Alabama Power Company v. United States ( 2014 )

In the United States Court of Federal Claims
No. 08-237 C
Filed December 29, 2014*
(*Originally Filed Under Seal December 11, 2014)
ALABAMA POWER COMPANY, )
GEORGIA POWER COMPANY, ) Spent Nuclear Fuel; Standard Contract
and SOUTHERN NUCLEAR ) Requirements; Breach of Contract
OPERATING COMPANY, INC. ) Damages; Proof of Causation; Loading
Plaintiffs, ) Costs; Equipment and Plant
v. ) Modifications Costs; and Nuclear
) Regulatory Commission Fees.
THE UNITED STATES, )
Defendant. )
Eric B. Langley, Balch & Bingham, LLP, Birmingham, AL, for plaintiffs.
M. Stanford Blanton, K.C. Hairston, Jason B. Tompkins, and Adam K. Israel, of
counsel.
James P. Connor, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C., with whom appeared Stuart F.
Delery, Acting Attorney General, Robert E. Kirshman, Jr., Director, Marian E.
Sullivan, Assistant Director, for defendant. Eric P. Bruskin, Alexis J. Echols, and
Shari A. Rose, Trial Attorneys. Jane K. Taylor, Office of the General Counsel,
United States Department of Energy, Washington, D.C., of counsel.
OPINION
Merow, Senior Judge
Plaintiffs Alabama Power Company (“Alabama Power”), Georgia Power
Company (“Georgia Power”), and Southern Nuclear Operating Company, Inc.
(“Southern”) (collectively “plaintiffs”)1, initially filed suit in this court in 1998,
alleging the government’s breach of its contractual obligations related to the
removal of spent nuclear fuel (“SNF”) from plaintiffs’ facilities. See S. Nuclear
Operating Co., et al. v. United States, No. 98-cv-614 (Fed. Cl. filed July 29, 1998).
1
Alabama Power and Georgia Power own and operate nuclear power plants, and Southern is the
holding company for those entities. See Tr. at 237:23-238:11 (Bunt).
In that first round of litigation, the court granted summary judgment on liability in
favor of plaintiffs. See id. at Doc. 234.
The parties went to trial on the issue of damages, and after detailed
consideration of plaintiffs’ claims, the court concluded that:
The contracts have been breached by a series of delays that now
continue into 2017 and perhaps 2018. As a result, plaintiffs have built
dry storage and reracked, . . . mitigating efforts that would not have
been necessary if DOE had commenced performance at any
reasonable pickup rate.
S. Nuclear Operating Co., et al. v. United States, 77 Fed. Cl. 396, 459 (2007). On
appeal, the Federal Circuit affirmed the court’s ruling “that the government had
partially breached the Standard Contract by failing to begin accepting SNF in
January 1998,” and noted “[t]here is no issue on appeal as to liability; liability in
these SNF cases has been established.” S. Nuclear Operating Co., et al. v. United
States, 637 F.3d 1297, 1299 (Fed. Cir. 2011) (affirming in part and reversing in
part the court’s damages award). Following the Circuit’s remand, the parties
settled the remaining damages issues, and stipulated to a judgment, which the court
entered on April 5, 2012. See S. Nuclear, No. 98-cv-614, Doc. 423.
The plaintiffs filed a second complaint on April 3, 2008, seeking to recover
damages accrued from January 1, 2005 through December 31, 2010. See Doc. 1 at
3; Tr. at 10:10. The alleged damages amount to approximately $77.4 million. See
Doc. 169. Because the government’s partial breach has already been established,
plaintiffs had the task of proving the amount of their alleged damages and
establishing that those damages flowed from the government’s breach.
Trial was held in this matter from November 18 through November 21,
2013. Following the submission of post-trial briefs, closing argument was heard
on June 24, 2014.
FINDINGS OF FACT
At the direction of the court, the parties have cooperated in an extensive
audit process, through which they evaluated plaintiffs’ damages claim. See Doc.
32. That process helped to focus the issues before the court at trial, which are as
follows: (1) whether plaintiffs established causation for the damages not
specifically contested at trial; (2) whether plaintiffs are entitled to recover for fuel
2
characterization and loading costs that may be incurred again prior to the
government’s performance under the Standard Contract; (3) whether plaintiffs are
entitled to recover for certain equipment purchases and plant modifications at Plant
Hatch, Plant Farley and Plant Vogtle; and (4) whether plaintiffs are entitled to
recover a portion of the fees paid to the Nuclear Regulatory Commission (“NRC”)
covering the time periods when plaintiffs did not have dry storage on site. The
following facts are relevant to deciding these issues.
I. THE STANDARD CONTRACTS
The government entered into nearly identical Standard Contracts with each
of the utilities in this case, under which the government, through the Department of
Energy (“DOE”), agreed to dispose of the utilities’ SNF.2 The provisions at issue
here define the plaintiffs’ responsibilities to prepare the fuel for transportation, and
the government’s responsibilities to provide certain equipment and information to
facilitate transportation of the casks.
The plaintiffs are obligated, in relevant part, to: “arrange for, and provide,
all preparation, packaging, required inspections, and loading activities necessary
for the transportation of SNF and/or HLW to the DOE facility.” Plaintiffs’ Ex. 1 at
IV.A.2.
The government’s obligations, in relevant part are as follows:
DOE shall arrange for, and provide, a cask(s) and all necessary
transportation of the SNF and/or HLW from the Purchaser’s site to the
DOE facility. Such cask(s) shall be furnished sufficiently in advance
to accommodate scheduled deliveries. Such cask(s) shall be suitable
for use at the Purchaser’s site, meet applicable regulatory
requirements, and be accompanied by pertinent information including,
but not limited to, the following:
2
In S. Nuclear, 77 Fed. Cl. at 396, the court wrote extensively on the contracts between the
utilities and the government, and on the historical context in which the contracts came about. In
the interest of focusing on the new issues before the court, the discussion is not repeated in this
opinion. As the parties have stipulated, the terms of each contract are identical, “other than the
name and certain administrative content of the contracting utility.” Doc. 136 at 1. To simplify
citations, when the court is referring to contract term that is common to all three plants, it will
refer to Plaintiffs’ Ex. 1.
3
(a) written procedures for cask handling and loading, including
specifications on Purchaser-furnished cannisters [sic] for
containment of failed fuel;
(b) training for Purchaser’s personnel in cask handling and loading,
as may be necessary;
(c) technical information, special tools, equipment, lifting
trunnions, spare parts and consumables needed to use and
perform incidental maintenance on the cask(s), and
(d) sufficient documentation on the equipment supplied by DOE.
Plaintiffs’ Ex. 1 at IV.B.2.
II. PLANT HATCH
On June 10, 1983, the government entered into a contract with Georgia
Power with regard to the disposal of fuel from Plant Edwin I. Hatch. Plaintiffs’
Exs. 2 and 3.3 In this second phase of litigation, Georgia Power seeks damages in
an amount of $36,948,000 to cover costs it alleges were incurred, due to the
government’s partial breach of the Standard Contract, between January 1, 2005,
and December 31, 2010. See Doc. 103 at 14.
During that time, Georgia Power made whole or partial payments for
twenty-eight casks; characterized, loaded, and stored twenty casks; expanded Plant
Hatch’s ISFSI; purchased several pieces of equipment for use in loading the casks;
and made a number of building modifications to accommodate that new
equipment. See id. at 14-15.
The broad categories of Georgia Power’s alleged damages at Plant Hatch are
as follows:
Dry Storage Operations and Maintenance: $3,865,000
Dry Storage Equipment: $3,291,000
Dry Casks: $29,132,000
3
Two contracts were executed for Plant Hatch—one “for the first four reloads of fuel for the
Unit 1 reactor at Plant Hatch,” and the other covering the balance of the SNF from Units 1 and 2.
See Doc. 103 at 11.
4
ISFSI Construction: $660,000
____________
Total: $36,948,000
See id. at 14.
A vast majority of these expenses were not specifically contested at trial.
The government, however, claims that Georgia Power should not recover for fuel
characterization and loading costs, and that it is not responsible for its expenditures
on certain building modifications. The parties stipulated that the fuel
characterization costs across all plants for this claims period amount to $964,793.
See Doc. 136 at 7. The parties further stipulated that the cask loading costs across
all plants for this claims period amount to $6,946,436. See id.
Cask loading takes place underwater, in the spent fuel pool. See Tr. at
161:15-23 (Ripple). After the fuel is loaded, the inside of the cask must be dried
before it is sealed. See Doc. 149 at 41 (citing Tr. at 161:15-162:20) (Ripple), Tr. at
256-259 (Bunt)). There are several different types of drying equipment for this
purpose. Before the claims period at issue, Georgia Power had a vacuum drying
system at Plant Hatch, but replaced it with a forced helium dehydrator, which was
required for use with the specific Holtec casks it was loading. See Tr. at 245:10-
19; 256-259 (Bunt). Georgia Power also installed a supplemental cooling system
that worked to keep the forced helium dehydrator from overheating. See Tr. at
256:25-257:6 (Bunt). In addition to purchasing and installing the equipment itself,
Georgia Power installed new power lines to supply the forced helium dehydrator
and supplemental cooling system. Tr. at 259:15-21 (Bunt).
Operating the forced helium dehydrator and the supplemental cooling
system on the loading room floor resulted in increased temperatures in an area of
the plant that was already adversely affected by heat. See Tr. at 259:24-25,
261:14-16 (Bunt). Prior to installation of the forced helium dehydrator and the
supplemental cooling system, Georgia Power controlled temperatures on the
loading room floor through use of “stay times” and “cooling vests” worn by
employees. See Tr. at 287:5-17 (Bunt). These methods were ineffective to
counteract the increased heat from the new equipment, so Georgia Power installed
a new HVAC system. See Tr. at 260:21-23 (Bunt). The HVAC system was used
to offset the heat from the forced helium dehydrator and the supplemental cooling
system, not to correct the preexisting concerns about high temperatures. Tr. at
260:21-261:4 (Bunt).
5
The new power lines and the HVAC system together cost $1,187,476. See
Doc. 169 at 6 (citing Defendant’s Ex. 89 at 8).
III. PLANT VOGTLE
On June 10, 1983, the government entered into a contract with Georgia
Power with regard to the disposal of fuel from Plant Alvin W. Vogtle. Plaintiffs’
Ex. 4. In this second phase of litigation, Georgia Power seeks damages in an
amount of $3,527,000 to cover costs it alleges were incurred, due to the
government’s partial breach of the Standard Contract, between January 1, 2005,
and December 31, 2010. See Doc. 103 at 16.
During that time, Georgia Power incurred the costs of an engineering study,
construction costs for a small ISFSI and a new sally port, and crane modifications.
See Doc. 103 at 16.
The broad categories of Georgia Power’s alleged damages at Plant Vogtle
are as follows:
Dry Storage Operations and Maintenance: $229,000
Dry Storage Modifications and Equipment: $1,637,000
ISFSI Construction: $1,661,000
____________
Total: $3,527,000
See id. at 14.
The government challenges the expenditures for the study, the sally port, and
the crane modifications.
Plant Vogtle includes four reactor units. Units 1 and 2 are operational, see
Tr. at 267:16-17 (Bunt), and the storage of SNF from these two units is the subject
of this lawsuit. Units 3 and 4 are in the construction phase, see Tr. at 267:15-16
(Bunt), and any future SNF storage needed for these units is unrelated to the breach
at issue. Here, Georgia Power seeks to recover for costs incurred in ISFSI
engineering and design costs to support storage for fuel from Units 1 and 2.
Georgia Power engaged Bechtel Corporation to do a comprehensive design
and engineering study that “involved looking at the plant site, identifying where an
6
ISFSI could go, what would be entailed in all the activities inside the building,
outside the building, to go through the full functionality of going to an ISFSI . . .”
Tr. at 265:16-20 (Bunt). In the work order, the scope of the project was defined as
follows:
Develop an overall plan for the design and implementation of the
[Plant Vogtle] ISFSI. The ISFSI will meet the fuel storage life cycle
requirements for Units 1 and 2, with consideration for Units 3 and 4.
The ISFSI will be designed to accommodate 250 casks for Units 1 and
2, with consideration for 50 additional casks to support an 80 year
plant life and consideration for an additional 200 casks for Units 3 and
4.
Defendant’s Ex. 69 at KRGSNCIIb-006053. Although the study considered the
existence of Units 3 and 4, it only supported fuel storage from Units 1 and 2. See
Tr. at 266:1-267:2; Tr. at 267:3-11 (Bunt). These services cost Georgia Power
$1,489,258, see Doc. 136 at 7, and were paid for from funds allocated to Units 1
and 2, see Tr. at 267:25-268:4 (Bunt); Tr. at 793:20-21 (Cash).
In order to transport the loaded Holtec casks to the ISFSI, Georgia Power
constructed a new sally port. The existing sally port was insufficient because it led
to a road that could not bear the weight of the loaded Holtec casks, and was too
narrow for the vehicles used to transport them to the ISFSI. See Tr. at 795:16-25
(Cash). The existing sally port, however, would have been sufficient to
accommodate small casks used in over-the-road transport. See Tr. at 796:10-13
(Cash). The sally port construction cost $486,595. See Doc. 136 at 7.
Georgia Power also made modifications to the crane at Plant Vogtle in order
to safely handle the loaded Holtec casks, which weigh approximately 125 tons.
See Tr. at 273:13 (Bunt). The crane at Plant Vogtle required modification because
it had been derated, meaning its permissible load was reduced, for a number of
reasons, including “reliability” problems. Tr. at 274:12 (Bunt). No definitive
weight limit was presented at trial, but the plant’s Severe Accident Management
Manager testified that the weight limit was something less than 55 tons. See Tr. at
277:12-15 (Bunt). Mr. Cash, who served as project manager for Plant Vogtle’s
Major Project Groups until shortly before trial, later testified that the crane was
unable to lift a 25-ton cask safely. See Tr. at 771:13-16. The crane modifications
cost $289,330. See Doc. 136 at 7.
7
IV. PLANT FARLEY
On June 13, 1983, the government entered into a contract with Alabama
Power with regard to the disposal of fuel from Plant Joseph M. Farley. Plaintiffs’
Ex. 1. In this second phase of litigation, Alabama Power seeks damages in an
amount of $32,612,000 to cover costs they allege were incurred, due to the
government’s partial breach of the Standard Contract, between January 1, 2005,
and December 31, 2010. See Doc. 103 at 15.
During that time, Alabama Power made whole or partial payments for
twenty-four casks; characterized, loaded, and stored twelve casks; and expanded
Plant Farley’s ISFSI, adding two pads. See id. In addition, Alabama Power
purchased equipment and made plant modifications, including:
installing a permanent work platform in Unit 2’s cask wash pit area,
installing a lift yoke support arm on the wall of Unit 2’s spent fuel
pool room, replacing the covers to Unit 2’s cask loading and cask
wash pits, designing and fabricating a lift yoke extension and storage
for that extension within Unit 2’s spent fuel pool room, constructing a
storage building for the dry cask crawler and other equipment
necessary for dry cask storage, and completing other building
improvements to facilitate dry cask storage operations.
Id.
The broad categories of Alabama Power’s alleged damages at Plant Farley
are as follows:
Dry Storage Operations and Maintenance: $5,660,000
Dry Storage Modifications and Equipment: $3,357,000
Dry Casks: $20,537,000
ISFSI Construction: $3,058,000
____________
Total: $32,612,000
See id. at 14.
As with Plant Hatch’s damages, a majority of these expenses were not
specifically contested at trial, but the government claims it is not responsible for
8
fuel characterization and loading costs, certain building modifications, or site-
specific loading procedures.
At Plant Farley, like Georgia Power at Plant Hatch, Alabama Power
modified the power supplies in both Reactor Unit 1 and Reactor Unit 2 to
accommodate the power requirements of the forced helium dehydrator and
supplemental cooling system needed to load the Holtec casks. See Tr. at 159:10-24
(Ripple) (explaining that Plant Farley had very limited space and so the helium
dehydrator and supplemental cooling systems were located outside the building
and penetrations through the walls were necessary to connect the equipment on the
loading room floor); Tr. at 242:14-18 (Bunt) (testifying that the penetrations would
not have been necessary if plaintiffs continued to use the vacuum drying system);
Tr. at 244:23-245:19 (Bunt) (explaining that Plant Farley had pre-existing
electrical hook-ups and penetrations that supported the vacuum drying system, but
that they needed to be modified to support the helium dehydration system, and
noting that the penetrations for Units 1 and 2 were of the same type). Plaintiffs are
unable to itemize the costs of the power supply modifications. See Doc. 169 at 5.
In order to accommodate the Holtec casks, Alabama Power installed new
loading pit and wash pit covers. The covers create a work space over the spent fuel
pool, where workers load the canisters. See Tr. at 158:2-4 (Ripple). The Holtec
dehydration equipment required considerable space, and new covers were
necessary to leave enough room for activities associated with closing the casks.
See Tr. at 158:5-12 (Ripple). The pit covers cost $69,364. See Doc. 169 at 4
(explaining Plaintiffs’ Ex. 11 at 961-63).
Alabama Power also installed a work platform at Plant Farley Unit 2, “to
provide access to the cask while [they are] doing welding and decontamination”
while loading. See Doc. 149 at 46 (citing Tr. at 156:23-25 (Ripple)). Alabama
Power had previously used temporary scaffolding to serve the same purpose. See
Tr. at 748:13-17 (Zabransky) (testifying that casks can be loaded with scaffolding
instead of work platforms); Tr. at 809:5-16 (McCallum) (testifying that plaintiffs
have previously used scaffolding to access the tops of casks); Tr. at 849:4-23
(Maret) (testifying that plaintiffs could have chosen to use scaffolding, but that the
work platform was a better solution); Tr. at 903:14-22 (Maret) (testifying that the
work platform “makes sense” but is “not necessary to load a cask”). But the work
platform increased efficiency and reduced workers’ radiation exposure. See Tr. at
849:15-17 (Maret) (testifying that the work platform allowed the plaintiffs to
“facilitate the work and make it more efficient, make it safer and to reduce the
9
potential for radiation exposure. . .”). The work platform cost $46,030. See Doc.
169 at 4 (explaining Plaintiffs’ Ex. 11 at 961-63).
Under the terms of the contract, the government would have brought some
equipment with it at the time of performance. See Plaintiffs’ Ex. 2 and 3 at
IV.B.2(c) (stating that the government would provide “technical information,
special tools, equipment, lifting trunnions, spare parts and consumables needed to
use and perform incidental maintenance on the cask(s)”). This equipment includes
a lift yoke—which is a piece of equipment “designed to attach the crane hook to
the transfer cask for lifting and lowering [the cask] components into and out of the
cask loading pit, which is part of the spent fuel pool.” Doc. 149 at 49-50; see Tr. at
901:10-11 (Maret). Because the lift yoke is submerged in the pool during this
process, it is radioactively contaminated, and must either be repeatedly
decontaminated, or stored within the spent fuel building, which is radiologically
controlled. See Tr. at 854-856 (Maret). Alabama Power chose the latter option,
and installed a support arm in the Farley Unit 2 building. See Tr. at 168:11-12
(Ripple). The lift yoke support arm cost $51,135. See Doc. 169 at 5 (explaining
Plaintiffs’ Ex. 11 at 957-59).
As additional measures to avoid repeated decontamination activities,
Alabama Power purchased a lift yoke extension and installed storage stands in
Farley Units 1 and 2. See Tr. at 152:2-153:3 (Ripple). The crane at Plant Farley is
located outside the spent fuel buildings. See Tr. at 151:25-152:2 (Ripple). In order
to use the crane to load casks, the roof on the building is removed, and the crane,
with the attached lift yoke, can then access the pool. See Tr. at 152:2-152:16
(Ripple). Alabama Power uses the lift yoke extension to avoid contaminating the
crane. See Tr. at 152:22-153:3 (Ripple). The stands are located within the
buildings, like the lift yoke support arm, to allow the extension to be stored with
the radiologically controlled area. See Tr. at 862:7-17 (Maret). The lift yoke
extension cost $97,812. See Defendant’s Ex. 90 at 2. Plaintiffs are unable to
itemize the costs of the storage stands. See Doc. 169 at 5.
Finally, at Plant Farley, Alabama Power was required to develop site-
specific loading procedures for loading the Holtec casks. See Tr. at 170:25-171:3
(Ripple). Alabama Power seeks to recover the costs of doing so under the
Standard Contract language that states that the government will provide “written
procedures for cask handling and loading, including specifications on Purchaser-
furnished cannisters [sic] for containment of failed fuel.” Plaintiffs’ Ex. 1 at
IV.B.2(a). The loading procedures development cost $303,030. See Doc. 136 at 7.
10
V. NUCLEAR REGULATORY COMMISSION FEES
The NRC “is required to recover nearly all of its costs of regulating the
nuclear power industry from the licensees that it supervises,” pursuant to the
Omnibus Budget Reconciliation Act, known as OBRA-90. Consol. Edison Co. of
New York, Inc. v. Entergy Nuclear Indian Point 2, LLC, 676 F.3d 1331, 1336 (Fed.
Cir. 2012) (citing 42 U.S.C. § 2214). It does so by levying a variety of annual
fees—some are site-specific, and others are generic and industry-wide. See id. at
1337. “The annual fees must have, to the maximum extent practicable, a
reasonable relationship to the cost of providing regulatory services in order to meet
the requirements of OBRA-90.” Revision of Fee Schedules; 100% Fee Recovery,
FY 1999, 64 Fed. Reg. at 31457. Plaintiffs seek to recover approximately
$4,331,000 in dry storage fees that they claim the NRC improperly collected. See
Plaintiffs’ Ex. 5 at 2; Doc. 169 at 2.
Prior to 1999, the NRC only charged dry storage fees to facilities with
ISFSIs. In 1999, that rule was changed, and the NRC began collecting dry storage
fees as part of a generic fee charged to all facilities with fuel on site. Doc. 149 at
29-31 (summarizing the history of the rule development). Plaintiffs argue that this
rule change, which caused them to incur dry storage fees they would not have been
required to pay under the old rule, was a direct result of the government’s breach.
CONCLUSIONS OF LAW
Under traditional contract law principles, which govern in spent nuclear fuel
disputes, the remedy for a breach “is damages sufficient to place the injured party
in as good a position as it would have been had the breaching party fully
performed.” Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1373
(Fed. Cir. 2005). Specifically, “[d]amages for a breach of contract are recoverable
where: (1) the damages were reasonably foreseeable by the breaching party at the
time of contracting; (2) the breach is a substantial causal factor in the damages; and
(3) the damages are shown with reasonable certainty.” Id. (citing Energy Capital
Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)).
To establish that damages were reasonably foreseeable, “a plaintiff must
show that the type of damages are foreseeable as well as the fact of damage.” See
Vermont Yankee Nuclear Power Corp. v. Entergy Nuclear Vermont Yankee, 683
F.3d 1330, 1344 (Fed. Cir. 2012). As the Federal Circuit has explained:
11
Although this does not require “actual foresight” that the breach will
cause a “specific injury or a particular amount in money[,] . . . the
injury actually suffered [still] must be one of a kind that the defendant
had reason to foresee and of an amount that is not beyond the bounds
of reasonable prediction.”
Id. (citing Joseph M. Perillo, 11 Corbin on Contracts § 56.7 at 108 (rev. ed. 2005)
(emphasis added)).
Plaintiffs must then show that the government’s breach was a “substantial
causal factor” in the damages they seek to recover. Indiana Michigan, 422 F.3d at
1373. Although the but-for test is also an acceptable causation standard, trial
courts have discretion to decide which standard should be applied in a particular
case. Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268, 1272 (Fed. Cir.
2008) (citing Citizens Fed. Bank v. United States, 474 F.3d 1314, 1318 (Fed. Cir.
2007)). In the first phase of litigation, the court opted to apply the substantial
factor test, see S. Nuclear Operating Co. v. United States, 77 Fed. Cl. 396, 405
(2007), and will do so in this second phase as well.
As part of their causation argument, plaintiffs must present a “comparison
between the breach and non-breach worlds.” Yankee Atomic, 536 F.3d at 1273.
The plaintiff bears the burden of proving “the extent to which his incurred costs
differ from the costs he would have incurred in the non-breach world.” Energy
Nw. v. United States, 641 F.3d 1300, 1306 (Fed. Cir. 2011).
And, although damages must be “shown with reasonable certainty,” they
need not be “ascertainable with absolute exactness or mathematical precision,” but
“recovery for speculative damages is precluded.” Indiana Michigan, 422 F.3d at
1373 (citations omitted). Enough evidence to allow the court to make “a fair and
reasonable approximation” is required. Bluebonnet Sav. Bank v. United States, 266
F.3d 1348, 1355 (Fed. Cir. 2001) (citations omitted).
In addition to these basic principles, a non-breaching party is obligated to
mitigate its damages when “a reasonable person, in light of the known facts and
circumstances, would have taken steps to avoid damage.” Indiana Michigan, 422
F.3d at 1375. The Circuit has explicitly stated that, in order to recover mitigation
damages, the mitigating party must “prove foreseeability, causation, and
reasonableness.” Id. at 1376. But when mitigation efforts are “reasonable,
foreseeable, and caused by the Government’s partial breach, their ultimate success
and usage is irrelevant.” Yankee Atomic, 536 F.3d at 1276.
12
After the plaintiff makes its case for mitigation damages, however, “the
defendant may eliminate or reduce the alleged damages by showing either that the
‘[p]laintffs did not undertake reasonable mitigation efforts, or that the efforts they
did undertake were unreasonable.’” Entergy Nuclear Vermont Yankee, LLC v.
United States, 95 Fed. Cl. 160, 184 (2010) (citing Carolina Power & Light Co. v.
United States, 82 Fed. Cl. 23, 44 (2008), rev’d on other grounds, Vermont Yankee,
683 F.3d 1330).
In the second phase of this litigation, plaintiffs have alleged entitlement to
damages in the amount of $77.4 million. See Doc. 149 at 8. The court will
analyze plaintiffs’ claims in four broad categories: (1) the alleged damages that the
government did not specifically contest at trial; (2) damages for loading costs and
fuel recharacterization; (3) damages for plant modifications and equipment; and (4)
NRC fees.
I. Alleged Damages Not Contested At Trial
At the outset of this case, the court issued an order directing the parties to
cooperate in an audit process meant to streamline the evidentiary proceedings with
regard to the “accuracy or admissibility” of evidence supporting plaintiffs’
damages claim. See Doc. 32 at 2. Through this process, the parties identified, and
ultimately stipulated to, $59,431,458 in uncontested costs. See Doc. 136. This
figure includes $32,048,515 for expenses at Plant Hatch; $1,262,564 for expenses
at Plant Vogtle; and $26,120,379 for expenses at Plant Farley. See id. at 4-7.
To recover those costs as damages, plaintiffs must prove that the costs were
reasonably foreseeable, that the government’s breach caused the expenditures, and
that the damages are shown to reasonable certainty. Indiana Michigan, 422 F.3d at
1373.
As this court has previously observed, “[n]uclear fuel storage is inherently a
sensitive and expensive endeavor.” Yankee Atomic Electric Co. v. United States,
113 Fed. Cl. 323, 333 (2013). Here, the parties have agreed that the stipulated
costs were incurred “in connection with construction, operation, and/or
maintenance of its dry storage facilit[ies]” at plants Farley, Hatch and Vogtle.
Doc. 136 at 4, 5, 6. And because the necessity for each utility to construct its own
dry storage is clearly a foreseeable consequence of the government’s failure to
provide such storage, the costs to do so are also foreseeable.
13
These costs have also been shown to a reasonable certainty. The parties
conducted a thorough audit process in accordance with the court’s order, dated
January 9, 2009. See Doc. 32. At the court’s direction, that parties summarized all
damages figures and exchanged schedules of the same, along with:
a statement describing the source(s) for the items or figures listed
(e.g., ledgers, journals payrolls, invoices, checks, time cards, etc.), the
location(s) of the source(s), the time during the discovery period when
the source(s) may be examined or audited by the opposing party, the
name and address of the person(s) who prepared each schedule or
summary and who shall be made available to the opposing party
during an examination or audit of the source material to provide
information and explanations required for verification of the listed
items or figures.
Doc. 32 at 1. These schedules of damages were then filed with the court prior to
trial. See Doc. 137 (Plaintiffs’ Revised Exhibit List). The parties, in fact,
stipulated prior to trial that a majority of plaintiffs’ costs were actually incurred.
See Doc. 136.
That leaves plaintiffs to prove causation with regard to the stipulated costs.
Plaintiffs claim in their post-trial brief that “[t]he Government does not dispute
Southern’s entitlement to $59,431,458.” Doc. 149 at 8. In its post-trial response
brief, the government denies concession to this amount in damages, insisting that it
has agreed only that plaintiffs have incurred $59,431,458 in costs. See Doc. 152
at 38. The government argues: “Southern apparently believes that it is entitled to
recover all costs that it incurred in furtherance of its dry storage facility, even
though some of those costs would have been incurred with DOE performance.” Id.
Because plaintiff failed to submit a model of non-breach world damages for the
costs included in the $59 million, the argument goes, plaintiffs should not recover
any part of those costs. Id.
The government is correct that plaintiffs, as part of their causation proof, are
responsible for presenting a “comparison between the breach and non-breach
worlds.” Yankee Atomic, 536 F.3d at 1273. In order to determine how much
damage the plaintiff has sustained, the court must understand “the extent to which
his incurred costs differ from the costs he would have incurred in the nonbreach
world.” Energy Nw., 641 F.3d at 1306. See also Bluebonnet Sav. Bank, 67 Fed.
Cl. at 238 (“[B]ecause plaintiffs in this case are seeking expectancy damages, it is
14
incumbent upon them to establish a plausible ‘but-for’ world.”). This requirement
is not, as plaintiffs suggest, a technicality. See Doc. 158 at 11.
But the government is over zealous in its argument. While it is true that
plaintiffs did not enter into evidence a document entitled “Model of Damages in
the Non-Breach World” with respect to the stipulated costs, previous findings of
this court and evidence in the record are sufficient to satisfy plaintiffs’ burden. In
advocating for its strict interpretation of this requirement, the government asks the
court to elevate form over substance in a truly useless way.
This court held in the first phase trial that plaintiffs’ dry storage facilities
would not have been necessary had DOE performed under the contract. See S.
Nuclear Operating Co., et al. v. United States, 77 Fed. Cl. 396, 459 (2007).
Testimony in the second phase trial was in accord with this earlier conclusion. See
Tr. at 110:14 (Mr. Cocherell testified that plaintiffs would not have needed to
construct dry storage facilities at any of its plants had DOE performed.); Tr. at
554:16-23, 557:4-11, 557:24-558:10 (Mr. Metcalfe testified that had DOE
performed, plaintiffs could have avoided incremental dry fuel storage at each
facility at issue.). As plaintiffs correctly point out, “a utility can certainly take the
position that certain categories of costs would have been $0 in the nonbreach
world.” See Doc. 158 at 10 (citing Yankee Atomic Power Co. v. United States, 94
Fed. Cl. 678, 710-11 (2010) (holding that “[i]n [the] non-breach world, the
Yankees’ dry storage costs would have been zero because dry storage would not
have been built”)).
The government stipulated, prior to this second phase trial, that plaintiffs
incurred: (1) $26,120,379 “in connection with construction, operation, and/or
maintenance of its dry storage facility at Plant Farley,” Doc. 136 at 4; (2)
$32,048,515 “in connection with construction, operation, and/or maintenance of its
dry storage facility at Plant Hatch,” id. at 5; and (3) $1,262,564 “in connection
with the planning and design of its dry storage facilities at Plant Vogtle Units 1 and
2,” id. at 6. These stipulations amount to $59,431,458.
Because the dry storage facilities were only necessary due to the
government’s breach, it is a reasonable and small inference that the non-breach
world costs associated with those facilities would have been zero. It logically
follows, then, that the costs stipulated as directly related to those facilities were
caused by the government’s breach.
15
Indeed, although the government pays lip service to its position that plaintiff
should not recover anything at all, it effectively concedes that $59,431,460 of
plaintiff’s claim is recoverable. See Doc. 152 at 12, 84. The government offers the
$59,431,460 figure as its own “non-breach model.” See id. at 84. It apparently
arrived at this number by taking plaintiffs’ total damages claim of $77.4 million,
and subtracting from that figure the various items that it contested at trial, which
are discussed in detail below.
Thus, with regard to this portion of the damages claim, the plaintiffs and the
government apparently agree on the recoverable amount. Plaintiffs, therefore, are
entitled to recover these stipulated costs in an amount of $59,431,458.
II. Fuel Characterization and Loading Costs
Under the terms of the Standard Contract, plaintiffs are responsible for
providing “all preparation, packaging, required inspections, and loading activities
necessary for the transportation of SNF and/or HLW to the DOE facility.”
Plaintiffs’ Ex. 1 at IV.A.2(a).
Although they do not dispute this contractual obligation, plaintiffs seek to
recover the costs incurred for fuel characterization in an amount of $964,793, see
Doc. 149 at 24, and the internal and third-party labor costs incurred for loading the
fuel into casks in an amount of $6,946,436, see id. at 20. They argue that
“[b]ecause Southern will need to incur fuel characterization and loading costs
again in the future when DOE performs, those costs incurred to date for the Holtec
cask system are recoverable.” Id. at 19.
The government takes issue with plaintiffs’ position on several grounds,
including that plaintiffs cannot recover fuel characterization and loading costs now
because it would have incurred these costs in the non-breach world. See Doc. 152
at 61-63. Plaintiffs did not present a hypothetical model of what the non-breach
world costs would have been, and the government contends, if they had it “would
have shown that Southern would have characterized its fuel before loading to
DOE, just as it did to load to dry storage.” Id. at 61-62. In addition, the
government points out that plaintiffs’ own expert, Mr. Metcalfe, identified loading
costs as non-breach world costs. Id. at 62 (citing Tr. at 586:3-8).
Plaintiffs rely heavily on the Federal Circuit’s reasoning in the second round
of the Carolina Power litigation to support their argument. In that case, the
government argued that because of its breach, the plaintiff avoided certain costs
16
that it would have incurred in the non-breach world, and therefore, plaintiff’s
damage claim should be reduced. See Carolina Power & Light Co. v. United
States, 573 F.3d 1271, 1277 (Fed. Cir. 2009). The court denied the government’s
request, holding that: “Just as the utilities cannot now collect damages not yet
incurred under the ongoing contract, the government cannot prematurely claim a
payment that has not become due.” See id. (quoting Yankee Atomic, 536 F.3d at
1281).
Despite the fact that plaintiffs here seek to recover damages that have
actually been incurred—and are, in fact, neither deferred nor avoided—they argue
that the Carolina Power decision supports an award of its characterization and
loading costs. The court disagrees.
As this court held in the recent Yankee Atomic decision, “a case in which the
government seeks to avoid responsibility for costs not yet incurred is
fundamentally different from a case where the plaintiffs seek to avoid
responsibility for proving that actually-incurred damages were caused by the
government’s breach are recoverable.” See Yankee Atomic, 113 Fed. Cl. at 342.
Plaintiffs have misinterpreted the import of the Circuit’s Energy Northwest
decision on its Carolina Power decision. As such, the court’s reasoning from the
second round Yankee Atomic decision bears repeating.
In Energy Northwest v. United States, the plaintiff sought to recover the
costs incurred for plant modifications under the theory that “the issue is not
whether the modification costs would have been incurred in a hypothetical non-
breach world, but whether they will be incurred again in the future, when the DOE
ultimately performs and begins accepting the . . . SNF.” 641 F.3d 1300, 1305 (Fed.
Cir. 2011). The government insisted that the plaintiff could not recover for these
plant modifications because it had failed to demonstrate what its costs would have
been in the non-breach world, citing the first-round Yankee Atomic case, 536 F.3d
1268.
The Circuit explained the various precedent as follows:
These cases address separate aspects of the damages analysis. Yankee
Atomic shows the importance of proving causation by comparing a
hypothetical “but for” world to a plaintiff’s actual costs. 536 F.3d at
1273-74. Under its rule, a plaintiff must prove the extent to which his
incurred costs differ from the costs he would have incurred in the non-
17
breach world. Carolina Power addresses the separate circumstance
where a breaching party seeks to offset an award by proving that the
non-breaching party has achieved some cost savings because the
breach permitted it to avoid—not just defer—some aspect of
performance. 573 F.3d 1277.
Energy Northwest, 641 F.3d at 1306-1307 (emphasis added). The court agreed
with the government, holding that “[b]efore considering any offsets to the award,
the trial court had an obligation to first establish that the entire awarded damages
were actually caused by the breach,” and that the plaintiff had an “obligation to
prove the recoverable costs associated with that construction,” noting that “[i]f a
cost would have been incurred even in the non-breach world, it is not recoverable.”
Id. at 1307.
As in the Yankee Atomic decision, plaintiffs here “improperly attempt to
apply to their own proof of damages a rule governing the breaching party’s burden
to prove entitlement to an offset against those damages. The Carolina Power
analysis simply does not apply to plaintiffs’ damages in this instance.” Yankee
Atomic, 113 Fed. Cl. at 343.
The court is not immune to the equitable appeal of plaintiffs’ argument that
they should not be required to shoulder the expense of re-characterizing or re-
loading their fuel. The court, in fact, agrees that a party should not ultimately be
made to pay twice for an expense it is obligated to pay only once under a contract.
In order to recover for such an injury, however, it makes good sense to require that
the injury first be sustained. Without proof of a difference between the breach
world and non-breach world costs as to characterizing and loading, the court
cannot find that plaintiffs have yet been injured.
Plaintiffs attempt to avoid this problem, at least with respect to the loading
costs, by arguing that they would not have incurred these particular costs, for
loading the Holtec casks, in the non-breach world. Rather, they would have
incurred the costs for loading the DOE-provided casks. See Doc. 149 at 20; Doc.
158 at 12-13. This argument seems to imply that plaintiffs’ costs to load Holtec
casks would have been zero in the non-breach world, making all such costs
incurred in the breach world recoverable.
This is a specious distinction. Plaintiffs are essentially arguing that because
their mitigation efforts are not identical to what performance under the contract
would have been, the two costs should not be compared in the causation analysis.
18
As an initial matter, plaintiffs may very well have been obligated to incur the costs
of loading Holtec casks in the non-breach world. See Tr. at 335:5-6 (Zabransky
testimony that DOE may choose to use the Holtec system). If that were the case,
plaintiffs would not recover any of the loading costs they now claim, even under
their own analysis.
But even assuming the government would have chosen a cask other than
Holtec, plaintiffs cannot recover here. Given the government’s failure to identify a
cask, the court does not fault plaintiffs for their inability to provide a precise
calculation of the cost difference between DOE and Holtec casks. See Locke v.
United States, 151 Ct. Cl. 262, 267 (1960) (“The defendant who has wrongfully
broken a contract should not be permitted to reap advantage from his own wrong
by insisting on proof which by reason of his breach is unobtainable.”). Plaintiffs,
however, failed to make any showing at all that the loading costs would be
different for any other available cask system. As such, plaintiffs have not met their
burden to demonstrate damages.
Plaintiffs also argue that the government should be collaterally estopped
from contesting its alleged damages for loading costs because loading costs were
awarded in the first round of litigation. See Doc. 149 at 21 n.6. Plaintiffs’ claim
fails on the first requirement for collateral estoppel—that the “issue is identical to
one decided in the first action.” See Laguna Hermosa Corp. v. United States, 671
F.3d 1284, 1288 (Fed. Cir. 2012) (listing the four requirements to prove collateral
estoppel). In the first-round case, the court found that the government failed to
prove entitlement to an offset. See S. Nuclear Operating Co. v. United States, 77
Fed. Cl. 396, 450 (2007). But here, the issue is plaintiffs’ responsibility to prove
their damages. Which, as the Federal Circuit explained in its Energy Northwest
decision discussed above, is a separate issue that must be addressed prior to
considering any offsets sought by the government. Energy Northwest, 641 F.3d at
1307.
Plaintiffs have failed to prove that they incurred characterization or loading
costs that would not have been incurred in the non-breach world. Recovery for
such costs are, therefore, denied.
III. Equipment and Plant Modifications
Plaintiffs claim entitlement to approximately $5.7 million in damages for
costs related to equipment, plant modifications, loading procedures development,
and an engineering study. See Doc. 149 at 10. Unlike the fuel characterization and
19
loading costs, which plaintiffs certainly would have incurred in the non-breach
world, plaintiffs contend that these items either would have been provided by DOE
in the non-breach world, or would not have been necessary had DOE performed.
See Doc. 149 at 10. The government disputes the claim, arguing that these costs
would have been incurred by plaintiff in the non-breach world, and are, therefore,
not recoverable. See Doc. 152 at 39.
Under the terms of the Standard Contract, DOE’s responsibilities are, in
relevant part, as follows:
DOE shall arrange for, and provide, a cask(s) and all necessary
transportation of the SNF and/or HLW from the Purchaser’s site to the
DOE facility. Such cask(s) shall be furnished sufficiently in advance
to accommodate scheduled deliveries. Such cask(s) shall be suitable
for use at the Purchaser’s site, meet applicable regulatory
requirements, and be accompanied by pertinent information including,
but not limited to, the following:
(a) written procedures for cask handling and loading, including
specifications on Purchaser-furnished cannisters [sic] for
containment of failed fuel;
(b) training for Purchaser’s personnel in cask handling and loading,
as may be necessary;
(c) technical information, special tools, equipment, lifting
trunnions, spare parts and consumables needed to use and
perform incidental maintenance on the cask(s), and
(d) sufficient documentation on the equipment supplied by DOE.
Plaintiffs’ Ex. 1 at IV.B.2.
In order to determine which costs plaintiffs are entitled to recover, the court
must balance the government’s responsibilities under the contract against
plaintiffs’ responsibilities to provide “all preparation, packaging, required
inspections, and loading activities necessary for the transportation of SNF and/or
HLW to the DOE facility.” Plaintiffs’ Ex. 1 at IV.A.2. The court finds that
plaintiffs are entitled to recover for items that are so related to either dry storage, or
the casks that they were forced to purchase because of the government’s breach, so
20
as to be part and parcel of their mitigation efforts. Plaintiffs, however, cannot
recover for items so related to each individual site that the costs fall within the
universe of preparation and loading costs. Deciding on which side of this line each
item falls is, obviously, an intensively fact-specific inquiry. After careful
consideration of the testimony and other evidence in the case, the court has divided
plaintiffs’ claim as follows.
A. Recoverable Costs
1. Plant Hatch
In order to accommodate the Holtec cask system, Georgia Power installed
“additional power supplies for the forced helium dehydrator and supplemental
cooling system,” along with “a new HVAC system to alleviate the higher
temperatures on the refueling floor that resulted from adding this additional
equipment.” Doc. 149 at 40-41. These modifications cost $1,187,476. See Doc.
169 at 6. The government argues that Georgia Power cannot recover for the
modifications because they would have been required with DOE performance. See
Doc. 152 at 56.
a. Power Supplies for Forced Helium Dehydrator and
Supplemental Cooling System
Loading SNF into a cask takes place underwater, in the spent fuel pool. See
Tr. at 161:15-23 (Ripple). In order to protect the structural integrity of the cask,
any water left in the cask from the loading process must be extracted prior to
sealing the lid, which is accomplished in one of two ways—through vacuum
drying or forced helium dehydration. See Doc. 149 at 41 (citing Tr. at 161:15-
162:20) (Ripple), Tr. at 256-259 (Bunt)). Here, Georgia Power had a vacuum
drying system in place, see Tr. at 245:10-19 (Bunt), but installed helium
dehydration equipment, as required for the Holtec casks chosen by Georgia Power
in its mitigation efforts. See Tr. at 256-259 (Bunt). In addition, Georgia Power
installed a supplemental cooling system to ensure that the Holtec casks did not get
too hot during the loading process. Tr. at 256:25-257:6 (Bunt).
The government has already stipulated that the cost of these systems are
related to Georgia Power’s dry storage efforts. See Doc. 136 at 5-6; Plaintiffs’ Ex.
5 at 2. As such, Georgia Power will recover for the equipment expenses as part of
the recovery awarded above for costs uncontested at trial. What the government
specifically contests here is the cost of building modifications to provide the
21
necessary power supplies for the dehydration and cooling systems. See Doc. 152
at 55.
The government argues that the plant modifications would have been
required in the non-breach world because Georgia Power would be unable to load
high burn-up fuel with a vacuum dehydration system. See Doc. 152 at 55. In
support of this assertion, the government offers Mr. Maret’s opinion that “the same
modifications would be necessary if DOE had performed and provided the
equipment for–the cask equipment for Southern’s use.” Tr. at 871:7-10. Mr.
Maret also testified, however, that he was “not certain” whether any other cask
manufacturer uses helium dehydration. Tr. at 912:9. In light of the government’s
refusal to identify the cask system it would have used in a non-breach world, see
Tr. at 327:16-24 (Zabransky), it is unclear to the court on what basis Mr. Maret
could have testified that Georgia Power would have been required to provide
power supplies for helium dehydration and supplemental cooling systems in the
non-breach world, while also failing to identify a single non-Holtec cask that
would have required such modifications. This incongruity in Mr. Maret’s
testimony prevents the court from crediting his opinion on this point. Mr. Maret’s
testimony is also at odds with Mr. Bunt’s testimony that vacuum drying systems
continue to be common in the industry. See Tr. at 261:12-13.
The court has previously held that plaintiffs’ choice to use Holtec casks was
reasonable mitigation. S. Nuclear, 77 Fed. Cl. at 432 (“The court concludes
plaintiffs’ reracking and ISFSI decisions were reasonable mitigation given the
utilities’ rational belief that DOE was not going to commence performance in
January of 1998, or at any reasonably foreseeable time thereafter.”) Furthermore,
it is clear that Georgia Power installed the power supplies at issue to support the
helium dehydration and supplemental cooling systems required to use the Holtec
casks. See Tr. at 258:24-259:3 (Bunt); 161:3-5 (Ripple). As such, the court holds
that the government’s breach caused Georgia Power to install the power supplies.
Because the government has failed to demonstrate that Georgia Power’s
mitigation decision with regard to the dehydration and supplemental cooling
systems was unreasonable, no offset is warranted.
b. HVAC System
Prior to installation of the forced helium dehydrator and the supplemental
cooling system, Georgia Power controlled temperatures on the loading room floor
through use of “stay times” and “cooling vests” worn by employees. Tr. at 287:5-
22
17 (Bunt). After installation of the helium dehydrator and supplemental cooling
system, however, these methods were no longer sufficient due to the increased heat
load caused by the new equipment. Tr. at 261:14-16 (Bunt) (testifying that
increased temperatures were “specifically attributed to the forced helium
dehydrator”); Tr. at 259:24-25 (Bunt) (stating that plaintiffs added “chilling units
to offset that heat load increase on the floor”). To compensate for the increased
temperatures, Georgia Power installed an HVAC system on the loading room floor.
Tr. at 260:21-23 (Bunt). Georgia Power claims that it should recover the costs of
the HVAC system because it would not have been necessary in the non-breach
world.
The government does not dispute the fact that the increased temperatures
were attributable to the new equipment. Instead, it attacks Georgia Power’s claim
on two grounds, arguing that they should not recover because: (1) Georgia Power
would have installed the HVAC unit in the non-breach world because it would not
have been able to continue using their vacuum-drying system and any replacement
system would have increased temperatures; and (2) Georgia Power benefitted from
the HVAC unit beyond offsetting the heat increases caused by the helium
dehydration and supplemental cooling systems, and would have made the
modifications to improve conditions at the plant even had it not installed the new
drying equipment. See Doc. 152 at 56-57.
As explained above, the government’s evidence that Georgia Power would
necessarily be unable to continue using a vacuum-drying system is unpersuasive,
and therefore cannot serve as the basis for offsetting its damages for the HVAC
equipment.
In support of its argument that Georgia Power would have installed the
HVAC unit even if it had not installed the helium dehydrator and supplemental
cooling system, the government insists that “the modification was ‘required’ not
just for cask loading, but as a ‘betterment’ to Plant Hatch.” Doc. 152 at 57 (citing
Tr. at 285:22-286:18 (Bunt); Defendant’s Ex. 58 at KRGSNCIIb-005996 (a work
order that includes the term “plant betterment” in reference to the HVAC
improvements)).
Georgia Power, however, presented evidence that they would not have
installed the HVAC system in the non-breach world. Mr. Bunt testified that he
would not have expected any changes in the cooling system, as Georgia Power had
“not modif[ied] any cooling up there for the first nine, ten years of operation of dry
storage, utilizing the vacuum drying system . . . .” Tr. at 261:5-13 (Bunt). He also
23
explained that the modifications were designed to offset only the additional heat
from the new equipment, not to compensate for pre-existing heat problems:
Those modifications were to offset the additional heat load that was
added to the refueling floor because of the added heater and chiller
functionality of the [forced helium dehydrator] system. And the way
we sized that chiller unit is we looked at the additional heat load from
those two components and we made sure that the chillers were
capable of offsetting that heat load to the floor. We did not do a full
heat load calculation of the floor, only the delta heat load difference
for the new equipment.
Tr. at 260:21-261:4 (Bunt).
The court finds that Georgia Power made a reasonable effort to limit its
mitigation efforts to the scope of the damage caused by the breach—here, the
increased heat load specifically attributable to the dehydration and supplemental
cooling equipment. The fact that the work order referred to by the government
uses the term “plant betterment” does not change this fact. Even if, as the
government suggests, Georgia Power’s reasonably-tailored mitigation efforts had
some unintended benefit on the work conditions on the refueling floor, Georgia
Power, as the non-breaching party, should not be penalized.
For the foregoing reasons, Georgia Power is entitled to recover $1,187,476,
the costs of installing power supplies for the forced helium dehydration,
supplemental cooling, and HVAC systems at Plant Hatch, and no offset is
warranted.
2. Plant Vogtle
Plant Vogtle includes four reactor units. Units 1 and 2 are operational, see
Tr. at 267:16-17 (Bunt), and the storage of SNF from these two units is the subject
of this lawsuit. Units 3 and 4 are in the construction phase, see Tr. at 267:15-16,
and any future SNF storage needed for these units is unrelated to the breach at
issue. Georgia Power made a number of modifications at Plant Vogtle, not all of
which are recoverable. The court will address each modification in turn, but finds
that Georgia Power may recover ISFSI engineering and design costs and the
construction costs of a new sally port.
24
a. ISFSI Engineering and Design Costs
While assessing dry storage options for SNF from Units 1 and 2, Georgia
Power hired Bechtel Corporation to conduct a comprehensive design and
engineering study. The study “involved looking at the plant site, identifying where
an ISFSI could go, what would be entailed in all the activities inside the building,
outside the building, to go through the full functionality of going to an ISFSI . . . .”
Tr. at 265:16-20 (Bunt). In the work order, the scope of the project was defined as
follows:
Develop an overall plan for the design and implementation of the
[Plant Vogtle] ISFSI. The ISFSI will meet the fuel storage life cycle
requirements for Units 1 and 2, with consideration for Units 3 and 4.
The ISFSI will be designed to accommodate 250 casks for Units 1 and
2, with consideration for 50 additional casks to support an 80 year
plant life and consideration for an additional 200 casks for Units 3 and
4.
Defendant’s Ex. 69 at KRGSNCIIb-006053. These services cost $1,489,258. See
Doc. 169 at 3.
The government claims that Georgia Power should not recover any costs of
the study, reasoning that it would have spent the same amount on a study in the
non-breach world. Georgia Power, so the argument goes, would need to build an
ISFSI for Units 3 and 4 irrespective of the government’s breach. And because the
cost of the study is not dependent on the size of the ISFSI, Georgia Power would
have paid the same amount for a future study that only applied to Units 3 and 4.
See Doc. 152 at 65-66. Therefore, it should not recover those costs now.
Georgia Power acknowledges that the cost of the ISFSI study is not
dependent on the size of the structure, see Doc. 149 at 60, but it effectively
counters the government’s position that these costs should be attributed to Units 3
and 4. Mr. Bunt testified that the study only analyzed the storage needs for Units 1
and 2, and did not support the future storage of fuel from Units 3 and 4 because the
fuel from Units 3 and 4 would have significantly different characteristics, and
therefore different storage requirements, than the fuel from Units 1 and 2. See Tr.
at 266:1-267:2. He also testified that Georgia Power has no present plan for
storing fuel from Units 3 and 4 on the ISFSI, and that it is not permitted to do so
under their current NRC license. See Tr. at 267:3-11. Both Mr. Bunt and Mr.
25
Cash testified that the study was paid for entirely from funds allocated for Units 1
and 2, see Tr. at 267:25-268:4 (Bunt); Tr. at 793:20-21 (Cash).
The government cites to several documents relating to the study that discuss
Units 3 and 4—including the work order for the study, see Defendant’s Ex. 69; the
study itself, Defendant’s Ex. 81; and several PowerPoint presentations about the
study, see Defendant’s Exs. 71, 73, 97. The mention of Units 3 and 4 in these
documents does not undercut Georgia Power’s position that the central purpose of
the study was to facilitate dry storage for fuel from Units 1 and 2. For example,
the Bechtel study states one of its goals as follows: “Design and implement the
[Plant Vogtle] ISFSI in such a way that spent fuel storage for Units 3 and 4 can be
accommodated; that is, not precluded.” Defendant’s Ex. 81 at KRGSNCIIb-
005784. Ensuring that future storage is not precluded does not shift the costs of
the study to that future storage project. The language of the work order, likewise,
indicates that Units 1 and 2 are truly the subject of the study, stating that the study
will plan an ISFSI to “meet the fuel storage life cycle requirements for Units 1 and
2, with consideration for Units 3 and 4.” Defendant’s Ex. 69 at KRGSNCIIb-
006053 (emphasis added). It simply makes no sense to ignore the existence of a
future project when dealing with something as serious, and as potentially
hazardous, as storing spent nuclear fuel.
Georgia Power is, therefore, entitled to recover $1,489,258 in connection
with engineering and design costs for Vogtle Units 1 and 2, and no offset is
warranted.
b. Sally Port Construction Costs
Georgia Power seeks to recover $486,595 in compensation for construction
costs of a new sally port. See Doc. 169 at 3. Georgia Power built the new sally
port because the existing port led to a road that could not bear the combined weight
of the loaded Holtec casks and the transportation vehicles, some 600,000 pounds.
See Tr. at 795:16-22 (Cash). The opening of the sally port was also too narrow for
the large transportation vehicles required to move the loaded casks to the ISFSI.
See Tr. at 795:22-25 (Cash). In the non-breach world, however, Georgia Power
claims that it would not have needed the new sally port because the government
would have brought smaller casks, in accord with its contractual obligation to
provide casks “suitable for use at the Purchaser’s site.” Plaintiffs’ Ex. 4 at IV.B.2.
In addition to the sally port limitations, Georgia Power argues that the government
would have provided small casks to Plant Vogtle because there was no functional
rail spur at the site, therefore requiring the government to remove the SNF in
26
smaller, lighter casks by truck. See Doc. 149 at 62; Tr. at 271:13-16, 315:17-
316:21 (Bunt). Georgia Power insists that the original sally port could have
accommodated any cask that was appropriate for such over-the-road transport. See
Doc. 149 at 62; Tr. at 796:10-13 (Cash).
The government’s counterargument is two-fold. First, it claims that Georgia
Power would have installed the new sally port in the non-breach world because the
ability to use larger casks is more efficient, and safer for the plants’ workers, since
loading fewer, large casks would reduce the radiation to which the workers were
exposed during the loading campaigns. See Tr. at 271:21-272:4, 272:9-13 (Bunt).
See Doc. 152 at 64 (citing Tr. at 879:20-880:9 (Maret) (testifying that SNF is
“essentially trash” that the plaintiffs “want to get rid of as much as [they] can at a
given time”); Tr. at 879:4-7 (Maret) (stating, with regard to loading one-assembly
casks, that: “Based on everything I’ve heard, it looks to me that that would be
contradictory to the way Southern or any company that I’m familiar with would
choose to conduct business.”)). Second, it argues that because Plant Vogtle had a
rail spur at some point in the past, and plans to install another spur at some point in
the future, see Tr. at 271:13-16 (Bunt), that the court should discredit Georgia
Power’s argument that DOE would have had to remove casks by truck. See Doc.
152 at 64-65.
It is useful in examining this particular item on plaintiffs’ list of damages to
consider what is meant by the short-hand terms “breach world” and “non-breach
world.” What the court, and presumably the parties, mean in using these terms is:
(1) the “breach world” refers to the collection of circumstances that exist, along
with the actions that were taken by the parties, because a party breached one or
more of its contractual obligations, and (2) the “non-breach world” refers to the
collection of circumstances and actions that one would expect to have occurred had
both parties performed their contractual obligations. It is tempting, however, to
stretch the term “non-breach world” to refer to all circumstances one would
reasonably expect to see had a breach not occurred—in other words, to divorce the
expected circumstances or actions from the language of the contract. The
difference appears subtle, but the sally port question brings it into relief.
Here, it seems very likely to the court that, as the government argues,
Georgia Power would have made plant modifications to accommodate larger casks.
The efficiencies of time and money, along with the reduction in risk to workers,
are considerable. On this basis, the government asks the court to find that in the
“non-breach world,” Georgia Power would have installed a new sally port, and
thus, disallow recovery of construction costs. The problem with this argument is
27
that these very reasonable, and even likely, steps are not required by the contract,
and it is merely speculation that Georgia Power would have taken them.
Therefore, insofar as the non-breach world is one in which the parties abide by
their contractual obligations, the court finds that Georgia Power would not have
been required to install a new sally port. The government is, in fact, required
under the contract to deliver casks that are “suitable for use at the Purchaser’s site.”
Plaintiffs’ Ex. 4 at IV.B.2. And casks requiring expensive building modifications
are, by definition, not “suitable for use at the Purchaser’s site.”
As such, Georgia Power is entitled to recover the sally port construction
costs in an amount of $486,595, and no offset is warranted.
3. Plant Farley
Alabama Power made a number of modifications at Plant Farley, not all of
which are recoverable. The court will address each modification in turn, but finds
that Alabama Power may recover for the pit covers and loading procedure
development.
a. Pit Covers
Alabama Power designed and installed new loading pit and wash pit covers
to accommodate the Holtec casks, while still leaving enough room for activities
associated with closing the casks. See Doc. 149 at 48. Specifically, the Holtec
dehydration equipment required considerable space. See Tr. at 158:5-12 (Ripple).
Alabama Power argues that it would not have incurred these costs in the non-
breach world because the government would have brought the equipment
necessary to load DOE casks, which it assumes would not be Holtec, and therefore,
would not have created a space issue. See Doc. 149 at 48-49. The pit covers cost
$69,364. See Doc. 169 at 4.
The government counters that because of the limited floor space in the plant,
Alabama Power would have replaced the pit covers in the non-breach world simply
to conduct “normal operations of the plant.” Doc. 152 at 46; Tr. at 852:21-853:11
(Maret).
Neither party hits precisely on the reasoning that the court believes is best
supported by the evidence in this case. The Standard Contract specifically states
that the government will provide casks that are “suitable for use at the Purchaser’s
site” and that the government will provide equipment “needed to use . . . the
28
cask(s).” Plaintiffs’ Ex. 1 at IV.B.2. The term “suitable for use,” read along with
the government’s obligation to provide equipment “needed to use” the casks,
implies that the casks chosen would not require major building renovations. Here,
the casks that were reasonably chosen in mitigation required new pit covers to
accommodate necessary equipment. As with the penetrations at Plant Farley, the
pit covers were installed to create room for the dehydration system which is
required for the Holtec casks. Because Alabama Power purchased and loaded the
Holtec casks as a result of the government’s breach, it is entitled to recover for the
modifications that were necessary to facilitate the loading process—including the
new pit covers.
Alabama Power is entitled to recover $69,364 for the pit covers, and no
offset is warranted.
b. Loading Procedure Development
Alabama Power seeks to recover $303,030 for site-specific loading
procedure development. See Doc. 169 at 3. The argument is straightforward—the
Standard Contract states that the government will provide “written procedures for
cask handling and loading, including specifications on Purchaser-furnished
cannisters [sic] for containment of failed fuel. . . .” Plaintiffs’ Ex. 1 at IV.B.2(a).
The government acknowledges this language in the Standard Contract, but
claims that DOE is only required “to provide general written procedures for
loading,” but not “site-specific loading procedures.” See Doc. 152 at 57. In
support of its position, the government offers the testimony of Mr. Zabransky, the
contracting officer for the Standard Contract, and Mr. Maret, one of the
government’s experts. First, Mr. Zabransky testified that “it’s [the utilities’]
responsibility to take those procedures [from DOE] and make them site-specific.”
Tr. at 741:4-7. Mr. Maret then testified that Alabama Power should be charged
with site-specific procedure development because those procedures “are associated
with how the plant [is] managed and operated, and they’re all done in accordance
with the Part 50 license, which is held by the customer, by Southern Company or
the owners of the facility, not by DOE.” Tr. at 869:24-870:4. Mr. Maret also
stated in his expert report that “basic loading operations for all spent fuel casks are
common and generic procedures are typically provided by cask vendors, variations
in the plant design and plant licensing requirements necessitate that procedures be
customized for each plant.” Defendant’s Ex. 74 at 16.
29
The language of the Standard Contract does not distinguish between general
and site-specific loading procedures. And if, as Mr. Maret explained, the cask
vendor or manufacturer provides general instructions, it stands to reason that the
government’s contractual responsibility is to provide something more than that.
Furthermore, there are additional indications in this section of the Standard
Contract that the government agreed to take specifics of each plant into
consideration. The contract states, for example, that the government will furnish
casks that are “suitable for use at the Purchaser’s site, meet applicable regulatory
requirements, and be accompanied by pertinent information,” and that the
government will provide “training for Purchaser’s personnel.” Plaintiffs’ Ex. 1 at
IV.B.
One of the cardinal rules of contract interpretation is that “[i]f the terms of a
contract are clear and unambiguous, they must be given their plain meaning.”
Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1375 (Fed. Cir. 2004). A
contract term is only ambiguous if it is “susceptible to more than one reasonable
meaning.” Id. at 1375-76. The court finds that the contract language at issue here
is unambiguous, and requires the government to provide site-specific loading
procedures. The government certainly could have circumscribed the specificity of
the procedures it agreed to provide in the contract language, but did not do so.
Alabama Power is entitled to recover $303,030 for loading procedure
development, and no offset is warranted.
B. Unrecoverable Costs
1. Plant Vogtle Crane Modifications
Georgia Power seeks to recover $289,330 for modifications made to the
crane at Plant Vogtle. See Doc. 149 at 63. It claims that it only modified the crane
to accommodate the 125-ton Holtec casks, and that because the crane could have
been used without modification to lift single-assembly, 25-ton casks, the
modifications would not have been necessary in the non-breach world. See id. at
63-64.
The crane at Plant Vogtle was derated, meaning its permissible load was
reduced, for a number of reasons, including “reliability” problems. Tr. at 274:12
(Bunt). The evidence adduced at trial does not support a finding of a definite
weight that the derated crane could safely handle. Mr. Bunt, Georgia Power’s
Severe Accident Management Manager, explained: “The placard I saw was 55 tons
30
that it was derated to, and then it was administratively controlled to a value less
than that so that you never approach that value.” Tr. at 277:12-15. When asked
what that administratively controlled value was, he could not recall. See Tr. at
277:17 (Bunt).
While Georgia Power did elicit an admission from Mr. Zabransky on cross-
examination that the crane could have hoisted a 25-ton, single-assembly cask, see
Tr. at 334:18, his testimony is at odds with the testimony of Mr. Cash, who served
as project manager for the Vogtle Major Project Groups until shortly before the
trial started, see Tr. at 756:8-12 (Cash). Mr. Cash testified that, due to problems
with the crane’s main hook, Georgia Power was unable to lift the 25-ton casks that
they planned to use to remove damaged fuel rodlets from the plant. See Tr. at
771:13-16.
Georgia Power’s theory for recovery depends on a finding that the crane, in
its unrepaired state, was capable of lifting an existing cask. See Doc. 149 at 63-64.
Because the most credible evidence at trial indicates that the crane would have had
problems handling even the relatively small load of 25 tons, the court finds that
Georgia Power would have repaired the crane in the non-breach world. Therefore,
it cannot recover the expenses for doing so.
2. Plant Farley
Alabama Power claims that it should recover for a number of modifications
at Plant Farley pursuant to the government’s obligation to provide “technical
information, special tools, equipment, lifting trunnions, spare parts and
consumables needed to use and perform incidental maintenance on the cask(s),”
Plaintiffs’ Ex. 1 at IV.B.2(c), including the power distribution and piping
penetrations, the work platform, 4 the lift yoke support arm, and the lift yoke
extension and stands. See Doc. 149 at 46-56. The court holds that Alabama Power
cannot recover these costs for the following reasons.
4
In the first Southern case, the court awarded plaintiffs damages for a work platform installed at
Plant Hatch, holding that there was “no dispute that the platform was required to load” the casks.
See S. Nuclear, 77 Fed. Cl. at 452. The evidence in this case does not support the same
conclusion.
31
a. Power Distribution and Piping Penetrations, Units 1
and 2
As Georgia Power did at Plant Hatch, Alabama Power modified the power
supplies at Plant Farley, in both Unit 1 and Unit 2, to accommodate the power
requirements of the forced helium dehydrator and supplemental cooling system
needed to load the Holtec casks. See Tr. at 159:10-24 (Ripple) (explaining that
Plant Farley had very limited space and so the helium dehydrator and supplemental
cooling systems were located outside the building and penetrations through the
walls were necessary to connect the equipment on the loading room floor); Tr. at
242:14-18 (Bunt) (testifying that the penetrations would not have been necessary if
plaintiffs continued to use the vacuum drying system); Tr. at 244:23-245:19 (Bunt)
(explaining that Plant Farley had pre-existing electrical hook-ups and penetrations
that supported the vacuum drying system, but that they needed to be modified to
support the helium dehydration system, and noting that the penetrations for Units 1
and 2 were of the same type).
The government objects to these expenses, again claiming that Alabama
Power would have incurred the costs in the non-breach world because it would
have needed to replace the vacuum-drying system with the helium dehydrator and
supplemental cooling system even with DOE performance. See Doc. 152 at 52-54.
This argument fails with respect to Plant Farley for the same reasons it failed with
respect to Plant Hatch.
The government makes an additional argument with respect to Plant Farley.
It claims that the penetrations were also used for “pool filtration and to install
lighting and receptacles in the cash wash pit area.” See Doc. 152 at 51, 53-54. In
other words, the government argues that Alabama Power would have made the
modifications to support functions in both Units 1 and 2 wholly apart from the
dehydration and supplemental cooling systems. In making this claim, the
government relies heavily on Mr. Maret’s opinion that the lighting and filtration
functions are necessary for loading any cask. See Tr. at 864:18-868:11.
Alabama Power does not disagree that lighting and filtration are important,
but it presented testimony that the modifications, to the extent they affected
functions beyond the dehydration equipment, “were made in order to ensure [Plant
Farley] had sufficient power for the filtration once we added the additional
electrical load.” Tr. at 214:16-18 (Ripple). In fact, Alabama Power successfully
loaded casks prior to making any modifications with the vacuum-drying system
and the existing electrical work. See Tr. at 159:4-6 (stating that plaintiffs switched
32
to the helium dehydrator system in 2008), and see Tr. at 150:4-6 (Ripple) (stating
that plaintiffs loaded casks from Farley Unit 1 in 2005 and 2006). See also Tr. at
106:11-14 (Cocherell) (citing 2005 as the year in which the first cask was loaded at
Plant Farley Unit 1).
The evidence tends to prove that loading activities and pool filtration were
functional prior to the plant’s decision to the install building penetrations at issue.
The penetrations were installed to accommodate the helium dehydration system
required for the Holtec casks and the necessary changes due to its substitution for
the vacuum-drying system. Because Alabama Power purchased and loaded the
Holtec casks as a result of the government’s breach, the court finds that the
government’s breach also caused Alabama Power to install the power distribution
and piping penetrations.
In order to recover, however, Alabama Power is required to prove not only
that the damages were reasonably foreseeable, and that the breach caused the
damages, but the damages must also be “shown with reasonable certainty.”
Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir.
2005) (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed.
Cir. 2002)).
On November 21, 2014, the court ordered plaintiffs to itemize their
damages, and to provide record cites to support each figure, because plaintiffs’
failure to identify specific dollar figures associated with each claimed item had
frustrated the court’s effort to finalize this opinion. See Doc. 168. In their
responsive filing, plaintiffs admitted that they had not proven specific costs
attributable to the power distribution and piping penetrations at Plant Farley. See
Doc. 169 at 5.
It is true that damages need not be “ascertainable with absolute exactness or
mathematical precision,” but “recovery for speculative damages is precluded.”
Indiana Michigan, 422 F.3d at 1373 (citations omitted). Enough evidence to allow
the court to make “a fair and reasonable approximation” is required. Bluebonnet
Sav. Bank v. United States, 266 F.3d 1348, 1355 (Fed. Cir. 2001) (citations
omitted). The court finds that plaintiffs did not submit enough evidence for the
court to assign a reasonable value to the power distribution and piping penetrations
at Plant Farley. Therefore, even though the court finds that the defendant’s breach
caused Alabama Power to make these modifications, it cannot recover.
33
b. Work Platform, Lift Yoke Support Arm, Lift Yoke
Extension and Stands
Alabama Power also claims that it should recover for the costs incurred to
install the work platform, the lift yoke support arm, the lift yoke extension and the
lift yoke extension stands. See Doc. 149 at 46-54. The problem with Alabama
Power’s argument is the same for each of these items—while they are convenient
and smart modifications, they are not necessary to load the casks.
Alabama Power installed a work platform at Farley, Unit 2 “to provide
access to the cask while we’re doing the welding and decontamination” while
loading. See Doc. 149 at 46 (citing Tr. at 156:23-25 (Ripple)). The government
argues that Alabama Power would have installed the platform in the non-breach
world because it makes sense to do so. Mr. Maret testified that the decision to
install the work platform was a good one, because it allowed Alabama Power to
“facilitate the work and make it more efficient, make it safer and to reduce the
potential for radiation exposure. . .” Tr. at 849:15-17. Alabama Power’s good
judgment, however, does not necessarily translate into contract recovery. As the
government correctly stated: “An installed work platform . . . is not ‘needed to use’
a cask because Southern could have—and actually did—use scaffolding to access
the top of its casks.” Doc. 152 at 43. See also Tr. at 748:13-17 (Zabransky)
(testifying that casks can be loaded with scaffolding instead of work platforms); Tr.
809:5-16 (McCallum) (testifying that plaintiffs have previously used scaffolding to
at access the tops of casks); Tr. at 849:4-23 (Maret) (testifying that plaintiffs could
have chosen to use scaffolding, but that the work platform was a better solution);
Tr. at 903:14-22 (Maret) (testifying that the work platform “makes sense” but is
“not necessary to load a cask”).
Alabama Power seeks to recover the costs of installing a support arm for the
lift yoke that allowed it to store the lift yoke in the spent fuel pool building. See
Doc. 149 at 49-52. In the non-breach world, the government would likely have
provided the lift yoke itself. See Tr. at 901:10-11 (Maret). The evidence shows,
however, that Alabama Power had a choice as to how to store the lift yoke. As the
plaintiffs explain, “either the yoke must be decontaminated after each use before
removing it from the spent fuel pool building or it must be stored within the
radiologically controlled spent fuel pool building.” Doc. 149 at 50 (citing Tr. at
854:19-855:13 (Maret)). The court tends to agree with Mr. Maret that Alabama
Power’s choice to install the support arm was “ingenuous,” Tr. at 844:25, but as
with the work platform, that does not make it necessary, and therefore the
government’s responsibility, under the terms of the contract.
34
For the same reasons, Alabama Power cannot recover for the lift yoke
extension and stands. Alabama Power attached the lift yoke extension to the crane
hook, and installed stands on which to store it, in order to avoid contaminating the
crane components that are stored outside of the spent fuel pool building. See Tr. at
152:22-153:3 (Ripple). The alternative to such an arrangement would require
plaintiffs to incur repeated decontamination costs. See Tr. at 862:7-17 (Maret).
Alabama Power argues that the lift yoke extension and stands were necessary for
loading the casks. See Doc. 149 at 53. The court agrees with the government, see
Doc. 152 at 49-50, and finds that this equipment, while a “keen solution,” see Tr.
at 862:12 (Maret), was not necessary.
IV. NRC Fees
Finally, plaintiffs claim that they are entitled to recover a portion of the fees
collected by the NRC. As the Federal Circuit has previously explained, “[t]he
NRC is required to recover nearly all of its costs of regulating the nuclear power
industry from the licensees that it supervises,” pursuant to the Omnibus Budget
Reconciliation Act, known as OBRA-90. Consol. Edison Co. of New York, Inc. v.
Entergy Nuclear Indian Point 2, LLC, 676 F.3d 1331, 1336 (Fed. Cir. 2012) (citing
42 U.S.C. § 2214). It does so by levying a variety of annual fees—some are site-
specific, and others are generic and industry-wide. See id. at 1337. “The annual
fees must have, to the maximum extent practicable, a reasonable relationship to the
cost of providing regulatory services in order to meet the requirements of OBRA-
90.” Revision of Fee Schedules; 100% Fee Recovery, FY 1999, 64 Fed. Reg. at
31457. This case, like Consolidated Edison, involves the generic fees that fund
“activities such as the development and provision of regulatory guidance,
‘research,’ and ‘[o]ther safety, environmental, and safeguards activities.’” See id.
(citing 10 C.F.R. § 171.15).
Prior to 1999, the NRC only charged generic dry storage fees to facilities
with ISFSIs onsite. Additional generic fees were charged to all facilities to cover
the costs relating to spent fuel pool storage and other decommissioning costs. See
Doc. 149 at 30. In 1999, the NRC consolidated the generic fees into one fee,
known as the Part 171 Spent Fuel Storage/Reactor Decommissioning (“SFS/RD”)
fee. See Consolidated Edison, 676 F.3d at 1338. The new fee was to be assessed
“to those Part 72 licensees who do not hold a Part 50 license and to all operating
and non-operating Part 50 power reactor licensees, except those power reactor
licensees who have permanently ceased operations and have no fuel onsite.”
Revision of Fee Schedules; 100% Fee Recovery, FY 1999, 64 Fed. Reg. 31448 at
31462 (June 10, 1999) (to be codified at 10 C.F.R. pts.170 & 171). The effect of
35
this rule change was that “all operating power reactor licensees were assessed a
portion of the NRC’s generic dry storage costs, regardless of whether or not they
had an ISFSI.” Doc. 149 at 31 (citing Tr. at 355:4-10 (Funches)).
Plaintiffs in several cases have since sought to recover a portion of the
generic fee, claiming that it was unfairly levied during the time they did not
maintain dry storage. The central issue here is whether plaintiffs can prove that
the government’s breach caused the increase in fees.
In Consolidated Edison, the Circuit set out two possible paths for
establishing a causal link between an increased NRC fee and the government’s
breach of the Standard Contract: “(1) that NRC’s overall generic costs increased
as a result of DOE’s breach, causing the NRC to assess increased generic fees on
each of its licensees; or (2) that a 1999 rule changed the fee allocation method as a
result of DOE’s breach and increased [plaintiff’s] share of generic fees.” 676 F.3d
at 1337. Here, plaintiffs claim a right to recovery on the second basis, “that the
1999 revised fee increased Southern’s share of the generic fees as a result of
DOE’s breach.” Doc. 149 at 31.
As in Consolidated Edison, plaintiffs’ argument in this case appears to be
“that, in a non-breach world, the NRC would not have changed its fee structure,
and [plaintiffs] would not have had to pay the portion of the SFS/RD fee
attributable to dry storage” for the period of time in which they did not have dry
storage facilities. 676 F.3d at 1338; see Doc. 149 at 29-30, 39. The Circuit denied
recovery in Consolidated Edison, holding that plaintiff’s evidence “failed to show
that the 1999 rule change was the result of DOE’s breach.” 676 F.3d at 1338. The
evidence considered by the Circuit included various public statements by the NRC
expressing concern that wet and dry storage were not being treated equitably, and
NRC Commissioners’ comments related to the rule change. See id. at 1337-39.
In order to recover here, plaintiffs must present more or different evidence to
prove the causal link. Plaintiffs rely on the following additional evidence: (1) the
testimony of Mr. Jesse Funches, who worked for the NRC from 1987 to 2007, and
served as the NRC’s Chief Financial Officer from 1997 until his retirement in
2007; (2) the Spent Fuel Storage and Decommissioning Fee Study, Plaintiffs’ Ex.
70, Attachment 2; 5 and (3) the testimony of Mr. Metcalfe, plaintiffs’ economics
expert, interpreting the NRC’s actions from an economic perspective.
5
The government argues that the court should presume that the Federal Circuit reviewed this
study because it was part of the record in Consolidated Edison. See Doc. 152 at 67 n.13. While
36
Plaintiffs primarily rely on Mr. Funches’ conclusion that DOE’s delay was
the sole factor “that caused the—the dry spent fuel storage part of that fee to be
structured the way it was.” Tr. at 496:15-17. Mr. Funches believes this to be the
case for two reasons.
First, he testified that the new generic fee must have been imposed because
of the government’s breach, which resulted in the expectation that all facilities
would eventually require dry storage. See Tr. at 359:5-13 (noting that “all power
reactors would need to store spent fuel going into the future because the fuel was
not being picked up by the DOE”), 365:4-12 (explaining the relationship to
OBRA-90). To conclude otherwise, plaintiffs claim, would run afoul of the
mandate that fees be assessed only to the class of licensees who contribute to the
costs. See Doc. 149 at 33-35.
Plaintiffs posit that the NRC’s response to a public comment made during
the rulemaking process, which was reviewed by the Federal Circuit in
Consolidated Edison, supports Mr. Funches’ position on this point. A utility
objected to the imposition of the new fee structure on the basis that it would not
need dry storage “had DOE honored its obligation to take possession of spent fuel
by January 1998.” See Doc. 149 at 35 (citing Revision of Fee Schedules; 100% Fee
Recovery, FY 1999, 64 Fed. Reg. at 31455). The NRC responded by recognizing
“that sites will be required to continue to store spent fuel onsite until another
solution becomes available,” but noting that this requirement “does not relieve
[the] NRC of the OBRA-90 requirement to recover approximately 100 percent of
its budget authority through fees.” Id. Plaintiffs take the position that this
exchange demonstrates a link between the government’s breach and the increased
fees. See id.
Second, Mr. Funches testified that the “NRC staff and Commissioners
expressed a desire for the generic dry storage costs [to] be covered by the Nuclear
Waste Fund, which necessarily required an actual economic link with DOE’s
obligations under the Standard Contract.” Doc. 149 at 35; see Tr. at 365:18-366:15
(Funches). In support of this opinion, Mr. Funches referred to Commissioner
Merrifield’s and Commissioner McGaffigan’s comments that were previously
considered by the Federal Circuit. He also points to the Spent Fuel Storage and
Decommissioning Fee Study, a document not explicitly discussed by the Federal
it may have technically been considered, the court chooses to review the import of the document
here because the Federal Circuit did not specifically discuss it in the Consolidated Edison
opinion.
37
Circuit, but one that, like the Commissioners’ comments, suggests recovering the
fees from the Nuclear Waste Fund. See Plaintiffs’ Ex. 70, Attachment 2 at 11.
Given that the Nuclear Waste Fund “can only be used ‘for purposes of
radioactive waste disposal services,’” see Yankee Atomic Elec. Co., 536 F.3d at
1281 (quoting 42 U.S.C. § 10222(c)-(d)), Mr. Funches concludes that “the only
rationale for taking funds from the Nuclear Waste Fund was that DOE was not
picking up the fuel.” Tr. at 370:24-25. Mr. Metcalfe aimed to bolster this
conclusion with his opinion that “this is an acknowledgement economically that
the NRC realizes that it’s the DOE’s breach, the DOE’s delay in picking up spent
fuel that the utilities having to build incremental storage that is causing this generic
fee to occur.” Tr. at 624:5-9.
The court is bound by the Federal Circuit’s decision that the evidence it
considered in Consolidated Edison is insufficient to establish that the
government’s breach of the Standard Contract was the cause of the 1999 rule
change. Therefore, regardless of the court’s view of that evidence, its analysis in
this case is restricted to evaluating the new evidence presented by plaintiffs. The
court holds that the new evidence is insufficient to establish causation.
Mr. Funches’ testimony simply does not add enough to the picture to
definitively establish that the government’s breach was a substantial cause of the
rule change. As Chief Financial Officer, Mr. Funches was not a decision-maker
with regard to rule changes. See Tr. at 385:21-23; 387:5-388:3 (Funches). And, in
fact, he testified that he cannot recall any conversations with, or specific statements
from, the Commissioners that directly connected the new fee with the
government’s breach. See Tr. at 390:14-24.
Plaintiffs are, however, offering his testimony as an expert, not a fact
witness. Federal Rule of Evidence 702 governs the admissibility of expert
testimony, and provides:
A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an
opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to
determine a fact in issue;
38
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods;
and
(d) the expert has reliably applied the principles and methods to the
facts of the case.
The trial court is tasked with the “gatekeeper” function under Rule 702, “to
ensur[e] that an expert’s testimony both rests on a reliable foundation and is
relevant to the task at hand.” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137,
141 (1999) (quoting Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579,
597) (1993)).
Although the court did not consider it appropriate to exclude Mr. Funches’
testimony prior to trial, see Doc. at 129 (order denying the government’s motion to
exclude), it is now clear that his opinion is not “relevant to the task at hand.” The
evidence presented by plaintiffs as forming the basis for Mr. Funches’ testimony is
almost entirely synonymous with the evidence in Consolidated Edison. He is
essentially arguing, through very protracted testimony, the logic of the plaintiff’s
position in Consolidated Edison. Regardless of whether this court finds the
argument convincing, it has been rejected by the Federal Circuit.
The only new document is the Spent Fuel Storage and Decommissioning Fee
Study. See Plaintiffs’ Ex. 70, Attachment 2. The study states: “[b]ecause of the
delay in the DOE high-level waste repository program, the team recommends that
legislation be sought, so that the generic costs associated with NRC’s spent fuel
storage activities can be derived from the Nuclear Waste Fund.” Id. at 11.
Reliance on this document to establish causation is problematic. As an
initial matter, the recommendation is echoed by Commissioner Merrifield’s
comments that have already been disregarded by the Federal Circuit. See Consol.
Edison, 676 F.3d at 1339 (stating that “while [Commissioner] Merrifield’s
comments explicitly suggest proposing legislation to amend the NWPA because of
the government’s delay in accepting SNF, it does nothing to suggest that the 1999
rule change was the result of that delay or DOE’s breach”).
Furthermore, the study recognizes that using money from the Nuclear Waste
Fund would “require[] legislative changes to the Nuclear Waste Policy Act
(NWPA) which likely would be difficult to obtain in a timely manner.” Id. And
39
notes that, “[l]egislative relief may be hindered . . . by the prospect of reducing
funds readily available for the DOE repository by diverting them to cover NRC
needs.” Id. It is clear that the authors of the study, in making this recommendation,
understood that diverting funds from the Nuclear Waste Fund was something that
could not be done under the existing legal structure. The logical foundation of Mr.
Funches’ opinion on this point, however, is the current legal structure, i.e., the
statutory requirement that the Nuclear Waste Fund can only be used “for purposes
of radioactive waste disposal activities.” 42 U.S.C. § 10222(d). Therefore,
because the study acknowledges the necessity of legislative change in order to
effectuate its recommendation, it does not necessarily support Mr. Funches’
conclusion. Mr. Metcalfe’s opinion is flawed for the same reason.
To be clear, the court does not hold that plaintiffs cannot, as a matter of law,
establish causation. But in this case, considering the Federal Circuit’s binding
precedent, plaintiffs have failed to present sufficient evidence to support a finding
that the government’s breach was a substantial causal factor in the NRC’s decision
to increase fees.
CONCLUSION
Based on the foregoing analysis, the court awards the plaintiffs the following
damages:
Georgia Power Company
Damages not specifically contested at trial (Hatch): $32,048,515
Damages not specifically contested at trial (Vogtle): $1,262,564
Plant Vogtle ISFSI engineering and design: $1,489,258
Plant Vogtle sally port: $486,595
Plant Hatch power supplies and HVAC system: $1,187,476
______________
Total Recovery: $36,474,408
Alabama Power Company
Damages not specifically contested at trial: $26,120,379
Plant Farley loading procedure development: $303,030
Plant Farley pit covers: $69,364
______________
Total Recovery: $26,492,773
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The court has filed this opinion under seal in the event that information
contained herein remains sensitive. The parties are directed to submit any
proposed redactions within fifteen days of the date of this opinion.
The clerk is directed to enter final judgment in favor of Georgia Power in an
amount of $36,474,408, and final judgment in favor of Alabama Power in an
amount of $26,492,773.
SO ORDERED.
s/ James F. Merow
James F. Merow
Senior Judge
41