Nuke points, counterpoints

Posted

Monday, May 7
Let's say you're a legislator convinced of the need to reduce climate change and oil dependence but reluctant to impose costs on Vermont oil customers. How might you raise the revenues needed to start up even the most cost effective oil reduction programs?

Well, one effective answer is the proposal recently approved in the Senate to raise the initial revenues through a charge on Entergy Nuclear Vermont Yankee (ENVY). However, this proposal has created one of the best funded lobbying blitzes of this or any other legislative session, a blitz that many Vermont businesses have been lured into joining even though it is against their own financial interest.

Some background:

1) About 80 percent of Vermont's green house gas emissions (and 100 percent of our oil dependence) come from heating buildings and fueling vehicles. Any serious effort to address global warming must introduce efficiency and renewable fuels into those sectors. However, Efficiency Vermont — the state's primary purveyor of energy efficiency — is now confined by law to the relatively clean electricity sector.

2) As a result solely of recent changes in government policy and rising natural gas prices, ENVY stands to earn more than $100 million in unexpected profit on sales of its uncommitted power output between now and 2012. As a result of electric restructuring, none of this extraordinary profit will flow through to customers. Indeed, Central Vermont Public Service has just announced another price increase.

3) Recognizing this, the Senate has voted to use some $35 million from Vermont Yankee to reduce Vermont's waste of oil between now and 2012, leaving some $70 million in new profits to ENVY, above and beyond what it will earn as a result of its own management decisions. Indeed, the governmentally created portion of these new profits alone is larger than the proposed tax. Originally, the funding for reducing oil waste was to have come from a small surcharge on oil that would have more than paid for itself through savings. However, Governor Douglas opposed this surcharge, so the Senate looked elsewhere.

4) Vermont entered into a memorandum of understanding two years ago with ENVY under which the company pays some $2.5 million per year to the state's Clean Energy Development Fund, which is devoted exclusively to cleaning up the electric sector. In return, ENVY received permission to move some of its spent fuel from the nearly full pool to dry casks. Without this permission ENVY could not have expanded the plant to realize the profits described above.

Because of the large amounts of money at stake for the nuclear industry in Vermont and perhaps nationally, this proposal has led to a tsunami of lobbying and misinformation deluging the Legislature and the Vermont business community. Here are a few allegations and some responses:

First, "The proposed tax breaks the two year old deal surrounding the dry cask approvals."

This is incorrect because the 2005 deal covered only the casks whereas nearly all of Vermont Yankee's storage remains in the spent fuel pool, which was in no way part of the 2005 deal. Long term storage of radioactive waste — certainly not part of Vermont's "deal" when the plant was built — is a very valuable activity in itself. Some states and towns have begun to charge large sums for this activity. In any case though, Vermont's proposed charge applies to ENVY's profits from uncommitted sales. The spent fuel storage is merely an indicator of the valuable activity going on at the plant.

Second, "By taxing these profits, the Legislature threatens Vermont's reputation as a place to do business."

This is silly. These unearned profits arise from Vermont's ongoing tolerance for storage of nuclear waste. No other Vermont business is exposed to such a charge because no other business stores spent fuel rods.

Third, "The tax will undermine negotiations to buy Vermont Yankee power after the existing contracts expire in 2012."

No. By law, the charge expires with the existing contracts, so it will not apply to any new ones. Taxes in general will have to be dealt with in any new contracts. This one does not complicate the negotiating process at all.

Fourth, "The tax will raise Vermont electric rates."

No. Vermont rates will not be affected, and Vermont oil bills will decline. The uncommitted electricity covered by this charge is sold in the New England power market, not into Vermont. More importantly, that market does not permit the pass through of taxes. The payments will come from the unearned profits, not from electric customers.

Given the energy waste to be avoided by this charge, given the absence of any impact on energy customers and given the lack of acceptable alternative sources of revenue, Vermont businesses — especially those adversely affected by climate change — should take a second look at where their real interests lie on this issue. Their reflexive support of Vermont Yankee's position will ultimately enrich that company at the expense of their own.

Peter Bradford lives in Peru and has taught at Vermont Law School.


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