When "Fair" Isn't

(Editor's note: Supporters of an override of Governor Douglas' veto of H 520 have based the emotional side of their case on the argument that Entergy (which owns the Vermont Yankee nuclear plant) hasn't been paying its "fair share" of taxes.  While no Vermonter would be surprised to learn of an egregious glitch in the state's cobbed together tax code, it seemed unlikely that Yankee could have flown under the radar all these years.  So we asked company spokesman Brian Cosgrove for his response to the fairness argument.  Cosgrove, it should be pointed out, has many, many friends in this state, to include people from all across the political spectrum and ... me.  That bias aside, Cosgrove's answer seems publishable by any measure and it seems "unfair" that it hasn't made it to any of the state's broadsheets.  But, then, as someone once said, "If life were fair, Elvis would be alive and all the impersonators would be dead."  gn)

The Real Vermont Yankee ‘Sweetheart’ Deal
by
Brian Cosgrove

    When the Vermont Senate leadership first sought to single out Entergy Vermont Yankee for a new multi-million dollar tax in the waning days of this year’s legislative session, they were no doubt surprised by the strong opposition they encountered from Vermonters all across the state.
 

    Vermont’s leading companies and business organizations pointed out that such a precedent-setting tax would not only threaten Vermont’s low electricity rates from Vermont Yankee, but also send a message that Vermont is an unfair, unpredictable, and unreliable place for companies to re-locate or expand their operations.

    Individual Vermonters wrote letters to their local newspapers and called radio talk shows to protest the legislature’s failure to honor agreements with Vermont Yankee, and to express dismay that in Montpelier “a deal is never a deal.”

    Editorial writers were almost unanimous in voicing misgivings about the fairness of the proposal.

    Now, despite compelling facts to the contrary, the same legislative leaders who orchestrated the attack on Vermont Yankee are trying to concoct a smokescreen --“tax fairness”—to justify their actions by claiming that Vermont Yankee’s taxes have gone down in recent years due to a “sweetheart deal” Vermont Yankee struck with the legislature in 2003. In a June 10 Op Ed that has appeared in many newspapers across the state, Senate President Pro Tem Peter Shumlin, one of the chief architects of the Yankee tax, states “Last year, Entergy paid $500,000 less in property taxes than it did in 2003.” However, according to the Legislature’s own Joint Fiscal Office, Sen. Shumlin’s statement is not supported by the facts. Vermont Yankee actually a paid an increase of nearly $50,000 --$4.5 million in 2006 compared to $4,451,748 in 2003.

    A short history of interactions between Entergy Vermont Yankee and the State of Vermont will provide context.

    Upon purchasing Vermont Yankee in 2002, Entergy entered into a ten-year agreement to provide one-third of Vermont’s power at advantageous, fixed prices. These prices are now well below the New England market and have already saved Vermonters nearly $200 million in electricity costs.   

    At the time of the sale, Vermont Yankee was entering the last decade of its 40-year operating license and, as expected, the plant’s book value – the basis for the existing property tax – was depreciating rapidly, as occurs under federal and Vermont State accounting rules.  In view of this trend, the tax departments of both the Dean and Douglas Administrations asked Vermont Yankee to consider switching from property tax to a per-megawatt generation-based tax to stabilize tax revenues to the state.

    Entergy agreed to this proposal, and both parties negotiated a transparent, fair, and predictable tax schedule tied directly to power generation. The agreement went through the full legislative committee process and was approved by both the House and Senate in the 2003 session. The tax issue appeared to be settled through 2012, the year Vermont Yankee’s current operating license and the 10-year power contract both expire.

    As expected, when the new tax went into effect in 2004, it immediately arrested the property depreciation and resulting decline in tax revenues from Vermont Yankee. According to a recent report from the legislature’s Joint Fiscal Office, the generation tax also automatically captured revenue increases from the plant’s 20 percent power uprate that went into effect in May, 2006, effectively discrediting claims by legislative leaders that Vermont Yankee’s taxes were “frozen” by a “sweetheart deal” in 2003.

    Entergy also paid $1,387,612 in local property taxes on the plant in Vernon and our offices in Brattleboro in 2006. This is a nine percent increase from the $1,284,672 paid in 2003. 

    In 2005, as part of negotiations between Vermont Yankee and the legislature to secure additional used fuel storage and an earlier agreement on power uprate, Entergy agreed to pay an additional $4.5 million a year into the Vermont Clean Energy Fund to develop renewable in-state energy resources. This agreement was overwhelmingly approved by the Legislature and will generate $28 million for the Clean Energy Fund through 2012.

    In fact, from 2003 to 2006 Vermont Yankee’s overall payments to the State of Vermont have gone from $6.2 million a year to about $9.5 million, an increase of more than 50 percent.

    It is disappointing that Sen. Shumlin and other legislative leaders are ignoring these facts when they attempt to convince the public that Vermont Yankee is not paying its fair share. The facts clearly do not support the “fairness” of an arbitrary and capricious $25 million new tax that was cobbled together by a handful of legislative leaders in the final two weeks of the 2007 session.

    Low energy prices create “fairness” for Vermont homeowners and residential ratepayers. Our little state must compete to attract and keep the businesses that create good jobs for Vermonters, and any of our major employers will tell you that favorable power costs help level that playing field and keep the competition “fair”.

    The Vermont Department of Public Service estimates that under the current 10-year power contract, Entergy’s Vermont customers will save $668 million from 2002 to 2012.
This is the real “sweetheart deal” between the State of Vermont and Vermont Yankee.

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About the Author:  Brian Cosgrove is Manager of Government Affairs for Vermont Yankee.

 

Comments

[Robert Skinner]

I heard Brian on WVMT's morning talk show hosted by Charlie Papillo and Ernie Farah. It's important that Vermonters put a "face" (voice) to Vermont Yankee and Brian filled the bill perfectly. His genuine alarm at Peter Shumlin's brazen attempt to rob the coffers of one of Vermont's Energy friends, was effective. Shumlin's sucker punch politics are his trademark and he never saw a tax he couldn't find some way to attach to a villian with money to spare - which is his spin.
Vermonters deserve better - Democrats deserve better - than the boogeyman, sucker punching politicking that seeks to illuminate a Bad Guy and put him or her in the public square for ridicule just before the pockets are emptied. Hang in there Brain and all the good and decent folks who work hard to bring safe, affordable energy to the homes of Vermont families.
Given enough time and focus by a majority of Vermont citizens, there will return to this state common sense and decent and "FAIR" minded politician dedicated to finding real solutions through mature thinking coupled with a respect for all parties involved in the SOLUTION !!