Ruling by Federal Judge Allows Vermont Yankee to Stay Open

By Terence Healey, Sohair Ahmadi and Sarah Tucker

On January 19, 2012, the United States District Court for the District of Vermont determined that the state of Vermont is preempted by federal law from shutting down the Vermont Yankee Nuclear Power Station (Vermont Yankee) owned and operated by Entergy Nuclear Vermont Yankee, LLC and Entergy Nuclear Operations, Inc. (collectively, “Entergy”).  The court also ruled that the state may not condition continued operation of the plant on the existence of a below-market power purchase agreement (PPA) between Entergy, Vermont Yankee’s owner, and Vermont retail electric utilities.  A judgment reflecting the January 19, 2012, decision on the merits was entered in the docket on January 20, 2012.  Litigants wishing to file a notice of appeal must do so by February 21, 2012.

Background

Vermont Yankee’s 40-year federal operating license is set to expire on March 21, 2012.  Although the U.S. Nuclear Regulatory Commission (NRC) in March 2011 granted a 20-year extension of the license, Vermont’s legislature passed several laws that would have allowed Vermont to close the plant.  Specifically, Act 160 prohibited Vermont Yankee from operating beyond March 2012 without affirmative approval of a certificate of public good (CPG) from the Vermont legislature, and Act 74 required Vermont Yankee to seek approval from the Public Service Board (PSB) to store spent fuel derived from operations after March 21, 2012.[i] The PSB also appeared to condition its approval of the CPG on Vermont Yankee’s agreeing to sell a portion of its output to Vermont utilities at below-market rates.[ii]

Entergy filed a lawsuit seeking:

1) A permanent injunction and declaration that Act 160 and §6522 of Act 74 are preempted by the Atomic Energy Act (AEA);

2) A permanent injunction and declaration stating that the Federal Power Act (FPA) preempts Vermont state actors from conditioning Vermont Yankee’s continued operation on the existence of a below-market PPA between Vermont Yankee and Vermont’s retail utilities; and

3) A permanent injunction and declaration that Vermont state actors are prohibited by the Commerce Clause from conditioning continued operation on the existence of a below-market PPA. [iii]

Atomic Energy Act Preemption Claim

States have very limited regulatory authority over nuclear matters, and the Supreme Court has concluded that under the AEA, “the federal government has occupied the entire field of nuclear safety concerns, except the limited powers expressly ceded to the states.”[iv]

Entergy argued that Act 160 and §6522 of Act 74 were rooted in concerns over nuclear safety.  The court agreed after conducting an extensive review of the legislative history behind the laws at issue, and citing multiple instances in the record of remarks and references to safety and health issues.  The state of Vermont argued that economic and environmental issues underpinned the laws.[v] However, according to the court,  references to public health and safety concerns were “almost too numerous to count,” and “reveal legislators’ radiological safety motivations and reflect their wish to empower the legislature to address their constituents’ fear of radiological risk, and beliefs that the plant was too unsafe to operate, in deciding a petition for continued operation.”[vi]

Federal Power Act Claim

Entergy claimed that the below-market PPA requirement conflicts with the Federal Energy Regulatory Commission’s (FERC’s) “exclusive authority to regulate the transmission and sale at wholesale of electric energy in interstate commerce.”[vii] The court found that while Entergy could appeal to FERC to have the contract terms and rates of an existing PPA reviewed, “it is not clear what preemptive effect the FPA has to prevent Defendants from refusing to consider continued operation without such an agreement, given that this necessarily means there is no agreement subject to review, or demonstrable agreed-upon or demanded rate over which FERC has jurisdiction under the FPA.”[viii] The court declined to issue an injunction on FPA pre-emption grounds.

Commerce Clause Claim

Entergy claimed that conditioning approval of a CPG for continued operation of Vermont Yankee on the existence of a PPA at below-market rates violates their right to be free from state action that unconstitutionally burdens interstate commerce.[ix] The court agreed, finding 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.”[x] Thus, the PSB may not condition approval of the CPG for Vermont Yankee to remain in operation on such a below-market PPA.

Reactions

Vermont Governor Peter Shumlin expressed dismay at the ruling, saying “Entergy has not been a trustworthy partner with the state of Vermont…I continue to believe that it is in Vermont’s best interest to retire the plant.  I will await the Attorney General’s review of the decision to comment further on whether the state will appeal.”[xi] Entergy welcomed the decision, calling it “good news for our 600 employees, the environment and New England residents and industries that depend on clean, affordable, reliable power.”[xii]

For more insight, contact Terence Healey, Sohair Ahmadi or Sarah Tucker.


[i] Entergy Nuclear Vermont Yankee v. Shumlin, Decision and Order on the Merits of Plaintiff’s Complaint, January 19, 2012 (Decision), pp. 2-3.

[ii] Decision p. 93

[iii] Decision p. 1-2.

[iv] Decision p. 58.

[v] Decision p. 76

[vi] Decision p. 14

[vii] Decision p. 83

[viii] Decision p. 86

[ix] Decision p. 86

[x] Decision p. 93

[xi] “Vermont Yankee Nuclear Plant Wins Right to Keep Generating.”  World Nuclear News, January 22, 2012.  https://www.eurasiareview.com/22012012-vermont-yankee-nuclear-plant-wins-right-to-keep-generating/

[xii] Wald, Matthew L.  “A Judge Rules Vermont Can’t Shut Nuclear Plant.”  The New York Times, January 19, 2012. https://www.nytimes.com/2012/01/20/science/earth/vermont-cant-shut-down-nuclear-plant-judge-rules.html

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