Free Memorandum of Contentions of Fact and Law - District Court of Federal Claims - federal

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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. ) ) ) ) ) ) ) ) ) ) )

No. 98-614C (Senior Judge Merow)

DEFENDANT'S MEMORANDUM OF CONTENTIONS OF FACT AND LAW Pursuant to this Court's order dated April 5, 2005, defendant, the United States, respectfully submits the following memorandum of contentions of fact and law. SUMMARY OF ARGUMENT This case involves a damages claim by plaintiffs, Alabama Power Company ("Alabama Power"), Georgia Power Company ("Georgia Power") and Southern Nuclear Operating Company ("Southern Nuclear") (collectively, the "plaintiffs"), for $69.7 million in past costs that they have allegedly incurred to date for, among other things, the design, licensing, and fabrication of dry storage facilities at two of their nuclear facilities and the licensing and installation of additional racks in the wet pool at plant Vogtle to store plaintiffs' spent nuclear fuel ("SNF"). Plaintiffs also seek damages of $8.5 million for amounts paid for the licensing of the yet-to-be constructed Private Fuel Storage ("PFS") facility in Utah. Finally, plaintiffs seek $28.9 million in pre-judgment interest ­ an amount totaling nearly 40 percent of plaintiffs' asserted actual costs. Plaintiffs contend that the Government is liable for these costs because their need for additional storage was wholly caused by the Government's failure to begin

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accepting SNF from commercial nuclear reactors on January 31, 1998 pursuant to the Standard Contracts between the Department of Energy ("DOE") and Alabama Power and Georgia Power.1 Plaintiffs' damages claims are grossly in excess of the amounts actually incurred as a result of DOE's breach of the Standard Contract. At trial, the Government will demonstrate that plaintiffs would have required significant additional storage at two of their facilities regardless of the Government's performance under the Standard Contract and that plaintiffs' damages claim fails to properly account for these significant additional costs. First, plaintiffs' damages theory is premised upon an SNF acceptance rate to which DOE expressly refused to obligate itself under the Standard Contract. As this Court is aware, the Standard Contract does not contain an acceptance rate, but, instead, contains a mechanism for the development of an acceptance rate as DOE's acceptance capacity becomes clear. Plaintiffs contend that the Standard Contract obligated DOE to accept SNF at a rate that was tied to the industry-wide generation rate and eliminated the backlog of SNF at commercial nuclear reactors. Pl. Br. at 24. However, during contract formation, DOE rejected language requested by the plaintiffs and others that would have tied the acceptance rate to the annual generation rate and to a reduction of the backlog. In support of their litigation position, plaintiffs rely upon language

By motion dated December 21, 2001, the Government sought to dismiss Southern Nuclear Operating Company as a plaintiff in this case because Southern Nuclear does not have a contract with the Government for the acceptance of spent nuclear fuel and therefore is not in privity with the Government. The Court, by order dated April 7, 2004, denied the Government's motion without prejudice, indicating that the Government could reassert the matter prior to the entry of any judgment in the case. In their pretrial brief, plaintiffs incorrectly describe Southern Nuclear as a party to the Standard Contracts. See Plaintiffs' Memorandum of Contentions of Fact and Law ("Pl. Br.") at 1, 18. Our reference to "plaintiffs" throughout this brief should not be construed as a waiver of our contentions regarding Southern Nuclear's status in this litigation or its entitlement to any damages arising from DOE's breach. 2

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contained in a contract recital that simply states that DOE has the responsibility to remove SNF "as expeditiously as practicable" once a repository is open, language that does not confer an enforceable obligation upon DOE as a matter of fact or law. Plaintiffs also rely upon program documents generated after the period of contract formation that outline DOE's plans and goals, but that do not establish contract obligations regarding the acceptance rate. At trial we will show that rather than plaintiffs' contractually rejected acceptance obligation, the proper rate of acceptance for the Court to apply is that which was developed pursuant to the terms of the Standard Contract and in accordance with the constraints upon DOE's acceptance of SNF imposed by Congress. This rate was first set forth in the 1991 Annual Capacity Report ("ACR"), as required by the Standard Contract.2 Based upon the allocations available to the plaintiffs pursuant to this rate and the oldest-fuel-first acceptance queue established pursuant to the Standard Contract, plaintiffs would have required dry cask storage at plant Hatch and would have been obligated to fully rack the Unit 1 spent fuel pool at plant Vogtle even if DOE had met the terms of the Standard Contract and begun accepting SNF on January 31, 1998. Applying the proper rate of acceptance to the "but for" world, among other adjustments, plaintiffs' claims for past costs properly are reduced to $14.4 million for the breaches to date.

The 1991 ACR projects DOE's acceptance capacity for the first 10 years of performance (1998-2007). For the purposes of the upcoming trial, the Court need not reach any conclusions about performance after 2007 because, in accordance with the recent decision of the United States Court of Appeals for the Federal Circuit in Indiana Michigan Power Co. v. United States, __ F.3d __, 2005 WL 2173563 (Fed. Cir. Sept. 9, 2005), the rate of acceptance at which DOE was obligated to perform in 2008 and beyond may be determined in the future proceedings, when, and if, plaintiffs bring future claims for damages. 3

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Second, plaintiffs seek reimbursement of the $8.5 million that they have paid for the licensing of the Private Fuel Storage ("PFS") facility in Utah. Pl. Br. at 60-61. However, plaintiffs cannot recover these costs as damages because they were incurred for a highly speculative venture that had little chance ­ applying foresight ­ of providing plaintiffs with an appropriate or, even, available alternative option for the storage of SNF. Plaintiffs invested in PFS only as an "insurance policy" to the construction of on-site dry storage facilities and plaintiffs now do not plan to utilize any PFS facility. As a result, plaintiffs' contributions to PFS merely increased the damages allegedly owing to plaintiffs and did not constitute reasonable mitigation.3 Significantly, the Federal Circuit in Indiana Michigan Power Co., 2005 WL 2173563, affirmed the trial court's factual findings that found that amounts paid to PFS by Indiana Michigan Power Company ("Indiana Michigan") did not constitute reasonable mitigation. The same facts that supported that conclusion in Indiana Michigan support a similar conclusion here. Third, the Government will establish that there are further, significant reductions that must be made to plaintiffs' claim to eliminate costs that are not attributable to DOE's breach. Specifically, the Government's auditors have eliminated costs that would have been incurred even if DOE had commenced acceptance of SNF in 1998. The Government also will show that other alleged costs, such as prejudgment interest charges and charges associated with internal company labor and overhead are not properly recovered here either as a matter of law or of fact. Further, the Government has eliminated additional costs based upon plaintiffs' failure to

Plaintiffs also are able to receive a profit from their investment in PFS to the extent the facility ever is constructed and operated. 4

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properly mitigate damages. These costs include the $8.7 million associated with the premature loading of dual purpose casks in 2000 at plant Hatch that improperly increased the damages allegedly resulting from DOE's delay and that could have been avoided altogether. Finally, the Government's auditors have eliminated costs contained in plaintiffs' claims because plaintiffs have not provided adequate support for these costs. STATEMENT OF FACTS I. THE ORIGINAL PROVISIONS OF THE NUCLEAR WASTE POLICY ACT

On January 7, 1983, the Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. 97-425, 96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270 (1982)), was enacted. In its statement of the statutory purposes underlying the NWPA, Congress identified the following four objectives: developing repositories to ensure the protection of the public and the environment from the hazards posed by SNF and high level radioactive waste ("HLW"); establishing Federal responsibility and policy for the disposal of SNF and HLW; defining the relationship between the Federal Government and state governments regarding SNF and HLW disposal; and establishing . . . a Nuclear Waste Fund, composed of payments made by the generators and owners of such waste and spent fuel, that will ensure that the costs of carrying out activities relating to the disposal of such waste and spent fuel will be borne by the persons responsible for generating such waste and spent fuel. Id. § 10131(b). The NWPA sets forth a specific process by which the Secretary of Energy, the President of the United States, and the United States Congress would determine a site for a repository for the permanent deep geologic disposal of SNF. See 42 U.S.C. §§ 10132, 10134, 10135. In 5

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addition to this process for the siting of a repository, the Secretary was to "prepare a comprehensive report, to be known as the mission plan, which shall provide an informational basis sufficient to permit informed decisions to be made in carrying out the repository program and the research, development, and demonstration programs required under this chapter." 42 U.S.C. § 10221(a) (1982). The Secretary was to provide a draft mission plan to the states, affected Indian tribes, the NRC, and other Federal Government agencies within 15 months of the date of the NWPA's enactment. Id. § 10221(b)(1). The Secretary was to obtain those entities' comments, revise the draft mission plan in response to them, and, within 17 months of the NWPA's enactment, to provide the appropriate committees of Congress with the mission plan. Id. § 10221(b)(2)-(3). Congress also included in the NWPA provisions allowing the Secretary to study the possibility of creating Monitored Retrievable Storage ("MRS") facilities, with Congress finding that "long-term storage of high-level radioactive waste or spent nuclear fuel in monitored retrievable storage facilities is an option for providing safe and reliable management of such waste or spent fuel." 42 U.S.C. § 10161(a)(1) (1982). By July 1, 1985, the Secretary was to "complete a detailed study of the need for and feasibility of, and shall submit to the Congress a proposal for, the construction of one or more monitored retrievable storage facilities for highlevel radioactive waste and spent nuclear fuel." Id. § 10161(b)(1). The proposal was to "include, for the first such facility, at least 3 alternative sites and at least 5 alternative combinations of such proposed sites and facility designs . . . ." Id. § 10161(b)(4). However, the NWPA provided that any MRS facility that Congress might authorize in response to the

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Secretary's proposal could "be constructed in any State in which there is located any site approved for site characterization under section 10132 of this title." Id. § 10161(g). In addition, the NWPA provided that the Secretary would enter into contracts with the owners and generators of SNF of domestic origin for "the acceptance of title, subsequent transportation, and disposal of such [SNF]." 42 U.S.C. § 10222(a)(1) (1982). The contracts had to "provide for payment to the Secretary of fees . . . sufficient to offset expenditures" described elsewhere in the statute. Id. II. THE DEPARTMENT OF ENERGY'S PROMULGATION OF THE "STANDARD CONTRACT FOR DISPOSAL OF SPENT NUCLEAR FUEL AND/OR HIGH-LEVEL RADIOACTIVE WASTE" THROUGH NOTICE AND COMMENT RULEMAKING IN THE FEDERAL REGISTER A. The Proposed Rule

On February 4, 1983, the Department of Energy ("DOE"), in furtherance of its obligations pursuant to the NWPA, 42 U.S.C. § 10222, published a notice of proposed rulemaking in the Federal Register, proposing terms for the "Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste" ("Standard Contract") mandated by the NWPA, 42 U.S.C. § 10222. See 48 Fed. Reg. 5458 (Feb. 4, 1983). The proposed Standard Contract provided a mechanism for determining both the order in which, and the rate at which, the various contract holders' SNF would be accepted. As for the order of SNF acceptance, the Standard Contract proposed that DOE would issue an "acceptance priority ranking" ("APR") of SNF and/or HLW, through which SNF and/or HLW would receive acceptance priority based generally upon its age. Id. at 5464 (Art. VI.B.3). Although the proposed Standard Contract itself did not identify a specific rate by which DOE would accept contract holders' SNF, it provided for DOE's issuance of documents for planning purposes to assist in the eventual 7

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definitization of the specific rate and order of SNF acceptance and disposal. Id. at 5463 (Art. V.B.5 & Art. V.B.6). The proposed contract further provided that, following DOE's issuance of planning documents, rates of SNF acceptance, as well as the specific order of SNF acceptance from particular contract holders, would be defined through the contract holders' submission of, and DOE's approval of, delivery commitment schedules ("DCSs"). Id. at 5462. The proposed Standard Contract also provided for the contract holders' subsequent submission of Final Delivery Schedules ("FDSs"), which would serve to take the annual allocation defined in a DCS and further refine it to reflect as closely as possible the month(s) and day(s) upon which SNF acceptance would occur in that year. Id. at 5463 (Art. IV.C). The term "DOE facility" in the proposed Standard Contract referred to a facility for disposal, in a permanent repository, of the SNF and/or HLW. Id. at 5462 (Art. I.11). The proposed rule provided that written comments had to be submitted by March 7, 1983. Id. at 5458. B. Public Comments

DOE received numerous comments in response to the proposed rule. A number of the comments recognized that the Standard Contract did not establish a specific rate at which DOE must accept SNF, and sought to have such a rate included. Alabama Power and Georgia Power submitted almost identical comments regarding the spent fuel receipt rate: The draft contract recognizes that the annual capacity of the DOE disposal facilities may not be adequate to handle the level of deliveries of spent fuel desired by the holders of such fuel. In this regard, it is important that the annual receipt rate of the disposal facility being designed be commensurate with the quantities of spent nuclear fuel being generated annually and also the need to reduce the back-log of spent fuel as expeditiously as possible. Consistent with Section 302(a)(5) of the Act, the contract should 8

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express the intent of DOE to take title to spent nuclear fuel as expeditiously as practicable upon the request of the generator or owner. DX 5.081 at 8 (ARC0010680) (Georgia Power's comments) (emphasis added); DX 5.028 at 8 (ARC0010281) (Alabama Power's comments). The Edison Electric Institute ("EEI"), an association of the nuclear power industry to which both Alabama Power and Georgia Power belonged, requested as follows: The contract should include a recognition that DOE will design its facilities with the capacity to receive SNF/HLW at a rate commensurate with the amount of SNF/HLW then being generated together with the accumulated backlog of SNF/HLW. We believe that DOE should be able to take delivery of SNF/HLW equal to that year's generation plus a reasonable share of the backlog. While the contract may not be the appropriate place to commit DOE to a specific numerical receiving rate, DOE should recognize, at least qualitatively, the need to have adequate annual receiving capacity to handle industry needs. DX 5.034, Attachment A at 2 (ARC0010334). Alabama Power and Georgia Power participated in the development of these comments. See DX 5.028 at 1 (ARC0010274); DX 5.081 at 1 (ARC0010673). Other utilities submitted similar comments seeking firm commitments regarding the rate of DOE performance. For instance, Tennessee Valley Authority ("TVA") submitted a comment, stating that "a commitment to do no more than start accepting deliveries by 1998 is empty and meaningless without setting forth some reasonable minimum rate of acceptance which corresponds to the purposes of the Act." DX 5.063 at 5 (ARC0010537). TVA recognized that, "[o]f course, under the priority ranking system in the draft contract, it would be difficult at the time contracts are executed to give each Purchaser assurances of delivery acceptance at any specific rate," but suggested that "[t]his could, however, be done on an industry wide basis." Id. 9

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TVA suggested that DOE add a contract provision to provide that "DOE shall start accepting delivery of SNF or HLW not later than January 31, 1998, at not less than the annual rate [at which] SNF and/or HLW is then being produced from civilian nuclear power plants covered by contracts . . . ." Id. DOE also received comments seeking a commitment for DOE to accept SNF at the rates set forth in the Mission Plan. For instance, Florida Power & Light Company, expressly stated that DOE should create a mandatory obligation that would require DOE to accept SNF and HLW at the rates identified in the Mission Plan, once that plan was approved by Congress: The [NWPA] specifically requires the Department of Energy to prepare a Mission Plan detailing a schedule for the construction of repositories and their capacities (Section 301). It is proposed that once this Mission Plan has been approved by Congress (18 months after the enactment of the [NWPA]), it becomes the standard by which contract performance by the DOE is judged. It is suggested that Article V B (3) be modified to include the statement: "Should the DOE fail to meet the schedule and capacities detailed in the approved 1984 DOE Mission Plan, because of Force Majeure or other causes, DOE shall, to the extent permitted by the [NWPA], as it may be amended from time to time, bear the reasonable and necessary incremental costs of storage or alternative disposal incurred by the Purchaser." DX 5.043, attachment 1 at 1 (ARC0010439). EEI also suggested that "[t]he definition of 'DOE Facility' (Article I.11) should be broadened to include destinations other than the repository." DX. 5.034, Attachment A at 4 (ARC0010336). EEI stated that "[t]he contract does not recognize the possibility that DOE might send SNF/HLW to an intermediate location (such as a monitored retrievable storage facility) before it goes to a repository" and that, "[t]o accommodate this, the definition of 'DOE

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Facility' should be broadened." DX 5.034, Attachment A at 5 (ARC0010337). See also DX 5.014 (ARC0010180) (change to contract language "would implicitly recognize DOE's option to reprocess SNF or to utilize Monitored Retrievable Storage prior to permanent disposal"); DX 5.069 (ARC0010625) ("[t]his change would recognize the possibility of DOE shipping SNF/HLW to an intermediate storage facility such as a monitored retrievable storage facility"). C. The Final Rule

On April 18, 1983, DOE issued the Standard Contract as a final rule. The final rule, as promulgated, made certain modifications to the Standard Contract set forth in the proposed rule. Although the proposed rule provided that "services provided to the Purchaser by DOE under this contract are related to disposal of SNF," 48 Fed. Reg. at 5462, that "disposal" was defined as emplacement in a permanent repository, id., and that such "disposal" services would begin by January 31, 1998, id., the final Standard Contract eliminated any requirement for DOE to begin SNF "disposal" in a permanent repository by January 31, 1998. Instead, the final Standard Contract only required DOE to begin SNF acceptance by January 31, 1998, after the commencement of "facility" operations. 10 C.F.R. § 961.11, Art. II. The "facility" to which the final Standard Contract refers is either a permanent repository to be constructed pursuant to the NWPA or such other facility to which SNF might be shipped by DOE prior to its transportation to a permanent repository. Id. § 961.11, Art. I.10. As the preamble to the final rule expressly recognized, the final Standard Contract would not obligate DOE to have an operational permanent repository by January 31, 1998:

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The definition of "DOE facility" (Article I.10) was expanded to expressly state, in accordance with the Act, that there may be an interim storage facility (or facilities) which DOE may utilize prior to emplacement in a repository. 48 Fed. Reg. 16590, 16591 (Apr. 18, 1983). DOE did not adopt the suggestion of EEI and many of the utilities to incorporate into the contract a requirement that DOE accept SNF at a rate equal to the annual generation rate plus some additional amount to reduce the accumulated backlog. DOE determined it could not include this requirement due to the number of uncertainties concerning the acceptance of SNF by DOE in 1998. Yankee Atomic Transcript, August 2, 2004, 3621:20-3622:4 (Mr. Robert Morgan, the first Director of the Office of Civilian Radioactive Waste Management testified: "I felt that the Nuclear Waste Policy Act requirements were extremely difficult because of the licensing, potential litigation, technical issues, stakeholder issues, that it was going to be difficult to meet the `98 date. And that I felt that it would be inappropriate and not required by the [A]ct to have a rate of acceptance in the contract."); 3626:9-3627:13 (rejection of request by utilities in comments during rulemaking); Tennessee Valley Authority Transcript, July 14, 2005, 2198:152199:3; 2209:14-20 (DOE's rejection of EEI's request for whereas clause). Instead, as Mr. Morgan testified, the contract provided that the acceptance rate would be developed later. Yankee Transcript, 3657:8-12 (Standard Contract provides that "there would be a process that would be an acceptance rate that would be negotiated with DOE at a later point in time."); Tennessee Valley Authority Transcript, 2221:18-2222:2 (acceptance rate to be determined at a later date).

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The utilities acknowledged that DOE rejected their request regarding the inclusion of a qualitative description of the acceptance rate in both internal memoranda and correspondence with DOE. For example, TVA noted that its request regarding the acceptance rate term had been rejected: DOE did not accept TVA's suggestion that DOE should start accepting delivery of SNF and HLW in 1998 at a rate not less than that which they are being produced by the civilian nuclear power industry as a whole. The final contract does obligate DOE to issue, not later than July 1, 1987, an annual capacity report for planning purposes and, beginning April 1, 1991, annual capacity priority rankings (the oldest SNF and HLW having priority) for receipt by the DOE repository. DOE is also obligated to provide annual reports giving the waste disposal programs' plans and cost projections. DX 32, Attachment 2 at 3 (TV1471) (TVA memorandum, dated May 24, 1983); see also DX 37 at 1 (Yankee Atomic memorandum, dated January 20, 1984). In a letter to Robert Morgan, EEI complained that the Standard Contract as promulgated lacked "standards or milestones for DOE's performance . . . ." DX 34, Attachment 1 at 1 (SN011049). Mr. Morgan, responding to this criticism, stated that the issue of the lack of standards for DOE's performance as well as other issues, "were addressed in the preamble to the April 18, 1983, final rule." Id., Attachment 3 at 1 (SN011057). However, Mr. Morgan also noted that "any issue can be readdressed by industry and, I would add, by the Government as well, after individual contracts are signed with utilities." Id. DOE likewise did not adopt Florida Power & Light Company's request that DOE add a contract clause obligating DOE to accept SNF and/or HLW under "the schedule and capacities detailed in the approved 1984 DOE Mission Plan . . . ." DX 5.043, attachment 1 at 1 (ARC00010439). Apparently, the utilities contemplated renewing this request in a rulemaking 13

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petition concerning the Standard Contract. DX 36 at 2 (YDK045589) (Yankee Atomic memorandum, dated October 19, 1983). The final Standard Contract included a "Disputes" clause, the purpose of which was to provide a mandatory administrative mechanism for the resolution of contract disputes arising under the contract: Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Purchaser. The decision of the Contracting Officer shall be final and conclusive unless within ninety (90) days from the date of receipt of such copy, the Purchaser mails or otherwise furnishes to the Contracting Officer a written appeal addressed to the DOE Board of Contract Appeals (Board). . . . 10 C.F.R. § 961.11, Art. XVI.A (emphasis added). Finally, the final Standard Contract contained an integration clause, precluding reliance upon any representation, promise, or condition not expressly incorporated into the contract: This contract, which consists of Articles I through XXII and Appendices A through G, annexed hereto and made a part hereof, contains the entire agreement between the parties with respect to the subject matter hereof. Any representation, promise, or condition not incorporated in this contract shall not be binding on either party. No course of dealing or usage of trade or course of performance shall be relevant to explain or supplement any provision contained in this contract. 10 C.F.R. § 961.11, Art. XXII.

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III.

PLAINTIFFS' EXECUTION OF THEIR STANDARD CONTRACTS

On June 10, 1983, Georgia Power executed three Standard Contracts with DOE. One contract covered the SNF generated at the Alvin W. Vogtle Electric Generating Plant ("plant Vogtle") (DX 1), and two contracts covered the SNF generated at the Edwin I. Hatch Electric Generating Plant ("plant Hatch"). DX 2 and 3. On June 13, 1983, Alabama Power executed one Standard Contract with DOE, covering the SNF generated at the Joseph M. Farley Nuclear Plant ("plant Farley"). DX 4. All of these Standard Contracts contained the same terms and conditions as the final rule promulgated by DOE on April 14, 1983. See DX 1-4. IV. ISSUANCE OF THE MISSION PLAN AND ITS AMENDMENT

In June 1985, DOE issued the Mission Plan, in accordance with the requirements of 42 U.S.C. § 10221 (1982), which was to "provide an informational basis sufficient to permit informed decisions to be made in carrying out the repository program and the research, development, and demonstration programs required under this chapter." 42 U.S.C. § 10221 (1982). In the 1985 Mission Plan, DOE projected for informational purposes that an initial permanent repository would begin operations in 1998 and that a second permanent repository would commence operations in 2006. DX 44 at 25 (HQR0031129) ("Assumptions About Geologic Repositories, A. Number of Repositories, Two"); id. at 26 ("Table 2-2 shows a schedule that is based on the current estimated emplacement capacities of the two planned geologic repositories, one of which is currently authorized"). Based upon these assumptions, the Mission Plan at pages 26-27 in Tables 2-2 and 2-3 uses a two repository assumption and the following waste acceptance rates (the improved system with an MRS):

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Authorized System First Repository MTU Second Repository

Improved System

Year Pre-1998 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total

MTU 2,200 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,900 4,800 34,900

400 400 400 900 1,800 3,000 3,000 3,000 3,900 4,800 21,600

400 400 400 400 400

DX 44 at 26-27 (HQR0031130-HQR0031131). These same schedules projected annual generation rates of approximately 3,000 MTU in 1998 and increasing in future years. Id. The Mission Plan noted that these schedules were "only an approximation of how the system may operate and is subject to considerable variation. The DOE will further define and specify the system acceptance parameters as the program progresses." DX 44 at 29 (HQR0031133). The Mission Plan further advised that, Under the terms of the contracts for disposal services that have been signed between the DOE and the utilities, an annual capacity report with projected annual receiving capacities and rankings will be issued by the DOE beginning in 1987. In 1991, the DOE will begin to publish firm waste-acceptance schedules for individual reactors, including shipment allocations. DX 44 at 29 (HQR0031133). In the 1987 Mission Plan Amendment, which DOE submitted to Congress in June 1987, DOE recommended deferral of the date contemplated for operation of the first repository from 1998 to 2003, with the second repository becoming operational by 2023. It explained that this recommendation was based upon experience gained in the program, a budget decrease for fiscal 16

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year 1987, and budget uncertainty for fiscal year 1988. The Mission Plan also noted that DOE could nonetheless start accepting waste in 1998 at an MRS facility.4 DX 63 at 6 (HQR0031634). Further, in the 1987 Mission Plan Amendment, DOE stated that, "[l]ike the schedule in the 1985 Mission Plan, the schedule presented here is only an approximation of how the system may operate and is subject to considerable variation." DX 63 at 60 (HQR0031687). The 1987 Mission Plan Amendment also acknowledged the importance of the Annual Capacity Report that would be issued in 1991; namely, that it would be used in the DCS process. DX 63 at 60 (HQR0031687). V. THE 1987 AMENDMENTS TO THE NUCLEAR WASTE POLICY ACT

On December 22, 1987, after DOE submitted the 1987 Mission Plan Amendment, Congress amended the NWPA "to redirect the program for the management and disposal of spent nuclear fuel and high-level radioactive waste under the [NWPA]." S. Rep. No. 100-152, at 1 (Sept. 1, 1987). The Senate Committee on Energy and Natural Resources reported, in considering legislation to amend the NWPA, that "[t]he schedules included in the NWPA have proven to be overly ambitious," and that "[t]his has been largely due to the need to provide additional time for completion of necessary technical work and additional time for public participation." Id. at 5. The committee reported that, "[i]n the four and a half years since passage of the NWPA, it has become clear that the program laid out in the Act will take longer to complete than was anticipated and that completion will be at much greater cost." Id. It further reported that, "[i]n addition to cost and schedule considerations, a number of other circumstances

The ability to start accepting waste in 1998 at an MRS facility was dependent upon congressional authorization. See 42 U.S.C. § 10161(b)-(c) (1982). 17

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have changed since passage of the NWPA," including that, "as we approach major decision points in the nuclear waste program, there will be great potential for political opposition . . . ." Id. The 1987 amendments to the NWPA directed DOE to characterize a single site, at Yucca Mountain in Nevada, for development of a single permanent repository and to terminate activities at all other sites. 42 U.S.C. § 10172(a). The 1987 amendments also authorized the Secretary to site, construct, and operate one, but only one, MRS facility. 42 U.S.C. § 10162(b). However, the 1987 amendments provided that "construction of [the MRS] facility may not begin until the Commission has issued a license for the construction of a repository under section 115(d)." 42 U.S.C. § 10168(d)(1). Finally, it also provided that "the quantity of [SNF] at the site of such facility at any one time may not exceed 10,000 metric tons of heavy metal until a repository under this Act first accepts [SNF]." Id. § 10168(d)(3).5 VI. DOE'S ISSUANCE OF ANNUAL CAPACITY REPORTS A. The 1987 Through 1990 Annual Capacity Reports

Beginning in 1987, in compliance with the NWPA and the language of the Standard Contract, DOE issued an "Annual Capacity Report." As each of these ACRs expressly stated, "[a]s specified in the Contract, the ACR is for planning purposes only and thus is not contractually binding on either DOE or the Purchasers." DX 62 at 2 (HQR0012713), DX 71 at 1

The 1987 amendments to the NWPA also established the Office of the Nuclear Waste Negotiator. 42 U.S.C. § 10242(a). That office was to seek to enter into negotiations with states and Indian tribes to "attempt to reach a proposed agreement" with them through which a state or Indian tribe "would agree to host a repository or [MRS] facility with such State or reservation." Id. § 10243(a). The authorization for that office expired in 1994, id. § 10250, without any agreements with any states or Indian tribes. 18

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(HQR0012617), DX 87 at 2 (HQR0012494) ("projections in this initial report are based on current plans and best available information; they are not contractually binding"). Further, each of the ACRs from 1987 through 1990 contained the following, or substantially similar, language: Beginning in 1991, the ACR acceptance ranking will be converted into an Annual Priority Ranking for receipt of SNF/HLW. In 1992, based on this priority ranking, the Purchasers will submit to DOE for approval, Delivery Commitment Schedules identifying the SNF/HLW that Purchasers propose to deliver to the DOE waste management system (WMS). Once approved, these schedules will become the basis for Final Delivery Schedules to be submitted by the Purchasers not less than 12 months before the date of DOE's anticipated acceptance of title to the SNF/HLW and subsequent transport to a DOE facility. DX 62 at 2 (HQR0012713), DX 71 at 2 (HQR0012618), DX 87 at 2 (HQR0012494). B. The 1991 Annual Capacity Report

In December 1991, DOE issued its "Annual Capacity Report" for that year, DOE-RW331P. DX 97 at 1-2 (HQR0012362-HQR0012363). The 1991 ACR was significant because it was the last ACR that would be issued prior to the contract holders' submission of DCSs beginning January 1, 1992. See 10 C.F.R. § 961.11, Art. V.B.1. In that regard, the 1991 ACR provided that, "[b]eginning in January 1992, the Purchasers may submit Delivery Commitment Schedules (DCS) to DOE identifying the range of SNF that the Purchasers propose to deliver to the Federal Waste Management System (FWMS) beginning sixty-three months thereafter." DX 97 at 2 (HQR0012363). It also stated that "[t]he Purchasers' allocations for each delivery year are presented in Tables A.1 through A.10 in Appendix A, and should be used as the basis for submitting DCSs." DX 97 at 2 (HQR0012363). See DX 97 at 7 (HQR0012368) ("[t]hese allocations are the basis for DCS submittals").

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The 1991 ACR specified the following acceptance allocations: TABLE 2.1 Projected Waste Acceptance Rates for Spent Nuclear Fuel Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TOTAL SNF (MTU) 400 600 900 900 900 900 900 900 900 900 900 8,200

DX 97 at 5 (HQR0012366). These allocations were created with the knowledge that no permanent repository would be available by January 31, 1998. Id. at 4 (HQR0012365). Thus, as DOE explained, "the waste acceptance projections used in this ACR are representative of a FWMS [Federal Waste Management System] configuration authorized by the NWPA, which includes a Monitored Retrievable Storage (MRS) facility." Id. In particular, they "are consistent with the 10,000 MTU storage capacity limit contained in the NWPA for an MRS facility before a repository starts operation." Id. DOE noted, however, that the schedule assumed that the schedule linkages between the MRS construction and repository construction authorization would be broken. Id. In a memorandum dated December 20, 1991, Ronald A. Milner, Associate Director for Storage and Transportation, stated in a memorandum to John Bartlett, Director, Office of Civilian Radioactive Waste Management, as follows: 20

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The 1991 ACR assumes that FWMS [Federal Waste Management System] operations commence in 1998 and the system configuration is that authorized by the Nuclear Waste Policy Amendments Act of 1987, specifically a Monitored Retrievable Storage facility with a 10,000 MTU storage limit prior to repository operations. The 1991 ACR differs from previously published ACRs for two reasons. First, while the information in the ACR has traditionally been used for planning purposes only, the allocations in the 1991 ACR will also serve as the basis for submission of Delivery Commitment Schedules (DCS) by the Contract holders. These DCSs, which will provide planning information for waste acceptance activities, may be submitted to the Department as early as January 1, 1992. DX 98. The utility industry recognized the importance of the 1991 ACR in the determination of delivery commitments for performance beginning in 1998. See, e.g., DX 99 at 2 and 3 (SN169910) (UWASTE memorandum explaining that the ACR and APR "are necessary to properly complete the DCS forms."); DX 100 at 2 (SN170373) (same); DX 66 at 8 (YDK038298) (UNWMG memorandum describing the 1991 ACR as "contractually binding.") C. The 1992 Through 1995 Annual Capacity Reports

The 1992 ACR, which was issued in May 1993, contained the same acceptance rates as the 1991 ACR. DX 121 at 4 (HQR 0012324). The 1992 ACR also provided that, "[d]uring the first ten years following projected commencement of the Civilian Radioactive Waste Management System (CRWMS) operation, the total quantity of SNF that could be accepted is projected to be 8,200 MTU." DX 121 at v (HQR 0012319). It stated that "[t]his is consistent with the storage capacity licensing conditions imposed on an MRS facility by the NWPA." Id. The ACR also stated that, "[a]s specified in the Standard Contract, the ACR is for planning

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purposes only and, thus, is not contractually binding on DOE or the Purchasers." DX 121 at 1-2 (HQR0012321-22). In 1995, DOE issued a combined APR and ACR, to "establish[] the order in which the Department allocates the projected acceptance capacity for commercial [SNF]" and to appl[y] projected nominal acceptance rates for the system to the priority ranking in the APR, resulting in individual allocations for the owners and generators expressed in metric tons per uranium (MTU)." PX 13 at 1 (HQR-001-2246). The 1995 ACR contained substantially similar SNF acceptance rates as the 1991 and 1992 ACRs, identifying a projected nominal waste acceptance rate of 8,200 for the first 10 years of SNF acceptance: Table 1. Projected Nominal Waste Acceptance Rates for Spent Nuclear Fuel Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 TOTAL SNF (MTU) 400 600 900 900 900 900 900 900 900 900 8,200

PX 13 at 4. See DX 97 at 5 (HQR0012366), DX 121 at 4 (HQR0012324). The 1995 ACR also contained the following statement: The ACR (see Appendix B) applies a 10-year projected nominal waste acceptance rate to the APR, resulting in individual capacity allocations. In the previous ACR, the projected nominal acceptance rate was based on the assumption of SNF acceptance beginning in 1998 at a Monitored Retrievable Storage facility prior 22

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to repository operations. Due to the uncertainty associated with the date of commencement of operation of the waste management system, the annual nominal waste acceptance rates are presented by year(s) of operation of the system rather than by specific calendar year(s). The projected nominal acceptance rates also reflect the capacity limit imposed by the Act on such a storage facility prior to repository operations. These projected nominal waste acceptance rates are presented in Table 1. The Department will continue to process DCS submittals on an annual basis. PX 13 at 3-4 (emphasis added). The 1995 ACR also provided that, "[a]s specified in the Standard Contract, the ACR is for planning purposes only and, thus, is not contractually binding on either DOE or the Purchasers." PX 13 at 1. However, it also provided that "[t]hese capacity allocations, as listed in the ACR, form the basis for the Purchasers' submittal of Delivery Commitment Schedules (DCS)." Id. VII. PROGRAM DOCUMENTS REFLECT PLANNED ACCEPTANCE AT AN MRS FACILITY A. Program Reassessment And 1991 Draft Mission Plan Amendment

In November 1989, the Secretary of Energy submitted a report to Congress regarding DOE's reassessment of the program. In this report, DOE stated that it would be unable to begin operations at a repository until 2010, because there was insufficient time to perform the scientific investigation necessary. PX 67 at ix-x (YMP0020191). However, DOE also stated that it planned "to work with Congress to modify the current linkages between the repository and the MRS facility and to embark on an aggressive program to develop an integrated MRS facility for spent fuel." Id. DOE further advised that "if the linkages [were] modified, it [was] likely that waste acceptance at an MRS facility could begin by 1998 or soon thereafter." Id. In September 1991, DOE issued another Draft Mission Plan amendment, which provided further details upon the "action plan" set forth in the Secretary's 1989 Reassessment. DX 94 at 23

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HQR0030799 ("[1989 Reassessment] stated that further details on the Secretary's action plan would be provided in a revised Mission Plan."). In accordance with the 1989 Reassessment, the 1991 Draft Mission Plan Amendment reaffirmed DOE's plans to begin performance in 1998 at an MRS. To achieve the objective of timely and adequate waste acceptance, we plan to develop an MRS facility that is to start waste acceptance in 1998. To make this possible, the President's legislative package for the National Energy Strategy includes a provision to repeal the schedule linkages established in the Nuclear Waste Policy Amendments of 1987 (Amendments Act). This could also be achieved by congressional enactment of a negotiated siting agreement reached through the efforts of the Nuclear Waste Negotiator. DX 94 at 18 (HQR0030825). The schedule set forth in the 1991 Mission Plan Amendment showed acceptance by DOE up to the 10,000 MTU limit on the MRS until the repository began operations in 2010. DX 94 at 205-206. B. Preliminary Estimates Of The Total-System Life Cycle Cost For The Restructured Program

DOE's anticipation of performance at an MRS was also reflected in the cost analyses it performed around the time of the 1991 ACR to support the adequacy of fees collected for the Nuclear Waste Fund. The fee paid by utilities, 1 mil per kilowatt hour, was determined by Congress in enacting the NWPA. 42 U.S.C. § 10222(a)(2). Pursuant to the NWPA, DOE is required to annually assess whether the fees collected pursuant to statute are adequate to fund all of the efforts necessary to implement the NWPA. 42 U.S.C. § 10222(a)(4). The Secretary is to advise Congress if the fee is found to be inadequate. Id. To determine whether the fee is adequate, DOE first prepares a Total System Life Cycle Cost report, in which it projects the total cost of the program. Yankee Atomic Transcript, 4727:8-12 (Testimony of Ronald Milner). This 24

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total system cost projection is based upon the projected number of years that the program is estimated to operate, projected transportation requirements, projected interest rates and other factors. See, e.g., PX 16 and 27. The current program plans, including acceptance rate projections, type and location of receiving facilities, scope of the transportation program, are the basis for the total cost estimate. Yankee Atomic Transcript, 4727:20-22 (Mr. Milner: the basis for the assumptions are the current program planning bases.); DX 330 at 2 ("It must be recognized that the waste management system is continually evolving. The TSLCC estimates represent snapshots in time which incorporated all available and appropriate information on program activities up to a specific point in time in order to develop a comprehensive set of estimates for the system."). In its Preliminary Estimates of the Total-System Life Cycle Cost For The Restructured Program: An Addendum to the May 1989 Analysis of the Total Life Cycle Cost for the Civilian Radioactive Waste Management Program, December 1990, ("1990 PETSLCC") DOE utilized a schedule that was explicitly based upon acceptance starting at an MRS. DX 330. The first ten years are identical to the ACR schedule, with the exception of the second year of acceptance, where the 1990 PETSLCC contemplates that 400 MTU rather than 600 MTU would be accepted. Id. This schedule goes on to show what DOE anticipated the transition from a repository to an MRS would look like. Id. In year eleven and year twelve of acceptance, 900 MTU would be accepted. In years thirteen through seventeen 1800 MTU would be accepted. And only in year eighteen would the system accept 3000 MTU. Id.

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VIII.

INDUSTRY SUBMISSION OF DELIVERY COMMITMENT SCHEDULES

By letter dated March 4, 1992, the DOE contracting officer issued a letter to plaintiffs and other utilities, along with the instructions for the submission of delivery commitment schedules. DX 102. The contracting officer stated that "[t]he allocations in the 1991 Annual Capacity Report (ACR) should be the basis for the DCS submittals." Id. The accompanying instructions provided that purchasers could "begin submitting to the Department of Energy (DOE) Delivery Commitment Schedules (DCS) that identify all spent nuclear fuel (SNF) the Purchasers plan to deliver to DOE beginning 63 months thereafter." Id. The instructions stated that "[t]he DCS provides the Purchasers with the opportunity to inform DOE of their plans for utilizing their allocations of projected Federal waste management system (FWMS) acceptance capacity." Id. They further provided that, "[f]or each allocation listed in the 1991 ACR (or subsequent ACRs, as appropriate), a Purchaser must submit at least one DCS for that allocation at least 63 months prior to the date that the allocation occurs (e.g., if a Purchaser has an allocation in 1998, a DCS must be submitted for that allocation by September 30, 1992)." Id. The DCS instructions were developed with the full participation of the nuclear industry. See, e.g., DX 91 at 3 (SN169940) (UWASTE memorandum advising members that DOE had issued the draft DCS instructions and that the Standard Contract Task Force would meet to develop comments); DX 92 (Minutes of Standard Contract Task Force meeting, during which members met with DOE to discuss and provide comments upon the draft DCS instructions); DX 96 at 3 (SN169920) (UWASTE memorandum advising members that Standard Contract Task Force had provided comments to DOE upon another draft of the DCS instructions); see DX 80 (Minutes of High-Level Waste/Spent Fuel Storage Working Group Meeting stating that "[b]y

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1/1/92, each utility is required to submit a DCS to DOE" and that the task force would be "following this closely."). After the instructions were issued, utilities met with DOE again to discuss the instructions. DX 103. Recognizing the need to submit DCSs to claim allocations, many utilities submitted timely DCSs that were approved by DOE. For example, Wisconsin Electric Power Company ("WEPCO") submitted DCSs for all of its allocations in the first ten years of acceptance in 1992. Yankee Atomic Transcript 4115:20-4117:2 (Testimony of David Zabransky). WEPCO submitted these DCSs for approval, believing that they "represented a commitment." Yankee Atomic Transcript 4116:6. Eight other utilities also submitted DCSs for all of their allocations in the first ten years of contract performance after 1998. Appendix to Defendant's Reply to Plaintiffs' Opposition to Defendant's Motion for Partial Summary Judgment and Response to Plaintiffs' Cross-Motion for Summary Judgment Regarding the Rate of Spent Nuclear Fuel Acceptance at 1. Moreover, every utility with an allocation in 1998 and 1999, with the exception of one utility, submitted a DCS for that allocation. Id. All of those DCSs were approved by DOE. Every utility with an allocation in 2000, with the exception of two utilities, submitted a DCS that was approved by DOE. Id. In a memorandum dated August 26, 1992 from Mr. Fennell to Mr. Cocherell, the two individuals responsible for administering the Standard Contracts for Alabama Power and Georgia Power, plaintiffs accurately described the mechanism for defining DOE's delivery obligations in accordance with the DCS process. Specifically, Mr. Fennell explained: Under the spent fuel disposal contracts, submittal of a Delivery Commitment Schedule (DCS) form to DOE for pickup of spent fuel is required 63 months prior to the year of the fuel pickup. The Annual Capacity Report, last issued in December 1991, provides 27

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the basis for determining the expected delivery schedule which in turn provides the timing of the DCS form submittal. The first DCS forms submittal due date is September 30, 1992, for the 1998 initial year of spent fuel pickup specified under the spent fuel contracts. The first Southern Electric System submittal would be required by September, 1995 for a 2001 projected DOE pickup from Plant Hatch. DX 110; DX 99 at 2 (SN169910) (UWASTE memorandum stating the same understanding); see also DX 105 at 3 (SN172054) (Mr. Fennell's report upon DCS process and recommendation to submit plaintiffs' DCS forms by September 30, 1992). In a memorandum dated November 12, 1991, Mr. Fennell explained that none of plaintiffs' fuel was scheduled for pickup in 1998. DX 95 at 2 (SN172239). By letter dated October 21, 1996, Mr. Cocherell submitted two DCSs for delivery of 0.8 and 4.5 MTU of SNF in years 2001 and 2002, respectively, from plant Hatch. DX 198. In his letter, Mr. Cocherell acknowledged that the DCS for 2001 did not comport with the contract requirement to submit the DCS 63 months in advance of the requested acceptance. Id. Mr. Cocherell also noted that, "[t]he attached [DCS] meets the notice obligations under the spent fuel disposal services Contracts but does not indicate Southern Nuclear's acceptance of the removal rates contained in the current ACR. Southern Nuclear believes the ACR rates are too low." Id. This statement is the only evidence in the record that plaintiffs disputed their allocations in the ACR. In response to the submissions for plant Hatch, DOE, by letter dated March 13, 1997, stated that it was "not able at this time to approve your DCS submittal" and "[c]onsequently, the Department hereby waives until further notice the contract requirement that you provide a revised schedule within 30 days." DX 203.

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IX.

THE APPLICATION OF THE TERMS OF THE STANDARD CONTRACT TO PLAINTIFFS' DAMAGES CLAIMS A. In The "But For" World, Plants Hatch And Vogtle Both Required Additional On-Site SNF Storage After January 31, 1998

At trial, the Government will establish that, based upon the application of the 900 MTU acceptance rate set forth in the 1991 ACR and the maintenance of a single full core reserve, Georgia Power would have been required to construct a dry storage facility at plant Hatch for the storage of 14 dry storage casks. Expert Witness Report of Jonathan A. Neuberger, Ph.D., dated June 10, 2005 ("Neuberger Rep."), Exh. 4. Indeed, the need for additional dry storage capacity at plant Hatch, assuming timely DOE performance, was expressly recognized by plaintiffs during early planning stages for alternative storage facilities. See, e.g., DX 158 at 2, 9; DX 154 at 2. Likewise, at plant Vogtle, based upon the acceptance rate of 900 MTUs and a single full core reserve, Georgia Power would have been required to rack the Unit 1 wet pool in the "but for" world. Neuberger Rep., 12. B. The Evidence Demonstrates Georgia Power Seeks To Maintain A Single Full Core Reserve At Plants Hatch And Vogtle

The evidence will demonstrate that the operating reserves at plants Hatch and Vogtle have historically been a single full core reserve per pool, in contrast to the two full core reserve per pool advocated in plaintiffs' brief. Plants Hatch and Vogtle each have two operating reactors that share either a single wet pool (plant Hatch) or that have two connected wet pools that are used interchangeably to store SNF discharged from both reactors (plant Vogtle). Pl. Br. at 1617. There is no regulatory requirement that a nuclear facility maintain full core reserve in its wet pools. Deposition of Eileen Supko ("Supko Dep.) 66:11-67:2; Deposition of Louis Long ("Long Dep.") 85:13-86:3. In the industry, it is an accepted practice to maintain a full core reserve in 29

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each spent fuel pool. DX 101. As a result, multiple reactors that share a single spent fuel pool typically will maintain a single full core reserve in that pool. Similarly, reactors that have their own, independent spent fuel pools will maintain a single reserve per pool. The purpose of the full core reserve is to allow the core of a reactor to be offloaded during any outage for reloading or repairs and for any unanticipated technical issues that may arise. "Assessment of Damages Resulting From The Department Of Energy's Failure To Perform Its Contractual Obligation Regarding Southern Nuclear Operating Company's, Alabama Power Company's And Georgia Power Company's Spent Nuclear Fuel," dated January 31, 2005 ("Kenrich Rep."), at 9-10. Plaintiffs' full core reserve policies at plants Hatch and Vogtle historically have been consistent with the standard industry practice of one full core reserve per pool. See, e.g., DX 101 ("The one full core reserve has been established at Hatch since the late 1970's."); DX 106 ("It is noted that maintenance of the single full core capability is still the official planning basis for Hatch . . ."). There is no probative evidence that plaintiffs have a two full core reserve policy at those facilities. In contrast, there are numerous exhibits either that articulate a single full core reserve policy or that track the loss of single full core reserve in the Hatch and Vogtle wet pools. See, e.g., DX 38, DX 101, DX 104, DX 312, DX 313, DX 324. C. Implementing A Two Full Core Reserve Policy Requires Additional Storage At Plants Hatch And Vogtle In The "But For" World

To the extent that this Court finds a two full core reserve policy at plants Hatch and Vogtle, the evidence will demonstrate that each of these plants would have been required to add storage in the "but for" world in the form of dry storage at plant Hatch and reracking at plant Vogtle, regardless of the rate applied to plaintiffs' claims. See Neuberger Rep., 17. Specifically, pursuant to the Government's contractual obligation, as set forth in the 1991 ACR, and assuming 30

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a two full core reserve, Georgia Power would need to load additional casks to the ISFSI at plant Hatch over-and-above the 14 needed in the single reserve scenario and would need space in the wet pool at plant Vogtle for an additional 297 assemblies. Neuberger Rep., Exh. 4. Assuming the acceptance rate advocated by plaintiffs and a two full core reserve, Georgia Power would have needed to load eight casks at plant Hatch from 2000-2001. Neuberger Rep., Exh. 6. Likewise, Georgia Power would have needed capacity for an additional 87 assemblies at plant Vogtle. Id. In either scenario, damages would require adjustment to reflect the cask loading at plant Hatch and reracking at plant Vogtle that would have been required based upon that full core reserve.6 With respect to plant Farley, if the Court finds that Alabama Power was somehow required to maintain a single full core reserve plus a reload of fresh fuel for each wet pool as set forth in plaintiffs' brief, Alabama Power would require dry storage of three casks at plant Farley if DOE had begun performance in 1998 at the 1991 ACR rate. See Neuberger Rep., Exh. 4.

The Government will present evidence that demonstrates that the rack addition at plant Vogtle should not be recoverable here. The connected wet pools at plant Vogtle were designed to identical specifications and were originally intended both to be fully racked with high density racks in the late 1980s, prior to the commencement of operations. Deposition of Ronald Cocherell ("Cocherell Dep."), 83:20-86:14, 308:20-309:14; Deposition of Kenneth Metcalfe ("Metcalfe Dep."), 407:8-408:1. However, due to the excessive cost of the Vogtle facility ($8.9 billion), Georgia Power decided not to proceed with the racking of the Unit 1 wet pool in an effort to reduce the cost overruns at that time by delaying the cost associated with utilizing plant Vogtle's full capacity. Cocherell Dep., 83:20-86:14, 308:20-309:14; Metcalfe Dep., 407:8-408:1. The Government contends that plaintiffs cannot recover the costs associated with racking the Vogtle Unit 1 wet pool because that pool would have been fully racked but for the construction cost overruns. Plaintiffs made a business decision in the late 1980s not to fully rack the pools and should not be able to use that business decision to transform otherwise nonincremental costs into recoverable damages. 31

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X.

THE EVIDENCE WILL ESTABLISH THAT PLAINTIFFS' INVESTMENT IN PRIVATE FUEL STORAGE DID NOT CONSTITUTE REASONABLE MITIGATION

Plaintiffs' damages claim includes approximately $8.5 million in costs associated with their pursuit of an off-site SNF storage alternative known as Private Fuel Storage ("PFS"). PFS involves a consortium of utilities that seek to license and, allegedly, construct a private off-site ISFSI in Utah for the storage of commercial SNF. See, e.g., DX 222. Plaintiffs' investment in PFS began in 1995 and, according to their damages claim, plaintiffs' last investment in PFS was made in 2004. Long Dep., 188:6-189:7. Plaintiffs did not have any contractual obligation to make that 2004 payment to PFS. Cocherell Dep., 388:7-389:12. To date, plaintiffs have invested approximately $8.5 million in the PFS effort, approximately $1.86 million of which was spent after the plant Hatch ISFSI was first loaded in 2000. Kenrich Damages Model, A52-A54. At the time plaintiffs elected to invest in the PFS effort, PFS was a highly speculative solution to the alleged space constraints in their three facilities' wet pools. In order to operate and accept commercial SNF, PFS needed to be licensed by the NRC and constructed by PFS members. Long Dep., 184:23-185:16; Cocherell Dep., 420:4-421:4. Additionally, PFS would have required the ability to ship large quantities of SNF across the country to the PFS facility. PFS applied for a license from the NRC in 1997. Cocherell Dep., 398:21-399:6. That license was granted eight years later in September 2005. PFS still faces issues related to the construction of the facility, estimated in 1995 to cost approximately $100 million. Cocherell Dep., 406:22-407:1; DX 161, 162. Transportation issues also abound including expected opposition from the State of Utah and potential opposition from cities and states across the United States that would be in the transportation path to any PFS facility. Cocherell Dep.,

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399:15-400:20. Each of these concerns was well known to plaintiffs at the time they decided to begin investing in that project. Cocherell Dep., 399:15- 400:20. Plaintiffs would never have been able to use PFS as mitigation. First, plaintiffs allegedly required additional storage as early as 2000 at plant Hatch, by 2005 at plant Farley and by 2006 at plant Vogtle. However, as early as 1998, plaintiffs recognized that, "Southern Nuclear is also part of a joint utility effort to develop a private fuel storage facility for operation as early as the year 2002, not in time to address Hatch storage requirements by the year 2000." DX 223. PFS also was a more costly storage alternative than on-site storage ­ a fact of which plaintiffs were aware at the beginning of their involvement. Cocherell Dep., 416:18-417:2; Long Dep., 190:11-191:4; DX 143. Finally, we will show that plaintiffs did not pursue PFS as their first choice alternative. From the beginning, plaintiffs intended PFS to serve merely as an insurance policy in the unlikely event that the state governments in Alabama and Georgia implemented dry storage restrictions similar to those implemented in Minnesota in the mid-1990s. Long Dep., 180:3-181:12. Of course, unlike Minnesota, no such actions were expected (Deposition of Richard Fennell ("Fennel Dep."), 234:17-235:9) and, ultimately, none were taken by either state to limit plaintiffs ability to construct dry storage facilities. Cocherell Dep., 405:18-406:4. Although a formal decision has not been made, plaintiffs do not anticipate using any PFS facility if ultimately constructed. Long Dep., 193:16-193:23. Moreover, as a founding member of the PFS consortium, plaintiffs may profit from PFS if it is developed. Cocherell Dep.,

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409:2-409:21; Long Dep., 182:13-183:13; DX 143, DX 145, DX 162. Plaintiffs' claim does not include any offset for these potential profits.7 ARGUMENT I. PLAINTIFFS BEAR THE BURDEN AT TRIAL OF ESTABLISHING THAT THEIR CLAIMED COSTS WERE CAUSED BY THE GOVERNMENT'S DELAY

As the United States Court of Appeals for the Federal Circuit recently recognized, the mere fact of DOE's breach of the Standard Contract does not "perforce" make all of a utility's costs "to store its SNF recompensable: [a plaintiff] must prove foreseeability, causation, and reasonableness," Indiana Michigan Power Co. v. United States, No. 04-5122, 2005 WL 2173563, at *5 (Fed. Cir. Sept. 9, 2005), and it must prove these elements "by a preponderance of the evidence." Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400, 413-14 (2004). According to the precedent of this circuit, TVA bears the burden of introducing clear proof that it was injured as a direct result of DOE's delay in accepting its SNF. Myerle v. United States, 33 Ct. Cl. 1, 27 (1897). Further, the "measure of damages to be applied in the particular case is irrelevant until the claimant has established the fact of losses that were the natural and proximate result of the

In addition to these damages theories, as part of the Government's evidence at trial, we anticipate that Mr. Kouts and perhaps other witnesses will testify regarding the reasons for DOE's delay in beginning SNF acceptance and its excusability. The Court may find it necessary to resolve these issues at trial. 34

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