ML18005B010

Requests That Commission Dismiss North Carolina Eastern Municipal Power Agency Complaint Re CP&L Violation of Antitrust Conditions on Basis That Power Agency Has Pursued Claim in Multiple Forums & Reasons in CP&L 890615 Ltr

ML18005B010
Person / Time
Site:	Harris
Issue date:	08/04/1989
From:	Avery G CADWALADER, WICKERSHAM & TAFT, CAROLINA POWER & LIGHT CO.
To:	Murley T Office of Nuclear Reactor Regulation
References
A, NUDOCS 8908150254
Download: ML18005B010 (7)

Text

gC CKLERATED D1 BUTION DEMO?i STRA,TION SYSTEM REGULATOR INFORMATION DISTRIBUTION ~STEM (RIDS)

ACCESSION NBR:8908150254 DOC.DATE: 89/08/04 NOTARIZED: NO FACIL:50-400 Shearon Harris Nuclear Power Plant, Unit 1, Carolina AUTH. NAME AUTHOR AFFILIATION AVERYiG.A. Cadwalader, Nickersham & Taft AVERY,G.,A. Carolina Power & Light Co.

RECIP.NAME RECIPIENT AFFILIATION MURLEY,T.E. Offi'ce of Nuclear Reactor Regulation, Director (Post 870411

SUBJECT:

Discusses CPaLs position re arbitration proceeding between CPaL 6 NC Eastern Municipal Power Agency. I DISTR1BUTION CODE: YE03D COPIES RECEIVED:LTR ( ENCL 0 SIZE: D TITLE: Request for NRR Action (e.g. 2.206 Petitions) 6 Related Correspondenc S

NOTES:Application for permit renewal filed. 05000400 RECIPIENT COPIES RECIPIENT COPIES ID CODE/NAME LTTR ENCL .ID CODE/NAME LTTR ENCL PD2-1 LA PD2-1 PD BECKERiD INTERNAL: EDO/BRIDGERS NRR DIR 1 NUDOCS-ABSTRACT OGC/HDS1 1 OGC/ROED 01 1 EXTERNAL: LPDR NRC PDR R

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PALM BEACH, FLA. 33480 HEW YORK, M.Y. IO038 (305) BSS 0500 (212) SOA BOOO YWX: SIO 952 7828 CABLE( LABELLVM YELEX: I20Iie/BBYies YWX: TIO 822 I034 RAPIEAX: (202) 203 8200 XEROX: (202) 387 ISIS August 4 1989 Dr. Thomas E. Murley Director, Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission 11555 Rockville Pike, 12th Floor Rockville, Maryland 20852

Dear Dr. Murley:

Carolina Power & Light Company ("CP&L") has received a copy of a letter to you, dated June 22, 1989, from Gary J.

Newell, counsel for North Carolina Eastern Municipal Power Agency

("Power Agency" ). CP&L believes that Power Agency's letter mischaracterizes CP&L's letter of June 15, 1989. CP&L wishes to clarify two matters: (1) the effect of the Federal Energy Regulatory Commission's ("FERC's") acceptance of the 1981 Power Coordination Agreement ("1981 PCA") between CP&L and Power Agency, and (2) CP&L's position regarding an arbitration proceeding between CP&L and Power Agency.

In its June 15, 1989 letter to you, CP&L responded to Power Agency's Request for Commencement of Xnformal Complaint Procedure under Section 5.3.2, NUREG-0970 (the "Complaint" ).

Power Agency's Complaint argued that CP&L's interpretation of the 1981 PCA violated the antitrust conditions contained in the facility operating license for CP&L's Shearon Harris Nuclear Power Plant. CP&L responded that Commitment 6 of the operating license required that the implementation of the antitrust commitments be "on reasonable terms and conditions as consistent with the Federal Power Act and all other lawful regulation and authority. . . ." CP&L affirmed that its actions have been entirely consistent with FERC's regulation under the Federal Power Act (FPA). Xn so doing, CP&L explained that FERC's acceptance of the 1981 PCA for filing and its dismissal of a Power Agency complaint pending arbitration proceedings I'908}50254'9080405000400 PDR ADOCK PNU

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I Dr. Thomas E. Murley August 3F 1989 Page 2 FPA. CPGL was careful to state that the had accepted the 1981 PCA, not that it had approved it. FERC Power Agency now argues that "FERC's acceptance of the 1981 PCA was ex ressl not a finding that the agreement comports with the statutory standards under the Federal Power Act."

Contrary schedules to Power Agency's implication, initial rate such as the 1981 PCA are presumed to be just and reasonable upon acceptance at FERC even though the structure of the FPA generally prevents FERC from making formal in that regard. In at least two cases, federal courts findings have stated that under the FPA initial rates are "presumed just and reasonable until the Commission determines otherwise." Boston Edison Co. v. FERC, 856 F.2d 361, 369 (1st Cir. 1988); Otter Tail Power Co. v. FERC, 583 F.2d 399, 405 (8th Cir. 1978), cert.

denied, 440 U.S. 950 (1979)

As the court recognized in Boston Edison, the conclusion that an initial rate is "presumed just and reasonable until the Commission determines otherwise" derives from the filed rate doctrine.~ See 856 F.2d at 368-69. As the court noted, a regulated electric utility must file all rates with FERC. Id. at 368, ~citin 16 U.S.C. 9 824d(c). From that requirement flows the basic tenet of the filed rate doctrine: a utility "can claim no rate as a legal right other than the filed rate, whether fixed or m~erel ~acce ted ~b the Commission, and not even a court can authorize commerce in the commodity on other terms." Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S.

246, 251-252 (1951), cited ~b Nantahala Power 6 Li ht Co. v.

added) . Moreover, as Boston Edison also recognized, all filed rates must be just: and reasonable. 856 F. 2d at 368, ~citin 16 U.S.C. 5 824d(a). The Federal Power Act provides in this regard that any rate or charge made, demanded or received any public utility for electric energy "that is not just and by reasonable is hereby declared to be unlawful." 16 U.S.C. 824d(a).

CP&L tendered the 1981 PCA for filing at FERC on October 7, initial rate transmittal 1981. The letter described the 1981 PCA as "an schedule [tendered] pursuant to Section 35.12 of the Commission's regulations." FERC accepted the 1981 PCA for filing in a letter order dated October 30, 1981.

In Otter Tail, the court did not discuss the basis for its conclusion that initial rates are presumed to be just and reasonable. The issue in Otter Tail was whether a particular transmission rate schedule constituted an initial rate or a change in rate.

4r Dr. Thomas E. Murley August 3, 1989 Page 3 Accordingly, once a rate is accepted for filing, presumed to be just and reasonable.

it must be Again, as the Boston Edison opinion noted:

[t]he legality of rates so filed is not conditioned upon the Commission's approval.

Unless they are challenged, either by an interested party or upon the Commission's initiative, the filed rates become legal rates.

Id., ~citin Montana-Dakota, 341 U.S. at 255-56 (Frankfurter, Z.

dissenting); see also Montana-Dakota, 341 U.S. at 251-252 (majority holding that the right to a reasonable rate is the right to a rate which the Commission files or fixes). Here, FERC accepted the 1981 PCA for filing.

CP&L recognizes that Otter Tail noted that notwithstanding its presumption that initial rates are presumed to be just and reasonable, it did not mean to imply that merely because a rate schedule is in effect that an evidentiary presumption of reasonableness attaches. See Otter Tail, 533 F.2d at 405 n.27. In this case, however, nothing has been done to undo the presumption of consistency with the FPA that is the necessary result of the filed rate doctrine. Under the FPA, FERC may hold a hearing, either upon complaint or sua ~s onte, to determine an initial rate's lawfulness. Boston Edison, 869 F.2d at 369. If FERC finds the rate or any charge therein to be "unjust, unreasonable, unduly discriminatory, or preferential,"

it shall proceed to determine the rate or charge to be thereafter observed or enforced and shall fix the same by order. Id.,

citinc[ 16 U.S.C. 5 824e(a), (FPA 6 206 (a)).

FERC has not modified the filed rate schedule in this case. On June 7, 1988, Power Agency filed a complaint with FERC asking that it require CP&L to accommodate Power Agency's proposed use of power from the South Carolina Public Service Authority. On December 22, 1988, FERC dismissed the complaint "because the dispute has not yet been subject to arbitration as required by the 1981 [PCA]." In its December 22, 1988 Order, FERC found that Power Agency had an obligation under the terms of the 1981 PCA to submit its dispute with CP&L to arbitration.

Thus, not only does the filed rate doctrine create a presumption that the 1981 PCA conforms with the FPA, FERC has specifically found the 1981 PCA's arbitration provision to be enforceable.

Power Agency also complains that CP&L's June 15, 1989 letter failed to advise you that "on June 14, 1989, CP&L filed with the arbitrator a motion to stay the arbitration proceeding C

0 t eW +v ws

Dr. Thomas E. Murley August 3, 1989 Page 4 pending a decision by the U.S Court of Appeals for the District of Columbia Circuit on Power Agency's petition for review of FERC's dismissal orders." CP&L wishes to make clear that not object to Power Agency's exercising its right to arbitration it does under the 1981 PCA. Nor does CP&L object to Power Agency seeking review of FERC's order dismissing Power Agency's complaint pending arbitration. CP&L's objection was to Power Agency's attempt to pursue simultaneously its claim in multiple forums.

CP&L believed that course of action to be wasteful of both public and private resources and was concerned that inconsistent determinations.

it might lead to If the court finds that FERC erred in deferring to the arbitrator and remands the matter to FERC for decision, the arbitration could be rendered nugatory.

Accordingly, it was CP&L's position that the arbitration should proceed only once the Power Agency accepts the arbitrator's jurisdiction or once the court finds that. he has jurisdiction.

Judge Sidney Smith, the arbitrator, met with the parties to discuss this issue on July 19, 1989, and, after hearing argument from CP&L & Power Agency, determined to proceed with the arbitration. In the course of discussing the issue during this meeting, the arbitrator observed that it, was his belief that the D.C. Circuit would uphold the FERC order requiring arbitration to proceed.

For the foregoing reasons and CP&L's letter of June 15, for the reasons stated in 1989, the Commission should dismiss Power Agency's complaint.

Respectfully submitted, Ge rge A. Avery Counsel for Carolina Power

& Light Company cc: Gary J. Newell