ML20058K313
| ML20058K313 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 12/08/1993 |
| From: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| References | |
| SECY-93-334, NUDOCS 9312150134 | |
| Download: ML20058K313 (85) | |
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December 8, 1993 pQ{lCylhhh{
SECY-93-334 (NEGATIVE CONSENT)
FOR:
The Commissioners FROM:
James M. Taylor Executive Director for Operations
SUBJECT:
FINDING OF NO SIGNIFICANT CHANGES PURSUANT TO THE RIVER BEND STATION POST OPERATING LICENSE ANTITRUST REVIEW RESULTING FROM THE PROPOSED MERGER BETWEEN GULF STATES UTILITIES COMPANY AND ENTERGY CORPORATION PURPOSE:
To recommend expedited Commission review of a completed staff action.
DISCUSSION:
As a result of the proposed merger between Gulf States Utilities Company (GSU) and Entergy Corporation (Entergy), GSU submitted two applications dated January 13, 1993, to amend the River Bend Station, Unit 1 (River Bend) operating license.
Contingent upon approval of the proposed merger, GSU will combine its business with Entergy to become a wholly owned subsidiary of the Entergy system.
Consummation of the proposed merger will transfer the common equity ownership of GSU and control of River Bend to Entergy.
Moreover, contingent upon the proposed merger, Entergy Operations, Inc. (EOI), a nuclear operating company subsidiary of Entergy, will replace GSU as the River Bend operator and be included as a River Bend licensee.
Pursuant to Section 105c of the Atomic Energy Act of 1954, as amended (Act) and the Commission's Regulations, the staff is required to conduct an antitrust operating license review to determine whether "significant changes" have occurred in the CONTACT:
NOTE:
TO BE MADE PUBLICLY AVAILABLE William Lambe, NRR WHEN THE FINAL SRM IS MADE 504-1277 AVAILABLE l
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The Commissioners 2
licensee's activities since the construction permit review.
The Commission, in its Summer decision (CLI-80-28, 11 NRC 817 (1980)), interpreted its significant change responsibility and set forth a definite set of criteria for making the determination of whether a "significant change" has occurred.
The criteria are that the change or changes:
"1) have occurred since the previous i
antitrust review of the licensee (s); 2) are reasonably I
attributable to the licensee (s); and 3) have antitrust implications that would likely warrant some Commission remedy."
Subsequently, the commission delegated the authority to make i
"significant change" determinations to the staff.
Although the Act does not specifically address the addition of new owners or operators after the initial licensing process, the 1
staff has, in analyzing situations in which new ownership occurs after issuance of an operating license, applied standards set forth by the Commission in the Summer proceeding in order to determine whether an antitrust review is required.
Against this backdrop, the staff has conducted antitrust reviews of operating license amendment requests that seek to add new licensees or transfer ownership of the facility.
Although the actions taken by the staff when faced with operating license amendments that request the addition of a new owner or i
placing a non-owner operator on a license have been tailored to each particular amendment request, reviews of post operating license amendment applications involving change in licensees have included an antitrust review by the staff and consultation w.'.th the Attorney General.
The staff focuses its antitrust review on significant changes in the licensee's activities since the most
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i recent antitrust review of the facility in question.
I The Director of the Office of Nuclear Reactor Regulation has made
- r. finding (Enclosure 1) that as a result of the proposed merger,
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no significant antitrust changes have occurred since the operating license antitrust review of River Bend.
The Director's post operating license no significant change finding was published in the Federal Recister on October 20, 1993, and provided for requests for reevaluation of the finding by November 19, 1993.
Requests for reevaluation dated November 19, 1993, were received from Cajun Electric Power Cooperative, Inc. (Cajun)
(Enclosure 2), the City of Lafayette, Louisiana (Lafayette)
(Enclosure 3), Louisiana Energy and Power Authority (LEPA)
(Enclosure 4) and Terrebonne Parish Consolidated Government (Terrebonne) (Enclosure 5) collectively, Requesters.
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The commissioners 3
The staff has determined that the concerns raised by Requesters were addressed and considered by the staff in its initial evaluation of anticipated competitive changes resulting from the proposed merger between GSU and Entergy.
The information submitted by Requesters does not identify any new competitive concerns or any data that were overlooked by the staff in its initial review of the proposed merger.
Consequently, it is the determination of the staff that the criteria established by the Commission in Summer to substantiate a "significant change" have not been met.
The staff has determined that the issues raised by Requesters primarily involve allegations of non-compliance with antitrust license conditions and as a result would not require any remedy by the Commission in the context of the instant licensing amendment proceeding.
In its post operating license no significant change finding and in its reevaluation finding (Enclosure 6), the staff noted that although Requesters raised competitive issues coincident with the proposed merger, the Federal Energy Regulatory Commission (FERC) has established procedures in a related proceeding that should provide Requesters with adequate remedy.
The Commission's Regulations (2.101(e)) provide for a 30-day period in which the Commission can review i reevaluation of a "significant change" determination.
The Director has determined that he will not change his finding that no "significant change" has occurred.
The Director's finding would normally become the final NRC decision 30 days after being made if the Commission has not exercised sua sDonte review.
GSU and Entergy have requested that every effort be made to issue the amendments in a time frame that would allow consummation of the proposed merger before December 31, 1993.
GSU and Entergy have indicated that closing of the merger during this calendar year will allow Entergy to take advantage of GSU'r; investment tax credits -- estimated at approximately $40 million -- and also minimize costs attendant to the operational, accounting, and regulatory reporting requirements associated with the proposed merger.
COORDINATION:
The office of the General Counsel has no legal objection to the finding and recommendations herein.
e l
The Commissioners 4
RECOMMENDATION:
In response to the exigencies of the instant situation, the staff recommends that the Commission determine that it will not exercise sua poonte review of the Director's determination, and l
thus allow the determination to become the final NRC decision.
Unless otherwise directed by the Commission the staff will issue l
the amendments by the close of business on Decc.ber 17, 1993.
\\
s' pues M. paylor Executive Director for Operations
Enclosures:
1.
Director's Finding of No Significant Changes 2.
Cajun Electric Power Cooperative, Inc.
3.
City of Lafayette, Louisiana 4.
Louisiana Energy and Power Authority 5.
Terrebonne Parish Consolidated Government 6.
Director's Reevaluation Finding SECY NOTE:
In the absence of instructions to the contrary, SECY
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will notify the staff on Thursday, December 16, 1993, that the Commission, by negative consent, assents to the action proposed in this paper.
1 DISTR!PUTION:
Commissioners OGC OCAA OIG OPA i
l RIVER BEND STATION l
GULF STATES UTILITIES COMPANY, CAJUN ELECTRIC POWER COOPERATIVE, INC.
POST OPERATING LICENSE ANTITRUST REVIEW FINDING OF NO SIGNIFICANT CHANGES l
Under Section 105 of the Atomic Energy Act of 1954, as amended, 42 U.S.C.
I 2135 (Act),10 C.F.R. _59 50.80 and 50.90, the Nuclear Regulatory Comission (NRC or Comission) requires an antitrust review of changes in ownership or operator of a power production facility after initial licensing.
In situations where requests for a change in ownership or operator have been received after issuance of an operating license for such a facility, the staff i
has conducted, with the Comission's approval, a significant change review to j
determine whether the licensee's activities create or tend to create a t
situation inconsistent with the antitrust laws. The Comission delegated the i
authority to make the significant change determination to the Director, Office of Nuclear Reactor Regulation (NRR).
Based upon an analysis of the extensive coments received, the record and findings in other regulatory proceedings involving the proposed merger of Gulf States Utilities Company (GSU) and Entergy Corporation (Entergy), and after consultation with the Department of Justice, the staffs of the Inspection and Licensing Policy Branch of NRR and the Office of the General Counsel (hereafter, " staff"), have concluded that the changes in GSU's activities which have been identified by the staff do no} decision. constitute significant chan as envisioned by the Comission in its Sumer The conclusion of the staff analysis is as follows:
After review of the filings in this proceeding, the record and testimony developed in the related proceedings at the Federal Energy Regulatory Comission and other public information, the staff determined that the changes in GSU's activities since the l
previous antitrust review, which may have com)etitive implications in the bulk power services market in the sout,1 central portion of the country, should be addressed in the context of a petition pursuant to 10 C.F.R. Section 2.206 requesting initiation of an antitrust compliance proceeding, not in the instant significant j
change proceeding. Consequently, the staff recomends that the Director of the Office of Nuclear Reactor Regulation issue a post OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend from GSU to Entergy. The staff further has determined that as a result of the inclusion of a license condition prohibiting E0!'s marketing or brokering of power or energy from the River Bend facility that the proposed transfer of operating responsibility of River Bend from GSU to EDI presents no relevant antitrust issues to the instant licensing review process.
' South Carolina Electric and Gas Company and South Carolina Public Service Authority, (Virgil C. Sumer Nuclear Station, Unit 1), CLI-80-28,11 HRC 817, 824 (1980).
2 Based upon the staff analysis, it is my fir. ding that there have been no "significant changes" in the licensee's activities or proposed activities since the completion of the antitrust operating license review of the River Bend Station.
/
F Thomas E. Murley, Director Office of Huclear Reactor Regulation J
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i RIVER BEND STATION GULF STATES LITILITIES COMPANY, CAJUN ELECTRIC P0ilER COOPERATIVE, INC.
DOCKET NO. 50-458 STAFF RECOMMENDATION POST OL NO SIGNIFICANT ANTITRUST CHANGES l
OCTOBER 1993 k
4
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.s CONTEHIS I
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+
I.
The River Bend Amendment Aeolications...................
1 II.
Aeolicable Statute and Reau1ations.....................
3 A.
Authority for NRC Antitrust Reviews...............
3 B.
NRC Operating License Antitrust Reviews..........
4 C.
Change in Ownership After Operating License Issuance..........................................
5 III.
Previous NRC Antitrust Reviews of River Bend............
6 A.
River Bend Construction Permit Review............
6 i
B.
River Bend Operating License Review..............
7 IV.
Other Reculatorv Reviews................................
8 1
A.
State Public Utility Commissions..................
8 B.
Securities and Exchange Commission...............
9 C.
Department of Justice.............................
9 I
D.
Federal Energy Regulatory Commission..............
9 V.
Armendment Anolication Comments Received By The Staff.. 12 l
A.
Cities & Cooperative.............................
13 B.
Brazos Electric Power Cooperative, Inc...........
14 i
C.
Cajun Electric Power Cooperative, Inc............
15 D.
Lafayette Public Power Authority.................
17 E.
Louisiana Energy and Power Authority /Terrebonne.. 18 1
l F.
Occidental Chemical Corporation..................
20 l
G.
Municipal Energy Agency of Mississippi........... 21 H.
South Mississippi Electric Power Association..... 22 i
VI.
NRC Staff Analysis of Addition of Non-Owner Operator... 23 l
VII.
NRC Staff Analysis of Chance in Ownershio..............
25 A.
Effects of the Proposed Merger on Competition.... 27 B.
NRC Staff Findings Regarding Change in Ownership. 32 l
VIII.
CONCLUSION.............................................
34 l
Appendix A - Previous NRC Reviews of GSU and Energy l
j I.
The River Bend Amendment Apolications Nuclear Regulatory Commission ("NRC" or " Commission") License No. NPF-47 authorizes Gulf States Utilities Company ("GSU") and Cajun Electric Power Cooperative
(" Cajun") to possess the River l
i Bend Station, Unit 1 (" River Bend") and further authorizes GSU to act as agent for Cajun with exclusive responsibility and control over the physical construction, operation, and maintenance of River Bend.1 By letter dated January 13, 1993, the NRC staff (" staff")
received an application from GSU for Commission consent, pursuant to 10 C.F.R. S 50.80, for GSU to transfer control of River Bend to a newly formed holding company to be called Entergy Corporation.2 t
By separate letter dated January 13, 1993, the staff also received an application from GSU, submitted on behalf of itself and Cajun, to transfer operating responsibility and management of River Bend i
r 1
Gulf States Utilities Company ("GSU") has a 70% undivided ownership interest in River Bend Station, Unit 1,
and Cajun l
Electric Power Cooperate (" Cajun") has the remaining 30% undivided i
ownership interest.
2 Entergy Corporation currently exists as a public utility holding company organized under the laws of the State of Florida, and, through its operating companies, engages principally in the generation, transmission, distribution and sale of electricity in
- Arkansas, Louisiana, and Mississippi.
The Entergy operating-companies include: Arkansas Power & Light Company, Louisiana Power
& Light Company, Mississippi Power & Light Company and New Orleans Public Service, Inc.
Under the proposed plan to combine the business of GSU with Entergy, a series of-mergers will result in the termination of the existing Entergy Corporation and the renaming of the surviving corporation as Entergy Corporation with GSU as a wholly owned subsidiary of the new Entergy Corporation.
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from GSU to Entergy Operations, Inc. ("EOI").a Under section 105 f
of the Atomic Energy Act of 1954, as amended, 42 U.S.C.
S 2135,
("Act")
the NRC requires an antitrust review of changes in f
ownership after initial licensing.
Further, the Commission has
- noted, with
- approval, the staff's practice of conducting a significant change review for a transfer of control of an operating license issued under section 103 of the Act.'
t After review of the filings in this proceeding, the record and I
testimony developed in the related proceedings at the Federal t
Energy Regulatory Commission and other public information, the
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staff determined that the changes in GSU's activities since the i
previous antitrust review, which may have competitive implications l
in the bulk power services market in the south central portion of the country, should be addressed in the context of a petition i
pursuant to 10 C.F.R.
Section 2.206 requesting initiation of an antitrust conpliance proceeding, not in the instant significar';
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change proceeding.
Consequently, the staff recommends that the Director of the Office of Nuclear Reactor Regulation issue a post i
OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend from GSU to i
i 3
Entergy Operations, Inc. (EOI) is a subsidiary of Entergy 1
which is licensed by the NRC as a non-owner operator of the four nuclear units of the Entergy system (Arkansas Nuclear One, Units 1 and 2; Grand Gulf Nuclear Station, Unit 1,; and Waterford Steam Generating Station, Unit No. 3).
S_qn Ohio Edison Comoany, (Perry Nuclear Power Plant, Unit 1); Cleveland Electric Illuminatina Co.
and Toledo Edison Co.,
(Perry Nuclear Power Plant, Unit 1; Davis-Besse Nuclear Power Station, Unit 1), CLI-92-11, 36 NRC 47, 60 n.45 (1992).
t,
Entergy.
The staff further has determined that as a result of the inclusion of a license condition prohibiting EOI's marketing or brokering of power or energy from the River Bend facility taat the proposed transfer of operating responsibility of River Bend from
[
GSU to EOI presents no relevant antitrust issues to the instant j
licensing review process.
II.
Aeolicable Statute and Reculations A.
Authority for NRC Antitrust Reviews r
Section 105 of the Act defines the antitrust authority of the NRC.S Subsection 105c(1) of the Act, as amended in 1970, requires the Commission to transmit, to the Attorney General, a copy of any i
license application to construct or operate a nuclear facility j
e under section 103 fo2 tha Attorney General's advice regarding a Commission finding pursuant to subsection 105c(5) as to whether the grant of an application will create or maintain a situation inconsistent with the antitrust laws.
Subsection 105c(2) provides i
an exception to the requirements of subsection 105c(1) for a license to operate a nuclear facility for which a construction i
permit was issued under section 103, unless the Commission determines that an antitrust review is advisable on the ground that "significant changes" in the licensee's activities or proposed activities have occurred subsequent to the previous review by the Attorney General and the Commission in connection with the 5
S_eg Houston Lichtina & Power Co.,
(South Texas Project),
e CLI-77-13, 5 NRC 1303, 1317 (1977).
1
s.
e-
_4_
constructionpermitfortheYacility.
In a decision regarding the l
significant changes determination for the vircril C.
Summer Nuclear k
Station, the Commission stated the criteria to be applied in making
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significant changes determinations:
The statute contemplates that the change or changes (1) f have occurred since the previous antitrust review of the licensee (s);
(2) are reasonably attributable to the i
licensee (s); and (3) have antitrust implications that would likely warrant some Commission remedy.'
I To warrant an affirmative significant change. finding, thereby I
triggering a formal OL antitrust review that seeks the advice of the Department of Justice on whether a hearing should be held, the particular change (s) must meet all three of these criteria.
l B.
NRC Operating License Antitrust Reviews The regulatory scheue regarding antitrust review of applications for operating licenses, as set out in the Commission's i
I regulations at 10 C.F.R. SS2.101fe) and 2.102(d), contemplates a j
determination by the Director, Office of Nuclear Reactor Regulation
("NRR"), whether an antitrust review is advisable on the grounds that "significant changes" in the licensee's activities or proposed activities have occurred.
Only if the Director concludes, using i
the criteria in Suraner, t. hat significant changes have occurred, will the application be reeferred to the Attorney General for review pursuant to section 105 of the Act.
If the application is referred l
to the Attorney General, interested persons have an opportunity to request a hearing after receipt of the Attorney General's advice.
South Carolina Electric and Gas Coreany and South Carolina Public Service Authority, (Virgil C.
Summer Nuclear Station, Unit 1), CLI-80-28, 11 IEC 817, 824 (1980).
s D C.
Change In Ownership After Operating License Issuance l
l Section 105 of the Act, by its terms and legislative history, and the commission's regulations do not directly address an antitrust review by the NRC when a transfer of control from the original owner (s) of a power reactor occurs aftest issuance of the initial section 103 operating license.
In these cases, the staff generally has followed a process similar to that set out in 10 C.F.R.
SS 2.101(e) and 2.102 (d).
This process generally consists of notice to the pblic of receipt of the application, l
solicitation of antitrust comments, and a determination by the Director, NRR, after consultation with DOJ, regarding "significant changes" since the last antitrust review.
A determination that there are no significant changes is published in the Federal i
Recister with an opportunity for interested persons to request a reevaluation of the finding.
A determination that there are significant changes requires transmitting the application to the Attorney General for his advice regarding whether the Commission should conduct an antitrust hearing.7 This process does not apply to applications to transfer ownership to new owners with sLe minimis electrical generating capacity at the time of the application or to facilities licensed 8
under subsection 104b.'
The process also does not apply to 7
Egg supra note 4.
i e
Sag 10 C.F.R. S 50.33a.
i Only section 103 facilities are subject to the antitrust requirements of subsection 105c.
Egg Anterican Public Power (continued...)
, applications to transfer control of a facility to a non-owner operator where the ability of the non-owner operator to affect competition has been limited through appropriate license conditions.18 i
III. Previous NRC Antitrust Reviews of River Bend A.
River Bend Construction Permit Review 1
T'se staff conducted a review of GSU's competitive activities in 1974 in conjunction with the River Bend construction permit
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("CP") application.
As part of the CP review, GSU entered into a I
set of policy commitments
.with DOJ regarding
- access, interconnection and reserve sharing, wheeling, and exchange of bulk power.
Although DOJ identified several instances of alleged abuse of market power by GSU, DOJ indicated in its March 25, 1974 advice letter to the NRC that if the policy commitments made by GSU were imposed as license conditions to the River Bend plant, "an antitrust hearing on this application would appear unnecessary."
The commitments were imposed as antitrust license conditions to the River Bend construction permit.
The license conditions provide a
(... continued)
Association v.
- NRC, No.
92-1061, slip op. at 7-8 (D.C.
Cir.
April 13, 1993).
i to The antitrust issues that the staff believes are associated with amending a section 103 license to authorize operation of a i
power reactor by an entity that has no ownership in the facility is discussed in SECY-91-246 (August 7, 1991).
In a memorandum from Samuel J. Chilk, Secretary, to the Executive Director of Operations and the General Counsel, dated September 9, 1991, the Commission approved the staff's proposal to include license conditions that limit a non-owner operator's ability to affect the marketing or brokering of power.
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broad array of access to bulk power and coordinated bulk power services including wholesale power for resale, transmission, interconnections, reserve sharing aad other services to primarily smaller power entities in and adjacent to GSU'r service area.
B.
River Bend Operating License Review In 1985, pursuant to section 105c(2) of the Act, the staff conducted a
significant change review of GSU's competitive activities pdor to issuance of the River Bend operating license.
The staff identified several changes in GSU's activities that were l
the result of the license conditions imposed upon GSU during the CP antitrust review.
The staff did identify one area of concern during its significant change review regarding a refusal by Gulf States to provide transmission services to n2n-generating power entities.
The staff concluded after extensive review of the relevant data that the affected non-generating entities in GSU's service area could receive transmission service through interconnection agreements with Cajun Electric Power Cooperative, Inc. and the Louisiana Energy and Power Authority as well as through a Power Delivery Agreement which was proposed by GSU.
Based on the CP antitrust license conditions and the origination of power delivery agreements that made transmission access available to non-generating entities, the staff made a no significant change determination pursuant to GSU's application for an operating license for the River Bend Station.
a
. l IV.
Other Reculatory Reviews A.
State Public Utility Commissions The proposed merger precipitated lengthy proceedings before i
two state public utility commissions, Texas and Louisiana, with
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each very much focused on the "public interest" concept of the proposed merger in terms of what effect it would have on rate payers in their respective jurisdictions.
The Louisiana Public Service Commission ("LPSC") approved the proposed merger in April 1993.
The LPSC. staff declared the proposed merger to be in the public interest and recommended approval of the merger with several conditions.
Approval was based primarily on projected fuel savings l
for the merged GSU/Entergy system of over $560 million over ten years with most of the savings coming from GSU operations.
The merger conditions were designed primarily to protect Louisiana rate i
payers and did not directly address the competitive effsets of the proposed merger on bulk power services marketr,.
In March
- 1993, CSU,
- Entergy, the Texas Public Utility Commission ("PUCT") staff and various parties to the Texas proposed merger proceeding agreed to a stipulation that resulted in a tentative settlement of the outstanding issues an he Texas proceeding involving the proposed GSU/Entergy
% er.
The settlement stipulates that the parties recommend the merger.for i
regulatory approval, calls for 100% of merger-created fuel savings in GSU's Texas service area be passed through to its Texas customers, allows for GSU customers to receive over half the non-fuel operations and maintenance savings created by the merger for
a
> eight years, and puts a five-year cap on GSU's Texas retail rates, based on the rates in effect on the merger closing date.
The stipulated agreement also assured other members of the Electric Reliability Council of Texas ("ERCOT") that Entergy did not intend to subject its Texas operations to interstate commerce by interconnecting GSU's Texas operations with non-ERCOT power systems.
The PUCT approved the settlement agreement in July 1993.
B.
Sect 11 ties and Exchange Commission In August 1992, pursuant to the requirements of the Public Utility Holding Company Act of 1935, Entergy filed an application with the SEC for approvkl of the proposed GSU/Entergy merger and various related transactions.
The SEC review of the proposed merger will encompass competitive implications as well as the projected structural efficiencies and economies associated with the merger.
Numerous petitions to intervene were filed with the SEC.
As of the date this staff recommendation was completed, the petitions to intervene had not been accepted by the SEC, nor had a hearing date been set.
C.
Department of Justice In March 1993, pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, GSU and Entergy filed notification of their intent to merge with DOJ.
On August 24, 1993, D3J withdrew its second request for any additional information from the applicants.
The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act has expired.
D.
Federal Energy Regulatory Commission
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There have been two proceedings before the Federal Energy Regulatory Commission ("FERC")
that relate to the competitive issues raised by the proposed Entergy/GSU merger.
In the first proceeding in 1992, the FERC examined the impact of an open access transmission tariff that was submitted by Entergy.
Jag Enterav Services. Inc., 58 FERC 1 61,234 (1992), (March 3, 1992 Order).
In that proceeding, the FERC determined, among other things, that, after certain modifications to the proposed tariff, Entergy does not possess market power in its relevant geographic or product markets.
The second proceeding began with the filing by GSU and Entergy of a joint application with the FERC, in August 1992, requesting the authority and approval for a merger and reorganization to
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combine the facilities of Gulf $tates with the facilities of the operating electric utility subsidiaries of Entergy.
Thirty-four notices or motions to intervene were filed before the FERC.
The majority of the intervening _ parties re. quested a hearing and imposition of conditions on the merging companies as a condition of FERC approval.
1 The FERC issued an order on the merger and rate applications on January 28, 1993.
Enterav Services. Inc.
and Gulf States Utilities Co.,
62 FERC 1 61,073, slip op, at 87-88 (1993),
(January 28, 1993 Order).
The January 28, 1993 order set a limited, expedited hearing schedule for issues pertaining to the-I merger's effect on costs and rates, the applicants' proposed accounting treatment and the applicants' proposed amendment to
, Entergy's System Agreement.
The FERC indicated in its order that the issues raised by intervenors pursuant to the competitive effects of the proposed merger were adequately mitigated by i
Entergy's open access transmission tariff, which the FERC approved in March 1992, and, for this reason, the FERC would not hold hearings on issues pertaining to competition or market power.
Before making its findings, the FERC accepted and considered r
extensive initial and supplemental filings on competition and trancmission issues in connection with the Entergy-GSU merger application. The FERC, on the merits, granted " summary disposition on the effect of the proposed merger on competition" and found
" Mat the provisions approved in Entergy's open-access tariff, when extended to Gulf States' service territory and in perpetuity (or until the Commission deems it unnecessary),
will adequately mitigate any increase in market power in the relevant geographic and product markets that may arise from the proposed merger, if approved."
Is1. at 106-07.
Subsequent to the FERC's January 28, 1993 Order, several parties filed requests for rehearing, indicating that FERC had not adequately addressed the competitive issues attendant to the proposed merger.
In a July 1, 1993 Order, the FERC denied the requests for rehearing and set September 30, 1993, as the date for the FERC Administrative Law Judge Initial Decision on the matters i
set for hearing.
Enterov Services. Inc. and Gulf States Utilities 22, 64 FERC 1 61,001 (1993),
(July 1, 1993 Order).
The FERC Administrative Law Judge issued an Initial Decision on September 9,
. 1993. The FERC's January 28, 1993 order limited the time period in which briefs on exceptions could be filed to 20 days, and briefs opposing exceptions to 35 days, after the administrative law judge's initial decision is rendered.
V.
Amendment Aeolication Comments Received By The Staff
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On March 25, 1993, the staff published in the Federal Recister notice of receipt of license amendment requests from GSU for approval of the proposed transfer of ownership control and operation of the River Bend plant from GSU to Entergy Corporation.
58 Fed. Reg. 16246 (1993).
Comments were received from the following entities:
Arkansas Cities of Benton, Conway, North Little Rock, Osceola, Prescott, West Memphis and the Farmers Electric Cooperative Cor
" Cities and Cooperative"); poration (collectively, Brazos Electric Power Cooperative, Inc. ("Brazos") ;
Cajun Electric Power Cooperative, Inc. ("Caj un") ;
Lafayette Public Power Authority and the Lafayette, Louisiana Utilities System (" Lafayette");
Louisiana Energy and Power Authority ("LEPA");
Municipal Energy Agency of Mississippi ("MEAM");
Occidental Chemical Corporation (" Occidental");
South Mississippi Electric Power Association ("SMEPA"); and Terrebonne Parish Consolidated Government ("Terrebonne").
On June 11, 1993, GSU filed a response to the comments and on July 9,
- 1993, Terrebonne filed a
reply to GSU's response.
Additionally, Brazos, Cajun, Lafayette, LEPA, MEAM, Occidental, and
- Terrebonne provided additional information in response to queries t
from the staff dated July 7 and 9, 1993.
Several of the commenters have similar concerns regarding the proposed merger between GSU and Entergy. Generally, the commenters allege that the proposed merger would adversely impact the competitive bulk power services market (s) served by the newly formed GSU/Entergy by restricting meaningful access to transmission facilities in the combined GSU/Entergy service area.
The comments are summarized below:
A.
Cities and Cooperative Arkansas Cities and Cooperative each own and/or operate electric generation and distribution systems or electric distribution systems within the State of Arkansas and are completely surrounded by the facilities of AP&L.
Arkansas Cities and Cooperative are full or partial requirements wholesale customers of AP&L.
Cities and Cooperative
- Comments, dated April 23, 1993, at 2-3.
Cities and Cooperative allege that the merger will have a detrimental impact on competition for wholesale load within the combined GSU/Entergy service area and that no regulatory agency has reviewed the anticompetitive effect of the merger to date.
Cities and Cooperative also allege that the.
proposed merger will eliminate GSU as an independent competitor in their regional arert and that the Entergy open access transmission tariff approved by the FERC in March 1992 will not effectively mitigate the potential anticompetitive effects of the proposed merger.
Moreover, Cities and Cooperative assert that a subset of e
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the transmission access tariff granting Entergy reciprocal wheeling l
rights discouraged meaningful competition for wholesale supplies.
M. at 18.
Cities and Cooperative recommend that the NRC and the Attorney General conduct a thorough antitrust review and give consideration to the imposition of antitrust license conditions which would grant comparable richts to the customers of al) of Entergy's operating company subsidiaries and would allow and i
require GSU and all of Entergy's operating company subsidiaries to compete for wholesale load in Entergy's service area.
M. at 28-29.
B.
Brazos Electric Power Cooperative, Inc.
Brazos is an electric generation and transmission cooperative which provides power and energy to its members, which resell to ultimate consumers in over 60 counties in the north central region of Texas.
Brazos purchases power and energy from GSU under a FERC-jurisdictional rate schedule.
Brazos also purchases from GSU transmission service for hydroelectric power and energy which Brazos obtains by contract from the Southwestern Power Administration ("SWPA").
Brazos comments, dated April 26, 1993, at 2.
Brazos asks the NRC to conduct a complete evidentiary hearing and review of the proposed merger between GSU and Entergy l
notwithstanding the ongoing review of the merger at the FERC.
In its petition to intervene, Brazos emphasizes the fact that the original River Bend antitrust license conditicas were imposed upon a " stand-alone GSU" and the addition of Entergy to the GSU system could result in the second largest utility in the United States v
. = -..
i o
=
i i with GSU a part of a centrally coordinated system of operation.
Brazos asks the NRC to develop a complete evidentiary record to determine if the existing River Benci antitrust license conditions, as well as those of Louisiana Power and Light
("LP&L")
and Mississippi Power and Light ("MP&L"), are adequate to deal with the anticompetitive effects arising from such increased centralitation of control over the nuclear operating licenses granted by the WRC.
M. at 7-8.
Brazos requests that the NRC find that the stranded investment 11 provision of the Entergy open access transmiscion tariff is contrary to the River Bend antitrust license conditions; ensure that GSU offer transmission to competitors on non-discriminatory rates, terms and conditions; and take any further action necessary to redress the "significantly changed circumstances resulting from GSU's proposed license amendment with regard to change in ownership of GSU."
M. at 10.
C.
Cajun Electric Power Cooperative, Inc.
- Cajun, the co-owner of the River Bend
- facility, is a
generation and transmission cooperative, headquartered in Baton Rouge, Louisiana, serving thirteen rural electric distribution cooperatives in Louisiana under all requirements contracts.
Cajun states that its primary purpose is to provide an adequate and reliable supply of economical power and energy to meet the full 11 Stranded investment costs usually refer to generation costs
[
allocated to supply a particular wholesale load, which in return makes use of the host generating system's transmission facilities to leave the system and take wholesale power from another source.
0 4 ;
requirements" of Cajun's Members.
Caiun Comments, dated April 26, 1993, at 5.
According to Cajun, the merged companies' control and ownership of regional transmission facilities, the integrated nature of its operations and its enhanced size and access to resources, will create anticompetitive effects which will not be remedied by the open access transmission tariff, which Entergy and i
GSU state will be made applicable to GSU after the consummation of i-the merger and upon which Entergy and GSU rely as the vehicle for mitigation of their market power.
Cajun further alleges that the proposed merger will enhance the market power of Entergy and GSU over Cajun and other native load transmission customers and that the open access transmission tariff is inadequate to meet the requirements of Cajun and native load transmission customers which
}
compete with Entergy and GSU in the requirements and bulk power markets.
J4. at 53-54.
Cajun asks the NRC to ensure that the following conditions are a part of the NRC's approval of the proposed GSU/Entergy merger:
- 1. that Cajun's rights as a thirty percent co-owner of River Bend are protected;
- 2. that Entergy assure the financial viability of GSU and EOI to avoid potential health and public safety dangers should GSU become bankrupt or financially unable to undertake its responsibilities regarding River Bend; 3.
that access to transmission on the Entergy system be provided on a non-discriminatory and equal price basis such that competitors, like Cajun, can utilize the transmission system in the same fashion as do the Entergy Operating companies; Full requirements customers are those customers with no generating capability of their own.
~17 -
- 4. that GSU's and Entergy's contractual obligations to Cajun are not obviated;
- 5. that GSU and Entergy comply with all license conditions on River Bend and the Entergy nuclear plants; and 6.
that the public interest is fully protected.
M. at 86.
Moreover, Cajun asks that the NRC delay its decision until final orders have been issued in other fora where the merger is also being reviewed.
Cajun asserts that the NRC is relying on findings of other agencies in making its own determination and must, therefore, analyze those decisions to determine if proposed conditions meet the standards which the NRC is charged with applying and enforcing.
H. at 87.
1 D.
Lafayette Public Power Authority Lafayette Public Power Authority ("LPPA") was created by the City of Lafayette, Louisiana for the purpose of acquiring and maint;ining public power projects.
LPPA owns and operates a municipal electric system that provides service to the city of Lafayette.
LPPA owns approximately 650 MW of generating capacity and has a peak load of approximately 320 MW.
LPPA has considerable surplus generating capacity and sells power to other utilities.
LPPA competes with the Entergy operating companies in the sale of wholesale power and is totally dependent upon the Central Louisiana Electric Company and GSU for transmission of power and energy.
LPPA alleges that Entergy is engaged in discriminatory treatment of its competitors largely through the exercise of its monopoly power in transmission.
LPPA contends that, Entergy's point-to point (contrasted to a form of network transmission
E 4 service) limitation is also at odds with long-standing antitrust license commitments made by Entergy to the Nuclear Regulatory Commission. Laf ayette Comments, dated April 26, 1993, at 12.
LPPA also alleges that the a portion of the Entergy transmission access tariff approved by the FERC in March 1992 includes a provision that allows for Entergy to include in its transmission rate funds allotted for stranded investment contrary to the NRC license conditions for the Waterford Steam Generating Station and Grand Gulf Nuclear Station. To remedy the allegations of abuse of market l
power by Entergy, LPPA requests that the NRC require Entergy to offer non-discriminatory transmission service, including network service; to find that the stranded investment provision afforded i
Entergy by the open access FERC approved rate is contrary to NRC license conditions; and to take any additional action needed to remedy the alleged anticompetitive implications of GSU and Entergy's proposal to transfer the River Bend license.
Is1. at 17.
E.
Louisiana Energy and Power Authority /Terrebonne Parish Louisiana Energy and Power Authority ("LEPA") is a political subdivision of the State of Louisiana that provides the facilities to generate and transmit power and energy for its 19 member municipal electric systems.
Terrebonne Parish, also known as the City of Houma, Louisiana, is one of the 19 members of LEPA.
Although both LEPA and Terrebonne made separate filings, they both have overlapping concerns and LEPA indicated in its filing that it intends to incor;. orate Terrebonne's Comments by reference.
LEPA Comments, dated April 26, 1993, at 2.
LEPA was formed to meet the
a b
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need for an efficient bulk power supply by municipal electric
{
systems throughout the state during a period in the late 1970s when gas fuel was in short supply and at a very high price and expected to go even higher.
Terrebonne comments, dated April 26, 1993, at 5.
LEPA and its members, in an effort to reduce the' coats of their baseload power supply, purchased an interest in a coal-fired generating plant, the Rodemacher Unit No. 2 from the Central Louisiana Electric Company ("CLECO").
Moreover, LEPA, contracted for transmission and other power exchange services from GSU, CLECO, and Louisiana Power and Light to deliver coal-fired power from the Rodemacher plant and backup for that power to its municipal members.
H. at 6.
Terrebonne. alleges that the proposed merger between GSU and Entergy will eliminate GSU as an independent entity in the bulk power services market in which it operates. Terrebonne argues that elimination of the second largest utility in the region as a potential coordinating partner will reduce substantially-the potential for coordinated development of generation available to Terrebonne and LEPA and makes reasonably assured access to transmission all the more crucial.
Terrebonne, at 11.
LEPA has similar concerns pursuant to the loss of an independent GSU and argues that assured transmission access at a fair and readily determinable rate with coordinating partners-is absolutely essential if LEPA is to continue in business.
H. at 12.
Both LEPA and Terrebonne argue that the provisions in the open access tariff, approved by the FERC in March 1992, that allow for
a e " point-to-point" transmission charges and " stranded investment" costs are anticompetitive and inconsistent with existing NRC antitrust license conditions.
LEPA and Terrebonne allege that if LEPA does not obtain meaningful access to the coordination services market, which contains the various factors of production that are melded together to produce a low-cost, reliable supply of wholesale requirements power, its ability to compete in the wholesale requirements market is greatly diminished because its rates would be much higher relative to the rates of those that have access to this market.
151. at 32.
LEPA and Terrebonne ask the NRC to make a significant change finding, hold an antitrust hearing on the proposed merger, and condition the proposed change in ownership of River Bend by adding a series of license conditions which provide for transmission of a given quantity of power among points for one transmission charge and remove stranded investment charges from the transmission rate.
F.
Occidental Chemical Corporation Occidental is the largest retail electric customer on the Entergy system and is one of the 25 largest retail customers of GSU.
Occidental asserts that the transfer of control of River Bend would impact competition in electric markets and thereby directly and substantially affect Occidental.
Occidental Comments, dated April 26, 1993, at 2.
Occidental alleges that the stipulation entered into by GSU, Entergy and Texas Utilities Company in the Texas Public Utilities Commission proceeding involving the proposed merger of GSU and Entergy amounts to an agreement among these three
D
- entities not to compete in the state of Texas and, therefore, is a violation of Sherman Act section 1 principles.
Occidental asks the l
NRC to find, because of the stipulation before the Texas PUC and the proposed merger between GSU and Entergy, that significant changes have occurred since the previous antitrust review of the River Bend plant.
G.
Municipal Energy Agency of Mississippi MEAM is a joint action agency organized under the laws of Mississippi in 1978 by eight municipalities to furnish reliable 1
electric service to its member cities at the lowest possible cost.
MEAM engages in the sale and purchase of power for its members and l
is interconnected with MP&L.
MEAM is a transmission dependent utility with respect to MP&L and to the Entergy system.
MEAM Comments, dated April 26, 1993, at 3.
MEAM argues that point-to-point transmission service, though providing for access to transmission facilities, does not provide i
meaningful access because the costs are duplicative and prohibitive compared to a single system network transmission service.
MEAM also argues that the FERC hearing did not fully consider the competitive implications of this distinction nor the fact that the NRC license conditions require network transmission service for individual Entergy operating subsidiaries.
MEAM also alleges that the Entergy open access transmission tariff is inconsistent with NRC antitrust license conditions in that it allows for stranded investment costs to be included in transmission costs whereas the NRC conditions specifically preclude such costs.
e 4
22 -
MEAM asked the NRC to make a significant change finding pursuant to the proposed merger amendments and review the existing antitrust license conditions imposed upon the Entergy subsidiaries and GSU to determine whether they are still adequate or should be modified to cover the entire Entergy system in order to reflect the operating realities of that system as it has evolved.
On September 9, 1993, MEAM notified the NRC that it had reached an accommodat. ion with Entergy which resolved the objections MEAM had previously asserted to the proposed merger and accordingly, MEAM was withdrawing its objections to the merger contained in its April 26, 1993 comments.
H.
South Mississippi Electric Power Association SMEPA is a generation and transmission cooperative owned by electric distribution cooperatives serving rural areas in the state of Mississippi and supplies all the power and energy requirements of its members in Mississippi.
SMEPA operates and maintains its own transmission system within its own control area, has an i
undivided 10 percent interest in Grand Gulf, and utilizes Entergy's transmission system to supply power to its members' load in the MP&L system control area served through delivery points located within MP&L's transmission system. SMEPA Comments, dated April 26, J
1993, at 5.
SMEPA alleged that the Entergy open access transmission tariff approved by FERC in March 1992 does not provide meaningful access to the GSU/Entergy transmission grid in that it
- offers, effectively, a more costly point-to-point service as opposed to i
J
i
.- 2 3 -
~
network transmission service.
SMEPA alleged that as a result it will be put at a greater competitive disadvantage in the purchase and sale of bulk power and energy after the proposed merger compared to the existing competitive relationship between SMFPA, GSU and the Entergy operating subsidiaries.
On August 19,
- 1993, SMEPA notified the NRC that it was withdrawing its opposition to the proposed merger.
VI.
NRC Staff Analysis Of Addition Of Non-Owner Operator In the case of new operators, it has been the staff's position that any new plant operator that agrees to separate itself from marketing or brokering of power and energy from the facility under review, ostensibly removes the ability of that plant operator to affect the bulk power or coordination services market under review.18 In August 1989, System Energy Resources Inc. ("SERI") (Grand Gulf licensee), Arkansas Power & Light Company (Arkansas Nuclear One
("ANO"i. Unit 2 licensee) and LP&L (Waterford licensee) submitted to the RC proposed license amendments to designate EOI as the licensed operator for all of Entergy's nuclear power plants, i.e.,
Grand Gulf, ANO 1 and 2 and Waterford.
EOI, at the time of the amendment applications for each of these plants, was slated to become Entergy's system wide nuclear operating company, replacing SERI in the same role.
EOI, like SERI and the operating companies l'
f.Ag suora note 10.
j i
\\
of the Entergy system, is a wholly owned subsidiary of Entergy.1' The staff was concerned with what competitive impact EOI,
]
a new corporate entity, would have, via its ability to market or broker power or energy from each or all of the Entergy nuclear plants, on relevant bulk power services markets served by the entire Entergy system.
The staff and Entergy developed a license condition for each of the Entergy nuclear plants licensed under section 103 of the Act that effectively removed EOI from any competitive activities associated with the power or energy produced by the nuclear facilities it would be operating.18 After discussions among representatives of Entergy, GSU, and the staff, GSU, by letter dated June 29, 1993, supplied language i
for two proposed new license conditions for River Bend.
The proposed license conditions would reaffirm GSU's commitment to comply with existing GSU antitrust license conditions, prohibit EOI from marketing or brokering power or energy produced by River Bend, and hold GSU accountable and responsible for EOI's actions to the s'
Esfg suora note 3.
15 A license condition was added to the Grand Gulf plant which held licensees, SERI and MP&L, responsible and accountable for the actions of its agents including EOI to the extent said actions contravened the antitrust license conditions of the Grand Gulf plant.
A similar license condition was included as a part of the Waterford license, holding LP&L responsible and accountable for -
the actions of its agents.
Because there were no existing antitrust license conditions as part of the Arkansas Nuclear One, Unit 2 facility, the licensee, AP&L, and the staff developed a specific license condition that prevented EOI from marketing or brokering the power or energy produced by the Arkansas Nuclear One, Unit 2 facility.
The same license condition held AP&L responsible and accountable for the actions of its agents, including EOI, regarding the marketing or brokering of power or energy from the plant.
a
) extent EOI's actions contravene the antitrust license conditions for River Bend.
If the proposed license conditions limiting EOI's ability to participate in the bulk power services market served by River Bend are made a part of the River Bend license, the staff finds that the change in operator of the River Bend facility from GSU to EOI will not adversely impact the relevant bulk power market served by River Bend.
VII. NRC Staff Analysis Of Chance In Ownershin The purpose of this review is to determine whether there have been significant changes in the licensee s proposed activities r
since the last antitrust review which have antitrust implications that would likely warrant some Commission remedy.
It is apparent from the filings in this proceeding that the change in ownership and control resulting from the proposed merger between GSU and Entergy have precipitated allegations of non-compliance with existing antitrust license conditions.
An allegation of non-conformance with license conditions is a matter properly dealt with in a 10 C.F.R.
S 2.206 petition.
Stated another way, allegations-of non-conformance with license conditions, if substantiated, are dealt with by enforcing the existing license conditions.
A significant change, as that term has been defined by the commission in Summer, on the other hand, may require a proceeding to determine what remedy would be appropriate to address the anticompetitive implications of the significant changes.
In making its findings and completing its review of the licensee's activities, the staff
s
. has had the benefit of testimony and hearings at the FERC concerning the proposed merger between GSU and Entergy and the related rate proceeding involving the Entergy open access transmission tariff.
Although many of the FERC findings are not germane te the instant review, many others have been helpful to the staff.
The FERC in its review of the proposed GSU/Entergy merger, indicated that the Entergy open access transmission tariff approved on March 3,
- 1992, effectively mitigates the potential anticompetitive effects of the proposed merger raised by the intervening parties at the FERC.
The intervenors at the FERC disagreed with this
- finding, indicating that the form of transmission service offered was, on occasion, less desirable than their existing agreements with GSU and individual Entergy operating subsidiaries. Moreover, intervenors argued that they are afforded access to network transmission service under the NRC River Bend, Grand Gulf and Waterford antitrust license conditions. In response to this argument, the FERC stated that any parties believing themselves eligible for service they perceive to be different, i.e., better, than allowed under the Entergy open access tariff, should come to the FERC with a specific service agreement to resolve any differences.
In filings to the NRC, commenters have indicated that such an approach is not satisfactory based primarily on the fact that resolution of the service agreements are too time consuming, perfunctory, and do not delineate the parameters of the problem which, according to the commenters, is the open access
) '
tariff itself.
For the purpose of this significant change analysis, the staff decided that any jurisdictional differences or standards of review differences between the NRC and the FERC in reviewing proposed mergers were not significant in determining whether all three Summer criteria have been met, i.e.,
in large-part, the concerns raised by commenters appear to be enforcement issues and not issues that address changes in licensee's activities.
A.
Effects of the Proposed Merger on Competition From the filings recaived at the NRC and the record established to date at the FERC, the staff believes that the GSU/Entergy merger impacts the bulk power services market in the south central portion of the country.
The FERC has ruled on the merger's effect on competition, finding that, with the transmission changes committed to by Entergy, the merger will not adversely affect competition.
January 28. 1993 Order, :tlip op. at 87-88.
To the extent that the FERC may be in error in reaching this conclusion as asserted by NRC commenters, there is an opportunity in the federal courts, for the same parties that are raising these issues before the NRC to seek review of the FERC decision.
With respect to any alleged violations of NRC license conditions that have or may occur as a result of the merger, the mechanism for requesting the NRC staff to take appropriate action for alleged noncompliance with license conditions is a petition filed pursuant to 10 C.F.R.
S 2.206.
EE.g, Consolidated Edison Company of New York, (Indian Point, Unit 2) and Power Authority of the State of
s e l New York, (Indian Point Unit 3), CLI-83-16, 17 NRC 1006, 1009 i
(1983).
1.
Network Transmission The overwhelming competitive concerns expressed by the majority of the intervenors in the FERC proceedings and commenters in the instant proceeding pertain to meaningful access to the i
combined GSU/Entergy transmission grid. Intervening parties in the FERC and commenters in the NRC proceeding allege that they cannot effectively compete against larger, more integrated power supply systems like GSU and the Entergy operating subsidiaries -- and have even more difficulty competing with a merged GSU/Entergy -- without access to alternative sources of power and energy.
The staff believes competition in the electric power industry is enhanced by access to transmission.
- Moreover, access to transmission must be meaningful in both its terms and conditions.
Competitively priced transmission allows both the requesting party and the transmitting party to benefit and obtain optimal allocation of scarce resources from the arrangement.
Although the staff believes unencumbered transmission access promotes the competitive process in bulk power services markets, the staff does not equate such access to a " free ride" for the requesting entity.
Until industry-wide terms and conditions associated with network transmission service are generally accepted and considered by the
- FERC, e.g., in the context of developing regional transmission groups or agreements throughout the country or various regional pooling arrangements which address transmission access issues, the I
t_
i
) -
staff will review relevant allegations involving network versus point-to-point transmission service on a case-by-case approach considering all relevant arguments as well as other federal agencies' findings.
In the instant proceeding, the staff believes l
the issues before the NRC relevant to network transmission are most appropriately addressed in the context of a 2.206 petition seeking initiation of an enforcement proceeding.
2.
Stranded Investment Similar arguments have been raised by FERC intervenors and commenters to the NRC regarding the treatment of stranded investment costs.
Simply put, stranded investment costs usually t
refer to generation costs allocated to supply a particular wholesale load which in return makes use of the host system's transmission f acilities to leave the system and take wholesale r
power from another source.
Intervenors argue that the open access transmission tariff provides for stranded investment costs to be included in a transmission rate whereas certain NRC antitrust license conditions for River Bend, Grand Gulf and Waterford,2' preclude such costs from being included in transmission costs.
The reading of the pertinent license conditions leaves some 9
doubt in regard to whether the language in the license conditions-refers to stranded investment costs or opportunity costs -- two related, yet different concepts.
Opportunity costs represent lost revenues or increased costs associated with foregone sales or l'
The relevant license conditions are:
River Bend (1) (c) ;
Grand Gulf I. (d) ; and Waterford (1) (b).
I i
=
, purchases or power or energy over an identified transmission path.
Although stranded investment costs could conceivably be construed as a type of cost which was intended to be excluded by the pertinent license conditions, it is the staff's opinion that the license conditions referred to by intervenors were intended to preclude opportunity costs as defined above and not stranded investment costs.
Moreover, costs associated with particular wholesale transactions are often case specific. The staff believes that if someone has specific examples where costs of particular transactions are in any way exorbitant or discriminatory, the proper forum for such a determination is the FERC (in a rate proceeding) and not the NRC.
The FERC, in its January 28, 1993 Order on Applications, agreed to review specific examples where parties objected to inclusion of stranded investment costs.
January 28. 1993 Order, slip op. at 11.
The phrase, " cost shall include a reasonable return on the applicant's investment," is included in the license conditions of the River Bend, Grand Gulf and Waterford NRC licenses.
Determining cost of service and rates of return for wholesale power transactions is under the jurisdiction of the FERC, not the NRC.
3.
Elimination of CSU as an Independent Competitor Cities and Cooperative raise relevant questions pertinent to the significant change review by identifying areas where wholesale competition may suffer as a result of the elimination of GSU as an independent competitor in the bulk power services market.
The
}
' staff is also concerned with GSU's disappearance from this market; however, GSU does not represent cities and Cooperative's only alternative source of power supply (alternative to AP&L) as evidenced by the fact that there were ten (apparently meaningful) responses to Cities and Cooperative's most recent request for service.
Moreover, there are seven power systems, including GSU,
- still under active consideration" to fulfill Cities and cooperative's wholesale power requirements upon termination of selected contracts with its principal supplier, AP&L.17 The entitics listed by cities and Cooperative all appear to be viable i
systems, capable of furnishing Cities and Cooperative the power and energy they are seeking. However, without a more in-depth analysis f
of the instant request, which is difficult given the proprietary nature of the negotiations, the staff could not label GSU's elimination as sig minimis.
Even if GSU were a non-sig minimis competitor in this market, there are several other competing systems willing to provide Cities and Cooperative market-tested rates for the services it is seeking.
For the above reasons, the staff does not believe the loss of GSU as an independent competitor to AP&L for Cities and Cooperative represents an irreplaceable loss.
Consequently, cities and Cooperative will not be significantly disadvantaged in the relevant bulk power services markets because of the elimination of GSU as an independent I
competitor.
I I
27 Letter to Geoffrey Grant from Zachary D. Wilson, dated July 22, 1993, p.
4.
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1 )
4.
Market Allocation Occidental Chemical Corporation expressed concern over the agreement reached before the PUCT between GSU, Entergy and Texas Utilities Electric Company (TU Electric) which resulted in resolution of outstanding issues before the PUCT pertaining to the proposed GSU/Entergy merger. Occidental alleged that the agreement represented a market allocation agreement in violation of section 1 of the Sherman Act.
The staff does not view the aforementioned stipulation as an agreement to allocate either wholesale or retail power markets.
Given the long history of the independent nature of electric utility systems in the Electric Reliability Council of Texas, the staff believes the PUCT stipulation acts to preserve the intrastate, non-jurisdictional nature of ERCOT and its member systems and not to allocate or segment markets between GSU, Entergy and TU Electric.
i B.
NRC Staff Findings Regarding Change in Ownership As previously discussed, the staff believes section 105 of the Act requires NRC antitrust review of changes in ownership after initial licensing.
The staff undertakes this review by performing a significant change review to determine whether there have been significant changes in the licensee's proposed activities since the
{
last antitrust review using the criteria set out by the Commission in Summer for making the determination.
The change in licensee activities that precipitated the instant significant change review is the request by GSU to transfer control of its ownership in River Bend to the Entergy Corporation and the request by GSU to change i
-.I
o 6 '
the operator of the plant from GSU to EOI.
These changes occurred since the previous antitrust review associated with the River Bend operating license review in 1985 and are reasonably attributable to the licensee, thereby satisfying the first two Summer criteria.
The staff believes that some of the concerns raised in connection
{
with the transmission issues involving the proposed merger and NRC license conditions are, if substantiated, enforcement issues, involving existing license conditions that can be dealt with appropriately pursuant to a 10 C.F.R. S 2.206 petition.
The issue of stranded investment cost is a matter within the jurisdiction of the FERC.
Further, the staff har no basis to disagree with the FERC finding that entities will not be competitively disadvantaged by the loss of GSU as an independent competitor.
Lastly, the staff, based on the information presented, does not view the agreements entered into by GSU and Entergy with TU Electric as a market allocation agreement in violation of the Sherman Act.
The staff believes there have been issues raised in the instant proceeding that may warrant Commission remedy, but not in the context of a post operating licens'e significant change review.
The staff believes there is no need to institute a new licensing proceeding at the NRC to effectively remedy a situation that has its genesis in activities involving alleged non-compliance with i
antitrust license conditions by GSU and Entergy operating subsidiaries LP&L and MP&L.
For these reasons, the staff believes that the proposed merger does not have antitrust implications that
s
_ 34 -
warrant some Commission remedy in this proceeding and, therefore, that the third Summer criterion has not been met.
VIII.
CONCLUSION For the reasons discussed above, and after consultation with DOJ, the staff recommends that the Director - of the Office of.
Nuclear Reactor Regulation issue a post OL no significant antitrust change finding pursuant to GSU's request to transfer control of ownership in River Bend to Entergy and transfer operation of River Bend from GSU to EOI.
t r
j
e Appendix A - Previous NRC Reviews of GSU and Entergy The staff has conducted several competitive reviews of the activities of both GSU and Entergy involving different nuclear facilities and various ownership arrangements.
The issues and matters in controversy in many of these reviews have reemerged in the instant licensing proceeding.
The following highlights are provided as background.
A.
Grand Gulf In 1972 Missiscippi Power & Light Company (MP&L), an operating subsidiary of tue Middle South Utilities, Inc. holding company, submitted an application to construct the Grand Gulf Nuclear Station.
[In May 1989 Middle South Utilities, Inc. changed its name to Entergy Corporation, the holding company system involved in the proposed merger with GSU.]
During the Grand Gulf CP review, MP&L entered into a set of policy commitments with the Department of Justice to remedy various allegations of abuse of market power by MP&L.
As indicated in the Department's advice letter to the staff of the Atomic Energy Commission dated May 24,
- 1973, In the course of our antitrust review, certain allegations were received, the general import of which was that Applicant has misused its monopoly position in-generation and transmission to restrain the competitive opportunities of smaller systems in western Mississippi.
s A-2 As a result of the commitments made by MP&L and the inclusion of these commitments as license conditions to the Grand Gulf plant, the Department concluded that the benefits associated with the commitments would provide smaller systems in the affected marketing area alternative sources of power and energy and "substantially eliminate the grounds on which complaints made to the Department by the smaller systems were based."1 As a result, the Department concluded that an antitrust hearing would not be necessary pursuant to MP&L's application to construct the l
Grand Gulf plant.
In 1981, in conjunction with the issuance of an operating license for the Grand Gulf plant, the staff conducted a significant change analysis of MP&L's competitive activities since the completion of the antitrust review at the CP stage.
During this review, the staff identified an on-going dispute between MP&L and several smaller power systems in MP&L's service area.
Over the past six or seven years (1973-80) various municipal and cooperative electric systems in MP&L's service area have been trying to consummate workable transmission and power supply arrangements with MP&L -
using the Grand Gulf CP license conditions as a basis for negotiations.
These negotiations have led to various allegations and disputes which are the focus of staff's investigation in this review.2 2Department of Justice advice letter dated May 24, 1973.
2Grand Gulf Nuclear Plant, Unit 1, Mississippi Power & Light Company and South Mississippi Electric Power Association, Docket i
No. 50-416:
Staff " Finding of No Significant Antitrust Changes",
- p. 7.
l l
e e
A-3 Negotiations between MP&L and the Municipal Energy Agency of Mississippi (MEAM), which represents the municipal systems in t
MP&L's service area, concerning access to MP&L's generation and transmission facilities, continued until early 1979 when the parties reached an impasse.
In May of 1979, counsel for NEAM sent a letter to the NRC expressing concern over MP&L's non-compliance with its CP license conditions and requested NRC to take i
enforcement action against MP&L.3 i
The staff initiated a compliance proceeding and began investigating MEAM's allegations.
The staff concluded that MP&L was not living up to its Grand Gulf antitrust license condit ions and issued a Notice of Violation to MP&L on May 29, 1980.
Subsequent to the Notice of Violation, MP&L proposed a settlement which offered MEAM access to both the Grand Gulf plant and the MP&L transmission grid.
W l
In its significant change operating license review of the Grand Gulf plant, the staff did not identify any anticompetitive activity by MP&L that represented changed activity.
A compliance proceeding was initiated by the staff and at the time the Finding was made, was apparently leading to a resolution of the competitive issues raised by MEAM pursuant to MP&L's non-compliance with the Grand Gulf antitrust license conditions.
r 8Ibid., p.
8.
w t
A-4
. all present indications are that MP&L has reversed its apparent policies that occasioned the notice of violation in June of 1980, has essentially reached a settlement agreement with the complaining parties, and is pursuing acceptance of rate schedules and agreements before FERC that would bring it into full compliance with its license conditions.
In the unlikely event that the settlement negotiations or the rate schedule implementations are unsuccessful, these matters can be resolved before the NRC in the present compliance proceeding which will remain in effect until the matters are satisfactorily resolved.'
The staff analysis concluded that no additional antitrust remedies were required, i.e., beyond any proscribed as a result of the on-going compliance proceeding, and as a result, a
significant change finding was not warranted under the NRC's criteria set forth in Summer.
t B.
Waterford The Louisiana Power & Light Company (LP&L), like MP&L, was an operating subsidiary of Middle South Utilities, Inc. -- a predecessor of Entergy Corporation -- at the time it filed a construction permit application for its proposed Waterford Steam Generating Station, Unit No. 3 (Waterford) with the staff of the Atomic Energy Commission in December 1970.
Subsequent to the filing of its application and initiation of the antitrust review,-
the Department of Justice entered into a settlement agreement with LP&L and concluded that an antitrust hearing on LP&L's
' Ibid., p. 11.
A-5 t
application would be unnecessary.
However, several intervenors were not satisfied that the policy commitments agreed to by LP&L 1
would adequately mitigate the alleged abuse of LP&L's market power and petitioned the Atomic Energy Commission requesting a hearing on antitrust issues and the right to intervene in said hearing.
The Atomic Safety and Licensing Board (Board) established to rule on the petitions to intervene decided to hold evidentiary hearings with respect to whether the proposed conditions would afford adequate relief.
As a result of the evidentiary hearing, the Board issued a memorandum in which it concluded that the proposed license conditions were inadequate in three areas:
- 1) access to nuclear facilities; 2) transmission "between" and "among"; and 3) reserve sharing.
After reviewing the record, as it existed at the time, the Board was able to set forth its views with respect to an adequate set of license conditions, assuming 3 situation inconsistent with the antitrust laws.8 The Board stated at 8 AEC 737 that:
Should Applicant elect to accept the Conditions.
this Board would be in a position to advise the Commission that, insofar as antitrust matters are concerned, a construction permit with the conditions can be issued promptly.
The principal difference in the license conditions proposed by LP&L and the Board that provides meaningful guidance in the instant license amendment request involves license condition No.
i i
5Louisiana Power and Licht ConDany, (Waterford Steam Generating Station Unit No. 3), LBP-74-78, 8 AEC 718 ' (1974).
l s
0; \\
A-6 5.
The tern _"between two entities" used by LP&L in its commitments was changed by the Board to "among entities".
\\*
According to the Board, 5
The purpose of this change is to prevent multiple I
transmission charges for transmission of_a contracted transmission entitlement among a coordinating group of two or more entities. [and) To make the' purpose of this change free from doubt, a clarifying sentence has been added.'
[ Brackets added.]
r Rather than participate in a " plenary hearing," the licensee accepted the license conditions prepared by the Board and the proceeding was terminated.
8 AEC 887 (1974).
An appeal of this decision was made by the Department of Justice with respect to a different aspect of the decision and the Appeal Loard noted that,-
1 as was its custom with respect to economic issues, it did not review any other issue in the decision since there nad been.no-i other appeals.
1 NRC 45 (1975).
Thus, there was no appellate j
review of this aspect of the decision.
)
i l
In 1382, in conjunction with its application for an operating licente for Waterford, the staff conducted a significant change i
review of LP&L's competitive activities.
Several changes were identified by the staff; however, the net effect, according to I
the staff was,
'The clarifying sentence added by the Board reads as follows:
"For each coordinating group nf entities there shall be a single transmission charge."
Memorandus of Board, dated October 24, 1974 [LBP-74-78], 8 AEC 737, 744 (1974).
h I
s D
A-7 the changes that have occurred since the construction permit antitrust review are not significant in the context of 105c of the Atomic Energy Act, as amended,and do not warrant action by the Nuclear Regulatory Commission.7 In May 1989, LP&L submitted an application to amend its operating license for Waterford.
The amendment requested approval on one or more sale / leaseback transactions by LP&L with respect to any portion of its 100% ownership interest in Waterford to one or more passive equity investors and at the same time lease back from said equity investors such interests sold in Waterford and receive from said equity investors the right to use and enjoy the benefits of the undivided ownership interests sold in Waterford.
As in a similar sale / leaseback arrangement involving the Grand Gulf plant (gf., "SERI", infra), the staff is concerned with new owners of nuclear power production facilities and examined the proposed arrangement for any possible anticompetitive effect upon the bulk power services market served by the Waterford plant.
LP&L and the staff resolved any potential for any abuse of market power associated with the purchase of Waterford ownership shares by including an antitrust license condition as a part of the operating license.
This license condition prohibits any new equity owner involved in the proposed sale / leaseback arrangement from engaging.an the marketing or brokering or power or energy from the Waterford plant.
The license condition also prohibited 7Waterford Unit No.
3, Docket No. 50-382A, Operating License Review:
Finding of No Significant Antitrust Changes, October 1982
s A-8 any such investor from exercising, directly or indirectly, control over the Waterford plant or any Waterford licensee.
[A similar license condition was imposed upon potential equity investors involved in the Grand Gulf sale / leaseback amendment which was reviewed in late 1988 and early 1989.]
C.
SERI In October 1988, System Energy Resources, Inc. (SERI), a wholly-owned subsidiary of Entergy, submitted to the NRC a proposed operating license amendment to Grand Gulf, Unit 1.
The amendment proposed changing the ownership of Grand Gulf by way of a sale and leaseback of a portion of SERI's 90% ownership share in Grand Gulf to passive equity investors.
In its review of the proposed a av / ment, the staff emphasized the importance of canvassing potential new owners of nuclear power production facilities in order to determine how a new owner will use the nuclear plant and any attendant facilities in its participation in the relevant bulk power services market served by the plant.
Owners and potential owners that possess the ability to control various aspects of the bulk power services
- market, i.e., those with market power, are reviewed by the staff in an effort to ensure that the addition of the nuclear facility to their generation and trans-mission mix will not adversely impact the competitive process -- specifically, staff is charged with preventing the creation or maintenance of activities that may be inconsistent with the antitrust laws.e
' Staff input to SER pursuant to sale / leaseback of a portion of Grand Gulf by SERI, dated December 9, 1988, p.
1.
1; i
9 0
i A-9 The licensee and the staff developed an antitrust license condition which was made a part of the Grand Gulf license.
The license condition prevented any new owner involved in the proposed sale / leaseback from marketing or brokering power or energy produced by Grand Gulf and to abstain from any direct or indirect control over the Grand Gulf plant or any Grand Gulf liceasee.
As a result of this license condition, the staff concluded that any new Grand Gulf owner involved in the sale / leaseback would not possess market power and therefore be unable to affect the bulk power services market served by the Grand Gulf plant.
Consequently, the staff did not recommend 1
initiation of a significant change and subsequent formal antitrust review in this proceeding.
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~ Enclosure 2 UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION Gulf States Utilities Company
)
Docket No. 50-458 i
CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, REQUEST FOR REEVALUATION OF FINDING OF NO SIGNIFICANT ANTITRUST CHANGES
[$
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James D.
Pembroke 23
~ Thomas L. Rudebus' DUNCAN, WEINBERG,ph MILLER &
PEMBROKE, P.C.
1615 M Street, N.W.
i Suite 800 Washington, D.C.
20036 (202) 467-6370 Attorneys for Cajun Electric Power Cooperative, Inc.
Dated:
November 19, 1993
- u..,
TABLE OF CONTENTS Page I.
INTRODUCTION.....................................
2 II.
PROCEDURAL STATEMENT............................
6 III. REQUEST FOR REEVALUTION.........................
8 A.
Overview of Director's Finding and Related Staff Recommendation...............
8 B.
The Director's Finding Errs in Not Requiring a Hearing under Section 105 of the Act.................................
9 C.
This Commission Must Consider The Anti-Competitive Effects of The Proposed License Amendment Applications.............
20 1.
The Merged Entity Would Be Among the Largest Utilities in the Country and Would Create Additional Market Power..
20 2.
The Proposed Combination Of Entergy And GSU Would Have Anticompetitive Effects Which Will Not Be Remedied By The Transmission Service Tariff As Filed By Applicants...................
25 a.
Entergy and GSU Have Market Power in the Relevant Product and Geographic Markets...........
26 b.
The Defects in the Transmission Service Tariff Exhibit the Adverse Competitive Effects of the Proposed Merger..............
30 3.
The Director's Finding / Staff Recommendation Improperly Concludes that the Gravamen of Commenters' Complaints Arise from License Condition Violations..................
35 D.
The Director's Finding Erred in Failing to Address the Antitrust Implications of the Operational Issues Raised By Cajun.....
37 IV.
CONCLUSION.....................................
43 i
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TABLE OF AUTHORITIES COURT CASES Charbonnaces de France v.
Smith, 597 F.2d 406 (4th Cir.
1979) 13 Citizens of Allechan County v.
PPC, 414 F.2d 1125 (D.C.
i Cir. 1969) 14 City of Lafayette v.
SEC, 454 F.2d 941 (D.C. Cir. 1971).
14 General Motors v.
FERC, 656 F.2d 791 (D.C. Cir. 1981) 13 Gordon v.
National Youth Work Alliance, 675 F.2d 356 i
(D.C. Cir. 1982) 13 Poller v.
Columbia Broadcastina System. Inc., 368 U.S.
464 (1962) 13 l
i White Motor Co.
v.
United Statga, 372 U.S. 253-(1963) 14 i
Wisconsin's Environmental Decade v.
SEC, 882 F.2d 52a (D.C.Cir. 1989) 18 ADMINISTRATIVE CASES
'Enterov Services. Inc., 58 FERC 5 61,234 (1992).
17, 20, 31 l
i Enterey Services. Inc. and Gulf States Utilities Co.,
. 17 l
62 FERC T 61,073 (1993) 3, Notice of No Sionificant' Antitrust Chances, 58 Fed. Reg. 54175 (1993) passim l
Public Service Comnany of New Hamnshire, et al.
Docket No. 50-443A (1991) 18 i
South Carolina Electric & Gas'Comnany and South y
Carolina Public Service Authority, Docket No. 50-395A (1980) 11 I
STATUTES / REGULATIONS 5 U.S.C. S 556 (1988).
19 42 U.S.C. 5 2135 (1988) 1, 9,
10 1
10 C.F.R. SS 50.80 and 50.90 (1993)
I j
DOU/FTC Merger Guidelines, 57 Fed. Reg. 41,553 (Sept.
10, 1992) 22, 23 1
11
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UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION Gulf States Utilities Company
)
Docket.No. 50-458 CAJUN ELECTRIC POWER COOPERATIVE, INC.'S, REQUEST FOR REEVALUATION OF FINDING OF NO SIGNIFICANT ANTITRUST CHANGES t
Cajun Electric Power Cooperative, Inc.
(" Cajun"),
pursuant to the Notice Of No Significant Antitrust Changes issued by the Director of the Office of Nuclear Reactor Regulation (" Director's Finding") of the Nuclear Regulatory Commission ("NRC" or " Commission") on October 20, 1993, 58 Fed. Reg. 54175 (1993),
hereby requests reevaluation of the Commission finding of no significant antitrust changes in the above-captioned proceeding on the applications (1) for
+
transfer of control of the ownership of Gulf States Utilities Company ("GSU" or " Gulf States") (which is a co-i licensee of River Bend Nuclear Station) from its stockholders to Entergy Corporation ("Entergy"), and (2) to.
transfer operation of River Bend from GSU to Entergy Operations, Inc. ("EOI")
(together " Applicants" or " Merged Companies") under, inter alia, Section 105 of the Atomic Energy Act ("Act"), 42 U.S.C.
5 2135 (1988), and Sections 50.80 and 50.90 of the NRC's Rules and Regulations, 10 C.F.R.
gg 50.80 and 50.90 (1993) and states as follows:
i k
9 l I.
INTRODUCTION Cajun is in a uniquely intertwined position with regard to GSU.
Cajun is a joint owner and co-licensee with GSU of River Bend.
Cajun is a joint owner with GSU of a coal-fired electric generating unit.
Cajun is a joint owner with GSU of a high voltage integrated transmission system
("ITS").
Cajun has an extremely large and important stake in the future of GSU as a corporate entity.
Cajun requests that the Director reevaluate the finding of no significant antitrust impact and requests the Commission to hold a full evidentiary hearing in this proceeding on operational and competition issues.
Cajun is a competitor of GSU and Entergy in the bulk power and requirements markets.
Cajun competes with GSU and Entergy for long-term requirements sales of capacity and energy, for long-term and short-term firm power and energy sales, and for economy energy sales.
In making power l
sales, Cajun depends on the transmission access, usage and I
f services available under the Cajun-GSU PIA, and, as appropriate under the circumstances, Cajun's agreements with l
Entergy operating companies.I' Cajun will be harmed by the impact of the proposed combination of GSU and Entergy on the bulk power and requirements markets, and on Cajun's ability 1/
The Entergy operating companies are Louisiana Power &
Light Company ("LP&L"), Mississippi Power & Light Company ("MP&L"), Arkansas Power & Light Company
("AP&L") and New Orleans Public Service, Inc.
("NOPSI").
s
c r
t to compete fairly with the combined GSU and Entergy systems.I' Cajun is a native load transmission customer of both GSU and Entergy.
Cajun has an interest in these proceedings, inter alia, as a transmission customer of GSU, under the Cajun-GSU Power Interconnection Agreement
(" PIA"),
and as a transmission customer of Entergy, under Cajun agreements with Entergy operating affiliates.
Cajun must utilize the agreements with GSU and Entergy to deliver power and energy to Cajun's Member delivery points located on the transmission facilities of GSU and Entergy.
Cajun's delivery arrangements are recognized both historically and by contract as native load obligations by GSU and Entergy.
Cajun is concerned about the effects of the proposed merger on GSU's and Entergy's native load obligations to Cajun and Cajun's Members, and on Cajun's rights under the PIA and Service Schedule CTOC to the PIA.
Further, Cajun is concerned about the higher transmission service costs which may be imposed on native load transmission customers, and the increased transmission usages which may foreclose native load transmission, as a result of the GSU-Entergy combination.I' 2/
Significantly, except as to the impact of the proposed merger on Cajun's rates, the Federal Energy Regulatory Commission ("FERC") did not set for hearing the impacts on Cajun's operational or contractual rights.
Enterov Services. Inc. and Gulf States Utilities Co.,
62 FERC 1 61,073 at 61,370-61,372 (1993).
1/
As noted, the FERC did not set these matters for hearing.
Egg Note 2, EU2TJlL
u o
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Cajun has a further vital interest in this proceeding because of its joint ownership with GSU of the Cajun-GSU ITS.
Cajun depends on this arrangement as a power supplier'to Cajun's Members and to other purchasers.
Cajun will be harmed by the effect of the proposed combination of GSU and Entergy on the ownership, operation and utilization of the Cajun /GSU ITS.
Cajun is a representative of interested consumsrs, numbering approximately 1,000,000 people, who may be affected by the proposed merger.
A reevaluation of the Director's Finding of no significant antitrust changes is necessary for the protection of rural electric consumers in Louisiana.
Cajun requests that the Commission institute a hearing to review the antitrust implications of the proposed transfer of ownership and modification of the operating I
license to reflect that EOI would become the operator of River Bend.
The full significance of this proposed change in j
ownership can be analyzed only through a full trial-type evidentiary proceeding on both competitive and operational issues.
This Commission does not have the benefit of a FERC review of the competitive and operational impacts of the proposed merger, since the FERC refused to conduct a hearing-on these matters.
Thus, a heavier burden is placed on this 4
Commission to fully examine the proposed merger-.
i
)
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' Unless properly conditioned to protect the public-interost and the interests of Cajun ~, the proposed license amendments should not be approved.
All of these matters were presented to the Commission in Cajun's Petition for Leave to Intervene, Comments and Request for a Hearing and Conditions
(" Cajun Petition") filed with the Commission on April 26, 1993.
However, the vast majority of these matters are ignored in the Director's Finding and Staff Recommendation related thereto.
Rather than dealing in substantive fashion with Cajun's competition arguments, the Staff Recommendation merely relies upon a two-pronged ipse dixit, i.e.,
(1) to the extent that the Commenters raise market dominance, P
market preclusion and other competition complaints, the FERC has determined that the extension of the Entergy Transmission Service Tariff ("TST") to GSU remedies those i
complaints and (2) to the extent that Commenters allege violations of license conditions, their remedy is in filing an enforcement proceeding.
The Staff recomnandation is in error on both counts.
The Staff Recommendation's reliance on the FERC proceeding is misplaced since the FERC conducted no hearing an the impact of the merger on competition and this Commission cannot merely rubber stamp FERC's conclusion 9
without abdicating its authority and ignoring its independent obligations under the Act.
With regard to the Staff Recommendation's suggestion that enforcement petitions l
l
- r ;
be filed to remedy concerns about license conditions violations, the Staff Recommendation has taken a
[
circumscribed, tunnel-vision approach.to the Commenters' pleadings.
Whereas the Staff Recommendation focuses on certain complaints regarding license condition violations which may be considered in an enforcement proceeding, the substantial portion of Commenters' concerns, including Cajun's, arise from the merger itself and not from license i
condition violations.
In sum, the Director's Finding and the related Staff Recommendation should be reevaluated and a determination should be made that the anticompetitive effects of the merger, and remedies therefore, cannot be accurately determined without a hearing on competition l
issues.
II.
PROCEDURAL STATEMENT This proceeding involves two license amendments related to the proposed merger between GSU and Entergy, in accordance with their Agreement and Plan of Reorganiration, dated June 5, 1992.
On January 13, 1993, GSU filed an application seeking approval of a effective change of control over GSU and a license amendment to the River Bend Station Unit 1 Facility Operating License NPF-47 to reflect such approval.
On the same day, GSU filed a second application requesting an amendment of the license to
?
reflect approval for EDI to be included as a licensee of River Bend with authority to operate the facility on behalf
I
< of its owners.F GSU requested Commission approval of the applications before October 1, 1993.
On March 25, 1993, the Commission issued a Notice of Filing of the ownership transfer application of GSU and, inter alia, established a deadline for interested' persons to comment and petition to intervene.
On April 26, 1993, Cajun filed its Petition.M On July 7, 1993, the Commission issued a Notice of-i Consideration of Issuance of Amendment to Facility Operating.
License, Proposed No Significant Hazards Determination and Opportunity for Hearing.
The July 7 Notice stated that antitrust concerne of interested persons would be the subject of a separate Notice in the Federal Recister.
On August 6, 1993, Cajun filed Comments, Petition for Leave to Intervene and Request for Hearing and Conditions, as amended and supplemented on August 17 and August 31.
On August 19, 1993, an Atomic Safety and Licensing Board
(" Licensing Board") was established to rule on Cajun's petition for 1/
GSU's request to transfer operational responsibility for River Bend to EOI was filed by GSU allegedly on its own behalf and on behalf of Cajun.
Egg Staff Recommendation at 1.
Cajun has previously advised the Commission that the proposed amendment was not filed on Cajun's behalf and that GSU lacks the agency authority to make such a filing on Cajun's behalf.
1/
Cajun's Petition is supported by:
The attached testimony of David Lee Mohre, Cajun's Executive Vice President and Chief Executive Officer; Victor J.
- Elmer, l
Cajun's Vice President of Operations; and Michael J.
Hamilton, a financial consultant to Cajun;,and by the attached affidavit of Roger Odisio, an economic l
consultant to Cajun.
_a.
-leave to intervene and request.?or hearing on the non-antitrust issues.
On July 7, 1993, Cajun and other interested parties received requests for information related to antitrust matters from the Staff of the' Commission.
Cajun responded by letter dated August 2, 1993.
On October 20, 1993, the Director issued his Finding of No Significant Antitrust Impacts.
III. REOUEST FOR REEVALUTION A.
Overview of Director's Findino and Related Staff Recommendation The record before this Commission establishing that the merger will adversely affect competition is massive.
Cajun and several other wholesale customers or wholesale customer groups filed comments on competition matters.
San Staff Recommendation at 12-23.
The Commenters' pleadings included substantive legal and factual presentations as well as sworn affidavits.
.The Staff Recommendation completely fails to analyze and effectively ignores the Commenters' presentations.
Shorn of its procedural history and summary of comments, the Staff Recommendation considers the Commenters' presentations in merely eleven pages.
Judged against the importance of this case and the evidentiary presentations made by the Commenters, the eleven page " analysis" borders on the surreal.
The Staff Recommendation reflects three basic flaws:
(1) exaggeration of the analysis undertaken by FERC
1 of the competition issues (see pages 15 to 18, infra); (2) improper rubber stamping of FERC's decision in the apparent absence of independent NRC Staff analysis (aga pages 18 to 20, infra); and (37 inaccurate descriptions of the Commenters' positions with the result that Staff concludes that Commenters' prime concerns are license violations (age pages 35 to 37, infra),
i B.
The Director's Pindina Errs in Not Recuirine a Hearino under Section 105 of the Act i
The NRC reviews licenses under Section 105 of the Act, 42 U.S.C.
5 2135 (1988).
Section 105(a) provides that nothing contained in Chapter 23 (Atomic Energy) of the Code shall relieve any person of liability under certain federal antitrust and labor. laws, and gives the Commission the power to " suspend, revoke, or take such other action as it may deem necessary with respect to any license issued by the Commission under the provisions of this chapter."
Id.
Only after an evidentiary hearing would such action be appropriate.
Section 105(c)(1) requires that the Commission forward to the Attorney General of the United States a copy of any license application, and further requires that the Attorney General forward her advice with regard to antitrust matters.F Section 105(c)(5) calls for the Commission to 1/
Section 105(c) provides in pertinent part:
(2) Paragraph (1) (Attorney General participation) of this subsection shall apply (continued...)
i 6
- . give "due consideration" to the advice received from the Attorney General, and make a_ finding as to.the effect-of the licensee's activities ~on the competitive situation.
42 U.S.C. 5 2135(c)(5) (1988).-
A review thus takes place if a finding is made-that a "significant change" in the licensee's activities has occurred.
Section 105(c)(6) gives the_ Commission the authority to refuse to issue a license, rescind a license or amend it, or impose conditions upon it.
42 U.S.C.
5 2135(c)(5) (1988).
The Commission uses the "significant changes" standard in review of a license transfer.
Furthermore, the Commission has clearly set out the general criteria which it considers when making a "significant-changes" determination.
i Those criteria were enumerated in South Carolina-Electric
- I i
Cas Comeanv and South-Carolina Public Service Authority 5
1 1/(.. continued) to-an applicatian for azlicense to construct or operate a utilization or production facility under section 2133 of_this. title:
Provided. however, That paragraph (1) shall not apply to an application for a license to operate a utilization or production-facility for which a construction permit was issued ~
under section 2133 of this title unless the Commission determines such~ review is advisable on the ground that sienificant chances in the licensee's activities or uronosed activities have occurred subsecuent to the crevious review by the Attorney General and the Commission under this subsection in connection with the construction oermit for the facility.
42 U.S.C.
g 2135(c)(2) (1988) (second emphasis added).
1 i
e- (Virgil C.
Summer Nuclear Station. Unit 11, Docket No. 50-395-A (1980)
(" Summer").
As the Commission stated,
[S)ince our full arsenal of antitrust remedies is available when an OL
[ operating license) antitrust hearing shows that remedies are warranted and since a determination that there have been "significant changes" is the necessary precedent to an OL antitrust 1
hearing... it follows that the requirement of such a determination establishes a threshold of some importance.
Id.
The NRC then set forth its criteria for a "significant i
changes" determination:
(1)
"the significant changes, if any, need to have occurred ' subsequent to the previous review by the Attorney General and the Commission under this subsection in connection with the construction permit for the facility'";
(2) the change must be reasonably attributable to the licensee, for the applicant cannot be held responsible "because the competitive picture had i
been altered in ways for which the applicant could not reasonably be held answerable"; and (3) the antitrust implications of the change create a likelihood that the Commission will be required to invoke its antitrust remedial powers to correct the competitive situation."
Id.
The changes wrought by the Entergy/GSU transaction pass this three-prong test with flying colors.
In fact, the Staff Recommendation reflects that the first two Summer criteria are satisfied.
Staff Recommendation at 33.
The only dispute is whether the third criterion is met:
that the antitrust implications of the merger create a likelihood i
that the Commission will be required to invoke its antitrust remedial powers to remedy the adverse impacts to competi-tion.
Id. at 33-34.
Indeed, the Staff Recommendation finds e-.
s e
that the "... GSU/Entergy merger impacts the bulk power l
service market in the south central portion of the country."
f i
Id. at 27.
Thus, the only issue remaining is_whether that
~
impact has been remedied by extension.of the TST to GSU.
As i
shown below, the TST is inadequate to remedy the impact and a hearing and further action by this Commission is i
necessary.
The Staff's position on the third Summer criterion i
i is that the antitrust remedial powers would involve primarily network transmission service which should be pursued either before FERC or in an enforcement action.
The j
Staff is wrong for two reasons.
First, the merger itself raises the stakes regarding anticompetitive effects so that network transmission service is the appropriate remedy.
Egg Section C, infra.
Secondly, Cajun has raised other non-network service related concerns about the proposed merger f
which are ignored by the Staff.
Egg Section D, infra.
The Entergy/GSU transaction is one which meets the threshold set by the NRC, and constitutes a "significant change" which warrants a hearing on the antitrust implications of the transactions.
l Cajun therefore urges this Commission to provide for full discovery and an adjudicatory hearing on the antitrust implications of this proceeding.
The evidence submitted by Cajun raises disputes with regard to, among j
other things, the effects of the proposed combination on competition and consumers.
Under Commission and federal
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i judicial precedent, a full evidentiary hearing should be held by this Commission in order to compile a record sufficient to resolve these disputed issues of material f
fact.
An agency bears a heavy burden when it approves f
applications, such as those tendered in the instant proceeding, without the benefit of a full and fair
?
evidentiary hearing.
General Motors v.
PERC, 656 F.2d 791, 798 (D.C. Cir. 1981).
Such approvals are analogous to f
grants of motions for summary disposition, and it is well-i i
established that when considering such motions, the facts must be considered in the light most favorable to the party.
opposing the motion.
Poller v.
Columbia Broadcastina System. Inc., 368 U.S.
464, 473 (1962); Gordon v.
National Youth work Alliance, 675 F.2d 356, 360 n.3 (D.C. Cir. 1982).
The non-moving party (here, Cajun) is entitled
[T]o have the credibility of his evidence as forecast assumed, his version of all that is in dispute accepted, all internal conflicts in it resolved favorably to him, the most favorable of possible alternative inferences from it drawn in his behalf; and finally to be given the benefit of all favorable legal theories invoked by the evidence as considered.
i Charbonnages de France v.
Smith, 597 F.2d 406, 414 (4th Cir.
l 1979).
Cajun attached detailed testimony and affidavits to the Cajun Petition and all of the facts asserted therein and the legal theories advanced therein must be examined and i
given considerable weight by this Commission.
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j In a proceeding such as this, because of the j
antitrust implications of the utility. acquisition, an agency I
bears an even Leavier burden when it fails to conduct an evidentiary hearing.
In Citizens of Allechan County v.
- PPC, f
414 F.2d 1125 (D.C. Cir. 1969), the United States Court of Appeals for the District of Columbia Circuit discussed l
agency approval of utility asset acquisitions without an j
evidentiary hearing, and suggested that it was inappropriate i
"to reach a conclusion on the bare bones of the documentary evidence," instead of " disposition in the light of a trial I
developing more information as to the actual impact on competition of the arrangements under attack."
Id. at 1129, quoti'ng Poller v.
Columbia Broadcastine System, 368 U.S.
464 (1962), and White Motor Co.
v.
United Sts121, 372'U.S. 253 (1963).
The fact that the Applicants' activities are regulated by other agencies does not obviate the need for a full inquiry into the anticompetitive impacts of the merger by this Commission.
City of Lafavette v.
SEC, 454 F.2d 941,
[
t 948-49 (D.C. Cir. 1971) ("It is a fair consensus of the cases cited that the nation's profound and pervasive i
devotion to competition as a fundamenta) economic policy...
I is applicable at least presumptively even in the case of monopolies or quasi-monopolies characterized by various I
degrees of government control and protection
....").
The Director's Finding and Staff Recommendation do f
not undertake this analysis but pervasively rely on actions i
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in related proceedings and adopt, without critical analysis, the FERC's decision on competition issues in the FERC merger proceedings, i
The Director's Finding of "no significant change" expressly relies upon the Staff Recommendation #s analysis t
regarding the antitrust considerations of the proposed license amendments.
In turn, the Staff, in making its Recommendation, purportedly had "the benefit of testimony and hearings at the FERC concerning the proposed merger between GSU and Entergy and the related rate proceeding i
involving the Entergy open access transmission tariff" and t
further benefitted from the FERC determinations.
Egg Staff Recommendation at 26.
Cajun preliminarily notes that competition issues were not considered in the FERC hearings.
In this case, uncritical deference to the FERC's findings is inappropriate and, indeed, insufficient to enable the Commission to carry out its obligations as defined by the Act.
j Cajun does not ask the Commission to turn a blind to the FERC proceedings, or the proceedings before any other regulatory body.
The Cajun Petition recognized that, in past proceedings, the NRC has relied on records developed by other agencies to make its finding of "no significant change."
Sam Cajun Petition at 36-38.
Cajun submits, l
however, that to replicate that course of action in this case would be inappropriate.
First, there is little record at the FERC upon which the NRC can rely.
Second, what
4 A,
record there is consists of the representations of Applicants, unchallenged in an adjudicatory proceeding, and an internal FERC study which has also not undergone scrutiny.
It is one thing for a regulatory decisionmaker to rely, with circumspection,-upon the full record of adjudication compiled by another administrative agency in-formulating its decision; it is wholly another matter to 1
i simply defer to the other agency's judgment altogether.
To do so would simply ignore the NRC's mandate to examine the l
merger transaction for possible detrimental effects on the j
i existing competitive situation.
In less than five pages of discussion, the Staff's Recommendation recaps the proceedings before various l_
regulatory bodies evaluating the proposed merger.
- However, l
that discussion is almost wholly irrelevant to the instant l
proceeding.
With respect to the review performed by the.
Louitiana Public Service Commission ("LPSC"), Staff admits that the LPSC "did not directly address the competitive effects of the proposed merger on bulk power services markets."
Staff Recommendation at 8.
Staff's discussion of the Public Utility Commission of Texas proceeding contains no mention of any federal antitrust analysis.
Staff Recommendation at 8-9.
With regard to a purported review of the proposed merger by the Securities and Exchange Commission ("SEC"),
Staff speculates that "the SEC review of the proposed merger will encompass competitive implications as well'as the
projected structural efficiencies and economies associated with the merger."
Staff Recommendation at 9.
Yet Staff admits that, as of the date of its recommendations,
" petitions to intervene had not been accepted by the SEC,.
nor had a hearing date been set."
Id.
A finding of "no r
significant change" cannot rely upon a review which has not occurred.
The only other regulatory body which has even cursorily addressed the antitrust implications of the proposed merger is the FERC, and as Cajun and other intervenors have pointed out, what little record there exists at the FERC on antitrust issues is either unscrutinized or unsubstantiated.
Traditior. ally, the FERC would have set for full adjudicatory hearing the effect of the combination of two utilities on the competitive situation in its review of any proposed merger.
In the context of the proposed.Entergy/GSU transaction, however, the FERC disposed of this issue without a hearing.
The FERC's decision, presumably, was i
based primarily upon the representations of the Applicants, which were unchallenged in an adjudicatory proceeding and upon the intervenors' pleadings which were drafted without i
the benefit of discovery.
Enterav service Inc. and Gulf j
States Utilities Co.,
62 FERC 1 61,073 (1993).
The Staff's. Recommendation also cites the findings I
of the FERC in the so-called "open access" case.
Enterav Services. Inc., 58 FERC 1 61,234 (1992).
However, the FERC
4 i ;
did not hold an evidentiary hearing on the antitrust considerations of that case either.
In other words, the FERC made is findings regarding the antitrust issues raised by the proposed Entergy/GSU merger without a full I
examination of the issues, and in doing so, merely relied on its findings in a prior proceeding in which it also failed to conduct an evidentiary hearing.
Both of these determinations by the FERC have been appealed to the D.C.
Circuit.
The Director's Finding errs, inter alia, because it adopts the decisions of the FERC, unsupported as it is by record evidence, apparently with no independent analysis by the Director or Staff.
This deference to the FERC's decision is not the " watchful" deference allowed by precedent, but rather constitutes an abdication of the ommission's statutory responsibilities.
Egg Wisconsin's Environmental Decade v.
SEC, 882 F.2d 523, 526-27 (D.C.Cir.
1989).
Likewise, the Director's Finding conflicts with previous occasions when the Commission relied on extensive records developed at FERC.
Egg Docket No. 50-423,-56 Fed.
i Reg. 22024 (May 13, 1991).
Sgg also Public Service Comcany of New Hamnshire, 31 al., Docket No. 50-443A (August 1991),
Staff Recommendation, No Post OL Significant Antitrust Changes at footnote 11
(" Twenty-five days of hearings were held during August and September 1990.
Thirty-five j
i witnesses were cross-examined, and 809 exhibits were j
admitted into evidence").
In the instant proceeding, the
e-Commission Staff cannot rely on the FERC record since little or no public record exists in the FERC docket with regard to the issue of the anticompetitive effects of the merger.
The FERC " record" upon which the Staff Recommendatien purports to rely is comprised of the Applicants' filed case, which was contested on competition' issues, intervenors' pleadings which were prepared without the benefit of discovery, and the FERC orders themselves.
The Director can find little evidence in this " record" upon which to base his finding.
The Administrative Procedure Act' demands that this Commission must base its decisions upon " substantial evidence."
5 U.S.C.
g 556(d) (1988). ("A sanction may not be imposed or rule or order issued except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence.")
Furtnermore, "[t]he transcript i
of testimony and exhibits, together with all papers and requests filed in the proceeding, constitutes the exclusive i
record...." for purposes of Commission decisionmaking.
5 U.S.C. S 556(e) (1988).
This requirement that the Commission's decisions be based upon substantial evidence l
applies in both rulemaking and adjudicatory proceedings.
5 U.S.C. 5 556(a) (1988).
It would be an abdication of this Commission's.
t statutory responsibilities to rely upon a summary decision of the FERC, which is based on an evidentiary record
~
consisting largely of a FERC internal study which neither i
i
o 20 -
the NRC (to Cajun's knowledge) nor intervenors have examined.I' This Commission cannot fulfill its obligations under the Act if it follows that course of actien.
Cajun has raised substantial issues of material fact in its pleadings and in sworn affidavits, both as to the effect of the merger upon concentration and competition in various product and geographic markets and the anticompetitive impacts of the merger on Cajun's operations.
Precedent demands that when such disputes of material fact are raised, a full evidentiary hearing be held in order to allow this Commission to base its judgment on a full, complete, and substantial evidentiary record.
l C.
This Commission Must Consider The Anti-Comnetitive Effects of The Pronosed License Amendment Aeolications
?
1.
The Merced Entity Would Be Amona the Larcest Utilities in the Country and Would Create Additional Market Power The NRC must examine the effects on concentration and competition of the application for the transfer of ownership of a license, and may only approve the transfer if the Commission makes a determination that it is not anticompetitive.
The mergar and combination of Entergy-and 2/
The FERC relied in large part on the findings of a study performed by-its own staff, which has yet1to be scrutinized by any party or intervenor.
Indeed, the Central Louisiana Electric Company requested the FERC's full analysis under the Freedom of Information Act.
J FERC denied that request.
Certain market data, however, was appended to its initial order in the open
]
access TST case.
Enterav Services. Inc. 58 FERC
$ 61,234 (1992).
)
0 0
! l f
GSU would create one of the largest utilities in the country, based on several standards.
With respect to operating revenues, the Merged Companies will be the sixth largest utility in the country, 3
t and the second largest in the southern region of the United' i
States.
Currently, Entergy is eleventh in_ size, and GSU i
holds the thirty-fifth place in the ranking by operating revenues.
The number of retail electric customers to be served by the Merged Companies, over 2.3 million, will place t
it eighth in the country; currently, Entergy ranks twelfth, and GSU, with its 578,660 customers, ranks forty-first.
By comparison, Cajun serves about 300,000 customers (one million ultimate consumers).
The Merged Companies' total retail service area 1
will more than double the current territory of GSU, and place it seventh in the nation, with over 73,000 square miles of service territory in four states.
The Merged Companies' retail KwH sales alone are projected by the Applicants to be almost 83.6 billion kWh, making it the third largest utility in the country. -Currently, Entergy is ninth (with 56.9 billion kWh) and GSU a mere twenty-seventh (with 26.7 billion kWh) in national rankings.
f In terms of electric generating capacity, the Merged Companies will rank fourth in the nation if the l
merger is approved, with just over 21,000 MW of generation.
Currently, GSU is ranked twenty-fourth with 6,797 MW.
Cajun
j i l
has 1,976 MW of generating capacity, less than half of the capacity owned by the utility ranked thirty-fifth nationally, according to the Applicants.
In addition to crecting one of the largest l
l utilities in the country, the merger will unacceptably enhance Applicants' market power in the provision of generation services.
Even pre-merger, wholesale markets are dominated by only a few utilities.
Together, the operating affiliates of the Southern Company (30,192 MW) and Entergy (16,509 MW) own and operate 55.4% of installed capacity in l
relevant wholesale markets (84,311 MW).
4 As part of Cajun's Petition presented to this j
Commission, Cajun submitted the affidavit of Dr. Roger
)
Odisio, a professional economist with twelve years' I
experience at PERC's Office of Economic Policy.
Dr. Odisio notes that merging GSU (6,797 MW) with Entergy produces a post-merger Herfindahl Hirschman Index ("HHI") in installed capacity of 2241, with an increase of 274 points due to the merger.
According to the Department of Justice / Federal Trade Commission ("DOJ/FTC") Merger Guidelines, "[w)here the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or j
facilitate its exercise."F Egg Odisio Affidavit, 1 25.
1/
DOU/FTC Mercer Guidelines, 57 Fed, Rec. 41,553 (Sept.
10, 1992).
The DOJ and FTC have joint federal responsibility for enforcing antitrust laws..
The merger Guidelines have been developed by the DOJ, and (continued...)
W
J l )
l Dr. Odisio also points out that Applicants filed estimates at FERC concerning the amount of capacity that utilities in the market expect to have available for sale through 1997, in order to evaluate the merger's immediate a
impact on competition.
These data are riddled with specification and measurement problems.I' For example, according to intervenors at FERC, the Southern Companies have a policy against using a transmission tariff containing
" reciprocity" provisions that would force it to make i
available its own transmission to others.
Yet Applicants' data before FERC includes Southern Companics as a major seller of capacity and energy.
Applic.erJr' capacity for sale consists significantly of officient base load units Entergy had spun-off from rate base to its newly created affiliate Entergy Power, Jnc. '* EPI").
But no information is provided on the types cf units others may have for i
sale--whether they are base load, intermediate, or peaking units.
Clearly base load and peaking capacity are typically sold in different markets because they cannot compete with each other on the basis of costs.
Egg Odisio Affidavit, T 26.
1/(... continued) now joined by the FTC, to " articulate the analytical framework the agency applies in determining whether a merger is likely to substantially lessen competition."
(Guidelines, Section 0.1 at 41,553).
i 1/
Moreover, without a hearing at FERC or at this Commission, intervenors have not had the opportunity to use discovery to fully evaluate the data supplied by Applicants.
t ;
i Dr. Odisio notes that, at a minimum, Applicants' estimates of capacity available for sale shows that by 1997, the Merged Companies would have 2 1/2 times as much capacity to sell as the next largest-supplier, and control almost 1/3 of all such capacity (32.0%).U' The market would be highly concentrated throughout the period measured by Applicants--
[
the p3st-m?.iger HHI would be 1782 in 1994, for example, and l
the merger would add 347 points to that HHI.11' Because the Merged Companies would be by far the largest supplier of I
existing capacity the Merged Companies' market power would increase as buyers' needs (1) are greater (they would have to rely more heavily on Merged Companies' capacity), (2) are for longer duration, or (3) begin at a later date (Merged Companies' share of capacity rises over time).
Egg Odisio Affidavit, 1 27.
By any of these measures, it is clear that the j
Applicants will have a concentration of control in the southern region of the United States that would enable them l
to exercise market power in ways that would have anticompetitive impacts on Ca~ a and its electric consumers.
1Q/
While other suppliers may enter the market during.this-time, the Applicants failed to make any convincing i
arguments about the ease with which new suppliers could-quickly compete with them for sales.
For this reason, FERC typically chooses to separately analyze the "short term" market for existing capacity--for which data is available--and "long term" markets that allow for entry i
but for which there is no reliable data.
All HHIs, of course, apply to the short term market as defined by FERC.
11/
This HHI excludes Southern Companies as a seller.
I v
t
e.
J W-l
~!
.I l
.i
~
The Director's Finding and Staff Recommendation erred in not-l even addressing Cajun's evidence in-its Petition.
The
~
Director's Finding should be reevaluated and this Commirsion must examine that concentration and control in an' evidentiary hearing, to determine what conditions must ce placed on any merg6r approval to eliminate the
'f anticompetitive impacto of.the combination at issue.
2.
The Pronosed Combination Of Enterav And GSU Would Have Anticomnetitive Effects Which Will' Not Be Remedied By The Transmission Service Tariff As Filed By Annlicants
{
The Merged Companies' control and ownership;of l
regional transmission facilities, the integrated nature of its operations and its enhanced size and access to-i resources, will create anticompetitive effects which will i
not be remedied by the TST, the so-called "open access" transmission tariff, which is the linchpin for which the Director's Finding as the vehicle for mitigation of' l
Applicants' market power.
Egg Odisio Affdiavit, 1 8; f
Director's Finding, Staff Recommendation at 26-27.
j In the context of an application for a permanent l
merger, the TST is woefully inadequate to remedy the I
anticompetitive impacts of the merger by meeting the
)
requirements of Cajun and native-load transmission customers which compete with Entergy and GSU in the requirements and 1
bulk power markets.
The TST is unlikely to be used by the very competitors, including Cajun, which would be.most affected by the proposed merger, i.e.,
the nati.7e load transmission customers.
In fact, no independent entity has
.I
)
_~
e.; utilized the TST to this date.
As a group, the native load transmission customers contribute the majority of the Applicants' wholesale transmission service revenues, not only for coordination services but for requirements service-to the native load transmission customers' retail consumers.
Cajun and its Members have historically contributed to the development of the Entergy and GSU transmission systems.
If the proposed merger is to be consistent with the public interest, there must be transmission conditions which respect to the rights of Cajun and other native load t
transmission customers which allow them to compete effectively with the Herged Companies, a.
Enterov and GSU Have Market Power in the Relevant Product and Geograohic Markets The Director's Finding erred in not addressing the fact that the Merged Companies have market. power in the relevant markets.
San Director's Finding, Staff Recommendation at 27.
In fact, the Applicants virtually admit that they have market power, in the absence of their so-called "open access" TST.
- Egg, e.g..,
FERC Testimony of Jerry J.
Saacks, FERC Ex. App. 42 at 8.
- Instead, Applicants' claim that the TST mitigates any and all market power in the context of the proposed merger.
Egg id. at 14; Odisio Affidavit, 5 8.
I However, there are disputed issues of material fact related to the enhanced market power of the proposed Merged Companies and the alleged effect of the.TST in i
mitigating thLt market power.
At the outset, any attempt to I
1 r
)
analyze the Merged Companies' market power must recognize the multiple roles of Cajun and other native load transmission customers as both customers and competitors.
On one hand, Cajun is a competitor of Entergy and GSU in the sale of long term and short term bulk power and economy energy.
Cajun has approximately 650 MW of e
generating capacity currently available for sales in the 4
bulk power markets.
However, the control of transmission access, through physical connection and by contract and the operation of transmission facilities, affects what entities are in a relevant bulk power product and geographic market t
at any given time.
Cajun is also a competitor with Entergy and GSU in the sale of all requirements power and energy to consumers.
The regt : ements market services differ from the services provided in the bulk power service market.
While bulk power consists of a variety of transactions ranging from non-firm energy to long-term bulk power, requirements service requires firm service along with voltage regulation, load following, long-term planning and coordination and access to relevant information.
As described above, Cajun supplies its twelve Member distribution cooperatives under all requirements long-term contracts at delivery points located on the transmission facilities of GSU and LP&L, as well as Central Louisiana Electric Company ("CLECO") and Southwestern Electric Power Company ("SWEPCO").
Cajun's Members located on Entergy and GSU systems are transmission
e r dependent eri tities, i.e.,
they are embedded within and therefore dependent upon the transmission facilities of Entergy and GSU for the delivery of their power i
requirements.
Cajun's transmission service contracts with GSU and Entergy, although restrictive in various ways, contain planning and coordination elements necessary for j
Cajun to supply requirements service to Cajun's Members.
The Entergy operating companies and GSU compete in the requirements market.
Through, inter alia, the Entergy i
System Agreement, the Operating Companies have.the flexibility to share generation reserves, and centrally dispatch and transmit power and energy throughout the system.
Egg Odisio Affidavit, 1 9.
The operating companies have access to joint planning and operations through Entergy Services.
Following the proposed merger, GSU would become a party to the System Agreement and become one of the operating companies, thus greatly expanding the opportunities for coordinated operations and planning.
The Merged Companies would have the flexibility to transmit power and energy on a network basis throughout the regional transmission grid.
While the Merged Companies would have the ability to provide requirements service on a coordinated network l
I basis throughout the areas served by Entergy and GSU, Cajun and other native load transmission customers are limited to the rights in their existing agreements with Entergy and GSU.
San Odisio Affidavit, Si 9-18.
In Cajun s case, Cajun i
l l
m 1
- c-has the right to meet its delivery point loads on GSU facilities, under Service-Schedule CSTS to the PIA,' based on-charges calculated on a peak delivery point load, without 1 having to specify a transmission path.
Cajun also has the right to serve its delivery point load' located on LP&L facilities on a similar basis, under Service: Schedule FTS.
Following the. merger, as proposed, Cajun will not-have the ability, as would the Entergy operating companies, to integrate the operations of Cajun's GSU and LP&L' delivery point loads'in a manner similar to the way the Merged Companies would operate their.GSU and LP&L loads.
The I
Merged Companies would be able to economically dispatch to l
capture.the diversity of their GSU and LP&L. loads, while-Cajun would be limited under Applicants'. proposal to its' existing arrangements.
Similarly, under the proposal, Cajun would also be denied the opportunity to coordinate planning, reserve sharing and other operational benefits with other.
l native load transmission customers in the Merged Companies'
]
service areas.
This is accomplished-through Applicants' 1
effective denial of network transmission service'to Cajun.
.1 and other native load transmission customers.
The denial of network transmission service by j
Applicants will. enhance their market power and facilitate.
]
the exercise of market power.
For the Commission Staff to l
conclude that. network transmission is appropriate only in the context of an enforcement proceeding is erroneous.
The a
A
4 e..-h3 r'sA Gi-A,4 4A 44+p..-.44+
J+
--3.i.?
=
4 4
4 6
30 -
antitrust ~ effects of the proposed license amendment
]
i applications are directly related to the merger.
I b.
The Defects in the Transmission' Service Tariff Exhibit the Adverse Comnetitive Effects of the Pronosed Mercer j
).
1 That the proposed merger of Entergy and GSU would l
have adverse competitive effects is evident from examining.
the defects in the Applicants' TST -- the very document-I which purportedly remedies the anticompetitive effects of' the proposed merger.
Applicants' claim that the TST "is l
intended to provide open access to Entergy's entire bulk l
t transmission system for. utilities, electric cooperatives,.
j
^
i and wholesale power sellers at a single cost-based rate."
t Egg FERC Testimony of Jerry J. Saacks at 9.
In fact, the TST is the Applicants' sole grounds for contending that the j
i merger would not impair ccmpetition and is the sole basis for the Staff Recommendation's conclusion that the l
anticompet'itive impacts of the merger have been remedied.
f Egg Staff Recommendation at 26-27.
If the TST does not t
function as-Applicants claim is " intended" there is n2 evidence that the market power of the Merged Companies would-be mitigated.
The TST does'not so. function and'the Director's Finding and Staff Recommendation erred in
{
ignoring Cajun's presentation.
l i
Applicants' antitrust witness before the FERC, Joe D.
Pace, purported to. examine the competitive situation-l i
following the proposed merger with the TST in place, l
i e
Witness Pace's prefiled testimony before the FERC assumes i
.i
~ 5
r a
9 4 that the Merged Companies would provide TST open access transmission service at cost-based rates across the Merged Companies' entire system, so that any first-tier utility directly interconnected with Entergy can conduct transactions with any other first-tier utility.
Egg FERC' Testimony of Joe D. Pace, FERC Ex. App. 49 at 4-5, 11-13, 21-26, 32-36, 37-38, 39-42, 43-46, and 53-55.
- However, since Mr. Pace's claims rest on at least three invalid assumptions, Applicants have failed to demonstrate that the merger will not adversely impact competition.
First, Applicants' witness Pace assumes that the transmission service provided to others under the TST is identical to the transmission service the Merged Companies would provide to themselves.
This is demonstrably false in both the bulk power and requirements markets.
The FERC required, in its March 3, 1992 Order in Docket No. ER91-569-000 (TST case), that Entergy Power (a power marketing subsidiary of Entergy) and the operating companies must utilize the TST when making sales at negotiated rates.
However, this requirement is extremely limited.
San Entergy services. Inc., 58 FERC 1 61,234 at 61,765 to:61,766 (1992).
Importantly, the Merged Companies will engage in requirements market transactions between and among themselves without utilizing the TST.
Indeed, the TST as filed is not amenable to being used for requirements market transactions, because of the point-to-point, transaction-by-transaction nature of the service offered therein.
The
e e Merged Companies would be able to utilize the Entergy/GSU system to extract new efficiencies in the requirements market, from which Applicants propose that Cajun and other l
native load transmission customers be excluded.
Cajun must have the option of utilizing a network transmission service between and among native load wholesale customers and others in the requirements market.
Second, Applicants' witness Pace assumes that i
Cajun and other native load transmission customers would be able to use the TST for one system-wide charge.
Sag FERC Testimony of Joe D.
Pace, FERC Ex. App. 49, at 12.
To the contrary, Cajun and others will have to pay two or more times for the same transmission service in the bulk power markets, for Cajun to retain its native load contract rights.
Sag Odisio Affidavit, i 11.
In the requirements i
market, Cajun and others would have to pay many times over for the requirements transmission services available to the Merged Companies following the proposed merger.
An example will illustrate the double charges.
1 Assume Cajun purchased 100 MW from a seller located in the A0&L system over a four-year term to serve a' portion of I
Cajun's delivery point loads located on LP&L transmission facilities.
If Cajun attempted to utilize the TST to deliver this 100 MW to its LP&L delivery points, Cajun wou3d pay the claimed $1.33 per kw-month for-transmission service 1
under the TST from the seller's generation over AP&L facilities to the AP&L-LP&L interconnection.
Cajun would i
1 l
. l then utilize Cajun-LP&L Service Schedule FTS, where the-current charge is $0.89 per kw-month, to transmit the 100 MW from the AP&L-LP&L interconnection points to Cajun's'LP&L delivery points.
The TST charge of $1.33 and the Schedule FTS charge of $0.89 are each calculated on the basis'of the entire Entergy transmission system costs, resulting in a.
t double charge.
The same is true if, g g, Cajun engaged in i
a sale of 100 MW to entities on the MP&L system.
Applicants assert that when an existing native load transmission customer uses the TST to serve a portion of its load, then the megawatt demand of its existing contract would be reduced by the amount of TST service utilized.
Egg FERC Testimony of Jerry J.
Saacks, FERC Ex.
I App. 42, at 29.
However, Schedule FTS to the Cajun /LP&L Electric System Interconnection Agreement contains a twelve-month rachet, requiring that Cajun pay the full price, even though the service is not utilized.
Additionally, Applicants' witness Saacks states that LP&L would no longer
[
t have planning responsibilities or the obligation to provide load growth service-for which Cajun pays Entergy under Schedule FTS for the 100 MW.
Id. at 29-30. 'Thus, Cajun would have to choose between continuing to pay the full contract demand under Schedule FTS, or lose its valuable native load rights.
i Third, Applicants' FERC witness Pace assumes that-l l
Cajun and other native load transmission customers would not give up any existing rights in using the TST.
This
1 i
l '
assumption is demonstrably false because Cajun would lose its native load rights for transmission services which utilize the TST under the scenario outlined by Applicants.
{
Egg id. at 29-30.
In the above example:
(1)
Cajun would lose its native load status for the 100 MW; (2) because its TST service is point-to-point, Cajun can lose its networking rights for the 100 MW; (3) since the 100 MW are no longer considered native load, LP&L would have no requirement to J
plan its transmission system for Cajun's full requirements;
)
(4) at the conclusion of the ten year transaction, Cajun 1
would have no assurance of continued transmission service
{
i for the 100 MW; and (5) if service is provided, at that time, it would not necessarily be at normal embedded cost rates, but might include compensation for transmission upgrades and redispatch costs.
Cajun and others may be unwilling to utilize the TST to serve requirements loads if they are forced to give up the bundling.and coordination rights that they have obtained and paid for under existing contracts.
According to the Applicants' FERC witness Pace, Entergy will lack market power over Cajun and native load transmission customers because of services available under the TST.
This conclusion is unreasonable and insupportable, because Cajun and others will be unwilling to forego their native load rights.
Moreover, to the extent that Cajun pays a double charge if it engages in a TST transaction, to protect its existing rights, this double charge is a measure
e
. t of the market power of the Merged Companies.
To the extent Cajun is unwilling to pay a double charge,- including-the cost of giving up native load contract rights, Cajun and other of Entergy's competitors in the bulk power and q
requirements markets, will be foreclosed from arranging transactions with would-be purchasers or would-be sellers.
As filed, the TST is a barrier to entry, rather than a mitigating factor.
This Commission must recognize t
that the Merged Companies can foreclose competition through the TST.
At a minimum, the Commission must set the matter for hearing to determine if the TST actually will mitigate the Merged Companies' market power.
The license amendment should not be approved without a full antitrust review and the imposition of conditions adequate to protect Cajun's ability to compete effectively with the Merged Companies.
3.
The Director's Findina/ Staff Recommendation Imoronerly Concludes that the Gravamen of Commenters' Comolaints Arise from License Condition Violations Throughout its Recommendation, Staff indicates I
that it interprets Commenters' pleadings regarding competition issues and requests for transmission service to t
be related nearly exclusively to alleged violations of l
existing license conditions.
Egg Staff Recommendation at 2, 25, 26, 27, 29, 33.
A review of the Commenters' pleadings, t
1 particularly Cajun's Petition, reveals that this simply is not the case.
While it is clear that Cajun did rely upon i
license condition violations in its Petition at pages.73 and i
. 74, it is also clear that the primary thrust of Cajun's Petition was the impact of the merger on competition.
Cajun's Petition discussed, using a number of criteria (retail customers, energy sales, and capacity), how the Merged Companies would constitute a tremendously large utility with substantial resources.
Cajun Petition at 49-50.
Cajun also analyzed the impact of the merger utilizing the Herfindahl Hirschman Index and the DOJ/FTC Merger-Guidelines.
Id. at 50-52.
Further, Cajun described in l
l detail the nature of the transmission services utilized by Cajun.
Id at 53-55.
An analysis was provided which established that Entergy and GSU have market power in the relevant markets.
Id. at 55-58.
Cajun then pointed out how the TST, Applicants' proposed panacea to competitive injury, is rife with defects which render it ineffective to remedy competitive harm and unattractive for use by certain entities, including Cajun.
Id. at 59-64.
Additionally, Cajun submitted the affidavit of Dr. Roger Odisio which reflects an analysis of the competition arena, Cajun's role in that arena, the impact of the merger on competition and recommendations to ameliorate.the impacts on competition.
This detailed competition analysis relies in no part on the violations by Entergy and GSU of any license conditions.
That analysis focuses solely on the impact of the merger on competition.
That analysis posits issues squarely before this Commission which must be resolved as part of its authority under the Act.
These issues are
4 1
, independent of any claim that Applicants are violating license conditions and must be resolved irrespective of any license condition violations.
Indeed, even if the Commission were to determine that the license conditions were not being violated by the Applicants, the competition
,.l 1ssues remain to be resolved by the Commission.U' An invitation to Cajun to litigate its competition claims related to the merger in a post-merger enforcement proceeding is hollow relief.
Cajun's Petition has clearly placed those issues before the Commission and those issue should be resolved now.
D.
The Director's Findina Erred in Failine to Address the Antitrust Imnlications of the Operational Issues Raised Bv Caiun The proposed license amendment will have detrimental effecte on an agreement that is critical to the continued effective operations of Cajun, and thus to the i
overall interests of its consumers.
These impacts must be examined by this Commission, and no license amendment may be approved where harm to the public interest or to the efficient operation of the interconnected public utility system results.
In fact, the Commission Staff has argued to the Licensing Board, established to rule on health, safety 1
I l
12/
Indeed, if Cajun attempted to raise.its arguments on the impact of the merger on competition in a license condition enforcement proceeding, Cajun has little doubt that Applicants would claim that these traditional competition issues are outside the narrow scope of an enforcement proceeding which is intended to I
determine whether existing license conditions are being violated.
i
. and other licensing issues, that Cajun's operational issues are antitrust issues, not safety or licensing issues.
The Commission Staff has stated:
Cajun's [ operational] concerns relate to matters addressed in Cajun's comments regarding whether granting the proposed amendments would constitute a l
significant change in the licensee's l
activities or proposed activities such as to require a formal antitrust review.
Egg NRC Staff Response to Cajun Electric Power Cooperative, Inc.'s Contentions, (October 13, 1993) at 13.
Yet, on October 20, 1993, the Director has issued his Finding on antitrust issues which ignores Cajun's operational issues.
If the operational issues " pea" is under some "shell" at this Commission, it is either before the Licensing Board or the Director.
Different departments of this Commission cannot take diametrically opposed positions on this matter.
With regard to operational issues, as reflected in the Testimony of Victor J. Elmer,U' Cajun and GSU have a power interconnection agreement, or PIAU', which provides, along with its Service Schedules, for the transmission of Cajun-generated or purchased power over the Cajun /GSU jointly-owned high voltage transmission system, the ITS, for ultimate delivery to Cajun's Member distribution cooperatives located on the GSU, LP&L, CLECO and SWEPCO 11/
Cajun notes that Cajun's operational concerns regarding the merger were contained in Mr. Elmer's prefiled testimony at FERC.
This testimony is attached to Cajun's Petition.
11/
Attached as Exhibit CJN-4, Schedule 1,
to the Elmer FERC Testimony.
E 4
l systems, and for transmission of Cajun-generated power for delivery of third party sales.
i Further the PIA and Service Schedule CTOC to the
[
PIA provide for the joint planning of the ITS by-Cajun and F
GSU.
Service Schedule CTOC is a transmission equalization and access agreement which provides, among other things, for the allocation of ownership and the cost sharing responsibilities for the ITS, which allocations are driven-in large part by the relationship between the relative r
levels of Cajun and GSU ITS investment to the relative levels of ITS usage by Cajun, and by GSU and third parties.
[
Egg Elmer FERC Testimony at 13-15.
In general, if the merger is approved as proposed, the planning functions of the PIA, its service schedules,
[
and the construction obligations, access rights of Service Schedule CTOC will be severely impacted in several ways.
First, GSU's planning and dispatch responsibilities will be I
transferred to Entergy with the result that decisions will be made on an Entergy system basis rather than on a GSU Cajun specific basis.
Following the' merger, as proposed, f
Cajun will no longer have a meaningful contractual planning i
or operating relationship with the actual decisionmaking f
entity.
Egg Elmer FERC Testimony at 17-22.
Second, the l
t increase in the use by the Merged Companies of the ITS, which will result from redispatch of the Merged Companies' j
i resources to achieve the claimed fuel savings derived from j
the merger, could result in " undue burdens
- on Cajun which, f
i under the terms of the PIA, GSU must' avoid.
Id.
Service Schedules CITS, CTS and CSTS to the PIA P
require a great deal of coordination and planning by Cajun and GSU.
Further, the transmission services provided in accordance with those Service Schedules are subject to the j
availability of transfer capability.
The merger will impact Cajun's rights and obligations under these Service Schedules j
in the following ways, among others:
(1) the redispatch of i
GSU's facilities to serve systen needs and achieve the
]
l expected fuel savings may affect the level of available i
transfer capability, the level of losses and the timing and need for upgrades; (2) planning activities then must be undertaken directly between Cajun and Entergy, thus Cajun must have access to Entergy personnel and must have direct and meaningful input into the Entergy planning process; and i
(3) ratchet provisions under the Service Schedules may be triggered, or in all events, wil.L be affected by Cajun's
..i acceptance of service under the TST resulting from the so-l called open access case (if and when Cajun takes'such 5
service).
Egg Elmer FERC Testim:iny at 22.
l Service Schedule CTOC :o the PIA is a transmission ownership and equalization agreement between GSU and Cajun.
Among the many concerns related to Service Schedule CTOC
-l l
which result from the proposed merger are the following.
Sections 1 and 2.2 of Service Schedule CTOC call for the coordinated development of the ITS.
Since the Merged
/l 6
r
. Companies' transmission system will be developed on a system basis, rather than on a GSU specific basis, Cajun must have meaningful input into the Entergy system transmission planning decisions in order to coordinate development of the ITS which is jointly owned and used by GSU and Cajun.
That coordinated development could be achieved, for instance, through direct participation by Cajun with the Entergy System Operating Committee.
]
Further, since the Merged Companies' transmission requirements will differ from those of GSU as a stand alone company, such difference may constitute an undue burden
[
which GSU, under Section 4.3 of the PIA, must avoid.
Further, under Section 2.2(a) of Service Schedule CTOC, if Cajun's investment in so-called " Qualified Transmission i
Facilities" is below its load ratio share of the ITS, Cajun I
has the right and obligation to construct any transmission l
i facilities needed on the ITS.
Different transmission usage i
on the ITS will affect that need to construct.
Indeed, the transmission construction obligation in the TST directly conflicts with the transmission construction obligation of l
't Service Schedule CTOC.
Service Schedule CTOC provides that i
the entity which is under investment parity shall have the I
i first opportunity to construct the f acilities, whereas the
-j TST provides that the entity requesting the incremental capacity which causes the need for construction has the payment obligation related to that construction.
l.
42 -
As noted above, Section 2.2(e) and 2.6 of Service 1
1 Schedule CTOC provide that Cajun and GSU *shall have access with equal priority" to the ITS and "the right to continuous use" of the ITS.
Cajun must maintain that equal access and l
continucus use regardless of modified use of the ITS resulting from the merger.
Indeed, the Applicants have admitted that they have not even analyzed the impacts of the expected changes regarding the ITS.
Frank F.
Gallaher, Entergy Senior Vice President, testified in a deposition taken in the LPSC merger proceeding that Entergy has undertaken no studies to determine what changes are necessary to the Entergy or Gulf States' transmission systems to accommodate this increased usage.
Since Entergy's stated position on the record is in contradiction and violation of Cajun's existing con-tractual rights, and is detrimental to Cajun's consumers, no approval of this proposed merger should be issued until this situation has been clarified and corrected.
The impact.of the proposed merger on the PIA and its attendant service schedules, on Service Schedule CTOC and on the ITS must be analyzed by this Commission.
As argued supra, this analysis should not take place in a vacuum.
Rather, it should be undertaken only after a full review of those impacts after the taking of discovery and the conduct of a trial type hearing.
- m. IV.
CONCLUSION Cajun requests reevaluation of the finding of no significant antitrust findings.
The Director's s
Finding / Staff Recommendation improperly rely on FERC's determination of competition issues and ignore major portions of Cajun's and other Commenters' pleadings to this Commission.
The Commission must hold an evidentiary hearing to decide disputed issues of material fact regarding the effect of the proposed license amendment on the public interest and impose conditions adequate, inter alia, to protect the public interest.
WHEREFORE, Cajun Electric Power Cooperative, Inc.,
respectfully requests that the Director and the Commission:
1.
Grant this request for reevaluation of the finding of no significant antitrust changes; 2.
Grant Cajun's request for a trial type evidentiary hearing; 3.
Approve the requested license amendment only upon conditions adequate to protect the public interest and Cajun's interests as a customer and competitor of GSU and Entergy and as a thirty percent owner of River Bend; and 1
i 1
m
- 44 4.
Grant such other and further relief as the Commission may deem just and appropriate.
Dated:
November 19, 1993 Respectfully submitted, 0b Jarw6s D.
Pembroke Thomas L.
Rudebusch DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C.
1615 M Street, N.W.
Suite 800 Washington, D.C.
20036 (202) 467-6370 l
Attorneys for Cajun i
Electric Power l
Cooperative, Inc.
1 i
i
^
t
CERTIFICATE OF SERVICE I,
James D.
Pembroke, hereby certify that have this 19th day of November,1993, served the foregoing document upon each t
person designated on the attached service list by Federal Express or first class mail, postage prepaid.
OoPA Jamss D. Pembroke DUNCAN, WEINBERG, MILLER
& PEMBROKE, P.C.
1615 M Street, N.W.
Suite 800 Washington, D.C.
20036 (202) 467-6370 l
Kell McInnis, Corporate Counsel Anthony G. Tummarello Cajun Electric Power Coop., Inc.
Director of Energy 10719 Airline Highway Occidental Chemical Corp.
P.O. Box 15540 5005 LBJ Freeway Baton Rouge, LA 70895 Dallas, TX 75244 Earle H. O'Donnell, Esq.
John Carley, Manager Judith A. Center, Esq.
Corporate Planning & Operations Dewey, Ballantine So. Mississippi Elec. Power Asso.
1775 Pennsylvania Ave., N.W.
6401 Highway 49, North Washington, DC 20006-4605 P.O. Box 1589 Battiesburg, MS 39401 Daniel Guttman Spiegel & McDiarmid Robert Weinberg, Esq.
1350 New York Ave., N.W.
Michael A. Postar, Esq.
Suite 1100 Charles A. Braun, Esq.
Washington, DC 20005 Duncan, Weinberg, Miller
& Pembroke, P.C.
l 1615 M Street, N.W.,
Ste. 800 i
Robert C. McDiarmid, Esq.
Washington, DC 20036 1
Bonnie S. Blair, Esq.
1 Spiegel & McDiarmid 1350 New York Ave., N.W.
James N. Compton, Esq.
Suite 1100 Compton, Crowell & Hewitt Washington, DC 20005 146 Porter Avenue P.O. Drawer 1937 Biloxi, MS 39533 Wallace E. Brand, Esq.
Sean T. Beeny, Esq.
Brand, Beeny, Berger & Whitler Don A. Ouchley, P.E.
1730 "K"
St.,
N.W.,
Ste. 1000 Frank D. Ledoux, P.E.
Washington, DC 20006 Lafayette Utilities System i
P.O. Box 4017-C Lafayette, LA 70502 J.A. Bouknight, Jr. (Esq.)
Newman & Holtzinger, P.C.
Philip P. Graham, Vice President 1615 L Street, N.W.
Gulf States Utilities Company Suite 1000 5485 U.S. Highway 61 i
Washington, DC 20036 P.O. Box 220 St. Francesville, LA 70775 David R.
Hunt, Esq.
Cecil L. Johnson, Esq.
1 Ross, Hunt, Spell & Ross Vice President - Legal Services P.O. Box 1196 Gulf States Utilities Company 123 Court Street 350 Pine Street Clarksdale, MS 38614 Beaumont, TX 77701 I
t
i s
James D. Pembroke, Esq.
Robert B. McGehee, Esq.
l Thomas L. Rudebusch, Esq.
Wise Carter Chile & Caraway l
Duncan, Weinberg, Miller 6000 Beritage Building l
& Pembroke, P.C.
P.O. Box 651-1615 M Street, N.W.,
Ste. 800 Jackson, MS 39205 Washington, DC 20036 Nuclear Regulatory Commission Victor J. Elmer Office of the General Counsel Vice President of Operations l',555 Rockville Pike Cajun Electric Power Coop., Inc.
Room 17 A2, 17A3 112 Telly Street Rockville, MD 10852 New Roads, LA 70760 Zachary D. Wilson, Esq.
321 Maple Street P.O. Box 5578 No. Little Rock, AR 72119 John Schwab, Esq.
r Schwab & Walter 10636 Linkwood Court Baton Rouge, LA 70810 Samuel J. Chilk, Secretary Nuclear Regulatory Commission t
One White Flint North 11555 Rockville Pike
[
Room 16 B1 Rockville, MD 20852 Edwin J. Reis, Esq.
l Ann P.-Bodgdon, Esq.
Office of the General Counsel Nuclear Regulatory Commission Washington, DC 20555 Joseph B. Knotts, Esq.
f Mark J. Wetterhahn, Esq.
{
Winston & Strawn i
1400 L Street, N.W.
Washington, DC 20005 (Counsel for GSU)
I h
L t
v Q
- nd Enclosure.3 SPIEGEL & McDI A R MID 1350 NEW YORK AVENUC. N W WASHINGTON. D C. 20005-4798 TELEPHONE 12O21879-4000 TELECOPIER 12C21393-2866 November 19,1993 M Hand Ihllygry Mr. William M. Lambe Antitrust Policy Analyst Inspection and licensing Policy Branch Program Management, Policy Development and Analysis Staff Office of Nuclear Reactor Regulation Nuclear Regulatory Comminion Washington, D.C. 20555 Re: Docket No. 50-458; River Bend Station, Unit 1: Post Operating License Antitrust Review - Request for Reevaluation of T nfayette. Louisiana
Dear Mr. L.ambe:
Pursuant to the Commiuion's Rules of Practice and Procedure, and the Federal Register notice of October 20,1993, Lafayette, Louisiana seeks reevaluation of the October 20,1993 finding that competitive questions "should be addressed in the context of a petition pursuant to 10 CFR Section 2.206 requesting initiation of an antitrust compliance proceeding, not in the instant significant change proceeding."
With due respect, this conclusion does not address, and is not responsive to, the shrawings of 12fayette and others that "significant changes" have occurred which require the Commission's attention - independent of any violations of preexisting license commitments.
As further str cd below, therefore, Lafayette requests that the Commis-sion:
(1) reevaluate its failure to find a "signi5 cant change";
(2) address the evidence which shows that there has been a "signi5 cant change"; and t
(3) find that "signi5 cant change" has occurred which requires further proceedings.
l
i 1
l Mr. William M. Lambe i
November 19,1993 Page 2
)
In addition, Lafayette requests that the Commission urge its Staff to reevaluate its analyses of the showing of Lafayette (and others) that its license conditions have been violated.1 I.
LAFAYETTE'S INTERVENTION On April 26,1993 Lafayette filed comments, a petition to intervene, and a request for hearing. Lafayette asked that the Commission:
i (1) act to impose license conditions which clarify that Entergy as a whole must provide transmission service for competitors on a par with that which it provides for itself-i.e., network senice; (2) confirm that the proposal to impose stranded invest-i ment costs in the Entergy transmission tariff violates prior license conditions entered into before the NRC; and (3) address the opportunity and incentive for generation affiliate preference and self-dealing embodied in Entergy's control of the transmission network.
On behalf of these requests Lafayette provided, inter alla, evidence of significant change. This included, for example, the admission by Entergy's Chairman that the operations of the Entergy " companies" (eg., GSU, LP&L) will now be con-ducted by "one organintion." Thus, license conditions crafted when the companies operated separately must be modified to reflect present reality. See Lafayette pleading at6-7.
1.
Lafayette presumes that the analyses do not constitute findings or holdings by the Commission. In the event they do, they would be, as stated herein, deficient.
r
.N Mr. William M. Lambe November 19,1993 Page 3 II.
THE COMMISSION FAIIs TO ADDRESS THE SHOWINGS OF SIGNIFICAhT CHANGE, AS REOUESED BY LAFAYETTE AND OTHERS As quoted above, the Comminion's Order urges Lafayette and others to file a complaint to address claims of license violation. In doing so, the Commission fails to address the essential point made by Lafayette and others -i.e., that a "signifi-cant change" requires the revisiting of prior license conditions.
Most signi5cantly, and as quoted above, Entergy now proposes to operate its member companies (including GSU) as a single entity. At the time the license conditions (for GSU, LP&L, et al.) were entered into, however, the world centered around individual companies.
There can be little question that this fundamental change in the way in which Entergy will do business meets the "significant change" criteria identified by the Comminion in the Summer decision.2 The recent decision to operate the Entergy companies: (1) has occurred since the previous antitrust review; and (2) is obviously attributable to the licensee.
The very license conditions which were previously applied by this Comminion confirm that the change has " antitrust implications that would be likely to warrant Comminion remedy." Summer, at 825. The existing conditions for, eg., the LP&L Waterford unit, were crafted to ensure that LP&L not make smaller competitors pay multiple charges for transmission where LP&L charges itself only once. Because of the significant change, the individual operating companies will now be operated as a single unit.
Where it once was necessary for the Commission to act to ensure that the individual units will not unfairly price transmission service, the Comminion must now act to ensure that the far larger combine will not similarly take unfair competitive advantage of its transmission monopoly.
2.
South Camlina Electric & Gas Company and South Camlina Public Service Authoriy (Virgil C Summer Nuclear Station, Unit 1), CLI-80-28,11 NRC 917, 824 (1980).
3.
See, eg., the discussion of the "between two entities" condition at 12 of the Lafayette intervention."
l
A Mr. William M. Lambe November 19,1993 Page 4 The Staff Recommendation on which the Notice relies does not seek to respond to the evidence of "significant change" produced by Lafayette and others.'
Thus, for example, there is no reference to Entergy's assertion that, it will now operate the previously distinct operating companies as a unit. Similarly, there does not even appear to be a reference to L.afayette's request that the Commission address the opportunity for self-dealing and affiliate preference.
Rather than address the evidence of"significant change," the Staff Anal-ysis appears to presume that Lafayette and others are essentially alleging that Entergy (and/or GSU) have violated already existing license conditions and, therefore, a complaint for enforcement is in order. Lafayette has alleged license violations. But it has independently, and, indeed, primarily, made claim to, and showing of, "significant change." The Notice (and underlying Staff analysis) do not address this claim and showing.
To be sure, the Staff Recommendation does refer to consideration of the merger in proceedings before other agencies, particularly the FERC. However, this Commission's obligations are hardly negated by the existence of oversight authority in other agencies. This is especially so where:
(1) the Staff analysis does not relate the standards used by the other agencies to the "significant change" stan-dard of this Comminion; (2) the Staff analysis does not consider the adequacy of the NRC's preexisting license conditions (which recognize the importance ofimposing restrictions on multiple transmission charges) in light of the signifi-cant changes; and (3) the Staff analysis asserts that the FERC action is dispositive because "the concerns raised by com-menters appear to be enforcement issues and not issues that address changes in licensee's activities" (Staff, at 27). Once again, the primary concern raised t
4.
Lafayette notes that, curiously, the Staff analysis also fails to treat prior NRC l
analyses of GSU. See Appendix A, which notes past analyses of GSU, but does not discuss them. GSU's longstanding history of anticompetitive conduct, as documented before this Commission, underscores the need for Commission action here.
o r
Mr. William M. Lambe November 19,1993 Page 5 by Lafayette was that "significant change" requires a new review.
III.
THE STAFF ANALYSIS OF THE STRANDED INVESn1ENT LICENSE CONDmON REOUIRES REEVALUATION Lafayette, among others, pointed out that Entergy's request that transmis-sion customers reimburse Entergy for stranded generation investment violates this Commission's license conditions (as well as antitrust law).
The October 20 Notice counsels those who believe that the license conditions have been violated to file a complaint. Lafayette therefore presumes that 8
the Comminion has not ventured to construe the license conditions at this point.
In any event, Lafayette notes that the Staff analysis of the standed investment claims requires reevaluation. Staff states its " opinion" that the license conditions at issue treats " opportunity costs," and not " stranded investment." Staff Analysis, at 29-30. Staff provides no support, in the hearing record of that licensing proceeding or elsewhere, for that " opinion." Staff asserts, as did the FERC, that issues regarding stranded investment are " case specific." Therefore, " staff believes that if someone has specific examples where costs of particular transactions are in any way exorbitant or discriminatory, the proper forum for such a determination is the FERC (in a rate proceeding) and not the NRC." Id.
With due respect, the Staff analysis is non-responsive to Lafayette's showing on stranded investment. In contrast to other transmission users, Lafayette has not purchased generation from the Entergy companies. It has not caused these companies to build generation. In this context, the imposition of stranded generation costs (which, all agree, are the stranded costs that will be at issue) can have no discernible basis incost of service or public policy. To the contrary, under well-established antitrust precedent, the requirement that a competitor / purchaser of one product (here, transmission) pay for a product that it has no use for (generation) isper 5.
Through such authority as may have been delegated to the Director of the Office of Nuclear Reactor Regulation.
ce a
Mr. William M. Lambe November 19,1993 Page 6 se anticompetitive. The Staff does not suggest any set of facts' under which the requirement that a transmission only customer pay for generation would be lawful.
To conclude, as the Staff does, that the NRC cannot address the stranded investment issue raised by Lafayette is, in sum, tantamount to saying that the NRC cannot address the very issues of competition which, all agree, it is statutorily obliged to address.
WHEREFORE, in view of the foregoing it is respectfully requested that:
(1) the October 20, decision be reevaluated; (2) the Comminion find that a "significant change" has taken place which requires further antitrust review in the above-captioned proceeding; and (3) the Commiuion take such further action as is appropriate.
Respectfully submitted, r.F-Daniel Guttman Attorney for Lafayette, Iouisiana
)
DG/kah i
l i
l 6.
Absent, of course, separate contractual commitment, as is not at issue in the case of Lafayette.
j O
d5 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION i
In the Matter of
)
Gulf States Utilities
)
NRC Docket No. 50-458 (River Bend Station,
)
Unit No. 1)
)
REQUEST OF LOUISIANA ENERGY AND POWER AUTHORITY FOR REEVALUATION l
OF FINDING OF "NO SIGNIFICANT CHANGE" Louisiana Energy & Power Authority ("LEPA") requests reevaluation of the finding of the Director of the Office of Nuclear Reactor Regulation to that the proposed changes in the ownership and operation of the River Bend unit do not constitute a "significant change" in the licensee's activities or proposed activities under the license for purposes of Section 105c of the Atomic Energy Act, as amended, 42 U.S.C. 5 21.
Today Terrebonne Parish Consolidated Government
("Terrebonne") filed request for reevaluation.
In order not to burden the record with duplicative filings, LEPA notes its concurrence in Terrebonne's request.
Respectfully submitted, Sean T.
Beeny BRAND & BEENY 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 (202) 347-7002 Attorneys for Terrebonne Parish Consolidated Government Dated:
November 19, 1993 r
F CERTIFICATE OF SERVICE I hereby certify that I have served a copy of the foregoing Request of Terrebonne Parish Consolidated Government for Reevaluation of Finding of "No Significant Changes," in the above-captioned proceeding by causing a copy to be deposited in the United States mail, first class postage prepaid, addressed as set forth below on this 19th day of November, 1993.
Sehn T. Beeny jf BRAND & BEENY 1730 K Street, N.W.
Suite 1000 Washington, DC 20006 (202) 347-7002 Attorneys for Terrebonne Parish Consolidated Government Office of the Secretary Zachary D. Wilson, Esq.
U.S. Nuclear Regulatory 321 Maple Street Commission P.O. Box 5578 Washington, DC 20555 North Little Rock, AR 72219 Robert C. McDiarmid, Esq.
Jonathan A. Liebowitz, Esq.
Spiegel & McDiarmid Robert A. O'Neil, Esq.
1350 New York Avenue, N.W.
Miller, Balis & O'Neil, P.C.
Suite 1100 1101 14th Street, N.W.
Washington, DC 20005-4798 Suite 1400 i
Washington, DC 20005 1
t
7 Daniel Guttman, Esq.
Robert Weinberg, Esq.
Spiegel & McDiarmid Duncan, Weinberg,
(
1350 New York Avenue, N.W.
Miller & Pembroke, P.C.-
)
Suite 1100 1615 M Street, N.W.,
Suite 800 Washington, DC 20005-4798 Washington, DC 20036 James D. Pembroke, Esq.
Earle H. O'Donnell, Esq.
Duncan, Weinberg, Dewey Ballantine i
Miller & Pembroke, P.C.
1775 Pennsylvania Ave.,
N.W.
1615 M Street, N.W.,
Suite 800 Washington, DC 20006-2605 Washington, DC 20036 Robert B. McGehee, Esq.
Mark J. Wetterhahn Wise, Carter, Child & Caraway Winston & Strawn 600 Heritage Building 1400 L Street, N.W.
l Congress at Capitol Washington, DC 20005-3502 Jackson, MS 39205 Joseph Rutberg, Esq.
Joseph B. Knotts, Jr., Esq.
Office of the General Counsel Winston & Strawn U.S. Nuclear Regulatory 1400 L Street, N.W.
Commission Washington, DC 20005-3502 Washington, DC 20555 William M. Lambe Geoffrey Grant Eugene Holler, Esq.
Acting Chief U.S. Nuclear Regulatory Nuclear Regulatory Commission Commission 11555 Rockville Pike Washington, DC 20555 Rockville, MD 20852 Regulatory Publication Branch Division of Freedom of Information and Publication Services Office of Administration U.S. Nuclear Regulatory Commission Washington, DC 20555
m D
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of
)
Gulf States Utilities
)
NRC Docket No. 50-458 (River Bend Station,
)
Unit No. 1)
)
REQUEST OF TERREBONNE PARISH CONSOLIDATED GOVERNMENT FOR REEVALUATION OF FINDING OF "NO SIGNIFICANT CHANGES" Terrebonne Parish Consolidated Government ("Terrebonne")
hereby requests reevaluation of the finding of the Director of the Office of Nuclear Reactor Regulation that no significant changes have occurred in the activities or proposed activities of Gulf States Utilities Company ("GSU") since the last antitrust review of its license to operate its River Bend Station.
The acquisition of one multistate transmission monopolist by another is on its face precisely the sort of change provided for in Section 105c(2) of the Atomic Energy Act, 42 U.S.C.
S 2135 (c) (2).
The Director's finding abdicates the Commission's statutory responsibility to insure that it tres not license conduct inconsistent with the antitrust laws and cannot be redeemed by the Director's proposed remission of the victims of that conduct to protracted, uncertain license enforcement proceedings.
Whatever the Co= mission's staff might prefer, Congress has provided that what staff itself characterizes as "the changes in GSU's activities since the previous antitrust review, which may have competitive implications in the bulk power services market
__. s._
,y w
e Li in the south central portion of the country"1 must'be addressed in this proceeding pursuant to Section 105c(2), not somewhere else pursuant to other statutory authority.
These are changes a
that raise Entergy's anticompetitive advantage by $1 billion.'
1.
The Meraer Constitutes a Sicnifi; ant Chance The Staff Recommendation upon which the Director's finding
')
is based concludes that the GSU-Entergy merger satisfies the
'I criteria for "significant changes"
'l first two of the lunner2 contemplated by Section 105c(2) of the Act.
Staff Recommendation' at 33.
The Staff Recommendation does not actually explain why j
these changes do not also meet the third Summer criterion:
that
_j the changes "have antitrust implications that would likely i
warrant some Commission remedy."- 11 NRC at 824.
Instead it I
merely characterizes commenters " concerns" as raising l
" enforcement issues" to be raised in different proceedings at the
'l NRC or the Federal Energy Regulatory Commission ("FERC").
Staff Recommendation at 26-27, 33-34.
The Staff Recommendation does i
not explain why conduct, some which may well have "its genesis" in violations of antitrust license conditions, but which nevertheless admittedly constitutes a change in a licensee's own voluntary conduct since the last antitrust review, is not also, or alternatively, remediable, as Congress ordained, pursuant to i
3 Staff-Recommendation Post OL No Significant Antitrust Changes, dated October,-1993 at 2.
(" Staff Recommendation")
2 South Carolina Electric and Gas Co. and South Carolina i
Public Service Authority (Virgil C. Summer Station, Unit 1),
11 NRC 817, 824 (1980).
2 i
sr I
Section 105(c) of the Act.
The Staff Recommendation affords no i
analysis or authority to support its recommendation that changes-which would otherwise be "significant" for purposes of Section 105c(2) be regarded as insignificant for that purpose because they also involve license violations.
2.
The Staff Recommends Abdication of NRC's Antitrust ResDonsibility i
To the limited extent that the Director's finding and the supporting Staff Recommendation even address the commenters' allegations that the GSU-Entergy merger -- as distinct from unilateral conduct of the-companies -- creates a situation inconsistent with the antitrust laws, they abdicate the Commission's statutory responsibility in favor of the FERC's cursory treatment of the competitive consequences of the merger pursuant to entirely different statutory authority than that Congress afforded to the NRC to enable it to discharge its very different, explicit antitrust _ responsibility.
a.
Difference Between NRC's and FERC's Antitrust Responsibilities Preclude Wholesale Reliance on FERC's Findinas The Staff Recommendation's sole reference to the fact that r
the NRC and the FERC have different statutory authority and responsibilities for assessing and remedying anticompetitive effects of mergers is to state that it decided that these differences "were not significant."
This position requires l
reevaluation.
The statutory standard governing the NRC's review of the effects of the GSU-Entergy merger are entirely different from 3
l i
that governing FERC's merger review.
Section 105c provides explicit auth'ority and responsibility to determine whether the change in ownership creates or maintains "a situation f
inconsistent within the antitrust laws."
Section 207 of the Federal Power Act, 16 U.S.C.
S 8246(a), on the other hand, permits the FERC to approve a merger merely on finding it l
" consistent with the public interest."
While antitrust policy is one of the considerations that the FERC must take into account in assessing "the public interest," the application of the antitrust laws is not determinative in that assessment.
Gulf States E!.ilities Co. v.
FPC, 411 U.S. 747 (1973); United States v. Radio Coro. of America, 358 U.S.
334, 350-53 (1959).
In contrast, the i
NRC is expressly charged to determine whether conduct under its licenses would create a situation inconsistent with the antitrust laws.
The Commission and its licensing boards have recognized i
that, because whether conduct would somehow serve the "public interest" is a entirely different question than whether that i
conduct would violate the antitrust laws, the "public interest" standard applied by the FERC is not appropriate for Section 105c purposes.
Toledo Edison Co. and Cleveland Electric Illuminatina 1
222 (Davis-Besse Nuclear Power Station, Units 1, 2, and 3), ALAB-560, 10 NRC 265, 283 (1979).
Cases decided under a "public interest" standard are, therefore, are not persuasive in an analysis under section 105c.
Idz at 284, citina, Houston Lichtina and Power Co. et. al (South Texas Project Unit Nos. I and 2), CLI-77-13, S NRC 1303, 1312 n.8 (1977).
4
C 4
Plainly, the NRC cannot rest the discharge of its explicit duty to ensure that the merger does not create or maintain a situation inconsistent with the antitrust laws on the FERC's summary findings on competition issues as it conceived them under its "public interest" standard.
b.
FERC's Summary Findings Made Without Benefit of Even a Paper Hearino Are Suspect The FERC findings upon which the Director's finding ultimately rests entirely are so suspect as a procedural matter as not to warrant reliance even if such reliance were otherwise lawful.
The FERC's summary merger orders regarding competition are themselves bootstrapped from its earlier summary orders regarding Entergy's open access tariff.
In neither proceeding were Entergy/GSU's affiants or the FERC's anonymous analysts subjected to cross examination on their conclusion -- remarkable on its face -- that the market power created by the merger of two entities with strategic dominance over electric transmission in a market involving much of four states is mitigated by a tariff undertaking, perhaps, to bargain for point-to-point transmission at an undetermined price.
In the merger proceeding FERC simply assumed that the product or service market that would be affected would be the same as that in the open-access case.
It ignored its own definitions of service categories to arrive at the markets it uced.
It did not use the market definitions accepted by the NRC even though it had used those definitions in previous cases.
By the same token, the factual allegations of other parties such as Terrebonne pointing to the opposite conclusion 5
u I
were simply ignored or contradicted.
Evidently by way of response to commenters' contention that it would be error for the l
NRC to rest its findings in this proceeding on the FERC's j
finding, the Staff Recommendation invites commenters to seek appellate court review of the FERC's orders.
Of course, relief obtained by that means would do nothing to remedy tha consequences of the NRC's abdication of its Section 105c responsibilities.
The Staff Recommendation nakes no effort to grapple with factual, economic and legal deficiencies of the FERC's antitrust analysis.
Among the more remarkable of these deficiencies is a studied indifference to evidence from one of Entergy's own witnesses impeaching the factual basis for the FERC's conplusion.
As the Staff Recommendation recognizes, the cornerstone of the FERC's conclusion that it need not even try the disputed' facts regarding the effect of the merger on competition was that any increase in market power over transmission that would result from the merger would be sufficiently mitigated by the open access tariff which the FERC had earlier accepted, also without a hearing on factual issues disputed by intervenors.
In this proceeding, and in the earlier open access case the FERC found, without holding even a paper hearing, that all first-tier utilities -- i.e. all utilities that directly interconnected with an Entergy company -- were in the same geographic market because the open access tariff provided sufficient access to transmission to enable each of these utilities to engage in transr.ctions with 6
i i
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-se r
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 the Louisiana Energy and Power Authority ("LEPA"), that many of the provisions of the open access tariff were so burdensome and uncertain, and placed so many limitations on the transmission service ostensibly being made available, that a hearing was needed to determine whether the tariff, in fact, mitigated Entergy's market power sufficiently to authorize market j
based pricing and to not require any transmission conditions on the merger.
As part of its presentation in the merger proceeding, Entergy and GSU presented a study sponsored by Mr. Frank F.
Gallaher, a primary Entergy witness, that allegedly demonstrated
.i significant savings would result from merger.
To determine the alleged merger savings, Entergy/GSU compared the costs of meeting their loads if they were two stand-alone utilities with the costs 4
of meeting their loads if they were merged.
In calculating the cost of GSU meeting its loads on a stand-alone basis, Entergy/GSU assumed that Gulf States would engage in some economy transactions but only with Entergy and with other utilities with which GSU was directly interconnected.
In the merged case scenario, however, Entergy/GSU assumed that GSU would also engage in significant economy transactions with firac'-tier utilities --
those with which it was interconnected through Entergy but not directly.
I 7
f
s.
+
l i
During Staff's cross-examination of a Mr. Gallaher in the l
truncated FERC merger docket hearing on issues other than competition, he was asked why he did not include economy energy transactions with first-tier utilities in calculating the cost of 1
l operating GSU as a stand-alone utility.
He stated that he did l
i j
not include economy transactions with utilities with which GSU l
was not directly interconnected because GSU's own projections showed a practice of only engaging in economy energy transactions with utilities with which it is directly interconnected.8 l
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 Gulf States, even thouch 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 open access nrovisions of an intervenina utility to make economy purchases as you are dispatchina the system.
It is more likely that you would use the utilities that ourchases.
So I really don't see that it would be imorudent on the Gulf State's side.
There are a lot of
)
other factors that ao into it rather than iust there beino
{
an availability of economy enerav, and that Enterav has an open access provision.
j Transcript at 863 (emphasis added).
In essence, Mr. Gallaher confirmed that the availability of the open access tariff, does not mean that all first-tier utilities could or would use it to engage in economy transactions.
Yet this is exactly the assumption the FERC had to make, and did make, finding that the market power of a merged 8
The pertinent portions of Mr. Gallaher's testimony were attached to Louisiana Energy and Power Authority's Request for Rehearing, dated June 18, 1993, in FERC Docket Nos. EC92-21-000 et al., which was, in turn, attached to the Reply of Terrebonne To Response of GSU To The Comments on Antitrust Issues, filed in this proceeding July 9, 1993.
8
s
..a Entergy/GSU would be mitigated by the open access tariff.
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 FERC's decision in both the open access case and the merger case.
Nevertheless, the FERC explicitly refused even to consider this testimony,' and the Staff Recommendation ignores it.
3.
Enforcement Proceedings Are Not Substitutable For 105c(2) Proceedines Relegating commenters such as Terrebonne to enforcement of existing antitrust conditions is no substitute for the action the facts require in this proceeding.
For one thing, the Staff Recommendation cites no authority for the notion that after-the-fact enforcement proceedings --
inevitably protracted by the licensees' comparatively unlimited ability to protract resistance -- is the proper means of dealing with a merger which the staff itself admits raises transmission 64 FERC 1 61,801 at 61,009.
The FERC ruled that it was without power to consider this testimony in the same docket because it was given more than 30 days after the deadline for petitions for rehearing of its initial order in the proceeding.
9
o issues that may have competitive implications.
The Congress prescribed a prospective, prophylactic proceeding pursuant to Section 105c(2), to invest the licensees as well as the other participants with an interest in prompt resolution of the controversy.
Substantively, the tenor of the Staff Recommendation also raises a serious doubt as to whether the proceedings envisioned by the Staff would materially remedy the anticompetitive effects l
of the merger.
As detailed in Terrebonne's comments, at l
pages 25-36, Entergy/GSU claim that their merger will create a network that will save them more than a billion dollars; these savings can only be achieved by using the companies' combined transmission systems as a network; the companies deny Terrebonne and their other competitors comparable access to the transmission network, denying those competitors of a means of reducing their costs; the competitive gap between Entergy/GSU and their competitors will increase; a substantial change in the nuclear license conditions is needed to remedy the situation.
The staff's invitation to replead these contentions in an enforcement rings hollow.
Nowhere does the Staff Recommendation affirm that i
Entergy network service, if proved appropriate, actually could be cobbled out of the existing conditions on GSU's River Bend license, Louisiana power & Light Company's Waterford license, Mississippi Power & Light Company's Grand Gulf license and
}
Arkansas Power & Light Company's Arkansas Nuclear One license.
The crabbed interpretation the Staff P9 commendation places on the 10 i
1 l
MW i
license conditions relating to pricing in its discussion of the
' stranded investment feature of the open access tariff does not i
betoken a flexible enough interpretive approach to extend the i
reach of the transmission conditions to Entergy's entire post-merger system.
And nothing less than such access to that system on terms that permit Terrebonne to continue compete will avert t
the anticompetitive effect of the merger.
Given the staff's approach, at best, license conditions enforcement can result in three sets of network transmission access to three systems at about three times the cost of Entergy network access.
Entergy network access is what is needed to permit fair competition by the beneficiaries of the license conditions in the light of an added $1 billion in anticompetitive advantages afforded to the merger participants.
Under the circumstances, a change in the license conditions to carry out this remedy can't be obtained by enforcement of existing conditions.
Terrebonne is authorized to state that Brazos Electric Power Cooperative, Inc., also seeks reevaluation of the Director's finding.
WHEREFORE, for the foregoing reasons, and for the reasons stated in Terrebonne's previous submissions, Terrebonne requests that the finding of no significant changes by the Direct of the Office of Nuclear Reactor Regulation be reevaluated, that a finding of significant change be made and that the procedures provided in Section 105c of the Act be put in train with a view 11 1
i s
e I
to impose new conditions on GSU's license which will remedy any anticompetitive situation maintained with added vigor by its I
merger with Entergy.
I Respectfully submitted, i
~Sean T. Beeny O
BRAND & BEENY 1730 K Street, N.W.
Suite 1000 l
Washington, DC 20006 i
(202) 347-7002 i
Attorneys for Terrebonne Parish i
consolidated Government Dated:
November 19, 1993 t
e i
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12 I
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of
)
Gulf States Utilities
)
NRC Docket No. 50-458
)
CERTIFICATE OF SERVICE I hereby certify that I have served a copy of the foregoing Request of Terrebonne Parish Consolidated Government for i
Reevaluation of Finding of "No Significant Changes," in the
[
above-captioned proceeding by causing a copy to be deposited in t
the United States nail, first class postage prepaid, addressed as set forth below on this 19th day of Nove ber, 199 l
I Sean T. Beeny
/
l BRAND & BEENY i
1730 K Street, N.W.
Suite 1000 l
Washington, DC 20006 E
(202) 347-7002 l
r Attorneys for Terrebonne Parish
(
Consolidated Government Office of the Secretary Zachary D.-Wilson, Esq.
U.S. Nuclear Regulatory 321 Maple Street Commission P.O. Box 5578
?
Washington, DC 20555 North _Little Rock, AR 72219 t
Robert C. McDiarmid, Esq.
Jonathan A. Liebowitz, Esq.
I Spiegel & McDiarmid Robert A. O'Neil, Esq.
1350 New York Avenue, N.W.
Miller, Balis & O'Neil, P.C.
Suite 1100 1101 14th Street, N.W.
Washington, DC 20005-4798 Suite 1400 Washington, DC 20005 l
t i
~
r i
i i
Daniel Guttman, Esq.
Robert Weinberg, Esq.
Spiegel & McDiarmid Duncan, Weinberg, 1350 New York Avenue, N.W.
Miller & Pembroke, P.C.
i Suite 1100 1615 M Street, N.W.,
Suite 800 washington, DC 20005-4798 Washington, DC 20036 James D. Pembroke, Esq.
Earle H. O'Donnell, Esq.
l Duncan, Weinberg, Dewey Ballantine Miller & Pembroke, P.C.
1775 Pennsylvania Ave., N.W.
1615 M Street, N.W.,
Suite 800 Washington, DC 20006-2605 i
Washington, DC 20036 i
Robert B. McGehee, Esq.
Mark J. Wetterhahn
'l Wise, Carter, Child & Caraway Winston & Strawn 600 Heritage Building 1400 L Street, N.W.
Congress at Capitol Washington, DC 20005-3502 Jackson, MS 39205 t-Joseph Rutberg, Esq.
Joseph B. Knotts, Jr., Esq.
Office of the General Counsel Winston & Strawn U.S. Nuclear Regulatory 1400 L Street, N.W.
Commission Washington, DC 20005-3502 Washington, DC 20553 William M. Lambe Geoffrey Grant Eugene Holler, Esq.
Acting Chief l
U.S. Nuclear Regulatory Nuclear Regulatory Commission Commission 11555 Rockville Pike Washington, DC 20555 Rockville, MD 20852 Regulatory Publication Branch Division of Freedom of Information and Publication Services Office of Administration U.S. Nuclear Regulatory Commission Washington, DC 20555 i
?
E 4
v REEVALUATION AND AFFIRMATION OF I
NO SIGNIFICANT CHANGE FINDING PURSUANT TO RIVER BEND STATION. UNIT 1 POST OPERATING LICENSE ANTITRUST REVIEW i
t By filings dated November 19, 1993, from Cajun Electric Power.
Cooperative, Inc.
(Cajun),
Lafayette, Louisiana (Lafayette),
Louisiana Energy and Power Authority (LEPA) and Terrebonne Parish Consolidated Government (Terrebonne)2 (collectively, Requesters),
I have been requested to reevaluate my Finding of No Significant Changes (Finding) pursuant to the anticipated ownership transfer in the River Bend Station, Unit 1 (River Bend) resulting from the proposed merger of Gulf States Utilities Company (GSU) and Entergy Corporation (Entergy).
Of the entities requesting reevaluation, Cajun is the only entity that specifically requests that I reevaluate both the transfer of ownership control in River Bend from GSU to Entergy and the transfer of operation of River Bend from GSU to Entergy operations, Inc.
(EOI).
This Finding was published in the Federal Reaister on October 20, 1993, (58 Fed.
Reg. 54176).
For the reasons set forth below, I have decided not to change my River Bend finding of no significant changes.
2 Terrebonne, at page 11 of its request, indicates that Terrebonne has been authorized to state that Brazos Electric Power Cooperative, Inc. also seeks reevaluation of my Finding; however, Brazos has not submitted any such request to the Commission nor has Terrebonne elaborated on the nature of such a
- request, consequently, the staff comments cited herein reflect only those requests cited above.
I BACKGROUND As indicated in the Staff Recommendation, the Nuclear Regulatory Commission (NRC or Commission) has established procedures by which-prospective licensees of nuclear production facilities are reviewed during the initial licensing process to determine whether the applicant's activities will create or maintain a
situation inconsistent with the antitrust laws.
Although section 105 of the Atomic Energy Act of 1954, as amended (AEA), 42 U.S.C. S 2135, does i
not specifically address the addition of new owners or operators after the initial licensing process, the NRC staff (staff) has, in analyzing situations where new ownership occurs after issuance of an operating license, applied the standards set forth by the Commission in its Summer order to determine whether an antitrust review is required.2 Against this backdrop, the staff has conducted antitrust reviews of operating license amendment requests
-- the subject of the instant reevaluation requests.
l 2
South Carolina Electric and Gas Company and South Carolina Public Service Authority, (Virgil C. Summer Nuclear Station, Unit 1), CLI-80-28, 11 NRC 817 (1980). The order was issued in response to a petition requesting the Commission to determine, pursuant to section 105c(2) of the Atomic Energy Act, as amended, that significant changes in the licensee's activities had occurred i
subsequent to the construction permit antitrust review.
The Commission ' enunciated the criteria to be used in making the decision but deferred the actual decision pending assistance from the Department of Justice.
In a subsequent decision, the Commission affirmed the criteria set out in the order and denied the petition.
Efe_e South Carolina Electric and Gas Company and South Carolina Public Service Authority, (Virgil C. Summer Nuclear Station, Unit 1), CLI-81-14, 13 NRC 862 (1981).
4
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c Although the actions taken by the staff, when faced with operating license amendments that request the addition of a new owner or placing a non-owner operator on a license, have been tailored to each particular amendment request, post-operating license amendment applications involving change in ownership have been subjected to a staff review, in conjunction with consultation with the Attorney General, to determine whether there has been a significant change.
The review by the staff focuses on changes in the market (s) in question caused by the proposed change in ownership since the most recent antitrust review of the facility in question.
Where appropriate, the staff review takes into account related proceedings and reviews in other federal agencies.
The staff has adopted a review process for post-operating license changes in plant ownership patterned after the operating license review associated with initial applicants.
Receipt of the application to add a new owner to the facility after tha operating license has been issued is noticed in the Federal Recister with the opportunity extended to the public to express views relating to any antitrust issues raised by the application. The notice states that the Director of the Office of Nuclear Reactor Regulation (NRR) will issue a finding whether significant changes in the licensee's activities or proposed activities have occurred since the completion of the previous antitrust review.
In the instant proceeding, the notice also recognized the existence of a related t
r e
~
+ federal agency review and the staff's intention to consider the related proceeding.
P With the benefit of public comment and consultation with the.
Department of Justice, the staff makes a determination whether the changes in question will require t-further antitrust review in order to deter.,ine whether the issuance of the license amendment e
will create or maintain a situation inconsistent with the antitrust laws.
If the Director of NRR finds a "significant change," the matter is referred to the Attorney General for a fornal antitrust review pursuant to Section 105(c) of the AEA.
If the Director of NRR finds no significant change, the finding is published in the Federal Recister with an opportunity for the public to request reevaluation of the finding.
The requests to reevaluate the Director's Finding noted above are the subject of this reevaluation finding.
I DISCUSSION The Commission delegated its authority to make significant change findings to the staff and in its Summer order, established a set of criteria the staff must follow in making the determination whether a significant change has occurred:
The statute contemplates that the change or changes (1) have occurred since the previous antitrust review of the licensee (s);
(2) are reasonably attributable to the
i I
m i l licensee (s); and (3) have antitrust implications that would likely warrant some Commission remedy.8 j
It is within this framewo@, established by the Commission that I f
made my initial Finding of No Significant Changes on October 15, 1993, and it is within this framework that I have analyzed each of the requesta to reevaluate my Finding.
Commission regulations providing for public requests for reconsideration of a Director's finding of no significant antitrust changes (10 C.F.R.
S 2.101(e)(2)) are intended to provide the public the opportunity to present new data or highlight data overlooked by the staff in the deliberative process leading up to the Director's finding. Requests for reevaluation are not intended to provide entities the opportunity to reiterate old arguments.
i The issues raised by Cajun, Lafayette, LEPA and Terrebonne in their requests for reevaluation were raised in their original comments i
during the amendment application process.
Requesters raise no l
issues which were not appropriately addressed in the post operating l
license significant change review.
Thus, the staff has already f
considered the merits of Requesters' arguments in its review process.
The staff has determined that the issues raised by Regaesters that fall within the jurisdiction of the NRC appear to ce more in the nature of enforcement issues, not licensing issues, that should be raised and addressed in the context of an enforcement or compliance proceeding, not a significant change l
I 3
CLI-80-28, suora, 11 NRC at 824.
i t
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b 3 antitrust licensing proceeding.
Although no new arguments have been raised by Requesters, I believe elaboration on the issues again raised by Requesters may clarify the staff's findings in this proceeding.
The common thread running throughout each of the requests for reevaluation is the assumption that the staff, in evaluating the competitive effects of the proposed GSU/Entergy merger upon relevant bulk power
- markets, relied exclusively upon the I
competitive analyses conducted by the Federal Energy Regulatory Commission (FERC) in arriving at its no significant change finding.
Each of the Requesters indicates that the staff, by relying so heavily on the findings to date at the FERC, is abdicating a statutory responsibility imposed upon the Commission in section 105c of the AEA.
I would like to address this argument first as it does pertain to all of the Requesters and then address specific arguments raised by each of the Requesters.
The Requesters are incorrect in their assumption that the staff adopted the findings and conclusions of the FERC pertaining to competitive issues raised by the proposed merger.
The FERC j
findings in both the proposed GSU/Entergy merger proceeding and the Entergy open access transmission proceeding were considered by the i
staff and were helpful to the staff in its analysis.
However, the j
staff has determined, based on its analysis of the reasonably apparent changes, that the primary concerns raised by Requesters
f.
m v.
I i
. i before the NRC pertain to issues and allegations that are more germane in the context of a petition pursuant to 10 C.F.R. S 2.206 seeking initiation of an enforcement proceeding not a significant l
change licensing proceeding as envisioned by Requesters.'
Thus,.
the staff has not abdicated its review responsibility to the FERC in this proceeding.
j At the outset, it is important to restate that the significant change review by the staff is performed using the criteria which were discussed by the Commission in its Summer order and affirmed 5
and further explained in its subsequent Summer decision.'
As the Commission explained in the Summer decision, " changes in order to i
be significant must also be reasonably. apparent. "'
Significant t
As further clarification of the distinction between the Commission's licensing and enforcement responsibilities, I refer Requesters to a reevaluation finding I made in 1989 pursuant to a request by Cap Rock Electric Power Cooperative, Inc. (Cap Rock) to reevaluate my no significant change finding associated with the operating license review of Unit 1 of the Comanche Peak Steam Electric Station (Comanche Peak). In the Comanche Peak proceeding, s
Cap Rock alleged that the licensee, Texas Utilities Electric i
Company, refused to provide certain transmission services that
~
would enable Cap Rock to better compete in the wholesale bulk power market in north central Texas.
In the Comanche Peak proceeding, as j
in the instant proceeding, I determined that the allegations of changed activity were issues that were more germane to an.
enforcement proceeding and should not be addressed in the context I
of a significant change licensing proceeding.
- _gs " Reevaluation I
and Affirmation of No Significant Change Finding Pursuant to i
Coma.nche Peak Steam Electric Station, Unit 1 Operating License Antitrust Review"; Docket'No. 50-445A, dated August 29, 1989.
8 CLI-80-28, suora, 11 NRC 817.
7 111. at 872.
i
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7 n
< change reviews are not intended to be proceedings, with discovery and examination and cross examination of witnesses, to determine if there should be a further proceeding.
Rather, the staff reviews-alleged alterations in the competitive structure based on submittals and other information available to it.s Within this framework for its review, the staff, in its analysis of the change in ownership, considered all the information available to it, including the assertions of the applicant and the commenters, and the decision reached by a sister federal agency regarding the effects of the proposed merger on competition.
Consideration of the FERC decision in this context, was not, as Requesters assert, an improper reliance on the FERC decision.
- Further, the nature of an NRC significant change review, as structured by the Commission, does not provide for the conduct of a proceeding "with all the attributes of a full-fledged hearing" to determine if there should be an antitrust hearing.'
For these reasons, the staff did not improperly raly on the FERC decision nor does section 105 of the AEA, as understood by the Commission, require initiation of an antitrust hearing without first reaching the threshold showing of a significant change that is also reasonably apparent.2" t
S.e.fa M.
M.
10 For these same
- reasons, Cajun's argument that the Director's Finding errs in not requiring a hearing is without (continued...)
l l
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Cajun The concerns raised by Cajun in its original comments and in its request for reevaluation that are not within the staff's jurisdictional purview relate to Cajun's rights under existing contracts with GSU (c.f., pp. 3,4,35,39 and 42 of Cajun's request for reevaluation).
Cajun states, at page 42 of its reevaluation request, that:
The impact of the proposed merger on the PIA [ Power Integration Agreement]
and its attendant service schedules, on Service Schedule CToc and on the ITS must be analyzed by this Commission.
', Brackets added.)
I disagree.
The extent to which the proposed merger affects existing wholesale power contracts is not in the purview of this Commission, but under the jurisdiction of the FERC.
The FERC's mandate deals specifically with reliable operation of the electric to
(... continued) merit.
Cajun at 9-20.
Cajun would have the Commission conduct a full hearing for the purpose on determining whether the application
~
should be forwarded to the Attorney General for her advice regarding whether a hearing is required on the antitrust issues.
I also note that Cajun asserts, in support of its argument for a full hearing to review significant change, that the Commission could only exercise the licensing action authorized in section 105a R
of the AEA with benefit of first having conducted a hearing.
Cajun at 9.
However, in quoting section 105a, Cajun omits the first part of the sentence quoted, which states:
In the event a licensee is found by a court of competent jurisdiction, c;ther in an original action in that court or in a proceeding to enfor<:c or review the findings or orders of any Government agiccy having jurisdiction under the laws cited above, to have violated any of the provisions of such laws in the conduct of the licensed activity, the commission may suspend, revoke 42 U.S.C. 5 2135(a).
a m
+ utility industry and mediation over contractual obligations therein.21 The FERC has indicated in its findings in the proposed GSU/Entergy merger proceeding that specific contractual disputes involving Entergy's open access transmission tariff will be resolved by the FERC when specific rate cases or service agreements are filed with the FERC.12 I see no reason for the NRC staff also to review contract disputes.18 Cajun suggests that the staff misinterpreted the comments of all of the petitioners in this proceeding regarding the issues pertaining 11 The Federal Energy Regulatory Commission (FERC) administers the Federal Power Act, 16 U.S.C.
824 et seq., which deals with, among other things, the wholesale interstate sale and distribution of electricity.
12 Enterov Services. Inc., 63 FERC 161,025, slip op at 42-48 (April 5, 1993).
l' Cajun argues that the Commission may not issue a license amendment "where harm to the public interest or to the efficient operation of the interconnected public utility system results."
Cajun at 37.
Cajun offers no authority for this proposition.
The Commission clearly has jurisdiction over health and safety issues, but other nonsafety issues such as the public interest in the efficient operation of a utility are dealt with in more suitable forums.
See Houston Lichtina & Power Co.,
(South Texas Project),
CLI-77-13, 5 NRC 1303, 1316-17 (1977).
Cajun has characterized these issues as " operational issues" which, in Cajun's view, have been ignored by the Director and argued by the staff as antitrust matters before the Atomic Safety and Licensing Board (Board) established to rule on the health and-safety issues associated with the proposed ownership transfer.
Cajun asserts that the issues must either be before the Board or before the Director in his antitrust review of significant change.
Cajun at 37-38.
Cajun omits a third possibility, that the issues may be matters not within the scope of either the antitrust or the health and safety province of the NRC.
The staff has evaluated the issues as contractual matters not within the scope of an NRC significant change review.
Whether the issues have health or safety implications is matter currently before the Licensing Board.
[
I
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. I to competition and requests for transmission service as related almost exclusively to alleged violations of existing license conditions.2' cajun alleges that the merger will adversely impact its access to GSU/Entergy transmission facilities and nullify or emasculate existing contractual rights.15 i
The transmission access issues raised by Cajun and the other Requesters, appear to have their genesis in long-standing relationships between Requesters, GSU and Entergy which were addressed by the staff at the construction permit and operating licensing stages of River Bend (as well as Entergy plants, Grand Gulf and Waterford).
The Requesters assert that specific license conditions for these plants give them access rights which a post merger Entergy may be able to frustrate.
For this reason, the issues raised by the Requesters that fall within the NRC's i
jurisdictional purview in this proceeding generally pertain to possible violations of antitrust license conditions.
Without agreeing or disagreeing with the manner in which FERC arrived at its findings in the Entergy open access transmission i
tariff or the findings themselves, it is apparent from_the' record developed at the FERC that provisions have been made by the FERC to accommodate any specific inadequacies, to the extent any exist, in the open access tariff.
The FERC stated that the open access i
2' Cajun at 35-37.
15 Cajun at 37-42.
transmission tariff agreed to by Entergy mitigated any market power l
resulting from the proposed merger.26 Moreover, the FERC indicated that if any of the parties believed that they had greater rights than provided by the open access agreement, they could file a-specific service agreement upon which the FERC would rule.17 The issues that were identified, therefore, were allegations that non-compliance with antitrust license conditions might result.
Given this situation, the staff determined that there was no factual t
basis to find changes in the licensee's proposed activities since the previous antitrust review of River Bend that would support a significant change finding resulting from the proposed merger.
Cajun also requests that I reevaluate my finding that there are no significant (competitive) changes involved in the transfer of i
operation of River Bend from GSU to non-owner operator EOI.is The staff determined that no further antitrust review is required because the River Bend license will be conditioned to prohibit EOI from marketing or brokering power or energy while holding GSU accountable for any actions that contravene any antitrust license conditions. 2' My finding follows the Commission's guidance l
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Enterav Services.
Inc.
and Gulf States Utilities Co.,
62 FERC 1 61,073, slip op. at 106-07 (January 28, 1993).
t 27 Entercy Services. Inc., 63 FERC 161,025, slip op. at 36-37 (April 5, 1993).
to Cajun at 4.
l' S3_e Staff Recommendation at 23-25.
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, regarding such transfers involving non-owner operators in which the facility license in question is so conditioned.zo Terrebonne/LEPA Terrebonne and LEPA reiterate Cajun's arguments that the staff has abdicated its statutory responsibility by relying on the FERC 5
findings regarding competitive effects of the proposed merger between GSU and Entergy.
I have addressed this issue suora.
Terrebonne and LEPA also have asked me to explain why the alleged changes do not meet the third Summer order criterion.
-The staff has adequately explained why the changes do not meet the third Summer order criterion and I have reiterated the rationale herein.
The criterion in dispute, the third, requires that the change or i
changes "have antitrust implications that would likely warrant some Commission remedy."21 The issues raised by Requesters are r
speculative, in that they will arise only if a FERC approved service agreement involving a particular licensee ~ appears to violate an NRC license condition applicable to that licensee.
As I noted in my discussion of the Cajun Request for Reevaluation, this type of issue falls short of a
" reasonably apparent" significant change.
- Further, the changed activity that the Requesters assert may remain after the open access transmission issues have been addressed by the FERC are enforcement issues.
l zo See Staff Recommendation at 6, note 10.
21 CLI-80-28, suora, 11 NRC at 824.
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Enforcement or compliance issues are not considered changed activity within the guidance established by the commission in the Summer order and Summer decision and are not remedied in the context of the significant change review process.
The staff noted the existence of the differing jurisdictional areas of review between the FERC and the Commission.
In addressing the open access transmission issues, the FERC is amenable to review of problems associated with the tariff on a case specific (service agreement) basis.
Also, the issues addressed by the staff are enforcement issues apparently beyond the reach of the FERC.
Therefore, the staff determined that the jurisdictional review differences in this particular proceeding would not have significantly altered my decision to issue a no significant change finding.
Lafayette In its request for reevaluation, Lafayette, like the other Requesters, reiterates its original arguments against the proposed merger.
The staff has addressed these arguments in the Staff Recommendation, which is the basis for my Finding, and I have tried to clarify them herein.
Lafayette also argues that the post merger Entergy companies will operate as one company and that this is a significant change in
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, that the license conditions were " applied" by the commission to the individual companies and do not take into account that the various companies will now operate as a single entity.
Lafayette looks to the Waterford license condition which includes a provision to prevent multiple transmission charges for transmission of a
contracted transmission entitlement among a coordinating group of two or more entities, as an example of the Commission acting to I
ensure that utilities did not unfairly price transmission service. 22 i
The license condition used as an examp_'c by Lafayette is unique to the Waterford plant and was accepted by the licensee to settle a pending hearing.23 The prohibition on multiple transmission charges in the Waterford licenso condition does not appear in the license conditions of the other plants.
Until industry-wide terms and conditions associated with network transmission service are generally accepted and considered by the FERC, e.g., in the context of developing regional transmission groups or agreements throughout the country or various regional pooling arrangements which address transmission access
- issues, the staff will review relevant allegations involving network versus point-to-point transmission service on a
case-by-case approach considering all relevant Lafayette at 3.
23 See Louisiana Power And Licht Company, (Waterford Steam Generating Station, Unit No. 3), LBP-74-78, 8 AEC 718 (1974) and Louisiana Power And Licht Company, (Waterford Steam Generating Station, Unit No. 3), ALAB-258, 1 NRC 45 (1975).
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arguments.2' In the case of Waterford, its license conditions would be relevant in the context of a 10 c.F.R. S 2.206 petition seeking initiation of an enforcement proceeding.
Additionally, at page 5 of its request, Lafayette makes the distinction between stranded investments costs for wholesale power customers and stranded investment costs for transmission only customers.
Lafayette takes issue with the staff's interpretation of stranded investment costs and the degree to which the Waterford, Grand Gulf and River Bend license conditions address opportunity costs or stranded investment costs.
The degree to which these costs have been (conceptually) excluded from transmission rates by the license conditions in the above plants would have to be determined in the context of an enforcement proceeding for a i
specific plant and factual situation.
The staff has not set any predetermined parameters for the scope of any enforcement proceeding that might take place.
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SUMMARY
Requesters ask that I reverse my finding of no significant changes regarding the proposed GSU/Entergy merger.
Although Requesters l
present no new data to the staff and revisit the same arguments as in their original comments to the staff, I have attempted to 2*
Staff Recommendation at 28-29.
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, clarify the staff's position in this significant change proceeding.
For the reasons stated herein, I have decided not to change my Finding.
2 Thomas E. Murley, Director Office of Nuclear Reactor Regul:htion i
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