ML20045G891
| ML20045G891 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 06/18/1993 |
| From: | Berger M BRAND, BEENY, BERGER & WHITLER |
| To: | |
| Shared Package | |
| ML20045G875 | List: |
| References | |
| NUDOCS 9307160110 | |
| Download: ML20045G891 (17) | |
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UNITED STATES OF AMERICA -
, l BEFORE THE r;
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FEDERAL ENERGY REGULATORY COMMISSION l3 ' ..
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Entergy Services, Inc. and Gulf States Utilities Company
) Docket Nos. EC92-21-000 and ER92-806-000
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SUPPLEMENT TO LOUISIANA ENERGY AND POWER AUTHORITY'8 .
REQUEST FOR REHEARING I 1
On January 28, 1993 the Commission issued its Order on 1
Applications that declined to set certain issues for hearing in the application of Entergy Services, Inc. ("Entergy") for approval for it to merge with Gulf States Utilities Company
(" Gulf States"). 62 FERC 1 61,073. Nuberous parties, including the Louisiana Energy and Power Authority ("LEPA") filed rehearing j 1
requests. The Commission issued a tolling order on March 12, !
i 1993. Subsequently, on May 13, 1993, during the limited hearing that the Commission did order in this proceeding, certain evidence was developed that undermines the cornerstone of the Commission's rationale for declining to set competition issues for hearing in this proceeding. Accordingly, LEPA supplements its request for rehearing by presenting this evidence.
BACKGROUND The cornerstone of the Commission's decision not to set competitive issues for hearing in this docket was that any increase in market power over transmission that would result from the merger would be sufficiently mitigated by Entergy's open access tariff. In this proceeding, and in the earlier open access or market-based pricing case, Docket No. ER91-569-000, the 9307160110 930709 PDR ADOCK 05000458 H PDR
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i Commission found, without holding even a paper hearing, that all
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first tier utilities, i.e. all utilities that were directly interconnected with an Entergy company, were in the same geographic market because the open access tariff provided i
sufficient access to transmission to enable each of these i utilities to engage in transactions with one another. In such a large geographic market Entergy had, according to the Commission, minimal market power. In so holding the Commission rejected contentions from many intervenors, including LEPA, that many of 1 the provisions of the open access tariff were so burdensome and uncertain, and placed so many limitations on the transmission service that was being made available, that a hearing was needed l
to determine whether the tariff, in fact, mitigated Entergy's market power sufficiently to authorize market based pricing and i
- to not require any transmission conditions on the merger.
) THE NEW EVIDENCE As part of its presentation in the merger proceeding, Entergy and Gulf States presented a study sponsored by Mr. Frank F. Gallaner, a primary Entergy witness, that allegedly demonstrated significant savings would result from merger. To determine the alleged merger savings, Entergy/ Gulf States compared the costs of meeting their loads if they were two stand-l alone utilities with the costs of meeting their loads if they were merged. In calculating the cost of Gulf States meeting its loads on a stand-alone basis, Entergy/ Gulf States assumed that Gulf States would engage in some economy transactions but only 2
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Entergy/ Gulf States assumed that Gulf States would also engage in I l
I I significant economy transactions with first tier utilities -- ;
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those with which it was interconnected through Entergy but not j directly, j During Staff's cross-examination of Mr. Gallaher, he was l
asked why he did not include economy energy transactions with 1
first tier utilities in calculating the cost of operating Gulf States as a stand-alone utility. He stated that he did not I i
l include economy transactions with utilities with which Gulf 1
States was not directly interconnected because Gulf States' own projections showed a practice of only engaging in economy energy I transactions with utilities with which it is directly i 1
interconnected. Tr. 862.2 Then, he was asked whether he thought it was prudent for j Gulf States, as a stand-alone company, not to take advantage of Entergy's open access tariff to engage in economy transactions with all first tier utilities, given the wide price disparity between Gulf States' self generating costs and the costs of the first tier utilities. His reply is extremely illuminating.
He stated:
Well, for the reasons that I have stated, I think it is difficult for Gulf States to try to tap this market that we have identified. Most of the market is to the North of [Entergy), and it is a long way from 8
The pertinent portions of Mr. Gallaher's testimony are attached for the convenience of the Commission.
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Gulf States, even thouah they could use the open access tariff. it is still difficult to make decisions on a real time basis when you have to utilize the ocen Agggps orovisions of an intervenina utility to make economy ourchases as you are discatchina the system.
It is mere likely that you would use the utilities that you are connected with as sources for that economy ourchases. So I really don't see that it would be imprudent on the Gulf State's side. There are a lot of other factors that ao into it rather than iust there beina an availability of economy enerav. and that Enterav has an ocen access orovision.. (Emphasis added.) Tr. 863.
In essence, Mr. Gallaher confirmed that the mere existence of the open access tariff, even if it did not suffer from so may defects, DOES HQI mean that all first tier utilities could or would use it to engage in economy transactions. Yet this is exactly the assumption that the Commission had to make, and did make, in declining to set competitive issues for hearing.
Mr. Gallaher's testimony demonstrates conclusively that Entergy's own expert believes that the mere existence of the open access tariff does not mean that it is practical for all first tier utilities to deal with one another, since there are many other factors that must be considered. At the very least this testimony requires an evidentiary inquiry into the extent, if any, to which the existence of the open access tariff facilitates transactions between all first tier utilities and defines the scope of the geographic market. Mr. Gallaher's testimony flatly contradicts the cornerstone of the Commission's decisions in the open access case and this one too. This testimony requires the j Commission to grant rehearing and set competitive issues for an evidentiary hearing.
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WHEREFORE for the foregoing reasons and for the reasons stated in LEPA's Request for Rehearing, LEPA urges the Commission to grant rehearing.
Respectfully submitted, Wallace E. Brand Melvin G. Berger Brand, Beeny, Berger & Whitler 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 (202) 347-7002 Dated: June 18, 1993 i
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194 1 AFTERMOON SESSION j ! 2
[1: 22 p.m. ]
3 PRESIDING JUDGE: Please be seated. The hearing 4 will come back to order. We are ready for your next 5 witness.
6 MR. SPECTOR: Your Honor, one thing that I 7 neglected to do was to move Exhibit APP-5 into evidence at 8 this time?
9 PRESIDING JUDGE: Are there any objections?
10 [No response.]
11 PRESIDING JUDGE: All right. Exhibit Number APP-12 5 previously marked for identification is now accepted into ,
l 13 evidence.
14 [ Applicant's Exhibit No. APP-5 was f )
i 15 received into evidence.]
16 MR. BOUKNIGHT: Your Honor, our next witness is 17 Frank F. Gallaher. '
18 PRESIDING JUDGE: Very well.
19 Whereupon, 20 FRANK F. GALLAHER, 21 a witness, was called for examination by counsel on behalf 22 of Entergy Services, Inc., and Gulf States Utilities 23 Company, and having been first duly sworn was examined and 24 testified as follows:
25 PRESIDING JUDGE: All right, counsellor.
IJU4 RILEY & ASSOCIATES, LTD.
Court Reporters 1612 K Street, N.W., Suite 300 Washington, D.C. 20006 (202) 293-3950 Y@d$$MlMWMWsMATdTT.~ M 3 5Ju is!fGini4 7 W 4 W C N M N um
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1 DIRECT EXAMINATION lg 2 BY MR. BOUKNIGHT:
3 0 would you state your name, please?
4 A My name is Frank F. Gallaher.
5 Q And by whom are you employed, sir?
6 A Entergy Services, Incorporated.
7 Q And what is your position with Entergy Services?
8 A Senior Vice President Fossil Operations.
9 Q Now, Mr. Gallaher I call your attention to I
10 documents that have been marked APP-15 through APP-28 which l is marked -- which is your direct testimony. APP-78 through 11 I
12 APP-83 which is your supplemental testimony, APP-91 throuch ,
13 APP-103 which is your additional supplemental testimony, 14 APP-110 through APP-133 which is your rebuttal testimony.
!lP 15 Sir, was this testimony prepared by you pr under 16 your supervision?
17 A Yes, it was.
18 MR. BOUKNIGHT: Your Honor, at this time I have a 19 sheet of corrections to this testimony which I think might 20 save us some time over Mr. Gallaher going through it line by
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21 line so if Ms. Sullivan can get you copies I would hand one 22 to you, and one for the reporter and one for the witness. ,
23 BY MR. BOUKNIGHT:
24 Q Mr. Gallaher, I have just handed you a sheet that 25 is entitled corrections to the testimony of Frank F.
ANN RILEY & ASSOCIATES, LTD.
Court Reporters 1612 K Street, N.W., Suite 300
'4ashingt on , D.C. 20006 (202) 293-3950 Ws%WSTE
W 702 1
PROCEEDINGS
- (9:03 a.m.)
2 Good morning. Please be seated.
3 PRESIDING JUDGE:
This is a l The hearing will come back to order.
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Inc.,
5 continued hearing in the matter of Entergy Services, 6
and Gulf States Utilities Company, Docket Number EC-92 ! 7 000, and ER-92-806-000. ;
I At the close of yesterday's hearing, Mr. Gallaher !
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' 9 was on the witness stand. Let the record show that he has !
30 resumed his place on the witness stand.
l 11 (Witness resumes stand.] ,
Mr. Witness, you have been 12 PRESIDING JUDGE:
You understand you are still testifying 13 previously sworn.
j 14 under oath?
THE WITNESS:
Yes, I do understand that. I j
15 PRESIDING JUDGE:
All right, very well.
- 16 Are we ready for cross-examination, counselor?
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? 18 Whereupon, FRANK F. GALLAHER, 19 20 resumed the stand as a witness herein, and, having been 21 previously duly sworn, war further examined and testified as f
22 follows:
CROSS EXAMINATION 23 24 BY MR. HERTZ:
Q Mr. Gallaher, I'm Mitchell Hertz, counsel for the 25 i ANN RILEY & ASSOCIATES, LTD.
Court Reporters 1612 K Street, N.W., Suite 300 Washington, D.C. 20006 (202) 293-3950
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862 1 megawatts of Grand Gulf ccpacity w3o not includod in the 2 retail rates, then we began to make the attempt to find some 3 way in which that capacity could be sold off-system. That 4 resulted from increased focus in the bulk power marketing 5 area that resulted from the change in management.
6 Q so it was fortuitous that the change in focus came 7 at the time of the change in management?
8 A I don't know that it was fortuitous. The change 9 in management resulted in a change in the focus that we had 10 in our off-system marketing efforts in the bulk power arena.
11 Q Please turn to page 78 of your rebuttal testimony.
12 You state there, starting at line 20, that it is 13 ;e.vonable to accept GSU's projections as to the amount of 14 off-system energy it will purchase in its continuing 15 practice of only buying economy energy from utilities with 16 which it is interconnected.
17 A Really, that was included in the question. I le guess my real feeling is that the Gulf State planners and 19 operators are in the best position to determine what off-20 system economy purchases they should make, and if that is 21 what they use to determine it, I felt like they were in the 22 best position to make that determination.
23 Q Given the enormous spread you have projected 24 between gas and coal prices, and the large amount of surplus 25 coal energy available in the off-system market, you consider ANN RILEY & ASSOCIATES, LTO.
Court Reporters 1612 K Street, N.W., Suite 300 Washington, D.C. 20006 (202) 293-3950
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1 it prudent for a stand-alone GSU not to take cdvantago of 1
2 Entergy's open access transmission to tap this off-system 4 3 market?
4 A Well, for the reasons that I'have stated, I think ;
5 itisdifficultforGulfStatestotrytotYpthismarket 6 that we have identified. Most of the market is to the North 7 of us, and it is a long way from Gulf States, even though 8 they could use the open access tariff, it is still difficult 9 to make decisions on a real time basis when you have to 10 utilize the open access provisions of an intervening utility l 11 to make economy purchases as you are dispatching the system.
12 It is more likely that you would use the utilities that you 13 are connected with as sources for that economy purchases. l 14 So I really don't see that it would be imprudent on the Gulf l Y5 State's side. There are a lot of other factors that go into 16 it rather than just there being an availability of economy 17 energy, and that Entergy has an open access provision. l l
18 Q Let's assume for a moment that you became 19 President and CEO of Gulf States, Gulf States remains a 20 stand-alone utility, wouldn't you vigorously pursue.the use j 21 of Entergy's open access tariff to obtain as much surplus 22 coal energy as possible from the off-system market if it !
l 23 made economic sense to do so? l 24 A I would to the extent that it would not violate 25 the reliability of my existing system and, as I state, that ANN RILEY & ASSOCIATES, LTD.
Court Reporters 1612 K Street, N.W., Suite 300 l Washington, D.C. 20006 (202) 293-3950 i
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. CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of the Rules of Practice and Procedure (18 C.F.R. S 385.2010).
i Melvin G. Berger "
BRAND, BEENY, BERGER & WHITLER 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 l
Dated: June 18, 1993 1
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. UNITED STATES OF AMERICA l l
NUCLEAR REGULATORY COMMISSION )
In the Matter of ) l Gulf States Utilities ) NRC Docket No. 50-458 1 I
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l CERTIFICATE OF SERVICE I, Melvin G. Berger, hereby certify that on this 9th day of July, 1993, I served on the following, by first class mail, postage pre-paid, a copy of the following:
Reply of Terrebonne Parish Consolidated Government to Response of Gulf States l Utilities Company to the Comments on l Antitrust Issues I Office of the Secretary Robert Weinberg, Esq.
U.S. Nuclear Regulatory Duncan, Weinberg, Commission Miller & Pembroke, P.C.
Washington, DC 20555 1615 M Street, N.W.
Suite 800 Zachary D. Wilson, Esq. Washington, DC 20036 321 Maple Street P.O. Box 5578 James D. Pembroke, Esq.
North Little Rock, AR 72219 Duncan, Weinberg, Miller & Pembroke, P.C.
Robert C. McDiarmid, Esq. 1615 M Street, N.W.
Spiegel & McDiarmid Suite 800 1350 New York Avenue, N.W. Washington, DC 20036 Suite 1100 Washington, DC 20005-4798 Earle H. O'Donnell, Esq.
Dewey Ballantine Robert A. O'Neil, Esq. 1775 Pennsylvania Ave., N.W.
Miller, Balls & O'Neil, P.C. Washington, DC 20006-2605 1101 14th Street, N.W.
Suite 1400 Robert B. McGehee, Esq.
Washington, DC 20005 Wise, Carter, Child & Caraway 600 Heri'?qe Building Daniel Guttman, Esq. Congrr,.3 Capitol Spiegel & McDiarmid Jackson, .3 39205 1350 New York Avenue, N.W.
Suite 1100 Washington, DC 20005-4798 4
Mark J. Wetterhahn Joseph B. Knotts, Jr., Esq.
Winston & Strawn Winston & Strawn 1400 L Street, N.W. 1400 L Street, N.W.
Washington, DC 20005-3502 Washington, DC 20005-3502 Joseph Rutberg, Esq. William M. Lambe Office of the General Counsel Eugene Holler, Esq.
U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, DC 20555 Washington, DC 29555 Donald M. Clements, Esq.
Gulf States Utilities 350 Pine Street Beaumont, TX 77701 l
! Sean T. Beeny BRAND, BEENY, BERGER & WHITLER 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 i
h UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of )
Gulf States Utilities ) NRC Docket No. 50-458
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REPLY OF LOUISIANA ENERGY j AND POWER AUTHORITY TO !
RESPONSE OF GULF STATES UTILITIES I COMPANY TO THE COMMENTS ON ,
ANTITRUST ISSUES 1
, On June 11, 1993, Gulf States Utilities Company ("GSU").
filed a second response to the comments on antitrust issues filed following the Nuclear Regulatory Commission's Federal Register Notice soliciting comments regarding this matter. The response-was neither requested by the NRC nor provided for in the NRC's rules.
Today Terrebonne Parish Consolidated Government filed a reply to the response. In order to not further burden the record in this proceeding the Louisiana Energy and Power Authority notes its concurrence in Terrebonne's reply, a Respectfully submitted,
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Melvin G. Berger V. /-
Sean T. Beeny BRAND, BEENY, BERGER & WHITLER 1730 K Street, N.W.'
Suite 1000 Washington, DC 20006 (202) 347-7002 Dated: July 9, 1993 l
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, UNITED STATES OF AMERICA l
NUCLEAR REGULATORY COMMISSION In the Matter of )
Gulf States Utilities ) NRC Docket No. 50-458
)
CERTIFICATE OF SERVICE l
I, Melvin G. Berger, hereby certify that on this 9th day of July, 1993, I served on the following, by first class mail, postage pre-paid, a copy of the following:
! Reply of Louisiana Energy and Power Authority to Response of Gulf States Utilities Company to the Comments on Antitrust Issues i
Office of the Secretary Robert Weinberg, Esq.
i U.S. Nuclear Regulatory Duncan, Weinberg, l
Commission Miller & Pembroke, P.C.
Washington, DC 20555 1615 M Street, N.W.
Suite 800 Zachary D. Wilson, Esq. Washington, DC 20036 l 321 Maple Street P.O. Box 5578 James D. Pembroke, Esq.
North Little Rock, AR 72219 Duncan, Weinberg, Miller & Pembroke, P.C.
Robert C. McDiarmid, Esq. 1615 M Street, N.W.
Spiegel & McDiarmid Suite 800 1350 New York Avenue, N.W. Washington, DC 20036 Suite 1100 Washington, DC 20005-4798 Earle H. O'Donnell, Esq.
Dewey Ballantine Robert A. O'Neil, Esq. 1775 Pennsylvania Ave., N.W.
Miller, Balis & O'Neil, P.C. Washington, DC 20006-2605 1101 14th Street, N.W.
Suite 1400 Robert B. McGehee, Esq.
Washington, DC 20005 Wise, Carter, Child & Caraway 600 Heritage Building Daniel Guttman, Esq. Congress at Capitol Spiegel & McDiarmid Jackson, MS 39205 1350 New York Avenuu, N.W.
Suite 1100 Washington, DC 20005-4798
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Mark J. Wetterhahn Joseph B. Knotts, Jr., Esq.
Winston & Strawn Winston & Strawn 1400 L Street, N.W. 1400 L Street, N.W.
Washington, DC 20005-3502 Washington, DC 20005-3502 Joseph Rutberg, Esq. William M. Lambe Office of the General Counsel Eugene Holler, Esq.
U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, DC 20555 Washington, DC 20555 Donald M. Clements, Esq.
Gulf States Utilities 350 Pine Street Beaumont, TX 77701 l
l Sean T. Beeny /
l BRAND, BEENY, BERGER & WHITLER
! 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 l
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