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

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS WISCONSIN ELECTRIC POWER COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. No. 00-697C (Senior Judge Merow)

WISCONSIN ELECTRIC POWER COMPANY'S POST-TRIAL BRIEF

Of Counsel: Donald J. Carney Mary Rose Hughes Emily C.C. Poulin Jay L. Griffiths Perkins Coie LLP 607 Fourteenth Street, N.W. Washington, D.C. 20005-2003 (202) 434-1675

Richard W. Oehler Perkins Coie LLP 1201 Third Avenue, Suite 4800 Seattle, Washington 98101-3099 (206) 359-8419 Attorneys for Plaintiff WISCONSIN ELECTRIC POWER COMPANY

Dated: December 21, 2007

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TABLE OF CONTENTS

Page I. II. III. IV. V. INTRODUCTION........................................................................................................ 1 RELEVANT PROCEDURAL HISTORY................................................................... 4 PROPOSED FINDINGS OF FACT ............................................................................ 5 SUMMARY OF ARGUMENT ................................................................................... 5 ARGUMENT ............................................................................................................... 9 A. The Legal Standard for Recovery of Mitigation Costs for DOE's Breach of Contract ........................................................................................... 9 1. 2. 3. B. Breach of Contract Recoverability Standards ...................................... 9 Mitigation Principles for Determining Past Damages........................ 11 Applicable Principles of Contract Interpretation ............................... 14

WE's Costs to Construct the ISFSI and Load 12 Casks Were Caused by DOE's Breach and Were Foreseeable........................................................ 15 1. 2. It Was Clearly Foreseeable that WE Would Need to Provide Alternate SNF Storage Facilities if DOE Failed to Perform .............. 15 DOE Program Developments in 1987-1988 Caused WE to be Extremely Concerned Regarding DOE's Ability to Perform in 1998 .................................................................................................... 16 DOE's Anticipated Failure to Timely Perform in 1998 Drove WE SNF Storage Decision-making from 1988 Forward ................... 20 WE's 1991 PSCW Application for Dry Storage Reflected DOE's Anticipated Breach ................................................................. 23 WE's Form 10-K's for 1988-1991 Confirm that WE Constructed Its Dry Storage Facility Because of DOE's Breach ....... 25 DOE's Anticipated Failure to Timely Perform Caused WE's Continued Pursuit of Dry Storage When WE Reevaluated the Project in 1992 ................................................................................... 29 In 1995, Following DOE's Announcement that It Would Not Perform in 1998, WE Implemented Its Dry Storage Project.............. 32

3. 4. 5. 6.

7. C. D.

In the Non-Breach World, WE Would Not Have Built Dry Storage ............. 34 In the Non-Breach World, WE Likely Would Have Used a Temporary Rack for Short-Term FCR Capability ............................................................ 37

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TABLE OF CONTENTS (continued)

Page E. The Court Should Find that DOE Would Accept Spent Fuel in the Non-Breach World at a Substantial Rate ....................................................... 41 1. 2. F. The Parties' Understanding Was that DOE Would Accept SNF at a Substantial Rate ........................................................................... 41 DOE's 900 MTU Rate Should Be Rejected as Contrary to the NWPA, the Standard Contract, and the Parties' Understanding ........ 44

WE's Procurement of Three TN-32B Backup Casks Was Foreseeable, Caused by DOE's Breach, and Commercially Reasonable ............................ 49 1. 2. 3. 4. Background ........................................................................................ 49 WE's Procurement of the TN-32B Casks Was Foreseeable............... 49 DOE's Breach Caused WE to Reasonably Incur Costs to Procure Three TN-32B Casks ............................................................ 50 WE Reasonably Continued with TN-32B Cask Fabrication After Loading of the VSC-24 Casks Resumed .................................. 52

G.

WE's Decision to Procure Dual-Purpose NUHOMS Systems Was Foreseeable and Is Recoverable ..................................................................... 53 1. 2. DOE Foresaw Dual-Purpose Systems................................................ 53 DOE's Continuing Breach and VSC-24 Cask Problems Caused WE to Reasonably Incur Costs to Procure the NUHOMS System ................................................................................................ 55

H. I.

WE's Costs Incurred in Exploring Private, Off-Site SNF Storage Were Caused by DOE's Breach and Were Foreseeable........................................... 59 The Dry Storage Fees Imposed by the NRC Since 1999 Were Caused by DOE's Breach and Were Foreseeable........................................................ 64 1. 2. 3. NRC Regulatory Expenses for Storing SNF Were Foreseeable ........ 65 DOE's Breach Caused the NRC to Impose Generic NRC Fees Under 10 C.F.R. Part 171 Across the Nuclear Power Industry.......... 66 WE Established at Trial the Spent Fuel Storage Portion of the NRC Fee ............................................................................................. 68

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TABLE OF CONTENTS (continued)

Page J. WE Has Established Its Damages with Reasonable Certainty....................... 69 1. 2. 3. 4. 5. K. L. VI. The Joint Stipulation and Other Indicia of the Accuracy of WE's Costs.......................................................................................... 69 WE Should Recover Its Internal Labor Costs .................................... 72 WE Should Recover Its Administrative & General Costs ................. 75 WE's Financing of Its Mitigation Costs Is Recoverable .................... 77 WE Has Estimated the Temporary Rack Offset to a Reasonable Certainty ............................................................................................. 83

WE May Reasonably Rely on Rebuttal Evidence.......................................... 84 DOE's Claimed Cask Loading Offset Is Speculative and Should Not Be Allowed..................................................................................................... 87

CONCLUSION .......................................................................................................... 90

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TABLE OF AUTHORITIES Cases Ace Constructors, Inc. v. United States, 70 Fed. Cl. 253 (2006), aff'd, 499 F.3d 1357 (Fed. Cir. 2007)................................................................................. 76 Black v. Finantra Capital, Inc., 418 F.3d 203 (2d Cir. 2005)................................................ 26 Blinderman Constr. Co. v. United States, 695 F.2d 552 (Fed. Cir. 1982) ....................... 15, 45 Bluebonnet Sav. Bank v. United States, 266 F.3d 1348 (Fed. Cir. 2001) ............ 61, 69, 77, 79 Brooklyn Life Ins. Co. of N.Y. v. Dutcher, 95 U.S. 269 (1877)........................................ 15, 45 Cal. Fed. Bank v. United States, 395 F.3d 1263 (Fed. Cir. 2005) ................................... 10, 28 Centex Corp. v. United States, 55 Fed. Cl. 381 (2003).......................................................... 79 Citizens Fed. Bank v. United States, 474 F.3d 1314 (Fed. Cir. 2007) ................... 9, 10, 61, 77 Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed. Cir. 2001) (en banc) .................................................................................................. 65 CUB v. PSCW, 565 N.W.2d 554 (Wis. Ct. App. 1997) ......................................................... 34 CUB v. PSCW, No. 95 CV 676 (Dane Cty. Cir. Ct. Dec. 22, 1995) ...................................... 34 Dep't of Water & Power v. United States, 131 F. Supp. 329 (S.D. Cal. 1955)...................... 79 Franconia Assocs. v. Unites States, 536 U.S. 129, 122 S. Ct. 1993 (2002)........................... 13 Gevyn Construction Corp. v. United States, 827 F.2d 752 (Fed. Cir. 1987) ......................... 80 Home Savings of Am., FSB v. United States, 399 F.3d 1341 (Fed. Cir. 2005) ...................... 14 Hughes Communications Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2001) ............................................................................................................ 11, 14 In re Kellett Aircraft Corp., 186 F.2d 197 (3d Cir. 1950)...................................................... 14 Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005), reg'g denied (Nov. 24, 2005)...........................................................passim Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (2004) .......................... 61, 63 Koby v. United States, 53 Fed. Cl. 493 (2002)....................................................................... 14

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TABLE OF AUTHORITIES LaSalle Talman Bank v. United States, 317 F.3d 1363 (Fed. Cir. 2003) ................... 77, 79, 81 Locke v. United States, 283 F.2d 521 (Ct. Cl. 1960).............................................................. 10 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000) .............................................................................................................. 2, 48 Martinez v. Union Pac. R.R. Co., 82 F.3d 223 (8th Cir. 1996).............................................. 84 Northern Helex Co. v. United States, 524 F.2d 707 (Ct. Cl. 1975)........................................ 14 Northern States Power Co. v. United States, 224 F.3d 1361 (Fed. Cir. 2000) ........................ 2 Northern States Power Co. v. United States, 78 Fed. Cl. 449 (2007) .............................passim Old Stone Corp. v. United States, 450 F.3d 1360 (Fed. Cir. 2006), cert. denied, ___ U.S. ___, 127 S. Ct. 1831 (2007) ....................................................... 2, 14 Pacific Gas & Elec. Co. v. United States, 73 Fed. Cl. 333 (2006)..................................passim Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002)................................................... 11 Roedler v. Department of Energy, 255 F.3d 1347 (Fed. Cir. 2005)................................. 14, 48 Roton Barrier, Inc. v. Stanley Works, 79 F.3d 1112 (Fed. Cir. 1996) ................................... 84 S. Cal. Fed. Sav. & Loan Ass'n v. United States, 422 F.3d 1319 (Fed. Cir. 2005), cert. denied, 126 S. Ct. 2967 (2006)....................................................... 69 Sacramento Mun. Util. Dist. v. United States, 70 Fed. Cl. 332 (2006)............................ 44, 89 San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557 (Fed. Cir. 1997) ........................................................................................................ 9, 10, 68 SEC v. Koenig, 469 F.2d 198 (2d Cir. 1972) ......................................................................... 26 Southern Nuclear Operating Co. v. United States, 77 Fed. Cl. 396 (2007)....................passim Southern Nuclear Operating Co. v. United States, 79 Fed. Cl. 135 (2007)..................... 46, 47 System Fuels, Inc. & Entergy Arkansas, Inc. v. United States, No. 03-2623C, 2007 WL3033659 (Fed. Cl. Oct. 16, 2007) ................................................................passim System Fuels, Inc. v. United States, 78 Fed. Cl. 769 (2007) ............................................ 81, 82

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TABLE OF AUTHORITIES Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515 (2006), appeal dismissed, 188 Fed. Appx. 1004 (2006)..........................................................passim United States v. Chiarella, 588 F.2d 1358 (2d Cir. 1978), rev'd on other grounds, 445 U.S. 222 (1980) ............................................................................................ 27 United States v. Ebbers, 458 F.3d 110 (2d Cir. 2006), cert. denied, 127 S. Ct. 1483 (2007) ....................................................................................................... 27 Westfed Holdings, Inc. v. United States, 52 Fed. Cl. 135, 163 (2002), aff'd in relevant part & rev 'd in part on other grounds, 407 F.3d 1352 (Fed. Cir. 2005) .................................................................................................................. 78 Wickham Contracting Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994) ....................... 77, 78, 80 Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249 (2006).................................passim Statutes 15 U.S.C. § 78ff(a) ................................................................................................................. 27 15 U.S.C. § 78j(b) .................................................................................................................. 26 15 U.S.C. § 78m(a)(2) ............................................................................................................ 25 15 U.S.C. § 78r....................................................................................................................... 26 15 U.S.C. § 78u(d) ................................................................................................................. 26 28 U.S.C. § 2501 .................................................................................................................... 13 42 U.S.C. § 10131(a)(4) ......................................................................................................... 47 42 U.S.C. § 10155(h) ............................................................................................................. 62 42 U.S.C. § 10168(b) ............................................................................................................. 46 42 U.S.C. § 10168(d)(3)......................................................................................................... 46 42 U.S.C. § 10168(d)(4)......................................................................................................... 46 42 U.S.C. § 2214(c)(4) ........................................................................................................... 68 Nuclear Waste Policy Act of 1982, Pub. L. No. 97-425, 96 Stat. 2201 (1983) (codified as amended at 42 U.S.C. §§ 10101-10270) .......................................................... 1

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TABLE OF AUTHORITIES Nuclear Waste Policy Amendments Act of 1987, Pub. L. No. 100-203, §§ 5001­5065, 101 Stat. 1330 (1987) (codified in scattered sections of 42 U.S.C. §§ 10101­10270).................................................................................................... 18 Pub. L. No. 101-508, the Omnibus Budget Reconciliation Act of 1990................................ 65 Wis. Admin. Code PSC § 112.05(1)(b) (1982)...................................................................... 22 Regulations and Rules 10 C.F.R. Part 170 .................................................................................................................. 64 10 C.F.R. § 170.16 ................................................................................................................. 67 10 C.F.R. § 171.15(c) ............................................................................................................. 64 10 C.F.R. Part 171 .................................................................................................................. 66 10 C.F.R. Part 171.16 ............................................................................................................. 64 17 C.F.R. § 240.10b-5 ............................................................................................................ 26 17 C.F.R. § 240.12b-20 .......................................................................................................... 26 17 C.F.R. § 240.13a-1 ............................................................................................................ 25 17 C.F.R. § 249.310(a) ........................................................................................................... 26 18 C.F.R. Part 101 .................................................................................................................. 79 64 Fed. Reg. 31448 (June 10, 1999) ...................................................................................... 67 71 Fed. Reg. 60490 (Oct. 13, 2006) ....................................................................................... 56 Cost Accounting Standards 410 ............................................................................................. 76 Federal Acquisition Regulation 31.203.................................................................................. 76 Federal Acquisition Regulation 31.205-6 .............................................................................. 74 Regulation S-K, 17 C.F.R. Part 229 ....................................................................................... 26 Sec. Exchange Act Release 11079, 5 SEC Doc. 380 (1974) ................................................. 26

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TABLE OF AUTHORITIES Other Authorities 4 Louis Loss & Joel Seligman, Securities Regulation 1854 (rev. 3d ed. 2000)..................... 26 Restatement (Second) of Contracts § 347 (1981)............................................................... 9, 11 Restatement (Second) of Contracts § 350(2) (1981) .......................................................passim Restatement (Second) of Contracts § 352 (1981)............................................................. 10, 68 Richard A. Lord, 11 Williston on Contracts § 32:14 (4th ed. (2007) .............................. 15, 45

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS
WISCONSIN ELECTRIC POWER COMPANY, Plaintiff, v. UNITED STATES, Defendant. WISCONSIN ELECTRIC POWER COMPANY'S POST-TRIAL BRIEF Pursuant to the Court's October 29, 2007 Order and the October 26, 2007 Joint Stipulation, Plaintiff Wisconsin Electric Power Company ("WE") respectfully submits this post-trial brief in support of WE's partial breach of contract damages claim of approximately $96.5 million. WE has submitted under separate cover Plaintiff's Proposed Findings of Fact ("PFF"). I. INTRODUCTION No. 00-697C Senior Judge Merow

Trial in this matter presented the Court with WE's compelling claim for damages arising from the partial breach by the U.S. Department of Energy ("DOE") of Contract No. DE-CR01-83NE44425 (the "Standard Contract" or "Contract"). As required by the Nuclear Waste Policy Act of 1982, Pub. L. No. 97-425, 96 Stat. 2201 (1983) ("NWPA") (codified as amended at 42 U.S.C. §§ 10101-10270), DOE entered into contracts with all nuclear utilities. In return for very substantial fees, DOE assumed responsibility for storage and disposal of commercial spent nuclear fuel ("spent fuel" or "SNF") and high-level radioactive waste ("HLW") "beginning not later than January 31, 1998." 42 U.S.C. § 10222(a)(5)(B) (2000). WE paid over $215 million in Contract fees to the Nuclear Waste

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Fund as of December 31, 2006, but has received no performance from DOE in return. DOE currently estimates that its "best-achievable" schedule for commencing acceptance of spent fuel is 2017 or 2018. PFF 1-2. On October 8, 2004, the Court granted WE's Motion for Partial Summary Judgment on Liability, finding that DOE's failure to timely begin disposal activity with respect to WE's SNF constituted a partial breach of contract. See October 8, 2004 Order, Dkt. 172. See also Northern States Power Co. v. United States, 224 F.3d 1361 (Fed. Cir. 2000); Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000) ("The breach involved all the utilities that had signed the contract--the entire nuclear electric industry."). Therefore, the purpose of trial was to determine the amount of WE's damages for the Government's partial breach of WE's contract. In Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005), reh'g denied (Nov. 24, 2005), the U.S. Court of Appeals for the Federal Circuit set forth the legal standard applicable for determining damages in partial breach cases, including DOE's partial breach of the Standard Contract. That DOE's impending delay required utilities to take measures mitigating the cost of DOE's failure to perform is "beyond debate." Id. at 1375. In order to recover its incurred mitigation expenditures, WE must establish foreseeability, causation, and reasonableness. Id. at 1376. As the breaching party, the Government bears the burden of showing that WE's mitigation efforts were unreasonable. Id. at 1375 (quoting Restatement (Second) of Contracts § 350(2) (1981)); Old Stone Corp. v. United States, 450 F.3d 1360 (Fed. Cir. 2006) (Government did not meet its burden to establish that actual expenditures were not reasonable), cert. denied, ___ U.S. ___, 127 S. Ct. 1831 (2007) . WE's damages fall into four general categories. First, WE seeks to recover the costs of constructing an Independent Spent Fuel Storage Installation ("ISFSI") at the Point Beach Nuclear Plant ("Point Beach") located north of Milwaukee in Manitowoc County. This

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category of costs includes significant expenditures that WE made to obtain the approval of the Public Service Commission of Wisconsin ("PSCW") for the storage facility, as well as SNF-related fees imposed by the Nuclear Regulatory Commission ("NRC"). Second, WE seeks to recover the costs for the dry storage casks that it acquired to store SNF at Point Beach and related plant modifications to accommodate these casks. Third, WE seeks to recover costs relating to investigation of Private Fuel Storage as an alternate SNF storage facility. Finally, WE seeks its costs for managing SNF issues and investigating other potential off-site SNF storage sites. WE's damages calculation also includes an offset to the Government for costs that WE may have incurred in the non-breach world, i.e., the world where DOE performed its obligations under the Standard Contract. The offset concerns the acquisition of a temporary rack for potential use in the cask laydown area in the Point Beach wet pool. WE's damages also include its cost of capital through September 10, 2007. A summary of WE's damages is as follows:

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SUMMARY OF DAMAGES (in millions of dollars)1 CATEGORY Engineering, design, licensing, and construction of an ISFSI, including NRC fees Dry Storage Cask Costs Private Fuel Storage Other SNF Management and Oversight Activities Temporary Cask Pit Rack TOTAL PFF 236 (including subparagraphs). NOMINAL DOLLARS $20.7 $31.5 $0.9 $1.2 ($2.0) $52.3 WITH COST OF CAPITAL $49.1 $48.8 $2.2 $2.3 ($5.9) $96.5

II.

RELEVANT PROCEDURAL HISTORY

WE filed its initial Complaint in this matter in November 2000, seeking past and future damages. In Indiana Michigan, the Federal Circuit limited the nuclear utilities to claims for past costs in these SNF partial breach of contract cases. 422 F.3d at 1376. Based on the Indiana Michigan decision, in April 2006, the Court granted WE's motion for leave to file an Amended and Supplemental Complaint to update its damages claim through December 2005. See April 6, 2006 Order, Dkt. 227. Then, on June 7, 2007, the Court granted WE's motion for leave to file a Second Amended and Supplemental Complaint. This permitted WE to update its claimed costs from January 1, 2006 through February 28, 2007.

As noted, the cut-off date for nominal damages in this case is February 28, 2007 with cost of capital damages through the beginning of trial, September 10, 2007. Nominal dollars means the actual dollars spent in each of the relevant years. Nominal dollars are unadjusted for the effects of financing.

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At that time, WE also updated its cost of capital to the start of the rescheduled trial, September 10, 2007. On September 21, 2007, the parties executed a Joint Stipulation Regarding Accuracy of Plaintiff's Costs, which stipulated as follows: The parties agree, with the two exceptions noted below, that all costs through February 28, 2007 that are included in WE's claim were incurred by WE and are traceable to and supported by WE's accounting records. These costs include (1) outside services and materials costs, (2) the NRC Power Reactors' Annual Fees, (3) employee expenses, (4) the Pension and Benefits Labor Adder, and (5) labor costs. In addition, the Government does not deny the accuracy of the budgeted Administrative and General cost rates used by WE in its claim. The Government, however, contests whether WE legally is entitled to recover these claimed monies in this action. Joint Stipulation Regarding Accuracy of Plaintiff's Costs, Dkt. 350 (Sept. 21, 2007) ("Joint Stipulation Re: Accuracy of Costs, Dkt. 350"). The two exceptions noted in the Joint Stipulation Re: Accuracy of Costs, Dkt. 350 were that the Government contests the accuracy of the calculation of WE's cost of capital and the accuracy of the calculated offset for the procurement and installation of a temporary rack. III. PROPOSED FINDINGS OF FACT

WE submits under separate cover Plaintiff's Proposed Findings of Fact and refers the Court to WE's proposed findings ("PFF") for the relevant facts and supporting citations. IV. SUMMARY OF ARGUMENT

Based on the established precedent and credible testimonial and documentary evidence, WE methodically and thoroughly established at trial its entitlement to the damages that it seeks in this action. It established that DOE's failure to timely perform under the Standard Contract was a substantial causal factor in WE's incurrence of foreseeable spent fuel storage damages. Indeed, WE established that DOE's breach was the causal factor in WE's incurrence of these damages. WE also established these costs with reasonable

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certainty. Finally, the Government has not established that these costs were not reasonably incurred by WE. WE demonstrated that it acted reasonably in response to delay in DOE's program by storing highly radioactive spent fuel in dry storage containers at Point Beach and in investigating off-site storage alternatives. Those costs clearly were a foreseeable response to DOE's failure to perform. WE further showed that it exercised reasonable commercial judgment in all of its mitigation activities given the long lead times to implement such activities as well as engineering, business and regulatory considerations. The Government failed to meet its burden of proving that any of WE's expenditures were unreasonable. The overwhelming evidence showed that the predominant factor in WE's SNF storage decision-making from 1988 forward was the reasonable certainty that DOE would not timely perform. Prior to 1988, WE had no plans to store spent fuel at Point Beach other than in its spent fuel pool. By 1988, however, DOE was not planning on accepting SNF at any facility in 1998 and amendments to the NWPA substantially delayed spent fuel acceptance by DOE. Testimonial and documentary evidence established that, in 1988, WE then began planning for additional spent fuel storage because of delays in DOE's spent fuel program. As a result, in 1988, WE began planning on providing additional storage capacity through at least through 2003 and, indeed, through the end of Point Beach's reactor licenses. WE reasonably chose dry storage as the means to satisfy its long-term storage needs caused by delays in DOE's performance. Because of DOE's breach of contract, it is impossible to know with certainty the actions WE would have taken to manage its spent fuel in the non-breach world. The evidence at trial, however, established that WE would not have built dry storage. WE and NMC engineering personnel familiar with Point Beach testified that Point Beach would have operated at least into 1998 and, if necessary, into 1999 without dry storage. Moreover, WE established that in the non-breach world, the DOE would have accepted SNF at a substantial

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rate, not unreasonable and illegal 900 Metric Tons Uranium ("MTU") rate advocated by DOE at trial. WE further established that, to preserve full core reserve in its spent fuel pool in the non-breach world, WE would have used a temporary rack in the cask pit area ­ a technique used by many other utilities ­ from 1996 until full core reserve in the permanent storage racks was restored after DOE began performance. WE presented testimony that WE considered the use of a cask pit rack, as well as other spent fuel management options, during the 1990s. WE also established the technical feasibility of the temporary rack and a reasonable estimate of its cost. The Court heard evidence regarding a May 1996 incident during the loading of the third cask (a VSC-24 cask) at Point Beach ­ the "hydrogen ignition incident" ­ that profoundly impacted WE's dry storage decisions. The incident caused WE to procure three backup TN-32B casks to address uncertainties in the continued use of the VSC-24 cask. WE presented compelling testimony as to the reasonableness of its decision. WE also presented comprehensive evidence supporting its decision to procure a nextgeneration, dual-purpose cask ­ the NUHOMS system. Point Beach personnel responsible for the safe and efficient operation of Point Beach testified to the need to move from the severely limited VSC-24 design to the safer, more flexible, more modern and transportable NUHOMS design. WE further proved at trial that its off-site private fuel storage expenditures stemmed directly from DOE's failure to perform. WE spent modest amounts investigating private fuel storage from approximately 1994 to 1999. During this timeframe, WE faced major uncertainties in implementation of its dry storage program and faced substantial pressure from its regulators to investigate means to move spent fuel out of Wisconsin. Thus, WE's limited expenditures in investigating such opportunities constituted eminently reasonable and foreseeable mitigation.

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WE also established that the NRC has imposed a spent fuel storage fee on all nuclear power plant licensees from 1999 forward as a direct result of DOE's partial breach of the Standard Contract. In imposing this fee, the NRC concluded that, given the lack of a DOE spent fuel storage facility, all licensees will need dry storage eventually. Therefore, the NRC decided to impose a generic spent fuel storage fee on all licensees. If DOE had performed, the NRC would have had no basis for imposing such a fee across the entire nuclear industry, including utilities, such as WE, that would not have built dry storage in the non-breach world. Accordingly, these NRC fee payments by WE are recoverable damages. WE presented more than sufficient evidence for the Court to determine WE's damages with reasonable certainty. In addition to the reasonable certainty reflected in the Joint Stipulation Re: Accuracy of Costs, Dkt. 350, nearly all of WE's claimed costs have already been reviewed and approved as reasonable expenditures by its regulator, the PSCW. Further, at trial, WE's damages experts applied a reliable expert methodology to calculate WE's damages. WE also established at trial that WE's Weighted Average Cost of Capital was a real economic cost to WE that should be recoverable as damages. WE also presented alternative calculations of its financing costs, such as a Weighted Average Cost of Debt calculation. Finally, the Government failed to establish any basis for its proposed offsets, including, but not limited to, its claimed cask loading offset. In sum, based on an extensive evidentiary record and established precedent, WE has established a compelling entitlement to its claimed damages arising from DOE's breach of the Standard Contract.

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V. A.

ARGUMENT

The Legal Standard for Recovery of Mitigation Costs for DOE's Breach of Contract 1. Breach of Contract Recoverability Standards

The remedy for breach of contract "is damages sufficient to place the injured party in as good a position as it would have been had the breaching party fully performed." Indiana Michigan, 422 F.3d at 1373 (citing San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1562 (Fed. Cir. 1997)). "The general principle is that all losses, however described, are recoverable." Id., 422 F.3d 1373 (quoting Restatement (Second) of Contracts § 347 cmt. c (1981)). Damages for a breach of contract "are recoverable where: (1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty." Id.. Generally, foreseeability is determined at the time of contracting. Id. The Court, however, has recognized that "there may be situations where foreseeability is more appropriately measured at the time of the breach, because that is when the breaching party should be on notice of the ramifications of its actions or failures to act." Southern Nuclear Operating Co. v. United States, 77 Fed. Cl. 396, 404 (2007). See also Pacific Gas & Elec. Co. v. United States, 73 Fed. Cl. 333, 395 (2006). While the general response to a breach must be foreseen, the specific response need not be foreseen. Citizens Fed. Bank v. United States, 474 F.3d 1314, 1321 (Fed. Cir. 2007); Southern Nuclear, 77 Fed. Cl. at 405 ("While the general response to a breach must be foreseen, the particular way that a mitigating decision is implemented need not."); System Fuels, Inc. & Entergy Arkansas, Inc. v. United States, No. 03-2623C, 2007 WL3033659, at *21 (Fed. Cl. Oct. 16, 2007) ("Entergy Arkansas").

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As to causation, selection of the appropriate causation standard "depends upon the facts of the particular case and lies largely within the trial court's discretion." Citizens Fed. Bank, 474 F.3d at 1318. In the SNF cases, the Court has held that the Government's breach of the Standard Contract must be a "substantial causal factor" in WE's mitigation decisions. See, e.g., Southern Nuclear, 77 Fed. Cl. at 405; Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515, 523 (2006), appeal dismissed, 188 Fed. Appx. 1004 (2006). If WE establishes that a causal connection exists between the breach and WE's claimed damages, WE can recover its mitigation damages. Cal. Fed. Bank v. United States, 395 F.3d 1263, 1268 (Fed. Cir. 2005) ("[T]he causal connection between the breach and the [claimed damages] must be 'definitely established.' . . . That is not to say that the breach must be the sole factor or sole cause in the [claimed damages.]). In determining whether a decision was substantially caused by DOE's delay, "reasonable not absolute certainty suffices." Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 268 (2006). This is because the "defendant who has wrongfully broken a contract should not be permitted to reap advantage from his own wrong by insisting on proof which by reason of his breach is unobtainable." Locke v. United States, 283 F.2d 521, 524 (Ct. Cl. 1960). In determining whether DOE's breach is a substantial causal factor, the "long lead time required for these mitigation decisions" also must be taken into account. Yankee Atomic, 73 Fed. Cl. at 268; PFF 104. In addition, WE need only establish the amount of its damages with reasonable certainty. Yankee Atomic, 73 Fed. Cl. at 268. The amount of contract damages "need not be 'ascertainable with absolute exactness or mathematical precision.'" Indiana Michigan, 422 F.3d at 1373 (quoting San Carlos Irrigation & Drainage Dist., 111 F.3d at 1563)). See also Restatement (Second) of Contracts § 352 cmt. a (1981) ("Damages need not be calculable with mathematical accuracy and are often at best approximate.").

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Finally, WE is not barred from recovering damages by the fact that its claim is one for partial breach. In Indiana Michigan, the Federal Circuit held that there is "no reason why efforts to avoid damages in contemplation of a partial breach should not . . . be recoverable," just as they are recoverable for mitigation upon a total breach. 422 F.3d at 1375. See also Tennessee Valley Auth., 69 Fed. Cl. at 522-23. 2. Mitigation Principles for Determining Past Damages

Expectation damages include mitigation expenses incurred by WE as the nonbreaching party, including its costs of arranging alternatives to the breaching party's required performance. Restatement (Second) of Contracts § 347 cmts. a, b (1981); Hughes Communications Galaxy, Inc. v. United States, 271 F.3d 1060, 1067-68 (Fed. Cir. 2001) (awarding costs for mitigation expenses). Thus, WE properly claims the costs that it incurred in actions taken to mitigate damages resulting from DOE's breach of the Standard Contract. "Mitigation was required." Southern Nuclear, 77 Fed. Cl. at 403. "[O]nce a party has reason to know that performance by the other party will not be forthcoming, . . . he is expected to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise.'" Indiana Michigan, 422 F.3d at 1375 (quoting Restatement (Second) of Contracts § 350 cmt. b (1981)). "Mitigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage." Id. (citing Robinson v. United States, 305 F.3d 1330, 1334 (Fed. Cir. 2002)). "Indiana Michigan altered the landscape considerably by parsing utility claims into actual expenditures and framing the inquiry as one of mitigation." Yankee Atomic, 73 Fed. Cl. at 260. In Indiana Michigan, the Federal Circuit held that mitigation was required by 1994 based on DOE's public and formal announcements of delay. 422 F.3d at 1375 ("It is beyond debate that because the government unequivocally announced in 1994 that it would not meet its contractual obligations beginning in 1998, the utilities were in fact obligated to take

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mitigatory steps."). Thus, Indiana Michigan indicated that mitigation by 1994 was mandatory. Indiana Michigan in no way suggests that a utility could not have determined prior to 1994 that it did not believe that DOE would perform in 1998 and reasonably acted to mitigate the consequences of DOE's anticipated breach. The Restatement (Second) of Contracts makes it clear that the duty to mitigate arises "once a party has reason to know that performance by the other party will not be forthcoming." Restatement (Second) of Contracts § 350 cmt. b (1981). See also Indiana Michigan, 422 F.3d at 1375. Addressing this specific issue in Northern States Power Co. v. United States, 78 Fed. Cl. 449, 459 (2007), the Court articulated the following standard: The court in Indiana Michigan identified only the time when efforts directed to mitigation would be regarded as mandatory and not, as defendant would have it, the time when such efforts might be justified in the first instance. To adopt defendant's understanding of the court's words ­ that the duty to mitigate in all spent fuel cases is triggered only by DOE's 1994 announcement ­ would submerge the very principle on which the Indiana Michigan was founded: that a party's duty to mitigate arises when there is "reason to know" that performance by the other party will not be forthcoming. The Court then applied this standard thusly: "In the instant case, the evidence demonstrates that plaintiff [Northern States] had 'reason to know' in 1988 that performance by DOE beginning in 1998 would not be forthcoming." Id. Here, WE established at trial that it reasonably began to incur mitigation damages in 1988. WE understood that the Monitored Retrieval Storage ("MRS") constraints imposed by the NWPA Amendments (as defined below) made it extremely unlikely that the MRS or any other DOE facility would be available in 1998 to begin accepting spent fuel. PFF 77. Then, in 1988, DOE announced that it was unlikely that it would perform significantly before 2003 at any facility. PFF 81-82. Thus, similarly to Northern States, WE had "reason to know" in 1988 that performance by DOE in 1998 would not be forthcoming. Accordingly, it was

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appropriate for WE to begin its mitigation activities at that time and to recover such costs in this action. It also should be remembered that WE's mitigation expenditures were relatively insignificant until the PSCW's February 1995 Order approved WE's dry storage project application. At that time, WE made the final decision to implement dry storage by construction of the dry storage facility and fabrication of casks. PFF 121. During opening arguments, the Court asked whether the statute of limitations would bar recovery of damages more than six years prior to WE's filing of suit in November 2000. Tr. 49:24-50:6 (Sept. 10, 2007). WE respectfully submits that the statute of limitations does not apply to this issue. The statute of limitations applies to whether WE filed its action within six years of accrual of the cause of action. 28 U.S.C. § 2501. A cause of action accrues only "when all the events have occurred that fix the defendant's alleged liability and entitle the plaintiff to institute an action." Indiana Michigan, 422 F.3d at 1378 (citation omitted). See also Franconia Assocs. v. Unites States, 536 U.S. 129, 142-44, 122 S. Ct. 1993 (2002) (explaining that the time for accrual of a contract claim differs based on whether the non-breaching party sues in repudiation or waits for the date of performance to pass and then sues, noting that "if the injured party instead opts to await performance [as WE did], 'the cause of action accrues, and the statute of limitations commences to run, from the time fixed for performance rather than from the earlier date of repudiation.'" (citations omitted)). Therefore, even though WE was obligated to take mitigation actions once it had reason to know that DOE would not be able to timely perform in 1998, WE's partial breach of contract action did not accrue until January 31, 1998. WE's filing in November 2000 was timely and there is no remaining statute of limitations issue. Instead, WE respectfully submits that whether WE can claim damages beginning in 1988 is an issue governed by mitigation principles, including the aforementioned Restatement (Second) of Contracts and the Northern States decision.

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In determining mitigation damages, the Court considers whether WE acted with "reasonable commercial judgment." Northern Helex Co. v. United States, 524 F.2d 707, 718 (Ct. Cl. 1975) (citations omitted); see also Hughes, 271 F.3d at 1067. The law requires only that WE make "those efforts that are fair and reasonable under the circumstances." Home Savings of Am., FSB v. United States, 399 F.3d 1341, 1353 (Fed. Cir. 2005), reh'g and reh'g en banc denied (June 28, 2005); Indiana Michigan, 422 F.3d at 1375. A mitigating party is "'not precluded from recovery . . . to the extent that it has made reasonable but unsuccessful efforts to avoid loss.'" Indiana Michigan, 422 F.3d at 1375. (quoting Restatement (Second) of Contracts § 350(2) (1981)). In addition, as the Court stated in Koby v. United States, 53 Fed. Cl. 493, 497 (2002) (quoting In re Kellett Aircraft Corp., 186 F.2d 197, 198-99 (3d Cir. 1950)): The rule of mitigation of damages may not be invoked by a contract breaker as a basis for hypercritical examination of the conduct of the injured party, or merely for the purpose of showing that the injured person might have taken steps which seemed wiser or would have been more advantageous to the defaulter. As the breaching party, the Government bears the burden of proving that any of WE's mitigation efforts were unreasonable. Indiana Michigan, 422 F.3d at 1375 (citing Restatement (Second) of Contracts § 350(2) (1981)); Old Stone Corp., 450 F.3d at 1368, 1370; Yankee Atomic, 73 Fed. Cl. at 264 ("Defendant has the burden of showing that plaintiffs' mitigation efforts were unreasonable."); Tennessee Valley Auth., 69 Fed. Cl. at 523 ("The government bears the burden of showing that [plaintiff's] mitigation efforts were unreasonable"). 3. Applicable Principles of Contract Interpretation

Where a contract implements a statutory requirement, the interpretation of the contract is guided by the underlying statute. Roedler v. Department of Energy, 255 F.3d 1347, 1352 (Fed. Cir. 2001) ("For determination of contractual and beneficial intent when, as

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here, the contract implements a statutory enactment, it is appropriate to inquire into the governing statute and its purpose."). Thus, the terms of the Standard Contract can be illuminated by the NWPA. Entergy Arkansas, 2007 WL 3033659, at *14. Further, the actions of the parties after execution of the Standard Contract can be extremely useful in its interpretation. Brooklyn Life Ins. Co. of N.Y. v. Dutcher, 95 U.S. 269, 273 (1877); Entergy Arkansas, 2007 WL 3033659, at *14; Richard A. Lord, 11 Williston on Contracts § 32:14 (4th ed. 2007). When a contract is indefinite, the practical construction adopted by the parties is frequently followed because it evidences what the parties believed the contract required before it became the subject of controversy. Blinderman Constr. Co. v. United States, 695 F.2d 552, 558 (Fed. Cir. 1982); Entergy Arkansas, 2007 WL 3033659, at *14. B. WE's Costs to Construct the ISFSI and Load 12 Casks Were Caused by DOE's Breach and Were Foreseeable WE's decision to investigate and eventually to license and construct dry storage at Point Beach is directly attributable to its knowledge that DOE would not begin performance until well after 1998. 1. It Was Clearly Foreseeable that WE Would Need to Provide Alternate SNF Storage Facilities if DOE Failed to Perform

The dry storage costs incurred by WE were reasonably foreseeable by DOE. The intent of the NWPA and the parties to the Standard Contract was to ensure that utilities would not have to build additional at-reactor storage after 1998. See Tennessee Valley Auth., 69 Fed. Cl. at 519, 528; PFF 41, 48, 52, 61, 63, 65, 134. It was reasonably foreseeable that WE would be required to take reasonable and necessary steps to continue to store its spent fuel in a safe and efficient manner and, thereby, incur storage expenses of this nature. Plaintiff's Exhibit ("PX") 52, p. CTR0421070 (Dec. 1983 Draft Mission Plan); Defendant's Exhibit ("DX") 493, p. SNO69702 (Proceedings of 1983 CRWM Info. Mtg.) ("When

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licensed, dry storage will probably become the preferred method for expanding interim storage capability."). See also PFF 134. WE's substantial dry storage costs are exactly the type of expenses that DOE foresaw and that the parties sought to preclude through DOE's acceptance of SNF under the Standard Contract, beginning no later than January 31, 1998. Indiana Michigan, 422 F.3d at 1376 ("DOE should have foreseen that its breach would force Indiana Michigan to find alternative storage for its SNF"); Southern Nuclear, 77 Fed. Cl. at 404 ("That plaintiffs would generally incur storage expenses of the nature and magnitude sought here was foreseeable."). As the Court stated in Tennessee Valley Auth.: DOE also recognized that utilities might be forced to build additional on-site storage facilities if DOE were not successful in performing under its contracts for SNF disposal, as reflected by the fact that one of DOE's goals was to preclude the utilities' need to provide storage outside their spent fuel pools. . . . In short, the court finds that it was entirely foreseeable to DOE that failure to perform under the contract would result in damages of the nature and magnitude that [plaintiff] claims. 69 Fed. Cl. at 528. See also PFF 41, 48, 52, 61, 63, 65, 134. 2. DOE Program Developments in 1987-1988 Caused WE to be Extremely Concerned Regarding DOE's Ability to Perform in 1998

When WE entered into the Standard Contract with DOE in 1983, it had no plans to build dry storage at Point Beach. PFF 49, 66. Based on a comparison of projected discharges against existing pool capacity, WE believed that it could operate until 1998 with its existing pool capacity. Id. WE also believed that it would have sufficient storage after that date because DOE's acceptance rate, based on the Oldest Fuel First principle, meant that DOE's acceptance of Point Beach's spent fuel in the early performance years would exceed Point Beach's discharges. Id.; Tr. 1240:18-1241:23 (Shimon) ("The January 31, 1998 date for commencing removal was critical to Wisconsin Electric because we expected to be able

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to provide our own storage through that date, and if the program commenced on January 31, 1998, we would not have to build additional storage.")2 Thus, at the time of execution of the Standard Contract, WE's program for on-site storage of spent nuclear fuel was "based on the contractual promise [they had] with DOE that [DOE] will start taking spent fuel no later than 1998." PX 81, p. 8 (March 1985 Comments by Sol Burstein). From WE's perspective, "[t]hat date must be held firm and inviolate." Id. See also PFF 65. WE began to have concerns regarding potential delays in DOE's performance in 1985. PFF 68. WE continued to monitor DOE's implementation of the NWPA and, by 1987, increasingly doubted DOE's ability to timely perform in 1998 based on DOE's statements and congressional action. PFF 69-77. In March 1987, Mr. Sol Burstein, then WE's Senior Vice President and Vice Chairman of WE's Board, testified before Congress that the industry "was extremely concerned over the current state of affairs surrounding the NWPA implementation." PX 116, p. 3 (March 1987 Statement of Sol Burstein); PFF 37, 75. Mr. Burstein further explained that DOE performance in 1998 was critical because, in planning for their on-site storage capacity, utilities had to "take into account the DOE schedule for operation of the high-level radioactive waste disposal system." PX 116, p. 7; PFF 75. Other developments in 1987 added to WE's concern that DOE would not accept Point Beach's spent fuel in 1998. In 1987, DOE's Mission Plan Amendment announced a five-year schedule delay until 2003 for the waste acceptance starting date at the repository. PFF 69.

Mr. Howard Shimon was responsible for spent fuel storage at WE from 1976 until 1990. PFF 21. Mr. Shimon was WE's primary point of contact with both DOE and industry groups at the working level regarding the NWPA and the Standard Contract. PFF 38. Mr. Shimon apprised WE management of all developments regarding the Standard Contract and how these developments related to WE's SNF storage planning. PFF 39.

2

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Then, DOE submitted to Congress a proposal for the construction of an interim MRS facility in Oak Ridge, Tennessee, theoretically to operate by 1998. PFF 70. Absent congressional approval of the MRS, DOE stated that it "may not be able to begin" transfer of the spent fuel to DOE facilities in 1998. PX 124, p. 63 (June 1987 Mission Plan Amendment). Over the industry's objection, DOE proposed certain linkages between use of an MRS and the availability of the permanent repository. PFF 70, 71, 73, 75-77. WE strongly opposed the linkages. In July 1987, Mr. Burstein, testifying before Congress, attempted to persuade the Government not to "link the use of an MRS to receipt of a first repository construction authorization." PX 134, p. 3 (July 1987 Testimony of Sol Burstein); PFF 75. Nevertheless, when Congress passed and the President signed the Nuclear Waste Policy Amendments Act of 1987, DOE's authority to build an MRS was linked to, among other things, milestones in the development of a permanent repository that were even more restrictive than those proposed by DOE ("linkages"). Nuclear Waste Policy Amendments Act of 1987, Pub. L. No. 100-203, §§ 5001­5065, 101 Stat. 1330, 1330-227 to -255 (1987) (codified in scattered sections of 42 U.S.C. §§ 10101­10270) ("NWPA Amendments"). PFF 76. The linkages included the following restrictions. First, Congress precluded construction of the MRS until (1) DOE received a construction license for the repository and (2) the Secretary of Energy recommended approval of a repository site to the President. Second, Congress limited the SNF quantity that an MRS could accept to 10,000 MTU until the permanent repository became operational. Without a change in these linkages, DOE would not be able to have an MRS in operation by January 31, 1998. The NWPA Amendments also established the Office of the Nuclear Waste Negotiator ("the Negotiator"), which was to assist DOE in obtaining either an MRS or repository site and to develop a negotiated agreement with the locality and the state associated with either of those facilities.

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The Negotiator was not appointed until approximately four years after the passage of the NWPA Amendments. DOE never initiated its own activities to site an MRS facility. Id. Despite DOE's hope to perform by 1998, WE came to believe that timely performance by DOE was extremely unlikely. In a July 1987 memorandum to senior WE executives, Mr. Burstein noted Representative Udall's view that DOE's implementation of the NWPA was a "shambles." PX 132 (July 1987 WE memo); PFF 75. It was, as Mr. Burstein bluntly put it, "more and more evident that actions by the Congress itself are delaying implementation of NWPA and will make it impossible for DOE to have a repository of any type available for receipt of utilities' spent nuclear fuel in 1998." Id. See also Tr. 1305:8-17 (Shimon) ("Q: And focusing on the linkages on the MRS facility [in the NWPA Amendment], what was the significance of that development to Wisconsin Electric? A: We had expressed our concerns that that would make the MRS little comfort to us in being able to count on having our spent fuel removed in 1998. With that linkage, we couldn't come up with a scenario that would enable DOE to have that facility available in 1998."); PFF 76, 77. In 1988, DOE reaffirmed that "waste acceptance at a waste-management facility cannot begin in 1998" under "current conditions." DOE Draft 1988 Mission Plan Amendment, PX 150, pp. 18-19 (June 1988 Draft Mission Plan Amendment); PFF 81. Moreover, DOE stated that, because of the linkages between the MRS and repository, it would be unlikely to start accepting waste significantly before 2003. PX 150, p. 19. Based on DOE's own statement in 1988 that it was unlikely to perform prior to 2003, WE reasonably concluded that it was extremely unlikely that DOE would timely perform in 1998 and began its planning based on DOE's anticipated breach. Tr. 1306:3-1308:14 (Shimon) ("[The 1988 Draft Mission Plan Amendment] was a confirmation that DOE agreed with our concerns that, given the slippage in the repository schedule and the linkages placed on the MRS, that they would not be able to meet the 1998 date. . . . [The document was] actually

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showing pickups in 2003 for both the MRS facility and the first repository, in the same year."). See also PFF 77, 78, 81-83. 3. DOE's Anticipated Failure to Timely Perform in 1998 Drove WE SNF Storage Decision-making from 1988 Forward

In 1988, WE began planning to meet Point Beach's SNF storage requirements because it believed that DOE would not perform until at least 2003, and likely much later. PFF 75, 77-78. Thus, in a May 1988 memorandum, WE concluded that it could not depend on DOE's performance until 2003 and that even that date was uncertain: The current DOE schedule calls for limited operation at the first repository in 2003. Although an MRS has been authorized, its operation is prohibited until the issuance of a NRC construction permit for the repository. The DOE schedule is optimistic and risky, as no backup sites are currently being pursued. At this time Wisconsin Electric should plan on providing sufficient capacity for the interim storage of spent fuel through at least 2003. PX 145, p. WISC00061023 (May 1988 Project Authorization); PFF 79. In these circumstances, WE had to plan to mitigate the impact of DOE's anticipated failure to perform. If WE did nothing and DOE did not timely perform, Point Beach would eventually have to shut down once it lost the ability to discharge fuel from the reactors. PFF 133. WE also had to take account of the "long lead time required for these mitigation decisions." Yankee Atomic, 73 Fed. Cl. at 268; Tr. 2179:18-2180:3 (Porter) ("Q: Did your expectation of a long approval process affect the company's planning for dry storage? A: It certainly did, as the expectation that it would be a controversial project meant that we needed to ensure that we had a long lead time and that, in our application, we impressed upon the Commission the need for timely approval . . .") 3; PFF 104. Based on consideration of these

Mr. David Porter was Senior Vice President at WE in November 1991 when he signed WE's dry storage application to the PSCW. PFF 25; PX 236.

3

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same 1987-1988 developments in the implementation of the Standard Contract, the Court in Northern States concluded: "In the instant case, the evidence demonstrates that plaintiff had 'reason to know' in 1988 that performance by DOE beginning in 1998 would not be forthcoming." 78 Fed. Cl. at 459. The Court further concluded: "In reality, then, mitigation was no less appropriate in 1988 than it was in 1994 when DOE formally acknowledged that it would not begin performance in 1998." Id. at 460. The primary driver in WE's SNF storage decision-making was to select a long-term spent fuel management strategy because of the anticipated long-term delay in DOE's performance. PFF 80, 87, 111, 115. Options that WE began exploring in 1988 for its longterm SNF storage requirements included constructing an additional spent fuel pool, fuel rod consolidation, and a new ventilated concrete cask storage system ("the VSC"). PFF 78. In 1988, WE participated, along with Sierra Nuclear and the Electric Power Research Institute, in a DOE demonstration program leading to the development of a dry storage cask using a concrete overpack. The demonstration cask held 17 assemblies and, therefore, was termed the VSC-17. It was the forerunner of the VSC-24, a cask that held 24 assemblies. PFF 106. WE eventually decided that a dry storage system, with the VSC-24 cask proposed by Sierra Nuclear, consisting of an ISFSI and concrete overpack cask technology, represented the most flexible, modular, long-term option. PFF 79, 80, 87. During this period, WE publicly identified DOE's failure to timely perform as the reason for WE's dry storage project. For example, Mr. Shimon told the Midwestern HighLevel Radioactive Waste Committee in November 1990 that WE's dry storage project was "a necessary response to the lack of progress in the waste disposal program." PX 208 (Nov. 1990 Summary of Proceedings). See also PX 209, p. 2 (Nov. 1990 Shimon Statement to Nuclear Waste Tech. Rev. Board); PFF 93, 94. Similar public statements were included in WE's 1988-1991 SEC Form 10-K's, discussed more fully below.

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In 1989, the WE Nuclear Power Department drafted an internal Work Order Requisition for dry storage. The requisition noted that, while DOE had announced a disposal schedule starting in 2003, WE was "not certain" when DOE would actually perform. PX 171 (May 1989 Work Order Requisition), 170 (May 1989 Project Requisition Summary); PFF 87. Accordingly, the Nuclear Power Department planned for ISFSI capacity through the end of the existing operating licenses (then, 2010 and 2013, respectively) by planning for an ISFSI that had an appropriately-sized pad to hold 45 casks. Id.; PFF 5. By regulation, the State of Wisconsin requires that the PSCW approve the costs of capital projects over certain thresholds. See Wis. Admin. Code PSC § 112.05(1)(b) (1982). The cost of the dry storage project would exceed the monetary threshold. PFF 104. The initial outlays for the project were low, and significant capital expenditures were not planned until after the project received the PSCW's approval. Id., PX 170, p. 2. In 1989, DOE announced a "significant" additional seven-year delay in the start of permanent repository operations from 2003 to a new date of "approximately" 2010. PX 183, p. vii (Nov. 1989 DOE Report to Congress); PFF 90. DOE speculated that it might nevertheless perform at a hypothesized MRS facility "on a limited basis, as early as 1998," but with significant conditions that would have to be satisfied before this could occur: (1) the Negotiator would have to obtain a voluntary MRS site, and (2) Congress would have to modify or remove the schedule linkages in the NWPA Amendments. PX 183, p. 11. If the Negotiator failed to find a volunteer MRS site, DOE admitted that even limited operations in 1998 would be impossible. Id. at 12. From 1989 until 1991, WE proceeded with the initial design and analysis for dry fuel storage. Nothing during this period suggested to WE that DOE would perform in 1998. PFF 86-96. To the contrary, the signs all pointed in the other direction ­ that DOE would not be able to perform until much later than 2003, perhaps 2010 or beyond. WE also did not

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believe that DOE would perform in 1998 with an MRS. PFF 75, 77, 79, 80, 83, 85, 87-89, 92-94, 96, 99, 107-108, 115, 117-118. 4. WE's 1991 PSCW Application for Dry Storage Reflected DOE's Anticipated Breach

Given that WE could not rely on DOE to dispose of its SNF in 1998, WE decided to apply for authority to construct dry storage well before 1998. WE informed the PSCW prior to its submittal that the dry storage application would be forthcoming and that WE was interested in obtaining approval for 48 casks that would provide sufficient SNF storage through the end of Point Beach's then current licenses. PFF 103. During those discussions, the PSCW requested that WE prepare an extensive Environmental Screening Report ("ESR") as part of the application and recommended that WE reduce the number of casks to 12 in order to facilitate approval. Id. In November 1991, WE submitted its dry storage project application. PX 236 (Nov. 15, 1991 PSCW Application). To accommodate the PSCW, WE only applied for authority to place 12 VSC-24 casks into service in this first request. PFF 103-104.4 WE used highly conservat