ML19332E994

Comments on Antitrust Issues Raised by Util Application to Amend OL for Plant.Commission Should Clarify That Antitrust Conditions in App C of Facility License Will Continue to Apply to Util

ML19332E994
Person / Time
Site:	Waterford
Issue date:	12/01/1989
From:	Vince C NEW ORLEANS, LA, VERNER, LIIPFERT, BERNHARD & MCPHERSON
To:	Mckenna E Office of Nuclear Reactor Regulation
Shared Package
ML19332E993	List: ML19332E992 ML19332E994
References
A, NUDOCS 8912130245
Download: ML19332E994 (6)

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._ (202) 371-6096 December 1, 1989

- Ms. Eileen M. McKenna ,

I Chief, Policy Development and l Analysis Staff,. Office of Nuclear Reactor. Regulation U.S. . Nuclear Regulatory Commission 11555 Rockville Pike Rockville, Maryland 20854 Re: ' Louisiana Power & Light Co., NRC Docket No. 50-382A, Comments on Antitrust Matters

Dear Ms. McKenna:

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1 1 Pursuant to the Commission's notice of November 1, 1989, 54 Fed. Reg. 46163, the City of New Orleans, Louisiana ("New Orleans") submits these comments with respect to the antitrust issues ~ raised by the application of Louisiana Power & Light Company ("LP&L")'to amend the operating license for the Waterford 3 Steam Electric Station Unit 3 ("Waterford 3"). In its application, LP&L proposes that its license-be amended to

-designate Entergy Operations, Inc. ("EOI"), a new management company not yet formed, as the licensed operator of Waterford 3.

For the reasons discussed below, it is New Orleans' position that the Commission should (1) clarify that the antitrust conditions set forth in Appendix C of the Waterford 3 license will continue to apply to LP&L and (2) direct that such conditions would' apply to EOI upon that company's assumption of the' role of licensed operator. This action would ensure the continued protection of the rights and interests of Louisiana

! entities engaging, or proposing to engage, in the sale and distribution of electricity, and would be in the public interest.

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1. LP&L's Acolication-LP&L's applicationF is part of a plan of Entergy Corporation ("Entergy") that EOI operate the three nuclear. plants currently owned and operated by LP&L and two of its affiliates.

Entergy owns all of the common stock of these and other companies, and proposes to own all of the common stock of EOI.

LP&L states in its application that EOI, as agent for LP&L, would j assume operating responsibility for -- but not ownership of --

Waterford 3 through an operating agreement between the two companies. Appl. at 2. LP&L asserts that implementation of this proposal would not impact " existing plant ownership or entitlements to capacity or energy." Id.

The antitrust conditions in LP&L's license initially were implemented in LP&L's construction permit for Waterford 3 granted on November 14, 1974. The conditions were agreed to by LP&L after allegations of antitrust violations and lengthy proceedings and negotiations involving the Department of Justice and affected Louisiana entitles. In 1982, the Commission reevaluated LP&L's.

activities and concluded that there were no significant changes to warrant modification to the-antitrust conditions. Finding of No Significant Antitrust Changes, NRC Docket No. 50-382-A, Oct.

12, 1982. The conditions were repeated in LP&L's operating license issued by the Commission on March 16, 1985.

l The conditions are provided for the benefit of certain

" entities," which generally are defined to include entities that own, or propose in good faith to own, generation facilities; are or will be public utilities; and have physical interconnections with LP&L in Louisiana. License, App. C, para. 1. The antitrust

. conditions obligate LP&L, under certain conditions, to interconnect and share reserves, including the provision of emergency and scheduled maintenance service; sell unit power and deficiency power; grant participation in Waterford 3 and future nuclear generating units; transmit power and energy over its

, transmission facilities; and sell power and energy. Id., paras.

l 2 - 6.

l In its application, LP&L makes ostensibly contrary representations with respect to the application of these antitrust conditions. At page 15 of the application, LP&L states:

[T]he proposed license amendment to designate EOI as the entity authorized to possess, use and operate Waterford 3 will not alter the existing antitrust license conditions applicable to LP&L. Those conditions will remain anolicable to LP&L.

1/ Louisiana Power & Light Co., Application to Amend Facility Operating License No. NPF-38 (" Appl.") (Aug. 15, 1989).

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. -(Emphasis added.) However, in the proposed " mark-up" of the license, LP&L changes the provision which now reads "The licensee

.shall comply with the antitrust conditions in' Appendix C to this l1 license," to."EQI shall comply with the antitrust conditions in L

Appendix C to this license." Attachment 2 at 3. (emphasis H

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added.)

2. New Orleans' Jurisdiction and Interest By virtue of Article 4, Section 21(C) of the Louisiana e Constitution and Section 4-1604 of the Home Rule Charter of the L City of~New Orleans, the New Orleans City Council is vested with L regulatory authority over the operations of LP&L conducted within the municipal boundaries of New Orleans. The Council is also vested with regulatory authority over the entirety of the operations.of New Orleans Public Service Inc. ("NOPSI"), another

. utility subsidiary of Entergy.

On August 18, 1989, LP&L filed an application with the Council for review of the proposed transfer of Waterford 3's operations to EOI. Subsequently, the Council issued a public notice announcing-its intent to hold a hearing with respect to the application following the parallel hearing of the Louisiana Public Service Commission-("LPSC") regarding the same matter.

The LPSC hearing is scheduled for December 5 and 6, 1989.

As a regulatory authority with jurisdiction in Louisiana, New Orleans has.aut interest in this proceeding to ensure that the p interconnection and transmission markets in Louisiana are not adversely affected by the disposition of the antitrust issues herein. The viability of those markets, in the Council's l

opinion,isenhancedbytheapplicationoftheaptitrust conditions in the Waterford 3 operating license.

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3. Acolication of the Antitrust Conditions In light of the confusing representation in LP&L's application as to whether the antitrust conditions would continue to apply to LP&L, the Commission should provide clarification that LP&L will remain subject to the conditions. There is nothing in the record before the Commission that warrants or even suggests that LP&L should be relieved of these obligations and, indeed, LP&L does not dispute this conclusion. In its response to the inquiries of the Commission's staff, LP&L states that:

l 2/ As a result of ongoing negotiations with Entergy to purchase the electric facilities of NOPSI and LP&L existing within the City, New Orleans itself may become a participant in these markets. In that event, the application of the antitrust conditions would be vital to New Orleans because the City is entirely surrounded by LP&L's transmission system and has no direct access to other sources of power supply.

. LP&L will remain the owner of the unit and therefore'will remain licensed "to possess" Waterford 3. The antitrust conditions on the licensee will remain anolicable to LP&L.

Attachment to Letter of R.F. Burski to NRC,-Oct. 27, 1989, at.2 (emphasis added.) Continued application of the antitrust  ;

conditions to LP&L would be consistant with the Commission's approval of an amendment to the Wolf Creek Generating Station license designating a new operating agent where the owner licensees remained subject to the original antitrust conditions.

333 Kansas Gas & Electric Co., Amendment to Facility Operating License, License No. NPF-42, Docket No. 50-482, Nov. 4, 1986.

Additionally,.the Commission should extend the antitrust

. conditions to EOI. LP&L, however, contests such extension, stating that "the amendments need not include new antitrust conditions applicable to EOI." Oct. 27 letter at 4. LP&L's position is supported by a legal opinion which concludes that "it is legally unnecessary to make EOI subject to the present antitrust conditions. . . " Attachment to letter of David A.

Repka to NRC, Oct. 30, 1989, at 2.

LP&L concedes, by implication, that the NRC could impose the antitrust. conditions on EOI and provides no affirmative reason as to why the Commission should n21 so impose those conditions on EOI. EOI would become the licensed operator of the plant; to the extent that EOI is able to commit antitrust violations, it should L be subject.to those conditions for the same reasons that L

compelled their original application to LP&L. The Commission may ensure that there is no diminution of the protections afforded the public in the existing antitrust conditions by simply directingthp'tEOIassume-thesameobligationsasitsaffiliated co-licensee.

LP&L does not expressly deny the possibility that EOI alone (in its proposed form as delineated in the operating agreement between EOI and LP&L) could cause non-compliance with the antitrust conditions. More important, perhaps, is the possibility that Entergy would empower EOI to take actions not l currently contemplated in the operating agreement. This possibility is suggested, in part, by the substantial corporate restructuring now underway on the Entergy system. Entergy is l attempting to consolidate its nuclear operations in EOI; it is I

also attempting to form an independent power producer ("IPP")

2/ In the Kansas Gas proceeding cited above, the question of whether the new Wolf Creek operating company should be subject to the antitrust obligations of the owner licensees apparently was not raised before the Commission. Thus, to the best of New Orleans' knowledge, the instant matter is one of first impression.

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.: l subsidiary and " spin-off" existing system generating. facilities to that subsidiary; it has engaged in sale / leaseback arrangements with respect to its largest assets;1and it is contemplating I

' selling substantial electric assets and all of its gas assets to New Orleans. . Given-this dynamic condition, as well as the possibility of modifications to the operating agreement that-might occur beyond NRC oversight,-the. commission should act ,

. cautiously and apply the antitrust conditions to EOI in order to discourage possible-arrangements with EOI that might circumvent '

those conditions.

New Orleans requests that the following be served with copies of all future correspondence in this proceeding:

Clinton A. Vince, Esq.

Glen L. Ortman, Esq.

Paul E. Nordstrom, Esq.

L Verner,.Liipfert, Bernhard, D

McPherson & Hand, Chartered 901 15th Street, N.W.

Suite 700 H Washington, D.C. 20005-2301 (202)371-6000 Okla Jones II, Esq.

City Attorney ,

1 Michael W. Tifft, Esq.

l Deputy City Attorney L City Council Utilities Regulatory Office l Room 1E04A - City Hall 1300 Perdido Street New Orleans, Louisiana 70112 (504)586-3892 Respectfully submitted, Clinton A.

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Glen L. Ortman Paul E. Nordstrom l Attorneys for the City of New Orleans, Louisiana cc: Attached service list 1

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[ Wh Malcolm Stevenson, Esq. Regional Administrator, Region IV Monroe &-Leman' H US Nuclear Regulatory Commission J 201-St. Charles Avenue Office'of Executive Director for Suite 3300- Operations c New Orleans, LA~70170-3300 611 Ryan Plaza Drive, Suite 1000

[ Arlington, Texas 76011-F ,

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? -Mr. E. Blake. Mr. William H. Spell, Admin. -i

-Shaw, Pittman, Potts Nuclear Energy Division .

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& Trowbridge Office of Environmental Affairs 2300 N Street, N.W. P.O. Box 14690 f Washington, D.C. 20037 Baton Rouge, LA 70898

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Resident-Inspector / President,' Police Jury y H Waterford NPS St. Charles Parish- 1 Post Office Box 822 Hahnville, Louisiana 70057 1 l

Killona, Louisiana 70066 L  !

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Chairman William A. Cross Louisiana Public Service Bethesda Licensing Office Commission 3 Metro Center One American Place, Suite 1630 Suite 610 Baton Rouge, LA 70825-1697 Bethesda, Maryland 20814 l

Mr. R.F. Burski Nuclear Safety and Regulatory y Affairs Manager Louisiana Power & Light Company 317 Baronne Street New Orleans, Louisiana 70112 i

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