Kreis: An inconvenient truth — Entergy might win

Donald M. Kreis is associate director, and an assistant professor of law, at the Institute for Energy and the Environment at Vermont Law School. He is the former general counsel of the New Hampshire Public Utilities Commission and a member of the Board of Trustees of the Vermont Journalism Trust, the publisher of VTDigger.org.

What a bizarre world it is, in which a giant energy conglomerate from the region that gave us the Gulf of Mexico oil spill disaster files a pleading with a federal court to deride Vermont for its allegedly secret desire to promote the safety of its citizens.

But that is what it has come to, as the Louisiana-based owner of the Vermont Yankee nuclear power plant seeks an injunction in U.S. District Court to stop Vermont from shutting down the facility.

Quoting statements Governor Shumlin has made, both before and after his election, about tritium leaks and other safety issues at Vermont Yankee, the Entergy Corporation argues that if Vermont now attempts to justify its position based on economics, or energy policy, or waste disposal concerns, “any such rationale is unsupportable and thus should be viewed as a pretext for Vermont’s true safety motivation.”

Wow.

But an even more bizarre reality is that Entergy might just have a point. In other words, Vermont should consider the possibility that Entergy will prevail in its lawsuit and that nothing can stop Vermont Yankee from continuing to operate now that the federal Nuclear Regulatory Commission (NRC) has given the plant an operating license good for another 20 years.

I am no fan of Vermont Yankee, particularly in the post-Fukushima era. And I do not rise to defend Entergy and its wholly owned subsidiaries that own and operate Vermont Yankee. They are more than sufficiently lawyered up to do that themselves.

But I cannot help but notice that, among those in Vermont with an enlightened perspective on energy policy, the talking points on the Entergy lawsuit seem to run along these lines: Just as the recent tritium leaks at Vermont Yankee prove that Entergy has been cavalier about plant safety and was then willing to mislead regulators about the leaks, so too is the company now willing to file a frivolous lawsuit and, in the process, blatantly violate a commitment it made when it bought the plant in 2002 not to do precisely what it is now doing.

Admittedly, it’s possible that Justice Scalia could cut-and-paste the preceding sentence and use it as the introduction of his majority opinion of the U.S. Supreme Court declaring Vermont the winner of Entergy Nuclear Vermont Yankee v. Shumlin. Any copyright-based impediments to that eventuality are hereby waived.

Meanwhile, those who hope Vermont Yankee’s days are numbered should read Justice White’s majority opinion, and Justice Blackmun’s concurring opinion, in the 1983 case of Pacific Gas & Electric Co. v. State Energy Resources Conservation and Development Commission. At issue there, as here, was the Supremacy Clause of the U.S. Constitution. In relevant part, this provision is quite straightforward: “The laws of the United States,” by which is meant federal law as enacted by Congress, “shall be the supreme law of the land . . . [anything in the] laws of any State to the contrary notwithstanding.”

One of those “laws of the United States” is the Atomic Energy Act, which, as Justice White made clear, reserves to the NRC (known at the time as the Atomic Energy Commission) the task of regulating the safety and operation of nuclear power plants. A potential “law of any State to the contrary notwithstanding” was a California statute precluding the construction of new nuclear power plants until there is a means of disposing of their high-level radioactive waste. Was this limitation superseded on Supremacy Clause grounds – or, in legal parlance, preempted – by the Atomic Energy Act?

No, ruled Justice White, because the law in question was a form of economic regulation that did not concern the safety and operation of nuclear plants. Rather, California was at least ostensibly concerned with the financial implications, for electricity customers, of radioactive waste that had no permanent home. This, of course, explains why Entergy is so keen on proving that Vermont’s assertion of veto power over the continued operation of Vermont Yankee is all about safety and nothing else.

Although Entergy’s injunction request is riddled with campaign quotes from Governor Shumlin about how unsafe Vermont Yankee is, the state certainly has a colorable argument that the assertion of a right to shut down the plant is, like the California statute, not at all concerned with plant operations or safety and thus not preempted. But those who hold that view should note that the majority in the 1983 case pointedly did not embrace the expansive view of state authority adopted by Justice Blackmun in his concurrence.

Here is what Justice Blackmun wrote: “Congress has occupied not the broad field of ‘nuclear safety concerns,’ but only the narrower area of how a nuclear plant should be constructed and operated to protect against radiation hazards. States traditionally have possessed the authority to choose which technologies to rely on in meeting their energy needs. Nothing in the Atomic Energy Act limits this authority, or intimates that a State, in exercising this authority, may not consider the features that distinguish nuclear plants from other power sources.” That view would be awfully favorable to Vermont, if only the full Court had actually adopted it.

Blackmun and the only colleague who joined his concurrence, Justice Stevens, are no longer on the Court. To state the obvious, the Roberts Court of today is far friendlier to the interests of big corporations, and more skeptical about feisty states’ efforts to rein in such corporations, than was the Burger Court of 1983. In these circumstances, whoever argues this case for the State of Vermont should have a good answer to this oral argument question from Chief Justice Roberts: If the 2006 Vermont law, reserving to the Legislature the right to veto continued operation of Vermont Yankee, is not about safety, then what exactly is its purpose?

In this regard, consider the structure of Vermont’s electric industries, which contrasts vividly with that which prevailed in California at the time of the Pacific Gas & Electric case. 1983 was within the good old days of vertically integrated electric utilities, in which the same companies serving retail electricity customers owned the nuclear power plants. Under that paradigm, the economic consequences of the plants’ circumstances inexorably flowed right into the bills of utility customers.

Vermont Yankee went on line in 1972 under this same paradigm, but everything changed when Vermont’s regulated utilities sold Vermont Yankee in 2002 to a subsidiary of Entergy. This made Vermont Yankee a so-called “merchant generator” that cannot pass the economic consequences of any misfortune onto retail electric customers. Thus, the Vermont of today will have a more difficult time than California did in 1983 in arguing that the state is just engaging in economic regulation.

Of course Vermont also has something that California didn’t – the so-called Memorandum of Understanding, or MOU, signed by Entergy and state officials and explicitly adopted by the Vermont Public Service Board (PSB) as a condition of approving the sale of Vermont Yankee. Paragraph 12 of the MOU clearly reflects that Entergy (a) agreed to let the PSB decide whether Vermont Yankee can continue to operate after March 21, 2012 and (b) waived any right to argue that federal law “preempts the jurisdiction of the Board” to make that decision.

As Entergy points out in its recent U.S. District Court pleadings, acceding to the jurisdiction of the PSB, which itself functions like a court, is one thing, but submitting to the approval of the Legislature is quite another. However, the state can marshal some compelling arguments in rebuttal: First, the PSB’s authority as a state agency is delegated to it by the Legislature; just because the Legislature has un-delegated some of that authority doesn’t necessarily mean that Entergy can renege on its agreement to be subject to that authority. Second, there’s evidence that Entergy made public statements in 2005-06 that could be understood as agreeing to the kind of legislative oversight to which it now objects as unconstitutional.

Moreover, there is plenty of blarney in Entergy’s written request for an injunction. My favorite is the reference to a study conducted by two professors of regional planning, concerning the shutdown of a nuclear power plant in Rowe, Mass. “Generally, there was a somewhat wistful feeling in Rowe that life wasn’t the same any more,” Entergy quotes the report as concluding. This is apparently among the irreparable harms that Entergy wants the U.S. District Court to prevent by issuing an injunction.

Entergy v. Shumlin will not turn on who is feeling wistful about Vermont Yankee. It will turn on cold, hard principles of constitutional law. These principles are likely to be applied by judges whose previous decisions suggest a heightened sensitivity to the concerns of giant corporations and little concern for upstart states that adopt progressive regulatory regimes. Vermont may well prevail nonetheless, as at least two of my distinguished colleagues at Vermont Law School have publicly predicted. I cannot prove them wrong, and I hope they are correct. But if we simply proceed on the assumption that Entergy will lose and Vermont Yankee will close in 2012, we do so at our peril.

Comments

  1. Howard Shaffer :

    How will Vermont answer the question,”If the Legilature wanted to be involved, why didn’t the MOU say so?”

    Won’t Article I, Section 10 apply? This forbids states from “impairing the obligation of contracts.” Isn’t that precisely what the Legislature intended?

  2. timothy k price :

    Comments about the Fukushima disaster often refer to the “aging nuclear plants”, failing with the onslaught of natural disaster, presumably due to their weakened condition, as being of the same type and age as Vermont Yankee. We can look at leaking pipes and collapsing cooling towers at Yankee to see some validity in this comparison.The facility is weakened from age and decay.

    Then too, push come to shove, the people of vermont, if they decide that Yankee will be shut down, then Yankee might have to figure out what to do without power lines to transmit the power, or what to do without access to or from the site, and similar necessities which determined people can affect in order to defend their safety, their environment, and the welfare of those across New England. When the people, on their own homeland, stand united against corporations, then corporations should lose. This is similar to what happened to the Native Americans and the native people lost. Not so this time as their numbers are great. Interesting prospect. Why would a corporation want to create such turmoil.. just for money?

  3. John Greenberg :

    First, I thank Donald Kreis for a thoughtful and intelligent analysis, even though I disagree with his main points. Frankly, Entergy should have hired HIM to make its case; they’d be far better off.

    Kreis correctly argues that this case will turn on the Court’s reading of PG&E, but he misrepresents the holding in the case. In it, a unanimous court found that the United States nuclear industry is under “dual regulation.” States have the right to regulate nuclear power in their areas of “traditional authority,” while the federal government (alone) regulates “safety” and the “nuclear aspects” of energy generation.” (Blackmun’s concurrence takes issue with this latter point believing that the states COULD regulate to some extent even within the areas the majority declared off limits, but the quotes are from WHITE’s majority opinion.) The Supremacy clause question, according to the majority, pertains to safety and nuclear aspects, NOT to other areas. Thus, the Court drew a clear line between these federalized subject areas and all others. Assuming precedent is followed (The current SCOTUS is entirely different from the one that decided PG&E, and has shown remarkable indifference to precedent), the question for the courts will be: Did Vermont cross that line?

    The Vermont PSB regulates generators AS SUCH, not just utilities selling power to Vermont ratepayers. Anyone who builds ANY kind of electrical generating plant in Vermont, needs an Act 248 permit (a CPG) regardless of whether ALL or NONE of my sales of electricity were going to in-state ratepayers.

    That being the case, it is hard to argue that demanding a CPG of Entergy has ANYTHING to do with VY’s being a NUCLEAR operator, and in fact, there’s vanishingly little evidence in the record or in Entergy’s brief to support that notion, and thousands of pages of evidence against it.

    (Kreis is wrong about the older history of the plant. Before the Entergy sale, VY was owned as a corporation (Vermont Yankee Nuclear Power Corporation) by its utility shareholders, and as such its rates were regulated by FERC. Under Miss Power & Light v. Miss ex rel. Moore (1988), FERC’s rates preempted any further decision-making by the VT PSB, so in fact, Vermont had no ratemaking authority over the plant then or now.)

    Kreis fails to mention two germane points. First, as even Entergy is forced to admit (though they relegate it to a footnote), the Vermont legislature was acutely aware of the preemption issue, specifically of the PG&E decision, and therefore did everything it could to avoid anything which could be interpreted as turning on preempted nuclear safety issues. Entergy’s briefs churn the record quite heavily in search of evidence that this was not the case, and the resulting “pickings” are confined to a few press quotes, mostly from one legislator — namely, now governor Shumlin. Stacked against this, however, is a massive legislative history behind the questioned bills and votes.

    Also, never mentioned in Kreis’s discussion (nor any of the others I’ve seen recently), but front and center during the Senate’s vote was the fact that Entergy thought it had, at the time of the Senate vote, transferred Vermont Yankee to a new corporation called Enexus, which would be the proud owner of its aging New York/New England nuclear fleet and a boatload of debt. That deal later fell through when NY regulators nixed it, but in the meantime, the votes of more than a few senators who opposed continued operations were at least partly based on this blatant attempt by Entergy to toss off its financial liability for decommissioning the plant.

    I turn now to Howard Shaffer’s question: “How will Vermont answer the question,”If the Legilature wanted to be involved, why didn’t the MOU say so?” The shoe is actually on the foot. As Mr. Kreis points out above: “the PSB’s authority as a state agency is delegated to it by the Legislature.” Knowing that, if Entergy was so concerned about the possibility that a legislative vote would remove the issue from a regulatory to a political process, as it now argues, why didn’t its “army of lawyers” add a provision to the MOU making that concern a part of the agreement? The legislature could not have done so, since it was not a party to the MOU; Entergy, however, was.

    Shaffer also continues to evade the answer I have previously given him, also provided by Kreis above, to his question about contracts: the contemporaneous record shows that Entergy supported Act 160.

    In fact, Entergy’s concern was never about shifting from the regulatory to the political arena, since they were confident that they would win in both. Their concern is clearly with LOSING, which is why they waited until now to sue, rather than when the actual change from regulatory to political was made.

  4. Howard Shaffer :

    Mr. Greenberg says that Entergy could have demanded a provison in the Memorandum of Understanding (MOU) preventing the Legislature from overiding the Public Service Board unilaterally.

    Whether or not Entergy agreed with Act 160 or not, doesn’t the issue turn on what the MOU is? If it is a contract, does it fall under the US Constitution, Article I, Section 10 that prohibits states from passing laws that “impair the obligations of contracts.” States have tried this before and lost before the US Supreme Court. Entergy may have thought that they didn’t need a provision in the MOU preventing the Legislature feom passing an illegal law!!

    I appreciate Mr. Greenberg’s statement many months ago in a post, that he understands that a nuclear power plant accident affecting the public is very rare, yet he believes that the possible consequences make the risk not worth the benefit. Congress believes the risk is worth the benefit, when they compare nuclear power to alternative supplies. What Mr. Greenberg and those opposed to nuclear power are doing is trying to change national policy by intervention, winter marches etc. because they have not been able to win in Congress.

    No one has ever said, nor has it ever been policy, that if we use nuclear power then we don’t have to do all we can in conservation and efficiency. They should and must be done, no matter what the supply.

  5. Howard Shaffer :

    Is the Memorandum of Understanding a contract or not? If it is, does the US Constitution, Article I, Section 10, that prohibits States from passing laws that “impair the obligations of contracts” apply?

    Does Act 160 “impair the obligations of the MOU?” In the MOU isn’t the Public Service Board “obligated” to make and release its findings? Isn’t Entergy obligated to obey them? Doesn’t Act 160 “impair” the PSB’s obligation under the contract?

  6. John Greenberg :

    I answered Mr. Shaffer’s question about Article I, Section 10 before, so I’ll just quote the answer:

    The courts have interpreted Article I, section 10 as applying only to criminal cases. According, for example to The Congressional Research Service/Library of Congress’s “The Constitution of the United States of America: Analysis and Interpretation,” p. 380-1: “This clause, like the cognate restriction imposed on the Federal Government by section 9, relates only to penal and criminal legislation and not to civil laws which affect private rights adversely.” (A footnote provides a sampling of cases which justify that statement).

    So the short answer to his question, is NO, it does NOT turn on what the MOU is. The longer answer is provided above and in the posts of James Leas’ articles.

  7. Don Kreis :

    I stand corrected in re John Greenberg’s having pointed out that when Vermont Yankee was owned by a consortium of utilities (with CVPS and Green Mountain Power collectively owning the majority interest) Vermont Yankee’s rates were regulated by the FERC rather than the Vermont Public Service Board.

    Although Mr. Greenberg mentions section 248, that’s not an issue here. The CPG (certificate of public good) that Entergy acquired was a section 231 CPG. Section 248 is the equivalent of Act 250 for utility facilities; section 231 concerns utility franchises. This might be relevant to the question of what ongoing PSB oversight Entergy agreed to in the MOU.

    As Mr. Greenberg points out, Vermont has the New York Public Service Commission to thank for scuttling the proposed spin-off of Vermont Yankee (and the rest of the Entergy nuclear fleet) to what would have been a new company, Enexus. This was a bad deal for precisely the reason Mr. Greenberg cites — basically, Enexus would have been Fairpoint with nuclear waste. (By “Fairpoint” I mean, in essence: too highly leveraged.) But I think it’s an overstatement to suggest that, as the Senate was voting last year on Vermont Yankee, Entergy “thought it had . . . transferred Vermont Yankee” to Enexus. It was clear, at the time, that the Enexus deal was just a proposal and a highly controversial one at that. In any event, I don’t understand why the Enexus issue remains relevant.

    Regarding the discussion of the Contracts Clause: Its application is NOT limited to criminal matters. See, e.g., Dartmouth College v. Woodward 17 U.S. 518 (1819). However, the issue is moot inasmuch as Entergy did not assert such a claim in its civil complaint. It’s not hard to conjure reasons why Entergy opted to eschew this particular legal theory.

  8. John Greenberg :

    1) Mr. Kreis writes: “Although Mr. Greenberg mentions section 248, that’s not an issue here. The CPG (certificate of public good) that Entergy acquired was a section 231 CPG. Section 248 is the equivalent of Act 250 for utility facilities; section 231 concerns utility franchises. This might be relevant to the question of what ongoing PSB oversight Entergy agreed to in the MOU.”

    Probably because I’m not an attorney, I’m not sure what he’s talking about. According to the July 17, 2009 DPS brief in Docket 7440: “In order to obtain Board authorization for continued operation of VY, the Petitioners must demonstrate: 1) compliance with the criteria of 30 V.S.A. ‘ 248(b); 2) that continued operation of the facility will promote the general good of Vermont pursuant to 30 V.S.A. ‘ 248(a)(2); and, 3) that Petitioners are competent to operate the facility under 30 V.S.A. ‘ 231(a).” (p.1) The other briefs also mention the same Act 248 criteria.

    So I’d appreciate clarification of that point.

    2) a) Mr. Kreis asks “why the Enexus issue remains relevant.” In my estimation, it is relevant to the legislative history of the Senate’s vote. Entergy is arguing that there were NO conceivable non-safety related motivations, and therefore that preempted safety reasons alone can explain the action taken. But to the extent that senators rejected extending VY’s operations due to the Enexus deal — as at least some senators, in fact, clearly did — that argument fails.

    b) Mr. Kreis also asserts: “It was clear, at the time, that the Enexus deal was just a proposal ….” I guess that depends on what you mean by “just a proposal.” My understanding at the time was that this was more of a done deal than the mergers that one reads about in the business press which are always “pending regulatory approval.” Entergy’s PPA offer, for example, actually came from Enexus, NOT Entergy, and Jay Thayer’s letter, filed at the PSB, was very explicit on that point: “The contracts will be subject to several conditions, including consummation of the transaction pending in Docket No.. 7404.” Entergy had begun presenting pro-forma accounts in its financial statements separating the two companies and showing their financials separately. As far as I recall, all federally required approvals had been obtained, and at the time NY nixed the deal, VT’s PSB had completed its docket and a decision was pending. So as I recall it, only approval from NY and VT were lacking to finalize the deal.

    3) Finally, Mr. Kreis concludes: “It’s not hard to conjure reasons why Entergy opted to eschew this particular legal theory.” I’d really appreciate his elaborating on this point.

  9. Don Kreis :

    I really appreciate this opportunity to engage in some open dialogue with folks who share my skepticism about Vermont Yankee as an ongoing enterprise but who are at least open to considering the possibility that Entergy may nonetheless prevail in the pending litigation.

    The section 248 vs. section 231 thing may be an example of Vermont utility law esoterica, and I haven’t come to a firm conclusion in my mind about whether it has any bearing on the outcome. But here’s my thinking at present.

    The referenced DPS brief notwithstanding, the Certificate of Public Good (CPG) issued to Entergy by the Public Service Board in 2002 was a section 231 permit. The Vermont Supreme Court thereafter ruled that the Board was NOT required to review the VY sale under section 248. See In re Proposed Sale of Vermont Yankee Nuclear Power Station, 175 Vt. 368 (2003).

    Why might this be important? Section 248 is essentially a land-use statute; review under section 248 is very much like seeking an Act 250 permit but with added criteria related to the necessity of the proposed facility to meet the needs of Vermont utility customers. Section 231, in contrast, really focuses on the suitability of the applicant AS AN ENTITY to operate as a utility in Vermont. See In re Verizon New England (Order of 12/21/2007 in Docket 7270, rejecting initially proposed Fairpoint transaction). As the Board reiterated in Docket 7270, the relevant criteria under section 231 are (1) technical expertise, (2) adequate service, (3) facility maintenance, (4) balance between customers and shareholders, (5) financial stability, (6) company’s ability to obtain financing, (7) business reputation, and (8) relationship with customers, though the Board stressed that these criteria are “guidelines only,” which the Board “may deviate from . . . as the circumstances require.”

    There is no provision under section 248 for expiration of a CPG – indeed, the plain language of the statute would suggest that expiration is an absurdity inasmuch as a section 248 CPG functions as a permit to construct a facility. By contrast, section 231 contains an explicit provision authorizing revocation of a CPG issued under that section “for good cause, after opportunity for hearing.” That plain language notwithstanding, the sixth ordering clause of the PSB’s 2002 order approving the VY sale makes clear (consistent with the infamous MOU) that the CPG ISSUED UNDER SECTION 231 that expires on March 21, 2012.

    I think this might be significant in construing what kind of scrutiny Entergy agreed to be subject to (in the MOU) under Vermont law in connection with operating VY after that date in 2012. Act 160 imposed upon Vermont Yankee a NEW obligation to seek a CPG under section 248 from the Board, as well as a finding by the Legislature that the continued operation will “promote[] the general welfare.” See 30 VSA 248(e)(2). My hypothesis is that nothing in the MOU suggests that Entergy waived its ability to object to section 248(e)(2) on preemption or any other ground. (To be continued.)

  10. Don Kreis :

    Here’s my effort to elaborate on why I think Entergy may have opted to eschew an argument that Act 160 is unconstitutional on Contracts Clause grounds:

    Essentially, I think Entergy wants the MOU to go away rather than to concede that when it signed the MOU it was binding itself in contract. I ran up against similar issues when I was at the Public Utilities Commission in New Hampshire. There, highly contentious federal litigation over the restructuring of the state’s electric industry was resolved via a settlement agreement entered into by the state’s largest utility (Public Service Co. of New Hampshire) and, among others, Governor Shaheen. The agreement required approval by the PUC. The order granting that approval is careful to make clear that the approval was NOT intended to bind the state in contract, except as to provisions related to the securitization of certain stranded costs. (Again, we’re wallowing in utility law esoterica here, for which I apologize.) Even in the absence of such language, I would argue that when an administrative agency like the NHPUC or the PSB approves a settlement agreement, this does not have the effect of creating a binding contractual obligation. Although a settlement in a judicial proceeding might have such effect, administrative agencies have more latitude to make decisions that are inconsistent with their prior orders.
    Here’s a flat-out prediction: When the dust settles, Entergy v. Shumlin will end up being about preemption and not about the MOU and its provisions, whether deemed to be a contract or not. Can’t prove it, obviously – just a hunch.

  11. Don Kreis :

    Regarding the never-consummated and putatively awful Enexus spin-off: I agree with Mr. Greenberg’s characterization of the state of the proposed transaction at the time it was abandoned – all that stood in the way were required approvals from utility regulators in New York and Vermont. I assume that the folks at the Vermont PSB are grateful to their New York counterparts for causing the issue to become moot in Vermont. In any event, I now understand why Mr. Greenberg was raising the issue here – it would indeed be relevant legislative history with respect to the issue of what motivated the senate to withhold its approval in 2010 for continued VY operation.

    Two points in response: (1) Obviously, the Enexus question is NOT relevant to what prompted the passage of Act 160 in 2007 – and it is Act 160 that is arguably the truly relevant enactment inasmuch as this is the statute that truly divested VY of its statutory authority to remain in operation after March 21, 2012. (For one thing, the House never acted in 2010 – and it’s black-letter law that legislation isn’t legislation unless it’s adopted by both chambers and presented to the governor for his signature or veto.) (2) Regardless of whether it’s Act 160, or the Senate’s 2010 vote that is under review, Courts don’t like to embroil themselves in reviewing legislative history to divine the meaning of a legislative act. The history is properly viewed as a refined form of blarney.

  12. John Greenberg :

    Once again, my thanks to Don Kreis. I too find this dialogue very helpful.

    I’ll respond to his posts in the order presented. First, let me make sure I understand the argument being made about the CPGs: namely, that the original CPG granted to VY in 2002 was a section 231 CPG; that the MOU, by not specifying which kind it meant in section 12, COULD have meant a section 231 CPG as well, and that therefore Act 160 was changing not only the type of forum (political vs regulatory)but also the TYPE of CPG, thus invalidating the MOU. (This issue of forum is not mentioned by Kreis, but is important in Entergy’s arguments).

    Assuming that’s a correct interpretation of Mr. Kreis’s point, it seems to me that it would, at BEST, provide an excuse (not very convincing, so far) for Entergy’s NOT having “really” waived THIS lawsuit by agreeing to Section 12 of the MOU. It’s interesting to me — since they are clearly looking for excuses to explain away Section 12 — that neither of their briefs makes this argument.

    But the real response is this. As Mr. Kreis says below, this case will turn on federal preemption (specifically on PG&E), NOT on the MOU, and this CPG argument does NOTHING for them in that regard. Quite to the contrary, if they admit that Vermont had the right to grant ANY CPG — whether 248 OR 231, they are ipso facto admitting that Vermont is not ENTIRELY preempted from regulating them. Yet, that precisely contradicts the central argument of the case they’re making: namely, that federal preemption allows NO room for Vermont to regulate them AT ALL. (And note that they’ve specifically argued that the PSB did not have the right to regulate them (presumably under section 231) before the passage of Act 160: “Plaintiffs are likely to succeed on either of two independent bases for finding Vermont’s effort to assert control … preempted … whether exercised by the PSB alone as before the 2006 Act, or by the PSB and the Vermont legislature after that Act.” (p. 14, April 18 brief)

    Two more points, before moving on. First, to the extent that this IS effectively an argument about how to interpret the MOU, 1) there is still the question of why Entergy’s “army of lawyers” didn’t write a document reflecting more precisely their understanding and more importantly, 2) the MOU has a provision for conflicts about interpretation (section 16, subsection 1: “This Memorandum of Understanding is governed by Vermont law and any
    disputes under this Memorandum of Understanding shall be decided by the Board.” Entergy should be bringing THIS issue to PSB, not to a federal court.

    In sum, it’s an interesting distinction you raise, but I don’t think the argument really gets them much breathing room.

    This leads to the question of arguing that the whole MOU should “go away,” 10 years after reaping millions of dollars based on it (an argument made eloquently elsewhere by James Leas). This may NOT be where Entergy really wants to be heading right now.

    There are a number of problems with Kreis’s final point. While it’s true that Enexus has no bearing on Act 160, if Entergy is forced to argue that their whole problem goes back to that law, then it’s going to make it pretty hard to explain why they waited 5 years to bring this lawsuit, cost everyone millions of dollars and hundreds or thousands of hours in effectively wasted time and effort, with the result that they are now asking a judge to grant them injunctive relief because the time is so short. Let’s just say I wouldn’t want to be their lawyer explaining the need for a speedy injunction to the judge next month (it’s the first matter on the docket, and if my hunch is right, it may be the last as well) when my client had waited 5 years to get around to suing with deadlines which did NOT change in the interim.

    I’m not sure what you mean by the words “statutory authority” in this sentence: “… it is Act 160 that is arguably the truly relevant enactment inasmuch as this is the statute that truly divested VY of its statutory authority to remain in operation after March 21, 2012.” And as far as I know, in 2006 when the law was written, Entergy had NO authority, statutory or otherwise, to remain in operation. In 2006, they didn’t have a federally renewed license (they may not even have applied at that point) and they did have an MOU saying they did NOT have the authority to continue without a NEW CPG (of whatever type).

    I don’t think your next point is applicable here: the House didn’t act because it was not required to. Act 160 says nothing about legislation, instead it forbids continued operation “… unless the general assembly approves and determines that the operation will promote the general welfare …,” (Section 2(e)(2), which the general assembly cannot do without an affirmative vote from BOTH houses. Put differently, the Senate vote didn’t ENACT a law; no one is arguing that it did. By its vote, the Senate precluded actions which REQUIRED the enactment of a law, and thus, unless and until reversed by a subsequent positive vote, precluded continued operations at VY. I’m not sure what the issue is supposed to be from a legal standpoint.

    Finally, I absolutely agree that courts are happier looking at the law itself than at anything leading up to it. And in this case, the judge will find nothing amiss: all of the laws (2006 and the 2010 text) were carefully drafted with the preemption issue in mind.

    It isn’t I raising the issue: it’s Entergy. (Or more precisely, my comments about Enexus are a response to Entergy’s argument about no other issues being even possible). Frankly, Energy’s argument is exceedingly weak on this point. They’re saying to the judge, in effect: ignore what the laws say (even though it’s pretty clear, and pretty straightforward), ignore the actual legislative history preceding enactment (which shows that the laws do, in fact, mean what they say), and instead take a look at these snappy press quotes we’ve got and our impeccable logic about how wonderful we are. Frankly, it’s not much more than a sophisticated version of three-card monte.

    P.S. I’m sure the PSB IS grateful to NY for ruling first.

  13. Townsend Peters :

    It is good for Vermont the Nuclear Regulatory Commission’s (NRC) interpretation of its jurisdiction – and apparent reading of the PG&E case – is different from that of Professor Kreis.

    Evidently Professor Kreis, like so many other commentators on this issue, has not read the NRC’s environmental impact statement (EIS) for continued operation of nuclear plants, which it supplemented and used in support of the license renewal of the Vermont Yankee plant.

    The NRC’s EIS clearly states that “the final decision” on continued operation of a nuke is up to other, non-NRC decision-makers _including_ the states. Check out volume 61 of the Federal Register, page 28743, 1996:

    “After the NRC makes its decision based on the safety and environmental considerations, the final decision on whether or not to continue operating the nuclear plant will be made by the utility, State, and Federal (non-NRC) decisionmakers. This final decision will be based on economics, energy reliability goals, and other objectives over which the other entities may have jurisdiction. The NRC has no authority or regulatory control over the ultimate selection of future energy alternatives.”

    If the NRC’s interpretation of its own jurisdiction is right – and it is, after all, _NRC_ preemption that Entergy asserts – then Entergy loses.

  14. Don Kreis :

    A couple of brief replies to the posts from messrs. Greenberg and Peters:

    1. Unfortunately it is not the NRC but the courts that are tasked with interpreting the extent to which federal law preempts Vermont’s assertion of authority over the continued operation of Vermont Yankee. Courts will sometimes defer to an agency’s construction of its enabling statute but I doubt they would defer to a comment in an EIS that is, obviously, tangential to the purpose of the document. That said, I want to continue to make clear that in my opinion Vermont has a colorable argument and the law may well be precisely as stated in the quoted EIS language.

    2. I have so far been unpersuaded by the arguments that Entergy somehow failed to pursue the litigation in a timely matter. To the contrary, the case was arguably unripe until the NRC had issued VY its new operating license. Until fairly recently, Entergy was in active negotiation with Vermont utilities about new VY power contracts. It is fair to say that, had such agreements been reached, and had the resulting rates been sufficiently favorable, it could have turned enough votes in the Legislature as to gain Act 160 approval. The existence of such negotiations undermines the argument that Entergy was simply sitting on its rights and should have filed the lawsuit earlier. On the other hand, I agree the timing undercuts some of Entergy’s arguments about the urgent need for an injunction.

    3. John Greenberg has correctly understood my previous comments about CPGs. I admit that the question of which ‘flavor’ of CPG is at issue probably is too tangential to be outcome-determinative. I stress, though, that I don’t think Entergy contends that Vermont is completely preempted from regulating them. I think (though don’t know) that Entergy would concede it’s subject to regulation under section 231. The factors typically applied by the Board in its section 231 analysis (previously laid out) are pretty far afield from the safety and operational issues with which the NRC is concerned.

  15. Townsend Peters :

    Prof. Kreis: You really ought to read the Federal Register cite and know what you are talking about before you write.

    The comments in the EIS specifically formed part of the basis of the regulatory action, including how the NRC shaped its consideration of the environmental impacts of continued operation generically and specifically for the VY plant. This interpretation is in no way tangential: It formed a key basis for the approach that the NRC decided to take in how it goes about performing EIS analysis for _all_ nuclear plants.

    You are correct that courts decide preemption. But an official opinion of the federal agency for which the preemption provisions exist on the scope of its jurisdiction is heavy thumb on the side of the scale against preemption.

    Vermont has far more than a “colorable” argument. It may win or lose, but your level of skepticism seems less well informed that a law professor ought to be.

  16. John Greenberg :

    Again, thanks to Don Kreis for his replies. Comments:

    1) “…the case was arguably unripe until the NRC had issued VY its new operating license.” “Arguably,” certainly. But there are certainly ALSO reasonable arguments to suggest that it WAS ripe in 2006. Indeed, the cost of going through the NRC relicensing would have been one of them: I’m sure that relicensing cost Entergy millions of dollars. The legal argument about ripeness is especially thin when compared to the obvious political reality: namely, that it never occurred to Entergy in 2006 that it could lose the legislative vote (and surely, virtually no one would have thought it likely back then). All that said, I’ll concede that it’s an argument which could be made, and frankly, of ALL the arguments we’ve been dealing with, it’s probably the one that works best for Energy.

    2) “It is fair to say that, had such agreements been reached, and had the resulting rates been sufficiently favorable, it could have turned enough votes in the Legislature as to gain Act 160 approval.” Fair to say? Sorry, but I don’t think that’s even close to being the case. It’s certainly an argument which one could make, but it deserves a closer look than this facile statement implies.

    The politics of reversing a 26-4 vote in ANY legislative body for ANY reason at ANY time is nowhere near simple. Here’s a challenge I’ve issued before. Come up with examples of ANY legislative vote in ANY legislature, however close, that’s been reversed in a year, especially when there has NOT been a major change in the way the legislature is constituted. I think you’ll find the number is VERY small. (Health care comes to mind at the federal level: a very close vote, which WAS reversed in the House, but will probablhy NOT be reversed in the Senate). I haven’t thought of ANY other examples, though I’m sure there must be a few.

    Now, think of the number of lopsided votes (26-4) that have been overturned with anything less than decades intervening. Again, the number is surely VERY small. Now, combine the two and consider the odds of reversing a heavily lopsided vote (more than 5-1!), bipartisan in nature (the Rs were more than 2-1), and with only a maximum of 2 years to do it. To that, add the fac that you are dealing with mostly the same players back in place (every member who voted against VY and ran for reelection was reelected), and then add to that mix a strongly opposed governor in place. Finally, add to that the fact that the Vermont House was also strongly opposed to relicensing, although its members never voted. My own guess last year was that there would have been at best 100 votes against VY; a House member (in an excellent position to know) guessed no fewer than 120 (in casual conversation). So, sure, a cheap PPA would almost certainly have changed SOME votes, but it is far from “fair to say” that it would have been enough, in my estimation, to overturn the vote in the time required. In short, I think the odds that it would, in fact, have been able to do so are actually very, very small.

    There are two points which should be added here. First, it’s pretty obvious to me, at this point, that Entergy has never been willing to offer a cheap PPA. Every time you think it might be doing that, a closer examination shows that it’s just a publicity stunt: e.g. 4.9 cents for 10MW for 1 year). In fact,it’s far from clear that Entergy CAN offer a really good deal on a substantial block of power: their total costs (including capital, etc.) appears to be right around recent market prices (at least statements from J. Wayne Leonard in quarterly analyst meetings suggested that they were just breaking at VY).

    Second, the biggest change in the economic environment of the last few years has been the huge drop in the price of alternatively purchased power. When the PSB case began, estimates for market rates in 2012 were in the 9 cents range, rising sharply over time. Now they’re in the 6 cents range for the next several years at least. That means that the spread between what would have been a GREAT offer a few years ago and the market is now MUCH smaller. And that, in turn, means that the rate impact of even the kind of offer you’re suggesting is really VERY small, probably in the roughly 4% range for most consumers. That figure is based on an offer of 4.5 cents in 2012 vs. a market priced at 6 cents, for the amount of power currently being purchased. All of these assumptions are very likely to be overly generous to your case: Entergy won’t offer 4.5 cents; the market looks to be closer to 5.8 cents and the utilities don’t want to buy as much going forward as they have been. A differential that small is unlikely to motivate anywhere near enough legislators to change their minds.

    Third, the notion that somehow this was a negotiation which required years is really pretty strange as soon as you think much about it. There just aren’t very many moving parts. It’s not like a complicated deal where one change impacts 6 others and there are dozens of balls in play simultaneously. In short, it’s really hard to imagine what the negotiators would be talking about after, say, the third session. The three variables are the price, the amount of power to include, and what, if anything, to do about the revenue sharing agreement if there’s as new PPA. What am I missing here?

    3) “I don’t think Entergy contends that Vermont is completely preempted from regulating them.” I’m not sure where you get this, and in particular, you don’t respond at all to this passage from Entergy’s brief, which I’ll quote again: “Plaintiffs are likely to succeed on either of two independent bases for finding Vermont’s effort to assert control … preempted … WHETHER EXERCISED BY THE PSB ALONE AS BEFORE THE 2006 ACT, or by the PSB and the Vermont legislature after that Act.” (p. 14, April 18 brief) (This time, I’ve added caps for emphasis)

    Actually, nothing I’ve seen provides ANY evidence for the notion that Entergy does NOT think Vermont is completely preempted from regulating them. In short, I’ve can’t recall ever having seen Entergy concede ANY grounds for Vermont regulation.

    4) “The factors typically applied by the Board in its section 231 analysis (previously laid out) are pretty far afield from the safety and operational issues with which the NRC is concerned.” So, certainly, are many of the factors applied in 248. After all, they’re applied in EVERY OTHER case to non-nuclear facilities. VY is not at all unique in being a generator; it’s unique in VT in being a NUCLEAR generator. Act 248 applies to ALL generators (with, perhaps exceptions which are not relevant to a federal preemption case. I’m not as familiar with utility law as perhaps I should be).

    I’m having a VERY hard time seeing a preemption case which says, in effect, Vermont HAS the right to regulate us under section 231, but is preempted from doing so under section 248. As soon as we take this CPG issue away from the MOU/contract/forum (political vs. regulatory) realm and put it in the preemption arena, it seems to me it loses ANY cogency or force. There’s certainly nothing in the record I’ve seen to suggest that Entergy IS making that case, and I’m not really seeing what it looks like. If I’m wrong, please show me what the argument for preemption looks like if it’s resting on the distinction between section 231 and 248.

  17. Mike Kerin :

    I have a few questions. I would like to know why the NRC is asleep on the job? The NRC is the sole safety regulator, so why did they issue a relicense to VY a nuclear plant with ongoing leaks? Why is the NRC cheer leading the nuclear industry instead of regulating the safety of the nuclear industry?

    Mike Kerin, Northfield VT.

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