Appendix — City of Vernon v. Southern California Edison Co.
Supreme Court brief1992
Ask Donna
What actually matters in this document.
Text
FILED
JUL 20 1992
OFHGE OF THE €LESK
In the Supreme Court
OF THE
United States
OCTOBER TERM 1992
CiTy OF VERNON,
Petitioner.
VS.
SOUTHERN CALIFORNIA EDISON COMPANY,
Respondent.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HUFSTEDLER, KAUS & ETTINGER
SHIRLEY M. HUFSTEDLER
355 S. Grand Avenue
Thirty-Ninth Floor
Los Angeles, California
90071-3101
Telephone: (213) 617-7070
& WALKER
Twenty-Third Floor
GOLDBERG, FIELDMAN
& LETHAM, P.C.
Davipb C. HJELMFELT, P.C.
CHANNING D. STROTHER, JR.
110 Fifteenth Street, N.W.
Washington, D.C. 20005
Telephone: (202) 46344800
Attorneys for Petitioner
PAUL, HASTINGS, JANOFSKY
555 South Flower Street
Los Angeles, California 90071
Telephone: (213) 683-6223
Bowne of Los Angeles, Inc., Law Printers (213) 627-2200
l
APPENDIX
No. 90-5628 1
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CITY OF VERNON,
Plaintiff-Appellant,
V.
SOUTHERN CALIFORNIA EDISON COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Maniana R. Pfaelzer, District Judge, Presiding
Argued and Submitted
October 11, 1991 — Pasadena, California
Filed February 7, 1992
Before: Mary M. Schroeder, Edward Leavy and
Ferdinand F. Fernandez, Circuit Judges.
Opinion by Judge Fernandez D.C. No. CV-83-8137-MRP
OPINION
SUMMARY
Antitrust
Affirming in part, reversing in part and remanding a district
court grant of summary judgment, the court of appeals held that a
public utility did not engage in anticompetitive conduct by deny-
ing a city access to power transmission lines or engaging in a
group boycott that prevented the city from obtaining bulk power
from other suppliers.
Appellant City of Vernon received electric power from South-
ern California Edison Company and other electrical utilities over
Edison’s transmission lines. It was Edison’s responsibility to see
that Vernon received all of the power it needed. Most of Edison’s
5
conduct with respect to Vernon was regulated by the FERC,
including the wholesale rates Edison charged, the terms of inte-
gration agreements, and transmission rights on Edison’s high
voltage lines. Vernon brought an action against Edison alleging
that Edison had engaged in anticompetitive conduct by denying
Vernon access to power transmission lines, filing discriminatory
rate schedules, and engaging in a group boycott that prevented
Vernon from obtaining bulk power from other suppliers. Vernon
sought damages and injuntive relief on each of its claims. The
district court granted summary judgment for Edison, and denied
reconsideration of its decision.
[1] Vernon did not appear to dispute the fact that retail
customers would pay increased rates if it received the access
sought. Nor did Vernon appear to dispute the fact that Edison
was legitimately concerned about the retail rates in making its
facilities access decisions. [2] Thus, the district court did not err
in granting summary judgment against Vernon on its relative size
share access claim. Vernon failed to show just why Edison was
required to cease using its own facility so that Vernon could begin
using it. This was not a case where Edison simply refused to
supply Vernon with its power needs. The demand that Edison
turn over its facility to a city simply because the city could save
money by obtaining cheaper power stands the essential facility
doctrine on its head. [3] In addition, Vernon cited no authority in
support of its theory that “reasonably” access to Edison’s facilities
must take the form of relative size share access.
[4] Although the integrated operations agreement was one way
in which Edison could meet its obligation to provide reasonable
access to its essential facilities, the district court held that to the
extent that Edison had a duty to integrate Vernon’s power
purchases, the duty was limited by legitimate business justifica-
tions. Edison offered none. [5] Had that determination been
made at the end of a trial, there would not be error, summary
judgment was another matter entirely. [6] Even though Edison
had a duty to integrate capacity resources on reasonable notice,
there was nothing to suggest that Edison was required to do so
through the speciai condition 12 claim. Thus, summary judgment
on this claim was appropriate.
Le ne oar
3
[7] The court noted that the contractual nght to interrupt
service did not grant Edison the freedom to act anticompetitively.
[8] Nonetheless, summary judgment was appropriate on this
claim. There was no evidence that transmission was interrupted at
any time at the behest of any person employed by Edison other
than a dispatcher, who was acting as he did for unknown reasons.
There was no evidence that any person with management or
supervisory authority ever told any dispatchers to interrupt or to
refuse transmissions for any anticompetitive reason or that dis-
patchers were acting on a policy of wrongfully refusing or inter-
rupting transmission. Summary judgment on this claim was
appropniate. [9] Nor was any evidence introduced by Vernon that
Edison conspired with anyone to deny access to the Pacific
Intertie. Because the Sherman Act requires “concerted action”
by more than one entity, the district court properly granted
judgment on this claim. [10] Concerning Vernon’s Edison-
Nevada Power boycott claims, the court agreed that Vernon’s
evidence was far too weak. There was no evidence that unnamed
Edison dispatchers entered into conspiracies with Nevada Power
dispatchers to boycott Vernon’s attempt to purchase power.
[11] The court agreed with the district court that the serious
flaws in the only damage study that could be proffered to the jury
placed Vernon in the position of having no proper proof of
damages at all. Thus, the district court did not err when it
awarded summary judgment based upon his lack of evidence.
[12] However, the court reversed the denial of injunctive relief as
to the integrated operations agreement and remanded to the
district court for consideration of the propriety of such relief if
Edison unreasonably refused access to its essential facilities.
COUNSEL
Shirley M. Hufstedler, Hufstedler, Kaus & Ettinger, Los Angeles,
California, for the plaintiff-appellant.
Paul G. Bower, Gibson, Dunn & Crutcher, Los Angeles, Califor-
nia, for the defendant-appellee.
r
4
OPINION
FERNANDEZ, Circuit Judge:
The City of Vernon (“Vernon”) brought this action against
Southern California Edison Company (“Edison”) and alleged
that Edison had engaged in anticompetitive conduct by denying
Vernon access to power transmission lines, by filing discrimina-
tory rate schedules, and by engaging in a group boycott that
prevented Vernon from obtaining bulk power from other suppli-
ers. Vernon sought damages and injunctive relief on each of its
claims. The district court granted summary judgment in favor of
Edison. Vernon appeals. We affirm in part and reverse in part.
BACKGROUND
Edison is an investor-owned fully integrated public utility,
which generates, transmits, and distributes electric power within
its service area, an area which includes much of Central and
Southern California. Vernon is located in Edison’s service area,
but it has its own electric distribution system, and is the sole
provider of retail electric service within its own boundaries.
Vernon is bounded by Edison territory and by the City of Los
Angeles, which also has its own service territory operated by the
Los Angeles Department of Water and Power.
Although Vernon distributes power at retail within its bounda-
ries, it generates a very small portion of its own electricity. Thus,
it obtains most of its power in bulk elsewhere and receives it over
Edison’s transmission lines. That wholesale power is purchased
from Edison or from other electrical utilities. It is Edison’s
responsibility to see to it that Vernon receives all of the power
that it needs. Edison also purchases power from and sells it to
other utilities.
Vernon and Edison have a long history of disputes over rates,
access to Edison’s transmission facilities, and the integration of
non-Edison power-sources into Edison’s operating system for the
5
benefit of Vernon.' Most of Edison’s conduct with respect to
Vernon is regulated by the Federal Energy Regulatory Commis-
sion (FERC), including the wholesale rates Edison charges, the
terms of integration agreements, and transmission rights on
Edison’s high voltage lines.’
Vernon’s denial of access claims (sometimes called foreclosure
claims) are based upon Edison’s refusal to provide relative size
share® access to its transmission lines, particularly the Pacific
Intertie* and lines from the desert Southwest. Vernon also claims
entitlement to what the district court characterized as “unlim-
ited”’ access to Edison’s 220 kV network.°
‘Integration of non-Edison power sources requires Edison to transmit
power obtained from other sources while giving credit to the wholesale
customer which obtained the outside power capacity credit because
Edison need not maintain as much power generation capacity if power
can be imported.
*The FERC regulates Edison’s conduct pursuant to the Federal Power
Act. 16 U.S.C. § 824.
“Relative size share” simply refers to Vernon’s theory that if it uses,
for example, 1.5% of the electricity transmitted into the Edison territory
then it should receive 1.5% of the firm transmission access to the EHV
(Extra High Voltage) transmission lines. While Vernon’s damage study
based damages on an assumption that it was entitled to relative size
share access, Vernon claims that it should receive a “fair share” and
Edison has failed to propose any other way of calculating Vernon’s fair
share.
“The Pacific Intertie is a group of high-power transmission lines which
bring hydroelectric power to Edison’s control area from the Pacific
Northwest. Edison shares ownership in the Pacific Intertie with several
other utilities, so that it is entitled to only a portion of the lines’ total
capacity. The lines consist of two 500 kV AC lines, and one 800 kV DC
line.
*The 220 kV network is the local transmission net work through which
Edison transmits energy directly to its retail and wholesale customers.
Vernon’s claim is that its access should be unlimited unless there is
insufficient capacity to meet the total demand. In that case, Vernon
contends that “the constraint on the system should be shared.”
r
6
Vernon claims that Edison has refused to enter into reasonable
agreements to integrate Vernon's firm purchases from other
sources. These claims involve a generic Integrated Operations
Agreement (IOA) and Special Condition 12 (SC-12). The IOA
which Edison submitted to Vernon provided that outside power
resources could be integrated into Edison’s service system on such
terms and at such time as Edison deemed appropnate. The FERC
determined that parts of the IOA, including the absence of a
reasonable notice provision, were unreasonable. Southern Cal.
Edison Co., 41 F.E.R.C. 961,188 at 61,493-94 (1987) and
Southern Cal. Edison Co., 52 F.E.R.C. 961,299 at 62,202-03
(1990), vacated in part, 55 F.E.R.C. J 61,258 (1991). SC-12 was
entered into as a partial settlement of Vernon’s claims that Edison
was unreasonably denying integration and access. SC-12 permits
Vernon to import and obtain capacity credit for outside resources
without integration pursuant to an IOA.
Vernon also asserts that Edison acted anticompetitively in
interrupting or refusing transmission from Nevada Power Com-
pany (Nevada Power) to Vernon. It also claims that Edison and
Nevada Power engaged in a group boycott designed to keep
Vernon from purchasing power from Nevada Power. Vernon and
Edison entered into a contract for interruptible transmission
service under which Vernon could purchase power from outside
supplier on a non-firm basis. That power would then be transmit-
ted over Edison lines. The contract provided for interruption by
Edison at any time and for any reason.
The parties brought several motions for summary judgment,
including those which ultimately resulted in judgment for Edison
on all claims. The district court granted summary judgment on
the foreclosure claims on several grounds. As to Vernon’s claim
that it was entitled to relative size share access, the district court
determined that Edison had established a legitimate business
reason for its refusal to provide the requested access, which
Vernon had failed to refute. Summary judgment on the integra-
tion claims was granted on the ground that Edison had shown a
legitimate business justification for not providing for integration
on eighteen months’ notice. The court granted summary judg-
ment on the SC-12 claims because Edison had no obligation to
7
offer SC-12 and its failure to offer it sooner was not an antitrust
violation. The court granted summary judgment on the inter-
ruptible transmission service claims because Vernon had not
quantified damages. The court viewed that claim as arising from a
contractual dispute, and found no material issue of fact regarding
whether Edison’s reasons for interruptir 2 were legitimate.
The district court also granted Edison’s motion for summary
judgment on its claims that Edison had discriminated against
Vernon in its rates® and on the claim that Edison and Nevada
Power engaged in a group boycott against Vernon. The court
concluded that summary judgment was appropriate because
Vernon had presented no evidence of damages and Vernon had
failed to introduce evidence sufficient to sustain a finding of
concerted action. Eventually, the court determined that judgment
was appropnate on all of Vernon’s claims, including a claim that
Edison had conspired with others to deny access to the Pacific
Intertie. Vernon asked the district court to compel Edison to bring
a motion for summary judgment on the latter claim, but the
district court declined to require the filing of a separate motion.
After entry of judgment, Vernon filed a timely motion for
reconsideration. The district court declined to reconsider its
decision.’ Vernon filed a timely notice of appeal.
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction under 15 U.S.C. §§15 and
26. We have jurisdiction under 28 U.S.C. § 1291.
We review a grant of summary judgment de novo. Jmage
Technical Serv., Inc. V. Eastman Kodak Co., 903 F.2d 612. 614
(9th Cir. 1990), cert. granted, 111 S. Ct. 2823, 115 L. Ed. 2d 994
*Vernon has not appealed the district court’s grant of summary
judgment on its rate claim.
’Though Vernon appealed from the denial of its motion for reconsid-
eration, it presented no argument on appeal that the district court
abused its discretion in denying the motion. In any event, we find no
abuse of discretion because Vernon should have been able to present
evidence of pretext, if any, at the original summary judgment hearings.
8
(1991). We must determine, viewing the evidence in the light
most favorable to the nonmoving party, whether there are any
genuine issues of material fact and whether the district court
correctly applied the relevant substantive law. /d.
Summary judgment is appropmiate if the nonmoving party bears
the ultimate burden of proof at trial as to an element essential to
its case, and fails to make a showing sufficient to establish a
genuine dispute of fact with respect to the existence of that
element. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct.
2548, 2552, 91 L. Ed. 2d 265 (1986).
DISCUSSION
To establish a violation of Section 2 of the Sherman Act, 15
U.S.C. § 2(§ 2), Vernon would have to show (1) that Edison
possessed monopoly power in the relevant market; (2) that it
willfully acquired or maintained that power, and (3) that Vernon
suffered a causal antitrust injury. Oahu Gas Serv., Inv. v. Pacific
Resources, Inc., 838 F.2d 360, 363 (9th Cir.), cert. denied, 488
U.S. 870, 109 S.Ct. 180, 102 L. Ed. 2d 149 (1988). An attempt to
monopolize is also actionable under § 2. Attempted monopoliza-
tion has three elements: “specific intent to monopolize, predatory
or anticompetitive conduct and a dangerous probability of suc-
cess.”” Drinkwine v. Federated Publications, Inc., 780 F.2d 735,
740 (9th Cir. 1985), cert. denied, 475 U.S. 1087, 106 S. Ct. 1471,
89 L. Ed. 2d 727 (1986). Vernon would also be required to show
causal antitrust injury in an attempted monopoly case. California
Computer Products, Inc. v. IBM Corp., 613 F.2d 727, 736 (9th
Cir. 1979).
To establish a violation of Section | of the Sherman Act, 15
U.S.C. § 1 (§ 1), Vernon would have to prove “three elements:
(1) an agreement or conspiracy among two or more persons or
distinct business entities: (2) by which the persons or entities
intend to harm or restrain competition; and (3) which actually
restrains competition.” Morgan, Strand, Wheeler & Biggs v.
Radiology, Ltd., 924 F.2d 1484, 1488 (9th Cir. 1991) (citation
and quotations omitted).
acne iesiniieieriaae tee neniiinlieiiiel
A. Essential Facility Claims.
Vernon’s foreciosure claims are based on its assertion that the
EHV transmission lines, such as the Pacific Intertie and the
Southwest lines, as well as the 220 kV grid, are essential facilities
to which Edison has improperly refused Vernon access. In our
opinion in the companion to this case, City of Anaheim vy.
Southern California Edison Co., No. 90-56375, slip op. 1221 (9th
Cir. 1991), filed on the same date as this opinion, we have
outlined the nature of the essential facility doctrine and the
elements necessary to prove liability for the refusal to allow use if
an essential facility. Jd. at slip op. 1233-36. See also Alaska
Airlines, Inc. v. United Airlines, Inc., No. 90-55162, slip op.
14751, 14762-68 (9th Cir. Oct. 29, 1991). Of course, that same
law applies here. |
However, in this case the district court assumed for purposes of
the summary judgment motion “that there was competition
between Edison and Vernon, that Edison had monopoly power in
a properly defined market, and that Edison’s transmission lines
are essential facilities.” Therefore, we will only determine
whether given those assumptions Edison has committed an anti-
trust violation by refusing to give all of the access to the facilities
that Vernon desires.®
1. Relative Size Share Access.
The district court determined that there were no genuine issues
of material fact with respect to Edison’s claim that it had a
legitimate business justification for refusing relative size share
access. Vernon asserted that Edison’s business justification was
insufficient as a matter of law, but also asserted that the alleged
justification was untrue. However, as noted by the district court,
Vernon did not point to any facts in opposition to Edison’s motion
for summary judgment which would create a material issue of
“We note that the district court granted summary judgment on at least
some of the claims because Vernon failed to offer sufficient proof of
damages from alleged misconduct. We will address the damages issue in
Part C of this opinion.
10
fact. Instead, Vernon argued that if the asserted justification was
not insufficient as a matter of law, a jury should be permitted to
decide whether a slight increase in retail prices to Edison's
customers was a legitimate business reason for Edison’s refusal to
grant relative size share transmission access.
[1] At the time of the summary judgment motion, Vernon did
not appear to dispute the fact that retail customers would pay
increased rates if it received the access sought — indeed,
Vernon’s damage study reflected that fact. Nor did Vernon appear
to dispute the fact that Edison was legitimately concerned about
the retail rates in making its facilities access decisions.’
[2] The district court did not err in granting summary judg-
ment against Vernon on the relative size share access claim.
Although the defendant generally has the burden of coming
forward with a legitimate business justification after the plaintiff
has shown evidence of monopolistic intent, the plaintiff, in this
case Vernon, ultimately has the burden of proving that the
defendant acted without a legitimate business justification. mage
Technical, 903 F.2d at 620 n.9; Calculators Hawaii, Inc. v.
Brandt, Inc., 724 F.2d 1332, 1339 (9th Cir. 1983). Cf Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608-
611, 105 S. Ct. 2847, 2860-61, 86 L. Ed. 2d 467 (1985)
(implying that defendant has burden of production and proof). In
order to survive summary judgment, Vernon had to point to
evidence demonstrating that there was a genuine issue of material
fact as to whether Edison in fact acted on the asserted grounds.
Having failed to do so, summary judgment was appropriate.
Furthermore, Vernon fails to demonstrate just why Edison is
required to cease using its own facility so that Vernon can begin
using it. This is not a situation where Edison had no use for the
facility and arbitrarily denied someone else its use. See MC/
Communications Corp. v. American Tel. & Tel. Co., 708 F.2d
1081, 1133 (7th Cir.) (AT&T was not asked to abandon its
facilities; no business reason shown for refusal), cert. denied, 464
*It is legitimate for Edison to refuse access that will affect its rates to
the detriment of its customers. See City of Anaheim, slip op. 1237.
ee
1]
U.S. 891, 104 S. Ct. 234, 78 L. Ed. 2d 226 (1983). Nor is it a
case where Edison simply refused to supply Vernon with its power
needs. See Otter Trail Power Co. v. United States, 410 U.S. 366,
378, 93 S. Ct. 1022, 1030, 35 L. Ed. 2d 359 (1973). In fine,
Edison clearly had a use for its lines. As we pointed out in City of
Anaheim, slip op. 1236, the demand that Edison turn over its
facility to a city simply because the city could save money by
obtaining cheaper power stands the essential facility doctrine on
its head.
[3] But, even had Vernon offered some evidence which raised
a material issue of fact with respect to Edison’s reasons for
refusing relative size share access, we can find no authority — and
Vernon has pointed to none — which supports Vernon’s theory
that “reasonable” access to Edison’s facilities must take the form
of relative size share access. Even more to the point, Vernon
admits that it never requested relative size share access to
Edison’s transmission facilities. The district court properly
granted summary judgment.
2. Integrated Operations Agreement.
[4] The IOA was one way in which Edison could meet its
obligation to provide reasonable access to its essential facilities.
The district court held that to the extent that Edison had a duty to
integrate Vernon’s power purchases, the duty was limited by
legitimate business justifications. The court found no triable issue
of fact on this claim and determined that summary judgment was
appropriate because Edison had a legitimate business justification
for not providing for an eighteen month notice period'® when the
FERC had determined that a three year period was reasonable.
Assuming, as the district court did, that Edison is a monopolist
in control of an essential facility, it must not unreasonably deny
access to the facility to its competitors. MCI, 708 F.2d at 1132.
Given that predicate, we conclude that Edison had a duty to
‘The 18 month period versus three year period engendered confusion
because Vernon’s damage study was based on the 18 month notice
period provided in Special Condition 12.
12
integrate purchases of outside resources upon reasonable notice.
Despite the assumptions made in Vernon’s damage study,
Vernon’s complaint is not that Edison refused to allow integration
on 18 months’ notice, but that Edison refused to allow integration
until it felt like it. The IOA proposed by Edison did not contain a
particular notice period — integration occurred at Edison’s dis-
cretion.'' The FERC determined that Edison’s discretionary stan-
dard was unreasonable, and that a three year period was
reasonable notice. Southern Cal. Edison Co., 41 F.E.R.C. at
61,493-94; Southern Cal. Edison Co., 52 F.E.R.C. at 62,202-03."
Edison offered no legitimate business reason for its refusal to
provide a reasonable notice period. Rather, in support of its
motion for summary judgment, it simply asserted that it had no
duty under the antitrust laws to provide integration on reasonable
notice. We find little merit in that contention. In any event, it
seems unlikely that Edison could have prevailed on a claim that it
had a legitimate business reason for refusing to establish a
reasonable notice period. The integration agreement provided
benefits not only to the municipal utility, but to Edison as well.
Edison would be able to avoid adding additional generating
capacity and it also received a portion of the integrated electricity
as reserves. The municipality would be able to lower its costs.
Thus, in refusing to provide for a reasonable notice period, Edison
was foregoing a benefit to itself and its ratepayers. Cf Aspen
Skiing, 472 U.S. at 608, 105 S.Ct. at 2860. A trier of fact might
well conclude that Edison had no legitimate business reason for
refusing to enter into a reasonable IOA.
''As characterized by the FERC, the IOA would have permitted
Edison to “subordinate a completed city project [desired to be inte-
grated] to an Edison project that may still be in the early stages of
development or which may be deferred or never completed.” Southern
Cal. Edison Co., 41 F.E.R.C. at 61,494.
"The district court did not determine what notice requirement would
be reasonable, but concluded that no liability could be imposed for
refusal to adopt a notice period of less than three years. Vernon asserted
before the FERC that a three year period was reasonable and the FERC
agreed.
13
[5] In other words, based upon all of the assumptions that the
district court made for summary judgment purposes, it is possible
that a trier of fact would find that Edison’s IOA position could
have been an attempt to use monopoly power to eleminate
competition. Had the determination of the district court been
made at the end of a trial, there would not be error; summary
judgment is another matter entirely.'°
3. Special Condition 12 Claim.
[6] The district court found that Edison had no obligation
under the antitrust laws to offer SC-12 to Vernon, particularly
where Edison could reasonably require three years notice for
integration of capacity resources. Even though Edison had a duty
to integrate capacity resources on reasonable notice, there is
nothing to suggest that Edison was required to do so through SC-
12. In addition, it appears that there are no damages attributable
to Edison’s failure to implement SC-12 sooner which are separa-
ble from Edison’s failure to provide for integration on reasonable
terms. As Vernon contends that SC-12 was only a partial correc-
tion of the defects in the IOA, there would appear to be no
additional losses from any delay or limitation in SC-12 over and
above the losses allegedly caused by the improper IOA. Summary
judgment on this claim was appropriate.
4. Interruptible Transmission Service.
The district court concluded that three grounds supported
summary judgment on Vernon’s claims that Edison improperly
denied, interrupted or curtailed Interruptible Transmission Ser-
vice (ITS) from Nevada Power to Vernon. First, the court
concluded that Vernon had failed to quantify any damages from
the interruptions.'* Second, the court concluded that an antitrust
claim could not be based on a contractual dispute as to the
reasonableness of conduct.” Finally, the court concluded that
‘However, see the damage discussion in Part C of this opinion.
'’See our discussion of damages in Part C of this opinion.
14
Vernon had failed to demonstrate that Edison’s reasons for
interrupting transmission were not legitimate.
[7] We are not convinced that antitrust liability may not be
predicated on conduct which also happens to create a contract
dispute. It is certainly true that a claimed breach of contract by
unreasonable conduct, standing alone, should not give rise to
antitrust liability. But in this case, Vernon is not simply claiming
that Edison breached its contract. Instead, Vernon is claiming
that by preventing the purchase of electricity from Nevada Power,
Edison acted anticompetitively and without a legitimate business
reason. The fact that Vernon and Edison have a contract allowing
Edison to interrupt transmission “for any reason” is beside the
point. The contractual nght to interrupt service does not grant
Edison the freedom to act anticompetitively. See California v.
Chevron Corp., 872 F.2d 1410, 1414 (9th Cir. 1989) discussing
pendent state law claims to antitrust case), cert. denied, 493 U.S.
1076, 110 S. Ct. 1126, 107 L. Ed. 2d 1032 (1990). See also City
of Long Beach v. Standard Oil, 872 F.2d 1401 (9th Cir. 1989)
(discussing antitrust claims in action related to California v.
Chevron), amended, 886 F.2d 246, cert. denied, 493 U.S. 1076.
110 S. Ct. 1126, 107 L. Ed. 2d 1032 (1990). In short, Edison
might avoid contractual liability through the interruption provi-
sion, although even that is questionable, California v. Chevron
Corp., 872 F.2d at 1414, but the contractual limitation does not
speak to antitrust concerns.
That, however, does not itself demonstrate that summary
judgment was inappropnate. At first blush, Vernon’s evidence
seems to raise an issue of fact as to whether Edison’s asserted
business justifications for interrupting transmission were legiti-
mate. There was some evidence from which a trier of fact could
conclude that Vernon encountered refusals to provide transmis-
sion even when Edison had capacity available.
Nonetheless, summary judgment was appropriate on this claim.
It is not enough for a party to content itself once it has produced a
mere scintilla of evidence to support its case. Rather, as the
Supreme Court held in Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89
L. Ed. 2d 538 (1986), the record must be sufficient to “lead a
en |
15
rational trier of fact to find for the non-moving part ...” That
requirement was underscored in Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202
(1986) where the Court held that the evidence must have
sufficient strength to allow a reasonable jury to “return a verdict
for the nonmoving party.” Here the evidence does not reach that
level.
Vernon’s evidence consists of an entry in a Nevada Power log
that indicates that on one occasion there was a refusal to allow
transmission if Nevada Power was “purchasing [power] from the
east,” and a sworn statement and a deposition from a single
former Nevada Power dispatcher, Richard Greenwalt.
[8] Greenwalt’s testimony was to the effect that there was on
occasion a refusal to allow transmission which prevented Nevada
Power from making a sale to Vernon. He indicated that some
possibly improper statements were made to him “reasonably
often” or were “very common.” His exact meaning is not clear.
More than that, he gave absolutely no specifics as to person or as
to time. Detail of a kind that would allow evaluation of the
accuracy of his recall or of the consistency and extent of the acts
is missing. Certainly, there was no evidence that transmission was
interrupted at any time at the behest of any person employed by
Edison other than a dispatcher, who was acting as he did for
unknown reasons. There was no evidence that any person with
management or supervisory authority ever told any dispatchers to
interrupt or to refuse transmissions for any anticompetitive reason
or that dispatchers were acting on a policy of wrongfully refusing
or interrupting transmission. There was no evidence produced to
show that any management level personnel ever approved or
ratified wrongful transmission interruptions or refusals.
It is important to remember that this is not a simple tort case
where a single incident is enough to support liability. The claim in
this case is that there was relatively long-term activity aimed at
crushing a competitor. If proved, antitrust liability and treble
damages would be imposed upon Edison. Yet, Vernon proposed
to proceed with this complex antitrust case based upon evidence
which almost entirely consisted of statement from a former
Nevada Power employee operating at a fairly low level. As
16
already mentioned, his statements were that unknown employees
of Edison, operating at a similarly low level, interrupted transmis-
sion from time to time improperly. Who did it remains unknown.
When they did it remains equally unknown. There is an almost
total absence of detail. Against that Edison did all one could do: it
submitted numerous affidavits from Nevada Power and Edison
employees who stated that they never did those things or even
heard of them. Their testimony, which was uncontested and
unchallenged, indicates that if the threats did occur they were
neither frequent no uniformly issued.
We agree with the district court that antitrust liability must be
composed of stronger stuff. In so doing we do not mean to suggest
that lower level employees cannot involve a corporation in anti-
trust liability. Nor do we suggest that credibility determinations
should be made at the time of summary judgment.
As to the former, we recognize that even if an employee is
violating express corporate policy, the corporation might still be
held responsible. As long as the employee is acting within the
scope of his employment, imposition of liability upon the corpora-
tion is appropriate. See United States v. Portac, Inc., 869 F.2d
1288, 1293 (9th Cir. 1989), cert denied, US. » 111 S.
Ct. 129, 112 L. Ed. 2d 97 (1990); United States v. Hilton Hotels
Corp., 467 F.2d 1000, 1004-07 (9th Cir. 1972), cert. denied, 409
U.S. 1125, 93 S. Ct. 938, 35 L. Ed. 2d 256 (1973). See also
American Society of Mechanical Engineers, Inc. v. Hydrolevel
Corp., 456 U.S. 556, 102 S. Ct. 1935, 72 L. Ed. 2d 330 (1982).
Nevertheless, we do not believe that the employee’s position
within the organization can be entirely ignored when we are
attempting to determine whether antitrust activity was afoot at
all. For example, in each of the cases just cited a conspiracy to act
for anticompetitive reasons was clearly present and the employee
involved wielded a good deal of authority. In Hilton Hotels there
was a full blown conspiracy and the employee in question was the
purchasing agent for the hotel in question. 467 F.2d at 1004. In
Portac, also, there clearly was a conspiracy and, again, the
employee involved was the sole purchasing agent for the defen-
dant. 869 F.2d at 1293. Finally, in American Society of Mechani-
cal Engineers there was a clear conspiracy to violate the antitrust
17
laws. One of the participants was the chairman of the subcommit-
tee that issued a letter designed to carry out the anticompetitive
intentions. 456 U.S. at 560-62, 102 S. Ct. at 1939-40. The letter
was then signed by the secretary of the committee itself, and
carried great weight in the engineering industry. /d. at 561-64, 102
S. Ct. at 1940-41. In the case at hand, however, the most Vernon
has shown is that one or more unidentified members of an
amorphous group of Edison dispatchers occasionally unnecessa-
rily interrupted power transmissions for largely unexplained rea-
sons, some of which may have been improper. They did so while
pursuing a myriad of transactions conducted over a long period.
Nor need we or should we evaluate credibility at summary
judgment. See McLaughlin v. Liu, 849 F.2d 1205, 1207 (9th Cir.
1988). Nevertheless, the testimony of Mr. Greenwalt, even if
accepted, would not be sufficient to allow a rational trier of fact to
impose antitrust liability on Edison. The question here is not
simply whether Edison can be held liable for the proven antitrust
violations of employees acting with apparent authority, see Hilton
Hotels, 467 F.2d at 1004 and Portac, 869 F.2d at 1293, but
whether a rational jury could conclude that there were antitrust
violations in the first place. In evaluating that question, the fact
that Mr. Greenwalt could not recall any names, dates or times
further indicates that Vernon has not raised a factual dispute
sufficient to survive summary judgment.
In sum, more evidence that that produced by Vernon would be
needed to impose liability upon Edison on this claim. The district
court did not err when it granted summary judgment.
5. The Pacific Intertie.
[9] Vernon asserted that Edison violated § | by conspiring with
others to prevent Vernon from obtaining access to the Pacific
Intertie.'* We recognize that in Vernon’s § | claim with respect to
the Pacific Intertie, Edison, no Vernon, would have the burden of
'SWhile Edison contends that Vernon abandoned its Pacific Intertie
claims, it is clear from the record that Vernon did not do so. We find no
error in the district court’s entry of judgment on this claim without a
18
proving that it had a legitimate business purpose for foreclosing
access. Image Technical, 903 F.2d at 618 n.5. However, a review
of the record does not reveal any evidence adduced by Vernon
that Edison conspired with anyone to deny access to the Pacific
Intertie. A § | violation requires “concerted action” by more than
one entity. The Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148,
1152 (9th Cir. 1988).'° The district court properly granted
judgment on this claim.
B. Edison-Nevada Power Boycott Claims.
To prevail on a claim under § 1, Vernon would have been
required to show concerted action on the part of Edison and
Nevada Power. The Jeaney, 849 F.2d at 1152. The district court
granted summary judgment on the horizontal boycott claims on
the grounds that Vernon had failed to show evidence of damages
from the alleged boycott and because Vernon had failed to offer
evidence of concerted action.
We agree with Vernon that a conspiracy to monopolize may
exist even where one of the conspirators participates involuntarily
or under coercion. Calnetics Corp. v. Vokswagen of America, Inc.,
532 F.2d 674, 682 (9th Cir.), cert. denied, 429 U.S. 940, 97 S. Ct.
355, 50 L. Ed. 2d 309 (1976). To survive summary judgment, a
plaintiff must point to evidence “‘that tends to exclude the
possibility’ that the alleged conspirators acted independently.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
588, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986) (citation
omitted); Morgan, Strand, 924 F.2d at 1488. Edison makes much
of this language and suggests that Vernon’s evidence does not
exclude the possibility of independent action. But Matsushita
does not extend quite as far as Edison suggests. Following its
“exclude the possibility” language, the Court stated that the
formal motion for summary judgment, since Vernon acceded to the
entry of judgment on this claim.
‘Vernon also conceded that it had not segregated damages on the
Pacific Intertie claims. See our discussion of damages in Part C of this
opinion.
19
nonmoving party, “in other words, must show that the inference
of conspiracy is reasonable in light of the competing inferences of
independent action or collusive action that could not have
harmed” it. /d., 475 U.S. at 588, 106 S. Ct. at 1356-57. Neverthe-
less, Vernon did not even meet this somewhat lesser standard.
[10] Here, too, Vernon’s evidence was far too weak. First,
there is no evidence that the alleged acts by the unnamed Edison
dispatchers were more than random, unauthorized acts by em-
ployees. There was no showing, in other words, that these Edison
dispatchers entered into conspiracies with Nevada Power dis-
patchers to boycott Vernon’s attempt to purchase power. Second,
if Edison refused to transmit Nevada Power's electricity over
Edison lines, Nevada Power had no choice but to acquiesce. That
does not make it a conspirator. Third, as the district court noted,
it would be most difficult to draw a reasonable inference of
conspiracy where there was no meeting of the minds. Instead,
according to Vernon’s evidence, Edison had to continually
threaten Nevada Power dispatchers and they did not necessarily
accede to those threats. The district court did not err.
C. Damages.
Vernon presented the court with a damage study which was, at
best, seriously flawed. That resulted in findings that because no
damages had been properly shown, there was an independent
reason to grant summary judgment on various claims against
Edison. Vernon asserts that the district court erred. We do not
agree. Indeed, the deficiencies in that study undermine Vernon’s
whole case.
The principles which the courts follow in deciding this issue are
well described in MCI. There the court reviewed a damage verdict
and in so doing made the following observations:
Once causation of damages has been established, the
amount of damages may be determined by a just and
reasonable estimate as long at the jury verdict is not the
product of speculation or guess work. Since the Supreme
Court has been willing to accept a degree of uncertainty in
the calculation of damages, strict proof of what damages
20
have been caused by which acts has not been required. Not
requiring strict disaggregation of damages among the various
unlawful acts of the defendant serves to prevent a defendant
from profiting from his own wrongdoing and makes sense
when damages arise from a series of unalwful acts interwined
with one another.
The courts have always distinguished between proof of
causation of damages and proof of the amount of damages.
Thus, the courts have been consistent in requiring plaintiffs
to prove in a reasonable manner the link between the injury
suffered and the illegal practices of the defendant.
708 F.2d at 1161 (citations omitted).
The court continued as follows at page 1163:
There is nothing inconsistent between requiring proof that
damages were caused by illegal acts and the rule that a
plaintiff need not disaggregate damages among those acts
found to be unlawful. In this case, the trial court granted
summary judgment for AT & T on seven of the twenty-two
counts in the complaint. In addition, the jury found for
AT &T on five of the fifteen counts it considered. The jury
found for MCI on two counts relating to Hi-Lo tariffs, two
counts relating to the tariffs filed with state agencies, and six
counts relating to interconnection. In addition, this court has
now determined that the jury’s findings for MCI on the
pricing and pre-announcement of Hi-Lo as well as the
finding relating to denial of multipoint interconnections must
be set aside.
MCI assumed in the preparation of its damage study that
all twenty-two of AT & T’s acts charged were illegal. In fact,
liability has now been established with respect to only seven
of the twenty-two counts of alleged monopolization. MCI’s
lost profits study does not establish any variation in the
outcome depending on which acts of AT & T were held to be
legal and which illegal.
21
The result was a remand for a new trial on the damage issue.
We accepted that view in Farley Transp. Co., Inc. v. Santa Fe
Trail Transp. Co., 786 F.2d 1342, 1352 (9th Cir. 1985) (footnote
omitted), where we, too, declared that the plaintiff's “utter failure
to make any segregation between damages attributable to lawful
competition and that attributable to the unlawful scheme to
deviate from the tariff rate requires reversal of the verdict and
remand for a new trial on the amount of damages.” Cf. William
Inglis & Sons Baking Co. v. Continental Baking Co., Inc., 942
F.2d 1332, 1341 (9th Cir. 1991) (where lost profits calculation
was wholly speculative, the district court should have granted
judgment notwithstanding the verdict).
Here, of course, the matter came up before trial commenced
and at a time when the only possibly admissible damage study
was before the court. That study failed to segregate the losses, if
any, caused by acts which were not antitrust violations from those
that were. Nor did Vernon attempt or offer to make corrections.
Rather, according to its own expert Stephen Flanagan, speaking
in the context of the group boycott claim, Vernon would not or
could not do so. That might well have been because Vernon’s
deeply flawed study is the handmaiden of its equally flawed theory
that it should have proportionate firm access to Edison’s whole
system at all times.
The question remaining is whether the district court was
nevertheless required to allow Vernon to go to the jury with its
erroneous approach or to give it still another opportunity to refine
a study that, according to Vernon, could not be refined. We think
not.
We dealt with a similar situation in McGlinchy v. Shell Chem.
Co., 845 F.2d 802 (9th Cir. 1988). There the damage studies of
the plaintiffs were plainly insufficient, so the district court ex-
cluded them. We held that the absence of a proper study meant
that the plaintiffs “could make no showing about the amount of
damages.” Jd. at 808. As a result, there was no “competent
evidence from which a jury could fairly estimate damages,” id. at
808, and summary judgment was proper. See also ILC Peripherals
Leasing Corp. v. International Business Mach. Corp., 458 F.
Supp. 423, 434 (N.D. Cal. 1978) (summary judgment granted
ae
where the damage study did not separate effects of various acts so
that “there was no basis in the record for the jury to determine
what the effect on damages would be if it found one or more of
the challenged acts lawful.’’)
In McGlinchy, we cited our earlier case of Dolphin Tours Inc.
v. Pacifico Creative Serv., Inc., 773 F.2d 1506 (9th Cir. 1985), a
case in which the damage study presented at the time of summary
judgment was also flawed. There, however, the flaws did not
appear to be insurmountable and we opined that “Dolphin has
presented evidence from which a jury could reasonably estimate
the amount of Dolphin’s injury without speculation if Dolphin’s
damage evidence were filled in by testimony at trial.” /d. at 1513.
We had confidence in that possibility because it appeared that the
date already existed even though it had not yet been placed in the
proposed damage report. Moreover, we said, if the repair was not
made the district court could grant a directed verdict or a
judgment notwithstanding the verdict.
Here we have no such confidence. Vernon insists that all of
Edison’s acts contributed to the damage figure, but the district
court and we have already found that many of those acts were
proper. It might be argued that since Vernon had a contract with
Nevada Power which was to save Vernon $80,000 per month and
did not, there was at least a loss of that amount, damage studies
notwithstanding. However, that argument would suffer from the
same flaw because there is no indication of what part of that
$80,000 loss of savings was due to proper interruptions of service
and what part to improper ones, or for that matter, due to other
factors entirely.
[11] In short, we agree with the district court that the serious
flaws in the only damage study which could be profferred to the
jury placed Vernon in the position of having no proper proof of
damages at all. Thus, the district court did not err when it
awarded summary judgment based upon this lack of evidence.
D. Injunctive Relief.
[12] Injunctive relief might be appropriate if Edison has
unreasonably refused access to its essential facilities. Otter Tail
23
Power Co., 410 U.S. at 381-82, 93 S. Ct. at 1031-32. The court
did not grant any injunctive relief because it concluded that
Edison had not violated the antitrust laws. However, summary
judgment on Vernon’s claim that Edison’s refusal to provide for a
reasonable notice term in the IOA was proper only because
Vernon failed to quantify damages which resulted from that
conduct. Thus, it is possible that Vernon will be entitled to
injunctive relief if it can prove an antitrust violation. We therefore
must reverse the denial of injunctive relief as to the IOA claim
only and remand the case to the district court to determine the
propriety of injunctive relief.
CONCLUSION
Here, as in City of Anaheim, slip op. 1221, we need only decide
whether the actions of Edison violated the antitrust laws. The
district judge held that Edison did not violate those laws, and,
even if it did, Vernon did not properly delineate damages. For the
most part we agree.
Therefore, we affirm the district court in every respect save one.
That one is: the district court erred in granting summary judg-
ment on Vernon’s claim for injunctive relief arising out of
Edison’s refusal to develop reasonable terms for integrated opera-
tions agreements.’
AFFIRMED IN PART, REVERSED IN PART AND RE-
MANDED FOR FURTHER PROCEEDINGS. The parties
shall bear their own costs on appeal.
"We deny Edison’s motion ot strike portions of Vernon’s brief and
excerpts.
24
Filed April 21, 1992
Cathy Caterson, Clerk, U.S. Court of Appeals
No. 90-56281
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CITY OF VERNON,
Plaintiff-Appellant,
wi
So. CALIFORNIA EDISON COMPANY
Defendant-Appellant,
ORDER
Before: SCHROEDER, LEAVY, and FERNANDEZ, Circuit
Judges.
The panel has unanimously voted to deny the appellant's
petition for rehearing. The suggestion for rehearing en banc was
circulated to the active judges of the court, and no judge re-
quested a vote for en banc consideration.
The petition for rehearing and the suggestion for rehearing en
banc are accordingly DENIED.
25
CASE NO. CV 83-2°37 MRP
UNITED STATES DISTKICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CITY OF VERNON, CALIFORNIA
Plaintiff,
V.
SOUTHERN CALIFORNIA EDISON COMPANY,
Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW IN
SUPPORT OF ORDER GRANTING EDISON’S MOTION
FOR SUMMARY JUDGMENT ON PLAINTIFF'S FORE-
CLOSURE CLAIMS
Having read and considered the papers and evidence submitted
in connection with defendant Southern California Edison Com-
pany’s (“Edison’s”) Motion for Summary Judgment on plaintiff's
foreclosure damage claims, associated motions of defendant
Edison and plaintiff the City of Vernon (“Vernon”) and the
pleadings filed herein, and having heard oral argument with
respect to the proposed findings and conclusions and objections
thereto, the Court finds and concludes as follows:
A.
FINDINGS OF FACT
1. INTRODUCTION
1.1 Plaintiff Vernon’s First Amended and Supplemental
Complaint in this action alleged, inter alia, that Edison violated
§§ 1 and 2 of the Sherman Act through a pattern of conduct
commencing in 1961 and continuing into the present. Vernon’s
contentions fall into three basic categories: (i} those relating to
the terms and conditions of Vernon’s access to Edison’s transmis-
sion lines and access to non-Edison sources of power (the “fore-
closure” claims); (2) those concerning Edison’s rates; and
(3) those asserting a conspiracy between Edison and the Nevada
Power Company to boycott Vernon.
26
1.2. Edison has filed motions for partial summary judgment on
Vernon's § 2 rate and § | group boycott claims, and for summary
judgment on Vernon's foreclosure claims.
Decision Granting Motions for Summary Judgment with Respect
to Rate Claims and Group Boycott Claims” filed March 7, 1990
(the “‘Memorandum of Decision”), the Court granted Edison’s
motions for partial summary judgment on the plaintiff's rate and
boycott claims.
1.3 By its Order dated March 1, 1990 and “Memorandum of
1.4 These Findings of Fact and Conclusions of Law are made
in connection with the Court’s Order dated March 1, 1990
granting Edison’s Motion for Summary Judgment on Plaintiff's
Foreclosure Damage Claims.
2. FACTUAL BACKGROUND
(a) Southern California Edison Company
2.1 Defendant Edison is an investor-owned utility that pro-
vides electric service in central and southern California, within a
service territory established by the California Public Utilities
Commission (“CPUC”).
2.2 Edison, as a fully integrated electric utility, generates,
transmits, and distributes electricity.
2.3 Edison provides electric service to residential, commer-
cial, and industnal customers located throughout its service
territory.
2.4 Edison also purchases electricity from and sells electricity
to other utilities located outside its service territory.
2.5 Edison operates its own electric “control area.” A “con-
trol area’ can be viewed as an area or system within which the
operation of all generation, transmission and distribution facilities
must be coordinated so that the system is operated as a synchro-
nized integrated whole, at the same frequency, and in a reliable
fashion. Typically every major utility operates a control area.
27
(b) Vernon and the Other Resale Cities
26 Plaintiff is a California municipality that owns its own
distribution system and provides electric service at retail within its
boundaries. While Vernon has some generating capacity, most of
the power it sells is acquired through wholesale purchases from
Edison or other bulk power suppliers.
2.7 Vernon occupies an area of approximately 5.06 square
miles and is located within Edison’s service territory. Vernon has
common boundaries with the City of Les Angeles, the service
territory of the Los Angeles Department of Water and Power
(“LADWP”) and other cities in Los Angeles County that are
also within Edison’s service territory. Vernon is primarily an
industrial city.
2.8 In addition to Vernon, Edison’s “wholesale” or “resale”
customers include the cities of Anaheim, Azusa, Banning, Colton,
and Riverside (the “Cities”). Because they purchase from Edison
wholesale electricity that they resell to their retail customers,
Vernon and the Cities are sometimes referred to as “Resale
Cities.” Like Vernon, the Cities are located within Edison's
service territory and each own their own distribution systems and
provide electric service at retail within their boundaries. Because
Vernon and the Cities do not operate their own control areas and
are within Edison’s control area, Edison has the ultimate respon-
sibility for meeting their system load requirements.
+9 From 1962 to 1977, Vernon purchased all of its electricity
that it resold to its resale customers from Edison pursuant to an
operating agreement entered into by the parties. Since 1977,
Vernon has been a partial requirements Customer of Edison.
4.10 Vernon and Edison entered into a limited Integrated
Operations Agreement (“IOA”) restricted to Vernon’s participa-
tion in the Palo Verde Nuclear Generating Station located in
Arizona. Vernon has an ownership interest in this generation
facility and has participated through the Southern California
Public Power Authority, in which it is a member. The Edison-
Vernon Palo Verde IOA is Exhibit P to the O'Malley Opposition
Declaration.
—
28
(c) Edison's Transmission Network
2.11 Edison’s transmission lines are a part of an intercon-
nected series of transmission lines connecting Edison with other
utilities located throughout the western United States. Edison’s
Extra High Voltage (“EHV”) transmission lines (generally oper-
ated at 500 kV or above) are used for the transmission of large
blocks of power from remote generation resources, including
those of other utilities, to the main grid of Edison’s transmission
system which is operated at 220 or 230 kilovolts or “kV” (the
“220 kV network’’).
2.12 One group of EHV transmission lines in which Edison
has nghts is the Pacific Intertie. The Pacific Intertie consists of
two 500 kV alternating current (“AC”) lines running from
Oregon through California (the “AC lines”) and one 800 kV
direct current (“DC”) line running from Oregon through Nevada
into Southern California (the “DC iine”’).
2.13 Edison’s EHV transmission lines to the Southwest con-
sist principally of 500 kV AC lines from the Los Angeles basin to
Nevada, Palo Verde (in Anzona) and the Four Corners area (in
New Mexico). Other EHV transmission lines to the Southwest
are owned by LADWP, San Diego Gas & Electric Company and
the Southern California Public Power Authority.
2.14 Edison’s 220-kV network, which consists of a grid or
network of 220 or 230 kV transmission lines, is situated in the
greater Los Angeles metropolitan area. Edison’s 220 kV network
connects with a number of major utilities, including LADWP and
the California Department of Water Resources (““CDWR”).
(d) Regulation
2.15 The terms and conditions of Edison’s rates and service to
its retail customers are regulated by the CPUC. The CPUC also
has jurisdiction over Edison in that Edison cannot dispose of its
assets or rights which are used or useful for service to retail
customers without CPUC approval.
2.16 Edison’s rates and terms of service to its resale custom-
ers are regulated by the FERC. Any agreements between Edison
29
and its Resale Cities, including Vernon, regarding resale service
or transmission must be filed with the FERC. Edison cannot
legally charge a rate or provide a service to a Resale City without
an appropriate FERC rate schedule for that rate or service being
in effect.
2.17 In 1972, in part as a result of certain antitrust claims
brought by the Cities, Edison and each of the Resale Cities
entered into settlement agreements. Those agreements, in addi-
tion to releasing Edison from antitrust liability for conduct prior to
that time, contemplated a framework within which the Resale
Cities could begin to acquire energy from other sources and
integrate it into the Edison system.
2.18 Integration is a contractual concept under which re-
sources and loads of independent parties are planned and operated
as if they were a single system.
2.19 The integration of resources into Edison’s system, as
opposed to the mere transmission of such energy by Edison is
important because of Edison’s rate structure. If Edison integrates
a proposed resource, Edison gives the customer credit not only for
the energy brought into the system, but also a “capacity credit”
for the reduction in generating capacity Edison must maintain.
2.20 Anaheim and Riverside, after five years of negotiations,
entered into IOAs with Edison to establish standards for the
integration and transmission of resources. These IOAs became
part of Edison’s rate schedules in 1979.
2.21 Vernon did not seek to participate in the negotiations for
IOAs that took place in the 1970s.
2.22 Azusa, Banning and Colton entered into IOAs similar to
those entered into by Anaheim and Riverside. These IOAs
became part of Edison’s rate schedules in 1981.
2.23 Since 1981, Edison has offered to enter into an IOA with
Vernon similar to the IOAs with the five Cities. Vernon, however,
has refused to enter into such a “generic” IOA.
2.24 Under the 1972 Settlement Agreements, and the Cities’
generic IOAs, Edison must provide the Resale Cities with all of
30
their requirements for electricity to the extent the Resale Cities
are unable to obtain power from others or from their own
facilities. The IOAs have allowed the Resale Cities to build their
own generation projects, to participate in joint projects with
others, and to purchase capacity from cthers.
2.25 Edison’s standard for the timing of capacity credit in the
generic IOAs, § 8.1.2.3 of the IOAs, past applications of that
standard, as well as other terms of the IOAs were challenged in
FERC Docket No. ER81-177. Although the decision in that
Docket is still subject to rehearing, the FERC concluded that the
standard set forth in § 8.1.2.3 of the generic IOAs was not just
and reasonable because it allowed Edison to discriminate unduly
in determining when a wholesale customer should begin receiving
capacity credits for a noticed resource. The FERC concluded that
a three-year notice requirement for partial requirements custom-
ers who intend to acquire and integrate a capacity resource was
reasonable. In that FERC Docket, Vernon proposed and sup-
ported the position that a three-year notice requirement should be
adopted for the integration of a capacity resource. Docket
No. ER 81-177, 27 FERC 63.053 at 65,205, incorporated by the
FERC in its decision (41 FERC 4 61,188 at 61,496). In addition,
the FERC found other terms in the generic IOA to be
unreasonable.
2.26 In this action, Vernon does not contend that a three-year
notice requirement for the integration of capacity is unreasonable.
(e) Special Condition 12
2.27 In addition to the IOAs, Special Condition 12 allows the
Resale Cities, in certain circumstances, to import and receive
credit for capacity obtained from sources other than Edison
without “integration” of the resource pursuant to the IOA.
2.28 Special Condition 12 arose, in part, out of an agreement
between Edison and Vernon regarding the operation of diesel
generators owned by Vernon. In July 1982, Edison and Vernon
entered into an agreement under which Edison committed to file
a tariff with the FERC which would provide Vernon with an
3]
opportunity to operate generation projects within the City of
Vernon, including Vernon’s diesel generators.
2.29 Special Condition 12 was included within a proposed
resale rate schedule filed by Edison with the FERC in October
1983. Under the terms of the July 1982 settlement, Vernon’s
diesel generators could be used by Vernon when they were
available for capacity and associated energy. Under Special Con-
dition 12, additional capacity and associated energy could be
generated or imported by Vernon by giving certain notices to
Edison, with the first notice due on or before July 1, 1985, for
generation or imports commencing during the two-year period
January 1, 1987 through December 31, 1988.
2.30 There is no provision for penalties if a resource noticed
by a Resale City under Special Condition 12 is not contracted for
or actually received by that City and no limit on the amount of a
City’s load that must be met by Special Condition 12 resources.
2.31 In June 1985, Vernon noticed approximately 27 MW of
Special Condition 12 resources from outside the City boundaries,
with credit to commence on January |, 1987. Prior to January 1,
1987, Vernon requested, and Edison agreed (although not obli-
gated to do so under Special Condition 12) that a purchase from
CDWR could substitute for the 27 MW of resources from other
utilities which Vernon had noticed. Edison provided Vernon firm
transmission service on Edison’s 220 kV network for the 27 MW
of Special Condition 12 resources from CDWR.
2.32 In June 1987, Vernon gave notice for all of the Special
Condition 12 resources that it felt it could handle for the period of
January 1, 1989 through December 31, 1990. That included
98 MW of capacity and associated energy during the summer and
62 MW of capacity and associated energy during the winter from
CDWR. Prior to the start of delivery of resources on January |,
1989, Edison again permitted Vernon to substitute for certain
Special Condition 12 resources previously noticed.
2.33 Vernon has used Special Condition 12 to reduce its
dependence on Edison for its capacity and energy needs.
32
(f) Interruptible Transmission Service
2.34 On or about December 15, 1981, Nevada Power Com-
pany (“NPC”) and Vernon entered into an Interconnection
Agreement providing, in part, for the sale of non-firm energy by
NPC to Vernon.
2.35 On or about January 5, 1982, Vernon and Edison entered
into an agreement for the integration and interruptible transmis-
sion service for non-firm energy purchased by Vernon from NPC.
The agreement was filed with the FERC and became part of
Edison’s rate schedules as of February 1, 1982.
2.36 Dunng 1982 and 1983, Vernon imported significant
quantities of non-firm energy from NPC _ under these
arrangements.
2.37 On or about December 23, 1983, Edison and Vernon
executed an agreement for the integration of, and interruptible
transmission service for, non-firm energy purchased by Vernon
from the CDWR.
2.38 The NPC and CDWR interruptible transmission service
(“ITS”) Agreement provided in part that the availability of
transmission service “shall be determined at the sole discretion of
Edison,” and Edison reserved the right to interrupt or curtail such
service “‘at any time and for any reason.” Edison has entered into
ITS agreements with the other Resale Cities that provide ITS on
all of Edison’s transmission lines. These agreements also provide
for interruption “‘at any time and for any reason.”
2.39 The form of interruptible transmission service contracts
offered by LADWP include a provision that allows LADWP to
interrupt or curtail such service “‘at any time and for any reason.”
One of Vernon’s consultants, Mr. Brodie, admitted that interrup-
tions of ITS for minimum load are not unusual in the industry and
that the owner of transmission facilities is expected to have a
priority of use of those facilities.
2.40 Although Edison’s ITS contracts with Vernon and its
other Resale Cities allow Edison to interrupt or curtail such
transmission service “‘at any time and for any reason,” Vernon has
not presented any evidence that when Edison did interrupt
33
Vernon’s transmission, that Edison did so for anticompetitive
reasons.
(g) Vernon's bulk power resources
2.41 In 1983, Vernon bought nearly all of its electricity from
Edison. By 1987, Vernon was purchasing less than one half of its
power from Edison.
2.42 As of 1989, Vernon’s non-Edison resources included the
following: (1) a diesel plant with peaking capacity of approxi-
mately 21.5 MW; (2) entitlements of an average of approxi-
mately 11 MW of peaking power and associated energy from
Hoover Dam; (3) a 10.6 MW interest in the Palo Verde Nuclear
Generation Station; and (4) two gas turbines with a total peaking
capacity of 11.2 MW. Vernon also purchases approximately
98 MW during the summer and 62 MW during the winter of
capacity and associated energy from the CDWR, and 30 MW of
capacity and associated energy from LADWP. In total, Vernon
currently has capacity from non-Edison resources of approxi-
mately 180 MW during the summer and 145 MW during the
winter.
2.43 Vernon’s electric requirements at its peak are approxi-
mately 195 MW, so during the summer months, Vernon has its
own non-Edison resources to obtain over 92% of its capacity.
2.44 In addition, Vernon is able to purchase economy energy
during off-peak hours from non-Edison sources at the rate of
approximately 70 MW.
2.45 Vernon operates its diesels, its Hoover power, CDWR,
and LADWP purchases, and the gas turbines, pursuant to
Edison’s Special Condition 12; Vernon’s Palo Verde ownership
interest is integrated pursuant to the Edison-Vernon Palo Verde
IOA.
2.46 Vernon is increasing its outside resources even beyond
what it had as of 1989.
34
3. VERNON’S FORECLOSURE DAMAGE CLAIMS
3.1 In support of its foreclosure claims, Vernon alleges that
Edison unlawfully restrained Vernon from purchasing bulk power
from suppliers other than Edison by denying Vernon access to its
transmission lines. Specifically, Vernon contends that Edison
should have given the City additional transmission -over the
Pacific Intertie and over certain other EHV lines extending to the
Southwest, as well as unconstrained transmission over Edison’s
220 kV network for Vernon’s purchases from CDWR. Vernon
further alleges that as a result of this foreclosure, as set out in
Claims I and II of Vernon’s First Amended Complaint, the City
was forced to purchase wholesale power from Edison at prices
higher than it would otherwise have had to pay. Vernon claims
that it was thus unable to compete with Edison in the provision of
retail electric service.
3.2 Vernon calculates its damages resulting from the foreclo-
sure as the difference between the rate Edison charged Vernon
and that which Vernon alleges it could have paid if Edison had
“foreclosed” Vernon’s access to the transmission lines.
3.3 Mr. Whitfield A. Russell, an engineer testifying on behalf
of Vernon, quantified these overcharge claims in five alternative
damage scenarios. Pursuant to the procedural schedule estab-
lished by the Court, Exhibit 2867 is the final version of Vernon’s
damage study and is the only one which could have been
presented by Vernon at trial.
3.4 Vernon’s damage study prepared by Mr. Russell includes
three principal damage scenarios, i.e., the Special Condition 12
capacity claims, the IOA capacity claims, and the energy-only
claim. The two capacity claim scenarios each offer an alternative
formulation, so that there are a total of five different damage
models in the Vernon study.
3.5 These alternative calculations, according to Vernon’s wit-
ness, produce damages ranging from a low of $14,969,341 under
the so called “Energy-Only” calculation to a high of $59,574,440
under the base case “Capacity Damage” calculation. Damages
are calculated for the years 1982 through 1987.
35
3.6 All five of the damage scenarios presented by Vernon
assume that Edison is obligated to provide Vernon with a relative
size share access to Edison’s EHV transmission lines, and uncon-
Strained access to Edison’s 220 kV network. The relative size
share access calculated by Mr. Russell is based upon the ratio of
Vernon’s load divided by Edison’s total load, including the load of
Vernon.
3.7 Under both of Vernon’s IOA capacity damage scenarios,
Vernon is assumed to be able to import new and additional
capacity and energy into the Edison control area, and receive
credit for capacity purchases, pursuant to the provisions of a
hypothetical IOA, upon 18-months notice to Edison of the
proposed additional capacity transactions.
3.8 Although Edison first made Special Condition 12 availa-
ble to Vernon in June 1984, such that resources noticed pursuant
to this provision could be imported to offset demand charges
beginning in January 1987, Vernon’s Special Condition 12 capac-
ity damage scenarios assume that this provision would have been
available for purposes of offsetting Vernon’s demand charge by
1983 rather than 1987.
3.9 In summary, the only conduct of Edison from which
Vernon claims quantifiable damages consists of: (1) the failure of
Edison to provide Vernon with relative size share access to its
EHV transmission lines and unconstrained access to its 220 kV
network; (2) the failure of Edison to provide Vernon with an
Integrated Operations Agreement containing terms acceptable to
Vernon, including a provision requiring Edison to accept into its
control area, and provide capacity credit for capacity imported on
18-months advance notice; and (3) the failure of Edison to have
Special Condition 12 included in its FERC resale rate schedules
four years earlier than this rate provision was included in Edison’s
FERC rate schedules.
3.10 Vernon’s damage study does not segregate damages as to
alleged foreclosure from any particular transmission line.
3.11 Vernon has also argued that Edison improperly inter-
rupted transmission service provided to Vernon for purchases of
non-firm energy from NPC and CDWR pursuant to the inter-
36
ruptible transmission service agreements between Vernon and
Edison. Vernon has not, however, quantified any damages specifi-
cally arising from this alleged conduct.
3.12 Vernon’s “relative size share” claim is premised on the
argument that Vernon is entitled to direct relative size share
acce.s to Edison’s EHV transmission lines, including Edison’s
entitlement on the Pacific Intertie and its transmission facilities
linking Edison with the desert Southwest. The relative size share
entitlement postulated by Vernon would give the City firm trans-
mission service over Edison’s EHV lines in an amount determined
by first calculating Vernon’s load as a proportion of Edison’s total
load and then multiplying this percentage figure by the megawatt
capacity of the particular transmission lines. Vernon claims that
Edison was obligated under the antitrust laws to offer this type of
access even in the absence of a specific request by the City and
even if Edison is unaware that access was desired.
3.13 The Court finds that Vernon has never made a formal
request to Edison for relative size share firm transmission access
3.14 In addition to this direct relative size share access,
Vernon contends that it is entitled to unlimited access to Edison’s
220 kV network provided there is sufficient capacity to meet the
total demand, and if the grid is unable to handle all the demand,
that the constraint on the system should be shared.
3.15 Edison admits that it has not given Vernon direct rela-
tive size share access to its transmission lines as assumed in
Vernon’s damage study.
3.16 If Edison granted Vernon relative size share access when
Edison was fully utilizing its transmission lines to import low cost
power, the result would be to shift the benefit of the low cost
power to Vernon and away from Edison’s other customers.
3.17 Exhibits A, B and C attached by Vernon to its “Double
Dip” Motion demonstrate the shifting of benefits that would
occur had Edison acceded to a Vernon demand for greater access
to Edison’s transmission lines.
3.18 Exhibit C is a specific example of how the type of access
assumed by Vernon in its damage claims would discriminate in
37
Vernon’s favor and against Edison’s retail customers. Page | of
that exhibit shows that the wholesale customer shares equally and
proportionately in the benefits of Edison’s low-cost imported
energy. Pages 2 and 3 of that exhibit reveal how providing a 10%
relative size share access, with the remainder purchased pursuant
to an average cost-based wholesale rate, would discriminate in
favor of the wholesale customers and against the retail customers.
As can be seen on page 3, as a result of the “double dip,”’ the
energy costs of the wholesale customer are decreased, with
additional costs imposed on the retail customers. This dispropor-
tionate access would result in the wholesale customer obtaining a
higher percentage of its requirements from the low-cost power,
while the retail customers would receive a lower percentage of
their requirements from the same source.
3.19 To the extent the foregoing Findings of Fact are also
Conclusions of Law, they are to be construed as Conclusions of
Law as well.
B.
CONCLUSIONS OF LAW
4. STANDARDS FOR GRANTING SUMMARY
JUDGMENT
4.1 Summary judgment is a useful tool for narrowing the
issues to be tried in antitrust proceedings. See Matsushita Electric
Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86
(1986); Richards v. Nielsen Freight Lines, 810 F.2d 898, 902 (9th
Cir. 1987); Universal Analytics, Inc. v. MacNeal-Schwendler
Corp., 707 F. Supp. 1170, 1173-74 (“Universal Analytics’).
4.2 Summary judgment is appropriate in an antitrust case
involving a regulated electric utility. See City of Mt. Pleasant,
Iowa v. Associated Electric Coop, Inc., 838 F.2d 268, 273 (8th
Cir. 1988) (the court expressly declined to accept the plaintiff's
‘That is, access to low-cost energy both from direct transmission use
and indirectly through Edison’s resale rates.
38
contention that “a different, heightened standard for summary
judgment applies in complex antitrust cases.”’).
4.3 A moving party is entitled to summary judgment when
“there is no genuine issue as to any matenal fact” and the movant
“is entitled to a judgment as a matter of law.” See Fed. R. Civ.
Proc. 56(c). Under the Celotex Court’s interpretation of this rule,
summary judgment is mandated “against a party who fails to
make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the
burden of proof at trial.” Celotex Corp. v. Catrett, supra, 477 U.S.
at 322.
4.4 The Court concludes that there is no genuine issue as to
any material fact, and that Edison’s Foreclosure Motion can be
decided as a matter of law. The Court further notes that Vernon
appears to agree with Edison that in this case, the sufficiency of
Edison’s proffered business justification is a matter of law and is
thus appropriate for resolution pursuant to Edison’s Foreclosure
Motion. Vernon explicitly states that “Edison’s asserted business
reasons for denying access to Vernon are insufficient as a matter
of law.” Vernon's Statement of Genuine Issues,’ Issue No. 4, at 3.
See, id., Issue Nos. 5, 12-13, at 3-4. Moreover, Vernon failed to
submit any facts sufficient to controvert or raise a factuat dispute
underlying the issue of legitimate business justification. See, e.g.,
Vernon's Opposition Memorandum at 22-27.
5. ELEMENTS OF A § 2 CLAIM FOR MONOPOLIZA-
TION AND ATTEMPTED MONOPOLIZATION
5.1 To prove the offense of monopolization under § 2, Vernon
must show that (1) Edison possesses monopoly power in a
relevant market, (2) Edison willfully acquired or maintained that
power, and (3) Vernon suffered causal antitrust injury. Oahu Gas
Service, Inc. v. Pacific Resources, Inc., 838 F.2d 360, 363 (9th
“Vernon's Statement of Genuine Issues” refers to Vernon's State-
ment of Genuine Issues of Fact Submitted in Opposition to Edison’s
Foreclosure Motion.
39
Cir.), cert. denied, 109 S. Ct. 180 (1988) (“Oahu Gas Service’),
Catlin v. Washington Energy Co., 791 F.2d 1343, 1347 (9th Cir.
1986).
5.2 To prevail on a claim of attempted monopolization under
§ 2, Vernon must demonstrate that (1) Edison had the specific
intent to control prices or destroy competition; (2) Edison en-
gaged in predatory or anticompetitive conduct directed towards
accomplishing that unlawful purpose; (3) there was a dangerous
probability that Edison would succeed in its endeavors: and
(4) Vernon suffered causal antitrust injury. See California Com-
puter Products, Inc. v. IBM Corp., 613 F.2d 727, 736 (9th Cir.
1979).
5.3 To show that Vernon’s claims constitute § 2 violations
under either theory, Vernon must show that these claims consti-
tute anticompetitive conduct that caused antitrust injury to
Vernon.
5.4 In its Foreclosure Motion, Edison assumed, solely for the
purposes of the Foreclosure Motion, that there was competition
between Edison and Vernon, that Edison had monopoly power in
a properly defined market, and that Edison’s transmission lines
are essential facilities. For the purpose of ruling on this Foreclo-
sure Motion, the Court also makes these assumptions, and makes
no findings and has reached no conclusions on the issues of
competition, monopoly power, or essential facilities.
5.5 In regard to the issue of whether Edison’s transmission
lines are essential facilities, the Court finds that there are factual
questions on this issue, and that such factual questions required
the denial of Vernon’s Motion for Partial Summary Judgment on
the Essential Facilities Claim (Vernon’s “Essential Facilities
Motion”’). The Court notes, however, that credible arguments can
be made that Edison’s transmission facilities are not essential
facilities within the meaning of the antitrust laws.
5.6 With respect to the issue of franchise competition, the
Court finds that there are factual questions and that such factual
questions required the denial of Vernon’s Motion for Partial
Summary Judgment on the Franchise Competition Claims
(Vernon’s “Franchise Competition Motion’’).
40
6. ANTITRUST OBLIGATIONS IMPOSED UPON A
COMPANY WITH MONOPOLY POWER
6.1 There is no general unqualified duty for a firm possessing
monopoly power to cooperate with its business rivals. Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 600.
6.2 A monopolist has no duty to reduce its prices in order to
help consumers, Berkey Photo, Inc..v. Eastman Kodak Co., 603
F.2d 263, 294 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980),
or any obligation to extend a helping hand to new market entrants
or to help its competitors survive or expand their businesses,
California Computer Products, Inc. v. IBM, supra, 613 F.2d at
744.
6.3 As the Ninth Circuit has recently acknowledged:
[I]t is consistent neither with Berkey Photo nor with the
body of antitrust law as a whole to say that a holder of lawful
monopoly power must passively concede every time someone
else demands the right to do some portion of what that firm
does, regardless of whether the services at issue are per-
formed within the scope of the lawfully acquired monopoly
and regardless of whether the ‘monopolist’ is merely con-
ducting itself in a way that any other (non-monopolist) firm
would under the circumstances.
Catlin v. Washington Energy Co., 792 F.2d at 1347, quoting
Grason Electric Co. v. Sacramento Mun. Utility Dist., 571
F. Supp. 1504, 1517 n.17 (E.D. Cal. 1983).
6.4 There are certain occasions, however, when a court will
impose affirmative obligations on a monopolist. See, e.g., Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. at 601.
Where the monopolist’s competitor is the monopolist’s customer
as well, the antitrust laws may impose duties on the monopolist to
ensure that the monopolist’s conduct does not unjustifiably impair
its customer’s ability to compete. See Olympia Equipment Leas-
ing, 797 F.2d at 376; Oahu Gas Serv., 838 F.2d at 368.
6.5 Although affirmative duties are imposed on a monopolist,
“[t]hese duties are not absolute, however, they arise only when
there is no justification for refusing to aid a competitor.” Oahu
i
4]
Gas Service, supra, 838 F.2d at 368; Aspen Skiing, supra, 472
U.S. at 604-05. Thus, even if the monopolist has affirmative
duties to its competitors, if the monopolist had a legitimate
business justification for its conduct, the plaintiff cannot prevail
on its claim of a violation of § 2. See, e.g., Oahu Gas Service,
supra, 838 F.2d at 368; Image Technical Service, Inc. v. Eastman
Kodak Co., 90 Daily Journal D.A.R. 4702, 4705 (9th Cir. 1990);
Theee Movies of Tarzana v. Pacific Theatres, Inc., 828 F.2d 1395,
1400-1401 (9th Cir. 1987), cert. denied, 108 S. Ct. 1028 (1988).
See also, Universal Analytics, supra, 707 F. Supp. at 1180.
6.6 Under this standard, even the presence of a predatory
motive “will not make otherwise lawful conduct (i.e., conduct
engaged in for a legitimate business purpose) unlawful.” Univer-
sal Analytics, supra, 707 F. Supp. at 1180 (citation omitted). As
the Ninth Circuit in Oahu Gas Service stated:
Where a monopolist’s refusal to aid a competitor is based
partially on a desire to restrict competition, we determine
antitrust liability by asking whether there was a legitimate
business justification for the monopolist’s conduct. See Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585,
105 S. Ct. 2847, 86 L.Ed.2d 467 (1985): Dimidowich v. Bell
& Howell, 8Q3 F.2d 1473, 1478 (9th Cir. 1986)>Drinkwine v.
Federated Publications, Inc., 780 F.2d 735, 740 (9th Cir.),
cert. denied, 475 U.S. 1087, 106 S. Ct. 1471, 89 L.Ed.2d 727
(1986).
Oahu Gas Service, supra, 838 F.2d at 368.
6.7 Under this view of the legitimate business justification
defense, the Ninth Circuit has found a variety of conduct not to
be in violation of the antitrust laws. See, e.g, Oahu Gas Service,
838 F.2d at 360 (monopolists-suppliers’ decision not to expand
refinery justified where investment required would have resulted
in negative return because of price controls); The Jeanery, Inc. v.
James Jeans, Inc, 849 F.2d 1148, 1159-60 (9th Cir. 1988)
(improvement of the defendant’s distribution network); Mozart
Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342,
1349 (9th Cir. 1987), cert. denied, 109 S. Ct. 179 (1988)
(“Mozart”) (quality control over the products and services pro-
42
vided by the defendant); Drinkwine v. Federated Publications,
Inc., 780 F.2d 735, 740 (9th Cir. 1985), cert. denied, 475 U.S.
1087 (1986) (same).
7. THE CONDUCT CHALLENGED BY VERNON DOES
NOT VIOLATE § 2 OF THE SHERMAN ACT
(a) Vernon's Relative Size Share Access Claim —
7.1 Even assuming that Edison has monopoly power and
viewing Edison’s transmission facilities and nights as an “essential
facility”, Vernon cannot sustain its allegations of an antitrust
violation premised on Edison’s refusal to provide relative size
share transmission access. Under the essential facilities doctrine,
Edison is only required to give Vernon reasonable access to its
transmission network. See, e.g., Southern Pacific Communications
Co. v. AT&T Co., 740 F.2d at 1009; In Re Air Passenger
Computer Reservations Systems Antitrust Litigation, 694
F. Supp. 1443, 1451 (C.D. Cal. 1988). Reasonable access does
not include that which would harm Edison’s other customers or
~which would be impractical. Southern Pacific Communications
Co. v. AT&T Co., supra, 740 F.2d at 1009, quoting Hecht v. Pro-
Football, Inc., 570 F.2d 982, 992-93 (D.C. Cir. 1977), cert.
denied, 436 U.S. 956 (1978).
7.2 Moreover, even complete denial of access to an essential
facility is not an antitrust violation where there is-a tegitimate
business justification for the denial. See, e.g. Image Technical
Service, Inc. v. Eastman Kodak Co., supra, 90 Daily Journal
D.A.R. at 4705; Becker v. Egypt News Co., Inc., 713 F.2d 363,
366 (8th Cir. 1983); Venture Technology Inc. v. Nat'l Fuel Gas
Co., 1980-81 Trade Cas. (CCH) ¥ 63,780, at 78-169 (W.D.N.Y.
1981), rev'd on other grounds, 685 F.2d 41 (2d Cir.), cert. denied,
459 U.S. 1007 (1982).
7.3 Under the standards articulated in the foregoing cases,
Edisen’s failure to allow Vernon “relative size share” access to
Edison’s EHV lines is not unlawful anticompetitive conduct.
Vernon has conceded that if Edison granted Vernon the access it
has demanded, the costs for Edison’s other customers would
increase. Even assuming competition exists between Edison and
43
Vernon, Edison is not obligated by the antitrust laws to confer a
benefit on Vernon at the expense of its own customers. Town of
Massena v. Niagara Mohawk Power Corp., 1982-82 Trade Cases
(CCH) ¥ 63,526 (N.D.N.Y. 1980), see also, Hecht, 570 F.2d at
992-93 (“antitrust laws do not require that an essential facility be
shared if such sharing would be impractical or would inhibit the
defendant’s ability to serve its customers adequately”).
7.4 Edison’s justification for not granting Vernon relative size
share access is distinguishable from that proffered by the utility,
and rejected by the Supreme Court, in Otter Tail Power Co. v.
United States, 410 U.S. 366, 372 reh'g denied, 411 U.S. 910
(1973). In Otter Tail, the Court addressed a situation where the
Otter Tail Power Company had refused to sell wholesale power to
municipal systems and refused to wheel power as well. Otter
Tail’s total refusats were motivated by an intent to retain the
municipals as -all-requirements customers. This result was
achieved by these absolute refusals to deal on an “essential
facility.” Otter Tail did not argue that it lacked excess transmis-
sion Capacity to provide transmission service or that its transmis-
sion system could not accommodate new imports wheeled into its
municipal customers. Otter Tail’s only justification for its refusals
to deal was the desire to keep its municipals (and future
municipals) as captive customers.
7.5 The facts now before this Court are not analogous to
those of Otter Tail. First, Edison has not refused to sell wholesale
power to Vernon. Edison has had in place a partial requirements
_ resale rate and there is no evidence that Edison ever threatened,
or even suggested, that it would terminate that service. Second,
Edison has not refused to wheel power to Vernon. As is stated
above, Edison has provided Vernon with significant transmission ~
service (or “wheeling”) for outside resources, and as a result,
Vernon is now buying relatively little power from Edison. Most of
Vernon’s power needs are being met from- outside resources
“wheeled” to Vernon’by Edison. Third, Edison’s denial of access
to its transmission system was motivated by a desire to benefit its
own customers rather than just Vernon. This is a legitimate
business justification.
44
7.6 As a matter of law, Edison’s conduct with respect to
transmission has not been unreasonably exclusionary.
(b) Vernon's IOA Claim
7.7 The issue in regard to the IOA claim is not whether
Edison can foreclose access to outside resources since it is clear
that Edison has offered Vernon an IOA and access to outside
resources. An IOA and access has been made available to Vernon
on the same terms and conditions as for the other Resale Cities;
Vernon made a decision to restrict its owr IOA to its Palo Verde
purchases.
7.8 As with Vernon’s demand for relative size share access, to
the extent that Edison had a duty to integrate Vernon’s power
purchases, that duty is not absolute; it is limited “by Edison’s
legitimate business justifications.
7.9 Even assuming an obligation of Edison to furnish a
different IOA than what was actually offered to Vernon, the
Court concludes that Edison had a legitimate business justifica-
tion for not providing Vernon with an IOA with only an 18-month
notice period for capacity additions to the Edison control area.
-7.10 The Court further notes that Vernon has previously
asserted, and the FERC has concluded, that a three-year notice
~ period is appropriate, and hence antitrust liability cannot be
premised in this action based upon an IOA that has only an 18-
month notice period.
7.11 Vernon’s damage study improperly assumes that the
failure of Edison to provide an IOA with an 18-month notice
provision was unlawful, since the failure to provide Vernon with
an IOA with an 18-month notice provision is not an antitrust
violation.
712 Vernon has presented no evidence which raises a iniable
issue of fact with respect to the IOA. »
(c) Vernon's Special Condition 12 Claim
7.13 In that the Court has concluded that there is and has
been a legitimate business justification for Edison refusing to
45
allow the import of capacity resources into the Edison control
area on less than three-years’ notice, the Court further concludes
that Edison was under no obligation under the antitrust laws to
offer Special Condition 12 to Vernon.
7.14 Vernon’s Special Condition 12 claim is analogous to that
raised by the plaintiff in Olympia Equipment Leasing Co. v.
Western Union Telegraph Co., supra, 797 F.2d at 376, and was
rejected by the court in that case. In Olympia, the plaintiff alleged
that Western Union’s withdrawal of assistance in marketing telex
equipment constituted a Sherman Act § 2 violation. The court
rejected the plaintiff's contention. Reasoning that a monopolist
has no generalized duty to extend a helping hand to its competi-
tors. The court concluded that Western Union’s withdrawal of
voluntary assistance could not possibly constitute a § 2 viofation.
7.
If a monopolist does extend a helping hand, though not
required to do so, and later withdraws it as happened in this
case, does not incur antitrust liability? We think not..
Since Westen Union had no duty to encourage the entry of
new firms into the equipment market, the law would be
perverse if it made Western Union’s encouraging gestures
the fulcrum of an antitrust violation.
Id., 797 F.2d at 376.
7.15 This rationale applies equally to Vernon’s contentions
concerning the availability of Special Condition 12. Here, Edison
had no duty under the antitrust laws to provide Special Condition
12 treatment to Vernon. Having no such obligation, its failure to
provide Special Condition 12 earlier than it actually did cannot be
the basis of a § 2 violation.
7.16 The Court concludes that Edison had a legitimate busi-
ness justification for not implementing Special Condition 12
earlier than it did.
7.17 Vernon’s damage study improperly assumes that the
failure of Edison to initiate Special Condition 12 earlier than it
did was unlawful, since the failure to initiate Special Condition 12
earlier was not an antitrust violation.
46
7.18 Vernon has presented no evidence which raises a triable
issue of fact with respect to Special Condition 12.
7.19 Because two of Vernon’s damage scenarios are predi-
cated upon the existence of Special Condition 12 years before it
was actually offered, the conduct underlying these scenarios is not
a violation of § 2 of the Sherman Act.
(d) Vernon's Interruptible Transmission Service Claim
7.20 The granting of summary judgment with respect to
Vernon’s contentions based upon purportedly improper denials,
interruptions, or curtailments of ITS for nonfirm energy is man-
dated on three separate grounds.
7.21 First, Vernon has failed to quantify any damages arising
from any of these interruptions. As the Court explained in its
“Memorandum of Decision” (at 14-16), a plaintiff must show
some measurable damages flowing from an antitrust injury in
order to meet the requirements of § 4 of the Clayton Act, 15
U.S.C. § 15. Vernon has failed to make this showing.
7.22 Second, Vernon’s concerns in regard to interruptions at
best involve the interpretation of contract language giving Edison
discretion as to when interruptions can be made. A contractual
dispute as to the reasonableness of conduct is not enough to
support an antitrust claim. See Universal Analytics, supra, 707
F. Supp. 822, 828 (N.D. Cal. 1986). See, also, Colorado Inter-
state Gas Co. v. Natural Gas Pipeline Co., 19892 Trade Cas.
(CCH) § 68,751, at 61,950 (10th Cir.).
7.23 Third, the Court concluded that Vernon has failed to
demonstrate that Edison’s reasons for interrupting were not
legitimate.
~ 8 THE CHALLENGED CONDUCT VIEWED SEPA-
RATELY AND AS A WHOLE
8.1 In examining Edison’s conduct that is alleged to give rise
to damages, the Court has concluded that the challenged conduct
does not constitute a violation of § 2 of the Sherman Act. None of
the challenged conduct individually amounts to an antitrust
p
47
violation and viewing the conduct in its totality does not change
any of the conclusions as to the propriety of the conduct.
8.2 At times in its opposition, Vernon argued that a number
of other Edison alleged acts or conduct constituted evidence of
violations of the antitrust laws. Vernon, however, failed to link any
of these other alleged acts to any quantifiable damages, and
Vernon makes no claim of damages or injury arising from these
alleged acts. Nor has Vernon presented any arguments to demon-
Strate that any such acts or conduct has any sort of synergistic
effect when viewed as a whole.
8.3 Accordingly, for the reasons set out at pages 19-20 of the
Court’s Memorandum of Decision, the Court concludes that
summary judgment in favor of Edison and against Vernon is
appropriate.
9. CONCLUSIONS
9.1 To the extent that the foregoing Conclusions of Law are
also Statements of Fact, they are intended to be Findings of Fact
as well.
9.2 Defendant Edison is entitled to summary judgment on
Vernon’s foreclosure damage claims in this action.
9.3 Having granted summary judgment in favor of defendant
Edison and against plaintiff Vernon on all damage claims in this
action and made the above stated Findings and Conclusions, the
Court asked plaintiff Vernon to advise the Court of what re-
mained for trial. Vernon advised the Court that the foregoing
Findings of Fact and Conclusions of Law address and dispose of
all remaining claims of Vernon herein, including those in Claim I
of the First Amended Complaint for which Vernon is seeking
relief. As a consequence, judgment in this action should now be
entered in favor of defendant Edison and against plaintiff Vernon,
with Edison to recover its costs of suit herein. -
Dated: August 30, 1990
MARIANA R. PFAELZER
Mariana R. Pfaelzer
United States District Judge
48
CERTIFICATION OF SERVICE
I hereby certify that I have served the foregoing APPEL-
LANT’S DOCKET SHEET on all parties of record in this
proceeding, Civil No. 90-56281, by placing a copy of the docu-
ment in a properly addressed envelope and sending by overnight
courier to the following parties or attorneys of parties:
Paul G. Bower, Esq.
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 3860
Los Angeles, California 90067-3026
DATED: December 12, 1990
JOSEPH J. OMALLEY
Joseph J. O’Malley
Attorneys of Record for
Plaintiff-Appellant City of Vernon
49
CASE NO. CV 83-8137 MRP
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CITY OF VERNON, CALIFORNIA,
Plaintiff,
i
SOUTHERN CALIFORNIA EDISON COMPANY,
Defendant.
JUDGMENT
The Court having granted Edison’s Motions for Summary
Judgment on plaintiff's foreclosure claims, rate claims and group
boycott claims, and having filed its Memorandum of Decision and
Findings of Fact and Conclusions of Law thereon, and the issues
having been duly heard and a decision having been duly rendered,
IT IS HEREBY ORDERED AND ADJUDGED that the
plaintiff City of Vernon take nothing in this action, that this
action be dismissed on the merits and with prejudice, and that
defendant Southern California Edison Company shall recover
from plaintiff City of Vernon its costs in this action in the amount
of $
DATED: August 30, 1990
Mariana R. Pfaelzer
United States District Judge
50
GIBSON, DUNN & CRUTCHER
PAUL G. BOWER
ARTHUR L. SHERWOOD
RICHARD D. HALL
333 South Grand Avenue
Los Angeles, California 90071
(213) 229-7000
David N. Barry, III
RICHARD K. DURANT
JANET K. LOHMANN
2244 WALNUT GROVE AVENUE
ROSEMEAD, CALIFORNIA 91770
(818) 302-3844
Attorneys for Defendant
Southern California Edison Company
NO. 83-8137-MRP (MCX)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CITY OF VERNON,
Plaintiff,
Vv.
SOUTHERN CALIFORNIA EDISON COMPANY,
Defendant.
ORDER DENYING VERNON
MOTION FOR RECONSIDERATION
HEARING: October 15, 1990
10:00 a.m.
Courtroom of the Honorable Mariana R. Pfaelzer
TRIAL DATE: None
The motion of plaintiff City of Vernon “For Reconsideration of
this Court’s Granting of Defendant Southern California Edison
Company’s Motion for Summary Judgment on Plaintiffs Fore-
closure Damage Claims” (the “Motion”) came on for hearing
5]
before the Court on October 15, 1990, with counsel for both
parties appearing. After hearing and considering the arguments of
counsel and the papers filed in connection with this Motion, and
the Court having determined that there is not good cause for the
granting of the Motion, the Motion of the plaintiff City of Vernon
is hereby denied.
DATED: October 22, 1990
Mariana R. Pfaelzer
United States District Judge
PREPARED AS TO FORM:
GIBSON, DUNN & CRUTCHER
PAUL G. BOWER
ARTHUR L. SHERWOOD
RICHARD D. HALL
DaAvID N. Barry, III
RICHARD K. DURANT
JANET K. LOHMANN
By
Arthur L. Sherwood
Attorneys for Defendant
Southern California Edison Company
APPROVED AS TO FORM:
PAUL HASTINGS, JANOFSKY. &
WALKER
JOSEPH J. O’MALLEY
By
Joseph J. O’Malley
Attorneys for Planitiff
City of Vernon
§°
~
No. 90-1544
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
September Term, 1990
SOUTHERN CALIFORNIA EDISON COMPANY,
Petitioner
VS.
FEDERAL ENERGY REGULATORY COMMISSION,
Respondent
FILED July 5, 1991
ORDER
Upon consideration of petitioner's motion for voluntary dismis-
sal and it being represented that no opposition thereto will be
filed, it is
ORDERED that petitioner’s motion be granted. The Clerk is
directed to send a certified copy of this order to respondent in lieu
of formal mandate.
FOR THE COURT:
Constance L. Dupré, Clerk
By: /s/ MARYANNE McMAIN
MaryAnne McMain
Deputy Clerk
53
[27 FERC { 63,053]
Southern California Edison Company, Docket No. ER81-177-
002 (Phase II) Initial Decision
(Issued May 18, 1984)
Jacob Leventhal, Presiding Administrative Law Judge
Procedural History
The genesis of this proceeding lies with a rate increase tendered
for filing by Southern California Edison Company (Edison or
Company) on December 16, 1980.... The instant proceeding,
entitled Phase II, was severed from the general rate filing after
Vernon’s request for phasing, dated March 17, 1982. was granted
on May 3, 1983....
Essentially, Phase II was established to determine the reasona-
bleness of the Integrated Operations Agreement (IOA), a series
of identical agreements which Edison has entered into indepen-
dently with Cities. The IOA is a document which enumerates the
services to be provided by Edison to its customers and dictates the
terms and conditions of those services. Acceptance of the IOA
has been treated by Edison as a condition precedent to a cus-
tomer's receipt of partial-requirements service. Vernon does not
presently receive such service but is desirous of becoming a
partial-requirements customer of Edison’s. Vernon, however,
takes issue with the terms of the IOA proffered by Edison in
return for rendering the partial-requirements service. Vernon
maintains that this JOA, which is identical to those already in
existence with Cities, contains provisions which are unreasonable
and onerous. Cities have joined with Vernon in requesting a major
alteration of the IOA.
54
[65,195]
Il. Amount of Energy Available Under Scheduled TOU-R When
a City Capacity Resource Is Not in Operation
The Joint Statement of Issues (Exhibit 302) poses the issue as
follows:
Is the method in the IOA for establishing the responsibility
for meeting a city’s load requirements a fair and reasonable
approach, or does this method result in unfair and unreason-
able restrictions on the amount of energy which can be
purchased by : a city under Schedule TOU-R?
This issue involves Sections 15.1.2, 16.2, and 16.2.2.1 of the
Integrated Operations Agreement (IOA). The Cities, who are
signatories of the IOA, and Vernon, which is not a signatory,
Suggest an amendment of the terms of these sections on the
ground that they result in an unjust, unreasonable, and discrimi-
natory rate. The problem, more concisely, concerns the provisions
of these sections which provide that the amount of energy
available to a city each hour under the partial-requirements rate
schedule TOU-R shall be the total energy requirement of the city
during that hour reduced by the greater of (i) the energy during
that hour from the city’s integrated resources, or (ii) the amount
of energy capability associated for that hour with the then
effective capacity credit.
Under the terms of the IOA, a city’s own generation units are
integrated with Edison’s capacity. The capacity credit is calcu-
lated by taking the rated capability of those units and reducing it
by the amount of reserve the city contributes to the Edison
system.
The critical problem arises when a city’s generating facilities
are closed down for periodic maintenance, repair, or any other
reason. Then, the JA provides that the city shall purchase from
Edison “contract energy.’ Contract energy is based upon the
incremental costing concept which assumes that the use of
Edison’s facilities consumes the most expensive fuel.
55
According to Edison, the IOA divides the load of a city into
two parts with the capacity credit as the dividing line. Up to the
limit of its capacity credit, the city is responsible for supplying its
own energy needs. If it cannot do so, then it may either replace
the energy from
[65,196]
some other source or purchase contract energy from Edison. This
is a below-the-line transaction.
For energy requirements above the Capacity credit, the city is
charged on an average cost basis. This is an above-the-line
transaction.
Edison defends this practice on the ground that the city is not
paying a demand charge for energy within the limits of its
Capacity credit. If this provision were to be eliminated, Edison
asserts that the cost of maintaining the utility’s capacity would be
passed on to other customers and therefor would be unfair.
* * *
[65,197]
+ * o
Ruling
. * *
Thus the question is: Do the partial-requirements customers
taking energy under the IOA and the TOU-R schedule pay the
demand charge associated with the Capacity credit?
The testimony and the briefs deal with the issue at some length.
However, at the core of the controversy is whether the demand
charge paid by the partial-requirements customers under the IOA
and the TOU-R schedule include Capacity required to replace the
Customer’s own generation for which it has received a Capacity
credit. If a demand charge has been paid, the customer is entitled
to the energy up to the limit of the demand at average system
cost.
56
I agree with Staff that the partial-requirements customer
should be able to purchase the maximum amount of energy
[65,198]
each hour associated with the maximum demands it imposes on
the Edison system as reduced by the capacity credit it receives. I
similarly agree with Staff that incremental pricing is appropriate
for customers who have not paid their fully allocated costs.
* * *
Edison attempts to distinguish the present proceedings from
either Kansas or Northern. Edison argues that the latter case
involved a true capacity reservation which prompted the Judge to
find that the limitation was not cost justified and would result in
an overrecovery of energy costs. However, the decision also
turned on the proposition that a customer is entitled to the energy
for which a demand charge has been paid.
The argument made by Edison that Northern involved another
type of capacity reservation is also not convincing. Although the
details of the tariff provision differ from those in the present
proceeding, the principle enunciated is the same. If the partial-
requirements customer pays demand charges on the same basis as
the full-requirements customer, it should be entitled to the same
energy charges up to the limit of the demand charge.
Edison has complete control of the dispatch of Cities’ generat-
ing units since their units are integrated with Edison’s units.
Edison operates the Cities’ units according to control area re-
quirements. Edison does not schedule power to the Cities like it
does with utilities outside its control area. (Ex. 367-T at 9-11.)
Since Edison does not operate Cities’ generating units according
to Cities’ requirements, its premise that the IOA’s capacity credit
provision changes the character of the Cities-Edison relationship
is not accurate. In reality, Cities’ relationship with Edison is
always that of a utility-customer and never one of utility-to-
utility. Edison is responsible for supplying all of Cities’ energy
needs — and thus all energy within the limit of the demand
charge should be supplied on an average cost basis.
57
The Cities, with generation, are in fact full-requirement cus-
tomers, and they are properly receiving the same TOU-R rate as a
customer without generation. Granting a demand credit for the
use of a City’s generating unit does, by definition, classify it as a
partial-requirements customer, but only on paper. In Northern
and Kansas, the Cities there operated their generation indepen-
dently of the suppliers. A partial-requirements customer of
Edison does not truly operate its generation as baseload or
peaking since Edison has complete control over the customer’s
generation. Edison operates these units as if they were owned by
Edison. (Id. at 9.) For the use of that generation, the Cities
obtain a credit against its demand charge. But all of a city’s load is
part of the control area load, whether or not it has its own
generation, and Edison is responsible for the entire control area
load.
I find that adoption of Staffs Proposal will eliminate the
undesirable portion of the IOA relating to this issue.
III. City Contribution to Installed Reserves
Section 12.2 of the IOA provides that the city’s contribution to
installed capacity reserves (expressed as a percent of the rated
capability of the city’s capacity resources) is determined annually
and shall be equal to the average of the five annual reserve
margins (expressed as a percentage of annual peak) of the
combined firm loads of the parties planned for the next five years.
* * *
The nub of the dispute is really whether the price the Cities are
paying for the service received is higher than warranted. Under
the
[65,199]
IOA, a city’s TOU-R billing demand is reduced by a capacity
credit. This credit is computed by subtracting the reserve margin
from the rated capability of the city’s generation. Thus, a higher
reserve margin results in a lesser capacity credit with a resulting
greater billing demand.
eT ae
58
Cities, Vernon, and Staff cbject to the method used and the
calculation of the reserve margin for a city. The opposition notes
that for its own reserve, Edison uses 18%+ or —2% applied to its
load to convert the percent reserve to kilowatts. The Edison
percentage is a target reserve used for planning, not billing. On
the other hand, the projected reserve percentage directly affects
the capacity credit and consequently the cost of energy to the
cities. Thus, they and Staff contend that for billing purposes a
precise standard is needed for application to the cities. They
propose a flat eighteen percent, the center point of the band used
by Edison for its own reserve calculation. The eighteen percent is
to be applied to the city’s load, not capacity. If conditions change,
as it is recognized could occur, the reserve margin can be
amended in future rate proceedings. (Staff 1.B. at 41-45.)
* + *
Ruling
[65,200]
he formula used to convert percent reserve requirements to
kilowatts should be the same for a city as it is for Edison. Under
the proposal by Vernon, supported by Staff, the city’s capacity
credit is used as a proxy for the load of the resale city and thus
applies the percentage to the capacity credit. This is a reasonable
method and is adopted here.
The proposal by Cities, Vernon, and Staff for the application of
eighteen percent to the Cities’ load to ascertain the required
reserve margin leads to a reasonable result and is also adopted.
Section 12.2 will be amended accordingly.
* * *
[65,201]
VI. Qualifications for Integration of City Capacity resources
VII. Procedures for Integration of City Capacity Resources
VIII. Qualifications for Integration of City Transmissions
Facilities
59
Issues VI, VII, and VIII present questions as to the reasonable-
ness of various provisions of Section 8 of the Integrated Opera-
tions Agreement pertaining to the qualifications and procedures
for integrating city Capacity resources and transmission facilities.
Although these three issues have been individually briefed by
some of the parties, they will be discussed together under ihis
heading since they are similar in content.
[65,202]
Section 8.1.2.]
Section 8.1.2.1 is the first of these provisions to be discussed by
the parties. It reads as follows:
A City Capacity Resource Proposed by City shall be of
appropriate size, type, reliability, design and operating char-
acteristics and shall be capable of performing in a manner
equivalent to Edison Capacity Resources.
* * *
Ruling
Rather than clarifying the qualifications for integration of a city
capacity resource, Edison’s proposal would create more ambigu-
ity. Not only would it be extremely difficult to ascertain whether
the California standard has been met, as Vernon and Staff point
out, it does not add anything of value to “good utility practice.”
Section 8.1.2.1 as it stands now, is also unacceptable. It leaves to
much discretion in Edison’s hands for rejecting a proposed inte-
gration. At the same time it creates an undue burden on a City to
try to duplicate Edison’s facilities. Accordingly, the proposal put
forth by Staff, Vernon, and Cities is adopted.
* * *
... On balance, the existing provisions are not unfair and the
recommended changes are rejected.
| ae
60
Section 8.1.3.3
Section 8.1.3.3 is controversial for much the same reason as
Section 8.1. Section 8.1.3.3 states:
Within 60 days of the later of (i) receipt by Edison of the
information on a proposed City Capacity Resource pursuant
to Section 8.1.3.1 or (ii) the agreement on Transmission
Facilities as required by Section 8.1.2.5, Edison shall inform
City in writing as to its decision regarding acceptance for
integration of the proposed City Capacity Resource. If such
proposed City Capacity Resource meets the qualifications for
integration, Edison shall use its best efforts to integrate the
proposed City Capacity Resource. If such proposed City
Capacity Resource meets the qualifications for integration,
Edison shall use its best efforts to integrate the proposed City
Capacity Resource. If Edison concludes that the proposed
City Capacity Resource does not meet the qualifications for
integration, Edison shall so inform City of Edison’s opinion
and shall, based upon Edison’s preliminary studies, fully state
in detail the reasons for its conclusion. Thereafter, within 30
days following a request by City, Edison shall make available
for examination by City, the plans and specifications for
similar Edison existing or planned capacity resources.
. * +
Ruling
The request that Edison “use its best efforts” to integrate be
deleted is granted for the same reason it was granted with respect
to Section 8.1. Its presence connotes an excessive amount of
discretion in the integration determination. However, there is no
merit to Vernon’s other complaints. The phrases objected to are
not onerous. Accordingly, Section 8.1.3.3 will remain in effect as
is, except that Edison’s obligation to integrate shall be absolute if
the proposed city capacity resource meets the qualifications for
integration.
* * *
[65,208]
+ * w
61
[65,212]
XIII. Peaking and Intermediate Capacity
Issue XIII has been set forth in the Joint Statement of Issues
as follows:
Whether the IOA should be revised to cover the City’s
peaking and/or intermediate generating facilities and, if so,
what the revision should be.
This issue has arisen due to the IOA’s failure to provide for
peaking or intermediate generating facilities, stemming from its
inability to differentiate between baseload, intermediate, and
peaking units.
Cities, Staff, and Vernon are in accord that the root of the
problem lies with the energy restrictions imposed by IOA Section
15.1 and the contract energy provision in Section 16.2. Accord-
ingly, they all agree that the modifications to the above IOA
sections proposed in Issues II and IV would alleviate the flaws
addressed under this heading as well.
Edison, while apparently conceding that a revision is required
in order to allow a city to make economic use of peaking and
intermediate facilities, disagrees with the solution offered by
Cities, Staff, and Vernon.
* * *
The opposition of Cities, Vernon, and Staff is well taken. The
rulings made on Issues II and IV dispose of the problem posed
here. Edison is urging the addition of a new section to the IOA by
the adoption of one of three alternative Suggestions. They main-
tain, and I agree, that the problem has become moot. Further
change is not necessary.
The proposed addition to the IOA sponsored by Edison is
rejected.
62
Findings and Conclusions
Upon consideration of the evidentiary record and the briefs in
this proceeding, it is found and concluded:
(1) Southern California Edison is a public utility under the
Federal Power Act.
(2) The Integrated Operations Agreement herein involve sales
of electric energy and are subject to the junsdiction of this
Commission.
(3) The sections of the Integrated Operations Agreement shall
be modified in compliance with the rulings made in this decision.
(4) The terms and conditions of service contained in the
agreements as modified by the rulings made above have been
shown to be just and reasonable and otherwise lawful.
[41 FERC { 61,188]
Southern California Edison Company, Docket No. ER81-177-
002 (Phase II)
Opinion No. 289; Opinion and Order on Initial Decision
(Issued November 19, 1987)
Before Commissioners: Martha O. Hesse, Chairman; Anthony
G. Sousa, Charles G. Stalon, Charles A. Trabandt and
C. M. Naeve.
{ Note: Initial Decision of the Presiding Administrative Law
Judge, issued May 18, 1984, appears at 27 FERC 4 63,053]
[Opinion No. 289 Text]
1. Introduction and Summary
The case commenced on December 16, 1980, when Southern
California Edison Company (Edison) filed for a general rate
increase for firm service to its wholesale customers. Subsequently,
the proceeding was separated into two phases. Phase I involved
various cost-of-service and rate design issues.' The instant pro-
ceeding, Phase II, deals with the reasonableness of an Integrated
Operations Agreement (IOA) between Edison and certain mu-
nicipal customers.
63
The IOA is a generic agreement which the Cities of Anaheim.
Riverside, Banning, Colton and Azusa, California (Cities) have
each entered into as a Precondition to receiving partial require-
ments service from Edison under rate schedule TOU-R. The City
of Vernon, California (Vernon) has also been offered partial
requirements, integrated operations service similar to that pro-
vided to Cities, but disputes the reasonableness of the IOA which
has been offered to Vernon by Edison. Cities join Vernon in its
dispute with Edison over specific provisions of the generic IOA.
Cities’
[61,490]
existing IOAs with Edison allow them existing IOAs with Edison
allow them to: receive Capacity and energy credit for resources
they may integrate with Edison’s system; pay TOU-R rates when
these integrated resources meet defined availability, scheduling
and reserve requirements: purchase generally higher priced con-
tract energy” or replacement capacity when the integrated re-
source requirements are not met: Participate to some extent in
partial ownership of Edison’s new generating units; and receive
various other integrated operations services and rights. The IOAs
are intended to provide a practical procedure by which Cities can
meet some or all of their electric loads through acquisition of non-
Edison resources, while remaining within Edison’s control area.
Vernon is also eligible to receive partial requirements service
under rate schedule TOU-R. Vernon has not signed the same
type of “generic IOA” entered into by Cities, but does have a
resource-specific IOA with Edison for purposes of integrating its
interest in the Palo Verde Nuclear Generation Station.’ Addition-
ally, Vernon owns diesel generators which are nonintegrated and
operate on its side of Edison’s billing meters. Vernon does not
have a broad agreement with Edison for integrated operation of
other resources.
This proceeding is presently before the Commission on excep-
tions to an Initial Decision in Phase II.4 Briefs On and Opposing
Exceptions were filed by Cities, Edison, Vernon’ and the Commi-
sion trial staff (staff).
64
There are ten issues before the Commission on exceptions, as
follows:°
I. the standard and burden of proof to be applied in
modifying the IOAs;
II. the amount of energy available under Schedule TOU-
R when a City capacity resource is not in operation;
III. the City contribution to installed reserve;
IV. the energy dispatched by Edison from City’s reserve
capacity;
VI. the qualifications for integration of City capacity
resources,
VII. the procedures for integration of City capacity
resources;
VIII. the qualifications for integration of City transmis-
sion facilities;
IX. the replacement capacity;
XI. the contract energy pricing; and
XIII. the peaking and intermediate capacity.
II. Discussion
We affirm the Judge with additional discussion on Issues I and
II. We affirm the Judge on other grounds on Issue IV. We reverse
the Judge on Issues VII and XIII. We summarily affirm the
Judge on Issues III, VI, VIII, 1X and XI.
A. ISSUE I — The Standard and Burden of Proof to be
Applied in Modifying the IOAs
The issue presented is what standard applies when Edison’s
customers, i.e., Cities, seek to modify their executed contracts,
and who bears the burden of proof. We summarily affirm the
Judge’s ruling concerning the standard and burden of proof with
respect to Vernon. We also summarily affirm the Judge’s ruling
65
that Cities can challenge individual provisions of the IOA rather
than having to show that the IOA in
[61,491]
“its totality is unreasonable.”’ We affirm the Judge’s ruling on
Issue I subject to the following clarification of his discussion on
the Mobile-Sierra doctrine.*
Mobile-Sierra establishes the applicable standard governing
rate increases which may be allowed in cases where the utility and
the customer have entered into a contract in which the rate is
fixed for the life of the contract or some other specified period.
Under Mobile-Sierra, a utility with such a fixed-rate contract
cannot file for a rate increase’ under section 205 of the Act that is
contrary to the contract. It can obtain relief under section 206 of
the Act only if it can show that the rates under the contract are
“sO low as to adversely affect the public interest — as where it
might impair the financial ability of the public utility to continue
its service, cast upon other customers an excessive burden. or be
unduly discriminatory.”'°
The Judge stated that Cities “are required to show that the
provisions of the contract are not in the public interest because
the terms are unjust and unreasonable.”'' He ruled that the
Proper method of challenging Cities’ executed IOAs is under
section 206 of the Act where the burden is on Cities and staff as
complainants to establish a prima facie case that the provisions
are unjust and unreasonable. However, the Judge also ruled that
the ultimate burden of persuasion as to the justness and reasona-
bleness of the terms lies with Edison. !
* * *&
Edison states that the IOA provides only Edison with the
option, in limited circumstances, of seeking to modify the rates in
the IOA, and that there is no right reserved by either party to seek
modification of other provisions in the IOA. Edison argues that in
the absence of any reserved right to seek changes, the terms and
conditions of service may be modified only upon a showing that
they are against the public interest.
66
We do not agree. In determining the meaning of the contract,
general principles of contract interpretation apply. As the court
said in Papago Tribal Utility Authority v. FERC in a rate revision
contest, “‘[i]n the absence of ambiguity the intent of the parties
to a contract must be as ascertained from the language thereof
without resort to parol evidence or extrinsic circumstances.’ ”’°
The IOA does not contain any provision which indicates that
Cities waived their nght to seek modification of the IOAs’ terms
and conditions under section 206 of the Act.
[61,492]
We agree with the Judge that Cities and staff have the burden
of coming forward and establishing a prima facie case that the
provisions in the IOA are unjust or unreasonable. However, as the
Judge further correctly noted, section 206 of the Act does not
refer to burden of proof. Thus, it is controlled by section 556(d)
of the Administrative Procedure Act, which imposes the burden
on “the proponent of a rule or order,” but the burden imposed is
one of coming forward with a prima facie case, not the ultimate
burden of persuasion.” Therefore, once Cities and staff present a
prima facie case for relief, the burden shifts to the respondent
Edison to make a persuasive defense.”
B. ISSUE II — Amount of Energy Available Under Schedule
TOU-R When A City Capacity Resource Is Not In Operation
We affirm the Judge’s ruling on Issue II, with the following
discussion. The issue presented is whether the IOA piaces unjust
or unreasonable restrictions on the amount of energy which can
be purchased by a city under rate schedule TOU-R.
* * *
Edison also states that even if a city’s capacity resources were
idle during Edison’s monthly system peak hour, providing reduced
reliability benefits, in the next rate case Edison would not be able
to allocate additional demand costs to the wholesale class since a
city’s capacity credit is always subtracted from the class 12 CP
aia
67
demand for cost allocation purposes. Edison thus views its rela-
tionship with the partial
[61,493]
requirements cities as fundamentally different from that with its
other customers, warranting the pricing of energy corresponding
with idle city Capacity resources at incremental costs. What
Edison overlooks, however, is that a city contributes reserves
along with its capacity resources to compensate Edison for un-
foreseen and planned unit Outages.
Staff argues that the situation described by Edison is extreme
in that a city’s use of a disproportionately large amount of average
Cost energy would occur, if at all, only during relatively short
intervals. The existing IOA prices energy associated with any
unavailable city capacity, during every hour, at Edison’s incre-
mental energy cost. As stated by staff: “[W ]hile there is a kernel
of truth to Edison’s claim that staff's remedy is not totally perfect,
Edison’s alternative remains fundamentally unfair to the IOA
cities.””"* We agree, and believe that staff's proposed remedy to
this problem, adopted by the Judge, is the most reasonable one
presented in the instant proceeding.
C. ISSUE IV — Energy Dispatched by Edison From City's
Reserve Capacity
The issue presented is whether Edison derives a benefit from
energy associated with a city’s reserve Capacity that is not ade-
quately reflected in the IOA and, if so, whether revision of the
IOA is necessary. The Judge stated that Edison receives a cost
benefit” from dispatching a city’s reserve Capacity under the
IOA, but that the benefit has been virtually eliminated through
his ruling in Issue II. Furthermore, he stated that any residual
inequity would be de minimis.*° Although we agree with the
results of the Judge’s ruling, we do so on different grounds.
We agree with Vernon”’ that the J udge’s ruling on Issue II does
not moot Issue IV; however, we do not believe Vernon’s proposed
banking arrangement” is an appropriate remedy. For reliability
purposes, Edison must maintain at least a minimum reserve level
>
68
on its system. Under the IOA, a city is required to contribute
reserve capacity for resources integrated with Edison’s system, a
principle uncontested in this proceeding. Because it has adequate
system reserves, Edison can operate Cities’ resources, including
reserve capacity, to achieve a decrease in system energy costs.
The opportunity to realize this benefit, however, is derived from
the integrated operation of Edison’s control area. This savings
inures to the benefit of all Edison’s customers, including Cities.
Cities will reveive their pro rata share of the system energy
benefit.’ The proposed treatment of the energy benefit to
Edison’s system derived from operating a city’s reserve capacity is
thus reasonable under the IOA.
D. ISSUE VII — Procedures for Integration of City Capacity
Resources
Issue VII involves the appropriate time limit or standard under
which Edison must allow integration of a proposed city capacity
resource with its system. We reverse the Judge regarding sections
8.1.2.3, 8.1.2.4 and 8.1.2.6. We adopt a modified form of staff's
proposal to delete section 8.1.2.4 and revise sections 8.1.2.3 and
8.1.2.6.
Under section 8.1.2.4, a proposed city capacity resource must
be “compatible with (i) resources planned to serve the Edison
Control Area, (ii, the resource schedule, and (iii) other resource
plans periodically submitted by either party to regional agencies
and organizations.” Thus Edison may determine that a city’s
resource is unacceptable by merely altering its resource plan or
submitting other resource plans to unspecified “regional agencies
and organizations.” Section 8.1.2.3 states that integration of such
a proposed city capacity resource shall not require Edison to defer
a proposed capacity resource listed by Edison in the current
resource schedule for which Edison has made substantial financial
or other commitments towards construction, unless the parties
[61,494]
otherwise agree. This provision should be read in conjunction
with section 8.1.2.6, which states that the parties shall agree upon
— °°.
69
the date when such city Capacity resource shall first be included in
the resource schedule for planning purposes.
We agree with Vernon that these Provisions give Edison and
undue amount of discretion. Moreover, even if Edison does not
abuse its discretion, these provisions unreasonably place a city in
an uncertain situation, i.e., guessing whether and when Edison
will permit integration. An example illustrates the potential prob-
lem. Edison is not obligated to integrate a City capacity resource
when Edison’s own Proposed resource would be deferred as a
result. Thus, section 8.1.2.3 would require a city to defer the
resource even though Edison may have the flexibility to defer that
Project or a different project or to include in its plans additional
megawatts of capacity that had been contemplated for a slightly
later date. In short, the IOA would hold a city to a higher
Standard of planning than is normal industry practice. In normal
practice, projects are constantly being added, subtracted, de-
ferred, and accelerated, and the total Capacity available at a given
time is never precisely the capacity level that was previously
planned.
The IOA does not allow for the fact that a city’s involvement in
a project may typically occur at a different stage of project
development than Edison’s involvement. Edison will usually be
involved with a project from its conception. On the other hand, a
city cannot feasibly add Capacity in large increments and may
invest in projects that are already underway. Since the IOA does
not accommodate the difference in lead time inherent in the
difference in the Stage of project development, a city is at a
disadvantage when an attempt is made to coordinate integration
under the IOA with the commencement of a commercial opera-
tion of a generating facility. The result is that the IOA authorizes
Edison to subordinate a completed city project to an Edison
project that may still be in the early stages of development or
which may be deferred or never completed.?®
It is reasonable to maintain the “substantial commitment”
standard of section 8.1.2.3, but with a modification. As proposed
by staff, the IOA would provide a three-year notice for the
integration of a city capacity resource if the resource is less than
fifty percent of a city’s peak load, and a five-year notice if the
70
Capacity resource is greater than fifty percent of a city’s load and
one percent of Edison’s system load. A city seeking to diversify its
sources of capacity would generally make an impact on Edison’s
system of less than one percent of system load. Edison’s capacity
resource planning appears sufficiently flexible to accommodate
such a de minimis fluctuation in Edison’s system resources,
especially in light of a proposed three-year notice for the integra-
tion of a city capacity resource. Indeed, currently Edison requires
a three-year notice of termination for its full requirements cus-
tomers.*© Thus, if any of these customers turn to alternative
sources, Edison apparently believes that such a notice is sufficient
for its planning purposes. Consequently, under these circum-
stances staff's proposed three-year notice requirement for partial
requirements customers who intend to acquire and integrate a
capacity resource®’ is reasonable. However, we find that the
record does not support staff's further proposal that under certain
load conditions a more protective five-year notice provision is
appropriate.
E. ISSUE XIII — Peaking and Intermediate Capacity
The issue presented is whether the IOA should be revised to
specifically address a city’s peaking and/or intermediate resources
and, if so, what the revision should be.
[61,495]
On exceptions, Vernon and Edison claim that the instant
problem is not moot, as stated by the Judge. However, both
Vernon and Edison endorse the concept of voluntary negotiations
ragarding this problem. Furthermore, Vernon, Cities and Edison
note that this issue is before the Commission in Docket No.
ER84-75-000, and can be pursued in that proceeding.
Edison has presented three possible approaches to revising the
IOA to cover a city’s peaking and intermediate generating
facilties.”
As one option, a city may wish to acquire a peaking or
intermediate facility which it dispatches itself on its side of the
meter, after giving Edison adequate notice of the acquisition. The
71
record shows that Edison has an arrangement with Vernon for
operation of its diesel generating units on Vernon’s side of the
4)
meter.
As a second option, a city may wish to integrate a peaking or
intermediate facility under the current IOA provisions. Edison
notes that this may be economically vaiable for a peaking facility
with low energy costs, such as a hydropower peaking resource. A
city would receive a capacity credit against its TOU-R demand
charge and receive the value of low cost energy generated by its
facility as an offset against TOU-R energy charges.
As a third option, a city would receive Capacity credit for a
peaking facility, but its exposure to purchasing contract energy
would be limited. A city would only be obligated to pay incremen-
tal energy costs when its peaking unit was unavailable or un-
scheduled during designated and agreed upon peak hours, and
then only when a city load is above its base load Capacity credit
line and exceeds the rate of delivery of a city’s billing demand.
Overall, Edison states that Vernon is taking the unfair position
that a city should be able to integrate and receive Capacity credit
for intermediate and peaking facilities
[61,496]
without regard to whether such facilities would be useful and
needed in Edison’s control area. Edison claims that its offer to
voluntarily negotiate along the lines of its three proffered propos-
als provides a reasonable vehicle for resolution of this issue.
Edison submits that the Commission should correct the Judge
by noting that the problem is not moot in the instant proceeding.
Vernon indicates that a combination of adopting its recommenda-
tions under Issue IV and voluntary negotiations between the
parties is appropriate. Edison and Cities appear to prefer that the
issue be pursued in other dockets.
* * *
We reverse the Judge’s ruling that his holding on Issues II and
IV disposes of the issue here and that the issue is moot. We find
that this record does not present the substantial evidence neces-
72
~~
sary to modify the existing IOA to specifically address the
acquisition and operation of a city’s peaking and intermediate
resource. We note, however, that it appears that the parties are
pursuing Issue XIII through other Commission proceedings.”
The Commission orders:
(A) The Initial Decision issued in Docket No. ER81-177-002
(Phase II]) on May 18, 1984 is hereby affirmed and adopted
except to the extent modified or reversed herein. Exceptions to
the Initial Decision not granted in this Opinion are hereby denied.
(B) Within 45 days following the date of issuance of this
order, Edison shall file any necessary amendments to the subject
IOAs with Cities in accordance with the findings and conclusions
of this decision and with the Commission’s regulations. In the
event a request for rehearing is pending at the close of the 45-day
period, however, the aforementioned filing shall be made no later
than 30 days from the date the request for rehearing is disposed
of.
(C) Subdocket 002 of Docket No. ER81-177 is hereby termi-
nated. A new subdocket will be assigned to the compliance filing
ordered in Ordering Paragraph (B).
[ Footnotes Omitted ]
73
PUBLIC UTILITIES REPORTS — 122 PUR&4th
Re SCEcorp
Additional applicants: Southern California
Edison Company; San Diego Gas and Electric Company
Decision 91-05-028
Application 88-12-035
California Public Utilities Commission
May 8, 1991
ORDER disapproving a proposed merger between Southern Cali-
fornia Edison Company and San Diego and Electric Company.
2. The Commission's Review
Early in this proceeding, applicants contended that the pro-
posed merger’s impact on transmission access and competition in
bulk power sales markets were within the exclusive jurisdiction of
FERC. We reject this contention for reasons articulated twenty
years ago. Northern California Power Agency v. Public Util. Com.
5S Cal.3d 370 (1971), delcared:
It is no longer open to serious question that in reaching a
decision to grant or deny a certificate of public convenience
and necessity, the commission should consider the anti-trust
implications of the matter before it. The Commission itself
has stated: ‘There can be no doubt that competition is a
relevant factor in weighing the public interest’...
Although the commission is not bound by the dictates of
the antitrust laws, it is clear that antitrust concepts are
intimately involved in a determination of what action is in
the public interest, and therefore the commission is obligated
to weigh antitrust policy, [citations omitted.] ... This is not
to suggest, however, that regulatory agencies have jurisdic-
tion to determine violations of antitrust laws. [citations
omitted] Nor ar the agencies strictly bound by the dictates of
these laws, for they can and do approve actions which violate
74
antitrust policies where other economic, social, or political
considerations are found to be of overriding importance. In
short, the antitrust laws are merely another tool which a
regulatory agency employs to a greater or lesser degree to
give ‘understandable content to the broad statutory concept
of the public interest.’ [citations omitted ]
. * »
It is true that sections 4, 9, 15, and 15a of Title 15 of the
United States Code give the federal courts exclusive jurisdic-
tion over antitrust actions brought by the federal government
and over certain private suits under the federal antitrust laws.
However, those sections clearly do not foreclose the Com-
mission from consideration of antitrust matters... . (5
Cal.3d 377-378.)
. * *
As applicants note at OB, p. VI-27, we have used federal
precedents in the past, and do so in this decision, due to the
well-developed body of available federal antitrust authority.”
However, our decision making authority over this merger,
and its broad public interest aspects, is not so limited that it
must be premised on whether the acquisition violates federal
antitrust statutes.
246-247
We now review the historical examples addressed by the
parties.”
First, the evidence of Edison’s abuse of Interruptible Transmis-
sion Service (ITS) curtailment, provided by Edison’s former
Energy Control Center Senior Operations Supervisor McCann, is
not rebutted effectively by applicants. Applicants’ argument, that
Resale Cities benefit as Edison customers whenever Edison
curtails in order to take cost-effective firm or economy energy,
misses the point. Even if true, this justification ignores the
economic harm to Resale Cities, as retail competitors of Edison,
caused by the abuse of ITS curtailment procedures (McCann,
75
Exh. 44,100, pp. 24-30). It is precisely this type of competitive
harm, rooted in the competition between Edison and the Resale
Cities to obtain least cost resources to meet their retail customers’
needs, which must be assessed in the review of this merger’s
vertical impacts.
257
* * *
In connection with claimed line-loading problems which argua-
bly prevented Nevada Power from selling power to Vernon
(Attorney General’s Opinion, p. 30), the effect of Edison’s
actions was to shift a portion of the loop flow burden to NPC
while also precluding Vernon’s purchase from NPC.
258
In connection with Edison’s refusal to schedule nonfirm trans-
mission more than an hour in advance, it appears that Edison has
the ability to supply nonfirm transmission to the Resale Cities on
a prescheduled basis and that there is no Operational impediment
in issue. Edison would retain the ability to interrupt prescheduled
ITS to the same extent and on the same terms as interruptible
transmission provided on an hour-by-hour basis. The problem is a
refusal to provide for prescheduling by contract or otherwise.
Without the ability to preschedule, the Resale Cities cannot
compete meaningfully with Edison for nonfirm purchases
258
The real question is whether Edison has merely played “hard
ball’’ with the Resale Cities in the interests of its native load
customers, or whether at times it has crossed this line and has
used its transmission dominance to undercut the cities’ efforts to
lower costs to their retail customers. Based on the historical
evidence, it is reasonable to conclude the latter. In sum, these
76
historical examples demonstrate that Edison has used its strategic
control over transmission to the competitive disadvantage of other
utilities, who are buyers and sellers in the relevant interregional
transmission markets and in the network transmission market.
The then Attorney General is correct that it is reasonable to infer
that the merged utility, dominated by Edison, will continue
Edison’s past transmission access policies, unless effective mitiga-
tion measures are imposed.
A second issue bearing upon present circumstances is the
already heavily concentrated state of transmission markets, as
noted by DRA and the then Attorney General. The latter’s expert
testified that the majority of available capacity from the SW
during 1993 to 2000 is controlled by Edison. He asserts that this
control, combined with Edison’s transmission access policies, has
effectively forced other utilities to attempt to build new transmis-
sion lines not otherwise needed. The testimony that Edison
engineered the LADWP swap to remove LADWP as a partici-
pant in the Mead-Adelanto project, in order to prevent or hamper
construction of that line (Mays, RT 5126-30), is undisputed. This
is also disturbing because Mead-Adelanto is one of the planned
lines upon which Edison relies in countering adverse testimony
concerning its transmission access policies.
259
. ” .
Element No. 4, feasibility of access, raises issues discussed
previously in connection with native load customer demands. We
do not contemplate a requirement that applicants share an essen-
tiai facility it such sharing would be infeasible or otherwise would
inhibit their ability to serve customers adequately. It is true that
pro-competitive access to transmission lines must be tempered by
native load requirements. However, the record is undisputed that,
notwithstanding the demands and needs of native load customers
and the obligation to serve, the merger partners have historically
provided transmission access to others for purposes not related to
native load needs. Network facilities are built to serve Edison’s
77
entire service area load, including the load of the Resale Cities.
And, import transmission lines are built with a view to the needs
of total load area requirements, including those of the Resale
Cities. These determinations are consistent with previous findings
on the merger’s competitive impacts in the defined transmission
markets.
The fact that ratepayers may ultimately benefit from this
redistribution of wealth if the price of SW nonfirm bulk power is
depressed is not a justification for ignoring the cornpetitive injury
to the SW shot-term bulk power markets associated with the
exercise of buyer market power. Ratepayers may be short-term
winners, but will be long-term losers if there are adverse long-
term efficiency consequences of the merged company’s exercise of
buyer market power in this market. Therefore, it would be
shortsighted to ignore or minimize the consequences of the
exercise of buyer market power just because it may favorably
impact California ratepayers in the near term.
Findings of Fact
100. the effect of Edison’s actions in connection with the
claimed line-loading problems preventing Nevada Power from
selling power to Vernon, was to shift a portion of the loop flow
burden to NPC, while also precluding Vernon’s purchase from
NPC.
309
102. Edison has the ability to supply nonfirm transmission to
the Resale Cities on a pre-scheduled basis, and there is no
operational impediinent issue which would support Edison’s re-
fusal to schedule nonfirm transmission more than one hour in
advance; Edison would retain the ability to interrupt pre-sched-
uled ITS to the same extent and on the same terms as inter-
ruptible transmission provided on an hour-by-hour basis.
103. Without the ability to pre-schedule, the Resale Cities
cannot meaningfully compete with Edison for nonfirm purchases.
105. The above-noted historical examples demonstrate that
Edison has used its strategic control over transmission to the
competitive disadvantage of other utilities, who are buyers and
sellers in the relevant interregional transmission markets, and who
are located in the network transmission market.
106. Applicants do not dispute the fact that Southern Cities
have borne a proportionate share of the Pacific Intertic costs, as
well as the cost of Edison’s transmission facilities in general,
through their wholesale and fully-allocated transmission rates.
309
& * *
109. Edison controls the majfority of available [transmission ]
capacity from the SW during 1993 to 2000, and this control plus
Edison’s transmission access policies have effectively forced other
utilities to explore the construction of new transmission lines that
might not otherwise be needed.
310
* * *
117. Several new transmission lines currently under study will
not be constructed in sufficient time to constitute effective ease of
entry under § 3.3 of the Merger Guidelines; Edison is making no
effort to construct DPV2 prior to 1997, and seveal other lines are
either on hold or in the study phase (Mead-Phoenix, Mead-
Adelanto, and Utah-Nevada).
118. In the case of the Mead-Phoenix, Mead-Adelanto, and
Utah-Nevada proposed transmission lines, LADWP’s role is
crucial to the participation of the Resale Cities, and its absence
may adversely affect the viability of these projects from the
————————————————————————————————————————EI7~*7~™
79
prospective of the Resale Cities, thus vitiating an ease of entry
determination under § 3.3 of the Merger Guidelines.
3 ge
310
* * *
130. Notwithstanding the demands and needs of native load
customers, and the obligation to serve, the merger partners have
provided transmission access to others for purposes not related to
native load needs.
131. Network facilities are built to serve Edison’s entire ser-
vice area load, including the Resale Cities’ load, and import
transmission lines are built with a view to the needs of total load
area requirements, including those of Resale Cities. These deter-
minations are consistent with previous findings on the merger’s
competitive impacts on the defined transmission markets.
311
* * *
133. Given the geographic impediments associated with the
Cajon and San Gorgonio Passes, the relevant transmission lines
between California and the SW are nonduplicable. Furthermore,
the physical constraints noted by intervenors in connection with
the L.A. [Edison] Basin and service area facilities also indicate
that these lines are nonduplicable.
311
* « *
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.