Vermont's case against nuclear power-plant stymied

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    Vermont's case against nuclear power-plant stymied

    The state of Vermont, trying to shut down the Vermont Yankee nuclear power-plant near Brattleboro, has been stymied by a Federal district court decision in Entergy v. Vermont, heard last September. [ Matthew L. Wald, Judge rules Vermont can't shut nuclear plant, New York Times, January 20, 2012, at ]

    In 2002, when it bought Vermont Yankee, Entergy agreed that continued operation beyond March, 2012, would require a new Certificate of Public Good (CPG) from the Vermont Public Service Board (PSB). At that time there was no legislative review for such a certificate. [ "Memorandum of Understanding" for Docket 6545, Vermont Department of Public Service, at ]

    In actions publicly supported by Entergy during 2006, the Vermont legislature subsequently required that a CPG for nuclear power receive legislative approval. At the time, Entergy enjoyed widespread support in the state. After collapse of a cooling tower in 2007, disclosure of radioactive leaks and misleading statements from Entergy management during investigations, public opinion sharply reversed.

    In 2010, Entergy's request for a new CPG was denied by a vote of the Vermont state senate, 26-4. As widely reported in Vermont, Entergy then sued the state, asking U.S. District Judge J. Garvan Murtha to revoke legislative acts 74 of 2006, 160 of 2006 and 189 of 2008. [ Matthew L. Wald, Vermont senate votes to close nuclear plant, New York Times, February 25, 2010, at ]

    Entergy has also asked for the company to be allowed a new application to the PSB and asked for that board to be enjoined from denying a CPG on grounds of safety or public health. Most of the recent news about the Entergy lawsuit against Vermont has been available only from sources in the state. [ for example: Josh Stilts, Entergy says lawmakers hid their real agenda, Brattleboro Reformer (VT), September 15, 2011, at ]

    A review of the case last year by faculty of the Vermont School of Law indicated less than likely prospects for Entergy. [ at ] Last July 18, Judge Murtha denied a preliminary injunction, indicating significant doubt about the merits of Entergy's case. Final arguments were heard on September 14 in Brattleboro, a few miles from the plant.

    In his opinion, Judge Murtha mainly evaluated legislative history for Acts 160 and 74 from 2006, before the controversies over the collapsed cooling tower and the disclosures of radioactive leaks. He found, despite written language in the legislative acts, that records showed motives of state senators were "grounded in radiological safety concerns," an area preempted by the Nuclear Regulatory Commission under federal law.

    The key flaw found in Vermont's acts of 2006 was allowing the legislature to regulate a nuclear power-plant by taking no action, when regulating nuclear safety, which is preempted by federal law, was shown to be a key element motivating legislative reviews. [ Entergy v. Vermont, U.S. District Court for the District of Vermont, Docket No. 1:11-cv-99, Document 181, January 19, 2012, via Rutland Herald at ]

    The district court decision enjoins Vermont from enforcing Act 160 of 2006, requiring legislative approval for a CPG involving nuclear power. and from enforcing a provision of Act 74 of 2006 requiring legislative approval for storage of spent nuclear fuel. It also enjoins Vermont from requiring below-market electric rates to Vermont consumers as a condition of a CPG.

    The district court order did not grant the Entergy request for an injunction requiring the PSB to accept a new application from Entergy. The application that Entergy filed with PSB in 2009 remains active and is freed from a requirement of approval by the Vermont legislature. As an agency of Vermont, PSB would not have a defensible case if it denied Entergy's application on grounds of safety.

    Entergy's likely next move is to press its existing application with the Vermont PSB. Gov. Peter Shumlin, an ardent opponent of Entergy, has had one opportunity to appoint a new PSB member. Members at the start of 2011 were David Coen and John Burke, both appointed by Democratic Gov. Howard Dean, and chairman James Volz, appointed by Republican Gov. Jim Douglas, whose term was expiring. Shumlin opted to reappoint Volz.

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    Next steps with Vermont Yankee

    Over the next several days, Vermont's attorney general and the environmental groups that intervened in Entergy v. Vermont (2012) will be scrambling for arguments to support reversal on appeal. Judge Murtha's opinion will make their work difficult. Basing much of his findings on activity in the Vermont legislature during 2006, he avoided the controversies since then that have produced big shifts in public opinion.

    However, the judge gave short shrift to Vermont's arguments that Entergy was trying to back out of a deal, accepting state regulation. Unlike his strict scrutiny of legislative activity while the 2006 bill that became Act 160 was under review, holding the legislature hostage to any of its members' remarks, the judge did not practice strict scrutiny of statements by Entergy's management or of Entergy's written agreement in 2002 with the Vermont Public Service Board (PSB).

    As one reviewer at the Vermont School of Law has suggested, Judge Murtha's reasoning on issues involved with regulating electricity prices to Vermont consumers is weaker than his reasoning on issues involved with regulating nuclear safety. [ Don Kreis, Count III reconsidered, Vermont School of Law, January 20, 2012, at ]

    The judge's decision rejected Entergy's plea for an injunction against Vermont's financial regulation based on the Federal Power Act. However, in a muddled flow of argument, it granted such an injunction based on the Constitution's commerce clause. [Entergy v. Vermont (2012), pp. 86 and 93] If that reasoning were correct, then the voluntary agreement between Entergy and the Vermont PSB in 2002 should have been vacated in toto, and Entergy would be eligible to recover compensation for any favorable electric prices from 2002 to 2012.

    The judge then showed purblind bias in favor of Entergy, claiming that the 2002 agreement "was very limited, waiving only a preemption claim challenging 'the jurisdiction of the Board'." Limited--yes, it might have been--but the judge's opinion had just quoted its most salient provision: "the Board has jurisdiction under current renew, amend or extend the [Vermont Yankee] CPG...[and] to allow operation of [Vermont Yankee] after March 21, 2012, or to decline to so renew, amend or extend." [Entergy v. Vermont, p. 94]

    Apparently this judge needs some new eyeglasses. As a matter of law, in 2002 Entergy accepted jurisdiction of Vermont PSB over continued operation of Vermont Yankee. PSB is routinely involved in financial regulation and has a significant case to make that in originally accepting siting of Vermont Yankee in the state and in subsequently accepting its sale to an out-of-state owner, with favorable in-state electricity prices, PSB balanced expected benefits to the state against potential risks to the state.

    As Entergy applies its leverage from the recent ruling, it would not be surprising to see offers to provide some form of in-state price advantage and some initiative to move spent fuel out of its reactor building and into dry-cask storage, as incentives to PSB for speedy approval of a CPG. Of course, Entergy may lapse into a Simon Legree posture, goading the state to come after it, as the state surely will.

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    Settling of accounts

    Vermont's politicians are just settling in with the court opinion and order in Entergy v. Vermont (2012), overturning Vermont's attempt at legislative regulation of nuclear power. [ Dave Gram, Associated Press, Vermont lawmakers reconsider nuclear strategy after defeat, Boston Globe, January 21, 2012, at ]

    Regulation by acts of legislatures has typically been a poor substitute for ordinary agencies. When legal, it tends to produce an open season for political shenanigans. As applied to nuclear power-plants in Vermont (of which there has been one), the season is probably over. However, the trial judge's meandering review of legislative history, the critical underpinning of his ruling, might conceivably be overturned on appeal, although such an event would be years away. [ Joel Schellhammer, Defining the court's role as faithful agent in statutory interpretation, Harvard Journal of Law and Public Policy 29(3):1119-1131, 2006, at ]

    The judge's opinion notwithstanding, Vermont appears to retain regulation over Vermont Yankee through its Public Service Board (PSB). [Pacific Gas and Electric v. Energy Resources Commission, U.S. Supreme Court, 461 US 190, 1983] For the next two or three years, activity will again focus on the PSB, not heard from since April, 2006, when it approved a dry-cask storage proposal. PSB negotiated an agreement providing continued regulation in 2002, when Entergy proposed to buy the plant from Vermont Yankee Nuclear Power Corp., whose utility partners took back a 10-year power purchase agreement providing favorable in-state electricity pricing.

    If reason were to prevail, not always certain in the Green Mountains, early state initiatives would focus on staying an injunction issued in Entergy v. Vermont (2012) that would partially tie the state's hands in achieving continued, favorable electricity pricing. In that area, the trial judge relied on weak precedent, an attempt to restrict distribution rather than influence pricing. [New England Power v. New Hampshire, U.S. Supreme Court, 455 US 331, 1982, cited in Entergy v. Vermont (2012), pp. 86-89]

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    Vermont unable to defend itself

    A Vermont Yankee mess is about to land on the desks of three hapless members of the Vermont Public Service Board (PSB), who last dealt with the plant in 2006, before its fall from grace. Since then, the plant has turned into a potential cash cow for Entergy, generating an average of 4,970 GWh of electricity each year from 2006 through 2010, after a power uprate that PSB approved in 2003 had stabilized. Adjusted for normal operation 17 out of every 18 months, the plant had average output of 601 MW, against a rated 620 MW.

    [ EIA-923 reports for Entergy Nuclear Vermont Yankee, plant ID 3751, U.S. Energy Information Administration, 2012, at ]

    At average pricing for the New England power grid, that would have brought an average $335 million per year in revenue. However, Entergy has not been receiving average pricing. Instead, at the time Entergy bought the plant, it committed to sell 520 MW of the output to three previous utility owners, at 4.5 cents per kWh. Since then, open-market New England wholesale prices have often been much higher. For 2006 through 2010, the 2002 power purchase agreement provided an average $160 million per year advantage to Vermont customers, at Entergy's expense. Recent, lower prices have reduced the advantage, still around $80 million per year.

    [ Wholesale electricity market data for NEPOOL New England, U.S. Energy Information Administration, 2012, at ]

    Previous Vermont distributors of the plant's output are going away. Green Mountain Power has contracted with Seabrook nuclear in New Hampshire, and Central Vermont Public Service has contracted with a collection of other New England power producers. Vermont Electric Co-operative has a new, 20-year contract with Vermont Yankee, but that is for only 10 MW of output. The contract price of 4.9 cents per kWh can be compared with a monthly average 2011 New England wholesale price of 5.3 cents per kWh.

    Entergy bought the plant for $180 million. It spent an estimated $60 million on the power uprate and claims to have spent more than $100 million on other improvements. Operating margins to date have approximately covered Entergy's purchase price and capital improvements, but Entergy has yet to make much profit from Vermont Yankee. Potential future profits are likely to be between $75 and $125 million per year. However, continuation of current Vermont price advantages would eat away most and possibly all of those profits.

    With around $2 billion in potential profits at stake, Entergy will be determined to get the additional 20 years of service NRC has allowed and to escape commitments providing special pricing. In defending its interests, Entergy brought first-class legal talent to the trial in Entergy v. Vermont, The state relied on its own, home-grown legal talent, which proved hopelessly outmatched. Unless the state wises up, the same thing is about to happen during PSB review of Entergy's application for continued operation.

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    Re: Vermont's case against nuclear power-plant stymied

    It is hard to "make a profit" on nuke plants. It is easy to make money though. Let me say how. The money set aside for decommission. Entergy has needed to increase its decommission cost and set aside far more money. To you and me it seems an expense. But not so. These monies are set aside and provide a hole to put real profit in to. It is a balance sheet thing. You buy a finacial instrument with real dollars today. But you do not get charged for the interest or the cap gain. In fact if there is inflation around you can lose money on the decommission fund. Thus on paper you lose money. But the instrument has a guaranteed life value. It is a wonderful world. Only better if you have the money overseas.
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    Safer storage of spent reactor fuel

    Thanks to reader "topaz978" for background on some of the convoluted financial accounting practiced for capital-intensive nuclear power-plants. Ultimately, the practical effects are on taxes, which treat the accounting fictions as truth.

    A real and pertinent aspect of the later days in a nuclear power-plant's lifetime is the fate of highly radioactive spent fuel. Because of "extended power uprates" and "operating-life extensions" that NRC has been granting, the U.S. has only a little experience with that. While storage of spent fuel left from operating Yankee has been of concern to Vermont, those issues have taken a distant, back seat in recent years, while expectations rose of being able to close the plant. As with the state's mistaken approach of trying to regulate by legislative act, its neglect of spent fuel storage has been an unwise development.

    Vermont Yankee, like the 34 other boiling-water reactors operating in the U.S., has a relatively small water pool to hold spent fuel, perched high in the air around the top of the reactor vessel. It was designed to store spent fuel for a few years, until heat released through residual radioactivity fell substantially, with expectations that the fuel would then be removed for recycling or permanent disposal. That did not happen. To accomodate far more spent fuel than originally expected, contents of storage pools have been repeatedly reracked at denser spacings, requiring heavily borated water to absorb neutrons and inhibit nuclear reactions, substantially reducing safety margins.

    After it became clear in the 1980s that the U.S. was probably decades away from a long-term approach to handling spent fuel, "interim" storage containers known as casks were developed, with NRC approval. Casks are sturdy, made mostly of metals and concrete designed to withstand long-term weather exposure. With weights of 100 tons and more, casks are fairly secure. Ordinary trucks cannot carry them. Although there have been manufacturing and safety issues, cask storage is much more robust than the suspended water pools of boiling-water reactors. However, cask storage is also fairly expensive. Without strong public pressure, reactor operators have bought as little as they could get by with.

    In 2006, Entergy got approval from the Vermont Public Service Board to install dry-cask storage at Vermont Yankee. Without it, the plant would have had to close in 2008, for lack of remaining room in its spent-fuel pool. Entergy proposed to use Holtec type 100S casks, each able to hold 68 assemblies of spent fuel, compared to an average of 81 per year being produced. However, Entergy proposed to build a storage pad sufficient for only 36 casks. [ Petition of Entergy Nuclear to construct a dry fuel storage facility, Vermont Public Service Board docket 7082, 2006, at ]

    So far, Entergy has loaded and stored five casks at Vermont Yankee, all in 2008. Its slow pace is clearly intended to minimize costs. Entergy transfers fuel to casks only as needed to clear out minimal space in the Vermont Yankee storage pool. Its storage pad accommodates only the casks expected to be loaded at that pace during the 20-year life extension that NRC approved last year.