U.S. District Judge Christina Reiss said Monday the issue of court jurisdiction must be decided first before Entergy Nuclear’s request for a preliminary injunction against the state’s $15 million generation tax on Vermont Yankee is taken up.
Entergy Nuclear filed suit last month against the state of Vermont, saying the newly increased generation tax was unconstitutional, and unfairly targeted the state’s only nuclear power plant in another attempt to put it out of business.
The state countered last week that the matter belonged in state court, not federal court, an issue that grabbed Reiss’ attention.
“I am concerned about jurisdiction,” she told the various lawyers in U.S. District Court in Rutland Monday.
Under the amended tax, Entergy has to pay its first quarterly payment of about $3 million by Oct. 25. Entergy’s lawyers argued it wasn’t a tax but a “levy,” and thus it didn’t come under current provisions that would refund the tax — with interest — if the tax is found unconstitutional. The state has defended the amended tax, which went into effect July 1. Vermont has always taxed Vermont Yankee for its generation; the first law was passed in 1969 and went into effect in 1972. But the rate has gone up and down over the years, said Jonathan Rose, the assistant attorney general handling the case.
The law as amended by the 2012 Legislature puts the tax between $12 million and $15 million, said Assistant Attorney General Danforth Cardozo, an attorney with the Department of Taxes. Cardozo told the judge that under Vermont law, if the generation tax was found to be unconstitutional, Entergy Nuclear would be entitled to a refund — plus interest.
“You’ve got to pay and we’ll sort it out later,” Cardozo said. But Entergy’s lawyer Matthew Byrne, of the Burlington law firm of Gravel and Shea, said his reading of the amended law showed no such guarantees.
“We believe refunds don’t exist,” Byrne said. “The other issue is it’s not a tax at all.”
Reiss then reminded Bryne that Cardozo had made the statement in court, in front of a judge, but Byrne remained unconvinced.
“It’s a punitive fee. The state of Vermont is trying to regulate and trying to punish my client,” Byrne said.
Byrne declined comment after the hearing, referring all comment to Entergy spokesman Jim Sinclair. Sinclair later declined any comment on legal matters. The judge said that any time crunch and Entergy’s request for a preliminary injunction against the new law was Entergy’s own fault, since it knew the tax was signed into law months ago, and knew it would go into effect in July.
“The motion for preliminary injunction was filed fairly late in the day,” the judge told the two sides. “You filed a month before the taxes were due.”
Reiss gave Entergy until Oct. 9 to file its response to the state’s motion to dismiss the lawsuit. The state asserts that the suit properly belongs in Vermont, not federal, court. The first step to any challenge, the state says, is before the Vermont commissioner of taxes. The state has defended the generation tax — a quarter of a cent per kilowatt hour of electricity – saying it is the same rate as the one levied by the state of Connecticut, and less than the generation tax levied against the state’s large commercial wind facilities.
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