ML17300A715

Forwards Response to Plains Electric Generation & Transmission Cooperative,Inc Comments on Antitrust Info, Request for Finding of Significant Change,For Antitrust Hearing & for Imposition of License Conditions

ML17300A715
Person / Time
Site:	Palo Verde
Issue date:	03/27/1987
From:	Gad R ARIZONA PUBLIC SERVICE CO. (FORMERLY ARIZONA NUCLEAR, ROPES & GRAY
To:	Funches J Office of Nuclear Reactor Regulation
References
CON-#287-3071 A, NUDOCS 8704030170
Download: ML17300A715 (32)

Text

REGULATOR NFORNATION DISTRIBUTION TEN (R IDB)ACCESSION NBR 8704030170 DOC.DATE: 87/03/27 NOTARIZED:

NO DOCKET 0 FACIL: BTN-50-530 Palo Verde Nuclear Stationi Unit 3i Arizona Pub'li 05000530 AUTH.NAME AUTHOR AFFILIATION QADi R.K.Arizona Nuclear Power Prospect (formerly Ari zona Public Serv QADi R.K.Ropes 5 Qrag RECIP.MANE RECIPIENT AFFILIATION Planning Zc Program Analysis StafF (post 851125)SUB JECT: Forward's response to Plains Electric Qeneration 5 Transmission Cooperativei Inc.comments on anti trust inf oi request for Finding of significant change.for antitrust.

hearing 5 f or imposition of license conditions.

DISTRIBUTION CODE: ZVV'iD COPIES RECEIVED: LTR (ENCL J.SIZE: TITL'E: Antitrust Inf ormation NOTES:Standardized plant.N.Davis>NRR:1Cg.05000530 RECIPIENT ID CODE/NAME PNR-B ADTB PNR-B PD7 PD COPIES-LTTR ENCL 0 0 RECIPIENT ID CODE/MANE PllR-B PD7 LA.'LIC ITRAi E COP IES LTTR ENCL 1 1 1 1 INTERNAL: OQC/AD EXTERNAL: LPDR NSIC NOTES: 3 3 1 1 1 1 NRC PDR 01 1 1 1 TOTAL NUMBER OF COPIEB REQUIRED: LT1R 12 ENCL 10 v<<~~g.fh<*l ,'h<",$'ill Vvv))g)o)h P~lh 1<<h W Jt VO V)1<r 11 Of<<v)Ql'gv<V of gf v i<,.1Iov (/ah lv h"~1)I,v<..<.."'V.I'~11 C<<I v)[V t)'o~<"0$kll,Vv.<<l f I l l VC"" S.I,",fi'K"v".h v, P'4 v vS.<<353~l Q'P V<<P<v<<,5p' 0 IN PROVIDCNCC 30 KENNEDY PLA2A PROVIDENCE R.l.02903 (40I)521-6400 TELECOPIER:

(40I)52I-09I0 TELEX NUMBER 9405I9 ROPGRALOR BSN TELEX NUMBER 95I973 ROPES GRAY BSN TCI.ECOPIERS:

(6I7)423-2377~(6I7)423-764I INTERNATIONAL:(617) 423 6905 IOOI TWCN'TY.SECOND STREET, N.W.WASHINGTON, D.C.20037 (202)429 1600 TCLECOPIER:(202) 429 I629 RapES 8 Gap,Y 8704030170 870327 PDR ADOCK 05000530 225 FRANKLIN STREET N PDR BOSTO N, M AS SAC H U S ETTS 02 I I 0 (6I7)423-6IOO IN WASHINGTON

'1 March 27, 1987 Mr.Jesse L.Funches, Director Planning and Program Analysis Staff Office of Nuclear Reactor Regulation U~S.Nuclear Regulatory Commission Washington, D.C.20555 Re: Arizona Public Service Company et al.Palo Verde Nuclear Generating Station, Unit 3 Docket No.50-530A

Dear Sir:

With reference to our earlier letter to you dated February 6, 1987, and to the"Reply" submitted by Plains to our responses transmitted thereby, we transmit herewith"Reply of El Paso Electric Company to'Reply of Plains Electric Generation and Transmission Cooperative, Inc., to Response of El Paso Electric Company to Comments of Plains Electric Generation and Transmission Cooperative, Inc., on Antitrust Information Request for Finding of Significant Change, Request for Antitrust Hearing and Request for Imposition of License Conditions'." ry uly yours, R.K~Gad I RKG/a j p Enclosure cc: Service List Secretary of the Commission Arthur C.Gehr, Esquire E F Cl 3/27/S7 REPLY OF EL PASO ELECTRIC COMPANY TO"REPLY OF PLAINS ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC.p TO RESPONSE OF EL PASO ELECTRIC COMPANY TO COMMENTS OF PLAINS ELECTRIC GENERATION AND TRANSMISSION COOPERATIVES INC.g ON ANTITRUST INFORMATION'BQUBST FOR FINDING OF SIGNIFICANT CHANGB, REQUEST FOR ANTITRUST HEARING AND REQUEST FOR IMPOSITION OF LICENSE CONDITIONS" R.K.Gad III Randall W.Bodner Ropes R Gray 225 Franklin Street Boston, Massachusetts 02110 George F.Bruder Bruder t Gentile 1350 New York Avenue, N.W.Washington, D.C.20005 Royal Furgeson, Jr.Kemp, Smith, Duncan 8c Hammond'.O.Drawer 2800 El Paso, Texas 79999 William W.Royer El Paso Electric Company Three Civic Center Plaza El Paso, Texas 79901 Attorneys for El Paso Electric Company Ik A.In its Repl+Plains makes a number of necessary but crucial admissions.

Plains admits the imperative that the New Mexico Power Pool transmission system be operated in a manner capable of withstanding the loss of the most critical transmission facility.Reply at 4.Plains admits that, given this imperative, the north-south transmission system cannot safely be operated above a level of 500-550 MW.Reply't 5.Plains admits that imports are presently at or near the 500-550 MW limit, such that no addi-tional imports are presently possible.Reply't 5.These necessary admissions are fatal to any claim-within or without the ambit of the Commission's antitrust jurisdiction

-premised upon the"essential facilities" or"bottleneck boycott" theory, as the entirety of Plains'omments is.The essential premise of this theory of liability is that the putative defendant has denied access to an excess facility: a facility or a capacity not needed by the putative defendant for its own business.~

Given~" Reply of Plains Electric Generation and Transmission Cooperative)

Inc., to Response of El Paso Electric Company to Comments of Plains Electric Generation and Transmission Cooperative, Inc., on Antitrust Informa-tion, Request for Finding of Significant Change, Request for Antitrust.Hearing and Request for Imposition of License Conditions," dated March 17, 1987.This document is hereinafter referred to simply as"Reply;""Com-ments" is used to refer to Plains'riginal Comments filed on November 28, 1986 and"Response" is used to refer to El Paso's Response filed on February 6,'987.~Hecht v.Pro-Football, Inc., 570 F.2d 982, 993 (D.C.Cir.1977), cert.denied, 436 U.S.956 (1978);Gamco, Inc.v.Providence Fruit and Produce Building, Inc., 194 F.2d 484, 487-88 5, n.3 (1st Cir.), cert.denied, 344 U.S.817 (1952).See also Seesen v.Professional Golfers'Ass'n, 358 F.2d 165 (9th Cir.), cert.denied, 385 U.S.846 (1966).One-notes that Plains'eply is singularly devoid of citation to author-ity on the substantive provisions of the antitrust laws upon which its Comments are premised.No cases are cited, and the only reference to agency precedent involves the scope of remedies once a violation has occurred.Reply'at 11'-13.Even that discussion is flawed, however, for Plains has overlooked the nexus distinction between the scope of a remedy 0

Plains'dmission that its thrust with respect to north-south importation is to oust El Paso from El Paso's own use of its own line-so that Plains may use that capacity for itself-its antitrust claims are fatally flawed and , cannot warrant a determination of"significant changes." B.Bereft of a cognizable antitrust claim, Plains continues to rely upon an asserted contractual right to oust El Paso from El Paso's use of its own line.Reply at-14-16.As before, Plains continues to rely upon an interpretation of Contract 1605 grounded in selective ellipsis and a curious unilateral interpretation of a manifestly bilateral disclaimer clause.Id.at 15.Compare Response at 23-27.Wholly unaddressed by Plains, however, is how an asserted contractual right supplies the foundation for an antitrust claim, particularly in a forum with distinctly limited antitrust jurisdiction.

See, e.g., Florida Power k Light Co.(St.Lucie Plant, Unit No.2), ALAB-665, 15 NRC 22 (1982).Nor, we respectfully submit, is it a matter of oversight that this essential point has been left unaddressed.

C.'Though Plains devotes the lion's share of its Reply to its asserted rights of power importation over its north-south transmission line, it has become difficult to tell from the Reply precisely what Plains continues to contend with respect to its line.At pages 6-7 Plains'bserves'.

"[t]he[550]MW limitation on imports to southern New Mexico does not, in itself, cause any'reliability curtailments'n north-south transmission.

Reliability curtailments occur only if utilities given a liability finding and the nexus between assertedly violative conduct and the activities for which a license is sought.Compare Florida Power k Light Co.(St.Lucie Plant, Unit No.2), ALAB-665, 15 NRC 22 (1982)(no nexus thus no remedies as to transmission system), with Alabama Power Co.(Joseph M.Farley Nuclear Plant, Units 1 and 2), ALAB-646, 13 NRC 1027, 1108-09 (1981)(nexus established between access to nuclear facility and access to associated transmission facilities'remedies as to latter permissible under the circumstances), aff'd on other grounds sub nom.Alabama Power Co.v.NRC, 692 F.2d 1362 (11th Cir., 1982), cert.denied, 104 S.Ct.72 (1983).

ik' attempt to transmit more than[550]MW.In that event, Public Service Company of New Mexico ("PNM"), as control agent for the NMPP, will undertake corrective action.But this inability to transmit more than[550]MW of power does not affect Plains'ase right to its 60 MW share-or any other utility's share-of the[550]MW available on the system.Those rights will be affected by curtailments undertaken by PNM." If Plains is now admitting an obligation to share in import curtailments when reliable system capacity has been reached, it has conceded all that El Paso contends is its obligation.

If, on the other hand, Plains contends that it alone among the utilities on the system is relieved of any obligation to share in curtailments, then the inequity of its position has been made more stark by its own description of the governing constraints.

The assertion that"[the]" inability[of the system]to transmit more than[550]MW does not affect Plains'ase right to its 60 MW share...of the[550]MW available on the system" is by itself a non sequitur.3 Nor is interpretation aided by Plains'urious failure to annex a copy of the February 27th"contracts" with PNM to which it refers on page 7.4 Plains asserts that the recent emergence of the competing claims of the 3The very nature of the unchallenged N-Minus-1 reliability criterion prevents participating utilities from utilizing the full physical capacities of~their respective transmission liqes.Otherwise the transmission system would not be able to accommodate the loss of the most crucial facility.As Plains itself admits (Reply at 2, 5 R 10), north-south transmissions in New Mexico are at or near the maximum reliability limit.Consequently, no additional imports are currently possible even though the gross physical capacity of the transmission system into southern New Mexico could accommodate more power.Accordingly, El Paso and the other utilities (besides Plains?)recognize the need to utilize their lines at less than full physical capacity in order to sustain the admittedly crucial N-Minus-I reliability.

4These"contracts," upon which Plains relies to neutralize the ap-pearance of"shirking its responsibilities or otherwise getting a free ride)" were apparently made three weeks after the filing of the Response to Plains'ommen ts.

'T 4'I 0 parties to use of the parallel lines demonstrates the existence of a"change." Reply at 8-9.This is so, it is argued, because the system import limitations have existed for some time, yet only recently has El Paso insisted that Plains stay in its own corner.What Plains has left out of the equation is that only recently have imports grown to the point where the limitation is controlling.

What has been demonstrated is not a,"recent change" but only that, for as long as tolerating Plains'se of El Paso's line did not result in precluding El Paso from capacity on its own line needed by it for its own purposes, El Paso was willing to tolerate such use.This establishes rather conclusively that El Paso's present motives are not based upon exclusion of'a competitor but rather only on the need to employ its own capacity for itself.Compare Reply at 1-2.IIL The most telling aspect of Plains'reatment of the requirement of nexus between the putative antitrust situation and the activities to be licensed is what Plains does not say.Plains makes no attempt to address or distinguish Florida Power k Light Co.(St.Lucie Plant, Unit No.2), ALAB-665, 15 NRC 22 (1982), a case which is directly on point and upon which El Paso relies heavily in its Response.ALAB-665 is neither addressed nor mentioned because the decision is simply not distinguishable from this case.See El Paso's Response at 3-4 and 16-22.Furthermore, the only case cited by Plains, Kansas Gas k Electric Co.(Wolf Creek Generating Station, Unit No.1), ALAB-279, 1 NRC 559 (1975)', is quoted out of context and does not support Plains'ontention of nexus.In fact, as El Paso noted in its Response, ALAB-279 and a subsequent and related decision, Kansas Gas 8'c Electric Co.(Wolf Creek Generating

Station, Cl Unit No.1), ALAB-299, 2 NRC 740 (1975), far from supporting Plains, actually reveal by their analysis the lack of nexus in the instant case.See Response at 19-21.5 Insofar as its claims are based upon access to any excess capacity that may be available in the proposed Springerville-Luna 345 kV transmission line 5Plains'wn description of the situation of which it complains confirms the patent absence of the required nexus.As Plains concedes: "the underlying dispute between El Paso and Plains is caused by a transmission shortage from northern to southern New Mexico.Simply put, utilities wish to transport more than[550]MW to southern New Mexico, but are prevented from doing so by the[N-Minus-1]operating limitations on the system." Reply at 10.This underlying dispute does not'involve access to PVNGS-3, as the cases require, but rather involves (1)access to El Paso's already fully utilized transmission system, (2)an equitable distribution of limited system-wide transmission capacity, and (3)the proper interpretation of Contract 1605.Whatever forum ultimately decid'es these issues, it is clear that they do not belong before the NRC.Furthermore, the very argument that Plains uses to attempt to establish nexus reveals an unavoidable and terminal inconsistency in its overall case.The argument Plains makes to establish nexus directly contradicts the argument it must make later in the antitrust context.In arguing for nexus, Plains asserts that bringing PVNGS-3 on line.would further tax what Plains concedes is an already overtaxed transmission system, which is currently operating at the maximum reliability limit.See Reply'at 10.Even assuming that such an indirect connection meets the nexus requirement (and ALAB-665 is to the contrary), Plains'ssertion forecloses any case on the merits, for Plains is not able to claim without contradicting itself that there is transmission capacity in excess of El Paso's own legitimate needs (to which excess Plains might assert a right of access).As noted above (with authorities), it is fundamental to the antitrust doctrine of"essential facilities," upon which doctrine Plains bases its case, that the owner of the alleged essential facility is not required to curtail his own use in order to make the facility available to others.This tension is dispositive

-Plains must fail either on the nexus issue or on the antitrust merits.Consistency precludes Plains from prevailing on both.

under construction6 by El Paso, Plains relies upon something of a shell game.The additional line will have two different effects once it becomes available.

First, it will provide added importation capacity in and of itself.Second, with the addition of the line on the system, the aggregate system importa-tion limits consistent with reliability constraints will be increased, thus freeing up capacity presently existing but not usable on existing lines.The assertion of inconsistency between El Paso's uncertainty about the prospec-tive existence of excess capacity on Sprin gerville-Luna and the prospective enhancement of system capacityavailable to ease Plains'resent limitations over its own north-south line is fallacious.

To meet its burden of a substantial demonstration of even a prima facie antitrust case in respect of Springerville-Luna, Plains must demonstrate.

that there is capacity in the line, that the capacity is not needed for El Paso's own use, and that El Paso has denied access to this excess capacity.Plains has not and cannot carry this burden.In the first instance, Springerville-Luna is not presently in existence and therefore it provides capacity to no one.~Second, Plains has not even attempted to demonstrate that there is (or will be)excess capacity in Springerville-Luna 8 Third, Plains has not~~The line is not under physical construction at this time', as was pointed out in El Paso's Response,'the line is subject to regulatory ap-provals.Plains has the capacity to aide in the obtaining of those regulatory approvals but to date has made no effort to do so.~Note that any assertion by Plains to the effect that El Paso is presently obligated to provide or to commit to provide Plains with capacity in the future line is tantamount to the assertion of a duty on El Paso's part to build the line at all.This.assertion, mercifully allowed to remain only implicit, bears no rational connection to the antitrust doctrines upon which Plains professes reliance.8Excess means, at the minimum, over and above the capacity needed to permit importation of El Paso's owned, remote generation (PVNGS-1 and-2 and Four Corners 1 and 2, plus, when on line, PVNGS-3).In addition,

,~I II II even attempted to demonstrate a refusal of access to excess capacity 9 Invocation of any NRC antitrust jurisdiction at this stage, of the PVNGS-3 facility is dependent upon Plains carrying a substantial burden.The burden has not been carried and the jurisdiction may not be invoked.To El Paso's letter to Public Service Company of New Mexico of January 28, 1987,'Plains attaches the colorful sobriquet of"late blooming." The letter in question, of course, was merely the most recent manifestation of the historical willingness of El Paso to engage in coordinated planning with other electric utilities that the Staff has previou'sly recognized.

Arizona Public Service Co.et al., 48 Fed.Reg.6,060{1983).Plains'hetoric because of the availability of"economy interchange" energy the importation of which saves the El Paso ratepayers substantial amounts of money, excess must also mean over and above the capacity that could be utilized (taking into account the availability of"economy interchange" energy and the amount of load on the El Paso system)to capture these economies for the benefit of the El Paso ratepayers.

9Plains'ague references to"statements made by El Paso management personnel," Reply at 2, are inadequate.

In the first place, such vague allegations, wholly unsupported, fail to carry the burden imposed upon one seeking a determination of"significant changes;" this is particularly so given the Staff's prior findings regarding the exemplary record of El Paso Electric Company concerning cooperation with other utilities.

Arizona Public Service Co.et al., 48 Fed.Reg, 6,060{1983){"El Paso[has]continued to offer and~provide to small utilities wholesale power service, wheeling service and various other coordinated services on a scale comparable to, and perhaps even larger than, that undertaken prior to the construction permit stage.").Second, Plains'pparent doubts about the reliability of representations made by El Paso through counsel seem to overlook Commission precedent on the obligations of counsel appearing before the Commission and its boards, of which, we assure the Staff, we remain cognizant.

See Vermont Yanlree Nuclear Power Corp.(Vermont Yankee Nuclear Power Station), ALAB-138, 6 AEC 520, 533{1973).Third, even as described by Plains, the asserted"statements" go only to predictions about the availability of excess capacity o'n Springerville-Luna, not to whether El Paso would make excess capacity (if any)available to other utilities.

El Paso has never taken the position that it would horde available capacity in order to deny it to other utilities, competitors or not.

~~~l'k 41 displays more flair than substance."Late blooming" or not, however, the overture by El Paso seems to be bearing flower, as is demonstrated by the attached letters from PNM dated'ebruary 19, 1987, and from Plains dated February 17, 1987.Putting aside Plains'wn rather unflattering desire to cut.other utilities out of the process, the planning process has been demonstrated to be functioning no less well than the Staff previously determined it to function.Conclusion For the foregoing reasons together with those set forth in the El Paso Response, the Staff should determine that no significant changes in El Paso's activities or proposed activities have occurred and that no operating license antitrust review is advisable.

Respec f ly itted, R.K.Gad II Randall W.Bodner Ropes 8c Gray 225 Franklin Street Boston, Massachusetts 02110 George F.Bruder Bruder k Gentile 1350 New York Avenue, N.W.Washington, D.C.20005 Royal Furgeson, Jr.Kemp, Smith, Duncan 8c Hammond P.O.Drawer 2800 El Paso, Texas 79999 William W.Royer El Paso Electric Company Three Civic Center Plaza El Paso, Texas 79901 Attorneys for El Paso Electric Company o ik~I Certificate of Service I, Robert K.Gad III, being one of the attorneys for El Paso Electric Company, do hereby certify that on this 27th day of March, 1987, I served the within"Reply of El Paso Electric Company to'Reply of Plains Electric Generation and Transmission Cooperative, Inc., To Response of El Paso Electric Company to Comments of Plains Electric Generation and Transmis-sion Cooperative, Inc., On A'ntitrust Information, Request for Finding of Significant Change, Request for Antitrust'Hearing and Request for Imposition of License Conditions'" by mailing copies thereof, first class.mail, postage prepaid, as follows.'rederick L.Miller, Jr., Esquire Duncan, Weinberg 8c Miller, P.C.1615 M Street, N.W., Suite 800 Washington, D.C.20036 Benjamin H.Vogler, Esquire U.S.N.R.C.

Washington, D.C.20555 Janet R.Urban,'Esquire U.S.D.O.J.

555 4th Street, N.W.Room 9816 Washington, D.C.20001 R.K.Gag III 41 II TNP FT.IOI'LANS ELECTRIC QKHKRATlON CUPID TRANPCSSION COOPKRATfVE.)N{.', February 17~1987 Albuquerque Heodquattcro 2401 haec Road, NE P.O.box 4%1 AJbuqverque, Hew HerJeo 47197 Phot'505)Sf}4 1451 EacaMI Oenaatlns Stance N3, Sod 077 PnwK New Medco 47NO Plxee<5%)476 2271~tN',$LcB'i FEB RO IQS?&.Allan 8, Oavii>Chairman Planning Enyineeriny Cancait~Hex Naxico'acer Pool~as-New Mexico Power Caapeny 4188 International plaza Fart cnorth, Texas 76189'He aze in zeceipt of the cepy of tpE's, J p~MIlonsy I hotter 00 pot)of 1/28/87,.8e are encouraged to see that EPg ie Iuggesting that thI ALP pro]act be studied by all of the~Hexico Utilities which will ba affected by thi currently proposed project, an5 EPR's suggestion that this study encmpais all other ma)or 345 kV pro)sets in New Mexico, i.e., (LE.This approach is consistent with the proposal that Plains made to EPE in August of 1986.awhile wa feel%at a)oint study by the~Nexico Power Pool (NNpp)ie appropriate, we question the need to include others outsida the%PP.lt is our suggestion that the tRPP do the work in order to determine what is best for those of us operating in New Yaxico, Canpleting thisi it would than be possible for those organizations obtain benefits from the new facilities to Ihare in the cost of said facilities.

This is consistent with tha philosophy that we have stated which ia to ensure that what is being built ia abaolutaly necessary and obtains the maximxn amount of benefit for all parti+a affectid.With this shared benefit and cost responsibilities, those organizations obtaining benefits fran the pro)ect and who have shared in the coat could then Nake whatever other contractual arrangements with other HAPP me4ers or no~embers which may be appropriate using the rights that they have obtained.He are concerned that the mors participants we have in this study, the longer the study will take to resolve all the critical issues.This ia obvious when different load demographics which must be considered.

8ince t li th t h of us-has different criteria<different standards and is claarl'md b ll th NHPP members that the import capability of Nae Noxico ed, in particular, southern Hew Hexico, are currently operating near thei,r n il.0 II Nr, M.lan 8, oavie Pebruary 17'987 Faye 2 isit 0 g it is important that we concentrate ae quickly a9 poeeible on the resolution of gtv Nexico probl ms.Therefore, we should take~taver aation is needed to expeditiously solve our.probZems and wo feel that the addition of non-NNpp me~hors vill not cOntribute Co the reaolution of Hew Mexico probleas a<<they will not have the arne nee5s and time oonatrainta as~members.Heesver>it is important to conlider the effecte on our neighboring sy<<trna.Therefore<

we would suggest that input be solicited fran.any systems that are not Sombers oC 8%PlNeo have'nterest during the course of the study and a13.M ,tham to oaneent on tha draft report.we feel the study shouid be developed by HAPP aeraberN.plains has been in the pait, and will continue to ba, ready to<<tudy th<<need for system improvenents and~n a need ii identified<

ve are needy to inve<<t in those pro)ects as long as we receive equitable rights in the pro)oct or its surrounding system ccameneurate with that investment This is a position that we have stated on a number of occasions to the various utilities that we work with>Therefore, we w9lcone a meeting which has been reeamended by Nr.baloney to be scheduled scmetime in February in El Paso.We do feel that prior to this meeting some resolution should be made with resgec o nvi non-NNPP members foi participation in this study.If you need any eddit onal information or w'ish to discuss this matter in mre detail<please do not hesitate to call.Sincerely, R.T.Dyer Director'porate Services FH)<Hev>326 cc: QPP Executive Gcamittee Rfpp Planning Gmnittee I II CbVi-i P LIE LIC SERVICE COMPANY OF NEW MEXICO ALVARADO SOUARE ALBUOULROVE.

hlCW REX(CO 871.'8 February 19, 1987 Hr.Jim Haloney Vice President El Paso Electric Company Post Office Box 982 El Paso, TX 79960

Dear aloney.'ubject:

Proposed Transmission Studies This is to acknowledge your letter of January 28, 1987 to Mr.Allan Davis, Chairman of the Nev MIcxico Power Pool (NMPP)Planning and Engi-neering Committee.

As I read it, your letter proposes: 1)to place the study of the Springerville-Luna-Rio Grande 345 kV line under the direction of NMPP;2)to include an assessment of the OLE Project in the study;3)to include Tucson Electric Power Company (TEP)as a par-ticipant in the study', and 4)to host a meeting of the NMPP Planning and Engineering Committee and TEP's rep esentative to discuss the ba-sis and scope of, the study.As I indicated to you earlier, PNM strongly supports making the study an interutility effort;ho~ever, we are concerned that belatedness in activating the.joint study not delay the study schedule, as the re-sults are urgently needed to avoid further delay" in meeting trans-mission needs in the State of Nev Mexico.As ve have previously discussed, ve feel the NMPP is an excellent forum for joint Ncv Mexico utility planning and operations activities.

Me also recognize that, at times, xt vsse c use u to ave other non"NMPP utilities contrib-ute to these studies.In this instance, ve agree that TEP should be invited to participate, though it remains a study under the control of NMPP.Vith regard to scope, the study should: 1)address the impact of thc Springerville"Luna-Rio Grande 345 kV line on the parties to the hHPP;2)incorporate the results of the current 1987 NMPP studies, which.vill identify measiIres for mitigating the impacts to NMPP parties caused by the line's delay beyond June 1, 1987;and 3)focus on opti-mizing the performance of the Nev Mexico transmission system on a total Nev Mexico transfer capability basis.To the extent the results are sensitive to OLE, the transfer capability impacts of OLE may also need to bc addrcsscd.

Toward this end, PNM vill provide thc ncccssary OL'E data'

~l Hr.Jim Haloney February 19, 1987 Lastly, PNH suggests that the proposed meeting bc held as quickly as possible to facilitate an expedited study schedule.Please let me knoM if you have any comments or questions on this ma;-ter.Sincerely yours,/i Sterba President, Revenue Hanagement RPK:krl cc.'r~Allan BE Davis, TNP Mr.Thomas A.DelaMder, TEP NHPP Executive Committee Hembers