McClaughry: A legislative extortion ploy

Editor’s note: John McClaughry is vice president of the Ethan Allen Institute.

On Jan. 20 federal District Judge J. Garvan Murtha ruled that federal law pre-empts the state from regulating the Vermont Yankee Nuclear Power Plant over safety concerns.

Well down in the media reports it was mentioned that the judge also found that the interstate commerce clause of the U.S. Constitution precludes the state from conditioning Vermont Yankee’s continued operation on Entergy offering below-market power prices to Vermont’s utilities. What the news accounts did not do was explain how Judge Murtha reached that second conclusion. It’s not a pretty story.

Beginning on page 91 of the court’s 102-page decision, the judge quoted verbatim a Feb. 9, 2009, letter to Entergy from then-Senate leader Peter Shumlin and House Speaker Shap Smith. The two lawmakers stated that “It was our expectation that a power purchase agreement would be reached between the negotiating parties no later than December, 2008 and in advance of the legislature convening for the 2009 session.”

The Shumlin-Smith letter continued that the General Assembly intended to consider “the terms of such a contract,” including “its length, the price to be paid for electricity products under the contract, and an analysis of its costs and benefits to our constituents.”

The letter concluded: “Accordingly, if [Entergy is] unable by Wednesday, February 18, 2009, to provide the General Assembly with a power purchase agreement between the parties, it will be nearly impossible for the legislature to make a judgment on the continued operation of the plant before we adjourn in May, 2009.”

After that adjournment Shumlin and Smith again wrote to Entergy’s Jay Thayer, stating that “it will be exceedingly difficult for the Vermont General Assembly to act in 2010 on the question of continued operation of the Vermont Yankee Nuclear Power Station unless a power purchase agreement between Vermont utilities and Entergy is filed with the Vermont Public Service Board before November 1, 2009.”

The letter noted that state officials “established this firm deadline” to permit review “by the Public Service Board and then by the Vermont General Assembly.” Furthermore, the “contract and its details are critical to the central issues of economic [sic] relative to the Vermont Yankee nuclear plant that the legislature must consider.”

Here, the judge stated, “there is evidence Vermont Yankee would be required to sell a portion of its output to Vermont utilities at below-market rates, rates that would not otherwise be available to the utilities if they were negotiating on the same footing as customers in other states, or the plant must suffer the consequences of closure. The New England Power decision makes clear that a state’s requirement that a wholesale plant satisfy local demands and provide its residents an ‘economic benefit’ not available to customers in other states runs afoul of the Commerce Clause, because it impermissibly burdens interstate commerce.”

He concluded, “this Court will permanently enjoin Defendants [Gov. Shumlin and the PSB] from conditioning Vermont Yankee’s continued operation on the existence of a below-market Power Purchase Agreement with Vermont utilities.”

What are we to make of this? First, Judge Murtha is describing an unmistakable political shakedown. The 2006 law interjected an unique legislative approval requirement before the applicant (Entergy) could obtain a final order from the Public Service Board to continue plant operation. Unlike the PSB, whose non-political decisions are guided by volumes of statute and case law, Act 160 allowed legislators to vote Vermont Yankee off the island for any reason, or no reason.

Shumlin and Smith made it clear that their price for allowing the PSB to rule on Entergy’s application was below-market power contracts. To put it in bold relief, this is only a little different from a Chicago ward boss demanding payment from a contractor seeking a building permit.

That leads to the second point. By using their political muscle to force Entergy to give them a political benefit – lower power costs – the two politicians cast a dark shadow over Vermont’s hitherto nearly spotless record of equality before the law and probity in public service.

Vermont is still ethically far removed from Chicago, but the judicially rejected Shumlin-Smith extortion attempt can only damage Vermont’s attractiveness as a place to engage in productive economic activity. This state has enough obstacles to job-creating economic growth without adding that one on top.

Comments

  1. Josh Fitzhugh :

    I won’t go as far as the author in characterizing the Shumlin-Smith communication to Entergy, but I do agree that Judge Murtha in his opinion inferred that for a price (ie, a future economic benefit to Vermont ratepayers), he felt that the Vermont legislature might have been willing to downplay its other concerns about the plant, i.e., its safety. That comes through pretty clearly in the opinion.

    • Townsend Peters :

      And, given that the proponents of Vt. Yankee tout that it produces low-cost power, one would expect Mr. McLaughry to argue that it is sound policy for the Speaker and President Pro Tem to want to see what what the price and terms will be, instead of calling it extortion.

  2. walter moses :

    so mccloughry thinks the legislature put the strong arm on energy. oh, give us all a break. the institute better do a little research into entergy’s history and the coverups and lies they have fed to the vt legislature. more drivel from the institute. perhaps john the veep should move to vernon and sit next to that nice hot waste we have by the river.

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