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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' POST-TRIAL 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 Shultz ARNOLD & PORTER LLP 555 Twelfth Street, N.W. Washington, D.C. 20004-1202 Telephone: (202) 942-5000 Facsimile: (202) 942-5999
March 17, 2006
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ......................................................................................................... vi INTRODUCTION .......................................................................................................................... 1 BACKGROUND ............................................................................................................................ 3 STATEMENT OF THE CASE....................................................................................................... 7 STATEMENT OF FACTS ........................................................................................................... 14 I. II. III. Proposed Findings of Fact................................................................................................. 14 Southern's Three Nuclear Plants....................................................................................... 19 The Nuclear Waste Policy Act of 1982 and the Standard Contract Require an SNF Acceptance Rate that Avoids the Need for Additional Dry Storage and Reduces the SNF Backlog to Allow for Timely Decommissioning...................................................... 22 A. B. Congress Enacted the Nuclear Waste Policy Act for the Purpose of Avoiding Spent Nuclear Fuel Storage Problems at Nuclear Reactor Sites........... 22 DOE's Implementation of the NWPA. ................................................................. 24 1. 2. IV. The Standard Contract. ............................................................................. 25 Annual Capacity Reports, Acceptance Priority Rankings, and Delivery Commitment Schedules. ............................................................ 28
From the Outset of the Program, DOE Interpreted its Contract Obligations Consistent with the Intent that No Utility Would Have To Build Additional AtReactor Storage Space for SNF Discharges After January 31, 1998................................ 29 A. B. DOE Documents. .................................................................................................. 30 Testimony.............................................................................................................. 35
V.
DOE Also Intended to Operate the Program to Remove SNF at a Rate Sufficient to Work-Off the Backlog of SNF Stored at Reactor Sites and to Ensure Timely Decommissioning of Nuclear Plants................................................................................. 37 DOE Based All of its Operational and Financial Planning On A Receipt Rate That Would Eliminate The Need For Additional Storage and Reduce the Backlog at a Reasonable Rate................................................................................................................ 40
VI.
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A. B. VII.
DOE Has Consistently Identified the 3000 MTU Rate as the Desired Steady-State Rate. ................................................................................................. 40 DOE Has Repeatedly Used a 3000 MTU Rate in Its Financial Planning Documents. ........................................................................................................... 44
DOE's Evolving Strategy for Use of a Monitored Retrievable Storage Facility.............. 45 A. B. C. D. E. DOE Announces Five-Year Delay in the Start of Repository Operations and Proposes Use of a Monitored Retrievable Storage Facility in the Interim. .......... 45 The 1987 NWPA Amendments ............................................................................ 48 DOE Publishes the 1990 Annual Capacity Report. .............................................. 51 DOE Publishes the 1991 Annual Capacity Report and Projects a 900 MTU Acceptance Rate Beginning in 1998 Based on the Operation of an MRS............ 52 DOE Continued to Assert the MRS Facility Capacity Limitations as the Basis for the 900 MTU Acceptance Rate Even After It Abandoned Plans for Such a Facility....................................................................................................... 55
VIII. IX.
The Delivery Commitment Schedule Process. ................................................................. 56 Expert Testimony Regarding Acceptance Rate. ............................................................... 62 A. THE REASONABLE ACCEPTANCE RATE REQUIRED BY THE STANDARD CONTRACT .................................................................................. 63 1. 2. 3. B. Results Using Strict "Oldest Fuel First" Priority Rankings...................... 66 Results Using Intra-Company Exchanges of Acceptance Rights. ............ 69 Other Available Means to Avoid Additional Dry Storage........................ 70
SOUTHERN NUCLEAR'S FUEL ACCEPTANCE RIGHTS. ........................... 72
X. XI.
The Government's Partial Breach of the Contracts. ......................................................... 73 Summary of Southern's Damages..................................................................................... 73 A. B. C. Overview of Southern's Evidence. ....................................................................... 73 Southern's Evidence. ............................................................................................ 74 Overview of the Government's Damages Evidence. ............................................ 78
XII.
The Principal Contested Damages Issues. ........................................................................ 79
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A.
The Number of Casks Loaded at Plant Hatch....................................................... 80 1. 2. Southern's Policies Regarding Full Core Reserves .................................. 80 Reasons for Operating Reserve Policies. .................................................. 84
B.
Southern Would Not Have Required Dry Cask Storage Had the Government Performed as Required by the Standard Contracts. ......................... 88 1. 2. The Parties' Experts Agree that Southern would have Avoided Dry Storage at Plant Hatch had the Government Performed. .......................... 88 Southern would have Installed the Second Bathtub Rack had the Government Performed............................................................................. 88
C. D. E.
The Dry Storage Facilities Were Required at Plant Hatch in the Breach Case....................................................................................................................... 89 The Government's Position Regarding the Number of Casks.............................. 91 The HI-STAR Issue. ............................................................................................. 93 1. 2. 3. The Development and Commencement of Operation of the Plant Hatch Dry Fuel Storage Facility. .............................................................. 93 Southern's Decision to Purchase the HI-STAR Casks Was Reasonable When Made............................................................................ 95 Costs Associated with Use of HI-STARs. ................................................ 97
F. G. H.
Southern's Use of Internal Labor and Allocation of Overhead. ......................... 101 Private Fuel Storage. ........................................................................................... 101 Miscellaneous Adjustments. ............................................................................... 103 1. 2. Work platform for cask loading. ............................................................. 103 Standby Welding Time. .......................................................................... 104
I.
Southern's Cost of Capital .................................................................................. 104
SUMMARY OF THE ARGUMENT ......................................................................................... 106 ARGUMENT .............................................................................................................................. 111 I. The Law of Damages. ..................................................................................................... 111 A. The Measure of Damages ................................................................................... 111
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1. 2. 3. B. II.
Southern Is Entitled to be Placed In As Favorable An Economic Position as if No Partial Breach Had Occurred....................................... 111 Mitigation................................................................................................ 112 The Burdens of Proof.............................................................................. 114
The Time Period Covered by Southern's Damages Claim. ................................ 115
Southern's Damages. ...................................................................................................... 116 A. B. Overview of Southern's Damages. ..................................................................... 116 Foreseeability, Certainty, and Causation. ........................................................... 118 1. 2. 3. Southern's Damages Were Foreseeable.................................................. 118 Southern's Damages Are Certain............................................................ 119 Southern's Damages Were Proximately Caused by the Government's Partial Breach. ................................................................. 119
III.
The Government's Challenges to Southern's Damages ................................................. 121 A. The "Alternate Rate" of SNF Acceptance. ......................................................... 121 1. 2. A 3000 MTU Per Year Acceptance Rate Is Required By The Standard Contract and Is Reasonable...................................................... 121 A 3000 MTU Acceptance Rate Would Have Eliminated The Need For Additional On-Site Dry Storage At Each Of Southern Nuclear's Plants, Was Contemplated By The Parties, Was Paid For By Southern Nuclear, And Is Reasonable. ................................................... 125
B.
The Number of Casks Loaded at Plant Hatch..................................................... 136 1. 2. The Size of the Operating Reserves in the Breach and Non-Breach Scenarios. ................................................................................................ 137 Southern's Nuclear Witnesses Demonstrated the Reasonableness of Southern's Operating Reserves, and the Government Presented No Proof that Southern's Approach was Unreasonable. .............................. 139
C.
The "Bathtub Rack" Adjustment. ....................................................................... 142 1. Southern's Management's Decision Not to Temporarily Use the Second Bathtub Rack in the Hatch Pool was Reasonable. ..................... 142
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2. D.
The Government's Adjustment Fails To Account For The Cost of Installing the Additional Bathtub Rack................................................... 146
The HI-STAR Casks Adjustment. ...................................................................... 146 1. 2. 3. The Purchase of the HI-STARs Was Reasonable................................... 147 Southern Reasonably Began Loading HI-STARs in 2000...................... 149 The Proposed Upender Pad Adjustment Is Erroneous............................ 150
E. F. G.
The Internal Labor Adjustment........................................................................... 151 The Private Fuel Storage Adjustment. ................................................................ 155 The Miscellaneous Costs Adjustments. .............................................................. 161 1. 2. Work platform for cask loading. ............................................................. 161 Standby Welding Time. .......................................................................... 161
H.
The Cost of Capital Adjustment.......................................................................... 162
CONCLUSION........................................................................................................................... 165 CERTIFICATE OF SERVICE ................................................................................................... 167
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TABLE OF AUTHORITIES Cases Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400 (2004) ........................................................ 114 Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348 (Fed Cir. 2001) .......................... 163 Bluebonnet Sav. Bank, F.S.B. v. United States, 339 F.3d 1341, 1344 (Fed Cir. 2003) ................ 163 Burke v. Thomas J. Fisher & Co., 127 F. Supp. 1 (D.D.C. 1953) ................................................ 124 Centex Corp. v. United States, 55 Fed. Cl. 381 (2003), aff'd, 395 F.3d 1283 (Fed. Cir. 2005)...................................................................................................................... 163 Citizens Federal Bank, 66 Fed. Cl. .......................................................................................... passim Clements Auto Supply Co. v. Service Bureau Corp., 298 F. Supp. 115 (D. Minn. 1969), aff'd in relevant part, 444 F.2d 169 (8th Cir. 1971) .............................................................. 152 Commercial Federal Bank, F.S.B. v. United States, 59 Fed. Cl. 338, 355 (2004), aff'd, 125 Fed. Appx. 1013 (Fed. Cir. 2005) ......................................................................... 114 Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 (2003) (Hewitt, J.) .................. passim Convoy Co. v. Sperry Rand Corp., 672 F.2d 781 (9th Cir. 1982)................................................. 152 Department of Water & Power v. United States, 131 F. Supp. 329 (S.D. Cal. 1955) .................. 165 Dunn Appraisal Co. v. Honeywell Information Systems, Inc., 687 F.2d 877 (6th Cir. 1982) ...... 153 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002)...................................... 111 First Nationwide Bank v. United States, 56 Fed. Cl. 438 (2003).......................................... 114, 149 Freeport Sulphur........................................................................................................................... 154 Gevyn Construction Corp. v. United States, 827 F.2d 752 (Fed. Cir. 1987) ................................ 164 Howell v. United States, 51 Fed. Cl. 516 (2002) .......................................................................... 127 In re Kellett Aircraft Corp., 186 F.2d 197 (3rd Cir. 1950) ................................................... 114, 149 In re Northern States Power Co., 604 N.W.2d 386 (Minn. Ct. App. 2000) ................................. 140 Indiana Michigan Power Co. v. Department of Energy, 88 F.3d 1272 (D.C. Cir. 1996)........ passim Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005)..................... passim 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 (2005) .............................................................................................. passim vi
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Intrepid v. Pollock, 907 F.2d 1125 (Fed. Cir. 1990)..................................................................... 115 KMS Fusion, Inc. v. United States, 36 Fed. Cl. 68 (1996), aff'd mem., 108 F.3d 1393 (Fed. Cir. 1997) .......................................................................... 126 LaSalle Tallman Bank, F.S.B. v. United States, 317 F.3d 1363 (Fed. Cir. 2003)......................... 112 LaSalle Talman Bank, F.S.B. v. United States, 317 F.3d 1363 (Fed. Cir. 2003).......................... 163 LaSalle Talman Bank, F.S.B. v. United States, 45 Fed. Cl. 64, 111 (1999), rev'd on other grounds, 317 F.ed 1363 (Fed. Cir. 2003)....................................................................... 114, 157 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000) ....................... 4 Massachusetts Bay Transp. Auth. v. United States, 129 F.3d 1226 (Fed. Cir. 1997) ........... 111, 152 Minpeco, S.A. v. Hunt, 686 F. Supp. 420 (S.D.N.Y. 1988) .......................................................... 163 Morris v. United States, 39 Fed. Cl. 7 (1997)............................................................................... 124 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) ....................................................... 4, 132 Northern States Power Co. v. United States, 224 F.3d 1361 (Fed. Cir. 2000) ............................. 4, 5 Pacific Gas & Elec. Co. v. Howard P. Foley Co., Civ. No. 85-2922 SW, 1993 WL 299219 (N.D. Cal. July 27, 1993).......................................................................... 163 S. J. Groves & Sons Co. v. Warner Co., 576 F.2d 524 (3d Cir. 1978) ......................................... 113 Sacramento Mun. Util. Dist. v. United States, 63 Fed. Cl. 495 (2005)..................................... 6, 123 Salles v. United States, 156 F.3d 1383 (Fed. Cir. 1998) ............................................................... 126 Systems Fuels, Inc. v. United States, 66 Fed. Cl. 722 (2005) .................................................. 6, 123 Tennessee Valley Authority v. United States, 69 Fed. Cl. 515 (2006) ..................................... passim United Power Ass'n v. L.K. Comstock & Co., 1992 U.S. Dist. LEXIS 18874, Civ. No. 3-89 766, 1992 WL 402906 (D. Minn., Oct. 27, 1992) .......................................... 163 United States v. New England S.S. Co., 297 F. 651 (S.D. N.Y. 1923) ......................................... 153 United States v. The John R. Williams, 144 F.2d 451 (2d Cir.), cert. denied, 323 U.S. 782 (1944).................................................................................. 153, 154 Westfed Holdings, Inc. v. United States, 52 Fed. Cl. 135 (2002), aff'd in relevant part & rev'd in part on other grounds, 407 F.3d 1352 (Fed. Cir. 2005)........................................... 163 Wickham Contracting Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994).......................................... 164 Yankee Atomic Electric Co. v. United States, No. 98-126C (Fed. Cl. June 26, 2003)............. passim
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Statutes 28 U.S.C. § 2516........................................................................................................... 162, 163, 164 42 U.S.C. § 7133............................................................................................................................. 23 42 U.S.C. §§ 10101-10270 ............................................................................................... 22, 48, 132 42 U.S.C. § 10168........................................................................................................... 48, 133, 134 42 U.S.C. § 10221........................................................................................................................... 41 42 U.S.C. § 10222.................................................................................................................... passim 42 U.S.C. § 10224........................................................................................................................... 25 42 U.S.C. §§ 10132-10145.............................................................................................................. 23 Nuclear Waste Policy Amendments Act of 1987, Pub. L. No. 100-203, §§ 5001-65, 101 Stat. 1330-1, -227 to -253 (1987) ..................................................................................... passim
Regulations 48 Fed. Reg. 5458-71.............................................................................................................. 25, 132 48 Fed. Reg. 16590-16608....................................................................................................... passim
Legislative History 128 Cong. Rec. 8002....................................................................................................................... 23 128 Cong. Rec. 26317 (Sept. 30, 1982) .......................................................................................... 23 H.R. Rep. No. 97-491 ..................................................................................................................... 24 H.R. Rep. No. 97-785 ............................................................................................................... 22, 23
Other Authorities 11 Corbin on Contracts § 1039..................................................................................................... 114 13 Weekly Comp. Pres. Doc. 502 (1977) ....................................................................................... 22 3 Dan B. Dobbs, Law of Remedies § 12.6(1)(6) (2d ed. 1993)..................................................... 113 6A Charles Alan Wright, et al., Federal Practice & Procedure § 1508 ...................................... 115
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E. Allan Farnsworth, Contracts § 12.12 ....................................................................................... 148 Restatement (Second) of Contracts § 204 ......................................................................... 27, 63, 127 Restatement (Second) of Contracts § 344 ..................................................................................... 111 Restatement (Second) of Contracts § 347 ............................................................. 112, 113, 138, 159 Restatement (Second) of Contracts § 350 ............................................................................. 112, 113 Restatement (Second) of Contracts § 351 ..................................................................................... 118
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IN THE UNITED STATES COURT OF FEDERAL CLAIMS Alabama Power Company, Georgia Power Company and Southern Nuclear Operating Co., Inc., Plaintiffs, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) )
No. 98-614C (Senior Judge Merow)
PLAINTIFFS' POST-TRIAL BRIEF Plaintiffs Alabama Power Company ("APC"), Georgia Power Company ("GPC"), and Southern Nuclear Operating Company, Inc., ("SNC")1 (collectively, "Southern")2 submit this Post-Trial Brief. This Post-Trial Brief addresses the findings of fact and conclusions of law necessary to calculate the amount of damages for which the Government is liable because of its breach of the four contracts (the "Contracts") that required it to remove, starting no later than January 31, 1998, the spent nuclear fuel ("SNF") generated by all contract holders, which includes Southern's three nuclear plants: Plant Hatch, Plant Farley, and Plant Vogtle.
INTRODUCTION On July 29, 1998, Southern filed a Complaint seeking damages for, among other things, partial breach of three Contracts.
1
On October 4, 2002, Southern filed its First Amended
SNC, while not a party to the Contracts, administers those Contracts on behalf of APC and GPC as their agent. (Trial Tr. vol. 1, 120, 123, 125-26, Oct. 17, 2005) (Long Test.) [Hereinafter "Tr."] 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.)
2
Prior to the incorporation of SNC in 1990, SNC's functions were performed by Southern Company Services, Inc. ("SCS"). (Tr. 119) (Long Test.) References to "Southern" include SCS for that period.
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Complaint for the same continuing partial breach clarifying that certain SNF had been covered by a fourth Contract. On September 23, 2005, Southern filed an Amended and Supplemental
Complaint that updated Southern's damages on the same partial breach of the Contracts by the Department of Energy ("DOE"). On April 7, 2004, this Court granted Southern's motion for summary judgment on the issue of DOE's liability for partial breach of the Contracts. Specifically, this Court noted, "[t]here is no dispute concerning the fact that the United States, operating through the DOE, failed to meet the contractual requirement to begin disposition of the nuclear waste covered by the Standard Contracts by no later than January 31, 1998." (Order of April 7, 2004, Dkt. 234, at 5.) On April 5, 2005, this Court set the damages issues for trial beginning on October 17, 2005. (Order of April 5, 2005, Dkt. 276, at 2.) On September 9, 2005, the Federal Circuit held in Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005), that a nuclear utility could not presently sue for damages arising from the Government's future breaches of the standard contract for the removal of SNF (the "Standard Contract"). Accordingly, on September 16, 2005, this Court limited, pursuant to Southern's request, the presentation of evidence for damages incurred through December 31, 2004, allowing Southern to bring future actions for partial breaches taking place after that date. (Order of Sept. 16, 2005, Dkt. 304, at 2.) The parties tried the damages case before this Court from October 17 to 21, October 24 to 27, 2005, and January 30 to 31, 2006. Southern presented evidence that the Nuclear Waste Policy Act of 1982 ("NWPA") and the Contracts required DOE to accept SNF at a rate sufficient to eliminate the need for storage capacity expansions at its plants after 1998 and to reduce the inventory of SNF existing as of 1998 so that the SNF inventories would be eliminated by the time
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Southern completed the decommissioning of its facilities. Southern presented evidence that the 3000 metric ton uranium ("MTU") per year steady-state acceptance rate published in numerous DOE planning documents since the execution of the Contracts satisfies those objectives, and that it is a reasonable and economically efficient acceptance rate for the DOE spent nuclear fuel program. Southern also presented evidence that it has suffered over $101,900,000 (see infra note 50) in damages, with costs of capital, through December 31, 2004, ($77,202,000 in nominal damages) as a result of the Government's partial breach. The Government presented evidence in an effort to support a two-part position that Southern's damages should be reduced. First, the Government argued that Southern's damages should be limited to $16,707,846 (Tr. 2349) (Johnson Test.), based on the application of an alternate SNF acceptance rate of 900 MTUs per year set forth in certain DOE planning documents in the early 1990s a rate that was never legally authorized and was abandoned as a planning basis for the program by 1995. Second, the Government argues that if the 3000 MTU rate is applied, only $38,574,066 (id. at 2348) in nominal damages should be recovered by Southern, based on a variety of arguments that Southern's managers, with years of nuclear experience, either expended funds unreasonably or that the funds expended were not the result of the Government's partial breach of contract.
BACKGROUND Prior to this case being filed, the United States Court of Appeals for the District of Columbia Circuit held in two separate opinions that the Government had an unconditional obligation under the Contracts to commence removal of SNF no later than January 31, 1998, and that the Government cannot rely on its failure to construct a repository in accordance with the NWPA as an excuse for its non-performance. See Northern States Power Co. v. United States 3
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Dep't of Energy, 128 F.3d 754, 760 (D.C. Cir. 1997), cert. denied, 525 U.S. 1016 (1998); Indiana Michigan Power Co. v. Department of Energy, 88 F.3d 1272, 1276-77 (D.C. Cir. 1996). In the seven years between Southern's filing of this lawsuit and its culmination in a damages trial, the Court of Appeals for the Federal Circuit and the Judges of this Court have resolved many of the issues relevant to this case. Among the issues that have been resolved are the following: First, the United States Court of Appeals for the Federal Circuit held that the Court of Federal Claims has jurisdiction to consider suits for partial breach of contract brought by nuclear utilities that entered into contracts with the Government. Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1341-42 (Fed. Cir. 2000); Northern States Power Co. v. United States, 224 F.3d 1361, 1367 (Fed. Cir. 2000). In Maine Yankee, 225 F.3d at 1342, the Federal Circuit concluded as a matter of law that the Government's failure to begin acceptance of SNF by January 31, 1998, was a partial breach of contract that extended to all nuclear utilities: "The breach involved all the utilities that had signed the contract -- the entire nuclear electric industry." The Federal Circuit also held that the unavoidable delays clause of the contracts applied only to the types of delays that "routinely" arise after performance under the contract had begun and not to the delay of "a critical and central obligation of the contract" -- to begin acceptance of SNF by January 31, 1998. Id. at 1341. Second, in light of the Federal Circuit's rulings in Maine Yankee, 225 F.3d at 1342, and Northern States, 224 F.3d at 1367, this Court granted Southern's motion for summary judgment on the issue of the Government's contract liability. Apr. 7, 2004 Order, Docket No. 234, at 5. This Court found that the Government partially breached the Standard Contracts it had entered
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into with Southern, which obligated the Government to begin and continue disposal of SNF by no later than January 31, 1998. Id. Third, Judge Hewitt, Judge Hodges, and Your Honor have denied the Government's partial summary judgment motions that the 900 Metric Tons of Uranium ("MTU") per year acceptance rate contained in the 1991, 1992, and 1995 Annual Capacity Reports ("ACRs") is the reasonable and appropriate acceptance rate on which to base the utilities' damages. See Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652, 666-67 (2003) (Hewitt, J.); Indiana Michigan Power Co. v. United States, 57 Fed. Cl. 88, 97-100 (2003) (Hodges, J.); Yankee Atomic Electric Co. v. United States, No. 98-126C (Fed. Cl. June 26, 2003) [hereinafter "Yankee Atomic"] (order adopting Judge Hewitt's opinion in Commonwealth Edison to extent applicable). The
Government's 900 MTU per year acceptance rate is based on limits that the 1987 Amendments to the NWPA imposed on a Monitored Retrievable Storage ("MRS") facility. See Indiana Michigan, 57 Fed. Cl. at 100; Commonwealth Edison, 56 Fed. Cl. at 666. 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 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.
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Fourth, Judge Hewitt in Commonwealth Edison rejected another Government argument, that the Delivery Commitment Schedule ("DCS") process described in the Standard Contract, which the DOE contracting officer acknowledged was suspended in 1997 in a purported effort to limit the Government's damages, should define the amount of SNF that the Government was required to accept in the non-breach scenario. Judge Hewitt properly 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, "In 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). Other Judges on this Court 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. See Systems Fuels, Inc. v. United States, 66 Fed. Cl. 722, 732 (2005) (Braden, J.) (finding that "[t]here is absolutely no evidence in the record that the ACR and DCSs were binding on either party" and that "as a matter of law, the ACR and DCSs did not amend the Standard Contract"); Sacramento Mun. Util. Dist. v. United States, 63 Fed. Cl. 495, 505 (2005) (finding 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 consideration was offered by the Government to support an independent contract modifying the DOE Standard Contract.") (Braden, J.); Indiana Michigan, 57 Fed Cl. at 97-98 (Hodges, J.) ("The 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)).
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Fifth, because an acceptance rate term is missing from the Standard Contracts, it has been established that the Court must supply a reasonable acceptance rate term. See Commonwealth Edison, 56 Fed. Cl. at 662, 667. In its April 7, 2004 Order, this Court adopted Judge Hewitt's reasoning in Commonwealth Edison, but left final resolution of the acceptance rate issue for trial. April 7, 2004 Order, at 6. The April 7 Order granted Southern's motion for partial summary judgment on liability, leaving for trial the proof of Southern's damages.3 Id. at 4-5. Sixth, on January 31, 2006, Judge Lettow issued his opinion in Tennessee Valley Authority v. United States, 69 Fed. Cl. 515 (2006) (hereinafter "TVA"), holding that TVA, which had incurred past damages in storing SNF, could recover those damages. Those damages included the cost of dry storage facilities, internal labor and overhead, and the cost of capital.
STATEMENT OF THE CASE Southern has incurred substantial costs related to the design, engineering, licensing, construction, installation, operation, and maintenance of additional SNF storage because of the Government's partial breach of the Contracts. At Plant Hatch, Southern has constructed a
licensed Independent Fuel Storage Installation ("ISFSI"), which currently consists of four concrete pads, each with a capacity to hold twelve dry SNF storage casks. By December 31, 2004, Southern had purchased twenty-two dry casks, loaded SNF into these casks, and placed the loaded casks onto Plant Hatch's ISFSI. Construction of an ISFSI at Plant Farley began in 2000. As of December 31, 2004, Southern had purchased three dry storage casks for Plant Farley.
3
This Court dismissed the takings claim as duplicative of the contract claim, but denied the Government's motion to dismiss the illegal exaction claim. April 7, 2004 Order at 4-5, 7-8. This Court also denied the Government's motion to dismiss any claim for damages arising from Greater than Class C radioactive waste. Id. at 5-6.
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Because of the Government's breach, Plant Vogtle procured and installed additional SNF pool racks during the period of 1998 to 2000. The arguments in this damages case fall into two categories: (1) the annual rate at which DOE was required to remove SNF from Southern's plant sites; and (2) the reasonableness of Southern's nuclear engineers and managers' actions taken to store SNF on-site given DOE's partial breach.
The 3000 MTU Acceptance Rate Determining the acceptance rate required by the Contracts is a critical element in calculating Southern's damages, because the higher the required acceptance rate, the more usable space that Southern would have had in its reactor pools, and the higher the damages Southern is due for storing up to that amount of SNF. Southern has demonstrated that DOE's contractual obligation was to remove SNF at the rate of 3000 MTUs per year after a 5-year ramp-up period. The Government argues that the rate should be set at 900 MTUs. Southern presented evidence that demonstrated that the 3000 MTU rate: (i) would accomplish the parties' intent to avoid additional at-reactor storage after January 31, 1998, and remove the backlog of SNF at a reasonable pace; (ii) is reflected in published DOE documents from the 1983 Draft Mission Plan to the 2004 Annual Capacity Report and Acceptance Priority Ranking; (iii) was used to compute the adequacy of the $850 million that Southern has paid for DOE to remove its SNF; and (iv) would have allowed for timely decommissioning of the plants. The 900 MTU rate was based on a Monitored Retrievable Storage ("MRS") facility that was never authorized by law and would not have prevented additional on-site storage at most utilities after January 31, 1998.
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The Government's Challenges to Southern's Damages Using the 3000 MTU annual acceptance rate published by DOE, the damages incurred at Plant Hatch, Plant Farley, and Plant Vogtle total $101,900,000 through December 31, 2004. At this acceptance rate, the Government does not dispute $38,574,066 in damages.4 The difference between the damages numbers derives from the Government's challenges to several of the damages items. Principally, the Government challenges the reasonableness of the decisions made by Southern's skilled and experienced team of nuclear engineers and nuclear managers in keeping sufficient space in Southern's reactor pools to allow the plants to continue to operate safely and efficiently. Because the Government withdrew its only expert witness with nuclear engineering and management experience, it cannot bear its burden of proving that the Southern's nuclear engineers and managers acted unreasonably in mitigating damages. The Operating Reserve Southern is Using and Its Loading Schedule, including the Number of Casks and Associated Infrastructure, is Reasonable The Government challenges the size of the operating reserve usable space Southern maintained in the Plant Hatch pool that was shared by two reactors. The larger the reserved space in the pool, the more SNF that must be removed and stored to create and maintain that reserve and the more damages that will be incurred. Based on the additional operational risk forced on Southern by the Government's partial breach, Southern's nuclear engineers and plant managers testified that an operating reserve of 2 full core reserve ("FCR") the amount of pool space needed to store a discharge of all the fuel from both reactors that share the pool was reasonable. The Government argues that Southern should have used an operating reserve of only 1 FCR for the shared pool. Without a nuclear
At an acceptance rate of 900 MTUs per year, which as discussed supra has been previously rejected, the Government calculates Southern's damages to be $16,707,846. (Tr. 2348) (Johnson Test.)
4
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operations expert, the Government's evidence consists of some of Southern's internal documents that tracked when the reactor pools would run out of a 1 FCR, as opposed to a 2 FCR operating reserve, and testimony by its economist, Dr. Neuberger, as to his interpretation of Southern's accountant's spreadsheet for tracking fuel discharges. The spreadsheet used the 1 FCR to show the effect of cask loading on pool capacity. Southern presented the testimony of Messers. Lou Long, David Bland, and Jim Wade, who have decades of nuclear engineering and management experience, that demonstrated that while a 1 FCR operating reserve is the minimum required for safe operation over the short term, their judgment is that a target of 2 FCR is the best operating reserve for efficient long-term plant operation. Two FCRs provide a margin of space in the pool in case both reactors have to be shut down for either maintenance or an NRC-ordered shut down, a storage cask or canister is defective or arrives late, or labor or equipment problems delay taking SNF out of the pool and placing it on the ISFSI. Further, Southern showed that while some documents tracked when Plant Hatch's pool would breach the 1 FCR limit, others tracked when Plant Hatch would breach both the 1 FCR and the 2 FCR target. Southern's accounting and damages expert, Ken Metcalfe, explained that his spreadsheet does not establish a 1 FCR policy for Plant Hatch, but merely tracks when Southern has actually loaded SNF into casks. Southern showed that had DOE performed, DOE would have removed substantially more SNF than Southern's actual loading schedule which the Government is challenging as unreasonable. Southern's Decision to Forgo Installation of the Second Bathtub Rack was Reasonable. The Government challenges Southern's loading of SNF at an ISFSI in 2000 because Southern could have installed a second bathtub rack in the bathtub area of the Plant Hatch pool and delayed loading casks from 2000 to 2001. Southern presented the testimony of its nuclear engineers and
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managers, Lou Long, Jim Wade, and David Bland, that once it was clear that Southern would have to build an ISFSI, the better and safer operational decision was to not install the second rack, have it contaminated with radiation, and expose its workers to more radiation in order to gain only a temporary delay in loading SNF into dry storage. Because the bathtub area of the pool was needed for the operation of the pool, Southern would have taken the second bathtub rack out of the pool the next year to reclaim the usable space (to store tools, contaminated equipment, etc). Had DOE performed, however, Mr. Long explained that Southern would have installed the second bathtub rack for $419,800 because that would have avoided building the ISFSI for millions of dollars as DOE would have removed SNF fast enough to reduce the SNF in the pool and provide an operating reserve of more than 1 FCR and, eventually, to more than 2 FCRs. The Government countered this evidence only with the testimony of its economist, Dr. Neuberger, that the breach and non-breach case should, in the abstract, keep all variables the same. He conceded, however, that he did not have the expertise to evaluate the reasonableness of how Southern's nuclear engineers and managers would react to different facts and circumstances in operating Plant Hatch. Southern's Purchase of Three HI-STAR Casks was Reasonable The Government challenges Southern's purchase of three HI-STAR casks for use in storing SNF at Plant Hatch in 2000 and related equipment and labor costs. Based on Dr. Neuberger's manipulations of
Southern's actual cask loading schedule, the Government contends that Southern could have waited until just before it lost its 1 FCR total operating reserve at Plant Hatch in 2001 to remove SNF from the pool and by that time less expensive HI-STORM casks (which are licensed only for storage) would have been available. Contrary to the Government's argument, Mr. Long testified that while the HI-STAR casks were more expensive than the subsequently used HI-STORM
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casks, the HI-STARs had the additional function of transporting SNF off-site to a facility such as PFS and being reused. Further, Mr. Bland's testifimony establishes that the purchase of the HI-STARs was reasonable because at the time the purchase decision was made, Southern had not yet received approval from the Nuclear Regulatory Commission ("NRC") to add racks to the Plant Hatch pool that were necessary to extend to extend Plant Hatch's 1 FCR minimum operating reserve from 2000 to 2001, as well as because it was the first SNF loading campaign that Southern had ever attempted. Any delay because of what at the time was a very uncertain licensing process, a defective or late arriving cask or canister, labor shortages, or equipment problems could have resulted in a reduction of the operating reserve below 1 FCR. Moreover, when the decision to begin loading was made in 1999, the HI-STAR casks had at least begun the licensing process before the NRC, whereas the HI-STORM casks had not. Southern's Internal Labor, Overhead, and Engineering Supervision Damages are Incremental The Government challenges the costs of Southern's own labor for SNF loading on the grounds that Southern would have incurred that payroll cost regardless of DOE's partial breach. Southern presented the testimony of Mr. Lou Long who explained that had Southern's workers not been used to load SNF, they would have been working on other backlogged maintenance projects at the plants. Southern was deprived of the value of this work by DOE's partial breach. Such mitigation is especially appropriate where the use of Southern's own workers to load SNF was less expensive than using outside contractors. The Government also challenges Southern's allocation of engineering supervision and overhead to the SNF project as non-incremental. Southern's accounting and damages expert, Mr. Ken Metcalfe, testified that Southern allocated labor and overhead to the SNF project in a manner consistent with generally accepted accounting principles, public service commission requirements,
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and the manner in which Southern allocates such costs to all other projects and that recovery of such costs by Southern in this matter was appropriate and consistent with his experience of over 20 years on government contract matters. The courts have allowed the Government and private plaintiffs to recover the costs of their own labor, overhead, and supervision incurred to mitigate damages. Southern's Payments to the Private Fuel Storage Program were Reasonable The Government challenges as unreasonable, Southern's payments beginning in the mid-1990s and ending in 2004 to Private Fuel Storage, LLC ("PFS"), an entity that recently has been licensed to store SNF in Utah. The Government asserts that the PFS program was speculative, Southern viewed it as an "insurance policy," and there was a profit potential. Unlike in Indiana Michigan, 60 Fed. Cl. 639, 58-59 (2004), however, the Government presented no expert testimony on this issue in this case, Southern presented DOE's own statements that PFS was reasonable, and, subsequent to the Indiana Michigan decision, the NRC approved PFS's application for a license. In addition, Messers. Long and Cocherell testified that due to the certainty that Southern would have to store its own SNF and the uncertainty of whether a State would bar or prohibitively tax SNF a decade in the future, Southern determined that it was reasonable in the mid-1990s to explore an off-site private ISFSI. Southern never earned any profit and stopped making payments in 2004 after it completed its ISFSIs in Georgia and Alabama and no adverse political action was taken. Southern's Cost of Capital is a Reasonable Cost Actually Incurred that is Not Pre-Judgment Interest The Government asserts that Southern's cost of capital on past damages constitutes pre-judgment interest on a claim and therefore is not recoverable as a matter of law. Southern presented the testimony of its accounting, finance, and economic damages expert Ken
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Metcalfe, that the cost of capital, however, represents a real economic cost, was computed in a manner consistent with industry accounting rules, and varies from year to year based on the cost of equity and debt capital in the markets and the capital structure of the relevant entities. The cost of capital is a separate component of damages and pre-judgment interest, if applicable, would apply on top of such cost. This Court in TVA, 69 Fed. Cl. at 540-42, allowed the nuclear utility to recover the cost of capital relating to construction period interest, incurred in building SNF storage facilities.
STATEMENT OF FACTS I. Proposed Findings of Fact. As demonstrated below, both parties submitted voluminous evidence and testimony regarding the formation of the Contracts, the performance due Southern from the Government under those Contracts, and the consequences of the Government's failure to perform. Southern proposes the following findings of fact are supported by a preponderance of the evidence and should govern the assessment of its damages: 1. Southern entered into four separate Contracts with the United States pursuant to the
NWPA for the removal of SNF from its three nuclear power plants. Southern has paid all fees due the Government under those Contracts. 2. The Contracts required DOE to commence acceptance of SNF from utilities on
January 31, 1998, on an oldest fuel first basis and to do so as expeditiously as practicable, consistent with the twin goals of the NWPA of avoiding additions of on-site storage capacity after that date and to reduce the backlog of SNF and thus avoid delays in the decommissioning of nuclear power plants at the end of their useful life.
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3. rate. 4.
The Contract does not set out an explicit utility or industry aggregate acceptance
DOE has adopted an industry-wide acceptance rate of 3000 MTUs per year as a
steady-state acceptance rate under the Contract, after a five year ramp up period in which the DOE would remove 400, 600, 1200 and 2000 MTUs of SNF in each of the first four years. The 3000 MTU rate is consistent with the performance objectives intended by the parties at the time of contracting. 5. The 3000 MTU rate, as reflected most recently in DOE's 2004 Annual Capacity
Report and Acceptance Priority Ranking, is a reasonable rate based on the expectations of the parties to the Contract. 6. If DOE had commenced performance utilizing the 3000 MTU acceptance rate,
DOE would have removed a sufficient amount of SNF from Southern's plants such that none of Southern's nuclear plants would have been required to expand their on-site SNF storage capacity after 1998. 7. As a proximate result of the Government's partial breach of contract, Southern was
required to construct and commence operation of dry cask storage facilities at two of its plants and to rerack one of the SNF storage pools at another of its plants in order to maintain the operational reliability of the plants, including a reasonable operating reserve in the SNF pools. There is no credible evidence that Southern acted unreasonably in expanding the capacity of its SNF storage capability or that its actions were caused by anything other than the Government's partial breach of contract. 8. Southern employees and supervisors were diverted from other productive work to
work on the construction and operation of dry cask storage facilities and the re-rack, and as a
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result, the portion of their cost to Southern that is attributable to that effort was the proximate result of the Government's breach. 9. Southern invested in PFS in order to pursue the development of a potential
alternative SNF storage facility as a contingency in case its on-site storage facilities could not be completed or operated for the life of the nuclear plants. It was reasonable for Southern to pursue this alternative option in light of the Government's failure to provide any credible guidance about when it would perform the Contracts, and in light of local opposition in some areas of the country that had complicated the on-site expansion of storage capacity. 10. The nominal damages to Southern of expansions of on-site storage capacity due to
the Government's failure to perform, through December 31, 2004, are: APC GPC Total 11. $17,275,000 59,927,000 $77,202,000
In addition to its nominal damages, Southern suffered actual economic damages in
the form of the cost of its capital to finance the SNF storage expansions. Adding the cost of capital to its damages, Southern's damages as of December 31, 2004 total $101,900,000.5 At trial, Southern presented testimony from its current and former nuclear executives and managers, with a combined 155 years of experience in the successful management of nuclear power plants. Southern's fact witnesses were: · Louis Long is currently the Vice President for Technical Support of SNC, with responsibility over the Contracts and for the development of SNF storage at Plants
5
Prior to this Court's order stating that damages should be computed through December 31, 2004, Southern's damages expert, Mr. Metcalfe, had computed Southern's total damages through December 31, 2004, including cost of capital damages through August 31, 2005, as $105,628,000. At trial, Mr. Metcalfe noted removing the cost of capital for the eight months from January 1 through August 31, 2005, would result in total damages as of December 31, 2004, of $101,900,000. (Tr. 1539-40) (Metcalfe Test.)
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Hatch, Farley, and Vogtle. Mr. Long has 35 years of experience with nuclear engineering and nuclear plant management. Mr. Long received his bachelor's degree in physics and his master's degree in nuclear engineering from Georgia Tech in 1966 and 1968, respectively. After assessing Soviet and Chinese nuclear weapons for the United States Army in the 1960s, Mr. Long began work in 1970 as a licensing engineer for Plant Hatch. Since then, he has managed hundreds of engineers responsible for the modification and operation of Southern's three nuclear plants, including the construction of SNF storage facilities. (Tr. 114-22.) (Long Test.) · Ronald Cocherell is the Nuclear Fuel Services Manager for SNC. He has over 25 years of nuclear-related engineering and management experience. Mr. Cocherell received a bachelor's and a master's degree in nuclear engineering from the University of Florida. Since joining the Southern Company in 1978, his duties have included planning nuclear fuel cycles, long range fuel planning for SNF storage, monitoring pool reserve capacities, and administering the Contracts. (Tr. 240-51) (Cocherell Test.) Bruce Hunt is currently the Nuclear Fuels Manager of SNC. He has 33 years of experience in operating and managing nuclear fuel. Mr. Hunt received his bachelor's degree in engineering physics from Cornell University and a master's degree in nuclear engineering from the Georgia Institute of Technology. Since joining Southern in 1972, Mr. Hunt has managed several areas relating to nuclear fuel, including, but not limited to, reactor core design, nuclear fuel procurement, nuclear fuel cycle planning, nuclear fuel performance, nuclear fuel surveillance and SNF Contract administration. (Tr. 439-43) (Hunt Test.) David Bland is the President of Trivis, Incorporated and previously worked for Southern in a variety of positions, including Senior Reactor Operator and manager of the Plant Hatch SNF dry storage project. He has over 20 years of nuclearrelated engineering and management experience, and has managed and participated in the construction of Independent Spent Fuel Storage Installations ("ISFSIs"), including the Plant Hatch ISFSI and several SNF dry storage loading campaigns. Mr. Bland received a nuclear engineering degree from the University of Florida and a master's in business administration from Samford University. Mr. Bland also received his senior reactor operator license, which authorized him to run a nuclear power plant. (Tr. 1141-55) (Bland Test.) Jim Wade is a Mechanical/Civil Supervisor for Southern Nuclear. He has 22 years of nuclear-related engineering and management experience, and has managed several SNF dry storage loading campaigns at Plant Hatch. Mr. Wade received a bachelor's degree in mechanical engineering from the Georgia Institute of Technology. His duties have included implementing and operating Plant Hatch's dry storage system, selecting dry storage technologies, preparation of cask loading schedules, and monitoring pool reserve capacities. (Tr. 884-90) (Wade Test.)
·
·
·
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·
Thomas McCallum is a Project Manager for Southern Nuclear and has managed the construction of Plant Farley's ISFSI and related dry storage procurement and planning activities. He has over 20 years of nuclear-related engineering and management experience. Mr. McCallum received a bachelor's and a master's degree in mechanical engineering from Mississippi State University. Mr. McCallum also served as a senior reactor operator. Since joining Southern Company in 1983, his duties have included implementing and operating Plant Farley's dry storage system, selecting dry storage technologies, preparation of cask loading schedules, and monitoring pool reserve capacities. (Tr. 1258-71) (McCallum Test.)
Southern also presented the testimony of two expert witnesses: · Eileen Supko is a Senior Consultant with Energy Resources International, Inc., a firm that consults on nuclear fuel cycle issues, including spent fuel management. She has extensive experience with the NWPA and the Standard Contracts at issue in this case. This Court accepted Ms. Supko as an expert in nuclear engineering, DOE's waste management program, storage and disposal of SNF, modeling of SNF acceptance rate scenarios and allocation rates, and allocations of SNF acceptance rights. (Tr. 878-81) (Supko Test.) Kenneth Metcalfe is the President of The Kenrich Group LLC, a business and litigation consulting firm. He is a Certified Public Accountant and a Certified Valuation Analyst, and he has computed accounting, financial, and economic damages in matters involving the construction and operation of over 40 nuclear plants during the past 20 years. (Tr. 1406) (Metcalfe Test.) This Court accepted Mr. Metcalfe as an expert in computing accounting, financial, and economic damages relating to nuclear plants and government contracts. (Id. at 1449.)
·
At trial, Southern's fact witnesses testified based on their decades of successful experience in operating Southern's nuclear plants as to the operational issues created by the Government's breach of the Contracts and as to what actions would have been reasonable for Southern to take in managing Southern's SNF had the Government met its obligations under the Contracts (i.e., the non-breach case) and what steps were reasonable for Southern to take when the Government breached its obligations under the Contracts (i.e., the breach case). The Government presented testimony from three DOE employees whose only relevant experience was the administration of DOE's High Level Waste Program that has never accepted any SNF, and an economist and a certified public accountant, neither of whom had any relevant
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nuclear experience.
No Government witness with any nuclear plant operations experience
provided any testimony as to what actions would have been reasonable had the Government performed under the Contracts or what actions were reasonable or what actions were appropriate from an operational or technical perspective in light of the Government's partial breach of Contract. (Tr. 2034; 2192-2193.) (Neuberger Test.) No Government witness challenged Ms. Supko's conclusions regarding a reasonable acceptance rate or presented any analysis supporting an alternative rate.
II.
Southern's Three Nuclear Plants. SNC operates three nuclear plants Plant Farley in Alabama and Plants Hatch and Vogtle
in Georgia. (Tr. 126) (Long Test.); PX 750, Appx. A; PX 751, Appx. A; PX 752, Appx. A.) While APC owns Plant Farley and GPC owns a majority of Plants Hatch and Vogtle,6 SNC operates the three nuclear plants and deals with government entities, including DOE, as agent for APC and GPC, on all issues regarding the Contracts. (Tr. 126-27) (Long Test.)7 Each of Southern's three plants has two nuclear reactors. (Tr. 134) (Long Test.) Hatch Unit 1 began operation in 1974, and Hatch Unit 2 began operation in 1978. (PX 751, Appx. A.) Farley Units 1 and 2 began operations in 1977 and 1981, respectively. (PX 750, Appx. A.)
6
Alabama Power owns 100% of Plant Farley. Georgia Power owns 50.1% of Plant Hatch and 45.7% of Plant Vogtle. Plant Hatch is also owned by Oglethorpe Power Company (30%), Municipal Electric Authority of Georgia (17.7%) and the City of Dalton (2.2%). Plant Vogtle is also owned by Oglethorpe Power Corporation (30%), Municipal Electric Authority of Georgia (22.7%), and the City of Dalton (1.6%). (PX 6 (Kenrich Report) at 1.) GPC is authorized to operate Plants Hatch and Vogtle on behalf of its co-owners, including execution and administration of the Contracts, and GPC is a signatory to the Contracts. (PX 751 (Hatch Contracts); PX 752 (Vogtle Contract.)) GPC has delegated its operational and contractual responsibilities on behalf of its co-owners to SNC. (Tr. 126-27) (Long Test.)
7
SNC, APC, and GPC are subsidiaries of the Southern Company. (Tr. 126) (Long Test.) The Southern Company is a publicly traded holding company. (Id.)
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Vogtle Units 1 and 2 began operations in 1987 and 1989, respectively. (PX 651 at 8; Tr. 133 (Long Test.)) Each of the three plants use nuclear reactors to produce heat that creates steam that turns turbines that generate electricity sold to APC's and GPC's customers. (Tr. 142) (Long Test.) Southern's Nuclear plants are the largest generators on its system. Electricity generated by Southern's three nuclear plants is substantially less expensive than electricity generated by oil, coal, or natural gas fired generators and for that reason are employed as "baseload" generation, meaning they are operated 24 hours per day and 7 days per week when they are available. (Id. 136.) Without the operation of any one of its three nuclear plants, Southern would have to generate electricity using higher cost plants or purchase electricity at a substantially higher cost in order to supply APC's and GPC's customers. (Id. at 138-39.) As a result, it is critical that Southern operate and maintain the plants so as to minimize forced outages (i.e., outages due to factors other than re-fueling). The fuel used in Southern's six reactors is in the form of enriched uranium pellets that are stacked into long metal tubes called "fuel rods." (Tr. 1427) (Metcalfe Test.) The fuel rods are placed into an array called an "assembly." (Tr. 142 (Long Test.); PX 651 (Kenrich Report) at 9.) The assembly is t