McClaughry: Shumlin’s Vermont Yankee coercion scheme

Editor’s note: This op-ed is by John McClaughry, vice president of the Ethan Allen Institute (www.ethanallen.org).

Entergy, the owner of the Vermont Yankee nuclear plant, and the state are now locked in judicial combat in Federal court.

In 2002, when buying Vermont Yankee from its utility owners, Entergy agreed that it would seek a new Certificate of Public Good from the Public Service Board if it sought federal approval to continue to produce power after the plant’s license expiration date (March21, 2012.) It also agreed not to attempt to bypass PSB jurisdiction by invoking Federal preemption – the doctrine that a state cannot regulate federally-licensed
economic activity serving an interstate market in a way that contravenes federal regulatory authority.

Four years after this agreement, the Vermont general assembly passed a bill (Act 160), opposed by Entergy, that required general assembly approval before the PSB could issue a final order on Entergy’s application
for a new certificate. This March Entergy received an extended 20 year license to continue producing power from Vermont Yankee, but Vermont’s legislative leadership refused even a vote on approving Yankee’s continued operation.

So Entergy went to Federal court seeking a declaratory judgment that by approving Yankee’s continued operation for twenty years, the federal government has preempted state regulation of nuclear plant operation. It also asks the Court to find that the legislature’s political interposition, ardently supported by Senator and now Governor Peter Shumlin, constitutes a deliberate scheme to extract money from Entergy for the benefit of Vermont utilities and ratepayers.

On the first point, Attorney General William Sorrell, defending the state, holds up a 1983 Supreme Court case, PG&E v. State. In that case a California statute required legislative approval of a proposed but unbuilt nuclear
plant, based on the applicant’s satisfying a state commission that spent fuel rods would be acceptably handled. The Court upheld the statute.

But in so doing, the Court held that “the statute does not seek to regulate the construction or operation of a nuclear power plant.” Clearly the Vermont statute seeks to completely deny the operation of an existing
nuclear power plant that has given Vermont businesses, farms, and homeowners low cost baseload electricity for 39 years.

Furthermore, since the plant is a merchant generator, no longer owned by Vermont utilities, the traditional concerns of state regulators no longer apply.

Of particular interest is Entergy’s charge of political coercion.

From the brief:

“Vermont officials have further stated that they might condition any favorable exercise of the state’s supposed licensing authority upon the wholesale sale of power generated by the Vermont Yankee Station to Vermont retail utilities at preferential rates compared to the rates charged by non-Vermont retail utilities.”

“This condition coerces Plaintiff [Entergy] to enter into below market power purchase agreements with Vermont’s retail utilities that will effectively result in [Vermont Yankee] and out of state consumers
subsidizing the electric bills of Vermont’s consumers.”

The brief supports that charge with several Shumlin statements, such as this one in January 2009, when he was Senate President: “There’s no way we’re going to vote to relicense the plant unless Vermonters are getting a great deal.”

The Court may well reach a conclusion favorable to Entergy’s preemption claim. If it does so, the Court may not choose to consider Entergy’s claim that Act 160′s political coercion of electricity generators violates the Federal Power Act. But Vermonters need to take a hard, clear look at the game that certain politicians, notably Peter Shumlin, have been playing.

That game comes down to a political ultimatum to Entergy: “unless you agree to sell power to Vermont utilities at a sufficiently below-market price, we’ll block you from obtaining the certificate you need to stay in
business in this state.”

This practice of selling valuable government permission has the rotten smell of every political machine from Tammany Hall to Boss Tweed to modern day Chicago to any number of today’s despotic Third World regimes. As the brief argues, the statements of Peter Shumlin and the general assembly’s politicization of the regulatory process have “irremediably tainted” the authority that Shumlin and Sorrell claim the state has to shut down Vermont Yankee.

Moreover, the growing perception that the politicians now leading Vermont are practicing extortion – for their political advantage – can only become an “irremediable taint” on the integrity of our state, and an increasingly troublesome obstacle to Vermont’s future economic prospects.