ML20126K005
| ML20126K005 | |
| Person / Time | |
|---|---|
| Site: | San Onofre  |
| Issue date: | 04/21/1971 |
| From: | Mcdiarmid R, Spiegel G, Strebel S SPIEGEL & MCDIARMID, SPIEGEL, G. |
| To: | |
| Shared Package | |
| ML20126J991 | List: |
| References | |
| NUDOCS 8105080258 | |
| Download: ML20126K005 (16) | |
Text
APPENDIX 6 s
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STATEMENT OF CITIES OF ANAHEIM, RIVERSIDE AND SANNING , CALIFORNIA FOR SUBMISSION TO THE ATTORNEY GENERAL FOR ANTITRUST REVIEW This s tat ement is submitted by the Cities of Ahaheim, Riverside and Banning, California, pursuant to Section 2 01 (b) of the Commission 's Rules of Practice, for the use of the Attorney General in his antitrust review of the instant applications. It fees not purport to be cem-prehensive, bu t is intended to call to the attention of the Attorney General the Operation of long standing policies of S uthern California Edis:n :: force the Cities to remain as all-requirements customers of SCE, all of whose electrical needs are mencpclized by SCE.
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a.1-:c;nre..::: :::::s:: . s t'r I:I i
in February 1 6' ade .creliminar.e i.:uiri:: :f the sal .
under River Project concerning a large scale thermal project consideration by Salt River for' construction in the vicinity of Page, Arizona. Salt River confirmed that such a project ;
n was under consideration by a group of utilities and provided some-preliminary cost estimates then available. .
On March 10, 1969, Mr. L. M. Alexander, Assistant
- General Manager of Salt River Project, wrote to Mr. Gorden W.
Hoyt, Utilities Director of the City of Anaheim, inquiring whether Anaheim was still interested in the Project near Page, Arizona, informing him of the Navajo-Four Corners and Steering Committee which was studying the project, ,
3, 1969 encicsing a co.e.v of the Interim Report dated Januarv.
The Interim Report shows SCE pre. cared bv. that Cc=mittee.
as a partici, c ant with membership on the 5:eering Commit tee.
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- Althou-hv the facts recited bel .- reiate to the City of Anaheim, they clearly demonstrate SCI's policies with respect to its all-requirements customers, and we have no reason to believe that SCE would act differently in dealing with the cther C: tie.=.
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Mr. Alexander, s :a:::.g cha: Anaheim was interes:G -..
par:icipa:ing in the project Oc the extent of 1 5 2 27.7 O f 2
generation,together with associated transmission capacity S h af t}, h .
from the generating stations to the Colorado River area and from the Colorado River area to Anaheim, California. That letter is attached hereto as Appendix s.
On April 8, 196 9, Mr. . Thomas T. Lacy, District Manager 's Representa tive , of SCE wrote to Mr. Hoyt outlining SCE's transmission line plans in the Anaheim area and giving Anahiem until June 1, 1969 to decide between two
. a lte rna t.tv e s : (1) continued service at 66 kv under the existing contract; or (2 ) 220 kv service under the R-2 rate with a new ten year all requirements contract. That letter is attached hereto as Appendix C. ,
On April 14, 1969, Mr. Alexander of Salt River, also Chairman of the ::avajo-Four Corners Steering Cerrnittee wrote to Mr. Royt, setting forth the requirements f:r participation in the s tudy, including financial co mitments ,
and i:si;r.i ti on of representa ti res to the S taering C r--ittee
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.' the va rious Ta s' Forces . The amount which Anaheim 1
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r-* e d :- he 52 3,6 92. 7C. The 1e::er .: :sd :he ::::izi.: nts ir the study at that time, including SCI, and also gave a target date of June 1,1969 for c:=pleting s tudies and a
negotiations required to advance the Project beyond the study stage. Mr. Alexander also requested that Anaheim, if it desired to participate, designate its representatives, send its check and send the additional information required I
before May 12, 1969. That letter is attached hereto as Appendix D.
On April 21, 1969, Mr. Lacy again wrote to Mr. Hoyt correcting an error in his April 8,1969 letter and again !
l emphasizing the necessity for a decision by Anaheim on )
22 0 kv service by June 1,1969. That letter i s attached hereto as Appendix E.
Thus, Anaheim found itself in a dilemma. At the l same time that it had to make a decision en participation
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(with expenditures of over S23,C00) in the ::avajo Project I
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study, it was being forced by SCE to choose between two
. l alternatives, either of which would be logically inconsisten:
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.=urchasci '.55 r Of the :'sct : :; :.:::;. ja. Le a ::n n ;;;r of 220 " servire, SCI attached the requiremen- tha: Anaheim.
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- s. wi:h S enter into a new ten-year all-requirements contract SCE, making participation in the Navajo project (with the first unit scheduled for 1973 or 1974) impossible.
On April 22, 1969 the Anaheim City Council authorized participation by the City in the Navajo-Four Corners Project studies. On April 25, 1969, Mr. Hoyt wrote to Mr. Alexander, Chairman of the Steering Committee, informing him of this authorization, designating Mr. Hoyt as Anaheim's representative on the Steering Committee and providing the information requested in Mr. Alexander's April 14th letter. On May 2, 1969, Mr. Hoyt sent a letter to Mr. Alexanfer transmitting a check in the amount of :
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$ 2 3 ,6 91. 7 0, together with a signed copy of a letter to j l
S teering Cc=ittee me:-hers dated Augus t 18, 1968 providing authorization for administration of funds. *'r.
Hoyt 's let ters t
of April 2 5th and May 2nd, '1969, with the atta:hed signed l
au thori t. :i e: c ." f unf.s letter are :::.ac'.ud hcreto a.s A.ccendix F.
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n.u= car.g Mr. 50yt attended the Steering Comm;::ee El:: r ; . . _ I ... c i t ; :h_: msetir.g.
Cn :'ay 15,196 9 Mr. William R. Gould wr te .. :..e me 3srs Of the 5:eering C0mmittee to notify them of SCI's withdrawal.as a study participant in the Navajo-Four Corners Severa,1
<'# s . , Project "as it is now constituted." (Letter, p. 3).
% s reasons were given in the letter for the withdrawal, one of which was (Letter, -p. 2 ) :
. In our judgment, as the largest single participant , our Company would have lacked a satisfactory degree of management and control over the planning,' construction and operating aspects of that portion of the project upon which we would have depended to serve our customers."
Mr. Gould's letter is attached hereto as Appendix G.
On May 19,196 9, Mr. Hoyt responded to Mr. Lacy's
. April 8,1969 and April 21, 1969 letters which had presented Anaheim with two unacceptable alternatives regarding a 220 kv interconnection. Mr. Hoyt selected neither of the alterna-tives, but offered a counter-proposal detailing the provisions Anaheim would propose to include in a new agreement with letter SCE. The proposal is summarized in Mr. Hoyt 's (p. 11 as foll:ws:
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. T :s at: reach cen:cmelates that SCE will upon receiving just compensation
- A;.un _. share _ar * .sw :: enlarged e'e:- . I v -- -C-=i , I' ror:se ti .a : upon payment cf f.:: ::. .::nrt:ic: 22:
..'i c:1untarily permi:
A-=-= - ce use transr:s ::n ca_cacity in SCE facili:ies.that are in excess of SCE needs. I propose that you would permit us, at our e:.:psns e , te enlarge facilities constructed, extended, modified er planned by SCE and to utilize the . enlarged capacity for the genera-
- tion and transmission of electric energy 2r electric energy customers in Anaheim."
Mr. Hoyt's letter is attached hereto as Appendix H.
Mr. Lacy of SCE responded to Mr. Hoyt 's letter on May 2 8, 1969. He again reiterated SCE's need for an immediate decision by Anaheim on 220 kv service. He declined to discuss Anaheim's counter-proposals, stating:
"The fact that this response does not discuss your other comments should,.of course, not be misinterpreted as agreement with them."
This letter is attached hereto as Appendix I.
On May 2 9,1969 Mr. Hoyt responded to Mr. Lacy's May 2 8 le t te r. He pointed out Anaheim's participation in the Navajo-Four Corners Study, confirmed Anaheim's intention to honor its present ten-year contract, and stated that Anaheim may wish to make other arrangements for its bulk pcwer supply after the expiration of that centract and
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APPENDIX 6 therefore did not wan: to agree to another long-term
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. hers:: as Ap,endix J.
On August 13, 1969, Mr. Hoyt wrote to Mr. Gould, Senior Vice President of SCE. He stated that Anaheim wished to purchase lay-of f power from the entitlement of the U. S.
Bureau of Reclamation in the Navajo Project, pointed out that in order to purchase this power Anaheim would need some means of transmitting that power to the City of Anaheim frem the Los Angeles Department of Water and Power's McCullough Subs ta tion. Mr. Hoyt requested SCE's price and other terms and conditions for transmitting energy from the M:Cullough Substation through ScE's transmission system to the City of Anaheim. This letter is attached hereto as Appenfix K.
Mr. Gould replied to Mr. Hoyt by letter of August 22,
_is'. He stated:
"We do not consider our Company to be in a
. position to perform such transmission service . . . . Its filed tariffs have
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Anaheir p ses, as we believe y:u are aware, many substantial questions beyond the mere transmission of such power. Among these are the follewing: i "1. The amount of lay-off power and the power that can be transmi:ted into california over the .cre.eosed three 500-kv line system is limited; therefore, if Anaheim purchases such power, the amount of power that Edison can purchase for the benefit of all of its cust==ers would be reduced. Such reductions l
would deprive Edison's customers of the benefit of such power and further, if transmitted by Edison would discriminate against them in the use of such transmission capacity.
"2 . Lay-off power will come frem the United States' entitlement in Navajo units 1975 and 1976; which are to be installed in 1974, and this power will not be firm and may be interrupted in total or in part at any time for scheduled maintenance or for forced ou: ages. If Anaheim expects to be served
\ either in whole or in part by the Navajo resource, new arrangements wculd have to be made by Anaheir for pcwer to supplement such rescurce a"' '~~ c'=nd-by service. None of Edisen's filed :ariffs w:uld be applicable to such service."
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to transmit :he desire: .=;
and i: s:rengly implied :ha- it would not furn. .- sup,lenen:al
- or stand-by power to Anaheim either. This response left Anaheim with no means available to transport pcwer or energy it might purchase as lay-off power.or which it might own by reason of participation in the joint project. Thus it was precluded from further attempts to purchase lay-off power.
Scussel, A memorandum dated September 3,1969 from Mr. T. G.
Chairman of Task Force 69, to Mr. Alexander, Chairman of the Steerin: Committee, re-cres r a telephone call frem Mr. J. E.
Conner of SCE on Augus: 29, 1969 advising that SCE will accept the lay-off proposal as outlined in Washington, D. C. on Augus t 2 7, 1969. That memorandum is attached as Appendix N.
The inabili y to purchase transmissien service over !
SCE's lines also mad: ;t im,:ssible for Anaheir to beccme a and its par ticipant in the cens tructi:r. chase of the croiec opportunity for joint parti:ipati:n ir this project was lcst.
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several 5:a te s , or with foreign nations, shall be deemed 9uiltv of a misdemeanor . .
The leading case of United Sta t es v. Griffith, 334 U. S. 100 (1948), sta tes that 5 2 of the sherman Act is aimed, inter alia, at the acquisition or retention of effective market ,
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i control (334 U. 5. at 107) . That case involved the use of the combined bargaining power of a number of motion picture theatres to obtain various advantages frem motion picture distributors. The ci:urt pointed out that "[t]he anti-trust laws are as much violated by the prevention cf com.:etitien as by its destruction", and held that "the use of monopoly power, however lawfully acquired, to s oreclose com,etition, to.gair a ::m.:stitive advantage or t o . d e s t r o v. a com.=etit:r, is unlawful."
(334 U. S . at 107).
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f acts s t a ted abc'Ie demonst:a:e, Ana:. _b * ....-s a; :ha end of its present contract term an o.=.=c r tuni:v. to .crevide its own Generation through joint participation in large-scale generating plants, to purchase Transmission service from SCE and to provide its own Distribution. Since SCE -
enjoys monopoly control over Transmission in the area of Anaheim, Anaheim cannot practically pursue its goal unless it can purchase its transmission needs from SCE. Edison 's position leaves only two alternatives: to install all its own isolated generation requirements, which is not ecencmically practical, or to remain a captive wholesale Distributi - cust0mer of SCE.
It is thus evident that SCE has used its en: poly control over :ransmission service to continue a moncpely centrol over the wholesale dis tributien of capacity and energy.
The Supreme Court has held that refusal te deal in order to preserve a w..nepoly constitutes liegal
_/* Riverside is also censidering similar pcssibilities.
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to sell advertising space :: : ny:ne , who ad.ertisef e- a competing radio station, the court held, 342 U. S. a: :43, that:
. . . . a single newspaper, already enjoying a substantial monopoly in its area, violates the ' attempt to monopolice' clause of 5 2 when it uses its monopoly to destroy threatened competition.
The so-called " bottleneck cases" are also relevant to a refusal to sell transmission service under the circum-A leading stances outlined in the statement of facts above.
case is United States v. Terminal Railroad Associatien, 224 U. S. 383 (1912). There a terminal company established .
by a group of railroads owned the lines connecting the tqrminals on each side of the Mississippi River with the only two bridges and ferry available for crossing the river. The Court held, 224 U. S. at 515, tha t :
. . . . When the inherent conditions are such as to prohibit any other reasonable means of entering the city, the combination of every such facility under the exclusive eenership and control of less than all of I
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l the companies und e r 0 0 ,-'? lr i-- t * "~0 t- l "iolete Set' the -e' *d ---- ' e:---* ' l Ohe aC: . . . ."
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,2145,, nd S il'/e r . . New Yo ri: S:0:1 I:.fr.inr , 2~2 *.. S. 242 (1952;. In the Navajo-Four Corners situation described above, Anaheim could purchase generation, it could purchase transmission as far as SCE's system, but it could not get that generation from that point to its own system due to SCE 's re fusal to sell Transmission service to Anaheim.
The statement of facts outlined above, suera, pp. 2 -10, also show that SCE has tied the sale of its transmission service, over which it has monopoly control, to the sale ofits own generation (generated by it in its own facilities or in facilities jointly owned with other utilities, or purchased by it from others for resale) on an all-requirements basis.
A leading case is Northern Pacific Rv. Co. v.
United States, 356 U. S. 1, where the Court said, 356 U.S. at 5-6:
"[T]here are certain agreements or practices
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which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively pr esumed to be unreasonable and ther:ffre illegal eithout elah:rste i n i r* ' E 5 00 the pr riSC h3rr t h :' ' **. O '/ :
cause. of the bus i.*.ess excuse fOr their use . . . .
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- party imposing the tying requiremencs has a better product or a lower price but because of his power or leverage in another market.
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". . . . They (tying arrangements] are un-reasonable in and of themselves whenever a :
party has suf ficient economic power with respect to'the tying product to appreciably restrain free competition in the market for the tied product and a 'not insubstantial' amount of interstate commerce is affected." International Salt Co. v. United States, 332 U. S. 392.
In a recent case, Fortner Enter rises v. United States Steel Cerr., 394 U. S. 495 (1969), the Supreme Court held the tying of credit to the sale of prefabricated hemes to be an unlawful tying arrangement.
-It is well established that the Commission has the affirmative cbliga:icn to scrutinize matters which come before it to determine their consisten:; with the
-' nati:nal policy in fa.'or of free competition. See
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- ne it :s c := r t r_n t:.e s t a t.eme n t or rac:= an
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- ..:s:::::- c::: s s s ed in :he in:::rus: laws. :hus, ~~I sh:ulf :: he :ermit:cf :: aggrandi e its eren:mic power by construction of the San onofre units until it agrees co provide to Cities non-discriminatory transmission service and makes available to the Cities on a non-discriminatory basis eit.':er partial ownership of the units or power therefrom, together with the necessary provision in its rate schedules for partial requirements service.
- Respectfully submitted, w/ &Y
' George spiefel '
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Of Counsel:
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City of Anaheim: Robert C. McDiarmid Joseph Geisler, Esq.
Alan R. Watts , Esq.
City of Riverside:
John E. Woodhead, Esq. , Sandra J. Sfrebel April 21, 1971 Attorneys for the Cities of Anaheim, Riverside and Banning, Law of fices : California George Spiegel 2600 Virginia Avenue, N. W.
Washington, D.C. 20037
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