Free Published Opinion - District Court of Federal Claims - federal

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In the United States Court of Federal Claims
No. 99-447C No. 03-2626C (partially consolidated) (Filed Under Seal: February 15, 2008) (Reissued: February 20, 2008) ___________________________________ ) ) BOSTON EDISON CO., ) ) Plaintiff, ) ) UNITED STATES, ) ) Defendant. ) ____________________________________) ) ENTERGY NUCLEAR GENERATION ) CO., ) ) Plaintiff, ) ) v. ) ) UNITED STATES, ) ) Defendant. ) ) Post-trial decision in suit for damages for partial breach of Standard Contract for disposal of spent nuclear fuel; sale of nuclear power plant; assignment of Standard Contract in connection with sale; seller's retention of pre-sale damage claims; causation; foreseeability; damages measured by diminution in value of nuclear power plant

Richard J. Conway, Dickstein Shapiro LLP, Washington, D.C., for plaintiff Boston Edison Co. With him at trial and on the briefs were Bradley D. Wine and Bernard F. Sheehan, Dickstein Shapiro LLP, and with him on the briefs was Nicholas W. Mattia, Jr., Dickstein Shapiro LLP, Washington, D.C. Of counsel was Neven Rabadjija, Associate General Counsel, NSTAR Electric & Gas Corp., Boston, MA. Alex D. Tomaszczuk, Pillsbury, Winthrop, Shaw, Pittman, LLP, McLean, VA, for plaintiff Entergy Nuclear Generation Co. With him at trial and on the briefs were Jay E. Silberg, Daniel S. Herzfeld, and Jack Y. Chu, Pillsbury, Winthrop, Shaw, Pittman, LLP, Washington, D.C., and L. Jager Smith, Jr., Wise, Carter, Child, & Caraway, PA., Jackson, MS.

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Alan J. Lo Re, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With him at trial and on the briefs were Joshua E. Gardner, Scott R. Damelin, Patrick B. Bryan, Sonia M. Orfield, and Stephen P. Finn, Trial Attorneys, United States Department of Justice, Washington, D.C. With him on the briefs were Peter D. Keisler, Assistant Attorney General, Jeanne E. Davidson, Director, and Harold D. Lester, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C. Of counsel was Jane K. Taylor, Office of General Counsel, United States Department of Energy, Washington, D.C.

OPINION AND ORDER LETTOW, Judge. INTRODUCTION1 This case is one of first impression for the court. Although suits brought by utilities against the government for damages resulting from the non-performance by the Department of Energy ("DOE") of its statutory and contractual obligations to collect spent nuclear fuel have become commonplace, this case is novel in that it involves the post-breach sale of a nuclear power plant and alleged damages measured by the diminution of the plant's value caused by DOE's non-performance. Both the seller and the buyer of the Pilgrim Nuclear Power Station ("Pilgrim") located in Plymouth, Massachusetts, have brought claims for contractual damages in this court. The seller, Boston Edison Company ("Boston Edison")2 entered into a Standard Contract with DOE on June 17, 1983, calling for the disposal by DOE of spent nuclear fuel ("SNF") and high-level

Because this opinion and order might have contained confidential or proprietary information within the meaning of Rule 26(c)(7) of the Rules of the Court of Federal Claims ("RCFC") and the protective order entered in this case, it was initially filed under seal. The parties were requested to review this decision and provide proposed redactions of any confidential or proprietary information on or before February 20, 2008. The resulting redactions are shown by brackets enclosing asterisks as follows: "[***]." In 2000, Boston Edison merged with Commonwealth Energy Corporation, forming NSTAR Electric and Gas Corporation ("NSTAR"). Tr. 419:22-420:4 (Test. of Henry V. Oheim, NSTAR Project Manager and former Pilgrim senior manager). Effective January 1, 2007, Boston Edison formally changed its name to NSTAR Electric Company. Citations to the trial transcript are to "Tr. __." Boston Edison's exhibits are denoted as "BX," plaintiff Entergy Nuclear Generation Company's exhibits are denoted as "NX," and defendant's exhibits are denoted as "DX." Citations to Boston Edison's demonstrative exhibits are to "BDX" and to the government's demonstrative exhibits are to "DDX." 2
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radioactive waste ("HLW") generated at Pilgrim. Stip. ¶ 1.3 In effect, the Standard Contract reflects and carries out certain provisions of the Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. No. 97-425, § 302, 96 Stat. 2201, 2257-2261 (Jan. 7, 1983) (codified as amended at 42 U.S.C. § 10222). Under the NWPA and the Standard Contract, DOE was to begin collecting SNF no later than January 31, 1998. See 42 U.S.C. § 10222(a)(5)(B); see also Boston Edison Co. v. United States, 64 Fed. Cl. 167, 170 (2005) ("Boston Edison I"). To date, DOE has not disposed of the SNF generated at Pilgrim, and DOE is not likely to have a SNF repository available to begin acceptance of SNF from Pilgrim or any other source within the foreseeable future. See System Fuels, Inc. v. United States, 79 Fed. Cl. 37, 40-41, 47 (2007). Boston Edison filed its complaint in this court on July 12, 1999, alleging that the United States had partially breached the Standard Contract and had breached the implied covenant of good faith and fair dealing. Boston Edison I, 64 Fed. Cl. at 170. One day later, on July 13, 1999, Boston Edison sold Pilgrim to Entergy Nuclear Generation Company ("Entergy"), assigning its Standard Contract to Entergy as part of the Purchase and Sale Agreement. Stip. ¶ 5; see also Entergy Nuclear Generation Co. v. United States, 64 Fed. Cl. 336, 338 (2005). Under the assignment, Boston Edison retained claims that had accrued as of the closing date, with Entergy acquiring claims accruing thereafter. See Boston Edison I, 64 Fed. Cl. at 173. Entergy filed suit against the United States on November 5, 2003, also alleging a partial breach of the contract and breach of the implied duty of good faith and fair dealing. See Entergy Nuclear, 64 Fed. Cl. at 338. In prior proceedings, this court denied a motion by the government to dismiss Boston Edison's claims and also denied the parties' cross-motions for summary judgment on liability. See Boston Edison I, 64 Fed. Cl. at 170. Thereafter, the government moved to consolidate the Boston Edison and Entergy Nuclear cases, contending that both cases arose out of the same contract and, absent consolidation, the government would be potentially exposed to overlapping awards of damages. The court consolidated the cases "for the limited purpose of addressing issues concerning (1) contract formation, (2) contract implementation through the date of sale of the Pilgrim Nuclear Power Station, and (3) Boston Edison Company's diminution-in-value claim and the government's attendant offset claim against Entergy." Boston Edison Co. v. United States, 67 Fed. Cl. 63, 67 (2005) ("Boston Edison II"). As the parties were preparing for trial, the court addressed and resolved several contentious discovery disputes in what by then had become a tripartite litigation. See Boston Edison Co. v. United States, 75 Fed. Cl. 557 (2007) ("Boston Edison III"). A thirteen-day trial was held June 4­20, 2007. Following completion of post-trial briefing and a closing argument on November 8, 2007, the case is ready for final disposition.

The parties jointly stipulated to certain facts, and the Joint Stipulation will be cited as "Stip. ¶ __." 3

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FACTS4 Pilgrim is a "boiling water" nuclear reactor that went into commercial operation in 1972, when the Nuclear Regulatory Commission ("NRC") issued Boston Edison a forty-year operating license, valid until 2012. See Tr. 277:2-13, 412:11-13 (Test. of Edward Howard, a former Executive Vice President of Boston Edison). Under the license, Pilgrim is subject to a detailed NRC regulatory regime, which includes rules adopted in the 1960s bearing on the sale of nuclear plants. See 10 C.F.R. § 50.80 (transfer of licenses); Tr. 806:4-20 (Test. of Robert S. Wood, a former Financial Analyst for the NRC). In its operations, Pilgrim "burns" nuclear fuel assemblies in its reactor core, and when those fuel assemblies have been burned to the point where they are "spent," they are discharged to a spent-fuel pool. See System Fuels, 79 Fed. Cl. at 48-49 (describing more completely the operational characteristics of a comparable nuclear power-generating reactor). In the pool, the spent assemblies are stored in basket-like racks under water, where the radioactive products of nuclear fission present in the assemblies can decay safely. Id. Pilgrim will discharge more than 3,000 spent fuel assemblies by the end of its license life in 2012. BX 122 (Expert Report of William J. Manion) at 4186.5 A. The Statutory and Contractual Regime On January 7, 1983, Congress enacted the NWPA to "establish the Federal responsibility, and a definite Federal policy, for the disposal" of SNF and high-level radioactive waste, 42 U.S.C. § 10131(b)(2), while ensuring "that the costs of carrying out activities relating to the disposal of such waste and spent fuel will be borne by the persons responsible for generating such waste and spent fuel." 42 U.S.C. § 10131(b)(4). Through the NWPA as initially enacted, Congress authorized "the siting, construction, and operation of repositories" by the federal government, that would be used for "the permanent disposal of high-level radioactive waste and . . . spent nuclear fuel." Pub. L. No. 97-425, § 111, 96 Stat. 2207 (codified at 42 U.S.C. § 10131(a)(4), (b)(1)). Congress directed the Secretary of Energy to nominate repository sites, and, following Presidential and Congressional approval, to authorize construction of repositories through action of the NRC. Id., §§ 112, 115, 96 Stat. 2208, 2217 (codified at 42 U.S.C. §§ 10132, 10135); see also Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 255 (2006) (citing 42 U.S.C. §§ 10132-35). The NWPA also establishes the regime by which nuclear power generators have contracted with DOE for the acceptance, transport, and disposal of SNF. System Fuels, 79 Fed.

This recitation of facts constitutes the court's principal findings of fact in accord with RCFC 52(a). Other findings of fact and rulings on questions of mixed fact and law are set out in the analysis which follows. At the time of sale, Pilgrim's spent fuel pool was licensed for 3,859 assembly-storage locations, although not all of the licensed racks had been installed. See BX 47 (Entergy's duediligence field notes) at RFP-21-787. Ten such cells were reportedly not available for use. Id. 4
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Cl. at 41 (citing 42 U.S.C. § 10222(a)(1)). The NWPA provides that contracts were to be entered requiring the contracting utilities to pay a one-time fee for the electricity generated and sold prior to April 7, 1983, and a continuing fee based on the amount of electricity generated after that date. Id. (citing 42 U.S.C. § 10222(a)(2)-(3)). In return, the contracts were to oblige the government to begin to collect and dispose of SNF and HLW no later than January 31, 1998. Id. (citing 42 U.S.C. § 10222(a)(5)(B)). Operators of nuclear power facilities had to enter into these contracts to avoid losing their nuclear facility licenses. Id. at 42 (citing 42 U.S.C. § 10222(b)(1)(A)); see also Indiana Michigan Power Co. v. United States, 422 F.3d at 1369, 1372 (Fed. Cir. 2005) (citing 42 U.S.C. § 10222); Northern States Power Co. v. United States, 224 F.3d 1361, 1364 (Fed. Cir. 2000). To implement the NWPA, the government promulgated a Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, codified at 10 C.F.R. § 961.11. See 48 Fed. Reg. 5,458 (Feb. 4, 1983). Both the NWPA and the Standard Contract anticipated and provided for the transfer of nuclear facilities. The statute provides that "[t]he rights and duties of a party to a contract entered into under this section may be assignable with transfer of title to the spent nuclear fuel or high-level radioactive waste involved." 42 U.S.C. § 10222(b)(3). The Standard Contract has a provision to the same effect with an added proviso, stating that "rights and duties of the Purchaser may be assignable with transfer of title to the SNF and/or HLW involved; provided, however, that notice of any such transfer shall be made to DOE within ninety (90) days of transfer." BX 5 (Contract # DE-CR01-83NE44368 for the Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste ("Boston Edison's Standard Contract")), art. XIV; see also Rochester Gas & Elec. Corp. v. United States, 65 Fed. Cl. 431 (2005) (holding that the express authorization in 42 U.S.C. § 10222(b)(3) for assignments of Standard Contracts supersedes the Assignment of Contracts Act, 41 U.S.C. § 15, and the Assignment of Claims Act, 31 U.S.C. § 3727). B. Experience Under the Contract As the parties have stipulated, Boston Edison met its obligations under the Standard Contract. Stip. ¶ 6. Boston Edison paid the one-time fee in the amount of $40,582,782 on June 27, 1985, and paid all one-mill-per-kilowatt-hour continuing fees required under the Standard Contract, in an amount in excess of $48,500,000. Stip. ¶ 7. On September 21, 1993, September 20, 1994, September 26, 1995, and September 29, 1998, Boston Edison submitted Delivery Commitment Schedules to the Department of Energy, as part of the process established in the Standard Contract by which DOE would identify and then collect SNF and HLW from nuclear utilities. Id. at ¶ 2; see also Tennessee Valley Auth. v. United States, 60 Fed. Cl. 665, 668-69 (2004) (outlining the process established in the Standard Contract for identification and collection of SNF). DOE, on the other hand, has not disposed of any SNF at Pilgrim, and DOE is not likely to have a SNF repository available to begin acceptance of SNF from Pilgrim or any other source for at least another ten years. See System Fuels, 79 Fed. Cl. at 44-48 (chronicling DOE's steps toward implementing the Standard Contract and its ultimate non-performance).

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C. Deregulation and Boston Edison's Generation-Divestment Program During the late 1990s, governmental actions were taken at the state and federal levels to deregulate the electric utility industry. Tr. 530:18-531:4 (Test. of Geoffrey O. Lubbock, Vice President-Financial Strategic Planning and Policy, NSTAR Electric and Gas Corporation, and former Director of Generation Divestiture for Boston Edison); BX 155 (Amended Expert Report of John J. Reed on behalf of Boston Edison ("Reed Report")) at 3986. At the federal level, the Federal Energy Regulatory Commission ("FERC") sought to encourage market competition through the issuance of FERC Order 888. See FERC, Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. and Regs. ¶ 31,036, 61 Fed. Reg. 21,540 (May 10, 1996); see also Tr. 532:21 to 533:1 (Lubbock). FERC Order 888 "required the functional unbundling of utilities and an open access requirement for transmission in the transmission markets . . . [and strongly] encouraged utilities to divest their generation and separate generation from the transmission and distribution businesses." Tr. 530:23 to 531:4 (Lubbock). Correlatively, in November 1997, Massachusetts enacted legislation to restructure its electric utility industry, "moving the state from a traditional vertically-integrated monopoly structure to a competitive generation market structure," in particular by requiring "regulated utilities, including [Boston Edison] to either divest or functionally separate their electricity generation assets and operations from their transmission and distribution operations." BX 155 (Reed Report) at 3986; Tr. 724:1-19 (Test. of Timothy Newhard, Financial Analyst, Utilities Division, Office of the Attorney General, Commonwealth of Massachusetts); Mass. Gen. Laws ch. 164 (1997) ("An Act Relative to Restructuring the Electric Utility Industry in the Commonwealth, Regulating the Provision of Electricity and Other Services, and Promoting Enhanced Consumer Protection") (capitals removed). In response to the Massachusetts restructuring legislation, Boston Edison entered into a Settlement Agreement with the Office of the Massachusetts Attorney General laying out Boston Edison's generation-divestment program. BX 288 (Settlement Agreement); Tr. 724:25 to 725:20 (Newhard); Tr. 528:24 to 529:12 (Lubbock). The Settlement Agreement established a procedure to sell or divest the company's power-generating assets, which included the Pilgrim nuclear plant and its contracts for purchasing power. BX 288 (Settlement Agreement, Letter from Douglas S. Horan, Senior Vice President and General Counsel, Boston Edison, to Secretary Mary L. Cottrell, Department of Public Utilities, outlining the Settlement Agreement) at 2, BEC-0002126; Tr. 725: 9-12, 725:25 to 726:3 (Newhard). The Agreement's purpose was "to open up the electric market in Massachusetts" so that consumers could "buy power from the competitive market. It required the company to divest its generation and power purchase contracts and in doing so required it to either sell the nuclear power plant or to value it and move it into a nonregulated subsidiary." Tr. 529:3-12 (Lubbock). However, the Agreement did not require, but only encouraged, the sale of Pilgrim because of uncertainty as to whether there would be a market for nuclear power plants. Tr. 726:4-18 (Newhard). Pilgrim was to be valued for the purpose of calculating stranded costs 6

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either through a competitive sale or through an administrative valuation process. Tr. 726:11-18 (Newhard); see also Tr. 528:24 to 529:12, 579:23 to 580:2, 582:8-19 (Lubbock). The Settlement Agreement was approved by the Massachusetts Department of Telecommunications and Energy ("DTE"), the state agency responsible for regulating Massachusetts utilities. Tr. 527:17-19 (Lubbock); BX 288 (Settlement Agreement, Petition of Boston Edison Co., D.P.U./D.T.E. 96-23 (D.T.E. Jan. 28, 1998)) at 2456-2547; BX 289 (Notice of Corrected Pages to DTE's order (Feb. 2, 1998)).6 Boston Edison elected to value Pilgrim through the use of a competitive auction, which it determined would result in the most accurate market valuation of the plant. Tr. 580:20-23 (Lubbock). D. Competitive Sale Process To manage a competitive auction for Pilgrim, Boston Edison employed the services of Reed Consulting Group ("Reed" or "Reed Consulting"). Reed drafted a confidential offering memorandum ("Offering Memorandum"), solicited bids, oversaw due diligence, managed the bidding process, and negotiated the details of the purchase and sale agreement. Tr. 13:2-5, 26:14-28:3, 85:19 to 86:2, 154:15-20 (Test. of John J. Reed, principal of Reed Consulting). Reed Consulting initially sent an early-interest letter as well as other marketing materials to 175 potential bidders, who represented a wide range of persons and entities interested in energy assets. BX 155 (Reed Report) at 3987. Nine parties who met the financial and operating qualifications necessary for purchasing Pilgrim signed a Confidentiality Agreement. Id. Reed Consulting issued the Offering Memorandum to the qualified parties in June 1998, Tr. 154:1520, 156:1 to 157:25 (Reed); BX 93 (Offering Memorandum), among other things advising them that Boston Edison intended to transfer to the successful bidder all decommissioning responsibilities, including those associated with spent fuel. BX 93 (Offering Memorandum). The Offering Memorandum specifically advised that Boston Edison would provide a fully-funded decommissioning fund in an amount deemed sufficient by the buyer to cover the costs of decommissioning Pilgrim plus "interim fuel storage until such a time as the [DOE] takes title to the fuel." BX 93 (Offering Memorandum) at 0009; Tr. 156:9-24 (Reed). Under this proposed approach, the decommissioning fund would reach beyond NRC's requirements, which provided that a decommissioning fund had to cover the costs of decommissioning the radioactive portions of a nuclear power plant but not also on-site storage costs for SNF. See 10 C.F.R. § 50.75(c) footnote 1 ("Amounts [required for the fund] are based on activities related to the definition of `Decommission' in § 50.2 of this part and do not include the cost of removal and disposal of spent fuel or of nonradioactive structures and materials beyond that necessary to terminate the license."). By June 1998, DOE was already months late in commencing spent fuel collection under the Standard Contract. Boston Edison, relying on the government's thenexpressed position that performance would begin "no longer [in the future] than 2010," Tr.
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DTE succeeded to regulatory functions performed by the Department of Public Utilities. 7

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157:6-7 (Reed), held the "expectation that it [i.e., DOE's collection] wasn't going to happen anytime soon." Tr. 158:3-4 (Reed). The fund therefore was intended to cover the cost of what Boston Edison characterized as "long-term" on-site storage. Boston Edison's Post-Trial Br. at 19. In addition to the Offering Memorandum, Boston Edison also supplied bidders with a draft dated April 1998 of a site-specific decommissioning study by Nuclear Energy Services, Inc. ("NES"), a decommissioning cost estimating firm, which provided detailed information about a number of decommissioning scenarios for Pilgrim. Tr. 159:18 to 161:22, 177:2-8 (Reed), 612:15 to 613:7 (Lubbock), 2282:20 to 2283:8, 2380:2-14 (Test. of William J. Manion, WJM Consulting Services LLC); BX 305 (NES Study). NES's site-specific decommissioning study included SNF storage costs, and the scenarios that were addressed in the study varied in their assumptions about future SNF storage. See BX 305 (NES Study) at RFP-21-14065-66. 1. Bidders' due diligence. Two principal bidders, Entergy and AmerGen Energy Co. ("AmerGen"), conducted a due-diligence examination of Pilgrim. Entergy commenced the due-diligence process with a detailed examination of Pilgrim and its operations that included a week-long visit by a team of over forty Entergy employees, a review of the plant and facility, and staff interviews. Tr. 1006:5 to 1007:25 (Test. of Jack Harrington, a former vice president of business systems and information for Entergy, retained as a consultant by Entergy for assistance with due diligence and who was called by Boston Edison to testify at trial). The Entergy team identified a need for installation of additional racks in Pilgrim's spent fuel pool to provide interim storage of SNF. Tr. 1027:22 to 1028:18, 1036:2-19 (Harrington); BX 47 (Entergy's due-diligence field notes) at RFP-21-787; cf. Tr. 446:19 to 448:6 (Test. of Henry V. Oheim, NSTAR Project Manager and former Pilgrim senior manager).7 It concluded that Pilgrim was then in good operating condition. BX 156 (Expert Rebuttal Report of John J. Reed) ("Reed Rebuttal Report") at 4055-56.8 Entergy also conducted detailed due diligence regarding decommissioning expenses. It expressly noted that decommissioning expenses (including those associated with SNF storage) were "the largest factor" in developing the Pilgrim bid. Tr. 2042:13 to 2043:6 (Test. of Dan

In June 1994, Boston Edison had obtained from the NRC an amendment to its operating license to allow it to install six high-density fuel storage racks. Tr. 446:19-22 (Oheim); BX 276 (NRC's Amend. No. 155 to Facility Operating License No. DPR-35 (June 22, 1994)). Boston Edison installed two such racks thereafter and planned to install the remaining racks on an asneeded basis. Tr. 446:23 to 447:2 (Oheim). Some years earlier, beginning in March 1986, Pilgrim had been shut down by action of the pertinent regional office of the NRC, after the plant had suffered three unplanned shutdowns within a period of thirty days. Tr. 508:4 to 509:25 (Oheim). Thereafter, upon starting up again, it remained on the NRC's watch list for several years. Tr. 510:12 to 511:4 (Oheim). Pilgrim's operating problems had been resolved by the time of the competitive auction, and Pilgrim then had attained a better than average operating record. Tr. 515:21 to 516:2 (Oheim). 8
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Keuter, Vice President for Business Development for Entergy); BX 67 (Letter from Keuter to Michael Meisner, President, Maine Yankee Atomic Power Co. (Aug. 24, 1998)). Entergy retained a decommissioning cost-evaluation firm, TLG Services Inc. ("TLG"), to independently analyze the NES study, and Entergy also requested a separate analysis from Entergy's decommissioning team that was managing the Maine Yankee nuclear plant decommissioning process. Tr. 1947:11 to 1950:4 (Keuter); BX 29 (Entergy's Pilgrim Acquisition Analysis (Sept. 1998)) at 13052, 13165-253; BX 67 (Letter from Keuter to Meisner). In comparing the decommissioning scenario of the NES study of Pilgrim that was deemed more likely to occur to TLG's estimates for decommissioning other similarly-sized plants, TLG determined that dry storage would be needed at Pilgrim. Interim storage of SNF in added racks at the pool would become insufficient as the plant continued in operation. Tr. 1179:1 to 1180:23 (Test. of Thomas LaGuardia, former President, TLG).9 When required, dry storage at Pilgrim would entail significant risks and costs. BX 72 (TLG Study) at SUPPL-21; BX 69 (Mem. from LaGuardia to Steve Downes, Entergy Nuclear, Inc. (Sept. 23, 1998)) at SUPPL-29. Specifically, TLG's study estimated approximately $80 to $85 million for SNF storage costs. Tr. 1161:12 to 1162:4 (LaGuardia). Correlatively, Entergy's Maine Yankee team confirmed that significant costs would be imposed for dry storage at Pilgrim, BX 29 (Entergy's Pilgrim Acquisition Analysis) at 13238, and both TLG and Entergy estimated that the annual operation and maintenance costs for a dry storage facility at Pilgrim would be more than $2 million. Tr. 1967:20 to 1969:3, 2110:5 to 2115:2 (Keuter); BX 72 (TLG Study) at Supp. 21; BX 29 (Entergy's Pilgrim Acquisition Analysis) at 13030. Entergy's due-diligence efforts were matched by those of AmerGen, the other principal bidder. AmerGen assessed a decommissioning strategy for Pilgrim and hired BNFL Inc. to provide a cost estimate and review the NES study. Tr. 1764:17 to 1770:8 (Test. of Drew Fetters, former Vice President, Nuclear Acquisitions, AmerGen). AmerGen also determined that Pilgrim would need additional storage racks for its spent fuel pool to provide interim storage of SNF, and that on-site, dry storage would be necessary for longer-term storage of SNF. Tr. 1752:3 to

Installation of the sixth high-density rack at the pool at Pilgrim was problematic because that rack would have had to be installed in the cask loading area. BX 47 (Entergy's duediligence field notes) at RFP-21-787; BX 227 (diagram of Pilgrim spent fuel pool, showing proposed final reracked configuration). Installation of racks in that area would have barred use of the area to load shipping casks with SNF for off-pool storage or for delivery to DOE, and thus such use would have impaired Pilgrim's future performance. Id. In all events, dry storage would have been an efficient and economic mode of storing SNF at Pilgrim on a longer-term basis after the plant had ceased operations. Tr. 2361:7-11, 2403:9-18 (Manion). A boiling-water reactor can be decommissioned only after all of the SNF has been removed from the spent-fuel pool. Tr. 2339:18 to 2340:16 (Manion). Putting a plant in SAFSTOR, as defined by the NRC, for later dismantling would not be an option to avoid dry storage because "you would have to . . . take the fuel out of the pool in a boiling water reactor before you put the plant in SAFSTOR." Tr. 2367:14-17 (Manion). 9

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1755:9, 1809:23 to 1810:8 (Fetters); BX 76 (AmerGen Due-Diligence Report) at 818; BX 78 (BNFL Study) at 1264. 2. Indicative and subsequent bids. Four parties submitted indicative bids, Entergy, AmerGen, and two parties code-named "Cranberry" and "Purple." Tr. 31:8 to 32:8 (Reed). Both Entergy and AmerGen's lead venture partner, PECO Energy,10 submitted bids that included separate amounts for the purchase of the plant and for the transfer of the decommissioning trust fund. DX 202 (Entergy's Indicative Bid (July 30, 1998); Tr. 1764:17 to 1770:8, 1808:2 to 1811:13 (Fetters).11 Qualifying bidders then submitted so-called "Final Bids." Tr. 32:13-23 (Reed); see DX 241 (Entergy's Final Bid (Oct. 15, 1998)); BX 384 (PECO's Bid (Oct. 16, 1998)). Entergy and PECO submitted competitive bids at that stage, Tr. 32:13-23 (Reed), and those two bidders were asked to supplement and clarify their bids. See, e.g., DX 244 (PECO's Supplemental Bid (Oct. 26, 1998)), responding to Reed's request). The two bidders were asked to address decommissioning costs in particular because Boston Edison was concerned that the amount the bidders wanted for the decommissioning fund was too high. See Tr. 1999:15-18 (Keuter) ("[Mr. Reed] basically gave us categories of where we could improve our bid and what approximately . . . we needed to be competitive."); DX 244 (PECO's Supplemental Bid); BX 91 (Letter from Reed to Keuter (Oct. 29, 1998)); DX 247 (Entergy's Second Supplemental Bid (Oct. 29, 1998)). Entergy ultimately adjusted both the purchase-price and decommissioning-fund elements of its bid to Boston Edison's satisfaction. As Mr. Keuter testified: Q. This letter, DX-247, is in response to Mr. Reed's BX-91 letter, correct? A. Correct.

AmerGen was a joint venture between PECO Energy and British Energy plc. AmerGen's role in the potential transaction was assigned to PECO because of uncertainty over whether British Energy would participate. See BX 384 (Transmittal of Final Bid Proposal of PECO Energy by Michael Egan, Senior Vice President, PECO Energy, to Reed (Oct. 16, 1998)) at 0291. Entergy also submitted an optional indicative bid premised upon Boston Edison's retention of the decommissioning fund and also the decommissioning and SNF-storage obligations. DX 202 (Entergy's Indicative Bid) at 157; Tr. 42:5 to 43:22 (Reed). This option was not seriously considered by Boston Edison because it would not have fully resolved the question of stranded costs. Tr. 50:8 to 52:1 (Reed). The Massachusetts restructuring legislation required resolution of the stranded-cost issue, as did Boston Edison's Settlement Agreement with the Office of the Massachusetts Attorney General. See supra, at 6-7. The decommissioningretention option would in any event have been undesirable from Boston Edison's perspective because it would have left the buyer in control of an obligation that Boston Edison would have had to fund. Tr. 48:12 to 49:7 (Reed). 10
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Q. Now this figure of 466 [for the decommissioning trust fund], did Mr. Reed suggest to you that that's the number you have got to come up with? A. He indicated that the 535 was significantly high and that we would have to reduce our bid to be competitive, but he did not quote a number, no. Q. He didn't tell you 466 or any particular number, did he? A. No. Q. This is a number that Entergy came up with, right? A. Yes. Tr. 1978:14 to 1979:4 (Keuter). Entergy's successful bid reflected a purchase price of $80 million for the plant, inventory, fuel, and land, and called for a decommissioning trust fund of $466 million to be transferred by Boston Edison to Entergy. DX 256 (Entergy Improved Supplemental Bid (Oct. 30, 1998)); BDX 1 (Pilgrim Sale Price); Tr. 64:19-24, 82:17-21 (Reed), 1920:5-21 (Keuter). To arrive at the $80 million purchase price, Entergy retained its former vice president, Mr. Harrington, as a consultant to develop a discounted-cash-flow ("DCF") model to value Pilgrim. Tr. 1286:10 to 1287:12 (Test. of Carolyn Shanks, then manager of financial control for Entergy Operations, Inc.); see also Tr. 1003:2 to 1004:2, 1039:24 to 1040:4, 1080:8-25 (Harrington). Mr. Harrington's model incorporated revenue and expense drivers to estimate Pilgrim's cash flows through 2012, when its license from the NRC was due to expire and it was expected that commercial operation of the plant would cease. Tr. 1018:1-14, 1023:7-21 (Harrington). The cash flows were discounted at a rate which equated to Entergy's "cost of capital" (based on a capital structure of 100% equity), to produce a net present value ("NPV") and internal rate of return ("IRR") for Pilgrim. Tr. 1024:10-18, 1053:2-9 (Harrington), 3014:20 to 3015:13 (Reed). While Entergy's model did not assume an extension of the plant's operating license past 2012, it did contemplate that SNF would have to be stored after plant closure, and, indeed, it assumed that the last pick up of SNF from Pilgrim by DOE would not occur until 2043. Tr. 1929:14-18 (Keuter). Entergy anticipated that there would be capital expenditures for cask purchases, construction of an independent on-site spent fuel storage facility, and handling equipment, as well as annual operating and maintenance costs for storing the SNF until that time. BX 72 (TLG Study) at SUPPL-21; BX 29 (Entergy's Pilgrim Acquisition Analysis) at 13030. Uncertainty associated with accurately estimating the actual costs and timing of storing and disposing SNF, however, dictated that Entergy could not guarantee that the decommissioning transfer amount it sought would be sufficient to cover these costs. BX 156 (Reed Rebuttal Report) at 4052-53. This residual risk and others associated with ownership and operation of a nuclear power plant were taken into account by Entergy's board in requiring that the purchase be made only with a projected NPV that was tens of millions of dollars above the acquisition cost, resulting in an estimated IRR well above Entergy's cost of capital. Tr. 1250:11-17 (Shanks) ("[W]e took a very conservative view because, again, it was a new business venture we were going into that did have risks that did not have ratepayer revenues to support it . . . if it were shut down, and we had no other power source to back that facility up, should it shut down."); see also BX 62 (Entergy board resolution approving purchase of Pilgrim (Oct. 30, 1998), with appended 11

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revised terms of purchase showing NPV analysis). Entergy's valuation thus accounted for all of the risks associated with the purchase that it could identify. Specifically with respect to the decommissioning trust fund, to reach the $466 million figure, Entergy (1) began with the TLG cost estimate of $578.1 million, (2) removed $6.1 million for pre-planning decommissioning costs identified in TLG's analysis, (3) anticipated an April 1, 1999 closing date, and, (4) applied a particular discount rate. Tr. 2986:1 to 2987:11 (Reed). Entergy determined that it would require $782 million to decommission Pilgrim in 2012, BX 88 (Closing Binders) at 3265-67, with $466 million representing the funding necessary as of April 1, 1999 to yield $782 million by 2012. Tr. 2222:21-25, 2230:25 to 2233:15 (Keuter), 2985:9 to 2989:15 (Reed); see also BX 57 (charts and graphs prepared by TLG for Entergy showing sitespecific funding requirements as of particular dates) at SUPPL-1 to -5. 3. The focus of the final negotiations. Two key elements in the final negotiations over the Purchase and Sale Agreement were a contractual provision regarding Boston Edison's retention of certain claims and the amount of the decommissioning fund. In preparation for the final negotiations, Geoffrey Lubbock and others from Boston Edison met with representatives of the Office of the Massachusetts Attorney General. The Massachusetts Attorney General's representatives advanced two requirements for the Pilgrim sale: (1) that Boston Edison ensure that it retained all of its claims against the United States arising out of DOE's breach of the Standard Contract, and (2) that Boston Edison agree that any damages awarded be returned to Boston Edison's ratepayers. Tr. 734:2 to 735:8 (Newhard); see also Tr. 539:22 to 540:11 (Lubbock). The latter requirement was intended to compensate Massachusetts ratepayers for having shouldered the burden of SNF-related costs, if Boston Edison recovered damages from and against the government for breach of Pilgrim's Standard Contract. Tr. 255:16 to 256:3 (Reed).12

In 1997, Massachusetts had commissioned ABZ, Incorporated to develop an independent estimate of the SNF-related storage costs that would be taken into account in a sale, Tr. 735:21 to 736:25 (Newhard); see BX 135 (Review of Decommissioning Cost Estimates for New England Nuclear Power Plants, prepared for the Office of the Massachusetts Attorney General (June 1997) ("ABZ Review")), and ABZ had estimated those costs for Pilgrim to be $124.46 million in 1997 dollars. BX 135 (ABZ Review) at 0055. ABZ assumed that the SNF generated at Pilgrim would not be fully removed by DOE until 2040. Id. Mr. Warren Brewer, who testified as an expert decommissioning-cost estimator for the government, see Tr. 3663:21 to 3664:17, 3714:3-25 (Test. of Warren Brewer), was the primary author of the study performed by ABZ in June 1997 for the Office of the Massachusetts Attorney General. Tr. 3710:13 to 3711:2 (Brewer); see also Tr. 3789:12 to 3790:2 (the study authored by Mr. Brewer was admitted into evidence). 12

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After Boston Edison's meeting with representatives of the Office of the Massachusetts Attorney General, one of Boston Edison's outside counsel drafted, and Reed Consulting negotiated with Entergy, a provision retaining Boston Edison's rights with respect to DOE's breach. Tr. 223:22 to 224:9 (Reed), 540:12-24 (Lubbock); BX 79 (E-mail from Jay Silberg to Keuter (Nov. 13, 1998), setting out draft language ("Silberg e-mail")). The language adopted in the Purchase and Sale Agreement stated that Boston Edison would retain "any claims of Seller related or pertaining to the [DOE's] defaults under the DOE Standard Contract accrued as of the Closing Date, whether relating to periods prior to or following the closing date." DX 265 (Purchase and Sale Agreement, § 2.2(g)) at 0176-77; Tr. 541:18 to 542:2 (Lubbock); BX 79 (Silberg e-mail). The negotiations between Boston Edison and Entergy also focused on the amount of money to be transferred to Entergy in the decommissioning fund. The Agreement established the rights and duties of Boston Edison and Entergy with respect to the fund. Tr. 192:24 to 193:17 (Reed), 706:7 to 708:14 (Lubbock); DX 265 (Purchase and Sale Agreement, § 5.21) at 0208-10. Specifically, Section 5.21 of the Agreement was developed to provide that Boston Edison would transfer a decommissioning trust amount totaling $466 million to Entergy, $70 million of which was to be deposited in a provisional trust pending the outcome of a request for a private letter ruling from the Internal Revenue Service ("IRS") relating to the taxability of income from amounts included in the fund. DX 265 (Purchase and Sale Agreement, § 5.21) at 0208-10; Tr. 190:2 to 191:23 (Reed), 706:22 to 707:16 (Lubbock). The $466 million figure was based on Entergy's calculation of the funding necessary to be transferred at the time of closing to provide for decommissioning commencing in 2012 and on-site SNF storage through 2043, as discussed above.13 Under the NRC's regulations, the amount of a decommissioning fund set up for a plant could be derived either from a plant-specific study or from a calculation that used a generic
13

At the time of the execution of the Purchase and Sale Agreement, Boston Edison and Entergy did not know how much of the trust fund being transferred would be considered by the IRS to be "qualified," as contrasted to "non-qualified," for tax-treatment purposes. Tr. 191:9-19 (Reed). The qualified portion would be subject to a preferred, lower tax rate, whereas the nonqualified portion would be taxed at the normal corporate rate. Tr. 233:9-20 (Reed); see 26 U.S.C. [I.R.C.] § 468A(e)(2) (providing that the rate of tax on the income of a qualified fund is 20 percent). Approximately $43 million of the provisional trust was eventually refunded to Boston Edison pursuant to the terms of the Agreement and an IRS Private Letter Ruling. Tr. 574:20 to 575:2 (Lubbock); BDX 2 (Summary of Decommissioning Fund Transferred); see IRS Priv. Ltr. Rul. 199952074, 1999 WL 1268309 (Dec. 29, 1999) (determining that the Service will treat the sale as a disposition qualifying under the general provisions of Treas. Reg. § 1.468A-6, subsection (g) of which allows the Service to "treat any disposition of an interest in a nuclear power plant occurring after December 27, 1994, as satisfying the requirements of the regulations if the Service determines that such treatment is necessary or appropriate to carry out the purposes of [I.R.C. §] 468A"). 13

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formula specified by the NRC. See 10 C.F.R. § 50.75(b)(4) (site-specific cost estimate for decommissioning a facility), (c) (formula for calculating "minimum amounts"); see also 10 C.F.R. § 50.75(e)(1)(i) (differing provisions for credit for projected earnings of the fund, depending upon whether a site-specific estimate or a formula-based computation was used to determine the amount of the fund). Relying on testimony of Ms. Shanks and Mr. Keuter, both the government and Entergy contend that the amount that Entergy finally agreed to accept for the decommissioning amount was derived from the NRC's minimum-amount formula expressed in 10 C.F.R. § 10.75(c). See Def.'s Post-Trial Br. at 20-21; Entergy's Post-Trial Br. at 14-15. Because that amount excludes SNF-storage costs, see 10 C.F.R. § 50.75(c) footnote 1, quoted supra, at 7, the government and Entergy assert that Boston Edison paid Entergy nothing for SNFstorage costs when it transferred a decommissioning fund amounting to $466 million to Entergy. Id. Both the government and Entergy use $396 million as the calculated minimum amount. See Def.'s Post-Trial Br. at 20-21; Entergy's Post-Trial Br. at 14-15. All parties including Boston Edison agree that $396 million was the minimum amount calculated under the NRC's formula, as the formula existed at the time the Purchase and Sale Agreement was entered, which was before a regulatory change, Revision 8 of NUREG 1307, reduced the minimum decommissioning-cost formula.14
14

Between the execution of the Purchase and Sale Agreement on November 18, 1998, and the closing on July 13, 1999, "the decommissioning amount prescribed by the NRC formula had decreased to $252 million, pursuant to Revision 8 to NUREG 1307." Def.'s Post-Trial Br. at 22. The parties disagree over the subsidiary issue of whether Boston Edison and Entergy were aware during their negotiations that the NRC was planning to reduce the minimum formula, and whether those plans were taken into account by Entergy in formulating its bid for the decommissioning-fund aspect of the Pilgrim acquisition. Compare Boston Edison's Post-Trial Br. at 37 n.20, with Def.'s Post-Trial Br. at 22 ("[T]here is no evidence in the record to suggest that Entergy was even aware of the fact that the NRC was going to reduce the decommissioning formula after the execution of the P[urchase and] S[ale] A[greement]."). This debate is largely irrelevant because the Purchase and Sale Agreement specifies that "[o]n the Closing Date, Seller shall fully fund and transfer to Buyer . . . an aggregate amount equal to or greater than the minimum amount required by the Nuclear Regulatory Commission regulations for the decommissioning of Pilgrim." DX 265 (Purchase and Sale Agreement, § 5.21) at 0208-09 (emphasis added) (quoted more fully infra). Thus, the pertinent amount for the NRC minimum formula is $252 million, not $396 million. In addition, the record also shows that Entergy was aware of the possible regulatory change. The report provided to Entergy by Mr. LaGuardia in September 1998, see BX 72 (TLG Study), indicated that the NRC's NUREG 1307, version 7, did not reflect waste-volumereduction technologies that had become available, and that the NRC was reevaluating its formula to take those technologies into account. See id. at SUPPL-19; Tr. 1145:9 to 1147:19 (LaGuardia). The TLG Report undercuts Mr. Keuter's testimony that "I kn[e]w that N[uclear] E[ntergy] I[nstitute] had been pursuing a reduction, but I was surprised that the NRC actually did. I expected it to go up, not down." Tr. 2138:2-5 (Keuter). In all events, the government's and Entergy's contentions in this regard are contravened by the evidence and are not credited. 14

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The evidence supporting the government's and Entergy's contentions in this regard is very weak, to the point that it is barely colorable. The record shows that Entergy wanted $466 million for the decommissioning fund, not $396 million, and that the formula-based calculation that produced $396 million was a cross-check prepared to insure that no difficulties would occur in obtaining the NRC's approval of the sale and transfer of the operating license. See BX 57 (charts and graphs prepared by TLG for Entergy showing site-specific funding requirements, as of particular dates, reflecting cost-escalation and fund-growth rates and the effect of tax-benefit assumptions, plus "NRC" minimum-formula amounts) at SUPPL-1 to -5; BX 62 (Entergy board resolution approving purchase of Pilgrim (Oct. 30, 1998), with appended revised terms of purchase showing NPV analysis) ("Transfer from seller of a fully-funded decommissioning trust of $466M (1999$)."). The testimony of Ms. Shanks and Mr. Keuter sidesteps the fact that $466 million was actually provided by Boston Edison for the decommissioning fund. Ms. Shanks testified that Entergy's board of directors authorized a minimum decommissioning "bid" of $396 million. See Tr. 1267:8-12 (Shanks) ("That was the bottom number, the threshold that the Board of Directors gave us that we had to receive in order to have this bid approved by them and make it to Boston Edison."). Mr. Keuter's testimony was to the same effect. See Tr. 2050:6-9 (Keuter) ("So we were using the NRC minimum as a floor that we wouldn't go below because we didn't want to have to top off the fund."). However, the Entergy board resolution approving the purchase contravenes this assertion. See BX 62 (Entergy board resolution), quoted supra. Indeed, Mr. Keuter's own testimony regarding the revised terms of sale as approved by the Entergy board on October 30, 1998, indicates that he recommended to the board the revised offer with $466 million for the decommissioning fund: Q. Would you bring up BX-62 please. Sir, this is a two-page exhibit, this is BX-62. Have you ever seen it before? A. Yes. Q. And did you see it on or about October 30, 1998? A. Yes. Q. And how did you come to see this on October 30, 1998? A. I was involved in its preparation. Q. And explain how you were involved in its preparation, please. A. This is a presentation that was made to a meeting of the Board of Directors. Q. When you say this is a presentation, are you referring to ­ A. The second page is the presentation. Q. Bates page 40-39? A. Yes. Q. Who made this presentation to the board? A. I don't remember. Q. But you prepared this document, though? A. Yes. Q. This 40-39? 15

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A. Q. A. Q.

Yes. And you recommended this revised offer? Correct. And on this page 40-39, in the left-hand column, third bullet from the bottom says, "transfer from seller of a fully-funded decommissioning trust of 466." A. Yes. Q. That's $466 million, right? A. Correct. Q. And in 1999 dollars, right? A. Yes. Tr. 1982:10 to 1983:23 (Keuter); see also BX 29 (Entergy's Pilgrim Acquisition Analysis) at 13028 ("Due to delays in constructing the DOE spent fuel repository, the necessity of on-site spent fuel storage is now reflected in decommissioning costs."); Tr. 1964:20 to 1965:19 (Keuter). Lastly, the Purchase and Sale Agreement plainly states that a total amount of $466 million was to be transferred, with any reduction from that amount to be based upon obtaining a favorable tax ruling from the Internal Revenue Service: 5.21. Funding of the Decommissioning Trust and Provisional Trust. (a) On the Closing Date, Seller shall fully fund and transfer to Buyer in accordance with this Section 5.21 an aggregate amount equal to or greater than the minimum amount required by the Nuclear Regulatory Commission regulations for the decommissioning of Pilgrim. Such funding and transfer is intended to occur in as tax efficient manner as possible in order to minimize the rate impact on Seller's ratepayers. Accordingly, Seller shall have or establish as of the Closing Date a Decommissioning Trust and, if necessary, a Provisional Trust. Absent any pre-closing change in the tax law, rule or regulation as in existence on the Effective Date, or an IRS ruling issued to either the Seller or Buyer, the aggregate amount to be funded for decommissioning in both the Decommissioning Trust and the Provisional Trust shall be based upon the assumption that the Decommissioning Trust and the Provisional Trust will be treated upon transfer to the Buyer as one hundred percent (100%) "nonqualified" pursuant to Section 468A of the Code. If the Closing Date is April 1, 1999, and no Pre-Closing Change (as defined below) has occurred, the Decommissioning Trust Closing Amount shall be $396 million, and the amount of funding for the Provisional Trust shall be $70 million. If the Closing Date is June 30, 2000, and no Pre-Closing Change has occurred, the Decommissioning Trust Closing Amount shall be $418 million, and the amount of the funding for the Provisional Trust shall be $70 million. If the Closing Date occurs on a date between April 1, 1999 and June 30, 2000, the 16

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Parties shall determine the Decommissioning Trust Closing Amount by computing a daily adjustment factor determined on the basis of the difference in the funding amount necessary for such two closing dates and the amount of funding for the Provisional Trust shall be $70 million. (b) If before the Closing Date there is an amendment of Section 468A of the Code or the Treasury regulations promulgated thereunder, or the IRS's interpretations thereof, which has the effect of causing the funds of the Decommissioning Trust to accumulate more rapidly than possible under the federal tax laws as of the Effective Date (e.g., the applicability of a lower tax rate) (a "Pre-Closing Change"), the funding amount for the Provisional Trust described above shall be decreased in accordance with Schedule 5.21; provided, that if such amount is decreased to zero, no Provisional Trust shall be established. (c) If on or after the Closing Date and before December 31, 2002, there is an amendment of Section 468A of the Code or the Treasury regulations promulgated thereunder, or the IRS's interpretations thereof, which has the effect of causing the funds of the Decommissioning Trust to accumulate more rapidly than possible under the federal tax laws as of the Closing Date (e.g., the applicability of a lower tax rate) (the "PostClosing Change"), the amount of the funds in the Provisional Trust shall be reduced in accordance with Schedule 5.21 and such reduction shall be rebated in accordance with the Provisional Trust; provided, however, that any such reduction and rebate shall be accomplished in a manner consistent with the Atomic Energy Act, the Code and other applicable law. Under no condition shall Buyer be personally liable for any payments or refunds except to the extent permitted to be paid from the Provisional Trust under applicable law. DX 265 (Purchase and Sale Agreement, § 5.21) at 0208-09. The Purchase and Sale Agreement as executed provided that Entergy would pay Boston Edison $80 million as the purchase price for the plant, its fuel, inventory, and land. DX 265 (Purchase and Sale Agreement, § 2.5(a)) at 0179. This amount was allocated to $67 million for the fuel in the core, $8 million for the inventory, $5 million for the land, and nothing for the plant itself. Tr. 1296:22 to 1299:8 (Shanks); BX 43 (Minutes of Entergy Board Nuclear Committee Special Meeting (Oct. 1, 1998), with attached DCF analysis ("Entergy Board Minutes")) at RFP21-3054, 3057. E. Regulatory Approvals for the Sale After executing the Agreement, Boston Edison and Entergy worked together to obtain regulatory approval from the NRC for the transfer of Pilgrim's operating license and from the Massachusetts DTE for the Pilgrim transaction. Tr. 193:7-13 (Reed), 557:14-24, 535:16-22 17

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(Lubbock). In the context of these approval processes, the federal and state regulatory bodies found that the decommissioning fund amount was premised upon site-specific studies of the Pilgrim plant, rather than on a calculation using the NRC's general formula, and, so tailored, included the costs of SNF storage and returning the site to a green-field condition, items not embraced by NRC regulations governing decommissioning funds. See BX 155 (Reed Report) at 3989; 10 C.F.R. § 50.75. To acquire the necessary approval from the NRC for the transfer of Pilgrim's operating license, Tr. 194:9-14 (Reed), 808:19 to 809:6 (Wood), Boston Edison and Entergy jointly submitted a License Transfer Application in December 1998, in which the two parties certified that the total amount of the decommissioning fund to be transferred was a "calculated" amount that was "higher than the NRC minimum due to the inclusion of [SNF] storage costs and costs to remove non-radioactive structures" and was based upon "independent decommissioning cost studies." Tr. 809:10 to 810:23 (Wood); BX 192 (License Transfer Application) at 3505-06, 3517-18. The NRC sent Boston Edison a Request for Additional Information on January 22, 1999, regarding the potential effect on the decommissioning trust fund of Revision 8 of NUREG 1307, which had reduced the NRC's minimum decommissioning-cost formula. Tr. 816:4 to 819:3 (Wood); BX 181 (Request for Additional Information (Jan. 22, 1999)). A response drafted by Entergy and approved by Boston Edison, Tr. 207:11-16, 210:20 to 211:3 (Reed), confirmed that the transfer-fund amount was independent of the formula-based NRC minimum because it included the cost of removal and disposal of SNF and non-radioactive structures, such that Revision 8 of NUREG 1307 had no effect on that amount. BX 1 (Response to Request for Additional Information) at email-7. In due course, the NRC developed a Safety Evaluation Report approving the license transfer and finding that the decommissioning amount "[wa]s based on a site-specific cost estimate performed for Pilgrim in 1998" that exceeded the NRC minimum amount "due to the inclusion of spent fuel storage costs." BX 184 (Safety Evaluation) at 9056; see also Tr. 825:917, 826:12 to 828:20 (Wood). The NRC issued a concurrent order approving the license transfer on April 29, 1999. Tr. 214:19-24 (Reed); BX 215 (NRC's Order Approving License Transfer). Upon Boston Edison's filing of an application for approval by the Massachusetts DTE, hearings before that body took place in January 1999. Tr. 14:6-18 (Reed), 546:2-20 (Lubbock). Both Boston Edison and Entergy participated in the hearings, at which Messrs. Reed and Lubbock were asked about the relationship between the amount of decommissioning funding being transferred to Entergy and the NRC minimum decommissioning cost estimate. Tr. 230:211 (Reed), 692:15 to 696:23 (Lubbock). Mr. Reed testified that there was no relationship but rather that the amount being transferred exceeded the NRC minimum because Entergy's decommissioning bid included costs associated with long-term on-site spent fuel storage. Tr. 106:13 to 109:18, 257:2-15 (Reed). Lubbock likewise testified that there was no relationship between the amount transferred and the NRC minimum. Tr. 673:1-7 (Lubbock). The Massachusetts DTE approved the sale on March 22, 1999, after determining that the sale process was competitive and had produced a value for Pilgrim consistent with the intent of the 18

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Massachusetts restructuring act. Tr. 551:15-24 (Lubbock); BX 101 (Mass. DTE Opinion). The Massachusetts DTE opinion stated that "[u]nder the terms of the divestiture transaction, Boston Edison retains its claim against US-DOE and amounts recovered from US-DOE would be credited to Boston Edison's customers to lower the effective net amount paid for decommissioning." BX 101 (Mass. DTE Opinion) at 5410-11. It also noted that while Revision 8 to NUREG 1307 would decrease the NRC minimum decommissioning cost estimate, the funds being transferred to Entergy exceeded the NRC minimum, largely due to the provision of funds for long-term SNF storage. Id. at 5413-14. F. Transfer of Ownership and Subsequent Decommissioning Fund Reports by Entergy Following regulatory approval, the Pilgrim sale closed on July 13, 1999, with Entergy paying Boston Edison $80,964,410 million for the plant and its associated land, fuel inventory, and non-fuel inventory. Tr. 571:10 to 572:8 (Lubbock); BDX 1 (Pilgrim Sale Price); BX 86, BX 87, BX 88 (Closing Binders). Pursuant to the Purchase and Sale Agreement, Boston Edison transferred decommissioning trust funds to Entergy totaling $401,218,181.82, plus an additional $70 million in a provisional trust, in return for Entergy's acceptance of full responsibility for decommissioning the plant and caring for the SNF that had been generated. BDX 2 (Summary of Decommissioning Fund Transferred); Tr. 574:7-16 (Lubbock).15 Boston Edison notified DOE of the transfer of the Standard Contract to Entergy, pursuant to Article XIV of the Contract, noting that the "sale include[d] the transfer and assignment of Boston Edison's rights and obligations . . . with the exception of any claims against [DOE] accrued prior to the date of transfer." BX 97 (Letter to DOE (July 13, 1999)); Tr. 557:14 to 562:12 (Lubbock). Following the closing, Entergy was required to provide annual reports to the NRC regarding the status of the decommissioning trust fund. Initially, Entergy reported only a portion of the total fund available to it, explaining by a footnote that "[t]he NRC formulas and the calculated fund amounts herein exclude the cost of dismantling or demolishing non-radiological systems and structures as well as costs to manage and store spent fuel until transfer to DOE." BX 367 (1999 Decommissioning Funding Assurance Report (March 20, 2000)) at email-45; Tr. 832:13 to 848:5 (Wood), 2569:8 to 2574:11 (Test. of Donald R. Denton, a former Entergy employee), 3358:16 to 3362:14 (Test. of Charles Minott, Senior Project Manager, Entergy); see also BX 359 (2000 Decommissioning Funding Assurance Report (March 20, 2001)) at RFP-3755 (same). Shortly after the decommissioning fund report for 2000 was submitted, however, Entergy officials suggested that the fund report for Pilgrim be revised to "look like [those for] the NY plants." BX 219 (E-mail from Minott (March 30, 2002)). The requesting officials' "logic [wa]s the 466M initial was to grow to meet the NRC minimum." Id. Mr. Minott noted that "no

As a result of the private letter ruling obtained respecting qualification of the decommissioning fund for taxation of the income from the fund at twenty percent rather than the normal corporate tax rates, Boston Edison was refunded $43,338,980.32. See BDX 2 (Summary of Decommissioning Fund Transferred). The net amount of the decommissioning fund transferred by Boston Edison to Entergy thus was $427,879,201.50. Id. 19

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one from Entergy . . . knew what the split between fuel and decom $ was in the trust or the sale amount." Id. After consideration of the suggestion, Entergy decided at that time not to redo the decommissioning fund report because "we want to keep $ to the extent we can in the fuel side so we could fund this if necessary. If in the decom, it cannot be used for its intended purpose." Id. Nonetheless, beginning in 2003 Entergy began reporting the entirety of its decommissioning trust fund as being designated solely for NRC minimum purposes. Tr. 2562:11 to 2566:3 (D. Denton); Tr. 3365:10 to 3366:13 (Minott); BX 354 (2002 Decommissioning Funding Assurance Report (March 31, 2003)) at email-8. Entergy's funding reports for 2002 indicate that Pilgrim's decommissioning trust fund when escalated both for costs and growth to December 2015 would exceed the NRC minimum funding requirement by more than a quarter of a billion dollars. BX 354 (2002 Decommissioning Funding Assurance Report) at email-8; Tr. 3366:14-22 (Minott). Entergy argues that subsequent to its decommissioning fund submissions to the NRC in March 2001, a teleconference among employees including Ms. Connie Wells, who had been involved Entergy's bid preparation for Pilgrim, caused it to adopt her view that the entire $466 million in the decommissioning trust fund was intended to meet the NRC minimum funding requirements set forth in 10 C.F.R. § 50.75. See Entergy's Post-Trial Br. at 17-18. The implicit factual assertion is that none of the Pilgrim decommissioning trust fund was intended for spent fuel storage costs. The court does not so find. Rather, SNF storage costs and greenfielding costs were included in the decommissioning fund transferred to Entergy by Boston Edison. The pertinent question is how much money was transferred by Boston Edison to Entergy to cover future SNF storage costs. STANDARDS FOR DECISION The remedy for a partial breach of an express 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)); see also System Fuels, 79 Fed. Cl. at 51; Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515, 522 (2006), appeal dismissed, 188 Fed. Appx. 1004 (Fed. Cir. 2006). "[T]he general principle is that all losses, however described, are recoverable." Indiana Michigan, 422 F.3d at 1373 (quoting Restatement (Second) of Contracts § 347 cmt. c (1981)). To recover damages, Boston Edison must show that "(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." Indiana Michigan, 422 F.3d at 1373 (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)). Damages must also be directly caused by defendant's breach and not be too remote. See Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012, 1021 (Fed. Cir. 1996) ("`[R]emote and consequential damages are not recoverable in a common-law suit for breach of contract . . . especially . . . in suits against the United States for the recovery of common-law damages.'") (quoting Northern Helex Co. v. United States, 524 F.2d 707, 720 (Ct. Cl. 1975)). 20

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Causation must be directly established, but the breach need not be the sole cause of the damages. California Fed. Bank v. United States, 395 F.3d 1263, 1267-68 (Fed. Cir. 2005).16 This court has previously noted that damages awarded in home- and facility-construction cases may provide an instructive analogy in this suit where Boston Edison seeks recovery of the diminution in the value of Pilgrim at the time of its sale to Entergy. See Boston Edison I, 64 Fed. Cl. at 182. The Restatement (Second) of Contracts provides an alternative to damages based on the cost of remediating defective or failed performance in a construction situation: "[i]f a breach results in defective or unfinished construction and the loss in value [of performance] to the injured party is not proved with sufficient certainty, he may recover damages based on (a) the diminution in the market price of the property caused by the breach." Restatement (Second) of Contracts § 348(2). The Restatement's comments provide that diminution in market value is assessed in the construction context when the cost of repairing defective construction far exceeds the actual loss in value of performance to the injured party, such that of the two alternatives ­ cost of repair or diminution in market price ­ the more reaso