Amicus Brief to Nuclear Regulatory Commission Regarding Its Antitrust Responsibilities in License Transfers
In the matter of Kansas City Gas & Electric Company, et al. (Wolf Creek Generating Station, Unit 1) Docket No. 50-482-LT
MOTION TO SUBMIT COMMENTS AND COMMENTS OF AMICI CURIAE OF THE AMERICAN ANTITRUST INSTITUTE
The Commission has invited comments, amici curiae, "whether as a matter of law or policy the Commission may and should eliminate all antitrust reviews in connection with license transfers and therefore terminate this adjudicatory proceeding forthwith." 64 Fed. Reg. 11069, 11070 (March 8, 1999). Pursuant to its March 2, 1999 Memorandum and Order in this proceeding, the American Antitrust Institute ("AAI") submits these brief comments.
The American Antitrust Institute is an independent, non-profit organization established in 1998 to promote a more competitive economy. Its Advisory Board consists of many of the nation's leading antitrust experts.
The AAI has participated in proceedings involving competitive issues relating to the electricity industry and other deregulated industries. It is well situated to advise the Commission with respect to matters pertaining to antitrust.
In assessing whether and to what extent the Commission should review the potential for anticompetitive harm from license transfers, both as a legal and policy matter, the Commission is governed by the Atomic Energy Act. Section 105(c) of the Atomic Energy Act, 42 U.S.C. §2135(c), explicitly provides for Commission antitrust review of license applications to ensure that activities under NRC issued licenses do not "create or maintain a situation inconsistent with the antitrust laws." Further, licensees are subject to further review of operating license applications where there have been "significant changes in the licensee's activities or proposed activities" subsequent to previous review. Id. Licenses may be transferred only in accordance with the provisions of the Act and with Commission approval. Section 184, 42 U.S.C. §2234.
As the Atomic Safety Licensing Appeal Board sets forth in the lead Commission antitrust case, Consumers Power Company (Midland Plant, Units 1 and 2), 6 NRC 892, 896-897 (1977): "The antitrust laws embody fundamental national economic policy." Midland states:
Congress has given the Commission specific antitrust responsibilities.... As the Commission has reiterated, the Atomic Energy Act's antitrust provisions reflect 'a basic Congressional concern over access to power produced by nuclear facilities' and represent legislative recognition 'that the nuclear industry originated as a Government monopoly and is in great measure the product of public funds [which] should not be permitted to develop into a private monopoly via the [NRC] licensing process ...
Id. at 896-97.
Thus, when Congress gave the NRC specific antitrust authority, it was recognized that the Commission is licensing nuclear technology that was developed by the government for private use. Congress desired to protect against the product of governmentally developed nuclear power being used anticompetitively. In view of the Commission's express statutory mandate to apply antitrust policy, the Commission can hardly interpret the Act to avoid antitrust review where to do so may result in antitrust harm.
Even without express statutory obligation to do so, Federal regulatory agencies must structure their decisions to ameliorate if not avoid anticompetitive consequences. Gulf States Utilities Co. . FPC, supra, 411 U.S. at 759-61; Denver and Rio Grande W. RR. Co. v. United States, 387 U.S. 485 (1967); California v. FPC, 369 U.S. 482, 484-85 (1962). See also, Cities of Statesville v. AEC, 411 F.2d 962 (D.C. Cir. 1969); Municipal Electric Assoc. v. SEC, 413 F.2d 1052 and 419 F.2d 757 (D.C. Cir. 1969).
6 NRC at 897, n.3
The NRC has express antitrust authority. Congressional concerns giving the Commission antitrust authority are largely economic. In this context, it matters who owns a plant and how the plant will be used in competitive (or non-competitive) markets. In antitrust contexts, one cannot rationally distinguish applications by license transferees from initial applications. Certainly they at least potentially create "significant changes."
The entire purpose of the Commission's antitrust jurisdiction is to prevent antitrust abuse. To be blunt, a company having a history of activities that is consistent with antitrust enforcement is not the equivalent of one that does not. Where a license transfer is made to a new applicant, who will use a nuclear plant differently than a prior license holder, the transfer cannot be deemed benign for antitrust purposes. For these reasons, interpreting the act as if no transfer took place would turn the statutory purpose on its head.
Those supporting the elimination of even the possibility of antitrust review would, therefore, turn the statute on its head. However, apart from attempts at creating legal technicalities by asking the Commission to reverse long-standing policy and common sense that require antitrust reviews of license transfers, the Applicants suggest two core arguments. The first is that the NRC ought to have a minimal antitrust review function because the NRC's primary mission is to protect public health and safety. The second is that other fora such as the Federal Energy Regulatory Commission, the Federal Trade Commission, the Department of Justice or the states can better perform an antitrust role.
The first argument is nothing more than a plea that antitrust review be eliminated, by those whose activities Congress made subject to such review. Congress mandated NRC antitrust review. Thus, Congress made such review a "mission" of this agency in light of the central role that nuclear plants play in electricity markets and the fundamental importance of the application of the antitrust laws. The oft-quoted recognition that the antitrust laws are "a charter of economic liberty" have the significance that antitrust considerations may not be relegated to a secondary role, especially by governmental agencies that are given an important enforcement role.
By statute, antitrust is a primary function of this agency. If elimination of this function is to take place, the initiative must come from Congress and not from the Commission. E.g., FPC v. Texaco, Inc., 417 U.S. 380 (1974) (Federal Power Commission may not abandon small gas producer regulation for policy reasons). See Calvert Cliffs Coordinating Committee v. AEC, 449 F.2d 1109 (1971).
The second argument, that somebody else may perform the antitrust role so that the Commission need not do so, is actually a variant of the first argument. The short answer, again, is that the statute requires review. Moreover, the argument ignores that the Commission and others may have parallel roles to play through "coordinate" antitrust jurisdiction. It does not follow that because another agency may perform an antitrust role, the Commission may excuse itself from an important statutory responsibility. United States v. Philadelphia National Bank, 374 U.S. 321 (1963), Consumers Power Company, supra, 6 NRC 892.
To the extent that the license transfer applicants or others make arguments that antitrust review may not be needed in some cases or that proponents of review may need to be required to make a threshold showing, the AAI has no quarrel. Presumably, the Commission may require those seeking antitrust review to specify and justify the need for such review, subject to the qualification that sufficient discovery or access to information solely in the possession of the parties seeking a transfer may be necessary to establish whether antitrust review is required. However, it can hardly be said that in no instance may a license transfer create potential antitrust problems such that the Commission need never look.
Some examples of potential difficulties come to mind, although in the absence of specific transfer applications one cannot guess at the particulars of situations. First, as the Commission is well aware, in order to prevent license activities being "inconsistent with the antitrust laws," many utilities have been issued licenses with antitrust conditions. Such conditions have helped shape pro-competitive markets. Both private and public parties have entered into settlements to obtain licensees' agreement to these conditions. In reliance upon these conditions, parties have settled cases or have failed to pursue alternative or parallel efforts to achieve rights. Systems have invested in millions of dollars of arrangements, based upon conditions.
For the Commission to permit license transfers without review of whether these transfers would undercut the very real reliance interests of those who have settled upon license conditions, litigated to obtain them or have invested in plant based upon them would create severe injury. For example, a utility could seek to get out of license condition obligations by transferring the license to an affiliate or could make a sham transfer. Alternatively, a licensee could make a legitimate sale of a nuclear plant interest to an independent third party, but such transfer could purportedly eliminate vested third party rights in license conditions. Indeed, the elimination of such pro-competitive conditions could be a consideration that led licensees to transfer their plant interests. Certainly, the Commission must take into account the implications of license transfers on existing antitrust conditions.
A transfer could make less valuable or meaningless existing license conditions. For example, many antitrust conditions provide neighboring entities with power purchase, coordination, transmission and other rights. Some of these are provided in conjunction with granting neighboring entities ownership interests in nuclear plants. If as a result of a merger, the market -- including the use of transmission, coordinated power sales, etc. -- will function differently, license conditions may have to be modified to maintain neighboring entity rights. Where major utilities combine their transmission systems and generating plants, it does smaller systems little good to be entitled to transmission only over the pre-merger system, but not over the totality of the new larger network. If a new combined dispatch of plants in a region is created, coordination rights with an entity that has been absorbed into a new larger entity may do little good. In antitrust terms, the smaller system is faced with a new larger com
petitor and an exclusion from the newly created market. More simply, where a majority owner sells its majority interest in a plant, the relationship or economics may justify smaller minority owners being able to sell their interests also or obtaining protective contract provisions.
There may not be a problem with respect to some proposed transfers. However, it is well recognized that in many regions there are transmission barriers which can result in circumscribed power markets. Nuclear plants are very large and can often be "base loaded" economically. Especially in "closed" or restricted transmission areas, the potential exists for a new owner of a nuclear plant to use that plant in conjunction with other generation to manipulate market energy prices or to otherwise advantage itself or its affiliates in ways that would contravene the antitrust laws. Or such company could create transmission barriers or deny pooling and coordination inconsistent with antitrust policy.
AAI raises these issues not because it claims that each of these potentials would create an anticompetitive situation, but because they may. The electric industry is sufficiently essential to the American economy so that the potential for abuse cannot be ignored.
Market or other detrimental company activities may be able to be corrected, at least in theory, by multiple agencies or courts. However, the potential for corrective action by others does not mean that the NRC does not have a significant interest in these matters. Most immediately, it must be stressed that NRC license transfers are at issue. No agency has a closer relationship to the matters that are likely to be at issue and a more immediate responsibility to correct against abuses that arise from transfers.
Applicants cite to the antitrust activities of other agencies. However, each of these has limitations in their jurisdiction or focus. To be sure, the Justice Department and Federal Trade Commission as well as State Attorney General offices are antitrust enforcement agencies. However, in general, their enforcement roles are very broad. It is hardly a denigration of these agencies to suggest that they may not be focused on electric industry competitive problems. Their review may be sporadic, at best. Further, forcing problems to be dealt with by agencies with discretionary authority runs counter to the mandatory antitrust review that has been given to this agency.
Moreover, enforcement agencies often have broad discretion where to devote their scarce resources. Such discretion hardly ensures the antitrust protection that Congress envisioned in passing the antitrust amendments to the Atomic Energy Act. In addition, the standards under which these agencies operate are different from those in the Atomic Energy Act. The result may be that real problems are ignored either because the agency in question may find a matter not sufficiently compelling to review or it may find its jurisdiction limited. The problem is exacerbated with respect to the states where transfers may take place that involve multiple state jurisdictions. This may lead to a lack of authority, resources or interest on the part of particular states.
Applicants focus on the Federal Energy Regulatory Commission's antitrust authority under Section 203 of the Federal Power Act, 16 U.S.C. 824b (although when they are actually before FERC, merging companies often choose to contest that agency's authority). Unlike this Commission, FERC's antitrust authority is not express. While certainly the FERC has broad merger review authority under Section 203 of the Act, there is a question of the Commission's authority over transfers of generating plants that would be at issue here; further, in merger proceedings the FERC has indicated limited interest in retail competition issues, which could be impacted by nuclear plant transfers. Baltimore Gas and Electric Company and Potomac Electric Power Company, 79 FERC 61,027 (1997). Setting aside whether the FERC could issue broad nuclear plant license conditions similar to those that have been issued by this Commission, it is extremely doubtful that it would. There is absolutely no history of FERC merger or license conditions analogous to those of the NRC. Its jurisdiction and focus is simply different.
Moreover, the applicants fundamentally misperceive this Commission's role which is to guard against potential situations that are inconsistent with the antitrust laws. This is a role that has been entrusted to this Commission. It is not substituted for by other agencies.
Albert A. Foer, President
The American Antitrust Institute