Federal Court Dismisses Vermont Yankee Tax Case

The Generation Tax

I have a wind turbine illustration for this post because the underlying issue in the Vermont Yankee tax case is about wind turbines.  Well, actually, it is about the Clean Energy Development Fund (CEDF), which was funded by Vermont Yankee, and paid for many wind turbines and other renewable projects.

Vermont Yankee's obligation to fund the CEDF ended in March 2012, and the people in Montpelier have been trying to do something about this ever since. "Doing something" consisted of finding a way to keep VY paying into the fund.  They levied an extra $7 million dollar generation tax on Vermont Yankee...rather, the tax applied to any power plant, larger than 200 MW, which was built after 1965.  There just happened to be only one power plant that met this description.

Was this a targeted, non-constitutional tax on one business, or just tax business as usual? Entergy thought it was not constitutional. I thought the same.

I blogged about the resulting lawsuit in  The Latest Lawsuit: Is It a Constitutional Case in Vermont?

Another reason for the wind turbine illustration, however, is that the new tax rate on VY became the same tax per kWh for Entergy and for (highly-subsidized) wind turbines.  This allowed the state to make the case that these taxes were simply state business.  Same tax for wind and nuclear, less for other electricity sources.  The argument was "that's just how Vermont wants to do it, and no business of the federal courts."

The Ruling

Yesterday, in federal court, the judge moved to dismiss the lawsuit.   The question hinged on whether this was a state "tax" on a business (and therefore, state business) or a "levy" against a single business (and therefore, a constitutional issue).  Judge Christina Reiss ruled that it was a tax and dismissed the federal case.

This is clearly and certainly a set-back for Entergy, but it has been reported as "case dismissed" when really the ruling is more like "case redirected."  To quote Andrew Stein's Vermont Digger article on the outcome:  Judge Christina Reiss ruled that the generating tax was indeed a “tax” under the Tax Injunction Act, and Entergy does have a “plain, speedy and efficient” avenue through the state court system.

Will Entergy move the case to the Vermont courts?  I don't know.

Quotes Without Comment

Tony Klein is the chairman of the Vermont House Natural Resources and Energy Committee; he was quoted in an article about this tax lawsuit.  The article is by Dave Gram, and appeared on September 11 in Boston.com.  I saved a copy to my hard disk, but I can't find the article on the web right now.  Note: this was an article about the lawsuit.

Rep. Tony Klein, D-East Montpelier and chairman of the House Natural Resources and Energy Committee, said Tuesday the state's intent was for Vermont Yankee to shut down.

In a September 13 article about the tax, on Vermont Digger, Mr, Klein was quoted as follows:

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.