort, until such public utility Oll";? , rhall first obtain from the commission a certificate that public con- tion Venience anti nceessity rettttites or will require such construction, op- Pd " h ", i>:an eration, setTice, or extension. 71 S.< ' l.. llistorical Note he 1 of n.> put h Sourec: MLhe - P.A.1000, No. 69,12, Imd Pff. April fore < o. 2J. scady C.L1929, I 11038. po w , 5 Cross References con:- prohi-Natural gas act, see 15 U.S.C.A. I 717 et seq. enLu throu-Law Review Commentaries l, Evolution and devolution of public
- Certificates of corivenience and neces. gg, '
sity. Ford P. Itall,2S Mich.LRev. 27G utility law. Edwin C. Goddard,32 Mich. l' (19'10); Ford P. Itall,23 Mich.LRev.107 LRev. 577 (1934). Stato utilities and the Supreme Court, g Fj' j 0 D29). g,g, I Commi>sion jurisdiction over utilityMich.LRev. 1922-10:;0. Thomas Reed Powett, 29 811,10Cl (PJ31). g[ i
~
co sp. ratives, bract Pact;el, 33 Mich. nod LRev. 411 (1937). 1:nn.
+
Competitive operation of municipa!!y with
! t horis -
and privately owned utilitics. Charles M. Kneier, 47 Mich.LRev. G39 00114 Nav. tm Lb. I Notes of Decisions Th A direct order by the Michigan public ry y In general 1 service commission merely denying right porta
*EssentiallylocaP' commerce 3 . of interstate carrier of gas to deliver it.; C(Hna - ' Interstate cc: amerce 2,3 product without.first obtaining a certifi. mer.- +
in t.cneral 2 cate of public convenience and noceni. H i+ 1 '
*I:ssentially local" commerce 3 ty, allowed entrict to proceed bef,rc sah.
j Judicial intervention or review 4 commi" ion on hearing to determine WM whether or not public convenience end (IS;> l necesity required the granting of such a nuu-
1. In general certificate. Panh mdle Eastern l'ipg Requirina certifict.te of convenknce LIId.
and necewity allows public- services Lhie Co. v. (10 Commision Michigan PubHe324,
6) -11 N.W.2d S ryh,:
3N Ir commi<sio.1 authority to limit ttrritmy I.lich. Ct. affirmed 71 S.Ct. 777, 311 b*t . , of utility and to prevent duplic:. tim of U.S.329,93 led.993. can capital facilitiet, lhtron Portland Cc- res i i ment Co. v. Michi;:an Pul.k &n nJ A Lusiness affceted with public use ;in, Commision 0953) S3 N.W.2d .192, 331 may be regulated by the state under the s .n , l Mich. 233. nan y f 71 i 1
g
.t I
..um___.._._..___. u._..-_-_.m.. a._ .
y_g. - -
l. t c .. .
a:in
=
460.502 prnue irrn.rrms p? . Nate 4 . tertnin' In federal di trict court tu rc.; train tim and nacenity to an interstate pipe lir.c g, comnd+. ion from enforcing tiie later- rariier of natural r s. pipe Ime carrier
?
I.H' C db; state cerr.:2.s rce a< t on trut:iid h ...or :n: obtin resi. w in the cour: 1 u: if was not a motor carrier, federal distait t cer'tificate is granted. any i.nese:.it ! par. ther[ity , court would deny injunctive tr!ief until ty would have the same right of review, 3:ajd ap ca,mmission had fargnally acted. fil. P.mhand!c !* astern Pipe !.ine Co. v. Mi< h-If the Michigan public ;ervice commi. . iran Public Service Commission t1:Gm Whet' k k -14 N.W.2d 321, a23 Mich. G~n0, affirmed sion nfter a statutory hearin;:, should 71 S.Ct. 777, a11 U.S. 329, D'i LUtt. 99:1. I deny a certificate of public convenis nce 1
. Sourec:
y,3. e 460.50'3 retition, contents 21 Sec. ti. Before any .such certificate of convenience and nece<sity C'E shall issue, th" applicant therefor shall file a petition with the com-
. m'ssion . stalin.: the name of the mimicipality or mttnicipalities d which . Criti il desires to seiTe and tho kind of seivies which it proposes to ren er, d'Z-j' 3- anit that the appliemit has secured the necessary consent or franchise iny ( :
from r.uch municipality or muidripalities authorizing it to transact a local busincu. Illstorical Not 460.E Source: Sc J. P.A.1020, No. C9, ! 3, Imd. Eff. April Upon
23. vided
C. LID 29, i 110S0.
Orders ise<u 4G0.504 nearing notices Sec. 4. Upon filing such application, the commission shall set a day for the hear'nq thereof in accordance with its rules and practice re- Sourc . L Jating to hearings and notify the applicant thereof. A copy of said P!" application and a notice of the time and place of hearing such applica- ci.i . tion shall also be setved upon each and every other utility or agency in the municipality or municipalities proposed to be setved by said neh. a:- l 'icant then rendering similar service therein, and also upon the Revis al c!crk or other similar otlicer of each municipality, at least 10 days be-fore such hearing, and said persons so served shall each be permitted to appear and be heard with reference to said application. In ren M" l IIistorical Note i
' Source:
P.A.1029, No. CO, ! .1, Imd. Eff. April I. In
'I 23. .
It;s
! C.L1929, i 11000. by n :
I same; matters for consuleration; certiscate, contents rl.7 e 4CO.505 y',.( '. Sec[ii. In determining the que.; tion of public convenience and nau .. necessity the commi.sion s shall take into consideration the service die h l- being rendered by the utility then .<erving such territory, the invest- ['s.c 7. . ment in such utility, the benefit, if any, to the public in the matter of t. rates and such other matters as shall be proper and equitable in de-7G j- . i t .
+
s. .- - ., f .
*en.. 4.
~ ;.. g a.....z .. a " m --~ - - ~ ~- ~ ~~~A~ ~ ~- - * ~
L I'CI(TiflCATE OF CONVENIENCE AND NI CESSITr 4G9.50G lerminintr.* tether ce not public convenience and;neces41y. re mires the applying utility to seire the territory. Every certificate of nub- . lie convenience and necessity issued by the commission, under the .'u-
'thoilty hereby granted, shall describe in detail the territory in which i- sal.1 olipIIcant shall operate md it'shall not operate in or serve any ; other territory under the authority of said certificate.
IIIstorical Note Source: '
.I P.A.1920, No. CO, ! 5, Imd. EIT. April - 23.
C.L1920,! !!001. I . Law Review Commentarles k Certificates of convenience and neces- Competitive operation of municipally sity. - Ford P. ILdi. 23 Mich.LRev. 27G and privately owned utilitics. Charles
. tHunt l'ord P. Itall, 2S Mich.L Rev. M. Kneier, 47 Mich.L.Rev. G39 (1949).
I 107(1929). 1 t* 4G0.506 nev'ew of order .. P.
^ Sec. 6. Any person aggrieved by the order of the commission made upon said application ma> review such order in the manner now pro-l
[i sided by Act No.111) of the Public Acts of 1919 5 for reviewing the orders of the Michigan public utilities commission. j C {.- i scriton .tco.sl et seq. .- v 1 I
! llistorical Note Source:
g
, P.A.lfi29, No. 09,10, Imd. Eff. April
23. '
/] C.Ll929, I 11002. Cross References y t Rehearin;'. sec !! -1C0.351, -Icit'152. y ' 1:rtiew,:.cc ! 4GO.59. 7 Notes of Decisions 4 In nencral I = 2. Aggrieved persons t Annriesed persons 2 - \Vhese ' pub!!c tersiae romnaoion grantr:.1 fir 3t natural en company a i e r-
* ~ . tificate of ptilie cong eniente and net t s-tity to tuaio diict! x.!c of, natural ::as to b In nencral ecrtain steel entorany. anil strotpl n:itur-IIir!}t to sell natnral gas in Mk hi;:an al gas roippeny appc.ded tu ritcuit i om t ,
14 Ju inter't ste p pelin i artie r di t xt to t:nd. f s'atutm an i fit: ' i *ayuny iater-u nstoners far Ib,h w9: a ;tt'd not for s on d a. part ek fradant. a.ul .*dihtional
..l . in a suoni ,4 J c v. a 1-' .asiti.or and other n.d. m ? wa s cddo cd in a ir. ^
g -I allie uti'ity was renderin; .nne sort of tuit t o.trt. nud .sta h evid -ni e was it.:ns-
rvica ww w; thin b'ti di1%a of Min hi- mittrJ to emrenission by rocnit iourt ar. '
N l'.in iniblic ertsice commi+ don. Panhan- -provided by statute, and -i num wion A- : 4 ' 1:a>'ern 1%re 1.ine Ca. v. M k hipan tincts att r re smil d it s mi: inal ord 'r gp 4 . I'ab;ic Servict' Commi . -ion (19.0) 41 whith rrant"d airtificate and repoi ed
' XW.2d 32 8, an Mis h. ten. af fir m d 71 its acti -n to s ittnit teatrt, and circin; h.- . !~ S Ct. 777,341 t!.S. 329 "" led. 993. court dismisssd action, Orst wmpany .s g .
=.n e; y _.a a._w. - ,.-...-...w.__.-..- ...
460.556 rimuc rrir.rrms 460.553 same: discretionary power.,: annuai report of utilities: i audit, expense Sec G. The comminion shall have poner in its discretion to order $'u$t electric current for distribution to be delivered at a suitable primary Frand-uevie ^ voltage, to m.y city, village or town. ship tbrough w hich a transmission line or lines may pass;- to order service to be renderett by :my sitch electric utility in any case in u hich it uill be reasonable for such ser- ,' i,, vice to be ordered; prescribe uniform metituds of keeping accounts to in a be observed by all persons, firms _or corporations engagert in such intsi- Michn ness of transmitting and supplying cicetricity, antl to keep informed d"' ' 'h[ '
.as to-the methrnis employed by all ciectric utilities in the tr:menelion fir t.
of their business; and to .6 e that their property is maintained mal op- the er crated for the security and accommodation of the publie and in com- "w *ont" . ' ph.ance with the provisions of law. 11 shall have power to require of coon, _;~ . such persons, firms or coiporations annually a vetilled report upon Mid j ('"" I such torm tut giving ruch information as will enable the commi<sion I" ' to better discharge the thttles imlosed upon it hereby; and shall also .
- have power to require from all electric utilities in 111e state .such in- $n.[
fonnation as the commission may need at any time in connection with he dJ the performance of the chilies imposed upon it by this act. Said com-I mission shalt al.co have power, in connection with an.s rate or service "I, hearing or investigation, to make such audit and analy; s of the books by ao and records of the utility, and such inventory and appraisal of its I" ".' property as may be necessary in connection with the duties imposed [$$ sEm ' upon the commission by this act; mia in any such case the commis- . h" # sion shall keep a record of all expenses incurred by it in connection v ith its investigation of the affairs and property of the said utility 2, p
~;
and dur,mg the progress or at the. conclusion of its work, shall state the .s j amount thereof in writing to the said utility and said utility sha'l pay I" C Into the treasury of the state the amount of such expense at.such times Y '
$4 he .
and in such manner as the commission may by order require. Said whim
. moneys when so paid into the state treasury shall go to the credit of the .T lichigan public utilitics commission, and are herchy appropriated 4E to the payment ofits expenses.
Illstoricat Note i Sourec: ort f P.A.1900, No.100, I G, Eff. Sept.1. P.A.1921, No. 274. Eff. Aug. IS. Shi -
C.L1015.1 4S 17. C. LID 29, ! !!099* h r.'
Michigan Administrative Codo htt ' oth For Rules and Regulations under numbered designation corresponding . to M.C.LA. Chapter 4G0, see Michi;an Administrative Code. DLI
.. . co-Law Review Commentaries I ,t. -t '- Commluton jurisdiction over utility Measures of land value for utility re.~,. pa t -
i cooperatives. Isr.ut Packel, 35 Mich. uLiion. Irston R. Darnes, 39 Ma h. eg" 8 LRev. 411 (1037). LRev. 37 (1910). I : SS . tr , 1
-in -~
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. ? '.N)? - Slich. . SS NORTII WESTERN REPORTER.11 SIRIES ,g ,g 3gg..h. E'ti "The facts rt<}uired to lac St.tted ia the (htlaratiam, like those f..und by a HURON POllTLAND CEMENT CO.'.itWlY, Plaintiff. Appellant, opreird u rdict, aic 4hduct d irvnt other facts, to be foamd from the testimony, v. .
and nmst be such as will enable the MICHIGAN PUDLIC SErtVICE COMMis.
' cour't to declarc the law in the case; so SiON, and Consumers Power Company, that it will be seen that the facts upon Defendants.Appellcas.
which ,the rights of the plaintiff are No. 43.
-I ' - made~ to depend are in a certain scuse ' conchnions, . but are neverthelevi the Suprenu Court M 3Hehkan, kind of facts requirt'd in pleading in 3tarch .1, hA stating the plaintitrs cause of action, while the othtrs are the testimony fur- . The Mich.igan Public Serv. ice Comm.is.
msh.mg the evn. lence of those fact.s and . . smn dem. e d petition of m . dustrial user for not proper to be g.iven m the dcciara- . . tion: *- * * , , direct c!cctric scruce from power company. The liower company appealed in the naturs. We think the allegations that the corpora. of certiorari. The Supreme Court, Smith, tions were so organized, controlled and J., held that where local power company managed that they were the mstrumentali. served city. and another power company, ties, agents and adjunets of each other and pursuant to cmtract approved by Michigan l were, in fact, one unit, coupled with the Public Servica Conunission, served a large
! averments of common ownership, director- industrial user in the area and in connection l ship, control, management and operation at therewith ran a transmission line to the i one location and that the licensed corpo- user's plant and the line did not pass through ration was uncollectible, while involving the city and the other power' company did -t expressions of legal conchnions, constitute, not profess to serve the area and had re-l st the same time, sunicient pleading of facts quested no certificate of put.lic convenience . to admit of offers of proofs of such agency, and necessity to the arca, the Commission .T. particularly when knowled; e of the ' facts had no authority under the statmes to order relating -thereto is peculiarly within the the other luwer company to furnish, from possession of defendants rather than plain. such transmission line, direct electric serv-tiiT. Such was the sense of what we said ice to another indu> trial user in the area.
in Spelman v. Addimn, 300 Mich. Mo, 2 N.W.2d 883, 88 8, in which we furthcr ob- Ordu afu.rined.
scrved that:
"In recent years, at least, this Court 1. Electricity C=1 t(4) has taken a liberal attitude' in passing In dttermining, nn certiorari, whviner upon >unicicney of pitaJings." Michigan Public Servise C..mminion, under The alh ?ations contained in plaintiff's dec. the circumstances, had tatutory authority laration entitic him to an opportunity to to order power company to give direct,elec-p prme his case against the defendants, tric service to indu-tri:d user, the ccen~mi:
Reversed, with costs of this a; teal to :stative concern and wom."! n..t be conm. L red pla.mt alt. by the Supreme Cimrt. Comp. Laws l'> tS and Comp. Laws Supp.1 Gi } +.u.1 tt aq.; SMITil, EDWARDS, KELLT, CARR, Comp. Law,1948, sg bel, -hd.?!& BLACK and VOELKER, JJ., concur.
2. Public Service Commissions C=G.2 KAVANAGil, J., took no part in this The Michig'an Pub:ie Service Commis-

lecision.' sion is an administrative L .dy creatsd by
v.- -- . - - ~ . y.q : a .. .~ - --- . . EURON PORTLAND CEM. CO. v. MIclueAN PUB. SEEV. C031'N. 31ieh. .W3 ! Che as 6 8 N.W.M 132 statute, and the warrsnt for the e istence ' ~ 6. Certlorarl C=c3 rf allits power and authority must be found On certiorari the Supreme Court wi!I in the statuis, and the Commission has no not pass upon controverted issues of fact. common law powers. Comp. Laws 1948 and , Complaws Supp.1956,-[ 460.1 et seq. , Snyder & Loomis, Lansing, for plaintiff *
3. P;hile Service Commissions Cm6.2 and appellant.
.The statute outlining the jurisdiction of - Thomas II. Kavanagh, Atty. Gen., Samu-th hiichigan Public Service Commission el J. Torina : Solicitor General, Lansing, furnishes no grant of specific ' powers. Robert A. Derengoski, John E. Tormey,
Comp. Laws Supp.1956, { 460.6. Asst. Attys. Gen., for appellee Public Serv-ice Commission.

4. Electricity call (4)
A. II. A>mond, Jr., H. P. Graves, Jack-In statute gevmg Stich.igan Public Serv- s n, for defendant and appellee Consumers ica Commission discretionaiy power to **' "* grder dcctric curtsnt for distribution to be John R. Watkins, East Tawas, Robert C.
. delivered at suitable primary voltage to any .
city, village or township through which a Winter, Wilhelmina Boersma, Detroit, of yr tran: mission line or lines may pass and to counsel, for Alpena Power Co., amicus iQ crder service to' bc rendered by any such curiae. eq
,M electric utility in any case in which it wiH be reasonable for such service to be ordered, Before the Entire Bench. 'j "such electric utility" means the utility wh:se transmis> ion lines pass through the SAIITH, Justice. ;,]
municipality involved. Comp. Laws 1948, si The problem presented concerns the fur- N , M 460.551 et seq., -h>0.536 nishing of cicctric senice to the appdhint. Sei p blientie.n Won 1s and I'h r:wca. .This is an appeal in the nature of certiorari d fir other judicial constructi. ns nod deG* from an ordcr of the Alichigan public strv. f af tions of *.hh 1:tect rie l'tility". - ice commission dated January 4,1957, **but $ only insofar as it denies in paragraph 4 of
5. Electrielty call (4) the order scetion thereof the petition of Where local power company served llnton Portlan 1 Cement Company for direct city and another power company, pursuant electric service from Consumers Power to contract a;mroved by 31ichigan Public Gimpany." Paragraph 4, above referred Service Commission, served a large indus- to, states as follows:
. trial user in the area and in comiection "1 The petition of linton Portland - theremth ran a trammirion line to the Csent Company rtynesting that this ' user's plant and the line did not pass thronxh G. ii 6G mim Pm r -
the city and 'the othtr power company did Ctmpany to render dirtet cicetric serv. not profe>> to >erve the area.an t had re- ice to it from its 1-loKV transmis ion quested no certiticate.of public convenience y; ,g g , dig 11idimn w . and neces<ity to the ar. . , the~ i. imm,us-ton - the 11. int of thi. Preupn l>te Corpora. ' had no anthority under the 36 uteg to md *r dm h M4- dmic.L" the other 1*>wir company. to turm>h, from such tran mission line, dh set i1. ctiie -ervice .It is the position of :he commioi..n. in to another in in trial user in the area. re>pect of such din al, that "the prosisium Complaws P.M and Punip.lc.w3 Sty p. of P.A.10, No. t.9, are controlling in ths 4 l L1956, j 46).1 et seq.; G.mp. Laws 1%:, s} . matter anil imder stetion 2 of = aid act it 40n.MI, 4%502 %A551 et seq., 400.556; is neeenary that Consumers Power Gim-Coiup.I.sws ..%pp.1956, { h>0.6.. pany obtain from this commission a ecrtifi-
[~ - ~;q "
~f _ ~ ^
4'l . 3Iieiv ff -
; i SS NOP,TII YlfbSTERN REPORTEE, 2d SEIMES ' ' ~ ._.
p g 4e.ite ihat pal.lic convenictice 'an 1 necessit e, _ will'rotnire the raidsring of this service.[ -
.see"L.(1)' . Dill the $lichigan Publi S ommi inn lac,.atatutory atu,aority
[ !! is the clai'a of apps!! ant,Mt the other . k4 . hatid, in its application for Icave to aplcal, to - ords r dircet th et rie >m ice from I_ that: Con umers Powcr Company to appel-
.. Iant - IInron Port!and Cun.:nt Com-O; "II. The13Iichigan Public Service' Panyj., - . Conunission ' erred in dstcrmining that A nd-- , - it dacked statutory anthurity to oriler . . "(2) h.as at necessarr that Con-Consumers P.mcr t.empany to serve -
O' 5"**" U"* C"mpany petiti n the Jdirectly from:its 'transmissinn line the p i.= . lluron Portland Coment Company un- - Alichigan Public Service Comm!'ssion der the fact, and circum >tances con-. . for the *~ rant.mg of a certiheate of con-sta m.ul m. the rtcord: venience and n<cenity to render dircce -
"(1) ally piving no c.in i.irration. to cicetric service to appell.mt before the
:the 1,owers vetal in it by the act cre* Commission eienld Jorder Cor>umers Power Cornpany to render direct Jee-ating the connui>> ion which is Act 3, trie service to appellant ?"
~Public Arts of IW (MSA s 22.141J, I '
1953 Cum.Supp.), which ;: rants to the Ye will confine our smumation d the
. Ofichigan l'ublic Service Conunioion facts to the inues thus prennted on .this b I broad di crttionary getrs to regulate appeal. Ity way of background, however, i
4 electric light and power comicinies; we si.ouM point out that the conunis.' ion l' .
"(2) Ily giving no consideration had hefore it 3 matters involving electrie
!' I service in and near Alpena. Alichigan. to the powers vested in it by the provi-sions of Act 106, Public Acts of P09 These matters were to some degree interre. J (MSA l 22.156) which is common!y lated and the commission hence issued a. single opinion and order thetcon. Huron referred to as the " Transmission Act"
j which provities in section 6 that the appealed, as above noted, from that part L
of the opinien and ordcr .vl.ich deni6d h3
.{ commission shall have powcr to order petition for direct electric service from '
service to be rendered from a trans-mission line in any case in which it Consnmers. re!/l be rca.coaHe for sucl. smice to The situation presented to the commission be ordered. was this: Appellant Ihtron Portland Cc-
. "C . The Stic!n.gan Pubh.c Service .
ment Company (IInron), a Alichigan corpo. Comnn.ssion erred m. determtmng that ration, engaged .m the business of manu-the provisions of Act 69, Pubh.c Acts - facturing and selling couent, conducted a portion of its oprations in the city of Al-L of 1929 (MSA { 22.141) were exclusive . i' ly controlh.ng m this case.,, pena. It was m. netd of.large additional- . i- amounts of c!cetric power. . The local elec- ! Upon the above record, in part, and upon tric power company is the Alpena Power the representation to us "that time was of Con pany (Alpena Power), a Miehipn cor-the essetyce in this case," we granted appli. poration with a service area compririn; the
- catir.n forleave to appeal. Appdiant' raises city of Alpena and certain nearby areas.1 2 questions and 2 only:
! 11nt Alpena Power was nc4 the'only'c!ce-
1. It aligwars from the np:+ndir of np;wl. Isy Con :amers contr.im.-! ta v!! adiiG. i.
! . tve. 5th4de m 1%'.lir S. nie* Conaui"o.n ~ al electricity L.> .U;-n.: l' owr. 'll.Is ( sul ' that ' of .t micus - (%5v, .Up.;na - amenthuent. tha cor e iui..n etnr.4 in its
' P.mer Cu c.t .myb Ot t *"cu o o r 4 sud 1.rief. "racas the tr.pnri em-nr .if it.. .wa.
h Alp. n a l' oar ' esrentnf. uni! .r it.ite of J umany 21,19.',T un asuen.hacnt to th<ir
~
suiolan oraler that .Utent l'orcer amuire !. a greater so!mne of ch etricity 1-fore
. sca rice contract of July 3 3.13.~,~,. where- ' I au:uratin; large inda<tiial >ervice."
's 6
^
m . e -a.e n . 9 >
+
s } :. exu ._
m U_" . .. %.e :.;.sab -= w. -s . ,-. 6 RURON POR,TLA.ND CEM. CO.v. MICIIIGAN PUE. SEP.V. COM'N . Mich. 105 Cite as 85 N.W.:J tH tric utility cdmp: y in the gcner'al area. *We are also mindful:of the in-Consumcrs Power Company :(Consumers) . terests of the Presque Isle Corpora-
' furnished large industrial Iower service ' - tion, which is a valued customer of <;;ithil AlpenA Power's service area to the Consumers Power Company, and which Presque hic Corporation- pursuant to a . paid for the cost of the construction contract thercic,r which had been approved of. the transmission _ line which en- .
by commission order. This order also ables Consumers Power Company to
granted Consumers. a certificate of con- . bring its c!cetric energy into this a venience and necessity to construct, main- area, tain, and opernte a 140KV transinission .
M "' '* *'E '#". ""
.line from Mio. Michigan to the plant of the entitled to refunds of such costs of Presque ble Corporation. Such trans- . . construct.mn on the bas.is of revenues muscu h. ne dou not enter or pass through which we may derive from des to . the city cf Alpina.
customers served from that h.ue. We IIuran wi>hed to purchase its power re. therefore Ltlieve that it would he in-guirements directly from Consumers. Ac. appropriate for us to take any action cordingly it petitioned the commission to which would tend to reduce the re-funds which the Presque Isle Corpore- , & t
crder Consunars to supply the service.
This the comm!>sion, by order dated Jan. tion might otherwisc receive. :M. uary 4,14.:7, refused to do. Other neces- "Now, on the other hand, the Al-sary facts will appear in our discussion of pena Power Company is presently I]-
- the issues of law presented. rendering service in the area in which $,r The appellant asserts (which the commis-these industries are located. Alpena . a Power Company also is a valued cus- 5-sion denies) that the eummission has' author-tomer of ours, or soon will be. More- N ,
ity to order Con omers to render this serv-ice. The quotion posed is a broad one, over, the Alpena 1lower C.unpany was ] of great assistance to Consumers Pow- j l oing to the very roots of private enter. 5. er Ccmpany in the acquisition of the prise. Thi> is not a case where a utility, already scrticing a city, arbitrarily refuses - "#C'"a ry ridts-of-way for the c @ to take on a utw (or expanded) Lurden, for transmissi<m lines by which we bring Consumers has never supplied cicetricity our p wer suppfy into this area. In e to either the city of Alptna ur the Alpena fact, the Alpena Power Cmup my ae-area generally. Furthermore, it has stated tually gave us rights-of-way across without ambiguity that it doo not profess their property. Ctrtainly it wonhl be to r;crvice the Alpena area. No othtr con. inappropriate ' for us to atttinpt to 8TC ""Y C"d"'nt r in their service clusion can I e reached from that gurtion of the record which purports to state the area without their constnt." - position of Con >umcts Power Com;.any in th.is matter: [1] 'I.hus t.onsumers ducs not offtr the Strvice rtyma t ed, does not pr+eh v to "Now. if the commis-ion please, serve the area, has no lower lines into ' these li ait cations place Con 3nme rs the city in which Ilur..n i< h catal, m.d Power C..mpany in a ddcub p..yili..n.- hu riquc tal no ecrti6cate of public cou. . becau>e if - thvsc . industrics were lo- vodence and necewity to the :m a in whi6 h cated in our >crvice ' area, we wo d.1 Iluron is h, cati l. Ilence tho<e cam in-volving an un tert.d.ing of <crvice to an
~
be plea-cd to >cive. thr+ en-t..mers_ with their requirements for. ricetrie - area, partien!arly where a statu:c imp.mcrs envrgy. Ke will appriciate 'their de- the comminiim to order reamnal!e (x-site for ricetric. servici on the most tensions of the mains and service (c. g., , odvantageons terms to ,them. People of State of New Ymkex rrl. r
= _ . - - . - - - - - - - -- w - m ._
.$ij 3tich. ~ E3 NOP,TII Y,T.STEnn Mr0RTER, 2d SERIES Woodhaven Gas 1.ight Company v. Public tion 6 of Act No. 3 of the Public Acts of Service Commi>sion,269 U.S. 2 84,46 S.Ct. 1939 (C.LS.19~6, I W.0.6 [Fnt. Ann.1955 -
M, 70 List. 255), are not controlling on Cum.Supp. I 22.13(6)]), which thus de-the jaue twfore us. If, un ter the cir. ' scribes the statutory jurisdiction of the cumstances related as to the position and ' commission:
dedication of Consumers, the commission ..Sec. 6. The Alichigan public serv-
* . . is cmpowered to ordtr such service to be ice commission is hereby vested with 4 ,. . rendered to IIuron, it.will require legisla- complete power and jurisdiction to .' tive mandate in the c!carest gues sible terms. regulate all publie utilities in the state Finding such, a constitutional <ptrstion of execpt any municipality owned utility g serious import would next .be presented? and except as otherwise restricted by It is pertinent to observe, al<o, with respect 1.w. It is henley vested with power to the legi lation undcr eonnieration, that and juritliction to regulate all rates, its economic wisdom, or lack thcreof, is fa res, fees, charges, services, rules, not our concern. We do not weigh the conditions of service and all other rtlative merits of Alptna Power's pos>ille matters pertaining to the formation, bss of revenue if this service cannot be operation, or direction of such public rendered by it, loss to stockhoklers, and utilities. It is further granted the
ultimate passing of the burden to the cus- pwer 'and jurisdiction to hear and tomers of Alpena Power, again7t the effect pass upon all matters pcrtaining to
, upon lluron s competitive position if the or necessary or incident to such regu-direct purchase from Consumers' can bc .lation of all pablic utilities, including made at a lower rate than cl<ew here.
c!cctric light and power companics, Those are matters of legislative concern. whether private, corporate, or coopera-
- We have had presented to us, upon tive, gas companies, telephone, tele-j certiorgri, an issue of law, the statutory graph, oil, gas, and pipeline companies, . authority of the conmission m the light motor carriers, and all public trans-of the facts before us to order the service, ] s and upon that, and that only, do we pro-portation and communication agencies other than railroads and railroad com-pose to pass. p nies. "The Michigan public ' service com-
[2] At the outset we will observe that the Afichigan public service commission mission shall have the same measure has no common law powers. As we stated of authority with respect to railroads in Sparta Foundry Co. v. Michigan Public and railroad companics as is granted Utilities Commission, 275 hiich. 562, 564, and conferred um!cr the various provi-267 N.W. 736 sions of the statutes creating the 31ichigan railroad commission and its "Tue Michigan putlic utilities com-
, shecessor, the Michigan public utilitics mission is an admuustrative body commission, and defining their powers created by statute and the warrant and duties."
for the exercise of all its power and authority must be found in statutory The broad language, however, furnishes cuaCluh uts." no grant of specific powers. It is an out-line of jurisdiction in the commission and [3] We turn, thcn, to the statutory en- does not purport to be mure. If,indeed, actinents. Appellant first cites to us tec- the ,,encral language quoted had the eficct
2. E. g., IInllywood Chamber of Cormn. , power to compel a strert raihray com- I

v. Railroad Co:unil+ ion. IN Cal. N , pany to exten.1 Its street car lines at 1 2t9 l'. tNL 038 Altit us 18th!.us 11: its own expense into a territory which I "Shher the Railrund Conunission nur any it does not and has never undertaken I other governmental agency possesmen the to serre?
1
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7 L , Mieh.- 497 IIonow roRTI.AND CEM. Co. v. MICHITAT. PUB. BERV. COM*N (*ne as 8s N.M".% 1,2 ' that neither ' the pleadings rior the' s cf vesting particular, specific, powers in briefs of counsci contained any claim the comrainion. not lonly .would a con-stitution:1 question be presented arising - that the immediate dicet cl.utse should be sustained ,because of the added
, from ' .in asserted lack of standards (42 -
powers given to the new Commission
Ara.Jur. p. 343; Sehtchter Poultry Cor-potation v. I*nited States, 295 U.S. 495, under section 6. We are justi6cd in assuming, I believe, that careful con- ,.
' 55 S.Ct. 837, 79 led.1570; ITarrigan & - sideration was given to the entire Act. Reid Company v. Burton, 224 Mich. 5M, 105 N.W. 60, 33 A.LR.142), but there both by the Court and by counsel,
- w;uld have been no need whatever for and the conclusion reached that sec. '
the many statutes enacted (both before tion 6 could not be construed as vest-ing the Public Service Commission and after t'he etTective date of Act. No. 3 with the broad powers now claimed to P.A,.193')) resting specific powers in the . have been granted by said scetion. commission.3 It may be notdd in passing that Justice
- Bushnell in his opinion used the fol-We agree, on this aspect of the case, with the analysis of Mr. Justice Carr in lowing significant language: ' ' -
his opinion (when sitting on the circuit "'The intent and purpose of the .y: court for the Cutmty of Ingham) in the new Act are the same as the old. case of Michigan Ikil Telephone Co. v. The new Commission exercises pre- . l, Public Service Comminion,315 31ich. 533, - cisclf the same powers as the old.' 24 N.W.2d 200, wherein he held: :6 "IInd scetion 6 been ignored on the "In reaching the conclusion that it S. theory that it was mvalid, some indi-
, had the requisite powcr to require a - ~~l refund to plainti(I's subscribers, the cation to that effect would doubtless -'
have been made by Court or counsel. defendant Cnmmission expressly relied The ' conclusion would therefore seem k'
.'s on section 6 of Act 3 of the PuMic to be justi6cd that at the time of the fd dets of 1030, and stated that the con-stitutionality of said scction was as- passage of the Act of 1939 and its N consideration by the Court in Todd -sumed. Said stature, which was given
v. IInt! it was not generally considersd immediate ( ffect by the legislature, abo'i>hed the Michigan Public Utilities that scetion 6 was to ',e given any such interpretation as is now claimed Commission and created the defend- for it. Rather, it was apparently the ant for the purpose of taking over accepted vicw that said section, stad -
the pout rs and duties that had been vested f>y law in the former Commis- in connection with the rest of the act and with prior >tatutes pertaining to - sion and in the Michigan Railroad Comminion. The validity of the im- the regulation of publi,e utilitics wa inttnded as afdrmance of the intent mediate a:Icet cl.mse was I.efare the Supremc Court of the State in Todd of the let:ietatnre to sub titute the new Commi% ion for the obi, to give it
v. Ilull, 2M 31ich. 321, 2:6 N.W. A Considcration was given to the chancs . the same powers at:d duties, and to made by the Act in the s xi ting law. Inake the i xcrcise of sneh tvmcrs and duties >nhjeet to the >arne limitations in none s, the 3 op;nions idcd was as hatl bo n picsi. e ly i 4aldi hu!.
any rcis rttw made to s.ction 6. It The fact that the b gi.latute in tscaion
~ may be of some >i,.:nideance, alw,
3. E. c.. t ratrndni.in i.f do a .iri:y Lr..aah yod - civN:: i "i eM I..n p .nir (i, n p.
"to t opd re 1:iJ w ay ne i. I'.A.1:W. .ht No. I'% 8 % p!kuion for rate incie" l t]t.* P ophr:a n. to gis e intelt tu Lice a.: it - I 3 91%.' $ ' It'r G*el . t maeq Stat.A n n, f 1*L'.-
l'.A.1!s'C. .ht No. 17:1, decins r etunah!r and nerecaty under 1.*.I si >. .g. t , n'nending nct to regulate tekt.houe cotu. the circusa30ince . 1 6SNAV.ht 4%
~
a l
c- . s- .- ~.~.--a.c - _ . _ , . _ wa- . . . , . . . , _ , . , ,. .x; L 4
.. 1
[ 4 L* , : . . . d'M 3fich. 88 NOP.TH WESTERN REPORTER, 2d SERIES
- 6 did not incorporate 'ny basic rules, grant to the comminion is not unlimited, principles, cr staternents of policy to but restricted. ' It is gis en statutory pows;r -
he observed by the. Commission may to order cicetrie current (for distribution)
. perhaps be regarded as indicating such to any community "thron;;h which a trans-intent merely." mission line or lines may pass." The por- ,, tion of the statute stressed by appellant,
p. [4] Appe!! ant relics, also, . upon the - in fact. refers to the rendition of service
.: provisions of the tran< mission act,' P.A; by any *>uch" 5 utihty innd it is clear that i
1909, No.106 '(C.I 1988,1 M.551 (t scq. tbc utility referred to is the utility whose [ Stat'. Ann.-. } 22.151 it wl.D. scetion 6 tran minion lines pass through the munic-
~+
of which provides as follows': ipality involved. This is not the case be.
. fore - us. Consumers' lines do not pass . - ".The comnu.s mn shall .have power . . A. rough the city-(Alpena) m. wlu.c h IInron in its discretion to order electrie cur-secks the ssrvice to be rem!ered.
rent for distribut.mn to be delivered at a >uitab!c prim:;ry voltage, to any city, Ecfore scetion 6 may be invoked the vdlage or township throtygh which a statutory retiuiremen* of passage of the
, transnnssion -line or imes may pass; lines through the municipality must be ~
to order scrrice la be rendcred by any satisfied.
.t.sch ciectric mility in any casc in tchic' it will be reawnabic for such '
[5,6] It is the further assertion of f scrcice to be ordercd; prescribe uni-form metho.:s of keeping accounts to appellant that it was unnecessary that Con- [ . g be observed by all persons, firms or sumqs petiti n the commission for the
, corporations engaged in such business granting or a certificate of public con-of transmitting and supplying c!cetric. **ngnce and necenity before the com '"*" C uld properly order Con 3nmers to
( ! ity, and to keep informed as to the
methods employed bv all electric util- ren er dr.uct service to Humni The stat-h, ities in the transaction of their Imsi- uw inmived is section 2 of P.A.193, No.
?- ness; and to see that their property 69 (C.l.19Ri, f k.0.302 [ Stat. Ann. s is ' maintained and operated for the , reading as follows:
security and accommodation of the "No public utility shall hereafter Le-pul;lic and in comp;iance with the pro- gin the construction or optration of
j. vmons of law. * * *" (Emphasis .
any public utility plant or sy>ttm there-supphed.) of m>r sha!! it render any ssrvice for With reference to the above statute the purpose of transacting or carrying Ituron I aces d particular emphasis upon the f" .a I cal business either directly, or word "reasonalde," arguing, that "The in treedy, by mdug an) en utHity language of this statuts could not be clear- r apucy so engasd ,ni such Iceal er or more extlicit as la the jurisdiction businen, in any munie!pality in this . an,! amhority of the comminion to onter st k u bere any other utility or agency slJetrie service fro:n an existing cl etrie is then cugaud in such L ca! business
- uti!ity in any ca<e in w:iich it is reason die and rendning th6 snme -on of mia, , for the comminion to order service." gr where sueh municipality is receit.
(Italie., in the ori,:inal.) '"% f"#2 O f th J ' ' ' '"il. U ';il Meh public utility shall fir.t stain inaa the Such a con truction, however, does vio- commissi6n a certifcate that puMic lence to the rtmainder of the tection. The convenience and n <cnity ruluirca or
4. ' .5% analysis of word "such" in City o'f Traverse City v. Towsnhlp of I!! air,100 3tich'
- 313,321, ITJ N.W. 81.
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1 i
- HURON PORTLAND CEM. CO. v. MICHIGAN PUD. SDEV. COM'N , Mich. 499 Ctte as 45 N.W.:d aM cill require such construction, opera- sity may enable the commission to .
4 prevent the ucedicss multiplication of [ "'on,' service, or extension." companics serving the same territory,
t The reason for certificat. ion was c!carly .
1 and at the satne time to avoid a waste-
stated m. Panhandte h. . astern Pipe L.me Co. . .
ful . duph.eatmn of capital fac.dit.ics,
= v. Pubh.c Serv. ice Comm.ission, thus keep.mg the . investment at the low--
- 530, -14 N.%. 21 24,rmed
. .00, 341afn.
U. ' 323 est figureMich. consonant with satisfactor~v
. 329,.1 S.L.t. m, 95 L.Ed. 993, m. the service. 'lly pr.otectmg the utility from .
following terms: . unnecessary competition, the rn. ks m.-
"Obvioudy. Panhandle seeks to skim ' herent 'in utility. investments are re-duced and the cost of capital is therc-the ertam off the bical market for nat.
ural gas in the m*mielpality where the by kept as low as the conditions of the intervening defendant now provides investr.. cut market permit." such services. by silling gas to Ford Motor Company an' other industrial - Appellant, however, urges that the stat. users, without regard to the public ute applies emly where a utility sccks. to convenience and necessity for natural render a new service and that it has na gas by other u3 cts in the Detroit area, application hete since the commission (it ff
'particularly for domestic use. If Pan- asserts) has the statutory authority to order fG
handic is frte to compcte at will for the rendition of the service. This latter ,....
tj such local markits, and ta'ke the cream argument we have heretofore examined anil
.- of the businen any other utility pro. re.iccted. The statutory prcrcquisitcs for 7-l 51 viding the same service in the'same the ordering of such service not obtaining,
! arca mi;:ht be forced'to of tain higher it follows that in their absence the only .] rates for la .trvicess when it mu,t incans by which Con <umcrs may provide q
~
obtain its natural gas from' Panhandic, the service is by winntarily scrking and ., t md thus wouhl- face a di>tii.ct dis. obtaining a certific..it th it public ce,n. d i adiantage. The right to ' exclude such venience and necessity require the ren. competition, where the general public _ dering of the service. No such rent.c-t .', convenience and meenitin m rc.piite, has been unde _ and that didi ose, of the < has ban ditrgated by the Irgi !ature niat ter. It is clear that the or.fer of the c.nnmi6n mnit be sustainrd. Upon thee
~
to the Michigan puldie >ctrice commis-siott. It is within the powrt oithat coneht ioth there is no tu e d to p.iw upon
' cotu+.Ission. a fter a proper heatin,: :it.d addition.il is ut* nrtcd, includme the con.
l l' - upim a proper sh. ming of the i ..m : tit uti. .n.d ir..nehis, n. nir ment e t 'on3 t. l
' nnd the n. etnitio, to dt ti rmine v.'a th. [P W :m b s 29. n.ir v i!! we, t.por er Panhau.Pc. by '>tlhng natural v.u. c. rtiorari, p e.> upon controu rtt I ir u.
dirm to in.histri.t! u-. rs in Ih tr..it. of fact.
Wouhl l!nt4 ys (tr tb.* pr.M * (a t;t e d. e an.1 ibe t4 e. witis :. o f .. .. r- . : .w .6..! WA r Mdm1 ('n t- b.. p ?.
. gas in ti nt an a whe r. l'ach.wEr now cliitas the ab uinte si Lt to smin:. in such ' et : vice/* IiliT11M F R.-:. s '. J., and l- I >W A K i y,-
W- i M ' U "U K and D M 1.R, l' ' See, al-o, l'cottomies of .Publie . t ti.:ty
.Il > u r.
l lirgulation by iltston' R.' Itarm <. p. .? " C"'
' uherem at is sud

,
ae
9 .The ..'rsquirtment ' of a K.WANAGil, J., took no p.irt in thi+
certificate of . cote.o.nce an1.n. cts. - dreirion. l 4 p )a L 4-
.}}

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