[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