ML19329E762

Requests Comments on Encl Proposed Recital of Contested Issues of Fact & Law in Preparation for 720712 Prehearing Conference.Excerpt from Util Annual Rept 1972 Encl

ML19329E762
Person / Time
Site:	Midland
Issue date:	06/29/1972
From:	Watson K WALD, HARKRADER & ROSS
To:	Rutberg J US ATOMIC ENERGY COMMISSION (AEC)
Shared Package
ML19329E760	List: ML19329E759 ML19329E762 ML19329E772
References
NUDOCS 8006170924
Download: ML19329E762 (19)

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APPENDIX B:

Letter from Keith S. Watson, Esq., to Joseph Rutberg, Esq., (Juen 29, 1972) and attached

" Recital of Contested Issues of Fact and Law".

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LAW OFFICES WA LD, H AR K R AD E R & R OSS C R ETON A 4KRADER 1320 NIN ET EENTH STREET. N. W.. WASHINGTON,0. C. 20036 WM. WARFIELD ROSS ST E PH E N S. IVE S. JR. AREA CODE RO2 OONALD M. GREEN g g g. g ig g M M AS C M ATTH EW S, JR.

JOEL E MOFFMAN '*

O EORG E A. AVERT ALEN ANDER W. SICRCK

"",0c L ' ";E ,",","O June 29, 1972 STEPH EN M. TMulTT JAMES R. WHIT E M EITH S. WATSON JAM E S DOUGLAS WELCH

8. MICH A E L GR E EN B ERS E R OF CouMSEL PMILIP ELM AN ,

NEAL P. RUTLEDGC Joseph Rutberg, Esq.

Offico of General Counsel Atomic Energy Commission 20852 w RE: Consumers Power Company, Midland Plant Unit 1 and 2, AEC Docket Nos. 50-329A, 50-330A, Department of Justico File 60-415-20

Dear Mr. Rutberg:

As agreed at the meeting of counsel in this proceeding on May 8, 1972, we have prepared and enclosed a proposed recital of contested issues, in preparation for the Prehearing Conference on July 12, 1972.

We request that counsel forward any suggested revisions or additions to this proposal to this office so that they are roccived by un by Monday, July 10, 1972. If no comments are forthcoming, we shall assume the recital is acceptable as proposed.

f. We are informing Mr. Brand and Mr. Fairman of this request by copies of this letter.

Sincerely, Keith S. Watson KSWaasi cca Wallace Brand, Esq.

/,Afames Fairman, Esq.

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UNITED STATES OF AMERICA ATOMIC ENElkjY ( OIGIISSION In the Matter of )

) Docket Nos. 50-329A CONSUME?.S POWER COMPANY ) and 50-330A (Midland Plant, Units 1 and 2) )

RECITAL OF CONTESTED ISSUES OF FACT AND LAW In accordance with the mandate of Section 2(b) of the Notice and Order for Prehearing Conference, th,e parties, and the proposed intervenors in this proceeding submit the following recital of contested issues of' fact and law, which have been raised by one o'r more parties or proposed intervenors in this proceeding. The following is submitted without prejudice to the right to submit to'later additions or modifications thereto and without prejudice to the right 4

of any party to contend that'a particular issue is not law-fully ~or properly before the Commission or Hearing Board:

1. What is the scope of the Commission's anti-t trust review embodied in the 1970 amendments to the Atomic Energy Act?

2. Wha,t is the-relationship between Consumers Pcwer Company's (hereinafter " Applicant") general system activities which are allegedly inconsistent with the anti-trust laws and the proposed licensing of the Midland units; to what extent are issues relating to such activities (e.g.,

sales contracts, coordination arrangements) relevant to this C

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proceeding?

3. What is (are) the relevant geographic bulk power supply market (s) ? What in (are) the relevant retail distribution market (s)?

4. Is there competition in the relevant bulk power supply market (s) and the retail distribution market (s);

what is the effect of government regulation upon competition in these markets? -

- 5. Does Applicant have a monopo,1y of, or has it monopolized, bulk power supply in the relevant mariet(s)?

6. Does Applicant own or control all or sub-stantially all transmission in the market (s)i if so, is that control a source of its alleged bulk pcwer monopoly power or its alleged monopolization?

7.. Is Applicant abusing its alleged control over transmission to retain and extend its alleged bulk power

i. supply monopoly; can the Applicant use such alleged mono-poly to retain and extend its alleged monopoly in the retail distribution markets?

8. Do Applicant's wholesale rate schedules and other contractual arrangements provide adequate access to ,

the benefits of large-scale generation and transmission, if any, for its wholesale customers and others seeking such access? If not, are other alternatives, such as self-I l

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.3-generation and transmission, available to municipal and cooperative electric systems which would provide such access?

9. Do the existing governmental subsidics and tax and financing advantages of the municipal and electric cooperative systems place them in.a position to compete unfairly with Applicant for wholesale and retail power, loads; should the Ccemission take account of such advan-(~

tages in determining to grant or condition.the licenses involved in these proceedings?

10. Can the criteria of Sections 1 or 2 of the

.Sherman Act be applied mechanically to the ilectric power industry?

11. Are Applicant's neighboring municipal and electric cooperative systems financially viable?

12. Are the aforementioned municipal and electric

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N cooperative systems able to compete effectively against Applicant in terms of their ability to attract new customers and their ability to operate efficiently and at reasonable profit margins? Are they able to take advantage of bulk power supplies- for the benefit of their present customers?

13. To what extent does the law contemplate that municipal or cooperative electric systems should compete with other neighboring utilitics and for what market (s) ?

4 14. Has Applicant unreasonably prevented arrange-a

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monts which would allow the aforementioned municipal and cooperative systems to utilize Applicant's transmission facilitics; has Applicant unrcasonably prevented the coordination of growth and operations between Applicant and such systems?

15. What would be appropriate relief in the event 4

of a Commission finding that unconditioned granting of the, licenses would. create or maintain a situation inc$n'sistent I, ,,. with the antitrust laws? ,,,. ,

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16. As a condition of the licenses, should the Applicant be required to make available to the proposed intervonors any or all of the following: s' (a) ownership of an appropriate portion of the Midland units or power therefrom on an equivalent basis, (b) the necessary transmise'.on services to transnit power on a non-discriminatory basis, and

' (c) specified coordination terms?

17. Would an arrangement granting some of Appli-cant's customers an ownership interest in or other forms of access to, the Midland units be unfair, discriminatory or unlawful under the laws of the State of Michigan and

-the Federal Power Act?

18. Would an arrangement providing for equal percentago.of reserves between Applicant and some or all k.

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19. Would the sale of unit power to, or partici-pation in the Midland plant, by some or all of the afore-mentioned municipals or cooperatives be unfair to Applicant or its customers, or be unlawful under the laws of the .

State of Michigan or the Federal Power Act?

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APPENDIX C:

Intervenors' proposed license conditions, Midland Units 1 and 2.

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( INTERVENORS' PROPOSED LICENSE CONDITIONS MIDIAND UdITS 1 AND 2

1. As used herein; (a) " Applicant" means Consumers

, Power. Company; (b) " utility" means a public utility under ,

fcderal or Michigan law; an REA Cooperative; a governmental (federal, state or municipal) unit or agency having an elec- ,

tric generation or distribution system; (c) " entity" means (1) a " utility"; or (2) any person or organization which is legally authorized to represent one or more utilities.

2. Consumers Power will interconnect with and co-ordinate reserves by means of the sale and exchange of emergency and maintenanco power with any entity or entities in its service arca. / engaging in or proposing to engage in

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electric bulk power supply on terms that will provide for Applicant's costs (including a reasonable return) in con-noction therewith and allow the other partzcipant(s) full '

accesstothebenefitsohreservecoordinationandreserve sharing.

• / The uso of the term " service arca" in no way indicates an assignment or allecation of wholesale market areas.

It is intended only as a general indication of an arca within the State of nichigan where Applicant provides como class of clectric service.

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(' The participant (s) to the reserve sharing arrangc-ment shall, ' jointly with Applicant, establish from time to time the minimum reserves to be installed and/or purchased, as necessary,to maintain adequato reliability of power supply on the interconnected system of Applicant and participant (s) .

The roscrvo responsibility thus determined shall be calculated as a percentage of peak loads and is not to be directly re-lated to'the size of generating units. Under no circumstanccs will minimum spinning or operating reserve requirements ex-coed the installed reserve requirement.

At the request of a participant or the Applicant, each shall, to the extent it has surplus available, soll and furnish spinning and/or operating reserve services to the other at terms which are compensatory, subject, however, that these terms be no higher than those charged to any other utility with which Applicant or the participant (s) is inter-connected. .

3. Interconnections will be made at the transmission voltage requested by the entity if such vo.lt. age is availabic on Applicant's installed or planned facilitics in the arca where interconne,c. 3 ion is desired, if the costs to Applicant will not c::cced Applicant's benefits. Where the entity pays b-

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the full costs of the interconnection, the benefits to the Applicant will always be deemed to exceed the costs.

4. Mutual emergency and maintenanco service provided under such agreements will be furnished by each party to the other to the fullest extent available as desired where such supply does not impair service to the supplier's customers.

Reimbursement for these services shall be on a non-discrimi-natory basis and rates shall be no higher than those estab--

lished with any other utility with which the supplier is interconnected.

The Applicant and cach participant shall provide to the other emergency and maintenance power if and when avail -

able from its own generation, or through its transmission from the gene ration of others to the extent it can do so without disrupting service to its own customers.  ;

5. Applicant will purchase frcm, or sell " bulk power" to any other entity or entities in the aforesaid arca engaging in, or proposing to engage in, the generation or

. ownerchip of electric power in bulk, at its cout, including a reasonable return', 'ihen such transactions would serve to reducc the overall cost of now bulk power supply for Appli-1 canf- or the other participant (s) to the transaction. This e

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refer:specifically to the opportunity to coordinate in tho

. planning of now generation, transmission, and associated

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..- facilitics, including the joint ownership of new generation and trancmission facilitics or a portion of the capacity in such facilities.

In circumstances where coordinated planning results tin any now generating unit (s) which Applicant owns, constructs, i organizes, or is a joint participant with others, Applicant will, upon timely request, sell to any other entitics who sech to participato in such planning, eith'c1 an appropriate undivided interest-in.the plant in foe, or a portion of the plant capacity (i.e., unit poucr) upon the basis of a rate that vill recover to the Applicant the average fixed costs

(including a reasonablo return) of the plant. In either event the utility rocciving power will pay the associated 4

energy and operating costs incurred for the power it receives, at rates and term:i no greater than those charged to any other L'

I~~ utility'to whom such power is sold. The above shall include

' the right to participate on an equitable basis in the owner-ship. of the Midla.nd Units lios.1 and 2, or a portion of the

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capacity and associated energy thereof. ,

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6. Applicant will provide transmission service over its system between or among two or more entitics with which it is interconnected on the same terms as exist betwcon Ap-plicant and any other utility with which it is interconnected ,

to the extent that subject arrangements reasonably can be ac-commodated from a functional and technical standpoint. ,

This condition applies to entitics with which Applicant may be

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interconnected in the future as well as those with which it is now interconnected.

Applicant is obligated under this condition to trans-mit bulk power for other entitics on the terms stated above, and to include in its planning and construction programs suf-ficient transmission capacity as required therefor, provided

.that such other entities give Applicant sufficient advance notice as may be required to accommodate the arrangement from a functional and'tcchnical standpoint and that the other enti-ties will be obligated to compensato applican't for the use of its. system at ratos and terms no higher than any other utility with which Applicant is interconnected. -

7. Applicant will not directly or indirectly, ontor into,. adhere' to, continuc, maintain, renow, enforce or claim

( .any rightn under any contract, agreement, understanding, joint

. plan or joint program wit'.h entitics to limit, allocate,-restrict,

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( divide or assis;n, or to impose, or attempt to impose, any

. limitations or rostrictions respecting the markets or terri-

. tories.in which cither the Applicant or any other entity may hereafter sell or transmit electric bulk power supply.

8. Upon request the Applicant will sponsor the mcmbership of any entity in its aforcsaid arca and will take all necessary and available steps to facilitato membership for said entity in utility planning organizations or power pools including the Michigan Power Pool and the Michigan Illinois Indiana Ohio ("MIIO") group with which the Applicant ic or may become affiliatad. Membership shall be sponsored on the basis of terms and conditions established herein.

9. To the extent that compliance with the foregoing conditions requires filings to be made under the provisions of the Federal Powcr Act or by the statutes ,of the Stte of Michigan or by any regulatory agency, the Company shall sub-mit all necessary filings to the Federal Powcr Commission or 4

to the MPSC or any other appropriate regniatory agency in ac-cordance with the provisions of the respective laws, the re.gu-lationn thereunder, and the provisions set forth thercin.

10. Unless otherwise specified, should a dispute arisc between the Applicant and an entity over obligations under k  : -G- .

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these-licenso conditions, this commission shall have con-tinuing jurisdiction to resolve such dispute.

11. Should a dispute arisc between the Applicant and an entity over the compensation to be received by the Appli-cant for services. it is obligated to provide hereunder, the Applicant will nonetheless provide the services and refund to the entity, or receivo from the entity such amounts ret-roactive'ly to the date of initiation of the service as do-termined by a final order of the Federal Power Commission to be either less then, or in excess of, a just and reasonable i

rate therefor.

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APPENDIX D:

Consumers Power's Tax Advantages e

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, Statement of income Consumers Power Company .

YEAR ENDED DECE!.*BER 31 s

1972 1971  !

OPERATING REVENUE (Note 5): .

Electric . . . . . . . . . . . . . . . . . .... $416,994,066 $364,229,770 /

Gas . . . . . . . . . . . . . . . . . . .... 332,085,528 286,091,455

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Steam . . . . . . . . . . . . . . . . . .... _ 1,373,540 1,295,582 Total operating revenue . . . . . . . . . . .... $750,453,134 $651,616,807 OPERATING EXPENSES AND TAXES:

Operation- -

Purchased and interchanged power . . . . . . . ... $ 55,6S2,305 -

S 41,860,127 fuct consumed in electric generation . . . . . . . ... 91,068,445 84,206,180 Cost of gas sold . . . . . . . . . . . . . .... 156,233,230 130,410,662 Other. . . . . . . . . . . . . . . . . .. 139,620,402 122,509,541

, Total operatbn . . . . . . . . . . . .... $444,469,333 - $378,986,513 Maintenance . . . . . . . . . . . . . . . . .... 41,186,864 31,512,272 Depreciation and amortizaticn . . . . . . ....

62,937,213 53,210,339  :

General taxes . . . . . . . . . . . . .. 48,203,933 43,872,856 Federal inc me taxes . . . . . . . . . . . .... 11,370,315 14,468,659 State income taxes . . . . . . . . . . . . 3,216,110 3.064,835 Provisien for deferred ine:me taxes, net . . . . .. . 18,972,411 14,300,1G4 Charge cquiva'ent to investment tax credit, net . . . .... 5,959.622 5,751,207 Total cperating expenses and 1:xes . . . . ... 5630.338,375 $550,16L955 Net operating income . . . . . . . . .. . $114,116,753 $101,449.852 OTHER INCOME:

Allowance for funds used during ccnstruction (Note 2) . . . $ 25,454,643 $ 21,861,822 Dividends from Michigan Gas Storage Company . . . . . . .... 1,920,000 1,897,500 Gain on reacquisition of long term debt . . . . . . . . .... 1,418,488 1,260,352 Other, net . . . . . . . . . . . . . . . .... 525,616 888,645 Net other income . . . . . . . . . . . . .... $ 29,318,747 $ 25,908,319 a

InIEREST CHARGES:

laterest on long terrn debt . . . . . . . . .... $ C3,753,928 $ 53,829,333 Otherinterest charges . . . . . . . .. 1,533,433 1,749,029

, Total interest charges . . . . $ 65,257,331 $ 55,573,412 Net income . . . . . . . . . . . ... $ 78,178,145 $ 71,779,759 DIVIDENDS ON PREFERRED STOCK 11,251,533 7.107,903 Net inccce after dividends on preferred stock . . . . .... $ 66,926,612 $ 64,671,856 EARNINGS PER SHARE OF CO?,'?,'ON STCCK BASED ON AVERACE SHARES OUTSU.NDING (24,533,833 shares in 1972 and 24,033,838 sh:rcs in 1971) .. 52.72 $2.69  !

The accompanyirg r.otes are an integral part of this statement. *j l

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,-Statement of Retained Earnings ' Consumers Power Company YEAR ENDED CECE'.'EER 31 1972 1971 RETAINED EARNINGS-Beginning of year . . . . . . . . ..... $195,599,260 $178,995,030 ADD-Net income after dividends on preferred stock . . . . . . ..... 66,926,612 64,671,856

$262,525,872 $243,666,936 DEDUCT-Cosh dividends on common sicck declared and paid in the amount cf $2.00 per share in 1972 and 1971 . . . . . . . . . 49,167,676 48,057.676 RETAINED EARNINGS-End cf year (Note 8) . . . . . . . . ..... $213,359,1S6 $195,599,260 Statement of Source of Funds for Gross Property Additions YEAR ENDED DECEMBER 31 SOURCE OF FUNDS FOR GROSS PROFERTY ADDITIONS: 1972 1971 Funds generated from operations: Net income after dividends on preferred stock . . $ 66,926,612 $ 64,671,856 Add-Expenses not requiring current outlay of funds- -

Depreciation and amertization i Per statement of inccme . . ..... 62,937,243 58,210,339 Charged to other accounts . .... 11,471,4'S 6,402,060 Osferred incoma taxes, net . . .. . . 18,972,411 14,300.164 Investment tax 4 dit, net . . ..... 5,959,632 5,751 207

$166,267,384 $149,335,676 Less-Divihnds declared on common stock . 49,167,676 48,067,676 Retirernent of long-tcrm debt and preferred stock 11,733,000 10.531000

$105,301,708 $ 90,73050' funds obtained from new financing: Issuance of common stock (Note 4) . .. $ 59,620,000 Issuance of praferred stock . . . ..... 70,000,000 70,000,000 Issuance of first mortgage bonds . . .... 120,000,003 120,000,000 Increase (decrease)in other long term debt . ... (4,417,219) (4,239,197)

Increase (decrease) in notes payable . ... 6,500,000 (36,500,000)

$251,702,781 $149,260.803 Funds obtained ham c%r sources: Increase in rescree for possible rate refunds (Note 5) $ 183,701 $ 7,277,749 increase in cottibutions in aid of construction . 6,293,033 3,496,440 Change in net currcrt assets and current liabilities . 9,020,027 7,018,363 Other, net . . . . 2.049.419- 62.061

$ 18,346,156 $ 17,854,613 (Increase). decrease in investment in Northern U.Lhisan Erp' oration Company (thte 3) 4,000,000 (4,000,000)

$ 22,346,126 5 13.851.613 GROSS PROPERTY ADDITIONS , . . . . . . . . . . . . . . $379,410,675 $253,845,416

, ( , Denotes deduction.

The accortpanying notes are an integral g: art of these statements. i-21 8 a