Responsibility of VY funds still debated
That's a question that has been on many people's minds since Entergy applied to the Nuclear Regulatory Commission to create a new subsidiary that would own Yankee and four other nuclear power plant sites in the eastern United States.
In financial filings with the Securities and Exchange Commission, Entergy appears to be responsible for the decommissioning fund, but this was disputed by Entergy Nuclear vice president and CFO Wanda Curry during testimony on April 16 at the Vermont Statehouse in Montpelier.
"You can think about it in numerous ways, but its owner is Entergy Nuclear Vermont Yankee. Its owner is not Entergy."
A reading of the 2002 sales agreement between Vermont Yankee Nuclear Power Corporation and Entergy appears to support that contention, despite what was issued in press releases related to the sale, said Yankee spokesman Rob Williams.
"The word 'Entergy' is used as shorthand for it and all its subsidiaries including those which are not SEC registrants like Entergy Nuclear Vermont Yankee. Entergy relies on its individual companies to carry out its business and, in this case, it is within the confines of its subsidiary Entergy Nuclear Vermont Yankee LLC to ensure that decommissioning is adequate."
"We find that the sale of Vermont Yankee transfers operating cost and decommissioning cost risks to ENVY," stated the Public Service Board in its approval of the 2002 sale. "ENVY's commitment to make whole any future deficiencies in ... decommissioning monies ... is a very positive aspect of the proposal before us."
Throughout the document, ENVY is referenced as the purchaser of the plant, with its parent company, Entergy Corporation "committed to financial guarantees that will assure that ENVY has sufficient capital to operate Vermont Yankee or to transition to decommissioning should ENVY decide to close the station."
Whether that means Entergy Corporation is liable for a decommissioning fund shortfall is still under review, said Stephen Wark, spokesman for Vermont's Department of Public Service.
It doesn't matter what the sales agreement says, said NRC spokesman Neil Sheehan, because the federal government has options not available to private citizens.
As an example, he cited the Superfund program administered by the Environmental Protection Agency, which forces companies to pay to clean up environmental damages for properties they may no longer own.
"We would go after the parent company if we saw the owner of the reactor on the license was unable to fully fund the decommissioning costs," said Sheehan.
While an attorney at the Vermont Law School in South Royalton agreed that the federal government may have other ways to go after a parent company, a subsidiary is established to shield a corporation from financial liability, especially in cases of bankruptcy.
"Could the parent company be held liable?" asked Jackie Gardena, associate professor of law at the Vermont Law School. "The general answer is no."
To do so, she said, creditors would have to "pierce the corporate veil."
"But parent companies are very aware and work hard to maintain that veil to make sure it can't be pierced."
Entergy could be held liable for the financial obligations of its subsidiaries if certain factors were proven, she said, such as if the subsidiary is simply a sham company set up to avoid liability or if the subsidiary is undercapitalized and is less likely to meet its financial obligations.
But if a subsidiary has its own board of directors, corporate structure and financial holdings it would be hard to hold the parent company liable for any fund shortfalls, she said.
The same would hold true if Entergy is allowed to transfer the license of Yankee to Enexus, which would be responsible for the decommissioning.
"Creating a holding company is a benefit for them."
The license transfer would raise more than $4 billion for its parent corporation, using Enexus' assets as leverage. The infusion would go to pay off debt and to reward Entergy shareholders but would leave Enexus with no financial resources besides revenues raised through power sales and a $700 million letter of credit from Entergy to be shared by the other power plants in the new holding company.
The decommissioning trust fund was established by VYNPC through a fee levied on power consumers. After the sale, ratepayers were no longer required to contribute to the fund. Entergy has made no contributions, relying on the market to grow the fund to the estimated $1 billion needed to clean up the site.
Currently there is about $425 million in the trust fund. If the plant doesn't receive a license extension and closes in 2012, it would be mothballed -- called Safstore by the NRC -- for up to 60 years to allow the fund to grow to sufficient levels to return the site to public use.
How long the site would need to stay in Safstore would depend on if and when the Department of Energy meets its promise to move the nuclear waste stored in a spent fuel pool and dry casks to a federal repository.
In its 2002 review of the sale agreement, the PSB recognized that the Safstore option might have to be utilized.
"Safstore should not be seen as a panacea for funding decommissioning," according to the document. "However, the Safstore option provides a form of protection against under-collected decommissioning funds."
One thing the PSB could not accept was a stipulation in the sale that would split any left over decommissioning funds with ENVY and Vermont ratepayers.
"We believe it inconsistent with the general good for there to be any financial incentive for ENVY to minimize costs in decommissioning ENVY."
Bob Audette can be reached at email@example.com or 802-254-2311, ext. 273.
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