ML20046B864

Submits Terrebone Parish Consolidated Govt & Louisiana Energy & Power Authority Response to Questions in NRC 930707 Ltr,W/Regard to Gsu Commitments Limit Enforcement Proceedings Brought Before AEC Now NRC,39FR12376 (740405)

ML20046B864
Person / Time
Site:	River Bend
Issue date:	08/02/1993
From:	Brand W BRAND, BEENY, BERGER & WHITLER, TERREBONNE PARISH, LA
To:	Grant G Office of Nuclear Reactor Regulation
References
NUDOCS 9308060336
Download: ML20046B864 (8)

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BR AND, BEENY, BERGER & WHITLER ATTORNEYS AT LAW WALLACE E DWARD ERAND SUITE 1000 SEAN T. BEENY 173O K 5 MEET, N W.

WASHINGTON, D C. 20006 MELVIN c. BERCE R JOHN D WHIRER JENNIf E R A DUANE FACSIMILE (202) 223-9183 07 COUN5f L DAVID A LECKIE MILTON J GROSSMAN August 2, 1993 BY HAND Geoffrey Grant, Acting Chief Inspection and Licensing Policy Branch Program Management, Policy Development and Analysis Staff U.S. Nuclear Regulatory Commission Washington, DC 20555

Dear Mr. Grant:

We submit herewith Terrebonne's and LEPA's response to the four questions in your letter of July 7, 1993.

1.Q In the FERC " Order Accepting Rate Schedules, Accepting Amendment to Power Agreement, Conditionally Accepting Transmission Tariff With Modifications, Conditionally Accepting Service Agreements, Granting Waiver of Notice, and Denying Motion to Update Market Power Analysis", dated April 5, 1993, 63 F.E.R.C. Paragraph 61,025, the FERC urged the Entergy customers (and the NRC staff presumes GSU's customers as well subsequent to the merger) who are eligible for certain benefits perceived to be broader than what is termed " point-to-point" transmission service over the Entergy system, to approach the FELC with specific objections in the context of a request to amend or approve a service contract with Entergy Corporation. Would Terrebonne and LEPA explain to the staff why this proposal would not be an acceptable option in resolving its transmission access dispute with GSU/Entergy?

1.A In the first place, GSU's commitments limit enforcement to proceedings brought before the Atomic Energy Commission (now NRC). 39 F.R. 12376 (April 5, 1974).

Secondly, the approach to obtaining network transmission service suggested by the FERC would require Entergy's customers, first, to find a coordinating partner willing to develop a transaction wholly dependent upon the favorable outcome of litigation to overturn the point-to-point limitation already permitted by FERC, without a DGOO#b 9308060336 930802 PDR ADOCK 05000458 y

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, BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief  :

August 2, 1993 Page 2 ,

hearing and over strenuous protest, not only in the "open access" case (Docket No. ER91-569-000) but also in the merger case (Docket No. EC92-21-000 & ER92-806-000). Then i the customers would have to successfully prosecute that litigation against Entergy as augmented by the proposed merger with GSU. Entergy as merged with Gulf States Utilities will have very deep pockets. It will have about

$21 billion in assets and will have gross revenues of between $5 and $6 billion annually. It is generally recognized by antitrust lawyers and economists that delay in .

litigation like that suggested by FERC runs to the benefit j of a well entrenched monopoly, and such monopolies have the ability to finance the delay of such proceedings for years.'

Associated with such delay from the standpoint of the opposing parties are the substantial costs of participating in such protracted litigation by those who are not receiving monopoly profits.

The factor of delay was taken into consideration by the framers of the "prelicensing" antitrust review provisions-- f Section 105 of the Atomic Energy Act. Congress framed the legislation so that the determination required by.Section 105 would have to be completed before a permit to begin {

construction would be issued. Requiring a final decision before a license could be issued helped to avoid such delay and high cost in the Consumers Power, Alabama Power, and 2

CAPCO proceedings. As the Commission is aware,.most other.

cases arising under Section 105 were settled, since it became apparent that these usual monopoly advantages would not be available.

These factors of delay and cost are potentially present  ;

in any alternative to this proceeding. If the anetwork transmission" issue is a part of the current license '

i amendment proceeding--in which Entergy and Gulf States have-a disincentive to delay--the smaller utilities such as l

'See e.a. , In re Burlincton Northern Inc. , 822 F.2d 518,527-28 l (5th Cir. 1987), cert. denied, 484 U.S. 1007 (1988). )

2 Consumers Power Company, (Midland Units 1 and 21, 6 NRC 892, 945-997 (ASLAB 1977); Alabama Power Company, (Joseph M. Farlev Nuclear Plant, Units 1 and 2), 5 NRC 804 (ASLB 1977), aff'd in part, reversed in part, 13 NRC 1027 (ASLAB.1981); aff'd sub, nom Alabama- Power Company v. Nuclear Reaulatory Commission,.

692 F.2d 1362 (11th Cir.1982) , cert. denied, 4 64 U.S. 816 (1983);

Toledo Edison Company, et al . , (Davis-Besse Nuclear Power Station, Units 1. 2 and 3), 5 NRC 133 (ASLB 1977), aff'd, 10 NRC 265 (ASLAB 1979).

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, BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief August 2, 1993 Page 3 ,

Terrebonne and LEPA will be able to participate and can fund some reasonable level of participation. If there is no disincentive to delay, the proceeding becomes one in which the arena is extremely favorable to the party able to fund litigation expense without regard to its cost. This is surely Entergy; it is not Terrebonne or LEPA.

In the present situation Entergy's so called "open access" tariff contains the seeds of delay that can prevent or greatly increase the cost to Terrebonne and/or LEPA of engaging in coordination with others. In order to even be eligible to reauest (not obtain but only request) transmission service under the "open access" tariff one must enter into a transaction that will commence within 90 days ,

or, if service is to commence later than 90 days, have either an executed contract or have a contract that is contingent on the availability of the requested transmission service. See Entergy open access tariff, Section 3 (b) (2) ,

which is contained as Attachment K to Terrebonne's Comments.

Thus, if Terrebonne or LEPA were to rely on the FERC filed tariff to resolve transmission problems they would first have to complete negotiations on the power arrangement before they could even request service under the "open access" tariff. And they would have to make business decisions without knowing about the availability or the price of transmission service. This puts Entergy in a position to block or, at least, greatly hinder Terrebonne and/or LEPA from engaging in coordination with others. It ,

also means that Terrebonne and/or LEPA may be required to expend substantial funds and time on negotiating transactions that could easily be delayed by Entergy to the '

point of rendering them impossible.

Various shortcomings of the "open access" tariff were 1 detailed in paragraphs 46-47 of the affidavit of Mr. Sylvan J. Richard, General Manager of LEPA. (This affidavit was included in Attachment E to Terrebonne's Comments) Among those shortcomings are no assurance as to price ($ 46d) and the inadequate nature of the time consuming FERC complaint procedure to resolve disputes, which can take years (4 C d).

Mr. Richard goes on to state how Entergy can delay or kill both short and long term transactions:

e. In the case of relatively short-term transactions, any coordinating utility would unquestionably try to deal with another utility that could readily commit to deal i rather than wait for the FERC to resolve the disputes. Further, the opportunity to engage ,

in the transaction may be gone by the time i

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BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief August 2, 1993 Page 4 FERC acts. Thus, the ability of Entergy to hinder a system like LEPA from committing to a short term transaction for even a few months is likely to kill many deals permanently.

f. In the case of long term transactions i.e., where a good deal of lead time is necessary, Entergy's ability to cause delay is not as great, but it still could cause enough trouble for the coord.inating partner to go elsewhere for a joint venturer or delay the project long enough to increase costs.

Here too, Entergy's ability to tie a utility up in a FERC proceeding regarding cost or availability of transmission service is likely to either kill the deal or increase its cost. ($ 46 e and f).

Mr. Richard goes on to conclude:

We need a "real" tariff, not just one that suggests you may ask for service and wait and see if you get a contract -- or at what price. The service should be available on notice. If the system lacks capacity, the response should be the date that service can be reasonably available. (1 47).

Entergy itself recognizes the impracticality of GSU using the open access tariff to engage in transactions through Entergy. One of Entergy's principal witnesses (Mr. Gallaher) testified at the FERC that there were many practical restraints that prevented first tier utilities from engaging in transactions with one another. See Replies of Terrebonne and LEPA to Response of GSU to the Comments on Antitrust Issues filed July 9, 1993 at p. 7 and supporting papers. If GSU cannot use the tariff effectively, how can Terrebonne or LEPA reasonably be expected to do so?

In sum, use of the suggested procedure, especially when coupled with provisions of the "open access" tariff, is exactly what a monopolist would want--a device for creating so much uncertainty that it will kill or delay coordination opportunities of its competitors and limit their ability to lower costs.

.. BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief August 2, 1993 Page 5 2.Q In terms of Terrebonne's and LEPA's access to the GSU/Entergy transmission grid, what is Terrebonne's and LEPA's understanding of the significance, if any, of the presence of a specific sentence requiring one transmission rate for a group of entities (i.e, "For each coordinating group of entities there shall be a single transmission t charge.") in the Waterford 3 nuclear license (antitrust license condition 5) and the lack of a similar sentence in the River Bend and Grand Gulf nuclear licenses?

2.A The specific sentence referred to was inserted by the NRC Atomic Safety and Licensing Board after the limited hearing discussed in Terrebonne's Comments, pp. 13-15. See Louisiana Power and Licht Company (Waterford Steam Generatina Station Unit No. 31, 8 AEC 718 (ASLB 1974). At page 737 of the decision, the Licensing Board expressly stated that it changed the transmission condition from "between two entities" to "among entities" "to prevent multiple transmission charges for transmission of a contracted transmission entitlement among a coordinating group of two or more entities." Then, in reference to the sentence quoted in your letter, the Board stated "[t]o make the purpose of this change free from doubt, a clarifyina sentence has been added" [ emphasis added). Thus, the referenced sentence clarifies--it does not modify--the meaning of the transmission "among" language.

l Although the sentence you quoted from the LP&L license ,

conditions does not' appear in the Mississippi Power and Light Company ("MP&L") conditions, the MP&L conditions commit MP&L to provide transmission between or among two or more entities. See 8 AEC at 733 and 38 Fed. Reg. 14879  !

(June 6, 1973). Since the LP&L Licensing Board found no i difference in the MP&L license condition to transmit "between or among" and the LP&L license conditions to transmit "among", 8 AEC at 733, the Licensing Board applied I the same requirement to MP&L in order to prohibit the assessment of multiple transmission charges for transmission i of a contracted transmission entitlement among a  !

coordinating group of two or more entities. l The Gulf States license conditions require Gulf States to transmit power "between two or more entities". 39 Fed. .

Reg. 12377 (April 5, 1974) [ emphasis added). This should be (

compared to the original license condition proposed by LP&L (and rejected by the Licensing Board) to only transmit j "between two entities". See 8 AEC at 739. Transactions  !

coordinating loads and resources of more than two entities l are clearly contemplated by the GSU condition. The only reasonable interpretation of the Gulf States conditions is

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. BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief August 2, 1993 Page 6 that GSU, too, must transmit a contracted-for quantity of power between two, or among more than two, entities for one transmission charge.

In sum, the license conditions of all three licensees require the same thing--transmission of a contracted-for quantity of power between and/or among two or more entities for one transmission charge.

3.Q Are there currently any specific power transactions underway or currently being negotiated which Terrebonne or LEPA will have to forego if the GSU/Entergy merger is consummated and Terrebonne or LEPA is not granted " network transmission" or parallel meaningful access to the newly created GSU/Entergy regional transmission network?

3.A At its " system control ce'nter" a utility will ordinarily adjust its generation from moment to moment to meet its load level at that time. This is referred to as

" load-frequency control." When meeting higher load levels, it will raise the on-line generator with the lowest incremental cost. Conversely when reducing generation to match reduced' load, it will lower the output of the highest incremental cost generator. This practice is referred to as

" central economic dispatch."

At present GSU maintains load-frequency control at its system control center in Beaumont, Texas and engages in central economic dispatch there solely of its own Louisiana and Texas generating units. Entergy proposes to add GSU to the Entergy's scheme of load-frequency control and central economic dispatch at Entergy's Pine Bluff, Arkansas control conter. It contemplates savings of some $800 million as a result.

There have been discussions concerning LEPA's providing load frequency control for Sam Rayburn Municipal Power Agency (SRMPA) and for the Municipal Energy Agency of Mississippi (MEAM) as well as for itself and concerning engaging in a combined central economic dispatch for all three entities.

There has been no study made which has measured the benefits of these projects. Small utilities such as Terrebonne or LEPA normally do not maintain system planning engineers on their staffs. When they need a study they must engage the services of an outside consultant. These studies are costly. Normally no study will be contracted for unless the small system is reasonably confident that if the study proves the feasibility of a project, it can obtain all the

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._ BRAND, BEENY, BERGER & WHITLER Geoffrey Grant, Acting Chief i August 2, 1993 Page 7 factors needed for the project at a reasonable cost--the cost used in the study.  :

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LEPA, SRMPA and MEAM have not been able to have  !

confidence that they can obtain network transmission service from Entergy at a reasonable cost so this project has gone no further than discussions of their mutual interest in obtaining anticipated benefits from such a coordination.  ;

There are many other possibilities of savings if network transmission were available to Terrebonne, LEPA and other small systems. If they had some assurance they could obtain it, such negotiations would ensue, based on studies which are funded taking into_ account only normal business risks. Without the assurance of network transmission at a '

reasonable price, there is, as a practical matter, nothing to negotiate.

4.Q At page 11 of Terrebonne's, " Comments, Petition For  :

Leave to Intervene, And Requests For A Finding Of Significant Change And A Hearing Of Terrebonne Parish Consolidated Government", Terrebonne states that the, i Elimination of the second largest utility [GSU) in the region as a potential coordinating partner will reduce substantially the potential for coordinated development of generation available to Terrebonne and LEPA.

4.A Operating independently, GSU engaged in a program of coordinated development with Cajun with respect to the River Bend Unit. It offered similar programs to others. GSU also engaged in a study of the economic feasibility of a plan of the coordinated rehabilitation of GSU's Nelson No. 2 unit ,

with LEPA. Under the Entergy system agreement, GSU will-be {

committed to coordinate with other members of the Enterav '

system. There is really no medium-to-large utility remaining in the region except CLECO which would have any _l incentive to engage in coordinated development with smaller  ;

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. . BRAND BEENY,- BERGER & WHITLER Geoffrey Grant, Acting Chief August 2,-1993 Page 8 systems. Many of'those in the power business believe it is likely that CLECO will be the next acquisition of Entergy.

x Wdllace E. Brand ()

Sean T. Beeny Attorneys for Terrebonne Parish Consolidated-Government and Louisiana Energy &

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