The Public Service Board Rewrites History

Pressing Control-H?

A petulant Board says Entergy is not a fair partner.

In granting the Certificate of Public Good (CPG) for Vermont Yankee to operate for a final year, the Public Service Board (PSB) stressed that Entergy had not been a "fair partner" to Vermont.  I considered the Board's assertions misleading and petulant.

My recent post on this subject was PSB and the Certificate: Powerless and Petulant. I ended that post with a question: "Well, did the Board have good reason to believe Entergy was not a fair partner?  Or were they just being petulant, as I claim?"  In this post, I begin to answer that question.

Let's start with the Board's rewrite of history.

As usual, here's a link to the Board's order approving the Vermont Yankee CPG.  http://psb.vermont.gov/sites/psb/files/orders/2014/2014-03/7862%20Final%20Order.pdf 

Rewriting History

The Board is made up of lawyers who were not under oath ("the whole truth") on a witness stand.  They were writing an opinion. Without an oath to tell the truth and the whole truth, they could omit important history from their opinion.  And they did.

If you asked an average Vermonter about Vermont Yankee's history, he would probably say something like: "Well, the legislature voted against the plant but then that vote was overturned by the court."

The PSB chose to forget this part of the history.

What the PSB mentioned

Let's look at page 28-29 of the ruling. This is extracted from the rulings history-chronology which is a background to this order.  I will summarize a few items, quote a few items (in italics). You can read the rest if you follow the link to the ruling. 

Item 6: 2002, Board approves sale of plant to Entergy
Items 7 and 8: 2006, Board approves construction of Dry Cask Storage and Power Uprate
Item 9: 2011, Entergy receives a license extension from the Nuclear Regulatory Commission.

10. On March 3, 2008, Entergy VY filed a petition with the Board seeking authority to continue operation of the VY Station for an additional 20 years through March 21, 2032. Docket 7440, Petition of 3/3/08 at 2.55

11. On January 19, 2012, the United States District Court for the District of Vermont issued a decision holding that provisions of Act 160, codified at 30 V.S.A. § 248(e)(2), were preempted by the federal Atomic Energy Act, and enjoined the enforcement of these provisions. Entergy Nuclear Vermont Yankee, LLC v. Shumlin, 838 F. Supp. 2d 183, 243 (D. Vt. 2012),

What the PSB forgot to mention

Did you notice anything missing? The legislature passed Act 160 in 2006 requiring the legislature to allow the PSB to issue a CPG.  The Board didn't mention that.

Act 160 was a clear change to the contract that Entergy signed when they bought the plant. That contract said that the PSB had to consider whether the plant deserved a CPG.  The original contract said nothing about the legislature.  For information on this, I recommend John McClaughry's post: Can Entergy Trust the State?

The legislature took over the decision about issuing a CPG to the plant (by passing Act 160 in 2006).   The legislature discussed, at great length, the plant's nuclear safety. However, nuclear safety is a matter of federal jurisdiction, and the legislature knew this. The legislature used what Cavan Stone calls the Control-H defense. Basically, the legislature decided: "Let's use another word for safety."  We will hit Control-H and we will change that word.  See Cavan Stone's guest post The State and the Control-H Defense.

Having attempted to use other words for "safety," the Vermont Senate held a vote in 2010. This vote denied a CPG to  Vermont Yankee-- by refusing to let the PSB rule on a CPG.  Essentially, this vote ordered the plant to shut down in 2012.

Entergy then sued the state,  because the legislature had acted on the basis of nuclear safety. It is a federal prerogative to regulate nuclear safety. Entergy won that lawsuit. The state appealed, and Entergy won that appeal. This was embarrassing for the legislature, and maybe embarrassing for the PSB.

What the PSB was embarrassed to mention

I can read what the PSB wrote, but why they wrote it is forever a mystery.  Here's my opinion.

Governor Peter Shumlin
Led the Senate to vote against VY
(before he was Governor)

Neither the 2006 law nor the 2010 vote are mentioned in the PSB history.  Why not?  Is it because these show that the state of Vermont was not being a "fair partner"?  Is it perhaps because the legislature took the PSB's power away from it?  The legislature said: "You can't release your findings, PSB,  unless we legislators allow you to do so." To write about this, the PSB would have to admit another example of being powerless.  Was that the reason they didn't mention the vote?  Or was it that Entergy won the lawsuits, hands-down, and the PSB is basically lawyers who ended up on the wrong side?

Was the PSB just plain embarrassed at the whole history?

Who knows?  As I say, the PSB didn't write this opinion under an oath to tell the whole truth, so they wrote what they wanted to write. They left out the part of the history that most Vermonters would mention if asked about the history of Vermont Yankee.

I thought I would mention that history.

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Note: I have plans for more posts about the PSB ruling.

Vermont Loses Lawsuit Against NRC about Water Quality Permit

The Intervenors (and Vermont) Sue the NRC and Lose

The New England Coalition (NEC) is an intervenor that has fought Vermont Yankee since before the plant opened.  About a year ago, NEC brought a lawsuit against the NRC.  NEC claimed  that the NRC should not have granted Vermont Yankee a license extension because the plant did not have an up-to-date water quality permit issued by the state. They claimed that Vermont Yankee's NRC license was invalid, and had to be rescinded.

Late last month, NEC lost the lawsuit.  The U.S Court of Appeals in Washington D.C. ruled against NEC and for the NRC.  You can read the ruling here.

Liz Miller
DPS Commissioner

Oops!  Did I say NEC lost the suit?  What I meant was that the Vermont Department of Public Service  (DPS) and NEC lost the suit, because Vermont joined the suit.  DPS joined the suit big-time.  Liz Miller, the DPS Commissioner, argued the case before the Court.

The State's Case and My Opinion

I found the state's case quite odd. I wrote an blog post last year -- A State of Confusion: The Suit about the Water Quality Permit.  As I said at the time: the state is the one that issues water quality permits.  If the plant's water quality permit was not up to the state's requirements, the state should have insisted that the plant do something about this.  Instead, the state sued the NRC, saying the NRC should not have issued the license extension.

In other words, Vermont claimed that Vermont hadn't cared about the water quality permit status, but the NRC should have cared.  My guess was this argument wouldn't convince a court.

It didn't.

The Court's Opinion

The court ruling was related to what I had expected, but different.  The appeals court ruled that the state had an obligation to bring up this contention before the NRC during the hearing, not wait until the license was granted and come in with an "oh, by the way" lawsuit.  To quote the ruling:

“.. petitioners here were required under agency regulations to afford the full Commission an opportunity to pass on the section 401 issue before seeking judicial review. And they had repeated opportunities to do so...[they] sat silent for two and one-half years thereafter, raising their... objection only after the Commission issued the license renewal in March 2011.”

The Opponents' Opinions

Many of the opponents cried bitter tears that the NRC had escaped on a procedural technicality.

According to VPR, a NEC spokesman, Chris Killen, said: "The New England Coalition, and all Vermonters, have now been deprived of the right that was guaranteed to them by Congress, to have a say in how this plant affects clean water." According to the same article, Shumlin's spokesman  John Being said "We're disappointed that the court declined to address our substantive water quality argument and instead ruled, based upon kind of a technical issue, a procedural issue,"

Pat Parentau
Vermont Law School

However, in the same VPR article, Pat Parentau of Vermont Law School said the court ruled on a fundamental point of administrative law.

"Where there's a clear process to raise an issue, before the commission - that‘s the key - before the commission itself - that you can't miss that opportunity and expect the circuit court to hear your argument," he said.

Pat Parentau would like to see Vermont Yankee shut down, but he knows this ruling was not procedural nit-picking.

The Next Step

Of course, Vermont claims it is considering an appeal to the Supreme Court.  Vermont always wants to take it all the way to the Supreme Court. (Take It To the Limit.)  However, most people admit that this ruling is the final ruling. The Supreme Court won't hear the case. The Supreme Court rarely reviews rulings that are made on the basis of administrative law.  So the next step is---this ruling will stand.

It's funny how often Vermont gets tripped up by the Constitution or by customary administrative law requirements, or other stuff like that. It's almost as if our administration doesn't think things through. (sarcasm alert)

Oh By The Way

Let's talk "substantive issues" here for a moment.

First issue.  Vermont Water Quality Reviews are On-Going: The Agency of Natural Resources (ANR)  has been working on a water quality permit with Vermont Yankee since 2006.  To quote a Brattleboro Reformer article on the lawsuit: ANR is still in the process of determining whether Yankee should receive a permit to discharge non-radioactive cooling water -- at up to 100 degrees -- into the Connecticut River. That process has been going on since 2006 and is not expected to be resolved anytime too soon.  In other words, what the heck was this Vermont lawsuit about?

Second issue. Why Is the Department of Public Service doing this?  The Department of Public Service is supposed to be protecting the rate-payer in hearings before the Public Service Board, not running down to Washington to join intervenor lawsuits.  However, as I said in my blog post: Gaz Metro Deal Goes Forward. Ratepayers Stiffed. the DPS is not defending the ratepayer.  The DPS is just another one of the ducks that Governor Shumlin gets in order.

The Sixth Lawsuit about Vermont Yankee: Suing for the Cost of Replacement Power

I never should have done it. Four days ago, I published a post Five Legal Wrangles About Vermont Yankee.

I counted five, but lo and behold! Today there's a sixth lawsuit! You just can't keep up a count around here.

The Cooling Tower Problems

In August 2007 and July 2008, Vermont Yankee had widely-publicized collapses of a part of the cooling tower bank. The first incident happened because it happened. Vermont Yankee has rather old wooden cooling towers, and there was a maintenance problem on one of them. The second incident happened because of an incomplete repair of the first incident. In both cases, the plant stayed on-line, but de-rated power. It lowered power output for 11 days (first incident) and 12 days (second incident).

On the basis of these incidents, Central Vermont Public Service (CVPS) and Green Mountain Power (GMP) are suing Entergy. They had to buy more expensive replacement power during the time of lowered output from Vermont Yankee. They say that the plant was negligent about maintaining the cooling towers, so they deserve the money in recompense. You can read their press release here and it has been widely reprinted as a news article. Albany station WAMC had a short program on the lawsuit, hosted by Pat Bradley. Don Kreis of Vermont Law School gives his opinion, and I give mine. (The program is three minutes long.)

If Everything Isn't Perfect, We're Suing

Briefly speaking, this is a ridiculous lawsuit. There are all sorts of utility contracts out there, and CVPS and GMP did not have a contract in which Entergy had to pay them for replacement power. That is the end of the story. GMP and CVPS didn't have a contract that required reimbursement.

The utilities are claiming that Entergy's plant maintenance was so bad that the de-rating was due to Entergy negligence. I have one word for that: Ridiculous! Vermont Yankee has a high capacity factor, and has had a series of breaker-to-breaker runs (from one refueling to another without a stop). In this case, it wasn't even off-line for the repairs. It had just powered down.

If utilities sued every time a plant powered down or went off-line unexpectedly, there would be no end to it! Of course, if a plant is not operating at full capacity, something went wrong. I suppose this could have been prevented if everything had been done perfectly. Let's look at coal plants, for example. They have to keep testing the coal they receive. Let's say they receive some coal and they don't get the chemistry analysis quite right and boom...their boiler is coated with slag and they are off-line. (Most coal plants test coal extensively and blend coal to avoid this situation. They don't always manage to avoid it.) Should a coal plant be sued on the basis that they should have done a better chemical analysis?

Utility Contracts

There are all sorts of utility contracts out there. Bob Hargraves and I visited seven plants when we led the ILEAD course on Energy Safari. If you read the posts on the Energy Safari blog, you will read about power plants that:

• sell power at the market price when the price is high enough
• sell power at a fixed price, and have to reimburse the utility when they have promised power but can't deliver
• sell power at a fixed price, and don't have to reimburse anybody if their power isn't available
• don't want to tell us the terms of their contracts

If a utility wants to buy power that is available without interruption at a given price, it writes a contract saying that the power plant must reimburse the utility for any power that is not provided. Of course, the utility can expect to pay more for power on that basis, just as you can expect to pay for an "extended service contract" on an appliance. Insurance against failure costs money.

Insurance

The utility can also pay money for insurance. If the utility buys insurance against having to buy higher-cost power, it doesn't have to put any terms in the contract with the power plant.

For example, I attended a hearing at the State House when GMP and CVPS testified that they actually have insurance policies which would reimburse them for replacement power costs if Vermont Yankee power was not available to them. The policies began to pay if Vermont Yankee was off-line for more than about 30 days. I am sure the utilities could have bought other insurance: insurance against three-day outages, twelve day power reductions, anything. Insurance companies love to sell insurance! However, insurance against small events would have been expensive, since such events are very likely. Most companies self-insure for small problems.

Money or Harassment?

I can never know anyone's motives, of course. However, to me this lawsuit sounds more harassment than like a business situation. Surely the utilities know what kind of contract they have with Vermont Yankee? Surely they know that they don't have the sort of contract that includes reimbursement for replacement power? Surely they know about the various types of contracts? Surely they know that accusing a plant of negligent maintenance won't fly, when the plant is running from fuel loading to fuel loading (breaker to breaker), 500 days or more, without unplanned shut-downs? Surely they know they could have purchased insurance against the costs of replacement power? Surely they know they actually have purchased insurance against the costs of replacement power due to long outages?

GMP and CVPS are acting as if they don't know any of this.

Interestingly, the utilities want to have a jury trial on this subject. I think they are hoping to capitalize on the "Entergy Louisiana" and "strontium fish" rhetoric of the Vermont administration. They hope to win their case by pounding on the table.

Washing Machines

The Entergy lawyers can argue their case without any table-pounding.

"Ladies and gentlemen of the jury. CVPS and GMP had opportunities to insure themselves against paying the cost of replacement power. They could have stipulated that we pay the cost of replacement power as a requirement in their contract with Entergy. Or they could have bought third-party insurance for their costs during power derates or outages. CVPS and GMP did not taken any such action.

"Instead, these utilities are in the position of someone who does not buy the extended warranty on the new washing machine, but expects to get free service anyway. We at Entergy are pleased that they expected perfect operation of the plant. We are pleased our general excellent maintenance and breaker-to-breaker runs may have led them to expect perfect operation. However, they took no steps to protect themselves if operation was imperfect. Though we are flattered at their expectations, we must point out that expectations of perfect operation are unrealistic, and are certainly not enforceable through the courts."

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Picture of the Comerford Hydro plant from Energy Safari blog. Picture taken by Bob Hargraves. All other graphics from Wikipedia..

The Vermont Yankee versus Vermont-Shumlin Trial: What's Next, and What Happened

What's Next

What is next is basically--a long wait. The trial at the Brattleboro Courthouse took three days, and was over on Wednesday. However, Smallheer at the Rutland Herald reports that the judge asked the attorneys to file briefs on the legal issues of waiver, estoppel and laches, as well as Act 248, the state law that regulates utilities. The attorneys have until September 26 to file answers to Judge Murtha's questions. (The Smallheer article is behind a paywall.)

The injunction hearings were June 23 and 24th in Brattleboro, and the judge ruled on July 18. That was about three weeks. The injunction ruling was a smaller ruling, and one that would not be tested by any sort of appeal process.

Most judges don't want to see their rulings overturned. In this case, both parties have said: "Whichever way it goes, we will appeal!" With that background, I suspect this will be a very carefully-written opinion. Everyone expects this ruling to take at least two months, if not longer. Early November? Thanksgiving? Christmas? Sometime in January?

What's next is....we wait.

What Happened: The Legal Points

Entergy basically had three major points within the court case.

1. Breach of contract. By passing Act 160, the legislature inserted itself into the Memorandum of Understanding between the state Public Service Board and Entergy. This changed and breached the contract, and basically invalidated it.
2. Pre-emption. Whatever the heck the legislature said about reliability, the only thing they looked at was safety, safety, safety. They never mentioned the plant's capacity factor, for example, but rather talked about the dangers of leaking tritium. Radiological safety is the legal business of the NRC and the federal government, not the state. The state was attempting to pre-empt an area reserved for federal rule-making.
3. Commerce clause. Legislators stated that they were not going to give a Certificate of Public Good to Vermont Yankee unless the plant sold power within Vermont at below-market rates. Since the plant sells power to three states (Vermont, New Hampshire, Massachusetts), a requirement for better rates in-state violates the interstate commerce clause of the Constitution.

What Happened: What Was Said

Discussing what was said about these three areas is clearly more than one blog post worth of discussion! So, here's my quick summary, to be expanded in future days.

The State pounded on the Breach of contract issue. It claimed that Entergy had agreed to abide by Act 160, even though it now objects to the act. The State claims that Entergy should have sued immediately, or something like that. As a matter of fact, the words waiver, estoppel and laches are all about this. I heard that the State played a video of a forty-minute deposition by a former Entergy vice-president. In the video he talked about how Entergy needed to mend fences with the legislature. The State contended that this video shows that Entergy accepted their authority and the legislature's role in the Certificate process. The State also pushed the question of whether Entergy had brought the suit at the right time. (I blogged about this several months ago. I link to my blog post on the subject, which includes very interesting comments by Donald Kreis of Vermont Law School.)

Entergy stressed the Pre-Emption issue, pointing out all the times the legislature talked about radiological safety and then added the word "reliability" like some kind of fairy dust that would keep them safe from accusations of pre-emption. Entergy also noted the many things the state never considered: capacity factor, turbine and other non-safety inspections, etc. The state responded that they only mentioned safety to be sure they weren't mentioning safety, that they were still on appropriate state-controlled ground.

(Stepping out of reporter role here: Yeah, right. I sat in hearings where legislators said in a very jolly tone of voice "You know we can't use the s-word." So they used the r-word for s-word concepts. I saw Shumlin talking about how radioactive leaks from this aging plant would affect the teeth of children in Vermont. Gimme a break. It was safety, safety, safety.)

In early parts of the trial, the Entergy brought up the issue of the Commerce Clause. Entergy showed that the legislators told them that Entergy would not be granted Certificate of Public Good unless they sold power at below market rates to Vermont utilities. Trying to enforce a better deal for your own state (of a commodity that is sold to several states) violates the Commerce Clause of the Constitution. This was discussed by Entergy's attorney, but I don't think it went anywhere within the context of the trial. But I am not sure.

Conclusions

Oh, I know I should have some conclusions. I don't.

I think it is all very much still up in the air. For further information, I recommend Olga Peterson's articles in the Commons and Vermont Digger, and the relatively sparse articles in the Vermont Law School blog about the lawsuit. For a quick overview, Pat Bradley at WAMC in Plattsburgh New York did a great 4-minute radio segment on the trial. (Full disclosure: Bradley quotes many people, including me.)

At the end of the radio segment, you can hear Cheryl Hanna of Vermont Law School explaining that the outcome is still up in the air.

More analysis to come in the future!

About the pictures: This post has photos of the September 12 rally; the photos were taken by Milo Shaefer. The upper picture shows both sides of the street in Brattleboro, shortly before court convened. Plant supporters are mostly to the right, plant opponents to the left. The lower picture shows plant supporters, with one plant opponent (wearing black) in the middle. You can click on the pictures to make them larger.

In the earlier post about the rally, the photos were by Bob Hargraves. I am very grateful to Milo and Bob for participating in the rally and taking these great pictures!