Tuesday, June 14, 2011

The Legislative Shakedown of Entergy. Plus A Song About the Master of the House



The Commerce Clause and the Insistence on a "Good Deal"


The legislators who were against the plant's continued operation probably realized (at some level of their minds) that constantly decrying the plant's safety might get them into trouble vis-a-vis the NRC.

So, for many of the legislators, a favorite statement was some variation of : "I won't vote for the plant continuing to run unless they give Vermont a good deal." Or, alternatively: "They haven't given Vermont a good enough deal, yet."

The legislators made it abundantly clear, on many occasions, that the State of Vermont was not going to let Vermont Yankee operate unless Entergy gave Vermont utilities a better deal than they give out-of-state customers.

That was equivalent was putting a tariff on goods shipped out of state, which is illegal according to the Commerce clause of the Constitution. As one on-line legal definition states: "The Commerce Clause authorizes Congress to regulate commerce in order to ensure that the flow of interstate commerce is free from local restraints imposed by various states."

As the Entergy lawsuit brief says: “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.”

There's another side to this issue, not about Vermont Yankee or even the U.S. Constitution. "They have to give us a better deal or else they are gone" is a form of political coercion. In other words, a shakedown.

The Shakedown

John McClaughry of the Ethan Allen Institute wrote an article about this: Shumlin's Vermont Yankee Coercion Scheme. The article has appeared at True North Reports, Vermont Digger and Vermont Tiger.

Whatever happens in the lawsuit or with Vermont Yankee, this action of the legislature makes it clear to employers and businessmen what they can expect at the hands of the State of Vermont. We don't welcome employers in Vermont. We shake them down for all they've got. "Give Vermont the deal we want, or we'll shut you down."

In the past, I was annoyed at the fact that Shumlin always emphasized that Entergy is a "Louisiana Company". He frequently stated some variation of: "We don't do things in Vermont the way they do in Louisiana." I wondered what other out-of-state companies would think of this. Would they come to Vermont to set up a factory? Would they be attacked as "That's a Delaware company. We don't do things in Vermont the way they do in Delaware" ? Would an out-of-state company even consider coming to Vermont?

Vermont has attacked a major out of state company for---being from out-of-state. It has also coerced that company: "you can't operate here unless you give us the deal we want."

Whichever way the Entergy lawsuit goes, this way of treating employers does does not portend a bright future for Vermont. Nobody likes a shakedown.

A Song

I headed this post with a song about extracting money from the people you supposedly serve: "Master of the House" from Les Mis. For my purposes, the song should be titled "Master of Vermont," since the House, the Senate and the Governor were all involved in the shakedown. It's not fair to just pick on the House. (small lame pun...)


Note and Disclosure: The Energy Education Project that I direct is part of the Ethan Allen Institute, co-founded by John McClaughry.

10 comments:

Martin Langeveld said...

Meredith, back in January you reported on IBM's thinly-veiled threats to leave the state if its electric rates went up 25 percent, with the obvious implication that the state should be doing something about those rates.

But now, you criticize legislators for making statements that do just that: demand lower rates from Entergy. I don't think you can have it both ways.

First of all, if "They have to give us a better deal or else they are gone" (your words in reference to the legislators' statements) is coercion and a shakedown, then you have to agree that IBM's earlier statement is coercion as well. (In effect: "If we don't get favorable electric rates we're gone and you lose these 5000 jobs.")

I don't think IBM's statement was coercion, and I don't think any legislative statements are coercion. Elected officials have freedom of speech like the rest of us, and should be able to speak their mind without having corporate lawyers use their statements in frivolous claims to dress up a lawsuit.

If the state had made an official demand for below-market rates as part of a negotiating process, or had actually passed a law stating that VY could not operate unless it provided power at below-market rates, THAT might violate the commerce clause.

But legislators publicly speaking their minds are not in violation of the constitution, any more than you or I are for voicing our opinions, and they should not get sued for doing it.

Meredith Angwin said...

Martin.

IBM, as a private company, can say what it wants to say.

Legislators with the power of denying a permit have to be careful not to make demands that are unconstitutional and unfair. I hope that you will understand the difference between a private person or corporation (which can announce its intentions freely) and a legislator with the power of permitting and taxation in his pocket.

If you don't understand that difference, I am sorry. There is a difference. Legislators take oaths of office including upholding the Constitution. Maybe someday you will hold office, and you will understand that the position comes with certain restraints.

Rich said...

Have the Vermont legislators considered the impact that the thousands of wind-turbines spread throughout the mountains they propose to replace Vermont Yankee will have on the tourism? When I lived in Connecticut, I visited every fall often staying a week or more. I am glad I have the pictures, in a few years the views will be very rare. What are the mountains going to look like with the construction/service roads? How many more MILES of high-tension transmission lines be built? I am not sure, but won't it take over 3,000 wind-turbines to get the same power as VY? How many acres of land does that impact? !,000, 3,000, or 5,000? How far will the ice be thrown off of the blades? Will the even work well in the winter?

Perhaps you should get some pictures from the PA (and others) wind farms showing what it will look like. That scenic view of the church in the valley along I-81 that I took every time I saw it will defiantly not get taken with 25 wind-turbines in the background (other than to show how bad it looks.) And the trips will no longer be taken.
Get your pictures now. here is what is coming ->
http://www.youtube.com/watch?v=SJCK8JTp_sg
http://www.youtube.com/watch?v=e11zcUTR5Uw&feature=related

Martin Langeveld said...

Sorry, Meredith, I have to heartily disagree with your idea that states are subject to lawsuits over "unconstitutional" statements of opinion by legislators. Having that kind of constraint on free speech is reminiscent of the way the Soviet Union operates, not the United States and the state of Vermont.

"Upholding the Constitution" means upholding freedom of speech, not squashing the right to express one's opinions for fear of violating the commerce clause.

Look at what Entergy cites as "evidence" of its claim about this: it quotes Shumlin, when he was still a legislator, as saying "“There’s no way we’re going to vote to relicense the plant unless Vermonters are getting a great deal.”

They also quote him saying, "to get an affirmative vote out of this Legislature, Vermonters would have to have a very good power price." And they quote one legislator as saying that failure to provide favorable prices would be a "deal-breaker." And as a final "smoking gun" they quote someone at the DPS as saying "If Entergy has any expectation for continued operation, it has to include a favorable purchase agreement. ... We would not support relicensure until such a tie that there is a PPA that is favorable to Vermonters."

What on earth could be wrong with a legislator, governor or public official saying something like that? Of course Vermont should get a great deal. It's what I've been saying in my previous comments here, myself. Was I violating the Constitution as well?

You need to look at clauses 86 and 87 of the filing, where Entergy says that "any state-law requirements" for ENVY to sell power at favorable rates violates federal preemption and the Commerce Clause.

That may well be, but there have been no state laws passed with any such requirements , and any deal with VY that convinced the legislature to permit its continued operation would not be in the form of a law requiring such rates. There is no coercion, preemption or violation of the commerce clause without legislation, and nobody has threatened or discussed legislation requiring VY to sell at sub-market rates.

Meredith Angwin said...

Martin.

I understand you see this as a free speech issue. However, when an elected official with the power to enforce his will by denying an operating permit states, over and over, that some company has to give a "really good deal, that a market-rate deal just won't be good enough" (which is what they were saying), that is not free speech. That is extortion.

It's the same reason that police can get into trouble for being discourteous to suspects, while I can be discourteous without the same type of consequences. Having power comes with some restraints. If my friend makes a racist remark---free speech. If my boss makes a racist remark---lawsuit.

If I understand that you don't "get" this. I think it is the sort of thing that is abundantly clear or not "gotten" at all. So we must agree to disagree, I think.

Martin Langeveld said...

See, you're free to call it extortion just as they're free to say they'd like a good deal. But that doesn't make it extortion in the legal sense. Same thing you do when you shop for a car. The dealer says, Meredith, you're killing me. But it's not the kind of killing you can get arrested for. And legislative speech is not the kind of thing that can by any stretch of the imagination be called unconstitutional or illegal. The examples you cite are not the same — there are rules and laws violated in those cases. Show me the rule or law that's violated when a legislator says the state should get a good deal, even when they say it over and over.

Meredith Angwin said...

Martin.

I know I won't convince you.

If a legislator says: "I will shut you down if you don't give us a below-market deal," it's extortion.

It is extortion because the legislator has power-over the plant.

Buying a car is a consensual transaction. I can walk away, he can decide he's not selling me a car because I didn't offer enough. Whatever. We are in a market transaction, and we don't hold any power over each other. I can't shut down his car lot, for example.

On the other hand, having power over others means having constraints on what you say and do.

You don't agree, and I can't convince you. I will happily publish another comment of yours on this subject, but I won't answer it. You don't understand the constraints of having power over others, and I simply cannot explain the obvious. So, you are hereby free to have the last word!

Talisker said...

In support of Meredith's points here--This is not a free speech issue. Citizens have the right of free speech and are protected from the governement infringing upon that; government officials are in this case not speaking as citizens but as government officials expressing viewpoints--which carry the threat of coercion because only they have the power to coerce in this case. My dictionary has as its first definition of coerce---to restrain or constrain by force, esp. by legal authority. Neither IBM nor VY have the power to coerce the state...they have every right to persuade, cajole, pound the table, use the courts, and hope to get what they want...and they can certainly threaten to pick up and go elsewhere. A similar situation is playing out with Boeing versus the NLRB. In this case the Federal Government is attempting to prevent Boeing from doing business at a new non-union plant in South Carolina and keep all work in union-dominated Washington State. The Federal Government is using the NLRB to coerce Boeing and it will probably prevail until it gets to the US Supreme Court where most observers beleive Boeing will prevail. Private entities (not the state) still have the right to vote with their feet and do business where the best opportunities for them exist. VY cannot pick up and move and so will attempt to prevail and stay in business here. IBM is more free to pick up its marbles and go to a more hospitable business climate.Hopefully VY will remain operating and IBM will feel it advantageous to remain here also.

Meredith Angwin said...

Rich and Talisker

Thank you for your comments. Rich, I try to tell people that renewables are very land-intensive, but they don't want to listen! Talisker, I appreciate your comments very much.

Martin Langeveld said...

This is a debate on a fairly narrow point, and I agree we should leave it as agreeing to disagree at this point.

But I'll make a prediction: the courts will rule against Entergy on this particular claim (coercion and violation of the Commerce Clause), even if they prevail on the larger claims about Vermont's modifications of the 2002 agreement.