[Federal Register Volume 61, Number 206 (Wednesday, October 23, 1996)]
[Notices]
[Pages 55049-55053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27159]
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UNITED STATES NUCLEAR REGULATORY COMMISSION
[Docket Nos. 50-440 and 50-346]
Perry Nuclear Power Plant, Unit 1 Davis-Besse Nuclear Power
Station, Unit 1 Issuance of Director's Decision Under 10 CFR Sec. 2.206
Notice is hereby given that the Director, Office of Nuclear Reactor
Regulation, U.S. Nuclear Regulatory Commission (NRC), has issued the
Director's Decision concerning the petition dated January 23, 1996,
filed by David R. Straus, Esq., et al., on behalf of the City of
Cleveland, Ohio, which owns and operates Cleveland Public Power (CPP or
the City) for allegedly violating the antitrust license conditions
applicable to the Perry Nuclear Power Plant, Unit 1, and the Davis-
Besse Nuclear Power Station, Unit 1. Supplements to the Petition were
filed on May 31 and August 13, 1996.
After consideration and careful review of the facts available to
the staff and the decisions reached in parallel proceedings involving
the same parties and similar issues before the Federal Energy
Regulatory Commission (FERC), the Director has determined that the
issues raised by the petitioner that could be remedied by the NRC have
been addressed and resolved in the FERC proceedings so as to require no
further action by the NRC. As a result, no proceeding in response to
the Petition will be instituted. The reasons for this decision are
explained in the ``Director's Decision under 10 CFR Sec. 2.206,'' (DD-
96-15).
A copy of the Director's Decision has been filed with the Secretary
of the Commission for Commission review in accordance with 10 CFR
Sec. 2.206(c). The Decision will become the final action of the
Commission 25 days after issuance, unless the Commission on its own
motion institutes review of the Decision within that time as provided
in 10 CFR Sec. 2.206(c).
Copies of the Petition, dated January 23, 1996, as supplemented May
31 and August 13, 1996, and the Notice of Receipt of Petition for
Director's Decision under 10 CFR Sec. 2.206 that was published in the
Federal Register on March 8, 1996 (61 FR 9506), and other documents
related to this Petition are available in the NRC Public Document Room,
the Gelman Building, 2120 L Street, NW., Washington, DC, and at the
local public document rooms for Perry Nuclear Power Plant (Perry Public
Library, 3753 Main Street, Perry, Ohio) and Davis-Besse Nuclear Power
Station (Government Documents Collection, William Carlson Library
(Depository), University of Toledo, 2801 West Bancroft Avenue, Toledo,
Ohio).
For the Nuclear Regulatory Commission.
[[Page 55050]]
Dated at Rockville, Maryland this 17th day of October 1996.
Frank J. Miraglia,
Acting Director, Office of Nuclear Reactor Regulation.
Director's Decision Under 10 CFR Sec. 2.206
I. Introduction
The City of Cleveland, Ohio, which owns and operates Cleveland
Public Power (CPP or the City), in a petition, dated January 23, 1996,
requested the Executive Director for Operations of the U.S. Nuclear
Regulatory Commission (NRC or the Commission) to take enforcement
action against the Cleveland Electric Illuminating Company (CEI) for
allegedly violating the Antitrust License Conditions applicable to its
nuclear units. The petition was referred to the Director, Office of
Nuclear Reactor Regulation, for review.
CPP requested that NRC, on an expedited basis, (1) declare that CEI
is obligated to provide the wheeling and interconnection services
specified in the Petition; (2) issue a Notice of Violation related to
that obligation; (3) impose a requirement by order directing CEI to
reply in writing and admit or deny violation of that obligation and
setting forth the steps it is taking to comply with the Antitrust
License Conditions; (4) impose a requirement by order directing CEI to
comply with the portions of the Antitrust License Conditions at issue
and directing CEI to withdraw from the Federal Energy Regulatory
Commission (FERC) portions of its filings in Docket No. ER93-471-000,
as specified in the Petition, which are contrary to CEI's obligations
under the Antitrust License Conditions, including withdrawal of the
deviation charge from rate schedules and withdrawal of that portion of
the ``Operating Agreement'' that provides Toledo Edison highest
priority treatment; and (5) impose civil monetary penalties for CEI's
violations of the license conditions.
Four specific violations of the Antitrust License Conditions are
alleged in the City's Sec. 2.206 petition. The first allegation is that
CEI has violated License Condition Number 3, concerning wheeling
service, by refusing to provide 40 MW of firm wheeling service from
Ohio Power Company to CPP to provide electrical service to Medical
Center Company (Medco), a former CEI retail customer. The second
allegation is that CEI has violated License Condition Numbers 6 and
11,1 which concern the sale of emergency power, by contracting in
the 1987 ``Centerior Dispatch Operating Agreement'' to provide Toledo
Edison Company emergency power on a preferential basis. The third
allegation is that CEI has violated License Condition Number 2,
concerning the offering of interconnections upon reasonable terms and
conditions, by failing to offer CPP a fourth interconnection point. The
fourth allegation is that CEI has violated License Condition Number 2
by imposing unreasonable deviation charges for unscheduled power
delivered over existing interconnections in excess of the amount
scheduled for delivery.
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\1\ License Condition Number 11, which concerns wholesale power
and coordination services is mentioned in the introductory portion
of the petition, but no argument is provided to support the claim
nor is this condition otherwise mentioned in any substantive
discussion in the petition.
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CEI responded to the City of Cleveland's petition in a letter dated
May 6, 1996, stating that the allegations should be dismissed not only
because they lack merit but also because they relate to matters
currently under FERC consideration.
II. Background
On the basis of the record developed during the antitrust hearings
of Davis-Besse and Perry an NRC Atomic Safety and Licensing Board
found, in a decision dated January 6, 1977, that CEI and the other
applicants engaged in activity that was inconsistent with the antitrust
laws, LBP-77-1, 5 NRC 133 (1977); affirmed with modifications, ALAB-
560, 10 NRC 265 (1979). The Board also found that because the municipal
system of Cleveland was isolated electrically from utilities other than
CEI, and was able to obtain only emergency power from CEI, it was
essential, in order for CPP to remain a viable competitor, that
Cleveland have power wheeled to it over CEI's transmission system. The
Board noted that CPP was unable to obtain wheeling service because CEI
would not agree to third-party wheeling on any terms. The Board
concluded that failure to exercise its authority under the Atomic
Energy Act to issue license conditions would result in a continuation
of this anticompetitive conduct. CEI, as an applicant, was ordered to
implement the following license condition (No. 3):
Applicants shall engage in wheeling for and at the request of
other entities [any electric generation and/or distribution system
or municipality or cooperative with a statutory right or privilege
to engage in either of these functions] in the CCCT [Combined CAPCO
Territories]:
(a) of electric energy from delivery points of applicants to the
entity(ies); and,
(b) of power generated by or available to the other entity, as a
result of its ownership or entitlements [includes but is not limited
to power made available to an entity pursuant to an exchange
agreement] in generating facilities, to delivery points of
Applicants designated by the other entity.
Such wheeling services shall be available with respect to any
unused capacity on the transmission lines of Applicants, the use of
which will not jeopardize Applicants' system. In the event
Applicants must reduce wheeling services to other entities due to
lack of capacity, such reduction shall not be effected until
reductions of at least 5% have been made in transmission capacity
allocations to other Applicants in these proceedings and thereafter
shall be made in proportion to reductions imposed upon other
Applicants to this proceeding.
Applicants shall make reasonable provisions for disclosed
transmission requirements of other entities in the CCCT in planning
future transmission either individually or within the CAPCO
grouping. By ``disclosed'' is meant the giving of reasonable advance
notification of future requirements by entities utilizing wheeling
services to be made available by Applicants.
Ten other Antitrust License Conditions were added to the Davis-
Besse and Perry licenses covering the sale of wholesale power; the
offering of interconnections; the sale of economy energy, maintenance
power, and emergency power; access to ownership shares in the nuclear
units; the sharing of reserves; and the provision of coordination
services. NRC ordered that these conditions be implemented in a manner
consistent with the provisions of the Federal Power Act. ALAB-560, 10
NRC at 295-299
Since the late 1970s, CPP, the City of Cleveland's municipal power
system, has sought greater access to the CEI transmission grid. CPP has
its own distribution system and generates a portion of its own power
supply requirements. To seek out the most cost-efficient source of
power supply, CPP needs meaningful access to transmission facilities
serving the local area, which are owned by CEI.
III. Discussion
CPP alleges four specific violations of the Antitrust License
Conditions. The first allegation is that CEI violated License Condition
No. 3 by refusing to provide firm wheeling service to CPP. This
allegation is the result of one disputed transaction, CEI's refusal to
wheel 40 MW from Ohio Power Company to CPP to service Medco, currently
a CEI retail customer. CPP claims that Medco has decided to become a
native load customer of CPP and that there is no credible basis upon
[[Page 55051]]
which to contend that the transaction at issue constitutes retail
wheeling. CPP claims that there was no request for CEI to provide
retail wheeling services, and the requested 40-MW wholesale purchase
from Ohio Power is to serve CPP's native load. CPP alleges that CEI is
attempting to delay the loss of a significant retail customer.
CEI responds to the allegation by stating that the written contract
between CPP and Medco reflects a direct pass-through of CPP payments to
Ohio Power. CEI further claims that CPP is acting as a strawman to
facilitate retail wheeling of power from Ohio Power to Medco. CEI
contends that the transactions are shams designed to circumvent
prohibitions in the Federal Power Act, Sections 212(g) and 212(h),
against retail wheeling. Section 212(g) prohibits issuing orders under
the Federal Power Act that are inconsistent with any State law that
governs the retail marketing areas of electric utilities. Section
212(h) prohibits mandatory retail wheeling and sham wholesale
transactions.
Two FERC proceedings are in progress concerning CEI's refusal to
transmit the Ohio Power purchase: a CEI petition filed November 2,
1995, requesting a ruling that CEI is not required to provide the
requested service under the Federal Power Act, Sections 211 or 212
(Docket #EL96-9-000), and a CPP complaint filed November 29, 1995,
concerning CEI's refusal to transmit the Ohio Power purchase (Docket
#EL96-21-000).
On July 31, 1996, FERC issued an order in connection with the
wheeling transaction raised in the City of Cleveland's 2.206 petition.
FERC decided in favor of the City and found that CEI is obligated under
the existing transmission service agreement to provide the requested
transmission service and that the service did not violate the Federal
Power Act. Since the transmission will be over CEI's lines to Cleveland
and the sale to Medco will be over Cleveland's 138kV-line, FERC found
that this case did not involve the transmission of electric energy by
CEI directly to an ultimate consumer, that is, there was no ``sham''
transaction.
In a letter to the NRC dated August 8, 1996, counsel for CEI stated
that, based on the FERC decision, a signed service agreement reserving
40 MW of firm transmission service for the requested period September 1
through December 31, 1996, has been forwarded to the City of Cleveland.
In a letter to the NRC dated August 13, 1996, CPP's counsel urged the
imposition of sanctions, even in light of the FERC decision, stating
that ``CEI's expressed willingness (August 8 letter) to comply now with
its wheeling obligations does not excuse the Company's unwarranted
refusal to wheel absent a directive from a federal agency.'' Counsel
for CEI responded in an August 21, 1996, letter that ``CEI sought
declatory ruling on the appropriateness of this request promptly enough
to obtain a determination without impacting the September 1 service
date.'' CEI agreed to a subsequent CPP request after the FERC order and
transmission service began on August 17, 1996. CEI's counsel further
stated that ``as a result, CEI's actions have not resulted in any loss
of transmission services to the City of Cleveland. In essence, the City
of Cleveland is asking for the imposition of penalties solely because
CEI exercised appropriate legal procedures to determine the propriety
of the service request. Such appropriate process cannot and should not
be the basis for any sanctions.''
In a letter to the NRC dated September 23, 1996, counsel for CEI
forwarded an opinion of the Ohio Supreme Court holding that the Public
Utility Commission of Ohio (PUCO) has jurisdiction to consider CEI's
complaint that the Medco transaction violated the Ohio Certified
Territory Act and directing PUCO to do so. The September 23, 1996,
letter also forwarded CEI's request for rehearing of the FERC decision
in the Medco transaction, stating that while CEI continues to exercise
its legal rights to determine the legality of the transaction, CEI
would continue to honor the service agreement that it executed after
the FERC decision.
The FERC order directing CEI to provide the requested transmission
service effectively resolves the first issue in the 2.206 petition.
Sanctions are not warranted when a licensee pursues legal procedures to
resolve a disputed request for transmission service. For this reason, I
am denying CPP's Sec. 2.206 request for an enforcement action against
CEI on this first issue.
The second issue raised by CPP alleges that CEI violated License
Condition No. 6 by contracting with Toledo Edison Company to provide
emergency power on a preferential basis.2 CPP objects to language
in the 1987 Centerior Dispatch Operating Agreement that states that CEI
and Toledo Edison (collectively ``Operating Companies'') ``will assign
highest priority to provide each other emergency power. An Operating
Company will terminate an existing emergency supply to an outside
utility in order to honor a request for emergency power from an
Operating Company.'' There is also similar priority language concerning
sales of short-term power. CPP has also brought this issue before FERC.
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\2\ Specifically, License Condition No. 6 requires CEI to sell
emergency power to requesting entities upon terms and conditions no
less favorable than those Applicants make available: (a) to each
other pursuant to the Central Area Power Coordination Group (CAPCO)
agreements or pursuant to bilateral contract; or (b) to non-
Applicant entities outside the Combined CAPCO Company Territories.
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CEI's response to the second issue states that the operation of
Toledo Edison and CEI as an integrated system under Centerior
necessarily requires them to provide power to each other as an internal
system. CEI further states that this is not an act of anticompetitive
discrimination but the workings of an integrated system required by the
Securities and Exchange Commission. CEI claims that CPP is treated no
differently from any other outside entity and has suffered absolutely
no injury from the provisions and asserts that CPP has never been
denied short-term or emergency power. CEI states that it has sold and
will continue to sell emergency power to CPP on an as-needed basis and
has never refused to provide emergency service when it had it available
on its system. CEI further stated that it was not aware of any instance
in which short-term or emergency power was provided to CPP under terms
less favorable than those to other utilities outside the Centerior
system. CEI concluded that it has honored both the letter and the
spirit of License Condition No. 6.3
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\3\ See note 2, above.
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As to the second issue, CPP has not shown that it had been harmed
or could be harmed by the language in the Centerior Dispatch Operating
Agreement. Under the agreement, Toledo Edison and CEI are affiliated in
that they are part of an integrated Centerior system. CPP has not shown
that it has been treated differently than other outside (non-
affiliated) utilities, or that it has been denied access to emergency
or short-term power. In any event, CPP has brought its concerns about
the operating agreement before the FERC. For these reasons, no action
by the NRC is warranted, and I am denying CPP's Sec. 2.206 request for
enforcement action against CEI on this second issue.
The third issue raised by CPP alleges that CEI has violated License
Condition No. 2 by failing to offer CPP a fourth interconnection point.
License Condition No. 2 requires that CEI (and the other applicants)
shall offer interconnections on reasonable terms and conditions at the
request of any
[[Page 55052]]
other local electric entities.4 CPP states that a fourth
interconnection point is needed to provide reliable service to the west
side of Cleveland. CPP states that the current transfer capability
limit is expected to be exceeded within 2 years. CEI previously
committed to permit a fourth interconnection in a letter dated
September 19, 1985, from CEI's chairman to the Mayor of Cleveland,
which acknowledged the requests for the third and fourth
interconnections; and in exchange for Cleveland's agreement not to
oppose the CEI merger with Toledo Edison, CEI committed to concur in
CPP's request for FERC approval of the two interconnections. CPP
alleges that CEI has refused CPP's request for installation of a fourth
interconnection.
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\4\ Specifically, License Condition No. 2 requires CEI to offer
interconnections upon reasonable terms and conditions at the request
of any other electric entities in its service area, with due regard
for any necessary and applicable safety procedures.
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A CPP complaint was filed with FERC in April 1993. On June 9, 1995,
FERC issued an order directing CEI to provide a fourth interconnection
and to file with FERC the proposed charges for the interconnection. The
decision by FERC found that the letter of September 19, 1985, a 1985
contract between CEI, Toledo Edison, and American Municipal Power-Ohio,
and the license conditions all supported the issuance of the order
requiring the fourth interconnection.
CEI responded to the third issue by stating that it has complied
with License Condition No. 2 by installing and maintaining three prior
interconnections, sufficient to meet all of CPP's current needs, and by
working toward the installation of a fourth interconnection. CEI claims
it has not refused the fourth interconnection but instead has expended
significant effort to establish reasonable terms for the
interconnection and to ensure that it is compatible in terms of safety
and reliability with CEI's system. CEI has filed suit in the Ohio Court
of Common Pleas to require CPP to comply with engineering and utility
industry standards in its construction projects. CEI further claims
that CPP admitted in a separate lawsuit that its system does not meet
applicable codes and standards. On July 7, 1995, CEI sought a rehearing
on the FERC order to proceed with the fourth interconnection. CEI
states that the rehearing was sought on the FERC order for two reasons:
(1) CEI believes that the order should not have been issued without
findings that the interconnection was warranted under Sections 202(b)
and 210 of the Federal Power Act and (2) CEI has indicated that a
number of technical issues and safety and reliability concerns need to
be resolved before the interconnection can be installed.
The issue of whether CEI is required to provide a fourth
interconnection was resolved with the FERC order of June 9, 1995,
directing CEI to proceed with the interconnection (71 FERC para.
61,324). The unresolved technical, safety, and reliability issues
raised in CEI's appeal of the FERC order will be resolved in the FERC
rehearing process. For these reasons, I am denying CPP's Sec. 2.206
request for enforcement action against CEI on this third issue.
The fourth and final allegation raised by CPP is that CEI has
violated License Condition No. 2 5 by imposing unreasonable
deviation charges for unscheduled power delivered in excess of the
amount CPP had scheduled for delivery. CPP states that in March 1993,
CEI unilaterally filed with FERC proposed amendments to the 1975
Interconnection Agreement. One amendment added a requirement that CPP
pay a deviation charge of $75 per kW-month for the maximum number of kW
of power delivered by CEI in any hour in excess of the amount scheduled
by CPP for that hour. Another amendment covers overscheduling of power
supplies by CPP and allows CEI to retain the excess energy for its own
use while paying CPP a rate equal to half of CEI's fuel cost for that
excess power. CPP alleges that the deviation charges are discriminatory
and represent an anticompetitive restriction on CPP's right to obtain
interconnections on reasonable terms. CPP claims that these provisions
apply to all deviations above and below zero, no matter how
insignificant. CPP alleges that the failure to utilize a deadband
approach with no charges for small deviations from scheduled power to
recognize the impossibility of zero deviations, is contrary to standard
industry practice. CPP states that the deviation charges are
anticompetitive in that CPP is the only utility against which the
deviation charges would be imposed and also the only utility in direct
competition with CEI.
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\5\ See note 4, above.
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CEI's response to the fourth issue states that this allegation
distorts the meaning of License Condition No. 2, which relates to the
installation of interconnections upon reasonable terms and conditions,
not incentives that CEI proposes to FERC to encourage CPP to minimize
unscheduled power deliveries from CEI.
A FERC administrative law judge (ALJ) issued an initial decision on
the issue of the deviation charges on November 28, 1994. CPP's
arguments opposing CEI's compensation proposal (of half of its then-
current fuel charge for deviations below that scheduled) were rejected
by the ALJ. The ALJ's decision also upheld the imposition of a
deviation charge for power supplied in excess of that scheduled by CPP,
but reduced the amount from $75 per kW-month to $25 per kW-month. The
decision also rejected CPP's proposed 6-percent deadband, finding ``no
reason appears why any deadband should be adopted for the purposes of
this decision.''
The issues raised by CPP in this fourth allegation are primarily
tariff-related issues and fall clearly under the jurisdiction of
FERC.6 The final FERC decision in this matter will resolve the
issues, and any excess amounts paid by CPP will be refunded with
interest in accordance with FERC regulations. For these reasons, I am
denying CPP's Sec. 2.206 request for an enforcement action against CEI
on this fourth issue.
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\6\ As indicated in Florida Power & Light Co. (St. Lucie
Nuclear Power Plant, Unit 2), DD-81-15, 14 NRC 589 (1981), issues of
terms used in license conditions raised before FERC ``will not
institute a requested proceeding where the petitioner's basis for
relief rests on resolution of an issue that is pending before
another agency and that is peculiarly within the competence of that
agency to decide.'' The staff continues to employ the concept of
``watchful deference'' when an issue is before FERC. See Florida
Power & Light Co. (St. Lucie Nuclear Power Plant, Unit 2), DD-95-10,
41 NRC 361 (1995).
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IV. Conclusion
I have concluded that FERC's order requiring CEI to provide the
requested wheeling transmission service in the Medco transaction
effectively resolves the first issue raised in CPP's Sec. 2.206
petition and request for action by NRC. In regard to the second issue
concerning CEI's contracting with Toledo Edison Company to provide
emergency power on a preferential basis, CPP has not shown that it had
been harmed or could be harmed as a result of the language in the
Centerior Dispatch Operating Agreement. Nor has CPP shown that it has
been treated differently than any other outside (nonaffiliated)
utilities. This matter is also the subject of a FERC proceeding. I am
therefore denying CPP's Sec. 2.206 request for enforcement action
against CEI on this second issue. I have concluded with respect to the
third issue concerning CEI's alleged refusal to offer a fourth
interconnection that the FERC order of June 9, 1995, effectively
resolves this issue by ordering CEI to provide the fourth
[[Page 55053]]
interconnection, and that the unresolved issues raised in CEI's appeal
of the FERC order will be resolved in the rehearing process. I have
concluded that the fourth issue raised concerning deviation charges for
unscheduled power deliveries is primarily a tariff-related issue and
falls clearly under the jurisdiction of FERC. The initial decision by
the ALJ in this case addressed each of the concerns raised in this
fourth issue. The final FERC decision in this matter will resolve these
issues, and any excess amounts paid by CPP will be refunded with
interest in accordance with FERC regulations. I have concluded that no
enforcement action is warranted for this fourth issue. As a result of
the foregoing, I have determined that no NRC proceeding should be
instituted and no further regulatory action by the NRC is required.
For the Nuclear Regulatory Commission.
Dated at Rockville, Maryland, this 17th day of October 1996.
Frank J. Miraglia,
Acting Director, Office of Nuclear Reactor Regulation.
[FR Doc. 96-27159 Filed 10-22-96; 8:45 am]
BILLING CODE 7590-01-P
