Saturday, December 21, 2013

A Lingering Lawsuit: The Generation Tax

Since I blog about Vermont Yankee, every now and again I have to update the legal issues.  So here we go...again.   The first lawsuit is about the Generation Tax.

The Generation Tax: The First Lingering Lawsuit

What it is: A tax law written so narrowly that only Vermont Yankee was affected by it. This tax was challenged by Entergy in federal court

History: The legislature passed a law which increased the "generation tax" on Vermont Yankee (fee to the state per kWh sold) to a total of about $12 million a year.  This tax was designed to force Vermont Yankee to continue to make payments to the state at the same level as it had been paying the state under Memorandums of Understanding (signed contracts with the state). However, these contracts ended in March 2012.

A federal court called some of those payments  "a form of blackmail (extorted by the state) for approval of construction (by Entergy)," but at least they were signed contracts.  The new twelve million dollar tax, however, is a tax imposed by the state on "power plants with a nameplate capacity of over 200 MW."  There's only one such plant in the state. When they passed this law, legislators were warned by lawyers that such a closely-directed law would probably be challenged in court. (See page 12 of this Entergy filing.)

What happened recently:  Entergy lost in federal court and in appeals court.  The tax continues in effect.

On the other hand, courts do not like to rule on constitutional issues if they can find another way to decide. Both federal courts ruled mostly on jurisdictional issues, claiming that Entergy should have filed suit in the state courts before coming to the federal court.  You can see these rulings on this page, maintained by the Attorney General of Vermont: Generating Tax Entergy Litigation.

In the sequence:

  • the federal court dismissed the case,
  • Entergy appealed the dismissal 
  • the appeals court ruled against Entergy.  

The appeals courts said that that Entergy has to start the appeals process in state courts.

You can also read a review of the case by Gabriella Khoransanee at FindLaw, a website for legal professionals.

Calvin Coolidge tips hat
By the way, a big hat tip and kudo to William Sorrell, Vermont Attorney General, for keeping up these user-friendly and complete pages on the various lawsuits.

What's next:   Khoransanee expects the legal challenges to the tax will continue in other courts, as suggested by the federal court rulings.  To some extent, the whole thing is going to be moot pretty soon, because Vermont Yankee is planning to close.  At that point, Vermont Yankee will no longer pay a "generation" tax, because it won't be generating electricity.

However, twelve million dollars for a year's worth of tax is twelve million dollars.  I suspect both sides will consider it worthwhile to keep litigating about this sum of money.  I think Entergy will follow the guidance of the federal court, and begin the litigation process again in the state courts.


Robert said...

Why are all the elected officials in Vermont so against VY? Obviously, people in Vermont did not always feel that way, or VY would never have been built in the first place. What happened to change everyone's minds? I can't believe Arnie could be that much influence. I also think that Entergy is using uneconomical as an excuse, but I don't blame them for closing for not wanting to deal with the aggravation.

jimwg said...

Seasons Greetings!

Re: "What happened to change everyone's minds?"

Simple! Outside rabid anti-nukers, abetted by a sympathetic media, poked their noses in and waged a relentless FUD campaign on a science-illiterate public and cowering windvane politicians while all of VY's (like most nuclear operators have) owners had slept at the PR complacency wheel. Anti-nukers never would've been effective as they've been had the nuclear industry put up a constant and adult educational counterattack since TMI and now it's royally come back to bite them in spades. The only thing we can salvage from VY now are lessons for other plants to heed. Unfortunately even now it's not sticking.

James Greenidge
Queens NY

Anonymous said...

The State is going to lose $12 million per yr at the end of next yr. They will probably start taxing wind, solar, and hydro to make up for the lost income. He certainly will not be putting extra taxes on his Canadian buddies!