ML20003C873

Discusses Municipal Electric Util Authority Petition for Extraordinary Relief,To Hasten ASLB Decision on Antitrust Review.Aslb Should Not Be Pressured to Reach Early Decision

ML20003C873
Person / Time
Site:	Farley
Issue date:	03/11/1981
From:	Balch S BALCH & BINGHAM (FORMERLY BALCH, BINGHAM, BAKER
To:	Bickwit L NRC OFFICE OF THE GENERAL COUNSEL (OGC)
References
81-0105, 81-105, ISSUANCES-A, NUDOCS 8103180606
Download: ML20003C873 (13)

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1717 H Street N. W. Washington, D. C. 20555 Re: Municipal Electric Utilit,- Association of Alabama v. The Nuclear Regulatory Commission, John F. Ahearc.e, Chairman, _ and Commissioners Victor Gilinsky, Peter Bradford, and Joseph Hendrie

                                     . Civil Action No. 81-0105

Dear Mr. Bickwit:

On behalf of Alabama Power Company (" Alabama Power") , holder of operating licenses for the Joseph M. Farley Nuclear Plant Units No. 1 and 2 ("Farley Plant"), I am i writing to advise you of the astonishment and concern of l Alabama Pe.eer upon learning that a petition for extraordin-ary relieti had been filed in the above-styled matter which relates directly to the Farley Plant. Petitioner, Municipal ! Electric Utility Authority.("MEDA") is seeking to hasten a decision from the Atomic Safety and Licensing Appeal Board l ("ALAB") of the Nuclear Regulatory Commission ("NRC" or l

                     " Commission") on the antitrust review conducted to determine the necessity of conditions to the license for the Farley l

Plant (Docket Nos. 50-348A, 50-364A). Uven though Alabama l Power will be affected by such a decision, and is necessarily concerned with the deliberations and decision-making process to% involved in this appeal, Alabama Power received no notice of } > g any kind from MEUA of its filing of this action. l Only in the last few weeks, and purely as a result of the courtesy of counsel for Alabama Electric Cooperative, f "'0318406 .. .

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BALCH, Bil 3HAli, BAKER, HAWTHORNE, WILLIAMS & WARD  ! March 11, 1981 Page Two Inc. ("AEC"), who likewise learned of the action only recently, did we discover that MEUA had petitioned in the federal judiciary for this extraordinary relief. It was not until March 2,1981 that we received a copy of the petition seeking a mandatory injunction " directing the prompt issu-ance" of a decision by the ALAB. It is our understanding that you, as general counsel for NRC, are charged with the duty of responding to this complaint. We are writing to make you aware of certain facts of which you might desire to be apprised as you de-velop the response NRC will file. The " Complaint for Mandatory Injunction.to Compel Agency Action" (" Complaint") was filed in the United States District Court for the District of Columbia on January 15, 1981 by the MEUA. Civ. Act. No. 81-0105. The Complaint names the NRC and its four commissioners as defendants. MEUA seeks a mandatory injunction against defendants " direct-ing the prompt issuance of a decision on the appeal from the Licensing Board's decisions" in conditioning Alabama Power licenses on the Farley Plant (Alabama Power comoany, 5 NRC 804 (1977)). See Complaint at 3-4. i As you are undoubtedly aware, the cited dockets are proceedings under section 105(c) of the Atomic Energy Act,

42 U.S.C. S 2135 (c) , to determine whether the grant of an unconditioned license to operate the Farley Plant, Units 1 and 2, would maintain a situation inconsistent with the antitrust laws. The history of the dockets may be briefly summarized ~as follows: ' October 10, 1969 - application by Alabama Power for construction permit for Unit 1. June 26, 1970 - similar application for Unit 2. August 16, 1971 - Department of Justice advises NRC that a hearing should be held to assess section 105(c) issues. j February 23, 1972 - MEUA petitions to intervene. l ' September 27, 1972 - Prehearing conference; atEUA perition to intervene granted. l

BALCH, BINGHAM, BAKER. HAWTHORNE, WILLIAMS & WARD March-11, 1981 Page Three December 4, 1972, December 11, 1972, March 20-21, 1973, September 24, 1973 - prehearing conferences before Atomic Safety and Licensing Board (" Board"). May 23, 1974 - Motion by Alabama Power to bifurcate proceeding into Phase I (liability) and Phase II (remedy) granted. December 4, 1974 - April 26, 1976 - Phase I (liability) evidentiary hearings. November 22, 1976 - briefing completed; Phase I oral argument held.

 ~               April 8, 1977 - Phase I decision (5 NRC 804).

Based on five. limited instances of a31eged anti-competitive conduct, the Board found that the grant of an unconditionad license for the Farley units would maintain a situation inconsistent with the antitrust laws. However, these findings were - limited to a second intervenor, AEC. With respect to MEUA, the Board's findings in Phase I were summarized by the Board as follows:

                        "Although we expressed this tentative view regarding relief, we determined no access to the Farley Plant was required in the case of Intervenor       '

Municipal Electric Utility Association of Alabama l (MEUA) or. its members, because of our finding on the basis of evidence of record that there was no significant actual or prospective competition between Applicant and these entities at'the retail distribution level, nor other conduct of Applicant

toward MEUA or its members which was inconsistent l ' with the antitrust laws within the meaning of Section 105c of the Atomic Energy Act. We concluded that if access to nuclear facilities were granted to MEUA in the face of our findings of no sig-nificant actual or prospective competition at ' the retail distribution level, and of no other anticompetitive conduct of applicant toward MEUA, such a ruling might be considered an unwarranted attempt to restructure the electric power industry at the retail level, rather than fulfilling the L

BALCH BINGHAM, BAKER, HAWTHORNE, WILLIAMS & WARD March =11, 1981 Page Four B statutory mandate of antitrust review under Section~105c." (5 NRC at 1484).y May 9, 1977 - Phase II (remedy) hearings commence. May 17, 1977 - Phase II hearings end. June 24, 1977 - Phase II decision issued. (5 NRC 1482) Conditions placed on license for Farley units. (5 NRC at 1506-09) i Appeals were thereafter taken to the ALAB by all parties. Briefing was completed on April 14, 1978. Oral argument before the ALAB was held on' March 8,_1979. The appeal is sub judice before the ALAB. As we view the Complaint, MEUA's principal contention 2

                  .is that the present 22 month delay in issuing a decision                         _

1. The Board noted in footnote 5 in this connection:

                            "MEUA attempted to participate in the second phase of                 .

this proceeding by seeking to offer evidence that MEUA

                             -and its members were prospective competitors of Alabama
                             . Power in the wholesale market, which we found was the relevant market for purposes of this intitrust review.

The Board ruled that MEUA could not participate in the second phase on grounds that our findings as to MEUA in the first phase were controlling and that the purpose of phase two was to fashion a remedy consistent with our findings in the first-phase. (Tr. 2 7,189 ) . " 5 NRC l at 1484. i 2. Paragraph 6 of the Complaint also_ erroneously suggests that MEUA was improperly excluded from Phase II hearings , because one of the five alleged anticompetitive' acts of Alabama Power concerned Alabama Power's wholesale

                           ' contracts with MEUA members. However, as the Board stated in its Phase II decision (supra), MEUA.was                       -

excluded becauselthe record revealed no actual or prospective competition between Alabama Power and MEUA

                            -thereby eliminating the need for remedial conditions in MEUA's favor.

6

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BALCM, BINGHAM, BAKER. H WTHORNE. WILLIAMS & WARD March 11, 1981 Page Five between oral argument and the filing of the Complaint is unreasonable because (1) 22 months is excessive " measured against the time reasonably necessary to dispose of this proceeding" 1(Complaint, 1 12); (2) MEUA and its members have , sustained damage by reason of the delay (Complaint, t 13); (3) the ALAB has decided two'other fully litigated antitrust hearings pursuant to Section 105 (c) which allegedly "have resolved issues of law relating to both liability and reme-dies which are common to the Farley proceeding" (Complaint, 1 10). First, when measured against the only two fully liti- ! gated proceedings to come before the ALAB, 22 months is not

   .        an excessive or unreasonable period of time for decision.

See The Toledo Edison Company, et al. (Davis-Besse Nuclear

Power Station, Units 1 and 2), 10 NRC 265 (1979) (hereinafter sometimes referred to as "CAPCO"); Consumers Power Co. (Mid-land Plant,-Units 1 and 2), 6 NRC 892 (1977). In both pro-ceedings, the elapsed period between oral argument before the -

ALAB.and the ALAB decision was at least 21 months. In CAPCO, l: the period'after~ oral argument was almost 24 months. Moreover, and significantly,=the record in this proceeding is dramatically [[ c larger than the record in either CAPCO or Consumers. y The~importance of the size of the record on the period l- .for decision can be demonstrated by reference to the " Study L of the Nuclear Regulatory Commission's Appellate System"

           ' (NUREG-0648) issued in January 1980 by the Office of the General Counsel of the NRC. The Study described the workload l

of the ALAB'for the period between November 1, 1977 and l November 1, 1978. Among other things, it was noted that the ALAB Panel published'64'" decisions" and " memoranda and orders."

           .Jul additional 100_ unpublished " memoranda and' orders" were also written._ The total number of appeals, petitions and                                              motions ll        ^ 33-34.
             .was 51 and over'95 different issues were addressed.                                             Id. at I-The~ Study continued:
                           "The aggregate length of the written records of the cases reviewed was phenomenal._ The records included a' total of 13,316 documents, 45 volumes
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4 BALCH, BINGHAM, BAKER, HAWTHdRNE, WILLIAMS & WARD March 11, 1981

,                 Page Six of interrogatories, 55 volumes of written testimony, 1939 exhibits and 164,309 pages of transcript. Under the current rules of practice in which the Appeal Boards can and do make findings of fact based on their own examination of the record (unlike appellate courts which do nc+, directly address the records themselves) the boards are responsible for taking proper account of every piece of.those massive records.
                                              "One particular aspect of the Appeal Panel's workload to date should be mentioned. To date, the I

Panel hasproceedings. antitrust issued two merits decicions on substantive Toledo Edison Co. (Davis-Besse Nuclear NRC Power Station, Units 1, 2 and 3) , ALAB-560, 10

  ~

(1979); Consumers Power Co. (Midland Plant Units 1 and 2), ALAE-452, 6 NRC 892 (1977). Members of f the Panel estimate that preparation of each opinion required over a full man-year from the Panel member - principally assigned to drafting the opinion, as well as requiring substantial time commitments from other Panel members who served on the Board, and from the Panel's counsel and law clerks. During that year the member who worked on the antitrust case had.little time to devote to other' matters before the Panel. Furthermore, it should be noted that these antitrust decisions do not.present technical or policy questions of the sort normally decided by the Commission and the Boards. Rather, they present only legal and, to a lesser extent, economic issues that would likely prove highly difficult for any person who lacks previous familiarity with antitrust law." (pd. at 34-35) . If the aggregate length of written records during the entire year being studied was deemed " phenomenal," then the record in The dented. the instant transcriproceeding-can only be termed unprece-pages which is appro::pt alone covers approximately 29,000 imately 18% of the transcript pages entire year being studied.opinions and memoranda during the reviewed in rendering 164

              .of transcript pages reviewed in either CAPCO or Consumers.

It'is several times the number Those decisions, of course, were 432 and 314 typewritten 2 pages.leng respectively.- Moreover, contrary to-the suggestion . of MEUA, l the ALAB must take proper account of all this record [ \

l - . _ , _ . . _ _ _ , , _ _ - - - _ _ - . . _ _ _ _ . , _ . , , , __ _. _ ._. __ _ _. .

4 BALCH. BINGHAM, BAKER, HAWTHORNE, WlLLIAMS & WARD March'll, 1981 Page Seven .

and cannet properly assume that the facts in either CAPCO or Consurars can be mechanically applied to the far different situation involved in the case at bar. Given the dramatic size of the instant record and .he Study's estimate that preparation of the CAPCO and Consumers opinions each required in excess of one full man-year, the period elapsed to date in preparation of the instant opinion is.neither " unreasonable" nor " unlawful," (Complaint, 5 12) but, if anything, is too short to properly dispose of this proceeding. This is particularly crue where one member of the three-member reviewing panel left the Commission soon after oral argument had been completed and a second member

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went on a "part-time intermittent basis" in August 1980. In addition, pursuant to Presidential-and Congressional direction over the past two years, the Commission and its personnel have had to devote substantial attention to the safety, environmental, enforcement and re-start issues and proceed-ings arising from the Three Mile Island accident. _ i l i Second, Paragraph 13 of the Complaint states that MEUA i and its members "have sustained substantial and irreparsble l damage" because ALAB has not issued a decision. While it is true that the Atomic Safety And Licensing Board's June 24, 1977 decision granted no relief to MEUA,("itBoard") l is not true that legally cognizable damages have been~ suffered. l Uncontroverted testimony in'the Farley antitrust review revealed that MEUA does.not have legal authority under Ala-bama law to engage in'the generation of. electricity, or ownership of generation-facilities with others. Nor do the members of.MEUA have'the authority;under state law to jointly own such facilities among themselves. Denial of ownership access to the Farley Plant could not, therefore, constitute damage, as alleged. In addition, MEUA has no status as a bulk. power sup-plier, being'only an association of individual municipal electric power distributors serving only their individual political constituencies. Contrary to the allegations in Paragraph 2 of the Complaint: ."The plaintiff is a corpora-tion organized and existing under the laws of the State of

' Alabama.", MEUA, as-the association permitted to intervene

BALCH, BINGHAM, BAKER, HAWTHORNE, WILLIAMS & WARD March -11, 1981 Page Eight in the Farley proceeding, is not a corporation under the laws of Alabama. Likewise, the individual municipalities, or their utility boards, engaged in the distribution of electricitj have suffered no damage in any case during the period since the issuance of the license for the Farley Plant. During this period, Alabama Power has continued to make wholesale power available to those municipalities desiring to manage ard contro] their own distribution facil-ities. Moreover, it has continued to transmit or " wheel" to individual municipalities low priced power marketed by the government-sponsored Southeastern Power Administration ("SEPA"), the only other power source identified by the municipalities as being available to them. These power supply arrangements are on terms which eliminate contractual provisions identified by the Board as anticompetitive. See Alabama Power Company II, 5 NRC 1482, 1501 (1977). MEUA and its individual municipalities have had ample opportunity to complain to regulatory agencies of any unfair - rates and terms or conditions in these wholesale power ' supply arrangements. As records of the Federal Energy Regulatory Commission (" FERC" ) reflect, there have been successive schedules filed by Alabama Power for regulatory approval. MEUA is a continuing intervenor in these proceed-ings and any objections.to provisions of these schedules have been resolved by the FERC. Alabama Power has offered to negotiate the sale of unit I nower from the Farley Plant to the municipalities which are j members of MEUA. As you may already know, the Board re-

quired that unit power sales be offered to AEC as a condi-tion to the Farley Plant license. Such a requirement is I embodied in the license terms issued by NRC. Alabama Power l made such an offer in a Memorandum of Principles for the i sale of unit power sent to AEC on October 27, 1977. While j not obligated to do so by the terms of the license condi-l tions issued for the Farley Plant, Alabama Power also in-formed the' municipalities which are members of MEUA that the s me offer for unit power sales would be available to them. Beyond simple requests for information, none of the munici-

pal distributors have pursued this matter during the period since the offer was made. l l l

          ,      ,      e  ,,,    , , -

Y i BALCH, SINGHAM, BAKER, HAWTHORNE, WILLIAMS & WARD ' March 11, 1991

,                           Page Nine Nothing in the chain of events occurring since the Board's decision suggests that Alabama Power would ne' in good faith engage in negotiating unit power sales and ancil-lary transmission arrangements for delivery of' power to the members of MEUA which are interested in acquiring a direct output'from the Farley-Plant.

Unit power sales from the Farley Plant have not been consummated to date with any of the municipalities or with AEC. Such failure has been solely a result of lack of interest on their part, not bad faith by Alabama Power. AEC last responded to Alabama Power's October 1977 Memorandum of Principles on-unit power sales on January 3, 1978. At that time, AEC indicated it had not had an opportunity to analyze the Memorandum sent the previous October. No further inte-rest has.been expressed by either AEC or the municipalities. 2 Alabama Power has continually manifested its willing-ness to' coordinate with smal?.er utilities seeking intercon-- nection and wheeling. As a matter of fact, Alabama Power has engaged in interconnection.and transmission services beyond what_the Board required with respect to AEC in the prescribed license conditions. Alabama Power ha's amended its Interconnection Agreement with AEC to rectify any un-fairness identified by the Board therein by making AEC's obligation'for maintenance of reserves equal to Alabama Power's obligation for reserves under the Intercompany e Interchange Contract among the four operating companies ' comprising the Southern Company Pool. The reserve sharing ' . arrangement negotiated with AEC offers.AEC even greater

                    ~

i benefits than'those required by_the license. condition ' because it requires.AEC' maintain reserves equal to Alabama Power's reserve obligation only so long as Alaba.9a' Power's reserves under the' Pool Intercompany Interchange Contract do ' not exceed twenty percent. The amended Agreement is on file with the Federal Energy Regulatory Commission ("FERC") for its approval (Docket No. ER-80-506). We would also' note that during the period since'the Board's decision, AEC has completed construction of.addi-tional generating capacity and-has reserves in excess of its needs.  : Because of such excess reserves, AEC approached e t

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t BALCH, BINGHAM, BAKER, HAWTHORNE, WILLIAMS & WARD March ~11, 1981 Page Ten Alabama Power seeking to utilize the Co=pany's transmission system for the sale of excess power to or through other utilities to which Alabama Power is interconnected. Pursuant to service Schedule I of the amended Interconnection Agree-or " wheel" certain power on AEC's behalf. ment referred to above, service schedule has been approved by the Alabama PublicThis wheeling Service Commission in its Order No. 2806 on August and has been filed with FERC for approval in Docket No. ER-29, 1980, 80-506. of MEUA.Reliability of service is not a problem for the members They, in fact, are backed up by the combined electric system resources of Alabama Power and its Southern Company affiliates, as well as the resources of Tennessee Valley Authority and other bulk power suppliers in the Southeast and the Middle South. The same resources have been made available to AEC through its Interconnection Agreement with Alabama Power. Th AEC provides for emergency power,emaintenance current Agreement with power, and other bulk change power services. supply services as well as other inter-Had any of the municipalities seen fit to pursue the purchase of unit power from the Farley Plant, they too would have been invited containing similar to enter into interconnection agreements provisions, meet their particular needs. tailored, nevertheless, to No events since the order of the Board palities would would notserve as a basis be treated to assume that the munici-similarly. 1 In summary, there are no barriers to market entry for i municipal law. distributors other than those established by state for mandatory injunctive relief simply do not exist.The damages c that issues relating to both liability and remedies commonThir to the Farley proceeding have been resolved.in two other fully litigated antitrust proceedings before the ALAB. Without addressing the factual details here, in should suffice to point out that in the development of almost

       -29,000 pages of record testimony and a multitude of contentions f

l

                                                                        -      -.          -     .=   ..- . . --      .- -

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4 BALCH, BINGHAM, BAKER, HAWTHORNE, WILLIAMS & WARD March 11, 1981 Page Eleven > i as to both law and fact, the Farley proceeding developed many issues distinguishable from those developed in other antitrust hearings before the ALAB. Thus, we believe that MEUA should be required to carry the burden of showing that the issues involved in this proceeding are common to issues in other proceedings which the ALAB resolved. In addition, as a general matter, the Farley proceeding essentially involves issues of liability and remedy under Section ALAB 2 of the Sherman Act in contrast to the two previous proceedings. i One of the previous proceedings, known as CAPCO, involved application of Section 1 of the Sherman Act. See The Toledo Edison Company, 10 NRC 265, 277, 281 (1979) . There, several distinct electric utility companies which had formed a power pool designated the " Central Area Power Ccordination" group (CAPCO) were seeking licenses for nuclear plants and a conspiracy in restraint of trade was alleged. Here, only one utility sought a license. The other proceeding, known as Consumers, which was a Sherman -' Act Section 2 proceeding did not resolve the issues of law relating uo the' appropriate remedy. The matter was remanded to the Licensing Board to fashion remedies. See Consumers Power Company, 6 NRC 892, 1098-1100 (1977). Thus, the allegations by MEUA that-the ALAB has decided two fully litigated cases which resolved issues relating to both liability untrue. simply and remedies common to the Farley proceeding are Finally, we suggest that there have been significant developments ceedings were conducted. in the applicable law since the earlier pro-The application of the antitrust laws to regulated electric utilities has undergone a change since the CAPCO and Consumers decision-of'the ALAB. The mechanical appl'ication of principles enunciated in earlier decisions has been, and continues to be, independently re-evaluated in the federal judiciary. In the last thirteen months, several major decisions have been rendered dealing with the antitrust laws and regulated electric utilities.  ; These cases make it clear  ;

            . that,Lwhile.the antitrust laws undoubtedly apply to the electric industry, pervasive regulation tempers the appli-cation.

e They do so particularly with respect to the appli- r cation of Section 2 of the Sherman Act, the essential legal - =

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SALCH. BlNGHAM. BAKER. HAWTHORNE. WILLIAMS & WARD i ' March 11, 1981 Page Twelve provision at issue in the case under deliberation, both by noting the impact of regulation in finding monopoly power and by raising the level of necessary intent so as to acecm-modate the role of the natural monopoly in carrying out public policy. The Public Utility Regulatory Policies Act of 19',?

             .("PURPA")-[ Pub. L. No. 95-617, 92 Stat. 3117 (Nov. 9, 1378)],                                   ,

passed'after the. record closed in the Farley proceeding, is especially important here because it provides additional powers to the FERC to compel interconnection and transmis-sion of electricity. .See 16 U.S.C.A. SS 8241; 824j (1974). At the conclusion of oral argument before the ALAB in the

   .         Farley proceeding, the_AL23 called upon the parties to

, submit briefs on the extent to which PURPA impacts on FERC's power to order interconnection and transmission. .This is significant because the existence and the extent of juris-diction in the FERC to regulate and thus require the supply of transmission services or " wheeling" was a matter central

            -to the decision of'the ALAB in the Consumers case. See Consumers, supra at 1005-1009.                  The extent of FERC's power in.these matters is still the subject of ongoing debate in cases where FERC has assumed jurisdiction. The' simple pr&-

sence of such additional regulatory powers, however, have t significant impact on the ALAB's ability even to find Alabama Power possesses monopoly power. Furthermore, the presence of the state and federal regulatory scheme m ri ce considered'in determining Alabama Power's monopolistic

intent under the new federal cases. Mere adverse effect on the number of competitors resulting from the business prac-

            .tices of a dominant firm in regulated .atural monopoly '

industries will no longer result cutomatically in a finding

            .of monopolisticLintent.under Section 2-of the Sherman Act.

We have studied these new-federal cases, and can furnish L you or.the ALAB:with a memorandum discussing their impact in more detail'should you or~the ALAB desire. , 4 , If the ALAB mechanistically adheres to certain of its ! pastLarticulated positions, as MEUA would have it do, it  ; I will commit error. In' view of such developments-in the law < l- applicable to this proceeding, the ALAB.should be given full L t i i l.-

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BALCH, BINGHAM, BAKER, HAWTHORNE. WILLIAMS & WARD March 11, 1981 Page Thirteen opportunity to take account of the ongoing developments in the law and reach a decision which is correct. If the ALAB desires further argument or briefing in these developments, the rash move by MEUA should not be permitted to preclude the ALAB from requiring the parties to file supplemental briefs on the evolving antitrust standards applicable to regulated electric utilities. With over 29,000 pages of transcript and several hundred exhibits, the task of factor-ing regulatory i= pact.on industry behavior into the analyt-ical technique now required for the electric industry in monopolization claims under the Sherman Act by more recent cases, is awesome.

 '            The ALAB shculd not be pressured in any way in reaching a decision, especially in view of the lack of injuries or damages presently being suffered by any party. Alabama Power assures that it will not complain about the ALAB taking sufficient time to reach a proper decision, but does take exceptions to ALAB being pressured into what might be         -

an ill-considered determination. We remain ready to coope-rate in implementing any alternatives available to insure that the correct rules of law will be applied to the facts of this case which is a matter of great concern to Alabama Power and affects the public interest including that of the hundreds'of thousands of customers of Alabama Power. If we can be of any assistance in this matter, please let us know. Yours very truly,

                                         / (

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                                       .:S. Eason t., .w 1 a Balch t t SES/hm cc:   Michael C. Farrar, Esq.         Reuben Goldberg, Esq.

Richard S. Salzman, Esq. David C. Hjelmfelt, Esq. Jerome E. Sharfman, Esq. Jesse M.. Williams, Jr., Esq. Joseph i Saunders, Esq. B. Biard MacGuiness, Esq. Joseph Rutherg, Esq. Maurice F. Bishop, Esq.}}