Free Post Trial Brief - District Court of Federal Claims - federal

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No. 00-697C (Senior Judge Merow) ______________________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS WISCONSIN ELECTRIC POWER COMPANY Plaintiff, v. UNITED STATES, Defendant. ______________________________________________________________________________ DEFENDANT'S POST-TRIAL BRIEF ______________________________________________________________________________ JEFFREY S. BUCHOLTZ Acting Assistant Attorney General JEANNE E. DAVIDSON Director HAROLD D. LESTER, JR. Assistant Director. SHARON A. SNYDER Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 305-9640 Fax: (202) 307-2503 Attorneys for Defendant

OF COUNSEL: JANE K. TAYLOR Office of the General Counsel U.S. Department of Energy 1000 Independence Ave., S.W. Washington, D.C. 20585 ALAN LO RE Senior Trial Attorney STEPHEN FINN SONIA M. ORFIELD RUSSELL A. SHULTIS Trial Attorneys Commercial Litigation Branch Civil Division Department of Justice March 25, 2008

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TABLE OF CONTENTS PAGE(S) TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii SUMMARY OF ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 I. WEPCO FAILED TO MEET ITS BURDEN OF ESTABLISHING THAT DOE'S DELAY IN ACCEPTING SNF CAUSED IT TO IMPLEMENT DRY FUEL STORAGE AT POINT BEACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 A. To Establish Causation, Wisconsin Electric Power Company Bore The Burden Of Demonstrating A Plausible "But For" Scenario.. . . . . . . . . . . . 5 WEPCO Implemented Its Dry Fuel Storage Project To Bridge The Gap Between 1995 and 1998, When It Expected DOE To Perform Under The Standard Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 WEPCO's Application To The PSCW Reflected Its Need For At-Reactor Storage Assuming DOE Performance in 1998. . . . . . . . . . . . 12 WEPCO's Assertions That The Assumptions It Presented To The PSCW Were Conservative Shed Doubt On Its Presentations To This Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 There Is No Evidence In The Record To Support WEPCO's Assertion That It Re-Evaluated Its Decision To Build An ISFSI In 1992 Or That It Postponed The Final Decision To Implement Dry Fuel Storage At Point Beach Until 1995.. . . . . . . . . . . . . . . . . . . . . . 16 There Is No Evidence In The Record To Support WEPCO's Assertion That It Would Have Used A Temporary Cask Pit Rack In The But-For World. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 WEPCO's Fuel Management Assertions Do Not Reflect The Information Used By Management in 1989 When The Decision To Implement Dry Fuel Storage Was Actually Made. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

B.

C.

D.

E.

F.

G.

i

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TABLE OF CONTENTS (Cont'd) PAGE(S) II. IN ANY EVENT, EVEN IF WEPCO BELIEVED THAT DOE WOULD NOT TIMELY PERFORM WHEN IT DECIDED TO CONSTRUCT DRY STORAGE, THAT DECISION, WHICH PRE-DATES DOE'S 1994 ANNOUNCEMENT THAT IT COULD NOT TIMELY PERFORM, CANNOT FORM THE BASIS FOR RECOVERY OF DRY STORAGE DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 TO THE EXTENT THAT THE COURT FINDS IT NECESSARY TO EVALUATE WEPCO'S ARGUMENTS REGARDING THE RATE AT WHICH DOE WAS OBLIGATED TO ACCEPT SPENT NUCLEAR FUEL UNDER THE STANDARD CONTRACT, WEPCO HAS FAILED TO MEET ITS BURDEN OF ESTABLISHING THAT DOE WAS OBLIGATED TO ACCEPT FUEL IN THE MANNER THAT WEPCO PROPOSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 27 A. Because, As Established Above, WEPCO Made Its Decision To Construct Dry Storage Without Reference To DOE's Delay In Performance, The Court Need Not Decide WEPCO's Rate Of Acceptance Arguments In This Particular Case.. . . . . . . . . . . . . . . . . . . . 28 To The Extent That The Court Finds It Necessary To Evaluate DOE's Rate Obligations In This Particular Case, WEPCO Must Establish A Rate At Which DOE Was Obligated To Perform To Prove That It Has Been Damaged By DOE's Delay In Accepting SNF From Point Beach. . . . . . 29 1. WEPCO's Argument That The Court Should Apply A Rate Of Acceptance That Is Inconsistent With WEPCO's Approved DCSs Should Be Barred By The Statute Of Limitations. . . . . . . . 29 The Standard Contract Contains No Language Imposing, And The History Of Its Formation Is Inconsistent With, The Rate Requirement That Plaintiff Proposes. . . . . . . . . . . . . . . 30 The Documents Upon Which Plaintiff Relies Do Not Evidence DOE's Intent To Be Bound To Any Rate Of Acceptance, Let Alone The One That Plaintiff Advocates.. . . . . . . . . . . . . . . . . . . 37 The Rate Of Acceptance Should Be Determined In Accordance With The APR/ACR Process Mandated By The Standard Contract, In Which Plaintiff Willingly Participated. . . . . . . . . . . 42

III.

B.

2.

3.

4.

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TABLE OF CONTENTS (Cont'd) PAGE(S)

a.

The Parties Agreed That The DCS Process Would Define The Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Plaintiff Voluntarily Participated In The APR/ACR Process And Voiced Concerns To DOE When It Had Them About DOE's Administration Of The Standard Contract.. . . . . . 45

b.

5.

The Court Should Not Impose A "Reasonable" Rate Of Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

IV.

WEPCO MAY NOT RECOVER THOSE COSTS ASSOCIATED WITH THE LOADING OF CASKS THAT WOULD HAVE OCCURRED EVEN IF DOE HAD TIMELY PERFORMED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 ANY DAMAGES INCURRED PRIOR TO NOVEMBER 16, 1994, THAT WEPCO SEEKS TO RECOVER ARE BARRED BY THE STATUTE OF LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 WEPCO'S DAMAGES CLAIM FAILS BECAUSE IT CONSTITUTES IMPROPER AND UNREASONABLE MITIGATION. . . . . . . . . . . . . . . . . . . . 51 A. B. Plaintiff Has Failed Properly To Mitigate Its Damages.. . . . . . . . . . . . . . 51 WEPCO's Investment In the TN-32B Metal Casks Was Unreasonable And, Therefore, Not Recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 The Costs That WEPCO Incurred To Procure A Dual-Purpose Cask System Are Not Reasonable Mitigation.. . . . . . . . . . . . . . . . . . . . . . . . . . 57 1. WEPCO's Investment In The NUHOMS Cask System Is Not Recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 WEPCO's Investment In Licensing Its VSC-24 Casks For Transportation Is Not Recoverable. . . . . . . . . . . . . . . . . . . . . . . . 60

V.

VI.

C.

2.

D.

WEPCO's Investment In Off-Site Storage Is Not Recoverable.. . . . . . . . 62

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TABLE OF CONTENTS (Cont'd) PAGE(S) 1. WEPCO's Investment In Private Fuel Storage And Other Off-Site Storage Projects Was Unforeseeable And Speculative.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 The Government Established That WEPCO's Investment In PFS Was Not Reasonable Mitigation. . . . . . . . . . . . . . . . . . . . . . . . . . 63 The Government Established That WEPCO's Investment In Other Off-Site Storage Options Was Not Reasonable Mitigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

2.

3.

VII.

WEPCO HAS FAILED TO MEET ITS BURDEN OF PROVING THAT FEES IT PAID FOR THE GENERIC ACTIVITIES OF THE NRC, 10 C.F.R. PART 171, WERE FORESEEABLE, OR CAUSED BY DOE'S DELAY, OR THAT THE ALLEGED DAMAGES RELATING TO THOSE FEES HAVE BEEN DEMONSTRATED WITH REASONABLE CERTAINTY.. . . . . . . . . . . . . . . . 66 A. The Fees WEPCO Has Paid For NRC Generic Activities Were Not Foreseeable At The Time Of Contract Formation And DOE's Delay In Performance Was Not The Proximate Cause For WEPCO's Alleged Damages Related To NRC Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 1. 2. Pre-1999 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 The 1999 Fee Change Rule And The Spent Fuel Storage/ Reactor Decommissioning Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 70

B.

WEPCO Has Failed To Demonstrate That It Has Been Harmed Because WEPCO Has Paid Less For Generic Fees In The Actual World Than It Would Have Paid In The Non-Breach World. . . . . . . . . . . . . . . . . . . . . . 79 WEPCO's Calculation Of Damages For The Spent Fuel Portion Of The NRC's Spent Fuel Storage/Reactor Decommissioning Fee Is Flawed, Includes Costs That Are Not Properly Included As Damages, And Duplicates Damages. . . . . . . . . . . . . . . . . . . 82

C.

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TABLE OF CONTENTS (Cont'd) PAGE(S) 1. WEPCO's Argument That The Government Has Failed To Offer Contrary Evidence Regarding WEPCO's Calculation Of Damages For Costs For The Spent Fuel Storage/Reactor Decommissioning Fee Is Misleading, And Impermissibly Attempts To Shift Plaintiff's Burden Of Proof To the Government. . . . . . . . . . . . . . . . 82 WEPCO's Calculation Fails To Properly Account For 10 C.F.R. Part 170 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 WEPCO's Calculation Fails Because It Improperly Includes Costs For A Surcharge That Would Have Been Incurred In The NonBreach World. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 WEPCO's Calculation Fails Because It Improperly Includes Costs For Wet Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 WEPCO's Calculation Fails Because It Does Not Accurately Divide The Spent Fuel Storage/Reactor Decommissioning Fee Between Its Three Elements, Wet Storage, Dry Storage, And Reactor Decommissioning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

2.

3.

4.

5.

VI.

THIS COURT SHOULD ADJUST THE DAMAGES CLAIM FOR THE COSTS ASSOCIATED WITH CASKS THAT WOULD HAVE BEEN LOADED TO DOE FROM POINT BEACH ASSUMING DO PERFOMANCE IN 1998.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 WEPCO CANNOT ESTABLISH CAUSATION FOR CERTAIN COSTS THAT IT ALLEGEDLY INCURRED FOR INTERNAL LABOR AND "OVERHEADS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 A. A Portion Of WEPCO's Internal Labor And Associated Payroll Adjustments And Employee Costs Were Not Incremental. . . . . . . . . . . . 93 WEPCO's Claimed Administrative & General Costs Were Not Incremental.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

VII.

B.

VIII.

WEPCO IMPERMISSIBLY SEEKS PRE-JUDGMENT INTEREST IN ITS DAMAGES CLAIM, WHICH IS NOT ALLOWABLE AGAINST THE GOVERNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 v

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TABLE OF CONTENTS (Cont'd) PAGE(S) A. B. WEPCO Cannot Recover Its Cost Of Capital. . . . . . . . . . . . . . . . . . . . . 100 WEPCO's Request To Recover AFUDC Is Untimely And, In Any Event, Unwarranted.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

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TABLE OF AUTHORITIES CASES PAGE(S)

AES Tech. Sys., Inc. v. Coherent Radiation, 583 F.2d 933 (7th Cir. 1978). .......................................................................................... 95 Bell v. United States, 404 F.2d 975 (Ct. Cl. 1968). .................................................................................. 105, 108 Bluebonnet Savings Bank, F.S.B. v. United States, 266 F.3d 1348 (Fed. Cir. 2001)...................................................................................... 106 Bluebonnet Savs. Bank, F.S.B. v. United States, 339 F.3d 1341 (Fed. Cir. 2003).......................................................................................... 7 Boeing Co., ASBCA No. 18,916, 74-2 B.C.A. ¶ 10,976 (1974)............................................................................................ 33 Boyajian v. United States, 423 F.2d 1231 (Ct. Cl. 1970). .......................................................................................... 94 Campbell v. United States, 661 F.2d 209 (Ct. Cl. 1981). ............................................................................................ 32 Centex Corp. v. United States, 55 Fed. Cl. 381 (2003), aff'd on other grounds, 395 F.3d 1283 (Fed. Cir. 2005)...................................................................................... 106 Columbia First Bank v. United States, 54 Fed. Cl. 693 (2002). .................................................................................................. 103 Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 (2003). .................................................................................................... 32 Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed. Cir. 2001), cert. denied, 535 U.S. 1096 (2002)....................................................................................................... 69 Convoy Co. v. Sperry Rand Corp., 672 F.2d 781 (9th Cir. 1982). .......................................................................................... 95

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TABLE OF AUTHORITIES (cont'd) CASES PAGE(S)

Danzig v. AEC Corp., 224 F.3d 1333 (Fed. Cir. 2000) , cert. denied, 532 U.S. 995 (2001)......................................................................................................... 27 Department of Energy v. Westland, 565 F.2d 685 (CCPA 1977). ............................................................................................ 40 Dunn Appraisal Co. v. Honeywell Information Systems, Inc., 687 F.2d 877 (6th Cir. 1982). .......................................................................................... 95 England v. Contel Advanced Systems, Inc., 384 F.3d 1372 (Fed. Cir. 2004).............................................................................. 102, 104 Federal Power Commission v. New England Power Co., 415 U.S. 345 (1974)......................................................................................................... 68 Florida Power & Light Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988), cert. denied, 490 U.S. 1045 (1989).................... 67, 68, 79 Gevyn Constr. Corp. v United States, 827 F.2d 752 (Fed. Cir. 1987)................................................................................ 105, 108 Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001).......................................................................................... 7 Hercules Inc. v. United States, 292 F.3d 1378 (Fed. Cir. 2002)........................................................................................ 32 Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (2004), aff'd, 422 F.3d 1369 (Fed. Cir. 2005). ....................................... 26 Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005)................................................................................. passim John R. Sand & Gravel Co. v. United States, 128 S. Ct. 750 (2008)................................................................................................. 30, 51 Julius Goldman's Egg City v. United States, 697 F.2d 1051 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983). ............................... 47

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TABLE OF AUTHORITIES (cont'd) CASES PAGE(S)

Koby v. United States, 54 Fed. Cl. 493 (Fed. Cl. 2002). ...................................................................................... 52 LTV Aerospace Corp., ASBCA No. 17,131, 76-1 B.C.A. ¶ 11,840 (1976)............................................................................................ 33 LaSalle Talman Bank, F.S.B. v. United States, 45 Fed. Cl. 64 (1999) , rev'd on other grounds, 317 F.3d 1363 (Fed. Cir. 2003)........................................................................................ 52 Library of Congress v. Shaw, 478 U.S. 310 (1986)................................................................................................ 101-102 Marshall v. United States, 164 F. Supp. 221 (Ct. Cl. 1958)..................................................................................... 104 Mississippi Power & Light Co. v. U.S. Nuclear Regulatory Commission, 601 F.2d 223 (5th Cir. 1979), cert. denied, 444 U.S. 1102 (1980). ................................. 67 Monessen Southwestern Railway Co. v. Morgan, 486 U.S. 330 (1988)....................................................................................................... 102 Myerle v. United States, 33 Ct. Cl. 1 (1897). ........................................................................................................... 70 National By-Products, Inc. v. United States, 405 F.2d 1256 (Ct. Cl. 1969). ........................................................................................... 39 National Cable Television Association, Inc. v. United States, 415 U.S. 336 (1974).................................................................................................... 67-68 Northern Helex Co. v. United States, 207 Ct. Cl. 862, 524 F.2d 707, 713 (1975)), rev'd on other grounds, 317 F.3d 1363 (Fed. Cir. 2003)......................................................................................... 52 Northern States Power Co. v. United States, 78 Fed. Cl. 449 (2007). ..................................................................................... 95, 104-105 Old Stone Corporation v. United States, 450 F.3d 1360 (Fed. Cir. 2006)........................................................................................ 70

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TABLE OF AUTHORITIES (cont'd) CASES PAGE(S)

PSEG Nuclear, L.L.C. v. United States, 465 F.3d 1343 (Fed. Cir. 2006).......................................................................................... 7 Pacific Gas & Electric Co. v. United States, 73 Fed. Cl. 333 (2006), appeal docketed, No. 2007-5046 (Fed. Cir. Jan. 24, 2007) ("PG&E"). ................................................................................. passim Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002)........................................................................................ 52 Rumsfeld v. Applied Cos., 325 F.3d 1328 (Fed. Cir. 2003)........................................................................................ 30 Sacramento Mun. Util. Dist. v. United States, 70 Fed. Cl. 332 (2006), appeal docketed, No. 2007-5052 (Fed. Cir. Feb. 6, 2007) ("SMUD").................................................................................................... 95, 99 Saddler v. United States, 287 F.2d 411 (Ct. Cl. 1961). ............................................................................................ 94 San Carlos Irr. & Drainage Dist. v. United States, 111 F.3d 1557 (Fed. Cir. 1997).......................................................................................... 6 Selman v. United States, 204 Ct. Cl. 675, 498 F.2d 1354 (1974). ............................................................................ 40 Skinner v. Mid-America Pipeline Co., 490 U.S. 212 (1989)......................................................................................................... 68 Southern Nuclear Operating Company v. United States, 77 Fed. Cl. 396 (2007). ............................................................................................. passim St. Christopher Assocs., L.P. v. United States, 511 F.3d 1376 (Fed. Cir. 2008)........................................................................................ 40 System Fuels, Inc., System Energy Resources, Inc. et al. v United States, 78 Fed. Cl. 769 (2007). .................................................................................................... 99 System Fuels, Inc. v. United States, 79 Fed. Cl. 37 (2007), appeal docketed, No. 2008-5025 (Fed. Cir. Jan. 9, 2008). ................................................................... passim -x-

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TABLE OF AUTHORITIES (cont'd) CASES PAGE(S)

TEG-Paradigm Environmental, Inc. v. United States, 465 F.3d 1329 (Fed. Cir. 2006)........................................................................................ 33 Tennessee Valley Authority v. United States, 69 Fed. Cl. 515 (2006). ............................................................................... 95, 99, 103-104 United States Steel Corp. v. United States, 618 F. Supp. 496 (Ct. Int'l Trade 1985). .......................................................................... 40 Westfed Holdings, Inc. v. United States, 52 Fed. Cl. 135 (2002). .................................................................................................. 106 White v. Delta Constr. Int'l, Inc., 285 F.3d 1040 (Fed. Cir. 2002).......................................................................................... 8 Wickham Contracting Co. v. Fisher, 12 F.3d 1574 (Fed. Cir. 1994)........................................................................................ 104 Wickham Contracting Co. v. GSA, GSBCA No. 8675, 92-3 B.C.A. ¶ 25040, 1992 WL 88326 (GSBCA 1992), aff'd, 12 F.3d 1574 (Fed. Cir. 1994)............................................................................... 104 Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822 (1961). ............................................................................... 6 Wilner v. United States, 23 Cl. Ct. 241 (1991). ....................................................................................................... 94 Wilson v. Marquette Elecs., Inc., 630 F.2d 575 (8th Cir. 1980). .......................................................................................... 94 Yankee Atomic Electric Co. v. United States, 73 Fed. Cl. 249 (2006). .................................................................................................... 27 STATUTES AND REGULATIONS 28 U.S.C. § 2501..................................................................................................................... 30, 51 28 U.S.C. § 2516(a). ........................................................................................................... 105-106 31 U.S.C. § 9701 (1982). .............................................................................................................. 67 -xi-

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TABLE OF AUTHORITIES STATUTES AND REGULATIONS PAGE(S)

42 U.S.C. § 2214(c)(3)........................................................................................................... 73, 78 42 U.S.C. § 7178 (1982). .............................................................................................................. 68 42 U.S.C. § 10168(d)(1). ........................................................................................................ 43, 44 42 U.S.C. § 10222(d). .................................................................................................................. 76 10 C.F.R. § 72. .................................................................................................................. 68-69, 74 10 C.F.R. § 170. .................................................................................................................... passim 10 C.F.R. § 171. .................................................................................................................... passim 10 C.F.R. § 961.11, Art. XV........................................................................................................ 35 FAR § 43.205, 48 C.F.R. § 43.205. ........................................................................................... 104 33 Fed. Reg. 10,923 (Aug. 1, 1968).............................................................................................. 67 51 Fed. Reg. 33,224 (Sept. 18, 1986). .......................................................................................... 67 51 Fed. Reg. 33,230. .................................................................................................................... 68 55 Fed. Reg. 7,510 (Mar. 2, 1990)............................................................................................... 68 56 Fed. Reg. 14,870 (Apr. 12, 1991). ........................................................................................... 69 56 Fed. Reg. 31,472, 31,482-86 (Jul. 10, 1991). ......................................................................... 69 64 Fed. Reg. 31,448.. ................................................................................................................... 71 64 Fed. Reg. 31,455.. ................................................................................................................... 71 Pub. L. 99-272, 100 Stat. 82 (1986)............................................................................................. 68 Pub. L. 100-203, 101 Stat. 1330 (1987)....................................................................................... 68 Pub. L. 101-508, 104 Stat. 1388 (1990)................................................................................ passim

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TABLE OF AUTHORITIES MISCELLANEOUS PAGE(S)

Fed. R. Evid. 801. ........................................................................................................................ 10 Fed. R. Evid. 803. ........................................................................................................................ 10 Restatement (Second) of Contracts § 211(b). ............................................................................... 35 Restatement (Second) of Contracts § 251 (1981). ....................................................................... 27 Restatement (Second) of Contracts § 350(2). ........................................................................ 26, 52

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS WISCONSIN ELECTRIC POWER COMPANY, Plaintiff, v. UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) )

No. 00-697C (Senior Judge Merow)

DEFENDANT'S POST-TRIAL BRIEF Pursuant to this Court's post-trial scheduling order, defendant, the United States, respectfully submits the following post-trial brief. SUMMARY OF ARGUMENT This case involves a damages claim by plaintiff, Wisconsin Electric Power Company ("WEPCO"), for approximately $52.3 million in costs and $44.2 million in prejudgment interest that it allegedly has incurred through December 31, 2005, at its Point Beach nuclear power plant, associated with the storage of spent nuclear fuel ("SNF"). The majority of WEPCO's claim, aside from its prejudgment interest claim, seeks costs relating to the engineering, design, licensing, and construction of a type of dry SNF storage facility known as an Independent Spent Fuel Storage Installation ("ISFSI") at the Point Beach plant. WEPCO contends that the Government is liable for these costs because the need for additional storage was caused by the Government's failure to begin accepting SNF from commercial nuclear reactors on January 31, 1998, pursuant to the "Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste" ("Standard Contract") between the Department of Energy ("DOE") and WEPCO.

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As the Government established at trial, WEPCO's causation theory is meritless. WEPCO has failed to meet its burden of proving that DOE's delay in accepting SNF from Point Beach caused it to implement dry storage. When WEPCO first disclosed its damages claim in July 2005, the claim was predicated upon the argument that, had DOE performed by beginning acceptance of SNF from WEPCO's Point Beach plant in 1998, WEPCO would not have needed any additional storage at the site. As such, WEPCO argued that it was entitled to all of the costs that it incurred to add dry storage at Point Beach. After extensive discovery by the Government, and after WEPCO's company witnesses had been confronted with the many company documents establishing that, when it made its decision to implement dry storage, WEPCO believed that it would run out of SNF storage capacity before DOE was obligated to begin SNF acceptance from the Point Beach plant, WEPCO reformulated its claim. At trial, WEPCO asserted that it had known all along that it would need additional SNF storage capacity before DOE was to begin acceptance in 1998. WEPCO asserted that, had it believed that DOE would have performed as expected, it would have handled that problem by the use of a temporary storage rack in the cask laydown area of its spent fuel pool. WEPCO asserted that this project would have been performed during the 1993 through 1996 time period, but that its belief that DOE was not going to begin SNF acceptance in 1998 caused it to implement dry storage instead. However, the evidence at trial demonstrated without question that WEPCO decided in 1988 that it would implement dry fuel storage or an ISFSI to increase the storage capacity for SNF at the Point Beach Nuclear Plant ("Point Beach" or "PBNP"). As we established, WEPCO planned to build its ISFSI to "bridge the gap" between 1995 and 1998, assuming DOE 2

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performance in 1998. Document after document from that period, as opposed to plaintiff's afterthe-fact, self-serving testimony, indicate the same thing: WEPCO was running out of room in its spent fuel pool, WEPCO wanted to maintain full core reserve for many operational reasons, WEPCO could not re-rack its SNF pool again, and, therefore, WEPCO must build an ISFSI. As we established at trial, there is no support for WEPCO's assertion that it would have used a temporary rack had it believed that DOE would commence accepting SNF in 1998. Several witnesses, including Gary Krieser,1 testified that WEPCO never considered using a temporary rack until 1998. There is no mention of a temporary rack in WEPCO's 1991 application to the PSCW for authorization to implement its dry fuel storage project. Furthermore, we established that Dr. Singh's report (the second report that he submitted for WEPCO, on that conflicted with his first report) was not technically sound and could not support WEPCO's assertions. Moreover, we established that, when WEPCO made its decision to build an ISFSI in late 1988, WEPCO management determined that it could not re-rack the SNF pool a third time, or implement any additional at-reactor storage that might increase the weight in the pool because of concerns that the pool had reached its maximum weight capacity. The Government established that WEPCO would have needed an ISFSI in the but-for world, and would have loaded five casks in order to maintain full core reserve ("FCR"). In other words, WEPCO failed to meets its burden of establishing that the DOE delay caused it to implement dry storage. To determine what, if any damages WEPCO has incurred because of DOE's delay in accepting SNF, the Court must first compare the expenditures that plaintiff actually incurred

Mr. Krieser is currently the manager of quality assurance for Wisconsin Energy Power. He began working for WEPCO beginning in 1977. Tr. 1509:8-1518:14 (Krieser). 3

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against the expenditures that it would have incurred in the absence of any partial breach by DOE. If plaintiff fails to prove that it would not have incurred a particular expenditure absent a breach, it is not entitled to a damage award for that expenditure. If WEPCO would have performed a project or incurred a cost absent any partial breach, WEPCO is responsible for that cost. Awarding plaintiff damages for that expenditure would not place it in the same position that it would have occupied absent the breach, but would place it in a better position. No theory of contract law permits an award of damages under this circumstance. The Government established that WEPCO's damages claim should be reduced to $10,259,000. We established that the fabrication of the ISFSI and the procurement and loading of the first five casks at WEPCO would have occurred even assuming DOE acceptance of SNF beginning in 1998 and, thus, that those costs must be adjusted out of WEPCO's claim. We established at trial that WEPCO's claim for three TN-32B casks, its pursuit of dual-purpose storage (including the NUHOMS cask system and licensing the VSC-24 cask for transportation), and its expenditures on off-site private fuel storage were unreasonable mitigation and those expenditures should be eliminated from WEPCO's damages claim. We further established at trial that WEPCO's claim for NRC fees was not foreseeable and, in any event, that those fees were not caused by DOE's delay in accepting SNF. WEPCO failed to prove that several of its components of damage were incremental to the partial breach. Most notably, it has failed to demonstrate that certain A&G or overhead costs and internal labor costs would not have been incurred in the absence of the Government's failure timely to commence spent fuel acceptance. In fact, the evidence adduced at trial indicates that WEPCO would have incurred the same costs in these categories irrespective of the delay in 4

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DOE's performance. In the absence of proof that these costs were incremental to the partial breach, WEPCO is not entitled to recover these components of its damages claim. Finally, we established that WEPCO's claim for weighted average cost of capital, weighted average cost of debt, and AFUDC is nothing more than a claim for prejudgment interest that is not available against the Government unless otherwise provided by contract or statute. WEPCO's cost of capital damages are little more than an attempt to obtain an award of prejudgment interest despite the absence of any waiver of sovereign immunity relating to such an award, and they are not an appropriate component of damage. STATEMENT OF FACTS The Government has submitted a separate document containing its proposed findings of fact.2 ARGUMENT I. WEPCO FAILED TO MEET ITS BURDEN OF ESTABLISHING THAT DOE'S DELAY IN ACCEPTING SNF CAUSED IT TO IMPLEMENT DRY FUEL STORAGE AT POINT BEACH A. To Establish Causation, Wisconsin Electric Power Company Bore The Burden Of Demonstrating A Plausible "But For" Scenario

The United States Court of Appeals for the Federal Circuit's decision in Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005), provides the proper framework for evaluating damages in a spent nuclear fuel case. In that case, in which the
2

"PX __" and "DX __" refers to plaintiff's and defendant's exhibits, respectively. "Tr. __" refers to the trial transcript or, where the testimony of witnesses has been admitted through the designation of prior testimony, to the applicable transcript and the date upon which the testimony was provided. "DFOF ¶¶ __" refers to paragraphs contained in defendant's proposed findings of fact. In addition, defendant files a separate document containing its responses to plaintiff's proposed findings of fact. 5

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plaintiff purported to seek "mitigation damages," the Federal Circuit explained that "[t]he presence of a duty to mitigate does not perforce make the pre-breach costs incurred by Indiana Michigan to store its SNF recompensable; appellant must prove foreseeability, causation, and reasonableness." Id. at 1376. Critically, in Indiana Michigan, the Federal Circuit upheld the trial court's decision not to award any damages, based in part upon its finding that the utility could not show that its actions were caused by DOE's breach and that these actions would have taken place even in the absence of a partial breach. Id. at 1376. In light of this holding, the question is not simply whether the actions that plaintiff took were the product of a "reasonable" business judgment made in an effort to limit its damages. As a threshold matter, WEPCO must prove, as a means of demonstrating that the costs that it incurred were "caused" by the partial breach, that it would not have incurred these so-called mitigation costs absent any delay. See San Carlos Irr. & Drainage Dist. v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997) ("A plaintiff must show that but for the breach, the damages alleged would not have been suffered."); Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822, 831 (1961) ("[T]he measure of damages to be applied in the particular case is irrelevant until the claimant has established the fact of losses that were the natural and proximate result of the breach of contract. Were this not true, the doctrine of mitigation of damages would lose much of its significance."). Requiring WEPCO to depict an accurate "but for" world is crucial to the Court's ability to evaluate whether certain items claimed as damages are costs that would have been incurred even if DOE had begun accepting spent fuel in 1998. This Court's decision in Pacific Gas & Electric Co. v. United States, 73 Fed. Cl. 333 (2006), appeal docketed, No. 2007-5046 (Fed. Cir. 6

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Jan. 24, 2007) ("PG&E"),3 recognizes the general principle that, when seeking expectancy damages, a plaintiff must establish a plausible "but for" world against which to measure causation. Specifically, the Court stated that "[p]laintiff bears the burden of `establishing what might have been' with reasonable certainty had defendant performed the Standard Contract." Id. at 386 (quoting Glendale Fed. Bank, FSB v. United States 239 F.3d 1374, 1380 (Fed. Cir. 2001)); see id. at 406 ("[t]o derive the proper amount for the damages award, the cost resulting from the breach must be reduced by the costs, if any, that the plaintiff[] would have experienced absent a breach" (quoting Bluebonnet Savs. Bank, F.S.B. v. United States, 339 F.3d 1341, 1345 (Fed. Cir. 2003)). The Court further clarified that PG&E's alleged expectancy damages could only be measured by reference to a world where DOE performed and that, without reference to the performance world, the measure of plaintiff's damages would be "irrelevant." Id. at 375 n.38; see PSEG Nuclear, L.L.C. v. United States, 465 F.3d 1343, 1351 (Fed. Cir. 2006) ("Any issues related to the types of damages permitted under the contract, if any, and the extent of those damages can be resolved by solely resolving the DOE's contractual obligations." (emphasis added)). To establish causation in this context, Indiana Michigan requires WEPCO to show that, at a minimum, had DOE begun accepting fuel in 1998, it would not have incurred the costs it now seeks as damages. Imposition of this requirement is necessary to ensure that plaintiff is merely restored to the position that it would have occupied in the absence of DOE's delay in performance and is not reimbursed for costs that it otherwise would have been required to incur, and is thus placed in a better position than it would have occupied but for any breach by DOE.
3

The Federal Circuit heard oral argument of the appeal in PG&E on February 4, 2008. 7

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See Indiana Michigan, 422 F.3d at 1373; Bluebonnet, 339 F.3d at 1344-45 (citing White v. Delta Constr. Int'l, Inc., 285 F.3d 1040, 1043 (Fed. Cir. 2002)) ("[T]he non-breaching party should on no account get more than would have accrued if the contract had been performed." (internal quotation marks and citation omitted)); PG&E, 73 Fed. Cl. at 385 (same). B. WEPCO Implemented Its Dry Fuel Storage Project To Bridge The Gap Between 1995 and 1998, When It Expected DOE To Perform Under The Standard Contract

WEPCO argues, relying principally on hindsight and the testimony of witnesses that has changed over time, that the only reason it chose to build an ISFSI was because DOE was not going to begin acceptance of its SNF by January 1998. See, e.g., Pl.Br.at 15. In making its case, for example, WEPCO relies upon testimony it elicited at trial, which we demonstrated was directly contradicted by testimony or documents of those same witnesses when WEPCO was actually planning or implementing the dry fuel storage project. WEPCO also relies upon fuel management models that its experts prepared for the litigation, rather than on fuel management information reviewed in 1988, 1989, 1990, and 1991, when the decision to implement dry storage at Point Beach was made. WEPCO seldom relies upon contemporaneous documents that reflect WEPCO's decision, preferring to ignore those documents that do not support its arguments. To determine whether WEPCO would have implemented dry fuel storage in the butfor world, the Court must focus on documents and testimony contemporaneous with that decision, not, as WEPCO would have it, on documents and testimony created long after the decision was made, and after the litigation was filed. WEPCO first argues that there were no plans for an ISFSI at WEPCO in 1983, when the Standard Contract was signed, and indeed no plans for an ISFSI at any time until WEPCO knew 8

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that DOE would not begin performance of the Standard Contract ­ a date that shifts in WEPCO's argument depending upon the point it strives to make ­ from 1985 to 1995. Pl.Br. at 17-18. However, in 1983, WEPCO could not have known if it would need to build an ISFSI, because WEPCO had no idea as to the amount of SNF that would be accepted by DOE beginning in 1998. Indeed, WEPCO expected that the amount of fuel to be accepted would be determined later. Tr. 2203:13-2206:25. (Porter). Furthermore, WEPCO's assertions completely ignore documents in 1977 and 1986, which clearly state that WEPCO would need additional at-reactor storage before 1998. See DFOF ¶¶ 159-165. In March 1986, after the SNF pool had been reracked a second time, one of the Point Beach technicians who monitored pool inventory informed J.J. Zach, the Point Beach plant manager, that, depending upon the assumption that was made ­ maintenance of one FCR, two FCRs, or no FCR ­ the Point Beach SNF pool would run out of room in 6.5 to 10 years, before 1998: All of these occur long before the DOE is pledged to start accepting spent fuel in 1998. This information should be considered in determining the timing of alternatives such as reconstitution, dry storage, or another spent fuel pit. DX184 (emphasis added).

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WEPCO relies principally on two witnesses ­ Howard Shimon4 and Sol Burstein5 ­ to argue that WEPCO believed it had sufficient storage space to avoid any at-reactor storage before 1998. And yet, Mr. Shimon testified that he understood, assuming that WEPCO would maintain FCR, that WEPCO would be forced to shut-down in 1994 or 1995, without additional at-reactor storage.6 DFOF ¶¶ 165. By the late 1980s, WEPCO internally began discussing the possibility of dry fuel storage, because it had already reracked its SNF pool twice and did not consider a third rerack a viable alternative. DFOF ¶¶ 166. WEPCO agreed to participate in a demonstration project which it believed might result in the acquisition of a dry storage system at a cheaper price. DFOF ¶¶ 167. Mr. Zabransky, who was the project administrator for the demonstration project at WEPCO, testified that because WEPCO had already re-racked its SNF pool twice, another re-rack was not a viable option. Tr.973:1-13 (Zabransky). The proposed demonstration project, using VSC-24

4

Mr. Shimon is a former WEPCO employee who was employed there from 1979 to

1995. WEPCO relies upon Sol Burstein to support its assertions that WEPCO would never have implemented dry fuel storage if DOE had performed beginning in January 1998. See,e.g., Pl.Br. at 17-19; PFOF at ¶¶ 75, 77. However, WEPCO was unable to introduce any testimony from Mr. Burstein because he passed away prior to this litigation. Plaintiff impermissibly introduced Mr. Burstein's purported testimony into the trial by asking Mr. Shimon to testify about Mr. Burstein's thoughts and understandings. Although there may be ways to introduce some available evidence relating to a witness who is deceased, asking another witness to provide hearsay testimony is not one of them. Fed. R. Evid. 801, 803. The Court cannot properly rely upon Mr. Shimon's testimony to indicate what Mr. Burstein believed or would have testified. Id. WEPCO knew it would ultimately have to replace the Unit 2 steam generators and that this replacement required removal of the full core. Tr.234:20-22 (Baumann). By the early 1990s, WEPCO anticipated that this replacement would occur sometime in 1996 or 1997. Tr.332:16-22 (Link); PX 251 (1992 correspondence to PSCW indicates steam generator replacement in 1996-1997 period); DX 54; DX 73 at 1315-1318. For WEPCO, maintaining FCR was not optional. 10
6 5

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casks, "had the potential for being a lot less expensive than the other technologies that were in use. Id. WEPCO management informed Mr. Zabransky that one goal for additional at-reactor storage must be maintaining FCR. DFOF ¶¶ 176 While FCR was not a policy at WEPCO, it continues to be considered a good operating practice there. DFOF ¶¶ 138-142. In order to maintain FCR in 1988, WEPCO needed storage for 504 fuel assemblies, or 21 24-assembly casks. DFOF ¶¶ 169. The decision to implement dry fuel storage, instead of pursuing other options, was made in or around 1989 by WEPCO's major project review committee. DFOF ¶¶ 175. At that time, based upon information regarding SNF discharges, as well as the assumed length of time to obtain the NRC license and authorization from the PSCW, WEPCO planned to have the ISFSI ready to be loaded by 1994. DFOF ¶¶ 170. In the 1989 Work Order Requisition, Charles Fay stated that: Additional spent fuel storage capacity will be required at Point Beach Nuclear Plant in 1994 to allow for continued operation. . . . It is not possible to provide additional storage by re-racking the spent fuel pool (this has been twice previously). DFOF ¶¶ 172. In every WEPCO communication sent regarding the ISFSI project, WEPCO stressed the need for dry fuel storage before 1998, even assuming timely DOE performance, in order to continue operations. Mr. Fay sent correspondence to another utility, with similar information: At our present usage rate, full core reserve in our spent fuel pool will no longer be available after 1995. Accordingly, we are proceeding with the development of an independent spent fuel storage installation (ISFSI) to supplement the storage capacity of our spent fuel pool and expect to have this facility operational by 1994. 11

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DFOF ¶¶ 177; see also DX 442 at HQR 364 0032 (March 1986 RW-859 states at section 3.22 that WEPCO loses its ability to operate the Point Beach reactor in September 1996); DX 444 at HQR 364 0063 (February 1987 RW-859 states at section 3.22 that WEPCO loses the ability to operate the Point Beach reactor in September 1996); DX 445 at HQR 364 0072 (February 1988 RW-659 states that WEPCO loses the ability to operate the Point Beach reactor in April 1997). In a video developed for public outreach and stockholder meetings as part of its public relations effort regarding the ISFSI project, WEPCO explained that: The spent fuel pool was designed to store spent fuel only temporarily, but after 20 years and several reconfigurations, the spent fuel pool at Point Beach is nearing its limit. By mid-1995, there will be no more room. To bridge the gap until the federal facilities are ready, Wisconsin Electric is proposing to build a temporary dry storage facility. DFOF ¶¶ 185-187 An internal WEPCO publication, Synergy, published in 1992, provided information about the upcoming ISFSI project to WEPCO employees and described the ISFSI, as follows: The facility would be sized for 48 casks to accommodate operation of Point Beach through the end of its current licenses (2010 for Unit 1 and 2013 for Unit 2). The application submitted to the PSCW requested only 12 casks ­ enough to bridge the gap between mid-1995, when the spent fuel pool would be full, and the acceptance of fuel at the MRS, scheduled to open in 1998. DFOF ¶¶ 188, see also DFOF ¶¶ 189 (Question and Answer Brochure indicates construction of ISFSI will begin in late 1992, with usage beginning in 1994). DFOF ¶¶ 189. After Robert Link became Vice-President of the Nuclear Power Department, he too confirmed the original operation date of June 1994 for the ISFSI. DFOF ¶¶ 191.

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C.

WEPCO's Application To The PSCW Reflected Its Need For At-Reactor Storage Assuming DOE Performance in 1998

WEPCO argues in its brief that its 1991 application to the PSCW for authorization of the ISFSI project reflects the anticipated DOE delay in accepting SNF from Point Beach. Pl. Br. at 23. However, its application reflects a need for additional at-reactor storage before January 1998, and a continuing assumption that DOE would perform. WEPCO submitted its application to the PSCW in November 1991 for authorization to build its ISFSI and to begin loading the first five casks placed into service in 1994, with a total of 12 casks loaded through 1998. DX171 at WISC 00014727. With respect to WEPCO's rationale for implementing dry fuel storage, while WEPCO was uncertain whether DOE would begin performance in 1998, it was certain about its needs before then. WEPCO stated in its application that: Additional spent fuel storage will be required at Point Beach in 1995 to allow for the continued operation of the plant while maintaining the capability to discharge one full-core of fuel assemblies to the spent fuel pool should the need arise. DX171 at WISC 00014730.7 The application requested the construction of a storage facility with a maximum capacity of 48 casks, but with an immediate request for only 12 casks. In testifying about the size of the ISFSI, Mr. Zabransky explained that:

7

The application also stated that: While the project as proposed addresses only the storage capacity required through 1998, Wisconsin Electric believes that it is necessary to plan for the possibility that the DOE may not meet is schedule.

DX 171 at WISC 00014730. 13

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Well, as of that point, that was presumed to be enough casks [45] to contain all the spent fuel that would be discharged by Point Beach from that point forward that needed to be stored outside the spent fuel pool, maintaining full core reserve. And the reason we did that was because we had done two major projects previously to expand the spent fuel storage capacity, which was the first two reracks. . . . We didn't want to have to go through an incremental project later on, since again, this required state approval, this required NRC approval, it was going to be the final time we had to create such a project and get it approved. And because of the incremental nature, we only would deploy the storage we needed. Tr.1003:18-1004:14 (Zabransky). Mr. Zabransky made clear that the reason for the ISFSI at Point Beach was because the SNF pool there was running out of space. If additional at-reactor storage was not implemented, the facility would need to shut-down by 1995. While DOE acceptance was on the WEPCO radar, and the size of the proposed ISFSI was for the life of the plant, the continuing rationale for the project was to bridge the gap in storage in the SNF pool from 1995 to 1998. DFOF ¶¶ 186-188. Plaintiff completely ignores this need for storage as early as 1995 and attempts to use current data and testimony to make its argument. However, the Court must rely upon the same data and assumptions that WEPCO relied upon in the 1987-1991 time in order to understand WEPCO's decision, rather than information that is litigation-driven, as WEPCO now suggests. In its application to the PSCW, WEPCO assumed two FCRs and assumed that, if DOE performed beginning in 1998, it would use the lower bounding rate in the 1990 ACR. Under those assumptions, WEPCO understood it would require 12 casks through 1998, and an additional two casks through 2007. Id. at WISC 00014753. As Mr. Zabransky explained, WEPCO decided on the ISFSI project to meet its immediate need for additional at-reactor storage

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and to meet any additional needs that it might have in the future. DFOF ¶ 176; Tr.1003:231004:14, Tr.1004:15-1006:2 (Zabransky). D. WEPCO's Assertions That The Assumptions It Presented To The PSCW Were Conservative Shed Doubt On Its Presentations To This Court

WEPCO asserts in its brief that it used "highly conservative," "overly conservative," and "conservative" assumptions in its submissions to the PSCW for authorization to implement an ISFSI at Point Beach. Pl.Br. at 23-25. It allegedly did so in an effort to "create a greater sense of urgency." First, there is no contemporaneous evidence to support this assertion. In addition, this raises a number of other issues for WEPCO. First, if WEPCO could manage its SNF inventory without any ISFSI until 1998 and beyond, as it now claims, there was really no reason for any urgency in 1991, as WEPCO describes. Second, a number of witnesses represented that WEPCO endeavored to provide accurate and truthful information to the PSCW. For example, Mr. Porter, a retired WEPCO Senior Vice-President, testified that there was typically an internal vetting of the facts that would be presented to the PSCW by the nuclear power department, first to the nuclear affairs group and then to the officers submitting the application to ensure the accuracy of the document. Tr. 2225:4-21 (Porter); see also Tr.257:12-258:12 (Baumann) (tables representing discharges at Point Beach submitted to PSCW true and accurate); Tr.776:17:780:10 (Zabransky) (information regarding relevance of FCR at Point Beach included in the ISFSI application true and accurate); Tr.1128:21-1130:8 (Zabransky) (WEPCO always endeavored to provide true and accurate information to the PSCW); Tr.1602:2-1603:16 (Krieser) (information provided to PSCW indicated loss of installed capacity by 1997, true and correct).

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Furthermore, Mr. Zabransky, the ISFSI project manager, testified that he understood, as he and others at WEPCO were planning the project, that it would take approximately five years to implement. Tr.984:16-986:20 (Zabransky). He based his understanding on discussions with other utilities, for example, Virginia Power, which had already built an ISFSI at its site. In establishing the timetable for the ISFSI project, Mr. Zabransky testified that he considered the time he and others at WEPCO believed it would take the PSCW to make a decision, with a complete understanding of all the potential issues that might arise before the PSCW. WEPCO pointed to no documents that indicated any sense of urgency in the project that needed to be communicated to the PSCW. In fact, there is no contemporaneous evidence in the record to support WEPCO's assertion that the information submitted to the PSCW was overly or highly conservative. WEPCO's after-the-fact trial testimony that contradicts all of the contemporaneous evidence is simply not trustworthy or reliable. E. There Is No Evidence In The Record To Support WEPCO's Assertion That It Re-Evaluated Its Decision To Build An ISFSI In 1992 Or That It Postponed The Final Decision To Implement Dry Fuel Storage At Point Beach Until 1995

WEPCO's assertion that Robert Link re-evaluated the decision to implement dry fuel storage at WEPCO in 1992 is likewise not supported by the evidence. Plaintiff cites to an August 20, 1992 memorandum from Mr. Link to WEPCO employees (PX258) as evidence that he re-evaluated the project because he knew that it would be a contentious and arduous process to obtain approval. Pl. Br. at 30; PFOF ¶108. However, quite the contrary, that memorandum reiterated the scheduled operation of the ISFSI beginning in June 1994, and announced the appointment of Kevin Annundson as the project manager. See PX258. In fact, Mr. Link

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optimistically estimated that PSCW approval of the project would be announced in May 1993. Id. (see DFOF ¶ 191). Nor does the correspondence from WEPCO to the PSCW, dated November 20, 1992, support WEPCO's assertion that Mr. Link evaluated different options before he decided to proceed with the ISFSI. See PX271 (correspondence providing economic evaluation of ISFSI project); DFOF ¶ 192. The testimony at trial supports the Government's assertion that there were no further evaluations conducted to determine if there were options other than the ISFSI. For example, Mr. Krieser testified that no formal studies, evaluations, or analyses were conducted to evaluate other options besides dry fuel storage. DFOF ¶¶ 207. Mr. Baumann testified that he could not find any studies, evaluations, or analyses regarding options such as fuel management strategies to determine if the amount of fuel discharged from the Point Beach reactors could be reduced. Tr.217:6-221:4 (Baumann). In all of the memoranda created at WEPCO during the period 1989 through 1995, WEPCO never states that it is re-evaluating its decision to implement dry fuel storage. Quite the contrary, in all documents introduced at trial, WEPCO is unwavering in its commitment to implement the ISFSI project beginning in 1994 or 1995. DFOF ¶¶ 186-196. Mr. Link's contemporaneous testimony before the PSCW in 1994 directly contradicts WEPCO's assertions that he did not make the final decision to build an ISFSI at WEPCO until 1995, after he was certain that DOE would not perform in 1998. Mr. Link testified before the PSCW in 1994 that the dry fuel storage application to the PSCW was based upon the assumption that DOE would begin acceptance of spent fuel from WEPCO in 1998 and that WEPCO needed 12 casks before DOE commenced acceptance in 1998:

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We still need an ISFSI prior to 1998 which is the first date by which we believe DOE is obligated to take fuel. Yes, we considered DOE obligated to take fuel starting in 1998. That does not negate the need for an ISFSI. * * *

As I stated, that does not negate the need for the ISFSI to be constructed, utilized with the 12 casks we asked for through 1998. * * *

I can state that the [dry fuel storage] proposal is based on the 1998 take date underneath the provisions of the contract. PX 907B at 534-535 (WPS002 6484-6485); DFOF ¶¶ 197. In his pre-filed testimony before the PSCW, dated October 11, 1994, Mr. Krieser testified that, "after the Unit 1 spring outage in 1997, there will not be enough spaces to accommodate all the spent fuel from another refueling outage." DFOF ¶¶ 198. In a response to the PSCW, dated July 21, 1995, Mr. Krieser also recognized WEPCO's need for an ISFSI assuming DOE performance in 1998: The date when spent fuel is actually removed from Point Beach is uncertain. The findings of fact in PSCW Docket 6630-CE-197 speculated that a DOE permanent repository may not be in operation until the year 2023. DOE, however, is under contract to begin removing spent fuel in 1998 and WEPCO believes that offsite centralized interim storage or Point Beach fuel beginning about 1998 is a more likely scenario than waiting for the DOE permanent repository to begin operations. DX73 at WISC 00001305. Mr. Krieser and Mr. Link continued to inform the PSCW as late as July 1995, that DOE performance at an MRS in 1998 was still possible. WEPCO cites to the final Environmental Impact Statement ("EIS") issued by the PSCW in July 1994 to support its assertion that it could operate until 1998 or 1999. Pl. Br. at 31. 18

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However, WEPCO fails to explain that the economic analysis by the PSCW in that EIS hinges on the issue of whether shut-down of Point Beach in 1998, necessitated by the fact that, without dry fuel storage there would be no room in the SNF pool, was more expensive than continuing to operate Point Beach with dry cask storage and replacement of the Unit 2 steam generators before 1998. DX 26A at WISC 00003583-3596. The PSCW staff determined that, indeed, it was a better option to implement dry cask storage and replace the steam generators. Completely missing from WEPCO's "analysis" of the PSCW order is the fact that the PSCW recognized, that after 1994, WEPCO only had one full core reserve, after 1995, WEPCO could only unload part of a core, and, after 1997, WEPCO could not unload any additional SNF into its pool. DX26A at p. xv. Under these circumstances, WEPCO would not be able to replace its steam generators in 1996, which it asserted to the PSCW was necessary in order to continue operating efficiently. The PSCW's EIS, and all contemporaneous document, including the testimony of Messrs. Link and Krieser before the PSCW in 1994, demonstrate that WEPCO needed dry cask storage assuming DOE performance in 1998, and its commitment to the project was unwavering. F. There Is No Evidence In The Record To Support WEPCO's Assertion That It Would Have Used A Temporary Cask Pit Rack In The But-For World

WEPCO asserts that it would have used a temporary rack in the but-for world had DOE begun accepting SNF beginning in 1998. Pl. Br. at 37-41. However, WEPCO's arguments are meritless because, as we will explain below, they are based upon a flawed analysis of the actual space that WEPCO had in its SNF pool. Further, WEPCO's assertions that it re-evaluated its options in 1992, and would have used a temporary rack, but did not knowing DOE would not

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perform, are based strictly on after-the-fact self-serving testimony of Robert Link and others which is not supported by contemporaneous documents. WEPCO's witnesses admitted that there was no discussion of the use of a temporary rack at WEPCO until at least 1998, after the DOE breach. DFOF ¶¶ 201, 205-206. That is true because a temporary rack would not have satisfied WEPCO's perceived storage needs in the early 1990's. A temporary rack - as indicated by its name - is a means by which WEPCO might have achieved full-core reserve by placing a rack in the cask laydown area in the spent fuel pool. However, a temporary rack would not have solved WEPCO's storage issues. As long as WEPCO needed to use the cask laydown area to load casks, any rack placed in that area cannot be used for storage of SNF indefinitely. DFOF ¶¶ 202, 204. Further, in its 1991 application for an ISFSI to the PSCW, WEPCO projected that, at its then-current rate of discharge, even with planned improvements to the spent fuel pool, WEPCO would have exceeded the usable capacity of the pool with the fall 1997 discharge, requiring the shut down of one of its operating units. DFOF ¶¶ 203. Finally, use of a temporary cask pit rack would have added weight to the SNF pool and would have necessitated NRC licensing. As Mr. Zabransky testified, WEPCO management ruled out any option for additional storage space in the SNF pool that would have required seeking approval from the NRC because analyses indicated tha