Vt. Must Fill Tax Hole Left by Yankee
Montpelier — Entergy Corp.’s decision to shut down the Vermont Yankee nuclear plant in October 2014 will come at a financial cost to the state of Vermont.
In addition to the loss of more than 600 jobs and the many economic benefits the plant brings to the Windham County region, the state will take a budget hit of $11.5 million to $12.5 million a year.
That’s because if Vermont Yankee isn’t producing power, Entergy pays no taxes on the plant. The state assessed a 0.0025 per kilowatt-hour power generation tax on Yankee last year; Vermont Yankee does not pay statewide property taxes.
Entergy sued the state in federal court over the new tax. A federal judge dismissed Entergy’s case in October, and the company’s appeal is pending. Even if Entergy’s appeal were successful, the Louisiana-based company would still have to pay about $6 million a year to Vermont while the plant is operating.
The Shumlin administration and the Legislature would have to alter the state tax structure to address the issue.
“Under the current scenario, we do know there will be a loss. It is significant in size,” Secretary of Administration Jeb Spaulding said. “That will be one of the challenges we’ll have to address when dealing with the budget.”
This next legislative session the House Ways and Means Committee and the Senate Finance Committee will look at revenue options for fiscal year 2015 and beyond. The exact size of the fiscal year 2015 budget shortfall is tied to just how much power is generated between July 1, 2014, and when the plant is shut down.
Entergy Vice President Jeff Forbes said the plant would shut down at the end of its current refueling cycle, 18 months from the last time it was refueled, which was April of this year. Entergy has not yet provided a final shutdown date.
The generating tax Entergy pays quarterly to the state is contingent on how much electricity Vermont Yankee produces during the previous quarter. If Vermont Yankee closes at the beginning of October — just after the start of the second quarter of the fiscal year that begins July 1, 2014 — Entergy would pay the state for two full quarters, or six months, worth of taxes.
Under the current tax structure, this would provide Vermont with roughly $6 million in revenue from the plant in FY 2015, about half of its current obligation.
Sen. Tim Ashe, D/P-Chittenden, chair of the Senate Finance Committee, said legislators need to figure out how to replace the generating tax this session.
“Do we need to figure out a new way to tax the plant? Yes,” he said. “Figuring out how to do that will be tricky, and we’ll probably look to other states for ideas, if not guidance.”
The plant’s shut down in the middle of the fiscal year complicates matters, Ashe said.
“We need to devise two revenue treatments,” he said. “One for the first half of the fiscal year, and one for the second half when it’s no longer generating. We really need to do it this year. We can’t wait.”
Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee said a new tax structure can’t wait.
“We will have to replace the revenues somehow or make cuts,” she said. “I don’t know where we’d cut. I think what we’ll do probably come January is look at the tax structures other states have and see if there is a substitute for revenues that makes sense.”
One state that will be of little help to Vermont legislators is Maine. David Heidreich, spokesman for the Maine Department of Administrative and Financial Services, said that Maine never applied a generation or property tax to the now decommissioned Maine Yankee plant.
“There was no generating tax or statewide revenue shortfall encountered as a result of the decommissioning of the plant,” he said.