The state of Vermont was back in federal court in January, again claiming that the Senate vote of 2010 was a legally valid reason for the state to close Vermont Yankee. This was the second attempt by the state to make that case. A year ago, U.S. District Court Judge J. Garvan Murtha ruled for Entergy, Yankee’s owner. For the federal appeals court hearing in January, Vermont Attorney General William Sorrell switched gears a bit: He hired high-priced legal help — Washington, D.C., litigator David Frederick.
|Attorney General Sorrell|
After the Murtha ruling, some plant opponents claimed that the state had simply been “outlawyered” by Entergy. Sorrell took the reasonable next step of getting a more high-powered attorney for the appeal. However, a good lawyer can get you only so far if the facts aren’t on your side. The state’s real problem is that it has a weak case.
Like airplane safety, nuclear safety is regulated by the federal government, not the states. Regulating nuclear and airline safety is a federal mandate partially because of the complexity of the regulated activities and partially to prevent wide variations in the degree of regulation among states.
The Vermont Yankee case hinges on a state Senate vote that denied Vermont Yankee the state-required certificate of public good. Murtha ruled that the Legislature had encroached on the federal mandate to regulate nuclear safety. Murtha based much of his ruling on quotes that referred to plant safety. In Murtha’s view, these quotes from the legislative debate revealed the motive for the senators’ votes.
To prevail in its appeal at the 2nd Circuit Court of Appeals, the state had to address this question: If safety concerns didn’t drive the Senate vote to reject Vermont Yankee’s application for a certificate of public good, what did? Citing a 1983 Supreme Court ruling that recognized the state of California’s right to regulate the economic aspects of a nuclear power plant, Vermont’s lawyer tried to make the case that his client had economic reasons to close the plant. It’s a tough case to make.
Economics and Timing
|Graph from the Consensus Report|
It seems clear that the Senate didn’t wait a few weeks for the economic consensus report because their vote wasn’t about economics.
During his arguments before the three-judge panel, Frederick was forced to resort to a fair amount of speculation to make an “economics” case. He claimed that if Entergy were to go bankrupt and if the Nuclear Regulatory Commission didn’t do an adequate job of supervising the decommissioning fund, then the state might face financial liabilities in the future. This degree of hypothesizing about events that “could” happen is unlikely to prove convincing.
Economics Today: Vermont Yankee May Pay Vermont Utilities
In terms of present-day economics, Frederick was on even weaker ground. He said that the paid-off nuclear plant makes it hard for newer plants to be built. That statement implies Vermont has an economic incentive to shut down cost-effective power plants. Entergy’s attorney, Kathleen Sullivan, argued that no Vermont utility is under any obligation to buy Vermont Yankee’s power, whether it is expensive or cheap. She pointed out that different circumstances prevailed in California in 1983 when the Supreme Court allowed a state to regulate the economic aspects of nuclear power. The California plant sold power directly to customers at regulated rates. Vermont Yankee, however, sells its power to the grid. Frederick countered her by saying the utilities still have a “relationship” with Vermont Yankee — one worth $587 million.
Frederick was referring to a revenue-sharing arrangement that was part of the original sales agreement with Entergy. The provision, which kicked in last year, says that if Vermont Yankee sells power for more than 6.1 cents per kilowatt hour, it has to split the revenue above 6.1 cents with Vermont utilities.
That agreement is worth potentially hundreds of millions to the utilities and ratepayers of Vermont. Its value depends on the price at which Vermont Yankee sells its power. I don’t know where Frederick derived such a precise number ($587 million) for the revenue share. However, a half-billion dollar financial relationship will be very helpful for the utilities (and therefore the ratepayers) of Vermont. Utilities could use the money to improve infrastructure or avoid raising rates.
Hundreds of millions of dollars in potential revenue sharing is not a reason to shut the plant down. What, exactly, is the logic here: Shut it down before it shares money with us?
Frederick’s statements on revenue sharing went by in a flash, near the end of the hearing. The appeals hearing in New York City was very brief. The court had scheduled 15 minutes for arguments from each side. From opening gavel to “thank you” from the judges, it lasted 37 minutes, moving much like a rapid-fire tennis match. The good news is that it is possible to listen to an audio of the entire hearing in less time than it takes to eat a leisurely dinner. (The audio is available in my Jan. 15 blog post, at Yes Vermont Yankee.) The bad news is that statements that could easily have been refuted by the opposition lawyers or judges were not challenged.
Despite the brevity of the hearing, the judges are expected to take weeks or months to rule on the appeal.
In her recap of the hearing, Vermont Law School professor Cheryl Hanna wrote, “The state should be happy that the bench at least took seriously their argument that Judge Murtha should not have ruled as he did. Whether the gravitas and intellect of Frederick is enough to convince them in the face of overwhelming evidence that the legislature was (not) primarily motivated by safety is harder to call. The state still bears the burden, and the facts and (in my opinion) the law still favor Entergy. If the state loses, it won’t be because it was out-lawyered.”
No, it will be because the state can’t make a credible case that Vermont officials were thinking about economics when they voted to close the plant.
This op-ed first appeared in the Valley News (my local paper) on February 10 and I put up a blog post with a link. It was also published at Vermont Digger. It may well appear in other places around the state (I sent to several more newspapers), but I thought is was time to put it on my own blog, too.