Business & Economy

Breaking down Entergy’s new suit against Vermont

Vermont Yankee on the banks of the Connecticut River

The Louisiana-based Entergy Corp. responded to a Vermont tax hike on its Vermont Yankee Nuclear Power Plant by filing a federal lawsuit on Tuesday against Gov. Peter Shumlin and the state of Vermont.

Entergy is suing the state on four counts of allegedly violating the U.S. Constitution. The suit is aimed at reversing a tax increase on electricity generation, which was passed during the 2012 legislative session and that would raise roughly $12.5 million annually for the state, instead of the $5 million previously raised by the tax.

But Gov. Peter Shumlin and leading legislators maintain that the tax increase is reasonable and warranted.

“Entergy’s decision to challenge the generating tax is disappointing,” said Shumlin in a press statement. “I firmly believe the tax is reasonable. It is less than the tax rate on wind projects, and it is comparable to the generating tax on nuclear plants in Connecticut. Nevertheless, Entergy clearly prefers to sue the state of Vermont, consistent with its history.”

The nuclear generating tax of $0.0025 per kilowatt-hour (kWh) is the same as Connecticut’s and less than the Vermont tax on large wind projects of $0.003 per kWh.

Scot Kline, chief environmental lawyer for the state, said Thursday morning that he and his team are reviewing the injunction and weighing the state’s options. While Kline and the Attorney General’s office get their ducks in a row, the nonprofit Vermont Public Interest Research Group (VPIRG) threw in its two cents on the issue.

“Given Entergy’s track record, it’s not a surprise that it would rather spend its money on high-priced lawyers than pay its fair share to the people of Vermont,” said Ben Walsh, clean energy advocate at VPIRG. “That’s what this lawsuit is all about.”

If Entergy wins this case, however, it wouldn’t be paying for Entergy’s lawyers at the Burlington-based Gravel & Shea — Vermont taxpayers would.

Cheryl Hanna
Cheryl Hanna, law professor at Vermont Law School.

“Anytime a state violates the constitutional rights of an entity that entity is entitled to reasonable attorney fees under federal law if they win,” said Cheryl Hanna, a constitutional law professor at Vermont Law School.

And that’s a situation Sorrell and his team are already trying to avoid, as the state appeals a previous lawsuit filed by Entergy.

The case

In January, Entergy won a federal case to continue operating its Vernon plant past the March 21, 2012, deadline imposed by the state. U.S. District Court Judge John J. Murtha ruled against a Vermont legislative act that prohibited Vermont Yankee from operating past its 40-year license, and he shot down another state act that would have required Yankee to obtain legislative approval to store nuclear waste on site.

The Nuclear Regulatory Commission (NRC) in 2011 extended Yankee’s operating license by another 20 years.

These incidents make Entergy’s newest case all the more convincing, said Hanna.

“I think the state of Vermont is going to have a difficult time defending the tax because the court is going to look at the reasons behind the state’s actions in light of all the history that’s led up to it,” she said. “I think Entergy has a fairly good argument that this is just another attempt by the state to preempt federal law and shut down an otherwise viable power plant.”

But Rep. Tony Klein, D-East Montpelier, who chairs the House Natural Resources and Energy Committee, and Rep. Dave Sharpe, D-Bristol, who is on the House Ways and Means Committee that designed the tax, steadfastly deny that the Legislature’s intent was to create a tax aimed at inhibiting the plant’s operation.

Rep. Tony Klein. VTD/Josh Larkin
Rep. Tony Klein. VTD/Josh Larkin

Sharpe indicated that the tax is meant to replace the former tax of just under $5 million annually, as well as to make up revenue for agreements with Entergy that are set to expire. Those agreements have brought roughly $6 million annually into the state’s Clean Energy Development Fund since fiscal year (FY) 2007.

“Our goal in the Legislature was to work through this transition period and come up with a fair taxation of the power they were producing,” said Sharpe.

While Entergy acknowledges the state’s intent, it doesn’t agree with its methods.

“The State seeks to replace these amounts by imposing what it labels a ‘tax’ on a single Vermont taxpayer, Entergy,” writes Entergy in the injunction. “As such, (state officials) improperly seek to continue the expired contractual payments.”

Entergy filed its suit almost two months before its first state-mandated payment is due on Oct. 25. The Legislature called for Entergy to make tax payments on a quarterly basis. In FY 2013, the Legislature expected the tax to generate $9.5 million, as Entergy was only responsible for three-quarters worth of fiscal year payments. Entergy has proposed paying the previous generation tax — the $5 million annually — while this issues is being litigated.

In the bill (H.782,) that leverages this new tax, Vermont Yankee isn’t specifically named. Instead, the House bill places the tax on any electric power plants that were constructed after July 1, 1965, and have a generating capacity of more than 200,000 kW.

According to Department of Public Service Commissioner Elizabeth Miller, the state only has one such plant: Vermont Yankee.

Entergy’s four counts

Entergy is suing the state on four counts of violating the Constitution.

The first count alleges that the state violated the supremacy clause, which places federal authority above that of a state. In this case, Entergy paints a picture of the state interfering with a federally licensed plant. Hanna, however, does not think this is the company’s strongest argument.

The second count accuses the state of violating the commerce clause for interfering with interstate commerce. As Yankee only sells power to out-of-state customers at the present, Entergy argues that the new tax rate doesn’t affect Vermont and “discriminates against interstate commerce in favor of intrastate commerce.”

In the third count, Entergy complains that the state violates the equal protection clause in the 14th Amendment, which provides all people with equal protection of the law. Since a corporation is considered a person in the court of law, Entergy has the right to equal protection, and it is accusing the state of discrimination “by singling out one entity,” as the injunction reads.

Fourthly, Entergy accuses the state of violating the contract clause by preventing the company’s ability to extend its previous contracts with the state. In this count, Entergy argues that the state aims to “unilaterally” extend the agreements “without providing any contractual consideration.”

Hanna thinks the equal protection argument might be Entergy’s strongest.

“Where the Legislature runs the greatest risk is that they targeted Vermont Yankee,” she said.

When asked about singling out Yankee, Sharpe said he would prefer to institute a flat generation tax for all commercial power producers in Vermont.

“My desire would be to tax all electric producers the same, and this was an attempt to bring Vermont Yankee closer to others,” he said.

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Andrew Stein

About Andrew

Andrew Stein is the energy and health care reporter for VTDigger. He is a 2012 fellow at the First Amendment Institute and previously worked as a reporter and assistant online editor at the Addison County Independent, where he helped the publication win top state and New England awards for its website. Andrew is a former China Fulbright Research Fellow and a graduate of Kenyon College. As a Fulbright fellow, he researched the junction of Chinese economic, agricultural and environmental policymaking through an analysis of China’s modern tea industry. He is fluent in Mandarin Chinese and has been awarded research grants from Middlebury College and the Freeman Foundation to investigate Chinese environmental policies. A member of Investigative Reporters and Editors, his work has also appeared in publications such as the Math Association of America’s quarterly journal Math Horizons and When Andrew isn’t writing stories, he can likely be found playing Boggle with his wife, fly fishing or brewing beer.

Email: [email protected]

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  • Mike Kerin

    How dare the State of Vermont tax the nuclear corporation?

  • Mike Kerin

    Big wind pays .003 cents tax per KWH but the tax rate for the nuclear plant is .0025 ! So why are they crying?

  • Sally Shaw

    Solution: change the tax rate to .003 per kwh across the board for ALL commercial generators. Why should the dirtiest energy of all, the cancer factory with a byproduct of electrons get a break? I hope the courts impose that remedy. While they’re at it, why not require ALL commercial power generators to fully fund their clean up/decommissioning costs up front, JUST AS WIND GENERATORS IN THE STATE ARE REQUIRED TO. Revoke CPG permit until funding is in the pot. And require them to have a valid effluent permit from the ANR or shut down. Can you drive your car without a license? If Entergy corporation is a person, what sort of person is it? One who lies, leaks, spits and toilets in public, bullies small children and litters all over the landscape? Whines and blats when expected to live up to agreements or responsibilities. Looks to big Daddy Bully to get them out of responsibilities? Sort of a Dudley Dursley. Sort of a dud period. VT can do better with homegrown power. Viva the sun and wind.

    • Mike Kerin

      Sally, I second your post!
      Well written.

  • david klein

    “Entergy complains that the state violates the equal protection clause in the 14th Amendment, which provides all people with equal protection of the law. Since a corporation is considered a person in the court of law, Entergy has the right to equal protection, and it is accusing the state of discrimination “by singling out one entity,”

    What can one do against the perverse legal definition of a corporation as a person? This is The Trial by Franz Kafka. Nuclear power is not worth the risk. When will enough be enough to the State and people of Vermont?

    • Alex Barnham

      I agree…and when will enough ineptitude by the State Legislature be enough?

    • timothy price

      “You’ll recall that the shooter in Trayvon Martin’s death was protected at first by Florida’s so-called “stand your ground” law.”

      Hey, people need to learn how to take advantage of these laws that the psychopaths put in place.   Take as an example: Vermont Yankee is a nuclear power plant, the same design as the ones in Fukushima, built at the same time, just as old and funky. You know Fukushima.. right?  
      Great event there caused by an aging nuke, just like this one, except this one has much more spent fuel stored in its attic. It is scary to have it on our land, on our river, and near our cities and farms.  It is a real threat. 

      Vermont Yankee is run by Entergy Corporation… and corporations are people,  right?  And Vermont did not renew Yankee’s license to operate past March of 2012, so now Entergy is trespassing on Vermont property.  So the “stand your ground” law gives all the hunters here the right to use any means of defense against this terrible threat that is trespassing and, despite all the time and effort that Vermonters have spent trying to get them to leave, they stay against our will and our state law.  

      Yes, the “stand your ground” law might well be used on their board of directors (the deciders for the corporation) because they threaten the people of Vermont, are there illegally, and though repeatedly told to leave, will not…

           If the hunters around the plant take things into their own hands for self defense, defense of their homes, their families, their way of life..  and their lives,    the board of Entergy is no longer safe. They have become dangerous criminals, targeted,  and should have real fear. Hey, they know the law.. right?

  • Ben Eastwood

    This is why we can’t have nice things… Why didn’t the legislature just institute a flat tax on ALL electricity commercially generated in the state, instead of this petty clause that singles out yankee and gives them, yet again, the legal foothold to challenge the case. Let’s ignore the fact that it would have also generated more revenue for the state to help offset the damage being done by its very presence, but it would have left them no choice but to pay the damned tax they owe.
    The legislature has botched it again, and once again the state is balking at standing up to a bully because it might be expensive to protect the people…

    • Alex Barnham

      Ben, we are seeing a pattern here…a lot of botches does not a successful legislature make. We are not stupid enough, right?

  • Steve WIble

    Generator taxes are short sighted as the consumer ends up paying eventually. This tax will not lower Entergy’s profits one cent. Regional Greenhouse Gas Initiative credits are the same as a generator tax. These costs are passed to the customer as well. It may feel good to tax the big bad company, but we all end up paying.