ML20011E857
| ML20011E857 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 02/10/1989 |
| From: | Adragna J, Oneil R CAP ROCK ELECTRIC COOPERATIVE, INC., MILLER, BALIS & O'NEIL |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#190-9870 A, NUDOCS 9002220610 | |
| Download: ML20011E857 (36) | |
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UNITED STATES OF AMERICA
.BEFORE TEE '90 FEB -1 0 '12
-NUCLEAR REGULATORY COMMISSION
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{' h f, f. h Texas Utilities Electric ) F 6P J"- ,
Company, 31 Alt ) Docket Nos. 50-445A Comanche Peak Steam Electric ) 50-446A-Station, Units 1 and 2 ) ]
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I REPLY OF CAP ROCK ELECTRIC COOPERATIVE, INC. l TO THE COMMENTS OF TEXAS UTILITIES ELECTRIC COMPANY I
Cap Rock Electric Cooperative, Inc. (" Cap Rock") hereby.
submits its reply to Texas Utilities Electric Company's ("TUEC") ,
1 responding comments, dated October 21, 1988 1/ TUEC's unsigned J response not only concedes that it is violating its license conditions, but' states unequivocally TUEC's intention to continue to do so.2/ .
The principal facts alleged in cap' Rock's comments are not in dicpute. TUEC does not deny that it refuses to provide Cap Rock the rates terms and conditions of partial requirements and
.other essential services. TUEC contends that it has no-obligation to provide such essential information until Cap Rock has terminated its full requirements contract with TUEC. TUEC does not deny that it will not permit Cap Rock to engage in virtually the identical economy energy purchase in which other customers of TUEC are engaged, even though the proposed purchase 1/ TU Electric Response to Comments of Cap Rock Electric Cooperative, Inc., dated October 21, 1988 ("TU Res.").
.2f See Section I, infra.
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from' Houston-Lighting and Power Company ("HLP") would ,
economically benefit TUEC.as well as Cap Rock. In TUEC's view, the license conditions do not obligate it to act non-Ciscriminatorily with respect to its competitors. TUEC also reiterates its demand _that Cap Rock terminate its full requirements contract before TUEC will consider whether Cap Rock has any rights under the license conditions.2/ Nor does TUEC deny that it is currently subjecting Cap Rock and other cooperative wholesale customers to a price squeeze. Instead TUEC makes the obtuse and inapposite argument that Cap Rock can file to change Cao Rock's rates before the Texas Public Utility L Commission-("PUCT").
TUEC's response to Cap Rock is a manufacture of matters that L
are, at best, irrelevant, and that are mainly incorrect or misleading. Each of TUEC'c allegations is addressed in turn, below. The first contention addressed, however, is the
fallacious premise of TUEC's comments: that TUEC has no obligation to Cap Rock under the license conditions as long as i Cap Rock is a full requirements customer. This supposed i
restriction on the reach of the license conditions is entirely I the Company's fabrication. This Commission approved no such restriction, and no such restriction exists in the license i
2/ TUEC's comments do not make it clear whether Cap Rock must merely notice the termination of its contract, or whether the contract actually must be terminated. The contract requires that Cap Rock give TUEC three year's written notice of the termination of the contract.
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f conditions. The' guarantees against-TUEC's abuse of.its monopoly power supposedly provided to future competitors like Cap Rock by-the license conditions are worthless if TUEC can " write-in" such restrictions as'may be convenient to the Company each time a potential competitor seeks protection under the license conditions.
Cap Rock believes that TUIC's on-going anticompetitive conduct warrants the seatching scrutiny of a full hearing before an operating license is issued for the Comanche Peak nuclear units. Cap Rock (and no doubt TUEC) recognize, however, that a final Staff recommendation concerning the changed-circumstances determination is unlikely to be made for several years. The most recent information available to Cap Rock indicates that the first Comanche Peak unit will not be placed into commercial service 4 until 1991 at the earliest. Cap Rock intends to pursue an
.immediate determination of TUEC's existing obligations under the l
license conditions. Cap Rock will therefore shortly file a i petition with the Director of Nuclear' Reactor Regulation to enforce the antitrust license conditions and to receive a-definitive determination of TUEC's obligations.
l I.
TUEC IS OBLIGATED BY THE LICENSE CONDITIONS TO PROVIDE THE REOUESTED SERVICES TO CAP ROCE TUEC's refusal to provide Cap Rock the rates, terms and l
conditions of partial requirements and other essential services l
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-it is obligated to provide under the license conditions until Cap Rock terminates its full requirements contract is itself a L violation of the outstanding antitrust license conditions. Nor is there any legitimate justification for TUEC's refusal to provide the rates, terms and conditions of service; certainly, TUEC has provided none. The obligation of a monopolist to provide service necessarily includes the obligation to tell the potential purchaser the rates, terms and conditions of the L requested services before the potential purchaser must execute a contract. The antitrust laws prohibit TUEC from acting in any ,
manner to hinder or to disadvantage competitors.3/ TUEC's position in this matter is a clear attempt to disadvantage and to hinder Cap Rock in its efforts to become a competitor of TUEC in !
the bulk power market.1/ l A/ See Cap Rock's Comments at 14.
1/ TUEC's demand that Cap Rock terminate its-full requirements contract is itself unclear, TUEC states that "when and if Cap Rock ceases to become (sic] a full requirements customer of TU Electric, TU Electric will treat Cap Rock the same as all other similarly situated entities...." TU Res. at 4. Cap Rock's current contract requires that it give TUEC three years' written notice of the termination of the contract in the absence of a change in the full requirements rate. Does TUEC intend that it will not provide the relevant rates, terms and conditions of service until the notice of termination or until the contract itself actually terminates?
Cap Rock does note that in TUEC's reply, the Company, for the first time, acknowledges that it is indeed obligated to provide the requested services at some time. Until its comments before this Commission, TUEC had refused formally to acknowledge that it was even obligated to provide the services that Cap Rock has requested.
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4 A. The License conditions Apply to Full Requirements
-Customers of TUEC.
TUEC denies that the license conditions impose any obligation _with respect to Cap Rock as long as cap Rock is a full requirements customer of TUEC.1/ This is a threshold question.
that goes to the heart and the effectiveness of the license conditions.2/ TUEC's position is flatly wrong and indefensible under the license conditions and relevant antitrust law. g/
f/ TU Res. at 2. TUEC also contends that neither its license conditions nor the antitrust laws " require TUEC to cancel, change or otherwise amend cap Rock's power purchase power agreement." Id. at 2. As discussed below, Cap Rock does_not contend that its contract with TUEC can or should be modified by the_ license conditions. Cap Rock fully intends to notice the termination of its full requirements contract l
I when and if the economics dictate the wisdom of such a L
decision. Cap Rock does contend, however, that TUEC's license conditions obligate the company not to obstruct Cap i
Rock's acquisition of bulk power from sources other than L
TUEC by refusing to provide essential services and the rates, terms and conditions of such service, and that the license conditions further obligate TUEC not to favor some competitors over others in the provision of essential services like the transmission and scheduling services u necessary for an economy energy purchase from HLP.
L L 2/ Cap Rock notes that TUEC has n21 said that it will sell
! essential partial requirements and other services to Cap
! Rock once Cap Rock's full requirements contract is terminated. TUEC says only that, until the contract is terminated, it has no obligations to Cap Rock under the license conditions.
1/ If TUEC's interpretation is considered valid, then the l
license conditions are fatally flawed and should be amended. As demonstrated in Cap Rock's August 11, 1988 comments, TUEC is engaged in activities that are inconsistent with the antitrust laws.
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TUEC's obligations under the license conditions are to
" Entities," as defined in Paragraphs 3.D. (1) (c) and (d). TUEC does not deny that Cap Rock is an " Entity" as defined'in those paragraphs. TUEC-nevertheless does deny that Cap Rock is entitled to the guarantees afforded an " Entity" by the license condi'tions. In other words, TUEC is knowingly and willingly violating its Comanche Peak license conditions. Further, TUEC-has stated in an unsigned pleading before this Commission that it intends to continue to violate those license conditions.
The criteria by which an " Entity" is determined, and the rights accorded'one who meets those criteria, were negotiated and agreed to by TUEC more than eight years ago. There is no provision in the license conditions that exclude from the protections accorded " Entities" full requirements customers of TUEC. Indeed, as sub-paragraphs (c) and (d) and subsequant paragraphs of the license conditions make clear, the rights here at issue were obviously intended specifically to benefit electric utilities that were, at the time, full requirements customers of TUEC and other utilities.
Paragraph 3.D. (1) (c) defines an Entity as:
an electric utility ... ownina, operatino or ;
contractually contro11ina, or erecosine in cood faith to own, operate or contractually control, facilities for ceneration of electric newer and enerov, provided, however, that as used in (certain specified paragraphs], " Entity" means an electric utility which is a person, a private or public corporation, a governmental agency or authority, a municipality, a cooperative, or an association ownina or operatina. or )
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7 proposina in_ coed faith to own or oeerste, facilities for generation,. transmission:
and/or distribution of electric power and energy.-(emphasis supplied)
Sub-paragraph (c) is clearly forward.-locking. The license conditions are intended to protect not only the interests of
. utilities with generation, transmission and/or distribution facilities at the time the license conditions were issued, but also those utilities that subsequently obtained such facilities.
The most obvious, as'well as numerous, group of utilities in TUEC's service territory without generation on the date of the issuance of the license conditions were full requirements customers like Cap Rock. A full requirements customer that otherwise meets the criteria of an " Entity" is entitled to the services guaranteed an " Entity" once it c.an demonstrate that it proposes in good faith to own, to operate or contractually to control the requisite facilities.
TUEC is explicitly obligated, upon reasonable advance notice, to sell full and partial recuirements service to
" requesting Entities in the North Texas Area having, on the date of this license, non-aggregated generating capacity of less than 200 MW (including no generating capacity) under reasonable terms and conditiens. . . . " Paragraph 3.D. (2) (k) . Cap Rock, which is an Entity in the North Texas Area, na., no generating capacity on the date on which the license conditions were made effective. TUEC therefore must sell partial requir ents service to cap Rock, or be in violation of its license cond.tions. To imply an exception
1 for full requirements customers of TUIC not only does violence to ,
the literal. obligations of the. paragraph, but renders the-provision entirely ineffective as a means of protecting potential L
Lentrants into the bulk power market from the improper exercise by TUEC of its monopoly power over partial requirements services.
The obligation to sell partial requirements service to full requirements customers likewise, of necessity, includes the obligation to provide the rates, terms and condition _.under wikich such partial requirements service will be provided. TUEC can not physically provide partial requirements service to an electric utility that has a good faith intent to acquire, but has not yet acquired, generating facilities. Yet the license conditions do not limit TUEC's obligations to "former full requirements .
customers." To have a.y meaning at all, the license conditions must require, at a min'aum, that TUEC provide the rates, terms and conditions of that service and otherwise not attempt to obstruct the acquis'. tion of such generating facilities. This is not only the most reasonable interpretation of the language, but the only interpretation that fosters the goal of the license
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market.2/ ;
1 similar obligations exist with respect to emergency, 1.
coordination and transmission services. TUEC must:
" connect with, coordinate reserves, and sell, purchase or exchange emergency and or/ scheduled maintenance bulk power with any Entities.in the North Texas Area;"12/
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" participate in and facilitate the exchange of bulk power by transmission over (TUIC) transmission facilities between or.among two or more Entities in the' North Texas Area with '
-which (TUEC is) connected;"11/ and "not refuse to provide such transmission service merely because the rates to be charged therefore are the subject of dispute with such Entity."12/
TUEC not only is obligated to provide such services to any Entity in the North Texas Area, but it is also obligated to plan its transmission. system so as to maintain adequate transmission 9
r 2/ As discussed below, no legitimate purpose is served by requiring the termination of a full requirements contract before providing the rates, terms and conditions under which partial requirements service will be sold. Moreover, Cap Rock is fully willing to notice the termination of its full requirements contract once it knows what-it is letting itself in for with respect to partial requirements service from TUEC.
IS/ Paragraph 3.D. (2) (.c) (emphasis supplied).
11/ Paragraph 3.D. (2) (i) . This obligation would appear to belie TUEC's contention that it is not obligated to facilitate Cap Rock's economy energy purchase from HLP.
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- capacity to meet the future transmission and partial requirements needs of Entities in the North Texas Area.12/
TUEC has cited no provision of the license conditions that exempt full requirements customers from the protections providec by the. license conditions; no such provision exists. To the contrary, TUEC is explicitly obligated to: provide the services requested by Cap Rock. If TUEC now believes that the conditions to which it agreed almost a decade ago are somehow unreasonable, it should' seek to amend those conditions before this Commission.
In_such a proceeding, Cap Rock, and no doubt other beneficiaries of the license conditions, would propose amendments that would prevent the kind of abuse TUEC currently is perpetrating. But TUEC cannot unilaterally abandon obligations imposed by its license conditions. As the following discussion makes clear, there is no legitimate reason for TUIC's refusal to provide Cap Rock the rates, terms and conditions under which the Company will provide the requested services.
B. No Legitimate Purpose Is Served By Requiring Cap Rock to Terminate Its Full Requirement.s Contract With TUEC Before the Company Provides the Rates, Terms and conditions Under Which It Will sell partial Requirements and other Essential Services; TUEC's Insistence on Such Is a Further Improper Exercise of Its Monocolv Power.
TUEC refuses to provide Cap Rock the rates, terms and conditions under which the company will sell the services TUEC is 12/ Paragraph 3.D. (2) (j) (a) .
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! committed to provide under the license conditions. The company- I
" apparently willinot' consider'providing this essential information until Cap Rock terminates'if full. requirements contract with j i
TUEC. TUEC has not attempted to justify this extortionate position.- There~is no justification for TUEC's obdurate position..
TUEC contends that, as the Company's rates are regulated by the PUCT, Cap Rock "is in as good a position as TU Electric in speculating what rates and charges the PUCT may establish.in the future."11/ TUEC's position is. preposterous.11/ TUEC, not Cap
-Rock or the PUCT, must initiate any' rate filing with the PUCT.
Although the PUCT has ultimate authority over the rate, rate design and the terms and conditions of service, TUEC is the sole source of the cost information that must form the basis for any
. rate-and the party that must propose cost allocation and rate design methodologies.11/
11/ TU Res at 3.
I i 11/- TUEC apparently considers providing Cap Rock the rates under
- which it is willing to sell partial requirements and other essential services to be "the making of economic decisions for Cap Rock." Letter from Darrell Bevelheymer to Steven E.
Collier, dated October 20, 1988, at 1 ("Bevelheymer l Letter").
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[ 11/ The-FUCT would no doubt give serious if not dispositiveIndeed, L weight to the rate design proposed by the Company.
L that commission has allowed to stand a summer / winter rate
! differential for TUEC in the face of its open acknowledge-I ment that the rate design imposes a severe price squeeze on L wholesale customers like Cap Rock. See Cap Rock's initial comments, pages 35-39.
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The provision of rates, terms and conditions by an electric l wholesale supplier prior-to actual approval by the relevant I
regulatory authority is not novel. Such a practice is a normal and accepted course of doing business in the electric utility industry. Each side recognizes that, although the rate, terms and conditions are subject to final approval by the relevant regulatory agency, the regulatory agency is likely to approve a reasonable, nondiscriminatory and cost justified rate, particularly if the customer in question does not opp.ese the company's filing. Each side also. recognizes that no customer can plan future bulk power transactions without knowledge of the rates, terms and conditions of essential services.
The case before this commission is even more clear. Here, TUEC has an unequivocal obligation to provide the services in question. Cap Rock is unaware of any precedent for the proposition that, although an electric utility must provide service, it does not need to provide the rates, terms and conditions of that service in time to permit the potential customer to decide whether and to what extent it wishes to l
l purchase that service. For example, if a potential customer knew the rates under which a seller would-provide coordination and
! ' transmission services, the potential customers could well decide that less expensive coordination services could be obtained by
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purchasing a combination of transmission service from that seller l
and coordination services from another utility. This is how a l
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.truly-competitive bulk power market would operate. Without some knowledge of the relative costs of the various services from TUEC, such a decision is impossible.
TUEC's contention that Cap Rock can "make its own decision with respect to its future power and energy resources" on.the basic of public information and other rates on file for other services is absurd. Would a purchaser decide to buy a car without knowing the sticker price on the basis of an estimate of the costs of steel, plastic and rubber? Cap Rock is entirely willing to make its own economic decisions, but it needs to know-the costs of those decisions; it cannot know the cost without knowing the rates that TUEC will demand.
The need to know the rates that TUEC intends to charge for j
essential services is even more critical"in this instance. The company has made it clear to Cap Rock that, if it is compelled to provide the services sought by Cap Rock, it may well attempt to impose novel rate schemes that are based on principles other than i 'the cost of providing service. Cap Rock believes that TUEC may well propose rates for these essential services that bear little or no relation to the-Company's actual cost of providing the service.12/
TUEC has not alleged in writing that there is any great burden in providing the rates and other information sought by cap 12/ If T"EC indeed makes good on this threat, such rates could l themselves be further evidence of TUEC's anticompetitive l
conduct.
4 Rock.11/ .Indeed, the-burden is minimal. In this era of '
computerization, the calculation of rates for-a particular service is a relatively short and inexpensive process. More c importantly, TUsC is obligated by its license conditions to provide certain services. That obligation necessarily includes the obligation to provide the rates, terms and conditions for those services, regardless the cost of preparing =those rates.
The Federal Energy Regulatory Commission ("FERC") determines the reasonableness of the-rates, terms and conditions of service for numerous electric utilities. The FERC has rejected the contention that the burden and cost of preparing rates justified exempting a utility from the obligation to sell those services.12/ In Oclethorre, the FERC rejected the argument that it would be unduly burdensome and costly for a generation and transmission cooperative to prepara rates for back-up and related services it was obligated to sell under PURPA.2S/
11/ Cap Rock understands that TUEC may have suggested that the preparation of the requested rates would be an undue burden in meetings with the Staff of this Commission. The company's refusal to put such contentions in writing, or to quantify the purported burden, illustrates the speciousness of this contention.
12/ Oclethorne Power Corporation, et. al., 32 FERC 1 61,103 (1985), rehearina denied in relevant part, Oclethorne Power Corporation, 35 FERC 1 61,069 (1986), aff'd Greensboro Lumber Co. v. FERC, 825 F.2d 518 (D.C. Cir. 1987),
20/ Public Utility Regulatory Policies Act of 1978, 16 U.S.C.
55 824a-3, 796(17-22)(1982).
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i i (D)eveloping retail rates for QFs should not be burdensome for oglethorpe. It now has a
- staff'which develops' rates for purchases from QFs and its wholesale rates to the EMCs. '
This staff'should certainly have the expertise to develop retail _ rates. Moreover, oglethorpe has only entered into contracts -
with only a few QFs since the Commission's regulations were promulgated'in 1980.
Petitioners' assertion that a whole new retail rate division is necessary to serve a ,
handful of back-up power customers is not persuasive.
32 FERC at pp. 61,286-87. The FERC's decision acknowledges two obvious facts: 1) for most electric utilities, the burden'of preparing rates is not great, and 2) regardless the burden, the L obligation to sell certain_ services carries with it the obligation to prepare and to provide the rates, terms and l-conditions under which those services will be provided. TUEC is one of the largest, if not the largest, investor-owned electric p utility in the Country. The burden on TUEC of preparing the -
l L rates, terms and conditions under which it will provide the services it must, under the license conditions, provide can not
! be considered undue.21/
Cap Rock is attcupting to acquire an independent source of generating capacity. Cap Rock cannot complete those negotiations and assemble a new bulk power resources plan without knowing the costs of essential partial requirements, transmission, emergency 21/ Notwithstanding TUEC's obligation to provide such rates',
Cap Rock would be willing to relieve TUEC of this burden if TUEC would provide the necessary cost of service and other information and stipulate that it will accept the results of Cap Rock's cost of service, rate design and other efforts.
and coordination services. No business entity can reasonably be ,
expected to make business decisions, negotiatela multi-million dollar acquisition of generating capacity,'and put into place plans 1for substantially altering its historical business relationship as a captive customer without knowing the costs'of ,
l the commodities essential to its business. Cap Rock believes that the license conditions were intended to prevent precisely this kind of abuse.
s C. The Antitrust Laws Prohibit Unreasonable Barriers to Competition Such As TUEC's Refusal to Provide the Rates, Terms and Conditions of Essential Services.
TUEC's refusal to provide the rater, terms and conditions of service before Cap Rock terminates its full requirements contract is the quintessential and unlawful use of monopoly power to disadvantage actual (in the retail market) and potential (i'n the bulk power market) competitors. The unlawful use of monopoly power has been defined as acts " derived from (the monopolist's) power in the market or its size ... acts which could only have been performed by one with the requisite power." Telex Coro, v.
IDH, 510 F.2d 894, 926 (10th Cir.), cert, dismissed, 423 U.S. 802 (1975). See Berkev Photo, supra, 603 F.2d 275. TUEC's ability i
successfully to' refuse to quote Cap Rock rates for essential services is derived from the Company's unquestioned monopoly
- power over partial requirements and other essential bulk power services.
j In a truly competitive. bulk power market', TUEC would want to quote the prices at which it would sell partial requirements and other essential services in order to compete effectively with other potential suppliers. In the bulk power market as it
-currently exists, TUEC does not have to compete, relying instead
[ on its monopoly power to force cap Rock to deal for such services, if at all, only with TUEC. TUEC is well aware that without the rates terms and conditions for partial requirements and other essential services, Cap Rock is unable to assemble a bulk power supply package that includes electric utilities other :
than TUEC. The Sherman Act " requires that the choice between (alternatives) result from unconstrained competition on the merits."22/
TUEC's position is that it may provide the required services at some time (in some as yet unspecified form and at yet unspecified rates), but that it is not obligated to provide the ,
I rates, terms and conditions under which it will provide such ]
services until, :n offect, it is too late for cap Rock to pursue 1 alternative suppliers of bulk power. Such a position is itself a 1 l
violation of the antitrust laws, an unlawful refusal to deal. -l The law is well-settled that " agreeing to deal on unreasonable l l
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22/ Fishman v. Estate of Wirtz, 807 F.2d 520, 537 (7th Cir.
1986). In Wirtz, the defendants, through the economic leverage provided by their monopoly of stadium facilities, I
succeeded in driving out all competition for the ownership of a professional basketball franchise. "They used a l monopoly in one market to foreclose competition in another
-- a classic violation of the antitrust laws." Id. at 536. j l
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terms is merely a type of refusal to deal." Fishman v. Estate of Wirtz, gngra, 807 F.2d at 541. Nor does the fact that TUEC has
! not yet succeeded in excluding Cap Rock from the bulk power market immunize TUEC's anticompetitive conduct. Egg, 32gt, Lorain Journal Co. v. United States, 342 U.S.-143, 153-54 (1951),
Indeed, Section 105 of the Atomic Energy Act was:
designed by Congress to ' nip in the bud any incipient antitrust situation,' albeit via the NRC prelicensing review process. H211 Creek I, supra, 1 NRC at 572 (quoting the Joint Committee RqngIt, p. 14).
Midland, supra, 6 NRC at 912. TUEC's refusal to provide the rates, terms and conditions under which it will sell the partial requirements and other essential services that it is obligated to provide under the license conditions is a patently anticompetitive act and, Cap Rock believes, is clearly in violation of the existing license conditions. If the license conditions do not preclude such anticompetitive action, they must be amended to close this obvious gap that permits TUEC to maintain a situation inconsistent with the antitrust laws.
II.
TUEC'S MANY AND VARIED CONTENTIONS CONCERNING THE MOTIVATIONS BEHIND CAP ROCK'S EFFORTS TO BECOME INDEPENDENT OF TUEC ARE MISLEADING. INCORRECT AND IRRELEVANT As previously noted, TUEC has chosen to ignore the issues raised in Cap Rock's comments. Virtually all of the facts presented in Cap Rock's comments stand unrebutted. Instead, TUEC
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.I has presented a laundry list of contentions and allegations that are apparently intended to convince this Commission that Cap Rock's desire to become independent of TUEC.is misguidad and ill-conceived. Cap Rock will address each of the allegations in TUEC's disjointed reply. At the most. basic level, however, each of TUEC's allegations is irrelevant. A truly competitive and free market is exemplified by the right of each participant to
'make its own business decisions and take its own business risks, ,
regardless whether those decisions and risks are perceived to be wise or. unwise by its competitors. Cap Rock is confident that the course it has chosen is the correct course. Though TUEC f feigns concern that Cap Rock may be mislead in this endeavor, Cap Rock doubts that it is truly Cap Rock's f,uture well-being.that TUEC has in mind.
A. Cap Rock Does Not Seek Preferential Treatment; It Seeks No More than Its Richts Under the License Conditions.
TUEC's principal defense is that Cap Rock's complaint that !
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.TUEC is refusing to honor its license conditions commitments to provide Cap Rock partial requirements and other essential services is:
nothing more than an attempt on its part, and on the part of Panda Energy Corporation ]
(" Panda"), to use this Commission's CPSES :
licensing proceeding to obtain preferential l l
treatment.
l TU'Res. at 1. TUEC's allegations with respect to Panda are discussed below. TUEC's contention that Cap Rock's request for l
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i the; services-that TUEC must provide under the license conditions is a request for " preferential treatment" reflects TUEC's-lack of concern for, and lack of commitment to honor, its obligations under the license conditions ~. What TUEC calls " preferential treatment" is no more than the rights guaranteed cap Rock under the license conditions. TUEC contends that Cap Rock is asking this Commission to interfere with the enforcement of Cap Rock's current full' requirements contract with TUEC:
by permitting Cap Rock to seek power and energy from other sources while continuing to demand the obligation of providing full requirements service by TU Electric ... or perhaps by seeking the premature termination of the agreement.
TU Res. at 2. This of course is not, and never has'been, Cap Rock's position. Cap Rock's positio.: is that TUEC can not maintain that it is improper for Cap Rock to purchase economy energy from HLP while a full requirements customer of TUEC, but it is alright for other TUEC full requirements customers to engage in the very same transactions. As demonstrated in Cap
-Rock's initial comments, such conduct is an improper exercise by .
TUEC of its monopoly power to advantage certain customers and to disadvantage other customers.22/ Although TUEC demands for itself this right, the license conditions and the antitrust laws l-deny it such life and death power over its competitors.
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22/ Cap Rock Comments at 24-27.
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The contention that Cap Rock-somehow seeks a " premature termination" of its current contract is flatly wrong.24/ Cap Rock has not requested, nor does it intend to request, that this commission take any. action with respect to the termination of its contract; TUEC cites no statement by Cap Rock to the contrary.
Cap. Rock will follow the procedures established by that contract when it decides to terminate its contract.
TUEC contends that its refusals to permit Cap Rock's purchase of economy energy from HLP and capacity and energy from Panda are not subject to this Commission's scrutiny because neither the license conditions nor the antitrust inws require TUEC to cancel, to amend or to change its full requirements contract with Cap Rock. Under this interpretation, an entire class of electric utilities in the North Texas Area, full requirements customers of TUEC, would be written out of the protections afforded " Entities in the North Texas Area" by the license conditions. As long as TUEC refuses to cooperate with existing full requirements customers, they will be compelled to remain captive customers of TUEC. Such a result would do nothing to mitigate the monopoly power of TUEC over essential services or to protect potential new entrants into the bulk power market from TUEC's abuse of that monopoly power. Put another way, this commission will have done little, if anything, to ensure that TUEC is not maintaining a situation int nsistent with the 11/ TU Res at 2.
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-antitrust laws. There .is absolutely no . support for this proposition in the language of the license conditions.-See Section I.A, annIA. If TUEC's interpretation were accepted as )
correct, this Commission would be obligated to amend the license 1
condit' ions to cure TUEC's blatant violation of 'the antitrust- I laws. j
. l TUEC's contention that, by seeking to purchase baseload generating capacity from Panda, Cap Rock seeks to " cherry pick" is likewise wrong.21/ Cap Rock seeks no more than.what it is guaranteed under the license conditions and the antitrust laws, ;
As demonstrated in Section I.A, supra, the license conditions l clearly anticipate that electric utilities without generating l l
facilities at the time of the issuance of the license conditions '
will acquire generating facilities and that TUEC is obligated to sell such electric utilities the services essential to the acquisition of such facilities. If the license conditions do not impose such obligations on TUEC, they are meaningless. TUEC's statement that it "has no intention of engaging in any such transaction"25/ is a declaration of its refusal to honor the license conditions.
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21/ TU Res. at.4 n. 2. Cap Rock notes that it is the prerogative of independent utilities, like TUEC and the other ERCOT members, to seek the most economical sources of l power.
25/ TU Res. at 4 n. 2.
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EI i I,w-B. Regulation by the Texas Public Utilities Commission Does Not Render TUEC's Admitted " Price Squeeze" Irrelevant As Evidence of TUEC's Anticompetitive Conduct and Intent. 3 TUEC does not deny that it is currently subjecting Cap Rock to a " price squeeze." Instead, TUEC contends that regulation of the relevant rates by the PUCT renders the existence of the price
-squeeze irrelevant to this Commission's determination of whether
.the Company is maintaining a situation inconsistent with the antitrust laws.22/ TUEC is wrong. ,
The Atomic Safety and Licensing Appeal Board (" Board") and the courts have repeatedly rejected this contention.21/ In Farlev,22/ the Board laid to rest TUEC's contention:
It is too late in the day for the argument that state and federal regulation -- even with respect to electric utilities -- bring a form of dispensation from the ant'itrust laws.
13 NRC at 1040'. Egg also 13 NRC at 1073-74.
Cap Rock does not contend that this Commission should remedy TUEC's price. squeeze. Cap Rock has sought, and will continue to seek, relief from the price squeeze before the PUCT. To date, Cap Rock has been unsuccessful in obtaining relief from that
-commission, principally because of the prohibitive influence of l
22/ TU Res. at 2.
11/ Cap Rock Comments at 17 n. 34.
l 12/ Alabama Power Company (Joseph M. Farley Nuclear Plants, !
Units 1 and 2), 13 NRC 1027 (1981), aff'd Alabama Power l Company v. Nuclear Reculatory Commission, 692 F.2d 1362 l (11th Cir. 1982), cert denied 464 U.S. 816 (1983). l l
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TUEC, notwithstan' ding.the PUCT's recognition of the price squeeze.22/. TUEC's strident efforts to maintain what it acknowledges to be a significant competitive disadvantage to its competitor, Cap Rock,.is'itself evidence of TUEC's ant $ competitive intent and conduct, evidence that this commission-must' consider in determining whether changed circumstances exist that warrant a hearing into TUEC's anticompetitive conduct.
Even constitutionally-protected actions can be used as evidence of anticompetitive intent. For example, TUEC's recent efforts to convince the Texas legislature that it should j; -eliminate.all service territory certification and permit unrestrained competition to serve any and all loads in Texas may ;
not be directly actionable. Under the well-established Neerr-Pennineten doctrine,21/ however, such conduct would clearly be admissable as evidence of TUEC's anticompetitive conduct. In Farley,~the Board found that the applicant had used legal and administrative proceedings to prevent captive customers from
,, installing their own generation. The Board held that such facts ;
l were clearly admissible to show the purpose and character of f other evidence under scrutiny. 13 NRC at 1079. TUEC's actions 1
j before the PUCT, in fighting to maintain and publicly lauding a price squeeze that harms its competitors, is clearly admissible j 29/ See pages 37-38 and Attachment F to Cap Rock's Comments.
11/ Eastern Railroad Presidents Conference v. Noerr Motor Freicht. Inc., 365 U.S. 127 (1961); United Mine Workers of America v. Pennincton, 381 U.S. 657 (1965).
a: ;= a;=. z . : .. ;. - -.
, t as evidence of the Company's-anticompetitive' conduct and intent.
Indeed, if this matter proceeds to hearing, Cap Rock intends to
.show that the price squeeze, coupled with TUEC's proposed decertification plan and refusal to honor its license conditions, are part of the_ Company's greater plan to extend its monopoly over retail sales through the acquisition of wholesale competitors like Cap Rock.
C. The Electric Reliability Council of Texas ("ERCOT")
Does Not Set or Affect TUEC's Rates.
TUEC states that it will not provide Cap Rock the rates under which it will sell essential services because such rates are, in part, determined by future electric planning activities within ERCOT that are not within TUEC's control.22/ This statement is both misleading and irrelevant. ERCOT does not establish or even suggest rates, nor does.it prescribe the facilities that an electric utility must construct. ERCOT is a L loose planning organization in which its members exchange information about their own plans to add generation and transmission facilities. ERCOT does not purport to prescribe what facilities should be constructed, nor does it have any authority to enforce such an edict if one were issued. Cap Rock L
is not aware of a single instance in which an ERCOT member has 1
1 22/ TU Res. at 3.
i been_ forced'by ERCOT to construct a facility that it did not wish I
to-construct for its own purposes, nor is Cap Rock aware of a I single instance in which a utility has foregone construction of a facility that it did wish to construct _merely because other ERCOT i members may have opposed such construction. , !
l If TUEC were permitted to refuse to provide rates for essential services simply because future actions micht affect.the overall rate, the company could effectively avoid ever having to provide such rates prior to the time the customer actually is required to sign a contract to purchase such services. Electric utilities routinely quote rates for prospective services with the understanding that major rate base additions in the future could give rise to an application by the seller to increase the rates.
TUEC's efforts to convince this Commission that this is somehow an insuperable barrier to the provision of rates before the prospective customer must decide whether to purchase the service is no more than an. attempt by the Company to sell this Commission a bogus bill of goods.
D. TUEC's Panda Gambit.
L TUEC suggests that Panda is somehow the evil force behind cap Rock's efforts to obtain independence from the Company.22/
This reflects TUEC's obtuse refusal to acknowledge Cap Rock's oft 1
o stated goal of ending its total dependency on the Company, a goal ll/ See TU Res. at 1, and 5-6.
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discussed with TUEC long before Panda entered the picture.21/ l Moreover, the actions of which TUIC complains show nothing more j than the operation of a competitive market in bulk power :
resources. !
TUEC complains that it turned down an offer by Panda to sell f capacity and energy because " Panda simply has not been competitive with other offers received by TUEC Electric."21/ '
TUEC apparently believes that there is something wrong with a !
supplier that cannot economically sell to the company finding another purchaser for whom the price may be right. If the Panda >
price ultimately proves not be advantageous to Cap Rock, Cap Rock will pursue other power supply options. But cap Rock will not know what the total cost of the Panda purchase will be, or the ;
total cost of any purchase, until TUEC provides the rates, terms and conditions of essential transmission,-back-up and other services. The " total cost" would necessarily include the cost of the capacity purchase, the cost of essential transmission service to move the power from the plant to Cap Rock's system, and the cost of essential coordination and back-up services.
23/ See Cap Rock Comments at 27-29.
2"/ TU Res. at 6. This statr 7ent is entirely unsupported by TUEC. Why TUEC may have chosen not to deal with Panda, and whether TUEC may be paying higher rates to other cogenerators than would have been required by Panda, are matters for hearing.
s l l- i Ne one is asking TUEC to buy anything from Panda. Cap Rock j is merely asking to be permitted to make its own business !
decisions without interference from TUEC.
l E. TUIC's Concerns About Cap Rock's Censultants Are Baseless and Irrelevant.
According to TUEC, the other evil force behind Cap Rock's efforts to exercise the rights guaranteed it by the license conditions is Cap Rock's consultants. TUEC, uniquely sensitive to questions of conflicts of interest before this Commission,
" suggests" that Cap Rock may be being ill-served by its consultants, who also represent Panda in some matters.2&/
suffice it to say that Cap Rock was fully informed of its consultants' representation of Panda in some matters before cap Rock began negotiations with Panda. Cap Rock is entirely satisfied with the ethical and professional standards of its consultants and that its interests are being well-served.
Aside from an unwarranted affront to cap Rock's consultants, TUEC's insinuations raise an overriding question: what business is it of TUEC's who Cap Rock employs or what advice Cap Rock receives? The antitrust laws do not permit a monopolist to
. frustrate the competitive efforts of competitor even if the monopolist's motives are well-intentioned. If Cap Rock's business decisiens are incorrect, its competitors, principally 2.f/ TU Res. at 5 n.4.
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TUEC, vill benefit. If Cap Rock's business decisions are, as it believes, correct, Cap Rock will benefit. Such risks and )
i benefits are the substance of truly competitive market.22/ j l
F. Turc's sundry other Alleantiens.
In response to Cap Rock's demonstration that TUEC is j subjecting Cap Rock to a price squeeze, TUEC states: ,
i The claim made is that the primary cause of l the " squeeze" is the impact of the summer- i winter differentiated rates for TU Electric's retail customers which are not also available to wholesale customers. Aside from the fact that this is not true,the clear implication i of Cap Rock's comments is that TU Electric is free to discriminate in pricing and the application of pricing to customer classes.
TU Res. at 9. TUEC does not deny the existence of the price squeeze. All that TUEC apparently denies is Cap Rock's assertion that the summer / winter differenticted rates are not offered to wholesale customers. Cap Rock reiterates that no such differentiated rates are offered to it or to any other TUIC 12/ The October 20, 1988 letter from TUEC's Mr. Bevelheymer to Cap Rock's consultant, Mr. Steven E. Collier is a transparent document. Although Mr. Develheymer feigns outrage at Mr. Collier's memorialization of their discussions on August 2, 1988, his outrage did not move him to answer Mr. Collier's letter until more than two months after the fact. Not surpriningly, Mr. Bevelhaymer's reply i integrates well with the allegations made by the Company in l its comments before this Commission. Cap Rock stands behind i
Mr. Collier's contemporaneous account of the August 2, 1988 l meeting in Dallas.
Mr. Collier's response to the Bevelheymer letter, dated January 19, 1989, has previously been submitted to this Commission.
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l wholesale customer of which it is aware. TVEC has presented no evidence that such differentiated rates are available. Mov.aover, I the apparent assertion that summer /vinter differentiated rates are available to Cap Rock is not credible unless this commission is to believe that Cap Rock is intentionally placing itself in a ,
price squeeze.
Regardless whether TUEC is " free" to subject Cap Rock to a price squeeze, the unrebutted facts are that TUEC 11 subjecting Cap Rock to a price squeeze, TUEC recognizes that it is subjecting Cap Rock to a price squeeze, and, rather than seeking to eliminate that price squeeze, TUIC is doing everything in its power to perpetuate the price squeeze. This is clear evidence of on-going anticompetitive conduct by TUEC which, when coupled with TUEC's refusals to provide essential services by which Cap Rock ;
may lessen its total dependence upon TUEC for its bulk power needs, creates a situation inconsistent with the antitrust laws and the existing license conditions.23/
TUEC's most puzzling contention is that there can be no price squeeze because Cap Rock can, and has, filed to change can Rock's rate design.21/ Cap Rock will stipulate that it is able j 11/ City of Mishawaka v. American Electric Power Company, l
Inst, 616 F.2d 976, 983 (7th Cir. 1980).
11/ TU Res. at 9-10. By recent order, a PUCT hearing examiner denied Cap Rock's application to change its rate design in order to mitigate the price squeeze caused by TUEC summer / winter differentiated rates. The price squeeze, ,
therefore, continues unabated.
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t to file a request with the PUCT to change its rate design and to i reduce further its operating margin in order to avoid losing f customers to TUEC. Any customer subjected to a price squeeze can f continue to reduce its operating margin until it is driven out of business; that is not the point. The point is that TUEC is admittedly maintaining a price squeeze that is seriously harming Cap Rock's ability to compete with TUIC. As an entity with monopoly power, TUEC is proscribed by Section 2 of the Sherman Act from using even lawfully acquired monopoly power "to foreclose competition, to gain a competitive advantage, or to destroy a competitor...." United States v. Griffith, 334 U.S.
100, 107 (1948).12/
The final TUEC contention that bears comment is the statement that, by demonstrating that TUEc' is engaged in a systematic program of cutthroat retail competition, Cap Rock is f
contending that "TU Electric should decline to serve new customers in dually certified areas or at least agree not to advertise its services."11/ Retail competition should not be stoked by anticompetitive advantages at wholesale. Moreover, the l
existence of this new campaign of virulent head-to-head retail competition is clearly relevant to this Commission determination
. 1 whether changed circumstances exist that warrant an investigation l
I 12/ S33 also Berkey Photo, Inc. v. Eastman Kodak Cemeanv, 603 F.2d 263, 275 (2d Cir. 1979), cert denied, 443 U.S. 1093 (1980). I 11/ TU Res. at 10. l l
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- i. 1 to determine if TUEC is currently maintaining a situation f inconsistent with the antitrust laws, similarly, TUEC is ;
entitled to advertise its services, but false or misleading advertisements that are apparently intended to hara TUEC's competitors are likewise relevant to the Commission's changed circumstances determination.12/
III. ;
22RCLUSION l l
Cap Rock's comments raised several allegations concerning ;
TUEC's conduct that demonstrate on-going violations of TUEC's comanche peak license conditions. Those allegations stand unrebutted. Indeed, TUEC's response itself constitutes evidence of anticompetitive intent. Cap Rock reiterates its belief that the existing license conditions prescribe precisely the kind of ,
anticompetitive conduct in which TUEC is currently engaged. If [
the license conditions permit this kind of conduct, Cap Rock submits that they are entirely ineffective to remedy the situation inconsistent with the antitrust laws that TUEC is ,
j currently perpetuating and no operating license should be issued i
l 12/ A monopolist is not forbidden to publicize its product L unless the extent of this action is so unwarranted by competitive exigencies as to constitute an entry barrier.
! Berkey Photo. In. v. Eastman Kodak Cox , 603 F.2d 263, 287 i (2d Cir. 1979), cert. denied, 444 U.S, 1093 (1980).
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TUEC until new license conditions are issued that effectively redress TUEC's anticompetitive conduct.
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Respectfully submitted, l By: '/ i Robert A. O'Neil l By: d ch j
fgofin Michael A3ragna*
r Attorneys For Cap Rock Electric Cooperative, Inc. ;
i Miller, Balis & o'Neil, P.C.
1101-Fourteenth Street, N.W.
Suite 1400 ,
Washington, D.C. 20005 (202) 789-1450 ;
Nebruary 10, 1989 I
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... l UNITED STATES OF AMERICA l EEFORE TEE l NUCLEAR REGULATORY COMMISSION l l
Texas Utilities Electric )
Company, at alt ) Docket Nos. 50-445A ;
Comanche Peak Steam Electric ) 50-446A i Station, Units 1 and 2 -
) !
f CERTIFICATE OF BERVICE r
I hereby certify that a copy of the foregoing " Reply of Cap i
)
Rock Electric Cooperative, Inc. to the Comments of Texas Utilities !
Electric Company" was served by hand delivery tot {
Cecil o. Thomas, Jr. William Lambe chief .
Office of Nuclear Regulations ;
Policy Development Technical U.S. Nuclear Regulatory .
Support Branch Ccamission :
Main Stop 12-3 One White Flint North !
One White Flint North llart Rockville Pike .
11155-Rockville Pike Rockville, MD 20852 Rockville, MD 20852 and by first class mail, postage prepaid on the loth day of February,1989 to:
Peter-B. Block, Esquire Chairman Administrative Judge Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Panel Board U. S. Nuclear Regulatory U. S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 Dr. Walter H. Jordan Ell:n Gir berg, Esquire Administrative Judge Atomic Sa;ity and Licensing .
881 W. Outer Drive Board Panel Oak Ridge, TN 37830 U.S. Nuclear Regulatory Commission Washingt: D.C. 20555 r
y 1
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l Elizabeth B. Johnson Stuart A. Treby, Esquire i Administrative Judge Office of the Executive Legal Oak Ridge Natural Laboratory U.S. Nuclear Regulatory l P. O. Box X, Building 3500 Commission 1 Cak Ridge, TN 37830 Washington, D.C. 20$55 l Chairman Thomas G. Dignan, Esquire ,
Atomic Safety and Licensing William E. Eggeling, Esquire i Board Panel Ropes & Gray U.S. Nuclear Regulatory 225 Franklin Street Commission Boston, MA 02110
- Washington, D.C. 20555 Mr. James E. Cummins Roy P. Lessy, Jr., Esquire ;
Resident Inspector Wright & Talisman, P.C. '
Comanche Peak S.E.S. 1050 17th Street, N.W.
P. O. Box 38 Washington, D.C. 20036-5566 Glen Rose, Texas 76043 ,
Mr. William L. Clements Mrs. Juanita Ellis Docketing & Service Branch President, CASE U.S. Nuclear Regulatory 1426 S. Polk Street Commission Dallas, Texas 75224 Washington, D.C. 20555 Nicholas S. Reynolds, Esquire Anthony 2. Roissan, Esquire f Wiliam A. Horin, Esquire Executive Director Bishop, Liberman, Cook, ,
Trial Lawyers for Public Purcell & Reynolds Justice 1200 17th Street, N.W. 2000 P Street, N.W., Suite 611 Washington, D.C. 20036 Washington, D.C. 20036 Robert A. Wooldridge, Esquire Billie Pirner Garde, Esquire Worsham, Forsythe, Sampels Citizens Clinic Director
& Wooldridge Government Accountability 2001 Bryan Tower Pro *jects .
Suite 2500 1901 Que Street, N.W.
Dallas, Texas 75201 Washington, D.C. 20009 Renea Hicks, Esquire Nancy Williams
- Assistant Attorney General Cygna Energy Services, Inc.
. Environmental Protection Div. 101 California Street
! P. O. Box 12548 Suite 10000 L Capitol Station San Francisco, CA 94111 Austin, Texas 78711
,o. }
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Mr. Lanny A. Sinkin l Christic Institute l 1234 North Capitol Street :
Washington, D.C. 20002 Mr. Kenneth A. McCollom i Administrative Judge i 1107 West Knapp j stillwater, OK 74075 !
seary S. Mizuno, Esquire !
office of the Executive I Legal Director !
U. S. Nuclear Regulatory )'
. Commission washington, D.C. 20555 Joceph Gallo, Esquire !
Isham, Lincoln & Beale !
1120 Connecticut Avenue, N.W.
Suite 840 l Washington, D.C. 20036 ;
Mr. Robert D. Martin Regional Administrator, Region IV l U.S. Nuclear Regulatory 1 Commission i 611 Ryan Plaza Dr., suite 1000 j Arlington, TX 76011 l
(de _
9' John' Michael Adragna
'* Miller, Balls & 0'Neil, P.C.
/ 1101 Fourteenth Street, N.W. '
Suite 1400 Washington, D.C. 20005 :
(202) 789-1450 ]
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