Federal Judge Strikes Down Legislative Extortion Ploy

by  John McClaughry

On January 20 Federal District Judge J. Garvan Murtha ruled that federal law preempts the state from regulating the Vermont

John McClaughry

Yankee nuclear power plant over safety concerns.

Well down in the media reports it was mentioned that the judge also found that the interstate commerce clause of the U.S Constitution precludes the state from conditioning Vermont Yankee’s continued operation on Entergy offering below market power prices to Vermont’s utilities. What the news accounts did not do was explain how Judge Murtha reached that second conclusion. It’s not a pretty story.

Beginning on page 91 of the court’s 102 page decision, the Judge quoted verbatim a February 9, 2009 letter to Entergy from then-Senate leader Peter Shumlin and House Speaker Shap Smith. The two lawmakers stated that “It was our expectation that a power purchase agreement would be reached between the negotiating parties no later than December, 2008 and in advance of the legislature convening for the 2009 session.”

The Shumlin-Smith letter continued that the General Assembly intended to consider “the terms of such a contract,” including “its length, the price to be paid for electricity products under the contract, and an analysis of its costs and benefits to our constituents.”

The letter concluded: “Accordingly, if [Entergy is] unable by Wednesday, February 18, 2009, to provide the General Assembly with a power purchase agreement between the parties, it will be nearly impossible for the legislature to make a judgment on the continued operation of the plant before we adjourn in May, 2009.”

After that adjournment Shumlin and Smith again wrote to Entergy’s Jay Thayer, stating that “it will be exceedingly difficult for the Vermont General Assembly to act in 2010 on the question of continued operation of the Vermont Yankee Nuclear Power Station unless a power purchase agreement between Vermont utilities and Entergy is filed with the Vermont Public Service Board before November 1, 2009.”

The letter noted that state officials “established this firm deadline” to permit review “by the Public Service Board and then by the Vermont General Assembly.” Furthermore, the “contract and its details are critical to the central issues of economic [sic] relative to the Vermont Yankee nuclear plant that the legislature must consider.”

Here, the judge stated, “there is evidence Vermont Yankee would be required to sell a portion of its output to Vermont utilities at below-market rates, rates that would not otherwise be available to the utilities if they were negotiating on the same footing as customers in other states, or the plant must suffer the consequences of closure. The New England Power decision makes clear that a state’s requirement that a wholesale plant satisfy local demands and provide its residents an ‘economic benefit’ not available to customers in other states runs afoul of the Commerce Clause, because it impermissibly burdens interstate commerce.”

He concluded, “this Court will permanently enjoin Defendants [Gov. Shumlin and the PSB] from conditioning Vermont Yankee’s continued operation on the existence of a below-market Power Purchase Agreement with Vermont utilities.”

What are we to make of this? First, Judge Murtha is describing an unmistakable political shakedown. The 2006 law interjected an unique legislative approval requirement before the applicant (Entergy) could obtain a final order from the Public Service Board to continue plant operation. Unlike the PSB, whose non-political decisions are guided by volumes of statute and case law, Act 160 allowed legislators to vote Vermont Yankee off the island for any reason, or no reason.

Shumlin and Smith made it clear that their price for allowing the PSB to rule on Entergy’s application was below-market power contracts. To put it in bold relief, this is only a little different from a Chicago ward boss demanding payment from a contractor seeking a building permit.

That leads to the second point. By using their political muscle to force Entergy to give them a political benefit – lower power costs – the two politicians cast a dark shadow over Vermont’s hitherto nearly spotless record of equality before the law and probity in public service.

Vermont is still ethically far removed from Chicago, but the judicially-rejected Shumlin-Smith extortion attempt can only damage Vermont’s attractiveness as a place to engage in productive economic activity. This state has enough obstacles to job-creating economic growth without adding that one on top.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

One thought on “Federal Judge Strikes Down Legislative Extortion Ploy

  1. it means.Moreover, to the extent that the issue DOES arise at all, it’s bseauce of Entergy’s synedochial suggestion that these laws are based on reliability and that reliability is really a code word for safety. Reading the laws, however, one can see a variety of other concerns, none of which concerns safety OR reliability. Looking at Act 160, for example, one finds the following, which mention NEITHER reliability NOR safety: Sec 1 a: including the state’s need for power, the economics and environmental impacts of long term storage of nuclear waste, and choice of power sources among various alternatives Sec. 1d: of the larger societal discussion of broader economic and environmental issues relating to the operation of a nuclear facility in the state, including an assessment of the potential need for the operation of the facility and its economic benefits, risks, and costs; and in order to allow opportunity to assess alternatives that may be more cost effective or that otherwise may better promote the general welfare. Sec. 254 b(1) The objectives of the studies : (A) to facilitate public discussion of long term economic and environmental issues relating to the operation of any nuclear facility in the state;(B) to identify and assess the potential need for the operation of the facility and its long term economic and environmental benefits, risks, and costs; and(C) to assess all practical alternatives to those set forth in the applicant’s petition that may be more cost effective or that otherwise may better promote the general welfare. There are more examples, if one continues reading the law. Suffice it to say that there is no preempted purpose on this list and therefore nothing requiring the court to satisfy itself about motive.6) Pat notes that [Judge Murtha] has come back to the same questions several times. What does “public safety” mean if it doesn’t mean radiological safety? Isn’t safety a necessary component of reliability? First, I think the phrase he came back to MANY times was public health, NOT public safety. It occurs in section 254 b(2)B. Again, since I addressed this in response to Don Kreis, I won’t repeat myself here. Second, he certainly did focus, with both attorneys, on the question of reliability and safety and their interaction, but it’s hard to see how the case would turn on his decision. Again, assume the worst (from my point of view): namely, that the judge agrees with Entergy that reliability is just code for safety. The word reliability appears exactly once in Act 160, where it is part of the name of another piece of legislation. It doesn’t appear at all in Act 74. In fact, its role is strictly limited to the so-called reliability study, which, perhaps, Judge Murtha will find should never have been done. And then? Entergy’s case requires him to overturn a whole spate of legislation, most or all of which predates the suspect study. How can he do this even if he grants Entergy’s notion that the reliability study was really about safety?7) At this point, however, there is nothing more the state can do to beef up the record on these points unless Judge Murtha requests further briefing. The judge did say that he would issue an order this week if he wanted more information, but he also acknowledged that the State had asked to submit proposed findings. While he didn’t seem to rule on the request, he seemed willing to grant it as far as I could tell.

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