A Contrast in Regulatory Climates

by Martin Harris

Those who have followed Entergy’s less-than-pleasant experiences with regulation by Vermont State government ever since buying the Vermont Yankee Nuclear Plant in 2002, and particularly since receiving a Federal operating license to continue generating electricity through 2032, might be forgiven for wondering two things; 1. Did Entergy New Orleans-based headquarters fully appreciate the regulatory climate it was buying into? and 2. Does Entergy have the same sorts of experiences at the other power sites, nuclear and otherwise, it owns and operates? The second is more-factually answerable than the first.

There’s been no shortage of studies, over the years, ranking the 50 States by “business climate” and “regulatory climate” and until 2000, when the monthly tabloid-format Energy User News was sold off by Cahners Publishing to Business News Publishing, EUN was the single best source for a monthly table of regulatory-climate ranking by State for utilities only. But no more; those of us who were once (non-industry) subscribers have either fallen off the BNP mailing list or EUN itself no longer exists; inquiries to BNP have been unanswered. Prior to 2000, Vermont was almost always ranked by EUN with a D or F. Since 2000, similar low rankings have been published by such as Cato, Mercatus, and the American Legislative Exchange Council, and all have typically placed Vermont (for all business types, not just utilities) in the bottom decile. Now, thanks to a dispute over rate structure between Entergy and another State –Louisiana—readers can compare Entergy’s present-day experiences in both States, via newspaper reports, and form their own conclusions.

In Vermont, the latest episode in the on-going legal soap-opera over Vermont Yankee re-licensure (it was approved by the Federal Nuclear Regulatory Commission in 2011, the VY plant having received in 2009 an operational quality award from the Nuclear Energy Institute, a trade organization, for boiling-water-reactor efficiency-of-operation) Entergy has ever since been embroiled in a series of lawsuits with Montpelier over State objections vs. Federal approval, and which trumps which. Most recently, Vermont has withheld approval for a critically-needed large-size diesel generator, to provide back-up power, along with two others already in place, required by the NRC in the event of a nuclear shut-down, to replace the nearby Connecticut River Vernon hydro-dam power source previously used. The Rutland Herald merely reported that “Entergy Nuclear has again sued the State of Vermont, this time over the delayed permit for a construction of a back-up power diesel generator”; in the 30 April newspiece, there’s no explanation of Public Service Board’s specific reason for permit non-issuance, only a quote from PSB Chairman James Volz that “it would be handled in conjunction with Entergy’s request for a new operating Certificate of Public Good for continued plant operation”, but without any explanation from the Chairman as to the reason for the delay caused by such approval bundling, which won’t be examined by his Board until Fall, at which time the absence of a third diesel plant will, of course, be considered an NRC requirement violation. Nice. Anti-nuke Conservation Law Foundation lawyer Sandra Levine is quoted as saying that “this lawsuit is another example of Entergy suing the State when it doesn’t get its way”, a comment of equal logical quality, in Humble Scribe opinion, with the anti-nuke activists’ throwing of what the Vermont press euphemistically labeled “compost” at an NRC approval hearing in Brattleboro last year. Double nice.

In contrast, Entergy’s debate with the Louisiana Public Service Department is about rate structure –specifically, the extent to which customer properties which generate power on site via solar panels and the like, and then sell the excess, if any back into the distribution network, should be paid by the local utility for that power, considering that the sellers-back don’t pay their normal pro rata share, when generating their own power, for the poles-and-wires they don’t need at times the sun is shining but do need (and have the legal right to use) whenever it isn’t shining. To be a bit more specific, Entergy’s debate with Louisiana PSD isn’t with that agency alone; it’s also with the NRG Corporation, which operates solar farms in various locations nationwide and is therefore directly involved in the rate-structure debate. (Humble Scribe full disclosure: ownership of a few, less than a round lot, common-stock shares of both energy corporations.) A detailed account in the 3 May Wall Street Journal describes a professional, objective and fact-based discussion over power use, infra-structure costs, and rate structure, not the sorts of subjective bureaucratic malice which may (not proveable but possible and probable) underlie the permit withholding in VT. In contrast, the debate in LA is about the math of cost-shifting, per Entergy Louisiana’s CEO Philip May quote: “, …the [present] system shifts costs from net-metered solar customers… to customers who choose not to, or can’t afford to generate their own power…” It’s worth noting that LA has repeatedly out-ranked VT in the various regulatory-rankings-by-State studies mentioned above.

A conclusion which might be drawn from this regulatory-climate comparison is the one SCOTUS Justice Louis Brandeis proposed early in the 20th century: that the several States be free to pursue their own solutions to internal governance questions and in the process serve as different “experiments in democracy” when some approaches prove more successful than others. Louisiana has, fairly clearly, chosen to opt for energy-cost-reduction as an important route to economic growth and citizen prosperity; Vermont, in contrast, as the on-going anti-nuclear campaign, at the corporate end of the energy spectrum –VY now furnishes some 70% of power generated in-State, although less and less of that power is now being sold and used in-State– and the recent jump in gasoline taxes, at the individual end of the energy spectrum, both illustrate, has opted for energy-cost-increase. It would of course be denied in Montpelier, but both initiatives raise the cost-of-stay in Vermont, presumably not by legislative accident or mistake (not one has ever been admitted) and therefore the Vermont experiment isn’t only about a policy which raises energy prices to end users, but also, and long-term more importantly, about an unstated policy which raises the cost-of-stay for middle-class residents who are most vulnerable to just such added costs. By executive and legislative intent? You decide.