Entergy Corporation (NYSE: ETR) announced on April 18 that two of its subsidiaries, Entergy Nuclear Vermont Yankee, LLC (ENVY) and Entergy Nuclear Operations, Inc. (ENOI), have filed a complaint in U.S. District Court for the District of Vermont seeking a judgment to prevent the state of Vermont from forcing the Vermont Yankee nuclear power plant to cease operation on March 21, 2012.
This request for declaratory and injunctive relief follows the federal Nuclear Regulatory Commission's March 21, 2011, renewal of Vermont Yankee's operating license authorizing the plant's operation through March 21, 2032. The NRC's action came after a thorough and exhaustive five-year safety and environmental review of the plant.
“We have made every reasonable effort to accommodate the state of Vermont and its officials while allowing the continued operation of Vermont Yankee - an outcome that benefits all stakeholders, including Vermont consumers and the approximately 650 men and women who work at the plant,” said Richard Smith, president of Entergy Wholesale Commodities.
“Despite the fact that Vermont Yankee is important to the reliability of the New England electric transmission grid, emits virtually no greenhouse gases, and provides more than $100 million in annual economic benefits to the state of Vermont, it has been made clear that state officials are singularly focused on shutting down the plant. That has left us with no other choice but to seek relief in the court system.”
In 2006, the Vermont General Assembly passed a law that invalidated a key provision of a 2002 Memorandum of Understanding signed by ENVY, ENOI, and Vermont officials when the company purchased Vermont Yankee.
Under that provision of the MOU, Entergy's two subsidiaries had agreed to seek a Certificate of Public Good from the Vermont Public Service Board if it sought to operate the plant beyond March 21, 2012. This was in accordance with the process and standard for securing the state certificate in effect at that time.
As the complaint alleges, Vermont repudiated the MOU, breaching that agreement and excusing the two Entergy subsidiaries' obligation to further comply with that specific provision.
“The 2006 state law took the decision about Vermont Yankee's future away from the Public Service Board, a quasi-judicial expert decision-maker, independent of legislative control,” said Smith. “It instead placed Vermont Yankee's fate in the hands of political decisionmakers, namely the state General Assembly and governor, who could deprive Entergy's two subsidiaries of the opportunity to operate the Vermont Yankee plant beyond March 21, 2012, for unsupported or arbitrary reasons. This is not what we signed up for in 2002.”
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Despite Entergy's disagreement with the 2006 state law, the company has made considerable effort to achieve state approvals to allow the continued operation of Vermont Yankee without resorting to litigation.
Those actions included:
• Filing a petition in 2008 with the VPSB for a Certificate of Public Good to operate the plant beyond March 21, 2012;
• Offering Vermont utilities a 20-year power purchase agreement at a fixed price of $49 per megawatt hour for the first contract year, followed by a market-adjusted pricing structure that ensured the utilities and their customers would benefit from low power market prices.
This proposal was well below comparable offers from other electricity providers.
It also included an inflation-adjusted price cap starting at $61 per megawatt hour which would have ensured the utilities and their customers were protected from high power market prices.
• Offering to negotiate with the Vermont Department of Public Service the establishment of a “date certain” for the commencement of decommissioning activities at Vermont Yankee earlier than the 60-year SAFSTOR period permitted by NRC regulations.
• Exploring the potential sale of Vermont Yankee.
Despite interest from some potential buyers, based largely on the superior operational record of the plant, Entergy was unable to reach commercial terms with any party due to the political uncertainty in Vermont; more specifically, due to the stated intent of Vermont officials to shut down the plant.
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In a meeting with Entergy representatives on March 30, the governor reiterated his firm opposition to the operation of Vermont Yankee after March 21, 2012. The lawsuit we filed is based in part on the following legal principles:
• Atomic Energy Act Preemption. Under the Supremacy Clause of the U.S. Constitution, the U.S. Supreme Court held in 1983 in a case involving Pacific Gas & Electric that a state has no authority over (1) nuclear power plant licensing and operations or (2) the radiological safety of a nuclear power plant.
In violation of these legal principles, Vermont has asserted that it can shut down a federally licensed and operating nuclear power plant, and that it can regulate the plant based upon Vermont's safety concerns.
• Federal Power Act Preemption and the Commerce Clause of the U.S. Constitution. Vermont is prohibited from conditioning post-March 2012 operation of the Vermont Yankee Station on the plant's agreement to provide power to state utilities at preferential wholesale rates.
The Federal Power Act preempts any state interference with the Federal Energy Regulatory Commission's exclusive regulation of rates in the wholesale power market.
The Commerce Clause of the U.S. Constitution bars a state from discriminatory regulation of private markets that favors in-state over out-of-state residents.
“Litigation is by far the least preferred approach,” said Smith. “But it is clear our disagreement with the state of Vermont on the scope of its authority over Vermont Yankee cannot be resolved between the two parties. Putting this dispute before a federal judge is the appropriate and responsible way to resolve this disagreement. Our filing today does just that.”