January 20, 2012, Don Kreis: And The Winner Is…

Don KreisSo, now we know that the formerly ominous date of March 21, 2012, will come and go and that Vermont Yankee will continue chugging away in Vernon, pumping out its 622 megawatts of reasonably reliable but wildly unpopular nuclear electricity.

But did Judge Murtha get it right in his 102-page tour de force disquisition on the history of Vermont’s troubled relationship with its only major in-state power plant?

That, of course, is truly a question for the U.S. Court of Appeals for the Second Circuit in New York, which will hear the state of Vermont’s inevitable appeal.

The three-judge appellate panel will clearly feel a sense of gratitude to Judge Murtha for his meticulously crafted summary of the evidence presented at trial. Since the parties put on the trial essentially as a means of documenting the story of how Vermont Yankee has been picked over, legally speaking, since Entergy purchased the plant from a consortium of local utilities in 2002, that story is now reasonably clear – and, of course, anything but pretty.

As the District Court opinion now amply documents, the Vermont Legislature conducted what was frequently a disingenuous charade in an effort to assert the right to close the plant without appearing to regulate radiological safety since that realm, everyone knew, is the exclusive province of the federal government.

But the appellate judges won’t have seen the actual trial. And, having worked at two appellate courts myself, I can testify that when judges ponder trials on a second-hand basis, with only a cold transcript and the lower court’s opinion to guide them, they have a tendency to treat courtroom drama as little more than sound and fury.

Here, for example, the appellate court might find itself wondering why Judge Murtha did not take a more straightforward path to his determination of preemption. He could have ruled:

  1. The legislative history is, at best, inconclusive on the question of whether the Vermont Legislature was regulating radiological safety.
  2. Legislative history doesn’t provide the answer to the central question in the case anyway because the question of legislative intent is fundamentally grounded in what the words in the text of the statute mean – a question that is one of law and not fact.
  3. As a matter of cold hard logic, there is no plausible and rational basis for what the Legislature did in any of the statutes at issue here other than concerns about radiological safety. To put it another way, if one could demonstrate to an absolute certainty that Vermont Yankee would operate 100 percent safely under its renewed federal license, one is hard pressed to find a logical reason why Vermont should not be indifferent to the plant’s continued operation.
  4. Speculation about, or even concern with, what motivated the Legislature in 2010 – the year that the Vermont Senate failed to reauthorize the continued operation of the plant – is unnecessary. Although they did so in a convoluted fashion, the earlier statutes – Acts 74 and 160 – had the legal effect of imposing a March 21, 2012, closure date on Vermont Yankee. That a subsequent Legislature could have, but ultimately did not, repeal this closure order is of no legal consequence. There is, after all, an infinity of bills the Legislature did not enact in 2010, and courts should not be in the business of figuring out why the Legislature didn’t do what it didn’t do.

In addition, the appellate court might find itself wondering why Judge Murtha could not resist the temptation to consider the merits of the last of the three counts in Entergy’s complaint. Both are arguably mooted by Judge Murtha’s decision in favor of Entergy on Count I.

Count II alleged preemption based on the Federal Power Act, which vests the Federal Energy Regulatory Commission with the authority to regulate the rates of wholesale electricity providers like Vermont Yankee. Count III claims that Vermont has been attempting to force Vermont Yankee to sell cheap power to Vermont utilities in violation of the so-called “dormant” Commerce Clause. The Commerce Clause of the U.S. Constitution makes clear that it is the federal government that has the exclusive right to regulate interstate commerce. And, in a doctrine that has come to be known as the “dormant” Commerce Clause, the Supreme Court has repeatedly held that individual states cannot burden interstate commerce by, in effect, inhibiting businesses within their borders from doing business outside their borders.

Quite logically, Judge Murtha determined that Count II is moot because of the simple fact that there is no wholesale power agreement between Vermont Yankee and Vermont utilities for the Court to review. Under this line of thinking, there is nothing here for the Federal Energy Regulatory Commission to consider under the Federal Power Act and thus no basis for the court to conclude that the FERC’s authority to regulate wholesale transactions has been usurped by Vermont.

The same logic would seem to apply, perhaps even more compellingly, to Count III.  If efforts to interpose a state-law veto of the plant’s continued operation are preempted by the Atomic Energy Act, there is simply no state action left for the courts to deem violative of the Commerce Clause.

It is certainly true that underlying the whole scenario is the whiff of a notion that if Entergy had offered Vermont utilities a good deal on Vermont Yankee power delivered after March 21, 2012, Vermont’s legislators and utility regulators would have looked with favor on continued plant operation. But, to the extent that’s true, it is more than arguable that this is precisely the flavor of state oversight to which Entergy agreed in the infamous MOU – i.e., the Memorandum of Understanding that it signed with the Department of Public Service and ultimately incorporated into the Public Service Board’s order approving the sale of Vermont Yankee from a group of regulated utilities to an unregulated one.

Here’s the rub. Vermont Yankee was built by regulated utilities whose rates were set by state regulators. Therefore, Vermont’s retail utility customers – with some help from utility customers in neighboring states because some of their utilities were likewise involved – paid the cost of building Vermont Yankee. They also bore the brunt of whatever safety risks are inherent in having a big generation facility operating in their midst. When the regulated utilities decided to sell Vermont Yankee to Entergy in 2002, ratepayers were entitled to share with their utilities some of the value arising out of the sale. Part of that value was speculative, since Vermont Yankee would likely continue to operate and produce relatively cheap power for some considerable time into the future – perhaps even after the expiration of its then-current operating license in 2012. To make sure that Vermont utility customers continued to enjoy the benefits of value they created and risks they incurred, Entergy agreed to come back before state regulators for a renewed determination of what value Vermonters could claim after March 12, 2012.

It is arguably Entergy’s refusal to produce any of that value – in the form of new and favorable wholesale power agreements with Vermont utilities – that prompted the state to intervene in Vermont Yankee’s future on the ground that the safety risks are not worth it given the total lack of cheap electricity in return. For substantially the reasons stated in Judge Murtha’s opinion, Entergy gets to keep a lot of money that really should belong to Vermont utility customers.

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