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

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No. 98-614C (Senior Judge Merow) ______________________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS

SOUTHERN NUCLEAR OPERATING COMPANY, ALABAMA POWER COMPANY AND GEORGIA POWER COMPANY, Plaintiffs, v. THE UNITED STATES, Defendant.

______________________________________________________________________________ PLAINTIFFS' REPLY BRIEF ______________________________________________________________________________

M. Stanford Blanton BALCH & BINGHAM LLP 1710 Sixth Avenue North Birmingham, AL 35203 Telephone: (205) 226-3417 Facsimile: (205) 226-8798 Of Counsel: Ed R. Haden K. C. Hairston BALCH & BINGHAM LLP 1710 Sixth Avenue North Birmingham, AL 35203 Telephone: (205) 251-8100 Facsimile: (205) 226-8798 Ronald A. Schechter Jeffrey L. Handwerker Matthew M. Shultz ARNOLD & PORTER LLP 555 Twelfth Street, N.W. Washington, D.C. 20004-1202 Telephone: (202) 942-5000 Facsimile: (202) 942-5999

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TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii SUMMARY OF THE ARGUMENT ............................................................................................. 2 ARGUMENT .................................................................................................................................. 8 I. DOE's 3000 MTU Annual Acceptance Rate Is a Reasonable Rate That Fulfills DOE's Contractual Obligations. ..................................................................................................... 8 A. B. II. The Nuclear Waste Policy Act, the Standard Contract, and the Government's Partial Breach.......................................................................................................... 8 Eileen Supko's Expert Opinions. .......................................................................... 15

The Number of Casks Southern Loaded at Plant Hatch was Based on a Reasonable Operating Reserve............................................................................................................. 24 A. Southern's Documents Tracked, and Southern Actually Used, the Minimum 1 FCR to Determine When and Whether to Build an ISFSI and the 2 FCR for Maintaining Long-Term Operational Efficiency. ................................................. 27 1. Southern's Documents Tracked 1 FCR and 2 FCR and Southern's Nuclear Engineers and Managers Explained the Use of the 1 FCR and 2 FCR Operating Reserves........................................................................ 27 Southern's Facts are Markedly Different from those in Indiana Michigan. .................................................................................................. 35

2. B.

Southern's 1 FCR Minimum Operating Reserve is Consistent in Both the Actual and Non-Breach Cases and its 2 FCR Long-Term Operating Reserve is More Conservative than the Non-Breach Case..................................................... 37 1. Southern Consistently Used the 1 FCR Minimum Operational Reserve in the Breach and Non-Breach Cases to Determine When to Build an ISFSI. ........................................................................................................ 37 Contract Law Does Not Require Southern's Actual Long-Term Reserve Target to be Identical to the Operating Reserve in the NonBreach Case............................................................................................... 40

2.

C.

Southern's Use of the 1 FCR Operating Reserve to Determine When and Whether to Build an ISFSI in the Breach Case was Reasonable. ......................... 41 1. 2. Southern's Use of the 1 FCR Minimum to Determine Whether to Build an ISFSI in the Non-Breach Case was Reasonable................................... 42 The Government's Cited Law Does Not Support its Argument in this Case........................................................................................................... 43

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III. IV.

Southern's Purchase of the HI-STAR Casks Was Reasonable When the Decision was Made in 1999. ................................................................................................................... 45 Southern's Internal Labor, Engineering, and Supervision Costs were Incremental Because they Deprived Southern of Other Work its Employees Would Have Performed Had DOE Not Breached.................................................................................. 50 Southern's Private Fuel Storage Costs Were Foreseeable and Reasonable...................... 53 A. B. A PFS Facility was Reasonably Foreseeable to DOE........................................... 54 Southern's Decommissioning Studies and 1994 Strategy Report Support the Reasonableness of Southern's Payments to PFS. ................................................. 57

V.

VI. VII.

The Miscellaneous Cost Items Were Reasonable. ............................................................ 59 The Cost of Capital Adjustment is a Separate Recoverable Element of Damages, Not Prejudgment Interest. ........................................................................................................ 60

CONCLUSION............................................................................................................................. 62 CERTIFICATE OF SERVICE ..................................................................................................... 64

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TABLE OF AUTHORITIES CASES Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400 (2004) .......................................................... 36 Autotrol Corp. v. Continental Water Systems Corp., 918 F.2d 689 (7th Cir. 1990)............. 5, 50, 51 Boston Edison Co. v. United States, 64 Fed. Cl. 167 (2005) .......................................................... 14 Citizens Federal Bank v. United States, 66 Fed. Cl. 179 (2005), appeal dismissed, 2006 U.S. App. LEXIS 8099 (Fed. Cir. Mar. 23, 2006) ............................. 49 Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 (2003) ..................................... passim Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) ........................................... 19 First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279 (Fed. Cir. 1999)................................................................................................... 1 First Nationwide Bank v. United States, 56 Fed. Cl. 438 (Fed. Cl. 2003), aff'd 431 F.3d 1342 (Fed. Cir. 2005) .................................................................................. 46, 47 In re Application for Certificate of Need for Indep. Spent Fuel Storage Installation (ISFSI), 501 N.W.2d 638 (Minn. Ct. App. 1993), review denied, 1993 Minn. LEXIS 477 (Minn. July 15, 1993)................................................................................................................ 56 In re Northern States Power Co., 604 N.W.2d 386 (Minn. Ct. App. 2000) ............................. 29, 56 Indiana Michigan Power Co. v. Dep't of Energy, 88 F.3d 1272 (D.C. Cir. 1996)..................... 9, 10 Indiana Michigan Power Co. v. United States, 57 Fed. Cl. 88 (2003) .................................... passim Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (2004), aff'd, 422 F.3d 1369 (Fed. Cir. 2005) ................................................................................ passim Indiana Michigan, 422 F.3d 1369 (Fed. Cir. 2005)............................................................ 25, 26, 40 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000) ................. 9, 10 New York State Energy Research & Dev. Auth. v. Nuclear Fuel Serv., Inc., 666 F.2d 787 (2d Cir. 1981)...................................................................................................... 56 Northern States Power Co. v. United States Dep't of Energy, 128 F.3d 754 (D.C. Cir. 1997), cert. denied, 525 U.S. 1016 (1998) ....................................................................................... 8, 10 Park Village Apartments v. United States, 32 Fed. Cl. 441 (1994) ................................................ 19 Sacramento Municipal Utility District v. United States, 63 Fed. Cl. 495 (2005) ..................... 13, 14 Sacramento Municipal Utility District v. United States, 70 Fed. Cl. 332 (2006) .................... passim Southern Pacific Communications Co. v. AT&T, 556 F. Supp. 825 (D.D.C. 1982), aff'd, 740 F.2d 980 (D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985)................... 43, 44, 48 System Fuels, Inc. v. United States, 66 Fed. Cl. 722 (2005)..................................................... 13, 14 Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515 (2006)............................................ passim

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Westfed Holdings, Inc. v. United States, 52 Fed. Cl. 135 (2002), aff'd in relevant part and rev'd in part, 407 F.3d 1352 (Fed. Cir. 2005) ............................................................... 7, 60 Yankee Atomic Electric Co. v. United States, No. 98-126C (Fed. Cl. June 26, 2003)............. passim

STATUTES Nuclear Waste Policy Act of 1982, as amended, Pub. L. 97-425, 96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270)............................................................................ passim 42 U.S.C. § 10131............................................................................................................................. 9 42 U.S.C. § 10155..................................................................................................................... 55, 56 42 U.S.C. § 10222............................................................................................................................. 9

LEGISLATIVE HISTORY H.R. Rep. 97-491 (1982), as reprinted in 1982 U.S.C.C.A.N. 3792.............................................. 55

OTHER AUTHORITIES E. Allan Farnsworth, Contracts § 12.12 ......................................................................................... 49 Oliver Wendell Holmes, The Common Law 1 (1881) .................................................................... 40 Restatement (Second) of Contracts § 350 ................................................................................. 40, 41

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS Southern Nuclear Operating Company, Inc., Alabama Power Company, and Georgia Power Company Plaintiffs, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) ) )

No. 98-614C (Senior Judge Merow)

PLAINTIFFS' REPLY BRIEF Plaintiffs Alabama Power Company ("APC"), Georgia Power Company ("GPC"), and Southern Nuclear Operating Company, Inc., ("SNC")1 (collectively, "Southern") file this Reply to the Government's Post-Trial Brief.

The Government argues that SNC should be dismissed because it is not a party to the contracts with DOE (the "Contracts"). (Def.'s Post-Trial Br. 92-93.) While not a party to the Contracts, SNC is a proper party to this lawsuit because the Operating Agreements with APC and GPC designate SNC as their "attorney-in-fact and agent" and SNC has administered the Contracts with DOE on this basis. (Trial Tr. vol. 1, 120, 123, 125-26, Oct. 17, 2005) (Long Test.) [Hereinafter "Tr."]; (PX 806 §§ 2.1, 2.11 (GPC Nuclear Operating Agreement)); PX 807 § 2.01(b) (APC Nuclear Operating Agreement)). Where a person or entity acts on behalf of a corporation that is a party to a contract, that person or entity is a proper party to a breach of contract action in this Court. See First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279 (Fed. Cir. 1999). SNC, APC, and GPC incorporate Plaintiffs' Response to the Government's Motion to Dismiss Southern Nuclear Operating Company as a Plaintiff for Lack of Subject Matter Jurisdiction (Jan. 24, 2002, Dkt. 119). Because APC and GPC bear the costs claimed as damages in this action, damages should be awarded to APC and GPC only.

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SUMMARY OF THE ARGUMENT The Government makes several arguments in an attempt to reduce Southern's damages, each of which fail for the reasons set forth below: The Government's Argument that the 3000 MTU Annual Rate is Improper Fails Because that is DOE's Own Published Rate, the 900 MTU Rate Was Based on a Statutorily-Barred MRS, and Ms. Supko's Relevant and Reasonable Expert Opinion Demonstrated that the 3000 MTU Annual Rate Is Reasonable ­ [$21,866,220] ­ This Court has held that an acceptance rate term is missing from the Standard Contract and that the Court therefore must supply a reasonable acceptance rate term. The Government argues that its liability should be limited to the obligation to accept 900 Metric Tons Uranium ("MTUs") of spent nuclear fuel ("SNF") per year and limited by the Standard Contract's Delivery Commitment Schedule ("DCS") process. This Court has repeatedly rejected these arguments because the 900 MTU rate was based on a Monitored Retrievable Storage ("MRS") facility that the Department of Energy ("DOE") was barred by statute from constructing and the DCS process was not contractually binding and, in any event, never completed. Presumably because the officials in charge of DOE's radioactive waste program testified that a 3000 MTU annual acceptance rate was reasonable, the Government offers no evidence that its proposed 900 MTU rate is reasonable. Instead, the Government focuses its rate argument on unfounded criticism of the methodology underlying Ms. Eileen Supko's opinion that the 3000 MTU rate is reasonable. Ms. Supko was clearly qualified to offer her expert opinion based on her education and experience; indeed, the Nuclear Regulatory Commission ("NRC") has relied on her work. Her opinion on the rate is relevant because it determines how much SNF DOE was obligated to remove. Her opinion was reliable because its methodology was the same as the methodology she uses on her consulting work and DOE's own Lake Barrett and Christopher 2

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Kouts agreed with its results. Southern introduced additional evidence that demonstrated that a 3000 MTU steady state rate was reasonable ­ such a rate was consistent with the purpose and intent of the Nuclear Waste Policy Act of 1982 ("NWPA" or "Act") and the Standard Contract, as well as the intent of the parties to the Contract to prevent additional on-site storage after January 1998, to reduce the SNF backlog at a reasonable pace, and to allow for orderly decommissioning of the reactors. The Court should adopt this rate in determining Southern's damages

The Government's Argument that Southern's Cask Loading Schedule is Based on an Unreasonable Operating Reserve Fails Because Southern's Operating Reserve is More Conservative than it Would Have Been Had DOE Performed, is Supported by Numerous Documents, and is Supported by the Testimony of Southern's Nuclear Engineers and Managers ­ [$7,697,015] ­ The Government argues that Southern loaded an excessive amount of casks from the Plant Hatch reactor pool. The Government argues that Southern should be limited to the number of casks needed to maintain only one full core reserve ("FCR") for both of Plant Hatch's reactors and contends that its position is supported by Southern internal documents that tracked when the Plant Hatch pool would lose 1 FCR. The Government's argument improperly collapses two different decisions. First, Southern determined when to build the ISFSI to avoid shutting down the plant using a minimum of 1 FCR. Second, Southern determined that it was reasonable to recover space sufficient to discharge the core of each of its reactors ­ which equates to 2 FCRs - as a long-term operating position. Consistent with its documents that track both 1 FCR and 2 FCRs, Southern's nuclear engineers and managers testified that it is reasonable for Plant Hatch to maintain a 2 FCR in the long-term for operational efficiency, but they would temporarily

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accept a reduction in the operating reserve down to 1 FCR to determine when to build an ISFSI. It is undisputed that Southern actually built the ISFSI at Plant Hatch when its operating reserve was only 1 FCR. It is also undisputed that while Southern's actual cask loading schedule is designed to recover dual core offload capability ­ or 2 FCR ­ in the future, it did not place Southern in as good a position ­ with as much usable reactor pool space ­ on December 31, 2004, as it would have enjoyed had DOE performed at the 3000 MTU rate.

The Government's Argument that Southern's Decision to Purchase Three HI-STAR Casks and Related Equipment was Unreasonable Fails Because it is Based on Hindsight, Would have Required Southern to Wait to the Last Minute to Load Casks, and Assumes Away the Fact that the HI-STORM Casks Were Not Licensed for Use ­ [$14,919,855] ­ The Government contends that because the less expensive HI-STORM was licensed in June 2000, Southern could have waited until then to order casks and make the other arrangements necessary for cask loading by September 2001 when the 1 FCR would be lost. The Government's argument is based on second guessing of decisions using 20/20 hindsight. Because of the long lead time for cask fabrication, cask licensing, and ISFSI construction, Southern's management made the decision to order casks in early 1999 when it was still "uncertain" when and if the HI-STORMs would be licensed. First, it would be unreasonable to require Southern to wait until the last minute before it lost its minimum operating reserve to load its first casks ­ a first of its kind operation at a boiling water reactor. Second, even had Southern waited until 2001 to load casks, the cask selection would have been made at a time (1999) when the HI-STORM casks were not yet licensed and the HI-STAR casks were far ahead of the HI-STORM casks in the licensing process. Finally, the three HI-STAR casks that were purchased provided Southern with valuable

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operational flexibility to transport spent fuel to other sites or to centralized storage facilities, a valuable commodity given Southern's understandable lack of confidence in the Government's performance of its responsibilities.

The Government's Argument that Southern's Internal Labor, Engineering, and Supervision were Not Incremental Fails Because the SNF Work Deprived Southern of a Reduction in its Backlogged Plant Maintenance Projects and Because the Use of Southern's Own Personnel was Less Expensive than the Use of Outside Contractors ­ [$6,466,016] ­ The Government asserts that under Autotrol Corp. v. Continental Water Systems Corp., 918 F.2d 689 (7th Cir. 1990) (Posner, J.), Southern's use of internal labor, engineering, and supervision was not incremental because Southern would have paid its employees anyway and Southern did not show that its employees worked overtime. Autotrol, 918 F.2d at 692-93, however, states that the Government's argued-for incremental "analysis is superficial" and that the correct test is whether the breach deprived the non-breaching party (i.e., Southern) of valuable services of its own employees. Southern established that the SNF work prevented its employees from reducing maintenance backlogs. Moreover, Southern established that using its own employees to load SNF casks was 50% less expensive than using outside contractors.

The Government's Arguments that Southern's Payments to PFS Were Unforeseeable and Unreasonable Fail Because the Head of DOE's SNF Program and the NWPA Expressly Recognized Private Off-Site Storage in 1982-83 and Southern's Documents Recognize that PFS Could be Implemented ­ [$8,466,672] ­ The Government argues that Southern's $8.5 million of payments to PFS were not foreseeable in 1983 when DOE signed the Contracts and were not

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reasonable because a 1994 report stated that SNF could be stored on-site as long as the plant was operating. To the contrary, it was clearly foreseeable in 1983 that utilities might resort to off-site storage without Government performance of its obligations under the contract. Robert Morgan, DOE's director of the SNF storage program, recognized off-site storage as an option when he stated in 1983: "During the first year of operation of the repository in 1998, we should be receiving fuel at a rate so that no utility would have to add any further storage facilities either on site or at another location." (PX 53 (Robert Morgan, Proceedings of the 1983 Radioactive Waste Management Program, December 12-15, 1983: Program Overview), at 11 (Feb. 1984)) (emphases added). Similarly, the NWPA recognizes that off-site SNF storage was a possibility for utilities that had exhausted on-site storage capacity. NWPA § 135(h) (codified at 42 U.S.C. § 10155(h)). The Government's argument that the payments to PFS were not reasonable because the 1994 Hatch Spent Fuel Storage Task Force Report noted that spent nuclear fuel could be stored on-site for the life of plant assumes that Southern could only recover for PFS if it was the only legal alternative to Southern for dealing with the hardship imposed by the Government's disregard of its contractual obligations. The premise of the Government's argument is simply wrong. The report in question simply stated a correct proposition of law, that Southern has unfortunately been required to apply since the Government has so completely ignored its obligations. Moreover, the report in question also noted that the situation could become "political" and that "[a] private MRS could be implemented," (DX 158 (1994 Report) at 19, SN065623,)) ­ a fact the Government conveniently omits from its discussion. Finally, DOE stated in 2002 that "DOE recognizes interim storage at the Private Fuel Storage Facility in Utah

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to be a reasonably foreseeable future action...," (PX 817 (DOE, Environmental Impact Statement) at vol. III § 9.1).

The Government's Argument that Southern's Cost of Capital was Prejudgment Interest (i.e., a Fixed Interest Rate Applied to Costs Incurred) Fails Because Southern Incurred a Separate Cost of Obtaining Debt and Equity Capital at Fluctuating Rates to Fund SNF Storage Projects and Such Cost is Recognized by FERC ­ [$28,423,972] ­ The Government argues that Southern's cost of capital is merely re-labeled prejudgment interest that cannot be recovered. Southern's damages expert, Mr. Metcalfe, however, explained that prejudgment interest is not a cost incurred by the plaintiff, but is an arbitrarily selected fixed rate imposed upon all costs that were incurred (including financing costs) regardless of the actual cost of capital of the plaintiff. Southern's cost of capital, however, is a real cost, based on APC's and GPC's respective weighted average costs of debt and equity capital, that it incurred to obtain the real money that was spent on its SNF projects. "[T]he distinction between interest as an element of damages and interest on a claim is well-recognized." Westfed Holdings, Inc. v. United States, 52 Fed. Cl. 135, 163 (2002) (internal quotations omitted), aff'd in relevant part and rev'd in part, 407 F.3d 1352 (Fed. Cir. 2005). Federal Energy Regulatory Commission ("FERC") accounting principles

recognize that utilities actually do incur a cost of capital Allowance for Funds Used During Construction ("AFUDC").

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ARGUMENT Southern seeks damages for costs it has reasonably incurred to store SNF. Southern has calculated its past damages based on DOE's published rate of SNF acceptance and the reasonable decisions of Southern's experienced and successful team of nuclear engineers and managers. The Government challenges its own published acceptance rate based on previously rejected legal theories, and it challenges the experienced judgment of Southern's nuclear engineers and managers based on 20/20 hindsight, as opposed to the opinion of its own nuclear expert whom it withdrew from trial.

I.

DOE's 3000 MTU Annual Acceptance Rate Is a Reasonable Rate That Fulfills DOE's Contractual Obligations. A. The Nuclear Waste Policy Act, the Standard Contract, and the Government's Partial Breach.

The Government's post-trial brief recycles the same arguments that it repeatedly has raised, and that numerous courts repeatedly have rejected, regarding the meaning and intent of the NWPA and the Standard Contract, as well as the Government's partial breach of that Contract. (Def.'s Post-Trial Br. 100-161.) Southern's opening brief addressed in detail virtually all of the Government's arguments. Given the extensive record in this case, as well as the Court's familiarity with the issues, Southern will not repeat its arguments here. Instead,

Southern will summarize the existing case law, including the law of this case, that demonstrates the error of the Government's positions. Congress enacted the NWPA to address "the `national problem' posed by the accumulation of spent nuclear fuel and radioactive waste produced by various domestic sources." Northern States Power Co. v. United States Dep't of Energy, 128 F.3d 754, 756 (D.C. Cir. 1997), cert. denied, 525 U.S. 1016 (1998). In the NWPA, Congress recognized that the federal

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government bore the responsibility for permanently disposing of radioactive waste to protect the public health, the public safety, and the environment. See 42 U.S.C. §§ 10131(a)(4), (b)(2); Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1337 (Fed. Cir. 2000); Indiana Michigan Power Co. v. United States, 57 Fed. Cl. 88, 90 (2003). The NWPA imposed two duties on DOE triggered by different conditions and at different times. One, in return for the payment of fees by the utilities, DOE was to dispose of SNF beginning no later than January 31, 1998. 42 U.S.C. § 10222(a)(5)(B); Indiana Michigan Power Co. v. Dep't of Energy, 88 F.3d 1272, 1276 (D.C. Cir. 1996). Two, DOE was to take title to SNF following the start of repository operations and upon the request of a utility. 42 U.S.C. § 10222(a)(5)(A); Indiana Michigan, 88 F.3d at 1276. See also Indiana Michigan, 57 Fed. Cl. at 91 n.9. The NWPA obligated the DOE to start disposing of nuclear utilities' SNF no later than January 31, 1998. Indiana Michigan, 88 F.3d at 1277.2 Further, Congress provided that the generators and owners of nuclear waste should bear the costs of the waste's disposal. See 42 U.S.C. §§ 10131(a)(4), (b)(2); Maine Yankee, 225 F.3d at 1337; Indiana Michigan, 57 Fed. Cl. at 90. Therefore, in return for the DOE's obligation to start disposing of SNF no later than January 31, 1998, nuclear utilities have reciprocal obligations to pay the fees established by the Act. Indiana Michigan, 88 F.3d at 1277. To accomplish the goals of the NWPA, the Act further authorized the DOE to enter into the Standard Contracts with utilities for the disposal of SNF. Maine Yankee, 225 F.3d at 1337. Moreover, in holding that Maine Yankee Atomic Power Company's claims against the Government were ripe, this Court found that DOE had an obligation "to begin accepting, transporting, and disposing of Maine Yankee's SNF `not later than January 31, 1998.'" Maine Yankee Atomic Power Co. v. United States, 42 Fed. Cl. 582, 583 (1998). But see Sacramento Mun. Util. Dist. v. United States, 70 Fed. Cl. 332, 339 (2006) ("The Standard Contract did not specify a date that DOE would accept a particular utility's SNF and HLW."). In addition, DOE was obligated to continue collecting SNF once it began collecting in 1998. See Indiana Michigan, 57 Fed. Cl. at 97.
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By prohibiting the issuance of licenses to a utility that has not entered into a Standard Contract, the NWPA effectively made these contracts mandatory for the utilities. Id. In two separate opinions, the United States Court of Appeals for the District of Columbia Circuit held that the Government had an unconditional obligation under the Act and the Standard Contracts to commence removal of SNF no later than January 31, 1998 and that the Government could not rely on its failure to construct a repository as an excuse for its non-performance. See Northern States, 128 F.3d at 760; Indiana Michigan, 88 F.3d at 1276-77. Thus, the Government cannot invoke the provision in the Standard Contract's unavoidable delay clause related to acts of the Government in its sovereign or contractual capacity. Northern States, 128 F.3d at 760. In Maine Yankee, 255 F.3d at 1342, the United States Court of Appeals for the Federal Circuit held that the DOE's failure to begin acceptance of SNF by January 31, 1998 was a partial breach of contract that extended to all utilities. The Federal Circuit also held that the avoidable delays clause of the Standard Contract applied only to the types of delays that "routinely" arise after performance under the contract has begun and not to the delay of "a critical and central obligation of the contract" ­ to begin SNF acceptance by January 31, 1998. Id. at 1341. In light of the rulings in Maine Yankee, 225 F.3d 1336, and Northern States, 224 F.3d 1361, this Court granted Southern's motion for summary judgment on the issue of the Government's contractual liability. Apr. 7, 2004 Order, Dkt. No. 234 at 4-5. This Court has held that an acceptance rate term is missing from the Standard Contract. Indiana Michigan, 57 Fed. Cl. at 96; Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652, 662 (2003); see Yankee Atomic Electric Co. v. United States, No. 98-126C, slip op. at 2 (Fed. Cl. June 26, 2003) (adopting Judge Hewitt's opinion in Commonwealth Edison to the extent applicable); Southern Nuclear Operating Co. v. United States, No. 98-614, Apr. 7, 2004

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Order, at 6 (same). Accordingly, Judge Hewitt, Judge Hodges, and Your Honor have held that the Court must supply a reasonable acceptance rate term. Indiana Michigan, 57 Fed. Cl. at 96; Commonwealth Edison, 56 Fed. Cl. at 662; see Yankee Atomic, No. 98-126C, slip op. at 2; Southern Nuclear, No. 98-1614, No. 98-614, Apr. 7, 2004 Order, at 6. In reaching these conclusions, the Judges of this Court, including Your Honor, have repeatedly rejected precisely the arguments the Government raises again in this case. The Government argues that the acceptance rate supplied by the Court should be 900 MTUs per year or one based on the Standard Contract's DCS process. See, e.g., (Def.'s PostTrial Br. 43-44, 44-46, 47-48, 49-53, 105, 156-57.) However, courts have consistently rejected both of these arguments. In denying the Government's partial summary judgment motions, Judge Hewitt, Judge Hodges, and Your Honor ruled that, as a matter of law, the 900 MTU per year acceptance rate contained in the 1991, 1992, and 1995 Annual Capacity Reports ("ACRs") is not a reasonable and appropriate acceptance rate on which to base the utilities' damages. See Commonwealth Edison, 56 Fed. Cl. at 666-67; Indiana Michigan, 57 Fed. Cl. at 97-100; Yankee Atomic, No. 98126C, slip op. at 2. The Government's 900 MTU per year acceptance rate is based on limits that the 1987 Amendments to the NWPA imposed on a MRS facility. See Indiana Michigan, 57 Fed. Cl. at 100; Commonwealth Edison, 56 Fed. Cl. at 666; see also Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515, 520 (2006).3 Because DOE was never authorized to build an MRS facility and because it was illegal under the 1987 Amendments to the NWPA to store SNF at an

An MRS was limited to a total capacity of 10,000 MTUs of SNF. The 900 MTU per year rate was derived by dividing the 10,000 MTU capacity by 12 years, the expected number of years from the beginning of MRS operations to the opening of the permanent repository, and applying a ramp-up of 400 MTUs and 600 MTUs for the first two years. Commonwealth Edison, 56 Fed. Cl. at 666 & n.12; see also (Def.'s Post-Trial Br. 155.)

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MRS before a permanent repository was licensed, the Indiana Michigan and Commonwealth Edison courts rejected the Government's position that its damages should be limited based on an acceptance rate derived from the operation of an MRS facility. See Indiana Michigan, 57 Fed. Cl. at 100; Commonwealth Edison, 56 Fed. Cl. at 666. Judge Hewitt concluded: The court does not agree with defendant that it is entitled to limit its damages based upon an optional disposal method of which it did not avail itself. The 10,000 MTU limitation applied only to a MRS until a permanent repository began accepting SNF; the 1987 Amendments did not apply this limitation to DOE's obligation to dispose of SNF under the Standard Contract beginning January 31, 1998. Commonwealth Edison, 56 Fed. Cl. at 666. Moreover, Judge Hodges concluded that the 900 MTU per year acceptance rate was artificially low and unsupported by the record in that case. Indiana Michigan, 57 Fed. Cl. at 98. Finally, it bears noting that Judge Lettow in TVA, 69 Fed. Cl. at 521, found that the DOE had abandoned plans for an MRS by 1995, but failed to reflect this change in an ACR or APR until 2004. In its Post-Trial Brief, the Government criticizes Southern for not citing to the DOE's Preliminary Estimates of the Total-System Life Cycle Cost for the Restructured Program (Dec. 1990) (DX 330) ("1990 PETSLCC"), "which shows performance at an MRS at a steady-state rate of 900 MTU until a repository opens with no ramp-up to 3000 until 2015." (Def.'s PostTrial Br. 115.) However, Judge Lettow in TVA, 69 Fed. Cl. at 531, rejected the Government's argument that the 1990 PETSLCC showed the acceptance rates that would have applied in the non-breach case. Specifically, Judge Lettow found that the 1990 PETSLCC was based upon a "mistaken assumption" never authorized by Congress ­ modification of the linkages between the repository and an MRS facility. Id. Judge Letow's reasoning is equally applicable to this case. Judge Hewitt in Commonwealth Edison rejected the Government's argument that the DCS process described in the Standard Contract should define the amount of SNF that the

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Government was required to accept in the non-breach case. Judge Hewitt held that the DCS process was a planning tool and that it did not create any binding obligation on either the Government or the utilities. See Commonwealth Edison, 56 Fed. Cl. at 663, 665-66. Judge Hewitt stated, "[i]n these circumstances, plaintiff's submission and defendant's acceptance of the proposed DCSs did not create a contractually binding obligation for either party." Id. at 666 (citations omitted). Furthermore, Judge Hewitt concluded that even if the process defined in the Standard Contract could create a binding obligation, the third step in the process ­ the submission and approval of final delivery schedules ­ was never completed. Id. Other Judges on this Court, including Your Honor, have agreed with Judge Hewitt that the DCS process did not create any obligation between the Government and the utilities nor did it alter the Government's obligations under the Standard Contract. In Indiana Michigan, 57

Fed. Cl. at 98, Judge Hodges concluded "[t]he Contract does not use [ACRs] and [DCSs] to determine an Acceptance Rate. The [DOE] did not consider these forms to be binding. . . . The Contract contemplated that DOE would use these reports for planning purposes only. The [ACRs] disclaimed any other purpose, specifically stating that they were not binding on either party." (Footnotes and citations omitted.) In System Fuels, Inc. v. United States, 66 Fed. Cl. 722, 731 (2005), Judge Braden held that as a matter of law the DOE could not amend the Standard Contract through the DCS process without separate consideration. Judge Braden

further found that "[t]here is absolutely no evidence in the record that the ACR and DCSs were binding on either party nor were they intended to create a separate contract between the parties." Id. at 732. In Sacramento Municipal Utility District [SMUD] v. United States, 63 Fed. Cl. 495 (2005), Judge Braden similarly ruled that "the DCSs imposed no legal obligation on either party to the DOE Standard Contract" and that "[t]he record contains no evidence that separate

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consideration was offered by the Government to support an independent contract modifying the DOE Standard Contract." Id. at 505. See also Yankee Atomic Electric Co. v. United States, No. 98-126C, slip op. at 2 (Fed. Cl. June 26, 2003) (adopting Judge Hewitt's opinion in Commonwealth Edison to the extent applicable); Southern Nuclear Operating Co. v. United States, Apr. 7, 2004 Order, at 6 (same). Courts have also found that the DOE's use of the 1991 ACR to govern the initial DCS process reflects DOE's effort to manipulate the acceptance rate to limit its liability in the spent fuel litigation in violation of its duty of good faith and fair dealing. See Boston Edison Co. v. United States, 64 Fed. Cl. 167, 186-87 (2005) (concluding that the utility plaintiff has alleged facts regarding DOE's planning process that "if proved, would make out a viable claim for relief under these implied covenants [of good faith and fair dealing]"); Commonwealth Edison, 56 Fed. Cl. at 665 ("The court agrees that DOE's use of the 1991 ACR to limit the amount of SNF requested by the utilities in their DCS submissions may be a breach of good faith and fair dealing"). But see System Fuels, 66 Fed. Cl. at 735 (dismissing claim for breach of good faith and fair dealing relating to DCS and ACR process). Finally, the Government argues in this case that the Standard Contract should be interpreted as a regulation. (Def.'s Post-Trial Br. 104 n.14.) However, Judge Hewitt in

Commonwealth Edison, 56 Fed. Cl. at 661-62, found that the Government's arguments, which were substantially the same as those advanced in its Post-Trial Brief here, did not "`follow logically from the text' nor [were] reasonably reflective of the intent of the parties." (Citations omitted.) Accordingly, Judge Hewitt refused to defer to the Government's positions, even under the more deferential interpretation standards applied to regulations. See id. at 662.

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As noted above, this Court, in its April 7, 2004 Order, adopted Judge Hewitt's reasoning in Commonwealth Edison, 56 Fed. Cl. 652, on the rate acceptance issue, but left final resolution of the acceptance rate issue for trial. (Apr. 7, 2004 Order, at 6.) The time is ripe for the Court to again reject the Government's arguments regarding a reasonable acceptance rate and to accept the rate that Southern presented at trial.4

B.

Eileen Supko's Expert Opinions.

Southern presented the expert testimony of Eileen Supko, whom the Court accepted as an expert in a variety of areas, including nuclear engineering, DOE's nuclear waste management program, and modeling of SNF acceptance rights.5 (Tr. 878-81) (Supko Test.) Ms. Supko provided expert testimony regarding the reasonable acceptance rate in the non-breach world.6 In reaching her expert opinion, Ms. Supko used the same research tools and methodology that she uses in performing similar analyses for non-litigation purposes. She relied upon the SPNTFUEL Model, which she has used in her work for the nuclear industry and upon which the Nuclear Regulatory Commission has relied in a recent proceeding. (Tr. 657-58) (Supko Test.)

4

The Government also argues that several deposition designations should not be considered. (Def.'s Post-Trial Br. 28 n.13.) As previously explained by Southern, the Government agreed to the deposition designations in open court. See Plaintiffs' Response to Defendant's Objection to Plaintiffs' Designations of Deposition and Trial Testimony, Dkt. No. 332 (Mar. 27, 2006). Southern incorporates herein by reference its previous response.

The Government describes Ms. Supko as an "advocate for the nuclear industry," (Def.'s Post-Trial Br. 124), but ignores the fact that DOE itself recognized Ms. Supko's expertise by nominating her for one of the two consultancies she has served with the International Atomic Energy Agency. (Tr. 654-65) (Supko Test.) Ms. Supko also provided consulting services for the government of Ontario, Canada. (Id. at 656.)
6

5

Ms. Supko also identified the quantities of SNF that DOE would have accepted from Southern's plants in the non-breach world through 2004, under the acceptance rate identified in her first opinion. (Tr. 710-12) (Supko Test.); PX 624 (Supko Report) at 38-40.) The Government's Post-Trial Brief does not challenge Ms. Supko's testimony in this area.

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She identified key factors that she deemed relevant in determining a reasonable acceptance rate ­ factors that she has used in her work for nuclear utilities unrelated to the SNF litigation7 ­ and she analyzed four acceptance rate scenarios, which largely were derived from various DOE documents.8 (PX 624 at 11-13, 27-28; (Tr. 673-77) (Supko Test.)). One of these scenarios ­ Scenario 2, with a steady state acceptance rate of 900 MTUs per year ­ was the acceptance rate that the Government insists the Court must apply in this case. (Def.'s Post-Trial Br. 156-57.)9 As a result of her analysis, Ms. Supko concluded that the only scenario that presented a reasonable acceptance rate was Scenario 1, which involved a steady-state annual acceptance rate of 3000 MTUs after a five-year ramp up. (Tr. 690, 694) (Supko Test.) This scenario required the nuclear industry as a whole to accommodate an additional 1030 MTUs of storage, which Ms.
7

These factors were: (1) The amount of additional spent fuel storage that utilities would have had to add had DOE begun acceptance of SNF in 1998, as the Standard Contract required; (2) The number of years after each plant is shut down for decommissioning that SNF remains on site prior to acceptance by DOE; and (3) The extent to which DOE would use the annual steadystate acceptance capacity over the life of the waste management program. (PX 624 (Supko Report) at 12-13; (Tr. 677-78) (Supko Test.))

One of the scenarios, which involved a higher acceptance rate, was included to show "the effect of a higher acceptance rate scenario . . . on a utility's spent nuclear fuel storage requirements." (Tr. 677) (Supko Test.) The Government suggests that the court in TVA, accepted its position that it is only bound to perform at the 900 MTU per year acceptance rate. See (Def.'s Post-Trial Br. 156.) The Government simply is wrong. TVA accepted the reduced 900 MTU per year acceptance rate for the purposes of its damages claim, but the Government argued that it was not bound to accept TVA's SNF because TVA had no approved DCSs. TVA, 60 Fed. Cl. at 671. Contrary to the Government's suggestion, what the court actually held was that the DOE could not use the lack of a repository as an excuse for failing to act on TVA's DCS submissions. Id. at 673. The TVA court made it clear that "[i]n light of the parties' concurrence on [the acceptance rate], the Court accepts only for the purposes of this case that the DCS process creates a binding `benchmark' for addressing breaches of the Standard Contract." Id. at 671 n.7 (emphasis added); see also TVA, 69 Fed. Cl. at 530 ("Both parties accept the aggregate rates of SNF acceptance that DOE provided for the first ten years of DOE SNF acceptance in the ACR for 1994 as issued in March 1995."). In addition, the Court in TVA expressly rejected the Government's argument that "3,000 MTU/year is not an appropriate long-term steady-state disposal rate," because this argument "does not comport with the long-term acceptance rates listed in nearly all of DOE's planning documents." (Id.)
9

8

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Supko concluded could have been accommodated without having to build additional dry storage facilities. In addition, Scenario 1 would have required utilities to store fuel after shutdown for an average of nine years, and would have allowed the waste management system to operate at maximum capacity for 28 years, both of which Ms. Supko concluded were reasonable periods of time. (Id. at 689.) In contrast, the rate scenario that the Government asks the Court to adopt ­ a 900 MTU rate ­ would require the industry to store more than 13,000 MTUs of SNF, and would have required a utility, on average, to store SNF for 64 years after it shut down ­ longer than its license period. And, the waste management program would have to operate for more than a century under the Government's preferred scenario. (Id. 690-94.) The Government presented no testimony to rebut Ms. Supko's expert opinions. In fact, DOE officials testified that they agreed with Ms. Supko's conclusion that a 3000 MTU rate was reasonable. As the former Acting Director of the program said, the 3000 MTU rate was chosen as a proper balance . . . . If you make the number too high, then you have--you would quickly work off the backlog, and then you would have a lot of idle capacity. If it was too low, you would have reactors needing to put in dry storage, and 3,000, based on an early 1980s, seemed like a reasonable number to use. (Barrett Dep. 1332-33, May 10, 2002) (PDD 5) (emphasis added); see also (Tr. at 1844, 1857) (Kouts Test.) (testifying that 3000 MTU per year acceptance rate was reasonable). Without a nuclear industry expert witness of its own, the Government attempts to impugn the integrity of Ms. Supko and to paint her SNF modeling and expert opinions as unreliable or inconsistent and contradictory. As discussed below, the Government's criticisms are misplaced and in some cases simply wrong. The Government begins by criticizing Ms. Supko based on her participation in two other SNF cases: Indiana Michigan Power Co. v. United States and Sacramento Municipal Utility District [SMUD] v. United States. (Def.'s Post-Trial Br. 125 n.24.) The Government suggests

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that none of Ms. Supko's opinions are based on a reliable or testable methodology because her opinions on when the DOE would begin repository operations were rejected by the Court in Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639, 647 (2004), aff'd, 422 F.3d 1369 (Fed. Cir. 2005). (Def.'s Post-Trial Br. 125 n.24.) However, in that case, the Government stipulated to Ms. Supko's expertise except to the extent that she would be testifying as to when a repository would open, and the Court subsequently accepted Ms. Supko's expertise in the following fields: "spent nuclear fuel storage and licensing, rate of acceptance, and `DOE's Yucca Mountain schedule.'" Indiana Michigan, 60 Fed. Cl. at 646. Although the Indiana Michigan court did reject Ms. Supko's opinion that repository operations would begin by 2015 or later, when DOE during trial still claimed it would open Yucca Mountain in 2010, subsequent events have proven Ms. Supko's opinion correct. (Tr. 859-861) (Supko Test.) The Government also relies on the fact that Ms. Supko was not qualified as an expert in the SMUD case and that in a footnote the SMUD court declined to make a determination on the SNF acceptance rate to suggest that Ms. Supko's opinions in this case are irrelevant or unreliable. (Def.'s Post-Trial Br. 125 n.24) (citing SMUD, 70 Fed. Cl. at 375 n.40). The Government reads too much into the SMUD court's actions on the acceptance rate. First, the SMUD court never directly addressed Ms. Supko's qualifications as an expert, and concluded that it did not need to determine an acceptance rate to award SMUD substantial amounts of damages. The Government can only speculate that footnote 40 was meant to reject Ms. Supko's opinion on the acceptance rate. Moreover, the Court's determination regarding the costs at issue in the section where footnote 40 appears relates to whether SMUD would have been able to move up in the SNF acceptance queue such that all of its SNF would have been removed by

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2003 ­ the Court's analysis does not address the underlying acceptance rate issue. See SMUD, 70 Fed. Cl. at 374-75. The Government next argues that Ms. Supko's expert opinions should be rejected under the standards established in Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). (Def.'s Post-Trial Br. 126-32.) The Government criticizes Ms. Supko's expert testimony as irrelevant because she is offering an opinion only on the reasonableness of the 3000 MTU per year acceptance rate and is not offering any opinions on what the Standard Contract requires or how the DOE would have actually performed had it not breached its contracts with Southern. (Def.'s Post-Trial Br. 126-27.) As discussed above, Judges on the Court of Federal Claims, including Your Honor, have held that an acceptance rate term is missing from the Standard Contract and that it is the court's duty to supply a reasonable acceptance rate term. See Indiana Michigan, 57 Fed. Cl. at 96; Commonwealth Edison, 56 Fed. Cl. at 662; Yankee Atomic, No. 98126C, slip op. at 2. Ms. Supko's expert testimony obviously is relevant to this key issue. The Government then turns to Daubert's indicia of reliability. The Government's initial attack is that Ms. Supko's opinions are unreliable because they are "subjective judgments or `intuition.'" (Def.'s Post-Trial Br. 129.) The Government's attack is misplaced. Expert

witnesses are expected to exercise their expert judgment when rendering opinions. See Park Village Apartments v. United States, 32 Fed. Cl. 441, 449 (1994) ("An expert's `judgment' is often based to some extent on `impressions' which can be characterized as more `art' than `science.' Here, each expert relied on his or her own expert judgment when selecting

comparable units and adjusting the rents of these comparable units to account for differing conditions."). Thus, this attack misses the mark in that it fails to recognize that reliable expert opinions are not always easily characterized as "science" as the Government contends.

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The Government also argues that Ms. Supko's methodology has not been subject to publication or peer review and is not "`generally accepted' in the relevant scientific community." (Def.'s Post-Trial Br. 130.) The SNF analyses and projections that form the bases of Ms. Supko's opinions in this case were performed using the SPNTFUEL computer model that Energy Resources International, Inc. ("ERI") developed in the early 1990s. See (Tr. 656) (Supko Test.) This model was developed for the purpose of assisting ERI's clients in planning their SNF needs. (Id. at 657.) For example, Ms. Supko has used the SPNTFUEL model to project SNF discharge and acceptance rates that her clients have used in filing decommissioning cost estimates with the NRC, to assist utilities in planning their dry storage needs, and to support a cost/benefit analysis submitted to the NRC in connection with the PFS's environmental impact statement. (Id. at 657-58.) The NRC relied on this cost/benefit analysis work in producing the environmental impact statement for the PFS facility. (Id. at 658.) The Government ignores these facts, which demonstrate that the SPNTFUEL model and Ms. Supko's expertise are relied on and trusted by colleagues working in the nuclear power industry, including the NRC. The Government further argues that Ms. Supko's expert opinions are somehow unreliable because Ms. Supko has modified the SPNTFUEL model over time and that the model has consequently produced varying results on the amount of additional at-reactor storage required in the non-breach case.10 (Def.'s Post-Trial Br. 130-32.) First, predicting events in the non-breach case necessarily involves making judgments about what would have happened had the Government not partially breached the contract. The Government cannot rely to its advantage on the fact that its partial breach has caused uncertainty in how it would have disposed of SNF had

10

I.e., had DOE begun acceptance at a 3000 MTU per year rate in 1998.

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it lived up to its obligations. Furthermore, the Government could rightly criticize Ms. Supko had she not updated her model when new information affecting the model came to light. Second, the variance in the amount of additional at-reactor storage represents, at most, a change of approximately 1000 MTUs over the approximately forty year designed life of the waste management program, (Tr. at 672) (SupkoTest.), and of the approximately 90,000 to 130,000 MTUs of SNF expected to be generated by reactor plants currently in operation, (id. at 763); (Def.'s Post-Trial Br. 143 n.35). Thus, this variance over the life of the waste management program cannot reasonably be considered "significant[]," "dramatic[]," "drastic," or "tremendous" as the Government has described it. (Def.'s Post-Trial Br. 130-32.) With respect to the increase from 600 MTUs to 1030 MTUs of additional at-reactor storage required under the 3000 MTU per year acceptance rate scenario (Scenario 1), the Government argues that this change should have caused Ms. Supko to conclude that this scenario was unreasonable. (Def.'s Post-Trial Br. 131-32.) However, Ms. Supko testified that even with this change, there remains a clear distinction between the reasonableness of Scenario 1 and Scenarios 2 and 3.11 (Tr. 747-48) (Supko Test.) Furthermore, the Government fails to

understand that the change in the SPNTFUEL model that prompted this increase in storage requirements will also affect the additional at-reactor storage requirements of all other acceptance rate scenarios, and do not affect Ms. Supko's conclusion. (Id. at 680-82.) Thus, contrary to the Government's suggestion, there is no reason to believe that this storage requirement increase should affect Ms. Supko's conclusion on the reasonableness of the 3000 MTU per year scenario.

Scenario 2 is the 900 MTU per year steady-state acceptance rate scenario. Scenario 3 is the 900 MTU per year acceptance rate scenario with a ramp-up to a 3000 MTU per year rate in 2015.

11

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Next, the Government argues that, in her initial analysis, Ms. Supko improperly presumed that no nuclear utility would seek a license extension for its facilities. (Def.'s

Post-Trial Br. 134-135.) However, in response to the Government's having raised this issue during deposition, Ms. Supko performed an analysis that presumed that utilities obtained license extensions, which confirmed her conclusion that the 3000 MTU acceptance rate was reasonable. (Tr. 785) (Supko Test.) The Government also argues that Ms. Supko inconsistently "mixes" information from the but-for and actual cases in two respects: pool capacities and SNF discharges. (Def.'s Post-Trial Br. 136-38.) With respect to pool capacities, the Government criticizes Ms. Supko for not "consistently assum[ing] pre-1998 pool capacity." (Id. at 136.) This criticism is misplaced. First, the Government mischaracterizes Ms. Supko's testimony. Ms. Supko testified that she decided whether to include post-1998 storage modifications depending on whether such an addition would be appropriate in the non-breach world; for example, where a utility would have made the modification had the DOE not breached the contract. See (Tr. 750, 756-57) (Supko Test.) Second, post-1998 pool capacity changed for only 12 plants out of the 122 plants with SNF ­ less than 1%. (Id. at 755.) Ms. Supko testified that the inclusion of these modifications would not affect her conclusions. (Id. at 751-52, 755.) With respect to SNF discharges, the Government criticizes Ms. Supko for using post-January 31, 1998 SNF discharge information as contained in the 1998 RW-859s, instead of RW-859s during the 1990-1991 time frame. Government's criticism is misplaced. (Def.'s Post-Trial Brief 138.) Again, the

As Ms. Supko explained at trial, the evolution and

improvement of reactor operations would have continued independently of whether the DOE performed in 1998. See (Tr. 763-64) (Supko Test.) Utilities would have upgraded reactor

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power, improved capacity factors, increased burn-up rates, and changed other factors that affect SNF discharges in the but-for and actual cases. See id. Therefore, it is entirely appropriate and reasonable for Ms. Supko to use the 1998 RW-859 discharge information. After criticizing Ms. Supko's opinions for taking into account changes that occurred after 1998 in calculating the amount of additional at-reactor storage required, the Government inexplicably argues that she should have included SNF stored at shutdown reactors prior to 1998. See (Def.'s Post-Trial Br. 141.) The Government accuses her of "deliberately exclud[ing]" this amount of SNF "in an attempt to make the amount of at-reactor storage after 1998 appear smaller." (Id.) This is nonsense. The record is clear that one of the goals of the NWPA and the Standard Contract, and the intent of the parties, was to eliminate the need for additional atreactor storage after January 31, 1998. This additional at-reactor storage was caused by the Government's partial breach of contract. Pre-1998 at-reactor storage simply is not relevant. Finally, the Government simultaneously criticizes Ms. Supko for assuming that reactor plants will generate too much and too little SNF. See (Def.'s Post-Trial Br. 142-43 & n.35.) First, the Government makes the point that Ms. Supko has projected that utilities will generate 20,000 MTUs more SNF than the NWPA's 70,000 MTU limit for a permanent repository. (Id. at 142-43.) Next, in a footnote to the same sentence, the Government argues that a 3000 MTU per year acceptance rate must be too low because DOE now projects that the total amount of SNF generated will be 130,000 MTUs, 40,000 MTUs greater than Ms. Supko's assumption. (Id. at 143 n.35.) The simple answer is that the Standard Contract does not contain a limit on the amount of SNF that the DOE can accept--by contract, DOE has bound itself to accept all SNF, regardless of any statutory limit. See (PX 2 (Standard Contract) art. II.))

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Despite the various concerns expressed regarding Ms. Supko's expert opinions, the Government cannot escape the reality that her conclusions, as well as her logic, are the same as Lake Barrett's and Christopher Kouts's. The criteria Ms. Supko used to evaluate the

reasonableness of the different acceptance rate scenarios, referred to by the Government as the Southern's "primary requirements," (Def.'s Post-Trial Br. 124-25), are consistent with the factors Mr. Barrett used in his deposition testimony. See (Barrett Dep. 1332-33, May 10, 2002). As noted earlier, based on these factors, Mr. Barrett, a former Deputy Director of the waste management program, concluded that "3,000. . . seemed like a reasonable number to use." (Id. at 1333.) Furthermore, elsewhere in his deposition, Mr. Barrett testified again that a 3000 MTU per year acceptance was a reasonable acceptance rate. (Id. at 1370-71.) Similarly, at trial, Mr. Kouts testified that a 3000 MTU per year rate was reasonable. (Tr. 1844, 1857) (Kouts Test.) Moreover, on much the same evidence as presented in this case, Judge Hodges in Indiana Michigan found that if DOE had begun acceptance of SNF on January 31, 1998 as required by the Standard Contract, DOE would have performed at a rate of 3000 MTU per year. Indiana Michigan, 57 Fed. Cl. at 99-100; see also TVA, 69 Fed. Cl. at 530-33.

II.

The Number of Casks Southern Loaded at Plant Hatch was Based on a Reasonable Operating Reserve. The Government contends that Southern has unreasonably mitigated its damages by

loading too many casks with SNF at Plant Hatch.

(Def.'s Post-Trial Br. 55-56.)

The

Government bases this argument on the contention that Southern's nuclear engineers and managers implemented too large an operating reserve in the reactor pool. (Id. at 56.) The larger the operating reserve, the more casks that have to be loaded with SNF from the reactor pool and the more damages that are incurred. The Government argues that Southern should have loaded

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only 9 casks, containing a total of 612 assemblies, as that would have maintained a maximum operating reserve of 1 FCR ­ 560 assemblies. (Def.'s Post-Trial Br. 70-71.) Southern contends that its actual loading of 22 casks, containing a total of 1496 assemblies, was reasonable in light of its long-term target operating reserve of 2 FCRs ­ 1120 assemblies. (Pls.' Post-Trial Br. 80.) The difference between 1 FCR and 2 FCR at Plant Hatch is significant because the Plant Hatch pool serves two reactors, meaning that both reactors could not discharge their cores if the reserve is limited to 1 FCR. The difference in damages is $7,697,015. Under the law of contracts, of course, the measure of damages is not the amount of damages sufficient to provide 1 or 2 FCRs, but "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 1369, 1373 (Fed. Cir. 2005) (internal quotations omitted). Both damages experts agree that had DOE performed at the 3000 MTU rate, DOE would have removed more SNF assemblies from Plant Hatch's pool than Southern has actually loaded into dry storage during the same period of time, and, as a result, Southern would have enjoyed an even larger operating reserve as of December 31, 2004, than it actually had. Dr. Neuberger, the

Government's economist, testified that had DOE performed, the SNF inventory at Plant Hatch would have been lower ­ and the usable pool space would have been larger ­ than it actually was on December 31, 2004: Q. A. Q. A. What is the end-of-the-year inventory in the Hatch pool for 2004, assuming the government had performed? Going across that column or that row to column J or, similarly, column R., the number there is 4,627 [assemblies of SNF]. All right, sir. 4,627 [SNF assemblies in the pool] if the government performed, correct? Correct.

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Q.

Now, under the actual scenario, using the numbers of casks that Hatch actually loaded what's the end-of-the-year number for 2004 under this scenario? ....

A. Q.

Right, 4,795. Okay. So in other words, there would be more space in the Hatch pool if the government had performed using these DOE allocations than using the actual loading that Plant Hatch did? As of the end of 2004, yes.

A.

(Tr. 2117-18) (Neuberger Test.) (emphases added). See (Id. at 2123, 2141, 2144-45); (Tr. 1522) (Metcalfe Test.) Without addressing the fact that Southern's 2 FCR cask loading schedule would not place Southern "in as good a position as it would have been had the breaching party [DOE] fully performed," Indiana Michigan, 422 F.3d at 1373, the Government asserts that Southern's cask loading schedule constitutes unreasonable mitigation. The Government presented no expert testimony on what a reasonable cask loading schedule for Plant Hatch would have been, but instead relies on 20/20 hindsight and second-guessing about policy and mischaracterization of Southern's dry storage planning documents in an attempt to justify its claim of unreasonable mitigation. The Government, in essence, argues that Southern loaded an excessive number of casks at Plant Hatch because: (1) a number of Southern's internal documents track 1 FCR as the minimum operating reserve; (2) Southern has loaded casks based on a target of 2 FCR in the actual scenario, but used a 1 FCR as the threshold for adding dry storage in the breach and nonbreach cases; and (3) a 1 FCR minimum operating reserve is unreasonable in the non-breach case because it could leave Plant Hatch without adequate reserves in the event of a DOE performance interruption. (Def.'s Post-Trial Br. 169-76.)

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A.

Southern's Documents Tracked, and Southern Actually Used, the Minimum 1 FCR to Determine When an